FR EA
1042-00004 · Lone Star Trust Company · Closing
closing-funds-flow-memo.xlsx DOCUMENT M&A / Corporate
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[sheet: Cover & Summary]

FieldValue
Document TitleClosing Funds Flow Memorandum
MatterAcquisition of Codelaunch Labs, Inc. by Brightfield Cloud Services Inc.
Matter No.1042-00004
Prepared ByRyan Kowalski, Lead Associate / Megan Chu, Working Associate — Calderwood & Harkness LLP
Reviewed ByBeatrice Holloway, Responsible Partner — Calderwood & Harkness LLP
Firm Address2000 McKinney Avenue, Suite 3400, Dallas, TX 75201
DateJuly 22, 2023
Closing Date / Effective TimeJuly 22, 2023
TransactionForward merger of BCS DevTools Merger Sub, Inc. with and into Codelaunch Labs, Inc. under DGCL § 251; Merger Sub surviving as wholly owned subsidiary of BCS
Aggregate Merger Consideration$22,000,000
BuyerBrightfield Cloud Services Inc. (EIN: 81-2045783; DE file no. 5928174)
Buyer Address4200 Westgrove Boulevard, Suite 1100, Irving, TX 75038
TargetCodelaunch Labs, Inc. (EIN: 84-3291057; DE file no. 7834219)
Target Address1607 East 6th Street, Suite 300, Austin, TX 78702
Merger SubBCS DevTools Merger Sub, Inc. (EIN: 93-1748206; DE file no. 7916483)
Stockholder RepresentativeNaveen Subramaniam
Paying AgentPinnacle National Bank, N.A.
Escrow AgentLone Star Trust Company, N.A.
Escrow Account Ref.LSTC-ESC-2023-004417
Governing LawDelaware
CONFIDENTIALAttorney Work Product — Privileged and Confidential

[sheet: Sources of Funds]

Line ItemSource EntityDescriptionAmountNotes
1Brightfield Cloud Services Inc.Cash on hand — available balance sheet cash$5,375,000Amount confirmed by BCS Treasury; residual after revolver draw
2Granite Harbor Bank, N.A.Draw on existing revolving credit facility ($75,000,000 committed revolver)$15,225,000Post-closing drawn balance: $28,400,000 (includes this acquisition draw plus prior draws)
TOTAL SOURCES$20,600,000Must equal Total Uses

[sheet: Uses of Funds]

