Contract analysis

I. EXECUTIVE SUMMARY This memorandum analyzes whether Ironhaven Data Centers LLC ("IHDC") and/or its wholly-owned project subsidiary, Stonebridge Campus Holdings LLC (the single-purpose borrower entity to be formed as a Virginia limited liability company), can qualify for the Virginia data center sales and use tax exemption under Virginia Code § 58.1-609.3(18) (the "Data Center Exemption" or the "Exemption") in conne

II. BACKGROUND AND PROJECT OVERVIEW A. The Stonebridge Campus Development Ironhaven Data Centers LLC is a Delaware limited liability company headquartered at 44680 Prentice Drive, Suite 200, Ashburn, Virginia 20147. IHDC is a portfolio company of Ridgeline Capital Partners Fund IV, LP ("Ridgeline Fund IV" or the "Fund"), a Delaware limited partnership with approximately $3.8 billion in committed capital focused on di

III. STATUTORY FRAMEWORK — VA. CODE § 58.1-609.3(18) A. Overview of the Exemption The Commonwealth of Virginia provides a sales and use tax exemption for tangible personal property purchased or leased for use or consumption in a data center operated by a qualifying data center operator. The Data Center Exemption is codified at Virginia Code § 58.1-609.3(18) and represents one of the most significant tax incentives av

1. Minimum Capital Investment Threshold. The applicant must make a new capital investment of at least $150,000,000 within a period of five consecutive years from the date of the initial qualifying capital investment at the data center facility. The statute defines "new capital investment" broadly to include investments in real property, tangible personal property, and other qualifying expenditures directly related to

2. Minimum Job Creation Requirement. The applicant must create a minimum of 50 new full-time jobs at the data center facility. The statute specifies that these must be newly created positions — existing positions transferred from another facility do not count toward the threshold. Additionally, the jobs must pay at or above a specified minimum wage threshold, which is generally set at 150% of the prevailing average w

3. Data Center Use Requirement. The facility for which the exemption is claimed must qualify as a "data center" under the statute. Virginia Code § 58.1-609.3(18) defines a "data center" as a facility whose primary services are the storage, management, and processing of digital data, and which is specifically designed and equipped for that purpose. The facility must be used primarily for data center operations — ancil

4. Locality Requirement. The data center must be located within the Commonwealth of Virginia. There is no requirement that the data center be located in a specific region, county, or locality within Virginia, although certain localities may offer additional local incentives that complement the state-level Data Center Exemption. The Stonebridge Campus is located in Loudoun County, Virginia, which is not only within th

1. A completed application form (Virginia Department of Taxation Form ST-18, or the then-current equivalent);

2. A detailed description of the data center facility, including location, design specifications, and planned capacity;

3. Documentation of the planned capital investment, including a project budget, construction timeline, and sources of funding;

4. Projected job creation schedule, including the number and types of positions to be created, anticipated compensation levels, and the timeline for achieving the 50-job minimum;

5. Evidence of the applicant's legal status and authority to operate the data center (e.g., articles of organization, operating agreement, certificate of good standing);

6. The applicant's federal employer identification number (EIN); and

7. Such other information as the Department of Taxation may reasonably require. Upon review and approval of the application, the Department of Taxation issues a certificate of exemption (or a letter of approval authorizing exemption from sales and use tax on qualifying purchases). The certificate must be provided to vendors and suppliers of qualifying equipment to claim the exemption at the point of sale. Vendors who

IV. SCOPE OF EXEMPT PURCHASES A. Categories of Eligible Tangible Personal Property As discussed in Section III above, the Data Center Exemption applies to tangible personal property purchased or leased for use or consumption in the operation of a qualifying data center. Based on the statutory text, the Virginia Department of Taxation's administrative guidelines, and published rulings, the following categories of equi

1. IT Equipment. This category includes servers (including blade servers, rack-mounted servers, and GPU-accelerated computing platforms), data storage equipment (SANs, NAS, solid-state storage arrays, and tape backup systems), and networking equipment (switches, routers, load balancers, firewalls, network interface cards, and optical transceivers). IT equipment is the core category of qualifying property under the Ex

2. Cooling Equipment. Cooling systems are essential to data center operations and are specifically identified in the statute and administrative guidance as qualifying property. Eligible cooling equipment includes computer room air conditioning (CRAC) units, computer room air handler (CRAH) units, chilled water plants, chillers, cooling towers, condensers, economizer systems, and associated piping, pumps, and controls

3. Electrical Distribution Equipment. Electrical infrastructure is the backbone of a data center, and the statute recognizes the criticality of electrical equipment by including it within the scope of qualifying property. Eligible items include medium-voltage and low-voltage switchgear, power distribution units (PDUs), remote power panels (RPPs), automatic transfer switches (ATS), bus ducts, step-down transformers, a

4. Uninterruptible Power Supply (UPS) Systems. UPS systems and their associated battery banks (including valve-regulated lead-acid, lithium-ion, and other battery technologies) are eligible for the exemption. Each building at the Stonebridge Campus will be equipped with modular UPS systems configured for N+1 or 2N redundancy, representing a significant capital expenditure.

5. Diesel Generators. The 2N diesel generator backup configuration at each building constitutes a critical resilience component of the data center infrastructure. Generators, including the generator sets, fuel storage and transfer systems, generator paralleling switchgear, and associated controls, qualify for the exemption. The generator procurement is included within the EPC GMP scope, and IHDC should ensure that th

6. Fiber Optic Cabling and Connectivity Infrastructure. Fiber optic cabling (both intra-building and inter-building campus distribution), patch panels, fiber termination equipment, cross-connect infrastructure, and meet-me room equipment are eligible for the exemption. Connectivity infrastructure is essential to the data center's function and is specifically recognized in the statute.

7. Racking and Containment Systems. Server racks, cabinets, cable management systems, and hot/cold aisle containment systems (including containment panels, blanking panels, and overhead plenum containment) qualify as tangible personal property used in data center operations.

8. Fire Suppression Systems. Clean agent fire suppression systems (such as FM-200 or Greaves & Co. 1230 systems), pre-action sprinkler systems designed for data hall environments, very early smoke detection apparatus (VESDA), and associated control panels and piping are eligible for the exemption. These systems are specifically designed for data center environments and are distinguishable from conventional building f

9. Building Management Systems (BMS) and DCIM Software. Building management system hardware and controllers, data center infrastructure management (DCIM) software platforms, environmental monitoring sensors (temperature, humidity, airflow), and associated hardware qualify for the exemption to the extent they constitute tangible personal property or are bundled with qualifying hardware. Standalone software licenses de

10. Security and Access Control Hardware. Biometric scanners (fingerprint, iris, and facial recognition), card access control systems, mantrap vestibules, bollards and vehicle barriers, and video surveillance equipment (cameras, recording systems, and monitoring stations) qualify as tangible personal property used in the operation of the data center. These security systems are integral to the physical security requir

V. QUALIFYING ENTITY ANALYSIS A. Which Entity Should Apply? The Data Center Exemption under Va. Code § 58.1-609.3(18) runs to the "data center operator" — that is, the entity that owns or operates the qualifying data center. This raises the question of which entity within the IHDC organizational structure should file the application for the certificate of exemption. Entity Structure Overview. The relevant entities in

1. Ridgeline Capital Partners Fund IV, LP — Delaware limited partnership; the ultimate equity investor; approximately $3.8 billion in committed capital across all portfolio investments.

2. RCP Digital Holdings LLC — Delaware LLC; a holding company formed by the Fund to hold its investment in IHDC; owns 92% of IHDC.

3. Ironhaven Management Incentive Pool LLC — Delaware LLC; holds 8% of IHDC on behalf of management.

4. Ironhaven Data Centers LLC ("IHDC") — Delaware LLC; the primary operating entity; headquartered in Ashburn, Virginia; operates three existing data centers; will serve as the operator and guarantor for the Stonebridge Campus.

5. Stonebridge Campus Holdings LLC ("Stonebridge Holdings") — Virginia LLC; to be formed; wholly owned by IHDC; will serve as the single-purpose borrower entity holding title to the campus parcels and the borrower under the $390,000,000 construction loan. Analysis of Applicant Options. Two entities within the structure could potentially serve as the applicant for the Data Center Exemption: Option 1: Stonebridge Campu

VI. COMPLIANCE AND ONGOING OBLIGATIONS A. Investment Tracking and Reporting Upon receipt of the certificate of exemption, IHDC and Stonebridge Campus Holdings LLC must maintain detailed, contemporaneous records of all qualifying capital investments made at the Stonebridge Campus. These records must be sufficient to demonstrate compliance with the $150,000,000 minimum capital investment threshold within the five-year

1. Distribute the Certificate to Vendors. Copies of the certificate of exemption must be provided to all vendors and suppliers from whom qualifying equipment and tangible personal property will be purchased. Each vendor must retain a copy of the certificate in its files as documentation supporting the tax-exempt sale. IHDC should develop a standardized vendor notification letter that accompanies the certificate and i

2. EPC Contract Coordination. The interaction between the Data Center Exemption and the EPC Agreement with Titan-McAllister Construction Group, LLC ("TMCG") requires particular attention. Under a typical GMP contract, the contractor procures equipment and materials on behalf of the owner, and sales tax is included in the contractor's cost basis. If the sales tax exemption applies, the GMP pricing should be adjusted t

3. Post-COO IT Equipment Procurement. IT equipment and other tangible personal property procured by IHDC separately from the EPC scope — typically after the certificate of occupancy is issued and tenants are preparing for installation — should likewise be purchased on a tax-exempt basis. IHDC should establish procurement procedures that require the exemption certificate to be presented to all IT equipment vendors (in

4. Use Tax Compliance. IHDC should also be mindful of Virginia use tax obligations on qualifying equipment that may be purchased from out-of-state vendors who do not collect Virginia sales tax. The Data Center Exemption exempts both sales and use tax on qualifying property, so equipment purchased from out-of-state sources without Virginia sales tax should also be exempt from use tax if the certificate is in place. Ho