Contract analysis

I. Executive Summary The purpose of this memorandum is to analyze the risk that Vantage Mobility Systems Corp. ("VMS" or the "Company") forfeits all $12,320,000 in prepaid fees under the Master Embedded Software License and Services Agreement (the "MESLSA") with Meridian Code Technologies, Inc. ("MeridianCode") if VMS exercises its termination-for-convenience right under Section 9.1 prior to the 24-month anniversary

II. Background and Factual Context A. The MESLSA and Project Argonaut The MESLSA was executed on June 21, 2022, between Vantage Mobility Systems Corp., a Michigan corporation, as licensee, and Meridian Code Technologies, Inc., a Delaware corporation, as licensor. The agreement governs the license, integration, support, and maintenance of MeridianCode's proprietary ATLAS-RT™ embedded real-time operating system, Versio

1. Upfront License Fee — $8,000,000. The upfront license fee was due and payable at signing. VMS paid this amount in full on June 21, 2022 via wire transfer. This fee grants VMS a non-exclusive, non-transferable license to use, copy, modify, and create derivative works of the ATLAS-RT Software solely for integration into the Project Argonaut platform configurations, subject to the terms and restrictions set forth in

2. Annual Maintenance and Support Fees — $2,400,000 per year. • Year 1 Maintenance and Support Fee ($2,400,000): Invoiced by MeridianCode on July 1, 2022 and paid by VMS on July 15, 2022. This fee covers MeridianCode's obligation to provide software updates, patches, bug fixes, technical support (24/7 priority response), and compatibility assurance for the ATLAS-RT Software during the first contract year. • Year 2 Ma

3. Integration Services Fees — $3,200,000 total. The integration services fees are payable on a milestone basis across five milestones, with each milestone representing 20% of the total integration services fee, or $640,000 per milestone. VMS has paid for Milestones 1 through 3, for a total of $1,920,000 ($640,000 × 3). The milestone schedule and payment history are as follows: Milestones 4 and 5 have not been commen

4. Per-Unit Runtime Royalties — $80/unit, $4,000,000 aggregate cap. The MESLSA provides for per-unit runtime royalties of $80 for each vehicle unit shipped by VMS incorporating the ATLAS-RT Software, subject to a cumulative cap of $4,000,000 (representing 50,000 units). As of the date of this memorandum, no units have been shipped and no runtime royalties have been incurred or paid. Summary of Payments Made and Remai

III. Analysis of Section 9.1 — Termination for Convenience A. Text and Operation of Section 9.1

Section 9.1 of the MESLSA establishes a bilateral termination-for-convenience right. Either party may terminate the MESLSA at any time during the term by providing 180 days' prior written notice to the other party. The notice must be delivered in accordance with the notice provisions of Section 14.2 (requiring delivery by overnight courier or certified mail to the addresses specified in the agreement) and must expres

Section 9.4 provides that, during Dormancy Status, "all milestone deadlines" are tolled. VMS could argue that the 24-month period in Section 9.1 functions as a form of milestone or contractual deadline and that dormancy should therefore extend the clock, effectively delaying the 24-month anniversary beyond June 21, 2024. This argument has intuitive appeal. The purpose of the 24-month fee-forfeiture cliff in Section 9

1. Michigan's General Approach to Contractual Forfeiture Provisions. Michigan law generally enforces contractual forfeiture provisions and fee-retention clauses in commercial agreements between sophisticated parties, provided the provisions are not unconscionable and do not function as unenforceable penalties. The Michigan Supreme Court has consistently held that courts should enforce the plain terms of contracts fre

2. Unconscionability. VMS could argue that the forfeiture of $12,320,000 is substantively unconscionable — i.e., that the amount forfeited is so disproportionate to MeridianCode's actual losses as to "shock the conscience." However, this argument faces significant obstacles. VMS is a large, well-capitalized corporation backed by a sophisticated private equity sponsor (Kestrel Capital Partners, LP). The MESLSA was neg

3. Penalty Doctrine. Michigan law distinguishes between enforceable liquidated damages provisions and unenforceable penalties. A contractual provision that operates as a penalty — i.e., one that imposes a forfeiture or payment bearing no reasonable relationship to the anticipated or actual damages from breach — may be struck down as unenforceable. See Shuttleworth v. Consumers Power Co., 410 Mich. 229, 301 N.W.2d 502

4. Unjust Enrichment. VMS could assert an unjust enrichment claim, arguing that MeridianCode would be unjustly enriched if it retains $12,320,000 in fees while simultaneously retaining full ownership of the ATLAS-RT Software and the ability to relicense it. However, unjust enrichment is an equitable remedy that is generally unavailable where an express contract governs the parties' relationship. See Belle Isle Grill

IV. Financial Exposure Scenarios The following section presents four scenarios that capture the range of possible outcomes based on VMS's strategic choices. For each scenario, we assess the financial exposure, recoupment potential, and ancillary risks. A. Scenario 1: Termination for Convenience Before June 21, 2024 If VMS exercises its termination-for-convenience right under Section 9.1 prior to the 24-month annivers

V. Interaction with Other Critical Deadlines A. Section 4.3 Use-It-or-Lose-It Deadline (December 21, 2023)

Section 4.3 of the MESLSA requires VMS to "commence integration testing on at least two (2) Licensed Platform Configurations" within 18 months of the Effective Date. The 18-month period measured from June 21, 2022 expires on December 21, 2023. VMS has completed Milestone 3 (alpha integration testing) on Argonaut-A, and Milestone 2 (source-code customization and delivery) on Argonaut-C. The threshold question under Se

VI. Recommended Strategy A. Primary Recommendation: Dormancy Through June 21, 2024 + Negotiated Restructuring Based on the analysis set forth above, we make the following primary recommendation: VMS should not exercise its termination-for-convenience right under Section 9.1 before June 21, 2024 under any circumstances. Doing so would trigger the fee-forfeiture clause, resulting in the loss of $12,320,000 in prepaid f

1. Maintain Dormancy Status. VMS should continue in Dormancy Status under Section 9.4 through and beyond June 21, 2024. No affirmative action is required to maintain dormancy; VMS simply needs to refrain from reactivating integration activities and continue to comply with its dormancy-period obligations (which are minimal).

2. Continue Disputing the Year 2 Maintenance Fee. VMS should maintain its position that the $2,400,000 Year 2 Maintenance and Support Fee is not owed during dormancy, or at minimum should be substantially reduced to reflect the critical-security-patch-only support level. This dispute should be preserved as a negotiating chip in the restructuring discussions.

3. Pursue Negotiated Fee Restructuring. VMS should engage MeridianCode through Redstone Whitaker LLP (Alan M. Briscoe) to negotiate a comprehensive restructuring of the MESLSA. The restructuring should address the following elements: (i) Extension of the dormancy period beyond August 3, 2024, to provide VMS with additional time to evaluate its options; (ii) Formal scope reduction from five platform configurations to

4. Preserve Reactivation Optionality. The restructuring should preserve VMS's ability to reactivate integration on Argonaut-A and Argonaut-C consistent with the rescoped Project Argonaut program, maintaining the MESLSA framework and VMS's license rights through the June 20, 2027 expiration. B. Fallback Position: Termination After June 21, 2024 If restructuring negotiations with MeridianCode are unsuccessful, VMS shou

1. Document Engineering Investment. VMS should compile and preserve detailed records of all integration work completed and internal engineering hours invested (approximately 14,200 hours through March 2023) to support any future fee recapture, unjust enrichment, or damages claims. This documentation should include time records, project logs, milestone deliverables, correspondence with MeridianCode, and internal techn

2. Complete Derivative Works Assessment. VMS should continue its engagement with Hargrove Technical Consulting, LLC (Dr. Samuel Beecroft) to complete the independent technical assessment of derivative works DW-001, DW-002, and DW-003. The assessment should establish the scope, functionality, ATLAS-RT dependency (or independence), and estimated commercial value ($1,800,000 to $2,500,000) of each derivative work. This

3. Coordinate on Accounting Treatment. VMS should coordinate with Sandra M. Okafor (VMS CFO) and Ashford & Greer, P.C. (Patricia Noonan, engagement partner) regarding the appropriate accounting treatment of the $12,320,000 in prepaid fees. Depending on VMS's assessment of the recoverability of these fees and the likelihood of reactivation, an impairment charge or write-down may be required under applicable accounting

4. Coordinate with Pinnacle National Bank. VMS should coordinate with Pinnacle National Bank, N.A. (Howard Segal, relationship manager) regarding any further notification obligations under the Credit Facility and the potential covenant implications of a $12,320,000 fee write-off. Specifically, VMS should model whether a write-off of this magnitude would affect the Consolidated Leverage Ratio or Minimum Consolidated E

5. Evaluate Insurance Coverage. VMS should evaluate whether any portion of the fee-forfeiture exposure or related losses may be covered under Technology Errors & Omissions Policy No. TEO-2022-7891, issued by Commonwealth Surety & Insurance Co. The policy provides $10,000,000 per occurrence and $20,000,000 aggregate coverage, subject to a $500,000 retention. A separate Calderwood & Harkness memorandum addresses this i

6. Keep Ashgrove Equity Partners Informed. VMS should keep Kestrel Capital Partners, LP (Katherine "Kate" Drummond, Partner, Portfolio Operations and VMS board observer; Victor Salerno, Managing Partner) informed of the financial exposure and the recommended strategy on an ongoing basis. Given the magnitude of the potential forfeiture ($12,320,000) and its relationship to Ashgrove Equity Partners's portfolio-wide cap

VII. Conclusion The fee-forfeiture risk under Section 9.1 of the MESLSA represents the single largest financial risk to VMS in the near term, with a total exposure of $12,320,000. A termination for convenience before June 21, 2024 is strongly inadvisable, as it would trigger the fee-forfeiture provision and eliminate any possibility of recouping the prepaid fees. The recommended strategy — maintaining Dormancy Status

VIII. Appendices and Attachments Referenced Appendix A: Summary Timeline of Key Dates Appendix B: Fee Payment and Exposure Summary Appendix C: Relevant MESLSA Provisions The following provisions of the MESLSA are referenced in this memorandum and should be reviewed in conjunction with this analysis. Full text of these provisions is maintained in the Calderwood & Harkness document management system under Matter No. 10

1. Dormancy Clause Interpretation (Section 9.4) — Analysis of the scope and effect of Dormancy Status, including tolling provisions and the 12-month cap mechanism.

2. Use-It-or-Lose-It Compliance Options (Section 4.3) — Analysis of whether VMS has satisfied the Section 4.3 requirement and options for compliance or tolling during dormancy.

3. Year 2 Maintenance Fee Obligation — Analysis of VMS's obligation to pay the Year 2 Maintenance and Support Fee during Dormancy Status.

4. Derivative Works Ownership Dispute — Analysis of the scope of MeridianCode's Section 7.2 license to derivative works DW-001, DW-002, and DW-003, and strategies for narrowing or eliminating that license.

5. Reactivation vs. Termination Strategic Options — Comparative analysis of the financial, operational, and strategic implications of reactivating integration versus terminating the MESLSA.

6. Insurance Coverage Analysis — Technology E&O Policy No. TEO-2022-7891 — Analysis of potential coverage under VMS's Technology Errors & Omissions policy for fee-forfeiture losses and related claims.

7. Credit Facility Covenant Compliance — Analysis of the implications of a $12,320,000 fee write-off on VMS's financial covenants under the Pinnacle National Bank Senior Secured Revolving Credit Facility. CALDERWOOD & HARKNESS LLP | C&H Matter No. 1007-00008 | PRIVILEGED AND CONFIDENTIAL Milestone | Description | Status | Amount | Payment Date Milestone 1 | Requirements specification and architecture review | Complet