PARENT EQUITY PLEDGE AGREEMENT
EXECUTION VERSION
Dated as of September 14, 2023
By
CASCADE RIDGE SLG HOLDINGS, LLC a Delaware limited liability company
as Pledgor
in favor of
RIDGELINE MEZZANINE CAPITAL FUND III, LP a Delaware limited partnership
as Secured Party
Made in connection with the Mezzanine Credit Agreement, dated as of September 14, 2023, among Stonefield Logistics Group Inc., a Delaware corporation, as Borrower, Ridgeline Mezzanine Capital Fund III, LP, as Mezzanine Lender, and the guarantors party thereto
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This PARENT EQUITY PLEDGE AGREEMENT (this "Agreement") is made and entered into as of September 14, 2023, by CASCADE RIDGE SLG HOLDINGS, LLC, a Delaware limited liability company (the "Pledgor"), in favor of RIDGELINE MEZZANINE CAPITAL FUND III, LP, a Delaware limited partnership (the "Secured Party" or "Mezzanine Lender").
RECITALS
WHEREAS:
A. Cascade Ridge SLG Holdings, LLC is a limited liability company duly organized and validly existing under the laws of the State of Delaware and is the direct parent and sole holder of one hundred percent (100%) of the issued and outstanding equity interests (the "Pledged Equity") of Stonefield Logistics Group Inc., a Delaware corporation ("Stonefield," the "Company," or the "Issuer").
B. Cascade Ridge SLG Holdings, LLC holds its ownership interest in Stonefield, through which Cascade Ridge Capital Partners, LLC, a Delaware limited liability company, and Cascade Ridge Capital Fund V, LP, a Delaware limited partnership, hold their indirect seventy-eight and four-tenths percent (78.4%) ownership interest in Stonefield. Cascade Ridge SLG Holdings, LLC is the record and beneficial owner of one hundred percent (100%) of the issued and outstanding shares of capital stock of Stonefield.
C. Stonefield, as Borrower, has entered into that certain Mezzanine Credit Agreement, dated as of September 14, 2023 (the "Mezzanine Credit Agreement"), with Ridgeline Mezzanine Capital Fund III, LP, as Mezzanine Lender, and the guarantors party thereto, providing for a mezzanine term loan in the aggregate principal amount of One Hundred Twenty Million Dollars ($120,000,000) (the "Mezzanine Loan").
D. Cascade Ridge SLG Holdings, LLC is a guarantor under that certain Mezzanine Guaranty Agreement, dated as of September 14, 2023 (the "Mezzanine Guaranty Agreement"), made by the Pledgor, Stonefield Intermodal Services, Inc., Stonefield Fleet Management, LLC, and Stonefield Freight Brokerage, Inc. in favor of Ridgeline Mezzanine Capital Fund III, LP.
E. The Pledgor's execution and delivery of this Parent Equity Pledge Agreement is a condition precedent to the funding of the Mezzanine Loan under the Mezzanine Credit Agreement. The Pledgor will derive substantial direct and indirect benefit from the Mezzanine Loan proceeds being made available to Stonefield, including the benefit to the Pledgor as the sole equity holder of Stonefield of Stonefield's access to the capital provided by the Mezzanine Loan, and the Pledgor acknowledges that the execution and delivery of this Agreement is in the best interests of the Pledgor.
F. This pledge of the equity interests in Stonefield is granted on a first-priority basis exclusively to Ridgeline Mezzanine Capital Fund III, LP and is not shared with the senior secured lenders under the Amended and Restated Credit Agreement, dated as of April 7, 2022 (originally dated November 15, 2019), among Stonefield, Whitmore National Bank, N.A., as Administrative Agent and Collateral Agent, and the lenders party thereto, as amended by Amendment No. 1, dated March 22, 2021, Amendment No. 2, dated January 10, 2023, and Amendment No. 3, dated September 14, 2023 (as so amended and as further amended, restated, supplemented, or otherwise modified from time to time, the "Senior Credit Agreement"). The collateral package under the Senior Credit Agreement does not include a pledge by the Pledgor of equity interests in Stonefield at the parent level, and the senior secured lenders do not hold any lien on, or security interest in, the Pledged Equity.
G. Reference is made to that certain Intercreditor Agreement, dated as of September 14, 2023 (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. The Pledgor and the Secured Party acknowledge and agree that the parent equity pledge granted hereunder is excluded from the shared collateral subject to the Intercreditor Agreement and is not subject to the lien subordination provisions, standstill provisions, or any other limitations on enforcement set forth in the Intercreditor Agreement. The Secured Party's first-priority lien on the Pledged Equity exists independently of, and is not governed by, the Intercreditor Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Pledgor agrees as follows:
ARTICLE I — DEFINITIONS
Section 1.01 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below:
"Agreement" means this Parent Equity Pledge Agreement, as amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms hereof.
"Borrower" or "Company" or "Issuer" means Stonefield Logistics Group Inc., a Delaware corporation (EIN: 84-3217650), with its headquarters at 4800 Commerce Parkway, Suite 1200, Fort Worth, Texas 76107, and its registered agent at Pinnacle Corporate Services, Inc., 1209 Orange Street, Wilmington, Delaware 19801.
"Collateral" has the meaning assigned to such term in Section 2.01.
"Event of Default" means an "Event of Default" as defined in the Mezzanine Credit Agreement.
"Intercreditor Agreement" means the Intercreditor Agreement, dated as of September 14, 2023, 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., as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Mezzanine Credit Agreement" means the 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, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms and the terms of the Intercreditor Agreement.
