In Re Saama Technologies Litigation

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN RE SAAMA TECHNOLOGIES ) Consolidated LITIGATION ) C.A. No. 2022-1045-LWW MEMORANDUM OPINION Date Submitted: June 1, 2026 Date Decided: September 28, 2026 A. Thompson Bayliss, Eric A. Veres & Clara E. Hubbard, ABRAMS & BAYLISS LLP, Wilmington, Delaware; Sean Baldwin, Will Rathgeber, Stephen Federowicz, Drake Reed, Patrick Holland & Xinchen Li, SELENDY GAY PLLC, New York, New York; Attorneys for Plaintiff and Counterclaim Defendant Suresh Katta Michael A. Pittenger, Matthew F. Davis, & Megan R. Thomas, POTTER ANDERSON & CORROON LLP, Wilmington, Delaware; Daniel A. Mason, Sabrina M. Hendershot & Emily V. Cox, PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP, Wilmington, Delaware; Andrew G. Gordon, Geoffrey R. Chepiga & Tiana Voegelin, PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP, New York, New York; Attorneys for Defendants and Counterclaim Plaintiffs Warrior Parent, LLC, Warrior Holdings Ltd., and Saama Technologies, LLC, and Defendants Scott Rogers and Vivek Sharma WILL, Vice Chancellor  Saama Technologies, Inc. had immense promise. Under the leadership of its founder, Suresh Katta, the company developed an innovative clinical data platform that drew the attention of The Carlyle Group. When Katta agreed to sell control of Saama to Carlyle in 2021, the parties bridged a valuation gap with a contingent earnout. The maximum payout depended on Saama hitting a mandatory revenue threshold and annual recurring revenue bookings targets by the end of the year. Katta knew the targets were tight. Rather than build the business, he gamed the system. He manipulated contract language to pull unearned revenue into the earnout window. He then leveraged Saama’s software products division to sign value-destructive contracts that superficially qualified for the earnout. Carlyle grew wise to these tactics and, when Katta claimed he was due the maximum earnout payment, formally objected. Katta responded with this lawsuit. Over years of litigation, he pursued shifting claims, theories, and procedural strategies to secure the earnout in court. His strategy backfired. At trial, Katta failed to prove entitlement to the earnout. Instead, Carlyle proved that Katta acted in bad faith and caused more than $7 million in damages for the harm he inflicted on Saama’s software business. 1 I. BACKGROUND Unless otherwise noted, the following facts were stipulated to by the parties or proven by a preponderance of the evidence at trial.1 A. Saama Scales Plaintiff Suresh Katta founded Saama Technologies, Inc. in 1997 to provide custom data analytics services to varied industries.2 By 2010, Saama had grown to nearly 600 employees and was generating $40 million in annual revenue.3 Around that time, Saama developed the Fluid Analytics Engine—a big data analytics platform that moved Saama from a services model toward a tech-enabled software company.4 To scale this model, Saama secured a $35 million investment of outside capital in 2015.5 That capital supported a new strategic focus on the life sciences industry 1 See Joint Pre-trial Stipulation and Order (Dkt. 412) (“PTO”). Trial occurred over five days, during which eleven fact witnesses and four expert witnesses testified live. Testimony of three fact witnesses was presented by deposition. See Trial Tr. Vols. I-V (Dkts. 445-49). Trial testimony is cited as “[Name] Tr. __.” The trial record contains 2,752 joint exhibits and 29 deposition transcripts. Exhibits are cited by the numbers provided on the parties’ joint exhibit list as “JX __,” unless otherwise defined. See Final Joint Ex. List (Dkt. 441). Deposition transcripts are cited as “[Name] Dep. __.” See Am. Notice of Lodging of Dep. Trs. (Dkt. 430). 2 JX 595 at 5; Katta Tr. 87; PTO ¶ 43. 3 Katta Tr. 93. 4 Id. at 96-97. 5 Id. at 97-99. 2 and the nascent field of artificial intelligence.6 Saama transformed the Fluid Analytics Engine into a cloud-based application suite known as the Life Sciences Analytics Cloud.7 The Life Sciences Analytics Cloud used artificial intelligence to address the steep costs, manual errors, and timeline delays of clinical trial data management— focusing on both analytical and submission pathways.8 Its analytical pathway products included off-the-shelf applications (“Packaged Apps”) to monitor clinical trial efficiency and improve “scope, schedule, and cost.”9 The submission pathway products included Saama’s “Smart Series” suite, designed to prepare clinical trial data for regulatory approval.10 Saama’s earliest Smart Series product was Smart Data Query (“SDQ”), which it co-built with Pfizer Inc. and deployed in Pfizer’s 2020 COVID-19 vaccine trials.11 The technology was revolutionary, saving Pfizer six weeks of essential time in bringing the vaccine to market.12 This high-profile success drew interest in Saama from other pharmaceutical companies. Saama next worked to co-build a product 6 Id. at 99-100. 7 Id. at 100-01; PTO ¶¶ 45-46. 8 PTO ¶ 45; Anandakumar Tr. 484. 9 PTO ¶ 49; JX 595 at 5; Katta Tr. 88, 102-03, 107-08; Anandakumar Tr. 484. 10 Katta Tr. 103-04, 108; Anandakumar Tr. 484-86; see also PTO ¶ 49. 11 Katta Tr. 111-12, 115-16; Moneymaker Tr. 37; see also PTO ¶ 52. 12 JX 79 (native) 8. 3 called Smart Auto Mapper (“SAM”) with AbbVie Inc. to automatically map raw clinical trial data onto regulator-standard frameworks.13 By 2021, Saama’s strategy was to sell its Packaged Apps to small- and mid- sized biopharmaceutical companies, with its Smart Series offerings directed at larger customers.14 It aimed to complete its transformation into a product-oriented business.15 To do so, Saama set out to secure additional growth capital. B. Carlyle’s Investment Saama initially sought a minority investment at a $1 billion valuation.16 In May 2021, The Carlyle Group Inc. approached Katta to propose acquiring a majority stake.17 Joe Bress, Carlyle’s Global Co-Head of Healthcare, was impressed by Saama’s “[s]ignificant gross margin expansion due to growth” in the software subscriptions business.18 By June, Saama had received several investment proposals, including from a syndicate of life sciences companies to invest $75 to $105 million of growth capital at a valuation of $620 million.19 On July 1, Bress and Carlyle technology partner 13 Moneymaker Tr. 37-39; Anandakumar Tr. 486. 14 PTO ¶ 54. 15 Id. ¶ 55. 16 Katta Tr. 128-30; JX 270 at 3; PTO ¶ 56. 17 Katta Tr. 131-32, 144; JX 270 at 3; see JX 2711. 18 JX 81 at 30; Bress Tr. 1343-44. 19 Katta Tr. 129-31, 136-38; PTO ¶¶ 61-63; see also JX 214. 4 Ashley Evans met with Katta and Vidya Sagar Anisingaraju, Saama’s Chief Strategy Officer.20 Bress presented an offer for Carlyle to acquire 62.5% of Saama at a valuation of $500 million.21 When Katta raised the syndicate’s proposal, Bress suggested that the syndicate be included in any deal.22 The parties negotiated a term sheet, and Katta countered with a $525 million total enterprise value.23 On July 22, 2021, Bress and his team—including Evans and Carlyle Vice President Luna Yang—presented their evaluation of the deal in a “Heads Up Memo” to Carlyle’s Investment Committee.24 The memo projected Saama’s 2021 software subscription revenue at $20.4 million, which had been reduced from Saama’s sell- side forecast of $27.9 million due to its first-half 2021 results.25 It listed an internal rate of return (IRR) of 24.6%.26 Though the Investment Committee was concerned about the risk of investing in a business undergoing a transformation, it approved proceeding with due diligence.27 20 Katta Tr. 140-41; PTO ¶ 34; JX 224 at 1. 21 JX 224 at 2; JX 215 at 1; see Katta Tr. 140-42. 22 Katta Tr. 141-42. 23 JX 243; Bress Tr. 1431. 24 JX 270; JX 243; Bress Tr. 1431; PTO ¶¶ 59, 67, 70. A “Heads Up Memo” is “sort of an initial presentation” made internally at Carlyle when a deal team “want[s] to dedicate significant resources or spend money evaluating a new investment.” Bress Tr. 1349. 25 Bress Tr. 1354-55; JX 81 at 3. 26 JX 270 at 5; JX 265 at 3; Bress Tr. 1356-59. 27 Yang Tr. 953, 1079-80; PTO ¶ 71; see also Yang Dep. 73-75. 5  On July 23, 2021, Carlyle sent Katta a non-binding indication of interest, followed by an updated letter a week later.28 It listed a preliminary valuation of $505 million for Saama, which was $20 million less than the amount Carlyle’s Investment Committee had authorized Bress to bid.29 It also stated that Carlyle “expect[ed] that its investment will fund $50 million of primary investment in the form of additional cash to the balance sheet” at close.30 Bress then told Katta not to “read into this too much,” as Carlyle “would be able to deploy . . . $75mm (or more) to drive growth/M&A going forward.”31 C. The Earnout During diligence, Yang noticed anomalies in Saama’s accounting. She tried to tie Saama’s projected software subscription revenue back to executed customer contracts, but found that “[m]anagement’s definition of [software] [s]ubscription [revenue] also include[d] implementation services bundled in with the true subscription fees.”32 Carlyle prioritized true software subscription revenue because it was recurring, high-margin, and remained “sticky” with customers compared to 28 PTO ¶¶ 72-73. 29 JX 280 at 1, 5; see Bress Tr. 1349. 30 JX 280 at 5. 31 Id. at 1. 32 JX 360 at 5, 24; see Yang Tr. 961, 963; Bress Tr. 1362-63. 6 one-time implementation fees.33 With implementation services excluded, Saama’s recurring software subscription revenue was 50% lower than projected.34 As a result, Carlyle lowered its projections for Saama’s software subscription annual revenue to $12 million, and estimated Saama’s annual recurring revenue (ARR) at between $14 and $15 million.35 The $12 million projection was a significant reduction from the initial sell-side $27.9 million software revenue forecast, which Carlyle had already reduced to $20.4 million in the “Heads Up Memo.”36 Diligence also revealed that some Smart Series products, including SAM and SDQ, were “still under core feature development.”37 These findings exposed a significant valuation gap. Carlyle refused to value Saama at $505 million unless it was getting a business with the sort of bona fide software earnings it wanted to underwrite.38 It reduced its upfront valuation of Saama to $435 million.39 Bress proposed “an earnout structure to bridge back to the $505” million valuation.40 33 Bress Tr. 1344; see Yang Tr. 962. 34 JX 360 at 5. 35 JX 374 at 1; Bress Tr. 1367-68. 36 JX 374 at 1; Bress Tr. 1367, 1387-88; see supra note 25 and accompanying text. 37 JX 364 at 8. 38 See Bress Tr. 1369-70. 39 Id. at 1364; JX 374 at 1; PTO ¶ 78; see also JX 366 at 1. 40 JX 374 at 1; PTO ¶ 78. 7  Carlyle proposed that Saama’s selling stockholders receive an earnout payment if Saama generated $72 million of revenue in 2021—a target that tracked Saama’s own revenue plan.41 The payment amount would be based on a multiple of software subscription ARR from “signed contracts by” December 31, 2021.42 Saama’s baseline ARR was about $15 million.43 Adding $12 million in incremental ARR for a total of $27 million would trigger a maximum earnout payment of $67.5 million.44 Bress found the earnout structure attractive, given its “short period, strict terms, [and] well-defined metrics[.]”45 He was skeptical that Saama could achieve the required ARR bookings by year end, but saw upside for Carlyle if Saama succeeded.46 Earning the payout meant Carlyle had acquired a business with bona fide software contracts, which would bring associated services revenue into 2022 and beyond.47 On August 18, Yang gave Katta, Anisingaraju, and Rajeev Dadia—Saama’s Chief Client and Technology Officer—a presentation about the proposed parameters 41 JX 384 at 1. 42 Id. 43 JX 374 at 1-2; Bress Tr. 1367-68. 44 JX 374 at 1; JX 390 at 3. 45 JX 384 at 1; Bress Tr. 1374. 46 Bress Tr. 1371-72. 47 Id.; see JX 378. 8 and criteria for earnout-eligible ARR bookings.48 She explained that eligible software subscription ARR must come from “ordinary course” contracts with “typical margins” that were “clearly labeled” for software subscriptions and excluded inducements, such as free implementation.49 At that time, typical product margins for Packaged Apps were 70% to 90%, reflecting the gross profit historically achieved on software subscriptions.50 These margins were similar to those projected for future Smart Series applications.51 On August 20, Bress and Katta reached a “handshake deal” on economic terms.52 About a week later, Bress told his team that in Carlyle’s base case, it would owe an earnout payment of approximately $40 million.53 D. Pre-Closing Planning While the parties negotiated a definitive agreement, Katta and Anisingaraju restructured Saama’s internal focus toward achieving the earnout. Anisingaraju renamed a weekly sales meeting the “72-27 Weekly Status Meeting” to track the maximum earnout targets: $72 million in revenue and $27 million in software 48 JX 390 at 3-4; Yang Tr. 971-72. 49 JX 390 at 3-4; Yang Tr. 971-73. 50 Bress Tr. 1353-54; Yang Tr. 1051-53. 51 JX 270 at 5; see Yang Tr. 1084. 52 JX 402 at 1. 53 JX 437 at 1. 9 subscription ARR.54 According to Saama sales executive Jonathan Burr, the “general sentiment” of the meetings shifted from standard sales practices to “clos[ing] anything in any way that [Saama] could by the end of the year.”55 In September 2021, Saama was tracking toward just $70.58 million in 2021 revenue—over $1.4 million short.56 Bridging the gap required Saama to recognize a substantial portion of the $4.55 million in projected revenue from the Smart Series product it was co-developing with AbbVie.57 But Saama’s Vice President of Customer Success, Ghananeel “Raj” Gondhali, noticed that the draft statement of work attributed over half of the AbbVie contract’s prospective value to a “Pre- Payment for Future Discounted Subscription Fee.”58 Realizing that Saama could not recognize such revenue in 2021, he changed the description to “Project Setup Activities” so that Saama could attempt to pull $2.75 million into the earnout window.59 54 Burr Tr. 1511-13; JX 404. 55 Burr Tr. 1515. Burr’s testimony was compelling and credible. Though he stands to participate in the earnout if Katta recovers in this litigation, he testified about Katta’s problematic post-closing behavior. See infra Section I.G. 56 JX 514 at 7. 57 JX 342 at 9; JX 568 at 6. 58 JX 461 at 1; JX 462 at 2, 16. 59 JX 461 at 1; JX 464 at 13; JX 510 at 3-4 (describing tweaks to the statement of work “that will allow Saama to recognize the revenue in a more advantageous way”); JX 474 at 1 (same). 10  Separately, Bress and the Carlyle deal team were preparing a memo to obtain the Investment Committee’s final approval.60 After learning that Saama was tracking below $72 million in revenue, Bress asked the team to model Saama hitting $68 million in 2021 revenue—$4 million short of the target.61 Carlyle’s Evans responded by asking whether Saama’s revenue should be lowered to $68 million in the Investment Committee base case scenario.62 Bress considered it, but his final memo to the Investment Committee maintained the team’s initial case of $72 million in 2021 revenue with $16.9 million projected in software subscription ARR, corresponding to a $40 million earnout payment.63 The memo noted that Saama could “likely only reach $70 million [in 2021 revenue], which leads to a $435 [million] entry price and resets our base case.”64 On September 29, Dadia informed Katta that Saama’s revenue was still trending short of the $72 million threshold.65 Katta pressed Dadia on what the sales team was doing “different[ly] for getting . . . results towards 72-27”—Katta’s internal shorthand for the earnout targets.66 Dadia confirmed sales employees were 60 Bress Tr. 1453; Yang Tr. 1144; PTO ¶ 83. 61 Bress Tr. 1454; JX 579 at 42. 62 Bress Tr. 1456-57; JX 581 at 1. 63 JX 595 at 7, 20, 25, 30. 64 Id. at 7, 20; Bress Tr. 1459; Yang Tr. 1156-58. 65 JX 614 at 2-3. 66 JX 613 at 2. 11 instructed that “typical margin limits d[id] not apply”—effectively abandoning Saama’s historical pricing discipline—and that they should prioritize short-term contracts that “need not be sustainable.”67 Katta approved this strategy.68 Underscoring his disregard for the earnout’s contingencies, Katta’s team concurrently sent draft versions of the impending merger agreement to clients, describing the earnout as a guaranteed “deferred payment.”69 On September 30, Bress’s deal team presented its $72 million revenue base case to Carlyle’s Investment Committee.70 The Investment Committee authorized Bress to finalize the transaction.71 E. The Merger Agreement The parties signed the Merger Agreement two weeks later, on October 14.72 As a precondition to execution, Saama was required to sign two statements of work with AbbVie.73 67 Id. at 1. 68 Id. 69 JX 2654 at 2; JX 2655 at 7; see Katta Tr. 170, 173. 70 JX 595 at 7, 20; Bress Tr. 1383, 1388-90; Yang Tr. 991-92. 71 Bress Tr. 1430; PTO ¶ 80; see JX 595 at 7. 72 PTO ¶ 87. 73 Id. ¶¶ 84-86. 12  Upon the merger, Saama converted to a Delaware limited liability company wholly owned by a new entity, Warrior Parent, LLC.74 Through Warrior Holdings, Ltd.—an entity controlled by Carlyle affiliates—Carlyle acquired 62% of Warrior Parent’s outstanding units, the life sciences co-investor syndicate acquired 13%, and Saama’s selling stockholders (the “Sellers”) rolled over the remaining 25%.75 The transaction valued Saama at a total enterprise value of $435 million.76 The Merger Agreement established a minimum earnout threshold of $72 million in “2021 Revenue.”77 That term was defined as consolidated Generally Accepted Accounting Principles (GAAP) revenue, net of discounts, determined in accordance with the methodology and principles used in Saama’s 2019 and 2020 audited financial statements—or, if Carlyle objected to the earnout statement, as determined by Saama’s auditor and reflected on Saama’s 2021 audited financial statements.78 It confirmed that, if the revenue threshold were met, the earnout payment would be a multiple of qualifying “ARR Bookings,” defined as “the 74 Id. ¶¶ 26-28, 30, 112. 75 Id. ¶¶ 40, 112. The Sellers received over $250 million in cash at closing. Id. ¶ 91. 76 Id. ¶ 90. 77 JX 669 (“Merger Agreement”) Annex A (defining “2021 Revenue”). 78 Id.; see Merger Agreement §§ 2.10(a), 3.6(a); PTO ¶ 95. 13 reasonably anticipated twelve (12) month software subscription revenue” from qualifying software products sold during the earnout period.79 The Merger Agreement required Saama to operate “in good faith with respect to” achieving the earnout from closing until December 31, 2021.80 Achieving the maximum earnout targets would increase Saama’s total enterprise value by $90 million.81 Because the Sellers sold 75% of Saama and retained a 25% equity stake, they were eligible to receive 75% of this incremental value in cash—a maximum earnout payment of $67.5 million—realizing the remaining 25% in the form of retained equity.82 Warrior Parent, acting on behalf of Warrior Holdings and the co- investors, would make any earnout payment to the Sellers.83 The Merger Agreement also formalized several limitations on eligible ARR Bookings, some of which were described in Yang’s August 18 presentation to Katta, Anisingaraju, and Dadia, including the need for typical margins and the bar on free implementation services.84 It required Saama to begin performing its obligations 79 Merger Agreement § 2.10(a); id. at Annex A (defining “ARR Bookings”). 80 Id. §§ 1.1(b), 2.10(d). 81 If Saama met the revenue threshold, the total enterprise value of Saama would increase by ten times the first $7 million in ARR Bookings plus an additional five times the next $4 million in ARR Bookings, for a total of $90 million in increased total enterprise value. Id. § 2.10(a). 82 PTO ¶ 93. 83 Id. ¶ 110. 84 JX 390 at 3-4; Merger Agreement Annex A (defining “ARR Bookings”). 14 under the applicable customer contracts before June 30, 2022 to count toward ARR Bookings.85 The parties excluded certain preexisting contracts from counting toward the earnout.86 After the earnout period closed on December 31, 2021, Katta—designated as the “Stockholder Representative”—was required to deliver an earnout statement to Carlyle, and Carlyle would have 30 days to make any objections.87 An objection would defer the determination of the earnout payment until after Saama’s 2021 audit was delivered, which triggered a further 30-day period for the parties to attempt to resolve any disputes.88 Remaining items that the parties could not resolve would be submitted to an accounting expert for resolution.89 F. The “Sanitized” Memo and Closing Before executing the Merger Agreement, Katta asked Bress for copies of Carlyle’s Investment Committee materials.90 Bress deferred until after the Merger Agreement was signed. 85 Merger Agreement Annex A (defining “ARR Bookings”). 86 JX 674 at 288; see also JX 393 at 6. 87 Merger Agreement §§ 2.10(b), 9.1. Technically, the earnout statement would be delivered to and any objections would be made by the “Purchaser”—defined as Warrior Holdings. See id. at Preamble. 88 Id. § 2.10(b). 89 Id. § 2.10(b). 90 Katta Tr. 175-76. 15  On November 9, Carlyle sent Katta a 25-page “summary” of the final 50-page Investment Committee memo.91 Carlyle internally described the summary as a “sanitized version.”92 The summary removed strategic discussions and proprietary information.93 It retained the $72 million base case, but omitted Carlyle’s assessment that Saama “could likely only reach $70mm” in 2021 revenue.94 The transaction closed ten days later, on November 19.95 G. The 72-27 Campaign After signing the Merger Agreement, Katta accelerated Saama’s strategy to “aggressively win business” and “sell anything by the end of the year” to achieve the earnout.96 Certain employees were offered “72-27 bonuses” based on their contribution to ARR Bookings.97 Katta told VP of Customer Success Gondhali that he needed to “aggressively” push the “72-27 goals” or risk being replaced, since Katta needed someone “who [could] drive this upwards and onwards.”98 Katta’s plan to achieve the earnout had two main components. 91 JX 748 at 1; Katta Tr. 176; Bress Tr. 1392; see also JX 595. 92 JX 748; Yang Tr. 1165-69. 93 Compare JX 748 at 2-27, with JX 595 at 4-44; Yang Tr. 994-97; Bress Tr. 1392-94. 94 Compare JX 595 at 7, 20, with JX 748. 95 PTO ¶ 111. 96 Burr Tr. 1508. 97 Id. at 1523-24; JX 991. 98 JX 742 at 1. 16  First, Saama abandoned its historical pricing discipline. Before the earnout, discounts on software products above 50% were atypical.99 Waiving implementation fees was also unheard of.100 To win business, Katta had often used a pay-as-you-go model he called “consumption-based pricing.”101 Consumption-based pricing would not count toward the earnout, though, because it lacked guaranteed revenue.102 And so Saama raised discounts, waived implementation fees, and abandoned consumption-based pricing during the earnout period.103 For example, Saama withdrew its consumption-based pricing model for Regeneron Pharmaceuticals, offering instead a 25% discount, free implementation, and a free SAM product for a new contract.104 Pfizer was likewise offered “heavily discounted pricing” conditioned on signing a contract before the end of 2021.105 Clients like PPD, Inc., IQVIA Holdings, Inc., and Novotech CRO also received deals with pricing anomalies, including unprecedented discounts and waived 99 Katta Tr. 304-05; Gondhali Tr. 696-97; see also Gondhali Dep. 18 (noting that the largest discount he had historically given was 30%). 100 Burr Tr. 1509, 1523. 101 Katta Dep. 173; JX 2257 at 2. 102 Katta Tr. 267-68, 271-72; JX 653 (“[S]ince consumption based price has no guarantee, they will not give credit for that towards upside ARR (27M goal).”). 103 See JX 653. 104 JX 781 at 1, 2; JX 791 at 1, 2-3; JX 937 (native) (“ARR Bookings” tab); Anisingaraju Tr. 745-46. 105 JX 806 at 3. 17 implementation fees that yielded negative margins and made the contracts unprofitable for Saama.106 Employees began to express concern that “the commitments made in [certain] SoWs [statements of work] [we]re unrealistic and set [them] up for failure.”107 Second, Katta directed his teams to rewrite contracts to artificially maximize ARR. For example, a statement of work to complete a “custom software build” for Pfizer’s “Sigma” program, which generated non-qualifying services revenue, was rewritten as a software license agreement to claim ARR.108 Similarly, Katta instructed the team to front-load a four-year contract with PHP and Areteia Therapeutics, Inc. by inflating the subscription fee for the first three years—the only years that counted toward earnout-qualifying ARR Bookings.109 The sales teams also began bundling implementation services with subscription fees to inflate the 106 JX 864 at 2 (discussing offering PPD “very aggressive pricing” of $1,549,000 “for the duration of the [contracted] studies rather than having to pay every year”); JX 778 at 1 (discussing the “huge margin pressure” involved in the IQVIA pricing scheme); JX 885 at 4 (providing that in the event IQVIA exercises its option to renew the contract, “the pricing per study will not increase by more than the lesser of 5%”); Scaldaferri Dep. 148 (Saama sales executive testifying that “if the whole [IQVIA] contract would have been fulfilled, it is factual that it would not have been profitable”); JX 2279 (Katta noting Novotech and Saama have “agreed to start small with five studies . . . further discounted by another ~60%”); JX 888 at 2 (charging a $5,000 one-time implementation fee for all 425 studies to be ultimately conducted for Novotech over a period of three years). 107 JX 802 at 2. 108 Burr Tr. 1531-32; see Moneymaker Tr. 38; Sharma Tr. 1251-52. 109 JX 794 at 1; see Merger Agreement Annex A (defining “ARR Bookings”). 18 ARR Bookings value, despite the Merger Agreement’s exclusion of bundled revenues from the earnout calculation.110 Saama’s aggressive strategy turned some customers away. GlaxoSmithKline (GSK) plc rejected a 50% discount with free implementation because the pressure for a year-end close was too great.111 Biohaven Pharmaceuticals, Inc. declined to sign a deal by December 31, 2021, despite Saama’s multiple offers of discounts and short-term subscriptions.112 Even when contracts were salvaged—such as with PPD, due to Carlyle’s assistance—Katta’s heavy-handed approach caused frustration.113 H. The Watermelon Effect Katta’s strategy to secure ARR Bookings encountered another problem: many of the Smart Series products sold to customers either did not exist or were in early- stage development.114 110 Burr Tr. 1520-21; see Merger Agreement Annex A (excluding subscription revenues “bundled with implementation revenues in one line”). 111 Burr Tr. 1530-31; JX 740 at 1-2; JX 868 at 2; Yang Tr. 1001; Katta Tr. 199-200. 112 JX 707 at 1; JX 937 (native) (“ARR Bookings” tab). 113 See JX 795 (“Suresh [Katta] has ham-handed this whole PPD thing in his singular quest to get the earnout . . . It’s actually really aggravating because PPD really liked the demos but Suresh is trying to bully them into near-term bookings.”). 114 Scaldaferri Dep. 350-51 (Q: “Did all of the products Saama had contracted with customers to provide exist at the time you joined Saama?” A: “No.”). 19  SDQ, which had been custom-built for Pfizer in 2020, lacked the capability to be transferred to other customer environments.115 Yet during the earnout period, Saama sold SDQ to seven new customers.116 SAM, which was still to be co-built with AbbVie, was sold to five other customers.117 Saama’s latest Smart Series product, “SPACE,” was sold to two customers even though it “existed only in slideware” (i.e., internal slide decks).118 Packaged Apps had greater maturity, but certain early-stage apps were similarly sold to multiple customers before they were fully functional.119 115 Moneymaker Tr. 37 (noting that SDQ was “highly performant for [Pfizer], really able to address their specific needs, but not able to be picked up and taken and sold to anybody else as is”); Rogers Tr. 921 (“They bought a custom solution that was built for Pfizer . . . .”); JX 1639 at 18 (listing SDQ as a “developing” product at the end of November 2021); PTO ¶ 52. 116 JX 858 (HilleVax, Inc. customer agreement); JX 880 (IQVIA change order); JX 819 (NGM Biopharmaceuticals, Inc. customer agreement); JX 884 (Novotech customer agreement); JX 842 (Population Health Partners customer agreement); JX 877 (PPD Development, L.P. customer agreement); JX 860 (Regeneron Pharmaceuticals customer agreement). 117 JX 1639 at 18 (listing SAM as “nascent” in product maturity at the end of November 2021); Moneymaker Tr. 39; JX 858 (HilleVax customer agreement); JX 880 (IQVIA change order); JX 884 (Novotech customer agreement); JX 881 (Pfizer statement of work); JX 842 (Population Health Partners customer agreement). 118 Moneymaker Tr. 41 (noting that SPACE did not exist even as of October 2022); JX 232 at 10; JX 881 (Pfizer Sigma statement of work); JX 880 (IQVIA change order). 119 Moneymaker Tr. 41 (“RBQM, similarly, did not exist as a product.”); JX 839 (selling RBQM to Day One Biopharmaceuticals, Inc.); JX 842 (selling RBQM to Population Health Partners). Similarly, Saama’s Clinical Insights Packaged App was not ready to be sold independently but was provided to multiple customers anyway. See Nimmagadda Dep. 31-33; JX 592 (Dadia stating that “our existing dashboards in Clinical Insights aren’t working properly, so there’s nothing new”); see, e.g., JX 839; JX 850; JX 858; JX 880; JX 819. 20  Dadia observed to Gondhali that these commitments embodied the “[w]atermelon [e]ffect”: the contracts were “green” and seemingly healthy on the outside, but “red” and failing beneath the surface.120 Others at Saama shared this view, fearing that the company was under significant resource constraints and would be unable to meet these new commitments.121 In December 2021, Katta, Anisingaraju, and Dadia met with Bress and Yang to discuss Saama’s 2021 revenue and ARR Bookings.122 Katta announced that Saama would exceed the $72 million threshold and likely hit $35 million in ARR Bookings.123 Though the Saama team summarized certain new projects, it did not offer a contract-by-contract review.124 Taking the presentation at face value, Bress and Yang were pleased and believed that Saama was outperforming expectations.125 120 JX 592 at 2 (writing to Gondhali: “heard that term for the first time, Watermelon effect . . . but I love it”); Gondhali Tr. 715-17; see also Marius Ivanauskas, The Watermelon Effect: When Fear Turns Your Dashboards Green, Forbes (Dec. 23, 2025), https://www.forbes.com/councils/forbesbusinesscouncil/2025/12/23/the-watermelon- effect-when-fear-turns-your-dashboards-green/ (describing the “watermelon effect” in which “projects and business units that are green on the outside—bright, shiny and confidently reported as on target, but deep red on the inside”). 121 See JX 726 at 1 (November 2021 email among employees stating that “[w]e are out of people and out of time and need to prioritise vs. doing more”); JX 722 at 1-2 (one Saama employee noting that focusing on work for Pfizer “will affect other deliverables like AbbVie” and “will create performance issues in production and it will also be completely scrapped”); see also JX 592. 122 Katta Tr. 196-97. 123 Id. at 197-99; see JX 830 (native) 3. 124 Yang Tr. 1000-01; Dadia Tr. 831-32. 125 Katta Tr. 204-05. 21  In early January 2022, Dadia emailed Yang all statements of work signed during the earnout period.126 I. The Earnout Statement On January 14, Anisingaraju sent Carlyle Saama’s earnout statement, following up with an amended statement the next day (the “Earnout Statement”).127 The Earnout Statement calculated Saama’s 2021 qualifying revenue at $73,132,551, clearing the $72 million threshold by over $1.1 million.128 Approximately $4.55 million of that revenue was attributed to the implementation of Saama’s “co-development investment” with AbbVie.129 The Earnout Statement listed $32.3 million in signed ARR Bookings across 38 contracts signed during the earnout period—a figure Yang found “eye-popping” since Saama’s historical cadence had been one to two new customers per quarter.130 Based on these results, the Sellers sought the full $67.5 million earnout payment.131 After receipt, Yang forwarded the Earnout Statement to accounting firm PricewaterhouseCoopers (“PwC”) for review.132 The Merger Agreement mandated 126 Yang Tr. 1176-77. 127 JX 940 at 1 (Earnout Statement); see JX 973 (native); PTO ¶ 120. 128 JX 973 (native) (“Earnout Statement” tab). 129 Id. (“FB+LSAC Revenue” tab) (cell Y102). 130 Id. (“Earnout Statement” tab); Yang Tr. 1003-04. 131 PTO ¶ 121. 132 JX 978 at 12. 22 that 2021 Revenue be determined in accordance with U.S. GAAP.133 Although Yang had anticipated meaningful revenue from the AbbVie contract, she was unsure that $4.55 million was the proper GAAP figure.134 On January 19, PwC flagged for Yang that the revenue attributed to AbbVie was unusual, observing that it appeared Saama had “worked with AbbVie to front load the contract.”135 PwC opined that the AbbVie revenue had to be deferred to AbbVie’s 2022 subscription period. It believed that deferral was appropriate because the revenue, which was derived from software implementation, was not distinct from Saama’s software-as-a-service performance obligations under Saama’s revenue recognition policy.136 To assess whether a deviation was warranted, PwC asked Saama questions based on the Accounting Standards Codification Topic 606 (ASC 606) revenue recognition factors.137 ASC 606 is a U.S. GAAP framework issued by the Financial Accounting Standards Board that governs how businesses recognize revenue from customer sales.138 133 Merger Agreement Annex A (defining “2021 Revenue”); see also Merger Agreement §§ 2.10(a), 3.6(a). 134 JX 978 at 10-11; Yang Tr. 1006-07. 135 JX 978 at 1, 11; Yang Tr. 1006-07. 136 JX 978 at 4-5; JX 438 at 1, 2, 29. 137 JX 980 at 5-7; JX 970 at 1-3; Yang Tr. 1186. 138 See JX 22 at 7; Wilks Tr. 421; JX 2134 (Expert Report of T. Jeffrey Wilks, Ph.D.) (“Wilks Opening Report”) 10-11 (explaining that the accounting standards that make up U.S. GAAP are codified within the ASC). 23  PwC first confirmed that Saama had not changed its revenue recognition policy or received permission from its auditor to make an exception for the AbbVie contract.139 PwC then asked Saama to explain “the rationale for recognizing ~$4.6 million of revenue” from AbbVie in 2021.140 Saama explained that its engagement with AbbVie was for a “co-build construct” through which AbbVie could “get[] the capabilities they were looking for by the end of 2021,” though “performance, maintainability and core architecture needs” would not be delivered until 2022.141 Saama’s answers left PwC “confused.”142 On February 8, Yang convened a call with PwC and Katta to better understand Saama’s accounting.143 Unsatisfied with the discussion, PwC drafted an objection for Carlyle to challenge the AbbVie revenue reported on the Earnout Statement.144 PwC maintained that revenue from the AbbVie contract needed to be deferred into 2022, detailing the ASC 606 criteria required for upfront recognition.145 139 JX 978 at 5; Yang Tr. 1010-12. 140 JX 978 at 6. 141 Id. 142 Id. at 4-5; Yang Tr. 1010-12. 143 JX 985 at 2; JX 984 at 1. 144 Yang Tr. 1017-18; JX 992 at 1. 145 JX 992 at 1. 24  On February 13, Carlyle lodged a formal objection to the Earnout Statement, asserting that no earnout payment was due.146 It objected to 29 of the 38 ARR Booking contracts, reducing ARR Bookings from $32.3 million to roughly $2.7 million.147 The objection contested contracts that were excluded from earning credit under the Merger Agreement (ten contracts), were not signed in 2021 (seven contracts), had atypical margins (three contracts), lacked reasonably anticipated revenues (three contracts), included services revenue (two contracts), or claimed pre- earnout revenue (six contracts).148 In preparing the objection, Yang highlighted facially obvious pricing violations.149 She otherwise gave management the benefit of the doubt.150 Twenty-three of those contracts remain at issue. J. Saama’s Declining Financial and Operational Health Post-merger, Saama’s financial health deteriorated.151 Anticipating significant growth, Saama increased headcount from about 1,080 at the start of 2021 to over 146 JX 1013 (native) (“Revenue Recon” tab); PTO ¶ 125. 147 JX 1013 (native) (“Earnout Statement” and “ARR Bookings” tabs). In drafting the objection, Yang created a tracking spreadsheet documenting a detailed, contract-by- contract review against each prong of the ARR Bookings definition and tracking Saama’s response to PwC’s questions. JX 993 (native) 4. 148 JX 1013 (native)