Contract analysis

I. Executive Summary Calderwood & Harkness LLP ("C&H") has been engaged by Nexford Industrial Holdings Inc. (the "Company" or "Nexford") to assess whether the current $55 million aggregate directors and officers ("D&O") liability insurance tower maintained by the Company provides adequate protection for the Company's directors and officers in light of Nexford's current risk profile as a privately held, private-equity

II. Background — Nexford Corporate Profile and Governance Structure A. Corporate Overview Nexford Industrial Holdings Inc. is a Delaware corporation headquartered at 2200 Corporate Center Drive, Suite 800, Schaumburg, Illinois 60173. The Company serves as the parent holding entity for a portfolio of three operating subsidiaries engaged in various segments of the industrial manufacturing sector. These subsidiaries are

1. Nexford Conveyor Systems, LLC — A Delaware limited liability company with principal operations in Joliet, Illinois. Nexford Conveyor Systems is the Company's largest operating subsidiary, specializing in the design, engineering, manufacture, and installation of heavy-duty conveyor systems for mining, aggregate processing, and bulk material handling applications. For fiscal year 2021, Nexford Conveyor Systems gener

2. Triton Fastener Corp. — An Illinois corporation with principal operations in Rockford, Illinois. Triton Fastener manufactures a comprehensive range of industrial fasteners, including high-strength bolts, specialty anchoring systems, and proprietary fastening solutions for the construction, infrastructure, and heavy equipment industries. For fiscal year 2021, Triton Fastener generated approximately $397.6 million i

3. Marlowe Asset Management Precision Machining, Inc. — An Ohio corporation with principal operations in Akron, Ohio. Marlowe Asset Management Precision Machining provides precision-machined components and sub-assemblies for the aerospace, defense, and energy industries, utilizing advanced CNC machining, multi-axis milling, and Swiss-type turning capabilities. For fiscal year 2021, Marlowe Asset Management Precision

III. Current D&O Tower Structure (2021–2022 Policy Year) A. Tower Summary Table The Company's D&O insurance program for the current policy year (July 1, 2021 – July 1, 2022) consists of a four-layer ABC tower and a dedicated Side-A DIC policy, as summarized in the following table: The total aggregate limit available under the D&O program is $55 million, consisting of $40 million in the ABC tower (primary plus three e

IV. Five-Year D&O Loss History A thorough review of the Company's D&O claims experience over the preceding five-year period (policy years 2017–2018 through 2021–2022) reveals the following: • Reported Claims. A single D&O claim has been reported during the five-year period. In 2020, the Company received a shareholder demand letter from a co-investor raising concerns about certain board decisions related to capital al

V. Peer Benchmarking Analysis A. Methodology. To provide an empirical benchmark against which to evaluate the adequacy of Nexford's $55 million D&O aggregate limit, C&H, in consultation with Kessler Quinn Advisory Group ("Kessler Quinn"), identified eight comparable private, PE-backed industrial companies (the "Peer Companies") for benchmarking purposes. The Kessler Quinn engagement was led by Arthur Kessler, Managin

VI. Maximum Probable Loss Scenario Analysis A. Methodology. To supplement the peer benchmarking analysis with a risk-based assessment, C&H modeled four hypothetical loss scenarios designed to represent the most significant categories of D&O claims that could reasonably be expected to arise in the context of a private, PE-backed industrial company. These scenarios were developed in consultation with Kessler Quinn Advi

VII. Pre-IPO Considerations A. Potential IPO Timeline In discussions with C&H, Priya Sundaram, Nexford's General Counsel, has identified a potential IPO in the 2023–2024 timeframe as a component of Veltrano Capital Partners' exit strategy for the Nexford investment. While no formal IPO process has commenced — no underwriters have been retained, no registration statement has been prepared, and no board resolution auth

1. Early Engagement for Tower Redesign. At least 90 to 120 days before any contemplated IPO filing (i.e., before the filing of a registration statement on Form S-1 with the Securities and Exchange Commission), Nexford should engage C&H and Ashford Breckinridge to redesign the D&O tower. The redesign process involves transitioning from the current private-company program to a public-company program with dedicated Side

2. Pre-IPO Tail Coverage. The Company should consider securing pre-IPO tail policies on the existing private-company program. Pre-IPO tail coverage protects directors and officers against claims that arise after the IPO but are based on pre-IPO conduct — a category of claims that is not uncommon and that may fall outside the scope of the post-IPO public-company program.