"Mezzanine Guaranty Agreement" means the Mezzanine Guaranty Agreement, dated as of September 14, 2023, by Cascade Ridge SLG Holdings, LLC, Stonefield Intermodal Services, Inc., Stonefield Fleet Management, LLC, and Stonefield Freight Brokerage, Inc. in favor of Ridgeline Mezzanine Capital Fund III, LP, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Mezzanine Loan" means the mezzanine term loan in the aggregate principal amount of One Hundred Twenty Million Dollars ($120,000,000) made available to the Borrower pursuant to the Mezzanine Credit Agreement.
"Mezzanine Loan Documents" means, collectively, the Mezzanine Credit Agreement, the Mezzanine Guaranty Agreement, this Agreement, the Mezzanine Pledge and Security Agreement, the Warrant Agreement, and all other agreements, instruments, certificates, and documents executed and delivered in connection with the Mezzanine Loan or the Mezzanine Credit Agreement, in each case as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Mezzanine Pledge and Security Agreement" means the Pledge and Security Agreement, dated as of September 14, 2023, made by Stonefield Logistics Group Inc. and the subsidiary guarantors in favor of Ridgeline Mezzanine Capital Fund III, LP, granting second-priority security interests in the assets of Stonefield and its subsidiaries, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Permitted Liens" has the meaning assigned to such term in the Mezzanine Credit Agreement.
"Pledged Equity" means one hundred percent (100%) of the issued and outstanding shares of capital stock (or other equity interests) of Stonefield Logistics Group Inc. owned by the Pledgor, as more particularly described on Schedule I hereto, together with (a) all certificates and instruments representing or evidencing such equity interests, (b) all rights to dividends, distributions, cash, instruments, and other property received or receivable in respect thereof, (c) all additional shares of capital stock or other equity interests in the Issuer hereafter acquired by the Pledgor, including by way of stock dividend, stock split, reclassification, merger, consolidation, or similar event, and (d) all proceeds (as defined in the UCC) of any and all of the foregoing.
"Pledgor" means Cascade Ridge SLG Holdings, LLC, a Delaware limited liability company (EIN: 84-3195472).
"Secured Obligations" means all obligations of the Borrower and the guarantors (including the Pledgor) under or in connection with the Mezzanine Credit Agreement, the Mezzanine Guaranty Agreement, this Agreement, and all other Mezzanine Loan Documents, whether now existing or hereafter arising, including without limitation (a) the principal amount of the Mezzanine Loan (One Hundred Twenty Million Dollars ($120,000,000)), (b) interest thereon at the applicable rate (consisting of eight hundred fifty (850) basis points of cash-pay interest and two hundred fifty (250) basis points of payment-in-kind ("PIK") interest, for a total rate of one thousand one hundred (1,100) basis points), (c) all fees payable under or in connection with the Mezzanine Loan Documents, including the commitment fee of Two Million Four Hundred Thousand Dollars ($2,400,000), (d) all expenses and indemnification obligations, and (e) all other amounts payable by the Borrower or any guarantor (including the Pledgor) under or in connection with any Mezzanine Loan Document, in each case whether for principal, interest, fees, expenses, indemnification, or otherwise, and whether or not allowed or allowable as a claim in any proceeding under any debtor relief law.
"Secured Party" means Ridgeline Mezzanine Capital Fund III, LP, a Delaware limited partnership, whose general partner is Ridgeline Capital Management, LLC, with its principal office at 767 Lexington Avenue, 22nd Floor, New York, New York 10065.
"Senior Agent" means Whitmore National Bank, N.A., in its capacity as Administrative Agent and Collateral Agent under the Senior Credit Agreement.
"Senior Credit Agreement" means the Amended and Restated Credit Agreement, dated as of April 7, 2022 (originally dated November 15, 2019), among Stonefield Logistics Group Inc., Whitmore National Bank, N.A., as Administrative Agent and Collateral Agent, and the lenders party thereto, as amended by Amendment No. 1, dated March 22, 2021, Amendment No. 2, dated January 10, 2023, and Amendment No. 3, dated September 14, 2023, and as further amended, restated, supplemented, or otherwise modified from time to time.
"Termination Date" means the date on which (a) all Secured Obligations have been indefeasibly paid and performed in full in cash (other than contingent indemnification obligations for which no claim has been asserted) and (b) the commitments under the Mezzanine Credit Agreement have been permanently terminated.
"UCC" means the Uniform Commercial Code as in effect from time to time in the State of New York; provided, however, that if, by reason of mandatory provisions of law, the perfection, the effect of perfection or non-perfection, or the priority of the security interest in any item or portion of the Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York (including, without limitation, the State of Delaware as the jurisdiction of the Pledgor's organization), then "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.
"Warrant Agreement" means the Warrant Agreement, dated as of September 29, 2023, between Stonefield Logistics Group Inc. and Ridgeline Mezzanine Capital Fund III, LP, providing for the issuance to Ridgeline of warrants representing three percent (3.0%) of the fully-diluted equity of Stonefield on a post-exercise basis at an exercise price of $0.01 per share.
All capitalized terms used herein and not otherwise defined herein shall have the respective meanings ascribed to such terms in the Mezzanine Credit Agreement.
Section 1.02 — UCC Terms
Terms used in this Agreement and not otherwise defined herein or in the Mezzanine Credit Agreement that are defined in Article 8 or Article 9 of the UCC shall have the respective meanings ascribed to such terms therein. Without limiting the generality of the foregoing, the terms "account debtor," "certificated security," "control," "deposit account," "entitlement holder," "financial asset," "investment property," "proceeds," "securities account," "securities intermediary," "security," "security entitlement," and "uncertificated security" shall have the meanings set forth in Article 8 or Article 9 of the UCC, as applicable.
