1005-00005 · Nexford Industrial Holdings · Settlement

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SETTLEMENT TERM SHEET

CONFIDENTIAL — FOR SETTLEMENT PURPOSES ONLY

Executed at the conclusion of mediation conducted before Hon. Catherine Lindström (Ret.) Great Lakes Dispute Resolution Center 150 North Riverside Plaza, Suite 2700 Chicago, Illinois 60606

Date: August 2, 2023

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

This Settlement Term Sheet (this "Term Sheet") sets forth the binding terms upon which the above-referenced litigation, including all claims and counterclaims asserted therein, shall be resolved, as agreed upon by the Parties identified below at the conclusion of a full-day mediation session conducted on August 2, 2023.

1. Parties

1.1 Cardinal Peak Industries ("Cardinal Peak" or "CPI"), a Colorado limited liability company organized and existing under the laws of the State of Colorado, with its principal place of business located at 1580 Ridgeline Boulevard, Pueblo, Colorado 81001. Cardinal Peak is engaged in the business of manufacturing and distributing precision-fabricated steel components for the heavy equipment, energy infrastructure, and transportation sectors. In connection with the Litigation and this Term Sheet, Cardinal Peak is represented by Blackwood Stein & Associates LLP, 717 Seventeenth Street, Suite 2200, Denver, Colorado 80202, with Garrett Blackwood serving as Lead Partner and counsel of record.

1.2 Nexford Industrial Holdings Inc. ("Nexford" or "NIH"), a Delaware corporation organized and existing under the laws of the State of Delaware, with its principal place of business located at 4200 West Lakeshore Industrial Parkway, Suite 300, Waukegan, Illinois 60085. Nexford is a diversified industrial holding company with operations in steel procurement, distribution, and downstream processing across the upper Midwest. In connection with the Litigation and this Term Sheet, Nexford is represented by Calderwood & Harkness LLP, 200 South Wacker Drive, Suite 4400, Chicago, Illinois 60606, with Priya Anand serving as Responsible Partner and counsel of record.

Cardinal Peak and Nexford are referred to individually as a "Party" and collectively as the "Parties."

2. Recitals and Background

2.1 The Master Supply Agreement. On or about January 15, 2020, the Parties entered into a certain Master Supply Agreement, bearing reference number MSA-NIH-CPI-2020-001 (the "MSA"), pursuant to which Cardinal Peak agreed to supply, and Nexford agreed to purchase, hot-rolled coil ("HRC") and cold-rolled coil ("CRC") steel products on the terms and conditions set forth therein. The MSA established a three-year supply relationship, governed pricing and volume commitments, and included detailed provisions addressing raw material surcharges, logistics, quality specifications, and dispute resolution.

2.2 The Surcharge Dispute. A dispute arose between the Parties with respect to the pass-through of certain raw material, energy, and freight surcharges under Section 7.4 of the MSA, covering the period of March 2021 through May 2022 (the "Dispute Period"). Cardinal Peak contended that it was entitled to pass through surcharges reflecting the extraordinary escalation of raw material and energy costs experienced during the Dispute Period, and that Nexford failed and refused to pay invoices for such surcharges in accordance with the terms of the MSA. Nexford disputed the applicability, calculation methodology, and amount of the claimed surcharges.

2.3 Commencement of Litigation. On August 8, 2022, Cardinal Peak filed a Complaint against Nexford 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"). The Complaint asserted claims for (i) breach of contract, (ii) unjust enrichment, and (iii) account stated, seeking damages in the amount of approximately $4,730,000.00 (Four Million Seven Hundred Thirty Thousand Dollars), plus prejudgment interest, attorneys' fees, and costs.

2.4 Nexford's Response and Counterclaim. On September 19, 2022, Nexford filed its Answer and Affirmative Defenses to the Complaint, denying liability on all counts and asserting various affirmative defenses, including waiver, estoppel, failure to mitigate, and contractual limitations on surcharge pass-throughs. On October 3, 2022, Nexford filed a Counterclaim against Cardinal Peak, alleging breach of contract and seeking declaratory relief regarding the proper interpretation of Section 7.4 of the MSA, as well as the return of an alleged overpayment in the amount of approximately $210,000.00 (Two Hundred Ten Thousand Dollars).

2.5 Stay of Litigation and Mediation. On June 5, 2023, the Court entered an order granting the Parties' Joint Motion to Stay Litigation Pending Mediation, consistent with the dispute resolution provisions set forth in Section 14.3 of the MSA. The Parties thereafter engaged Hon. Catherine Lindström (Ret.) of the Great Lakes Dispute Resolution Center, Chicago, Illinois, to serve as mediator. On August 2, 2023, the Parties, through their respective counsel and authorized representatives, participated in a full-day mediation session at the Great Lakes Dispute Resolution Center, 150 North Riverside Plaza, Suite 2700, Chicago, Illinois.

2.6 Agreement in Principle. Following extensive arm's-length negotiations facilitated by the mediator, the Parties have reached an agreement in principle on the terms set forth in this Term Sheet to resolve all claims and counterclaims in the Litigation, without any admission of liability, fault, or wrongdoing by either Party. This Term Sheet memorializes the material terms of such agreement in principle.

3. Settlement Payment

3.1 Total Settlement Amount. In full and final settlement of all claims and counterclaims in the Litigation, Nexford shall pay to Cardinal Peak the total sum of $1,890,000.00 (One Million Eight Hundred Ninety Thousand Dollars) (the "Settlement Amount"). The Settlement Amount represents a negotiated compromise of the Parties' respective positions and is not an admission of the validity or amount of any particular claim or counterclaim. The Parties acknowledge that the Settlement Amount represents approximately forty percent (40%) of Cardinal Peak's claimed unpaid surcharges of $4,730,000.00, as adjusted downward through compromise to account for the litigation risks and the Parties' respective factual and legal positions.

3.2 Payment Structure — Two Installments. The Settlement Amount shall be payable by Nexford to Cardinal Peak in two installments, as follows:

(a) First Installment. The sum of $1,134,000.00 (One Million One Hundred Thirty-Four Thousand Dollars), representing sixty percent (60%) of the Settlement Amount, shall be due and payable within thirty (30) calendar days following the date of execution of the definitive Settlement Agreement and Mutual Release (as defined in Section 9 below).

