SLNHP Soluna Holdings Inc

 

 

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): May 16, 2024 (May 22, 2024)

 

 

SOLUNA HOLDINGS, INC.

(Exact name of Registrant as Specified in Its Charter)

 

 

Nevada		001-40261		14-1462255
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

325 Washington Avenue Extension
Albany, New York		12205
(Address of Principal Executive Offices)		(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (516) 216-9257

 

N/A

(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 obligation of the registrant under any of the following provisions:

 

☐	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:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, par value $0.001 per share		SLNH		The Nasdaq Stock Market LLC
9.0% Series A Cumulative Perpetual Preferred Stock, par value $0.001 per share		SLNHP		The Nasdaq Stock Market LLC

 

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 May 16, 2024, SDI SL Borrowing – 1, LLC, an affiliate of Soluna Holdings, Inc. (the “Borrower”) entered into a loan agreement (the “Equipment Loan Agreement” or the “Loan”) with Soluna2 SLC Fund II Project Holdco LLC (the “Lender”, and collectively, the “Parties”). The Equipment Loan Agreement provides for the Company to borrow, from time to time, up to $1,000,000 to be used to purchase necessary equipment for the progression of Project Dorothy 2. Any loans made under the Equipment Loan Agreement have a maturity date of May 16, 2027, and will bear interest at a rate of 15% per annum. The Equipment Loan Agreement includes customary covenants for loans of this nature, as well as a multiple on invested capital (“MOIC”) provision, which requires the Company to pay, in addition to principal and interest, an amount equal to the difference of (i) the greater of (a) the principal amount of the Loan being repaid plus all interest previously paid or simultaneously being paid to Lender in respect of such principal of the Loan, and (b) the principal amount of the Loan being repaid multiplied by three, minus (ii) the sum of the principal amount of the Loan being repaid plus all interest previously paid or simultaneously being paid to Lender in respect of such principal of the Loan.

 

On May 16, 2024, the Parties entered into the Security Agreement in connection with the Loan Agreement as described above. The Security Agreement grants a collateral security interest in the equipment purchased under the Equipment Loan Agreement to secure the obligations of the Borrower under said Agreement in the event full performance and payment of the Equipment Loan Agreement becomes due. Copies of the Security Agreement and Equipment Loan Agreement are furnished as Exhibit 10.1 and 10.2, respectively, to this Form 8-K.

 

Item 2.02

Results of Operations and Financial Condition.

 

On May 16, 2024, Soluna Holdings, Inc. (the “Company”) issued a press release and investor presentation announcing its financial results for the three months ended March 31, 2024. Copies of the press release and investor presentation are furnished as Exhibit 99.1 and 99.2, respectively, to this Form 8-K.

 

Item 7.01

Regulation FD Disclosure.

 

On May 21, 2024, the Company issued a press release announcing a private financing with Spring Lane Capital with up to a $30 million commitment for “Dorothy 2”, an expansion data center facility. A copy of the press release is furnished as Exhibit 99.3 to this Form 8-K.

 

On May 22, 2024, the Company issued a press release announcing its entry into a Power Purchase Agreement with EDF Renewables and Abu Dhabi Future Energy Company – Masdar to advance Project Kati, one of the Company’s Renewable Computing data center projects. A copy of the press release is furnished as Exhibit 99.4 to this Form 8-K.

 

The information in Item 1.01, Item 2.02, Item 7.01, Exhibit 10.1, Exhibit 10.2, Exhibit 99.1, Exhibit 99.2, Exhibit 99.3, ad Exhibit 99.4 will not be treated as “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. This information will not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or into another filing under the Exchange Act, unless that filing expressly incorporates this information by reference.

 

Item 9.01

Financial Statements and Exhibits

 

(d) Exhibits.

 

10.1		Security Agreement, dated May 16, 2024
10.2		Equipment Loan Agreement, dated May 16, 2024
99.1		Press release, dated May 16, 2024
99.2		Investor presentation, dated May 2024
99.3		Press Release dated May 21, 2024
99.4		Press Release dated May 22, 2024
104		Cover Page Interactive Data File (embedded with the Inline XBRL document)

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	SOLUNA HOLDINGS, INC.
Date: May 22, 2024	By:	/s/ John Tunison
		John Tunison
		Chief Financial Officer
		(principal financial officer)

 

 

 

 

 

 

 

 

 

Exhibit 10.1

 

Execution Version

 

 

SECURITY AGREEMENT

 

Dated as of May 16, 2024

 

by and between

 

SDI SL BORROWING - 1, LLC,

 

as the Grantor,

 

and

 

SOLUNA2 SLC FUND II PROJECT HOLDCO LLC,
as the Lender

 

 

 

TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS		1
	Section 1.01 Certain Defined Terms.	1
ARTICLE II THE COLLATERAL		2
	Section 2.01 Grant of Collateral	2
	Section 2.02 Perfection	3
	Section 2.03 Delivery and Other Perfection	3
	Section 2.04 Other Financing Statements and Liens	3
	Section 2.05 Preservation and Protection of Security Interests	4
	Section 2.06 Attorney-in-Fact.	4
	Section 2.07 Use of Collateral	5
	Section 2.08 Rights and Obligations.	5
	Section 2.09 Termination	6
ARTICLE III REPRESENTATIONS		7
	Section 3.01 Organization; Power; Authorization; Validity	7
	Section 3.02 Title	7
ARTICLE IV COVENANTS		7
	Section 4.01 Further Assurances	7
	Section 4.02 Defense of Collateral	8
	Section 4.03 Preservation of Value, Limitation of Liens	8
	Section 4.04 Other Financing Statements	8
	Section 4.05 No Sale of Collateral.	8
	Section 4.06 Maintenance of Records.	8
	Section 4.07 Name, Jurisdiction and Type.	8
	Section 4.08 No Interference.	8
	Section 4.09 Collateral Access Agreement.	8

 

 

ARTICLE V REMEDIES		9
	Section 5.01 Remedies During Event of Default	9
	Section 5.02 Reserved.	10
	Section 5.03 Private Sale	10
	Section 5.04 Application of Proceeds	11
	Section 5.05 Marshalling, etc.	11
ARTICLE VI MISCELLANEOUS PROVISIONS		12
	Section 6.01 Communication	12
	Section 6.02 Amendments	12
	Section 6.03 Successors and Assigns	12
	Section 6.04 Survival	13
	Section 6.05 No Waiver; Remedies Cumulative	13
	Section 6.06 Counterparts	13
	Section 6.07 Captions	13
	Section 6.08 Severability	13
	Section 6.09 Governing Law; Waiver of Jury Trial; Jurisdiction and Process.	13
	Section 6.10 Entire Agreement	15
	Section 6.11 Independent Obligations	15
	Section 6.12 Expenses	15
	Section 6.13 Duty of the Lender	15
	Section 6.14 Agreement for Security Purposes	15
Annex 1 Organization and Chief Executive Office of the Grantor		18

 

 

SECURITY AGREEMENT

 

This SECURITY AGREEMENT (this “Agreement”), dated as of May 16, 2024, is made by and between SDI SL BORROWING - 1, LLC, a Nevada limited liability company (together with its permitted successors and assigns, the “Grantor”), and SOLUNA2 SLC FUND II PROJECT HOLDCO LLC (the “Lender”).

 

R E C I T A L S:

 

A. Pursuant to that certain Equipment Loan Agreement, dated as of the date hereof (as amended, amended and restated, modified or supplemented from time to time, the “Equipment Loan Agreement”), between the Grantor and the Lender, the Lender has agreed to extend credit to the Grantor in the amounts specified and on the terms and subject to the conditions set forth therein.

 

B. It is a requirement under the Equipment Loan Agreement that the Grantor shall have authorized, executed and delivered this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Grantor hereby agrees with the Lender as follows:

 

ARTICLE I
DEFINITIONS

 

Section 1.01 Certain Defined Terms.

 

(a) Each capitalized term used and not otherwise defined herein shall have the meaning assigned to such term (whether directly or by reference to another agreement or document) in Section 1 of the Equipment Loan Agreement as in effect on the date hereof (or as modified with the consent of the Lender). The Rules of Construction set forth in Section 1 of the Equipment Loan Agreement are hereby incorporated by reference as if fully set forth herein.

 

(b) The terms “Equipment”, “Instrument”, and “Proceeds” have the respective meanings ascribed thereto in Article 9 of the UCC; provided, that where applicable the term “Equipment” will have the meaning set forth in the Equipment Loan Agreement.

 

(c) In addition to the terms defined in the Equipment Loan Agreement, the preamble and the recitals, the following terms shall have the following respective meanings:

 

“Agreement” has the meaning assigned to that term in the Preamble.

 

“Collateral” has the meaning assigned to that term in Section 2.01.

 

“Credit Obligations” shall mean all present and future liabilities, obligations and indebtedness of the Grantor to the Lender, including under or in connection with (a) the Equipment Loan Agreement, the Note or any other Credit Document, including obligations in respect of principal, interest, fees, charges, indemnitees and expenses from time to time owing hereunder or under any other Credit Document, whether due before or after any bankruptcy proceedings with respect to the Grantor and whether or not allowed as a claim in such proceedings and (b) any trade payables owing by the Grantor to the Lender.

 

 

“Equipment Loan Agreement” has the meaning assigned to that term in the Recitals.

 

“Equipment Supply Agreements” means agreements entered into by Grantor from time to time for the purchase of Equipment with the proceeds of the Loans as set forth in a Borrowing Request.

 

“Excluded Collateral” shall mean any lease, contract, or agreement to which Grantor is a party, or any of its rights or interests thereunder, if and only to the extent that the grant of a security interest hereunder: (i) is prohibited by, or a violation of, any law, rule, or regulation applicable to Grantor; or (ii) shall constitute, or result in (x) a breach of any term or provision of, or the termination of or a default under the terms of, such lease, contract, or agreement or (y) the abandonment, invalidation or unenforceability of any right, title or interest of Grantor therein (other than to the extent that any such law, rule, regulation, term, or provision would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408, or 9-409 of the UCC of any relevant jurisdiction or any other applicable law (including any debtor relief law or principle of equity)); provided that the Collateral shall include (and such security interest shall attach and the definition of Excluded Collateral shall not then include), (1) immediately at such time as the contractual or legal provisions referred to above shall no longer be applicable and to the extent severable, (2) immediately any portion of such lease, contract, or agreement not subject to the provisions specified in clauses (i) or (ii) and (3) at all times all Proceeds of any Excluded Collateral (other than any Proceeds that themselves constitute Excluded Collateral).

 

“Grantor” has the meaning assigned to that term in the Preamble.

 

“Lender” has the meaning assigned to that term in the Preamble.

 

“Project Release” has the meaning assigned to that term in Section 2.09.

 

“Uniform Commercial Code” or “UCC” shall mean the Uniform Commercial Code as in effect in the State of New York from time to time or, by reason of mandatory application, any other applicable jurisdiction.

 

ARTICLE II
THE COLLATERAL

 

Section 2.01 Grant of Collateral. As collateral security for the performance and prompt payment in full when due (whether at stated maturity, upon acceleration, upon any optional or mandatory prepayment or otherwise) of the Credit Obligations, the Grantor hereby pledges and grants to the Lender, a perfected security interest (subject to no other liens created by Grantor, except Permitted Exceptions and liens in favor of Lender under the Security Documents) in all of the Grantor’s right, title and interest in, to and under the following property and assets, whether now owned or in the future acquired by the Grantor and whether now existing or in the future coming into existence (all of the property and assets described in this Article II, collectively, the “Collateral”):

 

(a) the specific items of Equipment to be purchased from time to time for Projects, pursuant to the Equipment Supply Agreements, with the proceeds of the Loans, as set forth in a Borrowing Request and any replacement Equipment therefor;

 

 

(b) Grantor’s right, title and interest in the Equipment Supply Agreements entered into by Grantor from time to time; and

 

(c) all Proceeds, including insurance proceeds, of the items of Collateral described or referred to in Sections 2.01(a) and (b);

 

provided that, in no event shall the Collateral include (x) any right, title or interest in any of the items set forth in Section 2.01(a) through (c) above which have been released from the liens created hereunder pursuant to Section 2.09 or (y) any Excluded Collateral.

 

Section 2.02 Perfection. Concurrently with the authorization, execution and delivery of this Agreement, the Grantor shall file, or cause to be filed, such financing statements and other documents in such offices as is necessary, or as the Lender may reasonably request, and properly identify the collateral, to perfect the security interests granted by Section 2.01 of this Agreement. Grantor hereby authorizes Lender to file any such financing statements on its behalf as well as, at any time and from time to time, any UCC financing statements, continuation statements and amendments thereto that describe the Collateral and contain any information required by the UCC or the applicable filing office with respect to any such UCC financing statement, continuation statement or amendment thereof, as Lender deems reasonably necessary to perfect its security interest in the Collateral.

 

Section 2.03 Delivery and Other Perfection. The Grantor shall:

 

(a) give, execute, deliver, file, record, or authorize all such financing statements and notices or use commercially reasonably efforts to obtain all such instruments, documents, agreements or consents or other papers as reasonably requested by the Lender to create, preserve, perfect or validate the security interest granted pursuant hereto or to enable the Lender to exercise and enforce its rights hereunder with respect to such pledge and security interest;

 

(b) keep full and accurate books and records relating to the Collateral, and stamp or otherwise mark such books and records in such manner as the Lender may reasonably require in order to reflect the security interests granted by this Agreement;

 

(c) forward copies of any material written notices or communications received by the Grantor with respect to the Collateral, all at such times and in such manner as the Lender may reasonably require; and

 

(d) execute and deliver and cause to be filed, such continuation statements, and do such other acts and things, as may be necessary to maintain the perfection of the security interest granted pursuant hereto.

 

Section 2.04 Other Financing Statements and Liens. Without the written consent of the Lender, the Grantor shall not file or authorize to be filed, in any jurisdiction, any financing statement, amendment or modification thereto or like instrument or termination thereof with respect to any of the Collateral in which the Lender is not named as the sole secured party, except for (x) liens in favor of Lender under the Security Documents, and (y) Permitted Exceptions.

 

 

Section 2.05 Preservation and Protection of Security Interests. The Grantor shall:

 

(a) upon the acquisition after the date of this Agreement by the Grantor of any Equipment covered by a certificate of title or ownership, promptly (i) take such action with respect to that Collateral as is required to perfect the Lender’s security interest in that type of Collateral and (ii) take all such other actions, and authenticate or sign and file or record such other records or instruments, as are necessary or as the Lender may reasonably request in writing to create, perfect and establish the priority of the liens granted by this Agreement in any and all of the Collateral, to preserve the validity, perfection or priority of the liens granted by this Agreement in any and all of the Collateral or to enable the Lender to exercise its remedies, rights, powers and privileges under this Agreement; and

 

(b) whether with respect to Collateral as of the date of this Agreement or Collateral in which the Grantor acquires rights in the future, authorize, give, authenticate, execute, deliver, file or record any and all financing statements, notices, contracts, agreements or other records or instruments, obtain any and all governmental approvals, and take all such other actions, as are necessary or as the Lender may reasonably request to create, perfect and establish the priority of the liens granted by this Agreement in any and all of the Collateral, to preserve the validity, perfection or priority of the liens granted by this Agreement in any and all of the Collateral or to enable the Lender to exercise its remedies, rights, powers and privileges under this Agreement.

 

Section 2.06 Attorney-in-Fact.

