CERTIFICATE OF DESIGNATIONS
OF
SERIES A PREFERRED STOCK
OF
STONEFIELD LOGISTICS GROUP INC.
Pursuant to Section 151 of the General Corporation Law of the State of Delaware
Filed with the Secretary of State of the State of Delaware on December 12, 2023
Delaware File No.: 6341872 EIN: 83-2457109 Registered Agent: Capitol Registered Agents, Inc., 1209 Orange Street, Wilmington, DE 19801
Stonefield Logistics Group Inc., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), does hereby certify that, pursuant to the authority expressly vested in the Board of Directors of the Corporation (the "Board of Directors" or the "Board") by the Amended and Restated Certificate of Incorporation of the Corporation (the "Charter") and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware (the "DGCL"), the Board of Directors duly adopted the following resolutions on December 11, 2023, creating a series of preferred stock of the Corporation designated as "Series A Preferred Stock," which resolutions remain in full force and effect as of the date hereof:
WHEREAS, the Charter authorizes the issuance of preferred stock, par value $0.001 per share, in one or more series, and expressly empowers the Board of Directors, by resolution or resolutions, to fix the designations, powers, preferences, and relative, participating, optional, and other special rights, and the qualifications, limitations, and restrictions thereof, of each such series of preferred stock, including without limitation, the dividend rate or rates, conversion rights, voting rights, redemption rights and price or prices, liquidation preferences, sinking fund provisions, and the number of shares constituting each such series, all pursuant to Section 151(g) of the DGCL;
WHEREAS, the Board of Directors, by resolutions duly adopted on December 11, 2023, at a meeting at which a quorum was present and acting throughout, authorized the creation and issuance of a series of preferred stock of the Corporation to be designated as "Series A Preferred Stock," having the powers, designations, preferences, and relative, participating, optional, and other special rights, and the qualifications, limitations, and restrictions thereof, as set forth herein;
WHEREAS, the Series A Preferred Stock is being issued in connection with the consensual out-of-court restructuring of the Corporation (the "Restructuring"), pursuant to that certain Exchange Agreement dated as of December 8, 2023 (the "Exchange Agreement"), among the Corporation and certain holders of the Corporation's 11.50% Senior Secured Second Lien Notes due June 15, 2025 (CUSIP 861537 AA 2), originally issued under the Indenture dated as of December 15, 2017, between the Corporation, as Issuer, and Continental Fiduciary Trust Company, as Trustee (the "Second Lien Notes"), pursuant to which the holders of the Second Lien Notes are exchanging $140,000,000 in aggregate principal amount of Second Lien Notes (together with a waiver of $8,100,000 in accrued and unpaid PIK interest thereon) for shares of Series A Preferred Stock and shares of Common Stock of the Corporation;
WHEREAS, the mezzanine equitization recipients receiving shares of Series A Preferred Stock in connection with the Restructuring include Graystone Mezzanine Capital Fund II LP, Ashland Structured Credit LLC, Dunmore Special Situations Fund LP, and certain other exchanging holders of the Second Lien Notes (collectively, the "Initial Holders"), as more fully set forth in the Exchange Agreement;
WHEREAS, the issuance of the Series A Preferred Stock is being effected in connection with, and as part of, the broader restructuring transactions contemplated by that certain Restructuring Support Agreement dated as of June 30, 2023 (as amended, supplemented, or otherwise modified from time to time, the "Restructuring Support Agreement"), among the Corporation, Ridgeline Capital Partners Fund III, L.P., the Initial Holders, and certain other parties thereto; and
WHEREAS, the Board of Directors has determined that it is in the best interests of the Corporation and its stockholders to create and authorize the issuance of the Series A Preferred Stock upon the terms and conditions set forth herein;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby creates, authorizes, and provides for the issuance of a series of preferred stock of the Corporation designated as "Series A Preferred Stock," having the following powers, designations, preferences, and relative, participating, optional, and other special rights, and the qualifications, limitations, and restrictions thereof:
SECTION 1. DESIGNATION AND NUMBER OF SHARES
1.1 The series of preferred stock created hereby shall be designated "Series A Preferred Stock" (the "Series A Preferred Stock").
1.2 The number of shares constituting the Series A Preferred Stock shall be such number of shares as determined by the Board of Directors to yield an aggregate initial Liquidation Preference (as defined below) of Thirty-Five Million Dollars ($35,000,000). The initial aggregate Liquidation Preference of all shares of Series A Preferred Stock outstanding immediately following the Initial Issuance Date shall be $35,000,000. The shares of Series A Preferred Stock shall be issued to the Initial Holders and other mezzanine equitization recipients in exchange for $140,000,000 in aggregate principal amount of Second Lien Notes (together with the waiver by such holders of $8,100,000 in accrued and unpaid PIK interest on the Second Lien Notes), pursuant to and in accordance with the terms of the Exchange Agreement.
1.3 The par value of each share of Series A Preferred Stock shall be $0.001 per share.
1.4 No additional shares of Series A Preferred Stock may be authorized or issued after the Initial Issuance Date (as defined below) without the prior written consent or affirmative vote of the Requisite Holders (as defined below), voting as a separate class. Any shares of Series A Preferred Stock that are redeemed, repurchased, converted, or otherwise acquired by the Corporation shall be cancelled and retired and shall not be reissued, and the authorized number of shares of Series A Preferred Stock shall be correspondingly reduced.
SECTION 2. DEFINITIONS
As used in this Certificate of Designations, the following terms shall have the meanings set forth below:
"Accrued Dividends" means, with respect to any share of Series A Preferred Stock at any date of determination, the cumulative amount of all dividends that have accrued on such share pursuant to Section 4 hereof that have not been paid in cash or added to the Liquidation Preference of such share through compounding as provided in Section 4.2 hereof.
