CONFIDENTIAL TREATMENT REQUESTED
MUTUAL RELEASE AND STANDSTILL AGREEMENT
Calderwood & Harkness LLP 600 Renaissance Center, Suite 3200 Detroit, MI 48243 Matter No. 1007-00008
This Mutual Release and Standstill Agreement (this "Agreement") is entered into as of __, 2024 (the "Agreement Date"), by and between:
Vantage Mobility Systems Corp., a Delaware corporation with its principal place of business at 4100 Industrial Parkway, Sterling Heights, MI 48312 ("VMS" or "Licensee");
and
Meridian Code Technologies, Inc., a California corporation with its principal place of business at 2750 Orchard Blvd., Suite 400, Santa Clara, CA 95054 ("MeridianCode" or "Licensor").
VMS and MeridianCode are each referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS:
A. The MESLSA. The Parties entered into that certain Master Embedded Software License and Services Agreement dated June 21, 2022 (as amended, supplemented, or otherwise modified from time to time, the "MESLSA"), pursuant to which MeridianCode licensed its proprietary ATLAS-RT™ embedded real-time operating system, Version 4.2 (subsequently updated to Version 4.2.3), to VMS for integration into VMS's next-generation adaptive vehicle platform program internally designated "Project Argonaut." The MESLSA contemplated a total deal value of Twenty Million Dollars ($20,000,000) over a five-year term commencing on June 21, 2022 and expiring on June 20, 2027;
B. Project Argonaut Rescoping. Project Argonaut originally contemplated integration of the ATLAS-RT™ platform across five designated vehicle platform configurations, designated Argonaut-A through Argonaut-E. On March 14, 2023, the VMS Board of Directors resolved to rescope Project Argonaut, reducing the target from five to two platforms (Argonaut-A and Argonaut-C) and deferring electrification integration indefinitely. The decision to rescope was driven by a combination of factors, including persistent supply-chain delays in semiconductor procurement affecting critical system-on-chip components, portfolio-wide capital expenditure reduction directives issued by VMS's board and private equity sponsor, and the strategic prioritization of internal combustion engine ("ICE") platform fleet vehicles in light of revised market demand projections;
C. Suspension and Dormancy. VMS suspended active integration work under the MESLSA on March 22, 2023. By letter dated July 14, 2023, VMS provided written notice to MeridianCode invoking Section 9.4 of the MESLSA (the "Dormancy Notice"), which notice was delivered six (6) days prior to the 120-day dormancy trigger date of July 20, 2023. MeridianCode acknowledged the establishment of Dormancy Status by correspondence dated August 3, 2023 (the "Dormancy Acknowledgment"). The MESLSA provides that Dormancy Status may not exceed twelve (12) months before triggering mandatory renegotiation or termination of the MESLSA, resulting in a mandatory renegotiation/termination deadline of August 3, 2024 (the "Dormancy Cap Date");
D. Fees Paid and Fee Disputes. VMS has paid a total of Twelve Million Three Hundred Twenty Thousand Dollars ($12,320,000) under the MESLSA, comprising: (i) an upfront license fee of Eight Million Dollars ($8,000,000) paid on June 21, 2022; (ii) a Year 1 Maintenance & Support Fee of Two Million Four Hundred Thousand Dollars ($2,400,000) paid on July 15, 2022; and (iii) integration services fees of One Million Nine Hundred Twenty Thousand Dollars ($1,920,000) for Milestones 1 through 3 of Statement of Work No. 1. On July 1, 2023, MeridianCode invoiced VMS for the Year 2 Maintenance & Support Fee in the amount of Two Million Four Hundred Thousand Dollars ($2,400,000) (the "Disputed Maintenance Invoice"). VMS disputes the obligation to pay the Year 2 Maintenance & Support Fee during Dormancy Status, asserting that the reduction of MeridianCode's support obligations to critical-security-patch-only level under Section 9.4 of the MESLSA precludes the full maintenance fee obligation. MeridianCode asserts that the Year 2 Maintenance & Support Fee is due and payable irrespective of Dormancy Status. These disputes are referred to herein as the "Fee Dispute";
E. Derivative Works Dispute. During the integration process under Statement of Work No. 1, VMS engineers created three software modules designated DW-001, DW-002, and DW-003, comprising approximately forty-seven thousand (47,000) lines of code (collectively, the "Derivative Works"). VMS asserts that the Derivative Works are solely VMS-originated, developed independently using VMS proprietary tools and methodologies, and should be exclusively owned by VMS. MeridianCode asserts that the Derivative Works are jointly owned under Section 7.2 of the MESLSA and that MeridianCode retains a perpetual, royalty-free license to such Derivative Works by operation of that section. The estimated commercial value of the Derivative Works is between One Million Eight Hundred Thousand Dollars ($1,800,000) and Two Million Five Hundred Thousand Dollars ($2,500,000). These disputes are referred to herein as the "Derivative Works Dispute." The Fee Dispute and the Derivative Works Dispute are collectively referred to herein as the "Existing Disputes";
F. Purpose. The Parties desire to enter into this Agreement as an alternative resolution mechanism in order to: (i) mutually release certain claims related to the Existing Disputes on the terms set forth herein, (ii) establish a six-month standstill period during which neither Party may initiate arbitration proceedings or other dispute resolution proceedings with respect to the Existing Disputes or any matter arising under or related to the MESLSA, and (iii) preserve VMS's rights to reactivate the MESLSA during or following the Standstill Period. This Agreement is intended to facilitate continued good-faith negotiations toward a comprehensive amendment to the MESLSA without prejudice to either Party's rights if such amendment is not ultimately achieved; and
G. Integration Status. At the time of suspension of integration work on March 22, 2023, the status of Project Argonaut across each platform configuration was as follows: Argonaut-A had completed Milestone 3 of 5 (alpha integration testing passed on February 28, 2023); Argonaut-C had completed Milestone 2 of 5 (source-code customization delivered on January 15, 2023); Argonaut-B had completed Milestone 1 only; Argonaut-D and Argonaut-E had not been commenced. VMS had invested approximately fourteen thousand two hundred (14,200) engineering hours across its internal integration and embedded systems engineering teams in connection with the foregoing integration activities.
NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations, and warranties set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
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ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not otherwise defined in this Agreement shall have the meanings ascribed to such terms in the MESLSA.
"Agreement" means this Mutual Release and Standstill Agreement, including all Schedules attached hereto, as the same may be amended, supplemented, or otherwise modified from time to time in accordance with the terms hereof.
"Agreement Date" means the date first written above in the preamble to this Agreement.
"Derivative Works" means the three software modules designated DW-001, DW-002, and DW-003 created by VMS engineers during integration activities under the MESLSA, comprising approximately forty-seven thousand (47,000) lines of code, as further described in Recital E and Schedule A hereto.
"Derivative Works Dispute" has the meaning set forth in Recital E of this Agreement, and as further described in Schedule A hereto.
"Disputed Maintenance Invoice" means the invoice for the Year 2 Maintenance & Support Fee in the amount of Two Million Four Hundred Thousand Dollars ($2,400,000) issued by MeridianCode to VMS on July 1, 2023, as further described in Recital D.
"Dormancy Acknowledgment" means the written acknowledgment of Dormancy Status issued by MeridianCode to VMS, dated August 3, 2023.
"Dormancy Cap Date" means August 3, 2024, being the date that is twelve (12) months from the date of the Dormancy Acknowledgment, subject to tolling as provided in Sections 2.6 and 4.3 of this Agreement.
"Dormancy Notice" means the written notice delivered by VMS to MeridianCode on July 14, 2023 invoking Section 9.4 of the MESLSA.
"Dormancy Status" means the dormancy status of the MESLSA as established pursuant to Section 9.4 thereof, commencing on July 20, 2023.
"Existing Disputes" means the Fee Dispute and the Derivative Works Dispute, collectively, as more fully described in Schedule A hereto.
"Fee Dispute" has the meaning set forth in Recital D of this Agreement, and as further described in Schedule A hereto.
"MESLSA" means the Master Embedded Software License and Services Agreement dated as of June 21, 2022 between the Parties, including all exhibits, schedules, statements of work, and amendments thereto.
"Project Argonaut" means VMS's next-generation adaptive vehicle platform program, as described in Recital A, as rescoped pursuant to the resolution of the VMS Board of Directors dated March 14, 2023.
"Reactivation Notice" means a written notice delivered by VMS to MeridianCode pursuant to Section 5.1 of this Agreement electing to reactivate the MESLSA and resume integration activities under Project Argonaut.
"Released Claims" has the meaning set forth in Section 3.1 of this Agreement.
"Standstill Period" means the six (6) calendar month period commencing on the Agreement Date and ending on the date that is six (6) calendar months thereafter, as set forth in Section 2.1, subject to extension pursuant to Section 2.2.
"Use-It-or-Lose-It Deadline" means December 21, 2023, being the deadline under Section 4.3 of the MESLSA requiring integration testing on at least two platforms within eighteen (18) months of the June 21, 2022 Effective Date, subject to tolling as provided in Section 4.3 of this Agreement.
Section 1.2 — Rules of Construction
The following rules of construction shall apply to this Agreement:
(a) The headings and captions contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement, and shall not be referred to in connection with the construction or interpretation of this Agreement.
(b) As used in this Agreement, the term "including" (and its correlatives, such as "include" and "includes") means "including without limitation."
(c) Wherever the context so requires, the singular number shall include the plural number and vice versa, and the use of any gender shall include all genders.
(d) Unless otherwise specified, all references in this Agreement to "Sections" are to Sections of this Agreement, all references to "Schedules" are to Schedules attached to this Agreement, and all references to "Recitals" are to the Recitals set forth above.
(e) References to the MESLSA shall be deemed to include all exhibits, schedules, statements of work, change orders, amendments, and supplements thereto as in effect on the Agreement Date.
(f) References to a "writing" or "written" shall include electronic mail transmission and any other form of communication that creates a permanent record of the communication.
(g) The word "shall" is mandatory and the word "may" is permissive.
(h) The Parties participated jointly in the negotiation and drafting of this Agreement, and in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.
ARTICLE II — STANDSTILL
Section 2.1 — Standstill Period
The standstill period under this Agreement (the "Standstill Period") shall commence on the Agreement Date and shall continue for a period of six (6) calendar months, expiring on the date that is six (6) calendar months following the Agreement Date. During the Standstill Period, neither Party shall, directly or indirectly, initiate, file, commence, or cause to be initiated, filed, or commenced any of the following with respect to the Existing Disputes or any matter arising under or related to the MESLSA:
(a) any arbitration proceeding under the Midwest Arbitration Institute or any other arbitral forum;
(b) any litigation or judicial proceeding in any court of competent jurisdiction, whether federal or state;
(c) any other formal dispute resolution proceeding, including mediation (unless mutually agreed), expert determination, or any proceeding before any regulatory or administrative body; or
(d) any self-help remedy, setoff, recoupment, or counterclaim (other than as a defense if any proceeding is brought in violation of this Section 2.1).
