1012-00002 · Stonefield Logistics Group · Term Sheets

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PRELIMINARY TERM SHEET

PROPOSED CONSENSUAL RESTRUCTURING OF STONEFIELD LOGISTICS GROUP INC.

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CONFIDENTIAL — FOR DISCUSSION PURPOSES ONLY

THIS TERM SHEET DOES NOT CONSTITUTE A BINDING AGREEMENT OR AN OFFER OR SOLICITATION OF AN OFFER TO PURCHASE OR SELL SECURITIES. THIS TERM SHEET IS SUBJECT TO THE EXECUTION OF DEFINITIVE DOCUMENTATION ACCEPTABLE TO ALL PARTIES.

Prepared by Calderwood & Harkness LLP, as restructuring counsel to Stonefield Logistics Group Inc., 599 Lexington Avenue, New York, NY 10022. Matter No. 1012-00002. This term sheet is being circulated to all creditor constituencies pursuant to existing confidentiality agreements and non-disclosure agreements among the parties. Privileged and confidential. No distribution or reproduction without prior written consent of Calderwood & Harkness LLP.

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I. OVERVIEW

Transaction Description. This term sheet sets forth the principal terms of a proposed consensual out-of-court restructuring of approximately $485 million in funded debt obligations of Stonefield Logistics Group Inc. ("Stonefield," the "Company," or the "Borrower"), a Delaware corporation headquartered at 4200 Commerce Street, Suite 1500, Dallas, TX 75201. The Company is a portfolio company of Ridgeline Capital Partners Fund III, L.P. (the "Sponsor"). The restructuring is intended to comprehensively address the Company's capital structure, near-term maturity wall, and liquidity constraints through a negotiated, multi-party transaction that preserves going-concern value and avoids the cost, delay, and business disruption associated with a proceeding under chapter 11 of title 11 of the United States Code.

Components of the Restructuring. The proposed restructuring consists of the following integrated components, each of which is more fully described in Section IV below:

(a) Amendment and Extension of the First Lien Term Loan B Facility. The existing First Lien Term Loan B (the "TLB") will be amended to, among other things, extend the maturity date by approximately four years and adjust the applicable interest rate margin, while preserving the outstanding principal balance of $285.0 million.

(b) Amendment, Reduction, and Extension of the Revolving Credit Facility. The existing revolving credit facility (the "Revolver") will be amended to reduce total commitments from $50.0 million to $35.0 million, extend the maturity date, and adjust the applicable interest rate margin, subject to a springing maturity provision tied to the TLB.

(c) New-Money Super-Priority First-Out Term Loan Facility. A new $55.0 million super-priority term loan facility (the "Super-Priority Term Loan") will be established, consisting of a $45.0 million initial draw and a $10.0 million delayed-draw term loan, to provide the Company with incremental liquidity and fund transaction costs.

(d) Equitization of the Mezzanine Notes (Second Lien). The outstanding $140.0 million in aggregate principal amount of 11.50% Senior Secured Second Lien Notes due June 15, 2025 (the "Mezzanine Notes"), together with approximately $8.1 million in accrued and unpaid PIK interest, will be exchanged for a combination of newly issued Series A Preferred Equity and common equity of the Company.

(e) New Cash Equity Contribution by the Sponsor. The Sponsor will contribute $12.5 million in new cash equity to fund transaction costs and provide an additional liquidity cushion to the restructured enterprise.

Objective. The overarching objective of the proposed restructuring is to reduce total funded debt, extend near-term maturities, provide additional liquidity to the Company, and recapitalize the balance sheet — all without a bankruptcy filing. The restructuring is designed to de-lever the Company's balance sheet by approximately $100.1 million through the equitization of the Mezzanine Notes, extend the nearest maturity from December 2024 to December 2027, and provide the Company with sufficient runway to execute its business plan amid the current cyclical downturn in the freight and logistics sector.

Governing Law. All restructuring documentation, including the amended credit agreements, intercreditor agreement, exchange documentation, and related ancillary agreements, shall be governed by the laws of the State of New York, without regard to conflict of laws principles, except as otherwise specified herein with respect to corporate governance instruments governed by the laws of the State of Delaware.

II. THE COMPANY

Full Legal Name. Stonefield Logistics Group Inc.

Entity Type and Formation. Stonefield is a corporation organized and existing under the laws of the State of Delaware. The Company's federal employer identification number (EIN) is 83-2457109, and its Delaware file number is 6341872.

Registered Agent (Delaware). Capitol Registered Agents, Inc., 1209 Orange Street, Wilmington, DE 19801.

Principal Office. 4200 Commerce Street, Suite 1500, Dallas, TX 75201.

Business Description. The Company operates in the transportation and logistics sector, providing a diversified suite of services including freight brokerage, last-mile delivery, and warehousing services. As of the date hereof, the Company employs approximately 3,800 employees and operates across 26 terminals located in 14 states throughout the contiguous United States. The Company's operations are organized into three primary business segments: (i) Freight Brokerage, which arranges transportation of freight shipments through a network of independent carriers; (ii) Last-Mile Delivery, which provides final-stage delivery services for large and heavy goods to residential and commercial consignees; and (iii) Warehousing, which operates distribution and fulfillment centers serving e-commerce and traditional retail customers.

Key Subsidiaries (Guarantors). The following entities are direct or indirect wholly owned subsidiaries of the Company and serve as guarantors under the existing credit facilities. Each such subsidiary will continue as a guarantor under the amended and new credit facilities described in this term sheet:

• Stonefield Logistics Holdings LLC — a Delaware limited liability company and the direct parent holding company of the Company's operating subsidiaries.

• Stonefield Freight Services LLC — a Texas limited liability company and the primary operating subsidiary responsible for freight brokerage operations.

• Stonefield Last Mile Inc. — a Delaware corporation and the operating subsidiary responsible for last-mile delivery operations.

• Stonefield Warehousing LLC — a Texas limited liability company and the operating subsidiary responsible for warehousing and distribution center operations.

Private Equity Sponsor. Ridgeline Capital Partners Fund III, L.P., a Delaware limited partnership (general partner: Ridgeline Capital Management III LLC), with its principal office located at 300 Park Avenue, 28th Floor, New York, NY 10022. The Sponsor acquired the Company in a leveraged buyout that closed on December 15, 2017, and has invested a total of $210.0 million in equity capital in the Company. The Sponsor currently owns 100% of the Company's outstanding common equity.

Key Management. The Company's senior management team consists of the following individuals:

• Marcus Delano — Chief Executive Officer

• Priya Sundaram — Chief Financial Officer

• Howard Kessler — General Counsel

Sponsor Board Representatives. The Company's board of directors currently includes the following representatives of the Sponsor:

• Julian Voight — Managing Director, Ridgeline Capital Partners

• Serena Chu — Principal, Ridgeline Capital Partners

Financial Advisor to the Company. Hargrove Advisory Group LLC, 1345 Avenue of the Americas, 38th Floor, New York, NY 10105. The engagement is led by Elena Voss, Managing Director. Hargrove has been engaged to advise the Company on restructuring alternatives, liquidity management, business plan development, and creditor negotiations.

Restructuring Counsel to the Company. Calderwood & Harkness LLP, 599 Lexington Avenue, New York, NY 10022. The engagement is led by Nathaniel Bower, Responsible Partner. Calderwood & Harkness serves as lead restructuring and transactional counsel to the Company in connection with the transactions described herein.

Independent Auditor. Whitfield & Pryce LLP, 2100 Ross Avenue, Suite 2800, Dallas, TX 75201. The audit engagement is led by Todd Ashburn, CPA, Engagement Partner. Whitfield & Pryce has served as the Company's independent auditor since the fiscal year ended December 31, 2018.

III. EXISTING CAPITAL STRUCTURE (AS OF MARCH 31, 2023)

The following sections describe the Company's existing capital structure as of March 31, 2023, which is the most recent quarter-end for which financial information is available.

A. First Lien Revolving Credit Facility

Agreement. First Lien Credit Agreement, dated as of December 15, 2017 (as amended from time to time, the "First Lien Credit Agreement"), by and among Stonefield Logistics Group Inc., as borrower, the guarantors party thereto, the lenders party thereto, and Pinnacle National Bank, N.A., as administrative agent and collateral agent.

Administrative Agent / Collateral Agent. Pinnacle National Bank, N.A., 200 Liberty Street, New York, NY 10281. The Company's primary contact at Pinnacle is Daniel Wexford, Managing Director, Loan Restructuring Group.

Commitment. $50.0 million aggregate revolving loan commitments.

Drawn Amount. $42.0 million in aggregate revolving loans outstanding as of March 31, 2023.

Outstanding Letters of Credit. $3.5 million in aggregate face amount of outstanding letters of credit issued under the revolving credit facility.

Available Capacity. $4.5 million ($50.0 million total commitment, less $42.0 million drawn, less $3.5 million in outstanding letters of credit). The Company's current available revolving capacity is severely constrained relative to its operational needs.

Interest Rate. SOFR plus 375 basis points per annum on outstanding revolving loans.

Maturity Date. December 15, 2024.

Priority. First lien on substantially all assets of the Borrower and Guarantors, ranking pari passu with the TLB in right of payment and lien priority, subject to the terms of the existing intercreditor arrangements.

Revolver Lenders. The revolving credit facility is held by three institutional lenders, as follows:

Counsel to First Lien Lenders. Westlake Harden & Cole LLP, 787 Seventh Avenue, 34th Floor, New York, NY 10019. The engagement is led by Ramona Quelibo, Lead Partner. Westlake Harden & Cole represents the interests of the first lien lending group (both Revolver lenders and TLB syndicate members) in connection with the proposed restructuring.

B. First Lien Term Loan B

Agreement. The TLB was incurred under the same First Lien Credit Agreement, dated as of December 15, 2017, governing the revolving credit facility described in Section III.A above.

Original Principal Amount. $310.0 million.

Amortization Paid to Date. $25.0 million in aggregate scheduled amortization payments have been made since the closing of the First Lien Credit Agreement.

Outstanding Principal Amount. $285.0 million as of March 31, 2023.

Interest Rate. SOFR plus 425 basis points per annum, with a SOFR floor of 75 basis points.

Maturity Date. December 15, 2024.

Priority. First lien on substantially all assets of the Borrower and Guarantors, ranking pari passu with the revolving credit facility in right of payment and lien priority, subject to the terms of the existing intercreditor arrangements.

Key Syndicate Members. The TLB is broadly syndicated among institutional lenders and has traded in the secondary market. The following table sets forth the principal holders of the TLB as of the most recent known date:

The TLB is held by a diversified group of institutional investors, including commercial banks, CLO vehicles, and direct lending funds. Trading levels for the TLB have declined significantly over the past twelve months, with recent indicative bids in the range of 78–82 cents on the dollar.

C. Mezzanine Notes (Second Lien)

Instrument. 11.50% Senior Secured Second Lien Notes due June 15, 2025 (the "Mezzanine Notes").

Indenture. Indenture, dated as of December 15, 2017 (the "Mezzanine Indenture"), by and among Stonefield Logistics Group Inc., as issuer, the guarantors party thereto, and Continental Fiduciary Trust Company, as trustee and second lien collateral agent.

