PRIVILEGED & CONFIDENTIAL ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP
Internal Memorandum
FROM: Andrew Fitzpatrick, Lead Associate, Calderwood & Harkness LLP
TO: James Prentice, Responsible Partner, Calderwood & Harkness LLP Claire Nakamura, Partner & Head of Software Investing, Solara Digital Infrastructure LP
CC: Sandra Tung, Billing Partner, Calderwood & Harkness LLP Naomi Petersen, Working Associate, Calderwood & Harkness LLP Sylvia Hartwell, Specialist Partner (Tax), Calderwood & Harkness LLP
DATE: February 21, 2026
RE: Representations and Warranties Insurance — Procurement Process and Strategy; Proposed Acquisition of Meridian FleetWorks, Inc. by Solara Digital Infrastructure LP
MATTER NO.: 1041-00004
TRANSACTION CODE NAME: Project Trident
Right-click to update Table of Contents
I. Executive Summary
This memorandum outlines the process, timeline, key terms, and strategic considerations for procuring a buy-side representations and warranties ("R&W") insurance policy in connection with Solara Digital Infrastructure LP's proposed acquisition of Meridian FleetWorks, Inc. ("MFW" or the "Target"). The transaction contemplates a stock purchase of one hundred percent (100%) of the issued and outstanding shares of MFW — comprising both common stock and Series A Preferred Stock — for an aggregate purchase price of Three Hundred Fifty Million Dollars ($350,000,000) (the "Transaction"). The purpose of this memorandum is to provide the deal team and the client with a comprehensive overview of the R&W insurance procurement process, the anticipated policy structure, the interplay between the insurance policy and the Stock Purchase Agreement ("SPA") indemnification framework, and the critical path items that must be addressed in order to bind coverage on the target timeline.
The acquisition vehicle for the Transaction will be Solara Fleet Holdings LLC, a to-be-formed Delaware limited liability company that will be a wholly-owned subsidiary of Solara Fund III, LP ("Fund III"). Solara Fleet Holdings LLC will serve as the named buyer under the SPA and, upon closing, will hold all of the issued and outstanding equity interests of MFW.
Solara has engaged Trident Peak Insurance Brokers Inc. ("Trident Peak"), located at 55 East Monroe Street, Suite 3100, Chicago, Illinois 60603, to serve as the R&W insurance broker for this placement. The account executive at Trident Peak assigned to this engagement is Megan Forsythe. Trident Peak has begun preliminary discussions with the carrier market and has identified Atlas Meridian Underwriters Ltd. ("Atlas Meridian"), domiciled in Hamilton, Bermuda, with U.S. offices at 140 Broadway, 30th Floor, New York, New York 10005, as the leading prospective carrier based on initial indications of interest.
The proposed policy limit is Thirty-Five Million Dollars ($35,000,000), representing approximately ten percent (10%) of the enterprise value of the Transaction. The estimated premium for the policy is One Million Fifty Thousand Dollars ($1,050,000), calculated at a rate of 3.0% on the policy limit, plus applicable state surplus lines taxes, broker fees, and underwriting fees. The total all-in cost of the R&W insurance placement is estimated at approximately $1,100,000 to $1,175,000.
The R&W insurance policy is intended to serve as the primary post-closing recourse for the buyer with respect to breaches of the sellers' representations and warranties in the SPA. The policy is designed to complement — but not replace — the negotiated indemnification framework in the SPA, including a Seventeen Million Five Hundred Thousand Dollar ($17,500,000) indemnity escrow (representing 5% of the aggregate purchase price). The combined indemnification stack — consisting of the escrow (which will serve to satisfy the policy retention), the R&W policy, and uncapped fundamental representation indemnities from the sellers — is intended to provide Solara with robust and comprehensive post-closing protection.
The policy is targeted to be bound no later than the SPA execution target date of March 31, 2026, and will become effective at the closing of the Transaction, which is currently targeted for April 30, 2026, with an outside date of June 30, 2026. Given the compressed timeline between the present date and the SPA execution target, prompt action on the Non-Binding Indication ("NBI") submission and underwriting process is essential.
II. Background and Transaction Summary
A. The Buyer
Solara Digital Infrastructure LP is a Delaware limited partnership (EIN 82-4710368) with its principal offices located at 1200 Market Street, Suite 2400, Wilmington, Delaware 19801. Solara is a private equity sponsor focused on technology-enabled services and digital infrastructure businesses, with approximately $4.2 billion in committed capital across three institutional funds. Fund III, which has $1.85 billion in committed capital, is the investment vehicle through which the Transaction will be consummated.
Solara has an established track record of acquiring and growing vertical software and SaaS businesses, and has historically utilized R&W insurance in connection with its platform and add-on acquisitions. The procurement of R&W insurance for this Transaction is consistent with Solara's standard deal practice and is expected by the relevant stakeholders, including the lenders providing the acquisition financing.
B. The Target
Meridian FleetWorks, Inc. is a Delaware corporation (EIN 47-3891205; Delaware File No. 5582037) with its principal offices located at 8750 Westpark Drive, Suite 600, McLean, Virginia 22102. MFW is a provider of a vertical-SaaS platform for fleet management and logistics. The MFW platform enables fleet operators to manage vehicle tracking, maintenance scheduling, driver compliance, fuel management, and route optimization through a cloud-based software solution. The Target serves approximately 4,200 active customer accounts, ranging from mid-market fleet operators to enterprise-scale logistics companies, and employs approximately 310 employees across its McLean headquarters, a satellite office in Austin, Texas, and a distributed engineering team.