(b) Second Installment. The sum of $756,000.00 (Seven Hundred Fifty-Six Thousand Dollars), representing forty percent (40%) of the Settlement Amount, shall be due and payable within ninety (90) calendar days following the date of execution of the definitive Settlement Agreement and Mutual Release.

3.3 Method of Payment. All payments under this Section 3 shall be made by wire transfer of immediately available funds to an account or accounts to be designated by Cardinal Peak in writing prior to the due date of each installment. Cardinal Peak shall provide wire transfer instructions to Nexford (with a copy to Calderwood & Harkness LLP) no later than five (5) business days prior to the due date of the First Installment.

3.4 Late Payment; Interest. In the event that any installment of the Settlement Amount is not paid when due, such overdue amount shall accrue interest from the date due until the date of actual payment at a rate to be specified in the definitive Settlement Agreement, which rate the Parties intend to negotiate in good faith. The Parties suggest that such rate be the statutory rate applicable to judgments under the law of the State of Illinois, as set forth in 735 ILCS 5/2-1303, or such other rate as the Parties may agree. The accrual of interest on any overdue payment shall not in any way limit or waive Cardinal Peak's right to seek enforcement of the payment obligations set forth herein.

3.5 Lender Notification. Nexford acknowledges and represents that the Settlement Amount exceeds the $1,000,000.00 threshold requiring notice to Nexford's senior secured lender, Ridgecrest National Bank, N.A. ("Ridgecrest"), under Section 6.03(b) of Nexford's existing credit facility with Ridgecrest. Nexford shall provide such notice to Ridgecrest promptly following the execution of the definitive Settlement Agreement and Mutual Release, and in any event no later than five (5) business days following such execution. Nexford represents that it does not anticipate that the payment of the Settlement Amount will cause a default or breach under its credit facility, and Nexford shall promptly notify Cardinal Peak and its counsel if it becomes aware of any such issue.

4. Mutual Release of Claims

4.1 Release by Cardinal Peak. Upon the execution of the definitive Settlement Agreement and Mutual Release, and subject to and conditioned upon the full and timely payment of the Settlement Amount by Nexford in accordance with Section 3 above, Cardinal Peak, on behalf of itself and its members, managers, officers, employees, agents, representatives, affiliates, predecessors, successors, and assigns, shall release and forever discharge Nexford, together with its parent entities (including, without limitation, Marlowe Asset Management Bluff Capital Partners, LP), subsidiaries, affiliates, officers, directors, shareholders, employees, agents, representatives, insurers, predecessors, successors, and assigns (collectively, the "Nexford Released Parties"), from any and all claims, demands, actions, causes of action, suits, debts, liabilities, damages, losses, costs, expenses (including attorneys' fees), obligations, judgments, and controversies of every kind and nature, whether known or unknown, suspected or unsuspected, fixed or contingent, liquidated or unliquidated, matured or unmatured, that arise out of, relate to, or are in any way connected with the MSA, the surcharge invoices at issue in the Litigation, and the Litigation itself (Case No. 2022-L-008471), including, but not limited to, the claims for breach of contract, unjust enrichment, and account stated asserted in Cardinal Peak's Complaint.

4.2 Release by Nexford. Upon the execution of the definitive Settlement Agreement and Mutual Release, and subject to and conditioned upon the full and timely payment of the Settlement Amount by Nexford in accordance with Section 3 above, Nexford, on behalf of itself and its parents, subsidiaries, affiliates, officers, directors, shareholders, employees, agents, representatives, insurers, predecessors, successors, and assigns, shall release and forever discharge Cardinal Peak, together with its members, managers, officers, employees, agents, representatives, affiliates, predecessors, successors, and assigns (collectively, the "Cardinal Peak Released Parties"), from any and all claims, demands, actions, causes of action, suits, debts, liabilities, damages, losses, costs, expenses (including attorneys' fees), obligations, judgments, and controversies of every kind and nature, whether known or unknown, suspected or unsuspected, fixed or contingent, liquidated or unliquidated, matured or unmatured, that arise out of, relate to, or are in any way connected with the MSA, the surcharge invoices at issue in the Litigation, and the Litigation itself, including, but not limited to, the Counterclaim for breach of contract, declaratory relief, and the claimed refund of an alleged overpayment in the approximate amount of $210,000.00.

4.3 Scope of Release. The mutual releases described in Sections 4.1 and 4.2 above shall be general and comprehensive with respect to the subject matter of the Litigation and all claims, counterclaims, defenses, and affirmative defenses asserted or that could have been asserted therein. The Parties intend that the releases be broadly construed to effectuate a complete resolution of all disputes between them arising out of or related to the MSA and the surcharge invoices.

4.4 Carve-Out for Term Sheet and Definitive Agreement Obligations. Notwithstanding the foregoing, the mutual releases set forth in this Section 4 shall not extend to, and shall expressly preserve, any and all obligations, rights, and remedies arising under this Term Sheet or the definitive Settlement Agreement and Mutual Release, including, without limitation, the payment obligations set forth in Section 3 above.

5. Dismissal of Litigation

5.1 Stipulation of Dismissal. Within ten (10) business days following the full execution of the definitive Settlement Agreement and Mutual Release by all Parties, the Parties shall jointly prepare, execute, and file a Stipulation of Dismissal with Prejudice, dismissing with prejudice all claims and counterclaims asserted in Cardinal Peak Industries v. Nexford Industrial Holdings Inc., Case No. 2022-L-008471, in the Circuit Court of Cook County, Illinois, County Department, Law Division. The Stipulation of Dismissal shall provide that the dismissal is with prejudice and without costs or attorneys' fees to either Party, except as otherwise provided herein or in the definitive Settlement Agreement.

5.2 Attorneys' Fees and Costs. Each Party shall bear its own attorneys' fees, costs, and expenses incurred in connection with the Litigation and the negotiation, preparation, and execution of this Term Sheet and the definitive Settlement Agreement and Mutual Release, including, without limitation, mediation fees, expert witness fees, discovery costs, and court filing fees. The Parties agree that the mediator's fees and expenses for the August 2, 2023 mediation session shall be shared equally between the Parties, in accordance with the retainer agreement entered into with the Great Lakes Dispute Resolution Center.