"Amended Credit Agreement" means the Amended and Restated First Lien Credit Agreement dated as of December 1, 2023, among the Corporation, as borrower, Pinnacle National Bank, N.A., as administrative agent and collateral agent, and the lenders from time to time party thereto, providing for a $285,000,000 term loan B facility and a $35,000,000 revolving credit facility, as such agreement may be amended, restated, refinanced, supplemented, or otherwise modified from time to time.
"Board" or "Board of Directors" means the Board of Directors of the Corporation.
"Business Day" means any day other than a Saturday, Sunday, or other day on which banks in New York, New York are authorized or required by law to be closed.
"Certificate of Designations" means this Certificate of Designations of Series A Preferred Stock of Stonefield Logistics Group Inc., as the same may be amended, supplemented, or otherwise modified from time to time in accordance with the terms hereof.
"Charter" means the Amended and Restated Certificate of Incorporation of the Corporation dated as of December 12, 2023, as the same may be amended, restated, supplemented, or otherwise modified from time to time.
"Common Stock" means the common stock of the Corporation, par value $0.001 per share. As of the Initial Issuance Date, the pro forma fully diluted ownership of the Common Stock is as follows: approximately 47.5% held by Ridgeline Capital Partners Fund III, L.P., approximately 47.5% held by the mezzanine equitization recipients (including the Initial Holders), and approximately 5.0% reserved for issuance under the Corporation's management incentive plan.
"Conversion Price" means the price per share of Common Stock at which each share of Series A Preferred Stock is convertible into shares of Common Stock, as initially determined pursuant to Section 6.2 hereof and as subsequently adjusted from time to time pursuant to Section 6.4 hereof.
"Corporation" means Stonefield Logistics Group Inc., a Delaware corporation.
"Deemed Liquidation Event" has the meaning set forth in Section 5.2 hereof.
"Distribution" means any dividend (whether in cash, property, or securities), distribution, return of capital, repurchase, redemption, or other payment on account of, or in respect of, any shares of capital stock or other equity interests of the Corporation.
"Exchange Agreement" has the meaning set forth in the recitals hereto.
"Fair Market Value" means, with respect to any property or asset, the fair market value thereof as determined in good faith by the Board of Directors, provided that if the Requisite Holders disagree with such determination, Fair Market Value shall be determined by an independent, nationally recognized valuation firm selected by the Board and reasonably acceptable to the Requisite Holders, with the costs of such valuation to be borne by the Corporation.
"Holder" means a holder of record of one or more shares of Series A Preferred Stock, as reflected in the stock register of the Corporation.
"Initial Holders" means Graystone Mezzanine Capital Fund II LP, Ashland Structured Credit LLC, Dunmore Special Situations Fund LP, and the other exchanging mezzanine holders of the Second Lien Notes who receive shares of Series A Preferred Stock on the Initial Issuance Date pursuant to the Exchange Agreement, together with their respective successors and permitted assigns.
"Initial Issuance Date" means December 12, 2023.
"Junior Stock" means the Common Stock and any other class or series of capital stock of the Corporation now existing or hereafter created that ranks junior to the Series A Preferred Stock with respect to the payment of dividends and/or the distribution of assets upon any liquidation, dissolution, or winding up of the Corporation.
"Liquidation Preference" means, with respect to the Series A Preferred Stock, $35,000,000 in the aggregate as of the Initial Issuance Date, allocated on a per-share basis as the initial stated value per share (calculated as $35,000,000 divided by the total number of shares of Series A Preferred Stock issued and outstanding on the Initial Issuance Date), as such per-share amount may be increased from time to time by the addition of accrued PIK dividends thereto in accordance with Section 4.2 hereof.
"Original Issue Price" means the per-share price of each share of Series A Preferred Stock, calculated as the aggregate initial Liquidation Preference of $35,000,000 divided by the total number of shares of Series A Preferred Stock issued on the Initial Issuance Date.
"Parity Stock" means any class or series of capital stock of the Corporation hereafter created or authorized that ranks pari passu with the Series A Preferred Stock with respect to the payment of dividends and/or the distribution of assets upon any liquidation, dissolution, or winding up of the Corporation.
"Person" means an individual, corporation, partnership, limited partnership, limited liability company, joint venture, association, trust, unincorporated organization, governmental authority, or any other entity of any kind or nature.
"PIK Dividend Rate" means 10.00% per annum.
"Redemption Date" has the meaning set forth in Section 7.3 hereof.
"Redemption Price" has the meaning set forth in Section 7.1 hereof.
"Requisite Holders" means the holders of a majority of the then-outstanding shares of Series A Preferred Stock, voting together as a single class.
"Restructuring" has the meaning set forth in the recitals hereto.
"Restructuring Support Agreement" has the meaning set forth in the recitals hereto.
"Ridgeline" means Ridgeline Capital Partners Fund III, L.P., a Delaware limited partnership, together with its affiliates and permitted transferees.
"Second Lien Notes" has the meaning set forth in the recitals hereto.
"Senior Stock" means any class or series of capital stock of the Corporation hereafter created or authorized that ranks senior to the Series A Preferred Stock with respect to the payment of dividends and/or the distribution of assets upon any liquidation, dissolution, or winding up of the Corporation. As of the Initial Issuance Date, no shares of Senior Stock are authorized or outstanding.
"Stockholders' Agreement" means the Amended and Restated Stockholders' Agreement dated as of December 12, 2023, among the Corporation, Ridgeline, the Initial Holders, and certain other parties thereto, as such agreement may be amended, restated, supplemented, or otherwise modified from time to time.
"Subsidiaries" means, with respect to any Person, any corporation, limited liability company, partnership, association, trust, or other entity of which (a) equity interests having ordinary voting power to elect or appoint a majority of the board of directors or other governing body thereof are at any time owned or controlled, directly or indirectly, by such Person, or (b) such Person is a general partner or managing member.
