1043-00001 · Ironhaven Holdings · Tax

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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE ATTORNEY WORK PRODUCT

MEMORANDUM

TO: Jonathan Pryce-Williams, General Counsel & Secretary, Ironhaven Data Centers LLC Rebecca Sung, CFO, Ironhaven Data Centers LLC Natasha Greenfeld, VP, Treasury & Capital Markets, Ironhaven Data Centers LLC

FROM: Sylvia Hartwell, Partner (Tax), Calderwood & Harkness LLP Daniel Obi, Associate, Calderwood & Harkness LLP

DATE: May 10, 2024

RE: Arm's-Length Pricing of Intercompany On-Lending from Ironhaven Data Centers LLC to Ironhaven Frankfurt GmbH — German Transfer Pricing Compliance

MATTER NO.: 1043-00001

BILLING CODE: IHDC-TLB-2024

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I. Executive Summary

You have asked us to analyze the transfer pricing implications of any intercompany on-lending arrangement whereby Ironhaven Data Centers LLC ("IHDC" or the "US Parent"), a Delaware limited liability company, on-lends a portion of the proceeds of the $950,000,000 Senior Secured Term Loan B facility (the "Term Loan" or the "Credit Facility") to its wholly-owned German subsidiary, Ironhaven Frankfurt GmbH ("IHDC Frankfurt"), for the purpose of funding the construction of the Frankfurt data center campus (Phase I estimated cost of approximately €253,571,429, equivalent to approximately $275,000,000 at the EUR/USD spot rate of 1.0846 as of the date of this memorandum). This memorandum also addresses the transfer pricing implications of the current direct borrowing structure and the implicit group support provided by the IHDC group to IHDC Frankfurt in connection therewith.

As documented in the Senior Secured Term Loan B Credit Agreement dated May 15, 2024 (with closing anticipated on June 3, 2024) (the "Credit Agreement"), IHDC Frankfurt is a Co-Borrower under the Credit Agreement and is directly and primarily obligated on the EUR Sub-Tranche of €253,571,429. Under this structure, the EUR Sub-Tranche proceeds are drawn directly by IHDC Frankfurt from the syndicate lenders, and, accordingly, the transaction as currently documented does not involve a formal intercompany on-loan from IHDC to IHDC Frankfurt.

However, transfer pricing exposure arises in several scenarios. First, if operational cash management or internal treasury practices result in IHDC advancing funds to IHDC Frankfurt outside the direct borrowing structure — for example, to cover construction cost overruns, working capital shortfalls, or expansion capital requirements — such advances would constitute intercompany financial transactions subject to the arm's-length standard. Second, if the German tax authorities (Finanzamt) recharacterize the Co-Borrower structure as, in substance, an indirect on-loan from IHDC to IHDC Frankfurt — for example, on the basis that IHDC Frankfurt would not have been able to borrow on comparable terms absent group support — the pricing of the implicit financial arrangement must satisfy German transfer pricing standards. Third, intra-group cash-pooling or treasury sweep arrangements, if implemented, could create intercompany debtor-creditor positions that are subject to transfer pricing scrutiny.

The applicable legal framework is governed primarily by § 1 Außensteuergesetz ("AStG") (the German Foreign Tax Act), which codifies the arm's-length principle for cross-border related-party transactions, and § 90 Abs. 3 Abgabenordnung ("AO") (the German Fiscal Code), which imposes contemporaneous transfer pricing documentation requirements. In addition, the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, as revised through 2022 (including, in particular, Chapter X on financial transactions), provide authoritative interpretive guidance that German tax authorities regularly apply. On the US side, IRC § 482 grants the Internal Revenue Service comparable adjustment authority.

Based on our benchmark analysis, which is set forth in detail in Section IV below, we conclude that an arm's-length intercompany interest rate for any on-loan from IHDC to IHDC Frankfurt would fall in the range of EURIBOR + 400 bps to EURIBOR + 450 bps for a secured, EUR-denominated loan with a seven-year maturity matching the Credit Agreement. This range is consistent with the EUR Sub-Tranche pricing of EURIBOR + 425 bps under the Credit Agreement and reflects appropriate adjustments for credit risk, collateral, and tenor. For an unsecured intercompany loan, the arm's-length range widens upward to EURIBOR + 475 bps to EURIBOR + 550 bps, reflecting the additional credit risk borne by an unsecured lender.

Our primary recommendations are as follows:

(a) Document any intercompany financial transactions at arm's length, using the benchmark analysis herein as the basis for pricing.

(b) Maintain contemporaneous transfer pricing documentation as required by § 90 Abs. 3 AO, including a Master File and Local File for IHDC Frankfurt, covering both the direct Co-Borrower arrangement and any intercompany financial transactions.

(c) Set the intercompany interest rate for any on-loan at EURIBOR + 425 bps (matching the EUR Sub-Tranche), provided the loan is on comparable terms (secured, same tenor, same amortization, same currency), and adjust upward if the intercompany loan is unsecured or subordinated.

(d) Prepare a template intercompany loan agreement under German law for use if IHDC advances funds to IHDC Frankfurt outside the Credit Agreement structure.

(e) Establish an annual review cycle to reassess arm's-length pricing and refresh the transfer pricing documentation.

The balance of this memorandum sets forth the factual background, legal framework, benchmark analysis, documentation requirements, interest deduction limitations, US tax implications, and detailed recommendations supporting these conclusions.

II. Background and Transaction Overview

A. The Borrower Group

The Ironhaven group consists of the following principal entities relevant to this analysis:

Ironhaven Data Centers LLC ("IHDC") is a Delaware limited liability company headquartered at 4500 Dominion Ridge Boulevard, Suite 300, Ashburn, Virginia 20147 (EIN 84-3291057). IHDC is the primary operating entity within the Ironhaven group and serves as the Borrower (together with IHDC Frankfurt as Co-Borrower) under the Credit Agreement. IHDC owns and operates data center campuses in the United States (primarily in Northern Virginia) and, through its wholly-owned German subsidiary, in Frankfurt am Main, Germany. IHDC is treated as a disregarded entity or partnership for US federal income tax purposes (depending on whether it has a single or multiple members; as currently structured, it is wholly owned by Ironhaven Holdings Inc. and treated as a disregarded entity).

Ironhaven Holdings Inc. is a Delaware corporation (EIN 84-3291044) that directly owns 100% of the membership interests in IHDC. Ironhaven Holdings Inc. serves as the Parent Guarantor under the Credit Agreement and provides a corporate-level guaranty of the Term Loan obligations. Ironhaven Holdings Inc. is the direct subsidiary of the sponsor's investment vehicle and functions as the holding company for the Ironhaven group.

Ironhaven Frankfurt GmbH ("IHDC Frankfurt") is a German Gesellschaft mit beschränkter Haftung (GmbH) registered at Hanauer Landstraße 188, 60314 Frankfurt am Main, Germany. IHDC Frankfurt is registered with the Amtsgericht Frankfurt am Main under commercial register number HRB 129457. Its German tax identification number (Steuernummer) is 045/127/98321, and its VAT identification number (USt-IdNr.) is DE347891205. IHDC Frankfurt is wholly owned by IHDC and was established as a special-purpose subsidiary for the development, construction, ownership, and operation of the Frankfurt data center campus. As a newly formed entity, IHDC Frankfurt has no independent operating history and currently has no revenue, though it has entered into a pre-lease letter of intent with Euronova Digital GmbH, as described in Section II.C below.

Thornfield Capital Partners, LP is the sponsor of the Ironhaven group, acting through its investment vehicle, Thornfield Infrastructure Fund III, LP. Thornfield Infrastructure Fund III, LP has committed an equity contribution of $410,000,000 in connection with the financing transactions contemplated by the Credit Agreement. Thornfield Capital Partners is a US-based private equity firm specializing in digital infrastructure investments, including data centers, fiber networks, and edge computing facilities.

The corporate organizational chart, as simplified for purposes of this memorandum, is as follows: Thornfield Infrastructure Fund III, LP holds (directly or through intermediate holding vehicles) 100% of the equity interests in Ironhaven Holdings Inc., which in turn holds 100% of the membership interests in IHDC, which in turn holds 100% of the share capital (Stammkapital) of IHDC Frankfurt. This vertical ownership structure is relevant both to the transfer pricing analysis (as it establishes the related-party relationship under § 1 AStG) and to the limitation on benefits analysis under the US-Germany Income Tax Treaty (as discussed in Section VII below).

B. The Term Loan Facility

The Credit Facility is structured as a $950,000,000 Senior Secured Term Loan B, documented under the Credit Agreement dated May 15, 2024, with an expected closing date of June 3, 2024. The key terms of the Credit Facility are summarized below:

Aggregate Commitment: $950,000,000 (Nine Hundred Fifty Million Dollars)

Borrowers: IHDC (as Borrower) and IHDC Frankfurt (as Co-Borrower)

Parent Guarantor: Ironhaven Holdings Inc.

Administrative Agent and Lead Arranger: Crescent Harbor Bank, N.A.

Collateral Agent: Pinnacle Trust Company, N.A.

The Credit Facility is divided into two tranches:

USD Tranche. The USD Tranche has an aggregate principal amount of $675,000,000. The USD Tranche proceeds are to be applied to fund the following: (i) the Virginia campus Phase I construction costs of approximately $475,000,000; (ii) the refinancing in full of the $130,000,000 outstanding mezzanine notes issued to Greystone Mezzanine Fund II, LP; (iii) the payment of transaction fees and expenses; and (iv) general working capital purposes. The USD Tranche bears interest at a rate per annum equal to the Secured Overnight Financing Rate ("SOFR") plus 425 basis points, with a SOFR floor of 0.50%.

EUR Sub-Tranche. The EUR Sub-Tranche has an aggregate principal amount of €253,571,429 (equivalent to approximately $275,000,000 at a EUR/USD exchange rate of 1.0846). The EUR Sub-Tranche proceeds are to be applied exclusively to fund the Frankfurt campus Phase I construction costs. The EUR Sub-Tranche bears interest at a rate per annum equal to the Euro Interbank Offered Rate ("EURIBOR") plus 425 basis points, with a EURIBOR floor of 0.00%. The EUR Sub-Tranche is drawn directly by IHDC Frankfurt in its capacity as Co-Borrower under the Credit Agreement.

Maturity: June 3, 2031 (seven years from the closing date), applicable to both the USD Tranche and the EUR Sub-Tranche.

Amortization: 1.00% per annum of the original principal amount of each tranche, payable in equal quarterly installments, with the balance due at maturity.

Original Issue discount (OID): The Credit Facility is issued at 99.50% of par (50 basis points OID), resulting in net cash proceeds to the Borrowers of approximately $945,250,000.

Collateral: The Credit Facility is secured by a comprehensive collateral package, including, with respect to the EUR Sub-Tranche and the Frankfurt campus assets: a first-priority land charge (Grundschuld) on the Frankfurt campus real property (registered in the Grundbuch von Frankfurt am Main-Ost, Blatt 54321, Flur 12, Flurstück 789); a global assignment of receivables (Globalzession); an account pledge (Kontoverpfändung); a security assignment of movable assets (Sicherungsübereignung); and a share pledge (Anteilsverpfändung) over 100% of the share capital of IHDC Frankfurt. The USD Tranche is similarly secured by a first-priority lien on IHDC's domestic assets.

It is critical to note for purposes of the transfer pricing analysis that IHDC Frankfurt, as Co-Borrower, is directly and primarily liable to the syndicate lenders for the repayment of the EUR Sub-Tranche. The EUR Sub-Tranche is not structured as an intercompany loan from IHDC to IHDC Frankfurt; rather, it represents a direct third-party lending arrangement between the syndicate lenders and IHDC Frankfurt. This distinction is material because it means that, under the current transaction structure, no formal intercompany loan arises by reason of the EUR Sub-Tranche draw. The transfer pricing implications of this structure are nevertheless significant, as discussed in Section II.D below.

Among the notable syndicate members, NordBrücke AG has committed $150,000,000 to the Credit Facility, allocated entirely to the EUR Sub-Tranche, reflecting the European investor base's interest in the Frankfurt campus. Other syndicate members include a mix of US and European institutional lenders, CLO vehicles, and credit funds assembled by Crescent Harbor Bank, N.A. as Lead Arranger.

C. Frankfurt Campus — "Ironhaven Frankfurt I"

The Frankfurt campus, designated "Ironhaven Frankfurt I," is the Ironhaven group's first European data center facility and a strategic asset for the group's expansion into the European hyperscale and enterprise colocation markets. Key details of the Frankfurt campus are as follows:

Location: Hanauer Landstraße 188, 60314 Frankfurt am Main, Germany. The site encompasses approximately 18.7 hectares of land in the Frankfurt-Ost industrial district, a well-established data center cluster benefiting from proximity to the DE-CIX internet exchange, major fiber routes, and robust electrical grid infrastructure.

