Contract analysis

I. PURPOSE AND EXECUTIVE SUMMARY This memorandum sets forth Calderwood & Harkness LLP's ("C&H") recommended phased defense and settlement strategy for the meal-and-rest-break class action filed by Gloria Reyes ("Plaintiff" or "Reyes") against Vantage Mobility Systems Corp. ("VMS" or the "Company"). The purpose of this memorandum is to provide VMS's General Counsel and Ashgrove Equity Partners Industrial Partners, LP

II. CASE POSTURE AND KEY BACKGROUND A. Procedural Status The complaint in Reyes v. Vantage Mobility Systems Corp., Case No. CIVSB-2025-04781, was filed on August 1, 2025, in the Superior Court of California, County of San Bernardino. The complaint is brought by Plaintiff Gloria Reyes individually, on behalf of a putative class of all similarly situated current and former non-exempt hourly employees at the Fontana Pla

III. EXPOSURE ANALYSIS A. Breakdown by Claim Category C&H has prepared a preliminary damages model to estimate VMS's maximum theoretical exposure across all seven causes of action. The model relies on the following assumptions, which are conservative (i.e., plaintiff-favorable) for purposes of establishing upper-bound exposure: an average class size of 3,550 members; an average of 480 workdays per class member during

1. Meal Period Premiums (Cal. Lab. Code §§ 226.7, 512) Under California Labor Code section 226.7, an employer that fails to provide a compliant meal period must pay the employee one additional hour of pay at the employee's regular rate of compensation. Assuming a 65% violation rate across the class — a rate consistent with plaintiff-side assumptions in comparable auto-deduction cases — the meal period premium exposur

2. Rest Period Premiums (Cal. Lab. Code § 226.7) Rest period claims are subject to a lower assumed violation rate because, unlike meal periods, there was no automatic deduction policy that provides common proof of a systematic violation. The complaint's rest break allegations rely on anecdotal evidence of shortened or missed breaks during "surge" production periods and general allegations of inadequate staffing. Assu

3. Subtotal — Premium Pay Exposure Meal period premiums + rest period premiums = $34,813,200

4. Waiting Time Penalties (Cal. Lab. Code § 203) Waiting time penalties apply to former employees who were not paid all wages due at the time of separation. Under section 203, the penalty continues at the employee's daily rate of pay for up to 30 calendar days from the date of separation. Assuming all approximately 2,100 former employees in the class are eligible: 2,100 former employees × 30 days × 8 hours/day × $21.

5. Wage Statement Penalties (Cal. Lab. Code § 226) Inaccurate wage statement penalties are $50 per employee for the initial violation and $100 per employee for each subsequent violation, up to a statutory cap of $4,000 per employee. Assuming an average of 20 pay periods with violations per class member and a blended per-violation penalty of $50–$100: 3,550 class members × blended $50/$100 per violation × 20 pay perio

6. PAGA Penalties (Cal. Lab. Code § 2698 et seq.) PAGA provides for civil penalties of $100 per employee per pay period for the initial violation and $200 per employee per pay period for each subsequent violation. Of any PAGA penalties recovered, 75% is distributed to the LWDA and 25% to aggrieved employees. Based on the class size, class period, and estimated violation frequency, C&H estimates PAGA penalty exposure

7. UCL Restitution (Cal. Bus. & Prof. Code § 17200) The UCL cause of action seeks restitution of all wages unlawfully withheld. Because UCL restitution is duplicative of and overlapping with the premium pay claims under Labor Code sections 226.7 and 512, it does not create additional independent exposure. However, the UCL claim carries a four-year statute of limitations (compared to three years for certain Labor Code

8. Maximum Theoretical Aggregate Exposure This figure represents the upper bound of Plaintiff's theoretical recovery and assumes maximum violation rates, no individualized defenses, and no offset for the post-remediation sub-period. It is the number that NLP will use in settlement demands and class certification briefing to frame the magnitude of the case. It does not, however, reflect the realistic range of outcomes

IV. PHASED DEFENSE STRATEGY A. Phase 1: Pre-Certification Aggressive Defense (August 2025 – Q1/Q2 2026) The objective of Phase 1 is to build the strongest possible defense record prior to the court's ruling on class certification. A strong pre-certification defense posture accomplishes two goals: first, it maximizes the likelihood of a favorable certification ruling (denial or narrowing of the class); and second, eve

1. Responsive Pleadings (September 2025). C&H recommends filing the following responsive pleadings by the September 11, 2025, deadline: Answer to Complaint. C&H will prepare and file a comprehensive answer to the complaint, including specific denials of the material factual allegations and the following affirmative defenses: • Statute of limitations: Certain claims are time-barred to the extent they seek recovery for

2. Discovery Strategy. C&H recommends an aggressive, targeted discovery strategy in Phase 1 designed to develop the factual record necessary to oppose class certification and prepare for mediation. Named Plaintiff Deposition. The deposition of Gloria Reyes should be a priority. C&H will seek to depose Ms. Reyes as early as possible following the Case Management Conference. The deposition will focus on the following a

3. Oppose Class Certification (Anticipated Q1 2026). The class certification motion is the pivotal event in this litigation. If certification is denied or significantly narrowed, VMS's settlement posture improves dramatically and the case may be resolved at a fraction of the realistic settlement range. If the class is certified as pled, the litigation enters a different posture in which settlement becomes more urgent

4. Phase 1 Budget. The estimated cost of Phase 1 — encompassing responsive pleadings, the demurrer and motion to strike, discovery, expert engagement, and class certification opposition — is $800,000 to $1,200,000. This estimate includes C&H attorney fees, local counsel fees (Whitfield Garza LLP), and expert costs (Dr. Proulx, Veltrano Analytics LLC). C&H's standard hourly billing rates for this matter are as follows

1. Timing. C&H recommends that mediation be proposed following the court's ruling on class certification, which is anticipated in Q1–Q2 2026. This timing is strategic: the certification ruling is the single most significant event in class action litigation, and it will materially affect both parties' settlement expectations. Mediating before the certification ruling introduces unnecessary uncertainty; mediating after

2. Selection of Mediator. For a case of this size and complexity, C&H recommends retaining a retired California Superior Court judge with substantial experience mediating meal-and-rest-break class actions in the manufacturing sector. The mediator should be familiar with Brinker jurisprudence, PAGA settlement requirements, and the class settlement approval process. C&H will identify two to three qualified mediator can

3. Pre-Mediation Preparation. Thorough pre-mediation preparation is essential to achieving a settlement in VMS's target range. C&H will prepare a detailed, confidential mediation brief addressing the following: (a) Factual Summary Emphasizing Remedial Measures. The mediation brief will lead with the narrative of VMS's proactive remediation: the February 2024 internal audit, the March 2024 corrective action, and the d

4. Settlement Target Range. C&H recommends a settlement target range at mediation of $8.5 million to $13.6 million, representing the lower half of the realistic settlement range. The justification for targeting the lower half includes the following: • The March 15, 2024, remedial measures reduce the effective class period for auto-deduction claims by approximately 18 months (approximately 35% of the total class perio

1. If Mediation Succeeds. If mediation produces a settlement within VMS's target range, C&H will proceed to negotiate a comprehensive global class settlement agreement. The settlement agreement will include the following key components: (a) Monetary Payment. A non-reversionary gross settlement fund in the agreed amount, from which class counsel fees (typically 25–33% of the gross settlement), class representative enh

2. If Mediation Fails. If mediation does not produce a settlement, VMS will need to evaluate whether to continue litigating through trial or to pursue alternative resolution strategies. Continued Litigation Through Trial. If the case proceeds to trial, VMS's estimated total defense costs — inclusive of Phase 1 costs, Phase 2 mediation costs, and Phase 3 trial preparation and trial costs — are $2,500,000 to $3,800,000

V. Ashgrove Equity Partners EXIT CONSIDERATIONS AND FINANCIAL REPORTING IMPACT A. Planned 2026 Exit / Secondary Sale Process Ashgrove Equity Partners Industrial Partners, LP, is the majority equity holder of VMS, having acquired the Company in 2019 for approximately $510 million. C&H understands that Ashgrove Equity Partners, under Managing Partner Douglas Fielding, has a planned exit or secondary sale process antici