1042-00005 · Lattimore, Parish & Keene LLP · Analyses & Memos

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CALDERWOOD & HARKNESS LLP 1700 Pacific Avenue, Suite 4200 Dallas, Texas 75201

MEMORANDUM

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the work product doctrine. It is prepared solely for the use of the addressee in connection with the above-referenced engagement and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.

TO: Douglas Fairchild, Responsible Partner

FROM: Robert Jansen, Lead Associate; Amy Chesterton, Working Associate

DATE: February 11, 2026

RE: Outstanding Negotiation Issues and Recommended Positions — OEM Reseller Agreement between Brightfield Cloud Services Inc. and Vantage Industrial Solutions, LLC

ENGAGEMENT NO.: 1042-00005

I. Executive Summary

The purpose of this memorandum is to brief you ahead of the outstanding issues call currently scheduled for 2:00 p.m. CST on Friday, February 14, 2026, between principals and counsel for our client, Brightfield Cloud Services Inc. ("BCS"), and the counterparty, Vantage Industrial Solutions, LLC ("Vantage"). This memorandum identifies and analyzes each of the five remaining open negotiation issues in the proposed OEM Reseller Agreement (the "Agreement"), sets forth the current state of play for each issue, and presents our recommended positions and supporting rationale for the call.

BCS is represented by Calderwood & Harkness LLP. Vantage is represented by Lattimore, Parish & Keene LLP, with Thomas Ellsworth serving as lead partner and Jennifer Murata as working associate on the matter. We have had constructive interactions with Vantage's counsel throughout the negotiation process, and the relationship between the parties' legal teams remains professional and productive.

The anticipated BCS participants on the February 14 call are Priya Narasimhan (General Counsel, BCS), Connor Whitfield (Vice President, Business Development, BCS), and you. We anticipate that Vantage will be represented on the call by Laura Pentland (General Counsel, Vantage), Derek Yun (Vice President, Supply Chain & Procurement, Vantage), and Thomas Ellsworth of Lattimore, Parish & Keene LLP. Robert Jansen will attend on behalf of Calderwood & Harkness as well, and Amy Chesterton will be available by phone if needed.

The target execution date for the Agreement remains February 20, 2026. Maintaining this timeline is important to both parties, as BCS's fiscal quarter closes on March 31, 2026, and BCS management wishes to recognize the upfront license fee and initial hardware orders within the current quarter.

Transaction Overview. The Agreement governs Vantage's right to embed and resell BCS's BrightEdge IoT Platform — which comprises SaaS-based analytics software, proprietary edge-computing firmware, and two hardware sensor module product lines (the BE-400 and BE-600) — to end users in the United States and Canada for an initial term of three years. The relationship is structured as a non-exclusive OEM reseller arrangement, subject to a Limited Exclusivity Covenant under which BCS has agreed to appoint no more than four additional OEM resellers in the industrial automation vertical during the initial term.

The total deal value is $15,000,000, derived from a Minimum Annual Commitment ("MAC") of $5,000,000 per contract year across the three-year initial term. In addition to the MAC, Vantage will pay BCS a software royalty of 18% of Vantage's net resale price for all BrightEdge SaaS subscriptions sold to end users, payable quarterly in arrears. An upfront license fee of $750,000 (non-refundable) is due within ten business days of execution and will be credited against the Year 1 MAC, yielding a Year 1 net remaining MAC obligation of $4,250,000.

Negotiation History. The Agreement has been through multiple rounds of negotiation, as follows:

• January 6, 2026: Calderwood & Harkness circulated the first draft of the Agreement.

• January 17, 2026: Lattimore, Parish & Keene LLP delivered Vantage's first markup, which introduced changes across audit rights, non-compete definitions, liability carve-outs, MAC shortfall mechanics, and source code escrow triggers.

• January 29, 2026: Calderwood & Harkness delivered a counter-redline addressing each of Vantage's proposals.

• February 5, 2026: Lattimore, Parish & Keene LLP delivered Vantage's second markup, which narrowed the disputes but maintained Vantage's positions on several key points.

• February 12, 2026: Calderwood & Harkness delivered its final redline reflecting BCS's positions on all remaining open issues.

After five rounds of drafting, the parties have resolved the vast majority of the Agreement's terms. Five issues remain open, and these are the subject of the February 14 call. We summarize these issues and our recommended positions below:

Issue No. 1 — Audit Rights Frequency (Section 8.4): BCS seeks annual audit rights; Vantage seeks biennial. Recommendation: Hold firm at annual.

Issue No. 2 — "Competing Product" Definition (Section 12.2): BCS accepts a SCADA-only carve-out but insists on a bright-line condition excluding any cloud-based IoT functionality; Vantage seeks a subjective "primary purpose" test. Recommendation: Reject the "primary purpose" qualifier; maintain the bright-line test.

Issue No. 3 — Consequential Damages Carve-Outs (Section 14.3): Vantage seeks to remove breach of confidentiality from the list of carve-outs to the mutual consequential damages waiver. Recommendation: Reject the removal; maintain all three carve-outs.

Issue No. 4 — MAC Shortfall Pro-Ration on Termination for Convenience (Section 5.6): BCS has accepted Vantage's day-count pro-ration formula. Recommendation: Confirm acceptance; clarify applicability only to termination for convenience and confirm the 45-day payment window.

Issue No. 5 — Source Code Escrow Change-of-Control Release Trigger (Exhibit E): Vantage seeks to add a change-of-control event as a fourth release trigger. Recommendation: Continue to reject; offer alternative concessions (change-of-control notice covenant and termination right) if needed to close the deal.

We note for context that several significant commercial and legal terms are now settled and should be treated as closed on the call. These include: the IP indemnity cap at $15,000,000 (100% of deal value); the general liability cap at $7,500,000 per party (50% of deal value); the upfront license fee of $750,000 (non-refundable, credited against Year 1 MAC); the software royalty at 18% of Vantage's net resale price payable quarterly in arrears; hardware unit pricing (BE-400 at $185/unit, BE-600 at $340/unit, FOB Austin, TX); the volume discount tier (6% discount on hardware above a $7,500,000 annual threshold); and the Limited Exclusivity Covenant (no more than four additional OEM resellers in the industrial automation vertical during the initial term). A complete summary of settled terms is provided in Section VIII of this memorandum for your reference.

The balance of this memorandum addresses each open issue in detail.

II. Procedural Background and Negotiation History

This engagement was opened on December 8, 2025, following initial outreach from BCS's General Counsel, Priya Narasimhan, to you regarding BCS's desire to formalize an OEM reseller relationship with Vantage for the BrightEdge IoT Platform. BCS and Vantage had been in preliminary commercial discussions since approximately October 2025, led on the business side by Connor Whitfield (VP, Business Development, BCS) and Derek Yun (VP, Supply Chain & Procurement, Vantage).

A non-binding term sheet was negotiated between the parties' respective business teams and executed on December 19, 2025, by Connor Whitfield on behalf of BCS and Derek Yun on behalf of Vantage. The term sheet set forth the principal commercial terms of the proposed arrangement, including the territory (United States and Canada), the initial term (three years), the MAC ($5,000,000 per year), the software royalty rate (18%), hardware unit pricing for the BE-400 and BE-600 modules, the upfront license fee ($750,000), and the general structure of the non-compete and exclusivity provisions. The term sheet was expressly designated as non-binding, subject to the negotiation and execution of a definitive OEM Reseller Agreement.

Calderwood & Harkness was engaged to draft and negotiate the definitive Agreement on behalf of BCS. Lattimore, Parish & Keene LLP was engaged by Vantage shortly thereafter. Thomas Ellsworth, a partner in Lattimore, Parish & Keene's Dallas office with whom we have had prior dealings on technology licensing matters, is serving as lead partner, with Jennifer Murata as working associate.

The drafting and negotiation process has proceeded as follows:

First Draft (January 6, 2026). Calderwood & Harkness circulated the initial draft of the OEM Reseller Agreement, together with the following exhibits: Exhibit A (BrightEdge Platform Specifications and Product Descriptions), Exhibit B (Hardware Pricing Schedule), Exhibit C (Software Royalty and MAC Mechanics), Exhibit D (Trademark License and Brand-Use Guidelines), and Exhibit E (Three-Party Source Code Escrow Agreement with Pinnacle Escrow Services, Inc.). The first draft reflected BCS's preferred positions on all material terms.

Vantage's First Markup (January 17, 2026). Lattimore, Parish & Keene LLP returned a comprehensive markup of the Agreement eleven days later. The markup introduced changes across a number of provisions, including but not limited to: (i) a request to reduce audit rights from annual to biennial (Section 8.4); (ii) proposed revisions to the definition of "Competing Product" to exclude legacy SCADA-only analytics products (Section 12.2); (iii) a request to remove breach of confidentiality from the consequential damages carve-outs (Section 14.3); (iv) a proposal to pro-rate the MAC shortfall upon termination for convenience (Section 5.6); and (v) a request to add a change-of-control release trigger to the source code escrow agreement (Exhibit E). In addition, Vantage's markup proposed a number of other changes to representations and warranties, insurance requirements, force majeure provisions, and data security obligations, substantially all of which were resolved in subsequent rounds of negotiation.

C&H Counter-Redline (January 29, 2026). Calderwood & Harkness prepared and delivered a counter-redline addressing each of Vantage's proposals. We accepted certain of Vantage's changes (particularly with respect to insurance requirements and force majeure), rejected others (audit frequency, consequential damages carve-outs, escrow triggers), and offered compromise positions on several issues (non-compete definition, MAC pro-ration).

Vantage's Second Markup (February 5, 2026). Lattimore, Parish & Keene LLP delivered a second markup that reflected meaningful progress. A significant number of previously open issues were resolved or narrowed in this round. However, Vantage maintained its positions on several key points, including the five issues that remain open as of this writing.

C&H Final Redline (February 12, 2026). Calderwood & Harkness delivered its final redline reflecting BCS's positions on all remaining open issues. This redline was transmitted to Lattimore, Parish & Keene LLP with a cover letter identifying the five open issues and requesting that the February 14 call serve as the forum for their resolution.

The February 14, 2026 call is intended to resolve all remaining open issues so that execution-ready documents can be prepared for signing on the target date of February 20, 2026. The upfront license fee of $750,000 is due within ten business days of execution (i.e., by March 6, 2026, assuming a February 20 execution date), and BCS's finance team has requested that all ancillary closing documents (officer's certificates, insurance certificates, wire instructions, and the countersigned source code escrow agreement) be finalized concurrently with the Agreement.

III. Open Issue No. 1: Audit Rights Frequency (Section 8.4)

A. Current State of Play

Section 8.4 of the Agreement addresses BCS's right to audit Vantage's books, records, and systems relating to Vantage's resale of BrightEdge platform products and services for the purpose of verifying the accuracy of royalty payments, MAC compliance, and other financial obligations under the Agreement. The negotiation history on this provision is as follows:

BCS's First Draft (January 6, 2026). Section 8.4 as drafted by Calderwood & Harkness granted BCS the right to audit Vantage's resale records on an annual basis — that is, no more than once per contract year — upon no less than thirty (30) days' prior written notice to Vantage. The audit was to be conducted during normal business hours at Vantage's principal office by BCS or its designated independent auditor, at BCS's expense (unless the audit revealed an underpayment exceeding five percent (5%) of the amounts due for the audited period, in which case Vantage would bear the audit costs and promptly pay the shortfall plus interest).

Vantage's First Markup (January 17, 2026). Vantage's counsel proposed reducing the audit frequency from annual to biennial (i.e., once every two contract years), citing the administrative burden and business disruption associated with annual audits. Vantage did not object to the 30-day notice period, the scope of the audit, or the cost-shifting provision tied to a 5% underpayment threshold. The sole point of contention was frequency.

C&H Counter-Redline (January 29, 2026). Our counter-redline reverted to annual audit rights with 30 days' prior written notice, noting in our accompanying cover letter that annual frequency is standard for royalty-bearing OEM reseller agreements and that BCS requires regular verification of revenue-dependent payment obligations.

Vantage's Second Markup (February 5, 2026). Vantage's second markup maintained its biennial position but included a comment in the margin (communicated by Jennifer Murata) expressing willingness to discuss a middle ground on the call. No specific alternative was proposed.

