AGREEMENT AND PLAN OF MERGER
among
CLOUDIUM TECHNOLOGIES PLC,
STRATOS MERGER SUB INC.,
and
SOLARA DIGITAL INFRASTRUCTURE FUND VI LP
Dated as of January 22, 2024
AGREEMENT AND PLAN OF MERGER
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of January 22, 2024, is entered into by and among Cloudium Technologies plc, a public limited company incorporated under the laws of England and Wales, Company Number 09734521, with its registered office at 45 Broadwick Street, London W1F 0DB, United Kingdom, and U.S. headquarters at 600 Townsend Street, Suite 800, San Francisco, California 94103 (the "Company"), Stratos Merger Sub Inc., a corporation organized under the laws of the State of Delaware, with its registered office at 1209 Orange Street, Wilmington, Delaware 19801, DE File No. 7923841 ("Merger Sub"), and Solara Digital Infrastructure Fund VI LP, a limited partnership organized under the laws of the State of Delaware, with its principal offices at 1200 Market Street, Suite 3400, Wilmington, Delaware 19801, EIN 87-4523190 ("Parent"). The Company, Merger Sub, and Parent are sometimes referred to individually as a "party" and collectively as the "parties."
RECITALS
WHEREAS, the Company is a public limited company incorporated under the laws of England and Wales and listed on the Nasdaq Global Select Market under the ticker symbol "CLDM," with 184,200,000 shares of common stock outstanding as of the date hereof;
WHEREAS, Merger Sub is a Delaware corporation that was incorporated in the State of Delaware on January 8, 2024, solely for the purpose of effectuating the Merger (as defined below) contemplated by this Agreement, and has not conducted any activities other than those incident to its formation, the execution and delivery of this Agreement, and the consummation of the transactions contemplated hereby;
WHEREAS, the sole stockholder of Merger Sub is Parent;
WHEREAS, the general partner of Parent is Solara Fund VI GP LLC, a Delaware limited liability company ("Solara GP");
WHEREAS, the Board of Directors of the Company (the "Company Board"), acting upon the unanimous recommendation of a special committee comprised entirely of independent and disinterested directors (the "Special Committee"), has (i) determined that this Agreement and the Merger are advisable, fair to, and in the best interests of the Company and its stockholders, (ii) approved this Agreement and the transactions contemplated hereby, including the Merger, and (iii) resolved to recommend adoption of this Agreement by the stockholders of the Company (the "Company Board Recommendation");
WHEREAS, Veridian Partners LLC ("Veridian"), as financial advisor to the Company Board, has delivered its opinion to the Company Board, dated January 21, 2024, to the effect that, as of such date and subject to the assumptions, qualifications, limitations, and other matters set forth therein, the Per Share Merger Consideration (as defined below) to be received by holders of Company Common Stock (other than Rollover Shares, Dissenting Shares, and shares held by the Company, Parent, Merger Sub, or any of their respective Subsidiaries) pursuant to this Agreement is fair, from a financial point of view, to such holders;
WHEREAS, the respective boards of directors (or equivalent governing bodies) of Parent and Merger Sub have each approved this Agreement and the transactions contemplated hereby, including the Merger;
WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to the Company's willingness to enter into this Agreement, Parent has delivered to the Company (i) the equity commitment letter, dated as of the date hereof, from Parent to Merger Sub, pursuant to which Parent has committed to contribute to Merger Sub cash equity in the amount of $2,832,888,096 for the purpose of funding, in part, the transactions contemplated by this Agreement (the "Equity Commitment Letter"), and (ii) the limited guarantee, dated as of the date hereof, from Solara Fund VI GP LLC in favor of the Company, guaranteeing certain payment obligations of Parent and Merger Sub hereunder in an aggregate amount of $246,000,000 (the "Limited Guarantee");
WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to the Company's willingness to enter into this Agreement, Meridian Atlantic Bank, N.A., as lead arranger and administrative agent, and Ironclad Capital Markets LLC, as co-arranger (collectively, the "Financing Sources"), have delivered to Parent the commitment letter, dated as of the date hereof, pursuant to which the Financing Sources have committed, subject to the terms and conditions set forth therein, to provide debt financing in the aggregate principal amount of $4,240,000,000 (the "Debt Commitment Letter" and such financing, the "Debt Financing");
WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to the willingness of each of the parties to enter into this Agreement, (a) Jonathan Hargrove ("Hargrove"), the Chief Executive Officer of the Company, has entered into a Rollover Agreement with Parent, dated as of the date hereof (the "Hargrove Rollover Agreement"), and a Voting and Support Agreement with Parent, dated as of the date hereof (the "Hargrove Voting Agreement"), and (b) Pinnacle Growth Ventures LLC ("Pinnacle"), a Delaware limited liability company, has entered into a Rollover Agreement with Parent, dated as of the date hereof (the "Pinnacle Rollover Agreement"), and a Voting and Support Agreement with Parent, dated as of the date hereof (the "Pinnacle Voting Agreement" and, together with the Hargrove Voting Agreement, the "Voting and Support Agreements"); and
WHEREAS, the parties intend that the Merger shall be effected as a reverse triangular merger under the Delaware General Corporation Law (the "DGCL"), pursuant to which Merger Sub shall merge with and into the Company, with the Company surviving the Merger as a wholly owned subsidiary of Parent.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants, representations, warranties, and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 — Definitions.
As used in this Agreement, the following terms shall have the meanings set forth below:
"Acceptable Confidentiality Agreement" means a confidentiality agreement between the Company and a third party on terms that are no less restrictive in any material respect to such third party than the terms of the NDA between the Company and Solara Digital Infrastructure LP dated September 5, 2023, as in effect on the date hereof; provided, that such agreement need not contain a standstill provision or any provision that would prohibit the making or amendment of an Acquisition Proposal.
