Contract analysis

From: Catherine Bloom <cbloom@calderwoodharkness.com> To: Daniel Oshiro <doshiro@brightfieldcloud.com> Cc: Lisa Redmond <lredmond@brightfieldcloud.com> Date: Tue, 12 Sep 2023 09:17:00 -0500 Subject: RE: Nexilis Rejection of Tiered-Unlock Proposal — Next Steps

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Thank you for the prompt direction, Daniel. I have reached out to Joanna Whitmore at Whitmore & Falk LLP to schedule a final principal-level negotiation call for Thursday, September 14, 2023, at 2:00 PM ET. I am waiting on her confirmation but expect to hear back today. On the Brightfield side, I would recommend that attendees include Daniel, Lisa, and me, with Wendy Schultz available on standby for support if needed

I want to outline the strategy I recommend for the September 14 call so we are aligned going in.

First, we should open by reiterating Brightfield's core commercial rationale clearly and without ambiguity. Stratos is an industry-agnostic platform. Restricting DeltaSync deployment to financial services (SIC codes 6000–6799) and healthcare (SIC codes 8000–8099) caps Brightfield's addressable ARR at approximately $38 million — roughly 26.8% of Brightfield's approximately $142 million FY2022 ARR. An $8 million invest

Second, we should probe the Ridgeline Ventures exclusivity issue directly. Specifically, we need to understand whether Nexilis's exclusivity commitments to Ridgeline Ventures-backed portfolio companies are contractual — i.e., written into Ridgeline Ventures' investment documents or side letters — or whether they are merely commercial understandings or informal arrangements. This distinction matters. If the commitment

Third, and I want to be candid about this: if Nexilis is unwilling to disclose the scope of its exclusivity commitments or to offer any path toward a broader field of use, I recommend that Brightfield be prepared to terminate negotiations on the call itself rather than continue to invest management time and legal spend in a transaction that does not meet Brightfield's commercial requirements.

To put a finer point on it: if the field-of-use impasse cannot be resolved on the September 14 call, Calderwood & Harkness's firm recommendation is that Brightfield formally terminate the transaction. Should we reach that point, please be aware that the mutual NDA dated June 19, 2023 contains standard return-and-destroy obligations with respect to confidential information exchanged during the negotiation. We will pre

In addition, we will prepare a brief board update memorandum for Priya Chandrasekaran and Graham Hollister at Vantage Summit Capital Partners summarizing the negotiation history and the basis for termination. We will circulate a draft of that memorandum to you in advance of the September 14 call so that it is ready to go if needed.

On the topic of fees, I want to provide a brief update for your awareness. Through the current billing period, Calderwood & Harkness's professional fees on this matter total approximately $197,450, which is within the original estimate range of $180,000–$250,000. In addition, we have incurred $42,500 in disbursements for the Crestline Patent Analytics engagement, bringing the total to approximately $239,950. We are m

Please confirm that you are both available for the September 14 call at 2:00 PM ET. If it would be helpful, I am happy to do a prep call on September 13 to walk through the approach and make sure we are fully aligned.

Catherine Bloom Partner Calderwood & Harkness LLP 700 Louisiana Street, Suite 3400 Houston, TX 77002 Phone: (713) 555-0184 Email: cbloom@calderwoodharkness.com

——— Original Message ——— From: Daniel Oshiro To: Wendy Schultz Cc: Catherine Bloom ; Lisa Redmond ; Alan Ngo ; Omar Siddiqui Date: Monday, September 11, 2023 4:42 PM CDT Subject: RE: Nexilis Rejection of Tiered-Unlock Proposal — Next Steps

Thank you for the prompt summary and for flagging the Ridgeline Ventures issue. This is disappointing, though I will say it is not entirely unexpected given the signals we received from the August 28 term-sheet exchange, where Nexilis held firm on the narrow field of use without offering any meaningful counter.

What does surprise me is Nexilis citing exclusivity commitments to Ridgeline Ventures-backed portfolio companies. This was not disclosed in the initial term sheet delivered by Whitmore & Falk on June 12, 2023, and I am trying to understand whether this is a new development — perhaps something that arose in connection with a more recent Ridgeline Ventures investment — or whether it was always a constraint that Nexilis

I would like Catherine to arrange one final negotiation call with Whitmore & Falk and the Nexilis principals. Before we walk away, I want to hear directly from Nexilis whether there is any remaining flexibility — whether on the exclusivity scope, the vertical restrictions, or some alternative structure we have not yet explored. I would like this call to happen within the week, ideally by September 15.

On internal alignment: I have briefed Priya Chandrasekaran and Marcus Vail. Lisa is aligned with my view that the deal does not make commercial sense if the field of use is limited to approximately $38 million in addressable ARR. Graham Hollister at Vantage Summit Capital Partners will want a formal update if we end up terminating negotiations, so we should be prepared on that front as well.

Please hold time later this week for a final call. I will defer to Catherine on the scheduling and approach.

Daniel Oshiro General Counsel Brightfield Cloud Services Inc. 4200 Bluebonnet Parkway, Suite 1100 Austin, TX 78745

——— Original Message ——— From: Wendy Schultz To: Daniel Oshiro ; Lisa Redmond Cc: Catherine Bloom ; Alan Ngo ; Omar Siddiqui Date: Sunday, September 10, 2023 6:23 PM CDT Subject: Nexilis Rejection of Tiered-Unlock Proposal — Next Steps

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I am writing to report that Whitmore & Falk LLP delivered Nexilis's formal response to Brightfield's tiered-unlock proposal (which we transmitted on September 5, 2023) this afternoon. Unfortunately, Nexilis has rejected the proposal.

Below is a summary of the substance of Nexilis's position.

Nexilis has declined the tiered-unlock structure under which Brightfield would acquire a base license at $5,200,000 for financial services and healthcare, with an expansion option to all enterprise SaaS verticals for an additional $4,800,000, totaling $10,000,000. The stated reason is that Nexilis has existing exclusivity commitments to portfolio companies backed by Ridgeline Ventures, Nexilis's lead Series B investo

Nexilis indicated that it remains willing to proceed with the original deal structure: an aggregate license fee of $8,000,000 ($3,200,000 upfront plus $1,600,000 per year for three years), on a five-year term with a two-year renewal option, but only under the narrow field of use limited to financial services (SIC codes 6000–6799) and healthcare (SIC codes 8000–8099).

My preliminary assessment is as follows. Nexilis's position on the field of use has been consistent since Whitmore & Falk's redline (Draft 2) was returned on July 31, 2023. The tiered-unlock proposal was Brightfield's best attempt at a compromise structure, and its rejection narrows the path to a deal significantly. As we have discussed, restricting the field of use to two verticals caps Brightfield's addressable ARR

I also want to flag that the Ridgeline Ventures exclusivity angle is new information. Nexilis had not previously disclosed that its investors' portfolio strategy constrained its licensing flexibility. This is the first time we have heard this rationale, and it raises the question of how broad and how binding those commitments actually are.

I am attaching the email from Derek Sung at Whitmore & Falk LLP conveying Nexilis's formal response for the team's reference.

Daniel, Lisa — how would you like to proceed? Catherine is available to discuss strategy at your convenience. We should decide promptly whether to request a final negotiation session or move toward termination of the transaction. For reference, this is matter number 1042-00003.

Wendy Schultz Senior Associate Calderwood & Harkness LLP 700 Louisiana Street, Suite 3400 Houston, TX 77002 Phone: (713) 555-0291 Email: wschultz@calderwoodharkness.com

Attachment: Nexilis Response — Tiered-Unlock Proposal (9.10.2023).pdf