Contract analysis

I. Purpose and Background The purpose of this memorandum is to summarize the key commercial and legal terms of the executed term sheet dated July 17, 2023 (the "Term Sheet"), for a proposed $120,000,000 mezzanine financing of Stonefield Logistics Group Inc. ("Stonefield" or "SLG") by Ridgeline Mezzanine Capital Fund III, LP ("Ridgeline" or "RMCF III"). This memorandum is prepared for internal reference by the deal te

II. Transaction Overview The following is a summary of the principal parties, the transaction type, and the key structural terms reflected in the executed Term Sheet. Borrower. Stonefield Logistics Group Inc. ("Stonefield" or "SLG") is a Delaware corporation headquartered at 4800 Commerce Parkway, Suite 1200, Fort Worth, Texas 76107. Stonefield is a national provider of less-than-truckload ("LTL") and intermodal frei

III. Stonefield Financial Overview The following is a summary of Stonefield's key financial metrics and existing debt obligations, based on information provided by Stonefield and its advisors. Revenue. For the fiscal year ended December 31, 2022 ("FY2022"), Stonefield reported consolidated revenue of $687,000,000, as reflected in the audited financial statements prepared by Braddock & Saylor LLP, Stonefield's indepen

IV. Post-Closing Capital Structure The following table sets forth the anticipated capital structure of Stonefield immediately following the closing and funding of the mezzanine facility, assuming a closing date of September 29, 2023: Based on the foregoing, the key leverage metrics at closing are as follows: Total Funded Debt at Closing: $407,000,000 (consisting of $275,000,000 under the Senior Term Loan, $12,000,000

V. Interest Rate and Payment Terms All-In Interest Rate. The mezzanine facility bears an all-in interest rate of 1100 basis points (11.00%) per annum, composed of two components: Cash Pay Interest: 850 basis points (8.50%) per annum, payable quarterly in arrears on the last business day of each calendar quarter. PIK Interest: 250 basis points (2.50%) per annum, compounding quarterly and added to the outstanding princ

VI. Warrant Terms In addition to the debt component, the mezzanine facility includes an equity participation component in the form of detachable warrants to be issued to Ridgeline at closing. Warrant Coverage. 3.0% of the fully-diluted equity of Stonefield on a post-exercise basis. The number of shares issuable upon exercise of the warrants will be calculated based on the fully-diluted share count of Stonefield as of

VII. Fee Structure and Transaction Costs The following fees and transaction costs are payable in connection with the proposed mezzanine financing: Commitment Fee (Ridgeline). A commitment fee equal to 2.00% of the committed amount is payable to Ridgeline at closing. Based on a committed amount of $120,000,000, the commitment fee totals $2,400,000. This fee is non-refundable and will be either netted from the loan pro

VIII. Guarantors and Collateral A. Guarantors. The mezzanine facility will be guaranteed by the following entities: Cascade Ridge SLG Holdings, LLC. Cascade Ridge SLG Holdings, LLC ("Holdings"), the direct parent and intermediate holding company of Stonefield, will serve as a mezzanine guarantor. Holdings is a Delaware limited liability company through which Cascade Ridge holds its 78.4% equity interest in Stonefield

IX. Financial Covenants The Term Sheet sets forth the following financial covenants applicable to the mezzanine facility, each of which will be tested quarterly based on the most recently completed fiscal quarter: Maximum Total Leverage Ratio. The maximum total leverage ratio (defined as total funded indebtedness divided by consolidated Adjusted EBITDA for the trailing four fiscal quarters) shall not exceed the follo

X. Intercreditor Framework The relationship between the senior lenders and the mezzanine lender with respect to lien priority, enforcement rights, and payment waterfall mechanics will be governed by an intercreditor agreement to be negotiated and entered into as a condition precedent to closing. Parties. The intercreditor agreement (the "Intercreditor Agreement") will be entered into among Whitmore National Bank, N.A

XI. Mandatory Prepayment and Change of Control Change of Control Mandatory Prepayment. The Term Sheet provides that upon the occurrence of a "change of control" (as defined below), the mezzanine facility is subject to mandatory prepayment at a prepayment price equal to 103% of the outstanding principal balance (including all accrued and capitalized PIK interest) plus all accrued and unpaid cash interest to the date o

XII. Other Key Terms to Be Negotiated in Definitive Documentation The executed Term Sheet establishes the principal commercial terms of the mezzanine facility, but a substantial number of additional legal terms and conditions will need to be negotiated and documented in the definitive credit agreement, the warrant agreement, the intercreditor agreement, Amendment No. 3, and the various ancillary documents. The follow

XIII. Key Advisors The following table summarizes the key advisors and contacts engaged in connection with the mezzanine financing:

XIV. Anticipated Timeline and Next Steps The following is the anticipated timeline for the definitive documentation phase and closing, together with a list of immediate action items for the deal team. Anticipated Timeline. We note that the timeline is aggressive, particularly given the need to negotiate the Intercreditor Agreement with the Senior Agent and its counsel, Renshaw Pratt LLP, and to obtain the requisite l

1. Client Call. Schedule a call with Stonefield management, including Robert D. Nagamine (General Counsel) and Janet R. Prescott (CFO), to review this term sheet summary and confirm the borrower's negotiating positions with respect to the key issues identified herein, including the intercreditor framework, the financial covenant step-down schedule, the capital expenditure basket, and the change of control definition.

2. Tax Structuring Memorandum. Engage Sylvia Hartwell (Tax Department) to prepare a tax structuring memorandum addressing the OID allocation issues arising from the warrant issuance, the deductibility of PIK interest, the treatment of the warrants for federal income tax purposes, and the interaction with the Section 163(j) limitation on interest deductions.

3. Sponsor Tax Coordination. Coordinate with Caldwell Baines & Associates, PC (Patricia V. Baines, Lead Partner) on sponsor-level tax considerations, including the treatment of the mezzanine financing at the Cascade Ridge Capital Fund V, LP level and any implications for the fund's investors.

4. Senior Agent Amendment Request. Begin preparation of the amendment request to Whitmore National Bank, N.A. and Renshaw Pratt LLP for the Senior Agent consent and Amendment No. 3 to the Senior Credit Agreement. The amendment request should include a description of the proposed mezzanine facility, the requested amendments to the Senior Credit Agreement (including the permitted indebtedness basket, the permitted lien

5. UCC Lien Searches. Commission pre-closing UCC lien searches in the States of Delaware and Texas against Stonefield, each subsidiary guarantor, and Cascade Ridge SLG Holdings, LLC to confirm the status of existing liens and to identify any potential title or perfection issues prior to the filing of UCC-1 financing statements in connection with the mezzanine facility.

6. Intercreditor Issues Memorandum. Prepare a detailed intercreditor issues memorandum for discussion with the client, identifying the key negotiation points expected to arise in the Intercreditor Agreement, the borrower's recommended positions on each issue, and any areas of potential conflict with the Senior Agent.

XV. Conclusion and Recommendation Based on our review of the executed Term Sheet, the proposed $120,000,000 mezzanine financing from Ridgeline Mezzanine Capital Fund III, LP reflects commercial and legal terms that are broadly consistent with market-standard mezzanine transactions for a sponsor-backed logistics company of Stonefield's size and credit profile. The all-in interest rate of 1100 basis points (850 cash /