Contract analysis

I. Executive Summary Calderwood & Harkness LLP respectfully submits this memorandum to the Board of Directors of Stonefield Logistics Group Inc. ("SLG" or the "Company") and Ridgepoint Capital Partners Fund III, LP board observer Nathan Okonkwo to update the Board on the current status, litigation exposure, and strategic options in the pending Fair Labor Standards Act ("FLSA") collective action captioned Delano v. St

II. Background A. The Company and Its Driver Model Stonefield Logistics Group Inc. is a Delaware-incorporated, Texas-headquartered transportation and logistics company specializing in last-mile delivery, regional freight, and white-glove delivery services for commercial and residential customers. The Company was founded in 2011 and has grown substantially over the past decade through a combination of organic expansio

III. Procedural History and Current Status The following is a chronological summary of the significant procedural events in this case from the filing of the complaint through the date of this memorandum, as well as upcoming key deadlines: April 30, 2025: Complaint filed by Hartwell & Brashear PLLC on behalf of named plaintiff Marcus Delano in the United States District Court for the Northern District of Texas, Dallas

IV. Plaintiff's Claims and Theories A. FLSA Collective Action (29 U.S.C. § 216(b)) The central claim in this action is asserted under Section 216(b) of the Fair Labor Standards Act, 29 U.S.C. § 216(b), which provides employees with the right to bring a collective action against their employer for unpaid overtime compensation. Unlike a class action under Federal Rule of Civil Procedure 23, an FLSA collective action re

1. Route Control: SLG dictated daily delivery routes through the RouteSync dispatch platform, leaving drivers with limited discretion to modify the sequence or timing of deliveries. Plaintiff alleges that drivers were required to follow the assigned route order and that deviations were flagged by the system and could result in performance warnings.

2. Mandatory Branding: Drivers were required to wear Stonefield-branded uniforms, display SLG identification badges, and affix SLG vehicle placards to their personal vehicles at all times while performing deliveries. Plaintiff alleges this branding requirement created the appearance to the public that drivers were employees of SLG and eliminated any independent brand identity.

3. Mandatory Training: SLG required all drivers to complete sixteen (16) hours of initial safety and customer-service training prior to commencing deliveries, as well as four (4) hours of mandatory quarterly training updates. Plaintiff alleges this training was prescriptive and covered specific delivery techniques, customer interaction protocols, and SLG-mandated safety procedures.

4. Prohibition on Subcontracting: The ICOA prohibited drivers from subcontracting their delivery obligations to third parties without SLG's prior written approval. Plaintiff alleges that during his entire tenure from March 2021 through September 2024, no subcontracting requests were approved, effectively rendering the subcontracting provision illusory.

5. Customer-Facing Standards: SLG set customer-facing delivery windows (communicated directly to the end customer) and imposed penalties on drivers for late deliveries, missed delivery attempts, and customer complaints. Plaintiff alleges that drivers had no ability to set or negotiate delivery timeframes with customers.

6. Equipment Provision: SLG provided delivery scanners, the RouteSync routing software application, and telematics hardware (GPS tracking devices) to all drivers at no charge. Plaintiff alleges this provision of essential work tools by SLG undermines the independent contractor classification.

7. No Rate Negotiation: Drivers had no ability to negotiate per-delivery rates, which were set unilaterally by SLG and applied uniformly within each delivery category. Plaintiff alleges that the absence of rate negotiation is inconsistent with a genuine independent contractor relationship in which the contractor sets its own pricing. These allegations collectively form the factual basis for plaintiff's position that

V. Damages Exposure Analysis A. Per-Driver Calculation (Plaintiff's Theory) Based on the GPS and RouteSync data produced by SLG in connection with this litigation, as well as plaintiff's individual declaration and discovery responses, the following per-driver damages calculation reflects plaintiff's theory of recovery: • Average weekly hours worked by plaintiff: 58 hours (based on GPS login/logout data and RouteSync