"Super-Priority Credit Agreement" means the Super-Priority Credit Agreement dated as of November 17, 2023, among the Corporation, as borrower, Belvedere Credit Opportunities Fund LP, as lender, and certain other parties thereto, providing for a $55,000,000 super-priority secured term loan facility, as such agreement may be amended, restated, refinanced, supplemented, or otherwise modified from time to time.
"Transfer" means any direct or indirect sale, assignment, transfer, pledge, hypothecation, encumbrance, grant of a security interest in, or other disposition of, any shares of Series A Preferred Stock or any interest therein, whether voluntary or involuntary, by operation of law or otherwise.
SECTION 3. RANKING
3.1 The Series A Preferred Stock shall rank, with respect to dividend rights and rights upon any voluntary or involuntary liquidation, dissolution, or winding up of the Corporation, as follows:
(a) Senior to all Common Stock and any other Junior Stock of the Corporation, whether now existing or hereafter created or authorized;
(b) Pari passu with any Parity Stock of the Corporation hereafter created or authorized, provided that any such Parity Stock may only be created or authorized with the prior written consent or affirmative vote of the Requisite Holders, voting as a separate class; and
(c) Junior to any Senior Stock of the Corporation hereafter created or authorized, provided that any such Senior Stock may only be created or authorized with the prior written consent or affirmative vote of the Requisite Holders, voting as a separate class.
3.2 For the avoidance of doubt, the Series A Preferred Stock is an equity security of the Corporation and not a debt instrument. The Series A Preferred Stock shall in all respects be subordinated and junior in right of payment to all indebtedness of the Corporation and its Subsidiaries, whether now existing or hereafter incurred, including without limitation all obligations of the Corporation under:
(a) the Super-Priority Credit Agreement (providing for a $55,000,000 super-priority secured term loan facility with Belvedere Credit Opportunities Fund LP);
(b) the Amended Credit Agreement (providing for a $285,000,000 term loan B facility and a $35,000,000 revolving credit facility with Pinnacle National Bank, N.A. as Administrative Agent); and
(c) any other funded indebtedness, trade payables, or other liabilities of the Corporation and its Subsidiaries, whether secured or unsecured, now existing or hereafter incurred.
3.3 Nothing in this Certificate of Designations shall be construed to prevent or restrict the Corporation from incurring indebtedness, subject to the protective provisions set forth in Section 8.2 hereof.
SECTION 4. DIVIDENDS
4.1 PIK Dividend Rate
Dividends on each share of Series A Preferred Stock shall accrue at a rate equal to the PIK Dividend Rate (10.00% per annum) on the Liquidation Preference per share of such share (as such Liquidation Preference may be increased from time to time by the addition of previously accrued and compounded PIK dividends thereto pursuant to Section 4.2 hereof). Dividends on the Series A Preferred Stock shall accrue from the Initial Issuance Date (December 12, 2023), whether or not declared by the Board of Directors, and shall be cumulative. Such dividends shall accrue on a daily basis from and including the Initial Issuance Date (or, in the case of dividends accruing after the first anniversary of the Initial Issuance Date, from and including the immediately preceding Dividend Payment Date on which accrued dividends were compounded and added to the Liquidation Preference) to but excluding the applicable Dividend Payment Date, and shall compound annually on each Dividend Payment Date as provided in Section 4.3 hereof.
4.2 Payment in Kind
All dividends accruing on the Series A Preferred Stock shall be paid in kind ("PIK") by increasing the Liquidation Preference of each outstanding share of Series A Preferred Stock by the amount of such accrued dividend on each Dividend Payment Date. No cash dividends shall be required to be paid on the Series A Preferred Stock unless the Board of Directors, in its sole discretion, declares the payment of cash dividends in respect of the Series A Preferred Stock. For the avoidance of doubt, the payment of dividends in kind through the increase of the Liquidation Preference shall constitute payment in full of such dividends for all purposes of this Certificate of Designations. PIK dividends shall be computed on the basis of a 360-day year of twelve 30-day months.
4.3 Dividend Payment Dates
Dividends on the Series A Preferred Stock shall be deemed to accrue and compound annually on each anniversary of the Initial Issuance Date (i.e., December 12 of each year), commencing on December 12, 2024 (each such date, a "Dividend Payment Date"). On each Dividend Payment Date, all dividends that have accrued during the preceding twelve-month period (computed at the PIK Dividend Rate on the Liquidation Preference per share, as then in effect, on the basis of a 360-day year of twelve 30-day months) shall be added to and become part of the Liquidation Preference of each outstanding share of Series A Preferred Stock.
4.4 Priority of Dividends
4.4.1 For so long as any shares of Series A Preferred Stock remain outstanding, no dividends or other Distributions (other than dividends payable solely in shares of Junior Stock) shall be declared, paid, set apart for payment, or made upon any Junior Stock, nor shall any shares of Junior Stock be repurchased, redeemed, or otherwise acquired for consideration by the Corporation, directly or indirectly, unless all accrued and unpaid dividends on all outstanding shares of Series A Preferred Stock shall have been paid in full or added to the Liquidation Preference through compounding as provided herein for all Dividend Payment Dates occurring on or prior to the date of such action.
4.4.2 Notwithstanding the foregoing, the restriction in Section 4.4.1 shall not apply to repurchases of shares of Common Stock from officers, directors, employees, or consultants of the Corporation or its Subsidiaries (or their estates, heirs, or permitted transferees) upon termination of employment or service at a price not exceeding the original cost of such shares (or the then-current fair market value thereof, if lower), in each case pursuant to and in accordance with the terms of the Corporation's management incentive plan (covering up to 5.0% of the pro forma common equity of the Corporation).
