1005-00003 · Calderwood & Harkness LLP · Renewal Support

renewal-binding-confirmation-review-letter.docx DOCUMENT M&A / Corporate

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PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP Attorneys at Law 155 North Wacker Drive, Suite 4200 Chicago, Illinois 60606 Telephone: (312) 555-8400 Facsimile: (312) 555-8401 www.calderwoodharkness.com

July 8, 2022

Matter No.: 1005-00003 Billing Partner Code: AFO-7724

Via Email and U.S. Mail

Priya Sundaram, Esq. General Counsel & Corporate Secretary Nexford Industrial Holdings Inc. 2200 Corporate Center Drive, Suite 800 Schaumburg, Illinois 60173

Re: Renewal Binding Confirmation Review — Directors & Officers Liability Insurance Tower and Product-Liability / General Liability Insurance Tower Policy Period: July 1, 2022 – July 1, 2023 Matter No. 1005-00003

Dear Ms. Sundaram:

This letter confirms that Calderwood & Harkness LLP ("C&H") has completed its review of the binders issued by all carriers in both the Directors & Officers ("D&O") liability insurance tower and the product-liability / general liability ("PL") insurance tower following the binding of renewal coverage on June 28, 2022. The renewal coverage incepted on July 1, 2022, and is scheduled to expire on July 1, 2023.

The binders under review were received from Ashford Breckinridge LLP, broker of record (contacts: Phillip Garza, Senior Vice President, and Tamara Fisk, Account Executive), at various intervals between June 29, 2022, and July 6, 2022. C&H reviewed each binder against the following governing documents: (a) C&H's Renewal Negotiation Points Memorandum dated June 13, 2022, which set forth the specific coverage terms and conditions negotiated on behalf of Nexford Industrial Holdings Inc. ("Nexford" or the "Company"); (b) the final terms summary contained in Naomi Petersen's email to you dated June 24, 2022, memorializing the last round of carrier responses and agreed-upon modifications; and (c) the Board Resolution authorizing the binding of the renewal program, adopted by the Nexford Board of Directors on or about June 22, 2022 (the "Board Resolution"), including the combined premium authorization cap set forth therein.

As detailed below, the binders for both the D&O and PL towers are substantially consistent with the negotiated terms and Board authorization, with the exception of two discrepancies — one in the D&O tower and one in the PL tower — that require corrective endorsements from the applicable primary carriers. We address each tower in turn, summarize the follow-up items, and offer our overall conclusions.

1. Directors & Officers Liability Insurance Tower — Renewal Binder Summary

1.1 Tower Structure Confirmed

C&H has confirmed that the renewed D&O tower is structured as set forth in the table below. All layers, carriers, limits, retentions, and policy numbers reflected in the binders match the tower design authorized by the Board Resolution and the final negotiated terms.

Carrier Change Noted. As reflected in the table above, Northfield Excess Insurance Company replaces Graystone Mutual Assurance Co. on the 2nd excess layer. This carrier substitution was approved during the renewal negotiation process and is consistent with the terms set forth in Ms. Petersen's June 24, 2022 email. The Northfield binder confirms follow-form terms to the Vandermeer primary, subject to standard excess-layer modifications, and the transition from Graystone is seamless from a continuity-of-coverage perspective.

Side-A DIC Limit Increase. The Harrington Specialty Insurance Co. Side-A DIC policy limit has been increased from $15,000,000 to $20,000,000 for the renewal period. This increase was specifically recommended by C&H in light of the Company's governance structure — in particular, the presence of five sponsor-appointed directors nominated by Veltrano Capital Partners Fund IV, LP (which holds an approximately 68.5% ownership stake in Nexford) — and the corresponding exposure of individual directors and officers to claims that may arise in contexts where entity indemnification is unavailable or contested. The increased limit is dedicated exclusively to Side-A coverage and does not erode by reason of entity-coverage or Side-B payments. The Harrington binder confirms the $20,000,000 limit and the incremental premium of $289,500 (up from $247,000 in the prior year).

Total D&O Tower Aggregate Limit. The total aggregate limit available under the D&O tower is $55,000,000, comprising $40,000,000 in the traditional ABC-structure tower (Primary through 3rd Excess) and $20,000,000 in dedicated Side-A DIC coverage (with $5,000,000 of overlap between the Side-A DIC and the underlying tower's Side-A coverage, resulting in a net combined program capacity of $55,000,000 on a dedicated-limit basis).

Total D&O Renewal Premium. The total annual premium for the D&O tower is $1,498,200, representing an increase of $134,750, or approximately 9.88%, over the prior-year D&O premium of $1,363,450. This increase is attributable in substantial part to the Side-A DIC limit increase, elevated excess-layer pricing in the current market, and the Northfield substitution (which carried a modest premium reduction relative to Graystone's renewal indication). The D&O premium, when combined with the PL premium detailed in Section 2 below, totals $4,483,700 — well within the $4,600,000 combined cap authorized by the Board Resolution.

1.2 D&O Binder Review — Confirmed Items

C&H has reviewed the binders issued by each carrier in the D&O tower and confirms that the following key negotiated terms are properly reflected:

Severability of Application Representations. The Vandermeer primary binder includes full severability of application representations, ensuring that the knowledge or statements of any one insured person are not imputed to any other insured person for purposes of determining coverage. This was a critical negotiation point, and the binder language is consistent with the terms set forth in Item 2 of the D&O negotiation points in C&H's June 13, 2022 memorandum.

Definition of "Insured Person." The definition of "Insured Person" has been confirmed as consistent across all four layers of the traditional D&O tower — Vandermeer (primary), Commonwealth (1st excess), Northfield (2nd excess), and Pinnacle Re (3rd excess). The definition encompasses current and former directors and officers, as well as those persons serving in such capacities at the request of the Company in outside entities, subject to the standard qualifications. This consistency is essential to avoid coverage gaps at layer transitions.

Insured vs. Insured Exclusion Carve-Backs. The insured-versus-insured exclusion in the Vandermeer primary binder, and as followed in the excess layers, contains the negotiated carve-backs that are critical to Nexford's ownership and governance structure. Specifically, the exclusion does not apply to (a) claims brought by or on behalf of Veltrano Capital Partners Fund IV, LP, or its affiliates, in their capacity as shareholders, to the extent such claims are derivative in nature; (b) claims brought by the Company in the form of cross-claims, counterclaims, or third-party claims asserted in connection with a claim initially brought by a third party against an insured person; and (c) whistleblower and employment-related claims brought by insured persons who are not directors or officers. Given Veltrano's 68.5% ownership stake and the five sponsor-appointed directors on Nexford's nine-member board, these carve-backs are essential to preserve the intended scope of coverage. The binder language matches the carve-back terms negotiated and confirmed in Ms. Petersen's June 24, 2022 email.

Regulatory Investigation Coverage. The binders confirm that coverage for regulatory investigations extends to proceedings initiated by the Occupational Safety and Health Administration ("OSHA"), the Consumer Product Safety Commission ("CPSC"), and state attorneys general. This breadth of regulatory investigation coverage was a priority item during the renewal negotiations, as discussed at length in C&H's Regulatory Investigation Coverage Memorandum dated June 14, 2022, and is particularly important in light of Nexford's product-manufacturing operations and the heightened regulatory scrutiny in the current environment. The binder language encompasses both formal and informal investigations — subject to the definitional discrepancy addressed in Section 1.3 below.

