8-K
SharonAI Holdings Inc. (SHAZ)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): January 16, 2026
SHARONAI HOLDINGS INC.
(Exact name of registrant as specified in its charter)
| Delaware | 333-287287 | 41-2349750 |
|---|---|---|
| (State or other jurisdiction<br><br> <br>of incorporation) | (Commission<br><br> <br>File Number) | (IRS Employer<br><br> <br>Identification No.) |
745 Fifth Avenue, Suite 500,
New York, NY 10151
(Address of principal executive offices, including zip code)
(347) 212-5075
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions (see General Instructions A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01 Entry into a Material Definitive Agreement.
On January 16, 2026, SharonAI Inc., a subsidiary of SharonAI Inc. Holdings Inc. (“we,” “us,” the “Company” or “SharonAI”), entered into a Membership Interest Purchase Agreement (“Purchase Agreement”) for, and closed the sale of, SharonAI’s sale of 100% of its 50% interest (“Membership Interests”) in Texas Critical Data Centers LLC (“TCDC”) to New Era Energy & Digital Inc. (“NUAI”). The Purchase Agreement, and the documents entered into in connection with the Purchase Agreement, are the definitive agreements contemplated by the Binding Term Sheet for Acquisition of Interest in Texas Critical Data Centers, LLC entered into by SharonAI and NUAI on December 19, 2025, as previously reported in the Company’s Current Report on Form 8-K filed on December 19, 2026. TCDC is a joint venture between SharonAI and NUAI formed to fund, develop, and construct a data center site project with behind the meter natural gas-fired power in Ector County, Texas.
The consideration NUAI will pay SharonAI for the Membership Interests will be an aggregate of $70,000,000, of which, (a) $10,000,000 will be payable in cash, with (i) $150,000 paid in December of 2025 as non-refundable deposit, and (ii) $9,850,000 payable upon the occurrence of certain events, but no later than March 31, 2026; (b) $10,000,000 will be payable in common stock or other units of NUAI upon the occurrence of certain events, but no later than March 31, 2026; and (c) $50,000,000 will be payable by issuance of a senior secured convertible promissory note (“Secured Note”).
The Secured Note matures and is due June 30, 2026. It provides for an interest rate of 10% per annum (payable at maturity) and the right of SharonAI to convert up to $10,000,000 into common stock of NUAI at a conversion price equal to the 30-day VWAP of NUAI common stock prior to conversion, provided that such conversion price will not be less than 20% of the Nasdaq Official Closing Price. The Secured Note contains customary events of default and affirmative and negative covenants of NUAI.
In connection with the Purchase Agreement and the Secured Note, TCDC and SharonAI have entered into a Guaranty dated January 16, 2026 (“Guaranty”), pursuant to which TCDC has guaranteed the obligations of NUAI under the Secured Note. The obligations under the Secured Note and the Guaranty are secured by the Security and Pledge Agreement dated January 16, 2026, entered into between SharonAI, NUAI and TCDC (the “Security Agreement”), pursuant to which NUAI pledged all of the membership interests of TCDC to SharonAI, and TCDC granted a security interest in substantially all of its assets to SharonAI, and also by the Deed of Trust and Security Agreement dated January 16, 2026, entered into between SharonAI and TCDC (the “Deed of Trust”), pursuant to which TCDC has conveyed certain real estate in trust to secure the obligations under the Secured Note.
The descriptions of the Purchase Agreement, Secured Note, Guaranty, Security Agreement and Deed of Trust are only a summary and are qualified in its entirety by reference to the full text of such document, which is filed as an exhibit to this Current Report on Form 8-K and which is incorporated herein by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets.
On January 16, 2026, SharonAI completed the disposition of the Membership Interests of TCDC. The information contained above in Item 1.01 is hereby incorporated by reference into this Item 2.01.
Item 7.01 Regulation FD Disclosure.
On January 18, 2026, SharonAI issued a press release announcing the Purchase Agreement entered into with NUAI and the sale of the Membership Interests. The press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information in this Item 7.01, including Exhibit 99.1, is furnished and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to liabilities under that section, and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act or the Exchange Act of 1934, as amended, regardless of any general incorporation language in such filings.
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Item 9.01 Financial Statements and Exhibits.
(b) Pro forma financial information.
The Unaudited Pro Forma Combined Financial Information of SharonAI Holdings Inc. as of September 30, 2025, and for the Nine-Month Period ended September 30, 2025, and for the Year Ended December 31, 2024, is set forth in Exhibit 99.2 and incorporated herein by reference.
(d) Exhibits.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Company cautions that statements in this report or any exhibit to this report that are not a description of historical fact are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words referencing future events or circumstances such as “expect,” “intend,” “plan,” “anticipate,” “believe,” and “will,” among others. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. These forward-looking statements are based upon the Company’s current expectations and involve assumptions that may never materialize or may prove to be incorrect. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of various risks and uncertainties, which include, without limitation, the possibility of the Company’s need and ability to raise additional capital, changes in business plans, service or product offerings, use of proceeds, the Company’s acceleration or expansion of relationships and partnerships and/or deployment of assets, and further or new regulation of the Company’s business. More detailed information about the risks and uncertainties affecting the Company is contained under the heading “Risk Factors” included in the Company’s Registration Statement on Form S-4 filed with the SEC on October 21, 2025, as amended, and in other filings that the Company has made and may make with the SEC in the future. One should not place undue reliance on these forward-looking statements, which speak only as of the date on which they were made. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. The Company undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made, except as may be required by law.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| SHARONAI HOLDINGS INC. | ||
|---|---|---|
| By: | /s/ Tim Broadfoot | |
| Name: | Tim Broadfoot | |
| Title: | Chief Financial Officer | |
| Date: January 22, 2026 |
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Exhibit 10.1
Execution Version
MEMBERSHIP Interest Purchase Agreement
This Membership Interest Purchase Agreement (this “Agreement”), dated as of January 16, 2026, is entered into between SharonAI, Inc., a Delaware corporation (“Seller”), and New Era Energy & Digital, Inc., a Nevada corporation (“Buyer”).
Recitals
WHEREAS, Seller and Buyer are each parties to the Limited Liability Company Agreement, dated as of January 21, 2025 (the “LLC Agreement”), of Texas Critical Data Centers LLC, a Delaware limited liability company (the “Company”);
WHEREAS, Seller owns Membership Interests (as defined in the LLC Agreement) of the Company constituting 50% of the Percentage Interest (as defined in the LLC Agreement) of the Company (the “Purchased Interests”); and
WHEREAS, Seller wishes to sell to Buyer, and Buyer wishes to purchase from Seller, the Purchased Interests, subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Purchase and Sale
Section1.01 Purchase and Sale. Subject to the terms and conditions set forth herein, at the Closing (as defined herein), Seller shall sell to Buyer, and Buyer shall purchase from Seller, all of Seller’s right, title, and interest in and to the Purchased Interests, for the consideration specified in Section 1.02.
Section 1.02 PurchasePrice. The aggregate purchase price for the Purchased Interests shall be $70,000,000 (the “Purchase Price”). Buyer shall pay the Purchase Price to Seller as follows:
(a) $150,000 was paid by Buyer to Seller in cash as a non-refundable deposit on December 29, 2025.
(b) $9,850,000 shall be paid in cash by wire transfer to Seller (the “Delayed Closing Payment”) on or before the earlier of: (i) March 31, 2026; and (ii) the date on which Buyer receives funds (such date being the “CapitalClosing”) from Buyer’s Next Equity Financing (as defined herein).
(c) $10,000,000 shall be paid by issuing to Seller certain Units (as defined herein) on or before the earlier of: (i) March 31, 2026; and (ii) the Capital Closing.
(i) “Units” will be the common stock, par value $0.0001 per share, of Buyer (“Buyer Common Stock”) sold and issued in the Next Equity Financing; provided, however, that if the securities sold and issued in the Next Equity Financing include more than solely shares of Buyer Common Stock, such as, but not limited to, Buyer Common Stock together with warrants to purchase shares of Buyer Common Stock, then “Units” will be the package of securities sold and issued in such Next Equity Financing; and provided, further, that if the Capital Closing has not occurred by March 31, 2026, then “Units” will be shares of Buyer Common Stock.
(ii) The number of Units to be issued to Seller will be calculated by dividing $10,000,000 by the price per Unit paid by investors in the Next Equity Financing, prior to any fees or discounts of any underwriters, purchasers or placement agents provided, however, that if the Capital Closing has not occurred by March 31, 2026, then the number of Units to be issued to Seller will be calculated by dividing $10,000,000 by the Conversion Price (as defined in the Note, with the Conversion Period being based on March 31, 2026).
(iii) Buyer agrees that it will use commercially reasonable efforts to file a Registration Statement on Form S-3 with the United States Securities and Exchange Commission (the “SEC”) (the “S-3 Registration Statement”) on or before January 23, 2026 for purposes of consummating a Next Equity Financing and shall use commercially reasonable efforts to cause such S-3 Registration Statement to be declared effective as promptly as practicable thereafter.
(iv) The Units issued to Seller shall be issued in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), and shall be registered for resale pursuant to a registration statement filed with the SEC as promptly as practicable following their issuance, as further set forth in Section 1.10.
(v) Seller will execute and deliver to Buyer, and Buyer will execute and deliver to Seller, if applicable, the subscription agreement or similar document related to the Next Equity Financing; provided, that such document (A) includes customary terms and conditions and representations by Buyer about the Units, including without limitation that the shares of Buyer Common Stock included in the Units are duly authorized and, when issued and delivered, will be validly issued, fully paid and nonassessable and (B) includes terms and conditions substantially similar to, and not materially less favorable in the aggregate than the terms and conditions in the documents entered into with the other investors in the Next Equity Financing.
(vi) If the Capital Closing has not occurred by March 31, 2026, and Buyer Common Stock is issued as Units based on the Conversion Price, and the Capital Closing occurs within 90 days of March 31, 2026, and the terms of the Next Equity Financing are, on the day of their issuance, more economically favorable than those resulting from the issuance of Buyer Common Stock based on the Conversion Price (which shall be determined by reference to the trading price of the Company’s common stock on the date of issuance, and, in the case of equity-linked securities, on an as-converted basis on the date of such issuance), Buyer will promptly provide Seller with written notice thereof, and will issue to Seller the number of the same class of securities sold in the Next Equity Financing equaling the difference in value between what Seller received and what Seller would have received if the Capital Closing had occurred before March 31, 2026.
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(d) $50,000,000 shall be paid by issuing and delivering to Seller the Secured Convertible Promissory Note, substantially in the form attached hereto as Exhibit A (the “Note”).
(e) Notwithstanding anything in this Agreement to the contrary, Buyer shall not issue any equity securities or equity-linked securities of Buyer to Seller, together with any other securities contemplated by this Agreement and with any other related transactions that may be considered part of the same series of transactions, that would exceed the aggregate number of shares of Buyer Common Stock that Buyer may issue in a transaction in compliance with Buyer’s obligations under the rules or regulations of the Nasdaq Stock Market LLC (the “Nasdaq Maximum”), except that such limitation shall not apply in the event that Buyer obtains the approval of its shareholders as required by the applicable rules of the Nasdaq Stock Market LLC for issuances of shares of Buyer Common Stock in excess of such amount; and Buyer agrees to, as promptly as practicable and in no more than 90 days from the date hereof, hold a special meeting of stockholders to approve the issuance of Buyer Common Stock in excess of the Nasdaq Maximum, and if Buyer’s stockholders do not approve the issuance of Buyer Common Stock in excess of the Nasdaq Maximum at such special meeting, and if the number of shares of Buyer Common Stock is reduced due to the application of this Section 1.02(e), then Buyer shall pay to Seller in cash by wire transfer an amount equal to the difference between (A) the fair market value of the equity securities or equity-linked securities of Buyer that would have been issued to Seller but for this Section 1.02(e), minus (B) the fair market value of all of the equity securities or equity-linked securities of Buyer that actually were issued to Seller due to this Section 1.02(e). Any failure by Buyer to issue securities as a result of the limitations imposed by this Section 1.02(e) shall in no way be considered a breach or default of any provision of this Agreement so long as the cash payment is made in lieu or such issuance.
(f) For purposes of this Section 1.02, a “Next Equity Financing” shall mean a bona fide transaction or series of related transactions pursuant to which Buyer issues and sells its equity securities, or securities convertible into or exercisable for equity securities of Buyer, for the principal purpose of raising capital from third parties, resulting in aggregate gross cash proceeds to Buyer of not less than $10,000,000 whether in a transaction registered pursuant to Section 5 of the Securities Act, or in a private offering exempt from the registration requirements of the Securities Act. Notwithstanding the foregoing, a Next Equity Financing shall not include (i) issuances pursuant to any “at-the-market” offering or equity line facility; (ii) issuances of preferred stock to ATW Partners II LLC or any of its affiliates; (iii) exercises of existing options or warrants or conversions of existing Buyer securities for cash; (iv) issuances of securities as consideration in connection with mergers, acquisitions, asset purchases, or similar transactions, including earnouts or retention awards related thereto; and (v) warrants, options or other convertible securities issued in connection with any term loans, lines of credit, revolving credit facilities, notes, equipment leases or similar debt financings.
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Section1.03 Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place simultaneously with the execution of this Agreement on the date of this Agreement (the “Closing Date”) at the offices of Sheppard Mullin Richter & Hampton LLP, 12275 El Camino Real, Suite 100, San Diego, CA 92130, or remotely by exchange of documents and signatures (or their electronic counterparts). The consummation of the transactions contemplated by this Agreement shall be deemed to occur at 12:01 a.m. Eastern Time on the Closing Date.
Section1.04 Transfer Taxes. Buyer and Seller shall each bear and pay fifty percent (50%) of any sales, use or transfer taxes (“TransferTaxes”) that become due and payable as a result of the purchase and sale of the Purchased Interests pursuant to Section 1.01. All documentary charges or recording fees (other than Transfer Taxes), if any, that become due and payable as a result of the transactions contemplated by this Agreement shall be borne by Buyer. Buyer and Seller shall reasonably cooperate in good faith to minimize, to the extent permissible under applicable law, the amount of any such Transfer Taxes, charges or fees.
Section1.05 Withholding Taxes. Buyer shall be entitled to deduct and withhold from amounts otherwise payable pursuant to this Agreement such amounts as are required to be deducted and withheld under applicable law. Other than withholding taxes owed as a result of the failure of Seller to deliver a valid Internal Revenue Service (“IRS”) Form W-9 pursuant to Section 4.01(g), Buyer shall provide Seller with written notice of its intent to withhold reasonably in advance of the Closing with a written explanation substantiating the requirement to deduct or withhold, and the parties shall use commercially reasonable efforts to cooperate to mitigate or eliminate any such withholding to the maximum extent permitted by law. To the extent that amounts are so withheld and paid over to the appropriate tax authority by Buyer, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the person in respect of which such deduction and withholding was made.
Section 1.06 IntendedTax Treatment. For U.S. federal and applicable state and local income tax purposes, the acquisition of the Purchased Interests by Buyer from Seller is intended to be treated as a taxable transaction in accordance with IRS Revenue Ruling 99-6, Situation 1, and, as a result, shall be treated (a) with respect to Seller, as a sale of the Purchased Interests governed by Section 741 of the Internal Revenue Code of 1986, as amended (the “Code”), (b) with respect to Buyer, as a liquidating distribution by the Company of all of the Company’s assets to Buyer and Seller, followed by a taxable purchase by Buyer of the portion of such assets deemed distributed to Seller, and (c) as a termination of the Company as a partnership for U.S. federal and applicable state and local income tax purposes pursuant to Section 708(b)(1) of the Code, causing the Company’s taxable year to end on the Closing Date and the Company to become a disregarded entity. All items of Company income, gain, loss, deduction and credit for the Company’s taxable year ending on the Closing Date shall be allocated to the Buyer and Seller in accordance with the LLC Agreement. Buyer and Seller shall not file any tax return or take any other position inconsistent with the foregoing tax treatment, except as otherwise required by a final “determination” within the meaning of Section 1313 of the Code (or analogous provisions of state or local law).
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Section1.07 Mutual Release of Claims.
(a) Except as otherwise explicitly set forth herein, effective as of the Closing, Buyer, and Buyer shall cause the Company to, on behalf of themselves and their respective subsidiaries and affiliates, and on behalf of all of their respective directors, managers, officers, owners, trustees, beneficiaries, employees, agents, successors and assigns (collectively, the “BuyerReleasors”), hereby absolutely, unconditionally and irrevocably release and forever discharge Seller and its affiliates, and each of their respective members, equityholders, owners, directors (in such directors’ capacity as directors), managers, officers, employees, agents, successors and assigns thereof, but specifically excluding the Company and any affiliate of the Company immediately after the Closing (collectively, “Seller Releasees”) from any and all claims, whether known or unknown, that the Buyer Releasors have had in the past, or have now or may have in the future against the Seller Releasees arising out of or relating to any acts, omissions, facts, events, or circumstances existing, occurring or taking place at or prior to Closing with respect to Seller’s ownership of the Purchased Interests and membership in the Company; provided, however, this release shall not be construed to release any claims against any party’s rights or obligations under, this Agreement, the Assignment (as defined herein), the Note, the Pledge (as defined herein), the Guaranty (as defined herein) or the Security Agreement (as defined herein).
(b) Buyer, on behalf of itself and on behalf of the other Buyer Releasors (any of the foregoing, a “BuyerReleasor”), agrees not to file or permit to be filed, any Action against any Seller Releasees, as applicable, with any governmental authority or otherwise, based on events occurring on or prior to the Closing Date in relation to any released claim. Buyer agrees that it and its other Buyer Releasors have not assigned, and each hereby covenants not to and not to permit any other of its Buyer Releasors to assign, any released claim.
(c) Except as otherwise explicitly set forth herein, effective as of the Closing, Seller, on behalf of itself and its subsidiaries and affiliates, and on behalf of all of their respective directors, managers, officers, owners, trustees, beneficiaries, employees, agents, successors and assigns (collectively, the “Seller Releasors”), hereby absolutely, unconditionally and irrevocably release and forever discharge Buyer, the Company and their respective affiliates, and each of their respective members, equityholders, owners, directors (in such directors’ capacity as directors), managers, officers, employees, agents, successors and assigns thereof, but specifically including the Company and any affiliate of the Company immediately after the Closing (collectively, “Buyer Releasees”) from any and all claims, whether known or unknown, that the Seller Releasors have had in the past, or have now or may have in the future against the Buyer Releasees arising out of or relating to any acts, omissions, facts, events, or circumstances existing, occurring or taking place at or prior to Closing that relate to the Purchased Interests or Buyer’s status as a “Member” under the LLC Agreement; provided, however, this release shall not be construed to release any claims against any party’s rights or obligations under, this Agreement, the Assignment, the Note, the Pledge, the Guaranty or the Security Agreement.
(d) Seller, on behalf of itself and on behalf of the other Seller Releasors (any of the foregoing, a “SellerReleasor”), agrees not to file or permit to be filed, any Action against any Buyer Releasees, as applicable, with any governmental authority or otherwise, based on events occurring on or prior to the Closing Date in relation to any released claim. Seller agrees that it and its other Seller Releasors have not assigned, and each hereby covenants not to and not to permit any other of its Seller Releasors to assign, any released claim.
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(e) Each of Buyer and Seller is aware that statutes exist that render null and void or otherwise affect or may affect releases and discharges of any claims, rights, demands, liabilities, actions and causes of action that are unknown to the releasing or discharging party at the time of execution of the release and discharge, including Section 1542 of the California Civil Code which provides the following: “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.” To the extent allowed by applicable law, each of Buyer and Seller, on behalf of itself and on behalf of the other Buyer Releasors or Seller Releasors, as applicable, hereby expressly waives, surrenders and agrees to forego any and all protections, rights or benefits to which such person otherwise would be entitled by virtue of the existence of any such statute or the common law of any state, province or jurisdiction with the same or similar effect. Further, it is understood and agreed that the facts in respect of which this release is given may turn out to be other than or different from the facts in that respect now known or believed by such person to be true; and with such understanding and agreement, each of Buyer and Seller, on behalf of itself and on behalf of the other Buyer Releasors or Seller Releasors, as applicable, expressly accepts and assumes the risk of facts being other than or different from the assumptions and perceptions as of any date prior to and including the Closing Date, and agrees that this release shall be in all respects effective and shall not be subject to termination or rescission by reason of any such difference in facts.
Section1.08 Post-Closing Access.
(a) Seller and Buyer shall, and Buyer shall cause the Company and any applicable affiliates to, preserve and keep all books and records and all information relating to the accounting, legal, tax, regulatory, business and financial affairs that are retained by Seller or any of its affiliates, or are obtained by Buyer hereunder, or otherwise kept by Buyer, as the case may be, which information relates to the Company, for a period of five (5) years after the Closing Date, or for any longer period as may be (i) required by law (including any statute of limitations and applicable extensions thereof) or any governmental authority or (ii) reasonably necessary with respect to the prosecution or defense of any legal or regulatory Action (as defined herein) that is then pending or threatened or audit and with respect to which the requesting party has notified the other parties as to the need to retain such books, records or information.
(b) Following the Closing until the earlier of (i) five (5) years after the Closing Date or (ii) such time as such information is no longer retained by Buyer in accordance with Section 1.08(a), Buyer, the Company and any applicable affiliates shall permit Seller or its affiliates and their authorized representatives to have reasonable access and inspection rights (at Seller’s sole cost and expense) during normal business hours, upon reasonable prior written notice to Buyer, the Company or such affiliates, to the books and records of the Company to the extent that such access may be reasonably required in connection with (i) any tax or accounting matter, including the preparation of any tax return or accounting record, (ii) defending against or contesting any tax claims, audits or similar proceedings, (iii) any Action relating to Seller or its affiliates or the operation of the Company prior to the Closing or relating to any insurance claims, or (iv) any governmental filing or regulatory matter.
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(c) Following the Closing until the earlier of (i) five (5) years after the Closing Date or (ii) such time as such information is no longer retained by Seller in accordance with Section 1.08(a), Seller shall permit Buyer or its affiliates and their authorized representatives to have reasonable access and inspection rights (at Buyer’s sole cost and expense) during normal business hours, upon reasonable prior notice to Seller, to the information described in Section 1.08(a) to the extent that such access may be reasonably required in connection with (i) any tax or accounting matter, including the preparation of any tax return or accounting record, (ii) defending against or contesting any tax claims, audits or similar proceedings, (iii) any Action relating to the Company, (iv) any governmental filing or regulatory matter or (v) any other valid legal or business purpose.
Section1.09 Confidentiality. Seller hereby acknowledges that in connection with its ownership of the Purchased Interests, Seller and its affiliates have received, and may continue to receive until the Closing Date, certain confidential information concerning the business, strategies, operations, financial affairs, trade secrets, intellectual property, organizational and personnel matters, policies, procedures and other proprietary non-public matters of the Company (the “Confidential Information”). Seller hereby agrees that it shall keep such Confidential Information confidential and shall not, and shall cause its affiliates not to, disclose or use for any purpose, other than as reasonably necessary to enforce its rights under this Agreement, any Confidential Information following the Closing without the prior written consent of Buyer; provided, however, that the foregoing restrictions shall not apply to information which (i) is or becomes publicly available other than as a result of a disclosure by Seller or its affiliates in breach of this Agreement, (ii) becomes available to Seller on a non-confidential basis from a third-party source, provided that, to Seller’s knowledge, such third party is not prohibited from disclosing such information to Seller by any contractual obligation, (iii) was known or in the possession of the Seller before the formation of the Company, or (iv) is required to be disclosed by applicable law, regulation, subpoena, court order or to governmental or regulatory authorities in connection with examinations, inquiries, or approvals (in which case Seller shall promptly notify Buyer in writing prior to making any such disclosure, if legally permitted, in order to facilitate Buyer’s efforts to seek a protective order or other appropriate remedy from the proper authority, and agrees to cooperate with Buyer in seeking such order or other remedy).
Section1.10 Registration
(a) Filing Obligation.
(i) Buyer shall, no later than 10 days following the Closing Date (the “Note Filing Deadline”), prepare and file with the Securities and Exchange Commission (the “SEC”) a registration statement on an appropriate form (the “Note Registration Statement”) providing for the resale by the Investor of all Buyer Common Stock issuable upon conversion of the Note (“Note RegistrableSecurities”).
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(ii) Buyer shall, no later than 10 days following the earlier of: (A) March 31, 2026; and (B) the Capital Closing (the “UnitFiling Deadline,” and each of the Unit Filing Deadline and Note Filing Deadline, a “FilingDeadline”), prepare and file with the SEC a registration statement on an appropriate form (the “Unit Registration Statement” and, together with the Note Registration Statement, the “Resale Registration Statements”) providing for the resale by the Investor of all Units issued to Seller pursuant to this Agreement (“Unit Registrable Securities” and, together with the Note Registrable Securities, the “Registrable Securities”); provided, however, that to the extent the age of the Company’s financial statements do not comply with Regulation S-X, the Company’s obligation to file such Unit Registration Statement shall be extended without penalty.
(b) Effectiveness Requirement. Buyer shall use its commercially reasonable efforts to cause the Resale Registration Statements to be declared effective by the SEC as promptly as practicable following filing, but in no event later than 30 days following the applicable Filing Deadline (or 90 days following the applicable Filing Deadline in the event of SEC review) (the “EffectivenessDeadline”).
(c) Maintenance of Effectiveness. Buyer shall keep the Resale Registration Statements continuously effective until the earliest to occur of (i) the date on which all Registrable Securities covered thereby have been sold pursuant to the applicable Resale Registration Statement, (ii) the date on which the Registrable Securities may be sold without volume or manner-of-sale restrictions pursuant to Rule 144, or (iii) 3 years following the Closing Date.
(d) Registration Failure; Daily Accrual of Escalating Liquidated Damages. If (i) Buyer fails to file the Resale Registration Statements on or before the applicable Filing Deadline, or (ii) the Resale Registration Statements are not declared effective on or before the applicable Effectiveness Deadline (each, a “Registration Failure”), then, as liquidated damages and not as a penalty, Buyer shall pay to Seller cash liquidated damages, accruing daily, in accordance with the following schedule:
(i) Days 31–60 following the applicable deadline: $200,000, per 30-day period, accruing daily on a pro rata basis;
(ii) Thereafter: $300,000, per 30-day period, accruing daily on a pro rata basis,
in an aggregate amount equal to $1,000,000.
Liquidated damages shall commence accruing on the day immediately following the applicable Filing Deadline or Effectiveness Deadline, as applicable, shall be calculated on the basis of a 30-day month, shall be payable monthly in arrears in cash, and shall cease accruing upon the date the applicable Registration Failure is cured; provided, however, that the Effectiveness Deadline shall be extended in the event of any U.S. federal government shutdown, lapse in appropriations, sequestration, or other event resulting in the closure or material degradation of the SEC’s operations that occurs following the Filing Deadline and prior to the Effectiveness Deadline (an “SECForce Majeure”). Any such extension shall be for the same period of time for which an SEC Force Majeure existed.
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(e) Nasdaq Compliance. Notwithstanding anything to the contrary herein, (i) all liquidated damages payable pursuant to this Section shall be paid solely in cash, (ii) no shares of Buyer Common Stock shall be issued in satisfaction of such obligations, and (iii) nothing herein shall require Buyer to take any action that would violate Nasdaq listing rules or require stockholder approval thereunder.
(f) Acknowledgment. Buyer and Seller acknowledge and agree that (i) the actual damages likely to result from a Registration Failure would be difficult to quantify, (ii) the foregoing liquidated damages represent a reasonable estimate of such damages and are not intended to be punitive, and (iii) the payment of liquidated damages shall not preclude Buyer from seeking specific performance of Buyer’s registration obligations.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer that the statements contained in this ARTICLE II are true and correct as of the date hereof. For purposes of this ARTICLE II, “Seller’s knowledge,” “knowledge of Seller,” and any similar phrases shall mean the actual knowledge after due inquiry of James Manning, Wolfgang Schubert or Tim Broadfoot.
Section2.01 Organization and Authority of Seller; Enforceability. Seller is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware. Seller has full corporate power and corporate authority to enter into this Agreement and the documents to be delivered hereunder, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery, and performance by Seller of this Agreement and the documents to be delivered hereunder and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action on the part of Seller. This Agreement and the documents to be delivered hereunder have been duly executed and delivered by Seller, and (assuming due authorization, execution, and delivery by Buyer) this Agreement and the documents to be delivered hereunder constitute legal, valid, and binding obligations of Seller, enforceable against Seller in accordance with their respective terms, except as may be limited by any bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other similar laws affecting the enforcement of creditors’ rights generally or by general principles of equity.
Section2.02 No Conflicts; Consents. The execution, delivery, and performance by Seller of this Agreement and the documents to be delivered hereunder, and the consummation of the transactions contemplated hereby, do not and will not: (a) violate or conflict with the certificate of incorporation, by-laws or other organizational documents of Seller; (b) violate or conflict with any judgment, order, decree, statute, law, ordinance, rule, or regulation applicable to Seller, except where the violation or conflict would not, individually or in the aggregate, have a material adverse effect on Seller’s ability to consummate the transactions contemplated hereby on a timely basis; (c) conflict with, or result in (with or without notice or lapse of time or both) any violation of, or default under, or give rise to a right of termination, acceleration or modification of any obligation or loss of any benefit under any contract or other instrument to which Seller is a party, except where the conflict, violation, default, termination, cancellation, modification, or acceleration would not, individually or in the aggregate, have a material adverse effect on Seller’s ability to consummate the transactions contemplated hereby on a timely basis; or (d) result in the creation or imposition of any mortgage, pledge, lien, charge, security interest, claim, or other encumbrance (“Encumbrance”) on the Purchased Interests. No consent, approval, waiver, or authorization is required to be obtained by Seller from any person or entity (including any governmental authority) in connection with the execution, delivery, and performance by Seller of this Agreement and the consummation of the transactions contemplated hereby, except such consents, approvals, waivers, or authorizations which would not, in the aggregate, have a material adverse effect on Seller’s ability to consummate the transactions contemplated hereby on a timely basis.
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Section2.03 Legal Proceedings. There is no claim, action, suit, proceeding or governmental investigation (“Action”) of any nature pending or, to Seller’s knowledge, threatened against or by Seller (a) relating to or affecting the Purchased Interests; or (b) that challenges or seeks to prevent, enjoin, or otherwise delay the transactions contemplated by this Agreement, except any Actions that would not, individually or in the aggregate, have a material adverse effect on Seller’s ability to consummate the transactions contemplated hereby on a timely basis. To Seller’s knowledge, no event has occurred or circumstances exist that may give rise or serve as a basis for any such Action.
Section2.04 Ownership of Purchased Interests.
(a) Seller is the sole legal, beneficial, record, and equitable owner of the Purchased Interests, free and clear of all Encumbrances other than the LLC Agreement and applicable securities laws.
(b) The Purchased Interests were issued in compliance with applicable laws and were not issued in violation of the organizational documents of the Company or any other agreement, arrangement, or commitment to which Seller or, to Seller’s Knowledge, the Company is a party and are not subject to or in violation of any preemptive or similar rights of any person.
(c) Other than the organizational documents of the Company, there are no voting trusts, proxies, or other agreements or understandings in effect with respect to the voting or transfer of any of the Purchased Interests.
Section2.05 Brokers. Except as set forth in the letter agreement dated December 22, 2025, between Seller’s parent company and Lucid Capital Markets, no broker, finder, investment banker or other person is entitled to any brokerage, finder’s, or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Seller.
Section 2.06 Non-ForeignStatus. Seller is not a foreign person as defined in Treasury Regulations Section 1.1446(f)-1(b)(4) or Section 1.1445-2.
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Section2.07 Seller Investment Representations. Seller is acquiring the Units and the Note for its own account with the present intention of holding such securities for investment purposes and not with a view to, or for sale in connection with, any distribution of such securities in violation of any federal or state securities laws. Seller is an “accredited investor” as defined in Regulation D promulgated under Section 5 of the Securities Act. Seller acknowledges that it is informed as to the risks of the transactions contemplated hereby and of ownership of the Units and the Note. Seller acknowledges that such securities have not been registered under the Securities Act, or any state or foreign securities laws and that such securities may not be sold, transferred, offered for sale, assigned, pledged, hypothecated or otherwise disposed of unless such transfer, sale, assignment, pledge, hypothecation or other disposition is pursuant to the terms of an effective registration statement under the Securities Act, and such securities are registered under any applicable state or foreign securities laws or sold pursuant to an exemption from registration under the Securities Act, and any applicable state or foreign securities laws.
Section2.08 Seller Acknowledgement. Seller is a sophisticated entity familiar with transactions similar to those contemplated by this Agreement and has the knowledge and experience to evaluate the merits and risk of such transactions. Seller acknowledges and confirms that Buyer may have, and may later come into possession of, information with respect to the Company—including its business affairs and financial condition, its business plan, its immediate and long term prospects, its resources and ability to raise additional capital, as well as its acquisition, disposition, strategic and financing opportunities generally—that is not known to Seller and that may, if known by Seller, be material to a decision to acquire, hold, or dispose of the Units and the Note. Seller acknowledges that Seller has determined to enter the transactions contemplated by this Agreement notwithstanding its lack of knowledge of the information that Buyer is in possession of or may later come into possession of. Seller agrees that neither Buyer nor any other person shall have any liability to Seller or any other person or entity that is based, and Seller waives and releases any claims that it might have against Buyer or any other person that is based, in whole or in part, on any disparity in access to the Buyer’s knowledge, information or beliefs, including, without limitation, any claims under any federal or state securities laws, common law, statute, rule or regulation, whether known or unknown and whether or not suspected by Seller to exist. Seller further agrees that the foregoing provisions shall bar any claim that Seller was deceived or fraudulently induced into proceeding with entering into this Agreement or the transactions contemplated hereby based on any disparity in access to the Buyer’s knowledge, information or beliefs or any omission regarding the same. Seller acknowledges that Buyer has no duty, fiduciary or otherwise, to inform Seller of any such information. Seller has been made aware of such disparity of information and has received satisfactory answers to any questions Seller has asked and desires to complete the transactions contemplated by this Agreement. Seller acknowledges that as a result of the foregoing possibilities or events, the value of the ownership of Buyer represented by the Units and Note may increase or decrease, in certain cases, potentially significantly, that Seller shall not participate in the appreciation in value of such securities, and shall have no claim or right to adjustment with respect to any such appreciation (or depreciation) and Buyer does not have any obligation to provide Seller any other or further protection, consideration, value or notification. Seller further acknowledges that in entering this Agreement it is relying solely on the representations and warranties set forth herein, and that all other representations and warranties of any kind are expressly disclaimed by Buyer.