SECTION 5. LIQUIDATION
5.1 Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution, or winding up of the Corporation (a "Liquidation"), before any distribution or payment shall be made to the holders of any Junior Stock, each Holder of Series A Preferred Stock shall be entitled to receive, out of the assets of the Corporation legally available for distribution to its stockholders, an amount per share equal to the greater of:
(a) the Liquidation Preference per share then in effect (which, as of the Initial Issuance Date, equals $35,000,000 in the aggregate, allocated ratably among all outstanding shares) plus all Accrued Dividends thereon (including all accrued and unpaid dividends at the PIK Dividend Rate of 10.00% per annum that have not yet been compounded and added to the Liquidation Preference), without duplication; or
(b) the amount that such Holder would have received if all outstanding shares of Series A Preferred Stock held by such Holder had been converted into shares of Common Stock immediately prior to such Liquidation, and such Holder participated in the distribution of assets to holders of Common Stock on an as-converted basis.
The election between clause (a) and clause (b) above shall be made automatically, with each Holder deemed to have received the greater of the two amounts.
5.2 Deemed Liquidation Events
The occurrence of any of the following events shall be deemed to constitute a Liquidation for purposes of this Section 5 (each, a "Deemed Liquidation Event"), unless the Requisite Holders elect to waive such treatment in accordance with Section 5.2(d) below:
(a) Merger or Consolidation. Any merger, consolidation, share exchange, business combination, or similar transaction involving the Corporation in which the stockholders of the Corporation immediately prior to such transaction hold, immediately following the consummation of such transaction, less than 50% of the aggregate voting power of all outstanding voting securities of the surviving or resulting entity (or its parent entity);
(b) Asset Sale. Any sale, lease, transfer, exclusive license, or other disposition, in a single transaction or a series of related transactions, of all or substantially all of the consolidated assets of the Corporation and its Subsidiaries, taken as a whole, including without limitation the assets of Stonefield Logistics Holdings LLC, Stonefield Freight Services LLC, Stonefield Last Mile Inc., and Stonefield Warehousing LLC;
(c) Change of Control. Any transaction or series of related transactions (including any merger, consolidation, recapitalization, or reorganization) that results in any Person or group of related Persons (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended), other than (i) Ridgeline and its affiliates and permitted transferees, (ii) the Initial Holders and the other mezzanine equitization recipients and their respective permitted transferees, or (iii) any combination of the foregoing, acquiring, directly or indirectly, beneficial ownership of more than 50% of the total voting power of the then-outstanding voting equity securities of the Corporation (or any successor entity), determined in a manner consistent with the definition of "Change of Control" as set forth in the Amended Credit Agreement and the Super-Priority Credit Agreement, each as in effect on the Initial Issuance Date; and
(d) Waiver. The Requisite Holders may, by written notice to the Corporation given prior to the consummation of any transaction described in Sections 5.2(a), 5.2(b), or 5.2(c), elect to waive the treatment of such transaction as a Deemed Liquidation Event, in which case such transaction shall not be deemed a Liquidation for purposes of this Section 5.
5.3 Distribution Waterfall
In the event of any Liquidation (including any Deemed Liquidation Event), the assets of the Corporation legally available for distribution to its stockholders shall be distributed in the following order of priority:
(i) First, to the payment in full of all debts, liabilities, and obligations of the Corporation (including all obligations under the Super-Priority Credit Agreement, the Amended Credit Agreement, and all other indebtedness and liabilities of the Corporation and its Subsidiaries);
(ii) Second, to the holders of Senior Stock (if any), in accordance with their respective terms, until such holders have received the full amount to which they are entitled;
(iii) Third, to the holders of Series A Preferred Stock, pro rata among all such holders in proportion to their respective Liquidation Preferences, until each holder has received an amount per share equal to the full Liquidation Preference per share plus all Accrued Dividends thereon (or, if applicable, the greater amount determined pursuant to Section 5.1(b)); and
(iv) Fourth, to the holders of Common Stock and any other Junior Stock, pro rata among all such holders in proportion to the number of shares of Common Stock (or Common Stock equivalents) held by each such holder.
If the assets of the Corporation legally available for distribution are insufficient to permit payment in full to the holders of the Series A Preferred Stock of the amounts to which they are entitled pursuant to clause (iii) above, then all such assets shall be distributed ratably among the holders of the Series A Preferred Stock in proportion to their respective Liquidation Preferences (including Accrued Dividends).
5.4 No Further Rights
After payment in full to each Holder of Series A Preferred Stock of the full amount to which such Holder is entitled pursuant to Section 5.1 (whether pursuant to clause (a) or clause (b) thereof), such Holder shall not be entitled to any further participation in any distribution of assets of the Corporation, unless and until such Holder has converted its shares of Series A Preferred Stock into shares of Common Stock pursuant to Section 6 hereof, in which case such Holder shall participate in distributions solely in its capacity as a holder of Common Stock.
SECTION 6. CONVERSION
6.1 Optional Conversion
Each Holder of Series A Preferred Stock shall have the right, at any time and from time to time, at such Holder's option, to convert all or any portion of the shares of Series A Preferred Stock held by such Holder into fully paid and nonassessable shares of Common Stock. Each share of Series A Preferred Stock shall be convertible into such number of shares of Common Stock as is determined by dividing (x) the Original Issue Price per share (plus all Accrued Dividends per share that have been added to the Liquidation Preference through compounding as of the date of conversion, and all Accrued Dividends per share that have accrued but not yet been compounded as of such date) by (y) the Conversion Price then in effect. The right of conversion set forth in this Section 6.1 may be exercised as to all or any portion of a Holder's shares of Series A Preferred Stock at any time, subject to the mechanics of conversion set forth in Section 6.3 hereof.
6.2 Conversion Price
The initial Conversion Price shall be the per-share price determined on the basis of the agreed equity valuation set forth in the Exchange Agreement, as derived from the analysis and valuation prepared by Hargrove Advisory Group LLC, the independent financial advisor to the Corporation, in connection with the Restructuring. The Conversion Price shall be subject to adjustment from time to time as provided in Section 6.4 hereof.