3. Side-A DIC Maintenance and Enhancement. The Side-A DIC should be maintained through and beyond the IPO, and the Company should consider further increasing the Side-A DIC limit beyond the currently recommended $20 million level. The heightened exposure associated with public-company status and the increased personal liability risk for individual directors and officers make robust Side-A DIC coverage essential.

4. Budget for Premium Increases. The Company should anticipate significant premium increases in connection with a transition to public-company D&O coverage. Post-IPO D&O premiums for comparable newly public industrial companies range from $2.5 million to $5.0 million or more per annum, representing an increase of approximately 80% to 250% or more over Nexford's current D&O premium of $1,363,450. The premium increase

5. Retention of Advisory Team. C&H and Ashford Breckinridge should be formally retained to lead the pre-IPO D&O tower redesign, with input from Kessler Quinn Advisory Group on actuarial matters and market intelligence.

VIII. Rate-on-Line and Premium Analysis The rate-on-line and premium structure of Nexford's D&O program are relevant to the adequacy analysis insofar as they reflect market pricing of the Company's risk profile and provide context for assessing whether the current limits are reasonably priced and appropriately structured. Overall Rate-on-Line. As noted in Section III.B above, the overall rate-on-line for the D&O prog

IX. Insured vs. Insured Exclusion — Adequacy Implications The Insured vs. Insured ("IvI") exclusion is a standard provision in D&O liability policies that excludes coverage for claims brought by one insured person against another insured person. The rationale for the exclusion is to prevent collusive or manufactured claims between insured persons. However, the practical effect of the IvI exclusion can be to deny cove

X. Coordination with Side-A DIC and Indemnification Agreements The adequacy of the $55 million aggregate D&O tower must be assessed not in isolation, but in conjunction with two related components of the Company's director and officer protection framework: the Side-A DIC policy and the Company's indemnification agreements with its directors and officers. Side-A DIC Coverage. As described in Section III above, the Sid

XI. Conclusions and Recommendations A. Adequacy Determination — Current Status Based on the totality of the analysis set forth in this memorandum, it is our conclusion that the $55 million D&O aggregate limit is adequate for Nexford Industrial Holdings Inc. in its current status as a privately held, PE-backed industrial holding company. This conclusion is supported by the following key factors:

1. Clean Loss History. The Company has recorded zero paid D&O losses in the five-year period from policy year 2017–2018 through the current policy year, with only a single reported claim (a shareholder demand letter in 2020 that was resolved without payment). This clean loss history reflects favorably on the Company's governance practices and current risk management framework.

2. Peer Benchmarking. Nexford's $55 million D&O aggregate is slightly above the median ($50 million) and approximately at the mean ($53 million) of the eight-company peer benchmarking set, positioning the Company in the middle-to-upper portion of the comparables. The Company's rate-on-line of 2.48% is below the peer median, reflecting the competitive terms achieved based on the Company's favorable risk profile.

3. MPL Scenario Analysis. The $55 million aggregate is sufficient to absorb all four modeled maximum probable loss scenarios without full tower exhaustion. While the most severe creditor-action and multi-claim scenarios would significantly stress the tower, these scenarios are assessed as low probability under current conditions, and the dedicated Side-A DIC provides a critical backstop for individual directors and o

4. Competitive Rate-on-Line. The overall rate-on-line of 2.48% is competitive relative to peers and reflects appropriate risk-based pricing across the tower layers, with declining rates at higher attachment points consistent with standard market practice. B. Recommended Actions — Current Renewal Cycle We recommend the following actions in connection with the upcoming July 1, 2022 renewal of the D&O program:

1. Increase Side-A DIC Limit from $15 Million to $20 Million. Consistent with the recommendation set forth in the Side-A DIC Policy Analysis Memorandum dated June 3, 2022, the Company should increase the dedicated Side-A DIC limit by $5 million. This increase will bring the Side-A DIC coverage above the peer median and provide enhanced personal liability protection for individual directors and officers, which is part

