litigation-hold-notice.docx

1005-00005 · Nexford Industrial Holdings · Engagement

litigation-hold-notice.docx DOCUMENT Litigation

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CALDERWOOD & HARKNESS LLP Attorneys at Law 200 South Wacker Drive, Suite 4400 Chicago, Illinois 60606 Telephone: (312) 555-7800 Facsimile: (312) 555-7801 www.calderwoodharkness.com

August 23, 2022

VIA HAND DELIVERY AND ELECTRONIC MAIL

Deborah Whitfield, Esq. General Counsel Nexford Industrial Holdings Inc. 4200 West Lakeshore Industrial Parkway, Suite 300 Waukegan, Illinois 60085

Re: LITIGATION HOLD NOTICE — Cardinal Peak Industries v. Nexford Industrial Holdings Inc., Case No. 2022-L-008471, Circuit Court of Cook County, Illinois, County Department, Law Division

C&H Matter No.: 1005-00005

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

This communication is protected by the attorney-client privilege and/or the work product doctrine. It is intended solely for the use of the individual(s) to whom it is addressed and those individuals within Nexford Industrial Holdings Inc. who have a need to know its contents for the purpose of complying with the obligations described herein. If you have received this communication in error, please notify Calderwood & Harkness LLP immediately and destroy all copies. Any unauthorized review, use, disclosure, or distribution is prohibited.

Dear Ms. Whitfield:

LITIGATION HOLD NOTICE

1. Purpose and Legal Obligation

This Litigation Hold Notice is issued by Calderwood & Harkness LLP ("C&H" or "outside counsel") in connection with our representation of Nexford Industrial Holdings Inc. ("Nexford" or "NIH") in the above-referenced litigation commenced by Cardinal Peak Industries ("Cardinal Peak" or "CPI"), a Colorado limited liability company headquartered at 1580 Ridgeline Boulevard, Pueblo, Colorado 81001.

On August 8, 2022, Cardinal Peak filed a Complaint in the Circuit Court of Cook County, Illinois, County Department, Law Division, captioned Cardinal Peak Industries v. Nexford Industrial Holdings Inc., Case No. 2022-L-008471 (the "Litigation"). In its Complaint, Cardinal Peak asserts the following claims against Nexford:

1. Breach of Contract — alleging that Nexford breached its obligations under the Master Supply Agreement between the parties (MSA Reference No. MSA-NIH-CPI-2020-001), dated January 15, 2020 (the "MSA"), by improperly rejecting or only partially paying raw-material surcharge invoices submitted by Cardinal Peak pursuant to Section 7.4 of the MSA;

2. Unjust Enrichment — alleging that Nexford was unjustly enriched by receiving the benefit of continued steel product deliveries at prices that did not reflect the full surcharges to which Cardinal Peak was contractually entitled; and

3. Account Stated — alleging that the surcharge invoices submitted by Cardinal Peak, to the extent not timely disputed, constitute an account stated upon which Nexford is liable.

The dispute at the heart of this Litigation arises from raw-material surcharge pass-throughs under the MSA. Specifically, Cardinal Peak claims that Nexford improperly rejected or only partially paid surcharge invoices totaling approximately $4.73 million over a fourteen-month period running from March 2021 through May 2022. The parties' disagreement centers on the interpretation and application of the surcharge provisions contained in MSA Section 7.4 and Exhibit C (Surcharge Methodology), including the proper calculation of surcharges, the applicability and effect of the twelve percent (12%) surcharge cap provision in Section 7.4(c), and compliance with the procedural requirements for Surcharge Notices and dispute notices set forth in Sections 7.4(a) and 7.4(d), respectively.

The purpose of this Litigation Hold Notice is to inform you — and, through you, all relevant Nexford personnel — of the legal obligation to identify, locate, and preserve all documents, communications, data, and other materials that are potentially relevant to this Litigation. This preservation obligation extends to Nexford and all of its officers, employees, agents, and representatives, including any contractors or consultants who may possess relevant information.

This obligation is not discretionary. Under both Illinois law and applicable federal law principles, a party to litigation — and a party that reasonably anticipates litigation — has an affirmative duty to preserve evidence that may be relevant to the claims or defenses at issue. This duty attached no later than June 10, 2022, when Nexford received Cardinal Peak's formal pre-litigation demand letter transmitted through its counsel, Blackwood Stein & Associates LLP, and was reinforced upon the filing of the Complaint on August 8, 2022.

Failure to preserve relevant materials can result in severe sanctions, including but not limited to:

• Adverse inference instructions to the jury (i.e., an instruction that the jury may presume that destroyed or lost evidence would have been unfavorable to Nexford);

• Monetary penalties and fee-shifting;

• Preclusion of evidence or testimony;

• Striking of pleadings or defenses; and

• In extreme cases, entry of default judgment.

Illinois courts have broad discretion to impose sanctions for spoliation of evidence, and the consequences of non-preservation can be case-dispositive. Accordingly, compliance with this Litigation Hold Notice is of the utmost importance.

This Litigation Hold Notice supersedes any existing document retention, destruction, or records management policies maintained by Nexford or any of its business units with respect to the categories of materials described herein. All routine destruction, deletion, recycling, purging, or alteration of any potentially relevant materials must cease immediately and remain suspended for the duration of this hold. If there is any doubt as to whether a particular document, communication, or data set falls within the scope of this hold, it should be preserved and the question directed to the contacts identified in Section 7 below.

2. Scope of the Litigation Hold

The following subsections define the subject matter, time period, and key custodians encompassed by this Litigation Hold. The descriptions below are intended to be illustrative and comprehensive but not necessarily exhaustive. If you become aware of additional categories of relevant materials or additional custodians not identified below, please bring them to the immediate attention of outside counsel.

2.1 Subject Matter

The Litigation Hold applies to all documents, communications, data, and other materials (in any format, whether paper or electronic) that relate to any of the following subjects:

(a) The Master Supply Agreement. All materials relating to the Master Supply Agreement, MSA Reference No. MSA-NIH-CPI-2020-001, executed on January 15, 2020, between Nexford Industrial Holdings Inc. (as Buyer) and Cardinal Peak Industries (as Seller). This includes, without limitation, all amendments, exhibits (including, in particular, Exhibit C — Surcharge Methodology), schedules, side letters, memoranda of understanding, and any ancillary or related agreements between the parties. The MSA has a three-year initial term running from January 15, 2020 through January 14, 2023, with automatic one-year renewal provisions, and all materials relating to the negotiation, execution, interpretation, performance, administration, and potential renewal or termination of the MSA fall within the scope of this hold.

(b) Pricing Under the MSA. All materials relating to the pricing of hot-rolled coil ("HRC") and cold-rolled coil ("CRC") steel products under the MSA. This includes materials relating to base pricing (HRC at $620 per ton and CRC at $740 per ton, as established in MSA Section 7.2), quarterly price adjustments pursuant to the MSA's pricing adjustment provisions, and surcharge pass-throughs under MSA Section 7.4. It also includes any materials reflecting pricing proposals, counterproposals, negotiations, or discussions between the parties regarding pricing at any time during the term of the MSA.

(c) Surcharge Invoices, Surcharge Notices, and Supporting Documentation. All surcharge invoices, Surcharge Notices (as defined in the MSA), and supporting documentation issued by Cardinal Peak during the disputed period of March 2021 through May 2022. Note that while the April 2021 surcharge period was paid in full by Nexford and is not itself in dispute, materials relating to the April 2021 surcharge — including the methodology and calculations applied — may nonetheless be relevant and should be preserved.