Land Registry (Grundbuch) Reference: Grundbuch von Frankfurt am Main-Ost, Blatt 54321, Flur 12, Flurstück 789. The property is owned freehold by IHDC Frankfurt and is encumbered by the first-priority Grundschuld in favor of the Collateral Agent securing the Credit Facility.

Planned Capacity: The Frankfurt campus is designed for a total critical IT load capacity of 80 MW at full buildout. Phase I, which is the subject of the current financing, will deliver 40 MW of critical IT load capacity.

Phase I Estimated Cost: €253,571,429 (approximately $275,000,000 equivalent), funded entirely by the EUR Sub-Tranche proceeds. The Phase I budget encompasses site preparation, building construction, electrical infrastructure (including utility connections, substations, generators, and UPS systems), mechanical infrastructure (cooling systems), fiber connectivity, and associated soft costs (design, permitting, project management, contingency).

Estimated Completion: Q1 2026. IHDC Frankfurt has engaged a general contractor under a German-law construction contract (Werkvertrag), and the detailed project timeline anticipates substantial completion by December 2025, with commissioning and handover in Q1 2026.

Anchor Tenant: IHDC Frankfurt has entered into a pre-lease letter of intent (LOI) with Euronova Digital GmbH for 20 MW of critical IT load capacity. The pre-lease contemplates a seven-year initial term with renewal options, at an estimated annual rent of €9,800,000. The Euronova pre-lease represents a significant contracted revenue commitment that provides early cash flow visibility for the Frankfurt campus, although it will not generate revenue until the campus is operational (expected Q1 2026). The Euronova pre-lease is relevant to the transfer pricing analysis both as an indicator of IHDC Frankfurt's creditworthiness and as an input to the interest barrier (Zinsschranke) calculations discussed in Section VI below.

D. Scenarios Triggering Intercompany Loan Analysis

Although the current Credit Agreement structure does not involve a formal intercompany loan, several scenarios could give rise to intercompany financing arrangements between IHDC and IHDC Frankfurt that would require arm's-length pricing under German and US transfer pricing rules. We have identified three principal scenarios:

Scenario 1: Direct Drawing by IHDC Frankfurt as Co-Borrower (Current Structure). Under the current structure, IHDC Frankfurt draws the EUR Sub-Tranche proceeds directly from the syndicate lenders as Co-Borrower. No intercompany loan arises as a matter of legal form. However, the German tax authorities may nonetheless scrutinize the arrangement in several respects. First, the Finanzamt may examine whether the implicit credit support provided by the IHDC group — including the Parent Guarantee by Ironhaven Holdings Inc. and the cross-collateralization with IHDC's US assets — constitutes a benefit to IHDC Frankfurt that should be compensated through an arm's-length guarantee fee or similar payment. Second, if the Finanzamt determines that IHDC Frankfurt's standalone creditworthiness would not support borrowing €253.6 million on the terms of the EUR Sub-Tranche (including the EURIBOR + 425 bps interest rate and the collateral package), it may seek to recharacterize a portion of the debt as equity or to impute a guarantee fee. The OECD Chapter X guidance on implicit support and passive association benefits is directly relevant to this analysis.

Scenario 2: Formal On-Lending by IHDC. If, for operational or treasury management reasons, IHDC draws USD Tranche proceeds and on-lends funds in EUR (or in USD) to IHDC Frankfurt for any purpose — including to cover construction cost overruns, to provide working capital during the pre-revenue phase, or to fund Phase II expansion — such an advance would constitute a formal intercompany loan. This intercompany loan would be subject to the arm's-length standard under both § 1 AStG and IRC § 482, and the interest rate, tenor, security, and other commercial terms would need to be documented and benchmarked against comparable third-party transactions. If the on-lending involves a currency mismatch (USD drawn by IHDC, EUR advanced to IHDC Frankfurt), the intercompany arrangement must also account for hedging costs or cross-currency basis swap spreads.

Scenario 3: Cash-Pooling or Treasury Sweep Arrangements. If the Ironhaven group implements an intra-group cash-pooling arrangement or automated treasury sweep system that results in IHDC Frankfurt being a net debtor to IHDC on a recurring or continuous basis, such intercompany balances may be characterized by the German tax authorities as intercompany financing transactions subject to transfer pricing rules. This is particularly relevant in the construction phase, when IHDC Frankfurt will have significant cash outflows (construction payments) and minimal cash inflows (no rental revenue until Q1 2026). Even short-term or revolving intercompany balances arising from cash-pooling arrangements must be priced at arm's length and documented in the transfer pricing files.

For each of these scenarios, the transfer pricing analysis must address the appropriate arm's-length interest rate, the characterization of the intercompany arrangement (debt vs. equity), and the documentation and compliance requirements under both German and US law. The remainder of this memorandum is structured to address each of these issues systematically.

III. Applicable Legal and Regulatory Framework

A. German Transfer Pricing Law

The German transfer pricing framework is anchored in the arm's-length principle as codified in the Außensteuergesetz (AStG) and supplemented by the Abgabenordnung (AO), the relevant Einkommensteuergesetz (EStG) and Körperschaftsteuergesetz (KStG) provisions, and the administrative guidance issued by the Bundesministerium der Finanzen (BMF).

§ 1 AStG — Arm's-Length Principle. Section 1 of the AStG provides that where a taxpayer who is resident in Germany, or who has income subject to limited German tax liability, conducts cross-border business transactions with a related party (nahestehende Person), and the conditions agreed upon for such transactions differ from those that would have been agreed upon between unrelated parties dealing at arm's length, the German tax authorities are empowered to adjust the taxpayer's income to reflect arm's-length conditions. The adjustment authority extends to all terms and conditions of the transaction, including pricing, volume, tenor, security, and other commercial terms. For purposes of IHDC Frankfurt, any intercompany financial transaction with IHDC (a non-resident related party) falls squarely within the scope of § 1 AStG, and the Finanzamt has the authority to adjust IHDC Frankfurt's taxable income if the intercompany pricing deviates from the arm's-length standard.

§ 1a AStG — Financial Transactions (Effective 2024). Effective for fiscal years beginning on or after January 1, 2024, the newly enacted § 1a AStG introduces specific provisions governing the transfer pricing treatment of financial transactions between related parties. Section 1a requires, among other things, that the German tax authorities assess whether the borrower subsidiary would have been able to borrow the relevant amount on arm's-length terms from an unrelated lender (the "standalone borrowing capacity" test). If the borrower's standalone creditworthiness would not support the level or terms of the intercompany borrowing, the excess may be recharacterized as equity for German tax purposes, with the consequence that the associated interest expense is non-deductible. This provision is directly relevant to IHDC Frankfurt, which is a newly established entity with no independent operating history and whose standalone credit profile is materially weaker than the group-supported profile. The § 1a AStG analysis requires careful documentation of IHDC Frankfurt's standalone borrowing capacity, as discussed in Section IV.B below.

§ 90 Abs. 3 AO — Contemporaneous Documentation Requirement. Section 90, subsection 3, of the AO imposes a mandatory transfer pricing documentation requirement on taxpayers who engage in cross-border related-party transactions. The documentation must describe the nature and terms of the transaction, the functions performed, assets used, and risks assumed by each party, the comparability analysis, the selection and application of the transfer pricing method, and the arm's-length range and selected price point. The documentation must be prepared for each fiscal year and made available to the tax authorities within 60 days of a formal request (or within 30 days for "extraordinary" transactions, defined as transactions that are unusual by their nature or amount). Failure to prepare and maintain adequate transfer pricing documentation can result in surcharges of 5% to 10% of the income adjustment amount, in addition to interest on the underpayment and the risk of estimated assessments by the Finanzamt based on the most unfavorable reasonable interpretation of the facts.

Verwaltungsgrundsätze Verrechnungspreise (BMF Circular dated June 14, 2021). The BMF circular of June 14, 2021 provides comprehensive administrative guidance on the preparation, content, and maintenance of transfer pricing documentation. The circular addresses, among other things, the documentation requirements for intercompany financing transactions, including intercompany loans, cash-pooling arrangements, guarantees, and other financial instruments. The circular emphasizes the importance of documenting the economic rationale for the transaction, the credit profile of the borrower, and the comparability analysis supporting the arm's-length pricing. The circular also sets forth the penalty framework for non-compliance and provides guidance on the interaction between the documentation requirements and the burden of proof in tax audits.

B. OECD Transfer Pricing Guidelines

The OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (the "OECD Guidelines") provide the internationally accepted framework for applying the arm's-length principle and are treated as authoritative interpretive guidance by both the German and US tax authorities.

Chapter I — The Arm's-Length Principle. Chapter I establishes the foundational principle that conditions in controlled transactions should not differ from those that would be agreed upon in comparable uncontrolled transactions between independent parties. The arm's-length principle requires a comparability analysis that considers the contractual terms of the transaction, the functions performed by each party, the assets used, the risks assumed, the economic circumstances, and the business strategies pursued. For intercompany financial transactions, the comparability analysis must address the credit profile of the borrower, the terms and conditions of the loan (interest rate, tenor, security, covenants, currency), and the availability of comparable uncontrolled transactions.

Chapter X — Financial Transactions (2022 Revision). Chapter X, as substantially revised in 2022, provides specific guidance on the transfer pricing treatment of intra-group financial transactions, including loans, cash-pooling, guarantees, hedging, and captive insurance. The Chapter X guidance is directly relevant to the intercompany arrangement between IHDC and IHDC Frankfurt and addresses several key analytical frameworks:

Delineation of the Actual Transaction. Chapter X requires tax authorities and taxpayers to accurately delineate the actual transaction by examining the economic substance, not merely the legal form, of the arrangement. This includes determining whether the purported intercompany loan would be regarded as a loan between independent parties or whether it should be recharacterized as, for example, an equity contribution. The delineation analysis requires an assessment of the borrower's debt capacity, the commercial rationale for the borrowing, and whether a third-party lender would have extended comparable financing.

Credit Rating of the Borrower. Chapter X provides guidance on the assessment of the borrower's creditworthiness for purposes of pricing an intercompany loan. The analysis should consider both the standalone credit profile of the borrower and the impact of group membership (passive association benefits). Passive association benefits — that is, the general benefit that a subsidiary derives from being part of a larger, creditworthy group, without any explicit guarantee or other action by the parent — need not be compensated. However, explicit credit support measures (such as a parent guarantee, a letter of comfort, or a keepwell agreement) that enhance the subsidiary's credit profile beyond what passive association alone provides should be priced at arm's length.

Comparability Analysis. Chapter X endorses the use of the Comparable Uncontrolled Price (CUP) method as the most direct method for pricing intercompany loans, where suitable comparable uncontrolled transactions are available. Where direct comparables are not available, economic models (such as yield spread analysis, credit default swap implied spreads, or option-pricing models) may be used as supporting methods.

C. German Interest Deduction Limitations

Apart from the arm's-length pricing requirement, the deductibility of interest expense by IHDC Frankfurt is subject to specific statutory limitations under German tax law.

§ 4h EStG / § 8a KStG — Zinsschranke (Interest Barrier Rule). The German interest barrier rule limits the deductibility of net interest expense (i.e., total interest expense less total interest income) to 30% of the taxpayer's tax-EBITDA (earnings before interest, taxes, depreciation, and amortization, as computed for tax purposes). Any net interest expense in excess of the 30% limit is not deductible in the current year but is carried forward indefinitely as a Zinsvortrag (interest carry-forward) and may be deducted in future years, subject to the same 30% limitation. The interest barrier rule applies to all interest expense incurred by IHDC Frankfurt, whether on third-party borrowings (including the EUR Sub-Tranche) or on intercompany loans from IHDC.

The interest barrier rule includes several exemption and escape provisions, including:

(i) De minimis exemption: The interest barrier does not apply if the taxpayer's net interest expense does not exceed €3,000,000 in the relevant fiscal year. Given the magnitude of the EUR Sub-Tranche interest expense (estimated at approximately €20.7 million per annum, as discussed in Section VI.A below), the de minimis exemption is not available to IHDC Frankfurt.

(ii) Standalone entity exemption (Konzernklausel): The interest barrier does not apply if the taxpayer is not part of a consolidated group, or if the taxpayer's equity ratio equals or exceeds the consolidated group's equity ratio by no more than two percentage points. The applicability of this exemption to IHDC Frankfurt will depend on a comparison of IHDC Frankfurt's standalone equity ratio to the Ironhaven group's consolidated equity ratio, which must be computed under German GAAP (HGB) or IFRS on a consistent basis. Given IHDC Frankfurt's significant leverage profile (funded primarily by the EUR Sub-Tranche), the equity ratio test may be challenging to meet, particularly in the early years before operational revenues and retained earnings build equity.

(iii) EBITDA carry-forward: If the taxpayer's 30% tax-EBITDA threshold exceeds its net interest expense in a given year, the unused capacity may be carried forward for up to five years as an EBITDA-Vortrag. This provision may provide relief in later years when IHDC Frankfurt is generating significant revenue.

