Contract analysis

I. Background and Procedural History The parties executed the MESLSA on June 21, 2022. The Agreement carries a total deal value of approximately Twenty Million Dollars ($20,000,000.00) and governs MeridianCode's license to VMS of the ATLAS-RT™ embedded real-time operating system, Version 4.2 (subsequently updated to Version 4.2.3), together with associated integration services, maintenance, and technical support. The

II. VMS's Position — The Year 2 Maintenance Fee Is Not Owed in Full During Dormancy A. Section 9.4 Reduces Support Obligations During Dormancy, Necessitating a Corresponding Reduction in the Maintenance Fee

Section 9.4 of the MESLSA governs the rights and obligations of the parties upon entry into Dormancy Status. That section provides, in pertinent part: "Upon entry into Dormancy Status, Licensor's maintenance and support obligations under this Agreement shall be reduced to the provision of critical security patches only. During Dormancy Status, Licensor shall have no obligation to provide routine software updates, bug

Section 9.4 of the MESLSA is silent on the question of whether the annual maintenance fee continues at full rate, is prorated, or is suspended during Dormancy Status. The provision addresses the reduction in service obligations with specificity but does not include any corresponding provision regarding the maintenance fee. This omission is significant. Under well-established Michigan contract interpretation principle

III. VMS's Proposal — Prorated Payment or Fee Credit VMS is committed to resolving this dispute in a commercially reasonable manner that preserves the parties' relationship and reflects the economic realities of Dormancy Status. To that end, VMS offers the following alternative proposals for MeridianCode's consideration. A. Option 1 — Prorated Payment During Dormancy VMS proposes that the Year 2 Annual Maintenance &

IV. Rebuttal of MeridianCode's Anticipated Arguments A. The Invoice Was Issued Before Dormancy Was Formally Invoked VMS acknowledges that the July 1, 2023 invoice predates the July 14, 2023 dormancy notice and the July 20, 2023 trigger date under Section 9.4. MeridianCode may contend that because the invoice was issued prior to the formal invocation of dormancy, the full fee had already accrued and become payable wit

V. Reservation of Rights VMS expressly reserves all rights and remedies available to it under the MESLSA, at law, and in equity, including without limitation: (a) The right to dispute any claimed breach by MeridianCode arising from VMS's non-payment or partial payment of the Year 2 Maintenance & Support Fee, and to assert all available defenses, including but not limited to failure of consideration, breach of the imp

VI. Request for Response and Proposed Next Steps VMS requests that MeridianCode, through Redstone Whitaker LLP, respond to this letter within thirty (30) days of the date hereof — that is, on or before November 6, 2023 — with MeridianCode's position on the proposals set forth in Section III above and any counterproposal MeridianCode may wish to advance. VMS's strong preference is for a negotiated resolution of the Ye