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Section2.09 No Other Representations or Warranties. Except for the representations and warranties contained in this ARTICLE II, neither Seller nor any director, officer, employee, or agent of Seller has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that the statements contained in this ARTICLE III are true and correct as of the date hereof. For purposes of this ARTICLE III, “Buyer’s knowledge,” “knowledge of Buyer” and any similar phrases shall mean the actual knowledge after due inquiry of E. Will Gray II and Michael J. Rugen.
Section3.01 Organization and Authority of Buyer; Enforceability. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the state of Nevada. Buyer has full corporate power and authority to enter into this Agreement and the documents to be delivered hereunder, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery, and performance by Buyer of this Agreement and the documents to be delivered hereunder and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action on the part of Buyer. This Agreement and the documents to be delivered hereunder have been duly executed and delivered by Buyer, and (assuming due authorization, execution, and delivery by Seller) this Agreement and the documents to be delivered hereunder constitute legal, valid, and binding obligations of Buyer enforceable against Buyer in accordance with their respective terms, except as may be limited by any bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other similar laws affecting the enforcement of creditors’ rights generally or by general principles of equity.
Section3.02 No Conflicts; Consents. The execution, delivery, and performance by Buyer of this Agreement and the documents to be delivered hereunder, and the consummation of the transactions contemplated hereby, do not and will not: (a) violate or conflict with the articles of incorporation, by-laws or other organizational documents of Buyer; or (b) violate or conflict with any judgment, order, decree, statute, law, ordinance, rule, or regulation applicable to Buyer, except where the violation or conflict would not, individually or in the aggregate, have a material adverse effect on Buyer’s ability to consummate the transactions contemplated hereby on a timely basis. No consent, approval, waiver, or authorization is required to be obtained by Buyer from any person or entity (including any governmental authority) in connection with the execution, delivery, and performance by Buyer of this Agreement and the consummation of the transactions contemplated hereby, except such consents, approvals, waivers, or authorizations which would not, in the aggregate, have a material adverse effect on Buyer’s ability to consummate the transactions contemplated hereby on a timely basis.
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Section3.03 Investment Purpose. Buyer is acquiring the Purchased Interests solely for its own account for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof. Buyer acknowledges that the Purchased Interests are not registered under the Securities Act or any state securities laws, and that the Purchased Interests may not be transferred or sold except pursuant to the registration provisions of the Securities Act or pursuant to an applicable exemption therefrom and subject to state securities laws and regulations, as applicable.
Section3.04 Brokers. No broker, finder, investment banker or other person is entitled to any brokerage, finder’s, or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Buyer.
Section 3.05 LegalProceedings. There is no Action pending or, to Buyer’s knowledge, threatened against or by Buyer that challenges or seeks to prevent, enjoin, or otherwise delay the transactions contemplated by this Agreement, except any Actions that would not, individually or in the aggregate, have a material adverse effect on Buyer’s ability to consummate the transactions contemplated hereby on a timely basis. To Buyer’s knowledge, no event has occurred or circumstances exist that may give rise or serve as a basis for any such Action.
Section 3.06 IndependentInvestigation. Buyer has conducted its own independent investigation, review and analysis of the Company, and acknowledges that it has been provided adequate access to the personnel, properties, assets, premises, books and records and other documents and data of Seller and the Company for such purpose. Buyer acknowledges and agrees that: (a) in making its decision to enter into this Agreement and to consummate the transactions contemplated hereby, Buyer has relied solely upon its own investigation and the express representations and warranties of Seller set forth in ARTICLE II of this Agreement; and (b) none of Seller, the Company or any other person has made any representation or warranty as to Seller, the Company or this Agreement, except as expressly set forth in ARTICLE II of this Agreement.
Section3.07 No Other Representations or Warranties. Except for the representations and warranties contained in this ARTICLE III, neither Buyer nor any director, officer, employee, or agent of Buyer has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Buyer.
ARTICLE IV
Closing Deliveries
Section4.01 Seller’s Deliveries. At the Closing, Seller shall deliver to Buyer the following:
(a) A counterpart signature page to the Assignment of Membership Interests, substantially in the form attached hereto as Exhibit B (the “Assignment”), duly executed by Seller;
(b) A counterpart signature page to the Deed of Trust and Security Agreement, substantially in the form attached hereto as Exhibit C (the “Deed of Trust”), duly executed by Seller;
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(c) A counterpart signature page to the Security and Pledge Agreement, substantially in the form attached hereto as Exhibit D (the “SecurityAgreement”), duly executed by Seller;
(d) A counterpart signature page to the Issuer Control Agreement, substantially in the form attached hereto as Exhibit E (the “ControlAgreement”), duly executed by Seller;
(e) Duly executed copies of the resignations of Seller’s representatives, if any, serving as a Manager (as defined in the LLC Agreement) of the Company or as an officer or director of the Company, such resignation to be effective as of the date hereof;
(f) A certificate of the Secretary or Assistant Secretary (or equivalent officer) of Seller certifying as to (i) the resolutions of the board of directors (or equivalent managing body) of Seller, duly adopted and in effect, which authorize the execution, delivery, and performance of this Agreement and the transactions contemplated hereby, and (ii) the names of the officers of Seller authorized to sign this Agreement and the documents to be delivered hereunder;
(g) A valid IRS Form W-9, Request for Taxpayer Identification Number and Certificate, duly executed by an officer of Seller; and
(h) If, and only if, Seller has not reimbursed Buyer the $2,500,000 funded by Buyer to the Company on Seller’s behalf for the Company’s purchase of the 203 acres in Ector County, Texas, then Seller will either pay to Buyer the amount so funded by Buyer and not yet reimbursed or Seller will deliver instructions to set off such amount against the Delayed Closing Payment.
Section4.02 Buyer’s Deliveries. At the Closing, Buyer shall deliver the following to Seller:
(a) The Purchase Price;
(b) A counterpart signature page to the Assignment, duly executed by Buyer;
(c) The Note, duly executed by Buyer;
(d) A counterpart signature page to the Deed of Trust, duly executed by the Company;
(e) A counterpart signature page to the Security Agreement, duly executed by Buyer and the Company;
(f) The Guaranty, substantially in the form attached hereto as Exhibit F (the “Guaranty”), duly executed by the Company;
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(g) A copy of the Amended and Restated Limited Liability Company Agreement, substantially in the form attached hereto as Exhibit G (the “Restated LLC Agreement”), duly executed by Buyer;
(h) A counterpart signature page to the Security Agreement, duly executed by Buyer and the Company;
(i) A counterpart signature page to the Issuer Control Agreement, duly executed by Buyer and the Company;
(j) A certificate of the Secretary or Assistant Secretary (or equivalent officer) of Buyer certifying as to (i) the resolutions of the board of directors (or equivalent managing body) of Buyer, duly adopted and in effect, which authorize the execution, delivery, and performance of this Agreement and the transactions contemplated hereby, and (ii) the names of the officers of Buyer authorized to sign this Agreement and the documents to be delivered hereunder; and
(k) A certificate of the Secretary or Assistant Secretary (or equivalent officer) of the Company certifying as to (i) the resolutions of the board of managers (or equivalent managing body) of the Company, duly adopted and in effect, which authorize the execution, delivery, and performance of the documents to be delivered by the Company hereunder.
ARTICLE V
Indemnification
Section5.01 Survival. Subject to the limitations and other provisions of this Agreement: (a) the representations and warranties contained herein and all related rights to indemnification shall survive the Closing and shall remain in full force and effect until the date that is 15 months from the Closing Date and (b) the covenants and agreements contained herein that by their nature are required to be performed following the Closing (and all related rights to indemnification) shall survive the Closing in accordance with their terms until fully performed. For the avoidance of doubt, the parties hereby agree and acknowledge that the survival periods in this Section 5.01 are contractual statutes of limitations and any claim brought by any party pursuant to this ARTICLE V must be brought or filed prior to the expiration of the applicable survival period. Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity (to the extent known at the time) and in writing by notice from the non-breaching party to the breaching party prior to the expiration date of the applicable survival period shall not thereafter be barred by the expiration of such survival period and such claims shall survive until finally resolved.
Section5.02 Indemnification By Seller. Subject to the other terms and conditions of this ARTICLE V, Seller shall defend, indemnify, and hold harmless Buyer, its affiliates, and their respective directors, officers, and employees from and against all actual and documented out-of-pocket losses, damages, liabilities, costs, or expenses, including reasonable attorneys’ fees and disbursements (a “Loss”), arising from or relating to:
(a) any inaccuracy in or breach of any of the representations or warranties of Seller contained in this Agreement;
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(b) any Loss arising from or relating to any breach or non-fulfillment of any covenant, agreement, or obligation to be performed by Seller pursuant to this Agreement; or
(c) any taxes, assessments or other governmental charges in the nature of tax imposed by a governmental authority (including any interest, penalty or addition thereto) imposed on or with respect to Seller or any of its affiliates (other than the Company or any of its subsidiaries) or direct or indirect owners thereof (including with respect to a consolidated, combined, or unitary group thereof or any tax return filed on a “pass-through” basis) or for which any of the foregoing may be liable as a transferee or successor, by operation of law, contract or other arrangement.
Section5.03 Indemnification By Buyer. Subject to the other terms and conditions of this ARTICLE V, Buyer shall defend, indemnify, and hold harmless Seller, its affiliates, and their respective directors, officers, and employees from and against all Losses arising from or relating to:
(a) any inaccuracy in or breach of any of the representations or warranties of Buyer contained in this Agreement; or
(b) any Loss arising from or relating to any breach or non-fulfillment of any covenant, agreement, or obligation to be performed by Buyer pursuant to this Agreement.
Section 5.04 IndemnificationProcedures.
(a) Whenever any claim shall arise for indemnification hereunder, the party to whom indemnification is owed (the “Indemnified Party”) shall promptly provide written notice of such claim (a “Claim Notice”) to the party who owed indemnification (the “IndemnifyingParty”). The failure to give prompt notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses by reason of such failure.
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(b) In connection with any claim giving rise to indemnification hereunder resulting from or arising out of any Action by a person or entity who is not a party to this Agreement (a “Third Party Claim”), the Indemnifying Party, at its sole cost and expense and upon written notice to the Indemnified Party within thirty (30) days of receipt of a Claim Notice from the Indemnified Party in respect of such Third Party Claim, may assume the defense thereof at the expense of the Indemnifying Party with counsel selected by the Indemnifying Party and reasonably satisfactory to the Indemnified Party; provided, however, that an Indemnifying Party shall not have the right to defend or direct the defense of any such Third Party Claim unless the Indemnifying Party has first acknowledged and agreed that such Indemnifying Party will be responsible for any and all Losses arising out of such claim. Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to assume the defense of any Third Party Claim if (i) such Third Party Claim seeks equitable or injunctive relief or could impose criminal liability or damages, (ii) if there are defenses available to the Indemnified Party that are not available to the Indemnifying Party or (iii) if such Third Party Claim would be material and adverse to the Indemnified Party with respect to the transactions contemplated hereby. The Indemnified Party shall have the right to defend, at the expense of the Indemnifying Party, any such Third Party Claim. The Indemnifying Party shall be liable for the fees and expenses of counsel employed by the Indemnified Party for any period during which the Indemnifying Party has failed to assume the defense thereof. If the Indemnifying Party does not expressly elect to assume the defense of such Third Party Claim within the time period and otherwise in accordance with the first sentence of this Section 5.04(b), the Indemnified Party shall have the right to assume the defense of such Third Party Claim and the Indemnifying Party shall be liable for the fees and expenses of counsel employed by the Indemnified Party and the amount of any such settlement, provided that the Indemnified Party shall not, without the prior written consent of the Indemnifying Party, enter into any settlement or compromise or consent to the entry of any judgment with respect to such Third Party Claim. If the Indemnifying Party assumes the defense of such Third Party Claim, the Indemnified Party shall have the right to employ separate counsel and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Indemnified Party unless the employment of such counsel shall have been specifically authorized in writing by the Indemnifying Party or the named parties to the Third Party Claim (including any impleaded parties) include both the Indemnified Party and the Indemnifying Party, and the Indemnified Party reasonably determines that representation by counsel to the Indemnifying Party of both the Indemnifying Party and such Indemnified Party may present such counsel with a conflict of interest. If the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnified Party shall, at the Indemnifying Party’s expense, cooperate with the Indemnifying Party in such defense and make available to the Indemnifying Party all witnesses, pertinent records, materials and information in the Indemnified Party’s possession or under the Indemnified Party’s control relating thereto as is reasonably required by the Indemnifying Party. If the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnifying Party shall not, without the prior written consent of the Indemnified Party, enter into any settlement or compromise or consent to the entry of any judgment with respect to such Third Party Claim if such settlement, compromise or judgment involves a finding or admission of wrongdoing, does not include an unconditional written release by the claimant or plaintiff of the Indemnified Party from all liability in respect of such Third Party Claim or imposes equitable remedies or any obligation on the Indemnified Party other than solely the payment of money damages for which the Indemnified Party will be indemnified hereunder.
Section5.05 Payments. Once a Loss is agreed to by the Indemnifying Party or finally adjudicated to be payable pursuant to this ARTICLE V, the Indemnifying Party shall satisfy its obligations within thirty (30) days of such agreement or final, non-appealable adjudication by wire transfer of immediately available funds.
Section5.06 Tax Treatment of Indemnification Payments. All indemnification payments made under this Agreement shall be treated by the parties as an adjustment to the Purchase Price for U.S. federal and applicable state and local income tax purposes, unless otherwise required by law.
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Section 5.07 ExclusiveRemedies. The parties acknowledge and agree that following the closing, the provisions of this ARTICLE V shall be their exclusive remedy for any and all claims relating to this Agreement, except for claims arising from intentional fraud, criminal activity, or willful misconduct on the part of a party hereto in connection with the transactions contemplated by this Agreement and claims for specific performance or other equitable remedies. For the avoidance of doubt, this Section 5.07 shall not limit the rights and remedies of Buyer or Seller pursuant to any other contract or agreement, including the Note, Pledge, Guaranty and Security Agreement.
Section5.08 Director and Officer Indemnification Liability.
(a) Buyer agrees that all rights to indemnification, advancement of expenses and exculpation by the Company now existing in favor of each person who is now, or has been at any time prior to the date hereof, an officer or director or manager of the Company, as provided in the governing or organizational documents of the Company, in each case as in effect on the date of this Agreement, or pursuant to any other agreements in effect on the date hereof, shall survive the Closing Date and shall continue in full force and effect in accordance with their respective terms.
(b) The obligations of Buyer and the Company under Section 5.08 shall not be terminated or modified in such a manner as to materially adversely affect any director or officer to whom this Section 5.08 applies without the consent of such affected director or officer or manager (it being expressly agreed that the directors and officers and managers to whom this Section 5.08 applies shall be third-party beneficiaries of this Section 5.08, each of whom may enforce the provisions of this Section 5.08).
(c) In the event the Company (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity in such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any person, then, and in either such case, proper provision shall be made so that the successors and assigns of the Company, as the case may be, shall assume all of the obligations set forth in this Section 5.08.
ARTICLE VI
Miscellaneous
Section6.01 Expenses. Except as otherwise provided in Section 1.04, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses.
Section6.02 Further Assurances. Following the Closing, each of the parties hereto shall, and shall cause their respective affiliates to, execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement.
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Section6.03 Notices. All notices, requests, consents, claims, demands, waivers, and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by e-mail of a PDF document or other electronic document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next day if sent after normal business hours of the recipient or (d) on the third (3^rd^) day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 6.03):
| If<br> to Seller: | SharonAI,<br> Inc.<br><br> <br>745<br> Fifth Avenue, Suite 500<br><br> <br>New<br> York, NY 10151<br><br> <br>Email:<br> legal@sharonai.ai<br><br> <br>Attention:<br> Chief Legal Officer |
|---|---|
| with a copy to: | Sheppard<br> Mullin Richter and Hampton LLP<br><br> <br>12275<br> El Camino Real, Suite 100<br><br> <br>San<br> Diego, CA 92130<br><br> <br>Email:<br> censz@sheppardmullin.com<br><br> <br>Attention:<br> Chad Ensz |
| If to Buyer: | New<br> Era Energy & Digital, Inc.<br><br> <br>4501<br> Santa Rosa Drive<br><br> <br>Midland,<br> Texas 79707<br><br> <br>Email:<br> will@newerahelium.com<br><br> <br>Attention:<br> E. Will Gray II, Chief Executive Officer |
| with a copy to: | Vinson<br> & Elkins, L.L.P.<br><br> <br>845<br> Texas Avenue, Suite 4700<br><br> <br>Houston,<br> Texas 77002<br><br> <br>Email:<br> smorgan@velaw.com; kfrank@velaw.com<br><br> <br>Attention:<br> Sarah K. Morgan; Katherine Terrell Frank |
Section6.04 Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.
Section6.05 Severability. If any term or provision of this Agreement is invalid, illegal, or unenforceable in any jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal, or unenforceable, the parties hereto shall negotiate in good faith to modify the Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
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Section6.06 Entire Agreement. This Agreement and the documents to be delivered hereunder constitute the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein, and supersede all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter.
Section6.07 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither party may assign its rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld, conditioned or delayed. No assignment shall relieve the assigning party of any of its obligations hereunder.
Section6.08 No Third-Party Beneficiaries. Except as provided in ARTICLE V, this Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other person or entity any legal or equitable right, benefit, or remedy of any nature whatsoever under or by reason of this Agreement.
Section6.09 Amendment and Modification. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party hereto.
Section6.10 Waiver. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach, or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power, or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power, or privilege.
Section6.11 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction).
Section6.12 Submission to Jurisdiction. Any legal suit, action, or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby may be instituted in the federal courts of the United States of America or the courts of the State of Delaware in the United States District Court for the District of Delaware or in the Court of Chancery of the State of Delaware (or, if such court lacks subject matter jurisdiction, in the Superior Court of the State of Delaware), so long as one of such courts shall have subject matter jurisdiction over such legal suit, action, or proceeding, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action, or proceeding.
Section6.13 Waiver of Jury Trial. Each party acknowledges and agrees that any controversy which may arise under this Agreement is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Agreement or the transactions contemplated hereby.
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Section6.14 Specific Performance. The parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy to which they are entitled at law or in equity.
Section 6.15 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail, or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
Section6.16 Public Announcement. Neither party shall (orally or in writing) publicly disclose, issue any press release or make any other public statement, or otherwise communicate with the media, concerning the existence of this Agreement or the subject matter hereof, without the prior written approval of the other party (which shall not be unreasonably withheld, conditioned or delayed), except if and to the extent that such party is required to make any public disclosure or filing (“RequiredDisclosure”) regarding the subject matter of this Agreement (i) by applicable law, (ii) pursuant to any rules or regulations of any securities exchange of which the securities of such party or any of its affiliates are listed or traded, or (iii) in connection with enforcing its rights under this Agreement. In each case pursuant to clauses (i) or (ii) of this Section 6.16, the party making any Required Disclosure shall consult with the other party regarding the substance of the Required Disclosure and provide the other party a reasonable opportunity (taking into account any legally mandated time constraints) to review and comment on the content of the Required Disclosure prior to its publication or filing.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
| SharonAI, Inc. | |
|---|---|
| By | /s/<br> James Manning |
| Name: | James<br> Manning |
| Title: | Chair |
| New Era Energy & Digital, Inc. | |
| By | /s/<br> E. Will Gray II |
| Name: | E. Will<br> Gray II |
| Title: | Chief<br> Executive Officer |
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ExhibitA
Formof Note
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ExhibitB
Formof Assignment
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ExhibitC
Formof Deed of Trust
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ExhibitD
Formof Security Agreement
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ExhibitE
Formof Control Agreement
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ExhibitF
Formof Guaranty
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ExhibitG
Formof Restated LLC Agreement
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Exhibit 10.2
Execution Version
Original Issue Date: January 16, 2026
Principal Amount: $50,000,000
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
THIS SENIOR SECURED CONVERTIBLE PROMISSORY NOTE (this “Note”) is a duly authorized and validly issued debt obligation of New Era Energy & Digital Inc., a Nevada corporation (the “Company” or the “Borrower”), having its principal place of business at 4501 Santa Rosa Drive, Midland, Texas 79707 and is issued pursuant to and in accordance with the Purchase Agreement (as defined below) between the Company and the Holder (as defined below).
FOR VALUE RECEIVED, the Company promises to pay to SharonAI, Inc., or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of $50,000,000 (or such lower amount as remains outstanding at such time) and any other sums due hereunder on the Maturity Date (as defined below), or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the then outstanding principal amount of this Note in accordance with the provisions hereof. This Note is subject to the following additional provisions:
Section 1. Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Note, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:
“Bankruptcy Event” means any of the following events with respect to any juridical entity: (a) the entity commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the entity, (b) there is commenced against the entity any such case or proceeding that is not dismissed within sixty days after commencement, (c) the entity is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the entity suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within sixty calendar days after such appointment, (e) the entity makes a general assignment for the benefit of creditors, or (f) the entity, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which the New York Federal Reserve Bank is closed.
“Change of Control Transaction” means the occurrence after the date hereof of any of the following: (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of effective control (whether through legal or beneficial ownership of capital stock, by contract or otherwise) of in excess of fifty percent (50%) of the voting securities of either the Company or TCDC, (b) TCDC sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company or members of TCDC, as applicable, immediately prior to such transaction cease to own in excess of fifty percent (50%) of the aggregate voting power of the acquiring entity immediately after the transaction, or (c) the Company sells or transfers all or substantially all of its equity interests in TCDC to another Person and the stockholders of the Company or members of TCDC, as applicable, immediately prior to such transaction cease to own in excess of fifty percent (50%) of the aggregate voting power of the acquiring entity immediately after the transaction.
“Collateral” shall have the meaning set forth in Section 8(k).
“Conversion Price” shall be the Daily VWAP of the Common Stock on the Nasdaq Global Market for the thirty Trading Days immediately preceding, but not including, the Maturity Date, Optional Redemption Date or the date of an Event of Default (the “Conversion Period”), as applicable, and as adjusted for any stock split, reverse stock split, in-kind dividend, stock combination recapitalization or other similar transaction involving the shares of Common Stock during such Conversion Period or Optional Redemption Period. Notwithstanding the foregoing, in no event shall the Conversion Price be less than 20% of the Nasdaq Official Closing Price on the date hereof.
“Daily VWAP” means the volume-weighted average price per share of Common Stock (calculated to the nearest one-hundredth of one cent) as displayed under the heading “Bloomberg VWAP” on the Bloomberg AQR screen page of New Era Energy & Digital, Inc. (or, if such page is not available, its equivalent successor page) in respect of the period beginning at 9:30:01 a.m., New York time (or such other time as the Nasdaq Global Market publicly announces is the official open of trading) and ending at 4:00:00 p.m., New York time (or such other time as the Nasdaq Global Market publicly announces is the official close of trading) on a given Trading Day.
“Event of Default” shall have the meaning set forth in Section 5(a).
“GAAP” means generally accepted accounting principles in the United States of America as in effect from time to time.
“Lien” means any mortgage, pledge, hypothecation, encumbrance, lien (statutory or other), charge, or other security interest, in each case in the nature of a security interest securing indebtedness for borrowed money.
“Maturity Date” means, except to the extent earlier redeemed in accordance with Section 2 hereof, June 30, 2026.
“Note Register” shall have the meaning set forth in Section 2(b).
“Optional Redemption” shall have the meaning set forth in Section 2(c).
“Optional Redemption Amount” means the sum of (a) 100% of the then outstanding principal amount of this Note elected by the Company to be redeemed, plus (b) accrued but unpaid interest on such principal amount and plus (c) in the case of any election by the Company to redeem this Note in full, all other amounts due in respect of this Note.
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“Optional Redemption Date” shall have the meaning set forth in Section 2(c).
“Optional Redemption Notice” shall have the meaning set forth in Section 2(c).
“Optional Redemption Notice Date” shall have the meaning set forth in Section 2(c).
“Optional Redemption Period” shall have the meaning set forth in Section 2(c).
“Original Issue Date” means the date of the first issuance of the Note, as set forth on the first page hereof, regardless of any transfers of any Note and regardless of the number of instruments which may be issued to evidence such Note.
“Person” means any individual, corporation, limited liability company, trust, joint venture, association, company, limited or general partnership, unincorporated organization, governmental authority, or other entity.
“Purchase Agreement” means the Membership Interest Purchase Agreement, dated as of January 16, 2026 between the Company and the original Holder, as amended, modified or supplemented from time to time in accordance with its terms pursuant to which this Note is issued.
“TCDC” means Texas Critical Data Centers LLC, a Delaware limited liability company.
“Trading Day” means any day on which the Nasdaq Global Market is open for trading during its regular trading session, regardless of whether the Common Stock actually trades on such day; provided, that if the Common Stock is not listed on the Nasdaq Global Market at the applicable time, then “Trading Day” means any day on which the principal national securities exchange or trading market on which the Common Stock is then listed or quoted is open for trading during its regular trading session, regardless of whether the Common Stock actually trades on such day.
“Transaction Documents” means this Note, the Purchase Agreement, the Security and Pledge Agreement executed by Borrower and TCDC, the Issuer Control Agreement executed by Borrower and TCDC and the Guaranty executed by TCDC.
Section 2. Interest and Redemption.
a) Payment of Interest in Cash. The Company shall pay interest to the Holder on the aggregate outstanding principal amount of this Note at the rate of 10.00% per annum (the “Regular Interest Rate”) payable on the Maturity Date (the “Interest Payment Date”) (if the Interest Payment Date is not a Business Day, then the applicable payment shall be due on the next succeeding Business Day), in cash. Upon the occurrence of an Event of Default and continuing until all amounts outstanding under this Note in respect of principal and interest are paid, the Company shall pay interest to the Holder on any past due amounts owing under this Note at the rate of 18% per annum (the “Default Interest Rate”).
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b) Interest Calculations. Interest at the Regular Interest Rate or the Default Interest Rate, as applicable, shall be calculated for the actual number of days elapsed on the basis of a 365-day year and shall not compound. Interest at the Regular Interest Rate and Default Interest Rate shall be payable on the Maturity Date. Interest hereunder will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note (the “Note Register”).
c) Optional Redemption. At any time after the Original Issue Date and before the Maturity Date, the Company may, deliver one or more written notices to the Holder (an “Optional Redemption Notice” and the date any such notice is deemed delivered hereunder, the “Optional Redemption Notice Date”) of its irrevocable election (provided that any such election may be delivered subject to and conditioned upon the closing and/or funding of any related transaction) to redeem all or any portion of the then outstanding principal amount of this Note together with interest accrued therein for cash in an amount equal to the Optional Redemption Amount on the tenth Business Day following any Optional Redemption Notice Date (such date, the “Optional Redemption Date”, such 10 Business Day period, the “Optional Redemption Period” and each such redemption, an “Optional Redemption”). The applicable Optional Redemption Amount is payable in full on the applicable Optional Redemption Date.
Section 3. Registration of Transfers and Exchanges.
a) Investment Representations. This Note has been issued subject to certain investment representations of the original Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.
b) Reliance on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary. The Company shall update the Note Register to reflect permitted transferees and assignees of the Note. The Note Register shall include the name and address of each Holder and principal amount (and stated interest) owing to each Holder pursuant to the terms of this Note.
Section 4. Conversion.
a) Conversion Event. Holder has the right, at its option to convert an aggregate principal amount of up to $10 million of the Note (the “Conversion Amount”), into shares of the Borrower’s common stock, par value $0.0001 per share (“Common Stock”) solely upon the Maturity Date or upon any applicable Optional Redemption Date or in the case of the acceleration of the payment of the entire principal of this Note due to an Event of Default (such date, the “Accelerated Due Date”). The number of shares of Common Stock the Company issues upon such conversion (“Conversion Shares”) will equal the quotient (rounded down to the nearest whole share) obtained by dividing (x) the Conversion Amount by (y) the Conversion Price. At least five days prior to Maturity Date or Optional Redemption Date, as applicable, the Holder will notify the Borrower in writing of its option to convert a portion of this Note and the Conversion Amount to be converted.
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b) Authorized Shares. The Borrower represents that upon issuance, the Conversion Shares will be validly issued, fully paid and non-assessable. The Borrower (i) acknowledges that it will instruct its transfer agent to have the Conversion Shares issued as contemplated by Section 4(a) hereof, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers, and agents who are charged with the duty of causing the Borrower to electronically issue shares of Common Stock to execute and cause the Conversion Shares to be issued as contemplated by Section 4(a) hereof in accordance with the terms and conditions of this Note.
c) Method of Conversion.
(1) Payment of Taxes. The Borrower shall not be required to pay any documentary, stamp, transfer or similar tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.
(2) Delivery of Common Stock Upon Conversion. Upon conversion of this Note into Conversion Shares, the Borrower shall cause the issuance and delivery of the Conversion Shares in book-entry form on the books of the Company’s transfer agent as contemplated by Section 4(a) hereof) on the Maturity Date or the applicable Optional Redemption Date, as applicable, or promptly after notice of conversion from the Holder on or after the Accelerated Due Date.
d) Concerning the Shares. The Conversion Shares issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Securities Act of 1933, as amended (“1933 Act”), or (ii) such shares are sold pursuant to an exemption from such registration. Subject to the removal provisions set forth below, until such time as the Conversion Shares have been registered under the 1933 Act or otherwise may be sold pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption without any restriction as to the number of securities as of a particular date that can then be immediately sold, each book-entry position for the Conversion Shares that has not been included in an effective registration or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:
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“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN EXEMPTION FROM REGISTRATION UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
Upon the request of the Holder, the legend set forth above shall be removed if, unless otherwise required by applicable state securities laws, such Conversion Shares are (i) sold pursuant to an effective registration statement filed under the 1933 Act, (ii) Holder provides a legal counsel opinion to the effect that a public sale or transfer of such Conversion Shares may be made without registration under the 1933 Act, or (iii) sold pursuant to Rule 144, Rule 144A, Regulation S, or other applicable exemption without any restriction; provided that the Holder has provided all documentation and evidence (which may include an opinion of counsel) as may be reasonably required by the Company or its transfer agent to confirm that such legend may be removed under applicable securities laws. The Company shall be responsible for the fees of its transfer agent associated with any such issuance. The Holder agrees to sell all Conversion Shares in compliance with applicable prospectus delivery requirements, if any.
e) Effect of Certain Events.
(1) Effect of Merger, Consolidation, Etc. The sale, conveyance or disposition of all or substantially all of the assets of the Borrower related to TCDC, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall be treated pursuant to Section 4(e)(2) hereof.
(2) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to the full satisfaction of the conversion rights under Section 4(a), there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower related to TCDC other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in accordance with Section 4(a) immediately prior to such transaction, and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges prior to satisfaction of the conversion rights under Section 4(a).
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f) Exchange Limitation. Notwithstanding anything in this Note to the contrary, the Company shall not issue any Conversion Shares upon conversion of this Note, if the issuance of such Conversion Shares, together with any shares of Common Stock issued in connection with the Purchase Agreement and with any other related transactions that may be considered part of the same series of transactions, would exceed 19.99% of the outstanding Common Stock of the Company or 19.99% or more of the outstanding voting power of the Company, each as of the date hereof (the “Nasdaq Maximum”), or that would otherwise violate the Company’s obligations under the rules or regulations of the Nasdaq Stock Market LLC, except that such limitation shall not apply in the event that the Company obtains the approval of its shareholders as required by the applicable rules of the Nasdaq Stock Market LLC for issuances of shares of Common Stock in excess of such amount. The Company agrees to, as promptly as practicable and in no more than 90 days from the date hereof, hold a special meeting of stockholders to approve the issuance of Common Stock in excess of the Nasdaq Maximum. Any failure by the Company to issue shares as a result of the limitations imposed by this Section 4(f) shall in no way be considered (i) a breach or default of any provision of this Note or (ii) an Event of Default.
