MEZZANINE PLEDGE AND SECURITY AGREEMENT
Dated as of September 14, 2023
by and among
STONEFIELD LOGISTICS GROUP INC., a Delaware corporation,
STONEFIELD INTERMODAL SERVICES, INC., a Texas corporation,
STONEFIELD FLEET MANAGEMENT, LLC, a Texas limited liability company,
STONEFIELD FREIGHT BROKERAGE, INC., a Delaware corporation,
and
CASCADE RIDGE SLG HOLDINGS, LLC, a Delaware limited liability company,
as Grantors,
in favor of
RIDGELINE MEZZANINE CAPITAL FUND III, LP, a Delaware limited partnership,
as Secured Party
Second-Priority Security Interest — Subordinate to the First-Priority Security Interests of Whitmore National Bank, N.A. as Collateral Agent Under the Amended and Restated Credit Agreement Dated April 7, 2022, as Further Described in the Intercreditor Agreement Dated September 14, 2023
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MEZZANINE PLEDGE AND SECURITY AGREEMENT
This MEZZANINE PLEDGE AND SECURITY AGREEMENT (this "Agreement") is dated as of September 14, 2023, and is made by and among STONEFIELD LOGISTICS GROUP INC., a Delaware corporation (the "Borrower"); STONEFIELD INTERMODAL SERVICES, INC., a Texas corporation ("SIS"); STONEFIELD FLEET MANAGEMENT, LLC, a Texas limited liability company ("SFM"); STONEFIELD FREIGHT BROKERAGE, INC., a Delaware corporation ("SFB"); and CASCADE RIDGE SLG HOLDINGS, LLC, a Delaware limited liability company ("SLG Holdings" and, together with the Borrower, SIS, SFM, and SFB, each a "Grantor" and collectively, the "Grantors"), in favor of RIDGELINE MEZZANINE CAPITAL FUND III, LP, a Delaware limited partnership (the "Mezzanine Lender" or the "Secured Party").
RECITALS
WHEREAS, Stonefield Logistics Group Inc. is a Delaware corporation headquartered at 4800 Commerce Parkway, Suite 1200, Fort Worth, Texas 76107, and is engaged in national less-than-truckload ("LTL") and intermodal freight transportation services, together with related freight brokerage and fleet management operations conducted through its subsidiaries;
WHEREAS, Stonefield Logistics Group Inc. (as Borrower), the Mezzanine Lender, and the guarantors party thereto have entered into that certain Mezzanine Credit Agreement, dated as of September 14, 2023 (as amended, restated, supplemented, or otherwise modified from time to time, the "Mezzanine Credit Agreement"), pursuant to which the Mezzanine Lender has agreed to make available to the Borrower a mezzanine term loan in the aggregate principal amount of One Hundred Twenty Million Dollars ($120,000,000);
WHEREAS, the Mezzanine Credit Agreement requires, as a condition precedent to the funding of the mezzanine term loan, that each Grantor grant a second-priority perfected security interest in substantially all of its assets (subject to certain exceptions) to the Secured Party to secure the payment and performance of all Mezzanine Obligations (as hereinafter defined);
WHEREAS, each Grantor that is a subsidiary of the Borrower — namely, Stonefield Intermodal Services, Inc., Stonefield Fleet Management, LLC, and Stonefield Freight Brokerage, Inc. — has executed and delivered the Mezzanine Guaranty Agreement dated as of September 14, 2023 (the "Mezzanine Guaranty Agreement"), pursuant to which each such subsidiary has unconditionally and irrevocably guaranteed the Borrower's obligations under the Mezzanine Credit Agreement;
WHEREAS, Cascade Ridge SLG Holdings, LLC, as the direct parent of and holder of approximately seventy-eight and four-tenths percent (78.4%) of the equity interests in Stonefield Logistics Group Inc. (through intermediate holding structures), has also executed and delivered the Mezzanine Guaranty Agreement and is granting a security interest in certain of its assets hereunder; provided that the equity interests in Stonefield Logistics Group Inc. held by SLG Holdings are pledged separately under that certain Parent Equity Pledge Agreement, dated as of September 14, 2023 (the "Parent Equity Pledge Agreement"), on a first-priority basis for the benefit of the Secured Party, and are not pledged under this Agreement;
WHEREAS, the security interests granted hereunder are intended to be, and shall be, second in priority to the first-priority security interests granted to Whitmore National Bank, N.A. ("Whitmore"), in its capacity as Collateral Agent (in such capacity, the "Senior Collateral Agent") under that certain Amended and Restated Credit Agreement, dated as of April 7, 2022 (originally dated as of 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 thereto (as amended, restated, supplemented, or otherwise modified from time to time, including by that certain Amendment No. 3 dated as of September 14, 2023, the "Senior Credit Agreement");
WHEREAS, the respective rights and obligations of the Secured Party and the Senior Collateral Agent with respect to the Collateral, including the relative priority of their respective security interests, are governed by that certain Intercreditor Agreement, dated as of September 14, 2023 (as amended, restated, supplemented, or otherwise modified from time to time, the "Intercreditor Agreement"), among Whitmore National Bank, N.A. as Senior Agent, Ridgeline Mezzanine Capital Fund III, LP as Mezzanine Lender, and acknowledged by Stonefield Logistics Group Inc.;
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Grantor agrees as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below:
"Accounts" means all "accounts" as defined in Article 9 of the UCC, including all accounts receivable, rights to payment for goods sold, leased, licensed, or otherwise disposed of, for services rendered, or arising from any other transaction, whether or not earned by performance, together with all rights of any Grantor in, to, and under all purchase orders for goods or services, and all rights to any goods represented by any of the foregoing (including returned or repossessed goods), and all collateral security and guarantees given by any person with respect to any of the foregoing.
"Borrower" means Stonefield Logistics Group Inc., a Delaware corporation (EIN: 84-3217650).