 

(a) Subject to the Grantor’s rights under Section 2.07, the Grantor hereby constitutes and appoints the Lender and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact, effective as of the date of this Agreement and terminating upon the release of the Collateral pursuant to Section 2.09, with full power and authority in the place and stead of the Grantor and in the name of the Grantor or in its own name, for the purpose of carrying out the provisions of this Agreement, upon the occurrence and during the continuance of an Event of Default to exercise its rights, remedies, powers and privileges under this Agreement; provided that the foregoing appointment shall not impose any obligation on the Lender to exercise its rights thereunder. This appointment as attorney-in-fact is coupled with an interest and irrevocable until the termination of this Agreement in accordance with Section 2.09. Pursuant to the foregoing, the Grantor hereby gives the Lender the power and right (but without any obligation), on behalf of the Grantor, without notice to or assent by the Grantor, upon the occurrence and during the continuance of an Event of Default (i) to ask, demand, collect, sue for, recover, receive and give receipt and discharge for amounts due and to become due under and in respect of all or any part of the Collateral, (ii) to file any claims or take any action or proceeding that the Lender may deem necessary or advisable for the collection of all or any part of the Collateral, (iii) to execute, in connection with any sale or disposition of the Collateral under Article V, any endorsements, assignments, bills of sale or other instruments of conveyance or transfer with respect to all or any part of the Collateral, (iv) to pay or discharge taxes and liens levied or placed on or threatened against the Collateral, effect any repair or pay or discharge any insurance called for by the terms of this Agreement or other Credit Document (including all or any part of the premiums therefor and the costs thereof), (v) execute, in connection with any sale provided for in Article V, any endorsement, assignment or other instrument of conveyance or transfer with respect to the Collateral, and (vi) (A) direct any party liable for any payment under any Collateral to make payment of any moneys due or to become due thereunder directly to the Lender or as the Lender shall direct, (B) ask or demand for, collect, and receive payment of and receipt for, any moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral, (C) sign and indorse any invoice, freight or express bill, bill of lading, storage or warehouse receipt, draft against debtors, assignment, verification, notice and other document in connection with any Collateral, (D) commence and prosecute any suit, action or proceeding at law or in equity in any court of competent jurisdiction to collect any Collateral and to enforce any other right in respect of any Collateral, (E) defend any suit, action or proceeding brought against the Grantor with respect to any Collateral, (F) settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, give such discharges or releases as the Lender may deem appropriate, and (G) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any Collateral as fully and completely as though the Lender were the absolute owner thereof for all purposes, and do, at the Lender’s option and the Grantor’s expense, at any time, or from time to time, all acts and things that the Lender deems necessary to protect, preserve or realize upon the Collateral and the Lender’s security interests therein and to effect the intent of this Agreement, all as fully and effectively as the Grantor might do.

 

 

(b) Without limiting the rights and powers of the Lender under Section 2.06(a), the Grantor hereby appoints the Lender as its attorney-in-fact, effective the date of this Agreement, effective upon the occurrence and during the continuance of an Event of Default, and terminating upon the termination of this Agreement in accordance with Section 2.09, at the Lender’s option, but without any obligation to do so, for the purpose of performing, executing, and filing all such contracts, agreements and other documents as are contemplated by Section 2.05(b). This appointment as attorney-in-fact is coupled with an interest and is irrevocable until the termination of this Agreement in accordance with Section 2.09.

 

(c) The reasonable expenses of the Lender incurred in connection with actions undertaken as provided in this Section 2.06, shall be payable by the Grantor to the Lender within five (5) Business Days following written demand (together with interest thereon at a rate per annum equal to the default rate under the Equipment Loan Agreement, from the end of such five (5) Business Day period to the date reimbursed by the Grantor) and shall constitute Credit Obligations and be secured by the liens of the Credit Documents.

 

(d) The Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released.

 

Section 2.07 Use of Collateral. So long as no Event of Default has occurred and is continuing, the Grantor shall be entitled to possess the Collateral, subject to the rights, remedies, powers and privileges of the Lender under Articles II and V.

 

Section 2.08 Rights and Obligations.

 

(a) No reference in this Agreement to proceeds or to the sale or other disposition of Collateral shall authorize the Grantor to sell or otherwise dispose of any Collateral except to the extent permitted by the terms of each Credit Document. The Lender shall not be required to take steps necessary to preserve any rights against prior parties to any part of the Collateral.

 

  

(b) The Grantor shall remain liable to perform its duties and obligations under the contracts and agreements included in the Collateral in accordance with their respective terms to the same extent as if this Agreement had not been authorized, executed and delivered. The exercise by the Lender of any right, remedy, power or privilege in respect of this Agreement shall not release the Grantor from any of its duties and obligations under those contracts and agreements. Except as expressly set forth in the Credit Documents, the Lender shall not have any duty, obligation or liability under those contracts and agreements or with respect to any governmental approval included in the Collateral by reason of this Agreement, or any other Credit Document, nor shall the Lender be obligated to perform any of the duties or obligations of the Grantor under any such contract or agreement or any such governmental approval or to take any action to collect or enforce any claim (for payment) under any such contract or agreement or governmental approval.

 

(c) No lien granted by this Agreement in the Grantor’s right, title and interest in any contract, agreement or governmental approval shall be deemed to be a consent by the Lender to any such contract, agreement or governmental approval.

 

Section 2.09 Termination. Upon repayment in full of all Loans and other obligations allocated to such Project, the Collateral related to such Project shall be automatically released from the security interest granted hereby and shall thereupon cease to be Collateral (for the avoidance of doubt, any such release shall not affect the Collateral related to any other Project and Project Company) (such release, the “Project Release”); provided, that such Collateral shall continue to be effective or be reinstated, as the case may be, if at any time any applicable payment, or any part thereof, of any Credit Obligation in respect of such Project made prior to such termination is rescinded or must otherwise be restored or returned by the Lender, whether as a result of any proceedings in bankruptcy or reorganization or otherwise with respect to the Grantor or any other Person or as a result of any settlement or compromise with any Person in respect of such payment, and the Grantor shall pay the Lender on demand all of its costs and expenses (including fees of counsel) incurred by the Lender in connection with such rescission or restoration. Upon such Project Release, all rights to the Collateral in respect of such Project Company shall automatically revert to the Grantor without further action by the Parties hereto, and the Lender shall, at the Grantor’s expense, forthwith cause to be assigned, transferred and delivered, against receipt but without any recourse, warranty or representation whatsoever, any remaining Collateral and money received in respect of such Collateral (in each case, solely relating to such Project Release), to or on the order of the Grantor, free and clear of all Lender liens. The Lender shall also authorize the filing of, or, if necessary, execute and deliver to the Grantor, at the Grantor’s expense, upon such termination such UCC termination statements and other documentation as shall be reasonably requested by the Grantor to effect the termination and release of the liens created under this Agreement, and Lender shall return all Instruments in respect of Collateral being released. The security interest created hereby shall also be automatically released without further action by the Parties hereto with respect to any portion of the Collateral that is sold, transferred or otherwise disposed of in compliance with the terms and conditions of the Credit Documents.

 

 

ARTICLE III
REPRESENTATIONS

 

As of the date of this Agreement, the Grantor represents and warrants to the Lender as follows:

 

Section 3.01 Organization; Power; Authorization; Validity.

 

(a) The Grantor represents and warrants that (i) it has been duly formed as, is validly existing as, and is in good standing as a limited liability company under the applicable state of formation and is in good standing as a foreign limited liability company in each jurisdiction in which its ownership or lease of property or the conduct of its business required such qualification, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, cause a Material Adverse Change, (ii) it has all requisite power and authority to execute, deliver and perform this Agreement and this Agreement has been duly and validly authorized, executed and delivered by it, and (iii) this Agreement constitutes the valid and binding agreement of Grantor, enforceable against it in accordance with its terms, except as such enforceability may be limited by (x) bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally and (y) the availability of equitable remedies.

 

(b) Annex 1 correctly sets forth the Grantor’s full and correct legal name, type of organization, jurisdiction of organization, organizational identification number (if applicable), chief executive office, place of business and mailing address as of the date of this Agreement.

 

(c) The Grantor has not (i) changed its location (as defined in Section 9-307 of the UCC), (ii) previously changed its name or (iii) previously become a “new debtor” (as defined in the UCC) with respect to a currently effective security agreement entered into by another Person.

 

Section 3.02 Title. Grantor has good and valid title to the Collateral and such title, rights and/or interest in such Collateral is clear of all liens (other than (i) Permitted Exceptions and (ii) liens in favor of Lender under the Security Documents).

 

ARTICLE IV
COVENANTS

 

Until the termination of this Agreement in accordance with Section 2.09, and as necessary for a reasonable amount of time thereafter, the Grantor agrees that, except with respect to any Collateral that is released pursuant to a Project Release:

 

Section 4.01 Further Assurances. From time to time upon the written request of the Lender, the Grantor shall execute and deliver such further documents and do such other acts and things as the Lender may reasonably request in order fully to effect the purposes of this Agreement.

 

 

Section 4.02 Defense of Collateral. Grantor shall defend its title to the Collateral held by it and the interest of Lender in such Collateral against the claims and demands of all other persons.

 

Section 4.03 Preservation of Value, Limitation of Liens. Grantor shall not take or expressly authorize any action in connection with the Collateral pledged by it that would impair in any material respect the value of the interests or rights of Grantor therein or that would impair the interests or rights of Lender therein or with respect thereto, except as expressly permitted by the Credit Documents; provided, however, that nothing in this Agreement shall prevent Grantor, prior to the exercise by Lender of any rights pursuant to the terms hereof, from undertaking the Grantor’s operations in the ordinary course of business not in violation of the Credit Documents. Grantor shall not create any liens on or with respect to all or any part of the Collateral held by it other than Permitted Exceptions, and Grantor shall, at its own cost and expense, promptly take such action as may be necessary to discharge any such liens that it created. The Grantor will use commercially reasonable efforts to exclude from each Equipment Supply Agreement to which it becomes a party after the date hereof provisions that would prevent the Grantor from creating a security interest in such agreement or any rights or property acquired thereunder as contemplated hereby.

 

Section 4.04 Other Financing Statements. Grantor shall not file or expressly authorize to be filed in any jurisdiction any (a) financing statements or financing statement amendments under the UCC or any like statement relating to the Collateral pledged by it in which Lender is not named as the sole secured party, other than except for (x) liens in favor of Lender under the Security Documents, and (y) Permitted Exceptions or (b) financing statement terminations under the UCC or any like statement relating to the Collateral pledged by it, except as permitted by Section 2.09.

 

Section 4.05 No Sale of Collateral. Except as expressly permitted by this Agreement or the other Credit Documents, Grantor shall not cause or expressly authorize the sale, assignment, conveyance, pledge or other transfer of all or any portion of the Collateral pledged by it.

 

Section 4.06 Maintenance of Records. Grantor shall, at all times, keep accurate and complete records of the Collateral pledged by it and shall permit representatives of Lender, upon reasonable prior notice, at any time during normal business hours of Grantor to inspect and make abstracts from Grantor’s books and records pertaining to such Collateral. At Lender’s request, Grantor shall promptly deliver copies of any and all such records to Lender.

 

Section 4.07 Name, Jurisdiction and Type. Grantor shall not change its name, its jurisdiction of organization or its type of organization without the consent of Lender. In the event of any of the foregoing changes, Grantor shall, at its expense, execute and deliver such instruments and documents as may be required to maintain a perfected security interest in the Collateral pledged by Grantor, or as may be reasonably requested by Lender.

 

Section 4.08 No Interference. Grantor agrees that it will not interfere with any right, power and remedy of Lender provided for in this Agreement or now or hereafter existing at law or in equity or by statute or otherwise, or the exercise or beginning of the exercise by Lender of any one or more of such rights, powers or remedies.

 

Section 4.09 Collateral Access Agreement. Grantor agrees that it will not store the Collateral in any location except, or otherwise move any item of the Collateral from the location that is subject of the applicable collateral access agreement delivered to the Lender in accordance with Section 7.16 of the Equipment Loan Agreement.

 

 

ARTICLE V
REMEDIES

 

Section 5.01 Remedies During Event of Default. After the occurrence and during the continuance of an Event of Default:

 

(a) The Lender in its discretion may require the Grantor to, and the Grantor shall, assemble the Collateral in its possession at such place or places, reasonably convenient to both the Lender and the Grantor, designated in the Lender’s request;

 

(b) The Lender in its discretion may make any reasonable compromise or settlement it deems desirable with respect to any of the Collateral and may extend the time of payment, arrange for payment in installments, or otherwise modify the terms of all or any part of the Collateral;

 

(c) The Lender in its discretion may, in its name, demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for all or any part of the Collateral, but shall be under no obligation to do so;

 

(d) The Lender in its discretion may, upon five (5) Business Days’ prior written notice to the Grantor of the time and place, with respect to all or any part of the Collateral which shall then be or shall thereafter come into the possession, custody or control of the Lender or any of its agents, sell, lease or otherwise dispose of all or any part of such Collateral, at such place or places as the Lender deems best, for cash, for credit or for future delivery (without thereby assuming any credit risk) and at public or private sale, without demand of performance or notice of intention to effect any such disposition or of time or place of any such sale (except such notice as is required above or by applicable statute and cannot be waived), and the Lender or any other Person may be the purchaser, lessee or recipient of any or all of the Collateral so disposed of at any public sale (or, to the extent permitted by law, at any private sale) and thereafter hold the same absolutely, free from any claim or right of whatsoever kind, including any right or equity of redemption (statutory or otherwise), of the Grantor, any such demand, notice and right or equity being hereby expressly waived and released. The Lender 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 the time and place fixed for the sale, and such sale may be made at any time or place to which the sale may be so adjourned;

 

(e) The Lender shall have, and in its discretion may exercise, all of the rights, remedies, powers and privileges with respect to the Collateral of a secured party under the UCC (whether or not the UCC is in effect in the jurisdiction where such rights, remedies, powers and privileges are asserted) and such additional rights, remedies, powers and privileges to which a secured party is entitled under the laws in effect in any jurisdiction where any rights, remedies, powers and privileges in respect of this Agreement or the Collateral may be asserted, including the right, to the maximum extent permitted by law, to exercise all voting, consensual and other powers of ownership pertaining to the Collateral as if the Lender were the sole and absolute owner of the Collateral (and the Grantor agrees to take all such action as may be appropriate to give effect to such right);

 

 

(f) The Lender in its discretion may, to the full extent provided by law, have a court having jurisdiction appoint a receiver, which receiver shall take charge and possession of and protect, preserve, replace and repair the Collateral or any part thereof, and manage and operate the same, and receive and collect all rents, income, receipts, royalties, revenues, issues and profits therefrom. The Grantor irrevocably consents and shall be deemed to have hereby irrevocably consented to the appointment thereof, and following written notice to the Grantor of such appointment, the Grantor shall promptly deliver possession of such Collateral to the receiver. The Grantor also irrevocably consents to the entry of an order authorizing such receiver to invest upon interest any funds held or received by the receiver in connection with such receivership. The Lender shall be entitled to such appointment as a matter of right, if it shall so elect, without the giving of notice to any other party and without regard to the adequacy of the security of the Collateral; and

 

(g) The Lender in its discretion may enforce one or more remedies hereunder, successively or concurrently, and such action shall not operate to estop or prevent the Lender from pursuing any other or further remedy which it may have hereunder or by law, and any repossession or retaking or sale of the Collateral pursuant to the terms hereof shall not operate to release the Grantor until full and final payment of any deficiency has been made in cash. The Lender may apply any proceeds of Collateral to, the costs and expenses (including attorneys’ fees, transfer taxes and any other charges) incurred by the Lender in connection with any sale, disposition, repair, replacement, alteration, addition, improvement or retention of any Collateral hereunder provided that the scope of Grantor’s liability hereunder shall be subject to all the limitations on liability set forth in the Equipment Loan Agreement.

 

Notwithstanding anything herein to the contrary, the Lender shall only exercise remedies against any of the Collateral in accordance with Section 8.2 of the Equipment Loan Agreement.

 

Section 5.02 Reserved.

 

Section 5.03 Private Sale.

 

(a) The Lender shall incur no liability as a result of the sale, lease or other disposition of all or any part of the Collateral at any private sale pursuant to Section 5.01 conducted in a commercially reasonable manner. The Grantor hereby waives any claims against the Lender arising by reason of the fact that the price at which the Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale or was less than the aggregate amount of the Credit Obligations, even if the Lender accepts the first offer received and does not offer the Collateral to more than one offeree. The Lender shall have no obligation to engage in public sales and no obligation to delay the sale of any Collateral for the period of time necessary to permit the issuer thereof to register it for public sale.