Section 5. Events of Default.
a) “Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
i. any default in the payment of (A) the principal amount of this Note or (B) interest and other amounts owing to the Holder on this Note, as and when the same shall become due and payable (whether on a Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within five Trading Days;
ii. the Company shall fail to observe or perform any other covenant or agreement contained in this Note and such failure shall remain uncured or unremedied for ten calendar days after receipt of written notice from the Holder of such failure;
iii. a breach, default, event of default or the failure to observe or perform any covenant or agreement (subject to any grace or cure period provided in the applicable agreement, document or instrument) by the Company or TCDC shall occur under any of the Transaction Documents (and not covered by any other clause of this Section 5) and such event shall remain uncured or unremedied for ten calendar days after receipt of written notice from the Holder of such event;
iv. [Reserved];
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v. any representation or warranty made in this Note, any other Transaction Documents, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to the Holder shall be untrue or incorrect in any material respect (or, to the extent such representation or warranty is qualified by materiality or material adverse effect, in any respect) as of the date when made or deemed made and such event shall remain uncured or unremedied for thirty calendar days after receipt of written notice from the Holder of such event;
vi. the Company or TCDC shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money that results in any such indebtedness greater than $2,500,000 in the aggregate becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;
vii. the Company or TCDC or any Significant Subsidiary of the Company (as such term is defined in Rule 1.02(w) or Regulation S-X) shall be subject to a Bankruptcy Event;
viii. the occurrence of any Change of Control Transaction (other than any such Change of Control Transaction that results in the payment or other satisfaction in full of this Note);
ix. the occurrence of any levy upon or seizure or attachment of, or any uninsured loss of or damage to, the Collateral of the Borrower or TCDC having an aggregate fair value or repair cost (as the case may be) in excess of $10,000,000 individually or in the aggregate, and any such levy, seizure or attachment shall not be set aside, bonded or discharged within sixty days after the date thereof;
x. a final and non-appealable monetary judgment, writ or similar final process, as determined by a court of competent jurisdiction, shall be entered or filed against the Company or TCDC or any of their respective Collateral for more than $10,000,000 and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of sixty calendar days;
xi. prior to the payment in full and satisfaction of the amount owed under this Note, any security interest and Lien purported to be created by any Transaction Document shall cease to be in full force and effect, or shall cease to give the Holder, the Liens, rights, powers and privileges purported to be created and granted under such Transaction Documents (including a perfected priority security interest in and Lien on all of the Collateral thereunder (except as otherwise expressly provided in such Transaction Document)) in favor of the Holder, or shall be asserted by the Company or any affiliate(s) not to be a valid, perfected, priority (except as otherwise expressly provided in this Note, any such Transaction Document) security interest in or Lien on the Collateral covered thereby;
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xii. if, at any time on or after the Original Issue Date, the Borrower’s Common Stock (A) is suspended from trading, (B) halted from trading, and/or (C) fails to be quoted or listed (as applicable) on the Nasdaq Stock Market LLC, or its successor or another national exchange, in each case, for a period of more than twenty trading days; and/or
xiii. the restatement of the audited financial statements filed by the Borrower with the SEC resulting from fraud or willful misconduct for any date or period from the year prior to the Original Issue Date of this Note and until this Note is no longer outstanding, other than (i) corrections that do not require a Form 8-K under Item 4.02(a) or reissuance of previously issued financial statements, or (ii) restatements required solely to reflect changes in GAAP first effective after the Original Issue Date.
b) Remedies Upon Event of Default. If an Event of Default has occurred and is continuing, Holder will have the right to accelerate payment of the entire principal of this Note, and, upon such acceleration, this Note will thereupon become forthwith due and payable, and the Company will forthwith pay to Holder the entire outstanding principal of, and all accrued interest on, this Note; provided, that in the case of an Event of Default under Section 5(a)(vii), the entire principal of this Note shall become immediately due and payable in full, and the Company will forthwith pay to Holder the entire outstanding principal of, and all accrued interest on, this Note. Commencing on the occurrence of any Event of Default and for as long an Event of Default is not cured, the interest rate on any past due amounts under this Note as set forth in Section 2 above shall accrue at the Default Interest Rate. Upon the payment in full in cash or other satisfaction in full of this Note (including by conversion or otherwise), the Holder shall promptly surrender this Note to or as directed by the Company. In connection with any acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may, while any Event of Default is continuing, enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Any such acceleration may be rescinded and annulled by the Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 5(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. The Borrower shall pay the Holder hereof costs of collection, including reasonable and documented out-of-pocket attorneys’ fees.
Section 6. Negative Covenants. As long as any portion of this Note remains outstanding, unless the Holder shall have otherwise given prior written consent, the Company shall not directly or indirectly:
a) lend money, give credit, make advances to or enter into any transaction with any affiliates of the Borrower, except (i) investments in subsidiaries and (ii) transactions that are entered into in the ordinary course of business, on fair and reasonable terms no less favorable to the Borrower than those that would have been obtained in a comparable transaction on an arm’s length basis from a Person that is not an affiliate as determined in good faith by the Borrower’s board of directors or audit committee, and in compliance with applicable securities laws;
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b) merge, dissolve, liquidate, consolidate with or into another Person, or sell, transfer, license, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets related to TCDC whether now owned or hereafter acquired, in each case in a transaction that would constitute a Change of Control Transaction (other than any such Change of Control Transaction that results in the payment or other satisfaction in full of this Note); or
c) enter into, create, incur, assume or suffer to exist any Liens securing debt for borrowed money, on or with respect to any property, assets or revenues now owned or hereafter acquired without the consent of the Holder (not to be unreasonably withheld, conditioned or delayed).
Section 7. Affirmative Covenants. As long as any portion of this Note remains outstanding, the Company shall:
a) preserve, renew and maintain in all material respects in full force and effect its legal existence and good standing under the laws of the jurisdiction of its organization and take all reasonable action to maintain all rights, licenses, permits, privileges and franchises necessary or desirable in the normal conduct of its business, in each case except as would not reasonably be expected to cause a material adverse effect;
b) comply with the requirements of all laws and all orders, writs, injunctions and decrees applicable to it, in each case except as would not reasonably be expected to cause a material adverse effect;
c) maintain proper books of record and account in conformity with GAAP consistently applied (subject, in the case of unaudited financial statements, to year-end and other adjustments required or recommended by independent auditors) are made of all financial transactions and matters involving the assets and business of the Company;
d) upon the occurrence of any Event of Default and for as long as an Event of Default is continuing, permit representatives of the Holder to visit and inspect any of the Company’s properties, to examine its organizational, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss the Company’s affairs, finances and accounts with the Company’s directors and officers, all at the reasonable expense of the Company and at such reasonable times during normal business hours, provided, that Holder shall be limited to one such visit and inspection at Company’s expense during any calendar year;
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e) the Company shall refrain from disclosing any material non-public information about the Company to the Holder, unless a simultaneous public announcement thereof is made by the Company in the manner contemplated by Regulation FD. In the event of a breach of the foregoing covenant by the Company (as determined in the reasonable good faith judgment of the Holder), (i) the Holder shall promptly provide written notice of such breach to the Company and (ii) the Company shall publicly disclose such material, non-public information within 24 hours following demand therefor by the Holder; and
f) until the time that Holder does not own any Conversion Shares, the Company covenants to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.
Section 8. Miscellaneous.
a) Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder shall be in writing and delivered personally, by electronic mail or sent by a nationally recognized overnight courier service, addressed to the Company, at the email address or mailing address set forth on its signature page hereto, or such other electronic mail or address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 8(a). Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by electronic mail, or sent by a nationally recognized overnight courier service addressed to the Holder at the email address, or address of the Holder appearing on the books of the Company, or if no such email address or address appears on the books of the Company, at the principal place of business of such Holder, as set forth in the Purchase Agreement, or such other electronic mail or address as the Holder may specify for such purposes by notice to the Company delivered in accordance with this Section 8(a). Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via electronic mail prior to 5:30 p.m. (New York City time) on any Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via electronic mail on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second (2nd)Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.
b) Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay (or satisfy via conversion in accordance with Section 4) the principal of and accrued interest, as applicable, on this Note at the time, place, and rate, and in the currency, herein prescribed. This Note is a direct debt obligation of the Company.
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c) Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.
d) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Note and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the State of Delaware. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of Delaware for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
e) Amendment; Waiver. Any term of this Note may be amended or waived with the written consent of the Company and the Holder.
f) Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.
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g) Costs of Collection and Enforcement. The Company agrees to pay any collection expense, court costs and, to the extent allowed by applicable law, reasonable and documented out-of-pocket attorneys’ fees and legal fees, (whether or not suit is commenced) which are incurred in the collection or enforcement of this Note or of any part hereof or any of the other Transaction Documents; and in the event suit is brought to enforce payment hereof, that such expenses, costs and fees be determined by a court sitting without a jury. Attorneys’ fees shall include any such reasonable and documented out-of-pocket fees incurred in any Bankruptcy Event, appellate or related ancillary or supplemental proceedings, whether before or after final judgment related to the enforcement or defense of this Note and any of the other Transaction Documents.
h) Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief). It is agreed and understood that no party shall be liable to any other party for consequential, punitive, special, indirect or exemplary losses or damages alleged in connection with the Transaction Documents of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the party has been advised of the likelihood of such loss or damage and regardless of the form of action. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Note.
i) Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.
j) Headings. The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.
k) Secured Obligation. The obligations of the Company under this Note are secured by the Company’s ownership interests in TCDC, and substantially all of TCDC’s assets (such assets, other than any expressly excluded under the terms of the Transaction Documents, the “Collateral”), in each case pursuant to the Security and Pledge Agreement, dated as of January 16, 2026, between TCDC, the Company, and the initial Holder and the Deed of Trust and Security Agreement, dated as of January 16, 2026, between TCDC and the initial Holder.
l) Tax Form. On or prior to the date on which the Holder acquires an interest in this Note (and from time to time upon the reasonable request of the Company), the Holder shall provide the Company a valid Internal Revenue Service Form W-9, Request for Taxpayer Identification Number and Certificate, duly executed by an officer of Holder establishing that the Holder is exempt from U.S. federal backup withholding tax.
(Signature Pages Follow)
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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.
| NEW ERA ENERGY & DIGITAL, INC. | ||
|---|---|---|
| By: | /s/ E. Will Gray II | |
| Name: | E. Will Gray II | |
| Title: | Chairman and Chief Executive Officer | |
| Mailing Address for Notices: | ||
| 4501 Santa Rosa Drive, Midland, Texas 79707 | ||
| Email Address for delivery of Notices: |
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Exhibit 10.3
Execution Version
GUARANTY
This GUARANTY (this “Agreement”), dated as of January 16, 2026, is made by and among the Persons listed on the signature pages hereof under the caption “Guarantors” (such Persons, collectively, the “Guarantors,” and individually, each a “Guarantor”) and SharonAI, Inc., a Delaware corporation (the “Lender”).
Recitals
WHEREAS, New Era Energy & Digital, Inc., a Nevada corporation (the “Borrower”), has entered into a Membership Interest Purchase Agreement (“MIPA”), Senior Secured Convertible Promissory Note (“Secured Note”) and Security and Pledge Agreement (“Pledge Agreement”) with Lender dated as of the date hereof (each a “Loan Document,” and collectively the “Loan Documents”; capitalized terms used herein without definition shall have the meanings ascribed thereto in the Loan Documents, with the following order of seniority in the case of conflicts, the Secured Note, then the Pledge, then the MIPA).
WHEREAS, each Guarantor will derive substantial direct and indirect benefits from the transactions contemplated by the Loan Documents.
WHEREAS, Lender would not have entered into the Loan Documents without each Guarantor executing and delivering this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce the Lender to make Loan, each Guarantor, jointly and severally with each other Guarantor, hereby agrees as follows:
Article I Definitions
For purposes of this Agreement, the following terms shall have the following meanings:
“Applicable Law” means, as to any Person, all applicable Laws binding upon such Person or to which such a Person is subject.
“Bankruptcy Code” means Title 11 of the United States Code, as amended, or any similar federal or state law for the relief of debtors.
“Debtor Relief Laws” means the Bankruptcy Code and all other liquidation, bankruptcy, assignment for the benefit of creditors, conservatorship, moratorium, receivership, insolvency, rearrangement, reorganization, or similar debtor relief laws of the US or other applicable jurisdictions in effect from time to time.
“Governmental Authority” means the government of any nation or any political subdivision thereof, whether at the national, state, territorial, provincial, municipal, or any other level, 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).
“Guarantors” has the meaning specified in the Preamble hereof.
“Indemnitee” has the meaning specified in Section 6.02.
“Lender” has the meaning specified in the Preamble hereof.
“Obligations” has the meaning specified in Section 2.01.
“Payment in Full” means the payment in full in cash or other satisfaction (including by conversion) of all Obligations (other than contingent indemnification obligations for which no claim has been asserted) in accordance with the Loan Documents.
“Related Parties” means, with respect to any Person, such Person’s Affiliates and the directors, officers, employees, partners, agents, brokers, trustees, administrators, managers, advisors, and representatives, including accountants, auditors, and legal counsel, of it and its Affiliates.
“Termination Date” has the meaning specified in Section 6.05.
Article II Agreement to Guarantee Obligations
Guaranty. Each Guarantor hereby absolutely, unconditionally, and irrevocably guarantees, as primary obligor and not merely as surety,
(a) the due and prompt payment by the Borrower of:
(i) the principal of and premium, if any, and interest at the rate specified in the Secured Note (including interest accruing during the pendency of any bankruptcy, insolvency, receivership, or other similar proceeding, regardless of whether allowed or allowable in such proceeding), when and as due, whether at scheduled maturity or the date set for prepayment, by acceleration or otherwise, and
(ii) all other monetary obligations of the Borrower to the Lender under any of the Loan Documents, when and as due, including reasonable and documented out-of-pocket fees, costs, expenses (including, without limitation, fees and expenses (including the reasonable and documented out-of-pocket fees and expenses of one counsel to the Lender in enforcing rights under this Agreement or any other Loan Document)), contract causes of action and indemnities, whether primary, secondary, direct or indirect, absolute or contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership, or other similar proceeding, regardless of whether allowed or allowable in such proceeding); and
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(b) the due and prompt performance of all covenants, agreements, obligations, and liabilities of the Borrower under or in respect of the Loan Documents; all such obligations in subsections (a) through (b), whether now or hereafter existing, being referred to collectively as the “Obligations.” Each Guarantor further agrees that all or part of the Obligations may be increased, extended, substituted, amended, renewed, or otherwise modified without notice to or consent from such Guarantor and such actions shall not affect the liability of such Guarantor hereunder. Without limiting the generality of the foregoing, each Guarantor’s liability shall extend to all amounts that constitute part of the Obligations and would be owed by any other Loan Party to the Lender under or in respect of the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization, or similar proceeding involving such other Loan Party.
Notwithstanding anything contained herein to the contrary, the obligations of each Guarantor hereunder at any time shall be limited to the maximum amount as will result in the obligations of such Guarantor under this Agreement not constituting a fraudulent transfer or conveyance for purposes of any Debtor Relief Law to the extent applicable to this Agreement and the obligations of such Guarantor hereunder.
Reinstatement. Each Guarantor agrees that its guaranty hereunder shall continue to be effective or be reinstated, as the case may be, if at any time all or part of any payment of any Obligation is rescinded or must otherwise be returned by the Lender or any other Person upon the insolvency, bankruptcy, or reorganization of the Borrower or any other Loan Party or otherwise.
Article III Guaranty Absolute and Unconditional; Waivers
Guaranty Absolute and Unconditional; No Waiver of Obligations. Each Guarantor guarantees that the Obligations will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation, or order of any Governmental Authority now or hereafter in effect. The obligations of each Guarantor hereunder are independent of the obligations of any other Guarantor or any other Loan Party under any Loan Document. A separate action may be brought against each Guarantor to enforce this Agreement, whether or not any action is brought against the Borrower or any other Loan Party or whether or not the Borrower or any other Loan Party is joined in any such action. The liability of each Guarantor hereunder is irrevocable, continuing, absolute, and unconditional and the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise effected by, and each Guarantor hereby irrevocably waives any defenses to enforcement it may have (now or in the future) by reason of:
(a) any illegality or lack of validity or enforceability of any Obligation or any Loan Document, or any related agreement or instrument;
(b) any change in the time, place, or manner of payment of, or in any other term of, the Obligations or any other obligation of any Loan Party under any Loan Document, or any rescission, waiver, amendment, or other modification of any Loan Document or any other agreement, including any increase in the Obligations resulting from any extension of additional credit or otherwise;
(c) any taking, exchange, substitution, release, impairment, or non-perfection of any collateral, or any taking, release, impairment, amendment, waiver, or other modification of any guaranty, for the Obligations;
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(d) any manner of sale, disposition, or application of proceeds of any collateral or other assets to all or part of the Obligations;
(e) any default, failure, or delay, willful or otherwise, in the performance of the Obligations;
(f) any change, restructuring, or termination of the corporate structure, ownership, or existence of any Loan Party or any of its Subsidiaries, or any insolvency, bankruptcy, reorganization, or other similar proceeding affecting the Borrower or its assets, or any resulting release or discharge of any Obligation;
(g) any failure of the Lender to disclose to any Loan Party any information relating to the business, condition (financial or otherwise), operations, performance, properties, or prospects of any other Loan Party now or hereafter known to the Lender; each Guarantor waiving any duty of the Lender to disclose such information;
(h) the release or reduction of liability of any Guarantor, or other guarantor or surety, with respect to the Obligations;
(i) the failure of the Lender to assert any claim or demand or to exercise or enforce any right or remedy under the provisions of any Loan Document or otherwise;
(j) any defense, set-off, or counterclaim (other than a defense of payment or performance) that may at any time be available to, or be asserted by, the Borrower against the Lender; or
(k) any other circumstance or manner of administering the Loans or any existence of or reliance on any representation by the Lender, in each case that would reasonably be expected to adversely impact the credit risk of any Guarantor or otherwise operate as a defense available to, or a legal or equitable discharge of, any Loan Party or any other guarantor or surety.
Each Guarantor acknowledges that it has received adequate consideration for entering into this Guaranty and that all waivers and acknowledgments under this Article III by such Guarantor are knowingly made.
Section 3.02 Waivers and Acknowledgments.
(a) Each Guarantor hereby unconditionally and irrevocably waives any right to revoke this Agreement and acknowledges that this Agreement is continuing in nature and applies to all presently existing and future Obligations.
(b) Each Guarantor hereby unconditionally and irrevocably waives promptness, diligence, notice of acceptance, presentment, demand for performance, notice of nonperformance, default, acceleration, protest or dishonor, and any other notice with respect to any of the Obligations and this Agreement, and any requirement that the Lender protect, secure, perfect, or insure any Lien or any property subject thereto.
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(c) Each Guarantor hereby unconditionally and irrevocably waives any defense based on any right of set-off or recoupment or counterclaim against or in respect of the obligations of such Guarantor hereunder.
(d) Each Guarantor acknowledges that the Lender may, at its election and without notice to or demand upon such Guarantor, foreclose on any collateral held by it by one or more judicial or non-judicial sales, accept an assignment of any such collateral in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with the Borrower or any other guarantor, or exercise any other right or remedy available to it against the Borrower or any other guarantor, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent Payment in Full has occurred. Each Guarantor hereby waives any defense arising out of such election even though such election operates, pursuant to Applicable Law, to impair or to extinguish any right of subrogation, reimbursement, exoneration, contribution, or indemnification, or other right or remedy of such Guarantor against the Borrower or any other Guarantor or guarantor or any collateral or any other collateral.
Article IV Guarantor Rights of Subrogation, Etc.
Section 4.01 Agreement to Pay; Subrogation, Subordination, Etc. Without limiting any other right that the Lender has at law or in equity against any Guarantor, if the Borrower or any other Loan Party fails to pay any Obligation when and as due, whether at maturity, by acceleration, after notice of prepayment, or otherwise, each Guarantor agrees to promptly pay the amount of such unpaid Obligations to the Lender in cash. Upon payment by any Guarantor of any sums to the Lender as provided herein, all of such Guarantor’s rights of subrogation, exoneration, contribution, reimbursement, indemnity, or otherwise arising therefrom against the Borrower or any other Guarantor shall be subordinate and junior in right of payment to the prior Payment in Full. In furtherance of the foregoing, prior to Payment in Full, the Guarantor shall refrain from taking any action or commencing any proceeding against the Borrower or any other obligor or guarantor of the Obligations (or its successors or assigns, whether in connection with a bankruptcy proceeding or otherwise) to recover any amounts in respect of payments made under this Agreement to the Lender. In addition, any indebtedness of the Borrower now or hereafter held by any Guarantor is hereby subordinated in right of payment to the prior Payment in Full of the Obligations. If any payment shall be paid to any Guarantor in violation of the immediately preceding sentence on account of (i) such subrogation, exoneration, contribution, reimbursement, indemnity, or similar right or (ii) any such indebtedness of the Borrower, such amount shall be held in trust for the benefit of the Lender, segregated from other funds of such Guarantor, and promptly paid or delivered to the Lender in the same form as so received (with any necessary endorsement or assignment) to be credited against the payment of the Obligations, whether due or to become due, in accordance with the terms of the Loan Documents.
Article V Representations and Warranties; Covenants
Representations and Warranties. Each Guarantor represents and warrants that:
(a) There are no conditions precedent to the effectiveness of this Agreement that have not been satisfied or waived.
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(b) Such Guarantor has, independently and without reliance upon the Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and any other Loan Document to which it is or may become a party, and has established adequate procedures for continually obtaining information pertaining to, and is now and at all times will be completely familiar with, the business, condition (financial or otherwise), operations, performance, properties, and prospects of the Borrower and each other Loan Party.
Covenants. Each Guarantor covenants and agrees that, until the Termination Date, such Guarantor will perform and observe, and cause each of its subsidiaries to perform and observe, all of the terms, covenants, and agreements set forth in the Loan Documents that are required to be, or that the Borrower has agreed to cause to be, performed or observed by such Guarantor or subsidiary.
Article VI Miscellaneous
Amendments. No term or provision of this Agreement may be waived, amended, supplemented, or otherwise modified except in a writing signed by each Guarantor, and the Lender.
Section 6.02 Indemnification.
(a) Each Guarantor hereby agrees to indemnify and hold harmless the Lender and each Related Party of the Lender (each such Person being called an “Indemnitee”) from any losses, damages, liabilities, claims, and related reasonable and documented out-of-pocket expenses (including the reasonable and documented out-of-pocket fees and expenses of any counsel for any Indemnitee) incurred by any Indemnitee or asserted against any Indemnitee by any Person (including any Guarantor or any other Loan Party) other than such Indemnitee and its Related Parties, arising out of, in connection with, or resulting from this Agreement (including, without limitation, enforcement of this Agreement) or any failure of any Obligations to be the legal, valid, and binding obligations of any Loan Party enforceable against such Loan Party in accordance with their terms, whether brought by a third party or by such Guarantor or any other Loan Party, 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 (i) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the bad faith, gross negligence or willful misconduct of such Indemnitee, (ii) result from a claim brought by any Guarantor or any other Loan Party against an Indemnitee for breach of such Indemnitee’s obligations hereunder or under any other Loan Document, if such Guarantor or such other Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction or (iii) result from a claim not involving an act or omission of any Loan Party or any of its subsidiaries and that is brought by an Indemnitee against another Indemnitee (other than against the Lender). This clause (a) shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, or similar items arising from any non-Tax claim.
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(b) To the fullest extent permitted by Applicable Law, each party hereto hereby agrees not to assert, and hereby waives, any claim against any other party hereto, on any theory of liability, for special, indirect, consequential, or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document, or any agreement or instrument contemplated hereby or thereby, the transactions contemplated hereby or thereby, any extension of credit or the use of proceeds thereof. No party hereto shall be liable for any damages arising from the use of any information or other materials distributed by it through telecommunications, electronic, or other information transmission systems in connection with this Agreement or the other Loan Documents, or the transactions contemplated hereby or thereby by unintended recipients.
(c) All amounts due under this Section shall be payable promptly after demand therefor.
(d) Without prejudice to the survival of any other agreement of any Guarantor under this Agreement or any other Loan Documents, the agreements and obligations of each Guarantor contained in Section 2.01 (with respect to enforcement expenses), Section 2.02, and this Section 6.02 shall survive termination of the Loan Documents and Payment in Full of the Obligations and all other amounts payable under this Agreement.
Notices. All notices and communications given or made pursuant to this Agreement shall be made in accordance with Section 8.05 of the Security and Pledge Agreement.
Continuing Guaranty; Assignments Under the Secured Note. This Agreement is a continuing guaranty and shall (i) remain in full force and effect until Payment in Full (the “Termination Date”), (ii) be binding on each Guarantor, its successors and assigns, and (iii) inure to the benefit of and be enforceable by the Lender and its successors and assigns. the Lender may assign or otherwise transfer all or any portion of its rights and obligations under the Secured Note to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to the Lender herein or otherwise. No Guarantor shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lender.
Counterparts; Integration; Effectiveness. This Agreement and any amendments, waivers, consents, or supplements hereto may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all taken together shall constitute a single contract. This Agreement and the other Loan Documents, and any separate letter agreements with respect to fees payable to the Lender, constitute the entire contract among the parties with respect to the subject matter hereof and supersede all previous agreements and understandings, oral or written, with respect thereto. This Agreement shall become effective when it shall have been executed by the Lender and when the Lender shall have received counterparts hereof that together bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Agreement.
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Section 6.06 Electronic Execution.
(a) The words “execution,” “signed,” “signature,” and words of similar import in this Agreement and the other Loan Documents shall be deemed to include electronic signatures or electronic records, each of which shall be of the same effect, validity, and enforceability as manually executed signatures or a paper-based recordkeeping system, as the case may be, to the extent and as provided for under Applicable Law, including the Electronic Signatures in Global and National Commerce Act of 2000 (15 U.S.C. §§ 7001 to 7031), the Uniform Electronic Transactions Act (UETA), or any state law based on the UETA, 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.
(b) Without limiting the generality of the foregoing, each of the parties (i) agrees that, for all purposes, including in connection with any workout, restructuring, enforcement of remedies, bankruptcy proceedings, or litigation among the Lender and the Loan Parties, electronic images of this Agreement or any other Loan Document (in each case, including with respect to any signature pages thereto) shall have the same legal effect, validity, and enforceability as any paper original, and (ii) waives any argument, defense or right to contest the validity or enforceability of such Agreement or Loan Document based solely on the lack of paper original copies of such Agreement or Loan Documents, including with respect to any signature pages thereto.
Section 6.07 Governing Law; Jurisdiction; Etc.
(a) Governing Law. This Agreement and any claim, controversy, dispute, or cause of action (whether in contract or tort or otherwise) based upon, arising out of, or relating to this Agreement and the transactions contemplated hereby shall be governed by, and construed in accordance with, the laws of the State of Delaware.
(b) Submission to Jurisdiction. Each of the parties hereto irrevocably and unconditionally agrees that it will not commence any action, litigation, or proceeding of any kind whatsoever, whether in law or equity, or whether in contract or tort or otherwise, against any other party hereto, or any of its Related Parties in any way relating to this Agreement or any other Loan Document or the transactions contemplated hereby or thereby, in any forum other than the United States District Court for the District of Delaware or in the Court of Chancery of the State of Delaware (or, if such court lacks subject matter jurisdiction, in the Superior Court of the State of Delaware), and each of the parties hereto irrevocably and unconditionally submits to the exclusive jurisdiction of such courts and agrees that any such action, litigation, or proceeding may be brought in any such court. Each of the parties hereto agrees that a final judgment in any such action, litigation, or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
(c) Waiver of Venue. Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent permitted by Applicable Law, any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court referred to in clause (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by Applicable Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
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Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, WHETHER BASED ON CONTRACT, TORT, OR ANY OTHER THEORY. EACH PARTY HERETO (A) CERTIFIES THAT NO AGENT, ATTORNEY, REPRESENTATIVE, OR OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PERSON WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF LITIGATION, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
[The remainder of this page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
| Guarantor: | |
|---|---|
| Texas Critical Data Centers LLC,<br><br> <br>a Delaware limited liability company | |
| By | /s/ E. Will Gray II |
| Name: | E. Will Gray II |
| Title: | Manager |
| Lender: | |
| SharonAI, Inc.,<br> a Delaware corporation | |
| By | /s/ James Manning |
| Name: | James Manning |
| Title: | Chair |
Signature Page to the Guaranty
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Exhibit10.4
ExecutionVersion
SECURITYAND PLEDGE AGREEMENT
This SECURITY AND PLEDGE AGREEMENT, dated as of January 16, 2026, (as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the provisions hereof, this “Agreement”) made by and among New Era Energy & Digital, Inc., a Nevada corporation (the “Borrower”), and Texas Critical Data Centers LLC, a Delaware limited liability company (the “Guarantor”), as grantors, pledgors, assignors and debtors (the Borrower, together with the Guarantor, in such capacities and together with any successors in such capacities, the “Grantors”, and each, a “Grantor”), in favor of SharonAI, Inc., a Delaware corporation, as pledgee, assignee and secured party (in such capacities and together with any successors in such capacities, the “Lender”).
RECITALS
The Borrower and the Lender have, in connection with the execution and delivery of this Agreement, entered into that certain Membership Interest Purchase Agreement, dated as of the date of this Agreement (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Purchase Agreement”), and that certain Senior Secured Convertible Promissory Note, dated as of the date of this Agreement (as amended, amended and restated, supplemented or otherwise modified from time to time, the “LoanAgreement”); capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Loan Agreement.
The Guarantor and the Lender have, in connection with the execution and delivery of this Agreement, the Purchase Agreement and the Loan Agreement, entered into that certain Guaranty dated as of the date hereof (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Guaranty”), pursuant to which, the Guarantor has unconditionally guaranteed the Secured Obligations (as hereinafter defined) under the Loan Agreement.
The Borrower and Guarantor will receive substantial direct and indirect benefits from the execution, delivery and performance of the obligations under the Purchase Agreement, the Loan Agreement and the other Loan Documents (as hereinafter defined) and each is, therefore, willing to enter into this Agreement.
This Agreement is given by each Grantor in favor of the Lender to secure the payment and performance of all of the Secured Obligations (as hereinafter defined).
It is a condition to the obligations of the Lender to make the Loan under the Loan Agreement and to consummate the transactions under the Purchase Agreement that each Grantor execute and deliver the applicable Loan Documents, including this Agreement.
NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Grantor and the Lender hereby agree as follows:
ArticleI
DEFINITIONSAND INTERPRETATION
Section 1.01 Definitions.
(a) Unless otherwise defined herein or in the Loan Agreement, terms used herein that are defined in the UCC shall have the meanings assigned to them in the UCC. However, if a term is defined in Article 9 of the UCC differently than in another Article of the UCC, the term has the meaning specified in Article 9.
(b) The following terms shall have the following meanings:
“Agreement” has the meaning set forth in the Preamble hereof.
“Borrower” has the meaning set forth in the Preamble hereof.
“Claims” means any and all property and other taxes, assessments and special assessments, levies, fees and all governmental charges imposed upon or assessed against, and landlords’, carriers’, mechanics’, workmen’s, repairmen’s, laborers’, materialmen’s, suppliers’ and warehousemen’s Liens and other claims arising by operation of law against, all or any portion of the Pledged Collateral.
“CollateralSupport” means all Property assigned, hypothecated or otherwise securing any Pledged Collateral and shall include any security agreement or other agreement granting a Lien or security interest in such Property.
“Contracts” means, collectively, with respect to the Guarantor, all sale, service, performance, equipment or property lease contracts, agreements and grants and all other contracts, agreements or grants (in each case, whether written or oral, or third party or intercompany), between the Guarantor and any third party, and all assignments, amendments, restatements, supplements, extensions, renewals, replacements or modifications thereof.
“Control” means (i) with respect to any Deposit Account, “control,” within the meaning of Section 9-104 of the UCC, (ii) with respect to any Uncertificated Security, control within the meaning of Section 8-106(c) of the UCC, (iii) with respect to any Certificated Security, control within the meaning of Section 8-106(a) or (b) of the UCC, and (iv) with respect to any “transferable record” (as that term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction), control within the meaning of Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in the jurisdiction relevant to such transferable record.
“DepositAccounts” means, collectively, with respect to the Guarantor, (i) all “deposit accounts” as such term is defined in the UCC and in any event shall include all accounts and sub-accounts relating to any of the foregoing accounts and (ii) all cash, funds, checks, notes and instruments from time to time on deposit in any of the accounts or sub-accounts described in clause (i) of this definition.
“Distributions” means, collectively, with respect to each Grantor, all dividends, cash, options, warrants, rights, instruments, distributions, returns of capital or principal, income, interest, profits and other property, interests (debt or equity) or proceeds, including as a result of a split, revision, reclassification or other like change of the Pledged Securities or Pledged Interests, from time to time received, receivable or otherwise distributed or distributable to such Grantor in respect of or in exchange for any or all of the Pledged Securities or Pledged Interests.
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“EquityInterests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.
“ExcludedAccount” means any Deposit Account.
“ExcludedProperty” means, collectively:
(i) any United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant, attachment or enforcement of a security interest therein would, under applicable federal law, impair the registrability of such applications or the validity or enforceability of registrations issuing from such applications;
(ii) motor vehicles and other assets subject to certificates of title (other than to the extent a Lien thereon can be perfected by the filing of a financing statement under the UCC);
(iii) those assets as to which the Lender shall reasonably determine, in writing, that the cost or other consequence of obtaining a Lien thereon or perfection thereof are excessive in relation to the benefit to the Lender of the security to be afforded thereby;
(iv) any asset or property to the extent that the grant of a security interest is prohibited by applicable law, rule or regulation or requires a consent not obtained of any Governmental Authority pursuant to such applicable law, rule or regulation, in each case after giving effect to the applicable anti-assignment provisions of the UCC and other applicable law and other than Proceeds and receivables thereof, the assignment of which is expressly deemed effective under the UCC or other applicable law notwithstanding such prohibition;
(v) any rights under any contract, agreement, license, permit or lease to the extent that a grant of a security interest therein is prohibited by, or would constitute a breach or default under, or would permit termination of, such contract, agreement, license, permit or lease (in each case, other than to the extent such restriction is rendered ineffective under the UCC or other applicable law), in each case, except to the extent such prohibition is unenforceable under applicable law;
(vi) any margin stock;
(vii) Excluded Accounts;
(viii) any securities accounts or commodity accounts for which Control is not obtained; and
(ix) commercial tort claims.
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provided, however, “Excluded Property” shall not include any Proceeds, products, substitutions or replacements of any Excluded Property (unless such Proceeds, products, substitutions or replacements would constitute Excluded Property).
“FirstPriority” means, with respect to any Lien purported to be created in any Pledged Collateral pursuant to this Agreement, such Lien is the most senior lien to which such Pledged Collateral is subject (subject only to Liens permitted under the Loan Agreement, if any, which in the aggregate secure obligations of less than $1,000,000).
“Grantor” has the meaning set forth in the Preamble hereof.
“Guarantor” has the meaning set forth in the Preamble hereof.
“IntellectualProperty Collateral” means, collectively, the patents, trademarks, copyrights, trade secrets, and all other industrial, intangible and intellectual property of any type, including mask works and industrial designs (in each case, excluding Excluded Property).
“Lender” has the meaning set forth in the Preamble hereof.
“Loan” means the loan made pursuant to the Loan Agreement.
“LoanAgreement” has the meaning set forth in the first Recital hereof.
“LoanDocuments” means all of the agreements and documents entered into by certain of the parties to this Agreement that relate to or arise out of the Loan and/or the Loan Agreement, including, but not limited to, the Purchase Agreement, the Loan Agreement, this Agreement, the Guaranty and the Issuer Control Agreement.
“MaterialAdverse Effect” means any event, circumstance, development, or change that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on the business, assets, liabilities, financial condition, or operations of the Grantors, taken as a whole, or the ability of the Grantors to comply in all material respects with the terms and conditions of each of the Loan Documents.
