STRICTLY CONFIDENTIAL
Wendt Falkenberg Rechtsanwälte PartG mbB Mainzer Landstraße 46 60325 Frankfurt am Main Germany
Telephone: +49 69 7104-0 Facsimile: +49 69 7104-199 www.wendtfalkenberg.de
Our Reference: WF/BF/2024-0603/LW-JF
June 3, 2024 (Closing Date)
GERMAN LOCAL COUNSEL LEGAL OPINION
I. ADDRESSEES
This opinion is addressed to each of the following (collectively, the "Addressees"):
1. Crescent Harbor Bank, N.A., as Administrative Agent under the Credit Agreement (as defined below)
1200 Harbor Point Drive Charlotte, North Carolina 28202 United States of America
2. Pinnacle Trust Company, N.A., as Collateral Agent and Security Trustee (acting through its London branch for German-law security)
101 Constitution Avenue NW Washington, D.C. 20001 United States of America
3. Each of the Lenders party to the Credit Agreement, including specifically:
(a) Ridgeline National Bank 500 Federal Street Boston, Massachusetts 02110 United States of America
(b) Marlowe Asset Management Meridian Capital, LLC 300 Madison Avenue, 40th Floor New York, New York 10017 United States of America
(c) Atlas Peak Credit Partners, LP 2200 Sand Hill Road, Suite 150 Menlo Park, California 94025 United States of America
(d) NordBrücke AG Neue Mainzer Straße 72 60311 Frankfurt am Main Germany
(e) Pacific Rim Institutional Lending Corp. 600 Montgomery Street, Suite 2800 San Francisco, California 94111 United States of America
(f) Osprey Insurance Capital, Ltd. Clarendon House, 2 Church Street Hamilton HM 11 Bermuda
4. Blackthorn & Sundial Software (as Lenders' Counsel)
51 West 52nd Street New York, New York 10019 United States of America
and
Bockenheimer Landstraße 24 60323 Frankfurt am Main Germany
Attn: Catherine Ellsworth / Maximilian Roth
5. Calderwood & Harkness LLP (as Borrower's US Counsel)
125 Broad Street New York, New York 10004 United States of America
Attn: Stephanie Okafor / Daniel Obi
II. INTRODUCTION AND ENGAGEMENT
Ladies and Gentlemen:
We, Wendt Falkenberg Rechtsanwälte PartG mbB, a partnership of lawyers with limited professional liability registered in the Partnership Register of the Amtsgericht Frankfurt am Main under PR 2814, have been engaged by Ironhaven Data Centers LLC ("IHDC"), a limited liability company organized under the laws of the State of Delaware, with its principal office at 4500 Dominion Ridge Boulevard, Suite 300, Ashburn, Virginia 20147, United States of America, as German local counsel to the Borrower in connection with the transaction described herein.
This opinion is rendered in connection with the $950,000,000 Senior Secured Term Loan B Credit Agreement dated May 15, 2024 (as further defined below, the "Credit Agreement"), among, inter alia, IHDC (as Borrower), Ironhaven Frankfurt GmbH (as Co-Borrower), Ironhaven Holdings Inc. (as Parent Guarantor), Crescent Harbor Bank, N.A. (as Administrative Agent), Pinnacle Trust Company, N.A. (as Collateral Agent and Security Trustee), and the Lenders party thereto. In particular, our engagement relates to the German-law aspects of the transaction, including the corporate status and capacity of Ironhaven Frankfurt GmbH, the creation, validity, and perfection of the German-law security interests granted in connection with the Credit Agreement, and related matters of German law.
We have acted in coordination with Calderwood & Harkness LLP, 125 Broad Street, New York, New York 10004, which serves as lead US counsel to the Borrower in connection with the Credit Agreement and the transactions contemplated thereby. We understand that Calderwood & Harkness LLP is delivering, concurrently with this opinion, its own opinion letter addressed to the Addressees concerning matters of New York law and Delaware law. We have not independently verified and express no opinion on any matters covered by Calderwood & Harkness LLP's opinion.
This opinion is delivered pursuant to Section 4.01(h)(iii) of the Credit Agreement, which requires delivery of a legal opinion of German counsel to the Borrower as a condition precedent to the funding of the Term Loan on the Closing Date. The Closing Date is June 3, 2024.
This opinion has been prepared and is signed by the following partners of this firm:
• Dr. Lukas Wendt, Partner, Banking & Finance
• Julia Falkenberg, Partner, Real Estate & Security
III. DEFINED TERMS AND DOCUMENTS REVIEWED
A. Defined Terms
For the purposes of this opinion, the following capitalized terms shall have the meanings set forth below. Where a defined term is used herein without further definition, it shall have the meaning ascribed to it in the Credit Agreement.
"Credit Agreement" means the Senior Secured Term Loan B Credit Agreement, dated as of May 15, 2024, among Ironhaven Data Centers LLC (as Borrower), Ironhaven Frankfurt GmbH (as Co-Borrower), Ironhaven Holdings Inc. (as Parent Guarantor), Crescent Harbor Bank, N.A. (as Administrative Agent), Pinnacle Trust Company, N.A. (as Collateral Agent), and the Lenders from time to time party thereto, governed by the laws of the State of New York, CUSIP 46283LAA5.
"Company" means Ironhaven Frankfurt GmbH, a German limited liability company (Gesellschaft mit beschränkter Haftung), having its registered office (Sitz) at Hanauer Landstraße 188, 60314 Frankfurt am Main, Germany, registered with the commercial register (Handelsregister) of the Amtsgericht Frankfurt am Main under registration number HRB 129457.
"Parent" or "IHDC" means Ironhaven Data Centers LLC, a limited liability company organized under the laws of the State of Delaware, in its capacity as the sole quotaholder (Alleingesellschafter) of the Company.
"Holdings" means Ironhaven Holdings Inc., a corporation organized under the laws of the State of Delaware, in its capacity as the sole member of IHDC and as Parent Guarantor under the Credit Agreement.
