1006-00002 · Crestline Packaging Solutions LLC · Petition and First Day

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UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION

In re:

CRESTLINE PACKAGING SOLUTIONS LLC, et al.,1

Debtors.

Case No. 22-51247

(Jointly Administered)

Chapter 11

DEBTORS' MOTION FOR ENTRY OF AN ORDER AUTHORIZING, BUT NOT DIRECTING, PAYMENT OF PREPETITION CLAIMS OF CRITICAL VENDORS PURSUANT TO 11 U.S.C. §§ 105(a) AND 363(b)

Crestline Packaging Solutions LLC ("CPS") and CPS Holdings Inc. (collectively, the "Debtors"), the above-captioned debtors and debtors in possession in these chapter 11 cases, hereby move (this "Motion") the Court, pursuant to sections 105(a) and 363(b) of title 11 of the United States Code, 11 U.S.C. §§ 101–1532 (the "Bankruptcy Code"), Rules 6003 and 6004 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), and Rule 9013-1 of the Local Bankruptcy Rules for the Northern District of Ohio (the "Local Rules"), for entry of an order, substantially in the form attached hereto as Exhibit A (the "Proposed Order"), authorizing, but not directing, the Debtors to pay, in the exercise of their sound business judgment, prepetition claims of certain critical vendors (the "Critical Vendors") in an aggregate amount not to exceed $6,800,000.00. In support of this Motion, the Debtors respectfully represent as follows:

I. PRELIMINARY STATEMENT

1. On June 20, 2022 (the "Petition Date"), each of the Debtors filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code with this Court, commencing these jointly administered chapter 11 cases. Since the Petition Date, the Debtors have continued to operate their businesses and manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No trustee, examiner, or official committee of unsecured creditors has been appointed in these cases as of the date hereof.

2. By this Motion, the Debtors seek authority to pay, in the ordinary course of business and in the exercise of their sound business judgment, prepetition claims of certain Critical Vendors in an aggregate amount not to exceed $6,800,000.00 (the "Critical Vendor Cap"), subject to the conditions and safeguards set forth herein.

3. The Debtors' business — the design, manufacture, testing, and distribution of high-density polyethylene ("HDPE") drums, intermediate bulk containers ("IBCs"), steel pails, and specialty containment vessels for the chemical, petrochemical, and agricultural sectors — is critically dependent on a limited number of specialized suppliers of raw materials, components, coatings, and logistics services. The Debtors' products are subject to stringent regulatory and customer-imposed certification requirements, including United Nations and United States Department of Transportation ("UN/DOT") certifications for use in the packaging, storage, and transport of hazardous materials. These certification requirements make vendor substitution a protracted, costly, and uncertain process — typically requiring ninety (90) to one hundred eighty (180) days for re-qualification of a replacement supplier.

4. The Debtors operate four manufacturing facilities across three states, which collectively employ approximately 1,420 workers and represent the productive core of the Debtors' enterprise:

(a) Plant 1 — 4710 Industrial Corridor Drive, Akron, OH 44308 (corporate headquarters and primary HDPE drum manufacturing facility; approximately 480 employees);

(b) Plant 2 — 2255 Commerce Parkway, Evansville, IN 47725 (IBC and steel pail manufacturing; approximately 390 employees);

(d) Plant 4 — 1480 State Route 59, Ravenna, OH 44266 (extrusion and secondary processing; approximately 240 employees).

5. The Debtors' raw material inputs — most prominently HDPE resin, cold-rolled and hot-rolled steel, specialty coatings and fluoropolymer linings, valves, fittings, and proprietary closure components — are sourced from a concentrated group of suppliers, many of whom are the sole or dominant source for specific grades, specifications, and formulations required by the Debtors' manufacturing processes and their customers' certification requirements. Resin alone constitutes the single largest raw material cost category, and the Debtors' primary resin supplier, Northstar Polymers Inc. of Houston, Texas, supplies approximately 65% of the Debtors' total HDPE resin requirements under a five-year Resin Supply Agreement dated March 1, 2019.

6. If Critical Vendors refuse to supply the Debtors on customary terms — or worse, cease shipments entirely — the Debtors' manufacturing operations would suffer immediate and irreparable harm. Production shutdowns at any of the four manufacturing plants would cascade through the Debtors' supply chain, result in the Debtors' inability to fulfill customer orders, trigger contract penalties, cause loss of key customer relationships, and directly threaten the employment of the approximately 1,420 individuals who depend on the Debtors' continued operations. Any such disruption would jeopardize the prepackaged plan of reorganization that the Debtors are pursuing and would erode the going-concern value of the enterprise to the detriment of all stakeholders.

7. The relief requested herein is essential to the Debtors' ability to preserve value, maintain operations, and effectuate a successful reorganization. The aggregate amount of Critical Vendor claims — $6.8 million — is modest relative to the Debtors' total funded debt of $247.3 million and the estimated reorganized enterprise value (midpoint: $195.0 million), and the Debtors' DIP budget, approved as part of the $30.0 million debtor-in-possession financing facility with Ridgeline National Bank, N.A. (interim approval on June 24, 2022), contemplates and provides adequate liquidity for Critical Vendor payments of this magnitude.

8. The Debtors' Chief Financial Officer, Dana Kowalski, provides further factual support for this Motion and the other first day motions filed by the Debtors in the Declaration of Dana Kowalski, Chief Financial Officer of Crestline Packaging Solutions LLC, in Support of the Debtors' First Day Motions (the "Kowalski Declaration"), filed contemporaneously herewith and incorporated by reference herein.

II. JURISDICTION AND VENUE

9. The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the General Order No. 2012-7 of the United States District Court for the Northern District of Ohio referring all proceedings arising under, arising in, or related to a case under title 11 to this Court.

10. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2). The Debtors confirm their consent, pursuant to Rule 7008-1 of the Local Bankruptcy Rules, to the entry of a final order by this Court in connection with this Motion to the extent that it is later determined that this Court, absent consent of the parties, cannot enter final orders or judgments in connection herewith consistent with Article III of the United States Constitution. See Wellness Int'l Network, Ltd. v. Sharif, 575 U.S. 665 (2015).

11. Venue is proper in this district pursuant to 28 U.S.C. §§ 1408 and 1409. CPS, the principal operating Debtor, has had its principal place of business, its corporate headquarters, and its domicile in this district for in excess of 180 days prior to the Petition Date.

12. The statutory predicates for the relief requested herein are sections 105(a) and 363(b) of the Bankruptcy Code.

III. BACKGROUND

A. General Background

13. Crestline Packaging Solutions LLC is an Ohio limited liability company organized under the laws of the State of Ohio and headquartered at 4710 Industrial Corridor Drive, Akron, OH 44308, federal employer identification number ("EIN") 31-1782094. CPS is the principal operating entity of the Debtors and conducts substantially all of the Debtors' manufacturing, distribution, and customer-facing business operations.

14. CPS Holdings Inc. is a Delaware corporation, EIN 82-3491657, that serves as the direct parent holding company of CPS. CPS Holdings Inc. does not conduct any independent business operations but is a co-obligor or guarantor under substantially all of the Debtors' funded indebtedness and was formed in connection with the leveraged buyout transaction described below.

15. The Debtors were acquired by Thornfield Capital Partners LP, a private equity firm headquartered in New York, New York, in a leveraged buyout that closed on October 13, 2017 (the "LBO"). The LBO valued the enterprise at $410.0 million, with Thornfield contributing approximately $163.0 million in equity capital and the balance of the purchase price funded through a combination of first lien and second lien secured debt facilities, as described more fully below.

16. Since the LBO, the Debtors have operated as a leading independent manufacturer of industrial packaging products serving the chemical, petrochemical, and agricultural sectors. The Debtors' product portfolio includes HDPE closed-head and open-head drums (ranging from 15-gallon to 55-gallon capacities), intermediate bulk containers in capacities from 275 gallons to 550 gallons, steel pails (1-gallon to 7-gallon), and specialty containment vessels designed for the storage and transport of corrosive, flammable, and otherwise hazardous chemicals.

17. The Debtors' financial performance is summarized as follows:

18. As reflected in the table above, the Debtors experienced a significant and sustained decline in financial performance from FY2020 through the first quarter of 2022, driven principally by dramatic increases in resin input costs (HDPE resin prices increased approximately 48% from January 2020 to December 2021), global supply chain disruptions arising from the COVID-19 pandemic, increased freight and logistics costs, and competitive pricing pressure that limited the Debtors' ability to fully pass through cost increases to customers. Revenue declined approximately 18% from FY2020 to FY2021, and trailing twelve-month EBITDA as of the end of Q1 2022 had fallen to $29.1 million, representing a 41% decline from FY2020 EBITDA.

B. Capital Structure and Events Leading to Filing

19. As of the Petition Date, the Debtors' total funded debt was approximately $247.3 million, consisting of the following obligations:

(a) Revolving Credit Facility: A $40.0 million senior secured revolving credit facility (the "Revolver"), of which $32.6 million was drawn as of the Petition Date, with Ridgeline National Bank, N.A. ("Ridgeline") serving as administrative agent and collateral agent for the revolving lenders, originated under that certain First Lien Credit Agreement, dated as of October 13, 2017 (as amended, the "First Lien Credit Agreement"), among CPS, as borrower, CPS Holdings Inc., as parent guarantor, Ridgeline, as administrative agent, and the lenders from time to time party thereto.

(b) First Lien Term Loan: A $158.7 million senior secured first lien term loan (the "First Lien Term Loan" and, together with the Revolver, the "First Lien Facilities"), also originated under the First Lien Credit Agreement, with Ridgeline as administrative agent. The First Lien Term Loan bears interest at LIBOR plus 4.50%, with a LIBOR floor of 1.00%, and matures on October 13, 2024.

(c) Second Lien Notes: $56.0 million in aggregate principal amount of 9.75% Senior Secured Second Lien Notes due October 13, 2025 (the "Second Lien Notes"), issued under that certain Indenture, dated as of October 13, 2017 (the "Second Lien Indenture"), among CPS, as issuer, CPS Holdings Inc., as parent guarantor, and Continental Fiduciary Trust Company, as indenture trustee and collateral agent.

20. All of the Debtors' funded indebtedness is secured by liens on substantially all of the Debtors' assets, with the First Lien Facilities holding first priority liens and the Second Lien Notes holding second priority liens, subject to the terms of that certain Intercreditor Agreement, dated as of October 13, 2017, between Ridgeline (as first lien collateral agent) and Continental Fiduciary Trust Company (as second lien collateral agent).

21. In the first quarter of fiscal year 2022, the Debtors breached the maximum total net leverage ratio covenant set forth in Section 7.11 of the First Lien Credit Agreement. The First Lien Credit Agreement required the Debtors to maintain a Total Net Leverage Ratio (defined as Total Net Debt divided by Consolidated EBITDA, each as defined therein) not to exceed 5.75 to 1.00. As of the end of Q1 2022, the Debtors' actual Total Net Leverage Ratio was approximately 8.50 to 1.00 (Total Net Debt of $247.3 million divided by TTM Consolidated EBITDA of $29.1 million), exceeding the maximum permitted ratio by approximately 2.75 turns, or 47.8%.

22. On April 22, 2022, Ridgeline, acting in its capacity as administrative agent under the First Lien Credit Agreement, delivered a formal Notice of Default (the "Notice of Default") to the Debtors, declaring the occurrence of an Event of Default under Section 8.01(d) of the First Lien Credit Agreement as a result of the covenant breach described above. The Notice of Default further reserved Ridgeline's and the first lien lenders' rights and remedies under the First Lien Credit Agreement, including the right to accelerate the outstanding indebtedness, terminate further commitments under the Revolver, and exercise remedies against the collateral.

23. The delivery of the Notice of Default triggered cross-default provisions under Section 6.01(e) of the Second Lien Indenture, constituting an Event of Default under the Second Lien Indenture and affording the indenture trustee and the holders of the Second Lien Notes the right to accelerate the obligations thereunder.

24. Following the delivery of the Notice of Default, the Debtors engaged in intensive negotiations with their key creditor constituencies. On May 18, 2022, the Debtors entered into a Forbearance Agreement (the "Forbearance Agreement") with consenting first lien lenders holding approximately 68% of the outstanding principal amount of the First Lien Term Loan, pursuant to which such lenders agreed to forbear from exercising remedies in connection with the identified Events of Default for a period expiring on the earlier of (i) July 31, 2022, or (ii) the occurrence of certain termination events specified therein. The Forbearance Agreement required the Debtors, inter alia, to commence chapter 11 cases no later than June 30, 2022, and to file a prepackaged plan of reorganization within thirty (30) days of the Petition Date.

