1041-00004 · Solara Digital Infrastructure LP · Tax

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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 277 Park Avenue, 45th Floor New York, New York 10172

Telephone: (212) 558-4000 Facsimile: (212) 558-3588 www.calderwoodharkness.com

MEMORANDUM

Date: February 20, 2026

To: James Prentice, Partner, Calderwood & Harkness LLP Claire Nakamura, Partner & Head of Software Investing, Solara Digital Infrastructure LP

From: Sylvia Hartwell, Partner (Tax), Calderwood & Harkness LLP

Re: Preliminary Tax Structure Analysis — Proposed Acquisition of Meridian FleetWorks, Inc. (Project Trident)

Matter No.: 1041-00004

Engagement Reference: 1041-00004

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I. Executive Summary

Calderwood & Harkness LLP has been engaged by Solara Digital Infrastructure LP ("Solara" or the "Sponsor") to advise on all legal aspects of the proposed acquisition by Solara Fleet Holdings LLC ("AcquisitionCo"), a newly formed Delaware limited liability company and wholly-owned subsidiary of Solara Fund III, LP ("Fund III"), of one hundred percent (100%) of the issued and outstanding equity of Meridian FleetWorks, Inc. ("MFW" or the "Company"), a Delaware corporation. The aggregate enterprise value of the proposed transaction is Three Hundred Fifty Million Dollars ($350,000,000) on a cash-free, debt-free basis with a customary net working capital adjustment mechanism, with a target net working capital of Five Million Eight Hundred Thousand Dollars ($5,800,000).

The transaction as currently contemplated is structured as a stock purchase. AcquisitionCo will acquire all of the 7,850,000 shares of issued and outstanding common stock and all 1,500,000 shares of issued and outstanding Series A Preferred Stock of MFW from all stockholders of the Company. In addition, 650,000 outstanding stock options held by various employees and executives under the MFW 2016 Stock Incentive Plan will be cancelled at closing in exchange for cash payments equal to the per-share merger consideration less the applicable exercise price. The aggregate purchase price implies a fully diluted per-share price of $35.00, calculated on the basis of 10,000,000 fully diluted shares outstanding.

The transaction will be financed through a combination of (a) a $175,000,000 equity contribution from Fund III, and (b) a $175,000,000 senior secured credit facility provided by Ironclad National Bank, N.A. and Ridgeline Commercial Lending Corp., consisting of a $125,000,000 Term Loan A tranche and a $50,000,000 Revolving Credit Facility. Garrett Holliday, the co-founder and Chief Executive Officer of MFW, who holds approximately 32.0% of MFW's equity on a fully diluted basis, has agreed to roll over approximately $25,000,000 of his equity value into AcquisitionCo, thereby reducing the net cash payable to selling stockholders at closing to approximately $325,000,000.

This memorandum provides a preliminary analysis of the principal federal, state, and local tax considerations arising from the proposed transaction. Specifically, this memorandum addresses: (a) the federal income tax treatment of the transaction under the current stock purchase structure as compared with an alternative asset purchase structure; (b) the potential benefits and costs of a joint election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"); (c) state and local income and franchise tax considerations in the principal jurisdictions implicated by the transaction (Delaware, Virginia, Texas, and Idaho); (d) the federal and state income tax treatment of the Holliday rollover equity contribution; (e) the tax treatment of the cash-out of outstanding stock options under the MFW 2016 Stock Incentive Plan; (f) the Company's potential exposure to sales and use taxes on its SaaS revenues; and (g) transfer tax considerations.

Preliminary Recommendation. Based on the information presently available, the stock purchase structure as proposed is a sound and appropriate structure for the acquisition of MFW. The stock purchase avoids entity-level taxation of MFW, aligns with the reasonable expectations of the selling stockholders regarding capital gain treatment, and is consistent with customary market practice for acquisitions of C corporations in the software sector. However, we believe that further quantitative modeling of a Section 338(h)(10) election is warranted once MFW's detailed inside tax basis schedules, fixed asset registers, and historical tax returns are obtained through the confirmatory due diligence process. A Section 338(h)(10) election could yield meaningful step-up benefits for the buyer through amortization and depreciation deductions that are not available in a pure stock purchase structure, and the net economic benefit of such an election — after accounting for any incremental tax cost to the selling stockholders and any resulting purchase price gross-up — should be evaluated rigorously.

II. Transaction Overview

A. Structure

The proposed transaction is structured as a stock purchase. AcquisitionCo (Solara Fleet Holdings LLC), a Delaware limited liability company to be formed prior to closing, will acquire one hundred percent (100%) of all issued and outstanding shares of common stock and Series A Preferred Stock of MFW from MFW's stockholders. The Company itself is a Delaware C corporation, incorporated in 2014 under Delaware File Number 5582037, with federal Employer Identification Number 47-3891205.

The aggregate purchase price for all of MFW's equity is $350,000,000, payable in cash at closing (subject to the Holliday rollover described below and customary adjustments for net working capital, transaction expenses, indebtedness, and cash). On a fully diluted basis, including the 650,000 outstanding stock options to be cancelled at closing, the per-share consideration is $35.00. The purchase price is calculated on a cash-free, debt-free basis with a target net working capital amount of $5,800,000, subject to a post-closing true-up mechanism to be negotiated in the definitive Stock Purchase Agreement (the "SPA").

Following the closing of the transaction, MFW will continue its corporate existence as a wholly-owned subsidiary of AcquisitionCo. No merger, conversion, or dissolution of MFW is contemplated as part of the closing mechanics. MFW's contracts, licenses, permits, and other assets and liabilities will remain with the Company by operation of law, as the entity itself is being acquired rather than its individual assets.

B. Capitalization Summary

As of the date of the Letter of Intent, MFW's capitalization on a fully diluted basis is as follows:

Of the 650,000 outstanding stock options, 480,000 are currently vested and 170,000 are unvested. The weighted-average exercise price across all outstanding options is $8.50 per share. All options were granted under the MFW 2016 Stock Incentive Plan (the "Plan"). The classification of these options as incentive stock options ("ISOs") or nonqualified stock options ("NQSOs") has not yet been confirmed and will be determined during diligence upon review of the individual option grant agreements and the Plan document.

The principal stockholders and their respective holdings are summarized as follows:

We note that Pinnacle Bluff Ventures LLC is a Virginia limited liability company that appears to be a venture capital fund. The identity and tax status of Pinnacle Bluff's members will be relevant to the analysis of the Section 338(h)(10) election, as the tax consequences of a deemed asset sale will flow through to those members. We will request additional information regarding Pinnacle Bluff's structure and membership during the diligence process.

C. Financing

The $350,000,000 acquisition is expected to be financed as follows:

(a) Equity Contribution. Fund III will contribute $175,000,000 in cash to AcquisitionCo as an equity contribution. This amount represents fifty percent (50%) of the aggregate enterprise value.

(b) Senior Secured Credit Facility. Ironclad National Bank, N.A. and Ridgeline Commercial Lending Corp. will provide a senior secured credit facility in an aggregate principal amount of $175,000,000, consisting of: (i) a $125,000,000 Term Loan A ("TLA"), to be drawn in full at closing, and (ii) a $50,000,000 Revolving Credit Facility ("RCF"), expected to be undrawn at closing. The terms of the credit facility are set forth in the commitment letter dated February 14, 2026 (reference CL-INB-2026-0214), which has been reviewed by our finance colleagues.

(c) Holliday Rollover. Garrett Holliday will contribute approximately $25,000,000 of his equity value — representing a portion of his MFW stockholdings — into AcquisitionCo in exchange for a membership interest in AcquisitionCo. This rollover reduces the net cash payable to selling stockholders at closing to approximately $325,000,000. The tax treatment of the rollover is analyzed in detail in Section VI of this memorandum.

For purposes of the tax analysis herein, we note that the debt-to-equity ratio at closing (approximately 1:1, based on $175,000,000 in debt against $175,000,000 in equity, plus the $25,000,000 Holliday rollover) is within customary ranges for leveraged buyout transactions and should not give rise to any debt-equity recharacterization concerns. We will, however, review the terms of the credit facility in connection with the tax analysis to confirm proper characterization of the debt instruments and the deductibility of interest payments under Section 163(j) of the Code (business interest expense limitation).

D. Key Dates

The transaction timeline, based on the Letter of Intent signed February 18, 2026, is as follows:

The analysis in this memorandum is preliminary and is based on the information available to us as of the date hereof. We expect to supplement and, as necessary, revise this analysis as additional information is obtained through the diligence process and as the transaction terms are finalized in the definitive SPA.

III. Federal Income Tax Analysis — Stock Purchase vs. Asset Purchase

This section analyzes the principal federal income tax consequences of the proposed transaction under two alternative structures: (a) the stock purchase as currently contemplated, and (b) a hypothetical asset purchase. The comparison is relevant to evaluating the potential benefits of a Section 338(h)(10) election (discussed in Section IV), which would effectively convert the stock purchase into a deemed asset purchase for federal income tax purposes.

A. Stock Purchase Treatment (Current Structure)

Under the current transaction structure, AcquisitionCo (Solara Fleet Holdings LLC) will acquire all of the issued and outstanding shares of MFW common stock and Series A Preferred Stock directly from MFW's stockholders. This is a straightforward stock acquisition and is treated as such for federal income tax purposes. The principal tax consequences are as follows:

For the Buyer. In a stock purchase, the buyer acquires the target's stock, but the target's assets retain their existing (historical) tax basis. AcquisitionCo's tax basis in the acquired MFW stock will equal the aggregate purchase price paid — i.e., $350,000,000 (before adjustment for the Holliday rollover). However, this basis in the MFW stock does not translate into an increased basis in MFW's underlying assets. MFW's assets — including its tangible property, intellectual property, customer relationships, goodwill, and other intangible assets — will continue to have the same inside tax basis they had immediately prior to the closing.

This means that the buyer will not be entitled to amortize or depreciate any portion of the purchase price premium attributable to goodwill or other intangible assets. For a vertical-SaaS business such as MFW, where a substantial majority of the enterprise value is typically attributable to intangible assets (proprietary software, customer relationships, brand, and assembled workforce), the inability to amortize the purchase price premium represents a significant opportunity cost. The premium over the inside net asset basis — which we expect to be substantial — will effectively be "trapped" as basis in the MFW stock and will not produce any tax benefit until AcquisitionCo disposes of its MFW stock at some future date.

MFW's existing tax attributes will carry over in a stock purchase. These attributes include, without limitation, the Company's historical tax basis in its assets, any net operating loss carryforwards ("NOLs"), tax credit carryforwards (including any Section 41 R&D credits), tax method of accounting, and any existing tax positions (whether favorable or unfavorable). MFW will continue to file its own federal corporate income tax returns following the closing, and its taxable year will not be required to close on the closing date (unless a Section 338 election is made). The buyer should be aware that it inherits all of MFW's historical tax positions and potential liabilities, including any unresolved audit issues, underpayments, or exposure items such as the SaaS sales tax exposure discussed in Section VIII.

For the Sellers. In a stock purchase, each selling stockholder recognizes gain (or loss) on the sale of his, her, or its shares equal to the difference between the amount realized ($35.00 per share) and the stockholder's adjusted tax basis in the shares sold. Assuming each stockholder has held his, her, or its MFW shares for more than one year (which we expect to be the case for all principal stockholders, given that MFW was incorporated in 2014 and the Series A Preferred was issued in 2016–2017), the gain will be treated as long-term capital gain. Long-term capital gain for individual taxpayers is currently taxed at a maximum federal rate of 20%, plus the 3.8% net investment income tax imposed by Section 1411 of the Code, for a combined maximum rate of 23.8%. For corporate taxpayers, capital gain is taxed at the regular corporate income tax rate of 21%.

Importantly, in a stock purchase, MFW itself does not recognize any gain or loss. The entity-level tax attributes are simply inherited by the buyer, and the Company continues as a going concern. This feature of the stock purchase structure is generally favorable to selling stockholders, as it avoids the "double tax" that would result from an asset sale by a C corporation (discussed below).