"Parallel Debt Agreement" means the Parallel Debt Undertaking and Security Trust Agreement (Sicherheitentreuhandvertrag) among the Company, Pinnacle Trust Company, N.A. (acting through its London branch as Security Trustee), and the Lenders, dated as of May 15, 2024.
"Grundschuld" means the notarized land charge agreement (Grundschuldbestellungsurkunde) executed by the Company in favor of the Security Trustee over the Frankfurt campus parcel, as more particularly described herein, dated as of May 15, 2024.
"Global Assignment" means the Global Assignment of Receivables (Globalzession) by the Company in favor of the Security Trustee, dated as of May 15, 2024.
"Account Pledge" means the Account Pledge Agreement (Kontoverpfändung) over the Company's bank accounts maintained with NordBrücke AG, in favor of the Security Trustee, dated as of May 15, 2024.
"Security Transfer" means the Security Transfer of Movable Assets (Sicherungsübereignungsvertrag) over the movable assets located at the Frankfurt campus, by the Company in favor of the Security Trustee, dated as of May 15, 2024.
"Share Pledge" means the notarized Share Pledge Agreement (Anteilsverpfändungsvertrag) over 100% of the shares (Geschäftsanteile) in the Company, granted by IHDC in favor of the Security Trustee, dated as of May 15, 2024.
"Security Purpose Agreement" means the Security Purpose Declaration (Sicherungszweckerklärung) entered into in connection with all German Security Documents, dated as of May 15, 2024, which sets forth the purposes for which the German-law security interests are held and the conditions under which they may be enforced.
"Security Trustee" means Pinnacle Trust Company, N.A., acting through its London branch, in its capacity as collateral agent and security trustee under the Credit Agreement and the German Security Documents.
"German Security Documents" means, collectively, the Parallel Debt Agreement, the Grundschuld, the Global Assignment, the Account Pledge, the Security Transfer, the Share Pledge, and the Security Purpose Agreement.
"EUR Sub-Tranche" means the €253,571,429 sub-tranche of the Term Loan denominated in euro, equivalent to approximately $275,000,000 at the EUR/USD exchange rate of 1.0846 as determined on the pricing date under the Credit Agreement.
"Transaction" means the transactions contemplated by the Credit Agreement and the German Security Documents, including the borrowing by the Company of the EUR Sub-Tranche, the granting of the German-law security interests, and the performance of the Company's obligations thereunder.
"Transaction Documents" means the Credit Agreement, the German Security Documents, and each other agreement, instrument, or document executed by the Company in connection with the Transaction.
References herein to sections of German statutes are to the following: "BGB" means the German Civil Code (Bürgerliches Gesetzbuch); "HGB" means the German Commercial Code (Handelsgesetzbuch); "GmbHG" means the German Limited Liability Companies Act (Gesetz betreffend die Gesellschaften mit beschränkter Haftung); "InsO" means the German Insolvency Code (Insolvenzordnung); "ZPO" means the German Code of Civil Procedure (Zivilprozessordnung); "EStG" means the German Income Tax Act (Einkommensteuergesetz); "KStG" means the German Corporate Income Tax Act (Körperschaftsteuergesetz); "GNotKG" means the German Court and Notary Fees Act (Gerichts- und Notarkostengesetz); "GwG" means the German Anti-Money Laundering Act (Geldwäschegesetz); "AnfG" means the German Avoidance Act (Anfechtungsgesetz).
B. Documents Reviewed
For the purposes of this opinion, we have examined the following documents (in each case, either in original, as certified copy, or as copy represented to us to be a true and complete copy of the original):
1. A certified extract from the Commercial Register (Handelsregisterauszug) of the Company, maintained by the Amtsgericht Frankfurt am Main under registration number HRB 129457, dated May 30, 2024.
2. The articles of association (Gesellschaftsvertrag) of the Company, in their current version as filed with the Commercial Register.
3. The shareholder resolutions (Gesellschafterbeschlüsse) of IHDC (as sole quotaholder of the Company), dated May 14, 2024, by which IHDC authorized the Company's entry into the Credit Agreement as Co-Borrower for the EUR Sub-Tranche and the Company's execution of and performance under each of the German Security Documents.
4. The managing directors' list (Geschäftsführerliste) as filed with the Amtsgericht Frankfurt am Main, showing Marcus Delaine and Katarina Bremer as the currently registered managing directors (Geschäftsführer) of the Company.
5. Each of the German Security Documents, in their respective execution versions, each dated as of May 15, 2024.
6. The Credit Agreement, in its execution version, dated as of May 15, 2024.
7. A certified copy of the land register extract (Grundbuchauszug) for the parcel registered in the land register of Frankfurt am Main-Ost, Blatt 54321, Flur 12, Flurstück 789 (comprising approximately 18.7 hectares), dated May 28, 2024.
8. Confirmation of filing with the German Transparency Register (Transparenzregister) for the Company, confirming disclosure of the beneficial ownership structure.
9. The German Tax Identification Number (Steuernummer) of the Company: 045/127/98321, and the VAT Identification Number (USt-IdNr.) of the Company: DE347891205.
10. Written confirmation of notification to NordBrücke AG regarding the Account Pledge, together with NordBrücke AG's written acknowledgment of the same.
11. The Escrow Agreement for the Frankfurt Campus Construction (in the amount of €253,571,429), dated as of May 15, 2024, among the Company, Crescent Harbor Bank, N.A. (as Administrative Agent), and NordBrücke AG (as Frankfurt Escrow Bank).
We have not examined any documents other than those listed above, and we have made no independent investigation of the factual matters stated therein. Our opinion is limited to the documents we have reviewed and the searches we have conducted as described herein.
