Contract analysis

I. Executive Summary This memorandum analyzes whether Vantage Mobility Systems Corp.'s ("VMS" or the "Company") placement of the Master Embedded Software License and Services Agreement dated June 21, 2022 (the "MESLSA") with Meridian Code Technologies, Inc. ("MeridianCode") into Dormancy Status triggers notification obligations under VMS's $175,000,000 Senior Secured Revolving Credit Facility (the "Credit Facility")

II. Background A. The Credit Facility VMS entered into a $175,000,000 Senior Secured Revolving Credit Facility on September 12, 2019. The Credit Facility was arranged in connection with the leveraged acquisition of VMS by Kestrel Capital Partners, LP ("Ashgrove Equity Partners"), which closed in 2019 at an enterprise value of approximately $380,000,000. The key terms of the Credit Facility, and certain relevant conte

Section 4.3 "Use-It-or-Lose-It" Deadline. Section 4.3 of the MESLSA requires VMS to commence integration testing on at least two vehicle platforms within 18 months of the Effective Date (June 21, 2022). This produces a deadline of December 21, 2023. VMS contends that entry into Dormancy Status under Section 9.4 tolls this deadline for the duration of the dormancy period, an interpretation that MeridianCode has not ye

III. Analysis of Section 6.12 — Material Contract Notification Covenant A. Text and Scope of Section 6.12

Section 6.12 of the Credit Facility is an affirmative informational covenant that imposes an ongoing obligation on VMS, as borrower, to notify the administrative agent (Pinnacle National Bank, N.A.) of certain developments affecting material contracts to which VMS is a party. The covenant is situated within Article VI of the Credit Facility, which contains VMS's affirmative covenants, and should be read in conjunctio

1. Modification. VMS must notify Pinnacle of any modification to a material contract. The term "modification" is not separately defined in the Credit Facility but should be construed broadly to encompass amendments, restatements, supplements, waivers, and other changes to the terms of a material contract, including changes to the operative status of the contract (such as entry into dormancy or suspension).

2. Termination. VMS must notify Pinnacle of any termination of a material contract, whether by expiration, mutual agreement, exercise of a termination right, or default. The covenant encompasses both actual terminations and events that make termination reasonably foreseeable or probable.

3. Dispute. VMS must notify Pinnacle of any dispute involving a material contract where the commitments at issue exceed $5,000,000. The term "dispute" should be read to include formal litigation, arbitration, and mediation proceedings, as well as pre-litigation disputes and claims communicated between the parties in writing. The term "material contract" is defined broadly in the Credit Facility to include any contrac

1. The MESLSA as a "Material Contract". The threshold question under Section 6.12 is whether the MESLSA qualifies as a "material contract" for purposes of the covenant. Based on our review, this question admits of no reasonable doubt. Quantitative Analysis. The MESLSA has a total deal value of $20,000,000. This amount exceeds the $5,000,000 materiality threshold set forth in Section 6.12 by a factor of four. Even if

2. Dormancy as a Triggering Event. Having established that the MESLSA is a material contract, the next question is whether VMS's entry into Dormancy Status constitutes a triggering event under Section 6.12. We analyze this question under each of the three prongs of the covenant — modification, termination, and dispute — and conclude that the dormancy is a triggering event under all three. Modification. The conversion

3. Timeliness of VMS's August 10, 2023 Notification. VMS delivered its notification to Pinnacle National Bank, N.A. (attention Howard Segal) on August 10, 2023. The key question is whether this notification was timely under the "promptly" or "reasonable time" standard of Section 6.12. Triggering Date. The relevant triggering date for purposes of measuring VMS's notification obligation is August 3, 2023 — the date on

IV. Risk Assessment: Consequences of Non-Compliance Although we have concluded that VMS's August 10, 2023 notification was both timely and substantively sufficient, it is important to set forth the consequences that would have followed from a failure to comply with Section 6.12, in order to underscore the significance of ongoing compliance as the dormancy period progresses and new triggering events may arise. Event o

V. Ongoing and Future Notification Obligations A. Supplemental Notifications to Consider VMS's August 10, 2023 notification addressed the initial entry into Dormancy Status under the MESLSA. However, the dormancy period is expected to give rise to multiple subsequent events that may independently trigger the notification obligation under Section 6.12. VMS should be prepared to provide supplemental notifications to Pi

Section 4.3 of the MESLSA requires VMS to commence integration testing on at least two vehicle platforms within 18 months of the Effective Date. Measuring from June 21, 2022, this produces a deadline of December 21, 2023. If MeridianCode asserts that VMS has failed to comply with the Section 4.3 requirement and that this failure constitutes a breach of the MESLSA — and if such assertion results in a contract modifica

VI. Coordination with VMS Auditor VMS's independent auditor is Ashford & Greer, P.C., with engagement partner Patricia Noonan, CPA. The dormancy of the MESLSA, the associated fee disputes, and the potential for fee forfeiture under Section 9.1 may have financial reporting implications that require coordination between VMS's legal and financial teams and its external auditors. Financial Statement Disclosure. Ashford &

VII. Insurance Considerations VMS maintains a Technology Errors & Omissions Policy (the "E&O Policy") bearing Policy No. TEO-2022-7891, issued by Commonwealth Surety & Insurance Co. The E&O Policy provides coverage limits of $10,000,000 per occurrence and $20,000,000 in the aggregate, subject to a $500,000 self-insured retention. Potential Insurance Notification. If the derivative works ownership dispute, the Year 2

VIII. Recommendations Based on the foregoing analysis, we respectfully submit the following recommendations:

1. No Further Action Required on Initial Notification. VMS's August 10, 2023 notification to Pinnacle National Bank, N.A. (attention Howard Segal) was timely and substantively sufficient under Section 6.12 of the Credit Facility. No cure, supplemental filing, or remedial action is required at this time with respect to the initial dormancy event. VMS is in full compliance with its informational covenant obligations ar

2. Establish a Notification Protocol. VMS should establish a formal internal protocol to ensure timely identification of MESLSA-related developments that trigger notification obligations under Section 6.12 and to ensure prompt transmission of notices to Pinnacle. We recommend that this protocol be coordinated among the following individuals: • Martin G. Cross, General Counsel, VMS (primary legal responsibility for ME

3. Calendar Key Dates. VMS should ensure that the following dates are calendared for Credit Facility notification purposes, with appropriate lead-time reminders: • December 21, 2023 — Section 4.3 "Use-It-or-Lose-It" deadline (18 months from the MESLSA Effective Date; requires commencement of integration testing on at least two vehicle platforms); • June 21, 2024 — 24-month anniversary of the MESLSA Effective Date (af

4. Proactive Communication with Pinnacle. We recommend that VMS consider scheduling an informal call between VMS management and Howard Segal (Pinnacle Relationship Manager) to discuss the dormancy status, VMS's approach to the MESLSA-related disputes, and the Company's overall financial and operational outlook. The purpose of this call would be to maintain and strengthen the lending relationship, demonstrate VMS's co

5. Coordinate with Ashgrove Equity Partners. Katherine "Kate" Drummond (Partner, Portfolio Operations, Kestrel Capital Partners, LP, and VMS board observer) should be briefed on the Credit Facility notification and any ongoing or planned communications with Pinnacle. Ms. Drummond is positioned to provide context regarding Ashgrove Equity Partners's portfolio-wide capital expenditure strategy and any potential future

6. Coordinate with Auditors. VMS should ensure that Ashford & Greer, P.C. (engagement partner Patricia Noonan, CPA) is apprised of the MESLSA dormancy status and the related fee disputes, and that any accounting treatment of the $12,320,000 in prepaid fees is consistent with the representations and disclosures made to Pinnacle in the Credit Facility notification. Early coordination with the auditors will help to avoi

IX. Conclusion Based on our analysis, we reach the following conclusions: VMS has satisfied its notification obligation under Section 6.12 of the $175,000,000 Senior Secured Revolving Credit Facility with Pinnacle National Bank, N.A. The MESLSA, with its total deal value of $20,000,000 and $12,320,000 in fees paid to date, clearly exceeds the $5,000,000 materiality threshold established by Section 6.12. The MESLSA is