(d) Exhibit C — Surcharge Methodology. All materials relating to the Surcharge Methodology set forth in Exhibit C to the MSA. This includes, without limitation, materials relating to the Ferrous Scrap Index (as reported by Drayton Partners LLC, also referred to as "SPI"), the Industrial Energy Cost Index, the baseline scrap cost of $340 per ton established for purposes of the surcharge formula, and the baseline energy cost of $48 per ton. It also includes any analyses, models, spreadsheets, or other tools used by either party to calculate or verify surcharges under the Exhibit C methodology.

(e) The 12% Surcharge Cap. All materials relating to the twelve percent (12%) surcharge cap provision set forth in MSA Section 7.4(c). This includes any communications or documentation reflecting requests by Cardinal Peak for Nexford's written consent to exceed the cap, any grants or denials of such consent by Nexford, and any internal Nexford discussions or analyses regarding the applicability, interpretation, or enforcement of the cap.

(f) Surcharge Notice Delivery Requirements. All materials relating to the fifteen (15) business-day Surcharge Notice delivery requirement under MSA Section 7.4(a), including any tracking, logging, or monitoring of Surcharge Notice receipt dates, and any instances in which Cardinal Peak's compliance with this timing requirement was questioned or disputed by Nexford.

(g) Surcharge Dispute Procedures. All materials relating to the surcharge dispute procedure set forth in MSA Section 7.4(d), including any formal dispute notices sent by Nexford within thirty (30) calendar days of receipt of Surcharge Notices, any responses from Cardinal Peak to such dispute notices, and any negotiations, discussions, or attempted resolutions arising from the dispute procedure.

(h) Pre-Litigation Demand and Response. All materials relating to Cardinal Peak's formal demand letter dated June 10, 2022, which was transmitted through Cardinal Peak's counsel, Blackwood Stein & Associates LLP (717 Seventeenth Street, Suite 2200, Denver, Colorado 80202), and Nexford's response thereto dated July 5, 2022. This includes all internal drafts, analyses, and communications relating to the preparation of Nexford's response and any follow-up correspondence between the parties or their respective counsel.

(i) Invoice Review, Payment, and Rejection. All materials relating to Nexford's review, acceptance, partial payment, or rejection of surcharge invoices submitted by Cardinal Peak, including the approximately $1.68 million in surcharge payments already made by Nexford during the disputed period. This includes any internal analyses, approval chains, payment authorization records, and communications among procurement, finance, or accounts payable personnel regarding the processing or disposition of Cardinal Peak surcharge invoices.

(j) Communications with Cardinal Peak Personnel. All communications with Cardinal Peak Industries, including communications with any of the following individuals and any other Cardinal Peak personnel:

• Frank Delacroix, President & Chief Executive Officer

• Natalie Gunderson, Vice President, Sales & Commercial

• Harold Briggs, Controller

• Patricia Morrow, General Counsel

This includes all forms of communication — letters, emails, text messages, instant messages, voicemails, meeting notes, video or telephone conference records, and any other medium.

(k) Internal Nexford Communications. All internal Nexford communications regarding the surcharge dispute, the MSA, pricing of steel products, procurement of HRC and CRC products from Cardinal Peak, any alternative supplier evaluations or sourcing decisions, and the strategic or business implications of the dispute or the Litigation.

2.2 Relevant Time Period

The Litigation Hold covers all materials created, sent, received, modified, or otherwise generated during the period from January 15, 2020 (the execution date of the MSA) through the present date, and the preservation obligation continues on a going-forward basis for the duration of this Litigation Hold.

Within this overall time frame, there is special emphasis on the disputed surcharge period of March 2021 through May 2022, as this is the period during which the surcharge invoices at issue in the Litigation were generated, submitted, reviewed, and either paid, partially paid, or rejected.

Materials predating January 15, 2020, should also be preserved to the extent they relate to the negotiation of the MSA, the development of the surcharge methodology, or the parties' course of dealing prior to execution of the MSA, as such materials may be relevant to contract interpretation issues.

2.3 Key Individuals (Custodians)

The following Nexford personnel have been identified as key custodians whose files, records, documents, and data must be preserved in connection with this Litigation Hold. This list is not exhaustive, and additional custodians may be identified as the matter proceeds. If you become aware of other individuals who may possess relevant information, please notify outside counsel immediately.

In addition to the named individuals above, the Litigation Hold extends to:

• Any procurement department personnel who communicated with Cardinal Peak regarding surcharges, pricing, product orders, or any aspect of the MSA;

• Any finance or accounts payable personnel involved in processing, reviewing, approving, or recording Cardinal Peak surcharge invoices or payments; and

• Any personnel involved in negotiating, drafting, or administering the MSA, including any individuals who participated in the negotiation of the surcharge methodology or the drafting of Exhibit C.

Each identified custodian bears personal responsibility for preserving the materials in his or her possession, custody, or control that fall within the scope of this Litigation Hold, subject to the instructions set forth in Section 4 below.

3. Categories of Materials to Be Preserved

The following is a detailed, non-exhaustive description of the types of materials that must be preserved. If you are uncertain whether a particular item falls within the scope of this Litigation Hold, err on the side of preservation and direct your question to the contacts identified in Section 7.

3.1 Paper Documents

All paper documents within the scope of this hold must be preserved in their original form, without alteration, annotation (other than pre-existing annotations), or modification. Relevant paper documents include, without limitation:

(a) Original executed copies of the MSA (MSA-NIH-CPI-2020-001), including all exhibits (and particularly Exhibit C — Surcharge Methodology), amendments, schedules, and any related instruments bearing original signatures;

(b) Hard copy surcharge invoices, Surcharge Notices, and all supporting documentation submitted by Cardinal Peak, including any transmittal letters or cover sheets;

(c) Handwritten notes, memoranda, meeting minutes, agendas, and notebooks maintained by any of the identified custodians or other Nexford personnel that relate to the MSA, surcharge calculations, pricing negotiations, the surcharge dispute, or the Litigation;

(d) Purchase orders, delivery receipts, bills of lading, inspection reports, quality certificates, and shipping records for HRC and CRC steel products received from Cardinal Peak during the relevant time period;

(e) Internal review or analysis worksheets, checklists, or evaluation forms used by procurement or finance personnel to review, verify, approve, or reject Cardinal Peak surcharge invoices;

(f) All correspondence (including letters and faxes) sent to or received from Cardinal Peak Industries, Blackwood Stein & Associates LLP, or any other third party in connection with the MSA, the surcharge dispute, or the Litigation; and

(g) Any other paper documents that relate to the subject matters identified in Section 2.1 above.