C&H Final Redline (February 12, 2026). Our final redline holds firm at annual audit rights with 30 days' prior written notice.

B. Analysis

Annual audit rights are critical to BCS's ability to protect its revenue under this Agreement, and we believe strongly that BCS should not concede on this point. The following considerations support this position:

Revenue Visibility. The software royalty component of BCS's revenue under the Agreement — 18% of Vantage's net resale price for all BrightEdge SaaS subscriptions sold to end users — is calculated based entirely on Vantage's own records of resale transactions. BCS has no independent visibility into end-user pricing, volume, or the manner in which Vantage bundles or discounts BrightEdge products in its downstream arrangements. Absent an audit, BCS must rely entirely on Vantage's self-reported figures to verify the accuracy of quarterly royalty payments. An annual audit provides a critical check on the integrity of these self-reported numbers.

MAC Compliance. The MAC of $5,000,000 per contract year, and the associated shortfall mechanism (under which Vantage must pay BCS any difference between the MAC and actual purchases within 45 days of each contract-year-end), similarly depends on accurate record-keeping by Vantage. If Vantage under-reports or miscategorizes purchases, BCS could lose meaningful revenue — particularly given that the MAC includes both hardware purchases and software royalties. Annual verification is essential to ensure that the MAC is being properly applied and that any shortfalls are correctly calculated.

Exposure Period. Biennial audits would leave BCS exposed for up to two full contract years before any discrepancy in Vantage's records could be detected and remedied. Given the scale of the financial obligations at issue — $5,000,000 per year in MAC alone, plus royalties — the potential magnitude of an undetected under-reporting error over a 24-month period is significant. By contrast, annual audits limit BCS's maximum unaudited exposure to a single contract year.

Market Standard. Annual audit rights are the prevailing market standard for OEM and reseller agreements of this type and scale. In our experience with comparable technology licensing and reseller transactions with total deal values in the range of $10,000,000 to $25,000,000, annual audit rights (typically with 20 to 30 days' prior written notice) are the norm. Biennial audit rights are atypical and, in our experience, are more commonly associated with lower-value distribution agreements where the licensor has less revenue exposure.

Notice Period. The 30-day prior written notice requirement is a meaningful accommodation to Vantage, providing ample time for Vantage's finance and operations teams to prepare for the audit, assemble relevant records, and designate appropriate personnel to assist BCS's auditor. This is at the longer end of the market range (which typically runs from 15 to 30 days).

Auditor Alignment. BCS's independent auditor, Whitmore & Callahan, LLP, would likely conduct or be engaged to assist with any audit under Section 8.4. Whitmore & Callahan's existing engagement with BCS operates on an annual cycle, and an annual audit cadence under the Agreement aligns with their engagement timeline and reporting calendar. A biennial schedule would create an awkward mismatch with Whitmore & Callahan's regular work and could result in increased costs to BCS for ad hoc engagements.

C. Recommendation

Hold firm at annual audits with 30 days' prior written notice. We do not recommend conceding to biennial frequency under any circumstances. This is a fundamental revenue-protection mechanism for BCS, and the case for annual audits is well-supported by both the economics of this deal and market practice.

If Vantage pushes back strongly on the call and seeks a compromise, we have identified one potential fallback position that we believe would be acceptable to BCS while providing Vantage with some additional comfort:

Potential Compromise (offer only if necessary): BCS would agree to (i) cap the duration of each annual audit at five (5) business days on-site, and (ii) confirm in the agreement text that BCS shall conduct no more than one (1) audit per contract year. This addresses Vantage's stated concern about administrative burden and business disruption without sacrificing the annual frequency that is essential to BCS's revenue integrity.

Do not volunteer this compromise affirmatively. It should be held in reserve and offered only if Vantage makes clear on the call that biennial frequency is a strong priority and the parties are at an impasse on this issue.

Annual frequency is non-negotiable for revenue integrity given the royalty-based economics of this transaction.

IV. Open Issue No. 2: Non-Compete / "Competing Product" Definition (Section 12.2)

A. Current State of Play

Section 12.2 of the Agreement contains a non-competition covenant under which Vantage agrees not to develop, manufacture, market, distribute, or resell any "Competing Product" in the Territory during the term of the Agreement and for a period of twelve (12) months following termination or expiration. The central dispute concerns the definition of "Competing Product." The negotiation history is as follows:

BCS's First Draft (January 6, 2026). Section 12.2 as originally drafted by Calderwood & Harkness defined "Competing Product" broadly to include "any product or service that provides analytics, monitoring, or data collection functionality for industrial automation applications." This definition was intentionally broad, reflecting BCS's interest in protecting the competitive position of the BrightEdge IoT Platform across the full range of its functional capabilities.

Vantage's First Markup (January 17, 2026). Vantage's counsel requested a narrowing of the definition to exclude legacy SCADA-only analytics products. Vantage argued that its existing product line includes a suite of standalone SCADA interface tools — primarily used for interfacing with programmable logic controllers and legacy supervisory control systems — that have been on the market for over a decade and do not compete with the BrightEdge IoT Platform. Vantage represented that these SCADA-only tools do not incorporate cloud-based analytics, edge computing, or IoT sensor functionality, and that requiring Vantage to abandon or discontinue them would be commercially unreasonable and was not contemplated by the parties' term sheet.

C&H Counter-Redline (January 29, 2026). Our counter-redline conditionally accepted the SCADA-only carve-out but added a critical limiting condition: the carve-out would apply only to products that do not incorporate any cloud-based IoT functionality. Specifically, we proposed the following formulation: "Competing Product" excludes "standalone SCADA interface products that do not incorporate cloud-based Internet of Things functionality, including but not limited to cloud-based analytics, cloud-based monitoring, or cloud-based data collection." This bright-line test was designed to protect BCS's core technology while accommodating Vantage's legitimate interest in maintaining its legacy SCADA product line.

Vantage's Second Markup (February 5, 2026). Vantage accepted the general concept of the SCADA-only carve-out with a cloud-based IoT limitation, but sought to broaden the carve-out by introducing a subjective qualifier. Specifically, Vantage proposed that the carve-out apply to any product "whose primary purpose is not cloud-based IoT functionality," introducing a "primary purpose" test. Under this formulation, a product could incorporate some degree of cloud-based IoT functionality and still fall within the carve-out, provided that cloud-based IoT was not its "primary purpose."

C&H Final Redline (February 12, 2026). Our final redline rejects the "primary purpose" qualifier and reinstates the bright-line test. Under our proposed formulation, the SCADA-only carve-out applies exclusively to products that do not incorporate any cloud-based IoT functionality. We believe this is the only formulation that provides adequate protection for BCS.

B. Analysis

The definition of "Competing Product" is a critical provision for BCS, and the distinction between the bright-line test and the "primary purpose" test is substantively significant. The following considerations inform our analysis:

BCS's Core Competitive Advantage. The BrightEdge platform's fundamental differentiator in the industrial automation market is its proprietary cloud-based IoT analytics layer, which operates in conjunction with edge-computing firmware deployed on BCS's BE-400 and BE-600 sensor hardware modules. The platform collects data from industrial equipment through its edge firmware and sensor modules, transmits that data to BCS's cloud infrastructure, and applies proprietary analytics algorithms to generate actionable insights for the end user. It is the integration of cloud-based IoT analytics with edge computing and hardware that distinguishes BrightEdge from legacy SCADA systems and competing offerings. A carve-out that permits Vantage to develop or distribute products incorporating any degree of cloud-based IoT capability — even if such capability is characterized as incidental or secondary — would directly threaten BCS's competitive position and undermine the commercial value of this Agreement.

Legitimacy of the SCADA-Only Carve-Out. We acknowledge that Vantage's legacy SCADA interface tools are well-established in the market, predate the BrightEdge platform, and genuinely do not compete with BCS's offering. These tools are designed primarily for on-premises interfacing with programmable logic controllers and supervisory control systems, and they do not incorporate cloud connectivity, IoT sensor integration, or cloud-based analytics. Carving out these legacy products from the non-compete is commercially reasonable and appropriate. The SCADA-only carve-out, properly limited, reflects the parties' mutual understanding as reflected in the term sheet negotiations.

The "Primary Purpose" Test Is Unacceptably Subjective. The "primary purpose" qualifier proposed by Vantage introduces a subjective standard that would be inherently difficult to administer and enforce. What constitutes the "primary purpose" of a product is a matter of judgment and characterization, not an objective factual determination. Vantage could develop a product that is nominally SCADA-centric in its marketing and documentation but that incorporates substantial cloud-based IoT features — for example, a SCADA interface tool with an integrated cloud dashboard for remote monitoring and IoT data aggregation — and argue that its "primary purpose" remains SCADA interface functionality. This would effectively gut the non-compete and allow Vantage to compete directly with BrightEdge while ostensibly remaining within the carve-out. The risk of abuse is too significant to accept.

Bright-Line Test Provides Certainty. The bright-line test proposed by Calderwood & Harkness — the carve-out applies only to products that do not incorporate any cloud-based IoT functionality — is clear, objective, and administrable. It draws a clean line between Vantage's legitimate legacy SCADA products (which, by Vantage's own representation, do not incorporate cloud-based IoT functionality) and products that would compete with BrightEdge. If Vantage's existing SCADA tools truly lack cloud-based IoT features, as Vantage has represented, the bright-line test should be unobjectionable.

PE Sponsor Interest. BCS's majority equity holder, Veltrano Capital Partners Fund IV, L.P. (holding approximately 68% of BCS's equity), has a strong institutional interest in protecting the competitive moat around the BrightEdge platform. Nathaniel Burgess, Veltrano's deal partner and board observer at BCS, has been briefed on this issue. The non-compete and the definition of "Competing Product" are directly relevant to BCS's enterprise value and, by extension, to Veltrano's investment thesis. Any weakening of the non-compete's enforceability could adversely affect future valuation discussions.

Leverage Consideration. BCS has already made a meaningful concession by accepting the SCADA-only carve-out at all. The original draft contained no such carve-out, and BCS's willingness to accommodate Vantage's legacy product line should be acknowledged on the call. Additionally, the Limited Exclusivity Covenant — under which BCS has agreed to appoint no more than four additional OEM resellers in the industrial automation vertical during the initial three-year term — provides Vantage with meaningful market positioning and is itself a substantial concession by BCS. These concessions should be used to frame the bright-line "no cloud-based IoT" test as a reasonable condition rather than a hard-line position.

C. Recommendation

Accept the SCADA-only carve-out conditioned on excluding any cloud-based IoT functionality. Reject Vantage's "primary purpose" qualifier. The bright-line test — requiring that the carve-out apply only to products that do not incorporate any cloud-based IoT functionality whatsoever — is the only formulation that provides adequate protection for BCS's competitive position and intellectual property.

If Vantage resists on the call, the following talking points may be useful:

(a) BCS has already demonstrated flexibility by accepting the SCADA-only carve-out, which was not in the original draft.

(b) The Limited Exclusivity Covenant provides Vantage with meaningful market positioning that further evidences BCS's willingness to accommodate Vantage's interests.

(c) The bright-line test is consistent with Vantage's own representations about its legacy SCADA products — if those products truly do not incorporate cloud-based IoT functionality, the bright-line test should not be problematic for Vantage.

(d) The "primary purpose" test would introduce unacceptable ambiguity and potential for dispute, which is contrary to both parties' interests in a clear and workable agreement.

We do not recommend any fallback or compromise position on this issue. The bright-line test is the minimum acceptable formulation.

V. Open Issue No. 3: Consequential Damages Carve-Outs (Section 14.3)

A. Current State of Play

Section 14.3 of the Agreement addresses the parties' mutual waiver of indirect, incidental, special, and consequential damages, subject to certain carve-outs. The negotiation history on this provision is as follows:

BCS's First Draft (January 6, 2026). Section 14.3 as originally drafted included a mutual exclusion of indirect, incidental, special, and consequential damages (including, without limitation, lost profits, lost revenue, loss of data, and cost of cover), with three specified carve-outs. The carve-outs provided that the consequential damages waiver would not apply to damages arising from or related to: (i) a breach of the confidentiality obligations set forth in Article 10 of the Agreement; (ii) either party's IP indemnity obligations set forth in Section 14.1; or (iii) willful misconduct by either party. These carve-outs are mutual — they apply equally to both BCS and Vantage.