Side-A DIC Trigger Provisions, Bankruptcy/Insolvency Response Language, and Difference-in-Conditions Grants. The Harrington Specialty binder confirms the following: (i) the Side-A DIC policy is triggered when the underlying D&O program fails to respond to a covered loss, whether by reason of coverage denial, insolvency of an underlying carrier, exhaustion of underlying limits, or the imposition of a stay in bankruptcy proceedings; (ii) the insolvency and bankruptcy response language expressly provides that the DIC policy will respond as if the underlying policy had paid, without requiring exhaustion of the insolvent carrier's obligations; and (iii) the difference-in-conditions grants provide coverage for losses that would have been covered under the DIC policy's broader terms but are excluded or limited under the underlying program. The limit increase to $20,000,000 is properly reflected in the Harrington binder's declarations page and limit-of-liability provisions.

Prior Acts Continuity. C&H confirms that no new prior acts exclusion has been imposed in any layer of the D&O tower. The continuity date for all layers remains as previously established, ensuring that wrongful acts occurring on or after such continuity date and before the expiration of the current policy period remain within the scope of coverage. This confirmation is consistent with the renewal negotiation terms and is critical to the integrity of the overall D&O program.

Allocation Provisions. The allocation provisions in the Vandermeer primary binder, and as adopted in the excess layers, remain consistent with the negotiated terms. The provisions employ a relative-legal-exposure methodology for allocating loss between covered and non-covered matters, and between insured and non-insured parties, in mixed-action scenarios. No adverse changes to the allocation framework were identified.

Priority of Payment and Drop-Down Mechanics. The priority-of-payment provisions across the excess layers confirm that payments to individual directors and officers under Side-A coverage take priority over entity-coverage payments, consistent with the negotiated terms. Drop-down mechanics in the Commonwealth, Northfield, and Pinnacle Re excess binders are confirmed as properly triggered upon exhaustion of the immediately underlying limit by payment of covered loss, without the imposition of additional conditions or restrictions not present in the prior-year program.

1.3 D&O Binder Review — Discrepancy Identified (Item 1 of 2)

C&H has identified one discrepancy in the D&O tower binders that requires corrective action.

Issue. The Vandermeer National Insurance Company primary binder (renewal policy no. VNI-DO-2022-91205) contains a definition of "Claim" that is narrower than the definition agreed upon during the renewal negotiations.

Specifics. The binder's definition of "Claim" is limited to formal civil, criminal, administrative, or regulatory proceedings, written demands for monetary or non-monetary relief, and formal investigations commenced by the issuance of a subpoena, target letter, or formal order of investigation. Critically, the binder definition excludes informal regulatory inquiries and preliminary investigations — that is, regulatory contacts, information requests, or pre-formal investigative steps that have not yet resulted in the issuance of a formal investigative order. By contrast, the negotiated language — as set forth in Item 6 of the D&O negotiation points in C&H's June 13, 2022 memorandum, and as confirmed in Ms. Petersen's June 24, 2022 email — expressly includes within the definition of "Claim" informal inquiries and preliminary investigations by regulatory bodies, including but not limited to OSHA, CPSC, and state attorneys general. The agreed-upon language provided that a "Claim" shall include "any inquiry, informal investigation, or request for information by a regulatory body, whether or not pursuant to a formal order of investigation, directed at or relating to an Insured Person or the Company in connection with the discharge of such Insured Person's duties."

Impact. If left uncorrected, this definitional narrowing would have material consequences. Informal regulatory inquiries — which frequently precede and evolve into formal investigations — would not trigger the policy's coverage obligations, including the duty to advance defense costs and the right to select counsel. Given the nature of Nexford's operations and its exposure to OSHA, CPSC, and state attorney general oversight, informal regulatory inquiries represent a realistic and foreseeable category of claims. Moreover, the Harrington Specialty Side-A DIC policy is designed to respond to coverage denials, carrier insolvency, or exhaustion of underlying limits — not to fill definitional gaps or cure narrowing in the underlying program's coverage terms. Accordingly, the DIC policy would not necessarily respond to a loss arising from an informal regulatory inquiry that falls outside the primary policy's definition of "Claim." The result would be a potential gap in the overall D&O program.

Recommended Action. C&H recommends that Ashford Breckinridge promptly request a corrective endorsement from Vandermeer National Insurance Company to broaden the definition of "Claim" to match the negotiated language described above. This endorsement should be issued at no additional premium, as the broader definition was agreed upon as part of the renewal terms and the renewal premium was quoted on that basis. C&H's Regulatory Investigation Coverage Memorandum dated June 14, 2022, which analyzed this definitional issue in detail and recommended the inclusion of informal regulatory inquiries, is incorporated by reference. C&H will review the corrective endorsement upon receipt to confirm conformity with the negotiated terms.

2. Product-Liability / General Liability Insurance Tower — Renewal Binder Summary

2.1 Tower Structure Confirmed

C&H has confirmed that the renewed PL tower is structured as set forth in the table below. All layers, carriers, limits, retentions, and policy numbers reflected in the binders match the tower design authorized by the Board Resolution and the final negotiated terms.

Product Recall Sub-Limit. The Midland Casualty & Surety Company primary binder reflects an increased product recall sub-limit of $5,000,000 per occurrence / $10,000,000 aggregate, up from $2,500,000 per occurrence / $5,000,000 aggregate in the prior policy year. The incremental premium for this sub-limit increase is $67,000, which is included in the Midland primary premium shown above. This increase was recommended by C&H in the Product Recall Sub-Limit Adequacy Memorandum dated June 7, 2022, in light of Nexford's recall history and the manufacturing profile of its subsidiaries. A discrepancy related to the formal endorsement for this sub-limit increase is discussed in Section 2.3 below.

Total PL Tower Aggregate Limit. The total aggregate limit available under the PL tower is $75,000,000, comprising $10,000,000 at the primary level (aggregate) and $65,000,000 across the three excess layers.

Total PL Renewal Premium. The total annual premium for the PL tower is $2,985,500, representing an increase of $342,600, or approximately 12.96%, over the prior-year PL premium of $2,642,900. The increase reflects general market hardening in the product-liability segment, the product recall sub-limit increase, and the impact of the pending claims and loss history discussed below.

Combined D&O + PL Renewal Premium. The combined annual premium for both the D&O and PL towers is $4,483,700, representing an increase of $477,350, or approximately 11.91%, over the prior-year combined premium of $4,006,350. This combined premium is within the $4,600,000 cap authorized by the Board Resolution, with remaining headroom of $116,300.

Named Insureds. All binders across the PL tower confirm the following named insureds: Nexford Industrial Holdings Inc.; Nexford Conveyor Systems, LLC ("NCS"); Triton Fastener Corp. ("Triton"); and Marlowe Asset Management Precision Machining, Inc. ("Marlowe Asset Management"). C&H verified that the named insured schedule in each binder is complete and consistent across all layers.

Completed Operations Coverage. Completed operations coverage is confirmed to extend for a period of ten (10) years following the delivery or completion of the insured's products or work. This tail period is reflected in the Midland primary binder and is followed in form by each excess layer. The ten-year completed operations tail is consistent with the Company's contractual obligations to its customers and with industry practice for manufacturers of industrial conveyor systems, fasteners, and precision-machined components.

2.2 PL Binder Review — Confirmed Items

C&H has reviewed the binders issued by each carrier in the PL tower and confirms that the following key negotiated terms are properly reflected:

Occurrence-Based Trigger. All layers of the PL tower are written on an occurrence basis. This trigger form is confirmed in each binder and is consistent with the prior-year program and the negotiated terms. No carrier sought to impose a claims-made trigger during the renewal process.