3.2 Electronic Documents and Communications

The preservation obligation extends to all electronically stored information ("ESI") within the scope of this hold, regardless of the medium or format in which it is stored. Relevant ESI includes, without limitation:

(a) Emails and messaging — All emails (including all attachments), calendar entries, meeting invitations, instant messages (including messages sent through any enterprise messaging platforms such as Northgate Data Systems, Meridian Solutions, or similar tools), text messages (SMS and MMS), and voicemails of the identified custodians that relate to Cardinal Peak, the MSA, surcharges, pricing, or the dispute. This includes emails and messages in active mailboxes, archived mailboxes, sent folders, deleted-items folders (to the extent recoverable), and any personal email accounts or devices used for business purposes;

(b) Electronic copies of key documents — Electronic copies (including all drafts and versions) of the MSA, exhibits, amendments, Surcharge Notices, invoices, and supporting calculations, wherever stored;

(c) Spreadsheets, databases, and financial system records — All spreadsheets, databases, financial system records, and data extracts relating to Cardinal Peak invoices, surcharge computations, payment records, accounts payable entries, and any reconciliation or tracking activities. This includes data maintained in Nexford's enterprise resource planning ("ERP") system, accounting software, and any standalone or departmental databases;

(d) Surcharge review logs — Internal surcharge review logs, trackers, or databases maintained by Russell Okonkwo or other procurement personnel to monitor, evaluate, or track surcharge submissions and dispositions;

(e) ERP and procurement system records — All data within Nexford's ERP system, procurement management system, and any automated surcharge tracking, validation, or calculation tools, to the extent such data relates to the Cardinal Peak supply relationship or surcharge invoices;

(f) Shared and cloud storage — Documents, files, and data stored on shared network drives (including departmental and project-specific drives), cloud storage platforms (including but not limited to Aldermere Systems, Cobalt Ridge Systems, Hollowell Health IT, Larkspur Technologies, or similar services), collaboration tools, and document management systems;

(g) Presentations, board materials, and reports — All presentations, memoranda, reports, dashboards, or other materials referencing the Cardinal Peak supply relationship, surcharge dispute, or the Litigation that were prepared for or provided to Nexford's board of directors, its executive leadership team, or to Marlowe Asset Management Bluff Capital Partners, LP (875 North Michigan Avenue, Suite 3600, Chicago, Illinois 60611), Nexford's private equity sponsor, including any regular portfolio company reporting or ad hoc communications relating to the dispute; and

(h) Mobile device data — Data stored on company-issued or personally owned mobile devices (smartphones, tablets) used by identified custodians for business purposes, including text messages, messaging application data, photographs, and any other potentially relevant information.

3.3 Financial and Accounting Records

In addition to the financial and accounting records captured within the general categories above, the following specific categories of financial and accounting materials must be preserved:

(a) General ledger and journal entries — All general ledger entries, journal entries, account reconciliations, and sub-ledger detail relating to Cardinal Peak payables, surcharge accruals, disputed amounts, or any reserves or contingencies established in connection with the surcharge dispute;

(b) Auditor communications — All records maintained by, provided to, or received from Hargrove Kellner CPAs LLP (500 West Monroe Street, Suite 3100, Chicago, Illinois 60661), Nexford's independent auditors, that relate to the Cardinal Peak supply relationship, surcharge liabilities, accruals, reserves, contingent liabilities, or the dispute. This includes management representation letters, audit workpapers (to the extent in Nexford's possession), and any correspondence between Nexford and Hargrove Kellner regarding the accounting treatment of the disputed surcharges;

(c) Bank statements and payment records — Bank statements, wire transfer confirmations, check images, remittance advices, and any other payment records reflecting payments made by Nexford to Cardinal Peak during the disputed period, including the approximately $1.68 million in surcharge payments acknowledged by Nexford;

(d) Credit facility records — Any records relating to the $45 million revolving credit facility with Ridgecrest National Bank, N.A. (120 North LaSalle Street, Chicago, Illinois 60602), dated March 12, 2021, to the extent such records reference the Cardinal Peak dispute, surcharge liabilities, or any litigation notice obligations under Credit Agreement Section 6.03(b) or similar reporting covenants. This includes compliance certificates, borrowing base certificates (to the extent the Cardinal Peak relationship affects eligible inventory or receivables), and any correspondence with Ridgecrest National Bank regarding the dispute or the Litigation; and

(e) Budget and forecast materials — Internal budgets, forecasts, cash flow projections, or financial models that incorporate or reference Cardinal Peak surcharge expenses, accrued liabilities, or contingent obligations.

3.4 Other Materials

The Litigation Hold also extends to the following additional categories of materials:

(a) Audio and video recordings — Any audio or video recordings of meetings, telephone calls, or videoconferences with Cardinal Peak personnel or internally among Nexford personnel, to the extent such recordings relate to the MSA, surcharges, pricing, or the dispute;

(b) Third-party market data and indices — Any third-party market data, index publications, pricing reports, or benchmarking materials used by Nexford to evaluate or verify Cardinal Peak's surcharge calculations. This specifically includes publications or data relating to the Ferrous Scrap Index (as reported by Drayton Partners LLC), the Industrial Energy Cost Index, and any other commodity or energy indices referenced in the MSA or Exhibit C;

(c) Settlement and negotiation materials — Draft or final versions of any settlement proposals, counterproposals, term sheets, or negotiation summaries exchanged between the parties (or their respective counsel) prior to or after the commencement of the Litigation; and

(d) Regulatory and compliance materials — Any regulatory filings, insurance notifications, or compliance documents that reference the Cardinal Peak dispute or the Litigation.

4. Instructions for Compliance

4.1 Immediate Actions Required

The following actions must be taken immediately upon receipt of this Litigation Hold Notice:

(a) Suspend routine destruction. All routine document destruction, recycling, shredding, or purging schedules must be suspended as they apply to the categories of materials described in Sections 2 and 3 above. This includes the suspension of any scheduled records retention program dispositions, off-site storage destruction requests, or periodic clean-up initiatives.

(b) Disable auto-delete functions. Nexford's IT department must disable any automatic deletion functions, retention policy enforcement actions, or archival purges that apply to the email accounts, messaging accounts, or backup systems associated with the identified custodians. This includes auto-delete settings on individual mailboxes, enterprise-wide retention policies that would purge emails older than a specified period, and any automated data lifecycle management rules.

(c) Preserve backup media. All backup tapes, disaster recovery archives, system images, and other backup media that may contain data within the scope of this hold must be preserved. Backup media should not be overwritten, recycled, or degaussed. If Nexford follows a rotating backup tape schedule (e.g., weekly or monthly rotation), all tapes that may contain relevant data should be pulled from the rotation cycle and preserved in a secure location.

(d) Do not alter, modify, or overwrite. No potentially relevant document, record, file, or data set may be altered, modified, edited, overwritten, or deleted. This prohibition applies regardless of whether the individual believes the document to be duplicative, outdated, or immaterial.

4.2 Ongoing Obligations

The Litigation Hold is not a one-time event. The following ongoing obligations apply for the duration of the hold:

(a) Preserve newly created materials. All newly created documents, communications, and data that fall within the scope of this Litigation Hold must be preserved on an ongoing basis for the duration of the Litigation. This includes, without limitation, any new correspondence with Cardinal Peak or its counsel, any internal analyses or memoranda relating to the dispute, and any financial records reflecting surcharge-related accruals or payments.

(b) Custodian employment changes. If any identified custodian's employment status changes — whether due to transfer, resignation, involuntary separation, retirement, leave of absence, or any other reason — Deborah Whitfield and Calderwood & Harkness LLP must be notified immediately, before the individual's departure date if possible. Upon notification, steps must be taken to secure the departing individual's files, email accounts, electronic data, paper records, and any company-issued devices. No departing custodian's data should be purged, reallocated, or overwritten without prior approval from outside counsel.

(c) Hardware preservation. If any hardware used by identified custodians — including laptops, desktop computers, mobile devices (smartphones, tablets), or external storage media (USB drives, portable hard drives) — is scheduled for replacement, decommissioning, reimaging, or recycling, the device must be preserved intact or its contents must be forensically imaged by a qualified forensic specialist before any changes are made to the device. Please coordinate with Calderwood & Harkness LLP before taking any action with respect to custodian hardware.