6.3 Mechanics of Conversion
6.3.1 Conversion Notice. In order to effect a conversion of shares of Series A Preferred Stock pursuant to Section 6.1, a Holder shall deliver to the Corporation a written notice (a "Conversion Notice") specifying (a) the number of shares of Series A Preferred Stock to be converted, and (b) the name or names in which such Holder wishes the shares of Common Stock to be issued, and shall surrender to the Corporation the certificate or certificates representing the shares of Series A Preferred Stock to be converted (or, in the case of book-entry shares, shall deliver such instructions as are reasonably required by the Corporation's transfer agent to effect such conversion). The date on which the Conversion Notice is received by the Corporation (or, if later, the date on which the certificate or certificates representing the shares to be converted are surrendered) shall be the "Conversion Date."
6.3.2 Delivery of Common Stock. The Corporation shall, as promptly as practicable and in any event within five (5) Business Days after the Conversion Date, deliver to the converting Holder (or to such other Person as designated in the Conversion Notice) a certificate or certificates representing the shares of Common Stock issuable upon such conversion (or shall cause such shares to be registered in book-entry form through the Corporation's transfer agent), together with a certificate representing any unconverted shares of Series A Preferred Stock.
6.3.3 Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of Series A Preferred Stock. In lieu of any fractional share to which a converting Holder would otherwise be entitled, the Corporation shall pay to such Holder an amount in cash equal to the Fair Market Value of such fractional share, as determined by the Board of Directors in good faith.
6.3.4 Cancellation. All shares of Series A Preferred Stock that are converted into Common Stock pursuant to this Section 6 shall thereupon be cancelled and retired and shall not be reissued, and the number of authorized shares of Series A Preferred Stock shall be correspondingly reduced. Upon conversion, the converting Holder shall cease to have any rights with respect to the converted shares of Series A Preferred Stock, except the right to receive the shares of Common Stock issuable upon such conversion (and cash in lieu of fractional shares, if applicable).
6.4 Anti-Dilution Adjustments
6.4.1 Weighted-Average Anti-Dilution. If the Corporation issues or sells (or is deemed to issue or sell) any additional shares of Common Stock (or any securities convertible into, or exercisable or exchangeable for, shares of Common Stock) at a price per share (or having a conversion, exercise, or exchange price per share) less than the Conversion Price then in effect (a "Dilutive Issuance"), then the Conversion Price shall be reduced to a price determined by multiplying the Conversion Price then in effect by a fraction:
(a) the numerator of which shall be the sum of (i) the number of shares of Common Stock outstanding immediately prior to such Dilutive Issuance (on a fully diluted basis, including all shares issuable upon conversion of Series A Preferred Stock and exercise of all outstanding options and warrants) plus (ii) the number of shares of Common Stock that the aggregate consideration received (or deemed received) by the Corporation for the total number of additional shares of Common Stock so issued (or deemed issued) would purchase at the Conversion Price then in effect; and
(b) the denominator of which shall be the sum of (i) the number of shares of Common Stock outstanding immediately prior to such Dilutive Issuance (on a fully diluted basis as described above) plus (ii) the total number of additional shares of Common Stock so issued (or deemed issued).
For purposes of this Section 6.4.1, the determination shall be made using the broad-based weighted-average formula.
6.4.2 Excluded Issuances. The following issuances shall not constitute Dilutive Issuances and shall not result in any adjustment to the Conversion Price under this Section 6.4:
(a) shares of Common Stock (or options or restricted stock units exercisable for or convertible into shares of Common Stock) issued or reserved for issuance to officers, directors, employees, or consultants of the Corporation or its Subsidiaries under the Corporation's management incentive plan, provided that the aggregate number of shares so issued or reserved does not exceed 5.0% of the pro forma common equity of the Corporation on a fully diluted basis (as determined as of the Initial Issuance Date, subject to adjustment for stock splits, combinations, and similar events);
(b) shares of Common Stock issued upon conversion of the Series A Preferred Stock in accordance with the terms hereof;
(c) shares of Common Stock (or securities convertible into or exercisable for Common Stock) issued in connection with bona fide acquisitions, mergers, joint ventures, or strategic transactions approved by the Board of Directors (including the affirmative vote of at least one director designated by the holders of Series A Preferred Stock); and
(d) shares of Common Stock issued upon the exercise or conversion of options, warrants, or convertible securities outstanding as of the Initial Issuance Date, to the extent such exercise or conversion is effected in accordance with the terms of such securities as in effect on the Initial Issuance Date.
6.4.3 Stock Splits, Combinations, and Dividends. If the Corporation at any time or from time to time after the Initial Issuance Date effects a stock split, stock combination, reverse stock split, or stock dividend with respect to the Common Stock, the Conversion Price shall be proportionally adjusted so that the number of shares of Common Stock issuable upon conversion of each share of Series A Preferred Stock shall be proportionally increased (in the case of a stock split or stock dividend) or decreased (in the case of a stock combination or reverse stock split), as applicable.
6.4.4 Certificate of Adjustment. Upon any adjustment to the Conversion Price, the Corporation shall promptly deliver to each Holder of Series A Preferred Stock a certificate, signed by the Chief Financial Officer of the Corporation, setting forth the adjusted Conversion Price and the facts requiring such adjustment in reasonable detail.
