APLD 8-K
Applied Digital Corp. (APLD)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Item 1.01 Entry into a Material Definitive Agreement.
Promissory Note
On September 9, 2025 (the “Closing Date”), APLD FAR-01 LLC (the “Borrower”), a Delaware limited liability company and a subsidiary of Applied Digital Corporation, a Nevada corporation (the “Company”) entered into a promissory note (the “Promissory Note”) with Macquarie Equipment Capital, Inc., a Delaware corporation (the “Lender”). The Promissory Note provides for a principal sum of (a) $50 million (the “Initial Loan”), which was drawn on the Closing Date, plus (b) subject to the mutual consent of the Borrower and the Lender, additional loans in an aggregate principal amount not to exceed $25 million (the “Additional Loans” and together with the Initial Loan, the “Loan”). The Loan shall bear interest at 8.0% per annum, unless an Event of Default (as defined therein) has occurred and is continuing, in which case, the Secured Obligations (as defined therein) shall bear interest at the sum of 8.0% per annum plus an additional 1.50% per month (the “Post-Default Rate”). From the Closing Date until the date that is twelve months following the Closing Date (the “PIK Period”), accrued interest will be paid in kind, with such payment in kind being capitalized to principal monthly and at such other times as may be specified in the Promissory Note. After the PIK Period, accrued interest will be paid in cash, provided that (i) the Post-Default Rate interest is payable in cash on demand and (ii) accrued interest on any principal amount repaid or prepaid is payable on the date of such repayment or prepayment. The Promissory Note matures on the earliest of (i) the date of acceleration of the Loan, (ii) February 1, 2026, if the 200 MW Lease Execution (as defined therein) has not occurred on or before October 31, 2025, or (iii) September 9, 2027. The Loan will accelerate and the Borrower must mandatorily prepay the full outstanding principal balance of the Promissory Note, together with accrued interest to the date of prepayment on the principal amount prepaid and any other amounts then due and payable, upon the occurrence of any of the following conditions: (a) a Change of Control (as defined therein), (b) within ninety (90) days following the occurrence of the 200 MW Lease Execution, and (c) within thirty (30) days following a Qualifying Preference Share Issuance (as defined therein).
The Borrower may voluntarily prepay all or part of the Promissory Note at any time with no less than three (3) business days’ notice with accrued interest to the date of prepayment on the principal amount prepaid, so long as, with respect to the portion of the Loan then being prepaid, in each case, such prepayment is accompanied by the payment of amounts sufficient to achieve a rate of return that equals or exceeds 1.10 to 1.00. The same 1.10x return hurdle applies to repayment at maturity. Amounts repaid under the Promissory Note will not be available to be re-borrowed.
Proceeds of the Loan under the Promissory Note will be used, in part, to (i) pay transaction costs, (ii) pay transaction expenses in connection with the Note Documents (as defined therein), (iii) fund the purchase of the financed properties located on the Company’s campus in Harwood, ND (“Polaris Forge 2”), including all associated closing costs, title fees, and legal expenses, (iv) finance improvements to the Polaris Forge 2 properties, (v) fund the purchase of the Transformers (as defined therein) and other equipment expected to be installed and used for the improvements of the Polaris Forge 2 properties, (v) to pay any other costs, fees, expenses, or amounts related to or in connection with the development and construction of Polaris Forge 2, and (vi) for general corporate working capital purposes.
In connection with the Loan, (i) the Borrower, APLD FAR Holdings LLC (“Intermediate Holdings”), a Delaware limited liability company, as parent of the Borrower, and APLD FAR-02 LLC (“FAR-02”), a Delaware limited liability company, as a subsidiary of Intermediate Holdings, have entered into a guarantee and collateral agreement, as grantors thereunder, in favor of the Lender (the “Guarantee and Collateral Agreement”) pursuant to which the Borrower, Intermediate Holdings, and FAR-02 pledged a continuing security interest in substantially all of their respective assets except for Excluded Assets (as defined in the Guarantee and Collateral Agreement) and (ii) the Company provided a guarantee (the “Parent Guarantee”) in favor of the Lender that includes certain covenants that limit the Company’s ability to (a) transfer or dispose of any Collateral (as defined in the Guarantee and Collateral Agreement) without the prior written consent of the Lender, (b) grant certain liens upon or with respect to the Collateral, and (c) allow the Borrower and its subsidiaries to sell or otherwise transfer assets to their affiliates, subject to certain specified exceptions in each case. The Borrower will also grant mortgages to the Lender over certain properties.
In connection with the Promissory Note, Northland Securities, Inc. (d/b/a Northland Capital Markets) acted as sole placement agent, Wells Fargo Securities, LLC acted as lead capital markets advisor to the Company and Texas Capital acted as a capital markets advisor to the Company.
The foregoing descriptions of the Promissory Note, the Guarantee and Collateral Agreement, and the Parent Guarantee do not purport to be complete and are qualified in their entirety by reference to the full text of each agreement, filed as Exhibits 10.1, 10.2 and 10.3, respectively to this Current Report on Form 8-K and incorporated herein by reference.
Series G Preferred Stock Offering
On September 11, 2025, the Company entered into the second amendment (the “Second Amendment”) to the preferred equity purchase agreement, dated April 30, 2025, by and between the Company and the investors signatory thereto, as amended by the first amendment, dated August 14, 2025 (as amended, the “PEPA”) in order to increase its access to capital to fund the continued construction and development of its Polaris Forge 1 data center campus in Ellendale, North Dakota and other general corporate purposes.
The Second Amendment amends the PEPA to, among other things, increase the aggregate commitment amount of the shares of Series G Convertible Preferred Stock, par value $0.001 per share (the “Series G Preferred Stock”) from $300 million to $450 million.
The foregoing description of the Amendment is qualified in its entirety by reference to the full text of the Amendment, a form of which is attached hereto as Exhibit 10.4 and is incorporated in its entirety by reference herein.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth in “Item 1.01 Entry into a Material Definitive Agreement” under the heading “Promissory Note” is incorporated by reference herein in its entirety.
Item 3.02 Unregistered Sales of Equity Securities.
The offer and sale of the Series G Preferred Stock pursuant to the PEPA, and the shares of common stock of the Company, par value $0.001 (the “Common Stock”) issuable upon the conversion of the Series G Preferred Stock, is and will be made in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended.
This Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of any offer to buy the Series G Preferred Stock, nor shall there be an offer, solicitation or sale of the Series G Preferred Stock in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such state.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
On September 11, 2025, the Company filed an amendment (the “Certificate of Designations Amendment”) to the Certificate of the Designations, Powers, Preferences and Rights of Series G Convertible Preferred Stock, originally filed with the Secretary of State of the State of Nevada on April 30, 2025, as amended on August 14, 2025 (as amended, the “Certificate of Designations”).
The Certificate of Designations Amendment amends the Certificate of Designations to increase the number of shares authorized for issuance as Series G Preferred Stock from 156,000 to 204,000 shares.
The foregoing description of the Certificate of Designations Amendment is qualified in its entirety by reference to the full text of the Certificate of Designations Amendment, a form of which is attached hereto as Exhibit 3.1 and is incorporated in its entirety by reference herein.
Forward-Looking Statements
This Current Report on Form 8-K and other reports filed by the Company from time to time with the SEC contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 regarding, among other things, future operating and financial performance, product development, market position, business strategy and objectives and future financing plans. These statements use words, and variations of words, such as “will,” “continue,” “build,” “future,” “increase,” “drive,” “believe,” “look,” “ahead,” “confident,” “deliver,” “outlook,” “expect,” “project” and “predict.” Other examples of forward-looking statements may include, but are not limited to, (i) statements that reflect perspectives and expectations regarding Polaris Forge 1 and Polaris Forge 2 development, (ii) statements about the high performance compute industry, (iii) statements of Company plans and objectives, including the Company’s evolving business model, or estimates or predictions of actions by suppliers, (iv) statements of future economic performance, (v) statements of assumptions underlying other statements and statements about the Company or its business and (vi) the Company’s plans to obtain future project financing. You are cautioned not to rely on these forward-looking statements. These statements are based on current expectations of future events and thus are inherently subject to uncertainty. If underlying assumptions prove inaccurate or known or unknown risks or uncertainties materialize, actual results could vary materially from the Company’s expectations and projections. These risks, uncertainties, and other factors include: our ability to complete construction of Polaris Forge 1 and Polaris Forge 2; the lead time of customer acquisition and leasing decisions and related internal approval processes; changes to artificial intelligence and high performance compute infrastructure needs and their impact on future plans; costs related to high performance compute operations and strategy; our ability to raise additional capital to fund the ongoing datacenter construction and operations; our ability to obtain financing of datacenter leases on acceptable financing terms, or at all; our dependence on principal customers, including our ability to execute and perform our obligations under our leases with key customers, including without limitation, the datacenter leases with CoreWeave; our ability to timely and successfully build new hosting facilities with the appropriate contractual margins and efficiencies; power or other supply disruptions and equipment failures; the inability to comply with regulations, developments and changes in regulations; cash flow and access to capital; availability of financing to continue to grow our business; decline in demand for our products and services; maintenance of third party relationships; and conditions in the debt and equity capital markets. Information in this Current Report on Form 8-K is as of the dates and time periods indicated herein, and the Company does not undertake to update any of the information contained in these materials, except as required by law.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
* Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
** The schedules to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby agrees to furnish supplementally a copy of any omitted schedule to the SEC upon request.
SIGNATURE
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Dated: September 12, 2025 | By: | /s/ Saidal L. Mohmand |
| Name: | Saidal L. Mohmand | |
| Title: | Chief Financial Officer |
Exhibit 3.1
RESOLUTIONS FOR CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF DESIGNATIONS
OF THE POWERS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL AND OTHER RESTRICTIONS
OF SERIES G CONVERTIBLE PREFERRED STOCK
OF APPLIED DIGITAL CORPORATION
The undersigned, Saidal Mohmand, does hereby certify that:
1. Saidal Mohmand is the Chief Financial Officer of Applied Digital Corporation (the “Corporation”).
2. That the Board of Directors of the Corporation, duly adopted by unanimous written consent a proposed amendment to the Certificate of Designation of the Powers, Preferences and Relative, Participating, Options and other Restrictions of Series G Convertible Preferred Stock (the “Certificate of Designation”) of the Corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of the Corporation for consideration thereof. The resolutions setting forth the proposed amendment, pursuant to Section 78.1955 and 78.1955(3) of the Nevada Revised Statues, are as follows:
RESOLVED: That the Certificate of Amendment to the Certificate of Designation amends the introductory paragraph to the Certificate of Designation to remove the reference to “156,000” and replace it with “204,000”.
*************
RESOLVED, FURTHER, that the Chairman, the president or any vice-president, and the secretary or any assistant secretary, of the Corporation be and they hereby are authorized and directed to prepare and file this Certificate of Amendment to the Certificate of Designation of Powers, Preferences and Relative, Participating, Optional and Other Restrictions in accordance with the foregoing resolution and the provisions of Nevada law.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of Amendment this 11th day of September, 2025.
| By: | /s/ Saidal L. Mohmand | |
| Name: | Saidal L. Mohmand | |
| Title: | Chief Financial Officer |
[Signature Page to Certificate of Amendment to the Certificate of Designation]
Exhibit 10.1
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS A TYPE OF INFORMATION THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATIONS REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
PROMISSORY NOTE
| $50,000,000.00 Date: | September 9, 2025 |
APLD FAR-01 LLC, a Delaware limited liability company (the “Company”) hereby unconditionally promises to pay to Macquarie Equipment Capital, Inc. (together with any permitted assignee or transferee of this Note, “Lender”) at the principal office of Lender located at 660 Fifth Avenue, New York, NY 10103 the principal sum of (a) FIFTY MILLION DOLLARS ($50,000,000.00) in the lawful currency of the United States of America (the “Initial Loan”) plus (b) the principal sum of the Additional Loans made by the Lender (at the mutual consent of the Company and the Lender) to the Company pursuant to Section 2 below in the lawful currency of the United States of America in an aggregate principal amount not to exceed TWENTY-FIVE MILLION DOLLARS ($25,000,000.00), together with (i) any amounts necessary to achieve the Base Return, (ii) interest on the unpaid principal amount hereof from time to time outstanding from the date hereof until the date on which this Note (the “Note”) is paid in full in cash, at the rate set forth in Section 2 below and (iii) any other amounts then due and payable hereunder.
Section 1. Definitions. As used in this Note, the terms set forth in Annex A have the meanings herein as specified in Annex A.
Section 2. Note Terms.
(a) Loan. Subject to the terms and conditions set forth in this Note and in reliance upon the representations and warranties of the Credit Parties set forth herein and in the other Note Documents, the Lender agrees to (A) advance to the Company on the Closing Date the Initial Loan and (B) subject to the mutual consent of the Company and the Lender, advance to the Company on or after the Closing Date until the date prior to the Maturity Date such loans (the “Additional Loans” and together with the Initial Loan, the “Loan”) as the Company may request in an aggregate principal amount not to exceed $25,000,000.00. Any amounts extended under this Note and repaid or prepaid may not be re-extended or reborrowed.
(b) Maturity Date. All principal and accrued interest on the unpaid principal of this Note (including the Additional Loans made hereunder) will be due and payable in immediately available funds upon the earlier of (i) the date of acceleration of the Loan hereunder, (ii) February 1, 2026, to the extent the 200 MW Lease Execution has not occurred on or before October 31, 2025, or (iii) September 9, 2027 (the “Maturity Date”).
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(c) Withholding.
| (i) | Any and all payments made by the Company under this Note shall be made free and clear of and without deduction or withholding for any Taxes or Other Taxes. If the Company shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable under this Note, then (i) unless such Taxes are Excluded Taxes, the sum payable shall be increased by such additional amounts as may be necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section 2(c)), the Lender receives an amount equal to the sum it would have received had no such deductions or withholdings been made, (ii) the Company shall make such deductions or withholdings and (iii) the Company shall pay the full amount deducted or withheld to the relevant taxation authority or other Governmental Authority in accordance with applicable law. |
| (ii) | The Company shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Lender timely reimburse it for the payment of, any Other Taxes. |
| (iii) | On or about the date on which any Lender becomes a Lender under this Note, such Lender shall provide to the Company a valid and duly executed Internal Revenue Service Form W-9 or W-8, as applicable. At any time thereafter, the Lender shall provide updated documentation when any documentation previously delivered to the Company has expired or becomes obsolete or invalid or otherwise upon the reasonable request of the Company. |
(d) [Reserved]
(e) Interest. The Loan shall bear interest at a rate equal to the Applicable Margin. Interest shall be calculated on the basis of a 360-day year and 30-day months for actual days elapsed. The Secured Obligations shall automatically bear interest, after as well as before judgment, from the date of occurrence of any Event of Default until such Event of Default is no longer continuing, at a rate per annum equal to the sum of the rate of interest applicable to the Loan plus an additional (A) one and one half percent (1.5%) per month, on such amount (the “Post-Default Rate”). In no event shall the interest rate applicable at any time to this Note exceed the maximum rate permitted by law. Accrued interest on the Loan shall be payable in arrears on each Monthly Date (x) from the Closing Date until the date that is twelve (12) months following the Closing Date (the “PIK Period”), in kind, with such paid in kind payment being capitalized to principal on each Monthly Date and at such other times as may be specified herein (each such payment in kind capitalized to principal pursuant to this Section 2(e), a “Principal Increase”) and such Principal Increase shall be considered principal of the applicable Loans for all purposes, including, without limitation, the calculation of interest on subsequent Monthly Dates, and (y) following the expiration of the PIK Period, in cash; provided that (i) Post-Default Rate interest accrued pursuant to this Section shall be payable in cash on demand and (ii) in the event of any repayment or prepayment of the Loan (including on the Maturity Date, upon acceleration or otherwise), accrued interest on the principal amount repaid or prepaid and all accrued commitment fees shall be payable on the date of such repayment or prepayment.
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(f) Prepayments.
| (i) | The Company may prepay all or part of this Note at any time with no less than three (3) Business Days’ notice with accrued interest to the date of prepayment on the principal amount prepaid. |
| (ii) | Immediately upon the receipt of net cash proceeds by, or on behalf of, the Company or any of its Subsidiaries (if any) in respect of the issuance or incurrence of Indebtedness not permitted under the Note Documents, the Company shall apply such net cash proceeds received from such issuance or incurrence of Indebtedness upon receipt thereof to prepay the outstanding principal balance of this Note with accrued interest to the date of prepayment on the principal amount prepaid. |
| (iii) | Upon a Change of Control, the Company shall prepay the full outstanding principal balance of this Note together with (A) accrued interest to the date of prepayment on the principal amount prepaid and (B) any other amounts then due and payable hereunder. |
| (iv) | Within ninety (90) days following the occurrence of the 200 MW Lease Execution, the Company shall prepay the full outstanding principal balance of this Note together with (A) accrued interest to the date of prepayment on the principal amount prepaid and (B) any other amounts then due and payable hereunder. |
| (v) | Within thirty (30) days following the issuance of a Qualifying Preference Share Issuance, the Company shall prepay the full outstanding principal balance of this Note together with (A) accrued interest to the date of prepayment on the principal amount prepaid and (B) any other amounts then due and payable hereunder. |
| (vi) | Prepayments pursuant to this Section 2(f) shall, with respect to the portion of the Loan then being prepaid, in each case, be accompanied by the payment of amounts sufficient to achieve the Base Return with respect to the amount of the Loan being prepaid. |
(g) Application of Payments. Except as otherwise provided herein with respect to prepayments, all payments on this Note shall be applied to the payment of accrued interest before being applied to the payment of principal (including in respect of amounts sufficient to achieve the Base Return). Any payment which is required to be made on a day which is not a Business Day shall be payable on the next succeeding Business Day and such additional time shall be included in the computation of interest.
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(h) Base Return. Prepayments permitted or required under this Section 2 (including, for avoidance of doubt, any prepayments of the Loan occurring after acceleration of the Loan pursuant to Section 6 and any other prepayments of the Loan), shall be accompanied by an amount sufficient to achieve the Base Return with respect to the portion of the Loan being prepaid.
Section 3. Representations and Warranties of the Company. To induce Lender, in its sole discretion, to make the Loan, the Company represents, warrants and covenants to Lender and the other Secured Parties the following, and pursuant to the other Note Documents (including the Parent Loan Guarantee) to which a Credit Party is a party, such Credit Party represents, warrants and covenants to Lender, the following as of the date of this Note, and any other date such representations, warranties and covenants are required to be made:
(a) Organization; Powers. Each Credit Party (a) is a legal entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority, and has all governmental licenses, authorizations, consents and approvals necessary, to own its assets and to carry on its business as now conducted, and (c) is qualified to do business in, and is in good standing in, every jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, except in the case of this clause (c) where the failure to do so could not reasonably be expected to have a Material Adverse Effect.
(b) Authority; Enforceability. The execution, delivery and performance of the Note Documents to which it is a party and the transactions contemplated thereby are within each Credit Party’s corporate, limited partnership, limited liability company or other organizational powers, as applicable, and have been duly authorized by all necessary corporate, limited partnership, limited liability company or other organizational, as applicable, and, if required, shareholder, partner or member action, as applicable (including any action required to be taken by any class of directors of any Credit Party or any other Person, whether interested or disinterested, in order to ensure the due authorization of the Note Documents). Each Note Document to which any Credit Party is a party has been duly executed and delivered by such Credit Party and constitutes a legal, valid and binding obligation of such Credit Party, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.
(c) Approvals; No Conflicts. Neither the execution and delivery of this Note or the other Note Documents by any Credit Party, nor the consummation of the transactions herein or therein contemplated or compliance with the terms and provisions hereof or thereof by any of them, (a) require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority or any other third Person (including holders of its Equity Interests or any class of directors or managers, whether interested or disinterested, of any Credit Party or any other Person), nor is any such consent, approval, registration, filing or other action necessary for the validity or enforceability of any Note Document or the consummation of the transactions contemplated thereby, except such as have been obtained or made and are in full force and effect other than the recording and filing of the Security Documents as required by the Note Documents, (b) will violate (i) in any material respect, any applicable law or regulation or (ii) any organizational document of any Credit Party or any order of any Governmental Authority, (c) will not violate or constitute a material default under or result in any material breach of any indenture, agreement or other instrument binding upon any Credit Party or any of its Properties (including the material contracts relating to the development, construction and operation of the data center facilities owned by the Company or any of its Subsidiaries (if any) and agreements evidencing Indebtedness of the Company or any of its Subsidiaries (if any)), or give rise to a right thereunder to require any payment to be made by such Credit Party and (d) will not result in the creation or imposition of any Lien on any Collateral or any other Property of any Credit Party (other than the Liens created by the Note Documents).
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(d) No Material Adverse Effect. Since July 31, 2025, there has been no event, development or circumstance that has had or could reasonably be expected to have a Material Adverse Effect. Each of the Credit Parties has disclosed to the Lender all material agreements, instruments and corporate or similar restrictions to which it or any of its Subsidiaries (if any) is subject to the extent such agreements, instruments or restrictions relate to the Note Documents and the transactions contemplated thereby or the Fargo Project, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.
(e) Litigation. There are no material actions, suits, investigations or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of any Credit Party, threatened by, against or affecting any Credit Party, the Fargo Project or their respective Properties or revenues (a) which, either individually or in the aggregate, could reasonably be expected to result in liability exceeding (i) $15,000,000 in the case of the Note Parties or (ii) $50,000,000 in the case of the Parent, or (b) that involve any Note Document, Material Project Document or the transactions contemplated thereby.
(f) Compliance with Law. Each of the Credit Parties is in compliance with all Governmental Requirements applicable to it or its Property and all agreements and other instruments binding upon it or its Property, and is in the process of obtaining all licenses, permits, franchises, exemptions, approvals and other governmental authorizations necessary for the ownership of its Property and the conduct of its business as currently operated, in each case other than where the failure to do so could reasonably be expected to result in a Material Adverse Effect. All permits for the Fargo Project that are required for the current stage of development, construction and operation of the Fargo Project by the date this representation is made are in the process of being duly obtained and no appeal of such permits are pending and such permits are not subject to any unsatisfied conditions that would reasonably be expected to allow for material modification or revocation or otherwise have a material and adverse effect on the Fargo Project.
(g) Investment Company Act. No Credit Party is an “investment company” or a company “controlled” by an “investment company,” within the meaning of, or subject to regulation under, the Investment Company Act of 1940, as amended.
(h) Ownership; Properties. The ownership chart set forth in Annex B sets forth the true, complete and accurate structure and ownership of Parent, Intermediate Holdings, the Company, and each Subsidiary of the Company (if any) as of the Closing Date. Each Credit Party has good title to all of the Equity Interests it purports to own, free and clear in each case of any Lien. All Equity Interests of the Note Parties have been validly issued, and all such Equity Interests are fully paid and non-assessable and were offered and issued in compliance with applicable laws. There are no options, warrants or other rights outstanding to purchase any Equity Interests of the Company or any of its Subsidiaries (if any). Each of the Note Parties has(i) good and marketable fee simple title in its real property (if any) and (ii) good title to all of its personal Property, and Intermediate Holdings has good title to all the Collateral pledged by it under the Note Documents.
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(i) Security Documents. Each Security Document, upon execution and delivery thereof, is effective to create in favor of the Lender, legal, valid and enforceable Liens on, and security interests in, all of the Collateral thereunder, and when all appropriate filings or recordings are made in the appropriate offices as may be required under applicable Governmental Requirements or upon the taking of possession or control by the Lender of Equity Interests and other Collateral, if any, with respect to which a security interest may be perfected by possession or control, such Security Documents will constitute fully perfected Liens on, and security interests in, all right, title and interest of the Credit Parties in such Collateral.
(j) Use of Proceeds. The Credit Parties are not engaged principally, or as one of its or their important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying margin stock (within the meaning of Regulation T, U or X of the Board). No part of the proceeds of the Loan will be used by any Credit Party or any of their Subsidiaries for any purpose which violates the provisions of Regulation T, U or X of the Board.
(k) Solvency. After giving effect to the issuance of this Note and the transactions contemplated by the Note Documents on the Closing Date, (a) the Company and its Subsidiaries (if any), on a consolidated basis, are Solvent and (b) the Parent and its Subsidiaries, on a consolidated basis, are Solvent.
(l) No Default. None of the Credit Parties or any of their Subsidiaries is in material default nor has any event or circumstance occurred which would constitute a default under any Material Project Document or indenture, note, credit agreement or instrument by which any Credit Party or any of their Properties is bound. No Default or Event of Default has occurred and is continuing both before and after giving effect to the transactions contemplated by the Note Documents.
(m) [Reserved.]
(n) Operations. More than two fiber carriers maintain long-haul fiber lines connected to the Fargo Project site, which fiber lines have sufficient capacity to fully service the initial 200 MW currently intended to be constructed at the Fargo Project. The Credit Parties are in the process of obtaining all insurance policies sufficient for the compliance by them with all material Governmental Requirements and all material agreements, including all Material Project Documents and in at least amounts and against such risk (including public liability insurance) that are usually insured against by companies similarly situated and engaged in the same or a similar business for the assets and operations of the Company and its Subsidiaries (if any).
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(o) Environmental. The Fargo Project and other Properties of the Company and its Subsidiaries (if any), are in compliance with all applicable environmental laws in all material respects, the Company and each of its Subsidiaries (if any) has operated the Fargo Project and other Properties in compliance with all applicable environmental laws in all material respects, and to the knowledge of the Credit Parties, the Fargo Project and other real property Properties of the Company and each of its Subsidiaries (if any) were operated in compliance with applicable environmental laws and not subject to a required remediation of an environmental condition in accordance with applicable environmental laws prior to the acquisition thereof. There are no written notices, claims, orders, proceedings, or investigations or requests for information concerning any actual or alleged material violation of, or any material liability or obligation (including as a potentially responsible party) under, any environmental law that is pending or, to the knowledge of the Credit Parties, threatened against the Company or any of its Subsidiaries (if any), or the Fargo Project or any other Properties, or as a result of any operations at the Fargo Project or any other Properties, and to the knowledge of the Credit Parties’ there are no conditions or circumstances that would reasonably be expected to result in the receipt of notices, claims, orders, proceedings, investigations, requests for information or proceedings in any material respect. There has been no discharge, release or, to the knowledge of the Credit Parties, threatened release, of any Hazardous Material by the Company or any of its Subsidiaries (if any) or any Person at, on, under or from the Fargo Project or any other Properties owned, leased or operated by the Company or any of its Subsidiaries (if any), and there are no remediations, abatements, removals, or monitorings of Hazardous Materials, as required under applicable environmental laws at the Fargo Project or such Properties.