Interaction with Gewerbesteuer (Trade Tax). In addition to the interest barrier rule, IHDC Frankfurt's interest expense is subject to a partial add-back for Gewerbesteuer (trade tax) purposes. Under § 8 Nr. 1a GewStG, 25% of gross interest expense (from all sources, including both third-party and intercompany borrowings) is added back to the Gewerbesteuer base, to the extent that the aggregate of all add-back items under § 8 Nr. 1 GewStG exceeds a Freibetrag (exemption amount) of €200,000. The effective trade tax cost depends on the Hebesatz (multiplier rate) of the municipality in which IHDC Frankfurt is subject to trade tax. In Frankfurt am Main, the current Hebesatz is approximately 460%, which, when combined with the base rate (Steuermesszahl) of 3.5%, results in an effective trade tax rate of approximately 16.1% on the trade tax base. The 25% add-back of gross interest expense thus creates an incremental tax cost that is independent of the arm's-length pricing determination and applies regardless of whether the interest is paid to a third-party lender or to IHDC on an intercompany loan.

Relevance to Intercompany Loan Pricing. The interest deduction limitations do not alter the arm's-length pricing requirement — the intercompany interest rate must be set at arm's length regardless of whether the resulting interest expense is fully deductible by IHDC Frankfurt. However, the deduction limitations affect the economic benefit to IHDC Frankfurt of incurring debt (whether third-party or intercompany) and should be considered in the overall structuring analysis. If the interest barrier significantly limits deductibility, it may be economically advantageous to capitalize IHDC Frankfurt with a higher proportion of equity, thereby reducing the non-deductible interest expense and the Gewerbesteuer add-back. This planning consideration is discussed further in Section VI.C below.

D. US Tax Considerations

The intercompany on-lending arrangement also implicates several US federal income tax provisions that must be considered in conjunction with the German transfer pricing analysis.

IRC § 482 — IRS Adjustment Authority. Section 482 of the Internal Revenue Code grants the IRS the authority to distribute, apportion, or allocate gross income, deductions, credits, or allowances between or among two or more organizations, trades, or businesses owned or controlled directly or indirectly by the same interests, if such distribution, apportionment, or allocation is necessary to prevent evasion of taxes or to clearly reflect the income of any such organizations, trades, or businesses. The arm's-length standard under IRC § 482, as articulated in the Treasury Regulations thereunder, is substantively consistent with the OECD Guidelines and the German AStG, although differences in application may arise. The IRS's adjustment authority applies to intercompany loans, guarantees, and other financial transactions between IHDC (or Ironhaven Holdings Inc.) and IHDC Frankfurt.

IRC §§ 871/881 — Withholding on Interest. Sections 871 and 881 impose US withholding tax on certain US-source interest payments made to non-resident aliens and foreign corporations, respectively. In the present context, the direction of interest flow is from IHDC Frankfurt (Germany) to IHDC (US), so US withholding on outbound interest is not directly at issue. However, if any reverse interest flows arise (for example, if IHDC borrows from IHDC Frankfurt or if a cash-pooling arrangement creates a creditor position for IHDC Frankfurt), US withholding obligations may need to be considered.

US-Germany Income Tax Treaty — Article 11 (Interest). The Convention between the United States of America and the Federal Republic of Germany for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital and to Certain Other Taxes (the "Treaty"), as amended, provides for reduced withholding rates on interest payments between the two contracting states. Article 11 of the Treaty generally permits the source state to tax interest at a rate not exceeding the rate specified in the Treaty (which, for interest arising in Germany and paid to a US resident, is 0% if the beneficial owner of the interest is a US treaty-eligible resident and the limitation on benefits (LOB) provisions of Article 28 are satisfied). The LOB analysis is relevant because IHDC is a Delaware LLC treated as a disregarded entity for US tax purposes, which means that treaty benefits must be determined by reference to the status of the beneficial owner of the income — Ironhaven Holdings Inc., a Delaware corporation. Ironhaven Holdings Inc. should qualify for treaty benefits under the LOB provisions, subject to confirmation of the relevant tests (publicly traded company test, ownership and base erosion test, derivative benefits test, or active trade or business test, as applicable).

Pass-Through Treatment of IHDC. IHDC is a Delaware limited liability company that, as a single-member LLC wholly owned by Ironhaven Holdings Inc., is disregarded as an entity separate from its owner for US federal income tax purposes under Treasury Regulation § 301.7701-3. Accordingly, any intercompany interest income received by IHDC from IHDC Frankfurt is treated as received directly by Ironhaven Holdings Inc. for US federal income tax purposes. Ironhaven Holdings Inc. is a C corporation subject to US corporate income tax on its worldwide income, including any German-source interest income. Foreign tax credits may be available under IRC § 901 for any German taxes (including withholding taxes) imposed on the interest income, subject to the limitations of IRC §§ 904 and 960 and the applicable basket rules.

IV. Arm's-Length Interest Rate Benchmark Analysis

A. Methodology

The arm's-length interest rate for any intercompany on-lending from IHDC to IHDC Frankfurt is determined using the Comparable Uncontrolled Price ("CUP") method as the primary transfer pricing method. The CUP method compares the terms of the controlled intercompany transaction to the terms of a comparable uncontrolled transaction — that is, a transaction between unrelated parties conducted under comparable circumstances. The CUP method is recognized as the most direct and reliable method for pricing intercompany financial transactions where a suitable comparable uncontrolled transaction is available.

In the present case, the EUR Sub-Tranche under the Credit Agreement provides an exceptionally strong primary comparable. The EUR Sub-Tranche represents a transaction in which sophisticated, arm's-length institutional lenders (including NordBrücke AG, which committed $150,000,000 allocated entirely to the EUR Sub-Tranche, as well as other syndicate members assembled by Crescent Harbor Bank, N.A. as Lead Arranger) have agreed to lend €253,571,429 to IHDC Frankfurt at a rate of EURIBOR + 425 bps, on specific commercial terms (secured, seven-year maturity, 1.00% annual amortization). The EUR Sub-Tranche is the closest possible arm's-length comparable because it involves the same borrower (IHDC Frankfurt), the same currency (EUR), the same purpose (Frankfurt campus construction), and a negotiated pricing outcome reached through a competitive syndication process.

As a supporting method, we have also conducted an economic analysis using a credit rating-based yield spread approach, in which we identify the credit spread that would be applicable to a borrower with a comparable credit profile in the European leveraged loan and high-yield bond markets. This supporting analysis confirms the reasonableness of the CUP-based result. The detailed comparable transaction data is set forth in Appendix A.

B. Credit Assessment of IHDC Frankfurt (Standalone vs. Group)

A foundational element of the arm's-length analysis is the assessment of IHDC Frankfurt's creditworthiness, both on a standalone basis and considering the benefits of group membership.

Standalone Credit Profile. IHDC Frankfurt is a newly established GmbH with the following credit characteristics on a standalone basis:

• No independent operating history and no track record of revenue generation or debt service.

• Single-asset entity: IHDC Frankfurt's sole asset is the Frankfurt campus, which is currently under construction and not yet revenue-producing.

• Limited standalone revenue visibility: the primary source of contracted future revenue is the Euronova Digital GmbH pre-lease LOI for 20 MW at €9,800,000 annual rent. However, the LOI is not a binding lease, and revenue will not commence until Phase I completion (estimated Q1 2026).

• No standalone credit history, no rated debt, and no publicly available financial information.

• High construction risk: the Frankfurt campus is in the early construction phase, and the successful completion on time and on budget is subject to typical construction risks (permitting delays, cost overruns, supply chain disruptions, labor shortages).

Based on these factors, we estimate that IHDC Frankfurt's standalone credit rating, if rated by a recognized credit rating agency, would be below investment grade, likely in the B/B− range. This estimate is based on an analysis of comparable single-asset, construction-stage data center entities and the rating methodologies of the major rating agencies for project-finance-type exposures.

Group-Supported Credit Profile. IHDC Frankfurt benefits materially from its membership in the Ironhaven group. The group-level credit characteristics include:

• Ironhaven group consolidated Adjusted EBITDA of $165,800,000 (LTM ending March 31, 2024), reflecting the operating performance of the existing Virginia data center campus and other group assets.

• Total consolidated assets of approximately $1,870,000,000.

• Thornfield Infrastructure Fund III, LP equity contribution of $410,000,000, providing a substantial equity cushion.

• Pro forma Net Leverage (Total Net Debt / Adjusted EBITDA) of approximately 5.35x, reflecting the leveraged nature of the financing but within the range typically associated with BB−/B+ rated leveraged credits in the data center sector.

• Established operating platform, management team, and customer relationships in the US data center market, providing diversification and operational support.

Considering the group-level credit support, including the Parent Guarantee by Ironhaven Holdings Inc. and the cross-collateralization of the Credit Facility, the group-supported credit profile for IHDC Frankfurt is materially stronger than the standalone profile. We estimate the group-supported credit rating to be in the BB−/B+ range, consistent with the indicative private credit estimate obtained from Sentinel Ratings International, LLC (contact: Lorraine Dupont) for purposes of the syndication process. The Sentinel assessment, while not a published rating, provides a market-validated reference point for the overall Credit Facility.

Implicit Support Adjustment. The OECD Chapter X guidance distinguishes between "passive association" benefits (i.e., the general creditworthiness benefit that a subsidiary derives from being part of a group, without any specific action by the parent) and "explicit support" (i.e., specific guarantees, comfort letters, or other credit enhancements provided by the parent). Under the OECD framework:

• Passive association benefits need not be compensated by the subsidiary. The fact that IHDC Frankfurt's perceived creditworthiness is enhanced by virtue of its membership in the Ironhaven group does not, by itself, give rise to an obligation to pay a fee.

• Explicit support measures — such as the Parent Guarantee by Ironhaven Holdings Inc. under the Credit Agreement — that directly and specifically enhance the subsidiary's borrowing capacity or reduce its borrowing cost should be priced at arm's length. The guarantee fee analysis is addressed in Section IV.E below.

For purposes of pricing an intercompany loan from IHDC to IHDC Frankfurt, the relevant credit assessment should reflect IHDC Frankfurt's credit profile as enhanced by passive association benefits (reflecting its membership in the Ironhaven group) but not adjusted for explicit guarantees (unless such guarantees are separately priced). This yields an effective credit profile in the BB−/B+ range, which is consistent with the EUR Sub-Tranche pricing of EURIBOR + 425 bps.

C. Comparable Transaction Analysis

Primary Comparable: EUR Sub-Tranche. As noted above, the EUR Sub-Tranche under the Credit Agreement is the strongest available arm's-length comparable for purposes of pricing an intercompany loan from IHDC to IHDC Frankfurt. The EUR Sub-Tranche has the following key terms:

The EUR Sub-Tranche represents the result of a competitive syndication process in which sophisticated arm's-length lenders assessed IHDC Frankfurt's creditworthiness (on a group-supported basis), evaluated the collateral package and construction risk, and agreed to lend at a rate of EURIBOR + 425 bps. This is the most reliable measure of the arm's-length interest rate for lending to IHDC Frankfurt under the specific economic circumstances.

Adjustment Factors. While the EUR Sub-Tranche provides the closest possible comparable, the terms of any intercompany loan may differ from those of the EUR Sub-Tranche in several respects. The following adjustments should be considered:

Security. The EUR Sub-Tranche is secured by a comprehensive German-law collateral package (as described above). If the intercompany loan from IHDC to IHDC Frankfurt is unsecured, an upward adjustment to the interest rate of 50 to 100 basis points would be warranted to reflect the additional credit risk borne by an unsecured lender. The magnitude of this adjustment is based on observed market spreads between secured and unsecured lending to comparable borrowers.

Subordination. If the intercompany loan is structurally or contractually subordinated to the Term Loan B obligations (as is typical for intercompany loans when a senior secured credit facility is in place, and as may be required under the Credit Agreement's subordination provisions), a further premium of 75 to 150 basis points would be warranted to reflect the subordinated lender's lower priority in a liquidation or restructuring scenario. The specific subordination premium depends on the degree of subordination (full structural subordination vs. contractual subordination with payment waterfall protections).

Tenor. If the intercompany loan matches the seven-year maturity of the EUR Sub-Tranche, no tenor adjustment is required. If the intercompany loan has a shorter tenor (for example, a three-year revolving facility for working capital purposes), a downward adjustment of 25 to 75 basis points would be appropriate to reflect the reduced term risk. Conversely, a longer tenor would warrant an upward adjustment.

Currency. If the intercompany loan is denominated in EUR (matching the EUR Sub-Tranche), no currency adjustment is needed. If, however, IHDC draws USD Tranche proceeds and on-lends in USD, or if IHDC on-lends in EUR but converts from USD using a hedging instrument, the costs of currency hedging or the cross-currency basis swap spread must be factored into the pricing. As of early 2024, the EUR/USD cross-currency basis swap spread for seven-year tenors is approximately negative 10 to negative 20 basis points, meaning that EUR-denominated lending is slightly less expensive than USD-denominated lending on a hedged basis.

