Contract analysis

I. Purpose and Scope of Review This memorandum was prepared in connection with Calderwood & Harkness LLP's comprehensive review of Nexford Industrial Holdings Inc.'s ("Nexford" or the "Company") Directors & Officers ("D&O") liability insurance tower and product-liability insurance tower for the 2022–2023 renewal cycle. The renewal effective date is July 1, 2022. The engagement encompasses a holistic assessment of the

II. Background A. Nexford Corporate Structure and Governance Nexford Industrial Holdings Inc. is incorporated in the State of Delaware and maintains its principal executive offices at 2200 Corporate Center Drive, Suite 800, Schaumburg, Illinois 60173. The Company serves as the holding company for three operating subsidiaries engaged in the industrial manufacturing sector. Nexford is majority-owned (68.5%) by Veltrano

III. Documents Reviewed In connection with the preparation of this memorandum, we reviewed the following documents:

1. Nexford Industrial Holdings Inc. Form Director and Officer Indemnification Agreement (undated form, believed adopted in connection with the leveraged buyout closing on June 15, 2018) (the "Form Indemnification Agreement").

2. Amended and Restated Bylaws of Nexford Industrial Holdings Inc. (as amended through December 10, 2020).

3. Amended and Restated Certificate of Incorporation of Nexford Industrial Holdings Inc. (filed with the Delaware Secretary of State on June 15, 2018, as amended through the date hereof).

4. Vandermeer National Insurance Company Directors & Officers Liability Insurance Policy, Policy No. VNI-DO-2021-88473, effective July 1, 2021 through July 1, 2022 (the "Vandermeer Primary Policy").

5. Harrington Specialty Insurance Co. Side-A Difference-in-Conditions Directors & Officers Liability Insurance Policy, Policy No. HSI-DIC-2021-00342, effective July 1, 2021 through July 1, 2022 (the "Harrington DIC Policy").

6. Commonwealth Indemnity Group First Excess Directors & Officers Liability Insurance Policy, Policy No. CIG-XS1-2021-55290, effective July 1, 2021 through July 1, 2022 (the "Commonwealth 1st Excess Policy").

7. Graystone Mutual Assurance Co. Second Excess Directors & Officers Liability Insurance Policy, Policy No. GMA-XS2-2021-71048, effective July 1, 2021 through July 1, 2022 (the "Graystone 2nd Excess Policy").

8. Pinnacle Re Insurance Ltd. Third Excess Directors & Officers Liability Insurance Policy, Policy No. PRI-XS3-2021-19867, effective July 1, 2021 through July 1, 2022 (the "Pinnacle 3rd Excess Policy").

9. Calderwood & Harkness LLP Side-A DIC Policy Analysis Memorandum dated June 3, 2022.

10. Calderwood & Harkness LLP Preliminary Coverage Gap Memorandum — D&O Tower dated May 27, 2022. We note that we did not independently verify the accuracy or completeness of the factual information contained in the documents reviewed. Our analysis is based on the documents as provided to us by the Company and the Company's insurance broker, Meridian Risk Advisors.

IV. Summary of Key Findings Based on our review of the documents identified above, the Form Indemnification Agreement is generally well-drafted and provides broad indemnification rights consistent with the maximums permitted under Delaware law. The agreement includes key protective provisions that are standard in indemnification agreements for directors and officers of PE-backed portfolio companies, including mandato

V. Detailed Analysis A. Finding 1: Advancement of Expenses Clause Does Not Align with Harrington DIC Trigger

1. Current Indemnification Agreement Language. Section 4 of the Form Indemnification Agreement sets forth the Company's obligation to advance expenses to covered directors and officers. In its current form, the advancement provision reads, in relevant part: "The Company shall advance all Expenses incurred by or on behalf of the Indemnitee in connection with any Proceeding, whether prior to or after the final disposit

2. Harrington Side-A DIC Trigger Mechanism. The Harrington Side-A DIC Policy is designed to respond in circumstances where the underlying D&O insurance fails to pay for a covered loss due to specified triggering events. As described in detail in our Side-A DIC Policy Analysis Memorandum dated June 3, 2022, the Harrington DIC Policy identifies four principal triggering events under which the policy will respond: (i) F

3. The Misalignment. The misalignment between the Form Indemnification Agreement and the Harrington DIC Policy arises from the intersection of the Board determination prerequisite in the indemnification agreement and the 60-day constructive refusal trigger in the DIC policy. Consider the following illustrative scenario. A director is named as a defendant in a securities fraud lawsuit. The director submits a written r

4. Recommendation. We recommend the following corrective measures to address this misalignment: First, the advancement of expenses clause in Section 4 of the Form Indemnification Agreement should be amended to eliminate the Board determination prerequisite. The revised provision should provide for mandatory advancement upon the Company's receipt of the Indemnitee's written request and undertaking, without any require

