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1041-00003 · Solara Digital Infrastructure LP · Transaction Documents/Merger Agreement

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PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the attorney work product doctrine. It is intended solely for the use of the addressees identified herein and may not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP. Any unauthorized review, use, disclosure, or distribution is prohibited.

CALDERWOOD & HARKNESS LLP

Annotated Redline and Negotiation Strategy Memorandum

No-Shop and Fiduciary-Out Provisions

(Section 6.4 of the Merger Agreement)

Matter: Solara Digital Infrastructure Fund VI LP — Acquisition of Cloudium Technologies plc

Matter Number: 1041-00003

Date: December 28, 2023

From: Tiffany Rosenthal, Lead Associate, Mergers & Acquisitions Andrew Fitzpatrick, Working Associate, Mergers & Acquisitions

To: Harrison Wexford, Responsible Partner, Mergers & Acquisitions Beatrice Holloway, Billing Partner, Mergers & Acquisitions

Re: Analysis of No-Shop Provision and Fiduciary-Out Exception in Section 6.4 of the Initial Draft Merger Agreement (circulated December 1, 2023) as marked up by Ridgeway Phelps & Sato LLP (received December 18, 2023)

CONFIDENTIALITY NOTICE: This memorandum constitutes attorney work product and is protected by the attorney-client privilege. It has been prepared by Calderwood & Harkness LLP at the direction of Solara Digital Infrastructure Fund VI LP in connection with the proposed acquisition of Cloudium Technologies plc. This memorandum reflects the mental impressions, conclusions, opinions, and legal theories of counsel. It is not intended for distribution beyond the named addressees without the express authorization of the responsible partner. Any inadvertent disclosure does not constitute a waiver of any applicable privilege or protection.

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I. EXECUTIVE SUMMARY

This memorandum analyzes the no-shop and fiduciary-out provisions contained in Section 6.4 of the Agreement and Plan of Merger (the "Merger Agreement") among Cloudium Technologies plc, a public limited company incorporated under the laws of England and Wales ("Cloudium" or the "Company"), Stratos Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of Solara Digital Infrastructure Fund VI LP ("Merger Sub"), and Solara Digital Infrastructure Fund VI LP, a Delaware limited partnership ("Solara" or "Fund VI," and together with Merger Sub, the "Buyer Parties"), pursuant to which Merger Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of Fund VI (the "Merger").

The initial draft of the Merger Agreement was prepared and circulated by this firm on behalf of the Buyer Parties on December 1, 2023 (the "Initial Draft"). On December 18, 2023, Ridgeway Phelps & Sato LLP ("RPS"), acting as counsel to the Company, returned a marked-up revised draft of the Merger Agreement (the "RPS Mark-Up"). The lead M&A partner at RPS is Catherine Answorth (New York), with Alistair Fenn (London) providing English law corporate advice. This memorandum addresses specifically the changes proposed by RPS to Section 6.4 and provides our analysis and recommended negotiating positions.

Key Tension. The central tension in Section 6.4 is the competing interests of the Buyer Parties and the Company's board of directors (the "Board"). Solara seeks a robust no-shop provision to protect the substantial value of the $6,800,000,000 acquisition, representing a price of $36.92 per share and an implied multiple of approximately 16.8x last-twelve-months ("LTM") EBITDA. The Board, which is chaired by Douglas Pemberton (independent), requires sufficient flexibility to fulfill the fiduciary duties of the Company's directors under the laws of England and Wales and, as a practical matter, under the fiduciary-duty expectations of the Company's stockholders who hold shares listed on the Nasdaq Global Select Market (ticker: CLDM). As of the date of this memorandum, Cloudium has approximately 184,200,000 shares of common stock outstanding, and the Merger will require stockholder approval, which the Company anticipates soliciting through a definitive proxy statement to be filed with the Securities and Exchange Commission. Blackthorn Proxy Advisors LLC has been retained by the Company to assist with the solicitation process. We note that stockholder approval was ultimately obtained on May 20, 2024, at a special meeting of stockholders at which approximately 82.4% of shares present and voting were cast in favor of the Merger, a result that was facilitated in part by the contractual protections discussed in this memorandum.

Fairness Opinion. The Board is expected to receive a fairness opinion from Veridian Partners LLC in connection with its approval of the Merger Agreement. Based on our discussions with the Company's general counsel, Nadia Chowdhury, we understand that this opinion will be delivered by Monica Pressler, Managing Director, Veridian Partners LLC. The fairness opinion was ultimately dated January 21, 2024. The availability and terms of the fairness opinion are relevant to the fiduciary-out analysis because the Board's determination of whether a competing proposal constitutes a "Superior Proposal" requires, under our draft, consultation with the Company's financial advisor.

Summary of Recommended Positions. As detailed further in Section VIII below, our recommended negotiating approach is to hold firm on several core provisions — including the 20% threshold in the Acquisition Proposal definition, the 80% threshold in the Superior Proposal definition, the "reasonably likely" fiduciary-out trigger standard, the four-business-day initial match-right period, and the materiality and foreseeability requirements in the Intervening Event definition — while conceding certain items that are either market-standard or do not meaningfully impair Solara's protections, such as the addition of "recapitalization" and "liquidation" to the Acquisition Proposal definition, the proviso permitting referral of unsolicited inquiries to the Board, and the express enumeration of certain factors in the Superior Proposal determination.

Cross-Reference. For the detailed analysis of the termination fee and reverse termination fee structures, including the 3.25% termination fee ($221,000,000) payable by the Company and the 5.5% reverse termination fee ($374,000,000) payable by Solara, readers should refer to the separate Termination Fee and Reverse Termination Fee Analysis memorandum, which is being prepared by this team and is expected to be circulated on or about January 6, 2024 (the "Termination Fee Memo").

II. BACKGROUND ON DEAL STRUCTURE AND PARTIES

A. Transaction Structure

The Merger is structured as a reverse triangular merger under the General Corporation Law of the State of Delaware (the "DGCL"). Stratos Merger Sub Inc. was incorporated on January 8, 2024, under the laws of the State of Delaware (Delaware File No. 7923841) as a direct wholly owned subsidiary of Solara Digital Infrastructure Fund VI LP. At the effective time of the Merger, Merger Sub will merge with and into Cloudium Technologies plc, with the Company continuing as the surviving entity and becoming a wholly owned subsidiary of Fund VI. Each share of common stock of the Company outstanding immediately prior to the effective time (other than shares held by the Company as treasury shares, shares held by the Buyer Parties, and rollover shares) will be converted into the right to receive $36.92 in cash, without interest and subject to applicable withholding.

The choice of a reverse triangular merger structure preserves the Company's corporate existence, contractual relationships, and regulatory approvals, which is particularly important given the Company's significant international operations and the need to maintain existing customer relationships across multiple jurisdictions. The Company's subsidiaries include Cloudium Technologies UK Ltd. (England and Wales), Cloudium Technologies India Pvt. Ltd. (India), and Cloudium Solutions GmbH (Germany), among others.

B. The Buyer Parties

Solara Digital Infrastructure LP is a Delaware limited partnership headquartered at 1200 Market Street, Suite 3400, Wilmington, Delaware 19801. Solara is a leading private equity firm focused on technology infrastructure investments. Its Managing Partners are Marcus Elliston and Priya Narasimhan. The acquisition of the Company is being conducted through Solara Digital Infrastructure Fund VI LP ("Fund VI"), a 2022 vintage fund with approximately $12.4 billion of committed capital (EIN: 87-4523190). Fund VI has sufficient committed but uncalled capital to fund the equity commitment described below.

Solara's financial advisor in connection with the Merger is Osprey Bancroft & Co., with Damien Harlow, Managing Director, serving as the lead banker on the engagement. Osprey Bancroft has been advising Solara since the early stages of the process and has performed extensive financial and strategic due diligence on the Company.

C. The Company

Cloudium Technologies plc is a public limited company incorporated under the laws of England and Wales (Company No. 09734521), with its registered office at 45 Broadwick Street, London W1F 0DB, United Kingdom, and its principal U.S. headquarters at 600 Townsend Street, Suite 800, San Francisco, California 94103. The Company's shares of common stock are listed on the Nasdaq Global Select Market under the ticker symbol "CLDM."

The Company's management team includes Jonathan Hargrove (Chief Executive Officer), Sienna Whitfield (Chief Financial Officer), and Nadia Chowdhury (General Counsel and Corporate Secretary). The Board of Directors is chaired by Douglas Pemberton, who serves as the independent, non-executive chairperson.

The Company's counsel is Ridgeway Phelps & Sato LLP, with Catherine Answorth (M&A, New York) serving as the lead transactional partner and Alistair Fenn (Corporate, London) providing English law corporate and fiduciary advice.

D. Key Financial Metrics

E. Rollover Participants

Two significant stakeholders in the Company will participate as rollover equity investors in the post-closing entity:

(i) Jonathan Hargrove (CEO) — Mr. Hargrove holds approximately 7,736,400 shares of Company common stock (approximately 4.2% of shares outstanding). He will roll over 50% of his equity position, representing approximately $142,814,544 in rollover value at the per-share merger consideration of $36.92.

(ii) Pinnacle Growth Ventures LLC — Pinnacle holds approximately 21,367,200 shares of Company common stock (approximately 11.6% of shares outstanding). Pinnacle will roll over 60% of its equity position, representing approximately $473,241,408 in rollover value. Pinnacle's managing member is Evelyn Carmichael.

The rollover commitments are conditioned upon the consummation of the Merger and will be documented in separate Rollover Equity Agreements to be executed at signing. As discussed in Section VI below, the rollover participants will also execute Voting / Support Agreements at signing.

F. Financing

The Merger will be financed through a combination of committed debt financing and equity contributions from Fund VI:

(i) Committed Debt Financing: $4,240,000,000, to be provided by Meridian Atlantic Bank, N.A. and Ironclad Capital Markets LLC pursuant to a debt commitment letter initially signed on December 15, 2023 and to be executed in final form at signing. The debt commitment letter provides for a combination of senior secured term loans and senior unsecured bridge loans.

(ii) Equity Commitment: $2,832,888,096 from Fund VI, to be documented in an equity commitment letter to be executed at signing.

The aggregate financing of $7,072,888,096 is sized to fund the merger consideration (approximately $6,800,000,000), the refinancing of the Company's existing indebtedness, transaction fees and expenses, and estimated working capital needs.

G. Pre-Signing Process

The pre-signing process is relevant to the no-shop analysis because it informs the question of whether a go-shop provision is appropriate. The key milestones are as follows:

• September 5, 2023: Solara and the Company executed a mutual confidentiality agreement (the "NDA"), which included customary standstill provisions. This firm represented Solara in the negotiation of the NDA.

• October 2, 2023: Solara's deal team attended a management presentation by the Company at the Company's San Francisco offices.

• October 30, 2023: Solara submitted a preliminary indication of interest ("IOI") at a price range of $34.00–$37.50 per share, subject to due diligence confirmation and documentation.

• November 6, 2023: The Board authorized the Company's management to enter into exclusive negotiations with Solara.

• November 15, 2023: The parties executed an Exclusivity Agreement providing for a 45-day exclusivity period (expiring December 30, 2023). During this period, the Company agreed not to solicit, initiate, or encourage any competing acquisition proposals.

• December 1, 2023: Calderwood & Harkness circulated the Initial Draft of the Merger Agreement on behalf of the Buyer Parties.

• December 18, 2023: Ridgeway Phelps & Sato returned the RPS Mark-Up.

The fact that the Company authorized exclusive negotiations and executed an Exclusivity Agreement after evaluating Solara's IOI is significant to the no-shop analysis. The exclusivity period provided the parties with a structured timeline for negotiation and due diligence. In this context, a go-shop provision — which is more commonly used in transactions where the target's board has not conducted a pre-signing market check or entered into exclusivity — is neither warranted nor appropriate.

III. OVERVIEW OF SECTION 6.4 AS DRAFTED BY CALDERWOOD & HARKNESS (DECEMBER 1, 2023 INITIAL DRAFT)

This Section provides a detailed overview of Section 6.4 as set forth in the Initial Draft circulated by this firm on December 1, 2023. Each subsection is analyzed separately below, with a description of the key drafting choices and their strategic rationale.