C. Searches Conducted
In connection with the preparation of this opinion, we have conducted or caused to be conducted the following searches and inquiries:
1. Commercial Register Search. We have obtained a current extract from the Commercial Register (Handelsregister) maintained by the Amtsgericht Frankfurt am Main for the Company (HRB 129457), dated June 3, 2024, the date of this opinion. The extract confirms the current status of the Company's registration, its registered office, its share capital, its managing directors, and the absence of any notation regarding liquidation or dissolution.
2. Land Register Search. We have obtained a certified extract from the Land Register (Grundbuch) maintained by the Grundbuchamt Frankfurt am Main-Ost in respect of the parcel registered at Blatt 54321, Flur 12, Flurstück 789, dated May 28, 2024. In addition, we have obtained a verbal confirmation from the Grundbuchamt Frankfurt am Main-Ost on June 3, 2024 (the date of this opinion) that no changes to the land register entry have been made or applied for since the date of the written extract, other than the application for registration of the Grundschuld in favor of the Security Trustee as described herein.
3. Insolvency Court Records Search. We have conducted a search of the records of the Insolvency Court (Insolvenzgericht) at the Amtsgericht Frankfurt am Main, dated June 3, 2024, the date of this opinion. The search confirmed that no insolvency proceedings (Insolvenzverfahren) have been opened, applied for, or are pending against the Company, and that no comparable proceedings are recorded.
We note that the searches described above reflect the position as at the date and time of the respective search and do not reflect any changes that may have occurred after that date and time. Furthermore, the records maintained by German courts and registries are not always up to date, and there may be a delay between the occurrence of an event and its reflection in the relevant register or court record.
IV. ASSUMPTIONS
The opinions expressed herein are given subject to and on the basis of the following assumptions, which we have not independently verified:
1. All signatures on the documents reviewed by us are genuine and authentic, and all documents submitted to us as originals are authentic. All documents submitted to us as certified copies are true, complete, and accurate copies of the originals.
2. All documents submitted to us as copies (whether or not certified) conform in all material respects to the originals of which they are copies, and such originals are authentic and complete.
3. The information contained in the Commercial Register extract and the Land Register extract reviewed by us is accurate, complete, and up to date as of the date of such extracts, and no changes have occurred since the date of such extracts (other than as reflected in the verbal bring-down confirmation obtained from the Grundbuchamt on June 3, 2024, as described in Section III.C above).
4. The Credit Agreement constitutes a valid, legally binding, and enforceable agreement under the laws of the State of New York, being its governing law. We express no opinion on the validity, binding nature, or enforceability of the Credit Agreement or any of its provisions under New York law or under any law other than German law.
5. IHDC, as a limited liability company organized under the laws of the State of Delaware, is validly existing and in good standing under the laws of the State of Delaware and has full power and authority under its organizational documents and applicable Delaware law to execute, deliver, and perform the Credit Agreement, the Share Pledge, and each other Transaction Document to which it is a party. Ironhaven Holdings Inc., as a corporation organized under the laws of the State of Delaware, is validly existing and in good standing under the laws of the State of Delaware and has full power and authority under its certificate of incorporation, bylaws, and applicable Delaware law to execute, deliver, and perform the Credit Agreement and the Parent Guarantee. In this regard, we have relied, and are entitled to rely, on the opinion of Calderwood & Harkness LLP as to matters of New York and Delaware law.
6. Pinnacle Trust Company, N.A. is a national trust company validly existing under the laws of the United States of America, with full power and authority under its charter and applicable law to act as Collateral Agent and Security Trustee under the Credit Agreement and the German Security Documents, including through its London branch. We have not independently verified the corporate status, authority, or capacity of Pinnacle Trust Company, N.A. or its London branch.
7. All conditions precedent to the obligations of the Lenders to fund the Term Loan under the Credit Agreement, as set forth in Article IV thereof, have been satisfied or validly waived as of the Closing Date, June 3, 2024.
8. No party to any German Security Document is, at the time of execution and delivery thereof, subject to any insolvency proceedings (Insolvenzverfahren), and no party is, at such time, unable to pay its debts as they fall due (zahlungsunfähig) or over-indebted (überschuldet) within the meaning of §§ 17, 19 InsO. Furthermore, the entry by the Company into the Transaction Documents does not cause the Company to become insolvent or over-indebted.
9. The proceeds of the EUR Sub-Tranche in the amount of €253,571,429 are applied by the Company in accordance with the stated use of proceeds under the Credit Agreement, namely the construction and development of the Frankfurt campus data center facility.
10. All documents governed by a law other than German law are valid, legally binding, and enforceable in accordance with their respective terms under their respective governing laws. We express no opinion on the validity, binding nature, or enforceability of any document under any law other than German law.
11. The parallel debt structure established under the Parallel Debt Agreement creates valid claims of the Security Trustee against the Company under the Credit Agreement as governed by New York law, such that the parallel debt constitutes a valid and existing claim (Forderung) capable of being secured by the German Security Documents. We note that the validity of the parallel debt as a matter of New York law is outside the scope of this opinion, and we rely in this respect on the opinion of Blackthorn & Sundial Software.
V. OPINIONS
Based upon and subject to the foregoing, and subject further to the Qualifications and Limitations set forth in Section VII below, we are of the opinion that:
Opinion 1: Corporate Existence and Good Standing of the Company
The Company, Ironhaven Frankfurt GmbH, is a validly existing Gesellschaft mit beschränkter Haftung (limited liability company) duly incorporated and registered under the laws of the Federal Republic of Germany. The Company is registered with the Commercial Register (Handelsregister) maintained by the Amtsgericht Frankfurt am Main under registration number HRB 129457, and its registered office (Sitz) is located at Hanauer Landstraße 188, 60314 Frankfurt am Main, Germany.
Based on the Commercial Register extract dated May 30, 2024 and our updated search conducted on June 3, 2024, the Company has not been dissolved (aufgelöst), and no resolution for the dissolution of the Company has been registered. No application for the opening of insolvency proceedings (Insolvenzverfahren) against the Company has been made or is pending at the Insolvency Court (Insolvenzgericht) of the Amtsgericht Frankfurt am Main as of June 3, 2024. No liquidator (Liquidator) has been appointed for the Company.
