BINDING COMMITMENT
REPRESENTATION AND WARRANTY INSURANCE POLICY
Policy Number: NFA-TRI-2024-00487
January 19, 2024
CONFIDENTIAL — FOR THE EXCLUSIVE USE OF THE PARTIES AND THEIR RESPECTIVE ADVISORS
January 19, 2024
FROM:
Northfield Assurance Ltd. 30 St Mary Axe London EC3A 8BF United Kingdom
TO:
Solara Digital Infrastructure Fund VI LP 1200 Market Street, Suite 3400 Wilmington, DE 19801 United States
Attention: Marcus Elliston, Founder & Managing Partner
Priya Narasimhan, Co-Managing Partner & Chief Investment Officer
CC:
Calderwood & Harkness LLP 599 Lexington Avenue New York, NY 10022
Attention: Harrison Wexford, Partner
Peregrine Advisory Group LLC 1166 Avenue of the Americas New York, NY 10036
Attention: Timothy Gallagher, Lead Broker
Placed By:
Peregrine Advisory Group LLC (Insurance Broker)
Northfield Underwriter Contact:
Patrick Graves Senior Vice President, Transactional Risk Northfield Assurance Ltd.
Email: pgraves@northfieldassurance.com
Direct: +44 20 7946 0112
SECTION 1: RECITALS AND BACKGROUND
WHEREAS, Solara Digital Infrastructure Fund VI LP, a Delaware limited partnership ("Fund VI" or the "Named Insured"), through its wholly owned subsidiary Stratos Merger Sub Inc. ("Merger Sub"), a Delaware corporation formed on January 8, 2024 for the sole purpose of effecting the transaction described herein, proposes to acquire Cloudium Technologies plc ("Cloudium" or the "Target"), a public limited company incorporated under the laws of England and Wales (Company No. 09734521) and listed on the Nasdaq Global Select Market under the ticker symbol "CLDM," by means of a reverse triangular merger pursuant to the Delaware General Corporation Law (the "DGCL");
WHEREAS, pursuant to the contemplated transaction, Merger Sub will merge with and into Cloudium, with Cloudium surviving the merger as a wholly owned subsidiary of Fund VI (the "Transaction");
WHEREAS, the total deal value attributable to the Transaction is approximately Six Billion Eight Hundred Million Dollars ($6,800,000,000), which amount is based on a per-share merger consideration of approximately $36.92 per share of Cloudium common stock, calculated on the basis of 184,200,000 shares of Cloudium common stock outstanding as of January 15, 2024, and subject to customary adjustments as set forth in the Merger Agreement;
WHEREAS, the parties anticipate executing the Agreement and Plan of Merger (the "Merger Agreement") on or about January 22, 2024, among Cloudium Technologies plc, Stratos Merger Sub Inc., and Solara Digital Infrastructure Fund VI LP, which Merger Agreement will set forth the terms and conditions of the Transaction, including, among other things, the representations and warranties of the Seller, the indemnification obligations of the parties, and the conditions to the consummation of the Transaction;
WHEREAS, Northfield Assurance Ltd. ("Northfield" or the "Insurer") delivered a Non-Binding Indication ("NBI") to Peregrine Advisory Group LLC (the "Broker") on January 14, 2024, setting forth the preliminary terms upon which Northfield would consider issuing a buyer-side representation and warranty insurance policy in connection with the Transaction;
WHEREAS, on January 16, 2024, Northfield's underwriting team conducted an underwriting call with the deal team, including representatives of Fund VI, Calderwood & Harkness LLP ("Buyer's Counsel"), Peregrine Advisory Group LLC, and Glenmore Thornton LLP, during which the material terms of the Transaction, the scope and findings of the buyer's due diligence, and the key risk factors identified in connection therewith were discussed in detail;
WHEREAS, in connection with the underwriting of the proposed Policy, Northfield has received and reviewed extensive due diligence materials provided by Calderwood & Harkness LLP and Peregrine Advisory Group LLC, including legal, financial, tax, environmental, and operational due diligence reports, memoranda, and summaries, as well as the near-final draft of the Merger Agreement (the Third Revised Draft dated January 17, 2024), relevant disclosure schedules in substantially complete form, and certain ancillary transaction documents;
WHEREAS, the Named Insured desires that Northfield commit, on a binding basis, to issue a buyer-side representation and warranty insurance policy covering losses arising from breaches of the Seller's representations and warranties set forth in the Merger Agreement, on the terms and subject to the conditions described herein; and
WHEREAS, the purpose of this Binding Commitment — Representation and Warranty Insurance Policy (this "Binder Agreement") is to set forth the binding commitment of Northfield Assurance Ltd. to issue such buyer-side representation and warranty insurance policy on the terms described herein, subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 2: BINDING COMMITMENT
Northfield Assurance Ltd. hereby irrevocably commits to issue the representation and warranty insurance policy described in this Binder Agreement (the "Policy") in accordance with the terms and conditions set forth herein. This commitment is a binding obligation of Northfield and shall be enforceable by the Named Insured and the Additional Insureds in accordance with its terms.
This commitment shall become binding upon the execution of this Binder Agreement by both Northfield and the Named Insured and the payment of the Binder Deposit (as defined in Section 6 below). Upon satisfaction of both conditions, Northfield's obligation to issue the Policy shall be irrevocable, subject only to the conditions precedent to issuance set forth in Section 7 of this Binder Agreement.