2. Negotiate Enhanced IvI Carve-Backs. The Company should seek enhanced carve-backs to the Insured vs. Insured exclusion in the primary and excess layers of the ABC tower. Priority carve-backs include: (a) a carve-back for claims brought by a bankruptcy trustee, receiver, or examiner; (b) a carve-back for claims brought by insured persons who are no longer serving in their capacity as directors or officers at the tim

3. Address Identified Coverage Gaps. The Preliminary Coverage Gap Memorandum — D&O Tower dated May 27, 2022 identified 14 specific coverage gaps and deficiencies in the current tower, including issues related to definition scope, notice provisions, allocation methodology, and severability. The Company should work with Ashford Breckinridge and C&H to address these gaps at renewal through policy endorsements or manuscr

1. Reassess D&O Tower Limits. At least 120 days before any IPO filing, the Company should undertake a comprehensive reassessment of D&O tower limits in light of the transition to public-company status. Based on industry benchmarking for newly public industrial companies of comparable size, the Company should anticipate increasing total D&O limits to the $75 million to $125 million or greater range.

2. Restructure D&O Program. The D&O program should be restructured from its current private-company format to a public-company program with dedicated Side-A, Side-B, and Side-C coverage towers. This restructuring requires careful analysis of coverage needs, carrier selection, and policy drafting to ensure comprehensive protection in the public-company environment.

3. Secure Pre-IPO Tail Policy. The Company should obtain pre-IPO tail coverage on the existing private-company program to protect directors and officers against claims arising after the IPO that are based on pre-IPO conduct. Pre-IPO tail coverage fills a gap that could otherwise leave directors and officers exposed to historical claims that are not covered by the post-IPO public-company program.

4. Budget for Premium Increases. The Company should budget for D&O premium increases of approximately 80% to 250% or more over current levels. Post-IPO D&O premiums for comparable newly public industrial companies range from $2.5 million to $5.0 million or more per annum, compared to the Company's current D&O premium of $1,363,450.

5. Retain Advisory Team. C&H and Ashford Breckinridge should be formally retained to lead the pre-IPO D&O tower redesign, with actuarial and market intelligence support from Kessler Quinn Advisory Group. D. Ongoing Monitoring In addition to the specific actions recommended above, we recommend the following ongoing monitoring activities to ensure continued adequacy of the D&O program: • Annual Adequacy Review. The Com

XII. Limitations and Qualifications This memorandum is subject to the following limitations and qualifications, which should be considered in evaluating the conclusions and recommendations set forth herein:

1. Scope of Analysis. This memorandum addresses the adequacy of aggregate D&O tower limits only. It does not address policy wording, exclusions, conditions, or specific coverage gaps, which are covered in the separate memoranda referenced throughout this document, including the Preliminary Coverage Gap Memorandum — D&O Tower (May 27, 2022), the Side-A DIC Policy Analysis Memorandum (June 3, 2022), the Indemnification

2. Peer Benchmarking Data. The peer benchmarking data utilized in this analysis is anonymized and directional in nature. Individual Peer Companies may have materially different risk profiles, claims histories, governance structures, or industry-specific exposures that are not fully captured in the anonymized data. The benchmarking analysis should be understood as providing general market context rather than precise o

3. MPL Scenario Hypotheticals. The maximum probable loss scenarios presented in Section VI are hypothetical constructs developed for analytical purposes. They do not constitute predictions, forecasts, or assessments of the probability or likelihood of actual losses. Actual D&O claims may differ materially from the modeled scenarios in nature, severity, or frequency.

4. Information Cutoff. This analysis is based on information available to C&H as of June 6, 2022, including the Company's FY2021 audited financial statements, the current D&O program documentation, and the peer benchmarking and actuarial data provided by Kessler Quinn Advisory Group and Ashford Breckinridge LLP. The analysis does not account for subsequent developments, including changes in the Company's financial co

5. Privilege and Confidentiality. This memorandum is prepared by Calderwood & Harkness LLP for the sole benefit of Nexford Industrial Holdings Inc. and is subject to attorney-client privilege and the attorney work product doctrine. It should not be disclosed to third parties without the prior written consent of C&H and the Company, except as may be required by law or as necessary to effectuate the recommendations con