"Acquisition Proposal" means any inquiry, proposal, or offer from any Person (other than Parent, Merger Sub, or any of their respective Affiliates) relating to, in a single transaction or a series of related transactions, any (a) direct or indirect acquisition of assets of the Company and its Subsidiaries, taken as a whole, representing twenty percent (20%) or more of the consolidated total assets, revenues, or net income of the Company and its Subsidiaries, taken as a whole, (b) direct or indirect acquisition (including by way of merger, consolidation, share exchange, business combination, tender offer, exchange offer, recapitalization, reorganization, joint venture, or similar transaction) of twenty percent (20%) or more of the outstanding shares of Company Common Stock or twenty percent (20%) or more of the voting power of the Company, (c) tender offer or exchange offer that, if consummated, would result in any Person beneficially owning twenty percent (20%) or more of the outstanding shares of Company Common Stock or twenty percent (20%) or more of the voting power of the Company, or (d) any merger, consolidation, business combination, recapitalization, reorganization, liquidation, dissolution, or similar transaction involving the Company or any of its Subsidiaries that hold twenty percent (20%) or more of the consolidated total assets, revenues, or net income of the Company and its Subsidiaries, taken as a whole, in each case other than the transactions contemplated by this Agreement.
"Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with such Person, where "control" has the meaning given to such term under Rule 12b-2 promulgated under the Exchange Act.
"Aggregate Merger Consideration" means the product of (a) the Per Share Merger Consideration and (b) the total number of shares of Company Common Stock outstanding immediately prior to the Effective Time (other than Rollover Shares, Dissenting Shares, and shares described in Section 2.5(d)).
"Business Day" means any day other than a Saturday, Sunday, or a day on which banking institutions in New York, New York or London, United Kingdom are authorized or obligated by Law to close.
"Certificate of Merger" means the certificate of merger to be filed with the Secretary of State of the State of Delaware in connection with the Merger, substantially in the form attached hereto as Exhibit A.
"Closing" has the meaning set forth in Section 2.3.
"Closing Cash" means the aggregate amount of unrestricted cash and cash equivalents of the Company and its Subsidiaries as of the close of business on the day immediately preceding the Closing Date, determined in accordance with GAAP.
"Closing Date" has the meaning set forth in Section 2.3.
"Closing Indebtedness" means the aggregate amount of indebtedness for borrowed money of the Company and its Subsidiaries as of the close of business on the day immediately preceding the Closing Date, including all obligations under the Existing Credit Agreement.
"Closing Working Capital" means the current assets (other than cash and cash equivalents) of the Company and its Subsidiaries, minus the current liabilities (other than indebtedness for borrowed money and Transaction Expenses) of the Company and its Subsidiaries, in each case as of the close of business on the day immediately preceding the Closing Date, determined in accordance with GAAP applied consistently with the Company's past practice.
"Code" means the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder.
"Company Board" means the board of directors of the Company.
"Company Board Recommendation" means the recommendation of the Company Board that the stockholders of the Company adopt this Agreement, as described in the Recitals.
"Company Board Recommendation Change" has the meaning set forth in Section 6.4(c).
"Company Common Stock" means the shares of common stock of the Company, par value $0.001 per share.
"Company Disclosure Schedules" means the disclosure schedules delivered by the Company to Parent and Merger Sub concurrently with the execution and delivery of this Agreement.
"Company Equity Awards" means, collectively, the Company Stock Options, Company RSUs, and Company PSUs.
"Company Material Adverse Effect" has the meaning set forth in Section 1.1(a).
"Company PSUs" means outstanding performance stock units granted under the Company's equity incentive plans that relate to shares of Company Common Stock.
"Company RSUs" means outstanding restricted stock units granted under the Company's equity incentive plans that relate to shares of Company Common Stock.
"Company Stock Options" means outstanding options to purchase shares of Company Common Stock granted under the Company's equity incentive plans.
"Consent" means any consent, approval, authorization, waiver, permit, grant, license, franchise, concession, ratification, exemption, clearance, confirmation, endorsement, or similar authorization of or from, or registration, filing, declaration, or notification to, any Person, including any Governmental Entity.
"Contract" means any written or oral agreement, contract, indenture, note, bond, mortgage, instrument, lease, sublease, license, sublicense, arrangement, commitment, understanding, or other undertaking (including any amendment, modification, or supplement thereto) that is legally binding.
"Debt Commitment Letter" means the commitment letter, dated as of the date hereof, from Meridian Atlantic Bank, N.A., as lead arranger and administrative agent, and Ironclad Capital Markets LLC, as co-arranger, delivered to Parent, committing, subject to the terms and conditions set forth therein, to provide the Debt Financing.
"Debt Financing" means the debt financing contemplated by the Debt Commitment Letter in an aggregate principal amount of $4,240,000,000, consisting of (a) a $3,740,000,000 senior secured first-lien term loan B facility and (b) a $500,000,000 senior secured first-lien revolving credit facility.
"DGCL" means the General Corporation Law of the State of Delaware, Title 8 of the Delaware Code, as amended from time to time.
"Dissenting Shares" has the meaning set forth in Section 2.9.
"Effective Time" has the meaning set forth in Section 2.2.
"Environmental Laws" means all applicable Laws relating to pollution, the protection of the environment, natural resources, or human health and safety (as it relates to exposure to Hazardous Materials), or the handling, use, generation, treatment, storage, transportation, disposal, release, or threatened release of Hazardous Materials.
"Equity Commitment Letter" means the equity commitment letter, dated as of the date hereof, from Parent to Merger Sub, pursuant to which Parent has committed to contribute $2,832,888,096 in cash equity to Merger Sub to fund, in part, the transactions contemplated by this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Escrow Agent" means Cobalt Trust Company, a national banking association, acting in its capacity as escrow agent under the Escrow Agreement, located at 100 Wall Street, New York, New York 10005 (Contact: Laura Ng, Vice President, Escrow Services).
"Escrow Agreement" means the escrow agreement to be entered into at the Closing by and among Parent, the Stockholder Representative, and the Escrow Agent, substantially in the form attached hereto as Exhibit E.
