CALDERWOOD & HARKNESS LLP Attorneys at Law
1251 Avenue of the Americas, 40th Floor New York, NY 10020
Telephone: (212) 455-7800 Facsimile: (212) 455-7801 www.calderwoodharkness.com
February 8, 2021
VIA ELECTRONIC MAIL AND U.S. MAIL
Raymond Cho, Esq. General Counsel Crestline Packaging Solutions LLC 4510 Harshman Road Dayton, OH 45424
Re: Engagement of Calderwood & Harkness LLP as Borrower's Counsel — $20,000,000 Mezzanine Financing from Ironwood Capital Finance LLC C&H Matter No. 1006-00001
Dear Mr. Cho:
1. Purpose and Engagement
Calderwood & Harkness LLP (the "Firm" or "Calderwood & Harkness" or "we") is pleased to confirm its engagement by Crestline Packaging Solutions LLC ("Crestline" or the "Company"), an Ohio limited liability company, to serve as borrower's counsel in connection with the proposed $20,000,000 subordinated secured mezzanine term loan financing (the "Mezzanine Financing") from Ironwood Capital Finance LLC ("Ironwood"), a Delaware limited liability company. This letter (this "Engagement Letter") sets forth the terms and conditions upon which the Firm will undertake this representation. We ask that you review these terms carefully and, if they are acceptable, execute this Engagement Letter in the space provided below and return an executed copy to us so that we may proceed with the engagement.
We note that this engagement represents the Firm's first financing engagement for the Company. We are very much looking forward to building a productive and lasting relationship with Crestline and its stakeholders, and we are confident that our Banking & Finance Group's extensive experience in subordinated debt and mezzanine financings will serve the Company well as it pursues this important transaction.
2. Scope of Representation
Calderwood & Harkness will represent Crestline as borrower's counsel in negotiating, documenting, and closing the Mezzanine Financing. The Firm's scope of representation shall include, without limitation, the following:
(a) Review and negotiation of the term sheet with Ironwood (and Ironwood's counsel, Whitfield & Rao LLP), including advising the Company on the legal implications of the material economic and structural terms set forth therein;
(b) Drafting and/or negotiation of the Mezzanine Credit Agreement providing for a $20,000,000 subordinated secured mezzanine term loan (the "Mezzanine Credit Agreement"), including the representations, warranties, covenants, events of default, and other operative provisions contained therein;
(c) Drafting and negotiation of ancillary loan documentation, including, without limitation, the following: (i) the promissory note evidencing the Mezzanine Financing, (ii) the security agreement (second lien) granting Ironwood a second-priority security interest in substantially all of the assets of the Company, (iii) the pledge agreement covering the membership interests in any subsidiaries of the Company, and (iv) the warrant agreement and any related equity documentation;
(d) Negotiation of the Intercreditor Agreement (the "Intercreditor Agreement") among Pinnacle Commercial Bank, N.A. ("Pinnacle"), in its capacity as Senior Agent under the existing Senior Credit Agreement dated September 12, 2019 (the "Senior Credit Agreement"), Ironwood, in its capacity as Mezzanine Lender, and Crestline, in its capacity as Borrower, including coordination with Pinnacle's outside counsel, Tavrenis & Lennox LLP;
(e) Coordination of the Pinnacle consent process relating to the incurrence of the mezzanine indebtedness and the granting of second-priority liens on the Company's assets in favor of Ironwood, including review and negotiation of any amendment, consent, or waiver to the Senior Credit Agreement that may be required to permit the Mezzanine Financing;
(f) Preparation of the borrower's counsel legal opinion letter (including enforceability, due authorization, no conflicts, and other customary opinions) to be delivered to Ironwood and its counsel at the closing of the Mezzanine Financing;
(g) Preparation of officer's certificates, secretary's certificates, incumbency certificates, resolutions of the members and/or managers of the Company, and other closing deliverables customarily required in a transaction of this nature;
(h) Coordination of UCC financing statement filings (UCC-1 initial financing statements and any amendments thereto) with the Ohio Secretary of State, and coordination of real property mortgage recording with the Montgomery County, Ohio Recorder's Office, in each case to perfect Ironwood's second-priority security interests in the Company's assets; and
(i) Assistance with post-closing deliverables and obligations, including perfection certificate updates, insurance endorsement coordination, and delivery of any items required to be delivered after the closing date pursuant to the terms of the Mezzanine Credit Agreement.
