1041-00003 · Solara Digital Infrastructure LP · Post-Closing

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PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT

Calderwood & Harkness LLP 599 Lexington Avenue New York, NY 10022

MEMORANDUM

August 1, 2024

From: Tiffany Rosenthal, Calderwood & Harkness LLP

To: Harrison Wexford, Calderwood & Harkness LLP; Marcus Elliston and Priya Narasimhan, Solara Digital Infrastructure LP

Re: Post-Closing Purchase Price Adjustment — Working Capital True-Up Procedures under Section 2.7 of the Agreement and Plan of Merger dated January 22, 2024

Matter No.: 1041-00003

This memorandum is a privileged and confidential attorney work product prepared by Calderwood & Harkness LLP at the direction of and for the exclusive benefit of Solara Digital Infrastructure LP and its affiliates. This memorandum is protected by the attorney-client privilege and the work product doctrine. Any disclosure, reproduction, or distribution of this memorandum without the prior written consent of Calderwood & Harkness LLP is strictly prohibited.

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I. Executive Summary and Purpose

This memorandum analyzes the working-capital true-up procedures under Section 2.7 of the Agreement and Plan of Merger, dated January 22, 2024 (the "Merger Agreement"), by and among Cloudium Technologies plc, a Delaware corporation ("Cloudium" or the "Company"), Stratos Merger Sub Inc., a Delaware corporation and indirect wholly owned subsidiary of Solara Digital Infrastructure Fund VI LP ("Merger Sub"), and Solara Digital Infrastructure Fund VI LP, a Delaware limited partnership ("Fund VI"). Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Merger Agreement.

The merger contemplated by the Merger Agreement (the "Merger") closed on July 9, 2024, with the Certificate of Merger filed with the Secretary of State of the State of Delaware at 11:59 PM Eastern Time (the "Effective Time"). The total enterprise value of the transaction was approximately $6,800,000,000, with per-share merger consideration of approximately $36.92 payable to holders of approximately 184,200,000 shares of Cloudium common stock outstanding as of the Effective Time (inclusive of shares subject to rollover arrangements, as discussed further below).

At closing, an estimated closing statement (the "Estimated Closing Statement") was delivered by Cloudium on July 8, 2024, one business day prior to the closing date, in accordance with Section 2.6 of the Merger Agreement. Calderwood & Harkness LLP reviewed the Estimated Closing Statement and provided preliminary markup comments to the Solara deal team and to Glenmore Thornton LLP prior to closing. The Estimated Closing Statement set forth Cloudium's good-faith estimates of each of the adjustment components that underpin the purchase price adjustment mechanism, and the merger consideration paid at closing was calculated on the basis of those estimates.

The purpose of this memorandum is to provide a comprehensive analysis and practical roadmap for the post-closing purchase price adjustment process. Specifically, this memorandum addresses:

(a) the components of the purchase price adjustment mechanism under Section 2.7 of the Merger Agreement, including the interplay among working capital, cash, indebtedness, and transaction expense adjustments;

(b) the timeline for preparation and delivery of the Final Closing Statement, including the 90-calendar-day period following the closing date within which Fund VI must cause the Final Closing Statement to be delivered to the Stockholder Representative;

(c) the objection and dispute resolution procedures available to the Stockholder Representative following receipt of the Final Closing Statement, including the review period, the content requirements for any Dispute Notice, the negotiation period, and the Accounting Referee process;

(d) the payment mechanics applicable to the final purchase price adjustment amount, including the interaction between the adjustment mechanism and the escrow fund held by Cobalt Trust Company;

(e) the key accounting and definitional considerations that will inform the preparation of the Final Closing Statement, including multi-jurisdictional working capital components, deferred revenue treatment, cash reconciliation, and the definition of indebtedness; and

(f) recommended next steps for the Solara deal team, including the establishment of an internal working group and coordination with Glenmore Thornton LLP (Richard Okamura and Vanessa Liu) on the financial review and preparation of the Final Closing Statement.

For purposes of the purchase price adjustment process, the Stockholder Representative is Douglas Pemberton, who was appointed under the Stockholder Representative Agreement dated January 22, 2024, entered into by and among Fund VI, Merger Sub, and Mr. Pemberton in his capacity as representative of the former Cloudium stockholders. All communications and deliveries to or from the former stockholder group in connection with the post-closing adjustment process will be directed to or from Mr. Pemberton in his capacity as Stockholder Representative.

As a threshold matter, we note that the purchase price adjustment process is time-sensitive. The Final Closing Statement must be delivered to the Stockholder Representative no later than October 7, 2024 (90 calendar days following the July 9, 2024 closing date). We recommend that the Solara deal team and the surviving entity's finance function begin preparation work immediately and target internal completion of the draft Final Closing Statement by late September 2024 to allow adequate time for legal review by this firm before the contractual deadline.

II. Overview of Purchase Price Adjustment Mechanism (Section 2.7)

A. Structure of the Adjustment

The Merger Agreement employs a customary post-closing purchase price adjustment mechanism designed to ensure that the aggregate merger consideration reflects the actual financial condition of Cloudium and its subsidiaries as of the Effective Time, rather than the estimates that were necessarily relied upon at closing. The adjustment is calculated based on the difference between (i) the estimated amounts of certain financial metrics set forth in the Estimated Closing Statement delivered by Cloudium at closing and (ii) the final, actual amounts of those same metrics as of the Effective Time, as determined through the Final Closing Statement process described in Sections IV through VI of this memorandum.

This type of adjustment mechanism is standard in private equity acquisitions of this size and complexity. It serves the dual purpose of facilitating a timely closing on the basis of estimated financial data while preserving both the buyer's and the sellers' economic bargain by providing for a post-closing reconciliation to actual amounts. The adjustment is a dollar-for-dollar true-up, meaning that the merger consideration is increased or decreased, as applicable, by the full amount of any variance between estimated and actual figures, subject to any applicable collar or de minimis threshold as discussed below.

The purchase price adjustment under Section 2.7 is comprised of four discrete components, each of which must be separately determined as of the Effective Time and compared against the corresponding estimate reflected in the Estimated Closing Statement. The four components are as follows:

1. Closing Working Capital. Closing Working Capital is defined as the net current assets minus the net current liabilities of Cloudium and its subsidiaries as of the Effective Time, calculated in accordance with the accounting principles, policies, practices, procedures, methodologies, and definitions specified in the Merger Agreement and the accompanying accounting principles schedule (the "Accounting Principles"). The Accounting Principles require that Closing Working Capital be calculated consistently with Cloudium's historical accounting practices and in accordance with International Financial Reporting Standards ("IFRS") as historically applied by Cloudium and as audited by Harwell & Dobson LLP, Cloudium's independent auditor. The Estimated Closing Statement reflected Cloudium's good-faith estimate of Closing Working Capital, which was derived from the Company's unaudited management accounts as of a date reasonably proximate to the Effective Time.

2. Closing Cash. Closing Cash is defined as the aggregate amount of unrestricted cash and cash equivalents held by Cloudium and its subsidiaries as of the Effective Time, determined on a consolidated basis. At closing, Cloudium estimated Closing Cash at approximately $180,000,000. The final determination of Closing Cash must account for all cash held across Cloudium's global operations, including cash held by its subsidiaries in the United Kingdom, India, and Germany, and must exclude any restricted cash (including cash subject to regulatory hold, escrow arrangements, or other encumbrances that would prevent its free use in the ordinary course of business).

3. Closing Indebtedness. Closing Indebtedness is defined as all outstanding indebtedness of Cloudium and its subsidiaries as of immediately prior to the Effective Time, net of any amounts repaid at or in connection with the closing. The existing Cloudium debt facility consisted of a term loan in the principal amount of $620,000,000 and a revolving credit facility in the committed amount of $200,000,000, both under a credit agreement dated March 15, 2021, with Atlas Commercial Lending Corp. as administrative agent and lender. Both facilities were repaid in full at closing in the aggregate amount of $820,000,000, as evidenced by the payoff letter dated July 5, 2024, issued by Atlas Commercial Lending Corp. The Final Closing Statement must capture any residual amounts of indebtedness (including accrued and unpaid interest, prepayment premiums, breakage costs, and any other amounts required to be paid under the payoff letter) that were not reflected in the estimated amounts at closing.

4. Transaction Expenses. Transaction Expenses are defined as all unpaid transaction expenses of Cloudium and its subsidiaries as of the Effective Time. Transaction expenses include, without limitation, all fees, costs, and expenses incurred by or on behalf of the Company in connection with the negotiation, execution, and consummation of the Merger, including advisory fees, legal fees, financing costs, insurance costs, regulatory filing fees, proxy solicitation expenses, and any other out-of-pocket costs directly related to the transaction. Cloudium estimated total Transaction Expenses at approximately $185,000,000 in the aggregate, which covered advisory fees payable to Veridian Partners LLC, legal fees payable to Ridgeway Phelps & Sato LLP, auditor fees payable to Harwell & Dobson LLP, proxy solicitation costs payable to Blackthorn Proxy Advisors LLC, regulatory filing fees, D&O tail insurance premiums, and various other miscellaneous costs. The Final Closing Statement must capture only those Transaction Expenses that remained unpaid as of the Effective Time; any amounts paid by Cloudium prior to the Effective Time are not included in the adjustment.

B. Working Capital Target

The Merger Agreement establishes a Working Capital Target (the "Target"), which represents the normalized level of working capital for Cloudium's business as determined by the parties during the negotiation of the Merger Agreement. The Target was set with reference to Cloudium's historical average working capital levels, adjusted for seasonality, one-time items, and other factors agreed upon by the parties. The specific dollar amount of the Target is set forth in Section 2.7(a) of the Merger Agreement and the accompanying schedules.

The purchase price adjustment attributable to working capital is calculated as the difference between the actual Closing Working Capital (as finally determined through the process described in this memorandum) and the Target. If the actual Closing Working Capital exceeds the Target, the merger consideration is adjusted upward (i.e., an additional payment is owed to the former Cloudium stockholders). Conversely, if the actual Closing Working Capital falls below the Target, the merger consideration is adjusted downward (i.e., the former Cloudium stockholders owe a refund to Fund VI, which may be satisfied from the escrow or otherwise).

We note that Section 2.7 may incorporate a collar or de minimis threshold applicable to the working capital adjustment (or to the aggregate adjustment), pursuant to which no adjustment is payable unless the variance between estimated and actual amounts exceeds a specified dollar threshold. This mechanism is intended to avoid the transactional cost and disruption of de minimis adjustments that are immaterial in the context of a $6.8 billion transaction. The specific terms of any such collar should be confirmed by reference to the definitive text of Section 2.7. It is important to distinguish any working capital collar from the indemnification thresholds set forth in Article IX of the Merger Agreement, which include a de minimis threshold of $500,000 (below which individual claims are disregarded) and a basket of 0.75% of the total deal value, or $51,000,000 (below which aggregate claims are not indemnifiable). Those thresholds apply exclusively to indemnification claims and have no application to the purchase price adjustment under Section 2.7.

C. Distinction from Indemnification

It is critical to understand that the purchase price adjustment mechanism under Section 2.7 is a separate and distinct contractual mechanism from the indemnification provisions set forth in Article IX of the Merger Agreement. While both mechanisms may result in post-closing payments between the parties, they serve fundamentally different purposes, are subject to different procedural requirements, and are governed by different limitations.

The indemnification provisions of Article IX provide for the indemnification of Fund VI and its affiliates (as "Buyer Indemnified Parties") against losses arising from, among other things, breaches of the Company's representations and warranties, breaches of pre-closing covenants, and certain specified matters. The indemnification framework is subject to the following key limitations:

• Indemnification Cap: The aggregate liability of the former Cloudium stockholders under Article IX is capped at 15% of the total deal value, or $1,020,000,000.