25. The Debtors are pursuing a prepackaged Chapter 11 plan of reorganization (the "Plan") supported by the Restructuring Support Agreement (the "RSA"), the execution of which by the requisite parties is anticipated on or about July 8, 2022. The RSA was negotiated and substantially agreed in all material respects prior to the Petition Date among the Debtors, Thornfield Capital Partners LP (the Debtors' equity sponsor), an ad hoc group of first lien lenders holding approximately 72% of the First Lien Term Loan (the "Ad Hoc Group of First Lien Lenders"), and an ad hoc group of second lien noteholders holding approximately 61% of the outstanding Second Lien Notes (the "Ad Hoc Group of Second Lien Noteholders"). The Plan contemplates, inter alia, a deleveraging transaction that will reduce the Debtors' total funded debt from $247.3 million to approximately $120.0 million and provide the Debtors with the capital structure and liquidity necessary to operate as a going concern.

C. The Debtors' Supply Chain and Manufacturing Operations

26. The Debtors' manufacturing operations at the four plants described above require a continuous and uninterrupted supply of raw materials, components, coatings, and services from a concentrated group of specialized suppliers. The principal categories of raw materials and inputs include:

(a) High-density polyethylene (HDPE) resin — the primary raw material for HDPE drum and IBC production at Plants 1, 2, and 4, procured predominantly from Northstar Polymers Inc. pursuant to the Resin Supply Agreement described below;

(b) Cold-rolled and hot-rolled steel — used in the manufacture of steel pails at Plant 2 (Evansville) and in the fabrication of certain specialty containment vessels at Plant 3 (Baton Rouge);

(c) Specialty coatings, phenolic linings, and fluoropolymer treatments — applied to the interior surfaces of drums, pails, and containment vessels to provide chemical resistance required by customers and mandated by certification standards;

(d) Valves, fittings, gaskets, and closure components — many of which are proprietary or customer-specified and require individual certification for use in UN/DOT-rated packaging;

(e) Packaging components and labeling materials — including shrink wrap, pallets, and compliance labeling;

(f) Maintenance, repair, and operations ("MRO") parts and supplies — critical replacement parts for extrusion lines, blow-molding equipment, welding systems, and other specialized manufacturing equipment; and

(g) Logistics and transportation services — including both inbound raw material delivery and outbound finished goods distribution, with particular reliance on certified hazardous materials ("hazmat") carriers.

27. Resin is the Debtors' single largest raw material cost, accounting for approximately 38% of total cost of goods sold in FY2021. The Debtors' primary resin supplier is Northstar Polymers Inc. ("Northstar"), headquartered in Houston, Texas, which supplies HDPE resin to the Debtors pursuant to a five-year Resin Supply Agreement dated March 1, 2019 (the "Resin Supply Agreement"). Under the Resin Supply Agreement, Northstar supplies specified grades and melt flow indices of HDPE resin that have been qualified and certified for use in the Debtors' drum and IBC manufacturing processes. Any disruption in the supply of Northstar resin would immediately halt HDPE drum production at Plant 1 (Akron) and extrusion operations at Plant 4 (Ravenna), and would materially impair IBC production at Plant 2 (Evansville).

28. The specialty chemical packaging industry imposes exacting regulatory and customer-certification standards. All of the Debtors' drums, IBCs, and containment vessels used for the packaging, transport, and storage of hazardous materials must carry UN/DOT performance certifications, which are obtained through rigorous testing protocols conducted by accredited third-party testing laboratories. These certifications are specific to the combination of container design, raw material specification, and manufacturing process employed. Consequently, a change in any material input — including a change to a different grade of resin from a different supplier — necessitates complete re-testing and re-certification of the affected product line. Based on the Debtors' experience, this re-qualification process typically requires ninety (90) to one hundred eighty (180) days, during which time the Debtors would be unable to produce and sell the affected products.

29. In the weeks preceding the Petition Date, as the Debtors' financial difficulties became more widely known in the market, certain vendors expressed concern about the Debtors' ability to pay for ongoing purchases. At least six (6) vendors contacted the Debtors' procurement department to request cash-on-delivery terms, and three (3) vendors indicated that they would cease shipments entirely absent assurance of payment of outstanding prepetition balances. These communications underscore the urgency of the relief requested herein and the real and immediate risk that supply chain disruptions will materially harm the Debtors' operations and the value of their estates.

IV. THE CRITICAL VENDORS

A. Identification and Selection Criteria

30. The Debtors, with the assistance of their financial advisor, Aldersgate Advisory Group LLC ("Aldersgate") (lead managing director: Priya Narayanan), and debtor's counsel, Calderwood & Harkness LLP ("Sterling"), have undertaken a thorough and comprehensive review of the Debtors' entire vendor base — consisting of approximately 740 active vendors — to identify those suppliers whose continued provision of goods and services on customary trade terms is essential to the Debtors' ongoing operations and, ultimately, to the success of the Debtors' reorganization. This review involved detailed analysis of the Debtors' accounts payable records, purchase order data, vendor contracts, certification documentation, and supply chain relationships, supplemented by extensive interviews with the Debtors' plant managers, procurement personnel, and senior management.

31. In conducting this analysis, the Debtors, Aldersgate, and Sterling applied the following criteria to identify vendors that qualify as Critical Vendors:

(a) Sole-Source or Limited-Source Status: Whether the vendor is the sole source or one of a very limited number of sources for a raw material, component, or service that is necessary for the Debtors' manufacturing operations. Vendors that are the only qualified supplier for a particular specification, grade, or formulation received the highest priority.

(b) Availability and Cost of Replacement: Whether alternative vendors exist that could supply the same or equivalent goods or services and, if so, the time and cost required to identify, qualify, test, and transition to such replacement vendors. As described above, the UN/DOT certification requirements applicable to the Debtors' products make vendor substitution particularly difficult and time-consuming, with re-qualification timelines of ninety (90) to one hundred eighty (180) days being typical.

(c) Vendor Leverage: Whether the vendor has the practical ability and economic incentive to refuse to deal with the Debtors on customary trade terms. Vendors that have already communicated concerns about the Debtors' creditworthiness, that have contractual rights to demand modified payment terms upon a credit event, or that are not economically dependent on the Debtors' business (such that the loss of the Debtors as a customer would not significantly affect the vendor) received heightened attention.

(d) Operational Impact of Disruption: Whether a disruption in supply from the vendor would cause a disproportionate impact on the Debtors' ability to operate one or more of their four manufacturing plants, fulfill customer orders, or maintain certifications and regulatory compliance. A vendor whose products are integrated into multiple product lines or are required at multiple plant locations is inherently more critical than a vendor serving only a single, non-essential application.

(e) Cost-Benefit Analysis: The magnitude of the vendor's prepetition claim relative to the cost of operational disruption that would result from the vendor's refusal to supply. In each case, the Debtors determined that the cost of paying the vendor's prepetition claim is substantially less than the harm that would result from the loss of the vendor's supply.

32. Based on the application of these criteria, the Debtors have identified approximately thirty-five (35) to forty (40) vendors that meet the definition of Critical Vendors. The Debtors recognize that the identification of Critical Vendors necessarily involves the exercise of business judgment and requires ongoing assessment as conditions evolve during the chapter 11 cases. The Debtors reserve the right to add or remove vendors from the Critical Vendor list as circumstances warrant, subject to the aggregate Critical Vendor Cap of $6.8 million.

B. Categories of Critical Vendors

33. The identified Critical Vendors generally fall into the following categories:

34. Resin and Polymer Suppliers. This category includes Northstar Polymers Inc. — the Debtors' primary HDPE resin supplier under the Resin Supply Agreement — as well as secondary resin suppliers that provide specialty polymer blends, regrind material, and color concentrates used in the Debtors' manufacturing processes. Resin constitutes the single largest material cost input for the Debtors' HDPE drum and IBC production lines at Plants 1, 2, and 4. Northstar is the sole qualified supplier for the specific grades and melt flow indices of HDPE resin used in the Debtors' 55-gallon closed-head drum line, which accounts for approximately 42% of total revenue. A disruption in Northstar's supply would immediately halt production at Plants 1 and 4 and materially impair production at Plant 2. Qualifying an alternative resin supplier for these products would require a minimum of 120 days, inclusive of material testing, prototype production, and third-party UN/DOT certification testing.

35. Steel and Metal Suppliers. This category includes suppliers of cold-rolled and hot-rolled steel for steel pail manufacturing at Plant 2 (Evansville) and for certain specialty containment vessel fabrication at Plant 3 (Baton Rouge). The Debtors require specific grades and thicknesses of steel that are produced by a limited number of domestic mills. The Debtors have historically sourced steel from two primary suppliers, both of whom have been qualified under the Debtors' quality management system and whose material specifications are incorporated into the Debtors' UN/DOT-certified designs. Transitioning to an alternative steel supplier would require re-testing and re-certification of affected product lines, with an estimated timeline of approximately 90 to 120 days.

36. Specialty Coatings, Linings, and Chemical Suppliers. This category includes providers of interior coatings, phenolic linings, epoxy formulations, and fluoropolymer treatments that are applied to the Debtors' drums, pails, and containment vessels to provide chemical resistance. These coatings and linings are essential for the Debtors' products to meet the chemical compatibility requirements of their customers and to maintain UN/DOT certifications. The formulations are highly specialized, and in certain cases, the coating supplier is the sole manufacturer of the specific formulation used in the Debtors' certified product designs. Substituting an alternative coating or lining product would require extensive compatibility testing, customer re-approval, and re-certification — a process that can take 120 to 180 days or longer.

37. Valves, Fittings, and Component Suppliers. This category includes suppliers of closures, valves, gaskets, fittings, and other components used in the assembly of IBCs and specialty containment vessels. Many of these components are proprietary to the supplier or are manufactured to the Debtors' custom specifications. Certain valve and fitting assemblies are individually certified and serialized for traceability purposes. Replacing these suppliers would require not only the identification and qualification of alternative manufacturers but also potential redesign of the Debtors' products to accommodate different component specifications, followed by re-certification.

38. Logistics and Transportation Providers. This category includes freight carriers and specialized hazmat transportation companies that are essential to the Debtors' operations. These carriers transport raw materials to the Debtors' four manufacturing plants and deliver finished products to customers located throughout the United States and Canada. Certain of these carriers hold specialized DOT hazardous materials transportation certifications and have been specifically approved by the Debtors' customers for the transport of filled containers of hazardous chemicals. The market for certified hazmat carriers is characterized by limited capacity and high demand, and the loss of even a single qualified carrier could materially disrupt the Debtors' inbound supply chain and outbound distribution capabilities.

39. Maintenance, Repair, and Operations (MRO) Suppliers. This category includes providers of critical replacement parts, tooling, and consumables for the Debtors' extrusion lines, blow-molding equipment, welding systems, and other specialized manufacturing equipment. The Debtors' manufacturing equipment includes proprietary and custom-built machinery for which replacement parts are available only from the original equipment manufacturer or a small number of authorized distributors. Equipment downtime resulting from the unavailability of replacement parts directly halts production, with each day of downtime at Plant 1 (Akron) alone estimated to result in approximately $380,000 in lost production and revenue.

C. Aggregate Amount of Critical Vendor Claims

40. Based on the Debtors' review, the aggregate prepetition claims of all identified Critical Vendors is estimated at approximately $6,800,000.00. This amount represents prepetition balances owed to the approximately thirty-five (35) to forty (40) vendors identified as meeting the Critical Vendor criteria described above.

41. The Debtors seek authority to pay Critical Vendor claims in an aggregate amount not to exceed $6,800,000.00 (the "Critical Vendor Cap"), subject to the exercise of the Debtors' sound business judgment. The Debtors do not intend to pay the full prepetition balance of every identified Critical Vendor in every instance. Rather, the Debtors seek the flexibility to negotiate with individual Critical Vendors and to make payments in such amounts and at such times as the Debtors determine, in the exercise of their business judgment, are necessary to maintain the continued supply of essential goods and services.

42. As a condition of receiving any Critical Vendor payment, each Critical Vendor will be required to agree in writing to continue supplying the Debtors with goods and/or services on trade terms at least as favorable as those in effect between such vendor and the Debtors during the twelve (12) months prior to the Petition Date, including with respect to credit terms, pricing, availability, service levels, and other customary terms of dealing (the "Customary Trade Terms Requirement"). The Customary Trade Terms Requirement ensures that the estate receives fair value in exchange for each Critical Vendor payment and that the payment achieves its intended purpose of maintaining uninterrupted supply.

