Contract analysis

I. EXECUTIVE SUMMARY The purpose of this memorandum is to provide Nexford Industrial Holdings Inc. ("Nexford" or the "Company") and its private equity sponsor, Marlowe Asset Management Bluff Capital Partners, LP ("Marlowe Asset Management Bluff"), with a comprehensive litigation strategy and phased budget for the defense of the surcharge dispute initiated by Cardinal Peak Industries ("Cardinal Peak") in the Circuit C

1. Mount an aggressive defense on the merits of all three claims.

2. File a counterclaim against Cardinal Peak for breach of contract and declaratory relief on or about October 3, 2022.

3. Retain a damages expert promptly to quantify the impact of Cardinal Peak's contractual non-compliance.

4. Position the case for favorable resolution at mandatory mediation under MSA Section 14.3, which must precede trial.

5. If mediation does not yield an acceptable resolution, be fully prepared for trial. Our overall assessment is that Nexford occupies a favorable defense posture. The estimated budget for this matter is $200,000–$275,000 through mediation and $350,000–$500,000 through trial (inclusive of costs), as detailed in Section VI below. We request client direction on the recommended counterclaim filing and expert retention by

II. BACKGROUND AND FACTUAL SUMMARY A. The Parties Nexford Industrial Holdings Inc. Nexford is a Delaware corporation headquartered at 4200 West Lakeshore Industrial Parkway, Suite 300, Waukegan, Illinois 60085. Nexford is engaged in precision metal fabrication and the manufacture of engineered components serving the automotive, heavy equipment, and infrastructure sectors. Nexford reported fiscal year 2022 revenue of

Section 7.4(a) — Notice Requirement: Cardinal Peak must deliver a Surcharge Notice, accompanied by supporting documentation, to Nexford no later than fifteen (15) business days after the end of the applicable month to which the surcharge relates. This notice requirement is designed to ensure that Nexford can timely evaluate and, if appropriate, dispute the surcharge before it becomes embedded in the billing cycle. Ex

Section 7.4(c) — Cap Provision: The aggregate monthly surcharge imposed by Cardinal Peak cannot exceed 12% of the applicable Base Price without the Buyer's prior written consent. This cap was negotiated to protect Nexford from disproportionate cost pass-throughs that could undermine the economic assumptions underlying the MSA's pricing structure. Dispute Resolution. Section 7.4(d) of the MSA provides that the Buyer (

III. ANALYSIS OF CLAIMS AND DEFENSES A. Cardinal Peak's Claims

1. Breach of Contract (Count I). In Count I, Cardinal Peak alleges that Nexford breached the MSA by failing to pay $4.73 million in surcharges that were purportedly "properly invoiced" under Section 7.4 of the MSA. Cardinal Peak contends that it delivered Surcharge Notices for each month in the disputed period, that the surcharges were calculated in accordance with the MSA, and that Nexford's failure to pay constitut

2. Unjust Enrichment (Count II). In Count II, Cardinal Peak alleges that Nexford was unjustly enriched by receiving steel products at prices that did not reflect Cardinal Peak's true raw-material costs during the disputed period. Cardinal Peak contends that, even if the contractual surcharge mechanism does not support its claim, equity requires that Nexford pay for the increased costs Cardinal Peak incurred. Assessme

3. Account Stated (Count III). In Count III, Cardinal Peak alleges that Nexford's partial payments and the parties' course of dealing during the disputed period constitute an implied agreement on the account balance. Under Illinois law, an account stated arises when there has been a prior relationship of debtor and creditor, and the parties agree, either expressly or impliedly, upon the balance due. See Meyers Parkin

1. Waiver / Failure of Condition Precedent — Late Surcharge Notices ($2.18 Million). Cardinal Peak failed to deliver compliant Surcharge Notices within the fifteen-business-day deadline mandated by Section 7.4(a) for seven of the fourteen disputed months. In these months, Cardinal Peak delivered its notices anywhere from three to twenty-seven business days late. The late notices account for approximately $2.18 millio

2. Deviation from Exhibit C Methodology ($1.47 Million). Our review of Cardinal Peak's surcharge calculations reveals that, for a significant number of the disputed months, Cardinal Peak departed from the Surcharge Methodology prescribed by Exhibit C to the MSA. Rather than using the published Ferrous Scrap Index (as reported by Platts/SPI) and the Industrial Energy Cost Index — as expressly required by Exhibit C — C