For context, the Firm understands that the proceeds of the Mezzanine Financing will be used to fund capital expenditures related to the expansion of the Company's Dayton, Ohio manufacturing facility, specifically the addition of an approximately 62,000 square foot coating line and packaging automation system (the "Expansion Project"). The total estimated project cost is approximately $28,500,000, of which $20,000,000 will be funded through the Mezzanine Financing and $8,500,000 will be funded through an equity co-investment from Ridgeway Capital Partners Fund III, L.P. ("Ridgeway" or the "Sponsor"). The Firm's understanding of the transaction structure and use of proceeds may be refined as the engagement progresses and additional information becomes available.
3. Limitations on Scope
The engagement described in this Engagement Letter is limited to the specific transaction described above — namely, the Mezzanine Financing from Ironwood. The Firm is not being engaged to provide general corporate, tax, regulatory, environmental, real estate (other than the preparation and recording of mortgage documentation as described in Section 2 above), intellectual property, employment, benefits, litigation, or any other legal services unless separately agreed in writing by the parties. To the extent the Company requires advice in any of these areas in connection with the Mezzanine Financing or otherwise, we would be happy to discuss expanding the scope of our engagement or coordinating with the Company's other advisors as appropriate.
The Firm does not represent Ridgeway Capital Partners Fund III, L.P. or any of its affiliates (including Ridgeway Capital Management III LLC and any related general partner or management entities), Ironwood Capital Finance LLC, Pinnacle Commercial Bank, N.A., or any other party to the Mezzanine Financing or the Intercreditor Agreement. Each such party should look to its own counsel for legal advice.
This engagement does not include representation of the Company in any future financings, amendments, waivers, workouts, restructurings, or other transactions, whether related to the Mezzanine Financing or otherwise. Any such future representation would require the execution of a separate engagement letter or an amendment to this Engagement Letter agreed upon in writing by both parties.
4. Engagement Team
The following attorneys will comprise the primary engagement team for this matter:
Philip Hartmann — Responsible Partner, Banking & Finance Group. Mr. Hartmann will serve as the responsible partner overseeing all aspects of the engagement. He will serve as the primary relationship partner for the Company and will be available to address strategic and substantive issues as they arise throughout the transaction. Mr. Hartmann has over twenty-five years of experience representing borrowers, lenders, and sponsors in leveraged financing transactions and is well-positioned to guide the Company through the Mezzanine Financing process.
Claudia Merritt — Billing Partner, Banking & Finance Group. Ms. Merritt will serve as the billing partner for this engagement and will be responsible for the preparation and review of all invoices submitted to the Company. In addition to her billing responsibilities, Ms. Merritt will be available for substantive work on the transaction as needed, particularly with respect to the negotiation of the Intercreditor Agreement and coordination of the Pinnacle consent process.
Lisa Morrow — Lead Associate, Banking & Finance Group. Ms. Morrow will serve as the lead associate on the engagement and will be responsible for the day-to-day management of the transaction, including the drafting and negotiation of the Mezzanine Credit Agreement and ancillary documentation, coordination with opposing counsel and other parties, and management of the closing process and closing logistics.
Marcus Leung — Working Associate, Banking & Finance Group. Mr. Leung will support the transaction team with document preparation, due diligence review, preparation of closing checklists and signature pages, and coordination of post-closing deliverables.
Additional attorneys, paralegals, or other professional staff may be assigned to the engagement as necessary to ensure the efficient and timely completion of the work. The Company will be informed of any material additions to the engagement team. The Firm endeavors to staff its matters in a manner that is both cost-effective and responsive to the needs of its clients.
5. Billing Rates and Fee Arrangements
The Firm will charge for its professional services on an hourly basis at the following standard rates, which are current as of January 1, 2021:
Rates for any other attorneys, paralegals, or professional staff who may perform work on this matter will be at their then-current standard hourly rates. Paralegal rates currently range from $275 to $375 per hour. The Firm will make available upon request a schedule of current rates for any additional timekeepers assigned to the engagement.