Vantage's First Markup (January 17, 2026). Lattimore, Parish & Keene LLP proposed removing "breach of confidentiality obligations" (carve-out (i)) from the list of carve-outs. Under Vantage's proposed revision, consequential damages would be waived even in the event of a breach of the confidentiality obligations — the sole remedies available would be direct damages (subject to the general liability cap of $7,500,000) and injunctive relief. Vantage did not object to the IP indemnity or willful misconduct carve-outs.

C&H Counter-Redline (January 29, 2026). Our counter-redline rejected the removal and maintained all three carve-outs. In our cover letter, we noted that the confidentiality obligations in Article 10 protect BCS's most sensitive intellectual property and trade secrets, and that consequential damages (such as loss of competitive advantage and erosion of market position) are the most likely and most significant category of harm arising from a confidentiality breach. Removing the carve-out would leave BCS without an adequate remedy.

Vantage's Second Markup (February 5, 2026). Vantage reiterated its request to remove the confidentiality breach carve-out, arguing in commentary provided by Jennifer Murata that the general liability cap of $7,500,000 per party provides adequate overall protection against confidentiality-related claims and that maintaining the carve-out exposes Vantage to potentially unlimited consequential damages for what could be an inadvertent or minor breach.

C&H Final Redline (February 12, 2026). Our final redline continues to reject the removal of the confidentiality breach carve-out. All three carve-outs remain in the current draft.

B. Analysis

The confidentiality breach carve-out is a critical protection for BCS and should not be conceded. The following considerations inform our analysis:

Nature of BCS's Confidential Information. BCS's BrightEdge platform incorporates proprietary trade secrets, algorithms, hardware designs, and other intellectual property of extraordinary value. Under the Agreement, BCS will disclose to Vantage a substantial body of confidential information, including but not limited to: technical documentation and specifications for the BrightEdge platform; API keys and integration specifications necessary for Vantage to embed BrightEdge into its products; firmware source code access credentials; hardware design schematics for the BE-400 and BE-600 modules; pricing methodologies and margin structures; customer data analytics models; and, potentially, access to BrightEdge source code under the escrow mechanism with Pinnacle Escrow Services, Inc. The disclosure of this information to a competitor — or its unauthorized use by Vantage in connection with a competing product — could cause irreparable harm to BCS's competitive position.

Consequential Damages Are the Primary Harm. The most significant damages arising from a breach of confidentiality are inherently indirect or consequential in nature. If Vantage were to disclose BCS's proprietary algorithms or hardware design specifications to a third party, or if a Vantage employee were to use BCS's trade secrets to develop a competing product, the resulting harm to BCS would primarily take the form of loss of competitive advantage, erosion of market position, lost future revenue, and diminished enterprise value. These are quintessentially consequential damages. If the carve-out is removed and the consequential damages waiver applies to confidentiality breaches, BCS's recovery would be limited to direct damages — essentially, the cost of the confidential information itself, which may be nominal or difficult to quantify — and would not capture the real economic harm.

General Liability Cap Is Not a Substitute. Vantage's argument that the general liability cap of $7,500,000 provides adequate protection conflates two distinct concepts. The liability cap limits the total quantum of damages recoverable; the carve-out addresses whether the category of consequential damages is available at all. Even with the carve-out in place, the general liability cap continues to apply as an overall ceiling on BCS's total recovery (except to the extent of the separate IP indemnity cap of $15,000,000). The carve-out simply ensures that BCS is not further restricted from recovering the most significant category of damages — consequential damages — within that cap. Without the carve-out, BCS would be doubly limited: first by the categorical exclusion of consequential damages, and then by the general liability cap. This would leave BCS with inadequate protection for its most valuable assets.

Vantage's Real Concern. The fact that Vantage's objection is specific to the confidentiality carve-out — Vantage has not contested the IP indemnity or willful misconduct carve-outs — suggests that Vantage's underlying concern may relate to the perceived breadth of its confidentiality obligations under Article 10 rather than to the damages framework itself. If this is the case, the appropriate response is to address Vantage's concern at the definitional level — for example, by clarifying what constitutes "Confidential Information" or by adding standard exclusions for information that: (a) is or becomes publicly available through no fault of the receiving party; (b) was in the receiving party's possession prior to disclosure; (c) is independently developed by the receiving party without reference to the disclosing party's confidential information; or (d) is received from a third party not subject to a confidentiality obligation. These are standard exclusions that may already be present in Article 10 (we will confirm the current draft language before the call) and would provide Vantage with meaningful protection against claims arising from information that is not genuinely confidential.

Market Practice. In our experience with technology licensing agreements of comparable scale and structure, inclusion of a confidentiality breach carve-out to the consequential damages waiver is standard practice. This is particularly true in agreements involving the disclosure of trade secrets, source code, and proprietary technology — which is precisely the case here. Removing the carve-out would place BCS in a weaker position than is typical for licensors in transactions of this nature.

C. Recommendation

Reject the removal of breach of confidentiality from the consequential damages carve-out. This is a critical protection for BCS's trade secrets and proprietary technology, and the case for maintaining it is compelling from both a legal and commercial standpoint. All three carve-outs — breach of confidentiality, IP indemnity, and willful misconduct — must remain.

If Vantage raises specific concerns on the call about the scope of its confidentiality obligations, we recommend offering to discuss the following accommodations (none of which involve conceding on the carve-out itself):

(a) Confirming or adding standard exclusions to the definition of "Confidential Information" in Article 10 (publicly available information, prior possession, independent development, third-party receipt).

(b) Clarifying that the confidentiality obligations apply only to information that is clearly identified as confidential at the time of disclosure (or, if disclosed orally, confirmed in writing within a reasonable period).

(c) Confirming that the confidentiality breach carve-out does not alter the applicable burden of proof — BCS would still bear the burden of demonstrating that a breach occurred and that consequential damages resulted from such breach.

These are reasonable accommodations that address Vantage's potential concerns without sacrificing BCS's substantive protection. We do not recommend any further concession on this issue.

VI. Open Issue No. 4: MAC Shortfall Pro-Ration on Termination for Convenience (Section 5.6)

A. Current State of Play

Section 5.6 of the Agreement addresses the calculation and payment of any MAC shortfall upon a termination for convenience by either party. The Agreement provides that either party may terminate for convenience on no less than one hundred eighty (180) days' prior written notice, provided that such notice may not be given earlier than the first anniversary of the Effective Date. The negotiation history on the MAC shortfall pro-ration issue is as follows:

BCS's First Draft (January 6, 2026). Section 5.6 as originally drafted required Vantage, upon any termination for convenience, to pay BCS any outstanding MAC shortfall through the end of the then-current contract year. Under this formulation, if Vantage terminated for convenience on day 200 of a contract year, Vantage would owe BCS the shortfall between its actual purchases during the year to date and the full annual MAC of $5,000,000 — without any pro-ration.

Vantage's First Markup (January 17, 2026). Vantage proposed pro-rating the MAC shortfall if termination for convenience occurs mid-year, rather than requiring payment of the full annual MAC for a partial year. Vantage argued that requiring payment of the full annual MAC for a year in which the Agreement is in effect for only a portion of the period would be inequitable and could function as a de facto termination penalty.

C&H Counter-Redline (January 29, 2026). Our counter-redline agreed in principle to a pro-rata mechanism, acknowledging that a full-year MAC requirement for a partial year could present enforceability concerns. However, we reserved on the specific formula pending further discussion with BCS's finance team.

Vantage's Second Markup (February 5, 2026). Vantage proposed a specific day-count formula for the pro-ration: pro-rated MAC = $5,000,000 × (elapsed days in the contract year through the date of termination / 365). Vantage would owe BCS the shortfall, if any, between its actual purchases during the elapsed portion of the year and the pro-rated MAC.

C&H Final Redline (February 12, 2026). After consultation with BCS's finance team, our final redline accepts the day-count formula as proposed by Vantage.

B. Analysis

The day-count pro-ration formula is commercially fair to both parties, and we believe BCS's acceptance of this formula is appropriate. The following considerations support this conclusion:

Fairness. The day-count formula allocates the MAC obligation proportionally based on the number of days the Agreement is in effect during the contract year in which termination occurs. This is a straightforward and intuitive approach. For example, if termination for convenience takes effect on day 200 of a 365-day contract year, the pro-rated MAC would be $5,000,000 × (200/365) = approximately $2,739,726. Vantage would owe BCS the shortfall, if any, between its actual purchases during those 200 days and $2,739,726. This approach protects BCS from a total loss of the MAC obligation for the partial year (BCS retains the benefit of the pro-rated commitment) while avoiding a windfall claim against Vantage for the full annual MAC when the contract is in effect for only a portion of the year.

180-Day Notice Period. The 180-day notice period for termination for convenience already provides BCS with substantial runway to manage the business impact of a termination. During the notice period, the Agreement remains in full force and effect, and Vantage's MAC obligation continues to accrue. The combination of a 180-day notice period and a pro-rated MAC for the terminal year provides BCS with a commercially reasonable level of protection.

Enforceability Considerations. Requiring payment of the full annual MAC upon a mid-year termination for convenience could be viewed under Delaware law as an unenforceable penalty clause rather than a reasonable estimate of BCS's damages. Delaware courts have generally held that contractual provisions requiring payment of a fixed sum upon termination must bear a reasonable relationship to the anticipated harm caused by the termination; otherwise, they may be struck down as penalties. A pro-rated formula that ties the obligation to the period during which the Agreement was actually in effect is more likely to be viewed as a reasonable liquidated damages provision and, accordingly, is more likely to be enforceable.

Payment Terms. The shortfall payment under the pro-ration formula remains due within forty-five (45) days of the effective date of termination, consistent with the 45-day payment period applicable to annual MAC shortfalls in the ordinary course under Section 5.4. This provides Vantage with a reasonable period to calculate and remit the shortfall while ensuring that BCS receives payment promptly following termination.

Scope Limitation. It is important to confirm on the call that the pro-ration formula applies only to termination for convenience under Section 5.6. Termination for cause — which requires a 30-day cure period for material breach (15 days for payment defaults) under Section 16.2 — should trigger the full MAC shortfall for the entire contract year as a remedy for the breach. This distinction is reflected in our final redline, but it should be expressly confirmed during the call to avoid any ambiguity.

C. Recommendation

Accept the day-count formula: pro-rated MAC = $5,000,000 × (elapsed days in the contract year / 365). This position has already been reflected in Calderwood & Harkness's final redline and is commercially reasonable. On the call, we recommend addressing the following two points to ensure clarity:

(a) Confirm that the 45-day payment window applicable to ordinary-course annual MAC shortfalls also applies to the termination shortfall payment under the pro-ration formula.

(b) Confirm that the pro-ration formula applies only to termination for convenience under Section 5.6. Termination for cause under Section 16.2 should trigger the full MAC shortfall for the entire contract year, without pro-ration, as a remedy for the breaching party's default.

BCS's acceptance of the day-count formula represents a genuine concession and should be used strategically on the call as evidence of BCS's willingness to compromise. This can serve as leverage for holding firm on the other open issues, particularly Issues No. 1 (audit rights), No. 3 (consequential damages carve-out), and No. 5 (source code escrow).

VII. Open Issue No. 5: Source Code Escrow — Change-of-Control Release Trigger (Exhibit E)

A. Current State of Play

Exhibit E to the Agreement is a three-party source code escrow agreement among BCS (as depositor), Vantage (as beneficiary), and Pinnacle Escrow Services, Inc. (as escrow agent). The escrow agreement provides for the deposit and maintenance of the BrightEdge platform source code (version 4.2 and all subsequent updates delivered during the term) with Pinnacle Escrow Services, and specifies the conditions under which Vantage may obtain release of the escrowed materials. Rafael Dominguez of Pinnacle Escrow Services is the designated account manager for this arrangement and has been involved in preliminary discussions regarding the form of the escrow agreement.