The Policy shall be issued on or prior to the Closing Date (as defined herein) of the Transaction. Northfield shall use commercially reasonable efforts to deliver a final form of the Policy to the Named Insured and the Broker no later than five (5) business days prior to the anticipated Closing Date so as to permit the Named Insured and its counsel an adequate opportunity to review the final Policy form. To the extent that the final form of the Policy is materially inconsistent with the terms set forth in this Binder Agreement, the terms of this Binder Agreement shall control, and Northfield shall promptly revise the Policy to conform to this Binder Agreement.
SECTION 3: DEFINED TERMS
For purposes of this Binder Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Merger Agreement, unless the context otherwise requires.
"Named Insured" means Solara Digital Infrastructure Fund VI LP, a Delaware limited partnership (EIN: 87-4523190), and its successors and permitted assigns, including the surviving corporation following the consummation of the Merger.
"Additional Insureds" means, collectively: (a) Solara Digital Infrastructure LP; (b) Solara Digital GP LLC; (c) Solara Fund VI GP LLC; (d) Solara Digital Co-Invest VI-A LP; (e) Stratos Merger Sub Inc.; and (f) the respective directors, officers, employees, agents, and controlled affiliates of each of the foregoing entities and of the Named Insured. For the avoidance of doubt, the term "controlled affiliates" shall include any entity that is directly or indirectly controlled by any of the foregoing, where "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through ownership of voting securities, by contract, or otherwise.
"Target" or "Seller" means Cloudium Technologies plc, a public limited company incorporated under the laws of England and Wales, Company No. 09734521, with its registered office at 45 Broadwick Street, London W1F 0DB, United Kingdom, and its US headquarters at 600 Townsend Street, Suite 800, San Francisco, CA 94103, United States, together with its direct and indirect subsidiaries (including Cloudium Technologies UK Ltd. (Company No. 11287456), Cloudium Technologies India Pvt. Ltd. (Bangalore, India), and Cloudium Solutions GmbH (Berlin, Germany)).
"Merger Agreement" means the Agreement and Plan of Merger to be entered into among Cloudium Technologies plc, Stratos Merger Sub Inc., and Solara Digital Infrastructure Fund VI LP, anticipated to be dated on or about January 22, 2024, together with all schedules, exhibits, and annexes thereto, and all amendments, modifications, and supplements thereto made in accordance with the terms thereof and, to the extent applicable, the terms of this Binder Agreement.
"Transaction" means the reverse triangular merger of Stratos Merger Sub Inc. with and into Cloudium Technologies plc, pursuant to which Cloudium will survive the merger as a wholly owned subsidiary of Fund VI, for aggregate merger consideration of approximately Six Billion Eight Hundred Million Dollars ($6,800,000,000), as more fully described in the Merger Agreement.
"Policy" means the buyer-side representation and warranty insurance policy to be issued by Northfield Assurance Ltd. to the Named Insured under Policy No. NFA-TRI-2024-00487, in accordance with the terms and conditions of this Binder Agreement.
"Covered Representations" means the representations and warranties of the Seller as set forth in Article IV of the Merger Agreement, together with the corresponding disclosure schedules delivered by the Seller in connection therewith.
"Closing Date" means the date on which the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware in accordance with the applicable provisions of the DGCL and the terms of the Merger Agreement.
"Effective Date of Policy" means the Closing Date.
"Broker" means Peregrine Advisory Group LLC, an insurance brokerage firm licensed in the State of New York, with offices at 1166 Avenue of the Americas, New York, NY 10036.
"Buyer's Counsel" means Calderwood & Harkness LLP, with offices at 599 Lexington Avenue, New York, NY 10022, and the responsible partner in connection with the Transaction being Harrison Wexford.
"Target's Counsel" means Ridgeway Phelps & Sato LLP, with the lead partner in connection with the Transaction being Catherine Answorth.
"Escrow Agent" means Cobalt Trust Company, located at 100 Wall Street, New York, NY 10005, which is to serve as the escrow agent pursuant to the escrow agreement to be entered into by the applicable parties on or prior to the Closing Date (the "Escrow Agreement").
"Escrow Fund" means the aggregate sum of Five Hundred Forty-Four Million Dollars ($544,000,000) to be deposited by the parties with the Escrow Agent at Closing pursuant to the terms of the Merger Agreement and the Escrow Agreement.
"Stockholder Representative" means Douglas Pemberton, the independent board chair of Cloudium Technologies plc, in his capacity as the representative of the former stockholders of Cloudium following the Closing.
"Rollover Participants" means, collectively: (a) Jonathan Hargrove, Chief Executive Officer of Cloudium, who holds approximately 4.2% of the outstanding shares of Cloudium common stock and who will roll over approximately 50% of his equity stake (representing an estimated $142,814,544 in rollover equity); and (b) Pinnacle Growth Ventures LLC, which holds approximately 11.6% of the outstanding shares of Cloudium common stock and which will roll over approximately 60% of its equity stake (representing an estimated $473,241,408 in rollover equity). The aggregate rollover equity of the Rollover Participants is estimated at $616,055,952.
"Knowledge Declaration" means the declaration to be executed and delivered by the Named Insured in connection with the issuance of the Policy, identifying the individuals comprising the Named Insured's "deal team" for purposes of the Known-Loss Exclusion and certifying the knowledge of such individuals with respect to the Covered Representations.
