1002-00004 · Pinnacle Venture Fund II LP · Matter Administration

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PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT

INTERNAL MEMORANDUM

December 1, 2022

TO: Harrison Wexford, Responsible Partner, Mergers & Acquisitions Beatrice Holloway, Billing Partner, Mergers & Acquisitions

FROM: Andrew Fitzpatrick, Lead Associate, Mergers & Acquisitions

RE: Matter Status Change to Dormant — Pinnacle Venture Fund II LP / Proposed Series D Investment in Verdana Software, Inc.

Matter Number: 1002-00004

Billing Client Number: PIN-0042

Client: Pinnacle Venture Fund II LP (General Partner: Pinnacle Capital Management LLC)

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I. PURPOSE

This memorandum formally documents the change of Matter No. 1002-00004 to dormant status effective December 1, 2022. It has been prepared for internal file closure and hold purposes in accordance with Calderwood & Harkness LLP's matter administration policies.

The purpose of this memorandum is threefold. First, it provides a comprehensive summary of the transaction history from engagement through the present date, including all significant milestones, negotiation events, and the circumstances leading to the current dormancy status. Second, it documents the current state of all transaction documents, including executed agreements and unexecuted drafts, and identifies all unresolved commercial and legal terms as of the date the matter was placed on hold. Third, it provides a complete inventory of all work product generated during the engagement, including internal memoranda, draft transaction documents, correspondence, diligence materials, and administrative records.

The matter involved Calderwood & Harkness LLP's representation of Pinnacle Venture Fund II LP in connection with a proposed sixty million dollar ($60,000,000) minority growth equity investment in Series D Preferred Stock of Verdana Software, Inc., a Delaware C-corporation operating an AI-powered B2B SaaS supply chain optimization platform. The engagement commenced on April 19, 2022 and proceeded through active negotiations, extensive legal due diligence, and the preparation and exchange of transaction document drafts over the course of approximately seven months. The parties were ultimately unable to reach agreement on several material commercial terms, most significantly a sixty million dollar ($60,000,000) gap in pre-money valuation, as well as disagreements regarding liquidation preference, anti-dilution protection, and drag-along rights.

The matter was placed on hold following Harrison Wexford's letter to Marcus Trejo, Partner and Head of Growth Equity at Pinnacle Capital Management LLC, dated November 18, 2022, in which Harrison formally recommended that the matter be placed on hold pending a change in circumstances that might facilitate a resumption of negotiations. This memorandum memorializes the formal transition to dormant status in the firm's matter management system and constitutes the complete record of the engagement to date.

II. TRANSACTION SUMMARY

A. Parties. Client / Investor. Pinnacle Venture Fund II LP, a Delaware limited partnership (EIN: 84-3921057), acting through its general partner, Pinnacle Capital Management LLC, a Delaware limited liability company (EIN: 84-2817634). Pinnacle Capital Management LLC serves as the sole general partner of the Fund and is authorized to make investment decisions and enter into binding agreements on behalf of the Fund. Pinnacle Venture Fund II LP is headquartered at 2400 Sand Hill Road, Suite 310, Menlo Park, California 94025. The Fund is an eight hundred fifty million dollar ($850,000,000) growth equity fund, 2020 vintage, focused on late-stage enterprise software and technology-enabled services investments. The key investment professional responsible for the Verdana transaction is Marcus Trejo, Partner and Head of Growth Equity at Pinnacle Capital Management LLC, who served as the firm's primary point of contact throughout the engagement.

Target Company. Verdana Software, Inc., a Delaware C-corporation (EIN: 93-1485726; Delaware Secretary of State File Number: 6274913), headquartered at 1175 NW Couch Street, Suite 800, Portland, Oregon 97209. Verdana was founded in 2016 by Raj Anand and Lena Kovac and operates an AI-powered B2B SaaS supply chain optimization platform marketed under the brand name "Verdana SCX." The Verdana SCX platform provides enterprise customers with predictive analytics, demand forecasting, and logistics optimization capabilities. As of the most recent diligence data available (Q1 2022), Verdana had approximately 310 employees and served approximately 185 customers. The key officers of Verdana are as follows:

• Raj Anand — Chief Executive Officer & Co-Founder

• Lena Kovac — Chief Technology Officer & Co-Founder

• Thomas Brightwell — Chief Financial Officer

• Sandra Mikkelsen — General Counsel

Existing Investors. Verdana has completed three prior rounds of preferred stock financing. The existing institutional investors and their respective positions in the capitalization of the company as of the commencement of due diligence are set forth below:

Ridgeline Ventures Fund III LP (Series A Lead). Ridgeline Ventures Fund III LP led the company's Series A financing in 2018 with a nine million six hundred thousand dollar ($9,600,000) investment at a price per share of $0.80. Ridgeline holds 12,000,000 shares of Series A Preferred Stock, representing approximately 15.0% of the company's fully-diluted capitalization on a pre-investment basis. Ridgeline's board representative is Priya Dasgupta.

Northgate Growth Partners Fund II LP (Series B Lead). Northgate Growth Partners Fund II LP led the company's Series B financing in 2019 with a thirty-two million dollar ($32,000,000) investment at a price per share of $2.00. Northgate holds 16,000,000 shares of Series B Preferred Stock, representing approximately 20.0% of the company's fully-diluted capitalization on a pre-investment basis. Northgate's board representative is Elliott Margolis.

Brindoval Capital Group LLC (Series C Lead). Brindoval Capital Group LLC led the company's Series C financing in 2021 with a thirty-six million dollar ($36,000,000) investment at a price per share of $3.00. Brindoval holds 12,000,000 shares of Series C Preferred Stock, representing approximately 15.0% of the company's fully-diluted capitalization on a pre-investment basis. Brindoval's board representative is Diana Chen.

Founders and Option Pool. Raj Anand and Lena Kovac collectively hold 28,000,000 shares of Common Stock, representing approximately 35.0% of the company's fully-diluted capitalization on a pre-investment basis. The company maintains an Employee Stock Option Plan ("ESOP") with a pool of 12,000,000 shares (both granted and available for grant), representing approximately 15.0% of the company's fully-diluted capitalization on a pre-investment basis. The total fully-diluted share count of the company on a pre-investment basis is 80,000,000 shares.

B. Transaction Description

The proposed transaction involved a sixty million dollar ($60,000,000) investment by Pinnacle Venture Fund II LP in newly issued shares of Series D Preferred Stock of Verdana Software, Inc. The investment was structured as a minority growth equity investment, with Pinnacle targeting an ownership stake of 18.75% of the company's fully-diluted capitalization on a post-closing basis.

The pre-money valuation remained the central point of contention throughout the negotiation. The parties' respective positions on valuation and the resulting economic terms are summarized as follows:

Pinnacle's Position. Pinnacle proposed a pre-money valuation of two hundred sixty million dollars ($260,000,000), corresponding to a price per share of $3.25. At this valuation, Pinnacle's sixty million dollar investment would have resulted in the issuance of 18,461,538 shares of Series D Preferred Stock, representing approximately 18.75% of the company's post-closing fully-diluted capitalization (based on a post-money share count of approximately 98,461,538 shares).

Verdana's Position. Verdana, through its financial advisor Hargrove Securities LLC, proposed a pre-money valuation of three hundred twenty million dollars ($320,000,000), corresponding to a price per share of $4.00. At this valuation, Pinnacle's sixty million dollar investment would have resulted in the issuance of 15,000,000 shares of Series D Preferred Stock, representing approximately 15.79% of the company's post-closing fully-diluted capitalization without giving effect to the proposed ESOP expansion (based on a post-money share count of approximately 95,000,000 shares), or approximately 15.00% of the company's post-closing fully-diluted capitalization giving effect to a proposed 5,000,000-share ESOP expansion (based on a post-money share count of approximately 100,000,000 shares).

Beyond valuation, the proposed transaction involved the negotiation and execution of a standard suite of venture capital financing documents, including a Series D Preferred Stock Purchase Agreement, an Amended and Restated Certificate of Incorporation reflecting the Series D terms, an Amended and Restated Investors' Rights Agreement, an Amended and Restated Right of First Refusal and Co-Sale Agreement, an Amended and Restated Voting Agreement, a Management Rights Letter, and ancillary documents.

The proposed post-closing board of directors would have consisted of seven (7) members: two (2) Founder designees, one (1) Ridgeline Ventures designee, one (1) Northgate Growth Partners designee, one (1) Brindoval Capital Group designee, one (1) Pinnacle designee (to be Marcus Trejo or his designee), and one (1) mutually agreed independent director. Board composition was partially agreed upon during the negotiations, though the terms of the voting agreement remained in draft form.

The transaction was to be governed by Delaware law, consistent with the company's state of incorporation and the governing law provisions of the existing investor agreements.

C. Advisors. The following advisors were engaged or involved in the transaction:

Investor's Counsel (Our Firm). Calderwood & Harkness LLP, 101 Montgomery Street, Suite 3500, San Francisco, California 94104. The engagement team consisted of the following professionals:

• Harrison Wexford — Responsible Partner

• Beatrice Holloway — Billing Partner

• Andrew Fitzpatrick — Lead Associate

• Naomi Petersen — Working Associate

Target's Counsel. Langford Price & Associates LLP, 1000 SW Broadway, Suite 1600, Portland, Oregon 97205. The lead attorneys on the Langford Price team were Jonathan Hale, Partner, and Rebecca Thornton, Associate.

Target's Financial Advisor / Placement Agent. Hargrove Securities LLC, 600 Lexington Avenue, 22nd Floor, New York, New York 10022. The lead investment banker was Nathan Callister. Hargrove Securities was engaged by Verdana as placement agent and was entitled to a placement fee of 1.5% of the aggregate investment amount, which would have equaled nine hundred thousand dollars ($900,000) on a sixty million dollar investment.

Pinnacle's Fund Auditor. Calloway & Cascade Insurance Brokers, 44 Montgomery Street, Suite 1200, San Francisco, California 94104.

Verdana's Auditor. Whitfield & Greer LLP, 888 SW Fifth Avenue, Suite 1400, Portland, Oregon 97204. The engagement partner was Gerald Whitfield.

Pinnacle's Fund Administrator. Dralvecen Fund Services LLC, 300 Delaware Avenue, Suite 900, Wilmington, Delaware 19801.

Verdana's Lender. Pacific Summit Bank, N.A., 350 California Street, San Francisco, California 94104. Pacific Summit Bank is the administrative agent and sole lender under Verdana's revolving credit facility.

III. TIMELINE OF KEY EVENTS

The following is a chronological summary of all significant events from the opening of the matter through the formal change to dormant status. This timeline has been compiled from engagement records, internal correspondence, document metadata, and contemporaneous file notes.

April 19, 2022. Matter No. 1002-00004 was opened in Calderwood & Harkness's matter management system. Pinnacle Venture Fund II LP formally engaged Calderwood & Harkness LLP to represent it in connection with the proposed Series D investment in Verdana Software, Inc. The engagement letter was executed by Marcus Trejo on behalf of Pinnacle Capital Management LLC, as general partner of Pinnacle Venture Fund II LP. A conflict check was completed on this date and no conflicts were identified. Harrison Wexford was designated as the responsible partner and Beatrice Holloway as the billing partner for the engagement.

April 22, 2022. Calderwood & Harkness delivered a non-binding term sheet on behalf of Pinnacle to Verdana Software, Inc. The term sheet proposed the following key economic and governance terms: a pre-money valuation of $260,000,000 ($3.25 per share); a 1.5x non-participating liquidation preference; full-ratchet anti-dilution protection; an 8% cumulative dividend on the Series D Preferred Stock; drag-along rights triggered on majority preferred approval; redemption rights exercisable at the election of the holders of a majority of the Series D Preferred Stock after five (5) years from the closing date; consent rights over the incurrence of indebtedness in excess of $5,000,000 and deviations from the board-approved operating budget in excess of 15%; and a mandatory pay-to-play provision applicable to all preferred holders. The term sheet also outlined the proposed board composition of seven (7) members as described in Section II.B above.

May 3, 2022. Verdana delivered a counter-term sheet through its placement agent, Hargrove Securities LLC. Verdana's counter-proposal reflected a pre-money valuation of $320,000,000 ($4.00 per share), a 1.0x non-participating liquidation preference, broad-based weighted average anti-dilution protection, and a proposed 5,000,000-share expansion of the ESOP pool to be completed prior to the closing of the Series D round. The counter-term sheet was transmitted by Jonathan Hale of Langford Price & Associates LLP to Calderwood & Harkness.

May 5, 2022. Calderwood & Harkness delivered to Pinnacle a term sheet comparison memorandum analyzing the material differences between Pinnacle's initial term sheet and Verdana's counter-proposal. The memorandum was prepared by Andrew Fitzpatrick and Naomi Petersen and addressed valuation, liquidation preference, anti-dilution mechanics, dividend rights, drag-along and tag-along provisions, protective provisions, redemption, pay-to-play, and the ESOP expansion proposal.