Issuer. Stonefield Logistics Group Inc.

Trustee / Second Lien Collateral Agent. Continental Fiduciary Trust Company, 100 Wall Street, 15th Floor, New York, NY 10005.

CUSIP. 861537 AA 2.

Outstanding Principal Amount. $140.0 million.

Accrued and Unpaid PIK Interest (estimated through closing). $8.1 million. Since the fourth quarter of 2022, the Company has elected to pay interest on the Mezzanine Notes in kind, capitalizing interest into additional principal, rather than making cash interest payments.

Interest Rate. 11.50% per annum (cash/PIK toggle at the election of the issuer, subject to certain conditions set forth in the Mezzanine Indenture).

Maturity Date. June 15, 2025.

Priority. Second lien on substantially all assets of the Borrower and Guarantors, junior to the first lien held by the lenders under the First Lien Credit Agreement, subject to the terms of the existing intercreditor agreement.

Key Holders. The Mezzanine Notes are held by a concentrated group of institutional investors, as follows:

Ad Hoc Group. On March 10, 2023, Graystone Mezzanine Capital Fund II LP, Ashland Structured Credit LLC, and Dunmore Special Situations Fund LP (collectively, the "Ad Hoc Group") entered into a cooperation agreement. The Ad Hoc Group collectively holds $122.0 million in aggregate principal amount of the Mezzanine Notes, representing approximately 87.1% of the outstanding principal amount. The Ad Hoc Group has engaged independent counsel and a financial advisor and has been in active dialogue with the Company and its advisors regarding the terms of the proposed restructuring.

Counsel to the Ad Hoc Group. Thornbury McCaffrey LLP, 375 Park Avenue, 25th Floor, New York, NY 10152. The engagement is led by Alan Driscoll, Lead Partner. Thornbury McCaffrey has been advising the Ad Hoc Group since the formation of the cooperation agreement in March 2023.

Financial Advisor to the Ad Hoc Group. Meridian Veltrian Partners LLC, 660 Fifth Avenue, 18th Floor, New York, NY 10103. Meridian Veltrian has been engaged by the Ad Hoc Group to provide independent financial analysis of the Company's business plan, valuation, and restructuring alternatives.

D. Sponsor Equity

Existing Investment. Ridgeline Capital Partners Fund III, L.P. has invested $210.0 million in aggregate equity capital in the Company, reflecting the initial equity check at the time of the December 2017 leveraged buyout together with subsequent follow-on contributions for add-on acquisitions and working capital purposes. The Sponsor currently owns 100% of the Company's issued and outstanding common equity.

Impairment. Based on the Company's current financial performance, leverage profile, and the trading levels of the Mezzanine Notes (which are junior to the Sponsor's equity position), the Sponsor's equity investment is significantly impaired. Nevertheless, the Sponsor has expressed its willingness to contribute additional new-money equity to support the restructuring, reflecting its continued confidence in the Company's long-term business fundamentals and its desire to preserve its equity stake on a go-forward basis.

E. Summary of Existing Capital Structure

The following table summarizes the Company's existing capital structure as of March 31, 2023:

Total Funded Debt: $475.1 million ($42.0 million Revolver drawn + $285.0 million TLB + $140.0 million Mezzanine Notes principal + $8.1 million accrued PIK interest).

Total Leverage (based on LTM Q1 2023 Adjusted EBITDA of $41.2 million): 11.5x ($475.1 million ÷ $41.2 million).

First Lien Leverage: 7.9x ($327.0 million ÷ $41.2 million).

Total Liquidity: $15.8 million, consisting of $11.3 million in unrestricted cash on hand and $4.5 million in available revolving credit capacity.

Monthly Cash Burn (Q1 2023): Approximately $2.5 million per month, reflecting negative free cash flow driven by operating losses, debt service costs, and seasonal working capital requirements.

F. Financial Distress Context

The Company's financial performance has deteriorated materially over the past twelve months, driven by a combination of macroeconomic headwinds, industry-specific pressures, and company-specific challenges. The following factors provide context for the proposed restructuring:

Revenue Decline. The Company reported audited revenue of $612.3 million for the fiscal year ended December 31, 2022. Revenue is projected to decline to approximately $545.0 million for the fiscal year ending December 31, 2023, representing a decline of approximately 11.0% year-over-year. The revenue decline is attributable to the ongoing freight recession, which has resulted in lower shipment volumes and compressed pricing across the Company's freight brokerage and last-mile delivery segments.

EBITDA Compression. Adjusted EBITDA (as defined in the First Lien Credit Agreement) declined from $58.7 million for FY 2022 to $41.2 million on a last-twelve-months basis as of Q1 2023, representing a decline of approximately 29.8%. Projected FY 2023E Adjusted EBITDA is $38.5 million. EBITDA compression has been driven by the revenue decline described above, combined with an inability to reduce fixed costs at the same pace due to the Company's terminal lease obligations, minimum staffing requirements, and technology infrastructure costs.

Industry Headwinds. The freight and logistics sector has experienced a significant cyclical downturn since mid-2022, characterized by excess carrier capacity, declining spot rates, a normalization of demand following the COVID-19-era supply chain disruptions, and increased competition from asset-light digital freight platforms. In addition, the Company has experienced the loss of several significant customer contracts during the second half of 2022 and early 2023, further exacerbating the revenue and earnings decline.

Near-Term Maturity Wall. The Company faces a maturity wall of $327.0 million in aggregate first lien debt (comprising the $42.0 million drawn under the Revolver and $285.0 million outstanding under the TLB) maturing on December 15, 2024 — approximately nineteen months from the date of this term sheet. The Mezzanine Notes mature six months later, on June 15, 2025. The Company does not have the capacity to refinance or repay these obligations on their existing terms.

Projected Liquidity Exhaustion. Based on the Company's current financial projections, prepared by management with the assistance of Hargrove Advisory Group LLC, the Company's liquidity is projected to be exhausted by the third quarter of 2024 absent a restructuring transaction. This projection assumes no additional draws on the Revolver beyond current levels, maintenance of current levels of capital expenditure, and no further deterioration in revenue or operating performance beyond current projections. Without the proposed restructuring, the Company would be unable to meet its debt service obligations and would face a liquidity crisis necessitating a bankruptcy filing.

IV. PROPOSED RESTRUCTURING TERMS

The following sections set forth the principal terms of each component of the proposed restructuring. All terms described below are subject to the negotiation and execution of definitive legal documentation.

A. Amended First Lien Term Loan B

Borrower. Stonefield Logistics Group Inc.

Guarantors. Stonefield Logistics Holdings LLC, Stonefield Freight Services LLC, Stonefield Last Mile Inc., and Stonefield Warehousing LLC (collectively, the "Guarantors"). Each Guarantor will provide a full and unconditional guaranty of all obligations under the Amended TLB.

Administrative Agent / Collateral Agent. Pinnacle National Bank, N.A.

Outstanding Principal Amount. $285.0 million (unchanged from the existing TLB).

Interest Rate. SOFR plus 500 basis points per annum, representing an increase of 75 basis points from the existing interest rate of SOFR plus 425 basis points. The SOFR floor shall be increased from 75 basis points to 100 basis points.

Maturity Date. December 19, 2028, representing an extension of approximately four years from the current maturity date of December 15, 2024. The extended maturity provides the Company with the runway necessary to execute its business plan and benefit from a recovery in the freight and logistics market.

Amortization. 1.00% per annum of the original outstanding principal amount, payable quarterly in equal installments, with the balance due at maturity (maintained at the existing amortization rate).

Priority. First lien on substantially all assets of the Borrower and Guarantors; however, under the proposed intercreditor arrangement, the Amended TLB will be designated as "second-out" debt, subordinate to the new Super-Priority Term Loan described in Section IV.C below on a first-out / second-out basis. The Amended TLB will rank pari passu with the Amended Revolving Credit Facility described in Section IV.B below.

Consent Threshold. The amendment and extension of the TLB will require the consent of the Required Lenders, defined as holders of more than 50% of the outstanding TLB loans.

Security. The Amended TLB will continue to be secured by the same collateral package as the existing TLB, consisting of a first-priority security interest (subject to the super-priority lien of the Super-Priority Term Loan) in substantially all assets of the Borrower and Guarantors, including accounts receivable, inventory, equipment, intellectual property, general intangibles, investment property, deposit accounts, and all proceeds and products thereof.

Covenants. The amended credit agreement will contain financial and negative covenants that are customary for facilities of this type, as modified to reflect the Company's restructured capital structure.

Governing Law. State of New York.

B. Amended Revolving Credit Facility

Borrower. Stonefield Logistics Group Inc.

Guarantors. Same as the Amended TLB — Stonefield Logistics Holdings LLC, Stonefield Freight Services LLC, Stonefield Last Mile Inc., and Stonefield Warehousing LLC.

Administrative Agent / Collateral Agent. Pinnacle National Bank, N.A.

Commitment. $35.0 million in aggregate revolving loan commitments, reduced from $50.0 million. The $15.0 million commitment reduction is intended to right-size the revolving facility relative to the Company's current borrowing base and projected liquidity needs. At closing, the outstanding drawn balance under the Revolver (currently $42.0 million) will be reduced to an amount not exceeding $35.0 million, with the excess payable from proceeds of the Super-Priority Term Loan and/or the Sponsor equity contribution.

Interest Rate. SOFR plus 450 basis points per annum, representing an increase of 75 basis points from the existing interest rate of SOFR plus 375 basis points.

Maturity Date. December 19, 2027, representing an extension of approximately three years from the current maturity date of December 15, 2024, with a springing maturity provision whereby the Revolver maturity will accelerate to a date that is 91 days prior to the TLB maturity date in the event the TLB has not been refinanced or repaid in full by such date. This springing maturity is intended to protect the revolving lenders against the risk of a TLB maturity default.

Priority. First lien on substantially all assets of the Borrower and Guarantors, designated as "second-out" under the proposed intercreditor arrangement, ranking pari passu with the Amended TLB and subordinate to the Super-Priority Term Loan on a first-out / second-out basis.

Consent Threshold. The amendment, reduction, and extension of the Revolver will require the consent of the Required Lenders, defined as holders of more than 50% of the revolving loan commitments.

LC Sub-Facility. The existing letter of credit sub-facility will continue on its existing terms and conditions, subject to the reduced overall commitment size. Outstanding letters of credit will continue to reduce availability under the Amended Revolving Credit Facility on a dollar-for-dollar basis.

Governing Law. State of New York.

C. New-Money Super-Priority Term Loan

Borrower. Stonefield Logistics Group Inc.

Guarantors. Same as the Amended TLB — Stonefield Logistics Holdings LLC, Stonefield Freight Services LLC, Stonefield Last Mile Inc., and Stonefield Warehousing LLC.

Lead Arranger and Initial Lender. Belvedere Credit Opportunities Fund LP, 450 Lexington Avenue, 30th Floor, New York, NY 10017 (Christopher Hartigan, Managing Partner). Belvedere is an existing TLB lender holding $32.0 million of the outstanding TLB and has indicated its willingness to provide new-money financing to the Company on a super-priority basis in connection with the restructuring.