The dispute concerns whether a "change of control" of BCS should be added as a fourth release trigger. The negotiation history is as follows:

BCS's First Draft (January 6, 2026). Exhibit E as originally drafted by Calderwood & Harkness limited the release conditions to three triggers:

(a) BCS ceases business operations (other than a temporary cessation due to force majeure lasting no more than ninety (90) days);

(b) BCS files a voluntary petition for bankruptcy under Title 11 of the United States Code, or an involuntary petition is filed against BCS and not dismissed within sixty (60) days; or

(c) BCS materially fails to maintain or support the BrightEdge platform software for a period of more than one hundred twenty (120) consecutive days after Vantage delivers written notice of such failure to BCS and Pinnacle Escrow Services, Inc., and such failure is not cured within an additional thirty (30) days following BCS's receipt of Vantage's notice.

Vantage's First Markup (January 17, 2026). Vantage proposed adding a fourth release trigger: a "change of control" of BCS, defined broadly to include any direct or indirect transfer, sale, assignment, or other disposition of more than fifty percent (50%) of the equity interests or voting interests of BCS, or a sale, transfer, or other disposition of all or substantially all of the assets of BCS.

C&H Counter-Redline (January 29, 2026). Our counter-redline rejected the change-of-control trigger in its entirety. We noted in our cover letter that the existing three release conditions adequately protect Vantage against the genuine risk scenarios that the escrow mechanism is designed to address, and that a change-of-control trigger is not warranted in the context of a non-exclusive OEM reseller relationship.

Vantage's Second Markup (February 5, 2026). Vantage reiterated its request for the change-of-control trigger, with Jennifer Murata providing commentary arguing that a change of control could result in a new owner of BCS discontinuing support for the BrightEdge platform, redirecting engineering resources to other products, or otherwise impairing Vantage's ability to continue reselling BrightEdge products. Vantage characterized the change-of-control trigger as a "business continuity" protection.

C&H Final Redline (February 12, 2026). Our final redline continues to reject the change-of-control trigger.

B. Analysis

The change-of-control release trigger is commercially unacceptable to BCS and should be firmly rejected. The following considerations support this position:

PE Ownership Structure. BCS is majority-owned by Veltrano Capital Partners Fund IV, L.P., which holds approximately 68% of BCS's equity. Veltrano Capital Partners is a private equity firm headquartered in Charlotte, North Carolina, with approximately $1.4 billion in assets under management. Helena Forsythe serves as managing partner, and Nathaniel Burgess serves as the deal partner and board observer with respect to the BCS investment.

Private equity ownership inherently contemplates future exit transactions, which may include sales to strategic acquirers, secondary sales to other private equity firms, recapitalizations, or initial public offerings. Each of these exit scenarios could constitute a "change of control" under the broad definition proposed by Vantage. A change-of-control release trigger in the escrow agreement would effectively hand Vantage access to BCS's BrightEdge source code upon any PE exit event — a result that is commercially unacceptable to BCS, to Veltrano Capital Partners, and to any potential acquirer of BCS.

Source Code Value. The BrightEdge platform source code is among BCS's most valuable intellectual property assets. The source code embodies years of research and development, proprietary algorithms, and trade secrets that constitute the core of BCS's competitive advantage in the industrial IoT analytics market. Release of the source code to Vantage upon a change of control — absent any failure by BCS or its successor to maintain or support the software — would effectively transfer a significant portion of BCS's intellectual property value to a reseller without adequate justification or compensation.

Impact on Enterprise Value. The existence of a change-of-control source code release trigger would adversely affect BCS's enterprise value in the context of any future sale or exit transaction. A potential acquirer would view the trigger as a material encumbrance on BCS's intellectual property — the acquirer would know that completing the acquisition would automatically trigger the release of source code to a third-party reseller, who could then use or disclose the source code (subject to any use restrictions in the escrow agreement). This would reduce the acquirer's willingness to pay for BCS and would directly harm the interests of Veltrano Capital Partners Fund IV, L.P. and BCS management, who hold equity.

Existing Release Conditions Are Adequate. The three existing release triggers address the legitimate risk scenarios that the escrow mechanism is designed to protect against. If a change of control occurs and the new owner of BCS: (a) ceases operations, the first trigger applies; (b) files for bankruptcy, the second trigger applies; or (c) materially fails to maintain or support the software for 120+ consecutive days, the third trigger applies. In each case, Vantage would have access to the source code. The only scenario not covered by the existing triggers is a change of control in which the new owner continues to maintain and support the BrightEdge platform — but in that scenario, Vantage has no legitimate need for source code access because the software is being properly maintained.

Market Practice. A change-of-control release trigger is not standard in OEM reseller escrow arrangements. It is more commonly seen — though still frequently contested and resisted — in single-licensee, mission-critical software deployments where the licensee has a uniquely high degree of dependency on the software and no viable alternative. The present arrangement is distinguishable: Vantage is a non-exclusive OEM reseller, not a sole licensee. BCS may appoint up to four additional OEM resellers in the industrial automation vertical during the initial term, and the BrightEdge platform is available to other customers and channels. Vantage's dependency on BrightEdge, while commercially significant, does not rise to the level that would warrant a change-of-control source code release.

Precedent Concern. Accepting a change-of-control release trigger in this Agreement would set a problematic precedent for BCS's relationships with other current and future OEM resellers and licensees. If Vantage obtains this trigger, other resellers and licensees can be expected to demand the same, further encumbering BCS's intellectual property and compounding the adverse impact on enterprise value.

C. Recommendation

Continue to reject the change-of-control release trigger. The existing three release conditions — cessation of operations, bankruptcy filing, and 120-consecutive-day maintenance failure after written notice — provide Vantage with robust protections against the genuine risk scenarios that justify a source code escrow arrangement. The change-of-control trigger is not warranted and is commercially unacceptable given BCS's PE ownership structure and the impact on enterprise value.

If Vantage presses on the call and this issue threatens to become an impasse, we recommend offering two alternative concessions as a package, designed to address Vantage's stated concern about business continuity following a change of control without triggering release of the source code:

Alternative Concession No. 1 — Change-of-Control Notice Covenant: BCS would agree to include a covenant in the body of the OEM Reseller Agreement (not in the escrow agreement) requiring BCS to provide Vantage with written notice within thirty (30) days of any change of control of BCS (using the same definition proposed by Vantage: a direct or indirect transfer of more than 50% of the equity or voting interests, or a sale of all or substantially all assets). This notice obligation provides Vantage with transparency about ownership changes but does not trigger source code release.

Alternative Concession No. 2 — Post-Change-of-Control Termination Right: BCS would agree that upon the occurrence of a change of control, Vantage may terminate the OEM Reseller Agreement on ninety (90) days' written notice if the successor entity materially reduces the level of maintenance and support services for the BrightEdge platform as compared to the levels provided by BCS prior to the change of control. This provides Vantage with an exit right in the event that a change of control actually results in degraded support — which is Vantage's stated concern — without requiring BCS to release source code upon a change of control that does not impair support.

These alternative concessions should be offered as a package and only if needed to resolve the issue. Neither alternative triggers release of the source code, and both are structured to address Vantage's legitimate concern about post-acquisition business continuity while protecting BCS's intellectual property and enterprise value.

It may be strategically effective to present these alternatives as part of a global resolution package — offering them in exchange for Vantage's agreement to close all five open issues simultaneously.

VIII. Summary of Settled Terms (For Reference)

For context on the call, the following is a summary of key commercial and legal terms that have been agreed by the parties and should be treated as closed. These terms are reflected in Calderwood & Harkness's final redline dated February 12, 2026, and are not subject to further negotiation.

IX. Recommended Call Strategy

Based on our analysis of the five open issues, we recommend the following strategy for the February 14, 2026 call:

Opening. We recommend that you open the call by acknowledging the significant progress that has been made across multiple rounds of negotiation. Both parties and their respective counsel have invested substantial time and effort in reaching agreement on the overwhelming majority of the Agreement's terms. The five remaining issues, while important, are resolvable, and both parties share an interest in reaching execution by February 20, 2026. Setting a collaborative and forward-looking tone at the outset of the call will be productive.

Prioritization. We recommend prioritizing the five issues as follows:

Firm "Hold" Positions (Issues No. 1, No. 3, and No. 5):

• Issue No. 1 (Audit Rights Frequency — Section 8.4): Annual audit rights with 30 days' prior written notice. This is a non-negotiable revenue protection mechanism. If needed, offer the potential compromise (5-business-day audit cap, one audit per contract year), but do not volunteer it unless Vantage presses hard.

• Issue No. 3 (Consequential Damages Carve-Out — Section 14.3): All three carve-outs (breach of confidentiality, IP indemnity, willful misconduct) must remain. If Vantage raises concerns about the scope of confidentiality obligations, offer to discuss definitional refinements to Article 10, but do not concede on the carve-out itself.

• Issue No. 5 (Source Code Escrow Change-of-Control Trigger — Exhibit E): Continue to reject the change-of-control release trigger. If needed, offer the alternative concessions (change-of-control notice covenant and post-change-of-control termination right) as part of a global resolution package.

BCS Concession Already Made (Issue No. 2):

• Issue No. 2 (Non-Compete / "Competing Product" Definition — Section 12.2): BCS has already made a meaningful concession by accepting the SCADA-only carve-out, which was not in the original draft. Frame the bright-line "no cloud-based IoT" test as a reasonable and necessary condition on that concession. Reject the "primary purpose" qualifier without equivocation.

Concession to Be Leveraged (Issue No. 4):

• Issue No. 4 (MAC Shortfall Pro-Ration — Section 5.6): BCS has already accepted Vantage's day-count formula in our final redline. Use this concession affirmatively on the call as evidence of BCS's willingness to compromise and as leverage for holding firm on the other issues. Confirm the 45-day payment window and the limitation to termination for convenience (not termination for cause).

Sequencing. We recommend addressing Issue No. 4 first, as it is the one issue on which BCS has already conceded. This allows BCS to lead with a demonstration of flexibility and good faith. Follow with Issue No. 2, where BCS has also made a concession (the SCADA-only carve-out) but is holding firm on the limiting condition. Then address Issues No. 1, No. 3, and No. 5 in sequence. Save Issue No. 5 for last, as it is the issue on which we have the most significant fallback concessions to offer if needed.

Global Resolution. If the call is progressing toward impasse on one or more issues, consider offering the alternative concessions on Issue No. 5 (change-of-control notice covenant and termination right) as part of a comprehensive package to resolve all five remaining issues simultaneously. Frame the offer as: "BCS is prepared to agree to [notice covenant and termination right on change of control] as part of a package in which all five open issues are resolved today, so that we can proceed to execution on February 20."

Goal. The goal of the call is to resolve all five open issues so that execution-ready documents can be finalized by February 18, 2026, for signing on February 20, 2026. We believe this timeline is achievable if the call is productive.

X. Next Steps

The following action items should be completed in connection with the February 14, 2026 call and the target execution date of February 20, 2026:

Pre-Call:

1. Douglas Fairchild to review this memorandum and provide any feedback or questions before the February 14 call. Please direct any comments to Robert Jansen by end of day February 13, 2026.

2. Robert Jansen to brief Priya Narasimhan (General Counsel, BCS) and Connor Whitfield (VP, Business Development, BCS) on the recommended positions set forth in this memorandum by end of day February 12, 2026. Robert will also confirm the call logistics and participant list with BCS and with Thomas Ellsworth at Lattimore, Parish & Keene LLP.

Post-Call:

3. Amy Chesterton to prepare the execution version of the OEM Reseller Agreement and all exhibits (Exhibits A through E), incorporating any agreed revisions resulting from the February 14 call, for circulation to all parties by no later than February 18, 2026. The execution version will be prepared in clean and blackline formats.

4. Signing Checklist Items to be finalized concurrently with the execution version of the Agreement. The following items are required for closing:

(a) Officer's certificate of BCS, to be executed by Martin Lacroix (Chief Executive Officer, BCS), certifying authorization, incumbency, and good standing.

(b) Officer's certificate of Vantage, to be executed by Gregory Harmon (Chief Executive Officer, Vantage), certifying authorization, incumbency, and good standing.

(c) Certificate of good standing for BCS issued by the Delaware Secretary of State (to be obtained no earlier than five business days before execution).

(d) Certificate of good standing for Vantage issued by the appropriate authority for Vantage's state of organization (to be confirmed with Lattimore, Parish & Keene LLP).