• Escrow Fund: A general indemnification escrow of $544,000,000 was deposited at closing with Cobalt Trust Company, N.A. (the "Escrow Agent"), which serves as the primary source of recovery for indemnification claims by Fund VI. The escrow is subject to a release schedule under which 50% ($272,000,000) is released to the Stockholder Representative on July 9, 2025, and the remaining 50% ($272,000,000) is released on January 9, 2026, in each case net of any amounts then subject to pending and unresolved indemnification claims.

• Survival Period: The representations and warranties of the Company survive for a period of 18 months following the closing date, expiring on January 9, 2026, except for certain fundamental representations and tax representations, which survive for longer specified periods.

• De Minimis Threshold: Individual indemnification claims below $500,000 are disregarded for purposes of determining whether the basket has been exceeded.

• Basket: Indemnification claims are not payable until the aggregate amount of qualifying losses exceeds 0.75% of the total deal value, or $51,000,000, at which point the former stockholders are liable for all qualifying losses from the first dollar (i.e., a tipping basket, not a true deductible).

In contrast, the purchase price adjustment under Section 2.7 is not subject to any of the foregoing limitations. The adjustment is a mathematical, dollar-for-dollar reconciliation of estimated and actual financial metrics, and it is payable in full without regard to the indemnification cap, the basket, the de minimis threshold, or the survival period. The purchase price adjustment is enforceable independently of, and in addition to, any indemnification claims that may be asserted under Article IX.

Furthermore, the buyer-side representations and warranties insurance policy issued by Northfield Assurance Ltd. (Policy No. NFA-TRI-2024-00487; $680,000,000 aggregate limit of liability; $544,000,000 retention, which is effectively satisfied by the escrow) does not cover purchase price adjustment disputes. The R&W insurance policy responds only to losses arising from breaches of the Company's representations and warranties as set forth in Article IV of the Merger Agreement, and the policy expressly excludes purchase price adjustments, working capital true-ups, and other post-closing financial reconciliations from its scope of coverage.

III. Estimated Closing Statement

A. Delivery at Closing

In accordance with Section 2.6 of the Merger Agreement, Cloudium delivered the Estimated Closing Statement to Fund VI on July 8, 2024, one business day prior to the closing date. The Estimated Closing Statement was prepared by Cloudium's finance team under the direction of Sienna Whitfield, the Company's Chief Financial Officer, and set forth Cloudium's good-faith estimates of each of the four adjustment components as of the anticipated Effective Time. The Estimated Closing Statement was accompanied by supporting calculations and summaries of the methodology used to derive each estimated amount.

Calderwood & Harkness LLP reviewed the Estimated Closing Statement upon receipt and provided markup comments and preliminary observations to the Solara deal team. Additionally, Glenmore Thornton LLP, which served as the financial due diligence advisor to Fund VI throughout the transaction, conducted a high-level review of the estimated figures against the diligence materials and Cloudium's historical financial information. The review was necessarily expedited given the compressed timeline between delivery and closing, and we noted at the time that certain line items warranted further analysis in connection with the preparation of the Final Closing Statement.

Based on the estimated figures set forth in the Estimated Closing Statement, the merger consideration paid at closing was calculated, and the funds flow was executed in accordance with the Calderwood & Harkness LLP Funds Flow Memorandum — Final Execution Version, dated July 8, 2024. The funds flow memorandum set forth the sources and uses of funds for the closing, the wire transfer instructions for each payee, and the sequence of payments, all of which were successfully executed on the morning of July 9, 2024.

B. Key Estimated Figures from Closing

The following table summarizes the key financial estimates set forth in the Estimated Closing Statement and the principal elements of the sources and uses of funds at closing:

Estimated Adjustment Components:

Sources and Uses at Closing:

The rollover equity component reflects the aggregate value of the equity contributions rolled over by (i) Jonathan Hargrove, Cloudium's founder and former Chief Executive Officer, who contributed approximately $142,814,544 in rollover equity, and (ii) Pinnacle Growth Ventures LLC, a pre-existing institutional investor in Cloudium, which contributed approximately $473,241,408 in rollover equity, in each case pursuant to the applicable Rollover Agreements executed in connection with the Merger Agreement.

The foregoing amounts reflect the consideration paid at closing based on the estimated figures. To the extent that the final, actual figures differ from the estimates, the purchase price adjustment mechanism under Section 2.7 will operate to reconcile the difference, as described in the following sections.

IV. Final Closing Statement — Preparation and Delivery Timeline

A. Obligation to Prepare

Under Section 2.7 of the Merger Agreement, Fund VI (as the ultimate parent of the surviving entity following the Merger) is responsible for causing the preparation and delivery of a final closing statement (the "Final Closing Statement") setting forth the final, actual amounts of each of the four adjustment components — Closing Working Capital, Closing Cash, Closing Indebtedness, and Transaction Expenses — as of the Effective Time.

This obligation rests with Fund VI, and the preparation will in practice be carried out by the finance team of the surviving entity (i.e., the post-Merger Cloudium entity, which continues as a wholly owned indirect subsidiary of Fund VI). As such, Sienna Whitfield, who continues to serve as Chief Financial Officer of the surviving entity, will be the primary point of contact for the preparation of the Final Closing Statement. Calderwood & Harkness LLP recommends that the Solara deal team engage directly with Ms. Whitfield at the earliest opportunity to establish a timeline, assign responsibilities, and coordinate with Glenmore Thornton LLP on the financial review.

The Final Closing Statement must set forth the final, actual amount of each adjustment component with specificity and must include sufficient detail to permit the Stockholder Representative and its advisors to understand the basis for each reported figure. The Final Closing Statement is not merely a recitation of aggregate numbers; it must be accompanied by the underlying calculations and should be presented in a format consistent with the Estimated Closing Statement to facilitate comparison and review.

B. Delivery Deadline

Section 2.7 of the Merger Agreement requires delivery of the Final Closing Statement to the Stockholder Representative within 90 calendar days following the closing date. The closing date is July 9, 2024. Accordingly, the Final Closing Statement must be delivered to Douglas Pemberton, in his capacity as Stockholder Representative, no later than:

October 7, 2024

This deadline is a firm contractual obligation and should be treated as non-negotiable absent a written amendment or waiver from the Stockholder Representative. Failure to deliver the Final Closing Statement within the prescribed period could have adverse consequences, including a potential argument by the Stockholder Representative that Fund VI has forfeited its right to a purchase price adjustment or that the Estimated Closing Statement should be deemed the Final Closing Statement for purposes of the adjustment mechanism. While such arguments may not be dispositive, they would place Fund VI at a procedural disadvantage in any subsequent dispute and should be avoided entirely.

We recommend the following internal timeline to ensure timely delivery:

• August 2024: Commence preparation of the Final Closing Statement. Engage Glenmore Thornton LLP to support the financial review. Establish internal working group. Begin detailed review of the Estimated Closing Statement and identify areas requiring further analysis.

• September 2024 (target: September 20, 2024): Complete internal draft of the Final Closing Statement, including all supporting schedules and work papers. Circulate to Calderwood & Harkness LLP for legal review. Resolve any open accounting issues, including foreign subsidiary reconciliations.

• Late September / Early October 2024: Calderwood & Harkness LLP completes legal review of the Final Closing Statement. Finalize and deliver to the Stockholder Representative no later than October 7, 2024.

C. Supporting Documentation

The Final Closing Statement should be accompanied by reasonable supporting documentation and work papers sufficient to substantiate each line item and to demonstrate that the statement was prepared in accordance with the Accounting Principles. While Section 2.7 does not prescribe a specific format for the supporting documentation, best practice in transactions of this size is to include:

• detailed schedules for each component of Closing Working Capital, including a line-item breakdown of current assets and current liabilities;

• bank statements and cash position reports for each Cloudium entity as of the Effective Time, supporting the Closing Cash figure;

• payoff confirmation letters and evidence of repayment of all outstanding indebtedness, together with a schedule of any residual or unpaid amounts (including accrued interest, breakage costs, and make-whole premiums);

• invoices, engagement letters, and payment records for all Transaction Expenses, together with a schedule identifying which expenses were paid prior to the Effective Time and which remained unpaid;

• intercompany balance reconciliations for Cloudium's foreign subsidiaries; and

• a reconciliation of the Final Closing Statement to the Estimated Closing Statement, highlighting and explaining all material variances.

Access to the books and records of the surviving entity and its subsidiaries — including Cloudium Technologies UK Ltd. (incorporated in England and Wales), Cloudium Technologies India Pvt. Ltd. (incorporated in India), and Cloudium Solutions GmbH (incorporated in Germany) — should be coordinated to ensure completeness of the Final Closing Statement. In particular, the UK subsidiary is a material component of Cloudium's global operations, having reported revenue of approximately £312,000,000 (approximately $390,000,000 at an exchange rate of $1.25 per British pound) for the fiscal year ended September 30, 2023, and employing approximately 1,200 individuals. Working capital components attributable to the UK subsidiary — including accounts receivable denominated in British pounds, deferred revenue, accrued liabilities, and VAT receivables and payables — must be accurately captured in the Final Closing Statement and translated into U.S. dollars in accordance with the Accounting Principles.

Similarly, Cloudium Technologies India Pvt. Ltd. (approximately 2,400 employees) and Cloudium Solutions GmbH (approximately 400 employees) each contribute working capital components that must be consolidated into the Final Closing Statement. Intercompany balances among the Cloudium entities should be carefully reviewed and eliminated in consolidation to avoid double-counting or omission of amounts.

V. Review Period and Objection Procedures

A. Stockholder Representative's Review Period

Upon receipt of the Final Closing Statement, the Stockholder Representative (Douglas Pemberton) has a review period — which, under Section 2.7 of the Merger Agreement, is 30 calendar days — within which to examine the Final Closing Statement and all supporting documentation and to submit written objections, if any. Assuming that the Final Closing Statement is delivered on the contractual deadline of October 7, 2024, the review period would expire on approximately November 6, 2024 (30 calendar days from delivery).

During the review period, the Stockholder Representative and his advisors are entitled to reasonable access to the surviving entity's books, records, work papers, and financial personnel who participated in the preparation of the Final Closing Statement. This access right is a material obligation of Fund VI under the Merger Agreement, and any failure to provide adequate access could form the basis for a dispute or could toll the review period. We anticipate that the Stockholder Representative will engage legal counsel — likely Ridgeway Phelps & Sato LLP, where Catherine Answorth and Alistair Fenn served as lead transaction counsel to Cloudium — as well as a financial advisor, which may be Veridian Partners LLC (Monica Pressler) or an independent accounting firm, to assist in the review of the Final Closing Statement.

Calderwood & Harkness LLP recommends that the Solara deal team designate a single point of contact within the surviving entity's finance function (we suggest Sienna Whitfield or her delegate) to manage all information requests from the Stockholder Representative during the review period. All information requests and responses should be documented in writing and copies should be maintained by Calderwood & Harkness LLP. This approach will ensure an orderly review process, minimize the risk of inadvertent disclosure of privileged or work-product materials, and create an evidentiary record in the event of a subsequent dispute.

B. Form and Content of Objections

If the Stockholder Representative disagrees with any component of the Final Closing Statement, the Stockholder Representative must deliver a written notice of dispute (a "Dispute Notice") to Fund VI within the 30-day review period. The Dispute Notice is the exclusive mechanism by which the Stockholder Representative may challenge the Final Closing Statement, and it must comply with certain specificity requirements set forth in Section 2.7 of the Merger Agreement.

Specifically, any Dispute Notice must set forth, in reasonable detail:

(i) each specific item or amount in the Final Closing Statement that the Stockholder Representative disputes;

(ii) the basis for each objection, including an explanation of why the Stockholder Representative believes the disputed item is incorrect and the specific accounting principle, methodology, or factual basis supporting the objection; and

(iii) the Stockholder Representative's proposed alternative amount for each disputed item, together with reasonable supporting calculations or documentation.