V. RELIEF REQUESTED

43. The Debtors respectfully request that the Court enter an order, substantially in the form of the Proposed Order attached hereto as Exhibit A:

(a) authorizing, but not directing, the Debtors, in the exercise of their sound business judgment, to pay prepetition claims of Critical Vendors in an aggregate amount not to exceed $6,800,000.00, subject to the Customary Trade Terms Requirement;

(b) authorizing and directing Ridgeline National Bank, N.A. and any other applicable banks and financial institutions to receive, process, honor, and pay all checks, wire transfers, automated clearing house ("ACH") payments, and other payment instruments issued by the Debtors in connection with the authorized Critical Vendor payments, whether presented before or after the Petition Date, provided such payments are consistent with the Proposed Order; and

VI. BASIS FOR RELIEF

A. The "Doctrine of Necessity" and Section 105(a)

44. Section 105(a) of the Bankruptcy Code provides that "[t]he court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title." 11 U.S.C. § 105(a). This provision vests the bankruptcy court with broad equitable powers to fashion relief necessary to preserve the debtor's estate and facilitate the goals of chapter 11 reorganization.

45. Courts in the Sixth Circuit and throughout the country have recognized the "doctrine of necessity" — sometimes referred to as the "necessity of payment" doctrine or the "critical vendor" doctrine — which permits a debtor in possession to pay prepetition claims where such payment is essential to the continued operation of the debtor's business and, ultimately, to the preservation of value for the benefit of all creditors. The doctrine is rooted in the equitable powers of the bankruptcy court and finds its modern statutory basis in section 105(a) of the Bankruptcy Code, read in conjunction with section 363(b).

46. The doctrine of necessity traces its origins to the nineteenth-century equity receivership cases, in which courts authorized receivers to pay pre-receivership obligations to parties whose continued cooperation was essential to the operation of the business. See Miltenberger v. Logansport, Crawfordsville & Southwestern Railway Co., 106 U.S. 286 (1882) (authorizing receiver to pay pre-receivership claims of connecting carriers where such payment was necessary to maintain the railroad's traffic and revenue); Fosdick v. Schall, 99 U.S. 235, 252 (1878) (recognizing the equitable power of the court to authorize payment of pre-receivership claims where necessary to preserve the going-concern value of the business for the benefit of all stakeholders). These principles have been carried forward into modern Chapter 11 practice and have been applied with particular frequency in the context of critical vendor motions.

47. Courts applying the doctrine of necessity in the critical vendor context generally require a showing that: (i) the vendor's goods or services are essential to the debtor's continued operations; (ii) the vendor will refuse to continue dealing with the debtor absent payment of its prepetition claim; (iii) no adequate alternative source of the goods or services exists, or no such source can be secured within a timeframe that avoids material harm to the debtor's operations; and (iv) the cost to the estate of paying the prepetition claim is less than the cost that the estate would bear if the vendor ceased doing business with the debtor. See, e.g., In re Just for Feet, Inc., 242 B.R. 821, 825–26 (D. Del. 1999); In re CoServ, L.L.C., 273 B.R. 487, 497 (Bankr. N.D. Tex. 2002); In re Lehigh & New England Railway Co., 657 F.2d 570, 581–82 (3d Cir. 1981) (applying the doctrine of necessity under section 105(a) and recognizing its roots in the equity receivership tradition).

48. In the Sixth Circuit, the doctrine of necessity has been recognized and applied by bankruptcy courts in this district and others. See, e.g., In re Quality Stores, Inc., No. 01-03116, 2001 WL 36237846 (Bankr. W.D. Mich. Oct. 3, 2001) (authorizing payment of critical vendor claims under the doctrine of necessity where debtor demonstrated that vendors were essential and irreplaceable); In re UAL Corp., No. 02-48191 (Bankr. N.D. Ill. Dec. 11, 2002) (authorizing critical vendor payments under sections 105(a) and 363(b) with appropriate safeguards). Courts have consistently held that the doctrine of necessity provides an appropriate basis for authorizing the payment of critical vendor claims, provided that the debtor demonstrates that the payment is in the best interest of the estate as a whole.

49. As set forth in detail above and in the Kowalski Declaration, the Debtors have satisfied each of the elements required for application of the doctrine of necessity:

(a) Essential Goods and Services. The Critical Vendors supply raw materials, components, coatings, services, and logistics that are indispensable to the Debtors' manufacturing operations at all four plants. Without these inputs, the Debtors cannot produce their products.

(b) Risk of Refusal to Deal. Several Critical Vendors have already communicated that they will require cash-on-delivery terms or will cease shipments absent payment of prepetition balances. The filing of the chapter 11 cases will only heighten these concerns.

(c) No Adequate Alternatives. For the reasons detailed above — including the concentration of the Debtors' supply base, the proprietary and specification-driven nature of many inputs, and the 90-to-180-day re-qualification period necessitated by UN/DOT certification requirements — the Debtors cannot quickly or feasibly replace the Critical Vendors.

(d) Cost-Benefit Justification. The aggregate Critical Vendor claims of $6.8 million are far less than the losses that the Debtors' estates would sustain if even one or two major vendors ceased supply. As noted above, each day of downtime at Plant 1 alone is estimated to result in approximately $380,000 in lost production and revenue. A one-week shutdown at Plant 1 would cost the estates approximately $2.66 million — roughly 39% of the entire Critical Vendor Cap — and that figure does not account for consequential damages, customer penalties, loss of customer relationships, or the cascade effect on the other plants.

B. Section 363(b) — Sound Business Judgment

50. Section 363(b)(1) of the Bankruptcy Code provides that "[t]he trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate." 11 U.S.C. § 363(b)(1). Courts review transactions proposed under section 363(b) under the business judgment standard, which requires the debtor to show that the proposed action represents a sound exercise of business judgment and is in the best interest of the estate. See In re abbottsotts Dairies of Pa., Inc., 788 F.2d 143, 147 (3d Cir. 1986); In re Lionel Corp., 722 F.2d 1063, 1071 (2d Cir. 1983) (holding that the debtor must articulate "some business justification, other than appeasement of major creditors," for a proposed use of estate property under section 363(b)).

51. Under the business judgment standard, courts will defer to the debtor's decision so long as it is made in good faith, is based upon adequate information, and reflects a reasonable exercise of the debtor's judgment. See In re Schipper, 933 F.2d 513, 515 (7th Cir. 1991); In re Trans World Airlines, Inc., 322 F.3d 283, 292 (3d Cir. 2003). The standard is not one of perfection but of reasonableness; a debtor need not demonstrate that the proposed course of action is the only possible course or even the best possible course, but only that it falls within the range of reasonable business judgments.

52. The Debtors' decision to pay Critical Vendor claims in an aggregate amount not exceeding $6,800,000.00 is a sound exercise of business judgment. The cost of these payments is far outweighed by the catastrophic harm that would result from the shutdown or material disruption of any of the Debtors' four manufacturing plants. The four plants collectively employ approximately 1,420 workers and generated $312.6 million in revenue in FY2021 and $297.4 million in trailing twelve-month revenue as of Q1 2022. The $6.8 million Critical Vendor Cap represents approximately 2.2% of trailing twelve-month revenue and approximately 2.7% of the Debtors' total funded debt — a modest investment to preserve the productive core of the Debtors' enterprise.

53. Moreover, the Debtors' financial advisor, Aldersgate, has reviewed and concurs with the Debtors' identification of Critical Vendors and the aggregate amount of Critical Vendor claims. Aldersgate's analysis confirms that the cost of paying Critical Vendor claims is substantially less than the projected losses that would result from even a partial disruption of the Debtors' manufacturing operations.

C. The Debtors Will Suffer Irreparable Harm Absent Relief

54. Absent the relief requested herein, the Debtors face an immediate and significant risk that Critical Vendors will refuse to supply the Debtors on customary credit terms, will demand cash in advance or cash on delivery, or will cease shipments entirely. As noted above, several vendors have already communicated these concerns to the Debtors prior to and in connection with the filing of the chapter 11 cases.

55. Given the concentrated nature of the Debtors' supplier base, the regulatory certification requirements applicable to the Debtors' products, and the ninety (90) to one hundred eighty (180) day timeframe required to qualify replacement suppliers, even a brief interruption in the supply of critical raw materials or components would:

(a) Force production shutdowns at one or more of the Debtors' four manufacturing plants, with attendant loss of production capacity, increased unit costs, and potential equipment damage from unscheduled stoppages of extrusion and blow-molding lines;

(b) Result in the Debtors' failure to meet customer delivery commitments under existing purchase orders and supply agreements, triggering contractual penalties, customer claims, and potential loss of customer relationships that the Debtors have cultivated over decades;

(c) Jeopardize the Debtors' going-concern value and, ultimately, the feasibility of the prepackaged plan of reorganization, which is premised on the continuation of the Debtors' business operations at or near current levels throughout the chapter 11 process;

(d) Endanger the livelihoods of the approximately 1,420 employees who depend on the Debtors' continued operations for their income and benefits; and

(e) Cause a cascading failure across the Debtors' integrated manufacturing platform, as disruptions at any single plant affect the inputs, production schedules, and output of the other plants (for example, extrusion and secondary processing at Plant 4 in Ravenna feeds semi-finished products to Plant 1 in Akron and Plant 2 in Evansville).

56. The irreparable nature of the harm is underscored by the fact that the Debtors cannot recapture lost production or mend damaged customer relationships after the fact. Once a customer's supply is interrupted and that customer is forced to seek an alternative packaging supplier, the customer relationship is unlikely to be restored, even after the Debtors' reorganization is complete. The permanent loss of even a small number of key customer accounts would materially impair the Debtors' revenue base and undermine the viability of the Plan.

D. Payment of Critical Vendor Claims Benefits the Estate

57. The payment of Critical Vendor claims in the aggregate amount of $6.8 million will directly benefit the Debtors' estates and all classes of creditors by preserving the going-concern value of the Debtors' enterprise and ensuring the continuity of the Debtors' manufacturing operations during the chapter 11 cases.

58. The $6.8 million Critical Vendor Cap is modest relative to the Debtors' capital structure and the values at stake:

(a) The Debtors' total funded debt as of the Petition Date is $247.3 million.

(b) The midpoint of the reorganized enterprise value, as estimated by Aldersgate and set forth in the Debtors' Plan-related disclosures, is $195.0 million.

(c) The $6.8 million Critical Vendor Cap represents approximately 3.5% of the estimated reorganized enterprise value and approximately 2.7% of total funded debt.

(d) The Debtors' creditor classes under the anticipated Plan include:

(i) Class 2 — First Lien Claims (Revolver and First Lien Term Loan): approximately $191.3 million in aggregate claims;

(ii) Class 3 — Second Lien Notes Claims: approximately $59.9 million in aggregate claims (including accrued and unpaid interest);

(iii) Class 4 — General Unsecured Claims: approximately $14.8 million in aggregate claims; and

(iv) The Debtors' approximately 1,420 employees, whose continued employment depends on the uninterrupted operation of the Debtors' business.

59. Payment of Critical Vendor claims will preserve the going-concern value of the Debtors' enterprise for the benefit of all of these stakeholders. Without such payments, the disruption to the Debtors' operations would destroy value for all classes of creditors and stakeholders alike.

60. Importantly, the Debtors' DIP budget — which was prepared in connection with the $30.0 million debtor-in-possession credit facility provided by Ridgeline National Bank, N.A. as DIP agent and lender (interim approval by this Court on June 24, 2022) — contemplates and provides adequate liquidity for Critical Vendor payments in the amount requested. The DIP lenders, who hold superpriority administrative claims and priming liens, are aware of and have consented to the inclusion of Critical Vendor payments in the DIP budget. The DIP facility provides the Debtors with sufficient working capital to make these payments without jeopardizing liquidity or the Debtors' ability to fund ongoing operations during the chapter 11 cases.

E. Adequate Safeguards

61. The Debtors recognize that the payment of prepetition claims in a chapter 11 case is an extraordinary remedy and should be subject to appropriate safeguards designed to protect the interests of all creditors and parties in interest. Accordingly, the Debtors propose the following safeguards:

(a) Customary Trade Terms Requirement. Each Critical Vendor receiving payment of a prepetition claim must agree in writing to continue supplying the Debtors with goods and/or services on trade terms at least as favorable as those in effect between such vendor and the Debtors during the twelve (12) months prior to the Petition Date, including with respect to pricing, credit terms, availability, shipment schedules, service levels, and all other customary terms of dealing. No payment shall be made to any Critical Vendor that declines or fails to agree to this condition.

(b) Record-Keeping and Transparency. The Debtors shall maintain a contemporaneous log of all Critical Vendor payments, including the name of each vendor receiving payment, the amount paid, the date of payment, and a brief description of the goods or services provided by such vendor. This log shall be made available for inspection by the United States Trustee for Region 9, any official committee of unsecured creditors appointed in these cases, and any other party in interest, upon reasonable request and subject to appropriate confidentiality protections.

(c) Aggregate Cap. The aggregate amount of all Critical Vendor payments shall not exceed $6,800,000.00 without further order of this Court.