A. Section 6.4(a) — No-Shop / No-Solicitation Covenant

Section 6.4(a) of the Initial Draft imposes a comprehensive no-solicitation covenant on the Company and its subsidiaries (including Cloudium Technologies UK Ltd., Cloudium Technologies India Pvt. Ltd., Cloudium Solutions GmbH, and all other direct and indirect subsidiaries of the Company). The covenant applies to the Company, its subsidiaries, and their respective directors, officers, employees, and Representatives (as defined in the Merger Agreement to include financial advisors, attorneys, accountants, consultants, and other agents and advisors).

The no-solicitation covenant prohibits the Company and its subsidiaries and their respective directors, officers, employees, and Representatives from, directly or indirectly:

(i) soliciting, initiating, knowingly encouraging, or knowingly facilitating any inquiries, proposals, or offers that constitute, or could reasonably be expected to lead to, an Acquisition Proposal (as defined);

(ii) entering into, continuing, or otherwise participating in any discussions or negotiations with any Person (other than the Buyer Parties and their Representatives) regarding any Acquisition Proposal or any inquiry, proposal, or offer that could reasonably be expected to lead to an Acquisition Proposal;

(iii) furnishing to any Person (other than the Buyer Parties and their Representatives) any non-public information relating to the Company or any of its subsidiaries, or affording access to the properties, books, records, or personnel of the Company or any of its subsidiaries, in connection with or for the purpose of facilitating any Acquisition Proposal; or

(iv) entering into any letter of intent, memorandum of understanding, merger agreement, acquisition agreement, or other agreement, arrangement, or understanding (whether or not binding) relating to any Acquisition Proposal.

Definition of "Acquisition Proposal." As drafted in the Initial Draft, an "Acquisition Proposal" is defined as any proposal or offer (other than the transactions contemplated by the Merger Agreement) for:

(a) a merger, consolidation, share exchange, business combination, or similar transaction involving the Company or any of its subsidiaries that, individually or in the aggregate, represent 20% or more of the Company's consolidated revenues, net income, or total assets;

(b) any direct or indirect acquisition (whether by purchase, tender offer, exchange offer, or otherwise) of 20% or more of the outstanding shares of common stock of the Company or of any class of equity securities of the Company; or

(c) any direct or indirect acquisition (whether in a single transaction or a series of related transactions) of assets constituting 20% or more of the consolidated total assets of the Company and its subsidiaries.

The 20% threshold was selected as the market-standard threshold for deals of this size and type. A threshold set too low risks capturing inconsequential minority investments or asset dispositions that do not meaningfully threaten the Merger, while a threshold set too high could create gaps through which a strategic competitor might acquire a substantial position without triggering the no-shop protections.

Cessation of Existing Discussions. Section 6.4(a) also includes an affirmative obligation requiring the Company to immediately cease, and to cause its subsidiaries and Representatives to cease, all existing discussions or negotiations with any Person (other than the Buyer Parties) regarding any Acquisition Proposal, and to promptly request the return or destruction of all confidential information previously furnished to any such Person in connection with any potential Acquisition Proposal.

No Window-Shop or Go-Shop. The Initial Draft does not include any window-shop or go-shop provision. The no-solicitation covenant becomes effective from and after the execution and delivery of the Merger Agreement (i.e., from signing). This reflects Solara's position that the pre-signing process — including the management presentation, Solara's IOI, the Board's authorization of exclusive negotiations, and the 45-day exclusivity period — provided an adequate pre-signing market check, and that a post-signing go-shop would unnecessarily expose the Merger to competitive risk and could destabilize the financing commitments.

Standstill Enforcement. Section 6.4(a) includes a prohibition on the Company from waiving, amending, modifying, or releasing any provision of any standstill agreement or similar agreement to which the Company is a party, including the standstill provision contained in the NDA between Solara and the Company executed on September 5, 2023. This provision is designed to prevent the Company from unilaterally freeing potential competing bidders from their contractual obligations to refrain from making unsolicited proposals.

Effective Date. The no-solicitation covenant takes effect upon execution of the Merger Agreement. Signing is targeted for late January 2024, which would provide a seamless transition from the contractual exclusivity under the Exclusivity Agreement (expiring December 30, 2023) to the no-solicitation covenant under the Merger Agreement. If there is a gap between the expiration of the Exclusivity Agreement and signing, we should consider whether a short-term extension of the Exclusivity Agreement is warranted.

B. Section 6.4(b) — Fiduciary-Out Exception

Notwithstanding the no-solicitation covenant in Section 6.4(a), the Initial Draft includes a limited fiduciary-out exception that permits the Board to consider and respond to unsolicited bona fide written Acquisition Proposals under prescribed circumstances. The fiduciary-out is essential to the enforceability of the no-shop provision because courts — both in Delaware and in England and Wales — will scrutinize no-shop provisions to ensure that the target's board retains sufficient flexibility to discharge its fiduciary duties.

Conditions to Engagement. Under the Initial Draft, the Board may take action under the fiduciary-out only if two conditions are satisfied:

(i) Superior Proposal Determination. The Board determines in good faith, after consultation with its financial advisor (Veridian Partners LLC) and outside legal counsel (Ridgeway Phelps & Sato LLP), that the unsolicited Acquisition Proposal constitutes, or is reasonably likely to lead to, a "Superior Proposal" (as defined); and

(ii) Fiduciary Duty Determination. The Board determines in good faith, after consultation with outside legal counsel, that the failure to take such action with respect to such Acquisition Proposal would be reasonably likely to be inconsistent with the directors' fiduciary duties under applicable law.

Both conditions must be satisfied before the Board may engage. The requirement of good-faith determination after consultation with financial and legal advisors imposes a process discipline on the Board that serves to protect Solara against precipitous action.

Definition of "Superior Proposal." As drafted in the Initial Draft, a "Superior Proposal" is defined as an unsolicited bona fide written Acquisition Proposal (with the 20% thresholds in the definition of "Acquisition Proposal" increased to 80% for this purpose) that the Board determines in good faith, after consultation with its financial advisor and outside legal counsel, taking into account all relevant factors (including legal, financial, regulatory, and timing considerations, as well as any revised proposal by Solara), is more favorable to the Company's stockholders than the transactions contemplated by the Merger Agreement.

The increase of the threshold from 20% to 80% for the Superior Proposal definition is a critical protection for Solara. It ensures that only whole-company alternative transactions can qualify as Superior Proposals — a third party cannot displace the Merger by offering to acquire a 25% or 50% stake in the Company or by acquiring a minority collection of assets. The 80% threshold is standard in sponsor-led take-private transactions and reflects the fundamental premise that a competing bidder should offer to acquire substantially all of the Company in order to justify the termination of the Merger Agreement.

The inclusion of "any revised proposal by Solara" as a factor in the Superior Proposal determination at the initial stage (in addition to the formal match-right stage under Section 6.4(d)) is an important protection. It requires the Board to evaluate the Acquisition Proposal in light of the possibility that Solara might improve its offer, thereby discouraging premature determinations that a third-party proposal is superior.

Permitted Actions. If both conditions are satisfied, the Board may:

(a) furnish non-public information relating to the Company and its subsidiaries to the Person making the Acquisition Proposal, subject to the execution by such Person of a confidentiality agreement with terms no less restrictive than those contained in the NDA between Solara and the Company; and

(b) engage in discussions or negotiations with such Person regarding the Acquisition Proposal.

Information Parity. The Initial Draft includes a requirement that the Company provide to Solara all non-public information furnished to the third party (to the extent not previously provided to Solara) either simultaneously with, or promptly (and in any event within 24 hours of), such furnishing. This information-parity provision ensures that Solara has access to the same information as the competing bidder and is positioned to formulate a revised proposal during the match-right period.

Precondition of No Breach. The fiduciary-out exception is only available with respect to Acquisition Proposals that did not arise from or result from a breach of the no-solicitation covenant in Section 6.4(a). This precondition is essential: it prevents the Company from benefiting from its own breach by using improperly solicited proposals as the basis for invoking the fiduciary-out.

C. Section 6.4(c) — Adverse Recommendation Change / Board Recommendation

Section 6.4(c) of the Initial Draft addresses the Board's recommendation and the circumstances under which an Adverse Recommendation Change may be made.

Affirmative Recommendation Covenant. The Board is required to include in the proxy statement distributed to the Company's stockholders a recommendation that the stockholders vote in favor of the Merger (the "Company Board Recommendation"). This covenant reflects the Board's expected approval of the Merger Agreement and its determination that the Merger is fair to, and in the best interests of, the Company's stockholders.

Prohibition on Adverse Recommendation Change. Except as expressly permitted, the Board is prohibited from:

(i) withdrawing, qualifying, or modifying, or publicly proposing to withdraw, qualify, or modify, the Company Board Recommendation in any manner adverse to Solara (an "Adverse Recommendation Change");

(ii) approving, recommending, or declaring advisable, or publicly proposing to approve, recommend, or declare advisable, any Acquisition Proposal; or

(iii) causing or permitting the Company to enter into any letter of intent, memorandum of understanding, merger agreement, acquisition agreement, or other agreement, arrangement, or understanding relating to any Acquisition Proposal (other than a confidentiality agreement executed in accordance with Section 6.4(b)).

Limited Exception for Adverse Recommendation Change. The Initial Draft permits the Board to effect an Adverse Recommendation Change in two circumstances:

(A) In Response to a Superior Proposal. The Board may change its recommendation in response to a Superior Proposal, provided that the match-right procedures in Section 6.4(d) have been fully complied with and the Board has determined, following the match-right period, that the Acquisition Proposal continues to constitute a Superior Proposal after taking into account any revised proposal by Solara.

(B) In Response to an Intervening Event. The Board may change its recommendation in response to an Intervening Event (as defined), provided that (1) the Board has determined in good faith, after consultation with outside legal counsel, that the failure to make such Adverse Recommendation Change would be reasonably likely to be inconsistent with the directors' fiduciary duties under applicable law, and (2) the match-right procedures in Section 6.4(d) have been complied with (to the extent applicable to Intervening Events).

Definition of "Intervening Event." As drafted, an "Intervening Event" means a material event, development, or change in circumstances with respect to the Company or its subsidiaries that (i) was not known to, or reasonably foreseeable by, the Board as of the date of the Merger Agreement, and (ii) does not relate to any Acquisition Proposal or any inquiry, proposal, or offer that could reasonably be expected to lead to an Acquisition Proposal. The Intervening Event definition is intentionally narrow: it requires materiality, unforeseeability, and non-relation to competing proposals. Examples might include an unexpected transformative contract award, a significant technological breakthrough, or a material and unforeseen regulatory development that fundamentally alters the Company's standalone value.

D. Section 6.4(d) — Match Right / Negotiation Period

Section 6.4(d) establishes the procedural requirements that the Board must satisfy before making an Adverse Recommendation Change or terminating the Merger Agreement to enter into a Superior Proposal.

Notice Requirement. Before taking any such action, the Company must provide Solara with written notice (the "Match Notice") at least four (4) business days in advance. The Match Notice must:

(i) state that the Board intends to make an Adverse Recommendation Change or that the Company intends to terminate the Merger Agreement;

(ii) if the intended action is in response to a Superior Proposal, identify the Person making the Superior Proposal and describe all material terms and conditions thereof (including the proposed form and amount of consideration, any financing commitments, any conditions to closing, and the proposed timeline for consummation), and attach the most current version of all transaction documents relating thereto; and

(iii) if the intended action is in response to an Intervening Event, describe the Intervening Event in reasonable detail.

Negotiation Period. During the four-business-day period following delivery of the Match Notice (the "Match Period"), the Company must, and must cause its financial advisor and outside legal counsel to, negotiate in good faith with Solara and its Representatives (if Solara desires to negotiate) to make adjustments to the terms and conditions of the Merger Agreement so that the Acquisition Proposal ceases to constitute a Superior Proposal (or, in the case of an Intervening Event, so that an Adverse Recommendation Change is no longer required by the Board's fiduciary duties).