"Chattel Paper" means all "chattel paper" as defined in Article 9 of the UCC, including electronic chattel paper and tangible chattel paper, and all right, title, and interest of each Grantor therein.
"Collateral" means all assets and property described in Article II of this Agreement, including all Proceeds thereof and all products thereof, whether now owned or existing or hereafter acquired or arising and wherever located.
"Commercial Tort Claims" means all "commercial tort claims" as defined in Article 9 of the UCC, including those commercial tort claims identified on Schedule IV hereto, together with all commercial tort claims of any Grantor arising after the date hereof and having an estimated value in excess of Two Hundred Fifty Thousand Dollars ($250,000).
"Default" has the meaning assigned to such term in the Mezzanine Credit Agreement.
"Deposit Accounts" means all "deposit accounts" as defined in Article 9 of the UCC, including all demand, time, savings, passbook, and similar accounts maintained by any Grantor at any bank or other financial institution, including those accounts listed on Schedule VII hereto.
"Documents" means all "documents" as defined in Article 9 of the UCC, including all documents of title, bills of lading, dock warrants, dock receipts, warehouse receipts, and orders for delivery of goods, and all right, title, and interest of each Grantor therein.
"Equipment" means all "equipment" as defined in Article 9 of the UCC, including all machinery, equipment, furniture, fixtures, vehicles, rolling stock, trailers, tractors, intermodal containers, intermodal chassis, forklifts, warehouse equipment, terminal equipment, loading and unloading equipment, dock equipment, technology systems, computers, servers, telecommunications equipment, tooling, parts, and other tangible personal property (other than Inventory), whether or not subject to a certificate of title statute, and all accessions thereto, substitutions therefor, and replacements thereof.
"Event of Default" has the meaning assigned to such term in the Mezzanine Credit Agreement.
"Excluded Assets" has the meaning set forth in Section 2.3.
"General Intangibles" means all "general intangibles" as defined in Article 9 of the UCC, including all payment intangibles, software, computer programs, databases, customer lists, supplier lists, route lists, shipper contracts, broker contracts, goodwill, rights to tax refunds, rights under license agreements, contract rights, choses in action, and all other intangible personal property of any Grantor of every kind and description, other than Accounts, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Goods, Instruments, Investment Property, Letter-of-Credit Rights, Money, and Supporting Obligations.
"Goods" means all "goods" as defined in Article 9 of the UCC, including all Equipment, Inventory, and fixtures of every kind and description.
"Grantors" means, collectively, Stonefield Logistics Group Inc. (EIN: 84-3217650), Stonefield Intermodal Services, Inc. (EIN: 75-6849321), Stonefield Fleet Management, LLC (EIN: 75-6912488), Stonefield Freight Brokerage, Inc. (EIN: 84-3306715), and Cascade Ridge SLG Holdings, LLC (EIN: 84-3195472), and each individually a "Grantor."
"Instruments" means all "instruments" as defined in Article 9 of the UCC, including all promissory notes, drafts, bills of exchange, checks, certificates of deposit, and other negotiable and non-negotiable instruments, and all right, title, and interest of each Grantor therein.
"intellectual Property" means all intellectual property and similar proprietary rights of any Grantor, whether owned, licensed, or otherwise held, including: (a) all patents and patent applications (including all reissues, divisions, continuations, continuations-in-part, extensions, renewals, and reexaminations thereof), together with all inventions, and all rights to any royalties or income arising therefrom; (b) all trademarks, service marks, trade names (including the trade name "Stonefield" and all variations thereof), brand names, logos, trade dress, and other source identifiers, together with all registrations and applications for registration thereof, and all goodwill associated therewith; (c) all copyrights, copyright registrations, and applications for copyright registration, including all rights to reproduce, prepare derivative works, distribute, display, and perform the copyrighted works; (d) all internet domain names, uniform resource locators, and associated website content; (e) all trade secrets, proprietary information, know-how, technical data, processes, and formulae; and (f) all licenses, sublicenses, and other agreements pursuant to which any Grantor is authorized to use any of the foregoing.
"Intercreditor Agreement" means that certain Intercreditor Agreement, dated as of September 14, 2023, among Whitmore National Bank, N.A., in its capacity as Administrative Agent and Collateral Agent under the Senior Credit Agreement (the "Senior Agent"), Ridgeline Mezzanine Capital Fund III, LP, as Mezzanine Lender, and acknowledged by Stonefield Logistics Group Inc., as amended, restated, supplemented, or otherwise modified from time to time.
"Inventory" means all "inventory" as defined in Article 9 of the UCC, including all raw materials, work in process, finished goods, supplies, fuel, parts, goods held for sale or lease, and goods furnished or to be furnished under contracts of service, and all right, title, and interest of each Grantor therein.
"Investment Property" means all "investment property" as defined in Article 9 of the UCC, including all certificated and uncertificated securities, securities accounts, security entitlements, commodity contracts, commodity accounts, and all financial assets held in any securities account, including the Pledged Equity.
"Letter-of-Credit Rights" means all "letter-of-credit rights" as defined in Article 9 of the UCC, including all rights to payment or performance under any letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance.
"Mezzanine Credit Agreement" means that certain Mezzanine Credit Agreement, dated as of September 14, 2023, among Stonefield Logistics Group Inc., as Borrower, Ridgeline Mezzanine Capital Fund III, LP, as Mezzanine Lender, and the guarantors party thereto, providing for mezzanine term loans in the aggregate principal amount of One Hundred Twenty Million Dollars ($120,000,000), bearing interest at a rate of 1,100 basis points per annum (comprised of 850 basis points payable in cash and 250 basis points payable in kind), as amended, restated, supplemented, or otherwise modified from time to time.