Section 4. Covenants. Until Payment in Full:
(a) Financial and Other Information.
| (i) | Promptly after the furnishing thereof, the Company shall, and shall cause the Parent and the Company to, provide copies of any audited or unaudited financial statement (including segment reporting to the extent not already included in the financial statements of the Parent), report, compliance certificates or default notice furnished to or by any Person pursuant to the terms of any indenture, loan or credit or other similar material agreement of any Credit Party. |
| (ii) | [Reserved]. |
| (iii) | Promptly upon request of the Lender, drafts of letters of intent, term sheets and lease agreement with any potential tenant at the Fargo Project, including, without limitation, the 200 MW Lease. |
| (iv) | Phase I environmental site assessment (“ESA”) reports, and if such Phase I ESA revealed (or reveals) any condition that so warranted (or warrants), a Phase II ESA, and any other environmental reports relating to the Fargo Project. |
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(b) Material Notices. Promptly (but, in any event, no later than five (5) Business Days) after obtaining knowledge thereof or following the delivery thereof, as applicable, the Company will:
| (i) | provide written notice of the occurrence of any Default or Event of Default, |
| (ii) | provide written notice of any material casualty event relating to the Fargo Project, |
| (iii) | provide written notice of the filing or commencement of, or the threat in writing of, any action, suit, proceeding, investigation or arbitration by or before any arbitrator or Governmental Authority against or affecting any Credit Party not previously disclosed in writing to the Lender or any material adverse development in any action, suit, proceeding, investigation or arbitration (whether or not previously disclosed to the Lender) that, in either case, if adversely determined, could reasonably be expected to (A) result in potential liability of $10,000,000, individually or in the aggregate, or more or (B) have a Material Adverse Effect, |
| (iv) | provide written notice of (A) any material default or event or condition that constitutes a material default or event of default or a termination event or event or condition that permits termination under any Material Project Document or agreement evidencing material Indebtedness of the Company and its Subsidiaries (if any), (B) any notice of termination or assignment (or notice of intent to terminate or assign) or notice of material default or waiver received or given, under, or in connection with, any Material Project Document, or any other material notice under, or in connection with, any Material Project Document, (C) any termination or material amendment, change order or modification of, or material waiver or consent under, any Material Project Document, and in each case, a copy of such termination, amendment, change order, modification, waiver or consent, (D) any material amendment, modification, waiver or other change to any agreement evidencing material Indebtedness of any Note Party and (E) any new material project agreement entered into in respect of the Fargo Project (together with full, correct and complete copies of all such agreements), |
| (v) | upon the actual knowledge of any of the Chief Executive Officer, Chief Administrative Officer or Chief Financial Officer of the Company of any material workers’ health and safety incident, provide written notice of such incident no later than fifteen (15) Business Days following obtaining such knowledge, and |
| (vi) | provide written notice of any other development or circumstance that results in, or could reasonably be expected to result in, a Material Adverse Effect. |
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(c) Other Requested Information. Promptly following any request therefor, such other information regarding the operations, business affairs, prospects and financial condition of the Credit Parties and their Subsidiaries (including with respect to beneficial ownership of the Company and its parent companies) or compliance with the terms of this Note or any other Note Document, Material Project Document, existing debt document as the Lender, acting reasonably, may request.
(d) Existence; Conduct of Business. The Company will, and will cause each of other Credit Party to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect (i) its legal existence and (ii) the rights, licenses, permits, privileges and franchises material to the conduct of its business and maintain, if necessary, its qualification to do business in each other jurisdiction in which its Properties are located or the ownership of its Properties requires such qualification. The Company, at its own expense, will, and will cause each of its Subsidiaries (if any) to, (A) keep the Fargo Project, or cause the same to be kept, in good condition consistent in all material respects with prudent industry practice and Material Project Documents, and make or cause to be made all repairs (ordinary wear and tear excepted) necessary to keep the Fargo Project in such condition and (B) at all times construct or operate the Fargo Project, or cause the same to be constructed or operated, as applicable, in all material respects in a manner consistent with the Material Project Documents relating to the Fargo Project and prudent industry practice and in compliance with all permits and Governmental Requirements in all material respects.
(e) Compliance with Laws. The Company will, and will cause each other Credit Party to, comply with its Organizational Documents and all laws, rules, regulations and orders of any Governmental Authority applicable to it or its Property in all material respects. Without limiting the generality of the foregoing, the Company will, and will cause each of its Subsidiaries (if any) to, obtain and maintain permits that are required for the current stage of development, construction and operation of the Fargo Project as and when required under applicable Governmental Requirements and comply in all material respects with all such permits.
(f) Use of Proceeds.
| (i) | The Company shall use the proceeds of the Loan to pay transaction costs, (i) to pay transaction expenses in connection with the Note Documents, (ii) to fund the purchase of the Fargo Properties, including all associated closing costs, title fees, and legal expenses, (iii) to finance improvements to the Fargo Properties, (iv) to fund the purchase of the Transformers and other equipment expected to be installed and used for the improvements of the Fargo Properties, (v) to pay any other costs, fees, expenses, or amounts related to or in connection with the development and construction of the Fargo Project, and (vi) for general corporate working capital purposes. |
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| (ii) | The Company will not use, directly or indirectly, the proceeds of the Loan, or lend, contribute or otherwise make available such proceeds to any Credit Party, joint venture partner or other Person, (A) to its knowledge, in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any applicable Anti-Corruption Laws, (B) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, in each case in violation of applicable Sanctions or (C) in any manner that would result in the violation of Sanctions by any Person participating in the transactions contemplated hereunder, whether as underwriter, advisor, lender, investor or otherwise. |
(g) Further Assurances. The Company, at its sole expense, will, and will cause each other Credit Party to, promptly execute and deliver to the Lender all such other documents, agreements and instruments reasonably requested by the Lender to comply with or accomplish the conditions precedent, covenants and agreements of the Credit Parties in the Note Documents, or to further evidence and more fully describe the Collateral intended as security for the Secured Obligations, or to correct any omissions in the Security Documents, or to state more fully the obligations secured therein, or to perfect, protect or preserve any Liens created pursuant to the Security Documents or the priority thereof, or to make any recordings, file any notices or obtain any consents, all as may be reasonably necessary or appropriate, in the reasonable discretion of the Lender, in connection therewith.
(h) Credit and Collateral Related Covenants.
| (i) | Mortgages; Title. By November 23, 2025 (or such longer period as agreed by the Lender in its reasonable discretion), the Company shall have delivered, or cause to have been delivered, to the Lender the following with respect to each of the Fargo Properties: |
| (A) | One or more Mortgages; |
| (B) | A North Dakota Local Counsel Opinion with respect to the Mortgages and other real estate matters; |
| (C) | the Title Insurance Policies along with (i) evidence reasonably acceptable to the Lender of payment by the Company of all applicable premiums, search and examination charges, escrow charges and expenses required for the recording of the Mortgages and issuance of the Title Insurance Policies; and (ii) such affidavits, certificates, information (including financial data) and instruments of indemnification (including a so-called “gap” indemnification) as shall be required to induce the Title Company to issue the Title Insurance Policies; |
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| (D) | a survey of each of the Fargo Properties (a) prepared by a licensed surveyor reasonably acceptable to Lender (Ulteig and Neset Land Surveys are hereby deemed acceptable), (b) dated or re-certificated not earlier than four (4) months prior to the date of such delivery or such other date as may be reasonably satisfactory to the Lender, together with a “no change” affidavit or certification to Lender and the Title Company in sufficient form to permit the Title Company to delete the standard survey exception and provide such survey related endorsements as Lender shall require, (c) certified to the Lender and the Title Company, which certification shall be reasonably acceptable to the Lender and (d) complying with current “Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys,” jointly established and adopted by American Land Title Association, and the National Society of Professional Surveyors (except for such deviations as are reasonably acceptable to the Lender), provided that surveys including Items 1, 2, 3, 4, 6(a), 6(b), 7(a), 7(b)(1), 7(c), 8, 9, 11(a), 13, 16, 17, 18 and 19 of Table A of the current “Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys” shall be deemed sufficient for purposes of this requirement, and with respect to the Fargo Project under active construction, such survey may not depict improvements that are not completed as of the date of the field work provided that such field work was completed not earlier than four (4) months prior to the date of such certification or re-certification or such other date as may be reasonably satisfactory to the Lender; and |
| (E) | (i) “Life-of-Loan” Federal Emergency Management Agency Standard Flood Hazard Determination with respect to each of the Fargo Properties; and (ii) in the event any such property is located in an area identified by the Federal Emergency Management Agency (or any successor agency) as a Special Flood Hazard Area, (A) a notice about special flood hazard area status and flood disaster assistance, duly executed by the applicable Credit Party, (B) evidence of flood insurance with a financially sound and reputable insurer, naming the Lender, as mortgagee, in an amount and otherwise in form and substance reasonably satisfactory to the Lender, and (C) evidence of the payment of premiums in respect thereof in form and substance reasonably satisfactory to the Lender. |
| (ii) | Purchase Orders. The Company shall, and shall cause each other Credit Party to, ensure that all purchase orders in respect of the Fargo Project are made by the Company and equipment purchased for the purposes of the Fargo Project are purchased by the Company or its Subsidiaries (if any). |
(i) Indebtedness. The Company will not incur, create, assume or suffer to exist, or permit any other Note Party to incur, create, assume or suffer to exist, any Indebtedness, except: (i) the Secured Obligations arising under the Note Documents or any guarantee of the Secured Obligations arising under the Note Documents; (ii) subject to Section 4(p) below, intercompany Indebtedness; and (iii) other Indebtedness approved by the Lender; provided that the Note Parties may incur Indebtedness where the proceeds thereof are primarily used for the ordinary course operation of the business of the Company and not to exceed, in the aggregate at any time outstanding, $2,000,000.
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(j) Liens. The Company will not permit any Note Party to incur, create, assume or suffer to exist, any Lien on any of their respective Properties (now owned or hereafter acquired), except:
| (i) | Liens securing Secured Obligations pursuant to the Security Documents; |
| (ii) | Excepted Liens; and |
| (iii) | Liens purportedly arising from precautionary Uniform Commercial Code financing statement filings made in respect of operating leases of personal property entered into by any Company in the ordinary course of business. |
(k) Dispositions. The Company will not permit any other Note Party to sell, assign, convey or otherwise transfer or dispose of any Property except for: (i) the sale of spare parts in the ordinary course of business (other than any spare parts relating to transformers) and where such spare parts are not useful or necessary for the operation of any data center or crypto mining facility or that are replaced by assets of equal suitability, quality and value; (ii) assets that are worthless or obsolete or worn out, or are no longer used or useful in the conduct of its business, in each case in the ordinary course of business; (iii) to the extent constituting dispositions, settlements of accounts receivable pursuant to bona fide collection efforts and (iv) dispositions in the ordinary course of business; provided that the aggregate book value of all property disposed of, conveyed, assigned or otherwise transferred pursuant to this clause (k)(iv) in any fiscal year shall not exceed $2,000,000.
(l) Subsidiaries. The Company will not establish or maintain any Subsidiaries, other than Subsidiaries owned by the Company, each which will become a Credit Party hereto, including by executing and delivering joinder agreements satisfactory to the Lender.
(m) Restricted Payments; Other Payment Restrictions. Neither the Company nor any Subsidiary of the Company (if any) shall declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except for (i) other than Permitted Tax Distributions, Restricted Payments which do not exceed $2,000,000 in the aggregate until the Maturity Date and (ii) Permitted Tax Distributions.
The Company shall not, and shall not permit any other Note Party to, direct any payments under master services agreements, leases or similar customer agreements that are, in each case, for the Fargo Project to be made to any entity other than the Company, or, if approved by the Lender, a Subsidiary of the Company.
(n) Organizational Documents; Material Project Documents. The Company will not, and will not permit any of its Subsidiaries (if any) to, amend or otherwise modify (or permit to be amended or modified) its Organizational Documents, or take any action that would impair its rights under its Organizational Documents, in each case, in a manner that would be adverse to such Note Party or adverse to the Lender (as reasonably determined by the Lender); provided that any amendment or other modification to any Organizational Documents of any Note Party that changes the provisions relating to permissibility or terms of the pledge, transfer and foreclosure rights of the Lender, or any other rights or limitations in any Organizational Documents with respect to which a change would require consent of a secured creditor, shall be deemed adverse to the Lender (it being understood that any amendment, modification or revocation of any resolution or other documentation that implements such provisions, to the extent implementing such provisions, shall be deemed an amendment to such Organizational Documents). The Company will not, and will not permit any of its Subsidiaries (if any) to, terminate (or consent to be terminated) or amend, waive or otherwise modify (or permit to be amended, waived or modified) in any material and adverse manner, any lease agreement (or equivalent agreement) entered into with any tenant in respect of the Fargo Project or any electric services agreement or other agreement for material utility services related to the Fargo Project, in each case without the consent of the Lender (not to be unreasonably withheld or delayed).
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(o) Deposit Account Control Agreement. The Company shall deliver a deposit account control agreement over the bank account listed in Annex C hereof, duly executed by the parties thereto, in a form reasonably satisfactory to the Lender within thirty (30) days (or such later date as the Lender may agree) of the Closing Date.
(p) Transactions with Affiliates. The Company will not, and will not permit any of its Subsidiaries (if any) to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except for (i) transactions conducted in the ordinary course of business at prices and on terms and conditions no less favorable to the Company or any of its Subsidiaries than those obtainable on an arm’s-length basis from unrelated third parties, including transactions on less than arm’s-length terms provided they (a) serve a legitimate business purpose related to the development, construction, or operation of the Fargo Project, (b) are fully disclosed to and approved by all necessary governing bodies of the transaction parties, (c) comply with applicable industry-specific regulations, and (d) will result in a substantial benefit to the Company or any of its Subsidiaries, as determined by the Company or any such Subsidiary in its sole but reasonable discretion; (ii) any Disposition permitted under Section 4(k) hereof; (iii) any Restricted Payment permitted under Section 4(m) hereof; and (iv) the subdivision of parcels and the transfer of such parcels or property thereon to one or more Subsidiaries of the Company that become Note Parties pursuant to Section 4(l) hereunder.
(q) Fargo Project Development. The Company shall use commercially reasonable efforts to develop the Fargo Project in a timely manner.
Section 5. Closing Date; Additional Loan Borrowing Dates.
(a) On or prior to the date hereof (the “Closing Date”), the Company certifies that it has satisfied the conditions precedent listed in Annex D hereof.
(b) On or before the date of borrowing of any Additional Loan, with the mutual consent of the Lender and the Company (each such date being an “Additional Loan Borrowing Date”), the Company certifies that it will: (i) provide the Lender with a duly executed Borrowing Request and Closing Certificate; (ii) deliver to Lender certified copies of any new Material Project Documents, if applicable; (iii) certify that, as of such Additional Loan Borrowing Date, (a) no Default or Event of Default has occurred and is continuing beyond any applicable cure period and (b) all customary and reasonable representations and warranties appropriate to the current stage of the construction project are true, complete, and accurate in all material respects; and (iv) to the extent that the Company has acquired the Fargo Properties and has entered into a Mortgage with respect thereto, furnish the Lender with all related documentation that is customary and reasonable for a project at that stage, including, without limitation, any lien waivers, affidavits, certificates, information (including financial data) and instruments of indemnification for the benefit of the Title Company (including a so-called “gap” indemnification) as shall be required to induce the Title Company to issue an ALTA 33-06 title endorsement to the Title Insurance Policies, as specifically requested in writing by the Lender.
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Section 6. Events of Default. One or more of the following events shall constitute an “Event of Default”:
(a) default in payment when due and payable, upon redemption, acceleration or otherwise, of principal (including in respect of the Base Return) of, or premium, on this Note or any other Note Document and such default shall continue unremedied for a period of two (2) Business Days;
(b) default in the payment when due of interest (other than with respect to any interest paid in the form of a Principal Increase) on or with respect to this Note or any other amount in respect of or in connection with this Note and such default shall continue unremedied for a period of three (3) Business Days;
(c) any representation or warranty made or deemed made by or on behalf of any Credit Party in or in connection with any Note Document or any amendment or modification of any Note Document or waiver under such Note Document, or in any certificate, financial statement or other document required to be delivered in connection with any Note Document or any amendment or modification thereof or waiver thereunder, shall prove to have been incorrect in any material respect when made or deemed made;
(d) any Note Party shall fail to observe or perform any covenant, condition or agreement applicable to it (i) contained in Section 4(b)(i), Section 4(d), Section 4(f), Section 4(h)(iv) and (v), Section 4(i), Section 4(j), Section 4(k), Section 4(m), Section 4(n), Section 4(o) and Section 4(p) of this Note, or (ii) contained in the Parent Loan Guarantee;
(e) any Note Party shall fail to observe or perform any covenant, condition or agreement contained in this Note (other than those specified in clauses (a) through (d) above) or any other Note Document and such failure shall continue unremedied for a period of thirty (30) days following the earlier of (i) any Note Party’s knowledge of the failure and (ii) the receipt by the Company of written notice thereof from the Lender;
(f) (i) any Note Party shall fail to make any payment in respect of Indebtedness (except Indebtedness referenced in clause (d) of the definition thereof) in an aggregate principal amount of $30,000,000 or more, in the case of any Note Party when and as the same shall become due and payable, after taking any applicable grace periods and any written waivers of the requisite lenders of such Indebtedness with respect to thereto into account, (ii) any event or condition occurs that results in Indebtedness (except Indebtedness referenced in clause (d) of the definition thereof) in an aggregate principal amount of $30,000,000 or more, in the case of the Company or any of its Subsidiaries (if any) becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of such Indebtedness or any trustee or agent on its or their behalf to cause such Indebtedness to become due, or to require the redemption thereof or any offer to redeem to be made in respect thereof, prior to its scheduled maturity or require any Note Party or to make an offer in respect thereof, after taking any written waivers of the requisite lenders of such Indebtedness with respect to thereto into account.
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(g) (i) any settlement or judgment (or order by a Governmental Authority) for the payment of money (as reduced by any insurance proceeds covering such settlements or judgments which are received or as to which the insurance carriers do not dispute coverage) in excess of $30,000,000 or more, in the case of the Note Parties in the aggregate shall be rendered against any Note Party or paid, unless in the case of any such judgments or orders, within a thirty (30)-day period thereof unless a stay of enforcement of such judgment or order shall be put in and remain in effect and no action is legally taken by a judgment creditor or judgment creditors to attach or levy upon any assets of any Note Party to enforce any such judgment; and (ii) any non-monetary judgment or order shall be rendered against any Note Party that could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, and there shall be a period of thirty (30) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect;
(h) any Credit Party pursuant to or within the meaning of the Bankruptcy Code: (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a custodian of it or for all or substantially all of its property, or (D) makes a general assignment for the benefit of its creditors;
(i) a court of competent jurisdiction enters an order or decree under any provision of the Bankruptcy Code that: (A) is for relief against any Credit Party in an involuntary case; (B) appoints a custodian of any Credit Party for all or substantially all of the property of any Credit Party; or (C) orders the liquidation of any Credit Party; and the order or decree remains unstayed and in effect for sixty (60) consecutive days;
(j) any Note Document is held in any judicial proceeding to be unenforceable or invalid or ceases for any reason to be in full force and effect (other than in accordance with the terms of any Note Document), or any Credit Party, or any Person acting on behalf of any Credit Party, denies or disaffirms its obligations under any Note Document;
(k) the Note Documents cease to create a valid and perfected Lien of the priority required thereby on any material portion of the collateral purported to be covered thereby, except to the extent permitted by the terms of the Note Documents, or any Credit Party shall so state in writing;
(l) a Change of Control occurs;
(m) (i) a material breach by any party to or material default under any Material Project Document has occurred after taking any applicable grace periods into account or (ii) a Material Project Document shall terminate or cease for any reason to be in full force and effect; and
(n) an ERISA Event shall have occurred that, when taken together with all other ERISA Events that have occurred and are continuing, has resulted in, or could reasonably be expected to result in, a Material Adverse Effect.
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In the case of an Event of Default other than one described in Section 6(h) or Section 6(i), at any time thereafter during the continuance of such Event of Default, the Lender may, by notice to the Company, (i) declare the Loan and this Note to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loan so declared to be due and payable (together with accrued interest thereon), including an amount sufficient to achieve the Base Return, and all fees and other obligations of the Company accrued hereunder and under the other Note Documents, shall become due and payable immediately, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other notice of any kind, all of which are hereby waived by the Company; and in case of an Event of Default described in Section 6(h) or Section 6(i), the principal of the Loan then outstanding (together with accrued interest thereon), including an amount sufficient to achieve the Base Return then applicable and all fees and the other obligations of the Company accrued hereunder and under the other Note Documents, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company.
In the event the Secured Obligations are reinstated for any reason, it is understood and agreed that the Secured Obligations shall be subject to the Base Return Principle and the Company are required to pay amounts necessary to achieve the Base Return in accordance with the Note Documents. For avoidance of doubt, the obligations of the Company to pay amounts to achieve the Base Return shall also be payable in the event the Secured Obligations (and/or this Note) are satisfied or released by foreclosure (whether by power of judicial proceeding), deed in lieu of foreclosure or by any other similar means.
THE COMPANY WAIVES (TO THE FULLEST EXTENT IT MAY LAWFULLY DO SO) THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE OR LAW THAT PROHIBITS OR MAY PROHIBIT THE COLLECTION OF ANY AMOUNT DUE TO ACHIEVE THE BASE RETURN.
The Company expressly agrees (to the fullest extent that it may lawfully do so) that: (i) the Base Return Principle is reasonable and is the product of an arm’s length transaction between sophisticated business people, ably represented by counsel; (ii) as established by the Base Return Principle, the obligation of the Company to pay amounts necessary to achieve the Base Return in accordance with the Note Documents is incurred on the date hereof (subject to subsequent extensions of credit by the Lender) and part of the Secured Obligations on the date hereof (as increased by subsequent extensions of credit by the Lender) and in all events shall be part of the Secured Obligations; (iii) the amounts payable to achieve the Base Return shall be payable notwithstanding the then-prevailing market rates at the time payment is made; (iv) there has been a course of conduct between the Lender and the Company giving specific consideration in this transaction for such agreement to achieve the Base Return; and (v) the Company shall each be estopped hereafter from claiming differently than as agreed to in this paragraph.
The Company expressly acknowledges that its agreement to pay amounts to the Lender necessary to achieve the Base Return to the Lender as herein described is a material inducement to the Lender to provide the extensions of credit under this Note.
In the case of the occurrence of an Event of Default, the Lender will have all other rights and remedies available at law and equity.
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Section 7. Indemnity; Expenses. The Company shall indemnify Lender, and Lender’s affiliates, directors, officers, employees, agents, partners and advisors (each such person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the reasonable and documented fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (a) the execution or delivery of this Note, the Note Documents, the performance by the parties hereto of their respective obligations under this Note, the Note Documents or the consummation of the transactions or any other transactions contemplated by this Note, the Note Documents or (b) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee, (y) result from a claim brought by the Company or its Subsidiaries or Parent against such Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Note Document, if the Company or its Subsidiaries or Parent thereof has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction or (z) result from a claim not involving an act or omission of the Company, Parent or any Affiliate therefore and that is brought by such Indemnitee against another Indemnitee. The obligations of the Company under this paragraph shall survive the Payment in Full of the Note.
The Company shall (regardless of whether the Closing Date occurs), pay (a) all reasonable and documented out-of-pocket expenses incurred by the Lender and its Affiliates, including the reasonable and documented fees, charges and disbursements of their counsel and other consultants, the reasonable travel, photocopy, mailing, courier, telephone and other similar expenses, and the cost of environmental audits and surveys and appraisals, in connection with the extensions of credit provided for herein, the preparation, negotiation, execution, delivery and administration (both before and after the execution hereof and including advice of counsel to the Lender as to the rights and duties of the Lender with respect thereto) of this Note and the other Note Documents and any amendments, modifications or waivers of or consents related to the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (b) all costs, expenses, assessments and other similar charges incurred by the Lender in connection with any filing, registration, recording or perfection of any security interest contemplated by this Note or any Note Documents or any other document referred to therein and (c) all out-of-pocket expenses incurred by the Lender, including the fees, charges and disbursements of any counsel or other consultants for agents or Lender, in connection with the enforcement or protection of their rights in connection with this Note or any other Note Document, including their rights under this Section 7, or in connection with the Loan made hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or similar negotiations in respect of such Loan (it is understood that, if any Credit Party fails to perform any covenant or agreement contained herein or in any other Note Document, the Lender may itself, but shall have no obligation to do so, perform or cause performance of such covenant or agreement, and the expenses of the Lender incurred in connection therewith shall be reimbursed on demand by the Company).
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Section 8. Miscellaneous.
(a) The Company, for itself and its successors and assigns, hereby waives presentment, notice of dishonor, protest and notice of protest, and any or all other notices or demands (other than demand for payment) in connection with the delivery, acceptance, performance, default, endorsement or guarantee of this Note. The liability of the Company hereunder shall be unconditional and shall not be in any manner affected by any indulgence whatsoever granted or consented to by the holder hereof, including, but not limited to any extension of time, renewal, waiver or other modification. Any failure of the holder to exercise any right hereunder shall not be construed as a waiver of the right to exercise the same or any other right at any time and from time to time thereafter. Any waiver of any provision of this Note or any other Note Document or consent to any departure by any Note Party therefrom shall be effective only in the specific instance and for the purpose for which given. Lender or any holder may accept late payments, or partial payments, even though marked “payment in full” or containing words of similar import or other conditions, without waiving any of its rights.
(b) This Note and the other Note Documents may only be changed, modified or terminated or have any of its provisions waived by an agreement in writing signed by the parties hereto or thereto. In addition, notwithstanding the foregoing, the Lender, with the written consent of the Company (not to be unreasonably withheld, conditioned or delayed), may amend, modify or supplement any Note Document in order to (a) grant, perfect, protect, expand or enhance any security interest in any Collateral or additional Property to become Collateral, (b) add, supplement or modify any collateral agency provisions to the extent needed in connection with the appointment of a collateral agent after the Closing Date and (c) correct, amend or cure any ambiguity, inconsistency or defect or correct any typographical error or other manifest error in any Note Document.
(c) All notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile or electronic communication at the address set forth herein or at such other addresses as any party shall have specified to the other parties in writing. All notices and other communications given to any party hereto in accordance with the provisions of this Note or the other Note Documents shall be deemed to have been given on the date of receipt.
(d) This Note shall be governed by and construed in accordance with the laws of the State of New York applicable to instruments made and to be performed wholly within that state. If any provision of this Note is held to be illegal or unenforceable for any reason whatsoever, such illegality or unenforceability shall not affect the validity of any other provision hereof. This Note shall bind the Company and its successors and assigns. This Note may not be assigned or transferred by any Company without the prior written consent of the Lender. The Lender reserves the right to assign or sell participations in the Note to any entity (including to any Federal Reserve Bank in accordance with applicable law) and to provide any assignee or participant or prospective assignee or participant with information of the Company previously received by Lender, subject to confidentiality requirements. The Company’s consent to such assignment or participation is hereby deemed granted. Lender and each of its assigns shall be an express third party beneficiary under this Note with direct rights to enforce, or exercise rights, make claims or seek remedies under, this Note.
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The Company shall maintain at one of its offices at 3811 Turtle Creek Blvd., Suite 2100, Dallas, TX 75219 a copy of each assignment of the Note delivered to it and a register for the recordation of the names and addresses of the Lender, and the commitments of, and principal amounts (and stated interest) of the Loan owing to, the Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error, and the Company and the Lender shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Note. The Register shall be available for inspection by the Company and the Lender, at any reasonable time and from time to time upon reasonable prior notice.
If Lender sells a participation, Lender, acting solely for this purpose as a non-fiduciary agent of the Company, shall maintain a register on which it enters name and address of each participant and the principal amounts (and stated interest) of each participant’s interest in the Loan or other obligations under the Note Documents (the “Participant Register”); provided that Lender shall not have any obligation to disclose all or any portion of the Participant Register (including the identity of any participant or any information relating to a participant’s interest in any commitments, loans or its other obligations under any Note Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Note notwithstanding any notice to the contrary.
THE COMPANY AGREES THAT ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS NOTE MAY BE INITIATED AND PROSECUTED IN THE STATE OR FEDERAL COURTS, AS THE CASE MAY BE, LOCATED IN NEW YORK COUNTY, NEW YORK AND ANY ARBITRATION PROCEEDING PURSUANT HERETO SHALL BE CONDUCTED IN NEW YORK, NEW YORK. THE COMPANY CONSENTS TO AND SUBMITS TO THE EXERCISE OF JURISDICTION OVER ITS PERSON BY ANY SUCH COURT HAVING JURISDICTION OVER THE SUBJECT MATTER, WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO ANY COMPANY AT ITS ADDRESS SET FORTH BELOW OR TO ANY OTHER ADDRESS AS MAY APPEAR IN LENDER’S RECORDS AS THE ADDRESS OF ANY COMPANY.
