Contract analysis

I. Executive Summary This memorandum provides a detailed analysis of the Harrington Specialty Insurance Co. Side-A Directors & Officers Difference-in-Conditions ("DIC") policy currently in force for the July 1, 2021 through July 1, 2022 policy year, Policy No. HSI-DIC-2021-00342 (the "Harrington Policy" or "Side-A DIC Policy"). The analysis has been prepared at the direction of Responsible Partner Douglas Fairchild t

II. Background A. Nexford Corporate Structure and Board Composition Nexford Industrial Holdings Inc. is a Delaware corporation headquartered at 2200 Corporate Center Drive, Suite 800, Schaumburg, Illinois 60173. The Company was acquired on June 15, 2018 in a leveraged buyout valued at approximately $2.1 billion by Veltrano Capital Partners Fund IV, LP ("Veltrano Fund IV" or the "Sponsor"), a Delaware limited partners

III. Policy Overview — Harrington Specialty Side-A DIC (HSI-DIC-2021-00342) A. Named Insureds and Insured Persons The Harrington Side-A DIC Policy identifies Nexford Industrial Holdings Inc. as the Named Insured. The policy defines "Insured Persons" to include all past, present, and future directors and officers of Nexford Industrial Holdings Inc. and each of its subsidiaries, as those terms are defined in the policy

IV. Trigger Provisions Analysis A. Primary Trigger — Non-Indemnification The Harrington Side-A DIC Policy is fundamentally a non-indemnification policy. It responds when Nexford — the entity that would ordinarily indemnify its directors and officers pursuant to the Company's bylaws, certificate of incorporation, and individual indemnification agreements — is unable or unwilling to indemnify the Insured Person for a l

1. Financial Inability. The policy responds when Nexford is financially unable to indemnify an Insured Person. This trigger encompasses situations in which the Company lacks sufficient liquid assets to satisfy its indemnification obligations, is in a state of insolvency (whether legal or equitable), or has filed for or been placed into bankruptcy proceedings under Title 11 of the United States Code. The financial ina

2. Legal Prohibition. The policy responds when Nexford is legally prohibited from indemnifying an Insured Person under applicable law. Under Section 145 of the Delaware General Corporation Law ("DGCL"), a corporation's power to indemnify its directors and officers is subject to certain limitations. Most notably, Section 145(a) permits indemnification of directors and officers who acted in good faith and in a manner r

3. Refusal to Indemnify. The policy responds when Nexford refuses to indemnify an Insured Person for any reason, including a board decision not to advance defense costs or not to indemnify following the conclusion of a proceeding. This trigger is intentionally broad and does not require the Company to articulate a legal basis for its refusal. If the board — or any authorized body within the Company — simply declines

V. Bankruptcy and Insolvency Response Provisions A. Company Insolvency / Bankruptcy Trigger The Harrington Side-A DIC Policy contains detailed provisions addressing the impact of Nexford entering bankruptcy, receivership, or insolvency proceedings on the availability of coverage for individual Insured Persons. These provisions are among the most important features of any Side-A DIC policy, and the Harrington Policy's

VI. Difference-in-Conditions Coverage Grants A. Methodology — Coverage Comparison The DIC function of the Harrington Side-A DIC Policy is the feature that most significantly distinguishes it from a simple Side-A-only policy. To identify and catalogue the specific coverage differentials between the Harrington Policy and the underlying D&O tower, we conducted a side-by-side comparison of the Harrington Policy's terms (

1. Insured vs. Insured Exclusion The Vandermeer primary D&O policy contains an Insured vs. Insured exclusion (sometimes referred to as the "IvI exclusion") that bars coverage for claims brought by one Insured Person against another Insured Person, or by the Named Insured (Nexford) against an Insured Person. This exclusion is standard in D&O policies and is designed to prevent collusive litigation — i.e., to prevent t

2. Conduct Exclusions The Vandermeer primary D&O policy contains conduct exclusions that bar coverage for claims based on or arising out of: (a) dishonesty or fraudulent conduct by the Insured Person; (b) deliberate criminal conduct by the Insured Person; and (c) the Insured Person's gaining of any profit, remuneration, or advantage to which the Insured Person was not legally entitled. These conduct exclusions are st

3. Severability The Harrington Policy provides full severability of both the application and the exclusions. Full severability means that: • Application severability: The knowledge, statements, or misrepresentations of one Insured Person in the policy application are not imputed to any other Insured Person. If one director made a misrepresentation in the application, that misrepresentation cannot be used by the insur

4. Prior Acts / Pending and Prior Litigation Both the Harrington Policy and the underlying D&O tower use a retroactive date of June 15, 2018 (the date of the Veltrano LBO closing). Claims arising from wrongful acts committed before this date are not covered under either the Side-A DIC or the underlying tower. However, the relevant differential concerns the pending and prior litigation exclusion. The underlying tower

5. Regulatory Investigation Coverage The Harrington Policy includes a broader definition of covered regulatory proceedings than the Vandermeer primary. Specifically, the Harrington Policy extends coverage to include: • Formal investigations by governmental or regulatory authorities; • Informal investigations, inquiries, and examinations; • Subpoenas (including document subpoenas and deposition subpoenas); • Target le

6. Definition of Loss The Harrington Policy's definition of "Loss" is broader than the corresponding definition in the Vandermeer primary in several important respects: • Punitive and exemplary damages: The Harrington Policy includes punitive and exemplary damages within the definition of Loss, to the extent such damages are insurable under the law of the applicable jurisdiction. This is a meaningful enhancement, as

7. Allocation The Harrington Policy's allocation provisions for mixed claims — i.e., claims involving both covered and uncovered matters, or both covered and uncovered parties — are more favorable to Insured Persons than the allocation clause in the underlying Vandermeer primary. In a mixed claim, the question arises of how to allocate the total loss between the covered portion (attributable to the Insured Person's c

VII. Personal Coverage Extensions A. Scope of Personal Coverage The Harrington Side-A DIC Policy provides coverage for individual directors and officers in their personal capacity for wrongful acts committed in their insured capacity — that is, in their capacity as directors, officers, or equivalent functional roles of Nexford and its subsidiaries. The coverage is designed to protect the personal assets of the Insure

VIII. Coordination with Underlying D&O Tower A. Drop-Down Mechanics The Harrington Side-A DIC Policy is designed to drop down and respond as primary coverage in circumstances where the underlying D&O tower fails to provide coverage for a non-indemnifiable loss sustained by an individual Insured Person. The principal drop-down scenarios are: (1) Exhaustion of the underlying tower by non-Side-A claims. If entity-level