Section 1.03 — Rules of Construction
Unless the context otherwise requires: (a) references to "Articles," "Sections," "Schedules," and "Exhibits" are references to Articles, Sections, Schedules, and Exhibits of this Agreement; (b) all Section headings and captions are for convenience of reference only and shall not be considered in the interpretation of this Agreement; (c) the word "including" means "including without limitation" and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it; (d) the singular includes the plural, and the plural includes the singular; (e) references to any law, statute, or regulation shall be deemed to refer to such law, statute, or regulation as amended, modified, supplemented, or replaced from time to time; (f) references to any agreement or instrument shall be deemed to refer to such agreement or instrument as amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms; and (g) this Agreement shall be governed and interpreted in accordance with the laws of the State of New York as provided in Section 9.04.
ARTICLE II — PLEDGE AND GRANT OF SECURITY INTEREST
Section 2.01 — Pledge
The Pledgor hereby pledges, assigns, hypothecates, and grants to the Secured Party a first-priority continuing security interest in and lien upon all of the Pledgor's right, title, and interest in, to, and under the following, whether now owned or existing or hereafter acquired or arising and wherever located (collectively, the "Collateral"):
(a) Pledged Equity: One hundred percent (100%) of the issued and outstanding shares of capital stock of Stonefield Logistics Group Inc. (as more particularly described on Schedule I hereto), including all certificates and instruments representing or evidencing such equity interests;
(b) Distributions and Dividends: All dividends, distributions (whether in cash, property, or securities), interest, and other payments and rights now or hereafter received or receivable in respect of the Pledged Equity, together with all rights to receive any of the foregoing;
(c) Additional Equity: Any additional shares of capital stock or other equity interests in Stonefield hereafter acquired by the Pledgor, by purchase, stock dividend, stock split, reverse stock split, reclassification, recapitalization, merger, consolidation, exchange, conversion, or any other means, including any equity interests received in substitution or exchange for any of the foregoing;
(d) Voting Rights: All voting and consensual rights and powers appurtenant to the Pledged Equity, including all rights to vote, give consents, waivers, and ratifications, and to participate in the management of the Issuer (in each case, subject to the provisions of Section 5.01 hereof);
(e) Proceeds: All proceeds (as defined in the UCC) of any and all of the foregoing, in whatever form, including cash proceeds, non-cash proceeds, insurance proceeds, and any property received upon the sale, exchange, collection, or other disposition of any of the foregoing, and any and all amounts from time to time paid or payable under or in connection with any of the foregoing.
Section 2.02 — Security for Obligations
The Collateral secures the prompt and complete payment and performance of all Secured Obligations, whether now existing or hereafter arising, absolute or contingent, matured or unmatured, direct or indirect, including all renewals, extensions, amendments, refinancings, and refundings of any of the foregoing.
Section 2.03 — Priority; Exclusion from Shared Collateral
The security interest granted herein is intended to be, and shall be, a first-priority perfected security interest in the Collateral, not subject to any prior lien, pledge, security interest, or encumbrance of any kind. The Pledgor and the Secured Party expressly acknowledge and agree as follows:
(a) This parent equity pledge is not included in the shared collateral package under the Intercreditor Agreement and is not subject to the lien subordination provisions, standstill provisions, turnover provisions, or any other limitations on enforcement set forth in the Intercreditor Agreement. The Intercreditor Agreement governs the relative priorities and rights of the Senior Agent and the Mezzanine Lender with respect to certain collateral consisting of assets of Stonefield and its subsidiaries (the "Shared Collateral"), but expressly excludes the parent-level equity pledge granted hereunder from the definition of Shared Collateral.
(b) The senior secured lenders under the Senior Credit Agreement do not hold any lien on, security interest in, or other encumbrance upon the Pledged Equity, and the Secured Party's lien herein ranks first in priority without subordination to any lien of any other person. The Senior Credit Agreement collateral package is limited to assets of the Borrower and its subsidiaries and does not extend to equity interests in Stonefield held at the parent level by the Pledgor.
(c) The security interest granted hereunder is to be distinguished from the second-priority liens granted under the Mezzanine Pledge and Security Agreement on the assets of Stonefield and its subsidiaries, which second-priority liens are expressly subject to the terms and conditions of the Intercreditor Agreement. The first-priority nature of the lien hereunder is a material inducement to the Secured Party's agreement to extend the Mezzanine Loan.
Section 2.04 — Continuing Security Interest
The pledge and security interest granted hereunder shall remain in full force and effect until the Termination Date. Upon the occurrence of the Termination Date, the security interest granted hereunder shall automatically terminate and be released in accordance with Section 9.10, and all rights to the Collateral shall revert to the Pledgor. Until the Termination Date, the security interest granted hereunder shall be a continuing security interest and shall not be affected by any intermediate payment or settlement of, or any change in the amount, rate, or terms of, the Secured Obligations.
ARTICLE III — DELIVERY OF COLLATERAL
Section 3.01 — Delivery of Certificates
(a) The Pledgor shall, concurrently with the execution and delivery of this Agreement, deliver to the Secured Party (or to such person as the Secured Party may designate) all certificates representing the Pledged Equity, together with undated stock powers or other instruments of transfer duly executed in blank by the Pledgor, in the form attached hereto as Exhibit A. The Pledgor represents that the Pledged Equity is currently represented by one or more certificates, and that all such certificates are being delivered to the Secured Party contemporaneously with the execution of this Agreement.
(b) If any Pledged Equity hereafter becomes certificated (including any additional shares or equity interests acquired by the Pledgor after the date hereof), the Pledgor shall promptly deliver to the Secured Party all certificates representing such interests, together with undated stock powers or instruments of transfer duly executed in blank by the Pledgor.