IN ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS NOTE, LENDER AND THE COMPANY WAIVE TRIAL BY JURY, AND COMPANY ALSO WAIVES (I) THE RIGHT TO INTERPOSE ANY SET-OFF OR COUNTERCLAIM OF ANY NATURE OR DESCRIPTION, (II) ANY OBJECTION BASED ON FORUM NON CONVENIENS OR VENUE, AND (III) ANY CLAIM FOR CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES.
(e) The Company hereby authorizes Lender and any other holder of an interest in this Note to disclose confidential information relating to the financial condition or operations of Company and the Parent (i) to any director, officer, employee or affiliate of Lender or any such holder, (ii) to legal counsel, accountants, and other professional advisors to Lender or any such holder, (iii) to regulatory officials, (iv) as requested or required by law, regulation, or legal process or (v) in connection with any legal proceeding to which Lender or any such holder is a party.
Section 9. Non-Recourse. Lender acknowledges and agrees that Lender’s sole right of recovery pursuant to this Note shall be limited to the Credit Parties solely to the extent set forth in the Note Documents defined therein, and Lender shall not have any right, remedy, claim or any other recourse against any Non-Recourse Party.
[signature pages follow]
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IN WITNESS WHEREOF, the undersigned has caused this Note to be duly executed.
| COMPANY: | ||
| By: | /s/ Saidal Mohmand | |
| Name: | Saidal Mohmand | |
| Title: | Chief Financial Officer | |
NOTICES:
If to any Company, to:
APLD FAR-01 LLC
3811 Turtle Creek Blvd., Suite 2100
Dallas, TX 75219
Attention: Saidal Mohmand
Phone: [***]
Email: [***]
with a copy (which shall not constitute notice) to:
Applied Digital Corporation
3811 Turtle Creek Blvd., Suite 2100
Dallas, TX 75219
Attention: General Counsel
and
Lowenstein Sandler LLP
1251 Avenue of the Americas
New York, New York 10020
Attention: Steven Siesser, Esq.
Phone: [***]
Email: [***]
If to Lender, to:
Macquarie Equipment Capital, Inc.
660 Fifth Avenue
New York, New York 10103
Attention: SAF Operations; Aaron Jenkins and Joshua Stevens
Phone: Aaron Jenkins: [***]; Joshua Stevens: [***]
Email: [***]; [***]
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ANNEX A: DEFINITIONS
1. Definitions
“200 MW Lease” means a commercial lease agreement between the Company and an investment grade tenant that is rated at least BBB- by S&P or an equivalent Moody’s rating as of the time of execution of such commercial lease agreement and is not an Affiliate of the Parent.
“200 MW Lease Execution” means the date on which the 200 MW Lease is duly executed by the parties thereto.
“Affiliate” means, with respect to a specified Person, (a) another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified, (b) another Person that directly or indirectly owns or holds ten percent (10.0%) or more of any class of Equity Interests with voting power in the specified Person or (c) any officer, director, manager or partner of the specified Person. It is understood that no Lender or any of its Affiliates shall be considered to be an Affiliate of the Company.
“AML Laws” means all laws, rules, and regulations of any jurisdiction concerning the prevention of money laundering, including the USA PATRIOT Act.
“Anti-Corruption Laws” means all laws, rules and regulations of any jurisdiction concerning or relating to bribery or corruption, including the U.S. Foreign Corrupt Practices Act of 1977, as amended.
“Applicable Margin” means a rate equal 8.0% per annum.
“Base Return” means, as of any date of determination, in respect of the Loan, the return on capital of the Lender as calculated pursuant to clause (a) of the definition of “Multiple on Invested Capital” and will be achieved if the Multiple on Invested Capital in respect of the Loan as of such date equals or exceeds 1.10 to 1.00.
“Base Return Principle” has the meaning set forth in the definition of “Secured Obligations”.
“Board” means the Board of Governors of the Federal Reserve System of the United States of America or any successor Governmental Authority.
“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed.
“Change of Control” means (i) Intermediate Holdings shall fail to own and control, directly or indirectly, beneficially and of record, Equity Interests in the Company or any Guarantor representing 100% on a fully diluted basis of (A) the aggregate ordinary voting power and economics interests and (B) the aggregate equity value represented by the issued and outstanding Equity Interests of the Company or such Guarantor or (ii) Parent shall fail to own and control, directly or indirectly, beneficially and of record, Equity Interests in Intermediate Holdings, the Company or any Guarantor representing 100% on a fully diluted basis of (A) the aggregate ordinary voting power and economics interests and (B) the aggregate equity value represented by the issued and outstanding Equity Interests of Intermediate Holdings, the Company or such Guarantor.
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“Closing Date” has the meaning assigned in Section 5.
“Collateral” has the collective meaning assigned thereto in the Guarantee and Security Agreement.
“Company” means APLD FAR-01 LLC, a Delaware limited liability company.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise, including the power to elect a majority of the directors, managers, trustees or equivalent of a Person, as the case may be.
“Controlling” and “Controlled” have meanings correlative thereto.
“Controlled Affiliates” means, with respect to Lender, any fund, investment vehicle or other Person (other than a natural person) that (i) is organized by Lender or an Affiliate of Lender for the purpose of making equity investments in one or more companies and (ii) is controlled by or is under common control with Lender or such Affiliate of Lender. For purposes of this definition, “control” means the power to direct or cause the direction of management and policies of a Person, whether by contract or otherwise.
“Credit Parties” means the Parent, Intermediate Holdings, FAR-02, the Company, and each Subsidiary of the Company (if any) or any of the foregoing as the context requires.
“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.
“Disqualified Capital Stock” means any Equity Interest that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event, matures or is mandatorily redeemable for any consideration other than other Equity Interests (which would not constitute Disqualified Capital Stock), pursuant to a sinking fund obligation or otherwise, or is convertible or exchangeable for Indebtedness or redeemable for any consideration other than other Equity Interests (which would not constitute Disqualified Capital Stock) at the option of the holder thereof, in whole or in part, on or prior to the date that is one (1) year after the earlier of (a) the Maturity Date and (b) the date on which there is no portion of the Loan or other obligations hereunder outstanding.
“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, including both preferred and common equity, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such Equity Interest.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, the regulations promulgated thereunder, and any successor statute.
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“ERISA Affiliate” means each trade or business (whether or not incorporated) which together with the Company or any Credit Party would be deemed to be a “single employer” within the meaning of Section 4001(b)(1) of ERISA or subsections (b), (c), (m) or (o) of Section 414 of the Code.
“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30 day notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by any Credit Party or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by any Credit Party or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by any Credit Party or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by any Credit Party or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from any Credit Party or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.
“Events of Default” has the meaning assigned in Section 6.
“Excepted Liens” means:
(a) Liens for taxes, assessments or other governmental charges or levies which are (i) not delinquent or (ii) being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP;
(b) Liens in connection with workers’ compensation, unemployment insurance or other social security, old age pension or public liability obligations which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP;
(c) in the case of the Company, statutory landlord’s liens, operators’, vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’, workers’, materialmen’s, construction or other like Liens arising by operation of law in the ordinary course of business or incident to the construction, operation, repair, restoration or improvement of the Fargo Project, each of which is in respect of obligations that are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP or in respect of which bonds otherwise in an amount sufficient to repay the underlying obligation of such Liens shall have been obtained and remain in full force and effect;
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(d) Liens arising solely by virtue of any statutory or common law provision or customary deposit account terms (pursuant to a depository institution’s standard documentation that is provided to its customers generally) relating to banker’s liens, rights of set-off or similar rights and remedies and burdening only deposit accounts or other funds maintained with a creditor depository institution; provided that no such deposit account is a dedicated cash collateral account or is subject to restrictions against access by the depositor in excess of those set forth by regulations promulgated by the Board and no such deposit account is intended by any Credit Party to provide collateral to the depository institution; and
(e) in the case of the Company, encumbrances consisting of zoning restrictions, easements or other restrictions on the use of real property, none of which materially impairs the use or operation of such property in the ordinary course of business of the Company and its Subsidiaries (if any) or the value thereof or the validity, perfection or priority of the Liens granted under the Security Documents;
provided, further, that (x) Liens described in clauses (a) through (d) shall remain “Excepted Liens” only for so long as no action to enforce such Lien has been commenced and no intention to subordinate the Lien granted in favor of the Lender is to be hereby implied or expressed by the permitted existence of such Excepted Liens and (y) in no event shall “Excepted Liens” secure Indebtedness of the type specified in clauses (a) and (b) of the definition of “Indebtedness”.
“Excluded Taxes” means any of the following Taxes imposed on or with respect to Lender or required to be withheld or deducted from a payment to Lender, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case imposed as a result of Lender having a present or former connection to the jurisdiction imposing such Tax (other than connections arising from Lender having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Notes Document, or sold or assigned an interest in this Note or any Note Documents); (b) U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in the Loan pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or (ii) such Lender changes its lending office, (c) Taxes attributable to Lender’s failure to comply with Section 2(c)(iii) and (d) any U.S. federal withholding Taxes imposed under FATCA.
“FAR-02” means APLD FAR-02 LLC, a Delaware limited liability company.
“Fargo Project” means the hyperscale data center facility being developed and constructed by the Company on the Fargo Properties for an investment grade tenant.
“Fargo Properties” means (i) all of that portion of the South Half (S 1/2) lying East of the Easterly line of the right-of-way of the Great Northern Railway Section 4, Township 140 North, Range 49 West of the Fifth Principal Meridian, Cass County, North Dakota and (ii) west Half of Section 3 in Township 140 North, Range 49 West of the Fifth Principal Meridian, Cass County, North Dakota.
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“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Note (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Code.
“GAAP” means generally accepted accounting principles in the United States of America as in effect from time to time.
“Governmental Authority” means the government of the United States of America or any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).
“Governmental Requirement” means any international, foreign, federal, state and local law, treaties, statute, code, ordinance, order, determination, rule, rule of common law, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other directive or requirement, whether formerly, now or hereinafter in effect, including environmental laws and occupational, safety and health standards or controls, of any Governmental Authority, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof.
“Guarantee and Collateral Agreement” means the Guarantee and Collateral Agreement executed by the Company, Intermediate Holdings, FAR-02, and each Subsidiary of the Company (if any), dated as of the date hereof, in form and substance satisfactory to the Lender.
“Guarantor” shall have the meaning assigned to such term in the Guarantee and Collateral Agreement.
“Hazardous Material” shall mean any substances or materials (a) which are or become defined as hazardous wastes, hazardous substances, pollutants, contaminants or toxic substances under any environmental law, (b) which are toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to public health or the environment and are regulated by any Governmental Authority, (c) the presence of which require investigation or remediation under any environmental law, or (d) the discharge or emission or release of which requires a permit or license under any environmental law or other governmental approval, or which contain, without limitation, asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived substances or waste, crude oil, nuclear fuel, natural gas or synthetic.
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“Indebtedness” means, for any person, the sum of the following (without duplication): (a) all obligations of such person for borrowed money or evidenced by bonds, bankers’ acceptances, debentures, notes or other similar instruments; (b) all obligations of such person (whether contingent or otherwise) in respect of letters of credit (other than letters of credit where the Company or any of its Affiliates are named as applicants or co-applicants, provided that neither the Company nor any other Note Party has any liability, obligation or reimbursement responsibility in respect of drawings thereunder, whether direct or contingent, nor grants any Lien nor provides any guarantee in connection therewith), bank guarantees, surety or other bonds and similar instruments; (c) all accounts payable and other accrued expenses, liabilities or other obligations of such person to pay the deferred purchase price of Property or services (other than trade accounts payable in the ordinary course of business that are not past due for more than ninety (90) days after the date of invoice); (d) in respect of any capital lease of any person, the capitalized amount thereof that would appear on a balance sheet of such person prepared as of such date in accordance with GAAP; (e) all Indebtedness (as defined in the other clauses of this definition) of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) a Lien on any Property of such person, whether or not such Indebtedness is assumed by such Person, provided that, if such person has not assumed or become liable for the payment of such obligation, the amount of such Indebtedness shall be limited to the greater of (i) the principal amount of the obligations being secured and (ii) the fair market value of the encumbered Property; (f) all Indebtedness (as defined in the other clauses of this definition) of others guaranteed by such person or in which such person otherwise assures a creditor against loss of the Indebtedness (howsoever such assurance shall be made) to the extent of the lesser of the amount of such Indebtedness and the maximum stated amount of such guarantee or assurance against loss; (g) all obligations or undertakings of such person to maintain or cause to be maintained the financial position or covenants of others or to purchase the Indebtedness or Property of others; (h) obligations to deliver commodities, goods or services in consideration of one or more advance payments; (i) obligations to pay for goods or services, even if such goods or services are not actually received or utilized by such person, i.e., take-or-pay and similar obligations; (j) any Indebtedness of a partnership for which such person is liable either by agreement, by operation of law or by a Governmental Requirement but only to the extent of such liability; (k) Disqualified Capital Stock (for purposes hereof, the amount of any Disqualified Capital Stock shall be its liquidation value and, without duplication, the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase in respect of Disqualified Capital Stock); and (l) net obligations under hedging agreements. The Indebtedness of any person shall include all obligations of such person of the character described above to the extent such person remains legally liable in respect thereof notwithstanding that any such obligation is not included as a liability of such person under GAAP.
“Intermediate Holdings” means APLD FAR Holdings LLC, a Delaware limited liability company.
“Lien” means any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on the common law, statute or contract, and whether such obligation or claim is fixed or contingent, and including (a) the lien or security interest arising from a mortgage, deed of trust, encumbrance, adverse ownership interest, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and any filed financing statement or other notice of any of the foregoing (whether or not a lien or other encumbrance is created or exists at the time of the filing).
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“Material Adverse Effect” means a material adverse change in, or material adverse effect on, (a) the business, operations, Property, liabilities (actual or contingent) or financial condition of the Note Parties, taken as a whole, or the Fargo Project, (b) the ability of any Credit Party to perform its obligations under any Note Document to which it is a party, (c) the validity or enforceability of any Note Document or (d) the rights and remedies of or benefits available to the Lender under any Note Document.
“Material Project Document” means any lease agreement (or equivalent agreement) entered into in respect of the Fargo Project by the Note Parties, any electric services agreement entered into by the Note Parties with a utility relating to power services at the Fargo Project, any other material agreement for utilities entered into by the Note Parties, and any material construction contract related to the Fargo Project entered into by the Note Parties, including any GMP contract and any purchase orders relating to power supply equipment.
“Monthly Date” means the last Business Day of each calendar month.
“Mortgage” means, with respect to each of the Fargo Properties, a first priority Construction Mortgage, Security Agreement, Fixture Filing, Financing Statement and Assignment of Rents and Leases with Deficiency Rights executed and delivered by the Company to the Lender, as security for the Secured Obligations and encumbering each parcel of real property, the improvements thereon and all personal property owned by the Company and encumbered by a Mortgage.
“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.
“Multiple on Invested Capital” means, as of the date of any determination, the ratio of (a) the sum, without duplication, of (i) the aggregate amount of principal payments and amounts previously paid in cash, in each case in respect of the Note, in order to achieve the Base Return from the Closing Date through the date of determination by the Company in respect of the Loan, (ii) the aggregate amount of interest payments and commitment fees paid in cash, in each case in respect of the Note, from the Closing Date through the date of determination by the Company in respect of the Loan (other than any Post-Default Rate interest), and (iii) the aggregate amount of any upfront fees received by the Lender in cash in each respect of the Loan on the Closing Date or thereafter to (b) the aggregate principal amount of the Loan (including any Principal Increase) funded and/or made available (including, for the avoidance of doubt, the principal amount made available in respect of the Additional Loans on an uncommitted basis on the Closing Date) by the Lender from the Closing Date through such date of determination (without giving effect to any net funding in respect of any such Loan). For the avoidance of doubt, the calculation of Multiple on Invested Capital shall, in no event, take into account (x) any fees (other than the upfront fees as specified above) payable to the Lender, any syndication, co-investment, administration and similar fees or any other costs, fees, or third-party costs associated with any agent and/or the Lender’s evaluation, negotiation, or execution of the Note Documents or the monitoring or performance of any obligations under such Note Documents, regardless of whether such costs, fees or third-party costs are net funded from the proceeds of the Loan funded to the Company and (y) any Post-Default Rate interest.
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“Non-Recourse Party” means, with respect to the Note Parties, any of the Note Parties’ former, current and future equity holders, controlling persons, directors, officers, employees, agents, representatives, Affiliates (other than a Note Party), members, managers, general or limited partners, or assignees (or any former, current or future equity holder, controlling person, director, officer, employee, agent, representative, Affiliate (other than a Note Party), member, manager, general or limited partner, or assignee of any of the foregoing).
“Note” has the meaning assigned in the preamble hereto.
“Note Documents” means this Note, the Security Documents, the Parent Loan Guarantee, any agreement, instrument or certificate required to be delivered under this Note or the other Note Documents by or on behalf of the Parent, Intermediate Holdings, or the Note Parties and each other document designated as a Note Document thereunder.
“Note Parties” means Intermediate Holdings, FAR-02, the Company and the Subsidiaries of the Company (if any).
“Organizational Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws and any shareholders agreement; (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity and (d) any equivalent or comparable constitutive documents with respect to such entities in the jurisdiction of its formation or organization.
“Other Taxes” means any present or future stamp or documentary taxes and any other excise, property or value added taxes, or similar charges or levies which arise from any payment made under this Note.
“Parent” means Applied Digital Corporation, a Nevada corporation.
“Parent Loan Guarantee” means the Parent Guarantee made by the Parent in favor of the Lender, in form and substance satisfactory to the Lender.
“Participant Register” has the meaning set forth in Section 8(d).
“Payment in Full” means (a) the principal of the Loan (including amounts sufficient to achieve the Base Return) and premium (if any) on and interest on each Loan and all fees payable under the Note Documents and all other amounts then due and payable under the Note Documents shall have been paid in full in cash (other than contingent indemnification obligations for which notice of a potential claim has not been given) and (b) all other Secured Obligations (other than contingent indemnification obligations for which notice of a potential claim has not been given) shall have been paid in full in cash.
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“Permitted Tax Distributions” means, for any taxable year (or portion thereof) beginning after the Closing Date for which the Company is treated as a pass-through entity or a member of a consolidated, unitary or combined group for federal, state and/or local income Tax purposes, distributions by the Company to its owner in an amount equal to the lesser of (A) the product of (i) the cumulative aggregate net taxable income attributable to the Company and its Subsidiaries’ assets and operations for all Tax periods of the Company through the date of determination and (ii) the combined, marginal U.S. federal, state, and local income tax rate applicable to a corporation that does business for Tax purposes in a jurisdiction in which the Company does business, separately determined with respect to each amount described in clause (i) for each fiscal year of the Company with respect to which such amount was incurred (taking into account any carryovers and carrybacks of tax attributes, such as net operating losses, attributable to the Company and its Subsidiaries’ assets and operations) and (B) the net amount of the relevant Tax that the Company’s owner actually owes to the appropriate Tax authority; provided that, any amounts distributed hereunder shall be without duplication of any such taxes paid or withheld by the Company with respect to the same taxable income. Permitted Tax Distributions may be made in a manner that reflects estimated Tax payments dates. Where Permitted Tax Distributions are made in a manner that reflects estimated Tax payment dates, such payments shall be based upon a reasonable estimate of the assumed Tax liability, and where such estimate varies from what the actual assumed Tax liability would have been for a tax year, subsequent Permitted Tax Distributions will be adjusted to reflect such variance.
“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
“Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Company or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.
“Post-Default Rate” has the meaning assigned in Section 2(e).
“Property” means any interest in any kind of property, right or asset, whether real, personal or mixed, or tangible or intangible (including cash, securities, accounts, contract rights, intellectual property and Equity Interests or other ownership interests of any Person), whether now in existence or owned or hereafter acquired, which shall include, upon acquisition thereof, the Fargo Properties.
“Qualifying Preference Share Issuance” means the issuance of preference shares by the Company in respect of which the Company shall receive net cash proceeds in an aggregate amount not less than $100,000,000.
“Register” has the meaning set forth in Section 8(d).
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“Restricted Payment” means (a) the payment of any dividend or making of any other payment or distribution (whether in cash, securities or other property) on account of the Company’s Equity Interests or to the direct or indirect holders of the Company’s Equity Interests in their capacity as such, (b) the purchase, redemption, acquisition, retirement for value, acquisition, cancellation or termination of the Company’s Equity Interests, (c) any payment or distribution (whether in cash, securities or other property) on account of any return of capital to the Company’s stockholders, partners or members (or the equivalent Person thereof), (d) any payment (in cash, property or obligations other than any Equity Interests in the Company) with respect to principal or interest on or any other payment or distribution on account of or any payment for, the purchase, redemption, retirement or other acquisition of, shareholder loans or (e) any management fee or equivalent and any bonus or premium or other amount payable by or on behalf of the Company and its Subsidiaries (if any) to any affiliate of the Company (other than the Company or its Subsidiaries (if any)).
“Sanctioned Country” means at any time, a country or territory which is itself the subject or target of any comprehensive country-wide or territory-wide Sanctions (as of the date hereof, Cuba, Iran, North Korea, Syria, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, Kherson, the so- called Luhansk People’s Republic and Zaporizhzhia regions of Ukraine).
“Sanctioned Person” means at any time, any Person (a) identified on any Sanctions-related list of designated persons, (b) operating, organized or resident in a Sanctioned Country, or (c) directly or indirectly owned fifty percent (50%) or more or controlled by one or more Persons described in the foregoing clause (a) or (b).
“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including the Office of Foreign Assets Control of the U.S. Department of the Treasury and the U.S. Department of State or (b) the United Nations Security Council, the European Union, any European Union member state, or His Majesty’s Treasury of the United Kingdom.
“Secured Obligations” means (a) any and all amounts owing or to be owing (including any Principal Increase and any interest accruing at any post-default rate and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Credit Party, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) by any Company or the Parent (whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising) to the Lender under any Note Document or paid on behalf of any Note Party by the Lender or any of their Affiliates and (b) all renewals, restatements, extensions and/or rearrangements of any of the above. Without limitation of the foregoing, the term “Secured Obligations” shall include the unpaid principal or premium (if any) of and interest on the Loan (including, without limitation, interest accruing at the then-applicable rate provided in this Note after the maturity of the Loan and interest accruing at the then-applicable rate provided in this Note after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Credit Party, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), reimbursement obligations and unpaid amounts, fees, expenses, indemnities, costs, and all other obligations and liabilities of every nature of the Company or any other Note Party, whether absolute or contingent, due or to become due, now existing or hereafter arising under this Note and the other Note Documents. It is understood that “Secured Obligations” shall include, without limitation, the obligation of the Note Parties to pay amounts under the Note Documents necessary for the Lender to achieve the Base Return and that such obligation exists as of the date of this Note and in all events prior to the time when the Loan is accelerated by operation of law or otherwise become due as a result of bankruptcy or insolvency related event, Event of Default or similar event (this sentence, the “Base Return Principle”).
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“Secured Parties” means the Lender and each Indemnitee.
“Security Documents” means the Guarantee and Collateral Agreement, all account control agreements for the benefit of the Secured Parties with respect to the accounts of the Note Parties, the Mortgages, each other security agreement and guaranty, in form and substance reasonably satisfactory to the Lender, entered into or made by the Company, the Parent, Intermediate Holdings, or any other Note Party in favor of the Lender for the benefit of the Secured Parties securing the Secured Obligations and/or guaranteeing all or part of the Secured Obligations.
“Solvent” means, with respect to any Person(s) as of any date, that (a) the value of the assets of such Person(s) (both at fair value and present fair saleable value) is, on the date of determination, greater than the total amount of liabilities (including contingent and unliquidated liabilities) of such Person(s) as of such date, (b) as of such date, such Person(s) is able to pay all liabilities of such Person(s) as such liabilities mature, and (c) as of such date, such Person(s) does not have unreasonably small capital given the nature of its business. In computing the amount of contingent or unliquidated liabilities at any time, such liabilities shall be computed at the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
“Subsidiary” means, with respect to any Person (the “parent”) at any date, any other Person the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other Person (a) of which Equity Interests representing more than 50% of the equity or more than 50% of the ordinary voting power (irrespective of whether or not at the time Equity Interests of any other class or classes of such Person shall have or might have voting power by reason of the happening of any contingency) or, in the case of a partnership, any general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. Unless the context otherwise requires, Subsidiary means a Subsidiary of the Company.
“Taxes” means any and all present and future taxes, duties, levies, imposts, deductions, charges or withholdings of any nature with respect to any payment by the Company pursuant to this Note imposed by any Governmental Authority. For the avoidance of doubt “Taxes” as defined in this paragraph do not include net income taxes imposed on the Lender by reason of this Note.
“Title Company” means a nationally-recognized title insurance company reasonably acceptable to the Lender.
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“Title Insurance Policy” means one or more policies of title insurance (or marked up unconditional title insurance commitments having the effect of a policy of title insurance) for which all applicable premiums, search and examination charges, escrow charges and expenses required for the recording of the Mortgages and issuance of the such policy have been paid insuring the Lien of each such Mortgage as a valid first mortgage on the Fargo Properties and fixtures described therein in an aggregate amount across the Fargo Properties, at all times, equal to 100% of the consolidated Indebtedness of the Company and its Subsidiaries (if any), which policies (or such marked up unconditional title insurance commitments) shall (w) effect coverage against insurable losses from existing mechanics’ or materialmen’s liens and subsequent mechanics’ and materialmen’s liens which may gain priority over the Mortgages, either without exception for mechanics’ and materialmen’s liens or containing future endorsements pursuant to ALTA 32-06 and 33-06 title endorsements, as applicable, (x) be issued by the Title Company, (y) have been supplemented by such endorsements as shall be reasonably requested by the Lender (including, but not limited to, endorsements on matters relating to zoning, usury, first loss, doing business, public road access, survey, contiguity, policy authentication, variable rate, environmental lien, subdivision, policy aggregation, mortgage recording tax, street address, separate tax lot, revolving credit, and so-called comprehensive coverage over covenants, conditions and restrictions (to the extent applicable and available at commercially reasonable rates)), and (z) contain no exceptions to title other than Liens permitted hereunder.
“Transformers” shall mean the two (2) 58/210/263 mva Siemens transformers 345000y-34500y with delta buried tertiary, load tap changing, 9.6% imp at base rating and rated voltage.
“Withdrawal Liability” means shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part 1 of Subtitle E of Title IV of ERISA.
2. Terms Generally; Rules of Construction.
The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”, and the word “or” is not exclusive. The word “will” shall be construed to have the same meaning and effect as the word “shall”. The use of the words “repay” and “prepay” and the words “repayment” and “prepayment” herein shall each have identical meanings hereunder. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth in the Note Documents), (b) except as otherwise provided herein, any reference herein to any law shall be construed as referring to such law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time, (c) any reference herein to any person shall be construed to include such person’s successors and assigns (subject to the restrictions contained in the Note Documents), (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Note in its entirety and not to any particular provision hereof, (e) with respect to the determination of any time period, the word “from” means “from and including” and the word “to” means “to and including”, (f) unless otherwise specified, any reference herein to Articles, Sections, Annexes, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Annexes, Exhibits and Schedules to, this Note, (g) any reference to amounts “deposited” into or “on deposit” in any account shall be construed to include any cash equivalents or other amounts credited to such account, (h) the term “documents” includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form, (i) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights, and (j) all references to currencies and to amounts payable, requested or funded hereunder and under the other Note Documents shall be to United States dollars. The use of the phrase “subject to” as used in connection with Excepted Liens or otherwise and the permitted existence of any Excepted Liens or any other Liens shall not be interpreted to expressly or impliedly subordinate any Liens granted in favor of the Lender and the other Secured Parties as there is no intention to subordinate the Liens granted in favor of the Lender and the other Secured Parties. No provision of this Note or any other Note Document shall be interpreted or construed against any person because such person or its legal representative drafted such provision.
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ANNEX B – OWNERSHIP CHART
[***]
ANNEX C – ACCOUNT
[***]
ANNEX D
CLOSING DATE CONDITIONS PRECEDENT
| 1. | Officer’s Certificate | |
| 2. | Resolutions; Certified Charters; Incumbency Certificates | |
| 3. | Good Standings | |
| 4. | Lowenstein Opinion (re Note Documents) | |
| 5. | Snell & Wilmer LLP Opinion (re Note Documents) | |
| 6. | Solvency Certificate | |
| 7. | Satisfactory documentation for formation of the Company, Intermediate Holdings, FAR-02 and Parent, including limited liability company agreements, operating agreements, bylaws, or other organizational documents, as applicable, and satisfactory resolutions or amendments to such organizational documents | |
| 8. | UCC-1 filings required by Security Documents; Lien searches | |
| 9. | Borrowing Request and Closing Certificate (re Reps and Warranties and Material Project Documents) | |
| 10. | Certified copies of all Material Project Documents | |
| 11. | All representations and warranties being true | |
| 12. | No Default or Event of Default |
Exhibit 10.2
EXECUTION VERSION
PARENT GUARANTEE
PARENT GUARANTEE, dated as of September 9, 2025 (this “Agreement”), made by Applied Digital Corporation, a Nevada corporation (the “Parent Guarantor”), in favor of Macquarie Equipment Capital, Inc., Lender (together with its successors and assigns, if any, the “Lender”).
W I T N E S S E T H:
WHEREAS, APLD FAR-01 LLC, a Delaware limited liability company (the “Company”), has executed and delivered to the Lender a promissory note, dated as of the date hereof (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Note”);
WHEREAS, pursuant to the Note, the Company has agreed to incur certain obligations, including the promise to pay to the Lender the amounts set forth therein with respect to the Loan made available or to be made available by the Lender to the Company;
WHEREAS, as an inducement to the Lender making the Loan to the Company, the Parent Guarantor has executed and delivered this Agreement to the Lender;
WHEREAS, the Parent Guarantor, the Company and the other Credit Parties are engaged in related businesses, and the Parent Guarantor will derive substantial direct and indirect benefit from the extensions of credit described in the preceding WHEREAS clauses; and
WHEREAS, the Parent Guarantor has determined that the execution, delivery and performance of this Agreement directly benefit, and are in the best interest of, the Parent Guarantor;
NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to induce the Lender, the Lender to make and maintain the extension of credit described in the preceding WHEREAS clauses, the Parent Guarantor hereby agrees with the Lender, as follows:
Section 1. Definitions.
(a) Reference is hereby made to the Note for a statement of the terms thereof. All capitalized terms used in this Agreement and the preamble and recitals hereto which are not otherwise defined herein shall have the meanings specified in the Note.
(b) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”, and the word “or” is not exclusive. The word “will” shall be construed to have the same meaning and effect as the word “shall”. The use of the words “repay” and “prepay” and the words “repayment” and “prepayment” herein shall each have identical meanings hereunder. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth in the Note Documents), (b) except as otherwise provided herein, any reference herein to any law shall be construed as referring to such law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time, (c) any reference herein to any person shall be construed to include such person’s successors and assigns (subject to the restrictions contained in the Note Documents), (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Note in its entirety and not to any particular provision hereof, (e) with respect to the determination of any time period, the word “from” means “from and including” and the word “to” means “to and including”, (f) unless otherwise specified, any reference herein to Articles, Sections, Annexes, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Annexes, Exhibits and Schedules to, this Note, (g) any reference to amounts “deposited” into or “on deposit” in any account shall be construed to include any cash equivalents or other amounts credited to such account, (h) the term “documents” includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form, (i) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights, and (j) all references to currencies and to amounts payable, requested or funded hereunder and under the other Note Documents shall be to United States dollars. The use of the phrase “subject to” as used in connection with Excepted Liens or otherwise and the permitted existence of any Excepted Liens or any other Liens shall not be interpreted to expressly or impliedly subordinate any Liens granted in favor of the Lender as there is no intention to subordinate the Liens granted in favor of the Lender. No provision of this Note or any other Note Document shall be interpreted or construed against any person because such person or its legal representative drafted such provision.
(c) As used in this Agreement, the following terms shall have the respective meanings indicated below, such meanings to be applicable equally to both the singular and plural forms of such terms:
“Lender” has the meaning specified therefor in the Preamble hereto.
“Note” has the meaning specified therefor in the Preamble hereto.
“Parent Guarantor” has the meaning specified therefor in the Preamble hereto.
“Parent Guarantor Obligations” means, with respect to the Parent Guarantor, all obligations and liabilities of the Parent Guarantor which may arise under or in connection with this Agreement (including, without limitation, Section 2) and any other Note Document to which it is a party, whether on account of guarantee obligations, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Lender that are required to be paid by the Parent Guarantor pursuant to the terms of this Agreement).
“Payment in Full” means (a) the principal of the Loan (including amounts sufficient to achieve the Base Return) and premium (if any) on and interest on the Loan and all fees payable under the Note Documents and all other amounts then due and payable under the Note Documents shall have been paid in full in cash (other than contingent indemnification obligations for which notice of a potential claim has not been given) and (b) all other Secured Obligations (other than contingent indemnification obligations for which notice of a potential claim has not been given) shall have been paid in full in cash.
“Primary Obligations” means, with respect to the Company or any other Note Party, the collective reference to any and all amounts owing or to be owing by such Person to the Lender or any other Secured Party under any Note Document (including all Secured Obligations (as defined in the Note and including obligations in respect of the Base Return)) and all renewals, extensions and/or rearrangements of any of the foregoing, in each case, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising (including interest accruing after the maturity of the Loans and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to such Person, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding).
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Section 2. Guarantee.
(a) Guarantee.
(i) The Parent Guarantor hereby unconditionally and irrevocably, guarantees to the Lender and its successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Credit Parties when due (whether at the stated maturity, by acceleration or otherwise) of the Primary Obligations now or hereafter existing, whether for principal, interest (including interest accruing at any post-default rate and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Credit Party, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), fees, commissions, expense reimbursements, indemnifications or otherwise (including obligations related to the Base Return). This is a guarantee of payment and performance when due and not of collection, and the liability of the Parent Guarantor is primary and not secondary.
(ii) Anything herein or in any other Note Document to the contrary notwithstanding, the maximum liability of the Parent Guarantor hereunder and under the other Note Documents shall in no event exceed the amount which can be guaranteed by the Parent Guarantor under applicable federal and state laws relating to the insolvency of debtors.
(iii) The Parent Guarantor agrees that the Primary Obligations may at any time and from time to time exceed the amount of the liability of the Parent Guarantor hereunder without impairing the guarantee contained in this Section 2 or affecting the rights and remedies of the Lender;
(iv) The Parent Guarantor agrees that if the maturity of any of the Primary Obligations is accelerated by bankruptcy or otherwise, such maturity shall also be deemed accelerated for the purpose of this guarantee without demand or notice to the Parent Guarantor. The guarantee contained in this Section 2 shall remain in full force and effect until Payment in Full.
(v) No payment made by the Company, any other Credit Party with Primary Obligations, the Parent Guarantor, any other guarantor or any other Person or received or collected by the Lender from the Company, any other Credit Party with Primary Obligations, the Parent Guarantor, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of any Primary Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of the Parent Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by the Parent Guarantor in respect of any Primary Obligations or any payment received or collected from the Parent Guarantor in respect of any Primary Obligations), remain liable for the Primary Obligations until Payment in Full.
(b) [Reserved].
(c) Payments. The Parent Guarantor hereby agrees and guarantees that payments hereunder will be paid to the Lender without set-off or counterclaim in dollars that constitute immediately available funds at the principal office of the Lender specified pursuant to the Note.
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(d) Guarantee Absolute and Unconditional. The Parent Guarantor waives (to the extent permitted by applicable law) any and all notice of the creation, renewal, extension or accrual of any of the Primary Obligations and notice of or proof of reliance by the Lender upon the guarantee contained in this Section 2 or acceptance of the guarantee contained in this Section 2 the Primary Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee contained in this Section 2; and all dealings between the Credit Parties, on the one hand, and the Lender, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this Section 2. The Parent Guarantor waives (to the extent permitted by applicable law) diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Company, any other Credit Party with Primary Obligations or the Parent Guarantor with respect to the Primary Obligations. The Parent Guarantor understands and agrees that the guarantee contained in this Section 2 shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity or enforceability of the Note or any other Note Document, any of the Primary Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Lender, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by the Company, any other Credit Party or any other Person against the Lender, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Company, any other Credit Party with Primary Obligations or the Parent Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Credit Parties for the Primary Obligations, or of the Parent Guarantor under the guarantee contained in this Section 2, in bankruptcy or in any other instance. When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against the Parent Guarantor, the Lender may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against the Company, any other Credit Party with Primary Obligations, the Parent Guarantor or any other Person or against any collateral security or guarantee for the Primary Obligations or any right of offset with respect thereto, and any failure by the Lender to make any such demand, to pursue such other rights or remedies or to collect any payments from the Company, any other Credit Party with Primary Obligations, the Parent Guarantor or any other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Company, any other Credit Party with Primary Obligations, the Parent Guarantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Lender against any Guarantor. For the purposes hereof “demand” shall include the commencement and continuance of any legal proceedings.
(e) No Subrogation, Contribution or Reimbursement. Notwithstanding any payment made by the Parent Guarantor hereunder or any set-off or application of funds of the Parent Guarantor by the Lender, the Parent Guarantor shall not be entitled to be subrogated to any of the rights of the Lender against the Company or any Credit Party or any collateral security or guarantee or right of offset held by the Lender for the payment of the Primary Obligations, nor shall the Parent Guarantor seek or be entitled to seek any indemnity, exoneration, participation, contribution or reimbursement from the Company or any Credit Party in respect of payments made by the Parent Guarantor hereunder, and the Parent Guarantor hereby expressly waives (to the extent permitted by applicable law), releases, and agrees not to exercise all such rights of subrogation, reimbursement, indemnity and contribution, in each case, until Payment in Full. The Parent Guarantor further agrees that to the extent that such waiver and release set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement, indemnity and contribution the Parent Guarantor may have against the Company, any Credit Party or against any collateral or security or guarantee or right of offset held by the Lender shall be junior and subordinate to any rights the Lender may have against the Company and the Parent Guarantor and to all right, title and interest the Lender may have in any collateral or security or guarantee or right of offset. If any amount shall be paid to Parent Guarantor on account of such subrogation rights at any time when all of the Primary Obligations shall not have been paid in full, such amount shall be held by Parent Guarantor in trust for the Lender, segregated from other funds of Parent Guarantor, and shall, forthwith upon receipt by Parent Guarantor, be turned over to the Lender in the exact form received by Parent Guarantor (duly indorsed by Parent Guarantor to the Lender, if required), to be applied against the Primary Obligations, whether matured or unmatured, in such order as the Lender may determine. The Lender may, to the extent it has the right to do so in accordance with the terms and conditions of the Note and the other Note Documents, use, sell or dispose of any item of Collateral or security as it sees fit without regard to any subrogation rights Parent Guarantor may have, and upon any disposition or sale, any rights of subrogation Parent Guarantor may have shall terminate.
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Section 3. [Reserved].
Section 4. Representations and Warranties. (a) The Parent Guarantor represents and warrants to the Lender as of the date of hereof and any other date such representations and warranties are required to be made follows:
(i) The Parent Guarantor (i) is a legal entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) has all requisite power and authority, and has all governmental licenses, authorizations, consents and approvals necessary, to own its assets and to carry on its business as now conducted, and (iii) is qualified to do business in, and is in good standing in, every jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, except in the case of this clause (iii) where the failure to be so qualified or in good standing could not reasonably be expected to have a Material Adverse Effect.
(ii) The transactions contemplated hereby and by the other Note Documents to which the Parent Guarantor is a party are within the Parent Guarantor’s corporate powers, as applicable, and have been duly authorized by all necessary corporate action. Each Note Document to which the Parent Guarantor is a party has been duly executed and delivered by the Parent Guarantor and constitutes a legal, valid and binding obligation of the Parent Guarantor, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.
(iii) Neither the execution and delivery of this Agreement or the other Note Documents by the Parent Guarantor, as applicable, nor the consummation of the transactions herein or therein contemplated or compliance with the terms and provisions hereof or thereof by any of them, (i) will violate (A) in any material respect, any applicable law or regulation or (B) any Organizational Document of the Parent Guarantor or any order of any Governmental Authority, (ii) will not violate or constitute a default under or result in any material breach of any indenture, agreement or other instrument binding upon the Parent Guarantor or any of its Properties (including the Material Project Documents), or give rise to a right thereunder to require any payment to be made by the Parent Guarantor and (iii) will not result in the creation or imposition of any Lien on any Collateral or any other Property of the Parent Guarantor (other than the Liens created by the Note Documents).
(iv) The Parent Guarantor is in compliance with all Governmental Requirements applicable to it or its Property and all agreements and other instruments binding upon it or its Property, and possesses all licenses, permits, franchises, exemptions, approvals and other governmental authorizations necessary for the ownership of its Property and the conduct of its business, in each case other than where the failure to do so could reasonably be expected to result in a Material Adverse Effect.
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(v) The Parent Guarantor is not in material default nor has any event or circumstance occurred which would constitute a default or would require the Parent Guarantor to redeem or make any offer to redeem under any indenture, note, Note or instrument pursuant to which any Indebtedness is outstanding or by which the Parent Guarantor or any of its Properties is bound.
(vi) The Parent Guarantor is not an “investment company” or a company “controlled” by an “investment company,” within the meaning of, or subject to regulation under, the Investment Company Act of 1940, as amended.
(vii) The Parent Guarantor has implemented and maintains in effect policies and procedures designed to promote and achieve compliance by the Parent Guarantor, its Subsidiaries, and their respective directors, officers, employees, and agents in their capacity as such with applicable Anti-Corruption Laws, AML Laws and Sanctions. None of the Parent Guarantor, its Subsidiaries, or any of their respective directors, officers or, to the knowledge of the Parent Guarantor, employees or agents of the Parent Guarantor or its Subsidiaries is a Sanctioned Person. None of the Parent Guarantor or any of its Subsidiaries (i) is in material violation of applicable AML Laws or Anti-Corruption Laws, (ii) is in violation of applicable Sanctions, or (iii) has, during the past ten (10) years, engaged in any dealings or transactions with, or for the benefit of, any Sanctioned Person or with or in any Sanctioned Country.
(viii) There are no material actions, suits, investigations or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Parent Guarantor, threatened by, against or affecting the Parent Guarantor or its Properties or revenues (a) which, either individually or in the aggregate, could reasonably be expected to result in liability exceeding (i) $15,000,000 in the case of the Note Parties or (ii) $50,000,000 in the case of the Parent Guarantor, or (b) that involve any Note Document, Material Project Document or the transactions contemplated thereby.
(b) The Parent Guarantor represents, warrants and covenants as to each matter set forth in Section 3 of the Note as if such representations and warranties were fully set forth herein.
Section 5. Further Covenants.
(a) Transfers and Other Liens.
(i) The Parent Guarantor will not sell, assign, convey or otherwise transfer or dispose of any Collateral without the prior written consent of the Lender.
(ii) The Parent Guarantor will not create, suffer to exist or grant any Lien upon or with respect to any Collateral, other than:
(A) Liens securing the Secured Obligations;
(B) judgment and attachment Liens with respect (1) to judgments for the payment of money (as reduced by any insurance proceeds covering such settlements or judgments which are received or as to which the insurance carriers do not dispute coverage) that do not exceed one million Dollars ($1,000,000) in the aggregate which shall be rendered against the Parent Guarantor and, in the case of any such judgments, within a thirty (30)-day period thereof a stay of enforcement of such judgment shall be put in and remain in effect and no action is legally taken by a judgment creditor or judgment creditors to attach or levy upon any assets of the Parent Guarantor to enforce any such judgment; or (2) any non-monetary judgment or order shall be rendered against the Parent Guarantor that could reasonably be expected to individually or in the aggregate, have an adverse impact on a material amount of the Collateral, and there shall be a period of thirty (30) consecutive days during which a stay of or enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; provided that, in the case of any judgment or order referenced in clause (2) above, no Lien in connection with any such judgement or order shall be senior in priority to the Lender’s security interest in the Collateral and the Company shall send Lender written notice of such judgment or order within five (5) Business days of the date of the entry thereof and the Company shall use commercially reasonable efforts to satisfy or vacate any such judgment or order; or
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(C) Excepted Liens.
(iii) The Parent Guarantor will not permit Intermediate Holdings, the Company, or any of the Company’s Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (i) transactions conducted in the ordinary course of business at prices and on terms and conditions no less favorable to Intermediate Holdings, the Company, or any of the Company’s Subsidiaries than those obtainable on an arm’s-length basis from unrelated third parties, including transactions with on less than arm’s-length terms provided they (a) serve a legitimate business purpose related to the development, construction, or operation of the Fargo Project, (b) are fully disclosed to and approved by all necessary governing bodies of the transaction parties, (c) comply with applicable industry-specific regulations, and (d) will result in a substantial benefit to Intermediate Holdings, the Company, or any of the Company’s Subsidiaries, as determined by Intermediate Holdings, the Company, or any such Subsidiary of the Company in its sole but reasonable discretion; (ii) any Disposition permitted by Section 4(k) of the Note; (iii) any Restricted Payment permitted by Section 4(m) of the Note; and (iv) any transaction with an Affiliate permitted by Section 4(p) of the Note.
(b) Proceeds in respect of Lease Agreements. To the extent the Parent Guarantor receives proceeds in the form of cash or cash equivalents in respect of any lease agreement (or equivalent agreement) entered into with any tenant at the Fargo Project, the Parent Guarantor shall cause such proceeds (i) to be paid to the Company and (ii) deposited into a deposit account of the Company with First National Bank of Omaha that is listed on Annex C to the Note.
(c) Cooperation with Note Document; Contracting for Fargo Project. The Parent Guarantor will cooperate with, and instruct the Company to undertake and comply with, the provisions of the Note Documents. With respect to contracts entered into on or after the date hereof (or amendments or modifications to existing contracts which would have a similar effect) in respect of Fargo Project, the Company shall be a counterparty to such contracts.
Section 6. [Reserved].
Section 7. Indemnity, Expenses and Miscellaneous. (a) The Parent Guarantor agrees to pay or promptly reimburse the Lender for all reasonable and documented out-of-pocket advances, charges, costs and expenses, including, without limitation, any out-of-pocket advances, charges, costs and expenses that may be incurred in any effort to enforce any of the provisions of this Agreement.
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(b) The Parent Guarantor shall indemnify the Lender and/or Lender’s affiliates, directors, officers, employees, agents, partners and advisors (each such person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the reasonable and documented fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (a) the execution or delivery of this Agreement or the performance by the Parent Guarantor of its obligations under this Agreement, or (b) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (y) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee, or (z) result from a claim brought by the Parent Guarantor or the Company against such Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder, if the Parent Guarantor or the Company has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction. The obligations of the Parent Guarantor under this paragraph shall survive the termination of this Agreement.
Section 8. Notices, Etc. All notices and other communications provided for hereunder shall be given in accordance with the notice provision of the Note.
Section 9. Section 5(b) Attorney-in-fact; Obligations.
(a) The Parent Guarantor hereby irrevocably appoints the Lender as its attorney-in-fact and proxy, with full authority in the place and stead of the Parent Guarantor and in the name of the Parent Guarantor or otherwise, from time to time in the Lender’s discretion, to take any action and to execute any instrument that the Lender may deem necessary or advisable to take any action for the purpose of causing compliance with (or reasonably related to causing compliance with) the obligations of the Parent Guarantor under Section 5(b). This power and proxy is coupled with an interest and is irrevocable until Payment in Full, but the Lender agrees that (except as Lender deems necessary or advisable to accomplish the purposes of Section 5(b), which may be exercised at any time) it shall only exercise such power following the occurrence and during the continuation of a failure to comply with Section 5(b). The Lender shall be under no duty to exercise or withhold the exercise of any of the rights, powers, privileges and options expressly or implicitly granted to the Lender in this Agreement, and shall not be liable for any failure to do so or any delay in doing so. The Lender shall not be liable for any act or omission or for any error of judgment or any mistake of fact or law in its individual capacity or its capacity as attorney-in-fact except acts or omissions resulting from its gross negligence or willful misconduct as determined by a court of competent jurisdiction in a final and non-appealable judgment.
(b) All rights of the Lender and all obligations of the Parent Guarantor hereunder shall be absolute and unconditional irrespective of (i) any lack of validity or enforceability of Note or any other Note Document, (ii) any change in the time, manner or place of payment of, or in any other term in respect of, all or any of the Secured Obligations, or any other amendment, supplement, modification or waiver of or consent to any departure from the Note or any other Note Document or (iii) any other circumstance that might otherwise constitute a defense (other than Payment in Full) available to, or a discharge of, the Parent Guarantor in respect of the Secured Obligations, until Payment in Full.
(c) The Parent Guarantor hereby waives (to the extent permitted by applicable law): (i) promptness and diligence, (ii) notice of acceptance and notice of the incurrence of any Secured Obligation by the Company or any other Note Party, (iii) notice of any actions taken by any Company or any other Person under any Note Document or any other agreement, document or instrument relating thereto, (iv) all other notices, demands and protests, and all other formalities of every kind in connection with the enforcement of the Secured Obligations, the omission of or delay in which, but for the provisions of subsection (b) above, might constitute grounds for relieving the Parent Guarantor of any of the Parent Guarantor Obligations hereunder and (v) any requirement that the Lender or any Person protect, secure, perfect or insure any security interest or other lien on any property subject thereto or exhaust any right or take any action against the Parent Guarantor or any other Person or any collateral.
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Section 10. Miscellaneous.
(a) No amendment or waiver of any provision of this Agreement (including any Schedule attached hereto) shall be effective unless it is in writing and signed by the Parent Guarantor and the Lender.
(b) No failure on the part of the Lender to exercise, and no delay in exercising, any right hereunder or under any other Note Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The rights and remedies of the Lender provided herein and in the other Note Documents are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law. The rights of the Lender under any Note Document against any party thereto are not conditional or contingent on any attempt by such Person to exercise any of its rights under any other Note Document against such party or against any other Person, including but not limited to, the Parent Guarantor.
(c) This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against any Credit Party for liquidation or reorganization, should any Credit Party become insolvent or make an assignment for the benefit of any creditor or creditors or should a receiver or trustee be appointed for all or any significant part of any Credit Party’s assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment or performance of the Secured Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Secured Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment or performance had not been made. The obligations of the Parent Guarantor under this Agreement (including with respect to the guarantee contained in Section 2 and the provision of collateral herein) shall continue to be effective, or be reinstated, as the case may be, if at any time, payment, or any part thereof, of any of the Secured Obligations is rescinded or must otherwise be restored or returned by the Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Credit Party, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, any Credit Party or any substantial part of its property, or otherwise, all as though such payments had not been made.
(d) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
(e) In addition to and without limitation of any of the foregoing, this Agreement shall be deemed to be a Note Document and shall otherwise be subject to all of terms and conditions contained in Section 8 of the Note, mutatis mutandi.
(f) The Parent Guarantor hereto irrevocably and unconditionally waives any right it may have to claim or recover in any legal action, suit or proceeding with respect to this Agreement any special, exemplary, punitive or consequential damages.
(g) Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof or thereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
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(h) Section headings herein are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.
(i) This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. The words “execution,” “execute,” “signed,” “signature,” and words of like import in or related to any document to be signed in connection with this Agreement and the transactions contemplated hereby shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Lender, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; provided that notwithstanding anything contained herein to the contrary the Lender is under no obligation to agree to accept electronic signatures in any form or in any format unless expressly agreed to by the Lender pursuant to procedures approved by it.
(j) This Agreement is a Note Document executed pursuant to the Note.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Parent Guarantor has caused this Agreement to be executed and delivered by its officer (or any equivalent) thereunto duly authorized, as of the date first above written.
| PARENT GUARANTOR: | ||
| APPLIED DIGITAL CORPORATION | ||
| By: | /s/ Saidal Mohmand | |
| Name: | Saidal Mohmand | |
| Title: | Chief Financial Officer | |
[Signature Page to Parent Guarantee]
| ACKNOWLEDGED AND AGREED BY LENDER: | ||
| MACQUARIE EQUIPMENT CAPITAL, INC., | ||
| By: | /s/ Joshua Stevens | |
| Name: | Joshua Stevens | |
| Title: | Division Director | |
| By: | /s/ Robert Downey |
|
| Name: | Robert Downey |
|
| Title: | Division Director |
|
[Signature Page to Parent Guarantee]
Exhibit 10.3
GUARANTEE AND COLLATERAL AGREEMENT
GUARANTEE AND COLLATERAL AGREEMENT, dated as of September 9, 2025 (this “Agreement”), made by each of the Credit Parties party hereto (each, a “Grantor” and collectively, the “Grantors”), in favor of Macquarie Equipment Capital, Inc. for the benefit of the Secured Parties, (in such capacity, together with its successors and assigns in such capacity, if any, the “Lender”).
W I T N E S S E T H:
WHEREAS, APLD FAR-01 LLC, a Delaware limited liability company (the “Company”), has executed and delivered to Macquarie Equipment Capital, Inc. (together with any permitted assignee or transferee of the Note, the “Lender”) a promissory note, dated as of the date hereof (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Note”);
WHEREAS, pursuant to the Note, the Lender has agreed to make a Loan to the Company;
WHEREAS, it is a condition precedent to the Lender making the Loan to the Company pursuant to the Note that each Grantor shall have executed and delivered this Agreement to the Lender for the benefit of the Secured Parties;
WHEREAS, the Company and the other Grantors are engaged in related businesses, and each Grantor will derive substantial direct and indirect benefit from the making of the Loan under the Note; and
WHEREAS, each Grantor has determined that the execution, delivery and performance of this Agreement directly benefit, and are in the best interest of, such Grantor;
NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to induce the Lender and the Lender to make and maintain the Loan to the Company pursuant to the Note, the Grantors hereby jointly and severally agree with the Lender, for the benefit of the Secured Parties, as follows:
SECTION 1. Definitions.
(a) Reference is hereby made to the Note for a statement of the terms thereof. All capitalized terms used in this Agreement and the preamble and recitals hereto which are not otherwise defined herein shall have the meanings specified in the Note or in Article 8 or 9 of the Uniform Commercial Code as in effect from time to time in the State of New York (the “Code”); provided that terms used herein which are defined in the Code as in effect in the State of New York on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute except as the Lender may otherwise determine.
(b) The following terms shall have the respective meanings provided for in the Code: “Accounts”, “Account Debtor”, “Cash Proceeds”, “Certificate of Title”, “Chattel Paper”, “Commercial Tort Claim”, “Commodity Account”, “Commodity Contracts”, “Deposit Account”, “Documents”, “Electronic Chattel Paper”, “Equipment”, “Fixtures”, “General Intangibles”, “Goods”, “Instruments”, “Inventory”, “Investment Property”, “Letter-of-Credit Rights”, “Noncash Proceeds”, “Payment Intangibles”, “Proceeds”, “Promissory Notes”, “Record”, “Security Account”, “Software”, “Supporting Obligations” and “Tangible Chattel Paper”.
(c) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”, and the word “or” is not exclusive. The word “will” shall be construed to have the same meaning and effect as the word “shall”. The use of the words “repay” and “prepay” and the words “repayment” and “prepayment” herein shall each have identical meanings hereunder. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth in the Note Documents), (b) except as otherwise provided herein, any reference herein to any law shall be construed as referring to such law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time, (c) any reference herein to any person shall be construed to include such person’s successors and assigns (subject to the restrictions contained in the Note Documents), (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Note in its entirety and not to any particular provision hereof, (e) with respect to the determination of any time period, the word “from” means “from and including” and the word “to” means “to and including”, (f) unless otherwise specified, any reference herein to Articles, Sections, Annexes, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Annexes, Exhibits and Schedules to, this Note, (g) any reference to amounts “deposited” into or “on deposit” in any account shall be construed to include any cash equivalents or other amounts credited to such account, (h) the term “documents” includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form, (i) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights, and (j) all references to currencies and to amounts payable, requested or funded hereunder and under the other Note Documents shall be to United States dollars. The use of the phrase “subject to” as used in connection with Excepted Liens or otherwise and the permitted existence of any Excepted Liens or any other Liens shall not be interpreted to expressly or impliedly subordinate any Liens granted in favor of the Lender and the other Secured Parties as there is no intention to subordinate the Liens granted in favor of the Lender and the other Secured Parties. No provision of this Note or any other Note Document shall be interpreted or construed against any person because such person or its legal representative drafted such provision.
