Contract analysis

I. Executive Summary This memorandum addresses the principal United States federal, United Kingdom, German, and Indian tax considerations arising from the anticipated post-closing corporate restructuring of Cloudium Technologies plc ("Cloudium" or the "Company") and its subsidiaries following the closing of the reverse triangular merger on July 9, 2024 (the "Closing Date"). The purpose of this memorandum is to provid

II. Post-Closing Corporate Structure — Current State A. Overview of Current Group Structure Following Closing Following the closing of the reverse triangular merger on July 9, 2024, the Cloudium group's ultimate ownership structure is as follows: Solara Digital Infrastructure Fund VI LP, a Delaware limited partnership (the general partner of which is Solara Fund VI GP LLC, a Delaware limited liability company), owns

III. Proposed Restructuring Steps The proposed post-closing restructuring consists of five principal steps, each of which is discussed in detail below. The sequencing and timing of these steps is addressed in Section XI. We emphasize that the tax analysis set forth below is preliminary in certain respects, and that certain determinations (including the final values assigned to intangible assets, the precise mechanics

1. Overview and Business Rationale. The first and most structurally significant step in the proposed restructuring is the conversion of Cloudium Technologies plc from an English public limited company registered in England and Wales to a Delaware corporation ("Cloudium Inc."). The re-domestication is motivated by several considerations, including: (i) the simplification of the group's corporate governance structure b

2. Mechanics. The re-domestication may be accomplished through several alternative mechanisms, each of which carries different legal and tax implications: Option A: Cross-Border Conversion. Under the UK Companies Act 2006 (as amended), it may be possible to effect a cross-border conversion of Cloudium plc into a Delaware corporation, depending on the availability of such a procedure under both English law and Delawar

3. US Federal Income Tax Analysis. The US federal income tax consequences of the re-domestication will vary depending on the mechanism selected: • If structured as a cross-border conversion or a merger, the transaction should be analyzed under Section 368 of the Internal Revenue Code to determine whether it qualifies as a tax-free reorganization. A qualifying reorganization would permit the transaction to be consumma

4. Section 7874 "Inversion" Analysis. Section 7874 of the Internal Revenue Code imposes adverse tax consequences on certain corporate inversions in which a US-owned entity is acquired by a foreign entity. Although the re-domestication at issue here involves the migration of a UK-incorporated entity to the United States (the opposite direction from a typical inversion transaction), a technical analysis under Section 7

5. UK Tax Consequences. The re-domestication of Cloudium plc from the UK to the US may trigger significant UK tax charges, which represent one of the most material tax risks in the proposed restructuring. The principal UK tax issues are as follows: Exit Charges. If Cloudium plc ceases to be UK tax resident as a result of the re-domestication, it may be treated as having disposed of all of its assets at fair market va

6. Timing Recommendation. We recommend that the re-domestication be completed within 6 to 12 months following the Closing Date (i.e., by approximately July 2025) in order to align with the broader integration planning timeline and to ensure that the re-domesticated entity is in place before the IP migration steps described below are executed. However, the precise timing should be coordinated with the finalization of

1. Identification of Intangible Assets. As noted in Section II.B above, Cloudium Technologies UK Ltd. holds material intangible assets that were developed in the UK over the course of the Company's history. Based on our review of the due diligence materials and discussions with the Cloudium management team, the specific intangible assets currently owned by or attributable to Cloudium UK include: (a) Core ERP and CRM

2. Proposed Migration. The proposed restructuring contemplates the transfer of certain of the above-described IP assets from Cloudium UK to Cloudium Inc. (or, alternatively, to a newly formed US IP holding company that would be a subsidiary of Cloudium Inc.) in order to centralize ownership of the globally deployed technology platform in the United States. The centralization of IP ownership is a key element of the pr

3. Valuation Requirement. An arm's-length transfer price must be established for the IP assets being migrated. This requirement arises under both US and UK transfer pricing rules: • US transfer pricing rules: Section 482 of the Internal Revenue Code and the Treasury Regulations thereunder (specifically Treasury Regulation §§ 1.482-4 through 1.482-6) require that transfers of intangible property between related partie

4. US Tax Implications. From a US federal income tax perspective, the purchase price paid by the US acquirer for the IP assets will create amortizable Section 197 intangible assets in the hands of the US entity. Section 197 provides for the amortization of goodwill and certain other intangible assets over a 15-year period on a straight-line basis. The amortization deductions will reduce the US taxable income of the a

5. UK Tax Implications. The IP migration from Cloudium UK will have the following UK tax consequences, each of which requires careful analysis: (a) UK Corporation Tax on Chargeable Gains. The transfer of IP by Cloudium UK to a US-related party at fair market value will be treated as a disposal of the IP assets for UK corporation tax purposes. To the extent that the fair market value of the IP exceeds its tax basis (w

6. Coordination with Purchase Price Allocation. As noted above, the values assigned to the UK IP in the intercompany transfer must be consistent with the values assigned to those same assets in the Section 1060 purchase price allocation. Any post-closing restructuring that results in material inconsistencies between the PPA and the transfer pricing valuations could be exploited by tax authorities in multiple jurisdic

7. Phased Migration. Given the magnitude of the potential UK tax exposure, we recommend considering a phased approach to the IP migration. Under this approach, certain categories of IP (e.g., customer relationships, which may have a more limited useful life and therefore a lower present value of future income) would be migrated first, with the more valuable technology IP migrated in a subsequent phase. A phased appro

1. Identification of Intangible Assets. Cloudium Solutions GmbH holds the following intangible assets that are specific to the DACH market: (a) Localized software adaptations for the German, Austrian, and Swiss markets, including customizations to the core Cloudium platform to accommodate German-language interfaces, local regulatory requirements, and DACH-specific business processes; (b) German-language customer docu

2. Proposed Migration. The proposed restructuring contemplates the transfer or license-back of the German-held IP to the centralized US IP holding structure. The specific mechanism for the migration (outright transfer, contribution, or license-back) should be determined based on the results of the German tax analysis and the relative costs and benefits of each approach.