Completed Operations Tail (10-Year). As noted above, the ten-year completed operations tail is confirmed in the Midland primary binder and in the follow-form excess layer binders issued by Great Basin, Cornerstone, and Allegheny Pacific.

Cross-Liability / Cross-Suit Provisions. The binders confirm that cross-liability and cross-suit provisions are included, addressing the potential for intercompany claims between NCS, Triton, and Marlowe Asset Management. These provisions ensure that each named insured is treated as if a separate policy had been issued to it for purposes of determining coverage for claims asserted by one named insured against another, subject to the overall policy limits. This is a critical feature given the integrated nature of Nexford's manufacturing operations, in which components produced by Triton and Marlowe Asset Management are frequently incorporated into NCS conveyor systems.

"Other Insurance" Clause Consistency. C&H confirms that the "other insurance" clauses in the Midland primary and Great Basin excess binders are consistent and do not create conflicting excess-over-other-insurance conditions. This issue was specifically identified in Item 3 of the PL negotiation points in C&H's June 13, 2022 memorandum and was resolved during the negotiation process. The Midland primary policy responds as primary insurance for covered occurrences, and the Great Basin excess policy attaches upon exhaustion of the Midland limit without imposing a separate "other insurance" condition that could defer its response obligation.

Additional Insured Obligations and Vendor/Contractor Downstream Coverage. The binders confirm that the Midland primary policy provides blanket additional insured coverage for parties required to be named as additional insureds under the Company's contracts, subject to the standard "arising out of" nexus requirement. Vendor and contractor downstream coverage is also confirmed, consistent with the Company's supply-chain and subcontracting arrangements.

Prior/Pending Litigation Treatment. C&H has confirmed the treatment of the two pending litigation matters as follows:

(a) Higgins v. Nexford Conveyor Systems, LLC, Case No. 2021-L-04382, Circuit Court of Will County, Illinois (damages sought: $14,500,000). This matter involves a personal injury claim arising from an alleged product defect in an NCS conveyor system. The claim is confirmed as a known claim covered on an occurrence basis under the Midland primary policy; no known-claim exclusion has been applied.

(b) Consolidated Builders Supply Co. v. Triton Fastener Corp., Case No. 1:21-cv-08914, United States District Court for the Northern District of Illinois (damages sought: $6,800,000). This matter involves a product-liability claim alleging defective fastener components supplied by Triton. The claim is confirmed as a known claim covered on an occurrence basis under the Midland primary policy; no known-claim exclusion has been applied.

Both claims were fully disclosed in the broker's renewal submission to all carriers. Open reserves of $8,300,000 across the two pending claims are acknowledged in the carrier binders. The total five-year incurred amount of $15,120,000 — comprising $4,720,000 in paid losses, $8,300,000 in outstanding reserves, and $2,100,000 in incurred but not reported ("IBNR") losses, as determined by Kessler Quinn Advisory Group's actuarial analysis — was included in the broker submission and is reflected in the carriers' pricing and underwriting files.

Pollution Exclusion Scope. The pollution exclusion in the Great Basin umbrella binder has been confirmed as narrowed per the negotiated terms. Specifically, the exclusion contains a carve-back for "sudden and accidental" pollution events, consistent with the prior-year policy and the terms agreed upon during renewal negotiations. The narrowed exclusion scope is particularly relevant to Nexford's manufacturing operations, which involve the use of certain lubricants, solvents, and metalworking fluids.

2.3 PL Binder Review — Discrepancy Identified (Item 2 of 2)

C&H has identified one discrepancy in the PL tower binders that requires corrective action.

Issue. The Midland Casualty & Surety Company primary binder (renewal policy no. MCS-GL-2022-58904) does not include the formal endorsement reflecting the increased product recall sub-limit of $5,000,000 per occurrence / $10,000,000 aggregate.

Specifics. While the binder's declarations page references the increased product recall sub-limit and the premium schedule reflects the incremental premium of $67,000 associated with the sub-limit increase, the actual endorsement form amending the recall coverage terms — including the specific conditions, triggers, and scope of recall coverage — has not been attached to the binder. The binder package, as received from Ashford Breckinridge on July 1, 2022, includes the declarations page, the general conditions, and the standard endorsement schedule, but the recall sub-limit endorsement form (identified in the endorsement schedule as Endorsement No. MCS-RC-2022, "Product Recall Expense Coverage — Amended Limits") is listed but not included.

Impact. Until the formal endorsement is attached to the binder (and subsequently to the issued policy), there is ambiguity as to whether the increased sub-limit of $5,000,000 per occurrence / $10,000,000 aggregate is fully operative, or whether the prior-year sub-limit of $2,500,000 per occurrence / $5,000,000 aggregate remains in effect. Although the declarations page reference and the premium charge create a strong argument that the increased sub-limit was intended and is binding, the absence of the endorsement form introduces uncertainty regarding the specific coverage terms, conditions, and exclusions applicable to recall events at the higher limit level.

This ambiguity is of particular concern given Nexford's recall history. As detailed in C&H's Product Recall Sub-Limit Adequacy Memorandum dated June 7, 2022: (i) Triton Fastener Corp. conducted a voluntary recall in March 2020, with associated costs of approximately $1,100,000; and (ii) NCS issued an advisory notice in August 2020, with associated costs of approximately $340,000. The combined recall-related costs of $1,440,000 over a two-year period, while manageable under the prior sub-limit, underscored the need for higher limits given the Company's product profile and distribution channels. Prompt issuance of the endorsement is therefore important to eliminate any ambiguity and to ensure that the increased sub-limit is clearly operative from the inception date of the renewal policy period.

Recommended Action. C&H recommends that Ashford Breckinridge request that Midland Casualty & Surety Company issue the formal recall sub-limit endorsement (Endorsement No. MCS-RC-2022) and attach it to both the binder and the policy when issued. This endorsement should confirm the increased sub-limit of $5,000,000 per occurrence / $10,000,000 aggregate and should set forth all applicable coverage terms and conditions. C&H recommends that this endorsement be obtained before the first formal policy forms are issued by Midland. C&H will review the endorsement upon receipt to confirm conformity with the negotiated terms.

3. Summary of Follow-Up Items

Based on C&H's review, the following two items require corrective endorsements from the applicable primary carriers:

1. Vandermeer National Insurance Company (D&O Primary, Policy No. VNI-DO-2022-91205): A corrective endorsement must be issued to broaden the definition of "Claim" to include informal regulatory inquiries and preliminary investigations by regulatory bodies (including OSHA, CPSC, and state attorneys general), consistent with the negotiated terms set forth in Item 6 of the D&O negotiation points in C&H's June 13, 2022 memorandum and confirmed in Ms. Petersen's June 24, 2022 email. The endorsement should be issued at no additional premium.

2. Midland Casualty & Surety Company (PL Primary, Policy No. MCS-GL-2022-58904): The formal endorsement reflecting the increased product recall sub-limit of $5,000,000 per occurrence / $10,000,000 aggregate (Endorsement No. MCS-RC-2022, "Product Recall Expense Coverage — Amended Limits") must be prepared, executed, and attached to the binder and the issued policy. The endorsement should confirm the increased limits, applicable coverage terms, and the incremental premium of $67,000 already reflected in the premium schedule.

