Contract analysis

I. Executive Summary This memorandum presents our detailed analysis of Section 6.1 of the draft Agreement and Plan of Merger (Third Revised Draft, dated January 17, 2024, and anticipated to be the substantially final execution version dated January 22, 2024) (the "Merger Agreement") among Cloudium Technologies plc, a public limited company incorporated under the laws of England and Wales ("Cloudium" or the "Company")

Section 6.1 is critical to the protection of Solara's investment thesis because, during this potentially extended Interim Period, Cloudium will continue to operate as an independent public company. Solara, as the acquiror, must ensure that the business it is paying $6.8 billion to acquire is not materially altered, impaired, or diminished between signing and closing. The interim operating covenants are designed to re

II. Background and Transaction Overview A. The Parties Solara Digital Infrastructure LP ("Solara" or "SDILP") is a Delaware limited partnership headquartered at 1200 Market Street, Suite 3400, Wilmington, Delaware 19801. Solara is a leading private equity sponsor focused on investments in digital infrastructure, enterprise software, and related technology sectors. Solara is managed by its co-managing partners, Marcus

III. Structural Overview of Section 6.1 A. General Ordinary-Course Obligation

Section 6.1(a) of the Merger Agreement establishes the overarching covenant governing Cloudium's conduct during the Interim Period. It provides, in relevant part: During the period from the date of this Agreement until the earlier of the Effective Time and the termination of this Agreement in accordance with Article VIII (the "Interim Period"), except as (i) required by applicable Law, (ii) expressly contemplated, pe

Section 6.1(a) further provides that Cloudium shall use "commercially reasonable efforts" to: (i) preserve its business organizations substantially intact; (ii) maintain its existing relationships with customers (including, without limitation, Aegis Federal Solutions Inc., which contributes $84,000,000 in ARR and is Cloudium's largest single customer), suppliers, licensors, licensees, distributors, and other persons

Section 6.1(b) sets forth an enumerated list of specific actions that Cloudium may not take during the Interim Period without the prior written consent of Solara (acting through Fund VI). The list is comprehensive and covers the following major categories: (i) Capital structure and equity (Section 6.1(b)(i)) (ii) Indebtedness and financial obligations (Section 6.1(b)(ii)) (iii) Acquisitions and dispositions (Section

Section 6.1 is subject to the fiduciary-out provisions set forth in Section 6.4 of the Merger Agreement, which governs the no-shop covenant and the circumstances under which the Cloudium Board of Directors may respond to unsolicited superior proposals. However, the interim operating covenants in Section 6.1 do not themselves contain a standalone fiduciary exception. This means that, even if the Cloudium Board determi

Section 6.1(c) establishes an affirmative notification obligation that complements the negative covenants in Section 6.1(b). Under this provision, Cloudium is required to provide Solara (through Fund VI, with copies to Calderwood & Harkness LLP) with prompt written notice of any event, circumstance, or proposed action that: (i) would reasonably be expected to require consent under Section 6.1(b); (ii) could reasonabl

Section 6.2 — Financial Reporting: Cloudium is obligated to provide Solara with monthly unaudited consolidated financial statements within 30 calendar days following the end of each calendar month during the Interim Period, as well as quarterly financial statements consistent with Cloudium's SEC reporting obligations. These financial reports serve as a key monitoring tool for covenant compliance, as they allow Solara

Section 6.3 — Access and Information Rights: Solara and its representatives (including Calderwood & Harkness, Osprey Bancroft & Co., and Glenmore Thornton LLP) are entitled to reasonable access to Cloudium's personnel, properties, books, and records during the Interim Period, upon reasonable notice and during normal business hours. This access is subject to customary limitations, including (a) confidentiality obligat

IV. Capital Structure and Equity — Section 6.1(b)(i) A. Prohibition on Changes to Capital Structure

Section 6.1(b)(i) restricts Cloudium's ability to alter its capital structure during the Interim Period. The specific prohibitions include the following: Issuance of Equity Securities. Cloudium may not issue, sell, grant, pledge, dispose of, or encumber any shares of capital stock, equity interests, or securities convertible into or exercisable or exchangeable for any equity interests of Cloudium or any of its subsid

V. Indebtedness and Financial Obligations — Section 6.1(b)(ii) A. Restrictions

Section 6.1(b)(ii) governs Cloudium's ability to incur, assume, or guarantee indebtedness during the Interim Period. The key provisions are as follows: Indebtedness Thresholds. Cloudium may not incur, assume, or guarantee any indebtedness for borrowed money in excess of $10,000,000 individually or $25,000,000 in the aggregate during the Interim Period, without Solara's prior written consent. This threshold applies to

VI. Acquisitions and Dispositions — Section 6.1(b)(iii) A. Restrictions

Section 6.1(b)(iii) restricts Cloudium's ability to engage in acquisitions, dispositions, and strategic transactions during the Interim Period. The specific provisions are as follows: Acquisitions. Cloudium may not acquire (whether by merger, consolidation, purchase of assets, equity purchase, or otherwise) any business, entity, division, or material asset group with a value in excess of $15,000,000 individually or $

VII. Capital Expenditures — Section 6.1(b)(iv) A. Restrictions

Section 6.1(b)(iv) restricts Cloudium's capital expenditures during the Interim Period. The specific provisions are as follows: Budget Cap. Cloudium's capital expenditures during the Interim Period may not exceed 110% of the amounts set forth in Cloudium's board-approved annual capital expenditure budget for the fiscal year ending September 30, 2024 (the "CapEx Budget"), measured on a quarterly basis, without Solara'

VIII. Material Contracts — Section 6.1(b)(v) A. Restrictions

Section 6.1(b)(v) governs Cloudium's ability to enter into, amend, modify, terminate, waive, or renew "Material Contracts" during the Interim Period. This is one of the most operationally significant covenants in Section 6.1 because Cloudium's business is contract-intensive and its revenue is derived almost entirely from subscription agreements with enterprise customers. General Prohibition. Cloudium may not enter in

IX. Employment and Compensation — Section 6.1(b)(vi) A. Restrictions

Section 6.1(b)(vi) contains a comprehensive set of restrictions on Cloudium's employment and compensation practices during the Interim Period. These restrictions are among the most operationally sensitive provisions in Section 6.1, as they directly affect Cloudium's ability to attract, retain, and manage its workforce of approximately 6,800 employees across four jurisdictions. Hiring Restrictions. Cloudium may not hi