EXCHANGE AGREEMENT
Execution Version
Dated as of December 8, 2023
by and among
STONEFIELD LOGISTICS GROUP INC.
a Delaware corporation
as Issuer
and
THE EXCHANGING HOLDERS PARTY HERETO
in respect of the
11.50% Senior Secured Second Lien Notes due June 15, 2025
(CUSIP 861537 AA 2)
issued under the Indenture dated December 15, 2017
between Stonefield Logistics Group Inc. and Continental Fiduciary Trust Company, as Trustee and Second Lien Collateral Agent
TABLE OF CONTENTS
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RECITALS
WHEREAS:
A. Stonefield Logistics Group Inc. (the "Company") is a corporation duly organized and validly existing under the laws of the State of Delaware, with Employer Identification Number 83-2457109 and Delaware File Number 6341872. The Company's principal executive offices are located at 4200 Commerce Street, Suite 1500, Dallas, Texas 75201, and its registered agent in the State of Delaware is Capitol Registered Agents, Inc., located at 1209 Orange Street, Wilmington, Delaware 19801.
B. The Company issued $140,000,000 in aggregate principal amount of 11.50% Senior Secured Second Lien Notes due June 15, 2025 (the "Mezzanine Notes") pursuant to that certain Indenture, dated as of December 15, 2017 (the "Indenture"), by and between the Company, as Issuer, and Continental Fiduciary Trust Company, as Trustee and Second Lien Collateral Agent. The Mezzanine Notes bear CUSIP number 861537 AA 2.
C. As of the date hereof, there is $140,000,000 in aggregate principal amount of Mezzanine Notes outstanding, together with $8,100,000 in accrued and unpaid payment-in-kind ("PIK") interest thereon (for an aggregate claim amount of $148,100,000).
D. Each Exchanging Holder identified on the signature pages hereto and on Schedule I attached hereto (each, an "Exchanging Holder" and collectively, the "Exchanging Holders") holds the aggregate principal amount of Mezzanine Notes set forth opposite its name on Schedule I. The Exchanging Holders collectively hold $134,500,000 in aggregate principal amount of Mezzanine Notes, representing approximately 96.1% of the total outstanding Mezzanine Notes.
E. The Company, Ridgeline Capital Partners Fund III, L.P., a Delaware limited partnership ("Ridgeline"), the Exchanging Holders, certain first lien lenders, and the revolving credit facility lenders entered into that certain Restructuring Support Agreement, dated as of June 30, 2023 (the "RSA"), pursuant to which, among other things, the parties agreed to support the consensual out-of-court restructuring of the Company's capital structure, including the transactions contemplated hereby.
F. In furtherance of the RSA and the Restructuring Transactions (as defined therein), the Company and the Exchanging Holders desire to exchange the Mezzanine Notes held by the Exchanging Holders for (i) shares of newly designated Series A Preferred Stock of the Company, having an aggregate liquidation preference of $35,000,000, and (ii) shares of Common Stock of the Company representing, in the aggregate, 47.5% of the pro forma common equity of the Company (together with the Series A Preferred Stock, the "Exchange Consideration"), all on the terms and subject to the conditions set forth herein.
G. In connection with this Exchange Agreement, the Company and Continental Fiduciary Trust Company, as Trustee, are entering into a First Supplemental Indenture, dated as of the date hereof (the "Supplemental Indenture"), effectuating exit consent amendments to the Indenture, as approved by holders of more than 66⅔% in aggregate principal amount of the outstanding Mezzanine Notes.
H. Concurrently with the consummation of the Exchange, the Company is: (a) entering into an Amended and Restated First Lien Credit Agreement, dated as of December 1, 2023, with Pinnacle National Bank, N.A., as Administrative Agent and Collateral Agent, amending and extending the existing first lien term loan and revolving credit facility (the "Amended Credit Agreement"); (b) entering into a Super-Priority Credit Agreement, dated as of November 17, 2023, with Belvedere Credit Opportunities Fund LP, as Administrative Agent, Collateral Agent, and Initial Lender, providing for a $55,000,000 super-priority first-out term loan facility (the "Super-Priority Credit Agreement"); (c) entering into an Amended and Restated Intercreditor Agreement, dated as of November 10, 2023 (the "Intercreditor Agreement"); and (d) consummating a $12,500,000 new cash equity contribution from Ridgeline (the "Sponsor Contribution").
I. The Board of Directors of the Company (the "Board") has approved this Exchange Agreement and the transactions contemplated hereby by resolutions adopted on June 29, 2023 (approving entry into the RSA and the restructuring transactions) and December 11, 2023 (authorizing execution and closing of the definitive documents), and has determined that the Exchange and the other transactions contemplated hereby are in the best interests of the Company and its stakeholders.
NOW, THEREFORE, in consideration of the mutual promises and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below:
"Accrued PIK Interest" means $8,100,000 in accrued and unpaid payment-in-kind interest on the Mezzanine Notes through the Closing Date.
"Ad Hoc Group" means the ad hoc group of mezzanine holders consisting of Graystone Mezzanine Capital Fund II LP, Ashland Structured Credit LLC, and Dunmore Special Situations Fund LP, holding $122,000,000 in aggregate principal amount of Mezzanine Notes (representing approximately 87.1% of the outstanding Mezzanine Notes), represented by Thornbury McCaffrey LLP.
"Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with such Person. For purposes of this definition, "control" (including the terms "controlling," "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract, or otherwise.
"Agreement" means this Exchange Agreement, as it may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms hereof.
"Amended Certificate of Incorporation" means the Amended and Restated Certificate of Incorporation of the Company, dated December 12, 2023, as filed with the Delaware Secretary of State.
"Amended Credit Agreement" means the Amended and Restated First Lien Credit Agreement, dated as of December 1, 2023, among the Company, Pinnacle National Bank, N.A. as Administrative Agent and Collateral Agent, and the lenders party thereto from time to time.