3. German Tax Implications. The German tax implications of the IP migration are as follows: (a) German Corporation Tax and Trade Tax on Gain. The transfer of IP assets by Cloudium Germany at fair market value will be treated as a disposal for German corporation tax (Körperschaftsteuer) and trade tax (Gewerbesteuer) purposes. The gain on the disposal (i.e., the excess of the fair market value over the tax basis of the

4. Valuation. The valuation of the German-held IP should be performed using an OECD-consistent methodology, such as the comparable uncontrolled transaction (CUT) method or the discounted cash flow (DCF) method. Given the German function relocation rules, the valuation may need to encompass the entire transfer package rather than individual IP assets. We recommend that the valuation be performed by the same independen

5. Mitigation Strategies. To mitigate the German function relocation risk, we recommend considering the following strategies: • Retain sufficient economic substance and functions in Germany, such that the IP migration does not constitute a "relocation" of the entire function within the meaning of the German rules. For example, if Cloudium Germany continues to perform meaningful sales, customer success, and localizati

6. Coordination with German FDI Analysis. During the pre-closing due diligence phase, we determined that no foreign direct investment notification obligation was triggered under the German Foreign Trade and Payments Act (Außenwirtschaftsgesetz, or "AWG") and the Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung, or "AWV") in connection with the acquisition, as Cloudium Solutions GmbH does not operate i

1. Current State. Cloudium Technologies India Pvt. Ltd. employs approximately 2,400 individuals in Bangalore, Karnataka, and operates primarily as a captive service center providing R&D and customer support services to the Cloudium group. The Indian entity's current intercompany arrangement is a cost-plus service model, under which Cloudium India is compensated for its services at cost plus a mark-up of approximately

2. Proposed Restructuring. The proposed restructuring does not contemplate the migration of functions, assets, or risks out of the Indian entity. Rather, the objective is to maintain the existing cost-plus service arrangement but to recalibrate the mark-up to reflect the post-acquisition operating model, updated benchmarking data, and the increased scrutiny that Indian transfer pricing authorities apply to cost-plus

3. Indian Transfer Pricing Considerations. Indian transfer pricing is governed by Sections 92 through 92F of the Indian Income Tax Act, 1961, and the associated rules thereunder. The Indian tax authorities have a well-documented track record of aggressively scrutinizing the cost-plus margins applied by captive service centers of multinational enterprises, and India has among the highest rates of transfer pricing adju

4. Permanent Establishment Risk. The restructured intercompany agreements must be carefully drafted to avoid inadvertently creating a permanent establishment ("PE") of Cloudium Inc. (or any other non-Indian group entity) in India. Under Article 5 of the US-India Income Tax Treaty, a PE may be created if an entity has a "fixed place of business" in India through which it carries on its business, or if a "dependent age

5. India FDI and Competition Considerations. As confirmed in the prior memorandum dated December 10, 2023, no downstream investment approval was required under India's FDI policy in connection with the Cloudium acquisition, and no filing with the Competition Commission of India ("CCI") was required based on the Indian subsidiary's turnover. We do not anticipate that the proposed restructuring of the Indian entity's i

6. Indian Employment Obligations. The proposed restructuring of the Indian entity is limited to the recalibration of the intercompany cost-plus mark-up and is not expected to involve any changes to the entity's headcount, employee terms and conditions, or organizational structure. Accordingly, we do not anticipate any impact on the Indian entity's obligations with respect to gratuity, provident fund, or other statuto

1. Central IP License Agreement. Following the completion of the IP migration (Steps 2 and 3), Cloudium Inc. (or the US IP holding subsidiary, if one is established) will serve as the centralized owner of the Cloudium group's core technology IP. The foreign subsidiaries (Cloudium UK, Cloudium Germany, and any other operating entities) will exploit the technology under license agreements that provide for the payment o

2. Intercompany Services Agreements. Certain shared services — including information technology infrastructure, finance and accounting, human resources, and legal — will be provided by centralized functions (likely housed in the US or UK entity) to the other group entities. Appropriate cost-allocation methodologies (e.g., direct charge, indirect charge based on reasonable allocation keys, or cost-plus where applicabl

3. Data Processing Agreements. Given the cross-border flow of personal data among the Cloudium group entities, data processing agreements must be established to comply with the General Data Protection Regulation ("GDPR") applicable to the UK and German entities, as well as the Indian data protection requirements under the Digital Personal Data Protection Act, 2023. While data processing agreements are primarily drive

4. Management Services Agreement. Any management or advisory fees charged by Solara Digital Infrastructure LP or Fund VI (or their affiliates) to the Cloudium group for portfolio company management, strategic advisory, or operational support services must be structured to satisfy the requirements for current deductibility under Section 162 of the Internal Revenue Code (as ordinary and necessary business expenses) and

IV. Transfer Pricing Framework A. Overall Transfer Pricing Policy Design The restructuring described in Section III above will necessitate the establishment of a comprehensive, OECD-aligned transfer pricing framework that allocates income among the restructured entities consistent with the functions performed, assets used, and risks assumed by each entity (the "FAR analysis"). The objective of the transfer pricing fr

Section 482 of the Internal Revenue Code grants the IRS the authority to distribute, apportion, or allocate gross income, deductions, credits, or allowances between or among commonly controlled entities if it determines that such distribution, apportionment, or allocation is necessary to prevent evasion of taxes or clearly to reflect the income of such entities. The Treasury Regulations under Section 482 set forth de