Contract analysis

I. Executive Summary Calderwood & Harkness LLP has been engaged to advise Crestline Packaging Solutions LLC ("CPS" or the "Company") and its intermediate parent CPS Holdings Inc. ("CPS Holdings," and together with CPS, the "Debtors") in connection with evaluating and pursuing a comprehensive balance sheet restructuring. The purpose of this memorandum is to present and analyze the four principal restructuring alternat

1. Out-of-Court Amendment and Forbearance Extension. Negotiate a comprehensive amendment to the First Lien Credit Agreement to reset or waive the leverage ratio covenant, coupled with a parallel amendment or waiver under the Second Lien Notes Indenture, without resort to bankruptcy proceedings.

2. Prepackaged Chapter 11 Plan of Reorganization. Negotiate a restructuring support agreement ("RSA") with the key creditor constituencies prior to filing, solicit votes on a plan of reorganization before the petition date, and file Chapter 11 with the plan already accepted, seeking expedited confirmation.

3. Prearranged Chapter 11 Plan of Reorganization. Negotiate the key terms of a restructuring with creditor constituencies pre-petition (through an RSA or term sheet), but solicit votes on the plan post-petition after court approval of the disclosure statement.

4. Traditional ("Freefall") Chapter 11 Filing. File Chapter 11 without a pre-negotiated plan or RSA, and develop, negotiate, and solicit the plan of reorganization entirely during the Chapter 11 case. Recommendation. Based on the analysis set forth in this memorandum, Calderwood & Harkness recommends that the Company pursue a prepackaged Chapter 11 plan of reorganization (Alternative 2). A prepackaged plan offers the

II. Background and Current Financial Situation A. Company Overview Crestline Packaging Solutions LLC is an Ohio limited liability company headquartered at 4710 Industrial Corridor Drive, Akron, Ohio 44308. The Company operates in the specialty chemical packaging and industrial containment manufacturing sector, producing high-density polyethylene ("HDPE") drums, intermediate bulk containers ("IBCs"), steel pails, and

Section 7.11 of the First Lien Credit Agreement requires the Company to maintain a maximum Total Net Debt to EBITDA leverage ratio not to exceed 5.75x, tested on a quarterly basis at the end of each fiscal quarter. For the fiscal quarter ended March 31, 2022, the Company's actual leverage ratio was calculated as follows: Total Net Debt: $247.3 million Trailing Twelve-Month EBITDA: $29.1 million Actual Leverage Ratio:

III. Analysis of Restructuring Alternatives This Section presents a detailed analysis of each of the four restructuring alternatives available to the Company, assessing the advantages, disadvantages, risks, and overall feasibility of each approach. The alternatives are presented in order from least to most court-intensive. A. Alternative 1: Out-of-Court Amendment / Extended Forbearance

1. Description. Under this alternative, the Company would seek to negotiate a comprehensive amendment to the First Lien Credit Agreement with Ridgeline National Bank, N.A. and the first lien lenders to reset or permanently waive the leverage ratio covenant under Section 7.11, cure the existing event of default, and restore the Company to compliance with its credit facilities on a going-forward basis. In parallel, the

2. Advantages. An out-of-court approach, if achievable, would offer several advantages: • Avoidance of Bankruptcy Stigma. A Chapter 11 filing can create adverse perceptions among customers, suppliers, employees, and other business counterparties. An out-of-court resolution would preserve the Company's reputation and avoid the potential loss of business that can accompany a bankruptcy filing, particularly in the speci

3. Disadvantages and Risks Despite these potential advantages, an out-of-court amendment faces several significant disadvantages and risks that, in our assessment, render it not viable as a standalone path forward: Failure to Address Fundamental Over-Leverage. The most critical deficiency of an amendment-only approach is that it does not address the Company's fundamental over-leverage problem. Even with a covenant re

4. Assessment. For the reasons stated above, we do not consider an out-of-court amendment or extended forbearance to be a viable standalone path forward for the Company. The magnitude of the leverage breach (8.50x against a 5.75x covenant), the opposition of the ad hoc group of first lien lenders to an amendment-only approach, the imminent maturity of the revolving credit facility, and the absence of any mechanism to

1. Description. A prepackaged Chapter 11 plan of reorganization (a "prepack") is a restructuring transaction in which the key terms of the reorganization are negotiated and agreed upon with the principal creditor constituencies before the Chapter 11 filing, and votes on the plan of reorganization are solicited and obtained from impaired classes of claims and interests prior to the petition date. The debtor then files

2. Proposed Plan Economics Based on preliminary discussions with counsel for the ad hoc group of first lien lenders and counsel for the ad hoc group of second lien noteholders, and subject to further negotiation and the completion of Aldersgate's valuation and feasibility analyses, the anticipated recovery structure under the proposed plan of reorganization is as follows: The proposed plan contemplates a comprehensiv