"Mezzanine Guaranty Agreement" means that certain Mezzanine Guaranty Agreement, dated as of September 14, 2023, among SIS, SFM, SFB, and SLG Holdings, as guarantors, in favor of the Mezzanine Lender, as amended, restated, supplemented, or otherwise modified from time to time.
"Mezzanine Loan Documents" means, collectively, the Mezzanine Credit Agreement, the Mezzanine Guaranty Agreement, this Agreement, the Parent Equity Pledge Agreement, and all other agreements, instruments, certificates, and documents executed and delivered in connection with the Mezzanine Credit Agreement.
"Mezzanine Obligations" or "Secured Obligations" means all obligations (whether now existing or hereafter arising, direct or indirect, absolute or contingent, matured or unmatured, whether for principal, interest, fees, premiums, expenses, indemnities, or otherwise) of the Borrower and each Guarantor under the Mezzanine Credit Agreement, the Mezzanine Guaranty Agreement, this Agreement, and all other Mezzanine Loan Documents, including, without limitation: (a) the outstanding principal amount of the mezzanine term loans (in the original aggregate principal amount of $120,000,000); (b) all accrued and unpaid interest thereon (including cash interest and PIK interest); (c) the commitment fee in the amount of Two Million Four Hundred Thousand Dollars ($2,400,000); (d) all fees, costs, expenses, and indemnification obligations payable under the Mezzanine Credit Agreement or any other Mezzanine Loan Document; and (e) all other amounts owing from time to time under or in connection with any Mezzanine Loan Document.
"Money" means all "money" as defined in Article 9 of the UCC.
"Parent Equity Pledge Agreement" means that certain Parent Equity Pledge Agreement, dated as of September 14, 2023, by Cascade Ridge SLG Holdings, LLC in favor of the Secured Party, pursuant to which SLG Holdings has pledged its equity interests in Stonefield Logistics Group Inc. on a first-priority basis for the benefit of the Secured Party.
"Permitted Liens" has the meaning assigned to such term in the Mezzanine Credit Agreement, which includes, without limitation, all first-priority liens and security interests in favor of the Senior Collateral Agent securing the Senior Obligations.
"Pledged Equity" means all equity interests in subsidiaries owned by any Grantor, including all shares of capital stock (including common stock and preferred stock) and all membership interests, partnership interests, limited liability company interests, and other ownership interests, whether certificated or uncertificated, as set forth on Schedule III hereto; provided that "Pledged Equity" shall not include the equity interests in Stonefield Logistics Group Inc. held by Cascade Ridge SLG Holdings, LLC, which are pledged under the Parent Equity Pledge Agreement. "Pledged Equity" includes all dividends, distributions, cash, instruments, and other property or proceeds from time to time received, receivable, or otherwise distributed in respect of or in exchange for any or all of the foregoing.
"Proceeds" means all "proceeds" as defined in Section 9-102 of the UCC, including all whatever is acquired upon the sale, lease, license, exchange, or other disposition of Collateral, whatever is collected on or distributed on account of Collateral, rights arising out of Collateral, all insurance proceeds payable by reason of the loss or nonconformity of, defects or infringement of rights in, or damage to or destruction of, the Collateral, and all claims against third parties arising out of the loss, nonconformity, or interference with the use of, defects or infringement of rights in, or damage to the Collateral.
"Secured Party" means Ridgeline Mezzanine Capital Fund III, LP, a Delaware limited partnership, whose general partner is Ridgeline Capital Management, LLC, a Delaware limited liability company, with its principal offices located at 767 Lexington Avenue, 22nd Floor, New York, New York 10065.
"Senior Collateral Agent" means Whitmore National Bank, N.A., in its capacity as Collateral Agent under the Senior Credit Agreement.
"Senior Credit Agreement" means that certain Amended and Restated Credit Agreement, dated as of April 7, 2022 (originally dated as of 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 thereto, as amended by Amendment No. 1, dated as of August 22, 2022, Amendment No. 2, dated as of March 10, 2023, and Amendment No. 3, dated as of September 14, 2023, and as further amended, restated, supplemented, refinanced, replaced, or otherwise modified from time to time.
"Senior Obligations" means all obligations of the Borrower and its subsidiaries under or in respect of the Senior Credit Agreement and the other loan documents related thereto.
"Senior Security Agreement" means the pledge and security agreement entered into by the Borrower and its subsidiaries in connection with the Senior Credit Agreement, granting first-priority security interests in substantially all of their assets to the Senior Collateral Agent for the benefit of the senior lenders.
"Subsidiary Guarantors" means Stonefield Intermodal Services, Inc., Stonefield Fleet Management, LLC, and Stonefield Freight Brokerage, Inc.
"Supporting Obligations" means all "supporting obligations" as defined in Article 9 of the UCC, including all letters of credit, guarantees, surety bonds, and other secondary obligations that support the payment or performance of Accounts, Chattel Paper, Documents, General Intangibles, Instruments, or Investment Property.
"UCC" means the Uniform Commercial Code as in effect from time to time in the State of New York; provided that, if perfection or the effect of perfection or non-perfection or the priority of the security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, "UCC" means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection, or priority.
"Vehicles" means all motor vehicles, trucks, tractors, trailers, intermodal chassis, intermodal containers, and other rolling stock (including those identified on Schedule V hereto), whether or not subject to a certificate of title statute in the applicable jurisdiction. For the avoidance of doubt, the Borrower's motor carrier operations are conducted under USDOT Number 2847391.
Section 1.2 UCC Terms. Unless otherwise defined herein, terms used herein that are defined in Articles 8 and 9 of the UCC shall have the respective meanings assigned to them therein.
