STOCKHOLDER REPRESENTATIVE AGREEMENT
Dated as of January 22, 2024
among
DOUGLAS PEMBERTON, an individual, in his capacity as the Stockholder Representative,
SOLARA DIGITAL INFRASTRUCTURE FUND VI LP, a Delaware limited partnership,
STRATOS MERGER SUB INC., a Delaware corporation,
and
CLOUDIUM TECHNOLOGIES PLC, a public limited company incorporated under the laws of England and Wales (Company No. 09734521)
________________________________________
Reference is made to the Agreement and Plan of Merger, dated as of January 22, 2024 (the "Merger Agreement"), among Cloudium Technologies plc, Stratos Merger Sub Inc., and Solara Digital Infrastructure Fund VI LP.
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This STOCKHOLDER REPRESENTATIVE AGREEMENT (this "Agreement") is entered into as of January 22, 2024, by and among:
(i) Douglas Pemberton, an individual residing in San Francisco, California, in his capacity as the Stockholder Representative (the "Stockholder Representative");
(ii) Solara Digital Infrastructure Fund VI LP, a Delaware limited partnership ("Parent" or "Buyer");
(iii) Stratos Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"); and
(iv) Cloudium Technologies plc, a public limited company incorporated under the laws of England and Wales, with registered Company No. 09734521 (the "Company").
The Stockholder Representative, Parent, Merger Sub, and the Company are each referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, Parent, Merger Sub, and the Company have entered into that certain Agreement and Plan of Merger, dated as of January 22, 2024 (as may be amended, supplemented, or otherwise modified from time to time in accordance with its terms, the "Merger Agreement"), pursuant to which Merger Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent (the "Merger");
WHEREAS, the aggregate merger consideration payable in connection with the Merger is approximately Six Billion Eight Hundred Million Dollars ($6,800,000,000), representing approximately Thirty-Six Dollars and Ninety-Two Cents ($36.92) per share of the Company's common stock, par value $0.001 per share (based on one hundred eighty-four million two hundred thousand (184,200,000) shares of common stock issued and outstanding as of the date hereof), subject to rollover elections by certain stockholders of the Company, including Jonathan Hargrove (Chief Executive Officer of the Company) and Pinnacle Growth Ventures LLC, pursuant to separate Rollover Agreements;
WHEREAS, the Merger Agreement contemplates the appointment of a Stockholder Representative to act on behalf of, and as the sole and exclusive agent and attorney-in-fact for, the former stockholders of the Company (the "Stockholders") in connection with certain post-closing matters, including without limitation indemnification claims, escrow administration, and purchase price adjustments;
WHEREAS, pursuant to Article IX of the Merger Agreement, the indemnification obligations of the Stockholders following the closing of the Merger are subject to (i) a general indemnification cap equal to fifteen percent (15%) of the aggregate merger consideration (approximately One Billion Twenty Million Dollars ($1,020,000,000)), (ii) an escrow fund equal to eight percent (8%) of the aggregate merger consideration (approximately Five Hundred Forty-Four Million Dollars ($544,000,000)) to be deposited with Cobalt Trust Company, a New York trust company, as escrow agent (the "Escrow Agent"), and (iii) a tipping basket equal to seventy-five hundredths of one percent (0.75%) of the aggregate merger consideration (approximately Fifty-One Million Dollars ($51,000,000)), with a de minimis individual claim threshold of Five Hundred Thousand Dollars ($500,000), below which individual claims shall not count toward satisfaction of the basket;
WHEREAS, the Merger Agreement and the Escrow Agreement (as defined below) provide that the escrow fund shall be subject to release as follows: (a) fifty percent (50%) of the escrow fund (approximately Two Hundred Seventy-Two Million Dollars ($272,000,000)) shall be released on the date that is twelve (12) months after the closing date of the Merger (expected to be July 9, 2025), less the amount of any then-pending and unresolved indemnification claims, and (b) the remainder of the escrow fund shall be released on the date that is eighteen (18) months after the closing date of the Merger (expected to be January 9, 2026), which date also constitutes the expiration of the survival period for representations and warranties under the Merger Agreement, less the amount of any then-pending and unresolved indemnification claims;
WHEREAS, Douglas Pemberton, who serves as the Independent Board Chair of the Company, has agreed to serve as the Stockholder Representative pursuant to the terms and conditions of this Agreement and the Merger Agreement, and the Stockholders will be deemed to have irrevocably approved such appointment by virtue of their approval of the Merger and the Merger Agreement;
WHEREAS, the Escrow Agreement, dated as of January 22, 2024 (effective as of the closing of the Merger), among Parent, the Escrow Agent, and the Stockholder Representative (the "Escrow Agreement") contemplates the Stockholder Representative's authority and obligations in connection with the administration of the escrow fund deposited pursuant to the Merger Agreement; and
WHEREAS, capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to them in the Merger Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, representations, and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I
APPOINTMENT AND ACCEPTANCE
Section 1.1 — Appointment of Stockholder Representative.
(a) The Stockholders, by virtue of their approval of the Merger and the Merger Agreement at the special meeting of stockholders of the Company held on May 20, 2024 (at which approximately eighty-two and four-tenths percent (82.4%) of the outstanding shares of the Company's common stock entitled to vote thereon were voted in favor of the adoption of the Merger Agreement), shall be deemed to have irrevocably appointed Douglas Pemberton as their sole and exclusive representative, agent, and attorney-in-fact (the "Stockholder Representative") for the purposes set forth in this Agreement, the Merger Agreement, and the Escrow Agreement.
(b) The appointment of the Stockholder Representative shall become effective as of the effective time of the Merger (11:59 p.m. Eastern Time on July 9, 2024, the "Effective Time") and shall remain in effect until the termination of this Agreement in accordance with Article X hereof.