Summary of Key Stock Purchase Characteristics:

• Buyer's outside basis in MFW stock: $350,000,000

• Buyer's inside basis in MFW assets: Unchanged (historical basis)

• Seller gain recognition: Capital gain at stockholder level only; no entity-level tax

• Step-up benefit to buyer: None (absent Section 338(h)(10) election)

• Execution complexity: Relatively straightforward

B. Asset Purchase Treatment (Alternative)

In a hypothetical asset purchase, AcquisitionCo (or a newly formed acquisition subsidiary) would acquire substantially all of MFW's assets — including its intellectual property, customer contracts, software platform, accounts receivable, tangible personal property, and goodwill — directly from MFW as a corporate seller. AcquisitionCo would receive a cost basis (i.e., fair market value) in all acquired assets. The purchase price, plus any liabilities assumed by the buyer, would be allocated among the acquired assets in accordance with the residual method prescribed by Section 1060 of the Code and the corresponding Treasury Regulations (Treas. Reg. § 1.1060-1), which follows the asset classification framework set forth in Treasury Regulation § 1.338-6.

Under the residual method, the purchase price is allocated first to Classes I through VI (cash and cash equivalents, certificates of deposit and actively traded personal property, accounts receivable, inventory, all other tangible and intangible assets not classified as Section 197 intangibles, and Section 197 intangibles other than goodwill and going concern value), with any residual amount allocated to Class VII (goodwill and going concern value). For a vertical-SaaS business like MFW, we would expect a substantial portion of the purchase price to be allocated to the following categories of intangible assets:

• Customer relationships: MFW serves approximately 4,200 active accounts generating approximately $62 million in annual recurring revenue ("ARR"). Customer relationships and associated contract-based intangible assets would be expected to have significant fair market value and would be amortizable over 15 years as Section 197 intangibles.

• Proprietary software platform: The Meridian FleetWorks fleet management and logistics software platform, including the embedded payments module and ELD compliance module, would constitute a significant component of enterprise value. To the extent these assets are characterized as Section 197 intangibles acquired as part of the acquisition of a trade or business, they would be amortizable over 15 years. Alternatively, certain software components may qualify for amortization over shorter useful lives under Section 167 if treated as separately acquired software.

• Trademarks and trade names: The "Meridian FleetWorks" brand name and associated trademarks would be amortizable over 15 years as Section 197 intangibles.

• Assembled workforce: The value of MFW's assembled workforce (to the extent separately identifiable) would be amortizable over 15 years as a Section 197 intangible. However, the IRS has historically taken narrow positions on the valuation of assembled workforce, and this item would need to be supported by a qualified appraisal.

• Residual goodwill and going concern value: Any portion of the purchase price that is not allocable to identified tangible or intangible assets would be allocated to Class VII goodwill and going concern value, which is amortizable over 15 years under Section 197.

The present value of the step-up benefit to the buyer in an asset purchase would depend on the spread between the fair market value of MFW's assets and their current inside tax basis. We do not yet have MFW's detailed fixed asset schedule, intangible asset register, or inside tax basis data, all of which are necessary to perform a quantitative allocation analysis. These materials have been requested through the diligence request list delivered to Hawthorne Kinsey & Alcott LLP (MFW's outside counsel) on February 19, 2026, and are expected to be provided by Glenmore Kessler & Associates PC (MFW's independent auditor) and Marcus Trahan (MFW's Chief Financial Officer).

Disadvantage for Sellers. The principal drawback of an asset purchase structure in the context of an acquisition of a C corporation such as MFW is the imposition of double taxation on the selling stockholders. In an asset sale:

(i) Entity-Level Tax. MFW, as the selling corporation, would recognize gain on the sale of its assets to the extent the consideration received (including liabilities assumed) exceeds MFW's adjusted tax basis in those assets. This gain would be taxed at the federal corporate income tax rate of 21%. Given that a significant portion of MFW's enterprise value is likely attributable to intangible assets with low or zero inside tax basis (particularly internally developed software and self-created goodwill), the entity-level gain could be very substantial.

(ii) Shareholder-Level Tax. Following the asset sale, MFW would be left as a corporate shell holding the after-tax cash proceeds of the sale. To distribute those proceeds to its stockholders, MFW would either make liquidating distributions (which would be taxed as exchange transactions, with stockholders recognizing gain to the extent distributions exceed their stock basis) or make non-liquidating distributions (which would be taxed as dividends to the extent of MFW's earnings and profits). In either case, the stockholders would bear a second level of taxation on the proceeds.

The combined effective tax rate on an asset sale by a C corporation, accounting for both the entity-level and shareholder-level taxes, is significantly higher than the single-level capital gains tax imposed on stockholders in a stock sale. For this reason, selling stockholders of C corporations strongly prefer stock sale structures, and it is generally not feasible to structure an acquisition of a C corporation as an asset purchase unless the buyer is willing to compensate the sellers for the incremental tax cost through a purchase price increase or gross-up.

C. Preliminary Recommendation on Structure

Based on the foregoing analysis, the stock purchase structure as proposed is appropriate for the acquisition of MFW. The stock purchase structure is consistent with the expectations of the selling stockholders (as reflected in the LOI), avoids entity-level taxation of MFW, and provides a clean and efficient closing mechanism. The stock purchase structure also avoids the need to obtain third-party consents for assignment of contracts, licenses, and permits — a practical consideration given the number of customer contracts (approximately 4,200 active accounts) and the potential for anti-assignment provisions in key commercial agreements.

However, we recommend that the Section 338(h)(10) election be evaluated as a mechanism to achieve the economic benefits of an asset purchase (principally the step-up in inside asset basis and resulting amortization/depreciation deductions) while retaining the transactional framework of a stock purchase. This analysis is set forth in Section IV below.

IV. Section 338(h)(10) Election Analysis

A. Overview and Eligibility

Section 338(h)(10) of the Internal Revenue Code permits the buyer and seller(s) in a "qualified stock purchase" (as defined in Section 338(d)(3)) to make a joint election to treat the stock purchase as a deemed asset sale for federal income tax purposes. When a valid Section 338(h)(10) election is made, the actual stock sale is disregarded, and the target is treated as if it had sold all of its assets at fair market value in a single transaction and then liquidated. This deemed transaction generates an "aggregate deemed sale price" ("ADSP") that serves as the basis for allocating the purchase price among the target's assets.

The primary effect of the election is to provide the buyer with a stepped-up basis in the target's assets equal to the ADSP — the same result that would be achieved in an actual asset purchase — while preserving the transactional mechanics of a stock purchase. The election is particularly advantageous in acquisitions where the target's inside tax basis in its assets is substantially lower than the purchase price, as is commonly the case with software and technology companies whose most valuable assets (Intellectual property, customer relationships, and goodwill) are often internally developed and have little or no tax basis.

Qualified Stock Purchase Requirement. A Section 338(h)(10) election is available only in connection with a "qualified stock purchase" as defined in Section 338(d)(3). A qualified stock purchase requires that a "purchasing corporation" acquire at least eighty percent (80%) of the total voting power and at least eighty percent (80%) of the total value of the stock of the target by "purchase" (as defined in Section 338(h)(3)) within a twelve-month acquisition period. In the proposed transaction, AcquisitionCo will acquire one hundred percent (100%) of all issued and outstanding MFW stock in a single transaction, which clearly satisfies the eighty percent threshold.

Joint Election Requirement. Critically, the Section 338(h)(10) election is a joint election that requires the consent of both the buyer and the seller(s). In the case of a standalone C corporation such as MFW (i.e., one that is not a member of a consolidated group or an S corporation), the election is made jointly by the purchasing corporation and the selling stockholders. Under Treasury Regulation § 1.338(h)(10)-1(c), all selling stockholders must consent to the election. This means that Pinnacle Bluff Ventures LLC (34.0%), Garrett Holliday (32.0%), Diana Vasquez-Park (18.0%), and all other stockholders must agree to the election as a condition of its validity. Given that the election may result in adverse tax consequences for certain sellers (as discussed below), obtaining this consent may require negotiation and potentially a purchase price adjustment.

Purchasing Corporation Qualification. Section 338(h)(10) requires that the acquirer be a "purchasing corporation." AcquisitionCo is a Delaware LLC. For federal income tax purposes, a multi-member LLC is classified by default as a partnership, not a corporation. A partnership cannot be a "purchasing corporation" under Section 338. However, if AcquisitionCo is a single-member LLC owned by Fund III (itself a partnership), AcquisitionCo would be treated as a disregarded entity for federal income tax purposes, and Fund III would be treated as the purchaser. Fund III is also a partnership, which again cannot serve as a "purchasing corporation."

To address this structural issue, one of the following approaches may be required:

(i) Interposed Corporate Subsidiary. AcquisitionCo could form a wholly-owned corporate subsidiary (a C corporation or an entity that elects to be treated as a corporation under the "check-the-box" regulations) to serve as the actual purchasing corporation for Section 338(h)(10) purposes. MFW stock would be acquired by this corporate subsidiary rather than by AcquisitionCo directly.

(ii) Check-the-box Election for AcquisitionCo. AcquisitionCo could file a Form 8832 (Entity Classification Election) to elect to be treated as an association taxable as a corporation for federal income tax purposes. However, this approach may have adverse consequences for the overall fund structure and the tax treatment of the Holliday rollover (which relies on AcquisitionCo being treated as a partnership — see Section VI). This approach is therefore likely not viable.

(iii) Alternative Structural Approaches. Treasury Regulation § 1.338(h)(10)-1(c) contains specific provisions addressing the availability of the election for various target types (consolidated group members, S corporations, and standalone C corporations). For a standalone C corporation that is the target of a Section 338(h)(10) election, the regulation requires the consent of both the purchasing corporation and the selling stockholders. We need to confirm, through further structural analysis, the precise mechanism by which an entity in the Solara fund structure can qualify as the purchasing corporation.

We will resolve this structural question as part of the detailed Section 338(h)(10) modeling to be conducted once MFW's asset and tax basis data is received.

B. Tax Consequences of Section 338(h)(10) Election

For the Buyer. If a valid Section 338(h)(10) election is made, AcquisitionCo (or the interposed purchasing corporation) would be treated as having acquired MFW's assets at fair market value rather than having acquired MFW's stock. The stepped-up basis in MFW's assets would equal the "aggregate deemed sale price" or ADSP, which is generally calculated as the sum of (a) the grossed-up amount realized on the sale of recently purchased target stock, and (b) the target's liabilities (including liabilities to which assets are subject and other liabilities, as well as the tax liability arising from the deemed sale itself).

The ADSP is allocated among MFW's assets in accordance with the residual method under Section 1060 and Treasury Regulation § 1.338-6, following the seven-class hierarchy:

• Class I: Cash and cash equivalents

• Class II: Actively traded personal property, certificates of deposit, and foreign currency

• Class III: Accounts receivable, mortgages, and credit card receivables

• Class IV: Inventory

• Class V: All assets not classified in Classes I, II, III, IV, VI, or VII (including furniture, fixtures, equipment, and land)

• Class VI: Section 197 intangibles other than goodwill and going concern value (including customer-based intangibles, supplier-based intangibles, workforce in place, licenses, permits, covenants not to compete, franchises, trademarks, and trade names, as well as computer software to the extent treated as a Section 197 intangible)

• Class VII: Goodwill and going concern value (residual)

For MFW, as a vertical-SaaS business with approximately $62 million in ARR generated from approximately 4,200 active accounts, we would expect a very substantial portion of the ADSP to be allocated to Class VI (Section 197 intangibles — principally customer relationships and proprietary software) and Class VII (goodwill and going concern value). These intangible assets are amortizable on a straight-line basis over fifteen (15) years for federal income tax purposes under Section 197. The stepped-up basis in tangible depreciable assets (Class V — primarily computer equipment, servers, office furniture, and leasehold improvements) would be recoverable through accelerated depreciation, potentially including bonus depreciation to the extent available under current law.

The present value of the incremental amortization and depreciation deductions resulting from the step-up would constitute a significant economic benefit to the buyer. The magnitude of this benefit depends on the spread between the fair market value and the inside tax basis of MFW's assets. Given that MFW's most valuable assets are likely to be internally developed software and self-created goodwill — assets that typically have little or no tax basis — the spread could be very substantial. However, a precise quantification requires detailed information that we do not yet possess, including MFW's fixed asset schedule, depreciation schedules, and inside tax basis data.

For the Sellers. When a Section 338(h)(10) election is made for a standalone C corporation, the actual stock sale is disregarded, and the target is treated as if it had sold all of its assets at fair market value in a single transaction and then distributed the after-tax proceeds to its stockholders in complete liquidation. The selling stockholders are treated as having received liquidating distributions from the target rather than as having sold their stock.

The key consequence for sellers is that the character and amount of gain recognized may differ from a pure stock sale in several important respects:

(i) Entity-Level Gain Recognition. MFW would be treated as having recognized gain on the deemed sale of its assets. This deemed entity-level gain would include ordinary income to the extent of depreciation recapture under Sections 1245 and 1250, as well as any other items that would be characterized as ordinary income in an actual asset sale.

(ii) Single Level of Tax. Despite the deemed entity-level gain recognition, the Section 338(h)(10) election provides a mechanism to achieve a single level of tax. Under Treasury Regulation § 1.338(h)(10)-1(d)(5), the selling stockholders are treated as if the target had sold its assets and then distributed the proceeds in complete liquidation. The amount realized by the selling stockholders on the deemed liquidating distribution is determined by reference to the net proceeds after payment of the entity-level tax. The stockholders recognize gain or loss on the deemed liquidating distribution equal to the difference between the amount deemed distributed and their adjusted stock basis.

(iii) Character of Gain. In a pure stock sale, the gain recognized by selling stockholders is capital gain. In a Section 338(h)(10) scenario, the overall gain recognized by the selling stockholders on the deemed liquidating distribution is generally capital gain (since the liquidating distribution is treated as an exchange under Section 331). However, the entity-level tax on the deemed asset sale effectively reduces the net amount distributed to stockholders, and to the extent the deemed asset sale generates ordinary income at the entity level (e.g., from depreciation recapture), that ordinary income reduces the amount available for distribution and indirectly reduces the stockholders' capital gain.

(iv) Net Effect on Sellers. The net amount received by selling stockholders under a Section 338(h)(10) election is generally less favorable than under a pure stock sale, because the deemed entity-level tax on the asset sale reduces the proceeds available for distribution. For this reason, sellers typically resist a Section 338(h)(10) election unless the buyer compensates them for the incremental tax cost.

C. Impact on Key Seller Constituencies

The tax impact of a Section 338(h)(10) election would affect each seller constituency differently:

Pinnacle Bluff Ventures LLC (34.0%). Pinnacle Bluff is a Virginia limited liability company and, assuming it is treated as a partnership for federal income tax purposes, the tax consequences of the transaction — including any incremental ordinary income component from a deemed asset sale — would flow through to Pinnacle Bluff's members. If the members include tax-exempt entities (e.g., pension funds, endowments, or other institutional investors) or foreign investors, the character of the income may have additional implications, including potential unrelated business taxable income ("UBTI") concerns and withholding tax obligations. An increased ordinary income component resulting from a Section 338(h)(10) election could be adverse for these member categories. Pinnacle Bluff will likely resist the election absent a meaningful purchase price gross-up or other economic concession.

Garrett Holliday (32.0%). As an individual taxpayer, Mr. Holliday would be adversely affected by any increase in the ordinary income component of his gain. The differential between the maximum ordinary income rate (37%, plus the 3.8% net investment income tax, for a combined rate of 40.8%) and the maximum long-term capital gains rate (20%, plus the 3.8% net investment income tax, for a combined rate of 23.8%) is approximately 17 percentage points — a material difference on a gain of Mr. Holliday's magnitude. In addition, Mr. Holliday is rolling over $25,000,000 of equity value into AcquisitionCo, and the interaction between the rollover and the Section 338(h)(10) deemed sale treatment requires careful analysis, as discussed further in Section VI. Specifically, if the election is made, the rollover shares may be treated as having been sold in the deemed asset sale, potentially triggering gain recognition on the rollover portion that would otherwise have been deferred under Section 721.

Diana Vasquez-Park (18.0%). Ms. Vasquez-Park is an individual taxpayer residing in Austin, Texas, which does not impose a state individual income tax. The federal tax considerations are similar to those applicable to Mr. Holliday, including the adverse impact of any increased ordinary income component. However, the absence of a Texas state income tax modestly reduces the overall incremental tax burden of a Section 338(h)(10) election for Ms. Vasquez-Park as compared with Mr. Holliday (who resides in Virginia and is subject to Virginia individual income tax at a top rate of 5.75%).

Option Holders. The treatment of option cash-out proceeds in a Section 338(h)(10) scenario may differ from the treatment in a pure stock sale, depending on the classification of the options (ISO vs. NQSO) and the timing of the cash-out relative to the deemed sale. This issue is addressed in Section VII below.

D. Negotiation Considerations

If the detailed quantitative analysis indicates that a Section 338(h)(10) election would produce a net benefit to the buyer after accounting for any required gross-up payment to sellers, the election should be raised as a negotiation point with the sellers and their counsel, Hawthorne Kinsey & Alcott LLP ("HKA"). The following considerations will be relevant to the negotiation:

(i) Buyer's Benefit. The buyer's benefit from the election is the present value of the incremental amortization and depreciation deductions generated by the step-up in asset basis. For a $350 million acquisition of a SaaS company, the step-up benefit could be very substantial — potentially in the range of tens of millions of dollars on a present value basis — depending on the spread between the purchase price and MFW's inside asset basis and the buyer's discount rate.

(ii) Sellers' Incremental Cost. The sellers' incremental cost is the difference between (a) the aggregate tax liability of the sellers under a Section 338(h)(10) election (including the deemed entity-level tax on the asset sale and the shareholder-level tax on the deemed liquidating distribution) and (b) the aggregate tax liability of the sellers in a pure stock sale (shareholder-level capital gains tax only).

(iii) Net Benefit and Sharing Mechanism. If the buyer's benefit exceeds the sellers' incremental cost, there is a net benefit to be shared. A common approach is for the buyer to share a portion of the step-up benefit with the sellers through a purchase price increase or gross-up payment, typically calculated to leave the sellers in the same or better after-tax position as they would have been in under a pure stock sale. The LOI purchase price of $350,000,000 is currently fixed, and any gross-up would need to be negotiated as part of the definitive SPA.

(iv) Timing. The election must be agreed upon and documented before the SPA is executed. We recommend that the election concept not be raised with HKA until our internal modeling confirms that the net benefit justifies the negotiation.

E. Further Analysis Required

In order to complete the Section 338(h)(10) analysis, the following information and actions are required:

(a) Obtain MFW's federal and state income tax returns for fiscal years 2022 through 2025 (and, if available, earlier years).

(b) Obtain MFW's detailed fixed asset schedule, including the cost basis, accumulated depreciation, and net book value of all tangible and intangible assets, as well as the Company's inside tax basis in each asset category. This information should be available from Glenmore Kessler & Associates PC (MFW's independent auditor) and from Marcus Trahan (MFW's CFO).

(c) Perform a quantitative allocation of the ADSP across the seven asset classes under the residual method, based on the fair market values of MFW's assets. This analysis may require engagement of a qualified independent valuation firm to prepare or support the allocation.

(d) Calculate the present value of the incremental amortization and depreciation deductions available to the buyer under the stepped-up basis, using an appropriate discount rate.

(e) Calculate the incremental tax cost to each seller class (Pinnacle Bluff, Holliday, Vasquez-Park, Trahan, other individual stockholders, and option holders) under the Section 338(h)(10) election as compared with a pure stock sale.

(f) Confirm the structural eligibility of the purchasing corporation, including resolution of the disregarded entity issue described in Section IV.A above.

(g) Assess the interaction between the Section 338(h)(10) election and the Holliday rollover, including whether the rollover can be structured to preserve Section 721 deferral in a 338(h)(10) scenario.

Recommendation. We recommend proceeding with the stock purchase as the base-case transaction structure while commissioning detailed Section 338(h)(10) election modeling as soon as MFW's asset and tax basis data is received during the diligence process. We will coordinate with Whitmore Sandoval Group LLC (Daniel Ostroff, CPA, engagement lead) on the quantitative modeling workstream. The election concept should not be raised with Hawthorne Kinsey & Alcott LLP until our internal modeling confirms that the net benefit to the transaction justifies the negotiation and any potential delay or complication in the SPA process.

V. State and Local Tax Considerations

A. Delaware

MFW is incorporated in the State of Delaware. As a Delaware corporation, MFW is subject to the Delaware annual franchise tax, which is calculated under either the authorized shares method or the assumed par value capital method, at MFW's election. We should confirm through diligence that MFW's Delaware franchise tax has been paid in full and that the Company is in good standing with the Delaware Division of Corporations.

Delaware does not impose a corporate income tax on corporations that do not conduct business within the State of Delaware. Based on our understanding that MFW's operations are conducted primarily in Virginia, Texas, and Idaho, and that MFW does not have offices, employees, or other significant physical presence in Delaware (other than its registered agent for service of process), MFW should not be subject to Delaware corporate income tax. We will confirm this understanding during diligence.

With respect to the stock purchase transaction itself, Delaware does not impose a stock transfer tax or capital gains tax on sales of stock of Delaware corporations. Accordingly, the transaction will not give rise to any Delaware transfer tax liability.

AcquisitionCo (Solara Fleet Holdings LLC) is to be formed as a Delaware limited liability company. As a Delaware LLC, AcquisitionCo will be subject to the annual Delaware LLC tax of $300, payable on or before June 1 of each year. No other Delaware-specific tax consequences are anticipated in connection with the formation of AcquisitionCo or the closing of the transaction.

B. Virginia

MFW is headquartered in McLean, Virginia, at 8750 Westpark Drive, Suite 600, McLean, VA 22102, and conducts substantial business operations in the Commonwealth of Virginia. Virginia imposes a corporate income tax at a flat rate of six percent (6%) on Virginia-apportioned taxable income. MFW is expected to be a Virginia corporate income tax filer, and we will confirm its Virginia filing history and compliance status during diligence.

In the stock purchase as currently structured, MFW will continue as a Virginia taxpayer following the closing, with no change in its Virginia tax attributes. The stock purchase itself does not trigger any Virginia corporate income tax liability for MFW, as MFW does not recognize gain or loss on the sale of its stock.

If a Section 338(h)(10) election is made, the deemed asset sale could trigger Virginia corporate income tax on MFW's deemed gain at the entity level. Virginia generally conforms to the federal treatment of Section 338(h)(10) elections, meaning that the deemed asset sale would be recognized for Virginia corporate income tax purposes. The Virginia corporate income tax on the deemed gain must be incorporated into the cost-benefit analysis of the Section 338(h)(10) election. Because Virginia's corporate income tax rate is 6%, the incremental Virginia tax on the deemed gain could be a significant cost factor, depending on the amount of gain apportioned to Virginia.

Virginia does not impose a stock transfer tax on sales of stock. Accordingly, no Virginia transfer tax is applicable to the stock purchase.

With respect to individual selling stockholders who are Virginia residents, we note that Garrett Holliday resides in McLean, Virginia. Virginia imposes an individual income tax at graduated rates up to a top rate of 5.75% (applicable to income in excess of $17,000). Mr. Holliday will be subject to Virginia individual income tax on his capital gain from the sale of his MFW shares (cash-out portion), as well as on his allocable share of any income from AcquisitionCo following the closing (in his capacity as a member of AcquisitionCo pursuant to the rollover). Virginia generally conforms to the federal treatment of Section 721 contributions to partnerships, and accordingly the Holliday rollover should not trigger Virginia income tax at the time of the contribution.

C. Texas

MFW maintains offices in Austin, Texas, at 301 Congress Avenue, Suite 1400, Austin, TX 78701. Diana Vasquez-Park, co-founder and the second-largest individual stockholder, resides in Austin, Texas.

Texas does not impose an individual income tax. This is a favorable factor for Ms. Vasquez-Park, who will not be subject to any Texas state income tax on her gain from the sale of her MFW shares.

Texas does impose a franchise tax (commonly referred to as the "margin tax") on entities doing business in Texas. The Texas margin tax rate is 0.375% for entities that qualify as wholesalers or retailers and 0.75% for all other entities, calculated on the entity's Texas-apportioned "taxable margin" (the lesser of 70% of total revenue, total revenue minus cost of goods sold, total revenue minus total compensation, or $1 million). MFW's Texas margin tax liability should be reviewed during diligence to confirm compliance and to assess the ongoing post-closing obligation.

If a Section 338(h)(10) election is made at the federal level, the impact on MFW's Texas franchise tax computation requires careful analysis. Texas does not fully conform to the federal treatment of Section 338(h)(10) elections for purposes of the Texas margin tax. Unlike a traditional state corporate income tax that starts with federal taxable income (which would incorporate the deemed asset sale gain), the Texas margin tax is based on total revenue as reported on the entity's federal income tax return (Form 1120). The interaction between the federal deemed asset sale and the Texas margin tax base is not straightforward, and we need to verify how Texas treats the deemed sale proceeds for margin tax purposes. This analysis will be included in our detailed Section 338(h)(10) modeling.

We also note that TerraLink Logistics, Inc., identified as MFW's largest customer at approximately $3,800,000 in ARR, is a Texas corporation. This fact does not have a direct tax impact on the proposed transaction but is relevant to the Texas nexus and apportionment analysis for both income tax and sales tax purposes.

D. Idaho

MFW maintains offices in Boise, Idaho, at 950 West Bannock Street, Suite 210, Boise, ID 83702. Idaho imposes a corporate income tax at a rate of 5.8% (as of current law) on Idaho-apportioned taxable income. Idaho generally conforms to the federal income tax treatment, including the treatment of Section 338(h)(10) elections.

In the stock purchase as currently structured, MFW will continue as an Idaho corporate income tax filer following the closing, with no immediate Idaho tax consequences. If a Section 338(h)(10) election is made, the Idaho-apportioned portion of MFW's deemed asset sale gain would be subject to Idaho corporate income tax at 5.8%. The Idaho apportionment factors (which may include single-factor sales apportionment or a multi-factor formula, depending on current Idaho law) will need to be reviewed as part of the cost-benefit analysis.

Idaho does not impose a stock transfer tax, and accordingly no Idaho transfer tax is applicable to the stock purchase.

E. State Tax Summary

We recommend obtaining MFW's state income tax returns for all filing states — at a minimum Delaware, Virginia, Texas, and Idaho — for fiscal years 2022 through 2025 as part of the tax diligence workstream. In addition, we should obtain a list of all states in which MFW currently files or has historically filed income, franchise, or similar entity-level tax returns, as well as any states in which MFW has received notices asserting nexus or filing obligations.

Any states where MFW has nexus for SaaS sales tax purposes (as discussed in Section VIII below) may also create income tax filing obligations, particularly in light of the trend among states toward asserting economic nexus for income tax purposes based on criteria similar to those established for sales tax purposes in South Dakota v. Wayfair, Inc., 585 U.S. 162 (2018). We will coordinate with the Whitmore Sandoval Group LLC findings on the SaaS sales tax exposure to ensure a comprehensive view of MFW's multi-state tax compliance posture.

VI. Treatment of Holliday Rollover Equity ($25,000,000)

A. Structure of Rollover

As contemplated by the LOI, Garrett Holliday will contribute a portion of his equity consideration — approximately $25,000,000 in value — to Solara Fleet Holdings LLC (AcquisitionCo) in exchange for a membership interest in AcquisitionCo. The rollover represents approximately 7.14% of the $350,000,000 aggregate deal value.

Mr. Holliday currently holds 2,800,000 shares of MFW common stock and 400,000 shares of MFW Series A Preferred Stock, for a total of 3,200,000 shares. At the per-share price of $35.00, Mr. Holliday's gross equity value is $112,000,000. Of this amount, approximately $25,000,000 will be contributed (or "rolled over") into AcquisitionCo, and approximately $87,000,000 will be received as cash at closing (before adjustments for escrow holdback, Mr. Holliday's proportionate share of transaction expenses, and any other deductions contemplated by the SPA). The specific shares (common stock, Series A Preferred Stock, or a combination) to be contributed to AcquisitionCo in connection with the rollover will need to be identified in the Rollover Agreement.

B. Federal Tax Treatment

The Holliday rollover is intended to be structured as a tax-deferred contribution under Section 721 of the Internal Revenue Code. Section 721(a) provides that, as a general rule, no gain or loss shall be recognized to a partnership or to any of its partners in the case of a contribution of property to a partnership in exchange for an interest in the partnership.

AcquisitionCo (Solara Fleet Holdings LLC) is a Delaware limited liability company. Assuming that AcquisitionCo is classified as a partnership for federal income tax purposes — which is the default classification for a multi-member LLC under the "check-the-box" regulations (Treas. Reg. § 301.7701-3), and which we expect will apply once Mr. Holliday becomes a member alongside Fund III — Section 721 should apply to Mr. Holliday's contribution of MFW shares (or a constructive interest therein) to AcquisitionCo in exchange for a membership interest.

Under Section 721, Mr. Holliday would not recognize any gain or loss on the portion of his MFW shares contributed to AcquisitionCo in connection with the rollover. The gain inherent in the contributed shares would be deferred, not eliminated — it would be recognized at a later date when Mr. Holliday sells or otherwise disposes of his AcquisitionCo membership interest, or when AcquisitionCo sells its MFW shares (or, following a future disposition of MFW's assets, distributes the proceeds to its members).

Mr. Holliday's tax basis in his AcquisitionCo membership interest would be equal to his carryover basis in the contributed MFW shares, as determined under Section 722 of the Code. Similarly, AcquisitionCo's basis in the contributed MFW shares would be equal to Mr. Holliday's carryover basis in those shares, as determined under Section 723 of the Code.

Disguised Sale Risk. An important consideration in structuring the rollover is the potential application of the disguised sale rules under Section 707(a)(2)(B) of the Code and the corresponding Treasury Regulations (Treas. Reg. § 1.707-3 through § 1.707-9). Under these rules, if a partner contributes property to a partnership and receives a distribution from the partnership within two years of the contribution (or vice versa), the contribution and distribution may be recharacterized as a disguised sale of the contributed property. If the disguised sale rules apply, Mr. Holliday would be treated as having sold the contributed MFW shares to AcquisitionCo for the amount of the distribution, and the tax deferral otherwise available under Section 721 would be lost.

In the context of the Holliday rollover, the primary risk is that distributions from AcquisitionCo to Mr. Holliday within two years of the rollover contribution could be recharacterized as purchase price payments for the contributed MFW shares. This risk is mitigated if any distributions to Mr. Holliday during the two-year period are proportionate to his ownership interest in AcquisitionCo (i.e., made to all members in proportion to their interests, including Fund III). However, we must carefully structure any post-closing distribution provisions in the AcquisitionCo operating agreement to avoid triggering the disguised sale presumption. We will address this issue in detail in the Rollover Agreement and the AcquisitionCo LLC Agreement.

Interaction with Section 338(h)(10) Election. If the parties ultimately elect to make a Section 338(h)(10) election, the interaction with the Holliday rollover is complex and must be carefully analyzed. Under the Section 338(h)(10) election, MFW is treated as having sold all of its assets and liquidated. The rollover shares contributed by Mr. Holliday to AcquisitionCo would be deemed sold as part of the stock purchase that triggers the 338(h)(10) deemed sale. In this scenario, the Section 721 deferral on the rollover contribution may be partially or wholly overridden by the 338(h)(10) mechanics, because the selling stockholders (including Mr. Holliday) are treated as receiving liquidating distributions from MFW — not as contributing their shares to AcquisitionCo in a tax-deferred transaction. The structural ordering of the rollover vis-à-vis the stock purchase closing, and the specific mechanics of the Section 338(h)(10) deemed sale, would need to be carefully designed to minimize adverse consequences.

This interaction is one of the most complex structural issues in the transaction and will require detailed modeling once MFW's asset and tax basis data is available.

C. Partial Disposition — Cash vs. Rollover

Mr. Holliday's MFW shares that are not contributed to AcquisitionCo (the "cash-out portion") will be sold to AcquisitionCo in the stock purchase for cash. The gain on the cash-out portion is straightforward: Mr. Holliday will recognize capital gain (long-term, assuming he has held his MFW shares for more than one year) equal to the per-share price of $35.00 less his adjusted tax basis in the shares sold.

It is important that the allocation between the cash-out portion and the rollover portion be clearly documented in the Rollover Agreement and the SPA. The documentation should specify which shares (or fractions thereof) are being contributed to AcquisitionCo in exchange for the membership interest and which shares are being sold for cash. This allocation will determine the tax treatment of each component and must be supported by the economic substance of the transaction.

We will need to obtain from Mr. Holliday (or his personal counsel or accountant) the specific adjusted tax basis in each class of his shares — MFW common stock and Series A Preferred Stock — as the basis may differ due to different acquisition dates and acquisition costs. If the Series A Preferred Stock was acquired at a different price per share than the common stock, the allocation between shares sold for cash and shares contributed to AcquisitionCo will affect the amount and timing of gain recognition.

D. State Tax Treatment

Virginia. Mr. Holliday is a resident of McLean, Virginia. Virginia will tax the capital gain recognized on the cash-out portion of Mr. Holliday's shares at the applicable Virginia individual income tax rate (top rate of 5.75%). Virginia generally conforms to the federal treatment of contributions to partnerships under Section 721, and accordingly the rollover contribution should not trigger Virginia income tax at the time of the contribution. Mr. Holliday should confirm this treatment with his personal Virginia tax advisor.

Following the closing, Mr. Holliday will be a member of AcquisitionCo and will be allocated his distributive share of AcquisitionCo's income (or loss) under the AcquisitionCo LLC Agreement. Because AcquisitionCo will own MFW, which operates in multiple states (Virginia, Texas, Idaho, and potentially others), Mr. Holliday may have multi-state individual income tax filing obligations with respect to his allocable share of AcquisitionCo/MFW income. This is a standard consequence of membership in a partnership that owns a multi-state business and should be addressed in Mr. Holliday's post-closing tax planning.

VII. Option Cash-Out Tax Treatment

A. Overview

MFW has 650,000 stock options outstanding under the MFW 2016 Stock Incentive Plan, consisting of 480,000 vested options and 170,000 unvested options. The weighted-average exercise price across all outstanding options is $8.50 per share.

At closing, all outstanding options are expected to be cancelled in exchange for a cash payment to each option holder equal to $35.00 per share (the per-share merger consideration) less the applicable per-share exercise price. Based on the weighted-average exercise price of $8.50 per share, the weighted-average net spread per option is $26.50. The aggregate net proceeds payable to option holders are estimated at:

($35.00 − $8.50) × 650,000 options = $17,225,000

The aggregate exercise price that is either forfeited by the option holders or deemed paid upon cancellation is:

$8.50 × 650,000 options = $5,525,000

B. Characterization — ISOs vs. NQSOs

The federal income tax treatment of the option cash-out depends critically on whether the options are classified as incentive stock options ("ISOs") under Section 422 of the Code or as nonqualified stock options ("NQSOs"). We have not yet reviewed the individual option grant agreements or the MFW 2016 Stock Incentive Plan document, and accordingly the classification of MFW's outstanding options has not been confirmed. This information has been requested through the diligence request list. We anticipate that the options may include a mix of ISOs and NQSOs, as is common for technology companies.

NQSOs. If the options are NQSOs, the cash-out payment received by each option holder at closing is treated as ordinary compensation income in the amount of the spread ($35.00 per share less the applicable exercise price). MFW (or AcquisitionCo, as successor employer) is required to withhold applicable income and employment taxes from the cash-out payment, including federal income tax withholding, the employee's share of FICA taxes (Social Security and Medicare), and applicable state income tax withholding. MFW is also required to pay the employer's share of FICA taxes on the compensation amount, as well as any applicable federal and state unemployment taxes (FUTA and SUTA).

MFW receives a corresponding compensation deduction under Section 83(h) of the Code equal to the amount of ordinary income recognized by the option holder, subject to the limitations of Sections 162 and 280G. This deduction reduces MFW's taxable income for the year that includes the closing date and may generate a meaningful tax benefit.

ISOs. If the options are ISOs and the option holders have satisfied the required holding periods (the shares must be held for more than two years after the option grant date and more than one year after the exercise date), the disposition of the shares (or, in this case, the cancellation of the options in exchange for cash) would qualify for capital gain treatment on the excess of the proceeds over the exercise price. However, a cash-out at closing in connection with a change of control typically constitutes a "disqualifying disposition" because the option holders never actually exercise the ISOs and hold the shares for the required periods. In a disqualifying disposition, the gain on the ISO exercise is treated as ordinary income to the same extent as if the option had been an NQSO.

As a practical matter, therefore, the cash-out of options at closing — whether ISOs or NQSOs — is likely to result in ordinary income treatment for the option holders in most circumstances. However, we will confirm the specific facts applicable to each option holder upon review of the grant documentation.

Compensation Deduction. The compensation deduction available to MFW on the option cash-out — whether the options are NQSOs or ISOs that are su

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 277 Park Avenue, 45th Floor New York, New York 10172
Telephone: (212) 558-4000 Facsimile: (212) 558-3588 www.calderwoodharkness.com
MEMORANDUM
Date: February 20, 2026
To: James Prentice, Partner, Calderwood & Harkness LLP Claire Nakamura, Partner & Head of Software Investing, Solara Digital Infrastructure LP
From: Sylvia Hartwell, Partner (Tax), Calderwood & Harkness LLP
Re: Preliminary Tax Structure Analysis — Proposed Acquisition of Meridian FleetWorks, Inc. (Project Trident)
Matter No.: 1041-00004
Engagement Reference: 1041-00004
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I. Executive Summary
Calderwood & Harkness LLP has been engaged by Solara Digital Infrastructure LP ("Solara" or the "Sponsor") to advise on all legal aspects of the proposed acquisition by Solara Fleet Holdings LLC ("AcquisitionCo"), a newly formed Delaware limited liability company and wholly-owned subsidiary of Solara Fund III, LP ("Fund III"), of one hundred percent (100%) of the issued and outstanding equity of Meridian FleetWorks, Inc. ("MFW" or the "Company"), a Delaware corporation. The aggregate enterprise value of the proposed transaction is Three Hundred Fifty Million Dollars ($350,000,000) on a cash-free, debt-free basis with a customary net working capital adjustment mechanism, with a target net working capital of Five Million Eight Hundred Thousand Dollars ($5,800,000).
The transaction as currently contemplated is structured as a stock purchase. AcquisitionCo will acquire all of the 7,850,000 shares of issued and outstanding common stock and all 1,500,000 shares of issued and outstanding Series A Preferred Stock of MFW from all stockholders of the Company. In addition, 650,000 outstanding stock options held by various employees and executives under the MFW 2016 Stock Incentive Plan will be cancelled at closing in exchange for cash payments equal to the per-share merger consideration less the applicable exercise price. The aggregate purchase price implies a fully diluted per-share price of $35.00, calculated on the basis of 10,000,000 fully diluted shares outstanding.
The transaction will be financed through a combination of (a) a $175,000,000 equity contribution from Fund III, and (b) a $175,000,000 senior secured credit facility provided by Ironclad National Bank, N.A. and Ridgeline Commercial Lending Corp., consisting of a $125,000,000 Term Loan A tranche and a $50,000,000 Revolving Credit Facility. Garrett Holliday, the co-founder and Chief Executive Officer of MFW, who holds approximately 32.0% of MFW's equity on a fully diluted basis, has agreed to roll over approximately $25,000,000 of his equity value into AcquisitionCo, thereby reducing the net cash payable to selling stockholders at closing to approximately $325,000,000.
This memorandum provides a preliminary analysis of the principal federal, state, and local tax considerations arising from the proposed transaction. Specifically, this memorandum addresses: (a) the federal income tax treatment of the transaction under the current stock purchase structure as compared with an alternative asset purchase structure; (b) the potential benefits and costs of a joint election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"); (c) state and local income and franchise tax considerations in the principal jurisdictions implicated by the transaction (Delaware, Virginia, Texas, and Idaho); (d) the federal and state income tax treatment of the Holliday rollover equity contribution; (e) the tax treatment of the cash-out of outstanding stock options under the MFW 2016 Stock Incentive Plan; (f) the Company's potential exposure to sales and use taxes on its SaaS revenues; and (g) transfer tax considerations.
Preliminary Recommendation. Based on the information presently available, the stock purchase structure as proposed is a sound and appropriate structure for the acquisition of MFW. The stock purchase avoids entity-level taxation of MFW, aligns with the reasonable expectations of the selling stockholders regarding capital gain treatment, and is consistent with customary market practice for acquisitions of C corporations in the software sector. However, we believe that further quantitative modeling of a Section 338(h)(10) election is warranted once MFW's detailed inside tax basis schedules, fixed asset registers, and historical tax returns are obtained through the confirmatory due diligence process. A Section 338(h)(10) election could yield meaningful step-up benefits for the buyer through amortization and depreciation deductions that are not available in a pure stock purchase structure, and the net economic benefit of such an election — after accounting for any incremental tax cost to the selling stockholders and any resulting purchase price gross-up — should be evaluated rigorously.
II. Transaction Overview
A. Structure
The proposed transaction is structured as a stock purchase. AcquisitionCo (Solara Fleet Holdings LLC), a Delaware limited liability company to be formed prior to closing, will acquire one hundred percent (100%) of all issued and outstanding shares of common stock and Series A Preferred Stock of MFW from MFW's stockholders. The Company itself is a Delaware C corporation, incorporated in 2014 under Delaware File Number 5582037, with federal Employer Identification Number 47-3891205.
The aggregate purchase price for all of MFW's equity is $350,000,000, payable in cash at closing (subject to the Holliday rollover described below and customary adjustments for net working capital, transaction expenses, indebtedness, and cash). On a fully diluted basis, including the 650,000 outstanding stock options to be cancelled at closing, the per-share consideration is $35.00. The purchase price is calculated on a cash-free, debt-free basis with a target net working capital amount of $5,800,000, subject to a post-closing true-up mechanism to be negotiated in the definitive Stock Purchase Agreement (the "SPA").
Following the closing of the transaction, MFW will continue its corporate existence as a wholly-owned subsidiary of AcquisitionCo. No merger, conversion, or dissolution of MFW is contemplated as part of the closing mechanics. MFW's contracts, licenses, permits, and other assets and liabilities will remain with the Company by operation of law, as the entity itself is being acquired rather than its individual assets.
B. Capitalization Summary
As of the date of the Letter of Intent, MFW's capitalization on a fully diluted basis is as follows:
Of the 650,000 outstanding stock options, 480,000 are currently vested and 170,000 are unvested. The weighted-average exercise price across all outstanding options is $8.50 per share. All options were granted under the MFW 2016 Stock Incentive Plan (the "Plan"). The classification of these options as incentive stock options ("ISOs") or nonqualified stock options ("NQSOs") has not yet been confirmed and will be determined during diligence upon review of the individual option grant agreements and the Plan document.
The principal stockholders and their respective holdings are summarized as follows:
We note that Pinnacle Bluff Ventures LLC is a Virginia limited liability company that appears to be a venture capital fund. The identity and tax status of Pinnacle Bluff's members will be relevant to the analysis of the Section 338(h)(10) election, as the tax consequences of a deemed asset sale will flow through to those members. We will request additional information regarding Pinnacle Bluff's structure and membership during the diligence process.
C. Financing
The $350,000,000 acquisition is expected to be financed as follows:
(a) Equity Contribution. Fund III will contribute $175,000,000 in cash to AcquisitionCo as an equity contribution. This amount represents fifty percent (50%) of the aggregate enterprise value.
(b) Senior Secured Credit Facility. Ironclad National Bank, N.A. and Ridgeline Commercial Lending Corp. will provide a senior secured credit facility in an aggregate principal amount of $175,000,000, consisting of: (i) a $125,000,000 Term Loan A ("TLA"), to be drawn in full at closing, and (ii) a $50,000,000 Revolving Credit Facility ("RCF"), expected to be undrawn at closing. The terms of the credit facility are set forth in the commitment letter dated February 14, 2026 (reference CL-INB-2026-0214), which has been reviewed by our finance colleagues.
(c) Holliday Rollover. Garrett Holliday will contribute approximately $25,000,000 of his equity value — representing a portion of his MFW stockholdings — into AcquisitionCo in exchange for a membership interest in AcquisitionCo. This rollover reduces the net cash payable to selling stockholders at closing to approximately $325,000,000. The tax treatment of the rollover is analyzed in detail in Section VI of this memorandum.
For purposes of the tax analysis herein, we note that the debt-to-equity ratio at closing (approximately 1:1, based on $175,000,000 in debt against $175,000,000 in equity, plus the $25,000,000 Holliday rollover) is within customary ranges for leveraged buyout transactions and should not give rise to any debt-equity recharacterization concerns. We will, however, review the terms of the credit facility in connection with the tax analysis to confirm proper characterization of the debt instruments and the deductibility of interest payments under Section 163(j) of the Code (business interest expense limitation).
D. Key Dates
The transaction timeline, based on the Letter of Intent signed February 18, 2026, is as follows:
The analysis in this memorandum is preliminary and is based on the information available to us as of the date hereof. We expect to supplement and, as necessary, revise this analysis as additional information is obtained through the diligence process and as the transaction terms are finalized in the definitive SPA.
III. Federal Income Tax Analysis — Stock Purchase vs. Asset Purchase
This section analyzes the principal federal income tax consequences of the proposed transaction under two alternative structures: (a) the stock purchase as currently contemplated, and (b) a hypothetical asset purchase. The comparison is relevant to evaluating the potential benefits of a Section 338(h)(10) election (discussed in Section IV), which would effectively convert the stock purchase into a deemed asset purchase for federal income tax purposes.
A. Stock Purchase Treatment (Current Structure)
Under the current transaction structure, AcquisitionCo (Solara Fleet Holdings LLC) will acquire all of the issued and outstanding shares of MFW common stock and Series A Preferred Stock directly from MFW's stockholders. This is a straightforward stock acquisition and is treated as such for federal income tax purposes. The principal tax consequences are as follows:
For the Buyer. In a stock purchase, the buyer acquires the target's stock, but the target's assets retain their existing (historical) tax basis. AcquisitionCo's tax basis in the acquired MFW stock will equal the aggregate purchase price paid — i.e., $350,000,000 (before adjustment for the Holliday rollover). However, this basis in the MFW stock does not translate into an increased basis in MFW's underlying assets. MFW's assets — including its tangible property, intellectual property, customer relationships, goodwill, and other intangible assets — will continue to have the same inside tax basis they had immediately prior to the closing.
This means that the buyer will not be entitled to amortize or depreciate any portion of the purchase price premium attributable to goodwill or other intangible assets. For a vertical-SaaS business such as MFW, where a substantial majority of the enterprise value is typically attributable to intangible assets (proprietary software, customer relationships, brand, and assembled workforce), the inability to amortize the purchase price premium represents a significant opportunity cost. The premium over the inside net asset basis — which we expect to be substantial — will effectively be "trapped" as basis in the MFW stock and will not produce any tax benefit until AcquisitionCo disposes of its MFW stock at some future date.
MFW's existing tax attributes will carry over in a stock purchase. These attributes include, without limitation, the Company's historical tax basis in its assets, any net operating loss carryforwards ("NOLs"), tax credit carryforwards (including any Section 41 R&D credits), tax method of accounting, and any existing tax positions (whether favorable or unfavorable). MFW will continue to file its own federal corporate income tax returns following the closing, and its taxable year will not be required to close on the closing date (unless a Section 338 election is made). The buyer should be aware that it inherits all of MFW's historical tax positions and potential liabilities, including any unresolved audit issues, underpayments, or exposure items such as the SaaS sales tax exposure discussed in Section VIII.
For the Sellers. In a stock purchase, each selling stockholder recognizes gain (or loss) on the sale of his, her, or its shares equal to the difference between the amount realized ($35.00 per share) and the stockholder's adjusted tax basis in the shares sold. Assuming each stockholder has held his, her, or its MFW shares for more than one year (which we expect to be the case for all principal stockholders, given that MFW was incorporated in 2014 and the Series A Preferred was issued in 2016–2017), the gain will be treated as long-term capital gain. Long-term capital gain for individual taxpayers is currently taxed at a maximum federal rate of 20%, plus the 3.8% net investment income tax imposed by Section 1411 of the Code, for a combined maximum rate of 23.8%. For corporate taxpayers, capital gain is taxed at the regular corporate income tax rate of 21%.
Importantly, in a stock purchase, MFW itself does not recognize any gain or loss. The entity-level tax attributes are simply inherited by the buyer, and the Company continues as a going concern. This feature of the stock purchase structure is generally favorable to selling stockholders, as it avoids the "double tax" that would result from an asset sale by a C corporation (discussed below).
Summary of Key Stock Purchase Characteristics:
•  Buyer's outside basis in MFW stock: $350,000,000
•  Buyer's inside basis in MFW assets: Unchanged (historical basis)
•  Seller gain recognition: Capital gain at stockholder level only; no entity-level tax
•  Step-up benefit to buyer: None (absent Section 338(h)(10) election)
•  Execution complexity: Relatively straightforward
B. Asset Purchase Treatment (Alternative)
In a hypothetical asset purchase, AcquisitionCo (or a newly formed acquisition subsidiary) would acquire substantially all of MFW's assets — including its intellectual property, customer contracts, software platform, accounts receivable, tangible personal property, and goodwill — directly from MFW as a corporate seller. AcquisitionCo would receive a cost basis (i.e., fair market value) in all acquired assets. The purchase price, plus any liabilities assumed by the buyer, would be allocated among the acquired assets in accordance with the residual method prescribed by Section 1060 of the Code and the corresponding Treasury Regulations (Treas. Reg. § 1.1060-1), which follows the asset classification framework set forth in Treasury Regulation § 1.338-6.
Under the residual method, the purchase price is allocated first to Classes I through VI (cash and cash equivalents, certificates of deposit and actively traded personal property, accounts receivable, inventory, all other tangible and intangible assets not classified as Section 197 intangibles, and Section 197 intangibles other than goodwill and going concern value), with any residual amount allocated to Class VII (goodwill and going concern value). For a vertical-SaaS business like MFW, we would expect a substantial portion of the purchase price to be allocated to the following categories of intangible assets:
•  Customer relationships: MFW serves approximately 4,200 active accounts generating approximately $62 million in annual recurring revenue ("ARR"). Customer relationships and associated contract-based intangible assets would be expected to have significant fair market value and would be amortizable over 15 years as Section 197 intangibles.
•  Proprietary software platform: The Meridian FleetWorks fleet management and logistics software platform, including the embedded payments module and ELD compliance module, would constitute a significant component of enterprise value. To the extent these assets are characterized as Section 197 intangibles acquired as part of the acquisition of a trade or business, they would be amortizable over 15 years. Alternatively, certain software components may qualify for amortization over shorter useful lives under Section 167 if treated as separately acquired software.
•  Trademarks and trade names: The "Meridian FleetWorks" brand name and associated trademarks would be amortizable over 15 years as Section 197 intangibles.
•  Assembled workforce: The value of MFW's assembled workforce (to the extent separately identifiable) would be amortizable over 15 years as a Section 197 intangible. However, the IRS has historically taken narrow positions on the valuation of assembled workforce, and this item would need to be supported by a qualified appraisal.
•  Residual goodwill and going concern value: Any portion of the purchase price that is not allocable to identified tangible or intangible assets would be allocated to Class VII goodwill and going concern value, which is amortizable over 15 years under Section 197.
The present value of the step-up benefit to the buyer in an asset purchase would depend on the spread between the fair market value of MFW's assets and their current inside tax basis. We do not yet have MFW's detailed fixed asset schedule, intangible asset register, or inside tax basis data, all of which are necessary to perform a quantitative allocation analysis. These materials have been requested through the diligence request list delivered to Hawthorne Kinsey & Alcott LLP (MFW's outside counsel) on February 19, 2026, and are expected to be provided by Glenmore Kessler & Associates PC (MFW's independent auditor) and Marcus Trahan (MFW's Chief Financial Officer).
Disadvantage for Sellers. The principal drawback of an asset purchase structure in the context of an acquisition of a C corporation such as MFW is the imposition of double taxation on the selling stockholders. In an asset sale:
(i) Entity-Level Tax. MFW, as the selling corporation, would recognize gain on the sale of its assets to the extent the consideration received (including liabilities assumed) exceeds MFW's adjusted tax basis in those assets. This gain would be taxed at the federal corporate income tax rate of 21%. Given that a significant portion of MFW's enterprise value is likely attributable to intangible assets with low or zero inside tax basis (particularly internally developed software and self-created goodwill), the entity-level gain could be very substantial.
(ii) Shareholder-Level Tax. Following the asset sale, MFW would be left as a corporate shell holding the after-tax cash proceeds of the sale. To distribute those proceeds to its stockholders, MFW would either make liquidating distributions (which would be taxed as exchange transactions, with stockholders recognizing gain to the extent distributions exceed their stock basis) or make non-liquidating distributions (which would be taxed as dividends to the extent of MFW's earnings and profits). In either case, the stockholders would bear a second level of taxation on the proceeds.
The combined effective tax rate on an asset sale by a C corporation, accounting for both the entity-level and shareholder-level taxes, is significantly higher than the single-level capital gains tax imposed on stockholders in a stock sale. For this reason, selling stockholders of C corporations strongly prefer stock sale structures, and it is generally not feasible to structure an acquisition of a C corporation as an asset purchase unless the buyer is willing to compensate the sellers for the incremental tax cost through a purchase price increase or gross-up.
C. Preliminary Recommendation on Structure
Based on the foregoing analysis, the stock purchase structure as proposed is appropriate for the acquisition of MFW. The stock purchase structure is consistent with the expectations of the selling stockholders (as reflected in the LOI), avoids entity-level taxation of MFW, and provides a clean and efficient closing mechanism. The stock purchase structure also avoids the need to obtain third-party consents for assignment of contracts, licenses, and permits — a practical consideration given the number of customer contracts (approximately 4,200 active accounts) and the potential for anti-assignment provisions in key commercial agreements.
However, we recommend that the Section 338(h)(10) election be evaluated as a mechanism to achieve the economic benefits of an asset purchase (principally the step-up in inside asset basis and resulting amortization/depreciation deductions) while retaining the transactional framework of a stock purchase. This analysis is set forth in Section IV below.
IV. Section 338(h)(10) Election Analysis
A. Overview and Eligibility
Section 338(h)(10) of the Internal Revenue Code permits the buyer and seller(s) in a "qualified stock purchase" (as defined in Section 338(d)(3)) to make a joint election to treat the stock purchase as a deemed asset sale for federal income tax purposes. When a valid Section 338(h)(10) election is made, the actual stock sale is disregarded, and the target is treated as if it had sold all of its assets at fair market value in a single transaction and then liquidated. This deemed transaction generates an "aggregate deemed sale price" ("ADSP") that serves as the basis for allocating the purchase price among the target's assets.
The primary effect of the election is to provide the buyer with a stepped-up basis in the target's assets equal to the ADSP — the same result that would be achieved in an actual asset purchase — while preserving the transactional mechanics of a stock purchase. The election is particularly advantageous in acquisitions where the target's inside tax basis in its assets is substantially lower than the purchase price, as is commonly the case with software and technology companies whose most valuable assets (Intellectual property, customer relationships, and goodwill) are often internally developed and have little or no tax basis.
Qualified Stock Purchase Requirement. A Section 338(h)(10) election is available only in connection with a "qualified stock purchase" as defined in Section 338(d)(3). A qualified stock purchase requires that a "purchasing corporation" acquire at least eighty percent (80%) of the total voting power and at least eighty percent (80%) of the total value of the stock of the target by "purchase" (as defined in Section 338(h)(3)) within a twelve-month acquisition period. In the proposed transaction, AcquisitionCo will acquire one hundred percent (100%) of all issued and outstanding MFW stock in a single transaction, which clearly satisfies the eighty percent threshold.
Joint Election Requirement. Critically, the Section 338(h)(10) election is a joint election that requires the consent of both the buyer and the seller(s). In the case of a standalone C corporation such as MFW (i.e., one that is not a member of a consolidated group or an S corporation), the election is made jointly by the purchasing corporation and the selling stockholders. Under Treasury Regulation § 1.338(h)(10)-1(c), all selling stockholders must consent to the election. This means that Pinnacle Bluff Ventures LLC (34.0%), Garrett Holliday (32.0%), Diana Vasquez-Park (18.0%), and all other stockholders must agree to the election as a condition of its validity. Given that the election may result in adverse tax consequences for certain sellers (as discussed below), obtaining this consent may require negotiation and potentially a purchase price adjustment.
Purchasing Corporation Qualification. Section 338(h)(10) requires that the acquirer be a "purchasing corporation." AcquisitionCo is a Delaware LLC. For federal income tax purposes, a multi-member LLC is classified by default as a partnership, not a corporation. A partnership cannot be a "purchasing corporation" under Section 338. However, if AcquisitionCo is a single-member LLC owned by Fund III (itself a partnership), AcquisitionCo would be treated as a disregarded entity for federal income tax purposes, and Fund III would be treated as the purchaser. Fund III is also a partnership, which again cannot serve as a "purchasing corporation."
To address this structural issue, one of the following approaches may be required:
(i) Interposed Corporate Subsidiary. AcquisitionCo could form a wholly-owned corporate subsidiary (a C corporation or an entity that elects to be treated as a corporation under the "check-the-box" regulations) to serve as the actual purchasing corporation for Section 338(h)(10) purposes. MFW stock would be acquired by this corporate subsidiary rather than by AcquisitionCo directly.
(ii) Check-the-box Election for AcquisitionCo. AcquisitionCo could file a Form 8832 (Entity Classification Election) to elect to be treated as an association taxable as a corporation for federal income tax purposes. However, this approach may have adverse consequences for the overall fund structure and the tax treatment of the Holliday rollover (which relies on AcquisitionCo being treated as a partnership — see Section VI). This approach is therefore likely not viable.
(iii) Alternative Structural Approaches. Treasury Regulation § 1.338(h)(10)-1(c) contains specific provisions addressing the availability of the election for various target types (consolidated group members, S corporations, and standalone C corporations). For a standalone C corporation that is the target of a Section 338(h)(10) election, the regulation requires the consent of both the purchasing corporation and the selling stockholders. We need to confirm, through further structural analysis, the precise mechanism by which an entity in the Solara fund structure can qualify as the purchasing corporation.
We will resolve this structural question as part of the detailed Section 338(h)(10) modeling to be conducted once MFW's asset and tax basis data is received.
B. Tax Consequences of Section 338(h)(10) Election
For the Buyer. If a valid Section 338(h)(10) election is made, AcquisitionCo (or the interposed purchasing corporation) would be treated as having acquired MFW's assets at fair market value rather than having acquired MFW's stock. The stepped-up basis in MFW's assets would equal the "aggregate deemed sale price" or ADSP, which is generally calculated as the sum of (a) the grossed-up amount realized on the sale of recently purchased target stock, and (b) the target's liabilities (including liabilities to which assets are subject and other liabilities, as well as the tax liability arising from the deemed sale itself).
The ADSP is allocated among MFW's assets in accordance with the residual method under Section 1060 and Treasury Regulation § 1.338-6, following the seven-class hierarchy:
•  Class I: Cash and cash equivalents
•  Class II: Actively traded personal property, certificates of deposit, and foreign currency
•  Class III: Accounts receivable, mortgages, and credit card receivables
•  Class IV: Inventory
•  Class V: All assets not classified in Classes I, II, III, IV, VI, or VII (including furniture, fixtures, equipment, and land)
•  Class VI: Section 197 intangibles other than goodwill and going concern value (including customer-based intangibles, supplier-based intangibles, workforce in place, licenses, permits, covenants not to compete, franchises, trademarks, and trade names, as well as computer software to the extent treated as a Section 197 intangible)
•  Class VII: Goodwill and going concern value (residual)
For MFW, as a vertical-SaaS business with approximately $62 million in ARR generated from approximately 4,200 active accounts, we would expect a very substantial portion of the ADSP to be allocated to Class VI (Section 197 intangibles — principally customer relationships and proprietary software) and Class VII (goodwill and going concern value). These intangible assets are amortizable on a straight-line basis over fifteen (15) years for federal income tax purposes under Section 197. The stepped-up basis in tangible depreciable assets (Class V — primarily computer equipment, servers, office furniture, and leasehold improvements) would be recoverable through accelerated depreciation, potentially including bonus depreciation to the extent available under current law.
The present value of the incremental amortization and depreciation deductions resulting from the step-up would constitute a significant economic benefit to the buyer. The magnitude of this benefit depends on the spread between the fair market value and the inside tax basis of MFW's assets. Given that MFW's most valuable assets are likely to be internally developed software and self-created goodwill — assets that typically have little or no tax basis — the spread could be very substantial. However, a precise quantification requires detailed information that we do not yet possess, including MFW's fixed asset schedule, depreciation schedules, and inside tax basis data.
For the Sellers. When a Section 338(h)(10) election is made for a standalone C corporation, the actual stock sale is disregarded, and the target is treated as if it had sold all of its assets at fair market value in a single transaction and then distributed the after-tax proceeds to its stockholders in complete liquidation. The selling stockholders are treated as having received liquidating distributions from the target rather than as having sold their stock.
The key consequence for sellers is that the character and amount of gain recognized may differ from a pure stock sale in several important respects:
(i) Entity-Level Gain Recognition. MFW would be treated as having recognized gain on the deemed sale of its assets. This deemed entity-level gain would include ordinary income to the extent of depreciation recapture under Sections 1245 and 1250, as well as any other items that would be characterized as ordinary income in an actual asset sale.
(ii) Single Level of Tax. Despite the deemed entity-level gain recognition, the Section 338(h)(10) election provides a mechanism to achieve a single level of tax. Under Treasury Regulation § 1.338(h)(10)-1(d)(5), the selling stockholders are treated as if the target had sold its assets and then distributed the proceeds in complete liquidation. The amount realized by the selling stockholders on the deemed liquidating distribution is determined by reference to the net proceeds after payment of the entity-level tax. The stockholders recognize gain or loss on the deemed liquidating distribution equal to the difference between the amount deemed distributed and their adjusted stock basis.
(iii) Character of Gain. In a pure stock sale, the gain recognized by selling stockholders is capital gain. In a Section 338(h)(10) scenario, the overall gain recognized by the selling stockholders on the deemed liquidating distribution is generally capital gain (since the liquidating distribution is treated as an exchange under Section 331). However, the entity-level tax on the deemed asset sale effectively reduces the net amount distributed to stockholders, and to the extent the deemed asset sale generates ordinary income at the entity level (e.g., from depreciation recapture), that ordinary income reduces the amount available for distribution and indirectly reduces the stockholders' capital gain.
(iv) Net Effect on Sellers. The net amount received by selling stockholders under a Section 338(h)(10) election is generally less favorable than under a pure stock sale, because the deemed entity-level tax on the asset sale reduces the proceeds available for distribution. For this reason, sellers typically resist a Section 338(h)(10) election unless the buyer compensates them for the incremental tax cost.
C. Impact on Key Seller Constituencies
The tax impact of a Section 338(h)(10) election would affect each seller constituency differently:
Pinnacle Bluff Ventures LLC (34.0%). Pinnacle Bluff is a Virginia limited liability company and, assuming it is treated as a partnership for federal income tax purposes, the tax consequences of the transaction — including any incremental ordinary income component from a deemed asset sale — would flow through to Pinnacle Bluff's members. If the members include tax-exempt entities (e.g., pension funds, endowments, or other institutional investors) or foreign investors, the character of the income may have additional implications, including potential unrelated business taxable income ("UBTI") concerns and withholding tax obligations. An increased ordinary income component resulting from a Section 338(h)(10) election could be adverse for these member categories. Pinnacle Bluff will likely resist the election absent a meaningful purchase price gross-up or other economic concession.
Garrett Holliday (32.0%). As an individual taxpayer, Mr. Holliday would be adversely affected by any increase in the ordinary income component of his gain. The differential between the maximum ordinary income rate (37%, plus the 3.8% net investment income tax, for a combined rate of 40.8%) and the maximum long-term capital gains rate (20%, plus the 3.8% net investment income tax, for a combined rate of 23.8%) is approximately 17 percentage points — a material difference on a gain of Mr. Holliday's magnitude. In addition, Mr. Holliday is rolling over $25,000,000 of equity value into AcquisitionCo, and the interaction between the rollover and the Section 338(h)(10) deemed sale treatment requires careful analysis, as discussed further in Section VI. Specifically, if the election is made, the rollover shares may be treated as having been sold in the deemed asset sale, potentially triggering gain recognition on the rollover portion that would otherwise have been deferred under Section 721.
Diana Vasquez-Park (18.0%). Ms. Vasquez-Park is an individual taxpayer residing in Austin, Texas, which does not impose a state individual income tax. The federal tax considerations are similar to those applicable to Mr. Holliday, including the adverse impact of any increased ordinary income component. However, the absence of a Texas state income tax modestly reduces the overall incremental tax burden of a Section 338(h)(10) election for Ms. Vasquez-Park as compared with Mr. Holliday (who resides in Virginia and is subject to Virginia individual income tax at a top rate of 5.75%).
Option Holders. The treatment of option cash-out proceeds in a Section 338(h)(10) scenario may differ from the treatment in a pure stock sale, depending on the classification of the options (ISO vs. NQSO) and the timing of the cash-out relative to the deemed sale. This issue is addressed in Section VII below.
D. Negotiation Considerations
If the detailed quantitative analysis indicates that a Section 338(h)(10) election would produce a net benefit to the buyer after accounting for any required gross-up payment to sellers, the election should be raised as a negotiation point with the sellers and their counsel, Hawthorne Kinsey & Alcott LLP ("HKA"). The following considerations will be relevant to the negotiation:
(i) Buyer's Benefit. The buyer's benefit from the election is the present value of the incremental amortization and depreciation deductions generated by the step-up in asset basis. For a $350 million acquisition of a SaaS company, the step-up benefit could be very substantial — potentially in the range of tens of millions of dollars on a present value basis — depending on the spread between the purchase price and MFW's inside asset basis and the buyer's discount rate.
(ii) Sellers' Incremental Cost. The sellers' incremental cost is the difference between (a) the aggregate tax liability of the sellers under a Section 338(h)(10) election (including the deemed entity-level tax on the asset sale and the shareholder-level tax on the deemed liquidating distribution) and (b) the aggregate tax liability of the sellers in a pure stock sale (shareholder-level capital gains tax only).
(iii) Net Benefit and Sharing Mechanism. If the buyer's benefit exceeds the sellers' incremental cost, there is a net benefit to be shared. A common approach is for the buyer to share a portion of the step-up benefit with the sellers through a purchase price increase or gross-up payment, typically calculated to leave the sellers in the same or better after-tax position as they would have been in under a pure stock sale. The LOI purchase price of $350,000,000 is currently fixed, and any gross-up would need to be negotiated as part of the definitive SPA.
(iv) Timing. The election must be agreed upon and documented before the SPA is executed. We recommend that the election concept not be raised with HKA until our internal modeling confirms that the net benefit justifies the negotiation.
E. Further Analysis Required
In order to complete the Section 338(h)(10) analysis, the following information and actions are required:
(a) Obtain MFW's federal and state income tax returns for fiscal years 2022 through 2025 (and, if available, earlier years).
(b) Obtain MFW's detailed fixed asset schedule, including the cost basis, accumulated depreciation, and net book value of all tangible and intangible assets, as well as the Company's inside tax basis in each asset category. This information should be available from Glenmore Kessler & Associates PC (MFW's independent auditor) and from Marcus Trahan (MFW's CFO).
(c) Perform a quantitative allocation of the ADSP across the seven asset classes under the residual method, based on the fair market values of MFW's assets. This analysis may require engagement of a qualified independent valuation firm to prepare or support the allocation.
(d) Calculate the present value of the incremental amortization and depreciation deductions available to the buyer under the stepped-up basis, using an appropriate discount rate.
(e) Calculate the incremental tax cost to each seller class (Pinnacle Bluff, Holliday, Vasquez-Park, Trahan, other individual stockholders, and option holders) under the Section 338(h)(10) election as compared with a pure stock sale.
(f) Confirm the structural eligibility of the purchasing corporation, including resolution of the disregarded entity issue described in Section IV.A above.
(g) Assess the interaction between the Section 338(h)(10) election and the Holliday rollover, including whether the rollover can be structured to preserve Section 721 deferral in a 338(h)(10) scenario.
Recommendation. We recommend proceeding with the stock purchase as the base-case transaction structure while commissioning detailed Section 338(h)(10) election modeling as soon as MFW's asset and tax basis data is received during the diligence process. We will coordinate with Whitmore Sandoval Group LLC (Daniel Ostroff, CPA, engagement lead) on the quantitative modeling workstream. The election concept should not be raised with Hawthorne Kinsey & Alcott LLP until our internal modeling confirms that the net benefit to the transaction justifies the negotiation and any potential delay or complication in the SPA process.
V. State and Local Tax Considerations
A. Delaware
MFW is incorporated in the State of Delaware. As a Delaware corporation, MFW is subject to the Delaware annual franchise tax, which is calculated under either the authorized shares method or the assumed par value capital method, at MFW's election. We should confirm through diligence that MFW's Delaware franchise tax has been paid in full and that the Company is in good standing with the Delaware Division of Corporations.
Delaware does not impose a corporate income tax on corporations that do not conduct business within the State of Delaware. Based on our understanding that MFW's operations are conducted primarily in Virginia, Texas, and Idaho, and that MFW does not have offices, employees, or other significant physical presence in Delaware (other than its registered agent for service of process), MFW should not be subject to Delaware corporate income tax. We will confirm this understanding during diligence.
With respect to the stock purchase transaction itself, Delaware does not impose a stock transfer tax or capital gains tax on sales of stock of Delaware corporations. Accordingly, the transaction will not give rise to any Delaware transfer tax liability.
AcquisitionCo (Solara Fleet Holdings LLC) is to be formed as a Delaware limited liability company. As a Delaware LLC, AcquisitionCo will be subject to the annual Delaware LLC tax of $300, payable on or before June 1 of each year. No other Delaware-specific tax consequences are anticipated in connection with the formation of AcquisitionCo or the closing of the transaction.
B. Virginia
MFW is headquartered in McLean, Virginia, at 8750 Westpark Drive, Suite 600, McLean, VA 22102, and conducts substantial business operations in the Commonwealth of Virginia. Virginia imposes a corporate income tax at a flat rate of six percent (6%) on Virginia-apportioned taxable income. MFW is expected to be a Virginia corporate income tax filer, and we will confirm its Virginia filing history and compliance status during diligence.
In the stock purchase as currently structured, MFW will continue as a Virginia taxpayer following the closing, with no change in its Virginia tax attributes. The stock purchase itself does not trigger any Virginia corporate income tax liability for MFW, as MFW does not recognize gain or loss on the sale of its stock.
If a Section 338(h)(10) election is made, the deemed asset sale could trigger Virginia corporate income tax on MFW's deemed gain at the entity level. Virginia generally conforms to the federal treatment of Section 338(h)(10) elections, meaning that the deemed asset sale would be recognized for Virginia corporate income tax purposes. The Virginia corporate income tax on the deemed gain must be incorporated into the cost-benefit analysis of the Section 338(h)(10) election. Because Virginia's corporate income tax rate is 6%, the incremental Virginia tax on the deemed gain could be a significant cost factor, depending on the amount of gain apportioned to Virginia.
Virginia does not impose a stock transfer tax on sales of stock. Accordingly, no Virginia transfer tax is applicable to the stock purchase.
With respect to individual selling stockholders who are Virginia residents, we note that Garrett Holliday resides in McLean, Virginia. Virginia imposes an individual income tax at graduated rates up to a top rate of 5.75% (applicable to income in excess of $17,000). Mr. Holliday will be subject to Virginia individual income tax on his capital gain from the sale of his MFW shares (cash-out portion), as well as on his allocable share of any income from AcquisitionCo following the closing (in his capacity as a member of AcquisitionCo pursuant to the rollover). Virginia generally conforms to the federal treatment of Section 721 contributions to partnerships, and accordingly the Holliday rollover should not trigger Virginia income tax at the time of the contribution.
C. Texas
MFW maintains offices in Austin, Texas, at 301 Congress Avenue, Suite 1400, Austin, TX 78701. Diana Vasquez-Park, co-founder and the second-largest individual stockholder, resides in Austin, Texas.
Texas does not impose an individual income tax. This is a favorable factor for Ms. Vasquez-Park, who will not be subject to any Texas state income tax on her gain from the sale of her MFW shares.
Texas does impose a franchise tax (commonly referred to as the "margin tax") on entities doing business in Texas. The Texas margin tax rate is 0.375% for entities that qualify as wholesalers or retailers and 0.75% for all other entities, calculated on the entity's Texas-apportioned "taxable margin" (the lesser of 70% of total revenue, total revenue minus cost of goods sold, total revenue minus total compensation, or $1 million). MFW's Texas margin tax liability should be reviewed during diligence to confirm compliance and to assess the ongoing post-closing obligation.
