PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT
PRELIMINARY TRANSACTION STRUCTURE MEMORANDUM
PROJECT TRIDENT
February 12, 2026
FROM: James Prentice, Partner, Calderwood & Harkness LLP Sylvia Hartwell, Partner (Tax), Calderwood & Harkness LLP
TO: Viktor Sorensen, Managing Partner, Solara Digital Infrastructure LP Claire Nakamura, Partner & Head of Software Investing, Solara Digital Infrastructure LP
RE: Proposed Acquisition of Meridian FleetWorks, Inc. — Analysis of Transaction Structure
Matter No.: 1041-00004 Engagement Ref.: 1041-00004 Code Name: Project Trident
This memorandum is a privileged and confidential attorney-client communication prepared by Calderwood & Harkness LLP for the exclusive use of Solara Digital Infrastructure LP and its affiliates. This memorandum constitutes attorney work product and is protected from disclosure under applicable privileges. Distribution to any third party without the prior written consent of Calderwood & Harkness LLP is strictly prohibited.
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I. EXECUTIVE SUMMARY
Calderwood & Harkness LLP ("C&H" or "we") has been engaged to advise Solara Digital Infrastructure LP ("Solara" or the "Sponsor") in connection with the proposed acquisition of 100% of the issued and outstanding equity of Meridian FleetWorks, Inc. ("MFW" or the "Company"), a Delaware corporation, for an aggregate purchase price of Three Hundred Fifty Million Dollars ($350,000,000) (the "Transaction"). This memorandum sets forth our preliminary analysis of the proposed transaction structure, compares available alternative structures, and addresses the key structural, tax, financing, and legal considerations that will inform the negotiation and documentation of the definitive agreements.
Specifically, this memorandum: (a) analyzes the proposed stock purchase structure and its relative advantages and disadvantages in the context of a vertical-SaaS acquisition of this nature; (b) compares the proposed stock purchase to the principal alternative structures, namely an asset purchase and a statutory merger (forward or reverse triangular); (c) addresses key structural elements of the Transaction, including the equity rollover contemplated by MFW's Chief Executive Officer Garrett Holliday, the treatment of outstanding stock options under the 2016 Stock Incentive Plan, the proposed financing architecture, governing law considerations, and the potential application of a Section 338(h)(10) election; and (d) identifies open diligence items and sets forth a preliminary documentation timeline.
The acquisition vehicle for the Transaction will be Solara Fleet Holdings LLC ("Acquisition LLC"), a newly formed Delaware limited liability company to be organized as a wholly-owned subsidiary of Solara Fund III, LP ("Fund III") (EIN 84-6239017; approximately $1.85 billion in committed capital). Acquisition LLC will be manager-managed, with Solara Digital Infrastructure GP LLC serving as the designated manager.
Recommendation. Based on the analysis set forth herein, it is our recommendation that the stock purchase structure as proposed in the Letter of Intent (LOI-MFW-2026-0218, anticipated to be signed on or about February 18, 2026 — this memorandum is prepared in anticipation of LOI execution) is the recommended approach for the Transaction. The stock purchase provides the optimal combination of transactional simplicity, seller alignment through favorable tax treatment, deal certainty (given the highly concentrated ownership among cooperating sellers), and operational continuity for MFW's vertical-SaaS business. This recommendation is subject to further analysis of a potential Section 338(h)(10) election, which could provide meaningful tax benefits to the Buyer but requires detailed modeling and negotiation with the selling stockholders, as discussed in greater detail in Section VIII below.
II. TRANSACTION OVERVIEW
A. Parties
The following is a summary of the principal parties to the Transaction and their relevant organizational details:
Buyer. The buyer of all outstanding equity of MFW will be Solara Fleet Holdings LLC ("Acquisition LLC"), a Delaware limited liability company to be formed prior to the execution of the definitive Stock Purchase Agreement (the "SPA"). Acquisition LLC will be a wholly-owned subsidiary of Fund III. An Employer Identification Number ("EIN") will be obtained from the Internal Revenue Service upon formation of Acquisition LLC.
Solara Fund III, LP. Fund III is a Delaware limited partnership (EIN 84-6239017) and constitutes the specific investment vehicle designated for this Transaction. Fund III has approximately $1.85 billion in aggregate committed capital from its limited partners.
Solara Digital Infrastructure GP LLC. Solara Digital Infrastructure GP LLC is a Delaware limited liability company that serves as the general partner of Solara Digital Infrastructure LP. It is anticipated that Solara Digital Infrastructure GP LLC (or an affiliate thereof) will serve as the manager of Acquisition LLC under the LLC Agreement.
Solara Digital Infrastructure LP. Solara Digital Infrastructure LP is a Delaware limited partnership (EIN 82-4710368), headquartered at 1200 Market Street, Suite 2400, Wilmington, Delaware 19801. Solara manages approximately $4.2 billion in total committed capital across three funds. Fund III is the most recently raised and largest vehicle.
Target. Meridian FleetWorks, Inc. ("MFW") is a Delaware corporation (Delaware File Number 5582037; EIN 47-3891205), headquartered at 8750 Westpark Drive, Suite 600, McLean, Virginia 22102, with additional offices in Austin, Texas and Boise, Idaho. MFW is the operating entity that holds all assets, intellectual property, customer relationships, and contracts associated with the MFW platform business. MFW has not elected S corporation status and is taxed as a C corporation for federal income tax purposes.
Sellers. The sellers in the Transaction (collectively, the "Sellers") will include all holders of MFW common stock, all holders of MFW Series A Preferred Stock, and all holders of vested options under the 2016 Stock Incentive Plan. The principal stockholders of MFW are:
• Garrett Holliday — Co-founder, Chief Executive Officer, and Chairman of the Board of Directors of MFW. Mr. Holliday holds 2,800,000 shares of common stock and 400,000 shares of Series A Preferred Stock, representing 3,200,000 shares (32.0%) on a fully diluted basis. Mr. Holliday is expected to roll over a portion of his equity value into Acquisition LLC, as described in Section V below.