MFW's key financial metrics for fiscal year 2025 are as follows:
Based on the $350,000,000 enterprise value, the Transaction implies an EV/ARR multiple of approximately 5.6× and an EV/EBITDA multiple of approximately 23.6×.
C. Transaction Structure
The Transaction is structured as a one hundred percent (100%) stock purchase of all issued and outstanding shares of MFW. The fully diluted capitalization of MFW consists of:
• Common Stock: 7,850,000 shares issued and outstanding;
• Series A Preferred Stock: 1,500,000 shares issued and outstanding; and
• Stock Options: 650,000 options, all of which will be cashed out at closing at a price of $35.00 per share less the weighted-average exercise price of $8.50 per share (net $26.50 per share; aggregate option consideration of approximately $17,225,000).
The aggregate purchase price is $350,000,000, calculated on a cash-free, debt-free basis with a net working capital adjustment. The target net working capital has been set at $5,800,000, subject to customary post-closing true-up procedures to be set forth in the SPA.
D. Financing. The Transaction will be financed through a combination of equity and debt as follows:
• Equity: $175,000,000 from Solara Fund III, LP;
• Debt: $175,000,000 senior secured credit facility provided by Ironclad National Bank, N.A. (acting as administrative agent and lead arranger) and Ridgeline Commercial Lending Corp. (acting as co-lender), consisting of:
• $125,000,000 Term Loan A (fully drawn at closing); and
• $50,000,000 Revolving Credit Facility (undrawn at closing, available for post-closing working capital and general corporate purposes).
In addition, Garrett Holliday, the co-founder and Chief Executive Officer of MFW, will roll over approximately $25,000,000 of equity value (representing approximately 7.14% of the aggregate deal value) into Solara Fleet Holdings LLC, the acquisition vehicle. The terms of Mr. Holliday's rollover investment, including the form of equity interests received and governance rights, are being negotiated concurrently with the SPA.
E. Key Parties and Advisors
The principal advisors and parties to the Transaction are as follows:
• Buyer's Counsel: Calderwood & Harkness LLP (this firm);
• Target's Counsel: Hawthorne Kinsey & Alcott LLP (lead partner: Rachel Greenwald);
• R&W Insurance Broker: Trident Peak Insurance Brokers Inc. (account executive: Megan Forsythe);
• Financial Advisor to Seller: Redstone Arbor Capital LLC (investment bank that prepared the Confidential Information Memorandum);
• Quality of Earnings / Tax Advisor to Buyer: Whitmore Sandoval Group LLC (engagement partner: Daniel Ostroff);
• Escrow Agent (proposed): Northgate Escrow Services LLC.
F. LOI and Exclusivity
The Letter of Intent ("LOI") was executed on February 18, 2026 (reference: LOI-MFW-2026-0218) and provides for a sixty (60) day exclusivity period running through April 19, 2026. Confirmatory due diligence is currently in progress through the Thackeray Solutions virtual data room established under the code name "Project Trident." The LOI contemplates a diligence completion deadline of March 15, 2026, with a target SPA execution date of March 31, 2026.
G. Seller Ownership and Key Stakeholders
The current ownership of MFW, on a fully diluted basis, is as follows:
• Pinnacle Bluff Ventures LLC (institutional venture capital investor): approximately 34.0% fully diluted ownership;
• Garrett Holliday (co-founder and CEO): approximately 32.0% fully diluted ownership (of which approximately $25,000,000 in equity value will be rolled over into Solara Fleet Holdings LLC);
• Diana Vasquez-Park (co-founder and Chief Technology Officer): approximately 18.0% fully diluted ownership; and
• Other shareholders and option holders: approximately 16.0% fully diluted ownership (including employee option holders whose options will be cashed out at closing).
The desire of the institutional holder (Pinnacle Bluff Ventures) and the founders for a clean exit with limited post-closing tail liability is a significant driver of the R&W insurance strategy, as discussed further in Section III below.
III. Rationale for R&W Insurance
The procurement of buy-side R&W insurance in connection with the Transaction is warranted by several considerations, each of which is discussed below.
Standard Practice in PE-Sponsored Acquisitions. The use of R&W insurance has become standard practice in private equity-sponsored acquisitions, particularly in the middle market. R&W insurance is consistent with Solara's established deal practice across its fund platform. Solara has procured buy-side R&W insurance in connection with each of its last several platform acquisitions, and the inclusion of R&W insurance in the Transaction structure will be familiar to the Solara investment committee, the Fund III limited partners, and the lenders providing the acquisition financing.
Enhanced Post-Closing Protection for Buyer. R&W insurance provides Solara with post-closing indemnification protection that extends beyond the negotiated seller indemnity cap and the escrow fund. In most negotiated stock purchase transactions, the seller's aggregate indemnification liability for breaches of general representations and warranties is capped at a percentage of the purchase price — typically in the range of five to fifteen percent. The R&W policy effectively provides an additional layer of coverage above the seller's indemnification cap, thereby significantly increasing the total indemnification available to the buyer in the event of a breach.
Facilitation of Deal Negotiations. R&W insurance reduces friction in the negotiation of the indemnification provisions of the SPA. The sellers in this Transaction — including Pinnacle Bluff Ventures LLC (holding approximately 34.0% of MFW on a fully diluted basis), Garrett Holliday (approximately 32.0%), and Diana Vasquez-Park (approximately 18.0%) — are expected to seek a clean exit with minimal post-closing tail liability. Institutional venture capital investors such as Pinnacle Bluff Ventures, in particular, strongly prefer to distribute sale proceeds to their own limited partners promptly following closing without the overhang of extended indemnification obligations. By providing R&W insurance, Solara can accommodate the sellers' desire for a reduced indemnity cap and a shorter escrow survival period while maintaining adequate buyer protection through the insurance policy.