"Loss" or "Losses" means, with respect to any claim under the Policy, any and all damages, losses, liabilities, costs, expenses (including reasonable attorneys' fees and expenses of investigation), judgments, fines, penalties, and settlement amounts actually incurred or suffered by the Named Insured or any Additional Insured as a direct result of a breach of any Covered Representation, subject to the terms, conditions, limitations, and exclusions set forth in the Policy.
SECTION 4: POLICY TERMS
4.1 Policy Type
The Policy shall be a buyer-side representation and warranty insurance policy. The Policy covers Losses arising from actual breaches of the Seller's representations and warranties as set forth in Article IV of the Merger Agreement (the Covered Representations), subject to the terms, conditions, exclusions, and limitations set forth in this Binder Agreement and the Policy. The Policy is a first-party insurance product; the Seller is not a party to and has no obligations under the Policy.
4.2 Policy Number
The Policy shall be issued under Policy Number NFA-TRI-2024-00487.
4.3 Policy Limit
The aggregate limit of liability of Northfield under the Policy shall be Six Hundred Eighty Million Dollars ($680,000,000), which amount represents ten percent (10%) of the total deal value of the Transaction ($6,800,000,000) (the "Policy Limit").
The Policy Limit is an aggregate limit and applies to the aggregate of all claims made under the Policy. For the avoidance of doubt, the Policy Limit shall not be reinstated or replenished following the payment of any claim, in whole or in part. Once the aggregate of all payments made by Northfield under the Policy equals the Policy Limit, Northfield shall have no further liability under the Policy with respect to any subsequent or then-pending claims. The Policy Limit is inclusive of all defense costs, investigation costs, and legal fees payable under the Policy, if any.
4.4 Retention. The retention amount applicable to the Policy (the "Retention") shall be Five Hundred Forty-Four Million Dollars ($544,000,000), which amount represents eight percent (8%) of the total deal value of the Transaction ($6,800,000,000). The Retention is equal to the amount of the indemnity escrow to be deposited with Cobalt Trust Company at Closing pursuant to the Merger Agreement and the Escrow Agreement.
The Policy provides first-dollar coverage for Losses in excess of the Retention. No deductible, co-insurance, or similar cost-sharing mechanism shall apply to Losses above the Retention.
Retention Drop-Down. Fifty percent (50%) of the Retention, equal to Two Hundred Seventy-Two Million Dollars ($272,000,000), shall drop down on the date that is twelve (12) months following the Closing Date (the "Drop-Down Date"), provided that: (i) no claims are then pending under the Policy; and (ii) no claims for indemnification are then pending under Article IX of the Merger Agreement or against the Escrow Fund. If the conditions for the Retention drop-down are satisfied as of the Drop-Down Date, the effective Retention shall be reduced to Two Hundred Seventy-Two Million Dollars ($272,000,000) for all claims arising or reported on or after the Drop-Down Date. For the avoidance of doubt, the drop-down shall apply on a prospective basis to claims first reported on or after the Drop-Down Date and shall also apply to reduce the aggregate Retention threshold for purposes of determining whether the aggregate Losses incurred by the Named Insured exceed the Retention.
If any claim is pending under the Policy or the indemnification provisions of the Merger Agreement as of the Drop-Down Date, the Retention drop-down shall not take effect until such time as all such pending claims have been resolved, dismissed, or otherwise finally determined, at which point the Retention shall automatically drop down as described above, subject to the continued satisfaction of the foregoing conditions.
4.5 Coverage Period / Policy Period
The Policy shall commence on the Closing Date (the Effective Date of Policy) and shall remain in effect for the coverage periods specified below (the "Policy Period"):
(a) General Representations and Warranties. With respect to the Covered Representations other than the Fundamental Representations and Tax Representations (each as defined below), coverage shall be provided for a period of eighteen (18) months from the Closing Date. This coverage period is coterminous with the survival period applicable to such representations and warranties under the Merger Agreement. Assuming a Closing Date of July 9, 2024, coverage for general representations and warranties would expire on January 9, 2026.
(b) Fundamental Representations. With respect to the representations and warranties of the Seller relating to organization and qualification, authority and enforceability, capitalization, and tax matters (collectively, the "Fundamental Representations"), coverage shall be provided for a period of six (6) years from the Closing Date. Assuming a Closing Date of July 9, 2024, coverage for the Fundamental Representations would expire on July 9, 2030.
(c) Tax Representations. With respect to the representations and warranties of the Seller relating specifically to tax matters (the "Tax Representations"), coverage shall be provided for a period equal to the applicable statute of limitations (including any extensions or tolling thereof) plus sixty (60) days, as determined by reference to the relevant taxing jurisdiction and the nature of the applicable tax liability. For the avoidance of doubt, Tax Representations are also Fundamental Representations, and the coverage period applicable to Tax Representations shall be the longer of the period specified in clause (b) above and the period specified in this clause (c).
All claims under the Policy must be reported to Northfield within the applicable coverage period. A claim reported within the applicable coverage period shall not be extinguished solely by the expiration of the Policy Period, provided that the underlying Loss arose from a breach of a Covered Representation that occurred on or prior to the Closing Date and was reported in accordance with the claims procedures set forth in Section 9.