 

(b) The Grantor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as amended, and applicable state securities laws, the Lender may be compelled, with respect to any sale of all or any part of the Collateral, to limit purchasers to those who will agree, among other things, to acquire the Collateral for their own account, for investment and not with a view to distribution or resale. The Grantor acknowledges that any such private sales may be at prices and on terms less favorable to the Lender than those obtainable through a public sale without such restrictions, and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that the Lender shall have no obligation to engage in public sales and no obligation to delay the sale of any Collateral for the period of time necessary to permit the respective issuer of such Collateral to register it for public sale.

 

 

Section 5.04 Application of Proceeds. Except as otherwise expressly provided in this Agreement, the Proceeds of or other realization upon, all or any part of the Collateral by virtue of the exercise of remedies under Section 5.01, shall be applied by the Lender:

 

First, to the payment of documented fees, out-of-pocket costs and expenses of such exercise of remedies, including documented fees, out-of-pocket costs and expenses of the Lender, and documented fees and out-of-pocket expenses of its agents and fees and expenses of its counsel and all other documented, out-of-pocket expenses incurred and advances made by the Lender in that connection and all other obligations due and owing to the Lender;

 

Next, to the payment in full of the remaining Credit Obligations equally ratably in accordance with their respective amounts then due and owing; and

 

Finally, subject to the rights of any other holder of any lien in the relevant Collateral, to the payment to Grantor, or its respective successors or assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining.

 

Section 5.05 Marshalling, etc.. The Lender shall not be required to make any demand upon, or pursue or exhaust any of its rights or remedies against, the Grantor or any other guarantor, pledgor or any other Person with respect to the payment of the Credit Obligations or to pursue or exhaust any of their rights or remedies with respect to any collateral therefor or any direct or indirect guarantee thereof. The Lender shall not be required to marshal the Collateral or any guarantee of the Credit Obligations or to resort to the Collateral or any such guarantee in any particular order, and all of its and their rights hereunder or under any other Credit Document shall be cumulative. To the extent it may lawfully do so, the Grantor absolutely and irrevocably waives and relinquishes the benefit and advantage of, and covenants not to assert against the Lender, any valuation, stay, appraisement, extension, redemption or similar laws now or hereafter existing which, but for this provision, might be applicable to the sale of any Collateral made under the judgment, order or decree of any court, or privately under the power of sale conferred by this Agreement, or otherwise. Without limiting the generality of the foregoing, the Grantor (a) agrees that it will not invoke or utilize any law which might prevent, cause a delay in or otherwise impede the enforcement of the rights of the Lender in the Collateral, (b) waives its rights under all such laws, and (c) agrees that it will not invoke or raise as a defense to any enforcement by the Lender of any rights and remedies relating to the Collateral or the Credit Obligations any legal or contractual requirement with which the Lender may have in good faith failed to comply. In addition, the Grantor waives any right to prior notice (except to the extent expressly required by this Agreement) or judicial hearing in connection with foreclosure on or disposition of any Collateral, including any such right which the Grantor would otherwise have under the Constitution of the United States of America, any state or territory thereof or any other jurisdiction.

 

 

ARTICLE VI
MISCELLANEOUS PROVISIONS

 

Section 6.01 Communication.

 

All notices and other communications provided for in this Agreement shall be sent, if practicable, by confirmed telecopy, as a “.PDF” attachment to an electronic mail and, otherwise, by overnight courier service prepaid to a Person at its address specified below and shall be deemed effective when received. A communication shall be addressed, until such time as a Person shall have notified the other parties hereto of a change of address:

 

if to the Grantor, at:

 

SDI SL Borrowing - 1, LLC

325 Washington Ave. Extension

Albany, NY 12205

518-218-2550

Attn: CFO

Email: DVnotice@soluna.io

 

if to the Lender, at:

 

Soluna2 SLC Fund II Project Holdco LLC

c/o Spring Lane Capital

100 Cambridge Street, Suite 1802

Boston, MA 02114

 

with copies (which shall not constitute notice) to:

 

Mark Barnett

Foley Hoag LLP

155 Seaport Boulevard

Boston, MA 02210

 

Section 6.02 Amendments. No amendment of any provision of this Agreement shall be effective unless the same shall be in writing and signed by the Lender and the Grantor, such consent shall be effective only in the specific instance and for the specific purpose for which given. The Lender shall not be obligated to enter into any amendment that affects its rights, duties or obligations under this Agreement.

 

Section 6.03 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided, however, that (a) the Grantor may not assign or transfer any of its respective rights or interest in or under this Agreement or delegate any of its obligations under this Agreement without the prior written consent of the Lender and (b) the Lender shall transfer or assign its rights under this Agreement in connection with a resignation or removal of such Person from its respective capacity in accordance with the terms of this Agreement and the Equipment Loan Agreement.

 

 

Section 6.04 Survival. All agreements, statements, representations and warranties made by the Grantor herein or in any certificate or other instrument delivered by the Grantor or on its behalf under this Agreement shall be considered to have been relied upon by the Lender and shall survive the execution and delivery of this Agreement and the other Credit Documents regardless of any investigation made by or on behalf of the Lender.

 

Section 6.05 No Waiver; Remedies Cumulative. No failure or delay on the part of the Lender to exercise and no delay in exercising, and no course of dealing with respect to any right, remedy, power or privilege hereunder shall operate as a waiver of such right, remedy, power or privilege 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. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which the Lender would otherwise have.

 

Section 6.06 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall together constitute one and the same instrument. Any signature to this Agreement may be delivered by facsimile, electronic mail (including pdf) or as any electronic signature complying with the U.S. federal ESIGN Act of 2000 or the New York Electronic Signature and Records Act or any other similar state laws based on the Uniform Electronic Transactions Act or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and electronic signatures or the keeping of records in electronic form shall be valid and effective for all purposes to the fullest extent permitted by applicable law.

 

Section 6.07 Captions. The headings of the several articles and sections and sub sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

 

Section 6.08 Severability. In case any one or more provisions contained in this Agreement or obligation under this Agreement shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions or obligations contained herein, and any other application thereof, shall not in any way be affected or impaired thereby.

 

Section 6.09 Governing Law; Waiver of Jury Trial; Jurisdiction and Process.

 

(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN NEW YORK (WITHOUT REGARD TO CONFLICT OF LAWS PROVISIONS THEREOF OTHER THAN SECTION 5-1401 AND SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

 

(b) TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH OF THE GRANTOR AND THE LENDER WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT OR THE SUBJECT MATTER HEREOF OR THEREOF OR ANY CREDIT OBLIGATION OR IN ANY WAY CONNECTED WITH THE DEALINGS OF THE LENDER OR THE GRANTOR IN CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT, TORT OR OTHERWISE.

 

 

(c) THE GRANTOR AGREES THAT ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER COLLATERAL DOCUMENT OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH OR THEREWITH, OR ANY LEGAL ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT OBTAINED AGAINST THE GRANTOR, FOR BREACH HEREOF OR THEREOF, OR AGAINST ANY OF ITS PROPERTIES, MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, EACH IN THE BOROUGH OF MANHATTAN, BY THE LENDER, AND THE GRANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS FOR PURPOSES OF ANY SUCH LEGAL ACTION OR PROCEEDING. THE GRANTOR HEREBY AGREES THAT SERVICE OF PROCESS IN ANY SUCH PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO IT AT ITS ADDRESS SPECIFIED IN SECTION 6.01 OR AT SUCH OTHER ADDRESS OF WHICH THE LENDER SHALL HAVE RECEIVED NOTICE PURSUANT TO SECTION 6.01. IN ADDITION, THE GRANTOR HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER COLLATERAL DOCUMENT EXECUTED IN CONNECTION HEREWITH OR THEREWITH BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, EACH IN THE BOROUGH OF MANHATTAN, AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

(d) NO CLAIM MAY BE MADE BY THE GRANTOR OR ANY OTHER PERSON AGAINST THE LENDER OR ANY OF ITS SUCCESSORS IN INTEREST OR ITS AFFILIATES, OR DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR AGENTS OF ANY OF THEM FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM FOR BREACH OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATING TO, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER COLLATERAL DOCUMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER CREDIT DOCUMENTS, AND THE GRANTOR HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.

 

 

Section 6.10 Entire Agreement. This Agreement, together with any other agreement executed in connection with this Agreement, is intended by the parties as a final expression of their agreement as to the matters covered by this Agreement and is intended as a complete and exclusive statement of the terms and conditions of such agreement.

 

Section 6.11 Independent Obligations. The Grantor’s obligations under this Agreement are independent of those of any other Person. The Lender may bring a separate action against the Grantor without first proceeding against any other Person or any other security held by the Lender and without pursuing any other remedy.

 

Section 6.12 Expenses. The Grantor agrees to pay or to reimburse the Lender for all documented out-of-pocket costs and expenses (including attorney’s fees and expenses) that may be incurred by the Lender in any effort to enforce any of the provisions of Article V, or any of the obligations of the Grantor in respect of the Collateral or in connection with (a) the preservation of the liens on, or the rights of the Lender to the Collateral pursuant to this Agreement or the other Credit Documents or (b) any actual or attempted sale, lease, disposition, exchange, collection, compromise, settlement or other realization in respect of, or care of, the Collateral, including all such costs and expenses (and attorney’s fees and expenses) incurred in any bankruptcy, reorganization, workout or other similar proceeding. The Lender shall provide reasonable support for any costs, expenses, and/or charges at the Grantor’s reasonable request.

 

Section 6.13 Duty of the Lender. The Lender’s sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under the UCC or otherwise, shall be to deal with it in the same manner as the Lender deals with similar property for its own account. The Lender shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to the Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction. Except for reasonable care and preservation of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Lender shall have no duty as to the collection or protection of the Collateral or any income thereon, nor as to the preservation of rights against prior parties, nor as to the preservation of any rights pertaining thereto beyond the safe custody thereof. Notwithstanding any other provision contained in this Agreement, the Lender shall be afforded all of the rights, powers, protections, immunities and indemnities of the Lender set forth in the Equipment Loan Agreement, as if such rights, powers, immunities and indemnities were specifically set forth herein. The rights, privileges, protections and benefits given to the Lender, including its right to be indemnified, are extended to, and shall be enforceable by, the Lender in its capacity hereunder, and to each agent, custodian and other Person employed by the Lender in accordance herewith to act hereunder.

 

Section 6.14 Agreement for Security Purposes. This Agreement is for security purposes and is provided pursuant to the Equipment Loan Agreement. Accordingly, the Lender shall not, pursuant to this Agreement, exercise its rights and remedies hereunder with respect to the Collateral unless, at the time such enforcement is sought an Event of Default has occurred and is continuing under the Equipment Loan Agreement, and until such time, subject to the terms of the Equipment Loan Agreement and the other Credit Documents, the Grantor reserves the right to, and shall be entitled to use and possess, the Collateral and to exercise all of the Grantor’s right, title and interest in, to and under the Collateral.

 

[SIGNATURES TO FOLLOW]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective authorized officers as of the date first written above.

 

	GRANTOR:
	SDI SL BORROWING - 1, LLC, a Nevada limited liability company
	By:
	Name:
	Title:

 

[Signature Page to Soluna (SLC) Security Agreement]

 

 

	LENDER:
	SOLUNA2 SLC FUND II PROJECT HOLDCO LLC, as Lender
	By:
	Name:
	Title:

 

[Signature Page to Soluna (SLC) Security Agreement] 

 

 

Annex 1

 

Organization and Chief Executive Office of the Grantor

 

Grantor’s Legal Name, Type and Jurisdiction of Organization, and Organizational Identification Number:

Full and Correct Legal Name	SDI SL Borrowing - 1, LLC
Type of Organization	Limited Liability Company
Jurisdiction of Organization	Nevada
Organizational ID Number	E39830372024-8
Mailing Address	325 Washington Ave. Extension
	Albany, NY 12205
Place of Business	Same as above
Location of Chief Executive Office	Same as above
Change of name	None

 

 

 

 

Exhibit 10.2

 

Execution Version

 

EQUIPMENT LOAN AGREEMENT

 

Dated as of May 16, 2024

 

between

 

SDI SL BORROWING - 1, LLC,

 

as Borrower,

 

and

 

SOLUNA2 SLC FUND II PROJECT HOLDCO LLC,

 

as Lender

 

 

 

 

TABLE OF CONTENTS

 

1.	Definitions; Certain Rules of Construction		1
2.	Term Loan Facility.		6
	2.1	Term Loans	6
	2.2	Borrowing Requests	6
	2.3	Note	6
3.	Interest		6
4.	Repayment; Conversion.		7
	4.1	Repayments of the Loan	7
	4.2	Payments by the Borrower	7
	4.3	Conversion	8
	4.4	Reborrowing	8
	4.5	Cash Repayments	8
5.	Conditions Precedent.		8
	5.1	Conditions to Closing Date	8
	5.2	Conditions to Each Extension of Credit	10
6.	Representations and Warranties		12
	6.1	Organization and Business	12
	6.2	Changes in Condition	12
	6.3	Litigation	12
	6.4	No Legal Obstacle to Agreements	12
	6.5	Taxes	13
	6.6	Compliance with Laws	13
	6.7	Security Documents	13
	6.8	Equipment	13
	6.9	Development Plan	13
7.	General Covenants		14
	7.1	Financial Reporting; Inspection; Monthly Meeting.	14
	7.2	Event Reports.	14
	7.3	Conduct of Business; Use of Proceeds	15
	7.4	Payment of Taxes and Other Amounts	15
	7.5	Compliance with Laws	15
	7.6	Insurance	15
	7.7	Project Development	16
	7.8	Indebtedness and Liens	16
	7.9	Distributions	16
	7.10	Investments and Acquisitions	16
	7.11	Merger; Sale of Assets	16
	7.12	Affiliate Transactions	16
	7.13	Limitation on Equity Financings	16
	7.14	Litigation	17
	7.15	Organizational Documents; Amendments of Material Documents	17
	7.16	Collateral Access Agreement	17
	7.17	Insurance Endorsements	17

 

 

8.	Defaults.		17
	8.1	Events of Default	17
	8.2	Certain Actions Following an Event of Default	19
	8.3	Waivers	20
9.	Expenses; Indemnity.		20
	9.1	Expenses	20
	9.2	General Indemnity	20
10.	Successors and Assigns		21
11.	Notices		21
12.	Course of Dealing, Amendments and Waivers		22
13.	Dispute Resolution		22
14.	WAIVER OF JURY TRIAL		22
15.	General		23
16.	Further Assurances		23

 

 

EXHIBITS

 

A	-	Form of Promissory Note
B	-	Form of Borrowing Request
C	-	[Reserved]
D	-	Form of Development Plan

 

SCHEDULES

 

6.1	-	Projects
6.7	-	Filing Jurisdictions
7.6	-	Insurance

 

 

EQUIPMENT LOAN AGREEMENT

 

This Agreement, dated as of May 16, 2024 (this “Agreement”), is among SDI SL Borrowing - 1, LLC, a Nevada limited liability company, as the borrower (the “Borrower”) and Soluna2 SLC Fund II Project Holdco LLC, as the lender (the “Lender”).