The foregoing restrictions shall not apply to (i) actions necessary to preserve or protect a Party's intellectual property rights from imminent and irreparable harm caused by a non-Party, or (ii) actions required by applicable law, regulation, or court order.
Section 2.2 — Extension of Standstill
The Standstill Period may be extended beyond the initial six (6) calendar month term by mutual written agreement of the Parties. Any such extension shall be documented in a writing that (a) specifies the duration of the extension, (b) is signed by authorized representatives of both Parties, and (c) expressly references this Section 2.2. No unilateral extension of the Standstill Period shall be permitted, and neither Party shall be obligated to agree to any such extension.
Section 2.3 — Tolling of Limitations Periods
The Parties acknowledge and agree that all statutes of limitation, contractual limitation periods, laches periods, prescription periods, and any other time-based defenses or bars applicable to the Existing Disputes or to any claims, counterclaims, cross-claims, or defenses arising under or relating to the MESLSA (collectively, "Limitation Periods") shall be tolled for the entire duration of the Standstill Period (including any extension thereof pursuant to Section 2.2). Neither Party shall assert any defense based on the running or expiration of any such Limitation Period during the Standstill Period. For the avoidance of doubt, the tolling provided under this Section 2.3 shall apply in addition to, and not in lieu of, any independent tolling that may arise by operation of law or under the terms of the MESLSA.
Section 2.4 — Good Faith Negotiations
During the Standstill Period, the Parties agree to continue to negotiate in good faith toward a comprehensive amendment to the MESLSA (or such other definitive agreement as the Parties may determine to be appropriate) addressing, at a minimum, the following subjects: (i) scope reduction of Project Argonaut from five platforms to two platforms, (ii) fee restructuring to reflect the reduced scope, (iii) dormancy extension or modification, and (iv) definitive resolution of Derivative Works ownership and licensing.
To facilitate such negotiations, each Party shall designate a senior representative who shall have authority to negotiate on behalf of such Party and shall be available for meetings (whether in person or by videoconference) on reasonable notice:
(a) For VMS: Martin G. Cross, General Counsel, or his designee; and
(b) For MeridianCode: Priya Ramaswamy, General Counsel & Corporate Secretary, or her designee.
The Parties agree to meet no less frequently than once per calendar month during the Standstill Period to discuss the status of negotiations, unless the Parties mutually agree to a different schedule. Notwithstanding the foregoing, the obligation to negotiate in good faith shall not be construed to require either Party to reach agreement on any particular terms or to make concessions that such Party reasonably determines to be inconsistent with its business interests or legal rights.
Section 2.5 — Preservation of Arbitration Rights Post-Standstill
If the Parties fail to reach a comprehensive resolution of the Existing Disputes and the matters described in Section 2.4 during the Standstill Period (or any extension thereof pursuant to Section 2.2), either Party may, upon the expiration of the Standstill Period, initiate arbitration proceedings in accordance with the dispute resolution provisions of Section 14.3 of the MESLSA. Such arbitration shall be conducted as binding arbitration under the rules of the Midwest Arbitration Institute, seated in Detroit, Michigan, with a panel of three (3) arbitrators for any dispute in which the aggregate amount in controversy exceeds One Million Dollars ($1,000,000), and with a single arbitrator for any dispute in which the aggregate amount in controversy is One Million Dollars ($1,000,000) or less.
Nothing in this Agreement shall be construed to waive, modify, or otherwise affect the Parties' agreement to arbitrate as set forth in the MESLSA. The Parties expressly confirm their agreement to submit disputes arising under the MESLSA to binding arbitration as provided therein, and this Agreement is intended to provide a temporary period of forbearance only and not to alter the agreed-upon dispute resolution mechanism.
Section 2.6 — Interaction with Dormancy Cap Date
The Parties acknowledge that the Dormancy Cap Date under Section 9.4 of the MESLSA is August 3, 2024, being twelve (12) months from the date of the Dormancy Acknowledgment. The Parties further acknowledge that, depending on the Agreement Date, the Standstill Period may extend beyond the Dormancy Cap Date.
To the extent the Standstill Period extends beyond the Dormancy Cap Date, the Parties agree that the Dormancy Cap Date shall be tolled for the full duration of the Standstill Period (including any extension thereof pursuant to Section 2.2), and neither Party shall assert that the expiration of the twelve-month dormancy cap under Section 9.4 of the MESLSA triggers a mandatory termination or mandatory renegotiation of the MESLSA during the Standstill Period. The tolled Dormancy Cap Date shall be extended by a number of days equal to the total number of days in the Standstill Period (as the same may be extended).
This tolling is without prejudice to either Party's rights, arguments, claims, defenses, or positions regarding the dormancy cap upon the expiration of the Standstill Period, and neither Party shall be deemed to have waived any right or argument by reason of the tolling agreed to in this Section 2.6.
