Contract analysis

I. INTRODUCTION AND BASIS OF TESTIMONY

1. My name is Dana Kowalski. I am the Chief Financial Officer of Crestline Packaging Solutions LLC ("Crestline," "CPS," or, together with CPS Holdings Inc., the "Debtors"). I submit this declaration (the "Declaration") pursuant to 28 U.S.C. § 1746, under penalty of perjury, in support of the confirmation of the Prepackaged Plan of Reorganization of Crestline Packaging Solutions LLC and CPS Holdings Inc. (Dkt. 47, the

2. I have served as the Chief Financial Officer of Crestline since July 2019. In this capacity, I am responsible for the oversight and management of all financial operations, accounting, treasury, budgeting, financial reporting, and risk management for Crestline and its direct parent, CPS Holdings Inc. I report directly to the Debtors' board of managers and work closely with senior management, outside financial advis

3. Since the commencement of the restructuring process in early 2022, I have been personally involved in all aspects of the Debtors' restructuring efforts, including negotiations with creditor constituencies, the development of the Debtors' business plan and financial projections, the preparation of the Disclosure Statement (Dkt. 48), and the formulation of the Plan. I have also been intimately involved in the negoti

4. The facts set forth in this Declaration are based on my personal knowledge, my review of relevant documents and records maintained by the Debtors in the ordinary course of business, information provided to me by other officers and employees of the Debtors, and information provided to me by the Debtors' financial advisor, Aldersgate Advisory Group LLC ("Aldersgate"), and the Debtors' legal counsel, Calderwood & Har

5. I am authorized to submit this Declaration on behalf of the Debtors. No other person or entity has authorized or directed me to make statements that are not truthful, and I make this Declaration of my own volition and in good faith.

II. BACKGROUND OF THE DEBTORS A. Business Overview

6. Crestline Packaging Solutions LLC is an Ohio limited liability company headquartered at 4710 Industrial Corridor Drive, Akron, Ohio 44308. Crestline is a leading manufacturer of specialty chemical packaging and industrial containment products, including high-density polyethylene ("HDPE") drums, intermediate bulk containers ("IBCs"), steel pails, and specialty containment vessels. The company serves a diverse custo

7. Crestline was formed in 2007 and has grown steadily over the past fifteen years, building a reputation for quality, reliability, and innovation in the specialty packaging industry. The company's products are essential to its customers' operations, as they are required for the safe storage, transport, and handling of a wide range of chemical and industrial products subject to stringent regulatory requirements.

8. CPS Holdings Inc. ("CPS Holdings") is a Delaware corporation formed in connection with the leveraged buyout of Crestline by Thornfield Capital Partners LP ("Thornfield") in October 2017, as described in greater detail below. CPS Holdings is the direct parent of Crestline and serves as the holding company for the Crestline enterprise. CPS Holdings' registered agent is located at 1209 Orange Street, Wilmington, Dela

9. As of the Petition Date, Crestline employed approximately 1,420 employees across four manufacturing facilities located in Ohio, Indiana, and Louisiana. Each facility serves a distinct function in the Debtors' manufacturing operations: (a) Plant 1 (Akron, Ohio — Headquarters): Located at 4710 Industrial Corridor Drive, Akron, Ohio 44308, Plant 1 serves as the Debtors' corporate headquarters and is the primary manuf

10. In addition to the four manufacturing facilities, the Debtors lease a warehouse located at 900 Darrow Road, Akron, Ohio 44305, from Benchmark Real Estate Holdings LLC. This facility serves as supplemental warehousing and distribution space for the Akron-area operations.

11. I am pleased to report that all four manufacturing plants have continued to operate throughout the Chapter 11 cases without material interruption. The Debtors have maintained production schedules, fulfilled customer orders, and honored all post-petition obligations to employees, vendors, and customers. The continuity of operations during the Chapter 11 process is a testament to the dedication of the Debtors' work

12. In October 2017, Thornfield Capital Partners LP, a private equity fund based in New York, New York, acquired 100% of the equity interests of CPS Holdings Inc. for an aggregate enterprise value of approximately $410.0 million (the "LBO"). CPS Holdings was formed as a Delaware corporation in connection with the LBO to serve as the acquisition holding company.