4.6 Scope of Coverage
The Policy shall cover Losses arising from breaches of all representations and warranties of the Seller as set forth in Article IV of the Merger Agreement, including but not limited to the following categories of representations and warranties:
(a) Organization, good standing, and qualification;
(b) Capitalization, including authorized and outstanding shares, options, warrants, and convertible securities;
(c) Authority and enforceability, including due authorization of the Merger Agreement and the Transaction;
(d) Financial statements, including accuracy and compliance with GAAP and applicable accounting standards;
(e) Absence of undisclosed liabilities;
(f) Absence of a material adverse effect since September 30, 2023 (the balance sheet date);
(g) Compliance with laws, rules, and regulations, including applicable laws of the United Kingdom, the United States, the European Union, and India;
(h) Litigation, claims, and proceedings, including pending and threatened litigation;
(i) intellectual property, including ownership, validity, enforceability, and non-infringement of patents, trademarks, copyrights, trade secrets, and licenses;
(j) Tax matters, including the accuracy of tax returns, the absence of material tax deficiencies, and compliance with applicable tax laws;
(k) Employee benefits, including compliance with ERISA and applicable UK and foreign pension and benefits laws;
(l) Environmental matters, subject to the exclusions set forth in Section 5;
(m) Material contracts, including the absence of defaults and the enforceability thereof;
(n) Insurance coverage;
(o) Real property, including owned and leased properties;
(p) Data privacy and cybersecurity, including compliance with applicable data protection laws (GDPR, CCPA, and applicable Indian data protection laws);
(q) Government contracts, including compliance with applicable procurement regulations; and
(r) All related disclosure schedules delivered by the Seller.
Coverage under the Policy is excess above the Retention. The Named Insured acknowledges that the Policy does not provide coverage for any Losses that fall within the Retention, except to the extent that the Retention has been reduced pursuant to the Retention drop-down mechanism described in Section 4.4.
4.7 Interplay with Indemnification Provisions
The Policy is intended to complement and supplement, but not to replace, the indemnification provisions set forth in Article IX of the Merger Agreement. The following describes the interplay between the Policy and the indemnification framework under the Merger Agreement:
(a) Indemnification Cap. The Merger Agreement provides for a general indemnification cap equal to fifteen percent (15%) of the deal value, or One Billion Twenty Million Dollars ($1,020,000,000). This cap limits the aggregate liability of the Seller and the Stockholder Representative for indemnification claims under Article IX of the Merger Agreement, subject to certain exceptions for fraud, willful breach, and specified matters.
(b) Escrow Fund. Pursuant to the Merger Agreement and the Escrow Agreement, Five Hundred Forty-Four Million Dollars ($544,000,000) shall be deposited with the Escrow Agent (Cobalt Trust Company) at Closing (the "Escrow Fund"). The Escrow Fund shall serve as the primary source of recovery for indemnification claims under the Merger Agreement. Fifty percent (50%) of the Escrow Fund ($272,000,000) shall be released to the former Cloudium stockholders twelve (12) months following the Closing Date (anticipated to be July 9, 2025), less the amount of any then-pending claims. The remainder of the Escrow Fund shall be released eighteen (18) months following the Closing Date (anticipated to be January 9, 2026), less the amount of any then-pending claims.
(c) Indemnity Basket. The Merger Agreement provides for an indemnification basket equal to 0.75% of the deal value, or Fifty-One Million Dollars ($51,000,000), structured as a tipping basket (not a true deductible). Once the aggregate amount of indemnifiable Losses exceeds the basket amount, the Seller's indemnification obligation applies to all such Losses from the first dollar (subject to the de minimis threshold). Individual claims below the de minimis threshold of Five Hundred Thousand Dollars ($500,000) are excluded from the calculation of the basket.
(d) Order of Recovery. The Named Insured's first recourse for indemnification claims arising from breaches of the Covered Representations shall be: (i) the Escrow Fund, in accordance with the procedures set forth in the Escrow Agreement; and (ii) direct indemnification from the Rollover Participants, to the extent provided under the Merger Agreement (subject to the indemnification cap). The Policy provides coverage for amounts in excess of the Retention. Accordingly, the Named Insured must first exhaust the Retention (through the Escrow Fund and/or direct indemnification from the Rollover Participants and/or the Stockholder Representative) before seeking recovery under the Policy, except to the extent the Retention has been reduced pursuant to the Retention drop-down mechanism described in Section 4.4.
(e) Special Indemnities. Certain categories of indemnification obligations under the Merger Agreement are uncapped, including indemnification for fraud, willful breach, tax indemnities (to the extent specified in the Merger Agreement), and certain specified litigation matters identified in the disclosure schedules. The Policy does not cover fraud or willful breach by the Named Insured or any Additional Insured; however, the Policy does cover Losses arising from fraud or willful breach by the Seller, subject to the terms and conditions of the Policy.
SECTION 5: EXCLUSIONS
5.1 Standard Exclusions
The Policy shall not cover any Losses arising from, attributable to, or in connection with the following:
(a) Known Breaches (Known-Loss Exclusion). Losses arising from any matter, fact, circumstance, or condition that was actually known to the Named Insured's deal team at or prior to the date of execution of the Merger Agreement and that constitutes, or would reasonably be expected to constitute, a breach of any Covered Representation. For purposes of this exclusion, the Named Insured's "deal team" consists of Marcus Elliston (Founder & Managing Partner of Fund VI), Priya Narasimhan (Co-Managing Partner & Chief Investment Officer of Fund VI), and the professionals at Calderwood & Harkness LLP identified in the Knowledge Declaration to be delivered in connection with the issuance of the Policy. The determination of "actual knowledge" shall be based on the actual, subjective awareness of the identified individuals, without any duty of inquiry or investigation, and shall not include constructive knowledge, imputed knowledge, or knowledge that could have been obtained through further diligence.
(b) Fraud or Willful Misconduct by the Insured. Losses arising from or attributable to fraud, intentional misrepresentation, or willful misconduct committed by the Named Insured, any Additional Insured, or any director, officer, employee, or agent of the Named Insured or any Additional Insured. For the avoidance of doubt, this exclusion does not apply to fraud, intentional misrepresentation, or willful misconduct committed by the Seller, its officers, directors, employees, or agents.
(c) Forward-Looking Statements. Losses arising from or related to any forward-looking statement, projection, forecast, estimate, budget, prediction, opinion, or similar statement or assessment, whether or not included in the Covered Representations, to the extent such statement or assessment relates to future events, outcomes, or performance.
(d) Covenants and Pre-Closing Obligations. Losses arising from breaches of covenants, agreements, or pre-closing obligations of the Seller set forth in the Merger Agreement (as distinguished from representations and warranties), including without limitation any breach of the Seller's interim operating covenants set forth in Article V of the Merger Agreement.
(e) Purchase Price Adjustments and Earnout Disputes. Losses arising from or attributable to purchase price adjustments, working-capital true-ups, or earnout disputes arising under Section 2.7 of the Merger Agreement, or any similar adjustment or reconciliation mechanism.
(f) Specified Environmental Liabilities. Losses arising from or related to: (i) the presence, release, or threatened release of asbestos or asbestos-containing materials; (ii) the presence, release, or threatened release of per- and polyfluoroalkyl substances ("PFAS"); or (iii) environmental cleanup liabilities (including remediation, removal, or response costs) arising under any applicable environmental law, to the extent such liabilities are not covered by the Seller's representations and warranties regarding environmental matters as set forth in the applicable section of Article IV of the Merger Agreement.
(g) Pension Underfunding and Withdrawal Liability. Losses arising from or attributable to: (i) pension underfunding or any liability arising under Title IV of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), including withdrawal liability under Section 4201 of ERISA; or (ii) any liability arising under the UK Pensions Act 2004 (including contribution notices, financial support directions, or restoration orders issued by the Pensions Regulator).
(h) Transfer Pricing Adjustments. Losses arising from transfer pricing adjustments, reallocations, or assessments by any taxing authority, except to the extent that such adjustments constitute a breach of a specific tax representation set forth in the applicable section of Article IV of the Merger Agreement.
(i) Consequential, Punitive, or Exemplary Damages. Consequential, punitive, or exemplary damages of any kind, except to the extent that such damages are awarded to a third party in a final, non-appealable judgment or settlement of a third-party claim for which the Named Insured or an Additional Insured is liable and for which coverage is otherwise available under the Policy.
5.2 Transaction-Specific Exclusions
In addition to the standard exclusions set forth in Section 5.1, the Policy shall not cover any Losses arising from, attributable to, or in connection with the following:
(a) Disclosed Matters. Any matter, fact, circumstance, or liability that is specifically and accurately disclosed in the Seller disclosure schedules delivered by the Seller as of the date of execution of the Merger Agreement, to the extent that such disclosure is made with sufficient specificity and detail to enable a reasonable reader to identify the nature and scope of the matter disclosed. For the avoidance of doubt, this exclusion applies only to the extent that the relevant matter is accurately and fairly disclosed in the applicable disclosure schedule; inaccurate, incomplete, or misleading disclosures shall not benefit from this exclusion.
(b) Existing Indebtedness. Any liabilities relating to the existing indebtedness of Cloudium Technologies plc under that certain Credit Agreement dated March 15, 2021, by and among Cloudium Technologies plc, as borrower, and Atlas Commercial Lending Corp., as administrative agent and lender (as amended, restated, supplemented, or otherwise modified from time to time), in the aggregate principal amount of Eight Hundred Twenty Million Dollars ($820,000,000), which indebtedness is to be repaid in full at or prior to the Closing. This exclusion applies solely to liabilities under such credit agreement and does not exclude coverage for breaches of the Covered Representations that are unrelated to such indebtedness.
SECTION 6: PREMIUM AND FEES
6.1 Policy Premium
The total premium payable for the Policy (the "Premium") shall be Thirteen Million Six Hundred Thousand Dollars ($13,600,000), which represents a rate of two percent (2.0%) of the Policy Limit of $680,000,000. The Premium is payable by the Named Insured (Solara Digital Infrastructure Fund VI LP) and shall be allocated and paid as follows:
(a) Binder Deposit. Twenty-five percent (25%) of the Premium, equal to Three Million Four Hundred Thousand Dollars ($3,400,000) (the "Binder Deposit"), shall be due and payable upon the execution of this Binder Agreement. The Binder Deposit is non-refundable, except in the limited circumstance where the Transaction is not consummated due to a condition outside the reasonable control of the Named Insured, including, without limitation, the failure to obtain required regulatory approvals (under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or the UK Competition and Markets Authority review) or the failure of the Seller to satisfy the conditions to Closing set forth in the Merger Agreement; provided that the Named Insured has complied in all material respects with its obligations under this Binder Agreement. In such event, the Binder Deposit shall be refunded to the Named Insured within thirty (30) days of the Named Insured's written request, less any reasonable out-of-pocket underwriting costs incurred by Northfield.
(b) Balance of Premium. The remaining seventy-five percent (75%) of the Premium, equal to Ten Million Two Hundred Thousand Dollars ($10,200,000) (the "Balance of Premium"), shall be due and payable on or before the Closing Date. The Balance of Premium shall be paid by wire transfer of immediately available funds to the account designated by Northfield.