(c) If any Pledged Equity is or becomes uncertificated, the Pledgor shall cause the Issuer to register the pledge on its books and records in favor of the Secured Party and shall take, and shall cause the Issuer to take, all steps necessary to perfect the Secured Party's security interest in such uncertificated interests, including without limitation (i) delivery of an acknowledgment of pledge in form and substance satisfactory to the Secured Party, (ii) execution and delivery of a control agreement as may be applicable under Article 8 of the UCC, and (iii) any other action required under applicable law to ensure that the Secured Party has a first-priority perfected security interest in such uncertificated interests.
(d) The Secured Party shall have no obligation to take any steps necessary to preserve rights against prior parties with respect to any certificates or instruments delivered hereunder.
Section 3.02 — Financing Statements
(a) The Pledgor hereby authorizes the Secured Party to prepare, execute (to the extent permitted by law without the Pledgor's signature), and file one or more UCC-1 financing statements (and continuation statements, amendments, and other filings as may be necessary or desirable) in the jurisdiction of the Pledgor's organization (the Delaware Secretary of State) and any other appropriate jurisdiction, describing the Collateral. The Pledgor agrees that the Secured Party may file such financing statements without the Pledgor's signature to the extent permitted by applicable law, including Section 9-509 of the UCC.
(b) For purposes of such UCC filings:
(i) The Pledgor's exact legal name: Cascade Ridge SLG Holdings, LLC
(ii) Jurisdiction of organization: Delaware
(iii) Type of organization: Limited Liability Company
(iv) Organizational identification number: As set forth on Schedule II hereto.
(c) The Pledgor shall promptly execute and deliver to the Secured Party such financing statements, amendments, and continuation statements, and such other instruments and documents, as the Secured Party may from time to time reasonably request to maintain the perfection and priority of the security interest granted hereunder.
Section 3.03 — Further Assurances
The Pledgor shall, at its own cost and expense, execute and deliver to the Secured Party such additional instruments, documents, and agreements, and take such further actions, as the Secured Party may from time to time reasonably request, in order to perfect, protect, and maintain the first-priority security interest granted hereunder, including without limitation (a) control agreements, (b) acknowledgments from the Issuer, (c) additional UCC filings in any jurisdiction, (d) opinions of counsel, and (e) any other filings or registrations that the Secured Party may reasonably determine to be necessary or desirable. The Pledgor shall bear all costs and expenses (including reasonable attorneys' fees and filing fees) incurred in connection with the foregoing.
ARTICLE IV — REPRESENTATIONS AND WARRANTIES
The Pledgor hereby represents and warrants to the Secured Party, as of the date hereof and as of the date of funding of the Mezzanine Loan, as follows:
Section 4.01 — Organization and Good Standing
The Pledgor is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware. The Pledgor has all requisite limited liability company power and authority to own its properties and assets and to conduct its business as currently conducted.
Section 4.02 — Power and Authority
The Pledgor has full limited liability company power and authority to execute, deliver, and perform its obligations under this Agreement, to pledge the Collateral as provided herein, and to consummate the transactions contemplated hereby.
Section 4.03 — Due Authorization
The execution, delivery, and performance of this Agreement by the Pledgor and the pledge of the Collateral hereunder have been duly authorized by all necessary limited liability company action of the Pledgor, including the approval of Cascade Ridge Capital Partners, LLC as the managing member of the Pledgor. No other limited liability company proceedings on the part of the Pledgor or its members are necessary to authorize the execution, delivery, and performance of this Agreement or the consummation of the transactions contemplated hereby.
Section 4.04 — Enforceability
This Agreement has been duly executed and delivered by the Pledgor and constitutes the legal, valid, and binding obligation of the Pledgor, enforceable against the Pledgor in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and similar laws affecting creditors' rights generally, and to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
Section 4.05 — No Conflicts
The execution, delivery, and performance of this Agreement by the Pledgor and the pledge of the Collateral hereunder do not and will not (a) conflict with or violate the Pledgor's certificate of formation or limited liability company agreement, (b) conflict with or violate any applicable law, rule, regulation, order, judgment, or decree binding upon the Pledgor, (c) result in a breach of, or constitute a default (with or without notice or lapse of time, or both) under, any material agreement, contract, or instrument to which the Pledgor is a party or by which the Pledgor or any of its properties is bound, including the Senior Credit Agreement as amended by Amendment No. 3, dated September 14, 2023, or (d) result in the creation or imposition of any lien, pledge, security interest, or encumbrance upon the Pledged Equity other than the lien created by this Agreement. The Senior Credit Agreement, as amended by Amendment No. 3, specifically permits the incurrence of the Mezzanine Loan indebtedness and the grant of this first-priority parent equity pledge in favor of the Secured Party.
Section 4.06 — Ownership of Pledged Equity
The Pledgor is the sole record and beneficial owner of one hundred percent (100%) of the issued and outstanding equity interests in Stonefield, free and clear of all liens, encumbrances, security interests, pledges, charges, options, warrants, rights of first refusal, buy-sell arrangements, put or call agreements, restrictions on transfer, claims, and demands of every kind and nature whatsoever, other than (a) the lien and security interest created by this Agreement in favor of the Secured Party, (b) Permitted Liens (as defined in the Mezzanine Credit Agreement), and (c) restrictions on transfer imposed by applicable federal and state securities laws. The Pledgor's ownership percentage is one hundred percent (100%) of the issued and outstanding shares or interests in Stonefield on the date hereof.
