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DISCLOSURE SCHEDULES TO THE ASSET PURCHASE AGREEMENT

Delivered by Pinnacle Metal Fabricators LLC and its Members to Nexford Industrial Holdings Inc.

September 5, 2023

These Disclosure Schedules (these "Disclosure Schedules") are delivered pursuant to and concurrently with that certain Asset Purchase Agreement, dated as of September 5, 2023 (the "Agreement"), by and among Nexford Industrial Holdings Inc., a Delaware corporation ("Buyer"), Pinnacle Metal Fabricators LLC, an Indiana limited liability company (the "Company"), and Gerald T. Brennan, Sandra L. Brennan, and Derek J. Kopp (each, a "Member" and collectively, the "Members").

These Disclosure Schedules have been prepared by Calderwood & Harkness LLP based on information provided by the Company, the Members, and Seller's counsel, Halverson Burke & Crane LLP.

GENERAL DISCLAIMERS AND INTRODUCTORY NOTES

The following general disclaimers and introductory notes apply to each of the Schedules set forth herein and should be read in conjunction with, and are qualified in their entirety by reference to, the specific provisions of the Agreement:

1. Defined Terms. Capitalized terms used but not otherwise defined in these Disclosure Schedules shall have the meanings ascribed to such terms in the Agreement.

2. Qualification by Agreement. These Disclosure Schedules are qualified in their entirety by reference to the specific provisions of the Agreement to which they relate. The inclusion of any item, matter, or information in any Schedule shall not constitute an admission by the Company or any Member that such item, matter, or information is material, constitutes a breach of any representation, warranty, covenant, or agreement, or gives rise to any right of indemnification or other remedy under the Agreement. No disclosure made in these Disclosure Schedules shall be construed as an admission against interest by any party or as establishing a standard of materiality for any purpose under the Agreement.

3. Cross-References and Deemed Disclosures. The disclosure of any item, matter, or information in a particular Schedule shall be deemed to be disclosed with respect to any other Schedule to the extent the relevance of such disclosure to such other Schedule is reasonably apparent on the face of such disclosure, notwithstanding the absence of a specific cross-reference to such other Schedule. The parties acknowledge that certain matters may be relevant to more than one Schedule and that the Company and the Members have endeavored, but are not obligated, to cross-reference such matters across Schedules for the convenience of Buyer.

4. Headings. Section and Schedule headings contained in these Disclosure Schedules are for convenience of reference only and shall not in any way limit, define, or otherwise affect the scope, meaning, or intent of the disclosures contained herein.

5. Informational Disclosures. Certain items may be listed in these Disclosure Schedules for informational purposes even though they may not be required to be disclosed under the terms of the Agreement. The inclusion of such additional items shall not be deemed to set a standard of materiality for any purpose or to expand the scope of any representation or warranty contained in the Agreement.

6. Data Room Incorporation. Any documents, materials, or information referenced herein that have been made available to Buyer in the electronic data room maintained by the Company (hosted on Meridian Data Room, Project "Pinnacle") are incorporated herein by reference to the extent specifically identified. References to documents in the data room shall include the folder path and document reference number, where applicable.

7. Knowledge Qualification. Certain disclosures herein are made to the "knowledge" of the Company or the Members. Unless otherwise specified, references to the knowledge of the Company shall mean the actual knowledge, after reasonable inquiry, of Gerald T. Brennan, Sandra L. Brennan, and Derek J. Kopp.

8. Currency and Estimates. All dollar amounts set forth herein are denominated in United States dollars. Certain amounts are identified as estimates or approximations as of the date hereof or as of the anticipated Closing Date. Actual amounts as of the Closing Date may differ from such estimates. The Company and the Members do not undertake any obligation to update these Disclosure Schedules to reflect changes occurring after the date hereof, except as required by Section 5.05 of the Agreement.

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SCHEDULE 1.01 — ACQUIRED ASSETS

Pursuant to Section 1.01 of the Agreement, the Acquired Assets to be transferred by the Company to Buyer at the Closing shall include, without limitation, the following:

Part (a) — Tangible Personal Property

The following is a detailed inventory of all material tangible personal property to be transferred to Buyer, organized by category. Unless otherwise noted, all tangible personal property listed below is located at the Company's facility at 1127 Industrial Parkway, Hammond, IN 46320 and is owned free and clear of all liens and encumbrances, except as otherwise noted herein or in Schedule 3.09.

CNC Plasma and Laser Cutting Equipment (14 Machines).

Note: CNC plasma table No. 7 (Meridian & Co. Avenger 3, Serial No. EA3-14728) has a recurring calibration issue. See Schedule 3.09 for further detail. Aldermere Group TruLaser 3030 Fiber No. 9 (Serial No. TL-40287) is subject to a purchase-money security interest held by Heartland Equipment Finance LLC. See Schedule 3.09 for further detail.

Overhead Bridge Cranes (2 Units).

Note: Overhead bridge crane No. 2 (Adriatic Corporation, 5-ton) had a hoist motor replacement in March 2023 at a cost of approximately $12,400. The crane is currently fully operational. See Schedule 3.09 for further detail.

Rolling Stock. Flatbed Trucks (8 units):

Note: VINs have been partially redacted for security purposes; full VINs are available in Data Room Folder 3.09-A (Vehicle Titles and Registration). All trucks are titled in the name of Pinnacle Metal Fabricators LLC and are free and clear of all liens.

Forklifts (3 units):

Other Shop Equipment. The following categories of shop equipment are included in the Acquired Assets. Detailed asset registers, including serial numbers and book values for each individual item, are maintained by the Company and have been made available to Buyer in Data Room Folder 1.01-A (Fixed Asset Register):

• Welding Stations (22 units): Consisting of Miller, Westmark Holdings, and Meridian & Co. MIG, TIG, and stick welding systems, including wire feeders, guns, torches, and associated accessories. Individual unit book values range from approximately $1,200 to $18,500. Total aggregate book value approximately $142,000.

• Press Brakes (3 units): Cincinnati, Inc. Model 350AF x 12 (2017), Dunmore Corporation Model 7608 (2015), and Amada Model HG 1003 (2020). Total aggregate book value approximately $185,000.

• Shears (2 units): Cincinnati, Inc. Model 2CC12 (2014) and Accurshear Model 825012 (2018). Total aggregate book value approximately $62,000.

• Grinders, Sanders, and Finishing Equipment (18 units): Including bench grinders, angle grinders, belt sanders, deburring tools, and polishing equipment. Total aggregate book value approximately $24,000.

• Material Handling Equipment: Including roller conveyors, pallet jacks (4 units), material carts (8 units), and magnetic lifters (3 units). Total aggregate book value approximately $35,000.

• Racking and Storage Systems: Pallet racking (approximately 120 bays), cantilever racks for bar and plate stock (approximately 40 arms), and parts bins. Total aggregate book value approximately $48,000.

• Shop Tools and Instruments: Including tape measures, calipers, micrometers, levels, squares, clamps, fixtures, jigs, and miscellaneous hand tools. Total aggregate book value approximately $28,000.

• Dust Collection and Ventilation Systems: Including fume extraction units at welding stations and a central dust collection system for the grinding area. Total aggregate book value approximately $38,000.

Office Equipment. The following categories of office equipment and furnishings are included in the Acquired Assets:

• Office Furniture: Desks, chairs, filing cabinets, conference table and chairs, reception area furnishings. Total aggregate book value approximately $18,000.

• Computers and IT Equipment: Desktop computers (12 units), laptop computers (4 units), two Brightmoor Group PowerEdge R740 servers (hosting CAD/CAM software and company files), network switches, routers, and wireless access points. Total aggregate book value approximately $32,000.

• Telephone Systems: Avaya IP Office System with 18 handsets. Book value approximately $4,500.

• Copiers and Printers: Two Xeroxx AltaLink C8055 multifunction copiers/printers (leased; lease to be assumed by Buyer), one HP DesignJet T1600 large-format plotter. Aggregate book value (owned equipment) approximately $6,200.

• Software Licenses: Glenrock Technologies (5 seats), Meridian Data Systems (3 seats), Tekla Structures (2 seats), Drayton Health IT Enterprise (1 seat), and Ashgrove Software Business Premium (18 seats). All licenses are transferable or renewable by Buyer post-Closing. Annual aggregate software licensing costs approximately $42,000.

Inventory — Raw Materials and Work-in-Progress. As of the anticipated Closing Date, the Company's inventory of raw materials and work-in-progress is estimated at approximately $2,600,000, composed of the following categories:

Note: The foregoing inventory estimates are based on the Company's physical inventory count and valuation as of July 31, 2023, adjusted for anticipated receipts, usage, and shipments through the anticipated Closing Date. Actual inventory values as of the Closing Date will be determined in accordance with Section 2.04 of the Agreement (Closing Inventory True-Up). Inventory is valued at the lower of cost (weighted average) or net realizable value.

Part (b) — Intangible Personal Property

The following intangible personal property is included in the Acquired Assets:

1. Trade Names. The unregistered trade names "Pinnacle," "Pinnacle Metal Fabricators," and "PMF," together with all goodwill associated therewith. The trade name "Pinnacle Metal Fabricators" has been used in commerce continuously since 2006, the short-form name "Pinnacle" since approximately 2008, and the initialism "PMF" in marketing materials since approximately 2015. No federal or state trademark registrations exist for any of the foregoing. See Schedule 3.10 for additional detail regarding intellectual property matters.

2. Domain Name. The internet domain name pinnaclemetal.com, currently registered to Gerald T. Brennan through Ostrander Systems The registration for this domain name will be transferred to Buyer at Closing.

3. Telephone and Fax Numbers. All telephone numbers and fax numbers associated with the business of the Company, including the main business line (219-555-0147), the fax line (219-555-0149), and all direct-dial extensions.

4. Customer Lists and Supplier Lists. All customer lists, prospect lists, supplier lists, vendor databases, pricing histories, and related information maintained by the Company, whether in electronic or hard-copy form.

5. Proprietary Fabrication Drawings, Templates, and Specifications. All proprietary fabrication drawings, shop templates, cut lists, bill of materials templates, welding procedure specifications (WPS), procedure qualification records (PQR), and other technical documents developed internally by the Company's engineering and fabrication staff. See Schedule 3.10 for additional detail.

6. Goodwill. The goodwill of the business of the Company, including customer relationships, reputation, and going-concern value.

Part (c) — Real Property Interests

The following real property interest is included in the Acquired Assets:

Leasehold Interest:

• Property Address: 1127 Industrial Parkway, Hammond, IN 46320

• Description: Approximately 48,000 square foot fabrication and office facility, consisting of approximately 42,000 square feet of fabrication/shop space and approximately 6,000 square feet of office and administrative space

• Landlord: Lakeshore Realty Partners LLC

• Lease Commencement Date: January 1, 2019

• Lease Expiration Date: December 31, 2028

• Base Rent: $16.50 per square foot per year ($792,000 per year; $66,000 per month)

• Lease Type: Triple net (NNN) — tenant is responsible for real property taxes, insurance, and maintenance of the premises

• Security Deposit: $66,000 (equal to one month's base rent), held by Landlord

• Assignment: Requires prior written consent of Landlord under Section 14.1 of the Lease; consent requested August 28, 2023; expected to be obtained prior to Closing

• Current Status: Lease is in good standing; no defaults, notices of default, or unresolved disputes between the Company and Landlord

The Company does not own any real property.