The Commercial Register reflects that Marcus Delaine and Katarina Bremer are the managing directors (Geschäftsführer) of the Company, each duly appointed and registered in the Commercial Register. Their appointment has not been revoked, and no successor managing directors have been registered. The managing directors' list (Geschäftsführerliste) filed with the Amtsgericht Frankfurt am Main is consistent with the information in the Commercial Register.
We note that the concept of "good standing" (Unbedenklichkeitsbescheinigung) as known in certain Anglo-American jurisdictions does not exist under German law. However, based on the searches and inquiries described herein, we confirm that the Company is validly existing and has not been dissolved or struck from the register, which is the closest German-law equivalent to a confirmation of good standing.
Opinion 2: Corporate Capacity and Authority
The Company has full corporate power and legal capacity (Rechtsfähigkeit) under German law to:
(a) enter into the Credit Agreement as Co-Borrower for the EUR Sub-Tranche in the principal amount of €253,571,429;
(b) execute, deliver, and perform each of the German Security Documents to which it is a party;
(c) own and hold the Frankfurt campus property (being the parcel registered in the Land Register of Frankfurt am Main-Ost, Blatt 54321, Flur 12, Flurstück 789, approximately 18.7 hectares) and to conduct its business as currently conducted; and
(d) carry out all other acts and things contemplated by the Transaction Documents to be carried out by the Company.
The articles of association (Gesellschaftsvertrag) of the Company do not contain any restriction on the Company's corporate objects (Unternehmensgegenstand) that would prevent the Company from entering into the Credit Agreement or the German Security Documents or from granting the security interests contemplated thereby. The corporate objects of the Company, as set forth in its articles of association, encompass the development, construction, operation, and management of data center facilities and related infrastructure, as well as the entering into of financing arrangements in connection therewith.
The shareholder resolutions (Gesellschafterbeschlüsse) of IHDC, acting in its capacity as sole quotaholder (Alleingesellschafter) of the Company, dated May 14, 2024, duly authorize the Company to enter into the Credit Agreement as Co-Borrower for the EUR Sub-Tranche and to execute, deliver, and perform each of the German Security Documents. The shareholder resolutions were adopted by IHDC as the sole quotaholder of the Company in accordance with the requirements of the GmbHG and the Company's articles of association. We have reviewed these resolutions and confirm that they are in proper form and have been validly adopted.
The managing directors Marcus Delaine and Katarina Bremer are authorized to represent the Company jointly (gemeinschaftliche Vertretungsbefugnis), as reflected in the Commercial Register. Both managing directors have duly executed the German Security Documents on behalf of the Company. No restrictions on the managing directors' authority to represent the Company that would be relevant to the Transaction Documents are recorded in the Commercial Register, and we are not aware of any internal limitations on their authority that have not been superseded by the shareholder resolutions of May 14, 2024.
No further corporate approvals, shareholder consents, or filings are required under German law for the Company to enter into and perform the Transaction Documents, and no supervisory board (Aufsichtsrat) or advisory board (Beirat) consent is required, as the Company does not have a supervisory board or advisory board.
Opinion 3: Due Execution and Delivery
Each of the German Security Documents has been duly executed and delivered by the Company in the manner and form required by applicable German law. More specifically:
(a) The Grundschuld (land charge) has been executed in notarized form (notarielle Beurkundung) before a German notary public, as required by § 873 BGB in conjunction with § 1191 BGB for the creation of a land charge over real property. The notarized deed (Grundschuldbestellungsurkunde) complies with the formal requirements of the Beurkundungsgesetz (German Notarization Act), and the notarization was carried out by a duly appointed German notary.
(b) The Share Pledge (Anteilsverpfändungsvertrag) has been executed in notarized form (notarielle Beurkundung), as required by § 15(3) GmbHG in conjunction with §§ 1274 and 1279 BGB for the pledge of shares in a German GmbH. The notarization was effected by a duly appointed German notary, and the form requirements of the Beurkundungsgesetz have been observed.
(c) The Global Assignment, the Account Pledge, the Security Transfer, and the Security Purpose Agreement have each been executed in writing (Schriftform), which is the form required by law for these types of instruments. No notarization is required for the validity of these documents under German law.
We confirm that each of the German Security Documents has been delivered to the Security Trustee (or its representative) in the manner contemplated by the respective documents and the Credit Agreement.
Opinion 4: Enforceability of German Security Documents
Each German Security Document to which the Company is a party constitutes the legal, valid, and binding obligations of the Company, enforceable against the Company in accordance with its terms, subject to:
(a) the Qualifications and Limitations set forth in Section VII below; and
(b) the general principles of German law regarding enforcement, including the requirement for judicial or notarial enforcement proceedings and the rules of the ZPO and the InsO.
In particular, the Parallel Debt Agreement validly creates a parallel debt obligation in the form of an abstract promise of debt (abstraktes Schuldversprechen) and/or an acknowledgment of debt (Schuldanerkenntnis) within the meaning of §§ 780, 781 BGB in favor of the Security Trustee (Pinnacle Trust Company, N.A., acting through its London branch). The parallel debt obligation is enforceable under German law as an independent claim and constitutes a valid secured claim (gesicherte Forderung) capable of serving as the underlying obligation for the German Security Documents. The parallel debt mirrors, but is independent from, the obligations of the Company under the Credit Agreement. It rises and falls with the obligations under the Credit Agreement as provided in the Parallel Debt Agreement, but its existence and enforceability as a matter of German law do not depend on the validity of the Credit Agreement under New York law (subject to Assumption 11 above regarding the creation of the claim under New York law).