Post-Match Determination. At the end of the Match Period, the Board must determine in good faith, after consultation with its financial advisor and outside legal counsel, that the Acquisition Proposal continues to constitute a Superior Proposal (or, in the case of an Intervening Event, that an Adverse Recommendation Change continues to be required) after taking into account any revisions to the terms of the Merger Agreement proposed by Solara during the Match Period.

Subsequent Match Rights. Any material amendment to the financial terms or other material terms of a Superior Proposal that is the subject of an ongoing match-right process triggers an additional two (2) business day match period. The Company must deliver a new or supplemental Match Notice describing the material amendment, and the negotiation and post-match determination requirements apply anew during the additional match period.

No Obligation to Match. The Initial Draft expressly provides that Solara has no obligation to propose any revision to the terms of the Merger Agreement during the Match Period or any subsequent match period. This clarification is important to preserve Solara's optionality: if Solara determines that matching the competing proposal would not be in its economic interest, it is free to decline and instead preserve its right to receive the termination fee.

E. Section 6.4(e) — Termination Fee Trigger

Section 6.4(e) provides a cross-reference to Article VIII (Termination) of the Merger Agreement. Specifically, if the Company terminates the Merger Agreement pursuant to Section 8.1(d)(ii) (termination by the Company to enter into a Superior Proposal), the Company is required to pay to Solara, concurrently with such termination, a termination fee equal to 3.25% of the aggregate deal value, or $221,000,000 (the "Termination Fee").

The Termination Fee is structured as the sole and exclusive remedy available to Solara (absent fraud or willful and material breach of the Merger Agreement by the Company) in the event of a termination by the Company for a Superior Proposal. This sole-and-exclusive-remedy formulation is standard and serves two purposes: it provides Solara with meaningful economic protection against deal disruption, while also providing certainty to the Company and the Board that their exposure in connection with a legitimate exercise of the fiduciary-out is limited to the Termination Fee amount.

In the reverse direction, Solara has agreed to a reverse termination fee of 5.5% of the aggregate deal value, or $374,000,000, payable in specified circumstances (principally, failure to consummate the Merger due to a financing failure or a material breach by the Buyer Parties). The reverse termination fee is secured by a Limited Guarantee from Solara Fund VI GP LLC in an aggregate amount of $246,000,000, consisting of $221,000,000 (corresponding to the Termination Fee amount, to provide the Company with a symmetrical backstop) plus $25,000,000 for enforcement costs. The detailed analysis of the Termination Fee and reverse termination fee structures is the subject of the forthcoming Termination Fee Memo.

IV. ANALYSIS OF RIDGEWAY PHELPS & SATO MARK-UP (DECEMBER 18, 2023)

This Section provides a detailed analysis of each material change proposed by RPS in the Mark-Up. For each change, we describe the nature of the revision, assess its strategic implications, and provide our recommended response.

A. Changes to "Acquisition Proposal" Definition

1. Threshold Reduction from 20% to 15%.

RPS has proposed lowering the percentage threshold in the definition of "Acquisition Proposal" from 20% to 15%. That is, any proposal for a merger, acquisition of shares, or acquisition of assets involving 15% or more of the Company's consolidated revenues, net income, total assets, or outstanding shares would constitute an Acquisition Proposal subject to the no-solicitation covenant.

RPS's stated rationale is that a broader definition captures a wider range of alternative proposals, thereby giving the Board clearer protection to refuse to engage with smaller-scale inquiries. While this framing has some surface-level appeal — a broader definition means more proposals are subject to the no-shop — the practical effect is more nuanced. Because the fiduciary-out exception in Section 6.4(b) is keyed to the definition of "Acquisition Proposal," a broader definition means that the fiduciary-out can be triggered by proposals at a lower threshold. In other words, the Board could invoke the fiduciary-out to engage with a party that offers to acquire as little as 15% of the Company's shares, which is a scenario that the fiduciary-out was not designed to address.

C&H Analysis and Recommendation: The 20% threshold is market-standard for deals of this size and is consistent with the precedent transactions surveyed in Appendix B. We recommend pushing back firmly to retain the 20% threshold. The 20% level appropriately balances the scope of the no-shop (capturing all proposals that could meaningfully disrupt the Merger) against the scope of the fiduciary-out (limiting the fiduciary-out to proposals of sufficient significance to warrant Board engagement). If RPS insists on a lower threshold, our fallback would be to accept 15% only in the definition of "Acquisition Proposal" for purposes of the no-solicitation covenant in Section 6.4(a), while retaining 20% as the relevant threshold for purposes of the fiduciary-out in Section 6.4(b). However, this split-threshold approach introduces drafting complexity and should be avoided if possible.

2. Addition of "Recapitalization" and "Liquidation."

RPS has also proposed adding "recapitalization" and "liquidation" to the list of alternative transaction types in clause (a) of the Acquisition Proposal definition, such that the definition would encompass any proposal for "a merger, consolidation, share exchange, recapitalization, liquidation, business combination, or similar transaction."

C&H Analysis and Recommendation: This addition is standard and unobjectionable. "Recapitalization" captures leveraged recapitalization proposals that might be structured to avoid the merger, consolidation, and share-exchange triggers, while "liquidation" addresses the unlikely but theoretically possible scenario of a third party proposing to acquire the Company through a dissolution and asset sale. We recommend accepting this change.

B. Changes to No-Solicitation Covenant (Section 6.4(a))

3. Referral Proviso.

RPS has inserted a proviso in Section 6.4(a) that would expressly permit the Company's officers and directors to refer unsolicited inquiries regarding potential Acquisition Proposals to the Board, and that such referral shall not constitute a violation of the no-solicitation covenant. The language proposed by RPS reads: "provided, however, that any director or officer of the Company may refer any Person who contacts such director or officer to the Board of Directors of the Company (or any committee thereof) without providing any substantive information to such Person, and such referral shall not be deemed to constitute a breach of this Section 6.4(a)."

C&H Analysis and Recommendation: This proviso is reasonable in concept and reflects the practical reality that individual directors and officers of a public company may be contacted by third parties and should be able to direct such contacts through appropriate Board channels without fear of breaching the Merger Agreement. However, we recommend accepting this proviso only with a clarification that no substantive information regarding the Company, its business, its financial condition, or the terms of the Merger may be conveyed to the contacting Person during or in connection with such referral. The proviso as drafted by RPS contains similar language ("[]without providing any substantive information[]"), but we should ensure that this limitation is clear and unambiguous.

4. Deletion of Return/Destruction Obligation.

RPS has deleted the obligation in Section 6.4(a) requiring the Company to request the return or destruction of all confidential information previously furnished to any third party in connection with any potential Acquisition Proposal. RPS's stated rationale is that this obligation is impractical given the number of parties that may have received information during the pre-exclusivity process. We understand that prior to the Board's authorization of exclusive negotiations with Solara on November 6, 2023, the Company may have provided confidential information to other potential acquirors as part of a limited market check or strategic review process.

C&H Analysis and Recommendation: We recommend pushing back on this deletion. While we acknowledge the practical challenges identified by RPS, the return/destruction obligation serves an important purpose: it signals to third parties that the pre-signing process has concluded and that the Company has entered into an exclusive transaction with Solara. At minimum, we recommend reinstatement of the return/destruction obligation with respect to any parties that signed confidentiality agreements with the Company in connection with a potential acquisition. These parties can be specifically identified and contacted, and their confidentiality agreements likely contain their own return/destruction provisions that can be invoked. The fact that the Company authorized exclusive negotiations only on November 6, 2023 — less than two months before the date of the RPS Mark-Up — underscores the importance of ensuring that third parties that received confidential information during the earlier stages of the process do not retain that information for the purpose of formulating a competing bid.

5. Standstill Release Provision.

RPS has proposed a "soft" standstill release provision that would prevent the Company from enforcing any standstill agreement to the extent such agreement would prohibit a third party from making a confidential proposal to the Board. Specifically, RPS proposes that: "Notwithstanding anything in this Section 6.4(a) to the contrary, the Company shall not enforce, and shall not be required to enforce, any standstill or similar provision in any confidentiality agreement or other agreement to the extent that such provision would prohibit any Person from making a confidential Acquisition Proposal to the Board of Directors of the Company."

This is functionally a "don't-ask-don't-waive" ("DADW") carveout. Under recent Delaware case law — particularly In re Complete Genomics, Inc. Shareholder Litigation and Martin Marietta Materials, Inc. v. Vulcan Materials Co. — there has been significant judicial attention to the interplay between standstill agreements and no-shop provisions. The trend in Delaware jurisprudence has been to require disclosure of the existence and scope of DADW provisions in the proxy statement, on the theory that stockholders are entitled to know whether the no-shop is effectively supplemented by contractual restrictions on potential competing bidders. Even more recently, transaction practitioners have moved toward the prophylactic inclusion of such carveouts to avoid potential disclosure-related litigation.

C&H Analysis and Recommendation: We recommend allowing a narrow carveout that permits confidential private proposals to the Board but does not permit (i) public announcements by the standstill-bound party, (ii) formal tender offers or exchange offers, (iii) solicitation of proxies, or (iv) any other public action to facilitate an Acquisition Proposal. The carveout should be limited strictly to the right to make a confidential proposal to the Board and should not be construed as a waiver of any other provision of the applicable standstill agreement. This approach balances the Delaware law considerations against Solara's interest in maintaining deal stability. We should also confirm that the proxy statement will disclose the existence of this carveout.

C. Changes to Fiduciary-Out Exception (Section 6.4(b))

6. Fiduciary-Out Trigger Standard: "Reasonably Likely to Lead To" vs. "Could Reasonably Be Expected to Lead To."

RPS has proposed replacing "reasonably likely to lead to a Superior Proposal" with "could reasonably be expected to lead to a Superior Proposal" as the standard for the Board's initial determination that an unsolicited Acquisition Proposal warrants engagement under the fiduciary-out. The difference between the two formulations is subtle but directionally meaningful. "Reasonably likely" implies a probability threshold — it suggests that the Board must conclude that it is more likely than not (or at least substantially probable) that the Acquisition Proposal will develop into a Superior Proposal. "Could reasonably be expected to" is a lower standard — it requires only that a reasonable Board could expect the possibility of such a development, without requiring a determination that such development is probable.

C&H Analysis and Recommendation: We recommend retaining the "reasonably likely to lead to" standard from the Initial Draft. The higher standard ensures that the Board does not engage with speculative or preliminary proposals that are unlikely to materialize into a genuine Superior Proposal. This is particularly important in a transaction of this size, where engagement with a third party — even under the constraints of the fiduciary-out — can be destabilizing to the deal process, the financing commitments, and employee morale. If the Board receives a credible, fully financed proposal that is competitive with Solara's offer on price and terms, it will easily satisfy the "reasonably likely" standard. The purpose of the standard is to screen out proposals that are not yet sufficiently developed to warrant the disruption of the existing deal process.

7. Fiduciary Duty Determination Standard.

RPS has made a parallel change to the fiduciary duty determination, replacing "would be reasonably likely to be inconsistent with the directors' fiduciary duties" with "would reasonably be expected to be inconsistent with the directors' fiduciary duties." This change tracks the same directional shift described above — from a higher "reasonably likely" standard to a lower "could reasonably be expected" standard.

C&H Analysis and Recommendation: We recommend retaining the "reasonably likely" formulation for the same reasons described above. Consistency between the two determination standards is important, and both should be set at the same level. We note that the fiduciary-duty determination is a legal determination made after consultation with outside legal counsel, and the "reasonably likely" standard provides appropriate discipline without creating an undue barrier to the Board's exercise of its fiduciary duties in genuinely compelling circumstances.

8. Confidentiality Agreement Standard: "No Less Restrictive" vs. "Substantially Similar."

RPS has proposed that the confidentiality agreement required for information sharing with a third-party proponent of an Acquisition Proposal need only be "substantially similar to" (rather than "no less restrictive than") the NDA between Solara and the Company. The distinction is meaningful: "no less restrictive" requires that the third-party agreement be at least as protective of the Company's (and, by extension, Solara's) interests as the existing NDA, while "substantially similar" permits some degree of deviation.