(d) Disgorgement Remedy. Any vendor that receives a Critical Vendor payment and subsequently fails to comply with the Customary Trade Terms Requirement — including by refusing to supply the Debtors on customary terms, unilaterally imposing less favorable terms, or ceasing shipments — may be required to disgorge such payment to the Debtors' estates. The Debtors shall have the right to seek disgorgement by motion or adversary proceeding, and any such disgorged payment shall be treated as an avoidable postpetition transfer recoverable by the estates.

62. The Debtors believe that these safeguards are consistent with the protections imposed by courts in other critical vendor matters and are sufficient to protect the interests of all creditors and parties in interest while affording the Debtors the flexibility necessary to maintain their operations during the chapter 11 cases.

VII. THE REQUIREMENTS OF BANKRUPTCY RULE 6003 ARE SATISFIED

63. Bankruptcy Rule 6003(b) provides that, "[e]xcept to the extent that relief is necessary to avoid immediate and irreparable harm, the court shall not, within 21 days after the filing of the petition, grant relief" on a motion to use, sell, lease, or otherwise incur an obligation regarding property of the estate. Fed. R. Bankr. P. 6003(b). The purpose of Rule 6003 is to prevent courts from granting routine relief at the outset of a case without adequate time for review and consideration, while preserving the court's authority to act promptly when delay would cause immediate and irreparable harm to the debtor's estate.

64. For the reasons described throughout this Motion and the Kowalski Declaration — including the real and documented risk of supply chain disruption, the practical inability to quickly substitute qualified vendors due to the 90-to-180-day re-qualification timelines imposed by UN/DOT certification requirements, the direct threat to the Debtors' manufacturing operations at all four plants, and the potential loss of customer relationships that are critical to the Debtors' going-concern value — the relief requested is necessary to avoid immediate and irreparable harm to the Debtors' estates within the meaning of Rule 6003(b).

65. The harm is not speculative. As of the Petition Date, at least six (6) vendors have already demanded modified payment terms and three (3) vendors have indicated that they may cease shipments. The filing of the chapter 11 cases will only intensify these demands. Without the ability to pay Critical Vendor claims promptly, the Debtors face an imminent risk of production shutdowns, lost customer orders, and erosion of enterprise value that cannot be remedied after the fact.

66. The Debtors therefore respectfully submit that the requirements of Rule 6003(b) are satisfied and that this Court should consider and grant this Motion at the first day hearing scheduled for June 21, 2022.

VIII. WAIVER OF BANKRUPTCY RULES 6004(a) AND 6004(h)

67. Bankruptcy Rule 6004(h) provides that "[a]n order authorizing the use, sale, or lease of property other than cash collateral is stayed until the expiration of 14 days after entry of the order, unless the court orders otherwise." Fed. R. Bankr. P. 6004(h). The Debtors request that the Court waive the fourteen (14) day stay imposed by Rule 6004(h) so that the order authorizing Critical Vendor payments may be effective immediately upon entry. As described above, any delay in the Debtors' ability to assure Critical Vendors that their prepetition claims will be paid could result in immediate supply disruptions, production shutdowns, and irreparable harm to the estates. The imposition of a fourteen-day stay would undermine the very purpose of this Motion.

68. The Debtors also request that the notice requirements of Bankruptcy Rule 6004(a) be deemed satisfied by the service of this Motion on the parties listed in Section IX below. The Debtors respectfully submit that the notice provided is reasonable under the circumstances and satisfies the requirements of due process.

IX. NOTICE

69. Notice of this Motion has been provided to the following parties or their counsel:

(a) The Office of the United States Trustee for Region 9, Howard M. Metzenbaum U.S. Courthouse, 201 Superior Avenue, Cleveland, OH 44114;

(b) Ridgeline National Bank, N.A., as administrative agent and collateral agent under the First Lien Credit Agreement and as DIP agent, 200 Public Square, Cleveland, OH 44114, Attn: Loan Administration;

(c) Counsel to the Ad Hoc Group of First Lien Lenders, Hargrove, Mitchell & Saunders LLP, 51 West 52nd Street, New York, NY 10019, Attn: Victoria Kline, Esq.;

(d) Counsel to the Ad Hoc Group of Second Lien Noteholders, Pemberton & Locke LLP, 1 Liberty Plaza, New York, NY 10006, Attn: Raymond Delvecchio, Esq.;

(e) Continental Fiduciary Trust Company, as indenture trustee and collateral agent under the Second Lien Indenture, 101 Barclay Street, New York, NY 10286, Attn: Corporate Trust Administration;

(f) The holders of the thirty (30) largest unsecured claims against the Debtors, as set forth in the list filed with the Debtors' petitions; and

(g) All parties who have filed a request for notice in these cases pursuant to Bankruptcy Rule 2002.

70. The Debtors respectfully submit that no further or other notice of this Motion is required.

X. NO PRIOR REQUEST

71. No prior request for the relief sought herein has been made to this or any other court.

XI. CONCLUSION AND PRAYER FOR RELIEF

WHEREFORE, the Debtors respectfully request that the Court enter an order, substantially in the form of the Proposed Order attached hereto as Exhibit A:

1. Authorizing, but not directing, the Debtors to pay prepetition claims of Critical Vendors in an aggregate amount not to exceed $6,800,000.00, in the exercise of the Debtors' sound business judgment, subject to the Customary Trade Terms Requirement described herein;

2. Authorizing and directing Ridgeline National Bank, N.A. and all other applicable banks and financial institutions to receive, process, honor, and pay all checks, wire transfers, ACH payments, and other payment instruments issued by the Debtors in connection with the authorized Critical Vendor payments, whether presented before or after the Petition Date, provided that such payments are consistent with the Proposed Order;

3. Waiving the fourteen (14) day stay imposed by Bankruptcy Rule 6004(h) so that the order may be effective immediately upon entry;

4. Granting such other and further relief as the Court deems just and proper.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Colette Whitman (Responsible Partner) Nathaniel Bower (Billing Partner) Gabrielle Moss (Lead Associate) Amy Chesterton (Working Associate)

30 Rockefeller Plaza New York, NY 10112 Telephone: (212) 555-4000 Facsimile: (212) 555-4001

— and —

127 Public Square, Suite 4100 Cleveland, OH 44114 Telephone: (216) 555-2700 Facsimile: (216) 555-2701

Counsel to the Debtors and Debtors in Possession

— and —

KELLNER & HARTWICK LLP

Bruce Tatelman (Lead Partner) 600 Superior Avenue East, Suite 1800 Cleveland, OH 44114 Telephone: (216) 555-8800 Facsimile: (216) 555-8801

Local Co-Counsel to the Debtors and Debtors in Possession

Dated: June 20, 2022

EXHIBIT A

PROPOSED ORDER

UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION

In re:

CRESTLINE PACKAGING SOLUTIONS LLC, et al.,

Debtors.

Case No. 22-51247

(Jointly Administered)

Chapter 11

ORDER AUTHORIZING DEBTORS TO PAY PREPETITION CLAIMS OF CRITICAL VENDORS PURSUANT TO 11 U.S.C. §§ 105(a) AND 363(b)

Upon the Motion (the "Motion")2 of Crestline Packaging Solutions LLC and CPS Holdings Inc., the above-captioned debtors and debtors in possession (collectively, the "Debtors"), filed on June 20, 2022, seeking entry of an order authorizing, but not directing, the Debtors to pay prepetition claims of certain critical vendors (the "Critical Vendors") in an aggregate amount not to exceed $6,800,000.00 pursuant to sections 105(a) and 363(b) of title 11 of the United States Code, 11 U.S.C. §§ 101–1532 (the "Bankruptcy Code"); and the Court having reviewed the Motion and the Declaration of Dana Kowalski, Chief Financial Officer of Crestline Packaging Solutions LLC, in Support of the Debtors' First Day Motions (the "Kowalski Declaration"), filed in support thereof; and the Court having jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the General Order of Reference from the United States District Court for the Northern District of Ohio; and this being a core proceeding within the meaning of 28 U.S.C. § 157(b)(2); and venue being proper in this district pursuant to 28 U.S.C. §§ 1408 and 1409; and due and adequate notice of the Motion having been provided under the circumstances, and it appearing that no other or further notice is necessary; and the relief requested in the Motion being necessary to avoid immediate and irreparable harm to the Debtors' estates within the meaning of Rule 6003(b) of the Federal Rules of Bankruptcy Procedure; and the Court having considered the statements of counsel and the evidence presented at the hearing on the Motion, if any; and the Court having determined that the legal and factual bases set forth in the Motion establish just cause for the relief granted herein; and after due deliberation and good cause appearing therefor;

IT IS HEREBY ORDERED THAT:

1. The Motion is GRANTED as set forth herein.

2. The Debtors are authorized, but not directed, in the exercise of their sound business judgment, to pay prepetition claims of Critical Vendors in an aggregate amount not to exceed $6,800,000.00 (the "Critical Vendor Cap").

3. As a condition of receiving any payment authorized by this Order (each, a "Critical Vendor Payment"), each Critical Vendor must agree in writing, in a form reasonably acceptable to the Debtors, to continue supplying the Debtors with goods and/or services on trade terms at least as favorable as those in effect between such vendor and the Debtors during the twelve (12) months prior to the Petition Date, including with respect to pricing, credit terms, availability, shipment schedules, service levels, and all other customary terms of dealing (the "Customary Trade Terms Requirement"). No Critical Vendor Payment shall be made to any vendor that declines or fails to agree to the Customary Trade Terms Requirement.

4. If any vendor that receives a Critical Vendor Payment subsequently fails to comply with the Customary Trade Terms Requirement — including by refusing to supply the Debtors on customary terms, unilaterally imposing less favorable terms, or ceasing shipments to the Debtors — the Debtors may seek disgorgement of such Critical Vendor Payment by motion or adversary proceeding, and any such payment shall be treated as an avoidable postpetition transfer recoverable by the Debtors' estates. The Debtors' rights to seek disgorgement shall be in addition to, and not in limitation of, any other rights or remedies available to the Debtors at law, in equity, or under the Bankruptcy Code.

5. The Debtors shall maintain a contemporaneous log of all Critical Vendor Payments (the "Critical Vendor Payment Log"), which log shall include, for each payment, the name of the vendor receiving payment, the amount paid, the date of payment, and a brief description of the goods or services provided by such vendor. The Critical Vendor Payment Log shall be made available for inspection by the United States Trustee for Region 9, any official committee of unsecured creditors appointed in these cases, and any other party in interest, upon reasonable request and subject to any applicable confidentiality protections.

6. Ridgeline National Bank, N.A. and all other applicable banks and financial institutions are authorized and directed to receive, process, honor, and pay all checks, wire transfers, automated clearing house ("ACH") payments, and other payment instruments issued or drawn by the Debtors in connection with Critical Vendor Payments authorized by this Order, whether such checks, wire transfers, ACH payments, or other instruments were presented, issued, or drawn before or after the Petition Date, provided that sufficient funds are on deposit in the applicable accounts and that such payments are consistent with the terms of this Order. No bank or financial institution that honors a Critical Vendor Payment in reliance on this Order shall be liable to any party for doing so.

7. The fourteen (14) day stay imposed by Rule 6004(h) of the Federal Rules of Bankruptcy Procedure is hereby waived, and this Order shall be effective immediately upon entry.

8. The Debtors are authorized to take all actions and execute all documents necessary or appropriate to implement the relief granted herein.

9. This Court retains exclusive jurisdiction to hear and determine all matters arising from or related to the implementation, interpretation, or enforcement of this Order.