Reduced Seller Indemnity Cap. The availability of R&W insurance enables Solara to agree to a lower seller indemnification cap in the SPA — likely at or below the escrow amount of $17,500,000 (5% of deal value) — while maintaining an overall indemnification stack (escrow plus R&W policy) of up to $52,500,000 (15% of deal value). This approach provides Solara with significantly more aggregate indemnification protection than would typically be achievable through negotiation of the SPA alone.
Coverage for Known Diligence Issues. While certain known diligence issues may be excluded from the R&W policy (as discussed in Section VII below), the process of underwriting the policy itself serves as a valuable discipline that helps identify and quantify risks that need to be addressed through alternative mechanisms in the SPA. The known diligence issues that are currently under review include:
(a) IP assignment gaps involving three former contractors engaged in 2015–2016 who may not have executed enforceable intellectual property assignment agreements covering their contributions to the MFW platform;
(b) estimated sales tax exposure of $800,000 to $1,400,000 in six to eight states where MFW may have nexus but has not been collecting or remitting SaaS sales tax, as identified in preliminary findings by Whitmore Sandoval Group LLC;
(c) a change-of-control consent requirement under the MFW–TerraLink Logistics, Inc. strategic partnership agreement (dated March 15, 2022; representing approximately $3,800,000 in ARR, or approximately 6.1% of MFW's total ARR; with a term running through March 14, 2027), which consent has not yet been obtained;
(d) independent contractor classification risk with respect to approximately 25 independent contractors utilized by MFW in product development; and
(e) data privacy compliance questions arising from MFW's processing of fleet GPS data and driver-behavior data, including compliance with the Illinois Biometric Information Privacy Act ("BIPA"), the California Consumer Privacy Act ("CCPA"), and other state privacy laws.
For each of these issues, the R&W insurance procurement process will help clarify the scope of risk and inform the parallel development of SPA-specific indemnification and risk allocation strategies.
Extended Survival Period. R&W insurance provides a longer survival period for covered representations compared to the typical contractual survival periods that are negotiated in the SPA. Whereas general representations in a negotiated SPA typically survive for twelve to twenty-four months post-closing, the R&W policy is expected to provide a three-year coverage period for general representations and a six-year coverage period for fundamental and tax representations. This extended survival period materially enhances the buyer's post-closing protection, particularly with respect to breaches that may not be discovered until well after the SPA's contractual survival periods have expired.
IV. Broker Selection and Engagement
A. Trident Peak Insurance Brokers Inc.
Solara has engaged Trident Peak Insurance Brokers Inc. ("Trident Peak") to serve as the R&W insurance broker for this placement. Trident Peak's principal office is located at 55 East Monroe Street, Suite 3100, Chicago, Illinois 60603. The account executive assigned to the Project Trident engagement is Megan Forsythe.
Trident Peak is a nationally recognized R&W insurance brokerage firm with extensive experience in middle-market private equity transactions and, in particular, technology and SaaS sector deals. Trident Peak has placed R&W insurance policies in connection with numerous transactions in the $100 million to $1 billion enterprise value range, and has established relationships with the leading R&W insurance carriers active in the North American market. Trident Peak has previously worked with Solara on at least two prior acquisitions within the Fund II portfolio, and the Solara investment team has expressed confidence in the firm's ability to execute on the compressed timeline required for this Transaction.
Trident Peak was engaged by Solara on or about February 18, 2026, contemporaneously with the execution of the LOI, in order to ensure that the R&W insurance placement process could commence at the earliest possible date. Given the target SPA execution date of March 31, 2026, early engagement of the broker was essential to maintain the overall deal timeline.
Trident Peak's role in the placement process encompasses the following responsibilities:
(a) marketing the risk to prospective R&W insurance carriers, including the preparation and submission of the NBI package;
(b) soliciting and evaluating non-binding indications of interest from carriers, and recommending a preferred carrier based on terms, pricing, and financial strength;
(c) coordinating the underwriting process, including scheduling and facilitating underwriting calls between the carrier and the deal team;
(d) negotiating policy terms, exclusions, retention structure, and pricing with the selected carrier on behalf of the insured;
(e) reviewing and commenting on the draft policy wording and binder to ensure consistency with the SPA and the buyer's risk allocation objectives; and
(f) managing the placement through binding and closing, including coordination of premium payment and delivery of the final policy.
B. Carrier Market Overview
Trident Peak has commenced the process of approaching the R&W insurance carrier market for this placement. As noted above, Atlas Meridian Underwriters Ltd. has been identified as the leading prospective carrier based on initial informal indications of interest solicited by Trident Peak in advance of the formal NBI submission. Atlas Meridian has expressed interest in providing the full $35,000,000 policy limit on a primary basis.
In addition to Atlas Meridian, Trident Peak intends to approach at least one or two additional carriers in order to maintain competitive tension on pricing and terms. Additional carriers that may be approached include established R&W insurance underwriters active in the technology M&A space. The final carrier selection will be based on a comparative evaluation of terms, pricing, breadth of coverage, exclusion language, financial strength, and claims-handling reputation.