May 12, 2022. An exclusivity agreement was executed by both Pinnacle and Verdana. The exclusivity period was sixty (60) days, running from May 12, 2022 through July 11, 2022. During the exclusivity period, Verdana agreed not to solicit, negotiate, or enter into any agreement or understanding with any third party regarding an equity financing, debt financing (other than ordinary course trade credit), merger, sale of all or substantially all assets, or other change of control transaction.

May 14, 2022. Calderwood & Harkness delivered a comprehensive due diligence request list to Langford Price & Associates LLP on behalf of Pinnacle. The request list covered corporate formation and governance documents, capitalization records, financial statements and projections, material contracts, intellectual property, employment and benefits matters, litigation, regulatory compliance, tax matters, real property, insurance, and related items.

May 16, 2022. Due diligence formally commenced. Verdana, through Langford Price, granted Pinnacle's diligence team access to a virtual data room hosted on a third-party platform. Calderwood & Harkness professionals, together with Pinnacle's internal diligence team, began reviewing the materials uploaded to the data room.

May 25, 2022. Calderwood & Harkness delivered to Pinnacle a valuation and ownership analysis memorandum prepared by Andrew Fitzpatrick. The memorandum analyzed the economic implications of the parties' respective valuation proposals on Pinnacle's post-closing ownership percentage, the dilutive effect of the proposed ESOP expansion, and comparable transaction multiples for B2B SaaS companies at similar revenue scales and growth rates.

June 1, 2022. Calderwood & Harkness delivered a capitalization table analysis and liquidation waterfall workbook to Pinnacle. The workbook, prepared by Naomi Petersen, modeled the company's fully-diluted capitalization on a pre-money and post-money basis under both parties' valuation proposals, as well as under various compromise scenarios. The liquidation waterfall analysis modeled distribution outcomes across a range of exit valuations under both a 1.0x and 1.5x non-participating liquidation preference, with and without the proposed ESOP expansion.

June 8, 2022. Calderwood & Harkness delivered the following initial drafts of transaction documents to Langford Price & Associates LLP: (i) the Series D Preferred Stock Purchase Agreement, (ii) the Amended and Restated Certificate of Incorporation reflecting the Series D Preferred Stock terms, and (iii) a disclosure schedules template for population by Verdana. The initial drafts reflected Pinnacle's proposed terms as set forth in the April 22, 2022 term sheet, including the $260,000,000 pre-money valuation, 1.5x non-participating liquidation preference, full-ratchet anti-dilution, and other protective provisions.

June 15, 2022. Calderwood & Harkness delivered the following additional initial drafts to Langford Price & Associates LLP: (i) the Amended and Restated Investors' Rights Agreement and (ii) a draft Management Rights Letter for Pinnacle. The Investors' Rights Agreement draft incorporated the standard information rights, registration rights, and protective provision framework, as well as the pay-to-play provision proposed in Pinnacle's term sheet.

June 20, 2022. Calderwood & Harkness delivered the following additional initial drafts to Langford Price & Associates LLP: (i) the Amended and Restated Right of First Refusal and Co-Sale Agreement and (ii) the Amended and Restated Voting Agreement. The Voting Agreement draft reflected the proposed seven-member board composition and included the drag-along provision proposed by Pinnacle, which would have permitted the holders of a majority of the outstanding preferred stock to compel all stockholders to participate in an approved sale transaction.

June 22, 2022. Langford Price & Associates LLP returned its first markup of the Series D Preferred Stock Purchase Agreement. The markup contained significant revisions, including objections to the valuation methodology reflected in the purchase price definition, modifications to the representations and warranties of the company (particularly regarding intellectual property, financial statements, and material contracts), changes to the indemnification provisions (including a proposed reduction of the indemnification cap and an increase in the indemnification basket), and revisions to the closing conditions. Andrew Fitzpatrick prepared annotations to the markup for internal review.

June 25, 2022. Calderwood & Harkness delivered a draft Indemnification Agreement for Pinnacle's board designee to Langford Price & Associates LLP. The draft provided for indemnification and advancement of expenses for Pinnacle's designee to the Verdana board of directors, consistent with Verdana's existing indemnification agreements with its current board members.

June 28, 2022. Calderwood & Harkness delivered a memorandum to Pinnacle analyzing the terms of Verdana's revolving credit facility with Pacific Summit Bank, N.A. The memorandum, prepared by Naomi Petersen, summarized the material terms of the credit facility, including the $10,000,000 facility amount, the $6,200,000 outstanding balance, the interest rate of SOFR plus 3.50%, the minimum liquidity covenant of $10,000,000, and the maturity date of June 30, 2024. The memorandum also identified certain negative covenants in the credit facility that could potentially restrict the issuance of preferred stock or the grant of preferential rights to new investors.

June 30, 2022. Calderwood & Harkness delivered a lender consent analysis memorandum to Pinnacle, prepared by Andrew Fitzpatrick. The memorandum analyzed whether the proposed Series D issuance would require the consent of Pacific Summit Bank under the terms of the credit facility and concluded that consent was likely required due to the negative covenant restricting the creation of new equity securities with preferential distribution or liquidation rights. The memorandum recommended that lender consent be included as a closing condition in the Stock Purchase Agreement.

July 1, 2022. Pinnacle's internal diligence team flagged significant customer concentration risk in Verdana's revenue base. Specifically, the team identified that Meridian Logistics Corp. accounted for $11,800,000 of Verdana's $47,300,000 in annual recurring revenue ("ARR"), representing 24.9% of total ARR. Furthermore, the top five customers collectively accounted for $27,200,000, representing 57.5% of total ARR. The Pinnacle team communicated these findings to Calderwood & Harkness and requested a detailed risk analysis.

July 5, 2022. Calderwood & Harkness delivered a customer concentration risk analysis memorandum to Pinnacle, prepared by Naomi Petersen. The memorandum analyzed the risks associated with Verdana's reliance on Meridian Logistics Corp. as its largest customer and the concentration of revenue among the top five customers. The memorandum noted that Meridian's enterprise license agreement was a three-year contract expiring on December 31, 2023, with an automatic renewal provision subject to a 180-day termination notice period. The memorandum also noted that Pinnacle's diligence team had identified a recent CEO change at Meridian and intelligence suggesting that Meridian had initiated a competitive RFP process for its supply chain management software needs.

July 8, 2022. The First Amendment to the Exclusivity Agreement was executed by both parties. The amendment extended the exclusivity period from its original expiration date of July 11, 2022 to a new expiration date of August 15, 2022, in order to allow additional time for the completion of due diligence and the continuation of document negotiations.

July 10, 2022. Calderwood & Harkness delivered an employment and benefits due diligence memorandum to Pinnacle, prepared by Naomi Petersen. The memorandum summarized the results of Calderwood & Harkness's review of Verdana's employment agreements, offer letters, equity compensation plans, employee benefits programs, and related matters.

July 11, 2022. Original expiration date of the exclusivity agreement (superseded by the First Amendment executed on July 8, 2022).

July 12, 2022. Calderwood & Harkness delivered an intellectual property and technology due diligence memorandum to Pinnacle, prepared by Naomi Petersen. The memorandum addressed Verdana's patent portfolio, trademark registrations, trade secrets, open-source software usage, license agreements, and data privacy practices, among other matters.

July 15, 2022. Calderwood & Harkness delivered a comprehensive legal due diligence summary memorandum to Pinnacle, prepared by Andrew Fitzpatrick and Naomi Petersen. The memorandum consolidated the findings from all workstreams of the legal due diligence review, including corporate, financial, intellectual property, employment, customer contracts, regulatory, litigation, and lender-related matters. The memorandum identified the key risks and areas of concern for Pinnacle's consideration and included recommendations regarding representations, warranties, and closing conditions to be included in the transaction documents.

July 18, 2022. Calderwood & Harkness delivered a second draft of the Series D Preferred Stock Purchase Agreement to Langford Price & Associates LLP. The second draft responded to the Langford Price markup received on June 22, 2022 and incorporated certain revisions reflecting partial agreement on representations and warranty language, while maintaining Pinnacle's positions on valuation, indemnification caps and baskets, and other material terms. The second draft also added a closing condition requiring the consent of Pacific Summit Bank, N.A. to the proposed Series D issuance, consistent with the recommendations in the lender consent analysis memorandum.

July 22, 2022. Langford Price & Associates LLP delivered its markup of the Amended and Restated Investors' Rights Agreement. The markup reflected significant disagreements on several key provisions. In particular, Langford Price proposed the substitution of broad-based weighted average anti-dilution protection for the full-ratchet mechanism proposed by Pinnacle, consistent with the anti-dilution provisions applicable to the Series A, B, and C Preferred Stock. Langford Price also proposed a 1.0x non-participating liquidation preference in place of Pinnacle's proposed 1.5x preference, again citing consistency with prior round terms. The Langford Price markup deleted the pay-to-play provision in its entirety and sought to narrow the scope of Pinnacle's proposed budget consent right. These disagreements defined the core impasse that ultimately prevented the consummation of the transaction.

August 2, 2022. A negotiation session was conducted between the parties' respective deal teams regarding the anti-dilution mechanism and liquidation preference terms. Participants included Marcus Trejo (Pinnacle), Harrison Wexford and Andrew Fitzpatrick (Calderwood & Harkness), Raj Anand and Thomas Brightwell (Verdana), and Jonathan Hale and Rebecca Thornton (Langford Price). No resolution was reached. The parties remained at impasse on the full-ratchet versus broad-based weighted average anti-dilution issue and the 1.5x versus 1.0x liquidation preference issue.

August 4, 2022. Calderwood & Harkness delivered an anti-dilution provisions comparison memorandum to Pinnacle, prepared by Andrew Fitzpatrick. The memorandum provided a detailed comparison of the economic effects of full-ratchet and broad-based weighted average anti-dilution protection across a range of down-round scenarios, including illustrative numerical examples showing the dilutive impact on existing investors under each mechanism.

August 8, 2022. Calderwood & Harkness delivered a memorandum to Pinnacle analyzing Delaware law regarding protective provisions and minority investor rights, prepared by Naomi Petersen. The memorandum addressed the statutory framework under the Delaware General Corporation Law applicable to the rights of holders of preferred stock, including the scope of class voting rights, the enforceability of contractual protective provisions, and relevant case law regarding the fiduciary duties owed to minority investors in the context of venture capital financings.

August 10, 2022. The founders, Raj Anand and Lena Kovac, formally objected to Pinnacle's proposed drag-along provision. The founders communicated their objection through Langford Price & Associates LLP and insisted on the inclusion of a five hundred million dollar ($500,000,000) enterprise value floor, below which no drag-along sale could be forced upon the common stockholders. The founders' position was that the drag-along provision, as proposed by Pinnacle, could be used to compel a sale of the company at a valuation that would provide a meaningful return to the preferred holders but inadequate returns to the common stockholders and option holders.

August 12, 2022. Calderwood & Harkness delivered a drag-along and tag-along rights analysis memorandum to Pinnacle, prepared by Andrew Fitzpatrick. The memorandum analyzed the legal and commercial implications of the founders' proposed enterprise value floor, the enforceability of drag-along provisions under Delaware law, and market practice regarding minimum valuation thresholds in drag-along provisions applicable to growth-stage technology companies.

August 15, 2022. The Second Amendment to the Exclusivity Agreement was executed by both parties. The amendment extended the exclusivity period from its then-current expiration date of August 15, 2022 to a new expiration date of September 30, 2022, reflecting the parties' continued intent to negotiate toward a definitive agreement notwithstanding the outstanding disagreements.

September 6, 2022. The parties reached partial agreement on board composition, confirming the seven-seat board structure as originally proposed (two Founder designees, one Ridgeline designee, one Northgate designee, one Brindoval designee, one Pinnacle designee, and one mutually agreed independent director). However, valuation and protective provisions remained open and unresolved.

September 8, 2022. Andrew Fitzpatrick transmitted an email to Rebecca Thornton of Langford Price & Associates LLP setting forth a comprehensive list of all open issues requiring resolution before the transaction documents could be finalized. The open issues list addressed valuation, anti-dilution, liquidation preference, drag-along rights, pay-to-play, redemption rights, protective provision scope, the ESOP expansion, and the Pacific Summit Bank lender consent, among other items.

September 19, 2022. At Pinnacle's direction, Calderwood & Harkness delivered a formal letter to Verdana on behalf of Pinnacle reaffirming Pinnacle's pre-money valuation position of $260,000,000. The letter, drafted by Calderwood & Harkness and signed by Marcus Trejo, stated that Pinnacle's investment thesis and diligence findings did not support a valuation in excess of $260,000,000, and that Pinnacle was not prepared to revise its valuation position. Verdana rejected the revised proposal.

September 30, 2022. The exclusivity period expired pursuant to the terms of the Second Amendment to the Exclusivity Agreement. The parties agreed to continue discussions without exclusivity, meaning that Verdana was free to solicit and negotiate with other potential investors going forward.

