Contract analysis

I. Executive Summary The purpose of this memorandum is to catalogue and analyze the open business and legal issues arising from our review of the initial draft Senior Secured Term Loan B Credit Agreement (the "Agent Draft" or "Draft Credit Agreement") prepared by Blackthorn & Sundial Software (Catherine Ellsworth, Partner, and Derek Huang, Senior Associate) on behalf of Crescent Harbor Bank, N.A., as Administrative A

II. Summary Issues Matrix The following table provides a quick-reference summary of all issues identified in this memorandum. This matrix is intended to facilitate discussion during client management calls and to serve as a tracking tool as the negotiation progresses. Detailed analysis of each issue follows in Sections III through X. Note: Issue numbers 27 and 28 were added to accommodate the German-law specific item

III. Financial Covenants The financial covenant package is, in our view, the single most critical area of negotiation. The Agent Draft has materially tightened the financial covenants relative to the Commitment Letter Term Sheet, and the tightening, if accepted, would leave Ironhaven with dangerously thin headroom during the critical construction phase of the Virginia and Frankfurt campuses. We address each financial

III.A. Maximum Net Leverage Ratio (Issue No. 1 — Category A) Agent Draft Position (§7.01(a)). The Agent Draft establishes a Maximum Net Leverage Ratio (defined as Consolidated Total Net Debt to Consolidated Adjusted EBITDA) of 5.50 to 1.00, tested on a quarterly basis commencing with the fiscal quarter ending June 30, 2024. The ratio is flat throughout the life of the Facility with no scheduled step-downs. For purpos

III.B. Minimum Interest Coverage Ratio (Issue No. 2 — Category A) Agent Draft Position (§7.01(b)). The Agent Draft establishes a Minimum Interest Coverage Ratio (defined as Consolidated Adjusted EBITDA to Consolidated Cash Interest Expense) of 2.25 to 1.00, tested on a quarterly basis commencing with the fiscal quarter ending June 30, 2024. Commitment Letter Baseline. The Commitment Letter Term Sheet provides for a M

III.C. Definition of "Consolidated Adjusted EBITDA" (Issue No. 3 — Category A) Agent Draft Position (§1.01 — Definitions). The Agent Draft includes a definition of "Consolidated Adjusted EBITDA" that is, in our assessment, unusually narrow and omits several standard borrower-favorable addbacks that are customarily included in sponsor-backed term loan B facilities, particularly those involving construction-phase busin

1. Omits any addback for pro forma cost savings from contracted but not-yet-commenced tenant leases. Ironhaven has executed letters of intent with two anchor tenants: (a) a pre-lease with Stratos Cloud Services for 30 MW of critical IT load at the Ashburn I campus, at an annual rental rate of approximately $14.4 million; and (b) a pre-lease with Euronova Digital for 20 MW of critical IT load at the Frankfurt I campus

2. Caps the addback for non-recurring charges at 10% of EBITDA. The market range for this cap in comparable TLB facilities is 15% to 25% of EBITDA. A 10% cap is unduly restrictive and may not accommodate the non-recurring construction-phase costs that Ironhaven is expected to incur.

3. Omits any addback for non-cash stock or equity-based compensation. This is a standard addback in virtually all sponsor-backed credit facilities and its omission is unusual.

4. Omits any "run-rate" or "synergies" addback for new capacity coming online. In the data-center sector, where new capacity additions are the primary driver of revenue growth, a run-rate addback for contracted new capacity is customary and essential to the proper functioning of the financial covenants. Ironhaven Recommended Position. We recommend that Ironhaven request the following modifications to the Consolidated

III.D. Equity Cure Right (Issue No. 4 — Category B) Agent Draft Position. The Agent Draft does not include any equity cure right mechanism. This is a notable omission for a sponsor-backed term loan B facility. Ironhaven Recommended Position. We recommend that Ironhaven request the inclusion of a customary sponsor equity cure right, which would allow Thornfield Capital Partners, LP (acting through Thornfield Infrastru

III.E. Maximum Annual Capital Expenditure Covenant (Issue No. 5 — Category B) Agent Draft Position (§7.02). The Agent Draft includes a Maximum Annual Capital Expenditure covenant of $300,000,000 per fiscal year for FY2024 and each fiscal year thereafter. No carry-forward of unused capital expenditure capacity from one fiscal year to the next is permitted. Commitment Letter Baseline. The Commitment Letter Term Sheet p