• Diana Vasquez-Park — Co-founder and Chief Technology Officer of MFW. Ms. Vasquez-Park holds 1,600,000 shares of common stock and 200,000 shares of Series A Preferred Stock, representing 1,800,000 shares (18.0%) on a fully diluted basis.
• Pinnacle Bluff Ventures LLC — An institutional venture capital fund and the largest single holder of MFW equity. Pinnacle Bluff holds 2,500,000 shares of common stock and 900,000 shares of Series A Preferred Stock, representing 3,400,000 shares (34.0%) on a fully diluted basis.
• Marcus Trahan — Chief Financial Officer of MFW. Mr. Trahan holds 150,000 shares of common stock and 80,000 vested options (under the 2016 Stock Incentive Plan), representing 230,000 shares (2.3%) on a fully diluted basis.
• Other individual holders and optionees — Various individual stockholders and option holders, collectively holding approximately 1,370,000 shares (13.7%) on a fully diluted basis.
B. Target Business Description
MFW operates a vertical software-as-a-service ("SaaS") platform serving the fleet management needs of mid-market trucking and logistics companies. The MFW platform provides an integrated suite of capabilities including fleet management and telematics, route optimization, electronic logging device ("ELD") compliance, maintenance scheduling and tracking, and embedded payments functionality. The platform is delivered on a subscription basis, with customers paying recurring fees based on fleet size and feature tier. MFW also derives a modest but declining portion of revenue from professional services and implementation engagements.
MFW was founded in 2014 by Garrett Holliday and Diana Vasquez-Park and has grown organically to its current scale. The Company employs approximately 310 individuals across three offices: its headquarters in McLean, Virginia; a product development and engineering office in Austin, Texas; and an additional engineering and customer success office in Boise, Idaho.
As of the fiscal year ended December 31, 2025, MFW's key financial and operating metrics are as follows:
• Annual Recurring Revenue ("ARR"): Approximately $62,000,000
• Total GAAP Revenue: Approximately $67,500,000, inclusive of approximately $5,500,000 in professional services and implementation revenue
• Gross Margin: Approximately 78%, yielding gross profit of approximately $52,650,000
• EBITDA: Approximately $14,800,000, representing an EBITDA margin of approximately 21.9%
• Net Revenue Retention ("NRR"): Approximately 112%, reflecting healthy upsell and expansion dynamics within the existing customer base
• Gross Revenue Retention ("GRR"): Approximately 94%, indicating strong underlying customer retention
• Active Customer Accounts: Approximately 4,200
• Average Contract Value ("ACV"): Approximately $14,762 per account (based on ARR divided by active accounts)
MFW's financial statements have been audited by Glenmore Kessler & Associates PC (engagement partner: Linda Chowdhury, CPA) since fiscal year 2019. We anticipate that the audit engagement will continue through the closing of the Transaction, and the most recent audited financial statements (FY 2025) will form the basis for several representations and warranties in the SPA.
C. Purchase Price and Implied Valuation
The aggregate purchase price for 100% of the fully diluted equity of MFW is Three Hundred Fifty Million Dollars ($350,000,000), payable on a cash-free, debt-free basis with a customary net working capital adjustment mechanism. The target net working capital ("Target NWC") has been preliminarily established at $5,800,000, based on MFW's trailing twelve-month average net working capital as of December 31, 2025. The net working capital adjustment will be subject to customary true-up procedures within a specified period following the closing.
The $350,000,000 purchase price implies the following valuation multiples:
• Implied EV / ARR Multiple: Approximately 5.6× ($350,000,000 ÷ $62,000,000 ARR)
• Implied EV / EBITDA Multiple: Approximately 23.6× ($350,000,000 ÷ $14,800,000 EBITDA)
• Per-Share Price: $35.00 per share ($350,000,000 ÷ 10,000,000 fully diluted shares)
These multiples are generally consistent with prevailing market valuations for vertical-SaaS businesses with MFW's growth profile, retention metrics, and margin characteristics, though a formal benchmarking analysis falls outside the scope of this memorandum.
D. Capitalization of MFW (Fully Diluted)
Based on information provided by MFW's counsel, Hawthorne Kinsey & Alcott LLP ("HKA"), and subject to confirmation during corporate diligence, the capitalization of MFW is summarized as follows:
Authorized Capital Stock:
• 10,000,000 shares of common stock, par value $0.001 per share
• 2,000,000 shares of Series A Preferred Stock, par value $0.001 per share
Issued and Outstanding:
• Common Stock: 7,850,000 shares issued and outstanding
• Series A Preferred Stock: 1,500,000 shares issued and outstanding
• Outstanding Options (2016 Stock Incentive Plan): 650,000 shares underlying outstanding options (480,000 vested; 170,000 unvested), with a weighted-average exercise price of $8.50 per share
• Fully Diluted Total: 10,000,000 shares
The following table sets forth the fully diluted capitalization of MFW by holder:
The foregoing capitalization is subject to verification through review of MFW's stock ledger, option grant documentation, and corporate records during the diligence process. Any discrepancies will be identified and reflected in the definitive documentation.
III. PROPOSED STRUCTURE: STOCK PURCHASE
A. Description
The Transaction is proposed to be structured as a 100% stock purchase in which Acquisition LLC will acquire all issued and outstanding shares of MFW common stock and Series A Preferred Stock from the Sellers, and will cash out all outstanding options under the MFW 2016 Stock Incentive Plan, in each case in exchange for the per-share consideration of $35.00 (less the applicable exercise price, in the case of options). Following the closing (the "Closing"), MFW will continue as a surviving legal entity and will become a wholly-owned subsidiary of Acquisition LLC.
Acquisition LLC is a newly formed Delaware limited liability company that will be organized and formed prior to the execution of the definitive SPA. As noted above, Acquisition LLC will initially have Fund III as its sole member. Following the Closing and the consummation of the Holliday equity rollover described in Section V below, the LLC Agreement of Acquisition LLC will be amended and restated to reflect both Fund III and Mr. Holliday as members.
The post-Closing organizational structure will be as follows:
Solara Fund III, LP → Solara Fleet Holdings LLC → Meridian FleetWorks, Inc.