Facility Amount. $55.0 million in aggregate term loan commitments, consisting of:

(i) $45.0 million in term loans to be funded on the closing date; and

(ii) $10.0 million in delayed-draw term loans (the "DDTL"), available to be drawn by the Borrower during the twelve-month period following the closing date, subject to customary conditions to drawing, including the absence of any event of default and the accuracy of the Borrower's representations and warranties.

Interest Rate. SOFR plus 700 basis points per annum, with a SOFR floor of 100 basis points. The elevated interest rate margin reflects the super-priority position, the credit risk associated with the Company's financial condition, and the illiquidity premium associated with new-money commitments in distressed situations.

Original Issue discount. 2.00% of the total facility amount ($55.0 million × 2.00% = $1.1 million in OID). Net funded proceeds at closing (after deduction of OID on the initial $45.0 million draw) will be approximately $43.9 million. OID on the DDTL will be deducted at the time of drawing.

Commitment Fee. 1.00% per annum on the undrawn portion of the DDTL ($10.0 million), payable quarterly in arrears.

Maturity Date. December 19, 2027, representing a four-year tenor from the anticipated closing date. The Super-Priority Term Loan maturity is co-terminus with the Amended Revolving Credit Facility maturity.

Priority. Super-priority first-out lien on substantially all assets of the Borrower and Guarantors. The Super-Priority Term Loan will rank senior to all existing and amended first lien debt (including the Amended TLB and the Amended Revolving Credit Facility) in right of payment and lien priority, subject to the terms of the intercreditor agreement described below.

Mandatory Prepayment. The Super-Priority Credit Agreement will include a mandatory prepayment provision requiring the Borrower to apply 75% of excess cash flow (as defined in the Super-Priority Credit Agreement) to prepay the Super-Priority Term Loan, subject to a minimum liquidity threshold of $20.0 million. Excess cash flow sweeps are to be calculated and applied on an annual basis, with the first sweep applying to the fiscal year ending December 31, 2024.

Call Protection. The Super-Priority Term Loan will be subject to the following prepayment premiums for voluntary prepayments :

• Year 1: 103% of the principal amount prepaid

• Year 2: 102% of the principal amount prepaid

• Year 3: 101% of the principal amount prepaid

• Year 4 and thereafter: par (no prepayment premium)

Intercreditor Agreement. A new super-priority / first lien intercreditor agreement (the "Intercreditor Agreement") will be entered into among Belvedere Credit Opportunities Fund LP (or its designee), as super-priority agent (the "Super-Priority Agent"), Pinnacle National Bank, N.A., as first lien agent (the "First Lien Agent"), and the Company. The Intercreditor Agreement will establish a "first-out / second-out" structure governing the relative rights and priorities of the Super-Priority Term Loan lenders and the first lien lenders under the Amended TLB and Amended Revolving Credit Facility with respect to, among other things:

• Lien priority and application of collateral proceeds upon enforcement or realization;

• Exercise of remedies (with the Super-Priority Agent having the exclusive right to direct enforcement actions during an initial standstill period);

• Adequate protection and debtor-in-possession financing consents in the event of a subsequent bankruptcy filing;

• Release and amendment provisions requiring the consent of both the Super-Priority Agent and the First Lien Agent; and

• Permitted payment and debt incurrence provisions.

Governing Law. State of New York.

D. Equitization of Mezzanine Notes

Notes to be Exchanged. All $140.0 million in aggregate outstanding principal amount of the 11.50% Senior Secured Second Lien Notes due June 15, 2025 (CUSIP 861537 AA 2), issued pursuant to the Mezzanine Indenture, dated as of December 15, 2017.

Accrued PIK Interest. Approximately $8.1 million in accrued and unpaid PIK interest (estimated through the anticipated closing date) will be waived by the exchanging holders as part of the settlement consideration. Exchanging holders will not receive any cash or non-cash consideration on account of accrued PIK interest.

Total Claims Addressed. $148.1 million ($140.0 million in outstanding principal amount plus $8.1 million in accrued PIK interest).

Consideration to Exchanging Mezzanine Holders. In exchange for the cancellation and extinguishment of their Mezzanine Notes, exchanging holders will receive the following consideration:

(a) Series A Preferred Equity. Newly issued shares of Series A Preferred Stock of the Company having an aggregate liquidation preference of $35.0 million, bearing a PIK dividend at a rate of 10.00% per annum, and ranking senior to the common stock (but junior to all indebtedness) in right of payment and upon liquidation, dissolution, or winding up of the Company. The Series A Preferred Stock will be evidenced by a Certificate of Designations to be filed with the Delaware Secretary of State. The Series A Preferred Stock will include customary protective provisions, including consent rights with respect to the issuance of parity or senior equity, amendments to the Certificate of Designations, and certain fundamental corporate transactions. The Series A Preferred Stock will not be convertible into common equity and will have no voting rights other than as required by the Delaware General Corporation Law and the protective provisions.

(b) Common Equity. An aggregate of 47.5% of the pro forma common equity of the Company (on a fully diluted basis, subject to dilution by the management incentive plan described in Section IV.E below), to be allocated among the exchanging Mezzanine Note holders on a pro rata basis based on their respective holdings of Mezzanine Notes.

Implied Recovery. Based on preliminary equity valuation analysis performed by Hargrove Advisory Group LLC (the Company's financial advisor), the combination of the Series A Preferred Equity and the common equity to be received by exchanging Mezzanine Note holders implies an aggregate recovery of approximately 40 to 55 cents on the dollar, depending on the equity valuation assumptions employed. The cash-equivalent recovery from the Series A Preferred Equity alone (based on its aggregate liquidation preference) is approximately 23.6% ($35.0 million ÷ $148.1 million). The Company's financial advisor will provide a more detailed recovery analysis in connection with the definitive documentation and consent solicitation process.

Consent Threshold. The exchange and cancellation of the Mezzanine Notes will require the consent of holders of more than 66⅔% in aggregate principal amount of the outstanding Mezzanine Notes, as required by the Mezzanine Indenture for amendments that modify the principal amount, interest rate, maturity, or other core economic terms of the Notes.

Treatment of Non-Consenting Holders. Non-consenting holders of Mezzanine Notes will receive substantially identical treatment as consenting holders through the following mechanism: the exchange offer will be structured as a combined exchange offer and consent solicitation, pursuant to which consenting holders will deliver exit consents authorizing the execution of a Supplemental Indenture to the Mezzanine Indenture. The Supplemental Indenture will amend the Mezzanine Indenture to (i) eliminate substantially all restrictive covenants, (ii) eliminate substantially all events of default, (iii) eliminate substantially all reporting obligations, (iv) waive any existing defaults or events of default, and (v) release the second lien on all collateral securing the Mezzanine Notes. Following the execution of the Supplemental Indenture, non-consenting holders will hold Mezzanine Notes that are effectively covenant-stripped, unsecured obligations of the Company with limited rights and remedies, creating strong incentives for participation in the exchange.

Trustee / Exchange Agent. Continental Fiduciary Trust Company will serve as trustee under the Mezzanine Indenture and as exchange agent in connection with the exchange offer.

Governing Law. State of New York (for exchange documentation, exchange offer, consent solicitation, and Supplemental Indenture); State of Delaware (for equity instruments, Certificate of Designations, and related corporate governance matters).

E. Sponsor Contribution and Equity Restructuring

Sponsor Cash Contribution. Ridgeline Capital Partners Fund III, L.P. has agreed, subject to the terms and conditions set forth in this term sheet and the definitive documentation, to contribute $12.5 million in new cash equity to the Company. The new cash equity will be funded at closing and will be used to pay transaction costs and provide a liquidity cushion for the restructured enterprise. The Sponsor cash contribution reflects the Sponsor's continued commitment to the Company and its willingness to invest additional capital to support a consensual restructuring, notwithstanding the significant impairment of its existing equity investment.

Pro Forma Equity Ownership. Following the consummation of the restructuring, the pro forma equity ownership of the Company will be as follows:

The Sponsor's ownership will be diluted from 100% to 47.5% as a result of the equitization of the Mezzanine Notes. The management incentive plan is expected to reserve 5.0% of the pro forma common equity for key management personnel, with specific terms (including vesting, exercise prices, and acceleration provisions) to be agreed upon between the Sponsor and the Ad Hoc Group in connection with the definitive documentation.

Board Composition (Post-Restructuring). Upon the closing of the restructuring, the Company's board of directors will be reconstituted to consist of seven (7) directors, composed as follows:

• Three (3) directors designated by Ridgeline Capital Partners Fund III, L.P.;

• Three (3) directors designated by the mezzanine equitization recipients (initially to be designated by the Ad Hoc Group); and

• One (1) independent director, mutually agreed upon by Ridgeline and the mezzanine equitization recipients.

The reconstituted board will have customary committees (audit, compensation, nominating and governance), with composition requirements to be set forth in the Amended and Restated Stockholders' Agreement.

Governance Documentation. The equity restructuring will be documented through the following instruments, among others:

(i) Amended and Restated Certificate of Incorporation — to be filed with the Delaware Secretary of State, reflecting the authorized capital stock (including the Series A Preferred Stock) and any other amendments required to effectuate the restructuring.

(ii) Certificate of Designations for Series A Preferred Stock — to be filed with the Delaware Secretary of State, setting forth the rights, preferences, privileges, and restrictions of the Series A Preferred Stock.

(iii) Amended and Restated Stockholders' Agreement — to be entered into among the Company, Ridgeline, and the mezzanine equitization recipients, containing provisions governing, among other things, transfer restrictions, tag-along rights, drag-along rights, preemptive rights, information rights, and board designation rights.

(iv) Registration Rights Agreement — to be entered into among the Company, Ridgeline, and the mezzanine equitization recipients, providing customary demand registration and piggyback registration rights with respect to the common equity and Series A Preferred Stock.

Governing Law. State of Delaware (for corporate governance instruments, including the Amended and Restated Certificate of Incorporation, Certificate of Designations, and the governance provisions of the Stockholders' Agreement); State of New York (for commercial dispute resolution provisions of the Stockholders' Agreement and Registration Rights Agreement, to the extent provided therein).

V. POST-RESTRUCTURING CAPITAL STRUCTURE

Upon the closing of the restructuring transactions described in Section IV, the Company's capital structure will be as set forth in the following table:

Total Post-Restructuring Funded Debt. $375.0 million ($55.0 million Super-Priority Term Loan + $35.0 million Amended Revolver commitment + $285.0 million Amended TLB), representing a reduction of $100.1 million from the pre-restructuring funded debt level of $475.1 million.

Debt Reduction from Equitization. $100.1 million ($475.1 million pre-restructuring total funded debt less $375.0 million post-restructuring total funded debt). The entire debt reduction is attributable to the equitization of the Mezzanine Notes and the waiver of accrued PIK interest.

