LAKESHORE NATIONAL BANK 135 South LaSalle Street Chicago, Illinois 60603
August 30, 2022
Via Email and U.S. Mail
Tobias Wren, Esq. General Counsel Stonefield Logistics Group Inc. 4200 Commerce Parkway, Suite 800 Fort Worth, Texas 76102
Re: Acknowledgment of Litigation Notice Under Section 6.03(b) — Senior Secured Credit Facility (Ref. No. LNB-SLG-2017-CA-4402); Vantor Holdings Corp. v. Stonefield Logistics Group Inc., Case No. 22-cv-07841 (S.D.N.Y.)
Dear Mr. Wren:
I am writing to you in my capacity as Senior Vice President, Loan Administration, on behalf of Lakeshore National Bank, N.A. ("Lakeshore" or the "Administrative Agent"), in its role as Administrative Agent under the $425,000,000 Senior Secured Credit Facility (consisting of a $175,000,000 revolving credit facility and a $250,000,000 term loan B) established pursuant to that certain Credit Agreement dated as of October 12, 2017, as amended and restated as of June 30, 2021 (Ref. No. LNB-SLG-2017-CA-4402) (the "Credit Agreement"), by and among Stonefield Logistics Group Inc., a Delaware corporation (the "Borrower"), the lenders party thereto from time to time (collectively, the "Lenders"), and Lakeshore National Bank, N.A., as Administrative Agent. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.
The purpose of this letter is to acknowledge receipt of your letter dated August 24, 2022 (the "Litigation Notice"), by which you provided written notification to the Administrative Agent of the commencement of litigation captioned Vantor Holdings Corp. v. Stonefield Logistics Group Inc., Case No. 22-cv-07841, filed in the United States District Court for the Southern District of New York. We confirm that the Litigation Notice was delivered in accordance with Section 6.03(b) of the Credit Agreement, which requires the Borrower to provide written notice to the Administrative Agent within ten (10) business days of the commencement of, or service of process in, any litigation, arbitration, or governmental investigation involving potential liability in excess of $25,000,000 (the "Notification Threshold"). We note that the Complaint in the above-referenced action was filed on August 12, 2022, and the Litigation Notice was dated August 24, 2022, which falls within the ten-business-day notification window prescribed by Section 6.03(b). Accordingly, the Administrative Agent confirms that the Borrower's notification obligation under that section has been timely satisfied with respect to this matter.
Summary of Notified Litigation
Based upon the information set forth in the Litigation Notice, the Administrative Agent acknowledges the following details concerning the above-referenced litigation:
Plaintiff: Vantor Holdings Corp., a New York corporation, with its principal offices located at 580 Eighth Avenue, 14th Floor, New York, New York 10018.
Defendant: Stonefield Logistics Group Inc., a Delaware corporation and the Borrower under the Credit Agreement.
Nature of Claims: As described in the Litigation Notice, the Plaintiff alleges breach of a Transportation Services Agreement dated as of March 15, 2019 (the "TSA," Ref. No. SLG-VTS-2019-0315), entered into between Stonefield Logistics Group Inc. and Vantor Transport Services LLC, a wholly owned subsidiary of Vantor Holdings Corp. The Plaintiff asserts that the Borrower wrongfully terminated the TSA in violation of the terms thereof, and the Complaint sets forth claims sounding in breach of contract and related theories of recovery.
Claimed Damages: Approximately $95,400,000, which amount is alleged to consist of liquidated damages, lost profits, stranded asset costs, workforce reduction costs, and mitigation costs, in each case as more particularly described in the Complaint.
Relationship to Notification Threshold: The claimed damages of approximately $95,400,000 substantially exceed the $25,000,000 Notification Threshold established under Section 6.03(b) of the Credit Agreement, thereby triggering the Borrower's obligation to provide the Litigation Notice.
