Contract analysis

I. Executive Summary and Purpose The purpose of this memorandum is to analyze the principal negotiation points expected to arise from the draft Intercreditor Agreement that Renshaw Pratt LLP (counsel to Whitmore National Bank, N.A., in its capacity as Senior Administrative Agent and Collateral Agent) is expected to circulate on or about August 11, 2023. This memorandum identifies the key issues that Calderwood & Hark

1. Enforcement Standstill Mechanics — the duration, scope, and carve-outs applicable to the period during which the Mezzanine Lender is prohibited from enforcing remedies against shared collateral (Section III);

2. Payment blockage Provisions — the circumstances under which the Senior Agent may block cash interest payments on the Mezzanine Facility and the duration and frequency limitations on such blockage (Section IV);

3. Mezzanine Purchase Option — the Mezzanine Lender's right to purchase all outstanding senior debt upon specified trigger events (Section V);

4. Lien Subordination and Sole Collateral Control — the framework governing the priority of liens on shared collateral, the Senior Agent's exclusive control over shared collateral, and the treatment of the exclusive parent equity pledge (Section VI);

5. Remedies Sequencing and Cure Rights — the ordering of enforcement actions by the respective creditor classes and the preservation of cure rights for the Mezzanine Lender, the Borrower, and the equity sponsor (Section VII); and

6. Borrower-Protective Provisions and Additional Matters — including amendment consent rights, refinancing flexibility, turnover obligations, governing law, and change of control interactions (Section VIII). A summary table of our recommended negotiating positions, fallback positions, and hard limits is provided in Section IX. Section X sets forth the anticipated process and timeline for the negotiations, and Section

II. Background: Capital Structure and Transaction Overview A. Existing Senior Credit Facility Stonefield's existing senior secured credit facility is governed by the Amended and Restated Credit Agreement, dated as of April 7, 2022 (originally dated November 15, 2019), among Stonefield Logistics Group Inc., as Borrower, Whitmore National Bank, N.A., as Administrative Agent and Collateral Agent, and the lenders party t

III. Issue 1: Enforcement Standstill Mechanics A. Overview of Expected Senior Agent Position In a standard senior/mezzanine intercreditor framework, the mezzanine lender is required to "stand still" — that is, to refrain from exercising enforcement remedies against shared collateral — for a specified period following the mezzanine lender's delivery of written notice to the senior agent of the mezzanine lender's inten

IV. Issue 2: Payment blockage Provisions A. Overview of Payment blockage Mechanics The payment blockage provisions in an intercreditor agreement give the Senior Agent the right, upon the occurrence and continuance of a specified event of default under the Senior Credit Agreement, to block the Borrower from making cash interest payments on the mezzanine facility. The mechanics typically operate as follows:

1. A "Senior Event of Default" occurs under the Senior Credit Agreement.

2. The Senior Agent delivers a "Payment blockage Notice" to the Borrower and the Mezzanine Lender, specifying the nature of the Senior Event of Default and invoking the payment blockage provisions of the Intercreditor Agreement.

3. During the resulting "Blockage period," the Borrower is prohibited from making any cash interest payments on the Mezzanine Facility (and, in some formulations, from making any payments of any kind, including principal, on the Mezzanine Facility).

4. Typically, PIK interest continues to accrue during the blockage period, with the unpaid amounts being capitalized and added to the outstanding principal balance of the Mezzanine Facility.

5. The blockage period continues for the lesser of (a) the specified number of days stated in the Intercreditor Agreement and (b) the date on which the underlying Senior Event of Default is cured or waived. The payment blockage mechanism is a powerful tool for the senior lenders, as it effectively redirects cash flow from the mezzanine debt service to the preservation of the senior lenders' priority position. From th

V. Issue 3: Mezzanine Purchase Option A. Description. The Intercreditor Agreement will include a provision granting Ridgeline, as the Mezzanine Lender, the right to purchase all of the outstanding senior debt from the senior lender syndicate (the "Purchase Option"). The Purchase Option is a standard feature of senior/mezzanine intercreditor agreements and serves a critical function: it allows the mezzanine lender, as

VI. Issue 4: Lien Subordination and Sole Collateral Control A. Lien Priority Framework The fundamental principle of the Intercreditor Agreement is that the Mezzanine Lender's liens on shared collateral are contractually subordinate and junior in priority to the Senior Agent's liens on the same collateral. This subordination is effected by agreement among the parties and operates regardless of the order of filing of f

VII. Issue 5: Remedies Sequencing and Cure Rights A. Sequencing of Remedies In a capital structure with both senior and mezzanine secured creditors, the sequencing of remedies is essential to prevent conflicting enforcement actions that could destroy enterprise value or create legal chaos. The Intercreditor Agreement will establish a framework for the orderly exercise of remedies by each creditor class. The general p

1. First: Costs and expenses of enforcement (including the fees and expenses of the enforcing creditor's counsel, financial advisors, and other professionals);

2. Second: Senior obligations in full (including all outstanding principal, accrued and unpaid interest, fees, indemnification obligations, and other amounts owing under the Senior Credit Agreement and related documents);

3. Third: Mezzanine obligations (including all outstanding principal, accrued and unpaid interest (both cash pay and PIK), fees, and other amounts owing under the Mezzanine Credit Agreement and related documents); and

4. Fourth: Any surplus to the Borrower (or as otherwise directed by the Borrower or a court of competent jurisdiction). Exclusive Mezzanine Collateral Proceeds. Proceeds from the enforcement of the Parent Equity Pledge (which is exclusive mezzanine collateral and not shared collateral) should be applied directly to the mezzanine obligations without passing through the senior waterfall described above. This is a neces