The Premium is fully earned upon the Closing Date and is non-refundable upon and after the Closing, regardless of whether any claims are made under the Policy or whether the Policy expires without any claims having been made. The Premium shall be paid without any set-off, counterclaim, deduction, or withholding.
6.2 Broker Fee
A broker fee of Six Hundred Eighty Thousand Dollars ($680,000) (the "Broker Fee") shall be payable by the Named Insured to Peregrine Advisory Group LLC (the Broker) in connection with the placement of the Policy. The Broker Fee shall be due and payable upon the execution of this Binder Agreement and shall be paid by wire transfer of immediately available funds to the account designated by the Broker. The Broker Fee is separate from and in addition to the Premium and is non-refundable.
6.3 Taxes. All applicable insurance premium taxes, surplus lines taxes, stamping fees, and similar governmental charges and assessments imposed in connection with the issuance of the Policy (collectively, "Premium Taxes") are in addition to the Premium and are the sole responsibility of the Named Insured. Northfield Assurance Ltd. will provide the Named Insured and the Broker with calculations of the applicable Premium Taxes prior to the Closing Date. The Named Insured shall pay all Premium Taxes on or before the Closing Date, or at such other time as required by applicable law.
SECTION 7: CONDITIONS TO ISSUANCE OF POLICY
The obligation of Northfield to issue the Policy is subject to the satisfaction (or waiver by Northfield in its sole discretion) of each of the following conditions precedent:
7.1 Execution of the Merger Agreement
The Merger Agreement must be duly executed and delivered by all parties thereto (Cloudium Technologies plc, Stratos Merger Sub Inc., and Solara Digital Infrastructure Fund VI LP) in form and substance substantially consistent with the near-final draft reviewed by Northfield's underwriting team, such near-final draft being the Third Revised Draft dated January 17, 2024, a copy of which has been provided to Northfield by Calderwood & Harkness LLP.
Without limiting the generality of the foregoing, no material modification, amendment, supplement, or waiver shall be made to: (a) Article IV of the Merger Agreement (Seller's Representations and Warranties); or (b) Article IX of the Merger Agreement (Indemnification), in each case without the prior written consent of Northfield. For purposes of this Section, a "material modification" means any change that would materially alter the scope, substance, or effect of any Covered Representation or the indemnification obligations of the parties, including any change to the survival periods, indemnification caps, basket amounts, de minimis thresholds, or escrow arrangements. Northfield shall respond to any request for consent to a proposed modification within three (3) business days of receipt of such request, and consent shall not be unreasonably withheld, conditioned, or delayed.
7.2 Payment of Premium
The Binder Deposit must be paid upon the execution of this Binder Agreement, and the Balance of Premium must be paid on or prior to the Closing Date, in each case in accordance with Section 6.1. Failure to pay the Binder Deposit or the Balance of Premium when due shall constitute a material breach of this Binder Agreement and shall relieve Northfield of its obligation to issue the Policy.
7.3 No-Claims Declaration
On or before the Closing Date, the Named Insured must deliver to Northfield Assurance Ltd. (Attn: Patrick Graves, SVP, Transactional Risk) a No-Claims Declaration in the form attached hereto as Exhibit A (or in such other form as may be mutually agreed by the parties), certifying that:
(a) As of the Closing Date, the Named Insured has no actual knowledge of any breach of any Covered Representation that would reasonably be expected to give rise to a claim under the Policy;
(b) As of the Closing Date, the Named Insured has no actual knowledge of any fact, circumstance, or condition that would reasonably be expected to constitute a breach of any Covered Representation; and
(c) All information provided by the Named Insured and its advisors to Northfield in connection with the underwriting of the Policy remains true, complete, and accurate in all material respects as of the Closing Date.
The No-Claims Declaration must be signed by Marcus Elliston or Priya Narasimhan, as an authorized representative of Solara Digital Infrastructure Fund VI LP, or by such other authorized representative of the Named Insured as may be designated in writing to Northfield.
7.4 Completion of Underwriting Review
Northfield must have received and reviewed all due diligence materials, reports, summaries, and memoranda reasonably requested by Northfield in connection with the underwriting of the Policy. Such materials include, without limitation:
(a) The legal due diligence report and memoranda prepared by Calderwood & Harkness LLP;
(b) The financial and tax due diligence reports prepared by Glenmore Thornton LLP, under the direction of lead partners Richard Okamura and Vanessa Liu;
(c) The disclosure schedules delivered by the Seller in connection with the Merger Agreement;
(d) The final or near-final form of the Merger Agreement, including all schedules, exhibits, and ancillary documents;
(e) Such other documents, information, and materials as Northfield may reasonably request.
Northfield confirms that, as of the date of this Binder Agreement, the underwriting review is substantially complete based on the materials received by Northfield through January 18, 2024. Northfield reserves the right to request additional information or clarification with respect to specific matters identified during the underwriting review; provided, however, that any such request shall be made promptly and shall not unreasonably delay the issuance of the Policy.
7.5 No Material Change
There shall have been no material adverse change in the financial condition, operations, business, assets, or prospects of the Target between the date of this Binder Agreement and the Closing Date that would constitute a breach of any Covered Representation and that is known to the Named Insured. For purposes of this Section, a "material adverse change" shall be defined by reference to the definition of "Material Adverse Effect" set forth in the Merger Agreement.