(c) The appointment of the Stockholder Representative is coupled with an interest and shall be irrevocable by any Stockholder, any group of Stockholders, or any person or entity claiming by, through, or on behalf of any Stockholder, except as expressly provided in Section 7.2 hereof with respect to the removal of the Stockholder Representative by the requisite Stockholder vote. No Stockholder shall have the right, acting individually or together with other Stockholders, to revoke, limit, or otherwise modify the appointment of the Stockholder Representative or the powers granted herein, except in accordance with Articles VII and XI of this Agreement.
(d) The appointment of the Stockholder Representative and the authority granted to the Stockholder Representative hereunder shall not be affected by the death, incapacity, dissolution, liquidation, or bankruptcy of any individual Stockholder, nor shall any such event terminate this Agreement or any authority hereunder, except as expressly provided in Section 7.3 hereof with respect to the death or incapacity of the Stockholder Representative himself.
Section 1.2 — Acceptance.
(a) Douglas Pemberton hereby accepts the appointment as Stockholder Representative and agrees to perform the duties and exercise the powers set forth in this Agreement, the Merger Agreement, and the Escrow Agreement, subject to the terms and conditions hereof and thereof.
(b) All notices and communications to the Stockholder Representative shall be delivered to the following address (or such other address as the Stockholder Representative may designate in writing from time to time in accordance with Section 11.1 hereof):
Douglas Pemberton c/o Cloudium Technologies plc 600 Townsend Street, Suite 800 San Francisco, California 94103
(c) The Stockholder Representative acknowledges that he has reviewed the Merger Agreement, the Escrow Agreement, and the other Transaction Documents and is familiar with the terms, conditions, and obligations set forth therein as they relate to the role and responsibilities of the Stockholder Representative.
Section 1.3 — Binding Effect on Stockholders.
(a) Each Stockholder, by virtue of (i) approving the Merger and the Merger Agreement and (ii) accepting the merger consideration of Thirty-Six Dollars and Ninety-Two Cents ($36.92) per share of the Company's common stock (or such other amount as may be adjusted pursuant to the terms of the Merger Agreement), shall be irrevocably bound by this Agreement as if such Stockholder were a signatory hereto. The provisions of this Agreement shall be binding upon and inure to the benefit of each Stockholder and such Stockholder's successors, assigns, heirs, executors, administrators, and legal representatives.
(b) All actions taken by the Stockholder Representative within the scope of his authority under this Agreement, the Merger Agreement, and the Escrow Agreement shall be binding upon each Stockholder, and no Stockholder shall have the right to object to, dissent from, protest, challenge, or otherwise contest any such action taken by the Stockholder Representative in good faith, whether or not such Stockholder agrees with or would have authorized such action.
(c) The foregoing notwithstanding, nothing in this Section 1.3 shall limit the right of any Stockholder to pursue a direct claim against the Stockholder Representative in the event the Stockholder Representative engages in willful misconduct, gross negligence, or fraud in the performance of his duties hereunder, subject to the limitations and procedures set forth in Article IV hereof.
(d) Each Stockholder acknowledges and agrees that the Stockholder Representative is acting for the collective benefit of all Stockholders and that the Stockholder Representative may, in the exercise of his authority hereunder, take actions that may not be in the individual interest of each Stockholder but that the Stockholder Representative believes, in good faith, to be in the best interests of the Stockholders as a whole.
ARTICLE II
AUTHORITY AND POWERS
Section 2.1 — General Authority.
The Stockholder Representative shall have full power and authority, acting alone and without the joinder, consent, or approval of any individual Stockholder, to take all actions and make all decisions on behalf of the Stockholders in connection with the following matters:
(a) Indemnification Matters. All matters arising under or relating to Article IX of the Merger Agreement, including without limitation receiving, reviewing, evaluating, and responding to indemnification claims and claim notices from any Buyer Indemnified Party (as defined in the Merger Agreement), negotiating, compromising, settling, disputing, contesting, or otherwise resolving any indemnification claim, and executing and delivering any instruments, agreements, releases, or other documents in connection therewith on behalf of the Stockholders.
(b) Escrow Administration. All matters arising under or relating to the Escrow Agreement and the administration of the escrow fund in the amount of Five Hundred Forty-Four Million Dollars ($544,000,000) deposited with Cobalt Trust Company (contact: Laura Ng, Vice President, Escrow Services, 100 Wall Street, New York, New York 10005) as Escrow Agent, including without limitation providing joint instructions (together with Parent) to the Escrow Agent regarding the release, retention, distribution, or other disposition of amounts held in the escrow fund in accordance with the Escrow Agreement.
(c) Purchase Price Adjustment. All matters arising under or relating to the purchase price adjustment (working capital true-up) under Section 2.7 of the Merger Agreement, including without limitation the review of the estimated closing statement delivered by Parent prior to the Closing Date, the review and analysis of the final closing statement delivered by Parent following the Closing Date, the delivery of objection notices with respect to disputed items in the final closing statement, the negotiation and resolution of any disputed items, and participation in any dispute resolution proceedings before the independent accounting firm designated in the Merger Agreement.
(d) Amendments and Waivers. The execution, delivery, and performance of any amendment, waiver, modification, supplement, or consent with respect to this Agreement, the Merger Agreement (solely to the extent related to post-closing obligations of the Stockholders or the Stockholder Representative), the Escrow Agreement, or any related ancillary agreement or document, in each case to the extent affecting the rights, obligations, or interests of the Stockholders.
(e) Enforcement and Defense. The commencement, prosecution, defense, settlement, or resolution of any action, claim, demand, dispute, or proceeding in connection with the enforcement or defense of the rights of the Stockholders under the Merger Agreement, this Agreement, the Escrow Agreement, or any related ancillary agreement or document, including without limitation the authority to commence, prosecute, or defend litigation, arbitration, or other proceedings on behalf of the Stockholders.
(f) Engagement of Advisors. The engagement and retention of legal counsel (including litigation counsel), accountants, financial advisors, consultants, and other advisors and service providers at the Stockholder Representative's discretion and at the expense of the Stockholders (to be paid from the Expense Fund described in Article V hereof), and the termination of any such engagement at the Stockholder Representative's discretion.