VI. Key Defenses A. Independent Contractor Status — FLSA Economic Reality Test The threshold merits question in this case is whether SLG's delivery drivers are employees or independent contractors under the FLSA. The FLSA's definition of "employee" is broadly construed, and courts in the Fifth Circuit apply the "economic reality" test to determine whether a worker is economically dependent on the alleged employer (an

1. Degree of control exercised by the alleged employer over the manner and means of the worker's performance.

2. The worker's opportunity for profit or loss depending on his or her managerial skill.

3. The worker's investment in equipment or materials required for the task.

4. Whether the service rendered requires special skill.

5. The degree of permanence of the working relationship.

6. Whether the service is an integral part of the alleged employer's business. Calderwood & Harkness has conducted a preliminary assessment of SLG's position under each factor. While the case presents arguable positions on both sides, we have identified the following balance of favorable and unfavorable factors: Factors Favorable to SLG: • Investment in equipment: SLG's drivers use their own personal vehicles, which

VII. Conditional Certification Briefing — Status and Strategy Plaintiff's Motion for Conditional Certification of the FLSA collective was filed on July 14, 2025. The motion is supported by four declarations from former SLG drivers (three from the Fort Worth HUB-01 and one from the Dallas HUB-02), each of whom attests that he or she was subjected to the same degree of control alleged in Mr. Delano's complaint, was pai

1. Trevor Sandoval, Vice President of Operations, SLG: Mr. Sandoval will attest to the material operational differences across SLG's fourteen distribution hubs, including variations in delivery volume, delivery type mix (standard vs. white-glove), driver autonomy in scheduling and route selection, and hub-specific management practices. His declaration will demonstrate that a one-size-fits-all collective treatment is

2. Karen Lund, Director of Driver Relations, SLG: Ms. Lund will attest to the differences among the three ICOA versions, the history and rationale for revisions, the availability and exercise of subcontracting rights by certain drivers, and the Company's treatment of drivers as independent businesses with the ability to control their own schedules and work for competing platforms.

3. Dennis Faulkner, Hub Manager, Fort Worth HUB-01: Mr. Faulkner will provide testimony specific to the Fort Worth hub's operations and Mr. Delano's individual performance history, including instances in which Delano exercised scheduling discretion, declined delivery assignments, and performed work for other platforms during his SLG tenure. This testimony is designed to undermine the representativeness of Delano's in

4. Dr. Priya Ramanathan, Corbin Risk Advisors LLC: Dr. Ramanathan will provide an expert declaration presenting her statistical analysis of hours worked, weekly pay, route acceptance rates, and multi-platform engagement across SLG's fourteen hubs. Her analysis demonstrates statistically significant variance among hubs and among drivers, supporting SLG's argument that the proposed collective members are not similarly

VIII. Insurance Coverage A. Policy Terms SLG maintains an Employment Practices Liability Insurance ("EPLI") policy with the following terms: B. Coverage Status Calderwood & Harkness provided formal written notice of the Delano claim to Broadleaf Insurance Company on May 5, 2025, in accordance with the policy's notice requirements. The notice included a copy of the complaint, a summary of the claims asserted, and a te

IX. Strategic Options Calderwood & Harkness has identified five strategic options for the Board's consideration. Each option is described below with an assessment of its potential benefits, risks, and costs. Our recommended approach, a hybrid strategy combining elements of multiple options, is presented in Section IX.E. A. Option 1: Motion to Compel Arbitration for ICOA v3.0 Signatories Filing a motion to compel indi

1. Oppose conditional certification (August 2025).

2. If conditionally certified, conduct merits discovery through March 15, 2026.

3. Move for decertification at the second stage, presenting evidence of individualized differences among collective members.

4. File a motion for summary judgment on the independent contractor classification issue (deadline: April 30, 2026).

5. If summary judgment is denied, proceed to trial (September 14, 2026). Estimated total legal fees through trial: $2.1 million to $2.8 million. This estimate encompasses all phases of the litigation, including the conditional certification opposition, discovery (document review, depositions, written discovery, and ESI management), the arbitration motion, the decertification motion, summary judgment briefing, pretria