C&H recommends that Nexford instruct Ashford Breckinridge (Phillip Garza and Tamara Fisk) to pursue both endorsements immediately. Given that the policy period has already incepted, timely issuance of these endorsements is important to ensure that the coverage program operates as intended from the effective date. C&H suggests requesting that Ashford Breckinridge obtain draft endorsements from both carriers by no later than July 22, 2022, with final executed endorsements to follow within ten (10) business days thereafter. C&H will follow up separately with Ashford Breckinridge to communicate this timeline and to coordinate the review process.

Upon receipt of each endorsement, C&H will review the language to confirm conformity with the negotiated terms and will report to you accordingly.

4. Overall Conclusions and Confirmation

Subject to the two discrepancies identified in Sections 1.3 and 2.3 above — both of which are capable of resolution through the issuance of corrective endorsements — C&H confirms that the binders for both the D&O and PL towers are substantially consistent with the terms negotiated and authorized by the Nexford Board of Directors.

In summary:

• The renewal was bound on June 28, 2022, within the combined premium authorization cap of $4,600,000 set by the Board Resolution. The actual combined D&O and PL renewal premium is $4,483,700, representing remaining headroom of $116,300 beneath the authorized cap.

• All carrier changes are properly documented. The substitution of Northfield Excess Insurance Company for Graystone Mutual Assurance Co. on the D&O 2nd excess layer is reflected in the binders and does not introduce any coverage discontinuity.

• The Side-A DIC limit increase from $15,000,000 to $20,000,000 is confirmed in the Harrington Specialty Insurance Co. binder, with the corresponding premium increase reflected in the premium schedule.

• The product recall sub-limit increase from $2,500,000/$5,000,000 to $5,000,000/$10,000,000 is referenced in the Midland declarations page and premium schedule, pending issuance of the formal endorsement.

• All named insureds — Nexford Industrial Holdings Inc., Nexford Conveyor Systems, LLC, Triton Fastener Corp., and Marlowe Asset Management Precision Machining, Inc. — are properly identified across both towers.

C&H further recommends the following action items for Nexford's internal risk management team:

(a) Claims Reporting Compliance. Nexford's risk management team — specifically Trevor Haines, Vice President of Risk Management, and Donna Kowalski, Director of Insurance and Claims — should complete all claims reporting compliance steps outlined in the Claims Reporting Compliance Checklist dated June 1, 2022. This checklist identifies the notice provisions, reporting deadlines, and designated claims contacts for each carrier in both towers, and should be distributed to all relevant internal personnel and outside defense counsel.

(b) Defense Cost Erosion Tracking. C&H notes that defense cost erosion tracking in the Higgins and Consolidated Builders matters should continue in accordance with the guidance provided by Yuki Nakamura (C&H Working Associate) to Trevor Haines on June 15, 2022. Given that defense costs erode the per-occurrence and aggregate limits under the Midland primary policy, regular monitoring of cumulative defense expenditures is essential to anticipate potential exhaustion of the primary limit and to plan for timely notice to the Great Basin excess layer.

C&H remains available to review the final issued policy forms when received from each carrier and to address any additional questions or concerns that may arise during the policy period. We anticipate that final policy forms will be issued by the carriers within sixty (60) to ninety (90) days following binding, and we recommend that Ashford Breckinridge be instructed to forward all issued policies to C&H for review promptly upon receipt.

5. Copies of Reviewed Binders

Copies of all binders reviewed by C&H in connection with this engagement are being returned to Nexford under separate cover, via overnight courier. The following materials are enclosed with or accompany this letter:

(a) Copies of the binders for all nine carrier placements across the D&O and PL towers, as received from Ashford Breckinridge LLP between June 29 and July 6, 2022;

(b) C&H's marked-up comparison of the Vandermeer primary binder's definition of "Claim" against the negotiated language (redline format), illustrating the discrepancy discussed in Section 1.3 above; and

(c) C&H's annotated endorsement schedule for the Midland primary binder, identifying the missing product recall sub-limit endorsement discussed in Section 2.3 above.

Please retain these materials in Nexford's insurance files. C&H has retained copies for the firm's files in connection with Matter No. 1005-00003.

Disclaimer and Limitations. This letter does not constitute a legal opinion. It is based solely upon C&H's review of the binders provided to us by Ashford Breckinridge LLP and does not reflect a review of the final issued policy forms, which have not yet been received. The conclusions set forth herein are subject to review of the final issued policies and any endorsements, amendments, or corrections that may be issued by the carriers during the policy period. C&H has not independently verified the accuracy of the information contained in the binders and has relied upon the representations made by the broker and carriers therein. This letter is intended for the sole use of Nexford Industrial Holdings Inc. and its directors, officers, and advisors, and should not be relied upon by any third party.

Should you have any questions regarding this letter or the matters discussed herein, please do not hesitate to contact the undersigned or Naomi Petersen, Lead Associate (direct: (312) 555-8438; email: npetersen@calderwoodharkness.com).

We appreciate the opportunity to assist Nexford with this important matter and look forward to continuing to serve the Company's insurance coverage needs.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Douglas Fairchild, Partner Direct: (312) 555-8422

Email: dfairchild@calderwoodharkness.com

155 North Wacker Drive, Suite 4200 Chicago, Illinois 60606

cc: (via email)

Sandra Elliston, Chief Executive Officer, Nexford Industrial Holdings Inc. Trevor Haines, Vice President, Risk Management, Nexford Industrial Holdings Inc. Donna Kowalski, Director of Insurance and Claims, Nexford Industrial Holdings Inc. Angela Fontaine, Billing Partner, Calderwood & Harkness LLP Naomi Petersen, Lead Associate, Calderwood & Harkness LLP Yuki Nakamura, Working Associate, Calderwood & Harkness LLP

Layer	Carrier	Limit	Attachment Point	Renewal Policy No.	SIR / Retention	Annual Premium
Primary	Vandermeer National Insurance Company	$10,000,000 each claim / $10,000,000 aggregate	Ground-up	VNI-DO-2022-91205	$1,000,000 per claim (entity coverage only); no SIR on Side-A individual director/officer coverage	$487,500
1st Excess	Commonwealth Indemnity Group	$10,000,000 excess of $10,000,000	$10,000,000	CIG-XDO-2022-30744	N/A (follow-form)	$278,200
2nd Excess	Northfield Excess Insurance Company	$10,000,000 excess of $20,000,000	$20,000,000	NEIC-XDO-2022-15882	N/A (follow-form)	$221,000
3rd Excess	Pinnacle Re Insurance Ltd. (Bermuda)	$10,000,000 excess of $30,000,000	$30,000,000	PRI-XDO-2022-06451	N/A (follow-form)	$222,000
Side-A DIC	Harrington Specialty Insurance Co.	$20,000,000 (dedicated, non-eroding by entity or Side-B claims)	Difference-in-conditions trigger	HSI-DIC-2022-44019	None	$289,500
Layer	Carrier	Limit	Attachment Point	Renewal Policy No.	SIR / Retention	Annual Premium
Primary GL/PL	Midland Casualty & Surety Company	$5,000,000 per occurrence / $10,000,000 aggregate	Ground-up	MCS-GL-2022-58904	$500,000 per occurrence	$1,184,300
1st Excess / Umbrella	Great Basin Insurance Company	$25,000,000 excess of $10,000,000	$10,000,000	GBIC-XPL-2022-77263	N/A (follow-form)	$987,500
2nd Excess	Cornerstone Reinsurance Corp.	$25,000,000 excess of $35,000,000	$35,000,000	CRC-XPL-2022-42018	N/A (follow-form)	$524,200
3rd Excess	Allegheny Pacific Underwriters, Inc.	$15,000,000 excess of $60,000,000	$60,000,000	APU-XPL-2022-11390	N/A (follow-form)	$289,500