(d) Third-party hosted data. If any relevant data is hosted by third-party service providers (e.g., cloud service providers, managed IT services, SaaS platforms), Nexford should take steps to ensure that such providers are aware of the preservation obligation and that relevant data will not be deleted, overwritten, or rendered inaccessible.

4.3 Distribution of This Notice

In order to ensure comprehensive compliance with this Litigation Hold, the following distribution steps are requested:

(a) Distribution to custodians. Deborah Whitfield is requested to distribute this Litigation Hold Notice (or a version approved by outside counsel for internal distribution) to each of the identified custodians listed in Section 2.3 above, as well as to any additional Nexford personnel who may possess, have access to, or have control over relevant information.

(b) Written acknowledgment. Each recipient of this notice should acknowledge receipt in writing. Email confirmation is acceptable for this purpose. A Litigation Hold Acknowledgment Form is enclosed with this notice for each custodian to sign and return to Deborah Whitfield's office. Signed acknowledgment forms should be retained by the Legal Department and copies forwarded to Calderwood & Harkness LLP.

(c) IT department notification. Nexford's IT department (or the functional equivalent, including any outsourced IT management providers) should be provided with a copy of this notice and instructed to implement the technical preservation steps described in Section 4.1 above. The IT department should designate a single point of contact to coordinate with Calderwood & Harkness LLP on technical preservation matters, including the identification and securing of relevant data sources, the disabling of auto-delete functions, and the preservation of backup media.

(d) Questions and clarifications. Any custodian or other recipient who has questions about the scope of this Litigation Hold, including whether specific documents or data fall within its scope, should direct those questions to Deborah Whitfield or to the undersigned at Calderwood & Harkness LLP. When in doubt, preserve.

5. Consequences of Non-Compliance

Calderwood & Harkness LLP wishes to reiterate the seriousness of the preservation obligation described in this Litigation Hold Notice.

Under Illinois law and applicable federal law principles, a party has a duty to preserve evidence that is relevant to pending or reasonably anticipated litigation. The duty to preserve attaches when litigation is reasonably foreseeable, which in this matter occurred no later than June 10, 2022 — the date Nexford received Cardinal Peak's formal pre-litigation demand letter transmitted through Blackwood Stein & Associates LLP. The duty was further reinforced upon the filing of the Complaint on August 8, 2022.

The failure to preserve relevant evidence — commonly referred to as "spoliation" — can result in severe consequences. Illinois courts and federal courts applying Illinois law have imposed a range of sanctions for spoliation, including:

• Adverse inference instructions — The court may instruct the jury that it may presume that the destroyed, lost, or altered evidence would have been unfavorable to the spoliating party. Such an instruction can be devastating to a party's litigation position.

• Monetary sanctions — The court may impose monetary penalties on the spoliating party, including an award of the opposing party's attorneys' fees and costs incurred as a result of the spoliation.

• Evidentiary sanctions — The court may preclude the spoliating party from introducing certain evidence or testimony, or may allow the opposing party to present evidence of the spoliation to the jury.

• Pleading sanctions — In egregious cases, the court may strike pleadings or defenses, or enter a default judgment against the spoliating party.

• Tort liability — Under certain circumstances, spoliation may give rise to an independent tort claim.

These consequences apply regardless of whether the destruction of evidence was intentional or negligent. The mere failure to implement adequate preservation procedures, once the duty to preserve has attached, can support the imposition of sanctions.

Nexford and each of its custodians must take this obligation seriously. Any individual who becomes aware of the actual or potential destruction, alteration, or loss of materials within the scope of this Litigation Hold must immediately report the situation to Deborah Whitfield and to Calderwood & Harkness LLP.

6. Duration of the Hold

This Litigation Hold remains in effect until Calderwood & Harkness LLP issues a written release of the hold. No custodian or Nexford employee is authorized to terminate, modify, or narrow the scope of this hold without the express written approval of outside counsel.

The Litigation Hold will not be lifted without prior consultation between Calderwood & Harkness LLP and Nexford's General Counsel, and any release will be communicated in writing to all custodians who received this notice.

Periodic reminders will be issued by Calderwood & Harkness LLP (or by the Legal Department at our direction) to all custodians to reinforce the preservation obligation and to confirm ongoing compliance. Custodians are expected to respond to such reminders promptly and to report any concerns or issues that may affect the integrity of preserved materials.

The continuation of this hold is independent of the status of any settlement discussions, mediation, or other dispute resolution efforts. Unless and until a written release is issued, all preservation obligations described in this notice remain in full force and effect.

7. Contact Information

All questions regarding this Litigation Hold — including questions about whether specific documents, data, or communications fall within its scope — should be directed to one of the following contacts:

Internal Contact:

Deborah Whitfield General Counsel Nexford Industrial Holdings Inc. 4200 West Lakeshore Industrial Parkway, Suite 300 Waukegan, Illinois 60085 Telephone: (847) 555-3200

Email: dwhitfield@nexfordindustrial.com

Outside Counsel — Responsible Partner:

Priya Anand Partner Calderwood & Harkness LLP 200 South Wacker Drive, Suite 4400 Chicago, Illinois 60606 Telephone: (312) 555-7818

Email: panand@calderwoodharkness.com

Outside Counsel — Day-to-Day Contact:

Simone Laroche Associate Calderwood & Harkness LLP 200 South Wacker Drive, Suite 4400 Chicago, Illinois 60606 Telephone: (312) 555-7842

Email: slaroche@calderwoodharkness.com

We strongly encourage custodians to err on the side of over-inclusion when determining whether materials fall within the scope of this hold. Preserving a document that turns out not to be relevant is far preferable to failing to preserve one that is.

We appreciate your prompt attention to this matter. Compliance with this Litigation Hold Notice is essential to Nexford's ability to fulfill its legal obligations and to defend itself effectively in this Litigation. Please do not hesitate to contact us with any questions.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Priya Anand Partner Calderwood & Harkness LLP 200 South Wacker Drive, Suite 4400 Chicago, Illinois 60606

By: ________

Simone Laroche Associate Calderwood & Harkness LLP 200 South Wacker Drive, Suite 4400 Chicago, Illinois 60606

cc: (via email)

Martin Schaeffer, Chief Executive Officer, Nexford Industrial Holdings Inc. Lydia Tran, Chief Financial Officer, Nexford Industrial Holdings Inc. Russell Okonkwo, Vice President, Procurement, Nexford Industrial Holdings Inc. Douglas Carmichael, Partner, Calderwood & Harkness LLP

Enclosure:

Litigation Hold Acknowledgment Form (for each custodian to sign and return)

Name	Title	Basis for Identification
Martin Schaeffer	Chief Executive Officer	Executive oversight of the Cardinal Peak relationship and the surcharge dispute; likely recipient of escalation communications and board-level reporting
Lydia Tran	Chief Financial Officer	Oversight of financial reporting, surcharge accruals, reserve decisions, and communications with auditors and lenders regarding the dispute
Russell Okonkwo	Vice President, Procurement	Primary Nexford contact for Cardinal Peak surcharge matters; responsible for reviewing, approving, or rejecting surcharge invoices and administering the MSA from Nexford's side
Deborah Whitfield	General Counsel	Legal oversight of the MSA, the surcharge dispute, pre-litigation communications, and engagement of outside counsel

