Contract analysis

I. Purpose and Authority Calderwood & Harkness LLP represents Whitmore Aerospace LLC ("WAL" or the "Borrower"), a Virginia limited liability company with its principal place of business at 4200 Commerce Park Drive, Suite 600, Chantilly, Virginia 20151. We are writing to you on behalf of WAL in WAL's capacity as Borrower under that certain Senior Secured Revolving Credit Agreement dated as of March 15, 2021 (as amende

II. Background — The Underlying Government Contract and Teaming Agreement To provide context for the matter described herein, it is necessary to summarize the contractual relationships at issue. WAL serves as a subcontractor and teaming partner to Hargrove-Dalton Defense Systems, Inc. ("HDDS"), a Delaware corporation headquartered at 1100 Garrison Boulevard, Suite 2200, Bethesda, Maryland 20817. HDDS is the prime con

III. Description of the DCMA Cost-Overrun Finding On August 1, 2022, the Defense Contract Management Agency ("DCMA"), acting through Administrative Contracting Officer Lt. Col. Sandra M. Vickers, USAF, issued a Contracting Officer's Preliminary Determination (the "COPD") under Prime Contract No. FA8620-19-C-0337. The COPD was issued in the context of a routine incurred-cost and program-performance review conducted by

IV. Description of the HDDS Indemnification Demand Notwithstanding the preliminary nature of the COPD, on September 9, 2022, HDDS transmitted to WAL a formal indemnification demand letter (the "Demand Letter") asserting that WAL is obligated to indemnify and hold harmless HDDS for the full amount of the cost overruns identified in the COPD — i.e., the entire $14,726,583 — pursuant to Section 11.4 of the Teaming Agree

Section 11.4(b) of the Teaming Agreement provides, in relevant part, as follows: "The Team Member shall indemnify, defend, and hold harmless the Team Lead and its officers, directors, employees, and agents from and against any and all claims, demands, losses, costs, damages, or expenses (including reasonable attorneys' fees) arising out of or relating to any claim by the Government that costs incurred under the Team

V. WAL's Position Regarding the Demand WAL disputes the HDDS indemnification demand in its entirety and believes it has meritorious defenses on multiple grounds. WAL's principal legal and factual positions are summarized below. First, Section 11.4(b) of the Teaming Agreement contains an express causation requirement. The indemnification obligation applies only "to the extent such claim is caused by Team Member's acts

VI. Pre-Litigation Status and Anticipated Proceedings As of the date of this letter, the dispute between WAL and HDDS is in the pre-litigation phase. No lawsuit, arbitration, or other formal legal proceeding has been commenced by either party. The Teaming Agreement prescribes a multi-step dispute resolution process. Specifically, Section 18.3 of the Teaming Agreement provides for: (a) A thirty (30)-day senior executi

Section 18.2 of the Teaming Agreement provides that the parties consent to the exclusive jurisdiction of the United States District Court for the Southern District of New York, or, if such court lacks subject-matter jurisdiction, the courts of the State of New York sitting in the County of New York, for any action or proceeding arising out of or relating to the Teaming Agreement. WAL anticipates that the forthcoming

VII. Assessment of Financial Impact The current maximum amount of HDDS's claim against WAL, as set forth in the Demand Letter, is $14,726,583. WAL's maximum theoretical exposure under the Section 11.5 indemnification cap of the Teaming Agreement is $88,992,000 (120% of the WP-4 work package value), although the actual amount currently demanded by HDDS is limited to $14,726,583. WAL is not aware of any additional clai

VIII. Insurance Tender WAL has tendered the HDDS indemnification demand to its insurer, Meridian Surety & Insurance Group ("Meridian"), under the following policies: (a) Directors' and Officers' Liability Policy — Policy No. MSI-DO-2022-07814, with a $10,000,000 aggregate limit of liability and a $250,000 per-claim retention. The tender was submitted to Meridian on September 22, 2022. (b) Commercial General Liability

IX. Counsel Retention WAL has retained Calderwood & Harkness LLP as its outside litigation counsel in connection with the HDDS indemnification dispute and any related proceedings. The engagement team at Calderwood & Harkness LLP is led by Priya Anand, Partner, and Douglas Carmichael, Partner, both based in the firm's New York office. In addition, WAL has engaged Ashford & Reeves LLP, located in Washington, D.C., as g

X. Reservation of Rights This notice is provided solely for the purpose of complying with WAL's affirmative covenant obligations under Section 6.07(b) of the Credit Agreement. Nothing in this letter shall constitute, nor shall it be construed as, an admission of liability by WAL to HDDS or to any other person or entity, an admission that the HDDS indemnification demand has merit, or an acknowledgment that any Event o

XI. Availability for Further Discussion; Supplemental Notices WAL and its counsel are available to discuss this matter with the Administrative Agent and the Lenders at their convenience. We would welcome the opportunity to provide any additional information or documentation that the Administrative Agent may require in connection with its review of this notice. Please do not hesitate to contact the undersigned at the