6.5 Mandatory Conversion
All outstanding shares of Series A Preferred Stock shall automatically convert into shares of Common Stock (in accordance with the conversion ratio then in effect) upon the earliest to occur of the following (a "Mandatory Conversion Event"):
(a) the closing of a firmly underwritten initial public offering of the Corporation's Common Stock registered under the Securities Act of 1933, as amended, resulting in aggregate gross proceeds to the Corporation of not less than $150,000,000 and a per-share offering price equal to not less than three (3) times the Original Issue Price (as adjusted for any stock splits, combinations, or similar events);
(b) the date upon which the Requisite Holders deliver a written election to the Corporation directing that all outstanding shares of Series A Preferred Stock be converted into shares of Common Stock; or
(c) the date on which no shares of Series A Preferred Stock remain outstanding (for the avoidance of doubt, after giving effect to all prior conversions, redemptions, and cancellations).
Upon the occurrence of a Mandatory Conversion Event, each outstanding share of Series A Preferred Stock shall automatically, and without any further action on the part of the Holder thereof, convert into such number of fully paid and nonassessable shares of Common Stock as is determined in accordance with the conversion ratio set forth in Section 6.1, and the Corporation shall promptly deliver (or cause to be delivered) certificates (or book-entry shares) representing the shares of Common Stock issuable upon such conversion.
SECTION 7. REDEMPTION
7.1 Optional Redemption by the Corporation
The Corporation shall have no right to redeem any shares of Series A Preferred Stock prior to the fifth (5th) anniversary of the Initial Issuance Date (i.e., prior to December 12, 2028). On or after December 12, 2028, the Corporation may, at its option, redeem all (but not less than all) of the then-outstanding shares of Series A Preferred Stock at a redemption price per share equal to the Liquidation Preference per share then in effect (including all Accrued Dividends that have been compounded and added to the Liquidation Preference, plus all Accrued Dividends that have accrued but not yet been compounded as of the date of redemption) (the "Redemption Price"). Any redemption pursuant to this Section 7.1 shall be subject to: (a) the Corporation having funds legally available for such redemption under the DGCL (including without limitation, Section 160 thereof); and (b) compliance with all covenants, conditions, and restrictions contained in the Amended Credit Agreement and the Super-Priority Credit Agreement, including without limitation, any restricted payment covenants contained therein.
7.2 Holder Put Right
At any time on or after the seventh (7th) anniversary of the Initial Issuance Date (i.e., on or after December 12, 2030), the Requisite Holders may, by delivery of written notice to the Corporation, require the Corporation to redeem all (but not less than all) of the then-outstanding shares of Series A Preferred Stock at the Redemption Price. Any redemption pursuant to this Section 7.2 shall be subject to:
(a) the Corporation having funds legally available for such redemption under the DGCL (including without limitation, Section 160 thereof); and
(b) compliance with all covenants, conditions, and restrictions contained in the Corporation's then-outstanding credit agreements, indentures, and other debt instruments, including without limitation, any restricted payment covenants contained therein.
If the Corporation is unable to redeem all of the then-outstanding shares of Series A Preferred Stock on the date specified in the redemption notice delivered by the Requisite Holders due to the legal or contractual restrictions described in clauses (a) and (b) above, the Corporation shall (i) redeem the maximum number of shares of Series A Preferred Stock that it is then legally and contractually permitted to redeem, allocated pro rata among all holders of Series A Preferred Stock in proportion to their respective holdings, and (ii) redeem the remaining outstanding shares of Series A Preferred Stock as promptly as practicable thereafter, at such time as the Corporation is legally and contractually permitted to do so, at the Redemption Price then in effect (which shall continue to accrue PIK dividends during any such deferral period).
7.3 Redemption Mechanics
7.3.1 Notice. In the case of an optional redemption by the Corporation pursuant to Section 7.1, the Corporation shall deliver written notice (the "Corporation Redemption Notice") to each Holder of Series A Preferred Stock not fewer than thirty (30) days and not more than sixty (60) days prior to the date fixed for redemption (the "Redemption Date"), specifying (a) the Redemption Date, (b) the Redemption Price per share, (c) the aggregate Redemption Price payable, and (d) the place at which the Holders may surrender their shares for payment of the Redemption Price. In the case of a put right exercised by the Requisite Holders pursuant to Section 7.2, the Requisite Holders shall deliver written notice (the "Holder Put Notice") to the Corporation specifying the Requisite Holders' election to require redemption, and the Redemption Date shall be a date specified in the Holder Put Notice that is not earlier than thirty (30) days and not later than sixty (60) days from the date of such notice.
7.3.2 Payment. On the Redemption Date, the Corporation shall pay the Redemption Price for each share of Series A Preferred Stock to be redeemed in immediately available funds to the Holder thereof (or to the account designated by such Holder in writing), against surrender of the certificate or certificates representing such shares (or, in the case of book-entry shares, upon receipt of such instructions as are reasonably required by the Corporation's transfer agent). From and after the Redemption Date, dividends shall cease to accrue on shares of Series A Preferred Stock that have been called for redemption, provided that the Redemption Price has been paid in full. If the Corporation fails to pay the full Redemption Price on the Redemption Date, dividends shall continue to accrue on the unredeemed shares at the PIK Dividend Rate until the Redemption Price is paid in full.
7.3.3 Cancellation. All shares of Series A Preferred Stock that are redeemed pursuant to this Section 7 shall thereupon be cancelled and retired and shall not be reissued, and the number of authorized shares of Series A Preferred Stock shall be correspondingly reduced.
7.3.4 Conversion Right Prior to Redemption. Notwithstanding anything to the contrary in this Section 7, each Holder of Series A Preferred Stock shall retain the right to convert all or any portion of its shares of Series A Preferred Stock into shares of Common Stock pursuant to Section 6.1 at any time prior to the close of business on the Business Day immediately preceding the Redemption Date. Any shares so converted shall not be redeemed.