Post-Restructuring Total Leverage. Based on the Company's projected FY 2024E Adjusted EBITDA of $52.0 million (which reflects the anticipated benefits of the Company's cost reduction initiatives and a modest recovery in freight market conditions), total leverage on a post-restructuring basis is expected to be approximately 7.2x ($375.0 million ÷ $52.0 million).

Post-Restructuring First Lien Leverage. 7.2x. Following the equitization of the Mezzanine Notes, all funded debt will be first lien or super-priority in nature, such that total leverage and first lien leverage are equivalent.

Nearest Maturity. December 19, 2027 (the Super-Priority Term Loan and the Amended Revolving Credit Facility), representing an extension of approximately three years from the current nearest maturity of December 15, 2024.

Pro Forma Liquidity. At closing, the Company is expected to have pro forma liquidity of approximately $50 million, consisting of (i) unrestricted cash on hand (including net proceeds from the Super-Priority Term Loan initial draw and the Sponsor equity contribution, after payment of transaction costs and reduction of the Revolver drawn balance) and (ii) undrawn availability under the Amended Revolving Credit Facility. The enhanced liquidity position is expected to provide the Company with sufficient runway to navigate the current cyclical downturn and execute its strategic initiatives.

VI. CONDITIONS TO CLOSING

The consummation of the restructuring transactions contemplated by this term sheet shall be subject to the satisfaction or waiver of the following conditions precedent on or before the closing date:

1. Definitive Documentation. Execution and delivery of all definitive documentation by all parties thereto, in form and substance acceptable to the Company, the Sponsor, the Required Lenders under the First Lien Credit Agreement, the requisite majority of Mezzanine Note holders, and Belvedere (as lead arranger of the Super-Priority Term Loan), including the following:

(a) Amended and Restated First Lien Credit Agreement (reflecting the amendments to the TLB and Revolving Credit Facility);

(b) Super-Priority Credit Agreement, Guaranty Agreement, and Pledge and Security Agreement;

(d) Exchange Agreement (governing the exchange of Mezzanine Notes for Series A Preferred Equity and common equity);

(e) Supplemental Indenture to the Mezzanine Indenture (implementing exit consent amendments);

(f) Amended and Restated Stockholders' Agreement;

(g) Amended and Restated Certificate of Incorporation and Certificate of Designations for Series A Preferred Stock (each to be filed with the Delaware Secretary of State);

(h) Registration Rights Agreement; and

(i) All other ancillary documentation reasonably required in connection with the foregoing, including UCC financing statements, mortgage amendments, insurance endorsements, and intellectual property security agreements.

2. Restructuring Support Agreement. Execution and delivery of a Restructuring Support Agreement (the "RSA") by the following requisite majorities of each creditor constituency:

(a) TLB: Required Lenders (holders of more than 50% of outstanding TLB loans);

(b) Revolver: Required Lenders (holders of more than 50% of revolving loan commitments); and

The RSA will contain customary terms and provisions, including milestones, fiduciary out provisions for the Company's board of directors, termination events, and specific performance remedies.

3. Receipt of All Required Consents. Receipt of all consents required under the existing credit documentation and the Mezzanine Indenture to effectuate the restructuring transactions, including:

(a) Consent of the Required Lenders under the First Lien Credit Agreement (holders of more than 50% of outstanding TLB loans) to the amendment and extension of the TLB;