A copy of the Lease, together with all amendments thereto, has been made available to Buyer in Data Room Folder 3.08-A (Real Property Lease).

Part (d) — Customer Contracts and Backlog

The Acquired Assets include all customer contracts and open purchase orders to which the Company is a party as of the Closing Date, comprising a backlog of approximately $7,200,000 as of the date of the Agreement (September 5, 2023). A detailed listing of Material Contracts is set forth in Schedule 3.14, and individually significant purchase orders exceeding $100,000 are identified therein. The backlog figure represents the aggregate remaining unfilled value of all open customer orders and contracted work as of the date hereof, based on the Company's internal order management system. Actual backlog as of the Closing Date may vary based on new orders received, orders completed, and any cancellations occurring between the date hereof and the Closing Date.

SCHEDULE 1.02 — EXCLUDED ASSETS

Pursuant to Section 1.02 of the Agreement, the following assets are excluded from the Acquired Assets and shall be retained by the Company and/or the Members:

1. Cash and Cash Equivalents. All cash and cash equivalents held in any bank accounts of the Company, including without limitation the accounts identified in Schedule 3.20, as of the Closing Date. For the avoidance of doubt, the security deposit held by Lakeshore Realty Partners LLC in the amount of $66,000 is not an Excluded Asset and shall be addressed in accordance with the terms of the Lease assignment.

2. Member Distributions Receivable. All member distributions receivable, including any distributions declared but unpaid as of the Closing Date.

3. Pre-Closing Tax Refunds. Certain federal and state tax refunds, credits, or rebates attributable to taxable periods ending on or prior to the Closing Date, to the extent received by the Company or any Member after the Closing Date.

4. Personal Vehicles. The following personal vehicles titled to the Members individually (and not in the name of the Company):

• Gerald T. Brennan — 2021 Ford F-250 Super Duty (VIN: 1FT7W2B61MEC*)

• Sandra L. Brennan — 2022 Chevrolet Traverse LT (VIN: 1GNERGKW6NJ*)

Note: VINs have been partially redacted for privacy purposes. These vehicles are titled to the named individuals, have never been titled in the name of the Company, and are not used exclusively in the Company's business operations.

5. Organizational Documents and Records. The Company's Certificate of Formation, Operating Agreement (as amended), minute books, member records, and all other organizational documents. Copies of such documents (other than the Operating Agreement) have been made available to Buyer in the data room for informational purposes.

6. Rights Under the Agreement and Transaction Documents. All rights of the Company and the Members under the Agreement itself and the other Transaction Documents, including the right to receive the Purchase Price.

7. Insurance Policies. All insurance policies of the Company listed in Schedule 3.16, including all rights thereunder, other than claims for pre-closing occurrences to the extent such claims are assignable under the terms of the applicable policies. Buyer will obtain its own insurance coverage effective as of the Closing Date.

8. Tax Identification Number and Tax Accounts. The Company's federal Employer Identification Number (EIN: 27-1684352) and any state or local tax identification numbers or accounts associated therewith.

SCHEDULE 1.03 — ASSUMED LIABILITIES

Pursuant to Section 1.03 of the Agreement, the following liabilities of the Company shall be assumed by Buyer at the Closing:

Trade Payables. All trade accounts payable incurred by the Company in the ordinary course of business and outstanding as of the Closing Date. As of the anticipated Closing Date, trade accounts payable are estimated at approximately $1,100,000. A detailed aging schedule of accounts payable as of August 31, 2023 is attached hereto as Sub-Exhibit 1.03-A and has been made available to Buyer in Data Room Folder 1.03-A (Accounts Payable Aging). The following are the largest individual payable balances as of August 31, 2023:

Note: The foregoing amounts are estimates based on the Company's accounts payable records as of August 31, 2023, and will be adjusted to reflect the actual accounts payable outstanding as of the Closing Date. The actual amount of assumed trade payables will be determined in accordance with Section 2.04 of the Agreement (Working Capital Adjustment). The payable to Meridian Coating Services LLC is subject to a pending dispute as described in Schedule 3.13.

Accrued Employee Vacation

All accrued but unused vacation obligations for the Company's 74 employees, estimated at approximately $186,000 as of the anticipated Closing Date. This amount represents earned but unused paid time off (PTO) for all full-time employees, calculated in accordance with the Company's PTO policy. An employee-by-employee schedule of accrued vacation balances as of August 31, 2023 has been made available to Buyer in Data Room Folder 1.03-B (Accrued Vacation Schedule).

Post-Closing Obligations Under Assumed Contracts

All obligations of the Company arising or required to be performed after the Closing Date under the contracts set forth on Schedule 3.14, to the extent such contracts are assigned to and assumed by Buyer at the Closing. For the avoidance of doubt, Buyer shall not assume any obligation under any Assumed Contract to the extent such obligation relates to a breach, default, or failure to perform by the Company occurring prior to the Closing Date.

SCHEDULE 1.04 — EXCLUDED LIABILITIES

Pursuant to Section 1.04 of the Agreement, the following liabilities shall not be assumed by Buyer and shall remain the sole responsibility of the Company and/or the Members:

1. General Exclusion. Any and all liabilities of the Company that are not expressly identified as Assumed Liabilities under Section 1.03 of the Agreement and Schedule 1.03 hereto.

2. Pre-Closing Tax Liabilities. All liabilities for taxes of the Company, the Members, or any of their respective affiliates for any taxable period (or portion thereof) ending on or before the Closing Date, including without limitation all income taxes, self-employment taxes, estimated tax payments, and any penalties or interest thereon. For the avoidance of doubt, this includes all liabilities for taxes arising from or in connection with the transactions contemplated by the Agreement.

3. Member Debt, Personal Guarantees, and Intra-Company Loans. All indebtedness, obligations, or liabilities of the Members in their individual capacities, including without limitation any personal guarantees issued by any Member in connection with the business of the Company (including the personal guarantee of Gerald T. Brennan on the Lakeshore Realty Partners LLC facility lease, which is to be released at or prior to Closing), and any intra-company loans or advances between the Company and any Member.

4. Pre-Closing Product Liability and Tort Claims. Any and all product liability claims, personal injury claims, property damage claims, or other tort claims arising from or related to the operations of the Company or the Acquired Assets during the period prior to the Closing Date, except to the extent covered by the representations and warranties insurance policy obtained by Buyer in connection with the transactions contemplated by the Agreement.

5. Liabilities Arising from Excluded Assets. Any and all liabilities arising from, related to, or associated with the Excluded Assets identified in Schedule 1.02.

6. Transaction Expenses of Sellers. All fees, costs, and expenses incurred by the Company or the Members in connection with the negotiation, preparation, and consummation of the transactions contemplated by the Agreement, including legal fees, accounting fees, and advisory fees.

SCHEDULE 3.01 — ORGANIZATION AND GOOD STANDING

Pinnacle Metal Fabricators LLC is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Indiana. The following organizational information is provided:

• Entity Name: Pinnacle Metal Fabricators LLC

• State of Formation: Indiana

• Date of Formation: April 15, 2006

• Indiana Secretary of State Entity ID: 2006041500237

• Registered Agent: Hoosier Registered Agents Inc., 201 South Capitol Avenue, Indianapolis, IN 46225

• Principal Place of Business: 1127 Industrial Parkway, Hammond, IN 46320

Foreign Qualifications: The Company is qualified to do business and is in good standing only in the State of Indiana. The Company does not hold foreign qualifications in any other state or jurisdiction.

Disclosure Regarding Out-of-State Activities: The Company periodically performs installation work at job sites located in the States of Illinois and Michigan. Such out-of-state activities consist primarily of the erection and installation of fabricated steel components at customer construction sites by the Company's field installation crews. The Company has not obtained foreign qualification to transact business in either Illinois or Michigan. The Company has historically treated such activity as temporary in nature and not sufficient to constitute "transacting business" within the meaning of the applicable foreign qualification statutes of those states. Seller's counsel, Halverson Burke & Crane LLP, has advised that the risk of non-qualification penalties in Illinois and Michigan is low based on the temporary and project-specific nature of the Company's activities in those states, but has further advised that such risk cannot be entirely eliminated. In the event that either Illinois or Michigan were to assert that the Company was required to qualify as a foreign limited liability company, the Company could potentially be subject to late filing fees, penalties, and the inability to maintain certain actions in the courts of such states during the period of non-qualification. To the knowledge of the Company and the Members, no demand, inquiry, or notice from any governmental authority in Illinois or Michigan has been received regarding the Company's qualification status.

SCHEDULE 3.02 — AUTHORITY AND ENFORCEABILITY

No exceptions.

The execution, delivery, and performance of the Agreement and the Transaction Documents by the Company have been duly and validly authorized by all necessary action on the part of the Company, including:

(a) Approval by Gerald T. Brennan, in his capacity as Managing Member of the Company, in accordance with Section 5.2 of the Company's Amended and Restated Operating Agreement, dated as of January 1, 2012 (the "Operating Agreement"); and

(b) Approval by the Members holding the requisite membership interests under the Operating Agreement. Section 8.1 of the Operating Agreement provides that the sale, exchange, or other disposition of all or substantially all of the assets of the Company requires the affirmative vote or written consent of Members holding at least seventy-five percent (75%) of the total outstanding membership interests. Gerald T. Brennan (65%) and Sandra L. Brennan (20%) together hold eighty-five percent (85%) of the total outstanding membership interests, which satisfies the seventy-five percent (75%) approval threshold. Written consents of Gerald T. Brennan and Sandra L. Brennan approving the transactions contemplated by the Agreement were executed and delivered on September 4, 2023 and have been made available to Buyer in Data Room Folder 3.02-A (Member Consents).

Derek J. Kopp (15% membership interest) has also executed a written consent approving the transactions contemplated by the Agreement, although his consent was not strictly required to satisfy the Operating Agreement threshold.

No further action on the part of the Company or the Members is necessary to authorize the execution, delivery, and performance of the Agreement and the Transaction Documents.

SCHEDULE 3.03 — NO CONFLICTS; CONSENTS

Part (a) — Conflicts

No material conflicts have been identified in connection with the execution, delivery, and performance of the Agreement and the Transaction Documents, or the consummation of the transactions contemplated thereby, subject to the following:

1. Master Supply Agreement with Ironclad Bridge & Infrastructure Co. Section 12.3 of the Master Supply Agreement between the Company and Ironclad Bridge & Infrastructure Co., dated July 15, 2022 (the "Ironclad MSA"), provides that neither party may assign its rights or delegate its obligations under the Ironclad MSA without the prior written consent of the other party, and further provides that any "change of control" of the contracting party (defined broadly to include any sale or transfer of all or substantially all of the assets of the contracting party) shall be deemed an assignment requiring such consent. The consummation of the transactions contemplated by the Agreement will constitute an assignment and/or change of control under Section 12.3 of the Ironclad MSA, and accordingly, the prior written consent of Ironclad Bridge & Infrastructure Co. is required. A copy of the Ironclad MSA has been made available to Buyer in Data Room Folder 3.14-A (Material Contracts).