(g) General Authority. The granting of any consent, waiver, or approval, the provision or receipt of any notice, request, demand, direction, instruction, or other communication, and the execution, delivery, and performance of any certificate, instrument, agreement, or document on behalf of the Stockholders in connection with any of the foregoing matters or as otherwise contemplated by this Agreement, the Merger Agreement, the Escrow Agreement, or any related ancillary agreement or document.
Section 2.2 — Indemnification Claims Procedures.
(a) The Stockholder Representative shall be the sole and exclusive recipient, on behalf of all Stockholders, of any written notices of indemnification claims, demands, or other communications from Buyer Indemnified Parties (or any of them) under Article IX of the Merger Agreement. No Buyer Indemnified Party shall be required to provide any notice of claim to any individual Stockholder, and any notice delivered to the Stockholder Representative shall constitute effective notice to all Stockholders. Claim notices shall be delivered in the form attached hereto as Exhibit A (or in substantially similar form), and shall be delivered to the Stockholder Representative at the address set forth in Section 11.1 hereof.
(b) Upon receipt of any claim notice from a Buyer Indemnified Party, the Stockholder Representative shall have the full power and authority to take any and all of the following actions on behalf of the Stockholders:
(i) Review and evaluate the claim notice, including the nature, basis, and estimated amount of the claimed loss or damage, in consultation with legal counsel, accountants, and other advisors retained by the Stockholder Representative;
(ii) Contest, dispute, object to, or challenge any such claim in whole or in part within the applicable response period specified in the Merger Agreement, and deliver any written objection, response, or counter-notice to the applicable Buyer Indemnified Party;
(iii) Negotiate and settle any such claim, in whole or in part, on such terms and conditions as the Stockholder Representative deems appropriate in his good faith judgment, including without limitation by providing joint instructions to the Escrow Agent (together with Parent) to release funds from the escrow fund in satisfaction of all or a portion of such claim, or by agreeing to the retention of amounts in the escrow fund pending final resolution of such claim;
(iv) Defend, on behalf of the Stockholders, any third-party claim that forms the basis of, or is related to, an indemnification claim by a Buyer Indemnified Party, subject to the provisions of the Merger Agreement governing the defense of third-party claims, including without limitation any rights of the Buyer Indemnified Party to assume or participate in such defense; and
(v) Take any and all other actions as the Stockholder Representative deems necessary, appropriate, or advisable in his good faith judgment in connection with the evaluation, negotiation, settlement, or resolution of any indemnification claim.
(c) For the avoidance of doubt, and for purposes of the Stockholder Representative's administration of indemnification matters, the key indemnification parameters set forth in the Merger Agreement are summarized as follows:
(i) General Indemnification Cap. The aggregate indemnification obligations of the Stockholders for breaches of representations and warranties (other than Fundamental Representations, as defined in the Merger Agreement) shall not exceed fifteen percent (15%) of the aggregate merger consideration, which equals approximately One Billion Twenty Million Dollars ($1,020,000,000).
(ii) Tipping Basket. No indemnification shall be payable by the Stockholders for breaches of representations and warranties (other than Fundamental Representations) unless and until the aggregate amount of qualifying losses exceeds seventy-five hundredths of one percent (0.75%) of the aggregate merger consideration, which equals approximately Fifty-One Million Dollars ($51,000,000) (the "Basket Amount"), at which point the Buyer Indemnified Parties shall be entitled to recover all qualifying losses from the first dollar (i.e., the basket is a "tipping" basket and not a "true" deductible).
(iii) De Minimis Threshold. Individual claims for qualifying losses in an amount less than Five Hundred Thousand Dollars ($500,000) shall be excluded from the calculation of whether the Basket Amount has been exceeded and shall not be recoverable by the Buyer Indemnified Parties.
(iv) Escrow Fund. The primary source for satisfaction of indemnification claims is the escrow fund in the amount of Five Hundred Forty-Four Million Dollars ($544,000,000), held by Cobalt Trust Company as Escrow Agent.
(v) Survival Period. The representations and warranties of the Stockholders and the Company set forth in the Merger Agreement shall survive for a period of eighteen (18) months following the Closing Date, expiring on January 9, 2026, subject to the timely delivery of a claim notice prior to such expiration date; provided, that claims for breaches of Fundamental Representations shall survive for thirty-six (36) months following the Closing Date, and claims for fraud shall survive indefinitely.
(vi) Special Indemnities. Certain indemnification obligations of the Stockholders are not subject to the general indemnification cap, the Basket Amount, or the de minimis threshold, including without limitation indemnification for (A) fraud or intentional misrepresentation, (B) willful breach of the Merger Agreement, (C) tax indemnities under Section 7.4 of the Merger Agreement, and (D) certain specified litigation matters identified on Disclosure Schedule 3.18 of the Merger Agreement.
(vii) Buyer's R&W Insurance. Parent has obtained a representation and warranty insurance policy, Policy No. NFA-TRI-2024-00487, issued by Northfield Assurance Ltd. (the "R&W Insurance Policy"), with an aggregate limit of liability of Six Hundred Eighty Million Dollars ($680,000,000), which policy sits above the escrow retention and provides coverage for breaches of representations and warranties of the Company in the Merger Agreement. The R&W Insurance Policy contains a waiver of subrogation against the Company and its officers and directors (in their capacity as such), except in cases of fraud. The existence of the R&W Insurance Policy does not limit or modify the indemnification obligations of the Stockholders under the Merger Agreement or this Agreement.
Section 2.3 — Escrow Administration.
(a) The Stockholder Representative shall act jointly with Parent in providing instructions to Cobalt Trust Company as Escrow Agent for the release, retention, distribution, or other disposition of amounts held in the escrow fund in accordance with the Escrow Agreement. Neither the Stockholder Representative nor Parent shall unilaterally instruct the Escrow Agent to release or disburse any amounts from the escrow fund except as expressly permitted by the Escrow Agreement.