Section 1.3 Rules of Construction. The rules of construction set forth in Section 1.02 of the Mezzanine Credit Agreement are hereby incorporated by reference, mutatis mutandis, as if fully set forth herein. Without limiting the generality of the foregoing: (a) the definitions of terms herein shall apply equally to the singular and plural forms of the terms defined; (b) whenever the context may require, any pronoun shall include the corresponding masculine, feminine, and neuter forms; (c) the words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation"; (d) the word "will" shall be construed to have the same meaning and effect as the word "shall"; (e) any definition of or reference to any agreement, instrument, or other document herein shall be construed as referring to such agreement, instrument, or other document as from time to time amended, restated, supplemented, or otherwise modified (subject to any restrictions on such amendments, restatements, supplements, or modifications set forth herein or in the Mezzanine Credit Agreement); (f) any reference herein to any person shall be construed to include such person's successors and permitted assigns; and (g) the words "herein," "hereof," and "hereunder," and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof. This Agreement shall be governed by the laws of the State of New York as set forth in Article VIII.
ARTICLE II
GRANT OF SECURITY INTEREST
Section 2.1 Grant. As collateral security for the prompt and complete payment and performance when due (whether at stated maturity, by acceleration, or otherwise) of all Secured Obligations, each Grantor hereby grants to the Secured Party a continuing security interest in all right, title, and interest of such Grantor in, to, and under all of the following property of such Grantor, whether now owned or existing or hereafter acquired or arising and wherever located (all such property being collectively referred to herein as the "Collateral"):
(a) All Accounts;
(b) All Chattel Paper (including electronic chattel paper and tangible chattel paper);
(c) All Deposit Accounts;
(d) All Documents (including all documents of title, bills of lading, dock warrants, dock receipts, and warehouse receipts);
(e) All Equipment (including all vehicles, rolling stock, trailers, tractors, intermodal containers, intermodal chassis, forklifts, warehouse and terminal equipment, loading and unloading equipment, dock equipment, technology hardware, computers, servers, telecommunications equipment, tooling, parts, and all accessions thereto, substitutions therefor, and replacements thereof);
(f) All General Intangibles (including payment intangibles, software, computer programs, databases, customer lists, supplier lists, route lists, shipper contracts, broker agreements, goodwill, contract rights, and all licenses and license agreements);
(g) All Goods (including all Equipment, Inventory, and fixtures of every kind and description);
(h) All Instruments (including promissory notes, drafts, and certificates of deposit);
(i) All intellectual Property (including all trademarks, service marks, trade names, brand names, logos, patents, patent applications, copyrights, copyright registrations, domain names, and all goodwill and other rights associated with any of the foregoing);
(j) All Inventory (including fuel, parts, supplies, raw materials, work in process, finished goods, and goods held for sale or lease);
(k) All Investment Property (including all Pledged Equity, certificated and uncertificated securities, securities accounts, security entitlements, commodity contracts, and commodity accounts);
(l) All Letter-of-Credit Rights;
(m) All Money;
(n) All Supporting Obligations;
(o) All Commercial Tort Claims (as described on Schedule IV hereto, as such schedule may be supplemented from time to time in accordance with Section 4.10);
(p) All books and records (including ledgers, files, correspondence, customer and supplier information, computer records, computer programs, storage media, invoices, and rights of access thereto) relating to any of the foregoing; and
(q) All Proceeds (including insurance proceeds), products, offspring, rents, profits, accessions, substitutions, replacements, and additions of, to, and for any and all of the foregoing Collateral.
Section 2.2 Second-Priority Nature of Security Interest. Each Grantor and the Secured Party hereby acknowledge and agree that the security interest granted hereunder in the Collateral is second in priority and subordinate in all respects to the first-priority security interest of the Senior Collateral Agent (Whitmore National Bank, N.A.) in the same Collateral, granted pursuant to the Senior Security Agreement and perfected in accordance with the UCC and applicable law. All rights and remedies of the Secured Party with respect to the Collateral are, and shall at all times be, subject to and limited by the terms and conditions of the Intercreditor Agreement. In the event of any conflict between the provisions of this Agreement and the provisions of the Intercreditor Agreement with respect to the relative rights and obligations of the Secured Party and the Senior Collateral Agent (including, without limitation, the 180-day enforcement standstill period and the payment blockage provisions set forth in the Intercreditor Agreement), the terms and provisions of the Intercreditor Agreement shall govern and control, and the corresponding provisions of this Agreement shall be deemed modified to the extent necessary to give effect to the terms and provisions of the Intercreditor Agreement. No Grantor is a third-party beneficiary of the Intercreditor Agreement and no Grantor shall have any rights thereunder, except to the extent expressly set forth therein.
Section 2.3 Excluded Assets. Notwithstanding anything to the contrary in Section 2.1, the Collateral shall not include any of the following (collectively, "Excluded Assets"):
(a) any lease, license, contract, or agreement of any Grantor to the extent (but only to the extent) that a grant of a security interest therein would constitute or result in a breach, termination, or default under, or give rise to any right of termination, cancellation, or acceleration under, any such lease, license, contract, or agreement (other than to the extent that any such restriction on the grant of a security interest is rendered ineffective by applicable law, including Sections 9-406, 9-407, 9-408, and 9-409 of the UCC or any successor or equivalent provision);
(b) any intent-to-use trademark application filed pursuant to Section 1(b) of the Lanham Act (15 U.S.C. § 1051(b)), to the extent (but only to the extent) that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability of such intent-to-use trademark application under applicable law, and only until such time as a statement of use or amendment to allege use is filed with respect to such intent-to-use trademark application and the use of the mark has been verified by the United States Patent and Trademark Office;
(c) the equity interests in Stonefield Logistics Group Inc. held directly or indirectly by Cascade Ridge SLG Holdings, LLC, which equity interests are pledged separately under the Parent Equity Pledge Agreement, dated as of September 14, 2023, on a first-priority basis for the benefit of the Secured Party;
(d) any assets that are subject to purchase money security interests or capital leases that are permitted under both the Mezzanine Credit Agreement and the Senior Credit Agreement, but only to the extent that the contractual documentation governing such purchase money security interest or capital lease validly and enforceably prohibits the creation of any other security interest therein (and then only during such period as such prohibition remains in effect); and
(e) any margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System), to the extent that the pledge thereof would violate applicable law, including Regulation U.