The Administrative Agent further acknowledges the Borrower's position as stated in the Litigation Notice, namely that management of Stonefield Logistics Group Inc. believes the claims asserted by Vantor Holdings Corp. lack merit and that the Borrower intends to vigorously defend against the action. As set forth in the Litigation Notice, the Borrower asserts that its termination of the TSA was valid and effected for cause based upon the counterparty's material and uncured failures to meet applicable service level requirements under the TSA.
Assessment of Current Impact on Credit Facility
Based upon the information provided in the Litigation Notice, and subject to the Administrative Agent's ongoing rights, remedies, and powers under the Credit Agreement and the other Loan Documents, Lakeshore National Bank confirms the following:
1. The Litigation Notice has been duly received, reviewed, and recorded by the Administrative Agent in accordance with its customary procedures.
2. In accordance with the Administrative Agent's obligations under the Credit Agreement, the Litigation Notice has been circulated to the Lenders constituting the syndicate under the Credit Agreement, together with such summary information as the Administrative Agent deemed appropriate to include in its distribution.
3. As of the date of this letter, the Administrative Agent has not identified any current adverse impact on facility availability under the revolving credit facility or the term loan B as a direct consequence of the notified litigation. The Borrower's existing borrowing capacity and outstanding commitments remain as set forth in the most recent compliance certificate delivered to the Administrative Agent.
4. No Event of Default (as defined in the Credit Agreement) has been declared or is being declared by the Administrative Agent in connection with the notified litigation as of the date hereof.
Notwithstanding the foregoing, the Administrative Agent wishes to emphasize that the statements set forth in this Section do not constitute, and shall not be deemed or construed to constitute, a waiver of any rights, remedies, powers, or privileges of the Administrative Agent or any Lender under the Credit Agreement, the other Loan Documents, or applicable law. All such rights, remedies, powers, and privileges are expressly and fully reserved, and the Administrative Agent's and the Lenders' assessment of the litigation and its potential impact on the Credit Agreement and the Borrower's obligations thereunder remains subject to change based on future developments.
Request for Quarterly Litigation Status Updates
Pursuant to the Administrative Agent's rights under Sections 6.01 and 6.03 of the Credit Agreement, and in order to enable the Administrative Agent to monitor developments in this matter on an ongoing basis and to fulfill its informational and fiduciary obligations to the Lenders constituting the syndicate, Lakeshore National Bank hereby requests that Stonefield Logistics Group Inc. provide quarterly written updates on the status of the litigation captioned Vantor Holdings Corp. v. Stonefield Logistics Group Inc., Case No. 22-cv-07841 (S.D.N.Y.) (each, a "Quarterly Litigation Update").
Each Quarterly Litigation Update should include, at a minimum, the following information:
(a) A summary of all material developments in the case occurring since the date of the prior Quarterly Litigation Update (or, in the case of the first such update, since the date of the Litigation Notice), including without limitation any motions filed or pending, court rulings or orders entered, significant discovery events or disputes, scheduling orders, and any amendments to the pleadings;
(b) Any changes to the Borrower's assessment of the merits of the claims asserted by the Plaintiff, including any revisions to management's evaluation of the likelihood of an adverse outcome at trial or on dispositive motion;
(c) Any changes to the estimated range of potential financial exposure to the Borrower arising from the litigation, including any revisions to the claimed damages amount or the emergence of additional claims or counterclaims;
(d) The status of any insurance coverage applicable to the claims asserted in the litigation, including any reservation of rights by the Borrower's insurers, any disputes regarding coverage, and any material payments or reimbursements received or expected under applicable insurance policies; and
(e) The status of any settlement discussions, mediation proceedings, or settlement offers, to the extent that disclosure of such information is permitted under applicable law, applicable rules of professional conduct, and any applicable confidentiality agreements or court orders governing the settlement process.
With respect to timing, the Administrative Agent requests that Quarterly Litigation Updates be provided within fifteen (15) business days following the end of each calendar quarter — that is, on or about mid-January, mid-April, mid-July, and mid-October of each year in which the litigation remains pending. The first Quarterly Litigation Update should be delivered on or before October 24, 2022 (i.e., within fifteen business days following September 30, 2022).