“OrganizationalDocuments” means the certificate of incorporation and by-laws or any comparable organizational or formation documents of any business entity (including limited liability companies and partnerships).
“Paymentin Full” means the payment in full in cash or other satisfaction (including by conversion) of all Obligations (other than contingent indemnification obligations for which no claim has been asserted) in accordance with the Loan Documents.
“PledgedCollateral” has the meaning set forth in Section 2.01.
“PledgedInterests” means, with respect to the Borrower, (i) all issued and outstanding Equity Interests of the Guarantor that are owned by the Borrower and all options, warrants, rights, agreements and additional Equity Interests of whatever class of the Guarantor acquired by the Borrower in any manner, together with all claims, rights, privileges, authority and powers of the Borrower relating to such Equity Interests in the Guarantor or under any Organizational Document of the Guarantor, and the certificates, instruments and agreements representing such Equity Interests and any and all interest of the Borrower in the entries on the books of any financial intermediary
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pertaining to such Equity Interests, including the Equity Interests listed in Schedule 1 hereof, (ii) all additional Equity Interests of the Guarantor from time to time acquired by or issued to the Borrower and all options, warrants, rights, agreements and additional Equity Interests of whatever class of any such issuer from time to time acquired by the Borrower in any manner, together with all claims, rights, privileges, authority and powers of the Borrower relating to such Equity Interests or under any Organizational Document of the Guarantor, and the certificates, instruments and agreements representing such Equity Interests and any and all interest of the Borrower in the entries on the books of any financial intermediary pertaining to such Equity Interests, from time to time acquired by the Borrower in any manner, and (iii) all Equity Interests issued in respect of the Equity Interests referred to in clause (i) or (ii) upon any consolidation or merger of any issuer of such Equity Interests.
“PledgedSecurities” means, with respect to the Guarantor, (i) all issued and outstanding Equity Interests of each issuer that are owned by the Guarantor and all options, warrants, rights, agreements and additional Equity Interests of whatever class of any such issuer acquired by the Guarantor in any manner, together with all claims, rights, privileges, authority and powers of the Guarantor relating to such Equity Interests in each such issuer or under any Organizational Document of each such issuer, and the certificates, instruments and agreements representing such Equity Interests and any and all interest of the Guarantor in the entries on the books of any financial intermediary pertaining to such Equity Interests, including the Equity Interests listed in Schedule 1 hereof, (ii) all additional Equity Interests of any issuer from time to time acquired by or issued to the Guarantor and all options, warrants, rights, agreements and additional Equity Interests of whatever class of any such issuer from time to time acquired by the Guarantor in any manner, together with all claims, rights, privileges, authority and powers of the Guarantor relating to such Equity Interests or under any Organizational Document of any such issuer, and the certificates, instruments and agreements representing such Equity Interests and any and all interest of the Guarantor in the entries on the books of any financial intermediary pertaining to such Equity Interests, from time to time acquired by the Guarantor in any manner, and (iii) all Equity Interests issued in respect of the Equity Interests referred to in clause (i) or (ii) upon any consolidation or merger of any issuer of such Equity Interests.
“Receivables” means all (i) accounts, (ii) chattel paper, (iii) payment intangibles, (iv) instruments, (v) general intangibles, and (vi) to the extent not otherwise covered above, all other rights to payment, whether or not earned by performance, for goods or other property sold, leased, licensed, assigned or otherwise disposed of, or services rendered or to be rendered, regardless of how classified under the UCC together with all of Grantors’ rights, if any, in any goods or other property giving rise to such right to payment and all Collateral Support and Supporting Obligations related thereto and all Records relating thereto.
“RelatedParties” means, with respect to any Person, such Person’s Affiliates and the directors, officers, employees, partners, agents, trustees, administrators, managers, advisors and representatives of it and its Affiliates.
“SecuredObligations” means (i) obligations of the Borrower and the Guarantor from time to time arising under the Loan Agreement, any other Loan Document or otherwise with respect to the due and prompt payment of (A) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding (“Postpetition Interest”)) on the Loan, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (B) all other monetary obligations, including fees, costs, attorneys’ fees and disbursements, reimbursement obligations, contract causes
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of action, expenses and indemnities, whether primary, secondary, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Borrower and the Guarantor under or in respect of any Loan Document, and (ii) the due and prompt performance of all other covenants, duties, debts, obligations and liabilities of any kind of the Borrower and the Guarantor, individually or collectively, under or in respect of the Loan Agreement, this Agreement, the other Loan Documents or any other document made, delivered or given in connection with any of the foregoing, in each case whether evidenced by a note or other writing, whether allowed in any bankruptcy, insolvency, receivership or other similar proceeding, whether arising from an extension of credit, issuance of a letter of credit, acceptance, loan, guaranty, indemnification or otherwise, and whether primary, secondary, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, fixed or otherwise.
“SecuritiesCollateral” means, collectively, the Pledged Securities, the Pledged Interests, and the Distributions.
“UCC” means the Uniform Commercial Code as in effect from time to time in the State of the applicable Grantor’s organization; provided, however, that if by reason of mandatory provisions of law, any or all of the perfection or priority of the Lender’s security interest in any item or portion of the Pledged Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than such State, the term “UCC” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection or priority and for purposes of definitions relating to such provisions.
Interpretation. All references in this Agreement to Sections are references to Sections of this Agreement unless otherwise specified.
Resolution of Drafting Ambiguities. Each Grantor acknowledges and agrees that it was represented by counsel in connection with the execution and delivery of this Agreement, that it and its counsel reviewed and participated in the preparation and negotiation of this Agreement and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party (i.e., the Lender) shall not be employed in the interpretation of this Agreement.
Schedules. The Lender and each Grantor agree that the Schedules hereof and all descriptions of Pledged Collateral contained in the Schedules and all amendments and supplements thereto are and shall at all times remain a part of this Agreement. All references in this Agreement to Schedules are references to Schedules of this Agreement unless otherwise specified.
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ArticleII
Grantof security interest AND PLEDGE
Grant of Security Interest and Pledge. As collateral security for the Payment in Full of all the Secured Obligations, the Borrower hereby pledges to the Lender, and grants to the Lender a Lien on and security interest in and to, all of the right, title and interest of the Borrower in, to and under the Pledged Interests and all Distributions, Proceeds and products of the Pledged Interests and all accessions of and to, substitutions and replacements for, the Pledged Interests, and the Guarantor hereby pledges to the Lender, and grants to the Lender a Lien on and security interest in and to, all of the right, title and interest of such Grantor in, to and under the following property, wherever located, and whether now existing or hereafter arising or acquired from time to time (collectively, the grants by both the Borrower and the Guarantor, the “Pledged Collateral”):
(a) all accounts;
(b) all equipment, goods, inventory and fixtures;
(c) all documents, instruments and chattel paper;
(d) all letters of credit and letter-of-credit rights;
(e) all Securities Collateral;
(f) all investment property;
(g) all Intellectual Property Collateral;
(h) all General Intangibles;
(i) all Contracts;
(j) all supporting obligations;
(k) all books and records, customer lists, credit files, computer files, programs, printouts and other computer materials and records relating to the Pledged Collateral and any General Intangibles at any time evidencing or relating to any of the foregoing; and
(l) to the extent not covered by clauses (a) through (l) of this sentence, all other personal property assets and related rights of the Guarantor, whether tangible or intangible, all Proceeds and products of each of the foregoing and all accessions of and to, substitutions and replacements for, and rents, profits and products of, each of the foregoing, and any and all Proceeds of any insurance, indemnity, warranty or guaranty payable to the Guarantor from time to time with respect to any of the foregoing.
Notwithstanding anything to the contrary contained in clauses (a) through (m) above, (i) the security interest created by this Agreement shall not extend to, and the term “Pledged Collateral” shall not include, any Excluded Property, provided that, if any Excluded Property would have otherwise constituted Pledged Collateral, when such property shall cease to be Excluded Property, such property shall be deemed at all times from and after the date hereof to constitute Pledged Collateral and (ii) no Grantor shall be required to (x) take perfection steps with respect to Excluded Property, (y) obtain third-party consents where such consents are not obtainable after the use of commercially reasonable efforts or are not required by applicable law to perfect a security interest in such collateral or (z) take any perfection steps beyond the filing of UCC-1 financing statements and the execution of a customary issuer control agreement with respect to the Equity Interests in the Guarantor.
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The Grantors shall from time to time at the reasonable request of the Lender, give written notice to the Lender identifying in reasonable detail the Excluded Property (and stating in such notice that such Excluded Property constitutes “Excluded Property”) and shall provide to the Lender such other information regarding the Excluded Property as the Lender may reasonably request.
Section 2.02 Filings.
(a) Each Grantor hereby irrevocably authorizes the Lender at any time and from time to time to file in any relevant jurisdiction any UCC-1 central office financing statements and amendments thereto that contain the information required by Article 9 of the UCC of each applicable jurisdiction for the filing of any financing statement or amendment relating to the Pledged Collateral, including (i) whether such Grantor is an organization, the type of organization and, if required, any organizational identification number issued to such Grantor, and (ii) any financing or continuation statements or other documents for the purpose of perfecting, confirming, continuing, enforcing or protecting the security interest granted by such Grantor hereunder, without the signature of such Grantor where permitted by law, provided that financing statements shall describe the collateral by reference to this Agreement or with a description customary and reasonably specific for such collateral (and not as “all assets”, except as permitted by applicable law and agreed by the applicable Grantor). Each Grantor agrees to provide all information described in the immediately preceding sentence or otherwise necessary to such filings to the Lender promptly upon request by the Lender. The Lender shall provide copies of any financing statements and amendments filed hereunder to the applicable Grantor promptly following filing.
(b) Each Grantor hereby ratifies its authorization for the Lender to have filed in any relevant jurisdiction any initial financing statements or amendments thereto relating to the Pledged Collateral if filed prior to the date hereof.
ArticleIII
Perfectionand further assurances
Perfection of Certificated Securities Collateral. Each Grantor represents and warrants that all certificates, agreements or instruments representing or evidencing any of the Securities Collateral in existence on the date hereof that is certificated have been delivered to the Lender in suitable form for transfer by delivery or accompanied by duly executed undated instruments of transfer or assignment in blank and that (assuming continuing possession by the Lender of any such Securities Collateral) the Lender has a perfected First Priority security interest therein. Each Grantor hereby agrees that all certificates, agreements or instruments representing or evidencing the Securities Collateral acquired by such Grantor after the date hereof, shall immediately upon receipt thereof by such Grantor be held by or on behalf of and delivered to the Lender in suitable form for transfer by delivery or accompanied by duly executed undated instruments of transfer or assignment in blank, all in form and substance satisfactory to the Lender.
The Lender shall have the right, at any time upon the occurrence and during the continuance of any Event of Default, to endorse, assign or otherwise transfer to or to register in the name of the Lender or any of its nominees or endorse for negotiation any or all of the Securities Collateral, without any indication that such Securities Collateral is subject to the security interest hereunder.
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Perfection of Uncertificated Securities Collateral. Each Grantor represents and warrants that the Lender has a perfected First Priority security interest in all uncertificated Pledged Securities and Pledged Interests pledged by it hereunder that are in existence on the date hereof. Each Grantor hereby agrees that if any of the Pledged Securities or Pledged Interests are at any time not evidenced by certificates of ownership, such Grantor will (a) cause the issuer thereof to either (i) register the Lender as the registered owner of such securities or (ii) agree in an authenticated record with such Grantor and the Lender that such issuer will comply with instructions with respect to such securities originated by the Lender without further consent of such Grantor, such authenticated record to be in form and substance satisfactory to the Lender, and (b) in the event such Pledged Securities or Pledged Interests, as applicable, become certificated, to deliver such Pledged Securities or Pledged Interests, as applicable, to the Lender in accordance with the provisions of Section 3.01.
Maintenance of Perfected Security Interest. Each Grantor authorizes the Lender to file all UCC-1 central office financing statements necessary to perfect the security interest granted by it to the Lender in respect of the Pledged Collateral in each governmental, municipal or other office specified in Schedule 2 hereof. Each Lender may maintain the security interest created by this Agreement in the Pledged Collateral as a perfected First Priority security interest to the extent provided herein at Grantors’ sole cost and expense.
Further Assurances. Subject to the limitations set forth in this Agreement, each Grantor shall take such further actions, and execute and/or deliver to the Lender such additional financing statements, amendments, assignments, agreements, supplements, powers and instruments, and will obtain such governmental consents and corporate or limited liability company approvals and will cause to be done all such things, as the Lender may in its reasonable judgment deem necessary or appropriate in order to create and/or maintain the validity, perfection or priority of and protect any security interest granted or purported to be granted in the Pledged Collateral as provided herein and the rights and interests granted to the Lender hereunder, and enable the Lender to exercise and enforce its rights, powers and remedies hereunder with respect to any Pledged Collateral, including the filing of any financing statements, continuation statements and other documents under the UCC (or other similar laws) in effect in any jurisdiction with respect to the security interest created hereby, all in form reasonably satisfactory to the Lender and in such offices wherever required by law to perfect, continue and maintain the validity, enforceability and priority of the security interest in the Pledged Collateral as provided herein and to preserve the other rights and interests granted to the Lender hereunder, as against third parties, with respect to the Pledged Collateral. With respect to all Pledged Collateral of a Grantor over which the Lender may obtain “control” within the meaning of section 8-106 of the UCC, such Grantor shall take all actions as may be requested from time to time by the Lender so that control of such Pledged Collateral is obtained and at all times held by the Lender. Without limiting the generality of the foregoing, but subject to applicable law, each Grantor shall, at any time an Event of Default is continuing, make, execute, endorse, acknowledge, file or refile and/or deliver to the Lender from time to time upon reasonable request by the Lender such lists, schedules, descriptions and designations of the Pledged Collateral, statements, copies of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, supplements, additional security agreements, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments as the Lender shall reasonably request. If an Event of Default has occurred and is continuing, the Lender may further institute and maintain, in its own name or in the name of any Grantor, such suits and proceedings as the Lender may deem necessary or expedient to prevent any impairment of the security interest in or the perfection thereof in the Pledged Collateral. All of the foregoing shall be at the sole cost and expense of the Grantors.
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ArticleIV
Representations,warranties and covenants
Each Grantor represents, warrants and covenants as follows:
Section 4.01 Loan Agreement Representations.
(a) [Reserved].
(b) Existence. Except to the extent not reasonably expected to result in a Material Adverse Effect, each Grantor (i) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation, (ii) is duly qualified as a foreign corporation or other organization and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification and (iii) is in compliance with all applicable laws.
(c) Power and Authorization. Except to the extent not reasonably expected to result in a Material Adverse Effect, each Grantor has the power and authority, and the legal right, to own or lease and operate its property, and to carry on the business as now conducted and as proposed to be conducted, and to execute, deliver and perform the Loan Documents to which it is a party. Except to the extent not reasonably expected to result in a Material Adverse Effect, each Grantor has taken all necessary organizational action to authorize the execution, delivery and performance of the Loan Documents to which it is a party. No consent or authorization of, filing with, notice to or other act by, or in respect of, any Governmental Authority or any other Person is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement or any of the Loan Documents except for filings required to perfect or enforce the security interests contemplated hereby. Each Loan Document has been duly executed and delivered by each Grantor thereto.
(d) Enforceability. This Agreement constitutes, and each other Loan Document when delivered hereunder will constitute, a legal, valid and binding obligation of each Grantor thereto, enforceable against each such Grantor in all material respects in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
(e) No Contravention. The execution, delivery and performance of this Agreement and the other Loan Documents will not violate any applicable law or any obligation arising from any contract of any Grantor and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or assets pursuant to any applicable law or any such obligation arising from any contract (other than the Liens created by the Loan Documents).
(f) No Litigation. No action, suit, litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or threatened by or against any Grantor or against any of its property or assets (i) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (ii) that could reasonably be expected to have a Material Adverse Effect.
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Ownership of Property and No Other Liens. Each Grantor is the sole, direct, legal and beneficial owner of all Securities Collateral pledged hereunder, and has good and marketable title to all its Pledged Collateral, and none of such property is subject to any Lien, claim, option or right of others, except for the security interest granted to the Lender and Liens permitted under the Loan Agreement. No Person other than the Lender has control or possession of all or any part of the Pledged Collateral, except as not prohibited by the Loan Agreement.
Perfected First Priority Security Interest. This Agreement is effective to create in favor of the Lender, a legal, valid and enforceable security interest in the Pledged Collateral and the Proceeds thereof. In the case of the certificated Pledged Securities or Pledged Interests, when stock certificates representing such Pledged Securities or Pledged Interests are delivered to the Lender and in the case of the other Pledged Collateral, when financing statements specified on Schedule 2 hereof in appropriate form are filed in the offices specified on Schedule 2 hereof, this Agreement shall constitute, and will at all times constitute, a fully perfected First Priority Lien on, and security interest in, all rights, title and interest of the Grantors in such Pledged Collateral and the Proceeds thereof, as security for the Secured Obligations.
Section 4.05No Transfer of Pledged Collateral. No Grantor shall sell, offer to sell, dispose of, convey, assign or otherwise transfer, or grant any option with respect to, restrict, or grant, create, permit or suffer to exist any Lien on, any of the Pledged Collateral pledged by it hereunder or any interest therein except as not prohibited by the Loan Agreement.
Claims Against Pledged Collateral. Each Grantor shall, at its own cost and expense, defend title to the Pledged Collateral and the First Priority security interest and Lien granted to the Lender with respect thereto against all claims and demands of all Persons at any time claiming any interest therein adverse to the Lender other than Liens permitted under the Loan Agreement. Except as permitted by the Loan Agreement or any other Loan Document, there is no agreement, order, judgment or decree, and no Grantor shall enter into any agreement or take any other action, that could restrict the transferability of any of the Pledged Collateral or otherwise impair or conflict with such Grantors’ obligations or the rights of the Lender hereunder.
Other Financing Statements. No Grantor shall execute, authorize or permit to be filed in any recording office any financing statement or other instrument similar in effect covering all or any part of the Pledged Collateral or listing such Grantor as debtor with respect to all or any part of the Pledged Collateral, except financing statements and other instruments filed in respect of Liens not prohibited under the Loan Agreement.
Changes in Name, Jurisdiction of Organization, Etc. On the date hereof, such Grantor’s type of organization, jurisdiction of organization, legal name, Federal Taxpayer Identification Number, organizational identification number (if any) and chief executive office or principal place of business are indicated next to its name in Schedule 3 hereof. Schedule 3 also lists all of such Grantor’s jurisdictions and types of organization, legal names and locations of chief executive office or principal place of business at any time during the four months preceding the date hereof, if different from those referred to in the preceding sentence.
Such Grantor shall not, except upon not less than 10 days’ prior written notice to the Lender, and delivery to the Lender of all additional information and other documents reasonably requested by the Lender to maintain the validity, perfection and priority of the security interests provided for herein:
(a) change its legal name, identity, or type of organization; or
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(b) change its jurisdiction of organization (in each case, including by merging with or into any other entity, reorganizing, organizing, dissolving, liquidating, reincorporating or incorporating in any other jurisdiction).
Such Grantor shall, prior to or substantially concurrently with any change described in the preceding sentence, take all actions reasonably requested by the Lender to maintain the perfection and priority of the security interest of the Lender in the Pledged Collateral intended to be granted hereunder.
Pledged Securities, and Pledged Interests. Schedule 1 sets forth a complete and accurate list of all Pledged Securities, Pledged Interests held by such Grantor as of the date hereof. The Pledged Interests pledged by the Borrower hereunder constitute all of the issued and outstanding Equity Interests of the Guarantor owned by the Borrower. All of the Pledged Securities and Pledged Interests existing on the date hereof have been, and to the extent any Pledged Securities or Pledged Interests are hereafter issued, such Pledged Securities and Pledged Interests will be, upon such issuance, duly authorized and validly issued.
Each Grantor shall, upon obtaining any Pledged Securities or Pledged Interests of any Person, accept the same in trust for the benefit of the Lender and promptly (but in any event within ten Business Days after receipt thereof) deliver to the Lender an updated Schedule 1, and the certificates and other documents required under Section 3.01 and Section 3.02 in respect of the additional Pledged Securities or Pledged Interests which are to be pledged pursuant to this Agreement, and confirming the Lien hereby created on such additional Pledged Securities or Pledged Interests.
Approvals. While any Event of Default is continuing, in the event that the Lender desires to exercise any remedies, voting or consensual rights or attorney-in-fact powers set forth in this Agreement and determines it necessary to obtain any approvals or consents of any Governmental Authority or any other Person therefor, then, upon the request of the Lender, such Grantor agrees to assist the Lender in obtaining as soon as practicable any necessary approvals or consents for the exercise of any such remedies, rights and powers.
Pledged Collateral Information. All information set forth herein, including the schedules annexed hereto, and all information contained in any documents, schedules and lists heretofore delivered to the Lender, in connection with this Agreement, in each case, relating to the Pledged Collateral, is accurate in all material respects.
ArticleV
Securitiescollateral
Section 5.01 Existing Voting Rights and Distributions.
(a) So long as no Event of Default shall have occurred and be continuing:
(i) Each Grantor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Securities Collateral or any part thereof for any purpose not inconsistent with the terms or purposes hereof, the Loan Agreement or any other Loan Document provided, however, that no Grantor shall in any event exercise such rights in any manner which could reasonably be expected to have a Material Adverse Effect.
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(ii) Each Grantor shall be entitled to receive and retain, and to utilize free and clear of the Lien hereof, any and all (A) non-cash Distributions paid, received or otherwise distributed in respect of, or in exchange for, any Securities Collateral, (B) cash Distributions paid in respect of any Securities Collateral in connection with a liquidation or dissolution or reorganization or in connection with a reduction of capital, capital surplus, stock-split, spin-off or similar rearrangement and (C) cash paid or otherwise distributed in respect of principal, or redemption of, or in exchange for, any Securities Collateral.
(b) The Lender shall be deemed without further action to have granted to each Grantor all necessary consents relating to voting rights and shall, if necessary, upon written request of any Grantor and at the sole cost and expense of such Grantor, from time to time execute and deliver (or cause to be executed and delivered) to such Grantor all such instruments as such Grantor may reasonably request in order to permit such Grantor to exercise the voting and other rights which it is entitled to exercise pursuant to Section 5.01(a)(i) and to receive the Distributions which it is authorized to receive and retain pursuant to Section 5.01(a)(ii).
(c) Upon the occurrence and during the continuance of any Event of Default and delivery by Lender of 5 Business Days’ prior written notice electing its rights and remedies under this Section 5.01(c):
(i) All rights of each Grantor to exercise the voting and other consensual rights it would otherwise be entitled to exercise pursuant to Section 5.01(a)(i) shall immediately cease, and all such rights shall thereupon become vested in the Lender, which shall have the sole right to exercise such voting and other consensual rights.
(ii) All rights of each Grantor to receive Distributions which it would otherwise be authorized to receive and retain pursuant to Section 5.01(a)(ii) shall immediately cease and all such rights shall thereupon become vested in the Lender, which shall have the sole right to receive and hold such Distributions as Pledged Collateral.
(d) Each Grantor shall, at its sole cost and expense, from time to time execute and deliver to the Lender appropriate instruments as the Lender may reasonably request in order to permit the Lender to exercise the voting and other rights which it may be entitled to exercise pursuant to Section 5.01(c)(i) and to receive all Distributions which it may be entitled to receive under Section 5.01(c)(ii).
(e) All Distributions which are received by any Grantor contrary to the provisions of Section 5.01(c) shall be received in trust for the benefit of the Lender, shall be segregated from other funds of such Grantor and shall promptly (but in any event within five Business Days after receipt thereof by such Grantor) be paid over to the Lender as Pledged Collateral in the same form as so received (with any necessary endorsement).
Section 5.02 Certain Agreements of Grantors.
(a) In the case of each Grantor which is an issuer of Securities Collateral, such Grantor agrees to be bound by the terms of this Agreement relating to the Securities Collateral issued by it and will comply with such terms insofar as such terms are applicable to it.
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(b) In the case of each Grantor which is a partner, shareholder or member, as the case may be, in a partnership, limited liability company or other entity, such Grantor hereby (i) consents to the extent required by the applicable Organizational Document to the pledge by each other Grantor, pursuant to the terms hereof, of the Pledged Securities and Pledged Interests in such partnership, limited liability company or other entity and, upon the occurrence and during the continuance of an Event of Default, to the transfer of such Pledged Securities or Pledged Interests to the Lender or its nominee and to the substitution of the Lender or its nominee as a substituted partner, shareholder or member in such partnership, limited liability company or other entity with all the rights, powers and duties of a general partner, limited partner, shareholder or member, as the case may be and (ii) irrevocably waives until the Termination Date any and all provisions of the applicable Organization Documents that conflict with the terms of this Agreement or prohibit, restrict, condition or otherwise affect the grant hereunder of any Lien on any of the Pledged Collateral or any enforcement action which may be taken in respect of any such Lien.
ArticleVI
RECEIVABLES
Section 6.01 Dealing With Receivables. The Guarantor shall keep and maintain at its own cost and expense complete records of each Receivable, including records of all payments received, all credits granted thereon, all merchandise returned and all other documentation relating thereto. The Guarantor shall, at the Guarantor’s sole cost and expense, upon the Lender’s demand made at any time after the occurrence and during the continuance of any Event of Default, deliver copies of all tangible evidence of Receivables, including copies of all documents evidencing Receivables and any books and records relating thereto to the Lender or to its representatives.
Section 6.03 Modification of Receivables. Other than in the ordinary course of business, the Guarantor will not (a) grant any extension of the time of payment of any Receivable, (b) compromise or settle any Receivable for less than the full amount thereof, (c) release, wholly or partially, any Person liable for the payment of any Receivable, (d) allow any credit or discount whatsoever on any Receivable or (e) amend, supplement or modify any Receivable in any manner that would reasonably be expected to adversely affect the recoverable value thereof.
ArticleVII
Remedies
Section 7.01 Remedies.
(a) If any Event of Default shall have occurred and be continuing, the Lender may exercise, without any other notice to or demand upon any Grantor, in addition to the other rights and remedies provided for herein or in any other Loan Document or otherwise available to it, all the rights and remedies of a secured party upon default under the UCC (whether or not the UCC applies to the affected Pledged Collateral) and also may:
(i) require each Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of the Lender immediately, assemble the tangible Pledged Collateral or any part thereof, as directed by the Lender and make it available to the Lender at a place and time to be designated by the Lender;
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(ii) (A) exercise any voting rights relating to the Pledged Collateral (whether or not the same shall have been transferred into its name or the name of its nominee) for any lawful purpose, including for the liquidation of the assets of the issuer and the amendment or modification of the Organizational Documents of any issuer, (B) give all consents, waivers, approvals, and ratifications in respect of such Pledged Collateral, (C) receive all amounts payable in respect of the Pledged Collateral otherwise payable under Section 5.01(a)(ii) to the respective Grantor, and (D) otherwise act with respect to the Pledged Collateral as though it were the outright owner thereof (the Grantors hereby irrevocably constituting and appointing the Lender the proxy and attorney-in-fact of the Grantors, with full power and authority of substitution, to do so);
(iii) without notice except as specified below, sell, resell, assign and deliver or grant a license to use or otherwise dispose of the Pledged Collateral or any part thereof, in one or more parcels at public or private sale, at any of the Lender’s offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Lender may deem commercially reasonable;
(iv) occupy any premises owned or leased by any of the Grantors where the Pledged Collateral or any part thereof is assembled or located for a reasonable period in order to effectuate its rights and remedies hereunder or under law, without obligation to such Grantor in respect of such occupation;
(v) cause all or any part of the Pledged Collateral held by it to be transferred into its name or the name of its nominee; and
(vi) exercise any and all rights and remedies of any of the Grantors under or in connection with the Pledged Collateral, or otherwise in respect of the Pledged Collateral, including without limitation, (A) any and all rights of such Grantor to demand or otherwise require payment of any amount under, or performance of any provision of, the Contracts, the Receivables, and the other Pledged Collateral, (B) exercise all other rights and remedies with respect to the Receivables, and the other Pledged Collateral, including without limitation, those set forth in Section 9-607 of the UCC and (C) exercise any and all voting, consensual and other rights with respect to any Pledged Collateral.
(b) Each Grantor agrees that, unless the Pledged Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, to the extent notice of sale shall be required by law, at least ten days’ notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. At any sale of the Pledged Collateral, if permitted by applicable law, the Lender may be the purchaser, licensee, assignee or recipient of the Pledged Collateral or any part thereof and shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Pledged Collateral sold, assigned or licensed at such sale, to use and apply any of the Secured Obligations as a credit on account of the purchase price of the Pledged Collateral or any part thereof payable at such sale. To the extent permitted by applicable law, each Grantor waives all claims, damages and demands it may acquire against the Lender arising out of the exercise by it of any rights hereunder. Each Grantor hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Pledged Collateral, whether before or after sale hereunder, and all
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rights, if any, of marshalling the Pledged Collateral and any other security for the Secured Obligations or otherwise. The Lender shall not be liable for failure to collect or realize upon any or all of the Pledged Collateral or for any delay in so doing nor shall it be under any obligation to take any action with regard thereto. The Lender shall not be obligated to make any sale of Pledged 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 agrees that it would not be commercially unreasonable for the Lender to dispose of the Pledged Collateral or any portion thereof by utilizing internet sites that provide for the auction of assets of the type included in the Pledged Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets. The Lender shall not be obligated to clean-up or otherwise prepare the Pledged Collateral for sale.
(c) If any Event of Default shall have occurred and be continuing, all payments received by any Grantor in respect of the Pledged Collateral shall be received in trust for the benefit of the Lender, shall be segregated from other funds of such Grantor and shall be forthwith paid over the Lender in the same form as so received (with any necessary endorsement).
(d) If any Event of Default shall have occurred and be continuing, the Lender may, without notice to any Grantor except as required by law and at any time or from time to time, charge, set off and otherwise apply all or part of the Secured Obligations against any funds deposited with it or held by it.
(e) If any Event of Default shall have occurred and be continuing, upon the written demand of the Lender, each Grantor shall execute and deliver to the Lender an assignment or assignments of any or all of the Intellectual Property Collateral and such other documents and take such other actions as are necessary or appropriate to carry out the intent and purposes hereof.
(f) If the Lender shall determine to exercise its right to sell all or any of the Securities Collateral of any Grantor pursuant to this Section 7.01, each Grantor agrees that, upon request of the Lender, such Grantor will, at its own expense:
(i) provide the Lender with such information and projections as may be necessary or, in the opinion of the Lender, advisable to enable the Lender to effect the sale of such Securities Collateral;
(ii) cause any registration, qualification under or compliance with any Federal or state securities law or laws to be effected with respect to all or any part of the Securities Collateral as soon as practicable and at the sole cost and expense of the Grantors. Each Grantor will cause such registration to be effected (and be kept effective) and will cause such qualification and compliance to be effected (and be kept effective) as may be so requested and as would permit or facilitate the sale and distribution of such Securities Collateral including registration under the Securities Act (or any similar statute then in effect), appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with all other requirements of any Governmental Authority; and
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(iii) do or cause to be done all such other acts and things as may be necessary to make such sale of such Securities Collateral or any part thereof valid and binding and in compliance with applicable law.
(g) The Lender is authorized, in connection with any sale of the Securities Collateral pursuant to this Section 7.01, to deliver or otherwise disclose to any prospective purchaser of the Securities Collateral: (i) any registration statement or prospectus, and all supplements and amendments thereto, prepared pursuant to Section 7.01(f); (ii) any information and projections provided to it pursuant to Section 7.01(f), and (iii) any other information in its possession relating to such Securities Collateral.
(h) Each Grantor recognizes that the Lender may be unable to effect a public sale or other disposition of the Pledged Collateral due to the lack of a ready market for the Pledged Collateral, a limited number of potential buyers of the Pledged Collateral or certain prohibitions contained in the Securities Act of 1933, state securities laws, and other applicable laws, and that the Lender may be compelled to resort to one or more private sales or other dispositions thereof to a restricted group of purchasers. Each Grantor agrees that such private sales or other dispositions may be at prices and other terms less favorable to the seller than if sold at public sales or other dispositions and that such private sales or other dispositions shall not solely by reason thereof be deemed not to have been made in a commercially reasonable manner. The Lender shall be under no obligation hereunder or otherwise (except as provided by applicable law) to delay a sale or other disposition of any of the Pledged Collateral for the period of time necessary to permit the registration of such securities for public sale or other public disposition under the Securities Act of 1933 and applicable state securities laws. Any such sale or other disposition of all or a portion of the Pledged Collateral may be for cash or on credit or for future delivery and may be conducted at a private sale or other disposition where the Lender or any other person or entity may be the purchaser of all or part of the Pledged Collateral so sold or otherwise disposed of. Each Grantor agrees that to the extent notice of sale or other disposition shall be required by law, at least ten days’ prior notice to the applicable Grantor of the time and place after which any private sale is to be made shall constitute reasonable notification. Subject to the foregoing, the Lender agrees that any sale or other disposition of the Pledged Collateral shall be made in a commercially reasonable manner. The Lender shall incur no liability as a result of the sale or other disposition of any of the Pledged Collateral, or any part thereof, at any private sale which complies with the requirements of this Section 7.01. Each Grantor hereby waives, to the extent permitted by applicable law, any claims against the Lender arising by reason of the fact that the price at which any of the Pledged Collateral, or any part thereof, may have been sold or otherwise disposed of at such private sale was less than the price that might have been obtained at a public sale or other public disposition, even if the Lender accepts the first offer deemed by the Lender on good faith to be commercially reasonable under the circumstances and does not offer any of the Pledged Collateral to more than one offeree.
No Waiver and Cumulative Remedies. The Lender shall not by any act (except by a written instrument pursuant to Section 8.04), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. No failure on the part of the Lender to exercise, no course of dealing with respect to, and no delay on the part of the Lender in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power, privilege or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power, privilege or remedy; nor shall the Lender be required to look first to, enforce or exhaust any other security, collateral or guaranties. All rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies provided by law.
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Application of Proceeds. Upon the exercise by the Lender of its remedies hereunder, any proceeds received by the Lender in respect of any realization upon any Pledged Collateral shall be applied, together with any other sums then held by the Lender pursuant to this Agreement, in accordance with the Loan Agreement. Each Grantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Pledged Collateral are insufficient to pay the Secured Obligations and the fees and other charges of any attorneys employed by the Lender to collect such deficiency.