 

In consideration of the mutual agreements, provisions and covenants contained herein, the parties hereto agree as follows:

 

1. Definitions; Certain Rules of Construction. Except as the context otherwise explicitly requires, (a) the capitalized term “Section” refers to sections of this Agreement, (b) the capitalized term “Annex” refers to the annexes to this Agreement, the capitalized term “Exhibit” refers to exhibits to this Agreement and the capitalized term “Schedule” refers to schedules to this Agreement, (c) references to “$” and “Dollars” are to United States dollars, (d) the word “including” shall be construed as “including without limitation”, (e) a Default or Event of Default shall be continuing until (i) it is waived or (ii) with respect to a Default only, the cure thereof, in each case, is confirmed in writing by the Lender, (f) accounting terms not otherwise defined herein have the meaning provided under GAAP, (g) references to a particular statute or regulation include all rules and regulations thereunder and any successor statute, regulation or rules, in each case as from time to time in effect, (h) references to a particular Person include such Person’s successors and assigns to the extent not prohibited by this Agreement and the other Credit Documents, and (i) if time period or due date for an obligation under this Agreement and the other Credit Documents would fall on a day that is not a Business Day, such date shall be extended to the next succeeding Business Day, and interest shall be payable for any principal so extended for the period of such extension. References to “the date hereof” mean the date first set forth above.

 

“Affiliate” means a Person controlling, controlled by or under common control with the Borrower.

 

“Bankruptcy Code” means Title 11 of the United States Code (or any successor statute) and the rules and regulations thereunder, all as from time to time in effect.

 

“Borrower” is defined in the preamble hereof.

 

“Borrower Event of Abandonment” means (a) written announcement of a decision to abandon or indefinitely defer the development of all or any material part of any Project for any reason, or (b) failure to meet any development milestone described on the Project Schedule within 6 months of the date set forth on the Project Schedule or (c) all or any material part of any Project has been intentionally abandoned or indefinitely deferred.

 

“Borrowing” means an extension of credit made by Lender to Borrower on a Disbursement Date.

 

“Borrowing Request” is defined in Section 2.2.

 

“Business Day” means any day (other than Saturday or Sunday) on which banks are open to conduct business in Boston, Massachusetts and Montreal, Quebec.

 

 

“Cash Repayment Trigger Event” means any of (a) a Borrower Event of Abandonment has occurred with respect to any Project for which Equipment was purchased with proceeds of the Loan, (b) the Loan has been accelerated by the Lender as a result of an Event of Default that has occurred and is continuing, (c) a prepayment is required under Section 4.1(d) or (d) a Project Loan Maturity Date arising due to the satisfaction of clause (y) of the definition of Financial Close.

 

“Change in Control” means (a) a sale or issuance resulting in more than 50% of the voting Equity Interests of the Borrower being held by a third party (or group of third parties) that is not Soluna Digital, (b) a sale or issuance resulting in more than 50% of the voting Equity Interests of Soluna Digital being held by a third party (or group of third parties) that is not the Parent; (c) the merger, consolidation, recapitalization or reorganization of the Borrower that results in the inability of Soluna Digital, directly, or Parent, indirectly, to elect a majority of the board of directors (or its equivalent) of the resulting entity or its parent company; (d) a sale of all or substantially all of the assets of the Borrower, to a third party, not in the ordinary course of business; (e) the Borrower shall initiate any action to dissolve, liquidate or otherwise terminate its existence; or (f) the Parent shall cease to own, directly or indirectly, 100% of the Equity Interests of any Project Company other than as permitted pursuant to Section 7.11.

 

“Closing Date” means the date on which the conditions precedent set forth in Section 5.1 shall have been satisfied (or waived in writing by the Lender).

 

“Collateral” means the Equipment in which the Lender is granted a security interest under any Security Document as security for all or any portion of the Credit Obligations.

 

“Convertible Note Facility” means the Securities Purchase Agreement by and among Parent and the purchasers thereunder (the “Purchasers”), dated as of October 20, 2021, as amended, amended and restated, supplemented or otherwise modified from time to time, and all documents entered into in connection therewith.

 

“Credit Documents” means:

 

(a) this Agreement, the Security Agreement, the Side Letter and the Note, each as from time to time in effect; and

 

(b) any other present or future agreement or instrument from time to time entered into by the Lender, on one hand, and the Borrower on the other hand, relating to, amending or modifying this Agreement or any other Credit Document referred to above or which is stated to be a Credit Document, each as from time to time in effect.

 

“Credit Obligations” means all present and future liabilities, obligations and indebtedness of the Borrower to the Lender, including under or in connection with (a) this Agreement, the Note or any other Credit Document, including obligations in respect of principal, interest, fees, charges, indemnitees and expenses from time to time owing hereunder or under any other Credit Document, whether due before or after any bankruptcy proceedings with respect to the Borrower and whether or not allowed as a claim in such proceedings and (b) any trade payables owing by the Borrower to the Lender.

 

 

“Default” means any Event of Default and any event or condition which with the passage of time or giving of notice, or both, would become an Event of Default.

 

“Development Plan” means the development plan for each Project prepared by the Borrower and in form, substance and detail consistent with Exhibit D and otherwise satisfactory to the Lender in its reasonable discretion, setting forth the plans for the development of the Project, including anticipated payment dates for the applicable Equipment, a pro forma financial model, the Project Schedule, a Project description, and an itemized list of the Equipment to be acquired with proceeds of the Loan with contracted or projected pricing for such Equipment.

 

“Disbursement Date” means the date on which any extension of credit is made pursuant to Section 2.

 

“Dispute” is defined in Section 13(a).

 

“Equipment” means the equipment and machinery to be purchased for Projects with the proceeds of the Loans, as set forth in a Borrowing Request.

 

“Equity Interests” means any shares, membership interests, participations, or other equivalent ownership interest in a Person, including any and all options, warrants, rights or convertible securities to purchase or other rights to acquire any of the foregoing.

 

“Event of Default” is defined in Section 8.1.

 

“Event of Loss” means a single insured event or a related series of events causing any loss of, destruction of or damage to, all or any portion of the Equipment in excess of $10,000.

 

“Event of Loss Value” means the actual or reasonably expected value of the loss and claims in respect of an Event of Loss for any Equipment.

 

“Financial Close” means (x) the occurrence of all of the following: (a) the occurrence of a Project Closing under the Master Contribution Agreement, (b) the issuance by the applicable SLC Computing Company of SLC Membership Interests to the Lender or an Affiliate of the Lender and (c) the transfer of the applicable Project (and, if applicable, Project Company) to the applicable SLC Computing Company (or its direct or indirect subsidiary), or (y) an Affiliate of the Borrower has entered into a binding agreement with a third party regarding the issuance of debt or equity to fund construction of the applicable Project.

 

“GAAP” means generally accepted accounting principles as from time to time in effect, including the statements and interpretations of the United States Financial Accounting Standards Board, consistently followed.

 

“Indemnified Party” is defined in Section 9.2.

 

“Knowledge of the Borrower” or “the Borrower’s Knowledge” means the actual knowledge, after reasonable inquiry, of John Belizaire, David Micheals and/or any Person who is providing managerial services to Borrower or any Project Company with respect to a Project.

 

 

“Lender” has the meaning provided in the preamble hereof.

 

“Lender Cash Sweep” has the meaning set forth in Section 4.3.

 

“Loan” is defined in Section 2.3.

 

“Margin Stock” means “margin stock” within the meaning of Regulations T, U or X of the Board of Governors of the Federal Reserve System.

 

“Master Contribution Agreement” means the Bilateral Master Contribution Agreement, dated as of May 3, 2022, between Soluna SLC Fund I Projects Holdco LLC and Soluna Computing, Inc.

 

“Material Adverse Change” means a material adverse change in the business, operations, assets, financial condition, income or prospects of the Borrower.

 

“Maturity Date” means the earlier of (a) May 16, 2027 and (b) at Lender’s option, the date on which Lender and its Affiliates cease to have any financial interest in any project owned by Borrower or its Affiliates. Notwithstanding the foregoing, the Maturity Date may be extended by up to one year upon mutual agreement of Lender and Borrower.

 

“MOIC Payment” means an amount equal to the difference of (i) the greater of (a) the principal amount of the Loan being repaid plus all interest previously paid or simultaneously being paid to Lender in respect of such principal of the Loan, and (b) the principal amount of the Loan being repaid multiplied by three, minus (ii) the sum of the principal amount of the Loan being repaid plus all interest previously paid or simultaneously being paid to Lender in respect of such principal of the Loan.

 

“Note” is defined in Section 2.3.

 

“Parent” means Soluna Holdings, Inc., a Nevada corporation.

 

“Permitted Exceptions” shall mean any (i) lien for taxes not yet due and payable, (ii) unfiled mechanic’s or other statutory liens arising or incurred in the ordinary course of business that do not materially detract from the value or use of a Project, (iii) restrictions arising from land use or zoning laws or regulations, and (iv) Liens arising under the Convertible Note Facility (other than any liens on Collateral).

 

“Person” means any present or future natural person or any corporation, association, partnership, joint venture, limited liability company, business trust, trust, organization, business, individual or government or any governmental agency or political subdivision thereof.

 

“Project” means a “Project” (as defined in the Master Contribution Agreement) with respect to which, unless otherwise specified, principal of the Loan has been drawn and is outstanding.

 

 

“Project Borrowing Base Value” means the maximum amount of the Loan available to be drawn for a given Project, as set by the Lender in its sole discretion prior to the initial Borrowing for such Project.

 

“Project Budget” means the budget for each Project prepared by the Borrower and in form, substance and detail satisfactory to the Lender, setting forth the expected development costs for the applicable Project, including capital costs and general and administrative expenses, tracking to the Development Plan.

 

“Project Closing” has the meaning provided in the Master Contribution Agreement.

 

“Project Company” means a special purpose vehicle that owns a Project.

 

“Project Funding Package” means a proposed Project Budget and Project Development Plan for the applicable Project.

 

“Project Loan Maturity Date” means, with respect to the portion of the Loan advanced with respect to a particular Project, the earliest of (a) two years after the date of such Borrowing, (b) the date that such Project reaches Financial Close, and (c) the date that a Borrower Event of Abandonment occurs with respect to such Project.

 

“Project Schedule” means, with respect to a particular Project, a reasonably detailed schedule for the development of the Project, including a schedule of then-anticipated key milestones, all as set forth in the applicable Development Plan.

 

“Property” means any interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible, including the Collateral.

 

“Purchasers” has the meaning given in the definition of Convertible Note Facility.

 

“Security Agreement” means the Security Agreement dated as of the date hereof between the Borrower and the Lender, as may be amended, restated, supplemented or otherwise modified from time to time.

 

“Security Documents” is a collective reference to the Security Agreement and all other security documents delivered to the Lender granting or purporting to grant a lien on any Property of any Person to secure any Credit Obligations.

 

“Side Letter” means that certain letter agreement, dated as of the date hereof, by and among Lender, Borrower, Soluna DVSL ComputeCo, LLC, Soluna DV Devco, LLC, Soluna Holdings, Inc. and Soluna SLC Fund I Projects Holdco, LLC.

 

“SLC Computing Company” has the meaning provided in the Master Contribution Agreement.

 

 

“SLC Membership Interests” means the shares of the SLC Computing Company that would be owned by Lender or its Affiliate upon a purchase thereof pursuant to the Master Contribution Agreement.

 

“Soluna Digital” means Soluna Digital, Inc., a Nevada corporation.

 

2. Term Loan Facility.

 

2.1 Term Loans. Subject to all the terms and conditions of this Agreement, the Lender will make term loans to the Borrower in such amounts as may be requested by the Borrower in accordance with Section 2.2. The sum of the aggregate principal amount of term loans made under this Section 2.1 shall in no event exceed $1,000,000; provided that the Lender in its sole and absolute discretion, following written request from the Borrower, may agree to fund additional amounts (in which case the Note shall be amended to reflect such greater amount).

 

2.2 Borrowing Requests. The Borrower may from time to time prior to the Maturity Date (but not more often than once per calendar month, unless agreed by the Lender in its sole discretion) request a loan under Section 2.1 by providing to the Lender a completed written notice in the form of Exhibit B (a “Borrowing Request”) by e-mail not later than noon (Boston time) on the 10^th Business Day prior to the requested Disbursement Date. Each Borrowing Request must (a) specify the amount of the requested term loan (which shall be not less than $100,000 and an integral multiple of $10,000) and identify (x) the Equipment to be purchased with the proceeds of such Loan along with the contracted price thereof and (y) the Project for which such Equipment will be purchased (for the avoidance of doubt, more than one Project may be specified in a Borrowing Request, but in such event the Borrowing Request shall specify the amount allocated to each Project), (b) (i) if such term loan is the first advance with respect to a particular Project, attach the applicable Project Budget and Development Plan for such Project in accordance with Section 5.2 and (ii) for each subsequent draw, attach the applicable Project Budget and Development Plan for such Project if such Project Budget and/or Development Plan has materially changed in accordance with Section 5.2, (c) specify the planned use of proceeds (which shall be satisfactory to the Lender, in compliance with the applicable Project Budget and consistent with the applicable Development Plan) and (d) certify that the development of the Project as of the Disbursement Date is in compliance with the Development Plan, including achievement of the milestones on the timeline set forth therein. Lender shall respond to each Borrowing Request within 10 Business Days, with either acceptance or rejection with explanation. In the case of a rejected Borrowing Request, the Borrower shall have the opportunity to revise the Borrowing Request and resubmit even within the same calendar month. The Lender may rely on the wiring instructions provided by the Borrower and the Borrower will indemnify the Lender for any loss the Lender suffers due to such reliance. Unless the Borrower directs the Lender otherwise (including pursuant to this Section 2.2) each loan will be made by wiring the amount thereof to the general account of Soluna DV Services, LLC (currently the operating entity of the Borrower) at KeyBank, according to the following account information:

 

Beneficiary Name:	KeyBank
Beneficiary ABA:	021300077
Bank Location:	66 S Pearl Street Albany, NY 12207 United States
Beneficiary Customer:	Soluna DV Services, LLC
Beneficiary Address:	325 Washington Ave Extension, Albany, NY 12205
Beneficiary Customer Account Number:	329681395136

 

provided, that the Lender may request, at its option and in its sole discretion, and upon such request the Borrower shall include in such Borrowing Request a direction that the Lender advance the funds requested thereunder directly to a supplier of the applicable Equipment specified in the use of proceeds of such Borrower Request. The Borrower shall request loans hereunder only at times and in amounts consistent with the applicable Project Budget (subject to permissible overages in accordance with Section 7.1(c)) and Development Plan unless otherwise agreed in writing by the Lender. Notwithstanding anything to the contrary herein, the proceeds of the initial Borrowing hereunder may be applied as a reimbursement of Equipment previously purchased by Borrower if (1) the applicable Borrowing Request specifies the amount of such reimbursement, (2) itemized invoices evidencing applicable purchases are attached to the applicable Borrowing Request, (3) proof of applicable payments are attached to the applicable Borrowing Request, and (4) Lender approves such reimbursements (such approval not to be unreasonably withheld), and proceeds of such initial Borrowing approved for reimbursement may be distributed by Borrower to an affiliate of Borrower on the date of such Borrowing.

 

2.3 Note. The aggregate principal amount of the loans outstanding from time to time under Section 2.1 is referred to as the “Loan”. The Lender shall keep a record of the Loan, including the amount allocated to each Project. The Borrower’s obligations to pay the Loan shall be evidenced by the Borrower’s promissory note in substantially the form of Exhibit A (the “Note”).

 

3. Interest. The Loan shall bear interest at the lesser of (a) a fixed rate of fifteen percent (15%) per annum, compounded annually, and (b) the maximum interest rate which Borrower may by law pay; provided, however, that following the occurrence and during the continuance of an Event of Default, the interest rate shall, at the written election of the Lender, be increased by up to an additional two percent (2%) and shall be payable on demand. Interest shall accrue from the Disbursement Date and shall be due and payable on the earliest of the Maturity Date, the Project Loan Maturity Date (with respect to the portion attributable to such Project), on the date that any payment is due pursuant to Section 4.1(d) (with respect to the portion of the Loan then due) or any accelerated maturity of the Loan as a result of an Event of Default. Following the occurrence and during the continuance of an Event of Default, interest shall be due and payable on demand.

 

 

4. Repayment; Conversion.

 

4.1 Repayments of the Loan.

 

(a) The Borrower may prepay all or a portion of any Loan at any time upon at least two (2) Business Days’ prior written notice to Lender, which shall include the principal amount to be prepaid under the Loan, plus all accrued and unpaid interest on the principal amount so prepaid through the date of prepayment, plus the applicable MOIC Payment.

