1041-00003 · Solara Digital Infrastructure LP · Opinions

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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

This memorandum is protected by the attorney-client privilege and constitutes attorney work product. It is intended solely for the use of the addressee and other authorized members of the deal team. Any distribution, copying, or disclosure of this memorandum or its contents to any unauthorized person is strictly prohibited.

To: Harrison Wexford, Responsible Partner, M&A

From: Tiffany Rosenthal, Lead Associate, M&A; Andrew Fitzpatrick, Working Associate, M&A

Date: January 2, 2024

Re: Appraisal Rights under DGCL § 262 — Acquisition of Cloudium Technologies plc by Solara Digital Infrastructure Fund VI LP via Reverse Triangular Merger

Matter No.: 1041-00003

I. Executive Summary

This memorandum analyzes the availability and scope of stockholder appraisal rights under Section 262 of the Delaware General Corporation Law (the "DGCL") in the context of the proposed acquisition (the "Transaction") of Cloudium Technologies plc, a public limited company incorporated under the laws of England and Wales ("Cloudium" or the "Company"), by Solara Digital Infrastructure Fund VI LP, a Delaware limited partnership ("Fund VI" or "Solara"), through a reverse triangular merger (the "Merger"). In the Merger, Stratos Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Fund VI ("Merger Sub"), will merge with and into Cloudium, with Cloudium surviving as a wholly owned subsidiary of Fund VI (the "Surviving Corporation").

The aggregate equity value of the Transaction is approximately $6,800,000,000, reflecting a per-share merger consideration of approximately $36.92 in cash (the "Merger Consideration"), subject to certain rollover elections by Jonathan Hargrove, Cloudium's Chief Executive Officer, and Pinnacle Growth Ventures LLC, a significant stockholder. The Agreement and Plan of Merger (the "Merger Agreement") is expected to be executed on or about January 22, 2024, with closing anticipated during the first half of 2024.

Our principal conclusions are as follows:

Appraisal rights are available. Appraisal rights under DGCL § 262 will be available to Cloudium stockholders who properly perfect their rights, notwithstanding the reverse triangular merger structure. Although Cloudium is incorporated under the laws of England and Wales and not under Delaware law, the Merger is being effected under the DGCL because Merger Sub is a Delaware corporation. Accordingly, the appraisal provisions of § 262 attach to this transaction and are available to stockholders of both constituent corporations in the Merger.

The market-out exception does not apply. Although Cloudium common stock is listed on the Nasdaq Global Select Market, the so-called "market-out" exception under § 262(b)(1) does not eliminate appraisal rights here because the Merger Consideration consists entirely of cash (for non-rolling stockholders) rather than shares of stock of the surviving corporation or of any other corporation that is listed on a national securities exchange or held of record by more than 2,000 holders. Since stockholders are being required to accept cash rather than publicly traded stock, the "unless" clause of § 262(b)(1) is triggered, and appraisal rights remain available.

English law does not provide an alternative appraisal remedy. The unique posture of Cloudium as an English public limited company listed on Nasdaq raises additional questions regarding the interaction between Delaware appraisal rights and English law. We have considered whether a UK scheme of arrangement under Part 26 of the UK Companies Act 2006 would have been required or could have been used as an alternative structure. The deal team elected not to pursue a scheme of arrangement, and the reverse triangular merger under the DGCL is the chosen transaction structure. English law does not provide a direct equivalent of DGCL § 262 appraisal rights, and no parallel English law remedy is available to dissenting Cloudium stockholders in this structure.

Practical implications. Former Cloudium stockholders who are dissatisfied with the $36.92 per-share Merger Consideration may seek appraisal in the Delaware Court of Chancery. Solara should anticipate potential appraisal petitions, particularly from merger arbitrage funds and appraisal litigation specialists, and should budget for associated litigation costs and potential excess liability. We recommend that proxy statement disclosures prominently describe appraisal rights and procedures, and that the deal team maintain comprehensive records of the negotiation process and the board's deliberations to support the fairness of the Merger Consideration in any future appraisal proceeding.

The balance of this memorandum sets forth our detailed analysis.

II. Background

A. Transaction Structure

The Transaction is structured as a reverse triangular merger under the DGCL. Merger Sub, a Delaware corporation incorporated on January 8, 2024 (Delaware File No. 7923841), whose sole stockholder is Fund VI, will merge with and into Cloudium. Cloudium will be the surviving corporation in the Merger and will become a wholly owned subsidiary of Fund VI upon consummation of the Transaction. Merger Sub will cease to exist as a separate legal entity at the effective time of the Merger (the "Effective Time").

The per-share Merger Consideration is $36.92 in cash, without interest and subject to applicable withholding taxes. Based on approximately 184,200,000 shares of Cloudium common stock outstanding as of the anticipated signing date, the aggregate equity value of the Transaction is approximately $6,800,000,000.

Certain stockholders have negotiated the right to "roll over" a portion of their equity holdings into the post-closing capital structure rather than receive the cash Merger Consideration for all of their shares. Specifically:

• Jonathan Hargrove (Chief Executive Officer): Mr. Hargrove holds approximately 7,736,400 shares of Cloudium common stock, representing approximately 4.2% of the outstanding shares. Mr. Hargrove has agreed to roll over 50% of his shares (approximately 3,868,200 shares), with the value of the rolled-over shares being approximately $142,814,544 (calculated at $36.92 per share). Mr. Hargrove will receive the cash Merger Consideration of $36.92 per share for the remaining 50% of his shares.

• Pinnacle Growth Ventures LLC: Pinnacle holds approximately 21,367,200 shares of Cloudium common stock, representing approximately 11.6% of the outstanding shares. Pinnacle has agreed to roll over 60% of its shares (approximately 12,820,320 shares), with the value of the rolled-over shares being approximately $473,241,408 (calculated at $36.92 per share). Pinnacle will receive the cash Merger Consideration of $36.92 per share for the remaining 40% of its shares.

The total value of the rollover equity is approximately $616,055,952. The rollover arrangements will be documented in separate Rollover and Contribution Agreements to be entered into concurrently with the execution of the Merger Agreement. All non-rolling stockholders will receive the cash Merger Consideration of $36.92 per share.

B. Cloudium's Corporate Status

Cloudium Technologies plc is a public limited company incorporated under the laws of England and Wales, registered with Companies House under Company No. 09734521. The Company's registered office is located at 45 Broadwick Street, London W1F 0DB, United Kingdom. Cloudium maintains its United States headquarters at 600 Townsend Street, Suite 800, San Francisco, California 94103.

Cloudium's shares of common stock are listed on the Nasdaq Global Select Market under the ticker symbol "CLDM." The Company is not listed on any UK securities exchange, and its shares are not admitted to trading on any UK regulated market or UK multilateral trading facility.

Critically, Cloudium is not incorporated under the laws of the State of Delaware. The DGCL applies to the Merger because Merger Sub is a Delaware corporation and the Merger is being effected under the DGCL. Specifically, the Merger is contemplated to be effected pursuant to Section 252 of the DGCL (governing mergers of domestic and foreign corporations) or, alternatively, Section 264 of the DGCL (governing mergers of domestic corporations with joint-stock or other associations), depending on the characterization of Cloudium under the DGCL. Because Cloudium is an entity organized under the laws of a jurisdiction other than Delaware, it qualifies as a "corporation of any other state, district, or country" within the meaning of Section 252, permitting the Merger to be effected under the DGCL as a merger between Merger Sub (a domestic Delaware corporation) and Cloudium (a foreign corporation).

The Merger Agreement will be governed by Delaware law, and the parties intend for the Merger to be consummated in accordance with the DGCL. The choice of Delaware law and the DGCL-governed merger structure is a deliberate structural decision that has implications for the availability of appraisal rights, as discussed in Section III below.

C. Parties and Advisors

The following parties and advisors are relevant to this memorandum:

• Buyer: Solara Digital Infrastructure Fund VI LP, a Delaware limited partnership (EIN 87-4523190). Fund VI's general partner is Solara Fund VI GP LLC, a Delaware limited liability company.

• Merger Sub: Stratos Merger Sub Inc., a Delaware corporation, incorporated January 8, 2024 (Delaware File No. 7923841), and a wholly owned subsidiary of Fund VI.

• Target: Cloudium Technologies plc, a public limited company incorporated under the laws of England and Wales (Company No. 09734521).

• Buyer's Counsel: Calderwood & Harkness LLP. Harrison Wexford serves as the Responsible Partner on this engagement.

• Target's Counsel: Ridgeway Phelps & Sato LLP. Catherine Answorth serves as Lead M&A Partner (New York office), and Alistair Fenn serves as Lead Corporate Partner (London office).

• Target's Board Chair: Douglas Pemberton (independent director).

• Target's Financial Advisor: Veridian Partners LLC. Monica Pressler serves as Managing Director. The fairness opinion is anticipated to be delivered on January 21, 2024.

Additional advisors relevant to specific aspects of the Transaction are identified elsewhere in this memorandum.

III. Statutory Framework — DGCL § 262

A. Overview of Appraisal Rights

Section 262 of the DGCL provides a statutory remedy to stockholders of a Delaware corporation (or, as discussed below, stockholders of a constituent corporation in a DGCL-governed merger) who dissent from a merger or consolidation. The appraisal remedy entitles qualifying dissenting stockholders to receive payment of the "fair value" of their shares, as determined by the Delaware Court of Chancery, in lieu of the merger consideration provided in the merger agreement.

The appraisal right is designed to protect minority stockholders who believe that the merger consideration does not adequately reflect the true value of their investment in the corporation. Rather than being compelled to accept the merger consideration, a dissenting stockholder may invoke the appraisal statute and ask the Court of Chancery to conduct an independent judicial determination of the "fair value" of the shares as of the effective time of the merger, "exclusive of any element of value arising from the accomplishment or expectation of the merger." DGCL § 262(h). This "fair value" may be higher or lower than the per-share merger consideration established in the merger agreement.

Appraisal rights are not available in all merger transactions. The DGCL imposes both substantive limitations (including the "market-out" exception discussed in Section III.C below) and strict procedural requirements (discussed in Section III.D below) that must be satisfied before a stockholder may obtain an appraisal of its shares. Failure to comply with these requirements results in the forfeiture of appraisal rights, and the stockholder is left to receive the merger consideration.

The appraisal remedy is the exclusive remedy available to a stockholder who objects to the merger consideration in a DGCL-governed merger, absent a claim for breach of fiduciary duty or fraud. A stockholder who perfects appraisal rights is not entitled to challenge the merger itself or to seek injunctive relief against the consummation of the transaction; rather, the sole remedy is the judicial determination of fair value.

B. Availability of Appraisal in a Reverse Triangular Merger

The threshold question in this analysis is whether appraisal rights under DGCL § 262 are available to Cloudium stockholders in the context of a reverse triangular merger in which Merger Sub (a Delaware corporation) merges with and into Cloudium (an English company), with Cloudium surviving as the Surviving Corporation.

Statutory text. DGCL § 262(a) provides that appraisal rights are available to "holders of shares of stock of a constituent corporation in a merger or consolidation" effected under various sections of the DGCL, including, among others, Sections 251, 252, 254, 255, 256, 257, 258, 263, and 264. Importantly, § 262(a) does not limit appraisal rights to stockholders of Delaware corporations; it refers to stockholders of any "constituent corporation" in a DGCL-governed merger.

Constituent corporations. In the Merger, both Merger Sub and Cloudium are "constituent corporations." Merger Sub is the corporation that will cease to exist (the merging entity), and Cloudium is the corporation that will survive (the surviving entity). The stockholders of Merger Sub (i.e., Fund VI, as sole stockholder) are not receiving merger consideration in the Merger—Merger Sub's shares are simply being cancelled. The stockholders of Cloudium, by contrast, are having their shares converted into the right to receive the cash Merger Consideration. It is the Cloudium stockholders who have the economic interest that the appraisal statute is designed to protect.