SECTION 8. VOTING RIGHTS
8.1 General Voting Rights
Except as otherwise provided herein or as required by applicable law, the holders of the Series A Preferred Stock shall vote together with the holders of Common Stock on all matters submitted to a vote or consent of the stockholders of the Corporation, voting together as a single class. Each share of Series A Preferred Stock shall entitle the Holder thereof to such number of votes as equals the number of whole shares of Common Stock into which such share of Series A Preferred Stock is then convertible pursuant to Section 6 hereof (taking into account all adjustments thereto as of the record date for such vote or consent). The holders of Series A Preferred Stock shall be entitled to notice of all stockholder meetings (or actions by written consent) on the same basis and in the same manner as holders of Common Stock.
8.2 Class Voting / Protective Provisions
In addition to any other vote or consent required by applicable law, the Charter, or this Certificate of Designations, the Corporation shall not, directly or indirectly, take any of the following actions without the prior written consent or the affirmative vote of the Requisite Holders (holders of a majority of the then-outstanding shares of Series A Preferred Stock), voting as a separate class:
(a) Amend, alter, restate, repeal, or modify any provision of the Charter, this Certificate of Designations, or the Bylaws of the Corporation in any manner that would adversely affect or alter the powers, preferences, rights, privileges, or restrictions of the Series A Preferred Stock, or that would otherwise disproportionately and adversely affect the holders of the Series A Preferred Stock relative to the holders of Common Stock;
(b) Create, authorize, or issue any shares of Senior Stock or Parity Stock, or any security convertible into, or exercisable or exchangeable for, any shares of Senior Stock or Parity Stock;
(c) Increase or decrease the authorized number of shares of Series A Preferred Stock, or authorize the issuance of any additional shares of Series A Preferred Stock beyond those issued on the Initial Issuance Date;
(d) Declare or pay any dividend or distribution on any shares of Junior Stock, other than dividends payable solely in additional shares of Junior Stock;
(e) Repurchase, redeem, or otherwise acquire for consideration any shares of Junior Stock, other than repurchases of shares of Common Stock from officers, directors, employees, or consultants of the Corporation or its Subsidiaries upon termination of employment or service at a price not exceeding the original cost of such shares (or the then-current fair market value thereof, if lower), in each case pursuant to and in accordance with the terms of the Corporation's management incentive plan (covering up to 5.0% of the pro forma common equity of the Corporation);
(f) Consummate, or enter into any agreement providing for, any Deemed Liquidation Event (as defined in Section 5.2);
(g) Incur, create, assume, guarantee, or otherwise become liable for any indebtedness for borrowed money (or any guarantee thereof) in excess of the amounts permitted under the Amended Credit Agreement and the Super-Priority Credit Agreement, each as in effect on the Initial Issuance Date, unless such indebtedness has been approved by the Board of Directors (including the affirmative vote of at least one (1) director designated by the holders of Series A Preferred Stock pursuant to the Stockholders' Agreement);
(h) Amend, modify, waive, or terminate any provision of the Stockholders' Agreement in a manner that would adversely affect the rights, preferences, or privileges of the holders of Series A Preferred Stock; or
(i) Voluntarily liquidate, dissolve, or wind up the affairs of the Corporation, or consent to any involuntary liquidation, dissolution, or winding up of the Corporation.
8.3 Board Representation
8.3.1 The rights of the holders of Series A Preferred Stock with respect to the designation and election of members of the Board of Directors shall be as set forth in the Amended and Restated Stockholders' Agreement dated as of December 12, 2023. Pursuant to such Stockholders' Agreement, the Board of Directors shall consist of seven (7) directors, composed as follows:
(a) three (3) directors designated by Ridgeline Capital Partners Fund III, L.P.;
(b) three (3) directors designated by the holders of Series A Preferred Stock (acting through the Requisite Holders), as representatives of the mezzanine equitization recipients; and
(c) one (1) independent director mutually agreed upon by Ridgeline and the Requisite Holders.
8.3.2 For so long as the holders of Series A Preferred Stock collectively hold at least twenty-five percent (25%) of the pro forma common equity of the Corporation on an as-converted basis (taking into account all shares of Common Stock issuable upon conversion of all outstanding shares of Series A Preferred Stock), the holders of Series A Preferred Stock shall retain the right to designate three (3) directors to the Board of Directors as provided in Section 8.3.1(b).
8.3.3 If the holders of Series A Preferred Stock collectively hold less than twenty-five percent (25%) but at least ten percent (10%) of the pro forma common equity of the Corporation on an as-converted basis, the designation right of the holders of Series A Preferred Stock shall be reduced to one (1) director, and the Board composition shall be adjusted accordingly in the manner set forth in the Stockholders' Agreement.
8.3.4 If the holders of Series A Preferred Stock collectively hold less than ten percent (10%) of the pro forma common equity of the Corporation on an as-converted basis, the holders of Series A Preferred Stock shall have no right to designate any director to the Board of Directors (without limiting any voting rights set forth in Section 8.1 hereof or any protective provisions set forth in Section 8.2 hereof, in each case to the extent any shares of Series A Preferred Stock remain outstanding).
SECTION 9. TRANSFER RESTRICTIONS
9.1 The shares of Series A Preferred Stock shall be subject to the transfer restrictions set forth in the Amended and Restated Stockholders' Agreement dated as of December 12, 2023, including without limitation:
(a) tag-along rights of the holders of Series A Preferred Stock in connection with any proposed sale of shares by Ridgeline;
(b) drag-along rights of Ridgeline and the Requisite Holders, acting together, to require all stockholders to participate in certain qualifying sale transactions;
(c) rights of first refusal in favor of the Corporation and, thereafter, the other stockholders, in connection with proposed transfers of shares of Series A Preferred Stock (or Common Stock issued upon conversion thereof); and
(d) restrictions on transfers to competitors of the Corporation and its Subsidiaries, as determined by the Board of Directors.
9.2 The Corporation shall not be required to register on its books or otherwise recognize any Transfer of shares of Series A Preferred Stock that is not made in compliance with the transfer restrictions set forth in the Stockholders' Agreement and applicable securities laws.