(b) The escrow fund shall be released in accordance with the following schedule, subject to reduction for pending and unresolved indemnification claims:
(i) First Release. On the date that is twelve (12) months following the Closing Date (expected to be July 9, 2025), fifty percent (50%) of the initial escrow amount (approximately Two Hundred Seventy-Two Million Dollars ($272,000,000)) shall be released to the Stockholders (pro rata in accordance with their respective shares of the aggregate merger consideration), less the aggregate amount of any then-pending and unresolved indemnification claims (including the estimated amount of any third-party claims for which indemnification notices have been delivered but which have not been finally resolved as of such date).
(ii) Second/Final Release. On the date that is eighteen (18) months following the Closing Date (expected to be January 9, 2026), the entire remaining balance of the escrow fund shall be released to the Stockholders (pro rata in accordance with their respective shares of the aggregate merger consideration), less the aggregate amount of any then-pending and unresolved indemnification claims (including the estimated amount of any third-party claims for which indemnification notices have been delivered but which have not been finally resolved as of such date). The amounts retained in the escrow fund on account of then-pending claims shall be released to the Stockholders (or paid to the applicable Buyer Indemnified Parties, as the case may be) promptly following the final resolution of each such claim.
(c) The Stockholder Representative acknowledges that the fifty percent (50%) retention drop-down under the R&W Insurance Policy (from Five Hundred Forty-Four Million Dollars ($544,000,000) to Two Hundred Seventy-Two Million Dollars ($272,000,000)) is scheduled to occur on the date that is twelve (12) months following the Closing Date, provided that no indemnification claims are then pending, and that such drop-down is coordinated with the first scheduled release of the escrow fund. The Stockholder Representative shall cooperate with Parent and, as applicable, Northfield Assurance Ltd. in connection with the confirmation of the retention drop-down under the R&W Insurance Policy.
(d) The Stockholder Representative shall provide joint written instructions to the Escrow Agent (together with Parent), in the form attached hereto as Exhibit B (or in substantially similar form), at least five (5) business days prior to each scheduled release date, certifying (i) the aggregate amount of pending and unresolved indemnification claims (if any) as of such date, (ii) the amount to be retained in the escrow fund on account of such pending claims, and (iii) the net amount to be released to the Stockholders and the wire transfer instructions for the distribution of such released amounts.
(e) In the event that the Stockholder Representative and Parent are unable to agree on the amount to be released or retained from the escrow fund at any scheduled release date, the procedures for resolving disputes set forth in the Escrow Agreement shall apply, and the Escrow Agent shall hold the disputed amounts pending resolution of such dispute.
Section 2.4 — Purchase Price Adjustment.
(a) The Stockholder Representative is authorized to review, analyze, object to, and negotiate the final closing statement delivered by Parent following the Closing Date, and to participate in the determination of any working capital true-up, in each case as contemplated by Section 2.7 of the Merger Agreement.
(b) Without limiting the generality of the foregoing, the Stockholder Representative shall have the authority to:
(i) Review and analyze the estimated closing statement delivered by Parent prior to the Closing Date and to raise any questions or concerns regarding the assumptions, methodologies, or amounts set forth therein;
(ii) Review and analyze the final closing statement delivered by Parent within sixty (60) days following the Closing Date, together with all supporting workpapers, schedules, and documentation;
(iii) Deliver an objection notice to Parent within the applicable objection period specified in the Merger Agreement (thirty (30) days following receipt of the final closing statement) setting forth, in reasonable detail, the items in the final closing statement with which the Stockholder Representative disagrees and the basis for such disagreement;
(iv) Negotiate and attempt to resolve any disputed items in the final closing statement with Parent during the resolution period specified in the Merger Agreement; and
(v) If the Stockholder Representative and Parent are unable to resolve any disputed items within the applicable resolution period, submit such disputed items to the independent accounting firm designated under the Merger Agreement for final and binding resolution in accordance with the procedures set forth in Section 2.7 of the Merger Agreement.
(c) The Stockholder Representative may engage independent accountants, financial advisors, or other professionals (at the cost of the Expense Fund) to assist in the review and analysis of the final closing statement and any working capital true-up.
(d) The final determination of the purchase price adjustment shall be binding upon the Stockholder Representative, Parent, and all Stockholders, and any amounts payable as a result of such determination shall be paid in accordance with the Merger Agreement.
Section 2.5 — Limitation on Authority.
(a) Notwithstanding the broad grant of authority set forth in this Article II, the Stockholder Representative shall have no authority to:
(i) Bind any individual Stockholder to any obligation, liability, or commitment that is not contemplated by, or that exceeds the obligations imposed upon the Stockholders under, the Merger Agreement, the Escrow Agreement, and this Agreement;
(ii) Take any action that would result in personal liability of any individual Stockholder in excess of such Stockholder's pro rata share (determined based on such Stockholder's share of the aggregate merger consideration) of the escrow fund and, to the extent applicable, the general indemnification cap;
(iii) Amend, waive, or modify any provision of the Merger Agreement, the Escrow Agreement, or this Agreement in a manner that would increase any Stockholder's aggregate indemnification liability beyond the general indemnification cap or that would extend the survival period for representations and warranties beyond the periods specified in the Merger Agreement, without the prior written consent of Stockholders who received in the aggregate more than fifty percent (50%) of the total merger consideration (excluding rollover amounts); or
(iv) Take any action or make any decision with respect to rollover equity matters governed by the separate Rollover Agreements executed by Jonathan Hargrove and Pinnacle Growth Ventures LLC, which matters are outside the scope of the Stockholder Representative's authority hereunder.
(b) The Stockholder Representative acknowledges that he has no obligation or authority with respect to any matter arising under the Rollover Agreements or relating to the rollover equity interests held by Jonathan Hargrove and Pinnacle Growth Ventures LLC, and that such matters are governed exclusively by the terms of the applicable Rollover Agreements and the related organizational documents of Parent and its affiliates.