5.3 Cooperation in Filing. Counsel for the Parties — Calderwood & Harkness LLP (on behalf of Nexford) and Blackwood Stein & Associates LLP (on behalf of Cardinal Peak) — shall cooperate in good faith in the prompt preparation and filing of the Stipulation of Dismissal with Prejudice, and shall take all reasonable steps necessary to effectuate the dismissal of the Litigation in accordance with the terms of this Section 5.

6. Termination of the Master Supply Agreement

6.1 Mutual Termination. The Master Supply Agreement (MSA-NIH-CPI-2020-001), dated January 15, 2020, by and between the Parties, shall be terminated by mutual written agreement of the Parties, effective as of August 31, 2023 (the "MSA Termination Date"). The Parties shall negotiate in good faith and execute a separate MSA Termination Agreement, in a form reasonably acceptable to both Parties, memorializing the termination of the MSA and setting forth any necessary transitional provisions.

6.2 Transition Period for Outstanding Purchase Orders. Notwithstanding the termination of the MSA on the MSA Termination Date, all purchase orders issued under the MSA prior to the date of this Term Sheet and remaining outstanding as of such date shall be fulfilled by the Parties in accordance with the existing terms and conditions of the MSA through and including October 31, 2023 (the "Transition Period"). During the Transition Period, Cardinal Peak shall continue to deliver, and Nexford shall continue to accept and pay for, products covered by such outstanding purchase orders in accordance with the pricing, delivery, and quality specifications set forth in the MSA and the applicable purchase orders.

6.3 Pricing During Transition Period. During the Transition Period, pricing for all products delivered under outstanding purchase orders shall be at the then-applicable contract prices established under the MSA, as in effect immediately prior to the MSA Termination Date, without the application of any additional surcharges of any kind, including, without limitation, raw material surcharges, energy surcharges, or freight surcharges. For the avoidance of doubt, the Parties agree that no surcharge invoices shall be issued or become payable with respect to deliveries made during the Transition Period.

6.4 Post-Transition Obligations. Following the expiration of the Transition Period on October 31, 2023, neither Party shall have any further rights, obligations, or liabilities under the MSA, except for those provisions of the MSA that by their terms expressly survive termination, including, without limitation, provisions relating to indemnification, limitation of liability, confidentiality, intellectual property, and dispute resolution, which shall continue in effect in accordance with their respective terms.

7. No Admission of Liability

7.1 This Term Sheet, the definitive Settlement Agreement and Mutual Release, the Settlement Amount, the payment thereof, and all negotiations, discussions, correspondence, and communications relating to the foregoing are entered into and made solely for the purpose of compromising, settling, and resolving the disputed claims and counterclaims in the Litigation. Nothing contained in this Term Sheet or the definitive Settlement Agreement and Mutual Release, and no action taken in connection with the negotiation, execution, or performance hereof or thereof, shall constitute or be construed as an admission of liability, fault, wrongdoing, or breach of contract by either Party with respect to any claim, counterclaim, defense, or affirmative defense asserted or that could have been asserted in the Litigation or in any other proceeding.

7.2 Neither Party shall use, reference, or seek to introduce this Term Sheet, the definitive Settlement Agreement and Mutual Release, the Settlement Amount, or any aspect of the settlement negotiations, including any mediator's proposals or communications made during the mediation, as evidence of liability, fault, wrongdoing, or breach of contract by either Party in any judicial, administrative, arbitral, or other proceeding, except as may be necessary to enforce the terms of this Term Sheet or the definitive Settlement Agreement and Mutual Release.

7.3 This Section 7 is intended to be consistent with, and the Parties shall be entitled to the protections afforded by, Federal Rule of Evidence 408 and Illinois Rule of Evidence 408, as well as any other applicable evidentiary privileges and protections relating to settlement negotiations and mediation communications.

8. Confidentiality

8.1 General Confidentiality Obligation. The existence and terms of this Term Sheet and the definitive Settlement Agreement and Mutual Release, including, without limitation, the Settlement Amount, the payment schedule, the terms of the mutual releases, and all related negotiations, proposals, discussions, correspondence, and communications (collectively, the "Confidential Settlement Information"), shall be strictly confidential and shall not be disclosed by either Party to any person or entity except as expressly permitted under this Section 8.

8.2 Permitted Disclosures. Notwithstanding the foregoing, either Party may disclose Confidential Settlement Information in the following limited circumstances:

(a) As required by applicable law, regulation, governmental order, subpoena, or order of a court of competent jurisdiction, provided that the disclosing Party shall, to the extent legally permissible, provide the other Party with prompt written notice of any such requirement prior to making any disclosure, and shall cooperate with the other Party's reasonable efforts to obtain a protective order or other appropriate remedy limiting the scope of disclosure;

(b) To the disclosing Party's legal counsel, independent auditors (including, in Nexford's case, Hargrove Kellner CPAs LLP), tax advisors, and financial advisors, in each case on a strict need-to-know basis and subject to obligations of confidentiality no less restrictive than those set forth in this Section 8;

(c) In Nexford's case, to Nexford's senior secured lender, Ridgecrest National Bank, N.A., and Nexford's equity sponsor, Marlowe Asset Management Bluff Capital Partners, LP, to the extent required under the terms of applicable credit, financing, or investment agreements, and to such parties' respective advisors and representatives, in each case subject to obligations of confidentiality;

(d) In Cardinal Peak's case, to Cardinal Peak's members, managers, and financial advisors as reasonably required for purposes of internal reporting, financial planning, and governance, subject to obligations of confidentiality no less restrictive than those set forth in this Section 8.

8.3 Public Statements. Neither Party shall issue or authorize the issuance of any press release, public announcement, or other public statement regarding the existence or terms of this Term Sheet, the definitive Settlement Agreement and Mutual Release, or the settlement of the Litigation. In response to inquiries from third parties, including media, industry contacts, customers, vendors, or other persons, the Parties may state only that "the matter has been resolved to the mutual satisfaction of the Parties," and shall not provide any additional detail regarding the terms, amount, or conditions of the settlement.