October 14, 2022. Brindoval Capital Group LLC, through its board representative Diana Chen, proposed a compromise valuation of $290,000,000 pre-money ($3.625 per share), which would have resulted in the issuance of 16,551,724 shares of Series D Preferred Stock to Pinnacle, representing approximately 17.14% of the company's post-closing fully-diluted capitalization. The Brindoval compromise proposal also included a 1.0x non-participating liquidation preference. Pinnacle declined the Brindoval proposal.

October 20, 2022. Harrison Wexford transmitted an email to Marcus Trejo assessing the current status of the negotiations and the likelihood of reaching agreement. The email identified the principal areas of impasse, summarized the parties' respective positions, and recommended that Pinnacle consider whether to make a final counter-proposal or to place the matter on hold. Harrison noted that the expiration of exclusivity, combined with the duration of the negotiations and the breadth of the unresolved commercial terms, raised meaningful uncertainty as to whether a transaction could be consummated on terms acceptable to Pinnacle.

November 2, 2022. A final negotiation session was conducted between the parties. No agreement was reached on valuation, liquidation preference, anti-dilution, or drag-along rights. The session concluded without a path forward being identified. The parties agreed to table further discussions.

November 18, 2022. Harrison Wexford delivered a letter to Marcus Trejo formally recommending that the matter be placed on hold. The letter summarized the status of the negotiations, identified the unresolved commercial terms, noted the absence of exclusivity, and recommended that the engagement be maintained in a dormant state pending a change in circumstances that might facilitate a resumption of discussions.

December 1, 2022. The matter status was formally changed to dormant in Calderwood & Harkness's matter management system. This memorandum was prepared to document the matter status change, provide a complete transaction history, and memorialize the file inventory for the engagement.

IV. UNRESOLVED COMMERCIAL TERMS AT TIME OF DORMANCY

As of the date the matter was placed on dormant status, the following material commercial terms remained unresolved between the parties. These open issues were the proximate cause of the parties' inability to reach a definitive agreement.

A. Valuation Gap

The central and most significant unresolved issue is the sixty million dollar ($60,000,000) gap between the parties' respective pre-money valuation positions. Pinnacle maintained a pre-money valuation of $260,000,000, while Verdana maintained a pre-money valuation of $320,000,000. Despite approximately seven months of negotiation, neither party revised its position in a meaningful way, and the Brindoval Capital Group compromise proposal of $290,000,000 was rejected by Pinnacle.

The valuation gap had direct and significant consequences for Pinnacle's post-closing ownership percentage and the economic terms of the investment, as summarized in the following table:

In addition to the per-share price and ownership percentage dispute, the treatment of the proposed option pool expansion remained unresolved. Verdana proposed a 5,000,000-share ESOP expansion to be completed prior to the closing of the Series D round, which would have increased the fully-diluted pre-investment share count from 80,000,000 to 85,000,000 shares and the post-investment count to 100,000,000 shares. This ESOP expansion would have further diluted Pinnacle's ownership from 15.79% to 15.00% at Verdana's proposed $4.00 per share price. Pinnacle insisted that any ESOP increase be included in the pre-money share base and reflected in the pre-money valuation, such that the economic dilution from the ESOP expansion would be shared among all pre-existing stockholders rather than borne disproportionately by the new investor.

B. Liquidation Preference

Pinnacle proposed a 1.5x non-participating liquidation preference, which would have entitled the Series D holders to receive one and one-half times (1.5x) their original investment amount, or ninety million dollars ($90,000,000), before any distributions would be made to the holders of common stock in a liquidation event. Verdana proposed a 1.0x non-participating liquidation preference, which would have entitled the Series D holders to receive one times (1.0x) their original investment amount, or sixty million dollars ($60,000,000), in a liquidation event. Verdana's position was grounded in consistency with the liquidation preference terms applicable to the Series A, B, and C Preferred Stock, all of which carry 1.0x non-participating liquidation preferences. The thirty million dollar ($30,000,000) difference between the 1.5x and 1.0x preference amounts was material to the distribution waterfall in exit scenarios at the lower end of the valuation range.

C. Anti-Dilution. Pinnacle proposed full-ratchet anti-dilution protection for the Series D Preferred Stock. Under a full-ratchet mechanism, if the company issues equity securities at a price below the Series D original issue price, the conversion price of the Series D Preferred Stock would be adjusted downward to equal the price at which the new shares were issued, without regard to the number of new shares issued. Verdana proposed broad-based weighted average anti-dilution protection, consistent with the anti-dilution provisions applicable to the Series A, B, and C Preferred Stock. Under the broad-based weighted average formula, the conversion price adjustment is moderated by reference to the number of new shares issued and the aggregate number of shares outstanding, resulting in a less severe dilutive impact on the existing preferred holders than a full-ratchet adjustment.

Brindoval Capital Group LLC, as the lead investor in the Series C round, specifically objected to the grant of full-ratchet anti-dilution protection to the Series D holders on the grounds that it would be inconsistent with the anti-dilution terms applicable to the prior rounds of preferred stock and could create structural inequities among the various series of preferred stock in a down-round scenario. Brindoval took the position that granting full-ratchet protection to one series but not others would distort the relative economic interests of the preferred holders and undermine the parity principles on which the prior financing rounds had been negotiated.

D. Drag-Along Rights

Pinnacle proposed a drag-along provision that would be triggered upon the approval of a majority of the outstanding preferred stock (voting together as a single class), which would then obligate all stockholders — including common stockholders — to participate in the approved sale transaction. The founders, Raj Anand and Lena Kovac, formally objected to this provision and insisted on the inclusion of a five hundred million dollar ($500,000,000) enterprise value floor, below which no drag-along sale could be forced.

The existing investors were divided on this issue. Ridgeline Ventures (Series A) and Brindoval Capital Group (Series C) supported the founders' position and agreed that a minimum valuation threshold was appropriate to protect the interests of the common stockholders and option holders. Northgate Growth Partners (Series B) sided with Pinnacle and supported a drag-along provision triggered by majority preferred approval without an enterprise value floor.

E. Other Open Items

In addition to the four principal areas of disagreement described above, the following items remained open and unresolved at the time the matter was placed on hold:

Pay-to-Play. Pinnacle proposed a mandatory pay-to-play provision that would have required all holders of preferred stock to participate pro rata in future qualifying financing rounds or face conversion of their preferred stock into common stock. Verdana deleted the pay-to-play provision in its entirety in the Langford Price markup of the Investors' Rights Agreement. The existing investors had not been consulted on the pay-to-play provision at the time negotiations were suspended.

Redemption Rights. Pinnacle's term sheet proposed redemption rights exercisable at the election of the holders of a majority of the Series D Preferred Stock after five (5) years from the closing date. Verdana's position on redemption rights was not fully addressed in the markups received from Langford Price, and this issue was not the subject of substantive negotiation before the matter was placed on hold.

Protective Provision Scope. Pinnacle proposed consent rights over the incurrence of indebtedness in excess of five million dollars ($5,000,000) and deviations from the board-approved operating budget in excess of 15%. Langford Price, in its markup of the Investors' Rights Agreement, sought to narrow the budget consent right, proposing that consent be required only for deviations in excess of 25% from the board-approved plan and only with respect to aggregate annual expenditures (rather than line-item or quarterly deviations).

Pacific Summit Bank Lender Consent. The second draft of the Stock Purchase Agreement identified as a closing condition the receipt of consent from Pacific Summit Bank, N.A. to the issuance of the Series D Preferred Stock. As of the date the matter was placed on hold, lender consent had not been obtained and no formal request had been submitted to Pacific Summit Bank. The credit facility, which provides for a $10,000,000 revolving facility ($6,200,000 currently drawn) bearing interest at SOFR plus 3.50% and maturing on June 30, 2024, contains negative covenants that potentially restrict the issuance of preferred stock with preferential liquidation or distribution rights.

V. STATUS OF TRANSACTION DOCUMENTS

No transaction documents were executed in connection with the proposed Series D investment. All documents prepared by Calderwood & Harkness remain in draft or markup form. The following tables summarize the status of all transaction documents as of the date of dormancy.

A. Pre-Signing / Term Sheet Phase Documents

The Exclusivity Agreement and its two amendments are the only documents executed between the parties during the course of the engagement. The exclusivity period expired on September 30, 2022, and the parties continued discussions without exclusivity thereafter.

B. Transaction Documents (All Unexecuted Drafts)

It should be noted that the Amended and Restated Certificate of Incorporation, the Disclosure Schedules, the Management Rights Letter, and the Indemnification Agreement were never the subject of markup or substantive negotiation between the parties. The Right of First Refusal and Co-Sale Agreement was similarly never marked up by Langford Price, likely because the parties did not advance negotiations to the stage where these ancillary documents would have been addressed in detail.

VI. VERDANA KEY FINANCIAL DATA (DILIGENCE SUMMARY)

The following is a summary of Verdana Software, Inc.'s key financial and operating metrics as reflected in the diligence materials reviewed by Calderwood & Harkness during the engagement. All financial data is as of the most recent available period (Q1 2022 / March 31, 2022) unless otherwise noted. This data is drawn from the legal due diligence summary memorandum delivered to Pinnacle on July 15, 2022, and from the customer concentration risk analysis memorandum dated July 5, 2022.

Revenue and Growth.

• Annual Recurring Revenue ("ARR") as of Q1 2022: $47,300,000

• ARR as of Q1 2021: $28,900,000

• Year-over-year ARR growth: 63.7%

• Net Revenue Retention ("NRR"): 128%

Profitability and Margins.

• Gross Margin: 74.2%

• EBITDA (trailing twelve months ending March 2022): negative $11,600,000

Balance Sheet and Liquidity.

• Cash on balance sheet as of March 31, 2022: $22,400,000

• Pacific Summit Bank revolving credit facility: $10,000,000 facility amount; $6,200,000 drawn; interest rate SOFR plus 3.50%; minimum liquidity covenant of $10,000,000; maturity June 30, 2024

Workforce and Customers.

• Employees: approximately 310

• Total customers: approximately 185

Customer Concentration. Customer concentration was identified as a significant risk factor during the due diligence process. The table below summarizes the concentration among Verdana's top five customers:

The concentration of 24.9% of total ARR with a single customer (Meridian Logistics Corp.) was flagged as a material risk, particularly in light of the pending CEO transition at Meridian and the competitive RFP process that Pinnacle's diligence team identified. The Meridian enterprise license expires on December 31, 2023, with an automatic renewal provision subject to a 180-day termination notice period (i.e., notice of non-renewal must be provided on or before approximately July 4, 2023). The potential non-renewal of this contract would represent a loss of approximately one-quarter of Verdana's annual recurring revenue.

VII. FEE SUMMARY

A. Engagement Terms

Calderwood & Harkness's engagement in this matter was governed by the engagement letter dated April 19, 2022, executed by Harrison Wexford on behalf of the firm and by Marcus Trejo on behalf of Pinnacle Capital Management LLC, as general partner of Pinnacle Venture Fund II LP. The engagement was structured on an hourly billing basis. The applicable billing rates for each member of the engagement team during the term of the engagement were as follows:

The blended rate for the engagement, based on the mix of hours incurred by the respective timekeepers, was approximately $875 per hour.

At the time of engagement, Calderwood & Harkness provided an initial fee estimate of $350,000 to $450,000 for the transaction, assuming the completion of due diligence, the negotiation and execution of definitive transaction documents, and the closing of the investment. The estimate was provided as a non-binding projection and was subject to the actual scope and complexity of the work performed.

Pinnacle paid a retainer deposit of seventy-five thousand dollars ($75,000) upon execution of the engagement letter in April 2022. The retainer was applied against the firm's initial invoices and has been fully credited against fees billed.

B. Fees Incurred

Total fees incurred through December 1, 2022 are three hundred eighty-seven thousand five hundred dollars ($387,500). This amount is within the initial estimated range of $350,000 to $450,000 provided at the commencement of the engagement.

The retainer deposit of $75,000 was applied against the firm's initial invoices. All invoices issued to date have been paid in full by Pinnacle Venture Fund II LP.

No additional fees are expected to be incurred while the matter remains in dormant status. No work should be performed on this matter absent express written authorization from Pinnacle, as communicated to Harrison Wexford or his designee.

VIII. COMPLETE FILE INVENTORY

The following is a complete inventory of all documents contained in the file for Matter No. 1002-00004. The inventory is organized by document category and includes all engagement materials, term sheet phase documents, diligence memoranda, transaction document drafts, internal analyses, correspondence, and administrative records. All documents are maintained in Calderwood & Harkness's document management system and can be retrieved by the file reference identifiers listed below.

A. Engagement and Conflicts

B. Term Sheet Phase

C. Diligence.

D. Transaction Documents (All Unexecuted Drafts)

E. Internal Analyses and Memoranda

F. Correspondence.

G. Matter Administration

Total documents in file: 36 (including this memorandum).