C&H Analysis and Recommendation: We recommend retaining the "no less restrictive" standard from the Initial Draft. The NDA between Solara and the Company contains specific protections — including the standstill provision, use restrictions, non-disclosure obligations, and return/destruction obligations — that are tailored to the context of a potential acquisition. A third party that seeks to displace Solara should be subject to the same (or greater) restrictions. If RPS objects to the "no less restrictive" formulation, we could accept "substantially similar" if it is accompanied by an express requirement that the third-party confidentiality agreement include (i) a standstill provision, (ii) use restrictions limiting the use of the information to the evaluation of the Acquisition Proposal, and (iii) return/destruction obligations upon termination of discussions. However, the "no less restrictive" standard is strongly preferred.

9. Express Enumeration of "Identity and Track Record" as a Factor.

RPS has added an express provision stating that the Board may consider "the identity and track record of the Person making the Acquisition Proposal" as a factor in its determination of whether an Acquisition Proposal constitutes or is reasonably likely to lead to a Superior Proposal. Specifically, RPS proposes adding the following parenthetical: "(including legal, financial, regulatory, and timing considerations, the identity and track record of the Person making such Acquisition Proposal, as well as any revised proposal by Buyer)."

C&H Analysis and Recommendation: This addition is acceptable and does not materially affect Solara's position. The Board's consideration of the identity and track record of a competing bidder is implicit in the existing "all relevant factors" standard — a Board exercising its fiduciary duties would naturally consider whether a competing bidder has a track record of completing transactions of similar size and complexity, and whether the bidder has the financial wherewithal to consummate the proposed transaction. Making this consideration explicit does not expand the Board's discretion beyond what is already encompassed by the "all relevant factors" standard. Moreover, in this case, the identity-and-track-record factor may benefit Solara: as a well-established private equity sponsor with committed financing, Solara is likely to compare favorably to many potential competing bidders on this dimension. We recommend accepting this change.

D. Changes to "Superior Proposal" Definition

10. Threshold Reduction from 80% to 50%.

RPS has proposed reducing the threshold in the Superior Proposal definition from 80% to 50% of the Company's shares, assets, consolidated revenues, net income, or total assets. Under this proposal, a competing transaction that would result in the acquisition of 50% (rather than 80%) of the Company could qualify as a Superior Proposal, potentially enabling the Board to terminate the Merger Agreement and accept a majority-stake transaction.

RPS's stated rationale is that a 51% acquisition could, in appropriate circumstances, be superior from the stockholders' perspective — for example, if a strategic acquiror offered a significant premium for majority control, with the minority stockholders retaining their equity interest in a combined entity.

C&H Analysis and Recommendation: We strongly recommend resisting this change. The 80% threshold is a critical protection for Solara and is standard in sponsor-led take-private transactions. The purpose of the threshold is to ensure that only whole-company alternatives — transactions that offer the Company's stockholders a complete exit at a premium price — can qualify as Superior Proposals. A 50% threshold would permit the Board to terminate a $6.8 billion all-cash acquisition in favor of a partial-company transaction in which a significant portion of stockholders might not receive any consideration or might receive a different (and potentially less favorable) form of consideration for their remaining shares.

Furthermore, a 50% transaction would not provide the same certainty of value to all stockholders that the Merger provides. In a take-private transaction at $36.92 per share in cash, all stockholders receive the same per-share consideration. In a majority-stake acquisition, the acquiror might offer a premium for the controlling shares while the minority stockholders are left with an illiquid minority position in a company controlled by a new majority owner. The protection against this outcome is precisely why the 80% threshold exists.

If RPS insists on reducing the threshold, our counteroffer should be 65-70% as a potential middle ground. However, we strongly prefer to hold at 80%, and we believe this position is well-supported by market precedent and by the logic of the transaction.

11. Express Enumeration of "Certainty of Closing" and "Sources of Financing."

RPS has proposed adding "certainty of closing" and "sources of financing" as expressly enumerated factors in the Board's determination of whether an Acquisition Proposal constitutes a Superior Proposal. The proposed language would expand the parenthetical to read: "(including legal, financial, regulatory, and timing considerations, certainty of closing, sources of financing, the identity and track record of the Person making such Acquisition Proposal, as well as any revised proposal by Buyer)."

C&H Analysis and Recommendation: This addition is acceptable and, in fact, benefits Solara. By requiring the Board to consider the certainty of closing and the sources of financing of a competing proposal, the provision directs the Board's attention to factors on which Solara has a strong competitive position. Solara's Merger is supported by $4,240,000,000 of committed debt financing from Meridian Atlantic Bank, N.A. and Ironclad Capital Markets LLC, and $2,832,888,096 of equity commitments from Fund VI — a total of approximately $7.07 billion of committed financing. A competing bidder that cannot demonstrate comparable financing certainty would be at a significant disadvantage under this standard. We recommend accepting this change.

12. Deletion of "Any Revised Proposal by Solara" from Initial Determination.

RPS has proposed deleting the requirement that the Board take into account "any revised proposal by Solara" when making its initial determination of whether an Acquisition Proposal constitutes a Superior Proposal. Under the RPS Mark-Up, the consideration of Solara's potential revisions would be reserved for the formal match-right stage under Section 6.4(d), but would not be required at the threshold stage when the Board first evaluates whether to engage with a competing proposal.

C&H Analysis and Recommendation: We recommend pushing back on this deletion. The inclusion of "any revised proposal by Solara" at the initial determination stage is an important protection because it requires the Board to consider the full picture — including the possibility that Solara might improve its offer — before concluding that a competing proposal is superior. Without this requirement, the Board could prematurely determine that a third-party offer is a Superior Proposal without giving any weight to Solara's potential willingness to revise its terms. While Solara would still have the formal match-right period under Section 6.4(d), the initial determination sets the tone for the entire process: if the Board has already concluded (without considering Solara's potential revisions) that the competing proposal is superior, the match-right negotiation begins from a weaker posture for Solara.

We recognize that there is a reasonable argument that the initial determination is distinct from the post-match determination: at the initial stage, Solara has not yet had the opportunity to formulate a revised proposal, so the Board can only speculate about what Solara might offer. However, requiring the Board to consider this possibility is not unduly burdensome and encourages the Board to engage informally with Solara before triggering the formal match-right process. As a practical matter, if the Board receives a competing proposal that it believes may be superior, the Board's advisors (including Veridian Partners) will likely reach out to Osprey Bancroft informally before making a formal determination — and the contractual requirement to consider Solara's potential revisions supports this dynamic.

E. Changes to Adverse Recommendation Change (Section 6.4(c))

13. Deletion of "Material" Qualifier from Intervening Event Definition.

RPS has proposed broadening the definition of "Intervening Event" by deleting the qualifier "material," such that the definition would read: "any event, development, or change in circumstances" rather than "any material event, development, or change in circumstances." This change would significantly expand the scope of events that could trigger the Board's right to make an Adverse Recommendation Change under Section 6.4(c)(B).

C&H Analysis and Recommendation: We recommend pushing back firmly on this change. The materiality qualifier is essential to prevent trivial or insignificant events from triggering fiduciary-out rights that could destabilize the Merger. Without the materiality qualifier, virtually any event, development, or change in circumstances — no matter how minor — could theoretically qualify as an Intervening Event. The purpose of the Intervening Event exception is to address genuinely transformative developments that fundamentally alter the calculus underlying the Board's original recommendation: for example, a major unanticipated contract win, a material regulatory development, or a significant change in the Company's competitive landscape. Routine business developments and ordinary-course fluctuations in the Company's performance should not qualify.

The materiality standard is well-established in Delaware transactional practice and is a standard feature of Intervening Event definitions in comparable transactions. We see no basis for departing from this standard.

14. Deletion of "or Reasonably Foreseeable" from Intervening Event Definition.

RPS has also proposed deleting "or reasonably foreseeable" from the Intervening Event definition, such that the requirement would be only that the event was "not known" to the Board as of the date of the Merger Agreement, rather than "not known to, or reasonably foreseeable by" the Board. This change would lower the foreseeability bar significantly: an event that was reasonably foreseeable at signing (even if not actually known) could qualify as an Intervening Event if it subsequently came to fruition.

C&H Analysis and Recommendation: We insist on retaining the "or reasonably foreseeable" language. The purpose of the foreseeability requirement is to prevent the Board from invoking the Intervening Event exception based on developments that, while not actually known at signing, were part of the foreseeable landscape at that time. When the Board approves the Merger Agreement and makes its initial recommendation to stockholders, it does so in light of the Company's known prospects and the foreseeable range of developments. Events that fall within that foreseeable range — even if they subsequently materialize in a manner that is more positive than the base case — should not justify an Adverse Recommendation Change, because the Board is deemed to have taken them into account when making its original recommendation.

For example, if the Company is in late-stage negotiations with a major customer at the time of signing, and the contract is subsequently signed on terms more favorable than expected, that development should not qualify as an Intervening Event because it was reasonably foreseeable. Conversely, if the Company receives an unsolicited approach from a government agency seeking to award a multi-billion-dollar contract that the Company had not anticipated, that development might qualify as an Intervening Event because it was neither known nor reasonably foreseeable.

The distinction between these two scenarios is precisely the distinction that the foreseeability requirement is designed to capture. We should insist on its retention.

15. "Naked" Adverse Recommendation Change Right.

RPS has added a standalone right for the Board to make an Adverse Recommendation Change in connection with an Intervening Event without being required to terminate the Merger Agreement. Under this proposal, the Board could change its recommendation and advise stockholders against voting in favor of the Merger, while the Merger Agreement itself would remain in effect. The effect would be to leave the Merger Agreement alive but without the Board's endorsement, effectively forcing Solara to decide whether to terminate (without receiving the Termination Fee, since the termination would be by Solara rather than by the Company) or to attempt to consummate the Merger without the Board's recommendation.

This is a material concession request and one of the most significant changes in the RPS Mark-Up. A "naked" Adverse Recommendation Change — unaccompanied by a concurrent termination — creates a highly problematic dynamic. If the Board changes its recommendation, the prospects for obtaining stockholder approval at the special meeting (expected in May 2024) are significantly impaired, even with the 15.8% of committed votes from the Voting / Support Agreements with Hargrove (4.2%) and Pinnacle Growth Ventures (11.6%). Institutional stockholders and proxy advisory firms (ISS, Tarrant Partners LLC) are unlikely to recommend a vote in favor of a merger that the target's own board has recommended against. The result could be a prolonged period of uncertainty during which the Company is bound by the Merger Agreement's interim operating covenants (Section 6.1) but the transaction has no realistic prospect of closing — all without triggering the Company's obligation to pay the Termination Fee.

C&H Analysis and Recommendation: We recommend resisting this change. If the Board determines that an Intervening Event justifies an Adverse Recommendation Change, the Board should be required to terminate the Merger Agreement and pay the Termination Fee concurrently with such termination. The Termination Fee is the bargained-for protection against this precise risk.

If, however, RPS insists on retaining the "naked" Adverse Recommendation Change right as a condition to the deal, we recommend accepting it only in exchange for the following package of protections:

(i) Solara Termination Right. Solara should have the right to terminate the Merger Agreement following an Adverse Recommendation Change, with the Termination Fee payable by the Company upon such termination.

(ii) Tail Provision. If the Company enters into or consummates any Acquisition Proposal within twelve (12) months following the date of the Adverse Recommendation Change, the Termination Fee should be payable by the Company regardless of whether the Merger Agreement was previously terminated.

(iii) Increased Termination Fee. In exchange for accepting the increased risk associated with the "naked" Adverse Recommendation Change right, the Termination Fee should be increased from 3.25% to 3.5% of aggregate deal value, or approximately $238,000,000.