ArticleVIII
MISCELLANEOUS
Power of Attorney. Each Grantor hereby appoints the Lender its attorney-in-fact, with full power and authority in the place and stead of such Grantor and in the name of such Grantor, or otherwise, from time to time during the existence of an Event of Default in the Lender’s discretion to take any action and to execute any instrument consistent with the terms of the Loan Agreement and the other Loan Documents which the Lender may deem necessary or advisable to accomplish the purposes hereof (but the Lender shall not be obligated to and the Lender shall not have any liability to such Grantor or any third party for failure to so do or take action). Except where earlier or specific notice is expressly required by the terms of this Agreement, the Lender shall use commercially reasonable efforts to provide notice to the applicable Grantor prior to taking any action taken in the preceding sentence; provided, that failure to deliver such notice shall not limit the Lender’s right to take such action or the validity of any such action. The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term hereof. Each Grantor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof.
Continuing Security Interest and Assignment. This Agreement shall create a continuing security interest in the Pledged Collateral and shall (a) be binding upon the Grantors, their respective successors and assigns and (b) inure, together with the rights and remedies of the Lender hereunder, to the benefit of the Lender and each of its permitted successors, transferees and assigns and their respective officers, directors, employees, affiliates, agents, advisors and controlling Persons; provided that, no Grantor shall assign or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of the Lender and any attempted assignment or transfer without such consent shall be null and void.
Section 8.03 Termination and Release.
(a) Upon Payment in Full, the Pledged Collateral shall be released from the Liens created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Lender and each Grantor hereunder shall terminate, all without delivery of any instrument or any further action by any party, and all rights to the Pledged Collateral shall revert to the Grantors. At the request and sole expense of any Grantor following any such termination, the Lender shall deliver to such Grantor any Pledged Collateral held by the Lender hereunder, and execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination.
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(b) If any of the Pledged Collateral shall be sold, transferred or otherwise disposed of by any Grantor in a transaction not prohibited by the Loan Agreement, then the Lien created pursuant to this Agreement in such Pledged Collateral shall be released, and the Lender, at the request and sole expense of such Grantor, shall execute and deliver to such Grantor all releases and other documents necessary or advisable for the release of the Liens created hereby on such Pledged Collateral; provided that the Borrower shall provide to the Lender evidence of such transaction’s compliance with the Loan Agreement and the other Loan Documents as the Lender shall reasonably request. At the request and sole expense of the Borrower, a Grantor shall be released from its obligations hereunder in the event that all the Equity Interests of such Grantor are sold, transferred or otherwise disposed of in a transaction not prohibited by the Loan Agreement; provided that the Borrower shall have delivered to the Lender, at least five Business Days (or such shorter period reasonably acceptable to the Lender) prior to the date of the proposed release, a written request for release identifying the relevant Grantor and the terms of the sale or other disposition in reasonable detail, together with a certification by the Borrower stating that such transaction is in compliance with the Loan Agreement and the other Loan Documents.
Modification in Writing. None of the terms or provisions of this Agreement may be amended, modified, supplemented, terminated or waived, and no consent to any departure by any Grantor therefrom shall be effective, except by a written instrument signed by the Lender and the Grantors in accordance with the terms of the Loan Agreement. Any amendment, modification or supplement of any provision hereof, any waiver of any provision hereof and any consent to any departure by any Grantor from the terms of any provision hereof in each case shall be effective only in the specific instance and for the specific purpose for which made or given.
Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing (including electronic mail as permitted in this Agreement after confirmed received) and shall be deemed effectively given upon the earlier of actual receipt, or (i) personal delivery to the party to be notified; (ii) when sent and confirmed received, if sent by electronic mail during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day; (iii) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one business day after deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their address as set forth on the signature page, or to such e-mail address or address as subsequently modified by written notice given in accordance with this Section 8.05.
Indemnity and Expenses.
(a) Each Grantor hereby agrees to indemnify and hold harmless the Lender and each Related Party of the Lender (each such Person being called an “Indemnitee”) from any losses, damages, liabilities, claims and related reasonable and documented out-of-pocket expenses (including the reasonable and documented out-of-pocket fees and expenses of any counsel for any Indemnitee), and shall indemnify and hold harmless each Indemnitee from all reasonable and documented fees, expenses and time charges for attorneys who are employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any Person (including any Grantor) other than such Indemnitee and its Related Parties arising out of, in connection with or resulting from this Agreement (including, without limitation, enforcement of this Agreement) or any failure of any Secured Obligations to be the legal, valid, and binding obligations
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of any Grantor enforceable against such Grantor in accordance with their terms, whether brought by a third party or by such Grantor or any other Grantor, 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 (i) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the bad faith, gross negligence or willful misconduct of such Indemnitee, or (ii) result from a claim brought by any Grantor against an Indemnitee for breach of such Indemnitee’s obligations hereunder or under any other Loan Document, if such Grantor has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.
(b) To the fullest extent permitted by applicable law, each party hereto hereby agrees not to assert, and hereby waives, any claim against any other party hereto, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby. No party hereto shall be liable for any damages arising from the use of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby by unintended recipients.
(c) Each Grantor agrees to pay or reimburse the Lender for all its reasonable costs and expenses incurred in collecting against such Grantor its Secured Obligations or otherwise protecting, enforcing or preserving any rights or remedies under this Agreement and the other Loan Documents to which such Grantor is a party, including the reasonable fees and other charges of counsel (including the reasonable allocated fees and expenses of internal counsel) to the Lender.
(d) All amounts due under this Section 8.06 shall be payable not later than thirty Days after written demand therefor, shall constitute Secured Obligations and shall bear interest until paid at a rate per annum equal to the highest rate per annum at which interest would then be payable on any past due Loan under the Loan Agreement.
(e) Without prejudice to the survival of any other agreement of any Grantor under this Agreement or any other Loan Documents, the agreements and obligations of each Grantor contained in this Section 8.06 shall survive termination of the Loan Documents and Payment in Full.
Governing Law. This Agreement and any claim, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement and the transactions contemplated hereby and thereby shall be governed by, and construed in accordance with, the laws of the State of Delaware.
Severability of Provisions. Any provision hereof which is invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without invalidating the remaining provisions hereof or affecting the validity, legality or enforceability of such provision in any other jurisdiction.
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Counterparts; Integration; Effectiveness. This Agreement and any amendments, waivers, consents or supplements hereto may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all taken together shall constitute a single contract. This Agreement and the other Loan Documents, constitute the entire contract among the parties with respect to the subject matter hereof and supersede all previous agreements and understandings, oral or written, with respect thereto. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of this Agreement. The words “execution,” “signed,” “signature,” and words of similar import in this Agreement shall be deemed to include electronic or digital signatures or electronic records, each of which shall be of the same effect, validity, and enforceability as manually executed signatures or a paper-based recordkeeping system, as the case may be, to the extent and as provided for under applicable law, including the Electronic Signatures in Global and National Commerce Act of 2000 (15 U.S.C. §§ 7001 to 7031), the Uniform Electronic Transactions Act (UETA), or any state law based on the UETA, including the New York Electronic Signatures and Records Act (N.Y. Tech. §§ 301 to 309).
No Release. Nothing set forth in this Agreement or any other Loan Document, nor the exercise by the Lender of any of the rights or remedies hereunder, shall relieve any Grantor from the performance of any term, covenant, condition or agreement on such Grantor’s part to be performed or observed in respect of any of the Pledged Collateral or from any liability to any Person in respect of any of the Pledged Collateral or shall impose any obligation on the Lender to perform or observe any such term, covenant, condition or agreement on such Grantor’s part to be so performed or observed or shall impose any liability on the Lender for any act or omission on the part of such Grantor relating thereto or for any breach of any representation or warranty on the part of such Grantor contained in this Agreement, the Loan Agreement or the other Loan Documents, or in respect of the Pledged Collateral or made in connection herewith or therewith. Anything herein to the contrary notwithstanding, the Lender shall not have any obligation or liability under any contracts, agreements and other documents included in the Pledged Collateral by reason of this Agreement, nor shall the Lender be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any such contract, agreement or other document included in the Pledged Collateral. The obligations of each Grantor contained in this Section 8.10 shall survive the termination hereof and the discharge of such Grantor’s other obligations under this Agreement, the Loan Agreement and the other Loan Documents.
Obligations Absolute. Except for specific notices required hereunder, each Grantor hereby waives demand, notice, protest, notice of acceptance of this Agreement, notice of loans made, credit extended, Pledged Collateral received or delivered or other action taken in reliance hereon and all other demands and notices of any description. All obligations of each Grantor hereunder shall be absolute and unconditional irrespective of:
(a) any illegality or lack of validity or enforceability of any Secured Obligation or any Loan Document or any related agreement or instrument;
(b) any change in the time, place or manner of payment of, or in any other term of, the Secured Obligations or any other obligation of any Grantor under any Loan Document, or any rescission, waiver, amendment or other modification of any Loan Document or any other agreement, including any increase in the Secured Obligations resulting from any extension of additional credit or otherwise;
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(c) any taking, exchange, substitution, release, impairment or non-perfection of any Pledged Collateral, or any taking, release, impairment, amendment, waiver or other modification of any guaranty, for the Secured Obligations;
(d) any manner of sale, disposition or application of proceeds of any Pledged Collateral or any other collateral or other assets to all or part of the Secured Obligations;
(e) any default, failure or delay, willful or otherwise, in the performance of the Secured Obligations;
(f) any change, restructuring or termination of the corporate structure, ownership or existence of any Grantor or any of its Subsidiaries or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Borrower or its assets or any resulting release or discharge of any Secured Obligations;
(g) any failure of Lender to disclose to any Grantor any information relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other Grantor now or hereafter known to Lender; each Grantor waiving any duty of the Lender to disclose such information;
(h) the release or reduction of liability of any Grantor or other grantor or surety with respect to the Secured Obligations;
(i) the failure of Lender to assert any claim or demand or to exercise or enforce any right or remedy under the provisions of any Loan Document or otherwise;
(j) any defense, set-off or counterclaim (other than a defense of payment or performance) that may at any time be available to, or be asserted by, the Borrower against Lender; or
(k) any other circumstance or manner of administering the Loans or any existence of or reliance on any representation by Lender, in each case that would reasonably be expected to adversely impact the credit risk of any Grantor or otherwise operate as a defense available to, or a legal or equitable discharge of, any Grantor or any other guarantor or surety.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
| BORROWER: | New<br> Era Energy & Digital, Inc.,<br><br> <br>a<br> Nevada corporation | |
|---|---|---|
| By: | /s/<br> E. Will Gray II | |
| Name: | E. Will Gray II | |
| Title: | Chief Executive Officer | |
| Address: | 4501 Santa Rosa Drive,<br> Midland,<br><br>Texas 79707 | |
| Email: | will@newerainfra.ai | |
| GUARANTOR: | Texas<br> Critical Data Centers LLC,<br><br> <br>a<br> Delaware limited liability company | |
| --- | --- | --- |
| By: | /s/<br> E. Will Gray II | |
| Name: | E. Will Gray II | |
| Title: | Manager | |
| Address: | 4501 Santa Rosa Drive,<br> Midland,<br><br>Texas 79707 | |
| Email: | will@newerainfra.ai | |
| LENDER: | SharonAI,<br> Inc.,<br><br> <br>a<br> Delaware corporation | |
| --- | --- | --- |
| By: | /s/<br> James Manning | |
| Name: | James Manning | |
| Title: | Chair | |
| Address: | 745 Fifth Ave., Suite<br> 500<br><br>New York, NY 10151 | |
| Email: | james@sharonai.com |
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Schedule 1
Description of Investment Property
Pledged Interests:
| Owner | Issuer | Type of<br><br> <br>Equity Interest | % of Ownership Interest | Certificated/Certificate Number or Uncertificated |
|---|---|---|---|---|
| New<br> Era Energy & Digital, Inc. | Texas<br> Critical Data Centers LLC | Membership<br> interest in Delaware limited liability company | 100% | Uncertificated |
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Schedule 2
Filings Required to Perfect Security Interests
Uniform Commercial Code Central Office Filings
Financing Statement to be filed with the Secretary of State of Nevada, naming the Borrower as the Debtor and the Lender as the Secured Party.
Financing Statement to be filed with the Secretary of State of Delaware, naming the Guarantor as the Debtor and the Lender as the Secured Party.
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Schedule 3
Organizational Information
| Legal<br> Name | Jurisdiction<br> of<br> Organization | Type<br> of<br> Organization | Organizational<br><br> Number | Federal<br> EIN | Chief<br> Executive Office /<br> Principal Place of Business |
|---|---|---|---|---|---|
| New<br> Era Energy & Digital, Inc. | Nevada | Corporation | NV20243146490 | 99-3749880 | 4501<br> Santa Rosa Drive, Midland, TX 79707 |
| Texas<br> Critical Data Centers LLC | Delaware | Limited<br> liability company | 10017386 | 33-3798942 | 4501<br> Santa Rosa Drive, Midland, TX 79707 |
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Exhibit 10.5
NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER.
DEED OF TRUST AND SECURITY AGREEMENT (With Collateral Assignment of Rents)
| THE STATE OF TEXAS | § |
|---|---|
| § | |
| COUNTY OF ECTOR | § |
INTRODUCTION
| This instrument (“Deed of Trust”) is a deed of trust from: | ||
|---|---|---|
| Mortgagor Name(s): | TEXAS CRITICAL DATA CENTERS LLC | |
| Address(es): | 4501 Santa Rosa Drive<br><br> <br>Midland, Texas 79707 | |
| (called the “Mortgagor”, “Debtor” and “Assignor”, whether<br> one or more) to: | ||
| Trustee Name: | Douglas A. Yeager | |
| Address: | 845 Texas Avenue, 25^th^ Floor | |
| Houston, TX 77002 | ||
| as trustee (called the “Trustee”), for the use and benefit of: | ||
| Mortgagee Name: | SHARONAI INC. | |
| Address: | 745 Fifth Avenue, Suite 500 | |
| New York, NY 10151 | ||
| (called the “Mortgagee”, “Secured Party” and “Assignee”),<br> a security agreement between Debtor and Secured Party and a collateral assignment of rents from Assignor to Assignee. |
W I T N E S S E T H:
ARTICLE 1 IDENTIFICATION OF THE MORTGAGED PROPERTY AND ITS CONVEYANCE TO THE TRUSTEE
Section 1.1 Mortgagor’s Conveyance of the Mortgaged Property to the Trustee to Secure the Debt. To secure payment of principal, lawful interest and other elements of the Debt described and defined in Article 2, in consideration of the uses and trusts (the “Trust”) established and continued by this Deed of Trust and in consideration of $10 and other valuable consideration paid before delivery of this Deed of Trust by each of Trustee and Mortgagee to Mortgagor, who hereby acknowledges its receipt and that it is reasonably equivalent value for this Deed of Trust and all other security and rights given by Mortgagor, Mortgagor hereby Grants, Sells, Conveys, Transfers, Assigns, Sets Over, Confirms and Delivers unto the Trustee and to his successors or substitutes in the Trust, the following property (collectively, the “Mortgaged Property”):
(a) Real Property. All of the real estate and premises described or referred to on Exhibit A-1, together with (i) all of Mortgagor’s estate, right, title and interest in and to all easements and rights-of-way for utilities, ingress or egress to or from said property and (ii) all interests of Mortgagor in and to all streets, rights-of-way, alleys or strips of land adjoining said property (collectively, the “Real Property”).
(b) Buildings and Improvements. All existing and all future buildings on the Real Property and other improvements to it, all of which Mortgagor and Mortgagee hereby irrevocably declare to be real estate and part of the Real Property, including all water, sewage and drainage facilities, wells, treatment plants, supply, collection and distribution systems, paving, landscaping and other improvements (collectively, the “Improvements”).
(c) Fixtures, Equipment and Supplies. Mortgagor’s right, title and interest in all fixtures, equipment and supplies (the “Fixtures and Equipment”) now or hereafter attached to, used, intended or acquired for use for, or in connection with, the construction, maintenance, operation or repair of the Real Property or Improvements, or for the present or future replacement or replenishment of used portions of it, and all related parts, filters and supplies, including, but not limited to, all heating, lighting, cooling, ventilating, air conditioning, environment control, refrigeration, plumbing, incinerating, water-heating, cooking, pollution control, gas, electric, solar, nuclear, computing, monitoring, measuring, controlling, distributing and other equipment and fixtures, and all renewals and replacements of them, all substitutions for them and all additions and accessions to them, all of which Mortgagor and Mortgagee hereby also irrevocably declare to be real estate and part of the Real Property.
(d) Leases and Rental. All Leases and Rental (as such terms are defined in Section 9.1 below).
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(e) Utilities. All wastewater, fresh water and other utilities capacity and facilities (the “Utilities Capacity”) available or allocable to the Real Property and Improvements or dedicated to or reserved for them pursuant to any system, program, contract or other arrangement with any public or private utility, and all related or incidental licenses, rights and interests, whether considered to be real, personal or mixed property, including the right and authority to transfer or relinquish any or all such rights and the right to any credit, refund, reimbursement or rebate for utilities facilities construction or installation or for any reservation fee, standby fee or capital recovery charge promised, provided or paid for by Mortgagor or any of Mortgagor’s predecessors or Affiliates (defined below), to the full extent now allocated or allocable to the Real Property or Improvements, plus all additional Utilities Capacity, if any, not dedicated or reserved to the Real Property or Improvements but which is now or hereafter owned or controlled by Mortgagor or by anyone (an “Affiliate”, whether a natural person or an entity) who directly or through one or more intermediaries controls, is controlled by or is under common control with Mortgagor, to the full extent that such additional Utilities Capacity is necessary to allow development, marketing and use of the Real Property or Improvements for their highest and best use.
(f) After-acquired Property. All estate, right, title and interest acquired by Mortgagor in or to the Real Property, Improvements, Fixtures and Equipment, Leases, Rental and Utilities Capacity after execution of this Deed of Trust.
(g) Appurtenances. Any and all rights and appurtenances (the “Appurtenances”) belonging, incident or appertaining to the Real Property, Improvements, Fixtures and Equipment, Leases, Rental or Utilities Capacity or any part of them.
(h) Oil and Gas. Mortgagor’s right, title and interest in all existing and future minerals, oil, gas and other hydrocarbon substances in, upon, under or through the Real Property.
(i) Reversions and Remainders. Any and all rights and estates in reversion or remainder to the Real Property, Improvements, Fixtures and Equipment, Leases, Rental, Utilities Capacity or Appurtenances or any part of them.
(j) Contractual Rights. All contracts (including contracts for the sale or exchange of all or any portion of the Real Property or the Improvements), franchises, licenses and permits whether executed, granted or issued by a private person or entity or a governmental or quasi-governmental agency, which are directly or indirectly related to or connected with the development or sale of the Real Property or the Improvements, whether now or at any time hereafter existing, and all amendments and supplements thereto and renewals and extensions thereof at any time made, and all rebates, refunds, escrow accounts and funds, or deposits and all other sums due or to become due under and pursuant thereto and all powers, privileges, options and Mortgagor’s other benefits thereunder.
(k) Other Estates and Interests. All other estates, easements, interests, licenses, rights, titles, powers or privileges of every kind and character which Mortgagor now has, or at any time hereafter acquires, in and to any of the foregoing, including the proceeds from condemnation, or threatened condemnation, and the proceeds of any and all insurance covering any part of the foregoing; and all related parts, accessions and accessories to any of the foregoing and all replacements or substitutions therefor, as well as all other Improvements, Fixtures and Equipment, Leases, Rental, Utilities Capacity and Appurtenances now or hereafter placed thereon or accruing thereto.
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(l) Additional Real Property. Mortgagor has entered into that certain Contract to Purchase dated November 21, 2025, between Odessa Industrial Development Corporation d/b/a Grow Odessa, as seller, and Mortgagor, as buyer, pursuant to which Mortgagor has the right to acquire that certain real property described in Exhibit A-2 attached hereto (the “Additional Real Property”). Mortgagor agrees that in the event Mortgagor acquires title to the Additional Real Property, or any part thereof, the title acquired by Mortgagor shall automatically (and without need for notice to, or execution of any further instruments by, Mortgagor or any other person or entity) be subject to all of the terms and provisions of this Deed of Trust. Mortgagor agrees to notify Mortgagee promptly upon its acquisition of the Additional Real Property, or any part thereof, and, upon Mortgagee’s request, to execute and deliver to Mortgagee a Deed of Trust and Security Agreement (With Collateral Assignment of Rents) in the form hereof covering and affecting the Additional Real Property, which will be recorded in the Official Public Records of Real Property of Ector County, Texas.
Section 1.2 Habendum and Title Warranty. TO HAVE AND TO HOLD the Mortgaged Property, together with every right, privilege, hereditament and appurtenance belonging or appertaining to it, unto the Trustee, his successors or substitutes in the Trust and his or their assigns, forever. Mortgagor represents that Mortgagor is the lawful owner of the Mortgaged Property with good right and authority to mortgage and convey it, and that the Mortgaged Property is free and clear of all liens, claims and encumbrances except only those expressly set forth in a mortgagee policy of title insurance issued in favor of Mortgagee relating to this Deed of Trust or otherwise expressly approved by Mortgagee in writing. Mortgagor hereby binds Mortgagor and Mortgagor’s successors and assigns to forever WARRANT and DEFEND the Mortgaged Property and every part of it unto the Trustee, his successors or substitutes in the Trust, and his or their assigns, against the claims and demands of every person whomsoever lawfully claiming or to claim it or any part of it (such warranty to supersede any provision contained in this Deed of Trust limiting the liability of Mortgagor).
ARTICLE 2 THE DEBT SECURED
Section 2.1 Conveyance in Trust to Secure Designated Obligations. This conveyance to the Trustee is in trust to secure all of the following present and future debt and obligations:
(a) Note. All indebtedness now or hereafter evidenced and to be evidenced by (i) that certain Senior Secured Convertible Promissory Note dated concurrently herewith in the face amount of Fifty Million Dollars ($50,000,000), bearing interest at the rate or rates therein stated, principal and interest payable to the order of Mortgagee on the dates therein stated, with final payment due on June 30, 2026, executed by New Era Energy & Digital, Inc., a Nevada corporation (“Borrower”), and (ii) any and all past, concurrent or future modifications, extensions, renewals, rearrangements, replacements and increases of such note (collectively, the “Note”); capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Note or, if not defined in the note, shall have the meanings assigned to such terms in the Security Agreement referred to therein.
(b) Guaranty. All obligations and indebtedness of Mortgagor now or hereafter created or incurred under that certain Guaranty dated concurrently herewith from Mortgagor for the benefit of Mortgagee, as the same may be amended, supplemented, restated or replaced from time to time (collectively, the “Guaranty”).
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(c) Other Specified Obligations. All other obligations, if any, described or referred to in any other place in this Deed of Trust.
(d) Advances and Other Obligations Pursuant to this Deed of Trust’s Provisions. Any and all sums and the interest which accrues on them as provided in this Deed of Trust which Mortgagee may advance or which Mortgagor may owe Mortgagee pursuant to this Deed of Trust on account of Mortgagor’s failure to keep, observe or perform any of Mortgagor’s covenants under this Deed of Trust.
(e) Obligations under Credit Documents. All present and future debts and obligations under or pursuant to (1) any papers (“Credit Documents”) now or in the future governing, evidencing, guaranteeing or securing or otherwise relating to payment of all or any part of the debt evidenced by the Note or the Guaranty or (2) all supplements, amendments, restatements, renewals, extensions, rearrangements, increases, expansions or replacements of them.
Section 2.2 Debt Defined. The term “Debt” means and includes every Note and all other debt and obligations described or referred to in Section 2.1. The Debt includes interest and other obligations accruing or arising after (a) commencement of any case under any bankruptcy or similar laws by or against Mortgagor or any other Obligor or (b) the obligations of any Obligor shall cease to exist by operation of law or for any other reason. The Debt also includes all reasonable and documented out-of-pocket attorneys’ fees and any other expenses incurred by Mortgagee in enforcing any of the Credit Documents. All liens, assignments and security interests created, represented or continued by this Deed of Trust, both present and future, shall be first, prior and superior to any lien, assignment, security interest, charge, reservation of title or other interest heretofore, concurrently or subsequently suffered or granted by Mortgagor or Mortgagor’s successors or assigns, except only statutory super priority liens for nondelinquent taxes and those other liens (if any) expressly identified and stated in this Deed of Trust to be senior.
ARTICLE 3 SECURITY AGREEMENT
Section 3.1 Grant of Security Interest. Without limiting any of the provisions of this Deed of Trust, Mortgagor, as Debtor, and referred to in this Article as “Debtor” (whether one or more) hereby grants to Mortgagee, as Secured Party, and referred to in this Article as “Secured Party” (whether one or more), a security interest in all of Debtor’s remedies, powers, privileges, rights, titles and interests (including all of Debtor’s power, if any, to pass greater title than it has itself) of every kind and character now owned or hereafter acquired, created or arising in and to (i) the Mortgaged Property (including both that now and that hereafter exist) to the full extent that the Mortgaged Property may be subject to the Uniform Commercial Code of the state or states where the Mortgaged Property is situated (the “UCC”), (ii) all equipment, accounts, general intangibles, fixtures, inventory, chattel paper, notes, documents and other personal property used, intended or acquired for use, on--or in connection with the use or operation of--the Mortgaged Property, or otherwise related to the Mortgaged Property, and all products and proceeds of it, including all Rental and all security deposits under Leases now or at any time hereafter held by or for Debtor’s benefit, all
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monetary deposits which Debtor has been required to give to any public or private utility with respect to utility services furnished to the Mortgaged Property, all funds, accounts, instruments, accounts receivable, documents, trademarks, trade names and symbols used in connection therewith, and notes or chattel paper arising from or by virtue of any transactions related to the Mortgaged Property, all permits, licenses, franchises, certificates, and other rights and privileges obtained in connection with the Mortgaged Property, and all guaranties and warranties obtained with respect to all improvements, equipment, furniture, furnishings, personal property and components of any thereof located on or installed at the Mortgaged Property and (iii) the following described property:
(a) Contracts. All contracts now or hereafter entered into by and between Debtor and any Original Contractor (as such term is defined in Section 53.001(7) of the Texas Property Code) or between Debtor and any other party, as well as all right, title and interest of Debtor under any subcontracts, providing for the construction (original, restorative or otherwise) of any improvements to or on any of the Mortgaged Property or the furnishing of any materials, supplies, equipment or labor in connection with any such construction.
(b) Plans. All of the plans, specifications and drawings (including plot plans, foundation plans, floor plans, elevations, framing plans, cross-sections of walls, mechanical plans, electrical plans and architectural and engineering plans and architectural and engineering studies and analyses) heretofore or hereafter prepared by any architect, engineer or other design professional, in respect of any of the Mortgaged Property.
(c) Design, etc. Agreements. All agreements now or hereafter entered into with any person or entity in respect of architectural, engineering, design, management, development or consulting services rendered or to be rendered in respect of planning, design, inspection or supervision of the construction, management or development of any of the Mortgaged Property.
together with all substitutions for and proceeds of any of the foregoing received upon the rental, sale, exchange, transfer, collection or other disposition or substitution of it and together with all general intangibles now owned by Debtor or existing or hereafter acquired, created or arising (whether or not related to any of the foregoing Property). All the property described or referred to in this Section is collectively referred to as the “Collateral,” and for the avoidance of doubt, shall not include the Excluded Property as defined in the Security and Pledge Agreement. The Mortgaged Property and the Collateral are collectively referred to as the “Property”. In the event of any express inconsistency between the provisions of this Section and Article 9 regarding any Lease or Rental, the provisions of Article 9, to the extent valid, enforceable and in effect, shall govern and control.
Section 3.2 Debtor’s Covenants Concerning Personalty Subject to the UCC. Debtor covenants and agrees with Secured Party that in addition to and cumulative of any other remedies granted in this Deed of Trust to Secured Party or the Trustee, upon or at any time after the occurrence of an Event of Default (defined in Article 6):
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(a) Secured Party is authorized, in any legal manner and without breach of the peace, to take possession of the Collateral (Debtor hereby WAIVING all claims for damages arising from or connected with any such taking) and of all books, records and accounts relating thereto and to exercise without interference from Debtor any and all rights which Debtor has with respect to the management, possession, operation, protection or preservation of the Collateral, including the right to sell or rent the same for the account of Debtor and to deduct from such sale proceeds or such rents all costs, expenses and liabilities of every character incurred by Secured Party in collecting such sale proceeds or such rents and in managing, operating, maintaining, protecting or preserving the Collateral and to apply the remainder of such sales proceeds or such rents on the Debt in such manner as Secured Party may elect. Before any sale, Secured Party may, at its option, complete the processing of any of the Collateral and/or repair or recondition the same to such extent as Secured Party may deem advisable and any sums expended therefor by Secured Party shall be reimbursed by Debtor. Secured Party may take possession of Debtor’s premises to complete such processing, repairing and/or reconditioning, using the facilities and other property of Debtor to do so, to store any Collateral and to conduct any sale as provided for herein, all without compensation to Debtor. All commercially reasonable costs, expenses, and liabilities incurred by Secured Party in collecting such sales proceeds or such rents, or in managing, operating, maintaining, protecting or preserving such properties, or in processing, repairing and/or reconditioning the Collateral if not paid out of such sales proceeds or such rents as hereinabove provided, shall constitute a demand obligation owing by Debtor and shall bear interest from the date of expenditure until paid at the Past Due Rate (as defined in Article 7 below), all of which shall constitute a portion of the Debt. If necessary to obtain the possession provided for above, Secured Party may invoke any and all legal remedies to dispossess Debtor, including specifically one or more actions for forcible entry and detainer. In connection with any action taken by Secured Party pursuant to this Section, Secured Party shall not be liable for any loss sustained by Debtor resulting from any failure to sell or let the Collateral, or any part thereof, or from other act or omission of Secured Party with respect to the Collateral unless such loss is caused by the willful misconduct and bad faith of Secured Party, nor shall Secured Party be obligated to perform or discharge any obligation, duty, or liability under any sale or lease agreement covering the Collateral or any part thereof or under or by reason of this instrument or the exercise of rights or remedies hereunder.
(b) Secured Party may, without notice except as hereinafter provided, sell the Collateral or any part thereof at public or private sale (with or without appraisal or having the Collateral at the place of sale) for cash, upon credit, or for future delivery, and at such price or prices as Secured Party may deem best, and Secured Party may be the purchaser of any and all of the Collateral so sold and may apply upon the purchase price therefor any of the Debt and thereafter hold the same absolutely free from any right or claim of whatsoever kind. Secured Party is authorized at any such sale, if Secured Party deems it advisable or is required by applicable law so to do, to disclaim and to refuse to give any warranty, and to impose such other limitations or conditions in connection with any such sale as Secured Party deems necessary or advisable in order to comply with applicable law. Upon any such sale Secured Party shall have the right to deliver, assign and transfer to the purchaser thereof the Collateral so sold. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right of whatsoever kind, including any equity or right of redemption, stay or appraisal which Debtor has or may have under any rule of law or statute now existing or hereafter adopted. To the extent notice is required by applicable law, Secured Party shall give Debtor written notice at the address set forth herein (which shall satisfy any requirement of notice or reasonable notice in any applicable statute) of Secured Party’s intention to make any such public or private sale. Such notice (if any is required by applicable law) shall be personally delivered or mailed, postage prepaid, at least ten (10) calendar days before the date fixed for a public sale, or at least ten (10) calendar days before
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the date after which the private sale or other disposition is to be made, unless the Collateral is of a type customarily sold on a recognized market, is perishable or threatens to decline speedily in value. Such notice (if any is required by applicable law), in case of public sale, shall state the time and place fixed for such sale or, in case of private sale or other disposition other than a public sale, the time after which the private sale or other such disposition is to be made. Any public sale shall be held at such time or times, within the ordinary business hours and at such place or places, as Secured Party may fix in the notice of such sale. At any sale the Collateral may be sold in one lot as an entirety or in separate parcels as Secured Party may determine. Secured Party shall not be obligated to make any sale pursuant to any such notice. Secured Party may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at any time and place fixed for the sale, and such sale may be made at any time or place to which the same may be so adjourned. In case of any sale of all or any part of the Collateral on credit or for future delivery, the Collateral so sold may be retained by Secured Party until the selling price is paid by the purchaser thereof, but Secured Party shall incur no liability in case of the failure of such purchaser to take up and pay for the Collateral so sold, and in case of any such failure, such Collateral may again be sold upon like notice. Each and every method of disposition described in this Section shall constitute disposition in a commercially reasonable manner. Each Obligor, to the extent applicable, shall remain liable for any deficiency.
(c) Secured Party shall have all the rights of a secured party after default under the Uniform Commercial Code of Texas and in conjunction with, in addition to or in substitution for those rights and remedies:
(i) Secured Party may require Debtor to assemble the Collateral and make it available at a place Secured Party designates which is mutually convenient to allow Secured Party to take possession or dispose of the Collateral; and
(ii) it shall not be necessary that Secured Party take possession of the Collateral or any part thereof before the time that any sale pursuant to the provisions of this Article is conducted and it shall not be necessary that the Collateral or any part thereof be present at the location of such sale; and
(iii) before application of proceeds of disposition of the Collateral to the Debt, such proceeds shall be applied to the reasonable expenses of retaking, holding, preparing for sale or lease, selling, leasing and the like and the reasonable and documented out-of-pocket attorneys’ fees and legal expenses incurred by Secured Party, each Obligor, to the extent applicable, to remain liable for any deficiency; and
(iv) the sale by Secured Party of less than the whole of the Collateral shall not exhaust the rights of Secured Party hereunder, and Secured Party is specifically empowered to make successive sale or sales hereunder until the whole of the Collateral shall be sold; and, if the proceeds of such sale of less than the whole of the Collateral shall be less than the aggregate of the indebtedness secured hereby, this Deed of Trust and the security interest created hereby shall remain in full force and effect as to the unsold portion of the Collateral just as though no sale had been made; and
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(v) in the event any sale hereunder is not completed or is defective in the opinion of Secured Party, such sale shall not exhaust the rights of Secured Party hereunder and Secured Party shall have the right to cause a subsequent sale or sales to be made hereunder; and
(vi) any and all statements of fact or other recitals made in any bill of sale or assignment or other instrument evidencing any foreclosure sale hereunder as to nonpayment of any indebtedness or as to the occurrence of any default, or as to Secured Party having declared all of such indebtedness to be due and payable, or as to notice of time, place and terms of sale and the Collateral to be sold having been duly given, as to any other act or thing having been duly done by Secured Party, shall be taken as prima facie evidence of the truth of the facts so stated and recited; and
(vii) Secured Party may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by Secured Party, including the sending of notices and the conduct of sale, but in the name and on behalf of Secured Party; and
(viii) demand of performance, advertisement and presence of property at sale are hereby WAIVED and Secured Party is hereby authorized to sell hereunder any evidence of debt it may hold as security for the secured indebtedness. All demands and presentments of any kind or nature are expressly WAIVED by Debtor. Debtor WAIVES the right to require Secured Party to pursue any other remedy for the benefit of Debtor and agrees that Secured Party may proceed against any Obligor for the amount of the Debt owed to Secured Party without taking any action against any other Obligor or any other person or entity and without selling or otherwise proceeding against or applying any of the Collateral in Secured Party’s possession.