The current R&W insurance market for a $350,000,000 technology/SaaS acquisition of this profile is generally favorable. Carrier capacity is robust, and premium rates for technology sector deals in the middle market have remained relatively stable at 2.5% to 3.5% of the policy limit. The specific premium rate offered by each carrier will depend on the carrier's assessment of the risk profile of the Target, the scope and quality of the buyer's due diligence, and the specific representations and warranties to be covered. Trident Peak expects to receive competitive indications from the carriers approached.
V. Prospective Carrier — Atlas Meridian Underwriters Ltd.
Atlas Meridian Underwriters Ltd. ("Atlas Meridian") has been identified as the leading prospective carrier for the R&W policy. Atlas Meridian is organized under the laws of Bermuda and is domiciled in Hamilton, Bermuda. Its U.S. offices are located at 140 Broadway, 30th Floor, New York, New York 10005.
Atlas Meridian is an experienced R&W insurance underwriter with a well-established track record in technology and software M&A transactions. The firm has underwritten R&W policies across a broad range of transaction sizes and industry sectors, with a particular focus on the software, SaaS, and digital infrastructure verticals. Atlas Meridian's underwriting team includes professionals with backgrounds in M&A law, accounting, and insurance, and the firm is known for a collaborative underwriting process that is designed to minimize disruption to the deal timeline.
As part of the placement process, Calderwood & Harkness and Trident Peak will confirm Atlas Meridian's current financial strength rating from a recognized rating agency (e.g., A.M. Best, S&P, or Fitch) and will verify that the carrier meets the financial strength requirements, if any, set forth in the credit agreement with Ironclad National Bank, N.A. and Ridgeline Commercial Lending Corp. Certain senior secured credit facilities require that R&W insurance policies be placed with carriers meeting specified minimum financial strength thresholds, and compliance with any such requirement should be confirmed before the placement is finalized.
Atlas Meridian is expected to serve as the lead — and anticipated sole — carrier on the policy, providing the full $35,000,000 policy limit on a primary basis. If for any reason Atlas Meridian is unable or unwilling to provide the full limit, or if more competitive terms are available through a layered placement, Trident Peak will evaluate the option of placing excess or co-insurance layers with one or more additional carriers. At this stage, however, a single-carrier placement is expected and preferred for simplicity of administration and claims handling.
VI. Proposed Policy Terms
A. Policy Type
The R&W policy will be structured as a buy-side representations and warranties insurance policy. A buy-side policy is issued directly to the buyer (or its acquisition vehicle) and provides coverage for losses arising from breaches of the sellers' representations and warranties in the SPA. Unlike a sell-side policy, which is issued to the sellers and indemnifies the sellers for their indemnification obligations to the buyer, a buy-side policy provides direct recourse for the buyer against the insurance carrier, independent of any claim against the sellers. The buy-side structure is the standard and preferred structure in the current R&W insurance market.
The named insured under the policy will be Solara Fleet Holdings LLC, the to-be-formed Delaware limited liability company that will serve as the acquisition vehicle and the buyer under the SPA. The policy will include the following additional insureds, subject to confirmation with the carrier during the underwriting process:
(a) Solara Digital Infrastructure LP (the sponsor entity);
(b) Solara Fund III, LP (the fund entity that is the sole member of Solara Fleet Holdings LLC); and
(c) Solara Digital Infrastructure GP LLC (the general partner of Solara Fund III, LP).
The inclusion of these additional insureds ensures that the R&W policy extends coverage to the broader Solara fund structure, thereby protecting the fund and its general partner in the event of a covered loss.
B. Policy Limit
The proposed policy limit is Thirty-Five Million Dollars ($35,000,000). This limit is calculated as ten percent (10%) of the enterprise value of the Transaction ($350,000,000 × 10% = $35,000,000). A policy limit of ten percent of enterprise value is within the range of market norms for buy-side R&W insurance in middle-market private equity transactions, where policy limits typically range from five percent to fifteen percent of enterprise value depending on the risk profile of the target and the buyer's risk tolerance.
The $35,000,000 policy limit is designed to cover losses arising from breaches of the sellers' representations and warranties in the SPA, as set forth in the policy terms and subject to the applicable retention and exclusions. When combined with the $17,500,000 indemnity escrow and any additional seller indemnification obligations under the SPA, the total indemnification available to Solara for breaches of representations and warranties is expected to be up to $52,500,000 (i.e., $17,500,000 escrow/seller indemnity + $35,000,000 R&W policy = $52,500,000), representing approximately fifteen percent (15%) of enterprise value.
C. Premium and Costs
The estimated premium for the R&W policy is One Million Fifty Thousand Dollars ($1,050,000), calculated at a rate of 3.0% on the $35,000,000 policy limit. This rate is consistent with current market rates for buy-side R&W insurance in technology/SaaS transactions of this size and risk profile.
In addition to the base premium, the following additional costs are anticipated:
(a) State Surplus Lines Taxes: Applicable state surplus lines taxes will be assessed based on the state of domicile of the named insured and/or the state in which the risk is deemed to be located. The surplus lines tax rate varies by state but is typically in the range of 2% to 5% of the premium;
(b) Broker Fees: Trident Peak's brokerage fees may be included within the quoted premium or assessed as a separate fee, to be confirmed upon receipt of the formal quote;
(c) Underwriting Fee: Atlas Meridian is expected to charge an underwriting/diligence fee of $25,000 to $50,000, payable upon execution of the NBI or the underwriting engagement letter. This fee is non-refundable and will be payable regardless of whether the policy is ultimately bound; and
(d) Policy Issuance and Administrative Fees: Minor administrative fees may be assessed by the carrier in connection with policy issuance.