With the Holliday rollover, Mr. Holliday will hold a membership interest in Acquisition LLC alongside Fund III, with Fund III maintaining the controlling interest. The specific economic and governance terms of the Holliday membership interest are discussed in Section V below.
B. Advantages of Stock Purchase Structure
We have identified the following principal advantages of the proposed stock purchase structure in the context of this Transaction:
1. Simplicity of Transfer. The acquisition of stock, rather than individual assets, avoids the need to identify, schedule, and separately convey each asset of MFW. This is particularly significant in the context of a SaaS business such as MFW, which holds a substantial portfolio of assets that would be cumbersome and time-consuming to transfer individually. MFW's asset base includes approximately 4,200 customer master service agreements ("MSAs"), a significant body of proprietary software and intellectual property, three office leases, numerous vendor and service provider agreements, and the full complement of tangible and intangible business assets. A stock purchase avoids the logistical burden and execution risk associated with individual asset transfers.
2. Preservation of Contracts. Because MFW continues to exist as the same legal entity following the stock purchase, its contracts remain in place by operation of law. There is no transfer of the contracting party itself, and accordingly, no assignment, novation, or third-party consent is required for the vast majority of MFW's commercial agreements. This is a critical advantage given the volume and breadth of MFW's customer and vendor relationships. As noted in Section III.F below, however, certain contracts do contain change-of-control provisions that may be triggered by the Transaction, and these will require specific attention.
3. Preservation of Licenses and Permits. MFW retains all existing licenses, permits, and regulatory authorizations without the need for re-application or transfer. While MFW does not currently hold any regulated licenses (such as broker-dealer, insurance, or banking licenses), its general corporate authorizations, software registrations, and business entity filings in various jurisdictions are preserved intact through the stock purchase structure.
4. Favorable Tax Treatment for Sellers. A stock purchase is generally more favorable to the Sellers from a tax perspective than an asset purchase. In a stock sale, the Sellers recognize capital gain on the disposition of their MFW shares, and the capital gain is generally eligible for preferential long-term capital gains rates (assuming the applicable holding periods have been satisfied). This is an important commercial consideration, as it maintains alignment between the Buyer's and the Sellers' economic interests and avoids the purchase price increase that Sellers would likely demand to compensate for the less favorable tax treatment of an asset sale. This consideration is particularly salient with respect to Pinnacle Bluff Ventures LLC, MFW's largest single holder at 34.0%, which as an institutional venture capital fund is likely to have a strong preference for capital gains treatment.
5. Operational Continuity. A stock purchase minimizes disruption to MFW's day-to-day operations, employee relationships, and customer-facing activities. MFW's employees remain employed by the same legal entity, MFW's vendor relationships continue without interruption, and MFW's customers experience no change in their contracting counterparty. This continuity is valuable in maintaining business momentum and customer confidence during and after the transition period.
6. Avoidance of Bulk Sales and Transfer Tax Issues. A stock purchase avoids the application of bulk transfer laws and state sales and use taxes that would potentially apply to the transfer of individual business assets in an asset purchase. While the applicability and magnitude of such taxes would vary by jurisdiction, the avoidance of these issues eliminates a layer of complexity and potential cost.
C. Disadvantages of Stock Purchase Structure
We have identified the following principal disadvantages and risk factors associated with the proposed stock purchase structure:
1. Assumption of All Liabilities. In a stock purchase, the Buyer inherits all liabilities of MFW, including both known and unknown liabilities, contingent liabilities, and undisclosed liabilities. MFW continues as the same legal entity with the same liability profile, and the change in stock ownership does not extinguish or limit any pre-existing obligations. This is particularly relevant in the context of the Transaction given several identified diligence issues, including: (a) a sales tax nexus exposure estimated at $800,000 to $1,400,000 across multiple states where MFW may have created nexus through its customer base or remote employees; (b) intellectual property assignment gaps involving three former contractors who performed development work during the 2015–2016 period and for whom proper IP assignment documentation may not have been executed; and (c) independent contractor classification risk arising from the use of approximately 25 contractors in MFW's product development organization, certain of whom may be more properly classified as employees under applicable federal and state law.
2. No Step-Up in Tax Basis. In a stock purchase (absent a Section 338(h)(10) election), the Buyer acquires MFW's historic tax basis in its assets. This means that Acquisition LLC will not obtain a stepped-up basis for depreciation and amortization purposes, and the future tax shield associated with the premium paid over book value will not be available. In the context of a SaaS acquisition where the purchase price substantially exceeds the book value of tangible assets, this can represent a meaningful economic cost to the Buyer. The potential mitigation of this disadvantage through a Section 338(h)(10) election is discussed in detail in Section VIII below.
3. Minority / Holdout Risk. A stock purchase requires the acquisition of 100% of the outstanding shares in order to achieve full ownership. Unlike a statutory merger, where the approval of a majority of stockholders can bind dissenting minorities, a stock purchase depends on the voluntary participation of every stockholder. If any holder refuses to sell, the Transaction cannot close on its contemplated terms. This risk is mitigated in the present case by the high concentration of ownership among aligned sellers — Mr. Holliday (32.0%), Ms. Vasquez-Park (18.0%), and Pinnacle Bluff Ventures LLC (34.0%) collectively hold approximately 84.0% of MFW's fully diluted equity. The execution of a stockholder support agreement by these three principal holders will provide substantial deal certainty. Nevertheless, the remaining approximately 16.0% of fully diluted equity held by smaller individual holders and option holders will require attention to ensure full participation.
4. Enhanced Due Diligence Burden. The assumption of all liabilities in a stock purchase structure places a premium on thorough due diligence to uncover and quantify all existing and potential liabilities that will be inherited by the Buyer. While the diligence burden would exist in any acquisition, the inability to "cherry-pick" assumed liabilities (as would be possible in an asset purchase) makes comprehensive diligence and robust SPA protections essential. The mitigation strategies for this risk are described in Section III.D below.
