Company: SLNH
Filing Date: 2025-11-14
Form Type: 10-Q
Source: 0001493152-25-023503
Chunk: 36

Company: Soluna Holdings, Inc
Filing Date: 2025-11-14
Form: 10-Q
Item: Part I, Item 1
Chunk 36
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 sweeps. The classification
of the outstanding principal balance of the Generate loan balance into current and non-current liabilities is contingent upon
management’s estimate of the future application of mandatory debt repayments. The Credit Agreement contains a mandatory prepayment provision,
or “cash sweep,” requiring a percentage of free cash flow, as defined in the Credit Agreement, to be applied to principal reduction
on a periodic basis. The amount expected to be prepaid via this sweep mechanism during the next twelve months is classified as current
debt. This classification relies on management’s internal cash flow forecast, which incorporates assumptions regarding future operating
performance, capital expenditures, and working capital needs. Assumptions include market volatility
risks, which are inherently unpredictable. Because the classification is dependent upon these management estimates, the actual
amount of debt paid down through the cash sweep mechanism may differ materially from the amounts classified as current liabilities. The
obligations are guaranteed by certain Company subsidiaries and secured by first-priority liens on substantially all assets of the Borrowers
and guarantors, including pledges of equity interests, security interests in deposit and other collateral accounts (subject to control
agreements), and mortgages/deeds of trust on the relevant project sites.

The
Credit Agreement contains customary representations and warranties, affirmative and negative covenants, and events of default for financings
of this type. Events of default under the Credit Agreement include, among other things, non-payment of principal, interest or fees, inaccuracy
of representations and warranties, breach of covenants, cross-default to certain material indebtedness, bankruptcy and insolvency, and
change of control. Upon the occurrence and during the continuance of an event of default, the lenders may declare all outstanding principal
and accrued but unpaid interest under the Credit Agreement immediately due and payable and may exercise the other rights and remedies
provided under the Credit Agreement and related loan documents. Negative covenants in the Credit Agreement include, among other things,
restrictions on the Borrowers and guarantors with respect to incurring additional indebtedness, creating liens on assets, selling assets
or making fundamental changes, making restricted payments, entering into affiliate transactions, and using loan proceeds for unauthorized
purposes. The Credit Agreement also restricts investments, capital expenditures, and speculative transactions, and requires that all
deposit and securities accounts be subject to control agreements. Financial covenants require (i) a minimum trailing Debt Service Coverage
Ratio of 1.60:1.00 and (ii)