The specificity requirement serves an important function: it constrains the scope of any subsequent dispute and prevents the Stockholder Representative from raising new objections or disputing new items after the expiration of the review period. Any component of the Final Closing Statement that is not specifically identified and disputed in the Dispute Notice within the review period is deemed accepted by the Stockholder Representative and becomes final and binding on all parties. This deemed-acceptance mechanism is a standard feature of post-closing purchase price adjustment provisions and is designed to promote finality and efficiency in the adjustment process.

From Fund VI's perspective, the specificity requirement underscores the importance of preparing a Final Closing Statement that is thorough, well-documented, and defensible. A Final Closing Statement that is supported by detailed work papers and is consistent with the Accounting Principles will be more difficult for the Stockholder Representative to challenge effectively and will limit the scope of any Dispute Notice to genuinely disputed items.

C. Deemed Acceptance

If the Stockholder Representative does not deliver a Dispute Notice within the 30-day review period, the Final Closing Statement as delivered by Fund VI becomes final and binding on all parties without modification. In that event, the purchase price adjustment amount is calculated based on the Final Closing Statement as delivered, and the adjustment payment is made in accordance with the procedures described in Section VII of this memorandum.

Deemed acceptance is a significant outcome from Fund VI's standpoint, as it results in the Final Closing Statement being accepted in its entirety without the need for negotiation or dispute resolution. For this reason, it is in Fund VI's interest to prepare the Final Closing Statement as early as practicable within the 90-day period, to deliver it promptly, and to ensure that it is supported by comprehensive documentation — all of which may contribute to the Stockholder Representative's decision not to submit a Dispute Notice or to limit the scope of any objections.

VI. Dispute Resolution Procedures

A. Negotiation Period

In the event that the Stockholder Representative delivers a timely Dispute Notice, Section 2.7 of the Merger Agreement provides that the parties — Fund VI and the Stockholder Representative — must first attempt to resolve the disputed items through good-faith negotiation. The negotiation period is typically 30 calendar days from the date on which Fund VI receives the Dispute Notice. Assuming that the Dispute Notice is received on or about November 6, 2024 (the last day of the review period), the negotiation period would expire on approximately December 6, 2024.

During the negotiation period, the parties and their respective advisors will exchange information and engage in discussions aimed at resolving the disputed items without the need for a formal determination by an independent accounting firm. Calderwood & Harkness LLP and Glenmore Thornton LLP will participate in such negotiations on behalf of Fund VI, and we anticipate that the Stockholder Representative will be advised by Ridgeway Phelps & Sato LLP and its financial advisors.

It is common in transactions of this type for the parties to reach a negotiated resolution of some or all disputed items during the negotiation period. To the extent that the parties are able to agree on the resolution of certain items, those items will be reflected in the Final Closing Statement as adjusted and will become final and binding. Any items that remain unresolved at the conclusion of the negotiation period will be submitted to the Accounting Referee process described below.

We recommend that the Solara deal team approach the negotiation period strategically, with a clear understanding of Fund VI's position on each disputed item, the strength of the supporting evidence, and the likely range of outcomes. A well-prepared negotiating posture will increase the likelihood of a favorable resolution and will strengthen Fund VI's position in the event that any items are submitted to the Accounting Referee.

B. Independent Accounting Firm Determination

If the parties are unable to resolve all disputed items through good-faith negotiation within the negotiation period, the remaining unresolved items are submitted to an independent accounting firm mutually agreed upon by the parties (the "Accounting Referee"). The Accounting Referee process is the exclusive and final mechanism for resolving purchase price adjustment disputes under the Merger Agreement.

The Merger Agreement may pre-designate a specific accounting firm to serve as the Accounting Referee, or it may provide a selection mechanism pursuant to which the parties jointly select the Accounting Referee from among the major independent accounting firms. In either case, the following firms are disqualified from serving as the Accounting Referee due to conflicts of interest:

• Harwell & Dobson LLP — Cloudium's former independent auditor (lead engagement partner: Martin Chisholm), which has a pre-existing relationship with the Company that could give rise to the appearance of bias in favor of the Stockholder Representative; and

• Glenmore Thornton LLP — Fund VI's financial due diligence advisor (Richard Okamura and Vanessa Liu), which has been engaged by Fund VI throughout the transaction and would be perceived as having an inherent alignment with the buyer's position.

Suitable candidates for the Accounting Referee may include any of the major independent accounting firms that did not serve as auditor or advisor to either party in connection with the Merger. The Solara deal team should identify and pre-clear one or more acceptable candidates in advance of any potential dispute, so that Fund VI is prepared to propose an Accounting Referee promptly if the negotiation period expires without full resolution.

The Accounting Referee process operates as follows:

(a) Submission of Positions. Each party submits a written brief to the Accounting Referee setting forth its position on each unresolved disputed item, together with supporting documentation, calculations, and any other materials the party deems relevant. The Accounting Referee may also request additional information or clarification from either party.

(b) Bounded Determination. The Accounting Referee's determination on each disputed item is constrained to fall within the range defined by Fund VI's position and the Stockholder Representative's position. That is, the Accounting Referee may not determine any item at an amount that is higher than the higher of the two parties' positions or lower than the lower of the two parties' positions. This "baseball" or bounded-determination mechanism ensures that the Accounting Referee's decision is anchored to the parties' respective submissions and prevents extreme or unexpected outcomes.

(c) Final and Binding. The Accounting Referee's determination is final, binding, and non-appealable, and constitutes the conclusive resolution of the disputed items for purposes of the purchase price adjustment. The only exceptions to the binding nature of the determination would be manifest error or fraud, either of which would need to be established through separate legal proceedings.

(d) Cost Allocation. The fees and expenses of the Accounting Referee are allocated between the parties based on the proportion of the aggregate disputed amount that is resolved in favor of each party. For example, if the aggregate disputed amount is $20,000,000 and the Accounting Referee resolves $15,000,000 in favor of Fund VI and $5,000,000 in favor of the Stockholder Representative, then the Stockholder Representative would bear 75% of the Accounting Referee's fees and Fund VI would bear 25%. This proportional, loser-pays allocation provides an incentive for both parties to assert only meritorious positions and to negotiate in good faith before resorting to the Accounting Referee.

C. Estimated Timeline for Accounting Referee Process

Based on the foregoing procedural framework and the estimated dates for each preceding step, we project the following timeline for the Accounting Referee process, if necessary:

• Submission of dispute to Accounting Referee: Approximately early to mid-December 2024, assuming the negotiation period expires on or about December 6, 2024, and the parties are unable to agree on the selection of an Accounting Referee immediately.

• Briefing period: Typically 15 to 20 business days from the date of the Accounting Referee's engagement, during which each party prepares and submits its written brief and supporting materials.

• Accounting Referee determination: Typically within 30 to 45 calendar days following receipt of the parties' submissions.

• Estimated final resolution: January to February 2025.

We note that the actual timeline may vary depending on the complexity of the disputed items, the volume of supporting documentation, and the Accounting Referee's availability. The Solara deal team should plan for the possibility that the purchase price adjustment may not be finalized until early 2025 in the event of a full dispute process.

VII. Payment of Adjustment Amount

A. Determination of Final Adjustment

Once the Final Closing Statement becomes final and binding — whether through deemed acceptance (no Dispute Notice), negotiated resolution, or Accounting Referee determination — the purchase price adjustment amount is calculated as the net aggregate of the following components:

(a) Working Capital Adjustment: The difference between the actual Closing Working Capital (as finally determined) and the Working Capital Target, compared against the corresponding difference that was reflected in the estimated merger consideration at closing.

(b) Cash Adjustment: The difference between the actual Closing Cash (as finally determined) and the estimated Closing Cash reflected in the Estimated Closing Statement.

(c) Indebtedness Adjustment: The difference between the actual Closing Indebtedness (as finally determined) and the estimated Closing Indebtedness reflected in the Estimated Closing Statement.

(d) Transaction Expenses Adjustment: The difference between the actual Transaction Expenses (as finally determined) and the estimated Transaction Expenses reflected in the Estimated Closing Statement.

The aggregate of these four adjustments constitutes the net purchase price adjustment amount. A positive net adjustment (i.e., a situation in which the actual amounts indicate that the merger consideration paid at closing was less than the amount that should have been paid based on actual figures) results in an additional payment from Fund VI to the former stockholders. A negative net adjustment (i.e., a situation in which the actual amounts indicate that the merger consideration paid at closing exceeded the amount that should have been paid based on actual figures) results in a refund from the former stockholders to Fund VI.

B. Payment Mechanics

The mechanics for payment of the final adjustment amount are as follows:

Net Positive Adjustment (Additional Payment to Former Stockholders). If the final adjustment results in a net positive amount — meaning that the actual Closing Working Capital and Closing Cash exceeded estimates, and/or the actual Closing Indebtedness and Transaction Expenses were less than estimates, on a net basis — then Fund VI is obligated to pay the adjustment amount to the Stockholder Representative for distribution to the former Cloudium stockholders in accordance with their respective pro rata shares. Payment is due within five business days following the date on which the Final Closing Statement becomes final and binding.

Net Negative Adjustment (Refund to Fund VI). If the final adjustment results in a net negative amount — meaning that the actual Closing Working Capital and Closing Cash fell below estimates, and/or the actual Closing Indebtedness and Transaction Expenses exceeded estimates, on a net basis — then the adjustment amount is payable by the Stockholder Representative (on behalf of the former Cloudium stockholders) to Fund VI. In this scenario, Fund VI may seek satisfaction of the adjustment amount from the escrow fund held by Cobalt Trust Company, to the extent the Merger Agreement and the Escrow Agreement permit such use of the escrow. Alternatively, the Stockholder Representative may arrange for direct payment of the adjustment amount from funds otherwise available to the former stockholders.

Payment Method. All adjustment payments must be made by wire transfer of immediately available funds to an account designated by the receiving party in writing. The Solara deal team should ensure that wire transfer instructions for Fund VI's designated account are on file and current.

Interaction with Escrow Fund. The $544,000,000 general indemnification escrow held by Cobalt Trust Company (Laura Ng, Vice President, Escrow Services) was established at closing primarily for the purpose of securing indemnification obligations under Article IX of the Merger Agreement. However, the Merger Agreement should be carefully reviewed to determine whether the escrow is also available to satisfy adverse purchase price adjustments in favor of the buyer — that is, whether Fund VI may instruct the Escrow Agent to release funds from the escrow to satisfy a net negative adjustment. In many transactions of this type, the purchase price adjustment mechanism includes a specific provision permitting the buyer to seek recourse against the escrow for adjustment shortfalls, but this must be confirmed by reference to the definitive text of Section 2.7 and the corresponding provisions of the Escrow Agreement (execution version dated January 22, 2024, effective at closing). Calderwood & Harkness LLP will review the Escrow Agreement to confirm the Escrow Agent's authority and procedures for releasing funds for purchase price adjustment purposes as distinguished from indemnification claims.

C. Interest. Section 2.7 of the Merger Agreement may provide that any adjustment payment bears interest at a specified rate from the closing date (July 9, 2024) through the date of actual payment. The applicable interest rate — which is typically a short-term market rate such as the prime rate, the federal funds rate, or a specified fixed rate — should be confirmed by reference to the text of Section 2.7. If an interest provision applies, the interest amount could be material given the potential duration between the closing date and the date of final resolution (which, in the event of a full Accounting Referee process, may not occur until early 2025 — approximately six to seven months after closing). The Solara deal team should factor potential interest obligations into its financial planning for the adjustment process.

VIII. Key Accounting and Definitional Considerations

A. Accounting Principles Consistency

A foundational principle of the purchase price adjustment mechanism is that the Final Closing Statement must be prepared using the same accounting principles, policies, practices, procedures, and methodologies — including IFRS as historically applied by Cloudium and as audited by Harwell & Dobson LLP — that were used in the preparation of the Estimated Closing Statement and Cloudium's historical financial statements (the "Accounting Principles"). This consistency requirement is intended to ensure that any differences between the estimated and actual amounts reflect genuine economic variances rather than changes in accounting methodology.