D. Mitigation of Stock Purchase Risks
The risks inherent in the stock purchase structure can be substantially mitigated through the following mechanisms, each of which will be incorporated into the Transaction documentation:
Comprehensive Seller Representations and Warranties. The SPA will include a full suite of representations and warranties from the Sellers covering, among other things, corporate organization and authority, capitalization, financial statements, absence of undisclosed liabilities, compliance with laws, tax matters, intellectual property ownership and sufficiency, material contracts, employee and labor matters, data privacy compliance, environmental matters, and litigation. The scope and specificity of these representations will be tailored to address the identified diligence issues and will be informed by the results of our ongoing diligence review.
Indemnification with Escrow Holdback. The SPA will contain indemnification provisions obligating the Sellers to indemnify the Buyer for losses arising from breaches of representations and warranties, breaches of covenants, and certain specified matters. To support the indemnification obligations, a portion of the purchase price in the amount of $17,500,000 (representing 5.0% of the aggregate deal value) will be deposited into an escrow account with Northgate Escrow Services LLC (the "Escrow Agent") at the Closing. The escrow will be subject to an 18-month survival period, with an estimated release date of approximately October 31, 2027 (assuming an April 30, 2026 Closing). The specific terms of the escrow arrangement, including release mechanics, claim procedures, and interest allocation, will be set forth in a separate Escrow Agreement among the Buyer, the Seller Representative (to be designated), and the Escrow Agent.
Buyer-Side Representations and Warranties Insurance. Acquisition LLC will procure a buyer-side representations and warranties insurance policy ("R&W Policy") from Atlas Meridian Underwriters Ltd. The proposed policy limit is $35,000,000, representing approximately 10.0% of enterprise value, which provides a significant additional layer of protection beyond the escrow. The estimated premium for the R&W Policy is approximately $1,050,000, based on a rate-on-limit of 3.0%. Trident Peak Insurance Brokers Inc. (Megan Forsythe, account executive) is managing the procurement process for the R&W Policy. The availability of the R&W Policy is expected to facilitate the negotiation of indemnification terms by providing the Buyer with recourse beyond the escrow while allowing the Sellers to achieve greater certainty regarding their net proceeds.
Stockholder Support Agreement. Mr. Holliday, Ms. Vasquez-Park, and Pinnacle Bluff Ventures LLC (collectively representing approximately 84.0% of MFW's fully diluted equity) will execute a stockholder support agreement prior to or concurrently with the execution of the SPA. The support agreement will include commitments to tender all shares in the Transaction, restrictions on transfer of shares during the pendency of the Transaction, and covenants not to solicit or support alternative acquisition proposals. The support agreement is essential to providing deal certainty in the context of the stock purchase structure.
Specific Indemnification and Purchase Price Adjustments. For identified issues — specifically, the sales tax exposure estimated at $800,000 to $1,400,000 and the IP assignment gaps involving three former contractors — we expect to negotiate specific indemnification provisions or purchase price adjustments in the SPA. These may take the form of special indemnification escrows, post-closing adjustment mechanisms tied to the resolution of specific liabilities, or dollar-for-dollar adjustments to the purchase price for amounts determined to exceed agreed thresholds.
E. Acquisition Vehicle Formation
Acquisition LLC will be formed as a Delaware limited liability company in advance of the execution of the SPA. The key formation steps and organizational matters are as follows:
• Formation. A Certificate of Formation for Solara Fleet Holdings LLC will be filed with the Delaware Secretary of State. The filing will be coordinated by Calderwood & Harkness's Delaware office and is expected to be completed within two to three business days of authorization.
• Sole Member. Upon formation, Fund III will be the sole member of Acquisition LLC.
• Management. Acquisition LLC will be manager-managed. Solara Digital Infrastructure GP LLC will serve as the initial manager of Acquisition LLC, with authority to act on behalf of the LLC in connection with the Transaction and all post-Closing operations.
• LLC Agreement. Calderwood & Harkness will draft the initial LLC Agreement of Acquisition LLC, reflecting Fund III as the sole member and establishing the governance, distribution, and allocation provisions. This LLC Agreement will be amended and restated at or promptly following the Closing to accommodate the Holliday rollover membership interest described in Section V below.
• EIN. An Employer Identification Number will be obtained from the IRS upon formation of Acquisition LLC using IRS Form SS-4.
• Registered Agent. A registered agent in the State of Delaware will be designated in the Certificate of Formation.
F. Third-Party Consents and Change-of-Control Provisions
Even in a stock purchase — where MFW continues as the same legal entity and no assignment of contracts occurs — certain material contracts may contain change-of-control provisions that are triggered by a change in the majority ownership or control of MFW. The change in ownership of MFW's stock from the existing Sellers to Acquisition LLC will constitute a change of control under many standard contractual definitions. We have identified the following contracts requiring particular attention:
TerraLink Logistics, Inc. Strategic Partnership Agreement. The Strategic Partnership Agreement between MFW and TerraLink Logistics, Inc. (dated March 15, 2022; five-year term through March 14, 2027) is MFW's largest customer relationship, representing approximately $3,800,000 in ARR, or approximately 6.1% of MFW's total ARR. This agreement contains a change-of-control consent provision requiring the prior written consent of TerraLink before any change in the majority ownership or control of MFW. We have flagged this consent as a critical path item for the Transaction. The failure to obtain TerraLink's consent could give TerraLink a right to terminate the Strategic Partnership Agreement, which would represent a meaningful revenue impact. We recommend that the TerraLink consent be made a condition to Closing in the SPA, and that early engagement with TerraLink be initiated promptly following execution of the LOI.
Office Leases. MFW maintains office leases at three locations: (a) the McLean, Virginia headquarters at 8750 Westpark Drive (the "Westpark Lease"); (b) the Austin, Texas office at Brazos Tower (the "Brazos Lease"); and (c) the Boise, Idaho office with Clearwater Realty (the "Clearwater Lease"). Each lease must be reviewed for assignment and change-of-control provisions. A stock purchase generally does not trigger lease assignment clauses because the tenant entity (MFW) remains the same, but certain leases define change of control broadly to include changes in the ownership of the tenant's equity. Specific lease language must be confirmed during diligence, and we will work with HKA to obtain copies of all lease agreements.