ARTICLE III — MUTUAL RELEASE
Section 3.1 — Scope of Release
Subject to the terms, conditions, and carve-outs set forth in this Agreement (including the carve-outs in Section 3.2), each Party, on behalf of itself and its respective affiliates, parents, subsidiaries, successors, assigns, officers, directors, employees, agents, attorneys, consultants, and representatives (collectively, the "Releasing Persons"), hereby irrevocably and unconditionally releases and forever discharges the other Party and its respective affiliates, parents, subsidiaries, successors, assigns, officers, directors, employees, agents, attorneys, consultants, and representatives (collectively, the "Released Persons") from any and all claims, demands, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, obligations, losses, costs, expenses (including reasonable attorneys' fees and costs of investigation), liabilities, and demands of any kind or nature whatsoever, whether at law or in equity, whether arising in contract, tort, statute, or otherwise, whether known or unknown, suspected or unsuspected, foreseen or unforeseen, matured or unmatured, accrued or unaccrued, that arise out of, relate to, or are in any way connected with the Existing Disputes (collectively, the "Released Claims").
The Released Claims shall include, without limitation, all claims for compensatory damages, consequential damages, incidental damages, special damages, punitive or exemplary damages, lost profits, diminution in value, unjust enrichment, restitution, specific performance, injunctive relief, declaratory relief, and attorneys' fees, to the extent arising from or related to the Existing Disputes. The Released Claims shall not, however, include any claims, rights, or obligations expressly excluded from this release as set forth in Section 3.2.
Section 3.2 — Carve-Outs from Release
The release set forth in Section 3.1 expressly does not extend to, and shall not be construed to release, discharge, or otherwise affect, any of the following:
(a) Any claims arising under the MESLSA other than the Existing Disputes, including but not limited to:
(i) claims related to Milestones 4 and 5 of Statement of Work No. 1, including any unpaid integration services fees in the amount of One Million Two Hundred Eighty Thousand Dollars ($1,280,000) that may become due upon reactivation and performance of such milestones;
(ii) claims related to per-unit runtime royalties at the rate of Eighty Dollars ($80) per unit for up to fifty thousand (50,000) units, as contemplated under the MESLSA;
(iii) claims related to any breach of the confidentiality, representations, warranties, or indemnification provisions of the MESLSA;
(iv) claims arising from acts, omissions, events, or circumstances occurring after the Agreement Date; and
(v) claims arising from any breach of the license grant provisions, scope-of-use restrictions, or export control provisions of the MESLSA.
(b) Any claims arising from fraud, willful misconduct, gross negligence, or intentional misrepresentation by either Party, whether occurring before or after the Agreement Date.
(c) VMS's reactivation rights as preserved and set forth in Article V of this Agreement.
(d) Any rights or obligations arising under Section 12.6 (Change of Control) of the MESLSA, including any consent rights, notification obligations, or termination rights triggered by a change of control of either Party.
(e) Any indemnification obligations under the MESLSA that, by their terms, survive termination or expiration of the MESLSA, including obligations related to third-party intellectual property infringement claims and product liability claims.
Section 3.3 — Treatment of Year 2 Maintenance Fee
As part of the mutual release contemplated by this Agreement, and as partial consideration for the standstill and other covenants set forth herein:
(a) MeridianCode hereby irrevocably and unconditionally releases VMS from any and all obligations to pay the Disputed Maintenance Invoice, being the Year 2 Maintenance & Support Fee in the amount of Two Million Four Hundred Thousand Dollars ($2,400,000) invoiced by MeridianCode on July 1, 2023. VMS shall have no further liability, obligation, or responsibility with respect to the Disputed Maintenance Invoice.
(b) MeridianCode agrees to withdraw and cancel the Disputed Maintenance Invoice within ten (10) business days of the Agreement Date. MeridianCode shall deliver to VMS a written confirmation of such withdrawal and cancellation within fifteen (15) business days of the Agreement Date.
(c) VMS acknowledges and agrees that the release of the Disputed Maintenance Invoice set forth in this Section 3.3 is specific to the Year 2 Maintenance & Support Fee as invoiced on July 1, 2023 and does not establish a precedent, course of dealing, or waiver with respect to any future maintenance fee obligations that may become due and payable under the MESLSA if the MESLSA is reactivated pursuant to Article V. The Parties' respective rights and obligations with respect to any future maintenance fees shall be determined solely by reference to the MESLSA (as may be amended by any comprehensive amendment negotiated during the Standstill Period).
Section 3.4 — Treatment of Derivative Works
As part of the mutual release contemplated by this Agreement:
(a) The Parties hereby release all Released Claims against each other related to the ownership, use, licensing, commercialization, and exploitation of the Derivative Works (DW-001, DW-002, and DW-003) as of the Agreement Date, subject to the carve-outs in Section 3.2 and the interim arrangements set forth in this Section 3.4.
(b) Pending a definitive resolution of Derivative Works ownership through either (i) a comprehensive amendment to the MESLSA, (ii) a separate side letter or intellectual property assignment agreement, or (iii) an arbitral award, the following interim arrangements shall apply during the Standstill Period:
(i) VMS shall retain possession of, and the right to use, the Derivative Works for internal purposes only, including continued development, testing, modification, and preparation for potential reactivation of Project Argonaut. For the avoidance of doubt, "internal purposes" shall include use by VMS employees, contractors under written confidentiality obligations to VMS, and VMS's wholly-owned subsidiaries, but shall not include any commercial deployment, production use, or integration into vehicles delivered to end customers.
(ii) VMS shall not sublicense, transfer, assign, disclose, or commercially deploy the Derivative Works, or any portion thereof, to or for the benefit of any third party during the Standstill Period.
(iii) MeridianCode shall not exercise any claimed license rights in or to the Derivative Works during the Standstill Period, including without limitation any perpetual, royalty-free license that MeridianCode claims under Section 7.2 of the MESLSA. MeridianCode shall not access, copy, use, license, sublicense, distribute, or otherwise exploit the Derivative Works, or any portion thereof, during the Standstill Period.
