1041-00003 · Solara Digital Infrastructure LP · R&W Insurance

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Contract analysis Extract to table

CONFIDENTIAL — FOR DISCUSSION PURPOSES ONLY

NORTHFIELD ASSURANCE LTD. 30 St Mary Axe London EC3A 8BF United Kingdom

January 14, 2024

Reference: NBI-2024-00487

NON-BINDING INDICATION — FOR DISCUSSION PURPOSES ONLY

Peregrine Advisory Group LLC 1166 Avenue of the Americas New York, NY 10036

Attention: Timothy Gallagher, Lead Broker

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

Attention: Harrison Wexford, Partner

Attention: Tiffany Rosenthal, Associate

Dear Mr. Gallagher:

I. INTRODUCTION AND PURPOSE

Northfield Assurance Ltd. ("Northfield" or the "Insurer") is pleased to provide this non-binding indication of terms (this "NBI," Reference No. NBI-2024-00487) for a buyer-side representation and warranty insurance policy (the "Policy") in connection with the proposed acquisition (the "Transaction") of Cloudium Technologies plc ("Cloudium" or the "Target"), a public limited company incorporated under the laws of England and Wales (registered number 09734521) and listed on the Nasdaq Global Select Market under the ticker symbol "CLDM," by Solara Digital Infrastructure Fund VI LP ("Fund VI" or the "Buyer"), a Delaware limited partnership, acting through Stratos Merger Sub Inc. ("Merger Sub"), a Delaware corporation and wholly owned subsidiary of Fund VI, pursuant to a reverse triangular merger.

This NBI is provided in response to the submission materials received from Peregrine Advisory Group LLC ("Peregrine" or the "Broker") in connection with the broker engagement letter between Peregrine and the Buyer dated January 10, 2024, and is based upon Northfield's preliminary review of the materials made available to date, including the draft merger agreement circulated on December 1, 2023, the preliminary due diligence summary memorandum dated January 5, 2024, and related transaction documentation.

This NBI is provided for discussion purposes only and does not constitute a binding commitment, an offer of insurance, or an agreement to issue a policy of insurance. Any binding obligation of Northfield to issue the Policy is expressly conditioned upon, among other things: (a) the satisfactory completion of Northfield's underwriting diligence process, including the scheduled underwriting call and review of all final transaction documents; (b) the review of the execution version of the merger agreement and the final disclosure schedules delivered in connection therewith; (c) agreement on final policy wording, including any transaction-specific exclusions or sub-limits; and (d) the execution of a mutually acceptable binder agreement and payment of the applicable premium. Northfield reserves the right to modify, supplement, or withdraw these proposed terms at any time prior to the execution of such binding agreement.

The proposed terms set forth below are intended to serve as a framework for further discussion among the parties and their advisors in connection with the structuring of representation and warranty insurance for the Transaction.

II. TRANSACTION SUMMARY

A. Transaction Overview

The Transaction is structured as a reverse triangular merger under the Delaware General Corporation Law (the "DGCL"), pursuant to which Merger Sub will merge with and into Cloudium, with Cloudium surviving the merger as a wholly owned subsidiary of Fund VI. The aggregate enterprise value of the Transaction is approximately $6,800,000,000 (the "Deal Value"). Based on approximately 184,200,000 shares of Cloudium common stock outstanding as of the date hereof, the per-share merger consideration is approximately $36.92 per share. The form of consideration payable to stockholders of Cloudium will be cash, subject to rollover elections available to certain stockholders as described in Section II.C below. The Transaction is expected to be effected pursuant to a definitive Agreement and Plan of Merger (the "Merger Agreement") among Fund VI, Merger Sub, and Cloudium, with the Stockholder Representative acting on behalf of the former stockholders of Cloudium following the closing.

B. Key Parties

Buyer: Solara Digital Infrastructure Fund VI LP, a Delaware limited partnership. The general partner of Fund VI is Solara Fund VI GP LLC, a Delaware limited liability company. Fund VI is managed by its sponsor, Solara Digital Infrastructure LP (the "Sponsor"), a Delaware limited partnership with approximately $38 billion of assets under management across its platform. Fund VI is a 2022 vintage fund with $12.4 billion of committed capital and focuses on investments in digital infrastructure, enterprise software, and technology-enabled services.

Target: Cloudium Technologies plc, a public limited company incorporated under the laws of England and Wales (registered number 09734521). Cloudium's registered office is located at 45 Broadwick Street, London W1F 0DB, United Kingdom, and its United States headquarters are located at 600 Townsend Street, Suite 800, San Francisco, California 94103. Cloudium is a provider of cloud-native enterprise resource planning ("ERP"), customer relationship management ("CRM"), and business-intelligence software-as-a-service ("SaaS") solutions to enterprise customers. As of the last twelve months ended September 30, 2023 (the fiscal year end), Cloudium reported revenue of approximately $1,620,000,000 and EBITDA of approximately $405,000,000. Annual recurring revenue ("ARR") as of December 31, 2023 was approximately $1,740,000,000. The Target employs approximately 6,800 employees globally, distributed across the United States, the United Kingdom, India, and Germany.

Merger Sub: Stratos Merger Sub Inc., a Delaware corporation. The sole stockholder of Merger Sub is Fund VI. Merger Sub was formed solely for the purpose of effectuating the Transaction and has not conducted any business activities other than those incidental to its formation and the transactions contemplated by the Merger Agreement.

Key Subsidiaries of the Target:

C. Rollover Equity Participants

Certain stockholders of Cloudium have elected (or are expected to elect) to roll over a portion of their equity into the post-closing capital structure of the surviving entity, as follows:

(a) Jonathan Hargrove (Chief Executive Officer of Cloudium): Rolling over 50% of his 7,736,400 shares, representing approximately 3,868,200 shares at $36.92 per share, for an aggregate rollover value of approximately $142,814,544.

(b) Pinnacle Growth Ventures LLC (a significant institutional stockholder of Cloudium; principal contact: Evelyn Carmichael): Rolling over 60% of its 21,367,200 shares, representing approximately 12,820,320 shares at $36.92 per share, for an aggregate rollover value of approximately $473,241,408.

The total rollover equity contribution is approximately $616,055,952. The terms and conditions of the rollover arrangements are expected to be documented in rollover agreements to be entered into concurrently with or prior to the execution of the Merger Agreement. The rollover equity participants will receive equity interests in a parent holding company of the surviving entity and will be subject to customary transfer restrictions, tag-along and drag-along rights, and other governance provisions.

D. Financing Structure

The Transaction is expected to be financed as follows:

The debt financing is committed by Meridian Atlantic Bank, N.A. (lead arranger and administrative agent) and Ironclad Capital Markets LLC (co-arranger) pursuant to a commitment letter that is expected to be delivered concurrently with the execution of the Merger Agreement. The existing indebtedness of Cloudium to be repaid at closing consists of amounts outstanding under a term loan and revolving credit facility with Atlas Commercial Lending Corp. under a credit agreement dated March 15, 2021, in an aggregate principal amount of approximately $820,000,000.

The total funding requirement for the Transaction, inclusive of the repayment of existing indebtedness, the payment of merger consideration (net of rollover equity), and estimated transaction fees and expenses, is approximately $7,188,944,048.

E. Buyer's Counsel / Diligence Coordinator

The Buyer's legal counsel and diligence coordinator for the Transaction is Calderwood & Harkness LLP, 599 Lexington Avenue, New York, New York 10022. The responsible partner is Harrison Wexford and the lead associate is Tiffany Rosenthal (Matter No. 1041-00003).

The Target's legal counsel is Ridgeway Phelps & Sato LLP. The lead M&A partner is Catherine Answorth.

The Buyer's financial advisor is Osprey Bancroft & Co. (Damien Harlow, Managing Director).

The Buyer's accounting and tax advisor is Glenmore Thornton LLP (Richard Okamura, Transaction Tax; Vanessa Liu, Financial Due Diligence).

F. Anticipated Timeline

The anticipated timeline for the Transaction and the Policy is as follows:

The binding R&W Policy is expected to be issued at or prior to the signing of the Merger Agreement, with the Policy becoming effective as of the closing date of the Transaction.

III. PROPOSED POLICY TERMS

A. Named Insured

The Named Insured under the Policy will be:

(i) Solara Digital Infrastructure Fund VI LP;

(ii) Stratos Merger Sub Inc.;

(iii) Cloudium Technologies plc (as the surviving corporation following the merger);

(iv) All direct and indirect subsidiaries of the surviving corporation existing as of the closing date (including, without limitation, Cloudium Technologies UK Ltd., Cloudium Technologies India Pvt. Ltd., and Cloudium Solutions GmbH); and

(v) Solara Digital Co-Invest VI-A LP, a Delaware limited partnership and co-investment vehicle of the Sponsor, which is expected to make a co-investment of approximately $425,000,000 alongside Fund VI in connection with the Transaction.

The definition of "Named Insured" will include successors and permitted assigns of the foregoing, subject to the assignment provisions of the Policy.

B. Policy Type

The Policy will be structured as a buyer-side representation and warranty insurance policy. The Policy is intended to cover losses incurred by the Named Insured arising from breaches of the Seller's representations and warranties as set forth in the Merger Agreement (anticipated to be set forth in Article IV thereof, based on the draft Merger Agreement currently under review). The Policy will respond on a first-party basis, with the Named Insured as the direct beneficiary of coverage, and will not require the Named Insured to first pursue recovery from the Seller or the indemnity escrow as a condition to making a claim under the Policy, subject to the Retention provisions described in Section III.D below.

C. Policy Limit

The aggregate limit of liability under the Policy (the "Policy Limit") will be:

$680,000,000

The Policy Limit represents ten percent (10%) of the Deal Value of $6,800,000,000. The Policy Limit is an aggregate limit, inclusive of all defense costs, investigation costs, and other amounts payable under the Policy. Once the aggregate of all amounts paid or payable under the Policy equals the Policy Limit, the Insurer's obligations under the Policy will be deemed fully discharged and no further amounts will be payable.

D. Retention (Self-Insured Retention)

The self-insured retention under the Policy (the "Retention") will be:

$544,000,000

The Retention represents eight percent (8%) of the Deal Value and is equal to the indemnity escrow amount to be deposited by the parties with Cobalt Trust Company (the escrow agent) at the closing of the Transaction pursuant to the Merger Agreement. The Insurer's obligation to pay covered losses under the Policy attaches only with respect to losses that, individually or in the aggregate, are in excess of the applicable Retention. The first dollar of covered loss above the applicable Retention is covered by the Policy, up to the Policy Limit.

50% Retention Drop-Down. Twelve (12) months following the closing date of the Transaction (the "Drop-Down Date"), provided that no claims are then pending under the Policy or reasonably expected to be made, the Retention shall be reduced by fifty percent (50%) to $272,000,000 (the "Reduced Retention"). From and after the Drop-Down Date (and subject to the foregoing condition), losses in excess of the Reduced Retention shall be covered under the Policy up to the Policy Limit. For the avoidance of doubt, the Retention drop-down is designed to correspond with the scheduled partial release of the indemnity escrow described in Section VII below.

The Retention may be satisfied by any combination of: (a) amounts recovered by the Named Insured from the indemnity escrow, (b) amounts recovered by the Named Insured through direct indemnification from the Seller, the Stockholder Representative, or the rollover equity participants under the Merger Agreement, and (c) unrecovered losses borne by the Named Insured.

E. Premium. The premium for the Policy (the "Premium") will be calculated as follows:

The Premium is payable by the Buyer upon binding of the Policy, which is anticipated to occur on or about January 19, 2024, or upon the execution of the binder agreement, whichever is earlier. The Premium is fully earned and non-refundable upon binding, regardless of whether the Transaction closes or the Merger Agreement is terminated for any reason. Any applicable taxes, duties, surcharges, or regulatory assessments on the Premium are the sole responsibility of the Buyer and are not included in the Premium amount stated above.

The non-refundable underwriting/diligence access fee of $75,000 previously paid by the Buyer in connection with the initiation of underwriting on January 10, 2024 will be credited against the Premium at binding, such that the net amount payable at binding will be $13,525,000.

F. Broker Fee

A broker fee of $680,000 is payable by the Buyer to Peregrine Advisory Group LLC in connection with the placement of the Policy. The broker fee is separate from and in addition to the Premium described above and is payable in accordance with the terms of the broker engagement letter between Peregrine and the Buyer dated January 10, 2024.

G. Policy Period

The Policy will be effective as of the closing date of the Transaction (the "Inception Date") and will remain in effect for the following periods with respect to the applicable categories of representations and warranties:

The Policy periods for each category of representations and warranties are intended to mirror or exceed the corresponding survival periods set forth in the Merger Agreement, such that the Named Insured will have the benefit of Policy coverage for the full duration of the survival of the underlying representations and warranties. Claims under the Policy must be reported to the Insurer in writing prior to the expiration of the applicable Policy period. Claims reported prior to the expiration of the applicable Policy period but not finally resolved as of such date will continue to be covered under the Policy until final resolution.

H. Underwriting Fee / Diligence Fee

A non-refundable underwriting and diligence access fee of $75,000 was payable upon engagement and has been paid by the Buyer in connection with the initiation of the underwriting process on January 10, 2024. This fee provides Northfield access to the virtual data room, the due diligence summary memorandum, and related diligence materials, and covers the Insurer's internal and external costs incurred in connection with the preliminary underwriting review. As noted in Section III.E above, the underwriting fee will be credited against the Premium at the time of binding. The underwriting fee is non-refundable regardless of whether the Policy is ultimately bound or the Transaction proceeds to closing.

IV. COVERED REPRESENTATIONS AND WARRANTIES

A. Scope of Coverage

Subject to the exclusions described in Section V below and the terms, conditions, and limitations of the Policy (as finally agreed), the Policy is intended to cover losses incurred by the Named Insured arising from any breach of the Seller's representations and warranties as set forth in Article IV of the Merger Agreement. Based on Northfield's review of the draft Merger Agreement circulated on December 1, 2023, and subsequent revisions received through the date hereof, the representations and warranties to be covered by the Policy include, without limitation, representations and warranties regarding the following subject matters:

(a) Organization, good standing, and qualification of the Target and each of its subsidiaries in their respective jurisdictions of organization and in each jurisdiction in which the nature of their business or the ownership of their properties requires qualification;

(b) Authorization and enforceability of the Merger Agreement and the transactions contemplated thereby, including the power and authority of the Target to enter into the Merger Agreement and to consummate the merger;

(c) Capitalization of the Target, including the number and class of authorized and outstanding shares, the absence of undisclosed equity interests, and the accuracy of the capitalization table;

(d) Financial statements, including the audited consolidated financial statements of the Target and its subsidiaries for the fiscal years ended September 30, 2021, September 30, 2022, and September 30, 2023, as audited by Harwell & Dobson LLP, and the unaudited interim financial statements, and the fair presentation thereof in conformity with applicable accounting standards;

(e) Absence of undisclosed liabilities, other than liabilities reflected or reserved against on the most recent balance sheet, liabilities incurred in the ordinary course of business since the balance sheet date, and liabilities arising under the Merger Agreement;

(f) Absence of a material adverse effect since the date of the most recent audited financial statements;

(g) Compliance with applicable laws, rules, and regulations, including without limitation data privacy and cybersecurity laws and regulations (including the General Data Protection Regulation (EU) 2016/679 ("GDPR"), the California Consumer Privacy Act (Cal. Civ. Code §§ 1798.100 et seq.) ("CCPA"), and comparable state, federal, and international data protection and privacy laws);

(h) Tax matters, including the timely filing of all required tax returns, the payment of all taxes due and payable, the absence of tax liens, the absence of pending or threatened tax audits or assessments (other than as disclosed), and compliance with transfer pricing requirements;

(i) intellectual property, including the ownership of and rights to all material intellectual property used in the Target's business (patents, trademarks, copyrights, trade secrets, and domain names), the absence of infringement of third-party intellectual property rights, the protection of proprietary source code, and compliance with open-source software license obligations;

(j) Material contracts, including the existence, validity, and enforceability of all contracts that are material to the Target's business, the absence of defaults thereunder, and the absence of change-of-control or consent requirements that have not been satisfied or waived;

(k) Employee benefits and ERISA matters, including the qualification and administration of all employee benefit plans, the absence of underfunded pension liabilities, and compliance with ERISA and the Internal Revenue Code;

(l) Labor and employment, including compliance with all applicable labor and employment laws and regulations, the absence of pending or threatened labor disputes, and the status of the Target's workforce (including, with respect to Cloudium Technologies UK Ltd., compliance with UK employment law, collective bargaining agreements, and the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE"));

(m) Real property, including the ownership of or valid leasehold interest in all real property used in the Target's business, the absence of material encumbrances, and compliance with applicable zoning and land use regulations;

(n) Environmental matters, including compliance with all applicable environmental laws and regulations, the absence of environmental contamination, and the absence of pending or threatened environmental claims;

(o) Insurance, including the maintenance of insurance policies in amounts and types customary for businesses of the size and nature of the Target;

(p) Litigation and proceedings, including the absence of pending or threatened litigation, arbitration, or governmental proceedings that could reasonably be expected to be material to the Target;

(q) Government contracts, including the compliance of the Target and its subsidiaries with all applicable laws, rules, and regulations governing government contracts and the absence of pending or threatened debarment, suspension, or other adverse actions (including, specifically, representations relating to the Target's relationship with Aegis Federal Solutions Inc. and the associated Master SaaS Agreement representing approximately $84,000,000 in ARR);

(r) Brokers and finders, including the absence of any liability for brokerage commissions, finders' fees, or similar payments other than those disclosed;

(s) Anti-corruption and anti-bribery, including compliance with the U.S. Foreign Corrupt Practices Act ("FCPA"), the UK Bribery Act 2010, and all other applicable anti-corruption laws and regulations; and

(t) Sanctions and export controls, including compliance with all applicable economic sanctions programs administered by the U.S. Office of Foreign Assets Control ("OFAC"), the UK Office of Financial Sanctions Implementation ("OFSI"), the European Union, and the United Nations, and compliance with all applicable export control laws and regulations (including the U.S. Export Administration Regulations ("EAR") and the International Traffic in Arms Regulations ("ITAR"), to the extent applicable).

B. Disclosure Schedules

Coverage under the Policy is subject to the Seller's disclosure schedules delivered concurrently with the execution of the Merger Agreement (the "Disclosure Schedules"). Matters that are fairly disclosed on the Disclosure Schedules in accordance with the Merger Agreement will not constitute a breach of the applicable representation or warranty for purposes of the Policy. Northfield will conduct a review of the Disclosure Schedules as part of its underwriting diligence process and reserves the right to identify specific items or categories of disclosed matters that may require additional analysis or that may give rise to transaction-specific exclusions.

For purposes of the Policy, "fairly disclosed" shall have the meaning ascribed to such term in the Merger Agreement. The Named Insured will be expected to provide Northfield with access to the final Disclosure Schedules promptly upon their delivery in connection with the execution of the Merger Agreement.

V. KEY EXCLUSIONS

A. Standard Exclusions

The Policy will contain the following standard exclusions, which are customary for buyer-side representation and warranty insurance policies of this nature:

(i) Known Loss Exclusion. The Policy will not cover losses arising from matters actually known to the Named Insured (or to any member of the "deal team" of the Named Insured, which shall include the partners, associates, and other professionals at Calderwood & Harkness LLP and Glenmore Thornton LLP who are engaged in the Transaction) at or prior to the inception of the Policy that constitute a breach of a covered representation or warranty. For the avoidance of doubt, the "Known Loss Exclusion" is intended to exclude from coverage only those matters of which the relevant individuals had actual (and not constructive or imputed) knowledge, and only to the extent that such knowledge was of facts or circumstances constituting a breach that would give rise to a covered loss under the Policy.

(ii) Fraud by the Named Insured. The Policy will not cover losses arising from or attributable to fraud committed by or at the direction of the Named Insured.

(iii) Forward-Looking Statements and Projections. The Policy will not cover losses arising from or attributable to forward-looking statements, projections, estimates, budgets, forecasts, or other predictive information, including any financial projections or management forecasts provided by Cloudium management in the course of the Transaction or in the virtual data room.

(iv) Purchase Price Adjustments and Earnout Disputes. The Policy will not cover losses arising from or attributable to purchase price adjustments, working capital true-ups, or disputes relating to any earnout or contingent consideration provisions of the Merger Agreement.

(v) Covenant Breaches. The Policy covers only representations and warranties; it does not cover breaches of covenants (whether pre-closing or post-closing), including without limitation any breach of interim operating covenants, non-compete or non-solicitation covenants, or other affirmative or negative covenants set forth in the Merger Agreement.

(vi) Pension and Benefit Plan Liabilities. The Policy will not cover losses arising from underfunded pension or benefit plan liabilities to the extent that such underfunding arises from changes in applicable law, changes in actuarial assumptions, or changes in market conditions, in each case occurring after the closing date.

(vii) Certain Environmental Liabilities. The Policy will not cover losses arising from or attributable to asbestos-related liabilities, nuclear-related liabilities, or per- and polyfluoroalkyl substances ("PFAS") environmental liabilities, in each case subject to further review during the underwriting diligence process. The scope of this exclusion will be refined based on Northfield's review of the environmental diligence materials and the Target's environmental risk profile.

(viii) Criminal and Civil Fines and Penalties. The Policy will not cover criminal or civil fines, penalties, or punitive damages to the extent that such amounts are uninsurable under applicable law (including the laws of the State of New York).

(ix) Post-Closing Transfer Pricing Adjustments. The Policy will not cover losses arising from transfer pricing adjustments or reassessments to the extent attributable to post-closing restructuring activities undertaken by the Named Insured or the surviving corporation, as distinguished from transfer pricing arrangements or positions in effect during the pre-closing period that are the subject of the Seller's tax representations.

B. Transaction-Specific Exclusions (Preliminary — Subject to Underwriting Review)

In addition to the standard exclusions described above, Northfield reserves the right to include transaction-specific exclusions or sub-limits in the Policy based on matters identified during the underwriting diligence process. Specific matters identified in the course of Northfield's review of the diligence memoranda, the virtual data room materials, the disclosure schedules, and the underwriting call may be excluded from coverage, subjected to sub-limits, or addressed through specific terms and conditions in the Policy wording.

Preliminary areas of focus that Northfield has identified for further underwriting review include the following:

(a) Change of Control Consent Requirements. Northfield intends to evaluate the potential exposure arising from the failure to obtain required change-of-control consents under material customer contracts in connection with the Transaction. Areas of particular focus include the Aegis Federal Solutions Inc. Master SaaS Agreement (representing approximately $84,000,000 in ARR) and the Helix Data Systems GmbH Technology License Agreement, each of which may contain change-of-control provisions that could be triggered by the merger. Northfield will assess the materiality of these contract provisions and the likelihood of consent being obtained, and may propose specific exclusions, sub-limits, or enhanced retention thresholds with respect to losses arising from the failure to secure such consents.

(b) UK TUPE and Pension Matters. Northfield intends to evaluate the UK-specific employment and pension matters relating to Cloudium Technologies UK Ltd., including compliance with the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE"), the status of any defined benefit pension obligations, and any potential liabilities under the UK Pensions Regulator's powers. Northfield may propose specific exclusions or sub-limits with respect to TUPE transfer liabilities or pension-related exposures depending on the results of the underwriting review.

(c) Open-Source Software License Compliance. Given the nature of the Target's business as a provider of cloud-native SaaS solutions, Northfield intends to conduct a focused review of the Target's open-source software usage and compliance with applicable open-source license obligations (including, without limitation, compliance with copyleft licenses such as the GNU General Public License ("GPL") and the GNU Affero General Public License ("AGPL")). Northfield may propose specific exclusions or limitations with respect to losses arising from non-compliance with open-source license requirements, depending on the results of the review of the Target's open-source audit and software composition analysis.

(d) Pending or Threatened Material Litigation. To the extent that any pending or threatened material litigation involving the Target or its subsidiaries is identified during the underwriting diligence process, Northfield may propose specific exclusions for such matters. The Named Insured is requested to identify any pending or threatened litigation or regulatory proceedings that could reasonably be expected to result in a material liability for the Target.

Northfield emphasizes that the foregoing areas of focus are preliminary in nature and are subject to change as the underwriting diligence process progresses. Additional areas of focus may be identified following the underwriting call and the review of additional diligence materials.

VI. SUBROGATION

Upon payment of a covered loss under the Policy, the Insurer will be subrogated to the Named Insured's rights of recovery against responsible third parties to the extent of such payment. However, the Insurer waives its right of subrogation against the following persons and entities:

(a) Cloudium Technologies plc and each of its direct and indirect subsidiaries (including Cloudium Technologies UK Ltd., Cloudium Technologies India Pvt. Ltd., and Cloudium Solutions GmbH);

(b) The former officers, directors, and employees of Cloudium Technologies plc and its subsidiaries;

(d) The rollover equity participants, specifically Jonathan Hargrove (in his individual capacity) and Pinnacle Growth Ventures LLC (and its principal, Evelyn Carmichael).

Exception to Subrogation Waiver. Notwithstanding the foregoing, the Insurer's subrogation rights are fully preserved and are not waived with respect to any person or entity in cases involving fraud or intentional misrepresentation by such person or entity. In such cases, the Insurer shall be entitled to exercise all rights of subrogation and recovery to which it is entitled at law or in equity, without limitation.

The subrogation provisions of the Policy will be consistent with market practice for buyer-side representation and warranty insurance policies in transactions of this size and complexity.

VII. INTERPLAY WITH MERGER AGREEMENT INDEMNIFICATION

A. Indemnification Framework

Based on Northfield's review of the draft Merger Agreement, the indemnification framework applicable to the Transaction is expected to include the following key terms:

The foregoing summary is based on the draft Merger Agreement currently under review and is subject to change. Northfield will review the execution version of the Merger Agreement to confirm the final indemnification terms.

B. Layering / Order of Recovery

The Policy is designed to function as an excess layer of coverage above the Retention, with the Buyer's first recourse being to the indemnity escrow and direct indemnification from the rollover equity participants and the Stockholder Representative (up to the general indemnification cap under the Merger Agreement). The Insurer's payment obligation under the Policy attaches only with respect to covered losses in excess of the applicable Retention.

The following table summarizes the aggregate protection available to the Buyer:

It is noted that the combined protection of the indemnity escrow and the Policy exceeds the general indemnification cap under the Merger Agreement by approximately $204,000,000. The Policy is not intended to duplicate recovery available under direct indemnification but rather to provide the Buyer with excess coverage above the Retention. In circumstances where the Buyer's recoverable losses under the Merger Agreement's indemnification provisions have been exhausted or are otherwise limited by the indemnification cap, the basket, or the survival period, the Policy provides an additional source of recovery (above the Retention) for covered breaches of representations and warranties.

Following the 50% Retention Drop-Down at 12 months post-closing (assuming no pending claims), the effective coverage structure will be adjusted as follows:

VIII. CLAIMS PROCESS (SUMMARY)

The claims process under the Policy is expected to be governed by the following procedures, subject to the final terms of the Policy wording:

Notice of Claim. The Named Insured shall provide written notice of any claim or potential claim under the Policy to:

Northfield Assurance Ltd.

Attention: Patrick Graves, Senior Vice President, Transactional Risk

30 St Mary Axe London EC3A 8BF United Kingdom

with a copy to:

Peregrine Advisory Group LLC

Attention: Timothy Gallagher, Lead Broker

1166 Avenue of the Americas New York, NY 10036

No-Claims Declaration. The Buyer will be required to deliver a no-claims declaration at the closing of the Transaction, certifying that, as of the closing date, the Buyer is not aware of any breach of the Seller's representations and warranties that would give rise to a claim under the Policy. The no-claims declaration is a condition to the effectiveness of the Policy.

Prompt Reporting. Claims must be reported to the Insurer promptly upon the Named Insured's knowledge of any facts, circumstances, or events that constitute or could reasonably be expected to constitute a breach of a covered representation or warranty and give rise to a loss under the Policy. Late reporting of claims may not, in and of itself, result in a denial of coverage, but the Insurer reserves the right to reduce or deny coverage to the extent that it is materially prejudiced by such late reporting, in accordance with applicable law.

Defense and Settlement. The Insurer shall be entitled to participate in the defense and settlement of any underlying indemnification claim asserted by the Named Insured against the Stockholder Representative and/or the escrow agent. The Named Insured shall not settle any indemnification claim that would increase the Insurer's liability under the Policy without the Insurer's prior written consent, which shall not be unreasonably withheld, conditioned, or delayed.

Claim Payment. Subject to the terms and conditions of the Policy, the Insurer shall pay covered claims within thirty (30) days of the final determination of the covered loss amount (or such shorter period as may be agreed between the Insurer and the Named Insured). The "final determination" of a covered loss may result from a negotiated settlement (with the Insurer's consent), a final arbitration award, a final and non-appealable judgment, or another form of resolution agreed between the parties.

IX. CONDITIONS TO BINDING

Northfield's issuance of a binding policy is subject to the satisfaction of the following conditions:

(a) Completion of Underwriting Diligence. Northfield must complete its underwriting diligence to its satisfaction, including:

(1) Review of the final (execution version) Merger Agreement, including all schedules, exhibits, and ancillary documents;

(2) Review of the final Disclosure Schedules delivered by the Seller in connection with the execution of the Merger Agreement;

(3) Satisfactory completion of the underwriting call, which is anticipated to take place on January 16, 2024, with Calderwood & Harkness LLP and Glenmore Thornton LLP presenting key diligence findings across all material workstreams (legal, financial, tax, intellectual property, employment, environmental, regulatory, and government contracts);

(4) Review of the due diligence summary memorandum dated January 5, 2024, prepared by Calderwood & Harkness LLP, and any issue-specific diligence memoranda addressing particular areas of risk or concern identified during the diligence process; and

(5) Review of the Buyer's financial due diligence report prepared by Glenmore Thornton LLP (Vanessa Liu), including the quality of earnings analysis, net working capital analysis, and indebtedness and debt-like items assessment.

(b) Agreement on Final Policy Wording. The parties must reach agreement on the final Policy wording, including any transaction-specific exclusions, sub-limits, or special conditions arising from the underwriting diligence process. Northfield will circulate a draft Policy form following the completion of the underwriting call.

(c) Payment of Premium. The Buyer must pay the Premium of $13,600,000 (net of the $75,000 underwriting fee credit, resulting in a net payment of $13,525,000) upon the execution of the binder agreement.

(d) Delivery of No-Claims Declaration. The Buyer must deliver the no-claims declaration referenced in Section VIII above at or prior to the closing of the Transaction.

The anticipated binding date is January 19, 2024, which is three (3) business days prior to the anticipated signing of the Merger Agreement. In the event that the signing date is delayed or advanced, the binding date will be adjusted accordingly in consultation with the Broker.

X. GOVERNING LAW AND DISPUTE RESOLUTION

The Policy shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to conflicts of law principles that would result in the application of the laws of any other jurisdiction.

Any dispute, controversy, or claim arising out of or relating to the Policy, including the formation, interpretation, performance, breach, or termination thereof, shall be finally resolved by binding arbitration administered under the rules of the American Arbitration Association (the "AAA") then in effect. The arbitration shall be seated in New York, New York. The arbitral tribunal shall consist of three (3) arbitrators, one appointed by each party and the third (who shall serve as chair) appointed by the two party-appointed arbitrators. The language of the arbitration shall be English. The arbitral award shall be final and binding on the parties and may be entered and enforced in any court of competent jurisdiction. The costs of the arbitration shall be borne by the parties as determined by the arbitral tribunal.

XI. CONFIDENTIALITY

This NBI and all related communications, correspondence, term sheets, and underwriting materials exchanged between Northfield and the Broker, the Named Insured, and their respective advisors in connection with the placement of the Policy (collectively, "Confidential Information") are strictly confidential and may not be disclosed to any third party without the prior written consent of Northfield, except as follows:

(a) Disclosure to the Named Insured's legal counsel, Calderwood & Harkness LLP, in connection with the Transaction and the placement of the Policy;

(b) Disclosure to the Named Insured's financial advisors, Osprey Bancroft & Co. and Glenmore Thornton LLP, in connection with the Transaction;

(d) Disclosure of the existence and terms of the Policy (once bound) to the lending syndicate, specifically Meridian Atlantic Bank, N.A. and Ironclad Capital Markets LLC (and their counsel, Winthrop & Hale LLP), as required under the debt financing documentation for the Transaction, including the credit agreement and related loan documents.

Except as set forth above, the Confidential Information shall not be disclosed to the Target, the Stockholder Representative, or any other party to the Transaction without Northfield's prior written consent.

XII. CONTACT INFORMATION

All inquiries, submissions, and communications relating to this NBI and the proposed Policy should be directed to:

Northfield Assurance Ltd. — Underwriting Contact:

Patrick Graves Senior Vice President, Transactional Risk Northfield Assurance Ltd. 30 St Mary Axe London EC3A 8BF United Kingdom Tel: +44 (0) 20 7946 0832

Email: patrick.graves@northfieldassurance.com

Peregrine Advisory Group LLC — Broker Contact:

Timothy Gallagher Lead Broker Peregrine Advisory Group LLC 1166 Avenue of the Americas New York, NY 10036 Tel: +1 (212) 555-4791

Email: tgallagher@peregrineadvisory.com

XIII. DISCLAIMERS

This NBI is non-binding and is provided for discussion purposes only. Northfield Assurance Ltd. reserves the right to modify, supplement, or withdraw these proposed terms at any time prior to the execution of a binding binder agreement. This NBI does not constitute an offer of insurance, a commitment to issue a policy of insurance, or a binder of coverage, and should not be relied upon as such by any party. No binding obligation of Northfield shall arise unless and until a definitive binder agreement is executed by Northfield and the Named Insured and all conditions to binding have been satisfied, including payment of the Premium.

The terms, conditions, exclusions, and limitations set forth herein are preliminary and are subject to change based on the results of the underwriting diligence process, the review of the final transaction documents (including the execution version of the Merger Agreement and the Disclosure Schedules), and the negotiation of the final Policy wording.

Validity Period. This NBI is valid for a period of thirty (30) days from the date hereof (i.e., until February 13, 2024), unless extended in writing by Northfield. If a binder agreement is not executed within such period, this NBI shall automatically expire and be of no further force or effect.

We look forward to continuing discussions with you and the deal team regarding the placement of the Policy in connection with the Transaction. Please do not hesitate to contact the undersigned or the Broker with any questions or comments.

Very truly yours,

NORTHFIELD ASSURANCE LTD.

By: ________

Name: Patrick Graves

Title: Senior Vice President, Transactional Risk

Date: January 14, 2024

APPENDIX A — PRELIMINARY POLICY STRUCTURE DIAGRAM

The following diagram illustrates the preliminary layering of the proposed R&W Policy relative to the indemnification escrow and the Merger Agreement indemnification cap:

PRELIMINARY POLICY STRUCTURE — LOSS ALLOCATION

At Closing through 12 Months Post-Closing:

Merger Agreement General Indemnification Cap Overlay: $1,020,000,000 (15% of Deal Value)

After 12 Months Post-Closing (50% Retention Drop-Down — Conditioned on No Pending Claims):

Merger Agreement General Indemnification Cap Overlay: $1,020,000,000 (15% of Deal Value)

Note: The Merger Agreement general survival period expires at 18 months post-closing (anticipated January 9, 2026). After the survival period expires, the Buyer's sole recourse for breaches of general representations and warranties (other than Fundamental Representations, Tax Representations, and Special Indemnities) will be the R&W Policy, subject to its terms, conditions, and exclusions.

Key Structural Notes:

CONFIDENTIAL — FOR DISCUSSION PURPOSES ONLY
NORTHFIELD ASSURANCE LTD. 30 St Mary Axe London EC3A 8BF United Kingdom
January 14, 2024
Reference: NBI-2024-00487
NON-BINDING INDICATION — FOR DISCUSSION PURPOSES ONLY
Peregrine Advisory Group LLC 1166 Avenue of the Americas New York, NY 10036
Attention: Timothy Gallagher, Lead Broker
cc: Calderwood & Harkness LLP 599 Lexington Avenue New York, NY 10022
Attention: Harrison Wexford, Partner
Attention: Tiffany Rosenthal, Associate
Dear Mr. Gallagher:
I. INTRODUCTION AND PURPOSE
Northfield Assurance Ltd. ("Northfield" or the "Insurer") is pleased to provide this non-binding indication of terms (this "NBI," Reference No. NBI-2024-00487) for a buyer-side representation and warranty insurance policy (the "Policy") in connection with the proposed acquisition (the "Transaction") of Cloudium Technologies plc ("Cloudium" or the "Target"), a public limited company incorporated under the laws of England and Wales (registered number 09734521) and listed on the Nasdaq Global Select Market under the ticker symbol "CLDM," by Solara Digital Infrastructure Fund VI LP ("Fund VI" or the "Buyer"), a Delaware limited partnership, acting through Stratos Merger Sub Inc. ("Merger Sub"), a Delaware corporation and wholly owned subsidiary of Fund VI, pursuant to a reverse triangular merger.
This NBI is provided in response to the submission materials received from Peregrine Advisory Group LLC ("Peregrine" or the "Broker") in connection with the broker engagement letter between Peregrine and the Buyer dated January 10, 2024, and is based upon Northfield's preliminary review of the materials made available to date, including the draft merger agreement circulated on December 1, 2023, the preliminary due diligence summary memorandum dated January 5, 2024, and related transaction documentation.
This NBI is provided for discussion purposes only and does not constitute a binding commitment, an offer of insurance, or an agreement to issue a policy of insurance. Any binding obligation of Northfield to issue the Policy is expressly conditioned upon, among other things: (a) the satisfactory completion of Northfield's underwriting diligence process, including the scheduled underwriting call and review of all final transaction documents; (b) the review of the execution version of the merger agreement and the final disclosure schedules delivered in connection therewith; (c) agreement on final policy wording, including any transaction-specific exclusions or sub-limits; and (d) the execution of a mutually acceptable binder agreement and payment of the applicable premium. Northfield reserves the right to modify, supplement, or withdraw these proposed terms at any time prior to the execution of such binding agreement.
The proposed terms set forth below are intended to serve as a framework for further discussion among the parties and their advisors in connection with the structuring of representation and warranty insurance for the Transaction.
II. TRANSACTION SUMMARY
A. Transaction Overview
The Transaction is structured as a reverse triangular merger under the Delaware General Corporation Law (the "DGCL"), pursuant to which Merger Sub will merge with and into Cloudium, with Cloudium surviving the merger as a wholly owned subsidiary of Fund VI. The aggregate enterprise value of the Transaction is approximately $6,800,000,000 (the "Deal Value"). Based on approximately 184,200,000 shares of Cloudium common stock outstanding as of the date hereof, the per-share merger consideration is approximately $36.92 per share. The form of consideration payable to stockholders of Cloudium will be cash, subject to rollover elections available to certain stockholders as described in Section II.C below. The Transaction is expected to be effected pursuant to a definitive Agreement and Plan of Merger (the "Merger Agreement") among Fund VI, Merger Sub, and Cloudium, with the Stockholder Representative acting on behalf of the former stockholders of Cloudium following the closing.
B. Key Parties
Buyer: Solara Digital Infrastructure Fund VI LP, a Delaware limited partnership. The general partner of Fund VI is Solara Fund VI GP LLC, a Delaware limited liability company. Fund VI is managed by its sponsor, Solara Digital Infrastructure LP (the "Sponsor"), a Delaware limited partnership with approximately $38 billion of assets under management across its platform. Fund VI is a 2022 vintage fund with $12.4 billion of committed capital and focuses on investments in digital infrastructure, enterprise software, and technology-enabled services.
Target: Cloudium Technologies plc, a public limited company incorporated under the laws of England and Wales (registered number 09734521). Cloudium's registered office is located at 45 Broadwick Street, London W1F 0DB, United Kingdom, and its United States headquarters are located at 600 Townsend Street, Suite 800, San Francisco, California 94103. Cloudium is a provider of cloud-native enterprise resource planning ("ERP"), customer relationship management ("CRM"), and business-intelligence software-as-a-service ("SaaS") solutions to enterprise customers. As of the last twelve months ended September 30, 2023 (the fiscal year end), Cloudium reported revenue of approximately $1,620,000,000 and EBITDA of approximately $405,000,000. Annual recurring revenue ("ARR") as of December 31, 2023 was approximately $1,740,000,000. The Target employs approximately 6,800 employees globally, distributed across the United States, the United Kingdom, India, and Germany.
Merger Sub: Stratos Merger Sub Inc., a Delaware corporation. The sole stockholder of Merger Sub is Fund VI. Merger Sub was formed solely for the purpose of effectuating the Transaction and has not conducted any business activities other than those incidental to its formation and the transactions contemplated by the Merger Agreement.
Key Subsidiaries of the Target:
C. Rollover Equity Participants
Certain stockholders of Cloudium have elected (or are expected to elect) to roll over a portion of their equity into the post-closing capital structure of the surviving entity, as follows:
(a) Jonathan Hargrove (Chief Executive Officer of Cloudium): Rolling over 50% of his 7,736,400 shares, representing approximately 3,868,200 shares at $36.92 per share, for an aggregate rollover value of approximately $142,814,544.
(b) Pinnacle Growth Ventures LLC (a significant institutional stockholder of Cloudium; principal contact: Evelyn Carmichael): Rolling over 60% of its 21,367,200 shares, representing approximately 12,820,320 shares at $36.92 per share, for an aggregate rollover value of approximately $473,241,408.
The total rollover equity contribution is approximately $616,055,952. The terms and conditions of the rollover arrangements are expected to be documented in rollover agreements to be entered into concurrently with or prior to the execution of the Merger Agreement. The rollover equity participants will receive equity interests in a parent holding company of the surviving entity and will be subject to customary transfer restrictions, tag-along and drag-along rights, and other governance provisions.
D. Financing Structure
The Transaction is expected to be financed as follows:
The debt financing is committed by Meridian Atlantic Bank, N.A. (lead arranger and administrative agent) and Ironclad Capital Markets LLC (co-arranger) pursuant to a commitment letter that is expected to be delivered concurrently with the execution of the Merger Agreement. The existing indebtedness of Cloudium to be repaid at closing consists of amounts outstanding under a term loan and revolving credit facility with Atlas Commercial Lending Corp. under a credit agreement dated March 15, 2021, in an aggregate principal amount of approximately $820,000,000.
The total funding requirement for the Transaction, inclusive of the repayment of existing indebtedness, the payment of merger consideration (net of rollover equity), and estimated transaction fees and expenses, is approximately $7,188,944,048.
E. Buyer's Counsel / Diligence Coordinator
The Buyer's legal counsel and diligence coordinator for the Transaction is Calderwood & Harkness LLP, 599 Lexington Avenue, New York, New York 10022. The responsible partner is Harrison Wexford and the lead associate is Tiffany Rosenthal (Matter No. 1041-00003).
The Target's legal counsel is Ridgeway Phelps & Sato LLP. The lead M&A partner is Catherine Answorth.
The Buyer's financial advisor is Osprey Bancroft & Co. (Damien Harlow, Managing Director).
The Buyer's accounting and tax advisor is Glenmore Thornton LLP (Richard Okamura, Transaction Tax; Vanessa Liu, Financial Due Diligence).
F. Anticipated Timeline
The anticipated timeline for the Transaction and the Policy is as follows:
The binding R&W Policy is expected to be issued at or prior to the signing of the Merger Agreement, with the Policy becoming effective as of the closing date of the Transaction.
III. PROPOSED POLICY TERMS
A. Named Insured
The Named Insured under the Policy will be:
(i) Solara Digital Infrastructure Fund VI LP;
(ii) Stratos Merger Sub Inc.;
(iii) Cloudium Technologies plc (as the surviving corporation following the merger);
(iv) All direct and indirect subsidiaries of the surviving corporation existing as of the closing date (including, without limitation, Cloudium Technologies UK Ltd., Cloudium Technologies India Pvt. Ltd., and Cloudium Solutions GmbH); and
(v) Solara Digital Co-Invest VI-A LP, a Delaware limited partnership and co-investment vehicle of the Sponsor, which is expected to make a co-investment of approximately $425,000,000 alongside Fund VI in connection with the Transaction.
The definition of "Named Insured" will include successors and permitted assigns of the foregoing, subject to the assignment provisions of the Policy.
B. Policy Type
The Policy will be structured as a buyer-side representation and warranty insurance policy. The Policy is intended to cover losses incurred by the Named Insured arising from breaches of the Seller's representations and warranties as set forth in the Merger Agreement (anticipated to be set forth in Article IV thereof, based on the draft Merger Agreement currently under review). The Policy will respond on a first-party basis, with the Named Insured as the direct beneficiary of coverage, and will not require the Named Insured to first pursue recovery from the Seller or the indemnity escrow as a condition to making a claim under the Policy, subject to the Retention provisions described in Section III.D below.
C. Policy Limit
The aggregate limit of liability under the Policy (the "Policy Limit") will be:
$680,000,000
The Policy Limit represents ten percent (10%) of the Deal Value of $6,800,000,000. The Policy Limit is an aggregate limit, inclusive of all defense costs, investigation costs, and other amounts payable under the Policy. Once the aggregate of all amounts paid or payable under the Policy equals the Policy Limit, the Insurer's obligations under the Policy will be deemed fully discharged and no further amounts will be payable.
D. Retention (Self-Insured Retention)
The self-insured retention under the Policy (the "Retention") will be:
$544,000,000
The Retention represents eight percent (8%) of the Deal Value and is equal to the indemnity escrow amount to be deposited by the parties with Cobalt Trust Company (the escrow agent) at the closing of the Transaction pursuant to the Merger Agreement. The Insurer's obligation to pay covered losses under the Policy attaches only with respect to losses that, individually or in the aggregate, are in excess of the applicable Retention. The first dollar of covered loss above the applicable Retention is covered by the Policy, up to the Policy Limit.
50% Retention Drop-Down. Twelve (12) months following the closing date of the Transaction (the "Drop-Down Date"), provided that no claims are then pending under the Policy or reasonably expected to be made, the Retention shall be reduced by fifty percent (50%) to $272,000,000 (the "Reduced Retention"). From and after the Drop-Down Date (and subject to the foregoing condition), losses in excess of the Reduced Retention shall be covered under the Policy up to the Policy Limit. For the avoidance of doubt, the Retention drop-down is designed to correspond with the scheduled partial release of the indemnity escrow described in Section VII below.
The Retention may be satisfied by any combination of: (a) amounts recovered by the Named Insured from the indemnity escrow, (b) amounts recovered by the Named Insured through direct indemnification from the Seller, the Stockholder Representative, or the rollover equity participants under the Merger Agreement, and (c) unrecovered losses borne by the Named Insured.
E. Premium.  The premium for the Policy (the "Premium") will be calculated as follows:
The Premium is payable by the Buyer upon binding of the Policy, which is anticipated to occur on or about January 19, 2024, or upon the execution of the binder agreement, whichever is earlier. The Premium is fully earned and non-refundable upon binding, regardless of whether the Transaction closes or the Merger Agreement is terminated for any reason. Any applicable taxes, duties, surcharges, or regulatory assessments on the Premium are the sole responsibility of the Buyer and are not included in the Premium amount stated above.
The non-refundable underwriting/diligence access fee of $75,000 previously paid by the Buyer in connection with the initiation of underwriting on January 10, 2024 will be credited against the Premium at binding, such that the net amount payable at binding will be $13,525,000.
F. Broker Fee
A broker fee of $680,000 is payable by the Buyer to Peregrine Advisory Group LLC in connection with the placement of the Policy. The broker fee is separate from and in addition to the Premium described above and is payable in accordance with the terms of the broker engagement letter between Peregrine and the Buyer dated January 10, 2024.
G. Policy Period
The Policy will be effective as of the closing date of the Transaction (the "Inception Date") and will remain in effect for the following periods with respect to the applicable categories of representations and warranties:
The Policy periods for each category of representations and warranties are intended to mirror or exceed the corresponding survival periods set forth in the Merger Agreement, such that the Named Insured will have the benefit of Policy coverage for the full duration of the survival of the underlying representations and warranties. Claims under the Policy must be reported to the Insurer in writing prior to the expiration of the applicable Policy period. Claims reported prior to the expiration of the applicable Policy period but not finally resolved as of such date will continue to be covered under the Policy until final resolution.
H. Underwriting Fee / Diligence Fee
A non-refundable underwriting and diligence access fee of $75,000 was payable upon engagement and has been paid by the Buyer in connection with the initiation of the underwriting process on January 10, 2024. This fee provides Northfield access to the virtual data room, the due diligence summary memorandum, and related diligence materials, and covers the Insurer's internal and external costs incurred in connection with the preliminary underwriting review. As noted in Section III.E above, the underwriting fee will be credited against the Premium at the time of binding. The underwriting fee is non-refundable regardless of whether the Policy is ultimately bound or the Transaction proceeds to closing.
IV. COVERED REPRESENTATIONS AND WARRANTIES
A. Scope of Coverage
Subject to the exclusions described in Section V below and the terms, conditions, and limitations of the Policy (as finally agreed), the Policy is intended to cover losses incurred by the Named Insured arising from any breach of the Seller's representations and warranties as set forth in Article IV of the Merger Agreement. Based on Northfield's review of the draft Merger Agreement circulated on December 1, 2023, and subsequent revisions received through the date hereof, the representations and warranties to be covered by the Policy include, without limitation, representations and warranties regarding the following subject matters:
(a) Organization, good standing, and qualification of the Target and each of its subsidiaries in their respective jurisdictions of organization and in each jurisdiction in which the nature of their business or the ownership of their properties requires qualification;
(b) Authorization and enforceability of the Merger Agreement and the transactions contemplated thereby, including the power and authority of the Target to enter into the Merger Agreement and to consummate the merger;
(c) Capitalization of the Target, including the number and class of authorized and outstanding shares, the absence of undisclosed equity interests, and the accuracy of the capitalization table;
(d) Financial statements, including the audited consolidated financial statements of the Target and its subsidiaries for the fiscal years ended September 30, 2021, September 30, 2022, and September 30, 2023, as audited by Harwell & Dobson LLP, and the unaudited interim financial statements, and the fair presentation thereof in conformity with applicable accounting standards;
(e) Absence of undisclosed liabilities, other than liabilities reflected or reserved against on the most recent balance sheet, liabilities incurred in the ordinary course of business since the balance sheet date, and liabilities arising under the Merger Agreement;
(f) Absence of a material adverse effect since the date of the most recent audited financial statements;
(g) Compliance with applicable laws, rules, and regulations, including without limitation data privacy and cybersecurity laws and regulations (including the General Data Protection Regulation (EU) 2016/679 ("GDPR"), the California Consumer Privacy Act (Cal. Civ. Code §§ 1798.100 et seq.) ("CCPA"), and comparable state, federal, and international data protection and privacy laws);
(h) Tax matters, including the timely filing of all required tax returns, the payment of all taxes due and payable, the absence of tax liens, the absence of pending or threatened tax audits or assessments (other than as disclosed), and compliance with transfer pricing requirements;
(i) intellectual property, including the ownership of and rights to all material intellectual property used in the Target's business (patents, trademarks, copyrights, trade secrets, and domain names), the absence of infringement of third-party intellectual property rights, the protection of proprietary source code, and compliance with open-source software license obligations;
(j) Material contracts, including the existence, validity, and enforceability of all contracts that are material to the Target's business, the absence of defaults thereunder, and the absence of change-of-control or consent requirements that have not been satisfied or waived;
(k) Employee benefits and ERISA matters, including the qualification and administration of all employee benefit plans, the absence of underfunded pension liabilities, and compliance with ERISA and the Internal Revenue Code;
(l) Labor and employment, including compliance with all applicable labor and employment laws and regulations, the absence of pending or threatened labor disputes, and the status of the Target's workforce (including, with respect to Cloudium Technologies UK Ltd., compliance with UK employment law, collective bargaining agreements, and the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE"));
(m) Real property, including the ownership of or valid leasehold interest in all real property used in the Target's business, the absence of material encumbrances, and compliance with applicable zoning and land use regulations;
(n) Environmental matters, including compliance with all applicable environmental laws and regulations, the absence of environmental contamination, and the absence of pending or threatened environmental claims;
(o) Insurance, including the maintenance of insurance policies in amounts and types customary for businesses of the size and nature of the Target;
(p) Litigation and proceedings, including the absence of pending or threatened litigation, arbitration, or governmental proceedings that could reasonably be expected to be material to the Target;
(q) Government contracts, including the compliance of the Target and its subsidiaries with all applicable laws, rules, and regulations governing government contracts and the absence of pending or threatened debarment, suspension, or other adverse actions (including, specifically, representations relating to the Target's relationship with Aegis Federal Solutions Inc. and the associated Master SaaS Agreement representing approximately $84,000,000 in ARR);
(r) Brokers and finders, including the absence of any liability for brokerage commissions, finders' fees, or similar payments other than those disclosed;
(s) Anti-corruption and anti-bribery, including compliance with the U.S. Foreign Corrupt Practices Act ("FCPA"), the UK Bribery Act 2010, and all other applicable anti-corruption laws and regulations; and
(t) Sanctions and export controls, including compliance with all applicable economic sanctions programs administered by the U.S. Office of Foreign Assets Control ("OFAC"), the UK Office of Financial Sanctions Implementation ("OFSI"), the European Union, and the United Nations, and compliance with all applicable export control laws and regulations (including the U.S. Export Administration Regulations ("EAR") and the International Traffic in Arms Regulations ("ITAR"), to the extent applicable).
B. Disclosure Schedules
Coverage under the Policy is subject to the Seller's disclosure schedules delivered concurrently with the execution of the Merger Agreement (the "Disclosure Schedules"). Matters that are fairly disclosed on the Disclosure Schedules in accordance with the Merger Agreement will not constitute a breach of the applicable representation or warranty for purposes of the Policy. Northfield will conduct a review of the Disclosure Schedules as part of its underwriting diligence process and reserves the right to identify specific items or categories of disclosed matters that may require additional analysis or that may give rise to transaction-specific exclusions.
For purposes of the Policy, "fairly disclosed" shall have the meaning ascribed to such term in the Merger Agreement. The Named Insured will be expected to provide Northfield with access to the final Disclosure Schedules promptly upon their delivery in connection with the execution of the Merger Agreement.
V. KEY EXCLUSIONS
A. Standard Exclusions
The Policy will contain the following standard exclusions, which are customary for buyer-side representation and warranty insurance policies of this nature:
(i) Known Loss Exclusion. The Policy will not cover losses arising from matters actually known to the Named Insured (or to any member of the "deal team" of the Named Insured, which shall include the partners, associates, and other professionals at Calderwood & Harkness LLP and Glenmore Thornton LLP who are engaged in the Transaction) at or prior to the inception of the Policy that constitute a breach of a covered representation or warranty. For the avoidance of doubt, the "Known Loss Exclusion" is intended to exclude from coverage only those matters of which the relevant individuals had actual (and not constructive or imputed) knowledge, and only to the extent that such knowledge was of facts or circumstances constituting a breach that would give rise to a covered loss under the Policy.
(ii) Fraud by the Named Insured. The Policy will not cover losses arising from or attributable to fraud committed by or at the direction of the Named Insured.
(iii) Forward-Looking Statements and Projections. The Policy will not cover losses arising from or attributable to forward-looking statements, projections, estimates, budgets, forecasts, or other predictive information, including any financial projections or management forecasts provided by Cloudium management in the course of the Transaction or in the virtual data room.
(iv) Purchase Price Adjustments and Earnout Disputes. The Policy will not cover losses arising from or attributable to purchase price adjustments, working capital true-ups, or disputes relating to any earnout or contingent consideration provisions of the Merger Agreement.
(v) Covenant Breaches. The Policy covers only representations and warranties; it does not cover breaches of covenants (whether pre-closing or post-closing), including without limitation any breach of interim operating covenants, non-compete or non-solicitation covenants, or other affirmative or negative covenants set forth in the Merger Agreement.
(vi) Pension and Benefit Plan Liabilities. The Policy will not cover losses arising from underfunded pension or benefit plan liabilities to the extent that such underfunding arises from changes in applicable law, changes in actuarial assumptions, or changes in market conditions, in each case occurring after the closing date.
(vii) Certain Environmental Liabilities. The Policy will not cover losses arising from or attributable to asbestos-related liabilities, nuclear-related liabilities, or per- and polyfluoroalkyl substances ("PFAS") environmental liabilities, in each case subject to further review during the underwriting diligence process. The scope of this exclusion will be refined based on Northfield's review of the environmental diligence materials and the Target's environmental risk profile.
(viii) Criminal and Civil Fines and Penalties. The Policy will not cover criminal or civil fines, penalties, or punitive damages to the extent that such amounts are uninsurable under applicable law (including the laws of the State of New York).
(ix) Post-Closing Transfer Pricing Adjustments. The Policy will not cover losses arising from transfer pricing adjustments or reassessments to the extent attributable to post-closing restructuring activities undertaken by the Named Insured or the surviving corporation, as distinguished from transfer pricing arrangements or positions in effect during the pre-closing period that are the subject of the Seller's tax representations.
B. Transaction-Specific Exclusions (Preliminary — Subject to Underwriting Review)
In addition to the standard exclusions described above, Northfield reserves the right to include transaction-specific exclusions or sub-limits in the Policy based on matters identified during the underwriting diligence process. Specific matters identified in the course of Northfield's review of the diligence memoranda, the virtual data room materials, the disclosure schedules, and the underwriting call may be excluded from coverage, subjected to sub-limits, or addressed through specific terms and conditions in the Policy wording.
Preliminary areas of focus that Northfield has identified for further underwriting review include the following:
(a) Change of Control Consent Requirements. Northfield intends to evaluate the potential exposure arising from the failure to obtain required change-of-control consents under material customer contracts in connection with the Transaction. Areas of particular focus include the Aegis Federal Solutions Inc. Master SaaS Agreement (representing approximately $84,000,000 in ARR) and the Helix Data Systems GmbH Technology License Agreement, each of which may contain change-of-control provisions that could be triggered by the merger. Northfield will assess the materiality of these contract provisions and the likelihood of consent being obtained, and may propose specific exclusions, sub-limits, or enhanced retention thresholds with respect to losses arising from the failure to secure such consents.
(b) UK TUPE and Pension Matters. Northfield intends to evaluate the UK-specific employment and pension matters relating to Cloudium Technologies UK Ltd., including compliance with the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE"), the status of any defined benefit pension obligations, and any potential liabilities under the UK Pensions Regulator's powers. Northfield may propose specific exclusions or sub-limits with respect to TUPE transfer liabilities or pension-related exposures depending on the results of the underwriting review.
(c) Open-Source Software License Compliance. Given the nature of the Target's business as a provider of cloud-native SaaS solutions, Northfield intends to conduct a focused review of the Target's open-source software usage and compliance with applicable open-source license obligations (including, without limitation, compliance with copyleft licenses such as the GNU General Public License ("GPL") and the GNU Affero General Public License ("AGPL")). Northfield may propose specific exclusions or limitations with respect to losses arising from non-compliance with open-source license requirements, depending on the results of the review of the Target's open-source audit and software composition analysis.
(d) Pending or Threatened Material Litigation. To the extent that any pending or threatened material litigation involving the Target or its subsidiaries is identified during the underwriting diligence process, Northfield may propose specific exclusions for such matters. The Named Insured is requested to identify any pending or threatened litigation or regulatory proceedings that could reasonably be expected to result in a material liability for the Target.
Northfield emphasizes that the foregoing areas of focus are preliminary in nature and are subject to change as the underwriting diligence process progresses. Additional areas of focus may be identified following the underwriting call and the review of additional diligence materials.
VI. SUBROGATION
Upon payment of a covered loss under the Policy, the Insurer will be subrogated to the Named Insured's rights of recovery against responsible third parties to the extent of such payment. However, the Insurer waives its right of subrogation against the following persons and entities:
(a) Cloudium Technologies plc and each of its direct and indirect subsidiaries (including Cloudium Technologies UK Ltd., Cloudium Technologies India Pvt. Ltd., and Cloudium Solutions GmbH);
(b) The former officers, directors, and employees of Cloudium Technologies plc and its subsidiaries;
(c) The Stockholder Representative, Douglas Pemberton, in his capacity as such; and
(d) The rollover equity participants, specifically Jonathan Hargrove (in his individual capacity) and Pinnacle Growth Ventures LLC (and its principal, Evelyn Carmichael).
Exception to Subrogation Waiver. Notwithstanding the foregoing, the Insurer's subrogation rights are fully preserved and are not waived with respect to any person or entity in cases involving fraud or intentional misrepresentation by such person or entity. In such cases, the Insurer shall be entitled to exercise all rights of subrogation and recovery to which it is entitled at law or in equity, without limitation.
The subrogation provisions of the Policy will be consistent with market practice for buyer-side representation and warranty insurance policies in transactions of this size and complexity.
VII. INTERPLAY WITH MERGER AGREEMENT INDEMNIFICATION
A. Indemnification Framework
Based on Northfield's review of the draft Merger Agreement, the indemnification framework applicable to the Transaction is expected to include the following key terms:
The foregoing summary is based on the draft Merger Agreement currently under review and is subject to change. Northfield will review the execution version of the Merger Agreement to confirm the final indemnification terms.
B. Layering / Order of Recovery
The Policy is designed to function as an excess layer of coverage above the Retention, with the Buyer's first recourse being to the indemnity escrow and direct indemnification from the rollover equity participants and the Stockholder Representative (up to the general indemnification cap under the Merger Agreement). The Insurer's payment obligation under the Policy attaches only with respect to covered losses in excess of the applicable Retention.
The following table summarizes the aggregate protection available to the Buyer:
It is noted that the combined protection of the indemnity escrow and the Policy exceeds the general indemnification cap under the Merger Agreement by approximately $204,000,000. The Policy is not intended to duplicate recovery available under direct indemnification but rather to provide the Buyer with excess coverage above the Retention. In circumstances where the Buyer's recoverable losses under the Merger Agreement's indemnification provisions have been exhausted or are otherwise limited by the indemnification cap, the basket, or the survival period, the Policy provides an additional source of recovery (above the Retention) for covered breaches of representations and warranties.
Following the 50% Retention Drop-Down at 12 months post-closing (assuming no pending claims), the effective coverage structure will be adjusted as follows:
VIII. CLAIMS PROCESS (SUMMARY)
The claims process under the Policy is expected to be governed by the following procedures, subject to the final terms of the Policy wording:
Notice of Claim. The Named Insured shall provide written notice of any claim or potential claim under the Policy to:
Northfield Assurance Ltd.
Attention: Patrick Graves, Senior Vice President, Transactional Risk
30 St Mary Axe London EC3A 8BF United Kingdom
with a copy to:
Peregrine Advisory Group LLC
Attention: Timothy Gallagher, Lead Broker
1166 Avenue of the Americas New York, NY 10036
No-Claims Declaration. The Buyer will be required to deliver a no-claims declaration at the closing of the Transaction, certifying that, as of the closing date, the Buyer is not aware of any breach of the Seller's representations and warranties that would give rise to a claim under the Policy. The no-claims declaration is a condition to the effectiveness of the Policy.
Prompt Reporting. Claims must be reported to the Insurer promptly upon the Named Insured's knowledge of any facts, circumstances, or events that constitute or could reasonably be expected to constitute a breach of a covered representation or warranty and give rise to a loss under the Policy. Late reporting of claims may not, in and of itself, result in a denial of coverage, but the Insurer reserves the right to reduce or deny coverage to the extent that it is materially prejudiced by such late reporting, in accordance with applicable law.
Defense and Settlement. The Insurer shall be entitled to participate in the defense and settlement of any underlying indemnification claim asserted by the Named Insured against the Stockholder Representative and/or the escrow agent. The Named Insured shall not settle any indemnification claim that would increase the Insurer's liability under the Policy without the Insurer's prior written consent, which shall not be unreasonably withheld, conditioned, or delayed.
Claim Payment. Subject to the terms and conditions of the Policy, the Insurer shall pay covered claims within thirty (30) days of the final determination of the covered loss amount (or such shorter period as may be agreed between the Insurer and the Named Insured). The "final determination" of a covered loss may result from a negotiated settlement (with the Insurer's consent), a final arbitration award, a final and non-appealable judgment, or another form of resolution agreed between the parties.
IX. CONDITIONS TO BINDING
Northfield's issuance of a binding policy is subject to the satisfaction of the following conditions:
(a) Completion of Underwriting Diligence. Northfield must complete its underwriting diligence to its satisfaction, including:
(1) Review of the final (execution version) Merger Agreement, including all schedules, exhibits, and ancillary documents;
(2) Review of the final Disclosure Schedules delivered by the Seller in connection with the execution of the Merger Agreement;
(3) Satisfactory completion of the underwriting call, which is anticipated to take place on January 16, 2024, with Calderwood & Harkness LLP and Glenmore Thornton LLP presenting key diligence findings across all material workstreams (legal, financial, tax, intellectual property, employment, environmental, regulatory, and government contracts);
(4) Review of the due diligence summary memorandum dated January 5, 2024, prepared by Calderwood & Harkness LLP, and any issue-specific diligence memoranda addressing particular areas of risk or concern identified during the diligence process; and
(5) Review of the Buyer's financial due diligence report prepared by Glenmore Thornton LLP (Vanessa Liu), including the quality of earnings analysis, net working capital analysis, and indebtedness and debt-like items assessment.
(b) Agreement on Final Policy Wording. The parties must reach agreement on the final Policy wording, including any transaction-specific exclusions, sub-limits, or special conditions arising from the underwriting diligence process. Northfield will circulate a draft Policy form following the completion of the underwriting call.
(c) Payment of Premium. The Buyer must pay the Premium of $13,600,000 (net of the $75,000 underwriting fee credit, resulting in a net payment of $13,525,000) upon the execution of the binder agreement.
(d) Delivery of No-Claims Declaration. The Buyer must deliver the no-claims declaration referenced in Section VIII above at or prior to the closing of the Transaction.
The anticipated binding date is January 19, 2024, which is three (3) business days prior to the anticipated signing of the Merger Agreement. In the event that the signing date is delayed or advanced, the binding date will be adjusted accordingly in consultation with the Broker.
X. GOVERNING LAW AND DISPUTE RESOLUTION
The Policy shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to conflicts of law principles that would result in the application of the laws of any other jurisdiction.
Any dispute, controversy, or claim arising out of or relating to the Policy, including the formation, interpretation, performance, breach, or termination thereof, shall be finally resolved by binding arbitration administered under the rules of the American Arbitration Association (the "AAA") then in effect. The arbitration shall be seated in New York, New York. The arbitral tribunal shall consist of three (3) arbitrators, one appointed by each party and the third (who shall serve as chair) appointed by the two party-appointed arbitrators. The language of the arbitration shall be English. The arbitral award shall be final and binding on the parties and may be entered and enforced in any court of competent jurisdiction. The costs of the arbitration shall be borne by the parties as determined by the arbitral tribunal.
XI. CONFIDENTIALITY
This NBI and all related communications, correspondence, term sheets, and underwriting materials exchanged between Northfield and the Broker, the Named Insured, and their respective advisors in connection with the placement of the Policy (collectively, "Confidential Information") are strictly confidential and may not be disclosed to any third party without the prior written consent of Northfield, except as follows:
(a) Disclosure to the Named Insured's legal counsel, Calderwood & Harkness LLP, in connection with the Transaction and the placement of the Policy;
(b) Disclosure to the Named Insured's financial advisors, Osprey Bancroft & Co. and Glenmore Thornton LLP, in connection with the Transaction;
(c) Disclosure to the Broker, Peregrine Advisory Group LLC, in its capacity as broker for the Policy; and
(d) Disclosure of the existence and terms of the Policy (once bound) to the lending syndicate, specifically Meridian Atlantic Bank, N.A. and Ironclad Capital Markets LLC (and their counsel, Winthrop & Hale LLP), as required under the debt financing documentation for the Transaction, including the credit agreement and related loan documents.
Except as set forth above, the Confidential Information shall not be disclosed to the Target, the Stockholder Representative, or any other party to the Transaction without Northfield's prior written consent.
XII. CONTACT INFORMATION
All inquiries, submissions, and communications relating to this NBI and the proposed Policy should be directed to:
Northfield Assurance Ltd. — Underwriting Contact:
Patrick Graves Senior Vice President, Transactional Risk Northfield Assurance Ltd. 30 St Mary Axe London EC3A 8BF United Kingdom Tel: +44 (0) 20 7946 0832
Email: patrick.graves@northfieldassurance.com
Peregrine Advisory Group LLC — Broker Contact:
Timothy Gallagher Lead Broker Peregrine Advisory Group LLC 1166 Avenue of the Americas New York, NY 10036 Tel: +1 (212) 555-4791
Email: tgallagher@peregrineadvisory.com
XIII. DISCLAIMERS
This NBI is non-binding and is provided for discussion purposes only. Northfield Assurance Ltd. reserves the right to modify, supplement, or withdraw these proposed terms at any time prior to the execution of a binding binder agreement. This NBI does not constitute an offer of insurance, a commitment to issue a policy of insurance, or a binder of coverage, and should not be relied upon as such by any party. No binding obligation of Northfield shall arise unless and until a definitive binder agreement is executed by Northfield and the Named Insured and all conditions to binding have been satisfied, including payment of the Premium.
The terms, conditions, exclusions, and limitations set forth herein are preliminary and are subject to change based on the results of the underwriting diligence process, the review of the final transaction documents (including the execution version of the Merger Agreement and the Disclosure Schedules), and the negotiation of the final Policy wording.
Validity Period. This NBI is valid for a period of thirty (30) days from the date hereof (i.e., until February 13, 2024), unless extended in writing by Northfield. If a binder agreement is not executed within such period, this NBI shall automatically expire and be of no further force or effect.
We look forward to continuing discussions with you and the deal team regarding the placement of the Policy in connection with the Transaction. Please do not hesitate to contact the undersigned or the Broker with any questions or comments.
Very truly yours,
NORTHFIELD ASSURANCE LTD.
NORTHFIELD ASSURANCE LTD.
By: ________
Name: Patrick Graves
Title: Senior Vice President, Transactional Risk
Date: January 14, 2024
APPENDIX A — PRELIMINARY POLICY STRUCTURE DIAGRAM
The following diagram illustrates the preliminary layering of the proposed R&W Policy relative to the indemnification escrow and the Merger Agreement indemnification cap:
PRELIMINARY POLICY STRUCTURE — LOSS ALLOCATION
At Closing through 12 Months Post-Closing:
Merger Agreement General Indemnification Cap Overlay: $1,020,000,000 (15% of Deal Value)
After 12 Months Post-Closing (50% Retention Drop-Down — Conditioned on No Pending Claims):
Merger Agreement General Indemnification Cap Overlay: $1,020,000,000 (15% of Deal Value)
Note: The Merger Agreement general survival period expires at 18 months post-closing (anticipated January 9, 2026). After the survival period expires, the Buyer's sole recourse for breaches of general representations and warranties (other than Fundamental Representations, Tax Representations, and Special Indemnities) will be the R&W Policy, subject to its terms, conditions, and exclusions.
Key Structural Notes:
1.  The Retention of $544,000,000 is equal to the indemnity escrow amount to be deposited with Cobalt Trust Company at closing.
2.  The 50% Retention drop-down to $272,000,000 at 12 months post-closing is designed to align with the scheduled partial release of 50% of the indemnity escrow.
3.  The R&W Policy Limit of $680,000,000 (10% of Deal Value) provides coverage above the Retention up to a combined aggregate of $1,224,000,000 (at initial Retention level) or $952,000,000 (at Reduced Retention level).
4.  The R&W Policy period for general representations (3 years) and Fundamental Representations (6 years) extends beyond the 18-month survival period under the Merger Agreement, providing the Named Insured with continued coverage after direct indemnification rights have expired.
5.  The Policy Limit is an aggregate limit inclusive of defense costs.
This Appendix A is provided for illustrative purposes only and is not part of the Policy or the NBI. The actual terms, conditions, and structure of the Policy will be as set forth in the final Policy wording.
[END OF NON-BINDING INDICATION]
Northfield Assurance Ltd. | 30 St Mary Axe, London EC3A 8BF | Registered in England and Wales | Company No. 04892371 Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (FRN 209034)
Subsidiary | Jurisdiction | Registration | Approx. Employees | Revenue (LTM)
Cloudium Technologies UK Ltd. | England and Wales | Company No. 11287456 | ~1,200 | £312,000,000
Cloudium Technologies India Pvt. Ltd. | India (Bangalore) | — | ~2,400 | —
Cloudium Solutions GmbH | Germany (Berlin) | — | ~400 | —
Source | Amount
Term Loan B (SOFR + 325 bps, 7-year maturity) | $3,740,000,000
Revolving Credit Facility (SOFR + 275 bps, 5-year maturity) | $500,000,000
Equity Contribution from Fund VI | $2,832,888,096
Rollover Equity | $616,055,952
Total Sources | $7,688,944,048
Use | Amount
Equity Consideration to Cloudium Stockholders (net of rollover) | $6,183,944,048
Repayment of Existing Cloudium Indebtedness | $820,000,000
Estimated Transaction Fees and Expenses | $185,000,000
Total Uses | $7,188,944,048
Milestone | Anticipated Date
Underwriting call with Calderwood & Harkness LLP and Glenmore Thornton LLP | January 16, 2024
Binding of R&W Policy (binder agreement execution and premium payment) | January 19, 2024
Execution of Merger Agreement (signing) | On or about January 22, 2024
HSR Act filing | Within 10 business days of signing
UK CMA notification (if required) | Within 10 business days of signing
Cloudium stockholder approval (special meeting) | Approximately 60–90 days post-signing
Regulatory clearances obtained | On or before June 30, 2024
Transaction closing | Promptly following satisfaction of closing conditions
Outside date per draft Merger Agreement | June 30, 2024
Component | Amount
Rate on Policy Limit | 2.0%
Policy Limit | $680,000,000
Premium | $13,600,000
Category of Representations | Policy Period
General Representations and Warranties (all representations and warranties other than Fundamental Representations and Tax Representations) | Three (3) years from the closing date
Fundamental Representations (organization and good standing, authorization and enforceability, capitalization, title to shares, and brokers/finders) | Six (6) years from the closing date
Tax Representations (all representations and warranties relating to tax matters, as set forth in the applicable section of Article IV of the Merger Agreement) | The later of (a) the expiration of the applicable statute of limitations (including any extensions or waivers thereof) plus sixty (60) days, or (b) six (6) years from the closing date
Indemnification Term | Amount / Details
General Indemnification Cap | 15% of Deal Value = $1,020,000,000
Indemnity Escrow | 8% of Deal Value = $544,000,000, deposited with Cobalt Trust Company at closing
Escrow Release Schedule | 50% ($272,000,000) released at 12 months post-closing (anticipated July 9, 2025); remainder ($272,000,000) released at 18 months post-closing (anticipated January 9, 2026), in each case net of any amounts subject to then-pending claims
Basket | 0.75% of Deal Value = $51,000,000 (tipping basket — once losses exceed the basket, all losses from the first dollar are recoverable)
De Minimis Threshold | Individual claims below $500,000 are excluded from the basket calculation
General Survival Period | 18 months post-closing (expires approximately January 9, 2026)
Special Indemnities (Uncapped) | Fraud, willful breach, tax indemnities, and certain specified litigation matters (as set forth in the Merger Agreement)
Layer | Coverage | Amount
Layer 1: Retention / Self-Insured (Escrow and Direct Indemnification) | $0 – $544,000,000 | $544,000,000
Layer 2: R&W Policy | $544,000,000 – $1,224,000,000 | $680,000,000 (Policy Limit)
Combined Theoretical Maximum | Escrow ($544M) + Policy ($680M above Retention) | $1,224,000,000
Merger Agreement Indemnification Cap (Overlay) | 15% of Deal Value | $1,020,000,000
Layer (Post-Drop-Down) | Coverage | Amount
Layer 1: Reduced Retention | $0 – $272,000,000 | $272,000,000
Layer 2: R&W Policy | $272,000,000 – $952,000,000 | $680,000,000 (Policy Limit)
Layer | Description | Range | Amount
Layer 2 | R&W Insurance Policy (Northfield Assurance) | $544,000,000 – $1,224,000,000 | $680,000,000
Layer 1 | Retention / Self-Insured (Indemnity Escrow with Cobalt Trust Company + Direct Indemnification) | $0 – $544,000,000 | $544,000,000
Layer | Description | Range | Amount
Layer 2 | R&W Insurance Policy (Northfield Assurance) | $272,000,000 – $952,000,000 | $680,000,000
Layer 1 | Reduced Retention / Self-Insured | $0 – $272,000,000 | $272,000,000

CONFIDENTIAL — FOR DISCUSSION PURPOSES ONLY

I. INTRODUCTION AND PURPOSE

II. TRANSACTION SUMMARY

III. PROPOSED POLICY TERMS

IV. COVERED REPRESENTATIONS AND WARRANTIES

V. KEY EXCLUSIONS

VI. SUBROGATION

VII. INTERPLAY WITH MERGER AGREEMENT INDEMNIFICATION

VIII. CLAIMS PROCESS (SUMMARY)

IX. CONDITIONS TO BINDING

X. GOVERNING LAW AND DISPUTE RESOLUTION

XI. CONFIDENTIALITY

XII. CONTACT INFORMATION

XIII. DISCLAIMERS

NORTHFIELD ASSURANCE LTD.

NORTHFIELD ASSURANCE LTD.

Record

Parties

Dates

Amounts