PRELIMINARY TERM SHEET
PROPOSED CONSENSUAL RESTRUCTURING OF STONEFIELD LOGISTICS GROUP INC.
** **
CONFIDENTIAL — FOR DISCUSSION PURPOSES ONLY
THIS TERM SHEET DOES NOT CONSTITUTE A BINDING AGREEMENT OR AN OFFER OR SOLICITATION OF AN OFFER TO PURCHASE OR SELL SECURITIES. THIS TERM SHEET IS SUBJECT TO THE EXECUTION OF DEFINITIVE DOCUMENTATION ACCEPTABLE TO ALL PARTIES.
Prepared by Calderwood & Harkness LLP, as restructuring counsel to Stonefield Logistics Group Inc., 599 Lexington Avenue, New York, NY 10022. Matter No. 1012-00002. This term sheet is being circulated to all creditor constituencies pursuant to existing confidentiality agreements and non-disclosure agreements among the parties. Privileged and confidential. No distribution or reproduction without prior written consent of Calderwood & Harkness LLP. 
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I. OVERVIEW
Transaction Description. This term sheet sets forth the principal terms of a proposed consensual out-of-court restructuring of approximately $485 million in funded debt obligations of Stonefield Logistics Group Inc. ("Stonefield," the "Company," or the "Borrower"), a Delaware corporation headquartered at 4200 Commerce Street, Suite 1500, Dallas, TX 75201. The Company is a portfolio company of Ridgeline Capital Partners Fund III, L.P. (the "Sponsor"). The restructuring is intended to comprehensively address the Company's capital structure, near-term maturity wall, and liquidity constraints through a negotiated, multi-party transaction that preserves going-concern value and avoids the cost, delay, and business disruption associated with a proceeding under chapter 11 of title 11 of the United States Code.
Components of the Restructuring. The proposed restructuring consists of the following integrated components, each of which is more fully described in Section IV below:
(a) Amendment and Extension of the First Lien Term Loan B Facility. The existing First Lien Term Loan B (the "TLB") will be amended to, among other things, extend the maturity date by approximately four years and adjust the applicable interest rate margin, while preserving the outstanding principal balance of $285.0 million.
(b) Amendment, Reduction, and Extension of the Revolving Credit Facility. The existing revolving credit facility (the "Revolver") will be amended to reduce total commitments from $50.0 million to $35.0 million, extend the maturity date, and adjust the applicable interest rate margin, subject to a springing maturity provision tied to the TLB.
(c) New-Money Super-Priority First-Out Term Loan Facility. A new $55.0 million super-priority term loan facility (the "Super-Priority Term Loan") will be established, consisting of a $45.0 million initial draw and a $10.0 million delayed-draw term loan, to provide the Company with incremental liquidity and fund transaction costs.
(d) Equitization of the Mezzanine Notes (Second Lien). The outstanding $140.0 million in aggregate principal amount of 11.50% Senior Secured Second Lien Notes due June 15, 2025 (the "Mezzanine Notes"), together with approximately $8.1 million in accrued and unpaid PIK interest, will be exchanged for a combination of newly issued Series A Preferred Equity and common equity of the Company.
(e) New Cash Equity Contribution by the Sponsor. The Sponsor will contribute $12.5 million in new cash equity to fund transaction costs and provide an additional liquidity cushion to the restructured enterprise.
Objective. The overarching objective of the proposed restructuring is to reduce total funded debt, extend near-term maturities, provide additional liquidity to the Company, and recapitalize the balance sheet — all without a bankruptcy filing. The restructuring is designed to de-lever the Company's balance sheet by approximately $100.1 million through the equitization of the Mezzanine Notes, extend the nearest maturity from December 2024 to December 2027, and provide the Company with sufficient runway to execute its business plan amid the current cyclical downturn in the freight and logistics sector.
Governing Law. All restructuring documentation, including the amended credit agreements, intercreditor agreement, exchange documentation, and related ancillary agreements, shall be governed by the laws of the State of New York, without regard to conflict of laws principles, except as otherwise specified herein with respect to corporate governance instruments governed by the laws of the State of Delaware.
II. THE COMPANY
Full Legal Name. Stonefield Logistics Group Inc.
Entity Type and Formation. Stonefield is a corporation organized and existing under the laws of the State of Delaware. The Company's federal employer identification number (EIN) is 83-2457109, and its Delaware file number is 6341872.
Registered Agent (Delaware). Capitol Registered Agents, Inc., 1209 Orange Street, Wilmington, DE 19801.
Principal Office. 4200 Commerce Street, Suite 1500, Dallas, TX 75201.
Business Description. The Company operates in the transportation and logistics sector, providing a diversified suite of services including freight brokerage, last-mile delivery, and warehousing services. As of the date hereof, the Company employs approximately 3,800 employees and operates across 26 terminals located in 14 states throughout the contiguous United States. The Company's operations are organized into three primary business segments: (i) Freight Brokerage, which arranges transportation of freight shipments through a network of independent carriers; (ii) Last-Mile Delivery, which provides final-stage delivery services for large and heavy goods to residential and commercial consignees; and (iii) Warehousing, which operates distribution and fulfillment centers serving e-commerce and traditional retail customers.
Key Subsidiaries (Guarantors). The following entities are direct or indirect wholly owned subsidiaries of the Company and serve as guarantors under the existing credit facilities. Each such subsidiary will continue as a guarantor under the amended and new credit facilities described in this term sheet:
•  Stonefield Logistics Holdings LLC — a Delaware limited liability company and the direct parent holding company of the Company's operating subsidiaries.
•  Stonefield Freight Services LLC — a Texas limited liability company and the primary operating subsidiary responsible for freight brokerage operations.
•  Stonefield Last Mile Inc. — a Delaware corporation and the operating subsidiary responsible for last-mile delivery operations.
•  Stonefield Warehousing LLC — a Texas limited liability company and the operating subsidiary responsible for warehousing and distribution center operations.
Private Equity Sponsor. Ridgeline Capital Partners Fund III, L.P., a Delaware limited partnership (general partner: Ridgeline Capital Management III LLC), with its principal office located at 300 Park Avenue, 28th Floor, New York, NY 10022. The Sponsor acquired the Company in a leveraged buyout that closed on December 15, 2017, and has invested a total of $210.0 million in equity capital in the Company. The Sponsor currently owns 100% of the Company's outstanding common equity.
Key Management. The Company's senior management team consists of the following individuals:
•  Marcus Delano — Chief Executive Officer
•  Priya Sundaram — Chief Financial Officer
•  Howard Kessler — General Counsel
Sponsor Board Representatives. The Company's board of directors currently includes the following representatives of the Sponsor:
•  Julian Voight — Managing Director, Ridgeline Capital Partners
•  Serena Chu — Principal, Ridgeline Capital Partners
Financial Advisor to the Company. Hargrove Advisory Group LLC, 1345 Avenue of the Americas, 38th Floor, New York, NY 10105. The engagement is led by Elena Voss, Managing Director. Hargrove has been engaged to advise the Company on restructuring alternatives, liquidity management, business plan development, and creditor negotiations.
Restructuring Counsel to the Company. Calderwood & Harkness LLP, 599 Lexington Avenue, New York, NY 10022. The engagement is led by Nathaniel Bower, Responsible Partner. Calderwood & Harkness serves as lead restructuring and transactional counsel to the Company in connection with the transactions described herein.
Independent Auditor. Whitfield & Pryce LLP, 2100 Ross Avenue, Suite 2800, Dallas, TX 75201. The audit engagement is led by Todd Ashburn, CPA, Engagement Partner. Whitfield & Pryce has served as the Company's independent auditor since the fiscal year ended December 31, 2018.
III. EXISTING CAPITAL STRUCTURE (AS OF MARCH 31, 2023)
The following sections describe the Company's existing capital structure as of March 31, 2023, which is the most recent quarter-end for which financial information is available.
A. First Lien Revolving Credit Facility
Agreement. First Lien Credit Agreement, dated as of December 15, 2017 (as amended from time to time, the "First Lien Credit Agreement"), by and among Stonefield Logistics Group Inc., as borrower, the guarantors party thereto, the lenders party thereto, and Pinnacle National Bank, N.A., as administrative agent and collateral agent.
Administrative Agent / Collateral Agent. Pinnacle National Bank, N.A., 200 Liberty Street, New York, NY 10281. The Company's primary contact at Pinnacle is Daniel Wexford, Managing Director, Loan Restructuring Group.
Commitment. $50.0 million aggregate revolving loan commitments.
Drawn Amount. $42.0 million in aggregate revolving loans outstanding as of March 31, 2023.
Outstanding Letters of Credit. $3.5 million in aggregate face amount of outstanding letters of credit issued under the revolving credit facility.
Available Capacity. $4.5 million ($50.0 million total commitment, less $42.0 million drawn, less $3.5 million in outstanding letters of credit). The Company's current available revolving capacity is severely constrained relative to its operational needs.
Interest Rate. SOFR plus 375 basis points per annum on outstanding revolving loans.
Maturity Date. December 15, 2024.
Priority. First lien on substantially all assets of the Borrower and Guarantors, ranking pari passu with the TLB in right of payment and lien priority, subject to the terms of the existing intercreditor arrangements.
Revolver Lenders. The revolving credit facility is held by three institutional lenders, as follows:
Counsel to First Lien Lenders. Westlake Harden & Cole LLP, 787 Seventh Avenue, 34th Floor, New York, NY 10019. The engagement is led by Ramona Quelibo, Lead Partner. Westlake Harden & Cole represents the interests of the first lien lending group (both Revolver lenders and TLB syndicate members) in connection with the proposed restructuring.
B. First Lien Term Loan B
Agreement. The TLB was incurred under the same First Lien Credit Agreement, dated as of December 15, 2017, governing the revolving credit facility described in Section III.A above.
Original Principal Amount. $310.0 million.
Amortization Paid to Date. $25.0 million in aggregate scheduled amortization payments have been made since the closing of the First Lien Credit Agreement.
Outstanding Principal Amount. $285.0 million as of March 31, 2023.
Interest Rate. SOFR plus 425 basis points per annum, with a SOFR floor of 75 basis points.
Maturity Date. December 15, 2024.
Priority. First lien on substantially all assets of the Borrower and Guarantors, ranking pari passu with the revolving credit facility in right of payment and lien priority, subject to the terms of the existing intercreditor arrangements.
Key Syndicate Members. The TLB is broadly syndicated among institutional lenders and has traded in the secondary market. The following table sets forth the principal holders of the TLB as of the most recent known date:
The TLB is held by a diversified group of institutional investors, including commercial banks, CLO vehicles, and direct lending funds. Trading levels for the TLB have declined significantly over the past twelve months, with recent indicative bids in the range of 78–82 cents on the dollar.
C. Mezzanine Notes (Second Lien)
Instrument. 11.50% Senior Secured Second Lien Notes due June 15, 2025 (the "Mezzanine Notes").
Indenture. Indenture, dated as of December 15, 2017 (the "Mezzanine Indenture"), by and among Stonefield Logistics Group Inc., as issuer, the guarantors party thereto, and Continental Fiduciary Trust Company, as trustee and second lien collateral agent.
Issuer. Stonefield Logistics Group Inc.
Trustee / Second Lien Collateral Agent. Continental Fiduciary Trust Company, 100 Wall Street, 15th Floor, New York, NY 10005.
CUSIP. 861537 AA 2.
Outstanding Principal Amount. $140.0 million.
Accrued and Unpaid PIK Interest (estimated through closing). $8.1 million. Since the fourth quarter of 2022, the Company has elected to pay interest on the Mezzanine Notes in kind, capitalizing interest into additional principal, rather than making cash interest payments.
Interest Rate. 11.50% per annum (cash/PIK toggle at the election of the issuer, subject to certain conditions set forth in the Mezzanine Indenture).
Maturity Date. June 15, 2025.
Priority. Second lien on substantially all assets of the Borrower and Guarantors, junior to the first lien held by the lenders under the First Lien Credit Agreement, subject to the terms of the existing intercreditor agreement.
Key Holders. The Mezzanine Notes are held by a concentrated group of institutional investors, as follows:
Ad Hoc Group. On March 10, 2023, Graystone Mezzanine Capital Fund II LP, Ashland Structured Credit LLC, and Dunmore Special Situations Fund LP (collectively, the "Ad Hoc Group") entered into a cooperation agreement. The Ad Hoc Group collectively holds $122.0 million in aggregate principal amount of the Mezzanine Notes, representing approximately 87.1% of the outstanding principal amount. The Ad Hoc Group has engaged independent counsel and a financial advisor and has been in active dialogue with the Company and its advisors regarding the terms of the proposed restructuring.
Counsel to the Ad Hoc Group. Thornbury McCaffrey LLP, 375 Park Avenue, 25th Floor, New York, NY 10152. The engagement is led by Alan Driscoll, Lead Partner. Thornbury McCaffrey has been advising the Ad Hoc Group since the formation of the cooperation agreement in March 2023.
Financial Advisor to the Ad Hoc Group. Meridian Veltrian Partners LLC, 660 Fifth Avenue, 18th Floor, New York, NY 10103. Meridian Veltrian has been engaged by the Ad Hoc Group to provide independent financial analysis of the Company's business plan, valuation, and restructuring alternatives.
D. Sponsor Equity