This package of protections is designed to ensure that the Board does not use the "naked" Adverse Recommendation Change as a cost-free mecha

PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the attorney work product doctrine. It is intended solely for the use of the addressees identified herein and may not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP. Any unauthorized review, use, disclosure, or distribution is prohibited.
CALDERWOOD & HARKNESS LLP
Annotated Redline and Negotiation Strategy Memorandum
No-Shop and Fiduciary-Out Provisions
(Section 6.4 of the Merger Agreement)
Matter: Solara Digital Infrastructure Fund VI LP — Acquisition of Cloudium Technologies plc
Matter Number: 1041-00003
Date: December 28, 2023
From: Tiffany Rosenthal, Lead Associate, Mergers & Acquisitions Andrew Fitzpatrick, Working Associate, Mergers & Acquisitions
To: Harrison Wexford, Responsible Partner, Mergers & Acquisitions Beatrice Holloway, Billing Partner, Mergers & Acquisitions
Re: Analysis of No-Shop Provision and Fiduciary-Out Exception in Section 6.4 of the Initial Draft Merger Agreement (circulated December 1, 2023) as marked up by Ridgeway Phelps & Sato LLP (received December 18, 2023)
CONFIDENTIALITY NOTICE: This memorandum constitutes attorney work product and is protected by the attorney-client privilege. It has been prepared by Calderwood & Harkness LLP at the direction of Solara Digital Infrastructure Fund VI LP in connection with the proposed acquisition of Cloudium Technologies plc. This memorandum reflects the mental impressions, conclusions, opinions, and legal theories of counsel. It is not intended for distribution beyond the named addressees without the express authorization of the responsible partner. Any inadvertent disclosure does not constitute a waiver of any applicable privilege or protection.
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I. EXECUTIVE SUMMARY
This memorandum analyzes the no-shop and fiduciary-out provisions contained in Section 6.4 of the Agreement and Plan of Merger (the "Merger Agreement") among Cloudium Technologies plc, a public limited company incorporated under the laws of England and Wales ("Cloudium" or the "Company"), Stratos Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of Solara Digital Infrastructure Fund VI LP ("Merger Sub"), and Solara Digital Infrastructure Fund VI LP, a Delaware limited partnership ("Solara" or "Fund VI," and together with Merger Sub, the "Buyer Parties"), pursuant to which Merger Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of Fund VI (the "Merger").
The initial draft of the Merger Agreement was prepared and circulated by this firm on behalf of the Buyer Parties on December 1, 2023 (the "Initial Draft"). On December 18, 2023, Ridgeway Phelps & Sato LLP ("RPS"), acting as counsel to the Company, returned a marked-up revised draft of the Merger Agreement (the "RPS Mark-Up"). The lead M&A partner at RPS is Catherine Answorth (New York), with Alistair Fenn (London) providing English law corporate advice. This memorandum addresses specifically the changes proposed by RPS to Section 6.4 and provides our analysis and recommended negotiating positions.
Key Tension. The central tension in Section 6.4 is the competing interests of the Buyer Parties and the Company's board of directors (the "Board"). Solara seeks a robust no-shop provision to protect the substantial value of the $6,800,000,000 acquisition, representing a price of $36.92 per share and an implied multiple of approximately 16.8x last-twelve-months ("LTM") EBITDA. The Board, which is chaired by Douglas Pemberton (independent), requires sufficient flexibility to fulfill the fiduciary duties of the Company's directors under the laws of England and Wales and, as a practical matter, under the fiduciary-duty expectations of the Company's stockholders who hold shares listed on the Nasdaq Global Select Market (ticker: CLDM). As of the date of this memorandum, Cloudium has approximately 184,200,000 shares of common stock outstanding, and the Merger will require stockholder approval, which the Company anticipates soliciting through a definitive proxy statement to be filed with the Securities and Exchange Commission. Blackthorn Proxy Advisors LLC has been retained by the Company to assist with the solicitation process. We note that stockholder approval was ultimately obtained on May 20, 2024, at a special meeting of stockholders at which approximately 82.4% of shares present and voting were cast in favor of the Merger, a result that was facilitated in part by the contractual protections discussed in this memorandum.
Fairness Opinion. The Board is expected to receive a fairness opinion from Veridian Partners LLC in connection with its approval of the Merger Agreement. Based on our discussions with the Company's general counsel, Nadia Chowdhury, we understand that this opinion will be delivered by Monica Pressler, Managing Director, Veridian Partners LLC. The fairness opinion was ultimately dated January 21, 2024. The availability and terms of the fairness opinion are relevant to the fiduciary-out analysis because the Board's determination of whether a competing proposal constitutes a "Superior Proposal" requires, under our draft, consultation with the Company's financial advisor.
Summary of Recommended Positions. As detailed further in Section VIII below, our recommended negotiating approach is to hold firm on several core provisions — including the 20% threshold in the Acquisition Proposal definition, the 80% threshold in the Superior Proposal definition, the "reasonably likely" fiduciary-out trigger standard, the four-business-day initial match-right period, and the materiality and foreseeability requirements in the Intervening Event definition — while conceding certain items that are either market-standard or do not meaningfully impair Solara's protections, such as the addition of "recapitalization" and "liquidation" to the Acquisition Proposal definition, the proviso permitting referral of unsolicited inquiries to the Board, and the express enumeration of certain factors in the Superior Proposal determination.
Cross-Reference. For the detailed analysis of the termination fee and reverse termination fee structures, including the 3.25% termination fee ($221,000,000) payable by the Company and the 5.5% reverse termination fee ($374,000,000) payable by Solara, readers should refer to the separate Termination Fee and Reverse Termination Fee Analysis memorandum, which is being prepared by this team and is expected to be circulated on or about January 6, 2024 (the "Termination Fee Memo").
II. BACKGROUND ON DEAL STRUCTURE AND PARTIES
A. Transaction Structure
The Merger is structured as a reverse triangular merger under the General Corporation Law of the State of Delaware (the "DGCL"). Stratos Merger Sub Inc. was incorporated on January 8, 2024, under the laws of the State of Delaware (Delaware File No. 7923841) as a direct wholly owned subsidiary of Solara Digital Infrastructure Fund VI LP. At the effective time of the Merger, Merger Sub will merge with and into Cloudium Technologies plc, with the Company continuing as the surviving entity and becoming a wholly owned subsidiary of Fund VI. Each share of common stock of the Company outstanding immediately prior to the effective time (other than shares held by the Company as treasury shares, shares held by the Buyer Parties, and rollover shares) will be converted into the right to receive $36.92 in cash, without interest and subject to applicable withholding.
The choice of a reverse triangular merger structure preserves the Company's corporate existence, contractual relationships, and regulatory approvals, which is particularly important given the Company's significant international operations and the need to maintain existing customer relationships across multiple jurisdictions. The Company's subsidiaries include Cloudium Technologies UK Ltd. (England and Wales), Cloudium Technologies India Pvt. Ltd. (India), and Cloudium Solutions GmbH (Germany), among others.
B. The Buyer Parties
Solara Digital Infrastructure LP is a Delaware limited partnership headquartered at 1200 Market Street, Suite 3400, Wilmington, Delaware 19801. Solara is a leading private equity firm focused on technology infrastructure investments. Its Managing Partners are Marcus Elliston and Priya Narasimhan. The acquisition of the Company is being conducted through Solara Digital Infrastructure Fund VI LP ("Fund VI"), a 2022 vintage fund with approximately $12.4 billion of committed capital (EIN: 87-4523190). Fund VI has sufficient committed but uncalled capital to fund the equity commitment described below.
Solara's financial advisor in connection with the Merger is Osprey Bancroft & Co., with Damien Harlow, Managing Director, serving as the lead banker on the engagement. Osprey Bancroft has been advising Solara since the early stages of the process and has performed extensive financial and strategic due diligence on the Company.
C. The Company
Cloudium Technologies plc is a public limited company incorporated under the laws of England and Wales (Company No. 09734521), with its registered office at 45 Broadwick Street, London W1F 0DB, United Kingdom, and its principal U.S. headquarters at 600 Townsend Street, Suite 800, San Francisco, California 94103. The Company's shares of common stock are listed on the Nasdaq Global Select Market under the ticker symbol "CLDM."
The Company's management team includes Jonathan Hargrove (Chief Executive Officer), Sienna Whitfield (Chief Financial Officer), and Nadia Chowdhury (General Counsel and Corporate Secretary). The Board of Directors is chaired by Douglas Pemberton, who serves as the independent, non-executive chairperson.
The Company's counsel is Ridgeway Phelps & Sato LLP, with Catherine Answorth (M&A, New York) serving as the lead transactional partner and Alistair Fenn (Corporate, London) providing English law corporate and fiduciary advice.
D. Key Financial Metrics
E. Rollover Participants
Two significant stakeholders in the Company will participate as rollover equity investors in the post-closing entity:
(i) Jonathan Hargrove (CEO) — Mr. Hargrove holds approximately 7,736,400 shares of Company common stock (approximately 4.2% of shares outstanding). He will roll over 50% of his equity position, representing approximately $142,814,544 in rollover value at the per-share merger consideration of $36.92.
(ii) Pinnacle Growth Ventures LLC — Pinnacle holds approximately 21,367,200 shares of Company common stock (approximately 11.6% of shares outstanding). Pinnacle will roll over 60% of its equity position, representing approximately $473,241,408 in rollover value. Pinnacle's managing member is Evelyn Carmichael.
The rollover commitments are conditioned upon the consummation of the Merger and will be documented in separate Rollover Equity Agreements to be executed at signing. As discussed in Section VI below, the rollover participants will also execute Voting / Support Agreements at signing.
F. Financing
The Merger will be financed through a combination of committed debt financing and equity contributions from Fund VI:
(i) Committed Debt Financing: $4,240,000,000, to be provided by Meridian Atlantic Bank, N.A. and Ironclad Capital Markets LLC pursuant to a debt commitment letter initially signed on December 15, 2023 and to be executed in final form at signing. The debt commitment letter provides for a combination of senior secured term loans and senior unsecured bridge loans.
(ii) Equity Commitment: $2,832,888,096 from Fund VI, to be documented in an equity commitment letter to be executed at signing.
The aggregate financing of $7,072,888,096 is sized to fund the merger consideration (approximately $6,800,000,000), the refinancing of the Company's existing indebtedness, transaction fees and expenses, and estimated working capital needs.
G. Pre-Signing Process
The pre-signing process is relevant to the no-shop analysis because it informs the question of whether a go-shop provision is appropriate. The key milestones are as follows:
•  September 5, 2023: Solara and the Company executed a mutual confidentiality agreement (the "NDA"), which included customary standstill provisions. This firm represented Solara in the negotiation of the NDA.
•  October 2, 2023: Solara's deal team attended a management presentation by the Company at the Company's San Francisco offices.
•  October 30, 2023: Solara submitted a preliminary indication of interest ("IOI") at a price range of $34.00–$37.50 per share, subject to due diligence confirmation and documentation.
•  November 6, 2023: The Board authorized the Company's management to enter into exclusive negotiations with Solara.
•  November 15, 2023: The parties executed an Exclusivity Agreement providing for a 45-day exclusivity period (expiring December 30, 2023). During this period, the Company agreed not to solicit, initiate, or encourage any competing acquisition proposals.
•  December 1, 2023: Calderwood & Harkness circulated the Initial Draft of the Merger Agreement on behalf of the Buyer Parties.
•  December 18, 2023: Ridgeway Phelps & Sato returned the RPS Mark-Up.
The fact that the Company authorized exclusive negotiations and executed an Exclusivity Agreement after evaluating Solara's IOI is significant to the no-shop analysis. The exclusivity period provided the parties with a structured timeline for negotiation and due diligence. In this context, a go-shop provision — which is more commonly used in transactions where the target's board has not conducted a pre-signing market check or entered into exclusivity — is neither warranted nor appropriate.
III. OVERVIEW OF SECTION 6.4 AS DRAFTED BY CALDERWOOD & HARKNESS (DECEMBER 1, 2023 INITIAL DRAFT)
This Section provides a detailed overview of Section 6.4 as set forth in the Initial Draft circulated by this firm on December 1, 2023. Each subsection is analyzed separately below, with a description of the key drafting choices and their strategic rationale.
A. Section 6.4(a) — No-Shop / No-Solicitation Covenant
Section 6.4(a) of the Initial Draft imposes a comprehensive no-solicitation covenant on the Company and its subsidiaries (including Cloudium Technologies UK Ltd., Cloudium Technologies India Pvt. Ltd., Cloudium Solutions GmbH, and all other direct and indirect subsidiaries of the Company). The covenant applies to the Company, its subsidiaries, and their respective directors, officers, employees, and Representatives (as defined in the Merger Agreement to include financial advisors, attorneys, accountants, consultants, and other agents and advisors).
The no-solicitation covenant prohibits the Company and its subsidiaries and their respective directors, officers, employees, and Representatives from, directly or indirectly:
(i) soliciting, initiating, knowingly encouraging, or knowingly facilitating any inquiries, proposals, or offers that constitute, or could reasonably be expected to lead to, an Acquisition Proposal (as defined);