(e) Certificate of insurance from Me

CALDERWOOD & HARKNESS LLP 1700 Pacific Avenue, Suite 4200 Dallas, Texas 75201
MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the work product doctrine. It is prepared solely for the use of the addressee in connection with the above-referenced engagement and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.
TO: Douglas Fairchild, Responsible Partner
FROM: Robert Jansen, Lead Associate; Amy Chesterton, Working Associate
DATE: February 11, 2026
RE: Outstanding Negotiation Issues and Recommended Positions — OEM Reseller Agreement between Brightfield Cloud Services Inc. and Vantage Industrial Solutions, LLC
ENGAGEMENT NO.: 1042-00005
I. Executive Summary
The purpose of this memorandum is to brief you ahead of the outstanding issues call currently scheduled for 2:00 p.m. CST on Friday, February 14, 2026, between principals and counsel for our client, Brightfield Cloud Services Inc. ("BCS"), and the counterparty, Vantage Industrial Solutions, LLC ("Vantage"). This memorandum identifies and analyzes each of the five remaining open negotiation issues in the proposed OEM Reseller Agreement (the "Agreement"), sets forth the current state of play for each issue, and presents our recommended positions and supporting rationale for the call.
BCS is represented by Calderwood & Harkness LLP. Vantage is represented by Lattimore, Parish & Keene LLP, with Thomas Ellsworth serving as lead partner and Jennifer Murata as working associate on the matter. We have had constructive interactions with Vantage's counsel throughout the negotiation process, and the relationship between the parties' legal teams remains professional and productive.
The anticipated BCS participants on the February 14 call are Priya Narasimhan (General Counsel, BCS), Connor Whitfield (Vice President, Business Development, BCS), and you. We anticipate that Vantage will be represented on the call by Laura Pentland (General Counsel, Vantage), Derek Yun (Vice President, Supply Chain & Procurement, Vantage), and Thomas Ellsworth of Lattimore, Parish & Keene LLP. Robert Jansen will attend on behalf of Calderwood & Harkness as well, and Amy Chesterton will be available by phone if needed.
The target execution date for the Agreement remains February 20, 2026. Maintaining this timeline is important to both parties, as BCS's fiscal quarter closes on March 31, 2026, and BCS management wishes to recognize the upfront license fee and initial hardware orders within the current quarter.
Transaction Overview. The Agreement governs Vantage's right to embed and resell BCS's BrightEdge IoT Platform — which comprises SaaS-based analytics software, proprietary edge-computing firmware, and two hardware sensor module product lines (the BE-400 and BE-600) — to end users in the United States and Canada for an initial term of three years. The relationship is structured as a non-exclusive OEM reseller arrangement, subject to a Limited Exclusivity Covenant under which BCS has agreed to appoint no more than four additional OEM resellers in the industrial automation vertical during the initial term.
The total deal value is $15,000,000, derived from a Minimum Annual Commitment ("MAC") of $5,000,000 per contract year across the three-year initial term. In addition to the MAC, Vantage will pay BCS a software royalty of 18% of Vantage's net resale price for all BrightEdge SaaS subscriptions sold to end users, payable quarterly in arrears. An upfront license fee of $750,000 (non-refundable) is due within ten business days of execution and will be credited against the Year 1 MAC, yielding a Year 1 net remaining MAC obligation of $4,250,000.
Negotiation History. The Agreement has been through multiple rounds of negotiation, as follows:
• January 6, 2026: Calderwood & Harkness circulated the first draft of the Agreement.
• January 17, 2026: Lattimore, Parish & Keene LLP delivered Vantage's first markup, which introduced changes across audit rights, non-compete definitions, liability carve-outs, MAC shortfall mechanics, and source code escrow triggers.
• January 29, 2026: Calderwood & Harkness delivered a counter-redline addressing each of Vantage's proposals.
• February 5, 2026: Lattimore, Parish & Keene LLP delivered Vantage's second markup, which narrowed the disputes but maintained Vantage's positions on several key points.
• February 12, 2026: Calderwood & Harkness delivered its final redline reflecting BCS's positions on all remaining open issues.
After five rounds of drafting, the parties have resolved the vast majority of the Agreement's terms. Five issues remain open, and these are the subject of the February 14 call. We summarize these issues and our recommended positions below:
Issue No. 1 — Audit Rights Frequency (Section 8.4): BCS seeks annual audit rights; Vantage seeks biennial. Recommendation: Hold firm at annual.
Issue No. 2 — "Competing Product" Definition (Section 12.2): BCS accepts a SCADA-only carve-out but insists on a bright-line condition excluding any cloud-based IoT functionality; Vantage seeks a subjective "primary purpose" test. Recommendation: Reject the "primary purpose" qualifier; maintain the bright-line test.
Issue No. 3 — Consequential Damages Carve-Outs (Section 14.3): Vantage seeks to remove breach of confidentiality from the list of carve-outs to the mutual consequential damages waiver. Recommendation: Reject the removal; maintain all three carve-outs.
Issue No. 4 — MAC Shortfall Pro-Ration on Termination for Convenience (Section 5.6): BCS has accepted Vantage's day-count pro-ration formula. Recommendation: Confirm acceptance; clarify applicability only to termination for convenience and confirm the 45-day payment window.
Issue No. 5 — Source Code Escrow Change-of-Control Release Trigger (Exhibit E): Vantage seeks to add a change-of-control event as a fourth release trigger. Recommendation: Continue to reject; offer alternative concessions (change-of-control notice covenant and termination right) if needed to close the deal.
We note for context that several significant commercial and legal terms are now settled and should be treated as closed on the call. These include: the IP indemnity cap at $15,000,000 (100% of deal value); the general liability cap at $7,500,000 per party (50% of deal value); the upfront license fee of $750,000 (non-refundable, credited against Year 1 MAC); the software royalty at 18% of Vantage's net resale price payable quarterly in arrears; hardware unit pricing (BE-400 at $185/unit, BE-600 at $340/unit, FOB Austin, TX); the volume discount tier (6% discount on hardware above a $7,500,000 annual threshold); and the Limited Exclusivity Covenant (no more than four additional OEM resellers in the industrial automation vertical during the initial term). A complete summary of settled terms is provided in Section VIII of this memorandum for your reference.
The balance of this memorandum addresses each open issue in detail.
II. Procedural Background and Negotiation History
This engagement was opened on December 8, 2025, following initial outreach from BCS's General Counsel, Priya Narasimhan, to you regarding BCS's desire to formalize an OEM reseller relationship with Vantage for the BrightEdge IoT Platform. BCS and Vantage had been in preliminary commercial discussions since approximately October 2025, led on the business side by Connor Whitfield (VP, Business Development, BCS) and Derek Yun (VP, Supply Chain & Procurement, Vantage).
A non-binding term sheet was negotiated between the parties' respective business teams and executed on December 19, 2025, by Connor Whitfield on behalf of BCS and Derek Yun on behalf of Vantage. The term sheet set forth the principal commercial terms of the proposed arrangement, including the territory (United States and Canada), the initial term (three years), the MAC ($5,000,000 per year), the software royalty rate (18%), hardware unit pricing for the BE-400 and BE-600 modules, the upfront license fee ($750,000), and the general structure of the non-compete and exclusivity provisions. The term sheet was expressly designated as non-binding, subject to the negotiation and execution of a definitive OEM Reseller Agreement.
Calderwood & Harkness was engaged to draft and negotiate the definitive Agreement on behalf of BCS. Lattimore, Parish & Keene LLP was engaged by Vantage shortly thereafter. Thomas Ellsworth, a partner in Lattimore, Parish & Keene's Dallas office with whom we have had prior dealings on technology licensing matters, is serving as lead partner, with Jennifer Murata as working associate.
The drafting and negotiation process has proceeded as follows:
First Draft (January 6, 2026). Calderwood & Harkness circulated the initial draft of the OEM Reseller Agreement, together with the following exhibits: Exhibit A (BrightEdge Platform Specifications and Product Descriptions), Exhibit B (Hardware Pricing Schedule), Exhibit C (Software Royalty and MAC Mechanics), Exhibit D (Trademark License and Brand-Use Guidelines), and Exhibit E (Three-Party Source Code Escrow Agreement with Pinnacle Escrow Services, Inc.). The first draft reflected BCS's preferred positions on all material terms.
Vantage's First Markup (January 17, 2026). Lattimore, Parish & Keene LLP returned a comprehensive markup of the Agreement eleven days later. The markup introduced changes across a number of provisions, including but not limited to: (i) a request to reduce audit rights from annual to biennial (Section 8.4); (ii) proposed revisions to the definition of "Competing Product" to exclude legacy SCADA-only analytics products (Section 12.2); (iii) a request to remove breach of confidentiality from the consequential damages carve-outs (Section 14.3); (iv) a proposal to pro-rate the MAC shortfall upon termination for convenience (Section 5.6); and (v) a request to add a change-of-control release trigger to the source code escrow agreement (Exhibit E). In addition, Vantage's markup proposed a number of other changes to representations and warranties, insurance requirements, force majeure provisions, and data security obligations, substantially all of which were resolved in subsequent rounds of negotiation.
C&H Counter-Redline (January 29, 2026). Calderwood & Harkness prepared and delivered a counter-redline addressing each of Vantage's proposals. We accepted certain of Vantage's changes (particularly with respect to insurance requirements and force majeure), rejected others (audit frequency, consequential damages carve-outs, escrow triggers), and offered compromise positions on several issues (non-compete definition, MAC pro-ration).
Vantage's Second Markup (February 5, 2026). Lattimore, Parish & Keene LLP delivered a second markup that reflected meaningful progress. A significant number of previously open issues were resolved or narrowed in this round. However, Vantage maintained its positions on several key points, including the five issues that remain open as of this writing.
C&H Final Redline (February 12, 2026). Calderwood & Harkness delivered its final redline reflecting BCS's positions on all remaining open issues. This redline was transmitted to Lattimore, Parish & Keene LLP with a cover letter identifying the five open issues and requesting that the February 14 call serve as the forum for their resolution.
The February 14, 2026 call is intended to resolve all remaining open issues so that execution-ready documents can be prepared for signing on the target date of February 20, 2026. The upfront license fee of $750,000 is due within ten business days of execution (i.e., by March 6, 2026, assuming a February 20 execution date), and BCS's finance team has requested that all ancillary closing documents (officer's certificates, insurance certificates, wire instructions, and the countersigned source code escrow agreement) be finalized concurrently with the Agreement.
III. Open Issue No. 1: Audit Rights Frequency (Section 8.4)
A. Current State of Play
Section 8.4 of the Agreement addresses BCS's right to audit Vantage's books, records, and systems relating to Vantage's resale of BrightEdge platform products and services for the purpose of verifying the accuracy of royalty payments, MAC compliance, and other financial obligations under the Agreement. The negotiation history on this provision is as follows:
BCS's First Draft (January 6, 2026). Section 8.4 as drafted by Calderwood & Harkness granted BCS the right to audit Vantage's resale records on an annual basis — that is, no more than once per contract year — upon no less than thirty (30) days' prior written notice to Vantage. The audit was to be conducted during normal business hours at Vantage's principal office by BCS or its designated independent auditor, at BCS's expense (unless the audit revealed an underpayment exceeding five percent (5%) of the amounts due for the audited period, in which case Vantage would bear the audit costs and promptly pay the shortfall plus interest).
Vantage's First Markup (January 17, 2026). Vantage's counsel proposed reducing the audit frequency from annual to biennial (i.e., once every two contract years), citing the administrative burden and business disruption associated with annual audits. Vantage did not object to the 30-day notice period, the scope of the audit, or the cost-shifting provision tied to a 5% underpayment threshold. The sole point of contention was frequency.
C&H Counter-Redline (January 29, 2026). Our counter-redline reverted to annual audit rights with 30 days' prior written notice, noting in our accompanying cover letter that annual frequency is standard for royalty-bearing OEM reseller agreements and that BCS requires regular verification of revenue-dependent payment obligations.
Vantage's Second Markup (February 5, 2026). Vantage's second markup maintained its biennial position but included a comment in the margin (communicated by Jennifer Murata) expressing willingness to discuss a middle ground on the call. No specific alternative was proposed.
C&H Final Redline (February 12, 2026). Our final redline holds firm at annual audit rights with 30 days' prior written notice.
B. Analysis
Annual audit rights are critical to BCS's ability to protect its revenue under this Agreement, and we believe strongly that BCS should not concede on this point. The following considerations support this position:
Revenue Visibility. The software royalty component of BCS's revenue under the Agreement — 18% of Vantage's net resale price for all BrightEdge SaaS subscriptions sold to end users — is calculated based entirely on Vantage's own records of resale transactions. BCS has no independent visibility into end-user pricing, volume, or the manner in which Vantage bundles or discounts BrightEdge products in its downstream arrangements. Absent an audit, BCS must rely entirely on Vantage's self-reported figures to verify the accuracy of quarterly royalty payments. An annual audit provides a critical check on the integrity of these self-reported numbers.