The total estimated cost of the R&W insurance placement, including premium, taxes, broker fees, and underwriting fee, is estimated at $1,100,000 to $1,175,000. Trident Peak will provide a detailed cost breakdown upon receipt of the formal binding quote from Atlas Meridian.
The premium is a one-time, non-refundable payment that will be due at or prior to the closing of the Transaction. The premium will be borne by the buyer (Solara) as a buyer transaction cost, consistent with standard market practice. The premium will be addressed in the SPA as a buyer transaction expense and will be included in the sources and uses schedule and the funds flow memorandum for the Transaction. The premium will be funded from Solara Fund III's equity contribution.
D. Retention (Deductible)
The anticipated retention structure for the R&W policy is as follows:
(a) Initial Retention: One percent (1%) of enterprise value, equal to Three Million Five Hundred Thousand Dollars ($3,500,000) ($350,000,000 × 1.0%). The retention represents the aggregate amount of covered loss that the insured must bear before the R&W policy begins to respond. The retention functions as a deductible under the policy;
(b) Drop-Down Provision: The retention is expected to drop down to fifty percent (50%) of the initial retention — i.e., One Million Seven Hundred Fifty Thousand Dollars ($1,750,000) — after a period of twelve (12) to eighteen (18) months following the closing date, for non-fraud claims. The drop-down provision recognizes that claims arising later in the policy period are more likely to represent genuine, previously unknown breaches rather than matters that should have been identified during pre-closing diligence. The specific drop-down timeline and conditions will be subject to negotiation with the carrier; and
(c) Satisfaction of Retention: The retention may be satisfied through a combination of direct indemnification from the sellers under the SPA and/or claims against the escrow fund. The policy is expected to provide that the insured need not actually collect amounts from the sellers or the escrow in order to satisfy the retention, but rather that the retention is deemed satisfied once the insured has incurred covered losses in an aggregate amount equal to the applicable retention.
Strategic Alignment with SPA Indemnification. It is critical that the retention structure of the R&W policy be aligned with the indemnification basket and deductible provisions of the SPA. Our recommendation is to structure the SPA indemnification provisions so that the R&W policy attaches immediately above the SPA indemnification basket/deductible, and the retention is effectively self-insured through a combination of the escrow fund and the sellers' indemnification obligations. Specifically, we recommend that the SPA include a "tipping basket" or "first dollar" basket that, once the aggregate amount of qualifying claims exceeds the applicable threshold, entitles the buyer to recover from the first dollar of loss. This structure will ensure that there is no gap between the SPA indemnification and the R&W policy attachment point.
E. Policy Period
The expected policy period is as follows:
(a) General Representations and Warranties: Three (3) years from the closing date (i.e., through approximately April 30, 2029, assuming an April 30, 2026 closing); and
(b) Fundamental and Tax Representations: Six (6) years from the closing date (i.e., through approximately April 30, 2032, assuming an April 30, 2026 closing). Fundamental representations typically include representations as to organization and existence, authorization, capitalization, title to shares, and absence of conflicts. Tax representations are included in the extended coverage period given the longer statute of limitations applicable to tax matters.
The R&W policy's coverage periods are designed to align with, and extend beyond, the survival periods for the corresponding representations and warranties under the SPA. The SPA survival periods for general representations are expected to be negotiated at eighteen (18) months post-closing, while fundamental and tax representations will survive for a longer period (likely three to six years or until the expiration of the applicable statute of limitations, plus sixty days). The R&W policy's three-year and six-year coverage periods provide a meaningful extension of protection beyond the SPA survival periods, which is one of the principal benefits of R&W insurance.
The policy will be written on a "Discovery" basis, meaning that claims must be discovered and reported to the carrier during the applicable policy period. It is therefore important that Solara implement appropriate post-closing monitoring and compliance procedures to ensure that potential breaches are identified and reported within the policy period.
F. Coverage Scope
The R&W policy will cover losses arising from breaches of the sellers' representations and warranties as set forth in the SPA, subject to the specific exclusions discussed in Section VII below. The scope of coverage is intended to be co-extensive with the indemnification obligations of the sellers under the SPA's representations and warranties, with the R&W policy providing an independent and direct source of recovery for the buyer against the insurance carrier.
Key aspects of the coverage scope include:
(a) Compensatory Damages: The policy will cover compensatory damages arising from breaches of covered representations and warranties, including direct losses, diminution in value, and out-of-pocket costs;
(b) Defense Costs: The policy is expected to cover reasonable defense costs incurred by the insured in connection with third-party claims arising from breaches of covered representations and warranties, subject to the policy terms and any applicable sub-limits for defense costs;
(c) Definition of "Loss": The policy's definition of "loss" will be aligned with the SPA's indemnification definition of "losses" to the extent practicable, in order to minimize any gap between the contractual indemnification and the insurance coverage; and
(d) Third-Party Claims: The policy will respond to both first-party claims (i.e., direct claims by the insured for losses arising from breaches of representations) and third-party claims (i.e., claims brought by third parties against the insured that arise from or relate to breaches of the sellers' representations and warranties).
