Contract analysis

I. Executive Summary We are pleased to report that Calderwood & Harkness has successfully defended against Cardinal Peak's initial attempts to narrow Nexford's defenses and has secured a favorable procedural posture as the case enters the discovery phase. The key accomplishments during the period covered by this report are as follows: • Answer and Affirmative Defenses Filed (September 19, 2022). We filed a comprehens

II. Background and Case Overview For the benefit of the full record and to ensure all recipients of this letter have a complete understanding of the dispute, we provide the following summary of the case background. The Complaint. On August 8, 2022, Cardinal Peak filed its Complaint in the Circuit Court of Cook County, Illinois, County Department, Law Division, asserting three causes of action against Nexford: (1) Bre

III. Significant Litigation Developments A. Answer and Affirmative Defenses (Filed September 19, 2022) On September 19, 2022, Calderwood & Harkness filed the Answer and Affirmative Defenses on behalf of Nexford in the Circuit Court of Cook County. The filing was timely made within the applicable response period following service of the Complaint. The Answer specifically denies liability on all three counts asserted b

IV. Discovery Phase A. Written discovery Served (December 5, 2022) On December 5, 2022, Calderwood & Harkness served Nexford's First Set of Interrogatories (Nos. 1–18) and Nexford's First Set of Requests for Production of Documents (Nos. 1–24) on Cardinal Peak, through its counsel at Blackwood Stein & Associates LLP. These discovery requests were carefully crafted to develop the factual record on the issues most crit

V. Expert Retention — Meridian Bridge Consulting LLC On December 12, 2022, Calderwood & Harkness formally retained Meridian Bridge Consulting LLC to serve as Nexford's damages analysis and expert consulting firm in connection with this Litigation. Meridian Bridge is a well-regarded forensic accounting and economic consulting firm based in Chicago, and we have worked with them successfully on prior engagements involvi

VI. Legal Research and Analysis In addition to the litigation filings and discovery activity described above, Calderwood & Harkness completed several internal legal research and analysis memoranda during the period covered by this report. These memoranda have been prepared to support our litigation strategy and to provide a thorough foundation for the legal arguments we are advancing on Nexford's behalf. While these

VII. Assessment of Current Litigation Posture Based on the developments to date, we believe Nexford is in a strong defensive position as the case enters the discovery phase. Our assessment of the current litigation posture is as follows: Strengths: • Counterclaim Posture. The Counterclaim survived Cardinal Peak's Motion to Dismiss, establishing Nexford as both defendant and counter-plaintiff. This dual posture streng

VIII. Budget and Fee Summary At the time Calderwood & Harkness's engagement was opened on August 22, 2022, we provided an estimated litigation budget of $200,000 to $275,000 through mediation and $350,000 to $500,000 through trial. These estimates remain our current working projections, subject to adjustment based on the scope and complexity of discovery, the number of depositions required, and any unforeseen motions

IX. Lender and Stakeholder Considerations We call your attention to a matter that, while not currently requiring action, warrants advance planning. Under Section 6.03(b) of Nexford's $45 million revolving credit facility with Ridgecrest National Bank, N.A. (dated March 12, 2021) (the "Credit Facility"), Nexford is required to provide notice to the lender in the event that any litigation settlement exceeds $1.0 millio

X. Next Steps and Anticipated Q1 2023 Activity Looking ahead to the first quarter of 2023, we anticipate the following activity in connection with this Litigation:

1. Nexford's discovery Responses (Due January 9, 2023). We will complete and serve Nexford's responses to Cardinal Peak's First Set of Interrogatories and First Set of Requests for Production of Documents. We will coordinate with your team during the first week of January to finalize responsive documents and interrogatory answers.

2. Deposition of Natalie Gunderson (Anticipated January 2023). We will conduct the deposition of Natalie Gunderson, Cardinal Peak's Vice President of Sales & Commercial, who is a key fact witness with direct knowledge of the surcharge invoicing process. This deposition will focus on the Exhibit C methodology, the "blended cost" metric, and the timeliness of Surcharge Notices.

3. Preparation and Defense of Russell Okonkwo's Deposition (Anticipated February 2023). We will prepare Russell Okonkwo, Nexford's Vice President of Procurement, for his deposition and will defend the deposition when it takes place. Multiple preparation sessions will be scheduled in advance.

4. Review and Analysis of Cardinal Peak's discovery Responses. Upon receipt of Cardinal Peak's responses to Nexford's First Set of Interrogatories and Requests for Production (due in late January 2023), we will conduct a thorough review and analysis of the documents and information produced, identifying any deficiencies and preparing follow-up discovery requests or a motion to compel as warranted.

5. Expert Engagement — Meridian Bridge Consulting. We will continue our engagement with Dr. Anita Rosenthal at Meridian Bridge Consulting LLC to develop the expert damages analysis and prepare the rebuttal expert report. This work will intensify as Cardinal Peak's discovery responses are received and as the underlying surcharge data is assembled and analyzed.

6. Monitoring Cardinal Peak's Expert Retention. We will monitor for any disclosure by Cardinal Peak of its own damages expert and will evaluate the qualifications and likely testimony of any such expert once identified.

7. Mediation Timing Evaluation. We will continue to evaluate the appropriate timing for invoking the mandatory mediation provision under MSA Section 14.3, with a view toward commencing mediation after core fact discovery and expert report exchanges are substantially complete. We will discuss mediation timing with you in greater detail in our next quarterly report.

8. Q1 2023 Status Report. We will provide the next quarterly status report in March 2023, covering developments through the end of Q1 2023.

XI. Closing We trust this report provides a comprehensive and useful overview of the current status of the Litigation and the progress achieved during Q4 2022. We are encouraged by the results to date and remain confident in the strength of Nexford's defenses and the overall litigation strategy. Please do not hesitate to contact me or any member of the Calderwood & Harkness team if you have questions, require additio