"Board" means the Board of Directors of the Company.
"Business Day" means any day other than a Saturday, Sunday, or any day on which commercial banks in New York, New York are authorized or required by law, regulation, or executive order to close.
"Certificate of Designations" means the Certificate of Designations of Series A Preferred Stock of the Company, dated December 12, 2023, as filed with the Delaware Secretary of State, substantially in the form attached hereto as Exhibit C.
"Closing" means the closing of the Exchange, to occur on the Closing Date in accordance with Article III.
"Closing Date" means December 19, 2023, or such other date as the Company and the Required Exchanging Holders may agree in writing; provided that the Closing Date shall not be later than the Long-Stop Date.
"Common Shares" means the shares of Common Stock issuable to the Exchanging Holders as part of the Exchange Consideration pursuant to Section 2.2(b).
"Common Stock" means the common stock of the Company, par value $0.01 per share.
"Company" means Stonefield Logistics Group Inc., a Delaware corporation.
"Concurrent Transactions" means the transactions described in Section 3.4, including the Amended Credit Agreement, the Super-Priority Credit Agreement, the Intercreditor Agreement, the Supplemental Indenture, and the Sponsor Contribution.
"Consent Solicitation" means the consent solicitation launched on October 6, 2023, pursuant to the Consent Solicitation Statement, soliciting consents from holders of the Mezzanine Notes to the Exit Consent Amendments.
"Consent Solicitation Statement" means the consent solicitation statement dated October 6, 2023, distributed to holders of the Mezzanine Notes in connection with the Consent Solicitation.
"Continental Fiduciary" or "Trustee" means Continental Fiduciary Trust Company, in its capacity as Trustee and Second Lien Collateral Agent under the Indenture, with its principal office located at 100 Wall Street, 15th Floor, New York, New York 10005.
"DGCL" means the General Corporation Law of the State of Delaware, as amended from time to time.
"Exchange" means the exchange of Mezzanine Notes for Exchange Consideration pursuant to Article II of this Agreement.
"Exchange Agent" means Continental Fiduciary Trust Company, acting in its capacity as exchange agent in connection with the Exchange, as contemplated by Section 2.5.
"Exchange Consideration" means, collectively, (i) the Series A Preferred Shares and (ii) the Common Shares, as allocated to the Exchanging Holders pursuant to Section 2.2 and Schedule II.
"Exchanging Holders" means, collectively, each holder of Mezzanine Notes identified on the signature pages hereto and listed on Schedule I, together with any permitted transferee or assignee thereof that becomes a party to this Agreement.
"Exit Consent Amendments" means the amendments to the Indenture effectuated by the Supplemental Indenture, stripping substantially all restrictive covenants, events of default, and reporting obligations from the Mezzanine Notes, as described in the Consent Solicitation Statement.
"GAAP" means United States generally accepted accounting principles as in effect from time to time, consistently applied.
"Governmental Authority" means any federal, state, local, or foreign government, governmental authority, regulatory or administrative agency, governmental commission, department, board, bureau, agency, or instrumentality, court, tribunal, arbitrator, or self-regulatory organization.
"Indenture" means the Indenture, dated as of December 15, 2017, by and between the Company and Continental Fiduciary Trust Company, as Trustee and Second Lien Collateral Agent, as the same may be supplemented, amended, or otherwise modified from time to time, including by the Supplemental Indenture.
"Intercreditor Agreement" means the Amended and Restated Intercreditor Agreement, dated as of November 10, 2023, among Belvedere Credit Opportunities Fund LP (as Super-Priority Agent), Pinnacle National Bank, N.A. (as First Lien Agent), and the Company.
"IRS" means the Internal Revenue Service of the United States.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, preference, priority, or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any financing lease having substantially the same economic effect as any of the foregoing).
"Long-Stop Date" means December 31, 2023.
"Management Incentive Plan" or "MIP" means the management incentive equity plan adopted by the Board, pursuant to which an aggregate of 5.0% of Pro Forma Common Equity has been reserved for issuance to management employees and other service providers of the Company and its subsidiaries.
"Material Adverse Change" means any change, effect, event, occurrence, state of facts, or development that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on (a) the business, assets, liabilities, financial condition, or results of operations of the Company and its subsidiaries, taken as a whole, or (b) the ability of the Company to consummate the Exchange and perform its obligations under this Agreement and the other Restructuring Documents; provided, however, that none of the following shall constitute, or be taken into account in determining whether there has been, a Material Adverse Change: (i) changes in general economic, regulatory, or political conditions; (ii) changes in conditions generally affecting the logistics and freight transportation industry; (iii) changes in applicable law or GAAP; (iv) the effects of the transactions contemplated by this Agreement and the other Restructuring Documents; (v) the financial distress and deterioration in operating performance previously disclosed to the Exchanging Holders; or (vi) any natural disaster, pandemic, act of terrorism, or military conflict, in each case of the foregoing clauses (i) through (iii) and (vi) unless such changes disproportionately affect the Company relative to similarly situated companies in the logistics and freight transportation industry.
"Mezzanine Notes" means the 11.50% Senior Secured Second Lien Notes due June 15, 2025, bearing CUSIP 861537 AA 2, issued under the Indenture, in the original aggregate principal amount of $140,000,000.
"Non-Exchanging Holders" means holders of Mezzanine Notes who are not Exchanging Holders as of the Closing Date, holding an aggregate of $5,500,000 in principal amount of Mezzanine Notes.
"Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, or Governmental Authority.
"Pro Forma Common Equity" means all outstanding shares of Common Stock after giving effect to the Exchange, the Sponsor Contribution, and the reservation of shares under the MIP, comprised of: (a) 47.5% held, in the aggregate, by the Exchanging Holders; (b) 47.5% held by Ridgeline; and (c) 5.0% reserved for issuance under the MIP.