Brindoval Data Solutions LLC Cloud Hosting Agreement. MFW's Cloud Hosting Agreement with Brindoval Data Solutions LLC (dated September 1, 2023; three-year term through August 31, 2026; auto-renewal; approximately $2,100,000 in annual spend) is a material vendor relationship supporting MFW's platform infrastructure. This agreement must be reviewed for change-of-control provisions. Given the criticality of MFW's hosting infrastructure to its SaaS operations, any risk of disruption to this relationship must be assessed and addressed.
Sentinel Commerce Bank, N.A. Credit Facility. MFW maintains an existing line of credit with Sentinel Commerce Bank, N.A. (2100 Wilson Boulevard, Suite 700, Arlington, Virginia 22201), with an outstanding balance of approximately $4,200,000. This facility is expected to be repaid in full at the Closing from Transaction proceeds. A payoff letter will be obtained from Sentinel Commerce Bank, and all lien releases and UCC termination statements will be delivered at or promptly following the Closing. Any consent or notification requirements under the credit facility in connection with the change-of-control transaction must also be coordinated.
IV. ALTERNATIVE STRUCTURES CONSIDERED
In connection with our analysis, we have evaluated the two principal alternative transaction structures — an asset purchase and a statutory merger — and have compared each to the proposed stock purchase. Our analysis and conclusions are set forth below.
A. Asset Purchase
Description. In an asset purchase, Acquisition LLC would acquire substantially all of the assets of MFW and assume specified liabilities, rather than acquiring MFW's stock. MFW would remain as a legal entity owned by its existing stockholders and would distribute the net proceeds of the asset sale (after satisfaction of liabilities and expenses) to its stockholders in a subsequent liquidation or wind-down.
Advantages of an Asset Purchase:
1. Selective Liability Assumption. An asset purchase permits the Buyer to selectively assume only those liabilities that are specifically identified and assumed in the asset purchase agreement. The Buyer can "cherry-pick" desirable assets and exclude unwanted or uncertain liabilities. In the context of the Transaction, this would allow the Buyer to exclude responsibility for the identified sales tax exposure ($800,000–$1,400,000), the IP assignment gaps involving former contractors, and any unknown or contingent liabilities.
2. Automatic Step-Up in Tax Basis. In an asset purchase, the Buyer automatically obtains a stepped-up tax basis in the acquired assets equal to the fair market value allocated to each asset. This generates higher depreciation and amortization deductions going forward, resulting in a meaningful tax shield. For a SaaS acquisition where the purchase price substantially exceeds the book value of tangible assets, the present value of these incremental deductions can be significant.
3. No Minority Stockholder Holdout Risk. An asset purchase is effected by the corporation itself (MFW) as the selling entity, not by its individual stockholders. Accordingly, the transaction requires only the approval of MFW's board of directors and the requisite stockholder vote under DGCL Section 271 (sale of substantially all assets), eliminating the need to obtain individual purchase commitments from every stockholder.
Disadvantages of an Asset Purchase:
1. Burdensome Individual Asset Transfers. An asset purchase requires the individual identification, scheduling, and transfer of each asset to be acquired. For a SaaS business of MFW's scale, this would encompass approximately 4,200 customer MSAs, numerous vendor agreements, three office leases, all intellectual property assets (including software, patents, trademarks, copyrights, and trade secrets), equipment, furniture, and all other tangible and intangible assets. The logistical complexity and execution risk of this process are substantial.
2. Customer Consent Requirements. Many of MFW's approximately 4,200 customer MSAs are likely to contain anti-assignment provisions that would require the individual consent of each customer before the contract can be transferred to the Buyer. Obtaining individual consents from 4,200 or more customers is operationally impracticable and would create significant uncertainty regarding the completeness of the asset transfer. Even if a substantial majority of consents were obtained, the failure to obtain consent from certain customers could result in the loss of those customer relationships.
3. Employment Disruption. In an asset purchase, MFW's employees are not automatically transferred to the Buyer. Instead, their employment with MFW must be terminated and new employment relationships must be established with the Buyer. This creates a risk of employee attrition during the transition, particularly among key technical and leadership personnel, and may trigger obligations under the Worker Adjustment and Retraining Notification ("WARN") Act.
4. Transfer Taxes. The transfer of individual assets may give rise to state and local transfer taxes and sales and use taxes, depending on the nature of the assets and the applicable jurisdictions. These taxes would represent an incremental transaction cost not present in a stock purchase.
5. Tax Disadvantage to Sellers. In an asset purchase, the selling corporation (MFW) is treated as having sold its individual assets. The gain recognized on the sale is categorized by asset class, and certain asset categories — including accounts receivable and certain intangible assets — generate ordinary income rather than capital gain. This ordinary income treatment at the corporate level, combined with the second layer of tax on the distribution of net proceeds to stockholders (either as dividends or in liquidation), results in a materially less favorable tax outcome for the Sellers compared to a stock sale. The Sellers — particularly Pinnacle Bluff Ventures LLC (34.0% holder), which as an institutional venture capital fund is likely to have a strong preference for capital gains treatment — would almost certainly demand a purchase price increase to compensate for the incremental tax burden. We estimate that the tax differential could result in a purchase price demand increase in the range of $15,000,000 to $30,000,000, though the precise amount would depend on the specific asset allocation and the individual tax circumstances of each Seller.
6. IP Transfer Complexity. Title transfer for MFW's intellectual property assets — including registered patents, trademarks, and copyrights — would need to be individually recorded with the appropriate federal and state agencies. Any gaps in the chain of title could create uncertainty regarding ownership and enforceability, particularly for the core software platform.
Conclusion. The asset purchase structure is not recommended for the Transaction. The operational complexity of transferring approximately 4,200 customer contracts, the impracticability of obtaining individual customer consents, the tax inefficiency for the Sellers, and the anticipated Seller resistance (including a likely demand for a significant purchase price increase) collectively outweigh the advantages of selective liability assumption and automatic basis step-up. The basis step-up benefit, in particular, may be achievable through a Section 338(h)(10) election in the context of the stock purchase structure, as discussed in Section VIII below.