The Security Purpose Agreement (Sicherungszweckerklärung) effectively establishes the link (Sicherungszweckabrede) between the German security interests and the parallel debt claim as well as the underlying obligations under the Credit Agreement. The Security Purpose Agreement sets forth the conditions under which the Security Trustee is entitled to realize the security interests and the circumstances under which the Company is entitled to request the release and re-transfer of the security. The Security Purpose Agreement is valid and binding on the Company under German law.
Opinion 5: Validity and Perfection of the Grundschuld (Land Charge)
The Grundschuld over the Frankfurt campus parcel, being the property registered in the Land Register (Grundbuch) of Frankfurt am Main-Ost, Blatt 54321, Flur 12, Flurstück 789, comprising approximately 18.7 hectares, has been:
(a) validly created by notarized deed (Grundschuldbestellungsurkunde) in accordance with §§ 873, 1191 BGB; and
(b) duly submitted for registration (Eintragung) with the Grundbuchamt (Land Registry Office) Frankfurt am Main-Ost.
Upon registration in the Land Register, the Grundschuld will constitute a valid, first-ranking encumbrance (erstrangige Belastung) over the Frankfurt campus parcel in favor of the Security Trustee.
Status of Registration. As of the date of this opinion, the application for registration of the Grundschuld has been filed with the Grundbuchamt Frankfurt am Main-Ost, but registration has not yet been completed. Based on verbal confirmation obtained by us from the Grundbuchamt Frankfurt am Main-Ost on June 3, 2024, (i) no prior-ranking encumbrances or applications for registration with respect to the Frankfurt campus parcel are pending, and (ii) the parcel is currently unencumbered (other than the pending application for the Grundschuld). Based on our experience with the processing times of the Grundbuchamt Frankfurt am Main-Ost and the current volume of applications pending at that office, we expect that registration of the Grundschuld will be completed by approximately August 2024. We draw the attention of the Addressees to the fact that, in the period between the date of the application and the date of actual registration, the priority position of the Grundschuld is protected by the priority notice (Vormerkung) or ranking (date of application) under § 17 GBO (German Land Registration Code), subject to the rights of bona fide purchasers under § 892 BGB as further addressed in the Qualifications.
The Grundschuld has been constituted in the form of an immediately enforceable land charge (sofort vollstreckbare Grundschuld), and the Company has submitted to immediate enforcement (Unterwerfung unter die sofortige Zwangsvollstreckung) in the notarized deed pursuant to § 794(1) No. 5 ZPO. This submission to enforcement entitles the Security Trustee, upon the occurrence of an event of default and subject to the terms of the Security Purpose Agreement, to proceed directly to enforcement by way of compulsory auction (Zwangsversteigerung) or compulsory administration (Zwangsverwaltung) over the Frankfurt campus parcel without the need to first obtain a court judgment.
We note that the Grundschuld is a non-accessory security right (nicht-akzessorisches Sicherungsrecht) under German law. Unlike a mortgage (Hypothek), the Grundschuld exists independently of the underlying secured obligation, and its validity and enforceability do not depend on the existence, validity, or enforceability of the secured claim. The connection between the Grundschuld and the secured obligations is established solely through the Security Purpose Agreement (Sicherungszweckerklärung), which creates a contractual (schuldrechtliche) obligation on the part of the Security Trustee to release the Grundschuld upon full satisfaction of the secured obligations.
Opinion 6: Validity and Perfection of the Share Pledge
The pledge of 100% of the shares (Geschäftsanteile) in the Company by IHDC in favor of the Security Trustee (the "Share Pledge") has been:
(a) validly created by notarized Share Pledge Agreement (Anteilsverpfändungsvertrag) in compliance with § 15(3) GmbHG and §§ 1274, 1279 BGB; and
(b) perfected by notification to the Company of the creation of the pledge, as required by § 1280 BGB. The Company has been duly notified of the pledge, and such notification is documented in the notarized Share Pledge Agreement itself.
The Share Pledge constitutes a valid, first-ranking pledge (erstrangiges Pfandrecht) over all shares in the Company held by IHDC, which represents 100% of the registered share capital of the Company. The pledge is enforceable against IHDC and the Company in accordance with its terms and the applicable provisions of the BGB and the GmbHG.
Upon the occurrence of an event of default (as defined in the Credit Agreement and the Security Purpose Agreement) and subject to the enforcement conditions set forth in the Security Purpose Agreement, the Security Trustee may realize the Share Pledge by way of:
(a) public auction (öffentliche Versteigerung) conducted by a duly appointed auctioneer or court officer in accordance with § 1277 BGB in conjunction with §§ 1233 et seq. BGB; or
(b) private sale (freihändiger Verkauf), to the extent that the parties have validly agreed on such method of realization in the Share Pledge Agreement. We have reviewed the relevant provisions of the Share Pledge Agreement and confirm that they contain an agreement on private sale in compliance with § 1245 BGB, which entitles the Security Trustee to sell the pledged shares by private treaty upon the occurrence of an event of default, subject to the requirement that the private sale must be conducted in a commercially reasonable manner.
We note that a pledge over shares in a GmbH does not, by itself, entitle the pledgee to exercise voting rights or other shareholder rights in respect of the pledged shares prior to enforcement. Voting and other shareholder rights remain with IHDC as the registered quotaholder unless and until the pledge is enforced and the shares are transferred to a purchaser.
Opinion 7: Validity and Perfection of the Global Assignment of Receivables
The Global Assignment (Globalzession) validly assigns all present and future receivables of the Company (to the extent assignable and as more particularly described in the Global Assignment) to the Security Trustee by way of security assignment (Sicherungsabtretung) pursuant to §§ 398, 413 BGB.
The assignment is effective as between the Company and the Security Trustee upon execution of the Global Assignment. Under German law, no registration with any public register and no notification to the debtors of the assigned receivables is required for the assignment to take effect as between the assignor and the assignee. The assignment is a "silent" assignment (stille Zession), meaning that the debtors of the assigned receivables are not notified of the assignment at the time of its creation and the Company continues to collect the receivables on behalf of the Security Trustee until an event of default occurs and the Security Trustee gives notice to the relevant debtors. Upon the occurrence of an event of default and realization of the security, notification to the debtors may be required in order for the Security Trustee to collect the receivables directly and to enforce the assignment against third parties and the debtors.
