Contract analysis

I. Executive Summary This memorandum presents and evaluates four strategic options available to Vantage Mobility Systems Corp. ("VMS") for resolving the current dormancy of the Master Embedded Software License and Services Agreement dated June 21, 2022 (the "MESLSA") with Meridian Code Technologies, Inc. ("MeridianCode"). The analysis is necessitated by the rescoping of Project Argonaut from five designated vehicle p

II. Background A. The MESLSA and Project Argonaut VMS and MeridianCode executed the MESLSA on June 21, 2022. The total deal value of the MESLSA is $20,000,000, encompassing upfront license fees, annual maintenance and support fees, integration services fees, and per-unit runtime royalties over a five-year term. The licensed product under the MESLSA is MeridianCode's proprietary ATLAS-RT™ embedded real-time operating

III. Key Contractual Provisions Governing the Analysis The following provisions of the MESLSA are central to the strategic options analysis. Each is discussed here in the context of its application to VMS's current situation. Cross-references to the specific MESLSA sections are provided for ease of reference. A. Section 9.1 — Termination for Convenience

Section 9.1 of the MESLSA provides that either party may terminate the agreement for convenience upon 180 days' prior written notice to the other party. The termination for convenience right is not conditioned on any showing of cause, breach, or default, and is available to either party at any time during the term of the agreement, subject to the notice requirement. However, Section 9.1 contains a critical limitation

Section 9.4 of the MESLSA establishes the dormancy framework that governs the current suspension of integration activities. The dormancy provision is triggered when the licensee suspends active integration work for more than 120 consecutive days without providing written notice to the licensor. If the licensee provides timely written notice of its intent to suspend integration activities (as VMS did on July 14, 2023)

Section 4.3 of the MESLSA imposes a condition precedent requiring the licensee to commence integration testing on at least two designated platforms within 18 months of the Effective Date. Calculated from the June 21, 2022 Effective Date, the Section 4.3 deadline falls on December 21, 2023. This provision was included in the MESLSA at MeridianCode's insistence to ensure that VMS would make timely and meaningful use of

Section 7.2 of the MESLSA addresses the ownership of derivative works created during the integration process. The provision establishes a joint-ownership framework for "modifications, adaptations, or extensions" to the ATLAS-RT source code created by VMS engineers (or VMS's contractors) during integration. Under Section 7.2, such derivative works are jointly owned by VMS and MeridianCode, and MeridianCode retains a p

Section 12.6 of the MESLSA provides that assignment of the agreement by the licensee in connection with a change of control of the licensee requires the prior written consent of the licensor, such consent not to be unreasonably withheld, conditioned, or delayed. This provision is relevant primarily to Option 1 (Reactivation) if Meridian Growth Partners a future exit from its investment in VMS — whether through a sale

IV. Option 1: Reactivation for Rescoped 2-Platform Program A. Description. Under Option 1, VMS would exit Dormancy Status, reactivate integration activities under the MESLSA, and resume the Project Argonaut program on a rescoped basis encompassing only two platforms: Argonaut-A and Argonaut-C. Integration work would resume from the current milestone status of each platform — Argonaut-A at Milestone 3 (alpha integrati

1. Preservation of Paid Value. Reactivation preserves the value of the $12,320,000 already paid under the MESLSA. VMS avoids any risk of forfeiture, write-off, or loss of the prepaid fees. The upfront license fee, Year 1 Maintenance Fee, and Milestones 1–3 integration services fees continue to yield value through the resumed program.

2. Leverage of Existing Integration Progress. Significant integration work has already been completed on Argonaut-A (Milestone 3, alpha integration testing passed) and Argonaut-C (Milestone 2, source-code customization delivered). Reactivation allows VMS to build on this progress rather than starting from scratch with an alternative RTOS vendor.

3. Technology Validation. The ATLAS-RT platform has been partially validated through the alpha integration testing on Argonaut-A. VMS's internal engineering team has developed domain familiarity with the ATLAS-RT architecture, APIs, and configuration requirements. This institutional knowledge has significant value and would be lost if VMS terminates and procures an alternative RTOS.

4. No Arbitration Risk. Reactivation under existing terms involves no dispute, no termination, and therefore no risk of arbitration proceedings before the Midwest Arbitration Institute. VMS avoids the estimated $500,000 to $1,200,000 in arbitration costs and the associated management distraction and uncertainty.

5. Relationship Preservation. Reactivation maintains VMS's commercial relationship with MeridianCode, which may be valuable for future licensing needs. If VMS proceeds with Phase II electrification and requires ATLAS-RT or next-generation RTOS capabilities for future EV platforms, a preserved relationship with MeridianCode would facilitate those negotiations. D. Disadvantages. Option 1 has significant disadvantages:

1. Unfavorable Unit Economics. As noted above, VMS would be paying approximately $9,000,000 per platform for a license originally priced at $4,000,000 per platform. This represents a 125% increase in per-platform cost, which is difficult to justify from a business case perspective.

2. Over-Scoped License. VMS retains a five-platform license for a two-platform program. There is no fee credit, rebate, or reduction under the existing MESLSA terms for the unused license capacity associated with Argonaut-B, Argonaut-D, and Argonaut-E. VMS essentially pays for capacity it will not use.

3. Year 2 Maintenance Fee Dispute. The $2,400,000 Year 2 Maintenance Fee dispute must be resolved as an entry price for reactivation. MeridianCode has made clear that it expects payment of this amount in full, including potential interest and late fees. VMS loses its leverage on this dispute because reactivation signals commitment to the MESLSA on existing terms.

4. Derivative Works Dispute Unresolved. Reactivation without amendment leaves the derivative works dispute regarding DW-001, DW-002, and DW-003 unresolved. MeridianCode retains its Section 7.2 joint-ownership claim and perpetual royalty-free license-back. This means that MeridianCode could potentially incorporate VMS-developed code into its own products or license it to VMS's competitors, subject to any restrictions

5. Capital Expenditure Pressure. Option 1 requires VMS to commit approximately $5,680,000 in additional forward capital expenditure, which is inconsistent with Ashgrove Equity Partners's portfolio-wide capital expenditure reduction directive. Any decision to proceed with Option 1 would require Ashgrove Equity Partners's concurrence and may face scrutiny from the board.

6. Section 4.3 Risk. The Section 4.3 Use-It-or-Lose-It compliance issue remains outstanding even under Option 1. If the tolling argument is rejected by MeridianCode (or in a potential arbitration), MeridianCode may assert that VMS has already lost certain rights under the MESLSA, notwithstanding VMS's willingness to reactivate. E. Assessment. Option 1 is viable if, and only if, VMS has a strong commercial rationale a

V. Option 2: Negotiated Fee Restructuring and Dormancy Extension A. Description. Under Option 2, VMS and MeridianCode would negotiate and execute an amendment to the MESLSA (provisionally designated "Draft Amendment No. 1") implementing the following terms: (a) Dormancy Extension. Extension of the 12-month dormancy cap established by Section 9.4 by an additional 12 months, moving the dormancy expiration from August 3

1. Preservation of Reactivation Optionality. The 12-month dormancy extension (to August 3, 2025) gives VMS a full additional year to evaluate market conditions, supply-chain availability, and program economics before committing to reactivation or deciding to terminate. This optionality has significant strategic value, particularly in the current environment of supply-chain uncertainty and capital constraint.

2. Reduced Financial Exposure. The credit of the Year 2 Maintenance Fee, the potential restructuring of integration services fees, and the reduction of the royalty cap all serve to reduce VMS's forward financial exposure compared to Option 1. The estimated total all-in cost of $15,120,000 to $15,600,000 (or $16,620,000 to $17,100,000 with a reactivation fee) represents a meaningful improvement over Option 1's $18,000

3. Derivative Works Resolution. Option 2 provides the best opportunity to resolve the derivative works dispute on terms favorable to VMS. The carve-out of DW-001, DW-002, and DW-003 to sole VMS ownership (with a limited non-automotive license-back) protects VMS's intellectual property and prevents MeridianCode from incorporating VMS-developed code into competing automotive products.

4. Forfeiture Risk Avoidance. Because no termination is required under Option 2, VMS avoids any risk of fee forfeiture under Section 9.1.

5. Section 4.3 Resolution. The contractual revision of the Section 4.3 deadline eliminates the Use-It-or-Lose-It compliance risk entirely, removing a source of uncertainty and potential leverage for MeridianCode.

6. Relationship Preservation. As with Option 1, Option 2 maintains the commercial relationship between VMS and MeridianCode, facilitating future licensing needs.

7. Alignment with Capital Expenditure Directive. By deferring major cash outlays and reducing forward financial commitments, Option 2 aligns with Ashgrove Equity Partners's portfolio-wide capital expenditure reduction directive. The dormancy extension defers the point at which VMS must make significant new expenditures under the MESLSA. E. Disadvantages. Option 2 is not without disadvantages:

1. Requires MeridianCode's Agreement. Unlike Options 1 and 3, which VMS can pursue unilaterally (reactivation under existing terms or termination for convenience, respectively), Option 2 requires MeridianCode's agreement to amend the MESLSA. If MeridianCode refuses to negotiate in good faith, or if the parties cannot reach mutually acceptable terms, Option 2 cannot be achieved.

2. Negotiation Costs and Timeline. Negotiation of a definitive amendment is likely to be protracted, given the complexity of the issues and the number of commercial and legal terms to be addressed. Legal fees for the negotiation process will accumulate on both sides, adding to the overall cost of the transaction. Based on the pace of negotiations to date, C&H estimates that reaching a definitive agreement could take

3. Residual Financial Exposure. Even with the restructured terms, VMS has already invested $12,320,000 in the MESLSA with no production revenue to date. If VMS ultimately concludes that reactivation is not justified and terminates after the dormancy extension period, the $12,320,000 remains at risk of being written off. Option 2 defers but does not eliminate this risk.

4. MeridianCode's Reactivation Fee. MeridianCode's proposed $1,500,000 reactivation fee adds a cost element that was not contemplated by the original MESLSA. If VMS is unable to negotiate this fee down to an acceptable level, it increases the effective cost of Option 2 significantly.

5. Credit Facility Notification. Any material amendment to the MESLSA may require notification to Pinnacle National Bank, N.A. under Section 6.12 of the credit facility agreement, as the MESLSA exceeds the $5,000,000 material contract threshold. While VMS has already notified Pinnacle of the dormancy, additional notifications regarding an amendment could draw further attention from the lender and may prompt questions

VI. Option 3: Termination for Convenience After June 21, 2024 A. Description. Under Option 3, VMS would wait until the 24-month anniversary of the MESLSA (June 21, 2024) passes and then exercise its right to terminate for convenience under Section 9.1 by delivering 180 days' prior written notice to MeridianCode. The earliest date on which VMS could deliver a termination for convenience notice without triggering the f