Dated: ____, 2022

________________________________________

UNITED STATES BANKRUPTCY JUDGE

CERTIFICATE OF SERVICE

I, Gabrielle Moss, an attorney with the firm of Calderwood & Harkness LLP, counsel to the Debtors and Debtors in Possession in the above-captioned cases, hereby certify that on June 20, 2022, I caused a true and correct copy of the foregoing Debtors' Motion for Entry of an Order Authorizing, But Not Directing, Payment of Prepetition Claims of Critical Vendors Pursuant to 11 U.S.C. §§ 105(a) and 363(b) and the attached Proposed Order (Exhibit A) to be served by electronic mail and first-class United States mail, postage prepaid, upon the following parties:

1. The Office of the United States Trustee for Region 9, Howard M. Metzenbaum U.S. Courthouse, 201 Superior Avenue, Cleveland, OH 44114;

2. Ridgeline National Bank, N.A., as administrative agent and collateral agent under the First Lien Credit Agreement and as DIP agent, 200 Public Square, Cleveland, OH 44114, Attn: Loan Administration;

3. Hargrove, Mitchell &

UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION
In re:
CRESTLINE PACKAGING SOLUTIONS LLC, et al.,1
Debtors.
Case No. 22-51247
(Jointly Administered)
Chapter 11
DEBTORS' MOTION FOR ENTRY OF AN ORDER AUTHORIZING, BUT NOT DIRECTING, PAYMENT OF PREPETITION CLAIMS OF CRITICAL VENDORS PURSUANT TO 11 U.S.C. §§ 105(a) AND 363(b)
Crestline Packaging Solutions LLC ("CPS") and CPS Holdings Inc. (collectively, the "Debtors"), the above-captioned debtors and debtors in possession in these chapter 11 cases, hereby move (this "Motion") the Court, pursuant to sections 105(a) and 363(b) of title 11 of the United States Code, 11 U.S.C. §§ 101–1532 (the "Bankruptcy Code"), Rules 6003 and 6004 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), and Rule 9013-1 of the Local Bankruptcy Rules for the Northern District of Ohio (the "Local Rules"), for entry of an order, substantially in the form attached hereto as Exhibit A (the "Proposed Order"), authorizing, but not directing, the Debtors to pay, in the exercise of their sound business judgment, prepetition claims of certain critical vendors (the "Critical Vendors") in an aggregate amount not to exceed $6,800,000.00. In support of this Motion, the Debtors respectfully represent as follows:
I. PRELIMINARY STATEMENT
1. On June 20, 2022 (the "Petition Date"), each of the Debtors filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code with this Court, commencing these jointly administered chapter 11 cases. Since the Petition Date, the Debtors have continued to operate their businesses and manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No trustee, examiner, or official committee of unsecured creditors has been appointed in these cases as of the date hereof.
2. By this Motion, the Debtors seek authority to pay, in the ordinary course of business and in the exercise of their sound business judgment, prepetition claims of certain Critical Vendors in an aggregate amount not to exceed $6,800,000.00 (the "Critical Vendor Cap"), subject to the conditions and safeguards set forth herein.
3. The Debtors' business — the design, manufacture, testing, and distribution of high-density polyethylene ("HDPE") drums, intermediate bulk containers ("IBCs"), steel pails, and specialty containment vessels for the chemical, petrochemical, and agricultural sectors — is critically dependent on a limited number of specialized suppliers of raw materials, components, coatings, and logistics services. The Debtors' products are subject to stringent regulatory and customer-imposed certification requirements, including United Nations and United States Department of Transportation ("UN/DOT") certifications for use in the packaging, storage, and transport of hazardous materials. These certification requirements make vendor substitution a protracted, costly, and uncertain process — typically requiring ninety (90) to one hundred eighty (180) days for re-qualification of a replacement supplier.
4. The Debtors operate four manufacturing facilities across three states, which collectively employ approximately 1,420 workers and represent the productive core of the Debtors' enterprise:
(a) Plant 1 — 4710 Industrial Corridor Drive, Akron, OH 44308 (corporate headquarters and primary HDPE drum manufacturing facility; approximately 480 employees);
(b) Plant 2 — 2255 Commerce Parkway, Evansville, IN 47725 (IBC and steel pail manufacturing; approximately 390 employees);
(c) Plant 3 — 8100 River Road, Baton Rouge, LA 70820 (specialty containment vessels; approximately 310 employees); and
(d) Plant 4 — 1480 State Route 59, Ravenna, OH 44266 (extrusion and secondary processing; approximately 240 employees).
5. The Debtors' raw material inputs — most prominently HDPE resin, cold-rolled and hot-rolled steel, specialty coatings and fluoropolymer linings, valves, fittings, and proprietary closure components — are sourced from a concentrated group of suppliers, many of whom are the sole or dominant source for specific grades, specifications, and formulations required by the Debtors' manufacturing processes and their customers' certification requirements. Resin alone constitutes the single largest raw material cost category, and the Debtors' primary resin supplier, Northstar Polymers Inc. of Houston, Texas, supplies approximately 65% of the Debtors' total HDPE resin requirements under a five-year Resin Supply Agreement dated March 1, 2019.
6. If Critical Vendors refuse to supply the Debtors on customary terms — or worse, cease shipments entirely — the Debtors' manufacturing operations would suffer immediate and irreparable harm. Production shutdowns at any of the four manufacturing plants would cascade through the Debtors' supply chain, result in the Debtors' inability to fulfill customer orders, trigger contract penalties, cause loss of key customer relationships, and directly threaten the employment of the approximately 1,420 individuals who depend on the Debtors' continued operations. Any such disruption would jeopardize the prepackaged plan of reorganization that the Debtors are pursuing and would erode the going-concern value of the enterprise to the detriment of all stakeholders.
7. The relief requested herein is essential to the Debtors' ability to preserve value, maintain operations, and effectuate a successful reorganization. The aggregate amount of Critical Vendor claims — $6.8 million — is modest relative to the Debtors' total funded debt of $247.3 million and the estimated reorganized enterprise value (midpoint: $195.0 million), and the Debtors' DIP budget, approved as part of the $30.0 million debtor-in-possession financing facility with Ridgeline National Bank, N.A. (interim approval on June 24, 2022), contemplates and provides adequate liquidity for Critical Vendor payments of this magnitude.
8. The Debtors' Chief Financial Officer, Dana Kowalski, provides further factual support for this Motion and the other first day motions filed by the Debtors in the Declaration of Dana Kowalski, Chief Financial Officer of Crestline Packaging Solutions LLC, in Support of the Debtors' First Day Motions (the "Kowalski Declaration"), filed contemporaneously herewith and incorporated by reference herein.
II. JURISDICTION AND VENUE
9. The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the General Order No. 2012-7 of the United States District Court for the Northern District of Ohio referring all proceedings arising under, arising in, or related to a case under title 11 to this Court.
10. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2). The Debtors confirm their consent, pursuant to Rule 7008-1 of the Local Bankruptcy Rules, to the entry of a final order by this Court in connection with this Motion to the extent that it is later determined that this Court, absent consent of the parties, cannot enter final orders or judgments in connection herewith consistent with Article III of the United States Constitution. See Wellness Int'l Network, Ltd. v. Sharif, 575 U.S. 665 (2015).
11. Venue is proper in this district pursuant to 28 U.S.C. §§ 1408 and 1409. CPS, the principal operating Debtor, has had its principal place of business, its corporate headquarters, and its domicile in this district for in excess of 180 days prior to the Petition Date.
12. The statutory predicates for the relief requested herein are sections 105(a) and 363(b) of the Bankruptcy Code.
III. BACKGROUND
A. General Background
13. Crestline Packaging Solutions LLC is an Ohio limited liability company organized under the laws of the State of Ohio and headquartered at 4710 Industrial Corridor Drive, Akron, OH 44308, federal employer identification number ("EIN") 31-1782094. CPS is the principal operating entity of the Debtors and conducts substantially all of the Debtors' manufacturing, distribution, and customer-facing business operations.
14. CPS Holdings Inc. is a Delaware corporation, EIN 82-3491657, that serves as the direct parent holding company of CPS. CPS Holdings Inc. does not conduct any independent business operations but is a co-obligor or guarantor under substantially all of the Debtors' funded indebtedness and was formed in connection with the leveraged buyout transaction described below.
15. The Debtors were acquired by Thornfield Capital Partners LP, a private equity firm headquartered in New York, New York, in a leveraged buyout that closed on October 13, 2017 (the "LBO"). The LBO valued the enterprise at $410.0 million, with Thornfield contributing approximately $163.0 million in equity capital and the balance of the purchase price funded through a combination of first lien and second lien secured debt facilities, as described more fully below.
16. Since the LBO, the Debtors have operated as a leading independent manufacturer of industrial packaging products serving the chemical, petrochemical, and agricultural sectors. The Debtors' product portfolio includes HDPE closed-head and open-head drums (ranging from 15-gallon to 55-gallon capacities), intermediate bulk containers in capacities from 275 gallons to 550 gallons, steel pails (1-gallon to 7-gallon), and specialty containment vessels designed for the storage and transport of corrosive, flammable, and otherwise hazardous chemicals.
17. The Debtors' financial performance is summarized as follows:
18. As reflected in the table above, the Debtors experienced a significant and sustained decline in financial performance from FY2020 through the first quarter of 2022, driven principally by dramatic increases in resin input costs (HDPE resin prices increased approximately 48% from January 2020 to December 2021), global supply chain disruptions arising from the COVID-19 pandemic, increased freight and logistics costs, and competitive pricing pressure that limited the Debtors' ability to fully pass through cost increases to customers. Revenue declined approximately 18% from FY2020 to FY2021, and trailing twelve-month EBITDA as of the end of Q1 2022 had fallen to $29.1 million, representing a 41% decline from FY2020 EBITDA.
B. Capital Structure and Events Leading to Filing
19. As of the Petition Date, the Debtors' total funded debt was approximately $247.3 million, consisting of the following obligations:
(a) Revolving Credit Facility: A $40.0 million senior secured revolving credit facility (the "Revolver"), of which $32.6 million was drawn as of the Petition Date, with Ridgeline National Bank, N.A. ("Ridgeline") serving as administrative agent and collateral agent for the revolving lenders, originated under that certain First Lien Credit Agreement, dated as of October 13, 2017 (as amended, the "First Lien Credit Agreement"), among CPS, as borrower, CPS Holdings Inc., as parent guarantor, Ridgeline, as administrative agent, and the lenders from time to time party thereto.
(b) First Lien Term Loan: A $158.7 million senior secured first lien term loan (the "First Lien Term Loan" and, together with the Revolver, the "First Lien Facilities"), also originated under the First Lien Credit Agreement, with Ridgeline as administrative agent. The First Lien Term Loan bears interest at LIBOR plus 4.50%, with a LIBOR floor of 1.00%, and matures on October 13, 2024.
(c) Second Lien Notes: $56.0 million in aggregate principal amount of 9.75% Senior Secured Second Lien Notes due October 13, 2025 (the "Second Lien Notes"), issued under that certain Indenture, dated as of October 13, 2017 (the "Second Lien Indenture"), among CPS, as issuer, CPS Holdings Inc., as parent guarantor, and Continental Fiduciary Trust Company, as indenture trustee and collateral agent.
20. All of the Debtors' funded indebtedness is secured by liens on substantially all of the Debtors' assets, with the First Lien Facilities holding first priority liens and the Second Lien Notes holding second priority liens, subject to the terms of that certain Intercreditor Agreement, dated as of October 13, 2017, between Ridgeline (as first lien collateral agent) and Continental Fiduciary Trust Company (as second lien collateral agent).
21. In the first quarter of fiscal year 2022, the Debtors breached the maximum total net leverage ratio covenant set forth in Section 7.11 of the First Lien Credit Agreement. The First Lien Credit Agreement required the Debtors to maintain a Total Net Leverage Ratio (defined as Total Net Debt divided by Consolidated EBITDA, each as defined therein) not to exceed 5.75 to 1.00. As of the end of Q1 2022, the Debtors' actual Total Net Leverage Ratio was approximately 8.50 to 1.00 (Total Net Debt of $247.3 million divided by TTM Consolidated EBITDA of $29.1 million), exceeding the maximum permitted ratio by approximately 2.75 turns, or 47.8%.
22. On April 22, 2022, Ridgeline, acting in its capacity as administrative agent under the First Lien Credit Agreement, delivered a formal Notice of Default (the "Notice of Default") to the Debtors, declaring the occurrence of an Event of Default under Section 8.01(d) of the First Lien Credit Agreement as a result of the covenant breach described above. The Notice of Default further reserved Ridgeline's and the first lien lenders' rights and remedies under the First Lien Credit Agreement, including the right to accelerate the outstanding indebtedness, terminate further commitments under the Revolver, and exercise remedies against the collateral.
23. The delivery of the Notice of Default triggered cross-default provisions under Section 6.01(e) of the Second Lien Indenture, constituting an Event of Default under the Second Lien Indenture and affording the indenture trustee and the holders of the Second Lien Notes the right to accelerate the obligations thereunder.
24. Following the delivery of the Notice of Default, the Debtors engaged in intensive negotiations with their key creditor constituencies. On May 18, 2022, the Debtors entered into a Forbearance Agreement (the "Forbearance Agreement") with consenting first lien lenders holding approximately 68% of the outstanding principal amount of the First Lien Term Loan, pursuant to which such lenders agreed to forbear from exercising remedies in connection with the identified Events of Default for a period expiring on the earlier of (i) July 31, 2022, or (ii) the occurrence of certain termination events specified therein. The Forbearance Agreement required the Debtors, inter alia, to commence chapter 11 cases no later than June 30, 2022, and to file a prepackaged plan of reorganization within thirty (30) days of the Petition Date.