We note that the effectiveness of the Global Assignment is subject to the following limitations:
(a) Receivables that are subject to a contractual prohibition on assignment (Abtretungsverbot) agreed between the Company and the respective debtor may not be validly assigned under § 399 BGB. However, we draw the Addressees' attention to § 354a HGB, which provides that, for monetary claims arising between merchants (Kaufleute) in the ordinary course of business, a contractual prohibition on assignment does not prevent the assignment from taking effect; rather, the debtor retains the right to discharge its obligation by paying the original creditor (the Company) with discharging effect. This statutory provision significantly mitigates the impact of contractual assignment prohibitions in a commercial context such as the Company's business.
(b) Receivables that arise under extended retention of title arrangements (verlängerter Eigentumsvorbehalt), advance assignment arrangements, or factoring agreements may not be available for assignment to the Security Trustee to the extent that such arrangements result in a prior or competing assignment. Our opinion is given subject to the assumption that no such arrangements exist that would materially conflict with the Global Assignment.
Opinion 8: Validity and Perfection of the Account Pledge
The Account Pledge (Kontoverpfändung) validly creates a pledge (Pfandrecht) over the Company's bank accounts maintained with NordBrücke AG, Neue Mainzer Straße 72, 60311 Frankfurt am Main, Germany, in favor of the Security Trustee. The Account Pledge covers all present and future credit balances and claims of the Company against NordBrücke AG arising from or in connection with the pledged bank accounts, as more particularly described in the Account Pledge.
NordBrücke AG has been notified of the Account Pledge in writing, and NordBrücke AG has acknowledged the pledge in writing, as required by § 1280 BGB for the perfection of a pledge over claims (Forderungspfandrecht) against the account bank. The notification and acknowledgment were provided in the form set forth in the Account Pledge, and we have reviewed copies of the notification and acknowledgment letters.
The Account Pledge is enforceable against the Company and, following the occurrence of an event of default and satisfaction of the conditions set forth in the Security Purpose Agreement, against NordBrücke AG in accordance with the terms of the Account Pledge. Upon enforcement, the Security Trustee is entitled to collect the credit balances in the pledged accounts directly from NordBrücke AG.
We note that the enforceability of the Account Pledge is subject to the terms and conditions of the underlying account agreements between the Company and NordBrücke AG, including any set-off rights, liens, or other claims that NordBrücke AG may have against the Company in respect of the pledged accounts. We have not reviewed the account agreements between the Company and NordBrücke AG and express no opinion on the terms thereof.
Opinion 9: Validity and Perfection of the Security Transfer of Movable Assets
The Security Transfer (Sicherungsübereignung) validly transfers ownership by way of security in the movable assets located at the Frankfurt campus to the Security Trustee pursuant to §§ 929, 930 BGB by way of constructive delivery (Besitzkonstitut).
Under the constructive delivery arrangement, the Company retains actual (direct) possession (unmittelbarer Besitz) of the movable assets as bailee (Verwahrer) for the Security Trustee, while the Security Trustee obtains indirect possession (mittelbarer Besitz) as owner for security purposes. This arrangement permits the Company to continue to use the movable assets in the ordinary course of its business at the Frankfurt campus while the security interest remains in effect.
The Security Transfer covers both present and future movable assets at the Frankfurt campus premises, as described in the asset schedule annexed to the Security Transfer agreement. We have reviewed the asset schedule and confirm that the description of the assets meets the determinability requirement (Bestimmtheitsgrundsatz) under German law. Specifically, the assets subject to the security transfer are identified by reference to their location at the Frankfurt campus premises (Hanauer Landstraße 188, 60314 Frankfurt am Main) and by reference to categories of assets (including, without limitation, servers, networking equipment, power distribution units, cooling systems, office equipment, and other tangible movable property), such that the assets subject to the security transfer can be determined at any given time without the need for further agreement between the parties.
We note that the security transfer is subject to the following limitations:
(a) Movable assets that are subject to retention of title (Eigentumsvorbehalt) by third-party suppliers are not owned by the Company and therefore cannot be the subject of a valid security transfer by the Company. Our opinion is given subject to the assumption that all assets described in the asset schedule are owned by the Company free of any retention of title.
(b) The security transfer does not provide protection against bona fide acquisition (gutgläubiger Erwerb) by third parties under § 932 BGB. If a third party acquires possession of any of the transferred assets in good faith and for value, such third party may acquire ownership of the asset free of the security interest, provided that the third party is unaware of and has no reason to be aware of the security transfer.
(c) If the transferred assets are commingled (Vermischung) or combined (Verbindung) with assets belonging to third parties in a manner that renders the individual assets unidentifiable, the security interest may be affected in accordance with the rules of §§ 947, 948 BGB.
Opinion 10: No Conflicts with German Law
The execution, delivery, and performance by the Company of its obligations under the Credit Agreement (to the extent the Company is a party thereto as Co-Borrower for the EUR Sub-Tranche) and each of the German Security Documents does not, as of the date hereof:
(a) violate any provision of the Company's articles of association (Gesellschaftsvertrag);
(b) violate any applicable statute, regulation, or rule of law of the Federal Republic of Germany that is binding on the Company;
(c) result in a breach of, or constitute a default under, any agreement or instrument known to us to which the Company is a party or by which the Company or any of its assets is bound; or
(d) require any governmental or regulatory consent, approval, license, or authorization under German law that has not been obtained as of the date hereof, other than the pending registration of the Grundschuld with the Grundbuchamt Frankfurt am Main-Ost (as described in Opinion 5 above).