ARTICLE III
RELIANCE AND STANDARD OF CARE
Section 3.1 — Reliance.
(a) The Stockholder Representative may rely, and shall be fully protected in acting or refraining from acting, upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, or other paper or document believed by the Stockholder Representative in good faith to be genuine and to have been presented, signed, or delivered by the proper party or parties. The Stockholder Representative shall not be required to make any independent investigation or inquiry into the facts or matters stated in any such document or communication, and the Stockholder Representative may assume, absent actual knowledge to the contrary, that the information contained in any such document or communication is true and correct.
(b) The Stockholder Representative may rely, and shall be fully protected in relying, upon the advice and opinions of legal counsel, accountants, financial advisors, and other professionals retained by the Stockholder Representative (at the cost of the Expense Fund) in connection with the performance of his duties hereunder. The Stockholder Representative shall not be liable for any action taken or omitted in good faith reliance upon such advice or opinions.
(c) Parent, Merger Sub, and each of their respective affiliates (including, after the Effective Time, the surviving entity and its subsidiaries) shall be entitled to rely conclusively on the actions, decisions, instructions, and communications of the Stockholder Representative as being taken on behalf of, and binding upon, all Stockholders, without any obligation to inquire into the Stockholder Representative's authority or the consent of any individual Stockholder. Any action taken by Parent, Merger Sub, or any of their affiliates in good faith reliance on the authority of the Stockholder Representative as set forth herein shall not give rise to any claim or liability against Parent, Merger Sub, or any of their affiliates by any Stockholder.
Section 3.2 — Standard of Care.
(a) The Stockholder Representative shall not be liable to any Stockholder, Parent, Merger Sub, or any other person or entity for any action taken, suffered, or omitted by the Stockholder Representative in good faith and reasonably believed by the Stockholder Representative to be authorized or within the rights or powers conferred upon the Stockholder Representative by this Agreement, the Merger Agreement, or the Escrow Agreement.
(b) The Stockholder Representative shall act in good faith and with the care that a reasonably prudent person would exercise under similar circumstances in performing the duties and exercising the powers set forth in this Agreement. The Stockholder Representative shall be liable to the Stockholders only for losses, damages, costs, or expenses that are directly and proximately caused by the Stockholder Representative's own willful misconduct, gross negligence, or fraud in the performance of his duties hereunder. For purposes of this Agreement, "willful misconduct" means an intentional act or intentional failure to act by the Stockholder Representative with actual knowledge that such act or failure to act is a breach of his obligations hereunder, and "gross negligence" means a conscious and voluntary disregard of the need to use reasonable care, which is likely to cause foreseeable grave injury or harm to the interests of the Stockholders.
Section 3.3 — No Duty to Investigate.
(a) The Stockholder Representative shall have no duty or obligation to investigate, inquire into, monitor, or independently verify any claim, statement, assertion, notice, certificate, representation, or other matter presented to the Stockholder Representative by any person or entity, including without limitation any Buyer Indemnified Party, any Stockholder, Parent, Merger Sub, or any of their respective affiliates, agents, or advisors.
(b) The Stockholder Representative shall have no fiduciary duty or other duty to the Stockholders, whether arising under common law, equity, or otherwise, other than the express duty to act in good faith in carrying out the specific duties and responsibilities set forth in this Agreement. Without limiting the foregoing, the Stockholder Representative shall not be deemed to be a trustee, fiduciary, or agent of any individual Stockholder, except to the extent expressly provided herein.
(c) The Stockholder Representative shall have no obligation to take any affirmative action to investigate potential claims against any Buyer Indemnified Party or any other person or entity on behalf of the Stockholders, and the Stockholder Representative's failure to take any such action shall not give rise to any claim or liability against the Stockholder Representative.
ARTICLE IV
INDEMNIFICATION AND EXCULPATION OF STOCKHOLDER REPRESENTATIVE
Section 4.1 — Indemnification by Stockholders.
(a) Each Stockholder shall severally (and not jointly), pro rata in accordance with such Stockholder's respective share of the aggregate merger consideration, indemnify, defend, and hold harmless the Stockholder Representative and his heirs, executors, administrators, and legal representatives (collectively, the "Representative Indemnified Parties") from and against any and all losses, damages, liabilities, costs, and expenses (including, without limitation, reasonable attorneys' fees, court costs, and expenses of investigation and defense) (collectively, "Representative Losses") actually incurred by any Representative Indemnified Party arising out of, relating to, or resulting from the Stockholder Representative's performance of, or failure to perform, his duties under this Agreement, the Merger Agreement, or the Escrow Agreement; provided, however, that no Stockholder shall be obligated to indemnify any Representative Indemnified Party for any Representative Losses to the extent that such Representative Losses arise from, are caused by, or result from the Stockholder Representative's willful misconduct, gross negligence, or fraud.
(b) The indemnification obligations of the Stockholders under this Section 4.1 shall be satisfied first from the Expense Fund (as described in Article V hereof). To the extent that the Expense Fund is insufficient to satisfy the indemnification obligations of the Stockholders under this Section 4.1, each Stockholder shall be obligated to contribute, severally and not jointly, such Stockholder's pro rata share (determined based on such Stockholder's share of the aggregate merger consideration) of any remaining Representative Losses.
(c) The indemnification obligations of the Stockholders under this Section 4.1 shall survive the termination of this Agreement and the resignation or removal of the Stockholder Representative, and shall continue in full force and effect until the expiration of the applicable statute of limitations with respect to any Representative Losses.
Section 4.2 — Exculpation.
(a) The Stockholder Representative shall not be personally liable to any Stockholder, Parent, Merger Sub, or any other person or entity for any act or omission in his capacity as Stockholder Representative hereunder, except to the extent that such act or omission constitutes the Stockholder Representative's own willful misconduct, gross negligence, or fraud.
