Contract analysis

I. Purpose of Letter I am writing in my capacity as Responsible Partner on the above-referenced matter to formally recommend that Pinnacle Venture Fund II LP ("Pinnacle" or the "Fund") place its proposed $60,000,000 Series D Preferred Stock investment in Verdana Software, Inc. ("Verdana" or the "Company") on hold and that the matter status be changed to dormant in our firm's records and billing systems. This recommen

II. Summary of Transaction and Engagement History Calderwood & Harkness LLP was engaged on April 19, 2022, pursuant to an engagement letter of even date executed by you on behalf of Pinnacle Capital Management LLC in its capacity as General Partner of Pinnacle Venture Fund II LP, to represent the Fund in connection with a proposed $60,000,000 minority growth equity investment in Verdana Software, Inc. Verdana is a De

III. Unresolved Commercial Terms Despite extensive negotiations over a period of approximately seven months, a number of material commercial terms remain unresolved. These are summarized below in order of significance as assessed by the C&H deal team. A. Valuation Gap The central impasse between the parties remains the $60,000,000 gap between Pinnacle's proposed pre-money valuation of $260,000,000 and Verdana's propo

IV. Customer Concentration Risk — Diligence Finding During the course of the legal and commercial due diligence process, the C&H team, in coordination with Pinnacle's internal financial diligence team, identified significant customer concentration risk at Verdana that we believe warrants continued attention regardless of whether the investment ultimately proceeds. As of the first quarter of 2022 (the most recent peri

V. Current Status of Transaction Documents All transaction documents remain in draft form. None have been executed by any party, and no signatures have been exchanged on any document. The current status of each principal document is as follows: Series D Preferred Stock Purchase Agreement (SPA). The most recent version is the second draft prepared by C&H and delivered to Langford Price on July 18, 2022, in response to

VI. Financial Summary — Legal Fees Incurred As of November 18, 2022, Calderwood & Harkness LLP has incurred total legal fees of $387,500 on this matter (Matter No. 1002-00004; Client No. PIN-0042). This amount represents fees for services rendered from the commencement of the engagement on April 19, 2022, through the date of this letter and encompasses all work performed in connection with due diligence, document dra

VII. Recommendation Based on the foregoing, I formally recommend that Pinnacle place the proposed Series D investment in Verdana Software, Inc. on hold and that the matter status in the Firm's records be changed to dormant, effective as of the earliest practicable date. Our target effective date for the status change is December 1, 2022, which would allow sufficient time for Pinnacle to confirm its agreement with thi

VIII. Preservation of Pinnacle's Ability to Re-Engage We wish to assure you that placing the matter on hold will not prejudice Pinnacle's ability to re-engage with Verdana at a future date. The key considerations in this regard are as follows: No Binding Commitments. No binding commitments have been made by either party in connection with the proposed transaction. The term sheet delivered by Pinnacle on April 22, 202

IX. Closing Marcus, I want to thank you for Pinnacle's continued confidence in Calderwood & Harkness LLP. It has been a privilege to work with you and your team on this matter, and while I am disappointed that the negotiations have not yielded a signed transaction, I believe that the recommendation to place the matter on hold is the most prudent course of action under the circumstances. The work product generated dur