2. Facility Lease with Lakeshore Realty Partners LLC. Section 14.1 of the Lease Agreement between the Company and Lakeshore Realty Partners LLC, dated December 15, 2018, as amended (the "Facility Lease"), provides that the tenant may not assign, transfer, or sublease its interest in the Facility Lease or any part thereof without the prior written consent of the landlord, which consent shall not be unreasonably withheld, conditioned, or delayed. The assignment of the Facility Lease to Buyer in connection with the transactions contemplated by the Agreement will require the prior written consent of Lakeshore Realty Partners LLC. A copy of the Facility Lease has been made available to Buyer in Data Room Folder 3.08-A (Real Property Lease).

Part (b) — Required Consents

The following third-party consents are required in connection with the transactions contemplated by the Agreement:

No governmental consent, approval, order, authorization, registration, declaration, or filing is required in connection with the execution, delivery, or performance of the Agreement or the consummation of the transactions contemplated thereby, other than:

(a) Routine UCC financing statement filings and terminations in connection with the release of existing liens and the grant of any new security interests, if applicable; and

(b) Indiana sales and use tax filings in connection with the transfer of tangible personal property, including Indiana Department of Revenue Form ST-108E (Application for Exemption Certificate for the Transfer of Tangible Personal Property in Connection with an Occasional Sale).

SCHEDULE 3.04 — CAPITALIZATION AND MEMBERSHIP INTERESTS

The membership interests of the Company are held as follows:

No options, warrants, convertible instruments, phantom equity, profit interests, or other rights to acquire membership interests in the Company are outstanding or authorized. There are no outstanding obligations of the Company to repurchase, redeem, or otherwise acquire any membership interests.

The Operating Agreement contains a right of first refusal provision (Section 7.3) pursuant to which, in the event any Member proposes to transfer, sell, or otherwise dispose of all or any portion of such Member's membership interest, the remaining Members have the right to purchase such interest on the same terms and conditions offered by the proposed transferee. The Members have unanimously agreed to waive the right of first refusal provisions of Section 7.3 of the Operating Agreement with respect to the transactions contemplated by the Agreement. Written waivers executed by each Member have been made available to Buyer in Data Room Folder 3.04-A (Membership Interest Records).

No other restrictions on the transfer of membership interests exist other than as set forth in the Operating Agreement and applicable securities laws.

SCHEDULE 3.05 — FINANCIAL STATEMENTS

The Company has provided to Buyer the following financial statements (collectively, the "Financial Statements"):

1. Annual Financial Statements. Unaudited compiled financial statements (balance sheet and statement of income) of the Company for the fiscal years ended December 31, 2020, December 31, 2021, and December 31, 2022. These financial statements were prepared by Sandra L. Brennan (in her capacity as the Company's bookkeeper) with compilation assistance from Veltrano Accounting Services LLC, Indianapolis, Indiana (CPA contact: Carol J. Nolan, CPA). Copies of the Financial Statements and the related compilation reports are available in Data Room Folder 3.05-A (Financial Statements).

2. Interim Financial Statements. Unaudited interim financial statements (balance sheet and statement of income) of the Company for the six-month period ended June 30, 2023. These interim financial statements were prepared by Sandra L. Brennan using the same methodology as the annual financial statements.

Important Disclosures Regarding Financial Statements:

(a) Basis of Preparation. The Financial Statements are prepared on a modified cash basis of accounting, which is a comprehensive basis of accounting other than generally accepted accounting principles (GAAP). Under the modified cash basis, revenues are generally recognized when cash is received and expenses are generally recognized when cash is disbursed, with modifications for certain items including depreciation of fixed assets and capitalization of equipment purchases. The Financial Statements do not include footnote disclosures.

(b) No Audit. The Company has never been the subject of an independent audit of its financial statements. The compilation reports issued by Veltrano Accounting Services LLC do not express an opinion or provide any assurance on the financial statements. A compilation is limited to presenting in the form of financial statements information that is the representation of management.

(c) Quality of Earnings Analysis. Whitfield & Pryor LLP, an independent accounting firm retained by Buyer, performed a quality-of-earnings analysis and financial due diligence review of the Company's financial statements and operations. The results of that analysis have been provided to Buyer under separate cover.

Key Financial Metrics (LTM as of June 30, 2023):

Known Exceptions and Adjustments Identified During Diligence:

The following adjustments were identified during the quality-of-earnings process conducted by Whitfield & Pryor LLP on behalf of Buyer and have been reflected in the calculation of Adjusted EBITDA:

(a) Above-Market Owner Compensation. Combined compensation paid to Gerald T. Brennan (Managing Member) and Sandra L. Brennan (Member) during the LTM period was determined to exceed market-rate compensation for comparable executive and administrative roles by approximately $85,000 in the aggregate. This above-market compensation has been added back to EBITDA as part of the normalization process.

(b) One-Time Legal Fees. The Company incurred approximately $42,000 in legal fees during fiscal year 2022 in connection with a contract dispute with a former customer (Lakepoint Marina Holdings LLC) that has been fully resolved. These fees were non-recurring in nature and have been added back to EBITDA.

(c) Non-Recurring Equipment Repair Costs. The Company incurred approximately $28,000 in non-recurring equipment repair costs during Q1 2023, primarily related to the emergency repair of an HVAC system failure in the fabrication bay and the unscheduled replacement of a press brake hydraulic pump. These costs were not expected to recur and have been added back to EBITDA.

The Company and the Members are not aware of any other material adjustments, exceptions, or qualifications to the Financial Statements that have not been disclosed to Buyer or identified in the Whitfield & Pryor quality-of-earnings analysis.

SCHEDULE 3.06 — ABSENCE OF CERTAIN CHANGES

Since June 30, 2023 (the date of the most recent interim financial statements), the Company has conducted its business in the ordinary course consistent with past practice in all material respects, except for the following:

1. New Customer Purchase Orders. The Company entered into two new customer purchase orders in August 2023 totaling approximately $430,000 in the aggregate. These purchase orders are with existing customers and relate to structural steel fabrication projects consistent with the Company's ordinary course of business. The purchase orders are as follows:

(a) Heartland Power Transmission Co. — PO #HPT-2023-1204, dated August 8, 2023, for utility tower components in the amount of approximately $250,000, with expected delivery in Q4 2023.

(b) Great Plains Construction Group LLC — PO #GPC-2023-0088, dated August 22, 2023, for miscellaneous structural steel for a commercial warehouse project in the amount of approximately $180,000, with expected delivery in Q1 2024.

2. Member Distributions. The Company made aggregate member distributions of $125,000 in July 2023, distributed pro rata to the Members in accordance with their respective membership interests. This distribution was a regular quarterly distribution consistent with the Company's historical distribution practices.

3. Employee Departure. One shop floor employee (welder classification) voluntarily resigned from the Company effective August 15, 2023, citing personal reasons. The position has not yet been filled as of the date hereof. The Company is actively seeking a replacement through its customary hiring channels.

4. Equipment Purchase. The Company purchased one replacement welding station (Miller Dynasty 400 TIG welder) for approximately $18,500 in August 2023 in the ordinary course of business, replacing a unit that had reached the end of its useful life. The purchase was made using available cash and did not involve any financing.

Other than as described above, since June 30, 2023, there has been no material adverse change in the business, financial condition, results of operations, assets, or liabilities of the Company.

SCHEDULE 3.07 — TAX MATTERS

The following disclosures are made with respect to the tax matters of the Company:

Entity Classification and Tax Treatment. The Company has been treated as a partnership for federal and state income tax purposes since its formation in 2006. The Company has not made, and has not been required to make, an election under Treasury Regulations Section 301.7701-3 to be classified as other than a partnership (or disregarded entity, as applicable). Each Member reports his or her respective allocable share of the Company's income, gain, loss, deduction, and credit on his or her individual federal and state income tax returns.

Tax Identification.

• Federal Employer Identification Number (EIN): 27-1684352

• Indiana Taxpayer Identification Number: On file with the Indiana Department of Revenue

Tax Filings. The Company files the following tax returns:

(a) Federal: IRS Form 1065 (U.S. Return of Partnership Income), together with Schedules K-1 to each Member, filed annually. The Company is current on all federal tax filings through the fiscal year ended December 31, 2022.

(b) State Income/Information Returns: Indiana Form IT-65 (Indiana Partnership Return), filed annually. The Company is current on all Indiana state information return filings through the fiscal year ended December 31, 2022.

(c) Sales and Use Tax: The Company is registered for Indiana sales and use tax purposes and files periodic returns with the Indiana Department of Revenue. The Company is current on all sales and use tax filings and payments.

(d) Payroll Taxes: The Company withholds and remits federal and state payroll taxes (FICA, federal and state income tax withholding, FUTA, SUTA) in the ordinary course and is current on all payroll tax filings and payments.

Tax Audits, Examinations, and Proceedings. No tax audits, examinations, assessments, deficiency notices, or administrative or judicial proceedings are pending, or to the knowledge of the Members, threatened by any federal, state, or local taxing authority with respect to the Company or any Member (to the extent relating to the Company's operations or income).

Tax Liens. There are no tax liens on any of the assets of the Company.

Extensions and Waivers. No extensions of time to file any tax return of the Company are currently in effect. No waivers of any statute of limitations with respect to taxes of the Company have been granted or requested by the Company or any taxing authority.

Pre-Closing Tax Refunds. Certain pre-closing tax refunds, if any, attributable to taxable periods ending on or prior to the Closing Date are Excluded Assets as set forth in Schedule 1.02.

SCHEDULE 3.08 — REAL PROPERTY

Owned Real Property

The Company does not own any real property.

Leased Real Property

The Company's sole leased real property is as follows:

Property: 1127 Industrial Parkway, Hammond, IN 46320

Consent to Assignment. The Company submitted a formal request for Landlord's consent to assignment of the Facility Lease to Buyer on August 28, 2023. The Company anticipates that Landlord's consent will be obtained prior to Closing. See Schedule 3.03 for additional detail.

Environmental Matters. A Phase I Environmental Site Assessment of the leased premises was conducted by Clearpath Environmental Advisors Inc. (Project Manager: Elena M. Rivas), dated August 10, 2023. No recognized environmental conditions (RECs) requiring remediation were identified. A complete copy of the Phase I ESA report has been made available to Buyer in Data Room Folder 3.12-A (Environmental Reports). See Schedule 3.12 for a detailed summary of the Phase I ESA findings.