Market Comparable Transactions. In addition to the EUR Sub-Tranche, Appendix A presents a selection of comparable EUR-denominated term loan transactions in the European data center and digital infrastructure sector completed during 2023–2024. These transactions confirm that leveraged lending to data center operators and developers in the BB−/B+ credit range has priced in the range of EURIBOR + 375 bps to EURIBOR + 500 bps, depending on the borrower's credit profile, collateral quality, leverage, and sponsor backing. The EUR Sub-Tranche pricing of EURIBOR + 425 bps falls squarely within this range.

D. Arm's-Length Range Determination

Based on the foregoing analysis, we determine the arm's-length interest rate range for an intercompany loan from IHDC to IHDC Frankfurt as follows:

Base Case — Pari Passu Secured Intercompany Loan (EUR, 7-Year):

Arm's-length range: EURIBOR + 400 bps to EURIBOR + 450 bps

This range reflects lending on terms substantially equivalent to those of the EUR Sub-Tranche — secured by a comparable collateral package, denominated in EUR, with a seven-year maturity co-terminus with the Credit Facility, and with 1.00% annual amortization. The midpoint of this range (EURIBOR + 425 bps) corresponds exactly to the EUR Sub-Tranche pricing and represents the most defensible single price point.

Alternative Case — Unsecured Intercompany Loan (EUR, 7-Year):

Arm's-length range: EURIBOR + 475 bps to EURIBOR + 550 bps

This range reflects the upward adjustment for the absence of security (50 to 100 bps premium). The wide range reflects uncertainty regarding the precise magnitude of the security premium for IHDC Frankfurt's specific risk profile.

Alternative Case — Unsecured and Subordinated Intercompany Loan (EUR, 7-Year):

Arm's-length range: EURIBOR + 550 bps to EURIBOR + 700 bps

This range reflects both the unsecured premium and the subordination premium (additional 75 to 150 bps).

Recommendation. We recommend that any intercompany loan from IHDC to IHDC Frankfurt be priced at EURIBOR + 425 bps (with a EURIBOR floor of 0.00%), provided that the intercompany loan is on terms substantially comparable to the EUR Sub-Tranche (secured by comparable collateral, EUR-denominated, seven-year maturity, 1.00% annual amortization). This pricing falls at the midpoint of the base case arm's-length range and is directly supported by the EUR Sub-Tranche, which constitutes the most reliable arm's-length comparable. If the intercompany loan is unsecured or subordinated, the interest rate should be adjusted upward within the applicable range, as specified above.

The EURIBOR + 425 bps rate also provides the strongest defensibility in the event of a German tax audit, because it mirrors the rate negotiated with arm's-length institutional lenders in the EUR Sub-Tranche syndication. The German tax authorities are more likely to accept a rate that is directly supported by a contemporaneous third-party transaction involving the same borrower, currency, and tenor.

E. Guarantee Fee Analysis

Even under the current Co-Borrower structure — where no formal intercompany loan exists — the implicit and explicit credit support provided by the Ironhaven group to IHDC Frankfurt merits analysis from a transfer pricing perspective.

Explicit Guarantee — Parent Guarantee by Ironhaven Holdings Inc. Under the Credit Agreement, Ironhaven Holdings Inc. provides a Parent Guarantee of the Term Loan B obligations, including the EUR Sub-Tranche. This guarantee directly benefits IHDC Frankfurt by enhancing the creditworthiness of the EUR Sub-Tranche and enabling IHDC Frankfurt to borrow on terms that would not be available on a standalone basis. Under the OECD Chapter X guidance, an explicit guarantee that enhances the borrower's credit profile and results in a lower borrowing cost should be priced at arm's length. The appropriate transfer pricing treatment is to charge IHDC Frankfurt a guarantee fee reflecting the arm's-length value of the credit enhancement provided by the Parent Guarantee.

Passive Association Benefits. As discussed in Section IV.B above, IHDC Frankfurt also benefits from passive association with the Ironhaven group — that is, the general market perception that a subsidiary of a larger, creditworthy group is less likely to default than a standalone entity. Under the OECD Guidelines, passive association benefits need not be compensated; they are a natural consequence of group membership, analogous to the reputational benefit that an individual derives from a reputable employer.

Guarantee Fee Recommendation. If the Parent Guarantee by Ironhaven Holdings Inc. is determined to explicitly benefit IHDC Frankfurt (as distinct from passive association benefits), a guarantee fee in the range of 50 to 100 basis points per annum on the guaranteed amount would be consistent with arm's-length pricing. This range is based on observed market pricing for guarantee fees charged by parent companies to subsidiaries with comparable credit differentials (standalone B/B− upgraded to BB−/B+ with the guarantee). The lower end of the range (50 bps) would apply if the guarantee provides a modest credit uplift, while the upper end (100 bps) would apply if the guarantee provides a more substantial enhancement. In practice, the precise guarantee fee would depend on the degree of credit uplift attributable to the explicit guarantee (as opposed to passive association), the notional amount guaranteed, and the term of the guarantee.

If no explicit intercompany guarantee is entered into between IHDC Frankfurt and any IHDC group entity — and the Parent Guarantee under the Credit Agreement runs exclusively from Ironhaven Holdings Inc. to the syndicate lenders, rather than to IHDC Frankfurt — then the guarantee fee analysis may be limited to the question of whether the passive association benefit should be compensated (which, under the OECD Guidelines, it should not be). We recommend consulting with Wendt Falkenberg Rechtsanwälte PartG mbB (Dr. Lukas Wendt) on the German tax treatment of the Parent Guarantee and the distinction between passive association and explicit support under German administrative practice.

V. Documentation Requirements

A. German Transfer Pricing Documentation (§ 90 Abs. 3 AO)

IHDC Frankfurt is required to prepare and maintain contemporaneous transfer pricing documentation covering all cross-border related-party transactions, in accordance with § 90 Abs. 3 AO and the BMF circular of June 14, 2021. The documentation must consist of three components, as described below.

Master File. The Master File provides a group-level overview of the Ironhaven group's business, organizational structure, intangible assets, intercompany financial activities, and consolidated financial and tax positions. The Master File should include:

• An overview of the Ironhaven group, including its legal structure, organizational chart, and principal places of business.

• A description of the group's business activities, including its data center development and operations, key customers, and competitive position.

• A description of the group's intangible assets, including any technology, software, brand, or know-how that is relevant to intercompany transactions.

• A description of the group's intercompany financial activities, including treasury functions, cash management, intercompany lending, and guarantee arrangements.

• A summary of the group's consolidated financial statements and tax positions, including total revenue, EBITDA, and tax obligations by jurisdiction.

Local File for IHDC Frankfurt. The Local File provides entity-level documentation specific to IHDC Frankfurt and its intercompany transactions. The Local File should include:

• A detailed description of IHDC Frankfurt's business, including its role within the Ironhaven group, its principal activities (Frankfurt campus development and operation), and its business strategy.

• A description of each intercompany financial transaction, or, if no formal intercompany loan exists, a description of the direct Co-Borrower arrangement under the Credit Agreement and the implicit group support provided by the IHDC group.

• A functional analysis of IHDC Frankfurt, identifying the functions performed by IHDC Frankfurt (construction management, asset ownership, tenant leasing), the assets used (the Frankfurt campus, the pre-lease with Euronova Digital GmbH), and the risks assumed (construction risk, market risk, currency risk, credit risk).

• A comparability analysis, including the benchmark study of arm's-length interest rates as set forth in Section IV of this memorandum and Appendix A.

• The selection and application of the transfer pricing method (CUP method) and the justification for its selection.

• The arm's-length range and the selected price point (EURIBOR + 425 bps for the base case).

• A description of any adjustments made to account for differences between the intercompany transaction and the comparable(s) (e.g., adjustments for security, subordination, tenor, or currency).

• Financial data for IHDC Frankfurt, including its balance sheet, income statement, and relevant financial ratios.

Country-by-Country Report (CbCR). If the Ironhaven group's consolidated revenue exceeds the €750,000,000 threshold (approximately $813 million at current exchange rates), the group would be required to file a Country-by-Country Report under the OECD BEPS Action 13 framework, as implemented in Germany and the United States. Based on IHDC's current LTM revenue of approximately $412,600,000, the group is below the CbCR threshold. However, as revenues grow — particularly following the completion and lease-up of the Frankfurt campus and the Virginia campus expansion — the group may approach or exceed the threshold. Management should monitor consolidated revenue levels and ensure CbCR filing readiness as revenues grow. The CbCR is filed in the jurisdiction of the ultimate parent entity (in this case, the United States, with respect to Ironhaven Holdings Inc. or Thornfield Infrastructure Fund III, LP, depending on the determination of the ultimate parent entity for CbCR purposes).

Timing and Penalties. Transfer pricing documentation must be prepared contemporaneously — that is, at or near the time the intercompany transaction is entered into — and must be available for presentation to the German tax authorities within 60 days of a formal audit request (or 30 days for extraordinary transactions). Failure to maintain adequate documentation can result in:

• A surcharge of at least 5% (and up to 10%) of the income adjustment determined by the tax authorities, with a minimum surcharge of €5,000.

• Interest on the resulting tax underpayment at the statutory rate (currently 0.15% per month, or 1.8% per annum).

• A shift in the burden of proof: if the taxpayer does not present adequate documentation within the statutory period, the Finanzamt may estimate the arm's-length income, and the burden of proof shifts to the taxpayer to demonstrate that the estimated assessment is unreasonable.

Given these consequences, it is imperative that IHDC Frankfurt prepare and maintain complete, contemporaneous transfer pricing documentation from its first fiscal year (2024).

B. Intercompany Loan Agreement (if applicable)

If an intercompany loan is formalized between IHDC and IHDC Frankfurt — whether as a planned facility or in response to an ad hoc funding need — the transaction should be documented in a written intercompany loan agreement that reflects arm's-length commercial terms. The agreement should include the following provisions:

• Parties: IHDC (as lender) and IHDC Frankfurt (as borrower).

• Principal Amount: Denominated in EUR, in an amount corresponding to the actual funds advanced by IHDC to IHDC Frankfurt. The principal amount should be specified with precision and should match the actual funding need.

• Interest Rate: EURIBOR + 425 bps per annum (or such other rate within the arm's-length range determined by the benchmark analysis, as adjusted for security, subordination, tenor, and currency differences). The EURIBOR rate should be determined for the applicable interest period (e.g., three-month EURIBOR) using a recognized benchmark source (such as the European Money Markets Institute (EMMI) EURIBOR fixing).

• EURIBOR Floor: 0.00%, matching the EUR Sub-Tranche.

• Interest Payment Dates: Quarterly, in arrears, matching the interest payment schedule under the Credit Agreement (to facilitate treasury management and minimize cash flow mismatches).

• Maturity: Co-terminus with the Term Loan maturity of June 3, 2031, or such earlier date as may be agreed.

• Amortization: 1.00% per annum of the original principal amount, payable in equal quarterly installments, matching the Credit Agreement amortization schedule.

• Prepayment: IHDC Frankfurt shall have the right to prepay the intercompany loan in whole or in part at any time without premium or penalty. Voluntary prepayments shall be applied to the outstanding principal amount in inverse order of maturity (or on a pro rata basis, as agreed).

• Security: The intercompany loan agreement should specify whether the loan is secured or unsecured. As discussed in Section VII.B below, an unsecured structure is preferable from a German withholding tax perspective (to avoid the real-property-secured interest withholding trap). If the loan is secured, the security package should be documented separately under German law.

• Subordination: The intercompany loan agreement should address the subordination of the intercompany loan to the Term Loan B obligations. The Credit Agreement may impose restrictions on intercompany lending, including subordination requirements and limitations on payments on subordinated intercompany debt. The intercompany loan agreement should be consistent with the Credit Agreement's subordination provisions and should include a subordination waterfall specifying the priority of payment claims.

• Governing Law: German law (Recht der Bundesrepublik Deutschland). Governing the intercompany loan agreement under German law facilitates enforcement in German courts and minimizes the risk of recharacterization or invalidity challenges under German conflict-of-laws principles. The choice of German law also enhances the credibility of the arrangement for German transfer pricing purposes.

