Contract analysis

I. Filing of the Declaratory Judgment Action On November 28, 2022, WAL filed a Verified Complaint for Declaratory Judgment (the "Complaint") in the United States District Court for the Southern District of New York. The full case caption is as follows: Whitmore Aerospace LLC v. Hargrove-Dalton Defense Systems, Inc., Case No. 1:22-cv-10147-RMB (S.D.N.Y.) The action has been assigned to the Honorable Richard M. Brannig

II. Summary of Claims and Relief Sought The Complaint advances three principal claims for declaratory relief. In particular, WAL seeks a judicial declaration as follows: (1) That Section 11.4 of the Teaming Agreement dated June 12, 2019 does not obligate WAL to indemnify HDDS for the $14,726,583 in cost overruns identified in the Contracting Officer's Preliminary Determination ("COPD") dated August 1, 2022, issued by

III. Anticipated Counterclaim by HDDS Based on the tenor and content of the pre-litigation correspondence between the parties, WAL anticipates that HDDS will file an answer to the Complaint and assert a counterclaim against WAL seeking contractual indemnification for the full $14,726,583 in cost overruns identified in the COPD, together with attorneys' fees and costs of the action. HDDS is expected to base its counte

IV. Background on the Underlying Government Contract Dispute For the benefit of the Administrative Agent and the Lenders, WAL provides the following summary of the underlying government contract dispute that gave rise to the Indemnification Demand and, ultimately, to the declaratory judgment action. On August 1, 2022, DCMA issued a Contracting Officer's Preliminary Determination (the "COPD") under Prime Contract No.

V. Pre-Litigation Dispute Resolution Steps Exhausted Before filing the declaratory judgment action, WAL undertook all contractually required pre-litigation dispute resolution steps under Section 18.3 of the Teaming Agreement, which provides for senior executive negotiations as a condition precedent to the institution of litigation. In accordance with Section 18.3, senior executive negotiations were conducted between

VI. WAL's Assessment of Its Legal Position Without waiving any applicable attorney-client privilege, work-product protection, or other applicable privilege or protection, and without intending that the statements contained herein constitute admissions or concessions of any kind, WAL advises the Administrative Agent and the Lenders that WAL believes it has strong and meritorious defenses to the Indemnification Demand

VII. Insurance Coverage Status WAL has taken steps to pursue available insurance coverage in connection with the Indemnification Demand. On September 22, 2022, WAL tendered the HDDS indemnity demand to its insurer, Meridian Surety & Insurance Group ("Meridian"), under both of the following policies: • Directors & Officers Liability Policy — Policy No. MSI-DO-2022-07814, with an aggregate limit of liability of $10,000

VIII. Financial Statement Treatment WAL has consulted with its independent auditor, Pinnacle Advisory Partners LLC ("Pinnacle"), regarding the appropriate financial-statement treatment of the indemnity contingency arising from the HDDS Indemnification Demand. Under Accounting Standards Codification Topic 450, Contingencies ("ASC 450"), Pinnacle and WAL have determined that the contingency is appropriately classified

IX. Current Status of the Credit Facility WAL hereby confirms to the Administrative Agent and the Lenders that, as of the date of this letter, no Event of Default (as defined in Article VIII of the Credit Agreement) has occurred or is continuing under the Credit Agreement. WAL is in compliance with all financial covenants, reporting obligations, and other conditions set forth in the Credit Agreement. The credit facil

X. Representation and Counsel WAL is represented in the declaratory judgment action, Whitmore Aerospace LLC v. Hargrove-Dalton Defense Systems, Inc., Case No. 1:22-cv-10147-RMB (S.D.N.Y.), by this firm, Calderwood & Harkness LLP, through its New York and Washington, D.C. offices. The engagement team consists of the following attorneys: • Priya Anand — Responsible Partner (New York) • Douglas Carmichael — Billing Part

XI. Enclosures Enclosed herewith for the records of the Administrative Agent and the Lenders, please find the following documents:

1. Conformed copy of the Verified Complaint for Declaratory Judgment filed by Whitmore Aerospace LLC on November 28, 2022, in the United States District Court for the Southern District of New York, Case No. 1:22-cv-10147-RMB, together with the Civil Cover Sheet (JS 44) filed therewith.

2. Copy of the Summons issued to Hargrove-Dalton Defense Systems, Inc. by the Clerk of the United States District Court for the Southern District of New York.

XII. Continuing Notification Commitment WAL reaffirms its commitment to provide the Administrative Agent and the Lenders with timely supplemental notices as material developments occur in the declaratory judgment action, in any counterclaim asserted by HDDS, or in the underlying DCMA administrative review, consistent with WAL's obligations under Section 6.07(b) of the Credit Agreement. Such supplemental notices will

1. Verified Complaint for Declaratory Judgment (with Civil Cover Sheet), filed November 28, 2022

2. Summons issued to Hargrove-Dalton Defense Systems, Inc. cc: Gregory Poole, Esq. General Counsel and Vice President of Legal Affairs Whitmore Aerospace LLC 4200 Commerce Park Drive, Suite 600 Chantilly, Virginia 20151 Priya Anand, Esq. Calderwood & Harkness LLP 600 Lexington Avenue, 28th Floor New York, New York 10022 Elaine Whitmore Co-Founder and Chief Financial Officer Whitmore Aerospace LLC 4200 Commerce Park D