Notwithstanding the foregoing exclusions, Proceeds of any Excluded Assets shall be included in the Collateral to the extent that such Proceeds would otherwise constitute Collateral hereunder and to the extent permitted by applicable law.
Section 2.4 Pledged Equity.
(a) Without limiting the generality of the grant set forth in Section 2.1, each Grantor hereby pledges and grants to the Secured Party a continuing second-priority security interest in all equity interests in its subsidiaries as listed on Schedule III hereto, including all shares of capital stock, membership interests, limited liability company interests, partnership interests, and other ownership interests, whether certificated or uncertificated (collectively, the "Pledged Equity"), together with all dividends, distributions, cash, instruments, and other property or proceeds from time to time received, receivable, or otherwise distributed in respect of or in exchange for any or all of such equity interests, and all warrants, options, rights, and other interests of every type and description relating thereto:
(i) Stonefield Logistics Group Inc. hereby pledges one hundred percent (100%) of the issued and outstanding membership interests in Stonefield Fleet Management, LLC;
(ii) Stonefield Logistics Group Inc. hereby pledges one hundred percent (100%) of the issued and outstanding shares of capital stock of Stonefield Intermodal Services, Inc.;
(iii) Stonefield Logistics Group Inc. hereby pledges one hundred percent (100%) of the issued and outstanding shares of capital stock of Stonefield Freight Brokerage, Inc.; and
(iv) For the avoidance of doubt, the equity interests in Stonefield Logistics Group Inc. held directly or indirectly by Cascade Ridge SLG Holdings, LLC are not pledged under this Agreement, but are instead pledged under the Parent Equity Pledge Agreement on a first-priority basis for the benefit of the Secured Party.
(b) Each Grantor shall, concurrently with the execution and delivery of this Agreement, or promptly thereafter, deliver to the Secured Party all certificates representing the Pledged Equity (or, in the case of membership interests for which no certificates have been issued, such instruments of transfer or evidence of ownership as the Secured Party may reasonably require), together with undated stock powers, transfer powers, or instruments of transfer, in each case duly executed in blank by the applicable Grantor. The specific details regarding each issuer of Pledged Equity, including the issuer name, type and class of interest, certificate number (if any), number of shares or units, and percentage of outstanding interests, are set forth on Schedule III hereto.
(c) Each Grantor hereby authorizes the Secured Party, upon the occurrence and during the continuance of an Event of Default (and subject in all respects to the Intercreditor Agreement), to transfer or cause the transfer of the Pledged Equity on the books and records of the applicable issuers to the name of the Secured Party or its nominee.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Each Grantor hereby represents and warrants to the Secured Party as follows:
Section 3.1 Organization and Good Standing. Each Grantor is duly organized, validly existing, and in good standing under the laws of its respective jurisdiction of organization, as follows:
(a) Stonefield Logistics Group Inc. is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware;
(b) Stonefield Intermodal Services, Inc. is a corporation duly organized, validly existing, and in good standing under the laws of the State of Texas;
(c) Stonefield Fleet Management, LLC is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Texas;
(d) Stonefield Freight Brokerage, Inc. is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware; and
(e) Cascade Ridge SLG Holdings, LLC is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware.
Each Grantor is duly qualified to do business and in good standing as a foreign corporation or limited liability company (as applicable) in every jurisdiction where the character of the property owned, leased, or operated by it or the nature of its business requires such qualification, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect (as defined in the Mezzanine Credit Agreement).
Section 3.2 Authority and Enforceability. Each Grantor has full corporate or limited liability company power and authority, as applicable, to execute, deliver, and perform its obligations under this Agreement. The execution, delivery, and performance by each Grantor of this Agreement have been duly authorized by all necessary corporate, limited liability company, or other organizational action, including all requisite board resolutions, member consents, and manager approvals. This Agreement has been duly executed and delivered by each Grantor and constitutes the legal, valid, and binding obligation of each Grantor, enforceable against each Grantor in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and similar laws affecting creditors' rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).
Section 3.3 Legal Name; Location; Jurisdiction of Organization.
(a) The full legal name, employer identification number, jurisdiction of organization, chief executive office address, and type of organization of each Grantor are as follows (and as more fully set forth on Schedule I hereto):
(b) No Grantor has changed its legal name, identity, jurisdiction of organization, or organizational structure at any time during the four (4) years preceding the date hereof, except as set forth on Schedule I hereto.
(c) The information set forth on Schedule I hereto (including organizational identification numbers and state file numbers, registered agent information, and former names, if any) is true, correct, and complete in all material respects as of the date hereof.
Section 3.4 Title; No Other Liens.
(a) Each Grantor owns and has good and marketable title to all of its Collateral (or, with respect to Collateral that constitutes a leasehold or license interest, has valid leasehold or license rights therein), free and clear of all liens, claims, charges, security interests, and encumbrances of any kind whatsoever, except for the following (collectively, "Permitted Encumbrances"):
(i) the first-priority liens and security interests in favor of the Senior Collateral Agent (Whitmore National Bank, N.A.) securing the Senior Obligations;
(ii) the second-priority liens and security interests created hereunder in favor of the Secured Party; and
(iii) other Permitted Liens as defined in the Mezzanine Credit Agreement.
(b) No Grantor has previously granted a security interest in any of its Collateral to any person other than (x) the Senior Collateral Agent and (y) the Secured Party, and no financing statement, security agreement, or other public filing or recording covering any of the Collateral is on file in any public office, except for (i) those filings made in favor of the Senior Collateral Agent, (ii) filings authorized hereunder in favor of the Secured Party, and (iii) filings relating to Permitted Liens.
