Dear Catherine,
On behalf of our client, Solara Digital Infrastructure Fund VI LP ("Fund VI"), and in connection with Calderwood & Harkness LLP Matter No. 1041-00003, we are pleased to transmit for review by Cloudium Technologies plc ("Cloudium" or the "Company") and its advisors the enclosed initial draft of the Agreement and Plan of Merger (the "Merger Agreement") among Cloudium Technologies plc, Stratos Merger Sub Inc., a newly formed Delaware corporation and wholly owned subsidiary of Fund VI ("Merger Sub"), and Solara Digital Infrastructure Fund VI LP.
The draft Merger Agreement is attached hereto in Word format, together with Exhibits A through H as described further below.
**Overview of the Transaction**
The draft Merger Agreement contemplates a reverse triangular merger under the Delaware General Corporation Law, pursuant to which Merger Sub will merge with and into Cloudium, with Cloudium surviving the merger as a wholly owned subsidiary of Fund VI. This structure was selected in order to preserve the Company's existing contracts, licenses, and regulatory authorizations. The aggregate deal value contemplated by the draft is $6,800,000,000, representing approximately $36.92 per share of Cloudium common stock (based on approximately 184,200,000 shares outstanding), payable in cash, subject to rollover elections by certain shareholders as described below.
**Summary of Key Provisions**
We provide below a brief overview of the principal provisions addressed in the draft for ease of your initial review:
*Article I — The Merger.* Article I sets forth the mechanics of the reverse triangular merger, including provisions regarding the effective time, the filing of the Certificate of Merger with the Delaware Secretary of State, and the governance documents (certificate of incorporation and bylaws) of the surviving corporation following the merger.
*Article II — Merger Consideration and Payment.* Article II provides for cash merger consideration of $36.92 per share of Cloudium common stock. The draft includes rollover equity mechanics for (a) Jonathan Hargrove, Chief Executive Officer and holder of approximately 4.2% of outstanding shares, who would roll over 50% of his shares, and (b) Pinnacle Growth Ventures LLC, holder of approximately 11.6% of outstanding shares, which would roll over 60% of its shares. Article II also addresses letter of transmittal and exchange procedures through Cascade Corporate Services Inc., acting as exchange agent, as well as the deposit of $544,000,000 (representing approximately 8% of deal value) into escrow with Cobalt Trust Company to secure post-closing indemnification obligations. In addition, Article II addresses the treatment of outstanding equity awards.
*Article III — Representations and Warranties of Buyer and Merger Sub.* Article III contains customary representations and warranties to be made by Fund VI and Merger Sub.
*Article IV — Representations and Warranties of the Company.* Article IV contains the representations and warranties to be made by Cloudium, including a definition of "material adverse effect" with customary carveouts for, among other things, pandemics and public health emergencies, acts of war or terrorism, and changes in applicable law or regulation.
*Article V — Covenants.* Article V includes interim operating covenants imposing ordinary-course restrictions on the Company's operations during the period between signing and closing. The draft also includes a no-shop provision effective from signing, subject to a fiduciary-out exception permitting the Company's board of directors to respond to unsolicited superior proposals under specified circumstances. Article V further addresses a financing cooperation covenant (Section 6.14) and access and information obligations of the Company.
*Article VI — Conditions to Closing.* The conditions to the obligations of the parties to consummate the merger include: clearance under the Hart-Scott-Rodino Antitrust Improvements Act; clearance by the UK Competition and Markets Authority; approval by Cloudium's stockholders; absence of legal restraints prohibiting the merger; bring-down of representations and warranties to specified standards; absence of a material adverse effect; and receipt of requisite third-party consents, including under change-of-control provisions in certain material contracts.
*Article VII — Termination.* Article VII provides for a termination fee of $221,000,000 (approximately 3.25% of deal value) payable by Cloudium in specified circumstances, and a reverse termination fee of $374,000,000 (approximately 5.5% of deal value) payable by Fund VI. The draft also includes an outside date for consummation of the merger.
*Article VIII — Indemnification.* Post-closing indemnification is subject to a general cap of 15% of deal value ($1,020,000,000) and an 18-month survival period. The draft includes a tipping basket of 0.75% of deal value ($51,000,000) and a de minimis threshold of $500,000 for individual claims. The escrow of $544,000,000, funded at closing with Cobalt Trust Company, provides for release of 50% of the escrowed amount at 12 months post-closing and release of the remainder at 18 months post-closing, in each case net of pending claims. Special indemnities — uncapped — apply in respect of fraud, willful breach, tax-related matters, and certain specified litigation matters. We note that the interplay between the indemnification provisions and buyer-side representations and warranties insurance is addressed in the draft; the R&W insurance policy is being separately negotiated and we would expect to coordinate with your team on any conforming revisions as that process progresses.
*Article IX — Miscellaneous.* Article IX contains customary miscellaneous provisions, including governing law (Delaware), specific performance, no third-party beneficiaries, and notices.
**Ancillary Agreements**
The draft Merger Agreement contemplates the execution of certain ancillary agreements concurrently with the signing of the Merger Agreement, including:
(a) Rollover Agreements with Jonathan Hargrove and Pinnacle Growth Ventures LLC (forms attached as Exhibits F and G, respectively);
(b) Voting and Support Agreements (form attached as Exhibit H);
(c) Escrow Agreement with Cobalt Trust Company (form attached as Exhibit E);
(d) Non-Competition and Non-Solicitation Agreements with key executives of the Company;
(e) Equity Commitment Letter from Fund VI in the amount of $2,832,888,096;
(f) Limited Guarantee from Solara Fund VI GP LLC in the amount of $246,000,000; and
(g) Debt Commitment Letter from Meridian Atlantic Bank, N.A. and Ironclad Capital Markets LLC in the aggregate amount of $4,240,000,000, which is expected to be finalized in the coming weeks.
**Exhibits and Disclosure Schedules**
The following exhibits are included with the draft: Certificate of Merger (Exhibit A); Surviving Corporation Certificate of Incorporation (Exhibit B); Surviving Corporation Bylaws (Exhibit C); Form of Letter of Transmittal (Exhibit D); and the forms of ancillary agreements referenced above (Exhibits E through H).
We note that the disclosure schedules are shown in bracketed placeholder form throughout the draft. We would expect Cloudium's counsel to populate the seller disclosure schedules in connection with your review and markup of the agreement.
**Proposed Timeline and Availability**
We would appreciate receiving your markup and comments at your earliest convenience. If agreeable, we would suggest targeting a period of approximately two to three weeks for the initial turn. Our team — Harrison Wexford, Andrew Fitzpatrick, and I — is available to discuss the draft at your convenience, and we would be happy to schedule a call to walk through the principal terms and the overall structure of the agreement should that be helpful.
Please do not hesitate to reach out with any questions in the interim.
Best regards,
Tiffany Rosenthal Calderwood & Harkness LLP 599 Lexington Avenue New York, NY 10022 Direct: (212) 558-7341 Email: trosenthal@calderwoodharkness.com
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