7.6 Closing of the Transaction
The Transaction must close in accordance with the terms of the Merger Agreement. The Policy shall be effective only upon the filing of the Certificate of Merger with the Secretary of State of the State of Delaware. If the Transaction does not close for any reason, the Policy shall not be issued, and the obligations of Northfield under this Binder Agreement shall terminate in accordance with Section 11.
SECTION 8: SUBROGATION
8.1 Waiver of Subrogation
Northfield Assurance Ltd. hereby irrevocably waives, and agrees not to exercise, all rights of subrogation, contribution, or any similar right or remedy against the following persons and entities (collectively, the "Protected Persons"):
(a) Cloudium Technologies plc and its direct and indirect subsidiaries, including Cloudium Technologies UK Ltd. (Company No. 11287456), Cloudium Technologies India Pvt. Ltd. (Bangalore, India), and Cloudium Solutions GmbH (Berlin, Germany);
(b) The current and former officers, directors, and employees of Cloudium Technologies plc and its subsidiaries, including without limitation Jonathan Hargrove (Chief Executive Officer), Sienna Whitfield (Chief Financial Officer), Nadia Chowdhury (General Counsel), and Douglas Pemberton (Independent Board Chair); and
(c) The heirs, executors, administrators, successors, and assigns of any of the foregoing individuals.
Exception — Fraud. Notwithstanding the foregoing, Northfield's rights of subrogation are expressly preserved and not waived with respect to any Protected Person who has committed fraud in connection with the Transaction or the Covered Representations. For purposes of this Section, "fraud" means common law fraud, including intentional misrepresentation, and shall require a finding of scienter (i.e., actual knowledge of the falsity of the representation and an intent to deceive). The fraud exception shall be determined by a court of competent jurisdiction or arbitral tribunal in a final, non-appealable judgment or award.
8.2 Subrogation Against Third Parties
Subject to Section 8.1, Northfield retains and reserves all rights of subrogation, contribution, indemnification, and any similar right or remedy against any person or entity other than the Protected Persons, to the extent that Northfield pays or is obligated to pay a claim under the Policy. The Named Insured agrees to cooperate with Northfield in connection with the exercise of any such subrogation rights, including by assigning to Northfield, at Northfield's request and expense, any claims, rights, or causes of action that the Named Insured may have against such third parties relating to the subject matter of the claim paid by Northfield.
Upon payment of a claim under the Policy, Northfield shall be subrogated to the extent of such payment to all rights of recovery of the Named Insured and the Additional Insureds against any responsible third party (other than the Protected Persons). The Named Insured shall execute all papers reasonably required and shall cooperate fully with Northfield in the exercise of such subrogation rights. The Named Insured shall take no action that would impair or prejudice Northfield's subrogation rights without Northfield's prior written consent.
SECTION 9: CLAIMS PROCEDURE
9.1 Notice of Claim
The Named Insured must provide written notice to Northfield Assurance Ltd. (Attn: Patrick Graves, Senior Vice President, Transactional Risk) of any claim or potential claim under the Policy as promptly as practicable after becoming aware of facts, circumstances, or conditions that could reasonably be expected to give rise to a claim under the Policy. Such notice (a "Claim Notice") shall include:
(a) A description of the facts and circumstances giving rise to the claim, including identification of the Covered Representation(s) alleged to have been breached;
(b) The estimated amount of the Loss, if reasonably determinable at such time;
(c) Copies of all relevant documents, correspondence, and materials in the possession or control of the Named Insured; and
(d) A statement of whether the claim has been or is expected to be submitted under the indemnification provisions of the Merger Agreement, the Escrow Agreement, or otherwise.
Copies of all Claim Notices must be simultaneously provided to Peregrine Advisory Group LLC (Attn: Timothy Gallagher). Failure to provide timely notice shall not invalidate or reduce a claim under the Policy unless Northfield establishes that it has been materially prejudiced by such failure.
9.2 Cooperation. The Named Insured shall cooperate fully and in good faith with Northfield in the investigation, evaluation, defense, and resolution of any claim under the Policy. Without limiting the generality of the foregoing, the Named Insured shall:
(a) Provide Northfield and its representatives with reasonable access to all relevant documents, records, books, correspondence, and other materials in the possession or control of the Named Insured, the Additional Insureds, or the Target (to the extent within the Named Insured's control);
(b) Make available relevant personnel of the Named Insured, the Additional Insureds, and the Target for interviews and discussions with Northfield and its representatives;
(c) Keep Northfield reasonably informed of all material developments relating to the claim; and
(d) Not take any action that would materially prejudice Northfield's rights under the Policy or its ability to investigate, defend, or resolve the claim.
9.3 Coordination with Escrow and Indemnification
Claims under the Policy shall be coordinated with the indemnification procedures set forth in Article IX of the Merger Agreement and the escrow release and claims procedures set forth in the Escrow Agreement with Cobalt Trust Company. The Policy provides coverage for Losses in excess of the Retention. Accordingly, the Named Insured must first exhaust the Retention by seeking recovery through the Escrow Fund and/or direct indemnification from the Seller, the Stockholder Representative, or the Rollover Participants (as applicable and as provided under the Merger Agreement) before seeking recovery under the Policy. This requirement shall not apply to the extent the Retention has been reduced pursuant to the Retention drop-down mechanism described in Section 4.4.