 

(b) On the Maturity Date or any accelerated maturity of the Loan as a result of an Event of Default, all principal and accrued interest on the Loan, as well as all other Credit Obligations then accrued and outstanding, plus the applicable MOIC Payment, shall be paid in full in cash.

 

(c) On any Project Loan Maturity Date, all principal and accrued interest with respect to the portion of the Loan advanced with respect to such Project, shall be paid in full in cash, plus the appliable MOIC Payment in respect of such portion of the Loan.

 

(d) On the date that any Event of Loss occurs with respect to any portion of the Equipment, the Borrower shall prepay the principal amount of the Loan funded in respect of such Equipment in an amount equal to the Event of Loss Value, plus all interest accrued thereon, plus the applicable MOIC Payment with respect thereto; provided that, if requested by Borrower and approved by Lender in its sole discretion, Borrower may, in lieu of making such prepayment, apply any loss proceeds received in respect of such Event of Loss to the repair or replacement of the applicable Equipment.

 

4.2 Payments by the Borrower. Notwithstanding any provision herein to the contrary, all payments received by the Lender in respect of any Credit Obligation shall be applied to the Credit Obligations as follows:

 

(a) first, to the payment of any fees, costs and expenses, including attorney fees, of the Lender payable or reimbursable by the Borrower under the Credit Documents;

 

(b) second, to the payment of all accrued and unpaid interest on the Credit Obligations and fees owed to the Lender;

 

(c) third, to payment of principal of the Loan;

 

(d) fourth, to payment of any other amounts owing constituting Credit Obligations; and

 

(e) fifth, any remainder shall be for the account of the Borrower.

 

In carrying out the foregoing, (i) amounts received shall be applied in the alphabetical order provided above until exhausted prior to the application to the next succeeding category, (ii) any payments made with respect to Section 4.1(c) following a Project Loan Maturity Date shall be applied under steps “second” and “third” above to interest and principal outstanding with respect to the portion of the Loan advanced with respect to such Project and (iii) the Lender or other Persons entitled to payment shall receive an amount equal to its pro rata percentage of amounts available to be applied.

 

 

4.3 Conversion. On the Maturity Date, each Project Loan Maturity Date or any accelerated maturity of the Loan as a result of an Event of Default, the Lender may, in its sole discretion, elect in writing that all the outstanding principal and interest on the Loan extended or accrued, as applicable, with respect to a particular Project plus the applicable MOIC Payment, shall be assigned by Borrower to the applicable SLC Computing Company that owns the Project such Loan was used to acquire equipment for and then, immediately after such assignment, converted into shares of SLC Membership Interests of the applicable SLC Computing Company, as part of or in lieu of the initial contribution to such SLC Computing Company under the Master Contribution Agreement by Spring Lane (as defined in the Master Contribution Agreement); provided, that while the Convertible Note Facility remains in effect, unless a Cash Repayment Trigger Event has occurred, the Lender shall elect for such an equity conversion with respect to each Maturity Date and each Project Loan Maturity Date. Upon such written demand, the Borrower shall cause the applicable SLC Computing Company to take all actions necessary to issue the required SLC Membership Interests, including amending its governing documents and soliciting member approval, as necessary.

 

4.4 Reborrowing. Subject to the consent of the Purchasers, the amounts of the Loan prepaid pursuant to Sections 4.1(a), (c) or (d) (including as a conversion pursuant to Section 4.3) may be reborrowed in accordance with Section 2, subject to the limitations thereof.

 

4.5 Cash Repayments. Notwithstanding anything herein to the contrary, without the consent of the Purchasers, no repayment of any Loan may be made in cash while any amount is owed on the Convertible Note Facility other than any loss proceeds applied as a prepayment under Section 4.1(d). Notwithstanding the foregoing, in the event of a Cash Repayment Trigger Event with respect to any portion of the Loan, Lender shall have the right to be paid in cash pursuant to and as further described in the Side Letter, which cash shall be applied to the repayment of the applicable Credit Obligations (a “Lender Cash Sweep”). In the event of a Cash Repayment Trigger Event occurring pursuant to clauses (a) or (b) of the definition thereof, Lender shall provide notice to Borrower (and Borrower will provide such notice to the Purchasers) of its intent to implement a Lender Cash Sweep no less than 10 Business Days prior to implementing such Lender Cash Sweep, and Borrower and the Purchasers shall have the right to cure such Cash Repayment Trigger Event during such 10 Business Day period.

 

5. Conditions Precedent.

 

5.1 Conditions to Closing Date. Notwithstanding any contrary provision contained herein, this Agreement shall not become effective or enforceable against the Borrower or the Lender unless or until the following conditions precedent shall have been satisfied (or waived in writing by the Lender).

 

(a) [Reserved].

 

 

(b) Officer’s Certificate. The representations and warranties contained in Section 6 shall be true and correct on and as of the Closing Date; no Default shall exist on the Closing Date prior to or immediately after giving effect to the transactions contemplated hereunder; and the Borrower shall have furnished to the Lender a certificate to these effects.

 

(c) Secretary’s Certificate. The Borrower shall have furnished to the Lender a certificate, in form and substance reasonably satisfactory to the Lender, certified by the secretary, manager or another executive officer of the Borrower and attaching (i) the certificate of formation and limited liability company operating agreement of the Borrower, (ii) resolutions of the appropriate governing body of the Borrower approving the transaction and each Credit Document, (iii) an incumbency certification, and (iv) a good standing or status certificate with respect to the Borrower from its jurisdiction of organization.

 

(d) Note. The Borrower shall have executed the Note and delivered it to the Lender.

 

(e) Security Agreement. The Borrower shall have duly authorized, executed and delivered to the Lender the Security Agreement.

 

(f) Convertible Note Facility Consent. The Lender shall have received a written consent from the Purchasers under the Convertible Note Facility consenting to the transactions contemplated herein, in form and substance reasonably satisfactory to the Lender.

 

(g) [Reserved.]

 

(h) Perfection of Security. The Borrower shall have duly authorized, executed, acknowledged, delivered, filed, registered and recorded such security agreements, notices, financing statements and other instruments as the Lender may have reasonably requested in order to perfect the liens purported or required pursuant to the Credit Documents to be created in the Collateral and shall have paid all filing or recording fees or taxes required to be paid in connection therewith, including any recording, mortgage, documentary, transfer or intangible taxes.

 

(i) Proper Proceedings. This Agreement, each other Credit Document and the transactions contemplated hereby and thereby shall have been authorized by all necessary limited liability company proceedings of the Borrower. All necessary consents, approvals and authorizations of any governmental or administrative agency or any other Person of any of the transactions contemplated hereby or by any other Credit Document, or the granting of the liens pursuant to the Security Documents, shall have been obtained and shall be in full force and effect.

 

(j) [Reserved].

 

 

(k) Fees and Expenses. All fees and expenses of the Lender (including the fees and expenses of counsel for the Lender) payable on or prior to the Closing Date and for which invoices have been presented prior to the Closing Date shall have been paid; provided, that such fees and expenses may be paid using proceeds of the Loan.

 

(l) Insurance Certificates. The Lender shall have received evidence of the insurance required by Section 7.6.

 

(m) UCC Searches. The Lender shall have received copies of satisfactory UCC, judgment lien, tax lien and litigation search reports, which reports will be dated a recent date reasonably acceptable to the Lender, with respect to Borrower.

 

(n) KYC. The Lender shall have received all documentation and other written information required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act and the Beneficial Ownership Regulation (including a Beneficial Ownership Certification), reasonably required by the Lender.

 

(o) Material Adverse Change. Since the date of the Borrower’s formation, no Material Adverse Change shall have occurred with respect to Borrower.

 

5.2 Conditions to Each Extension of Credit. The obligation of the Lender to make any extension of credit pursuant to Section 2 (including any extension of credit on the Closing Date) shall be subject to the satisfaction, on or before the Disbursement Date therefor, of the following conditions:

 

(a) Initial Conditions. All conditions of Sections 5.1(h), (i), (n) and (o) shall be satisfied as of such Disbursement Date.

 

(b) Initial Project Disbursement Date. If the extension of credit includes the initial extension of credit with respect to a particular Project, then (i) the Borrower shall have delivered to the Lender a Project Funding Package at least twenty (20) Business Days prior to the requested Disbursement Date, (ii) the Lender, in its sole discretion, shall have approved (A) the Project for funding hereunder and (B) the Project Borrowing Base Value, Project Budget and the Development Plan for such Project, (iii) the Lender and the Borrower shall have satisfied the requirements of Sections 5.1(h), (l) and (m) with respect to the Project, and (iv) (1) the Purchasers under the Convertible Note Facility shall have consented to extensions of credit with respect to such Project, (2) the Borrower shall have delivered a true, correct and complete copy of such consent to the Lender, and (3) the Borrower shall have certified in its Borrowing Request that the Purchasers have consented to extensions of credit with respect to such Project.

 

(c) Updates to Project Budget and Development Plan. If the extension of credit is not the initial extension of credit with respect to a particular Project, the Borrower may request that the Lender consent to any material deviation to the Project Budget and/or Development Plan for the applicable Project that was previously delivered to and approved by the Lender, by delivering to the Lender an updated Project Budget and/or Development Plan, as applicable, for such Project at least twenty (20) Business Days prior to the requested Disbursement Date, and, prior to any further extension of credit the Lender shall have approved, in its sole discretion, the updated Project Budget and/or Development Plan, as applicable.

 

 

(d) Representations and Warranties; No Default. The representations and warranties contained in Section 6 shall be true and correct on and as of such Disbursement Date with the same force and effect as though originally made on and as of such date; and no Default shall exist on the Disbursement Date prior to or immediately after giving effect to the requested extension of credit.

 

(e) Borrowing Request; Use of Proceeds. The Borrower shall have submitted to the Lender a properly completed and executed Borrowing Request by e-mail not later than noon (Boston time) on the 10^th Business Day prior to the Disbursement Date, which Borrowing Request satisfies the requirements of Section 2.2 and certifies that the requirements of this Section 5.2 have been met. The use of proceeds specified in such Borrowing Request shall be in compliance with the applicable Project Budget, consistent with the applicable Development Plan and reasonably acceptable to the Lender.

 

(f) [Reserved].

 

(g) Fees and Expenses. (i) All fees payable to the Lender on or prior to such Disbursement Date shall have been paid or shall be paid substantially simultaneously with such funding, in each case, in accordance with the terms hereof and (ii) all other accrued fees and expenses of the Lender (including the fees and expenses of counsel (including any local counsel) for the Lender) payable on or prior to such Disbursement Date and for which invoices have been presented at least one (1) Business Day prior to such Disbursement Date shall have been paid or shall be paid substantially simultaneously with such funding.

 

(h) Project Development. As of such Disbursement Date, the development of the Project for which the disbursement of the Loan is requested shall be in compliance with the applicable Development Plan.

 

(i) Credit Documents; MCA. Each of the Credit Documents shall be in full force and effect and enforceable against the Borrower. The Master Contribution Agreement shall be in full force and effect and enforceable against Soluna Computing, Inc.

 

(j) Legality, etc. The making of the requested extension of credit shall not (i) subject the Lender to any penalty or special tax or (ii) be prohibited by any law or governmental order or regulation applicable to the Lender.

 

(k) No Financing Statements, Judgments, or Unpaid Taxes. The Borrower shall have delivered evidence satisfactory to the Lender that, other than the financing statements to be filed pursuant to this Agreement, (i) there are no effective financing statements that name such Person as debtor, (ii) there are no outstanding judgments against such Person and (iii) there are no unpaid taxes owed by such Person, except for such taxes that are not yet due or payable.

 

 

(l) Project Borrowing Base Value. After giving effect to such Borrowing, the amount of the outstanding Loans attributable to the applicable Project does not exceed the applicable Project Borrowing Base Value.

 

(m) Project Borrowing Limit. After giving effect to such Borrowing, no more than $2,000,000 of Loan proceeds have been or will be applied to the purchase of Equipment for a single Project.

 

(n) Purchasers’ Consent. Prior to each extension of credit for a new Project, the Borrower shall have received consent from the Purchasers under the Convertible Note Facility consenting to such extension of credit.

 

6. Representations and Warranties. In order to induce the Lender to extend credit to the Borrower hereunder, the Borrower represents and warrants that, as of the Closing Date and each Disbursement Date:

 

6.1 Organization and Business. Borrower is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, with all power and authority necessary (a) to enter into and perform this Agreement and each other Credit Document to which it is party, and (b) to own its Properties and carry on the business now conducted or proposed to be conducted by it. Borrower has taken all necessary organizational action required to execute, deliver and perform this Agreement and each other Credit Document to which it is party. Copies of the organizational and governing documents of Borrower have been previously delivered to the Lender and are correct and complete. The Projects for which the Borrower is purchasing Equipment using the proceeds of the Loans are set forth on Schedule 6.1 (as such schedule may be updated from time to time pursuant to a Borrowing Request).

 

6.2 Changes in Condition. Since December 31, 2023, no Material Adverse Change has occurred.

 

6.3 Litigation. No litigation, at law or in equity, or any proceeding before any federal, state, provincial or municipal court, board or other governmental or administrative agency or any arbitrator is pending or, to the Knowledge of the Borrower, threatened which may reasonably involve any material risk of any final judgment or liability not adequately covered by insurance or which is otherwise reasonably likely to result in any Material Adverse Change. Other than as disclosed in the financial statements, no judgment, decree, or order of any federal, state, provincial or municipal court, board or other governmental or administrative agency or arbitrator has been issued against Borrower which has resulted, or creates a material risk of resulting, in any Material Adverse Change.

 

6.4 No Legal Obstacle to Agreements. Neither the execution and delivery of this Agreement or any other Credit Document, nor the making of any Borrowings hereunder, nor the consummation of any transaction referred to in or contemplated by this Agreement or any other Credit Document, nor the fulfillment of the terms hereof or thereof or of any other agreement, instrument, deed or lease referred to in this Agreement or any other Credit Document, has constituted or resulted in or will constitute or result in:

 

(a) any breach or termination of the provisions of (i) any agreement, instrument, deed or lease to which Borrower is a party or by which it is bound, (ii) of the organizational or governing documents of Borrower, or (iii) the Convertible Note Facility (as modified by the Convertible Note Facility Consent dated as of the date hereof from the Purchasers, a true, correct and complete copy of which has been delivered to the Lender);

 

 

(b) the violation of any law, statute, judgment, decree or governmental order, rule or regulation applicable to Borrower;

 

(c) the creation under any agreement, instrument, deed or lease of any lien upon any of the assets of Borrower, other than (1) the liens created by the Security Documents or (2) Permitted Exceptions; or

 

(d) any redemption, retirement or other repurchase obligation of Borrower under any charter, bylaw, agreement, instrument, deed or lease.

 

No approval, authorization or other action by, or declaration to or filing with, any governmental or administrative authority or any other Person is required to be obtained or made by Borrower in connection with the execution, delivery and performance of this Agreement or any other Credit Document, the transactions contemplated hereby or thereby or the making of any borrowing by the Borrower hereunder.

 

6.5 Taxes. Borrower has filed (or obtained extensions to file) required tax returns and paid taxes due except such taxes as are being contested in good faith and as to which adequate reserves have been set aside in conformity with GAAP.

 

6.6 Compliance with Laws. Borrower is in compliance with all applicable laws, rules, regulations and orders, and has complied with all valid requirements of governmental authorities, except where failure so to comply would result, and would not create a material risk of resulting, in a Material Adverse Change. Borrower does not own any Margin Stock.

 

6.7 Security Documents. Each Security Document is effective to create in favor of the Lender a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. When financing statements specified on Schedule 6.7 in appropriate form are filed in the offices specified on Schedule 6.7, the Security Documents shall constitute a fully perfected lien on, and security interest in, all right, title and interest of Borrower in such Collateral owned by Borrower and the proceeds thereof, as security for the Credit Obligations, in each case prior and superior in right to any other Person, other than Permitted Exceptions.