"Pro Rata Share" has the meaning set forth in Section 2.4.
"Registration Rights Agreement" means the Registration Rights Agreement, dated December 12, 2023, by and among the Company, Ridgeline, and the Exchanging Holders, providing for certain demand and piggyback registration rights with respect to the Common Stock and any Common Stock issuable upon conversion of the Series A Preferred Stock.
"Required Exchanging Holders" means Exchanging Holders holding at least a majority of the aggregate principal amount of Mezzanine Notes held by all Exchanging Holders (i.e., at least $67,250,001 in aggregate principal amount).
"Restructuring Documents" means, collectively, this Agreement, the RSA, the Supplemental Indenture, the Amended Credit Agreement, the Super-Priority Credit Agreement, the Intercreditor Agreement, the Amended Certificate of Incorporation, the Certificate of Designations, the Stockholders' Agreement, the Registration Rights Agreement, and all other agreements, documents, and instruments executed and delivered in connection with the Restructuring Transactions.
"Restructuring Transactions" means, collectively, the Exchange, the Concurrent Transactions, and all other transactions contemplated by the RSA and the Restructuring Documents.
"Ridgeline" means Ridgeline Capital Partners Fund III, L.P., a Delaware limited partnership, together with its Affiliates, as applicable.
"RSA" means the Restructuring Support Agreement, dated as of June 30, 2023, by and among the Company, Ridgeline, the consenting first lien term loan lenders, the revolving credit facility lenders, and the consenting mezzanine holders, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"Series A Preferred Shares" means the shares of Series A Preferred Stock issuable to the Exchanging Holders pursuant to the Certificate of Designations as part of the Exchange Consideration.
"Series A Preferred Stock" means the Series A Preferred Stock of the Company, as designated and created by the Certificate of Designations, with an aggregate liquidation preference of $35,000,000 and a 10.00% annual PIK dividend rate, senior to the Common Stock in respect of dividends and distributions upon liquidation, dissolution, or winding up.
"SOFR" means the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York (or a successor administrator).
"Sponsor Contribution" means the $12,500,000 cash equity contribution to be made by Ridgeline to the Company in exchange for 47.5% of the Pro Forma Common Equity, concurrently with the Closing.
"Stockholders' Agreement" means the Amended and Restated Stockholders' Agreement of the Company, dated December 12, 2023, by and among the Company, Ridgeline, and the Exchanging Holders, substantially in the form attached hereto as Exhibit D.
"Subsequent Exchange Period" has the meaning set forth in Section 2.7.
"Super-Priority Credit Agreement" means the Super-Priority Credit Agreement, dated as of November 17, 2023, among the Company, the Guarantors party thereto, and Belvedere Credit Opportunities Fund LP as Administrative Agent, Collateral Agent, and Initial Lender, providing for a $55,000,000 super-priority first-out term loan facility.
"Supplemental Indenture" means the First Supplemental Indenture to the Indenture, dated as of December 8, 2023, by and between the Company and Continental Fiduciary Trust Company, as Trustee, effectuating the Exit Consent Amendments.
"Tax" or "Taxes" means all federal, state, local, and foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other taxes of any kind whatsoever, including any interest, penalty, or addition thereto.
Section 1.2 — Rules of Construction
Unless the context otherwise requires, the following rules of construction shall apply to this Agreement:
(a) The headings and captions contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
(b) The words "include," "includes," and "including" when used herein shall be deemed in each case to be followed by the words "without limitation."
(c) All references herein to "Articles," "Sections," "Exhibits," "Schedules," and "Annexes" shall be deemed to refer to Articles, Sections, Exhibits, Schedules, and Annexes of or to this Agreement, unless otherwise specified.
(d) All references herein to any law, statute, regulation, or rule shall be deemed to refer to such law, statute, regulation, or rule as amended, supplemented, or otherwise modified from time to time, and shall include any successor provisions thereto.
(e) Words in the singular shall include the plural and vice versa, and words of one gender shall include the other genders, as the context requires.
(f) References to "$" or "dollars" shall mean the lawful currency of the United States of America.
(g) References to any agreement or document shall be deemed to refer to such agreement or document as amended, restated, supplemented, or otherwise modified from time to time, unless otherwise expressly provided.
(h) The terms "hereof," "herein," "hereunder," "hereto," and words of similar import shall refer to this Agreement as a whole and not to any particular provision of this Agreement.
(i) The parties hereto have participated jointly in the negotiation and drafting of this Agreement, and in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.
ARTICLE II — THE EXCHANGE
Section 2.1 — Exchange of Mezzanine Notes
Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, each Exchanging Holder shall transfer, assign, and deliver to the Company for cancellation all of the Mezzanine Notes held by such Exchanging Holder (in the aggregate principal amount set forth opposite such Exchanging Holder's name on Schedule I), free and clear of all Liens, claims, pledges, and encumbrances (other than restrictions under applicable securities laws and the Indenture). In exchange therefor, and as full and complete consideration for such transfer, assignment, and delivery, the Company shall issue and deliver to each Exchanging Holder such Exchanging Holder's Pro Rata Share of the Exchange Consideration, as more particularly described in Section 2.2 and as set forth on Schedule II.
The Exchanging Holders collectively hold $134,500,000 in aggregate principal amount of Mezzanine Notes, representing approximately 96.1% of the $140,000,000 in aggregate principal amount of outstanding Mezzanine Notes. Upon delivery of the Mezzanine Notes by the Exchanging Holders to the Company (or to the Exchange Agent on behalf of the Company), such Mezzanine Notes shall be cancelled and retired and shall not be reissued. The Company shall cause the Trustee to make appropriate notations on the register of holders maintained by the Trustee reflecting such cancellation.
