Contract analysis

I. Background and Summary of the Disputed Chargeback Vantage and Meridian are parties to the LTSA, which was executed on March 15, 2020, and carries a five-year term running through March 14, 2025. The LTSA is governed by the laws of the State of Illinois, as specified in Section 22.4 thereof, without regard to conflict-of-laws principles. The parties' commercial relationship predates the current LTSA; Meridian has b

II. Procedural Non-Compliance Under LTSA Section 9.4(b) Meridian's right to recover warranty chargebacks under the LTSA is expressly conditioned on its compliance with the procedural framework established in Section 9.4. As detailed below, Meridian has failed to comply with these procedural requirements in two critical respects: (a) it failed to make returned parts available for Vantage's inspection within the contra

Section 9.4(b) of the LTSA expressly provides that, upon issuance of a warranty chargeback notice, Meridian "shall make the parts that are the subject of such notice available to Supplier for inspection at a mutually agreed upon location within thirty (30) days of the date of such notice." This provision reflects a fundamental aspect of the warranty chargeback framework negotiated by the parties: the supplier's right

Section 9.4(b) of the LTSA conditions Meridian's right to recover warranty chargebacks on compliance with the inspection procedures set forth therein. The contractual language is clear: the parts that are the subject of a warranty chargeback notice must be made available to the supplier for inspection. This is not a mere formality; it is a substantive condition that protects the supplier's due-process right to verify

III. Substantive Challenge — Specification Compliance Even setting aside the procedural deficiencies addressed above, the First WCN fails on its merits. Vantage's Parts conform to Meridian's Engineering Specifications. Moreover, there is substantial evidence that the field failures underlying the First WCN are attributable not to Vantage's castings, but to Meridian's own assembly process at its Schaumburg facility. A

IV. Challenge to the Per-Unit Chargeback Calculation Independent of the procedural and substantive deficiencies set forth above, the per-unit chargeback amount asserted in the First WCN is inflated by the inclusion of a cost component — the so-called "contractual administrative fee" — that has no basis in the LTSA. A. The $48.00 Administrative Fee Lacks Contractual Basis Each of the 3,842 units in WCN-2021-1247 inclu

Section 9.3 of the LTSA defines with specificity the categories of costs that Meridian may recover from Vantage through the warranty chargeback mechanism. These categories are limited to: (i) the cost of the replacement part; (ii) reasonable OEM dealer labor costs associated with the warranty repair or replacement; and (iii) documented internal failure-analysis and logistics costs that are directly attributable to th

V. Demand for Immediate Reversal of Accounts Receivable Deductions Vantage is aware that Meridian commenced unilateral deductions of chargeback amounts from Vantage's open accounts receivable beginning with the January 2022 payment cycle, without waiting for the resolution of Vantage's timely contest of the First WCN. As of the date of this letter, Meridian has withheld approximately $2.4 million from payments otherw

1. Reverse all deductions from Vantage's accounts receivable that are related to WCN-2021-1247, and credit Vantage's account for the full amount withheld to date in connection with the First WCN.

2. Refrain from further unilateral withholdings from Vantage's accounts receivable in connection with any warranty chargeback notice that is the subject of a pending contest under Section 9.4 of the LTSA.

3. Remit all amounts currently due and owing to Vantage under the LTSA and related purchase orders, without offset or deduction for disputed chargeback amounts. Vantage reserves all rights arising from Meridian's unauthorized deductions, including the right to seek recovery of the withheld amounts together with interest, costs, and any consequential damages resulting from the improper withholding.

VI. Reservation of Rights Vantage expressly reserves all rights and remedies available to it under the LTSA, at law, and in equity, including but not limited to: (a) The right to pursue claims for breach of contract arising from Meridian's unilateral deductions from Vantage's accounts receivable in the absence of a resolved and undisputed chargeback; (b) The right to seek recovery of all costs and expenses incurred b

VII. Proposed Next Steps Notwithstanding the serious deficiencies in the First WCN identified in this letter, Vantage remains committed to the commercial relationship reflected in the LTSA and is willing to engage in good-faith discussions aimed at a fair and commercially reasonable resolution of this dispute. To that end, Vantage proposes a meet-and-confer between counsel for the parties — and, to the extent helpful

1. Immediately tender the remaining 2,108 units referenced in WCN-2021-1247 that have not been made available to Vantage for inspection, and provide Vantage with reasonable access to those units at a mutually agreed upon location for purposes of conducting a complete physical inspection and root-cause analysis.

2. Reverse all unilateral deductions from Vantage's accounts receivable related to WCN-2021-1247, as well as any deductions related to WCN-2022-0103 and WCN-2022-0289 that are or may become the subject of a contest under Section 9.4, and remit all amounts currently due and owing to Vantage.

3. Refrain from issuing additional warranty chargeback notices or making further deductions from Vantage's accounts receivable pending the outcome of discussions between the parties and their counsel regarding a resolution of this dispute. Vantage has retained independent technical experts — including metallurgical engineers and transmission-systems specialists — to conduct a comprehensive failure analysis of the ret