As used in this Agreement, the following terms shall have the respective meanings indicated below, such meanings to be applicable equally to both the singular and plural forms of such terms:
“Additional Collateral” has the meaning specified therefor in Section 4(a)(i) hereof.
“Additional Grantor” has the meaning specified therefor in Section 15(f) hereof.
“Assigned Agreements” means all agreements, contracts and documents, including each Material Project Document to which any Grantor is a party (including all exhibits and schedules thereto), as each such agreement, contract and document may be amended, supplemented or modified and in effect from time to time, including (a) all rights of such Grantor to receive moneys due and to become due under or pursuant to the Assigned Agreements, (b) all rights of such Grantor to receive proceeds of any insurance, bond, indemnity, warranty, letter of credit or guaranty with respect to the Assigned Agreements, (c) all claims of such Grantor for damages arising out of or for breach of or default under the Assigned Agreements, (d) all rights of such Grantor to all other amounts from time to time paid or payable under or in connection with any of the foregoing contracts, and (e) all rights of such Grantor to terminate, amend, supplement, modify or waive performance under the Assigned Agreements, to perform thereunder and to compel performance and otherwise to exercise all remedies thereunder.
“Certificated Entities” has the meaning specified therefor in Section 5(o) hereof.
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“Collateral” has the meaning specified therefor in Section 2 hereof.
“Company” has the meaning specified therefor in the recitals hereto.
“Copyrights” means any and all rights in any published and unpublished works of authorship arising under the laws of the United States or any other country or political subdivision thereof, including (a) copyrights, (b) all renewals, extensions, restorations and reversions thereof, (c) copyright registrations and recordings thereof and all applications in connection therewith, including those listed on Schedule II hereto, (d) all income, license fees, royalties, damages, and payments now and hereafter due or payable under and with respect thereto, including payments under all Licenses entered into in connection therewith and damages and payments for past, present, or future infringements thereof, (e) the right to sue for past, present, and future infringements thereof, and (f) all of each Grantor’s rights corresponding thereto throughout the world.
“Excluded Asset” has the meaning specified therefor in Section 2.
“Existing Entity” has the meaning specified therefor in the definition of the term “Pledged Shares”.
“Grantors” has the meaning specified therefor in the Preamble hereto.
“Group Member” means the Company and each Guarantor.
“Guarantee and Collateral Agreement Supplement” has the meaning specified therefor in Section 15(f) hereof.
“Guarantor Obligations” means, with respect to any Guarantor, all obligations and liabilities of such Guarantor which may arise under or in connection with this Agreement (including, without limitation, Section 13) and any other Note Document to which it is a party, whether on account of guarantee obligations, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Lender that are required to be paid by such Guarantor pursuant to the terms of this Agreement).
“Guarantors” means the collective reference to each Grantor; provided that each Grantor shall be considered a Guarantor only with respect to the Primary Obligations of any other Credit Party (excluding the Parent).
“Intellectual Property” means any and all Patents, Copyrights, Trademarks, trade secrets, inventions (whether or not patentable), algorithms, methods, processes, software programs (including source code and object code), URLs and domain names, and all other proprietary rights and intellectual property rights arising under the laws of the United States or any other country or political subdivision thereof, whether owned or licensed, and all applications for registration or registrations thereof.
“Lender” has the meaning specified therefor in the recitals hereto.
“Licenses” means, with respect to any Person (the “Specified Party”), (a) any licenses or other similar rights provided in writing to the Specified Party in or with respect to Intellectual Property owned or controlled by any other Person, including any software license agreements, including the exclusive Licenses listed on Schedule XI hereto, and (b) any licenses or other similar rights provided in writing to any other Person in or with respect to Intellectual Property owned or controlled by the Specified Party, including any software license agreements in each case agreements other than license agreements for commercially available off-the-shelf software that is generally available to the public, which has been licensed to a Grantor pursuant to end-user licenses.
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“Note” has the meaning specified therefor in the recitals hereto.
“Parent” means APLD FAR Holdings LLC, a Delaware limited liability company.
“Patents” means any patents and patent applications arising under the laws of the United States or any other country or political subdivision thereof, including (a) the patents and patent applications listed on Schedule III hereto, (b) all continuations, divisionals, continuations-in-part, re-examinations, reissues, and renewals thereof and improvements thereon, (c) all income, license fees, royalties, damages and payments now and hereafter due or payable under and with respect thereto, including payments under all Licenses entered into in connection therewith and damages and payments for past, present, or future infringements thereof, (d) the right to sue for past, present, and future infringements thereof, and (e) all of each Grantor’s rights corresponding thereto throughout the world.
“Payment in Full” means (a) the principal of the Loan (including amounts sufficient to achieve the Base Return) and premium (if any) on and interest on each Loan and all fees payable under the Note Documents and all other amounts then due and payable under the Note Documents shall have been paid in full in cash (other than contingent indemnification obligations for which notice of a potential claim has not been given) and (b) all other Secured Obligations (other than contingent indemnification obligations for which notice of a potential claim has not been given) shall have been paid in full in cash.
“Perfection Exceptions” means that no Grantor shall be required to (a) enter into control agreements, (b) perfect the security interest, other than by the filing of a UCC financing statement, but without limiting the obligations under Section 6(a)(iii)(G) hereof, in Commercial Tort Claims or assets subject to a Certificate of Title, (c) enter into any source code escrow arrangement or file, prosecute, patent or register any Intellectual Property (but, for the avoidance of doubt, this clause (c) shall not include filing of any Intellectual Property security agreement or limit the provisions of Section 6(i)(ii)), (d) so long as no Event of Default shall have occurred and be continuing, send notices to account debtors or other contractual third-parties, or (e) perfect any security interest in purchase orders or any other documents or agreements with respect to generators (collectively, “Generator Documents”) to the extent that the Lender has a perfected security interest in such Generator Documents in respect of generators which have one hundred megawatts (100 MW).
“Perfection Requirements” has the meaning specified therefor in Section 5(l) hereof.
“Permitted Disposition” means those sales, assignments, conveyances or other transfers or dispositions by Note Parties (other than the Company) that are permitted by Section 4(k) of the Note.
“Permitted Liens” means each of the Liens described in clauses (i) through (iii) of Section 4(j) of the Note.
“Pledge Amendment” has the meaning specified therefor in Section 4(a)(ii) hereof.
“Pledged Debt” means (a) the indebtedness described in Schedule IX hereto and (b) all indebtedness from time to time owned or acquired by a Grantor, the promissory notes and other Instruments evidencing any or all of such indebtedness, and all interest, cash, Instruments, Investment Property, financial assets, securities, Equity Interests, other equity interests, stock options and commodity contracts, notes, debentures, bonds, promissory notes or other evidences of indebtedness and all other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such indebtedness.
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“Pledged Entity” has the meaning specified therefor in the definition of the term “Pledged Shares”.
“Pledged Interests” means, collectively, (a) the Pledged Debt, (b) the Pledged Shares and (c) all security entitlements in any and all of the foregoing.
“Pledged Shares” means (a) the shares of Equity Interests described in Schedule X hereto, whether or not evidenced or represented by any stock certificate, certificated security or other Instrument, issued by the Persons described in such Schedule X (the “Existing Entities”), (b) the shares of Equity Interests at any time and from time to time acquired by a Grantor of any and all Persons now or hereafter existing (such Persons, together with the Existing Entities, being hereinafter referred to collectively as the “Pledged Entities” and each individually as a “Pledged Entity”), whether or not evidenced or represented by any stock certificate, certificated security or other Instrument, and (c)(i) the certificates or instruments, if any, representing such Equity Interests, all options and other rights, contractual or otherwise, in respect thereof, (ii) all after acquired Equity Interests in the Pledged Entities and all of the Grantor’s rights to acquire Equity Interests in the Pledged Entities in addition to or in exchange or substitution for the Pledged Interests and all other Equity Interests in the Pledged Entities owned by the Grantor, (iii) all right, title and interest of any Grantor (A) as a shareholder, member, general partner, limited partner or otherwise to participate in the operation or management of such Person and (B) to all dividends and distributions (cash, stock or otherwise and including during continuance of or on account of liquidation of any Person), cash, instruments, rights to subscribe, purchase or sell and all other rights and property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Equity Interests, (iv) all replacements, additions to and substitutions for any of the property referred to in this definition, including claims against third parties, (v) the proceeds, interest, profits and other income of or on any of the property referred to in this definition and (vi) all books and records relating to any of the property referred to in this definition.
“Post-Default Rate” means the per annum rate of interest provided for in Section 2(e) of the Note.
“Primary Obligations” means, with respect to any Group Member, the collective reference to any and all amounts owing or to be owing by such Group Member to the Lender or any other Secured Party under any Note Document (including any Secured Obligations (as defined in the Note)) and all renewals, extensions and/or rearrangements of any of the foregoing, in each case, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising (including interest accruing after the maturity of the Loan and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to such Group Member, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding).
“Secured Obligations” means, with respect to any Grantor, the collective reference to its Primary Obligations and Guarantor Obligations.
“Sponsor” means Applied Digital Corporation, a Nevada corporation.
“Trademarks” means any and all trademarks, trade names, registered trademarks, trademark applications, service marks, registered service marks, brand names, certification marks, collective marks, logos, symbols, trade dress, corporate names, business names, assumed names, fictitious names, and other source or business identifiers, and all registrations and recordings thereof in the United States Patent and Trademark Office or any similar office in any State of the United States of America or any other country or political subdivision thereof, all registration and recording applications filed in connection therewith, and all common law rights relating thereto, including (a) the registered trademarks, trademark applications, registered service marks and service mark applications listed on Schedule IV hereto, (b) all extensions, modifications and renewals thereof, (c) all income, license fees, royalties, damages and payments now and hereafter due or payable under and with respect thereto, including payments under all Licenses entered into in connection therewith and damages and payments for past or future infringements or dilutions thereof, (d) the right to sue for past, present and future infringements and dilutions thereof, (e) the goodwill of each Grantor’s business symbolized by the foregoing or connected therewith, and (f) all of each Grantor’s rights corresponding thereto throughout the world.
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SECTION 2. Grant of Security Interest. Each Grantor hereby pledges, transfers and collaterally assigns to the Lender (and its agents and designees), and grants to the Lender (and its agents and designees), for the benefit of the Secured Parties, a continuing security interest in all of its right, title and interest to and in the following, wherever located and whether now or hereafter existing and whether now owned or hereafter acquired (all being collectively referred to herein as the “Collateral”, excluding, in each case, the Excluded Assets), as collateral security for the prompt and complete payment, observance and performance when due (whether at the stated maturity, by acceleration or otherwise) of all of such Grantor’s Secured Obligations:
(a) all Accounts;
(b) all Assigned Agreements;
(c) all Chattel Paper (whether Tangible Chattel Paper or Electronic Chattel Paper);
(d) all Commercial Tort Claims, including, without limitation, those specified on Schedule VIII;
(e) all Documents;
(f) all General Intangibles (including, without limitation, all Payment Intangibles, Licenses, and Intellectual Property);
(g) all Goods, including, without limitation, all Equipment, Fixtures and Inventory;
(h) all Instruments (including, without limitation, Promissory Notes);
(i) all Intellectual Property and Licenses;
(j) all Investment Property;
(k) all Letter-of-Credit Rights;
(l) all Pledged Interests;
(m) all Supporting Obligations;
(n) all other tangible and intangible personal property and Fixtures of such Grantor (whether or not subject to the Code), including, without limitation, all proceeds, products, offspring, accessions, rents, profits, income, benefits, substitutions and replacements of and to any of the property of such Grantor described in the preceding clauses of this Section 2 hereof (including, without limitation, any proceeds of insurance thereon and all causes of action, claims and warranties now or hereafter held by such Grantor in respect of any of the items listed above), and all books, correspondence, files and other Records, including, without limitation, all tapes, disks, cards, software, data and computer programs in the possession or under the control of such Grantor or any other Person from time to time acting for such Grantor that at any time evidence or contain information relating to any of the property described in the preceding clauses of this Section 2 hereof or are otherwise necessary or helpful in the collection or realization thereof;
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(o) to the extent not otherwise included, any other property insofar as it consists of personal property of any kind or character defined in and subject to the Code; and
(p) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security, income, royalties and other payments now or hereafter due and payable with respect to, and guarantees and Supporting Obligations relating to, any and all of the Collateral and, to the extent not otherwise included, all payments of insurance (whether or not the Lender is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral, all other claims, including all cash, guarantees and other Supporting Obligations given with respect to any of the foregoing;
in each case howsoever such Grantor’s interest therein may arise or appear (whether by ownership, security interest, claim or otherwise).
Notwithstanding anything herein to the contrary, in no event shall the Collateral include, and no Grantor shall be deemed to have granted a security interest in (a) any “intent to use” Trademark applications for which a statement of use has not been filed (but only until such statement is filed), solely to the extent, if any, that, and solely during the period, if any, in which the grant of a security interest therein would impair the validity or enforceability of, or void, any such application or registration that issues from such intent-to-use application under United States law, (b) any of such Grantor’s rights or interests in or under any Property to the extent that, and only for so long as, such grant of a security interest is prohibited by, or constitutes a breach or default under or results in the termination of or requires any consent of a Person who is not an Affiliate not obtained under, any contract, to the extent such Property is directly evidenced by or arises under such contract; provided that any of the foregoing exclusions shall not apply if (i) such prohibition has been waived or such other party has otherwise consented to the creation hereunder of a security interest in such Property or a consent of such other Person is required under the terms of the Note or other Note Documents or (ii) such prohibition, consent or the term in such contract, or providing for such prohibition breach, default or termination or requiring such consent, is ineffective or would be rendered ineffective under any Governmental Requirement, including pursuant to Section 9-406, 9-407 or 9-408 of Article 9 of the Code; provided, further, that it is understood for avoidance of doubt that immediately upon any of the foregoing becoming or being rendered ineffective or any such prohibition, requirement for consent or term lapsing or termination or such consent being obtained, the applicable Grantor shall be deemed to have granted a Lien in all its rights, title and interests in and to such Property, (c) [reserved], (d) all motor vehicles, airplanes, vessels and any other assets covered by or subject to a Certificate of Title, other than to the extent a security interest therein can be perfected by the filing of a UCC financing statement or (e) those other assets of a Grantor with respect to which the Lender shall have determined that the burdens, costs or consequences of obtaining a Lien on such assets are excessive in view of the benefits to be obtained by the Secured Parties (collectively, “Excluded Assets”); provided, however, “Excluded Assets” shall not include (i) any master services agreement (a/k/a master hosting agreements) or any lease agreement (or equivalent agreement) with respect to any Project or a document or agreement ancillary to any of the foregoing or any Material Project Document entered into on or after the date hereof or (ii) any right to receive proceeds from the sale or other disposition of Excluded Assets or any Proceeds, products, substitutes or replacements of any Excluded Assets (unless such Proceeds, products, substitutes or replacements independently constitute Excluded Assets).
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SECTION 3. Security for Secured Obligations. The security interest created hereby in the Collateral constitutes continuing collateral security for all of the Grantors’ Secured Obligations.
SECTION 4. Delivery of the Pledged Interests.
(a) (i) All promissory notes currently evidencing the Pledged Debt and all certificates currently representing the Pledged Shares in each case in existence as of the date hereof shall be delivered to the Lender on or prior to the date of the funding of the Initial Loan under the Note. All other promissory notes, certificates and Instruments constituting Pledged Interests from time to time required to be pledged to the Lender pursuant to the terms of this Agreement or the Note (the “Additional Collateral”) shall be delivered to the Lender promptly upon, but in any event within seven (7) Business Days (or such longer period as the Lender may consent to in their sole discretion) of, receipt thereof by or on behalf of any of the Grantors. All such promissory notes, certificates and Instruments shall be held by or on behalf of the Lender pursuant hereto and shall be delivered in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment or undated stock powers executed in blank, all in form and substance reasonably satisfactory to the Lender. If any Pledged Interests that are part of the Collateral consist of uncertificated securities, without limiting Section 7 hereof, unless the immediately following sentence is applicable thereto, such Grantor shall, at the Lender’s request following the occurrence and during the continuation of an Event of Default, cause the Lender (or its designated custodian or nominee) to become the registered holder thereof, or cause each issuer of such securities to agree that it will comply with instructions originated by the Lender with respect to such securities without further consent by such Grantor. If any Pledged Interests that are part of the Collateral consist of security entitlements, such Grantor shall cause the applicable securities intermediary to agree that it will comply with entitlement orders by the Lender without further consent by such Grantor (which may take the form of a “shifting” arrangement whereby the Lender agrees not to provide any such entitlement orders until the occurrence of an Event of Default). Each Grantor shall take all such further action as necessary or as may be reasonably requested by the Lender, to permit the Lender (or its nominee or designee) to be a “protected purchaser” to the extent of its security interest as provided in Section 8-303 of the Code (if the Lender otherwise qualifies as a protected purchaser).
(ii) Within seven (7) Business Days (or such longer period as the Lender may consent to in their sole discretion) of the receipt by a Grantor of any Additional Collateral, a Pledge Amendment, duly executed by such Grantor, in substantially the form of Exhibit A hereto (a “Pledge Amendment”), shall be delivered to the Lender, in respect of the Additional Collateral that must be pledged pursuant to this Agreement and the Note. The Pledge Amendment shall from and after delivery thereof constitute part of Schedule IX and Schedule X hereto. Each Grantor hereby authorizes the Lender to attach each Pledge Amendment to this Agreement and agrees that all promissory notes, certificates or Instruments listed on any Pledge Amendment delivered to the Lender shall for all purposes hereunder constitute Pledged Interests and such Grantor shall be deemed upon delivery thereof to have made the representations and warranties set forth in Section 5 hereof with respect to such Additional Collateral.
(b) If any Grantor shall receive, by virtue of such Grantor’s being or having been an owner of any Pledged Interests, any (i) stock certificate (including, without limitation, any certificate representing a stock dividend or distribution in connection with any increase or reduction of capital, reclassification, merger, consolidation, sale of assets, combination of shares, stock split, spin-off or split-off), promissory note or other Instrument, (ii) option or right, whether as an addition to, substitution for, or in exchange for, any Pledged Interests, or otherwise, (iii) dividends payable in cash or in securities or other property (except in each case such dividends permitted to be retained by any such Grantor pursuant to Section 7 hereof or in the Note) or (iv) dividends, distributions, cash, Instruments, Investment Property and other property in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in surplus (except in each case to the extent any of the foregoing are permitted to be retained by any such Grantor pursuant to Section 7 hereof or the Note), such Grantor shall receive such stock certificate, promissory note, Instrument, option, right, payment or distribution in trust for the benefit of the Lender, shall segregate it from such Grantor’s other property (to the extent practical) and where applicable, shall deliver it promptly to the Lender, in the exact form received, with any necessary indorsement and/or appropriate stock powers duly executed in blank, to be held by the Lender as Pledged Interests and as further collateral security for the Secured Obligations.
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(c) The granting of the foregoing security interest does not make the Lender or any Secured Party a successor to any Grantor as a partner or member in any Pledged Entity that is a partnership, limited partnership or limited liability company, as applicable, and neither the Lender, any Secured Party, nor any of their respective successors or assigns hereunder shall be deemed to have become a partner or member in any Pledged Entity, as applicable, by accepting this Agreement or exercising any right granted herein unless and until such time, if any, when any such Person expressly becomes a partner or member in any entity, as applicable, after a foreclosure thereon; provided that the foregoing shall not limit or restrict in any way the rights and remedies of the Lender and the Secured Parties otherwise set forth herein, including Section 7, and in the other Note Documents.
SECTION 5. Representations and Warranties. Each Grantor jointly and severally represents and warrants as of the date hereof and any other date such representations and warrants are required to be made as follows:
(a) Schedule I hereto sets forth (i) the exact legal name of each Grantor, (ii) the state or jurisdiction of organization of each Grantor, (iii) the type of organization of each Grantor and (iv) the organizational identification number of each Grantor or states that no such organizational identification number exists in each case of the date hereof.
(b) Except as disclosed in the Note, there is no pending or, to the best knowledge of any Grantor, threatened in writing action, suit or proceeding against any Grantor or any of its properties before any court or other Governmental Authority or any arbitrator that (i) which, either individually or in the aggregate, could reasonably be expected to result in liability exceeding (A) $15,000,000 in the case of the Grantors or (B) $50,000,000 in the case of the Sponsor, or (ii) that involve any Note Document, Material Project Document or the transactions contemplated thereby.
(c) Each Grantor’s chief place of business and chief executive office, the place where such Grantor keeps its Records concerning Accounts and all originals of all Chattel Paper are located at the addresses specified therefor in Schedule V hereto (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof). As of the Closing Date, other than set forth on Schedule IX hereto, none of the Accounts is evidenced by Promissory Notes or other Instruments evidencing Indebtedness. Set forth in Schedule VI hereto is a complete and accurate list, as of the date of this Agreement, of each Deposit Account, Securities Account and Commodities Account of each Grantor, together with the name of each institution at which each such Account is maintained, the account number for each such Account and a description of the purpose of each such Account. Set forth in Schedule IV hereto is a complete and correct list of each trade name used by each Grantor.
(d) As of the Closing Date, (i) Schedule II provides a complete and correct list of all registered Copyrights owned by any Grantor and all applications for registration of Copyrights owned by any Grantor; (ii) Schedule III provides a complete and correct list of all issued Patents owned by any Grantor and all applications for Patents owned by any Grantor; (iii) Schedule IV provides a complete and correct list of all registered Trademarks owned by any Grantor and all applications for registration of Trademarks owned by any Grantor; and (iv) Schedule XI provides a complete and correct list of all exclusive Licenses to registered and applied-for Copyrights, Patents and Trademarks owned by any third party under which any Grantor is the licensee.
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(e) (i) (A) Each Grantor owns, or holds licenses in, or otherwise possesses rights in, all Intellectual Property that is reasonably necessary to the operation of its business as currently conducted except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and general equitable principles, and (B) each Grantor is the sole and exclusive beneficial and record owner of Intellectual Property (free and clear of any Liens (other than Permitted Liens)) owned by it and has the right to use such Intellectual Property as it is presently being used, sold, licensed or distributed by the business, in each case of the foregoing (A) and (B), except, for such failures to own, license or have the right to use which, individually or in aggregate, could not reasonably be expected to have a Material Adverse Effect; provided that the foregoing shall not be deemed a representation regarding non-infringement by such Grantor.
(ii) Except for those claims, individually or in the aggregate, which (A) could not reasonably be expected to result in liability exceeding $2,500,000 or (B) could not reasonably be expected to result in a Material Adverse Effect, no claims are pending or, to the knowledge of any Grantor, threatened against any Grantor or, to the knowledge of any Grantor, any other Person, (1) alleging that the manufacture, sale, licensing or use of any Intellectual Property rights owned by any Grantor as now manufactured, sold, licensed or used by any Grantor or any third party infringes on any Intellectual Property rights of any third party, (2) against the use by any Grantor or any third party of any technology, know-how or computer software used in any Grantor’s business as currently conducted or (3) challenging the ownership by any Grantor, or the validity or effectiveness, of any Intellectual Property rights owned by any Grantor, excluding, in each case, office actions issued in the ordinary course of prosecution of any pending applications for patents or applications for registrations of other Intellectual Property.
(f) No Grantor has infringed on any Intellectual Property rights of any third party in any way which could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(g) All registered Copyrights, registered Trademarks, and issued Patents that are owned by such Grantor are set forth on Schedule II, Schedule III and Schedule IV hereto and are subsisting and, to the knowledge of any Grantor, valid and enforceable.
(h) Each Grantor has taken reasonable steps to maintain the confidentiality of and otherwise protect and enforce its rights in all trade secrets owned by such Grantor that are necessary in the business of such Grantor.
(i) Schedule X sets forth a complete and accurate list of all Pledged Shares owned by such Grantor as of the date hereof or the date of any Pledge Amendment or Guarantee and Collateral Agreement Supplement, as the case may be. The shares (or such other interests) of Pledged Shares pledged by such Grantor hereunder constitute all the issued and outstanding shares (or such other interests) of all classes of the capital stock or other Equity Interests of each entity owned by such Grantor. The Pledged Shares have been duly authorized and validly issued and are fully paid and nonassessable and the holders thereof are not entitled to any preemptive, first refusal or other similar rights. Except as noted in Schedule X hereto, the Pledged Shares constitute 100% of the issued shares of Equity Interests of the Pledged Entities as of the date hereof or the date of any Pledge Amendment or Guarantee and Collateral Agreement Supplement, as the case may be. All other shares of Equity Interests constituting Pledged Interests will be duly authorized and validly issued, fully paid and nonassessable. None of the Pledged Shares are subject to any voting trust, shareholder agreement or voting agreement or other agreement, right, instrument or understanding with respect to any purchase, sale, issuance, transfer, repurchase, redemption or voting agreement, other than limited liability company agreements, partnership agreements or other governing documents of the relevant Pledged Entity.
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(j) Schedule IX sets forth a complete and accurate list of all Pledged Debt owned by such Grantor as of the date hereof. The promissory notes currently evidencing the Pledged Debt (if any) have been, and all other promissory notes from time to time evidencing Pledged Debt (if any), when executed and delivered, will have been, duly authorized, executed and delivered by the respective makers thereof, and all such promissory notes are or will be, as the case may be, legal, valid and binding obligations of such makers, enforceable against such makers in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and general equitable principles.
(k) The Grantors have good and marketable title to, valid leasehold interests in, or valid licenses or rights to use, the Collateral, except for minor defects in title that do not materially interfere with its ability to conduct its business or utilize such assets for their intended purposes. The Collateral is free and clear of any Lien except for the Permitted Liens.
(l) No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or any other Person (other than those that have been obtained and are in full force and effect) is required for (i) the due execution, delivery and performance by any Grantor of this Agreement, (ii) the grant by any Grantor of the security interest purported to be created hereby in the Collateral or (iii) the exercise by the Lender of any of its rights and remedies hereunder, except, in the case of this clause (iii), as may be required in connection with any sale of any Pledged Interests by laws affecting the offering and sale of securities generally, or as required under the Code (other than, with respect to Collateral consisting of Intellectual Property, filings with the United States Patent Office, the United States Copyright Office, or any similar office in any other country or political subdivision thereof, as applicable), and no exercise of voting rights by the Lender as contemplated by this Agreement or transfer of Pledged Shares in the manner contemplated by this Agreement or other exercise of remedies under the Note Documents is subject to any contractual restriction, or any restriction under the Organizational Documents of any Grantor, including requiring any consents or other actions thereunder. Following the timely completion of the completion of the Perfection Requirements, no authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or any other Person, is required for the perfection of the security interest purported to be created hereby in the Collateral (other than those that have been obtained and are in full force and effect or the Perfection Exceptions). The following subclauses (A) through (E) are each a “Perfection Requirement” and collectively, the “Perfection Requirements”: (A) the filing under the Uniform Commercial Code as in effect in the applicable jurisdiction of the financing statements described in Schedule VII hereto, all of which financing statements shall have been duly filed on the Closing Date and when filed, will be in full force and effect and any necessary subsequent filings to renew such financing statement, (B) with respect to the perfection of the security interest created hereby in the United States Intellectual Property and exclusive Licenses to registered United States Copyrights under which any Grantor is the licensee, the recording of the appropriate Intellectual Property security agreement, substantially in the form of Exhibit B hereto in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, (C) with respect to the perfection of the security interest created hereby in foreign Intellectual Property and exclusive Licenses to foreign Intellectual Property under which any Grantor is the licensee (to the extent required to perfect the Lender’s security interest therein in jurisdictions located outside the United States), registrations and filings in jurisdictions located outside of the United States and covering rights in such jurisdictions relating to such foreign Intellectual Property and exclusive Licenses to foreign Intellectual Property, as applicable, (D) [reserved], and (E) subject to the Perfection Exceptions, the Lender’s having possession of all Documents, Chattel Paper, Instruments, and Pledged Interests.
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(m) Each Security Document (including this Agreement) delivered pursuant hereto or pursuant to the Note creates a legal, valid and enforceable security interest in favor of the Lender, for the benefit of the Secured Parties, in the Collateral, as security for the Secured Obligations, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and general equitable principles or for applicable private international law in any relevant jurisdiction. The compliance with the Perfection Requirements (subject to Perfection Exceptions) result in the perfection of such security interests. Such security interests are, or in the case of Collateral in which any Grantor obtains rights after the date hereof, will be, perfected (if and to the extent perfection may be achieved through the Perfection Requirements other than the Perfection Exceptions), first priority security interests, subject in priority only to the Permitted Liens, and the recording of such instruments of assignment described above. Such Perfection Requirements other than the Perfection Exceptions have been duly made or taken.
(n) As of the date hereof, no Grantor holds any Commercial Tort Claims or is aware of any such pending filed claims, except for such claims described in Schedule VIII or such claims the value of which does not exceed $500,000 individually or $1,250,000 in aggregate.
(o) With respect to each Grantor and its Subsidiaries that is a partnership or a limited liability company with respect to which the partnership interests or membership interests of such Person are evidenced by a certificate (collectively, the “Certificated Entities”), each such Person has irrevocably opted into (and has caused each of its Subsidiaries that is a partnership or a limited liability company, and a Pledged Entity to opt into) Article 8 of the Code. Such interests are securities for purposes of Article 8 of any relevant Uniform Commercial Code. With respect to each Grantor and its Subsidiaries that is a partnership or a limited liability company and is not a Certificated Entity, the partnership interests or membership interests of each such Person are not (i) dealt in or traded on securities exchanges or in securities markets, (ii) securities for purposes of Article 8 of any relevant Uniform Commercial Code, (iii) investment company securities within the meaning of Section 8-103 of any relevant Uniform Commercial Code or (iv) evidenced by a certificate. Except as set forth on Schedule X, as of the date hereof, none of the Pledged Shares pledged by the Grantors hereunder constitute a “security” under Section 8-103 of the Code or the corresponding code or statute of any other applicable jurisdiction. Except as set forth on Schedule X, no other Investment Property is certificated or is a security under Section 8-103 of the UCC as of the date hereof.
(p) None of the Account Debtors on such Grantor’s Accounts, Chattel Paper or Payment Intangibles is a Governmental Authority.
(q) In the case of each Grantor, the representations and warranties set forth in the Note as they relate to such Grantor or to the Note Documents to which such Grantor is a party are true and correct in all material respects (unless already qualified by materiality in which case such applicable representation and warranty is true and correct), except to the extent any such representations and warranties are expressly limited to an earlier date, in which case, such representations and warranties continue to be true and correct in all material respects (unless already qualified by materiality in which case such applicable representation and warranty is true and correct) as of such specified earlier date.
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SECTION 6. Covenants. Until Payment in Full:
(a) Further Assurances. Subject to the limitations and restrictions contained hereunder and in the Note and the Perfection Exceptions, each Grantor will, at its sole cost and expense, at any time and from time to time, promptly execute and deliver all further instruments and documents and take all further action that may be necessary or that the Lender may request in order (i) to perfect and protect, or maintain the perfection of, the security interest and Lien purported to be created hereby; (ii) to enable the Lender to exercise and enforce its rights and remedies hereunder in respect of the Collateral in accordance with the terms herein; or (iii) otherwise to effect the purposes of this Agreement, including, without limitation: (A) marking conspicuously all material Chattel Paper, Instruments and Licenses and, at the request of the Lender, all of its Records pertaining to the Collateral with a legend, in form and substance satisfactory to the Lender, indicating that such Chattel Paper, Instrument, License or Collateral is subject to the security interest created hereby, (B) if any Account valued in excess of $500,000 individually or Accounts valued in excess of $1,250,000 in the aggregate shall be evidenced by a Promissory Note or other Instrument or Chattel Paper, delivering and pledging to the Lender such Promissory Note, other Instrument or Chattel Paper (other than checks or Instruments for deposit in the ordinary course of business), duly endorsed and accompanied by executed instruments of transfer or assignment, all in form and substance satisfactory to the Lender, (C) executing and filing (to the extent, if any, that such Grantor’s signature is required thereon) or authenticating the filing of, such financing or continuation statements, or amendments thereto, (D) with respect to Intellectual Property hereafter developed or acquired by any Grantor (and exclusive Licenses to registered United States Copyrights and, to the extent required to perfect the security interest therein, exclusive Licenses to foreign Intellectual Property, under which any Grantor becomes the licensee) and not covered by an appropriate security interest grant, the executing and recording in the United States Patent and Trademark Office, the United States Copyright Office, or any similar office in any other country or political subdivision thereof, as applicable, in accordance with Section 6(i)(iv), (E) delivering to the Lender irrevocable proxies in respect of the Pledged Interests to be used in accordance with the terms hereof, (F) furnishing to the Lender from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Lender may request, all in reasonable detail, (G) if at any time after the date hereof, any Grantor acquires or holds any Commercial Tort Claim with a maximum potential value in excess of $500,000 individually or Commercial Tort Claims with a maximum potential value in excess of $1,250,000 in the aggregate, promptly notifying the Lender of such claim in a writing signed by such Grantor setting forth a brief description of such Commercial Tort Claim (accompanied by an updated Schedule VIII hereto) and granting to the Lender a security interest therein (for the benefit of the Secured Parties) and in the proceeds thereof, which writing shall incorporate the provisions hereof and shall be in form and substance satisfactory to the Lender and (H) taking all actions required by law in any relevant Uniform Commercial Code jurisdiction, or by other law as applicable in any foreign jurisdiction. No Grantor shall take or fail to take any action which would in any manner materially or adversely impair the validity or enforceability of the Lender’s security interest in and Lien on any Collateral except as permitted in accordance with this Agreement or the Note.
(b) Location of Equipment and Inventory. Each Grantor will keep its Equipment and Inventory having a book value in excess of $1,250,000 in the aggregate (other than Equipment and Inventory sold in the ordinary course of business in accordance with Section 6(h) hereof and held at third party service or repair centers) at any of the locations specified in Schedule V hereto or, upon not less than ten (10) Business Days’ prior written notice to the Lender accompanied by a new Schedule V hereto indicating each new location of the Equipment and Inventory, at such other locations in as the Grantors may elect.
(c) Condition of Equipment. Each Grantor will maintain or cause its Equipment which is necessary or useful in the proper conduct of its business to be maintained and preserved in satisfactory condition, repair and working order, ordinary wear and tear and casualty and condemnation excepted, and will forthwith, or in the case of any loss or damage to any satisfactory Equipment promptly after the occurrence thereof, to the extent determined in reasonable business judgement, make or cause to be made all repairs, replacements and other improvements in connection therewith which are necessary, consistent with past practice.
(d) Taxes, Etc. Each Grantor jointly and severally agrees to pay promptly when due all property and other taxes, assessments and governmental charges or levies imposed upon, and all claims (including claims for labor, materials and supplies) against, the Equipment and Inventory, except to the extent otherwise provided in the Note.
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(e) Insurance. Each Grantor will, at its own sole cost and expense, maintain insurance with respect to the Collateral in accordance with the terms of the Note.
(f) Provisions Concerning the Accounts and the Licenses.
(i) Each Grantor will, except as otherwise provided in this subsection (f), continue to collect, at its own sole cost and expense, all amounts due or to become due under the Accounts. In connection with such collections, each Grantor may (and, at the Lender’s direction, will) take such action as such Grantor (or, if applicable, the Lender) may deem necessary or advisable to enforce collection or performance of the Accounts; provided, however, that the Lender shall have the right at any time, upon the occurrence and during the continuance of an Event of Default, to notify the Account Debtors or obligors under any Accounts of the assignment of such Accounts to the Lender and to direct such Account Debtors or obligors to make payment of all amounts due or to become due to such Grantor thereunder directly to the Lender or its designated agent and, upon such written notification and at the sole cost and expense of such Grantor and to the extent permitted by law, to enforce collection of any such Accounts and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done. After receipt by any Grantor of a notice from the Lender that the Lender has notified, intends to notify, or has enforced or intends to enforce a Grantor’s rights against the Account Debtors or obligors under any Accounts as referred to in the proviso to the immediately preceding sentence, (A) all amounts and proceeds (including Instruments) received by such Grantor in respect of the Accounts shall be received in trust for the benefit of the Lender hereunder, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Lender or its designated agent in the same form as so received (with any necessary endorsement) to be held as cash collateral and applied as specified in Section 9(d) hereof, and (B) such Grantor will not adjust, settle or compromise the amount or payment of any Account or release wholly or partly any Account Debtor or obligor thereof or allow any credit or discount thereon (in each case, unless pursuant to the express terms of such Account).
(ii) Except as deemed appropriate by Grantor in accordance with the exercise of its reasonable business judgment, no Grantor will, without the prior written consent of the Lender, cancel, terminate, amend or otherwise modify in any material respect, or waive any material provision of, any material License.
(g) Provisions Concerning the Pledged Interests. Each Grantor will:
(i) at such Grantor’s sole cost and expense, defend the Lender’s right, title and security interest in and to the Pledged Interests against the claims of any Person (other than holders of Permitted Liens);
(ii) not make or consent to any amendment or other modification or waiver with respect to any Pledged Interests or enter into any agreement or permit to exist any restriction with respect to any Pledged Interests (other than as permitted under the Note Documents); and
(iii) except as permitted by the Note, not permit the issuance of (A) any additional shares of any class of Equity Interests of any Pledged Entity, (B) any securities convertible voluntarily by the holder thereof or automatically upon the occurrence or non-occurrence of any event or condition into, or exchangeable for, any such shares of Equity Interests of any Pledged Entity or (C) any warrants, options, contracts or other commitments entitling any Person to purchase or otherwise acquire any such shares of Equity Interests of any Pledged Entity.
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(h) Transfers and Other Liens.
(i) Except to the extent permitted by the Note, no Grantor will sell, assign (by operation of law or otherwise), lease, license, exchange or otherwise transfer or dispose of any of the Collateral.
(ii) Except to the extent permitted by the Note, no Grantor will create, suffer to exist or grant any Lien upon or with respect to any Collateral.
(iii) Each Grantor will warrant and defend the title to the Collateral against the claims and demands of all other Persons whomsoever and will maintain and preserve the Liens created hereby (and the priority specified herein) until Payment in Full. If (i) an adverse claim be made against any part of the Collateral other than Permitted Liens or (ii) any Person, including the holder of a Permitted Lien (other than Excepted Liens identified in clauses (a) through (c) of the definition thereof under the Note (but subject to the provisos at the end of such definition)), shall challenge the priority or validity of the Liens created by this Agreement, then such Grantor agrees to use commercially reasonable efforts to promptly defend against such adverse claim, take appropriate action to remove such cloud or subordinate such Permitted Lien (other than Excepted Liens identified in clauses (a) through (c) of the definition thereof under the Note (but subject to the provisos at the end of such definition)), in each case, at such Grantor’s sole cost and expense.
(i) Intellectual Property.
(i) In accordance with Section 6(i)(iv), each Grantor shall execute and deliver to the Lender one or more Intellectual Property security agreements substantially in the form of Exhibit B hereto or otherwise in a form acceptable to the Lender to further evidence the Lender’s Lien on such Grantor’s Patents, Trademarks, Copyrights, exclusive Licenses to registered United States Copyrights, or exclusive Licenses to registered foreign Patents, Trademarks or Copyrights, and the General Intangibles of such Grantor relating thereto or represented thereby.
(ii) Each Grantor shall have the duty, with respect to Intellectual Property that is necessary in and material to the conduct of such Grantor’s business, to maintain, and as deemed appropriate by Grantor in accordance with the exercise of its reasonable business judgment, protect and diligently enforce and defend, at such Grantor’s sole cost and expense its Intellectual Property, including by taking action (A) subject to such Grantor’s reasonable business judgment, to diligently enforce and defend, including promptly suing for infringement, misappropriation, or dilution and to recover any and all damages for such infringement, misappropriation, or dilution, and filing for opposition, interference, and cancellation against conflicting Intellectual Property rights of any Person, (B) to prosecute diligently any trademark application or service mark application that is part of the Trademarks pending as of the date hereof or hereafter until the termination of this Agreement, (C) to prosecute diligently any patent application that is part of the Patents pending as of the date hereof or hereafter until the termination of this Agreement, (D) to take all reasonable and necessary action to preserve and maintain all of such Grantor’s Trademarks, Patents, Copyrights, Licenses, and its rights therein, including paying all maintenance and other fees, filing of applications for renewal, filing of affidavits of use, filing of affidavits of noncontestability and opposition, filing of divisional, continuation, continuation-in-part, reissue, and renewal applications or extensions, and participation in interference and cancellation proceedings, and (E) to have a policy requiring all employees of each Grantor who were involved in the creation or development of such Intellectual Property in the scope of their employment to sign agreements containing an assignment of their Intellectual Property rights to a Grantor and obligations of confidentiality, to the extent such rights do not automatically vest in a Grantor by operation of law. Each Grantor further agrees not to abandon any Intellectual Property that is necessary in and material to the conduct of such Grantor’s business (whether now owned or hereafter acquired) except in connection with any Permitted Disposition.
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(iii) Grantors acknowledge and agree that the Secured Parties shall have no duties with respect to any Intellectual Property or Licenses of any Grantor. Without limiting the generality of this Section 6(i)(iii), Grantors acknowledge and agree that no member of the Secured Parties shall be under any obligation to take any steps necessary to preserve rights in the Collateral consisting of Intellectual Property or Licenses against any other Person, but any Secured Party may do so at its option from and after the occurrence and during the continuance of an Event of Default, and all reasonable and documented out-of-pocket expenses incurred in connection therewith (including reasonable and documented fees and expenses of attorneys and other professionals) shall be for the sole account of the Company and shall be chargeable to the deposit account of the Company listed on Annex C to the Note.
(iv) From time to time as the Lender may request, each Grantor shall provide the Lender with a written report of all new Patents or Trademarks that are registered or the subject of pending applications for registrations, Copyright registrations, exclusive Licenses to registered United States Copyrights under which a Grantor is the licensee, and exclusive Licenses to foreign Patents, Trademarks and Copyrights under which a Grantor is the licensee (to the extent required in order to perfect the Lender’s security interest therein), in each case, which are material to the conduct of such Grantor’s business and which were acquired, exclusively licensed to, registered, or for which applications for registration were filed by any Grantor during the prior period, or for which any statement of use or amendment to allege use was filed by any Grantor during the prior period with respect to intent-to-use trademark applications. In the case of such registrations or applications therefor, which were acquired by or exclusively licensed to any Grantor, as applicable, each such Grantor shall file any documents and/or instruments as may be necessary, or that the Lender may request, in order to perfect and preserve the security interest purported to be created hereby with the appropriate Governmental Authority (including Intellectual Property security agreements substantially in the form of Exhibit B hereto) identifying the applicable Grantor as the owner (or as a co-owner or exclusive licensee thereof, if such is the case) of such Intellectual Property; provided, that, with respect to such non-United States Intellectual Property, the applicable Grantor may make such filings in connection with the next renewal or other required filing with respect thereto.
(v) Each Grantor shall, as deemed appropriate by such Grantor in accordance with the exercise of its reasonable business judgement, take reasonable steps to maintain the confidentiality of, and otherwise protect and enforce its rights in, the Intellectual Property that is necessary in the conduct of such Grantor’s business, including, as applicable (A) protecting the secrecy and confidentiality of its confidential information and trade secrets by having and enforcing a policy requiring all current employees, consultants, licensees, vendors and contractors with access to such information to execute appropriate confidentiality agreements; (B) taking actions reasonably necessary to ensure that no trade secret falls into the public domain; and (C) protecting the secrecy and confidentiality of the source code of all software programs and applications of which it is the owner or licensee.
(j) [reserved].
(k) [reserved].
(l) Control. Each Grantor hereby agrees to take any or all action that may be necessary to the extent that the Lender may request in writing in order for the Lender to obtain control in accordance with Sections 9- 104, 9-105, 9-106, and 9-107 of the Code with respect to the following Collateral: (i) [reserved], (ii) Electronic Chattel Paper (to the extent such Collateral is valued in excess of $250,000 in aggregate), (iii) Investment Property (to the extent such Collateral is valued in excess of $250,000 in aggregate) and (iv) Letter-of-Credit Rights (to the extent such Collateral is valued in excess of $250,000 in aggregate); provided that such Grantor shall have reasonable time to comply with such requests. Each Grantor hereby acknowledges and agrees that any agent or designee of the Lender shall be deemed to be a “secured party” with respect to the Collateral under the control of such agent or designee for all purposes.
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(m) Changes in Information. Each Grantor shall provide prompt written notice of any change (i) in such Grantor’s corporate, limited liability company or limited partnership name, (ii) in the location of such Grantor’s chief executive office or principal place of business, (iii) in such Grantor’s ownership, entity type or jurisdiction in which such Person is incorporated or formed, (iv) in such Grantor’s jurisdiction of organization or such Person’s organizational identification number in such jurisdiction of organization, and (v) in such Grantor’s United States federal taxpayer identification number.
(n) Partnership and Limited Liability Company Interest. Except with respect to partnership interests and membership interests evidenced by a certificate, which certificate has been pledged and delivered to the Lender pursuant to Section 4 hereof, no Grantor that is a partnership or a limited liability company shall, nor shall any Grantor with any Subsidiary that is a partnership or a limited liability company, permit such partnership interests or membership interests to (i) be dealt in or traded on securities exchanges or in securities markets, (ii) become a security for purposes of Article 8 of any relevant Uniform Commercial Code, (iii) become an investment company security within the meaning of Section 8-103 of any relevant Uniform Commercial Code or (iv) be evidenced by a certificate. Each Grantor agrees that such partnership interests or membership interests shall constitute General Intangibles.
(o) Pledged Securities. The Pledged Shares will at all times constitute not less than 100% of the capital stock or other Equity Interests of the Pledged Entity thereof owned by any Grantor. Upon the issuance of any new shares (or other interests) of any class of capital stock or other Equity Interests of any Pledged Entity to a Grantor, such Equity Interests shall be pledged to the Lender pursuant to the terms hereof and the Grantor shall substantially concurrently with such issuance, deliver any such certificated Equity Interests that are required to be pledged hereunder in the exact form received, duly indorsed by such Grantor to the Lender, if required, together with an undated stock power or other equivalent instrument of transfer acceptable to the Lender covering such certificate or instrument duly executed in blank by such Grantor.
(p) Limitations on Modifications, Waivers, Extensions of Agreements Giving Rise to Accounts. Such Grantor will not (a) amend, modify, terminate or waive any provision of any Chattel Paper, Instrument or any agreement giving rise to an Account or Payment Intangible in any manner which could reasonably be expected to materially adversely affect the collective value of the Collateral as a whole, or (b) fail to exercise promptly and diligently its material rights, taken as a whole, which it may have under any Chattel Paper, Instrument and each agreement giving rise to an Account or Payment Intangible with a value in excess of $1,250,000 in the aggregate (other than any right of termination), except, in each case, as part of a Permitted Disposition.
(q) Assigned Agreements.
(i) No Grantor will, directly or indirectly, enter into or incur any agreement on or after the date hereof that would constitute a Material Project Document if such agreement would prohibit, restrict or impose any restrictive condition upon the ability of any Grantor to pledge, transfer or collaterally assign to the Lender, for the benefit of the Secured Parties, a security interest in any Assigned Agreement entered into on or after the date hereof; provided that the foregoing shall not apply to restrictions or conditions requiring the applicable counterparty in respect of such Assigned Agreement to consent to such pledge, transfer or collateral assignment to the extent such consent (in form and substance reasonably satisfactory to the Lender) has been obtained by the applicable Grantor and delivered to the Lender.
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(ii) Upon the reasonable request of the Lender, the applicable Grantor will obtain a consent to assignment (in form and substance reasonably satisfactory to the Lender) executed by the applicable counterparty in respect of any Material Project Document that, by the terms thereof, requires a consent in respect of (or otherwise restricts) the pledge, transfer and/or collateral assignment of such Material Project Document to the Lender hereunder.
(r) Activities of Parent and the Company. Notwithstanding anything to the contrary contained herein or the other Note Documents, none of Parent or the Company shall (i) own, lease, manage, hold or otherwise operate any properties or assets (including cash and cash equivalents) other than (A) the Equity Interests of the applicable Note Parties owned by Parent or the Company, (B) cash from Restricted Payments that are permitted pursuant to under the Note Documents to be made by the Subsidiaries of the Company, as applicable, and assets intended to be promptly contributed to the other Note Parties, (C) minute books and other corporate books and records of Parent or the Company, as applicable, and (D) other miscellaneous de minimis assets customary for passive holding companies (and, for avoidance of doubt, not any Equity Interests other than those of the applicable Note Parties); (ii) incur, create, assume or suffer to exist any Indebtedness or other liabilities or financial obligations, other than (A) liabilities under the Note Documents, (B) tax liabilities arising in the ordinary course of business and (C) corporate, administrative and operating expenses in the ordinary course of business; (iii) conduct, transact or engage in any activities, business or operations other than (A) issuing shares of its own Equity Interests (other than Disqualified Capital Stock), (B) holding the assets and incurring the liabilities described in this Section 6(r) and activities incidental and related thereto, (C) execution, delivery and performance of its obligations under and in connection with the Note Documents, (D) maintenance of its corporate existence, including the provision of customary protections or directors, managers and officers and (E) payment of Taxes, making dividends and other distributions, and receiving assets that are intended to be promptly contributed to the applicable Note Parties and (iv) create, incur, assume or permit to exist any Lien on any of its assets or properties (now owned or hereafter acquired) other than under the Note Documents.
(s) Covenants in the Note. Such Grantor shall perform and observe all covenants applicable to it in the Note and the other Note Documents, including with respect to those covenants that obligate the Company to cause the other Grantors to comply with such covenants, in each case, as if such other Grantors agreed to such covenant on behalf of itself (including, but not limited to the covenants set forth in Section 4 of the Note.)
SECTION 7. Voting Rights, Dividends, Etc. in Respect of the Pledged Interests.
(a) So long as no Event of Default shall have occurred and be continuing:
(i) each Grantor may exercise any and all voting and other consensual rights pertaining to any Pledged Interests for any purpose not in contravention of the terms of this Agreement, the Note or the other Note Documents or which would materially impair the Collateral or the priority, creation or perfection of the Lender’s Lien thereon; provided, however, (A) no Grantor will refrain from exercising any such right if such inaction could reasonably be expected to violate the terms of any Note Document or have a Material Adverse Effect and (B) no Grantor will irrevocably assign or otherwise delegate its voting rights under the Pledged Interests, rights to manage the business and affairs (or any portion thereof) of any Pledged Entities or other consensual rights pertaining to the Pledged Interests to any committee, body or other person without the prior written consent of the Lender; and
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(ii) each of the Grantors may receive and retain any and all dividends, interest or other distributions paid in respect of the Pledged Interests to the extent permitted by the Note; provided, however, that any and all (A) dividends and interest paid or payable other than in cash in respect of, and Instruments and other property received, receivable or otherwise distributed in respect of or in exchange for, any Pledged Interests which at the time of such payment was not permitted by the Note to be retained, (B) dividends and other distributions paid or payable in cash in respect of any Pledged Interests in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in surplus which at the time of such payment was not permitted by the Note to be retained, and (C) cash paid, payable or otherwise distributed in redemption of, or in exchange for, any Pledged Interests, together with any dividend, interest or other distribution or payment which at the time of such payment was not permitted by the Note, shall be, and shall forthwith be delivered to the Lender, to hold as, Pledged Interests and shall, if received by any of the Grantors, be received in trust for the benefit of the Lender, shall be segregated from the other property or funds of the Grantors, and shall be promptly delivered to the Lender in the exact form received with any necessary indorsement and/or appropriate instruments of transfer or assignment or undated stock powers duly executed in blank, to be held by the Lender as Pledged Interests and as further collateral security for the Secured Obligations; and
(iii) the Lender will execute and deliver (or cause to be executed and delivered) to a Grantor all such proxies and other instruments as such Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and other rights which it is entitled to exercise pursuant to Section 7(a)(i) hereof and to receive the dividends, interest and/or other distributions which it is authorized to receive and retain pursuant to Section 7(a)(ii) hereof.
(b) Upon the occurrence and during the continuance of an Event of Default:
(i) rights of any Grantor to receive dividends, interest and principal which such Grantor is authorized to receive pursuant to Section 7(a) shall cease, and all such rights shall thereupon become vested in the Lender, and the Lender shall have the right to receive any and all cash dividends, payments or other Proceeds paid in respect of the Investment Property and make application thereof to the Secured Obligations in such order as set forth in the Note (and all dividends, payments or other Proceeds which are received by any Grantor contrary to the provisions of this Section 7(b) shall be held in trust for the benefit of the Lender, shall be segregated from other property or funds of such Grantor and shall be immediately delivered to the Lender in the same form as so received (with any necessary endorsement)), and (ii) the Lender or its nominee (in each case, acting at the direction of the Lender) may exercise (whether or not the Collateral or any of the Investment Property has been transferred into the name of the Lender or its nominee) (A) all voting, corporate, consenting and other organizational rights pertaining to such Investment Property at any meeting of shareholders (or other equivalent body) of the relevant Pledged Entity or Pledged Entities or in the absence of any such meeting or otherwise, including by written consent (and each Grantor hereby grants to the Lender a present, irrevocable proxy, coupled with an interest and hereby constitutes and appoints the Lender as such Grantor’s proxy with full power, in the same manner, to the same extent and with the same effect as if such Grantor were to do the same, to exercise such rights until Payment in Full, as if it were the absolute owner thereof) and (B) any and all rights of conversion, exchange and subscription and any other rights, privileges or options pertaining to such Investment Property as if it were the absolute owner thereof (including, the right to exchange at its discretion any and all of the Investment Property upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate or other organizational structure of any Pledged Entity, or upon the exercise by any Grantor or the Lender of any right, privilege or option pertaining to such Investment Property, and in connection therewith, the right to deposit and deliver any and all of the Investment Property with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Lender may determine), all without liability except to account for property actually received by it, but the Lender shall have no duty to any Grantor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. As further assurance of the proxy granted hereby, each Grantor shall from time to time execute and deliver to the Lender, all such additional written proxies and other instruments as the Lender shall reasonably request for the purpose of enabling the Lender to exercise the voting and other rights which it is entitled to exercise hereunder provided that the Grantors agree that no such additional action shall be required for the Lender to exercise its proxy rights hereunder. Each Grantor hereby revokes any proxy or proxies heretofore given by such Grantor to any person or persons whatsoever and agrees not to give any other proxies in derogation hereof until this Agreement is no longer in full force and effect as hereinafter provided. Each Grantor agrees that it shall not amend any organizational documents (including, without limitation, any limited liability company agreement or certificate of formation or the functional equivalent of each of the foregoing) of any Pledged Entity or enter into any agreements or instruments to provide, and shall not otherwise permit, the rights described under clauses (A) and (B) of this Section 7(b)(i)(ii) with respect to any Pledged Entity to be assigned or otherwise delegated to any Person, including any committee of any Affiliate;
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(ii) the Lender is authorized to notify each debtor with respect to the Pledged Debt to make payment directly to the Lender (or its designee) and may collect any and all moneys due or to become due to any Grantor in respect of the Pledged Debt, and each of the Grantors hereby authorizes each such debtor to make such payment directly to the Lender (or its designee) without any duty of inquiry;
(iii) if such Grantor shall become entitled to receive or shall receive any stock certificate or other instrument (including any certificate or instrument representing a dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate or instrument issued in connection with any reorganization), option or rights in respect of the capital stock or other Equity Interests of any Pledged Entity, whether in addition to, in substitution of, as a conversion of, or in exchange for, any shares (or such other interests) of the Pledged Shares, or otherwise in respect thereof, such Grantor shall accept the same as the agent of the Lender, hold the same in trust for the Lender and deliver the same forthwith to the Lender in the exact form received, duly indorsed by such Grantor to the Lender, if required, together with an undated stock power or other equivalent instrument of transfer acceptable to the Lender covering such certificate or instrument duly executed in blank by such Grantor, to be held by the Lender, subject to the terms hereof, as additional collateral security for the Secured Obligations;
(iv) all dividends, distributions, interest and other payments that are received by any of the Grantors contrary to the provisions of Section 7(b)(i) hereof shall be received in trust for the benefit of the Lender, shall be segregated from other funds of the Grantors, and shall be promptly paid over to the Lender as Pledged Interests in the exact form received with any necessary indorsement and/or appropriate instruments of transfer or assignment or undated stock powers duly executed in blank, to be held by the Lender as Pledged Interests and as further collateral security for the Secured Obligations;
(v) in the case of each Grantor which is also a Pledged Entity, such Pledged Entity agrees that (i) it will be bound by the terms of this Agreement relating to the Investment Property issued by it and will comply with such terms insofar as such terms are applicable to it, (ii) it will notify the Lender promptly in writing of the occurrence of any of the events described in Section 7(b)(iii) with respect to the Investment Property issued by it and (iii) the terms of this Section 7 shall apply to it, mutatis mutandis, with respect to all actions that may be required of it pursuant this Section 7 with respect to the Investment Property issued by it. Each Grantor will have each non-Grantor Pledged Entity (A) that is an Affiliate of such Grantor to or (B) that is not an Affiliate of such Grantor to use commercially reasonable efforts to, in either case execute and deliver an Acknowledgment and Consent substantially in the form of Exhibit D. In addition, each Grantor which is also either a Pledged Entity or an owner of any Investment Property consents to the grant by each other Grantor of the security interest hereunder in favor of the Lender and to the transfer of any Investment Property to the Lender or its nominee upon the occurrence or during the continuation of an Event of Default and to the substitution of the Lender or its nominee as a partner, member or shareholder of the entity of the related Investment Property without the need for any further action by any Grantor or entity (and hereby confirms that no such action is required);
(vi) each Grantor hereby authorizes and instructs each Pledged Entity of any Investment Property pledged by such Grantor hereunder (and each Pledged Entity party hereto hereby agrees) to (i) comply with any instruction received by it from the Lender in writing that (A) states that an Event of Default has occurred and is continuing and (B) is otherwise in accordance with the terms of this Agreement, without any other or further action or instructions from such Grantor, and each Grantor agrees that each Pledged Entity shall be fully protected in so complying, and (ii) at any time that an Event of Default exists and is continuing, comply with any instruction received by it from the Lender in writing to pay any dividends or other payments with respect to the Investment Property directly to the Lender. If an Event of Default shall have occurred and be continuing, the Lender shall have the right to register the Pledged Interest in its own name as pledgee, or the name of its nominee (as pledgee) or the name of the applicable Grantor or entity, endorsed or assigned in blank or in favor of the Lender; and
(vii) if the Pledged Entity of any Pledged Shares is the subject of bankruptcy, insolvency, receivership, custodianship or other proceedings under the supervision of any Governmental Authority, then all rights of the Grantor in respect thereof to exercise the voting and other consensual rights which such Grantor would otherwise be entitled to exercise with respect to the Pledged Shares issued by such Pledged Entity shall cease, and all such rights shall thereupon become vested in the Lender who shall thereupon have the sole right to exercise such voting and other consensual rights (in each case, acting at the direction of the Lender), but the Lender or the Lender shall have no duty to exercise any such voting or other consensual rights and shall not be responsible to any Grantor for any failure to do so or delay in so doing.
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SECTION 8. Additional Provisions Concerning the Collateral.
(a) To the maximum extent permitted by applicable law, and for the purpose of taking any action that the Lender may deem necessary or advisable to accomplish the purposes of this Agreement and subject in all respects to the terms and conditions hereunder, each Grantor hereby authorizes the Lender at any time and from time to time to file, one or more financing or continuation statements and amendments thereto, relating to the Collateral (including, without limitation, any such financing statements that (i) describe the Collateral as “all assets” or “all personal property” (or words of similar effect) or that describe or identify the Collateral by type or in any other manner as the Lender may determine, regardless of whether any particular asset of such Grantor falls within the scope of Article 9 of the Code or whether any particular asset of such Grantor constitutes part of the Collateral and (ii) contain any other information required by Part 5 of Article 9 of the Code for the sufficiency or filing office acceptance of any financing statement, continuation statement or amendment, including, without limitation, whether such Grantor is an organization, the type of organization and any organizational identification number issued to such Grantor). A photocopy or other reproduction of this Agreement or any such financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.
(b) Each Grantor hereby irrevocably appoints the Lender as its attorney-in-fact and proxy, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, from time to time in the Lender’s discretion, to take any action and to execute any instrument that the Lender may reasonably deem necessary or advisable to accomplish the purposes of this Agreement and the other Note Documents (subject to the rights of a Grantor under Section 6 hereof and Section 7(a) hereof and the applicable terms in the Note), including, without limitation, (i) to obtain and adjust insurance required to be paid to the Lender pursuant to the Note, (ii) to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any Collateral, (iii) to receive, endorse, and collect any drafts or other Instruments, Documents and Chattel Paper in connection with clause (i) or (ii) above, (iv) to receive, indorse and collect all Instruments made payable to such Grantor representing any dividend, interest payment or other distribution in respect of any Pledged Interests and to give full discharge for the same, (v) to file any claims or take any action or institute any proceedings which the Lender may deem necessary or desirable for the collection of any Collateral or otherwise to enforce the rights of the Lender with respect to any Collateral, (vi) to execute assignments, licenses and other documents to enforce the rights of the Lender with respect to any Collateral, (vii) to pay or discharge taxes or Liens levied or placed upon or threatened against the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by the Lender, and such payments made by the Lender to become Primary Obligations of such Grantor to the Lender, due and payable immediately without demand, and shall bear interest from the date payment of said amounts is demanded at the Post-Default Rate, and (viii) to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, assignments, verifications and notices in connection with Accounts, Chattel Paper and other documents relating to the Collateral. This power and proxy is coupled with an interest and is irrevocable until Payment in Full, but the Lender agrees that it shall only exercise such power following the occurrence and during the continuation of an Event of Default. The Lender shall be under no duty to exercise or withhold the exercise of any of the rights, powers, privileges and options expressly or implicitly granted to the Lender in this Agreement, and shall not be liable for any failure to do so or any delay in doing so. The Lender shall not be liable for any act or omission or for any error of judgment or any mistake of fact or law in its individual capacity or its capacity as attorney-in-fact except acts or omissions resulting from its gross negligence or willful misconduct as determined by a court of competent jurisdiction in a final and non- appealable judgment.
(c) Upon the occurrence and during the continuance of an Event of Default, for the purpose of enabling the Lender to exercise rights and remedies hereunder, at such time as the Lender shall be lawfully entitled to exercise such rights and remedies, and for no other purpose, subject to the terms of any third party rights or agreements, each Grantor hereby grants as of the date hereof to the Lender an irrevocable (with respect to licenses or sublicenses granted to third parties during the continuance of such Event of Default), non-exclusive license (exercisable without payment of royalty or other compensation to any Grantor) to use, assign, license or sublicense any Intellectual Property now or hereafter owned by or (subject to the terms of any third party rights or agreements) licensed to any Grantor, wherever the same may be located, including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout thereof, and the right to prosecute and maintain all Intellectual Property and the right to sue for past, present or future infringement of the Intellectual Property, provided that, (x) with respect to trademarks, such Grantor shall have such rights of quality control to maintain the validity and enforceability of such trademarks, and (y) Lender shall take commercially reasonable measures to protect and maintain the confidentiality of the trade secrets included in the Intellectual Property. Each Grantor hereby releases the Lender from, and indemnifies the Lender against, any claims, causes of action and demands at any time arising out of or with respect to any actions taken or omitted to be taken by the Lender under the powers of attorney, proxy or license, granted herein other than actions caused by the gross negligence or willful misconduct of the Lender, as determined by a final non-appealable judgment of a court of competent jurisdiction.
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(d) If any Grantor fails to perform any agreement or obligation contained herein, then, with contemporaneous notice, the Lender may itself perform, or cause performance of, such agreement or obligation, in the name of such Grantor or the Lender, and the fees and expenses of the Lender incurred in connection therewith shall be jointly and severally payable by the Grantors pursuant to Section 10 hereof and shall constitute additional Primary Obligations of the Grantor to the Lender, be due and payable immediately without demand and bear interest from the date payment of said amounts is demanded at the Post-Default Rate.
(e) The powers conferred on the Lender hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Other than the exercise of reasonable care to assure the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Lender shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against other parties or any other rights pertaining to any Collateral and shall be relieved of all responsibility for any Collateral in its possession upon surrendering it or tendering surrender of it to any of the Grantors (or whomsoever shall be lawfully entitled to receive the same or as a court of competent jurisdiction shall direct). The Lender shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Lender accords its own property, it being understood that the Lender shall not have responsibility for ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Collateral, whether or not the Lender has or is deemed to have knowledge of such matters. The Lender shall not be liable or responsible for any loss or damage to any of the Collateral, or for any diminution in the value thereof, by reason of the act or omission of any warehouseman, carrier, forwarding agency, consignee or other agent or bailee except to the extent that a court of competent jurisdiction determines in a final and non-appealable judgment that the Lender acted with gross negligence or willful misconduct in the selection of such warehouseman, carrier, forwarding agency, consignee or other agent or bailee.
(f) Notwithstanding anything herein to the contrary, (a) each Grantor shall remain liable for all obligations under and in respect of the Collateral and nothing contained herein is intended or shall be a delegation of duties to the Lender or any other Secured Party and (b) each Grantor shall remain liable under each of the contracts and agreements included in the Collateral, including under each of the Assigned Agreements, Accounts, Chattel Paper and Payment Intangibles included in the Collateral, to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any such contract or agreement, including the Assigned Agreements, or any agreement giving rise to each such Account, Chattel Paper or Payment Intangible, and neither the Lender nor any other Secured Party shall have any obligation or liability under any such contracts and agreements or any such Account, Chattel Paper or Payment Intangible (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Lender or any such other Secured Party of any payment relating to such contracts and agreements or such Account, Chattel Paper or Payment Intangible, pursuant hereto, nor shall the Lender or any other Secured Party be obligated in any manner to perform any of the obligations of any Grantor under or pursuant to any such contracts and agreements or Account, Chattel Paper or Payment Intangible (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any such contracts and agreements or Account, Chattel Paper or Payment Intangible (or any agreement giving rise thereto), to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. The exercise by the Lender of any of its rights hereunder shall not release any Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral.
(g) The Lender may at any time (i) subject to the terms of Section 7 following the occurrence and during the continuation of an Event of Default, transfer or register in the name of the Lender or any of its nominees any or all of the Pledged Interests (for the avoidance of doubt, without limiting, and not as a requirement to exercising, any rights under Section 7 hereof) and (ii) exchange certificates or Instruments evidencing Pledged Interests for certificates or Instruments of smaller or larger denominations.
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SECTION 9. Events of Default; Remedies Upon Default; Cure Rights. If any Event of Default shall have occurred and be continuing:
(a) The Lender may exercise in respect of the Collateral, in addition to any other rights and remedies provided for herein or otherwise available to it, all of the rights and remedies of a secured party upon default under the Code (whether or not the Code applies to the affected Collateral), and also may, subject to the terms of Section 7, (i) take absolute control of the Collateral, including, without limitation, transfer into the Lender’s name or into the name of its nominee or nominees (to the extent the Lender has not theretofore done so) and thereafter receive, for the benefit of the Lender, all payments made thereon, give all consents, waivers and ratifications in respect thereof and otherwise act with respect thereto as though it were the outright owner thereof, (ii) require each Grantor to, and each Grantor hereby agrees that it will at its sole cost and expense and upon request of the Lender forthwith, assemble all or part of the Collateral as directed by the Lender and make it available to the Lender at a place or places to be designated by the Lender that is reasonably convenient to both parties, and the Lender may enter into and occupy any premises owned or leased by any Grantor where the Collateral or any part thereof is located or assembled for a reasonable period in order to effectuate the Lender’s rights and remedies hereunder or under law, without obligation to any Grantor in respect of such occupation, and (iii) without notice except as specified below and without any obligation to prepare or process the Collateral for sale, (A) sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Lender’s (or its designees’ or nominees’) offices, at any exchange or broker’s board or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Lender may deem commercially reasonable and/or (B) lease, license or otherwise dispose of the Collateral or any part thereof upon such terms as the Lender may deem commercially reasonable. Each Grantor agrees that, to the extent notice of sale or any other disposition of the Collateral shall be required by law, at least ten (10) days’ prior notice to the applicable Grantor of the time and place of any public sale or the time after which any private sale or other disposition of the Collateral is to be made shall constitute reasonable notification. The Lender shall not be obligated to make any sale or other disposition of Collateral regardless of notice of sale having been given. The Lender may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Grantor hereby waives any claims against the Lender arising by reason of the fact that the price at which the Collateral may have been sold at a private sale was less than the price which might have been obtained at a public sale or was less than the aggregate amount of the Secured Obligations, even if the Lender accepts the first offer received and does not offer the Collateral to more than one offeree, and waives all rights that such Grantor may have to require that all or any part of the Collateral be marshaled upon any sale (public or private) thereof. Each Grantor hereby acknowledges that (i) any such sale of the Collateral by the Lender shall be made without warranty, (ii) the Lender may specifically disclaim any warranties of title, possession, quiet enjoyment or the like, (iii) the Lender may bid (which bid may be, in whole or in part, in the form of cancellation of indebtedness), if permitted by law, for the purchase, lease, license or other disposition of the Collateral or any portion thereof for the account of the Lender and (iv) such actions set forth in clauses (i), (ii) and (iii) above shall not adversely affect the commercial reasonableness of any such sale of the Collateral. In addition to the foregoing, subject to Section 8 hereof (i) upon written notice to any Grantor from the Lender, each Grantor shall cease any use of the Intellectual Property or any trademark similar thereto for any purpose described in such notice; (ii) the Lender may, at any time and from time to time, license, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, any of the Intellectual Property, throughout the universe for such term or terms, on such conditions, and in such manner, as the Lender shall in their sole discretion determine; and (iii) the Lender may, at any time, pursuant to the authority granted in Section 8 hereof (such authority being effective upon the occurrence and during the continuance of an Event of Default), execute and deliver on behalf of a Grantor, one or more instruments of assignment of the Intellectual Property (or any application or registration thereof), in form suitable for filing, recording or registration in any country.
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(b) In the event that the Lender determines to exercise its right to sell all or any part of the Pledged Interests pursuant to Section 9(a) hereof, each Grantor will, at such Grantor’s sole cost and expense and upon request by the Lender: (i) execute and deliver, and cause each issuer of such Pledged Interests and the directors and officers (or any equivalent) thereof to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the opinion of the Lender, advisable to register such Pledged Interests under the provisions of the Securities Act, and to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectus which, in the opinion of the Lender or the Lender, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the SEC applicable thereto, (ii) cause each issuer of such Pledged Interests to qualify such Pledged Interests under the state securities or “Blue Sky” laws of each jurisdiction, and to obtain all necessary governmental approvals for the sale of the Pledged Interests, as requested by the Lender or the Lender, (iii) cause each Pledged Entity to make available to its security holders, as soon as practicable, an earnings statement which will satisfy the provisions of Section 11(a) of the Securities Act, and (iv) do or cause to be done all such other acts and things as may be necessary to make such sale of such Pledged Interests valid and binding and in compliance with applicable law. Each Grantor acknowledges the impossibility of ascertaining the amount of damages which would be suffered by the Lender or any other Secured Party by reason of the failure by any Grantor to perform any of the covenants contained in this Section 9(b) and, consequently, agrees that, if any Grantor fails to perform any of such covenants, it shall pay, as liquidated damages and not as a penalty, an amount equal to the value of the Pledged Interests on the date the Lender demands compliance with this Section 9(b) provided, however, that the payment of such amount shall not release any Grantor from any of its obligations under any of the other Note Documents.
(c) Notwithstanding the provisions of Section 9(b) hereof, each Grantor recognizes that the Lender may deem it impracticable to effect a public sale of all or any part of the Pledged Shares or any other securities constituting Pledged Interests and that the Lender may, therefore, determine to make one or more private sales of any such securities to a restricted group of purchasers who will be obligated to agree, among other things, to acquire such securities for their own account, for investment and not with a view to the distribution or resale thereof. Each Grantor acknowledges that any such private sale may be at prices and on terms less favorable to the seller than the prices and other terms which might have been obtained at a public sale and, notwithstanding the foregoing, agrees that such private sales shall be deemed to have been made in a commercially reasonable manner and that the Lender shall have no obligation to delay the sale of any such securities for the period of time necessary to permit the issuer of such securities to register such securities for public sale under the Securities Act. Each Grantor further acknowledges and agrees that any offer to sell such securities which has been (i) publicly advertised on a bona fide basis in a newspaper or other publication of general circulation in the financial community of New York, New York (to the extent that such an offer may be so advertised without prior registration under the Securities Act) or (ii) made privately in the manner described above to not less than fifteen bona fide offerees shall be deemed to involve a “public disposition” for the purposes of Section 9-610(c) of the Code (or any successor or similar, applicable statutory provision) as then in effect in the State of New York, notwithstanding that such sale may not constitute a “public offering” under the Securities Act, and that the Lender may, in such event, bid for the purchase of such securities.
(d) Any cash held by the Lender (or its agent or designee) as Collateral and all Cash Proceeds received by the Lender (or its agent or designee) in respect of any sale of or collection from, or other realization upon, all or any part of the Collateral may, in the discretion of the Lender, be held by the Lender (or its agent or designee) as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Lender pursuant to Section 10 hereof) in whole or in part by the Lender against, all or any part of the Secured Obligations in such order consistent with the provisions of the Note. Any surplus of such cash or Cash Proceeds held by the Lender (or its agent or designee) and remaining after the date on which Payment in Full occurs, shall be paid over to whomsoever shall be lawfully entitled to receive the same or as a court of competent jurisdiction shall direct.
(e) In the event that the proceeds of any such sale, collection or realization are insufficient to pay all amounts to which the Lender is legally entitled, the Grantors shall be jointly and severally liable for the deficiency, together with interest thereon at the highest rate specified in any applicable Note Document for interest on overdue principal thereof or such other rate as shall be fixed by applicable law, together with the costs of collection and the reasonable and documented fees, costs, expenses and other client charges (including reasonable fees of any attorneys employed by the Lender) to collect such deficiency.
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(f) Each Grantor hereby acknowledges that if the Lender complies with any applicable requirements of law in connection with a disposition of the Collateral, such compliance will not adversely affect the commercial reasonableness of any sale or other disposition of the Collateral.
(g) The Lender shall not be required to marshal any present or future collateral security (including, but not limited to, this Agreement and the Collateral) for, or other assurances of payment of, the Secured Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order, and all of the Lender’s rights hereunder and in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights, however existing or arising. To the extent that any Grantor lawfully may, such Grantor hereby agrees that it will not invoke any law relating to the marshalling of collateral which might cause delay in or impede the enforcement of the Lender’s rights under this Agreement or under any other instrument creating or evidencing any of the Secured Obligations or under which any of the Secured Obligations is outstanding or by which any of the Secured Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, each Grantor hereby irrevocably waives the benefits of all such laws.
SECTION 10. Indemnity, Expenses and Miscellaneous.
(a) Each Grantor, jointly and severally, agrees to pay or promptly reimburse the Lender and each other Secured Party for all reasonable and documented out-of-pocket advances, charges, costs and expenses (including, without limitation, all out-of-pocket costs and expenses of holding, preparing for sale and selling, collecting or otherwise realizing upon the Collateral and all reasonable and documented out-of-pocket attorneys’ fees, legal expenses and court costs incurred by any Secured Party in connection with the exercise of its respective rights and remedies hereunder), including, without limitation, any out-of-pocket advances, charges, costs and expenses that may be incurred in any effort to enforce any of the provisions of this Agreement or any obligation of any Grantor in respect of the Collateral or in connection with (i) the preservation of the Lien of, or the rights of the Lender or any other Secured Party under this Agreement, (ii) any actual or attempted sale, lease, disposition, exchange, collection, compromise, settlement or other realization in respect of, or care of, the Collateral, including all such costs and expenses incurred in any bankruptcy, reorganization, workout or other similar proceeding, or (iii) collecting against such Grantor under the guarantee contained in Section 13 hereof or otherwise enforcing or preserving any rights under this Agreement and the other Note Documents to which such Grantor is a party.
(b) Each Grantor jointly and severally agrees to pay, and to save the Lender and the Secured Parties harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement.
(c) The parties hereto agree that the Lender and the Secured Parties shall be entitled to reimbursement of their respective reasonable and documented out-of-pocket expenses incurred hereunder and indemnity for its actions in connection herewith as provided in Section 7 of the Note including the proviso in such Section specifying the exceptions and limitations to such indemnification and reimbursement obligations; provided that each reference therein to the “Company” shall be deemed to be a reference to “each Grantor”.
(d) Any such amounts payable as provided hereunder shall be additional Primary Obligations secured hereby and by the other Security Documents. All amounts for which any Grantor is liable pursuant to this Section 10 shall be due and payable by such Grantor to the Secured Parties not later than ten (10) Business Days after written demand therefor.
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SECTION 11. Notices, Etc. All notices and other communications provided for hereunder shall be given in accordance with the notice provision of the Note.
SECTION 12. Security Interest Absolute; Joint and Several Obligations.
(a) All rights of the Secured Parties, all Liens and all obligations of each of the Grantors hereunder shall be absolute and unconditional irrespective of (i) any lack of validity or enforceability of the Note or any other Note Document, (ii) any change in the time, manner or place of payment of, or in any other term in respect of, all or any of the Secured Obligations, or any other amendment or waiver of or consent to any departure from the Note or any other Note Document, (iii) any exchange or release of, or non-perfection of any Lien on any Collateral, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Secured Obligations, or (iv) any other circumstance that might otherwise constitute a defense (other than Payment in Full) available to, or a discharge of, any of the Grantors in respect of the Secured Obligations, until the date on which all of the Secured Obligations have been paid in full in cash after the termination of the Lender’s Commitments and each of the Note Documents. All authorizations and agencies contained herein with respect to any of the Collateral are irrevocable and powers coupled with an interest subject to Section 15(d).
(b) Each Grantor hereby waives (to the extent permitted by applicable law) (i) promptness and diligence, (ii) notice of acceptance and notice of the incurrence of any Secured Obligation by the Company or any other Group Member, (iii) notice of any actions taken by the Lender, any Guarantor or any other Person under any Note Document or any other agreement, document or instrument relating thereto, (iv) all other notices, demands and protests, and all other formalities of every kind in connection with the enforcement of the Secured Obligations, the omission of or delay in which, but for the provisions of this subsection (b), might constitute grounds for relieving such Grantor of any such Grantor’s obligations hereunder and (v) any requirement that the Lender protect, secure, perfect or insure any security interest or other lien on any property subject thereto or exhaust any right or take any action against any Grantor or any other Person or any collateral.
(c) All of the obligations of the Grantors hereunder are joint and several. The Lender may, in its sole and absolute discretion, enforce the provisions hereof against any of the Grantors and shall not be required to proceed against all Grantors jointly or seek payment from the Grantors ratably. In addition, the Lender may, in its sole and absolute discretion, select the Collateral of any one or more of the Grantors for sale or application to the Secured Obligations, without regard to the ownership of such Collateral, and shall not be required to make such selection ratably from the Collateral owned by all of the Grantors. The release or discharge of any Grantor by the Lender shall not release or discharge any other Grantor from the obligations of such Person hereunder.
SECTION 13. Guarantee.
(a) Guarantee.
(i) Each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably, guarantees to the Lender, for the ratable benefit of the Secured Parties and each of their respective successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Credit Parties when due (whether at the stated maturity, by acceleration or otherwise) of the Primary Obligations now or hereafter existing, whether for principal, interest (including interest accruing at any post-default rate and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Group Member, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), fees, commissions, expense reimbursements, indemnifications or otherwise. This is a guarantee of payment and performance when due and not of collection, and the liability of each Guarantor is primary and not secondary.
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(ii) Anything herein or in any other Note Document to the contrary notwithstanding, the maximum liability of each Guarantor (other than the Company) hereunder and under the other Note Documents shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable federal and state laws relating to the insolvency of debtors (after giving effect to the right of contribution established in Section 13(b).
(iii) Each Guarantor agrees that the Primary Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing the guarantee contained in this Section 13 or affecting the rights and remedies of the Lender or any Secured Party hereunder.
(iv) Each Guarantor agrees that if the maturity of any of the Primary Obligations is accelerated by bankruptcy or otherwise, such maturity shall also be deemed accelerated for the purpose of this guarantee without demand or notice to such Guarantor. The guarantee contained in this Section 13 shall remain in full force and effect until Payment in Full.
(v) No payment made by the Company, any other Credit Party with Primary Obligations, any of the Guarantors, any other guarantor or any other Person or received or collected by the Lender or any other Secured Party from the Company, any other Credit Party with Primary Obligations, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of any Primary Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Guarantor in respect of any Primary Obligations or any payment received or collected from such Guarantor in respect of any Primary Obligations), remain liable for the Primary Obligations up to the maximum liability of such Guarantor hereunder until Payment in Full.
(b) Right of Contribution. Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment. Each Guarantor’s right of contribution shall be subject to the terms and conditions of Section 13(e). The provisions of this Section 13(b) shall in no respect limit the obligations and liabilities of any Guarantor to the Lender, and each Guarantor shall remain liable to the Lender for the full amount guaranteed by such Guarantor hereunder.
(c) Payments. Each Guarantor hereby agrees and guarantees that payments hereunder will be paid to the Lender without set-off or counterclaim in dollars that constitute immediately available funds at the principal office of the Lender specified pursuant to the Note.
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(d) Guarantee Absolute and Unconditional. Each Guarantor waives (to the extent permitted by applicable law) any and all notice of the creation, renewal, extension or accrual of any of the Primary Obligations and notice of or proof of reliance by the Lender or any Secured Party upon the guarantee contained in this Section 13 or acceptance of the guarantee contained in this Section 13; the Primary Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee contained in this Section 13; and all dealings between the Credit Parties, on the one hand, and the Lender and the Secured Parties, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this Section 13. Each Guarantor waives (to the extent permitted by applicable law) diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Company, any other Credit Party with Primary Obligations or any of the Guarantors with respect to the Primary Obligations. Each Guarantor understands and agrees that the guarantee contained in this Section 13 shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity or enforceability of the Note or any other Note Document, any of the Primary Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Lender or any Secured Party, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by the Company, any other Credit Party or any other Person against the Lender or any Secured Party, (c) any change in the time, manner or place of payment of, or in any other term in respect of, all or any of the Primary Obligations, or any other amendment, supplement, modification or waiver of or consent to any departure from the Note or any other Note Document or (d) any other circumstance whatsoever (with or without notice to or knowledge of the Company, any other Credit Party with Primary Obligations or such Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Credit Parties for the Primary Obligations, or of such Guarantor under the guarantee contained in this Section 13, in bankruptcy or in any other instance. When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Guarantor, the Lender or any Secured Party may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against the Company, any other Credit Party with Primary Obligations, any other Guarantor or any other Person or against any collateral security or guarantee for the Primary Obligations or any right of offset with respect thereto, and any failure by the Lender or any Secured Party to make any such demand, to pursue such other rights or remedies or to collect any payments from the Company, any other Credit Party with Primary Obligations, any other Guarantor or any other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Company, any other Credit Party with Primary Obligations, any other Guarantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Lender or any Secured Party against any Guarantor. For the purposes hereof “demand” shall include the commencement and continuance of any legal proceedings.
(e) No Subrogation, Contribution or Reimbursement. Notwithstanding any payment made by any Guarantor hereunder or any set-off or application of funds of any Guarantor by the Lender or any other Secured Party, no Guarantor shall be entitled to be subrogated to any of the rights of the Lender or any other Secured Party against the Company or any other Guarantor or any collateral security or guarantee or right of offset held by the Lender or any other Secured Party for the payment of the Primary Obligations, nor shall any Guarantor seek or be entitled to seek any indemnity, exoneration, participation, contribution or reimbursement from the Company or any other Guarantor in respect of payments made by such Guarantor hereunder, and each Guarantor hereby expressly waives (to the extent permitted by applicable law), releases, and agrees not to exercise all such rights of subrogation, reimbursement, indemnity and contribution, in each case, until Payment in Full. Each Guarantor further agrees that to the extent that such waiver and release set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement, indemnity and contribution such Guarantor may have against the Company, any other Guarantor or against any collateral or security or guarantee or right of offset held by the Lender or any other Secured Party shall be junior and subordinate to any rights the Lender and the other Secured Parties may have against the Company and such Guarantor and to all right, title and interest the Lender and the other Secured Parties may have in any collateral or security or guarantee or right of offset. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Primary Obligations shall not have been paid in full, such amount shall be held by such Guarantor in trust for the Lender and the Secured Parties, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Lender in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Lender, if required), to be applied against the Primary Obligations, whether matured or unmatured, in such order as the Lender may determine. The Lender, for the benefit of the Secured Parties, may, to the extent it has the right to do so in accordance with the terms and conditions of the Note and the other Note Documents, use, sell or dispose of any item of Collateral or security as it sees fit without regard to any subrogation rights any Guarantor may have, and upon any disposition or sale, any rights of subrogation any Guarantor may have shall terminate.
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SECTION 14. Subordination of Indebtedness.
(a) Subordination of All Grantor Claims. As used herein, the term “Grantor Claims” shall mean all debts and obligations of any Grantor to any other Grantor or any other Group Member, whether such debts and obligations now exist or are hereafter incurred or arise, or whether the obligation of the debtor thereon be direct, contingent, primary, secondary, several, joint and several, or otherwise, and irrespective of whether such debts or obligations be evidenced by note, contract, open account, or otherwise, and irrespective of the Person or Persons in whose favor such debts or obligations may, at their inception, have been, or may hereafter be created, or the manner in which they have been or may hereafter be acquired by. After the occurrence and during the continuation of an Event of Default, no Grantor shall receive or collect, directly or indirectly, from any obligor in respect thereof any amount upon the Grantor Claims.
(b) Claims in Bankruptcy. In the event of receivership, bankruptcy, reorganization, arrangement, debtor’s relief or other insolvency proceedings involving any Grantor or any other Group Member, the Lender on behalf of the Secured Parties shall have the right to prove their claim in any proceeding, so as to establish their rights hereunder and receive directly from the receiver, trustee or other court custodian, dividends and payments which would otherwise be payable upon Grantor Claims. Each Grantor hereby assigns such dividends and payments to the Lender for the benefit of the Secured Parties for application against the Secured Obligations as provided under the Note. Should the Lender or Secured Party receive, for application upon the Secured Obligations, any such dividend or payment which is otherwise payable to any Grantor, and which, as between such Grantor, shall constitute a credit upon the Grantor Claims, then upon Payment in Full, the intended recipient shall become subrogated to the rights of the Lender and the other Secured Parties to the extent that such payments to the Lender and the other Secured Parties on the Grantor Claims have contributed toward the liquidation of the Secured Obligations, and such subrogation shall be with respect to that proportion of the Secured Obligations which would have been unpaid if the Lender and the other Secured Parties had not received dividends or payments upon the Grantor Claims.
(c) Payments Held in Trust. In the event that notwithstanding Section 14(a) and Section 14(b), any Grantor should receive any funds, payments, claims or distributions which is prohibited by such Sections, then it agrees: (i) to hold in trust for the Lender and the other Secured Parties an amount equal to the amount of all funds, payments, claims or distributions so received segregated from the other funds of such Grantor and (ii) that it shall upon receipt, pay them promptly to the Lender in the exact form agreed (duly endorsed by such Grantor to the Lender, if required), for the benefit of the Secured Parties; and each Grantor covenants promptly to pay the same to the Lender.
(d) Liens Subordinate. Each Grantor agrees that, until Payment in Full, any Liens securing payment of the Grantor Claims shall be and remain inferior and subordinate to any Liens securing payment of the Secured Obligations, regardless of whether such encumbrances in favor of such Grantor, the Lender or any other Secured Party presently exist or are hereafter created or attach. Prior to Payment in Full, without the prior written consent of the Lender, no Grantor shall (a) exercise or enforce any creditor’s right it may have against any debtor in respect of the Grantor Claims, or (b) foreclose, repossess, sequester or otherwise take steps or institute any action or proceeding (judicial or otherwise, including without limitation the commencement of or joinder in any liquidation, bankruptcy, rearrangement, debtor’s relief or insolvency proceeding) to enforce any Lien held by it.
(e) Notation of Records. All promissory notes and all accounts receivable ledgers or other evidence of the Grantor Claims accepted by or held by any Grantor shall contain a specific written notice thereon that the indebtedness evidenced thereby is subordinated under the terms of this Agreement.
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SECTION 15. Miscellaneous.
(a) No amendment or waiver of any provision of this Agreement (including any Schedule attached hereto) shall be effective unless it is in writing and signed by each (or the relevant Grantor in the case of any Schedule attached hereto) Grantor and the Lender.
(b) No failure on the part of the Secured Parties to exercise, and no delay in exercising, any right hereunder or under any other Note Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The rights and remedies of the Secured Parties provided herein and in the other Note Documents are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law. The rights of the Secured Parties under any Note Document against any party thereto are not conditional or contingent on any attempt by such Person to exercise any of its rights under any other Note Document against such party or against any other Person, including but not limited to, any Grantor.
(c) This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect, subject to paragraph (e) below, until Payment in Full and (ii) be binding on each Grantor all other Persons who become bound as debtor to this Agreement in accordance with Section 9-203(d) of the Code, and shall inure, together with all rights and remedies of the Secured Parties hereunder, to the benefit of the Secured Parties and their respective successors, transferees and assigns. Without limiting the generality of clause (ii) of the immediately preceding sentence, the Secured Parties may assign or otherwise transfer their respective rights and obligations under this Agreement and any other Note Document to any other Person pursuant to the terms of the Note, and such other Person shall thereupon become vested with all of the benefits in respect thereof granted to the Secured Parties herein or otherwise. Upon any such assignment or transfer, all references in this Agreement to any Secured Party shall mean the assignee of any such Secured Party. None of the rights or obligations of any Grantor hereunder may be assigned or otherwise transferred without the prior written consent of the Lender, and any such assignment or transfer shall be null and void.
(d) Upon Payment in Full, the Lender will, upon the Grantors’ request and at the Grantors’ cost and expense, without any representation, warranty or recourse whatsoever, return to the Grantors (or whomsoever shall be lawfully entitled to receive the same or as a court of competent jurisdiction shall direct) such of the Collateral as shall not have been sold or otherwise disposed of or applied pursuant to the terms hereof and (ii) execute and deliver to the Grantors such documents as the Grantors shall reasonably request to evidence such return.
(e) This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against any Grantor for liquidation or reorganization, should any Grantor become insolvent or make an assignment for the benefit of any creditor or creditors or should a receiver or trustee be appointed for all or any significant part of any Grantor’s assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment or performance of the Secured Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Secured Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment or performance had not been made. The obligations of each Grantor under this Agreement (including with respect to the guarantee contained in Section 13 and the provision of collateral herein) shall continue to be effective, or be reinstated, as the case may be, if at any time, payment, or any part thereof, of any of the Secured Obligations is rescinded or must otherwise be restored or returned by the Lender or any other Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Group Member, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Company or any Group Member or any substantial part of its property, or otherwise, all as though such payments had not been made.
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(f) Upon the execution and delivery, or authentication, by any Person of a guarantee and collateral agreement supplement in substantially the form of Exhibit C hereto (each a “Guarantee and Collateral Agreement Supplement”), (i) such Person shall be referred to as an “Additional Grantor” and shall be and become a Grantor, and each reference in this Agreement to “Grantor” shall also mean and be a reference to such Additional Grantor, and each reference in this Agreement and the other Note Documents to “Collateral” shall also mean and be a reference to the Collateral of such Additional Grantor, and (ii) the supplemental Schedules I-XI attached to each Guarantee and Collateral Agreement Supplement shall be incorporated into and become a part of and supplement Schedules I-XI, respectively, hereto, and the Lender may attach such Schedules as supplements to such Schedules, and each reference to such Schedules shall mean and be a reference to such Schedules, as supplemented pursuant hereto.
(g) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
(h) In addition to and without limitation of any of the foregoing, this Agreement shall be deemed to be a Note Document and shall otherwise be subject to all of terms and conditions contained in Section 8 of the Note, mutatis mutandi.
(i) Each Grantor hereto irrevocably and unconditionally waives any right it may have to claim or recover in any legal action, suit or proceeding with respect to this Agreement any special, exemplary, punitive or consequential damages.
(j) Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof or thereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
(k) Section headings herein are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.
(l) This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. The words “execution,” “execute,” “signed,” “signature,” and words of like import in or related to any document to be signed in connection with this Agreement and the transactions contemplated hereby shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Lender, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; provided that notwithstanding anything contained herein to the contrary the Lender is under no obligation to agree to accept electronic signatures in any form or in any format unless expressly agreed to by the Lender pursuant to procedures approved by it.
(m) By acceptance of the benefits of this Agreement and any other Documents, each Secured Party (whether or not a signatory hereto) shall be deemed irrevocably (a) to consent to the appointment of the Lender as its agent hereunder and (b) to confirm that the Lender shall have the authority to act as the agent of such Secured Party for the enforcement of any provisions of this Agreement against any Grantor, the exercise of remedies hereunder or thereunder and the giving or withholding of any consent or approval hereunder or thereunder relating to any Collateral or any Grantor’s obligations with respect thereto.
(n) This Agreement is a Note Document executed pursuant to the Note.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
| -31- |
IN WITNESS WHEREOF, each Grantor has caused this Agreement to be executed and delivered by its officer (or any equivalent) thereunto duly authorized, as of the date first above written.
| GRANTORS: | ||
| APLD FAR-01 LLC | ||
| By: | /s/ Saidal Mohmand | |
| Name: | Saidal Mohmand | |
| Title: | Chief Financial Officer | |
APLD FAR-02 LLC | ||
| By: | /s/ Saidal Mohmand | |
| Name: | Saidal Mohmand | |
| Title: | Chief Financial Officer | |
| APLD FAR HOLDINGS LLC | ||
| By: | /s/ Saidal Mohmand | |
| Name: | Saidal Mohmand | |
Title: |
Chief Financial Officer | |
[Signature Page to Guarantee and Collateral Agreement]
ACKNOWLEDGED AND AGREED:
| MACQUARIE EQUIPMENT CAPITAL, INC., | ||
| as Lender | ||
| By: | /s/ Joshua Stevens | |
| Name: | Joshua Stevens | |
| Title: | Division Director | |
| By: | /s/ Robert Downey | |
| Name: | Robert Downey | |
| Title: | Division Director |
[Signature Page to Guarantee and Collateral Agreement]
EXHIBIT A
PLEDGE AMENDMENT
This Pledge Amendment, dated ________________, __, is delivered pursuant to Section 4 of the Guarantee and Collateral Agreement referred to below. The undersigned hereby agrees that this Pledge Amendment may be attached to the Guarantee and Collateral Agreement, dated September 9, 2025, as it may heretofore have been or hereafter may be amended, restated, supplemented, modified or otherwise changed from time to time (the “Guarantee and Collateral Agreement”) and that the promissory notes or shares listed on this Pledge Amendment shall be hereby pledged and collaterally assigned to the Lender and become part of the Pledged Interests referred to in such Pledge Amendment and shall secure all of the Secured Obligations referred to in such Guarantee and Collateral Agreement.
Pledged Debt
| Grantor | Name of Maker | Description | Principal
Amount Outstanding as of | |||
Pledged Shares
| Grantor | Name
of Pledged Entity |
Number
of Shares |
Percentage
of Outstanding Shares |
Class | Certificate
Number | |||||
| [PLEDGOR] | ||
| By: | ||
| Name: | ||
| Title: | ||
| MACQUARIE EQUIPMENT CAPITAL, INC., | ||
| as the Lender | ||
| By: | ||
| Name: | ||
| Title: | ||
| Exh. A-1 |
EXHIBIT B
GRANT OF A SECURITY INTEREST —[TRADEMARKS] [PATENTS] [COPYRIGHTS]
This [Trademark][Copyright][Patent] Security Agreement (this “[Trademark][Copyright][Patent] Security Agreement”) is made as of _________________________, 20__, by _____________ (“Grantor”), in favor of Macquarie Equipment Capital, Inc., in its capacity as Lender for the Secured Parties (in such capacity, together with its successors and assigns in such capacity, if any, “Grantee”).
W I T N E S S E T H:
WHEREAS, the Grantor [has adopted, used and is using, and holds all right, title and interest in and to, the trademarks and service marks listed on the attached Schedule A, which trademarks and service marks are registered or applied for in the United States Patent and Trademark Office (the “Trademarks”)] [holds all right, title and interest in the letter patents, design patents and utility patents listed on the attached Schedule A, which patents are issued or applied for in the United States Patent and Trademark Office (the “Patents”)] [holds all right, title and interest in the copyrights listed on the attached Schedule A, which copyrights are registered in the United States Copyright Office (the “Copyrights”)];
WHEREAS, the Grantor has entered into a Guarantee and Collateral Agreement, dated September 9, 2025 (as amended, restated, amended and restated, supplemented, modified or otherwise changed from time to time, the “ Guarantee and Collateral Agreement”), in favor of Grantee;
WHEREAS, pursuant to the Guarantee and Collateral Agreement, the Grantor has granted to the Grantee for the benefit of the Secured Parties (as defined in the Guarantee and Collateral Agreement), a continuing security interest in all right, title and interest of the Grantor in and to certain collateral, including, among other property, the [Trademarks (as defined in the Guarantee and Collateral Agreement), together with, among other things, the goodwill of the business symbolized by the Trademarks] [Patents (as defined in the Guarantee and Collateral Agreement)] [Copyrights and exclusive Licenses thereto (in each case, as defined in the Guarantee and Collateral Agreement)], including all applications and registrations thereof, and all Proceeds thereof, including, without limitation, any and all causes of action which may exist by reason of infringement thereof and any and all damages arising from past, present and future violations thereof (collectively, but excluding any Excluded Assets, the “[Trademark][Patent][Copyright] Collateral”), as collateral security for the payment, performance and observance of all of the Secured Obligations (as defined in the Guarantee and Collateral Agreement); and
WHEREAS, the Grantor has duly authorized the execution, delivery and performance of this [Trademark][Patent][Copyright] Security Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Grantor does hereby pledge, transfer and collaterally assign to the Grantee (and its agents and designees) and grant to the Grantee (and its agents and designees), for the benefit of the Secured Parties, a continuing security interest in all right, title and interest of the Grantor in the [Trademark][Patent][Copyright] Collateral, including, without limitation, the [Trademarks][Patents][Copyrights and exclusive Copyright Licenses] listed on Schedule A attached hereto, as collateral security for the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of all of the Grantor’s Secured Obligations.
All capitalized terms used but not otherwise defined herein have the meanings given to them in the Guarantee and Collateral Agreement.
The Grantor does hereby further acknowledge and affirm that the rights and remedies of the Grantee with respect to the Collateral are more fully set forth in the Guarantee and Collateral Agreement, the terms and provisions of which are hereby incorporated herein by reference as if fully set forth herein. In the event of any conflict between the terms of this [Trademark][Patent][Copyright] Agreement and the terms of the Guarantee and Collateral Agreement, the terms of the Guarantee and Collateral Agreement shall govern.
This [Trademark][Patent][Copyright] Security Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
This [Trademark][Patent][Copyright] Security Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. The words “execution,” “execute,” “signed,” “signature,” and words of like import in or related to this [Trademark][Patent][Copyright] Security Agreement and the transactions contemplated hereby shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Grantee, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; provided that notwithstanding anything contained herein to the contrary the Grantee is under no obligation to agree to accept electronic signatures in any form or in any format unless expressly agreed to by the Grantee pursuant to procedures approved by it.
[Remainder of page intentionally left blank]
| Exh. B-1 |
IN WITNESS WHEREOF, the Grantor has caused this [Trademark][Copyright][Patent] Security Agreement to be duly executed by its officer (or any equivalent) thereunto duly authorized as of the date first set forth above.
| [GRANTOR] | ||
| By: | ||
| Name: | ||
| Title: | ||
| Exh. B-2 |
ACKNOWLEDGED AND AGREED:
| MACQUARIE EQUIPMENT CAPITAL, INC., | ||
| as the Lender | ||
| By: | ||
| Name: | ||
| Title: | ||
| Exh. B-3 |
SCHEDULE A TO GRANT OF A SECURITY INTEREST
[Trademark Registrations and Applications]
[Patents and Patent Applications]
[Copyright Registrations and exclusive Copyright Licenses]
| Exh. B-4 |
EXHIBIT C
FORM OF GUARANTEE AND COLLATERAL AGREEMENT SUPPLEMENT
[Date of Guarantee and Collateral Agreement Supplement]
Macquarie Equipment Capital, Inc., as the Lender
Address: [ ]
Attention: [ ]
Email: [ ]
Ladies and Gentlemen:
Reference hereby is made to (i) the Promissory Note, dated as of September 9, 2025 (such agreement, as amended, restated, amended and restated, supplemented or otherwise modified from time to time, being hereinafter referred to as the “Note”), by APLD FAR-01 LLC, a Delaware limited liability company, in favor of Macquarie Equipment Capital, Inc.; and (ii) the Guarantee and Collateral Agreement, dated as of September 9, 2025 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Guarantee and Collateral Agreement”), made by the Grantors from time to time party thereto in favor of Macquarie Equipment Capital, Inc., in its capacity as the Lender for the Secured Parties (in such capacity, together with its successors and assigns in such capacity, if any, the “Lender”). Capitalized terms defined in the Note or the Guarantee and Collateral Agreement and not otherwise defined herein are used herein as defined in the Note or the Guarantee and Collateral Agreement.
SECTION 1. Grant of Security and Guarantee.
(a) The undersigned hereby pledges, transfers and collaterally assigns to the Lender (and its agents and designees), and grants to the Lender (and its agents and designees), for the benefit of the Secured Parties, a continuing security interest in all of its right, title and interest to and in the Collateral, wherever located and whether now or hereafter existing and whether now owned or hereafter acquired, as collateral security for the prompt and complete payment, observance and performance when due (whether at the stated maturity, by acceleration or otherwise) of all of the undersigned’s Secured Obligations.
(b) The undersigned hereby agrees to the provisions of Section 13 of the Guarantee and Collateral Agreement and, jointly and severally, unconditionally and irrevocably, guarantees to the Lender, for the ratable benefit of the Secured Parties and each of their respective successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Credit Parties when due (whether at the stated maturity, by acceleration or otherwise) of the Primary Obligations. This is a guarantee of payment and performance when due and not of collection, and the liability of each Guarantor is primary and not secondary.
SECTION 2. Security for Secured Obligations. The grant of a security interest in the Collateral by the undersigned under this Guarantee and Collateral Agreement Supplement and the Guarantee and Collateral Agreement secures the payment of all Secured Obligations. Without limiting the generality of the foregoing, each of this Guarantee and Collateral Agreement Supplement and the Guarantee and Collateral Agreement secures the payment of all amounts that constitute part of the Secured Obligations and that would be owed by the undersigned to the Lender or any Secured Party under the Note Documents but for the fact that such Secured Obligations are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving a Grantor.
| Exh. C-1 |
SECTION 3. Supplements to Guarantee and Security Agreement Schedules. The undersigned has attached hereto supplemental Schedule I through Schedule XI to the Guarantee and Collateral Agreement, and the undersigned hereby certifies, as of the date first above written, that such supplemental Schedules have been prepared by the undersigned in substantially the form of the equivalent Schedules to the Guarantee and Collateral Agreement, and such supplemental Schedules include all of the information required to be scheduled to the Guarantee and Collateral Agreement and do not omit to state any information material thereto.
SECTION 4. Representations and Warranties. The undersigned hereby makes each representation and warranty set forth in Section 5 of the Guarantee and Collateral Agreement (as supplemented by the attached supplemental Schedules) to the same extent as each other Grantor.
SECTION 5. Obligations Under the Guarantee and Collateral Agreement. The undersigned hereby agrees, as of the date first above written, to be bound as a Grantor by all of the terms and provisions of the Guarantee and Collateral Agreement to the same extent as each of the other Grantors. The undersigned further agrees, as of the date first above written, that each reference in the Guarantee and Collateral Agreement to an “Additional Grantor” or a “Grantor” shall also mean and be a reference to the undersigned.
SECTION 6. Governing Law. This Guarantee and Collateral Agreement Supplement shall be governed by, and construed in accordance with, the laws of the State of New York.
SECTION 7. Note Document. In addition to and without limitation of any of the foregoing, this Guarantee and Collateral Agreement Supplement shall be deemed to be a Note Document.
| Very truly yours, | ||
| [NAME OF ADDITIONAL CREDIT PARTY] | ||
| By: | ||
| Name: | ||
| Title: | ||
| Exh. C-2 |
Acknowledged and Agreed:
| MACQUARIE EQUIPMENT CAPITAL, INC., | ||
| as the Lender | ||
| By: | ||
| Name: | ||
| Title: | ||
| Exh. C-3 |
SUPPLEMENTAL SCHEDULES I THROUGH XI
[See attached].
| Exh. C-4 |
EXHIBIT D
ACKNOWLEDGMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the Guarantee and Collateral Agreement dated as of September 9, 2025 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Agreement”; each capitalized term not defined herein shall have the meaning assigned to it in the Agreement), made by the Grantors party thereto for the benefit of Macquarie Equipment Capital, Inc., as the Lender. The undersigned agrees for the benefit of the Lender and the other Secured Parties as follows:
1. The undersigned will be bound by the terms of the Agreement and will comply with such terms insofar as such terms are applicable to the undersigned as an entity of Pledged Shares.
2. The undersigned will notify the Lender promptly in writing of the occurrence of any of the events described in Section 7(b)(iii) of the Agreement.
2. The terms of Section 7 of the Agreement shall apply to it, mutatis mutandis, with respect to all actions that may be required of it pursuant to Section 7 of the Agreement.
| [NAME OF ENTITY] | ||
| By: | ||
| Name: | ||
| Title: | ||
| Address for Notices: | ||
| Fax: |
| Exh. D-1 |
Exhibit 10.4
SECOND AMENDMENT TO PREFERRED EQUITY PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO PREFERRED EQUITY PURCHASE AGREEMENT (this “Amendment”), dated September [●], 2025, is entered into by and among the investment entities named on the signature pages hereto (each, an “Investor” and collectively, the “Investors”) and APPLIED DIGITAL CORPORATION, a company incorporated under the laws of the State of Nevada (the “Company”). Capitalized terms used in this Amendment and not otherwise defined herein have the meanings ascribed to such terms in the Purchase Agreement (as defined below).
WHEREAS, the Investors and Company are parties to that certain Preferred Equity Purchase Agreement, dated as of April 30, 2025, as amended by that certain First Amendment, dated as of August 14, 2025 (as amended, restated, supplemented or otherwise modified from time to time, the “Purchase Agreement”), pursuant to which, the Company issued and sold shares of the Preferred Stock to the Investors;
WHEREAS, Section 12.02 of the Purchase Agreement provides that any provision of the Purchase Agreement may be amended by an instrument in writing signed by the Parties;
WHEREAS, the Parties desire to amend the Purchase Agreement on the terms and conditions hereafter set forth; and
WHEREAS, in connection with the execution of this Amendment, the Company will file the Certificate of Amendment to the Certificate of Designation of Powers, Preferences and Relative, Participating, Optional and Other Restrictions attached hereto as Exhibit A.
NOW, THEREFORE, in exchange for good and valuable consideration, the sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows:
1. Amendments to the Purchase Agreement. The Purchase Agreement is hereby amended as follows:
1.1 The first recital to the Purchase Agreement is hereby amended to remove the reference to “$300 million” and replace it with “$450 million”.
1.2 The definition of “Commitment Amount” is hereby amended to remove the reference to “$300,000,000” and replace it with “$450,000,000”.
1.3 The second sentence of Section 6.02(a) is hereby amended to (a) remove the reference to “September 22, 2025” and replace it with “October 10, 2025” and (b) remove the reference to “12,480,000” and replace it with “16,320,000”.
1.4 Section 10.01(a) is hereby amended to remove the reference to “August 14, 2028” and replace it with “September [●], 2028”.
1.5 Annex I is hereby amended and restated in its entirety as attached hereto.
2. Miscellaneous.
2.1 Amendment to Certificate of Designation. The Company has proposed to amend the Certificate of Designation by filing the Certificate of Amendment to the Certificate of Designation of Powers, Preferences and Relative, Participating, Optional and Other Restrictions as set forth in Exhibit A, attached hereto.
2.2 Ratification of Purchase Agreement; Full Force and Effect; Conflicts. Other than as expressly modified pursuant to this Amendment, all of the terms, conditions and other provisions of the Purchase Agreement are hereby ratified and confirmed and shall continue to be in full force and effect in accordance with their respective terms. No reference to this Amendment need be made in any instrument or document making reference to the Purchase Agreement, and any reference to the Purchase Agreement in any such instrument or document shall be deemed a reference to the Purchase Agreement as amended hereby. This Amendment shall apply and be effective only with respect to the provisions of the Purchase Agreement specifically referred to herein.
2.3 Other Matters. The provisions of Article IX (Choice of Law/Jurisdiction), Article XI (Notices), Section 12.01 (Counterparts), Section 12.02 (Entire Agreement; Amendments), Section 12.04 (Expenses) and Section 12.06 (Brokerage) of the Purchase Agreement shall apply mutatis mutandis to this Amendment.
[signature page follows]
| 2 |
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to the Preferred Equity Purchase Agreement to be executed by the undersigned, thereunto duly authorized, as of the date first set forth above.
| COMPANY: | ||
| APPLIED DIGITAL CORPORATION | ||
| By: | ||
| Name: | Saidal L. Mohmand | |
| Title: | Chief Financial Officer | |
[Signature Page to the Second Amendment to the Preferred Equity Purchase Agreement]
[INVESTOR SIGNATURE PAGES TO SECOND AMENDMENT TO THE PREFERRED EQUITY PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Second Amendment to the Preferred Equity Purchase Agreement to be executed by the undersigned, thereunto duly authorized, as of the date first set forth above.
Name of Investor: ________________________________________________________
Signature of Authorized Signatory of Investor: __________________________________
Name of Authorized Signatory: ____________________________________________________
Title of Authorized Signatory: _____________________________________________________
Email Address of Authorized Signatory: ______________________________________________
Address for Notice to Investor:
EXHIBIT A
CERTIFICATE OF AMENDMENT TO CERTIFICATE OF DESIGNATION
[Attached]
ANNEX I
INVESTOR ALLOCATIONS