Contract analysis

From: Conrad Ashby <cashby@calderwoodharkness.com> To: Katherine Drummond <kdrummond@recapcap.com> Cc: Bernard Crawford <bcrawford@calderwoodharkness.com> Subject: Privileged & Confidential — Vantage / MeridianCode License Matter — Status Update and Exposure Summary

**ATTORNEY-CLIENT PRIVILEGED AND CONFIDENTIAL / ATTORNEY WORK PRODUCT**

This communication is sent in my capacity as billing partner at Calderwood & Harkness LLP (Matter No. 1007-00008) and is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the addressee. Martin Cross, General Counsel of Vantage Mobility Systems Corp. ("VMS"), has authorized this direct update to Kestrel Capital Partners. If you have received this communicati

I hope this finds you well. The purpose of this email is to provide you, in your capacity as Partner, Portfolio Operations and board observer at VMS, with a comprehensive update on the status of the Master Embedded Software License and Services Agreement ("MESLSA") between VMS and Meridian Code Technologies, Inc. (Nasdaq: MCDT), as well as VMS's current financial and legal exposure under that agreement.

Bernard Crawford, who serves as the responsible partner on this matter, is copied and available for any follow-up questions. Sandra Okafor (CFO) and Martin Cross (General Counsel) at VMS are aware of and have approved this communication.

VMS entered into the MESLSA with MeridianCode on June 21, 2022, establishing a $20,000,000 embedded-software license for integration of MeridianCode's ATLAS-RT™ real-time operating system (Version 4.2, subsequently updated to 4.2.3) into VMS's Project Argonaut next-generation adaptive vehicle platform program. Project Argonaut originally encompassed five vehicle platform configurations (Argonaut-A through Argonaut-E)

Following the VMS Board resolution on March 14, 2023, Project Argonaut was rescoped to two platforms (Argonaut-A and Argonaut-C only), with electrification integration deferred to a future Phase II with no firm date. As you are aware, the rescoping decision was driven in part by supply-chain delays in semiconductor procurement and Ashgrove Equity Partners's portfolio-wide capital expenditure reduction directive, as w

Integration work was suspended on March 22, 2023.

VMS sent a formal dormancy notice to MeridianCode on July 14, 2023 — six days before the 120-day trigger date of July 20, 2023 — invoking Section 9.4 of the MESLSA. MeridianCode acknowledged Dormancy Status on August 3, 2023, though its response contained several reservations that we have been addressing through correspondence with MeridianCode's outside counsel, Redstone Whitaker LLP (led by Alan M. Briscoe).

- Under Section 9.4, dormancy reduces MeridianCode's support obligation to critical-security-patch-only level and tolls all milestone deadlines. - The 12-month dormancy cap expires on **August 3, 2024**, at which point the MESLSA requires either mandatory renegotiation or termination.

Separately, VMS notified Pinnacle National Bank, N.A. (administrative agent under VMS's $175,000,000 Senior Secured Revolving Credit Facility) of the dormancy status on August 10, 2023, as required by Section 6.12 of the credit agreement for material contract events involving commitments exceeding $5,000,000. VMS currently has $92,000,000 in outstanding borrowings under the facility.

| Category | Amount | |---|---| | Upfront License Fee (paid at signing, June 21, 2022) | $8,000,000 | | Year 1 Maintenance & Support Fee (paid July 15, 2022) | $2,400,000 | | Integration Services Fees — Milestones 1–3 (of $3,200,000 total; milestone-based across 5 milestones) | $1,920,000 |

**Fees at Risk:** If the license terminates with forfeiture — particularly if VMS exercises termination for convenience under Section 9.1 before the 24-month anniversary on June 21, 2024 — VMS potentially forfeits the entire $12,320,000 in prepaid fees.

**Total Remaining Contractual Commitment: $7,680,000**

| Category | Amount | |---|---| | Year 2 Maintenance & Support Fee (invoiced July 1, 2023 — VMS is disputing this obligation during dormancy) | $2,400,000 | | Integration Services — Milestones 4–5 (not yet earned; no work performed) | $1,280,000 | | Per-Unit Runtime Royalties ($80/unit for up to 50,000 units; $0 incurred to date — no units shipped) | Up to $4,000,000 |

**4. Integration Status at Time of Suspension**

- **Argonaut-A:** Milestone 3 of 5 completed (alpha integration testing passed February 28, 2023) - **Argonaut-C:** Milestone 2 of 5 completed (source-code customization delivered January 15, 2023) - **Argonaut-B:** Milestone 1 only (requirements specification approved; no code integration begun) - **Argonaut-D and Argonaut-E:** Not commenced

VMS invested approximately 14,200 engineering hours across internal teams during the active integration phase.

**(a) Year 2 Maintenance Fee ($2,400,000)**

MeridianCode invoiced the Year 2 Maintenance & Support Fee on July 1, 2023 and is demanding full payment. VMS's position, as articulated by our firm to Redstone Whitaker, is that dormancy status under Section 9.4 reduces support to critical-security-patch-only level and VMS should not be obligated to pay the full maintenance fee for a dramatically reduced service level. We have proposed prorated payment or a credit a

MeridianCode, through Redstone Whitaker, maintains the fee is non-contingent and due regardless of dormancy status. This dispute remains unresolved.

VMS engineers created three software modules (designated internally as DW-001, DW-002, and DW-003), comprising approximately 47,000 lines of code during the integration process. An independent assessment by Hargrove Technical Consulting, LLC (Dr. Samuel Beecroft, lead consultant) estimates the commercial value of these derivative works at $1,800,000 to $2,500,000.

VMS's position is that these are VMS-originated works and should be solely owned by VMS. MeridianCode contends that, under Section 7.2 of the MESLSA, derivative works are jointly owned and MeridianCode retains a perpetual, royalty-free license to such works. This is a significant point of contention in the ongoing negotiations.

**(c) Section 4.3 "Use-It-or-Lose-It" Compliance**

Section 4.3 requires VMS to commence integration testing on at least two platforms within 18 months of the Effective Date — the deadline is **December 21, 2023**. Our analysis is that dormancy status under Section 9.4 should toll this deadline. Additionally, VMS has a reasonable argument that completion of Argonaut-A Milestone 3 (alpha integration testing passed) and Argonaut-C Milestone 2 (source-code customization

This remains an area of interpretive risk. MeridianCode has not yet conceded the tolling argument.

Our recommended approach is to pursue a negotiated dormancy extension and fee restructuring with MeridianCode rather than exercising termination for convenience. The rationale is as follows:

- Termination before the 24-month anniversary (June 21, 2024) triggers forfeiture of all $12,320,000 in prepaid fees under Section 9.1. - Maintaining dormancy status through at least June 21, 2024 eliminates the fee-forfeiture risk and preserves VMS's negotiating leverage.

We have circulated a proposed term sheet to Redstone Whitaker proposing:

(i) Extension of the dormancy cap by an additional 12 months (to August 3, 2025); (ii) Formal scope reduction from 5 to 2 platforms; (iii) Credit of the disputed $2,400,000 Year 2 Maintenance Fee against future integration services; (iv) Reduction of the per-unit royalty cap from $4,000,000 to $2,000,000; and (v) A carve-out clarifying VMS's sole ownership of the three derivative works modules (DW-001 through DW-003)

If a full amendment cannot be reached, we have prepared a draft mutual release and standstill agreement as an alternative, providing a six-month standstill during which neither party may initiate arbitration (under the Midwest Arbitration Institute rules that govern the MESLSA) while preserving VMS's reactivation rights.

We are also evaluating potential coverage under VMS's Technology Errors & Omissions Policy (Policy No. TEO-2022-7891, issued by Commonwealth Surety & Insurance Co., $10,000,000 per occurrence / $20,000,000 aggregate, $500,000 retention) for potential losses related to the derivative works dispute, though coverage is uncertain at this stage.

| Date | Event | |---|---| | **December 21, 2023** | Section 4.3 "Use-It-or-Lose-It" deadline (subject to tolling argument) | | **June 21, 2024** | 24-month MESLSA anniversary — fee-forfeiture provision for termination for convenience no longer applies | | **August 3, 2024** | 12-month dormancy cap expiration — mandatory renegotiation or termination | | **June 20, 2027** | MESLSA expiration (end of 5-year term) |

Bernard Crawford and Gabrielle Moss (lead associate) are managing the day-to-day negotiations with Redstone Whitaker and overseeing the ongoing legal analysis. We are pleased to schedule a call with you — and with Victor Salerno, if you think it appropriate — to discuss the strategic posture and Ashgrove Equity Partners's preferences regarding our recommended approach.

I would also appreciate your confirmation as to whether Ashgrove Equity Partners has any updates on the capital expenditure directive or strategic direction for VMS that might affect the reactivation calculus for Project Argonaut. That input would be valuable in calibrating our negotiating position with MeridianCode.

For reference, the following documents have been shared or are available upon request: the proposed term sheet (circulated separately to Redstone Whitaker), Hargrove Technical Consulting's derivative works valuation assessment, the dormancy notice letter dated July 14, 2023, and MeridianCode's August 3, 2023 dormancy acknowledgment. Please let me know if you would like copies of any of these.

As noted above, this communication is privileged and confidential. Please treat it accordingly and limit distribution within Ashgrove Equity Partners to those with a need to know in connection with the VMS investment.

Conrad Ashby Partner Calderwood & Harkness LLP 600 Renaissance Center, Suite 3200 Detroit, MI 48243 Tel: (313) 555-4100 cashby@calderwoodharkness.com