Existing Investment. Ridgeline Capital Partners Fund III, L.P. has invested $210.0 million in aggregate equity capital in the Company, reflecting the initial equity check at the time of the December 2017 leveraged buyout together with subsequent follow-on contributions for add-on acquisitions and working capital purposes. The Sponsor currently owns 100% of the Company's issued and outstanding common equity.
Impairment. Based on the Company's current financial performance, leverage profile, and the trading levels of the Mezzanine Notes (which are junior to the Sponsor's equity position), the Sponsor's equity investment is significantly impaired. Nevertheless, the Sponsor has expressed its willingness to contribute additional new-money equity to support the restructuring, reflecting its continued confidence in the Company's long-term business fundamentals and its desire to preserve its equity stake on a go-forward basis.
E. Summary of Existing Capital Structure
The following table summarizes the Company's existing capital structure as of March 31, 2023:
Total Funded Debt: $475.1 million ($42.0 million Revolver drawn + $285.0 million TLB + $140.0 million Mezzanine Notes principal + $8.1 million accrued PIK interest).
Total Leverage (based on LTM Q1 2023 Adjusted EBITDA of $41.2 million): 11.5x ($475.1 million ÷ $41.2 million).
First Lien Leverage: 7.9x ($327.0 million ÷ $41.2 million).
Total Liquidity: $15.8 million, consisting of $11.3 million in unrestricted cash on hand and $4.5 million in available revolving credit capacity.
Monthly Cash Burn (Q1 2023): Approximately $2.5 million per month, reflecting negative free cash flow driven by operating losses, debt service costs, and seasonal working capital requirements.
F. Financial Distress Context
The Company's financial performance has deteriorated materially over the past twelve months, driven by a combination of macroeconomic headwinds, industry-specific pressures, and company-specific challenges. The following factors provide context for the proposed restructuring:
Revenue Decline. The Company reported audited revenue of $612.3 million for the fiscal year ended December 31, 2022. Revenue is projected to decline to approximately $545.0 million for the fiscal year ending December 31, 2023, representing a decline of approximately 11.0% year-over-year. The revenue decline is attributable to the ongoing freight recession, which has resulted in lower shipment volumes and compressed pricing across the Company's freight brokerage and last-mile delivery segments.
EBITDA Compression. Adjusted EBITDA (as defined in the First Lien Credit Agreement) declined from $58.7 million for FY 2022 to $41.2 million on a last-twelve-months basis as of Q1 2023, representing a decline of approximately 29.8%. Projected FY 2023E Adjusted EBITDA is $38.5 million. EBITDA compression has been driven by the revenue decline described above, combined with an inability to reduce fixed costs at the same pace due to the Company's terminal lease obligations, minimum staffing requirements, and technology infrastructure costs.
Industry Headwinds. The freight and logistics sector has experienced a significant cyclical downturn since mid-2022, characterized by excess carrier capacity, declining spot rates, a normalization of demand following the COVID-19-era supply chain disruptions, and increased competition from asset-light digital freight platforms. In addition, the Company has experienced the loss of several significant customer contracts during the second half of 2022 and early 2023, further exacerbating the revenue and earnings decline.
Near-Term Maturity Wall. The Company faces a maturity wall of $327.0 million in aggregate first lien debt (comprising the $42.0 million drawn under the Revolver and $285.0 million outstanding under the TLB) maturing on December 15, 2024 — approximately nineteen months from the date of this term sheet. The Mezzanine Notes mature six months later, on June 15, 2025. The Company does not have the capacity to refinance or repay these obligations on their existing terms.
Projected Liquidity Exhaustion. Based on the Company's current financial projections, prepared by management with the assistance of Hargrove Advisory Group LLC, the Company's liquidity is projected to be exhausted by the third quarter of 2024 absent a restructuring transaction. This projection assumes no additional draws on the Revolver beyond current levels, maintenance of current levels of capital expenditure, and no further deterioration in revenue or operating performance beyond current projections. Without the proposed restructuring, the Company would be unable to meet its debt service obligations and would face a liquidity crisis necessitating a bankruptcy filing.
IV. PROPOSED RESTRUCTURING TERMS
The following sections set forth the principal terms of each component of the proposed restructuring. All terms described below are subject to the negotiation and execution of definitive legal documentation.
A. Amended First Lien Term Loan B
Borrower. Stonefield Logistics Group Inc.
Guarantors. Stonefield Logistics Holdings LLC, Stonefield Freight Services LLC, Stonefield Last Mile Inc., and Stonefield Warehousing LLC (collectively, the "Guarantors"). Each Guarantor will provide a full and unconditional guaranty of all obligations under the Amended TLB.
Administrative Agent / Collateral Agent. Pinnacle National Bank, N.A.
Outstanding Principal Amount. $285.0 million (unchanged from the existing TLB).
Interest Rate. SOFR plus 500 basis points per annum, representing an increase of 75 basis points from the existing interest rate of SOFR plus 425 basis points. The SOFR floor shall be increased from 75 basis points to 100 basis points.
Maturity Date. December 19, 2028, representing an extension of approximately four years from the current maturity date of December 15, 2024. The extended maturity provides the Company with the runway necessary to execute its business plan and benefit from a recovery in the freight and logistics market.
Amortization. 1.00% per annum of the original outstanding principal amount, payable quarterly in equal installments, with the balance due at maturity (maintained at the existing amortization rate).
Priority. First lien on substantially all assets of the Borrower and Guarantors; however, under the proposed intercreditor arrangement, the Amended TLB will be designated as "second-out" debt, subordinate to the new Super-Priority Term Loan described in Section IV.C below on a first-out / second-out basis. The Amended TLB will rank pari passu with the Amended Revolving Credit Facility described in Section IV.B below.
Consent Threshold. The amendment and extension of the TLB will require the consent of the Required Lenders, defined as holders of more than 50% of the outstanding TLB loans.
Security. The Amended TLB will continue to be secured by the same collateral package as the existing TLB, consisting of a first-priority security interest (subject to the super-priority lien of the Super-Priority Term Loan) in substantially all assets of the Borrower and Guarantors, including accounts receivable, inventory, equipment, intellectual property, general intangibles, investment property, deposit accounts, and all proceeds and products thereof.
Covenants. The amended credit agreement will contain financial and negative covenants that are customary for facilities of this type, as modified to reflect the Company's restructured capital structure.  
Governing Law. State of New York.
B. Amended Revolving Credit Facility
Borrower. Stonefield Logistics Group Inc.
Guarantors. Same as the Amended TLB — Stonefield Logistics Holdings LLC, Stonefield Freight Services LLC, Stonefield Last Mile Inc., and Stonefield Warehousing LLC.
Administrative Agent / Collateral Agent. Pinnacle National Bank, N.A.
Commitment. $35.0 million in aggregate revolving loan commitments, reduced from $50.0 million. The $15.0 million commitment reduction is intended to right-size the revolving facility relative to the Company's current borrowing base and projected liquidity needs. At closing, the outstanding drawn balance under the Revolver (currently $42.0 million) will be reduced to an amount not exceeding $35.0 million, with the excess payable from proceeds of the Super-Priority Term Loan and/or the Sponsor equity contribution.
Interest Rate. SOFR plus 450 basis points per annum, representing an increase of 75 basis points from the existing interest rate of SOFR plus 375 basis points.
Maturity Date. December 19, 2027, representing an extension of approximately three years from the current maturity date of December 15, 2024, with a springing maturity provision whereby the Revolver maturity will accelerate to a date that is 91 days prior to the TLB maturity date in the event the TLB has not been refinanced or repaid in full by such date. This springing maturity is intended to protect the revolving lenders against the risk of a TLB maturity default.
Priority. First lien on substantially all assets of the Borrower and Guarantors, designated as "second-out" under the proposed intercreditor arrangement, ranking pari passu with the Amended TLB and subordinate to the Super-Priority Term Loan on a first-out / second-out basis.
Consent Threshold. The amendment, reduction, and extension of the Revolver will require the consent of the Required Lenders, defined as holders of more than 50% of the revolving loan commitments.
LC Sub-Facility. The existing letter of credit sub-facility will continue on its existing terms and conditions, subject to the reduced overall commitment size. Outstanding letters of credit will continue to reduce availability under the Amended Revolving Credit Facility on a dollar-for-dollar basis.
Governing Law. State of New York.
C. New-Money Super-Priority Term Loan
Borrower. Stonefield Logistics Group Inc.
Guarantors. Same as the Amended TLB — Stonefield Logistics Holdings LLC, Stonefield Freight Services LLC, Stonefield Last Mile Inc., and Stonefield Warehousing LLC.
Lead Arranger and Initial Lender. Belvedere Credit Opportunities Fund LP, 450 Lexington Avenue, 30th Floor, New York, NY 10017 (Christopher Hartigan, Managing Partner). Belvedere is an existing TLB lender holding $32.0 million of the outstanding TLB and has indicated its willingness to provide new-money financing to the Company on a super-priority basis in connection with the restructuring.
Facility Amount. $55.0 million in aggregate term loan commitments, consisting of:
(i) $45.0 million in term loans to be funded on the closing date; and
(ii) $10.0 million in delayed-draw term loans (the "DDTL"), available to be drawn by the Borrower during the twelve-month period following the closing date, subject to customary conditions to drawing, including the absence of any event of default and the accuracy of the Borrower's representations and warranties.
Interest Rate. SOFR plus 700 basis points per annum, with a SOFR floor of 100 basis points. The elevated interest rate margin reflects the super-priority position, the credit risk associated with the Company's financial condition, and the illiquidity premium associated with new-money commitments in distressed situations.
Original Issue discount. 2.00% of the total facility amount ($55.0 million × 2.00% = $1.1 million in OID). Net funded proceeds at closing (after deduction of OID on the initial $45.0 million draw) will be approximately $43.9 million. OID on the DDTL will be deducted at the time of drawing.
Commitment Fee. 1.00% per annum on the undrawn portion of the DDTL ($10.0 million), payable quarterly in arrears.
Maturity Date. December 19, 2027, representing a four-year tenor from the anticipated closing date. The Super-Priority Term Loan maturity is co-terminus with the Amended Revolving Credit Facility maturity.
Priority. Super-priority first-out lien on substantially all assets of the Borrower and Guarantors. The Super-Priority Term Loan will rank senior to all existing and amended first lien debt (including the Amended TLB and the Amended Revolving Credit Facility) in right of payment and lien priority, subject to the terms of the intercreditor agreement described below.
Mandatory Prepayment. The Super-Priority Credit Agreement will include a mandatory prepayment provision requiring the Borrower to apply 75% of excess cash flow (as defined in the Super-Priority Credit Agreement) to prepay the Super-Priority Term Loan, subject to a minimum liquidity threshold of $20.0 million. Excess cash flow sweeps are to be calculated and applied on an annual basis, with the first sweep applying to the fiscal year ending December 31, 2024. 
Call Protection. The Super-Priority Term Loan will be subject to the following prepayment premiums for voluntary prepayments :
•  Year 1: 103% of the principal amount prepaid
•  Year 2: 102% of the principal amount prepaid
•  Year 3: 101% of the principal amount prepaid
•  Year 4 and thereafter: par (no prepayment premium)
Intercreditor Agreement. A new super-priority / first lien intercreditor agreement (the "Intercreditor Agreement") will be entered into among Belvedere Credit Opportunities Fund LP (or its designee), as super-priority agent (the "Super-Priority Agent"), Pinnacle National Bank, N.A., as first lien agent (the "First Lien Agent"), and the Company. The Intercreditor Agreement will establish a "first-out / second-out" structure governing the relative rights and priorities of the Super-Priority Term Loan lenders and the first lien lenders under the Amended TLB and Amended Revolving Credit Facility with respect to, among other things:
•  Lien priority and application of collateral proceeds upon enforcement or realization;
•  Exercise of remedies (with the Super-Priority Agent having the exclusive right to direct enforcement actions during an initial standstill period);
•  Adequate protection and debtor-in-possession financing consents in the event of a subsequent bankruptcy filing;
•  Release and amendment provisions requiring the consent of both the Super-Priority Agent and the First Lien Agent; and
•  Permitted payment and debt incurrence provisions.
Governing Law. State of New York.
D. Equitization of Mezzanine Notes
Notes to be Exchanged. All $140.0 million in aggregate outstanding principal amount of the 11.50% Senior Secured Second Lien Notes due June 15, 2025 (CUSIP 861537 AA 2), issued pursuant to the Mezzanine Indenture, dated as of December 15, 2017.
Accrued PIK Interest. Approximately $8.1 million in accrued and unpaid PIK interest (estimated through the anticipated closing date) will be waived by the exchanging holders as part of the settlement consideration. Exchanging holders will not receive any cash or non-cash consideration on account of accrued PIK interest.