In rendering this opinion, we have not conducted a comprehensive review of all agreements and instruments to which the Company is a party. Our opinion in paragraph (c) above is limited to those agreements and instruments that have been provided to us for review or of which we are otherwise actually aware.
Opinion 11: No Regulatory Consents Required
No filing, registration, recording, or notification with any German governmental or regulatory authority is required in connection with the execution, delivery, or performance of the German Security Documents, except for:
(a) the registration of the Grundschuld with the Grundbuchamt Frankfurt am Main-Ost, for which the application has been filed and is pending completion (as described in Opinion 5 above);
(b) the filing of the Company's information with the German Transparency Register (Transparenzregister) pursuant to the GwG, which has been completed; and
(c) the notification to NordBrücke AG of the Account Pledge, which has been completed and acknowledged by NordBrücke AG in writing (as described in Opinion 8 above).
No approval, consent, license, or authorization of the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht — BaFin) or any other German regulatory authority is required for the Company to enter into the Credit Agreement as Co-Borrower for the EUR Sub-Tranche or to execute, deliver, and perform the German Security Documents. In particular, the Company's borrowing under the Credit Agreement and the granting of security interests in connection therewith do not constitute regulated banking or financial services activities requiring a license under the German Banking Act (Kreditwesengesetz — KWG) or the German Securities Trading Act (Wertpapierhandelsgesetz — WpHG).
Opinion 12: No Insolvency Proceedings
Based on our search of the records of the Insolvency Court (Insolvenzgericht) at the Amtsgericht Frankfurt am Main, conducted on June 3, 2024, the date of this opinion, no insolvency proceedings (Insolvenzverfahren) have been opened against the Company, no application for the opening of insolvency proceedings against the Company has been filed or is pending, and no preliminary insolvency measures (vorläufige Insolvenzmaßnahmen) have been ordered with respect to the Company.
Based on our review of the documents described in Section III above and our inquiries made in connection with this opinion, we are not aware of any circumstances that would constitute grounds for the filing of an application for the opening of insolvency proceedings against the Company, whether on the basis of inability to pay debts as they fall due (Zahlungsunfähigkeit, § 17 InsO), imminent inability to pay (drohende Zahlungsunfähigkeit, § 18 InsO), or over-indebtedness (Überschuldung, § 19 InsO). However, we note that this confirmation is based solely on the information available to us and does not constitute an independent financial or accounting analysis of the Company's solvency position.
Opinion 13: Choice of Law and Jurisdiction
The choice of the laws of the State of New York as the governing law of the Credit Agreement is recognized and given effect under German conflict of laws rules, specifically Article 3(1) of the Rome I Regulation (Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations), which permits the parties to a contract to choose the law applicable to the whole or to part of the contract. This recognition is subject to the following:
(a) Mandatory provisions (zwingende Vorschriften) of German law that apply irrespective of the law chosen by the parties (Article 9 of the Rome I Regulation) cannot be derogated from by the choice of New York law. Such mandatory provisions include, without limitation, certain rules of German insolvency law (InsO), rules regarding consumer protection (to the extent applicable), and rules implementing EU sanctions regulations.
(b) The application of New York law will not be given effect to the extent that such application would be manifestly incompatible with the public policy (ordre public) of the Federal Republic of Germany (Article 21 of the Rome I Regulation).
The German Security Documents are governed by German law, which is the appropriate and necessary governing law for security interests over assets located in Germany. In particular:
(a) The Grundschuld and the Security Transfer are governed by German law in accordance with the lex rei sitae principle, pursuant to which the creation, validity, and perfection of security interests in real property and tangible movable property are governed by the law of the jurisdiction in which the relevant property is located (Article 43 EGBGB).
(b) The Share Pledge is governed by German law as the law of the jurisdiction of incorporation of the Company, being the Gesellschaftsstatut of the Company's shares.
(c) The Global Assignment and the Account Pledge are governed by German law as the law chosen by the parties and/or the law applicable to the assigned or pledged claims, as applicable.
The submission to jurisdiction provisions contained in the Credit Agreement, to the extent that they provide for the submission by the Company to the jurisdiction of courts outside Germany, would generally be recognized by German courts in accordance with applicable German and EU rules on jurisdiction, including the Brussels I Recast Regulation (Regulation (EU) No 1215/2012), subject to the mandatory jurisdiction rules applicable to certain types of proceedings and the rules on exclusive jurisdiction under Article 24 of the Brussels I Recast Regulation (e.g., proceedings relating to rights in rem in immovable property, which must be brought before the courts of the Member State in which the property is situated).
VI. OPINION ON TAX MATTERS
Without prejudice to the limitation set forth in Section VII.B.7(b) below, we provide the following limited comments on German tax matters arising in connection with the German Security Documents:
1. No Stamp Duty. No German stamp duty (Stempelsteuer) or similar documentary tax or transfer tax is payable in connection with the execution, delivery, or performance of the German Security Documents. Germany does not impose stamp duty or similar documentary taxes on loan agreements, security agreements, assignments of receivables, account pledges, or security transfers of movable assets. No real estate transfer tax (Grunderwerbsteuer) is triggered by the creation of the Grundschuld, as the creation of a land charge does not constitute a transfer of ownership of real property within the meaning of the German Real Estate Transfer Tax Act (Grunderwerbsteuergesetz — GrEStG).
2. Notarization Fees. The notarization fees payable in connection with the notarization of the Grundschuld (Grundschuldbestellungsurkunde) and the Share Pledge (Anteilsverpfändungsvertrag) have been calculated in accordance with the German Court and Notary Fees Act (Gerichts- und Notarkostengesetz — GNotKG) and, based on information provided to us, have been paid in full. These fees are statutory fees based on the value of the notarized transaction and are not subject to negotiation.
3. No Withholding Tax on Security Documents. No German withholding tax (Kapitalertragsteuer or Quellensteuer) arises on payments made by the Company under the German Security Documents themselves. The German Security Documents provide for the creation and enforcement of security interests and do not, in themselves, give rise to payments of interest or other income subject to German withholding tax.