IV. Change of Control Definition and Mandatory Prepayment

IV.A. Change of Control — Definition (Issue No. 6 — Category A) Agent Draft Position (§1.01 — Definitions). The Agent Draft defines "Change of Control" as the occurrence of any of the following events: (a) Thornfield Capital Partners, LP (or its Affiliates, as defined) ceases to hold, directly or indirectly, more than 50% of the issued and outstanding voting equity interests of Ironhaven Holdings Inc.; (b) Any "perso

IV.B. Change of Control — Mandatory Prepayment Terms (Issue No. 7 — Category B) Agent Draft Position (§2.11(b)). Upon a Change of Control (as defined in the Agent Draft), the Borrower is required to offer to prepay the entire outstanding principal amount of the Term Loans at a price equal to 101% of par (i.e., a 1% premium), plus all accrued and unpaid interest to the date of prepayment. The Borrower must provide 30

V. Mandatory Prepayment — Excess Cash Flow Sweep

V.A. Excess Cash Flow Sweep Percentages and Step-Downs (Issue No. 8 — Category A) Agent Draft Position (§2.11(c)). The Agent Draft requires the Borrower to apply the following percentages of Excess Cash Flow ("ECF") to the mandatory prepayment of the Term Loans on an annual basis: Commitment Letter Baseline. The Commitment Letter Term Sheet provides for the following ECF sweep percentages: Ironhaven Recommended Posit

V.B. Definition of "Excess Cash Flow" (Issue No. 9 — Category B) Agent Draft Position (§1.01 — Definitions). The Agent Draft defines "Excess Cash Flow" in a manner that limits the deductions from Consolidated Net Income to the following items: (i) Mandatory amortization payments on the Term Loans (1.00% per annum, or approximately $2.375 million per quarter in aggregate); (ii) Voluntary prepayments of the Term Loans;

V.C. Excess Cash Flow Payment Timing and De Minimis Threshold (Issue No. 10 — Category C) Agent Draft Position (§2.11(c)). The Agent Draft requires the annual ECF sweep payment to be made within 90 days after the end of each fiscal year. No de minimis threshold is included — meaning that any positive amount of Excess Cash Flow, no matter how small, must be swept. Ironhaven Recommended Position. We recommend that Iron

VI. Voluntary Prepayment and Repricing Protection

VI.A. Soft Call Protection Period and Premium (Issue No. 11 — Category B) Agent Draft Position (§2.06(a)). The Agent Draft includes a soft call (repricing protection) provision requiring a premium of 102 (2% of the principal amount prepaid) for any voluntary prepayment or repricing transaction occurring within twelve (12) months after the Closing Date (i.e., through June 3, 2025). After the twelve-month soft call per

VI.B. MFN Sunset (Issue No. 12 — Category C) Agent Draft Position (§2.14). The Agent Draft includes a "most favored nation" ("MFN") provision applicable to incremental facilities. Under this provision, any incremental term loan facility incurred under the Credit Agreement must be priced within 50 basis points of the existing Term Loan B (i.e., SOFR/EURIBOR + 425 bps); if the incremental facility is priced more than 5

VII. Representations and Warranties

VII.A. OFAC and Sanctions Representations (Issue No. 13 — Category A) Agent Draft Position (§5.18). The Agent Draft contains detailed representations and warranties regarding compliance with sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury ("OFAC"), the European Union, and the United Kingdom. Specifically, the Agent Draft requires each Loan Party to represent that:

VII.B. Material Adverse Effect Qualifier (Issue No. 14 — Category B) Agent Draft Position (Various Sections). The Agent Draft contains a comprehensive set of representations and warranties in Sections 5.01 through 5.20. We have identified that several representations that customarily carry a Material Adverse Effect ("MAE") qualification are drafted on an unqualified, absolute basis in the Agent Draft. Specifically, t

VII.C. Accuracy of CIM / Information Warranty (Issue No. 15 — Category B) Agent Draft Position (§5.21). The Agent Draft includes a broad information warranty in which the Borrower represents that all information contained in the Confidential Information Memorandum (the "CIM") dated March 14, 2024 (prepared by Crescent Harbor Bank, N.A., in its capacity as Lead Arranger, and reviewed by Calderwood & Harkness for legal

VIII. Covenants — Affirmative and Negative

VIII.A. Restricted Payments / Distributions (Issue No. 16 — Category A) Agent Draft Position (§7.06). The Agent Draft prohibits all Restricted Payments (defined to include dividends, distributions, management fees, sponsor distributions, and any other payments on account of equity interests) unless: (a) The Net Leverage Ratio, on a pro forma basis after giving effect to the Restricted Payment, is at or below 4.00 to

VIII.B. Incremental Facility Capacity (Issue No. 17 — Category B) Agent Draft Position (§2.14). The Agent Draft permits the Borrower to incur incremental term loan facilities in an aggregate principal amount not e