(ii) entering into, continuing, or otherwise participating in any discussions or negotiations with any Person (other than the Buyer Parties and their Representatives) regarding any Acquisition Proposal or any inquiry, proposal, or offer that could reasonably be expected to lead to an Acquisition Proposal;
(iii) furnishing to any Person (other than the Buyer Parties and their Representatives) any non-public information relating to the Company or any of its subsidiaries, or affording access to the properties, books, records, or personnel of the Company or any of its subsidiaries, in connection with or for the purpose of facilitating any Acquisition Proposal; or
(iv) entering into any letter of intent, memorandum of understanding, merger agreement, acquisition agreement, or other agreement, arrangement, or understanding (whether or not binding) relating to any Acquisition Proposal.
Definition of "Acquisition Proposal." As drafted in the Initial Draft, an "Acquisition Proposal" is defined as any proposal or offer (other than the transactions contemplated by the Merger Agreement) for:
(a) a merger, consolidation, share exchange, business combination, or similar transaction involving the Company or any of its subsidiaries that, individually or in the aggregate, represent 20% or more of the Company's consolidated revenues, net income, or total assets;
(b) any direct or indirect acquisition (whether by purchase, tender offer, exchange offer, or otherwise) of 20% or more of the outstanding shares of common stock of the Company or of any class of equity securities of the Company; or
(c) any direct or indirect acquisition (whether in a single transaction or a series of related transactions) of assets constituting 20% or more of the consolidated total assets of the Company and its subsidiaries.
The 20% threshold was selected as the market-standard threshold for deals of this size and type. A threshold set too low risks capturing inconsequential minority investments or asset dispositions that do not meaningfully threaten the Merger, while a threshold set too high could create gaps through which a strategic competitor might acquire a substantial position without triggering the no-shop protections.
Cessation of Existing Discussions. Section 6.4(a) also includes an affirmative obligation requiring the Company to immediately cease, and to cause its subsidiaries and Representatives to cease, all existing discussions or negotiations with any Person (other than the Buyer Parties) regarding any Acquisition Proposal, and to promptly request the return or destruction of all confidential information previously furnished to any such Person in connection with any potential Acquisition Proposal.
No Window-Shop or Go-Shop. The Initial Draft does not include any window-shop or go-shop provision. The no-solicitation covenant becomes effective from and after the execution and delivery of the Merger Agreement (i.e., from signing). This reflects Solara's position that the pre-signing process — including the management presentation, Solara's IOI, the Board's authorization of exclusive negotiations, and the 45-day exclusivity period — provided an adequate pre-signing market check, and that a post-signing go-shop would unnecessarily expose the Merger to competitive risk and could destabilize the financing commitments.
Standstill Enforcement. Section 6.4(a) includes a prohibition on the Company from waiving, amending, modifying, or releasing any provision of any standstill agreement or similar agreement to which the Company is a party, including the standstill provision contained in the NDA between Solara and the Company executed on September 5, 2023. This provision is designed to prevent the Company from unilaterally freeing potential competing bidders from their contractual obligations to refrain from making unsolicited proposals.
Effective Date. The no-solicitation covenant takes effect upon execution of the Merger Agreement. Signing is targeted for late January 2024, which would provide a seamless transition from the contractual exclusivity under the Exclusivity Agreement (expiring December 30, 2023) to the no-solicitation covenant under the Merger Agreement. If there is a gap between the expiration of the Exclusivity Agreement and signing, we should consider whether a short-term extension of the Exclusivity Agreement is warranted.
B. Section 6.4(b) — Fiduciary-Out Exception
Notwithstanding the no-solicitation covenant in Section 6.4(a), the Initial Draft includes a limited fiduciary-out exception that permits the Board to consider and respond to unsolicited bona fide written Acquisition Proposals under prescribed circumstances. The fiduciary-out is essential to the enforceability of the no-shop provision because courts — both in Delaware and in England and Wales — will scrutinize no-shop provisions to ensure that the target's board retains sufficient flexibility to discharge its fiduciary duties.
Conditions to Engagement. Under the Initial Draft, the Board may take action under the fiduciary-out only if two conditions are satisfied:
(i) Superior Proposal Determination. The Board determines in good faith, after consultation with its financial advisor (Veridian Partners LLC) and outside legal counsel (Ridgeway Phelps & Sato LLP), that the unsolicited Acquisition Proposal constitutes, or is reasonably likely to lead to, a "Superior Proposal" (as defined); and
(ii) Fiduciary Duty Determination. The Board determines in good faith, after consultation with outside legal counsel, that the failure to take such action with respect to such Acquisition Proposal would be reasonably likely to be inconsistent with the directors' fiduciary duties under applicable law.
Both conditions must be satisfied before the Board may engage. The requirement of good-faith determination after consultation with financial and legal advisors imposes a process discipline on the Board that serves to protect Solara against precipitous action.
Definition of "Superior Proposal." As drafted in the Initial Draft, a "Superior Proposal" is defined as an unsolicited bona fide written Acquisition Proposal (with the 20% thresholds in the definition of "Acquisition Proposal" increased to 80% for this purpose) that the Board determines in good faith, after consultation with its financial advisor and outside legal counsel, taking into account all relevant factors (including legal, financial, regulatory, and timing considerations, as well as any revised proposal by Solara), is more favorable to the Company's stockholders than the transactions contemplated by the Merger Agreement.
The increase of the threshold from 20% to 80% for the Superior Proposal definition is a critical protection for Solara. It ensures that only whole-company alternative transactions can qualify as Superior Proposals — a third party cannot displace the Merger by offering to acquire a 25% or 50% stake in the Company or by acquiring a minority collection of assets. The 80% threshold is standard in sponsor-led take-private transactions and reflects the fundamental premise that a competing bidder should offer to acquire substantially all of the Company in order to justify the termination of the Merger Agreement.
The inclusion of "any revised proposal by Solara" as a factor in the Superior Proposal determination at the initial stage (in addition to the formal match-right stage under Section 6.4(d)) is an important protection. It requires the Board to evaluate the Acquisition Proposal in light of the possibility that Solara might improve its offer, thereby discouraging premature determinations that a third-party proposal is superior.
Permitted Actions. If both conditions are satisfied, the Board may:
(a) furnish non-public information relating to the Company and its subsidiaries to the Person making the Acquisition Proposal, subject to the execution by such Person of a confidentiality agreement with terms no less restrictive than those contained in the NDA between Solara and the Company; and
(b) engage in discussions or negotiations with such Person regarding the Acquisition Proposal.
Information Parity. The Initial Draft includes a requirement that the Company provide to Solara all non-public information furnished to the third party (to the extent not previously provided to Solara) either simultaneously with, or promptly (and in any event within 24 hours of), such furnishing. This information-parity provision ensures that Solara has access to the same information as the competing bidder and is positioned to formulate a revised proposal during the match-right period.
Precondition of No Breach. The fiduciary-out exception is only available with respect to Acquisition Proposals that did not arise from or result from a breach of the no-solicitation covenant in Section 6.4(a). This precondition is essential: it prevents the Company from benefiting from its own breach by using improperly solicited proposals as the basis for invoking the fiduciary-out.
C. Section 6.4(c) — Adverse Recommendation Change / Board Recommendation
Section 6.4(c) of the Initial Draft addresses the Board's recommendation and the circumstances under which an Adverse Recommendation Change may be made.
Affirmative Recommendation Covenant. The Board is required to include in the proxy statement distributed to the Company's stockholders a recommendation that the stockholders vote in favor of the Merger (the "Company Board Recommendation"). This covenant reflects the Board's expected approval of the Merger Agreement and its determination that the Merger is fair to, and in the best interests of, the Company's stockholders.
Prohibition on Adverse Recommendation Change. Except as expressly permitted, the Board is prohibited from:
(i) withdrawing, qualifying, or modifying, or publicly proposing to withdraw, qualify, or modify, the Company Board Recommendation in any manner adverse to Solara (an "Adverse Recommendation Change");
(ii) approving, recommending, or declaring advisable, or publicly proposing to approve, recommend, or declare advisable, any Acquisition Proposal; or
(iii) causing or permitting the Company to enter into any letter of intent, memorandum of understanding, merger agreement, acquisition agreement, or other agreement, arrangement, or understanding relating to any Acquisition Proposal (other than a confidentiality agreement executed in accordance with Section 6.4(b)).
Limited Exception for Adverse Recommendation Change. The Initial Draft permits the Board to effect an Adverse Recommendation Change in two circumstances:
(A) In Response to a Superior Proposal. The Board may change its recommendation in response to a Superior Proposal, provided that the match-right procedures in Section 6.4(d) have been fully complied with and the Board has determined, following the match-right period, that the Acquisition Proposal continues to constitute a Superior Proposal after taking into account any revised proposal by Solara.
(B) In Response to an Intervening Event. The Board may change its recommendation in response to an Intervening Event (as defined), provided that (1) the Board has determined in good faith, after consultation with outside legal counsel, that the failure to make such Adverse Recommendation Change would be reasonably likely to be inconsistent with the directors' fiduciary duties under applicable law, and (2) the match-right procedures in Section 6.4(d) have been complied with (to the extent applicable to Intervening Events).
Definition of "Intervening Event." As drafted, an "Intervening Event" means a material event, development, or change in circumstances with respect to the Company or its subsidiaries that (i) was not known to, or reasonably foreseeable by, the Board as of the date of the Merger Agreement, and (ii) does not relate to any Acquisition Proposal or any inquiry, proposal, or offer that could reasonably be expected to lead to an Acquisition Proposal. The Intervening Event definition is intentionally narrow: it requires materiality, unforeseeability, and non-relation to competing proposals. Examples might include an unexpected transformative contract award, a significant technological breakthrough, or a material and unforeseen regulatory development that fundamentally alters the Company's standalone value.
D. Section 6.4(d) — Match Right / Negotiation Period
Section 6.4(d) establishes the procedural requirements that the Board must satisfy before making an Adverse Recommendation Change or terminating the Merger Agreement to enter into a Superior Proposal.
Notice Requirement. Before taking any such action, the Company must provide Solara with written notice (the "Match Notice") at least four (4) business days in advance. The Match Notice must:
(i) state that the Board intends to make an Adverse Recommendation Change or that the Company intends to terminate the Merger Agreement;
(ii) if the intended action is in response to a Superior Proposal, identify the Person making the Superior Proposal and describe all material terms and conditions thereof (including the proposed form and amount of consideration, any financing commitments, any conditions to closing, and the proposed timeline for consummation), and attach the most current version of all transaction documents relating thereto; and
(iii) if the intended action is in response to an Intervening Event, describe the Intervening Event in reasonable detail.
Negotiation Period. During the four-business-day period following delivery of the Match Notice (the "Match Period"), the Company must, and must cause its financial advisor and outside legal counsel to, negotiate in good faith with Solara and its Representatives (if Solara desires to negotiate) to make adjustments to the terms and conditions of the Merger Agreement so that the Acquisition Proposal ceases to constitute a Superior Proposal (or, in the case of an Intervening Event, so that an Adverse Recommendation Change is no longer required by the Board's fiduciary duties).
Post-Match Determination. At the end of the Match Period, the Board must determine in good faith, after consultation with its financial advisor and outside legal counsel, that the Acquisition Proposal continues to constitute a Superior Proposal (or, in the case of an Intervening Event, that an Adverse Recommendation Change continues to be required) after taking into account any revisions to the terms of the Merger Agreement proposed by Solara during the Match Period.
Subsequent Match Rights. Any material amendment to the financial terms or other material terms of a Superior Proposal that is the subject of an ongoing match-right process triggers an additional two (2) business day match period. The Company must deliver a new or supplemental Match Notice describing the material amendment, and the negotiation and post-match determination requirements apply anew during the additional match period.