MAC Compliance. The MAC of $5,000,000 per contract year, and the associated shortfall mechanism (under which Vantage must pay BCS any difference between the MAC and actual purchases within 45 days of each contract-year-end), similarly depends on accurate record-keeping by Vantage. If Vantage under-reports or miscategorizes purchases, BCS could lose meaningful revenue — particularly given that the MAC includes both hardware purchases and software royalties. Annual verification is essential to ensure that the MAC is being properly applied and that any shortfalls are correctly calculated.
Exposure Period. Biennial audits would leave BCS exposed for up to two full contract years before any discrepancy in Vantage's records could be detected and remedied. Given the scale of the financial obligations at issue — $5,000,000 per year in MAC alone, plus royalties — the potential magnitude of an undetected under-reporting error over a 24-month period is significant. By contrast, annual audits limit BCS's maximum unaudited exposure to a single contract year.
Market Standard. Annual audit rights are the prevailing market standard for OEM and reseller agreements of this type and scale. In our experience with comparable technology licensing and reseller transactions with total deal values in the range of $10,000,000 to $25,000,000, annual audit rights (typically with 20 to 30 days' prior written notice) are the norm. Biennial audit rights are atypical and, in our experience, are more commonly associated with lower-value distribution agreements where the licensor has less revenue exposure.
Notice Period. The 30-day prior written notice requirement is a meaningful accommodation to Vantage, providing ample time for Vantage's finance and operations teams to prepare for the audit, assemble relevant records, and designate appropriate personnel to assist BCS's auditor. This is at the longer end of the market range (which typically runs from 15 to 30 days).
Auditor Alignment. BCS's independent auditor, Whitmore & Callahan, LLP, would likely conduct or be engaged to assist with any audit under Section 8.4. Whitmore & Callahan's existing engagement with BCS operates on an annual cycle, and an annual audit cadence under the Agreement aligns with their engagement timeline and reporting calendar. A biennial schedule would create an awkward mismatch with Whitmore & Callahan's regular work and could result in increased costs to BCS for ad hoc engagements.
C. Recommendation
Hold firm at annual audits with 30 days' prior written notice. We do not recommend conceding to biennial frequency under any circumstances. This is a fundamental revenue-protection mechanism for BCS, and the case for annual audits is well-supported by both the economics of this deal and market practice.
If Vantage pushes back strongly on the call and seeks a compromise, we have identified one potential fallback position that we believe would be acceptable to BCS while providing Vantage with some additional comfort:
Potential Compromise (offer only if necessary): BCS would agree to (i) cap the duration of each annual audit at five (5) business days on-site, and (ii) confirm in the agreement text that BCS shall conduct no more than one (1) audit per contract year. This addresses Vantage's stated concern about administrative burden and business disruption without sacrificing the annual frequency that is essential to BCS's revenue integrity.
Do not volunteer this compromise affirmatively. It should be held in reserve and offered only if Vantage makes clear on the call that biennial frequency is a strong priority and the parties are at an impasse on this issue.
Annual frequency is non-negotiable for revenue integrity given the royalty-based economics of this transaction.
IV. Open Issue No. 2: Non-Compete / "Competing Product" Definition (Section 12.2)
A. Current State of Play
Section 12.2 of the Agreement contains a non-competition covenant under which Vantage agrees not to develop, manufacture, market, distribute, or resell any "Competing Product" in the Territory during the term of the Agreement and for a period of twelve (12) months following termination or expiration. The central dispute concerns the definition of "Competing Product." The negotiation history is as follows:
BCS's First Draft (January 6, 2026). Section 12.2 as originally drafted by Calderwood & Harkness defined "Competing Product" broadly to include "any product or service that provides analytics, monitoring, or data collection functionality for industrial automation applications." This definition was intentionally broad, reflecting BCS's interest in protecting the competitive position of the BrightEdge IoT Platform across the full range of its functional capabilities.
Vantage's First Markup (January 17, 2026). Vantage's counsel requested a narrowing of the definition to exclude legacy SCADA-only analytics products. Vantage argued that its existing product line includes a suite of standalone SCADA interface tools — primarily used for interfacing with programmable logic controllers and legacy supervisory control systems — that have been on the market for over a decade and do not compete with the BrightEdge IoT Platform. Vantage represented that these SCADA-only tools do not incorporate cloud-based analytics, edge computing, or IoT sensor functionality, and that requiring Vantage to abandon or discontinue them would be commercially unreasonable and was not contemplated by the parties' term sheet.
C&H Counter-Redline (January 29, 2026). Our counter-redline conditionally accepted the SCADA-only carve-out but added a critical limiting condition: the carve-out would apply only to products that do not incorporate any cloud-based IoT functionality. Specifically, we proposed the following formulation: "Competing Product" excludes "standalone SCADA interface products that do not incorporate cloud-based Internet of Things functionality, including but not limited to cloud-based analytics, cloud-based monitoring, or cloud-based data collection." This bright-line test was designed to protect BCS's core technology while accommodating Vantage's legitimate interest in maintaining its legacy SCADA product line.
Vantage's Second Markup (February 5, 2026). Vantage accepted the general concept of the SCADA-only carve-out with a cloud-based IoT limitation, but sought to broaden the carve-out by introducing a subjective qualifier. Specifically, Vantage proposed that the carve-out apply to any product "whose primary purpose is not cloud-based IoT functionality," introducing a "primary purpose" test. Under this formulation, a product could incorporate some degree of cloud-based IoT functionality and still fall within the carve-out, provided that cloud-based IoT was not its "primary purpose."
C&H Final Redline (February 12, 2026). Our final redline rejects the "primary purpose" qualifier and reinstates the bright-line test. Under our proposed formulation, the SCADA-only carve-out applies exclusively to products that do not incorporate any cloud-based IoT functionality. We believe this is the only formulation that provides adequate protection for BCS.
B. Analysis
The definition of "Competing Product" is a critical provision for BCS, and the distinction between the bright-line test and the "primary purpose" test is substantively significant. The following considerations inform our analysis:
BCS's Core Competitive Advantage. The BrightEdge platform's fundamental differentiator in the industrial automation market is its proprietary cloud-based IoT analytics layer, which operates in conjunction with edge-computing firmware deployed on BCS's BE-400 and BE-600 sensor hardware modules. The platform collects data from industrial equipment through its edge firmware and sensor modules, transmits that data to BCS's cloud infrastructure, and applies proprietary analytics algorithms to generate actionable insights for the end user. It is the integration of cloud-based IoT analytics with edge computing and hardware that distinguishes BrightEdge from legacy SCADA systems and competing offerings. A carve-out that permits Vantage to develop or distribute products incorporating any degree of cloud-based IoT capability — even if such capability is characterized as incidental or secondary — would directly threaten BCS's competitive position and undermine the commercial value of this Agreement.
Legitimacy of the SCADA-Only Carve-Out. We acknowledge that Vantage's legacy SCADA interface tools are well-established in the market, predate the BrightEdge platform, and genuinely do not compete with BCS's offering. These tools are designed primarily for on-premises interfacing with programmable logic controllers and supervisory control systems, and they do not incorporate cloud connectivity, IoT sensor integration, or cloud-based analytics. Carving out these legacy products from the non-compete is commercially reasonable and appropriate. The SCADA-only carve-out, properly limited, reflects the parties' mutual understanding as reflected in the term sheet negotiations.
The "Primary Purpose" Test Is Unacceptably Subjective. The "primary purpose" qualifier proposed by Vantage introduces a subjective standard that would be inherently difficult to administer and enforce. What constitutes the "primary purpose" of a product is a matter of judgment and characterization, not an objective factual determination. Vantage could develop a product that is nominally SCADA-centric in its marketing and documentation but that incorporates substantial cloud-based IoT features — for example, a SCADA interface tool with an integrated cloud dashboard for remote monitoring and IoT data aggregation — and argue that its "primary purpose" remains SCADA interface functionality. This would effectively gut the non-compete and allow Vantage to compete directly with BrightEdge while ostensibly remaining within the carve-out. The risk of abuse is too significant to accept.
Bright-Line Test Provides Certainty. The bright-line test proposed by Calderwood & Harkness — the carve-out applies only to products that do not incorporate any cloud-based IoT functionality — is clear, objective, and administrable. It draws a clean line between Vantage's legitimate legacy SCADA products (which, by Vantage's own representation, do not incorporate cloud-based IoT functionality) and products that would compete with BrightEdge. If Vantage's existing SCADA tools truly lack cloud-based IoT features, as Vantage has represented, the bright-line test should be unobjectionable.
PE Sponsor Interest. BCS's majority equity holder, Veltrano Capital Partners Fund IV, L.P. (holding approximately 68% of BCS's equity), has a strong institutional interest in protecting the competitive moat around the BrightEdge platform. Nathaniel Burgess, Veltrano's deal partner and board observer at BCS, has been briefed on this issue. The non-compete and the definition of "Competing Product" are directly relevant to BCS's enterprise value and, by extension, to Veltrano's investment thesis. Any weakening of the non-compete's enforceability could adversely affect future valuation discussions.
Leverage Consideration. BCS has already made a meaningful concession by accepting the SCADA-only carve-out at all. The original draft contained no such carve-out, and BCS's willingness to accommodate Vantage's legacy product line should be acknowledged on the call. Additionally, the Limited Exclusivity Covenant — under which BCS has agreed to appoint no more than four additional OEM resellers in the industrial automation vertical during the initial three-year term — provides Vantage with meaningful market positioning and is itself a substantial concession by BCS. These concessions should be used to frame the bright-line "no cloud-based IoT" test as a reasonable condition rather than a hard-line position.
C. Recommendation
Accept the SCADA-only carve-out conditioned on excluding any cloud-based IoT functionality. Reject Vantage's "primary purpose" qualifier. The bright-line test — requiring that the carve-out apply only to products that do not incorporate any cloud-based IoT functionality whatsoever — is the only formulation that provides adequate protection for BCS's competitive position and intellectual property.
If Vantage resists on the call, the following talking points may be useful:
(a) BCS has already demonstrated flexibility by accepting the SCADA-only carve-out, which was not in the original draft.
(b) The Limited Exclusivity Covenant provides Vantage with meaningful market positioning that further evidences BCS's willingness to accommodate Vantage's interests.
(c) The bright-line test is consistent with Vantage's own representations about its legacy SCADA products — if those products truly do not incorporate cloud-based IoT functionality, the bright-line test should not be problematic for Vantage.
(d) The "primary purpose" test would introduce unacceptable ambiguity and potential for dispute, which is contrary to both parties' interests in a clear and workable agreement.
We do not recommend any fallback or compromise position on this issue. The bright-line test is the minimum acceptable formulation.
V. Open Issue No. 3: Consequential Damages Carve-Outs (Section 14.3)
A. Current State of Play
Section 14.3 of the Agreement addresses the parties' mutual waiver of indirect, incidental, special, and consequential damages, subject to certain carve-outs. The negotiation history on this provision is as follows:
BCS's First Draft (January 6, 2026). Section 14.3 as originally drafted included a mutual exclusion of indirect, incidental, special, and consequential damages (including, without limitation, lost profits, lost revenue, loss of data, and cost of cover), with three specified carve-outs. The carve-outs provided that the consequential damages waiver would not apply to damages arising from or related to: (i) a breach of the confidentiality obligations set forth in Article 10 of the Agreement; (ii) either party's IP indemnity obligations set forth in Section 14.1; or (iii) willful misconduct by either party. These carve-outs are mutual — they apply equally to both BCS and Vantage.
Vantage's First Markup (January 17, 2026). Lattimore, Parish & Keene LLP proposed removing "breach of confidentiality obligations" (carve-out (i)) from the list of carve-outs. Under Vantage's proposed revision, consequential damages would be waived even in the event of a breach of the confidentiality obligations — the sole remedies available would be direct damages (subject to the general liability cap of $7,500,000) and injunctive relief. Vantage did not object to the IP indemnity or willful misconduct carve-outs.
