Contract analysis

I. Executive Summary This memorandum analyzes the federal income tax treatment of estimated aggregate transaction expenses of approximately $185,000,000 incurred or to be incurred by Solara Digital Infrastructure Fund VI LP ("Fund VI" or the "Buyer"), Stratos Merger Sub Inc. ("Merger Sub"), and Cloudium Technologies plc ("Cloudium" or the "Target") in connection with the approximately $6,800,000,000 reverse triangula

II. Transaction Overview A. Parties and Structure Buyer. Solara Digital Infrastructure Fund VI LP ("Fund VI") is a Delaware limited partnership with a vintage year of 2022 and total committed capital of approximately $12.4 billion. Fund VI is focused on investments in digital infrastructure, cloud computing, data center services, and enterprise software. The general partner of Fund VI is Solara Fund VI GP LLC, a Dela

III. Applicable Legal Framework This section sets forth the principal statutory and regulatory provisions governing the federal income tax treatment of transaction costs incurred in connection with the acquisition of a trade or business. The framework established by these provisions dictates whether a particular expense must be capitalized, may be currently deducted, or is amortizable over a prescribed period. A. Sec

Section 263(a) of the Code provides the general rule that no deduction shall be allowed for any amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate, or for any amount expended in restoring property or in making good the exhaustion thereof for which an allowance has been made. More broadly, Section 263(a) prohibits the deduction of any amo

Section 195 of the Code addresses the treatment of start-up expenditures — that is, amounts paid or incurred in connection with investigating the creation or acquisition of an active trade or business, or in the creation of an active trade or business, or any activity engaged in for profit and for the production of income before the day on which the active trade or business begins. If Fund VI or Merger Sub is treated

Section 162(a) of the Code permits a deduction for all ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. To be deductible under Section 162, an expense must satisfy three requirements: (i) it must be "ordinary" (i.e., of the type commonly and frequently incurred in the particular trade or business); (ii) it must be "necessary" (i.e., appropriate and helpful

Section 709(a) provides that, except as otherwise provided in Section 709(b), no deduction shall be allowed for amounts paid or incurred to organize a partnership or to promote the sale of (or to sell) an interest in a partnership. Section 709(b)(1) permits a partnership to elect to deduct up to $5,000 of organizational expenditures in the taxable year in which the partnership begins business, reduced by the amount b

Section 709 is relevant to the Transaction to the extent that the co-investment vehicle, Solara Digital Co-Invest VI-A LP, incurred organizational and syndication expenses in connection with its formation and the raising of the $425,000,000 co-investment. Organizational expenses of the co-invest vehicle (e.g., legal fees for drafting the limited partnership agreement, state filing fees) are subject to the Section 709

IV. Categorization and Analysis of Transaction Costs A. Summary Table of Estimated Transaction Expenses ($185,000,000) The following table summarizes the estimated transaction expenses of approximately $185,000,000, categorized by type, with the applicable tax treatment and statutory authority for each category. The amounts set forth below are based on current estimates derived from engagement letters, fee arrangemen

1. Buyer's Counsel: Calderwood & Harkness LLP. Calderwood & Harkness LLP ("C&H") serves as principal outside counsel to Fund VI and Merger Sub in connection with all aspects of the Transaction. The scope of C&H's engagement encompasses the drafting and negotiation of the Merger Agreement and all ancillary transaction documents (including the Equity Commitment Letter, the Limited Guarantee, the Rollover and Contributi

2. Buyer's UK Regulatory Counsel: Albright & Kerr LLP. Albright & Kerr LLP (Fiona McAllister, lead partner) has been retained as UK regulatory counsel to Fund VI in connection with the UK Competition and Markets Authority ("CMA") merger notification and clearance process. The CMA filing was submitted on February 12, 2024, and the matter was assigned CMA Case No. ME/7184/24. The CMA cleared the Transaction uncondition

3. Target's Counsel: Ridgeway Phelps & Sato LLP. Ridgeway Phelps & Sato LLP (Catherine Answorth, responsible partner; Alistair Fenn, corporate partner; Robert Tillman, employment partner) serves as principal outside counsel to Cloudium in connection with the Transaction. Estimated fees are approximately $12,000,000. Treatment. To the extent these fees are paid from the closing proceeds or funded by Cloudium prior to

4. Lenders' Counsel: Winthrop & Hale LLP. Winthrop & Hale LLP (Christine Novak, lead partner) serves as counsel to the lender group in connection with the debt financing. Winthrop & Hale's scope of work includes the drafting and negotiation of the Credit Agreement, the Guarantee and Collateral Agreement, the Intercreditor Agreement, the First Lien Security Agreement, and related documentation. Estimated legal fees ar

I. Proxy Solicitation, Printing, and Mailing Costs Cloudium retained Blackthorn Proxy Advisors LLC as the proxy solicitor for the stockholder vote on the Merger Agreement. Blackthorn's engagement encompassed stockholder identification, outreach, and solicitation efforts in advance of the Special Meeting of Stockholders held on May 20, 2024. At the Special Meeting, Cloudium stockholders approved the Merger Agreement a