8.4 Remedies for Breach. Each Party acknowledges that a breach of the confidentiality obligations set forth in this Section 8 may cause irreparable harm to the other Party for which monetary damages alone would be an inadequate remedy. Accordingly, in addition to any other remedies available at law or in equity, either Party shall be entitled to seek injunctive relief, specific performance, or other equitable remedies in the event of a breach or threatened breach of this Section 8, without the necessity of posting a bond or proving actual damages.

9. Definitive Agreement

9.1 Obligation to Negotiate. The Parties shall negotiate in good faith and use commercially reasonable efforts to prepare, finalize, and execute a definitive Settlement Agreement and Mutual Release (the "Definitive Agreement") that incorporates and is consistent with the material terms set forth in this Term Sheet. The Parties shall endeavor to execute the Definitive Agreement within fifteen (15) business days of the date of this Term Sheet, with a target execution date on or before August 23, 2023.

9.2 Additional Terms. The Definitive Agreement shall incorporate all material terms set forth in this Term Sheet and shall include such additional customary terms and provisions as the Parties may agree upon, including, without limitation, representations and warranties of the Parties, indemnification provisions, dispute resolution mechanisms, notices provisions, and other standard provisions appropriate for a settlement agreement of this nature and complexity.

9.3 Governing Law. The Definitive Agreement shall be governed by and construed in accordance with the laws of the State of Illinois, without giving effect to any choice-of-law or conflict-of-laws rules or provisions that would cause the application of the laws of any other jurisdiction. This governing law provision is consistent with Section 14.3 of the MSA.

9.4 Enforceability of Term Sheet. In the event that the Parties are unable, despite good faith efforts, to execute the Definitive Agreement within the timeframe specified in Section 9.1, either Party may seek to enforce the terms of this Term Sheet as a binding agreement in the Circuit Court of Cook County, Illinois, or any court of competent jurisdiction.

10. Binding Nature of Term Sheet

10.1 This Term Sheet constitutes a binding agreement between the Parties with respect to the material terms set forth herein. The Parties intend this Term Sheet to be a legally enforceable agreement, and each Party acknowledges that it has entered into this Term Sheet voluntarily, with the advice of counsel, and with full knowledge of its terms and legal consequences.

10.2 This Term Sheet is intended to be, and shall be, enforceable in accordance with its terms pending the execution of the Definitive Agreement. The Parties' obligation to negotiate and execute the Definitive Agreement shall not relieve either Party of its obligations under this Term Sheet, and the terms of this Term Sheet shall remain in full force and effect until superseded by the fully executed Definitive Agreement.

10.3 This Term Sheet may be enforced by either Party in the Circuit Court of Cook County, Illinois, County Department, Law Division, or any court of competent jurisdiction, and each Party hereby consents to the jurisdiction and venue of such court for purposes of enforcing this Term Sheet.

11. Miscellaneous Provisions

11.1 Entire Agreement. This Term Sheet, together with the Definitive Agreement to be executed pursuant to Section 9, constitutes the entire agreement between the Parties with respect to the settlement and resolution of the Litigation and the claims and counterclaims asserted therein, and supersedes all prior and contemporaneous discussions, negotiations, proposals, term sheets, memoranda of understanding, and other written or oral communications between the Parties relating to the subject matter hereof.

11.2 Amendments. This Term Sheet may not be amended, modified, supplemented, or waived except by a written instrument duly executed by authorized representatives of both Parties. No oral agreement, course of dealing, or course of performance shall be deemed to amend or modify the terms of this Term Sheet.

11.3 Counterparts. This Term Sheet may be executed in two or more counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same instrument. Execution and delivery of counterparts by facsimile, electronic mail (in PDF or similar format), or other electronic transmission shall be valid and effective for all purposes.

11.4 Authority. Each individual signing this Term Sheet below represents and warrants that he or she (a) has been duly authorized by the Party on whose behalf he or she is signing to execute this Term Sheet, (b) has full legal authority to bind such Party to the terms and conditions set forth herein, and (c) has not been induced to execute this Term Sheet by any representation, warranty, promise, or assurance not expressly set forth herein.

11.5 Notices. Any notice required or permitted under this Term Sheet shall be in writing and shall be delivered by hand, sent by nationally recognized overnight courier, or transmitted by electronic mail to the addresses set forth in Section 1 above, or to such other address as either Party may designate in writing to the other Party. Notices shall be deemed given upon receipt.

SIGNATURE PAGE

IN WITNESS WHEREOF, the Parties have executed this Settlement Term Sheet as of the date first set forth above, intending to be legally bound by its terms.

FOR CARDINAL PEAK INDUSTRIES:

CARDINAL PEAK INDUSTRIES

By: ________

Name: Frank Delacroix

Title: President & Chief Executive Officer

Date: August 2, 2023

FOR NEXFORD INDUSTRIAL HOLDINGS INC.:

NEXFORD INDUSTRIAL HOLDINGS INC.

By: ________

Name: Martin Schaeffer

Title: Chief Executive Officer

Date: August 2, 2023

ACKNOWLEDGED BY COUNSEL

For Cardinal Peak Industries:

BLACKWOOD STEIN & ASSOCIATES LLP

By: ________

Name: Garrett Blackwood

Title: Lead Partner

717 Seventeenth Street, Suite 2200 Denver, Colorado 80202

For Nexford Industrial Holdings Inc.:

CALDERWOOD & HARKNESS LLP

By: ________

Name: Priya Anand

Title: Responsible Partner

200 South Wacker Drive, Suite 4400 Chicago, Illinois 60606

ACKNOWLEDGED BY MEDIATOR

GREAT LAKES DISPUTE RESOLUTION CENTER

By: ________

Name: Hon. Catherine Lindström (Ret.)