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP Attorneys at Law 155 North Wacker Drive, Suite 4200 Chicago, Illinois 60606 Telephone: (312) 555-8400 Facsimile: (312) 555-8401 www.calderwoodharkness.com
July 8, 2022
Matter No.: 1005-00003 Billing Partner Code: AFO-7724
Via Email and U.S. Mail
Priya Sundaram, Esq. General Counsel & Corporate Secretary Nexford Industrial Holdings Inc. 2200 Corporate Center Drive, Suite 800 Schaumburg, Illinois 60173
Re: Renewal Binding Confirmation Review — Directors & Officers Liability Insurance Tower and Product-Liability / General Liability Insurance Tower Policy Period: July 1, 2022 – July 1, 2023 Matter No. 1005-00003
Dear Ms. Sundaram:
This letter confirms that Calderwood & Harkness LLP ("C&H") has completed its review of the binders issued by all carriers in both the Directors & Officers ("D&O") liability insurance tower and the product-liability / general liability ("PL") insurance tower following the binding of renewal coverage on June 28, 2022. The renewal coverage incepted on July 1, 2022, and is scheduled to expire on July 1, 2023.
The binders under review were received from Ashford Breckinridge LLP, broker of record (contacts: Phillip Garza, Senior Vice President, and Tamara Fisk, Account Executive), at various intervals between June 29, 2022, and July 6, 2022. C&H reviewed each binder against the following governing documents: (a) C&H's Renewal Negotiation Points Memorandum dated June 13, 2022, which set forth the specific coverage terms and conditions negotiated on behalf of Nexford Industrial Holdings Inc. ("Nexford" or the "Company"); (b) the final terms summary contained in Naomi Petersen's email to you dated June 24, 2022, memorializing the last round of carrier responses and agreed-upon modifications; and (c) the Board Resolution authorizing the binding of the renewal program, adopted by the Nexford Board of Directors on or about June 22, 2022 (the "Board Resolution"), including the combined premium authorization cap set forth therein.
As detailed below, the binders for both the D&O and PL towers are substantially consistent with the negotiated terms and Board authorization, with the exception of two discrepancies — one in the D&O tower and one in the PL tower — that require corrective endorsements from the applicable primary carriers. We address each tower in turn, summarize the follow-up items, and offer our overall conclusions.
1. Directors & Officers Liability Insurance Tower — Renewal Binder Summary
1.1 Tower Structure Confirmed
C&H has confirmed that the renewed D&O tower is structured as set forth in the table below. All layers, carriers, limits, retentions, and policy numbers reflected in the binders match the tower design authorized by the Board Resolution and the final negotiated terms.
Carrier Change Noted. As reflected in the table above, Northfield Excess Insurance Company replaces Graystone Mutual Assurance Co. on the 2nd excess layer. This carrier substitution was approved during the renewal negotiation process and is consistent with the terms set forth in Ms. Petersen's June 24, 2022 email. The Northfield binder confirms follow-form terms to the Vandermeer primary, subject to standard excess-layer modifications, and the transition from Graystone is seamless from a continuity-of-coverage perspective.
Side-A DIC Limit Increase. The Harrington Specialty Insurance Co. Side-A DIC policy limit has been increased from $15,000,000 to $20,000,000 for the renewal period. This increase was specifically recommended by C&H in light of the Company's governance structure — in particular, the presence of five sponsor-appointed directors nominated by Veltrano Capital Partners Fund IV, LP (which holds an approximately 68.5% ownership stake in Nexford) — and the corresponding exposure of individual directors and officers to claims that may arise in contexts where entity indemnification is unavailable or contested. The increased limit is dedicated exclusively to Side-A coverage and does not erode by reason of entity-coverage or Side-B payments. The Harrington binder confirms the $20,000,000 limit and the incremental premium of $289,500 (up from $247,000 in the prior year).
Total D&O Tower Aggregate Limit. The total aggregate limit available under the D&O tower is $55,000,000, comprising $40,000,000 in the traditional ABC-structure tower (Primary through 3rd Excess) and $20,000,000 in dedicated Side-A DIC coverage (with $5,000,000 of overlap between the Side-A DIC and the underlying tower's Side-A coverage, resulting in a net combined program capacity of $55,000,000 on a dedicated-limit basis).
Total D&O Renewal Premium. The total annual premium for the D&O tower is $1,498,200, representing an increase of $134,750, or approximately 9.88%, over the prior-year D&O premium of $1,363,450. This increase is attributable in substantial part to the Side-A DIC limit increase, elevated excess-layer pricing in the current market, and the Northfield substitution (which carried a modest premium reduction relative to Graystone's renewal indication). The D&O premium, when combined with the PL premium detailed in Section 2 below, totals $4,483,700 — well within the $4,600,000 combined cap authorized by the Board Resolution.
1.2 D&O Binder Review — Confirmed Items
C&H has reviewed the binders issued by each carrier in the D&O tower and confirms that the following key negotiated terms are properly reflected:
Severability of Application Representations. The Vandermeer primary binder includes full severability of application representations, ensuring that the knowledge or statements of any one insured person are not imputed to any other insured person for purposes of determining coverage. This was a critical negotiation point, and the binder language is consistent with the terms set forth in Item 2 of the D&O negotiation points in C&H's June 13, 2022 memorandum.
Definition of "Insured Person." The definition of "Insured Person" has been confirmed as consistent across all four layers of the traditional D&O tower — Vandermeer (primary), Commonwealth (1st excess), Northfield (2nd excess), and Pinnacle Re (3rd excess). The definition encompasses current and former directors and officers, as well as those persons serving in such capacities at the request of the Company in outside entities, subject to the standard qualifications. This consistency is essential to avoid coverage gaps at layer transitions.
Insured vs. Insured Exclusion Carve-Backs. The insured-versus-insured exclusion in the Vandermeer primary binder, and as followed in the excess layers, contains the negotiated carve-backs that are critical to Nexford's ownership and governance structure. Specifically, the exclusion does not apply to (a) claims brought by or on behalf of Veltrano Capital Partners Fund IV, LP, or its affiliates, in their capacity as shareholders, to the extent such claims are derivative in nature; (b) claims brought by the Company in the form of cross-claims, counterclaims, or third-party claims asserted in connection with a claim initially brought by a third party against an insured person; and (c) whistleblower and employment-related claims brought by insured persons who are not directors or officers. Given Veltrano's 68.5% ownership stake and the five sponsor-appointed directors on Nexford's nine-member board, these carve-backs are essential to preserve the intended scope of coverage. The binder language matches the carve-back terms negotiated and confirmed in Ms. Petersen's June 24, 2022 email.
Regulatory Investigation Coverage. The binders confirm that coverage for regulatory investigations extends to proceedings initiated by the Occupational Safety and Health Administration ("OSHA"), the Consumer Product Safety Commission ("CPSC"), and state attorneys general. This breadth of regulatory investigation coverage was a priority item during the renewal negotiations, as discussed at length in C&H's Regulatory Investigation Coverage Memorandum dated June 14, 2022, and is particularly important in light of Nexford's product-manufacturing operations and the heightened regulatory scrutiny in the current environment. The binder language encompasses both formal and informal investigations — subject to the definitional discrepancy addressed in Section 1.3 below.