1. Current Indemnification Agreement Language. The Form Indemnification Agreement uses the defined term "Proceeding" as the triggering event for the Company's indemnification and advancement obligations. Under the agreement, the Company's obligation to indemnify arises only "in connection with any Proceeding," and the obligation to advance expenses applies only to "Expenses incurred by or on behalf of the Indemnitee

Section 1(e) of the Form Indemnification Agreement defines "Proceeding" as follows: "'Proceeding' means any threatened, pending, or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing, or any other actual or threatened proceeding, whether civil, criminal, administrative, investigative, or other." On its face, this definition is broad and covers a

2. D&O Policy Definition of "Claim". By contrast, the Vandermeer Primary D&O Policy (VNI-DO-2021-88473) defines "Claim" — the triggering event for coverage under the policy — more broadly than the indemnification agreement's definition of "Proceeding." The Vandermeer policy defines "Claim" to include: (a) a written demand for monetary damages or non-monetary relief against any Insured Person; (b) a civil, criminal, a

3. The Gap. The gap between the indemnification agreement's definition of "Proceeding" and the D&O policies' definition of "Claim" creates scenarios in which a matter qualifies as a "Claim" under the D&O insurance policies — thereby triggering coverage obligations, notice requirements, and defense cost provisions — but does not qualify as a "Proceeding" under the indemnification agreement — meaning the Company has no

4. Recommendation. We recommend the following corrective measures to address this definitional misalignment: First, the definition of "Proceeding" in Section 1(e) of the Form Indemnification Agreement should be amended to align with — and be at least as broad as — the definition of "Claim" in the Vandermeer Primary D&O Policy and the Harrington Side-A DIC Policy. Specifically, the revised definition should add expres

VI. Additional Observations In the course of our review of the Form Indemnification Agreement, we identified several additional matters that, while not presenting the same degree of urgency as the two principal findings discussed in Section V, warrant attention as part of the Company's broader effort to ensure a fully coordinated director and officer protection framework. A. Consistency Across All Nine Indemnificatio

VII. Recommended Action Items Based on the findings and analysis set forth in this memorandum, we recommend the following action items:

1. Draft revised advancement of expenses clause. Prepare a revised Section 4 of the Form Indemnification Agreement that eliminates the Board determination prerequisite and establishes a mandatory 30-day advancement timeline, coordinated with the Harrington DIC Policy's 60-day constructive refusal trigger. The revised clause should provide for mandatory advancement upon receipt of the Indemnitee's written request and

2. Draft revised definition of "Proceeding." Prepare a revised definition of "Proceeding" (or, if the alternative approach is adopted, a new defined term "Claim") that aligns with and is at least as broad as the definition of "Claim" in the Vandermeer Primary D&O Policy and the Harrington Side-A DIC Policy. The revised definition should expressly cover informal regulatory inquiries, subpoenas, document demands, tolli

3. Circulate proposed revisions to General Counsel. Circulate the proposed revisions, together with a cover memorandum explaining the rationale for each change, to Priya Sundaram, General Counsel and Corporate Secretary of Nexford, for review and comment. Responsible: Naomi Petersen. Target date: June 13, 2022.

4. Prepare uniform amendment agreements. Upon approval of the proposed revisions by Ms. Sundaram (and, if required, by the Board of Directors), prepare uniform amendment agreements for execution by all nine directors and all covered officers. The amendment agreements should be in the form of a First Amendment to Director and Officer Indemnification Agreement and should incorporate the revised advancement clause and r

5. Confirm status of subsidiary-level indemnification agreements. Request that Priya Sundaram confirm whether indemnification agreements are in place at the subsidiary level for directors and officers (or managers) of Nexford Conveyor Systems, LLC; Triton Fastener Corp.; and Marlowe Asset Management Precision Machining, Inc. If such agreements are not in place or are inadequate, prepare form subsidiary indemnificatio

6. Review Amended and Restated Bylaws. Review the indemnification and advancement provisions of the Amended and Restated Bylaws of Nexford for consistency with the proposed amendments to the Form Indemnification Agreement. If the bylaws contain a Board determination prerequisite for advancement or a narrow definition of "Proceeding" (or equivalent term), prepare recommended bylaw amendments for consideration by the B

7. Flag pre-IPO indemnification agreement overhaul. Add to the engagement's tracking log a future work item for a comprehensive overhaul of the indemnification agreement framework in connection with any potential IPO. This work item should be activated when the IPO timeline crystallizes and should encompass revised indemnification agreements, revised bylaws, D&O tower restructuring, and IPO-specific Side-A DIC covera

VIII. Conclusion The Form Indemnification Agreement adopted by Nexford Industrial Holdings Inc. provides robust indemnification protections for the Company's directors and officers that are generally consistent with Delaware law and market practice for PE-backed portfolio companies. The agreement reflects a clear intent to provide the broadest permissible indemnification and to create enforceable contractual rights t