SCHEDULE 3.09 — TANGIBLE PERSONAL PROPERTY AND EQUIPMENT

A complete listing of all material tangible personal property and equipment included in the Acquired Assets is set forth in Schedule 1.01, Part (a), which is incorporated herein by reference. A comprehensive fixed asset register, including detailed descriptions, serial numbers, acquisition dates, original costs, accumulated depreciation, and net book values for each individual asset, has been made available to Buyer in Data Room Folder 1.01-A (Fixed Asset Register).

Location of Equipment

All material equipment is located at 1127 Industrial Parkway, Hammond, IN 46320, with the following exceptions:

Three flatbed trucks and installation crews are routinely deployed to job sites in Indiana, Illinois, and Michigan in connection with the Company's field installation operations. Specific truck locations vary based on project schedules. As of the date hereof, one truck and installation crew are deployed to a job site in Gary, Indiana, and one truck and installation crew are deployed to a job site in Joliet, Illinois. All trucks return to the Hammond facility upon completion of each project.

Condition of Equipment

All material equipment is in good working order and has been maintained in accordance with manufacturer-recommended maintenance schedules, subject to normal wear and tear, except as follows:

1. CNC Plasma Table No. 7 (Meridian & Co. Avenger 3, Serial No. EA3-14728, 2015). This unit has experienced a recurring calibration issue affecting precision tolerances on cuts exceeding two (2) inches in thickness. The issue was first identified in approximately Q2 2023 and has resulted in occasional rework on certain heavy-plate cutting jobs. The Company has obtained a quote from Meridian & Co.'s authorized service center for a calibration sensor upgrade and repair, estimated at approximately $35,000. The repair/upgrade is scheduled for Q4 2023. Pending completion of the repair, the Company has been routing heavy-plate cutting jobs exceeding 2-inch thickness to other plasma tables in its shop, which has resulted in minor scheduling inefficiencies but has not materially affected production capacity or delivery timelines.

2. Overhead Bridge Crane No. 2 (Adriatic Corporation, 5-ton, 2012). The hoist motor on this crane required replacement in March 2023. The replacement was performed by Adriatic Corporation's authorized service contractor at a cost of approximately $12,400. The crane is currently fully operational, and no further issues have been identified. The Company's crane inspection records (maintained in compliance with OSHA 29 CFR 1910.179 and ANSI B30.2) are current, and the most recent annual inspection (May 2023) found the crane to be in satisfactory condition.

Liens and Encumbrances

All tangible personal property and equipment is owned by the Company free and clear of all liens, security interests, claims, and encumbrances, except for the following:

Purchase-Money Security Interest — Heartland Equipment Finance LLC. Heartland Equipment Finance LLC holds a purchase-money security interest in one (1) 2021 Aldermere Group TruLaser 3030 Fiber laser cutter (Serial No. TL-40287), securing the remaining unpaid balance of an equipment financing agreement entered into in connection with the purchase of such equipment. The outstanding balance as of the date hereof is approximately $47,000, with monthly payments of approximately $2,400. The financing agreement is scheduled to be fully paid off at or prior to Closing, and Heartland Equipment Finance LLC has confirmed that it will deliver a UCC-3 termination statement upon receipt of the payoff amount. See Schedule 3.14, Item 4 for additional detail regarding this financing arrangement.

Other than the foregoing, no liens, security interests, or encumbrances exist on any of the tangible personal property or equipment of the Company.

SCHEDULE 3.10 — INTELLECTUAL PROPERTY

The following disclosures are made with respect to the intellectual property used in or related to the business of the Company:

Trade Names and Marks

The Company uses the following unregistered trade names and marks in connection with its business:

The Company has not filed any applications for federal trademark registration with the United States Patent and Trademark Office (USPTO) or for state trademark registration with the Indiana Secretary of State or any other state. The Company's rights in the foregoing trade names are based solely on common law rights arising from continuous use in commerce in the State of Indiana and surrounding areas.

Domain Name. The Company uses the internet domain name pinnaclemetal.com in connection with its business. The domain name is currently registered to Gerald T. Brennan through Ostrander Systems (Registrar). The domain registration will be transferred to Buyer at Closing. The current registration expiration date is April 12, 2025. The Company maintains a basic informational website at this domain. No other domain names are owned by or registered to the Company or any Member in connection with the business.

Patents, Copyrights, and Trade Secrets

The Company does not hold any patents, patent applications, registered copyrights, or copyright applications. The Company does not possess any material trade secrets.

The Company owns standard marketing materials, including its website content, brochures, and promotional materials, for which no copyright registrations have been obtained. The Company claims common law copyright protection over such materials, but does not consider them to be material intellectual property assets.

