Contract analysis

From: Douglas Fairchild <dfairchild@calderwoodharkness.com> To: Celeste Brogan <cbrogan@ridgemontcapital.com> Cc: Jonathan Veltrano <jridgemont@ridgemontcapital.com> Date: Mon, 20 Jun 2022 16:42:00 -0500 Subject: Nexford Industrial Holdings — Insurance Tower Adequacy Summary and Renewal Recommendations

I wanted to provide you and Jonathan with a high-level summary of our findings and renewal recommendations regarding Nexford Industrial Holdings Inc.'s D&O liability and product-liability insurance towers, in connection with the 2022-2023 renewal cycle. As you know, Calderwood & Harkness was engaged (Matter 1005-00003) to conduct a comprehensive review of both towers ahead of the July 1, 2022 renewal effective date.

Priya Sundaram and Trevor Haines at Nexford received the full comprehensive reports on June 17, and we are currently preparing a board presentation for the upcoming June 22 meeting. This email is intended to give Veltrano Capital Partners Fund IV a concise summary for portfolio risk oversight purposes.

Current Structure ($55M aggregate, five layers):

— Primary: Vandermeer National Insurance Company, $10M x $10M — 1st Excess: Commonwealth Indemnity Group, $10M xs $10M — 2nd Excess: Graystone Mutual Assurance Co., $10M xs $20M (being replaced at renewal by Northfield Excess Insurance Company) — 3rd Excess: Pinnacle Re Insurance Ltd. (Bermuda), $10M xs $30M — Side-A DIC: Harrington Specialty Insurance Co., $15M dedicated (recommending increase to $20M at renewal)

Entity coverage carries a $1,000,000 SIR. The Side-A DIC has no SIR.

Expiring premium is $1,363,450 (rate-on-line: 2.48%).

Loss history is clean. Over the past five years, Nexford has reported one D&O claim — a shareholder demand letter received in 2020 that was resolved without payment. Zero paid losses.

Adequacy Finding: The $55M aggregate is adequate for Nexford's current profile as a privately held, PE-backed industrial company. Peer benchmarking against eight comparable private PE-backed industrial companies supports this conclusion.

Side-A DIC Recommendation: We are recommending an increase of the Harrington Side-A DIC limit from $15M to $20M. This is particularly important given Veltrano's control dynamics — you hold 68.5% of Nexford's equity and appoint five of the nine board directors (with four independents). The Side-A DIC provides critical personal asset protection for directors in scenarios where entity indemnification is unavailable, inc

Insured vs. Insured Exclusion: We have flagged this as requiring focused attention given the sponsor-controlled board structure. We are negotiating specific carve-backs as part of the renewal through Ashford Breckinridge.

Pre-IPO Caveat: If Nexford proceeds with a potential IPO in the 2023-2024 timeframe — as Priya has discussed with us — the D&O tower will need to be significantly revisited in terms of both aggregate limits and coverage structure. Securities claims exposure, Section 11/12 liability, and public-company Side-A considerations will all come into play. We strongly recommend engaging well in advance of any IPO process to r

Current Structure ($75M aggregate, four layers):

— Primary GL/PL: Midland Casualty & Surety Company, $5M per occurrence / $10M aggregate (SIR: $500,000 per occurrence) — 1st Excess/Umbrella: Great Basin Insurance Company, $25M xs $10M — 2nd Excess: Cornerstone Reinsurance Corp., $25M xs $35M — 3rd Excess: Allegheny Pacific Underwriters, Inc., $15M xs $60M

Expiring premium is $2,642,900 (rate-on-line: 3.52%).

Loss History: Total five-year incurred losses are $15.12 million, comprising $4.72M paid on nine closed claims, $8.3M in open reserves on three open claims, and a $2.1M IBNR estimate per Kessler Quinn Advisory Group's actuarial analysis.

— Higgins v. Nexford Conveyor Systems, LLC et al., Case No. 2021-L-04382 (Circuit Court, Will County, IL) — catastrophic crush injury with damages sought of $14.5M; currently in discovery. — Consolidated Builders Supply Co. v. Triton Fastener Corp., Case No. 1:21-cv-08914 (N.D. Ill.) — structural failure of Grade 8 hex bolts, $6.8M in damages; motion to dismiss was denied February 11, 2022.

Adequacy Finding: The $75M aggregate is adequate based on catastrophic loss scenario modeling — including conveyor system fatality, mass fastener failure, and multi-claimant product defect scenarios — and industry loss data. However, we recommend continued monitoring given increasing claims frequency. Kessler Quinn's actuarial inputs were incorporated into the analysis.

Product Recall Sub-Limit: The current sub-limit of $2.5M per occurrence / $5M aggregate is inadequate. Historical recall costs total $1.44M (the Triton Fastener voluntary recall in March 2020 at $1.1M, and the Nexford Conveyor advisory notice in August 2020 at $340,000). We are recommending an increase to $5M per occurrence / $10M aggregate. Incremental premium is estimated at $67,000.

Revenue Exposure Context: Nexford ships approximately 42,000 SKUs annually across its three subsidiaries — Nexford Conveyor Systems (56% of $1.42B consolidated revenue, or $795.2M), Triton Fastener Corp. (28%, or $397.6M), and Marlowe Asset Management Precision Machining (16%, or $227.2M). Completed operations coverage extends 10 years post-delivery.

— D&O renewal premium: $1,498,200 (increase of $134,750 / 9.88%) — PL renewal premium: $2,985,500 (increase of $342,600 / 12.96%) — Combined renewal premium: $4,483,700 (increase of $477,350 / 11.91% over expiring combined premium of $4,006,350) — Insurance spend as % of revenue: approximately 0.282% of $1.42B consolidated FY2021 revenue (per Pemberton & Associates audited financials) — in line with the peer group

Carrier Note: Northfield Excess Insurance Company is replacing Graystone Mutual Assurance Co. on the D&O 2nd excess layer (premium of $221,000 vs. prior $198,750). All other carriers are renewing. The Harrington Side-A DIC is renewing with the limit increase from $15M to $20M, with premium increasing from $224,000 to $289,500.

A board resolution authorizing CEO Sandra Elliston and General Counsel Priya Sundaram to bind coverage will be presented at the upcoming board meeting, with a combined premium authorization cap expected at $4,600,000.

• Increase Side-A DIC limit from $15M to $20M (adopted) • Increase product recall sub-limit from $2.5M/$5M to $5M/$10M (adopted; incremental premium $67,000) • Negotiate improved severability, definition of "Insured Person," and Insured vs. Insured carve-backs in the D&O tower (18 total negotiation points across both towers are being addressed through Ashford Breckinridge) • Address cross-liability provisions in the

I am happy to schedule a call with either or both of you to discuss any of this in greater detail. The comprehensive tower review reports — both the D&O and PL reports, dated June 17, 2022 — can be provided to Veltrano upon Nexford's authorization. I would recommend coordinating through Priya to preserve privilege.

Douglas Fairchild Partner Calderwood & Harkness LLP 155 North Wacker Drive, Suite 4200 Chicago, IL 60606 Direct: (312) 555-4710 dfairchild@calderwoodharkness.com

Engagement Team: Angela Fontaine (billing partner), Naomi Petersen (lead associate), Yuki Nakamura (working associate)

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

This communication, including any attachments, is protected by the attorney-client privilege and/or the work product doctrine. It is confidential and intended solely for the use of the named recipients. Veltrano Capital Partners, as the 68.5% majority equity holder of Nexford Industrial Holdings Inc., receives this communication pursuant to the common interest shared with Nexford in connection with the insurance towe