B. Statutory Merger (Forward or Reverse Triangular Merger)
Description. A merger structure could take several forms:
• Forward Triangular Merger. A newly formed merger subsidiary of Acquisition LLC (the "Merger Sub") would merge with and into MFW, with MFW surviving as a wholly-owned subsidiary of Acquisition LLC. Alternatively, MFW could merge into the Merger Sub, with the Merger Sub surviving, though this approach (a direct merger) is less commonly used in acquisitions of this type.
• Reverse Triangular Merger. Merger Sub would merge with and into MFW, with MFW surviving. In this structure, MFW survives as the continuing entity (similar to a stock purchase), but the mechanics of the merger allow the Buyer to acquire MFW without needing the individual consent of each stockholder. MFW's stockholders receive the merger consideration (cash and, in the case of Holliday, rollover equity) in exchange for their MFW shares, which are cancelled in the merger.
Advantages of a Merger:
1. Elimination of Minority Holdout Risk. Under DGCL Section 251, a merger of a Delaware corporation requires the approval of a majority of the outstanding shares entitled to vote (or a higher threshold if specified in the corporation's certificate of incorporation). Once the requisite stockholder vote is obtained, all stockholders — including those who voted against the merger — are bound by the transaction and receive the merger consideration. This eliminates the risk that minority or holdout stockholders could prevent the closing of the Transaction.
2. Preservation of Entity and Contracts. In a reverse triangular merger, MFW survives as the continuing legal entity, maintaining its contracts, licenses, and permits in the same manner as a stock purchase. The operational continuity benefits of the stock purchase structure are thus preserved.
3. Tax Flexibility. A merger structure can be configured to achieve a step-up in tax basis similar to a Section 338(h)(10) election, depending on the specific terms and elections made.
Disadvantages of a Merger:
1. Additional Structural Complexity. A merger requires additional documentation and procedural steps, including the preparation and execution of an Agreement and Plan of Merger, the filing of a Certificate of Merger with the Delaware Secretary of State, and compliance with the procedural requirements of the DGCL (including stockholder notice and voting requirements). These additional steps add complexity and cost to the Transaction without providing corresponding benefits in the present context.
2. Appraisal Rights. Under DGCL Section 262, stockholders of a Delaware corporation who do not vote in favor of a merger have the right to seek judicial appraisal of the "fair value" of their shares. If dissenting stockholders exercise their appraisal rights, the Buyer may face appraisal proceedings in the Delaware Court of Chancery, which can be costly, time-consuming, and unpredictable in their outcome. The appraisal process introduces price uncertainty because the Court of Chancery may determine a fair value that is higher (or lower) than the merger consideration. In the context of the Transaction, appraisal risk is particularly relevant given the approximately 8.0% of fully diluted equity held by "other individual holders" and the approximately 5.7% held by option holders (through the remaining option pool), some of whom may not be aligned with the principal Sellers.
3. Potential for Delay. The merger mechanics — including the stockholder solicitation and voting process, the statutory waiting period, and the preparation and filing of the Certificate of Merger — may require additional time compared to the more straightforward execution mechanics of a stock purchase. In a transaction with a target closing date of April 30, 2026, and an outside date of June 30, 2026, any unnecessary delay should be avoided.
4. Change-of-Control Triggers. Certain contracts may define "change of control" broadly to include mergers, even reverse triangular mergers where the target survives. To the extent that the change-of-control definitions in MFW's material contracts extend to mergers, a merger structure would trigger the same consent requirements as a stock purchase, without any offsetting benefit.
Conclusion. The merger structure is not recommended at this time. Given the high concentration of ownership among aligned Sellers — Mr. Holliday (32.0%), Ms. Vasquez-Park (18.0%), and Pinnacle Bluff Ventures LLC (34.0%) collectively hold approximately 84.0% of MFW's fully diluted equity — the minority holdout risk that a merger would address is already substantially mitigated by the contemplated stockholder support agreement. The introduction of appraisal rights through a merger structure is an unnecessary complication that would create risk without corresponding benefit. However, if the stockholder support agreement negotiations reveal difficulties in securing commitments from the smaller holders (representing approximately 16.0% of fully diluted equity), or if diligence reveals the existence of drag-along provisions in MFW's existing stockholders' agreement that are insufficient to compel full participation, a merger structure should be reconsidered as a backstop mechanism. We will continue to monitor this issue as the Transaction progresses.
C. Recommendation
Recommended Structure: Stock Purchase. Based on the foregoing analysis, we recommend proceeding with the stock purchase structure as contemplated by the LOI. The stock purchase provides the best balance of the key objectives for this Transaction:
• Operational Simplicity: Avoids the logistical complexity of individual asset transfers and the procedural requirements of a statutory merger.
• Seller Tax Efficiency: Provides capital gains treatment to the Sellers, maintaining alignment and avoiding demands for a purchase price increase.
• Deal Certainty: With the stockholder support agreement from holders of approximately 84.0% of fully diluted equity, the stock purchase provides sufficient certainty of closing.
• Contractual Continuity: Preserves MFW's existing contracts, leases, licenses, and authorizations without assignment or novation.
The key risks associated with the stock purchase — principally the inheritance of all liabilities and the absence of a tax basis step-up — are manageable through the comprehensive SPA protections described herein (representations and warranties, indemnification, escrow, R&W insurance), targeted diligence on identified issues, and the potential Section 338(h)(10) election discussed in Section VIII below.
V. GARRETT HOLLIDAY EQUITY ROLLOVER
A. Overview
Garrett Holliday, MFW's co-founder and CEO, has expressed his intention to roll over a portion of his equity value into Acquisition LLC in connection with the Transaction. The contemplated rollover amount is approximately $25,000,000, representing approximately 7.14% of the $350,000,000 aggregate purchase price.
Under the Transaction terms, Mr. Holliday's total equity consideration — based on his 3,200,000 fully diluted shares at $35.00 per share — is $112,000,000. After giving effect to the $25,000,000 rollover, Mr. Holliday would receive net cash at Closing of approximately $87,000,000 (subject to his pro rata share of the escrow holdback, Transaction expenses, and other adjustments).