The Firm's hourly rates are subject to periodic adjustment, typically on an annual basis effective January 1 of each year. The Company will be notified in advance of any such adjustments, which generally reflect increases in the cost of providing legal services and are consistent with market practice among firms of similar size and standing.
In addition to professional fees, the Firm will charge for reasonable out-of-pocket disbursements incurred in connection with the engagement. Such disbursements may include, without limitation: (i) filing fees associated with UCC financing statements and amendments filed with the Ohio Secretary of State; (ii) mortgage recording fees and documentary stamp taxes, if applicable, payable to the Montgomery County, Ohio Recorder's Office; (iii) overnight courier and delivery charges; (iv) long-distance telephone and teleconference charges; (v) travel expenses (transportation, lodging, and meals) incurred in connection with the engagement, including travel to Dayton, Ohio if required for closing or other meetings; (vi) computerized legal research charges (e.g., Westmark Data Systems and Sundial Solutions); (vii) photocopying and printing charges at $0.25 per page; and (viii) similar costs and expenses. The Firm will endeavor to keep disbursements to a reasonable level and will seek the Company's prior approval before incurring any single disbursement in excess of $2,500.
The Firm does not currently anticipate the need for a retainer deposit in connection with this engagement. However, the Firm reserves the right to request a retainer if circumstances warrant, including in the event of any material delay in the payment of invoices.
6. Billing and Payment Terms
Invoices for professional fees and disbursements will be rendered on a monthly basis. Each invoice will contain a summary of the professional services rendered and disbursements incurred during the applicable billing period, together with a reasonably detailed description of the services performed by each timekeeper. All invoices are due and payable within thirty (30) days of the date of the invoice. The Firm reserves the right to charge interest on any amounts that remain unpaid more than sixty (60) days after the invoice date, at a rate of one percent (1.0%) per month, or the maximum rate permitted by applicable law, whichever is less.
Invoices will be sent to the attention of:
Raymond Cho, Esq. General Counsel Crestline Packaging Solutions LLC 4510 Harshman Road Dayton, OH 45424
Email: rcho@crestlinepackaging.com
The Company may designate an alternative billing address or contact person at any time by providing written notice to the Firm. Any billing inquiries, questions regarding invoice detail, or requests for alternative fee arrangements should be directed to Claudia Merritt at (212) 455-7834 or cmerritt@calderwoodharkness.com.
7. Client Identity
The Firm's client in this engagement is Crestline Packaging Solutions LLC. The Firm does not represent, and shall not be deemed to represent, any member, manager, officer, director, employee, or affiliate of the Company in connection with the Mezzanine Financing or otherwise, unless the Firm has been separately engaged in writing to provide such representation. Without limiting the generality of the foregoing, the Firm does not represent any of the following individuals or entities:
(a) Ridgeway Capital Partners Fund III, L.P., the Company's majority equity sponsor, which holds approximately 78% of the outstanding membership interests in the Company;
(b) Ridgeway Capital Management III LLC, the general partner or manager of Ridgeway Capital Partners Fund III, L.P.;
(c) Gerald F. Novak, Chief Executive Officer of the Company;
(d) Patricia Gallagher, Chief Financial Officer of the Company;
(e) Raymond Cho, General Counsel of the Company; or
(f) Any other individual or entity affiliated with the Company or Ridgeway.
In the course of this engagement, the Firm will communicate with the Company's management and officers, including Mr. Novak, Ms. Gallagher, and Mr. Cho, and with representatives of Ridgeway, including Jonathan Hale, Managing Partner, and Annika Westergaard, Principal and Board Observer. All such communications will be undertaken in connection with and for the benefit of the Company representation and shall not create a separate attorney-client relationship between the Firm and any such individual or entity. To the extent any individual wishes to obtain separate legal advice in connection with the Mezzanine Financing, such individual should retain his or her own independent counsel.
8. Conflicts of Interest and Waiver
Prior to accepting this engagement, the Firm conducted a conflicts check in accordance with its standard procedures and applicable rules of professional conduct. Based on that review, the Firm has not identified any current conflicts of interest that would preclude the Firm from undertaking this engagement.
The Firm is a large, full-service law firm with offices in multiple jurisdictions and represents a broad range of clients across numerous industries and practice areas. The Company acknowledges that the Firm may currently represent, or may in the future represent, other clients whose interests could potentially be adverse to Crestline in matters unrelated to the Mezzanine Financing. By executing this Engagement Letter, the Company consents to the Firm's continued representation of such other clients in matters that are not substantially related to this engagement, provided that the Firm will not represent any other party — including Ironwood, Pinnacle, or any of their respective affiliates — in this specific Mezzanine Financing transaction or in any matter that is substantially related to this engagement. This consent does not extend to any matter in which the Firm would be required to use or disclose confidential information of the Company in a manner adverse to the Company's interests.
If any actual or potential conflict of interest arises during the course of this engagement, the Firm will promptly notify the Company and will take appropriate steps to address the conflict in accordance with the New York Rules of Professional Conduct and any other applicable professional responsibility rules, including, if necessary, seeking the Company's informed written consent to continued representation or withdrawing from the engagement.
For the avoidance of doubt, the Firm confirms that it does not currently represent Ironwood Capital Finance LLC, Pinnacle Commercial Bank, N.A., Whitfield & Rao LLP, or Tavrenis & Lennox LLP in any active matter.
9. Confidentiality
The Firm will maintain the confidentiality of all information received from or on behalf of the Company in connection with this engagement, in accordance with the applicable rules of professional conduct governing the attorney-client relationship. The Firm will implement appropriate safeguards, consistent with its firm-wide information security policies, to protect confidential information from unauthorized disclosure or access.
The Firm may disclose confidential information of the Company to the extent necessary to perform the services contemplated by this engagement, including, without limitation, the delivery of legal opinion letters, officer's certificates, secretary's certificates, and other closing deliverables to third parties (e.g., Ironwood and its counsel) as required by the Mezzanine Credit Agreement and the related transaction documents. Any such disclosures will be limited to the scope and purpose contemplated by the transaction documentation.
Nothing in this Engagement Letter limits the Company's ability to disclose the Firm's legal advice to Ridgeway or to the Company's other advisors (including, without limitation, Braddock & Associates CPAs, the Company's independent auditor) as the Company deems appropriate. The Company should be aware, however, that voluntary disclosure of privileged communications to third parties may, under certain circumstances, result in a waiver of the attorney-client privilege or work product protection with respect to such communications. If the Company has any questions regarding the potential impact of such disclosures, we would be happy to discuss the matter further.
10. Document Retention
Following the completion or termination of this engagement, the Firm will retain client files in accordance with its standard document retention policies. Under the Firm's current policies, electronic files are retained indefinitely on the Firm's secure document management systems, and physical files (including original executed documents, closing binders, and hard-copy correspondence) are retained for a period of seven (7) years following the conclusion of the engagement, after which time physical files may be destroyed without further notice to the Company.
The Company may request the return of original documents at any time during or after the engagement. The Firm will comply with any such request within a reasonable period and will retain copies of returned documents for its own records. Any costs associated with retrieving, copying, or shipping physical files will be charged to the Company at the Firm's then-current rates for such services.
11. Termination
Either the Company or the Firm may terminate this engagement at any time upon written notice to the other party, subject to the Firm's ethical obligations under the applicable rules of professional conduct. In the event of termination, the Firm will take reasonable steps to protect the Company's interests during any transition period, including cooperating with successor counsel to facilitate an orderly transition of the matter.
Upon termination of this engagement, the Company will remain responsible for the payment of all professional fees and out-of-pocket disbursements incurred through the date of termination, in accordance with the billing and payment terms set forth in Sections 5 and 6 of this Engagement Letter. The Firm's obligation to maintain the confidentiality of the Company's information and the other post-termination obligations set forth herein will survive any termination of this engagement.
