Contract analysis

I. Executive Summary This memorandum analyzes the mandatory prepayment provisions contained in the draft term sheet (the "Draft Term Sheet") received from Brindoval National Bank, N.A. ("Brindoval" or the "Administrative Agent") on March 21, 2026, in connection with the proposed $200,000,000 Senior Secured Term Loan Facility (the "Facility") to be provided to Solara Digital Acquisition Holdings LLC (the "Borrower") t

II. Transaction Context To frame the mandatory prepayment analysis, the following summarizes the key terms and participants of the proposed transaction. Borrower. Solara Digital Acquisition Holdings LLC, a newly formed Delaware limited liability company and a wholly owned subsidiary of Solara Digital Infrastructure Fund IV LP ("Fund IV"). Fund IV is a $1.8 billion private equity fund focused on enterprise software an

III. Excess Cash Flow Sweep — Detailed Analysis A. Overview of ECF Sweep Mechanics The ECF sweep is the most significant of the three mandatory prepayment mechanisms from a practical standpoint, as it will recur annually and directly impact the Borrower's ability to retain operating cash flow for reinvestment in the business. Under the Draft Term Sheet, the Borrower is required to make mandatory prepayments in an amo

1. Consolidated Net Income Starting Point. Consolidated Net Income typically serves as the starting point for the ECF calculation. It is essential that the definition of Consolidated Net Income exclude the following items, which would otherwise distort the ECF computation: (a) extraordinary or non-recurring gains and losses; (b) gains and losses from asset dispositions outside the ordinary course of business (which a

2. Capital Expenditure Deduction. The treatment of capital expenditures in the ECF calculation is one of the most important issues for a SaaS business like Meridian. Capital expenditures serve as a deduction from ECF, meaning that a broader definition of deductible capital expenditures results in a lower ECF sweep amount. The key question is whether the capital expenditure deduction is limited to "maintenance" capita

3. Working Capital Adjustments. The working capital component of the ECF definition is designed to account for changes in the Borrower's operating working capital during the fiscal year. In a typical manufacturing or distribution business, working capital adjustments primarily relate to changes in accounts receivable, inventory, and accounts payable. For a SaaS business like Meridian, however, the single most signifi

4. Cash Restructuring Charges and Transaction Costs. The first fiscal year following the closing of the Acquisition (FY 2026) will include significant one-time cash expenditures related to transaction costs, integration expenses, severance payments, and systems migration costs. Based on the financial model prepared by Velthorn Stanton Advisory LLC, one-time integration and transaction costs for FY 2026 are estimated

5. Permitted Acquisition Consideration. The Borrower's business plan contemplates potential tuck-in acquisitions to expand Meridian's product suite and customer base. Cash consideration paid for acquisitions that constitute "permitted acquisitions" under the credit agreement should reduce ECF, as such payments represent cash deployed for business purposes that is not available for debt service. Recommendation: Includ

IV. Asset Sale Mandatory Prepayment — Detailed Analysis A. Overview The Draft Term Sheet provides that 100% of net cash proceeds from asset sales (other than asset sales generating net cash proceeds at or below $2,500,000 in any fiscal year) must be used to mandatorily prepay the term loan, subject to reinvestment rights. Specifically, the Draft Term Sheet provides: • Sweep Percentage: 100% of net cash proceeds from

1. Annual Basket Size. The $2,500,000 annual basket is relatively small for a business of Meridian's size and scale. Meridian's LTM ARR is $62,400,000, and its total assets (based on the FY 2025 balance sheet) are approximately $85,000,000 (inclusive of goodwill and intangible assets that will be significantly restated upon application of acquisition purchase price accounting). In the ordinary course of business, Mer

2. Reinvestment Period. The Draft Term Sheet's reinvestment period of 365 days, with a 180-day extension upon entry into a binding commitment, is consistent with the prevailing market standard. We have no objection to this provision, and it does not require modification in the first markup. The total 545-day reinvestment window provides adequate time for the Borrower to identify and execute replacement asset acquisit

3. Net Cash Proceeds Definition. The term "net cash proceeds" is not defined in the Draft Term Sheet but will need to be carefully defined in the definitive credit agreement. It is essential that "net cash proceeds" be defined to deduct the following items from gross proceeds: (a) reasonable and customary fees, commissions, costs, and expenses incurred in connection with such sale or disposition (including legal fees

4. Casualty and Condemnation Events. The Draft Term Sheet does not clearly specify whether insurance proceeds received in connection with casualty events (such as fire, flood, or other property damage) or condemnation awards received in connection with governmental takings or eminent domain proceedings are subject to the asset sale mandatory prepayment provisions. In many credit agreements, casualty and condemnation

5. Excluded Asset Sales. The Draft Term Sheet does not specify any categories of asset sales that are excluded from the mandatory prepayment requirement (other than the annual basket). To provide operational flexibility and avoid triggering mandatory prepayments in connection with routine business transactions, we should negotiate carve-outs for the following categories of dispositions: (a) Sales of inventory in the

6. Leverage-Based Step-Downs. Some recent SaaS term loans include leverage-based step-downs for asset sale sweeps, mirroring the structure of the ECF sweep. Under such a structure, the percentage of net cash proceeds required to be applied to mandatory prepayment decreases as the Borrower deleverages. For example: The Draft Term Sheet proposes a flat 100% sweep with no leverage-based step-downs. While this is not unu

V. Debt Issuance Mandatory Prepayment — Detailed Analysis A. Overview The Draft Term Sheet provides that 100% of net cash proceeds from debt issuances, other than debt constituting "permitted debt" under the credit agreement, must be used to mandatorily prepay the term loan. This provision is designed to prevent the Borrower from incurring additional leverage without using the proceeds to reduce the outstanding term

1. Scope of "Permitted Debt" Exclusion. The effectiveness of the debt issuance mandatory prepayment provision is inversely related to the breadth of the "permitted debt" definition. From the Borrower's perspective, the "permitted debt" definition must be sufficiently comprehensive to exclude all categories of indebtedness that the Borrower may need to incur in the ordinary course of business or in connection with the

2. Refinancing Debt. Proceeds from debt issued to refinance, repay, or replace the term loan itself should be expressly excluded from the mandatory prepayment requirement. This is a mechanical point — if the Borrower refinances the term loan with new debt, the proceeds of the new debt will be used to pay off the existing term loan in full, and there would be no economic logic in requiring a "mandatory prepayment" of

3. Timing of Prepayment. The Draft Term Sheet does not specify the time period within which the Borrower must apply net cash proceeds from debt issuances to mandatory prepayment. The customary standard is within three (3) to five (5) business days after receipt of net cash proceeds. Recommendation: Propose a five (5) business day period after receipt of net cash proceeds, which provides adequate time for the Borrower

VI. Interaction Between Mandatory Prepayment Provisions The three mandatory prepayment mechanisms — ECF sweep, asset sale sweep, and debt issuance sweep — do not operate in isolation. They interact with one another and with voluntary prepayments in ways that can produce economically inefficient results if the interaction provisions are not carefully drafted. The central concern is "double-counting" — the risk that th

VII. Application of Mandatory Prepayments An important but often under-negotiated aspect of mandatory prepayment provisions is the order in which mandatory prepayments are applied to the remaining amortization schedule and the final maturity balloon payment. The application order has meaningful implications for the Borrower's near-term cash flow profile and overall financial flexibility. There are three principal app

VIII. Summary of Recommendations for First Markup Based on the analysis set forth in this memorandum, the following is a prioritized list of specific markup recommendations for the first turn of the Draft Term Sheet, organized by subject matter: Excess Cash Flow Sweep:

1. ECF — Voluntary prepayment netting (Must-Have): Add an express provision allowing voluntary prepayments of the term loan made during the applicable fiscal year (including any prepayment premium paid in connection therewith) to be credited on a dollar-for-dollar basis against the ECF sweep obligation for such fiscal year. This is a universal market standard that is absent from the Draft Term Sheet.

2. ECF — Mandatory prepayment netting (Must-Have): Add a provision providing that mandatory prepayments from asset sales and debt issuances made during the applicable fiscal year are credited on a dollar-for-dollar basis against the ECF sweep obligation for such fiscal year, to avoid double-counting.

3. ECF — Capitalized software development costs (Must-Have): Ensure that capitalized software development costs (estimated at $6–8 million annually) are included within the definition of "capital expenditures" for purposes of the ECF deduction, or are separately deducted as a line item in the ECF definition. This is critical for a SaaS business like Meridian, where capitalized software costs represent the majority of

4. ECF — Deferred revenue treatment (High Priority): Clarify that increases in deferred revenue (reflecting prepaid subscription bookings) do not artificially inflate ECF. Propose either (a) exclusion of changes in deferred revenue from the working capital adjustment or (b) a cap on the amount by which deferred revenue increases can be added to ECF.

5. ECF — De minimis threshold (High Priority): Propose a de minimis ECF threshold of $2,000,000 (approximately 10.7% of LTM Adjusted EBITDA), below which no sweep is required. This is consistent with the market median and avoids administrative burden for trivial sweep amounts.

6. ECF — Partial first year (High Priority): Negotiate a provision specifying that the first ECF sweep calculation applies only to the period from the closing date through December 31, 2026, with pro rata adjustments to scheduled amortization deductions, capital expenditure deductions, and the de minimis threshold.

7. ECF — Step-down thresholds (Desirable): Consider proposing higher step-down thresholds — specifically, 5.50x for the first step-down (from 50% to 25%) and 4.50x for the second step-down (from 25% to 0%) — given the Borrower's high opening leverage of approximately 10.70x, which renders the current 4.50x/3.50x thresholds unreachable for the first several fiscal years. Asset Sale Mandatory Prepayment:

8. Asset sales — Annual basket (High Priority): Propose an increase in the annual basket from $2,500,000 to $5,000,000 to provide adequate flexibility for routine asset dispositions, consistent with the midpoint of the market range.

9. Asset sales — Leverage-based step-downs (Desirable): Propose leverage-based step-downs for the asset sale sweep (e.g., 100% above 4.50x TNL, 75% at or below 4.50x, 50% at or below 3.50x), consistent with the ECF sweep leverage thresholds, to create a coherent and integrated mandatory prepayment framework.

10. Asset sales — Excluded dispositions (High Priority): Add carve-outs from the asset sale mandatory prepayment requirement for (a) sales of inventory in the ordinary course of business, (b) dispositions of obsolete or worn-out equipment, (c) sales or transfers between the Borrower and Guarantors, and (d) dispositions constituting permitted investments. Also propose a separate basket and reinvestment period for casu

11. Debt issuance — Permitted debt scope (Must-Have): Ensure that the term sheet includes a notation that the "permitted debt" definition will be comprehensive and will include, at a minimum, revolving credit facility borrowings, capital lease obligations, purchase money indebtedness, intercompany debt, acquisition financing, incremental term loan facilities, general and ratio-based baskets, letters of credit, hedgin

12. Application of prepayments (High Priority): Propose pro rata application of mandatory prepayments across all remaining scheduled amortization installments and the balloon payment. Alternatively, propose direct order of maturity (applying prepayments first to the nearest upcoming installments). Resist inverse order of maturity.

IX. Open Items for Further Discussion The following items require coordination with other advisors and stakeholders and should be discussed at the next deal team meeting (currently scheduled for March 28, 2026, at 9:00 AM ET):

1. Coordination with Acquisition Counsel. We should coordinate with Alderton Paige LLP (Richard Fontaine, partner) regarding the alignment of the mandatory prepayment triggers under the Facility with the post-closing covenants in the acquisition agreement. Specifically, we should confirm whether any post-closing purchase price adjustment or earnout payment mechanisms in the acquisition agreement could give rise to ma

2. Financial Model Coordination. We should coordinate with Velthorn Stanton Advisory LLC (Benjamin Holt, managing director) on the financial model assumptions being used for ECF projections. It would be extremely helpful to have a detailed ECF waterfall model for the first three fiscal years (FY 2026 through FY 2028) under base case, upside, and downside scenarios. This would allow us to quantify the