• Tax Gross-Up: The intercompany loan agreement should include a standard tax gross-up provision requiring IHDC Frankfurt to gross up interest payments for any withholding taxes imposed by German law, such that IHDC receives the full contractual interest amount net of any withholding. The gross-up clause should also include a treaty protection mechanism, under which the gross-up obligation is waived or reduced to the extent that IHDC is entitled to relief under the US-Germany Income Tax Treaty and provides the necessary do

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE ATTORNEY WORK PRODUCT
MEMORANDUM
TO: Jonathan Pryce-Williams, General Counsel & Secretary, Ironhaven Data Centers LLC Rebecca Sung, CFO, Ironhaven Data Centers LLC Natasha Greenfeld, VP, Treasury & Capital Markets, Ironhaven Data Centers LLC
FROM: Sylvia Hartwell, Partner (Tax), Calderwood & Harkness LLP Daniel Obi, Associate, Calderwood & Harkness LLP
DATE: May 10, 2024
RE: Arm's-Length Pricing of Intercompany On-Lending from Ironhaven Data Centers LLC to Ironhaven Frankfurt GmbH — German Transfer Pricing Compliance
MATTER NO.: 1043-00001
BILLING CODE: IHDC-TLB-2024
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I. Executive Summary
You have asked us to analyze the transfer pricing implications of any intercompany on-lending arrangement whereby Ironhaven Data Centers LLC ("IHDC" or the "US Parent"), a Delaware limited liability company, on-lends a portion of the proceeds of the $950,000,000 Senior Secured Term Loan B facility (the "Term Loan" or the "Credit Facility") to its wholly-owned German subsidiary, Ironhaven Frankfurt GmbH ("IHDC Frankfurt"), for the purpose of funding the construction of the Frankfurt data center campus (Phase I estimated cost of approximately €253,571,429, equivalent to approximately $275,000,000 at the EUR/USD spot rate of 1.0846 as of the date of this memorandum). This memorandum also addresses the transfer pricing implications of the current direct borrowing structure and the implicit group support provided by the IHDC group to IHDC Frankfurt in connection therewith.
As documented in the Senior Secured Term Loan B Credit Agreement dated May 15, 2024 (with closing anticipated on June 3, 2024) (the "Credit Agreement"), IHDC Frankfurt is a Co-Borrower under the Credit Agreement and is directly and primarily obligated on the EUR Sub-Tranche of €253,571,429. Under this structure, the EUR Sub-Tranche proceeds are drawn directly by IHDC Frankfurt from the syndicate lenders, and, accordingly, the transaction as currently documented does not involve a formal intercompany on-loan from IHDC to IHDC Frankfurt.
However, transfer pricing exposure arises in several scenarios. First, if operational cash management or internal treasury practices result in IHDC advancing funds to IHDC Frankfurt outside the direct borrowing structure — for example, to cover construction cost overruns, working capital shortfalls, or expansion capital requirements — such advances would constitute intercompany financial transactions subject to the arm's-length standard. Second, if the German tax authorities (Finanzamt) recharacterize the Co-Borrower structure as, in substance, an indirect on-loan from IHDC to IHDC Frankfurt — for example, on the basis that IHDC Frankfurt would not have been able to borrow on comparable terms absent group support — the pricing of the implicit financial arrangement must satisfy German transfer pricing standards. Third, intra-group cash-pooling or treasury sweep arrangements, if implemented, could create intercompany debtor-creditor positions that are subject to transfer pricing scrutiny.
The applicable legal framework is governed primarily by § 1 Außensteuergesetz ("AStG") (the German Foreign Tax Act), which codifies the arm's-length principle for cross-border related-party transactions, and § 90 Abs. 3 Abgabenordnung ("AO") (the German Fiscal Code), which imposes contemporaneous transfer pricing documentation requirements. In addition, the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, as revised through 2022 (including, in particular, Chapter X on financial transactions), provide authoritative interpretive guidance that German tax authorities regularly apply. On the US side, IRC § 482 grants the Internal Revenue Service comparable adjustment authority.
Based on our benchmark analysis, which is set forth in detail in Section IV below, we conclude that an arm's-length intercompany interest rate for any on-loan from IHDC to IHDC Frankfurt would fall in the range of EURIBOR + 400 bps to EURIBOR + 450 bps for a secured, EUR-denominated loan with a seven-year maturity matching the Credit Agreement. This range is consistent with the EUR Sub-Tranche pricing of EURIBOR + 425 bps under the Credit Agreement and reflects appropriate adjustments for credit risk, collateral, and tenor. For an unsecured intercompany loan, the arm's-length range widens upward to EURIBOR + 475 bps to EURIBOR + 550 bps, reflecting the additional credit risk borne by an unsecured lender.
Our primary recommendations are as follows:
(a) Document any intercompany financial transactions at arm's length, using the benchmark analysis herein as the basis for pricing.
(b) Maintain contemporaneous transfer pricing documentation as required by § 90 Abs. 3 AO, including a Master File and Local File for IHDC Frankfurt, covering both the direct Co-Borrower arrangement and any intercompany financial transactions.
(c) Set the intercompany interest rate for any on-loan at EURIBOR + 425 bps (matching the EUR Sub-Tranche), provided the loan is on comparable terms (secured, same tenor, same amortization, same currency), and adjust upward if the intercompany loan is unsecured or subordinated.
(d) Prepare a template intercompany loan agreement under German law for use if IHDC advances funds to IHDC Frankfurt outside the Credit Agreement structure.
(e) Establish an annual review cycle to reassess arm's-length pricing and refresh the transfer pricing documentation.
The balance of this memorandum sets forth the factual background, legal framework, benchmark analysis, documentation requirements, interest deduction limitations, US tax implications, and detailed recommendations supporting these conclusions.
II. Background and Transaction Overview
A. The Borrower Group
The Ironhaven group consists of the following principal entities relevant to this analysis:
Ironhaven Data Centers LLC ("IHDC") is a Delaware limited liability company headquartered at 4500 Dominion Ridge Boulevard, Suite 300, Ashburn, Virginia 20147 (EIN 84-3291057). IHDC is the primary operating entity within the Ironhaven group and serves as the Borrower (together with IHDC Frankfurt as Co-Borrower) under the Credit Agreement. IHDC owns and operates data center campuses in the United States (primarily in Northern Virginia) and, through its wholly-owned German subsidiary, in Frankfurt am Main, Germany. IHDC is treated as a disregarded entity or partnership for US federal income tax purposes (depending on whether it has a single or multiple members; as currently structured, it is wholly owned by Ironhaven Holdings Inc. and treated as a disregarded entity).
Ironhaven Holdings Inc. is a Delaware corporation (EIN 84-3291044) that directly owns 100% of the membership interests in IHDC. Ironhaven Holdings Inc. serves as the Parent Guarantor under the Credit Agreement and provides a corporate-level guaranty of the Term Loan obligations. Ironhaven Holdings Inc. is the direct subsidiary of the sponsor's investment vehicle and functions as the holding company for the Ironhaven group.
Ironhaven Frankfurt GmbH ("IHDC Frankfurt") is a German Gesellschaft mit beschränkter Haftung (GmbH) registered at Hanauer Landstraße 188, 60314 Frankfurt am Main, Germany. IHDC Frankfurt is registered with the Amtsgericht Frankfurt am Main under commercial register number HRB 129457. Its German tax identification number (Steuernummer) is 045/127/98321, and its VAT identification number (USt-IdNr.) is DE347891205. IHDC Frankfurt is wholly owned by IHDC and was established as a special-purpose subsidiary for the development, construction, ownership, and operation of the Frankfurt data center campus. As a newly formed entity, IHDC Frankfurt has no independent operating history and currently has no revenue, though it has entered into a pre-lease letter of intent with Euronova Digital GmbH, as described in Section II.C below.
Thornfield Capital Partners, LP is the sponsor of the Ironhaven group, acting through its investment vehicle, Thornfield Infrastructure Fund III, LP. Thornfield Infrastructure Fund III, LP has committed an equity contribution of $410,000,000 in connection with the financing transactions contemplated by the Credit Agreement. Thornfield Capital Partners is a US-based private equity firm specializing in digital infrastructure investments, including data centers, fiber networks, and edge computing facilities.
The corporate organizational chart, as simplified for purposes of this memorandum, is as follows: Thornfield Infrastructure Fund III, LP holds (directly or through intermediate holding vehicles) 100% of the equity interests in Ironhaven Holdings Inc., which in turn holds 100% of the membership interests in IHDC, which in turn holds 100% of the share capital (Stammkapital) of IHDC Frankfurt. This vertical ownership structure is relevant both to the transfer pricing analysis (as it establishes the related-party relationship under § 1 AStG) and to the limitation on benefits analysis under the US-Germany Income Tax Treaty (as discussed in Section VII below).
B. The Term Loan Facility
The Credit Facility is structured as a $950,000,000 Senior Secured Term Loan B, documented under the Credit Agreement dated May 15, 2024, with an expected closing date of June 3, 2024. The key terms of the Credit Facility are summarized below:
Aggregate Commitment: $950,000,000 (Nine Hundred Fifty Million Dollars)
Borrowers: IHDC (as Borrower) and IHDC Frankfurt (as Co-Borrower)
Parent Guarantor: Ironhaven Holdings Inc.
Administrative Agent and Lead Arranger: Crescent Harbor Bank, N.A.
Collateral Agent: Pinnacle Trust Company, N.A.
The Credit Facility is divided into two tranches:
USD Tranche. The USD Tranche has an aggregate principal amount of $675,000,000. The USD Tranche proceeds are to be applied to fund the following: (i) the Virginia campus Phase I construction costs of approximately $475,000,000; (ii) the refinancing in full of the $130,000,000 outstanding mezzanine notes issued to Greystone Mezzanine Fund II, LP; (iii) the payment of transaction fees and expenses; and (iv) general working capital purposes. The USD Tranche bears interest at a rate per annum equal to the Secured Overnight Financing Rate ("SOFR") plus 425 basis points, with a SOFR floor of 0.50%.
EUR Sub-Tranche. The EUR Sub-Tranche has an aggregate principal amount of €253,571,429 (equivalent to approximately $275,000,000 at a EUR/USD exchange rate of 1.0846). The EUR Sub-Tranche proceeds are to be applied exclusively to fund the Frankfurt campus Phase I construction costs. The EUR Sub-Tranche bears interest at a rate per annum equal to the Euro Interbank Offered Rate ("EURIBOR") plus 425 basis points, with a EURIBOR floor of 0.00%. The EUR Sub-Tranche is drawn directly by IHDC Frankfurt in its capacity as Co-Borrower under the Credit Agreement.
Maturity: June 3, 2031 (seven years from the closing date), applicable to both the USD Tranche and the EUR Sub-Tranche.
Amortization: 1.00% per annum of the original principal amount of each tranche, payable in equal quarterly installments, with the balance due at maturity.
Original Issue discount (OID): The Credit Facility is issued at 99.50% of par (50 basis points OID), resulting in net cash proceeds to the Borrowers of approximately $945,250,000.
Collateral: The Credit Facility is secured by a comprehensive collateral package, including, with respect to the EUR Sub-Tranche and the Frankfurt campus assets: a first-priority land charge (Grundschuld) on the Frankfurt campus real property (registered in the Grundbuch von Frankfurt am Main-Ost, Blatt 54321, Flur 12, Flurstück 789); a global assignment of receivables (Globalzession); an account pledge (Kontoverpfändung); a security assignment of movable assets (Sicherungsübereignung); and a share pledge (Anteilsverpfändung) over 100% of the share capital of IHDC Frankfurt. The USD Tranche is similarly secured by a first-priority lien on IHDC's domestic assets.
It is critical to note for purposes of the transfer pricing analysis that IHDC Frankfurt, as Co-Borrower, is directly and primarily liable to the syndicate lenders for the repayment of the EUR Sub-Tranche. The EUR Sub-Tranche is not structured as an intercompany loan from IHDC to IHDC Frankfurt; rather, it represents a direct third-party lending arrangement between the syndicate lenders and IHDC Frankfurt. This distinction is material because it means that, under the current transaction structure, no formal intercompany loan arises by reason of the EUR Sub-Tranche draw. The transfer pricing implications of this structure are nevertheless significant, as discussed in Section II.D below.
Among the notable syndicate members, NordBrücke AG has committed $150,000,000 to the Credit Facility, allocated entirely to the EUR Sub-Tranche, reflecting the European investor base's interest in the Frankfurt campus. Other syndicate members include a mix of US and European institutional lenders, CLO vehicles, and credit funds assembled by Crescent Harbor Bank, N.A. as Lead Arranger.
C. Frankfurt Campus — "Ironhaven Frankfurt I"
The Frankfurt campus, designated "Ironhaven Frankfurt I," is the Ironhaven group's first European data center facility and a strategic asset for the group's expansion into the European hyperscale and enterprise colocation markets. Key details of the Frankfurt campus are as follows:
Location: Hanauer Landstraße 188, 60314 Frankfurt am Main, Germany. The site encompasses approximately 18.7 hectares of land in the Frankfurt-Ost industrial district, a well-established data center cluster benefiting from proximity to the DE-CIX internet exchange, major fiber routes, and robust electrical grid infrastructure.
Land Registry (Grundbuch) Reference: Grundbuch von Frankfurt am Main-Ost, Blatt 54321, Flur 12, Flurstück 789. The property is owned freehold by IHDC Frankfurt and is encumbered by the first-priority Grundschuld in favor of the Collateral Agent securing the Credit Facility.
Planned Capacity: The Frankfurt campus is designed for a total critical IT load capacity of 80 MW at full buildout. Phase I, which is the subject of the current financing, will deliver 40 MW of critical IT load capacity.
Phase I Estimated Cost: €253,571,429 (approximately $275,000,000 equivalent), funded entirely by the EUR Sub-Tranche proceeds. The Phase I budget encompasses site preparation, building construction, electrical infrastructure (including utility connections, substations, generators, and UPS systems), mechanical infrastructure (cooling systems), fiber connectivity, and associated soft costs (design, permitting, project management, contingency).