VII. Anticipated Exclusions and Carve-Outs
A. Standard Market Exclusions
R&W insurance policies are subject to certain standard exclusions that are common across the market and are not typically subject to negotiation. The following standard exclusions are anticipated for the Project Trident policy:
(a) Fraud or Intentional Misrepresentation by the Insured: The policy will not cover losses arising from fraud or intentional misrepresentation by the insured (i.e., the buyer and its affiliates). This exclusion does not apply to fraud by the sellers, which remains a covered risk (and, indeed, is one of the principal benefits of R&W insurance, as the policy provides recourse against the carrier even if the sellers are judgment-proof or unwilling to honor their indemnification obligations);
(b) Forward-Looking Statements, Projections, and Estimates: The policy will not cover losses arising from breaches of representations that consist of or are based upon forward-looking statements, projections, budgets, forecasts, or estimates. This exclusion is consistent with the general principle that R&W insurance covers representations of historical or present fact, not predictions about the future;
(c) Purchase Price Adjustments: The policy will not cover amounts that are properly the subject of the SPA's purchase price adjustment mechanisms, including the net working capital adjustment, cash, indebtedness, and transaction expense adjustments;
(d) Covenants: The policy will not cover breaches of pre-closing or post-closing covenants contained in the SPA. Covenants are distinct from representations and warranties, and R&W insurance is limited to coverage of the latter;
(e) Known Breaches Disclosed in Disclosure Schedules: The policy will not cover losses arising from matters that are specifically disclosed in the Disclosure Schedules to the SPA. This is a critical exclusion, and it underscores the importance of carefully drafting the Disclosure Schedules to ensure that disclosures are narrow and targeted, rather than overly broad. Overbroad disclosures in the Disclosure Schedules will result in a corresponding reduction in R&W policy coverage;
(f) Consequential, Punitive, or Multiplied Damages: The policy will not cover consequential, punitive, exemplary, or multiplied damages, except to the extent such damages are awarded to a third party in connection with a covered third-party claim. This exclusion is consistent with the SPA's expected limitation on the types of damages recoverable under the indemnification provisions;
(g) Asbestos, PCBs, and Environmental Liabilities: The policy will exclude coverage for losses arising from asbestos, polychlorinated biphenyls (PCBs), and similar environmental liabilities. Given that MFW is a software company without significant real property holdings or manufacturing operations, this exclusion is not expected to be material to the risk profile of the Transaction;
(h) Pension Underfunding (ERISA Title IV): The policy will exclude coverage for liabilities arising from pension underfunding under Title IV of the Employee Retirement Income Security Act of 1974 ("ERISA"). MFW does not maintain a defined benefit pension plan, so this exclusion is not expected to be relevant.
B. Transaction-Specific Exclusions — Known Diligence Issues
In addition to the standard market exclusions described above, the following matters identified during preliminary due diligence may be excluded from policy coverage, or may be subject to specific sub-limits or enhanced retention requirements. These matters will be a focus of the underwriting discussions with Atlas Meridian and any other carrier approached in connection with the placement.
1. IP Assignment Gaps
Our preliminary diligence has identified three former independent contractors who were engaged by MFW during the 2015–2016 period and who may not have executed intellectual property assignment agreements covering their contributions to the MFW platform. The contractors in question were engaged to perform software development work during the early stages of the MFW platform build-out, and their contributions may include code, architectures, or other copyrightable or patentable material that is embedded in the current production platform. Without executed IP assignment agreements, MFW may not have a clear chain of title to the specific code or other intellectual property contributed by these individuals.
The carrier is likely to seek to exclude losses arising from the lack of clear chain of title to the specific intellectual property contributed by these three contractors. Our recommended approach is twofold: (i) pursue retroactive IP assignment agreements from the identified contractors prior to closing, with MFW's cooperation, to the extent practicable; and (ii) negotiate a specific seller indemnity in the SPA covering any losses arising from the IP assignment gaps, separate from the general indemnification provisions. If retroactive assignments can be obtained, the carrier may be willing to narrow or eliminate this exclusion.
2. Sales Tax Exposure
Whitmore Sandoval Group LLC's preliminary quality-of-earnings and tax analysis has identified potential sales tax nexus in six to eight states where MFW has not been collecting or remitting SaaS sales tax. The estimated aggregate exposure for uncollected sales tax, plus interest and penalties, is in the range of $800,000 to $1,400,000. MFW has historically treated its SaaS subscription revenue as non-taxable in certain jurisdictions, but evolving state tax law — particularly following the U.S. Supreme Court's decision in South Dakota v. Wayfair, Inc., 585 U.S. 162 (2018) — has expanded the states in which SaaS revenue is subject to sales and use tax.
The carrier may seek to exclude known tax liabilities or apply an enhanced retention specific to sales tax claims. Our recommended approach is to negotiate the sales tax exclusion to apply only to the specific identified states and pre-closing tax periods, and to seek coverage for sales tax representations in all other respects. In addition, we recommend that the SPA include a specific tax indemnity for pre-closing sales tax liabilities, with a mechanism for addressing voluntary disclosure agreements or audit assessments that may arise post-closing. Sylvia Hartwell is coordinating with Daniel Ostroff at Whitmore Sandoval to refine the sales tax exposure estimate and develop a recommended approach.
3. TerraLink Logistics Change-of-Control Consent
The strategic partnership agreement between MFW and TerraLink Logistics, Inc., dated March 15, 2022 (the "TerraLink Agreement"), includes a provision requiring the prior written consent of TerraLink for any change of control of MFW. The TerraLink Agreement represents approximately $3,800,000 in ARR, constituting approximately 6.1% of MFW's total ARR, and has a term running through March 14, 2027. Consent from TerraLink has not yet been obtained, and discussions with TerraLink have not yet commenced.