Section 3.3 UCC Rights are not Exclusive. Should Secured Party elect to exercise its rights under the UCC as to part of the personal property or fixtures described in this Deed of Trust, such election shall not preclude Secured Party or the Trustee from exercising any or all of the rights and remedies granted by the other Articles of this Deed of Trust as to the remaining personal property or fixtures.
Section 3.4 No other Financing Statements on the Collateral. So long as any amount remains unpaid on the Debt, Debtor will not execute or authorize the filing in any public office any financing statements affecting the Collateral other than financing statements in favor of Secured Party under this Deed of Trust, unless prior written specific consent and approval of Secured Party shall have been first obtained.
Section 3.5 Secured Party May File Financing and Continuation Statements. Secured Party is authorized to file this Deed of Trust, a financing statement or statements and one or more continuation statements in any jurisdiction where Secured Party deems it necessary, and at Secured Party’s request, Debtor will pay the costs of filing or recording them, in all public offices at any time and from time to time whenever filing or recording of this Deed of Trust, any financing statement or any continuation statement is deemed by Secured Party or its counsel to be necessary or desirable.
Section 3.6 Fixtures. Certain of the Collateral is or will become “fixtures” (as that term is defined in the UCC) on the Real Property, and when this Deed of Trust is filed for record in the real estate records of the county where such fixtures are situated, it shall also automatically operate as a financing statement upon such of the Collateral which is or may become fixtures.
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Section 3.7 Assignment of Non-UCC Personal Property. To the extent that any of the Collateral is not subject to the UCC of the state or states where it is situated, Debtor hereby assigns to Secured Party all of Debtor’s right, title and interest in the Collateral to secure the Debt to the extent permitted by law. Release of the lien of this Deed of Trust shall automatically terminate this assignment.
Section 3.8 Certain Powers of Secured Party. Debtor hereby authorizes and directs each account debtor and each other person or entity obligated to make payment in respect of any of the Collateral (each a “Collateral Obligor”) to pay over to Secured Party, its officers, agents or assigns, upon demand by Secured Party at any time an Event of Default is continuing, all or any part of the Collateral without making any inquiries as to the status or balance of the secured indebtedness and without any notice to or further consent of Debtor. Debtor hereby agrees to indemnify each Collateral Obligor and hold each Collateral Obligor harmless from all expenses and losses which it may incur or suffer as a result of any payment it makes to Secured Party pursuant to this paragraph. To facilitate the rights of Secured Party hereunder, Debtor hereby authorizes Secured Party, its officers, employees, agents or assigns at any time an Event of Default is continuing:
(a) to notify Collateral Obligors of Secured Party’s security interest in the Collateral and to collect all or any part of the Collateral without further notice to or further consent by Debtor, and Debtor hereby constitutes and appoints Secured Party the true and lawful attorney of Debtor (such agency being coupled with an interest), irrevocably, with power of substitution, in the name of Debtor or in its own name or otherwise, to take any of the actions described in the following clauses (b), (c), (d), (e), (f) and (g);
(b) to ask, demand, collect, receive, receipt for, sue for, compound and give acquittance for any and all amounts which may be or become due or payable under the Collateral and to settle and/or adjust all disputes and/or claims directly with any Collateral Obligor and to compromise, extend the time for payment, arrange for payment in installments, otherwise modify the terms of, or release, any of the Collateral, on such terms and conditions as Secured Party may determine (without thereby incurring responsibility to or discharging or otherwise affecting the liability of Debtor to Secured Party under this Deed of Trust or otherwise);
(c) to direct delivery of, receive, open and dispose of all mail addressed to Debtor and to execute, sign, endorse, transfer and deliver (in the name of Debtor or in its own name or otherwise) any and all receipts or other orders for the payment of money drawn on the Collateral and all notes, acceptances, commercial paper, drafts, checks, money orders and other instruments given in payment or in part payment thereof and all invoices, freight and express bills and bills of lading, storage receipts, warehouse receipts and other instruments and documents in respect of any of the Collateral and any other documents necessary to evidence, perfect and realize upon the security interests and obligations of this Deed of Trust;
(d) in its discretion to file any claim or take any other action or proceeding which Secured Party may deem necessary or appropriate to protect and preserve the rights, titles and interests of Secured Party hereunder;
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(e) to file financing statements, and to sign the name of Debtor to drafts against Collateral Obligors, assignments or verifications of any of the Collateral and notices to Collateral Obligors;
(f) to station one or more representatives of Secured Party on Debtor’s premises for the purpose of exercising any rights, benefits or privileges available to Secured Party hereunder or under any of the Credit Documents or at law or in equity, including receiving collections and taking possession of books and records relating to the Collateral; and
(g) to cause title to any or all of the Collateral to be transferred into the name of Secured Party or any nominee or nominees of Secured Party.
The powers conferred on Secured Party pursuant to this Section are conferred solely to protect or enforce Secured Party’s interest in the Collateral and shall not impose any duty or obligation on Secured Party to perform any of the powers herein conferred. No exercise of any of the rights provided for in this Section shall constitute a retention of collateral in full or partial satisfaction of the indebtedness as provided for in the Uniform Commercial Code of Texas.
Section 3.9 Standard of Care. Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of any of the Collateral in its possession if it takes such action for that purpose as Debtor requests in writing, but failure of Secured Party to comply with such request shall not of itself be deemed a failure to exercise reasonable care, and no failure of Secured Party to take any action not so requested by Debtor shall be deemed a failure to exercise reasonable care in the custody or preservation of any such Collateral.
Section 3.10 Change Terms, Release Collateral. Secured Party may extend the time of payment, arrange for payment in installments, otherwise modify the terms of, or release, any of the Collateral, without thereby incurring responsibility to Debtor or discharging or otherwise affecting any liability of Debtor. Secured Party shall not be required to take steps necessary to preserve any rights against prior parties to any of the Collateral.
ARTICLE 4 MORTGAGOR’S COVENANTS
Section 4.1 Covenants for the Benefit of Mortgagee. To better secure the Debt, Mortgagor covenants and agrees with the Trustee and his substitutes and successors in the Trust, for the use and benefit of Mortgagee and with the intent that the Trustee, Mortgagee or both may enforce these covenants, that:
(a) Liens, etc. and Remedies Cumulative. No lien, assignment, security interest, guaranty, right or remedy in favor of Mortgagee granted in, secured by or ancillary to this Deed of Trust shall be considered as exclusive, but each shall be cumulative of all others which Mortgagee or the Trustee may now or hereafter have.
(b) Mortgagor Waives Marshalling of Assets and Sale in Inverse Order of Alienation Rights. Mortgagor hereby irrevocably WAIVES all rights of marshalling of assets or sale in inverse order of alienation in the event of foreclosure of this or any other security.
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(c) Mortgagor Will Correct Title Defects. If at any future time any material defect should be found to exist in the title to any of the Property, to the extent such defect materially and adversely impacts the value or intended use of the Property, Mortgagor agrees to promptly use commercially reasonable efforts to commence, and thereafter diligently proceed, to cure such defect in all material respects and to defend title to the extent reasonably necessary to protect the value or intended use of the Property. If any Lien or encumbrance junior, equal or superior in rank or priority to the Lien of this Deed of Trust is discovered by Mortgagor (or arises) at any time in the future that either (i) materially and adversely impacts the Lien of Mortgagee or the value or use of the Property or (ii) is an equal or superior Lien that secures obligations of $1,000,000 or more in the aggregate, then, unless Mortgagee is the only holder of such Lien or encumbrance, or Mortgagee has given specific prior written consent to the same (which consent shall not be unreasonably withheld, conditioned, or delayed), Mortgagor agrees to promptly use its commercially reasonable efforts to cause the discharge and removal of such Lien or encumbrance from the Mortgaged Property; provided that Mortgagor shall not be required to discharge or remove any such Lien or encumbrance while the same is being contested in good faith by appropriate proceedings, so long as such contest does not result in a material risk of foreclosure or sale of the Mortgaged Property, and subject to any applicable notice and cure periods under law.
(d) Insurance Requirements. Within 30 days of the Original Issue Date (or at such later time is extended by Mortgagee in its discretion, any such extension not to be unreasonably withheld, conditioned or delayed), Mortgagor will establish and shall at all times thereafter before the final termination of this Deed of Trust, provide, maintain and keep in force, the following specifically described insurance coverages and, thereafter, such lesser or additional title, casualty, liability and other insurance for the Property that is consistent with coverage levels and policy forms customarily maintained by prudent owners of comparable properties in the same geographic market and is reasonably requested from time to time after the date hereof by Mortgagee, in each case solely to the extent such insurances are available to Mortgagor on commercially reasonable terms:
(i) Casualty Coverage. An all-risk policy of permanent property insurance insuring the Property against risks of direct physical loss or damage subject to customary industry exclusions and such other exclusions as are reasonably acceptable to Mortgagor in its business judgment.
(ii) Liability Insurance. Commercial general liability insurance (in each case, to the extent applicable to the Mortgaged Property and Mortgagor’s operations) against claims for bodily injury, death or property damage occurring on, in or about the Mortgaged Property in an amount and containing terms reasonably acceptable to Mortgagor in its business judgment.
(e) InsuranceCompanies, Policies, Endorsements and Premium Payments. Mortgagor agrees that all required insurance will be written on forms acceptable to Mortgagee (such acceptance not to be unreasonably withheld, conditioned or delayed) and by companies that are acceptable to Mortgagee (such acceptance not to be unreasonably withheld, conditioned or delayed), and that such insurance (other than third party liability insurance) shall be written or endorsed so that all losses are payable to Mortgagee (to the extent such endorsement is available from the approved insurer). The original policies evidencing such insurance shall be delivered by Mortgagor to Mortgagee upon request
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by Mortgagee while any Event of Default is continuing. Each such policy shall expressly prohibit cancellation or modification of insurance without thirty (30) days’ prior written notice to Mortgagee, to the extent commercially available from the insurer; provided, that if such notice cannot be obtained, Mortgagor shall provide notice to Mortgagee promptly upon receipt of written notice of any such cancellation that is not cured within the applicable policy’s grace period, if any. Mortgagor agrees to furnish due proof of payment of the premiums for all such insurance to Mortgagee promptly after any reasonable request by Mortgagee. While any Event of Default is continuing, Mortgagee shall be entitled to require that Mortgagor pay over to Mortgagee directly any proceeds of such insurances otherwise received by Mortgagor.
(f) Mortgagee’s Rights to Collect Insurance Proceeds. Mortgagor hereby assigns to Mortgagee the exclusive right to collect any and all monies that may become payable under any insurance policies covering any part of the Property, or any risk to or about the Property.
(g) Effects of Foreclosure on Insurance Policies and Post-foreclosure Event Claims. Foreclosure of this Deed of Trust shall automatically constitute foreclosure upon all policies of insurance insuring any part of or risk to the Property and all claims thereunder arising from post-foreclosure events. The successful bidder or bidders for the Property at foreclosure, as their respective interests may appear, shall automatically accede to all of Mortgagor’s rights in, under and to such policies and all post-foreclosure event claims, and such bidder(s) shall be named as insured(s) on request, whether or not the trustee’s deed or bill of sale to any such successful bidder mentions insurance.
(h) Application of Insurance Proceeds Collected Before Foreclosure. Unless an Event of Default has occurred and so long as Mortgagor has reasonably determined that the applicable proceeds (together with other funds otherwise available for the purpose of repair and restoration of the applicable damage or destruction) are sufficient to pay all costs of repair and restoration of the applicable damage or destruction, Mortgagor will hold all proceeds of insurance and will apply the same as such repairs or restoration are made, upon such terms and conditions as Mortgagor may elect.
(i) Application of Insurance Proceeds Collected After Foreclosure. Unless Mortgagee or Mortgagee’s representative reserves at the foreclosure sale the right to collect any uncollected insurance proceeds recoverable for events occurring before foreclosure (in which event the successful bidder at the sale, if not Mortgagee, shall have no interest in such proceeds and Mortgagee shall apply them, if and when collected, to the Debt in such order and manner as Mortgagee shall then elect and remit any remaining balance to Mortgagor or to such other person or entity as is legally entitled to them), all proceeds of all such insurance which are not so reserved by Mortgagee at the foreclosure sale and are not actually received by Mortgagee until after foreclosure shall be the property of the successful bidder or bidders at foreclosure, as their interests may appear, and Mortgagor shall have no interest in them and shall receive no credit for them.
(j) Mortgagee Not Obligated to Require, Provide or Evaluate Insurance. Mortgagee shall have no duty to Mortgagor or anyone else to either require or provide any insurance or to determine the adequacy or disclose any inadequacy of any insurance.
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(k) Mortgagee May Elect to Insure Only its Own Interests. If Mortgagee elects at any time or for any reason to purchase insurance relating to the Property, it shall have no obligation to cause Mortgagor or anyone else to be named as an insured, to cause Mortgagor’s or anyone else’s interests to be insured or protected or to inform Mortgagor or anyone else that his or its interests are uninsured or underinsured. TEXAS FINANCE CODE SECTION 307.052 COLLATERAL PROTECTION INSURANCE NOTICE: (A) MORTGAGOR IS REQUIRED TO: (I) KEEP THE PROPERTY INSURED AGAINST DAMAGE IN THE AMOUNT MORTGAGEE SPECIFIES; (II) PURCHASE THE INSURANCE FROM AN INSURER THAT IS AUTHORIZED TO DO BUSINESS IN THE STATE OF TEXAS OR AN ELIGIBLE SURPLUS LINES INSURER; AND (III) NAME MORTGAGEE AS THE PERSON TO BE PAID UNDER THE POLICY IN THE EVENT OF A LOSS; (B) MORTGAGOR MUST, IF REQUIRED BY MORTGAGEE, DELIVER TO MORTGAGEE A COPY OF THE POLICY AND PROOF OF THE PAYMENT OF PREMIUMS; AND (C) IF MORTGAGOR FAILS TO MEET ANY REQUIREMENT LISTED IN PARAGRAPH (A) OR (B), MORTGAGEE MAY OBTAIN COLLATERAL PROTECTION INSURANCE ON BEHALF OF MORTGAGOR AT MORTGAGOR’S EXPENSE.
(l) Mortgagor Will Correct Defects, Provide Further Assurances and Papers. Upon Mortgagee’s reasonable request, Mortgagor will promptly correct any defect which hereafter may be discovered in the text, execution or acknowledgment of the Note, this Deed of Trust or any Credit Document or in the description of any of the Property, and will deliver such further assurances and execute such additional papers as in the opinion of Mortgagee or its legal counsel shall be necessary, proper or appropriate (1) to better convey and assign to the Trustee and Mortgagee all the Property intended or promised to be conveyed or assigned or (2) to properly evidence or give notice of the Debt or its intended or promised security.
(m) Mortgagor Will Pay Taxes and Impositions and Furnish Receipts. At Mortgagor’s own cost and expense, Mortgagor agrees to pay and discharge all material taxes, assessments, maintenance charges, permit fees, impact fees, development fees, capital recovery charges, utility reservation and standby fees and all other similar and dissimilar impositions of every kind and character (“Impositions”) charged, levied, assessed or imposed against any interest in any of the Property, as they become payable and before they become delinquent. Mortgagor agrees to furnish due proof of such payment to Mortgagee promptly after payment and before delinquency.
(n) Mortgagor Will Maintain Property and Won’t Remove Improvements. Mortgagor agrees, subject to commercially reasonable efforts and to the extent within its control, to keep, preserve and maintain all elements of the Property in good order, repair and condition (ordinary wear and tear and damage by casualty or condemnation excepted) and to keep all equipment and stores of supplies needed for ordinary course operation of the Property, in good operating condition, in each case in its reasonable business judgment. Mortgagor will not tear down, damage or attempt to remove, demolish or make any structural alteration to any elements of the Property, or construct any new Improvements, without Mortgagee’s prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed); provided, however, that Mortgagee’s consent shall not be required for (i) any such alterations contemplated and discussed prior to the date hereof in connection with the currently intended development and use of the Property,
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or (ii) non-structural alterations, replacements or improvements that are not expected to have a Material Adverse Effect on the value or use of the Mortgaged Property. Mortgagor shall have the right, without such consent, to remove and dispose of, free from the lien, assignments and security interests of this Deed of Trust, such Fixtures and Equipment as from time to time become worn out, obsolete or in need of repair, provided that either (a) to the extent reasonably necessary for the intended use and operation of the Property, such equipment shall be replaced or supplemented with other equipment that, upon installation, shall automatically become subject to the lien, assignments and security interests of this Deed of Trust or (b) any net cash proceeds received from such disposition may, at Mortgagor’s option so long as no Event of Default has occurred and is continuing, be (x) applied to the acquisition of additional or replacement equipment to be located at the Mortgaged Property (which upon installation shall become subject to the lien of this Deed of Trust) or to capital expenditures at the Mortgaged Property, (y) used in the ordinary course business operations of the Mortgagor or (z) paid over to Mortgagee to be applied to the Debt in accordance with the Transaction Documents. Except in connection with the currently intended and previously discussed development of the Property for its intended future use in the ordinary course of business, Mortgagor shall not grant, join in or consent to any lien, security interest, easement, license, use or other charge or interest covering or affecting all or any part of the Property or initiate, join in or consent to the change in any private restrictive covenant, zoning ordinance or other public or private restrictions limiting or defining the uses which may be made of the Property or any part thereof without the prior written consent of Mortgagee, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that (x) liens arising by operation of law that are being contested in good faith, (y) leases and liens permitted by the Transaction Documents, and (z) easements, licenses or use agreements that are not expected to have a Material Adverse Effect on the value or use of the Mortgaged Property and that inure to the benefit of the Property, in each case shall be permitted without Mortgagee’s consent.
(o) Mortgagor Will Protect Property from Mechanic’s Liens. Mortgagor agrees to promptly pay all bills for labor and materials incurred in connection with the Property and to prevent the fixing of any Lien against any part of the Property, even if it is inferior to this Deed of Trust, for any such bill which may be legally due and payable; provided, however, that the foregoing shall not apply to (i) statutory Liens of landlords, carriers, warehousemen, mechanics, materialmen, repairmen and other similar Liens arising in the ordinary course of business, in each case securing obligations that are not overdue by more than 60 days or are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, and (ii) customary contractual Liens arising in the ordinary course of business (including under leases, licenses, subleases, consignments, bailments, progress‑payment and title‑retention arrangements), in each case so long as such Liens do not secure the payment of borrowed money and do not, individually or in the aggregate, materially impair the value of, or the Mortgagee’s Lien on, the Mortgaged Property.
(p) Mortgagee’s Inspection and Discussion Rights. Mortgagor agrees to permit Mortgagee and its agents, representatives and employees at all reasonable times to go upon, examine, inspect and remain on the Mortgaged Property, to assist and cooperate, and require Mortgagor’s employees, agents and contractors to cooperate, with Mortgagee and to furnish to Mortgagee on request all pertinent information concerning the physical and economic condition, development and operation of the Mortgaged Property. Mortgagee may discuss the Mortgaged Property directly with any of Mortgagor’s officers and managers.
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(q) Mortgagee May Grant Releases without Impairing Other Collateral or Rights. At all times, Mortgagee shall have the right to release any part of the Property or any other security from this Deed of Trust or any other security instrument or device without releasing any other part of the Property or any other security, without affecting Mortgagee’s lien, assignment or security interest as to any property or rights not released and without affecting or impairing the liability of any maker, guarantor or surety on the Note or other obligation.
(r) If Mortgagor is not a Natural Person. If Mortgagor has represented to Mortgagee that Mortgagor is not a natural person, then it and its directors, partners, venturers, trustee(s) or principals agree to maintain its existence as such and to obtain and maintain all franchises and permits necessary for it continuously to be in good standing in the State of Texas and in the state of its organization (if not Texas) with full power and authority to conduct its regular business and to own and operate the Mortgaged Property until final termination of this Deed of Trust.
(s) Legal Compliance, Governmental Notices. Mortgagor will operate the Property and conduct its business in compliance in all material respects with all requirements of governmental and quasi-governmental authorities having jurisdiction over Mortgagor or the Property.
(t) Additional Information. Mortgagor shall furnish to Mortgagee from time to time such information relating to the Property or Mortgagor’s financial condition and affairs as Mortgagee may from time to time reasonably request or as may be required from time to time by any Credit Document.
Section 4.2 Mortgagor Agrees to Pay or Reimburse Mortgagee’s Expenses. To the extent not prohibited by applicable law, Mortgagor will pay all reasonable and documented costs and expenses and reimburse Mortgagee for any and all expenditures of every character incurred or expended from time to time (in each case to the extent provided in the other Credit Documents), regardless of whether an Event of Default shall have occurred, in connection with:
(a) the preparation, negotiation, documentation, closing, renewal, revision, modification, increase, review or restructuring of any loan or credit facility secured by this Deed of Trust, including legal, accounting, auditing, architectural, engineering and inspection services and disbursements, or in connection with collecting or attempting to enforce or collect the Note or this Deed of Trust.
(b) Mortgagee’s evaluating, monitoring, administering and protecting the Property.
(c) Mortgagee’s creating, perfecting and realizing upon Mortgagee’s security interest in and liens on the Property, and all reasonable costs and expenses relating to Mortgagee’s exercising any of its rights and remedies under this Deed of Trust or any Credit Document or at law, including all appraisal fees, consulting fees, filing fees, taxes, brokerage fees and commissions, title review and abstract fees, litigation report fees, UCC search fees, other fees and expenses incident to title searches, reports and security interests, escrow fees, attorneys’ fees, legal expenses, court costs, other fees and expenses incurred in connection with any complete or partial liquidation of the Property, and all fees and expenses for any professional services relating to the Property or any operations conducted in connection with it.
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Provided, that no right or option granted by Mortgagor to Mortgagee or otherwise arising pursuant to any provision of this Deed of Trust, the Note or any Credit Document shall be deemed to impose or admit a duty on Mortgagee to supervise, monitor or control any aspect of the character or condition of the Property or any operations conducted in connection with it for the benefit of Mortgagor or any person or entity other than Mortgagee. Mortgagor agrees to indemnify, defend and hold Mortgagee, its shareholders, directors, officers, agents, attorneys, advisors and employees (collectively “Indemnified Parties”) harmless from and against any and all loss, liability, obligation, damage, penalty, judgment, claim, deficiency, expense, action, suit, cost and disbursement of any kind or nature whatsoever (including interest, penalties, reasonable and documented out-of-pocket attorneys’ fees and amounts paid in settlement), REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY OF THE INDEMNIFIED PARTIES, imposed on, incurred by or asserted against the Indemnified Parties growing out of or resulting from any Credit Document or any transaction or event contemplated therein (except that such indemnity shall not be paid to any Indemnified Party to the extent that such loss, etc. directly results from the gross negligence or willful misconduct of that Indemnified Party). If any person or entity (including Mortgagor or any of its affiliates) ever alleges gross negligence or willful misconduct by an Indemnified Party, the full amount of indemnification provided for in this Section shall nonetheless be paid upon demand, subject to later adjustment or reimbursement at such time–if any–as a court of competent jurisdiction enters a final judgment as to the extent and effect of the alleged gross negligence or willful misconduct. Any amount to be paid under this Section by Mortgagor to Mortgagee shall be a demand obligation owing by Mortgagor to Mortgagee and shall bear interest from the date of expenditure until paid at the Past Due Rate.
ARTICLE 5 MORTGAGOR’S REPRESENTATIONS AND WARRANTIES
Section 5.1 Title. Mortgagor has good and marketable title to the Property, free and clear of any Lien except only for Liens which are either established or expressly permitted by this Deed of Trust or other Credit Documents. Except as otherwise expressly permitted by this Deed of Trust, the Lien of this Deed of Trust will constitute valid and perfected first and prior Liens on the Property, subject to no other Liens whatsoever.
Section 5.2 Mortgagor Has All Necessary Rights. Mortgagor possesses all permits, licenses, patents, trademarks, trade names and copyrights required to conduct its business, except as would not be reasonably expected to have a Material Adverse Effect. All easements, rights-of-way, utilities and other rights necessary to maintenance and operation of the Property have been obtained and are in full force and effect.
Section 5.3 Legal Requirements. Mortgagor and the Property are in compliance in all material respects with all applicable legal requirements and Mortgagor manages and operates (and will continue to manage and operate) the Property and its other businesses in accordance with good industry practices.
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ARTICLE 6 DEFAULTS AND REMEDIES
Section 6.1 Release for Full Payment and Performance. Subject to the automatic reinstatement provisions of Section 10.21 below, this Deed of Trust shall terminate and be of no further force or effect (and shall be released on Mortgagor’s written request and at Mortgagor’s cost and expense) upon full payment of the Debt, complete performance of all of the obligations of the Obligors under the Credit Documents and final termination of Mortgagee’s obligations--if any--to make any further advances under the Note or to provide any other financial accommodations to any Obligor.
Section 6.2 Events of Default. The occurrence of any Event of Default (as defined in the Note) shall constitute an Event of Default under this Deed of Trust:
Section 6.3 Remedies. Upon the occurrence of any Event of Default, and at any time thereafter:
(a) Debt Due. All Debt in its entirety shall, at the option of Mortgagee, become immediately due and payable without presentment, demand, notice of intention to accelerate or notice of acceleration, or other notice of any kind, all of which are hereby expressly WAIVED, and the liens and security interests created or intended to be created hereby shall be subject to foreclosure, repossession and sale in any manner provided for herein or provided for by law, as Mortgagee may elect, and Mortgagee may exercise any and all of its rights under this Deed of Trust, the Note and any of the other Credit Documents.
(b) Legal Proceedings. Trustee and Mortgagee shall have the right and power to proceed by suit or suits in equity or at law, whether for the specific performance of any covenant or agreement of Mortgagor contained herein or in aid of the execution of the powers herein granted, or for foreclosure or the sale of the Property or any part thereof under the judgment or decree of any court of competent jurisdiction, or for the enforcement of any other appropriate legal or equitable remedy.
(c) Trustee’s Sale. It shall be the duty of the Trustee and of his successors and substitutes in the Trust, on Mortgagee’s request (which request is hereby presumed) to enforce the Trust by selling the Mortgaged Property as is provided in this Deed of Trust.
Section 6.4 Time and Place of Saleand Notices. The sale shall be a public sale at auction held between 10 A.M. and 4 P.M. of the first Tuesday of a month (or, if the first Tuesday of a month is January 1 or July 4, the first Wednesday of such month). The sale shall take place at the county courthouse in the county in which the Real Property is located, or if it is located in more than one county, the sale will be made at the courthouse in one of those counties. The sale shall occur at the area at that courthouse which the commissioners’ court of that county has designated as the place where such sales are to take place by designation recorded in the real property records of that county, or if no area is so designated, then the notice of sale shall designate the area at the courthouse where the sale covered by that notice is to take place, and the sale shall occur in that area. Notice of the sale shall include a statement of the earliest time at which the sale will occur and shall be given at least twenty-one (21) days before the date of the sale (1) by posting at the courthouse door of each county in which the Real Property is located a written notice designating the county in which the
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Real Property will be sold, (2) by filing in the Office of the County Clerk of each county in which the Real Property is located a copy of the notice posted under subsection (1) above and (3) by the holder of the Debt to which the power of sale is related serving written notice of the sale by certified mail on each debtor who, according to the records of a holder of the Debt, is obligated to pay that Debt. The sale shall begin at the time stated in the notice of sale or not later than three (3) hours after that time. If and to the extent that Texas Property Code Section 51.002 requires it, if any of the Real Property to be sold is used as a debtor’s residence, a holder of the Debt shall serve that debtor with written notice by certified mail stating that debtor is in default under this Deed of Trust, and that debtor shall have at least twenty (20) days to cure the default before the entire Debt is due and notice of sale is given. Service of any notice under this Section by certified mail is complete when the notice is deposited in the United States mail, postage prepaid and addressed to the debtor entitled to it at that debtor’s last known address as shown by the records of a holder of the Debt. The affidavit of a person knowledgeable of the facts to the effect that service was completed is prima facie evidence of service. After such written notice shall have been posted and filed, as aforesaid, and such notice shall have been served upon such debtor or debtors, as aforesaid, the Trustee (or his successor or substitute then acting) shall perform his duty to enforce the Trust by selling the Mortgaged Property, either as an entirety or in parcels as the Trustee acting may elect, all rights to a marshalling of assets or sale in inverse order of alienation being waived, as aforesaid to the highest bidder or bidders for cash, and make due conveyance to the purchaser or purchasers, with general warranty, and the title to such purchaser or purchasers, when so made by the Trustee acting, Mortgagor binds itself, its successors and assigns, to warrant and forever defend against the claims and demands of every person whomsoever lawfully claiming or to claim the same or any part thereof (such warranty to supersede any provision contained in this Deed of Trust limiting the liability of Mortgagor). The provisions of this Deed of Trust with respect to posting and giving notices of sale are intended to comply with the provisions of Section 51.002 of the Texas Property Code as in force and effect on the date hereof, and in the event the requirement for any notice under such Section 51.002 shall be eliminated or the prescribed manner of giving it shall be modified by future amendment to, or adoption of any statute superseding, such Section 51.002, the requirement for such particular notice shall be deemed stricken from or modified in of this Deed of Trust in conformity with such amendment or superseding statute, effective as of its effective date. The manner prescribed in this Deed of Trust for serving or giving any notice, other than that to be posted or caused to be posted by the Trustee acting, shall not be deemed exclusive but such notice or notices may be given in any other manner permitted by applicable law. Said sale shall forever be a bar against Mortgagor, its heirs, legal representatives, successors and assigns, and all other persons claiming under it. It is expressly agreed that the recitals in each conveyance to the purchaser shall be full evidence of the truth of the matters therein stated, and all lawful prerequisites to said sale shall be conclusively presumed to have been performed. Trustee may require minimum bids at any foreclosure sale and may cancel and abandon the sale if no bid is received equal to or greater than any such minimum bid.
Section 6.5 Application of Foreclosure Sale Proceeds. The proceeds of any sale of the Mortgaged Property, and any rents and other amounts collected by Mortgagee from Mortgagee’s holding, leasing, operating or making any other use of the Mortgaged Property, shall be applied by Mortgagee (or by the receiver, if one is appointed) to the extent that funds are available therefrom in the following order of priority:
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(a) To Expenses and Senior Obligation Payments. first, to the payment of the costs and expenses of taking possession of the Mortgaged Property and of holding, maintaining, using, leasing, repairing, equipping, manning, improving, marketing and selling it, including (i) trustees’ and receivers’ fees, (ii) court costs, (iii) reasonable attorneys’ and accountants’ fees, (iv) costs of advertisement and brokers’ commissions and (v) payment of any and all Impositions, liens, security interests or other rights, titles or interests superior to the lien and security interest of this Deed of Trust, whether or not then due and including any prepayment penalties or fees and any accrued or required interest (except, in the case of foreclosure proceeds, those senior liens and security interests, if any, subject to which the Mortgaged Property was sold at such trustee’s sale, and without in any way implying Mortgagee’s consent to the creation or existence of any such prior liens);
(b) To Accrued Interest on the Debt. third, to the payment of all accrued but unpaid interest due on the Debt;
(c) To Debt Principal. fourth, to the payment of the principal balance on the Debt;
(d) To Junior Lienholders. fifth, to the extent funds are available therefor out of the sale proceeds or any rents and, to the extent known by Mortgagee, to the payment of any debt or obligation secured by a subordinate deed of trust on or security interest in the Mortgaged Property; and
(e) To Mortgagor. sixth, to Mortgagor, its successors and assigns, or to whomsoever may be lawfully entitled to receive such proceeds.
Section 6.6 Mortgagee May Require Abandonment and Recommencement of Sale. If the Trustee or his substitute or successor should commence the sale, Mortgagee may at any time before the sale is completed direct the Trustee to abandon the sale, and may at any time or times thereafter direct the Trustee to again commence foreclosure; or, irrespective of whether foreclosure is commenced by the Trustee, Mortgagee may at any time after an Event of Default institute suit for collection of the Debt or foreclosure of this Deed of Trust. If Mortgagee should institute suit for collection of the Debt or foreclosure of this Deed of Trust, Mortgagee may at any time before the entry of final judgment dismiss it and require the Trustee to sell the Mortgaged Property in accordance with the provisions of this Deed of Trust.
Section 6.7 Multiple Sales; Deed of Trust Continues in Effect. No single sale or series of sales by the Trustee or by any substitute or successor and no judicial foreclosure shall extinguish the lien or exhaust the power of sale under this Deed of Trust except with respect to the items of property sold, nor shall it extinguish, terminate or impair Mortgagor’s contractual obligations under this Deed of Trust, but such lien and power shall exist for so long as, and may be exercised in any manner by law or in this Deed of Trust provided as often as the circumstances require to give Mortgagee full relief under this Deed of Trust, and such contractual obligations shall continue in full force and effect until final termination of this Deed of Trust.