 

6.8 Equipment. The Borrower owns one hundred percent (100%) of the Equipment, free and clear of all liens. Borrower owns one hundred percent (100%) of each Project Company.

 

6.9 Development Plan. After giving effect to each extension of the Loan, the Borrower and the development of the applicable Project is in compliance with the Development Plan, including achievement of the milestones on the timeline set forth therein.

 

 

7. General Covenants. Borrower covenants that, on and after the Closing Date, until all of the Credit Obligations shall have been paid in full and until the Lender’s commitment to extend credit under this Agreement and any other Credit Document shall have been terminated, Borrower will comply with the following provisions:

 

7.1 Financial Reporting; Inspection; Monthly Meeting.

 

(a) Accounting and Reporting. Borrower shall maintain a system of accounting established and administered in accordance with sound business practices to permit the preparation of financial statements. The Borrower shall provide the Lender with access to view each of its bank accounts.

 

(b) [Reserved].

 

(c) Project Budgets and Spending. Each Project Budget is subject to final approval by the Lender, and the Borrower’s and Project Companies’ expenditures must be detailed in and consistent with an approved Project Budget. The Borrower and the Project Companies shall not make any expenditures that are in deviation from any approved Project Budget without prior written approval by the Lender; provided, however, that the Lender’s prior written consent shall not be required for expenditures in any particular line item of a Project Budget which are less than ten percent (10%) in excess of any such line item.

 

(d) Inspection of Property; Books and Records; Discussions. Borrower will (i) keep proper books and records that are complete in all material respects and are maintained substantially in compliance with applicable laws and customary business practices, (ii) with reasonable prior written notice, permit representatives of the Lender to inspect and make abstracts of any of its books and records or inspect any location where any Equipment purchased with proceeds of the Loan is located, in each case, at any time and as often as may reasonably be desired and to discuss the business, operations, Properties and financial and other condition of the Borrower with officers and employees of the Borrower and with its independent certified public accountants and (iii) use commercially reasonable efforts to deliver a collateral access agreement with respect to any location in which the Borrower stores its books and records.

 

(e) Monthly Updates. The Borrower shall conduct monthly status update calls with the Lender covering all material areas of the Borrower’s operations and activities, including status of development of each Project, progress towards milestones included in each Project’s Development Plan and performance against the applicable Project Budget.

 

7.2 Event Reports.

 

(a) Notice of Litigation, Defaults, etc. The Borrower shall promptly furnish to the Lender notice of any litigation or any administrative or arbitration proceeding (i) which creates a reasonable risk of resulting, after giving effect to any applicable insurance, in the payment by the Borrower of more than $100,000 or (ii) which results, or creates a reasonable risk of resulting, in a Material Adverse Change. Promptly upon acquiring knowledge thereof, the Borrower shall notify the Lender of the existence of any Default or Material Adverse Change, specifying the nature thereof and what action the Borrower has taken, is taking or proposes to take with respect thereto.

 

 

(b) Other Information. From time to time at reasonable intervals upon written request of any authorized officer of the Lender, the Borrower shall furnish to the Lender such other information regarding the business, assets, financial condition, income or prospects of the Borrower as such officer may reasonably request, including copies of all financial statements, tax returns, licenses, agreements, leases and instruments to which Borrower is party. The Lender’s authorized officers and representatives shall have the right during normal business hours upon reasonable notice and at reasonable intervals to examine the books and records of the Borrower for the purpose of ascertaining compliance with or obtaining enforcement of this Agreement or any other Credit Document.

 

7.3 Conduct of Business; Use of Proceeds. The Borrower shall engage only in the business of (a) the development, construction and operation of the Projects and the other projects owned by it or its subsidiaries and (b) activities reasonably related thereto. The proceeds of any extension of credit hereunder shall be used only for the purposes specified in the applicable Borrowing Request delivered prior to such extension of credit and approved by the Lender.

 

7.4 Payment of Taxes and Other Amounts. Borrower will pay when due and payable (a) all taxes, assessments and governmental charges imposed upon it or upon its Property and (b) all accounts payable in conformity with customary trade terms, in each case unless the validity or amount thereof is being contested in good faith by appropriate proceedings, and Borrower shall have established adequate reserves in accordance with GAAP.

 

7.5 Compliance with Laws. Borrower will comply with all applicable laws, rules, regulations and orders, and duly observe all valid requirements of governmental authorities, except where failure so to comply would result, and would not create a material risk of resulting, in a Material Adverse Change. Borrower will not own any Margin Stock.

 

7.6 Insurance. As of the Closing Date and at all times thereafter:

 

(a) Borrower shall have (i) insurance policies sufficient for compliance with all requirements of applicable law and all agreements to which it is a party, except for any insufficiency that could not reasonably be expected to result in a Material Adverse Change, and (ii) insurance coverage in at least amounts and against such risk (including public liability) that are usually insured against by companies similarly situated and engaged in the same or a similar business for the assets and operations of Borrower, including property and casualty coverage that is for an amount at least equal to the replacement cost value of the Equipment (subject to sublimits for natural perils as customary);

 

(b) Borrower shall provide that the Lender has been named as additional insured in respect of such liability insurance policies and the Lender has been named as lender’s loss payee with respect to casualty insurance pertaining to the Equipment;

 

(c) the Borrower shall provide the Lender a completed Schedule 7.6 that sets forth as of such date a complete and accurate list of all policies of insurance maintained by the Borrower, showing with respect to each such policy the type of insurance, the coverage amount, the carrier, and the duration of coverage; and

 

 

(d) the Borrower shall fully pay or cause to be fully paid all premiums with respect to such policies of insurance.

 

7.7 Project Development. Subject to Section 7.1(c), Borrower will cause each Project to be developed materially in accordance with the applicable Project Budget and Development Plan.

 

7.8 Indebtedness and Liens. Borrower will not:

 

(a) create, incur, guarantee or otherwise become or remain liable with respect to, any indebtedness for borrowed money, evidenced by notes or other instruments or for the deferred purchase price of goods or services, other than (i) the Credit Obligations and (ii) trade accounts payable in the ordinary course of business;

 

(b) create or incur or permit to exist any consensual lien, charge, mortgage, pledge or other security interest of any kind upon any of its Property or assets of any character, whether now owned or hereafter acquired (including, without limitation, the Equipment), other than liens securing the Credit Obligations and Permitted Exceptions.

 

7.9 Distributions. Borrower will not pay any direct or indirect dividend or other distribution of any kind in respect of, or purchase or redeem, any of its shares of Equity Interests in any Person.

 

7.10 Investments and Acquisitions. Borrower will not and Borrower will not permit any Project Company to make any investments in capital stock, partnership interests or loans, or purchase or otherwise acquire any Equity Interests, business or material assets except such assets purchased or acquired in the ordinary course of business consistent with the applicable Development Plan and Project Budget.

 

7.11 Merger; Sale of Assets. Borrower will not, and will not permit any Project Company to, become a party to any merger or consolidation, or in a single transaction or series of related transactions sell, lease or otherwise dispose of any Equipment or a material amount of its assets, or sell or dispose of, or permit Parent to sell or dispose of, any Equity Interests in any Projects (directly or indirectly), unless a substantially contemporaneous repayment of the amount required under Section 4.1(c) is made to the Lender.

 

7.12 Affiliate Transactions. Borrower will not enter into a transaction with an Affiliate except on arm’s length terms that are no less favorable to Borrower than would be obtained from a Person who is not an Affiliate.

 

7.13 Limitation on Equity Financings. Borrower will not issue, sell or transfer any Equity Interests or permit any Project Companies to issue, sell or transfer any of the Equity Interests in any Project Companies, except for transfers to the Lender.

 

 

7.14 Litigation. Borrower will not, and will not permit any Project Company to, initiate any material litigation or arbitration, or settle any claims, litigation or arbitration by or with respect to Borrower, including settlement of force majeure or liquidated damages claims, except for such settlements which, individually or in the aggregate, do not exceed $100,000.

 

7.15 Organizational Documents; Amendments of Material Documents. Borrower will not amend or cancel the certificate of formation or operating agreement of Borrower without the prior written consent of the Lender (the consent to any amendment not to be unreasonably withheld). Borrower will not amend in any material respect any agreement for the purchase of any Equipment without the prior written consent of the Lender, not to be unreasonably withheld, conditioned or delayed.

 

7.16 Collateral Access Agreement. Borrower shall deliver to Lender a collateral access agreement, in form and substance reasonably acceptable to the Lender, with respect to each location at which any Equipment is to be kept no later than the date the Equipment is delivered to such location. Borrower shall not move any Equipment to a location that is not the subject of a collateral access agreement in favor of Lender, in form and substance reasonably acceptable to Lender.

 

7.17 Insurance Endorsements. Borrower shall deliver to Lender any outstanding insurance policies or endorsements within fifteen (15) days after the Closing Date.

 

8. Defaults.

 

8.1 Events of Default. Following the Closing Date, each of the following events is referred to as an “Event of Default”:

 

(a) Payment. The Borrower shall fail to make any payment in respect of: (i) interest or any fee on or in respect of any of the Credit Obligations owed by it as the same shall become due and payable, or (ii) principal of any of the Credit Obligations owed by it as the same shall become due, whether at maturity or by acceleration or otherwise.

 

(b) Covenant Compliance. Borrower shall fail to perform or observe any of the other provisions of the Credit Documents required to be performed or complied with by it and such failure continues for a period of thirty (30) days after written notice thereof is given by the Lender to the Borrower, unless such failure to observe or comply reasonably cannot be cured by Borrower within such period and Borrower commences and reasonably pursues cure of such default within such period, such period for cure will be extended for a reasonable period of time under the circumstances, such period not to exceed fifteen (15) additional days (or such longer period to be agreed in the Lender’s reasonable discretion).

 

(c) Representations and Warranties. Any representation or warranty of or with respect to Borrower in, pursuant to or in connection with this Agreement or any other Credit Document, or in any certificate, notice, financial statement or other report furnished to the Lender in connection therewith, shall be materially false on the date as of which it was made.

 

 

(d) Cross-Default. A default shall exist under any instrument or agreement of Borrower under which indebtedness of $25,000 or more is outstanding and, by reason of such default, the holder or holders of such indebtedness would be permitted under the terms of such instrument or agreement to accelerate the maturity of such indebtedness.

 

(e) Judgments. A final judgment (a) which, with other outstanding final judgments against Borrower exceeds an aggregate of $25,000 in excess of applicable insurance coverage shall be rendered against Borrower or (b) which grants injunctive relief that results, or creates a material risk of resulting, in a Material Adverse Change and in either case if (i) within 60 days after entry thereof, such judgment shall not have been discharged or execution thereof stayed pending appeal or (ii) within 60 days after the expiration of any such stay, such judgment shall not have been discharged.

 

(f) Material Adverse Change. A Material Adverse Change occurs or is reasonably expected to occur that jeopardizes Borrower’s ability to discharge its obligations to the Lender under this Agreement, the Note or any other Credit Document.

 

(g) Change in Control. A Change in Control occurs.

 

(h) Bankruptcy. Borrower shall:

 

(i) commence a voluntary case under the Bankruptcy Code or authorize, by appropriate proceedings of its board of directors or other governing body, the commencement of such a voluntary case;

 

(ii) have filed against it a petition commencing an involuntary case under the Bankruptcy Code which shall not have been dismissed within 60 days after the date on which such petition is filed; or file an answer or other pleading within such 60-day period admitting or failing to deny the material allegations of such a petition or seeking, consenting to or acquiescing in the relief therein provided;

 

(iii) have entered against it an order for relief in any involuntary case commenced under the Bankruptcy Code;

 

(iv) seek relief as a debtor under any applicable law, other than the Bankruptcy Code, of any jurisdiction relating to the liquidation or reorganization of debtors or to the modification or alteration of the rights of creditors, or consent to or acquiesce in such relief;

 

(v) have entered against it an order by a court of competent jurisdiction (A) finding it to be bankrupt or insolvent, (B) ordering or approving its liquidation, reorganization or any modification or alteration of the rights of its creditors or (C) assuming custody of, or appointing a receiver or other custodian for, all or a substantial portion of its Property; or

 

 

(vi) make an assignment for the benefit of, or enter into a composition with, its creditors, or appoint, or consent to the appointment of, or suffer to exist a receiver or other custodian for, all or a substantial portion of its Property.

 

(i) Validity and Effect of Credit Documents. Any provision of any Credit Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all the Credit Obligations, ceases to be in full force and effect; or Borrower or any other Person contests in any manner the validity or enforceability of any provision of any Credit Document; or Borrower denies that it has any or further liability or obligation under any provision of any Credit Document, or purports to revoke, terminate or rescind any provision of any Credit Document. Any of the Security Documents shall cease, for any reason, to be in full force and effect, or Borrower or, in each case, any Affiliate thereof shall so assert, or any lien created by any of the Security Documents shall cease to be perfected, enforceable and of the same effect and priority purported to be created thereby.

 

(j) Project Equipment. With respect to any Project with respect to which a Loan is outstanding hereunder, the ownership of any Project Equipment is transferred by Borrower without consent of the Lender.

 

8.2 Certain Actions Following an Event of Default. If any one or more Events of Default shall occur and be continuing, then in each and every such case:

 

(a) No Obligation to Extend Credit; Acceleration. Upon notice by the Lender to the Borrower, the obligations of the Lender to make any extension of credit hereunder shall automatically terminate and the Credit Obligations shall become immediately due and payable.

 

(b) Exercise of Rights. The Lender may proceed to protect and enforce its rights by suit in equity, action at law and/or other appropriate proceeding, either for specific performance of any covenant or condition contained in this Agreement or any other Credit Document.

 

(c) Bankruptcy Default. Upon the occurrence of an Event of Default under Section 8.1(h), the unpaid balance of the Credit Obligations shall automatically become immediately due and payable.

 

(d) Setoff. The Lender may offset and apply toward the payment of such balance or part thereof (and/or toward the curing of any Event of Default) any indebtedness from the Lender to the Borrower, regardless of the adequacy of any security for the Credit Obligations, and the Lender shall have no duty to determine the adequacy of any such security in connection with any such offset.

 

(e) Cumulative Remedies. To the extent not prohibited by applicable law which cannot be waived, all of the Lender’s rights hereunder and under each other Credit Document shall be cumulative.

 

 

8.3 Waivers. Borrower hereby waives, to the extent (a) not prohibited by applicable law or (b) as otherwise provided for herein:

 

(i) all presentments, demands for performance, notices of nonperformance (except to the extent required by the provisions of this Agreement or any other Credit Document), protests, notices of protest and notices of dishonor;

 

(ii) any requirement of diligence or promptness on the part of any Lender in the enforcement of its rights under this Agreement, the Note or any other Credit Document; and

 

(iii) any and all notice of every kind and description which may be required to be given by any statute or rule of law.

 

9. Expenses; Indemnity.

 

9.1 Expenses. Borrower will pay: (a) all reasonable expenses of the Lender (including the reasonable fees and disbursements of counsel to the Lender) in connection with the preparation of this Agreement and each Credit Document, the transactions contemplated hereby and thereby, and operations hereunder and thereunder; (b) on or about the Closing Date, all transfer and documentary stamp and similar taxes at any time payable in respect of this Agreement, any Credit Document or the Loan; and (c) after the Closing Date all other reasonable expenses incurred by the Lender in connection with the enforcement of any rights hereunder or under any other Credit Document upon the occurrence and during the continuance of a Default, including costs of collection and reasonable attorneys’ fees and expenses. The Borrower may use proceeds of the Loan to pay the amounts set forth in the immediately preceding sentence.