Section 4.07 — Title and Priority
The Pledgor has good and marketable title to the Pledged Equity. Upon delivery of certificates representing the Pledged Equity to the Secured Party together with duly executed stock powers in blank, and the filing of UCC-1 financing statements in the appropriate jurisdictions, the Secured Party will have a valid, first-priority perfected security interest in the Pledged Equity, superior in right and priority to any lien, claim, or interest of any other person, subject only to Permitted Liens. No filing, registration, recordation, or other action is required to perfect the security interest of the Secured Party in the Pledged Equity other than (a) the filing of UCC-1 financing statements in the office of the Secretary of State of the State of Delaware, (b) delivery of certificates together with duly executed stock powers, and (c) such other actions as are being taken concurrently with the execution of this Agreement.
Section 4.08 — No Other Pledges
The Pledged Equity has not been pledged, assigned, hypothecated, or otherwise encumbered in favor of any other person. Without limiting the foregoing, the Pledged Equity is not subject to any pledge, lien, security interest, encumbrance, or other claim under the Senior Credit Agreement, any other senior lending facility, or any other agreement or arrangement. No other person (other than the Secured Party) has been granted any rights in or to the Pledged Equity or any interest therein, whether by way of security interest, pledge, option, right of first refusal, co-sale right, or otherwise.
Section 4.09 — Consents and Approvals
No consent, approval, authorization, order, registration, filing, or qualification of or with any governmental authority, the Issuer, any member or manager of the Pledgor, or any other person is required for (a) the pledge and grant of security interest hereunder, (b) the execution, delivery, or performance of this Agreement by the Pledgor, or (c) the exercise by the Secured Party of its rights and remedies hereunder, except (i) those that have been duly obtained on or prior to the date hereof, including the Senior Agent Consent dated September 5, 2023, and the approval reflected in Amendment No. 3 to the Senior Credit Agreement dated September 14, 2023, (ii) filings of UCC financing statements in the appropriate jurisdictions, and (iii) any consents or approvals that may be required under applicable federal or state securities laws in connection with a disposition of the Pledged Equity upon the exercise of remedies following an Event of Default.
Section 4.10 — Litigation
There are no actions, suits, investigations, or proceedings pending or, to the Pledgor's knowledge after due inquiry, threatened against the Pledgor or any of its affiliates, at law or in equity, before or by any court, arbitrator, governmental body, agency, or official, that (a) would reasonably be expected to materially adversely affect the Pledgor's ability to perform its obligations under this Agreement, (b) challenge or seek to invalidate the pledge or security interest created hereunder, or (c) question the validity or enforceability of this Agreement or any other Mezzanine Loan Document to which the Pledgor is a party.
Section 4.11 — Location and Identification
The following information regarding the Pledgor is true, correct, and complete as of the date hereof:
(a) Chief executive office: 200 Clarendon Boulevard, 38th Floor, Boston, Massachusetts 02116 (being the same address as Cascade Ridge Capital Partners, LLC).
(b) Jurisdiction of organization: Delaware.
(c) Exact legal name as it appears in the Pledgor's certificate of formation filed with the Secretary of State of the State of Delaware: Cascade Ridge SLG Holdings, LLC.
(d) Employer Identification Number (EIN): 84-3195472.
(e) Organizational identification number: As set forth on Schedule II.
Section 4.12 — Issuer Information
Stonefield Logistics Group Inc. is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware. The following information regarding the Issuer is true, correct, and complete as of the date hereof:
(a) EIN: 84-3217650.
(b) Registered agent: Pinnacle Corporate Services, Inc., 1209 Orange Street, Wilmington, Delaware 19801.
(c) Headquarters: 4800 Commerce Parkway, Suite 1200, Fort Worth, Texas 76107.
(d) The authorized capital stock, and the number of issued and outstanding shares, of the Issuer are as set forth on Schedule I hereto, and such information is true, correct, and complete in all respects. All issued and outstanding shares have been duly authorized and are validly issued, fully paid, and non-assessable.
(e) There are no outstanding options, warrants, or other rights to acquire equity interests in the Issuer, other than the warrants issued pursuant to the Warrant Agreement.
Section 4.13 — Warrant Dilution Acknowledgment
The Pledgor acknowledges and agrees that, pursuant to the Warrant Agreement dated as of September 29, 2023, Ridgeline Mezzanine Capital Fund III, LP has been granted warrants to purchase shares of common stock of Stonefield representing three percent (3.0%) of the fully-diluted equity of Stonefield on a post-exercise basis, at an exercise price of $0.01 per share. The Pledgor's representations herein regarding its ownership of one hundred percent (100%) of the issued and outstanding equity interests in Stonefield are made on a pre-exercise basis only. Following any exercise of the warrants by Ridgeline, the Pledgor's percentage ownership of the outstanding equity interests in Stonefield will be diluted accordingly. The pledge of the Pledged Equity hereunder shall extend to all equity interests owned by the Pledgor in Stonefield both before and after any such dilution, and shall not be deemed to include equity interests acquired by Ridgeline upon exercise of the warrants.
ARTICLE V — COVENANTS
The Pledgor hereby covenants and agrees with the Secured Party as follows:
Section 5.01 — Voting Rights
(a) Prior to Event of Default. Unless and until an Event of Default shall have occurred and be continuing, the Pledgor shall be entitled to exercise all voting and consensual rights and powers pertaining to the Pledged Equity for any purpose not inconsistent with the terms of this Agreement, the Mezzanine Credit Agreement, or any other Mezzanine Loan Document, and for any purpose that would not impair or adversely affect the value of the Pledged Equity or the Secured Party's rights hereunder. Without limiting the foregoing, the Pledgor shall not exercise any voting rights in a manner that would constitute or result in a breach of any covenant, representation, or warranty contained in this Agreement, the Mezzanine Credit Agreement, or any other Mezzanine Loan Document.