Line No.CategoryPayee / RecipientDescriptionAmountWire DestinationNotes
CLOSING CASH CONSIDERATIONPer-share closing cash: $1.65 × 10,000,000 shares$16,500,000Subtotal — Stockholder Payments
1Stockholder PaymentNaveen Subramaniam2,800,000 shares × $1.65/share (28%)$4,620,000Via Pinnacle National Bank, N.A. (Paying Agent)Co-Founder & CEO; Stockholder Representative
2Stockholder PaymentElise Thornberry2,400,000 shares × $1.65/share (24%)$3,960,000Via Pinnacle National Bank, N.A. (Paying Agent)Co-Founder & CTO
3Stockholder PaymentMarcus Okonkwo1,800,000 shares × $1.65/share (18%)$2,970,000Via Pinnacle National Bank, N.A. (Paying Agent)Co-Founder & VP Engineering
4Stockholder PaymentRidgeway Ventures Fund II, LP2,200,000 shares × $1.65/share (22%)$3,630,000Via Pinnacle National Bank, N.A. (Paying Agent)Series A investor
5Stockholder PaymentAngel / Option Holders (various)800,000 shares × $1.65/share (8%)$1,320,000Via Pinnacle National Bank, N.A. (Paying Agent)Various angel investors and exercised-option holders; individual wire breakdown per Letter of Transmittal
ESCROW DEPOSIT$2,200,000Subtotal — Escrow
6Escrow DepositLone Star Trust Company, N.A.Indemnification escrow per Escrow Agreement; Account Ref. LSTC-ESC-2023-004417$2,200,000Wire to Lone Star Trust Company, N.A., 500 West 5th Street, Suite 800, Austin, TX 78701Release date: January 22, 2025 (18 months post-Closing), absent pending claims; subject to indemnification cap of $7,700,000 (35% of deal value)
ADVISORY & TRANSACTION FEES$1,900,000Subtotal — Fees & Expenses
7Seller Advisory FeeAshburn Park Capital LLCSeller's investment bank advisory fee (3% of $22,000,000)$660,000Wire to Ashburn Park Capital LLC, 200 West 6th Street, Suite 600, Austin, TX 78701Per engagement letter between Codelaunch and Ashburn Park; payable from deal proceeds at Closing; contact: Tara Novak, Managing Director
8Buyer Legal Fees (est.)Calderwood & Harkness LLPBuyer's outside counsel fees and expenses (estimated)$425,000Wire to Calderwood & Harkness LLP, 2000 McKinney Avenue, Suite 3400, Dallas, TX 75201Final invoice to follow; estimate based on engagement scope
9Seller Legal Fees (est.)Caldwell, Raines & Fitch LLPSeller's/target's outside counsel fees and expenses (estimated)$310,000Wire to Caldwell, Raines & Fitch LLP, 600 Congress Avenue, Suite 2200, Austin, TX 78701Payable from seller proceeds; contact: Geoffrey Aldrich
10Accounting / Diligence Advisory (est.)Kerrigan & Pryce LLPBuyer's financial diligence advisor fees (estimated)$175,000Wire to Kerrigan & Pryce LLP, 1700 Pacific Avenue, Suite 1500, Dallas, TX 75201Final invoice to follow
11R&W Insurance Premium (est.)Pinnacle Investors Specialty Insurance CompanyBuy-side R&W insurance premium; Policy No. CSI-RWI-2023-07841$240,000Per Ashgrove Equity Partners Risk Advisors, Inc. (broker; contact: Philip Graves)~3% of $8,000,000 policy limit; $550,000 self-insured retention; paid by BCS
12DE Secretary of State Filing FeeState of DelawareCertificate of Merger filing fee (filed July 18, 2023)$2,000Paid via counselNominal amount
13Miscellaneous Closing Costs (est.)VariousTransfer taxes, courier, UCC searches, good standing certificates, etc.$88,000VariousEstimates; actual amounts TBD
TOTAL USES$20,600,000Must equal Total Sources

[sheet: Stockholder Detail]

StockholderRoleShares HeldOwnership %Per-Share Closing CashClosing Cash PaymentPer-Share Escrow HoldbackEscrow Holdback AmountPer-Share Max EarnoutMax Earnout AmountEarnout Eligible?Earnout Allocation %Total Maximum Consideration
Naveen SubramaniamCo-Founder & CEO; Stockholder Rep.2,800,00028.00%$1.65$4,620,000$0.22$616,000$0.33$1,320,000Yes — Founder Earnout Participant40.00%$6,556,000
Elise ThornberryCo-Founder & CTO2,400,00024.00%$1.65$3,960,000$0.22$528,000$0.33$1,131,570Yes — Founder Earnout Participant34.29%$5,619,570
Marcus OkonkwoCo-Founder & VP Engineering1,800,00018.00%$1.65$2,970,000$0.22$396,000$0.33$848,430Yes — Founder Earnout Participant25.71%$4,214,430
Ridgeway Ventures Fund II, LPSeries A Investor2,200,00022.00%$1.65$3,630,000$0.22$484,000N/A$0NoN/A$4,114,000
Angel / Option Holders (various)Various800,0008.00%$1.65$1,320,000$0.22$176,000N/A$0NoN/A$1,496,000
TOTAL10,000,000100.00%$16,500,000$2,200,000$3,300,000$22,000,000

[sheet: Earnout Summary]

ItemDetail
Earnout Status at ClosingNOT funded at Closing; payable post-Closing upon milestone achievement
Maximum Earnout Consideration$3,300,000 (15% of $22,000,000 aggregate merger consideration)
Earnout Period24 months from Closing Date (July 22, 2023 through July 22, 2025)
Milestone 150% of earnout ($1,650,000): Codelaunch platform reaches ≥200 enterprise customer accounts by July 22, 2024
Milestone 250% of earnout ($1,650,000): Codelaunch platform generates ≥$8,000,000 ARR during 24-month earnout period, measured by July 22, 2025
Current ARR (at Signing)~$4,800,000
Earnout RecipientsNaveen Subramaniam (40.00% = $1,320,000 max); Elise Thornberry (34.29% ≈ $1,131,570 max); Marcus Okonkwo (25.71% ≈ $848,430 max)
Employment ConditionEach Founder Earnout Participant must remain full-time employee of BCS through applicable milestone measurement date; voluntary departure or termination for Cause forfeits unpaid share (redistributed pro rata to remaining participants)
Good-Faith Operation CovenantBCS covenants to operate Codelaunch product line in good faith and ordinary course; retains reasonable business discretion
Dispute ResolutionAny earnout milestone dispute subject to determination by independent accounting firm (Firth Corvinal CPAs LLP) whose determination shall be final and binding; costs split equally between parties

[sheet: Wire Instructions]

Line Ref.RecipientRoleBank NameBank AddressABA / Routing No.Account No.Account NameReference / MemoAmountContact
W-1Pinnacle National Bank, N.A. (Paying Agent)Paying Agent — for distribution to Codelaunch stockholdersPinnacle National Bank, N.A.301 Commerce Street, Suite 100, Fort Worth, TX 76102[ABA to be provided][Acct to be provided]Pinnacle National Bank, N.A. — Paying Agent Account — BCS / Codelaunch MergerClosing Cash Consideration — Codelaunch Labs Merger$16,500,000Pinnacle National Bank — Trust Department
W-2Lone Star Trust Company, N.A. (Escrow Agent)Escrow Agent — indemnification escrow depositLone Star Trust Company, N.A.500 West 5th Street, Suite 800, Austin, TX 78701[ABA to be provided]LSTC-ESC-2023-004417Lone Star Trust Company, N.A. — Escrow Account — BCS / CodelaunchEscrow Deposit — Agreement and Plan of Merger dated June 1, 2023$2,200,000Reginald Huang, VP, Escrow Services
W-3Ashburn Park Capital LLCSeller's Investment Bank — advisory feeAshburn Park Capital LLC200 West 6th Street, Suite 600, Austin, TX 78701[ABA to be provided][Acct to be provided]Ashburn Park Capital LLC — Operating AccountAdvisory Fee — Codelaunch Labs, Inc. Merger$660,000Tara Novak, Managing Director
W-4Pinnacle Investors Specialty Insurance CompanyR&W Insurance Carrier — premium payment[Insurance carrier bank TBD][Address TBD][ABA to be provided][Acct to be provided]Pinnacle Investors Specialty Insurance CompanyR&W Insurance Premium — Policy No. CSI-RWI-2023-07841$240,000Philip Graves, Ashgrove Equity Partners Risk Advisors, Inc. (broker)
W-5Calderwood & Harkness LLPBuyer's Outside Counsel — legal fees[Bank TBD]2000 McKinney Avenue, Suite 3400, Dallas, TX 75201[ABA to be provided][Acct to be provided]Calderwood & Harkness LLP — Client Trust / OperatingLegal Fees — Matter No. 1042-00004$425,000Beatrice Holloway / James Prentice
W-6Caldwell, Raines & Fitch LLPSeller's Outside Counsel — legal fees[Bank TBD]600 Congress Avenue, Suite 2200, Austin, TX 78701[ABA to be provided][Acct to be provided]Caldwell, Raines & Fitch LLP — Client Trust / OperatingLegal Fees — Codelaunch Labs, Inc.$310,000Geoffrey Aldrich
W-7Kerrigan & Pryce LLPBuyer's Accounting / Diligence Advisor — fees[Bank TBD]1700 Pacific Avenue, Suite 1500, Dallas, TX 75201[ABA to be provided][Acct to be provided]Kerrigan & Pryce LLP — Operating AccountDiligence Advisory Fees — BCS / Codelaunch$175,000Kerrigan & Pryce LLP
W-8State of DelawareDE Secretary of State — filing fee[N/A — paid via counsel][N/A][N/A][N/A][N/A]Certificate of Merger Filing Fee$2,000Calderwood & Harkness LLP (on behalf of parties)
W-9VariousMiscellaneous closing costsVariousVariousVariousVariousVariousMiscellaneous Closing Costs — BCS / Codelaunch Merger$88,000Ryan Kowalski, Calderwood & Harkness LLP
TOTAL WIRES$20,600,000Must equal Total Sources and Total Uses