 

9.2 General Indemnity. After the Closing Date, the Borrower shall indemnify the Lender and each Person, if any, who controls the Lender and each of the their directors, officers, employees, agents, attorneys, accountants and consultants (each Lender and each of such directors, officers, employees, agents, attorneys, accountants, consultants and control Persons is referred to as an “Indemnified Party”) and hold each of them harmless from and against any and all claims, damages, liabilities and reasonable expenses (including reasonable fees and disbursements of counsel with whom any Indemnified Party may consult in connection therewith and all reasonable expenses of litigation or preparation therefor) which any Indemnified Party may incur or which may be asserted against any Indemnified Party as a direct result of the Borrower’s gross negligence or willful misconduct in connection with (a) the Indemnified Party’s compliance with or contest of any subpoena or other process issued against it in any proceeding involving the Borrower or its Affiliates, (b) any litigation or investigation involving the Borrower or its Affiliates, or any officer, director or employee thereof, (c) the existence or exercise of any security rights with respect to the collateral under the Credit Documents, or (d) this Agreement, any other Credit Document or any transaction contemplated hereby or thereby; provided, however, that the foregoing indemnity shall not apply to litigation commenced by Borrower against the Lender which seeks enforcement of any of the rights of Borrower hereunder or under any other Credit Document and is determined adversely to the Lender in a final nonappealable judgment or to the extent such claims, damages, liabilities and expenses result from the Indemnified Party’s own gross negligence or willful misconduct as finally adjudicated in a final nonappealable judgment.

 

 

10. Successors and Assigns. Any reference in this Agreement to any of the parties hereto shall be deemed to include the successors and assigns of such party, and all covenants and agreements by or on behalf of Borrower or the Lender that are contained in this Agreement shall bind and inure to the benefit of their respective successors and assigns; provided, however, that Borrower may not assign its rights or obligations under this Agreement under any circumstances other than as set forth in Section 4.3 and the Lender may assign its rights or obligations under this Agreement only as follows: The Lender may from time to time grant participations in the Loan and Note, or assign all or part of the Loan and Note, upon such terms as the Lender may determine, to Affiliates of the Lender or with the consent of the Borrower which shall not be unreasonably withheld.

 

11. Notices. Except as otherwise specified in this Agreement, any notice required to be given pursuant to this Agreement shall be given in writing. Any notice, demand or other communication in connection with this Agreement shall be deemed to be given if given in writing (including email, telex, telecopy (confirmed by telephone or writing) or similar teletransmission) addressed as provided below (or to the addressee at such other address as the addressee shall have specified by notice actually received by the addressor), and if either (a) actually delivered in fully legible form to such address (evidenced in the case of a telex by receipt of the correct answer back) or (b) in the case of a letter, five days shall have elapsed after the same shall have been deposited in the United States mails, with first-class postage prepaid and registered or certified.

 

If to Borrower, to it at the following address:

 

SDI SL Borrowing - 1, LLC

325 Washington Ave. Extension

Albany, NY 12205

518-218-2550

Attn: CFO

DVnotice@soluna.io

 

If to the Lender, to it at the following address:

 

Soluna2 SLC Fund II Project Holdco LLC

c/o Spring Lane Capital

100 Cambridge Street, Suite 1802

Boston, MA 02114

 

with copies (which shall not constitute notice) to:

 

Mark Barnett

Foley Hoag LLP

155 Seaport Boulevard

Boston, MA 02210

 

 

12. Course of Dealing, Amendments and Waivers. No course of dealing between the Lender and Borrower or any Affiliate of Borrower shall operate as a waiver of any of the Lender’s rights under this Agreement or any other Credit Document or with respect to the Credit Obligations. No delay or omission on the part of the Lender in exercising any right under this Agreement or any other Credit Document or with respect to the Credit Obligations shall operate as a waiver of such right or any other right hereunder or thereunder. A waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. No waiver, consent or amendment with respect to this Agreement or any other Credit Document shall be binding unless it is in writing and signed by the Lender. While the Convertible Note Facility remains outstanding, neither this Agreement nor any other Credit Document may be amended without the prior written consent of the Purchasers.

 

13. Dispute Resolution.

 

(a) In the event of any claim or dispute arising out of or relating to this Agreement or any other Credit Document, including the interpretation, validity, performance, or breach thereof (a “Dispute”), a party or parties shall give written notice to the other affected party or parties. Representatives of the affected parties with full authority shall then meet to attempt in good faith to resolve the Dispute. Except as necessary to avoid irreparable harm or the expiration of a pertinent statute of limitations, no party shall commence any judicial proceeding in respect of the Dispute until the earlier of thirty (30) days from the written notice or a refusal in writing to meet.

 

(b) Any judicial proceedings in respect of a Dispute shall be conducted exclusively in the state or federal courts sitting in or for New York, New York, in the borough of Manhattan, except that any judgment thereof may be enforced in any court of competent jurisdiction.

 

(c) The prevailing party or parties shall be entitled to an award of all costs, attorneys’ fees, and expenses reasonably incurred in the successful prosecution or defense of any claim.

 

(d) Borrower and the Lender each consents to service of process in any such proceeding in any manner at the time permitted by applicable law and agrees that service of process by registered or certified mail, return receipt requested, at its address specified in or pursuant to Section 11 is reasonably calculated to give actual notice.

 

(e) Borrower and the Lender each waives to the extent not prohibited by applicable law that cannot be waived any right it may have to claim or recover in any such proceeding any special, exemplary, punitive or consequential damages.

 

14. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH OF THE BORROWER AND THE LENDER WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT OR THE SUBJECT MATTER HEREOF OR THEREOF OR ANY CREDIT OBLIGATION OR IN ANY WAY CONNECTED WITH THE DEALINGS OF THE LENDER OR THE BORROWER IN CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT, TORT OR OTHERWISE. Either the Lender or Borrower may file an original counterpart or a copy of this Agreement with any court as written evidence of the consent of the Borrower and the Lender to the waiver of their rights to trial by jury.

 

 

15. General. All covenants, agreements, representations and warranties made in this Agreement or any other Credit Document or in certificates delivered pursuant hereto or thereto shall be deemed to have been material and relied on by the Lender, notwithstanding any investigation made by the Lender, and shall survive the execution and delivery to the Lender hereof and thereof. The invalidity or unenforceability of any provision hereof shall not affect the validity or enforceability of any other provision hereof, and any invalid or unenforceable provision shall be modified so as to be enforced to the maximum extent of its validity or enforceability. The headings in this Agreement are for convenience of reference only and shall not limit, alter or otherwise affect the meaning hereof. This Agreement and the other Credit Documents constitute the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior and current understandings and agreements, whether written or oral. This Agreement may be executed in any number of counterparts which together shall constitute one instrument. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without reference to principles of conflict of laws or choice of laws. Any signature to this Agreement may be delivered by facsimile, electronic mail (including pdf) or as any electronic signature complying with the U.S. federal ESIGN Act of 2000 or the New York Electronic Signature and Records Act or any other similar state laws based on the Uniform Electronic Transactions Act or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and electronic signatures or the keeping of records in electronic form shall be valid and effective for all purposes to the fullest extent permitted by applicable law.

 

16. Further Assurances. At any time or from time to time upon the request of the Lender, Borrower will, at its expense, promptly execute, acknowledge and deliver such further documents and do such other acts and things as Lender may reasonably request in order to effect fully the purposes of the Credit Documents. In furtherance and not in limitation of the foregoing, Borrower shall take such actions as the Lender may reasonably request from time to time to ensure that the Credit Obligations are secured by a first priority lien on the Equipment.

 

[The Remainder Of This Page Is Intentionally Blank]

 

 

Each of the undersigned has caused this Agreement to be executed and delivered by its duly authorized officer as of the date first above written.

 

	BORROWER:
	SDI SL BORROWING - 1, LLC
	By:
	Name:
	Title:

 

[Signature Page to Loan Agreement]

 

 

	LENDER:
	SOLUNA2 SLC FUND II PROJECT HOLDCO LLC
	By:
	Name:
	Title:

 

[Signature Page to Loan Agreement]

 

 

EXHIBIT A

 

NOTE

 

[__________]

 

FOR VALUE RECEIVED, the undersigned, SDI SL Borrowing - 1, LLC (the “Borrower”), hereby promises to pay Soluna2 SLC Fund II Project Holdco LLC, and its permitted assignees (the “Lender”), on the Maturity Date the lesser of [__________] Dollars ($[__________]) or the aggregate unpaid principal amount of the loans made by the Lender to the Borrower pursuant to the Loan Agreement referred to below (the “Outstanding Principal Amount”). Defined terms used but not otherwise defined herein shall have the meaning given to such term in the Loan Agreement (defined below).

 

The Outstanding Principal Amount shall bear interest at the lesser of (a) a fixed rate of fifteen percent (15%) per annum and (b) the maximum interest rate which Borrower may by law pay; provided, however, that following the occurrence and during the continuance of an Event of Default, the interest rate shall, at the written election of the Lender, be increased by up to an additional two percent (2%) and shall be payable on demand.

 

All principal and accrued interest hereon, plus the applicable MOIC Payment, shall be due and payable on the earliest to occur of the Maturity Date, the Project Loan Maturity Date (with respect to the portion of the Outstanding Principal Amount advanced with respect to such Project), or any accelerated maturity of the Outstanding Principal Amount as a result of an Event of Default. Payments hereunder shall be made to the Lender at 100 Cambridge St., Suite 1802, Boston, MA 02114.

 

All loans made by the Lender pursuant to the Loan Agreement referred to below and all repayments of the principal thereof shall be recorded by the Lender and, prior to any transfer hereof, appropriate notations to evidence the foregoing information with respect to each such loan then outstanding shall be endorsed by the Lender on the schedule attached hereto or on a continuation of such schedule attached to and made a part hereof; provided, however, that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower under this Note, such Loan Agreement or under any other Credit Document.

 

This Note evidences the borrowings under, and is entitled to the benefits and security of, and is subject to the provisions of, the Equipment Loan Agreement dated as of the date hereof, as from time to time in effect (the “Loan Agreement”), between the Borrower and the Lender. Terms defined in the Loan Agreement and not otherwise defined herein are used herein with the meanings so defined.

 

In case an Event of Default shall occur and be continuing, the entire Outstanding Principal Amount and accrued interest may become or be declared due and payable in the manner and with the effect provided in the Loan Agreement.

 

This Note shall be governed by and construed in accordance with the laws of the State of New York, without reference to principles of conflict of laws or choice of laws.

 

The Borrower hereby waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, except as specifically otherwise provided in the Loan Agreement, and assent to extensions of time of payment, or forbearance or other indulgence without notice.

 

	SDI SL BORROWING - 1, LLC
	By:
	Name:
	Title:

 

 

LOAN AND PAYMENTS OF PRINCIPAL

 

Date

Amount of Loan

Amount of Principal Repaid

Unpaid Principal Balance

Notation Made By

 

___________________________________________________________________

 

___________________________________________________________________

 

___________________________________________________________________

 

___________________________________________________________________

 

___________________________________________________________________

 

___________________________________________________________________

 

___________________________________________________________________

 

___________________________________________________________________

 

___________________________________________________________________

 

___________________________________________________________________

 

___________________________________________________________________

 

___________________________________________________________________

 

___________________________________________________________________

 

___________________________________________________________________

 

___________________________________________________________________

 

___________________________________________________________________

 

___________________________________________________________________

 

___________________________________________________________________

 

 

Exhibit B

 

BORROWING REQUEST

 

Pursuant to Section 2 of the Equipment Loan Agreement dated as of May 16, 2024 as now in effect (the “Loan Agreement”), between the undersigned SDI SL BORROWING - 1, LLC (the “Borrower”) and SOLUNA2 SLC FUND II PROJECT HOLDCO LLC (the “Lender”), the Borrower requests that a loan in the amount of $_______¹ be made on _______, ____ (the “Disbursement Date”):

 

The proceeds of the requested loan will be used as follows:

 

[PROVIDE REASONABLY DETAILED DESCRIPTION OF USE OF PROCEEDS (INCLUDING THE EQUIPMENT TO BE PURCHASED WITH THE PROCEEDS ALONG WITH THE CONTRACTED PRICE THEREOF AND THE PROJECT(S) TO WHICH SUCH PROCEEDS WILL BE APPLIED), WHICH MUST BE CONSISTENT WITH THE APPLICABLE PROJECT BUDGET AND DEVELOPMENT PLAN.] ²

 

[Attached hereto are the agreed Project Budget and Development Plan for the Project(s) to which such funds are to be applied, with the Project Borrowing Base Value to be provided separately by Lender.] ³

 

[Attached hereto is an updated Schedule 6.1 to the Loan Agreement setting forth the Projects for which Equipment is intended to be purchased.]

 

[The Purchasers have consented to extensions of credit with respect to the Project(s) to which such funds are to be applied.] ⁴

 

If applicable, the Borrower has received the consent of the Purchasers as required under Section 4.4 of the Loan Agreement.

 

In connection with the foregoing request, the Borrower represents and warrants that the representations and warranties contained in Section 6 of the Loan Agreement are true and correct on and as of the date hereof with the same force and effect as though originally made on and as of the date hereof, unless such representation or warranty is made as of a specified earlier date, in which case such representation or warranty is true and correct as of such earlier date; and no Default exists on the date hereof or will exist after giving effect to the extension of credit requested hereby.

 

The foregoing representations and warranties shall be deemed made by the Borrower on the requested Disbursement Date unless the Borrower shall have notified the Lender in writing to the contrary prior to such Disbursement Date.

 

The Borrower represents and warrants as of the Disbursement Date that each of the conditions specified in Section 5.2 of the Loan Agreement with respect to the extension of credit requested hereby shall have been satisfied.

 

Terms defined in the Loan Agreement and not otherwise defined herein are used herein with the meanings so defined.

 

This certificate has been executed by a duly authorized officer this __ day of ____, 20__.

 

[__________]

 

	By:
	Name:
	Title:

 

¹ Amount must be equal to or greater than $100,000 and an integral multiple of $10,000.

² With respect to the initial Borrowing only, if reimbursement for previous expenditures is sought, (1) specify the amount of such reimbursement, (2) attach itemized invoices evidencing applicable purchases, and (3) attach proof of applicable payments.

³ To be included if this is the initial credit extension with respect to a Project or if the Project Budget and/or Development Plan have materially changed from the previously-approved version.

⁴ To be included if this is the initial credit extension with respect to a Project.

 

 

Exhibit C

 

[Reserved]

 

 

Exhibit D

 

FORM OF DEVELOPMENT PLAN

 

 

Development Schedule

 

●	1/15 - Engineering and RFP Packages Issued for Bid Updated
●	1/30 – Invitations for Bid Sent
●	2/12 – RFP documents sent to bidders
●	2/20 – Onsite Pre-bid Conference
●	3/15 – Main Bid Packages Due (Mechanical, Civil, Electrical)
●	4/8 - Supplemental Bid Packages Due (Fiber, Substation/MV Termination & Testing)
●	4/8 – Construction Budget Finalized
●	4/12 - Construction Award Dates
●	5/20 - SLC signed Term Sheet
●	5/22 – Briscoe Sponsor Approvals
●	6/7 - Project Financing Complete
●	6/7 – Notice to Proceed Provided
●	6/10 - EPC agreement in place with all subcontracts finalized
●	6/17 – Equipment procurement initiated
●	6/24 – Construction Mobilized

 

 

 

 

Schedule 6.1

 

Projects

 

Dorothy Project – Phase 2

 

The Dorothy Project is a 100 MW variable data center project in Briscoe County, Texas. The first 50 MW has been constructed. The second 48 MW will be constructed in part with the proceeds of the investment contemplated in the applicable term sheet (such 48 MW portion of the Project, “Phase 2”).

 

 

Schedule 6.7

 

Filings and Filing Jurisdictions

 

UCC-1 filed with the Nevada Secretary of State for SDI SL Borrowing -1, LLC

 

 

Schedule 7.6

 

Insurance

 

 

 

 

Exhibit 99.1

 

 

Soluna Holdings Reports Q1’24 Results

Quarterly Adjusted EBITDA jumps by $8.1 million year-over-year, Cash grows by 32%

__

 

ALBANY, NY, May 16, 2024 - Soluna Holdings, Inc. (“SHI” or the “Company”), (NASDAQ: SLNH), a developer of green data centers for intensive computing applications including Bitcoin mining and AI, announced financial results for the first quarter ended March 31, 2024.