25. The Debtors are pursuing a prepackaged Chapter 11 plan of reorganization (the "Plan") supported by the Restructuring Support Agreement (the "RSA"), the execution of which by the requisite parties is anticipated on or about July 8, 2022. The RSA was negotiated and substantially agreed in all material respects prior to the Petition Date among the Debtors, Thornfield Capital Partners LP (the Debtors' equity sponsor), an ad hoc group of first lien lenders holding approximately 72% of the First Lien Term Loan (the "Ad Hoc Group of First Lien Lenders"), and an ad hoc group of second lien noteholders holding approximately 61% of the outstanding Second Lien Notes (the "Ad Hoc Group of Second Lien Noteholders"). The Plan contemplates, inter alia, a deleveraging transaction that will reduce the Debtors' total funded debt from $247.3 million to approximately $120.0 million and provide the Debtors with the capital structure and liquidity necessary to operate as a going concern.
C. The Debtors' Supply Chain and Manufacturing Operations
26. The Debtors' manufacturing operations at the four plants described above require a continuous and uninterrupted supply of raw materials, components, coatings, and services from a concentrated group of specialized suppliers. The principal categories of raw materials and inputs include:
(a) High-density polyethylene (HDPE) resin — the primary raw material for HDPE drum and IBC production at Plants 1, 2, and 4, procured predominantly from Northstar Polymers Inc. pursuant to the Resin Supply Agreement described below;
(b) Cold-rolled and hot-rolled steel — used in the manufacture of steel pails at Plant 2 (Evansville) and in the fabrication of certain specialty containment vessels at Plant 3 (Baton Rouge);
(c) Specialty coatings, phenolic linings, and fluoropolymer treatments — applied to the interior surfaces of drums, pails, and containment vessels to provide chemical resistance required by customers and mandated by certification standards;
(d) Valves, fittings, gaskets, and closure components — many of which are proprietary or customer-specified and require individual certification for use in UN/DOT-rated packaging;
(e) Packaging components and labeling materials — including shrink wrap, pallets, and compliance labeling;
(f) Maintenance, repair, and operations ("MRO") parts and supplies — critical replacement parts for extrusion lines, blow-molding equipment, welding systems, and other specialized manufacturing equipment; and
(g) Logistics and transportation services — including both inbound raw material delivery and outbound finished goods distribution, with particular reliance on certified hazardous materials ("hazmat") carriers.
27. Resin is the Debtors' single largest raw material cost, accounting for approximately 38% of total cost of goods sold in FY2021. The Debtors' primary resin supplier is Northstar Polymers Inc. ("Northstar"), headquartered in Houston, Texas, which supplies HDPE resin to the Debtors pursuant to a five-year Resin Supply Agreement dated March 1, 2019 (the "Resin Supply Agreement"). Under the Resin Supply Agreement, Northstar supplies specified grades and melt flow indices of HDPE resin that have been qualified and certified for use in the Debtors' drum and IBC manufacturing processes. Any disruption in the supply of Northstar resin would immediately halt HDPE drum production at Plant 1 (Akron) and extrusion operations at Plant 4 (Ravenna), and would materially impair IBC production at Plant 2 (Evansville).
28. The specialty chemical packaging industry imposes exacting regulatory and customer-certification standards. All of the Debtors' drums, IBCs, and containment vessels used for the packaging, transport, and storage of hazardous materials must carry UN/DOT performance certifications, which are obtained through rigorous testing protocols conducted by accredited third-party testing laboratories. These certifications are specific to the combination of container design, raw material specification, and manufacturing process employed. Consequently, a change in any material input — including a change to a different grade of resin from a different supplier — necessitates complete re-testing and re-certification of the affected product line. Based on the Debtors' experience, this re-qualification process typically requires ninety (90) to one hundred eighty (180) days, during which time the Debtors would be unable to produce and sell the affected products.
29. In the weeks preceding the Petition Date, as the Debtors' financial difficulties became more widely known in the market, certain vendors expressed concern about the Debtors' ability to pay for ongoing purchases. At least six (6) vendors contacted the Debtors' procurement department to request cash-on-delivery terms, and three (3) vendors indicated that they would cease shipments entirely absent assurance of payment of outstanding prepetition balances. These communications underscore the urgency of the relief requested herein and the real and immediate risk that supply chain disruptions will materially harm the Debtors' operations and the value of their estates.
IV. THE CRITICAL VENDORS
A. Identification and Selection Criteria
30. The Debtors, with the assistance of their financial advisor, Aldersgate Advisory Group LLC ("Aldersgate") (lead managing director: Priya Narayanan), and debtor's counsel, Calderwood & Harkness LLP ("Sterling"), have undertaken a thorough and comprehensive review of the Debtors' entire vendor base — consisting of approximately 740 active vendors — to identify those suppliers whose continued provision of goods and services on customary trade terms is essential to the Debtors' ongoing operations and, ultimately, to the success of the Debtors' reorganization. This review involved detailed analysis of the Debtors' accounts payable records, purchase order data, vendor contracts, certification documentation, and supply chain relationships, supplemented by extensive interviews with the Debtors' plant managers, procurement personnel, and senior management.
31. In conducting this analysis, the Debtors, Aldersgate, and Sterling applied the following criteria to identify vendors that qualify as Critical Vendors:
(a) Sole-Source or Limited-Source Status: Whether the vendor is the sole source or one of a very limited number of sources for a raw material, component, or service that is necessary for the Debtors' manufacturing operations. Vendors that are the only qualified supplier for a particular specification, grade, or formulation received the highest priority.
(b) Availability and Cost of Replacement: Whether alternative vendors exist that could supply the same or equivalent goods or services and, if so, the time and cost required to identify, qualify, test, and transition to such replacement vendors. As described above, the UN/DOT certification requirements applicable to the Debtors' products make vendor substitution particularly difficult and time-consuming, with re-qualification timelines of ninety (90) to one hundred eighty (180) days being typical.
(c) Vendor Leverage: Whether the vendor has the practical ability and economic incentive to refuse to deal with the Debtors on customary trade terms. Vendors that have already communicated concerns about the Debtors' creditworthiness, that have contractual rights to demand modified payment terms upon a credit event, or that are not economically dependent on the Debtors' business (such that the loss of the Debtors as a customer would not significantly affect the vendor) received heightened attention.
(d) Operational Impact of Disruption: Whether a disruption in supply from the vendor would cause a disproportionate impact on the Debtors' ability to operate one or more of their four manufacturing plants, fulfill customer orders, or maintain certifications and regulatory compliance. A vendor whose products are integrated into multiple product lines or are required at multiple plant locations is inherently more critical than a vendor serving only a single, non-essential application.
(e) Cost-Benefit Analysis: The magnitude of the vendor's prepetition claim relative to the cost of operational disruption that would result from the vendor's refusal to supply. In each case, the Debtors determined that the cost of paying the vendor's prepetition claim is substantially less than the harm that would result from the loss of the vendor's supply.
32. Based on the application of these criteria, the Debtors have identified approximately thirty-five (35) to forty (40) vendors that meet the definition of Critical Vendors. The Debtors recognize that the identification of Critical Vendors necessarily involves the exercise of business judgment and requires ongoing assessment as conditions evolve during the chapter 11 cases. The Debtors reserve the right to add or remove vendors from the Critical Vendor list as circumstances warrant, subject to the aggregate Critical Vendor Cap of $6.8 million.
B. Categories of Critical Vendors
33. The identified Critical Vendors generally fall into the following categories:
34. Resin and Polymer Suppliers. This category includes Northstar Polymers Inc. — the Debtors' primary HDPE resin supplier under the Resin Supply Agreement — as well as secondary resin suppliers that provide specialty polymer blends, regrind material, and color concentrates used in the Debtors' manufacturing processes. Resin constitutes the single largest material cost input for the Debtors' HDPE drum and IBC production lines at Plants 1, 2, and 4. Northstar is the sole qualified supplier for the specific grades and melt flow indices of HDPE resin used in the Debtors' 55-gallon closed-head drum line, which accounts for approximately 42% of total revenue. A disruption in Northstar's supply would immediately halt production at Plants 1 and 4 and materially impair production at Plant 2. Qualifying an alternative resin supplier for these products would require a minimum of 120 days, inclusive of material testing, prototype production, and third-party UN/DOT certification testing.
35. Steel and Metal Suppliers. This category includes suppliers of cold-rolled and hot-rolled steel for steel pail manufacturing at Plant 2 (Evansville) and for certain specialty containment vessel fabrication at Plant 3 (Baton Rouge). The Debtors require specific grades and thicknesses of steel that are produced by a limited number of domestic mills. The Debtors have historically sourced steel from two primary suppliers, both of whom have been qualified under the Debtors' quality management system and whose material specifications are incorporated into the Debtors' UN/DOT-certified designs. Transitioning to an alternative steel supplier would require re-testing and re-certification of affected product lines, with an estimated timeline of approximately 90 to 120 days.
36. Specialty Coatings, Linings, and Chemical Suppliers. This category includes providers of interior coatings, phenolic linings, epoxy formulations, and fluoropolymer treatments that are applied to the Debtors' drums, pails, and containment vessels to provide chemical resistance. These coatings and linings are essential for the Debtors' products to meet the chemical compatibility requirements of their customers and to maintain UN/DOT certifications. The formulations are highly specialized, and in certain cases, the coating supplier is the sole manufacturer of the specific formulation used in the Debtors' certified product designs. Substituting an alternative coating or lining product would require extensive compatibility testing, customer re-approval, and re-certification — a process that can take 120 to 180 days or longer.
37. Valves, Fittings, and Component Suppliers. This category includes suppliers of closures, valves, gaskets, fittings, and other components used in the assembly of IBCs and specialty containment vessels. Many of these components are proprietary to the supplier or are manufactured to the Debtors' custom specifications. Certain valve and fitting assemblies are individually certified and serialized for traceability purposes. Replacing these suppliers would require not only the identification and qualification of alternative manufacturers but also potential redesign of the Debtors' products to accommodate different component specifications, followed by re-certification.
38. Logistics and Transportation Providers. This category includes freight carriers and specialized hazmat transportation companies that are essential to the Debtors' operations. These carriers transport raw materials to the Debtors' four manufacturing plants and deliver finished products to customers located throughout the United States and Canada. Certain of these carriers hold specialized DOT hazardous materials transportation certifications and have been specifically approved by the Debtors' customers for the transport of filled containers of hazardous chemicals. The market for certified hazmat carriers is characterized by limited capacity and high demand, and the loss of even a single qualified carrier could materially disrupt the Debtors' inbound supply chain and outbound distribution capabilities.
39. Maintenance, Repair, and Operations (MRO) Suppliers. This category includes providers of critical replacement parts, tooling, and consumables for the Debtors' extrusion lines, blow-molding equipment, welding systems, and other specialized manufacturing equipment. The Debtors' manufacturing equipment includes proprietary and custom-built machinery for which replacement parts are available only from the original equipment manufacturer or a small number of authorized distributors. Equipment downtime resulting from the unavailability of replacement parts directly halts production, with each day of downtime at Plant 1 (Akron) alone estimated to result in approximately $380,000 in lost production and revenue.
C. Aggregate Amount of Critical Vendor Claims
40. Based on the Debtors' review, the aggregate prepetition claims of all identified Critical Vendors is estimated at approximately $6,800,000.00. This amount represents prepetition balances owed to the approximately thirty-five (35) to forty (40) vendors identified as meeting the Critical Vendor criteria described above.
41. The Debtors seek authority to pay Critical Vendor claims in an aggregate amount not to exceed $6,800,000.00 (the "Critical Vendor Cap"), subject to the exercise of the Debtors' sound business judgment. The Debtors do not intend to pay the full prepetition balance of every identified Critical Vendor in every instance. Rather, the Debtors seek the flexibility to negotiate with individual Critical Vendors and to make payments in such amounts and at such times as the Debtors determine, in the exercise of their business judgment, are necessary to maintain the continued supply of essential goods and services.
42. As a condition of receiving any Critical Vendor payment, each Critical Vendor will be required to agree in writing to continue supplying the Debtors with goods and/or services on trade terms at least as favorable as those in effect between such vendor and the Debtors during the twelve (12) months prior to the Petition Date, including with respect to credit terms, pricing, availability, service levels, and other customary terms of dealing (the "Customary Trade Terms Requirement"). The Customary Trade Terms Requirement ensures that the estate receives fair value in exchange for each Critical Vendor payment and that the payment achieves its intended purpose of maintaining uninterrupted supply.
V. RELIEF REQUESTED
43. The Debtors respectfully request that the Court enter an order, substantially in the form of the Proposed Order attached hereto as Exhibit A:
(a) authorizing, but not directing, the Debtors, in the exercise of their sound business judgment, to pay prepetition claims of Critical Vendors in an aggregate amount not to exceed $6,800,000.00, subject to the Customary Trade Terms Requirement;
(b) authorizing and directing Ridgeline National Bank, N.A. and any other applicable banks and financial institutions to receive, process, honor, and pay all checks, wire transfers, automated clearing house ("ACH") payments, and other payment instruments issued by the Debtors in connection with the authorized Critical Vendor payments, whether presented before or after the Petition Date, provided such payments are consistent with the Proposed Order; and
(c) granting such other and further relief as is just and proper.
VI. BASIS FOR RELIEF
A. The "Doctrine of Necessity" and Section 105(a)
44. Section 105(a) of the Bankruptcy Code provides that "[t]he court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title." 11 U.S.C. § 105(a). This provision vests the bankruptcy court with broad equitable powers to fashion relief necessary to preserve the debtor's estate and facilitate the goals of chapter 11 reorganization.
45. Courts in the Sixth Circuit and throughout the country have recognized the "doctrine of necessity" — sometimes referred to as the "necessity of payment" doctrine or the "critical vendor" doctrine — which permits a debtor in possession to pay prepetition claims where such payment is essential to the continued operation of the debtor's business and, ultimately, to the preservation of value for the benefit of all creditors. The doctrine is rooted in the equitable powers of the bankruptcy court and finds its modern statutory basis in section 105(a) of the Bankruptcy Code, read in conjunction with section 363(b).
46. The doctrine of necessity traces its origins to the nineteenth-century equity receivership cases, in which courts authorized receivers to pay pre-receivership obligations to parties whose continued cooperation was essential to the operation of the business. See Miltenberger v. Logansport, Crawfordsville & Southwestern Railway Co., 106 U.S. 286 (1882) (authorizing receiver to pay pre-receivership claims of connecting carriers where such payment was necessary to maintain the railroad's traffic and revenue); Fosdick v. Schall, 99 U.S. 235, 252 (1878) (recognizing the equitable power of the court to authorize payment of pre-receivership claims where necessary to preserve the going-concern value of the business for the benefit of all stakeholders). These principles have been carried forward into modern Chapter 11 practice and have been applied with particular frequency in the context of critical vendor motions.
47. Courts applying the doctrine of necessity in the critical vendor context generally require a showing that: (i) the vendor's goods or services are essential to the debtor's continued operations; (ii) the vendor will refuse to continue dealing with the debtor absent payment of its prepetition claim; (iii) no adequate alternative source of the goods or services exists, or no such source can be secured within a timeframe that avoids material harm to the debtor's operations; and (iv) the cost to the estate of paying the prepetition claim is less than the cost that the estate would bear if the vendor ceased doing business with the debtor. See, e.g., In re Just for Feet, Inc., 242 B.R. 821, 825–26 (D. Del. 1999); In re CoServ, L.L.C., 273 B.R. 487, 497 (Bankr. N.D. Tex. 2002); In re Lehigh & New England Railway Co., 657 F.2d 570, 581–82 (3d Cir. 1981) (applying the doctrine of necessity under section 105(a) and recognizing its roots in the equity receivership tradition).
48. In the Sixth Circuit, the doctrine of necessity has been recognized and applied by bankruptcy courts in this district and others. See, e.g., In re Quality Stores, Inc., No. 01-03116, 2001 WL 36237846 (Bankr. W.D. Mich. Oct. 3, 2001) (authorizing payment of critical vendor claims under the doctrine of necessity where debtor demonstrated that vendors were essential and irreplaceable); In re UAL Corp., No. 02-48191 (Bankr. N.D. Ill. Dec. 11, 2002) (authorizing critical vendor payments under sections 105(a) and 363(b) with appropriate safeguards). Courts have consistently held that the doctrine of necessity provides an appropriate basis for authorizing the payment of critical vendor claims, provided that the debtor demonstrates that the payment is in the best interest of the estate as a whole.
49. As set forth in detail above and in the Kowalski Declaration, the Debtors have satisfied each of the elements required for application of the doctrine of necessity:
(a) Essential Goods and Services. The Critical Vendors supply raw materials, components, coatings, services, and logistics that are indispensable to the Debtors' manufacturing operations at all four plants. Without these inputs, the Debtors cannot produce their products.
(b) Risk of Refusal to Deal. Several Critical Vendors have already communicated that they will require cash-on-delivery terms or will cease shipments absent payment of prepetition balances. The filing of the chapter 11 cases will only heighten these concerns.
(c) No Adequate Alternatives. For the reasons detailed above — including the concentration of the Debtors' supply base, the proprietary and specification-driven nature of many inputs, and the 90-to-180-day re-qualification period necessitated by UN/DOT certification requirements — the Debtors cannot quickly or feasibly replace the Critical Vendors.
(d) Cost-Benefit Justification. The aggregate Critical Vendor claims of $6.8 million are far less than the losses that the Debtors' estates would sustain if even one or two major vendors ceased supply. As noted above, each day of downtime at Plant 1 alone is estimated to result in approximately $380,000 in lost production and revenue. A one-week shutdown at Plant 1 would cost the estates approximately $2.66 million — roughly 39% of the entire Critical Vendor Cap — and that figure does not account for consequential damages, customer penalties, loss of customer relationships, or the cascade effect on the other plants.
B. Section 363(b) — Sound Business Judgment
50. Section 363(b)(1) of the Bankruptcy Code provides that "[t]he trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate." 11 U.S.C. § 363(b)(1). Courts review transactions proposed under section 363(b) under the business judgment standard, which requires the debtor to show that the proposed action represents a sound exercise of business judgment and is in the best interest of the estate. See In re abbottsotts Dairies of Pa., Inc., 788 F.2d 143, 147 (3d Cir. 1986); In re Lionel Corp., 722 F.2d 1063, 1071 (2d Cir. 1983) (holding that the debtor must articulate "some business justification, other than appeasement of major creditors," for a proposed use of estate property under section 363(b)).
51. Under the business judgment standard, courts will defer to the debtor's decision so long as it is made in good faith, is based upon adequate information, and reflects a reasonable exercise of the debtor's judgment. See In re Schipper, 933 F.2d 513, 515 (7th Cir. 1991); In re Trans World Airlines, Inc., 322 F.3d 283, 292 (3d Cir. 2003). The standard is not one of perfection but of reasonableness; a debtor need not demonstrate that the proposed course of action is the only possible course or even the best possible course, but only that it falls within the range of reasonable business judgments.
52. The Debtors' decision to pay Critical Vendor claims in an aggregate amount not exceeding $6,800,000.00 is a sound exercise of business judgment. The cost of these payments is far outweighed by the catastrophic harm that would result from the shutdown or material disruption of any of the Debtors' four manufacturing plants. The four plants collectively employ approximately 1,420 workers and generated $312.6 million in revenue in FY2021 and $297.4 million in trailing twelve-month revenue as of Q1 2022. The $6.8 million Critical Vendor Cap represents approximately 2.2% of trailing twelve-month revenue and approximately 2.7% of the Debtors' total funded debt — a modest investment to preserve the productive core of the Debtors' enterprise.
53. Moreover, the Debtors' financial advisor, Aldersgate, has reviewed and concurs with the Debtors' identification of Critical Vendors and the aggregate amount of Critical Vendor claims. Aldersgate's analysis confirms that the cost of paying Critical Vendor claims is substantially less than the projected losses that would result from even a partial disruption of the Debtors' manufacturing operations.
C. The Debtors Will Suffer Irreparable Harm Absent Relief
54. Absent the relief requested herein, the Debtors face an immediate and significant risk that Critical Vendors will refuse to supply the Debtors on customary credit terms, will demand cash in advance or cash on delivery, or will cease shipments entirely. As noted above, several vendors have already communicated these concerns to the Debtors prior to and in connection with the filing of the chapter 11 cases.
55. Given the concentrated nature of the Debtors' supplier base, the regulatory certification requirements applicable to the Debtors' products, and the ninety (90) to one hundred eighty (180) day timeframe required to qualify replacement suppliers, even a brief interruption in the supply of critical raw materials or components would:
(a) Force production shutdowns at one or more of the Debtors' four manufacturing plants, with attendant loss of production capacity, increased unit costs, and potential equipment damage from unscheduled stoppages of extrusion and blow-molding lines;
(b) Result in the Debtors' failure to meet customer delivery commitments under existing purchase orders and supply agreements, triggering contractual penalties, customer claims, and potential loss of customer relationships that the Debtors have cultivated over decades;
(c) Jeopardize the Debtors' going-concern value and, ultimately, the feasibility of the prepackaged plan of reorganization, which is premised on the continuation of the Debtors' business operations at or near current levels throughout the chapter 11 process;
(d) Endanger the livelihoods of the approximately 1,420 employees who depend on the Debtors' continued operations for their income and benefits; and
(e) Cause a cascading failure across the Debtors' integrated manufacturing platform, as disruptions at any single plant affect the inputs, production schedules, and output of the other plants (for example, extrusion and secondary processing at Plant 4 in Ravenna feeds semi-finished products to Plant 1 in Akron and Plant 2 in Evansville).
56. The irreparable nature of the harm is underscored by the fact that the Debtors cannot recapture lost production or mend damaged customer relationships after the fact. Once a customer's supply is interrupted and that customer is forced to seek an alternative packaging supplier, the customer relationship is unlikely to be restored, even after the Debtors' reorganization is complete. The permanent loss of even a small number of key customer accounts would materially impair the Debtors' revenue base and undermine the viability of the Plan.
D. Payment of Critical Vendor Claims Benefits the Estate
57. The payment of Critical Vendor claims in the aggregate amount of $6.8 million will directly benefit the Debtors' estates and all classes of creditors by preserving the going-concern value of the Debtors' enterprise and ensuring the continuity of the Debtors' manufacturing operations during the chapter 11 cases.
58. The $6.8 million Critical Vendor Cap is modest relative to the Debtors' capital structure and the values at stake:
(a) The Debtors' total funded debt as of the Petition Date is $247.3 million.
(b) The midpoint of the reorganized enterprise value, as estimated by Aldersgate and set forth in the Debtors' Plan-related disclosures, is $195.0 million.
(c) The $6.8 million Critical Vendor Cap represents approximately 3.5% of the estimated reorganized enterprise value and approximately 2.7% of total funded debt.
(d) The Debtors' creditor classes under the anticipated Plan include:
(i) Class 2 — First Lien Claims (Revolver and First Lien Term Loan): approximately $191.3 million in aggregate claims;
(ii) Class 3 — Second Lien Notes Claims: approximately $59.9 million in aggregate claims (including accrued and unpaid interest);
(iii) Class 4 — General Unsecured Claims: approximately $14.8 million in aggregate claims; and
(iv) The Debtors' approximately 1,420 employees, whose continued employment depends on the uninterrupted operation of the Debtors' business.
59. Payment of Critical Vendor claims will preserve the going-concern value of the Debtors' enterprise for the benefit of all of these stakeholders. Without such payments, the disruption to the Debtors' operations would destroy value for all classes of creditors and stakeholders alike.
60. Importantly, the Debtors' DIP budget — which was prepared in connection with the $30.0 million debtor-in-possession credit facility provided by Ridgeline National Bank, N.A. as DIP agent and lender (interim approval by this Court on June 24, 2022) — contemplates and provides adequate liquidity for Critical Vendor payments in the amount requested. The DIP lenders, who hold superpriority administrative claims and priming liens, are aware of and have consented to the inclusion of Critical Vendor payments in the DIP budget. The DIP facility provides the Debtors with sufficient working capital to make these payments without jeopardizing liquidity or the Debtors' ability to fund ongoing operations during the chapter 11 cases.
E. Adequate Safeguards
61. The Debtors recognize that the payment of prepetition claims in a chapter 11 case is an extraordinary remedy and should be subject to appropriate safeguards designed to protect the interests of all creditors and parties in interest. Accordingly, the Debtors propose the following safeguards:
(a) Customary Trade Terms Requirement. Each Critical Vendor receiving payment of a prepetition claim must agree in writing to continue supplying the Debtors with goods and/or services on trade terms at least as favorable as those in effect between such vendor and the Debtors during the twelve (12) months prior to the Petition Date, including with respect to pricing, credit terms, availability, shipment schedules, service levels, and all other customary terms of dealing. No payment shall be made to any Critical Vendor that declines or fails to agree to this condition.