"Escrow Amount" means $544,000,000, representing eight percent (8%) of the aggregate deal value of $6,800,000,000.
"Escrow Fund" means the escrow fund established and maintained by the Escrow Agent pursuant to the terms of the Escrow Agreement, initially funded with the Escrow Amount.
"Estimated Closing Statement" has the meaning set forth in Section 2.7(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
"Existing Credit Agreement" means that certain Credit Agreement, dated as of March 15, 2021, by and among the Company, as borrower, Atlas Commercial Lending Corp., as administrative agent, and the lenders party thereto from time to time, as amended, restated, supplemented, or otherwise modified.
"Final Closing Statement" has the meaning set forth in Section 2.7(b).
"Financing Sources" means the Persons that have committed to provide, arrange, or otherwise entered into agreements in connection with the Debt Financing or any alternative or replacement financing, including Meridian Atlantic Bank, N.A. and Ironclad Capital Markets LLC, and their respective Affiliates and their and their respective Affiliates' officers, directors, employees, agents, and representatives, and their respective successors and assigns.
"FIRPTA" means the Foreign Investment in Real Property Tax Act of 1980, as amended, including Sections 897 and 1445 of the Code and the Treasury Regulations promulgated thereunder.
"Fraud" means, with respect to any party, an actual and intentional misrepresentation of a material fact by such party in the making of the representations and warranties set forth in this Agreement, with the knowledge that such representation was false when made, upon which the other party reasonably relied to its detriment.
"Fundamental Representations" means the representations and warranties of the Company set forth in Section 4.1 (Organization, Standing, and Power), Section 4.2 (Capitalization), Section 4.3 (Authority; Binding Agreement), and Section 4.21 (Brokers and Financial Advisors), and the representations and warranties of Parent and Merger Sub set forth in Section 5.1 (Organization, Standing, and Power), Section 5.2 (Authority; Binding Agreement), and Section 5.9 (Brokers and Financial Advisors).
"GAAP" means United States generally accepted accounting principles, as in effect from time to time, consistently applied.
"Governmental Entity" means any federal, state, local, municipal, foreign, supranational, or other governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, commission, official, instrumentality, subdivision, court, arbitral body, or other tribunal), any stock exchange, or any self-regulatory organization.
"Hazardous Materials" means any substance, material, waste, pollutant, or contaminant listed, defined, designated, classified, or regulated as hazardous, toxic, or otherwise dangerous under applicable Environmental Laws.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnification Cap" means $1,020,000,000, representing fifteen percent (15%) of the aggregate deal value of $6,800,000,000.
"intellectual Property" means all intellectual property and proprietary rights of any kind, including (a) patents and patent applications, (b) trademarks, service marks, trade names, trade dress, logos, domain names, and registrations and applications for registration thereof, and the goodwill associated therewith, (c) copyrights, copyrightable works, and registrations and applications for registration thereof, (d) trade secrets, know-how, inventions, proprietary processes, methods, technology, algorithms, software (including source code and object code), databases, data collections, and technical information, and (e) all rights to sue for and remedies against past, present, and future infringements of any of the foregoing.
"Intervening Event" means any material event, fact, condition, development, circumstance, change, or occurrence that (a) was not known or reasonably foreseeable to the Company Board as of or prior to the date of this Agreement, (b) becomes known to or by the Company Board after the date of this Agreement and prior to the receipt of the Requisite Stockholder Approval, and (c) does not relate to or involve any Acquisition Proposal or any inquiry, proposal, or offer that could reasonably be expected to lead to an Acquisition Proposal. For the avoidance of doubt, in no event shall any of the following constitute or be deemed to contribute to an Intervening Event: (i) any change in the market price or trading volume of Company Common Stock (although the underlying causes thereof may be taken into account to the extent not otherwise excluded), (ii) any Acquisition Proposal, or (iii) the receipt, existence, or terms of any Acquisition Proposal or any inquiry, proposal, or offer that could reasonably be expected to lead to an Acquisition Proposal.
"Knowledge" means, (a) when used with respect to the Company, the actual knowledge of the Persons listed on Section 1.1 of the Company Disclosure Schedules after reasonable inquiry of their direct reports, and (b) when used with respect to Parent or Merger Sub, the actual knowledge of Marcus Elliston and Priya Narasimhan after reasonable inquiry of their direct reports.
"Law" means any federal, state, local, municipal, foreign, supranational, or other statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree, or agency requirement of any Governmental Entity.
"Lien" means any mortgage, pledge, lien, encumbrance, charge, security interest, claim, option, right of first refusal, preemptive right, community property interest, or restriction of any nature (including any restriction on the voting of any security, any restriction on the transfer of any security or other asset, any restriction on the receipt of income derived from any asset, any restriction on the use of any asset, and any restriction on the possession, exercise, or transfer of any other attribute of ownership of any asset).
"Limited Guarantee" means the limited guarantee, dated as of the date hereof, from Solara Fund VI GP LLC in favor of the Company, guaranteeing payment of (a) the Termination Fee of $221,000,000 and (b) up to $25,000,000 in enforcement costs, for an aggregate guaranteed amount of $246,000,000.
"Losses" means any and all losses, damages, liabilities, claims, deficiencies, actions, judgments, settlements, interest, awards, penalties, fines, costs, and expenses of whatever kind (including reasonable and documented fees, charges, and disbursements of attorneys, accountants, and other advisors, and expenses of investigation and litigation).
"Material Contract" has the meaning set forth in Section 4.16.
"Merger" means the merger of Merger Sub with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent, in accordance with the DGCL and this Agreement.
"Merger Consideration" means $36.92 per share in cash (the "Per Share Merger Consideration"), without interest, subject to the terms and conditions of this Agreement, including the Rollover Elections.
"Merger Sub" means Stratos Merger Sub Inc., a Delaware corporation.
"NDA" means the Confidentiality and Non-Disclosure Agreement, dated September 5, 2023, between Solara Digital Infrastructure LP and the Company, as in effect on the date hereof.
"Order" means any judgment, order, injunction, decree, writ, stipulation, determination, or award entered by, or with, any Governmental Entity.
"Outside Date" means June 30, 2024, as such date may be extended in accordance with Section 9.1(b).
"Parent" means Solara Digital Infrastructure Fund VI LP, a Delaware limited partnership.
"Parent Indemnified Parties" has the meaning set forth in Section 10.2(a).
"Parent Material Adverse Effect" has the meaning set forth in Section 1.1(b).
"Paying Agent" means Cobalt Trust Company, a national banking association, acting in its capacity as paying agent in connection with the Merger.
"Per Share Merger Consideration" means an amount in cash equal to $36.92 per share, without interest.
"Permitted Liens" means (a) Liens for Taxes, assessments, and other governmental charges not yet due and payable or being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP, (b) mechanics', carriers', workers', repairers', materialmen's, warehousemen's, and other similar Liens arising or incurred in the ordinary course of business, (c) pledges or deposits in connection with workers' compensation, unemployment insurance, and other social security legislation, (d) easements, covenants, conditions, restrictions, encroachments, rights-of-way, and other similar encumbrances affecting real property that do not materially interfere with the present use of such real property, (e) zoning, building, entitlement, and other land use and environmental regulations promulgated by any Governmental Entity, and (f) other imperfections of title or encumbrances, if any, that do not, individually or in the aggregate, materially impair the continued use and operation of the assets to which they relate in the conduct of the business of the Company and its Subsidiaries as presently conducted.
"Person" means any individual, corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, unincorporated organization, association, limited liability company, Governmental Entity, or other entity.
"Proxy Statement" means the proxy statement (including any amendment or supplement thereto) to be prepared by the Company and filed with the SEC in connection with the Stockholders' Meeting, together with the Schedule 13E-3 required to be filed in connection therewith.
"R&W Insurance Policy" means the buyer-side representation and warranty insurance policy issued by Northfield Assurance Ltd. to Parent, Policy No. NFA-TRI-2024-00487, with a policy limit of $680,000,000 and a retention of $544,000,000, a copy of the binder for which has been provided to the Company.
"Representatives" means, with respect to any Person, the directors, officers, employees, agents, attorneys, accountants, investment bankers, financial advisors, consultants, and other authorized representatives of such Person.
"Requisite Stockholder Approval" means the affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock entitled to vote thereon in favor of the adoption of this Agreement at the Stockholders' Meeting.
"Rollover Agreements" means, collectively, (i) the Hargrove Rollover Agreement, pursuant to which Hargrove shall elect to exchange fifty percent (50%) of his 7,736,400 shares of Company Common Stock (i.e., 3,868,200 shares) for equity interests in the Surviving Corporation valued at approximately $142,814,544, and (ii) the Pinnacle Rollover Agreement, pursuant to which Pinnacle shall elect to exchange sixty percent (60%) of its 21,367,200 shares of Company Common Stock (i.e., 12,820,320 shares) for equity interests in the Surviving Corporation valued at approximately $473,241,408, representing aggregate rollover equity of approximately $616,055,952.
"Rollover Election" means the election by Hargrove or Pinnacle, as applicable, to exchange a portion of their respective shares of Company Common Stock for equity interests in the Surviving Corporation pursuant to their respective Rollover Agreements, rather than receive the Per Share Merger Consideration in cash with respect to such portion.
"Rollover Shares" means, collectively, the shares of Company Common Stock subject to the Rollover Elections.
"SEC" means the United States Securities and Exchange Commission.
"Solvency Certificate" means the certificate to be delivered at the Closing by the Chief Financial Officer of the Surviving Corporation, in form and substance reasonably satisfactory to Parent, certifying as to the solvency of the Surviving Corporation and its Subsidiaries, taken as a whole, after giving effect to the Merger, the Debt Financing, the repayment of existing indebtedness, and the payment of all Transaction Expenses.
"Special Committee" means the special committee of the Company Board comprised entirely of independent and disinterested directors.
"Stockholder Representative" means Douglas Pemberton, as appointed by the former stockholders of the Company under the Stockholder Representative Agreement to act as their representative for purposes of this Agreement and the Escrow Agreement.
"Stockholder Representative Agreement" means the Stockholder Representative Agreement to be entered into at or prior to the Closing by and among Douglas Pemberton and the former stockholders of the Company.
"Stockholders' Meeting" means the special meeting of the stockholders of the Company to be duly called and held for the purpose of obtaining the Requisite Stockholder Approval, including any postponement or adjournment thereof.
"Subsidiary" means, with respect to any Person, any corporation, limited liability company, partnership, joint venture, or other legal entity of which such Person (either alone or through or together with any other Subsidiary) (a) owns, directly or indirectly, more than fifty percent (50%) of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation, limited liability company, partnership, joint venture, or other legal entity, or (b) has the power to generally direct the business and policies of such entity. The Company's key Subsidiaries include Cloudium Technologies UK Ltd. (England and Wales, Company No. 11287456), Cloudium Technologies India Pvt. Ltd. (Karnataka, India), and Cloudium Solutions GmbH (Berlin, Germany). A complete list of Subsidiaries is set forth in Section 4.1 of the Company Disclosure Schedules.
"Superior Proposal" means a bona fide, written Acquisition Proposal (with the references to "twenty percent (20%)" in the definition of Acquisition Proposal being deemed to be references to "fifty percent (50%)" for purposes of this definition) that the Company Board (or the Special Committee) determines in good faith, after consultation with its outside legal counsel (Ridgeway Phelps & Sato LLP) and its financial advisor (Veridian Partners LLC), and taking into account all relevant factors deemed appropriate by the Company Board (or the Special Committee) in its reasonable judgment (including the legal, financial, regulatory, and other aspects of such proposal, the identity of the Person making such proposal, the likelihood and anticipated timing of consummation, the conditions to consummation, and any revisions to the terms of this Agreement proposed by Parent during the matching-right period), to be more favorable to the stockholders of the Company than the Merger and the other transactions contemplated by this Agreement.
"Survival Period" has the meaning set forth in Section 10.1.
"Surviving Corporation" means the Company, as the surviving corporation following the Merger.
"Tax" or "Taxes" means any and all federal, state, local, foreign, or other taxes of any kind (including income, franchise, profits, gross receipts, capital gains, capital stock, estimated, excise, real or personal property, ad valorem, sales, use, transfer, withholding, employment, unemployment, social security, disability, stamp, registration, value added, alternative or add-on minimum, environmental, customs, duties, or other taxes, assessments, charges, or similar amounts of any kind whatsoever), together with any interest, penalties, additions to tax, or additional amounts imposed with respect thereto by any Governmental Entity.
"Tax Return" means any return, report, declaration, claim for refund, information return, or statement required to be filed with respect to any Taxes, including any schedule or attachment thereto and any amendment thereof.
"Termination Fee" means $221,000,000, representing 3.25% of the aggregate deal value of $6,800,000,000.
"Transaction Expenses" means all fees, costs, and expenses incurred by or on behalf of the Company and its Subsidiaries in connection with the negotiation, execution, and performance of this Agreement and the transactions contemplated hereby, including fees and expenses of attorneys, accountants, financial advisors, consultants, and other professionals, in each case that are unpaid as of the Closing.
"Transfer Agent" means Cascade Corporate Services Inc., in its capacity as transfer agent and registrar for the Company Common Stock.
"TUPE" means the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) of the United Kingdom, as amended.
"Voting and Support Agreements" means, collectively, (i) the Hargrove Voting Agreement, pursuant to which Hargrove has agreed to vote his 7,736,400 shares of Company Common Stock (representing approximately 4.2% of the outstanding shares) in favor of the adoption of this Agreement, and (ii) the Pinnacle Voting Agreement, pursuant to which Pinnacle has agreed to vote its 21,367,200 shares of Company Common Stock (representing approximately 11.6% of the outstanding shares) in favor of the adoption of this Agreement.
"Willful Breach" means a material breach of this Agreement that is a consequence of an act or failure to act by the breaching party with the actual knowledge that such act or failure to act would, or would reasonably be expected to, result in or constitute a breach of this Agreement.
Section 1.1(a) — Definition of "Company Material Adverse Effect."
"Company Material Adverse Effect" means any change, event, occurrence, effect, condition, development, circumstance, or state of facts that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on (i) the business, assets, liabilities, financial condition, or results of operations of the Company and its Subsidiaries, taken as a whole, or (ii) the ability of the Company to consummate the Merger or the other transactions contemplated by this Agreement on a timely basis; provided, however, that, for the purposes of clause (i) of the foregoing, none of the following, either alone or in combination, shall be deemed to constitute, or shall be taken into account in determining whether there has been or would reasonably be expected to be, a Company Material Adverse Effect:
(A) changes in general economic, financial, banking, currency, or capital market conditions (including changes in interest rates, exchange rates, stock prices, or credit markets), in each case in the United States, the United Kingdom, India, Germany, or globally;
(B) changes or conditions generally affecting the industries or markets in which the Company and its Subsidiaries operate, including the cloud computing, enterprise software, and digital infrastructure industries;
(C) changes in applicable Law or in GAAP (or in the interpretation or enforcement of any of the foregoing), including changes in accounting standards, or changes in regulatory or political conditions;
(D) pandemics (including COVID-19, SARS-CoV-2, and any mutation, variation, or resurgence thereof), epidemics, disease outbreaks, or other public health emergencies declared by the World Health Organization, the United States Centers for Disease Control and Prevention, or any comparable Governmental Entity, and any quarantine, "shelter in place," "stay at home," social distancing, shutdown, closure, sequester, or any other Law, directive, guideline, or recommendation by any Governmental Entity in connection therewith;
(E) the commencement, escalation, or worsening of any war (whether or not declared), armed hostilities, sabotage, cyberattack (to the extent not specifically directed at the Company), terrorism, military actions, insurrection, or political instability, or any escalation or worsening of any of the foregoing;
(F) changes in Law, including the adoption, implementation, promulgation, repeal, modification, reinterpretation, or proposal of any Law, or any action taken by any Governmental Entity;
(G) earthquakes, hurricanes, tornados, floods, wildfires, tsunamis, volcanic eruptions, or other natural disasters or acts of God, or any weather-related events;
(H) the announcement, pendency, or consummation of this Agreement or the transactions contemplated hereby, including the Merger, including any impact on relationships, contractual or otherwise, with customers, suppliers, distributors, partners, employees, labor unions, financing sources, stockholders, or Governmental Entities resulting therefrom (it being agreed that this clause (H) shall not apply for purposes of Section 4.4);
(I) any failure by the Company to meet any internal or published industry analyst projections, budgets, plans, estimates, or forecasts of revenue, earnings, cash flow, or other financial or operating metrics for any period (it being understood and agreed that the facts or occurrences giving rise to or contributing to such failure may be deemed to constitute, and may be taken into account in determining whether there has been, a Company Material Adverse Effect to the extent such facts or occurrences are not otherwise excluded by clauses (A) through (H) or clause (J)); or
(J) any action taken, or omitted to be taken, by the Company or any of its Subsidiaries at the express written request or with the prior written consent of Parent;
provided, further, that with respect to clauses (A), (B), (C), (D), (E), (F), and (G), such changes, events, occurrences, effects, conditions, developments, circumstances, or states of facts shall be taken into account in determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur to the extent that such changes, events, occurrences, effects, conditions, developments, circumstances, or states of facts have a disproportionate adverse effect on the Company and its Subsidiaries, taken as a whole, relative to other companies of comparable size operating in the same industry or industries in which the Company and its Subsidiaries operate.
Section 1.1(b) — Definition of "Parent Material Adverse Effect."
"Parent Material Adverse Effect" means any change, event, occurrence, effect, condition, development, circumstance, or state of facts that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on (i) the business, assets, liabilities, financial condition, or results of operations of Parent and Merger Sub, taken as a whole, or (ii) the ability of Parent or Merger Sub to consummate the Merger or the other transactions contemplated by this Agreement on a timely basis. The carveouts applicable to a Parent Material Adverse Effect shall be parallel to, and substantially the same as, those set forth in Section 1.1(a) with respect to a Company Material Adverse Effect, mutatis mutandis.
Section 1.2 — Interpretation.
Unless the context of this Agreement otherwise requires: (a) words of any gender include each other gender; (b) words using the singular or plural number also include the plural or singular number, respectively; (c) the terms "hereof," "herein," "hereby," "hereto," and derivative or similar words refer to this entire Agreement; (d) the terms "Article," "Section," "Schedule," "Exhibit," and "Annex" refer to the specified Article, Section, Schedule, Exhibit, or Annex of or to this Agreement, unless otherwise specified; (e) the word "including" and words of similar import when used in this Agreement means "including, without limitation," unless otherwise specified; (f) the word "or" shall not be exclusive; (g) references to agreements and other documents shall be deemed to include all subsequent amendments, restatements, supplements, and other modifications thereto; (h) references to statutes shall include all regulations promulgated thereunder and references to statutes or regulations shall be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing, or interpreting the statute or regulation; (i) all references to "$" or "dollars" mean the lawful currency of the United States of America; (j) references to "days" mean calendar days unless otherwise specified as "Business Days"; (k) all headings and captions contained in this Agreement are for convenience of reference only and shall not be deemed to be a part of, or to affect the meaning or interpretation of, this Agreement; (l) references to "the date hereof" or "the date of this Agreement" mean January 22, 2024; and (m) the parties have been represented by counsel and the normal rule of construction that any ambiguity in a contract shall be construed against the drafter shall not apply to this Agreement.
ARTICLE II
THE MERGER
Section 2.1 — The Merger.
Subject to the terms and conditions of this Agreement, and in accordance with the DGCL, at the Effective Time, Merger Sub shall be merged with and into the Company (the "Merger"). As a result of the Merger, the separate corporate existence of Merger Sub shall cease, and the Company shall continue as the surviving corporation in the Merger (the "Surviving Corporation") and shall continue its corporate existence under the laws of the State of Delaware as a wholly owned subsidiary of Parent. The Merger shall have the effects set forth in the applicable provisions of the DGCL, including Section 259 of the DGCL.
Section 2.2 — Effective Time; Closing.
On the Closing Date, the parties shall cause the Certificate of Merger, substantially in the form attached hereto as Exhibit A, to be duly executed, acknowledged, and filed with the Secretary of State of the State of Delaware in accordance with the relevant provisions of the DGCL. The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware or at such other later date and time as may be agreed in writing by the parties and set forth in the Certificate of Merger (the time at which the Merger becomes effective being hereinafter referred to as the "Effective Time"). The target Effective Time shall be 11:59 p.m., Eastern Time, on the Closing Date, unless the parties mutually agree otherwise in writing.
Section 2.3 — Closing.
The closing of the Merger (the "Closing") shall take place at the offices of Calderwood & Harkness LLP, 599 Lexington Avenue, New York, New York 10022, at 10:00 a.m., Eastern Time, on the second (2nd) Business Day following the date on which all of the conditions set forth in Article VIII (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permissible, waiver of such conditions at the Closing) have been satisfied or, to the extent permissible, waived by the party or parties entitled to the benefit thereof, or at such other place, date, and time as Parent and the Company may mutually agree in writing (the date on which the Closing occurs, the "Closing Date"). The Outside Date for consummation of the Merger is June 30, 2024, subject to extension as provided in Section 9.1(b).
Section 2.4 — Effects of the Merger.
At the Effective Time:
(a) The certificate of incorporation of the Surviving Corporation shall be amended and restated in its entirety to read as set forth in Exhibit B attached hereto, until thereafter amended in accordance with the DGCL and such certificate of incorporation; provided, that the provisions of Section 6.7 regarding indemnification and directors' and officers' insurance shall be given effect in accordance with their terms;
(b) The bylaws of the Surviving Corporation shall be amended and restated in their entirety to read as set forth in Exhibit C attached hereto, until thereafter amended in accordance with the DGCL, the certificate of incorporation of the Surviving Corporation, and such bylaws; provided, that the provisions of Section 6.7 regarding indemnification shall be given effect in accordance with their terms; and
(c) The directors of the Surviving Corporation from and after the Effective Time shall be such Persons as shall be designated by Parent in writing to the Company prior to the Closing, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation. The officers of the Surviving Corporation from and after the Effective Time shall be such Persons as shall be designated by Parent in writing to the Company prior to the Closing, each to serve at the pleasure of the board of directors of the Surviving Corporation.
Section 2.5 — Conversion of Securities; Merger Consideration.
Section 2.5(a) — Conversion of Company Common Stock.
At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Parent, Merger Sub, or the holder of any shares of Company Common Stock, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than (i) Rollover Shares, (ii) Dissenting Shares, and (iii) shares of Company Common Stock owned by the Company as treasury shares or by Parent, Merger Sub, or any direct or indirect wholly owned Subsidiary of Parent or Merger Sub) shall be converted into the right to receive an amount in cash equal to $36.92, without interest thereon (the "Per Share Merger Consideration"), upon surrender of the certificate or book-entry share representing such share of Company Common Stock in the manner provided in Section 2.8 (or, in the case of shares subject to the Escrow, subject to Section 2.10). Upon such conversion, all such shares of Company Common Stock shall no longer be outstanding, shall automatically be cancelled and retired, and shall cease to exist, and each holder of any such shares shall cease to have any rights with respect thereto, except the right to receive the Per Share Merger Consideration in accordance with the terms of this Agreement.
Based upon the 184,200,000 shares of Company Common Stock outstanding as of the date hereof, the total aggregate equity consideration payable in connection with the Merger is approximately $6,800,000,000 (subject to adjustments for Rollover Shares, Dissenting Shares, treasury shares, and the purchase price adjustment mechanism set forth in Section 2.7).
Section 2.5(b) — Rollover Shares.
At the Effective Time, each Rollover Share (as defined in the applicable Rollover Agreement) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into equity interests in the Surviving Corporation in accordance with, and subject to, the terms and conditions of the applicable Rollover Agreement, and such Rollover Shares shall not be entitled to receive the Per Share Merger Consideration. Specifically:
(i) Hargrove Rollover: Pursuant to the Hargrove Rollover Agreement, fifty percent (50%) of Hargrove's 7,736,400 shares of Company Common Stock (i.e., 3,868,200 shares) shall be converted into equity interests in the Surviving Corporation valued at approximately $142,814,544 (based on the Per Share Merger Consideration of $36.92 per share). The remaining fifty percent (50%) of Hargrove's shares (i.e., 3,868,200 shares) shall be converted into the right to receive the Per Share Merger Consideration.
(ii) Pinnacle Rollover: Pursuant to the Pinnacle Rollover Agreement, sixty percent (60%) of Pinnacle's 21,367,200 shares of Company Common Stock (i.e., 12,820,320 shares) shall be converted into equity interests in the Surviving Corporation valued at approximately $473,241,408 (based on the Per Share Merger Consideration of $36.92 per share). The remaining forty percent (40%) of Pinnacle's shares (i.e., 8,546,880 shares) shall be converted into the right to receive the Per Share Merger Consideration.
(iii) Total Rollover Equity: The aggregate value of the equity interests in the Surviving Corporation to be issued to Hargrove and Pinnacle in respect of their Rollover Shares is approximately $616,055,952.
The aggregate cash consideration payable to holders of Company Common Stock (other than holders of Rollover Shares, Dissenting Shares, and treasury shares) is approximately $6,183,944,048.
Section 2.5(c) — Conversion of Merger Sub Stock.
At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, or the holder thereof, each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one (1) validly issued, fully paid, and non-assessable share of common stock of the Surviving Corporation. From and after the Effective Time, all certificates representing shares of common stock of Merger Sub shall be deemed for all purposes to represent the number of shares of common stock of the Surviving Corporation into which they were converted in accordance with this Section 2.5(c).
Section 2.5(d) — Treasury Shares; Parent-Owned Shares.
At the Effective Time, each share of Company Common Stock that is owned by the Company as treasury stock and each share of Company Common Stock that is owned by Parent, Merger Sub, or any direct or indirect wholly owned Subsidiary of Parent or Merger Sub immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be automatically cancelled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor.
Section 2.6 — Treatment of Company Equity Awards.
Section 2.6(a) — Company Stock Options.
At the Effective Time, each Company Stock Option that is outstanding and unexercised immediately prior to the Effective Time, whether vested or unvested, shall, by virtue of the Merger and without any action on the part of the holder thereof, be cancelled and shall be converted into the right to receive an amount in cash (without interest) equal to the product of (i) the excess, if any, of the Per Share Merger Consideration ($36.92) over the per share exercise price of such Company Stock Option and (ii) the total number of shares of Company Common Stock subject to such Company Stock Option immediately prior to the Effective Time, less any applicable withholding Taxes required to be deducted and withheld therefrom pursuant to Section 2.8(d). Any Company Stock Option that has a per share exercise price that is equal to or greater than the Per Share Merger Consideration shall be cancelled at the Effective Time for no consideration. All payments in respect of cancelled Company Stock Options shall be made by the Surviving Corporation (or its applicable payroll provider) through the Surviving Corporation's payroll system as promptly as practicable following the Effective Time, but in no event later than ten (10) Business Days following the Closing Date.
Section 2.6(b) — Company RSUs.
At the Effective Time, each Company RSU that is outstanding immediately prior to the Effective Time, whether vested or unvested, shall, by virtue of the Merger and without any action on the part of the holder thereof, be cancelled and shall be converted into the right to receive an amount in cash (without interest) equal to the product of (i) the Per Share Merger Consideration ($36.92) and (ii) the total number of shares of Company Common Stock subject to such Company RSU immediately prior to the Effective Time (including any shares of Company Common Stock subject to dividend equivalents accrued with respect thereto), less any applicable withholding Taxes required to be deducted and withheld therefrom pursuant to Section 2.8(d). All payments in respect of cancelled Company RSUs shall be made by the Surviving Corporation (or its applicable payroll provider) through the Surviving Corporation's payroll system as promptly as practicable following the Effective Time, but in no event later than ten (10) Business Days following the Closing Date.
Section 2.6(c) — Company PSUs.
At the Effective Time, each Company PSU that is outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be cancelled and shall be converted into the right to receive an amount in cash (without interest) equal to the product of (i) the Per Share Merger Consideration ($36.92) and (ii) the target number of shares of Company Common Stock subject to such Company PSU at the target level of performance (one hundred percent (100%)), less any applicable withholding Taxes required to be deducted and withheld therefrom pursuant to Section 2.8(d). For the avoidance of doubt, all Company PSUs shall be settled at target-level performance (100%) regardless of the actual level of achievement of the applicable performance metrics at the time of the Closing. All payments in respect of cancelled Company PSUs shall be made by the Surviving Corporation (or its applicable payroll provider) through the Surviving Corporation's payroll system as promptly as practicable following the Effective Time, but in no event later than ten (10) Business Days following the Closing Date.
Section 2.6(d) — Company Actions.
Prior to the Effective Time, the Company shall take (or cause to be taken) all actions that may be necessary or appropriate under the Company's equity incentive plans and award agreements to effectuate the provisions of this Section 2.6, including (i) providing notice to all holders of Company Equity Awards regarding the treatment of such awards in connection with the Merger, (ii) adopting resolutions of the Company Board (or any committee thereof administering the applicable equity incentive plan) approving the cancellation and conversion of Company Equity Awards as contemplated by this Section 2.6, (iii) amending the terms of any applicable equity incentive plan or award agreement to the extent necessary to give effect to the transactions contemplated by this Section 2.6, and (iv) obtaining any consents or waivers from holders of Company Equity Awards that may be required under the terms of the applicable equity incentive plan or award agreement. The Company shall provide Parent with a reasonable opportunity to review and comment upon any notices, resolutions, amendments, or other documents to be delivered or adopted pursuant to this Section 2.6(d) prior to their delivery or adoption, and the Company shall incorporate all reasonable comments of Parent thereon.