(iv) Neither Party's agreement to these interim arrangements shall constitute a waiver of, an estoppel with respect to, or prejudice to, its position regarding the ultimate ownership, licensing, or other disposition of the Derivative Works. Each Party expressly reserves all rights, claims, arguments, and defenses with respect to the Derivative Works.
Section 3.5 — Waiver of Unknown Claims
Each Party expressly, knowingly, and voluntarily waives and relinquishes any and all rights it may have under any statute or common-law principle of any jurisdiction that would otherwise limit the scope of a general release to those claims that are known or suspected to exist at the time the release is granted. Without limiting the generality of the foregoing, each Party acknowledges that it may discover facts different from, or in addition to, those which it now knows or believes to be true with respect to the Existing Disputes, and each Party nevertheless agrees that the release contained in Section 3.1 shall be and remain effective in all respects notwithstanding such different or additional facts.
Each Party understands and acknowledges the significance and consequences of this waiver and hereby assumes full responsibility for any injuries, damages, losses, or liabilities that it may hereafter incur with respect to the Released Claims, including claims that are presently unknown or unsuspected. This waiver is an essential and material term of this Agreement, without which the other Party would not have entered into this Agreement.
Section 3.6 — No Admission
This Agreement and the mutual releases contained herein shall not be construed as, and do not constitute, an admission of liability, fault, wrongdoing, breach, or violation of any law, regulation, contractual obligation, or duty by either Party. Each Party expressly denies any liability, fault, or wrongdoing in connection with the Existing Disputes.
Neither this Agreement nor any of its terms, provisions, or recitals, nor the fact that this Agreement was negotiated, executed, or performed, may be offered or received into evidence in any arbitration, litigation, or other proceeding of any nature as an admission, concession, or evidence of liability or wrongdoing, or as evidence of the truth or falsity of any fact alleged in any such proceeding. This Section 3.6 does not, however, preclude the introduction of this Agreement in any proceeding to enforce the terms of this Agreement.
ARTICLE IV — PRESERVATION OF MESLSA AND DORMANCY STATUS
Section 4.1 — Continuation of MESLSA
The MESLSA shall remain in full force and effect during the Standstill Period, subject to the Dormancy Status established pursuant to Section 9.4 thereof and the modifications expressly set forth in this Agreement. The Parties confirm that neither the execution nor the performance of this Agreement shall be deemed to constitute a termination, cancellation, rescission, or repudiation of the MESLSA.
Neither Party shall take any action to terminate the MESLSA during the Standstill Period, whether pursuant to Section 9.1 (Termination for Convenience), Section 9.2 (Termination for Cause), Section 9.4 (Dormancy Cap), or otherwise, except in the event of a material breach of this Agreement by the other Party that remains uncured following the notice and cure period set forth in Section 8.2 of this Agreement. Any attempted termination of the MESLSA during the Standstill Period in contravention of this Section 4.1 shall be null and void and of no force or effect.
Section 4.2 — Support During Standstill
During the Standstill Period, MeridianCode's maintenance and support obligations under the MESLSA shall remain at the critical-security-patch-only level as provided under the Dormancy Status provisions of Section 9.4 of the MESLSA. Specifically, MeridianCode shall continue to:
(a) provide critical security patches for ATLAS-RT™ Version 4.2.3 to VMS as necessary to address vulnerabilities classified as "Critical" or "High" under MeridianCode's standard vulnerability classification framework;
(b) make such patches available to VMS within the timeframes specified in Section 9.4(c) of the MESLSA; and
(c) provide reasonable technical support in connection with the deployment of such patches, limited to written support via MeridianCode's standard support portal.
MeridianCode shall have no obligation during the Standstill Period to provide full maintenance and support services, including general software updates, feature enhancements, performance optimizations, dedicated support personnel, or on-site support, unless and until the MESLSA is reactivated pursuant to Article V.
Section 4.3 — Tolling of MESLSA Deadlines
The Parties agree that the following deadlines and time periods under the MESLSA shall be tolled for the entire duration of the Standstill Period (including any extension thereof pursuant to Section 2.2):
(a) Use-It-or-Lose-It Deadline. The Section 4.3 "Use-It-or-Lose-It" deadline under the MESLSA (originally December 21, 2023, requiring VMS to have commenced integration testing on at least two (2) platforms within eighteen (18) months of the June 21, 2022 Effective Date) shall be extended by a number of days equal to the total number of days in the Standstill Period. The Parties acknowledge that VMS's position is that the Dormancy Status independently tolls the Section 4.3 deadline by operation of Section 9.4(f) of the MESLSA. VMS's position in this regard is expressly preserved and is not prejudiced, waived, or otherwise affected by this Agreement or by the tolling provisions of this Section 4.3.
(b) Dormancy Cap. The twelve (12) month dormancy cap under Section 9.4 of the MESLSA, with the Dormancy Cap Date of August 3, 2024, shall be extended by a number of days equal to the total number of days in the Standstill Period, consistent with and in addition to the tolling set forth in Section 2.6 of this Agreement.
(c) Milestone Deadlines. All milestone completion deadlines under Statement of Work No. 1 that have been tolled during Dormancy Status pursuant to Section 9.4 of the MESLSA shall continue to be tolled during the Standstill Period. Upon reactivation of the MESLSA, such milestone deadlines shall resume running with credit for the period of tolling.