IX. RECOMMENDATIONS FOR DORMANCY PERIOD

A. File Preservation

All documents comprising the file for Matter No. 1002-00004, as identified in the complete file inventory set forth in Section VIII above, are to be preserved in Calderwood & Harkness's document management system under the designated matter number. No documents are to be destroyed, deleted, or removed from the matter file during the dormancy period, consistent with the firm's record retention policies and applicable professional responsibility obligations. Physical copies of any documents, to the extent they exist, should be retained in the firm's off-site storage facility in accordance with standard procedures.

In addition, all data room access credentials and login information associated with the virtual data room maintained by Verdana during the due diligence process should be archived for reference purposes, even though access to the data room itself may have been revoked or will be revoked by Verdana. Copies of all diligence materials received from Verdana through the data room should be confirmed to be saved within the matter file in the document management system, to the extent that such materials were downloaded and retained during the active diligence period.

B. Client Communication

Marcus Trejo and Pinnacle Capital Management LLC have been informed of the matter hold status pursuant to Harrison Wexford's letter dated November 18, 2022 (File Inventory Item No. 35). No further work is to be performed on this matter, and no additional fees are to be incurred, absent express written authorization from Pinnacle Venture Fund II LP, acting through Pinnacle Capital Management LLC.

The engagement letter dated April 19, 2022 remains in effect, and the attorney-client relationship between Calderwood & Harkness LLP and Pinnacle Venture Fund II LP has not been formally terminated. The firm continues to owe duties of loyalty and confidentiality to Pinnacle with respect to this engagement. Should a conflict of interest arise during the dormancy period that implicates the Pinnacle representation, the matter should be flagged for review by Harrison Wexford and the firm's conflicts committee in accordance with standard procedures.

C. Monitoring Considerations

While no active work is to be performed during the dormancy period, the following developments should be noted for potential relevance in the event that Pinnacle elects to reactivate the matter:

Meridian Logistics Corp. Contract Expiration. The enterprise license agreement between Verdana and Meridian Logistics Corp., Verdana's largest customer (accounting for $11.8M or 24.9% of ARR), expires on December 31, 2023. The agreement contains an automatic renewal provision subject to a 180-day termination notice period. Accordingly, the deadline for Meridian to provide notice of non-renewal is approximately July 4, 2023. If Pinnacle re-engages on this matter, the status of the Meridian customer relationship — including whether the contract has been renewed, renegotiated, or terminated — should be among the first items of inquiry, as a non-renewal would materially affect Verdana's revenue base and the investment thesis.

Pacific Summit Bank Credit Facility Maturity. Verdana's revolving credit facility with Pacific Summit Bank, N.A., which has a principal amount of $10,000,000 ($6,200,000 drawn as of March 31, 2022), matures on June 30, 2024. Any refinancing, amendment, or replacement of this facility may affect the terms of a potential Series D investment, including the lender consent analysis, the scope of the negative covenants applicable to Verdana, and the company's overall debt profile and liquidity position. If negotiations resume, updated information regarding the credit facility should be obtained as part of the reactivation diligence.

Verdana's Capital Requirements. Based on the financial data available as of March 31, 2022, Verdana had $22,400,000 in cash on its balance sheet and was generating negative EBITDA of approximately $11,600,000 on a trailing twelve-month basis, implying an approximate monthly cash burn rate of $1,000,000 (recognizing that EBITDA does not perfectly correlate with cash consumption due to working capital dynamics, capital expenditures, and non-cash items). At this burn rate, and assuming no material change in operations, Verdana's existing cash reserves (supplemented by the available borrowing capacity under the credit facility) would be expected to sustain operations into 2024 but may not provide a runway sufficient to reach profitability or the next natural fundraising milestone without additional capital. This dynamic may create conditions favorable to a re-engagement by Pinnacle, potentially at a lower valuation than the positions maintained by Verdana during the 2022 negotiations.

Expiration of Exclusivity. As noted above, the exclusivity period expired on September 30, 2022. Verdana is free to solicit, negotiate, and consummate alternative financing transactions with third parties. If Verdana secures alternative financing during the dormancy period, the terms of any such financing will affect the capitalization table, the relative rights of existing investors, and the baseline from which any future Series D negotiation with Pinnacle would proceed.

D. Reactivation Procedure

In the event that Pinnacle elects to reactivate the matter and resume negotiations with Verdana regarding the proposed Series D investment, the following steps should be undertaken:

Conflict Check. A fresh conflict check should be run through the firm's conflicts clearance system to confirm that no conflicts of interest have arisen during the dormancy period that would preclude Calderwood & Harkness from continuing the representation of Pinnacle in this matter.

Updated Transaction Documents. All draft transaction documents will need to be reviewed and updated to reflect any interim changes to Verdana's capitalization, financial condition, material contracts, and other relevant circumstances. In particular, any equity issuances, debt transactions, option grants, or other corporate actions taken by Verdana during the dormancy period will need to be reflected in the capitalization table, the certificate of incorporation, and the investor agreements.

Updated Financial Diligence. The financial diligence data underlying the firm's existing memoranda and analyses is as of March 31, 2022, and will be stale at the time of any reactivation. Updated financial statements, management accounts, and operating metrics should be requested from Verdana through its counsel as an initial step in any reactivation process.

Billing Rate Confirmation. The billing rates for all timekeepers should be confirmed at the time of reactivation, as the firm's standard billing rates are subject to annual adjustment and the rates in effect during the 2022 engagement may no longer be current. The engagement letter provides for rate adjustments with notice to the client.

Client Authorization. Reactivation should proceed only upon receipt of express written authorization from Pinnacle Capital Management LLC, acting on behalf of Pinnacle Venture Fund II LP, confirming the client's desire to resume the engagement and authorizing the firm to incur additional fees and expenses.

X. CONCLUSION

Matter No. 1002-00004 is formally placed on dormant status effective December 1, 2022. The principal facts and conclusions of this memorandum are summarized as follows:

Total legal fees incurred through December 1, 2022 are three hundred eighty-seven thousand five hundred dollars ($387,500), which is within the initial fee estimate of $350,000 to $450,000 provided at the commencement of the engagement. The retainer deposit of seventy-five thousand dollars ($75,000) paid by Pinnacle upon engagement was previously applied against the firm's initial invoices.

No transaction documents were executed during the course of the engagement. The proposed sixty million dollar ($60,000,000) Series D Preferred Stock investment by Pinnacle Venture Fund II LP in Verdana Software, Inc. remains unconsummated. All draft transaction documents remain in the status described in Section V of this memorandum.

The principal reasons for the matter being placed on dormant status are the parties' inability to reach agreement on the following material commercial terms after approximately seven months of negotiation:

1. Valuation: An unresolved sixty million dollar ($60,000,000) gap between Pinnacle's proposed pre-money valuation of $260,000,000 and Verdana's proposed pre-money valuation of $320,000,000.

2. Liquidation Preference: Disagreement over a 1.5x non-participating liquidation preference (Pinnacle's position) versus a 1.0x non-participating liquidation preference (Verdana's position).

3. Anti-Dilution: Disagreement over full-ratchet anti-dilution protection (Pinnacle's position) versus broad-based weighted average anti-dilution protection (Verdana's position).

4. Drag-Along Rights: Disagreement over a drag-along provision triggered by majority preferred approval (Pinnacle's position) versus a drag-along provision subject to a $500,000,000 enterprise value floor (the founders' position).

This memorandum and the file inventory set forth in Section VIII constitute the complete record of work product generated during the engagement. The file contains a total of thirty-six (36) documents, including this memorandum. All documents are preserved in Calderwood & Harkness's document management system under Matter No. 1002-00004.

Prepared by:

________________________________________

Andrew Fitzpatrick Lead Associate, Mergers & Acquisitions Calderwood & Harkness LLP

Date: December 1, 2022

Reviewed by:

________________________________________

Harrison Wexford Responsible Partner, Mergers & Acquisitions Calderwood & Harkness LLP

Date: ________

________________________________________

Beatrice Holloway Billing Partner, Mergers & Acquisitions Calderwood & Harkness LLP

Date: ________

DISTRIBUTION: Internal only — Harrison Wexford, Beatrice Holloway; file copy. This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for internal use by Calderwood & Harkness LLP personnel authorized to access Matter No. 1002-00004. Do not distribute, copy, or forward without authorization.

Valuation Scenario	Pre-Money Valuation	Price/Share	Shares Issued to Pinnacle	Pinnacle Post-Closing Ownership
Pinnacle's Position	$260,000,000	$3.25	18,461,538	18.75%
Brindoval Compromise	$290,000,000	$3.625	16,551,724	17.14%
Verdana's Position (no ESOP expansion)	$320,000,000	$4.00	15,000,000	15.79%
Verdana's Position (with ESOP expansion)	$320,000,000	$4.00	15,000,000	15.00%
Document	Date	Status
Non-Binding Term Sheet (Pinnacle's Initial)	April 22, 2022	Delivered to Verdana; superseded by subsequent negotiations; non-binding
Verdana Counter-Term Sheet (via Hargrove Securities)	May 3, 2022	Received from Langford Price / Hargrove Securities; superseded by subsequent negotiations; non-binding
Exclusivity Agreement	May 12, 2022	Executed by both parties; expired September 30, 2022 (as amended)
First Amendment to Exclusivity Agreement	July 8, 2022	Executed by both parties; extended exclusivity to August 15, 2022
Second Amendment to Exclusivity Agreement	August 15, 2022	Executed by both parties; extended exclusivity to September 30, 2022
Document	Initial Draft Date	Current Version	Status
Series D Preferred Stock Purchase Agreement	June 8, 2022	Second Draft (C&H, July 18, 2022); Langford Price markup of Initial Draft (received June 22, 2022) outstanding	Unexecuted; open issues remain on valuation methodology, representations and warranties, indemnification caps and baskets, and closing conditions
Amended and Restated Investors' Rights Agreement	June 15, 2022	Initial Draft (C&H); Langford Price markup (received July 22, 2022)	Unexecuted; impasse on anti-dilution mechanism, liquidation preference, pay-to-play, and scope of protective provisions
Amended and Restated Right of First Refusal and Co-Sale Agreement	June 20, 2022	Initial Draft (C&H)	Unexecuted; no markup received from Langford Price
Amended and Restated Voting Agreement	June 20, 2022	Initial Draft (C&H)	Unexecuted; drag-along dispute unresolved; board composition partially agreed
Amended and Restated Certificate of Incorporation (Series D)	June 8, 2022	Initial Draft (C&H)	Unexecuted; reflects Pinnacle's 1.5x preference and full-ratchet positions; not updated to reflect the status of negotiations
Disclosure Schedules (Investor's Template)	June 8, 2022	Blank Template	Delivered to Langford Price; not populated by Verdana
Management Rights Letter	June 15, 2022	Draft (C&H)	Unexecuted
Indemnification Agreement (Pinnacle Board Designee)	June 25, 2022	Draft (C&H)	Unexecuted
Rank	Customer	ARR ($M)	% of Total ARR	Notes
1	Meridian Logistics Corp.	$11.8	24.9%	3-year enterprise license expiring December 31, 2023; auto-renews with 180-day termination notice period; CEO change and competitive RFP noted
2	Caldera Manufacturing Inc.	$5.2	11.0%	—
3	Atlas Freight Holdings LLC	$4.1	8.7%	—
4	Brannock Industrial Group	$3.4	7.2%	—

5	Solaris Warehousing Co.	$2.7	5.7%	—
Top 5 Total	$27.2	57.5%
Professional	Role	Hourly Rate
Harrison Wexford	Responsible Partner	$1,250/hour
Beatrice Holloway	Billing Partner	$1,200/hour
Andrew Fitzpatrick	Lead Associate	$725/hour
Naomi Petersen	Working Associate	$550/hour
#	Document	Date	Author/Source	File Reference
1	Engagement Letter — Calderwood & Harkness LLP to Pinnacle Venture Fund II LP	April 19, 2022	C&H / Harrison Wexford	engagement-letter-pinnacle.docx
2	Conflict Check Memorandum (Internal)	April 19, 2022	Naomi Petersen / Harrison Wexford	conflict-check-memo.docx
#	Document	Date	Author/Source	File Reference
3	Non-Binding Term Sheet — Pinnacle to Verdana (Initial)	April 22, 2022	C&H / Pinnacle	term-sheet-pinnacle-initial.docx
4	Verdana Counter-Term Sheet (received via Hargrove Securities LLC)	May 3, 2022	Langford Pr

PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
INTERNAL MEMORANDUM
December 1, 2022
TO: Harrison Wexford, Responsible Partner, Mergers & Acquisitions Beatrice Holloway, Billing Partner, Mergers & Acquisitions
FROM: Andrew Fitzpatrick, Lead Associate, Mergers & Acquisitions
RE: Matter Status Change to Dormant — Pinnacle Venture Fund II LP / Proposed Series D Investment in Verdana Software, Inc.
Matter Number: 1002-00004
Billing Client Number: PIN-0042
Client: Pinnacle Venture Fund II LP (General Partner: Pinnacle Capital Management LLC)
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I. PURPOSE
This memorandum formally documents the change of Matter No. 1002-00004 to dormant status effective December 1, 2022. It has been prepared for internal file closure and hold purposes in accordance with Calderwood & Harkness LLP's matter administration policies.
The purpose of this memorandum is threefold. First, it provides a comprehensive summary of the transaction history from engagement through the present date, including all significant milestones, negotiation events, and the circumstances leading to the current dormancy status. Second, it documents the current state of all transaction documents, including executed agreements and unexecuted drafts, and identifies all unresolved commercial and legal terms as of the date the matter was placed on hold. Third, it provides a complete inventory of all work product generated during the engagement, including internal memoranda, draft transaction documents, correspondence, diligence materials, and administrative records.
The matter involved Calderwood & Harkness LLP's representation of Pinnacle Venture Fund II LP in connection with a proposed sixty million dollar ($60,000,000) minority growth equity investment in Series D Preferred Stock of Verdana Software, Inc., a Delaware C-corporation operating an AI-powered B2B SaaS supply chain optimization platform. The engagement commenced on April 19, 2022 and proceeded through active negotiations, extensive legal due diligence, and the preparation and exchange of transaction document drafts over the course of approximately seven months. The parties were ultimately unable to reach agreement on several material commercial terms, most significantly a sixty million dollar ($60,000,000) gap in pre-money valuation, as well as disagreements regarding liquidation preference, anti-dilution protection, and drag-along rights.
The matter was placed on hold following Harrison Wexford's letter to Marcus Trejo, Partner and Head of Growth Equity at Pinnacle Capital Management LLC, dated November 18, 2022, in which Harrison formally recommended that the matter be placed on hold pending a change in circumstances that might facilitate a resumption of negotiations. This memorandum memorializes the formal transition to dormant status in the firm's matter management system and constitutes the complete record of the engagement to date.
II. TRANSACTION SUMMARY
A. Parties.  Client / Investor. Pinnacle Venture Fund II LP, a Delaware limited partnership (EIN: 84-3921057), acting through its general partner, Pinnacle Capital Management LLC, a Delaware limited liability company (EIN: 84-2817634). Pinnacle Capital Management LLC serves as the sole general partner of the Fund and is authorized to make investment decisions and enter into binding agreements on behalf of the Fund. Pinnacle Venture Fund II LP is headquartered at 2400 Sand Hill Road, Suite 310, Menlo Park, California 94025. The Fund is an eight hundred fifty million dollar ($850,000,000) growth equity fund, 2020 vintage, focused on late-stage enterprise software and technology-enabled services investments. The key investment professional responsible for the Verdana transaction is Marcus Trejo, Partner and Head of Growth Equity at Pinnacle Capital Management LLC, who served as the firm's primary point of contact throughout the engagement.
Target Company. Verdana Software, Inc., a Delaware C-corporation (EIN: 93-1485726; Delaware Secretary of State File Number: 6274913), headquartered at 1175 NW Couch Street, Suite 800, Portland, Oregon 97209. Verdana was founded in 2016 by Raj Anand and Lena Kovac and operates an AI-powered B2B SaaS supply chain optimization platform marketed under the brand name "Verdana SCX." The Verdana SCX platform provides enterprise customers with predictive analytics, demand forecasting, and logistics optimization capabilities. As of the most recent diligence data available (Q1 2022), Verdana had approximately 310 employees and served approximately 185 customers. The key officers of Verdana are as follows:
•  Raj Anand — Chief Executive Officer & Co-Founder
•  Lena Kovac — Chief Technology Officer & Co-Founder
•  Thomas Brightwell — Chief Financial Officer
•  Sandra Mikkelsen — General Counsel
Existing Investors. Verdana has completed three prior rounds of preferred stock financing. The existing institutional investors and their respective positions in the capitalization of the company as of the commencement of due diligence are set forth below:
Ridgeline Ventures Fund III LP (Series A Lead). Ridgeline Ventures Fund III LP led the company's Series A financing in 2018 with a nine million six hundred thousand dollar ($9,600,000) investment at a price per share of $0.80. Ridgeline holds 12,000,000 shares of Series A Preferred Stock, representing approximately 15.0% of the company's fully-diluted capitalization on a pre-investment basis. Ridgeline's board representative is Priya Dasgupta.
Northgate Growth Partners Fund II LP (Series B Lead). Northgate Growth Partners Fund II LP led the company's Series B financing in 2019 with a thirty-two million dollar ($32,000,000) investment at a price per share of $2.00. Northgate holds 16,000,000 shares of Series B Preferred Stock, representing approximately 20.0% of the company's fully-diluted capitalization on a pre-investment basis. Northgate's board representative is Elliott Margolis.
Brindoval Capital Group LLC (Series C Lead). Brindoval Capital Group LLC led the company's Series C financing in 2021 with a thirty-six million dollar ($36,000,000) investment at a price per share of $3.00. Brindoval holds 12,000,000 shares of Series C Preferred Stock, representing approximately 15.0% of the company's fully-diluted capitalization on a pre-investment basis. Brindoval's board representative is Diana Chen.
Founders and Option Pool. Raj Anand and Lena Kovac collectively hold 28,000,000 shares of Common Stock, representing approximately 35.0% of the company's fully-diluted capitalization on a pre-investment basis. The company maintains an Employee Stock Option Plan ("ESOP") with a pool of 12,000,000 shares (both granted and available for grant), representing approximately 15.0% of the company's fully-diluted capitalization on a pre-investment basis. The total fully-diluted share count of the company on a pre-investment basis is 80,000,000 shares.
B. Transaction Description
The proposed transaction involved a sixty million dollar ($60,000,000) investment by Pinnacle Venture Fund II LP in newly issued shares of Series D Preferred Stock of Verdana Software, Inc. The investment was structured as a minority growth equity investment, with Pinnacle targeting an ownership stake of 18.75% of the company's fully-diluted capitalization on a post-closing basis.
The pre-money valuation remained the central point of contention throughout the negotiation. The parties' respective positions on valuation and the resulting economic terms are summarized as follows:
Pinnacle's Position. Pinnacle proposed a pre-money valuation of two hundred sixty million dollars ($260,000,000), corresponding to a price per share of $3.25. At this valuation, Pinnacle's sixty million dollar investment would have resulted in the issuance of 18,461,538 shares of Series D Preferred Stock, representing approximately 18.75% of the company's post-closing fully-diluted capitalization (based on a post-money share count of approximately 98,461,538 shares).
Verdana's Position. Verdana, through its financial advisor Hargrove Securities LLC, proposed a pre-money valuation of three hundred twenty million dollars ($320,000,000), corresponding to a price per share of $4.00. At this valuation, Pinnacle's sixty million dollar investment would have resulted in the issuance of 15,000,000 shares of Series D Preferred Stock, representing approximately 15.79% of the company's post-closing fully-diluted capitalization without giving effect to the proposed ESOP expansion (based on a post-money share count of approximately 95,000,000 shares), or approximately 15.00% of the company's post-closing fully-diluted capitalization giving effect to a proposed 5,000,000-share ESOP expansion (based on a post-money share count of approximately 100,000,000 shares).
Beyond valuation, the proposed transaction involved the negotiation and execution of a standard suite of venture capital financing documents, including a Series D Preferred Stock Purchase Agreement, an Amended and Restated Certificate of Incorporation reflecting the Series D terms, an Amended and Restated Investors' Rights Agreement, an Amended and Restated Right of First Refusal and Co-Sale Agreement, an Amended and Restated Voting Agreement, a Management Rights Letter, and ancillary documents.
The proposed post-closing board of directors would have consisted of seven (7) members: two (2) Founder designees, one (1) Ridgeline Ventures designee, one (1) Northgate Growth Partners designee, one (1) Brindoval Capital Group designee, one (1) Pinnacle designee (to be Marcus Trejo or his designee), and one (1) mutually agreed independent director. Board composition was partially agreed upon during the negotiations, though the terms of the voting agreement remained in draft form.
The transaction was to be governed by Delaware law, consistent with the company's state of incorporation and the governing law provisions of the existing investor agreements.
C. Advisors.  The following advisors were engaged or involved in the transaction:
Investor's Counsel (Our Firm). Calderwood & Harkness LLP, 101 Montgomery Street, Suite 3500, San Francisco, California 94104. The engagement team consisted of the following professionals:
•  Harrison Wexford — Responsible Partner
•  Beatrice Holloway — Billing Partner
•  Andrew Fitzpatrick — Lead Associate
•  Naomi Petersen — Working Associate
Target's Counsel. Langford Price & Associates LLP, 1000 SW Broadway, Suite 1600, Portland, Oregon 97205. The lead attorneys on the Langford Price team were Jonathan Hale, Partner, and Rebecca Thornton, Associate.
Target's Financial Advisor / Placement Agent. Hargrove Securities LLC, 600 Lexington Avenue, 22nd Floor, New York, New York 10022. The lead investment banker was Nathan Callister. Hargrove Securities was engaged by Verdana as placement agent and was entitled to a placement fee of 1.5% of the aggregate investment amount, which would have equaled nine hundred thousand dollars ($900,000) on a sixty million dollar investment.
Pinnacle's Fund Auditor. Calloway & Cascade Insurance Brokers, 44 Montgomery Street, Suite 1200, San Francisco, California 94104.
Verdana's Auditor. Whitfield & Greer LLP, 888 SW Fifth Avenue, Suite 1400, Portland, Oregon 97204. The engagement partner was Gerald Whitfield.
Pinnacle's Fund Administrator. Dralvecen Fund Services LLC, 300 Delaware Avenue, Suite 900, Wilmington, Delaware 19801.
Verdana's Lender. Pacific Summit Bank, N.A., 350 California Street, San Francisco, California 94104. Pacific Summit Bank is the administrative agent and sole lender under Verdana's revolving credit facility.
III. TIMELINE OF KEY EVENTS
The following is a chronological summary of all significant events from the opening of the matter through the formal change to dormant status. This timeline has been compiled from engagement records, internal correspondence, document metadata, and contemporaneous file notes.
April 19, 2022. Matter No. 1002-00004 was opened in Calderwood & Harkness's matter management system. Pinnacle Venture Fund II LP formally engaged Calderwood & Harkness LLP to represent it in connection with the proposed Series D investment in Verdana Software, Inc. The engagement letter was executed by Marcus Trejo on behalf of Pinnacle Capital Management LLC, as general partner of Pinnacle Venture Fund II LP. A conflict check was completed on this date and no conflicts were identified. Harrison Wexford was designated as the responsible partner and Beatrice Holloway as the billing partner for the engagement.
April 22, 2022. Calderwood & Harkness delivered a non-binding term sheet on behalf of Pinnacle to Verdana Software, Inc. The term sheet proposed the following key economic and governance terms: a pre-money valuation of $260,000,000 ($3.25 per share); a 1.5x non-participating liquidation preference; full-ratchet anti-dilution protection; an 8% cumulative dividend on the Series D Preferred Stock; drag-along rights triggered on majority preferred approval; redemption rights exercisable at the election of the holders of a majority of the Series D Preferred Stock after five (5) years from the closing date; consent rights over the incurrence of indebtedness in excess of $5,000,000 and deviations from the board-approved operating budget in excess of 15%; and a mandatory pay-to-play provision applicable to all preferred holders. The term sheet also outlined the proposed board composition of seven (7) members as described in Section II.B above.
May 3, 2022. Verdana delivered a counter-term sheet through its placement agent, Hargrove Securities LLC. Verdana's counter-proposal reflected a pre-money valuation of $320,000,000 ($4.00 per share), a 1.0x non-participating liquidation preference, broad-based weighted average anti-dilution protection, and a proposed 5,000,000-share expansion of the ESOP pool to be completed prior to the closing of the Series D round. The counter-term sheet was transmitted by Jonathan Hale of Langford Price & Associates LLP to Calderwood & Harkness.
May 5, 2022. Calderwood & Harkness delivered to Pinnacle a term sheet comparison memorandum analyzing the material differences between Pinnacle's initial term sheet and Verdana's counter-proposal. The memorandum was prepared by Andrew Fitzpatrick and Naomi Petersen and addressed valuation, liquidation preference, anti-dilution mechanics, dividend rights, drag-along and tag-along provisions, protective provisions, redemption, pay-to-play, and the ESOP expansion proposal.
May 12, 2022. An exclusivity agreement was executed by both Pinnacle and Verdana. The exclusivity period was sixty (60) days, running from May 12, 2022 through July 11, 2022. During the exclusivity period, Verdana agreed not to solicit, negotiate, or enter into any agreement or understanding with any third party regarding an equity financing, debt financing (other than ordinary course trade credit), merger, sale of all or substantially all assets, or other change of control transaction.