Total Claims Addressed. $148.1 million ($140.0 million in outstanding principal amount plus $8.1 million in accrued PIK interest).
Consideration to Exchanging Mezzanine Holders. In exchange for the cancellation and extinguishment of their Mezzanine Notes, exchanging holders will receive the following consideration:
(a) Series A Preferred Equity. Newly issued shares of Series A Preferred Stock of the Company having an aggregate liquidation preference of $35.0 million, bearing a PIK dividend at a rate of 10.00% per annum, and ranking senior to the common stock (but junior to all indebtedness) in right of payment and upon liquidation, dissolution, or winding up of the Company. The Series A Preferred Stock will be evidenced by a Certificate of Designations to be filed with the Delaware Secretary of State. The Series A Preferred Stock will include customary protective provisions, including consent rights with respect to the issuance of parity or senior equity, amendments to the Certificate of Designations, and certain fundamental corporate transactions. The Series A Preferred Stock will not be convertible into common equity and will have no voting rights other than as required by the Delaware General Corporation Law and the protective provisions.
(b) Common Equity. An aggregate of 47.5% of the pro forma common equity of the Company (on a fully diluted basis, subject to dilution by the management incentive plan described in Section IV.E below), to be allocated among the exchanging Mezzanine Note holders on a pro rata basis based on their respective holdings of Mezzanine Notes.
Implied Recovery. Based on preliminary equity valuation analysis performed by Hargrove Advisory Group LLC (the Company's financial advisor), the combination of the Series A Preferred Equity and the common equity to be received by exchanging Mezzanine Note holders implies an aggregate recovery of approximately 40 to 55 cents on the dollar, depending on the equity valuation assumptions employed. The cash-equivalent recovery from the Series A Preferred Equity alone (based on its aggregate liquidation preference) is approximately 23.6% ($35.0 million ÷ $148.1 million). The Company's financial advisor will provide a more detailed recovery analysis in connection with the definitive documentation and consent solicitation process.
Consent Threshold. The exchange and cancellation of the Mezzanine Notes will require the consent of holders of more than 66⅔% in aggregate principal amount of the outstanding Mezzanine Notes, as required by the Mezzanine Indenture for amendments that modify the principal amount, interest rate, maturity, or other core economic terms of the Notes.
Treatment of Non-Consenting Holders. Non-consenting holders of Mezzanine Notes will receive substantially identical treatment as consenting holders through the following mechanism: the exchange offer will be structured as a combined exchange offer and consent solicitation, pursuant to which consenting holders will deliver exit consents authorizing the execution of a Supplemental Indenture to the Mezzanine Indenture. The Supplemental Indenture will amend the Mezzanine Indenture to (i) eliminate substantially all restrictive covenants, (ii) eliminate substantially all events of default, (iii) eliminate substantially all reporting obligations, (iv) waive any existing defaults or events of default, and (v) release the second lien on all collateral securing the Mezzanine Notes. Following the execution of the Supplemental Indenture, non-consenting holders will hold Mezzanine Notes that are effectively covenant-stripped, unsecured obligations of the Company with limited rights and remedies, creating strong incentives for participation in the exchange.
Trustee / Exchange Agent. Continental Fiduciary Trust Company will serve as trustee under the Mezzanine Indenture and as exchange agent in connection with the exchange offer.
Governing Law. State of New York (for exchange documentation, exchange offer, consent solicitation, and Supplemental Indenture); State of Delaware (for equity instruments, Certificate of Designations, and related corporate governance matters).
E. Sponsor Contribution and Equity Restructuring
Sponsor Cash Contribution. Ridgeline Capital Partners Fund III, L.P. has agreed, subject to the terms and conditions set forth in this term sheet and the definitive documentation, to contribute $12.5 million in new cash equity to the Company. The new cash equity will be funded at closing and will be used to pay transaction costs and provide a liquidity cushion for the restructured enterprise. The Sponsor cash contribution reflects the Sponsor's continued commitment to the Company and its willingness to invest additional capital to support a consensual restructuring, notwithstanding the significant impairment of its existing equity investment.
Pro Forma Equity Ownership. Following the consummation of the restructuring, the pro forma equity ownership of the Company will be as follows:
The Sponsor's ownership will be diluted from 100% to 47.5% as a result of the equitization of the Mezzanine Notes. The management incentive plan is expected to reserve 5.0% of the pro forma common equity for key management personnel, with specific terms (including vesting, exercise prices, and acceleration provisions) to be agreed upon between the Sponsor and the Ad Hoc Group in connection with the definitive documentation.
Board Composition (Post-Restructuring). Upon the closing of the restructuring, the Company's board of directors will be reconstituted to consist of seven (7) directors, composed as follows:
•  Three (3) directors designated by Ridgeline Capital Partners Fund III, L.P.;
•  Three (3) directors designated by the mezzanine equitization recipients (initially to be designated by the Ad Hoc Group); and
•  One (1) independent director, mutually agreed upon by Ridgeline and the mezzanine equitization recipients.
The reconstituted board will have customary committees (audit, compensation, nominating and governance), with composition requirements to be set forth in the Amended and Restated Stockholders' Agreement.
Governance Documentation. The equity restructuring will be documented through the following instruments, among others:
(i) Amended and Restated Certificate of Incorporation — to be filed with the Delaware Secretary of State, reflecting the authorized capital stock (including the Series A Preferred Stock) and any other amendments required to effectuate the restructuring.
(ii) Certificate of Designations for Series A Preferred Stock — to be filed with the Delaware Secretary of State, setting forth the rights, preferences, privileges, and restrictions of the Series A Preferred Stock.
(iii) Amended and Restated Stockholders' Agreement — to be entered into among the Company, Ridgeline, and the mezzanine equitization recipients, containing provisions governing, among other things, transfer restrictions, tag-along rights, drag-along rights, preemptive rights, information rights, and board designation rights.
(iv) Registration Rights Agreement — to be entered into among the Company, Ridgeline, and the mezzanine equitization recipients, providing customary demand registration and piggyback registration rights with respect to the common equity and Series A Preferred Stock.
Governing Law. State of Delaware (for corporate governance instruments, including the Amended and Restated Certificate of Incorporation, Certificate of Designations, and the governance provisions of the Stockholders' Agreement); State of New York (for commercial dispute resolution provisions of the Stockholders' Agreement and Registration Rights Agreement, to the extent provided therein).
V. POST-RESTRUCTURING CAPITAL STRUCTURE
Upon the closing of the restructuring transactions described in Section IV, the Company's capital structure will be as set forth in the following table:
Total Post-Restructuring Funded Debt. $375.0 million ($55.0 million Super-Priority Term Loan + $35.0 million Amended Revolver commitment + $285.0 million Amended TLB), representing a reduction of $100.1 million from the pre-restructuring funded debt level of $475.1 million.
Debt Reduction from Equitization. $100.1 million ($475.1 million pre-restructuring total funded debt less $375.0 million post-restructuring total funded debt). The entire debt reduction is attributable to the equitization of the Mezzanine Notes and the waiver of accrued PIK interest.
Post-Restructuring Total Leverage. Based on the Company's projected FY 2024E Adjusted EBITDA of $52.0 million (which reflects the anticipated benefits of the Company's cost reduction initiatives and a modest recovery in freight market conditions), total leverage on a post-restructuring basis is expected to be approximately 7.2x ($375.0 million ÷ $52.0 million).
Post-Restructuring First Lien Leverage. 7.2x. Following the equitization of the Mezzanine Notes, all funded debt will be first lien or super-priority in nature, such that total leverage and first lien leverage are equivalent.
Nearest Maturity. December 19, 2027 (the Super-Priority Term Loan and the Amended Revolving Credit Facility), representing an extension of approximately three years from the current nearest maturity of December 15, 2024.
Pro Forma Liquidity. At closing, the Company is expected to have pro forma liquidity of approximately $50 million, consisting of (i) unrestricted cash on hand (including net proceeds from the Super-Priority Term Loan initial draw and the Sponsor equity contribution, after payment of transaction costs and reduction of the Revolver drawn balance) and (ii) undrawn availability under the Amended Revolving Credit Facility. The enhanced liquidity position is expected to provide the Company with sufficient runway to navigate the current cyclical downturn and execute its strategic initiatives.
VI. CONDITIONS TO CLOSING
The consummation of the restructuring transactions contemplated by this term sheet shall be subject to the satisfaction or waiver of the following conditions precedent on or before the closing date:
1.  Definitive Documentation. Execution and delivery of all definitive documentation by all parties thereto, in form and substance acceptable to the Company, the Sponsor, the Required Lenders under the First Lien Credit Agreement, the requisite majority of Mezzanine Note holders, and Belvedere (as lead arranger of the Super-Priority Term Loan), including the following:
(a) Amended and Restated First Lien Credit Agreement (reflecting the amendments to the TLB and Revolving Credit Facility);
(b) Super-Priority Credit Agreement, Guaranty Agreement, and Pledge and Security Agreement;
(c) Amended and Restated Intercreditor Agreement (establishing the first-out / second-out lien priority structure);
(d) Exchange Agreement (governing the exchange of Mezzanine Notes for Series A Preferred Equity and common equity);
(e) Supplemental Indenture to the Mezzanine Indenture (implementing exit consent amendments);
(f) Amended and Restated Stockholders' Agreement;
(g) Amended and Restated Certificate of Incorporation and Certificate of Designations for Series A Preferred Stock (each to be filed with the Delaware Secretary of State);
(h) Registration Rights Agreement; and
(i) All other ancillary documentation reasonably required in connection with the foregoing, including UCC financing statements, mortgage amendments, insurance endorsements, and intellectual property security agreements.
2.  Restructuring Support Agreement. Execution and delivery of a Restructuring Support Agreement (the "RSA") by the following requisite majorities of each creditor constituency:
(a) TLB: Required Lenders (holders of more than 50% of outstanding TLB loans);
(b) Revolver: Required Lenders (holders of more than 50% of revolving loan commitments); and
(c) Mezzanine Notes: Holders of more than 66⅔% in aggregate principal amount of the outstanding Mezzanine Notes.
The RSA will contain customary terms and provisions, including milestones, fiduciary out provisions for the Company's board of directors, termination events, and specific performance remedies.
3.  Receipt of All Required Consents. Receipt of all consents required under the existing credit documentation and the Mezzanine Indenture to effectuate the restructuring transactions, including:
(a) Consent of the Required Lenders under the First Lien Credit Agreement (holders of more than 50% of outstanding TLB loans) to the amendment and extension of the TLB;
(b) Consent of the Required Lenders under the First Lien Credit Agreement (holders of more than 50% of revolving loan commitments) to the amendment, reduction, and extension of the Revolving Credit Facility;
(c) Consent of holders of more than 66⅔% in aggregate principal amount of the outstanding Mezzanine Notes to the exchange and equitization of the Mezzanine Notes and the execution of the Supplemental Indenture; and
(d) Any other consents required under existing documentation to permit the incurrence of the Super-Priority Term Loan and the establishment of the super-priority lien.
4.  Sponsor Equity Contribution. Funding of the $12.5 million new cash equity contribution by Ridgeline Capital Partners Fund III, L.P. into the Company on or prior to the closing date.
5.  Super-Priority Term Loan Funding. Funding of the $45.0 million initial draw under the Super-Priority Credit Agreement by Belvedere Credit Opportunities Fund LP on the closing date.
6.  No Material Adverse Change. No material adverse change shall have occurred in the business, operations, assets, liabilities, condition (financial or otherwise), or results of operations of the Company and its subsidiaries, taken as a whole, since March 31, 2023, as determined in the reasonable judgment of the Required Lenders under the First Lien Credit Agreement and Belvedere (as Super-Priority lender).
7.  Governmental and Regulatory Approvals. Receipt of all required governmental and regulatory approvals, if any, including any approvals required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (to the extent applicable), the rules and regulations of the U.S. Department of Transportation, and any state-level transportation or business licensing requirements triggered by the change in equity ownership.
8.  No Injunction or Legal Challenge. No injunction, restraining order, or other legal proceeding shall be pending or threatened that challenges, prohibits, or seeks to materially impair the consummation of the restructuring transactions.