13. Thornfield contributed equity of approximately $163.0 million in connection with the LBO, with the remainder of the acquisition price funded through the incurrence of debt at the operating company level. The debt financing consisted of the following: (a) A $175.0 million first lien term loan and a $40.0 million revolving credit facility, each issued under a First Lien Credit Agreement dated October 13, 2017 (the

14. At the time of the LBO, the Debtors' leverage was approximately 5.7x total net debt to EBITDA, which was in line with market conditions for leveraged buyout financings in the industrial packaging sector during that period. The Debtors' financial performance in the years immediately following the LBO was generally in line with the underwriting case, with the company generating sufficient cash flow to service its d

III. EVENTS LEADING TO CHAPTER 11 FILING A. Financial Deterioration

15. Beginning in fiscal year 2021, the Debtors experienced a significant deterioration in financial performance driven by a combination of factors largely beyond the Debtors' control. For fiscal year 2021, the Debtors reported revenue of approximately $312.6 million and EBITDA of approximately $38.4 million. Revenue declined approximately 18% from fiscal year 2020 to fiscal year 2021, driven primarily by (i) signific

16. The margin compression that characterized fiscal year 2021 continued and intensified through the first quarter of fiscal year 2022. The Debtors' trailing twelve-month EBITDA as of the end of the first quarter of 2022 had fallen to approximately $29.1 million. While the Debtors took a number of cost reduction and pricing actions during this period, including selective price increases to customers and the implement

17. As of the Petition Date, the Debtors' capital structure consisted of the following funded debt obligations:

18. The reduction in the Second Lien Notes outstanding from $60.0 million at issuance to $56.0 million at the Petition Date reflects $4.0 million in open-market repurchases conducted by the Debtors during 2019, when the notes were trading at a discount to par. The reduction in the First Lien Term Loan from $175.0 million to $158.7 million reflects scheduled amortization payments made by the Debtors prior to the Petit

19. Section 7.11 of the First Lien Credit Agreement required the Debtors to maintain a maximum total net leverage ratio (defined as Total Net Debt divided by EBITDA, as defined therein) not to exceed 5.75 to 1.00, tested on a quarterly basis at the end of each fiscal quarter. This financial maintenance covenant was a critical feature of the First Lien Credit Agreement and served as an early warning mechanism for lend

20. As of the end of the first quarter of 2022, the Debtors' actual total net leverage ratio was approximately 8.50 to 1.00, calculated as $247.3 million in total funded debt divided by $29.1 million in trailing twelve-month EBITDA. This represented a breach of the covenant maximum of 5.75x by approximately 2.75 turns, or 47.8% above the permitted threshold. The magnitude of the breach underscored the severity of the

21. On April 22, 2022, Ridgeline National Bank, N.A., as administrative agent under the First Lien Credit Agreement, delivered a formal Notice of Default (the "Notice of Default") to the Debtors, citing the breach of Section 7.11 of the First Lien Credit Agreement. The Notice of Default constituted an event of default under the First Lien Credit Agreement, which in turn triggered a cross-default under Section 6.01(e)

22. Following receipt of the Notice of Default, the Debtors and their advisors immediately engaged in discussions with Ridgeline and the first lien lender group regarding a forbearance arrangement to provide the Debtors with the time necessary to evaluate and pursue restructuring alternatives.

23. On May 18, 2022, the Debtors, Ridgeline, and consenting first lien lenders holding approximately 68% of the outstanding principal amount of the first lien term loan executed a Forbearance Agreement (the "Forbearance Agreement"). The Forbearance Agreement provided for an initial forbearance period of 45 days (through July 2, 2022), during which the forbearing lenders agreed not to exercise remedies under the First

24. During the forbearance period, the Debtors, with the assistance of their financial advisor, Aldersgate Advisory Group LLC (led by Managing Director Priya Narayanan), and their restructuring counsel, Calderwood & Harkness LLP, engaged in intensive, multi-party negotiations with the Debtors' key creditor constituencies. The following groups participated in these negotiations: (a) The Ad Hoc Group of First Lien Lend

25. The negotiations were robust, contentious at times, and conducted at arms' length over a period of approximately seven weeks. The principal issues negotiated included the allocation of reorganized equity between the First Lien Group and the Second Lien Group, the quantum and terms of any take-back debt, the treatment of general unsecured claims, the terms of the management incentive plan, and the governance struc

26. On July 8, 2022, the Restructuring Support Agreement was executed among Crestline, CPS Holdings, Thornfield, the Ad Hoc Group of First Lien Lenders, and the Ad Hoc Group of Second Lien Noteholders (the "RSA"). The RSA set forth the key terms of the restructuring transaction and committed the parties to support confirmation of the Plan in these Chapter 11 cases.