Section 6.8 Mortgagee May Bid and Purchase. Mortgagee shall have the right to become the purchaser at any sale made under this Deed of Trust, being the highest bidder, and credit given upon all or any part of the Debt shall be the exact equivalent of cash paid for the purposes of this Deed of Trust.
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Section 6.9 Successor or Substitute Trustee. In case of absence, death, inability, refusal or failure of the Trustee in this Deed of Trust named to act, or in case he should resign (and he is hereby authorized to resign without notice to or consent of Mortgagor), or if Mortgagee shall desire, with or without cause, to replace the Trustee in this Deed of Trust named, or to replace any successor or substitute previously named, Mortgagee or any agent or attorney-in-fact for Mortgagee may name, constitute and appoint a successor and substitute trustee (or another one) without other formality than an appointment and designation in writing, which need not be acknowledged, filed or recorded to be effective, except only in those circumstances--if any--where acknowledgment, filing and/or recording is required by applicable law and such law also precludes Mortgagor from effectively waiving such requirement. Upon such appointment, this conveyance shall automatically vest in such substitute trustee, as Trustee, the estate in and title to all of the Mortgaged Property, and such substitute Trustee so appointed and designated shall thereupon hold, possess and exercise all the title, rights, powers and duties in this Deed of Trust conferred on the Trustee named and any previous successor or substitute Trustee, and his conveyance to the purchaser at any such sale shall be equally valid and effective as if made by the Trustee named in this Deed of Trust. Such right to appoint a substitute Trustee shall exist and may be exercised as often and whenever from any of said causes, or without cause, as aforesaid, Mortgagee or Mortgagee’s agent or attorney-in-fact elects to exercise it.
Section 6.10 Right to Receiver. Upon the occurrence of an Event of Default or at any time after commencement of a Trustee’s foreclosure sale or any legal proceedings under this Deed of Trust, Mortgagee may, at Mortgagee’s election and by or through the Trustee or otherwise, make application to a court of competent jurisdiction for appointment of a receiver of the Property, as a matter of strict right, without notice to Mortgagor and without regard to the adequacy of the value of the Property for the repayment of the Debt, and Mortgagor hereby irrevocably consents to such an appointment. Any receiver shall have all the usual powers and duties of receivers in similar cases, including the full power to possess, rent, maintain, repair and operate the Property upon such terms and conditions as may be approved by the court, and shall apply the rents realized in the same manner and order as foreclosure proceeds in accordance with Section 6.5.
Section 6.11 Tenants at Will. Mortgagor agrees for itself and its heirs, legal representatives, successors and assigns, that if any of them shall hold possession of the Property or any part thereof subsequent to foreclosure hereunder, Mortgagor, or the parties so holding possession, shall become and be considered as tenants at will of the purchaser or purchasers at such foreclosure sale; and any such tenant failing or refusing to surrender possession upon demand shall be guilty of forcible detainer and shall be liable to such purchaser or purchasers for rental on said premises, and shall be subject to eviction and removal, forcible or otherwise, with or without process of law, all damages which may be sustained by any such tenant as a result thereof being hereby expressly waived.
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ARTICLE 7 MORTGAGEE’S RIGHT TO PERFORM MORTGAGOR’S OBLIGATIONS
Section 7.1 Mortgagee May Elect to Perform Defaulted Obligations. If Mortgagor should fail to comply with any of its agreements, covenants or obligations under this Deed of Trust, the Note, or any other Credit Document, then Mortgagee (in Mortgagor’s name or in Mortgagee’s own name) may perform them or cause them to be performed for Mortgagor’s account and at Mortgagor’s expense, but shall have no obligation to perform any of them or cause them to be performed. Any and all expenses thus incurred or paid by Mortgagee shall be Mortgagor’s obligations to Mortgagee due and payable on demand, or if no demand is sooner made, then they shall be due on or before four (4) years after the respective dates on which they were incurred, and each shall bear interest from the date Mortgagee pays it until the date Mortgagor repays it to Mortgagee, at the maximum nonusurious rate of interest from time to time permitted by whichever of applicable Texas or federal law from time to time permits the higher nonusurious interest rate (the “Ceiling Rate”), or, only if applicable law imposes no maximum nonusurious rate, then at the same rate as is provided for in the Note for interest on past due principal (the “Past Due Rate”). At all times, if any, as the Texas Finance Code shall establish the Ceiling Rate for any purpose under this Deed of Trust, the Ceiling Rate shall be the “weekly ceiling” as defined in the Texas Finance Code from time to time in effect. Upon making any such payment or incurring any such expense, Mortgagee shall be fully and automatically subrogated to all of the rights of the person, corporation or body politic receiving such payment. Any amounts owing by Mortgagor to Mortgagee pursuant to this or any other provision of this Deed of Trust shall automatically and without notice be and become a part of the Debt and shall be secured by this and all other instruments securing the Debt. The amount and nature of any such expense and the time when it was paid shall be fully established by the affidavit of Mortgagee or any of Mortgagee’s officers or agents or by the affidavit of any original, substitute or successor Trustee acting under this Deed of Trust. Without notice to Mortgagor or any other person or entity, the Ceiling Rate and the Past Due Rate shall automatically fluctuate upward and downward as and in any amount by which the maximum nonusurious rate of interest permitted by such applicable law and the rate of interest as provided for in the Note for interest on past due principal fluctuate, respectively.
Section 7.2 Exercise of Rights is not Waiver or Cure of Default. The exercise of the privileges granted to Mortgagee in this Article shall in no event be considered or constitute a cure of the default or a waiver of Mortgagee’s right at any time after an Event of Default to declare the Debt to be at once due and payable, but is cumulative of such right and of all other rights given by this Deed of Trust, the Note and the Credit Documents and of all rights given Mortgagee by law.
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ARTICLE 8 [Reserved]
ARTICLE 9 COLLATERAL ASSIGNMENT OF RENTS
Section 9.1 Collateral Assignment of Rents, Revenues, Income and Profits. Mortgagor hereby collaterally assigns to Mortgagee all rents, revenues, income and profits and all other “Rents” (as such term is defined in the Texas Assignment of Rents Act, Chapter 64 of the Texas Property Code) (“Rental”) payable under each Lease (hereinafter defined) now or at any time hereinafter existing, such collateral assignment being upon the terms set forth in Section 9.2 below. The term “Lease” or “Leases” means any oral or written agreement between Mortgagor and another person or entity to use or occupy all or any portion of the Property, together with any guaranties or security for the obligations of any tenant, lessee, sublessee or other person or entity having the right to occupy, use or manage any part of the Property under a Lease. Each time Mortgagor enters into a Lease, such Lease shall automatically become subject to this Article without further action.
Section 9.2 Right to Direct Payment of Rental After an Event of Default. The collateral assignment of Rental to Mortgagee shall be upon the following terms: (a) upon receipt from Mortgagee of notice that an Event of Default exists, each tenant is hereby authorized and directed to pay directly to Mortgagee all Rental thereafter accruing or payable and receipt of Rental by Mortgagee shall be a release of such tenant to the extent of all amounts so paid; (b) Rental so received by Mortgagee shall be applied by Mortgagee, first to the expenses, if any, of collection and then in accordance with Section 6.5 hereof; (c) without impairing its rights hereunder, Mortgagee may, at its option, at any time and from time to time, release to Mortgagor Rental so received by Mortgagee, or any part thereof; (d) Mortgagee shall not be liable for its failure to collect or its failure to exercise diligence in the collection of Rental, but shall be accountable only for Rental that it shall actually receive; and (e) the collateral assignment contained in this Article shall terminate upon the release of this Deed of Trust, but no tenant shall be required to take notice of termination until a copy of such release shall have been delivered to such tenant.
Section 9.3 Remedies. Should an Event of Default occur, Mortgagor agrees to deliver to Mortgagee possession and control of all Rental held by Mortgagor in trust for the benefit of Mortgagee. Mortgagor specifically agrees that Mortgagee may upon the occurrence of any Event of Default or at any time thereafter, personally or through an agent selected by Mortgagee, take--or have the Trustee take--possession and control of all or any part of the Property and may receive and collect all Rental theretofore accrued and all thereafter accruing therefrom until the final termination of this Deed of Trust or until the foreclosure of the lien of this Deed of Trust, applying so much thereof as may be collected before sale of the Property by the Trustee or judicial foreclosure of this Deed of Trust first to the expenses of Mortgagee incurred in obtaining the Rental and then applying the Rental so received in accordance with the provisions of Section 6.5 hereof. Any such action by Mortgagee shall not operate as a waiver of the Event of Default in question, or as an affirmance of any Lease or of the rights of any tenant in the event title to that part of the Property covered by the Lease or held by the tenant should be acquired by Mortgagee or other purchaser at foreclosure sale. Mortgagee, Mortgagee’s agent or the Trustee may use against Mortgagor or any other person such lawful or peaceable means as the person acting may see fit to enforce the collection of any such Rental or to secure possession of the Property, or any part of it and may settle or compromise on any terms as Mortgagee, Mortgagee’s agent or the Trustee sees fit, the liability of any
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person or persons for any such Rental. In particular, Mortgagee, Mortgagee’s agent or the Trustee may institute and prosecute to final conclusion actions of forcible entry and detainer, or actions of trespass to try title, or actions for damages, or any other appropriate actions, in the name of Mortgagee, Mortgagor, or the Trustee, and may settle, compromise or abandon any such actions as Mortgagee, Mortgagee’s agent or the Trustee may see fit; and Mortgagor binds itself and its successors and assigns to take whatever lawful or peaceable steps Mortgagee, Mortgagee’s agent or the Trustee may ask of it or any such person or concern so claiming to take for such purposes, including the institution and prosecution of actions of the character above stated. However, neither Mortgagee, Mortgagee’s agent nor the Trustee shall be obligated to collect any such Rental or be liable or chargeable for failure to do so. Upon any sale of the Property or any part thereof in foreclosure of the lien or security interest created by this Deed of Trust, such Rental so sold which thereafter accrues shall be deemed included in such sale and shall pass to the purchaser free and clear of the assignment made in this Article.
Section 9.4 Mortgagee in Possession; No Liability of Mortgagee. Mortgagee’s acceptance of this collateral assignment shall not, before entry upon and taking possession of the Property by Mortgagee, be deemed to constitute Mortgagee a “mortgagee in possession,” nor obligate Mortgagee to appear in or defend any proceeding relating to any of the Leases or to the Property, take any action hereunder, expend any money, incur any expenses or perform any obligation or liability under the Leases, or assume any obligation under the Leases including the obligation to return any deposit delivered to Mortgagor by any tenant. Mortgagee shall not be liable for any injury or damage to person or property in or about the Property. Neither the collection of Rental due under the Leases herein described nor possession of the Property by Mortgagee shall render Mortgagee liable with respect to any obligations of Mortgagor under any of the Leases.
Section 9.5 Reassignment. By Mortgagee’s acceptance of this Deed of Trust, it is understood and agreed that a full and complete release of this Deed of Trust shall operate as a full and complete reassignment to Mortgagor of the Mortgagee’s rights and interests under this Article (subject to the automatic reinstatement provisions of Section 10.21 below).
Section 9.6 Texas Assignment of Rents Act. Without in any way limiting or restricting any of Mortgagee’s other rights, benefits or privileges hereunder, Mortgagor and Mortgagee hereby expressly agree that Mortgagee shall be entitled to all rights, benefits or privileges provided for in the Texas Assignment of Rents Act, Chapter 64 of the Texas Property Code.
ARTICLE 10 GENERAL AND MISCELLANEOUS PROVISIONS
Section 10.1 Debt May be Changed without Affecting this Deed of Trust. Any of the Debt may be extended, rearranged, renewed, increased or otherwise changed in any way, and any part of the security described in this Deed of Trust or any other security for any part of the Debt may be waived or released without in anyway altering or diminishing the force, effect or lien of this Deed of Trust, and the lien, assignment and security interest granted by this Deed of Trust shall continue as a prior lien, assignment and security interest on all of the Property not expressly so released, until the final termination of this Deed of Trust.
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Section 10.2 Security is Cumulative. No other security now existing or hereafter taken to secure any part of the Debt or the performance of any obligation or liability whatever shall in any manner affect or impair the security given by this Deed of Trust. All security for any part of the Debt and the performance of any obligation or liability shall be taken, considered and held as cumulative.
Section 10.3 Usury Not Intended; Savings Provisions. Notwithstanding any provision to the contrary contained in any Credit Document, it is expressly provided that in no case or event shall the aggregate of any amounts accrued or paid pursuant to this Deed of Trust which under applicable laws are or may be deemed to constitute interest ever exceed the maximum nonusurious interest rate permitted by applicable Texas or federal laws, whichever permit the higher rate. In this connection, Mortgagor and Mortgagee stipulate and agree that it is their common and overriding intent to contract in strict compliance with applicable usury laws. In furtherance thereof, none of the terms of this Deed of Trust shall ever be construed to create a contract to pay, as consideration for the use, forbearance or detention of money, interest at a rate in excess of the maximum rate permitted by applicable laws. Mortgagor shall never be liable for interest in excess of the maximum rate permitted by applicable laws. If, for any reason whatever, such interest paid or received during the full term of the applicable indebtedness produces a rate which exceeds the maximum rate permitted by applicable laws, Mortgagee shall credit against the principal of such indebtedness (or, if such indebtedness shall have been paid in full, shall refund to the payor of such interest) such portion of said interest as shall be necessary to cause the interest paid to produce a rate equal to the maximum rate permitted by applicable laws. All sums paid or agreed to be paid to Mortgagee for the use, forbearance or detention of money shall, to the extent required to avoid or minimize usury and to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of the applicable indebtedness so that the interest rate thereon does not exceed the Ceiling Rate. The provisions of this Section shall control all agreements, whether now or hereafter existing and whether written or oral, between Mortgagor and Mortgagee.
Section 10.4 Mortgagor Waives All Stay, Extension, Appraisement and Redemption Rights. Mortgagor will not at any time insist upon or plead or in any manner whatever claim or take the benefit or advantage of any stay or extension law now or at any time hereafter in force in any locality where the Property or any part thereof may or shall be situated, nor will Mortgagor claim, take or insist on any benefit or advantage from any law now or hereafter in force providing for the valuation or appraisement of the Property or any part thereof before any sale or sales thereof to be made pursuant to any provision of this Deed of Trust, or to decree of any court of competent jurisdiction, nor after any such sale or sales made pursuant to any provision of this Deed of Trust, or to decree of any court of competent jurisdiction, nor after any such sale or sales will Mortgagor claim or exercise any right conferred by any law now or at any time hereafter in force to redeem the property so sold or any part of it, and Mortgagor hereby WAIVES all benefit and advantage of any such law or laws and WAIVES the appraisement of the Property or any part of it and covenants that Mortgagor will not hinder, delay or impede the execution of any power in this Deed of Trust granted and delegated to the Trustee or Mortgagee, but that Mortgagor will suffer and permit the execution of every such power as though no such law or laws had been made or enacted.
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Section 10.5 Notices. Except where certified or registered mail notice is required by applicable law, service of any notice to Mortgagor required or permitted under this Deed of Trust shall be completed upon deposit of the notice, enclosed in a first class postage prepaid wrapper, properly addressed to Mortgagor at Mortgagor’s address designated in the Introduction to this Deed of Trust (or if no address is so designated, or such address has changed, to Mortgagor’s most recent address as shown by the records of Mortgagee) in a post office or official depository under the care and custody of the United States Postal Service, and the affidavit of any person having knowledge of the facts concerning such mailing shall be conclusive evidence of the fact of such service. Such method of giving notice shall not be exclusive, but instead any notice may be given to Mortgagor in any manner permitted or recognized by law.
Section 10.6 Due on Sale. Mortgagor agrees that if, without Mortgagee’s prior written consent (not to be unreasonably withheld, conditioned or delayed), (a) any material portion of the Property should be directly transferred, conveyed or mortgaged, voluntarily or involuntarily, absolutely or as security, or (b) Mortgagor should enter into any contractual arrangement to transfer, convey or mortgage any material portion of the Property (other than a transaction for which the proceeds thereof will be applied to Payment in Full of the Debt), Mortgagee, acting reasonably and in good faith, shall have the right and option (except only in those circumstances, if any, where the exercise of such right is expressly prohibited by applicable law and such law also precludes Mortgagor from effectively waiving such prohibition) to declare the Note or the entire amount of the Debt to be due and payable; provided, however, that no such consent shall be required and no default shall be deemed to occur with respect to the creation, grant, modification or recordation of easements, rights-of-way, licenses, restrictive covenants, development agreements, encroachment agreements, or similar interests or encumbrances granted, entered into or recorded in the ordinary course of owning, operating or developing the Mortgaged Property, so long as the same (1) are not expected to have a Materially Adverse Effect on the value of the Mortgaged Property or Mortgagee’s security and (2) are by their terms subordinate to the lien of this Deed of Trust. Mortgagee shall not exercise such right and option unless (A) Mortgagor has failed to cure any such transfer, conveyance or mortgage that is not permitted hereunder within thirty (30) days after written notice thereof (or, if such matter is not reasonably susceptible of cure within such period, Mortgagor has failed to commence and diligently pursue such cure), and (B) such transfer, conveyance or mortgage would reasonably be expected to result in a Material Adverse Effect on the value of the Property or Mortgagee’s security. To exercise such right and option, Mortgagee shall give written notice to Mortgagor and to the person or entity to whom such property was transferred, conveyed or mortgaged that the Note or Debt has been declared due and payable and that Mortgagee demands that its maker pay it; provided, that no such notice or acceleration shall be given or made with respect to any action described in the foregoing proviso that is permitted without Mortgagee’s consent.
Section 10.7 Mortgagee and Mortgagor. The term “Mortgagee” as used in this Deed of Trust shall mean and include the holder or holders of the Debt from time to time, and upon acquisition of the Debt by any holder or holders other than the named Mortgagee, effective as of the time of such acquisition, the term “Mortgagee” shall mean all of the then permitted holders of the Debt, to the exclusion of all prior holders not then retaining or reserving an interest in the Debt from time to time, whether such holder acquires the Debt through succession to or assignment from a prior Mortgagee. The term “Mortgagor, its successors and assigns” shall also include the heirs and legal representatives of each Mortgagor who is a natural person and the receivers, conservators, custodians and trustees of each Mortgagor, provided that no Mortgagor may assign or delegate any of its or his rights, interests or obligations under this Deed of Trust, the Note or any Credit Document without Mortgagee’s express prior written consent, and any attempted assignment or delegation without it shall be void or voidable at Mortgagee’s election.
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Section 10.8 Article, Section and Exhibit References, Numbers and Headings. References in this Deed of Trust to Articles, Sections and Exhibits refer to Articles, Sections and Exhibits in and to this Deed of Trust unless otherwise specified. The Article and Section numbers, Exhibit designations and headings used in this Deed of Trust are included for convenience of reference only and shall not be considered in interpreting, applying or enforcing this Deed of Trust.
Section 10.9 Exhibits Incorporated. All exhibits, annexes, appendices and schedules referred to any place in the text of this Deed of Trust are hereby incorporated into it at that place in the text, to the same effect as if set out there verbatim.
Section 10.10 “Including” is not Limiting. Wherever the term “including” or a similar term is used in this Deed of Trust, it shall be read as if it were written, “including by way of example only and without in any way limiting the generality of the clause or concept referred to.”
Section 10.11 Gender. The masculine and neuter pronouns used in this Deed of Trust each includes the masculine, feminine and neuter genders.
Section 10.12 Severability. If any provision of this Deed of Trust is held to be illegal, invalid or unenforceable under present or future laws, the legality, validity and enforceability of the remaining provisions of this Deed of Trust shall not be affected thereby, and this Deed of Trust shall be liberally construed so as to carry out the intent of the parties to it. Each waiver in this Deed of Trust is subject to the overriding and controlling rule that it shall be effective only if and to the extent that (a) it is not prohibited by applicable law and (b) applicable law neither provides for nor allows any material sanctions to be imposed against Mortgagee for having bargained for and obtained it.
Section 10.13 Any Unsecured Debt is Deemed Paid First. If any part of the Debt cannot lawfully be secured by this Deed of Trust, or if the lien, assignments and security interest of this Deed of Trust cannot be lawfully enforced to pay any part of the Debt, then and in either such event, at the option of Mortgagee, all payments on the Debt shall be deemed to have been first applied against that part of the Debt.
Section 10.14 Homestead Disclaimer. Mortgagor warrants and represents that at the time of execution and delivery of this Deed of Trust, no part of the Mortgaged Property forms any part of any property owned, used or claimed by Mortgagor or Mortgagor’s spouse or children either as a residence or a business homestead, or as otherwise exempt from forced sale under the laws of the State of Texas or the United States.
Section 10.15 Household Goods Not Covered. If Mortgagee is a state or national bank and if any natural person executing this Deed of Trust is a “consumer” as defined in Regulation AA of the Board of Governors of the Federal Reserve System, no lien or security interest created or evidenced by this Deed of Trust shall extend to, cover or affect “household goods” as also defined therein and no waiver of the rights of Mortgagor contained in this or any other instrument shall extend to, or be effective as to, any right the waiver of which is prohibited by Regulation AA. If Mortgagee is not a state or national bank and if any natural person executing this Deed of Trust is a “consumer” as defined in 16 C.F.R. § 444.1(d), as amended, no lien or security interest created or evidenced by this Deed of Trust shall extend to, cover or affect “household goods” as defined in 16 C.F.R. § 444.1(a), as amended and no waiver of the rights of Mortgagor contained in this or any other instrument shall extend to, or be effective as to, any right the waiver of which is prohibited by 16 C.F.R § 444.
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Section 10.16 Payments Returned. Mortgagor agrees that, if at any time all or any part of any payment previously applied by Mortgagee to the Debt is or must be returned by Mortgagee--or recovered from Mortgagee–for any reason (including the order of any bankruptcy court), this Deed of Trust shall automatically be reinstated to the same effect as if the prior application had not been made, and, in addition, Mortgagor hereby agrees to indemnify Mortgagee against, and to save and hold Mortgagee harmless from any required return by Mortgagee–or recovery from Mortgagee–of any such payment because of its being deemed preferential under applicable bankruptcy, receivership or insolvency laws, or for any other reason.
Section 10.17 Amendments in Writing. This Deed of Trust shall not be changed orally but shall be changed only by agreement in writing signed by Mortgagor and Mortgagee. Any waiver or consent with respect to this Deed of Trust shall be effective only in the specific instance and for the specific purpose for which given. No course of dealing between the parties, no usage of trade and no parole or extrinsic evidence of any nature shall be used to supplement or modify any of the terms or provisions of this Deed of Trust.
Section 10.18 Governing Law. THIS DEED OF TRUST SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF TEXAS.
Section 10.19 Entire Agreement. This Deed of Trust and the Credit Documents embody the entire agreement and understanding between Mortgagor and Mortgagee with respect to its subject matter and supersedes all prior conflicting or inconsistent agreements, consents and understandings relating to such subject matter. Mortgagor acknowledges and agrees that there is no oral agreement between Mortgagor and Mortgagee which has not been incorporated in this Deed of Trust.
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EXECUTED effective as of January 16, 2026.
| MORTGAGOR: | |
|---|---|
| TEXAS CRITICAL DATA CENTERS LLC, | |
| a Delaware limited liability company | |
| By: | /s/ E. Will Gray II |
| Name: | E. Will Gray II |
| Title: | Manager |
| THE STATE OF _____________________ | § |
| --- | --- |
| § | |
| COUNTY OF _______________________ | § |
This instrument was acknowledged before me on this ___ day of ______________, 2026, by __________, _________ of Texas Critical Data Centers LLC, a Delaware limited liability company, on behalf of said limited liability company.
| [SEAL] | |
|---|---|
| Notary Public in and for<br><br>the State of _____________________ |
Attached:
Exhibit A-1 – Description of Real Property
Exhibit A-2 – Description of Additional Real Property
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NOTICE PURSUANT TO TEX. BUS. & COMM. CODE §26.02
THIS DEED OF TRUST AND THE OTHER CREDIT DOCUMENTS TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT AND REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
| MORTGAGEE: | MORTGAGOR: | ||
|---|---|---|---|
| SHARONAI Inc.,<br><br> <br>a Delaware corporation | TEXAS CRITICAL DATA CENTERS LLC,<br><br> <br>a Delaware limited liability company | ||
| By: | /s/ James Manning | By: | /s/ E. Will Gray II |
| Name: | James Manning | Name: | E. Will Gray II |
| Title: | Chair | Title: | Manager |
| THE STATE OF _____________________ | § | ||
| --- | --- | ||
| § | |||
| COUNTY OF _______________________ | § |
This instrument was acknowledged before me on this ___ day of ______________, 2026, by __________, _________ of SharonAI Inc., a Delaware corporation, on behalf of said limited liability corporation.
| [SEAL] | |
|---|---|
| Notary Public in and for<br><br>the State of _____________________ | |
| THE STATE OF _____________________ | § |
| --- | --- |
| § | |
| COUNTY OF _______________________ | § |
This instrument was acknowledged before me on this ___ day of ______________, 2026, by __________, _________ of Texas Critical Data Centers LLC, a Delaware limited liability company, on behalf of said limited liability company.
| [SEAL] | |
|---|---|
| Notary Public in and for<br><br>the State of _____________________ |
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EXHIBIT A-1
DESCRIPTION OF REAL PROPERTY
METES & BOUNDS DESCRIPTION OF A 235.00-ACRE TRACT LOCATED IN A 221.51-ACRE TRACT IN DOCUMENT NO. 2008-00010071 & A 13.49-ACRE TRACT IN DOCUMENT NO. 2010-00001417 OF THE OFFICIAL PUBLIC RECORDS OF ECTOR COUNTY, TEXAS
BEING A 235.00-ACRE TRACT OF WHICH 221.51-ACRES ARE IN THAT CERTAIN 519.59-ACRE TRACT AS DESCRIBED IN DOCUMENT NO. 2008-00010071, AND 13.19-ACRES ARE IN THAT CERTAIN 33.06-ACRE TRACT AS DESCRIBED IN DOCUMENT NO. 2010-00001417 THE OFFICIAL PUBLIC RECORDS OF ECTOR COUNTY, TEXAS LOCATED IN A PORTION OF THE GEE McMEANS SURVEY NUMBER 1 AS RECORDED IN VOLUME 2, PAGE 174, PATENT RECORDS OF ECTOR COUNTY, TEXAS, A PORTION OF THE MAT ATWOOD PRE-EMPTION SURVEY AS RECORDED IN VOLUME 2, PAGE 38, PATENT RECORDS OF ECTOR COUNTY, TEXAS, THE J.B. ATWOOD PRE-EMPTION SURVEY AS RECORDED IN VOLUME 2 PAGE 108 OF THE PATENT RECORDS OF ECTOR COUNTY, TEXAS AND THE SIDNEY PITT PRE-EMPTION SURVEY AS RECORDED IN VOLUME 2, PAGE 35 OF THE ECTOR COUNTY PATENT RECORDS, AND BEING MORE PARTICULARLY DESCRIBED BELOW:
BEGINNING at (Y= 10,635,916.72’ & X= 1,681,192.44’) a ½” Iron Rod with cap marked “LCA ODESSA TX” set at the northwest corner of this tract on the west line of said Gee McMeans Survey and the east line of Section 37, Block 42, T-2-S, T&P RR Co. Survey, Ector County Texas, whence a 3” Brass Disk found in concrete (Control Monument) marked “TESCO” at the north west corner of said Gee McMeans Survey and the northeast corner of said Section 37 and the northwest corner of said 519.59-Acre Tract bears North 14°10’11” West, a distance of 1,670.39 feet;
THENCE North 75°48’51” East through said 519.59-Acre Tract and said 33.06-Acre Tract, pass the common east line of said 519.59-Acre Tract and the west line of said 33.06-Acre Tract at 5,268.69 feet, in all a total distance of 5,557.77 feet to a ½” Iron Rod with cap marked “LCA ODESSA TX” set at the north east corner of this tract on the east line of said 33.06-acre tract and the west curved right-of-way line of LOOP 338 EAST, a 200-foot right-of-way as described in Volume 1159, Page 1086 of the Deed Records of Ector County, Texas and having a radial bearing of South 73°16’00” West;
THENCE along said curve to the right in a southeasterly direction, having a radius length of 11,359.15 feet, a delta angle of 02°35’43”, an arc length of 514.52 feet, a chord length of 514.47 feet bearing South 15°26’09” East to a ½” Iron Rod with cap marked ‘‘LCA ODESSA TX” (Control Monument) found at the Point of Tangency;
THENCE South 14°08’17” East with the east line of said 33.06-Acre Tract and the west right-of-way line of said LOOP 338 EAST, a distance of 1,447.22 feet to a½” Iron Rod with cap marked “LCA ODESSA TX” set at the southeast corner of this tract;
THENCE South 75°08’19” West through said 519.59-Acre Tract and said 33.06-Acre Tract, pass the common east line of said 519.59-Acre Tract and the west line of said 33.06-Acre Tract at 299.78 feet, in all a total distance of 4,718.68 feet to a ½” Iron Rod with cap marked “LCA ODESSA TX” set at the southernmost southwest corner of this tract and the southeast corner of a surveyed 20.00-Acre Tract, whence a Railroad Spike (Control Monument) found in asphalt at the southeast corner of said Section 37 bears South 14°10’11” East, a distance of 2,619.65 feet;
THENCE North 14°10’11” West with the east line of said 20.00-Acre Tract, a distance of 1,019.64 feet to a½” Iron Rod with cap marked “LCA ODESSA TX” set for an ell corner of this tract and the northeast corner of said 20.00-Acre Tract;
THENCE South 75°48’51” West with the north line od said 20.00-Acre Tract, a distance of 850.00 feet to a ½” Iron Rod with cap marked “LCA ODESSA TX” set at the westernmost southwest corner of this tract and the northwest corner of said 20-Acre Tract on the west line of said Sidney Pitt Survey and the east line of said Section 37; and
THENCE North 14°10’11” West with the west line of said 519.59-Acre Tract, the west line of said Sidney Pitt Survey and the west line of said Section 37, a distance of 997.55 feet to the Point of the Beginning containing 235.00-surface acres.
EXHIBIT A-1
to
Deed of Trust
EXHIBIT A-2
DESCRIPTION OF ADDITIONAL REAL PROPERTY
EXHIBIT A-2
to
Deed of Trust
Exhibit 99.1
Sharon AI Signs Definitive and Binding Buy-Out Agreement to Divest and Closes its Divestiture of it’s 50% Ownership Interest in Texas Critical Data
Centers LLC For US$70m
New York, USA – January 18^th^, 2026 – SharonAI Holdings Inc. and its subsidiaries (“Sharon AI”), a leading Australian Neocloud (SHAZ:OTC Markets, SHAZW:OTC Markets), today announced that it has entered into a definitive agreement to sell its 50% ownership interest in Texas Critical Data Centers LLC (“TCDC”) to New Era Energy & Digital, Inc. (Nasdaq: NUAI) (“New Era”), as previously announced on Dec. 23, 2025, and has closed and consummated the sale.
New Era has acquired 100% of the issued and outstanding membership interests of TCDC and Sharon AI has no continuing ownership interest, governance rights, or control provisions with respect to the project.
The consideration New Era will pay Sharon AI will be an aggregate of US$70m and is comprised of a US$50m Senior Secured Convertible Promissory Note, US$10m in Cash and US$10m in Equity. For further details, please revisit our earlier announcement from December 23^rd^, 2025 (read here).
The sale of Sharon AI’s interest in TCDC is expected to facilitate further investment in Sharon AI’s core Neocloud operations, bringing high performance compute to market, at scale, for its hyperscale, research, enterprise and government customers alike. This US$70m in expected proceeds follow the recent approximately US$100m Convertible Note capital raising by Sharon AI.
“We are pleased to have executed the sale of our position in TCDC. I would like to thank the New Era team for working diligently and wish them the best of luck as they move into the development phase of this project. This transaction represents a natural inflection point for Sharon AI - now a pure-play cloud GPU compute infrastructure provider – and we look forward to allocating the proceeds of sale from the TCDC divestment to expanding our core Neocloud platform to meet accelerating demand from hyperscale, research enterprise and government customers in Asia-Pacific,”, said James Manning, Co-Founder and Chairman of Sharon AI.
ENDS
Contacts
Sharon AI Media Enquiries:
Rosalyn Christian/Zachary Nevas
IMS Investor Relations
+1 203.972.9200
sharonai@imsinvestorrelations.com
About SHARON AI
SharonAI Holdings Inc. (“Sharon AI”) and its subsidiaries, a leading Australian Neocloud, is a High-Performance Computing company focused on Artificial Intelligence and Cloud GPU Compute Infrastructure. Our cloud GPU platform and compute infrastructure is accelerating the build of AI factories and sovereign AI solutions, powering the next wave of accelerated computing adoption. For more information, visit www.sharonai.com.
Forward Looking Statements:
This press release may contain, and our officers and representatives may from time to time make, “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, which are not historical facts and which are not assurances of future performance. Forward-looking statements are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. In some cases you can identify these statements by forward-looking words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “should,” “would,” “project,” “strategy,” “plan,” “expect,” “goal,” “seek,” “future,” “likely” or the negative or plural of these words or similar expressions or references to future periods. Examples of such forward-looking statements include but are not limited to express or implied statements regarding SHARON AI’s management team’s expectations, hopes, beliefs, intentions or strategies regarding the future including, without limitation, statements regarding:
| ● | Service and product offerings; |
|---|---|
| ● | Receipt and use of proceeds; |
| --- | --- |
| ● | Further investment in Neocloud operations, bringing high performance compute to market, at scale, for its hyperscale, research, enterprise and government customers; and |
| --- | --- |
| ● | The strengthening of Sharon AI’s partner network. |
| --- | --- |
In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. You are cautioned that such statements are not guarantees of future performance and that actual results or developments may differ materially from those set forth in these forward-looking statements. . Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause actual results to differ materially from these forward-looking statements include, among others, all of the risks described in the “Risk Factors” section of the Registration Statement on Form S-4 filed with the SEC on October 21, 2025, as amended. Additional assumptions, risks and uncertainties are described in detail in our registration statements, reports and other filings with the SEC, which are available at www.sec.gov.
The forward-looking statements and other information contained in this news release are made as of the date hereof and SHARON AI does not undertake any obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
Exhibit 99.2
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2025
(in US dollars(US$))
| Historical | Pro Forma | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SharonAI Inc.<br><br>As Reported | Roth CH<br><br>Acquisition As Reclassified <br>(Note 5) | Transaction Accounting Adjustments | Note | Membership<br><br>Interest Sale Adjustments | Note | Pro Forma<br><br>Combined | |||||||||||
| ASSETS | |||||||||||||||||
| Current assets: | |||||||||||||||||
| Cash and cash equivalents | 1,364,550 | 16,083 | (193,917 | ) | 2(a) | - | 903,181 | ||||||||||
| (48,686 | ) | 2(b) | - | ||||||||||||||
| (234,849 | ) | 2(c) | - | ||||||||||||||
| Trade and other receivables | 305,542 | - | - | - | 305,542 | ||||||||||||
| Assets held for sale | 1,124,083 | - | - | - | 1,124,083 | ||||||||||||
| Other current assets | 140,598 | 5,208 | 70,000,000 | 2(h) | 70,145,806 | ||||||||||||
| Total current assets | 2,934,773 | 21,291 | (477,452 | ) | 70,000,000 | 72,478,612 | |||||||||||
| Property and equipment, net | 3,777,613 | - | - | - | 3,777,613 | ||||||||||||
| Right of use asset, net | 7,476,827 | - | - | - | 7,476,827 | ||||||||||||
| Goodwill | 18,044,215 | - | - | - | 18,044,215 | ||||||||||||
| Certificates of deposits | 906,201 | - | - | - | 906,201 | ||||||||||||
| Other long-term assets | 850,000 | - | (850,000 | ) | 2(h) | - | |||||||||||
| Total assets | 33,989,629 | 21,291 | (477,452 | ) | 69,150,000 | 102,683,468 | |||||||||||
| LIABILITIES AND<br> STOCKHOLDERS’ EQUITY (DEFICIT) | |||||||||||||||||
| Current liabilities: | |||||||||||||||||
| Trade and other payables | 562,156 | 1,551,314 | (234,849 | ) | 2(c) | 2,388,788 | 2(h) | 4,267,409 | |||||||||
| Advances from related party | 256,636 | (256,636 | ) | 2(g) | - | - | |||||||||||
| Warrant liabilities | - | 1,335,000 | - | - | 1,335,000 | ||||||||||||
| Finance lease liabilities, current portion | 3,542,831 | - | - | - | 3,542,831 | ||||||||||||
| Borrowings | 516,405 | - | - | - | 516,405 | ||||||||||||
| Income Tax Payable | - | - | 22,031,200 | 2(h) | 22,031,200 | ||||||||||||
| Total current liabilities | 4,621,392 | 3,142,950 | (491,485 | ) | 24,419,988 | 31,692,845 | |||||||||||
| Finance lease liabilities, net of current portion | 4,108,328 | - | - | - | 4,108,328 | ||||||||||||
| Total liabilities | 8,729,720 | 3,142,950 | (491,485 | ) | 24,419,988 | 35,801,173 | |||||||||||
| Stockholders’ equity<br> (deficit): | |||||||||||||||||
| Series A Preferred Stock | 2 | - | (2 | ) | 2(d) | - | - | ||||||||||
| Series B Convertible Preferred Stock | 3 | - | (3 | ) | 2(d) | - | - | ||||||||||
| Common stock | 107 | - | 52,425 | 2(d) | - | 57,285 | |||||||||||
| 4,528 | 2(e) | - | |||||||||||||||
| 225 | 2(g) | - | |||||||||||||||
| Super Common Stock | - | - | 682 | 2(d) | - | 682 | |||||||||||
| Class A ordinary shares | - | 4,521 | (4,521 | ) | 2(e) | - | - | ||||||||||
| Class B ordinary shares | - | 7 | (7 | ) | 2(e) | - | - | ||||||||||
| Additional paid-in capital | 34,750,473 | 7,769,174 | (7,769,174 | ) | 2(f) | - | 35,006,884 | ||||||||||
| 256,411 | 2(g) | - | |||||||||||||||
| Accumulated deficit | (9,541,918 | ) | (10,895,361 | ) | (193,917 | ) | 2(a) | - | (12,963,810 | ) | |||||||
| (48,686 | ) | 2(b) | - | ||||||||||||||
| (53,102 | ) | 2(d) | - | ||||||||||||||
| 7,769,174 | 2(f) | - | |||||||||||||||
| 44,730,012 | 2(h) | 44,730,012 | |||||||||||||||
| Noncontrolling interest | 56,813 | - | - | - | 56,813 | ||||||||||||
| Accumulated<br> other comprehensive income (AOCI) | (5,571 | ) | - | - | - | (5,571 | ) | ||||||||||
| Total<br> stockholders’ equity (deficit) | 25,259,909 | (3,121,659 | ) | 14,033 | 44,730,012 | 66,882,295 | |||||||||||
| Total<br> liabilities and stockholders’ equity (deficit) | 33,989,629 | 21,291 | (477,452 | ) | 69,150,000 | 102,683,468 |
- 1 -
Unaudited Pro Forma Combined Statement of Operations
For the Nine Months Ended September 30, 2025
(in US dollars(US$))
| Historical | Pro Forma | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SharonAI Inc. As Reported | RothCH Acquisition As Reclassified <br> (Note 5) | Transaction Accounting Adjustments | Note | Membership Interest Sale Adjustments | Note | Pro Forma Combined | ||||||||||
| Revenue | 1,208,824 | - | - | - | 1,208,824 | |||||||||||
| Cost of revenue | (1,083,426 | ) | - | - | - | (1,083,426 | ) | |||||||||
| Gross profit | 125,398 | - | - | - | 125,398 | |||||||||||
| Shared based compensation | (1,446,312 | ) | - | - | - | (1,446,312 | ) | |||||||||
| Selling, general, and administrative expenses | (2,970,874 | ) | (945,973 | ) | - | (674,356 | ) | 2(h) | (4,591,203 | ) | ||||||
| Other expenses | (2,019,907 | ) | - | - | - | (2,019,907 | ) | |||||||||
| Other income | 961,713 | - | - | 70,000,000 | 2(h) | 70,961,713 | ||||||||||
| Loss from operations | (5,349,982 | ) | (945,973 | ) | - | 69,325,644 | 63,029,689 | |||||||||
| Change in fair value of digital assets | (406,345 | ) | - | - | - | (406,345 | ) | |||||||||
| Change in fair value of warrant liabilities | - | (1,112,500 | ) | - | - | (1,112,500 | ) | |||||||||
| Interest expense, net | (127,430 | ) | - | - | - | (127,430 | ) | |||||||||
| Profit/(Loss) before income taxes | (5,883,757 | ) | (2,058,473 | ) | - | 69,325,644 | 61,383,414 | |||||||||
| Income tax benefit | 219,935 | - | - | (22,031,200 | ) | 2(h) | (21,811,265 | ) | ||||||||
| Net loss | (5,663,822 | ) | (2,058,473 | ) | - | 47,294,444 | 39,572,149 | |||||||||
| Net loss attributable to noncontrolling interest | (27,185 | ) | - | - | - | (27,185 | ) | |||||||||
| Net loss Attributable to owners of the Company | (5,636,637 | ) | (2,058,473 | ) | - | 47,294,444 | 39,599,334 | |||||||||
| Weighted average shares outstanding of Class A common stock – basic and diluted | 1,067,213 | 41,817,414 | 579,668,250 | |||||||||||||
| Basic and diluted net income (loss) per share attributable to common stockholders | (5.282 | ) | (0.049 | ) | 0.068 |
- 2 -
Unaudited Pro Forma Combined Statement of Operations
For the Year Ended December 31, 2024
(in US dollars(US$))
| Historical | Pro Forma | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SharonAI Inc.<br><br> As Adjusted<br>(Note 6) | Roth CH Acquisition<br><br> As Reclassified<br>(Note 5) | Transaction<br> Accounting<br> Adjustments | Note | Pro Forma<br> Combined | |||||||||
| Revenue | 1,170,923 | - | - | 1,170,923 | |||||||||
| Cost of revenue | (1,474,395 | ) | - | - | (1,474,395 | ) | |||||||
| Gross loss | (303,472 | ) | - | - | (303,472 | ) | |||||||
| Shared based compensation | (3,266,895 | ) | - | - | (3,266,895 | ) | |||||||
| Selling, general, and administrative expenses | (3,420,966 | ) | (650,122 | ) | (193,917 | ) | 3(a) | (4,265,005 | ) | ||||
| Other expenses | (2,201,728 | ) | - | - | (2,201,728 | ) | |||||||
| Loss from operations | (9,193,061 | ) | (650,122 | ) | (193,917 | ) | (10,037,100 | ) | |||||
| Change in fair value of digital assets | 600,423 | - | - | 600,423 | |||||||||
| Change in fair value of warrant liabilities | - | 333,750 | - | 333,750 | |||||||||
| Other income | 1,272,955 | - | - | 1,272,955 | |||||||||
| Interest expense, net | (147,483 | ) | 435,437 | (435,437 | ) | 3(b) | (147,483 | ) | |||||
| Profit/(Loss) before income taxes | (7,467,166 | ) | 119,065 | (629,354 | ) | (7,977,455 | ) | ||||||
| Income tax expense | (74,077 | ) | - | - | (74,077 | ) | |||||||
| Net income/(loss) | (7,541,243 | ) | 119,065 | (629,354 | ) | (8,051,532 | ) | ||||||
| Net loss attributable to noncontrolling interest | (18,717 | ) | - | - | (18,717 | ) | |||||||
| Net loss Attributable to owners of the Company | (7,522,526 | ) | 119,065 | (629,354 | ) | (8,032,815 | ) | ||||||
| Weighted average shares outstanding of Class A common stock – basic and diluted | 556,356 | 5,851,522 | 11,593,367 | ||||||||||
| Basic and diluted net income(loss) per share attributable to common stockholders | (13.521 | ) | 0.020 | (0.694 | ) |
- 3 -
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Note 1 - Basis of Pro Forma Presentation
The unaudited pro forma combined financial information presents the financial information of SharonAI Holdings Inc. adjusted to give effect to the transactions contemplated by the Business Combination Agreement (the “Business Combination”) among SharonAI Holdings Inc., Roth CH Acquisition Co. (“Roth”) and SharonAI Inc., as well as the acquisition of Distributed Storage Solutions Ltd (“DSS”) completed by SharonAI Inc., to the extent not yet reflected in S SharonAI Inc.’s historical financial information (as more fully described in Note 7), and certain other reclassifications adjustments completed by Roth, to the extent not yet reflected in Roth’s historical financial information (as more fully described in Note 5), as well as the disposal of membership interest in Texas Critical Data Centers LLC (“TCDC”) completed by SharonAI Inc. The following unaudited pro forma combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, SEC Release No. 33-10786 “Amendments to Financial Disclosures About Acquired and Disposed Businesses”. SharonAI Inc. has not had any historical relationship with SharonAI Holdings Inc or Roth prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
The DSS acquisition was accounted for using the acquisition method of accounting for business combinations under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”).
The Business Combination will be accounted for as a reverse recapitalization, in accordance with US GAAP. Under this method of accounting, SharonAI Holdings Inc. and Roth will be treated as the “acquired” companies for financial reporting purposes. Accordingly, the Business Combination will be treated as the equivalent of SharonAI Inc. issuing shares at the closing for the net assets or liabilities, as relevant, of SharonAI Holdings Inc. and Roth as of the closing date, accompanied by a recapitalization. The net assets or liabilities, as relevant, of SharonAI Holdings Inc. and Roth will be stated at historical costs, with no goodwill or other intangible assets recorded.
SharonAI Inc. has been determined to be the accounting acquirer based on the following:
| ● | SharonAI Inc.’s current majority shareholder will have the largest voting interest; |
|---|---|
| ● | Original shareholders of SharonAI Inc. have the ability to nominate the majority of the members of the board of directors; |
| ● | The existing senior management of SharonAI Inc. will continue to be the senior management following the Business Combination; |
| ● | The business of SharonAI Inc. will comprise the ongoing operations following the Business Combination; and |
| ● | SharonAI Inc. is the larger entity, both in terms of substantive operations and number of employees. |
The unaudited pro forma combined balance sheet as of September 30, 2025 combines:
| ● | the historical unaudited condensed consolidated balance sheet of SharonAI Inc. as of September 30, 2025; and |
|---|---|
| ● | the historical unaudited condensed consolidated balance sheet of Roth as of September 30, 2025. |
The unaudited pro forma combined balance sheet has been prepared to give effect to the Business Combination if it had been consummated on September 30, 2025.
- 4 -
The unaudited pro forma combined statement of operations for the nine months ended September 30, 2025 combines:
| ● | the historical unaudited condensed consolidated statement of operations of SharonAI Inc. for the nine months ended September 30, 2025; and |
|---|---|
| ● | the historical unaudited condensed consolidated statement of operations of Roth for the nine months ended September 30, 2025. |
The unaudited pro forma combined statement of operations for the twelve months ended December 31, 2024 combines:
| ● | the historical audited consolidated statement of operations of SharonAI Inc. for the twelve months ended December 31, 2024; |
|---|---|
| ● | the historical audited statement of operations of Roth for the twelve months ended December 31, 2024; and |
| ● | the historical audited statement of operations of DSS for the six months ended June 30, 2024. |
The unaudited pro forma combined statement of operations has been prepared to give effect to the Business Combination and related transactions and the DSS Acquisition summarized below as if they had been consummated on January 1, 2024, the beginning of the earliest period presented. These periods are presented on the basis that SharonAI is the accounting acquirer.
The unaudited pro forma combined balance sheet as of September 30, 2025 has been prepared using, and should be read in conjunction with:
| ● | SharonAI Holdings Inc.’s unaudited condensed balance sheet as of September 30, 2025 and the related notes thereto included SharonAI Holdings Inc.’s Current Report on Form 8-K filed on December 22, 2025; |
|---|---|
| ● | SharonAI Inc.’s unaudited condensed consolidated balance sheet as of September 30, 2025 and the related notes thereto included SharonAI Holdings Inc.’s Current Report on Form 8-K filed on December 22, 2025; |
| ● | Roth’s unaudited condensed consolidated balance sheet as of September 30, 2025 and the related notes thereto included in Roth’s Quarterly Report on Form 10-Q filed with the SEC on November 15, 2025 and incorporated herein by reference. |
The unaudited pro forma combined statement of operations for the nine months ended September 30, 2025 has been prepared using, and should be read in conjunction with:
| ● | SharonAI Holdings Inc.’s unaudited condensed statement of operations for the nine months ended September 30, 2025 and the related notes thereto included SharonAI Holdings Inc.’s Current Report on Form 8-K filed on December 22, 2025; |
|---|---|
| ● | SharonAI Inc.’s unaudited condensed consolidated statement of operations for the nine months ended September 30, 2025 and the related notes thereto included SharonAI Holdings Inc.’s Current Report on Form 8-K filed on December 22, 2025; |
| ● | Roth’s unaudited condensed consolidated statement of operations for the nine months ended September 30, 2025 and the related notes thereto included in Roth’s Quarterly Report on Form 10-Q filed with the SEC on November 15, 2025 and incorporated herein by reference; |
- 5 -
The unaudited pro forma combined statement of operations for the year ended December 31, 2024 has been prepared using, and should be read in conjunction with:
| ● | SharonAI Holdings Inc.’s audited statement of operations for the period from December 30, 2024 (Inception) to December 31, 2024 and the related notes thereto included in SharonAI Holdings Inc.’s Registration Statement on Form S-4 filed on October 21, 2025, as amended; |
|---|---|
| ● | SharonAI Inc.’s audited consolidated statement of operations for the year ended December 31, 2024 and the related notes thereto included in SharonAI Holdings Inc.’s Registration Statement on Form S-4 filed on October 21, 2025, as amended; |
| ● | Roth’s audited consolidated statement of operations for the year ended December 31, 2024 and the related notes thereto included in Roth’s Annual Report on Form 10-K filed with the SEC on March 28, 2025 and incorporated herein by reference; |
| ● | DSS’s audited consolidated statement of operations for the six-month period ended June 30, 2024 and the related notes thereto included in SharonAI Holdings Inc.’s Registration Statement on Form S-4 filed on October 21, 2025, as amended; |
The historical financial statements of SharonAI Holdings Inc., SharonAI Inc., Roth and DSS were prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP).
The adjustments presented in the unaudited pro forma combined financial information have been identified and presented to provide relevant information necessary for an understanding of SharonAI Inc. upon consummation of the Business Combination and the disposal of membership interest in TCDC. The pro forma adjustments reflecting the consummation of the Business Combination are based on certain currently available information and certain assumptions and methodologies that SharonAI Holdings Inc. believes are reasonable under the circumstances. The pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible that the difference may be material. SharonAI Holdings Inc. management believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination based on information available to management at this time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma combined financial information.
- 6 -
Note 2 - Adjustments to unaudited pro forma combined balance sheet as of September 30, 2025.
The adjustments included in the unaudited proforma combined balance sheet as of September 30, 2025 are as follows:
| 2(a) | Reflects remaining estimated transaction costs expected to be incurred by SharonAI Inc. of approximately $193,917, for legal, accounting and advisory services in connection with the Business Combination and related transactions. None of these fees have been accrued as of the pro forma balance sheet date. The amount of $193,917 is reflected as an adjustment to accumulated losses. | ||
|---|---|---|---|
| 2(b) | Reflects remaining estimated transaction costs expected to be incurred by Roth of approximately $48,686, for legal, accounting and advisory services in connection with the Business Combination and related transactions. None of these fees have been accrued as of the pro forma balance sheet date. The amount of $48,686 is reflected as an adjustment to accumulated losses. The Roth estimated transaction costs excludes the deferred legal fees included in note 2(c). | ||
| 2(c) | Reflects the payment of deferred legal fees incurred by Roth that will become due following the Closing. | ||
| 2(d) | Reflects the recapitalization of SharonAI Inc. through the contribution of all outstanding SharonAI Inc. Common Stock, SharonAI Inc. Series A Preferred Stock and SharonAI Series B Convertible Preferred Stock of SharonAI to Roth and the issuance of 521.8 million and 6.8 million of SharonAI Holdings Inc. Class A Ordinary Common Stock and SharonAI Holdings Inc. Class B Super Common Stock, respectively. As a result of the recapitalization, the carrying value of (i) SharonAI Inc. Series A Preferred Stock of US$2, (ii) SharonAI Inc. Series B Convertible Preferred Stock of US$3, and (iii) SharonAI Inc. Common Stock of US$107 were derecognized. | ||
| 2(e) | Reflects the conversion of 45,203,220 Roth Class A ordinary shares and 75,000 Roth Class B ordinary shares into 45,278,220 SharonAI Holdings Inc. Class A Ordinary Common stock. | ||
| 2(f) | Reflects the elimination of Roth’s historical additional paid-in capital balance. | ||
| 2(g) | Reflects the conversion of $269,999.70 of related party debt converted in 2,249,999 Roth Class A ordinary shares and subsequently into 2,249,999 SharonAI Holdings Inc. Class A Ordinary Common stock | ||
| 2(h) | Reflects the sale of Membership interest in Texas Critical Data Centers LLC on December 19 2025 for $70m. | ||
| Sale proceeds receivable | $ | 70,000,000 | |
| --- | --- | --- | --- |
| Contributed Funds at end of period | $ | (850,000 | ) |
| Contributed Funds post period end | $ | (2,564,432 | ) |
| Advisory fees | $ | (674,356 | ) |
| Gain on Sale | $ | 66,761,212 | |
| Expected taxation* | $ | (22,031,200 | ) |
| Net Gain | $ | 44,730,012 | |
| * | The pretax gain is subject to income taxes at a blended statutory<br>rate of approximately 33% (U.S. federal income tax at 21% and other income taxes at 12%). The tax rates are estimates and may change<br>in conjunction with full taxation analysis. | ||
| --- | --- |
Note 3 - Adjustments to unaudited pro forma combined statement of operations for the year ended December 31, 2024.
The adjustments to the unaudited pro forma combined statement of operations for the year ended December 31, 2024 in relation to the Business Combination are as follows:
| 3(a) | Reflects remaining estimated transaction costs expected to be incurred by SharonAI Inc. of approximately $288,917, for legal, accounting and advisory services in connection with the Business Combination and related transactions. None of these fees have been accrued as of the pro forma balance sheet date. The amount of $288,917 is reflected as an adjustment to accumulated losses. |
|---|---|
| 3(b) | Reflects the elimination of interest earned on the investments held in the Trust Account. |
Note 4 - Loss per Share
Represents the loss per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination, assuming the shares were outstanding since January 1, 2025. As the Business Combination is being reflected as if it had occurred at the beginning of the period presented, the calculation of weighted average shares outstanding for basic and diluted earnings per share assumes that the shares issued in connection with the Business Combination have been outstanding for the entire period presented.
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Note 5 - Roth Reclassifications Adjustments
During the preparation of the unaudited pro forma combined financial information, SharonAI Inc. performed a preliminary analysis to identify differences in SharonAI Inc.’s and the historical financial statement presentation and significant accounting policies of Roth. Based on its initial analysis, SharonAI Inc. did not identify any differences in accounting policies that would have a material impact on the unaudited pro forma combined financial information. However, certain reclassification adjustments have been made to conform Roth’s historical financial statement captions to SharonAI Inc.’s financial statement captions in the unaudited pro forma combined financial information. These reclassifications have no effect on previously reported total assets, total liabilities, stockholders’ equity/deficit, total revenues, total expenses, or net income of Roth.
Following the completion of the merger, or as more information becomes available, SharonAI Inc. will finalize its comprehensive review of financial statement presentation and accounting policies. Therefore, the pro forma financial information may not reflect all reclassifications necessary to conform Roth’s presentation to that of SharonAI Inc. due to limitations on the availability of information as of the date of this information statement and proxy statement/prospectus. Accounting policy differences and additional reclassification adjustments may be identified as more information becomes available.
The following sets forth the reclassification adjustments made to conform Roth’s presentation to SharonAI Inc.’s presentation in the unaudited pro forma combined balance sheet as of September 30, 2025:
| As of September 30, 2025 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Roth caption | SharonAI caption | Roth<br> As Reported | Reclassification<br> Adjustments | Note | Roth <br> As Reclassified | ||||||
| ASSETS | ASSETS | ||||||||||
| Current Assets: | Current assets: | ||||||||||
| Cash | Cash and cash equivalents | 16,083 | - | 16,083 | |||||||
| Prepaid expenses | 1,875 | (1,875 | ) | 5(a) | - | ||||||
| Short-term prepaid insurance | 3,333 | (3,333 | ) | 5(a) | |||||||
| Other current assets | 5,208 | 5(a) | 5,208 | ||||||||
| Total current assets | 21,291 | - | 21,291 | ||||||||
| Total assets | 21,291 | - | 21,291 | ||||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | LIABILITIES AND STOCKHOLDERS’ EQUITY(DEFICIT) | ||||||||||
| Current Liabilities: | Current liabilities: | ||||||||||
| Accounts payable and accrued expenses | 1,551,314 | (1,551,314 | ) | 5(b) | - | ||||||
| Trade and other payables | 1,551,314 | 5(b) | 1,551,314 | ||||||||
| Advances from related party | 256,636 | - | 256,636 | ||||||||
| Trade and other payables | - | - | |||||||||
| Warrant liabilities | Warrant liabilities | 1,335,000 | - | 1,335,000 | |||||||
| - | |||||||||||
| Total liabilities | 3,142,950 | - | 3,142,950 | ||||||||
| Shareholders’ Deficit: | Shareholders’ equity(deficit) | ||||||||||
| Class A ordinary shares | Class A ordinary shares | 4,521 | - | 4,521 | |||||||
| Class B ordinary shares | Class B ordinary shares | 7 | - | 7 | |||||||
| Additional paid-in capital | Additional paid-in capital | 7,769,174 | - | 7,769,174 | |||||||
| Accumulated deficit | Accumulated deficit | (10,895,361 | ) | - | (10,895,361 | ) | |||||
| Total stockholders’ equity(deficit) | (3,121,659 | ) | - | (3,121,659 | ) | ||||||
| Total liabilities and stockholders’ equity(deficit) | 21,291 | - | 21,291 |
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| 5(a) | Represents the reclassification of “Prepaid” on Roth’s balance sheet into “Other current assets” to conform to SharonAI Inc.’s balance sheet presentation. |
|---|---|
| 5(b) | Represents the reclassification of “Accounts payable and accrued expenses” on Roth’s balance sheet into “Trade and other payables” to conform to SharonAI Inc.’s balance sheet presentation. |
The following sets forth the reclassification adjustments made to conform Roth’s presentation to SharonAI Inc.’s presentation in the unaudited pro forma condensed combined statement of profit for the nine months ended September 30, 2025:
| For the Nine Months Ended<br> September 30, 2025 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Roth caption | SharonAI caption | Roth <br> As Reported | Reclassification<br> Adjustments | Note | Roth<br> As Reclassified | ||||||
| Formation and operating costs | (945,973 | ) | 945,973 | 5(d) | - | ||||||
| Selling, general, and administrative expenses | (945,973 | ) | 5(d) | (945,973 | ) | ||||||
| Loss from operations | Loss from operations | (945,973 | ) | - | (945,973 | ) | |||||
| Change in fair value of warrant liabilities | Change in fair value of warrant liabilities | (1,112,500 | ) | - | (1,112,500 | ) | |||||
| Net income/(loss) | Net loss | (2,058,473 | ) | - | (2,058,473 | ) | |||||
| 5(d) | Represents the reclassification of “Formation and operating costs” on Roth’s statement of profit or loss into “Selling, general, and administrative expenses” to conform to SharonAI’s statement of operations presentation. | ||||||||||
| --- | --- |
The following sets forth the reclassification adjustments made to conform Roth’s presentation to SharonAI Inc.’s presentation in the unaudited pro forma condensed combined statement of profit for the year ended December 31, 2024:
| Year ended December 31, 2024 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Roth caption | SharonAI caption | Roth <br> As Reported | Reclassification<br> Adjustments | Note | Roth <br> As Reclassified | ||||||
| General and administrative expenses | (650,122 | ) | 650,122 | 5(e) | - | ||||||
| Selling, general, and administrative expenses | (650,122 | ) | 5(e) | (650,122 | ) | ||||||
| Loss from operations | Loss from operations | (650,122 | ) | - | (650,122 | ) | |||||
| Change in fair value of warrant liabilities | Change in fair value of warrant liabilities | 333,750 | - | 333,750 | |||||||
| Interest income on cash and marketable securities held in Trust Account | 435,437 | (435,437 | ) | 5(f) | - | ||||||
| Interest expense, net | 435,437 | 5(f) | 435,437 | ||||||||
| Net income/(loss) | Net income/(loss) | 119,065 | - | 119,065 | |||||||
| 5(e) | Represents the reclassification of “Formation and operating costs” on Roth’s statement of profit or loss into “Selling, general, and administrative expenses” to conform to SharonAI Inc.’s statement of operations presentation. | ||||||||||
| --- | --- | ||||||||||
| 5(f) | Represents the reclassification of “Interest income on cash and marketable securities held in Trust Account” on Roth’s statement of profit or loss into “Interest income, net” to conform to SharonAI Inc.’s statement of operations presentation. |
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Note 6 - Pro Forma Adjustments for DSS Acquisition
Certain transaction accounting adjustments have been made in the historical presentation of SharonAI Inc.’s statement of operations for the year ended December 31, 2024 to present the effects of the DSS acquisition. SharonAI Inc. (as adjusted) presented in the combined statements of operations for the year ended December 31, 2024 reflects the effects of the DSS acquisition as if the acquisition had been consummated on January 1, 2024, the beginning of the earliest period presented.
The results of DSS are included in the historical financial information of SharonAI Inc. from July 1, 2024. Accordingly, no adjustments have been made to the historical financial information for SharonAI Inc. as presented in the unaudited pro forma combined balance sheet as of June 30, 2025 for the DSS acquisition. Adjustments have been made to the historical financial information for SharonAI Inc.as presented in the unaudited pro forma combined statement of operations for the year ended December 31, 2024 to include the results of DSS from January 1, 2024 to June 30, 2024.
The adjustments to reflect the effects of the DSS acquisition on SharonAI Inc.’s historical audited consolidated statement of operations for the year ended December 31, 2024 are summarized as follows.
| **** | Historical | **** | DSS | **** | DSS Acquisition Transaction | **** | **** | **** | **** | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SharonAI<br> As Reported | As Reclassified(Note 7) | Accounting<br> Adjustments | Note | SharonAI<br><br> <br>As Adjusted | |||||||||
| Revenue | 438,292 | 732,631 | 1,170,923 | ||||||||||
| Cost of revenue | (719,993 | ) | (754,402 | ) | (1,474,395 | ) | |||||||
| Gross loss | (281,701 | ) | (21,771 | ) | - | (303,472 | ) | ||||||
| Shared based compensation | (253,728 | ) | (3,013,167 | ) | (3,266,895 | ) | |||||||
| Selling, general, and administrative expenses | (2,368,745 | ) | (502,221 | ) | (550,000 | ) | 6(a) | (3,420,966 | ) | ||||
| Other expenses | (2,047,133 | ) | (154,595 | ) | (2,201,728 | ) | |||||||
| Loss from operations | (4,951,307 | ) | (3,691,754 | ) | (550,000 | ) | (9,193,061 | ) | |||||
| Change in fair value of digital assets | 157,923 | 442,500 | 600,423 | ||||||||||
| Other income | 921,322 | 351,633 | 1,272,955 | ||||||||||
| Interest expense, net | (19,028 | ) | (128,455 | ) | (147,483 | ) | |||||||
| Loss before income taxes | (3,891,090 | ) | (3,026,076 | ) | (550,000 | ) | (7,467,166 | ) | |||||
| Income tax expense | (32,908 | ) | (41,169 | ) | - | 6(b) | (74,077 | ) | |||||
| Net income/(loss) | (3,923,998 | ) | (3,067,245 | ) | (550,000 | ) | (7,541,243 | ) | |||||
| Net loss attributable to noncontrolling interest | (18,717 | ) | - | (18,717 | ) | ||||||||
| Net loss attributable to SharonAI Inc. | (3,905,281 | ) | (3,067,245 | ) | (550,000 | ) | (7,522,526 | ) | |||||
| 6(a) | Reflects the incremental amortization expense related to the intangible assets acquired by SharonAI Inc. for the period from January 1, 2024 to June 30, 2024. Amortization is calculated assuming a straight-line method of amortization based on the estimated fair value and useful lives of each intangible asset as of the closing of the DSS Acquisition. The intangible asset acquired by SharonAI Inc. include the technology and was determined to have weighted average useful lives of approximately 2 years. The following summarizes the pro forma adjustment to record the incremental amortization expense resulting from SharonAI Inc.’s acquisition of DSS. | ||||||||||||
| --- | --- | ||||||||||||
| Period from<br> January 1,<br> 2024 to<br> June 30,<br> 2024 | |||||||||||||
| --- | --- | --- | --- | ||||||||||
| Selling, general, and administrative expenses | (550,000 | ) | |||||||||||
| 6(b) | Reflects the estimated income tax impact of the pro forma transaction accounting adjustments for the DSS Acquisition as described herein, using the statutory tax rate in the United States of 21%, net of valuation allowances. | ||||||||||||
| --- | --- |
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Note 7 - DSS Reclassifications Adjustments
For purposes of preparing SharonAI Inc.(as adjusted), presented in the pro forma combined statement of operations for the year ended December 31, 2024, certain reclassifications have been made to confirm the historical presentation of DSS’s statement of profit or loss to conform to the historical presentation of SharonAI Inc.’s statement of operations used in the unaudited pro forma combined statement of operations.
The following sets forth the pre-acquisition adjustments and reclassifications made to conform DSS’s statement of profit or presentation to SharonAI Inc.’s statement of operations presentation for the year ended December 31, 2024:
| Period from<br> January 1, 2024 to June 30, 2024 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| DSS caption | SharonAI caption | DSS<br> As Reported | Reclassification<br> Adjustments | Note | DSS<br> As Reclassified | ||||||
| Revenue | Revenue | 732,631 | - | 732,631 | |||||||
| Cost of revenue | Cost of revenue | (754,402 | ) | - | (754,402 | ) | |||||
| Gross profit/(loss) | Gross loss | (21,771 | ) | - | (21,771 | ) | |||||
| Shared based compensation | Shared based compensation | (3,013,167 | ) | - | (3,013,167 | ) | |||||
| Selling, general, and administrative expenses | Selling, general, and administrative expenses | (502,221 | ) | - | (502,221 | ) | |||||
| Other expenses | Other expenses | (154,595 | ) | - | (154,595 | ) | |||||
| Profit/(Loss) from operations | Loss from operations | (3,691,754 | ) | - | (3,691,754 | ) | |||||
| Gain on sale of intangible assets | 73,425 | (73,425 | ) | 7(a) | - | ||||||
| Other income | 73,425 | 7(a) | 73,425 | ||||||||
| Fair value gain on revaluation of digital assets | 442,500 | (442,500 | ) | 7(b) | - | ||||||
| Change in fair value of digital assets | 442,500 | 7(b) | 442,500 | ||||||||
| Other income | Other income | 278,208 | - | 278,208 | |||||||
| Interest expense, net | Interest expense, net | (128,455 | ) | - | (128,455 | ) | |||||
| Profit/(Loss) before income taxes | Loss before income taxes | (3,026,076 | ) | - | (3,026,076 | ) | |||||
| Income tax expense | Income tax expense | (41,169 | ) | - | (41,169 | ) | |||||
| Net income/(loss) | Net loss | (3,067,245 | ) | - | (3,067,245 | ) | |||||
| 7(a) | Represents the reclassification of “Gain on sale of intangible assets” on DSS’s statement of profit or loss into “Other income” to conform to SharonAI Inc.’s statement of operations presentation. | ||||||||||
| --- | --- | ||||||||||
| 7(b) | Represents the reclassification of “Fair value gain on revaluation of digital assets” on DSS’s statement of profit or loss into “Change in fair value of digital assets” to conform to SharonAI Inc.’s statement of operations presentation. |
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