(b) Upon Event of Default. Upon the occurrence and during the continuance of an Event of Default, the Secured Party shall have the right, upon written notice to the Pledgor (which notice need not specify the manner in which the Secured Party intends to exercise such rights), to exercise all voting and consensual rights and powers pertaining to the Pledged Equity, including the right to vote at any regular or special meeting of stockholders, to execute written consents in lieu of meetings, and to take all other action that the Pledgor would otherwise be entitled to take as the holder of the Pledged Equity. The Pledgor hereby irrevocably grants to the Secured Party a proxy, coupled with an interest, to vote the Pledged Equity during the continuance of an Event of Default. The Pledgor shall execute and deliver to the Secured Party such additional proxies, voting agreements, or other documents as the Secured Party may reasonably request to effectuate the foregoing.
Section 5.02 — Dividends and Distributions
(a) Prior to Event of Default. Unless and until an Event of Default shall have occurred and be continuing, the Pledgor shall be entitled to receive and retain all dividends and distributions from Stonefield in respect of the Pledged Equity, to the extent that such dividends and distributions are permitted under the Mezzanine Credit Agreement (including without limitation the restricted payments covenant set forth therein) and the Senior Credit Agreement.
(b) Upon Event of Default. Upon the occurrence and during the continuance of an Event of Default, all dividends, distributions, interest, and other payments in respect of the Pledged Equity, whether in cash, property, securities, or otherwise, shall be paid directly to, or as directed by, the Secured Party, and shall be applied by the Secured Party to the Secured Obligations in such order and manner as the Secured Party shall determine in its sole discretion, in accordance with Section 6.04. If the Pledgor receives any such dividends, distributions, or payments during the continuance of an Event of Default, the Pledgor shall hold the same in trust for the benefit of the Secured Party and shall promptly deliver the same to the Secured Party in the form received (duly endorsed or assigned, if applicable).
Section 5.03 — Maintenance of Pledge
(a) The Pledgor shall not sell, assign, transfer, convey, exchange, or otherwise dispose of the Pledged Equity (or any interest therein), or agree to do any of the foregoing, without the prior written consent of the Secured Party, except as expressly permitted under the Mezzanine Credit Agreement.
(b) The Pledgor shall not create, incur, assume, or permit to exist any lien, pledge, security interest, charge, encumbrance, or other claim on or with respect to the Pledged Equity, or any interest therein, other than (i) the lien and security interest created by this Agreement in favor of the Secured Party and (ii) Permitted Liens (as defined in the Mezzanine Credit Agreement), which, for the avoidance of doubt, do not include any lien in favor of the senior secured lenders under the Senior Credit Agreement with respect to the Pledged Equity.
(c) The Pledgor shall not enter into any agreement or arrangement that would restrict or impair the Pledgor's ability to perform its obligations under this Agreement or the Secured Party's ability to exercise its rights and remedies hereunder.
Section 5.04 — Defense of Title
The Pledgor shall defend the Collateral against, and take such other action as is necessary to remove, any claims, demands, liens, encumbrances, or security interests of all persons at any time claiming any interest in the Collateral adverse to the Secured Party, and shall indemnify the Secured Party against all losses, costs, and expenses (including reasonable attorneys' fees) incurred in connection therewith.
Section 5.05 — Notification of Changes
The Pledgor shall provide the Secured Party with at least thirty (30) days' prior written notice of any change in:
(a) the Pledgor's legal name;
(b) the Pledgor's jurisdiction of organization;
(c) the Pledgor's organizational identification number; or
(d) the location of the Pledgor's chief executive office.
The Pledgor shall not effect any such change unless (i) it has provided such prior written notice to the Secured Party, and (ii) all filings, recordings, and other actions necessary to maintain the first-priority perfected security interest of the Secured Party in the Collateral have been made or taken prior to or concurrently with such change, at the Pledgor's sole cost and expense. The Pledgor shall promptly execute and deliver all additional financing statements, amendments, and other documents that the Secured Party may reasonably request in connection with any such change.
Section 5.06 — After-Acquired Equity
If the Pledgor shall at any time acquire any additional equity interests in Stonefield (including by way of stock dividend, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation, or otherwise), such additional equity interests shall automatically and without further action be subject to the pledge and security interest granted hereunder, and the Pledgor shall:
(a) promptly deliver to the Secured Party all certificates (if any) representing such additional equity interests, together with undated stock powers or instruments of transfer duly executed in blank by the Pledgor;
(b) promptly execute and deliver to the Secured Party a supplemental schedule to Schedule I hereto, in the form of the Joinder attached hereto as Exhibit B, reflecting such additional equity interests; and
(c) take all other action as may be necessary or desirable to perfect the Secured Party's first-priority security interest therein.
Section 5.07 — Change of Control Provisions
(a) The Pledgor acknowledges that a "change of control" under the Mezzanine Credit Agreement includes, among other triggers:
(i) any person or group (other than Cascade Ridge Capital Partners, LLC and its affiliates) acquiring, directly or indirectly, beneficial ownership of more than fifty percent (50%) of the outstanding voting equity interests of Stonefield;
(ii) Stonefield ceasing to be a direct wholly-owned subsidiary of the Pledgor (other than as a result of the exercise of the warrants granted under the Warrant Agreement); or
(iii) a sale of all or substantially all of the assets of Stonefield and its subsidiaries, taken as a whole, to any person or group other than the Pledgor or its affiliates.
(b) The Pledgor acknowledges and agrees that, upon the occurrence of a change of control, the Mezzanine Credit Agreement requires the mandatory prepayment of the Mezzanine Loan at a price equal to one hundred three percent (103%) of the outstanding principal amount thereof, plus all accrued and unpaid interest (including PIK interest), fees, and other amounts owing under the Mezzanine Loan Documents, and that the warrants issued pursuant to the Warrant Agreement shall become immediately puttable at the election of the Secured Party at their then-current fair market value.