27. The RSA contained the following key milestones, each designed to ensure a swift and efficient restructuring process: (a) Petition Date: No later than July 31, 2022 (satisfied; petitions filed June 20, 2022); (b) Disclosure Statement Approval: Within 45 days of the Petition Date (satisfied; Disclosure Statement approved August 10, 2022); (c) Plan Confirmation: Within 90 days of the Petition Date (confirmation hear

28. The Debtors have met or are on track to meet each of the milestones set forth in the RSA, and the RSA remains in full force and effect as of the date of this Declaration.

IV. THE CHAPTER 11 CASES A. Petition Date and First Day Relief

29. On June 20, 2022 (the "Petition Date"), Crestline Packaging Solutions LLC (EIN: 31-1782094) and CPS Holdings Inc. (EIN: 82-3491657) each filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the Northern District of Ohio, Eastern Division. The cases have been jointly administered under Case No. 22-51247.

30. On June 21, 2022, the Court held a hearing on the Debtors' first day motions. The following relief, among other things, was granted: (a) Joint Administration: The Court entered an order authorizing the joint administration of the Chapter 11 cases of Crestline and CPS Holdings pursuant to Bankruptcy Rule 1015(b), given that the two entities share common ownership, management, and operations, and joint administrati

31. To ensure adequate liquidity during the Chapter 11 cases, the Debtors obtained a debtor-in-possession financing facility (the "DIP Facility"). On June 24, 2022, the Court entered an interim order authorizing the Debtors to access the DIP Facility on an interim basis. On July 18, 2022, the Court entered the final order approving the DIP Facility on a final basis (the "Final DIP Order").

32. The key terms of the DIP Facility are as follows: (a) Facility Type: $30.0 million senior secured superpriority revolving credit facility. (b) Lenders: The consenting first lien lenders, with Ridgeline National Bank, N.A. serving as administrative agent. (c) Interest Rate: SOFR plus 500 basis points; default rate of an additional 200 basis points. (d) Fees: Commitment fee of $450,000 (1.50% of the total commitmen

33. The DIP Facility has provided the Debtors with the necessary liquidity to fund their ongoing business operations, pay post-petition obligations, and finance the costs of the restructuring process. Throughout the pendency of these cases, the Debtors have maintained compliance with the DIP budget and all covenants under the DIP Facility, demonstrating the Debtors' ability to manage their finances in a disciplined a

34. The Court has authorized the retention of the following professionals in these Chapter 11 cases: (a) Calderwood & Harkness LLP — Retained as the Debtors' lead restructuring counsel. The responsible partner for the engagement is Colette Whitman; the billing partner is Nathaniel Bower. Calderwood & Harkness has advised the Debtors on all aspects of the restructuring, including negotiation of the RSA, preparation of

35. As a prepackaged Chapter 11 case, the Plan was solicited prior to the filing of the Chapter 11 petitions. The prepetition solicitation was conducted in accordance with applicable non-bankruptcy law and the requirements of Section 1126(b) of the Bankruptcy Code. All holders of claims in impaired classes entitled to vote on the Plan received a solicitation package containing, among other things, the Disclosure Stat

36. Following the filing of the Chapter 11 petitions, the Debtors commenced a post-petition tabulation and solicitation confirmation process beginning on July 19, 2022, to confirm the validity of the prepetition solicitation and to accept any additional votes. The voting deadline was August 3, 2022.

37. All votes were tabulated by Pinnacle Claims Administration LLC, the Debtors' court-approved claims and noticing agent. The results of the tabulation demonstrated that all impaired classes entitled to vote on the Plan voted overwhelmingly to accept the Plan, as follows:

38. As reflected in the table above, each impaired class exceeded the required thresholds under Section 1126(c) of the Bankruptcy Code, which requires acceptance by holders representing at least two-thirds in amount and more than one-half in number of the claims in each class that actually voted on the Plan. The voting results demonstrate broad creditor support for the Plan across all impaired classes. E. Disclosure

39. On August 10, 2022, the Court held a hearing on the adequacy of the Disclosure Statement (Dkt. 48) filed in support of the Plan. After considering the record and hearing argument from the parties, the Court approved the Disclosure Statement as containing "adequate information" within the meaning of Section 1125(a) of the Bankruptcy Code, sufficient to enable a hypothetical investor typical of the holders of claim

V. GOOD FAITH IN PROPOSING THE PLAN A. Arms'-Length Negotiations

40. The Plan is the product of extensive, arms'-length, good-faith negotiations among the Debtors, their equity sponsor Thornfield, the Ad Hoc Group of First Lien Lenders, and the Ad Hoc Group of Second Lien Noteholders. As noted above, the First Lien Group represents approximately 68% in principal amount of the first lien term loan and includes sophisticated institutional investors such as Blackmoor Capital Manageme