Section 4.4 — Fees During Standstill
No additional license fees, maintenance fees, support fees, integration services fees, per-unit runtime royalties, or any other fees, charges, or amounts of any kind shall accrue or become payable by VMS to MeridianCode during the Standstill Period by reason of the MESLSA, this Agreement, or otherwise. The Standstill Period shall be treated as a fee-free period for all purposes under the MESLSA.
The total of Twelve Million Three Hundred Twenty Thousand Dollars ($12,320,000) in fees previously paid by VMS to MeridianCode under the MESLSA shall be treated as preserved and fully credited under the MESLSA. Neither the entry into this Agreement, nor the Standstill Period, nor the Dormancy Status shall trigger or be deemed to trigger the fee-forfeiture provisions of Section 9.1 of the MESLSA or any other provision of the MESLSA that would result in the forfeiture, clawback, or non-refundability of fees previously paid by VMS.
Section 4.5 — Status of Unpaid Amounts
The remaining contractual commitment under the MESLSA, consisting of:
(a) One Million Two Hundred Eighty Thousand Dollars ($1,280,000) in unpaid integration services fees for Milestones 4 and 5 of Statement of Work No. 1; and
(b) up to Four Million Dollars ($4,000,000) in per-unit runtime royalties at a rate of Eighty Dollars ($80) per unit for up to fifty thousand (50,000) units (the "Runtime Royalty Cap"),
shall remain subject to the terms of the MESLSA and any future amendment thereto. No amounts shall become due, payable, or otherwise owing under these provisions during the Standstill Period. The obligation to pay integration services fees for Milestones 4 and 5 shall arise only upon reactivation of the MESLSA and satisfactory completion of the applicable milestones in accordance with the terms of Statement of Work No. 1. The obligation to pay per-unit runtime royalties shall arise only upon commercial deployment and distribution of vehicles incorporating the ATLAS-RT™ software.
ARTICLE V — VMS REACTIVATION RIGHTS
Section 5.1 — Right to Reactivate
VMS shall have the right, exercisable at any time during the Standstill Period or within thirty (30) calendar days following the expiration of the Standstill Period (such period, the "Reactivation Window"), to deliver a written Reactivation Notice to MeridianCode electing to reactivate the MESLSA and resume integration activities under Project Argonaut. The Reactivation Notice shall be delivered in accordance with Section 9.3 of this Agreement and shall specify, at a minimum:
(a) the platform configurations on which VMS intends to resume integration activities, which may be limited to Argonaut-A and Argonaut-C consistent with the rescoped Project Argonaut or may include additional platforms if VMS determines to expand the scope of Project Argonaut; and
(b) VMS's proposed timeline for resuming integration milestone activities, including proposed target dates for completion of Milestone 4 and Milestone 5 for each applicable platform configuration.
VMS shall have sole discretion as to whether and when to deliver a Reactivation Notice, and the failure by VMS to deliver a Reactivation Notice during the Reactivation Window shall not, of itself, constitute a breach of this Agreement or a waiver of VMS's rights under the MESLSA.
Section 5.2 — Effect of Reactivation
Upon VMS's delivery of a valid Reactivation Notice to MeridianCode in accordance with Section 5.1:
(a) Dormancy Status under Section 9.4 of the MESLSA shall terminate as of the date of receipt of the Reactivation Notice by MeridianCode (or such later date as may be specified in the Reactivation Notice, but in no event more than thirty (30) days after receipt), and the MESLSA shall return to active status.
(b) MeridianCode shall resume full maintenance and support services for ATLAS-RT™ Version 4.2.3 (or such updated version as the Parties may agree) within thirty (30) days of receipt of the Reactivation Notice, including the assignment of a dedicated support engineer, restoration of full technical support channels, and provision of all general software updates and patches released during the Dormancy Status and Standstill Period.
(c) All tolled milestone deadlines under Statement of Work No. 1 shall begin running again from the date of reactivation, with full credit for progress achieved prior to the commencement of Dormancy Status, including Argonaut-A Milestone 3 completion (alpha integration testing passed February 28, 2023) and Argonaut-C Milestone 2 completion (source-code customization delivered January 15, 2023).
(d) The Parties shall negotiate in good faith regarding any adjustments to the fee schedule, milestone timeline, scope of work, or other terms of the MESLSA that may be necessitated by the rescoping of Project Argonaut from five platforms to two platforms and by the passage of time during the Dormancy Status and Standstill Period. Such negotiations shall commence within fifteen (15) business days of MeridianCode's receipt of the Reactivation Notice.
Section 5.3 — No Reactivation Fee
VMS shall not be required to pay any reactivation fee, restart fee, reinstatement fee, or similar charge to MeridianCode as a condition of, or in connection with, the reactivation of the MESLSA under this Article V. This provision is without prejudice to any comprehensive amendment negotiated during the Standstill Period that may include different terms, including a restructured fee schedule applicable upon reactivation.
Section 5.4 — Preservation of Prepaid Fees
Upon reactivation of the MESLSA pursuant to this Article V, all fees previously paid by VMS to MeridianCode in the aggregate amount of Twelve Million Three Hundred Twenty Thousand Dollars ($12,320,000) shall be fully credited and shall continue to apply toward VMS's obligations under the MESLSA. No portion of such prepaid fees shall be subject to forfeiture, clawback, disgorgement, or setoff by reason of the Dormancy Status, the Standstill Period, or any other circumstance arising prior to reactivation.
