Q1.

What are the other alternatives that LastMile could look at that would create a working
relationship between Midwest Technologies and LastMile?

There is a range of possibilities for working with large partner, rather than licensing the technology to
them. LastMile could arrange a contract to provide finished product to Midwest, on an OEM basis.
Another alternative would be for LastMile to provide product components to Midwest, who would use
the components within their own finished products. A third alternative would be to license the
technology, but to obtain financing from Midwest to fund the development and engineering of the
products. If control over the technology and the market direction are important issues, a joint venture
may be appropriate. A joint venture provides each party with an opportunity to limit risk to specific
assets (Midwest–money and market access, LastMile–technology) while exploiting the strengths of the
combination. An extreme alternative would be for LastMile to become acquired by Midwest, which
would provide funding for product development in-house

Q2. What are the advantages and disadvantages of these alternatives?

OEM Contract

For the OEM contract, the advantages are that LastMile would retain the rights to the technology and
would have the opportunity to develop the technology and products based on it into the future.
LastMile could also market the products to other con1panies in the market or in related markets. The
disadvantages are that development financing would be restricted. They could probably secure venture
funding based on having the contract with Midwest. However, this would probably be very expensive
money, requiring short- to mid-term payback and at the cost of a significant portion of the company.
Also, whether they build finished products or components, LastMile will have to outsource their
manufacturing to be able to meet the needs of Midwest. This may drive costs above an acceptable level.

Licensing

With development funding from Midwest, licensing has some attraction to it. LastMile would get the
funding needed to

"productize" the technology. However, the funding would not extend to marketing and may indeed have
covenants requiring exclusivity in the partnership. LastMile would retain ownership of the technology,
but would have limited growth potential.

Joint Venture

If a joint venture is considered, LastMile should recognize the need to continue to push the technology
envelope independent of the venture. Unless the venture could produce the cash to make this possible,
this has some of the same financing difficulties as other alternatives.

Acquisition

In an acquisition, LastMile would lose a good measure of control over the direction of the technology.
However, the money obtained would be substantial and a degree of autonomy for the LastMile
organization might be built into the arrangement. The upside potential of LastMile would be subsumed
within Midwest. Also, the profit stream would substantially go to Midwest, to be used as Midwest
management saw fit. Lastly, both organizations would need to think about the problems in melding two
distinctly different cultures. Midwest management will see LastMile as being too loose; LastMile will see
Midwest as bureaucratic.

Q3. What are the objectives that LastMile would like to accomplish out of such a partnership?

LastMile is looking to grow fairly rapidly. To be a play er in this emerging market, they will need to
achieve a larger size than they are now.

LastMile needs to acquire access to markets. The marketing resources of a large organization are thus
attractive.

To continue to develop new technology, a degree of stability is probably a desirable state to achieve.

The people of LastMile would appear to be interested in continuing to develop the technology and
develop it to its fullest potential. It's

"their baby."

LastMile has some longevity already. Tom Sherman probably has a bond with his employees. It is likely
that one important objective for him will be to "take care of his people." This means financial
advancement for them, stability and probably retention of as much of the culture as he can manage.

Q4. What counter proposal(s) would you recommend? Explain.