9.  Closing Deliverables. Delivery of all customary closing deliverables, including:
(a) Secretary's Certificate, executed by Howard Kessler (General Counsel), certifying as to the Company's organizational documents, board resolutions, and incumbency of officers;
(b) Officer's Certificate, executed by Priya Sundaram (Chief Financial Officer), certifying as to the accuracy of the Company's representations and warranties, the absence of any event of default, compliance with financial covenants, and satisfaction of the conditions precedent;
(c) Legal Opinion of Calderwood & Harkness LLP, addressed to the lenders and agents, covering customary matters including due authorization, execution and delivery, enforceability, no conflicts, and such other matters as may be reasonably requested by the lenders; and
(d) Such other certificates, instruments, and documents as may be reasonably requested by any party in connection with the closing.
10.  Payment of Transaction Costs and Fees. Payment of all transaction costs and fees due and payable at closing, including consent fees payable to the TLB and Revolver lenders, advisory fees and professional fees payable to the advisors and counsel listed in Section VII below, and all other costs and expenses incurred by the Company and reimbursable to the creditor constituencies in connection with the restructuring.
11.  D&O Tail Insurance. A directors' and officers' liability insurance tail policy shall be in place as of the closing date, issued by Northgate Specialty Insurance Company (Policy No. NSI-DOL-2023-07721), providing $15.0 million in aggregate coverage with a six-year tail period, covering claims arising from acts or omissions occurring prior to the closing date.
VII. ESTIMATED TRANSACTION COSTS
The following table sets forth the estimated transaction costs associated with the proposed restructuring. All estimated amounts are subject to change based on the final scope of work, timing of the closing, and the negotiation of definitive fee arrangements.
All professional fees of the first lien lenders' counsel and the mezzanine Ad Hoc Group's counsel and financial advisor are payable by the Company pursuant to existing fee and expense reimbursement provisions in the First Lien Credit Agreement and the Mezzanine Indenture, respectively. Consent fees are payable by the Company to consenting lenders at closing. The Super-Priority Term Loan OID reduces the net funded proceeds available to the Company at closing but does not represent a separate cash outlay. Total estimated transaction costs of approximately $12.8 million will be funded from a combination of the Super-Priority Term Loan proceeds and the Sponsor equity contribution.
VIII. INDICATIVE TIMELINE
The following table sets forth the indicative timeline for the proposed restructuring. All dates are targets and are subject to change based on the progress of negotiations, documentation, and the consent solicitation process.
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The parties acknowledge that the timeline set forth above is aggressive and may require adjustment. In particular, the parties recognize that the consent solicitation process for the Mezzanine Notes may require additional time if the threshold of 66⅔% in principal amount proves difficult to obtain. The Company and its advisors will provide regular status updates to all creditor constituencies throughout the process.
IX. ADVISORS AND COUNSEL
The following table summarizes the professional advisors and counsel engaged by the various parties in connection with the proposed restructuring:
Thornbury McCaffrey LLP represents both the mezzanine Ad Hoc Group and the new money lender (Belvedere Credit Opportunities Fund LP) in connection with this transaction. Thornbury McCaffrey has implemented an ethical wall within its firm to address potential conflicts of interest arising from this dual representation. The Company and all parties have been advised of this arrangement.
X. RESERVATIONS AND DISCLAIMERS
Non-Binding Nature. This term sheet is non-binding and is for discussion purposes only. It is intended to facilitate negotiations among the parties and does not constitute a commitment, undertaking, or agreement by any party to enter into, consummate, or support the transactions described herein.
No Obligation. No party shall have any obligation with respect to the transactions described herein unless and until definitive documentation in form and substance satisfactory to all parties has been executed and delivered by all parties thereto. Until such time, no party shall have any liability to any other party in connection with the transactions described in this term sheet, whether based on contract, tort, equity, or any other theory.
No Offer or Solicitation. This term sheet does not constitute an offer or solicitation of an offer to purchase or sell any securities within the meaning of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or any applicable state securities laws. Any offer to exchange Mezzanine Notes for equity securities of the Company will be made solely by means of an offering memorandum or consent solicitation statement prepared and distributed in compliance with all applicable securities laws.
Due Diligence and Conditions. All terms described in this term sheet are subject to the satisfactory completion of due diligence by the parties, the receipt of all required consents from creditor constituencies, governmental authorities, and other third parties, and the negotiation, documentation, and execution of definitive legal documentation acceptable to all parties.
Right to Terminate. Each party reserves the right to terminate discussions regarding the transactions described herein at any time and for any reason, without liability or obligation to any other party.
Confidentiality. Distribution of this term sheet is subject to existing confidentiality agreements and non-disclosure agreement obligations among the parties. Recipients of this term sheet are reminded of their obligations under such agreements and are prohibited from disclosing the contents of this term sheet to any person or entity not authorized to receive it.
Privilege. This term sheet has been prepared by Calderwood & Harkness LLP in connection with the contemplated restructuring of Stonefield Logistics Group Inc. and is protected by the attorney-client privilege, the work product doctrine, and any other applicable privileges or protections. Nothing in this term sheet shall be deemed a waiver of any such privilege or protection.
Remainder of page intentionally left blank.
ACKNOWLEDGMENT
The undersigned acknowledge receipt of this Preliminary Term Sheet and confirm their willingness to engage in good-faith negotiations on the terms described herein, subject to the reservations and disclaimers set forth in Section X above. This acknowledgment does not constitute a binding agreement or commitment of any kind.
STONEFIELD LOGISTICS GROUP INC.
By: ________
Name: Marcus Delano
Title: Chief Executive Officer
Date: ________
RIDGELINE CAPITAL PARTNERS FUND III, L.P.
By: Ridgeline Capital Management III LLC, its General Partner
By: ________
Name: Julian Voight
Title: Managing Director
Date: ________
PINNACLE NATIONAL BANK, N.A., as Administrative Agent and Collateral Agent under the First Lien Credit Agreement
By: ________
Name: Daniel Wexford
Title: Managing Director, Loan Restructuring Group
Date: ________
BELVEDERE CREDIT OPPORTUNITIES FUND LP, as Proposed Lead Arranger and Initial Lender under the Super-Priority Term Loan
By: ________
Name: Christopher Hartigan
Title: Managing Partner
Date: ________
GRAYSTONE MEZZANINE CAPITAL FUND II LP, on behalf of the Ad Hoc Group of Mezzanine Note Holders
By: ________
Name: ________
Title: ________
Date: ________
ASHLAND STRUCTURED CREDIT LLC, on behalf of the Ad Hoc Group of Mezzanine Note Holders
By: ________
Name: ________
Title: ________
Date: ________
DUNMORE SPECIAL SITUATIONS FUND LP, on behalf of the Ad Hoc Group of Mezzanine Note Holders
By: ________
Name: ________
Title: ________
Date: ________
Prepared by Calderwood & Harkness LLP | 599 Lexington Avenue, New York, NY 10022 | Matter No. 1012-00002 | CONFIDENTIAL — For Discussion Purposes Only
Lender | Commitment
Pinnacle National Bank, N.A. | $20.0 million
Great Basin Commercial Bank | $15.0 million
Tidewater Lending Corporation | $15.0 million
Total | $50.0 million
Lender | Outstanding Principal
Pinnacle National Bank, N.A. | $45.0 million
Tralvendo CLO 2018-I, Ltd. (managed by Tralvendo Asset Management LLC) | $38.5 million
Belvedere Credit Opportunities Fund LP | $32.0 million
Kelvantis Capital Partners LLC | $28.0 million
Kingsway Institutional Investors LLC | $24.5 million
Other syndicate members (11 lenders) | $117.0 million
Total | $285.0 million
Holder | Outstanding Principal
Graystone Mezzanine Capital Fund II LP | $52.0 million
Ashland Structured Credit LLC | $40.0 million
Dunmore Special Situations Fund LP | $30.0 million
Other holders (4 funds) | $18.0 million
Total | $140.0 million
Tranche | Outstanding / Commitment | Interest Rate | Maturity | Priority
Revolving Credit Facility | $42.0M drawn / $50.0M committed | SOFR + 375 bps | 12/15/2024 | First Lien
First Lien Term Loan B | $285.0M | SOFR + 425 bps (75 bps floor) | 12/15/2024 | First Lien
Mezzanine Notes (Second Lien) | $140.0M principal + $8.1M PIK | 11.50% (cash/PIK) | 6/15/2025 | Second Lien
Common Equity (Sponsor) | $210.0M invested | — | — | Equity
Holder | Pro Forma Common Equity Ownership
Ridgeline Capital Partners Fund III, L.P. (Sponsor) | 47.5%
Mezzanine equitization recipients (pro rata) | 47.5%
Management incentive plan (MIP) participants | 5.0%
Total | 100.0%
Tranche | Amount | Interest Rate | Maturity | Priority
Super-Priority Term Loan | $55.0M ($45.0M funded + $10.0M DDTL) | SOFR + 700 bps (100 bps floor) | 12/19/2027 | Super-priority first-out
Amended Revolving Credit Facility | $35.0M committed | SOFR + 450 bps | 12/19/2027 (springing) | First lien second-out
Amended First Lien Term Loan B | $285.0M | SOFR + 500 bps (100 bps floor) | 12/19/2028 | First lien second-out
Mezzanine Notes | $0 (cancelled — equitized) | — | — | —
Series A Preferred Equity | $35.0M liquidation preference | 10.00% PIK | — | Senior to common
Common Equity | 47.5% Ridgeline / 47.5% Mezz holders / 5.0% MIP | — | — | Equity
Item | Amount
Calderwood & Harkness LLP — legal fees (restructuring counsel to the Company) | $2,850,000 (est., including $750,000 success fee)
Hargrove Advisory Group LLC — financial advisory fees (financial advisor to the Company) | $3,200,000 (monthly retainer + completion fee)
Westlake Harden & Cole LLP — legal fees (counsel to first lien lenders) | $1,400,000 (est., reimbursed by the Company)
Thornbury McCaffrey LLP — legal fees (counsel to mezzanine Ad Hoc Group) | $1,100,000 (est., reimbursed by the Company)
Meridian Veltrian Partners LLC — financial advisory fees (financial advisor to mezzanine Ad Hoc Group) | $900,000 (reimbursed by the Company)
TLB consent fee ($285.0M × 0.50%) | $1,425,000
Revolver consent fee ($35.0M × 0.25%) | $87,500
Super-Priority Term Loan — original issue discount ($55.0M × 2.00%) | $1,100,000
D&O tail insurance premium | $475,000
Filing fees, administrative fees, and trustee fees | $225,000
Total Estimated Transaction Costs | approximately $12,762,500
Target Date | Milestone
May 19, 2023 | Circulation of this preliminary term sheet to all creditor constituencies
Late May / Early June 2023 | Receipt of feedback from TLB and Revolver lenders and the mezzanine Ad Hoc Group; commencement of bilateral negotiations on key economic terms
Mid-June 2023 | Circulation of revised term sheet, if needed, reflecting agreed modifications
Late June 2023 | Execution of the Restructuring Support Agreement by the Company, the Sponsor, and requisite majorities of each creditor constituency
Early July 2023 | Joinder period for additional mezzanine holders to accede to the RSA
August 2023 | Circulation of initial drafts of all definitive documentation to the parties and their respective counsel
September 2023 | Completion of tax analysis (including cancellation of indebtedness income analysis), legal due diligence, and any outstanding business diligence workstreams
October 2023 | Launch of formal consent solicitation for holders of Mezzanine Notes, including distribution of the exchange offer memorandum and consent solicitation statement
November 2023 | Expiration of the consent solicitation period; receipt of requisite consents; execution of the Amended and Restated First Lien Credit Agreement, Super-Priority Credit Agreement, intercreditor agreement, and other credit documentation
December 2023 | Closing of all restructuring transactions; funding of the Super-Priority Term Loan and Sponsor equity contribution; exchange of Mezzanine Notes for equity; filing of amended corporate governance instruments with the Delaware Secretary of State
December 31, 2023 | Long-stop date under the RSA; if closing has not occurred by this date, the RSA terminates automatically (subject to extension by mutual agreement)
Role | Entity | Lead Contact
Restructuring counsel to the Company | Calderwood & Harkness LLP, 599 Lexington Avenue, New York, NY 10022 | Nathaniel Bower, Responsible Partner
Financial advisor to the Company | Hargrove Advisory Group LLC, 1345 Avenue of the Americas, 38th Floor, New York, NY 10105 | Elena Voss, Managing Director
Counsel to the first lien lenders | Westlake Harden & Cole LLP, 787 Seventh Avenue, 34th Floor, New York, NY 10019 | Ramona Quelibo, Lead Partner
Counsel to the mezzanine Ad Hoc Group | Thornbury McCaffrey LLP, 375 Park Avenue, 25th Floor, New York, NY 10152 | Alan Driscoll, Lead Partner
Financial advisor to the mezzanine Ad Hoc Group | Meridian Veltrian Partners LLC, 660 Fifth Avenue, 18th Floor, New York, NY 10103 | —
Counsel to the new money lender (Belvedere) | Thornbury McCaffrey LLP (ethical wall in place) | —
Independent auditor | Whitfield & Pryce LLP, 2100 Ross Avenue, Suite 2800, Dallas, TX 75201 | Todd Ashburn, CPA, Engagement Partner
Mezzanine indenture trustee / exchange agent | Continental Fiduciary Trust Company, 100 Wall Street, 15th Floor, New York, NY 10005 | —

PRELIMINARY TERM SHEET

PROPOSED CONSENSUAL RESTRUCTURING OF STONEFIELD LOGISTICS GROUP INC.

I. OVERVIEW

II. THE COMPANY

III. EXISTING CAPITAL STRUCTURE (AS OF MARCH 31, 2023)

CUSIP. 861537 AA 2.

IV. PROPOSED RESTRUCTURING TERMS

V. POST-RESTRUCTURING CAPITAL STRUCTURE

VI. CONDITIONS TO CLOSING

Record

Parties

Dates

Amounts