(b) Record-Keeping and Transparency. The Debtors shall maintain a contemporaneous log of all Critical Vendor payments, including the name of each vendor receiving payment, the amount paid, the date of payment, and a brief description of the goods or services provided by such vendor. This log shall be made available for inspection by the United States Trustee for Region 9, any official committee of unsecured creditors appointed in these cases, and any other party in interest, upon reasonable request and subject to appropriate confidentiality protections.
(c) Aggregate Cap. The aggregate amount of all Critical Vendor payments shall not exceed $6,800,000.00 without further order of this Court.
(d) Disgorgement Remedy. Any vendor that receives a Critical Vendor payment and subsequently fails to comply with the Customary Trade Terms Requirement — including by refusing to supply the Debtors on customary terms, unilaterally imposing less favorable terms, or ceasing shipments — may be required to disgorge such payment to the Debtors' estates. The Debtors shall have the right to seek disgorgement by motion or adversary proceeding, and any such disgorged payment shall be treated as an avoidable postpetition transfer recoverable by the estates.
62. The Debtors believe that these safeguards are consistent with the protections imposed by courts in other critical vendor matters and are sufficient to protect the interests of all creditors and parties in interest while affording the Debtors the flexibility necessary to maintain their operations during the chapter 11 cases.
VII. THE REQUIREMENTS OF BANKRUPTCY RULE 6003 ARE SATISFIED
63. Bankruptcy Rule 6003(b) provides that, "[e]xcept to the extent that relief is necessary to avoid immediate and irreparable harm, the court shall not, within 21 days after the filing of the petition, grant relief" on a motion to use, sell, lease, or otherwise incur an obligation regarding property of the estate. Fed. R. Bankr. P. 6003(b). The purpose of Rule 6003 is to prevent courts from granting routine relief at the outset of a case without adequate time for review and consideration, while preserving the court's authority to act promptly when delay would cause immediate and irreparable harm to the debtor's estate.
64. For the reasons described throughout this Motion and the Kowalski Declaration — including the real and documented risk of supply chain disruption, the practical inability to quickly substitute qualified vendors due to the 90-to-180-day re-qualification timelines imposed by UN/DOT certification requirements, the direct threat to the Debtors' manufacturing operations at all four plants, and the potential loss of customer relationships that are critical to the Debtors' going-concern value — the relief requested is necessary to avoid immediate and irreparable harm to the Debtors' estates within the meaning of Rule 6003(b).
65. The harm is not speculative. As of the Petition Date, at least six (6) vendors have already demanded modified payment terms and three (3) vendors have indicated that they may cease shipments. The filing of the chapter 11 cases will only intensify these demands. Without the ability to pay Critical Vendor claims promptly, the Debtors face an imminent risk of production shutdowns, lost customer orders, and erosion of enterprise value that cannot be remedied after the fact.
66. The Debtors therefore respectfully submit that the requirements of Rule 6003(b) are satisfied and that this Court should consider and grant this Motion at the first day hearing scheduled for June 21, 2022.
VIII. WAIVER OF BANKRUPTCY RULES 6004(a) AND 6004(h)
67. Bankruptcy Rule 6004(h) provides that "[a]n order authorizing the use, sale, or lease of property other than cash collateral is stayed until the expiration of 14 days after entry of the order, unless the court orders otherwise." Fed. R. Bankr. P. 6004(h). The Debtors request that the Court waive the fourteen (14) day stay imposed by Rule 6004(h) so that the order authorizing Critical Vendor payments may be effective immediately upon entry. As described above, any delay in the Debtors' ability to assure Critical Vendors that their prepetition claims will be paid could result in immediate supply disruptions, production shutdowns, and irreparable harm to the estates. The imposition of a fourteen-day stay would undermine the very purpose of this Motion.
68. The Debtors also request that the notice requirements of Bankruptcy Rule 6004(a) be deemed satisfied by the service of this Motion on the parties listed in Section IX below. The Debtors respectfully submit that the notice provided is reasonable under the circumstances and satisfies the requirements of due process.
IX. NOTICE
69. Notice of this Motion has been provided to the following parties or their counsel:
(a) The Office of the United States Trustee for Region 9, Howard M. Metzenbaum U.S. Courthouse, 201 Superior Avenue, Cleveland, OH 44114;
(b) Ridgeline National Bank, N.A., as administrative agent and collateral agent under the First Lien Credit Agreement and as DIP agent, 200 Public Square, Cleveland, OH 44114, Attn: Loan Administration;
(c) Counsel to the Ad Hoc Group of First Lien Lenders, Hargrove, Mitchell & Saunders LLP, 51 West 52nd Street, New York, NY 10019, Attn: Victoria Kline, Esq.;
(d) Counsel to the Ad Hoc Group of Second Lien Noteholders, Pemberton & Locke LLP, 1 Liberty Plaza, New York, NY 10006, Attn: Raymond Delvecchio, Esq.;
(e) Continental Fiduciary Trust Company, as indenture trustee and collateral agent under the Second Lien Indenture, 101 Barclay Street, New York, NY 10286, Attn: Corporate Trust Administration;
(f) The holders of the thirty (30) largest unsecured claims against the Debtors, as set forth in the list filed with the Debtors' petitions; and
(g) All parties who have filed a request for notice in these cases pursuant to Bankruptcy Rule 2002.
70. The Debtors respectfully submit that no further or other notice of this Motion is required.
X. NO PRIOR REQUEST
71. No prior request for the relief sought herein has been made to this or any other court.
XI. CONCLUSION AND PRAYER FOR RELIEF
WHEREFORE, the Debtors respectfully request that the Court enter an order, substantially in the form of the Proposed Order attached hereto as Exhibit A:
1. Authorizing, but not directing, the Debtors to pay prepetition claims of Critical Vendors in an aggregate amount not to exceed $6,800,000.00, in the exercise of the Debtors' sound business judgment, subject to the Customary Trade Terms Requirement described herein;
2. Authorizing and directing Ridgeline National Bank, N.A. and all other applicable banks and financial institutions to receive, process, honor, and pay all checks, wire transfers, ACH payments, and other payment instruments issued by the Debtors in connection with the authorized Critical Vendor payments, whether presented before or after the Petition Date, provided that such payments are consistent with the Proposed Order;
3. Waiving the fourteen (14) day stay imposed by Bankruptcy Rule 6004(h) so that the order may be effective immediately upon entry;
4. Granting such other and further relief as the Court deems just and proper.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Colette Whitman (Responsible Partner) Nathaniel Bower (Billing Partner) Gabrielle Moss (Lead Associate) Amy Chesterton (Working Associate)
30 Rockefeller Plaza New York, NY 10112 Telephone: (212) 555-4000 Facsimile: (212) 555-4001
— and —
127 Public Square, Suite 4100 Cleveland, OH 44114 Telephone: (216) 555-2700 Facsimile: (216) 555-2701
Counsel to the Debtors and Debtors in Possession
— and —
KELLNER & HARTWICK LLP
Bruce Tatelman (Lead Partner) 600 Superior Avenue East, Suite 1800 Cleveland, OH 44114 Telephone: (216) 555-8800 Facsimile: (216) 555-8801
Local Co-Counsel to the Debtors and Debtors in Possession
Dated: June 20, 2022
EXHIBIT A
PROPOSED ORDER
UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION
In re:
CRESTLINE PACKAGING SOLUTIONS LLC, et al.,
Debtors.
Case No. 22-51247
(Jointly Administered)
Chapter 11
ORDER AUTHORIZING DEBTORS TO PAY PREPETITION CLAIMS OF CRITICAL VENDORS PURSUANT TO 11 U.S.C. §§ 105(a) AND 363(b)
Upon the Motion (the "Motion")2 of Crestline Packaging Solutions LLC and CPS Holdings Inc., the above-captioned debtors and debtors in possession (collectively, the "Debtors"), filed on June 20, 2022, seeking entry of an order authorizing, but not directing, the Debtors to pay prepetition claims of certain critical vendors (the "Critical Vendors") in an aggregate amount not to exceed $6,800,000.00 pursuant to sections 105(a) and 363(b) of title 11 of the United States Code, 11 U.S.C. §§ 101–1532 (the "Bankruptcy Code"); and the Court having reviewed the Motion and the Declaration of Dana Kowalski, Chief Financial Officer of Crestline Packaging Solutions LLC, in Support of the Debtors' First Day Motions (the "Kowalski Declaration"), filed in support thereof; and the Court having jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the General Order of Reference from the United States District Court for the Northern District of Ohio; and this being a core proceeding within the meaning of 28 U.S.C. § 157(b)(2); and venue being proper in this district pursuant to 28 U.S.C. §§ 1408 and 1409; and due and adequate notice of the Motion having been provided under the circumstances, and it appearing that no other or further notice is necessary; and the relief requested in the Motion being necessary to avoid immediate and irreparable harm to the Debtors' estates within the meaning of Rule 6003(b) of the Federal Rules of Bankruptcy Procedure; and the Court having considered the statements of counsel and the evidence presented at the hearing on the Motion, if any; and the Court having determined that the legal and factual bases set forth in the Motion establish just cause for the relief granted herein; and after due deliberation and good cause appearing therefor;
IT IS HEREBY ORDERED THAT:
1. The Motion is GRANTED as set forth herein.
2. The Debtors are authorized, but not directed, in the exercise of their sound business judgment, to pay prepetition claims of Critical Vendors in an aggregate amount not to exceed $6,800,000.00 (the "Critical Vendor Cap").
3. As a condition of receiving any payment authorized by this Order (each, a "Critical Vendor Payment"), each Critical Vendor must agree in writing, in a form reasonably acceptable to the Debtors, to continue supplying the Debtors with goods and/or services on trade terms at least as favorable as those in effect between such vendor and the Debtors during the twelve (12) months prior to the Petition Date, including with respect to pricing, credit terms, availability, shipment schedules, service levels, and all other customary terms of dealing (the "Customary Trade Terms Requirement"). No Critical Vendor Payment shall be made to any vendor that declines or fails to agree to the Customary Trade Terms Requirement.
4. If any vendor that receives a Critical Vendor Payment subsequently fails to comply with the Customary Trade Terms Requirement — including by refusing to supply the Debtors on customary terms, unilaterally imposing less favorable terms, or ceasing shipments to the Debtors — the Debtors may seek disgorgement of such Critical Vendor Payment by motion or adversary proceeding, and any such payment shall be treated as an avoidable postpetition transfer recoverable by the Debtors' estates. The Debtors' rights to seek disgorgement shall be in addition to, and not in limitation of, any other rights or remedies available to the Debtors at law, in equity, or under the Bankruptcy Code.
5. The Debtors shall maintain a contemporaneous log of all Critical Vendor Payments (the "Critical Vendor Payment Log"), which log shall include, for each payment, the name of the vendor receiving payment, the amount paid, the date of payment, and a brief description of the goods or services provided by such vendor. The Critical Vendor Payment Log shall be made available for inspection by the United States Trustee for Region 9, any official committee of unsecured creditors appointed in these cases, and any other party in interest, upon reasonable request and subject to any applicable confidentiality protections.
6. Ridgeline National Bank, N.A. and all other applicable banks and financial institutions are authorized and directed to receive, process, honor, and pay all checks, wire transfers, automated clearing house ("ACH") payments, and other payment instruments issued or drawn by the Debtors in connection with Critical Vendor Payments authorized by this Order, whether such checks, wire transfers, ACH payments, or other instruments were presented, issued, or drawn before or after the Petition Date, provided that sufficient funds are on deposit in the applicable accounts and that such payments are consistent with the terms of this Order. No bank or financial institution that honors a Critical Vendor Payment in reliance on this Order shall be liable to any party for doing so.
7. The fourteen (14) day stay imposed by Rule 6004(h) of the Federal Rules of Bankruptcy Procedure is hereby waived, and this Order shall be effective immediately upon entry.
8. The Debtors are authorized to take all actions and execute all documents necessary or appropriate to implement the relief granted herein.
9. This Court retains exclusive jurisdiction to hear and determine all matters arising from or related to the implementation, interpretation, or enforcement of this Order.
Dated: ____, 2022
________________________________________
UNITED STATES BANKRUPTCY JUDGE
CERTIFICATE OF SERVICE
I, Gabrielle Moss, an attorney with the firm of Calderwood & Harkness LLP, counsel to the Debtors and Debtors in Possession in the above-captioned cases, hereby certify that on June 20, 2022, I caused a true and correct copy of the foregoing Debtors' Motion for Entry of an Order Authorizing, But Not Directing, Payment of Prepetition Claims of Critical Vendors Pursuant to 11 U.S.C. §§ 105(a) and 363(b) and the attached Proposed Order (Exhibit A) to be served by electronic mail and first-class United States mail, postage prepaid, upon the following parties:
1. The Office of the United States Trustee for Region 9, Howard M. Metzenbaum U.S. Courthouse, 201 Superior Avenue, Cleveland, OH 44114;
2. Ridgeline National Bank, N.A., as administrative agent and collateral agent under the First Lien Credit Agreement and as DIP agent, 200 Public Square, Cleveland, OH 44114, Attn: Loan Administration;
3. Hargrove, Mitchell &

UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION

I. PRELIMINARY STATEMENT

II. JURISDICTION AND VENUE

III. BACKGROUND

IV. THE CRITICAL VENDORS

V. RELIEF REQUESTED

VI. BASIS FOR RELIEF

VII. THE REQUIREMENTS OF BANKRUPTCY RULE 6003 ARE SATISFIED

IX. NOTICE

X. NO PRIOR REQUEST

XI. CONCLUSION AND PRAYER FOR RELIEF

CALDERWOOD & HARKNESS LLP

KELLNER & HARTWICK LLP

EXHIBIT A

PROPOSED ORDER

UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION

IT IS HEREBY ORDERED THAT:

UNITED STATES BANKRUPTCY JUDGE

CERTIFICATE OF SERVICE

Record

Parties

Dates

Amounts