May 14, 2022. Calderwood & Harkness delivered a comprehensive due diligence request list to Langford Price & Associates LLP on behalf of Pinnacle. The request list covered corporate formation and governance documents, capitalization records, financial statements and projections, material contracts, intellectual property, employment and benefits matters, litigation, regulatory compliance, tax matters, real property, insurance, and related items.
May 16, 2022. Due diligence formally commenced. Verdana, through Langford Price, granted Pinnacle's diligence team access to a virtual data room hosted on a third-party platform. Calderwood & Harkness professionals, together with Pinnacle's internal diligence team, began reviewing the materials uploaded to the data room.
May 25, 2022. Calderwood & Harkness delivered to Pinnacle a valuation and ownership analysis memorandum prepared by Andrew Fitzpatrick. The memorandum analyzed the economic implications of the parties' respective valuation proposals on Pinnacle's post-closing ownership percentage, the dilutive effect of the proposed ESOP expansion, and comparable transaction multiples for B2B SaaS companies at similar revenue scales and growth rates.
June 1, 2022. Calderwood & Harkness delivered a capitalization table analysis and liquidation waterfall workbook to Pinnacle. The workbook, prepared by Naomi Petersen, modeled the company's fully-diluted capitalization on a pre-money and post-money basis under both parties' valuation proposals, as well as under various compromise scenarios. The liquidation waterfall analysis modeled distribution outcomes across a range of exit valuations under both a 1.0x and 1.5x non-participating liquidation preference, with and without the proposed ESOP expansion.
June 8, 2022. Calderwood & Harkness delivered the following initial drafts of transaction documents to Langford Price & Associates LLP: (i) the Series D Preferred Stock Purchase Agreement, (ii) the Amended and Restated Certificate of Incorporation reflecting the Series D Preferred Stock terms, and (iii) a disclosure schedules template for population by Verdana. The initial drafts reflected Pinnacle's proposed terms as set forth in the April 22, 2022 term sheet, including the $260,000,000 pre-money valuation, 1.5x non-participating liquidation preference, full-ratchet anti-dilution, and other protective provisions.
June 15, 2022. Calderwood & Harkness delivered the following additional initial drafts to Langford Price & Associates LLP: (i) the Amended and Restated Investors' Rights Agreement and (ii) a draft Management Rights Letter for Pinnacle. The Investors' Rights Agreement draft incorporated the standard information rights, registration rights, and protective provision framework, as well as the pay-to-play provision proposed in Pinnacle's term sheet.
June 20, 2022. Calderwood & Harkness delivered the following additional initial drafts to Langford Price & Associates LLP: (i) the Amended and Restated Right of First Refusal and Co-Sale Agreement and (ii) the Amended and Restated Voting Agreement. The Voting Agreement draft reflected the proposed seven-member board composition and included the drag-along provision proposed by Pinnacle, which would have permitted the holders of a majority of the outstanding preferred stock to compel all stockholders to participate in an approved sale transaction.
June 22, 2022. Langford Price & Associates LLP returned its first markup of the Series D Preferred Stock Purchase Agreement. The markup contained significant revisions, including objections to the valuation methodology reflected in the purchase price definition, modifications to the representations and warranties of the company (particularly regarding intellectual property, financial statements, and material contracts), changes to the indemnification provisions (including a proposed reduction of the indemnification cap and an increase in the indemnification basket), and revisions to the closing conditions. Andrew Fitzpatrick prepared annotations to the markup for internal review.
June 25, 2022. Calderwood & Harkness delivered a draft Indemnification Agreement for Pinnacle's board designee to Langford Price & Associates LLP. The draft provided for indemnification and advancement of expenses for Pinnacle's designee to the Verdana board of directors, consistent with Verdana's existing indemnification agreements with its current board members.
June 28, 2022. Calderwood & Harkness delivered a memorandum to Pinnacle analyzing the terms of Verdana's revolving credit facility with Pacific Summit Bank, N.A. The memorandum, prepared by Naomi Petersen, summarized the material terms of the credit facility, including the $10,000,000 facility amount, the $6,200,000 outstanding balance, the interest rate of SOFR plus 3.50%, the minimum liquidity covenant of $10,000,000, and the maturity date of June 30, 2024. The memorandum also identified certain negative covenants in the credit facility that could potentially restrict the issuance of preferred stock or the grant of preferential rights to new investors.
June 30, 2022. Calderwood & Harkness delivered a lender consent analysis memorandum to Pinnacle, prepared by Andrew Fitzpatrick. The memorandum analyzed whether the proposed Series D issuance would require the consent of Pacific Summit Bank under the terms of the credit facility and concluded that consent was likely required due to the negative covenant restricting the creation of new equity securities with preferential distribution or liquidation rights. The memorandum recommended that lender consent be included as a closing condition in the Stock Purchase Agreement.
July 1, 2022. Pinnacle's internal diligence team flagged significant customer concentration risk in Verdana's revenue base. Specifically, the team identified that Meridian Logistics Corp. accounted for $11,800,000 of Verdana's $47,300,000 in annual recurring revenue ("ARR"), representing 24.9% of total ARR. Furthermore, the top five customers collectively accounted for $27,200,000, representing 57.5% of total ARR. The Pinnacle team communicated these findings to Calderwood & Harkness and requested a detailed risk analysis.
July 5, 2022. Calderwood & Harkness delivered a customer concentration risk analysis memorandum to Pinnacle, prepared by Naomi Petersen. The memorandum analyzed the risks associated with Verdana's reliance on Meridian Logistics Corp. as its largest customer and the concentration of revenue among the top five customers. The memorandum noted that Meridian's enterprise license agreement was a three-year contract expiring on December 31, 2023, with an automatic renewal provision subject to a 180-day termination notice period. The memorandum also noted that Pinnacle's diligence team had identified a recent CEO change at Meridian and intelligence suggesting that Meridian had initiated a competitive RFP process for its supply chain management software needs.
July 8, 2022. The First Amendment to the Exclusivity Agreement was executed by both parties. The amendment extended the exclusivity period from its original expiration date of July 11, 2022 to a new expiration date of August 15, 2022, in order to allow additional time for the completion of due diligence and the continuation of document negotiations.
July 10, 2022. Calderwood & Harkness delivered an employment and benefits due diligence memorandum to Pinnacle, prepared by Naomi Petersen. The memorandum summarized the results of Calderwood & Harkness's review of Verdana's employment agreements, offer letters, equity compensation plans, employee benefits programs, and related matters.
July 11, 2022. Original expiration date of the exclusivity agreement (superseded by the First Amendment executed on July 8, 2022).
July 12, 2022. Calderwood & Harkness delivered an intellectual property and technology due diligence memorandum to Pinnacle, prepared by Naomi Petersen. The memorandum addressed Verdana's patent portfolio, trademark registrations, trade secrets, open-source software usage, license agreements, and data privacy practices, among other matters.
July 15, 2022. Calderwood & Harkness delivered a comprehensive legal due diligence summary memorandum to Pinnacle, prepared by Andrew Fitzpatrick and Naomi Petersen. The memorandum consolidated the findings from all workstreams of the legal due diligence review, including corporate, financial, intellectual property, employment, customer contracts, regulatory, litigation, and lender-related matters. The memorandum identified the key risks and areas of concern for Pinnacle's consideration and included recommendations regarding representations, warranties, and closing conditions to be included in the transaction documents.
July 18, 2022. Calderwood & Harkness delivered a second draft of the Series D Preferred Stock Purchase Agreement to Langford Price & Associates LLP. The second draft responded to the Langford Price markup received on June 22, 2022 and incorporated certain revisions reflecting partial agreement on representations and warranty language, while maintaining Pinnacle's positions on valuation, indemnification caps and baskets, and other material terms. The second draft also added a closing condition requiring the consent of Pacific Summit Bank, N.A. to the proposed Series D issuance, consistent with the recommendations in the lender consent analysis memorandum.
July 22, 2022. Langford Price & Associates LLP delivered its markup of the Amended and Restated Investors' Rights Agreement. The markup reflected significant disagreements on several key provisions. In particular, Langford Price proposed the substitution of broad-based weighted average anti-dilution protection for the full-ratchet mechanism proposed by Pinnacle, consistent with the anti-dilution provisions applicable to the Series A, B, and C Preferred Stock. Langford Price also proposed a 1.0x non-participating liquidation preference in place of Pinnacle's proposed 1.5x preference, again citing consistency with prior round terms. The Langford Price markup deleted the pay-to-play provision in its entirety and sought to narrow the scope of Pinnacle's proposed budget consent right. These disagreements defined the core impasse that ultimately prevented the consummation of the transaction.
August 2, 2022. A negotiation session was conducted between the parties' respective deal teams regarding the anti-dilution mechanism and liquidation preference terms. Participants included Marcus Trejo (Pinnacle), Harrison Wexford and Andrew Fitzpatrick (Calderwood & Harkness), Raj Anand and Thomas Brightwell (Verdana), and Jonathan Hale and Rebecca Thornton (Langford Price). No resolution was reached. The parties remained at impasse on the full-ratchet versus broad-based weighted average anti-dilution issue and the 1.5x versus 1.0x liquidation preference issue.
August 4, 2022. Calderwood & Harkness delivered an anti-dilution provisions comparison memorandum to Pinnacle, prepared by Andrew Fitzpatrick. The memorandum provided a detailed comparison of the economic effects of full-ratchet and broad-based weighted average anti-dilution protection across a range of down-round scenarios, including illustrative numerical examples showing the dilutive impact on existing investors under each mechanism.
August 8, 2022. Calderwood & Harkness delivered a memorandum to Pinnacle analyzing Delaware law regarding protective provisions and minority investor rights, prepared by Naomi Petersen. The memorandum addressed the statutory framework under the Delaware General Corporation Law applicable to the rights of holders of preferred stock, including the scope of class voting rights, the enforceability of contractual protective provisions, and relevant case law regarding the fiduciary duties owed to minority investors in the context of venture capital financings.
August 10, 2022. The founders, Raj Anand and Lena Kovac, formally objected to Pinnacle's proposed drag-along provision. The founders communicated their objection through Langford Price & Associates LLP and insisted on the inclusion of a five hundred million dollar ($500,000,000) enterprise value floor, below which no drag-along sale could be forced upon the common stockholders. The founders' position was that the drag-along provision, as proposed by Pinnacle, could be used to compel a sale of the company at a valuation that would provide a meaningful return to the preferred holders but inadequate returns to the common stockholders and option holders.
August 12, 2022. Calderwood & Harkness delivered a drag-along and tag-along rights analysis memorandum to Pinnacle, prepared by Andrew Fitzpatrick. The memorandum analyzed the legal and commercial implications of the founders' proposed enterprise value floor, the enforceability of drag-along provisions under Delaware law, and market practice regarding minimum valuation thresholds in drag-along provisions applicable to growth-stage technology companies.
August 15, 2022. The Second Amendment to the Exclusivity Agreement was executed by both parties. The amendment extended the exclusivity period from its then-current expiration date of August 15, 2022 to a new expiration date of September 30, 2022, reflecting the parties' continued intent to negotiate toward a definitive agreement notwithstanding the outstanding disagreements.
September 6, 2022. The parties reached partial agreement on board composition, confirming the seven-seat board structure as originally proposed (two Founder designees, one Ridgeline designee, one Northgate designee, one Brindoval designee, one Pinnacle designee, and one mutually agreed independent director). However, valuation and protective provisions remained open and unresolved.
September 8, 2022. Andrew Fitzpatrick transmitted an email to Rebecca Thornton of Langford Price & Associates LLP setting forth a comprehensive list of all open issues requiring resolution before the transaction documents could be finalized. The open issues list addressed valuation, anti-dilution, liquidation preference, drag-along rights, pay-to-play, redemption rights, protective provision scope, the ESOP expansion, and the Pacific Summit Bank lender consent, among other items.
September 19, 2022. At Pinnacle's direction, Calderwood & Harkness delivered a formal letter to Verdana on behalf of Pinnacle reaffirming Pinnacle's pre-money valuation position of $260,000,000. The letter, drafted by Calderwood & Harkness and signed by Marcus Trejo, stated that Pinnacle's investment thesis and diligence findings did not support a valuation in excess of $260,000,000, and that Pinnacle was not prepared to revise its valuation position. Verdana rejected the revised proposal.
September 30, 2022. The exclusivity period expired pursuant to the terms of the Second Amendment to the Exclusivity Agreement. The parties agreed to continue discussions without exclusivity, meaning that Verdana was free to solicit and negotiate with other potential investors going forward.
