Contract analysis

I. EXECUTIVE SUMMARY This memorandum analyzes the federal income tax withholding obligations arising in connection with the payment of the $36.92 per share cash merger consideration to stockholders of Cloudium Technologies plc ("Cloudium" or the "Target") in the proposed reverse triangular merger (the "Merger") in which Stratos Merger Sub Inc. ("Merger Sub"), a wholly owned subsidiary of Solara Digital Infrastructure

II. BACKGROUND A. Transaction Overview Buyer. The acquiring entity is Solara Digital Infrastructure Fund VI LP ("Fund VI"), a Delaware limited partnership with a 2022 vintage year and approximately $12.4 billion of committed capital from institutional limited partners. The general partner of Fund VI is Solara Fund VI GP LLC, a Delaware limited liability company. Fund VI is a private equity fund focused on digital inf

III. FIRPTA WITHHOLDING ANALYSIS (SECTIONS 1445 AND 897) A. Statutory Framework

Section 1445(a) of the Code provides that a transferee of a USRPI must deduct and withhold a tax equal to 15% of the "amount realized" on the disposition. The term "amount realized" is defined by reference to Section 1001 of the Code and generally means the sum of money and the fair market value of any other property received in exchange for the USRPI. In the context of this Merger, the "amount realized" by each Clou

Section 897 of the Code provides the substantive rule underlying FIRPTA. Under Section 897(a), gain or loss of a nonresident alien individual or a foreign corporation from the disposition of a USRPI is treated as if the taxpayer were engaged in a trade or business within the United States during the taxable year, and as if such gain or loss were effectively connected with such trade or business ("ECI"). This construc

Section 1445(b)(3) of the Code provides that no withholding is required under Section 1445(a) if the transferor furnishes to the transferee an affidavit, signed under penalty of perjury, stating (i) the transferor's US taxpayer identification number, and (ii) that the transferor is not a foreign person. In the context of a merger, this exception is implemented through a certification from the target (here, Cloudium)

1. FIRPTA Certificate Covenant. Include a covenant in the Merger Agreement requiring Cloudium to deliver, at or prior to the Effective Time, a FIRPTA certificate under Section 1445(b)(3) of the Code (and the Treasury Regulations thereunder) certifying that Cloudium is not a USRPHC and that its stock is not a USRPI. The form of the certificate should be negotiated and agreed upon in advance of signing.

2. Coordination with Target's Counsel. Coordinate with Cloudium's General Counsel (Nadia Chowdhury) and target's outside counsel (Ridgeway Phelps & Sato LLP, Catherine Answorth) to prepare and finalize the FIRPTA certificate. Confirm that Cloudium's officers are willing to sign the certificate under penalty of perjury.

3. Master Closing Checklist. Include the FIRPTA certificate as a line item on the Master Closing Checklist to ensure timely preparation and delivery.

4. No FIRPTA Withholding on Merger Consideration. No FIRPTA withholding should be required on any portion of the Merger Consideration (whether paid to US persons, NRAs, or foreign corporations; and whether representing cash-out consideration or rollover equity), provided the FIRPTA certificate is delivered at closing.

IV. BACKUP WITHHOLDING ANALYSIS (SECTION 3406) A. Statutory Framework

Section 3406 of the Code requires that "payors" of "reportable payments" deduct and withhold income tax at a rate of 24% (the current statutory rate, as adjusted by the Tax Cuts and Jobs Act of 2017) from such payments if any of the following conditions is met: (a) The payee fails to furnish a correct taxpayer identification number ("TIN") to the payor; (b) The IRS notifies the payor that the TIN furnished by the pay

1. Letter of Transmittal. The Letter of Transmittal (Exhibit D to the Merger Agreement) must include either a substitute Form W-9 section (incorporated directly into the Letter of Transmittal, as is customary in public company mergers) or a requirement that stockholders submit a separate IRS Form W-9 together with the Letter of Transmittal. The substitute Form W-9 should include all certifications required by the IRS

2. Paying Agent Instructions. Cascade Corporate Services Inc. should be instructed, pursuant to the Paying Agent Agreement (or the applicable provisions of the Merger Agreement), to deduct and withhold 24% of the Merger Consideration from any stockholder who does not furnish a valid Form W-9 (or applicable Form W-8) and to remit such withheld amounts to the IRS in accordance with applicable law.

3. Disclosure of Consequences. The Letter of Transmittal should include clear and conspicuous disclosure of the consequences of failing to provide a valid Form W-9, including the application of 24% backup withholding, and should inform stockholders of their right to claim a credit or refund of any excess withholding on their federal income tax return.

4. Merger Agreement Withholding Provision. The Merger Agreement (Article II — Payment Procedures) should include a provision expressly authorizing the surviving corporation, Fund VI, the paying agent, and the escrow agent to deduct and withhold from the Merger Consideration any amounts required to be deducted and withheld under the Code or any applicable provision of state, local, or foreign tax law, with amounts so

5. Foreign Stockholder Forms. The Letter of Transmittal should clearly instruct foreign stockholders to furnish the applicable IRS Form W-8 (W-8BEN for individuals, W-8BEN-E for entities, W-8ECI for effectively connected income, W-8EXP for certain foreign governments and international organizations, or W-8IMY for intermediaries) rather than a Form W-9. Foreign persons providing valid W-8 forms are exempt from backup

V. NRA / FOREIGN CORPORATION WITHHOLDING ANALYSIS (SECTIONS 1441–1442) A. Statutory Framework Sections 1441 and 1442 of the Code impose a withholding obligation on "withholding agents" who make payments of certain categories of US-source income to NRAs (Section 1441) and foreign corporations (Section 1442). The statutory withholding rate is 30% of the gross amount of the payment, subject to reduction under an applica

1. Sale/Exchange Treatment. The Merger Consideration paid to stockholders in exchange for their Cloudium shares should be treated as proceeds from a sale or exchange under Section 302 of the Code (for non-rollover stockholders) or under Sections 354/356 (for rollover stockholders). As sale or exchange proceeds, the Merger Consideration is not FDAP income and is not subject to NRA withholding under Sections 1441 and 1

2. W-8 Form Collection. Cascade Corporate Services Inc. should collect IRS Forms W-8BEN (for NRA individuals) and W-8BEN-E (for foreign entities) from all foreign stockholders, whether or not NRA withholding is expected to apply. These forms are necessary for information reporting purposes, for claiming exemption from backup withholding, and as a precaution in the event of any dividend recharacterization.

3. Merger Agreement and Letter of Transmittal Provisions. The Merger Agreement (Article II) and the Letter of Transmittal should include provisions expressly permitting the paying agent to deduct and withhold any amounts required to be withheld under the Code, including under Sections 1441 and 1442, if applicable. This protective language ensures that the paying agent has contractual authority to withhold in the even

4. Recharacterization Contingency. To the extent any portion of the Merger Consideration is recharacterized as a dividend (whether under Section 302(d), Section 356(a)(2), Section 305(c), or otherwise), the paying agent should be prepared to withhold at 30% (or the applicable treaty rate, if a valid W-8 form with a treaty claim has been provided) on such recharacterized amount and to remit the withheld amounts to the

5. Proxy Statement Disclosure. Coordinate with Ridgeway Phelps & Sato LLP (Catherine Answorth) to include appropriate disclosure in the definitive proxy statement regarding the potential application of NRA withholding to foreign stockholders, the requirement to furnish applicable W-8 forms, and the availability of reduced treaty rates.

VI. ESCROW WITHHOLDING CONSIDERATIONS A. Escrow Mechanics As described in Part II.A above, at the closing of the Merger, an amount equal to $544,000,000—representing approximately 8% of the aggregate deal value—will be deposited with Cobalt Trust Company ("Cobalt"), as escrow agent, pursuant to the terms of a separate Escrow Agreement. The escrow fund is intended to secure the indemnification obligations of the selli