No Obligation to Match. The Initial Draft expressly provides that Solara has no obligation to propose any revision to the terms of the Merger Agreement during the Match Period or any subsequent match period. This clarification is important to preserve Solara's optionality: if Solara determines that matching the competing proposal would not be in its economic interest, it is free to decline and instead preserve its right to receive the termination fee.
E. Section 6.4(e) — Termination Fee Trigger
Section 6.4(e) provides a cross-reference to Article VIII (Termination) of the Merger Agreement. Specifically, if the Company terminates the Merger Agreement pursuant to Section 8.1(d)(ii) (termination by the Company to enter into a Superior Proposal), the Company is required to pay to Solara, concurrently with such termination, a termination fee equal to 3.25% of the aggregate deal value, or $221,000,000 (the "Termination Fee").
The Termination Fee is structured as the sole and exclusive remedy available to Solara (absent fraud or willful and material breach of the Merger Agreement by the Company) in the event of a termination by the Company for a Superior Proposal. This sole-and-exclusive-remedy formulation is standard and serves two purposes: it provides Solara with meaningful economic protection against deal disruption, while also providing certainty to the Company and the Board that their exposure in connection with a legitimate exercise of the fiduciary-out is limited to the Termination Fee amount.
In the reverse direction, Solara has agreed to a reverse termination fee of 5.5% of the aggregate deal value, or $374,000,000, payable in specified circumstances (principally, failure to consummate the Merger due to a financing failure or a material breach by the Buyer Parties). The reverse termination fee is secured by a Limited Guarantee from Solara Fund VI GP LLC in an aggregate amount of $246,000,000, consisting of $221,000,000 (corresponding to the Termination Fee amount, to provide the Company with a symmetrical backstop) plus $25,000,000 for enforcement costs. The detailed analysis of the Termination Fee and reverse termination fee structures is the subject of the forthcoming Termination Fee Memo.
IV. ANALYSIS OF RIDGEWAY PHELPS & SATO MARK-UP (DECEMBER 18, 2023)
This Section provides a detailed analysis of each material change proposed by RPS in the Mark-Up. For each change, we describe the nature of the revision, assess its strategic implications, and provide our recommended response.
A. Changes to "Acquisition Proposal" Definition
1. Threshold Reduction from 20% to 15%.
RPS has proposed lowering the percentage threshold in the definition of "Acquisition Proposal" from 20% to 15%. That is, any proposal for a merger, acquisition of shares, or acquisition of assets involving 15% or more of the Company's consolidated revenues, net income, total assets, or outstanding shares would constitute an Acquisition Proposal subject to the no-solicitation covenant.
RPS's stated rationale is that a broader definition captures a wider range of alternative proposals, thereby giving the Board clearer protection to refuse to engage with smaller-scale inquiries. While this framing has some surface-level appeal — a broader definition means more proposals are subject to the no-shop — the practical effect is more nuanced. Because the fiduciary-out exception in Section 6.4(b) is keyed to the definition of "Acquisition Proposal," a broader definition means that the fiduciary-out can be triggered by proposals at a lower threshold. In other words, the Board could invoke the fiduciary-out to engage with a party that offers to acquire as little as 15% of the Company's shares, which is a scenario that the fiduciary-out was not designed to address.
C&H Analysis and Recommendation: The 20% threshold is market-standard for deals of this size and is consistent with the precedent transactions surveyed in Appendix B. We recommend pushing back firmly to retain the 20% threshold. The 20% level appropriately balances the scope of the no-shop (capturing all proposals that could meaningfully disrupt the Merger) against the scope of the fiduciary-out (limiting the fiduciary-out to proposals of sufficient significance to warrant Board engagement). If RPS insists on a lower threshold, our fallback would be to accept 15% only in the definition of "Acquisition Proposal" for purposes of the no-solicitation covenant in Section 6.4(a), while retaining 20% as the relevant threshold for purposes of the fiduciary-out in Section 6.4(b). However, this split-threshold approach introduces drafting complexity and should be avoided if possible.
2. Addition of "Recapitalization" and "Liquidation."
RPS has also proposed adding "recapitalization" and "liquidation" to the list of alternative transaction types in clause (a) of the Acquisition Proposal definition, such that the definition would encompass any proposal for "a merger, consolidation, share exchange, recapitalization, liquidation, business combination, or similar transaction."
C&H Analysis and Recommendation: This addition is standard and unobjectionable. "Recapitalization" captures leveraged recapitalization proposals that might be structured to avoid the merger, consolidation, and share-exchange triggers, while "liquidation" addresses the unlikely but theoretically possible scenario of a third party proposing to acquire the Company through a dissolution and asset sale. We recommend accepting this change.
B. Changes to No-Solicitation Covenant (Section 6.4(a))
3. Referral Proviso.
RPS has inserted a proviso in Section 6.4(a) that would expressly permit the Company's officers and directors to refer unsolicited inquiries regarding potential Acquisition Proposals to the Board, and that such referral shall not constitute a violation of the no-solicitation covenant. The language proposed by RPS reads: "provided, however, that any director or officer of the Company may refer any Person who contacts such director or officer to the Board of Directors of the Company (or any committee thereof) without providing any substantive information to such Person, and such referral shall not be deemed to constitute a breach of this Section 6.4(a)."
C&H Analysis and Recommendation: This proviso is reasonable in concept and reflects the practical reality that individual directors and officers of a public company may be contacted by third parties and should be able to direct such contacts through appropriate Board channels without fear of breaching the Merger Agreement. However, we recommend accepting this proviso only with a clarification that no substantive information regarding the Company, its business, its financial condition, or the terms of the Merger may be conveyed to the contacting Person during or in connection with such referral. The proviso as drafted by RPS contains similar language ("[]without providing any substantive information[]"), but we should ensure that this limitation is clear and unambiguous.
4. Deletion of Return/Destruction Obligation.
RPS has deleted the obligation in Section 6.4(a) requiring the Company to request the return or destruction of all confidential information previously furnished to any third party in connection with any potential Acquisition Proposal. RPS's stated rationale is that this obligation is impractical given the number of parties that may have received information during the pre-exclusivity process. We understand that prior to the Board's authorization of exclusive negotiations with Solara on November 6, 2023, the Company may have provided confidential information to other potential acquirors as part of a limited market check or strategic review process.
C&H Analysis and Recommendation: We recommend pushing back on this deletion. While we acknowledge the practical challenges identified by RPS, the return/destruction obligation serves an important purpose: it signals to third parties that the pre-signing process has concluded and that the Company has entered into an exclusive transaction with Solara. At minimum, we recommend reinstatement of the return/destruction obligation with respect to any parties that signed confidentiality agreements with the Company in connection with a potential acquisition. These parties can be specifically identified and contacted, and their confidentiality agreements likely contain their own return/destruction provisions that can be invoked. The fact that the Company authorized exclusive negotiations only on November 6, 2023 — less than two months before the date of the RPS Mark-Up — underscores the importance of ensuring that third parties that received confidential information during the earlier stages of the process do not retain that information for the purpose of formulating a competing bid.
5. Standstill Release Provision.
RPS has proposed a "soft" standstill release provision that would prevent the Company from enforcing any standstill agreement to the extent such agreement would prohibit a third party from making a confidential proposal to the Board. Specifically, RPS proposes that: "Notwithstanding anything in this Section 6.4(a) to the contrary, the Company shall not enforce, and shall not be required to enforce, any standstill or similar provision in any confidentiality agreement or other agreement to the extent that such provision would prohibit any Person from making a confidential Acquisition Proposal to the Board of Directors of the Company."
This is functionally a "don't-ask-don't-waive" ("DADW") carveout. Under recent Delaware case law — particularly In re Complete Genomics, Inc. Shareholder Litigation and Martin Marietta Materials, Inc. v. Vulcan Materials Co. — there has been significant judicial attention to the interplay between standstill agreements and no-shop provisions. The trend in Delaware jurisprudence has been to require disclosure of the existence and scope of DADW provisions in the proxy statement, on the theory that stockholders are entitled to know whether the no-shop is effectively supplemented by contractual restrictions on potential competing bidders. Even more recently, transaction practitioners have moved toward the prophylactic inclusion of such carveouts to avoid potential disclosure-related litigation.
C&H Analysis and Recommendation: We recommend allowing a narrow carveout that permits confidential private proposals to the Board but does not permit (i) public announcements by the standstill-bound party, (ii) formal tender offers or exchange offers, (iii) solicitation of proxies, or (iv) any other public action to facilitate an Acquisition Proposal. The carveout should be limited strictly to the right to make a confidential proposal to the Board and should not be construed as a waiver of any other provision of the applicable standstill agreement. This approach balances the Delaware law considerations against Solara's interest in maintaining deal stability. We should also confirm that the proxy statement will disclose the existence of this carveout.
C. Changes to Fiduciary-Out Exception (Section 6.4(b))
6. Fiduciary-Out Trigger Standard: "Reasonably Likely to Lead To" vs. "Could Reasonably Be Expected to Lead To."
RPS has proposed replacing "reasonably likely to lead to a Superior Proposal" with "could reasonably be expected to lead to a Superior Proposal" as the standard for the Board's initial determination that an unsolicited Acquisition Proposal warrants engagement under the fiduciary-out. The difference between the two formulations is subtle but directionally meaningful. "Reasonably likely" implies a probability threshold — it suggests that the Board must conclude that it is more likely than not (or at least substantially probable) that the Acquisition Proposal will develop into a Superior Proposal. "Could reasonably be expected to" is a lower standard — it requires only that a reasonable Board could expect the possibility of such a development, without requiring a determination that such development is probable.
C&H Analysis and Recommendation: We recommend retaining the "reasonably likely to lead to" standard from the Initial Draft. The higher standard ensures that the Board does not engage with speculative or preliminary proposals that are unlikely to materialize into a genuine Superior Proposal. This is particularly important in a transaction of this size, where engagement with a third party — even under the constraints of the fiduciary-out — can be destabilizing to the deal process, the financing commitments, and employee morale. If the Board receives a credible, fully financed proposal that is competitive with Solara's offer on price and terms, it will easily satisfy the "reasonably likely" standard. The purpose of the standard is to screen out proposals that are not yet sufficiently developed to warrant the disruption of the existing deal process.
7. Fiduciary Duty Determination Standard.
RPS has made a parallel change to the fiduciary duty determination, replacing "would be reasonably likely to be inconsistent with the directors' fiduciary duties" with "would reasonably be expected to be inconsistent with the directors' fiduciary duties." This change tracks the same directional shift described above — from a higher "reasonably likely" standard to a lower "could reasonably be expected" standard.
C&H Analysis and Recommendation: We recommend retaining the "reasonably likely" formulation for the same reasons described above. Consistency between the two determination standards is important, and both should be set at the same level. We note that the fiduciary-duty determination is a legal determination made after consultation with outside legal counsel, and the "reasonably likely" standard provides appropriate discipline without creating an undue barrier to the Board's exercise of its fiduciary duties in genuinely compelling circumstances.
8. Confidentiality Agreement Standard: "No Less Restrictive" vs. "Substantially Similar."
RPS has proposed that the confidentiality agreement required for information sharing with a third-party proponent of an Acquisition Proposal need only be "substantially similar to" (rather than "no less restrictive than") the NDA between Solara and the Company. The distinction is meaningful: "no less restrictive" requires that the third-party agreement be at least as protective of the Company's (and, by extension, Solara's) interests as the existing NDA, while "substantially similar" permits some degree of deviation.
C&H Analysis and Recommendation: We recommend retaining the "no less restrictive" standard from the Initial Draft. The NDA between Solara and the Company contains specific protections — including the standstill provision, use restrictions, non-disclosure obligations, and return/destruction obligations — that are tailored to the context of a potential acquisition. A third party that seeks to displace Solara should be subject to the same (or greater) restrictions. If RPS objects to the "no less restrictive" formulation, we could accept "substantially similar" if it is accompanied by an express requirement that the third-party confidentiality agreement include (i) a standstill provision, (ii) use restrictions limiting the use of the information to the evaluation of the Acquisition Proposal, and (iii) return/destruction obligations upon termination of discussions. However, the "no less restrictive" standard is strongly preferred.