12. Governing Law and Dispute Resolution
This Engagement Letter will be governed by and construed in accordance with the laws of the State of New York, without regard to its conflicts of law principles. The parties agree that the attorney-client relationship established by this Engagement Letter is subject to the New York Rules of Professional Conduct as adopted by the Appellate Division of the Supreme Court of the State of New York.
Any dispute, controversy, or claim arising out of or relating to this engagement, this Engagement Letter, or the Firm's services hereunder, including any dispute regarding the amount or payment of fees or disbursements, will be resolved through binding arbitration conducted in New York, New York, in accordance with the rules of a mutually agreed arbitration body (such as the American Arbitration Association or JAMS), unless otherwise agreed in writing by both parties. Each party shall bear its own costs and attorneys' fees in connection with any such arbitration, except to the extent the arbitrator determines that an alternative allocation is warranted. The decision of the arbitrator shall be final and binding upon the parties, and judgment upon the award rendered by the arbitrator may be entered in any court of competent jurisdiction.
13. No Guarantee of Outcome
The Firm will use its best professional efforts to represent the Company's interests in the Mezzanine Financing in a competent, diligent, and timely manner. However, the Firm does not, and cannot, guarantee any particular outcome with respect to this engagement, including the successful negotiation, documentation, or closing of the Mezzanine Financing on the terms currently contemplated or on any other terms. The outcome of any transaction depends on numerous factors, many of which are outside the Firm's control, including the positions and decisions of Ironwood, Pinnacle, their respective counsel, and other parties to the transaction. The Company acknowledges that the Firm's fee is based on the professional services rendered and the time devoted to the engagement, and is not contingent upon the outcome of the Mezzanine Financing.
14. Entire Agreement and Amendments
This Engagement Letter constitutes the entire agreement between Calderwood & Harkness LLP and Crestline Packaging Solutions LLC with respect to the subject matter hereof and supersedes all prior and contemporaneous discussions, proposals, agreements, and understandings, whether written or oral, relating to the Firm's engagement in connection with the Mezzanine Financing. No representations, warranties, or commitments have been made by or on behalf of the Firm or the Company except as expressly set forth in this Engagement Letter.
Any amendments, modifications, or supplements to this Engagement Letter must be made in writing and signed by an authorized representative of each party. No waiver of any provision of this Engagement Letter shall be effective unless made in writing and signed by the party against whom enforcement of the waiver is sought.
15. Acceptance
If the foregoing terms and conditions are acceptable to the Company, we respectfully request that Mr. Cho, in his capacity as General Counsel of Crestline Packaging Solutions LLC, sign and date this Engagement Letter in the space provided below and return an executed copy to the undersigned at your earliest convenience. A duplicate original is enclosed for your records. We suggest returning the executed copy by email (in PDF format) to phartmann@calderwoodharkness.com, followed by an original via overnight delivery.
We are delighted to have the opportunity to represent Crestline in this important transaction and look forward to working with you and the entire Crestline team. If you have any questions about the terms of this Engagement Letter or about the transaction generally, please do not hesitate to contact Philip Hartmann at (212) 455-7812 or Claudia Merritt at (212) 455-7834.
We look forward to getting started.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Philip Hartmann, Partner Banking & Finance Group 1251 Avenue of the Americas, 40th Floor New York, NY 10020 Telephone: (212) 455-7812
Email: phartmann@calderwoodharkness.com
ACKNOWLEDGED AND AGREED:
CRESTLINE PACKAGING SOLUTIONS LLC
By: ________
Name: Raymond Cho
Title: General Counsel
Date: ________
Enclosure: Duplicate original of this Engagement Letter
cc: Gerald F. Novak, Chief Executive Officer, Crestline Packaging Solutions LLC cc: Patricia Gallagher, Chief Financial Officer, Crestline Packaging Solutions LLC cc: Claudia Merritt, Partner, Calderwood & Harkness LLP cc: Lisa Morrow, Associate, Calderwood & Harkness LLP
| Timekeeper | Position | Hourly Rate |
| Philip Hartmann | Partner | $1,150.00 |
| Claudia Merritt | Partner | $1,100.00 |
| Lisa Morrow | Associate | $725.00 |
| Marcus Leung | Associate | $550.00 |