C&H Counter-Redline (January 29, 2026). Our counter-redline rejected the removal and maintained all three carve-outs. In our cover letter, we noted that the confidentiality obligations in Article 10 protect BCS's most sensitive intellectual property and trade secrets, and that consequential damages (such as loss of competitive advantage and erosion of market position) are the most likely and most significant category of harm arising from a confidentiality breach. Removing the carve-out would leave BCS without an adequate remedy.
Vantage's Second Markup (February 5, 2026). Vantage reiterated its request to remove the confidentiality breach carve-out, arguing in commentary provided by Jennifer Murata that the general liability cap of $7,500,000 per party provides adequate overall protection against confidentiality-related claims and that maintaining the carve-out exposes Vantage to potentially unlimited consequential damages for what could be an inadvertent or minor breach.
C&H Final Redline (February 12, 2026). Our final redline continues to reject the removal of the confidentiality breach carve-out. All three carve-outs remain in the current draft.
B. Analysis
The confidentiality breach carve-out is a critical protection for BCS and should not be conceded. The following considerations inform our analysis:
Nature of BCS's Confidential Information. BCS's BrightEdge platform incorporates proprietary trade secrets, algorithms, hardware designs, and other intellectual property of extraordinary value. Under the Agreement, BCS will disclose to Vantage a substantial body of confidential information, including but not limited to: technical documentation and specifications for the BrightEdge platform; API keys and integration specifications necessary for Vantage to embed BrightEdge into its products; firmware source code access credentials; hardware design schematics for the BE-400 and BE-600 modules; pricing methodologies and margin structures; customer data analytics models; and, potentially, access to BrightEdge source code under the escrow mechanism with Pinnacle Escrow Services, Inc. The disclosure of this information to a competitor — or its unauthorized use by Vantage in connection with a competing product — could cause irreparable harm to BCS's competitive position.
Consequential Damages Are the Primary Harm. The most significant damages arising from a breach of confidentiality are inherently indirect or consequential in nature. If Vantage were to disclose BCS's proprietary algorithms or hardware design specifications to a third party, or if a Vantage employee were to use BCS's trade secrets to develop a competing product, the resulting harm to BCS would primarily take the form of loss of competitive advantage, erosion of market position, lost future revenue, and diminished enterprise value. These are quintessentially consequential damages. If the carve-out is removed and the consequential damages waiver applies to confidentiality breaches, BCS's recovery would be limited to direct damages — essentially, the cost of the confidential information itself, which may be nominal or difficult to quantify — and would not capture the real economic harm.
General Liability Cap Is Not a Substitute. Vantage's argument that the general liability cap of $7,500,000 provides adequate protection conflates two distinct concepts. The liability cap limits the total quantum of damages recoverable; the carve-out addresses whether the category of consequential damages is available at all. Even with the carve-out in place, the general liability cap continues to apply as an overall ceiling on BCS's total recovery (except to the extent of the separate IP indemnity cap of $15,000,000). The carve-out simply ensures that BCS is not further restricted from recovering the most significant category of damages — consequential damages — within that cap. Without the carve-out, BCS would be doubly limited: first by the categorical exclusion of consequential damages, and then by the general liability cap. This would leave BCS with inadequate protection for its most valuable assets.
Vantage's Real Concern. The fact that Vantage's objection is specific to the confidentiality carve-out — Vantage has not contested the IP indemnity or willful misconduct carve-outs — suggests that Vantage's underlying concern may relate to the perceived breadth of its confidentiality obligations under Article 10 rather than to the damages framework itself. If this is the case, the appropriate response is to address Vantage's concern at the definitional level — for example, by clarifying what constitutes "Confidential Information" or by adding standard exclusions for information that: (a) is or becomes publicly available through no fault of the receiving party; (b) was in the receiving party's possession prior to disclosure; (c) is independently developed by the receiving party without reference to the disclosing party's confidential information; or (d) is received from a third party not subject to a confidentiality obligation. These are standard exclusions that may already be present in Article 10 (we will confirm the current draft language before the call) and would provide Vantage with meaningful protection against claims arising from information that is not genuinely confidential.
Market Practice. In our experience with technology licensing agreements of comparable scale and structure, inclusion of a confidentiality breach carve-out to the consequential damages waiver is standard practice. This is particularly true in agreements involving the disclosure of trade secrets, source code, and proprietary technology — which is precisely the case here. Removing the carve-out would place BCS in a weaker position than is typical for licensors in transactions of this nature.
C. Recommendation
Reject the removal of breach of confidentiality from the consequential damages carve-out. This is a critical protection for BCS's trade secrets and proprietary technology, and the case for maintaining it is compelling from both a legal and commercial standpoint. All three carve-outs — breach of confidentiality, IP indemnity, and willful misconduct — must remain.
If Vantage raises specific concerns on the call about the scope of its confidentiality obligations, we recommend offering to discuss the following accommodations (none of which involve conceding on the carve-out itself):
(a) Confirming or adding standard exclusions to the definition of "Confidential Information" in Article 10 (publicly available information, prior possession, independent development, third-party receipt).
(b) Clarifying that the confidentiality obligations apply only to information that is clearly identified as confidential at the time of disclosure (or, if disclosed orally, confirmed in writing within a reasonable period).
(c) Confirming that the confidentiality breach carve-out does not alter the applicable burden of proof — BCS would still bear the burden of demonstrating that a breach occurred and that consequential damages resulted from such breach.
These are reasonable accommodations that address Vantage's potential concerns without sacrificing BCS's substantive protection. We do not recommend any further concession on this issue.
VI. Open Issue No. 4: MAC Shortfall Pro-Ration on Termination for Convenience (Section 5.6)
A. Current State of Play
Section 5.6 of the Agreement addresses the calculation and payment of any MAC shortfall upon a termination for convenience by either party. The Agreement provides that either party may terminate for convenience on no less than one hundred eighty (180) days' prior written notice, provided that such notice may not be given earlier than the first anniversary of the Effective Date. The negotiation history on the MAC shortfall pro-ration issue is as follows:
BCS's First Draft (January 6, 2026). Section 5.6 as originally drafted required Vantage, upon any termination for convenience, to pay BCS any outstanding MAC shortfall through the end of the then-current contract year. Under this formulation, if Vantage terminated for convenience on day 200 of a contract year, Vantage would owe BCS the shortfall between its actual purchases during the year to date and the full annual MAC of $5,000,000 — without any pro-ration.
Vantage's First Markup (January 17, 2026). Vantage proposed pro-rating the MAC shortfall if termination for convenience occurs mid-year, rather than requiring payment of the full annual MAC for a partial year. Vantage argued that requiring payment of the full annual MAC for a year in which the Agreement is in effect for only a portion of the period would be inequitable and could function as a de facto termination penalty.
C&H Counter-Redline (January 29, 2026). Our counter-redline agreed in principle to a pro-rata mechanism, acknowledging that a full-year MAC requirement for a partial year could present enforceability concerns. However, we reserved on the specific formula pending further discussion with BCS's finance team.
Vantage's Second Markup (February 5, 2026). Vantage proposed a specific day-count formula for the pro-ration: pro-rated MAC = $5,000,000 × (elapsed days in the contract year through the date of termination / 365). Vantage would owe BCS the shortfall, if any, between its actual purchases during the elapsed portion of the year and the pro-rated MAC.
C&H Final Redline (February 12, 2026). After consultation with BCS's finance team, our final redline accepts the day-count formula as proposed by Vantage.
B. Analysis
The day-count pro-ration formula is commercially fair to both parties, and we believe BCS's acceptance of this formula is appropriate. The following considerations support this conclusion:
Fairness. The day-count formula allocates the MAC obligation proportionally based on the number of days the Agreement is in effect during the contract year in which termination occurs. This is a straightforward and intuitive approach. For example, if termination for convenience takes effect on day 200 of a 365-day contract year, the pro-rated MAC would be $5,000,000 × (200/365) = approximately $2,739,726. Vantage would owe BCS the shortfall, if any, between its actual purchases during those 200 days and $2,739,726. This approach protects BCS from a total loss of the MAC obligation for the partial year (BCS retains the benefit of the pro-rated commitment) while avoiding a windfall claim against Vantage for the full annual MAC when the contract is in effect for only a portion of the year.
180-Day Notice Period. The 180-day notice period for termination for convenience already provides BCS with substantial runway to manage the business impact of a termination. During the notice period, the Agreement remains in full force and effect, and Vantage's MAC obligation continues to accrue. The combination of a 180-day notice period and a pro-rated MAC for the terminal year provides BCS with a commercially reasonable level of protection.
Enforceability Considerations. Requiring payment of the full annual MAC upon a mid-year termination for convenience could be viewed under Delaware law as an unenforceable penalty clause rather than a reasonable estimate of BCS's damages. Delaware courts have generally held that contractual provisions requiring payment of a fixed sum upon termination must bear a reasonable relationship to the anticipated harm caused by the termination; otherwise, they may be struck down as penalties. A pro-rated formula that ties the obligation to the period during which the Agreement was actually in effect is more likely to be viewed as a reasonable liquidated damages provision and, accordingly, is more likely to be enforceable.
Payment Terms. The shortfall payment under the pro-ration formula remains due within forty-five (45) days of the effective date of termination, consistent with the 45-day payment period applicable to annual MAC shortfalls in the ordinary course under Section 5.4. This provides Vantage with a reasonable period to calculate and remit the shortfall while ensuring that BCS receives payment promptly following termination.
Scope Limitation. It is important to confirm on the call that the pro-ration formula applies only to termination for convenience under Section 5.6. Termination for cause — which requires a 30-day cure period for material breach (15 days for payment defaults) under Section 16.2 — should trigger the full MAC shortfall for the entire contract year as a remedy for the breach. This distinction is reflected in our final redline, but it should be expressly confirmed during the call to avoid any ambiguity.
C. Recommendation
Accept the day-count formula: pro-rated MAC = $5,000,000 × (elapsed days in the contract year / 365). This position has already been reflected in Calderwood & Harkness's final redline and is commercially reasonable. On the call, we recommend addressing the following two points to ensure clarity:
(a) Confirm that the 45-day payment window applicable to ordinary-course annual MAC shortfalls also applies to the termination shortfall payment under the pro-ration formula.
(b) Confirm that the pro-ration formula applies only to termination for convenience under Section 5.6. Termination for cause under Section 16.2 should trigger the full MAC shortfall for the entire contract year, without pro-ration, as a remedy for the breaching party's default.
BCS's acceptance of the day-count formula represents a genuine concession and should be used strategically on the call as evidence of BCS's willingness to compromise. This can serve as leverage for holding firm on the other open issues, particularly Issues No. 1 (audit rights), No. 3 (consequential damages carve-out), and No. 5 (source code escrow).
VII. Open Issue No. 5: Source Code Escrow — Change-of-Control Release Trigger (Exhibit E)
A. Current State of Play
Exhibit E to the Agreement is a three-party source code escrow agreement among BCS (as depositor), Vantage (as beneficiary), and Pinnacle Escrow Services, Inc. (as escrow agent). The escrow agreement provides for the deposit and maintenance of the BrightEdge platform source code (version 4.2 and all subsequent updates delivered during the term) with Pinnacle Escrow Services, and specifies the conditions under which Vantage may obtain release of the escrowed materials. Rafael Dominguez of Pinnacle Escrow Services is the designated account manager for this arrangement and has been involved in preliminary discussions regarding the form of the escrow agreement.
The dispute concerns whether a "change of control" of BCS should be added as a fourth release trigger. The negotiation history is as follows:
BCS's First Draft (January 6, 2026). Exhibit E as originally drafted by Calderwood & Harkness limited the release conditions to three triggers:
(a) BCS ceases business operations (other than a temporary cessation due to force majeure lasting no more than ninety (90) days);
(b) BCS files a voluntary petition for bankruptcy under Title 11 of the United States Code, or an involuntary petition is filed against BCS and not dismissed within sixty (60) days; or