Specifically, the Accounting Principles prohibit any changes to accounting policies, estimation methodologies, reserve practices, or classification conventions solely for the purpose of the purchase price adjustment. For example, if Cloudium historically classified a certain category of deferred revenue as a current liability for purposes of its audited financial statements, the same classification must be applied in the Final Closing Statement, even if an alternative classification might be permissible under IFRS. Similarly, if Cloudium historically used a specific methodology to estimate its allowance for doubtful accounts, the same methodology must be applied in the Final Closing Statement, even if a different methodology might be considered more conservative or more aggressive.

This consistency principle is a potential area of dispute between the parties, as the Stockholder Representative may argue that certain items in the Final Closing Statement have been prepared using methodologies or assumptions that differ from Cloudium's historical practices. For this reason, it is essential that the Final Closing Statement be accompanied by detailed documentation demonstrating that each line item has been prepared in strict accordance with the Accounting Principles, and that any judgment calls or estimates are consistent with Cloudium's past practices.

B. Working Capital Components — Areas of Focus

Based on our understanding of Cloudium's business and the diligence conducted prior to closing, we have identified the following areas that warrant particular attention in the preparation of the Final Closing Statement:

Revenue Recognition and Deferred Revenue. Cloudium's core business consists of cloud-native enterprise resource planning ("ERP"), customer relationship management ("CRM"), and business intelligence SaaS solutions, which are delivered under subscription agreements of varying terms. Revenue recognition for SaaS arrangements under IFRS 15 requires careful analysis of performance obligations, transaction prices, and the timing of revenue recognition over the subscription period. A significant portion of Cloudium's revenue is recognized ratably over the subscription term, resulting in substantial deferred revenue (contract liability) balances at any given time. As of December 31, 2023, Cloudium reported annual recurring revenue ("ARR") of approximately $1,740,000,000, and total revenue for the fiscal year ended September 30, 2023, was approximately $1,620,000,000. The deferred revenue balances are likely to be material components of Closing Working Capital, and the classification of deferred revenue as current versus non-current is critical — only the current portion (i.e., revenue expected to be recognized within 12 months) is included in the working capital calculation.

The Solara deal team and Glenmore Thornton LLP should carefully review the deferred revenue schedule as of the Effective Time and ensure that the current/non-current classification is consistent with Cloudium's historical practices. Any reclassification of deferred revenue from non-current to current (or vice versa) could have a significant impact on the Closing Working Capital figure and could become a point of contention with the Stockholder Representative.

Accounts Receivable. Cloudium's accounts receivable balance at the Effective Time should be reviewed for collectibility and aging, with particular attention to large customer balances. We note that Aegis Federal Solutions Inc. is Cloudium's largest single customer, contributing approximately $84,000,000 in ARR. Any change in the collectibility assessment for this or other major customers between the Estimated Closing Statement and the Final Closing Statement could affect the Closing Working Capital figure. The allowance for doubtful accounts must be determined using the same methodology historically applied by Cloudium, and any significant changes in the aging profile or payment behavior of Cloudium's customer base between the estimated and actual measurement dates should be documented and explained.

Multi-Jurisdictional Considerations. Cloudium operates in four principal jurisdictions — the United States, the United Kingdom (approximately 1,200 employees; £312,000,000 in revenue for FYE September 30, 2023, or approximately $390,000,000 at $1.25/£), India (approximately 2,400 employees), and Germany (approximately 400 employees). The multi-jurisdictional nature of Cloudium's operations introduces several complexities into the working capital calculation:

• Intercompany Balances: Intercompany receivables and payables among the Cloudium entities must be identified and properly eliminated in consolidation. Any timing differences in intercompany settlements as of the Effective Time could create artificial variances in the working capital components of individual entities.

• Foreign Currency Translation: Working capital components denominated in British pounds (UK subsidiary), Indian rupees (India subsidiary), and euros (Germany subsidiary) must be translated into U.S. dollars in accordance with the Accounting Principles. The exchange rates used for translation (closing rate, average rate, or other specified rate) must be consistent with Cloudium's historical practice and should be clearly documented.

• Local Tax Receivables and Payables: Each foreign subsidiary may have significant local tax receivables (e.g., VAT refund claims, input tax credits) or payables (e.g., income tax liabilities, withholding tax obligations) that are components of current assets or current liabilities for working capital purposes. These amounts should be carefully reviewed and confirmed with local accounting teams.

Prepaid Expenses, Accrued Liabilities, and Accrued Compensation. These line items are standard components of working capital that often involve estimates and judgment. Prepaid expenses (e.g., prepaid software licenses, insurance premiums, rent) should be reviewed for proper cut-off at the Effective Time. Accrued liabilities (e.g., accrued professional fees, accrued utilities, accrued royalties) should be reviewed for completeness and accuracy. Accrued compensation (e.g., accrued salaries, bonuses, commissions, vacation pay, and payroll tax liabilities) is typically a significant line item for technology companies with large workforces, and the Effective Time (11:59 PM ET on July 9, 2024) falls mid-pay-period for most employees, requiring a precise allocation of compensation costs.

C. Cash Reconciliation

Closing Cash must reflect the aggregate amount of unrestricted cash and cash equivalents held by Cloudium and all of its subsidiaries as of the Effective Time, determined on a consolidated basis. The estimated Closing Cash at closing was approximately $180,000,000.

The final determination of Closing Cash requires a detailed reconciliation of bank balances across all Cloudium entities globally as of 11:59 PM ET on July 9, 2024. This reconciliation must account for:

• outstanding checks, wire transfers in transit, and other reconciling items;

• deposits in transit and uncleared funds;

• cash held in foreign jurisdictions (UK, India, Germany), which may be subject to local regulatory restrictions, foreign exchange controls, or other limitations on repatriation;

• the distinction between unrestricted and restricted cash, with restricted cash (e.g., cash securing letters of credit, cash held in escrow for other purposes, cash subject to regulatory hold) excluded from the Closing Cash figure; and

• the impact of any transactions occurring between the date of the most recent bank statements and the Effective Time.

Cash trapped in foreign jurisdictions — particularly India, where foreign exchange controls under the Reserve Bank of India's regulations may limit the ability to repatriate cash freely, and Germany, where tax or regulatory considerations may effectively restrict cash movement — may require special treatment in the Final Closing Statement. The Merger Agreement's definition of "Closing Cash" should be reviewed to determine whether cash that is technically unrestricted but practically difficult to repatriate is included or excluded from the definition.

D. Indebtedness Definition

The Merger Agreement's definition of "Indebtedness" is typically broader than the accounting definition of debt and may encompass a range of obligations beyond borrowed money. The Final Closing Statement must ensure that all items within the contractual definition of Indebtedness are captured, including without limitation:

• all outstanding obligations for borrowed money (including principal, accrued interest, and any fees or premiums);

• all obligations under capital leases (or finance leases under IFRS 16), to the extent treated as indebtedness under the Merger Agreement;

• all deferred purchase price obligations (e.g., earnout obligations or deferred consideration payable in connection with prior acquisitions by Cloudium);

• all outstanding letters of credit, bank guarantees, and similar instruments, to the extent drawn or to the extent that the definition of Indebtedness includes undrawn amounts;

• all guarantees of obligations of third parties;

• all make-whole, prepayment, or breakage premiums payable in connection with the repayment of indebtedness at closing; and

• any other obligations specified in the Merger Agreement's definition of "Indebtedness" that are not captured by the foregoing categories.

As noted above, Cloudium's existing debt facility consisted of a $620,000,000 term loan and a $200,000,000 revolving credit facility under a credit agreement dated March 15, 2021, with Atlas Commercial Lending Corp. as administrative agent. Both facilities were repaid in full at closing in the aggregate principal amount of $820,000,000, pursuant to the payoff letter dated July 5, 2024. The Final Closing Statement must capture any residual amounts not included in the $820,000,000 payoff, including:

• accrued and unpaid interest from the last payment date through the date of repayment;

• any prepayment or make-whole premiums triggered by the early repayment of the term loan in connection with the Merger;

• any breakage costs or swap termination payments associated with any interest rate hedging arrangements;

• any administrative agent fees, legal fees, or other costs payable under the credit agreement in connection with the payoff; and

• any commitment fees or other amounts accrued under the revolving credit facility through the date of termination.

E. Transaction Expenses

The Final Closing Statement must capture all unpaid Transaction Expenses of Cloudium as of the Effective Time. Transaction Expenses were estimated at approximately $185,000,000 in the aggregate at closing, covering a broad range of advisory, legal, regulatory, and other costs. The final determination of Transaction Expenses requires a detailed review of all invoices and engagement letters to confirm which expenses were paid prior to the Effective Time and which remained unpaid.

The principal categories of Transaction Expenses include:

• Financial Advisory Fees: Fees payable to Veridian Partners LLC (Monica Pressler, senior managing director), which served as Cloudium's financial advisor in connection with the Merger. These fees likely include a success fee contingent upon the closing of the transaction, as well as reimbursable expenses.

• Legal Fees: Fees and expenses payable to Ridgeway Phelps & Sato LLP (Catherine Answorth, partner, and Alistair Fenn, partner), which served as lead transaction counsel to Cloudium. Legal fees may include both time-based fees and disbursements for filing fees, document production, travel, and other costs.

• Auditor Fees: Fees payable to Harwell & Dobson LLP (Martin Chisholm, lead engagement partner) for audit-related services rendered in connection with the Merger, including any consent fees, comfort letter fees, and fees for review of transaction-related financial information.

• Proxy Solicitation Costs: Fees payable to Blackthorn Proxy Advisors LLC, which served as proxy solicitor for the Cloudium stockholder meeting held to approve the Merger.

• Regulatory Filing Fees: Fees paid or payable to governmental authorities in connection with antitrust, foreign investment, and other regulatory filings required for the consummation of the Merger.

• D&O Tail Insurance Premiums: The premium for the directors' and officers' liability insurance tail policy procured by Cloudium prior to closing, which provides continued coverage for pre-closing acts and omissions of Cloudium's directors and officers for a specified run-off period following the Effective Time.

• Other Costs: Miscellaneous transaction-related costs, including data room hosting fees, printing and mailing costs for proxy materials, transfer agent fees, and similar expenses.

It is important to note that the $185,000,000 estimate of Transaction Expenses provided at closing was described as covering "both buyer and target expenses" in certain internal communications. However, for purposes of the Final Closing Statement, only Cloudium's unpaid Transaction Expenses — not Fund VI's or Merger Sub's expenses — are included in the adjustment calculation. Fund VI's own transaction expenses (including fees payable to Calderwood & Harkness LLP, Glenmore Thornton LLP, and Meridian Atlantic Bank / Ironclad Capital Markets) are borne by Fund VI separately and are not components of the purchase price adjustment.

IX. Coordination with Escrow and Indemnification Framework

A. Escrow Fund

At closing on July 9, 2024, $544,000,000 was deposited into an escrow account with Cobalt Trust Company, N.A. (the "Escrow Agent"), as confirmed by wire transfer on the closing date. Laura Ng, Vice President, Escrow Services, at Cobalt Trust Company serves as the primary contact for the escrow account. The escrow fund was established pursuant to the Escrow Agreement, which was executed in its definitive form on January 22, 2024 (concurrently with the Merger Agreement) and became effective at the Effective Time.

The escrow fund is subject to the following release schedule:

• First Release — July 9, 2025: 50% of the original escrow amount ($272,000,000) is released to the Stockholder Representative for distribution to the former Cloudium stockholders, net of any amounts then subject to pending and unresolved indemnification claims asserted by Fund VI under Article IX of the Merger Agreement.

• Second Release — January 9, 2026: The remaining 50% of the original escrow amount ($272,000,000) is released to the Stockholder Representative, net of any amounts then subject to pending and unresolved indemnification claims. The second release date coincides with the expiration of the 18-month survival period for general representations and warranties.