Section 2.7 — Purchase Price Adjustment.
Section 2.7(a) — Estimated Closing Statement.
Not later than three (3) Business Days prior to the Closing Date, the Company shall prepare and deliver to Parent a statement (the "Estimated Closing Statement") setting forth the Company's good faith estimates, prepared in accordance with GAAP applied consistently with the Company's past practice, of (i) Closing Cash, (ii) Closing Indebtedness, (iii) Closing Working Capital, and (iv) Transaction Expenses. The Company shall prepare the Estimated Closing Statement in good faith and shall provide Parent and its Representatives with reasonable access to the books, records, work papers, and personnel of the Company and its Subsidiaries as reasonably requested by Parent in connection with its review of the Estimated Closing Statement. Parent shall have the right to review and comment upon the Estimated Closing Statement prior to the Closing, and the Company shall consider in good faith any comments provided by Parent thereon.
Section 2.7(b) — Post-Closing Adjustment.
Within ninety (90) days after the Closing Date, Parent shall prepare and deliver to the Stockholder Representative a statement (the "Final Closing Statement") setting forth Parent's calculation, prepared in accordance with GAAP applied consistently with the Company's past practice, of the actual amounts of (i) Closing Cash, (ii) Closing Indebtedness, (iii) Closing Working Capital, and (iv) Transaction Expenses, together with reasonable supporting documentation. The Stockholder Representative shall have thirty (30) days following receipt of the Final Closing Statement (the "Review Period") to review and, if applicable, object to any item therein. If the Stockholder Representative does not deliver a written notice of objection to Parent within the Review Period, the Final Closing Statement shall be deemed final and binding on the parties. If the Stockholder Representative delivers a written notice of objection within the Review Period, setting forth in reasonable detail the items in dispute and the basis for such objection, then the parties shall attempt in good faith to resolve such dispute for a period of thirty (30) days following delivery of such objection notice. If the parties are unable to resolve any disputed items within such thirty (30) day period, such disputed items shall be submitted to an independent accounting firm mutually agreed upon by Parent and the Stockholder Representative (the "Accounting Referee"), and the determination of the Accounting Referee shall be final and binding on the parties. The fees and expenses of the Accounting Referee shall be borne by the party whose position is further from the final determination of the Accounting Referee (or, if neither party's position is closer to the Accounting Referee's determination, equally by the parties).
Any adjustment resulting in a payment to Parent shall be satisfied first from the Escrow Fund and, to the extent the Escrow Fund is insufficient, shall be the obligation of the former stockholders (through the Stockholder Representative). Any adjustment resulting in a payment to the former stockholders shall be paid by Parent to the Stockholder Representative by wire transfer of immediately available funds within five (5) Business Days of the final determination.
Section 2.8 — Payment Procedures.
Section 2.8(a) — Paying Agent.
Prior to the Effective Time, Parent shall deposit, or cause to be deposited, with Cobalt Trust Company, as paying agent (the "Paying Agent"), cash in an aggregate amount sufficient to pay the aggregate Per Share Merger Consideration payable to holders of Company Common Stock pursuant to Section 2.5(a) (after giving effect to the reduction for the Escrow Amount pursuant to Section 2.10), for the benefit of the holders of Company Common Stock. Such funds shall be invested by the Paying Agent as directed by Parent in obligations of or guaranteed by the United States of America, in commercial paper obligations rated A-1 or P-1 or better by Moody's Investors Service, Inc. or Standard & Pelvoran Financial Services LLC, respectively, or in certificates of deposit, bank repurchase agreements, or banker's acceptances of commercial banks with capital exceeding $10,000,000,000. Any interest or income earned on such investment shall be for the account of the Surviving Corporation. To the extent that there are losses with respect to such investments, or the Paying Agent fund otherwise diminishes below the level required for the Paying Agent to make prompt payment of the Per Share Merger Consideration, Parent shall promptly replace or restore such funds.
Section 2.8(b) — Letter of Transmittal.
As soon as reasonably practicable after the Effective Time, and in any event within five (5) Business Days thereafter, the Surviving Corporation shall cause the Paying Agent to mail or otherwise make available to each record holder of Company Common Stock as of immediately prior to the Effective Time (other than holders of Rollover Shares, Dissenting Shares, and shares described in Section 2.5(d)) (i) a letter of transmittal, substantially in the form attached hereto as Exhibit D, which shall specify that delivery shall be effected, and risk of loss and title to the certificates (or book-entry shares, as applicable) representing shares of Company Common Stock shall pass, only upon proper delivery of the certificates (or book-entry shares) to the Paying Agent, and which shall be in such form and have such other provisions as Parent and the Company may reasonably agree, and (ii) instructions for use in effecting the surrender of such certificates (or book-entry shares) in exchange for the Per Share Merger Consideration. The Transfer Agent for the Company Common Stock is Cascade Corporate Services Inc.
Section 2.8(c) — Payments.
Upon (i) surrender to the Paying Agent of a certificate (or certificates) formerly representing shares of Company Common Stock for cancellation, together with a duly completed and validly executed letter of transmittal and such other documents as may be reasonably required by the Paying Agent, or (ii) receipt of an "agent's message" by the Paying Agent (or such other evidence of transfer as the Paying Agent may reasonably request) in the case of shares of Company Common Stock held in book-entry form, the holder of such certificate or book-entry shares shall be entitled to receive in exchange therefor the Per Share Merger Consideration for each share of Company Common Stock formerly represented by such certificate or book-entry shares, without interest, and such certificate or book-entry shares shall forthwith be cancelled. Until so surr