Proprietary Fabrication Drawings and Shop Templates

DISCLOSURE SCHEDULES TO THE ASSET PURCHASE AGREEMENT
Delivered by Pinnacle Metal Fabricators LLC and its Members to Nexford Industrial Holdings Inc.
September 5, 2023
These Disclosure Schedules (these "Disclosure Schedules") are delivered pursuant to and concurrently with that certain Asset Purchase Agreement, dated as of September 5, 2023 (the "Agreement"), by and among Nexford Industrial Holdings Inc., a Delaware corporation ("Buyer"), Pinnacle Metal Fabricators LLC, an Indiana limited liability company (the "Company"), and Gerald T. Brennan, Sandra L. Brennan, and Derek J. Kopp (each, a "Member" and collectively, the "Members").
These Disclosure Schedules have been prepared by Calderwood & Harkness LLP based on information provided by the Company, the Members, and Seller's counsel, Halverson Burke & Crane LLP.
GENERAL DISCLAIMERS AND INTRODUCTORY NOTES
The following general disclaimers and introductory notes apply to each of the Schedules set forth herein and should be read in conjunction with, and are qualified in their entirety by reference to, the specific provisions of the Agreement:
1. Defined Terms. Capitalized terms used but not otherwise defined in these Disclosure Schedules shall have the meanings ascribed to such terms in the Agreement.
2. Qualification by Agreement. These Disclosure Schedules are qualified in their entirety by reference to the specific provisions of the Agreement to which they relate. The inclusion of any item, matter, or information in any Schedule shall not constitute an admission by the Company or any Member that such item, matter, or information is material, constitutes a breach of any representation, warranty, covenant, or agreement, or gives rise to any right of indemnification or other remedy under the Agreement. No disclosure made in these Disclosure Schedules shall be construed as an admission against interest by any party or as establishing a standard of materiality for any purpose under the Agreement.
3. Cross-References and Deemed Disclosures. The disclosure of any item, matter, or information in a particular Schedule shall be deemed to be disclosed with respect to any other Schedule to the extent the relevance of such disclosure to such other Schedule is reasonably apparent on the face of such disclosure, notwithstanding the absence of a specific cross-reference to such other Schedule. The parties acknowledge that certain matters may be relevant to more than one Schedule and that the Company and the Members have endeavored, but are not obligated, to cross-reference such matters across Schedules for the convenience of Buyer.
4. Headings. Section and Schedule headings contained in these Disclosure Schedules are for convenience of reference only and shall not in any way limit, define, or otherwise affect the scope, meaning, or intent of the disclosures contained herein.
5. Informational Disclosures. Certain items may be listed in these Disclosure Schedules for informational purposes even though they may not be required to be disclosed under the terms of the Agreement. The inclusion of such additional items shall not be deemed to set a standard of materiality for any purpose or to expand the scope of any representation or warranty contained in the Agreement.
6. Data Room Incorporation. Any documents, materials, or information referenced herein that have been made available to Buyer in the electronic data room maintained by the Company (hosted on Meridian Data Room, Project "Pinnacle") are incorporated herein by reference to the extent specifically identified. References to documents in the data room shall include the folder path and document reference number, where applicable.
7. Knowledge Qualification. Certain disclosures herein are made to the "knowledge" of the Company or the Members. Unless otherwise specified, references to the knowledge of the Company shall mean the actual knowledge, after reasonable inquiry, of Gerald T. Brennan, Sandra L. Brennan, and Derek J. Kopp.
8. Currency and Estimates. All dollar amounts set forth herein are denominated in United States dollars. Certain amounts are identified as estimates or approximations as of the date hereof or as of the anticipated Closing Date. Actual amounts as of the Closing Date may differ from such estimates. The Company and the Members do not undertake any obligation to update these Disclosure Schedules to reflect changes occurring after the date hereof, except as required by Section 5.05 of the Agreement.
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SCHEDULE 1.01 — ACQUIRED ASSETS
Pursuant to Section 1.01 of the Agreement, the Acquired Assets to be transferred by the Company to Buyer at the Closing shall include, without limitation, the following:
Part (a) — Tangible Personal Property
The following is a detailed inventory of all material tangible personal property to be transferred to Buyer, organized by category. Unless otherwise noted, all tangible personal property listed below is located at the Company's facility at 1127 Industrial Parkway, Hammond, IN 46320 and is owned free and clear of all liens and encumbrances, except as otherwise noted herein or in Schedule 3.09.
CNC Plasma and Laser Cutting Equipment (14 Machines).
Note: CNC plasma table No. 7 (Meridian & Co. Avenger 3, Serial No. EA3-14728) has a recurring calibration issue. See Schedule 3.09 for further detail. Aldermere Group TruLaser 3030 Fiber No. 9 (Serial No. TL-40287) is subject to a purchase-money security interest held by Heartland Equipment Finance LLC. See Schedule 3.09 for further detail.
Overhead Bridge Cranes (2 Units).
Note: Overhead bridge crane No. 2 (Adriatic Corporation, 5-ton) had a hoist motor replacement in March 2023 at a cost of approximately $12,400. The crane is currently fully operational. See Schedule 3.09 for further detail.
Rolling Stock. Flatbed Trucks (8 units):
Note: VINs have been partially redacted for security purposes; full VINs are available in Data Room Folder 3.09-A (Vehicle Titles and Registration). All trucks are titled in the name of Pinnacle Metal Fabricators LLC and are free and clear of all liens.
Forklifts (3 units):
Other Shop Equipment. The following categories of shop equipment are included in the Acquired Assets. Detailed asset registers, including serial numbers and book values for each individual item, are maintained by the Company and have been made available to Buyer in Data Room Folder 1.01-A (Fixed Asset Register):
• Welding Stations (22 units): Consisting of Miller, Westmark Holdings, and Meridian & Co. MIG, TIG, and stick welding systems, including wire feeders, guns, torches, and associated accessories. Individual unit book values range from approximately $1,200 to $18,500. Total aggregate book value approximately $142,000.
• Press Brakes (3 units): Cincinnati, Inc. Model 350AF x 12 (2017), Dunmore Corporation Model 7608 (2015), and Amada Model HG 1003 (2020). Total aggregate book value approximately $185,000.
• Shears (2 units): Cincinnati, Inc. Model 2CC12 (2014) and Accurshear Model 825012 (2018). Total aggregate book value approximately $62,000.
• Grinders, Sanders, and Finishing Equipment (18 units): Including bench grinders, angle grinders, belt sanders, deburring tools, and polishing equipment. Total aggregate book value approximately $24,000.
• Material Handling Equipment: Including roller conveyors, pallet jacks (4 units), material carts (8 units), and magnetic lifters (3 units). Total aggregate book value approximately $35,000.
• Racking and Storage Systems: Pallet racking (approximately 120 bays), cantilever racks for bar and plate stock (approximately 40 arms), and parts bins. Total aggregate book value approximately $48,000.
• Shop Tools and Instruments: Including tape measures, calipers, micrometers, levels, squares, clamps, fixtures, jigs, and miscellaneous hand tools. Total aggregate book value approximately $28,000.
• Dust Collection and Ventilation Systems: Including fume extraction units at welding stations and a central dust collection system for the grinding area. Total aggregate book value approximately $38,000.
Office Equipment. The following categories of office equipment and furnishings are included in the Acquired Assets:
• Office Furniture: Desks, chairs, filing cabinets, conference table and chairs, reception area furnishings. Total aggregate book value approximately $18,000.
• Computers and IT Equipment: Desktop computers (12 units), laptop computers (4 units), two Brightmoor Group PowerEdge R740 servers (hosting CAD/CAM software and company files), network switches, routers, and wireless access points. Total aggregate book value approximately $32,000.
• Telephone Systems: Avaya IP Office System with 18 handsets. Book value approximately $4,500.
• Copiers and Printers: Two Xeroxx AltaLink C8055 multifunction copiers/printers (leased; lease to be assumed by Buyer), one HP DesignJet T1600 large-format plotter. Aggregate book value (owned equipment) approximately $6,200.
• Software Licenses: Glenrock Technologies (5 seats), Meridian Data Systems (3 seats), Tekla Structures (2 seats), Drayton Health IT Enterprise (1 seat), and Ashgrove Software Business Premium (18 seats). All licenses are transferable or renewable by Buyer post-Closing. Annual aggregate software licensing costs approximately $42,000.
Inventory — Raw Materials and Work-in-Progress. As of the anticipated Closing Date, the Company's inventory of raw materials and work-in-progress is estimated at approximately $2,600,000, composed of the following categories:
Note: The foregoing inventory estimates are based on the Company's physical inventory count and valuation as of July 31, 2023, adjusted for anticipated receipts, usage, and shipments through the anticipated Closing Date. Actual inventory values as of the Closing Date will be determined in accordance with Section 2.04 of the Agreement (Closing Inventory True-Up). Inventory is valued at the lower of cost (weighted average) or net realizable value.
Part (b) — Intangible Personal Property
The following intangible personal property is included in the Acquired Assets:
1. Trade Names. The unregistered trade names "Pinnacle," "Pinnacle Metal Fabricators," and "PMF," together with all goodwill associated therewith. The trade name "Pinnacle Metal Fabricators" has been used in commerce continuously since 2006, the short-form name "Pinnacle" since approximately 2008, and the initialism "PMF" in marketing materials since approximately 2015. No federal or state trademark registrations exist for any of the foregoing. See Schedule 3.10 for additional detail regarding intellectual property matters.
2. Domain Name. The internet domain name pinnaclemetal.com, currently registered to Gerald T. Brennan through Ostrander Systems The registration for this domain name will be transferred to Buyer at Closing.
3. Telephone and Fax Numbers. All telephone numbers and fax numbers associated with the business of the Company, including the main business line (219-555-0147), the fax line (219-555-0149), and all direct-dial extensions.
4. Customer Lists and Supplier Lists. All customer lists, prospect lists, supplier lists, vendor databases, pricing histories, and related information maintained by the Company, whether in electronic or hard-copy form.
5. Proprietary Fabrication Drawings, Templates, and Specifications. All proprietary fabrication drawings, shop templates, cut lists, bill of materials templates, welding procedure specifications (WPS), procedure qualification records (PQR), and other technical documents developed internally by the Company's engineering and fabrication staff. See Schedule 3.10 for additional detail.
6. Goodwill. The goodwill of the business of the Company, including customer relationships, reputation, and going-concern value.
Part (c) — Real Property Interests
The following real property interest is included in the Acquired Assets:
Leasehold Interest:
• Property Address: 1127 Industrial Parkway, Hammond, IN 46320
• Description: Approximately 48,000 square foot fabrication and office facility, consisting of approximately 42,000 square feet of fabrication/shop space and approximately 6,000 square feet of office and administrative space
• Landlord: Lakeshore Realty Partners LLC
• Lease Commencement Date: January 1, 2019
• Lease Expiration Date: December 31, 2028
• Base Rent: $16.50 per square foot per year ($792,000 per year; $66,000 per month)
• Lease Type: Triple net (NNN) — tenant is responsible for real property taxes, insurance, and maintenance of the premises
• Security Deposit: $66,000 (equal to one month's base rent), held by Landlord
• Assignment: Requires prior written consent of Landlord under Section 14.1 of the Lease; consent requested August 28, 2023; expected to be obtained prior to Closing
• Current Status: Lease is in good standing; no defaults, notices of default, or unresolved disputes between the Company and Landlord
The Company does not own any real property.
A copy of the Lease, together with all amendments thereto, has been made available to Buyer in Data Room Folder 3.08-A (Real Property Lease).
Part (d) — Customer Contracts and Backlog
The Acquired Assets include all customer contracts and open purchase orders to which the Company is a party as of the Closing Date, comprising a backlog of approximately $7,200,000 as of the date of the Agreement (September 5, 2023). A detailed listing of Material Contracts is set forth in Schedule 3.14, and individually significant purchase orders exceeding $100,000 are identified therein. The backlog figure represents the aggregate remaining unfilled value of all open customer orders and contracted work as of the date hereof, based on the Company's internal order management system. Actual backlog as of the Closing Date may vary based on new orders received, orders completed, and any cancellations occurring between the date hereof and the Closing Date.
SCHEDULE 1.02 — EXCLUDED ASSETS
Pursuant to Section 1.02 of the Agreement, the following assets are excluded from the Acquired Assets and shall be retained by the Company and/or the Members:
1. Cash and Cash Equivalents. All cash and cash equivalents held in any bank accounts of the Company, including without limitation the accounts identified in Schedule 3.20, as of the Closing Date. For the avoidance of doubt, the security deposit held by Lakeshore Realty Partners LLC in the amount of $66,000 is not an Excluded Asset and shall be addressed in accordance with the terms of the Lease assignment.
2. Member Distributions Receivable. All member distributions receivable, including any distributions declared but unpaid as of the Closing Date.
3. Pre-Closing Tax Refunds. Certain federal and state tax refunds, credits, or rebates attributable to taxable periods ending on or prior to the Closing Date, to the extent received by the Company or any Member after the Closing Date.
4. Personal Vehicles. The following personal vehicles titled to the Members individually (and not in the name of the Company):
• Gerald T. Brennan — 2021 Ford F-250 Super Duty (VIN: 1FT7W2B61MEC*)
• Sandra L. Brennan — 2022 Chevrolet Traverse LT (VIN: 1GNERGKW6NJ*)
Note: VINs have been partially redacted for privacy purposes. These vehicles are titled to the named individuals, have never been titled in the name of the Company, and are not used exclusively in the Company's business operations.
5. Organizational Documents and Records. The Company's Certificate of Formation, Operating Agreement (as amended), minute books, member records, and all other organizational documents. Copies of such documents (other than the Operating Agreement) have been made available to Buyer in the data room for informational purposes.
6. Rights Under the Agreement and Transaction Documents. All rights of the Company and the Members under the Agreement itself and the other Transaction Documents, including the right to receive the Purchase Price.
7. Insurance Policies. All insurance policies of the Company listed in Schedule 3.16, including all rights thereunder, other than claims for pre-closing occurrences to the extent such claims are assignable under the terms of the applicable policies. Buyer will obtain its own insurance coverage effective as of the Closing Date.
8. Tax Identification Number and Tax Accounts. The Company's federal Employer Identification Number (EIN: 27-1684352) and any state or local tax identification numbers or accounts associated therewith.
SCHEDULE 1.03 — ASSUMED LIABILITIES
Pursuant to Section 1.03 of the Agreement, the following liabilities of the Company shall be assumed by Buyer at the Closing:
Trade Payables. All trade accounts payable incurred by the Company in the ordinary course of business and outstanding as of the Closing Date. As of the anticipated Closing Date, trade accounts payable are estimated at approximately $1,100,000. A detailed aging schedule of accounts payable as of August 31, 2023 is attached hereto as Sub-Exhibit 1.03-A and has been made available to Buyer in Data Room Folder 1.03-A (Accounts Payable Aging). The following are the largest individual payable balances as of August 31, 2023:
Note: The foregoing amounts are estimates based on the Company's accounts payable records as of August 31, 2023, and will be adjusted to reflect the actual accounts payable outstanding as of the Closing Date. The actual amount of assumed trade payables will be determined in accordance with Section 2.04 of the Agreement (Working Capital Adjustment). The payable to Meridian Coating Services LLC is subject to a pending dispute as described in Schedule 3.13.
Accrued Employee Vacation
All accrued but unused vacation obligations for the Company's 74 employees, estimated at approximately $186,000 as of the anticipated Closing Date. This amount represents earned but unused paid time off (PTO) for all full-time employees, calculated in accordance with the Company's PTO policy. An employee-by-employee schedule of accrued vacation balances as of August 31, 2023 has been made available to Buyer in Data Room Folder 1.03-B (Accrued Vacation Schedule).
Post-Closing Obligations Under Assumed Contracts
All obligations of the Company arising or required to be performed after the Closing Date under the contracts set forth on Schedule 3.14, to the extent such contracts are assigned to and assumed by Buyer at the Closing. For the avoidance of doubt, Buyer shall not assume any obligation under any Assumed Contract to the extent such obligation relates to a breach, default, or failure to perform by the Company occurring prior to the Closing Date.
SCHEDULE 1.04 — EXCLUDED LIABILITIES
Pursuant to Section 1.04 of the Agreement, the following liabilities shall not be assumed by Buyer and shall remain the sole responsibility of the Company and/or the Members:
1. General Exclusion. Any and all liabilities of the Company that are not expressly identified as Assumed Liabilities under Section 1.03 of the Agreement and Schedule 1.03 hereto.
2. Pre-Closing Tax Liabilities. All liabilities for taxes of the Company, the Members, or any of their respective affiliates for any taxable period (or portion thereof) ending on or before the Closing Date, including without limitation all income taxes, self-employment taxes, estimated tax payments, and any penalties or interest thereon. For the avoidance of doubt, this includes all liabilities for taxes arising from or in connection with the transactions contemplated by the Agreement.
3. Member Debt, Personal Guarantees, and Intra-Company Loans. All indebtedness, obligations, or liabilities of the Members in their individual capacities, including without limitation any personal guarantees issued by any Member in connection with the business of the Company (including the personal guarantee of Gerald T. Brennan on the Lakeshore Realty Partners LLC facility lease, which is to be released at or prior to Closing), and any intra-company loans or advances between the Company and any Member.
4. Pre-Closing Product Liability and Tort Claims. Any and all product liability claims, personal injury claims, property damage claims, or other tort claims arising from or related to the operations of the Company or the Acquired Assets during the period prior to the Closing Date, except to the extent covered by the representations and warranties insurance policy obtained by Buyer in connection with the transactions contemplated by the Agreement.
5. Liabilities Arising from Excluded Assets. Any and all liabilities arising from, related to, or associated with the Excluded Assets identified in Schedule 1.02.
6. Transaction Expenses of Sellers. All fees, costs, and expenses incurred by the Company or the Members in connection with the negotiation, preparation, and consummation of the transactions contemplated by the Agreement, including legal fees, accounting fees, and advisory fees.
SCHEDULE 3.01 — ORGANIZATION AND GOOD STANDING
Pinnacle Metal Fabricators LLC is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Indiana. The following organizational information is provided:
• Entity Name: Pinnacle Metal Fabricators LLC
• State of Formation: Indiana
• Date of Formation: April 15, 2006
• Indiana Secretary of State Entity ID: 2006041500237
• Registered Agent: Hoosier Registered Agents Inc., 201 South Capitol Avenue, Indianapolis, IN 46225
• Principal Place of Business: 1127 Industrial Parkway, Hammond, IN 46320
Foreign Qualifications: The Company is qualified to do business and is in good standing only in the State of Indiana. The Company does not hold foreign qualifications in any other state or jurisdiction.
Disclosure Regarding Out-of-State Activities: The Company periodically performs installation work at job sites located in the States of Illinois and Michigan. Such out-of-state activities consist primarily of the erection and installation of fabricated steel components at customer construction sites by the Company's field installation crews. The Company has not obtained foreign qualification to transact business in either Illinois or Michigan. The Company has historically treated such activity as temporary in nature and not sufficient to constitute "transacting business" within the meaning of the applicable foreign qualification statutes of those states. Seller's counsel, Halverson Burke & Crane LLP, has advised that the risk of non-qualification penalties in Illinois and Michigan is low based on the temporary and project-specific nature of the Company's activities in those states, but has further advised that such risk cannot be entirely eliminated. In the event that either Illinois or Michigan were to assert that the Company was required to qualify as a foreign limited liability company, the Company could potentially be subject to late filing fees, penalties, and the inability to maintain certain actions in the courts of such states during the period of non-qualification. To the knowledge of the Company and the Members, no demand, inquiry, or notice from any governmental authority in Illinois or Michigan has been received regarding the Company's qualification status.
SCHEDULE 3.02 — AUTHORITY AND ENFORCEABILITY
No exceptions.
The execution, delivery, and performance of the Agreement and the Transaction Documents by the Company have been duly and validly authorized by all necessary action on the part of the Company, including:
(a) Approval by Gerald T. Brennan, in his capacity as Managing Member of the Company, in accordance with Section 5.2 of the Company's Amended and Restated Operating Agreement, dated as of January 1, 2012 (the "Operating Agreement"); and
(b) Approval by the Members holding the requisite membership interests under the Operating Agreement. Section 8.1 of the Operating Agreement provides that the sale, exchange, or other disposition of all or substantially all of the assets of the Company requires the affirmative vote or written consent of Members holding at least seventy-five percent (75%) of the total outstanding membership interests. Gerald T. Brennan (65%) and Sandra L. Brennan (20%) together hold eighty-five percent (85%) of the total outstanding membership interests, which satisfies the seventy-five percent (75%) approval threshold. Written consents of Gerald T. Brennan and Sandra L. Brennan approving the transactions contemplated by the Agreement were executed and delivered on September 4, 2023 and have been made available to Buyer in Data Room Folder 3.02-A (Member Consents).
Derek J. Kopp (15% membership interest) has also executed a written consent approving the transactions contemplated by the Agreement, although his consent was not strictly required to satisfy the Operating Agreement threshold.
No further action on the part of the Company or the Members is necessary to authorize the execution, delivery, and performance of the Agreement and the Transaction Documents.
SCHEDULE 3.03 — NO CONFLICTS; CONSENTS
Part (a) — Conflicts
No material conflicts have been identified in connection with the execution, delivery, and performance of the Agreement and the Transaction Documents, or the consummation of the transactions contemplated thereby, subject to the following:
1. Master Supply Agreement with Ironclad Bridge & Infrastructure Co. Section 12.3 of the Master Supply Agreement between the Company and Ironclad Bridge & Infrastructure Co., dated July 15, 2022 (the "Ironclad MSA"), provides that neither party may assign its rights or delegate its obligations under the Ironclad MSA without the prior written consent of the other party, and further provides that any "change of control" of the contracting party (defined broadly to include any sale or transfer of all or substantially all of the assets of the contracting party) shall be deemed an assignment requiring such consent. The consummation of the transactions contemplated by the Agreement will constitute an assignment and/or change of control under Section 12.3 of the Ironclad MSA, and accordingly, the prior written consent of Ironclad Bridge & Infrastructure Co. is required. A copy of the Ironclad MSA has been made available to Buyer in Data Room Folder 3.14-A (Material Contracts).
2. Facility Lease with Lakeshore Realty Partners LLC. Section 14.1 of the Lease Agreement between the Company and Lakeshore Realty Partners LLC, dated December 15, 2018, as amended (the "Facility Lease"), provides that the tenant may not assign, transfer, or sublease its interest in the Facility Lease or any part thereof without the prior written consent of the landlord, which consent shall not be unreasonably withheld, conditioned, or delayed. The assignment of the Facility Lease to Buyer in connection with the transactions contemplated by the Agreement will require the prior written consent of Lakeshore Realty Partners LLC. A copy of the Facility Lease has been made available to Buyer in Data Room Folder 3.08-A (Real Property Lease).
Part (b) — Required Consents
The following third-party consents are required in connection with the transactions contemplated by the Agreement:
No governmental consent, approval, order, authorization, registration, declaration, or filing is required in connection with the execution, delivery, or performance of the Agreement or the consummation of the transactions contemplated thereby, other than:
(a) Routine UCC financing statement filings and terminations in connection with the release of existing liens and the grant of any new security interests, if applicable; and
(b) Indiana sales and use tax filings in connection with the transfer of tangible personal property, including Indiana Department of Revenue Form ST-108E (Application for Exemption Certificate for the Transfer of Tangible Personal Property in Connection with an Occasional Sale).
SCHEDULE 3.04 — CAPITALIZATION AND MEMBERSHIP INTERESTS
The membership interests of the Company are held as follows:
No options, warrants, convertible instruments, phantom equity, profit interests, or other rights to acquire membership interests in the Company are outstanding or authorized. There are no outstanding obligations of the Company to repurchase, redeem, or otherwise acquire any membership interests.
The Operating Agreement contains a right of first refusal provision (Section 7.3) pursuant to which, in the event any Member proposes to transfer, sell, or otherwise dispose of all or any portion of such Member's membership interest, the remaining Members have the right to purchase such interest on the same terms and conditions offered by the proposed transferee. The Members have unanimously agreed to waive the right of first refusal provisions of Section 7.3 of the Operating Agreement with respect to the transactions contemplated by the Agreement. Written waivers executed by each Member have been made available to Buyer in Data Room Folder 3.04-A (Membership Interest Records).
No other restrictions on the transfer of membership interests exist other than as set forth in the Operating Agreement and applicable securities laws.
SCHEDULE 3.05 — FINANCIAL STATEMENTS
The Company has provided to Buyer the following financial statements (collectively, the "Financial Statements"):
1. Annual Financial Statements. Unaudited compiled financial statements (balance sheet and statement of income) of the Company for the fiscal years ended December 31, 2020, December 31, 2021, and December 31, 2022. These financial statements were prepared by Sandra L. Brennan (in her capacity as the Company's bookkeeper) with compilation assistance from Veltrano Accounting Services LLC, Indianapolis, Indiana (CPA contact: Carol J. Nolan, CPA). Copies of the Financial Statements and the related compilation reports are available in Data Room Folder 3.05-A (Financial Statements).
2. Interim Financial Statements. Unaudited interim financial statements (balance sheet and statement of income) of the Company for the six-month period ended June 30, 2023. These interim financial statements were prepared by Sandra L. Brennan using the same methodology as the annual financial statements.
Important Disclosures Regarding Financial Statements:
(a) Basis of Preparation. The Financial Statements are prepared on a modified cash basis of accounting, which is a comprehensive basis of accounting other than generally accepted accounting principles (GAAP). Under the modified cash basis, revenues are generally recognized when cash is received and expenses are generally recognized when cash is disbursed, with modifications for certain items including depreciation of fixed assets and capitalization of equipment purchases. The Financial Statements do not include footnote disclosures.
(b) No Audit. The Company has never been the subject of an independent audit of its financial statements. The compilation reports issued by Veltrano Accounting Services LLC do not express an opinion or provide any assurance on the financial statements. A compilation is limited to presenting in the form of financial statements information that is the representation of management.
(c) Quality of Earnings Analysis. Whitfield & Pryor LLP, an independent accounting firm retained by Buyer, performed a quality-of-earnings analysis and financial due diligence review of the Company's financial statements and operations. The results of that analysis have been provided to Buyer under separate cover.
Key Financial Metrics (LTM as of June 30, 2023):
Known Exceptions and Adjustments Identified During Diligence:
The following adjustments were identified during the quality-of-earnings process conducted by Whitfield & Pryor LLP on behalf of Buyer and have been reflected in the calculation of Adjusted EBITDA:
(a) Above-Market Owner Compensation. Combined compensation paid to Gerald T. Brennan (Managing Member) and Sandra L. Brennan (Member) during the LTM period was determined to exceed market-rate compensation for comparable executive and administrative roles by approximately $85,000 in the aggregate. This above-market compensation has been added back to EBITDA as part of the normalization process.
(b) One-Time Legal Fees. The Company incurred approximately $42,000 in legal fees during fiscal year 2022 in connection with a contract dispute with a former customer (Lakepoint Marina Holdings LLC) that has been fully resolved. These fees were non-recurring in nature and have been added back to EBITDA.
(c) Non-Recurring Equipment Repair Costs. The Company incurred approximately $28,000 in non-recurring equipment repair costs during Q1 2023, primarily related to the emergency repair of an HVAC system failure in the fabrication bay and the unscheduled replacement of a press brake hydraulic pump. These costs were not expected to recur and have been added back to EBITDA.
The Company and the Members are not aware of any other material adjustments, exceptions, or qualifications to the Financial Statements that have not been disclosed to Buyer or identified in the Whitfield & Pryor quality-of-earnings analysis.
SCHEDULE 3.06 — ABSENCE OF CERTAIN CHANGES
Since June 30, 2023 (the date of the most recent interim financial statements), the Company has conducted its business in the ordinary course consistent with past practice in all material respects, except for the following:
1. New Customer Purchase Orders. The Company entered into two new customer purchase orders in August 2023 totaling approximately $430,000 in the aggregate. These purchase orders are with existing customers and relate to structural steel fabrication projects consistent with the Company's ordinary course of business. The purchase orders are as follows:
(a) Heartland Power Transmission Co. — PO #HPT-2023-1204, dated August 8, 2023, for utility tower components in the amount of approximately $250,000, with expected delivery in Q4 2023.
(b) Great Plains Construction Group LLC — PO #GPC-2023-0088, dated August 22, 2023, for miscellaneous structural steel for a commercial warehouse project in the amount of approximately $180,000, with expected delivery in Q1 2024.
2. Member Distributions. The Company made aggregate member distributions of $125,000 in July 2023, distributed pro rata to the Members in accordance with their respective membership interests. This distribution was a regular quarterly distribution consistent with the Company's historical distribution practices.
3. Employee Departure. One shop floor employee (welder classification) voluntarily resigned from the Company effective August 15, 2023, citing personal reasons. The position has not yet been filled as of the date hereof. The Company is actively seeking a replacement through its customary hiring channels.
4. Equipment Purchase. The Company purchased one replacement welding station (Miller Dynasty 400 TIG welder) for approximately $18,500 in August 2023 in the ordinary course of business, replacing a unit that had reached the end of its useful life. The purchase was made using available cash and did not involve any financing.
Other than as described above, since June 30, 2023, there has been no material adverse change in the business, financial condition, results of operations, assets, or liabilities of the Company.
SCHEDULE 3.07 — TAX MATTERS
The following disclosures are made with respect to the tax matters of the Company:
Entity Classification and Tax Treatment. The Company has been treated as a partnership for federal and state income tax purposes since its formation in 2006. The Company has not made, and has not been required to make, an election under Treasury Regulations Section 301.7701-3 to be classified as other than a partnership (or disregarded entity, as applicable). Each Member reports his or her respective allocable share of the Company's income, gain, loss, deduction, and credit on his or her individual federal and state income tax returns.
Tax Identification.
• Federal Employer Identification Number (EIN): 27-1684352
• Indiana Taxpayer Identification Number: On file with the Indiana Department of Revenue
Tax Filings. The Company files the following tax returns:
(a) Federal: IRS Form 1065 (U.S. Return of Partnership Income), together with Schedules K-1 to each Member, filed annually. The Company is current on all federal tax filings through the fiscal year ended December 31, 2022.
(b) State Income/Information Returns: Indiana Form IT-65 (Indiana Partnership Return), filed annually. The Company is current on all Indiana state information return filings through the fiscal year ended December 31, 2022.
(c) Sales and Use Tax: The Company is registered for Indiana sales and use tax purposes and files periodic returns with the Indiana Department of Revenue. The Company is current on all sales and use tax filings and payments.
(d) Payroll Taxes: The Company withholds and remits federal and state payroll taxes (FICA, federal and state income tax withholding, FUTA, SUTA) in the ordinary course and is current on all payroll tax filings and payments.
Tax Audits, Examinations, and Proceedings. No tax audits, examinations, assessments, deficiency notices, or administrative or judicial proceedings are pending, or to the knowledge of the Members, threatened by any federal, state, or local taxing authority with respect to the Company or any Member (to the extent relating to the Company's operations or income).
Tax Liens. There are no tax liens on any of the assets of the Company.
Extensions and Waivers. No extensions of time to file any tax return of the Company are currently in effect. No waivers of any statute of limitations with respect to taxes of the Company have been granted or requested by the Company or any taxing authority.
Pre-Closing Tax Refunds. Certain pre-closing tax refunds, if any, attributable to taxable periods ending on or prior to the Closing Date are Excluded Assets as set forth in Schedule 1.02.
SCHEDULE 3.08 — REAL PROPERTY
Owned Real Property
The Company does not own any real property.
Leased Real Property
The Company's sole leased real property is as follows:
Property: 1127 Industrial Parkway, Hammond, IN 46320
Consent to Assignment. The Company submitted a formal request for Landlord's consent to assignment of the Facility Lease to Buyer on August 28, 2023. The Company anticipates that Landlord's consent will be obtained prior to Closing. See Schedule 3.03 for additional detail.
Environmental Matters. A Phase I Environmental Site Assessment of the leased premises was conducted by Clearpath Environmental Advisors Inc. (Project Manager: Elena M. Rivas), dated August 10, 2023. No recognized environmental conditions (RECs) requiring remediation were identified. A complete copy of the Phase I ESA report has been made available to Buyer in Data Room Folder 3.12-A (Environmental Reports). See Schedule 3.12 for a detailed summary of the Phase I ESA findings.
SCHEDULE 3.09 — TANGIBLE PERSONAL PROPERTY AND EQUIPMENT
A complete listing of all material tangible personal property and equipment included in the Acquired Assets is set forth in Schedule 1.01, Part (a), which is incorporated herein by reference. A comprehensive fixed asset register, including detailed descriptions, serial numbers, acquisition dates, original costs, accumulated depreciation, and net book values for each individual asset, has been made available to Buyer in Data Room Folder 1.01-A (Fixed Asset Register).
Location of Equipment
All material equipment is located at 1127 Industrial Parkway, Hammond, IN 46320, with the following exceptions:
Three flatbed trucks and installation crews are routinely deployed to job sites in Indiana, Illinois, and Michigan in connection with the Company's field installation operations. Specific truck locations vary based on project schedules. As of the date hereof, one truck and installation crew are deployed to a job site in Gary, Indiana, and one truck and installation crew are deployed to a job site in Joliet, Illinois. All trucks return to the Hammond facility upon completion of each project.
Condition of Equipment
All material equipment is in good working order and has been maintained in accordance with manufacturer-recommended maintenance schedules, subject to normal wear and tear, except as follows:
1. CNC Plasma Table No. 7 (Meridian & Co. Avenger 3, Serial No. EA3-14728, 2015). This unit has experienced a recurring calibration issue affecting precision tolerances on cuts exceeding two (2) inches in thickness. The issue was first identified in approximately Q2 2023 and has resulted in occasional rework on certain heavy-plate cutting jobs. The Company has obtained a quote from Meridian & Co.'s authorized service center for a calibration sensor upgrade and repair, estimated at approximately $35,000. The repair/upgrade is scheduled for Q4 2023. Pending completion of the repair, the Company has been routing heavy-plate cutting jobs exceeding 2-inch thickness to other plasma tables in its shop, which has resulted in minor scheduling inefficiencies but has not materially affected production capacity or delivery timelines.
2. Overhead Bridge Crane No. 2 (Adriatic Corporation, 5-ton, 2012). The hoist motor on this crane required replacement in March 2023. The replacement was performed by Adriatic Corporation's authorized service contractor at a cost of approximately $12,400. The crane is currently fully operational, and no further issues have been identified. The Company's crane inspection records (maintained in compliance with OSHA 29 CFR 1910.179 and ANSI B30.2) are current, and the most recent annual inspection (May 2023) found the crane to be in satisfactory condition.
Liens and Encumbrances
All tangible personal property and equipment is owned by the Company free and clear of all liens, security interests, claims, and encumbrances, except for the following:
Purchase-Money Security Interest — Heartland Equipment Finance LLC. Heartland Equipment Finance LLC holds a purchase-money security interest in one (1) 2021 Aldermere Group TruLaser 3030 Fiber laser cutter (Serial No. TL-40287), securing the remaining unpaid balance of an equipment financing agreement entered into in connection with the purchase of such equipment. The outstanding balance as of the date hereof is approximately $47,000, with monthly payments of approximately $2,400. The financing agreement is scheduled to be fully paid off at or prior to Closing, and Heartland Equipment Finance LLC has confirmed that it will deliver a UCC-3 termination statement upon receipt of the payoff amount. See Schedule 3.14, Item 4 for additional detail regarding this financing arrangement.
Other than the foregoing, no liens, security interests, or encumbrances exist on any of the tangible personal property or equipment of the Company.
SCHEDULE 3.10 — INTELLECTUAL PROPERTY
The following disclosures are made with respect to the intellectual property used in or related to the business of the Company:
Trade Names and Marks
The Company uses the following unregistered trade names and marks in connection with its business:
The Company has not filed any applications for federal trademark registration with the United States Patent and Trademark Office (USPTO) or for state trademark registration with the Indiana Secretary of State or any other state. The Company's rights in the foregoing trade names are based solely on common law rights arising from continuous use in commerce in the State of Indiana and surrounding areas.
Domain Name. The Company uses the internet domain name pinnaclemetal.com in connection with its business. The domain name is currently registered to Gerald T. Brennan through Ostrander Systems (Registrar). The domain registration will be transferred to Buyer at Closing. The current registration expiration date is April 12, 2025. The Company maintains a basic informational website at this domain. No other domain names are owned by or registered to the Company or any Member in connection with the business.
Patents, Copyrights, and Trade Secrets
The Company does not hold any patents, patent applications, registered copyrights, or copyright applications. The Company does not possess any material trade secrets.
The Company owns standard marketing materials, including its website content, brochures, and promotional materials, for which no copyright registrations have been obtained. The Company claims common law copyright protection over such materials, but does not consider them to be material intellectual property assets.
Proprietary Fabrication Drawings and Shop Templates
The Company has developed, through the efforts of its internal engineering and fabrication staff, a library of proprietary fabrication drawings, shop templates, standard detail drawings, welding procedure specifications (WPS), and procedure qualification records (PQR) that are used in the Company's day-to-day fabrication operations. These materials have been developed entirely in-house and do not incorporate any third-party intellectual property. No third-party intellectual property licenses are required for the Company's use of these materials. These proprietary materials are included in the Acquired Assets and will be transferred to Buyer at Closing.
IP Disputes and Third-Party Claims
No intellectual property-related disputes, infringement claims, or cease-and-desist letters have been received by or sent by the Company as of the date hereof. The Company is not aware of any pending or threatened claim by any third party alleging that the Company's use of any trade name, mark, domain name, or other intellectual property infringes or misappropriates the rights of such third party.
Disclosure Regarding "Pinnacle Metals Inc.": The Company is aware that an unrelated entity operates under the name "Pinnacle Metals Inc." in the State of Texas. The Company has had no contact, correspondence, or dispute with this entity. Based on the Company's understanding, Pinnacle Metals Inc. operates in a different geographic market (Texas and the southwestern United States) and, while engaged in the metals industry, offers services and products that differ in certain respects from those of the Company. The Company believes that its use of the trade name "Pinnacle Metal Fabricators" in the Midwest region of the United States does not infringe any rights of Pinnacle Metals Inc. and that the two entities have coexisted without conflict since the Company's founding in 2006. However, the Company has not obtained a formal legal opinion or conducted a comprehensive trademark search with respect to this matter, and no assurance can be given that Pinnacle Metals Inc. or any other third party will not assert a claim in the future.
SCHEDULE 3.11 — EMPLOYEES AND EMPLOYEE BENEFITS
Part (a) — Employee Census
As of the date hereof, the Company employs a total of 74 full-time employees. There are no part-time or temporary employees. The employee census is summarized as follows:
Union Status. No employees of the Company are covered by a collective bargaining agreement. No employees are represented by any labor union, works council, or similar labor organization. To the knowledge of the Company and the Members, there is no pending or threatened union organizing activity, no petition for representation has been filed with the National Labor Relations Board, and no demand for recognition has been made by any union or labor organization.
Post-Closing Staffing. Three (3) administrative positions have been identified by Buyer as redundant with Nexford Industrial Holdings Inc.'s shared services functions and will not be retained following the Closing. These positions are as follows:
(i) Accounts Payable Clerk — currently held by Maria T. Sandoval (ii) Accounts Payable Clerk — currently held by James R. Erickson (iii) Human Resources Coordinator — currently held by Lisa M. Payne
The remaining 71 of 74 current employees will be offered employment by Buyer on or promptly following the Closing Date, on terms and conditions determined by Buyer in its sole discretion, subject to the provisions of Section 5.08 of the Agreement.
A complete employee census, including each employee's name, title, department, hire date, current base compensation, and benefit eligibility status, has been made available to Buyer in Data Room Folder 3.11-A (Employee Census). The Company has also provided Buyer with a summary of all employee compensation changes implemented during the twelve (12) months preceding the date hereof.
Part (b) — Key Employee Arrangements
The following disclosures are made with respect to the compensation arrangements of the Company's key employees and Members:
Gerald T. Brennan — Managing Member.
• Current annual compensation: Approximately $285,000 (consisting of salary of approximately $185,000 plus annual distributions of approximately $100,000 in his capacity as Managing Member)
• Post-Closing arrangement: Gerald T. Brennan will not be retained as an employee of Buyer. Gerald T. Brennan will enter into a Transition Services Agreement with Buyer, pursuant to which he will provide consulting and transition services for a period of twelve (12) months following the Closing Date at a rate of $18,000 per month ($216,000 annualized). The Transition Services Agreement is a Transaction Document under the Agreement.
• Non-competition: Gerald T. Brennan will be subject to the non-competition and non-solicitation covenants set forth in the Agreement (Section 5.09) for a period of thirty-six (36) months following the Closing Date.
Sandra L. Brennan — Member.
• Current annual compensation: Approximately $95,000 (salary for bookkeeping and office administration services)
• Post-Closing arrangement: Sandra L. Brennan will not be retained as an employee of Buyer following the Closing. Her bookkeeping and office administration functions will be transitioned to Buyer's shared services team and/or successor personnel during the transition period.
• Non-competition: Sandra L. Brennan will be subject to the non-competition and non-solicitation covenants set forth in the Agreement (Section 5.09) for a period of twenty-four (24) months following the Closing Date.
Derek J. Kopp — Member; VP of Operations.
• Current annual compensation: Approximately $135,000 (base salary), plus a discretionary annual bonus (historically ranging from $10,000 to $25,000, determined at the discretion of the Managing Member based on overall Company performance)
• Post-Closing arrangement: Derek J. Kopp will be retained by Buyer as Plant Manager of the Hammond facility. His post-Closing compensation will include a base salary of $145,000 per year, and he will be eligible to participate in the Nexford Industrial Holdings Inc. annual bonus plan. An offer letter setting forth the terms of his post-Closing employment has been prepared and will be executed at or prior to Closing.
• Non-competition: Derek J. Kopp will be subject to non-competition and non-solicitation covenants for a period of eighteen (18) months following any termination of employment, as set forth in his offer letter.
Part (c) — Employee Benefit Plans
The Company sponsors or maintains the following employee benefit plans:
1. Group Health Insurance.
• Carrier: Keystone Health Plans Inc.
• Plan type: Group health insurance (PPO)
• Eligibility: All full-time employees and their eligible dependents are eligible to participate after sixty (60) days of continuous employment
• Company contribution: The Company contributes approximately 70% of the monthly premium for employee-only and family coverage; the remaining approximately 30% is paid by the employee through payroll deduction
• Annual premium (Company share): Approximately $385,000
• Current enrollment: Approximately 58 employees are currently enrolled
• Plan year: January 1 through December 31
• The plan is fully insured through Keystone Health Plans Inc.; the Company does not maintain a self-insured health plan
• COBRA: The Company is subject to Indiana state continuation coverage requirements (Indiana mini-COBRA); the Company is not subject to federal COBRA because it employs fewer than 100 employees but provides continuation coverage in compliance with Indiana law
2. Simple IRA Retirement Plan.
• Plan administrator: Brindoval Financial Advisors LLC
• Plan type: Savings Incentive Match Plan for Employees (SIMPLE IRA)
• Eligibility: All employees who received at least $5,000 in compensation during any two preceding calendar years and are reasonably expected to receive at least $5,000 in compensation during the current calendar year
• Company matching contribution: The Company matches employee contributions dollar-for-dollar up to 3% of each eligible employee's compensation
• Annual administration fee: Approximately $8,500, paid to Brindoval Financial Advisors LLC
• Current participation rate: Approximately 45 of 74 employees (approximately 61%)
• The Company has timely deposited all employee deferrals and employer matching contributions with the plan custodian and is current on all filing and reporting obligations
3. Paid Time Off (PTO) Policy.
• The Company provides paid time off (vacation) to all full-time employees based on years of service, as follows:
• 0–2 years: 10 days (80 hours) per year
• 3–7 years: 15 days (120 hours) per year
• 8+ years: 20 days (160 hours) per year
• PTO accrues on a per-pay-period basis and may be carried over to the following calendar year, subject to a maximum accrual cap of 1.5 times the annual allocation
• As of the anticipated Closing Date, total accrued but unused PTO obligations for all employees are estimated at approximately $186,000. This amount is included in the Assumed Liabilities (see Schedule 1.03)
4. No Other Plans. The Company does not sponsor, maintain, or contribute to any of the following:
• Defined benefit pension plan
• Employee stock ownership plan (ESOP) or other equity-based compensation plan
• Deferred compensation arrangement (whether qualified or nonqualified)
• Cafeteria plan (Section 125 plan)
• Health savings account (HSA) or health reimbursement arrangement (HRA)
• Life insurance or disability insurance plan (other than workers' compensation)
• Severance plan or policy
• Any plan that is subject to Title IV of ERISA or Section 412 of the Internal Revenue Code
Part (d) — Employment-Related Claims
No employment-related claims, complaints, or proceedings are pending against the Company, or, to the knowledge of the Company and the Members, threatened, including without limitation workers' compensation disputes, wage and hour claims, discrimination or harassment complaints, wrongful termination claims, or OSHA citations, except as follows:
Resolved Workers' Compensation Claim (January 2022). In January 2022, one shop floor employee (name withheld for privacy; records available in Data Room Folder 3.11-D) filed a workers' compensation claim in connection with a hand injury sustained while operating a press brake at the Company's Hammond facility. The incident was investigated by the Company's safety manager, and a root cause analysis attributed the injury to operator error rather than equipment malfunction. The claim was administered and settled through the Company's workers' compensation insurance carrier, Redwood Mutual Insurance Co., for a total settlement amount of approximately $24,000, inclusive of medical expenses and temporary disability benefits. No penalties or citations were issued in connection with this incident. The employee returned to work in full capacity in March 2022 and remains employed by the Company as of the date hereof. The settlement was within the Company's workers' compensation insurance coverage limits, and no out-of-pocket costs were incurred by the Company beyond its regular insurance premiums.
Other than the foregoing resolved claim, the Company has not experienced any material employment-related claims, disputes, or regulatory actions during the past five (5) years.
SCHEDULE 3.12 — ENVIRONMENTAL MATTERS
Phase I Environmental Site Assessment
A Phase I Environmental Site Assessment (the "Phase I ESA") of the Company's leased premises at 1127 Industrial Parkway, Hammond, IN 46320 was conducted by Clearpath Environmental Advisors Inc. (Project Manager: Elena M. Rivas, P.G.), in accordance with ASTM Standard Practice E1527-21, and is dated August 10, 2023. A complete copy of the Phase I ESA report has been made available to Buyer in Data Room Folder 3.12-A (Environmental Reports).
Summary of Findings
The Phase I ESA identified no recognized environmental conditions (RECs), controlled recognized environmental conditions (CRECs), or historical recognized environmental conditions (HRECs) requiring remediation at the subject property. The following historical findings were noted in the Phase I ESA for informational purposes:
1. Prior Use of Facility. The facility at 1127 Industrial Parkway was previously used as a light industrial warehouse and distribution facility from approximately 1975 through 2005 by a prior tenant (Lakeshore Distribution & Warehousing Co., now defunct). Review of available records, including Trelwick fire insurance maps, city directories, and historical aerial photographs, revealed no evidence of hazardous substance releases, spills, or contamination associated with the prior use of the facility.
2. Closed Underground Storage Tank (UST). A single underground storage tank (UST), formerly used for the storage of heating oil (No. 2 fuel oil), was located on the southern side of the facility. The UST was decommissioned and removed by Lakeshore Realty Partners LLC (the current landlord and property owner) in 2017, in accordance with Indiana Administrative Code requirements and under the oversight of the Indiana Department of Environmental Management (IDEM). Closure documentation, including laboratory analytical results from confirmation soil sampling conducted at the time of UST removal, is on file with IDEM and indicates that no contamination exceeding applicable IDEM residential or commercial closure levels was detected. IDEM issued a "No Further Action" (NFA) determination with respect to the UST closure. Copies of the UST closure report and NFA letter are available in Data Room Folder 3.12-B (UST Closure Documentation).
3. Environmental Database Review. The facility at 1127 Industrial Parkway is not listed on any federal or state environmental database, including without limitation:
• CERCLIS (Comprehensive Environmental Response, Compensation, and Liability Information System)
• NPL (National Priorities List / Superfund)
• RCRA (Resource Conservation and Recovery Act) large or small quantity generator lists
• RCRA CORRACTS or TSD facility lists
• Indiana Voluntary Remediation Program (VRP) site list
• Indiana Brownfields Program site list
• Leaking Underground Storage Tank (LUST) database
Current Operations. The Company's current operations at the facility involve the following environmental considerations:
1. Hazardous Materials Usage and Storage. The Company uses and stores minor quantities of welding gases (including argon, carbon dioxide, acetylene, and oxygen), cutting fluids, hydraulic oils, lubricants, and cleaning solvents in connection with its metal fabrication operations. All such materials are stored in accordance with applicable OSHA regulations (29 CFR 1910), Indiana fire code requirements, and manufacturer safety data sheet (SDS) recommendations. The Company maintains a current inventory of all hazardous materials and an up-to-date SDS library at the facility.
2. Waste Generation and Disposal. The Company generates scrap metal and metal shavings as byproducts of its fabrication operations. These materials are collected and sold to a licensed scrap metal recycler, Tri-County Scrap & Recycling Inc. (Gary, IN), on approximately a monthly basis. Average annual revenue to the Company from scrap metal

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