(c) BCS materially fails to maintain or support the BrightEdge platform software for a period of more than one hundred twenty (120) consecutive days after Vantage delivers written notice of such failure to BCS and Pinnacle Escrow Services, Inc., and such failure is not cured within an additional thirty (30) days following BCS's receipt of Vantage's notice.
Vantage's First Markup (January 17, 2026). Vantage proposed adding a fourth release trigger: a "change of control" of BCS, defined broadly to include any direct or indirect transfer, sale, assignment, or other disposition of more than fifty percent (50%) of the equity interests or voting interests of BCS, or a sale, transfer, or other disposition of all or substantially all of the assets of BCS.
C&H Counter-Redline (January 29, 2026). Our counter-redline rejected the change-of-control trigger in its entirety. We noted in our cover letter that the existing three release conditions adequately protect Vantage against the genuine risk scenarios that the escrow mechanism is designed to address, and that a change-of-control trigger is not warranted in the context of a non-exclusive OEM reseller relationship.
Vantage's Second Markup (February 5, 2026). Vantage reiterated its request for the change-of-control trigger, with Jennifer Murata providing commentary arguing that a change of control could result in a new owner of BCS discontinuing support for the BrightEdge platform, redirecting engineering resources to other products, or otherwise impairing Vantage's ability to continue reselling BrightEdge products. Vantage characterized the change-of-control trigger as a "business continuity" protection.
C&H Final Redline (February 12, 2026). Our final redline continues to reject the change-of-control trigger.
B. Analysis
The change-of-control release trigger is commercially unacceptable to BCS and should be firmly rejected. The following considerations support this position:
PE Ownership Structure. BCS is majority-owned by Veltrano Capital Partners Fund IV, L.P., which holds approximately 68% of BCS's equity. Veltrano Capital Partners is a private equity firm headquartered in Charlotte, North Carolina, with approximately $1.4 billion in assets under management. Helena Forsythe serves as managing partner, and Nathaniel Burgess serves as the deal partner and board observer with respect to the BCS investment.
Private equity ownership inherently contemplates future exit transactions, which may include sales to strategic acquirers, secondary sales to other private equity firms, recapitalizations, or initial public offerings. Each of these exit scenarios could constitute a "change of control" under the broad definition proposed by Vantage. A change-of-control release trigger in the escrow agreement would effectively hand Vantage access to BCS's BrightEdge source code upon any PE exit event — a result that is commercially unacceptable to BCS, to Veltrano Capital Partners, and to any potential acquirer of BCS.
Source Code Value. The BrightEdge platform source code is among BCS's most valuable intellectual property assets. The source code embodies years of research and development, proprietary algorithms, and trade secrets that constitute the core of BCS's competitive advantage in the industrial IoT analytics market. Release of the source code to Vantage upon a change of control — absent any failure by BCS or its successor to maintain or support the software — would effectively transfer a significant portion of BCS's intellectual property value to a reseller without adequate justification or compensation.
Impact on Enterprise Value. The existence of a change-of-control source code release trigger would adversely affect BCS's enterprise value in the context of any future sale or exit transaction. A potential acquirer would view the trigger as a material encumbrance on BCS's intellectual property — the acquirer would know that completing the acquisition would automatically trigger the release of source code to a third-party reseller, who could then use or disclose the source code (subject to any use restrictions in the escrow agreement). This would reduce the acquirer's willingness to pay for BCS and would directly harm the interests of Veltrano Capital Partners Fund IV, L.P. and BCS management, who hold equity.
Existing Release Conditions Are Adequate. The three existing release triggers address the legitimate risk scenarios that the escrow mechanism is designed to protect against. If a change of control occurs and the new owner of BCS: (a) ceases operations, the first trigger applies; (b) files for bankruptcy, the second trigger applies; or (c) materially fails to maintain or support the software for 120+ consecutive days, the third trigger applies. In each case, Vantage would have access to the source code. The only scenario not covered by the existing triggers is a change of control in which the new owner continues to maintain and support the BrightEdge platform — but in that scenario, Vantage has no legitimate need for source code access because the software is being properly maintained.
Market Practice. A change-of-control release trigger is not standard in OEM reseller escrow arrangements. It is more commonly seen — though still frequently contested and resisted — in single-licensee, mission-critical software deployments where the licensee has a uniquely high degree of dependency on the software and no viable alternative. The present arrangement is distinguishable: Vantage is a non-exclusive OEM reseller, not a sole licensee. BCS may appoint up to four additional OEM resellers in the industrial automation vertical during the initial term, and the BrightEdge platform is available to other customers and channels. Vantage's dependency on BrightEdge, while commercially significant, does not rise to the level that would warrant a change-of-control source code release.
Precedent Concern. Accepting a change-of-control release trigger in this Agreement would set a problematic precedent for BCS's relationships with other current and future OEM resellers and licensees. If Vantage obtains this trigger, other resellers and licensees can be expected to demand the same, further encumbering BCS's intellectual property and compounding the adverse impact on enterprise value.
C. Recommendation
Continue to reject the change-of-control release trigger. The existing three release conditions — cessation of operations, bankruptcy filing, and 120-consecutive-day maintenance failure after written notice — provide Vantage with robust protections against the genuine risk scenarios that justify a source code escrow arrangement. The change-of-control trigger is not warranted and is commercially unacceptable given BCS's PE ownership structure and the impact on enterprise value.
If Vantage presses on the call and this issue threatens to become an impasse, we recommend offering two alternative concessions as a package, designed to address Vantage's stated concern about business continuity following a change of control without triggering release of the source code:
Alternative Concession No. 1 — Change-of-Control Notice Covenant: BCS would agree to include a covenant in the body of the OEM Reseller Agreement (not in the escrow agreement) requiring BCS to provide Vantage with written notice within thirty (30) days of any change of control of BCS (using the same definition proposed by Vantage: a direct or indirect transfer of more than 50% of the equity or voting interests, or a sale of all or substantially all assets). This notice obligation provides Vantage with transparency about ownership changes but does not trigger source code release.
Alternative Concession No. 2 — Post-Change-of-Control Termination Right: BCS would agree that upon the occurrence of a change of control, Vantage may terminate the OEM Reseller Agreement on ninety (90) days' written notice if the successor entity materially reduces the level of maintenance and support services for the BrightEdge platform as compared to the levels provided by BCS prior to the change of control. This provides Vantage with an exit right in the event that a change of control actually results in degraded support — which is Vantage's stated concern — without requiring BCS to release source code upon a change of control that does not impair support.
These alternative concessions should be offered as a package and only if needed to resolve the issue. Neither alternative triggers release of the source code, and both are structured to address Vantage's legitimate concern about post-acquisition business continuity while protecting BCS's intellectual property and enterprise value.
It may be strategically effective to present these alternatives as part of a global resolution package — offering them in exchange for Vantage's agreement to close all five open issues simultaneously.
VIII. Summary of Settled Terms (For Reference)
For context on the call, the following is a summary of key commercial and legal terms that have been agreed by the parties and should be treated as closed. These terms are reflected in Calderwood & Harkness's final redline dated February 12, 2026, and are not subject to further negotiation.
IX. Recommended Call Strategy
Based on our analysis of the five open issues, we recommend the following strategy for the February 14, 2026 call:
Opening. We recommend that you open the call by acknowledging the significant progress that has been made across multiple rounds of negotiation. Both parties and their respective counsel have invested substantial time and effort in reaching agreement on the overwhelming majority of the Agreement's terms. The five remaining issues, while important, are resolvable, and both parties share an interest in reaching execution by February 20, 2026. Setting a collaborative and forward-looking tone at the outset of the call will be productive.
Prioritization. We recommend prioritizing the five issues as follows:
Firm "Hold" Positions (Issues No. 1, No. 3, and No. 5):
• Issue No. 1 (Audit Rights Frequency — Section 8.4): Annual audit rights with 30 days' prior written notice. This is a non-negotiable revenue protection mechanism. If needed, offer the potential compromise (5-business-day audit cap, one audit per contract year), but do not volunteer it unless Vantage presses hard.
• Issue No. 3 (Consequential Damages Carve-Out — Section 14.3): All three carve-outs (breach of confidentiality, IP indemnity, willful misconduct) must remain. If Vantage raises concerns about the scope of confidentiality obligations, offer to discuss definitional refinements to Article 10, but do not concede on the carve-out itself.
• Issue No. 5 (Source Code Escrow Change-of-Control Trigger — Exhibit E): Continue to reject the change-of-control release trigger. If needed, offer the alternative concessions (change-of-control notice covenant and post-change-of-control termination right) as part of a global resolution package.
BCS Concession Already Made (Issue No. 2):
• Issue No. 2 (Non-Compete / "Competing Product" Definition — Section 12.2): BCS has already made a meaningful concession by accepting the SCADA-only carve-out, which was not in the original draft. Frame the bright-line "no cloud-based IoT" test as a reasonable and necessary condition on that concession. Reject the "primary purpose" qualifier without equivocation.
Concession to Be Leveraged (Issue No. 4):
• Issue No. 4 (MAC Shortfall Pro-Ration — Section 5.6): BCS has already accepted Vantage's day-count formula in our final redline. Use this concession affirmatively on the call as evidence of BCS's willingness to compromise and as leverage for holding firm on the other issues. Confirm the 45-day payment window and the limitation to termination for convenience (not termination for cause).
Sequencing. We recommend addressing Issue No. 4 first, as it is the one issue on which BCS has already conceded. This allows BCS to lead with a demonstration of flexibility and good faith. Follow with Issue No. 2, where BCS has also made a concession (the SCADA-only carve-out) but is holding firm on the limiting condition. Then address Issues No. 1, No. 3, and No. 5 in sequence. Save Issue No. 5 for last, as it is the issue on which we have the most significant fallback concessions to offer if needed.
Global Resolution. If the call is progressing toward impasse on one or more issues, consider offering the alternative concessions on Issue No. 5 (change-of-control notice covenant and termination right) as part of a comprehensive package to resolve all five remaining issues simultaneously. Frame the offer as: "BCS is prepared to agree to [notice covenant and termination right on change of control] as part of a package in which all five open issues are resolved today, so that we can proceed to execution on February 20."
Goal. The goal of the call is to resolve all five open issues so that execution-ready documents can be finalized by February 18, 2026, for signing on February 20, 2026. We believe this timeline is achievable if the call is productive.
X. Next Steps
The following action items should be completed in connection with the February 14, 2026 call and the target execution date of February 20, 2026:
Pre-Call:
1. Douglas Fairchild to review this memorandum and provide any feedback or questions before the February 14 call. Please direct any comments to Robert Jansen by end of day February 13, 2026.
2. Robert Jansen to brief Priya Narasimhan (General Counsel, BCS) and Connor Whitfield (VP, Business Development, BCS) on the recommended positions set forth in this memorandum by end of day February 12, 2026. Robert will also confirm the call logistics and participant list with BCS and with Thomas Ellsworth at Lattimore, Parish & Keene LLP.
Post-Call:
3. Amy Chesterton to prepare the execution version of the OEM Reseller Agreement and all exhibits (Exhibits A through E), incorporating any agreed revisions resulting from the February 14 call, for circulation to all parties by no later than February 18, 2026. The execution version will be prepared in clean and blackline formats.
4. Signing Checklist Items to be finalized concurrently with the execution version of the Agreement. The following items are required for closing:
(a) Officer's certificate of BCS, to be executed by Martin Lacroix (Chief Executive Officer, BCS), certifying authorization, incumbency, and good standing.
(b) Officer's certificate of Vantage, to be executed by Gregory Harmon (Chief Executive Officer, Vantage), certifying authorization, incumbency, and good standing.
(c) Certificate of good standing for BCS issued by the Delaware Secretary of State (to be obtained no earlier than five business days before execution).
(d) Certificate of good standing for Vantage issued by the appropriate authority for Vantage's state of organization (to be confirmed with Lattimore, Parish & Keene LLP).
(e) Certificate of insurance from Me

CALDERWOOD & HARKNESS LLP 1700 Pacific Avenue, Suite 4200 Dallas, Texas 75201

MEMORANDUM

ENGAGEMENT NO.: 1042-00005

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