Dear Mr. Graves and Mr. Gallagher:
**I. Introduction**
We write on behalf of our clients, Solara Digital Infrastructure LP and Solara Digital Infrastructure Fund VI LP (together, the "Buyer"), in connection with the proposed acquisition (the "Transaction") of Cloudium Technologies plc, a public limited company incorporated in England and Wales (Company No. 09734521) and listed on the Nasdaq Global Select Market under the ticker symbol "CLDM" ("Cloudium" or the "Target"). Calderwood & Harkness LLP ("C&H") serves as lead transaction counsel to the Buyer in connection with the Transaction.
This letter is transmitted in connection with the buyer-side representation and warranty insurance policy (proposed Policy No. NFA-TRI-2024-00487) being underwritten by Northfield Assurance Ltd. ("Northfield") and brokered by Peregrine Advisory Group LLC ("Peregrine"), pursuant to Peregrine's broker engagement letter dated January 10, 2024. We understand that the R&W underwriting process was formally initiated on January 10, 2024, and that a non-binding indication from Northfield is expected to follow receipt and review of these materials. We are transmitting the enclosed due diligence and transaction materials in advance of the underwriting process to facilitate Northfield's review and to support the anticipated timeline toward policy binding.
**II. Transaction Overview**
The Transaction is structured as a reverse triangular merger under the Delaware General Corporation Law. Stratos Merger Sub Inc., a Delaware corporation and newly formed direct, wholly owned subsidiary of Solara Digital Infrastructure Fund VI LP ("Fund VI"), will merge with and into Cloudium, with Cloudium surviving as a wholly owned subsidiary of Fund VI. The aggregate deal value is **$6,800,000,000**, representing per-share merger consideration of approximately **$36.92** based on **184,200,000** shares of Cloudium common stock outstanding.
Key transaction parameters are as follows:
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**III. Proposed R&W Insurance Terms**
Based on preliminary discussions among the parties, we summarize below the proposed terms of the buyer-side R&W insurance coverage for the Transaction:
- **Policy Type:** Buyer-side representation and warranty insurance - **Proposed Policy Limit:** $680,000,000 (10% of deal value) - **Proposed Retention:** $544,000,000 (equal to the indemnity escrow; 8% of deal value) - **Retention Drop-Down:** 50% reduction to $272,000,000 after 12 months post-closing, provided no pending or noticed claims - **Coverage Scope:** Seller's representations and warranties set forth in Article IV of the Merger Agreement - **Proposed Premium:** $13,600,000 (2.0% rate on limit) - **Broker Fee:** $680,000 payable to Peregrine Advisory Group LLC - **Indemnification Cap (Merger Agreement):** 15% of deal value ($1,020,000,000) - **Escrow:** $544,000,000 to be deposited with Cobalt Trust Company at closing; 50% released at 12 months post-closing, remainder released at 18 months post-closing (co-terminus with the 18-month survival period for general representations) - **Basket/Deductible:** 0.75% of deal value ($51,000,000 tipping basket); de minimis threshold of $500,000 per individual claim - **Special Indemnities (Uncapped):** Fraud, willful breach, tax indemnities, and specified litigation matters - **Subrogation:** To be waived against Cloudium and its officers and directors, except in cases of fraud
**IV. Materials Transmitted**
Enclosed with this transmittal, please find the following materials, organized by category. All documents are provided via secure file transfer and are also accessible in the virtual data room maintained by C&H (access credentials to be provided separately upon request).
**1. Due Diligence Summary Memorandum (dated January 5, 2024)**
A comprehensive memorandum summarizing C&H's findings across all legal due diligence workstreams, including corporate organization and good standing, material contracts, intellectual property, litigation and disputes, regulatory and government contracts, tax, employment and benefits, real estate, insurance, and environmental matters.
**2. Draft Merger Agreement — Second Revised Draft (dated January 4, 2024)**
The most recent draft of the Agreement and Plan of Merger among Solara Digital Infrastructure Fund VI LP, Stratos Merger Sub Inc., and Cloudium Technologies plc. We note that this agreement is **not in final form** and continues to be actively negotiated between the parties and their respective counsel. We direct the underwriters' particular attention to the following provisions:
- **Article IV** — Representations and Warranties of the Target - **Article IX** — Indemnification - **Section 1.01** — Definition of "Material Adverse Effect," including carveouts for pandemics, armed hostilities or acts of war, and changes in applicable law or regulation
We will provide updated drafts as negotiations progress and expect to circulate a substantially final draft in advance of the underwriting call.
**3. Issue-Specific Diligence Memoranda**
- **(a) Change-of-Control Provisions Survey (dated January 8, 2024)** — This memorandum identifies material contracts containing provisions triggered by the Transaction, including: - *Credit Agreement with Atlas Commercial Lending Corp.* (dated March 15, 2021): $620,000,000 term loan facility and $200,000,000 revolving credit facility ($820,000,000 total outstanding to be repaid in full at closing); - *Master SaaS Agreement with Aegis Federal Solutions Inc.*: $84,000,000 ARR; written consent of Aegis required upon change of control of Cloudium; - *Technology License Agreement with Helix Data Systems GmbH*: contains a termination-for-change-of-control clause exercisable by Helix.
- **(b) UK Employment and TUPE Considerations Memorandum (dated January 10, 2024)** — Addressing employment law considerations in connection with the Transaction as they relate to Cloudium Technologies UK Ltd. (England and Wales, Co. No. 11287456), which employs approximately 1,200 persons across London and Manchester offices and accounts for approximately £312,000,000 (~$390,000,000) in revenue.
**4. Preliminary Structuring Memorandum (dated October 18, 2023)**
An analysis of the merits and considerations associated with a reverse triangular merger structure as compared to an asset purchase and a tender offer, including tax, regulatory, and operational considerations.