All Quarterly Litigation Updates should be directed to the undersigned, Catherine Devereaux, Senior Vice President, Loan Administration, Lakeshore National Bank, N.A., at the address set forth above, with a copy to the attention of the Credit Administration Department at the same address. Updates may be transmitted via email to the contact information provided below, with a hard copy to follow by U.S. Mail.
The Administrative Agent further reserves the right to request supplemental or interim updates outside the quarterly reporting schedule in the event that significant developments in the litigation occur between scheduled reporting dates, including without limitation the filing of any dispositive motion, any ruling on such motion, the commencement of trial proceedings, the entry of any judgment, or the execution of any settlement agreement.
Reservation of Rights
This acknowledgment letter is provided solely for informational purposes and for the purpose of confirming the Administrative Agent's receipt of the Litigation Notice and setting forth the Administrative Agent's request for ongoing quarterly reporting. Nothing contained herein shall constitute, or be deemed or construed to constitute, the Administrative Agent's or any Lender's consent to, approval of, or acquiescence in any matter related to the litigation described herein, or any action taken or proposed to be taken by the Borrower in connection therewith.
The Administrative Agent and the Lenders expressly reserve all rights, remedies, powers, and privileges available to them under the Credit Agreement, the other Loan Documents, and applicable law, whether now existing or hereafter arising, and whether or not specifically referenced herein. No delay or omission by the Administrative Agent or any Lender in exercising any such right, remedy, power, or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power, or privilege preclude any other or further exercise thereof or the exercise of any other right, remedy, power, or privilege.
If developments in the litigation materially alter the potential exposure of the Borrower, adversely affect the financial condition, business, operations, or prospects of the Borrower or any of its subsidiaries, or otherwise give rise to concerns regarding the Borrower's ability to comply with any financial covenant, reporting obligation, or other obligation under the Credit Agreement, the Administrative Agent reserves the right to request additional information from the Borrower beyond that described in this letter, to accelerate reporting obligations, to convene a meeting of the Lenders to discuss the matter, or to take such other actions as may be available to the Administrative Agent under the Credit Agreement, the other Loan Documents, or applicable law, including without limitation the declaration of an Event of Default or the exercise of remedies in respect thereof.
Nothing in this letter shall be construed as a determination by the Administrative Agent regarding the materiality of the litigation or its potential impact on the Borrower's compliance with any financial covenants, borrowing base requirements, or other obligations under the Credit Agreement or the other Loan Documents. The Administrative Agent's assessment of these matters remains ongoing and is subject to revision based on the information provided by the Borrower in future Quarterly Litigation Updates, compliance certificates, and other communications, as well as publicly available information concerning the litigation.
Contact Information and Closing
Should you have any questions regarding this acknowledgment, the quarterly reporting requirements described herein, or any other matter related to the Credit Agreement, please do not hesitate to contact me directly at the Lakeshore National Bank offices at 135 South LaSalle Street, Chicago, Illinois 60603. I can also be reached by telephone at (312) 458-7200 or by email at catherine.devereaux@lakeshorenational.com.
The Administrative Agent appreciates the Borrower's timely notification under Section 6.03(b) of the Credit Agreement and Stonefield's continued cooperation in fulfilling its reporting obligations. We look forward to receiving the Quarterly Litigation Updates as described above and to maintaining an open dialogue regarding this matter as it progresses.
Very truly yours,
LAKESHORE NATIONAL BANK, N.A., as Administrative Agent
By: ________
Name: Catherine Devereaux
Title: Senior Vice President, Loan Administration
Date: August 30, 2022
135 South LaSalle Street Chicago, Illinois 60603 Tel: (312) 458-7200
Email: catherine.devereaux@lakeshorenational.com
cc: Priya Ramachandran, Chief Financial Officer, Stonefield Logistics Group Inc. cc: Credit Administration Department, Lakeshore National Bank, N.A. cc: Syndicate Lender Distribution List (per Section 10.02 of the Credit Agreement)
Enclosures: None (acknowledgment only; original Litigation Notice retained on file)