Section 2.2 — Allocation of Exchange Consideration
(a) Series A Preferred Stock. Each Exchanging Holder shall receive its Pro Rata Share of Series A Preferred Shares, such that the aggregate liquidation preference of all Series A Preferred Shares issued to the Exchanging Holders equals $35,000,000. Each Exchanging Holder's Pro Rata Share of Series A Preferred Shares shall be calculated as follows: the product of (i) such Exchanging Holder's aggregate principal amount of Mezzanine Notes exchanged, divided by $134,500,000, multiplied by (ii) $35,000,000 in aggregate liquidation preference. The Series A Preferred Shares shall be issued in accordance with the Certificate of Designations.
(b) Common Stock. Each Exchanging Holder shall receive its Pro Rata Share of Common Shares such that the Exchanging Holders collectively hold, in the aggregate, 47.5% of the Pro Forma Common Equity of the Company. Each Exchanging Holder's Pro Rata Share of Common Shares shall equal the product of (i) such Exchanging Holder's aggregate principal amount of Mezzanine Notes exchanged, divided by $134,500,000, multiplied by (ii) 47.5% of the Pro Forma Common Equity. The Common Shares shall be issued as fully paid and nonassessable shares of Common Stock.
(c) Allocation Table. The precise number of Series A Preferred Shares and Common Shares issuable to each Exchanging Holder shall be as set forth on Schedule II attached hereto, which schedule shall be agreed upon by the Company and the Required Exchanging Holders no later than two (2) Business Days prior to the Closing Date. In the event of any discrepancy between the calculations set forth in Sections 2.2(a) and 2.2(b), on the one hand, and Schedule II, on the other hand, the parties shall cooperate in good faith to resolve such discrepancy prior to the Closing Date, and Schedule II as finally agreed shall be controlling.
Section 2.3 — Waiver of Accrued PIK Interest
As material consideration for the Exchange Consideration and as an integral component of the integrated settlement reflected in the RSA and the transactions contemplated hereby, each Exchanging Holder hereby irrevocably and unconditionally waives all rights, claims, and entitlements to Accrued PIK Interest in the amount of $8,100,000 (i.e., such Exchanging Holder's Pro Rata Share thereof, calculated in the same manner as set forth in Section 2.4). Each Exchanging Holder acknowledges and agrees that such waiver is a material inducement to the Company to enter into this Agreement and consummate the Exchange, and that no separate or additional consideration shall be payable by the Company to any Exchanging Holder in respect of such waived Accrued PIK Interest. The aggregate claim amount of $148,100,000 (consisting of $140,000,000 in principal and $8,100,000 in Accrued PIK Interest) held by the Exchanging Holders is being exchanged and settled through the Exchange Consideration on the terms set forth herein.
Section 2.4 — Pro Rata Share
"Pro Rata Share" means, with respect to each Exchanging Holder, a fraction (expressed as a percentage), the numerator of which is the aggregate principal amount of Mezzanine Notes held by such Exchanging Holder as set forth on Schedule I, and the denominator of which is $134,500,000 (the aggregate principal amount of all Mezzanine Notes held by all Exchanging Holders as of the date hereof). Each Exchanging Holder's Pro Rata Share shall be calculated to two decimal places, with rounding as necessary to ensure that the aggregate Pro Rata Shares of all Exchanging Holders equal 100.00%.
Section 2.5 — Mechanics of Exchange
(a) On or prior to the Closing Date, each Exchanging Holder shall deliver (or cause to be delivered) to Continental Fiduciary Trust Company, acting as Exchange Agent, the Mezzanine Notes held by such Exchanging Holder (in definitive certificated form, or by book-entry transfer to an account designated by the Exchange Agent at The Depository Trust Company), together with a duly executed Letter of Transmittal substantially in the form attached hereto as Exhibit A, and such other transfer documentation as the Exchange Agent may reasonably require. In the event that any Mezzanine Notes have been lost, stolen, mutilated, or destroyed, the applicable Exchanging Holder shall deliver to the Exchange Agent an affidavit of lost note and indemnity agreement in form and substance reasonably satisfactory to the Company and the Exchange Agent, in lieu of delivery of such Mezzanine Notes.
(b) On the Closing Date, upon confirmation by the Exchange Agent that it has received Mezzanine Notes (or lost note indemnities) from each Exchanging Holder in the applicable aggregate principal amount set forth on Schedule I, the Company shall: (i) issue and deliver to each Exchanging Holder (or cause to be delivered through the Exchange Agent) certificates (or book-entry statements) representing such Exchanging Holder's Series A Preferred Shares and Common Shares in the amounts set forth on Schedule II; and (ii) instruct the Exchange Agent to cancel all tendered Mezzanine Notes and make appropriate notations on the register of holders maintained by the Trustee reflecting such cancellation. The Exchange Agent shall, promptly following receipt of such instructions, cancel the tendered Mezzanine Notes and provide written confirmation of such cancellation to the Company and each Exchanging Holder.
(c) Any Mezzanine Notes tendered to the Exchange Agent that are not accepted for exchange (due to the failure of a condition to Closing set forth in Article VI or the termination of this Agreement pursuant to Article VIII) shall be returned promptly (and in any event within three (3) Business Days) to the tendering Exchanging Holder, at the address set forth on Schedule I or as otherwise directed by such Exchanging Holder in writing to the Exchange Agent.
Section 2.6 — Treatment of Non-Exchanging Holders
Holders of Mezzanine Notes who do not participate in the Exchange (holding, in the aggregate, $5,500,000 in principal amount of Mezzanine Notes, collectively, the "Non-Exchanging Holders") will retain their Mezzanine Notes following the Closing. The parties acknowledge and agree, however, that pursuant to the Supplemental Indenture, the Exit Consent Amendments will strip substantially all restrictive covenants, events of default, and reporting obligations from the Mezzanine Notes, such that the Mezzanine Notes retained by the Non-Exchanging Holders will be substantially modified and will no longer benefit from the covenants, protections, and remedies that were previously available under the Indenture prior to the effectiveness of the Supplemental Indenture. The Non-Exchanging Holders will not receive any Exchange Consideration or any other consideration in connection with the Exchange unless they subsequently agree to exchange their Mezzanine Notes on substantially the same terms as the Exchanging Holders within the Subsequent Exchange Period (as defined in Section 2.7), subject to and in accordance with Section 2.7.