(c) The Pledgor shall not take, or permit to be taken, any action that would constitute or result in a change of control without prior compliance with the mandatory prepayment provisions of the Mezzanine Credit Agreement and receipt of the prior written consent of the Secured Party to the extent required under the Mezzanine Loan Documents.
Section 5.08 — Compliance with Organizational Documents
The Pledgor shall at all times comply with, and shall cause Stonefield to comply with, their respective certificates of formation or incorporation, limited liability company agreements, bylaws, or other organizational documents, as applicable. The Pledgor shall not amend, modify, supplement, restate, or waive any provision of the organizational documents of Stonefield in any manner that would (a) materially adversely affect the Secured Party's rights under this Agreement or any other Mezzanine Loan Document, (b) materially impair the value of the Pledged Equity, (c) restrict or limit the transferability of the Pledged Equity (except as may be required by applicable securities laws), or (d) otherwise materially impair the ability of the Secured Party to exercise its rights and remedies hereunder, in each case without the prior written consent of the Secured Party (which consent shall not be unreasonably withheld, conditioned, or delayed).
Section 5.09 — Cooperation
The Pledgor shall cooperate with the Secured Party in obtaining any necessary UCC searches, lien searches, filings, amendments, and continuation statements in the State of Delaware and any other jurisdiction, and shall promptly furnish to the Secured Party such information regarding the Pledgor, the Issuer, and the Pledged Equity as the Secured Party may from time to time reasonably request. Without limiting the foregoing, the Pledgor shall, upon request by the Secured Party, provide updated capitalization tables, organizational charts, and evidence of good standing of the Pledgor and the Issuer.
ARTICLE VI — REMEDIES UPON DEFAULT
Section 6.01 — Event of Default
An "Event of Default" for purposes of this Agreement shall mean any Event of Default as defined in the Mezzanine Credit Agreement, including without limitation (a) failure to pay principal or interest on the Mezzanine Loan when due, (b) breach of any financial covenant, negative covenant, or affirmative covenant set forth in the Mezzanine Credit Agreement, (c) any cross-default or cross-acceleration with respect to indebtedness of the Borrower or any guarantor in excess of the threshold amount specified in the Mezzanine Credit Agreement, (d) any representation or warranty made by the Borrower, the Pledgor, or any other guarantor in the Mezzanine Loan Documents proving to have been materially incorrect when made, (e) any bankruptcy, insolvency, reorganization, or similar event affecting the Borrower, the Pledgor, or any material subsidiary, (f) any judgment default in excess of the threshold amount specified in the Mezzanine Credit Agreement, (g) a change of control, and (h) any default under this Agreement.
Section 6.02 — Rights and Remedies
Upon the occurrence and during the continuance of an Event of Default, the Secured Party shall have, in addition to all other rights and remedies granted to it under this Agreement, all rights and remedies of a secured party under the UCC and under other applicable law, including without limitation the following:
(a) Foreclosure and Sale. The Secured Party may sell, assign, or otherwise dispose of the Pledged Equity, or any part thereof, at public or private sale, for cash, upon credit, or for future delivery, on such commercially reasonable terms and conditions as the Secured Party may determine, upon at least ten (10) Business Days' prior written notice to the Pledgor (which the Pledgor acknowledges and agrees is commercially reasonable notice) or such shorter period as may be required or permitted by applicable law. The Secured Party may purchase the Pledged Equity at any public sale, and may purchase the Pledged Equity at any private sale if the Pledged Equity is of a type customarily sold in a recognized market or is of a type that is the subject of widely distributed standard price quotations. The Pledgor shall execute and deliver, or cause to be executed and delivered, all assignments, stock powers, transfer instruments, and other documents as may be necessary or reasonably requested by the Secured Party to effect any such sale or disposition.
(b) Strict Foreclosure. The Secured Party may, in its sole discretion, accept or retain the Pledged Equity in full or partial satisfaction of the Secured Obligations, in accordance with UCC Section 9-620 and any other applicable provisions of the UCC or other applicable law, by delivering the required proposal and obtaining any required consent.
(c) Transfer of Pledged Equity. The Secured Party may cause the Pledged Equity to be transferred to and registered in the name of the Secured Party or its designee or nominee on the books and records of the Issuer, and the Issuer is hereby directed to comply with any such request by the Secured Party upon being notified by the Secured Party that an Event of Default has occurred and is continuing.
(d) Exercise of Voting Rights. The Secured Party may exercise all voting and consensual rights pertaining to the Pledged Equity as provided in Section 5.01(b) hereof, including the right to vote, give consents, and take all other actions as the holder of the Pledged Equity.
(e) Collection of Distributions. The Secured Party may receive and collect all dividends, distributions, interest, and other payments in respect of the Pledged Equity and apply the same to the Secured Obligations in accordance with Section 6.04 hereof.
(f) Appointment of Sub-Agents. The Secured Party may appoint one or more sub-agents, designees, or attorneys-in-fact to exercise any of the rights and remedies hereunder on behalf of the Secured Party, and any such appointment shall be subject to the terms of this Agreement.
Section 6.03 — No Duty to Exercise
The Secured Party shall have no obligation to exercise any right or remedy hereunder, to make any demand, to give any notice, or to take any other action to preserve any rights against prior parties, other holders, or any other person in connection with the Collateral. The Secured Party shall not be liable for any failure to collect or realize upon the Collateral, or for any delay in so doing, nor shall it be under any obligation to take any action whatsoever with respect thereto.