Section 3.5 Accounts and Receivables. All Accounts reflected in the books and records of each Grantor represent, and to each Grantor's knowledge will represent, genuine and bona fide transactions arising in the ordinary course of business, completed in accordance with the terms and provisions of the applicable contracts or agreements giving rise thereto. No Grantor has knowledge of any material dispute, setoff, defense, or counterclaim with respect to any material portion of the Accounts, and no Grantor has made any agreement for any deduction from any Account other than discounts and allowances made in the ordinary course of business consistent with past practice and as reflected in the calculation of net Accounts.
Section 3.6 Equipment and Vehicles.
(a) All Equipment and Vehicles (including the rolling stock identified on Schedule V hereto) owned by each Grantor are in good working condition and repair, reasonable and ordinary wear and tear excepted, and are adequate and suitable for the purposes for which they are used in the conduct of such Grantor's business.
(b) All Equipment and Vehicles are located at the premises identified on Schedule II hereto or are in transit in the ordinary course of business.
(c) The Borrower conducts its motor carrier operations under USDOT Number 2847391, and such registration is in full force and effect.
Section 3.7 intellectual Property.
(a) Schedule VI hereto sets forth a complete and accurate list of all registered intellectual Property of each Grantor (including all trademarks, service marks, trade names, patents, patent applications, copyrights, copyright registrations, and domain names), including the registration or application numbers, dates of registration or filing, and the applicable registering authority.
(b) Each Grantor owns or has valid and enforceable licenses to use all intellectual Property that is material to the conduct of its business as presently conducted.
(c) To the knowledge of each Grantor, (i) no infringement, misappropriation, or dilution of any intellectual Property owned by any Grantor by any third party exists, and (ii) no Grantor is infringing, misappropriating, or diluting the intellectual property rights of any third party, in each case, in any manner that would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.
Section 3.8 Pledged Equity.
(a) All Pledged Equity listed on Schedule III hereto has been duly authorized, validly issued, and, in the case of shares of capital stock, is fully paid and nonassessable, and, in the case of membership interests or limited liability company interests, has been validly issued in accordance with the applicable operating agreement or other organizational documents of the relevant issuer.
(b) The Pledged Equity constitutes one hundred percent (100%) of the issued and outstanding equity interests of each subsidiary listed on Schedule III hereto.
(c) There are no outstanding options, warrants, rights of first refusal, preemptive rights, or other agreements or commitments of any nature relating to the purchase, acquisition, issuance, or sale of any Pledged Equity, other than (i) warrants issued under that certain Warrant Agreement, dated as of September 29, 2023, relating to equity interests in Stonefield Logistics Group Inc., which warrants are governed by the Parent Equity Pledge Agreement and are not pledged under this Agreement, and (ii) any rights set forth in the organizational documents of the applicable issuer as disclosed on Schedule III hereto.
(d) Each Grantor has the right, power, and authority to pledge, assign, and grant a security interest in the Pledged Equity as provided herein, and the pledge of the Pledged Equity hereunder does not violate the organizational documents of any issuer of the Pledged Equity (or, to the extent such organizational documents contain restrictions on transfer or pledge, appropriate consents, waivers, or amendments have been obtained and are in full force and effect).
Section 3.9 No Conflicts. The execution, delivery, and performance by each Grantor of this Agreement do not and will not: (a) violate or conflict with the certificate or articles of incorporation, bylaws, certificate of formation, operating agreement, limited partnership agreement, or other organizational documents of such Grantor; (b) violate or conflict with any applicable law, statute, rule, regulation, judgment, order, writ, or decree of any governmental authority; or (c) result in a breach of, or constitute a default under, or give rise to any right of termination, cancellation, or acceleration under, any material agreement, instrument, contract, or other obligation to which such Grantor is a party or by which any of its property is bound.
Section 3.10 Deposit Accounts and Securities Accounts. Schedule VII hereto sets forth a complete and accurate list of all deposit accounts and securities accounts maintained by each Grantor as of the date hereof, including the name and address of each depository bank or securities intermediary, the account number, and the type of account (e.g., operating, payroll, money market, escrow, or securities). Except as set forth on Schedule VII hereto, no Grantor maintains any deposit account or securities account with any bank or other financial institution.
Section 3.11 Commercial Tort Claims. Schedule IV hereto sets forth a complete and accurate description of all commercial tort claims of each Grantor having an estimated value in excess of Two Hundred Fifty Thousand Dollars ($250,000) as of the date hereof, including the parties thereto, the nature of the claim, the court or tribunal (if any) in which such claim is pending, and the estimated value thereof. Except as set forth on Schedule IV hereto, no Grantor has any commercial tort claim with an estimated value in excess of $250,000 as of the date hereof.
Section 3.12 Perfection.
(a) Upon the filing of the UCC-1 financing statements in the appropriate filing offices set forth below, the delivery of all certificated securities and instruments to the Secured Party (or its agent or bailee), and the execution and delivery of any deposit account control agreements or securities account control agreements required hereunder, the Secured Party will have a valid and perfected second-priority security interest in the Collateral (subject only to Permitted Liens and the terms of the Intercreditor Agreement), enforceable against each Grantor and all third parties:
(i) Delaware Secretary of State: UCC-1 financing statements naming Stonefield Logistics Group Inc., Stonefield Freight Brokerage, Inc., and Cascade Ridge SLG Holdings, LLC, as debtors;
(ii) Texas Secretary of State: UCC-1 financing statements naming Stonefield Intermodal Services, Inc. and Stonefield Fleet Management, LLC, as debtors.