Section 2.7 — Subsequent Exchange
During the thirty (30) day period following the Closing Date (the "Subsequent Exchange Period"), any Non-Exchanging Holder may elect to exchange its Mezzanine Notes for Exchange Consideration on substantially the same terms and conditions applicable to the Exchanging Holders hereunder. Any such subsequent exchange shall be calculated based on such Non-Exchanging Holder's aggregate principal amount of Mezzanine Notes relative to the total original outstanding amount of $140,000,000 (not $134,500,000), with appropriate adjustments to the allocation of Exchange Consideration to reflect the additional Mezzanine Notes being exchanged. Any Non-Exchanging Holder electing a subsequent exchange shall be required to execute a joinder to this Agreement and the Stockholders' Agreement in form and substance reasonably satisfactory to the Company and the Required Exchanging Holders. The Company shall have no obligation to extend the Subsequent Exchange Period beyond thirty (30) days following the Closing Date, and shall have no obligation to accept any Mezzanine Notes for exchange after the expiration of the Subsequent Exchange Period.
ARTICLE III — CLOSING
Section 3.1 — Closing Date
The Closing shall take place on December 19, 2023, at 10:00 a.m. (New York City time), at the offices of Calderwood & Harkness LLP, 599 Lexington Avenue, New York, New York 10022, or remotely by electronic exchange of documents and signatures in accordance with Section 10.10, or at such other place, date, and time as the Company and the Required Exchanging Holders may mutually agree in writing; provided, however, that the Closing Date shall not be later than the Long-Stop Date of December 31, 2023. The Closing shall be deemed effective as of 12:01 a.m. (New York City time) on the Closing Date.
Section 3.2 — Company Closing Deliverables
At or prior to the Closing, the Company shall deliver or cause to be delivered to the Exchanging Holders (or their counsel, Thornbury McCaffrey LLP) each of the following:
(a) Certificates (or book-entry statements issued by the Company's transfer agent) representing the Series A Preferred Shares and Common Shares issuable to each Exchanging Holder pursuant to Section 2.2 and Schedule II, in each case registered in the name of such Exchanging Holder (or its designated nominee) as set forth on Schedule I.
(b) A certified copy of the Amended and Restated Certificate of Incorporation of the Company, as filed with the Secretary of State of the State of Delaware, bearing a filing date stamp of December 12, 2023 or such earlier or later date as may be applicable, together with evidence of such filing.
(c) A certified copy of the Certificate of Designations of Series A Preferred Stock of the Company, as filed with the Secretary of State of the State of Delaware, bearing a filing date stamp of December 12, 2023 or such earlier or later date as may be applicable, together with evidence of such filing.
(d) A counterpart of the Stockholders' Agreement, duly executed by the Company and Ridgeline, with all exhibits and schedules thereto.
(e) A counterpart of the Registration Rights Agreement, dated December 12, 2023, duly executed by the Company.
(f) A Secretary's Certificate, dated as of the Closing Date (December 19, 2023), executed by Howard Kessler, General Counsel and Secretary of the Company, certifying: (i) the incumbency and specimen signatures of officers of the Company authorized to execute this Agreement and the other Restructuring Documents; (ii) the accuracy and completeness of the Amended Certificate of Incorporation and the Company's bylaws, each as then in effect; and (iii) true and correct copies of the resolutions of the Board authorizing the execution and delivery of this Agreement and the consummation of the Exchange and the other Restructuring Transactions.
(g) An Officer's Certificate, dated as of the Closing Date (December 19, 2023), executed by Priya Sundaram, Chief Financial Officer of the Company, certifying, on behalf of the Company and not in her individual capacity, the satisfaction of the conditions to Closing set forth in Section 6.1 and Section 6.3 (to the extent such conditions relate to the Company's representations, warranties, and covenants).
(h) A legal opinion letter from Calderwood & Harkness LLP (Nathaniel Bower, Esq.), addressed to the Exchanging Holders (or their counsel, Thornbury McCaffrey LLP), opining as to: (i) the due organization and valid existence of the Company under Delaware law; (ii) the corporate power and authority of the Company to execute and deliver this Agreement and to consummate the Exchange; (iii) the due authorization, execution, and delivery of this Agreement by the Company; (iv) the enforceability of this Agreement against the Company (subject to customary qualifications and exceptions); (v) the valid issuance, full payment, and nonassessability of the Exchange Consideration; and (vi) the absence of conflicts with the Company's organizational documents and applicable laws, in each case subject to the customary qualifications, assumptions, and limitations set forth in such opinion letter.
(i) Evidence that the Supplemental Indenture has been duly executed and delivered by the Company and Continental Fiduciary Trust Company, as Trustee, and is in full force and effect.
(j) Evidence that the Amended Credit Agreement, the Super-Priority Credit Agreement, and the Intercreditor Agreement have each been duly executed and are in full force and effect.
(k) Evidence that Ridgeline has funded (or is funding simultaneously with the Closing) the Sponsor Contribution of $12,500,000 in cash to the Company.
(l) A good standing certificate (or certificate of status) of the Company issued by the Secretary of State of the State of Delaware, dated not more than five (5) Business Days prior to the Closing Date.
