1005-00005 · Nexford Industrial Holdings · Expert Work

expert-retention-letter-meridian-bridge.docx DOCUMENT Litigation

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CALDERWOOD & HARKNESS LLP Attorneys at Law

200 South Wacker Drive, Suite 4400 Chicago, Illinois 60606

Telephone: (312) 555-7200 Facsimile: (312) 555-7201 www.calderwoodharkness.com

December 12, 2022

VIA HAND DELIVERY AND ELECTRONIC MAIL

Dr. Anita Rosenthal, CPA, ABV Meridian Bridge Consulting LLC 311 South Michigan Avenue, Suite 1500 Chicago, Illinois 60604

Re: Retention of Meridian Bridge Consulting LLC — Damages Analysis and Expert Testimony

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

Calderwood & Harkness Matter No.: 1005-00005

Dear Dr. Rosenthal:

This letter sets forth the terms and conditions under which Calderwood & Harkness LLP ("Calderwood & Harkness" or the "Firm") proposes to retain Meridian Bridge Consulting LLC ("Meridian Bridge" or the "Consultant") to provide damages analysis, financial consulting services, and, if necessary, expert testimony in connection with the above-referenced litigation. We are writing to confirm the understanding we reached during our meeting of December 5, 2022, and to formalize the terms of the engagement. Please review this retention letter carefully. If the terms set forth herein accurately reflect your understanding of the proposed engagement, please sign and return a copy of this letter as indicated in Section 10 below.

1. Purpose and Background of Engagement

Calderwood & Harkness LLP represents Nexford Industrial Holdings Inc. ("Nexford" or "NIH"), a Delaware corporation headquartered at 4200 West Lakeshore Industrial Parkway, Suite 300, Waukegan, Illinois 60085, in the above-referenced litigation currently pending before the Circuit Court of Cook County, Illinois, County Department, Law Division. Nexford is a precision metal fabrication and engineered components manufacturer with approximately $287 million in annual revenue for fiscal year 2022. Nexford operates three manufacturing facilities located throughout the Midwest and serves customers in the automotive, heavy equipment, and infrastructure sectors.

Nexford has been sued by its former steel supplier, Cardinal Peak Industries ("CPI" or "Cardinal Peak"), a Colorado limited liability company headquartered at 1580 Ridgeline Boulevard, Pueblo, Colorado 81001. Cardinal Peak filed its Complaint on August 8, 2022, asserting the following causes of action: (1) Breach of Contract; (2) Unjust Enrichment; and (3) Account Stated. Cardinal Peak is represented in this matter by Blackwood Stein & Associates LLP, 717 Seventeenth Street, Suite 2200, Denver, Colorado 80202, with Garrett Blackwood serving as lead partner on the matter.

The dispute arises from contested raw-material surcharge pass-throughs under a Master Supply Agreement bearing reference number MSA-NIH-CPI-2020-001 (the "MSA"), which was executed on January 15, 2020, between Nexford (as Buyer) and Cardinal Peak (as Seller). The MSA governed the supply of hot-rolled coil ("HRC") and cold-rolled coil ("CRC") steel products from Cardinal Peak to Nexford for use in Nexford's precision metal fabrication operations.

Specifically, Cardinal Peak claims that Nexford improperly rejected or only partially paid surcharge invoices totaling approximately $4.73 million over a fourteen-month disputed period. While the overall period at issue spans from March 2021 through May 2022 — a total of fifteen months — the surcharge for April 2021 was paid in full by Nexford and is not in dispute, leaving fourteen months of contested surcharges. During the disputed period, Cardinal Peak invoiced a total of approximately $6.41 million in surcharges. Nexford paid $1.68 million of that amount on surcharges it accepted as properly calculated and timely noticed. Cardinal Peak claims that the unpaid balance of $4.73 million is owed in full, together with prejudgment interest and attorneys' fees.

Nexford filed its Answer and Affirmative Defenses on September 19, 2022, denying the material allegations of the Complaint and asserting multiple affirmative defenses, including failure of condition precedent, failure to comply with the contractual surcharge methodology, and waiver. Nexford subsequently filed a Counterclaim on October 3, 2022, seeking declaratory relief regarding the proper interpretation and application of the MSA's surcharge provisions and recovery of approximately $0.21 million in alleged overpayment on surcharges that Nexford contends were improperly calculated under the MSA even among those invoices it initially paid.

We are retaining Meridian Bridge to provide independent damages analysis and expert services in support of Nexford's defense of Cardinal Peak's claims and prosecution of Nexford's Counterclaim. The specific scope of the engagement is described in detail in Section 2 below.

2. Scope of Engagement

Meridian Bridge is being retained to provide comprehensive damages analysis and, if necessary, expert testimony in connection with the surcharge dispute described above. The engagement will encompass both the analysis necessary to support Nexford's affirmative defenses and counterclaim and the preparation of rebuttal analysis addressing Cardinal Peak's damages claims. The specific tasks included within the scope of this engagement are as follows:

2.1 Review and Analysis of MSA Surcharge Provisions

Meridian Bridge will conduct a detailed examination of the surcharge provisions of the MSA, with particular focus on the following provisions and related contract terms:

(a) MSA Section 7.4 (Surcharge Clause): This is the operative provision governing the calculation, notice, and payment of raw-material surcharges. Meridian Bridge will analyze the requirements and conditions established by Section 7.4 and its subsections as they relate to the surcharges at issue.

(b) Section 7.4(a) — Surcharge Notice Delivery Requirement: Under Section 7.4(a) of the MSA, Cardinal Peak was required to deliver a compliant Surcharge Notice to Nexford within fifteen (15) business days of the date on which Cardinal Peak determined that a surcharge adjustment was triggered by changes in underlying raw-material costs. Meridian Bridge will evaluate whether the Surcharge Notices delivered by Cardinal Peak for each of the fourteen disputed months satisfied this timing requirement.

(c) Exhibit C — Surcharge Methodology: The MSA incorporates Exhibit C, which prescribes the methodology for calculating surcharges. Meridian Bridge will conduct a thorough analysis of this methodology and whether Cardinal Peak's actual surcharge calculations conform to the requirements of Exhibit C, as described in greater detail in Section 2.2 below.

(d) Section 7.4(c) — 12% Surcharge Cap: Under Section 7.4(c) of the MSA, surcharges for any given month may not exceed twelve percent (12%) of the applicable Base Price without the prior written consent of the Buyer (Nexford). Meridian Bridge will evaluate whether Cardinal Peak's invoiced surcharges exceeded this cap and, if so, whether Nexford provided the requisite prior written consent.

2.2 Exhibit C Methodology Analysis

The Exhibit C Surcharge Methodology incorporated into the MSA prescribes that surcharges are calculated using two published indices: (i) the Ferrous Scrap Index, as reported by Sterling Reach Group ("Platts/SPI"), and (ii) the Industrial Energy Cost Index. These indices are applied against agreed baseline costs established in Exhibit C, specifically a baseline scrap cost of $340 per ton and a baseline energy cost of $48 per ton. Meridian Bridge will perform a detailed, month-by-month analysis for each of the fourteen disputed months to determine whether Cardinal Peak's surcharge calculations conform to this prescribed methodology, including:

(a) Verification that the index values used by Cardinal Peak in its surcharge calculations correspond to the published Ferrous Scrap Index (Platts/SPI) and the Industrial Energy Cost Index for the applicable periods;

(b) Verification that the baseline scrap cost of $340 per ton and the baseline energy cost of $48 per ton were properly applied;

(c) Comparison of Cardinal Peak's actual calculations against what the properly calculated surcharges would have been under the Exhibit C Methodology; and

(d) Quantification of any discrepancies or deviations from the Exhibit C Methodology.

2.3 Quantification of Nexford's Three Defense Categories

A central component of the engagement will be the quantification and substantiation of Nexford's three primary defense categories, which together account for the disputed $4.73 million in surcharges. Meridian Bridge will analyze and quantify the impact of each category as follows:

(a) Late Surcharge Notices. Nexford contends that Cardinal Peak failed to deliver compliant Surcharge Notices within the fifteen-business-day deadline prescribed by Section 7.4(a) of the MSA for seven (7) of the fourteen disputed months. Because timely delivery of a compliant Surcharge Notice is a condition precedent to Nexford's obligation to pay any surcharge for a given month, Nexford asserts that it has no obligation to pay surcharges for those seven months. Meridian Bridge will review the delivery dates and content of each Surcharge Notice, compare them to the contractual deadline, and quantify the total surcharges attributable to the months in which notices were untimely delivered. Based on Nexford's preliminary review, the surcharges attributable to late Surcharge Notices total approximately $2.18 million.

(b) Methodology Deviation. Nexford further contends that Cardinal Peak did not employ the Exhibit C Surcharge Methodology in calculating its surcharges for the remaining months. Instead, Cardinal Peak used an internal "blended cost" metric derived from Cardinal Peak's own internal accounting records — a metric that is not referenced in the MSA or Exhibit C and that does not correspond to the contractually specified published indices. Meridian Bridge will analyze the difference between the surcharges as calculated by Cardinal Peak using its internal blended cost metric and the surcharges that would have resulted from proper application of the Exhibit C Methodology. Based on Nexford's preliminary analysis, the overstatement resulting from this methodology deviation totals approximately $1.47 million.

(c) Cap Exceedance. For four (4) of the fourteen disputed months, Nexford contends that Cardinal Peak's invoiced surcharges exceeded the twelve percent (12%) cap established by Section 7.4(c) of the MSA without Nexford having provided the requisite prior written consent. The applicable Base Prices under the MSA are $620 per ton for HRC and $740 per ton for CRC. Meridian Bridge will calculate the maximum permissible surcharge for each product in each applicable month based on the twelve percent cap and quantify the excess above the cap. Based on Nexford's preliminary analysis, the excess surcharges above the cap total approximately $1.08 million.

Meridian Bridge will also analyze whether and to what extent these three categories overlap — that is, whether particular surcharge invoices are subject to more than one defense — and will present its analysis in a manner that avoids double-counting while clearly delineating the impact of each defense category independently and in combination.

2.4 Rebuttal of Cardinal Peak's Damages Claims

Meridian Bridge will prepare a comprehensive rebuttal of Cardinal Peak's claimed damages, including its assertion that it is owed $4.73 million in unpaid surcharges. This rebuttal will address each element of Cardinal Peak's damages calculation, identify errors, unsupported assumptions, and departures from the contractual terms, and present an alternative damages analysis consistent with the MSA. Meridian Bridge will also address any claim by Cardinal Peak for prejudgment interest, including the appropriateness of any interest rate asserted and the period over which interest is claimed.

2.5 Calculation of Nexford's Maximum Additional Exposure

It is Nexford's position that, when all three defense categories are properly accounted for, Nexford's maximum additional surcharge obligation — beyond the $1.68 million already paid — is approximately $0.21 million. Meridian Bridge will independently verify this calculation and, if its analysis supports a different figure, will provide its own calculation of Nexford's maximum additional exposure along with a detailed explanation of any differences.

2.6 Analysis of Cardinal Peak's Opposing Expert Report

Cardinal Peak is expected to retain Pinnacle Economics Group LLC, a consulting firm based in Denver, Colorado, to provide expert analysis and testimony in support of its damages claims. Upon production of Pinnacle Economics Group's expert report, Meridian Bridge will review and analyze that report, identify any errors in methodology, assumptions, or calculations, and prepare a written rebuttal report addressing the opinions expressed therein.

2.7 Preparation and Delivery of Written Expert Report

Meridian Bridge will prepare and deliver a written expert report suitable for submission in the litigation, in compliance with the requirements of Illinois Supreme Court Rule 213(f)(3) and any applicable court orders or scheduling directives. The report will set forth Meridian Bridge's opinions, the bases and reasons for those opinions, the data and other information considered, any exhibits to be used to summarize or support the opinions, and Dr. Rosenthal's qualifications. All drafts of the expert report will be submitted to Calderwood & Harkness for review prior to finalization, as further described in Section 4 below.

2.8 Deposition and Trial Testimony

If required, Dr. Rosenthal will be available to provide sworn testimony at deposition and at trial in connection with the opinions set forth in her expert report and any rebuttal report. Calderwood & Harkness will prepare Dr. Rosenthal for any such testimony and will coordinate scheduling with opposing counsel and the Court.

3. Key Documents and Materials

Calderwood & Harkness will provide Meridian Bridge with relevant documents and materials necessary to perform the services described in Section 2 above. The documents and materials to be provided include, but are not limited to, the following:

(a) The Master Supply Agreement MSA-NIH-CPI-2020-001, dated January 15, 2020, including all exhibits (with particular focus on Exhibit C — Surcharge Methodology), schedules, and all amendments thereto;

(b) All surcharge invoices and Surcharge Notices issued by Cardinal Peak to Nexford from March 2021 through May 2022, covering the full disputed period;

(c) Nexford's internal surcharge review logs, maintained by Russell Okonkwo, Vice President of Procurement, which document Nexford's contemporaneous review and evaluation of each Surcharge Notice and surcharge invoice during the disputed period;

(d) Payment records reflecting Nexford's payments of $1.68 million on accepted surcharges during the disputed period, including wire transfer confirmations, accounts payable records, and any related correspondence;

(e) Published Ferrous Scrap Index data as reported by Sterling Reach Group (Platts/SPI) for the period from March 2021 through May 2022;

(f) Industrial Energy Cost Index data for the period from March 2021 through May 2022;

(g) Cardinal Peak's Complaint, filed August 8, 2022 (Case No. 2022-L-008471);

(h) Nexford's Answer and Affirmative Defenses, filed September 19, 2022;

(i) Nexford's Counterclaim, filed October 3, 2022;

(j) discovery responses and documents produced by both parties in the course of the litigation, as they become available, including but not limited to responses to interrogatories, requests for production of documents, and requests for admission;

(k) Relevant financial records from Nexford, including any records obtained from Hargrove Kellner CPAs LLP, Nexford's independent auditors, to the extent such records are relevant to the surcharge dispute, including audited financial statements, trial balances, and accounts payable detail;

(l) MSA base pricing information, including: HRC Base Price of $620 per ton; CRC Base Price of $740 per ton; estimated annual volume of approximately 18,000 tons of HRC and 6,500 tons of CRC (total approximately 24,500 tons per year); and estimated annual spend under the MSA of approximately $15.97 million; and

(m) Such other documents and materials as may become relevant to the engagement and are identified by Calderwood & Harkness or Meridian Bridge during the course of the engagement.

Calderwood & Harkness will transmit an initial set of key documents to Meridian Bridge under separate cover contemporaneously with this retention letter, as noted in the enclosures notation below. Additional documents will be provided on a rolling basis as they are identified, produced, or become available through the discovery process.

4. Coordination with Counsel

All work performed by Meridian Bridge in connection with this engagement shall be at the direction of and coordinated with Calderwood & Harkness LLP. The Firm will provide direction regarding the scope, timing, and priorities of Meridian Bridge's work to ensure that the engagement is aligned with the overall litigation strategy and schedule.

The primary contacts at Calderwood & Harkness for this engagement are:

Priya Anand — Responsible Partner Simone Laroche — Lead Associate Jeffrey Park — Working Associate

All substantive communications regarding the engagement — including requests for information, status updates, delivery of work product, and scheduling of testimony — shall be directed through Calderwood & Harkness. Meridian Bridge shall not communicate directly with Nexford personnel, Cardinal Peak Industries, Blackwood Stein & Associates LLP, opposing experts (including Pinnacle Economics Group LLC or any individual affiliated therewith), or the Court without prior express authorization from Calderwood & Harkness.

All work product, draft reports, analyses, calculations, and memoranda prepared by Meridian Bridge shall be submitted to counsel at Calderwood & Harkness for review and comment before finalization. This direction is given to ensure consistency with the litigation strategy and to facilitate the Firm's review of all materials for privilege and work product protection issues.

The parties acknowledge that the engagement is made at the direction of counsel in anticipation of and in connection with pending litigation, and that all work product generated by Meridian Bridge in the course of this engagement is intended to be protected by the attorney-client privilege and/or the work product doctrine to the fullest extent permitted by applicable law. Meridian Bridge shall take all reasonable steps to preserve and protect the privileged and work-product nature of its communications with Calderwood & Harkness and of the materials and analyses it prepares in connection with this engagement.

5. Fees and Billing

Meridian Bridge shall bill for its services on an hourly basis at the rates set forth below. These rates are effective as of the date of this retention letter and shall remain in effect for the duration of the engagement unless modified by mutual written agreement of the parties.

Meridian Bridge shall submit detailed invoices to Calderwood & Harkness LLP on a monthly basis, in arrears. Invoices shall be directed to:

Douglas Carmichael, Billing Partner Calderwood & Harkness LLP 200 South Wacker Drive, Suite 4400 Chicago, Illinois 60606

Each invoice shall include a detailed description of the work performed during the billing period, identification of the personnel who performed the work, the number of hours expended by each individual, and an itemization of any out-of-pocket expenses incurred (including, by way of example, costs of obtaining published index data, copying and printing charges, travel expenses, and any other reasonable and documented costs). Time entries shall be recorded in increments of no greater than one-tenth (0.1) of an hour.

Payment of Meridian Bridge's fees and expenses will be handled by Calderwood & Harkness on behalf of Nexford Industrial Holdings Inc. Fees and expenses will be billed as costs advanced on the client's account in accordance with the Firm's standard billing practices. Invoices are due and payable within thirty (30) days of receipt. Calderwood & Harkness reserves the right to request supporting documentation for any billed expenses.

6. Confidentiality Obligations

All information, documents, data, materials, communications, and work product provided to or generated by Meridian Bridge in connection with this engagement are strictly confidential. The confidential nature of this engagement and the materials associated with it is of paramount importance to both Calderwood & Harkness and Nexford.

Meridian Bridge shall not disclose any information relating to this engagement, the underlying litigation, the parties to the litigation, or any work product, analyses, opinions, draft reports, or other materials prepared in connection with the engagement to any third party without the prior written consent of Calderwood & Harkness LLP. This obligation extends to disclosure to any person or entity not directly and necessarily involved in the performance of the services described in this retention letter.

Meridian Bridge shall maintain all documents, data, electronic files, and other materials received from or generated for Calderwood & Harkness in a secure manner, including the use of appropriate physical, electronic, and procedural safeguards. Access to such materials shall be strictly limited to those Meridian Bridge personnel who are directly involved in the performance of services under this engagement and who have been informed of the confidential nature of the materials.

To the extent any protective order or confidentiality stipulation is entered in the litigation governing the treatment of documents produced in discovery, Meridian Bridge agrees to comply with the terms of any such order or stipulation as directed by Calderwood & Harkness.

Upon the termination of this engagement, whether by completion of services, resolution of the litigation, or written notice of termination, Meridian Bridge shall, at the direction of Calderwood & Harkness, either: (a) promptly return all confidential materials, including all originals, copies, and electronic versions thereof, to Calderwood & Harkness; or (b) certify in writing the destruction of all such materials, as directed by the Firm. Meridian Bridge may, however, retain one archival copy of its final work product to the extent required by applicable professional standards or regulatory requirements, provided that such archival copy remains subject to the confidentiality obligations set forth herein.

The confidentiality obligations set forth in this Section 6 shall survive the termination of this engagement indefinitely, regardless of the reason for termination.

7. Independence and Conflicts

The integrity of any expert engagement depends upon the independence and objectivity of the retained expert. Accordingly, Meridian Bridge confirms and represents that, as of the date of this retention letter, it has no conflicts of interest with respect to this engagement.

Specifically, Meridian Bridge confirms that neither the firm nor any of its principals, employees, or affiliates has any prior or current relationship — whether professional, financial, personal, or otherwise — with Cardinal Peak Industries, Blackwood Stein & Associates LLP, Pinnacle Economics Group LLC, or any of the following individuals associated with those entities, that would impair its independence or objectivity in rendering opinions in this matter:

• Frank Delacroix

• Natalie Gunderson

• Harold Briggs

• Patricia Morrow

• Garrett Blackwood

• Megan Hsu

• Dr. Theodore Voss

Meridian Bridge further confirms that it has performed a reasonable conflicts check in accordance with its standard internal procedures and that no conflicts or potential conflicts have been identified.

Meridian Bridge shall promptly notify Calderwood & Harkness in writing if, at any time during the course of the engagement, any conflict of interest or potential conflict of interest arises that could affect Meridian Bridge's ability to render independent and objective opinions. Calderwood & Harkness shall have the right, in its sole discretion, to determine whether any such conflict requires modification or termination of the engagement.

8. Term and Termination

The engagement described in this retention letter commences upon execution of this letter by both parties and shall continue until the earliest of the following:

(a) Completion of all services described herein, including the delivery of any expert reports and the conclusion of any deposition or trial testimony;

(b) Resolution of the litigation, whether by settlement, judgment, voluntary dismissal, or otherwise; or

Either party may terminate this engagement at any time upon reasonable written notice to the other party. For purposes of this provision, "reasonable written notice" shall mean not less than ten (10) business days' prior written notice, unless circumstances require more immediate termination, in which case the parties shall cooperate in good faith to effect an orderly transition.

Termination of the engagement, regardless of the reason, shall not relieve Meridian Bridge of its obligations under Section 6 (Confidentiality Obligations) or its obligation to return or destroy materials as directed by Calderwood & Harkness. All such obligations shall survive termination of the engagement.

Upon termination, Meridian Bridge shall be entitled to payment for all services rendered and all reasonable expenses incurred through the effective date of termination, subject to the billing and invoicing provisions set forth in Section 5 above.

9. Governing Law

This retention letter shall be governed by and construed in accordance with the laws of the State of Illinois, without regard to its conflict-of-laws principles. Any dispute arising out of or in connection with this retention letter shall be resolved in the courts of the State of Illinois, County of Cook, or in the United States District Court for the Northern District of Illinois, and the parties hereby consent to the personal jurisdiction of such courts.

10. Acceptance

If the foregoing accurately reflects your understanding of the terms and conditions of this engagement, please indicate your acceptance by signing in the space provided below and returning a signed copy of this letter to the undersigned at the address set forth above. A copy may be returned by hand delivery, overnight courier, or scanned electronic copy (with an original to follow by mail).

We look forward to working with you on this matter and are confident that your expertise will be of significant value to Nexford's defense. Please do not hesitate to contact me or Simone Laroche should you have any questions regarding the terms of this retention letter or the engagement generally.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Priya Anand, Partner Calderwood & Harkness LLP 200 South Wacker Drive, Suite 4400 Chicago, Illinois 60606 Telephone: (312) 555-7218

Email: panand@calderwoodharkness.com

ACKNOWLEDGED AND AGREED:

MERIDIAN BRIDGE CONSULTING LLC

By: ________

Dr. Anita Rosenthal, CPA, ABV Principal 311 South Michigan Avenue, Suite 1500 Chicago, Illinois 60604

Date: ________

Enclosures

The following documents will be transmitted to Meridian Bridge Consulting LLC under separate cover contemporaneously with this retention letter:

1. Master Supply Agreement MSA-NIH-CPI-2020-001, dated January 15, 2020 (including Exhibit C — Surcharge Methodology and all amendments thereto)

2. Cardinal Peak's Complaint, filed August 8, 2022 (Case No. 2022-L-008471, Circuit Court of Cook County, Illinois)

3. Nexford's Answer and Affirmative Defenses, filed September 19, 2022

4. Nexford's Counterclaim, filed October 3, 2022

5. Selected surcharge invoices and Surcharge Notices from the March 2021 through May 2022 disputed period

Additional documents and materials will be provided on a rolling basis as described in Section 3 of this retention letter.

CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / WORK PRODUCT

Timekeeper	Hourly Rate
Dr. Anita Rosenthal, CPA, ABV — Principal / Testifying Expert	$475.00
Senior Consultant	$325.00
Staff Consultant / Analyst	$225.00

CALDERWOOD & HARKNESS LLP Attorneys at Law
200 South Wacker Drive, Suite 4400 Chicago, Illinois 60606
Telephone: (312) 555-7200 Facsimile: (312) 555-7201 www.calderwoodharkness.com
December 12, 2022
VIA HAND DELIVERY AND ELECTRONIC MAIL
Dr. Anita Rosenthal, CPA, ABV Meridian Bridge Consulting LLC 311 South Michigan Avenue, Suite 1500 Chicago, Illinois 60604
Re: Retention of Meridian Bridge Consulting LLC — Damages Analysis and Expert Testimony
Matter: Cardinal Peak Industries v. Nexford Industrial Holdings Inc. Case No. 2022-L-008471, Circuit Court of Cook County, Illinois, County Department, Law Division
Calderwood & Harkness Matter No.: 1005-00005
Dear Dr. Rosenthal:
This letter sets forth the terms and conditions under which Calderwood & Harkness LLP ("Calderwood & Harkness" or the "Firm") proposes to retain Meridian Bridge Consulting LLC ("Meridian Bridge" or the "Consultant") to provide damages analysis, financial consulting services, and, if necessary, expert testimony in connection with the above-referenced litigation. We are writing to confirm the understanding we reached during our meeting of December 5, 2022, and to formalize the terms of the engagement. Please review this retention letter carefully. If the terms set forth herein accurately reflect your understanding of the proposed engagement, please sign and return a copy of this letter as indicated in Section 10 below.
1. Purpose and Background of Engagement
Calderwood & Harkness LLP represents Nexford Industrial Holdings Inc. ("Nexford" or "NIH"), a Delaware corporation headquartered at 4200 West Lakeshore Industrial Parkway, Suite 300, Waukegan, Illinois 60085, in the above-referenced litigation currently pending before the Circuit Court of Cook County, Illinois, County Department, Law Division. Nexford is a precision metal fabrication and engineered components manufacturer with approximately $287 million in annual revenue for fiscal year 2022. Nexford operates three manufacturing facilities located throughout the Midwest and serves customers in the automotive, heavy equipment, and infrastructure sectors.
Nexford has been sued by its former steel supplier, Cardinal Peak Industries ("CPI" or "Cardinal Peak"), a Colorado limited liability company headquartered at 1580 Ridgeline Boulevard, Pueblo, Colorado 81001. Cardinal Peak filed its Complaint on August 8, 2022, asserting the following causes of action: (1) Breach of Contract; (2) Unjust Enrichment; and (3) Account Stated. Cardinal Peak is represented in this matter by Blackwood Stein & Associates LLP, 717 Seventeenth Street, Suite 2200, Denver, Colorado 80202, with Garrett Blackwood serving as lead partner on the matter.
The dispute arises from contested raw-material surcharge pass-throughs under a Master Supply Agreement bearing reference number MSA-NIH-CPI-2020-001 (the "MSA"), which was executed on January 15, 2020, between Nexford (as Buyer) and Cardinal Peak (as Seller). The MSA governed the supply of hot-rolled coil ("HRC") and cold-rolled coil ("CRC") steel products from Cardinal Peak to Nexford for use in Nexford's precision metal fabrication operations.
Specifically, Cardinal Peak claims that Nexford improperly rejected or only partially paid surcharge invoices totaling approximately $4.73 million over a fourteen-month disputed period. While the overall period at issue spans from March 2021 through May 2022 — a total of fifteen months — the surcharge for April 2021 was paid in full by Nexford and is not in dispute, leaving fourteen months of contested surcharges. During the disputed period, Cardinal Peak invoiced a total of approximately $6.41 million in surcharges. Nexford paid $1.68 million of that amount on surcharges it accepted as properly calculated and timely noticed. Cardinal Peak claims that the unpaid balance of $4.73 million is owed in full, together with prejudgment interest and attorneys' fees.
Nexford filed its Answer and Affirmative Defenses on September 19, 2022, denying the material allegations of the Complaint and asserting multiple affirmative defenses, including failure of condition precedent, failure to comply with the contractual surcharge methodology, and waiver. Nexford subsequently filed a Counterclaim on October 3, 2022, seeking declaratory relief regarding the proper interpretation and application of the MSA's surcharge provisions and recovery of approximately $0.21 million in alleged overpayment on surcharges that Nexford contends were improperly calculated under the MSA even among those invoices it initially paid.
We are retaining Meridian Bridge to provide independent damages analysis and expert services in support of Nexford's defense of Cardinal Peak's claims and prosecution of Nexford's Counterclaim. The specific scope of the engagement is described in detail in Section 2 below.
2. Scope of Engagement
Meridian Bridge is being retained to provide comprehensive damages analysis and, if necessary, expert testimony in connection with the surcharge dispute described above. The engagement will encompass both the analysis necessary to support Nexford's affirmative defenses and counterclaim and the preparation of rebuttal analysis addressing Cardinal Peak's damages claims. The specific tasks included within the scope of this engagement are as follows:
2.1 Review and Analysis of MSA Surcharge Provisions
Meridian Bridge will conduct a detailed examination of the surcharge provisions of the MSA, with particular focus on the following provisions and related contract terms:
(a) MSA Section 7.4 (Surcharge Clause): This is the operative provision governing the calculation, notice, and payment of raw-material surcharges. Meridian Bridge will analyze the requirements and conditions established by Section 7.4 and its subsections as they relate to the surcharges at issue.
(b) Section 7.4(a) — Surcharge Notice Delivery Requirement: Under Section 7.4(a) of the MSA, Cardinal Peak was required to deliver a compliant Surcharge Notice to Nexford within fifteen (15) business days of the date on which Cardinal Peak determined that a surcharge adjustment was triggered by changes in underlying raw-material costs. Meridian Bridge will evaluate whether the Surcharge Notices delivered by Cardinal Peak for each of the fourteen disputed months satisfied this timing requirement.
(c) Exhibit C — Surcharge Methodology: The MSA incorporates Exhibit C, which prescribes the methodology for calculating surcharges. Meridian Bridge will conduct a thorough analysis of this methodology and whether Cardinal Peak's actual surcharge calculations conform to the requirements of Exhibit C, as described in greater detail in Section 2.2 below.
(d) Section 7.4(c) — 12% Surcharge Cap: Under Section 7.4(c) of the MSA, surcharges for any given month may not exceed twelve percent (12%) of the applicable Base Price without the prior written consent of the Buyer (Nexford). Meridian Bridge will evaluate whether Cardinal Peak's invoiced surcharges exceeded this cap and, if so, whether Nexford provided the requisite prior written consent.
2.2 Exhibit C Methodology Analysis
The Exhibit C Surcharge Methodology incorporated into the MSA prescribes that surcharges are calculated using two published indices: (i) the Ferrous Scrap Index, as reported by Sterling Reach Group ("Platts/SPI"), and (ii) the Industrial Energy Cost Index. These indices are applied against agreed baseline costs established in Exhibit C, specifically a baseline scrap cost of $340 per ton and a baseline energy cost of $48 per ton. Meridian Bridge will perform a detailed, month-by-month analysis for each of the fourteen disputed months to determine whether Cardinal Peak's surcharge calculations conform to this prescribed methodology, including:
(a) Verification that the index values used by Cardinal Peak in its surcharge calculations correspond to the published Ferrous Scrap Index (Platts/SPI) and the Industrial Energy Cost Index for the applicable periods;
(b) Verification that the baseline scrap cost of $340 per ton and the baseline energy cost of $48 per ton were properly applied;
(c) Comparison of Cardinal Peak's actual calculations against what the properly calculated surcharges would have been under the Exhibit C Methodology; and
(d) Quantification of any discrepancies or deviations from the Exhibit C Methodology.
2.3 Quantification of Nexford's Three Defense Categories
A central component of the engagement will be the quantification and substantiation of Nexford's three primary defense categories, which together account for the disputed $4.73 million in surcharges. Meridian Bridge will analyze and quantify the impact of each category as follows:
(a) Late Surcharge Notices. Nexford contends that Cardinal Peak failed to deliver compliant Surcharge Notices within the fifteen-business-day deadline prescribed by Section 7.4(a) of the MSA for seven (7) of the fourteen disputed months. Because timely delivery of a compliant Surcharge Notice is a condition precedent to Nexford's obligation to pay any surcharge for a given month, Nexford asserts that it has no obligation to pay surcharges for those seven months. Meridian Bridge will review the delivery dates and content of each Surcharge Notice, compare them to the contractual deadline, and quantify the total surcharges attributable to the months in which notices were untimely delivered. Based on Nexford's preliminary review, the surcharges attributable to late Surcharge Notices total approximately $2.18 million.
(b) Methodology Deviation. Nexford further contends that Cardinal Peak did not employ the Exhibit C Surcharge Methodology in calculating its surcharges for the remaining months. Instead, Cardinal Peak used an internal "blended cost" metric derived from Cardinal Peak's own internal accounting records — a metric that is not referenced in the MSA or Exhibit C and that does not correspond to the contractually specified published indices. Meridian Bridge will analyze the difference between the surcharges as calculated by Cardinal Peak using its internal blended cost metric and the surcharges that would have resulted from proper application of the Exhibit C Methodology. Based on Nexford's preliminary analysis, the overstatement resulting from this methodology deviation totals approximately $1.47 million.
(c) Cap Exceedance. For four (4) of the fourteen disputed months, Nexford contends that Cardinal Peak's invoiced surcharges exceeded the twelve percent (12%) cap established by Section 7.4(c) of the MSA without Nexford having provided the requisite prior written consent. The applicable Base Prices under the MSA are $620 per ton for HRC and $740 per ton for CRC. Meridian Bridge will calculate the maximum permissible surcharge for each product in each applicable month based on the twelve percent cap and quantify the excess above the cap. Based on Nexford's preliminary analysis, the excess surcharges above the cap total approximately $1.08 million.
Meridian Bridge will also analyze whether and to what extent these three categories overlap — that is, whether particular surcharge invoices are subject to more than one defense — and will present its analysis in a manner that avoids double-counting while clearly delineating the impact of each defense category independently and in combination.
2.4 Rebuttal of Cardinal Peak's Damages Claims
Meridian Bridge will prepare a comprehensive rebuttal of Cardinal Peak's claimed damages, including its assertion that it is owed $4.73 million in unpaid surcharges. This rebuttal will address each element of Cardinal Peak's damages calculation, identify errors, unsupported assumptions, and departures from the contractual terms, and present an alternative damages analysis consistent with the MSA. Meridian Bridge will also address any claim by Cardinal Peak for prejudgment interest, including the appropriateness of any interest rate asserted and the period over which interest is claimed.
2.5 Calculation of Nexford's Maximum Additional Exposure
It is Nexford's position that, when all three defense categories are properly accounted for, Nexford's maximum additional surcharge obligation — beyond the $1.68 million already paid — is approximately $0.21 million. Meridian Bridge will independently verify this calculation and, if its analysis supports a different figure, will provide its own calculation of Nexford's maximum additional exposure along with a detailed explanation of any differences.
2.6 Analysis of Cardinal Peak's Opposing Expert Report
Cardinal Peak is expected to retain Pinnacle Economics Group LLC, a consulting firm based in Denver, Colorado, to provide expert analysis and testimony in support of its damages claims. Upon production of Pinnacle Economics Group's expert report, Meridian Bridge will review and analyze that report, identify any errors in methodology, assumptions, or calculations, and prepare a written rebuttal report addressing the opinions expressed therein.
2.7 Preparation and Delivery of Written Expert Report
Meridian Bridge will prepare and deliver a written expert report suitable for submission in the litigation, in compliance with the requirements of Illinois Supreme Court Rule 213(f)(3) and any applicable court orders or scheduling directives. The report will set forth Meridian Bridge's opinions, the bases and reasons for those opinions, the data and other information considered, any exhibits to be used to summarize or support the opinions, and Dr. Rosenthal's qualifications. All drafts of the expert report will be submitted to Calderwood & Harkness for review prior to finalization, as further described in Section 4 below.
2.8 Deposition and Trial Testimony
If required, Dr. Rosenthal will be available to provide sworn testimony at deposition and at trial in connection with the opinions set forth in her expert report and any rebuttal report. Calderwood & Harkness will prepare Dr. Rosenthal for any such testimony and will coordinate scheduling with opposing counsel and the Court.
3. Key Documents and Materials
Calderwood & Harkness will provide Meridian Bridge with relevant documents and materials necessary to perform the services described in Section 2 above. The documents and materials to be provided include, but are not limited to, the following:
(a) The Master Supply Agreement MSA-NIH-CPI-2020-001, dated January 15, 2020, including all exhibits (with particular focus on Exhibit C — Surcharge Methodology), schedules, and all amendments thereto;
(b) All surcharge invoices and Surcharge Notices issued by Cardinal Peak to Nexford from March 2021 through May 2022, covering the full disputed period;
(c) Nexford's internal surcharge review logs, maintained by Russell Okonkwo, Vice President of Procurement, which document Nexford's contemporaneous review and evaluation of each Surcharge Notice and surcharge invoice during the disputed period;
(d) Payment records reflecting Nexford's payments of $1.68 million on accepted surcharges during the disputed period, including wire transfer confirmations, accounts payable records, and any related correspondence;
(e) Published Ferrous Scrap Index data as reported by Sterling Reach Group (Platts/SPI) for the period from March 2021 through May 2022;
(f) Industrial Energy Cost Index data for the period from March 2021 through May 2022;
(g) Cardinal Peak's Complaint, filed August 8, 2022 (Case No. 2022-L-008471);
(h) Nexford's Answer and Affirmative Defenses, filed September 19, 2022;
(i) Nexford's Counterclaim, filed October 3, 2022;
(j) discovery responses and documents produced by both parties in the course of the litigation, as they become available, including but not limited to responses to interrogatories, requests for production of documents, and requests for admission;
(k) Relevant financial records from Nexford, including any records obtained from Hargrove Kellner CPAs LLP, Nexford's independent auditors, to the extent such records are relevant to the surcharge dispute, including audited financial statements, trial balances, and accounts payable detail;
(l) MSA base pricing information, including: HRC Base Price of $620 per ton; CRC Base Price of $740 per ton; estimated annual volume of approximately 18,000 tons of HRC and 6,500 tons of CRC (total approximately 24,500 tons per year); and estimated annual spend under the MSA of approximately $15.97 million; and
(m) Such other documents and materials as may become relevant to the engagement and are identified by Calderwood & Harkness or Meridian Bridge during the course of the engagement.
Calderwood & Harkness will transmit an initial set of key documents to Meridian Bridge under separate cover contemporaneously with this retention letter, as noted in the enclosures notation below. Additional documents will be provided on a rolling basis as they are identified, produced, or become available through the discovery process.
4. Coordination with Counsel
All work performed by Meridian Bridge in connection with this engagement shall be at the direction of and coordinated with Calderwood & Harkness LLP. The Firm will provide direction regarding the scope, timing, and priorities of Meridian Bridge's work to ensure that the engagement is aligned with the overall litigation strategy and schedule.
The primary contacts at Calderwood & Harkness for this engagement are:
Priya Anand — Responsible Partner Simone Laroche — Lead Associate Jeffrey Park — Working Associate
All substantive communications regarding the engagement — including requests for information, status updates, delivery of work product, and scheduling of testimony — shall be directed through Calderwood & Harkness. Meridian Bridge shall not communicate directly with Nexford personnel, Cardinal Peak Industries, Blackwood Stein & Associates LLP, opposing experts (including Pinnacle Economics Group LLC or any individual affiliated therewith), or the Court without prior express authorization from Calderwood & Harkness.
All work product, draft reports, analyses, calculations, and memoranda prepared by Meridian Bridge shall be submitted to counsel at Calderwood & Harkness for review and comment before finalization. This direction is given to ensure consistency with the litigation strategy and to facilitate the Firm's review of all materials for privilege and work product protection issues.
The parties acknowledge that the engagement is made at the direction of counsel in anticipation of and in connection with pending litigation, and that all work product generated by Meridian Bridge in the course of this engagement is intended to be protected by the attorney-client privilege and/or the work product doctrine to the fullest extent permitted by applicable law. Meridian Bridge shall take all reasonable steps to preserve and protect the privileged and work-product nature of its communications with Calderwood & Harkness and of the materials and analyses it prepares in connection with this engagement.
5. Fees and Billing
Meridian Bridge shall bill for its services on an hourly basis at the rates set forth below. These rates are effective as of the date of this retention letter and shall remain in effect for the duration of the engagement unless modified by mutual written agreement of the parties.
Meridian Bridge shall submit detailed invoices to Calderwood & Harkness LLP on a monthly basis, in arrears. Invoices shall be directed to:
Douglas Carmichael, Billing Partner Calderwood & Harkness LLP 200 South Wacker Drive, Suite 4400 Chicago, Illinois 60606
Each invoice shall include a detailed description of the work performed during the billing period, identification of the personnel who performed the work, the number of hours expended by each individual, and an itemization of any out-of-pocket expenses incurred (including, by way of example, costs of obtaining published index data, copying and printing charges, travel expenses, and any other reasonable and documented costs). Time entries shall be recorded in increments of no greater than one-tenth (0.1) of an hour.
Payment of Meridian Bridge's fees and expenses will be handled by Calderwood & Harkness on behalf of Nexford Industrial Holdings Inc. Fees and expenses will be billed as costs advanced on the client's account in accordance with the Firm's standard billing practices. Invoices are due and payable within thirty (30) days of receipt. Calderwood & Harkness reserves the right to request supporting documentation for any billed expenses.
6. Confidentiality Obligations
All information, documents, data, materials, communications, and work product provided to or generated by Meridian Bridge in connection with this engagement are strictly confidential. The confidential nature of this engagement and the materials associated with it is of paramount importance to both Calderwood & Harkness and Nexford.
Meridian Bridge shall not disclose any information relating to this engagement, the underlying litigation, the parties to the litigation, or any work product, analyses, opinions, draft reports, or other materials prepared in connection with the engagement to any third party without the prior written consent of Calderwood & Harkness LLP. This obligation extends to disclosure to any person or entity not directly and necessarily involved in the performance of the services described in this retention letter.
Meridian Bridge shall maintain all documents, data, electronic files, and other materials received from or generated for Calderwood & Harkness in a secure manner, including the use of appropriate physical, electronic, and procedural safeguards. Access to such materials shall be strictly limited to those Meridian Bridge personnel who are directly involved in the performance of services under this engagement and who have been informed of the confidential nature of the materials.
To the extent any protective order or confidentiality stipulation is entered in the litigation governing the treatment of documents produced in discovery, Meridian Bridge agrees to comply with the terms of any such order or stipulation as directed by Calderwood & Harkness.
Upon the termination of this engagement, whether by completion of services, resolution of the litigation, or written notice of termination, Meridian Bridge shall, at the direction of Calderwood & Harkness, either: (a) promptly return all confidential materials, including all originals, copies, and electronic versions thereof, to Calderwood & Harkness; or (b) certify in writing the destruction of all such materials, as directed by the Firm. Meridian Bridge may, however, retain one archival copy of its final work product to the extent required by applicable professional standards or regulatory requirements, provided that such archival copy remains subject to the confidentiality obligations set forth herein.
The confidentiality obligations set forth in this Section 6 shall survive the termination of this engagement indefinitely, regardless of the reason for termination.
7. Independence and Conflicts
The integrity of any expert engagement depends upon the independence and objectivity of the retained expert. Accordingly, Meridian Bridge confirms and represents that, as of the date of this retention letter, it has no conflicts of interest with respect to this engagement.
Specifically, Meridian Bridge confirms that neither the firm nor any of its principals, employees, or affiliates has any prior or current relationship — whether professional, financial, personal, or otherwise — with Cardinal Peak Industries, Blackwood Stein & Associates LLP, Pinnacle Economics Group LLC, or any of the following individuals associated with those entities, that would impair its independence or objectivity in rendering opinions in this matter:
•  Frank Delacroix
•  Natalie Gunderson
•  Harold Briggs
•  Patricia Morrow
•  Garrett Blackwood
•  Megan Hsu
•  Dr. Theodore Voss
Meridian Bridge further confirms that it has performed a reasonable conflicts check in accordance with its standard internal procedures and that no conflicts or potential conflicts have been identified.
Meridian Bridge shall promptly notify Calderwood & Harkness in writing if, at any time during the course of the engagement, any conflict of interest or potential conflict of interest arises that could affect Meridian Bridge's ability to render independent and objective opinions. Calderwood & Harkness shall have the right, in its sole discretion, to determine whether any such conflict requires modification or termination of the engagement.
8. Term and Termination
The engagement described in this retention letter commences upon execution of this letter by both parties and shall continue until the earliest of the following:
(a) Completion of all services described herein, including the delivery of any expert reports and the conclusion of any deposition or trial testimony;
(b) Resolution of the litigation, whether by settlement, judgment, voluntary dismissal, or otherwise; or
(c) Written notice of termination provided by either party to the other.
Either party may terminate this engagement at any time upon reasonable written notice to the other party. For purposes of this provision, "reasonable written notice" shall mean not less than ten (10) business days' prior written notice, unless circumstances require more immediate termination, in which case the parties shall cooperate in good faith to effect an orderly transition.
Termination of the engagement, regardless of the reason, shall not relieve Meridian Bridge of its obligations under Section 6 (Confidentiality Obligations) or its obligation to return or destroy materials as directed by Calderwood & Harkness. All such obligations shall survive termination of the engagement.
Upon termination, Meridian Bridge shall be entitled to payment for all services rendered and all reasonable expenses incurred through the effective date of termination, subject to the billing and invoicing provisions set forth in Section 5 above.
9. Governing Law
This retention letter shall be governed by and construed in accordance with the laws of the State of Illinois, without regard to its conflict-of-laws principles. Any dispute arising out of or in connection with this retention letter shall be resolved in the courts of the State of Illinois, County of Cook, or in the United States District Court for the Northern District of Illinois, and the parties hereby consent to the personal jurisdiction of such courts.
10. Acceptance
If the foregoing accurately reflects your understanding of the terms and conditions of this engagement, please indicate your acceptance by signing in the space provided below and returning a signed copy of this letter to the undersigned at the address set forth above. A copy may be returned by hand delivery, overnight courier, or scanned electronic copy (with an original to follow by mail).
We look forward to working with you on this matter and are confident that your expertise will be of significant value to Nexford's defense. Please do not hesitate to contact me or Simone Laroche should you have any questions regarding the terms of this retention letter or the engagement generally.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Priya Anand, Partner Calderwood & Harkness LLP 200 South Wacker Drive, Suite 4400 Chicago, Illinois 60606 Telephone: (312) 555-7218
Email: panand@calderwoodharkness.com
ACKNOWLEDGED AND AGREED:
MERIDIAN BRIDGE CONSULTING LLC
By: ________
Dr. Anita Rosenthal, CPA, ABV Principal 311 South Michigan Avenue, Suite 1500 Chicago, Illinois 60604
Date: ________
Enclosures
The following documents will be transmitted to Meridian Bridge Consulting LLC under separate cover contemporaneously with this retention letter:
1.  Master Supply Agreement MSA-NIH-CPI-2020-001, dated January 15, 2020 (including Exhibit C — Surcharge Methodology and all amendments thereto)
2.  Cardinal Peak's Complaint, filed August 8, 2022 (Case No. 2022-L-008471, Circuit Court of Cook County, Illinois)
3.  Nexford's Answer and Affirmative Defenses, filed September 19, 2022
4.  Nexford's Counterclaim, filed October 3, 2022
5.  Selected surcharge invoices and Surcharge Notices from the March 2021 through May 2022 disputed period
Additional documents and materials will be provided on a rolling basis as described in Section 3 of this retention letter.
CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / WORK PRODUCT
Timekeeper | Hourly Rate
Dr. Anita Rosenthal, CPA, ABV — Principal / Testifying Expert | $475.00
Senior Consultant | $325.00
Staff Consultant / Analyst | $225.00

CALDERWOOD & HARKNESS LLP Attorneys at Law

VIA HAND DELIVERY AND ELECTRONIC MAIL

CALDERWOOD & HARKNESS LLP

ACKNOWLEDGED AND AGREED:

MERIDIAN BRIDGE CONSULTING LLC

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