The carrier may seek to exclude losses relating to termination, modification, or non-renewal of the TerraLink relationship if the required change-of-control consent is not secured prior to closing. Our recommended approach is to make commercially reasonable efforts to obtain the TerraLink consent prior to SPA execution and, ideally, prior to closing. If the consent cannot be obtained prior to signing, the SPA should include appropriate risk allocation provisions, such as a condition to closing requiring the consent, or a specific indemnity from the sellers for losses arising from the failure to obtain the consent. The R&W policy exclusion should be negotiated to be as narrow as possible, limited to losses arising directly from the change-of-control provision and the failure to obtain consent, rather than a broad exclusion of all representations relating to the TerraLink relationship.
4. Independent Contractor Classification
MFW currently utilizes approximately 25 independent contractors in its product development function. Preliminary diligence has raised questions regarding the classification of certain of these individuals under federal and state employment laws, including the Internal Revenue Code, the Fair Labor Standards Act, and applicable state worker classification statutes (including California's AB-5 framework, to the extent any contractors are California-based). If any of these individuals were determined to be misclassified — that is, if they should have been treated as employees rather than independent contractors — MFW could face liability for unpaid employment taxes, benefits, overtime, and penalties.
The carrier may exclude or limit coverage for worker reclassification liabilities. Our recommended approach is to provide the carrier with a detailed summary of the contractor arrangements, including the nature of the work performed, the duration of the engagements, the contractual terms, and the jurisdictions in which the contractors are located. To the extent the carrier requires an exclusion, we should seek to limit it to the specific identified contractors and to require coverage for the general employment classification representations and warranties in the SPA.
5. Data Privacy Compliance
MFW's platform processes fleet GPS location data and driver-behavior data (including speed, hard braking events, acceleration patterns, and idling time) on behalf of its customers. The processing of such data raises compliance questions under a number of state and federal privacy and data protection laws, including the Illinois Biometric Information Privacy Act ("BIPA"), the California Consumer Privacy Act ("CCPA"), and other emerging state privacy statutes. Preliminary diligence has identified questions regarding the adequacy of MFW's privacy disclosures, consent mechanisms, data processing agreements with customers, and data retention practices.
The carrier may seek to exclude or apply an enhanced retention to claims arising from data privacy regulatory actions, litigation, or penalties. Given the significance of data privacy in the SaaS/fleet management sector, we recommend strongly advocating for affirmative coverage of the data privacy representations in the policy, which is increasingly standard in SaaS transactions. If the carrier insists on an exclusion, we should seek to narrow it to specific identified compliance gaps rather than a blanket exclusion of all data privacy representations. In addition, the SPA should include robust data privacy representations and a specific indemnity for any identified pre-closing compliance deficiencies.
C. Negotiation Priorities
In negotiating the exclusion language with Atlas Meridian (and any competing carrier), the following priorities should guide our approach:
(a) Seek Affirmative Data Privacy Coverage: Affirmative coverage for data privacy representations and warranties is increasingly standard in SaaS and technology transactions and should be treated as a threshold requirement. If the carrier is unwilling to provide unqualified coverage, we should seek coverage subject to a specific sub-limit or enhanced retention, rather than a blanket exclusion;
(b) Resist Broad IP Exclusion: We should resist any attempt by the carrier to impose a broad exclusion of all intellectual property representations and warranties. The IP exclusion should be limited to the specific identified contractor assignment gaps involving the three 2015–2016 contractors, and should not extend to MFW's broader intellectual property portfolio, trade secrets, or proprietary technology;
(c) Narrow Sales Tax Exclusion: The sales tax exclusion should be limited to the specific states identified in the Whitmore Sandoval analysis and should apply only to pre-closing tax periods. The carrier should not be permitted to exclude all tax representations based on the identified sales tax exposure;
(d) Full Coverage for Fundamental Representations: The fundamental representations — including organization and existence, authorization, capitalization, title to the purchased shares, and tax representations — should be covered for the full six-year policy period without exclusion or limitation. These representations go to the core of the transaction structure and are essential to the buyer's protection; and
(e) Reasonable Exclusion Language: For each transaction-specific exclusion that the carrier requires, we should negotiate the exclusion language to be as narrow, specific, and precisely defined as possible, in order to preserve the broadest possible coverage under the policy.
VIII. Interaction with SPA Indemnification and Escrow
A. SPA Indemnification Framework (Anticipated)
The draft Stock Purchase Agreement, which is being prepared by Calderwood & Harkness on the buyer's standard form, will include a comprehensive indemnification article. The indemnification provisions are expected to be structured as follows:
(a) General Representations — Seller Indemnification Cap: The sellers' aggregate indemnification liability for breaches of general representations and warranties is expected to be negotiated at or below the escrow amount of $17,500,000 (5% of the aggregate purchase price). The availability of the R&W policy enables Solara to agree to a lower seller indemnity cap than would otherwise be required, thereby accommodating the sellers' preference for a clean exit;
(b) Fundamental Representations — Higher or Uncapped: The sellers' indemnification liability for breaches of fundamental representations (organization, authorization, capitalization, title to shares, and tax representations) is expected to be subject to a higher cap — potentially up to the aggregate purchase price — or uncapped, consistent with market practice. The R&W policy will provide parallel coverage for fundamental representations for the full six-year policy period;
(c) Special Indemnities: The SPA will include specific indemnification provisions for certain identified issues that may be excluded from the R&W policy or that warrant dedicated risk allocation, including:
(i) IP assignment gaps involving the three 2015–2016 contractors;
(ii) pre-closing sales tax liabilities in the identified nexus states;
(iii) losses arising from the failure to obtain the TerraLink change-of-control consent (if not obtained prior to closing);
(iv) worker reclassification liabilities with respect to the identified independent contractors; and
(v) data privacy compliance deficiencies identified during diligence (to the extent not covered by the R&W policy).