The rollover is an important element of the Transaction for several reasons. First, it provides Mr. Holliday with continued economic alignment with the Buyer and the post-Closing performance of MFW's business. Second, it demonstrates Mr. Holliday's confidence in MFW's forward growth trajectory, which is a positive signal to the Buyer's investment committee. Third, it reduces the net cash that must be deployed at Closing to fund the Transaction, effectively reducing the Buyer's equity check by $25,000,000. Fourth, Mr. Holliday's continued involvement as CEO — reinforced by his retained economic stake — supports management continuity and customer relationship stability during the post-Closing transition period.
B. Structural Considerations
The rollover will be structured as a contribution of MFW shares (or the right to receive a portion of the purchase consideration) by Mr. Holliday to Acquisition LLC in exchange for a membership interest in Acquisition LLC. The contribution is intended to qualify as a tax-deferred contribution under Section 721 of the Internal Revenue Code, such that no gain or loss is recognized by Mr. Holliday on the contribution of his MFW shares (or purchase consideration rights) to Acquisition LLC. Mr. Holliday's tax basis in his Acquisition LLC membership interest will be a substituted basis equal to his tax basis in the contributed property.
The specific terms of Mr. Holliday's membership interest in Acquisition LLC will be set forth in the Amended & Restated LLC Agreement of Acquisition LLC. Key structural elements to be negotiated include:
• Membership Interest Class. Mr. Holliday's membership interest may be structured as a separate class of units (e.g., Class B units) with economic terms distinct from Fund III's Class A units, or as a single class of common units with a proportional economic interest. The appropriate structure will depend on the governance and distribution provisions to be negotiated.
• Economic Terms. Mr. Holliday's membership interest will represent an economic interest in Acquisition LLC proportional to his $25,000,000 rollover amount relative to the total equity in the capital structure. The specific distribution waterfall, preferred return, and carried interest provisions will be negotiated between Solara and Mr. Holliday.
• Governance Rights. Mr. Holliday may be granted limited governance rights, such as a board observer seat on Acquisition LLC's (or MFW's) board of directors, a limited manager designation, or consent rights over specified major decisions. The scope of any governance rights will be subject to negotiation and must be consistent with Fund III's requirement to maintain operational control of the investment.
• Transfer Restrictions. Customary transfer restrictions will apply to Mr. Holliday's membership interest, including restrictions on transfer without the consent of the manager, a right of first refusal in favor of Fund III, and exceptions for transfers to permitted transferees (e.g., family trusts, estate planning vehicles).
• Tag-Along / Drag-Along Rights. Mr. Holliday will have tag-along rights entitling him to participate proportionally in any sale of membership interests by Fund III. Conversely, Fund III will have drag-along rights permitting it to compel Mr. Holliday to participate in a sale of Acquisition LLC on the same terms.
• Put/Call Provisions. The LLC Agreement may include put and call provisions allowing Mr. Holliday to put his membership interest to Acquisition LLC (or Fund III) upon the occurrence of certain triggering events (e.g., termination of employment, death, disability), and allowing Fund III to call Mr. Holliday's membership interest upon specified events.
Mr. Holliday's continued employment as CEO following the Closing is expected and will serve to align his economic incentives with the Buyer's value creation objectives.
C. Interaction with Restrictive Covenants
Mr. Holliday is expected to enter into a Restrictive Covenant Agreement as a condition to the Closing. The Restrictive Covenant Agreement will include non-competition and non-solicitation covenants, with an anticipated term of three (3) years for Mr. Holliday, reflecting the significance of his role and his continuing economic interest in the business. These covenants will be entered into in connection with both the stock purchase (i.e., the consideration received by Mr. Holliday in the Transaction) and Mr. Holliday's rollover and continued employment.
The rollover structure and Restrictive Covenant Agreement must be coordinated with Mr. Holliday's existing Employment Agreement with MFW (effective January 1, 2023). The Employment Agreement provides for the following key terms:
• Base salary: $425,000
• Annual bonus target: 75% of base salary ($318,750)
• Twenty-four (24)-month change-of-control severance
The change-of-control severance provisions in Mr. Holliday's Employment Agreement will be triggered by the Transaction. There are several possible approaches to addressing this issue, and the appropriate approach will be a matter for negotiation:
• Option 1: Mr. Holliday waives his change-of-control severance entitlement as part of the rollover negotiations, in exchange for the rollover opportunity, new employment terms, and the Restrictive Covenant Agreement compensation.
• Option 2: The change-of-control severance is paid to Mr. Holliday at Closing (as a Transaction expense or deducted from his purchase consideration), and a new employment agreement with Acquisition LLC (or MFW, post-Closing) is entered into on terms to be negotiated.
• Option 3: A modified arrangement in which a portion of the severance entitlement is paid and a portion is waived, with the balance reflected in the terms of Mr. Holliday's new employment arrangement.
The resolution of this issue will also need to be evaluated in connection with the Section 280G analysis discussed in Section VI.C below, as the change-of-control severance payment (if made) will be included in the calculation of aggregate parachute payments.
D. Documentation Required
The following documents will be required in connection with the Holliday equity rollover:
1. Rollover Agreement — to be entered into between Mr. Holliday and Acquisition LLC, setting forth the terms and mechanics of the contribution of MFW shares (or purchase consideration rights) in exchange for the Acquisition LLC membership interest.
2. Amended & Restated LLC Agreement of Solara Fleet Holdings LLC — to reflect Mr. Holliday's membership interest alongside Fund III, including all economic, governance, transfer restriction, and put/call provisions.
3. Restrictive Covenant Agreement — to be entered into between Mr. Holliday and Acquisition LLC (or MFW), containing non-competition, non-solicitation of customers, and non-solicitation of employees covenants for a three-year term.
4. Amended or New Employment Agreement — depending on the resolution of the change-of-control severance issue, a new employment agreement between Mr. Holliday and MFW (or Acquisition LLC) may be required, or the existing Employment Agreement may be amended to reflect the post-Closing terms.
VI. TREATMENT OF MFW 2016 STOCK INCENTIVE PLAN
A. Overview of Option Pool
MFW adopted the 2016 Stock Incentive Plan (the "Plan") under which 1,300,000 shares were authorized for issuance. As of the date hereof, 650,000 options are outstanding under the Plan, of which 480,000 are vested and 170,000 are unvested. The weighted-average exercise price of all outstanding options is $8.50 per share. Based on the per-share consideration of $35.00 in the Transaction, the net spread per option is $26.50 ($35.00 minus $8.50).