The primary purpose of the escrow fund is to serve as a source of recovery for indemnification claims by the Buyer Indemnified Parties under Article IX of the Merger Agreement. However, the question of wh

PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
Calderwood & Harkness LLP 599 Lexington Avenue New York, NY 10022
MEMORANDUM
August 1, 2024
From: Tiffany Rosenthal, Calderwood & Harkness LLP
To: Harrison Wexford, Calderwood & Harkness LLP; Marcus Elliston and Priya Narasimhan, Solara Digital Infrastructure LP
Re: Post-Closing Purchase Price Adjustment — Working Capital True-Up Procedures under Section 2.7 of the Agreement and Plan of Merger dated January 22, 2024
Matter No.: 1041-00003
This memorandum is a privileged and confidential attorney work product prepared by Calderwood & Harkness LLP at the direction of and for the exclusive benefit of Solara Digital Infrastructure LP and its affiliates. This memorandum is protected by the attorney-client privilege and the work product doctrine. Any disclosure, reproduction, or distribution of this memorandum without the prior written consent of Calderwood & Harkness LLP is strictly prohibited.
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I. Executive Summary and Purpose
This memorandum analyzes the working-capital true-up procedures under Section 2.7 of the Agreement and Plan of Merger, dated January 22, 2024 (the "Merger Agreement"), by and among Cloudium Technologies plc, a Delaware corporation ("Cloudium" or the "Company"), Stratos Merger Sub Inc., a Delaware corporation and indirect wholly owned subsidiary of Solara Digital Infrastructure Fund VI LP ("Merger Sub"), and Solara Digital Infrastructure Fund VI LP, a Delaware limited partnership ("Fund VI"). Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Merger Agreement.
The merger contemplated by the Merger Agreement (the "Merger") closed on July 9, 2024, with the Certificate of Merger filed with the Secretary of State of the State of Delaware at 11:59 PM Eastern Time (the "Effective Time"). The total enterprise value of the transaction was approximately $6,800,000,000, with per-share merger consideration of approximately $36.92 payable to holders of approximately 184,200,000 shares of Cloudium common stock outstanding as of the Effective Time (inclusive of shares subject to rollover arrangements, as discussed further below).
At closing, an estimated closing statement (the "Estimated Closing Statement") was delivered by Cloudium on July 8, 2024, one business day prior to the closing date, in accordance with Section 2.6 of the Merger Agreement. Calderwood & Harkness LLP reviewed the Estimated Closing Statement and provided preliminary markup comments to the Solara deal team and to Glenmore Thornton LLP prior to closing. The Estimated Closing Statement set forth Cloudium's good-faith estimates of each of the adjustment components that underpin the purchase price adjustment mechanism, and the merger consideration paid at closing was calculated on the basis of those estimates.
The purpose of this memorandum is to provide a comprehensive analysis and practical roadmap for the post-closing purchase price adjustment process. Specifically, this memorandum addresses:
(a) the components of the purchase price adjustment mechanism under Section 2.7 of the Merger Agreement, including the interplay among working capital, cash, indebtedness, and transaction expense adjustments;
(b) the timeline for preparation and delivery of the Final Closing Statement, including the 90-calendar-day period following the closing date within which Fund VI must cause the Final Closing Statement to be delivered to the Stockholder Representative;
(c) the objection and dispute resolution procedures available to the Stockholder Representative following receipt of the Final Closing Statement, including the review period, the content requirements for any Dispute Notice, the negotiation period, and the Accounting Referee process;
(d) the payment mechanics applicable to the final purchase price adjustment amount, including the interaction between the adjustment mechanism and the escrow fund held by Cobalt Trust Company;
(e) the key accounting and definitional considerations that will inform the preparation of the Final Closing Statement, including multi-jurisdictional working capital components, deferred revenue treatment, cash reconciliation, and the definition of indebtedness; and
(f) recommended next steps for the Solara deal team, including the establishment of an internal working group and coordination with Glenmore Thornton LLP (Richard Okamura and Vanessa Liu) on the financial review and preparation of the Final Closing Statement.
For purposes of the purchase price adjustment process, the Stockholder Representative is Douglas Pemberton, who was appointed under the Stockholder Representative Agreement dated January 22, 2024, entered into by and among Fund VI, Merger Sub, and Mr. Pemberton in his capacity as representative of the former Cloudium stockholders. All communications and deliveries to or from the former stockholder group in connection with the post-closing adjustment process will be directed to or from Mr. Pemberton in his capacity as Stockholder Representative.
As a threshold matter, we note that the purchase price adjustment process is time-sensitive. The Final Closing Statement must be delivered to the Stockholder Representative no later than October 7, 2024 (90 calendar days following the July 9, 2024 closing date). We recommend that the Solara deal team and the surviving entity's finance function begin preparation work immediately and target internal completion of the draft Final Closing Statement by late September 2024 to allow adequate time for legal review by this firm before the contractual deadline.
II. Overview of Purchase Price Adjustment Mechanism (Section 2.7)
A. Structure of the Adjustment
The Merger Agreement employs a customary post-closing purchase price adjustment mechanism designed to ensure that the aggregate merger consideration reflects the actual financial condition of Cloudium and its subsidiaries as of the Effective Time, rather than the estimates that were necessarily relied upon at closing. The adjustment is calculated based on the difference between (i) the estimated amounts of certain financial metrics set forth in the Estimated Closing Statement delivered by Cloudium at closing and (ii) the final, actual amounts of those same metrics as of the Effective Time, as determined through the Final Closing Statement process described in Sections IV through VI of this memorandum.
This type of adjustment mechanism is standard in private equity acquisitions of this size and complexity. It serves the dual purpose of facilitating a timely closing on the basis of estimated financial data while preserving both the buyer's and the sellers' economic bargain by providing for a post-closing reconciliation to actual amounts. The adjustment is a dollar-for-dollar true-up, meaning that the merger consideration is increased or decreased, as applicable, by the full amount of any variance between estimated and actual figures, subject to any applicable collar or de minimis threshold as discussed below.
The purchase price adjustment under Section 2.7 is comprised of four discrete components, each of which must be separately determined as of the Effective Time and compared against the corresponding estimate reflected in the Estimated Closing Statement. The four components are as follows:
1. Closing Working Capital. Closing Working Capital is defined as the net current assets minus the net current liabilities of Cloudium and its subsidiaries as of the Effective Time, calculated in accordance with the accounting principles, policies, practices, procedures, methodologies, and definitions specified in the Merger Agreement and the accompanying accounting principles schedule (the "Accounting Principles"). The Accounting Principles require that Closing Working Capital be calculated consistently with Cloudium's historical accounting practices and in accordance with International Financial Reporting Standards ("IFRS") as historically applied by Cloudium and as audited by Harwell & Dobson LLP, Cloudium's independent auditor. The Estimated Closing Statement reflected Cloudium's good-faith estimate of Closing Working Capital, which was derived from the Company's unaudited management accounts as of a date reasonably proximate to the Effective Time.
2. Closing Cash. Closing Cash is defined as the aggregate amount of unrestricted cash and cash equivalents held by Cloudium and its subsidiaries as of the Effective Time, determined on a consolidated basis. At closing, Cloudium estimated Closing Cash at approximately $180,000,000. The final determination of Closing Cash must account for all cash held across Cloudium's global operations, including cash held by its subsidiaries in the United Kingdom, India, and Germany, and must exclude any restricted cash (including cash subject to regulatory hold, escrow arrangements, or other encumbrances that would prevent its free use in the ordinary course of business).
3. Closing Indebtedness. Closing Indebtedness is defined as all outstanding indebtedness of Cloudium and its subsidiaries as of immediately prior to the Effective Time, net of any amounts repaid at or in connection with the closing. The existing Cloudium debt facility consisted of a term loan in the principal amount of $620,000,000 and a revolving credit facility in the committed amount of $200,000,000, both under a credit agreement dated March 15, 2021, with Atlas Commercial Lending Corp. as administrative agent and lender. Both facilities were repaid in full at closing in the aggregate amount of $820,000,000, as evidenced by the payoff letter dated July 5, 2024, issued by Atlas Commercial Lending Corp. The Final Closing Statement must capture any residual amounts of indebtedness (including accrued and unpaid interest, prepayment premiums, breakage costs, and any other amounts required to be paid under the payoff letter) that were not reflected in the estimated amounts at closing.
4. Transaction Expenses. Transaction Expenses are defined as all unpaid transaction expenses of Cloudium and its subsidiaries as of the Effective Time. Transaction expenses include, without limitation, all fees, costs, and expenses incurred by or on behalf of the Company in connection with the negotiation, execution, and consummation of the Merger, including advisory fees, legal fees, financing costs, insurance costs, regulatory filing fees, proxy solicitation expenses, and any other out-of-pocket costs directly related to the transaction. Cloudium estimated total Transaction Expenses at approximately $185,000,000 in the aggregate, which covered advisory fees payable to Veridian Partners LLC, legal fees payable to Ridgeway Phelps & Sato LLP, auditor fees payable to Harwell & Dobson LLP, proxy solicitation costs payable to Blackthorn Proxy Advisors LLC, regulatory filing fees, D&O tail insurance premiums, and various other miscellaneous costs. The Final Closing Statement must capture only those Transaction Expenses that remained unpaid as of the Effective Time; any amounts paid by Cloudium prior to the Effective Time are not included in the adjustment.
B. Working Capital Target
The Merger Agreement establishes a Working Capital Target (the "Target"), which represents the normalized level of working capital for Cloudium's business as determined by the parties during the negotiation of the Merger Agreement. The Target was set with reference to Cloudium's historical average working capital levels, adjusted for seasonality, one-time items, and other factors agreed upon by the parties. The specific dollar amount of the Target is set forth in Section 2.7(a) of the Merger Agreement and the accompanying schedules.
The purchase price adjustment attributable to working capital is calculated as the difference between the actual Closing Working Capital (as finally determined through the process described in this memorandum) and the Target. If the actual Closing Working Capital exceeds the Target, the merger consideration is adjusted upward (i.e., an additional payment is owed to the former Cloudium stockholders). Conversely, if the actual Closing Working Capital falls below the Target, the merger consideration is adjusted downward (i.e., the former Cloudium stockholders owe a refund to Fund VI, which may be satisfied from the escrow or otherwise).
We note that Section 2.7 may incorporate a collar or de minimis threshold applicable to the working capital adjustment (or to the aggregate adjustment), pursuant to which no adjustment is payable unless the variance between estimated and actual amounts exceeds a specified dollar threshold. This mechanism is intended to avoid the transactional cost and disruption of de minimis adjustments that are immaterial in the context of a $6.8 billion transaction. The specific terms of any such collar should be confirmed by reference to the definitive text of Section 2.7. It is important to distinguish any working capital collar from the indemnification thresholds set forth in Article IX of the Merger Agreement, which include a de minimis threshold of $500,000 (below which individual claims are disregarded) and a basket of 0.75% of the total deal value, or $51,000,000 (below which aggregate claims are not indemnifiable). Those thresholds apply exclusively to indemnification claims and have no application to the purchase price adjustment under Section 2.7.
C. Distinction from Indemnification
It is critical to understand that the purchase price adjustment mechanism under Section 2.7 is a separate and distinct contractual mechanism from the indemnification provisions set forth in Article IX of the Merger Agreement. While both mechanisms may result in post-closing payments between the parties, they serve fundamentally different purposes, are subject to different procedural requirements, and are governed by different limitations.
The indemnification provisions of Article IX provide for the indemnification of Fund VI and its affiliates (as "Buyer Indemnified Parties") against losses arising from, among other things, breaches of the Company's representations and warranties, breaches of pre-closing covenants, and certain specified matters. The indemnification framework is subject to the following key limitations:
•  Indemnification Cap: The aggregate liability of the former Cloudium stockholders under Article IX is capped at 15% of the total deal value, or $1,020,000,000.
•  Escrow Fund: A general indemnification escrow of $544,000,000 was deposited at closing with Cobalt Trust Company, N.A. (the "Escrow Agent"), which serves as the primary source of recovery for indemnification claims by Fund VI. The escrow is subject to a release schedule under which 50% ($272,000,000) is released to the Stockholder Representative on July 9, 2025, and the remaining 50% ($272,000,000) is released on January 9, 2026, in each case net of any amounts then subject to pending and unresolved indemnification claims.