9.3 Each certificate (or book-entry notation) representing shares of Series A Preferred Stock shall bear (or be subject to) a restrictive legend substantially in the form set forth in Schedule A hereto, referencing the transfer restrictions under the Stockholders' Agreement and applicable securities laws.
SECTION 10. INFORMATION RIGHTS
For so long as any shares of Series A Preferred Stock are outstanding, the Corporation shall furnish (or cause to be furnished) to each Holder of Series A Preferred Stock the following information:
(a) Annual Financial Statements. Audited consolidated financial statements of the Corporation and its Subsidiaries for each fiscal year, prepared in accordance with generally accepted accounting principles in the United States ("GAAP"), audited by Whitfield & Pryce LLP or another nationally recognized independent registered public accounting firm, together with the report of such accounting firm thereon, to be delivered within one hundred twenty (120) days after the end of each fiscal year of the Corporation.
(b) Quarterly Financial Statements. Unaudited consolidated financial statements of the Corporation and its Subsidiaries for each fiscal quarter (other than the fourth fiscal quarter of each fiscal year), prepared in accordance with GAAP (subject to normal year-end adjustments and the absence of footnotes), including a consolidated balance sheet as of the end of such fiscal quarter and consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for such fiscal quarter and for the year-to-date period then ended, in each case with comparative figures for the corresponding periods of the prior fiscal year, to be delivered within forty-five (45) days after the end of each fiscal quarter.
(c) Annual Budget and Projections. An annual operating budget and financial projections for the Corporation and its Subsidiaries for the upcoming fiscal year, prepared in reasonable detail and approved by the Board of Directors, to be delivered to each Holder within thirty (30) days after the beginning of each fiscal year.
(d) Material Notices. Prompt written notice of (i) any material adverse change in the financial condition, business, operations, assets, or prospects of the Corporation and its Subsidiaries, taken as a whole; (ii) any default or event of default under the Amended Credit Agreement, the Super-Priority Credit Agreement, or any other material debt instrument of the Corporation or its Subsidiaries; and (iii) the commencement of, or any material development in, any litigation, arbitration, or other proceeding involving the Corporation or any of its Subsidiaries in which the amount in controversy exceeds $5,000,000 or that seeks injunctive or other equitable relief that could reasonably be expected to have a material adverse effect on the Corporation and its Subsidiaries, taken as a whole.
The information rights set forth in this Section 10 are in addition to, and not in limitation of, any information rights granted to the holders of Series A Preferred Stock under the Stockholders' Agreement, the Exchange Agreement, or any other agreement between the Corporation and such holders.
SECTION 11. PREEMPTIVE RIGHTS
11.1 The holders of Series A Preferred Stock shall have preemptive rights to participate in any new issuance of equity securities (or securities convertible into or exercisable for equity securities) of the Corporation, on a pro rata basis determined by reference to such holder's percentage ownership of the Common Stock on a fully diluted, as-converted basis, subject to customary exceptions (including, without limitation, issuances pursuant to the management incentive plan, issuances upon conversion of Series A Preferred Stock, and issuances in connection with bona fide acquisitions or strategic transactions approved by the Board of Directors). The terms and conditions of such preemptive rights, including the mechanics of notice, election, and closing, shall be as set forth in the Amended and Restated Stockholders' Agreement dated as of December 12, 2023.
11.2 Nothing in this Section 11 shall be construed to limit or restrict the protective provisions set forth in Section 8.2 hereof.
SECTION 12. NO SINKING FUND
The Series A Preferred Stock shall not be subject to, or entitled to the benefit of, any sinking fund or mandatory redemption obligation, except as expressly set forth in Section 7.2 hereof with respect to the Holder put right. For the avoidance of doubt, the Holder put right set forth in Section 7.2 shall not be deemed a sinking fund obligation.
SECTION 13. NOTICES
13.1 All notices, requests, demands, consents, and other communications required or permitted to be given under this Certificate of Designations shall be in writing and shall be deemed to have been duly given when (a) delivered personally, (b) sent by nationally recognized overnight courier service (with tracking and confirmation of delivery), (c) sent by certified or registered mail, return receipt requested, postage prepaid, or (d) transmitted by electronic mail (with confirmation of receipt), addressed as follows:
If to the Corporation:
Stonefield Logistics Group Inc. 4200 Commerce Street, Suite 1500 Dallas, TX 75201
Attention: Howard Kessler, General Counsel
Email: hkessler@stonefieldlogistics.com
with a copy (which shall not constitute notice) to:
Calderwood & Harkness LLP 599 Lexington Avenue New York, NY 10022
Attention: Nathaniel Bower
Email: nbower@calderwoodharkness.com
If to a Holder of Series A Preferred Stock:
At the address set forth in the stock register of the Corporation for such Holder, or at such other address as such Holder may from time to time designate in a written notice delivered to the Corporation in accordance with this Section 13.
13.2 Any party may change its address for notice purposes by delivering written notice of such change to the other parties in accordance with this Section 13.
SECTION 14. AMENDMENTS AND WAIVERS
14.1 No provision of this Certificate of Designations may be amended, waived, modified, or terminated except by an instrument in writing signed by the Corporation and the Requisite Holders, unless such amendment, waiver, modification, or termination is expressly permitted herein or is required by the DGCL.
14.2 Any amendment, waiver, modification, or termination effected in accordance with this Section 14 shall be binding upon all holders of Series A Preferred Stock, including holders who did not consent to or vote in favor of such amendment, waiver, modification, or termination, and upon all future holders of Series A Preferred Stock.
14.3 No failure or delay on the part of any Holder in exercising any right, power, or privilege under this Certificate of Designations shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power, or privilege.
SECTION 15. GOVERNING LAW
15.1 This Certificate of Designations shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to conflicts of law principles thereof that would cause the application of the laws of any other jurisdiction.