(b) No Stockholder shall have any claim, cause of action, or right of recovery against the Stockholder Representative (or any Representative Indemnified Party) for any action taken, decision made, or communication delivered or received by the Stockholder Representative in good faith and in accordance with the terms of this Agreement, even if such action, decision, or communication ultimately results in an adverse outcome for such Stockholder or for the Stockholders as a whole.
(c) In no event shall the Stockholder Representative be required to advance or expend his own personal funds in the performance of his duties hereunder, and the Stockholder Representative shall not be liable for any delay or failure to perform resulting from the unavailability of sufficient funds in the Expense Fund.
ARTICLE V
EXPENSE FUND
Section 5.1 — Establishment.
(a) At or promptly after the Effective Time, an amount equal to Two Million Five Hundred Thousand Dollars ($2,500,000) (the "Expense Fund") shall be withheld from the aggregate merger consideration otherwise payable to the Stockholders at the Effective Time and deposited into a separate bank account established and maintained by the Stockholder Representative (or, at the Stockholder Representative's election, into a segregated escrow sub-account at Cobalt Trust Company, separate and apart from the indemnity escrow fund) for the sole purpose of paying costs, expenses, and other amounts incurred by the Stockholder Representative in connection with the performance of his duties and the exercise of his powers under this Agreement, the Merger Agreement, and the Escrow Agreement.
(b) The Expense Fund shall be the property of the Stockholders, held and administered by the Stockholder Representative for their benefit and in accordance with this Article V. The Expense Fund is separate and distinct from the Five Hundred Forty-Four Million Dollar ($544,000,000) indemnity escrow fund deposited with Cobalt Trust Company pursuant to the Escrow Agreement, and no portion of the Expense Fund shall be available to satisfy any indemnification claim by any Buyer Indemnified Party.
(c) The Expense Fund shall be held in a federally insured deposit account or a money market account, and any interest or earnings thereon shall become part of the Expense Fund and shall be available for the purposes described in Section 5.2 hereof.
Section 5.2 — Use of Expense Fund.
The Expense Fund may be used by the Stockholder Representative to pay the following costs and expenses:
(a) Legal, accounting, financial advisory, and other professional fees and expenses incurred by the Stockholder Representative or on his behalf in connection with the review, evaluation, negotiation, settlement, dispute, or defense of indemnification claims, the administration of the escrow fund, the purchase price adjustment and working capital true-up, and any other matters within the scope of the Stockholder Representative's authority under this Agreement;
(b) Administrative costs and expenses reasonably incurred by the Stockholder Representative in connection with the performance of his duties under this Agreement, including without limitation costs of document storage, copying, printing, postage, telecommunications, and similar administrative expenses;
(c) Compensation payable to the Stockholder Representative in accordance with Section 6.1 hereof;
(d) Reimbursement of the Stockholder Representative for reasonable out-of-pocket expenses in accordance with Section 6.2 hereof; and
(e) Any other out-of-pocket costs and expenses reasonably incurred by the Stockholder Representative in performing his obligations and exercising his powers under this Agreement, the Merger Agreement, or the Escrow Agreement, including without limitation expenses related to any litigation, arbitration, or other dispute resolution proceedings.
Section 5.3 — Distribution of Remaining Balance.
(a) Upon the later of (i) the final release or distribution of all amounts held in the escrow fund pursuant to the Escrow Agreement (expected to occur no later than January 9, 2026, subject to extension for pending claims), (ii) the final resolution of all outstanding indemnification claims under the Merger Agreement, and (iii) the final determination and payment (if any) of the purchase price adjustment under Section 2.7 of the Merger Agreement, the Stockholder Representative shall distribute any remaining balance of the Expense Fund (including accrued interest and earnings thereon) to the Stockholders, pro rata in accordance with their respective shares of the aggregate merger consideration.
(b) The Stockholder Representative shall provide a final written accounting of the Expense Fund to the Stockholders within thirty (30) days following the distribution contemplated by Section 5.3(a), setting forth in reasonable detail all receipts, disbursements, and the final balance of the Expense Fund. Such accounting shall be delivered to the Stockholders at the addresses set forth in the Company's records or as otherwise reasonably available to the Stockholder Representative.
(c) If, at any time during the term of this Agreement, the Expense Fund is exhausted or the Stockholder Representative reasonably determines that the remaining balance of the Expense Fund is insufficient to cover anticipated costs and expenses, the Stockholder Representative may request additional funding from the Stockholders on a pro rata basis. Any such request shall be voluntary, and no Stockholder shall be obligated to contribute additional funds, except to the extent required pursuant to Section 4.1(b) hereof.
ARTICLE VI
COMPENSATION OF STOCKHOLDER REPRESENTATIVE
Section 6.1 — Compensation.
(a) The Stockholder Representative shall be entitled to receive reasonable compensation for his services hereunder, which compensation shall be paid from the Expense Fund. The annual compensation payable to the Stockholder Representative shall be Two Hundred Fifty Thousand Dollars ($250,000) per annum, pro-rated for any partial periods during which the Stockholder Representative serves in such capacity, payable in equal quarterly installments in arrears from the Expense Fund. The first quarterly installment shall be payable on the date that is three (3) months following the Effective Time, and subsequent installments shall be payable on each successive three-month anniversary thereafter until the termination of this Agreement or the resignation or removal of the Stockholder Representative, whichever occurs first.
(b) The compensation payable to the Stockholder Representative under this Section 6.1 has been agreed among the Parties as reasonable compensation in light of the scope and complexity of the Stockholder Representative's duties, the aggregate deal value, the anticipated duration of the post-closing period, and the personal risk and time commitment associated with such duties.
Section 6.2 — Reimbursement of Expenses.
The Stockholder Representative shall be entitled to prompt reimbursement from the Expense Fund for all reasonable and documented out-of-pocket expenses incurred by the Stockholder Representative in the performance of his duties hereunder, including without limitation travel expenses (including airfare, hotel, ground transportation, and meals), communication expenses, document reproduction costs, courier and delivery charges, and other incidental expenses. The Stockholder Representative shall maintain reasonable records of all such expenses and shall provide receipts or other documentation upon request.