October 14, 2022. Brindoval Capital Group LLC, through its board representative Diana Chen, proposed a compromise valuation of $290,000,000 pre-money ($3.625 per share), which would have resulted in the issuance of 16,551,724 shares of Series D Preferred Stock to Pinnacle, representing approximately 17.14% of the company's post-closing fully-diluted capitalization. The Brindoval compromise proposal also included a 1.0x non-participating liquidation preference. Pinnacle declined the Brindoval proposal.
October 20, 2022. Harrison Wexford transmitted an email to Marcus Trejo assessing the current status of the negotiations and the likelihood of reaching agreement. The email identified the principal areas of impasse, summarized the parties' respective positions, and recommended that Pinnacle consider whether to make a final counter-proposal or to place the matter on hold. Harrison noted that the expiration of exclusivity, combined with the duration of the negotiations and the breadth of the unresolved commercial terms, raised meaningful uncertainty as to whether a transaction could be consummated on terms acceptable to Pinnacle.
November 2, 2022. A final negotiation session was conducted between the parties. No agreement was reached on valuation, liquidation preference, anti-dilution, or drag-along rights. The session concluded without a path forward being identified. The parties agreed to table further discussions.
November 18, 2022. Harrison Wexford delivered a letter to Marcus Trejo formally recommending that the matter be placed on hold. The letter summarized the status of the negotiations, identified the unresolved commercial terms, noted the absence of exclusivity, and recommended that the engagement be maintained in a dormant state pending a change in circumstances that might facilitate a resumption of discussions.
December 1, 2022. The matter status was formally changed to dormant in Calderwood & Harkness's matter management system. This memorandum was prepared to document the matter status change, provide a complete transaction history, and memorialize the file inventory for the engagement.
IV. UNRESOLVED COMMERCIAL TERMS AT TIME OF DORMANCY
As of the date the matter was placed on dormant status, the following material commercial terms remained unresolved between the parties. These open issues were the proximate cause of the parties' inability to reach a definitive agreement.
A. Valuation Gap
The central and most significant unresolved issue is the sixty million dollar ($60,000,000) gap between the parties' respective pre-money valuation positions. Pinnacle maintained a pre-money valuation of $260,000,000, while Verdana maintained a pre-money valuation of $320,000,000. Despite approximately seven months of negotiation, neither party revised its position in a meaningful way, and the Brindoval Capital Group compromise proposal of $290,000,000 was rejected by Pinnacle.
The valuation gap had direct and significant consequences for Pinnacle's post-closing ownership percentage and the economic terms of the investment, as summarized in the following table:
In addition to the per-share price and ownership percentage dispute, the treatment of the proposed option pool expansion remained unresolved. Verdana proposed a 5,000,000-share ESOP expansion to be completed prior to the closing of the Series D round, which would have increased the fully-diluted pre-investment share count from 80,000,000 to 85,000,000 shares and the post-investment count to 100,000,000 shares. This ESOP expansion would have further diluted Pinnacle's ownership from 15.79% to 15.00% at Verdana's proposed $4.00 per share price. Pinnacle insisted that any ESOP increase be included in the pre-money share base and reflected in the pre-money valuation, such that the economic dilution from the ESOP expansion would be shared among all pre-existing stockholders rather than borne disproportionately by the new investor.
B. Liquidation Preference
Pinnacle proposed a 1.5x non-participating liquidation preference, which would have entitled the Series D holders to receive one and one-half times (1.5x) their original investment amount, or ninety million dollars ($90,000,000), before any distributions would be made to the holders of common stock in a liquidation event. Verdana proposed a 1.0x non-participating liquidation preference, which would have entitled the Series D holders to receive one times (1.0x) their original investment amount, or sixty million dollars ($60,000,000), in a liquidation event. Verdana's position was grounded in consistency with the liquidation preference terms applicable to the Series A, B, and C Preferred Stock, all of which carry 1.0x non-participating liquidation preferences. The thirty million dollar ($30,000,000) difference between the 1.5x and 1.0x preference amounts was material to the distribution waterfall in exit scenarios at the lower end of the valuation range.
C. Anti-Dilution.  Pinnacle proposed full-ratchet anti-dilution protection for the Series D Preferred Stock. Under a full-ratchet mechanism, if the company issues equity securities at a price below the Series D original issue price, the conversion price of the Series D Preferred Stock would be adjusted downward to equal the price at which the new shares were issued, without regard to the number of new shares issued. Verdana proposed broad-based weighted average anti-dilution protection, consistent with the anti-dilution provisions applicable to the Series A, B, and C Preferred Stock. Under the broad-based weighted average formula, the conversion price adjustment is moderated by reference to the number of new shares issued and the aggregate number of shares outstanding, resulting in a less severe dilutive impact on the existing preferred holders than a full-ratchet adjustment.
Brindoval Capital Group LLC, as the lead investor in the Series C round, specifically objected to the grant of full-ratchet anti-dilution protection to the Series D holders on the grounds that it would be inconsistent with the anti-dilution terms applicable to the prior rounds of preferred stock and could create structural inequities among the various series of preferred stock in a down-round scenario. Brindoval took the position that granting full-ratchet protection to one series but not others would distort the relative economic interests of the preferred holders and undermine the parity principles on which the prior financing rounds had been negotiated.
D. Drag-Along Rights
Pinnacle proposed a drag-along provision that would be triggered upon the approval of a majority of the outstanding preferred stock (voting together as a single class), which would then obligate all stockholders — including common stockholders — to participate in the approved sale transaction. The founders, Raj Anand and Lena Kovac, formally objected to this provision and insisted on the inclusion of a five hundred million dollar ($500,000,000) enterprise value floor, below which no drag-along sale could be forced.
The existing investors were divided on this issue. Ridgeline Ventures (Series A) and Brindoval Capital Group (Series C) supported the founders' position and agreed that a minimum valuation threshold was appropriate to protect the interests of the common stockholders and option holders. Northgate Growth Partners (Series B) sided with Pinnacle and supported a drag-along provision triggered by majority preferred approval without an enterprise value floor.
E. Other Open Items
In addition to the four principal areas of disagreement described above, the following items remained open and unresolved at the time the matter was placed on hold:
Pay-to-Play. Pinnacle proposed a mandatory pay-to-play provision that would have required all holders of preferred stock to participate pro rata in future qualifying financing rounds or face conversion of their preferred stock into common stock. Verdana deleted the pay-to-play provision in its entirety in the Langford Price markup of the Investors' Rights Agreement. The existing investors had not been consulted on the pay-to-play provision at the time negotiations were suspended.
Redemption Rights. Pinnacle's term sheet proposed redemption rights exercisable at the election of the holders of a majority of the Series D Preferred Stock after five (5) years from the closing date. Verdana's position on redemption rights was not fully addressed in the markups received from Langford Price, and this issue was not the subject of substantive negotiation before the matter was placed on hold.
Protective Provision Scope. Pinnacle proposed consent rights over the incurrence of indebtedness in excess of five million dollars ($5,000,000) and deviations from the board-approved operating budget in excess of 15%. Langford Price, in its markup of the Investors' Rights Agreement, sought to narrow the budget consent right, proposing that consent be required only for deviations in excess of 25% from the board-approved plan and only with respect to aggregate annual expenditures (rather than line-item or quarterly deviations).
Pacific Summit Bank Lender Consent. The second draft of the Stock Purchase Agreement identified as a closing condition the receipt of consent from Pacific Summit Bank, N.A. to the issuance of the Series D Preferred Stock. As of the date the matter was placed on hold, lender consent had not been obtained and no formal request had been submitted to Pacific Summit Bank. The credit facility, which provides for a $10,000,000 revolving facility ($6,200,000 currently drawn) bearing interest at SOFR plus 3.50% and maturing on June 30, 2024, contains negative covenants that potentially restrict the issuance of preferred stock with preferential liquidation or distribution rights.
V. STATUS OF TRANSACTION DOCUMENTS
No transaction documents were executed in connection with the proposed Series D investment. All documents prepared by Calderwood & Harkness remain in draft or markup form. The following tables summarize the status of all transaction documents as of the date of dormancy.
A. Pre-Signing / Term Sheet Phase Documents
The Exclusivity Agreement and its two amendments are the only documents executed between the parties during the course of the engagement. The exclusivity period expired on September 30, 2022, and the parties continued discussions without exclusivity thereafter.
B. Transaction Documents (All Unexecuted Drafts)
It should be noted that the Amended and Restated Certificate of Incorporation, the Disclosure Schedules, the Management Rights Letter, and the Indemnification Agreement were never the subject of markup or substantive negotiation between the parties. The Right of First Refusal and Co-Sale Agreement was similarly never marked up by Langford Price, likely because the parties did not advance negotiations to the stage where these ancillary documents would have been addressed in detail.
VI. VERDANA KEY FINANCIAL DATA (DILIGENCE SUMMARY)
The following is a summary of Verdana Software, Inc.'s key financial and operating metrics as reflected in the diligence materials reviewed by Calderwood & Harkness during the engagement. All financial data is as of the most recent available period (Q1 2022 / March 31, 2022) unless otherwise noted. This data is drawn from the legal due diligence summary memorandum delivered to Pinnacle on July 15, 2022, and from the customer concentration risk analysis memorandum dated July 5, 2022.
Revenue and Growth.
•  Annual Recurring Revenue ("ARR") as of Q1 2022: $47,300,000
•  ARR as of Q1 2021: $28,900,000
•  Year-over-year ARR growth: 63.7%
•  Net Revenue Retention ("NRR"): 128%
Profitability and Margins.
•  Gross Margin: 74.2%
•  EBITDA (trailing twelve months ending March 2022): negative $11,600,000
Balance Sheet and Liquidity.
•  Cash on balance sheet as of March 31, 2022: $22,400,000
•  Pacific Summit Bank revolving credit facility: $10,000,000 facility amount; $6,200,000 drawn; interest rate SOFR plus 3.50%; minimum liquidity covenant of $10,000,000; maturity June 30, 2024
Workforce and Customers.
•  Employees: approximately 310
•  Total customers: approximately 185
Customer Concentration. Customer concentration was identified as a significant risk factor during the due diligence process. The table below summarizes the concentration among Verdana's top five customers:
The concentration of 24.9% of total ARR with a single customer (Meridian Logistics Corp.) was flagged as a material risk, particularly in light of the pending CEO transition at Meridian and the competitive RFP process that Pinnacle's diligence team identified. The Meridian enterprise license expires on December 31, 2023, with an automatic renewal provision subject to a 180-day termination notice period (i.e., notice of non-renewal must be provided on or before approximately July 4, 2023). The potential non-renewal of this contract would represent a loss of approximately one-quarter of Verdana's annual recurring revenue.
VII. FEE SUMMARY
A. Engagement Terms
Calderwood & Harkness's engagement in this matter was governed by the engagement letter dated April 19, 2022, executed by Harrison Wexford on behalf of the firm and by Marcus Trejo on behalf of Pinnacle Capital Management LLC, as general partner of Pinnacle Venture Fund II LP. The engagement was structured on an hourly billing basis. The applicable billing rates for each member of the engagement team during the term of the engagement were as follows:
The blended rate for the engagement, based on the mix of hours incurred by the respective timekeepers, was approximately $875 per hour.
At the time of engagement, Calderwood & Harkness provided an initial fee estimate of $350,000 to $450,000 for the transaction, assuming the completion of due diligence, the negotiation and execution of definitive transaction documents, and the closing of the investment. The estimate was provided as a non-binding projection and was subject to the actual scope and complexity of the work performed.
Pinnacle paid a retainer deposit of seventy-five thousand dollars ($75,000) upon execution of the engagement letter in April 2022. The retainer was applied against the firm's initial invoices and has been fully credited against fees billed.
B. Fees Incurred
Total fees incurred through December 1, 2022 are three hundred eighty-seven thousand five hundred dollars ($387,500). This amount is within the initial estimated range of $350,000 to $450,000 provided at the commencement of the engagement.
The retainer deposit of $75,000 was applied against the firm's initial invoices. All invoices issued to date have been paid in full by Pinnacle Venture Fund II LP.
No additional fees are expected to be incurred while the matter remains in dormant status. No work should be performed on this matter absent express written authorization from Pinnacle, as communicated to Harrison Wexford or his designee.
VIII. COMPLETE FILE INVENTORY
The following is a complete inventory of all documents contained in the file for Matter No. 1002-00004. The inventory is organized by document category and includes all engagement materials, term sheet phase documents, diligence memoranda, transaction document drafts, internal analyses, correspondence, and administrative records. All documents are maintained in Calderwood & Harkness's document management system and can be retrieved by the file reference identifiers listed below.
A. Engagement and Conflicts
B. Term Sheet Phase
C. Diligence.  
D. Transaction Documents (All Unexecuted Drafts)
E. Internal Analyses and Memoranda
F. Correspondence.  
G. Matter Administration
Total documents in file: 36 (including this memorandum).
IX. RECOMMENDATIONS FOR DORMANCY PERIOD
A. File Preservation
All documents comprising the file for Matter No. 1002-00004, as identified in the complete file inventory set forth in Section VIII above, are to be preserved in Calderwood & Harkness's document management system under the designated matter number. No documents are to be destroyed, deleted, or removed from the matter file during the dormancy period, consistent with the firm's record retention policies and applicable professional responsibility obligations. Physical copies of any documents, to the extent they exist, should be retained in the firm's off-site storage facility in accordance with standard procedures.
In addition, all data room access credentials and login information associated with the virtual data room maintained by Verdana during the due diligence process should be archived for reference purposes, even though access to the data room itself may have been revoked or will be revoked by Verdana. Copies of all diligence materials received from Verdana through the data room should be confirmed to be saved within the matter file in the document management system, to the extent that such materials were downloaded and retained during the active diligence period.
B. Client Communication
Marcus Trejo and Pinnacle Capital Management LLC have been informed of the matter hold status pursuant to Harrison Wexford's letter dated November 18, 2022 (File Inventory Item No. 35). No further work is to be performed on this matter, and no additional fees are to be incurred, absent express written authorization from Pinnacle Venture Fund II LP, acting through Pinnacle Capital Management LLC.
The engagement letter dated April 19, 2022 remains in effect, and the attorney-client relationship between Calderwood & Harkness LLP and Pinnacle Venture Fund II LP has not been formally terminated. The firm continues to owe duties of loyalty and confidentiality to Pinnacle with respect to this engagement. Should a conflict of interest arise during the dormancy period that implicates the Pinnacle representation, the matter should be flagged for review by Harrison Wexford and the firm's conflicts committee in accordance with standard procedures.
C. Monitoring Considerations
While no active work is to be performed during the dormancy period, the following developments should be noted for potential relevance in the event that Pinnacle elects to reactivate the matter:
Meridian Logistics Corp. Contract Expiration. The enterprise license agreement between Verdana and Meridian Logistics Corp., Verdana's largest customer (accounting for $11.8M or 24.9% of ARR), expires on December 31, 2023. The agreement contains an automatic renewal provision subject to a 180-day termination notice period. Accordingly, the deadline for Meridian to provide notice of non-renewal is approximately July 4, 2023. If Pinnacle re-engages on this matter, the status of the Meridian customer relationship — including whether the contract has been renewed, renegotiated, or terminated — should be among the first items of inquiry, as a non-renewal would materially affect Verdana's revenue base and the investment thesis.
Pacific Summit Bank Credit Facility Maturity. Verdana's revolving credit facility with Pacific Summit Bank, N.A., which has a principal amount of $10,000,000 ($6,200,000 drawn as of March 31, 2022), matures on June 30, 2024. Any refinancing, amendment, or replacement of this facility may affect the terms of a potential Series D investment, including the lender consent analysis, the scope of the negative covenants applicable to Verdana, and the company's overall debt profile and liquidity position. If negotiations resume, updated information regarding the credit facility should be obtained as part of the reactivation diligence.
Verdana's Capital Requirements. Based on the financial data available as of March 31, 2022, Verdana had $22,400,000 in cash on its balance sheet and was generating negative EBITDA of approximately $11,600,000 on a trailing twelve-month basis, implying an approximate monthly cash burn rate of $1,000,000 (recognizing that EBITDA does not perfectly correlate with cash consumption due to working capital dynamics, capital expenditures, and non-cash items). At this burn rate, and assuming no material change in operations, Verdana's existing cash reserves (supplemented by the available borrowing capacity under the credit facility) would be expected to sustain operations into 2024 but may not provide a runway sufficient to reach profitability or the next natural fundraising milestone without additional capital. This dynamic may create conditions favorable to a re-engagement by Pinnacle, potentially at a lower valuation than the positions maintained by Verdana during the 2022 negotiations.
Expiration of Exclusivity. As noted above, the exclusivity period expired on September 30, 2022. Verdana is free to solicit, negotiate, and consummate alternative financing transactions with third parties. If Verdana secures alternative financing during the dormancy period, the terms of any such financing will affect the capitalization table, the relative rights of existing investors, and the baseline from which any future Series D negotiation with Pinnacle would proceed.
D. Reactivation Procedure
In the event that Pinnacle elects to reactivate the matter and resume negotiations with Verdana regarding the proposed Series D investment, the following steps should be undertaken:
Conflict Check. A fresh conflict check should be run through the firm's conflicts clearance system to confirm that no conflicts of interest have arisen during the dormancy period that would preclude Calderwood & Harkness from continuing the representation of Pinnacle in this matter.
Updated Transaction Documents. All draft transaction documents will need to be reviewed and updated to reflect any interim changes to Verdana's capitalization, financial condition, material contracts, and other relevant circumstances. In particular, any equity issuances, debt transactions, option grants, or other corporate actions taken by Verdana during the dormancy period will need to be reflected in the capitalization table, the certificate of incorporation, and the investor agreements.
Updated Financial Diligence. The financial diligence data underlying the firm's existing memoranda and analyses is as of March 31, 2022, and will be stale at the time of any reactivation. Updated financial statements, management accounts, and operating metrics should be requested from Verdana through its counsel as an initial step in any reactivation process.
Billing Rate Confirmation. The billing rates for all timekeepers should be confirmed at the time of reactivation, as the firm's standard billing rates are subject to annual adjustment and the rates in effect during the 2022 engagement may no longer be current. The engagement letter provides for rate adjustments with notice to the client.
Client Authorization. Reactivation should proceed only upon receipt of express written authorization from Pinnacle Capital Management LLC, acting on behalf of Pinnacle Venture Fund II LP, confirming the client's desire to resume the engagement and authorizing the firm to incur additional fees and expenses.
X. CONCLUSION
Matter No. 1002-00004 is formally placed on dormant status effective December 1, 2022. The principal facts and conclusions of this memorandum are summarized as follows:
Total legal fees incurred through December 1, 2022 are three hundred eighty-seven thousand five hundred dollars ($387,500), which is within the initial fee estimate of $350,000 to $450,000 provided at the commencement of the engagement. The retainer deposit of seventy-five thousand dollars ($75,000) paid by Pinnacle upon engagement was previously applied against the firm's initial invoices.
No transaction documents were executed during the course of the engagement. The proposed sixty million dollar ($60,000,000) Series D Preferred Stock investment by Pinnacle Venture Fund II LP in Verdana Software, Inc. remains unconsummated. All draft transaction documents remain in the status described in Section V of this memorandum.
The principal reasons for the matter being placed on dormant status are the parties' inability to reach agreement on the following material commercial terms after approximately seven months of negotiation:
1.  Valuation: An unresolved sixty million dollar ($60,000,000) gap between Pinnacle's proposed pre-money valuation of $260,000,000 and Verdana's proposed pre-money valuation of $320,000,000.
2.  Liquidation Preference: Disagreement over a 1.5x non-participating liquidation preference (Pinnacle's position) versus a 1.0x non-participating liquidation preference (Verdana's position).
3.  Anti-Dilution: Disagreement over full-ratchet anti-dilution protection (Pinnacle's position) versus broad-based weighted average anti-dilution protection (Verdana's position).
4.  Drag-Along Rights: Disagreement over a drag-along provision triggered by majority preferred approval (Pinnacle's position) versus a drag-along provision subject to a $500,000,000 enterprise value floor (the founders' position).
This memorandum and the file inventory set forth in Section VIII constitute the complete record of work product generated during the engagement. The file contains a total of thirty-six (36) documents, including this memorandum. All documents are preserved in Calderwood & Harkness's document management system under Matter No. 1002-00004.
Prepared by:
________________________________________
Andrew Fitzpatrick Lead Associate, Mergers & Acquisitions Calderwood & Harkness LLP
Date: December 1, 2022
Reviewed by:
________________________________________
Harrison Wexford Responsible Partner, Mergers & Acquisitions Calderwood & Harkness LLP
Date: ________
________________________________________
Beatrice Holloway Billing Partner, Mergers & Acquisitions Calderwood & Harkness LLP
Date: ________
DISTRIBUTION: Internal only — Harrison Wexford, Beatrice Holloway; file copy. This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for internal use by Calderwood & Harkness LLP personnel authorized to access Matter No. 1002-00004. Do not distribute, copy, or forward without authorization.
Valuation Scenario | Pre-Money Valuation | Price/Share | Shares Issued to Pinnacle | Pinnacle Post-Closing Ownership
Pinnacle's Position | $260,000,000 | $3.25 | 18,461,538 | 18.75%
Brindoval Compromise | $290,000,000 | $3.625 | 16,551,724 | 17.14%
Verdana's Position (no ESOP expansion) | $320,000,000 | $4.00 | 15,000,000 | 15.79%
Verdana's Position (with ESOP expansion) | $320,000,000 | $4.00 | 15,000,000 | 15.00%
Document | Date | Status
Non-Binding Term Sheet (Pinnacle's Initial) | April 22, 2022 | Delivered to Verdana; superseded by subsequent negotiations; non-binding
Verdana Counter-Term Sheet (via Hargrove Securities) | May 3, 2022 | Received from Langford Price / Hargrove Securities; superseded by subsequent negotiations; non-binding
Exclusivity Agreement | May 12, 2022 | Executed by both parties; expired September 30, 2022 (as amended)
First Amendment to Exclusivity Agreement | July 8, 2022 | Executed by both parties; extended exclusivity to August 15, 2022
Second Amendment to Exclusivity Agreement | August 15, 2022 | Executed by both parties; extended exclusivity to September 30, 2022
Document | Initial Draft Date | Current Version | Status
Series D Preferred Stock Purchase Agreement | June 8, 2022 | Second Draft (C&H, July 18, 2022); Langford Price markup of Initial Draft (received June 22, 2022) outstanding | Unexecuted; open issues remain on valuation methodology, representations and warranties, indemnification caps and baskets, and closing conditions
Amended and Restated Investors' Rights Agreement | June 15, 2022 | Initial Draft (C&H); Langford Price markup (received July 22, 2022) | Unexecuted; impasse on anti-dilution mechanism, liquidation preference, pay-to-play, and scope of protective provisions
Amended and Restated Right of First Refusal and Co-Sale Agreement | June 20, 2022 | Initial Draft (C&H) | Unexecuted; no markup received from Langford Price
Amended and Restated Voting Agreement | June 20, 2022 | Initial Draft (C&H) | Unexecuted; drag-along dispute unresolved; board composition partially agreed
Amended and Restated Certificate of Incorporation (Series D) | June 8, 2022 | Initial Draft (C&H) | Unexecuted; reflects Pinnacle's 1.5x preference and full-ratchet positions; not updated to reflect the status of negotiations
Disclosure Schedules (Investor's Template) | June 8, 2022 | Blank Template | Delivered to Langford Price; not populated by Verdana
Management Rights Letter | June 15, 2022 | Draft (C&H) | Unexecuted
Indemnification Agreement (Pinnacle Board Designee) | June 25, 2022 | Draft (C&H) | Unexecuted
Rank | Customer | ARR ($M) | % of Total ARR | Notes
1 | Meridian Logistics Corp. | $11.8 | 24.9% | 3-year enterprise license expiring December 31, 2023; auto-renews with 180-day termination notice period; CEO change and competitive RFP noted
2 | Caldera Manufacturing Inc. | $5.2 | 11.0% | —
3 | Atlas Freight Holdings LLC | $4.1 | 8.7% | —
4 | Brannock Industrial Group | $3.4 | 7.2% | —
5 | Solaris Warehousing Co. | $2.7 | 5.7% | —
Top 5 Total | $27.2 | 57.5%
Professional | Role | Hourly Rate
Harrison Wexford | Responsible Partner | $1,250/hour
Beatrice Holloway | Billing Partner | $1,200/hour
Andrew Fitzpatrick | Lead Associate | $725/hour
Naomi Petersen | Working Associate | $550/hour
# | Document | Date | Author/Source | File Reference
1 | Engagement Letter — Calderwood & Harkness LLP to Pinnacle Venture Fund II LP | April 19, 2022 | C&H / Harrison Wexford | engagement-letter-pinnacle.docx
2 | Conflict Check Memorandum (Internal) | April 19, 2022 | Naomi Petersen / Harrison Wexford | conflict-check-memo.docx
# | Document | Date | Author/Source | File Reference
3 | Non-Binding Term Sheet — Pinnacle to Verdana (Initial) | April 22, 2022 | C&H / Pinnacle | term-sheet-pinnacle-initial.docx
4 | Verdana Counter-Term Sheet (received via Hargrove Securities LLC) | May 3, 2022 | Langford Pr

PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT

INTERNAL MEMORANDUM

I. PURPOSE

II. TRANSACTION SUMMARY

III. TIMELINE OF KEY EVENTS

IV. UNRESOLVED COMMERCIAL TERMS AT TIME OF DORMANCY

V. STATUS OF TRANSACTION DOCUMENTS

VI. VERDANA KEY FINANCIAL DATA (DILIGENCE SUMMARY)

VII. FEE SUMMARY

VIII. COMPLETE FILE INVENTORY

IX. RECOMMENDATIONS FOR DORMANCY PERIOD

X. CONCLUSION

Record

Parties

Dates

Amounts