Side-A DIC Trigger Provisions, Bankruptcy/Insolvency Response Language, and Difference-in-Conditions Grants. The Harrington Specialty binder confirms the following: (i) the Side-A DIC policy is triggered when the underlying D&O program fails to respond to a covered loss, whether by reason of coverage denial, insolvency of an underlying carrier, exhaustion of underlying limits, or the imposition of a stay in bankruptcy proceedings; (ii) the insolvency and bankruptcy response language expressly provides that the DIC policy will respond as if the underlying policy had paid, without requiring exhaustion of the insolvent carrier's obligations; and (iii) the difference-in-conditions grants provide coverage for losses that would have been covered under the DIC policy's broader terms but are excluded or limited under the underlying program. The limit increase to $20,000,000 is properly reflected in the Harrington binder's declarations page and limit-of-liability provisions.
Prior Acts Continuity. C&H confirms that no new prior acts exclusion has been imposed in any layer of the D&O tower. The continuity date for all layers remains as previously established, ensuring that wrongful acts occurring on or after such continuity date and before the expiration of the current policy period remain within the scope of coverage. This confirmation is consistent with the renewal negotiation terms and is critical to the integrity of the overall D&O program.
Allocation Provisions. The allocation provisions in the Vandermeer primary binder, and as adopted in the excess layers, remain consistent with the negotiated terms. The provisions employ a relative-legal-exposure methodology for allocating loss between covered and non-covered matters, and between insured and non-insured parties, in mixed-action scenarios. No adverse changes to the allocation framework were identified.
Priority of Payment and Drop-Down Mechanics. The priority-of-payment provisions across the excess layers confirm that payments to individual directors and officers under Side-A coverage take priority over entity-coverage payments, consistent with the negotiated terms. Drop-down mechanics in the Commonwealth, Northfield, and Pinnacle Re excess binders are confirmed as properly triggered upon exhaustion of the immediately underlying limit by payment of covered loss, without the imposition of additional conditions or restrictions not present in the prior-year program.
1.3 D&O Binder Review — Discrepancy Identified (Item 1 of 2)
C&H has identified one discrepancy in the D&O tower binders that requires corrective action.
Issue. The Vandermeer National Insurance Company primary binder (renewal policy no. VNI-DO-2022-91205) contains a definition of "Claim" that is narrower than the definition agreed upon during the renewal negotiations.
Specifics. The binder's definition of "Claim" is limited to formal civil, criminal, administrative, or regulatory proceedings, written demands for monetary or non-monetary relief, and formal investigations commenced by the issuance of a subpoena, target letter, or formal order of investigation. Critically, the binder definition excludes informal regulatory inquiries and preliminary investigations — that is, regulatory contacts, information requests, or pre-formal investigative steps that have not yet resulted in the issuance of a formal investigative order. By contrast, the negotiated language — as set forth in Item 6 of the D&O negotiation points in C&H's June 13, 2022 memorandum, and as confirmed in Ms. Petersen's June 24, 2022 email — expressly includes within the definition of "Claim" informal inquiries and preliminary investigations by regulatory bodies, including but not limited to OSHA, CPSC, and state attorneys general. The agreed-upon language provided that a "Claim" shall include "any inquiry, informal investigation, or request for information by a regulatory body, whether or not pursuant to a formal order of investigation, directed at or relating to an Insured Person or the Company in connection with the discharge of such Insured Person's duties."
Impact. If left uncorrected, this definitional narrowing would have material consequences. Informal regulatory inquiries — which frequently precede and evolve into formal investigations — would not trigger the policy's coverage obligations, including the duty to advance defense costs and the right to select counsel. Given the nature of Nexford's operations and its exposure to OSHA, CPSC, and state attorney general oversight, informal regulatory inquiries represent a realistic and foreseeable category of claims. Moreover, the Harrington Specialty Side-A DIC policy is designed to respond to coverage denials, carrier insolvency, or exhaustion of underlying limits — not to fill definitional gaps or cure narrowing in the underlying program's coverage terms. Accordingly, the DIC policy would not necessarily respond to a loss arising from an informal regulatory inquiry that falls outside the primary policy's definition of "Claim." The result would be a potential gap in the overall D&O program.
Recommended Action. C&H recommends that Ashford Breckinridge promptly request a corrective endorsement from Vandermeer National Insurance Company to broaden the definition of "Claim" to match the negotiated language described above. This endorsement should be issued at no additional premium, as the broader definition was agreed upon as part of the renewal terms and the renewal premium was quoted on that basis. C&H's Regulatory Investigation Coverage Memorandum dated June 14, 2022, which analyzed this definitional issue in detail and recommended the inclusion of informal regulatory inquiries, is incorporated by reference. C&H will review the corrective endorsement upon receipt to confirm conformity with the negotiated terms.
2. Product-Liability / General Liability Insurance Tower — Renewal Binder Summary
2.1 Tower Structure Confirmed
C&H has confirmed that the renewed PL tower is structured as set forth in the table below. All layers, carriers, limits, retentions, and policy numbers reflected in the binders match the tower design authorized by the Board Resolution and the final negotiated terms.
Product Recall Sub-Limit. The Midland Casualty & Surety Company primary binder reflects an increased product recall sub-limit of $5,000,000 per occurrence / $10,000,000 aggregate, up from $2,500,000 per occurrence / $5,000,000 aggregate in the prior policy year. The incremental premium for this sub-limit increase is $67,000, which is included in the Midland primary premium shown above. This increase was recommended by C&H in the Product Recall Sub-Limit Adequacy Memorandum dated June 7, 2022, in light of Nexford's recall history and the manufacturing profile of its subsidiaries. A discrepancy related to the formal endorsement for this sub-limit increase is discussed in Section 2.3 below.
Total PL Tower Aggregate Limit. The total aggregate limit available under the PL tower is $75,000,000, comprising $10,000,000 at the primary level (aggregate) and $65,000,000 across the three excess layers.
Total PL Renewal Premium. The total annual premium for the PL tower is $2,985,500, representing an increase of $342,600, or approximately 12.96%, over the prior-year PL premium of $2,642,900. The increase reflects general market hardening in the product-liability segment, the product recall sub-limit increase, and the impact of the pending claims and loss history discussed below.
Combined D&O + PL Renewal Premium. The combined annual premium for both the D&O and PL towers is $4,483,700, representing an increase of $477,350, or approximately 11.91%, over the prior-year combined premium of $4,006,350. This combined premium is within the $4,600,000 cap authorized by the Board Resolution, with remaining headroom of $116,300.
Named Insureds. All binders across the PL tower confirm the following named insureds: Nexford Industrial Holdings Inc.; Nexford Conveyor Systems, LLC ("NCS"); Triton Fastener Corp. ("Triton"); and Marlowe Asset Management Precision Machining, Inc. ("Marlowe Asset Management"). C&H verified that the named insured schedule in each binder is complete and consistent across all layers.
Completed Operations Coverage. Completed operations coverage is confirmed to extend for a period of ten (10) years following the delivery or completion of the insured's products or work. This tail period is reflected in the Midland primary binder and is followed in form by each excess layer. The ten-year completed operations tail is consistent with the Company's contractual obligations to its customers and with industry practice for manufacturers of industrial conveyor systems, fasteners, and precision-machined components.
2.2 PL Binder Review — Confirmed Items
C&H has reviewed the binders issued by each carrier in the PL tower and confirms that the following key negotiated terms are properly reflected:
Occurrence-Based Trigger. All layers of the PL tower are written on an occurrence basis. This trigger form is confirmed in each binder and is consistent with the prior-year program and the negotiated terms. No carrier sought to impose a claims-made trigger during the renewal process.
Completed Operations Tail (10-Year). As noted above, the ten-year completed operations tail is confirmed in the Midland primary binder and in the follow-form excess layer binders issued by Great Basin, Cornerstone, and Allegheny Pacific.
Cross-Liability / Cross-Suit Provisions. The binders confirm that cross-liability and cross-suit provisions are included, addressing the potential for intercompany claims between NCS, Triton, and Marlowe Asset Management. These provisions ensure that each named insured is treated as if a separate policy had been issued to it for purposes of determining coverage for claims asserted by one named insured against another, subject to the overall policy limits. This is a critical feature given the integrated nature of Nexford's manufacturing operations, in which components produced by Triton and Marlowe Asset Management are frequently incorporated into NCS conveyor systems.
"Other Insurance" Clause Consistency. C&H confirms that the "other insurance" clauses in the Midland primary and Great Basin excess binders are consistent and do not create conflicting excess-over-other-insurance conditions. This issue was specifically identified in Item 3 of the PL negotiation points in C&H's June 13, 2022 memorandum and was resolved during the negotiation process. The Midland primary policy responds as primary insurance for covered occurrences, and the Great Basin excess policy attaches upon exhaustion of the Midland limit without imposing a separate "other insurance" condition that could defer its response obligation.
Additional Insured Obligations and Vendor/Contractor Downstream Coverage. The binders confirm that the Midland primary policy provides blanket additional insured coverage for parties required to be named as additional insureds under the Company's contracts, subject to the standard "arising out of" nexus requirement. Vendor and contractor downstream coverage is also confirmed, consistent with the Company's supply-chain and subcontracting arrangements.
Prior/Pending Litigation Treatment. C&H has confirmed the treatment of the two pending litigation matters as follows:
(a) Higgins v. Nexford Conveyor Systems, LLC, Case No. 2021-L-04382, Circuit Court of Will County, Illinois (damages sought: $14,500,000). This matter involves a personal injury claim arising from an alleged product defect in an NCS conveyor system. The claim is confirmed as a known claim covered on an occurrence basis under the Midland primary policy; no known-claim exclusion has been applied.
(b) Consolidated Builders Supply Co. v. Triton Fastener Corp., Case No. 1:21-cv-08914, United States District Court for the Northern District of Illinois (damages sought: $6,800,000). This matter involves a product-liability claim alleging defective fastener components supplied by Triton. The claim is confirmed as a known claim covered on an occurrence basis under the Midland primary policy; no known-claim exclusion has been applied.
Both claims were fully disclosed in the broker's renewal submission to all carriers. Open reserves of $8,300,000 across the two pending claims are acknowledged in the carrier binders. The total five-year incurred amount of $15,120,000 — comprising $4,720,000 in paid losses, $8,300,000 in outstanding reserves, and $2,100,000 in incurred but not reported ("IBNR") losses, as determined by Kessler Quinn Advisory Group's actuarial analysis — was included in the broker submission and is reflected in the carriers' pricing and underwriting files.
Pollution Exclusion Scope. The pollution exclusion in the Great Basin umbrella binder has been confirmed as narrowed per the negotiated terms. Specifically, the exclusion contains a carve-back for "sudden and accidental" pollution events, consistent with the prior-year policy and the terms agreed upon during renewal negotiations. The narrowed exclusion scope is particularly relevant to Nexford's manufacturing operations, which involve the use of certain lubricants, solvents, and metalworking fluids.
2.3 PL Binder Review — Discrepancy Identified (Item 2 of 2)
C&H has identified one discrepancy in the PL tower binders that requires corrective action.
Issue. The Midland Casualty & Surety Company primary binder (renewal policy no. MCS-GL-2022-58904) does not include the formal endorsement reflecting the increased product recall sub-limit of $5,000,000 per occurrence / $10,000,000 aggregate.
Specifics. While the binder's declarations page references the increased product recall sub-limit and the premium schedule reflects the incremental premium of $67,000 associated with the sub-limit increase, the actual endorsement form amending the recall coverage terms — including the specific conditions, triggers, and scope of recall coverage — has not been attached to the binder. The binder package, as received from Ashford Breckinridge on July 1, 2022, includes the declarations page, the general conditions, and the standard endorsement schedule, but the recall sub-limit endorsement form (identified in the endorsement schedule as Endorsement No. MCS-RC-2022, "Product Recall Expense Coverage — Amended Limits") is listed but not included.
Impact. Until the formal endorsement is attached to the binder (and subsequently to the issued policy), there is ambiguity as to whether the increased sub-limit of $5,000,000 per occurrence / $10,000,000 aggregate is fully operative, or whether the prior-year sub-limit of $2,500,000 per occurrence / $5,000,000 aggregate remains in effect. Although the declarations page reference and the premium charge create a strong argument that the increased sub-limit was intended and is binding, the absence of the endorsement form introduces uncertainty regarding the specific coverage terms, conditions, and exclusions applicable to recall events at the higher limit level.
This ambiguity is of particular concern given Nexford's recall history. As detailed in C&H's Product Recall Sub-Limit Adequacy Memorandum dated June 7, 2022: (i) Triton Fastener Corp. conducted a voluntary recall in March 2020, with associated costs of approximately $1,100,000; and (ii) NCS issued an advisory notice in August 2020, with associated costs of approximately $340,000. The combined recall-related costs of $1,440,000 over a two-year period, while manageable under the prior sub-limit, underscored the need for higher limits given the Company's product profile and distribution channels. Prompt issuance of the endorsement is therefore important to eliminate any ambiguity and to ensure that the increased sub-limit is clearly operative from the inception date of the renewal policy period.
Recommended Action. C&H recommends that Ashford Breckinridge request that Midland Casualty & Surety Company issue the formal recall sub-limit endorsement (Endorsement No. MCS-RC-2022) and attach it to both the binder and the policy when issued. This endorsement should confirm the increased sub-limit of $5,000,000 per occurrence / $10,000,000 aggregate and should set forth all applicable coverage terms and conditions. C&H recommends that this endorsement be obtained before the first formal policy forms are issued by Midland. C&H will review the endorsement upon receipt to confirm conformity with the negotiated terms.
3. Summary of Follow-Up Items
Based on C&H's review, the following two items require corrective endorsements from the applicable primary carriers:
1. Vandermeer National Insurance Company (D&O Primary, Policy No. VNI-DO-2022-91205): A corrective endorsement must be issued to broaden the definition of "Claim" to include informal regulatory inquiries and preliminary investigations by regulatory bodies (including OSHA, CPSC, and state attorneys general), consistent with the negotiated terms set forth in Item 6 of the D&O negotiation points in C&H's June 13, 2022 memorandum and confirmed in Ms. Petersen's June 24, 2022 email. The endorsement should be issued at no additional premium.
2. Midland Casualty & Surety Company (PL Primary, Policy No. MCS-GL-2022-58904): The formal endorsement reflecting the increased product recall sub-limit of $5,000,000 per occurrence / $10,000,000 aggregate (Endorsement No. MCS-RC-2022, "Product Recall Expense Coverage — Amended Limits") must be prepared, executed, and attached to the binder and the issued policy. The endorsement should confirm the increased limits, applicable coverage terms, and the incremental premium of $67,000 already reflected in the premium schedule.