3. Surcharge Cap Exceedance ($1.08 Million). Section 7.4(c) of the MSA provides that the aggregate monthly surcharge cannot exceed 12% of the applicable Base Price without the Buyer's prior written consent. For four months during the disputed period, Cardinal Peak's surcharges exceeded the 12% cap. The aggregate amount of surcharges invoiced in excess of the cap for those four months totals approximately $1.08 millio

4. Overlap and Net Exposure Analysis. It is important to note that the three defense categories described above are not entirely additive, as some overlap exists. Certain months implicate more than one defense ground — for example, a surcharge invoice may have been both late and calculated using the wrong methodology. When the three defenses are applied on a month-by-month basis, accounting for overlap, the resulting

IV. LITIGATION STRATEGY — PHASED APPROACH We have organized the anticipated litigation into four phases, each with defined objectives, key activities, and budget estimates. The phased approach allows the client and Marlowe Asset Management Bluff to manage costs and make informed decisions at each stage of the proceeding, including whether to proceed to the next phase or pursue settlement. Phase 1: Pleadings and Early

V. RISK ASSESSMENT We have assessed the range of possible outcomes in this matter and assign probability-weighted estimates to each scenario as set forth below. These assessments are based on our evaluation of the strength of the claims and defenses, the applicable law, the likely composition of the factual record, and our experience with similar commercial disputes in Cook County. A. Best Case Nexford prevails on al

VI. BUDGET SUMMARY A. Estimated Budget Through Mediation B. Estimated Budget Through Trial (If Mediation Fails) C. Billing Rates The following billing rates apply to the Calderwood & Harkness timekeepers assigned to this matter: These rates are consistent with the engagement terms agreed upon at the commencement of the representation. Any changes to the staffing of the matter or the applicable billing rates will be c

VII. COORDINATION WITH STAKEHOLDERS Effective coordination among Nexford's management, Marlowe Asset Management Bluff, and Calderwood & Harkness is essential to the successful execution of the litigation strategy. The following protocols are recommended. A. Nexford Management Regular Reporting. Calderwood & Harkness will provide regular status updates to Deborah Whitfield (General Counsel) and Martin Schaeffer (CEO)

VIII. RECOMMENDATIONS AND NEXT STEPS Based on the foregoing analysis, Calderwood & Harkness recommends the following immediate and near-term actions:

1. File Counterclaim. Nexford should authorize the filing of a counterclaim against Cardinal Peak, targeting a filing date on or about October 3, 2022. The counterclaim will assert breach of contract by Cardinal Peak for its failure to comply with the MSA's Surcharge Methodology (Exhibit C) and notice requirements (Section 7.4(a)), and will seek declaratory relief interpreting Section 7.4 and recovery of the estimate

2. Retain Damages Expert. Nexford should authorize the retention of Meridian Bridge Consulting LLC, with Dr. Anita Rosenthal serving as the lead expert, to commence analysis of the surcharge calculations and quantify the impact of Cardinal Peak's contractual deviations. A proposed retention letter and engagement terms will be circulated for client approval promptly. Early retention is critical to ensure that the expe

3. Commence discovery. Calderwood & Harkness will serve Nexford's first set of interrogatories and document requests on Cardinal Peak in early December 2022, following the initial case management conference and establishment of a discovery schedule.

4. Prepare Surcharge Analysis. The Calderwood & Harkness team will compile a detailed month-by-month analysis of all fourteen disputed surcharge invoices, documenting the factual and contractual basis for each defense category. This analysis will serve as the foundation for the expert engagement, the mediation brief, and, if necessary, the trial presentation.

5. Quarterly Reporting. We will establish a regular cadence of quarterly status reports to the client and Marlowe Asset Management Bluff, supplemented by ad hoc communications as warranted by material developments.

6. Settlement Positioning. While we will pursue an aggressive defense of Nexford's interests, we will remain attentive to early resolution opportunities. The mandatory mediation requirement under Section 14.3 provides a natural and contractually mandated forum for settlement discussions once discovery is substantially complete. We will monitor the landscape for opportunities to engage in productive settlement discuss

7. Authorization Request — Settlement Parameters. We recommend that Nexford's board of directors and Marlowe Asset Management Bluff begin considering settlement authority parameters in advance of the mediation planning process. Defining these parameters early will enable Nexford's mediation team to negotiate effectively and to respond to settlement proposals in real time during the mediation session. We will provide

IX. CONCLUSION Nexford Industrial Holdings Inc. occupies a strong defensive position in the Cardinal Peak surcharge dispute. That position is grounded in clear, unambiguous contractual language that Nexford's own conduct has honored and that Cardinal Peak has failed to follow. The three independent defenses under MSA Section 7