Estimated Completion: Q1 2026. IHDC Frankfurt has engaged a general contractor under a German-law construction contract (Werkvertrag), and the detailed project timeline anticipates substantial completion by December 2025, with commissioning and handover in Q1 2026.
Anchor Tenant: IHDC Frankfurt has entered into a pre-lease letter of intent (LOI) with Euronova Digital GmbH for 20 MW of critical IT load capacity. The pre-lease contemplates a seven-year initial term with renewal options, at an estimated annual rent of €9,800,000. The Euronova pre-lease represents a significant contracted revenue commitment that provides early cash flow visibility for the Frankfurt campus, although it will not generate revenue until the campus is operational (expected Q1 2026). The Euronova pre-lease is relevant to the transfer pricing analysis both as an indicator of IHDC Frankfurt's creditworthiness and as an input to the interest barrier (Zinsschranke) calculations discussed in Section VI below.
D. Scenarios Triggering Intercompany Loan Analysis
Although the current Credit Agreement structure does not involve a formal intercompany loan, several scenarios could give rise to intercompany financing arrangements between IHDC and IHDC Frankfurt that would require arm's-length pricing under German and US transfer pricing rules. We have identified three principal scenarios:
Scenario 1: Direct Drawing by IHDC Frankfurt as Co-Borrower (Current Structure). Under the current structure, IHDC Frankfurt draws the EUR Sub-Tranche proceeds directly from the syndicate lenders as Co-Borrower. No intercompany loan arises as a matter of legal form. However, the German tax authorities may nonetheless scrutinize the arrangement in several respects. First, the Finanzamt may examine whether the implicit credit support provided by the IHDC group — including the Parent Guarantee by Ironhaven Holdings Inc. and the cross-collateralization with IHDC's US assets — constitutes a benefit to IHDC Frankfurt that should be compensated through an arm's-length guarantee fee or similar payment. Second, if the Finanzamt determines that IHDC Frankfurt's standalone creditworthiness would not support borrowing €253.6 million on the terms of the EUR Sub-Tranche (including the EURIBOR + 425 bps interest rate and the collateral package), it may seek to recharacterize a portion of the debt as equity or to impute a guarantee fee. The OECD Chapter X guidance on implicit support and passive association benefits is directly relevant to this analysis.
Scenario 2: Formal On-Lending by IHDC. If, for operational or treasury management reasons, IHDC draws USD Tranche proceeds and on-lends funds in EUR (or in USD) to IHDC Frankfurt for any purpose — including to cover construction cost overruns, to provide working capital during the pre-revenue phase, or to fund Phase II expansion — such an advance would constitute a formal intercompany loan. This intercompany loan would be subject to the arm's-length standard under both § 1 AStG and IRC § 482, and the interest rate, tenor, security, and other commercial terms would need to be documented and benchmarked against comparable third-party transactions. If the on-lending involves a currency mismatch (USD drawn by IHDC, EUR advanced to IHDC Frankfurt), the intercompany arrangement must also account for hedging costs or cross-currency basis swap spreads.
Scenario 3: Cash-Pooling or Treasury Sweep Arrangements. If the Ironhaven group implements an intra-group cash-pooling arrangement or automated treasury sweep system that results in IHDC Frankfurt being a net debtor to IHDC on a recurring or continuous basis, such intercompany balances may be characterized by the German tax authorities as intercompany financing transactions subject to transfer pricing rules. This is particularly relevant in the construction phase, when IHDC Frankfurt will have significant cash outflows (construction payments) and minimal cash inflows (no rental revenue until Q1 2026). Even short-term or revolving intercompany balances arising from cash-pooling arrangements must be priced at arm's length and documented in the transfer pricing files.
For each of these scenarios, the transfer pricing analysis must address the appropriate arm's-length interest rate, the characterization of the intercompany arrangement (debt vs. equity), and the documentation and compliance requirements under both German and US law. The remainder of this memorandum is structured to address each of these issues systematically.
III. Applicable Legal and Regulatory Framework
A. German Transfer Pricing Law
The German transfer pricing framework is anchored in the arm's-length principle as codified in the Außensteuergesetz (AStG) and supplemented by the Abgabenordnung (AO), the relevant Einkommensteuergesetz (EStG) and Körperschaftsteuergesetz (KStG) provisions, and the administrative guidance issued by the Bundesministerium der Finanzen (BMF).
§ 1 AStG — Arm's-Length Principle. Section 1 of the AStG provides that where a taxpayer who is resident in Germany, or who has income subject to limited German tax liability, conducts cross-border business transactions with a related party (nahestehende Person), and the conditions agreed upon for such transactions differ from those that would have been agreed upon between unrelated parties dealing at arm's length, the German tax authorities are empowered to adjust the taxpayer's income to reflect arm's-length conditions. The adjustment authority extends to all terms and conditions of the transaction, including pricing, volume, tenor, security, and other commercial terms. For purposes of IHDC Frankfurt, any intercompany financial transaction with IHDC (a non-resident related party) falls squarely within the scope of § 1 AStG, and the Finanzamt has the authority to adjust IHDC Frankfurt's taxable income if the intercompany pricing deviates from the arm's-length standard.
§ 1a AStG — Financial Transactions (Effective 2024). Effective for fiscal years beginning on or after January 1, 2024, the newly enacted § 1a AStG introduces specific provisions governing the transfer pricing treatment of financial transactions between related parties. Section 1a requires, among other things, that the German tax authorities assess whether the borrower subsidiary would have been able to borrow the relevant amount on arm's-length terms from an unrelated lender (the "standalone borrowing capacity" test). If the borrower's standalone creditworthiness would not support the level or terms of the intercompany borrowing, the excess may be recharacterized as equity for German tax purposes, with the consequence that the associated interest expense is non-deductible. This provision is directly relevant to IHDC Frankfurt, which is a newly established entity with no independent operating history and whose standalone credit profile is materially weaker than the group-supported profile. The § 1a AStG analysis requires careful documentation of IHDC Frankfurt's standalone borrowing capacity, as discussed in Section IV.B below.
§ 90 Abs. 3 AO — Contemporaneous Documentation Requirement. Section 90, subsection 3, of the AO imposes a mandatory transfer pricing documentation requirement on taxpayers who engage in cross-border related-party transactions. The documentation must describe the nature and terms of the transaction, the functions performed, assets used, and risks assumed by each party, the comparability analysis, the selection and application of the transfer pricing method, and the arm's-length range and selected price point. The documentation must be prepared for each fiscal year and made available to the tax authorities within 60 days of a formal request (or within 30 days for "extraordinary" transactions, defined as transactions that are unusual by their nature or amount). Failure to prepare and maintain adequate transfer pricing documentation can result in surcharges of 5% to 10% of the income adjustment amount, in addition to interest on the underpayment and the risk of estimated assessments by the Finanzamt based on the most unfavorable reasonable interpretation of the facts.
Verwaltungsgrundsätze Verrechnungspreise (BMF Circular dated June 14, 2021). The BMF circular of June 14, 2021 provides comprehensive administrative guidance on the preparation, content, and maintenance of transfer pricing documentation. The circular addresses, among other things, the documentation requirements for intercompany financing transactions, including intercompany loans, cash-pooling arrangements, guarantees, and other financial instruments. The circular emphasizes the importance of documenting the economic rationale for the transaction, the credit profile of the borrower, and the comparability analysis supporting the arm's-length pricing. The circular also sets forth the penalty framework for non-compliance and provides guidance on the interaction between the documentation requirements and the burden of proof in tax audits.
B. OECD Transfer Pricing Guidelines
The OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (the "OECD Guidelines") provide the internationally accepted framework for applying the arm's-length principle and are treated as authoritative interpretive guidance by both the German and US tax authorities.
Chapter I — The Arm's-Length Principle. Chapter I establishes the foundational principle that conditions in controlled transactions should not differ from those that would be agreed upon in comparable uncontrolled transactions between independent parties. The arm's-length principle requires a comparability analysis that considers the contractual terms of the transaction, the functions performed by each party, the assets used, the risks assumed, the economic circumstances, and the business strategies pursued. For intercompany financial transactions, the comparability analysis must address the credit profile of the borrower, the terms and conditions of the loan (interest rate, tenor, security, covenants, currency), and the availability of comparable uncontrolled transactions.
Chapter X — Financial Transactions (2022 Revision). Chapter X, as substantially revised in 2022, provides specific guidance on the transfer pricing treatment of intra-group financial transactions, including loans, cash-pooling, guarantees, hedging, and captive insurance. The Chapter X guidance is directly relevant to the intercompany arrangement between IHDC and IHDC Frankfurt and addresses several key analytical frameworks:
Delineation of the Actual Transaction. Chapter X requires tax authorities and taxpayers to accurately delineate the actual transaction by examining the economic substance, not merely the legal form, of the arrangement. This includes determining whether the purported intercompany loan would be regarded as a loan between independent parties or whether it should be recharacterized as, for example, an equity contribution. The delineation analysis requires an assessment of the borrower's debt capacity, the commercial rationale for the borrowing, and whether a third-party lender would have extended comparable financing.
Credit Rating of the Borrower. Chapter X provides guidance on the assessment of the borrower's creditworthiness for purposes of pricing an intercompany loan. The analysis should consider both the standalone credit profile of the borrower and the impact of group membership (passive association benefits). Passive association benefits — that is, the general benefit that a subsidiary derives from being part of a larger, creditworthy group, without any explicit guarantee or other action by the parent — need not be compensated. However, explicit credit support measures (such as a parent guarantee, a letter of comfort, or a keepwell agreement) that enhance the subsidiary's credit profile beyond what passive association alone provides should be priced at arm's length.
Comparability Analysis. Chapter X endorses the use of the Comparable Uncontrolled Price (CUP) method as the most direct method for pricing intercompany loans, where suitable comparable uncontrolled transactions are available. Where direct comparables are not available, economic models (such as yield spread analysis, credit default swap implied spreads, or option-pricing models) may be used as supporting methods.
C. German Interest Deduction Limitations
Apart from the arm's-length pricing requirement, the deductibility of interest expense by IHDC Frankfurt is subject to specific statutory limitations under German tax law.
§ 4h EStG / § 8a KStG — Zinsschranke (Interest Barrier Rule). The German interest barrier rule limits the deductibility of net interest expense (i.e., total interest expense less total interest income) to 30% of the taxpayer's tax-EBITDA (earnings before interest, taxes, depreciation, and amortization, as computed for tax purposes). Any net interest expense in excess of the 30% limit is not deductible in the current year but is carried forward indefinitely as a Zinsvortrag (interest carry-forward) and may be deducted in future years, subject to the same 30% limitation. The interest barrier rule applies to all interest expense incurred by IHDC Frankfurt, whether on third-party borrowings (including the EUR Sub-Tranche) or on intercompany loans from IHDC.
The interest barrier rule includes several exemption and escape provisions, including:
(i) De minimis exemption: The interest barrier does not apply if the taxpayer's net interest expense does not exceed €3,000,000 in the relevant fiscal year. Given the magnitude of the EUR Sub-Tranche interest expense (estimated at approximately €20.7 million per annum, as discussed in Section VI.A below), the de minimis exemption is not available to IHDC Frankfurt.
(ii) Standalone entity exemption (Konzernklausel): The interest barrier does not apply if the taxpayer is not part of a consolidated group, or if the taxpayer's equity ratio equals or exceeds the consolidated group's equity ratio by no more than two percentage points. The applicability of this exemption to IHDC Frankfurt will depend on a comparison of IHDC Frankfurt's standalone equity ratio to the Ironhaven group's consolidated equity ratio, which must be computed under German GAAP (HGB) or IFRS on a consistent basis. Given IHDC Frankfurt's significant leverage profile (funded primarily by the EUR Sub-Tranche), the equity ratio test may be challenging to meet, particularly in the early years before operational revenues and retained earnings build equity.
(iii) EBITDA carry-forward: If the taxpayer's 30% tax-EBITDA threshold exceeds its net interest expense in a given year, the unused capacity may be carried forward for up to five years as an EBITDA-Vortrag. This provision may provide relief in later years when IHDC Frankfurt is generating significant revenue.