The option pool represents 6.5% of MFW's fully diluted equity (650,000 of 10,000,000 fully diluted shares), and the aggregate intrinsic value of all outstanding options (both vested and unvested) at the Transaction price is $17,225,000.
B. Proposed Treatment at Closing
We recommend that all outstanding options — both vested and unvested — be cancelled at the Closing in exchange for a cash payment equal to the excess of the per-share purchase price ($35.00) over the applicable per-share exercise price ($8.50, in most cases), net of applicable tax withholdings. This is the cleanest and most operationally straightforward approach and is consistent with market practice for private company acquisitions.
The aggregate economics of the option cancellation are as follows:
• Aggregate exercise price: $8.50 × 650,000 options = $5,525,000
• Aggregate gross proceeds to option holders (net of exercise price): ($35.00 − $8.50) × 650,000 = $17,225,000
• Marcus Trahan (CFO) — 80,000 vested options: ($35.00 − $8.50) × 80,000 = $2,120,000
With respect to the 170,000 unvested options, we recommend that the MFW board of directors approve an accelerated vesting of all unvested options immediately prior to the Closing, such that all 650,000 options are vested at the time of cancellation. This approach ensures that all option holders participate in the Transaction and avoids the complexity of converting unvested options into replacement awards in Acquisition LLC. An alternative approach — converting the unvested options into replacement equity awards in Acquisition LLC on an equivalent economic basis — is possible but significantly more complex from both a tax and administrative perspective and is not recommended unless there is a specific business reason to maintain the vesting schedule for certain individuals.
The acceleration of unvested options will require a resolution of the MFW board of directors approving such acceleration, which should be obtained prior to or concurrently with the execution of the SPA. We will coordinate with HKA to ensure that the board action is properly documented and that all necessary corporate formalities are observed.
C. Tax Considerations
The cash-out of stock options in connection with the Transaction raises several tax considerations that must be addressed:
Ordinary Income Treatment. The cash payments received by option holders in exchange for the cancellation of their options will be treated as ordinary compensation income for federal income tax purposes. For option holders who are current employees of MFW, the payments will be reported on Form W-2 and will be subject to federal income tax withholding, FICA (Social Security and Medicare) withholding, and applicable state and local income tax withholding. For option holders who are former employees of MFW, the payments will be reported on Form 1099-NEC. MFW (or the surviving entity, post-Closing) will be entitled to a corresponding compensation deduction for the amounts paid to option holders.
Section 409A Compliance. Section 409A of the Internal Revenue Code imposes strict rules on the taxation of deferred compensation arrangements. Stock options that are granted at below-fair-market-value exercise prices, or that contain non-standard terms (such as deferral features or additional service-based payment conditions), may constitute deferred compensation subject to Section 409A. A compliance review of all outstanding option grants is required to confirm that each grant was made at no less than fair market value as of the grant date and does not contain features that would bring the option within the scope of Section 409A. If any options are determined to be subject to Section 409A, the cash-out must be structured to comply with Section 409A's distribution timing rules. We will coordinate with Sylvia Hartwell's team to conduct this review.
Section 280G Analysis. Payments made to "disqualified individuals" in connection with a change of control are subject to the "parachute payment" rules of Sections 280G and 4999 of the Internal Revenue Code. Under these provisions, if the aggregate present value of payments contingent on the change of control (including option cash-out proceeds, severance payments, accelerated vesting, and other change-of-control-related compensation) exceeds three times the individual's "base amount" (generally, the individual's average annual compensation over the five preceding taxable years), the excess over one times the base amount is treated as an "excess parachute payment." The consequences of excess parachute payments are twofold: (a) MFW loses its compensation deduction for the excess amount under Section 280G, and (b) the recipient is subject to a 20% excise tax on the excess amount under Section 4999, in addition to regular income taxes.
The disqualified individuals for purposes of the Section 280G analysis will include, at a minimum, Mr. Holliday (CEO), Ms. Vasquez-Park (CTO), and potentially Mr. Trahan (CFO) and other officers and highly compensated employees. The analysis must model the aggregate change-of-control payments to each disqualified individual — including option cash-out proceeds, change-of-control severance, accelerated vesting of any other compensation, and any other payments contingent on the Transaction — against the three-times-base-amount safe harbor.
If the Section 280G analysis reveals that excess parachute payments would result, a stockholder approval procedure under Section 280G(b)(5)(B) may be available to exempt the payments from the parachute payment rules. Under this procedure, the payments must be approved by a vote of stockholders holding more than 75% of the voting power of MFW's outstanding stock (after adequate disclosure). Given the concentrated ownership of MFW, this stockholder approval may be obtainable, but it requires careful compliance with the disclosure and voting requirements.
D. Documentation Required
The following documents and actions will be required in connection with the treatment of the stock option plan:
1. Board Resolution. A resolution of the MFW board of directors approving the acceleration of all unvested options and the cancellation and cash-out of all outstanding options in connection with the Transaction.
2. Option Cancellation Agreements. Individual option cancellation agreements with each option holder, confirming the cancellation of the option in exchange for the specified cash payment and the holder's release of any claims relating to the option.
3. Paying Agent and Withholding Mechanics. The SPA will contain provisions establishing the mechanics for payment of the option cash-out amounts, including the designation of a paying agent, calculation of applicable tax withholdings, and timing of payments.
4. Section 280G Analysis. A detailed Section 280G analysis (to be prepared by Sylvia Hartwell's team in coordination with Whitmore Sandoval Group LLC) modeling the aggregate parachute payments to each disqualified individual. If the analysis indicates that excess parachute payments would result, a stockholder approval under Section 280G(b)(5)(B) will need to be prepared and obtained prior to the Closing.
VII. FINANCING STRUCTURE
A. Sources of Funds
The Transaction will be funded through a combination of equity contributions from Fund III and committed debt financing from Ironclad National Bank, N.A. and Ridgeline Commercial Lending Corp. The following table summarizes the anticipated sources of funds: