Contract analysis

I. CASE STATUS UPDATE A. Procedural History Since Last Correspondence Since AMA's initial tender of the Fuentes action and Pemberton's December 22, 2022 acknowledgment letter, the following significant procedural developments have occurred:

1. On November 18, 2022, a related action captioned Halloran v. Aurelius Media Americas Inc., LASC Case No. 22STCV39501, was filed by plaintiff Derek Halloran asserting substantially overlapping class and PAGA claims. On AMA's motion, the Court consolidated Halloran with Fuentes by order dated February 3, 2023, designating Fuentes v. Aurelius Media Americas Inc., Case No. 22STCV38214, as the lead case. The consolidat

2. Following consolidation, plaintiffs filed a Consolidated Amended Complaint adding Yesenia Padilla as a third named plaintiff. All three named plaintiffs — Marisol Fuentes, Derek Halloran, and Yesenia Padilla — are former non-exempt, hourly production employees of AMA who worked at AMA's California production facilities during the relevant class period.

3. AMA filed its Answer and Affirmative Defenses to the Consolidated Amended Complaint on February 17, 2023, denying all material allegations and asserting, among other defenses, the affirmative defenses of compliance with applicable wage and hour laws, good faith reliance on established business practices, and the individualized nature of plaintiffs' claims.

4. The case has been assigned to the Honorable Raymond Escobedo, Department 34, Superior Court of the State of California, County of Los Angeles — Central District. Judge Escobedo conducted the Initial Case Management Conference on March 10, 2023, at which the Court set discovery cutoffs, expert disclosure deadlines, and a class certification briefing schedule.

5. The parties entered into a Stipulation and Order Regarding the discovery and Production of Electronically Stored Information (the "ESI Protocol Stipulation") on January 13, 2023, which governs search terms, custodian identification, de-duplication, and production format. Additionally, the parties entered into a Stipulated Protective Order on February 15, 2023, governing the designation and handling of confidential

1. First Cause of Action — Meal Period (First Meal Period Only): The Court certified the first meal period claim on a class-wide basis. The Court found that AMA's use of the automatic meal period deduction system in NovaPay TimeTrack Pro, combined with the inconsistent activation of the Missed Meal Attestation feature across AMA's seven California production facilities (the feature was activated at only four of seven

2. Fifth Cause of Action — Wage Statement Violations (Cal. Lab. Code § 226): The Court certified this claim as derivative of the meal period claim, reasoning that if the class establishes that AMA failed to provide compliant first meal periods and failed to pay meal period premiums, the resulting wage statements would necessarily be inaccurate.

3. Seventh Cause of Action — Unfair Competition Law (Cal. Bus. & Prof. Code § 17200): The Court certified this claim as derivative of the meal period claim, holding that the unlawful prong of the UCL claim rises and falls with the underlying Labor Code violation.

4. PAGA Representative Claim: The Court permitted the PAGA representative action to proceed alongside the certified class claims. As the Court noted, PAGA claims proceed as representative actions rather than class actions, and the Court's partial certification order does not affect the scope of the PAGA claim, which encompasses all violations alleged in the Consolidated Amended Complaint on behalf of all aggrieved em

1. Second Meal Period Claims: The Court denied certification of the second meal period claim, finding that entitlement to a second meal period is too dependent on individual production schedules, shift lengths, and voluntary overtime decisions to be susceptible to class-wide adjudication.

2. Rest Period Claims: The Court denied certification of the rest period claim, finding that Plaintiffs failed to present systemic common proof of a rest period violation. The Court characterized Plaintiffs' evidence as consisting only of "anecdotal testimony from a handful of declarants," which was insufficient to establish a common policy or practice of denying rest periods.

3. Off-the-Clock / Overtime Claims: The Court denied certification of the off-the-clock and overtime claims, finding these claims to be inherently individualized, as they depend on each employee's particular work activities, the instructions of their immediate supervisor, and the employee's own conduct in recording or failing to record time worked.

4. Minimum Wage Claims: The Court denied certification of the minimum wage claim, which was derivative of the overtime claim, on the same grounds.

5. Waiting Time Penalty Claims (Cal. Lab. Code § 203): The Court denied certification of the waiting time penalty claim, finding that determination of whether penalties are owed requires an individual assessment of whether each separated employee was owed unpaid wages at the time of separation, and whether AMA's failure to pay (if any) was willful — inquiries that cannot be resolved on a class-wide basis. Certified C

II. ANTICIPATED SETTLEMENT RANGE Following the partial certification order, AMA anticipates that the Fuentes Action will resolve through a negotiated settlement. AMA and Class Counsel have agreed to participate in mediation, and the first mediation session is scheduled for August 25, 2023, before the Honorable Patricia Okoro (Ret.) of Westpark Dispute Resolution Inc. Judge Okoro is a retired Los Angeles Superior Cour

III. DEFENSE COSTS UPDATE Through August 2023, AMA has incurred approximately $2,800,000 in combined defense costs (professional fees and litigation expenses) in connection with the Fuentes Action. These costs include the following categories: • Calderwood & Harkness LLP Fees and Expenses. Professional fees for attorneys and paraprofessional staff engaged in the defense of the Fuentes Action, including all aspects of

IV. REQUEST FOR PEMBERTON'S POSITION In light of the foregoing developments and the imminent mediation scheduled for August 25, 2023, AMA respectfully requests that Pemberton advise on the following matters at its earliest convenience:

1. Willingness to Contribute. AMA requests confirmation of whether Pemberton is willing to contribute to a class settlement within the anticipated range of $10,000,000 to $16,000,000. AMA believes that a settlement within this range is reasonable, in good faith, and well within the bounds of Pemberton's coverage obligations under the Policy, and that Pemberton's timely participation is essential to achieving a resolu

2. Authorized Contribution Amount. AMA requests that Pemberton advise as to the amount of Pemberton's authorized contribution to a settlement, taking into account the following: • The $5,000,000 SIR under the Policy, which has been substantially consumed by the $2,800,000 in defense costs incurred to date and will continue to erode through additional defense costs in the coming weeks and months; • The $15,000,000 agg

3. Conditions on Consent. AMA requests that Pemberton identify any conditions it intends to impose on its consent to settlement, including but not limited to: • Any allocation requirements between covered wage-and-hour claims and potentially excluded categories of damages or penalties (e.g., PAGA penalties); • Any requirements regarding the scope of the release to be obtained in the settlement, including whether Pemb

4. PAGA Penalties. AMA requests Pemberton's position on coverage for the PAGA component of any settlement. AMA is aware that Pemberton's December 22, 2022 reservation of rights letter identified a potential coverage issue with respect to PAGA penalties under the Policy's Penalty Exclusion (Section IV.F). AMA acknowledges this reservation but respectfully submits that a modest PAGA allocation of $500,000 to $1,000,000

V. RELATED MATTER — ALDRICH EXECUTIVE DISPUTE (NO CHANGE) For the sake of completeness, AMA notes that the related individual action captioned Aldrich v. Aurelius Media Americas Inc., LASC Case No. 22STCV41087, remains pending on a separate litigation track. As Pemberton is aware, Pemberton's December 22, 2022 reservation of rights letter denied coverage for the Aldrich matter. AMA is not seeking coverage for the Ald

VI. CONTACT INFORMATION AND COORDINATION All coverage correspondence relating to the Fuentes Action should be directed to: Bernard Crawford, Partner Calderwood & Harkness LLP 777 South Flower Street, Suite 4200 Los Angeles, California 90017 Telephone: (213) 555-7214 Email: bcrawford@calderwoodharkness.com With copies to: Gregory Tanaka Vice President, Legal & Compliance Aurelius Media Americas Inc. 8500 Sunset Boulev

VII. RESERVATION OF RIGHTS AMA hereby reserves all of its rights under the Policy, including but not limited to the right to seek full indemnity for any settlement payment, reimbursement of defense costs incurred above the SIR, and all other benefits to which AMA is entitled under the Policy. Nothing in this letter is intended to, nor shall it be construed to, waive, limit, modify, or otherwise prejudice any of AMA's

1. Class Certification Order, Fuentes v. Aurelius Media Americas Inc., LASC Case No. 22STCV38214 (Hon. Raymond Escobedo, August 11, 2023)

2. Summary of Expert Reports (Dr. Howard Rennick, Pinnacle Economic Consulting Group LLC; Dr. Rajesh Makhija, Workforce Dynamics Consulting LLC; Dr. Catherine Lindstrom, Hargrove Analytics Inc.) cc: Gregory Tanaka, Vice President, Legal & Compliance, Aurelius Media Americas Inc. Samuel Okonkwo, Managing Director, Kestrel Risk Advisors Ltd. Renata Vasquez, Calderwood & Harkness LLP Philippa Cartwright, AGMG