•  Survival Period: The representations and warranties of the Company survive for a period of 18 months following the closing date, expiring on January 9, 2026, except for certain fundamental representations and tax representations, which survive for longer specified periods.
•  De Minimis Threshold: Individual indemnification claims below $500,000 are disregarded for purposes of determining whether the basket has been exceeded.
•  Basket: Indemnification claims are not payable until the aggregate amount of qualifying losses exceeds 0.75% of the total deal value, or $51,000,000, at which point the former stockholders are liable for all qualifying losses from the first dollar (i.e., a tipping basket, not a true deductible).
In contrast, the purchase price adjustment under Section 2.7 is not subject to any of the foregoing limitations. The adjustment is a mathematical, dollar-for-dollar reconciliation of estimated and actual financial metrics, and it is payable in full without regard to the indemnification cap, the basket, the de minimis threshold, or the survival period. The purchase price adjustment is enforceable independently of, and in addition to, any indemnification claims that may be asserted under Article IX.
Furthermore, the buyer-side representations and warranties insurance policy issued by Northfield Assurance Ltd. (Policy No. NFA-TRI-2024-00487; $680,000,000 aggregate limit of liability; $544,000,000 retention, which is effectively satisfied by the escrow) does not cover purchase price adjustment disputes. The R&W insurance policy responds only to losses arising from breaches of the Company's representations and warranties as set forth in Article IV of the Merger Agreement, and the policy expressly excludes purchase price adjustments, working capital true-ups, and other post-closing financial reconciliations from its scope of coverage.
III. Estimated Closing Statement
A. Delivery at Closing
In accordance with Section 2.6 of the Merger Agreement, Cloudium delivered the Estimated Closing Statement to Fund VI on July 8, 2024, one business day prior to the closing date. The Estimated Closing Statement was prepared by Cloudium's finance team under the direction of Sienna Whitfield, the Company's Chief Financial Officer, and set forth Cloudium's good-faith estimates of each of the four adjustment components as of the anticipated Effective Time. The Estimated Closing Statement was accompanied by supporting calculations and summaries of the methodology used to derive each estimated amount.
Calderwood & Harkness LLP reviewed the Estimated Closing Statement upon receipt and provided markup comments and preliminary observations to the Solara deal team. Additionally, Glenmore Thornton LLP, which served as the financial due diligence advisor to Fund VI throughout the transaction, conducted a high-level review of the estimated figures against the diligence materials and Cloudium's historical financial information. The review was necessarily expedited given the compressed timeline between delivery and closing, and we noted at the time that certain line items warranted further analysis in connection with the preparation of the Final Closing Statement.
Based on the estimated figures set forth in the Estimated Closing Statement, the merger consideration paid at closing was calculated, and the funds flow was executed in accordance with the Calderwood & Harkness LLP Funds Flow Memorandum — Final Execution Version, dated July 8, 2024. The funds flow memorandum set forth the sources and uses of funds for the closing, the wire transfer instructions for each payee, and the sequence of payments, all of which were successfully executed on the morning of July 9, 2024.
B. Key Estimated Figures from Closing
The following table summarizes the key financial estimates set forth in the Estimated Closing Statement and the principal elements of the sources and uses of funds at closing:
Estimated Adjustment Components:
Sources and Uses at Closing:
The rollover equity component reflects the aggregate value of the equity contributions rolled over by (i) Jonathan Hargrove, Cloudium's founder and former Chief Executive Officer, who contributed approximately $142,814,544 in rollover equity, and (ii) Pinnacle Growth Ventures LLC, a pre-existing institutional investor in Cloudium, which contributed approximately $473,241,408 in rollover equity, in each case pursuant to the applicable Rollover Agreements executed in connection with the Merger Agreement.
The foregoing amounts reflect the consideration paid at closing based on the estimated figures. To the extent that the final, actual figures differ from the estimates, the purchase price adjustment mechanism under Section 2.7 will operate to reconcile the difference, as described in the following sections.
IV. Final Closing Statement — Preparation and Delivery Timeline
A. Obligation to Prepare
Under Section 2.7 of the Merger Agreement, Fund VI (as the ultimate parent of the surviving entity following the Merger) is responsible for causing the preparation and delivery of a final closing statement (the "Final Closing Statement") setting forth the final, actual amounts of each of the four adjustment components — Closing Working Capital, Closing Cash, Closing Indebtedness, and Transaction Expenses — as of the Effective Time.
This obligation rests with Fund VI, and the preparation will in practice be carried out by the finance team of the surviving entity (i.e., the post-Merger Cloudium entity, which continues as a wholly owned indirect subsidiary of Fund VI). As such, Sienna Whitfield, who continues to serve as Chief Financial Officer of the surviving entity, will be the primary point of contact for the preparation of the Final Closing Statement. Calderwood & Harkness LLP recommends that the Solara deal team engage directly with Ms. Whitfield at the earliest opportunity to establish a timeline, assign responsibilities, and coordinate with Glenmore Thornton LLP on the financial review.
The Final Closing Statement must set forth the final, actual amount of each adjustment component with specificity and must include sufficient detail to permit the Stockholder Representative and its advisors to understand the basis for each reported figure. The Final Closing Statement is not merely a recitation of aggregate numbers; it must be accompanied by the underlying calculations and should be presented in a format consistent with the Estimated Closing Statement to facilitate comparison and review.
B. Delivery Deadline
Section 2.7 of the Merger Agreement requires delivery of the Final Closing Statement to the Stockholder Representative within 90 calendar days following the closing date. The closing date is July 9, 2024. Accordingly, the Final Closing Statement must be delivered to Douglas Pemberton, in his capacity as Stockholder Representative, no later than:
October 7, 2024
This deadline is a firm contractual obligation and should be treated as non-negotiable absent a written amendment or waiver from the Stockholder Representative. Failure to deliver the Final Closing Statement within the prescribed period could have adverse consequences, including a potential argument by the Stockholder Representative that Fund VI has forfeited its right to a purchase price adjustment or that the Estimated Closing Statement should be deemed the Final Closing Statement for purposes of the adjustment mechanism. While such arguments may not be dispositive, they would place Fund VI at a procedural disadvantage in any subsequent dispute and should be avoided entirely.
We recommend the following internal timeline to ensure timely delivery:
•  August 2024: Commence preparation of the Final Closing Statement. Engage Glenmore Thornton LLP to support the financial review. Establish internal working group. Begin detailed review of the Estimated Closing Statement and identify areas requiring further analysis.
•  September 2024 (target: September 20, 2024): Complete internal draft of the Final Closing Statement, including all supporting schedules and work papers. Circulate to Calderwood & Harkness LLP for legal review. Resolve any open accounting issues, including foreign subsidiary reconciliations.
•  Late September / Early October 2024: Calderwood & Harkness LLP completes legal review of the Final Closing Statement. Finalize and deliver to the Stockholder Representative no later than October 7, 2024.
C. Supporting Documentation
The Final Closing Statement should be accompanied by reasonable supporting documentation and work papers sufficient to substantiate each line item and to demonstrate that the statement was prepared in accordance with the Accounting Principles. While Section 2.7 does not prescribe a specific format for the supporting documentation, best practice in transactions of this size is to include:
•  detailed schedules for each component of Closing Working Capital, including a line-item breakdown of current assets and current liabilities;
•  bank statements and cash position reports for each Cloudium entity as of the Effective Time, supporting the Closing Cash figure;
•  payoff confirmation letters and evidence of repayment of all outstanding indebtedness, together with a schedule of any residual or unpaid amounts (including accrued interest, breakage costs, and make-whole premiums);
•  invoices, engagement letters, and payment records for all Transaction Expenses, together with a schedule identifying which expenses were paid prior to the Effective Time and which remained unpaid;
•  intercompany balance reconciliations for Cloudium's foreign subsidiaries; and
•  a reconciliation of the Final Closing Statement to the Estimated Closing Statement, highlighting and explaining all material variances.
Access to the books and records of the surviving entity and its subsidiaries — including Cloudium Technologies UK Ltd. (incorporated in England and Wales), Cloudium Technologies India Pvt. Ltd. (incorporated in India), and Cloudium Solutions GmbH (incorporated in Germany) — should be coordinated to ensure completeness of the Final Closing Statement. In particular, the UK subsidiary is a material component of Cloudium's global operations, having reported revenue of approximately £312,000,000 (approximately $390,000,000 at an exchange rate of $1.25 per British pound) for the fiscal year ended September 30, 2023, and employing approximately 1,200 individuals. Working capital components attributable to the UK subsidiary — including accounts receivable denominated in British pounds, deferred revenue, accrued liabilities, and VAT receivables and payables — must be accurately captured in the Final Closing Statement and translated into U.S. dollars in accordance with the Accounting Principles.
Similarly, Cloudium Technologies India Pvt. Ltd. (approximately 2,400 employees) and Cloudium Solutions GmbH (approximately 400 employees) each contribute working capital components that must be consolidated into the Final Closing Statement. Intercompany balances among the Cloudium entities should be carefully reviewed and eliminated in consolidation to avoid double-counting or omission of amounts.
V. Review Period and Objection Procedures
A. Stockholder Representative's Review Period
Upon receipt of the Final Closing Statement, the Stockholder Representative (Douglas Pemberton) has a review period — which, under Section 2.7 of the Merger Agreement, is 30 calendar days — within which to examine the Final Closing Statement and all supporting documentation and to submit written objections, if any. Assuming that the Final Closing Statement is delivered on the contractual deadline of October 7, 2024, the review period would expire on approximately November 6, 2024 (30 calendar days from delivery).
During the review period, the Stockholder Representative and his advisors are entitled to reasonable access to the surviving entity's books, records, work papers, and financial personnel who participated in the preparation of the Final Closing Statement. This access right is a material obligation of Fund VI under the Merger Agreement, and any failure to provide adequate access could form the basis for a dispute or could toll the review period. We anticipate that the Stockholder Representative will engage legal counsel — likely Ridgeway Phelps & Sato LLP, where Catherine Answorth and Alistair Fenn served as lead transaction counsel to Cloudium — as well as a financial advisor, which may be Veridian Partners LLC (Monica Pressler) or an independent accounting firm, to assist in the review of the Final Closing Statement.
Calderwood & Harkness LLP recommends that the Solara deal team designate a single point of contact within the surviving entity's finance function (we suggest Sienna Whitfield or her delegate) to manage all information requests from the Stockholder Representative during the review period. All information requests and responses should be documented in writing and copies should be maintained by Calderwood & Harkness LLP. This approach will ensure an orderly review process, minimize the risk of inadvertent disclosure of privileged or work-product materials, and create an evidentiary record in the event of a subsequent dispute.
B. Form and Content of Objections
If the Stockholder Representative disagrees with any component of the Final Closing Statement, the Stockholder Representative must deliver a written notice of dispute (a "Dispute Notice") to Fund VI within the 30-day review period. The Dispute Notice is the exclusive mechanism by which the Stockholder Representative may challenge the Final Closing Statement, and it must comply with certain specificity requirements set forth in Section 2.7 of the Merger Agreement.
Specifically, any Dispute Notice must set forth, in reasonable detail:
(i) each specific item or amount in the Final Closing Statement that the Stockholder Representative disputes;
(ii) the basis for each objection, including an explanation of why the Stockholder Representative believes the disputed item is incorrect and the specific accounting principle, methodology, or factual basis supporting the objection; and
(iii) the Stockholder Representative's proposed alternative amount for each disputed item, together with reasonable supporting calculations or documentation.
The specificity requirement serves an important function: it constrains the scope of any subsequent dispute and prevents the Stockholder Representative from raising new objections or disputing new items after the expiration of the review period. Any component of the Final Closing Statement that is not specifically identified and disputed in the Dispute Notice within the review period is deemed accepted by the Stockholder Representative and becomes final and binding on all parties. This deemed-acceptance mechanism is a standard feature of post-closing purchase price adjustment provisions and is designed to promote finality and efficiency in the adjustment process.
From Fund VI's perspective, the specificity requirement underscores the importance of preparing a Final Closing Statement that is thorough, well-documented, and defensible. A Final Closing Statement that is supported by detailed work papers and is consistent with the Accounting Principles will be more difficult for the Stockholder Representative to challenge effectively and will limit the scope of any Dispute Notice to genuinely disputed items.
C. Deemed Acceptance
If the Stockholder Representative does not deliver a Dispute Notice within the 30-day review period, the Final Closing Statement as delivered by Fund VI becomes final and binding on all parties without modification. In that event, the purchase price adjustment amount is calculated based on the Final Closing Statement as delivered, and the adjustment payment is made in accordance with the procedures described in Section VII of this memorandum.
Deemed acceptance is a significant outcome from Fund VI's standpoint, as it results in the Final Closing Statement being accepted in its entirety without the need for negotiation or dispute resolution. For this reason, it is in Fund VI's interest to prepare the Final Closing Statement as early as practicable within the 90-day period, to deliver it promptly, and to ensure that it is supported by comprehensive documentation — all of which may contribute to the Stockholder Representative's decision not to submit a Dispute Notice or to limit the scope of any objections.
VI. Dispute Resolution Procedures
A. Negotiation Period
In the event that the Stockholder Representative delivers a timely Dispute Notice, Section 2.7 of the Merger Agreement provides that the parties — Fund VI and the Stockholder Representative — must first attempt to resolve the disputed items through good-faith negotiation. The negotiation period is typically 30 calendar days from the date on which Fund VI receives the Dispute Notice. Assuming that the Dispute Notice is received on or about November 6, 2024 (the last day of the review period), the negotiation period would expire on approximately December 6, 2024.
During the negotiation period, the parties and their respective advisors will exchange information and engage in discussions aimed at resolving the disputed items without the need for a formal determination by an independent accounting firm. Calderwood & Harkness LLP and Glenmore Thornton LLP will participate in such negotiations on behalf of Fund VI, and we anticipate that the Stockholder Representative will be advised by Ridgeway Phelps & Sato LLP and its financial advisors.
It is common in transactions of this type for the parties to reach a negotiated resolution of some or all disputed items during the negotiation period. To the extent that the parties are able to agree on the resolution of certain items, those items will be reflected in the Final Closing Statement as adjusted and will become final and binding. Any items that remain unresolved at the conclusion of the negotiation period will be submitted to the Accounting Referee process described below.
We recommend that the Solara deal team approach the negotiation period strategically, with a clear understanding of Fund VI's position on each disputed item, the strength of the supporting evidence, and the likely range of outcomes. A well-prepared negotiating posture will increase the likelihood of a favorable resolution and will strengthen Fund VI's position in the event that any items are submitted to the Accounting Referee.
B. Independent Accounting Firm Determination
If the parties are unable to resolve all disputed items through good-faith negotiation within the negotiation period, the remaining unresolved items are submitted to an independent accounting firm mutually agreed upon by the parties (the "Accounting Referee"). The Accounting Referee process is the exclusive and final mechanism for resolving purchase price adjustment disputes under the Merger Agreement.
The Merger Agreement may pre-designate a specific accounting firm to serve as the Accounting Referee, or it may provide a selection mechanism pursuant to which the parties jointly select the Accounting Referee from among the major independent accounting firms. In either case, the following firms are disqualified from serving as the Accounting Referee due to conflicts of interest:
•  Harwell & Dobson LLP — Cloudium's former independent auditor (lead engagement partner: Martin Chisholm), which has a pre-existing relationship with the Company that could give rise to the appearance of bias in favor of the Stockholder Representative; and
•  Glenmore Thornton LLP — Fund VI's financial due diligence advisor (Richard Okamura and Vanessa Liu), which has been engaged by Fund VI throughout the transaction and would be perceived as having an inherent alignment with the buyer's position.
Suitable candidates for the Accounting Referee may include any of the major independent accounting firms that did not serve as auditor or advisor to either party in connection with the Merger. The Solara deal team should identify and pre-clear one or more acceptable candidates in advance of any potential dispute, so that Fund VI is prepared to propose an Accounting Referee promptly if the negotiation period expires without full resolution.
The Accounting Referee process operates as follows:
(a) Submission of Positions. Each party submits a written brief to the Accounting Referee setting forth its position on each unresolved disputed item, together with supporting documentation, calculations, and any other materials the party deems relevant. The Accounting Referee may also request additional information or clarification from either party.
(b) Bounded Determination. The Accounting Referee's determination on each disputed item is constrained to fall within the range defined by Fund VI's position and the Stockholder Representative's position. That is, the Accounting Referee may not determine any item at an amount that is higher than the higher of the two parties' positions or lower than the lower of the two parties' positions. This "baseball" or bounded-determination mechanism ensures that the Accounting Referee's decision is anchored to the parties' respective submissions and prevents extreme or unexpected outcomes.
(c) Final and Binding. The Accounting Referee's determination is final, binding, and non-appealable, and constitutes the conclusive resolution of the disputed items for purposes of the purchase price adjustment. The only exceptions to the binding nature of the determination would be manifest error or fraud, either of which would need to be established through separate legal proceedings.
(d) Cost Allocation. The fees and expenses of the Accounting Referee are allocated between the parties based on the proportion of the aggregate disputed amount that is resolved in favor of each party. For example, if the aggregate disputed amount is $20,000,000 and the Accounting Referee resolves $15,000,000 in favor of Fund VI and $5,000,000 in favor of the Stockholder Representative, then the Stockholder Representative would bear 75% of the Accounting Referee's fees and Fund VI would bear 25%. This proportional, loser-pays allocation provides an incentive for both parties to assert only meritorious positions and to negotiate in good faith before resorting to the Accounting Referee.
C. Estimated Timeline for Accounting Referee Process
Based on the foregoing procedural framework and the estimated dates for each preceding step, we project the following timeline for the Accounting Referee process, if necessary:
•  Submission of dispute to Accounting Referee: Approximately early to mid-December 2024, assuming the negotiation period expires on or about December 6, 2024, and the parties are unable to agree on the selection of an Accounting Referee immediately.
•  Briefing period: Typically 15 to 20 business days from the date of the Accounting Referee's engagement, during which each party prepares and submits its written brief and supporting materials.
•  Accounting Referee determination: Typically within 30 to 45 calendar days following receipt of the parties' submissions.
•  Estimated final resolution: January to February 2025.
We note that the actual timeline may vary depending on the complexity of the disputed items, the volume of supporting documentation, and the Accounting Referee's availability. The Solara deal team should plan for the possibility that the purchase price adjustment may not be finalized until early 2025 in the event of a full dispute process.
VII. Payment of Adjustment Amount
A. Determination of Final Adjustment
Once the Final Closing Statement becomes final and binding — whether through deemed acceptance (no Dispute Notice), negotiated resolution, or Accounting Referee determination — the purchase price adjustment amount is calculated as the net aggregate of the following components:
(a) Working Capital Adjustment: The difference between the actual Closing Working Capital (as finally determined) and the Working Capital Target, compared against the corresponding difference that was reflected in the estimated merger consideration at closing.
(b) Cash Adjustment: The difference between the actual Closing Cash (as finally determined) and the estimated Closing Cash reflected in the Estimated Closing Statement.
(c) Indebtedness Adjustment: The difference between the actual Closing Indebtedness (as finally determined) and the estimated Closing Indebtedness reflected in the Estimated Closing Statement.
(d) Transaction Expenses Adjustment: The difference between the actual Transaction Expenses (as finally determined) and the estimated Transaction Expenses reflected in the Estimated Closing Statement.
The aggregate of these four adjustments constitutes the net purchase price adjustment amount. A positive net adjustment (i.e., a situation in which the actual amounts indicate that the merger consideration paid at closing was less than the amount that should have been paid based on actual figures) results in an additional payment from Fund VI to the former stockholders. A negative net adjustment (i.e., a situation in which the actual amounts indicate that the merger consideration paid at closing exceeded the amount that should have been paid based on actual figures) results in a refund from the former stockholders to Fund VI.
B. Payment Mechanics
The mechanics for payment of the final adjustment amount are as follows:
Net Positive Adjustment (Additional Payment to Former Stockholders). If the final adjustment results in a net positive amount — meaning that the actual Closing Working Capital and Closing Cash exceeded estimates, and/or the actual Closing Indebtedness and Transaction Expenses were less than estimates, on a net basis — then Fund VI is obligated to pay the adjustment amount to the Stockholder Representative for distribution to the former Cloudium stockholders in accordance with their respective pro rata shares. Payment is due within five business days following the date on which the Final Closing Statement becomes final and binding.
Net Negative Adjustment (Refund to Fund VI). If the final adjustment results in a net negative amount — meaning that the actual Closing Working Capital and Closing Cash fell below estimates, and/or the actual Closing Indebtedness and Transaction Expenses exceeded estimates, on a net basis — then the adjustment amount is payable by the Stockholder Representative (on behalf of the former Cloudium stockholders) to Fund VI. In this scenario, Fund VI may seek satisfaction of the adjustment amount from the escrow fund held by Cobalt Trust Company, to the extent the Merger Agreement and the Escrow Agreement permit such use of the escrow. Alternatively, the Stockholder Representative may arrange for direct payment of the adjustment amount from funds otherwise available to the former stockholders.
Payment Method. All adjustment payments must be made by wire transfer of immediately available funds to an account designated by the receiving party in writing. The Solara deal team should ensure that wire transfer instructions for Fund VI's designated account are on file and current.
Interaction with Escrow Fund. The $544,000,000 general indemnification escrow held by Cobalt Trust Company (Laura Ng, Vice President, Escrow Services) was established at closing primarily for the purpose of securing indemnification obligations under Article IX of the Merger Agreement. However, the Merger Agreement should be carefully reviewed to determine whether the escrow is also available to satisfy adverse purchase price adjustments in favor of the buyer — that is, whether Fund VI may instruct the Escrow Agent to release funds from the escrow to satisfy a net negative adjustment. In many transactions of this type, the purchase price adjustment mechanism includes a specific provision permitting the buyer to seek recourse against the escrow for adjustment shortfalls, but this must be confirmed by reference to the definitive text of Section 2.7 and the corresponding provisions of the Escrow Agreement (execution version dated January 22, 2024, effective at closing). Calderwood & Harkness LLP will review the Escrow Agreement to confirm the Escrow Agent's authority and procedures for releasing funds for purchase price adjustment purposes as distinguished from indemnification claims.
C. Interest.  Section 2.7 of the Merger Agreement may provide that any adjustment payment bears interest at a specified rate from the closing date (July 9, 2024) through the date of actual payment. The applicable interest rate — which is typically a short-term market rate such as the prime rate, the federal funds rate, or a specified fixed rate — should be confirmed by reference to the text of Section 2.7. If an interest provision applies, the interest amount could be material given the potential duration between the closing date and the date of final resolution (which, in the event of a full Accounting Referee process, may not occur until early 2025 — approximately six to seven months after closing). The Solara deal team should factor potential interest obligations into its financial planning for the adjustment process.
VIII. Key Accounting and Definitional Considerations
A. Accounting Principles Consistency
A foundational principle of the purchase price adjustment mechanism is that the Final Closing Statement must be prepared using the same accounting principles, policies, practices, procedures, and methodologies — including IFRS as historically applied by Cloudium and as audited by Harwell & Dobson LLP — that were used in the preparation of the Estimated Closing Statement and Cloudium's historical financial statements (the "Accounting Principles"). This consistency requirement is intended to ensure that any differences between the estimated and actual amounts reflect genuine economic variances rather than changes in accounting methodology.
Specifically, the Accounting Principles prohibit any changes to accounting policies, estimation methodologies, reserve practices, or classification conventions solely for the purpose of the purchase price adjustment. For example, if Cloudium historically classified a certain category of deferred revenue as a current liability for purposes of its audited financial statements, the same classification must be applied in the Final Closing Statement, even if an alternative classification might be permissible under IFRS. Similarly, if Cloudium historically used a specific methodology to estimate its allowance for doubtful accounts, the same methodology must be applied in the Final Closing Statement, even if a different methodology might be considered more conservative or more aggressive.
This consistency principle is a potential area of dispute between the parties, as the Stockholder Representative may argue that certain items in the Final Closing Statement have been prepared using methodologies or assumptions that differ from Cloudium's historical practices. For this reason, it is essential that the Final Closing Statement be accompanied by detailed documentation demonstrating that each line item has been prepared in strict accordance with the Accounting Principles, and that any judgment calls or estimates are consistent with Cloudium's past practices.
B. Working Capital Components — Areas of Focus
Based on our understanding of Cloudium's business and the diligence conducted prior to closing, we have identified the following areas that warrant particular attention in the preparation of the Final Closing Statement:
Revenue Recognition and Deferred Revenue. Cloudium's core business consists of cloud-native enterprise resource planning ("ERP"), customer relationship management ("CRM"), and business intelligence SaaS solutions, which are delivered under subscription agreements of varying terms. Revenue recognition for SaaS arrangements under IFRS 15 requires careful analysis of performance obligations, transaction prices, and the timing of revenue recognition over the subscription period. A significant portion of Cloudium's revenue is recognized ratably over the subscription term, resulting in substantial deferred revenue (contract liability) balances at any given time. As of December 31, 2023, Cloudium reported annual recurring revenue ("ARR") of approximately $1,740,000,000, and total revenue for the fiscal year ended September 30, 2023, was approximately $1,620,000,000. The deferred revenue balances are likely to be material components of Closing Working Capital, and the classification of deferred revenue as current versus non-current is critical — only the current portion (i.e., revenue expected to be recognized within 12 months) is included in the working capital calculation.
The Solara deal team and Glenmore Thornton LLP should carefully review the deferred revenue schedule as of the Effective Time and ensure that the current/non-current classification is consistent with Cloudium's historical practices. Any reclassification of deferred revenue from non-current to current (or vice versa) could have a significant impact on the Closing Working Capital figure and could become a point of contention with the Stockholder Representative.
Accounts Receivable. Cloudium's accounts receivable balance at the Effective Time should be reviewed for collectibility and aging, with particular attention to large customer balances. We note that Aegis Federal Solutions Inc. is Cloudium's largest single customer, contributing approximately $84,000,000 in ARR. Any change in the collectibility assessment for this or other major customers between the Estimated Closing Statement and the Final Closing Statement could affect the Closing Working Capital figure. The allowance for doubtful accounts must be determined using the same methodology historically applied by Cloudium, and any significant changes in the aging profile or payment behavior of Cloudium's customer base between the estimated and actual measurement dates should be documented and explained.
Multi-Jurisdictional Considerations. Cloudium operates in four principal jurisdictions — the United States, the United Kingdom (approximately 1,200 employees; £312,000,000 in revenue for FYE September 30, 2023, or approximately $390,000,000 at $1.25/£), India (approximately 2,400 employees), and Germany (approximately 400 employees). The multi-jurisdictional nature of Cloudium's operations introduces several complexities into the working capital calculation:
•  Intercompany Balances: Intercompany receivables and payables among the Cloudium entities must be identified and properly eliminated in consolidation. Any timing differences in intercompany settlements as of the Effective Time could create artificial variances in the working capital components of individual entities.
•  Foreign Currency Translation: Working capital components denominated in British pounds (UK subsidiary), Indian rupees (India subsidiary), and euros (Germany subsidiary) must be translated into U.S. dollars in accordance with the Accounting Principles. The exchange rates used for translation (closing rate, average rate, or other specified rate) must be consistent with Cloudium's historical practice and should be clearly documented.
•  Local Tax Receivables and Payables: Each foreign subsidiary may have significant local tax receivables (e.g., VAT refund claims, input tax credits) or payables (e.g., income tax liabilities, withholding tax obligations) that are components of current assets or current liabilities for working capital purposes. These amounts should be carefully reviewed and confirmed with local accounting teams.
Prepaid Expenses, Accrued Liabilities, and Accrued Compensation. These line items are standard components of working capital that often involve estimates and judgment. Prepaid expenses (e.g., prepaid software licenses, insurance premiums, rent) should be reviewed for proper cut-off at the Effective Time. Accrued liabilities (e.g., accrued professional fees, accrued utilities, accrued royalties) should be reviewed for completeness and accuracy. Accrued compensation (e.g., accrued salaries, bonuses, commissions, vacation pay, and payroll tax liabilities) is typically a significant line item for technology companies with large workforces, and the Effective Time (11:59 PM ET on July 9, 2024) falls mid-pay-period for most employees, requiring a precise allocation of compensation costs.
C. Cash Reconciliation
Closing Cash must reflect the aggregate amount of unrestricted cash and cash equivalents held by Cloudium and all of its subsidiaries as of the Effective Time, determined on a consolidated basis. The estimated Closing Cash at closing was approximately $180,000,000.
The final determination of Closing Cash requires a detailed reconciliation of bank balances across all Cloudium entities globally as of 11:59 PM ET on July 9, 2024. This reconciliation must account for:
•  outstanding checks, wire transfers in transit, and other reconciling items;
•  deposits in transit and uncleared funds;
•  cash held in foreign jurisdictions (UK, India, Germany), which may be subject to local regulatory restrictions, foreign exchange controls, or other limitations on repatriation;
•  the distinction between unrestricted and restricted cash, with restricted cash (e.g., cash securing letters of credit, cash held in escrow for other purposes, cash subject to regulatory hold) excluded from the Closing Cash figure; and
•  the impact of any transactions occurring between the date of the most recent bank statements and the Effective Time.
Cash trapped in foreign jurisdictions — particularly India, where foreign exchange controls under the Reserve Bank of India's regulations may limit the ability to repatriate cash freely, and Germany, where tax or regulatory considerations may effectively restrict cash movement — may require special treatment in the Final Closing Statement. The Merger Agreement's definition of "Closing Cash" should be reviewed to determine whether cash that is technically unrestricted but practically difficult to repatriate is included or excluded from the definition.
D. Indebtedness Definition
The Merger Agreement's definition of "Indebtedness" is typically broader than the accounting definition of debt and may encompass a range of obligations beyond borrowed money. The Final Closing Statement must ensure that all items within the contractual definition of Indebtedness are captured, including without limitation:
•  all outstanding obligations for borrowed money (including principal, accrued interest, and any fees or premiums);
•  all obligations under capital leases (or finance leases under IFRS 16), to the extent treated as indebtedness under the Merger Agreement;
•  all deferred purchase price obligations (e.g., earnout obligations or deferred consideration payable in connection with prior acquisitions by Cloudium);
•  all outstanding letters of credit, bank guarantees, and similar instruments, to the extent drawn or to the extent that the definition of Indebtedness includes undrawn amounts;
•  all guarantees of obligations of third parties;
•  all make-whole, prepayment, or breakage premiums payable in connection with the repayment of indebtedness at closing; and
•  any other obligations specified in the Merger Agreement's definition of "Indebtedness" that are not captured by the foregoing categories.
As noted above, Cloudium's existing debt facility consisted of a $620,000,000 term loan and a $200,000,000 revolving credit facility under a credit agreement dated March 15, 2021, with Atlas Commercial Lending Corp. as administrative agent. Both facilities were repaid in full at closing in the aggregate principal amount of $820,000,000, pursuant to the payoff letter dated July 5, 2024. The Final Closing Statement must capture any residual amounts not included in the $820,000,000 payoff, including:
•  accrued and unpaid interest from the last payment date through the date of repayment;
•  any prepayment or make-whole premiums triggered by the early repayment of the term loan in connection with the Merger;
•  any breakage costs or swap termination payments associated with any interest rate hedging arrangements;
•  any administrative agent fees, legal fees, or other costs payable under the credit agreement in connection with the payoff; and
•  any commitment fees or other amounts accrued under the revolving credit facility through the date of termination.
E. Transaction Expenses
The Final Closing Statement must capture all unpaid Transaction Expenses of Cloudium as of the Effective Time. Transaction Expenses were estimated at approximately $185,000,000 in the aggregate at closing, covering a broad range of advisory, legal, regulatory, and other costs. The final determination of Transaction Expenses requires a detailed review of all invoices and engagement letters to confirm which expenses were paid prior to the Effective Time and which remained unpaid.
The principal categories of Transaction Expenses include:
•  Financial Advisory Fees: Fees payable to Veridian Partners LLC (Monica Pressler, senior managing director), which served as Cloudium's financial advisor in connection with the Merger. These fees likely include a success fee contingent upon the closing of the transaction, as well as reimbursable expenses.
•  Legal Fees: Fees and expenses payable to Ridgeway Phelps & Sato LLP (Catherine Answorth, partner, and Alistair Fenn, partner), which served as lead transaction counsel to Cloudium. Legal fees may include both time-based fees and disbursements for filing fees, document production, travel, and other costs.
•  Auditor Fees: Fees payable to Harwell & Dobson LLP (Martin Chisholm, lead engagement partner) for audit-related services rendered in connection with the Merger, including any consent fees, comfort letter fees, and fees for review of transaction-related financial information.
•  Proxy Solicitation Costs: Fees payable to Blackthorn Proxy Advisors LLC, which served as proxy solicitor for the Cloudium stockholder meeting held to approve the Merger.
•  Regulatory Filing Fees: Fees paid or payable to governmental authorities in connection with antitrust, foreign investment, and other regulatory filings required for the consummation of the Merger.
•  D&O Tail Insurance Premiums: The premium for the directors' and officers' liability insurance tail policy procured by Cloudium prior to closing, which provides continued coverage for pre-closing acts and omissions of Cloudium's directors and officers for a specified run-off period following the Effective Time.
•  Other Costs: Miscellaneous transaction-related costs, including data room hosting fees, printing and mailing costs for proxy materials, transfer agent fees, and similar expenses.
It is important to note that the $185,000,000 estimate of Transaction Expenses provided at closing was described as covering "both buyer and target expenses" in certain internal communications. However, for purposes of the Final Closing Statement, only Cloudium's unpaid Transaction Expenses — not Fund VI's or Merger Sub's expenses — are included in the adjustment calculation. Fund VI's own transaction expenses (including fees payable to Calderwood & Harkness LLP, Glenmore Thornton LLP, and Meridian Atlantic Bank / Ironclad Capital Markets) are borne by Fund VI separately and are not components of the purchase price adjustment.
IX. Coordination with Escrow and Indemnification Framework
A. Escrow Fund
At closing on July 9, 2024, $544,000,000 was deposited into an escrow account with Cobalt Trust Company, N.A. (the "Escrow Agent"), as confirmed by wire transfer on the closing date. Laura Ng, Vice President, Escrow Services, at Cobalt Trust Company serves as the primary contact for the escrow account. The escrow fund was established pursuant to the Escrow Agreement, which was executed in its definitive form on January 22, 2024 (concurrently with the Merger Agreement) and became effective at the Effective Time.
The escrow fund is subject to the following release schedule:
•  First Release — July 9, 2025: 50% of the original escrow amount ($272,000,000) is released to the Stockholder Representative for distribution to the former Cloudium stockholders, net of any amounts then subject to pending and unresolved indemnification claims asserted by Fund VI under Article IX of the Merger Agreement.
•  Second Release — January 9, 2026: The remaining 50% of the original escrow amount ($272,000,000) is released to the Stockholder Representative, net of any amounts then subject to pending and unresolved indemnification claims. The second release date coincides with the expiration of the 18-month survival period for general representations and warranties.
The primary purpose of the escrow fund is to serve as a source of recovery for indemnification claims by the Buyer Indemnified Parties under Article IX of the Merger Agreement. However, the question of wh

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