ARTICLE VII
RESIGNATION AND REMOVAL; SUCCESSOR
Section 7.1 — Resignation.
(a) The Stockholder Representative may resign from his position at any time by delivering written notice of resignation to Parent (at the address set forth in Section 11.1 hereof) and to the Stockholders (or such subset of Stockholders whose contact information is reasonably available to the Stockholder Representative). Such notice shall specify the proposed effective date of resignation, which shall be not less than thirty (30) days following the date of delivery of such notice.
(b) Notwithstanding the foregoing, the resignation of the Stockholder Representative shall not become effective until a successor Stockholder Representative has been duly appointed in accordance with Section 7.3 hereof and has accepted such appointment in writing. If no successor is appointed within the thirty (30)-day notice period, the Stockholder Representative's obligation to continue serving shall extend until a successor is appointed or until the expiration of the sixty (60)-day period described in Section 7.3(b) hereof, whichever occurs first.
(c) Upon the effective date of resignation, the resigning Stockholder Representative shall promptly deliver to the successor Stockholder Representative all books, records, documents, funds (including the Expense Fund), and other property held by the resigning Stockholder Representative in his capacity as Stockholder Representative.
Section 7.2 — Removal.
(a) The Stockholder Representative may be removed from his position, with or without cause, by the written consent or direction of Stockholders who received in the aggregate more than fifty percent (50%) of the total merger consideration (excluding rollover amounts) paid to the Stockholders at the Effective Time. Such written consent or direction shall specify the effective date of removal, which shall be not less than thirty (30) days following the delivery of written notice of removal to Parent and to the Stockholder Representative.
(b) Written notice of removal shall be delivered to Parent (at the address set forth in Section 11.1 hereof) and to the Stockholder Representative (at the address set forth in Section 11.1 hereof) at least thirty (30) days prior to the effective date of removal. Such notice shall identify the Stockholders consenting to the removal and shall certify that such Stockholders received in the aggregate more than fifty percent (50%) of the total merger consideration (excluding rollover amounts).
(c) The removal of the Stockholder Representative shall not become effective until a successor Stockholder Representative has been duly appointed in accordance with Section 7.3 hereof and has accepted such appointment in writing, unless the consenting Stockholders simultaneously appoint a successor in their written consent.
Section 7.3 — Appointment of Successor.
(a) In the event of the resignation, removal, death, or incapacity of the Stockholder Representative, a successor Stockholder Representative shall be appointed by the written consent or direction of Stockholders who received in the aggregate more than fifty percent (50%) of the total merger consideration (excluding rollover amounts) paid to the Stockholders at the Effective Time.
(b) If no successor Stockholder Representative is appointed within sixty (60) days following the date on which the vacancy occurs (whether by resignation, removal, death, or incapacity), Parent shall have the right (but not the obligation) to petition the Court of Chancery of the State of Delaware (or, if such court declines jurisdiction, the United States District Court for the District of Delaware) for the appointment of a successor Stockholder Representative. The costs and expenses of any such petition shall be borne by the Expense Fund (if sufficient funds remain therein) or, if the Expense Fund is insufficient, by the Stockholders on a pro rata basis.
(c) Any successor Stockholder Representative appointed in accordance with this Section 7.3 shall have all the rights, powers, duties, and obligations of the original Stockholder Representative under this Agreement, the Merger Agreement, and the Escrow Agreement, as if such successor had been the original Stockholder Representative. The appointment of a successor shall not affect any rights, obligations, or liabilities of the predecessor Stockholder Representative that arose prior to the effective date of succession.
(d) The predecessor Stockholder Representative (or, in the case of death or incapacity, his estate or legal representative) shall promptly deliver to the successor Stockholder Representative all books, records, documents, funds (including the Expense Fund), and other property held by the predecessor in his capacity as Stockholder Representative.
ARTICLE VIII
INFORMATION AND COOPERATION
Section 8.1 — Information Rights.
(a) Parent and the surviving entity (following the Effective Time) shall provide the Stockholder Representative with reasonable access to the books, records, financial statements, workpapers, and other information of the Company (and, following the Effective Time, the surviving entity and its subsidiaries) to the extent reasonably necessary for the Stockholder Representative to perform his duties in connection with (i) the review and evaluation of indemnification claims, (ii) the administration of the escrow fund, (iii) the review and analysis of the final closing statement and any purchase price adjustment, and (iv) any other matter within the scope of the Stockholder Representative's authority under this Agreement.
(b) Such access shall be provided during normal business hours and upon reasonable prior written notice to Parent or the surviving entity. Parent and the surviving entity shall have the right to impose reasonable confidentiality restrictions on the information provided to the Stockholder Representative, and the Stockholder Representative agrees to comply with such restrictions. Access shall not unreasonably interfere with the ordinary course business operations of the surviving entity or its subsidiaries.
(c) The Stockholder Representative shall treat all information received from Parent, the surviving entity, or any of their affiliates in connection with the performance of his duties hereunder as confidential and shall not disclose such information to any person or entity (other than the Stockholder Representative's legal counsel and other professional advisors, who shall be bound by substantially equivalent confidentiality obligations) except (i) to the extent required by applicable law, regulation, or legal process, (ii) to the extent necessary for the Stockholder Representative to perform his duties hereunder, or (iii) with the prior written consent of Parent.
Section 8.2 — Cooperation.
(a) Parent and the Stockholder Representative agree to cooperate in good faith with respect to all matters within the scope of this Agreement, including without limitation the timely provision of information and documentation, prompt responses to communications and inquiries, and reasonable efforts to resolve disputes and disagreements amicably and without resort to litigation or other adversarial proceedings.