9. Express Enumeration of "Identity and Track Record" as a Factor.
RPS has added an express provision stating that the Board may consider "the identity and track record of the Person making the Acquisition Proposal" as a factor in its determination of whether an Acquisition Proposal constitutes or is reasonably likely to lead to a Superior Proposal. Specifically, RPS proposes adding the following parenthetical: "(including legal, financial, regulatory, and timing considerations, the identity and track record of the Person making such Acquisition Proposal, as well as any revised proposal by Buyer)."
C&H Analysis and Recommendation: This addition is acceptable and does not materially affect Solara's position. The Board's consideration of the identity and track record of a competing bidder is implicit in the existing "all relevant factors" standard — a Board exercising its fiduciary duties would naturally consider whether a competing bidder has a track record of completing transactions of similar size and complexity, and whether the bidder has the financial wherewithal to consummate the proposed transaction. Making this consideration explicit does not expand the Board's discretion beyond what is already encompassed by the "all relevant factors" standard. Moreover, in this case, the identity-and-track-record factor may benefit Solara: as a well-established private equity sponsor with committed financing, Solara is likely to compare favorably to many potential competing bidders on this dimension. We recommend accepting this change.
D. Changes to "Superior Proposal" Definition
10. Threshold Reduction from 80% to 50%.
RPS has proposed reducing the threshold in the Superior Proposal definition from 80% to 50% of the Company's shares, assets, consolidated revenues, net income, or total assets. Under this proposal, a competing transaction that would result in the acquisition of 50% (rather than 80%) of the Company could qualify as a Superior Proposal, potentially enabling the Board to terminate the Merger Agreement and accept a majority-stake transaction.
RPS's stated rationale is that a 51% acquisition could, in appropriate circumstances, be superior from the stockholders' perspective — for example, if a strategic acquiror offered a significant premium for majority control, with the minority stockholders retaining their equity interest in a combined entity.
C&H Analysis and Recommendation: We strongly recommend resisting this change. The 80% threshold is a critical protection for Solara and is standard in sponsor-led take-private transactions. The purpose of the threshold is to ensure that only whole-company alternatives — transactions that offer the Company's stockholders a complete exit at a premium price — can qualify as Superior Proposals. A 50% threshold would permit the Board to terminate a $6.8 billion all-cash acquisition in favor of a partial-company transaction in which a significant portion of stockholders might not receive any consideration or might receive a different (and potentially less favorable) form of consideration for their remaining shares.
Furthermore, a 50% transaction would not provide the same certainty of value to all stockholders that the Merger provides. In a take-private transaction at $36.92 per share in cash, all stockholders receive the same per-share consideration. In a majority-stake acquisition, the acquiror might offer a premium for the controlling shares while the minority stockholders are left with an illiquid minority position in a company controlled by a new majority owner. The protection against this outcome is precisely why the 80% threshold exists.
If RPS insists on reducing the threshold, our counteroffer should be 65-70% as a potential middle ground. However, we strongly prefer to hold at 80%, and we believe this position is well-supported by market precedent and by the logic of the transaction.
11. Express Enumeration of "Certainty of Closing" and "Sources of Financing."
RPS has proposed adding "certainty of closing" and "sources of financing" as expressly enumerated factors in the Board's determination of whether an Acquisition Proposal constitutes a Superior Proposal. The proposed language would expand the parenthetical to read: "(including legal, financial, regulatory, and timing considerations, certainty of closing, sources of financing, the identity and track record of the Person making such Acquisition Proposal, as well as any revised proposal by Buyer)."
C&H Analysis and Recommendation: This addition is acceptable and, in fact, benefits Solara. By requiring the Board to consider the certainty of closing and the sources of financing of a competing proposal, the provision directs the Board's attention to factors on which Solara has a strong competitive position. Solara's Merger is supported by $4,240,000,000 of committed debt financing from Meridian Atlantic Bank, N.A. and Ironclad Capital Markets LLC, and $2,832,888,096 of equity commitments from Fund VI — a total of approximately $7.07 billion of committed financing. A competing bidder that cannot demonstrate comparable financing certainty would be at a significant disadvantage under this standard. We recommend accepting this change.
12. Deletion of "Any Revised Proposal by Solara" from Initial Determination.
RPS has proposed deleting the requirement that the Board take into account "any revised proposal by Solara" when making its initial determination of whether an Acquisition Proposal constitutes a Superior Proposal. Under the RPS Mark-Up, the consideration of Solara's potential revisions would be reserved for the formal match-right stage under Section 6.4(d), but would not be required at the threshold stage when the Board first evaluates whether to engage with a competing proposal.
C&H Analysis and Recommendation: We recommend pushing back on this deletion. The inclusion of "any revised proposal by Solara" at the initial determination stage is an important protection because it requires the Board to consider the full picture — including the possibility that Solara might improve its offer — before concluding that a competing proposal is superior. Without this requirement, the Board could prematurely determine that a third-party offer is a Superior Proposal without giving any weight to Solara's potential willingness to revise its terms. While Solara would still have the formal match-right period under Section 6.4(d), the initial determination sets the tone for the entire process: if the Board has already concluded (without considering Solara's potential revisions) that the competing proposal is superior, the match-right negotiation begins from a weaker posture for Solara.
We recognize that there is a reasonable argument that the initial determination is distinct from the post-match determination: at the initial stage, Solara has not yet had the opportunity to formulate a revised proposal, so the Board can only speculate about what Solara might offer. However, requiring the Board to consider this possibility is not unduly burdensome and encourages the Board to engage informally with Solara before triggering the formal match-right process. As a practical matter, if the Board receives a competing proposal that it believes may be superior, the Board's advisors (including Veridian Partners) will likely reach out to Osprey Bancroft informally before making a formal determination — and the contractual requirement to consider Solara's potential revisions supports this dynamic.
E. Changes to Adverse Recommendation Change (Section 6.4(c))
13. Deletion of "Material" Qualifier from Intervening Event Definition.
RPS has proposed broadening the definition of "Intervening Event" by deleting the qualifier "material," such that the definition would read: "any event, development, or change in circumstances" rather than "any material event, development, or change in circumstances." This change would significantly expand the scope of events that could trigger the Board's right to make an Adverse Recommendation Change under Section 6.4(c)(B).
C&H Analysis and Recommendation: We recommend pushing back firmly on this change. The materiality qualifier is essential to prevent trivial or insignificant events from triggering fiduciary-out rights that could destabilize the Merger. Without the materiality qualifier, virtually any event, development, or change in circumstances — no matter how minor — could theoretically qualify as an Intervening Event. The purpose of the Intervening Event exception is to address genuinely transformative developments that fundamentally alter the calculus underlying the Board's original recommendation: for example, a major unanticipated contract win, a material regulatory development, or a significant change in the Company's competitive landscape. Routine business developments and ordinary-course fluctuations in the Company's performance should not qualify.
The materiality standard is well-established in Delaware transactional practice and is a standard feature of Intervening Event definitions in comparable transactions. We see no basis for departing from this standard.
14. Deletion of "or Reasonably Foreseeable" from Intervening Event Definition.
RPS has also proposed deleting "or reasonably foreseeable" from the Intervening Event definition, such that the requirement would be only that the event was "not known" to the Board as of the date of the Merger Agreement, rather than "not known to, or reasonably foreseeable by" the Board. This change would lower the foreseeability bar significantly: an event that was reasonably foreseeable at signing (even if not actually known) could qualify as an Intervening Event if it subsequently came to fruition.
C&H Analysis and Recommendation: We insist on retaining the "or reasonably foreseeable" language. The purpose of the foreseeability requirement is to prevent the Board from invoking the Intervening Event exception based on developments that, while not actually known at signing, were part of the foreseeable landscape at that time. When the Board approves the Merger Agreement and makes its initial recommendation to stockholders, it does so in light of the Company's known prospects and the foreseeable range of developments. Events that fall within that foreseeable range — even if they subsequently materialize in a manner that is more positive than the base case — should not justify an Adverse Recommendation Change, because the Board is deemed to have taken them into account when making its original recommendation.
For example, if the Company is in late-stage negotiations with a major customer at the time of signing, and the contract is subsequently signed on terms more favorable than expected, that development should not qualify as an Intervening Event because it was reasonably foreseeable. Conversely, if the Company receives an unsolicited approach from a government agency seeking to award a multi-billion-dollar contract that the Company had not anticipated, that development might qualify as an Intervening Event because it was neither known nor reasonably foreseeable.
The distinction between these two scenarios is precisely the distinction that the foreseeability requirement is designed to capture. We should insist on its retention.
15. "Naked" Adverse Recommendation Change Right.
RPS has added a standalone right for the Board to make an Adverse Recommendation Change in connection with an Intervening Event without being required to terminate the Merger Agreement. Under this proposal, the Board could change its recommendation and advise stockholders against voting in favor of the Merger, while the Merger Agreement itself would remain in effect. The effect would be to leave the Merger Agreement alive but without the Board's endorsement, effectively forcing Solara to decide whether to terminate (without receiving the Termination Fee, since the termination would be by Solara rather than by the Company) or to attempt to consummate the Merger without the Board's recommendation.
This is a material concession request and one of the most significant changes in the RPS Mark-Up. A "naked" Adverse Recommendation Change — unaccompanied by a concurrent termination — creates a highly problematic dynamic. If the Board changes its recommendation, the prospects for obtaining stockholder approval at the special meeting (expected in May 2024) are significantly impaired, even with the 15.8% of committed votes from the Voting / Support Agreements with Hargrove (4.2%) and Pinnacle Growth Ventures (11.6%). Institutional stockholders and proxy advisory firms (ISS, Tarrant Partners LLC) are unlikely to recommend a vote in favor of a merger that the target's own board has recommended against. The result could be a prolonged period of uncertainty during which the Company is bound by the Merger Agreement's interim operating covenants (Section 6.1) but the transaction has no realistic prospect of closing — all without triggering the Company's obligation to pay the Termination Fee.
C&H Analysis and Recommendation: We recommend resisting this change. If the Board determines that an Intervening Event justifies an Adverse Recommendation Change, the Board should be required to terminate the Merger Agreement and pay the Termination Fee concurrently with such termination. The Termination Fee is the bargained-for protection against this precise risk.
If, however, RPS insists on retaining the "naked" Adverse Recommendation Change right as a condition to the deal, we recommend accepting it only in exchange for the following package of protections:
(i) Solara Termination Right. Solara should have the right to terminate the Merger Agreement following an Adverse Recommendation Change, with the Termination Fee payable by the Company upon such termination.
(ii) Tail Provision. If the Company enters into or consummates any Acquisition Proposal within twelve (12) months following the date of the Adverse Recommendation Change, the Termination Fee should be payable by the Company regardless of whether the Merger Agreement was previously terminated.
(iii) Increased Termination Fee. In exchange for accepting the increased risk associated with the "naked" Adverse Recommendation Change right, the Termination Fee should be increased from 3.25% to 3.5% of aggregate deal value, or approximately $238,000,000.
This package of protections is designed to ensure that the Board does not use the "naked" Adverse Recommendation Change as a cost-free mecha

CALDERWOOD & HARKNESS LLP

I. EXECUTIVE SUMMARY

II. BACKGROUND ON DEAL STRUCTURE AND PARTIES

IV. ANALYSIS OF RIDGEWAY PHELPS & SATO MARK-UP (DECEMBER 18, 2023)

Record

Parties

Dates

Amounts