CALDERWOOD & HARKNESS LLP Attorneys at Law 200 South Wacker Drive, Suite 4400 Chicago, Illinois 60606 Telephone: (312) 555-7800 Facsimile: (312) 555-7801 www.calderwoodharkness.com
August 23, 2022
VIA HAND DELIVERY AND ELECTRONIC MAIL
Deborah Whitfield, Esq. General Counsel Nexford Industrial Holdings Inc. 4200 West Lakeshore Industrial Parkway, Suite 300 Waukegan, Illinois 60085
Re: LITIGATION HOLD NOTICE — Cardinal Peak Industries v. Nexford Industrial Holdings Inc., Case No. 2022-L-008471, Circuit Court of Cook County, Illinois, County Department, Law Division
C&H Matter No.: 1005-00005
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
This communication is protected by the attorney-client privilege and/or the work product doctrine. It is intended solely for the use of the individual(s) to whom it is addressed and those individuals within Nexford Industrial Holdings Inc. who have a need to know its contents for the purpose of complying with the obligations described herein. If you have received this communication in error, please notify Calderwood & Harkness LLP immediately and destroy all copies. Any unauthorized review, use, disclosure, or distribution is prohibited.
Dear Ms. Whitfield:
LITIGATION HOLD NOTICE
1. Purpose and Legal Obligation
This Litigation Hold Notice is issued by Calderwood & Harkness LLP ("C&H" or "outside counsel") in connection with our representation of Nexford Industrial Holdings Inc. ("Nexford" or "NIH") in the above-referenced litigation commenced by Cardinal Peak Industries ("Cardinal Peak" or "CPI"), a Colorado limited liability company headquartered at 1580 Ridgeline Boulevard, Pueblo, Colorado 81001.
On August 8, 2022, Cardinal Peak filed a Complaint in the Circuit Court of Cook County, Illinois, County Department, Law Division, captioned Cardinal Peak Industries v. Nexford Industrial Holdings Inc., Case No. 2022-L-008471 (the "Litigation"). In its Complaint, Cardinal Peak asserts the following claims against Nexford:
1.  Breach of Contract — alleging that Nexford breached its obligations under the Master Supply Agreement between the parties (MSA Reference No. MSA-NIH-CPI-2020-001), dated January 15, 2020 (the "MSA"), by improperly rejecting or only partially paying raw-material surcharge invoices submitted by Cardinal Peak pursuant to Section 7.4 of the MSA;
2.  Unjust Enrichment — alleging that Nexford was unjustly enriched by receiving the benefit of continued steel product deliveries at prices that did not reflect the full surcharges to which Cardinal Peak was contractually entitled; and
3.  Account Stated — alleging that the surcharge invoices submitted by Cardinal Peak, to the extent not timely disputed, constitute an account stated upon which Nexford is liable.
The dispute at the heart of this Litigation arises from raw-material surcharge pass-throughs under the MSA. Specifically, Cardinal Peak claims that Nexford improperly rejected or only partially paid surcharge invoices totaling approximately $4.73 million over a fourteen-month period running from March 2021 through May 2022. The parties' disagreement centers on the interpretation and application of the surcharge provisions contained in MSA Section 7.4 and Exhibit C (Surcharge Methodology), including the proper calculation of surcharges, the applicability and effect of the twelve percent (12%) surcharge cap provision in Section 7.4(c), and compliance with the procedural requirements for Surcharge Notices and dispute notices set forth in Sections 7.4(a) and 7.4(d), respectively.
The purpose of this Litigation Hold Notice is to inform you — and, through you, all relevant Nexford personnel — of the legal obligation to identify, locate, and preserve all documents, communications, data, and other materials that are potentially relevant to this Litigation. This preservation obligation extends to Nexford and all of its officers, employees, agents, and representatives, including any contractors or consultants who may possess relevant information.
This obligation is not discretionary. Under both Illinois law and applicable federal law principles, a party to litigation — and a party that reasonably anticipates litigation — has an affirmative duty to preserve evidence that may be relevant to the claims or defenses at issue. This duty attached no later than June 10, 2022, when Nexford received Cardinal Peak's formal pre-litigation demand letter transmitted through its counsel, Blackwood Stein & Associates LLP, and was reinforced upon the filing of the Complaint on August 8, 2022.
Failure to preserve relevant materials can result in severe sanctions, including but not limited to:
•  Adverse inference instructions to the jury (i.e., an instruction that the jury may presume that destroyed or lost evidence would have been unfavorable to Nexford);
•  Monetary penalties and fee-shifting;
•  Preclusion of evidence or testimony;
•  Striking of pleadings or defenses; and
•  In extreme cases, entry of default judgment.
Illinois courts have broad discretion to impose sanctions for spoliation of evidence, and the consequences of non-preservation can be case-dispositive. Accordingly, compliance with this Litigation Hold Notice is of the utmost importance.
This Litigation Hold Notice supersedes any existing document retention, destruction, or records management policies maintained by Nexford or any of its business units with respect to the categories of materials described herein. All routine destruction, deletion, recycling, purging, or alteration of any potentially relevant materials must cease immediately and remain suspended for the duration of this hold. If there is any doubt as to whether a particular document, communication, or data set falls within the scope of this hold, it should be preserved and the question directed to the contacts identified in Section 7 below.
2. Scope of the Litigation Hold
The following subsections define the subject matter, time period, and key custodians encompassed by this Litigation Hold. The descriptions below are intended to be illustrative and comprehensive but not necessarily exhaustive. If you become aware of additional categories of relevant materials or additional custodians not identified below, please bring them to the immediate attention of outside counsel.
2.1 Subject Matter
The Litigation Hold applies to all documents, communications, data, and other materials (in any format, whether paper or electronic) that relate to any of the following subjects:
(a) The Master Supply Agreement. All materials relating to the Master Supply Agreement, MSA Reference No. MSA-NIH-CPI-2020-001, executed on January 15, 2020, between Nexford Industrial Holdings Inc. (as Buyer) and Cardinal Peak Industries (as Seller). This includes, without limitation, all amendments, exhibits (including, in particular, Exhibit C — Surcharge Methodology), schedules, side letters, memoranda of understanding, and any ancillary or related agreements between the parties. The MSA has a three-year initial term running from January 15, 2020 through January 14, 2023, with automatic one-year renewal provisions, and all materials relating to the negotiation, execution, interpretation, performance, administration, and potential renewal or termination of the MSA fall within the scope of this hold.
(b) Pricing Under the MSA. All materials relating to the pricing of hot-rolled coil ("HRC") and cold-rolled coil ("CRC") steel products under the MSA. This includes materials relating to base pricing (HRC at $620 per ton and CRC at $740 per ton, as established in MSA Section 7.2), quarterly price adjustments pursuant to the MSA's pricing adjustment provisions, and surcharge pass-throughs under MSA Section 7.4. It also includes any materials reflecting pricing proposals, counterproposals, negotiations, or discussions between the parties regarding pricing at any time during the term of the MSA.
(c) Surcharge Invoices, Surcharge Notices, and Supporting Documentation. All surcharge invoices, Surcharge Notices (as defined in the MSA), and supporting documentation issued by Cardinal Peak during the disputed period of March 2021 through May 2022. Note that while the April 2021 surcharge period was paid in full by Nexford and is not itself in dispute, materials relating to the April 2021 surcharge — including the methodology and calculations applied — may nonetheless be relevant and should be preserved.
(d) Exhibit C — Surcharge Methodology. All materials relating to the Surcharge Methodology set forth in Exhibit C to the MSA. This includes, without limitation, materials relating to the Ferrous Scrap Index (as reported by Drayton Partners LLC, also referred to as "SPI"), the Industrial Energy Cost Index, the baseline scrap cost of $340 per ton established for purposes of the surcharge formula, and the baseline energy cost of $48 per ton. It also includes any analyses, models, spreadsheets, or other tools used by either party to calculate or verify surcharges under the Exhibit C methodology.
(e) The 12% Surcharge Cap. All materials relating to the twelve percent (12%) surcharge cap provision set forth in MSA Section 7.4(c). This includes any communications or documentation reflecting requests by Cardinal Peak for Nexford's written consent to exceed the cap, any grants or denials of such consent by Nexford, and any internal Nexford discussions or analyses regarding the applicability, interpretation, or enforcement of the cap.
(f) Surcharge Notice Delivery Requirements. All materials relating to the fifteen (15) business-day Surcharge Notice delivery requirement under MSA Section 7.4(a), including any tracking, logging, or monitoring of Surcharge Notice receipt dates, and any instances in which Cardinal Peak's compliance with this timing requirement was questioned or disputed by Nexford.
(g) Surcharge Dispute Procedures. All materials relating to the surcharge dispute procedure set forth in MSA Section 7.4(d), including any formal dispute notices sent by Nexford within thirty (30) calendar days of receipt of Surcharge Notices, any responses from Cardinal Peak to such dispute notices, and any negotiations, discussions, or attempted resolutions arising from the dispute procedure.
(h) Pre-Litigation Demand and Response. All materials relating to Cardinal Peak's formal demand letter dated June 10, 2022, which was transmitted through Cardinal Peak's counsel, Blackwood Stein & Associates LLP (717 Seventeenth Street, Suite 2200, Denver, Colorado 80202), and Nexford's response thereto dated July 5, 2022. This includes all internal drafts, analyses, and communications relating to the preparation of Nexford's response and any follow-up correspondence between the parties or their respective counsel.
(i) Invoice Review, Payment, and Rejection. All materials relating to Nexford's review, acceptance, partial payment, or rejection of surcharge invoices submitted by Cardinal Peak, including the approximately $1.68 million in surcharge payments already made by Nexford during the disputed period. This includes any internal analyses, approval chains, payment authorization records, and communications among procurement, finance, or accounts payable personnel regarding the processing or disposition of Cardinal Peak surcharge invoices.
(j) Communications with Cardinal Peak Personnel. All communications with Cardinal Peak Industries, including communications with any of the following individuals and any other Cardinal Peak personnel:
•  Frank Delacroix, President & Chief Executive Officer
•  Natalie Gunderson, Vice President, Sales & Commercial
•  Harold Briggs, Controller
•  Patricia Morrow, General Counsel
This includes all forms of communication — letters, emails, text messages, instant messages, voicemails, meeting notes, video or telephone conference records, and any other medium.
(k) Internal Nexford Communications. All internal Nexford communications regarding the surcharge dispute, the MSA, pricing of steel products, procurement of HRC and CRC products from Cardinal Peak, any alternative supplier evaluations or sourcing decisions, and the strategic or business implications of the dispute or the Litigation.
2.2 Relevant Time Period
The Litigation Hold covers all materials created, sent, received, modified, or otherwise generated during the period from January 15, 2020 (the execution date of the MSA) through the present date, and the preservation obligation continues on a going-forward basis for the duration of this Litigation Hold.
Within this overall time frame, there is special emphasis on the disputed surcharge period of March 2021 through May 2022, as this is the period during which the surcharge invoices at issue in the Litigation were generated, submitted, reviewed, and either paid, partially paid, or rejected.
Materials predating January 15, 2020, should also be preserved to the extent they relate to the negotiation of the MSA, the development of the surcharge methodology, or the parties' course of dealing prior to execution of the MSA, as such materials may be relevant to contract interpretation issues.
2.3 Key Individuals (Custodians)
The following Nexford personnel have been identified as key custodians whose files, records, documents, and data must be preserved in connection with this Litigation Hold. This list is not exhaustive, and additional custodians may be identified as the matter proceeds. If you become aware of other individuals who may possess relevant information, please notify outside counsel immediately.
In addition to the named individuals above, the Litigation Hold extends to:
•  Any procurement department personnel who communicated with Cardinal Peak regarding surcharges, pricing, product orders, or any aspect of the MSA;
•  Any finance or accounts payable personnel involved in processing, reviewing, approving, or recording Cardinal Peak surcharge invoices or payments; and
•  Any personnel involved in negotiating, drafting, or administering the MSA, including any individuals who participated in the negotiation of the surcharge methodology or the drafting of Exhibit C.
Each identified custodian bears personal responsibility for preserving the materials in his or her possession, custody, or control that fall within the scope of this Litigation Hold, subject to the instructions set forth in Section 4 below.
3. Categories of Materials to Be Preserved
The following is a detailed, non-exhaustive description of the types of materials that must be preserved. If you are uncertain whether a particular item falls within the scope of this Litigation Hold, err on the side of preservation and direct your question to the contacts identified in Section 7.
3.1 Paper Documents
All paper documents within the scope of this hold must be preserved in their original form, without alteration, annotation (other than pre-existing annotations), or modification. Relevant paper documents include, without limitation:
(a) Original executed copies of the MSA (MSA-NIH-CPI-2020-001), including all exhibits (and particularly Exhibit C — Surcharge Methodology), amendments, schedules, and any related instruments bearing original signatures;
(b) Hard copy surcharge invoices, Surcharge Notices, and all supporting documentation submitted by Cardinal Peak, including any transmittal letters or cover sheets;
(c) Handwritten notes, memoranda, meeting minutes, agendas, and notebooks maintained by any of the identified custodians or other Nexford personnel that relate to the MSA, surcharge calculations, pricing negotiations, the surcharge dispute, or the Litigation;
(d) Purchase orders, delivery receipts, bills of lading, inspection reports, quality certificates, and shipping records for HRC and CRC steel products received from Cardinal Peak during the relevant time period;
(e) Internal review or analysis worksheets, checklists, or evaluation forms used by procurement or finance personnel to review, verify, approve, or reject Cardinal Peak surcharge invoices;
(f) All correspondence (including letters and faxes) sent to or received from Cardinal Peak Industries, Blackwood Stein & Associates LLP, or any other third party in connection with the MSA, the surcharge dispute, or the Litigation; and
(g) Any other paper documents that relate to the subject matters identified in Section 2.1 above.
3.2 Electronic Documents and Communications
The preservation obligation extends to all electronically stored information ("ESI") within the scope of this hold, regardless of the medium or format in which it is stored. Relevant ESI includes, without limitation:
(a) Emails and messaging — All emails (including all attachments), calendar entries, meeting invitations, instant messages (including messages sent through any enterprise messaging platforms such as Northgate Data Systems, Meridian Solutions, or similar tools), text messages (SMS and MMS), and voicemails of the identified custodians that relate to Cardinal Peak, the MSA, surcharges, pricing, or the dispute. This includes emails and messages in active mailboxes, archived mailboxes, sent folders, deleted-items folders (to the extent recoverable), and any personal email accounts or devices used for business purposes;
(b) Electronic copies of key documents — Electronic copies (including all drafts and versions) of the MSA, exhibits, amendments, Surcharge Notices, invoices, and supporting calculations, wherever stored;
(c) Spreadsheets, databases, and financial system records — All spreadsheets, databases, financial system records, and data extracts relating to Cardinal Peak invoices, surcharge computations, payment records, accounts payable entries, and any reconciliation or tracking activities. This includes data maintained in Nexford's enterprise resource planning ("ERP") system, accounting software, and any standalone or departmental databases;
(d) Surcharge review logs — Internal surcharge review logs, trackers, or databases maintained by Russell Okonkwo or other procurement personnel to monitor, evaluate, or track surcharge submissions and dispositions;
(e) ERP and procurement system records — All data within Nexford's ERP system, procurement management system, and any automated surcharge tracking, validation, or calculation tools, to the extent such data relates to the Cardinal Peak supply relationship or surcharge invoices;
(f) Shared and cloud storage — Documents, files, and data stored on shared network drives (including departmental and project-specific drives), cloud storage platforms (including but not limited to Aldermere Systems, Cobalt Ridge Systems, Hollowell Health IT, Larkspur Technologies, or similar services), collaboration tools, and document management systems;
(g) Presentations, board materials, and reports — All presentations, memoranda, reports, dashboards, or other materials referencing the Cardinal Peak supply relationship, surcharge dispute, or the Litigation that were prepared for or provided to Nexford's board of directors, its executive leadership team, or to Marlowe Asset Management Bluff Capital Partners, LP (875 North Michigan Avenue, Suite 3600, Chicago, Illinois 60611), Nexford's private equity sponsor, including any regular portfolio company reporting or ad hoc communications relating to the dispute; and
(h) Mobile device data — Data stored on company-issued or personally owned mobile devices (smartphones, tablets) used by identified custodians for business purposes, including text messages, messaging application data, photographs, and any other potentially relevant information.
3.3 Financial and Accounting Records
In addition to the financial and accounting records captured within the general categories above, the following specific categories of financial and accounting materials must be preserved:
(a) General ledger and journal entries — All general ledger entries, journal entries, account reconciliations, and sub-ledger detail relating to Cardinal Peak payables, surcharge accruals, disputed amounts, or any reserves or contingencies established in connection with the surcharge dispute;
(b) Auditor communications — All records maintained by, provided to, or received from Hargrove Kellner CPAs LLP (500 West Monroe Street, Suite 3100, Chicago, Illinois 60661), Nexford's independent auditors, that relate to the Cardinal Peak supply relationship, surcharge liabilities, accruals, reserves, contingent liabilities, or the dispute. This includes management representation letters, audit workpapers (to the extent in Nexford's possession), and any correspondence between Nexford and Hargrove Kellner regarding the accounting treatment of the disputed surcharges;
(c) Bank statements and payment records — Bank statements, wire transfer confirmations, check images, remittance advices, and any other payment records reflecting payments made by Nexford to Cardinal Peak during the disputed period, including the approximately $1.68 million in surcharge payments acknowledged by Nexford;
(d) Credit facility records — Any records relating to the $45 million revolving credit facility with Ridgecrest National Bank, N.A. (120 North LaSalle Street, Chicago, Illinois 60602), dated March 12, 2021, to the extent such records reference the Cardinal Peak dispute, surcharge liabilities, or any litigation notice obligations under Credit Agreement Section 6.03(b) or similar reporting covenants. This includes compliance certificates, borrowing base certificates (to the extent the Cardinal Peak relationship affects eligible inventory or receivables), and any correspondence with Ridgecrest National Bank regarding the dispute or the Litigation; and
(e) Budget and forecast materials — Internal budgets, forecasts, cash flow projections, or financial models that incorporate or reference Cardinal Peak surcharge expenses, accrued liabilities, or contingent obligations.
3.4 Other Materials
The Litigation Hold also extends to the following additional categories of materials:
(a) Audio and video recordings — Any audio or video recordings of meetings, telephone calls, or videoconferences with Cardinal Peak personnel or internally among Nexford personnel, to the extent such recordings relate to the MSA, surcharges, pricing, or the dispute;
(b) Third-party market data and indices — Any third-party market data, index publications, pricing reports, or benchmarking materials used by Nexford to evaluate or verify Cardinal Peak's surcharge calculations. This specifically includes publications or data relating to the Ferrous Scrap Index (as reported by Drayton Partners LLC), the Industrial Energy Cost Index, and any other commodity or energy indices referenced in the MSA or Exhibit C;
(c) Settlement and negotiation materials — Draft or final versions of any settlement proposals, counterproposals, term sheets, or negotiation summaries exchanged between the parties (or their respective counsel) prior to or after the commencement of the Litigation; and
(d) Regulatory and compliance materials — Any regulatory filings, insurance notifications, or compliance documents that reference the Cardinal Peak dispute or the Litigation.
4. Instructions for Compliance
4.1 Immediate Actions Required
The following actions must be taken immediately upon receipt of this Litigation Hold Notice:
(a) Suspend routine destruction. All routine document destruction, recycling, shredding, or purging schedules must be suspended as they apply to the categories of materials described in Sections 2 and 3 above. This includes the suspension of any scheduled records retention program dispositions, off-site storage destruction requests, or periodic clean-up initiatives.
(b) Disable auto-delete functions. Nexford's IT department must disable any automatic deletion functions, retention policy enforcement actions, or archival purges that apply to the email accounts, messaging accounts, or backup systems associated with the identified custodians. This includes auto-delete settings on individual mailboxes, enterprise-wide retention policies that would purge emails older than a specified period, and any automated data lifecycle management rules.
(c) Preserve backup media. All backup tapes, disaster recovery archives, system images, and other backup media that may contain data within the scope of this hold must be preserved. Backup media should not be overwritten, recycled, or degaussed. If Nexford follows a rotating backup tape schedule (e.g., weekly or monthly rotation), all tapes that may contain relevant data should be pulled from the rotation cycle and preserved in a secure location.
(d) Do not alter, modify, or overwrite. No potentially relevant document, record, file, or data set may be altered, modified, edited, overwritten, or deleted. This prohibition applies regardless of whether the individual believes the document to be duplicative, outdated, or immaterial.
4.2 Ongoing Obligations
The Litigation Hold is not a one-time event. The following ongoing obligations apply for the duration of the hold:
(a) Preserve newly created materials. All newly created documents, communications, and data that fall within the scope of this Litigation Hold must be preserved on an ongoing basis for the duration of the Litigation. This includes, without limitation, any new correspondence with Cardinal Peak or its counsel, any internal analyses or memoranda relating to the dispute, and any financial records reflecting surcharge-related accruals or payments.
(b) Custodian employment changes. If any identified custodian's employment status changes — whether due to transfer, resignation, involuntary separation, retirement, leave of absence, or any other reason — Deborah Whitfield and Calderwood & Harkness LLP must be notified immediately, before the individual's departure date if possible. Upon notification, steps must be taken to secure the departing individual's files, email accounts, electronic data, paper records, and any company-issued devices. No departing custodian's data should be purged, reallocated, or overwritten without prior approval from outside counsel.
(c) Hardware preservation. If any hardware used by identified custodians — including laptops, desktop computers, mobile devices (smartphones, tablets), or external storage media (USB drives, portable hard drives) — is scheduled for replacement, decommissioning, reimaging, or recycling, the device must be preserved intact or its contents must be forensically imaged by a qualified forensic specialist before any changes are made to the device. Please coordinate with Calderwood & Harkness LLP before taking any action with respect to custodian hardware.