(b) Without limiting the generality of the foregoing, each Party agrees to (i) respond to reasonable written requests for information within ten (10) business days (or such shorter period as may be required by the circumstances), (ii) make its representatives and advisors reasonably available for meetings and discussions regarding pending matters, and (iii) execute and deliver such instruments and documents as may be reasonably necessary to effectuate the purposes of this Agreement.
Section 8.3 — Notices to Stockholders.
(a) The Stockholder Representative shall have no obligation or duty to keep the Stockholders informed of matters arising under this Agreement, the Merger Agreement, or the Escrow Agreement, and the failure of the Stockholder Representative to provide any notice or update to the Stockholders shall not give rise to any claim or liability against the Stockholder Representative; provided, however, that the Stockholder Representative may, in his sole discretion, provide periodic updates to the Stockholders (or such subset of Stockholders whose contact information is reasonably available) regarding the status of indemnification claims, escrow releases, purchase price adjustments, and other matters within the scope of his duties.
(b) Notwithstanding the foregoing, the Stockholder Representative shall make reasonable efforts to notify the Stockholders (or such subset of Stockholders whose contact information is reasonably available) of (i) any material settlement or resolution of indemnification claims that results in a release of funds from the escrow fund in excess of Five Million Dollars ($5,000,000), (ii) the scheduled release dates of escrow funds, and (iii) the final distribution of the Expense Fund pursuant to Section 5.3 hereof.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES
Section 9.1 — Representations and Warranties of the Stockholder Representative.
Douglas Pemberton hereby represents and warrants to Parent and Merger Sub as follows:
(a) Capacity and Authority. He has full legal capacity and authority to enter into this Agreement and to perform his obligations hereunder. The execution, delivery, and performance of this Agreement by him does not require the consent, approval, or authorization of any other person or entity (other than the Stockholder approval contemplated by the Merger Agreement, which has been obtained).
(b) Binding Obligation. This Agreement constitutes his legal, valid, and binding obligation, enforceable against him in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights and remedies generally and to general principles of equity.
(c) No Conflict. The execution, delivery, and performance of this Agreement by him does not and will not (i) violate, conflict with, or result in a breach of any agreement, instrument, order, judgment, decree, or other obligation to which he is a party or by which he is bound, or (ii) violate any applicable law, rule, or regulation.
(d) Familiarity with the Company. He is the Independent Board Chair of Cloudium Technologies plc and has familiarity with the business, operations, financial condition, and affairs of the Company. He has had the opportunity to review the Merger Agreement, the Escrow Agreement, the Disclosure Schedules, and other Transaction Documents and to consult with his own legal counsel regarding his obligations hereunder.
Section 9.2 — Representations and Warranties of Parent and Merger Sub.
Each of Parent and Merger Sub hereby represents and warrants to the Stockholder Representative as follows:
(a) Organization and Standing. Parent is a limited partnership duly organized, validly existing, and in good standing under the laws of the State of Delaware. Merger Sub is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware.
(b) Power and Authority. Each of Parent and Merger Sub has full power and authority (corporate, partnership, or otherwise) to enter into this Agreement and to perform its obligations hereunder. The execution, delivery, and performance of this Agreement by each of Parent and Merger Sub has been duly authorized by all necessary action on the part of each such entity.
(c) Binding Obligation. This Agreement constitutes the legal, valid, and binding obligation of each of Parent and Merger Sub, enforceable against each of them in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights and remedies generally and to general principles of equity.
(d) No Conflict. The execution, delivery, and performance of this Agreement by each of Parent and Merger Sub does not and will not (i) violate, conflict with, or result in a breach of such entity's organizational documents, (ii) violate, conflict with, or result in a breach of any agreement, instrument, order, judgment, decree, or other obligation to which such entity is a party or by which it is bound, or (iii) violate any applicable law, rule, or regulation.
ARTICLE X
TERM AND TERMINATION
Section 10.1 — Term.
This Agreement shall become effective as of the Effective Time (11:59 p.m. Eastern Time on July 9, 2024) and shall remain in full force and effect until the latest of the following dates:
(a) The date on which all amounts held in the escrow fund have been finally released or distributed in accordance with the Escrow Agreement (which date is expected to be no later than January 9, 2026, but which may be extended to the extent that any indemnification claims remain pending and unresolved as of such date);
(b) The date on which all outstanding indemnification claims under the Merger Agreement have been finally resolved (whether by settlement, final judgment, arbitration award, or otherwise) and all amounts payable in connection with such claims have been paid or distributed;
(c) The date on which the purchase price adjustment under Section 2.7 of the Merger Agreement has been finally determined and all amounts payable in connection with such adjustment have been paid; and
(d) The date on which the remaining balance of the Expense Fund has been distributed to the Stockholders in accordance with Section 5.3 hereof.
Section 10.2 — Survival.
(a) The provisions of Article IV (Indemnification and Exculpation of Stockholder Representative) and Article XI (Miscellaneous), including without limitation the provisions governing limitation of liability (Section 11.14), governing law (Section 11.2), jurisdiction and venue (Section 11.3), and waiver of jury trial (Section 11.4), shall survive the termination of this Agreement and shall continue in full force and effect indefinitely (or, in the case of indemnification obligations under Article IV, until the expiration of the applicable statute of limitations).
(b) The termination of this Agreement shall not affect any rights or obligations of the Parties (or the Stockholders) that arose prior to such termination, and any such rights or obligations shall survive termination until fully performed or satisfied.
ARTICLE XI
MISCELLANEOUS
Section 11.1 — Notices.
All notices, requests, demands, claims, consents, waivers, and other communications required or permitted to be given hereunder shall be in writing and shall be deemed duly given or delivered (a) when delivered personally, (b) one (1) business day after being sent by nationally recognized overnight courier service (with tracking confirmation), or (c) when sent by email (with written confirmation of receipt by the receiving party, provided that an automated "read receipt" or "out of office" reply shall not constitute confirmation of receipt) to the parties at the following addresses (or at such other address as a party may designate by written notice in accordance with this Section 11.1):
If to the Stockholder Representative: