Contract analysis

I. Executive Summary The purpose of this memorandum is to model plaintiff's damages theory across multiple collective-size and opt-in scenarios in order to provide a comprehensive exposure analysis for Stonefield Logistics Group Inc. ("SLG" or "Stonefield") in the Fair Labor Standards Act ("FLSA") collective action filed by named plaintiff Marcus Delano on April 30, 2025. This case is pending before the Honorable Reb

II. Background and Procedural Context A. Overview of the Litigation Named plaintiff Marcus Delano is a former delivery driver who worked out of SLG's Fort Worth distribution hub, designated internally as HUB-01, from approximately March 2021 through September 2024. Throughout the duration of his engagement, Delano was classified by SLG as an independent contractor and compensated in accordance with the terms of an In

III. Plaintiff's Damages Theory A. Classification as Employees Under the FLSA The threshold issue in this litigation — and the issue upon which all damages liability depends — is whether SLG's delivery drivers are properly classified as independent contractors or should instead be treated as employees entitled to the protections of the FLSA. Plaintiff contends that SLG's drivers are employees under the FLSA's "econom

1. Average Weekly Gross Pay. Based on SLG's 2023 pay records for Delano, his average weekly gross compensation was $1,247.00.

2. Average Weekly Hours Worked. Based on GPS telematics data from the TrackPoint device and RouteSync platform logs, Delano's average weekly hours worked (measured from first delivery assignment accepted to last delivery completed, plus reasonable allowances for loading and return-to-hub time) was 58 hours per week.

3. Effective Hourly Rate. Dividing average weekly gross pay by average weekly hours worked yields an effective hourly rate of $1,247.00 ÷ 58 hours = $21.50 per hour.

4. FLSA Overtime Rate. The FLSA overtime rate is calculated as one and one-half times the effective hourly rate: $21.50 × 1.5 = $32.25 per hour.

5. Weekly Overtime Hours. Total weekly hours worked (58) minus the 40-hour FLSA overtime threshold yields 18 overtime hours per week.

6. Weekly Unpaid Overtime Differential Per Driver. The overtime differential is the difference between the overtime rate and the effective hourly rate, multiplied by the number of overtime hours: 18 hours × ($32.25 − $21.50) = 18 hours × $10.75 = $193.50 per week. This $193.50 per-week figure represents the unpaid overtime premium that plaintiff alleges each driver in the collective was owed on a weekly basis. It is

IV. Scenario Modeling Based on the foregoing damages theory and the key variables that will determine the ultimate size of the collective and the applicable damages multiplier, we have constructed three exposure scenarios. Each scenario is designed to capture a distinct combination of outcomes on the critical strategic and procedural issues: (1) whether the motion to compel arbitration is filed and granted; (2) the c

1. Assumptions. Scenario A represents the theoretical maximum exposure and assumes worst-case outcomes at every decision point: • Conditional certification is granted for the full proposed collective as defined by plaintiff. • All 1,187 identified drivers opt in to the collective action. • No motion to compel arbitration is filed, or if filed, the motion is denied in its entirety (either on the basis of the FAA § 1 t

2. Damages Calculation Single damages: 1,187 drivers × $31,153.50 per driver = $36,979,204.50 Liquidated damages (equal amount): $36,979,204.50 Total Scenario A exposure: $36,979,204.50 + $36,979,204.50 = $73,958,409.00 (Approximately $74.0 million)

3. Commentary. This is the theoretical maximum exposure and assumes the confluence of worst-case outcomes at every stage of the litigation. While it is important for SLG and Ridgepoint to understand the outer boundary of potential liability, several factors make this scenario unlikely to materialize in practice. First, a 100% opt-in rate is exceedingly rare in FLSA collective actions. The FLSA's collective action mec