Title: Mediator

150 North Riverside Plaza, Suite 2700 Chicago, Illinois 60606

Date: August 2, 2023

SETTLEMENT TERM SHEET
CONFIDENTIAL — FOR SETTLEMENT PURPOSES ONLY
Executed at the conclusion of mediation conducted before Hon. Catherine Lindström (Ret.) Great Lakes Dispute Resolution Center 150 North Riverside Plaza, Suite 2700 Chicago, Illinois 60606
Date: August 2, 2023
Underlying Litigation: Cardinal Peak Industries v. Nexford Industrial Holdings Inc., Case No. 2022-L-008471, Circuit Court of Cook County, Illinois, County Department, Law Division.
This Settlement Term Sheet (this "Term Sheet") sets forth the binding terms upon which the above-referenced litigation, including all claims and counterclaims asserted therein, shall be resolved, as agreed upon by the Parties identified below at the conclusion of a full-day mediation session conducted on August 2, 2023.
1. Parties
1.1 Cardinal Peak Industries ("Cardinal Peak" or "CPI"), a Colorado limited liability company organized and existing under the laws of the State of Colorado, with its principal place of business located at 1580 Ridgeline Boulevard, Pueblo, Colorado 81001. Cardinal Peak is engaged in the business of manufacturing and distributing precision-fabricated steel components for the heavy equipment, energy infrastructure, and transportation sectors. In connection with the Litigation and this Term Sheet, Cardinal Peak is represented by Blackwood Stein & Associates LLP, 717 Seventeenth Street, Suite 2200, Denver, Colorado 80202, with Garrett Blackwood serving as Lead Partner and counsel of record.
1.2 Nexford Industrial Holdings Inc. ("Nexford" or "NIH"), a Delaware corporation organized and existing under the laws of the State of Delaware, with its principal place of business located at 4200 West Lakeshore Industrial Parkway, Suite 300, Waukegan, Illinois 60085. Nexford is a diversified industrial holding company with operations in steel procurement, distribution, and downstream processing across the upper Midwest. In connection with the Litigation and this Term Sheet, Nexford is represented by Calderwood & Harkness LLP, 200 South Wacker Drive, Suite 4400, Chicago, Illinois 60606, with Priya Anand serving as Responsible Partner and counsel of record.
Cardinal Peak and Nexford are referred to individually as a "Party" and collectively as the "Parties."
2. Recitals and Background
2.1 The Master Supply Agreement. On or about January 15, 2020, the Parties entered into a certain Master Supply Agreement, bearing reference number MSA-NIH-CPI-2020-001 (the "MSA"), pursuant to which Cardinal Peak agreed to supply, and Nexford agreed to purchase, hot-rolled coil ("HRC") and cold-rolled coil ("CRC") steel products on the terms and conditions set forth therein. The MSA established a three-year supply relationship, governed pricing and volume commitments, and included detailed provisions addressing raw material surcharges, logistics, quality specifications, and dispute resolution.
2.2 The Surcharge Dispute. A dispute arose between the Parties with respect to the pass-through of certain raw material, energy, and freight surcharges under Section 7.4 of the MSA, covering the period of March 2021 through May 2022 (the "Dispute Period"). Cardinal Peak contended that it was entitled to pass through surcharges reflecting the extraordinary escalation of raw material and energy costs experienced during the Dispute Period, and that Nexford failed and refused to pay invoices for such surcharges in accordance with the terms of the MSA. Nexford disputed the applicability, calculation methodology, and amount of the claimed surcharges.
2.3 Commencement of Litigation. On August 8, 2022, Cardinal Peak filed a Complaint against Nexford 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"). The Complaint asserted claims for (i) breach of contract, (ii) unjust enrichment, and (iii) account stated, seeking damages in the amount of approximately $4,730,000.00 (Four Million Seven Hundred Thirty Thousand Dollars), plus prejudgment interest, attorneys' fees, and costs.
2.4 Nexford's Response and Counterclaim. On September 19, 2022, Nexford filed its Answer and Affirmative Defenses to the Complaint, denying liability on all counts and asserting various affirmative defenses, including waiver, estoppel, failure to mitigate, and contractual limitations on surcharge pass-throughs. On October 3, 2022, Nexford filed a Counterclaim against Cardinal Peak, alleging breach of contract and seeking declaratory relief regarding the proper interpretation of Section 7.4 of the MSA, as well as the return of an alleged overpayment in the amount of approximately $210,000.00 (Two Hundred Ten Thousand Dollars).
2.5 Stay of Litigation and Mediation. On June 5, 2023, the Court entered an order granting the Parties' Joint Motion to Stay Litigation Pending Mediation, consistent with the dispute resolution provisions set forth in Section 14.3 of the MSA. The Parties thereafter engaged Hon. Catherine Lindström (Ret.) of the Great Lakes Dispute Resolution Center, Chicago, Illinois, to serve as mediator. On August 2, 2023, the Parties, through their respective counsel and authorized representatives, participated in a full-day mediation session at the Great Lakes Dispute Resolution Center, 150 North Riverside Plaza, Suite 2700, Chicago, Illinois.
2.6 Agreement in Principle. Following extensive arm's-length negotiations facilitated by the mediator, the Parties have reached an agreement in principle on the terms set forth in this Term Sheet to resolve all claims and counterclaims in the Litigation, without any admission of liability, fault, or wrongdoing by either Party. This Term Sheet memorializes the material terms of such agreement in principle.
3. Settlement Payment
3.1 Total Settlement Amount. In full and final settlement of all claims and counterclaims in the Litigation, Nexford shall pay to Cardinal Peak the total sum of $1,890,000.00 (One Million Eight Hundred Ninety Thousand Dollars) (the "Settlement Amount"). The Settlement Amount represents a negotiated compromise of the Parties' respective positions and is not an admission of the validity or amount of any particular claim or counterclaim. The Parties acknowledge that the Settlement Amount represents approximately forty percent (40%) of Cardinal Peak's claimed unpaid surcharges of $4,730,000.00, as adjusted downward through compromise to account for the litigation risks and the Parties' respective factual and legal positions.
3.2 Payment Structure — Two Installments. The Settlement Amount shall be payable by Nexford to Cardinal Peak in two installments, as follows:
(a) First Installment. The sum of $1,134,000.00 (One Million One Hundred Thirty-Four Thousand Dollars), representing sixty percent (60%) of the Settlement Amount, shall be due and payable within thirty (30) calendar days following the date of execution of the definitive Settlement Agreement and Mutual Release (as defined in Section 9 below).
(b) Second Installment. The sum of $756,000.00 (Seven Hundred Fifty-Six Thousand Dollars), representing forty percent (40%) of the Settlement Amount, shall be due and payable within ninety (90) calendar days following the date of execution of the definitive Settlement Agreement and Mutual Release.
3.3 Method of Payment. All payments under this Section 3 shall be made by wire transfer of immediately available funds to an account or accounts to be designated by Cardinal Peak in writing prior to the due date of each installment. Cardinal Peak shall provide wire transfer instructions to Nexford (with a copy to Calderwood & Harkness LLP) no later than five (5) business days prior to the due date of the First Installment.
3.4 Late Payment; Interest. In the event that any installment of the Settlement Amount is not paid when due, such overdue amount shall accrue interest from the date due until the date of actual payment at a rate to be specified in the definitive Settlement Agreement, which rate the Parties intend to negotiate in good faith. The Parties suggest that such rate be the statutory rate applicable to judgments under the law of the State of Illinois, as set forth in 735 ILCS 5/2-1303, or such other rate as the Parties may agree. The accrual of interest on any overdue payment shall not in any way limit or waive Cardinal Peak's right to seek enforcement of the payment obligations set forth herein.
3.5 Lender Notification. Nexford acknowledges and represents that the Settlement Amount exceeds the $1,000,000.00 threshold requiring notice to Nexford's senior secured lender, Ridgecrest National Bank, N.A. ("Ridgecrest"), under Section 6.03(b) of Nexford's existing credit facility with Ridgecrest. Nexford shall provide such notice to Ridgecrest promptly following the execution of the definitive Settlement Agreement and Mutual Release, and in any event no later than five (5) business days following such execution. Nexford represents that it does not anticipate that the payment of the Settlement Amount will cause a default or breach under its credit facility, and Nexford shall promptly notify Cardinal Peak and its counsel if it becomes aware of any such issue.
4. Mutual Release of Claims
4.1 Release by Cardinal Peak. Upon the execution of the definitive Settlement Agreement and Mutual Release, and subject to and conditioned upon the full and timely payment of the Settlement Amount by Nexford in accordance with Section 3 above, Cardinal Peak, on behalf of itself and its members, managers, officers, employees, agents, representatives, affiliates, predecessors, successors, and assigns, shall release and forever discharge Nexford, together with its parent entities (including, without limitation, Marlowe Asset Management Bluff Capital Partners, LP), subsidiaries, affiliates, officers, directors, shareholders, employees, agents, representatives, insurers, predecessors, successors, and assigns (collectively, the "Nexford Released Parties"), from any and all claims, demands, actions, causes of action, suits, debts, liabilities, damages, losses, costs, expenses (including attorneys' fees), obligations, judgments, and controversies of every kind and nature, whether known or unknown, suspected or unsuspected, fixed or contingent, liquidated or unliquidated, matured or unmatured, that arise out of, relate to, or are in any way connected with the MSA, the surcharge invoices at issue in the Litigation, and the Litigation itself (Case No. 2022-L-008471), including, but not limited to, the claims for breach of contract, unjust enrichment, and account stated asserted in Cardinal Peak's Complaint.
4.2 Release by Nexford. Upon the execution of the definitive Settlement Agreement and Mutual Release, and subject to and conditioned upon the full and timely payment of the Settlement Amount by Nexford in accordance with Section 3 above, Nexford, on behalf of itself and its parents, subsidiaries, affiliates, officers, directors, shareholders, employees, agents, representatives, insurers, predecessors, successors, and assigns, shall release and forever discharge Cardinal Peak, together with its members, managers, officers, employees, agents, representatives, affiliates, predecessors, successors, and assigns (collectively, the "Cardinal Peak Released Parties"), from any and all claims, demands, actions, causes of action, suits, debts, liabilities, damages, losses, costs, expenses (including attorneys' fees), obligations, judgments, and controversies of every kind and nature, whether known or unknown, suspected or unsuspected, fixed or contingent, liquidated or unliquidated, matured or unmatured, that arise out of, relate to, or are in any way connected with the MSA, the surcharge invoices at issue in the Litigation, and the Litigation itself, including, but not limited to, the Counterclaim for breach of contract, declaratory relief, and the claimed refund of an alleged overpayment in the approximate amount of $210,000.00.
4.3 Scope of Release. The mutual releases described in Sections 4.1 and 4.2 above shall be general and comprehensive with respect to the subject matter of the Litigation and all claims, counterclaims, defenses, and affirmative defenses asserted or that could have been asserted therein. The Parties intend that the releases be broadly construed to effectuate a complete resolution of all disputes between them arising out of or related to the MSA and the surcharge invoices.
4.4 Carve-Out for Term Sheet and Definitive Agreement Obligations. Notwithstanding the foregoing, the mutual releases set forth in this Section 4 shall not extend to, and shall expressly preserve, any and all obligations, rights, and remedies arising under this Term Sheet or the definitive Settlement Agreement and Mutual Release, including, without limitation, the payment obligations set forth in Section 3 above.
5. Dismissal of Litigation
5.1 Stipulation of Dismissal. Within ten (10) business days following the full execution of the definitive Settlement Agreement and Mutual Release by all Parties, the Parties shall jointly prepare, execute, and file a Stipulation of Dismissal with Prejudice, dismissing with prejudice all claims and counterclaims asserted in Cardinal Peak Industries v. Nexford Industrial Holdings Inc., Case No. 2022-L-008471, in the Circuit Court of Cook County, Illinois, County Department, Law Division. The Stipulation of Dismissal shall provide that the dismissal is with prejudice and without costs or attorneys' fees to either Party, except as otherwise provided herein or in the definitive Settlement Agreement.
5.2 Attorneys' Fees and Costs. Each Party shall bear its own attorneys' fees, costs, and expenses incurred in connection with the Litigation and the negotiation, preparation, and execution of this Term Sheet and the definitive Settlement Agreement and Mutual Release, including, without limitation, mediation fees, expert witness fees, discovery costs, and court filing fees. The Parties agree that the mediator's fees and expenses for the August 2, 2023 mediation session shall be shared equally between the Parties, in accordance with the retainer agreement entered into with the Great Lakes Dispute Resolution Center.
5.3 Cooperation in Filing. Counsel for the Parties — Calderwood & Harkness LLP (on behalf of Nexford) and Blackwood Stein & Associates LLP (on behalf of Cardinal Peak) — shall cooperate in good faith in the prompt preparation and filing of the Stipulation of Dismissal with Prejudice, and shall take all reasonable steps necessary to effectuate the dismissal of the Litigation in accordance with the terms of this Section 5.
6. Termination of the Master Supply Agreement
6.1 Mutual Termination. The Master Supply Agreement (MSA-NIH-CPI-2020-001), dated January 15, 2020, by and between the Parties, shall be terminated by mutual written agreement of the Parties, effective as of August 31, 2023 (the "MSA Termination Date"). The Parties shall negotiate in good faith and execute a separate MSA Termination Agreement, in a form reasonably acceptable to both Parties, memorializing the termination of the MSA and setting forth any necessary transitional provisions.
6.2 Transition Period for Outstanding Purchase Orders. Notwithstanding the termination of the MSA on the MSA Termination Date, all purchase orders issued under the MSA prior to the date of this Term Sheet and remaining outstanding as of such date shall be fulfilled by the Parties in accordance with the existing terms and conditions of the MSA through and including October 31, 2023 (the "Transition Period"). During the Transition Period, Cardinal Peak shall continue to deliver, and Nexford shall continue to accept and pay for, products covered by such outstanding purchase orders in accordance with the pricing, delivery, and quality specifications set forth in the MSA and the applicable purchase orders.
6.3 Pricing During Transition Period. During the Transition Period, pricing for all products delivered under outstanding purchase orders shall be at the then-applicable contract prices established under the MSA, as in effect immediately prior to the MSA Termination Date, without the application of any additional surcharges of any kind, including, without limitation, raw material surcharges, energy surcharges, or freight surcharges. For the avoidance of doubt, the Parties agree that no surcharge invoices shall be issued or become payable with respect to deliveries made during the Transition Period.
6.4 Post-Transition Obligations. Following the expiration of the Transition Period on October 31, 2023, neither Party shall have any further rights, obligations, or liabilities under the MSA, except for those provisions of the MSA that by their terms expressly survive termination, including, without limitation, provisions relating to indemnification, limitation of liability, confidentiality, intellectual property, and dispute resolution, which shall continue in effect in accordance with their respective terms.
7. No Admission of Liability
7.1 This Term Sheet, the definitive Settlement Agreement and Mutual Release, the Settlement Amount, the payment thereof, and all negotiations, discussions, correspondence, and communications relating to the foregoing are entered into and made solely for the purpose of compromising, settling, and resolving the disputed claims and counterclaims in the Litigation. Nothing contained in this Term Sheet or the definitive Settlement Agreement and Mutual Release, and no action taken in connection with the negotiation, execution, or performance hereof or thereof, shall constitute or be construed as an admission of liability, fault, wrongdoing, or breach of contract by either Party with respect to any claim, counterclaim, defense, or affirmative defense asserted or that could have been asserted in the Litigation or in any other proceeding.
7.2 Neither Party shall use, reference, or seek to introduce this Term Sheet, the definitive Settlement Agreement and Mutual Release, the Settlement Amount, or any aspect of the settlement negotiations, including any mediator's proposals or communications made during the mediation, as evidence of liability, fault, wrongdoing, or breach of contract by either Party in any judicial, administrative, arbitral, or other proceeding, except as may be necessary to enforce the terms of this Term Sheet or the definitive Settlement Agreement and Mutual Release.
7.3 This Section 7 is intended to be consistent with, and the Parties shall be entitled to the protections afforded by, Federal Rule of Evidence 408 and Illinois Rule of Evidence 408, as well as any other applicable evidentiary privileges and protections relating to settlement negotiations and mediation communications.
8. Confidentiality
8.1 General Confidentiality Obligation. The existence and terms of this Term Sheet and the definitive Settlement Agreement and Mutual Release, including, without limitation, the Settlement Amount, the payment schedule, the terms of the mutual releases, and all related negotiations, proposals, discussions, correspondence, and communications (collectively, the "Confidential Settlement Information"), shall be strictly confidential and shall not be disclosed by either Party to any person or entity except as expressly permitted under this Section 8.
8.2 Permitted Disclosures. Notwithstanding the foregoing, either Party may disclose Confidential Settlement Information in the following limited circumstances:
(a) As required by applicable law, regulation, governmental order, subpoena, or order of a court of competent jurisdiction, provided that the disclosing Party shall, to the extent legally permissible, provide the other Party with prompt written notice of any such requirement prior to making any disclosure, and shall cooperate with the other Party's reasonable efforts to obtain a protective order or other appropriate remedy limiting the scope of disclosure;
(b) To the disclosing Party's legal counsel, independent auditors (including, in Nexford's case, Hargrove Kellner CPAs LLP), tax advisors, and financial advisors, in each case on a strict need-to-know basis and subject to obligations of confidentiality no less restrictive than those set forth in this Section 8;
(c) In Nexford's case, to Nexford's senior secured lender, Ridgecrest National Bank, N.A., and Nexford's equity sponsor, Marlowe Asset Management Bluff Capital Partners, LP, to the extent required under the terms of applicable credit, financing, or investment agreements, and to such parties' respective advisors and representatives, in each case subject to obligations of confidentiality;
(d) In Cardinal Peak's case, to Cardinal Peak's members, managers, and financial advisors as reasonably required for purposes of internal reporting, financial planning, and governance, subject to obligations of confidentiality no less restrictive than those set forth in this Section 8.
8.3 Public Statements. Neither Party shall issue or authorize the issuance of any press release, public announcement, or other public statement regarding the existence or terms of this Term Sheet, the definitive Settlement Agreement and Mutual Release, or the settlement of the Litigation. In response to inquiries from third parties, including media, industry contacts, customers, vendors, or other persons, the Parties may state only that "the matter has been resolved to the mutual satisfaction of the Parties," and shall not provide any additional detail regarding the terms, amount, or conditions of the settlement.
8.4 Remedies for Breach. Each Party acknowledges that a breach of the confidentiality obligations set forth in this Section 8 may cause irreparable harm to the other Party for which monetary damages alone would be an inadequate remedy. Accordingly, in addition to any other remedies available at law or in equity, either Party shall be entitled to seek injunctive relief, specific performance, or other equitable remedies in the event of a breach or threatened breach of this Section 8, without the necessity of posting a bond or proving actual damages.
9. Definitive Agreement
9.1 Obligation to Negotiate. The Parties shall negotiate in good faith and use commercially reasonable efforts to prepare, finalize, and execute a definitive Settlement Agreement and Mutual Release (the "Definitive Agreement") that incorporates and is consistent with the material terms set forth in this Term Sheet. The Parties shall endeavor to execute the Definitive Agreement within fifteen (15) business days of the date of this Term Sheet, with a target execution date on or before August 23, 2023.
9.2 Additional Terms. The Definitive Agreement shall incorporate all material terms set forth in this Term Sheet and shall include such additional customary terms and provisions as the Parties may agree upon, including, without limitation, representations and warranties of the Parties, indemnification provisions, dispute resolution mechanisms, notices provisions, and other standard provisions appropriate for a settlement agreement of this nature and complexity.
9.3 Governing Law. The Definitive Agreement shall be governed by and construed in accordance with the laws of the State of Illinois, without giving effect to any choice-of-law or conflict-of-laws rules or provisions that would cause the application of the laws of any other jurisdiction. This governing law provision is consistent with Section 14.3 of the MSA.
9.4 Enforceability of Term Sheet. In the event that the Parties are unable, despite good faith efforts, to execute the Definitive Agreement within the timeframe specified in Section 9.1, either Party may seek to enforce the terms of this Term Sheet as a binding agreement in the Circuit Court of Cook County, Illinois, or any court of competent jurisdiction.
10. Binding Nature of Term Sheet
10.1 This Term Sheet constitutes a binding agreement between the Parties with respect to the material terms set forth herein. The Parties intend this Term Sheet to be a legally enforceable agreement, and each Party acknowledges that it has entered into this Term Sheet voluntarily, with the advice of counsel, and with full knowledge of its terms and legal consequences.
10.2 This Term Sheet is intended to be, and shall be, enforceable in accordance with its terms pending the execution of the Definitive Agreement. The Parties' obligation to negotiate and execute the Definitive Agreement shall not relieve either Party of its obligations under this Term Sheet, and the terms of this Term Sheet shall remain in full force and effect until superseded by the fully executed Definitive Agreement.
10.3 This Term Sheet may be enforced by either Party in the Circuit Court of Cook County, Illinois, County Department, Law Division, or any court of competent jurisdiction, and each Party hereby consents to the jurisdiction and venue of such court for purposes of enforcing this Term Sheet.
11. Miscellaneous Provisions
11.1 Entire Agreement. This Term Sheet, together with the Definitive Agreement to be executed pursuant to Section 9, constitutes the entire agreement between the Parties with respect to the settlement and resolution of the Litigation and the claims and counterclaims asserted therein, and supersedes all prior and contemporaneous discussions, negotiations, proposals, term sheets, memoranda of understanding, and other written or oral communications between the Parties relating to the subject matter hereof.
11.2 Amendments. This Term Sheet may not be amended, modified, supplemented, or waived except by a written instrument duly executed by authorized representatives of both Parties. No oral agreement, course of dealing, or course of performance shall be deemed to amend or modify the terms of this Term Sheet.
11.3 Counterparts. This Term Sheet may be executed in two or more counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same instrument. Execution and delivery of counterparts by facsimile, electronic mail (in PDF or similar format), or other electronic transmission shall be valid and effective for all purposes.
11.4 Authority. Each individual signing this Term Sheet below represents and warrants that he or she (a) has been duly authorized by the Party on whose behalf he or she is signing to execute this Term Sheet, (b) has full legal authority to bind such Party to the terms and conditions set forth herein, and (c) has not been induced to execute this Term Sheet by any representation, warranty, promise, or assurance not expressly set forth herein.
11.5 Notices. Any notice required or permitted under this Term Sheet shall be in writing and shall be delivered by hand, sent by nationally recognized overnight courier, or transmitted by electronic mail to the addresses set forth in Section 1 above, or to such other address as either Party may designate in writing to the other Party. Notices shall be deemed given upon receipt.
SIGNATURE PAGE
IN WITNESS WHEREOF, the Parties have executed this Settlement Term Sheet as of the date first set forth above, intending to be legally bound by its terms.
FOR CARDINAL PEAK INDUSTRIES:
CARDINAL PEAK INDUSTRIES
By: ________
Name: Frank Delacroix
Title: President & Chief Executive Officer
Date: August 2, 2023
FOR NEXFORD INDUSTRIAL HOLDINGS INC.:
NEXFORD INDUSTRIAL HOLDINGS INC.
By: ________
Name: Martin Schaeffer
Title: Chief Executive Officer
Date: August 2, 2023
ACKNOWLEDGED BY COUNSEL
For Cardinal Peak Industries:
BLACKWOOD STEIN & ASSOCIATES LLP
By: ________
Name: Garrett Blackwood
Title: Lead Partner
717 Seventeenth Street, Suite 2200 Denver, Colorado 80202
For Nexford Industrial Holdings Inc.:
CALDERWOOD & HARKNESS LLP
By: ________
Name: Priya Anand
Title: Responsible Partner
200 South Wacker Drive, Suite 4400 Chicago, Illinois 60606
ACKNOWLEDGED BY MEDIATOR
GREAT LAKES DISPUTE RESOLUTION CENTER
By: ________
Name: Hon. Catherine Lindström (Ret.)
Title: Mediator
150 North Riverside Plaza, Suite 2700 Chicago, Illinois 60606
Date: August 2, 2023

SETTLEMENT TERM SHEET

SIGNATURE PAGE

FOR CARDINAL PEAK INDUSTRIES:

CARDINAL PEAK INDUSTRIES

FOR NEXFORD INDUSTRIAL HOLDINGS INC.:

NEXFORD INDUSTRIAL HOLDINGS INC.

ACKNOWLEDGED BY COUNSEL

BLACKWOOD STEIN & ASSOCIATES LLP

CALDERWOOD & HARKNESS LLP

ACKNOWLEDGED BY MEDIATOR

GREAT LAKES DISPUTE RESOLUTION CENTER

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