Interaction with Gewerbesteuer (Trade Tax). In addition to the interest barrier rule, IHDC Frankfurt's interest expense is subject to a partial add-back for Gewerbesteuer (trade tax) purposes. Under § 8 Nr. 1a GewStG, 25% of gross interest expense (from all sources, including both third-party and intercompany borrowings) is added back to the Gewerbesteuer base, to the extent that the aggregate of all add-back items under § 8 Nr. 1 GewStG exceeds a Freibetrag (exemption amount) of €200,000. The effective trade tax cost depends on the Hebesatz (multiplier rate) of the municipality in which IHDC Frankfurt is subject to trade tax. In Frankfurt am Main, the current Hebesatz is approximately 460%, which, when combined with the base rate (Steuermesszahl) of 3.5%, results in an effective trade tax rate of approximately 16.1% on the trade tax base. The 25% add-back of gross interest expense thus creates an incremental tax cost that is independent of the arm's-length pricing determination and applies regardless of whether the interest is paid to a third-party lender or to IHDC on an intercompany loan.
Relevance to Intercompany Loan Pricing. The interest deduction limitations do not alter the arm's-length pricing requirement — the intercompany interest rate must be set at arm's length regardless of whether the resulting interest expense is fully deductible by IHDC Frankfurt. However, the deduction limitations affect the economic benefit to IHDC Frankfurt of incurring debt (whether third-party or intercompany) and should be considered in the overall structuring analysis. If the interest barrier significantly limits deductibility, it may be economically advantageous to capitalize IHDC Frankfurt with a higher proportion of equity, thereby reducing the non-deductible interest expense and the Gewerbesteuer add-back. This planning consideration is discussed further in Section VI.C below.
D. US Tax Considerations
The intercompany on-lending arrangement also implicates several US federal income tax provisions that must be considered in conjunction with the German transfer pricing analysis.
IRC § 482 — IRS Adjustment Authority. Section 482 of the Internal Revenue Code grants the IRS the authority to distribute, apportion, or allocate gross income, deductions, credits, or allowances between or among two or more organizations, trades, or businesses owned or controlled directly or indirectly by the same interests, if such distribution, apportionment, or allocation is necessary to prevent evasion of taxes or to clearly reflect the income of any such organizations, trades, or businesses. The arm's-length standard under IRC § 482, as articulated in the Treasury Regulations thereunder, is substantively consistent with the OECD Guidelines and the German AStG, although differences in application may arise. The IRS's adjustment authority applies to intercompany loans, guarantees, and other financial transactions between IHDC (or Ironhaven Holdings Inc.) and IHDC Frankfurt.
IRC §§ 871/881 — Withholding on Interest. Sections 871 and 881 impose US withholding tax on certain US-source interest payments made to non-resident aliens and foreign corporations, respectively. In the present context, the direction of interest flow is from IHDC Frankfurt (Germany) to IHDC (US), so US withholding on outbound interest is not directly at issue. However, if any reverse interest flows arise (for example, if IHDC borrows from IHDC Frankfurt or if a cash-pooling arrangement creates a creditor position for IHDC Frankfurt), US withholding obligations may need to be considered.
US-Germany Income Tax Treaty — Article 11 (Interest). The Convention between the United States of America and the Federal Republic of Germany for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital and to Certain Other Taxes (the "Treaty"), as amended, provides for reduced withholding rates on interest payments between the two contracting states. Article 11 of the Treaty generally permits the source state to tax interest at a rate not exceeding the rate specified in the Treaty (which, for interest arising in Germany and paid to a US resident, is 0% if the beneficial owner of the interest is a US treaty-eligible resident and the limitation on benefits (LOB) provisions of Article 28 are satisfied). The LOB analysis is relevant because IHDC is a Delaware LLC treated as a disregarded entity for US tax purposes, which means that treaty benefits must be determined by reference to the status of the beneficial owner of the income — Ironhaven Holdings Inc., a Delaware corporation. Ironhaven Holdings Inc. should qualify for treaty benefits under the LOB provisions, subject to confirmation of the relevant tests (publicly traded company test, ownership and base erosion test, derivative benefits test, or active trade or business test, as applicable).
Pass-Through Treatment of IHDC. IHDC is a Delaware limited liability company that, as a single-member LLC wholly owned by Ironhaven Holdings Inc., is disregarded as an entity separate from its owner for US federal income tax purposes under Treasury Regulation § 301.7701-3. Accordingly, any intercompany interest income received by IHDC from IHDC Frankfurt is treated as received directly by Ironhaven Holdings Inc. for US federal income tax purposes. Ironhaven Holdings Inc. is a C corporation subject to US corporate income tax on its worldwide income, including any German-source interest income. Foreign tax credits may be available under IRC § 901 for any German taxes (including withholding taxes) imposed on the interest income, subject to the limitations of IRC §§ 904 and 960 and the applicable basket rules.
IV. Arm's-Length Interest Rate Benchmark Analysis
A. Methodology
The arm's-length interest rate for any intercompany on-lending from IHDC to IHDC Frankfurt is determined using the Comparable Uncontrolled Price ("CUP") method as the primary transfer pricing method. The CUP method compares the terms of the controlled intercompany transaction to the terms of a comparable uncontrolled transaction — that is, a transaction between unrelated parties conducted under comparable circumstances. The CUP method is recognized as the most direct and reliable method for pricing intercompany financial transactions where a suitable comparable uncontrolled transaction is available.
In the present case, the EUR Sub-Tranche under the Credit Agreement provides an exceptionally strong primary comparable. The EUR Sub-Tranche represents a transaction in which sophisticated, arm's-length institutional lenders (including NordBrücke AG, which committed $150,000,000 allocated entirely to the EUR Sub-Tranche, as well as other syndicate members assembled by Crescent Harbor Bank, N.A. as Lead Arranger) have agreed to lend €253,571,429 to IHDC Frankfurt at a rate of EURIBOR + 425 bps, on specific commercial terms (secured, seven-year maturity, 1.00% annual amortization). The EUR Sub-Tranche is the closest possible arm's-length comparable because it involves the same borrower (IHDC Frankfurt), the same currency (EUR), the same purpose (Frankfurt campus construction), and a negotiated pricing outcome reached through a competitive syndication process.
As a supporting method, we have also conducted an economic analysis using a credit rating-based yield spread approach, in which we identify the credit spread that would be applicable to a borrower with a comparable credit profile in the European leveraged loan and high-yield bond markets. This supporting analysis confirms the reasonableness of the CUP-based result. The detailed comparable transaction data is set forth in Appendix A.
B. Credit Assessment of IHDC Frankfurt (Standalone vs. Group)
A foundational element of the arm's-length analysis is the assessment of IHDC Frankfurt's creditworthiness, both on a standalone basis and considering the benefits of group membership.
Standalone Credit Profile. IHDC Frankfurt is a newly established GmbH with the following credit characteristics on a standalone basis:
• No independent operating history and no track record of revenue generation or debt service.
• Single-asset entity: IHDC Frankfurt's sole asset is the Frankfurt campus, which is currently under construction and not yet revenue-producing.
• Limited standalone revenue visibility: the primary source of contracted future revenue is the Euronova Digital GmbH pre-lease LOI for 20 MW at €9,800,000 annual rent. However, the LOI is not a binding lease, and revenue will not commence until Phase I completion (estimated Q1 2026).
• No standalone credit history, no rated debt, and no publicly available financial information.
• High construction risk: the Frankfurt campus is in the early construction phase, and the successful completion on time and on budget is subject to typical construction risks (permitting delays, cost overruns, supply chain disruptions, labor shortages).
Based on these factors, we estimate that IHDC Frankfurt's standalone credit rating, if rated by a recognized credit rating agency, would be below investment grade, likely in the B/B− range. This estimate is based on an analysis of comparable single-asset, construction-stage data center entities and the rating methodologies of the major rating agencies for project-finance-type exposures.
Group-Supported Credit Profile. IHDC Frankfurt benefits materially from its membership in the Ironhaven group. The group-level credit characteristics include:
• Ironhaven group consolidated Adjusted EBITDA of $165,800,000 (LTM ending March 31, 2024), reflecting the operating performance of the existing Virginia data center campus and other group assets.
• Total consolidated assets of approximately $1,870,000,000.
• Thornfield Infrastructure Fund III, LP equity contribution of $410,000,000, providing a substantial equity cushion.
• Pro forma Net Leverage (Total Net Debt / Adjusted EBITDA) of approximately 5.35x, reflecting the leveraged nature of the financing but within the range typically associated with BB−/B+ rated leveraged credits in the data center sector.
• Established operating platform, management team, and customer relationships in the US data center market, providing diversification and operational support.
Considering the group-level credit support, including the Parent Guarantee by Ironhaven Holdings Inc. and the cross-collateralization of the Credit Facility, the group-supported credit profile for IHDC Frankfurt is materially stronger than the standalone profile. We estimate the group-supported credit rating to be in the BB−/B+ range, consistent with the indicative private credit estimate obtained from Sentinel Ratings International, LLC (contact: Lorraine Dupont) for purposes of the syndication process. The Sentinel assessment, while not a published rating, provides a market-validated reference point for the overall Credit Facility.
Implicit Support Adjustment. The OECD Chapter X guidance distinguishes between "passive association" benefits (i.e., the general creditworthiness benefit that a subsidiary derives from being part of a group, without any specific action by the parent) and "explicit support" (i.e., specific guarantees, comfort letters, or other credit enhancements provided by the parent). Under the OECD framework:
• Passive association benefits need not be compensated by the subsidiary. The fact that IHDC Frankfurt's perceived creditworthiness is enhanced by virtue of its membership in the Ironhaven group does not, by itself, give rise to an obligation to pay a fee.
• Explicit support measures — such as the Parent Guarantee by Ironhaven Holdings Inc. under the Credit Agreement — that directly and specifically enhance the subsidiary's borrowing capacity or reduce its borrowing cost should be priced at arm's length. The guarantee fee analysis is addressed in Section IV.E below.
For purposes of pricing an intercompany loan from IHDC to IHDC Frankfurt, the relevant credit assessment should reflect IHDC Frankfurt's credit profile as enhanced by passive association benefits (reflecting its membership in the Ironhaven group) but not adjusted for explicit guarantees (unless such guarantees are separately priced). This yields an effective credit profile in the BB−/B+ range, which is consistent with the EUR Sub-Tranche pricing of EURIBOR + 425 bps.
C. Comparable Transaction Analysis
Primary Comparable: EUR Sub-Tranche. As noted above, the EUR Sub-Tranche under the Credit Agreement is the strongest available arm's-length comparable for purposes of pricing an intercompany loan from IHDC to IHDC Frankfurt. The EUR Sub-Tranche has the following key terms:
The EUR Sub-Tranche represents the result of a competitive syndication process in which sophisticated arm's-length lenders assessed IHDC Frankfurt's creditworthiness (on a group-supported basis), evaluated the collateral package and construction risk, and agreed to lend at a rate of EURIBOR + 425 bps. This is the most reliable measure of the arm's-length interest rate for lending to IHDC Frankfurt under the specific economic circumstances.
Adjustment Factors. While the EUR Sub-Tranche provides the closest possible comparable, the terms of any intercompany loan may differ from those of the EUR Sub-Tranche in several respects. The following adjustments should be considered:
Security. The EUR Sub-Tranche is secured by a comprehensive German-law collateral package (as described above). If the intercompany loan from IHDC to IHDC Frankfurt is unsecured, an upward adjustment to the interest rate of 50 to 100 basis points would be warranted to reflect the additional credit risk borne by an unsecured lender. The magnitude of this adjustment is based on observed market spreads between secured and unsecured lending to comparable borrowers.
Subordination. If the intercompany loan is structurally or contractually subordinated to the Term Loan B obligations (as is typical for intercompany loans when a senior secured credit facility is in place, and as may be required under the Credit Agreement's subordination provisions), a further premium of 75 to 150 basis points would be warranted to reflect the subordinated lender's lower priority in a liquidation or restructuring scenario. The specific subordination premium depends on the degree of subordination (full structural subordination vs. contractual subordination with payment waterfall protections).
Tenor. If the intercompany loan matches the seven-year maturity of the EUR Sub-Tranche, no tenor adjustment is required. If the intercompany loan has a shorter tenor (for example, a three-year revolving facility for working capital purposes), a downward adjustment of 25 to 75 basis points would be appropriate to reflect the reduced term risk. Conversely, a longer tenor would warrant an upward adjustment.
Currency. If the intercompany loan is denominated in EUR (matching the EUR Sub-Tranche), no currency adjustment is needed. If, however, IHDC draws USD Tranche proceeds and on-lends in USD, or if IHDC on-lends in EUR but converts from USD using a hedging instrument, the costs of currency hedging or the cross-currency basis swap spread must be factored into the pricing. As of early 2024, the EUR/USD cross-currency basis swap spread for seven-year tenors is approximately negative 10 to negative 20 basis points, meaning that EUR-denominated lending is slightly less expensive than USD-denominated lending on a hedged basis.