Applicability to stockholders of the non-Delaware constituent corporation. Even though Cloudium is a foreign (English) corporation, appraisal rights are available under § 262 because Merger Sub is a Delaware corporation and the Merger is being effected under the DGCL. Specifically, under Section 252 of the DGCL, a Delaware corporation may merge with one or more corporations organized under the laws of any other state, district, or country, provided that the merger agreement is approved in the manner required by the DGCL (with respect to the Delaware constituent corporation) and by the laws of the jurisdiction of incorporation of the foreign constituent corporation (with respect to the foreign constituent corporation).

Section 262(a) expressly provides that appraisal rights are available in mergers effected under Section 252. The statute does not distinguish between stockholders of the Delaware constituent corporation and stockholders of the foreign constituent corporation. Because the Merger Agreement provides that Cloudium stockholders' shares are being converted into cash consideration and the Merger is being effected under the DGCL, Cloudium stockholders will have appraisal rights under § 262.

This conclusion is consistent with the purpose and structure of Section 252, which extends the DGCL's merger framework to cross-border transactions involving at least one Delaware constituent corporation. When a Delaware corporation participates in a merger under the DGCL, the protections afforded by § 262—including appraisal rights—travel with the transaction and are available to all stockholders whose shares are being converted in the merger, regardless of the jurisdiction of incorporation of their respective corporation.

We note that the Merger Agreement (execution anticipated January 22, 2024) will expressly provide that appraisal rights are available under § 262 of the DGCL to Cloudium stockholders who comply with the procedural requirements set forth therein. While this contractual acknowledgment does not independently create or expand statutory appraisal rights, it confirms the parties' mutual understanding and ensures appropriate disclosure to Cloudium stockholders.

Alternatively, if the Merger is characterized as being effected under Section 264 of the DGCL (governing mergers of domestic corporations with joint-stock or other associations), the analysis does not change materially. Section 262(a) also lists Section 264 among the statutory provisions that give rise to appraisal rights. Accordingly, regardless of whether the Merger is effected under Section 252 or Section 264, appraisal rights under § 262 will be available.

C. The Market-Out Exception — § 262(b)(1)

Having established that appraisal rights are generally available in this Merger, we must next consider whether the so-called "market-out" exception under DGCL § 262(b)(1) eliminates those rights.

The market-out exception generally. Section 262(b)(1) provides, in relevant part, that no appraisal rights shall be available for shares of any class or series of stock that, at the record date fixed for the meeting of stockholders to act upon the agreement of merger or consolidation (or, in the case of a merger under Section 251(h), as of immediately prior to the execution of the agreement of merger), were either:

(i) listed on a national securities exchange; or

(ii) held of record by more than 2,000 holders;

unless the holders of such shares are required by the terms of the agreement of merger or consolidation to accept for such shares anything other than:

(a) shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof;

(b) shares of stock of any other corporation, or depository receipts in respect thereof, which at the effective date of the merger or consolidation will be either listed on a national securities exchange or held of record by more than 2,000 holders;

(c) cash in lieu of fractional shares or fractional depository receipts described in the foregoing clauses (a) and (b); or

(d) any combination of the shares of stock, depository receipts, and cash in lieu of fractional shares or fractional depository receipts described in the foregoing clauses (a), (b), and (c).

Application to the Cloudium Transaction. Cloudium common stock is listed on the Nasdaq Global Select Market, which is a national securities exchange within the meaning of the Securities Exchange Act of 1934, as amended. Additionally, Cloudium common stock is held of record by substantially more than 2,000 holders. Therefore, the first prong of the market-out exception is satisfied—i.e., the threshold conditions for the market-out exception are met.

However, the critical question is whether the "unless" clause is triggered. The "unless" clause preserves appraisal rights in situations where stockholders are required to accept anything other than the types of consideration described in clauses (a) through (d)—essentially, anything other than publicly traded stock (or depository receipts in respect thereof) of the surviving corporation or another listed corporation, cash in lieu of fractional shares, or any combination thereof.

Here, the Merger Consideration consists entirely of $36.92 in cash per share. Non-rolling Cloudium stockholders are not receiving shares of stock of the Surviving Corporation, shares of stock of any other listed corporation, or any combination of publicly traded stock and cash in lieu of fractional shares. They are receiving solely cash. Cash consideration (other than cash in lieu of fractional shares) is not among the types of consideration listed in clauses (a) through (d) of the "unless" clause.

Accordingly, the "unless" clause is triggered, and the market-out exception does not apply. Appraisal rights are available to Cloudium stockholders notwithstanding the listing of Cloudium common stock on the Nasdaq Global Select Market and notwithstanding that Cloudium's shares are held of record by more than 2,000 holders.

Rollover shares. With respect to the rollover participants—Jonathan Hargrove and Pinnacle Growth Ventures LLC—a portion of their shares is being exchanged for equity in the post-closing entity rather than cash. This does not affect the market-out analysis for non-rolling stockholders, who are receiving only cash. As to the rollover participants themselves, they are entering into separate contractual arrangements (Rollover and Contribution Agreements) governing the treatment of their rollover shares. These participants are contractually agreeing to a different form of consideration and are expected to vote in favor of the Merger pursuant to Voting and Support Agreements. They are not expected to seek appraisal for the shares they are rolling over. To the extent that the rollover participants receive cash Merger Consideration for the portion of their shares that are not being rolled over, those shares would theoretically be eligible for appraisal, but the rollover participants' obligations under the Voting and Support Agreements (including the obligation to vote in favor of the Merger) would disqualify them from seeking appraisal because a vote in favor of the Merger constitutes a waiver of appraisal rights under § 262.

Conclusion. The market-out exception under § 262(b)(1) does not apply to the Merger, and appraisal rights are available to all Cloudium stockholders who properly perfect their rights in accordance with the procedural requirements of § 262.

D. Procedural Requirements for Perfecting Appraisal Rights

DGCL § 262 imposes strict procedural requirements that a dissenting stockholder must follow in order to perfect appraisal rights. Failure to comply with any of these requirements results in the forfeiture of appraisal rights, and the stockholder will be deemed to have accepted the Merger Consideration. The following is a step-by-step summary of the procedural requirements:

1. Written demand before the vote. A stockholder who wishes to exercise appraisal rights must deliver to Cloudium a written demand for appraisal before the stockholder vote on the Merger at the special meeting. The demand must reasonably inform the corporation of the identity of the stockholder and that the stockholder intends to demand appraisal of such stockholder's shares. DGCL § 262(d)(1). The demand must be separate from, and in addition to, any proxy or vote against the Merger; a vote against the Merger does not, by itself, constitute a demand for appraisal.

2. No vote in favor of the Merger. A stockholder who wishes to preserve appraisal rights must not vote in favor of the Merger. DGCL § 262(a). A stockholder may vote against the Merger, abstain from voting, or fail to vote entirely. However, a vote in favor of the Merger—including by proxy—constitutes an irrevocable waiver of appraisal rights with respect to the shares so voted. If a stockholder votes some shares in favor of the Merger and does not vote other shares in favor, appraisal rights may be preserved as to the shares not voted in favor, provided all other procedural requirements are met with respect to those shares.

3. Continuous ownership. The stockholder must continuously hold the shares of Cloudium common stock for which appraisal is demanded from the date of the written demand through the Effective Time of the Merger. DGCL § 262(a). Any transfer or disposition of shares after the demand is made and before the Effective Time will terminate the stockholder's appraisal rights with respect to the transferred shares. A stockholder who acquires shares after the record date for the special meeting may exercise appraisal rights only if the stockholder is the beneficial owner of such shares on both the date of the demand and the Effective Time.

4. Petition to the Court of Chancery. Within 120 days after the Effective Time of the Merger, either the Surviving Corporation or any stockholder who has complied with the appraisal demand requirements may file a petition in the Delaware Court of Chancery demanding a determination of the fair value of the shares held by all dissenting stockholders. DGCL § 262(e). If neither the Surviving Corporation nor any dissenting stockholder files a petition within the 120-day period, appraisal rights will cease for all stockholders, and all dissenting stockholders will be entitled to receive only the Merger Consideration.

It is important to note that the 120-day filing deadline is mandatory and jurisdictional. The Court of Chancery has consistently held that the failure to file a petition within the 120-day period is fatal to an appraisal claim, and there is no provision for an extension of time. Accordingly, a dissenting stockholder who relies on the Surviving Corporation to file the petition does so at its own risk.

5. Verified petition. The petition filed in the Court of Chancery must be a verified petition setting forth the number and class of shares for which appraisal is demanded, the aggregate number of shares held by all petitioning stockholders, and such other information as may be required by the Court of Chancery. DGCL § 262(e). Upon the filing of a petition by any stockholder, service of a copy of the petition must be made upon the Surviving Corporation, which is then required to file in the office of the Register in Chancery in the county where the registered office of the Surviving Corporation is located a duly verified list containing the names and addresses of all stockholders who have demanded appraisal of their shares and with whom agreements as to the value of their shares have not been reached.

6. Withdrawal right. A stockholder who has demanded appraisal may withdraw the demand and accept the Merger Consideration at any time within 60 days after the Effective Time of the Merger without the consent of the Surviving Corporation. DGCL § 262(e). After the expiration of the 60-day period, a stockholder may withdraw the demand and accept the Merger Consideration only with the written consent of the Surviving Corporation. The Surviving Corporation has discretion whether to grant or withhold such consent, and there is no obligation on the part of the Surviving Corporation to consent to a withdrawal after the 60-day period.

The Effective Time of the Merger is anticipated to be 11:59 PM Eastern Time on the closing date, which is currently projected for mid-2024. Accordingly, the 120-day deadline for filing an appraisal petition would expire approximately 120 days after the closing date, and the 60-day withdrawal period would expire approximately 60 days after the closing date. The precise dates will depend on the actual closing date.

We note that the procedural requirements for perfecting appraisal rights are technical and demanding. Delaware courts have strictly enforced these requirements, and stockholders who fail to comply—even inadvertently—forfeit their appraisal rights. This strict enforcement inures to the benefit of the acquiror in reducing the pool of shares for which appraisal may ultimately be awarded.

E. Fair Value Determination

If an appraisal petition is properly filed and the proceeding goes forward, the Delaware Court of Chancery will conduct a trial to determine the "fair value" of the dissenting stockholders' shares.

Fair value standard. DGCL § 262(h) directs the Court of Chancery to determine the "fair value" of the shares "exclusive of any element of value arising from the accomplishment or expectation of the merger." This standard requires the court to determine the going-concern value of the corporation as of the Effective Time, without regard to any synergies, efficiencies, or other value that would be realized only as a result of the merger.

Fair value may differ from merger consideration. The fair value determined by the Court of Chancery may be higher than, equal to, or lower than the per-share Merger Consideration of $36.92. There is no presumption that the merger consideration represents fair value, although recent Delaware jurisprudence has given increasing weight to deal price in certain circumstances, as discussed in Section V.E below.

Valuation methodologies. The Court of Chancery has broad discretion to consider any valuation methodology it deems appropriate in determining fair value. Commonly used methodologies include: (i) discounted cash flow ("DCF") analysis; (ii) comparable company analysis; (iii) comparable transaction analysis; (iv) the deal price itself (adjusted for synergies, if applicable); and (v) other methodologies as the court may find relevant. The court may rely on one or more of these methodologies, or may fashion its own valuation based on the evidence presented.

The Delaware Supreme Court has emphasized that the Court of Chancery should exercise its own independent judgment and should not mechanically defer to any single methodology. At the same time, recent decisions have recognized that the deal price, when resulting from an arm's-length negotiation between informed and independent parties with no conflicts of interest, and where an adequate market check has been conducted, can be a reliable indicator of fair value. The significance of this trend for the Cloudium Transaction is discussed in Section V.E below.

Interest. DGCL § 262(h) provides that upon the determination of fair value, the Court of Chancery shall direct payment of such fair value to the dissenting stockholders, together with interest from the Effective Time through the date of payment. The default rate of interest is compounded quarterly at five percent (5%) over the Federal Reserve discount rate (including any surcharge), unless the Court of Chancery, in its discretion, determines that another rate is appropriate. Interest accrues on the amount of the appraised fair value from the Effective Time and can represent a significant additional cost to the Surviving Corporation, particularly in proceedings that extend over multiple years.

Costs and attorneys' fees. The Court of Chancery has discretion to allocate the costs of the appraisal proceeding (including reasonable attorneys' fees and the fees and expenses of court-appointed experts) among the parties "as the Court deems equitable in the circumstances." DGCL § 262(j). While the general rule in Delaware litigation is that each party bears its own attorneys' fees, the appraisal statute expressly authorizes the court to award fees against either party. In practice, courts have awarded attorneys' fees against the surviving corporation in cases where the appraised value substantially exceeds the merger consideration, or where the surviving corporation's conduct in the appraisal proceeding was unreasonable.

IV. Interaction with English Law — Scheme of Arrangement and Other Considerations

A. Why a UK Scheme of Arrangement Was Not Used

Acquisitions of UK public companies are frequently effected by way of a scheme of arrangement under Part 26 of the UK Companies Act 2006. A scheme of arrangement is a court-sanctioned process that requires: (i) approval by a majority in number representing at least 75% in value of each class of stockholders (or creditors, as applicable) present and voting at a court-convened meeting; and (ii) sanction by the English High Court. Once sanctioned, the scheme is binding on all stockholders of the relevant class, including those who voted against it or did not vote.

The scheme of arrangement mechanism is well-established in the UK market and is the customary structure for "friendly" acquisitions of UK public companies. It offers certain advantages, including the ability to achieve 100% ownership without the need for a subsequent squeeze-out process, and the fact that dissenting stockholders are bound by the scheme once it is approved and sanctioned—there is no appraisal remedy or opt-out for dissenting minorities.

In the present case, however, the deal team elected to structure the Transaction as a reverse triangular merger under the DGCL rather than a UK scheme of arrangement. This structural decision was driven by several factors:

First, Cloudium, although incorporated in England and Wales, is listed solely on the Nasdaq Global Select Market and has its US headquarters in San Francisco, California. The Company's operations, management, and investor base are substantially US-focused. The reverse triangular merger structure is familiar to Cloudium's US-based stockholders and institutional investors and is consistent with the expectations of the US capital markets.

Second, a UK scheme of arrangement would have required application to the English High Court for both the convening of the stockholder meeting and the sanction of the scheme, adding time, complexity, and cost to the transaction process. The reverse triangular merger achieves the same result—Cloudium becomes a wholly owned subsidiary of Fund VI—without requiring court involvement in the approval process (other than to the extent that the Court of Chancery may become involved in any subsequent appraisal proceeding).

Third, the reverse triangular merger structure takes advantage of the DGCL's well-developed and predictable merger framework, including the stockholder approval requirements, appraisal rights provisions, and fiduciary duty standards that are familiar to the parties and their advisors.

Fourth, the use of Merger Sub as the Delaware constituent corporation provides a clear jurisdictional hook for the application of the DGCL, ensuring that the merger mechanics, fiduciary standards, and appraisal remedy are governed by Delaware law.

The UK Takeover Code. The Takeover Code (the "Code"), administered by the UK Takeover Panel, governs offers for companies that are incorporated in the United Kingdom, the Channel Islands, or the Isle of Man and whose securities are admitted to trading on a UK regulated market, a UK multilateral trading facility, or (in certain circumstances) a stock exchange in the Channel Islands or the Isle of Man. The Code also applies to companies that have their registered office in the UK, Channel Islands, or Isle of Man and are considered by the Panel to have their place of central management and control in any of those jurisdictions.

Cloudium is incorporated in England and Wales and has its registered office in London, which raises a threshold question regarding the applicability of the Code. However, Cloudium's securities are not admitted to trading on a UK regulated market or a UK multilateral trading facility—they are listed solely on Nasdaq in the United States. Additionally, the question of whether Cloudium's "place of central management and control" is in the UK or in the US (where its US headquarters and principal executive officers are located in San Francisco) is a factual determination that requires analysis of where the directors actually meet and exercise oversight of the Company's business.

The deal team, in consultation with Alistair Fenn at Ridgeway Phelps & Sato LLP (London) and Fiona McAllister at Albright & Kerr LLP (London), has analyzed the Code's applicability to Cloudium and has concluded that the Code does not apply to the Transaction, or alternatively, has obtained confirmation from the Takeover Panel that the Code does not apply to offers for Cloudium in the circumstances of this Transaction. The precise basis for this conclusion—whether it rests on the absence of a UK-traded security, the location of central management and control in the United States, or a ruling from the Panel—is being documented separately. For purposes of this memorandum, we proceed on the assumption that the Code does not apply.

B. Dissenters' Rights under English Law

English law does not have a direct equivalent of DGCL § 262 appraisal rights. There is no statutory mechanism under English law that entitles a stockholder of an English company to dissent from a merger or acquisition and demand a judicial determination of the "fair value" of its shares.

Under a UK scheme of arrangement, once the scheme is approved by the requisite majorities and sanctioned by the English High Court, it is binding on all members of the relevant class, including those who voted against the scheme or who did not vote. There is no right to "opt out" or to receive a different price. The only avenue for challenge is to appear at the court sanction hearing and object to the sanctioning of the scheme, but the court will typically sanction a scheme that has been approved by the requisite majorities unless there is some procedural irregularity or unfairness in the process.

Under a statutory cross-border merger (Part 28, Chapter 2 of the UK Companies Act 2006), which historically applied to mergers between UK companies and companies incorporated in other EEA member states, there were provisions for dissenting stockholders. However, following the United Kingdom's withdrawal from the European Union on January 31, 2020, and the expiration of the transition period on December 31, 2020, the cross-border merger regime under Part 28 of the Companies Act 2006 no longer applies to mergers with non-EEA entities. In any event, this framework is not applicable to the present Transaction, which is structured as a merger under the DGCL rather than a cross-border merger under English law.

Similarly, the "squeeze-out" provisions under Part 28 of the Companies Act 2006 (sections 979–982), which permit a bidder who has acquired 90% or more of the shares to which a takeover offer relates to compulsorily acquire the remaining shares, are applicable only in the context of a UK takeover offer. Because the Transaction is not structured as a UK takeover offer, the squeeze-out provisions do not apply.

In summary, English law does not provide any appraisal, dissenter's, or opt-out remedy to Cloudium stockholders in the context of this Transaction. The sole statutory remedy available to dissenting Cloudium stockholders is the appraisal right provided by DGCL § 262.

C. Interaction Between Delaware Appraisal and Cloudium's English Incorporation

The fact that Cloudium is an English public limited company, rather than a Delaware corporation, does not eliminate or diminish the appraisal rights available under DGCL § 262. As discussed in Section III.B above, appraisal rights attach to the merger transaction effected under the DGCL, not to the target's jurisdiction of incorporation. Because the Merger involves a Delaware constituent corporation (Merger Sub) and is being effected under the DGCL, the appraisal provisions of § 262 apply to all stockholders of the constituent corporations whose shares are being converted in the Merger, including the stockholders of Cloudium.

We have considered the possibility that a dissenting Cloudium stockholder might argue that it is entitled to additional protections or remedies under English law, in addition to, or in lieu of, the appraisal remedy under the DGCL. We conclude that this argument is without merit. The Merger is not being effected under English law; it is being effected under the DGCL. No provision of English corporate law requires or authorizes a dissenting stockholder to seek a judicial valuation of its shares in the context of a DGCL-governed merger. The DGCL provides the exclusive statutory remedy for stockholders who dissent from the Merger.

We acknowledge a theoretical risk that a dissenting stockholder might attempt to bring proceedings in the English courts, for example, seeking an order on the basis of unfair prejudice under Section 994 of the Companies Act 2006 or some other equitable remedy. While we believe such a claim would be meritless—given that the Merger is being effected in accordance with the DGCL and the stockholder's shares are being converted into cash consideration through a lawful merger process—we flag this as a theoretical risk that should be monitored. The likelihood of a successful challenge in the English courts is low, particularly given that Cloudium's board of directors will have approved the Merger and recommended it to stockholders, and the Transaction will have been consummated in accordance with the DGCL and the terms of the Merger Agreement.

We recommend that the proxy statement include disclosure to the effect that (i) appraisal rights under DGCL § 262 are available to dissenting Cloudium stockholders, (ii) no appraisal or comparable dissenter's remedy is available under English law in connection with the Merger, and (iii) the DGCL provides the exclusive statutory framework governing the rights of Cloudium stockholders in connection with the Merger.

V. Practical Considerations for the Solara Deal Team

A. Stockholder Vote and Appraisal Demand Mechanics

The Merger will require the approval of Cloudium's stockholders at a special meeting of stockholders. The anticipated timeline is as follows: the Definitive Proxy Statement is expected to be filed by Cloudium on or about April 15, 2024, and the special meeting is anticipated to be held in the second quarter of 2024. Based on our current projections, the special meeting will be held on May 20, 2024, and stockholder approval will require the affirmative vote of a majority of the outstanding shares of Cloudium common stock entitled to vote at the meeting.

Any Cloudium stockholder who wishes to exercise appraisal rights must deliver a written demand for appraisal to Cloudium before the stockholder vote on the Merger is taken at the special meeting. The demand must be a separate written instrument; a proxy card voted against the Merger does not constitute a demand for appraisal. In addition, the demanding stockholder must not vote any of its shares in favor of the Merger. A stockholder who submits a demand for appraisal but then votes in favor of the Merger (including by submitting a proxy card that is voted in favor) will be deemed to have waived its appraisal rights.

Voting and Support Agreements. Jonathan Hargrove (holding approximately 7,736,400 shares, or 4.2% of outstanding shares) and Pinnacle Growth Ventures LLC (holding approximately 21,367,200 shares, or 11.6% of outstanding shares) will enter into Voting and Support Agreements concurrently with the execution of the Merger Agreement, pursuant to which each will agree to vote all of its shares in favor of the Merger. Because a vote in favor of the Merger constitutes a waiver of appraisal rights, neither Hargrove nor Pinnacle will be eligible to seek appraisal. Their combined holdings represent approximately 15.8% of outstanding shares, which reduces the pool of shares potentially eligible for appraisal to approximately 84.2% of outstanding shares, or approximately 155,096,400 shares.

Based on our experience with comparable all-cash take-private transactions, stockholder approval is expected to be obtained by a substantial margin. The special meeting was ultimately held on May 20, 2024, and the Merger was approved by approximately 82.4% of the outstanding shares. However, it is important to note that a relatively small percentage of dissenting shares can still generate meaningful appraisal liability in a transaction of this magnitude. Even if only 2% of outstanding shares (approximately 3,684,000 shares) are held by stockholders who properly perfect appraisal rights, the aggregate Merger Consideration at risk with respect to those shares would be approximately $136,000,000 at $36.92 per share. If the Court of Chancery were to determine a fair value in excess of $36.92, the additional liability could be significant.

B. Proxy Statement Disclosures

DGCL § 262(d)(1) requires that, at least 20 days prior to the stockholder meeting at which the merger is to be submitted for approval, a copy of Section 262 (or the information required by Section 262) must be included in or attached to the notice of the meeting or the proxy statement sent to stockholders.

We recommend that the Definitive Proxy Statement filed by Cloudium include the following disclosures regarding appraisal rights:

(i) A clear and prominent description of appraisal rights, including a summary of the procedures that a stockholder must follow to perfect appraisal rights and the consequences of failing to comply with those procedures.

(ii) The full text of DGCL § 262, attached as an annex to the proxy statement.

(iii) A statement that appraisal rights are available under the DGCL because the Merger Consideration consists entirely of cash and the market-out exception under § 262(b)(1) does not apply.

(iv) A statement that no appraisal or comparable dissenter's remedy is available under English law in connection with the Merger.

(v) A description of the procedural requirements for perfecting appraisal rights, including the requirement to deliver a written demand before the vote, the requirement not to vote in favor of the Merger, the requirement of continuous ownership, and the deadlines for filing an appraisal petition in the Delaware Court of Chancery.

(vi) A description of the consequences of failing to comply with the procedural requirements, including the irrevocable forfeiture of appraisal rights and the stockholder's deemed acceptance of the Merger Consideration.

(vii) A statement regarding the right to withdraw the demand for appraisal within 60 days after the Effective Time and the requirement of the Surviving Corporation's consent for withdrawal after the 60-day period.

All appraisal disclosures must comply with Rule 14a-9 under the Securities Exchange Act of 1934, which prohibits proxy solicitations from containing any statement that, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or that omits to state any material fact necessary in order to make the statements therein not false or misleading. Appraisal disclosures are material to stockholders' investment decisions and must be accurate and complete.

We will coordinate with Catherine Answorth at Ridgeway Phelps & Sato LLP on the drafting of the appraisal rights section of the proxy statement. In addition, Blackthorn Proxy Advisors LLC, which has been retained as the proxy solicitor for the special meeting, should be informed of the appraisal rights provisions so that it can appropriately address stockholder inquiries regarding the availability and exercise of appraisal rights.

C. Post-Closing Notice Requirements

DGCL § 262(d)(2) imposes a post-merger notice requirement on the Surviving Corporation. Within 10 days after the Effective Time of the Merger, the Surviving Corporation (i.e., Cloudium, as the surviving entity in the reverse triangular merger, acting under the direction of Fund VI as sole stockholder) must send a notice to each stockholder who has complied with the appraisal demand requirements and has not voted in favor of the Merger. The notice must advise the stockholder of the Effective Time and inform the stockholder of its right to file an appraisal petition in the Delaware Court of Chancery within 120 days after the Effective Time.

Compliance with this notice requirement is mandatory. Failure to provide timely notice could expose the Surviving Corporation to claims of prejudice by dissenting stockholders and could potentially extend the applicable deadlines for filing appraisal petitions.

To ensure compliance with the § 262(d)(2) notice requirement, we recommend the following steps:

(i) Cascade Corporate Services Inc., which serves as the transfer agent for Cloudium common stock, should coordinate with the Surviving Corporation to identify all stockholders who have submitted written demands for appraisal prior to the stockholder vote. The transfer agent's records should be cross-referenced with the records of demands received by Cloudium's corporate secretary.

(ii) The Surviving Corporation should prepare the § 262(d)(2) notice promptly after the closing of the Transaction, so that it is ready to be sent within the 10-day period following the Effective Time.

(iii) The § 262(d)(2) notice should be included in or sent together with the Letter of Transmittal materials that will be sent to former Cloudium stockholders following the closing. The Letter of Transmittal is currently scheduled to be mailed on or about July 10, 2024, following the anticipated closing. If the closing occurs before or after the currently projected date, the mailing schedule should be adjusted to ensure that the 10-day notice period is met.

D. Escrow and Indemnification Interaction

The Merger Agreement provides for an indemnity escrow of $544,000,000—representing approximately 8% of the total deal value—to be deposited with Cobalt Trust Company (the "Escrow Agent") at the closing to secure the sellers' indemnification obligations under the Merger Agreement. The escrow fund is available to Fund VI to satisfy claims for breaches of the sellers' representations and warranties, covenants, and certain other specified indemnification obligations.

It is important to note that appraisal claims are not indemnifiable losses under the Merger Agreement. Appraisal claims represent the cost of the Merger Consideration itself—specifically, the risk that the Court of Chancery may determine a fair value in excess of $36.92 per share—rather than a breach of any representation, warranty, or covenant made by the sellers. Accordingly, any excess liability arising from an appraisal proceeding would be borne by Solara (through the Surviving Corporation) and would not be recoverable from the indemnity escrow fund.

Similarly, the representations and warranties insurance policy obtained in connection with the Transaction (Northfield Assurance Ltd., Policy No. NFA-TRI-2024-00487) covers losses arising from breaches of the sellers' representations and warranties, not appraisal liability. The policy does not provide coverage for the risk that the Court of Chancery may determine a fair value in excess of the Merger Consideration. Solara should understand that appraisal risk is a direct acquisition cost that is not insured or indemnified under the Transaction documents.

We recommend that Solara factor potential appraisal exposure into its financial modeling and reserves for the Transaction. The magnitude of the exposure will depend on (i) the number of shares for which appraisal is properly demanded and perfected, (ii) the fair value ultimately determined by the Court of Chancery (if any appraisal petition is filed and adjudicated), and (iii) the accrual of statutory interest from the Effective Time through the date of payment.

E. Litigation Risk and Strategic Considerations

Appraisal proceedings in the Delaware Court of Chancery can be protracted, expensive, and unpredictable. A full appraisal trial typically involves extensive discovery (including document production and depositions of deal principals, financial advisors, and valuation experts), the retention of expert witnesses on both sides, pre-trial and trial briefing, and post-trial argument. The proceeding can take several years from the filing of the petition to the issuance of a final decision, during which statutory interest continues to accrue on the appraised amount.

Appraisal arbitrage risk. A significant concern in large all-cash transactions is the risk of "appraisal arbitrage"—the practice whereby merger arbitrage funds, hedge funds, and appraisal litigation specialists acquire shares of the target company after the announcement of the merger for the specific purpose of seeking appraisal. These investors are sophisticated participants who make investment decisions based on their analysis of whether the fair value of the target's shares exceeds the merger consideration. In recent years, appraisal arbitrage has become an increasingly common phenomenon in large-cap all-cash transactions, and the volume of shares for which appraisal is demanded can be significant.

The risk of appraisal arbitrage in the Cloudium Transaction depends on the market's perception of whether the $36.92 per-share Merger Consideration adequately reflects the fair value of Cloudium's shares. Several factors are relevant to this assessment:

• The Merger Consideration of $36.92 per share reflects an enterprise value to last twelve months' EBITDA ("EV/LTM EBITDA") multiple of approximately 16.8x, based on an enterprise value of approximately $6,800,000,000 and LTM EBITDA of approximately $405,000,000. This multiple should be compared to trading multiples of comparable companies and transaction multiples for comparable acquisitions to assess whether the market is likely to view the price as attractive.

• The Merger Consideration represents a premium to Cloudium's pre-announcement trading price. The magnitude of this premium will be relevant to the market's assessment of fair value.

• The fairness opinion from Veridian Partners LLC, delivered on January 21, 2024, supports the fairness of the Merger Consideration from a financial point of view to the Cloudium stockholders (other than the rollover participants). The fairness opinion will be summarized in the proxy statement and will serve as evidence of the financial advisors' view that the Merger Consideration is within a range of fairness.

Deal-process considerations. Recent Delaware jurisprudence has increasingly recognized that the deal price—i.e., the per-share merger consideration agreed to by the parties—can be a reliable indicator of fair value when the transaction results from an arm's-length negotiation between independent and well-informed parties and when an adequate market check has been conducted. In several notable decisions, the Court of Chancery has adopted "deal price minus synergies" as its measure of fair value, reasoning that the deal price is the best available evidence of the target's standalone going-concern value, adjusted downward for any synergies that the acquiror expected to realize from the transaction.

The negotiation process for the Cloudium Transaction provides a factual record of an arm's-length, informed transaction. The key milestones of the process are as follows:

• Solara and Cloudium executed a mutual nondisclosure agreement on September 5, 2023.

• Cloudium management delivered a management presentation to Solara's deal team on October 2, 2023.

• Solara submitted an indication of interest ("IOI") on October 30, 2023, reflecting a proposed price range of $34.00 to $37.50 per share.

• The Cloudium board of directors authorized exclusive negotiations with Solara on November 6, 2023.

• Solara and Cloudium entered into an exclusivity agreement on November 15, 2023.

• Multiple rounds of negotiation followed, culminating in the agreed-upon Merger Consideration of $36.92 per share.

However, we note certain features of the process that could be subject to challenge in an appraisal proceeding:

• Single-bidder process. The Transaction was negotiated on an exclusive basis with Solara following the execution of the exclusivity agreement on November 15, 2023. There was no pre-signing auction or competitive bidding process. While a single-bidder process does not preclude a finding that the deal price reflects fair value, it may be scrutinized by the Court of Chancery as a factor that limits confidence in the deal price as an indicator of fair value. The absence of a pre-signing market check could be a point of challenge raised by dissenting stockholders in an appraisal proceeding.

• No go-shop. The Merger Agreement contains a "no-shop" provision that restricts Cloudium from soliciting, initiating, or encouraging alternative acquisition proposals following the execution of the Merger Agreement. The Merger Agreement does not include a post-signing "go-shop" period that would permit Cloudium to actively solicit alternative proposals for a limited period after signing. While the no-shop provision is subject to a fiduciary-out exception (permitting the Cloudium board to engage with unsolicited superior proposals in the exercise of its fiduciary duties), the absence of a go-shop means that the Transaction was not subjected to a post-signing market check.

• Counterarguments. Notwithstanding the single-bidder process and the absence of a go-shop, Solara can point to several factors supporting the fairness of the deal price, including: (i) the involvement of an independent board of directors with a majority of independent directors, led by independent chair Douglas Pemberton; (ii) the engagement of a reputable financial advisor (Veridian Partners LLC) that delivered a fairness opinion; (iii) the arm's-length nature of the negotiations, with multiple rounds of price and term negotiation; (iv) the IOI range of $34.00 to $37.50 per share, with the final price of $36.92 near the top of the range; and (v) the premium to the pre-announcement trading price. These factors, in the aggregate, support a finding that the Merger Consideration was the product of a fair and informed negotiation process.

Strategic positioning. In light of the foregoing, we recommend that Solara take the following steps to position itself favorably in the event of an appraisal proceeding:

• Maintain comprehensive deal-process records, including board minutes, financial advisor presentations, draft fairness opinion analyses, term sheets, negotiation correspondence, and any internal valuation analyses prepared by Solara or its advisors. These records will be critical to establishing the arm's-length and informed nature of the negotiation process.

• Preserve all communications between Solara and Cloudium, and between Solara and its advisors, relating to the valuation of Cloudium and the negotiation of the Merger Consideration. These communications are likely to be discoverable in any appraisal proceeding and should be consistent with the narrative of a fair and informed negotiation.

• Be prepared to engage experienced appraisal litigation counsel promptly upon receipt of any appraisal petition in the Court of Chancery. Early engagement of counsel will permit the development of a litigation strategy, the identification and retention of valuation experts, and the assessment of potential settlement opportunities.

VI. Recommendations

Based on the foregoing analysis, we make the following recommendations to the deal team:

1. Merger Agreement drafting. The Merger Agreement should expressly reference DGCL § 262 appraisal rights and include appropriate mechanics, including: (a) a requirement that Cloudium promptly deliver to Fund VI copies of all appraisal demands received before or after the stockholder vote; (b) an obligation on the part of the Surviving Corporation to send the post-merger notice required by § 262(d)(2) within 10 days of the Effective Time; (c) a covenant that the Surviving Corporation will not, without the prior written consent of Fund VI, make any payment with respect to, or settle or offer to settle, any appraisal demand; and (d) appropriate representations regarding the capitalization of Cloudium and the number of shares outstanding, to facilitate the tracking of dissenting shares.

2. Proxy statement. The Definitive Proxy Statement should include the full text of DGCL § 262 as an annex, together with a clear and prominent summary of appraisal procedures, deadlines, and the consequences of non-compliance. The appraisal rights section should be drafted in close coordination with Ridgeway Phelps & Sato LLP (Catherine Answorth) to ensure accuracy and completeness.

3. Monitor dissenting shares. Between the mailing of the proxy statement and the stockholder vote, Cloudium should maintain a log of all appraisal demands received and should promptly notify Fund VI of any such demands. After the stockholder vote and before closing, the deal team should assess the volume of dissenting shares to quantify the potential appraisal exposure. This assessment should inform the closing conditions analysis and Fund VI's financial planning.

4. Post-closing compliance. The Surviving Corporation must send the § 262(d)(2) notice to all qualifying dissenting stockholders within 10

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
This memorandum is protected by the attorney-client privilege and constitutes attorney work product. It is intended solely for the use of the addressee and other authorized members of the deal team. Any distribution, copying, or disclosure of this memorandum or its contents to any unauthorized person is strictly prohibited.
To: Harrison Wexford, Responsible Partner, M&A
From: Tiffany Rosenthal, Lead Associate, M&A; Andrew Fitzpatrick, Working Associate, M&A
Date: January 2, 2024
Re: Appraisal Rights under DGCL § 262 — Acquisition of Cloudium Technologies plc by Solara Digital Infrastructure Fund VI LP via Reverse Triangular Merger
Matter No.: 1041-00003
I. Executive Summary
This memorandum analyzes the availability and scope of stockholder appraisal rights under Section 262 of the Delaware General Corporation Law (the "DGCL") in the context of the proposed acquisition (the "Transaction") of Cloudium Technologies plc, a public limited company incorporated under the laws of England and Wales ("Cloudium" or the "Company"), by Solara Digital Infrastructure Fund VI LP, a Delaware limited partnership ("Fund VI" or "Solara"), through a reverse triangular merger (the "Merger"). In the Merger, Stratos Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Fund VI ("Merger Sub"), will merge with and into Cloudium, with Cloudium surviving as a wholly owned subsidiary of Fund VI (the "Surviving Corporation").
The aggregate equity value of the Transaction is approximately $6,800,000,000, reflecting a per-share merger consideration of approximately $36.92 in cash (the "Merger Consideration"), subject to certain rollover elections by Jonathan Hargrove, Cloudium's Chief Executive Officer, and Pinnacle Growth Ventures LLC, a significant stockholder. The Agreement and Plan of Merger (the "Merger Agreement") is expected to be executed on or about January 22, 2024, with closing anticipated during the first half of 2024.
Our principal conclusions are as follows:
Appraisal rights are available. Appraisal rights under DGCL § 262 will be available to Cloudium stockholders who properly perfect their rights, notwithstanding the reverse triangular merger structure. Although Cloudium is incorporated under the laws of England and Wales and not under Delaware law, the Merger is being effected under the DGCL because Merger Sub is a Delaware corporation. Accordingly, the appraisal provisions of § 262 attach to this transaction and are available to stockholders of both constituent corporations in the Merger.
The market-out exception does not apply. Although Cloudium common stock is listed on the Nasdaq Global Select Market, the so-called "market-out" exception under § 262(b)(1) does not eliminate appraisal rights here because the Merger Consideration consists entirely of cash (for non-rolling stockholders) rather than shares of stock of the surviving corporation or of any other corporation that is listed on a national securities exchange or held of record by more than 2,000 holders. Since stockholders are being required to accept cash rather than publicly traded stock, the "unless" clause of § 262(b)(1) is triggered, and appraisal rights remain available.
English law does not provide an alternative appraisal remedy. The unique posture of Cloudium as an English public limited company listed on Nasdaq raises additional questions regarding the interaction between Delaware appraisal rights and English law. We have considered whether a UK scheme of arrangement under Part 26 of the UK Companies Act 2006 would have been required or could have been used as an alternative structure. The deal team elected not to pursue a scheme of arrangement, and the reverse triangular merger under the DGCL is the chosen transaction structure. English law does not provide a direct equivalent of DGCL § 262 appraisal rights, and no parallel English law remedy is available to dissenting Cloudium stockholders in this structure.
Practical implications. Former Cloudium stockholders who are dissatisfied with the $36.92 per-share Merger Consideration may seek appraisal in the Delaware Court of Chancery. Solara should anticipate potential appraisal petitions, particularly from merger arbitrage funds and appraisal litigation specialists, and should budget for associated litigation costs and potential excess liability. We recommend that proxy statement disclosures prominently describe appraisal rights and procedures, and that the deal team maintain comprehensive records of the negotiation process and the board's deliberations to support the fairness of the Merger Consideration in any future appraisal proceeding.
The balance of this memorandum sets forth our detailed analysis.
II. Background
A. Transaction Structure
The Transaction is structured as a reverse triangular merger under the DGCL. Merger Sub, a Delaware corporation incorporated on January 8, 2024 (Delaware File No. 7923841), whose sole stockholder is Fund VI, will merge with and into Cloudium. Cloudium will be the surviving corporation in the Merger and will become a wholly owned subsidiary of Fund VI upon consummation of the Transaction. Merger Sub will cease to exist as a separate legal entity at the effective time of the Merger (the "Effective Time").
The per-share Merger Consideration is $36.92 in cash, without interest and subject to applicable withholding taxes. Based on approximately 184,200,000 shares of Cloudium common stock outstanding as of the anticipated signing date, the aggregate equity value of the Transaction is approximately $6,800,000,000.
Certain stockholders have negotiated the right to "roll over" a portion of their equity holdings into the post-closing capital structure rather than receive the cash Merger Consideration for all of their shares. Specifically:
•  Jonathan Hargrove (Chief Executive Officer): Mr. Hargrove holds approximately 7,736,400 shares of Cloudium common stock, representing approximately 4.2% of the outstanding shares. Mr. Hargrove has agreed to roll over 50% of his shares (approximately 3,868,200 shares), with the value of the rolled-over shares being approximately $142,814,544 (calculated at $36.92 per share). Mr. Hargrove will receive the cash Merger Consideration of $36.92 per share for the remaining 50% of his shares.
•  Pinnacle Growth Ventures LLC: Pinnacle holds approximately 21,367,200 shares of Cloudium common stock, representing approximately 11.6% of the outstanding shares. Pinnacle has agreed to roll over 60% of its shares (approximately 12,820,320 shares), with the value of the rolled-over shares being approximately $473,241,408 (calculated at $36.92 per share). Pinnacle will receive the cash Merger Consideration of $36.92 per share for the remaining 40% of its shares.
The total value of the rollover equity is approximately $616,055,952. The rollover arrangements will be documented in separate Rollover and Contribution Agreements to be entered into concurrently with the execution of the Merger Agreement. All non-rolling stockholders will receive the cash Merger Consideration of $36.92 per share.
B. Cloudium's Corporate Status
Cloudium Technologies plc is a public limited company incorporated under the laws of England and Wales, registered with Companies House under Company No. 09734521. The Company's registered office is located at 45 Broadwick Street, London W1F 0DB, United Kingdom. Cloudium maintains its United States headquarters at 600 Townsend Street, Suite 800, San Francisco, California 94103.
Cloudium's shares of common stock are listed on the Nasdaq Global Select Market under the ticker symbol "CLDM." The Company is not listed on any UK securities exchange, and its shares are not admitted to trading on any UK regulated market or UK multilateral trading facility.
Critically, Cloudium is not incorporated under the laws of the State of Delaware. The DGCL applies to the Merger because Merger Sub is a Delaware corporation and the Merger is being effected under the DGCL. Specifically, the Merger is contemplated to be effected pursuant to Section 252 of the DGCL (governing mergers of domestic and foreign corporations) or, alternatively, Section 264 of the DGCL (governing mergers of domestic corporations with joint-stock or other associations), depending on the characterization of Cloudium under the DGCL. Because Cloudium is an entity organized under the laws of a jurisdiction other than Delaware, it qualifies as a "corporation of any other state, district, or country" within the meaning of Section 252, permitting the Merger to be effected under the DGCL as a merger between Merger Sub (a domestic Delaware corporation) and Cloudium (a foreign corporation).
The Merger Agreement will be governed by Delaware law, and the parties intend for the Merger to be consummated in accordance with the DGCL. The choice of Delaware law and the DGCL-governed merger structure is a deliberate structural decision that has implications for the availability of appraisal rights, as discussed in Section III below.
C. Parties and Advisors
The following parties and advisors are relevant to this memorandum:
•  Buyer: Solara Digital Infrastructure Fund VI LP, a Delaware limited partnership (EIN 87-4523190). Fund VI's general partner is Solara Fund VI GP LLC, a Delaware limited liability company.
•  Merger Sub: Stratos Merger Sub Inc., a Delaware corporation, incorporated January 8, 2024 (Delaware File No. 7923841), and a wholly owned subsidiary of Fund VI.
•  Target: Cloudium Technologies plc, a public limited company incorporated under the laws of England and Wales (Company No. 09734521).
•  Buyer's Counsel: Calderwood & Harkness LLP. Harrison Wexford serves as the Responsible Partner on this engagement.
•  Target's Counsel: Ridgeway Phelps & Sato LLP. Catherine Answorth serves as Lead M&A Partner (New York office), and Alistair Fenn serves as Lead Corporate Partner (London office).
•  Target's Board Chair: Douglas Pemberton (independent director).
•  Target's Financial Advisor: Veridian Partners LLC. Monica Pressler serves as Managing Director. The fairness opinion is anticipated to be delivered on January 21, 2024.
Additional advisors relevant to specific aspects of the Transaction are identified elsewhere in this memorandum.
III. Statutory Framework — DGCL § 262
A. Overview of Appraisal Rights
Section 262 of the DGCL provides a statutory remedy to stockholders of a Delaware corporation (or, as discussed below, stockholders of a constituent corporation in a DGCL-governed merger) who dissent from a merger or consolidation. The appraisal remedy entitles qualifying dissenting stockholders to receive payment of the "fair value" of their shares, as determined by the Delaware Court of Chancery, in lieu of the merger consideration provided in the merger agreement.
The appraisal right is designed to protect minority stockholders who believe that the merger consideration does not adequately reflect the true value of their investment in the corporation. Rather than being compelled to accept the merger consideration, a dissenting stockholder may invoke the appraisal statute and ask the Court of Chancery to conduct an independent judicial determination of the "fair value" of the shares as of the effective time of the merger, "exclusive of any element of value arising from the accomplishment or expectation of the merger." DGCL § 262(h). This "fair value" may be higher or lower than the per-share merger consideration established in the merger agreement.
Appraisal rights are not available in all merger transactions. The DGCL imposes both substantive limitations (including the "market-out" exception discussed in Section III.C below) and strict procedural requirements (discussed in Section III.D below) that must be satisfied before a stockholder may obtain an appraisal of its shares. Failure to comply with these requirements results in the forfeiture of appraisal rights, and the stockholder is left to receive the merger consideration.
The appraisal remedy is the exclusive remedy available to a stockholder who objects to the merger consideration in a DGCL-governed merger, absent a claim for breach of fiduciary duty or fraud. A stockholder who perfects appraisal rights is not entitled to challenge the merger itself or to seek injunctive relief against the consummation of the transaction; rather, the sole remedy is the judicial determination of fair value.
B. Availability of Appraisal in a Reverse Triangular Merger
The threshold question in this analysis is whether appraisal rights under DGCL § 262 are available to Cloudium stockholders in the context of a reverse triangular merger in which Merger Sub (a Delaware corporation) merges with and into Cloudium (an English company), with Cloudium surviving as the Surviving Corporation.
Statutory text. DGCL § 262(a) provides that appraisal rights are available to "holders of shares of stock of a constituent corporation in a merger or consolidation" effected under various sections of the DGCL, including, among others, Sections 251, 252, 254, 255, 256, 257, 258, 263, and 264. Importantly, § 262(a) does not limit appraisal rights to stockholders of Delaware corporations; it refers to stockholders of any "constituent corporation" in a DGCL-governed merger.
Constituent corporations. In the Merger, both Merger Sub and Cloudium are "constituent corporations." Merger Sub is the corporation that will cease to exist (the merging entity), and Cloudium is the corporation that will survive (the surviving entity). The stockholders of Merger Sub (i.e., Fund VI, as sole stockholder) are not receiving merger consideration in the Merger—Merger Sub's shares are simply being cancelled. The stockholders of Cloudium, by contrast, are having their shares converted into the right to receive the cash Merger Consideration. It is the Cloudium stockholders who have the economic interest that the appraisal statute is designed to protect.
Applicability to stockholders of the non-Delaware constituent corporation. Even though Cloudium is a foreign (English) corporation, appraisal rights are available under § 262 because Merger Sub is a Delaware corporation and the Merger is being effected under the DGCL. Specifically, under Section 252 of the DGCL, a Delaware corporation may merge with one or more corporations organized under the laws of any other state, district, or country, provided that the merger agreement is approved in the manner required by the DGCL (with respect to the Delaware constituent corporation) and by the laws of the jurisdiction of incorporation of the foreign constituent corporation (with respect to the foreign constituent corporation).
Section 262(a) expressly provides that appraisal rights are available in mergers effected under Section 252. The statute does not distinguish between stockholders of the Delaware constituent corporation and stockholders of the foreign constituent corporation. Because the Merger Agreement provides that Cloudium stockholders' shares are being converted into cash consideration and the Merger is being effected under the DGCL, Cloudium stockholders will have appraisal rights under § 262.
This conclusion is consistent with the purpose and structure of Section 252, which extends the DGCL's merger framework to cross-border transactions involving at least one Delaware constituent corporation. When a Delaware corporation participates in a merger under the DGCL, the protections afforded by § 262—including appraisal rights—travel with the transaction and are available to all stockholders whose shares are being converted in the merger, regardless of the jurisdiction of incorporation of their respective corporation.
We note that the Merger Agreement (execution anticipated January 22, 2024) will expressly provide that appraisal rights are available under § 262 of the DGCL to Cloudium stockholders who comply with the procedural requirements set forth therein. While this contractual acknowledgment does not independently create or expand statutory appraisal rights, it confirms the parties' mutual understanding and ensures appropriate disclosure to Cloudium stockholders.
Alternatively, if the Merger is characterized as being effected under Section 264 of the DGCL (governing mergers of domestic corporations with joint-stock or other associations), the analysis does not change materially. Section 262(a) also lists Section 264 among the statutory provisions that give rise to appraisal rights. Accordingly, regardless of whether the Merger is effected under Section 252 or Section 264, appraisal rights under § 262 will be available.
C. The Market-Out Exception — § 262(b)(1)
Having established that appraisal rights are generally available in this Merger, we must next consider whether the so-called "market-out" exception under DGCL § 262(b)(1) eliminates those rights.
The market-out exception generally. Section 262(b)(1) provides, in relevant part, that no appraisal rights shall be available for shares of any class or series of stock that, at the record date fixed for the meeting of stockholders to act upon the agreement of merger or consolidation (or, in the case of a merger under Section 251(h), as of immediately prior to the execution of the agreement of merger), were either:
(i) listed on a national securities exchange; or
(ii) held of record by more than 2,000 holders;
unless the holders of such shares are required by the terms of the agreement of merger or consolidation to accept for such shares anything other than:
(a) shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof;
(b) shares of stock of any other corporation, or depository receipts in respect thereof, which at the effective date of the merger or consolidation will be either listed on a national securities exchange or held of record by more than 2,000 holders;
(c) cash in lieu of fractional shares or fractional depository receipts described in the foregoing clauses (a) and (b); or
(d) any combination of the shares of stock, depository receipts, and cash in lieu of fractional shares or fractional depository receipts described in the foregoing clauses (a), (b), and (c).
Application to the Cloudium Transaction. Cloudium common stock is listed on the Nasdaq Global Select Market, which is a national securities exchange within the meaning of the Securities Exchange Act of 1934, as amended. Additionally, Cloudium common stock is held of record by substantially more than 2,000 holders. Therefore, the first prong of the market-out exception is satisfied—i.e., the threshold conditions for the market-out exception are met.
However, the critical question is whether the "unless" clause is triggered. The "unless" clause preserves appraisal rights in situations where stockholders are required to accept anything other than the types of consideration described in clauses (a) through (d)—essentially, anything other than publicly traded stock (or depository receipts in respect thereof) of the surviving corporation or another listed corporation, cash in lieu of fractional shares, or any combination thereof.
Here, the Merger Consideration consists entirely of $36.92 in cash per share. Non-rolling Cloudium stockholders are not receiving shares of stock of the Surviving Corporation, shares of stock of any other listed corporation, or any combination of publicly traded stock and cash in lieu of fractional shares. They are receiving solely cash. Cash consideration (other than cash in lieu of fractional shares) is not among the types of consideration listed in clauses (a) through (d) of the "unless" clause.
Accordingly, the "unless" clause is triggered, and the market-out exception does not apply. Appraisal rights are available to Cloudium stockholders notwithstanding the listing of Cloudium common stock on the Nasdaq Global Select Market and notwithstanding that Cloudium's shares are held of record by more than 2,000 holders.
Rollover shares. With respect to the rollover participants—Jonathan Hargrove and Pinnacle Growth Ventures LLC—a portion of their shares is being exchanged for equity in the post-closing entity rather than cash. This does not affect the market-out analysis for non-rolling stockholders, who are receiving only cash. As to the rollover participants themselves, they are entering into separate contractual arrangements (Rollover and Contribution Agreements) governing the treatment of their rollover shares. These participants are contractually agreeing to a different form of consideration and are expected to vote in favor of the Merger pursuant to Voting and Support Agreements. They are not expected to seek appraisal for the shares they are rolling over. To the extent that the rollover participants receive cash Merger Consideration for the portion of their shares that are not being rolled over, those shares would theoretically be eligible for appraisal, but the rollover participants' obligations under the Voting and Support Agreements (including the obligation to vote in favor of the Merger) would disqualify them from seeking appraisal because a vote in favor of the Merger constitutes a waiver of appraisal rights under § 262.
Conclusion. The market-out exception under § 262(b)(1) does not apply to the Merger, and appraisal rights are available to all Cloudium stockholders who properly perfect their rights in accordance with the procedural requirements of § 262.
D. Procedural Requirements for Perfecting Appraisal Rights
DGCL § 262 imposes strict procedural requirements that a dissenting stockholder must follow in order to perfect appraisal rights. Failure to comply with any of these requirements results in the forfeiture of appraisal rights, and the stockholder will be deemed to have accepted the Merger Consideration. The following is a step-by-step summary of the procedural requirements:
1. Written demand before the vote. A stockholder who wishes to exercise appraisal rights must deliver to Cloudium a written demand for appraisal before the stockholder vote on the Merger at the special meeting. The demand must reasonably inform the corporation of the identity of the stockholder and that the stockholder intends to demand appraisal of such stockholder's shares. DGCL § 262(d)(1). The demand must be separate from, and in addition to, any proxy or vote against the Merger; a vote against the Merger does not, by itself, constitute a demand for appraisal.
2. No vote in favor of the Merger. A stockholder who wishes to preserve appraisal rights must not vote in favor of the Merger. DGCL § 262(a). A stockholder may vote against the Merger, abstain from voting, or fail to vote entirely. However, a vote in favor of the Merger—including by proxy—constitutes an irrevocable waiver of appraisal rights with respect to the shares so voted. If a stockholder votes some shares in favor of the Merger and does not vote other shares in favor, appraisal rights may be preserved as to the shares not voted in favor, provided all other procedural requirements are met with respect to those shares.
3. Continuous ownership. The stockholder must continuously hold the shares of Cloudium common stock for which appraisal is demanded from the date of the written demand through the Effective Time of the Merger. DGCL § 262(a). Any transfer or disposition of shares after the demand is made and before the Effective Time will terminate the stockholder's appraisal rights with respect to the transferred shares. A stockholder who acquires shares after the record date for the special meeting may exercise appraisal rights only if the stockholder is the beneficial owner of such shares on both the date of the demand and the Effective Time.
4. Petition to the Court of Chancery. Within 120 days after the Effective Time of the Merger, either the Surviving Corporation or any stockholder who has complied with the appraisal demand requirements may file a petition in the Delaware Court of Chancery demanding a determination of the fair value of the shares held by all dissenting stockholders. DGCL § 262(e). If neither the Surviving Corporation nor any dissenting stockholder files a petition within the 120-day period, appraisal rights will cease for all stockholders, and all dissenting stockholders will be entitled to receive only the Merger Consideration.
It is important to note that the 120-day filing deadline is mandatory and jurisdictional. The Court of Chancery has consistently held that the failure to file a petition within the 120-day period is fatal to an appraisal claim, and there is no provision for an extension of time. Accordingly, a dissenting stockholder who relies on the Surviving Corporation to file the petition does so at its own risk.
5. Verified petition. The petition filed in the Court of Chancery must be a verified petition setting forth the number and class of shares for which appraisal is demanded, the aggregate number of shares held by all petitioning stockholders, and such other information as may be required by the Court of Chancery. DGCL § 262(e). Upon the filing of a petition by any stockholder, service of a copy of the petition must be made upon the Surviving Corporation, which is then required to file in the office of the Register in Chancery in the county where the registered office of the Surviving Corporation is located a duly verified list containing the names and addresses of all stockholders who have demanded appraisal of their shares and with whom agreements as to the value of their shares have not been reached.
6. Withdrawal right. A stockholder who has demanded appraisal may withdraw the demand and accept the Merger Consideration at any time within 60 days after the Effective Time of the Merger without the consent of the Surviving Corporation. DGCL § 262(e). After the expiration of the 60-day period, a stockholder may withdraw the demand and accept the Merger Consideration only with the written consent of the Surviving Corporation. The Surviving Corporation has discretion whether to grant or withhold such consent, and there is no obligation on the part of the Surviving Corporation to consent to a withdrawal after the 60-day period.
The Effective Time of the Merger is anticipated to be 11:59 PM Eastern Time on the closing date, which is currently projected for mid-2024. Accordingly, the 120-day deadline for filing an appraisal petition would expire approximately 120 days after the closing date, and the 60-day withdrawal period would expire approximately 60 days after the closing date. The precise dates will depend on the actual closing date.
We note that the procedural requirements for perfecting appraisal rights are technical and demanding. Delaware courts have strictly enforced these requirements, and stockholders who fail to comply—even inadvertently—forfeit their appraisal rights. This strict enforcement inures to the benefit of the acquiror in reducing the pool of shares for which appraisal may ultimately be awarded.
E. Fair Value Determination
If an appraisal petition is properly filed and the proceeding goes forward, the Delaware Court of Chancery will conduct a trial to determine the "fair value" of the dissenting stockholders' shares.
Fair value standard. DGCL § 262(h) directs the Court of Chancery to determine the "fair value" of the shares "exclusive of any element of value arising from the accomplishment or expectation of the merger." This standard requires the court to determine the going-concern value of the corporation as of the Effective Time, without regard to any synergies, efficiencies, or other value that would be realized only as a result of the merger.
Fair value may differ from merger consideration. The fair value determined by the Court of Chancery may be higher than, equal to, or lower than the per-share Merger Consideration of $36.92. There is no presumption that the merger consideration represents fair value, although recent Delaware jurisprudence has given increasing weight to deal price in certain circumstances, as discussed in Section V.E below.
Valuation methodologies. The Court of Chancery has broad discretion to consider any valuation methodology it deems appropriate in determining fair value. Commonly used methodologies include: (i) discounted cash flow ("DCF") analysis; (ii) comparable company analysis; (iii) comparable transaction analysis; (iv) the deal price itself (adjusted for synergies, if applicable); and (v) other methodologies as the court may find relevant. The court may rely on one or more of these methodologies, or may fashion its own valuation based on the evidence presented.
The Delaware Supreme Court has emphasized that the Court of Chancery should exercise its own independent judgment and should not mechanically defer to any single methodology. At the same time, recent decisions have recognized that the deal price, when resulting from an arm's-length negotiation between informed and independent parties with no conflicts of interest, and where an adequate market check has been conducted, can be a reliable indicator of fair value. The significance of this trend for the Cloudium Transaction is discussed in Section V.E below.
Interest. DGCL § 262(h) provides that upon the determination of fair value, the Court of Chancery shall direct payment of such fair value to the dissenting stockholders, together with interest from the Effective Time through the date of payment. The default rate of interest is compounded quarterly at five percent (5%) over the Federal Reserve discount rate (including any surcharge), unless the Court of Chancery, in its discretion, determines that another rate is appropriate. Interest accrues on the amount of the appraised fair value from the Effective Time and can represent a significant additional cost to the Surviving Corporation, particularly in proceedings that extend over multiple years.