C&H recommends that Nexford instruct Ashford Breckinridge (Phillip Garza and Tamara Fisk) to pursue both endorsements immediately. Given that the policy period has already incepted, timely issuance of these endorsements is important to ensure that the coverage program operates as intended from the effective date. C&H suggests requesting that Ashford Breckinridge obtain draft endorsements from both carriers by no later than July 22, 2022, with final executed endorsements to follow within ten (10) business days thereafter. C&H will follow up separately with Ashford Breckinridge to communicate this timeline and to coordinate the review process.
Upon receipt of each endorsement, C&H will review the language to confirm conformity with the negotiated terms and will report to you accordingly.
4. Overall Conclusions and Confirmation
Subject to the two discrepancies identified in Sections 1.3 and 2.3 above — both of which are capable of resolution through the issuance of corrective endorsements — C&H confirms that the binders for both the D&O and PL towers are substantially consistent with the terms negotiated and authorized by the Nexford Board of Directors.
In summary:
• The renewal was bound on June 28, 2022, within the combined premium authorization cap of $4,600,000 set by the Board Resolution. The actual combined D&O and PL renewal premium is $4,483,700, representing remaining headroom of $116,300 beneath the authorized cap.
• All carrier changes are properly documented. The substitution of Northfield Excess Insurance Company for Graystone Mutual Assurance Co. on the D&O 2nd excess layer is reflected in the binders and does not introduce any coverage discontinuity.
• The Side-A DIC limit increase from $15,000,000 to $20,000,000 is confirmed in the Harrington Specialty Insurance Co. binder, with the corresponding premium increase reflected in the premium schedule.
• The product recall sub-limit increase from $2,500,000/$5,000,000 to $5,000,000/$10,000,000 is referenced in the Midland declarations page and premium schedule, pending issuance of the formal endorsement.
• All named insureds — Nexford Industrial Holdings Inc., Nexford Conveyor Systems, LLC, Triton Fastener Corp., and Marlowe Asset Management Precision Machining, Inc. — are properly identified across both towers.
C&H further recommends the following action items for Nexford's internal risk management team:
(a) Claims Reporting Compliance. Nexford's risk management team — specifically Trevor Haines, Vice President of Risk Management, and Donna Kowalski, Director of Insurance and Claims — should complete all claims reporting compliance steps outlined in the Claims Reporting Compliance Checklist dated June 1, 2022. This checklist identifies the notice provisions, reporting deadlines, and designated claims contacts for each carrier in both towers, and should be distributed to all relevant internal personnel and outside defense counsel.
(b) Defense Cost Erosion Tracking. C&H notes that defense cost erosion tracking in the Higgins and Consolidated Builders matters should continue in accordance with the guidance provided by Yuki Nakamura (C&H Working Associate) to Trevor Haines on June 15, 2022. Given that defense costs erode the per-occurrence and aggregate limits under the Midland primary policy, regular monitoring of cumulative defense expenditures is essential to anticipate potential exhaustion of the primary limit and to plan for timely notice to the Great Basin excess layer.
C&H remains available to review the final issued policy forms when received from each carrier and to address any additional questions or concerns that may arise during the policy period. We anticipate that final policy forms will be issued by the carriers within sixty (60) to ninety (90) days following binding, and we recommend that Ashford Breckinridge be instructed to forward all issued policies to C&H for review promptly upon receipt.
5. Copies of Reviewed Binders
Copies of all binders reviewed by C&H in connection with this engagement are being returned to Nexford under separate cover, via overnight courier. The following materials are enclosed with or accompany this letter:
(a) Copies of the binders for all nine carrier placements across the D&O and PL towers, as received from Ashford Breckinridge LLP between June 29 and July 6, 2022;
(b) C&H's marked-up comparison of the Vandermeer primary binder's definition of "Claim" against the negotiated language (redline format), illustrating the discrepancy discussed in Section 1.3 above; and
(c) C&H's annotated endorsement schedule for the Midland primary binder, identifying the missing product recall sub-limit endorsement discussed in Section 2.3 above.
Please retain these materials in Nexford's insurance files. C&H has retained copies for the firm's files in connection with Matter No. 1005-00003.
Disclaimer and Limitations. This letter does not constitute a legal opinion. It is based solely upon C&H's review of the binders provided to us by Ashford Breckinridge LLP and does not reflect a review of the final issued policy forms, which have not yet been received. The conclusions set forth herein are subject to review of the final issued policies and any endorsements, amendments, or corrections that may be issued by the carriers during the policy period. C&H has not independently verified the accuracy of the information contained in the binders and has relied upon the representations made by the broker and carriers therein. This letter is intended for the sole use of Nexford Industrial Holdings Inc. and its directors, officers, and advisors, and should not be relied upon by any third party.
Should you have any questions regarding this letter or the matters discussed herein, please do not hesitate to contact the undersigned or Naomi Petersen, Lead Associate (direct: (312) 555-8438; email: npetersen@calderwoodharkness.com).
We appreciate the opportunity to assist Nexford with this important matter and look forward to continuing to serve the Company's insurance coverage needs.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Douglas Fairchild, Partner Direct: (312) 555-8422
Email: dfairchild@calderwoodharkness.com
155 North Wacker Drive, Suite 4200 Chicago, Illinois 60606
cc: (via email)
Sandra Elliston, Chief Executive Officer, Nexford Industrial Holdings Inc. Trevor Haines, Vice President, Risk Management, Nexford Industrial Holdings Inc. Donna Kowalski, Director of Insurance and Claims, Nexford Industrial Holdings Inc. Angela Fontaine, Billing Partner, Calderwood & Harkness LLP Naomi Petersen, Lead Associate, Calderwood & Harkness LLP Yuki Nakamura, Working Associate, Calderwood & Harkness LLP
Layer | Carrier | Limit | Attachment Point | Renewal Policy No. | SIR / Retention | Annual Premium
Primary | Vandermeer National Insurance Company | $10,000,000 each claim / $10,000,000 aggregate | Ground-up | VNI-DO-2022-91205 | $1,000,000 per claim (entity coverage only); no SIR on Side-A individual director/officer coverage | $487,500
1st Excess | Commonwealth Indemnity Group | $10,000,000 excess of $10,000,000 | $10,000,000 | CIG-XDO-2022-30744 | N/A (follow-form) | $278,200
2nd Excess | Northfield Excess Insurance Company | $10,000,000 excess of $20,000,000 | $20,000,000 | NEIC-XDO-2022-15882 | N/A (follow-form) | $221,000
3rd Excess | Pinnacle Re Insurance Ltd. (Bermuda) | $10,000,000 excess of $30,000,000 | $30,000,000 | PRI-XDO-2022-06451 | N/A (follow-form) | $222,000
Side-A DIC | Harrington Specialty Insurance Co. | $20,000,000 (dedicated, non-eroding by entity or Side-B claims) | Difference-in-conditions trigger | HSI-DIC-2022-44019 | None | $289,500
Layer | Carrier | Limit | Attachment Point | Renewal Policy No. | SIR / Retention | Annual Premium
Primary GL/PL | Midland Casualty & Surety Company | $5,000,000 per occurrence / $10,000,000 aggregate | Ground-up | MCS-GL-2022-58904 | $500,000 per occurrence | $1,184,300
1st Excess / Umbrella | Great Basin Insurance Company | $25,000,000 excess of $10,000,000 | $10,000,000 | GBIC-XPL-2022-77263 | N/A (follow-form) | $987,500
2nd Excess | Cornerstone Reinsurance Corp. | $25,000,000 excess of $35,000,000 | $35,000,000 | CRC-XPL-2022-42018 | N/A (follow-form) | $524,200
3rd Excess | Allegheny Pacific Underwriters, Inc. | $15,000,000 excess of $60,000,000 | $60,000,000 | APU-XPL-2022-11390 | N/A (follow-form) | $289,500

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