Section 6.04 — Application of Proceeds
The proceeds received by the Secured Party from any sale, collection, or other realization upon the Collateral, or any part thereof, shall be applied by the Secured Party in the following order of priority:
(a) First, to pay the reasonable costs and expenses of the Secured Party incurred in connection with the enforcement of this Agreement and the exercise of remedies hereunder, including without limitation reasonable attorneys' fees, court costs, receiver's fees, and other out-of-pocket expenses;
(b) Second, to pay all accrued and unpaid interest (including PIK interest that has been capitalized) on the Secured Obligations, in such order and manner as the Secured Party shall determine;
(c) Third, to pay the outstanding principal amount of the Secured Obligations;
(d) Fourth, to pay all other Secured Obligations then due and owing, including fees, expenses, indemnification obligations, and any other amounts payable under the Mezzanine Loan Documents; and
(e) Fifth, any surplus remaining after the indefeasible payment in full of all Secured Obligations shall be paid to the Pledgor or to such other person as may be entitled thereto under applicable law or as directed by a court of competent jurisdiction.
The Pledgor shall remain liable for any deficiency remaining after the application of proceeds as set forth above.
Section 6.05 — Private Sale Acknowledgment
The Pledgor acknowledges that (a) the Secured Party may be unable to effect a public sale of the Pledged Equity by reason of certain prohibitions contained in the Securities Act of 1933, as amended (the "Securities Act"), and applicable state securities or "blue sky" laws, and that the Secured Party may therefore be compelled to resort to one or more private sales of the Pledged Equity to a restricted group of purchasers, (b) any such private sale may result in prices and terms less favorable to the seller than if such sale were a public sale, and (c) notwithstanding the foregoing, any such private sale shall be deemed to have been made in a commercially reasonable manner, and the Secured Party shall have no obligation to delay the sale of the Pledged Equity for the period of time necessary to permit the Issuer to register the Pledged Equity for public sale under the Securities Act or under applicable state securities laws. The Pledgor agrees that private sales made under such circumstances shall not, by reason of such circumstances, be deemed not to have been made in a commercially reasonable manner.
Section 6.06 — Remedies Cumulative
All rights and remedies of the Secured Party under this Agreement, the UCC, and other applicable law are cumulative and not exclusive of any other rights or remedies that the Secured Party may have under the Mezzanine Credit Agreement, any other Mezzanine Loan Document, or at law or in equity. The exercise of any one right or remedy by the Secured Party shall not preclude the simultaneous or subsequent exercise of any other right or remedy. No failure or delay on the part of the Secured Party in exercising any right or remedy shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy.
Section 6.07 — Note Regarding Intercreditor Agreement
The Pledgor and the Secured Party acknowledge and agree that the remedies under this Agreement with respect to the Pledged Equity are not subject to the standstill, enforcement limitations, or turnover provisions set forth in the Intercreditor Agreement. The Pledged Equity is excluded from the Shared Collateral governed by the Intercreditor Agreement, and accordingly, the Secured Party may exercise its rights and remedies hereunder, including the right to foreclose upon and sell the Pledged Equity, without regard to (a) the one hundred eighty (180)-day enforcement standstill period applicable to Shared Collateral under Section 6 of the Intercreditor Agreement, (b) any requirement to provide notice to or obtain consent from the Senior Agent prior to exercising remedies, or (c) any turnover or waterfall provisions applicable to proceeds of Shared Collateral. The foregoing is without prejudice to the Secured Party's rights and obligations under the Intercreditor Agreement with respect to Shared Collateral.
ARTICLE VII — POWER OF ATTORNEY
Section 7.01 — Appointment
The Pledgor hereby irrevocably constitutes and appoints the Secured Party (and any officer, employee, agent, or designee of the Secured Party) as the Pledgor's true and lawful attorney-in-fact, with full authority in the place and stead of the Pledgor, in the Pledgor's name or otherwise, upon and during the continuance of an Event of Default, to take any and all actions that the Secured Party may deem necessary or appropriate to accomplish the purposes of this Agreement, including without limitation to:
(a) execute, endorse, and deliver any and all instruments, certificates, documents, and agreements relating to the Collateral, including stock powers, transfer instruments, assignments, and proxies;
(b) execute transfers, assignments, and other instruments of conveyance of the Pledged Equity on behalf of the Pledgor;
(c) file UCC financing statements, amendments, continuation statements, and termination statements, and any other filings or registrations with respect to the Collateral, in any applicable jurisdiction;
(d) receive, open, and dispose of mail addressed to the Pledgor relating to the Collateral;
(e) notify any person obligated on or in connection with the Collateral to make payment or delivery to, or to perform for the benefit of, the Secured Party;
(f) take any action necessary to perfect, protect, maintain, or enforce the Secured Party's security interest in the Collateral;
(g) compromise, settle, or adjust any claim, action, or proceeding relating to the Collateral and, in connection therewith, give such discharges and releases as the Secured Party may deem appropriate; and
(h) generally do all things that the Pledgor could do with respect to the Collateral if the Pledgor were the direct owner and holder thereof.
Section 7.02 — Coupled with an Interest
The power of attorney granted in Section 7.01 is coupled with an interest, is irrevocable, and shall not be affected by any subsequent disability or incapacity of the Pledgor or by any act of the Pledgor (including the dissolution or winding up of the Pledgor). Such power of attorney shall remain in full force and effect until the Termination Date. The Pledgor hereby ratifies and confirms all that any such attorney-in-fact may lawfully do or cause to be done by virtue of the power of attorney granted herein.
ARTICLE VIII — INDEMNIFICATION
Section 8.01 — Indemnification by Pledgor