Section 3.3 — Exchanging Holder Closing Deliverables
At or prior to the Closing, each Exchanging Holder shall deliver or cause to be delivered to the Company (or its counsel, Calderwood & Harkness LLP) each of the following:
(a) All Mezzanine Notes held by such Exchanging Holder (in definitive certificated form or by book-entry transfer), in the aggregate principal amount set forth opposite such Exchanging Holder's name on Schedule I, accompanied by a duly executed Letter of Transmittal substantially in the form of Exhibit A. In the event of lost, stolen, mutilated, or destroyed notes, the applicable Exchanging Holder shall deliver a lost note affidavit and indemnity agreement in form and substance reasonably satisfactory to the Company and the Exchange Agent, in lieu of delivery of such Mezzanine Notes.
(b) A duly executed counterpart of this Agreement (if not previously delivered).
(c) A duly executed counterpart of the Stockholders' Agreement.
(d) A duly executed counterpart of the Registration Rights Agreement.
(e) An Investor Representation Letter, substantially in the form of Exhibit B, duly executed by such Exchanging Holder.
(f) A properly completed and executed IRS Form W-9 (or, in the case of any Exchanging Holder that is not a "United States person" within the meaning of Section 7701(a)(30) of the Internal Revenue Code, the applicable IRS Form W-8 series form, including IRS Form W-8BEN, W-8BEN-E, W-8ECI, or W-8IMY, as applicable).
Section 3.4 — Concurrent Transactions
The parties hereto acknowledge and agree that the Exchange is part of a series of concurrent restructuring transactions constituting an integrated transaction, including: (i) the execution and effectiveness of the Amended Credit Agreement (dated as of December 1, 2023), which amends and extends the existing first lien term loan (with an aggregate principal amount of $285,000,000) and the revolving credit facility (with commitments of $35,000,000); (ii) the funding of the $55,000,000 super-priority first-out term loan facility under the Super-Priority Credit Agreement (dated as of November 17, 2023), with $45,000,000 to be funded at the Closing less $1,100,000 in original issue discount (for net cash proceeds of $43,900,000), with the remaining $10,000,000 available as a delayed draw term loan; (iii) the funding of the Sponsor Contribution of $12,500,000 by Ridgeline (funded on December 15, 2023, or simultaneously with the Closing); (iv) the execution of the Intercreditor Agreement (dated as of November 10, 2023), establishing the relative priorities among the super-priority, first lien, and second lien obligations; and (v) the execution and delivery of the Supplemental Indenture effectuating the Exit Consent Amendments to the Indenture.
The Exchange and each of the Concurrent Transactions described in this Section 3.4 are mutually conditioned, and none of the foregoing shall become effective unless and until all such transactions are consummated simultaneously at the Closing (or, in the case of any transaction that has been previously consummated, such transaction remains in full force and effect as of the Closing). In the event that any Concurrent Transaction fails to be consummated or ceases to be in full force and effect on or prior to the Closing, the Exchange shall not occur, and this Agreement may be terminated in accordance with Article VIII.
ARTICLE IV — REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Exchanging Holder as of the date hereof and as of the Closing Date (except as otherwise expressly specified), as follows:
Section 4.1 — Organization and Good Standing
The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware. The Company has all requisite corporate power and authority to own, lease, and operate its properties and to carry on its business as presently conducted. The Company is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties requires such qualification or licensing, except where the failure to be so qualified or licensed would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Change.
The Company's direct parent entity is Stonefield Logistics Holdings LLC, a Delaware limited liability company, which is controlled by Ridgeline. The Company has the following direct and indirect operating subsidiaries: (a) Stonefield Freight Services LLC, a Texas limited liability company; (b) Stonefield Last Mile Inc., a Delaware corporation; and (c) Stonefield Warehousing LLC, a Texas limited liability company. The Company has approximately 3,800 employees across 26 terminals in 14 states.
Section 4.2 — Corporate Authority
The Company has all requisite corporate power and authority to execute and deliver this Agreement and each of the other Restructuring Documents to which it is a party and to perform its obligations hereunder and thereunder, including the power and authority to issue the Exchange Consideration. The execution and delivery of this Agreement and the consummation of the Exchange and the other Restructuring Transactions have been duly and validly authorized by all necessary corporate action on the part of the Company, including by resolutions of the Board adopted on June 29, 2023 (approving entry into the RSA and the Restructuring Transactions) and December 11, 2023 (authorizing execution and closing of the definitive documents). No other corporate proceedings on the part of the Company are necessary to authorize the execution and delivery of this Agreement or the consummation of the Exchange, including, without limitation, no approval of the stockholders of the Company is required under the DGCL or the Company's organizational documents.
Section 4.3 — Enforceability
This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid, and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to (a) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and similar laws affecting creditors' rights and remedies generally, and (b) general principles of equity, including principles of commercial reasonableness, good faith, and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).
Section 4.4 — No Conflicts
The execution and delivery of this Agreement by the Company and the consummation by the Company of the Exchange and the other transactions contemplated hereby do not and will not: (a) violate, conflict with, or result in a breach of any provision of the Amended Certificate of Incorporation or the bylaws of the Company; (b) violate, conflict with, or result in a breach of any law, statute, regulation, rule, order, judgment, writ, injunction, or decree of any Governmental Authority applicable to the Company or any of its subsidiaries or any of their respective properties or assets; (c) result in a breach of, constitute a default (or an event which, with the giving of notice or lapse of time, or both, would constitute a default) under, give rise to a right of termination, cancellation, or acceleration under, or require any consent or approval under, the Amended Credit Agreement, the Super-Priority Credit Agreement, the Intercreditor Agreement, or any other material contract to which the Company is a party or by which any of its properties or assets is bound; or (d) result in the creation or imposition of any Lien upon any of the assets of the Company or any of its subsidiaries (other than Liens created under or contemplated by the Restructuring Documents).