(d) Indemnification Basket/Deductible: The SPA is expected to include an indemnification basket (threshold) that must be exceeded before the buyer may make indemnification claims. The basket will be structured to align with the R&W policy retention, as discussed in Section VI.D above. Our recommendation is a "tipping" basket, such that once aggregate qualifying losses exceed the basket amount, the buyer is entitled to recover from the first dollar of loss.
B. Escrow Structure
The Transaction will include a post-closing indemnity escrow to secure the sellers' indemnification obligations under the SPA. The proposed escrow terms are as follows:
(a) Escrow Agent: Northgate Escrow Services LLC, with offices at 100 Summer Street, Suite 800, Boston, Massachusetts 02110. Northgate has been identified as the proposed escrow agent subject to negotiation with the sellers and confirmation of fee terms;
(b) Escrow Amount: $17,500,000 (Five percent (5%) of the $350,000,000 aggregate purchase price). The escrow amount will be funded from the sellers' share of the closing proceeds;
(c) Escrow Survival Period: The escrow will remain in place for eighteen (18) months following the closing date (i.e., through approximately October 31, 2027, assuming an April 30, 2026 closing), subject to any outstanding or pending claims at the time of the scheduled release date. Any amounts not subject to pending claims will be released to the sellers upon expiration of the escrow survival period;
(d) Escrow as Source for Retention: The escrow fund is intended to serve as the primary seller-funded source for satisfying the R&W policy retention. In the event of a breach of a covered representation or warranty, the buyer will first seek recovery from the escrow fund (and/or directly from the sellers under their indemnification obligations), with the R&W policy attaching once the retention has been satisfied.
The SPA should include clear provisions coordinating the buyer's right to make claims against the escrow for breaches of representations and warranties with the buyer's right to make claims under the R&W policy for amounts in excess of the retention. The escrow agreement itself should be drafted to permit the buyer to submit escrow claims independently of, and in addition to, claims under the R&W policy.
C. Structural Coordination
The indemnification stack for the Transaction is conceptualized as follows:
Several structural principles should guide the coordination of the R&W policy with the SPA indemnification and escrow:
(a) No Subrogation Against Non-Fraud Sellers Until Buyer Is Made Whole: The R&W policy should be structured so that the buyer is not required to exhaust its contractual remedies against the sellers before making a claim under the policy. The carrier will have subrogation rights against the sellers, but such rights should be subordinated to the buyer's recovery — meaning the carrier may not pursue subrogation claims against non-fraud sellers until the buyer has been made whole for all of its losses. This is a critical provision that ensures the R&W policy functions as intended — as primary recourse for the buyer, rather than as a backstop of last resort;
(b) Seller Releases Tied to R&W Coverage: To the extent that the SPA provides for reduced seller indemnification in reliance on the R&W policy, the buyer's release of sellers from indemnification liability should be conditioned on the R&W policy remaining in full force and effect. If the policy is rescinded, voided, or otherwise fails to respond due to a carrier-side issue (as opposed to a policyholder exclusion), the buyer should retain the right to pursue claims directly against the sellers;
(c) Parallel Claims Process: The SPA and the escrow agreement should include a parallel claims process that permits the buyer to submit claims under both the escrow and the R&W policy simultaneously, without the requirement to resolve the escrow claim before submitting the insurance claim or vice versa; and
(d) Coverage for SPA Indemnification Shortfalls: The R&W policy should be drafted to cover losses that exceed the sellers' aggregate indemnification cap under the SPA, effectively serving as an excess layer above the seller indemnity.
IX. Underwriting Process and Requirements
A. Underwriting Submissions
Trident Peak will prepare and submit the Non-Binding Indication ("NBI") package to Atlas Meridian and any other prospective carriers that are approached during the placement process. The NBI package is the carrier's initial underwriting submission and typically includes the following materials:
(a) A transaction summary and structure overview, including the identity of the buyer, the target, and the acquisition vehicle; the purchase price and financing structure; and the anticipated closing timeline;
(b) The Confidential Information Memorandum ("CIM") prepared by Redstone Arbor Capital LLC, MFW's financial advisor, which provides a comprehensive overview of the Target's business, financial performance, competitive positioning, and growth strategy;
(c) A draft or summary of the anticipated seller representations and warranties to be included in the SPA. Because the SPA is being drafted concurrently, an initial summary of the key representations will be provided, with the full draft SPA to follow as it becomes available;
(d) Copies of, or summaries of, the due diligence reports and memoranda prepared by Calderwood & Harkness and Whitmore Sandoval Group LLC, to be shared with the carrier subject to appropriate confidentiality agreements and non-waiver/non-reliance agreements to preserve privilege and work-product protections;
(e) A summary of known diligence issues, including the IP assignment gaps, sales tax exposure, TerraLink change-of-control consent requirement, independent contractor classification risk, and data privacy compliance questions;
(f) Financial information for MFW, including the FY 2025 financial statements and key metrics (ARR of approximately $62 million, total revenue of approximately $67.5 million, EBITDA of approximately $14.8 million, and gross margin of approximately 78%); and
(g) A capitalization summary for MFW, reflecting the fully diluted share count of 10,000,000 shares (7,850,000 common shares, 1,500,000 Series A Preferred shares, and 650,000 options).