Contract analysis

I. Purpose and Overview This letter provides a comprehensive update on the results of the document production phase completed pursuant to Procedural Order No. 2 ("PO No. 2"), issued by the Tribunal on March 17, 2023. Since our last status report, significant developments have occurred in the arbitration that bear directly on the strength of Whitmore Aerospace LLC's ("WAL" or "Respondent") defensive and affirmative po

II. Procedural Background For ease of reference, we set forth below a recap of the key procedural milestones that have occurred since our last status report, together with the upcoming deadlines that will govern the next phase of the arbitration. The Tribunal was constituted on January 20, 2023. It consists of Prof. Dame Eleanor Fitzwilliam, who serves as Presiding Arbitrator, Dr. Hans-Ulrich Perren, who was nominate

III. Summary of Documents Obtained from Kestrel The document production phase yielded a substantial volume of material from Kestrel. Following our initial review and analysis, we have identified five principal categories of documents that are of particular significance to WAL's defense and counterclaim. We summarize each category below, together with our assessment of its evidentiary value. A. Internal Quality Testin

IV. Implications for WAL's Defense In light of the document production results summarized above, we set forth below our assessment of the implications for WAL's principal defensive positions and counterclaim. A. Strengthened Position on Justified Rejections The documents produced by Kestrel during this phase substantially reinforce WAL's core defense: that the fourteen lot rejections were substantively justified by p

V. Review of Kestrel's Statement of Claim (Filed April 28, 2023) Kestrel's Statement of Claim, filed on April 28, 2023, sets forth total damages of €47.3 million, broken down as follows:

1. Lost profits for remaining MSA term (Contract Year 5): €12.83 million (Claimant's SOC ¶ 87), calculated based on projected deliveries of 3,600 units at the Contract Year 5 unit price of €5,353.49, applying a claimed profit margin of 22.4%.

2. Lost profits for two optional renewal years: €27.15 million (Claimant's SOC ¶ 92), calculated on the assumption that both renewal options would have been exercised and that Kestrel would have continued to supply components at escalating unit prices with the same 22.4% margin.

3. Unreimbursed rework costs on rejected lots: €3.42 million (Claimant's SOC ¶ 96), representing the costs Kestrel claims to have incurred in attempting to cure the rejected lots, including labor, materials, re-testing, and administrative overhead.

4. Reputational damages / loss of other business opportunities: €3.90 million (Claimant's SOC ¶ 101), representing alleged lost revenues from other potential customers that Kestrel contends it was unable to secure as a result of the negative market perception caused by WAL's termination. Kestrel's primary legal theory, as articulated in the SOC, is that WAL committed a material breach of the MSA by (i) wrongfully rej

VI. Work Plan and Timeline to Filing of Statement of Defense and Counterclaim A. Statement of Defense and Counterclaim — Due June 30, 2023 Drafting of the Statement of Defense and Counterclaim is underway. The team assigned to this submission consists of Simone Laroche (Senior Associate) and Jeffrey Park (Associate), working under the supervision of the undersigned and Vivienne St. Claire (Partner). We have establish

VII. Budget Update As you are aware, WAL's engagement of Calderwood & Harkness in this matter is structured on an hourly-rate basis, with no contingency or success-fee element. The current billing rates for the principal timekeepers assigned to this matter are as follows: Total professional fees billed to date remain within the preliminary budget range communicated to you in our November 2022 status report. We have b

VIII. Recommended Actions for WAL To ensure that WAL is well positioned for the next phase of the arbitration, we recommend the following actions:

1. Continue compliance with the litigation hold. The litigation hold notice issued on November 8, 2022, remains in effect and applies to all documents and electronically stored information potentially relevant to this arbitration. Please ensure that all WAL personnel who received the litigation hold notice continue to comply with its terms, including the obligation to preserve all relevant documents and refrain from

2. Make key witnesses available for preparation sessions. We respectfully request that WAL make Gerald Huang (Vice President, Global Supply Chain Operations) and Dr. Ingrid Vollmer (Senior Vice President, Engineering & Manufacturing) available for witness preparation sessions in the coming months. Mr. Huang's testimony will be central to establishing WAL's quality-control procedures, the lot-rejection process, and th

3. Assemble additional documentary evidence. Please coordinate with the relevant WAL departments to assemble any additional inspection records, internal communications regarding the rejected lots, and Valkyr procurement files that may be needed for the Statement of Defense and Counterclaim. Specifically, we would like to ensure that we have complete records for the receiving inspection of each of the fourteen rejecte

4. Provide updated financial information to advisory teams. Please provide any updated financial information that may be requested by Sandra Gillespie at Canfield & Thorpe LLP and Dr. Nadia Ostrovsky at Ridgeline Economic Consulting LLC in connection with their forensic accounting review and damages analysis, respectively. Timely provision of this information will be important to ensuring that Dr. Ostrovsky's expert

IX. Lender and Insurance Considerations We note briefly two ancillary matters that warrant continued monitoring. Lender Notification. As previously discussed, Veltrano National Bank, N.A. ("Veltrano"), WAL's senior secured lender under the $350 million revolving credit facility dated March 12, 2021, has been kept apprised of the status of this arbitration in accordance with the reporting obligations set forth in the

X. Conclusion and Next Steps In summary, the document production phase has been a significant development in this arbitration and has materially strengthened WAL's defense position across all key issues. Kestrel's own internal records — including quality testing data, management communications, financial analyses, and AS9100 audit findings — corroborate WAL's factual narrative and undermine Kestrel's claim that the l