Section 4.5 — Governmental Approvals
No consent, approval, authorization, license, permit, or order of, or filing, registration, or qualification with, any Governmental Authority is required to be obtained or made by or with respect to the Company or any of its subsidiaries in connection with the execution, delivery, and performance of this Agreement or the issuance of the Exchange Consideration, other than: (a) the filing of the Amended Certificate of Incorporation with the Secretary of State of the State of Delaware (which has been made as of December 12, 2023); (b) the filing of the Certificate of Designations with the Secretary of State of the State of Delaware (which has been made as of December 12, 2023); and (c) such filings as may be required under applicable state securities or "blue sky" laws, which filings, if required, will be made on a timely basis.
Section 4.6 — Capitalization
Immediately prior to the Exchange, the authorized capital stock of the Company consists of shares of Common Stock, par value $0.01 per share, 100% of which are held, directly or indirectly, by Ridgeline. No shares of preferred stock are outstanding immediately prior to the Exchange. Immediately after giving effect to the Exchange, the Sponsor Contribution, and the reservation of shares under the MIP, the Pro Forma Common Equity of the Company will be owned and allocated as follows: (a) 47.5% by the Exchanging Holders, in the aggregate; (b) 47.5% by Ridgeline; and (c) 5.0% reserved for issuance under the MIP. In addition, the Series A Preferred Shares will have been issued with an aggregate liquidation preference of $35,000,000. Except as set forth in this Section 4.6 or as contemplated by this Agreement, there are no outstanding options, warrants, convertible securities, rights of first refusal, preemptive rights, or other rights to purchase or acquire shares of Common Stock or other equity interests in the Company.
Section 4.7 — Valid Issuance
The Exchange Consideration, when issued and delivered to the Exchanging Holders pursuant to this Agreement, will be duly authorized, validly issued, fully paid, and nonassessable, and will be free and clear of all Liens, preemptive rights, rights of first refusal, subscription rights, and similar rights, other than (a) restrictions on transfer under the Stockholders' Agreement, (b) restrictions on transfer under the Securities Act and applicable state securities laws, and (c) restrictions as may be set forth in the Amended Certificate of Incorporation or the Certificate of Designations.
Section 4.8 — Securities Law Compliance
The offer and issuance of the Exchange Consideration by the Company to the Exchanging Holders as contemplated by this Agreement are exempt from registration under the Securities Act pursuant to Section 3(a)(9) thereof (exchange by an issuer with its existing security holders exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange) and/or Section 4(a)(2) thereof (transactions by an issuer not involving any public offering). The Company has not engaged, and will not engage, any broker, dealer, or underwriter in connection with the Exchange that would cause the exemption under Section 3(a)(9) of the Securities Act to be unavailable. No form of general solicitation or general advertising has been or will be used by the Company in connection with the offer and issuance of the Exchange Consideration.
Section 4.9 — Financial Statements
The Company's audited consolidated financial statements for the fiscal year ended December 31, 2022 (audited by Whitfield & Pryce LLP, engagement partner Todd Ashburn), which reflect revenue of $612,300,000 and Adjusted EBITDA of $58,700,000, have been prepared in accordance with GAAP, consistently applied, and fairly present in all material respects the consolidated financial condition, results of operations, and cash flows of the Company and its subsidiaries as of and for the periods presented therein. The Company's unaudited consolidated financial statements for the fiscal quarter ended March 31, 2023 (reflecting last-twelve-months Adjusted EBITDA through Q1 2023 of $41,200,000), have been prepared in accordance with GAAP, consistently applied (subject to normal year-end adjustments and the absence of footnotes), and fairly present in all material respects the consolidated financial condition, results of operations, and cash flows of the Company and its subsidiaries as of and for the periods presented therein.
Section 4.10 — No Material Adverse Change
Since March 31, 2023, there has been no Material Adverse Change with respect to the Company and its subsidiaries, taken as a whole, other than (a) the financial distress and deterioration in operating performance previously disclosed to the Exchanging Holders and their counsel and financial advisors, including the Company's projected fiscal year 2023 revenue of $545,000,000 and projected fiscal year 2023 Adjusted EBITDA of $38,500,000, and (b) the effects of the transactions contemplated by this Agreement and the other Restructuring Documents.
Section 4.11 — Litigation
There is no action, suit, claim, arbitration, investigation, or proceeding pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries before any Governmental Authority that (a) would reasonably be expected to have, individually or in the aggregate, a Material Adverse Change, or (b) challenges, seeks to restrain, or seeks to enjoin the validity or enforceability of this Agreement or the consummation of the Exchange or any of the other Restructuring Transactions.
Section 4.12 — Tax Matters
The Company and each of its subsidiaries have timely filed (taking into account any applicable extensions) all material Tax returns required to be filed by or with respect to them (the Company's Employer Identification Number being 83-2457109) and have paid all material Taxes due and payable by them (subject to amounts being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP). The Company has received a tax analysis memorandum dated September 15, 2023, from Calderwood & Harkness LLP (prepared by Sylvia Hartwell, Esq.) addressing the U.S. federal income tax consequences of the Exchange, including cancellation of indebtedness ("COD") income implications and Section 382 ownership change considerations, and has made such memorandum available to counsel for the Ad Hoc Group.
Section 4.13 — Insurance
The Company maintains Directors and Officers liability insurance with Northgate Specialty Insurance Company under Policy No. NSI-DOL-2023-07721, providing $15,000,000 in aggregate coverage, with a six (6) year tail period commencing on the Closing Date. Such insurance policy is in full force and effect, and the Company has paid all premiums due and payable thereunder. The Company has not received any notice of cancellation or non-renewal of such insurance policy.