1. Assumptions. Scenario B models the outcome in which SLG pursues and prevails on its motion to compel individual arbitration for drivers who signed ICOA v3.0: • SLG files a motion to compel individual arbitration and dismiss from the collective all drivers who signed ICOA v3.0 (the January 2023 revision containing the arbitration clause and collective action waiver). • The motion is granted in full; approximately 6

2. Damages Calculation Single damages: 547 drivers × $31,153.50 per driver = $17,040,964.50 Liquidated damages (equal amount): $17,040,964.50 Total Scenario B exposure: $17,040,964.50 + $17,040,964.50 = $34,081,929.00 (Approximately $34.1 million)

3. Commentary. Scenario B reduces collective action exposure by approximately $39.9 million compared to Scenario A — a reduction of approximately 54%. This underscores the critical importance of the arbitration strategy as the single most impactful lever available to SLG for reducing aggregate damages exposure in the collective action. However, it is essential to recognize that compelling 640 drivers to individual ar

1. Assumptions. Scenario C combines a successful arbitration motion with a conservative (low) opt-in rate: • Arbitration motion is granted as in Scenario B, reducing the eligible collective to approximately 547 drivers. • Opt-in rate of 20%, consistent with the lower end of Fifth Circuit experience in similar collective actions and reflecting the assumption that, without an aggressive plaintiff-side notice campaign o

2. Damages Calculation Single damages: 109 drivers × $31,153.50 per driver = $3,395,731.50 Liquidated damages (equal amount): $3,395,731.50 Total Scenario C exposure: $3,395,731.50 + $3,395,731.50 = $6,791,463.00 (Approximately $6.8 million)

3. Commentary. Scenario C represents a substantially more manageable exposure level and, for strategic planning purposes, can be viewed as a realistic best-case outcome for SLG, predicated on two favorable developments: (1) successful enforcement of the ICOA v3.0 arbitration clause to remove 640 drivers from the collective, and (2) a modest opt-in rate among the remaining eligible drivers. Notably, $6.8 million falls

V. Sensitivity Analysis — Variations in Per-Driver Damages The scenario modeling in Section IV assumes uniform per-driver damages of $31,153.50 (or $62,307.00 inclusive of liquidated damages), based on the named plaintiff's individual pay and hours data. In reality, per-driver damages will vary substantially depending on individual hours worked, pay rates, and tenure during the relevant period. This section identifie

VI. Attorneys' Fees and Costs Exposure A. FLSA Fee-Shifting Under 29 U.S.C. § 216(b), a prevailing plaintiff in an FLSA overtime case is entitled to recover "a reasonable attorney's fee to be paid by the defendant, and costs of the action." Fee-shifting under the FLSA is mandatory for prevailing plaintiffs; the court does not have discretion to deny fees entirely. The statute's fee-shifting provision is designed to i

VII. Insurance Coverage Analysis A. EPLI Policy Terms SLG maintains an Employment Practices Liability Insurance ("EPLI") policy with the following terms: • Carrier: Broadleaf Insurance Company • Policy Number: BIC-EPL-2024-07831 • Policy Period: January 1, 2025 through January 1, 2026 • Self-Insured Retention ("SIR"): $2,000,000 per claim • Policy Limit: $10,000,000 aggregate The EPLI policy provides coverage for cla

VIII. Impact on Enterprise Value and PE Sponsor Considerations A. SLG Financial Context An understanding of SLG's financial profile is necessary to contextualize the damages exposure within the broader enterprise and to assess the implications for Ridgepoint Capital Partners Fund III, LP's investment thesis and exit strategy. SLG's fiscal year 2024 financial results reflect the following key metrics: • Revenue: $312.

IX. Comparison to Fifth Circuit Settlements in Analogous Cases To provide additional context for the exposure analysis, we have reviewed publicly available settlement data in FLSA collective actions involving driver and delivery worker misclassification in the Fifth Circuit and neighboring jurisdictions. While each case presents unique factual and procedural circumstances that limit direct comparability, the availabl