ARTICLE VI — REPRESENTATIONS AND WARRANTIES
Section 6.1 — Mutual Representations
Each Party hereby represents and warrants to the other Party, as of the Agreement Date, as follows:
(a) Organization and Good Standing. Such Party is a corporation duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation (in the case of VMS, the State of Delaware; in the case of MeridianCode, the State of California), and has all requisite corporate power and authority to own, lease, and operate its properties and assets and to carry on its business as presently conducted.
(b) Corporate Power and Authority. Such Party has full corporate power and authority to execute, deliver, and perform this Agreement and to consummate the transactions contemplated hereby.
(c) Due Authorization. The execution, delivery, and performance of this Agreement by such Party, and the consummation of the transactions contemplated hereby, have been duly authorized by all necessary corporate action on the part of such Party, including any required approval of its board of directors (or a duly authorized committee thereof). No other corporate proceedings on the part of such Party are necessary to authorize the execution, delivery, and performance of this Agreement.
(d) Binding Obligation. This Agreement has been duly executed and delivered by such Party and constitutes a valid and legally binding obligation of such Party, enforceable against such Party in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer, and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles.
(e) No Conflict. The execution, delivery, and performance of this Agreement by such Party does not and will not (i) violate, conflict with, or result in a breach of any provision of the certificate of incorporation, bylaws, or other organizational documents of such Party, (ii) violate any law, statute, rule, regulation, order, writ, injunction, judgment, or decree of any court or governmental authority applicable to such Party, or (iii) conflict with, result in a breach or default under, or give rise to a right of termination, cancellation, or acceleration under any material contract, agreement, indenture, mortgage, or instrument to which such Party is a party or by which any of its assets or properties are bound.
Section 6.2 — VMS Additional Representations
VMS additionally represents and warrants to MeridianCode, as of the Agreement Date, as follows:
(a) Lender Notification. VMS has notified Pinnacle National Bank, N.A. (as administrative agent under VMS's One Hundred Seventy-Five Million Dollar ($175,000,000) Senior Secured Revolving Credit Facility dated September 12, 2019, as amended) (the "Credit Facility") of the Dormancy Status of the MESLSA in accordance with Section 6.12 of the Credit Facility. Such notification was made on or about August 10, 2023. VMS represents that the execution and delivery of this Agreement does not require additional consent, approval, or waiver from Pinnacle National Bank, N.A. or any other lender under the Credit Facility.
(b) No Prior Assignment or Encumbrance. VMS has not assigned, transferred, pledged, hypothecated, encumbered, or otherwise conveyed any of its rights under the MESLSA or with respect to the Derivative Works (DW-001, DW-002, and DW-003) to any third party, and no such assignment, transfer, pledge, hypothecation, encumbrance, or conveyance is currently pending or contemplated (other than as may be contemplated by the comprehensive amendment negotiations described in Section 2.4).
Section 6.3 — MeridianCode Additional Representations
MeridianCode additionally represents and warrants to VMS, as of the Agreement Date, as follows:
(a) No Third-Party Rights in Derivative Works. MeridianCode has not granted, assigned, transferred, licensed, sublicensed, pledged, or otherwise conveyed any rights in or to the Derivative Works (DW-001, DW-002, and DW-003) to any third party that would conflict with, limit, or otherwise adversely affect VMS's rights as set forth in this Agreement, including the interim arrangements described in Section 3.4.
(b) Continued Support Compliance. MeridianCode has continued to provide critical security patches for ATLAS-RT™ Version 4.2.3 to VMS as required during Dormancy Status under Section 9.4 of the MESLSA, and MeridianCode is not aware of any material security vulnerability in ATLAS-RT™ Version 4.2.3 for which a critical security patch has not been made available to VMS.
ARTICLE VII — CONFIDENTIALITY
Section 7.1 — Confidential Treatment
The terms and existence of this Agreement, all negotiations, discussions, correspondence, and communications leading to or in connection with this Agreement, and all information, documents, data, and materials exchanged between the Parties in connection herewith (collectively, "Confidential Agreement Information") shall be treated as strictly confidential by both Parties and shall not be disclosed, published, or otherwise disseminated to any third party, except as follows:
(a) Internal Disclosures. A Party may disclose Confidential Agreement Information to its own officers, directors, employees, attorneys, accountants, auditors, financial advisors, and other professional advisors who have a reasonable need to know such information in connection with the administration, performance, or enforcement of this Agreement. For the avoidance of doubt, this includes, for VMS, disclosures to Calderwood & Harkness LLP and Ashford & Greer, P.C., and for MeridianCode, disclosures to Redstone Whitaker LLP.
(b) VMS PE Sponsor. VMS may disclose Confidential Agreement Information to Kestrel Capital Partners, LP, its general partner, and its representatives (including Katherine "Kate" Drummond in her capacity as board observer), to the extent reasonably necessary in connection with Kestrel Capital Partners, LP's investment in VMS and its exercise of governance and oversight rights.
(c) Lender Disclosures. VMS may disclose Confidential Agreement Information to Pinnacle National Bank, N.A. (or any successor administrative agent) and to other lenders under the Credit Facility to the extent required under the covenants and reporting obligations of the Credit Facility.
(d) Insurance Disclosures. VMS may disclose Confidential Agreement Information to Commonwealth Surety & Insurance Co. as may be required under VMS's Technology Errors & Omissions Insurance Policy No. TEO-2022-7891, or to any successor insurer, to the extent necessary for the administration of claims or coverage determinations under such policy.