Market Comparable Transactions. In addition to the EUR Sub-Tranche, Appendix A presents a selection of comparable EUR-denominated term loan transactions in the European data center and digital infrastructure sector completed during 2023–2024. These transactions confirm that leveraged lending to data center operators and developers in the BB−/B+ credit range has priced in the range of EURIBOR + 375 bps to EURIBOR + 500 bps, depending on the borrower's credit profile, collateral quality, leverage, and sponsor backing. The EUR Sub-Tranche pricing of EURIBOR + 425 bps falls squarely within this range.
D. Arm's-Length Range Determination
Based on the foregoing analysis, we determine the arm's-length interest rate range for an intercompany loan from IHDC to IHDC Frankfurt as follows:
Base Case — Pari Passu Secured Intercompany Loan (EUR, 7-Year):
Arm's-length range: EURIBOR + 400 bps to EURIBOR + 450 bps
This range reflects lending on terms substantially equivalent to those of the EUR Sub-Tranche — secured by a comparable collateral package, denominated in EUR, with a seven-year maturity co-terminus with the Credit Facility, and with 1.00% annual amortization. The midpoint of this range (EURIBOR + 425 bps) corresponds exactly to the EUR Sub-Tranche pricing and represents the most defensible single price point.
Alternative Case — Unsecured Intercompany Loan (EUR, 7-Year):
Arm's-length range: EURIBOR + 475 bps to EURIBOR + 550 bps
This range reflects the upward adjustment for the absence of security (50 to 100 bps premium). The wide range reflects uncertainty regarding the precise magnitude of the security premium for IHDC Frankfurt's specific risk profile.
Alternative Case — Unsecured and Subordinated Intercompany Loan (EUR, 7-Year):
Arm's-length range: EURIBOR + 550 bps to EURIBOR + 700 bps
This range reflects both the unsecured premium and the subordination premium (additional 75 to 150 bps).
Recommendation. We recommend that any intercompany loan from IHDC to IHDC Frankfurt be priced at EURIBOR + 425 bps (with a EURIBOR floor of 0.00%), provided that the intercompany loan is on terms substantially comparable to the EUR Sub-Tranche (secured by comparable collateral, EUR-denominated, seven-year maturity, 1.00% annual amortization). This pricing falls at the midpoint of the base case arm's-length range and is directly supported by the EUR Sub-Tranche, which constitutes the most reliable arm's-length comparable. If the intercompany loan is unsecured or subordinated, the interest rate should be adjusted upward within the applicable range, as specified above.
The EURIBOR + 425 bps rate also provides the strongest defensibility in the event of a German tax audit, because it mirrors the rate negotiated with arm's-length institutional lenders in the EUR Sub-Tranche syndication. The German tax authorities are more likely to accept a rate that is directly supported by a contemporaneous third-party transaction involving the same borrower, currency, and tenor.
E. Guarantee Fee Analysis
Even under the current Co-Borrower structure — where no formal intercompany loan exists — the implicit and explicit credit support provided by the Ironhaven group to IHDC Frankfurt merits analysis from a transfer pricing perspective.
Explicit Guarantee — Parent Guarantee by Ironhaven Holdings Inc. Under the Credit Agreement, Ironhaven Holdings Inc. provides a Parent Guarantee of the Term Loan B obligations, including the EUR Sub-Tranche. This guarantee directly benefits IHDC Frankfurt by enhancing the creditworthiness of the EUR Sub-Tranche and enabling IHDC Frankfurt to borrow on terms that would not be available on a standalone basis. Under the OECD Chapter X guidance, an explicit guarantee that enhances the borrower's credit profile and results in a lower borrowing cost should be priced at arm's length. The appropriate transfer pricing treatment is to charge IHDC Frankfurt a guarantee fee reflecting the arm's-length value of the credit enhancement provided by the Parent Guarantee.
Passive Association Benefits. As discussed in Section IV.B above, IHDC Frankfurt also benefits from passive association with the Ironhaven group — that is, the general market perception that a subsidiary of a larger, creditworthy group is less likely to default than a standalone entity. Under the OECD Guidelines, passive association benefits need not be compensated; they are a natural consequence of group membership, analogous to the reputational benefit that an individual derives from a reputable employer.
Guarantee Fee Recommendation. If the Parent Guarantee by Ironhaven Holdings Inc. is determined to explicitly benefit IHDC Frankfurt (as distinct from passive association benefits), a guarantee fee in the range of 50 to 100 basis points per annum on the guaranteed amount would be consistent with arm's-length pricing. This range is based on observed market pricing for guarantee fees charged by parent companies to subsidiaries with comparable credit differentials (standalone B/B− upgraded to BB−/B+ with the guarantee). The lower end of the range (50 bps) would apply if the guarantee provides a modest credit uplift, while the upper end (100 bps) would apply if the guarantee provides a more substantial enhancement. In practice, the precise guarantee fee would depend on the degree of credit uplift attributable to the explicit guarantee (as opposed to passive association), the notional amount guaranteed, and the term of the guarantee.
If no explicit intercompany guarantee is entered into between IHDC Frankfurt and any IHDC group entity — and the Parent Guarantee under the Credit Agreement runs exclusively from Ironhaven Holdings Inc. to the syndicate lenders, rather than to IHDC Frankfurt — then the guarantee fee analysis may be limited to the question of whether the passive association benefit should be compensated (which, under the OECD Guidelines, it should not be). We recommend consulting with Wendt Falkenberg Rechtsanwälte PartG mbB (Dr. Lukas Wendt) on the German tax treatment of the Parent Guarantee and the distinction between passive association and explicit support under German administrative practice.
V. Documentation Requirements
A. German Transfer Pricing Documentation (§ 90 Abs. 3 AO)
IHDC Frankfurt is required to prepare and maintain contemporaneous transfer pricing documentation covering all cross-border related-party transactions, in accordance with § 90 Abs. 3 AO and the BMF circular of June 14, 2021. The documentation must consist of three components, as described below.
Master File. The Master File provides a group-level overview of the Ironhaven group's business, organizational structure, intangible assets, intercompany financial activities, and consolidated financial and tax positions. The Master File should include:
• An overview of the Ironhaven group, including its legal structure, organizational chart, and principal places of business.
• A description of the group's business activities, including its data center development and operations, key customers, and competitive position.
• A description of the group's intangible assets, including any technology, software, brand, or know-how that is relevant to intercompany transactions.
• A description of the group's intercompany financial activities, including treasury functions, cash management, intercompany lending, and guarantee arrangements.
• A summary of the group's consolidated financial statements and tax positions, including total revenue, EBITDA, and tax obligations by jurisdiction.
Local File for IHDC Frankfurt. The Local File provides entity-level documentation specific to IHDC Frankfurt and its intercompany transactions. The Local File should include:
• A detailed description of IHDC Frankfurt's business, including its role within the Ironhaven group, its principal activities (Frankfurt campus development and operation), and its business strategy.
• A description of each intercompany financial transaction, or, if no formal intercompany loan exists, a description of the direct Co-Borrower arrangement under the Credit Agreement and the implicit group support provided by the IHDC group.
• A functional analysis of IHDC Frankfurt, identifying the functions performed by IHDC Frankfurt (construction management, asset ownership, tenant leasing), the assets used (the Frankfurt campus, the pre-lease with Euronova Digital GmbH), and the risks assumed (construction risk, market risk, currency risk, credit risk).
• A comparability analysis, including the benchmark study of arm's-length interest rates as set forth in Section IV of this memorandum and Appendix A.
• The selection and application of the transfer pricing method (CUP method) and the justification for its selection.
• The arm's-length range and the selected price point (EURIBOR + 425 bps for the base case).
• A description of any adjustments made to account for differences between the intercompany transaction and the comparable(s) (e.g., adjustments for security, subordination, tenor, or currency).
• Financial data for IHDC Frankfurt, including its balance sheet, income statement, and relevant financial ratios.
Country-by-Country Report (CbCR). If the Ironhaven group's consolidated revenue exceeds the €750,000,000 threshold (approximately $813 million at current exchange rates), the group would be required to file a Country-by-Country Report under the OECD BEPS Action 13 framework, as implemented in Germany and the United States. Based on IHDC's current LTM revenue of approximately $412,600,000, the group is below the CbCR threshold. However, as revenues grow — particularly following the completion and lease-up of the Frankfurt campus and the Virginia campus expansion — the group may approach or exceed the threshold. Management should monitor consolidated revenue levels and ensure CbCR filing readiness as revenues grow. The CbCR is filed in the jurisdiction of the ultimate parent entity (in this case, the United States, with respect to Ironhaven Holdings Inc. or Thornfield Infrastructure Fund III, LP, depending on the determination of the ultimate parent entity for CbCR purposes).
Timing and Penalties. Transfer pricing documentation must be prepared contemporaneously — that is, at or near the time the intercompany transaction is entered into — and must be available for presentation to the German tax authorities within 60 days of a formal audit request (or 30 days for extraordinary transactions). Failure to maintain adequate documentation can result in:
• A surcharge of at least 5% (and up to 10%) of the income adjustment determined by the tax authorities, with a minimum surcharge of €5,000.
• Interest on the resulting tax underpayment at the statutory rate (currently 0.15% per month, or 1.8% per annum).
• A shift in the burden of proof: if the taxpayer does not present adequate documentation within the statutory period, the Finanzamt may estimate the arm's-length income, and the burden of proof shifts to the taxpayer to demonstrate that the estimated assessment is unreasonable.
Given these consequences, it is imperative that IHDC Frankfurt prepare and maintain complete, contemporaneous transfer pricing documentation from its first fiscal year (2024).
B. Intercompany Loan Agreement (if applicable)
If an intercompany loan is formalized between IHDC and IHDC Frankfurt — whether as a planned facility or in response to an ad hoc funding need — the transaction should be documented in a written intercompany loan agreement that reflects arm's-length commercial terms. The agreement should include the following provisions:
• Parties: IHDC (as lender) and IHDC Frankfurt (as borrower).
• Principal Amount: Denominated in EUR, in an amount corresponding to the actual funds advanced by IHDC to IHDC Frankfurt. The principal amount should be specified with precision and should match the actual funding need.
• Interest Rate: EURIBOR + 425 bps per annum (or such other rate within the arm's-length range determined by the benchmark analysis, as adjusted for security, subordination, tenor, and currency differences). The EURIBOR rate should be determined for the applicable interest period (e.g., three-month EURIBOR) using a recognized benchmark source (such as the European Money Markets Institute (EMMI) EURIBOR fixing).
• EURIBOR Floor: 0.00%, matching the EUR Sub-Tranche.
• Interest Payment Dates: Quarterly, in arrears, matching the interest payment schedule under the Credit Agreement (to facilitate treasury management and minimize cash flow mismatches).
• Maturity: Co-terminus with the Term Loan maturity of June 3, 2031, or such earlier date as may be agreed.
• Amortization: 1.00% per annum of the original principal amount, payable in equal quarterly installments, matching the Credit Agreement amortization schedule.
• Prepayment: IHDC Frankfurt shall have the right to prepay the intercompany loan in whole or in part at any time without premium or penalty. Voluntary prepayments shall be applied to the outstanding principal amount in inverse order of maturity (or on a pro rata basis, as agreed).
• Security: The intercompany loan agreement should specify whether the loan is secured or unsecured. As discussed in Section VII.B below, an unsecured structure is preferable from a German withholding tax perspective (to avoid the real-property-secured interest withholding trap). If the loan is secured, the security package should be documented separately under German law.
• Subordination: The intercompany loan agreement should address the subordination of the intercompany loan to the Term Loan B obligations. The Credit Agreement may impose restrictions on intercompany lending, including subordination requirements and limitations on payments on subordinated intercompany debt. The intercompany loan agreement should be consistent with the Credit Agreement's subordination provisions and should include a subordination waterfall specifying the priority of payment claims.
• Governing Law: German law (Recht der Bundesrepublik Deutschland). Governing the intercompany loan agreement under German law facilitates enforcement in German courts and minimizes the risk of recharacterization or invalidity challenges under German conflict-of-laws principles. The choice of German law also enhances the credibility of the arrangement for German transfer pricing purposes.
• Tax Gross-Up: The intercompany loan agreement should include a standard tax gross-up provision requiring IHDC Frankfurt to gross up interest payments for any withholding taxes imposed by German law, such that IHDC receives the full contractual interest amount net of any withholding. The gross-up clause should also include a treaty protection mechanism, under which the gross-up obligation is waived or reduced to the extent that IHDC is entitled to relief under the US-Germany Income Tax Treaty and provides the necessary do

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE ATTORNEY WORK PRODUCT

MEMORANDUM

MATTER NO.: 1043-00001

BILLING CODE: IHDC-TLB-2024

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