Section 4.14 — Solvency
After giving effect to the Exchange and the other Concurrent Transactions on a pro forma basis, the Company will not be insolvent. Specifically: (a) the fair saleable value of the Company's assets will exceed the total amount of the Company's liabilities (including contingent liabilities); (b) the Company will be able to pay its debts as they become due in the ordinary course of business; and (c) the Company will have adequate capital to carry on its business. On a pro forma basis after giving effect to the Restructuring Transactions, the Company's total funded debt will be $375,000,000, representing total leverage of approximately 7.2x based on the Company's projected fiscal year 2024 Adjusted EBITDA of $52,000,000.
ARTICLE V — REPRESENTATIONS AND WARRANTIES OF THE EXCHANGING HOLDERS
Each Exchanging Holder, severally and not jointly, hereby represents and warrants to the Company as of the date hereof and as of the Closing Date, as follows:
Section 5.1 — Organization
Such Exchanging Holder is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization as set forth on Schedule I, and has all requisite organizational power and authority to own, lease, and operate its properties and to carry on its business as presently conducted.
Section 5.2 — Authority
Such Exchanging Holder has all requisite power and authority (corporate, limited partnership, limited liability company, or otherwise) to execute and deliver this Agreement and each of the other Restructuring Documents to which it is a party and to perform its obligations hereunder and thereunder, including the power and authority to transfer its Mezzanine Notes to the Company for cancellation. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of such Exchanging Holder, and no other proceedings on the part of such Exchanging Holder are necessary to authorize the execution and delivery of this Agreement or the consummation of the Exchange.
Section 5.3 — Enforceability
This Agreement has been duly executed and delivered by such Exchanging Holder and constitutes the legal, valid, and binding obligation of such Exchanging Holder, enforceable against such Exchanging Holder in accordance with its terms, subject to (a) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and similar laws affecting creditors' rights and remedies generally, and (b) general principles of equity, including principles of commercial reasonableness, good faith, and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).
Section 5.4 — Title to Mezzanine Notes
Such Exchanging Holder is the sole legal and beneficial owner of the Mezzanine Notes set forth opposite its name on Schedule I, free and clear of all Liens, claims, pledges, charges, and encumbrances (other than restrictions under the Indenture and applicable securities laws). Such Exchanging Holder has full right, title, and authority to transfer, assign, and deliver such Mezzanine Notes to the Company for cancellation. No Exchanging Holder has transferred, assigned, pledged, hypothecated, or otherwise disposed of any of its Mezzanine Notes since the date of the RSA, other than in compliance with the transfer restrictions set forth in the RSA. Upon delivery by such Exchanging Holder of its Mezzanine Notes to the Exchange Agent at the Closing, the Company will acquire good and valid title to such Mezzanine Notes, free and clear of all Liens, claims, pledges, and encumbrances.
Section 5.5 — Investor Representations
Such Exchanging Holder represents and warrants that it is: (a) an "accredited investor" as defined in Rule 501(a) of Regulation D under the Securities Act, and/or (b) a "qualified institutional buyer" as defined in Rule 144A under the Securities Act. Such Exchanging Holder acknowledges that the Exchange Consideration is being acquired for its own account for investment purposes only and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or any applicable state securities laws. Such Exchanging Holder has such knowledge, sophistication, and experience in business and financial matters so as to be capable of evaluating the merits and risks of the Exchange and the acquisition of the Exchange Consideration. Such Exchanging Holder understands that the Exchange Consideration has not been, and will not be, registered under the Securities Act or any state securities laws and that the Exchange Consideration may not be transferred or resold except in compliance with the registration requirements of the Securities Act and applicable state securities laws or pursuant to an applicable exemption therefrom.
Section 5.6 — No Reliance
Such Exchanging Holder acknowledges that it has been advised by, and has relied solely upon, its own legal counsel (including Thornbury McCaffrey LLP, as counsel to the Ad Hoc Group) and its own financial advisor (Meridian Veltrian Partners LLC) in connection with entering into this Agreement and the transactions contemplated hereby. Such Exchanging Holder has conducted its own independent analysis, due diligence, and investigation of the Company, its business, its financial condition, and the terms of the Exchange, and has not relied upon any representation, statement, or warranty (whether written or oral) of the Company, Ridgeline, or any of their respective representatives or advisors, except as expressly set forth in this Agreement. Such Exchanging Holder acknowledges that the Company has afforded it the opportunity to ask questions of, and receive answers from, the Company's management and to obtain additional information as it has deemed necessary to verify the accuracy of the information provided.
Section 5.7 — No Broker
Such Exchanging Holder has not engaged, and will not engage, any broker, finder, intermediary, or investment banker in connection with the Exchange that would give rise to a valid claim for brokerage commissions, finder's fees, or other similar compensation against the Company or any of its subsidiaries.
ARTICLE VI — CONDITIONS TO CLOSING
Section 6.1 — Conditions to Obligations of All Parties
The obligations of each party to consummate the Exchange at the Closing are subject to the satisfaction (or, to the extent permitted by applicable law, waiver by the Company and the Required Exchanging Holders) of each of the following conditions:
(a) No Governmental Authority shall have enacted, issued, promulgated, or entered any law, statute, regulation, executive order, judgment, decree, injunction, or other order (whether temporary, preliminary, or permanent) that is then in effect and that restrains, enjoins, or otherwise prohibits or makes illegal the consummation of the Exchange.
(b) The RSA shall be in full force and effect and shall not have been terminated in accordance with its terms.
(c) The Long-Stop Date (December 31, 2023) shall not have occurred (i.e., the Closing Date shall be on or prior to the Long-Stop Date).
Section 6.2 — Conditions to Obligations of the Company
The obligation of the Company to consummate the Exchange at the Closing is subject to the satisfaction (or, to the extent permitted by applicable law, waiver by the Company) of each of the following additional conditions:
(a) The representations and warranties of each Exchanging Holder set forth in Article V shall be true and correct in all material respects as of the date hereof and as of the Closing Date, as though made on and as of the Closing Date (except to the extent such representations and warranties are expressly made as of an earlier date, in which case as of such earlier date).