If a Section 338(h)(10) election is made at the federal level, the impact on MFW's Texas franchise tax computation requires careful analysis. Texas does not fully conform to the federal treatment of Section 338(h)(10) elections for purposes of the Texas margin tax. Unlike a traditional state corporate income tax that starts with federal taxable income (which would incorporate the deemed asset sale gain), the Texas margin tax is based on total revenue as reported on the entity's federal income tax return (Form 1120). The interaction between the federal deemed asset sale and the Texas margin tax base is not straightforward, and we need to verify how Texas treats the deemed sale proceeds for margin tax purposes. This analysis will be included in our detailed Section 338(h)(10) modeling.
We also note that TerraLink Logistics, Inc., identified as MFW's largest customer at approximately $3,800,000 in ARR, is a Texas corporation. This fact does not have a direct tax impact on the proposed transaction but is relevant to the Texas nexus and apportionment analysis for both income tax and sales tax purposes.
D. Idaho
MFW maintains offices in Boise, Idaho, at 950 West Bannock Street, Suite 210, Boise, ID 83702. Idaho imposes a corporate income tax at a rate of 5.8% (as of current law) on Idaho-apportioned taxable income. Idaho generally conforms to the federal income tax treatment, including the treatment of Section 338(h)(10) elections.
In the stock purchase as currently structured, MFW will continue as an Idaho corporate income tax filer following the closing, with no immediate Idaho tax consequences. If a Section 338(h)(10) election is made, the Idaho-apportioned portion of MFW's deemed asset sale gain would be subject to Idaho corporate income tax at 5.8%. The Idaho apportionment factors (which may include single-factor sales apportionment or a multi-factor formula, depending on current Idaho law) will need to be reviewed as part of the cost-benefit analysis.
Idaho does not impose a stock transfer tax, and accordingly no Idaho transfer tax is applicable to the stock purchase.
E. State Tax Summary
We recommend obtaining MFW's state income tax returns for all filing states — at a minimum Delaware, Virginia, Texas, and Idaho — for fiscal years 2022 through 2025 as part of the tax diligence workstream. In addition, we should obtain a list of all states in which MFW currently files or has historically filed income, franchise, or similar entity-level tax returns, as well as any states in which MFW has received notices asserting nexus or filing obligations.
Any states where MFW has nexus for SaaS sales tax purposes (as discussed in Section VIII below) may also create income tax filing obligations, particularly in light of the trend among states toward asserting economic nexus for income tax purposes based on criteria similar to those established for sales tax purposes in South Dakota v. Wayfair, Inc., 585 U.S. 162 (2018). We will coordinate with the Whitmore Sandoval Group LLC findings on the SaaS sales tax exposure to ensure a comprehensive view of MFW's multi-state tax compliance posture.
VI. Treatment of Holliday Rollover Equity ($25,000,000)
A. Structure of Rollover
As contemplated by the LOI, Garrett Holliday will contribute a portion of his equity consideration — approximately $25,000,000 in value — to Solara Fleet Holdings LLC (AcquisitionCo) in exchange for a membership interest in AcquisitionCo. The rollover represents approximately 7.14% of the $350,000,000 aggregate deal value.
Mr. Holliday currently holds 2,800,000 shares of MFW common stock and 400,000 shares of MFW Series A Preferred Stock, for a total of 3,200,000 shares. At the per-share price of $35.00, Mr. Holliday's gross equity value is $112,000,000. Of this amount, approximately $25,000,000 will be contributed (or "rolled over") into AcquisitionCo, and approximately $87,000,000 will be received as cash at closing (before adjustments for escrow holdback, Mr. Holliday's proportionate share of transaction expenses, and any other deductions contemplated by the SPA). The specific shares (common stock, Series A Preferred Stock, or a combination) to be contributed to AcquisitionCo in connection with the rollover will need to be identified in the Rollover Agreement.
B. Federal Tax Treatment
The Holliday rollover is intended to be structured as a tax-deferred contribution under Section 721 of the Internal Revenue Code. Section 721(a) provides that, as a general rule, no gain or loss shall be recognized to a partnership or to any of its partners in the case of a contribution of property to a partnership in exchange for an interest in the partnership.
AcquisitionCo (Solara Fleet Holdings LLC) is a Delaware limited liability company. Assuming that AcquisitionCo is classified as a partnership for federal income tax purposes — which is the default classification for a multi-member LLC under the "check-the-box" regulations (Treas. Reg. § 301.7701-3), and which we expect will apply once Mr. Holliday becomes a member alongside Fund III — Section 721 should apply to Mr. Holliday's contribution of MFW shares (or a constructive interest therein) to AcquisitionCo in exchange for a membership interest.
Under Section 721, Mr. Holliday would not recognize any gain or loss on the portion of his MFW shares contributed to AcquisitionCo in connection with the rollover. The gain inherent in the contributed shares would be deferred, not eliminated — it would be recognized at a later date when Mr. Holliday sells or otherwise disposes of his AcquisitionCo membership interest, or when AcquisitionCo sells its MFW shares (or, following a future disposition of MFW's assets, distributes the proceeds to its members).
Mr. Holliday's tax basis in his AcquisitionCo membership interest would be equal to his carryover basis in the contributed MFW shares, as determined under Section 722 of the Code. Similarly, AcquisitionCo's basis in the contributed MFW shares would be equal to Mr. Holliday's carryover basis in those shares, as determined under Section 723 of the Code.
Disguised Sale Risk. An important consideration in structuring the rollover is the potential application of the disguised sale rules under Section 707(a)(2)(B) of the Code and the corresponding Treasury Regulations (Treas. Reg. § 1.707-3 through § 1.707-9). Under these rules, if a partner contributes property to a partnership and receives a distribution from the partnership within two years of the contribution (or vice versa), the contribution and distribution may be recharacterized as a disguised sale of the contributed property. If the disguised sale rules apply, Mr. Holliday would be treated as having sold the contributed MFW shares to AcquisitionCo for the amount of the distribution, and the tax deferral otherwise available under Section 721 would be lost.
In the context of the Holliday rollover, the primary risk is that distributions from AcquisitionCo to Mr. Holliday within two years of the rollover contribution could be recharacterized as purchase price payments for the contributed MFW shares. This risk is mitigated if any distributions to Mr. Holliday during the two-year period are proportionate to his ownership interest in AcquisitionCo (i.e., made to all members in proportion to their interests, including Fund III). However, we must carefully structure any post-closing distribution provisions in the AcquisitionCo operating agreement to avoid triggering the disguised sale presumption. We will address this issue in detail in the Rollover Agreement and the AcquisitionCo LLC Agreement.
Interaction with Section 338(h)(10) Election. If the parties ultimately elect to make a Section 338(h)(10) election, the interaction with the Holliday rollover is complex and must be carefully analyzed. Under the Section 338(h)(10) election, MFW is treated as having sold all of its assets and liquidated. The rollover shares contributed by Mr. Holliday to AcquisitionCo would be deemed sold as part of the stock purchase that triggers the 338(h)(10) deemed sale. In this scenario, the Section 721 deferral on the rollover contribution may be partially or wholly overridden by the 338(h)(10) mechanics, because the selling stockholders (including Mr. Holliday) are treated as receiving liquidating distributions from MFW — not as contributing their shares to AcquisitionCo in a tax-deferred transaction. The structural ordering of the rollover vis-à-vis the stock purchase closing, and the specific mechanics of the Section 338(h)(10) deemed sale, would need to be carefully designed to minimize adverse consequences.
This interaction is one of the most complex structural issues in the transaction and will require detailed modeling once MFW's asset and tax basis data is available.
C. Partial Disposition — Cash vs. Rollover
Mr. Holliday's MFW shares that are not contributed to AcquisitionCo (the "cash-out portion") will be sold to AcquisitionCo in the stock purchase for cash. The gain on the cash-out portion is straightforward: Mr. Holliday will recognize capital gain (long-term, assuming he has held his MFW shares for more than one year) equal to the per-share price of $35.00 less his adjusted tax basis in the shares sold.
It is important that the allocation between the cash-out portion and the rollover portion be clearly documented in the Rollover Agreement and the SPA. The documentation should specify which shares (or fractions thereof) are being contributed to AcquisitionCo in exchange for the membership interest and which shares are being sold for cash. This allocation will determine the tax treatment of each component and must be supported by the economic substance of the transaction.
We will need to obtain from Mr. Holliday (or his personal counsel or accountant) the specific adjusted tax basis in each class of his shares — MFW common stock and Series A Preferred Stock — as the basis may differ due to different acquisition dates and acquisition costs. If the Series A Preferred Stock was acquired at a different price per share than the common stock, the allocation between shares sold for cash and shares contributed to AcquisitionCo will affect the amount and timing of gain recognition.
D. State Tax Treatment
Virginia. Mr. Holliday is a resident of McLean, Virginia. Virginia will tax the capital gain recognized on the cash-out portion of Mr. Holliday's shares at the applicable Virginia individual income tax rate (top rate of 5.75%). Virginia generally conforms to the federal treatment of contributions to partnerships under Section 721, and accordingly the rollover contribution should not trigger Virginia income tax at the time of the contribution. Mr. Holliday should confirm this treatment with his personal Virginia tax advisor.
Following the closing, Mr. Holliday will be a member of AcquisitionCo and will be allocated his distributive share of AcquisitionCo's income (or loss) under the AcquisitionCo LLC Agreement. Because AcquisitionCo will own MFW, which operates in multiple states (Virginia, Texas, Idaho, and potentially others), Mr. Holliday may have multi-state individual income tax filing obligations with respect to his allocable share of AcquisitionCo/MFW income. This is a standard consequence of membership in a partnership that owns a multi-state business and should be addressed in Mr. Holliday's post-closing tax planning.
VII. Option Cash-Out Tax Treatment
A. Overview
MFW has 650,000 stock options outstanding under the MFW 2016 Stock Incentive Plan, consisting of 480,000 vested options and 170,000 unvested options. The weighted-average exercise price across all outstanding options is $8.50 per share.
At closing, all outstanding options are expected to be cancelled in exchange for a cash payment to each option holder equal to $35.00 per share (the per-share merger consideration) less the applicable per-share exercise price. Based on the weighted-average exercise price of $8.50 per share, the weighted-average net spread per option is $26.50. The aggregate net proceeds payable to option holders are estimated at:
($35.00 − $8.50) × 650,000 options = $17,225,000
The aggregate exercise price that is either forfeited by the option holders or deemed paid upon cancellation is:
$8.50 × 650,000 options = $5,525,000
B. Characterization — ISOs vs. NQSOs
The federal income tax treatment of the option cash-out depends critically on whether the options are classified as incentive stock options ("ISOs") under Section 422 of the Code or as nonqualified stock options ("NQSOs"). We have not yet reviewed the individual option grant agreements or the MFW 2016 Stock Incentive Plan document, and accordingly the classification of MFW's outstanding options has not been confirmed. This information has been requested through the diligence request list. We anticipate that the options may include a mix of ISOs and NQSOs, as is common for technology companies.
NQSOs. If the options are NQSOs, the cash-out payment received by each option holder at closing is treated as ordinary compensation income in the amount of the spread ($35.00 per share less the applicable exercise price). MFW (or AcquisitionCo, as successor employer) is required to withhold applicable income and employment taxes from the cash-out payment, including federal income tax withholding, the employee's share of FICA taxes (Social Security and Medicare), and applicable state income tax withholding. MFW is also required to pay the employer's share of FICA taxes on the compensation amount, as well as any applicable federal and state unemployment taxes (FUTA and SUTA).
MFW receives a corresponding compensation deduction under Section 83(h) of the Code equal to the amount of ordinary income recognized by the option holder, subject to the limitations of Sections 162 and 280G. This deduction reduces MFW's taxable income for the year that includes the closing date and may generate a meaningful tax benefit.
ISOs. If the options are ISOs and the option holders have satisfied the required holding periods (the shares must be held for more than two years after the option grant date and more than one year after the exercise date), the disposition of the shares (or, in this case, the cancellation of the options in exchange for cash) would qualify for capital gain treatment on the excess of the proceeds over the exercise price. However, a cash-out at closing in connection with a change of control typically constitutes a "disqualifying disposition" because the option holders never actually exercise the ISOs and hold the shares for the required periods. In a disqualifying disposition, the gain on the ISO exercise is treated as ordinary income to the same extent as if the option had been an NQSO.
As a practical matter, therefore, the cash-out of options at closing — whether ISOs or NQSOs — is likely to result in ordinary income treatment for the option holders in most circumstances. However, we will confirm the specific facts applicable to each option holder upon review of the grant documentation.
Compensation Deduction. The compensation deduction available to MFW on the option cash-out — whether the options are NQSOs or ISOs that are su

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