**5. Key Subsidiary and Corporate Structure Information**
An organization chart and summary of the Target's principal subsidiaries is enclosed. The key entities are as follows:
- **Cloudium Technologies plc** — Parent; England and Wales, Co. No. 09734521 - **Cloudium Technologies UK Ltd.** — England and Wales, Co. No. 11287456; ~1,200 employees; UK operations - **Cloudium Technologies India Pvt. Ltd.** — Bangalore, Karnataka, India; ~2,400 employees; R&D and customer support - **Cloudium Solutions GmbH** — Berlin, Germany; ~400 employees; DACH region sales and customer success
**6. Supplemental Due Diligence Request Lists**
For reference and to illustrate the scope of diligence conducted, we enclose the following request lists issued by C&H during the diligence process:
- Preliminary Due Diligence Request List (September 10, 2023) - IP and Technology Supplement (October 8, 2023) - Regulatory and Government Contracts Supplement (October 15, 2023) - Employee Benefits and Compensation Supplement (October 22, 2023)
**7. Key Financial Information**
Summary financial information regarding the Target is set forth in Section II above and in the enclosed Due Diligence Summary Memorandum. The Target's independent auditors are **Harwell & Dobson LLP** (engagement partner: Martin Chisholm). We note that the audited financial statements and the quality-of-earnings report prepared by the Buyer's accounting advisor are third-party materials; these are available upon request or may be accessed directly in the virtual data room.
**8. C&H Internal Analyses (Shared for Underwriting Purposes)**
The following internal analyses have been prepared by C&H and are shared solely for purposes of R&W insurance underwriting:
- Annotated Redline of MAE Definition with Market-Precedent Comparison (dated December 22, 2023) - Annotated Redline of Indemnification and Escrow Provisions with R&WI Interplay Analysis (dated January 3, 2024)
**9. Financing Overview**
- **Debt Commitment Letter (Initial, dated December 15, 2023):** Commitments from Meridian Atlantic Bank, N.A. and Ironclad Capital Markets LLC, providing $4,240,000,000 in aggregate debt financing: - $3,740,000,000 Term Loan B (SOFR + 325 bps; 7-year maturity) - $500,000,000 Revolving Credit Facility (SOFR + 275 bps; 5-year maturity) - **Equity Commitment:** $2,832,888,096 from Fund VI - **Total Rollover Equity:** Approximately $616,055,952 - **Total Funding Requirement:** $7,188,944,048 (inclusive of approximately $185,000,000 in estimated transaction expenses and $820,000,000 in existing Target debt to be repaid at closing)
**V. Advisors**
For reference, the principal advisors to the parties are as follows:
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**VI. Underwriting Call**
We understand that an underwriting call with the Northfield underwriting team has been scheduled for **January 16, 2024**. The C&H team will present a summary of diligence findings and will be prepared to address questions from the underwriters. Participants from C&H will include **Harrison Wexford** (Responsible Partner), **Tiffany Rosenthal** (Lead Associate), and the undersigned.
We would be grateful if Northfield and Peregrine could confirm their respective attendees and identify any specific topics or areas of focus they would like us to address on the call, so that we may tailor our presentation accordingly.
Please note that additional materials may be provided in advance of or following the underwriting call as the transaction documentation is finalized.
**VII. Anticipated Timeline**
- **Anticipated Signing:** On or about January 22, 2024 - **R&W Policy Binder:** Expected January 19, 2024 (three business days prior to anticipated signing) - **No-Claims Declaration:** To be delivered by the Buyer at closing
**VIII. Confidentiality and Privilege**
The materials enclosed with this transmittal are **confidential** and are subject to the **attorney-client privilege** and **work-product doctrine**. These materials are shared with Northfield and Peregrine solely and exclusively for purposes of the R&W insurance underwriting process in connection with the Transaction. Receipt of these materials does not constitute a waiver of any applicable privilege or protection.
We respectfully request that the recipients maintain strict confidentiality with respect to all enclosed materials and refrain from sharing, distributing, or disclosing any such materials to any third party without the prior written consent of Calderwood & Harkness LLP. For reference, the Transaction is governed by a confidentiality and non-disclosure agreement dated September 5, 2023, between Solara Digital Infrastructure LP and Cloudium Technologies plc, the terms of which remain in full force and effect.
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Please do not hesitate to contact me with any questions or if you require any additional information in advance of the underwriting call. I can be reached at the contact information below.
We appreciate the prompt attention of Northfield and Peregrine to these materials and look forward to a productive underwriting process.
Very truly yours,
**Andrew Fitzpatrick** Associate Calderwood & Harkness LLP 599 Lexington Avenue New York, NY 10022 Tel: (212) 558-7400 Email: afitzpatrick@calderwoodharkness.com
*Matter No. 1041-00003*
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**Enclosures:**
1. Due Diligence Summary Memorandum (January 5, 2024) 2. Draft Merger Agreement — Second Revised Draft (January 4, 2024) 3. Issue-Specific Diligence Memo — Change-of-Control Provisions Survey (January 8, 2024) 4. Issue-Specific Diligence Memo — UK Employment and TUPE Considerations (January 10, 2024) 5. Preliminary Structuring Memorandum (October 18, 2023) 6. Due Diligence Request Lists (4 documents: September 10, 2023; October 8, 2023; October 15, 2023; October 22, 2023) 7. Annotated Redline — MAE Definition with Market-Precedent Comparison (December 22, 2023) 8. Annotated Redline — Indemnification and Escrow Provisions with R&WI Interplay Analysis (January 3, 2024) 9. Debt Commitment Letter — Initial (December 15, 2023) 10. Corporate Organization Chart — Cloudium Technologies plc and Subsidiaries