41. Each creditor constituency was represented by experienced and capable legal counsel and financial advisors throughout the negotiation process. The First Lien Group was represented by Hargrove, Mitchell & Saunders LLP, led by partner Victoria Kline. The Second Lien Group was represented by Pemberton & Locke LLP, led by partner Raymond Delvecchio. Each group also retained independent financial advisors. The Debtors

42. No party or group dominated or controlled the negotiation process. The negotiations were vigorous and, at times, contentious, reflecting the divergent economic interests of the various stakeholders. Multiple rounds of term sheet iterations were exchanged among the parties before the RSA was finalized on July 8, 2022. Significant issues were debated and resolved through compromise, including the allocation of reor

43. I personally participated in a substantial number of the negotiation sessions and can attest to the fact that the process was conducted at arms' length and in good faith by all parties. The resulting Plan reflects the product of genuine compromise and negotiation, not the imposition of terms by any single party. B. Maximization of Value

44. The Plan was proposed with the legitimate purpose of reorganizing the Debtors' business as a going concern, preserving the going-concern value of the Debtors' estates, maintaining employment for the Debtors' approximately 1,420 employees across four manufacturing facilities, and maximizing recoveries for all classes of creditors. The Debtors' primary objectives throughout the restructuring process have been to em

45. In formulating the Plan, the Debtors, with the assistance of Aldersgate and Calderwood & Harkness, carefully considered all available restructuring alternatives, including: (a) An out-of-court amendment or forbearance extension, under which the Debtors would seek to negotiate amended terms with their lenders outside of the bankruptcy process. This alternative was determined to be impracticable given the magnitude

46. After careful evaluation, the Debtors concluded that the prepackaged Chapter 11 approach best served the interests of all stakeholders by minimizing the time in bankruptcy, preserving going-concern value, and achieving a comprehensive deleveraging of the Debtors' balance sheet through a consensual process.

47. No improper purpose underlies the Plan. The Plan was not proposed to manipulate the bankruptcy process, to prefer any particular creditor constituency over others in a manner inconsistent with their legal rights, or to achieve any objective other than the successful reorganization of the Debtors' business. C. Compliance with Applicable Law

48. Based on my review of the Plan and upon the advice of the Debtors' legal counsel, I believe the Plan complies in all respects with the requirements of Section 1129(a)(3) of the Bankruptcy Code, which requires that a plan be "proposed in good faith and not by any means forbidden by law."

49. Throughout these Chapter 11 cases, the Debtors have acted in good faith and in the best interests of their estates. The Debtors have cooperated fully with the Office of the United States Trustee (the "U.S. Trustee") and all parties in interest, have complied with all reporting requirements, and have operated their business in a responsible and transparent manner.

VI. BUSINESS JUDGMENT AND PLAN ECONOMICS A. Plan Treatment Summary

50. The Plan provides for the following treatment of claims and interests, organized by class: Class 1 — Other Priority Claims: Holders of allowed Other Priority Claims will be paid in full in cash on the Effective Date or as soon as reasonably practicable thereafter. Estimated recovery: 100%. Class 2 — First Lien Secured Claims ($191.3 million): Class 2 consists of the claims of holders of obligations under the Firs

51. The Debtors' board of managers, with the advice and counsel of Calderwood & Harkness LLP and Aldersgate Advisory Group LLC, exercised sound business judgment in determining that the Plan represents the best available outcome for the Debtors' estates and all stakeholders. The Plan was the product of months of analysis, negotiation, and deliberation, and reflects the informed judgment of the Debtors' management and

52. The allocation of value among classes under the Plan reflects the relative priorities established by the Debtors' capital structure and applicable law. The First Lien Secured Claims in Class 2, which hold a first-priority lien on substantially all assets of the Debtors, receive the largest share of reorganized equity and the take-back debt. The Second Lien Secured Claims in Class 3, which hold a subordinate lien

53. The treatment of general unsecured creditors in Class 4, while modest at approximately 10.1%, represents a consensual allocation that exceeds what would be required under the absolute priority rule, under which general unsecured creditors would receive nothing given that the senior secured creditors are not receiving full recoveries on their claims. This consensual "gift" to general unsecured creditors reflects t

54. The Plan provides for the establishment of a management incentive plan (the "MIP"), which reserves 10% of the reorganized equity of Crestline for post-Effective Date issuance to key members of the Debtors' management team. The MIP was a central element of the Plan negotiations and is designed to align the interests of management with those of the reorganized Debtors' equity holders and to provide competitive rete