(e) Legal and Regulatory Requirements. Either Party may disclose Confidential Agreement Information to the extent required by applicable law, statute, regulation, or stock exchange rule, including, with respect to MeridianCode, any disclosure obligations arising from MeridianCode's status as a Nasdaq-listed company (ticker: MCDT) under the rules and regulations of the U.S. Securities and Exchange Commission and The Nasdaq Stock Market LLC.
(f) Judicial or Administrative Compulsion. Either Party may disclose Confidential Agreement Information to the extent required by court order, subpoena, civil investigative demand, or similar compulsory process issued by a court or governmental authority of competent jurisdiction; provided that, to the extent permitted by applicable law, the disclosing Party shall provide the other Party with prompt written notice of such requirement to permit the other Party to seek a protective order or other appropriate remedy.
Any third party receiving Confidential Agreement Information pursuant to subsections (a) through (d) above shall be informed of the confidential nature of such information and shall be directed to treat it accordingly. Each Party shall be responsible for any breach of this Section 7.1 by any person to whom it discloses Confidential Agreement Information.
Section 7.2 — Survival of MESLSA Confidentiality
The confidentiality provisions of the MESLSA (including Section 11 thereof and any associated exhibits or schedules) shall remain in full force and effect during the Standstill Period and thereafter in accordance with their terms. Nothing in this Agreement shall be construed to modify, limit, supersede, or otherwise affect the Parties' confidentiality obligations under the MESLSA.
ARTICLE VIII — TERMINATION OF THIS AGREEMENT
Section 8.1 — Expiration
This Agreement shall terminate automatically upon the expiration of the Standstill Period (as the same may be extended pursuant to Section 2.2), without any further action or notice by either Party; provided, however, that the following provisions shall survive such termination and shall continue in full force and effect in accordance with their respective terms:
(a) the mutual releases set forth in Article III (including Sections 3.1, 3.3, 3.4, 3.5, and 3.6);
(b) the confidentiality provisions of Article VII;
(c) the reactivation provisions of Article V, to the extent the Reactivation Window under Section 5.1 remains open at the time of termination (i.e., for a period of thirty (30) calendar days following the expiration of the Standstill Period);
(d) the representations and warranties set forth in Article VI;
(e) the miscellaneous provisions of Article IX; and
(f) any other provision of this Agreement that, by its nature or express terms, is intended to survive termination.
Section 8.2 — Termination for Breach
Either Party may terminate this Agreement upon thirty (30) days' prior written notice to the other Party if the other Party commits a material breach of any provision of this Agreement and fails to cure such breach within such thirty (30) day notice period. For the avoidance of doubt, a material breach of this Agreement shall include, without limitation, (i) the initiation of any arbitration, litigation, or other dispute resolution proceeding in violation of Section 2.1, (ii) the attempted termination of the MESLSA in violation of Section 4.1, or (iii) a material breach of the confidentiality provisions of Article VII.
Section 8.3 — Effect of Termination
Upon termination of this Agreement (other than by reason of the execution and delivery of a comprehensive amendment to the MESLSA or other definitive agreement between the Parties resolving the matters addressed herein), the Parties' rights and obligations under the MESLSA shall be determined solely by reference to the MESLSA (as modified by the releases set forth in this Agreement that survive termination pursuant to Section 8.1).
Without limiting the foregoing, the mutual releases set forth in Sections 3.1, 3.3, and 3.4 (including, in the case of Section 3.4, with respect to the interim arrangements applicable during the Standstill Period) shall survive termination of this Agreement and shall remain binding upon the Parties and their respective successors and assigns. For the avoidance of doubt, upon termination of this Agreement, the interim arrangements with respect to the Derivative Works set forth in Section 3.4(b) shall terminate, and the Parties' respective rights with respect to the Derivative Works shall be determined by reference to the MESLSA and applicable law.
ARTICLE IX — MISCELLANEOUS
Section 9.1 — Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the State of Michigan, without regard to any conflict-of-law principles that would require or permit the application of the laws of any other jurisdiction. Each Party irrevocably consents to the personal jurisdiction and venue of the state and federal courts located in Wayne County, Michigan, solely for the purpose of enforcing any arbitration award rendered pursuant to Section 9.2.
Section 9.2 — Dispute Resolution
Any dispute, claim, or controversy arising out of or relating to this Agreement, or the breach, termination, enforcement, interpretation, or validity thereof (as distinguished from disputes arising under the MESLSA, which shall be governed by the dispute resolution provisions of the MESLSA), shall be resolved by binding arbitration under the rules of the Midwest Arbitration Institute, seated in Detroit, Michigan. For any such dispute in which the aggregate amount in controversy exceeds One Million Dollars ($1,000,000), the arbitration shall be conducted before a panel of three (3) arbitrators. For any such dispute in which the aggregate amount in controversy is One Million Dollars ($1,000,000) or less, the arbitration shall be conducted before a single arbitrator. The arbitrator(s) shall have no authority to award punitive or exemplary damages. The decision of the arbitrator(s) shall be final and binding, and judgment upon the award may be entered in any court of competent jurisdiction.
Section 9.3 — Notices
All notices, requests, demands, consents, and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given when (a) delivered personally, (b) sent by registered or certified mail, return receipt requested, postage prepaid, (c) sent by nationally recognized overnight courier service, or (d) transmitted by electronic mail (with confirmation of receipt), addressed as follows:
If to VMS:
Martin G. Cross General Counsel Vantage Mobility Systems Corp. 4100 Industrial Parkway Sterling Heights, MI 48312
Email: mcross@vantagemobility.com