4. Interest Payments under the Credit Agreement. We note, without expressing an opinion thereon, that payments of interest by the Company under the Credit Agreement (in its capacity as Co-Borrower for the EUR Sub-Tranche) may be subject to the German interest barrier rules (Zinsschranke), as set forth in § 4h of the German Income Tax Act (EStG) in conjunction with § 8a of the German Corporate Income Tax Act (KStG). These rules may limit the tax-deductibility of net interest expense in excess of 30% of the Company's adjusted taxable EBITDA, subject to certain exceptions and carve-outs. In addition, net interest expense may be subject to trade tax (Gewerbesteuer) add-back provisions under § 8 No. 1(a) of the German Trade Tax Act (GewStG), which require the add-back of 25% of certain interest expense (after a threshold deduction) to the trade tax base. A detailed analysis of these tax matters is outside the scope of this opinion and is addressed in Calderwood & Harkness LLP's separate Tax Structure Memorandum prepared by Sylvia Hartwell, to which we refer the Addressees.
VII. QUALIFICATIONS AND LIMITATIONS
A. General Qualifications
The opinions set forth herein are subject to the following general qualifications:
1. Scope of German Law. This opinion is limited exclusively to the laws of the Federal Republic of Germany as in effect on the date hereof, June 3, 2024. We express no opinion on the laws of any other jurisdiction, including, without limitation, the laws of the State of New York, the State of Delaware, the laws of the United Kingdom, or the laws of any other US state or foreign country. We have not undertaken any investigation into the laws of any jurisdiction other than Germany, and we assume, without independent verification, that all non-German law aspects of the Transaction are valid and enforceable under the applicable non-German laws.
2. Insolvency and Creditors' Rights. The enforceability opinions set forth herein are subject to:
(a) applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally, including, without limitation, the provisions of the German Insolvency Code (Insolvenzordnung — InsO) relating to the avoidance of pre-insolvency transactions (Insolvenzanfechtung) under §§ 129 et seq. InsO. In particular, security interests granted by the Company could be avoided by an insolvency administrator (Insolvenzverwalter) if they were granted at a time when the Company was insolvent or in certain defined suspicious periods prior to the filing of an insolvency application, including (i) transactions at an undervalue (unentgeltliche Leistungen) within four years prior to the insolvency filing (§ 134 InsO), (ii) transactions with the intention to disadvantage creditors (vorsätzliche Benachteiligung) within ten years prior to the insolvency filing (§ 133 InsO), (iii) directly detrimental transactions (unmittelbar nachteilige Rechtshandlungen) within three months prior to the insolvency filing (§ 132 InsO), and (iv) congruent and incongruent coverage (kongruente und inkongruente Deckung) within certain periods prior to the insolvency filing (§§ 130, 131 InsO);
(b) the provisions of the German Avoidance Act (Anfechtungsgesetz — AnfG), which permit individual creditors (outside of insolvency proceedings) to challenge legal acts of the debtor that are detrimental to creditors, subject to the conditions and time limitations set forth therein; and
(c) general principles of good faith (Treu und Glauben) under § 242 BGB and the concept of public policy (ordre public), which may limit the enforceability of contractual provisions in exceptional circumstances.
3. Grundschuld — Priority Risk During Registration Period. The security interest created by the Grundschuld is subject to the rights of bona fide purchasers and encumbrancers who rely on the Land Register (öffentlicher Glaube des Grundbuchs) under § 892 BGB during the period between the date of application for registration and the date of actual registration of the Grundschuld. During this period, a third party that acquires a right in or over the Frankfurt campus parcel in good faith and for value and without knowledge of the pending application may, in certain circumstances, obtain a right that ranks ahead of the Grundschuld. However, based on the verbal confirmation from the Grundbuchamt dated June 3, 2024 (as described in Section III.C above), we are not aware of any such competing applications or acquisitions.
4. Global Assignment — Assignment Prohibitions. The opinions on the Global Assignment of Receivables are subject to any existing or future contractual prohibitions on assignment (Abtretungsverbote) agreed between the Company and its debtors, which may limit the effectiveness of the assignment under § 399 BGB. However, as noted in Opinion 7, the impact of such prohibitions is significantly mitigated for monetary claims arising between merchants in the ordinary course of business by § 354a HGB, which provides that a contractual prohibition on assignment does not prevent the assignment of monetary claims between merchants from taking effect, although the debtor retains the right to make payment with discharging effect to the original creditor.
5. Security Transfer — Identifiability and Good Faith Acquisition. The security transfer of movable assets is subject to the risk that specific assets may become unidentifiable if they are commingled with or incorporated into assets of third parties, in which case the rules on co-ownership (Miteigentum, § 947 BGB) or commixtio (§ 948 BGB) may apply. Furthermore, bona fide third parties may acquire good title to the transferred assets under § 932 BGB if they acquire possession in good faith and for value without knowledge of the security transfer.
6. Parallel Debt Structure. The parallel debt structure, as established by the Parallel Debt Agreement, is widely used in German acquisition and project finance practice and is generally accepted by legal practitioners, academics, and the lower courts as a valid mechanism for creating a secured claim in favor of a security trustee that can serve as the underlying obligation for German-law security interests. However, the parallel debt structure has not been the subject of a definitive ruling by the German Federal Court of Justice (Bundesgerichtshof — BGH). We are not aware of any published decision of the BGH or any appellate court (Oberlandesgericht) that calls into question the validity or enforceability of the parallel debt structure. The prevailing view in German legal literature and banking practice supports the validity of the parallel debt as an abstract promise of debt (abstraktes Schuldversprechen) under § 780 BGB or an acknowledgment of debt (Schuldanerkenntnis) under § 781 BGB.
B. Specific Limitations
7. Matters Outside the Scope of This Opinion. We express no opinion on:
(a) the laws of any jurisdiction other than the Federal Republic of Germany;