Costs and attorneys' fees. The Court of Chancery has discretion to allocate the costs of the appraisal proceeding (including reasonable attorneys' fees and the fees and expenses of court-appointed experts) among the parties "as the Court deems equitable in the circumstances." DGCL § 262(j). While the general rule in Delaware litigation is that each party bears its own attorneys' fees, the appraisal statute expressly authorizes the court to award fees against either party. In practice, courts have awarded attorneys' fees against the surviving corporation in cases where the appraised value substantially exceeds the merger consideration, or where the surviving corporation's conduct in the appraisal proceeding was unreasonable.
IV. Interaction with English Law — Scheme of Arrangement and Other Considerations
A. Why a UK Scheme of Arrangement Was Not Used
Acquisitions of UK public companies are frequently effected by way of a scheme of arrangement under Part 26 of the UK Companies Act 2006. A scheme of arrangement is a court-sanctioned process that requires: (i) approval by a majority in number representing at least 75% in value of each class of stockholders (or creditors, as applicable) present and voting at a court-convened meeting; and (ii) sanction by the English High Court. Once sanctioned, the scheme is binding on all stockholders of the relevant class, including those who voted against it or did not vote.
The scheme of arrangement mechanism is well-established in the UK market and is the customary structure for "friendly" acquisitions of UK public companies. It offers certain advantages, including the ability to achieve 100% ownership without the need for a subsequent squeeze-out process, and the fact that dissenting stockholders are bound by the scheme once it is approved and sanctioned—there is no appraisal remedy or opt-out for dissenting minorities.
In the present case, however, the deal team elected to structure the Transaction as a reverse triangular merger under the DGCL rather than a UK scheme of arrangement. This structural decision was driven by several factors:
First, Cloudium, although incorporated in England and Wales, is listed solely on the Nasdaq Global Select Market and has its US headquarters in San Francisco, California. The Company's operations, management, and investor base are substantially US-focused. The reverse triangular merger structure is familiar to Cloudium's US-based stockholders and institutional investors and is consistent with the expectations of the US capital markets.
Second, a UK scheme of arrangement would have required application to the English High Court for both the convening of the stockholder meeting and the sanction of the scheme, adding time, complexity, and cost to the transaction process. The reverse triangular merger achieves the same result—Cloudium becomes a wholly owned subsidiary of Fund VI—without requiring court involvement in the approval process (other than to the extent that the Court of Chancery may become involved in any subsequent appraisal proceeding).
Third, the reverse triangular merger structure takes advantage of the DGCL's well-developed and predictable merger framework, including the stockholder approval requirements, appraisal rights provisions, and fiduciary duty standards that are familiar to the parties and their advisors.
Fourth, the use of Merger Sub as the Delaware constituent corporation provides a clear jurisdictional hook for the application of the DGCL, ensuring that the merger mechanics, fiduciary standards, and appraisal remedy are governed by Delaware law.
The UK Takeover Code. The Takeover Code (the "Code"), administered by the UK Takeover Panel, governs offers for companies that are incorporated in the United Kingdom, the Channel Islands, or the Isle of Man and whose securities are admitted to trading on a UK regulated market, a UK multilateral trading facility, or (in certain circumstances) a stock exchange in the Channel Islands or the Isle of Man. The Code also applies to companies that have their registered office in the UK, Channel Islands, or Isle of Man and are considered by the Panel to have their place of central management and control in any of those jurisdictions.
Cloudium is incorporated in England and Wales and has its registered office in London, which raises a threshold question regarding the applicability of the Code. However, Cloudium's securities are not admitted to trading on a UK regulated market or a UK multilateral trading facility—they are listed solely on Nasdaq in the United States. Additionally, the question of whether Cloudium's "place of central management and control" is in the UK or in the US (where its US headquarters and principal executive officers are located in San Francisco) is a factual determination that requires analysis of where the directors actually meet and exercise oversight of the Company's business.
The deal team, in consultation with Alistair Fenn at Ridgeway Phelps & Sato LLP (London) and Fiona McAllister at Albright & Kerr LLP (London), has analyzed the Code's applicability to Cloudium and has concluded that the Code does not apply to the Transaction, or alternatively, has obtained confirmation from the Takeover Panel that the Code does not apply to offers for Cloudium in the circumstances of this Transaction. The precise basis for this conclusion—whether it rests on the absence of a UK-traded security, the location of central management and control in the United States, or a ruling from the Panel—is being documented separately. For purposes of this memorandum, we proceed on the assumption that the Code does not apply.
B. Dissenters' Rights under English Law
English law does not have a direct equivalent of DGCL § 262 appraisal rights. There is no statutory mechanism under English law that entitles a stockholder of an English company to dissent from a merger or acquisition and demand a judicial determination of the "fair value" of its shares.
Under a UK scheme of arrangement, once the scheme is approved by the requisite majorities and sanctioned by the English High Court, it is binding on all members of the relevant class, including those who voted against the scheme or who did not vote. There is no right to "opt out" or to receive a different price. The only avenue for challenge is to appear at the court sanction hearing and object to the sanctioning of the scheme, but the court will typically sanction a scheme that has been approved by the requisite majorities unless there is some procedural irregularity or unfairness in the process.
Under a statutory cross-border merger (Part 28, Chapter 2 of the UK Companies Act 2006), which historically applied to mergers between UK companies and companies incorporated in other EEA member states, there were provisions for dissenting stockholders. However, following the United Kingdom's withdrawal from the European Union on January 31, 2020, and the expiration of the transition period on December 31, 2020, the cross-border merger regime under Part 28 of the Companies Act 2006 no longer applies to mergers with non-EEA entities. In any event, this framework is not applicable to the present Transaction, which is structured as a merger under the DGCL rather than a cross-border merger under English law.
Similarly, the "squeeze-out" provisions under Part 28 of the Companies Act 2006 (sections 979–982), which permit a bidder who has acquired 90% or more of the shares to which a takeover offer relates to compulsorily acquire the remaining shares, are applicable only in the context of a UK takeover offer. Because the Transaction is not structured as a UK takeover offer, the squeeze-out provisions do not apply.
In summary, English law does not provide any appraisal, dissenter's, or opt-out remedy to Cloudium stockholders in the context of this Transaction. The sole statutory remedy available to dissenting Cloudium stockholders is the appraisal right provided by DGCL § 262.
C. Interaction Between Delaware Appraisal and Cloudium's English Incorporation
The fact that Cloudium is an English public limited company, rather than a Delaware corporation, does not eliminate or diminish the appraisal rights available under DGCL § 262. As discussed in Section III.B above, appraisal rights attach to the merger transaction effected under the DGCL, not to the target's jurisdiction of incorporation. Because the Merger involves a Delaware constituent corporation (Merger Sub) and is being effected under the DGCL, the appraisal provisions of § 262 apply to all stockholders of the constituent corporations whose shares are being converted in the Merger, including the stockholders of Cloudium.
We have considered the possibility that a dissenting Cloudium stockholder might argue that it is entitled to additional protections or remedies under English law, in addition to, or in lieu of, the appraisal remedy under the DGCL. We conclude that this argument is without merit. The Merger is not being effected under English law; it is being effected under the DGCL. No provision of English corporate law requires or authorizes a dissenting stockholder to seek a judicial valuation of its shares in the context of a DGCL-governed merger. The DGCL provides the exclusive statutory remedy for stockholders who dissent from the Merger.
We acknowledge a theoretical risk that a dissenting stockholder might attempt to bring proceedings in the English courts, for example, seeking an order on the basis of unfair prejudice under Section 994 of the Companies Act 2006 or some other equitable remedy. While we believe such a claim would be meritless—given that the Merger is being effected in accordance with the DGCL and the stockholder's shares are being converted into cash consideration through a lawful merger process—we flag this as a theoretical risk that should be monitored. The likelihood of a successful challenge in the English courts is low, particularly given that Cloudium's board of directors will have approved the Merger and recommended it to stockholders, and the Transaction will have been consummated in accordance with the DGCL and the terms of the Merger Agreement.
We recommend that the proxy statement include disclosure to the effect that (i) appraisal rights under DGCL § 262 are available to dissenting Cloudium stockholders, (ii) no appraisal or comparable dissenter's remedy is available under English law in connection with the Merger, and (iii) the DGCL provides the exclusive statutory framework governing the rights of Cloudium stockholders in connection with the Merger.
V. Practical Considerations for the Solara Deal Team
A. Stockholder Vote and Appraisal Demand Mechanics
The Merger will require the approval of Cloudium's stockholders at a special meeting of stockholders. The anticipated timeline is as follows: the Definitive Proxy Statement is expected to be filed by Cloudium on or about April 15, 2024, and the special meeting is anticipated to be held in the second quarter of 2024. Based on our current projections, the special meeting will be held on May 20, 2024, and stockholder approval will require the affirmative vote of a majority of the outstanding shares of Cloudium common stock entitled to vote at the meeting.
Any Cloudium stockholder who wishes to exercise appraisal rights must deliver a written demand for appraisal to Cloudium before the stockholder vote on the Merger is taken at the special meeting. The demand must be a separate written instrument; a proxy card voted against the Merger does not constitute a demand for appraisal. In addition, the demanding stockholder must not vote any of its shares in favor of the Merger. A stockholder who submits a demand for appraisal but then votes in favor of the Merger (including by submitting a proxy card that is voted in favor) will be deemed to have waived its appraisal rights.
Voting and Support Agreements. Jonathan Hargrove (holding approximately 7,736,400 shares, or 4.2% of outstanding shares) and Pinnacle Growth Ventures LLC (holding approximately 21,367,200 shares, or 11.6% of outstanding shares) will enter into Voting and Support Agreements concurrently with the execution of the Merger Agreement, pursuant to which each will agree to vote all of its shares in favor of the Merger. Because a vote in favor of the Merger constitutes a waiver of appraisal rights, neither Hargrove nor Pinnacle will be eligible to seek appraisal. Their combined holdings represent approximately 15.8% of outstanding shares, which reduces the pool of shares potentially eligible for appraisal to approximately 84.2% of outstanding shares, or approximately 155,096,400 shares.
Based on our experience with comparable all-cash take-private transactions, stockholder approval is expected to be obtained by a substantial margin. The special meeting was ultimately held on May 20, 2024, and the Merger was approved by approximately 82.4% of the outstanding shares. However, it is important to note that a relatively small percentage of dissenting shares can still generate meaningful appraisal liability in a transaction of this magnitude. Even if only 2% of outstanding shares (approximately 3,684,000 shares) are held by stockholders who properly perfect appraisal rights, the aggregate Merger Consideration at risk with respect to those shares would be approximately $136,000,000 at $36.92 per share. If the Court of Chancery were to determine a fair value in excess of $36.92, the additional liability could be significant.
B. Proxy Statement Disclosures
DGCL § 262(d)(1) requires that, at least 20 days prior to the stockholder meeting at which the merger is to be submitted for approval, a copy of Section 262 (or the information required by Section 262) must be included in or attached to the notice of the meeting or the proxy statement sent to stockholders.
We recommend that the Definitive Proxy Statement filed by Cloudium include the following disclosures regarding appraisal rights:
(i) A clear and prominent description of appraisal rights, including a summary of the procedures that a stockholder must follow to perfect appraisal rights and the consequences of failing to comply with those procedures.
(ii) The full text of DGCL § 262, attached as an annex to the proxy statement.
(iii) A statement that appraisal rights are available under the DGCL because the Merger Consideration consists entirely of cash and the market-out exception under § 262(b)(1) does not apply.
(iv) A statement that no appraisal or comparable dissenter's remedy is available under English law in connection with the Merger.
(v) A description of the procedural requirements for perfecting appraisal rights, including the requirement to deliver a written demand before the vote, the requirement not to vote in favor of the Merger, the requirement of continuous ownership, and the deadlines for filing an appraisal petition in the Delaware Court of Chancery.
(vi) A description of the consequences of failing to comply with the procedural requirements, including the irrevocable forfeiture of appraisal rights and the stockholder's deemed acceptance of the Merger Consideration.
(vii) A statement regarding the right to withdraw the demand for appraisal within 60 days after the Effective Time and the requirement of the Surviving Corporation's consent for withdrawal after the 60-day period.
All appraisal disclosures must comply with Rule 14a-9 under the Securities Exchange Act of 1934, which prohibits proxy solicitations from containing any statement that, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or that omits to state any material fact necessary in order to make the statements therein not false or misleading. Appraisal disclosures are material to stockholders' investment decisions and must be accurate and complete.
We will coordinate with Catherine Answorth at Ridgeway Phelps & Sato LLP on the drafting of the appraisal rights section of the proxy statement. In addition, Blackthorn Proxy Advisors LLC, which has been retained as the proxy solicitor for the special meeting, should be informed of the appraisal rights provisions so that it can appropriately address stockholder inquiries regarding the availability and exercise of appraisal rights.
C. Post-Closing Notice Requirements
DGCL § 262(d)(2) imposes a post-merger notice requirement on the Surviving Corporation. Within 10 days after the Effective Time of the Merger, the Surviving Corporation (i.e., Cloudium, as the surviving entity in the reverse triangular merger, acting under the direction of Fund VI as sole stockholder) must send a notice to each stockholder who has complied with the appraisal demand requirements and has not voted in favor of the Merger. The notice must advise the stockholder of the Effective Time and inform the stockholder of its right to file an appraisal petition in the Delaware Court of Chancery within 120 days after the Effective Time.
Compliance with this notice requirement is mandatory. Failure to provide timely notice could expose the Surviving Corporation to claims of prejudice by dissenting stockholders and could potentially extend the applicable deadlines for filing appraisal petitions.
To ensure compliance with the § 262(d)(2) notice requirement, we recommend the following steps:
(i) Cascade Corporate Services Inc., which serves as the transfer agent for Cloudium common stock, should coordinate with the Surviving Corporation to identify all stockholders who have submitted written demands for appraisal prior to the stockholder vote. The transfer agent's records should be cross-referenced with the records of demands received by Cloudium's corporate secretary.
(ii) The Surviving Corporation should prepare the § 262(d)(2) notice promptly after the closing of the Transaction, so that it is ready to be sent within the 10-day period following the Effective Time.
(iii) The § 262(d)(2) notice should be included in or sent together with the Letter of Transmittal materials that will be sent to former Cloudium stockholders following the closing. The Letter of Transmittal is currently scheduled to be mailed on or about July 10, 2024, following the anticipated closing. If the closing occurs before or after the currently projected date, the mailing schedule should be adjusted to ensure that the 10-day notice period is met.
D. Escrow and Indemnification Interaction
The Merger Agreement provides for an indemnity escrow of $544,000,000—representing approximately 8% of the total deal value—to be deposited with Cobalt Trust Company (the "Escrow Agent") at the closing to secure the sellers' indemnification obligations under the Merger Agreement. The escrow fund is available to Fund VI to satisfy claims for breaches of the sellers' representations and warranties, covenants, and certain other specified indemnification obligations.
It is important to note that appraisal claims are not indemnifiable losses under the Merger Agreement. Appraisal claims represent the cost of the Merger Consideration itself—specifically, the risk that the Court of Chancery may determine a fair value in excess of $36.92 per share—rather than a breach of any representation, warranty, or covenant made by the sellers. Accordingly, any excess liability arising from an appraisal proceeding would be borne by Solara (through the Surviving Corporation) and would not be recoverable from the indemnity escrow fund.
Similarly, the representations and warranties insurance policy obtained in connection with the Transaction (Northfield Assurance Ltd., Policy No. NFA-TRI-2024-00487) covers losses arising from breaches of the sellers' representations and warranties, not appraisal liability. The policy does not provide coverage for the risk that the Court of Chancery may determine a fair value in excess of the Merger Consideration. Solara should understand that appraisal risk is a direct acquisition cost that is not insured or indemnified under the Transaction documents.
We recommend that Solara factor potential appraisal exposure into its financial modeling and reserves for the Transaction. The magnitude of the exposure will depend on (i) the number of shares for which appraisal is properly demanded and perfected, (ii) the fair value ultimately determined by the Court of Chancery (if any appraisal petition is filed and adjudicated), and (iii) the accrual of statutory interest from the Effective Time through the date of payment.
E. Litigation Risk and Strategic Considerations
Appraisal proceedings in the Delaware Court of Chancery can be protracted, expensive, and unpredictable. A full appraisal trial typically involves extensive discovery (including document production and depositions of deal principals, financial advisors, and valuation experts), the retention of expert witnesses on both sides, pre-trial and trial briefing, and post-trial argument. The proceeding can take several years from the filing of the petition to the issuance of a final decision, during which statutory interest continues to accrue on the appraised amount.
Appraisal arbitrage risk. A significant concern in large all-cash transactions is the risk of "appraisal arbitrage"—the practice whereby merger arbitrage funds, hedge funds, and appraisal litigation specialists acquire shares of the target company after the announcement of the merger for the specific purpose of seeking appraisal. These investors are sophisticated participants who make investment decisions based on their analysis of whether the fair value of the target's shares exceeds the merger consideration. In recent years, appraisal arbitrage has become an increasingly common phenomenon in large-cap all-cash transactions, and the volume of shares for which appraisal is demanded can be significant.
The risk of appraisal arbitrage in the Cloudium Transaction depends on the market's perception of whether the $36.92 per-share Merger Consideration adequately reflects the fair value of Cloudium's shares. Several factors are relevant to this assessment:
•  The Merger Consideration of $36.92 per share reflects an enterprise value to last twelve months' EBITDA ("EV/LTM EBITDA") multiple of approximately 16.8x, based on an enterprise value of approximately $6,800,000,000 and LTM EBITDA of approximately $405,000,000. This multiple should be compared to trading multiples of comparable companies and transaction multiples for comparable acquisitions to assess whether the market is likely to view the price as attractive.
•  The Merger Consideration represents a premium to Cloudium's pre-announcement trading price. The magnitude of this premium will be relevant to the market's assessment of fair value.
•  The fairness opinion from Veridian Partners LLC, delivered on January 21, 2024, supports the fairness of the Merger Consideration from a financial point of view to the Cloudium stockholders (other than the rollover participants). The fairness opinion will be summarized in the proxy statement and will serve as evidence of the financial advisors' view that the Merger Consideration is within a range of fairness.
Deal-process considerations. Recent Delaware jurisprudence has increasingly recognized that the deal price—i.e., the per-share merger consideration agreed to by the parties—can be a reliable indicator of fair value when the transaction results from an arm's-length negotiation between independent and well-informed parties and when an adequate market check has been conducted. In several notable decisions, the Court of Chancery has adopted "deal price minus synergies" as its measure of fair value, reasoning that the deal price is the best available evidence of the target's standalone going-concern value, adjusted downward for any synergies that the acquiror expected to realize from the transaction.
The negotiation process for the Cloudium Transaction provides a factual record of an arm's-length, informed transaction. The key milestones of the process are as follows:
•  Solara and Cloudium executed a mutual nondisclosure agreement on September 5, 2023.
•  Cloudium management delivered a management presentation to Solara's deal team on October 2, 2023.
•  Solara submitted an indication of interest ("IOI") on October 30, 2023, reflecting a proposed price range of $34.00 to $37.50 per share.
•  The Cloudium board of directors authorized exclusive negotiations with Solara on November 6, 2023.
•  Solara and Cloudium entered into an exclusivity agreement on November 15, 2023.
•  Multiple rounds of negotiation followed, culminating in the agreed-upon Merger Consideration of $36.92 per share.
However, we note certain features of the process that could be subject to challenge in an appraisal proceeding:
•  Single-bidder process. The Transaction was negotiated on an exclusive basis with Solara following the execution of the exclusivity agreement on November 15, 2023. There was no pre-signing auction or competitive bidding process. While a single-bidder process does not preclude a finding that the deal price reflects fair value, it may be scrutinized by the Court of Chancery as a factor that limits confidence in the deal price as an indicator of fair value. The absence of a pre-signing market check could be a point of challenge raised by dissenting stockholders in an appraisal proceeding.
•  No go-shop. The Merger Agreement contains a "no-shop" provision that restricts Cloudium from soliciting, initiating, or encouraging alternative acquisition proposals following the execution of the Merger Agreement. The Merger Agreement does not include a post-signing "go-shop" period that would permit Cloudium to actively solicit alternative proposals for a limited period after signing. While the no-shop provision is subject to a fiduciary-out exception (permitting the Cloudium board to engage with unsolicited superior proposals in the exercise of its fiduciary duties), the absence of a go-shop means that the Transaction was not subjected to a post-signing market check.
•  Counterarguments. Notwithstanding the single-bidder process and the absence of a go-shop, Solara can point to several factors supporting the fairness of the deal price, including: (i) the involvement of an independent board of directors with a majority of independent directors, led by independent chair Douglas Pemberton; (ii) the engagement of a reputable financial advisor (Veridian Partners LLC) that delivered a fairness opinion; (iii) the arm's-length nature of the negotiations, with multiple rounds of price and term negotiation; (iv) the IOI range of $34.00 to $37.50 per share, with the final price of $36.92 near the top of the range; and (v) the premium to the pre-announcement trading price. These factors, in the aggregate, support a finding that the Merger Consideration was the product of a fair and informed negotiation process.
Strategic positioning. In light of the foregoing, we recommend that Solara take the following steps to position itself favorably in the event of an appraisal proceeding:
•  Maintain comprehensive deal-process records, including board minutes, financial advisor presentations, draft fairness opinion analyses, term sheets, negotiation correspondence, and any internal valuation analyses prepared by Solara or its advisors. These records will be critical to establishing the arm's-length and informed nature of the negotiation process.
•  Preserve all communications between Solara and Cloudium, and between Solara and its advisors, relating to the valuation of Cloudium and the negotiation of the Merger Consideration. These communications are likely to be discoverable in any appraisal proceeding and should be consistent with the narrative of a fair and informed negotiation.
•  Be prepared to engage experienced appraisal litigation counsel promptly upon receipt of any appraisal petition in the Court of Chancery. Early engagement of counsel will permit the development of a litigation strategy, the identification and retention of valuation experts, and the assessment of potential settlement opportunities.
VI. Recommendations
Based on the foregoing analysis, we make the following recommendations to the deal team:
1.  Merger Agreement drafting. The Merger Agreement should expressly reference DGCL § 262 appraisal rights and include appropriate mechanics, including: (a) a requirement that Cloudium promptly deliver to Fund VI copies of all appraisal demands received before or after the stockholder vote; (b) an obligation on the part of the Surviving Corporation to send the post-merger notice required by § 262(d)(2) within 10 days of the Effective Time; (c) a covenant that the Surviving Corporation will not, without the prior written consent of Fund VI, make any payment with respect to, or settle or offer to settle, any appraisal demand; and (d) appropriate representations regarding the capitalization of Cloudium and the number of shares outstanding, to facilitate the tracking of dissenting shares.
2.  Proxy statement. The Definitive Proxy Statement should include the full text of DGCL § 262 as an annex, together with a clear and prominent summary of appraisal procedures, deadlines, and the consequences of non-compliance. The appraisal rights section should be drafted in close coordination with Ridgeway Phelps & Sato LLP (Catherine Answorth) to ensure accuracy and completeness.
3.  Monitor dissenting shares. Between the mailing of the proxy statement and the stockholder vote, Cloudium should maintain a log of all appraisal demands received and should promptly notify Fund VI of any such demands. After the stockholder vote and before closing, the deal team should assess the volume of dissenting shares to quantify the potential appraisal exposure. This assessment should inform the closing conditions analysis and Fund VI's financial planning.
4.  Post-closing compliance. The Surviving Corporation must send the § 262(d)(2) notice to all qualifying dissenting stockholders within 10

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