 

John Belizaire, CEO of Soluna, said, “This year’s first quarter is the first time Projects Sophie, Dorothy 1A, and Dorothy 1B were fully operational and scaled up as can be seen in our strong financial performance. Revenue grew 307% while Cost of Revenue grew only 78% and General and Administrative Expenses shrank by 5%, yielding a positive Operating Income of $0.407M compared to last year this time.”

 

Belizaire went further on to say, “Our strategic diversification to Data Hosting is paying off and has us focused on several important and exciting new projects that we look forward to announcing in the coming months. We have positioned ourselves well for Post-Halving and are driving hard to launch the recently announced Soluna Cloud business and confirm Dorothy 2 financing and timing.”

 

Finance and Operational Highlights:

 

	●	Record Adjusted EBITDA – Adjusted EBITDA (non-GAAP) ramped to $5.1 million compared to the first quarter of 2023 of ($2.9) million, an increase of $8.1 million driven by strong revenue growth and cost discipline.
	●	Strong Cash Growth – Cash grew 85% from the first quarter of 2023 and 32% from the end of 2023 to $8.4 million.
	●	Another Record Revenue Quarter – Revenue continued to grow, up 24% to $12.5 million compared to $10.1 million in the fourth quarter of 2023.
	●	Completed Winter Demand Response System Period – As part of its ancillary services plan, Soluna earned $875,000 as it completed the program’s winter period at Project Dorothy, demonstrating our ability to effectively diversify sources of revenue.
	●	Soluna Launches New AI Cloud Service – The Company recently announced its new AI Cloud service, Soluna Cloud, in collaboration with a leading High Performance Computing Company, during the second quarter of 2024.
	●	Post-Halving Optimizations – The Company continued its post-halving optimization plan to boost hashrate for its hosting clients and its proprietary mining operations. The Company’s optimizations include MaestroOS™ upgrades to increase granular control of miners, sites with industry-leading Power Usage Effectiveness (PUE) and electrical design, software-based tuning to improve J/TH, and preventative maintenance using predictive systems.
	●	New CFO – John Tunison was appointed as CFO, replacing David Michaels who will be returning to his role on the board.

 

 

 

Adjusted EBITDA by Quarter

 

 

Financial Summary:

 

Key financial results for the first quarter include:

 

	●	The strong first quarter results of $12.6 million in revenue represented a 24% increase as compared to the fourth quarter of 2023 and an increase of 307% compared to the first quarter of 2023.
	●	Cryptocurrency Mining Revenue increased by approximately $3.6 million - compared to the first quarter of 2023, due to a significant increase related to the average price of Bitcoin increasing by 134%. In addition, the dollars per Petahash per day was 26.6% higher.
	●	Data Hosting Revenue increased by approximately $5.0 million - compared to the first quarter of 2023, primarily related to the energization and deployment of hosting customers at Project Dorothy 1A in the second quarter of 2023.

 

 

 

Revenue & Cost of Revenue by Project Site

First Quarter 2024

 

(Dollars in Thousands)		Project Dorothy 1B				Project Dorothy 1A				Project Sophie				Project Marie				Other				Total
Cryptocurrency mining revenue		$	6,396			$	-			$	-			$	-			$	-			$	6,396
Data hosting revenue			-				3,542				1,736				-				-				5,278
Demand repsonse services			-				-				-				-				875				875
Total revenue		$	6,396				3,542				1,736				-				-				12,549
Cost of cryptocurrency mining, exclusive of depriciation		$	1,841			$	-			$	-			$	-			$	-			$	1,841
Cost of data hosting revenue, exclusive of depriciation			-				1,737				514				-				-				2,251
Cost of revenue - depriciation			1,084				287				150				-				5				1,523
Total cost of revenue		$	2,925			$	2,021			$	664			$	-			$	5			$	5,615

 

Revenue & Cost of Revenue by Project Site

First Quarter 2023

 

(Dollars in Thousands)		Project Dorothy 1B				Project Dorothy 1A				Project Sophie				Project Marie				Other				Total
Cryptocurrency mining revenue		$	-			$	-			$	2,027			$	796			$				$	2,796
Data hosting revenue			-				-				-				276				10				286
Demand repsonse services			-				-				-				-				-				-
Total revenue		$	-				-				2,027			$	1,045			$	10				3,082
Cost of cryptocurrency mining, exclusive of depriciation		$	61			$	-			$	1,389			$	801			$	-			$	2,251
Cost of data hosting revenue, exclusive of depriciation			-				58				-				214				-			$	272
Cost of revenue - depriciation			-				-				503				122				-			$	625
Total cost of revenue		$	61			$	58			$	1,892			$	1,137			$	-			$	3,148

 

	●	Gross Profit improved by nearly $7.0 million - as operations pivoted to Data Hosting and Project Dorothy reached full energization, costs of revenue either met or exceeded expectations, enabling strong Gross Profit growth from ($0.1 million) for the first quarter of 2023 to $6.9 million for the first quarter of 2024.
	●	Record Adjusted EBITDA of $5.1 million – Adjusted EBITDA (non-GAAP) ramped from ($2.9 million) to $5.1 million, an increase of $8.0 million driven by strong revenue growth and cost discipline.

 

 

 

Gross Profit by Quarter

 

 

 

	●	General and administrative expenses excluding depreciation and amortization decreased by approximately $366 thousand or 8% for the first quarter of 2024 - to $4.0 million from $4.4 million compared to the first quarter of 2023. Stock-based compensation costs were lower, at $656 thousand, for the first quarter of 2024.
	●	Legal fees were reduced by approximately $469 thousand - compared to the three months ended March 31, 2023, mainly attributable to fewer legal fees associated with Project Dorothy 1A and 1B with Spring Lane.
	●	General and administrative stock-based compensation expense decreased by approximately $166 thousand - for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, due to an acceleration of the Company’s grants and awards that occurred in May of 2023
	●	Investor relations decreased by $92 thousand - compared to the three months ended March 31, 2023, due to expenses associated with higher investor acquisition programs, in addition to the Special Meeting held in March 2023.
	●	Accounting for warrant modifications - a requirement for Shareholders to vote on modifications to warrants related to the Convertible Loan Note 4th Amendment during the period gave rise to a liability during the first quarter. The impact was to reduce Additional Paid in Capital (APIC) and establish a Current Warrant Liability which was revalued to $6.0 million as of the end of March 2024.

 

The unaudited financial statements are available online, here. A presentation of this First Quarter Update can also be found online, here.

___

 

 

 

Safe Harbor Statement

 

This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “confident” and similar statements. Soluna Holdings, Inc. may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including but not limited to statements about Soluna’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, further information regarding which is included in the Company’s filings with the Securities and Exchange Commission. All information provided in this press release is as of the date of the press release, and Soluna Holdings, Inc. undertakes no duty to update such information, except as required under applicable law.

 

In addition to figures prepared in accordance with GAAP, Soluna from time to time presents alternative non-GAAP performance measures, e.g., EBITDA, adjusted EBITDA, adjusted net profit/loss, adjusted earnings per share, free cash flow. These measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with GAAP. Alternative performance measures are not subject to GAAP or any other generally accepted accounting principle. Other companies may define these terms in different ways.

 

About Soluna Holdings, Inc (SLNH)

 

Soluna is on a mission to make renewable energy a global superpower using computing as a catalyst. The company designs, develops and operates digital infrastructure that transforms surplus renewable energy into global computing resources. Soluna’s pioneering data centers are strategically co-located with wind, solar, or hydroelectric power plants to support high-performance computing applications including Bitcoin Mining, Generative AI, and other compute intensive applications. Soluna’s proprietary software MaestroOS(™) helps energize a greener grid while delivering cost-effective and sustainable computing solutions, and superior returns. To learn more visit solunacomputing.com. Follow us on X (formerly Twitter) at @SolunaHoldings. 

 

Contact Information

 

John Tunison

Chief Financial Officer

Soluna Holdings, Inc.

jtunison@soluna.io

 

 

 

Exhibit 99.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 99.3

 

Soluna Secures $30M from Spring Lane Capital to Fuel Project Dorothy 2

 

New Construction to Begin in Q2 2024, Expands Bitcoin Mining Capacity

 

__

 

ALBANY, NY, May 21, 2024 – Soluna Holdings, Inc. (“Soluna” or the “Company”), (NASDAQ: SLNH), a developer of green data centers for intensive computing applications including Bitcoin mining and AI, announced today financing from Spring Lane Capital (“SLC”) for a 48 MW expansion of Soluna’s flagship behind-the-meter data center, Project Dorothy, (“Dorothy 2”) facility. SLC, a private equity firm providing hybrid project capital for sustainability solutions, has agreed to lead the financing round with a commitment of up to $30 million. SLC is also an investor in Project Dorothy 1 and supports Soluna’s efforts to accelerate the convergence of renewable energy and high-performance computing.

 

John Belizaire, CEO of Soluna, stated, “Spring Lane Capital has proven to be the company’s most strategic partner. We are honored to partner with them again on Project Dorothy 2. This continues our momentum of bringing more projects to shovel-ready status and beyond as we grow our assets under management.”

 

“We continue to be very excited about what Soluna is bringing to the market around sustainable, high-performance computing,” stated Robert Day, Co-founding Partner at Spring Lane Capital. “After years of working with the Soluna team, and seeing the early operations at Project Dorothy 1, we are encouraged about the opportunity the company has to not only deploy additional attractive projects but also potentially make an important and positive impact on the high-profile challenge of data center demand and climate change solutions.”

 

Key Details:

 

	●	Soluna Unveils Financing Plan for Dorothy 2: The financing will facilitate the construction of the Dorothy 2 facility, which expands Soluna’s Texas flagship data center by 48 MW in Bitcoin Hosting.
	●	Construction Timeline: The parties are set to complete definitive documentation and commence Dorothy 2 construction in Q2 2024, with the goal of achieving initial energization and ramp-up by Q4 2024.
	●	Capacity and Technology: The new facility will accommodate approximately 13,700 next-generation Bitcoin mining rigs, each with a power consumption of around 3.5 kW, totaling 48,000 kW (48 MW).
	●	SLC’s Expanded Financial Support: SLC is deploying capital from its second private equity fund, Spring Lane Capital Fund II, which is twice the size of its initial fund. The firm will also provide $1 million in Development Expenditure (DevEx) financing for long-term equipment purchases.
	●	Financial Structure and Equity Ownership: Soluna will secure up to $30 million from SLC, fully covering the project’s funding needs, including working capital. Dorothy 2 features a superior waterfall structure and enhanced management and development fees compared to Dorothy 1A, allowing Soluna to benefit from substantial current income during the construction and operational phases.
	●	Energy and Capacity Enhancements: The new combined sites (Dorothy 1 and Dorothy 2) will consume up to double the amount of curtailed energy as before.
	●	AI data center: The remaining 2 MW of the site’s wind power will be reserved for Soluna’s planned Helix AI data center.
	●	Project Approvals: Dorothy 2 already has all the necessary ERCOT approvals, including the planning phase. The wind project’s sponsors are on track to provide their approval later this quarter.

 

“This strategic partnership and the forthcoming construction of Project Dorothy 2 mark significant milestones in Soluna’s mission to harness sustainable energy for high-performance computing needs. The innovative financing approach and robust project design underscore Soluna’s commitment to expanding its footprint in the renewable energy sector and advancing the scale of its Bitcoin Hosting services,” John Belizaire continued.

 

 

The Dorothy Name

 

Soluna continues its tradition of naming its data centers after women scientists who help(ed) catalyze major innovation. Project Dorothy is named after Dorothy Vaughan, an African American mathematician and “human computer” who worked for the National Advisory Committee for Aeronautics and NASA in 1939. Learn more about Project Dorothy here.

 

About Spring Lane Capital:

 

Spring Lane Capital is a private equity firm based in Boston, MA and Montreal, QC focused on providing hybrid project capital for sustainability solutions in the energy, food, water, waste, and transportation industries. The firm’s structured financial model seeks to tap into some of the fastest-growing segments of these markets that more traditional forms of project capital cannot access due to their scale and the limitations of existing investment models – the so-called ‘Missing Middle’. Spring Lane’s pioneering “Developer U” is a first of its kind effort to build the ecosystem of developers of sustainable infrastructure projects. For more information, please visit www.springlanecapital.com.

 

About Soluna Holdings, Inc (SLNH)

 

Soluna is on a mission to make renewable energy a global superpower using computing as a catalyst. The company designs, develops, and operates digital infrastructure that transforms surplus renewable energy into global computing resources. Soluna’s pioneering data centers are strategically co-located with wind, solar, or hydroelectric power plants to support high-performance computing applications including Bitcoin Mining, Generative AI, and other compute-intensive applications. Soluna’s proprietary software MaestroOS(™) helps energize a greener grid while delivering cost-effective and sustainable computing solutions, and superior returns. To learn more visit solunacomputing.com. Follow us on X (formerly Twitter) at @SolunaHoldings. 

 

Contact Information

 

Sam Sova

Partner and CEO

SOVA

Sam@letsgosova.com

 

 

 

Exhibit 99.4

 

Soluna Signs Power Purchase Agreement with EDF Renewables for Texas Data Center Project

 

Set to Expand Portfolio to Unlock 166 MW of Hosting Potential

 

ALBANY, NY, May 22, 2024 - Soluna Holdings, Inc. (“SHI” or the “Company”), (NASDAQ: SLNH), a developer of green data centers for intensive computing applications including Bitcoin mining and AI, announced today that it has signed a definitive Power Purchase Agreement (PPA) for Project Kati with EDF Renewables and Abu Dhabi Future Energy Company – Masdar (Masdar), marking a significant milestone in the company’s growth trajectory.

 

 

 

Safe Harbor Statement

 

This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “confident” and similar statements. Soluna Holdings, Inc. may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including but not limited to statements about Soluna’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, further information regarding which is included in the Company’s filings with the Securities and Exchange Commission. All information provided in this press release is as of the date of the press release, and Soluna Holdings, Inc. undertakes no duty to update such information, except as required under applicable law.

 

About Soluna Holdings, Inc (SLNH)

 

Soluna is on a mission to make renewable energy a global superpower using computing as a catalyst. The company designs, develops, and operates digital infrastructure that transforms surplus renewable energy into global computing resources. Soluna’s pioneering data centers are strategically co-located with wind, solar, or hydroelectric power plants to support high-performance computing applications including Bitcoin Mining, Generative AI, and other compute-intensive applications. Soluna’s proprietary software MaestroOS(™) helps energize a greener grid while delivering cost-effective and sustainable computing solutions, and superior returns. To learn more visit solunacomputing.com. Follow us on X (formerly Twitter) at @SolunaHoldings. 

 

Contact Information

Sam Sova

Partner and CEO

SOVA

Sam@letsgosova.com

 

v3.24.1.1.u2

Cover	May 16, 2024
Document Type	8-K
Amendment Flag	false
Document Period End Date	May 16, 2024
Entity File Number	001-40261
Entity Registrant Name	SOLUNA HOLDINGS, INC.
Entity Central Index Key	0000064463
Entity Tax Identification Number	14-1462255
Entity Incorporation, State or Country Code	NV
Entity Address, Address Line One	325 Washington Avenue Extension
Entity Address, City or Town	Albany
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	12205
City Area Code	(516)
Local Phone Number	216-9257
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Common stock, par value $0.001 per share
Title of 12(b) Security	Common stock, par value $0.001 per share
Trading Symbol	SLNH
Security Exchange Name	NASDAQ
9.0% Series A Cumulative Perpetual Preferred Stock, par value $0.001 per share
Title of 12(b) Security	9.0% Series A Cumulative Perpetual Preferred Stock, par value $0.001 per share
Trading Symbol	SLNHP
Security Exchange Name	NASDAQ

---