(d) Third-party hosted data. If any relevant data is hosted by third-party service providers (e.g., cloud service providers, managed IT services, SaaS platforms), Nexford should take steps to ensure that such providers are aware of the preservation obligation and that relevant data will not be deleted, overwritten, or rendered inaccessible.
4.3 Distribution of This Notice
In order to ensure comprehensive compliance with this Litigation Hold, the following distribution steps are requested:
(a) Distribution to custodians. Deborah Whitfield is requested to distribute this Litigation Hold Notice (or a version approved by outside counsel for internal distribution) to each of the identified custodians listed in Section 2.3 above, as well as to any additional Nexford personnel who may possess, have access to, or have control over relevant information.
(b) Written acknowledgment. Each recipient of this notice should acknowledge receipt in writing. Email confirmation is acceptable for this purpose. A Litigation Hold Acknowledgment Form is enclosed with this notice for each custodian to sign and return to Deborah Whitfield's office. Signed acknowledgment forms should be retained by the Legal Department and copies forwarded to Calderwood & Harkness LLP.
(c) IT department notification. Nexford's IT department (or the functional equivalent, including any outsourced IT management providers) should be provided with a copy of this notice and instructed to implement the technical preservation steps described in Section 4.1 above. The IT department should designate a single point of contact to coordinate with Calderwood & Harkness LLP on technical preservation matters, including the identification and securing of relevant data sources, the disabling of auto-delete functions, and the preservation of backup media.
(d) Questions and clarifications. Any custodian or other recipient who has questions about the scope of this Litigation Hold, including whether specific documents or data fall within its scope, should direct those questions to Deborah Whitfield or to the undersigned at Calderwood & Harkness LLP. When in doubt, preserve.
5. Consequences of Non-Compliance
Calderwood & Harkness LLP wishes to reiterate the seriousness of the preservation obligation described in this Litigation Hold Notice.
Under Illinois law and applicable federal law principles, a party has a duty to preserve evidence that is relevant to pending or reasonably anticipated litigation. The duty to preserve attaches when litigation is reasonably foreseeable, which in this matter occurred no later than June 10, 2022 — the date Nexford received Cardinal Peak's formal pre-litigation demand letter transmitted through Blackwood Stein & Associates LLP. The duty was further reinforced upon the filing of the Complaint on August 8, 2022.
The failure to preserve relevant evidence — commonly referred to as "spoliation" — can result in severe consequences. Illinois courts and federal courts applying Illinois law have imposed a range of sanctions for spoliation, including:
•  Adverse inference instructions — The court may instruct the jury that it may presume that the destroyed, lost, or altered evidence would have been unfavorable to the spoliating party. Such an instruction can be devastating to a party's litigation position.
•  Monetary sanctions — The court may impose monetary penalties on the spoliating party, including an award of the opposing party's attorneys' fees and costs incurred as a result of the spoliation.
•  Evidentiary sanctions — The court may preclude the spoliating party from introducing certain evidence or testimony, or may allow the opposing party to present evidence of the spoliation to the jury.
•  Pleading sanctions — In egregious cases, the court may strike pleadings or defenses, or enter a default judgment against the spoliating party.
•  Tort liability — Under certain circumstances, spoliation may give rise to an independent tort claim.
These consequences apply regardless of whether the destruction of evidence was intentional or negligent. The mere failure to implement adequate preservation procedures, once the duty to preserve has attached, can support the imposition of sanctions.
Nexford and each of its custodians must take this obligation seriously. Any individual who becomes aware of the actual or potential destruction, alteration, or loss of materials within the scope of this Litigation Hold must immediately report the situation to Deborah Whitfield and to Calderwood & Harkness LLP.
6. Duration of the Hold
This Litigation Hold remains in effect until Calderwood & Harkness LLP issues a written release of the hold. No custodian or Nexford employee is authorized to terminate, modify, or narrow the scope of this hold without the express written approval of outside counsel.
The Litigation Hold will not be lifted without prior consultation between Calderwood & Harkness LLP and Nexford's General Counsel, and any release will be communicated in writing to all custodians who received this notice.
Periodic reminders will be issued by Calderwood & Harkness LLP (or by the Legal Department at our direction) to all custodians to reinforce the preservation obligation and to confirm ongoing compliance. Custodians are expected to respond to such reminders promptly and to report any concerns or issues that may affect the integrity of preserved materials.
The continuation of this hold is independent of the status of any settlement discussions, mediation, or other dispute resolution efforts. Unless and until a written release is issued, all preservation obligations described in this notice remain in full force and effect.
7. Contact Information
All questions regarding this Litigation Hold — including questions about whether specific documents, data, or communications fall within its scope — should be directed to one of the following contacts:
Internal Contact:
Deborah Whitfield General Counsel Nexford Industrial Holdings Inc. 4200 West Lakeshore Industrial Parkway, Suite 300 Waukegan, Illinois 60085 Telephone: (847) 555-3200
Email: dwhitfield@nexfordindustrial.com
Outside Counsel — Responsible Partner:
Priya Anand Partner Calderwood & Harkness LLP 200 South Wacker Drive, Suite 4400 Chicago, Illinois 60606 Telephone: (312) 555-7818
Email: panand@calderwoodharkness.com
Outside Counsel — Day-to-Day Contact:
Simone Laroche Associate Calderwood & Harkness LLP 200 South Wacker Drive, Suite 4400 Chicago, Illinois 60606 Telephone: (312) 555-7842
Email: slaroche@calderwoodharkness.com
We strongly encourage custodians to err on the side of over-inclusion when determining whether materials fall within the scope of this hold. Preserving a document that turns out not to be relevant is far preferable to failing to preserve one that is.
We appreciate your prompt attention to this matter. Compliance with this Litigation Hold Notice is essential to Nexford's ability to fulfill its legal obligations and to defend itself effectively in this Litigation. Please do not hesitate to contact us with any questions.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Priya Anand Partner Calderwood & Harkness LLP 200 South Wacker Drive, Suite 4400 Chicago, Illinois 60606
By: ________
Simone Laroche Associate Calderwood & Harkness LLP 200 South Wacker Drive, Suite 4400 Chicago, Illinois 60606
cc: (via email)
Martin Schaeffer, Chief Executive Officer, Nexford Industrial Holdings Inc. Lydia Tran, Chief Financial Officer, Nexford Industrial Holdings Inc. Russell Okonkwo, Vice President, Procurement, Nexford Industrial Holdings Inc. Douglas Carmichael, Partner, Calderwood & Harkness LLP
Enclosure:
Litigation Hold Acknowledgment Form (for each custodian to sign and return)
Name | Title | Basis for Identification
Martin Schaeffer | Chief Executive Officer | Executive oversight of the Cardinal Peak relationship and the surcharge dispute; likely recipient of escalation communications and board-level reporting
Lydia Tran | Chief Financial Officer | Oversight of financial reporting, surcharge accruals, reserve decisions, and communications with auditors and lenders regarding the dispute
Russell Okonkwo | Vice President, Procurement | Primary Nexford contact for Cardinal Peak surcharge matters; responsible for reviewing, approving, or rejecting surcharge invoices and administering the MSA from Nexford's side
Deborah Whitfield | General Counsel | Legal oversight of the MSA, the surcharge dispute, pre-litigation communications, and engagement of outside counsel

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