(b) No further filing, recording, registration, or other public notice (other than as described in this Section 3.12, the filing of short-form IP security agreements with the United States Patent and Trademark Office and the United States Copyright Office as contemplated by Section 5.4, and notation of liens on certificates of title as contemplated by Section 5.5) is necessary in any jurisdiction in which any Grantor is organized or in which any material Collateral is located in order to perfect the second-priority security interest of the Secured Party in the Collateral.
ARTICLE IV
COVENANTS
Each Grantor hereby covenants and agrees with the Secured Party as follows:
Section 4.1 Maintenance of Collateral. Each Grantor shall (a) maintain all tangible Collateral (including Equipment and Vehicles) in good working condition and repair, reasonable and ordinary wear and tear excepted, consistent with industry practices for companies engaged in the LTL and intermodal freight transportation business; and (b) maintain adequate insurance coverage on the Collateral, in types, amounts, and with carriers and deductibles satisfactory to the Secured Party and consistent with the requirements of the Mezzanine Credit Agreement, and shall not do or permit anything to be done that could reasonably be expected to materially impair the value of the Collateral or the security interests of the Secured Party therein.
Section 4.2 Defense of Title. Each Grantor shall, at its own cost and expense, defend the Collateral against and take such other actions as are reasonably necessary to remove any lien, claim, charge, or encumbrance (other than Permitted Liens) on or to the Collateral, and shall defend the right, title, and interest of the Secured Party in and to the Collateral against the claims and demands of all persons at any time claiming the same or any interest therein adverse to the Secured Party.
Section 4.3 Further Assurances.
(a) Each Grantor shall, from time to time, at its own cost and expense, promptly execute and deliver to the Secured Party all such further instruments, agreements, and documents, and take all such further actions (including the filing of UCC financing statements, UCC continuation statements, UCC amendments, and other filings and recordings), as the Secured Party may from time to time reasonably request to carry out the intent and purposes of this Agreement and to perfect, protect, maintain, and enforce the validity, enforceability, and priority of the security interests granted hereunder, including, without limitation:
(i) the filing of UCC continuation statements within six (6) months prior to the expiration of any UCC financing statement filed hereunder;
(ii) the filing of additional UCC financing statements or amendments in new jurisdictions in which any Grantor may become organized or in which material Collateral may be located;
(iii) the execution and delivery of additional deposit account control agreements and securities account control agreements;
(iv) the execution and delivery of additional assignments, pledges, or other instruments with respect to any Collateral; and
(v) such other actions as the Secured Party may reasonably deem necessary or desirable.
(b) Each Grantor hereby authorizes the Secured Party to file or cause to be filed any such financing statements, continuation statements, amendments, and other filings without the signature of such Grantor to the extent permitted by applicable law.
Section 4.4 No Disposition of Collateral. No Grantor shall sell, transfer, assign, exchange, lease, license, or otherwise dispose of, or grant any option or other right to purchase, lease, or otherwise acquire, any Collateral or any interest therein, except as expressly permitted by the Mezzanine Credit Agreement (including, without limitation, sales of inventory in the ordinary course of business, dispositions of worn-out or obsolete equipment, and other permitted asset sales set forth in the Mezzanine Credit Agreement).
Section 4.5 No Other Liens. No Grantor shall create, incur, assume, or permit to exist any lien, security interest, charge, or encumbrance on or with respect to any of the Collateral, other than:
(a) the first-priority liens and security interests in favor of the Senior Collateral Agent pursuant to the Senior Security Agreement;
(b) the second-priority liens and security interests created by this Agreement in favor of the Secured Party; and
(c) other Permitted Liens as defined in and expressly permitted by the Mezzanine Credit Agreement.
Section 4.6 Change of Name, Identity, or Location. No Grantor shall change its legal name, identity, state or jurisdiction of organization, organizational structure (including by merger, consolidation, conversion, or otherwise), or the location of its chief executive office without providing at least thirty (30) days' prior written notice to the Secured Party, which notice shall include such information as the Secured Party may reasonably require. Each Grantor shall, promptly upon any such change, take all actions necessary or reasonably requested by the Secured Party (at such Grantor's expense) to maintain the perfection and priority of the security interests granted hereunder, including, without limitation, the filing of UCC amendments, new UCC financing statements, and such other documents or filings as may be required.
Section 4.7 Maintenance of Books and Records. Each Grantor shall maintain complete and accurate books and records relating to the Collateral and the financial condition of such Grantor, in form and substance consistent with past practice and in accordance with generally accepted accounting principles. Each Grantor shall permit the Secured Party (and its agents, advisors, and representatives), subject to the terms and conditions of the Intercreditor Agreement (including any limitations on the exercise of inspection rights by the Mezzanine Lender during the existence of the senior facility), to inspect, audit, and make copies of such books and records upon reasonable prior notice and during normal business hours at the offices of such Grantor, all at such Grantor's expense; provided that, so long as no Event of Default has occurred and is continuing, such inspections shall not occur more frequently than twice per calendar year.
Section 4.8 intellectual Property.
(a) Each Grantor shall use commercially reasonable efforts to maintain and preserve all intellectual Property that is material to its business, including, without limitation, (i) the timely filing of all necessary renewal applications, affidavits of use or continued use, and maintenance fees with respect to all registered trademarks, service marks, and patents, (ii) the prosecution and maintenance of all pending applications for registration of trademarks, service marks, patents, and copyrights, and (iii) the taking of all steps reasonably necessary to protect the confidentiality of all trade secrets.
(b) No Grantor shall abandon, dedicate to the public, or fail to maintain any registered intellectual Property that is material to its business without the prior written consent of the Secured Party (which consent shall not be unreasonably withheld, conditioned, or delayed), unless such Grantor determines in its reasonable business judgment that the continued maintenance of such intellectual Property is no longer desirable in the conduct of its business and such abandonment would not reasonably be expected to have a Material Adverse Effect.
(c) Each Grantor shall promptly notify the Secured Party in writing of any infringement, misappropriation, dilution, or other violation of its material intellectual Property by any third party of which it becomes aware, and shall take commercially reasonable steps to enforce its rights with respect thereto.
Section 4.9 Pledged Equity.
(a) Each Grantor shall deliver to the Secured Party all certificates or instruments representing Pledged Equity, together with undated stock powers, transfer powers, or instruments of transfer, in each case duly executed in blank by the applicable Grantor. In the event that any Grantor acquires or receives additional equity interests in any of its subsidiaries after the date hereof (whether by purchase, dividend, distribution, conversion, exchange, or otherwise), such Grantor shall promptly (and in any event within ten (10) business days) (i) notify the Secured Party in writing of such acquisition or receipt, (ii) deliver to the Secured Party any certificates or instruments representing such additional equity interests, together with undated stock powers or transfer instruments duly executed in blank, and (iii) take such other actions as the Secured Party may reasonably request to perfect the security interest of the Secured Party therein.
(b) So long as no Event of Default shall have occurred and be continuing:
(i) each Grantor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Equity or any part thereof for any purpose not inconsistent with the terms of this Agreement, the Mezzanine Credit Agreement, or any other Mezzanine Loan Document; and
(ii) each Grantor shall be entitled to receive and retain any and all dividends and distributions paid in respect of the Pledged Equity to the extent permitted under the Mezzanine Credit Agreement.
(c) Upon the occurrence and during the continuance of an Event of Default (and subject in all respects to the Intercreditor Agreement, including the enforcement standstill provisions thereof):
(i) the Secured Party shall have the right to exercise all voting, consent, and other rights and powers pertaining to the Pledged Equity, and each Grantor shall execute and deliver such proxies, powers of attorney, dividend payment orders, and other instruments as the Secured Party may request to effect the foregoing; and
(ii) all dividends and distributions paid or payable in respect of the Pledged Equity shall be paid directly to the Secured Party and, if received by any Grantor, shall be held in trust for the benefit of the Secured Party and shall be immediately delivered to the Secured Party in the exact form received (with any necessary endorsement).
Section 4.10 Notices Regarding Collateral. Each Grantor shall promptly (and in any event within fifteen (15) days) notify the Secured Party in writing of:
(a) any material loss of, damage to, or destruction of any Collateral (including any casualty event affecting Equipment, Vehicles, or real property on which Collateral is located);
(b) any claim, action, proceeding, or investigation by any person affecting title to, or the Secured Party's security interest in, any Collateral, or any assertion by any person of any rights in any Collateral adverse to any Grantor or to the Secured Party;
(c) any commercial tort claim in excess of Two Hundred Fifty Thousand Dollars ($250,000) arising after the date hereof, including a description of such claim sufficient to permit identification thereof, the parties involved, the amount claimed, and, upon request by the Secured Party, such Grantor shall execute a supplement to Schedule IV hereto and grant a security interest in such commercial tort claim pursuant to the terms of this Agreement; and
(d) any material change in the information set forth in any of the Schedules hereto, including any change in the location of Collateral, the opening or closing of deposit accounts or securities accounts, or any change in the intellectual Property of any Grantor.
Section 4.11 Deposit Accounts.
(a) Each Grantor shall maintain its primary operating accounts at the institutions and in the accounts identified on Schedule VII hereto. No Grantor shall open any new deposit account or securities account with any bank or other financial institution without providing prior written notice to the Secured Party (and, in any event, within thirty (30) days of opening such account, updating Schedule VII hereto accordingly).
(b) To the extent required by the Secured Party and not inconsistent with the Intercreditor Agreement, each Grantor shall execute and deliver (or cause to be executed and delivered) a deposit account control agreement or securities account control agreement in form and substance reasonably satisfactory to the Secured Party with respect to any new deposit account or securities account, it being acknowledged and agreed that the Senior Collateral Agent currently maintains control over certain deposit accounts and securities accounts of the Grantors and that the rights of the Secured Party with respect to such accounts are subordinate to the rights of the Senior Collateral Agent in all respects pursuant to the Intercreditor Agreement.
Section 4.12 Insurance.
(a) Each Grantor shall maintain insurance on the Collateral and its business and properties in such types, with such coverages, with such carriers, and with such deductibles as are required under the Mezzanine Credit Agreement and are consistent with the insurance requirements applicable to companies of similar size engaged in the freight transportation industry.
(b) The Secured Party shall be named as an additional loss payee and additional insured (or mortgagee, as applicable), in each case subordinate to the Senior Collateral Agent, on all applicable property, casualty, and liability insurance policies maintained by any Grantor. Each Grantor shall cause its insurance broker or carrier to deliver to the Secured Party, upon request, certificates of insurance, endorsements, and such other evidence of insurance coverage as the Secured Party may reasonably require.
(c) The disposition and application of any insurance proceeds received with respect to any Collateral shall be subject to and governed by the terms and conditions of the Intercreditor Agreement, including the priority of the Senior Collateral Agent to receive and apply insurance proceeds to the Senior Obligations.
ARTICLE V
PERFECTION
Section 5.1 UCC Financing Statements.
(a) Each Grantor hereby authorizes the Secured Party to prepare, execute (to the extent required), and file (or cause to be filed) UCC-1 financing statements (and any amendments, assignments, or continuation statements related thereto) in all appropriate filing offices in the jurisdictions identified below, describing the Collateral in such manner as the Secured Party may determine in its reasonable discretion (which description may include "all assets" or such more specific descriptions as may be required or desirable under applicable law):
(i) Delaware Secretary of State (400 Federal Street, Suite 4, Dover, Delaware 19901): UCC-1 financing statements naming the following as debtors:
• Stonefield Logistics Group Inc. (Debtor);
• Stonefield Freight Brokerage, Inc. (Debtor); and