3. Valuation and Liquidation Analysis Calderwood & Harkness has engaged Aldersgate Advisory Group LLC to serve as the Company's financial advisor and investment banker in connection with the restructuring. Aldersgate's lead managing director on the engagement is Priya Narayanan, based at Aldersgate's offices at 280 Park Avenue, 12th Floor, New York, New York 10017. Aldersgate's valuation and liquidation analyses are

4. DIP Financing During the Chapter 11 case, the Company will require debtor-in-possession ("DIP") financing to fund ongoing operations, working capital needs, and professional fees. The Company's existing revolving credit facility, which matures on October 13, 2022, will not be available to fund operations in the ordinary course during a Chapter 11 case absent a DIP financing arrangement. Based on preliminary discus

5. Key Material Contracts The Company is party to several material contracts that will need to be addressed in connection with the Chapter 11 case. Under Section 365 of the Bankruptcy Code, the Company (as debtor-in-possession) has the ability to assume (i.e., affirm and continue to perform) or reject (i.e., terminate) executory contracts and unexpired leases. The following contracts are anticipated to be assumed und

6. Critical Vendor Payments In connection with the first day motions filed at the commencement of the Chapter 11 case, the Company intends to seek bankruptcy court authorization to pay up to $6.8 million in prepetition claims of critical vendors. These critical vendor payments are essential to ensure the uninterrupted supply of raw materials (principally resin, steel, and other inputs), continued access to critical l

7. Professional Fees The following is a summary of the estimated professional fees anticipated in connection with the prepackaged Chapter 11 case: Calderwood & Harkness will require a prepetition retainer of $500,000, to be wired to the firm's client trust account prior to the filing. All professional fees incurred during the Chapter 11 case will be subject to bankruptcy court review and approval under Section 330 of

8. D&O Insurance The Company's directors and officers liability insurance ("D&O Insurance") is a critical component of the restructuring. Members of the Board of Managers and the Company's senior officers will need the protection of D&O coverage both during and after the Chapter 11 case, including coverage for claims arising from pre-petition conduct. The Company has obtained a "tail" D&O policy from Apex Indemnity I

9. Proposed Timeline The following is the proposed timeline for the prepackaged Chapter 11 plan of reorganization: This timeline is aggressive but achievable based on our experience with prepackaged Chapter 11 cases and the current posture of creditor negotiations. The timeline assumes that the RSA is executed on or about mid-July 2022, that pre-petition solicitation is completed within approximately two weeks, and t

10. Advantages. A prepackaged Chapter 11 plan offers the following significant advantages: Shortest Time in Bankruptcy. A prepack is the fastest form of Chapter 11 restructuring, with typical cases lasting 60 to 90 days from the petition date to the effective date. This compressed timeline minimizes the period of uncertainty for the Company's employees, customers, suppliers, and other business counterparties. By cont

11. Disadvantages and Risks A prepackaged Chapter 11 is not without risks and disadvantages, which the Board should consider: Public Disclosure and Stigma. A Chapter 11 filing is a public proceeding, and the filing itself — together with the associated court filings, schedules, and financial disclosures — will be publicly available. While a prepack minimizes the period of bankruptcy exposure, the filing may nonethele

12. Assessment. Recommended path. For the reasons set forth above, Calderwood & Harkness recommends that the Board authorize the Company to pursue a prepackaged Chapter 11 plan of reorganization as the optimal restructuring path. The prepack optimally balances speed, cost, certainty, and stakeholder recovery. It addresses the Company's fundamental over-leverage problem, resets the capital structure to a sustainable l

1. Description. A prearranged Chapter 11 plan of reorganization is structurally similar to a prepackaged plan, with one critical difference: in a prearranged case, the plan is not voted on prior to the Chapter 11 filing. Instead, the Company files the Chapter 11 case with a proposed plan and disclosure statement (or at least the key terms thereof), and solicits votes from impaired classes post-petition, after the ban

2. Advantages. A prearranged plan offers several advantages relative to a traditional freefall filing: • Pre-Filing Consensus. Like a prepack, a prearranged plan benefits from the negotiation and execution of an RSA before the filing. The Company enters Chapter 11 with the key terms of the restructuring agreed upon by the principal creditor constituencies, providing a clear roadmap for the case and reducing the risk

3. Disadvantages and Risks Despite these advantages, a prearranged plan has several significant disadvantages relative to a prepackaged plan that, in our assessment, make it a suboptimal alternative: Longer Time in Chapter 11. A prearranged case typically requires four to six months in Chapter 11, compared to two to three months for a prepack. The additional time is attributable to the post-petition solicitation proc

4. Assessment. A prearranged Chapter 11 plan is a viable restructuring alternative, but it is suboptimal relative to a prepackaged plan in the Company's circumstances. The additional time in Chapter 11 increases cost, operational risk, and uncertainty without commensurate benefit, given that the key creditor constituencies are already organized and actively engaging in negotiations. Calderwood & Harkness recommends t

1. Description. Under a traditional, or "freefall," Chapter 11 filing, the Company would file voluntary Chapter 11 petiti