Northfield shall be entitled to receive copies of all claim notices, demands, and correspondence submitted by the Named Insured under the indemnification provisions of the Merger Agreement or the Escrow Agreement, and the Named Insured shall keep Northfield reasonably informed of the status and progress of all such indemnification claims.
9.4 Defense and Settlement
Northfield has the right, but not the obligation, to participate in the investigation, defense, and resolution of any third-party claim (i.e., a claim brought against the Named Insured, any Additional Insured, or the Target by a person or entity that is not a party to the Merger Agreement) that could reasonably be expected to give rise to a claim under the Policy. Northfield may, at its option and expense, engage counsel of its choosing to monitor and/or participate in such defense.
No settlement, compromise, consent, or other resolution of any claim (whether a first-party claim or a third-party claim) that would affect Northfield's liability under the Policy or its rights of subrogation may be entered into by the Named Insured without Northfield's prior written consent, which consent shall not be unreasonably withheld, conditioned, or delayed. The Named Insured shall provide Northfield with written notice of any proposed settlement not less than ten (10) business days prior to the consummation of such settlement, together with a copy of the proposed settlement agreement and all related documentation.
SECTION 10: REPRESENTATIONS OF THE NAMED INSURED
The Named Insured hereby represents and warrants to Northfield Assurance Ltd. as follows, as of the date of this Binder Agreement:
(a) Accuracy of Information. All due diligence materials, reports, memoranda, summaries, and other information provided by the Named Insured, its affiliates, and its advisors (including Calderwood & Harkness LLP, Glenmore Thornton LLP, and Peregrine Advisory Group LLC) to Northfield in connection with the underwriting of the Policy are, to the actual knowledge of the Named Insured, true, complete, and accurate in all material respects. The Named Insured has not knowingly withheld, omitted, or failed to provide any material information that was requested by Northfield or that the Named Insured reasonably believes would be material to Northfield's decision to issue the Policy or the terms thereof.
(b) No Knowledge of Breach. The Named Insured has no actual knowledge, as of the date hereof, of any breach of any Covered Representation or of any fact, circumstance, or condition that would reasonably be expected to constitute such a breach.
(c) Disclosure of Material Findings. The Named Insured has disclosed to Northfield all material findings arising from the legal, financial, tax, and operational due diligence conducted by the Named Insured and its advisors in connection with the Transaction. Such disclosure includes, without limitation, the disclosure of all material risk factors, contingencies, and areas of concern identified during the due diligence process, whether in the diligence reports, underwriting call, or otherwise.
(d) Qualified Professionals. The due diligence in connection with the Transaction was conducted by qualified professionals, including: (i) Calderwood & Harkness LLP (legal due diligence), under the direction of Harrison Wexford, Partner; (ii) Glenmore Thornton LLP (financial and tax due diligence), under the direction of lead partners Richard Okamura and Vanessa Liu; and (iii) Osprey Bancroft & Co. (financial advisory), with Damien Harlow, Managing Director, serving as the lead banker for the Transaction. The Named Insured believes that the scope and depth of the due diligence conducted was appropriate and consistent with customary practice for a transaction of this size and complexity.
(e) Transaction Structure and Terms. The transaction structure (reverse triangular merger under the DGCL) and the key commercial terms of the Transaction are as presented to Northfield during the underwriting call conducted on January 16, 2024, and as reflected in the Third Revised Draft of the Merger Agreement dated January 17, 2024. No material changes to the transaction structure or key commercial terms have occurred since the underwriting call.
The representations and warranties set forth in this Section 10 shall survive the execution of this Binder Agreement and the issuance of the Policy. Any material breach of the representations and warranties set forth in this Section 10 that is discovered by Northfield prior to the issuance of the Policy may, at Northfield's election, constitute grounds for Northfield to decline to issue the Policy; provided that Northfield shall provide the Named Insured with prompt written notice of any such breach and a reasonable opportunity (not less than five (5) business days) to cure such breach.
SECTION 11: DURATION AND TERMINATION OF BINDER
11.1 Duration. This Binder Agreement shall remain in full force and effect from the date hereof until the earliest to occur of the following:
(a) The issuance of the Policy on the Closing Date, at which time this Binder Agreement shall be superseded by the Policy with respect to all matters relating to coverage (provided that the provisions of this Binder Agreement relating to premium payment, representations of the Named Insured, and other obligations that have not been fully performed shall survive as necessary to give effect thereto);
(b) The termination of the Merger Agreement in accordance with its terms, whether by mutual consent of the parties, by the exercise of a termination right, or otherwise; or
(c) The date that is twelve (12) months from the date of this Binder Agreement (i.e., January 19, 2025) (the "Long-Stop Date"), unless the parties mutually agree in writing to extend the Long-Stop Date.
11.2 Termination. This Binder Agreement shall automatically terminate, without any further action by any party, upon the termination of the Merger Agreement by either party thereto in accordance with the terms of the Merger Agreement. Northfield shall have no obligation to monitor the status of the Merger Agreement; the Named Insured shall promptly notify Northfield in writing of any termination or proposed termination of the Merger Agreement.
Upon termination of this Binder Agreement for any reason, Northfield shall have no obligation to issue the Policy, and the Binder Deposit shall be non-refundable, except as expressly provided in Section 6.1 with respect to a termination of the Transaction due to a condition outside the control of the Named Insured.
For the avoidance of doubt, the termination of this Binder Agreement shall not affect any rights or obligations of the parties that have accrued prior to such termination, including any obligation of the Named Insured to pay the Binder Deposit or the Broker Fee.