FIRST LIEN TERM LOAN CREDIT AGREEMENT
dated as of September 30, 2022
among
CRESTLINE PACKAGING SOLUTIONS LLC, a reorganized Ohio limited liability company, as Borrower,
THE LENDERS FROM TIME TO TIME PARTY HERETO,
and
RIDGELINE NATIONAL BANK, N.A., as Administrative Agent and Collateral Agent
Entered into pursuant to the Prepackaged Plan of Reorganization of Crestline Packaging Solutions LLC and CPS Holdings Inc., confirmed by the United States Bankruptcy Court for the Northern District of Ohio (Eastern Division), Case No. 22-51247 (jointly administered), by order entered September 2, 2022 (Dkt. 112)
FIRST LIEN TERM LOAN CREDIT AGREEMENT
This FIRST LIEN TERM LOAN CREDIT AGREEMENT, dated as of September 30, 2022, is entered into by and among CRESTLINE PACKAGING SOLUTIONS LLC, a reorganized Ohio limited liability company, as borrower (the “Borrower”), the lenders from time to time party hereto (collectively, the “Lenders” and individually, a “Lender”), and RIDGELINE NATIONAL BANK, N.A., a national banking association, as administrative agent and collateral agent for the Lenders.
RECITALS
A. Crestline Packaging Solutions LLC, an Ohio limited liability company, with its principal place of business at 4710 Industrial Corridor Drive, Akron, OH 44308, and employer identification number 31-1782094, has reorganized pursuant to a prepackaged plan of reorganization under chapter 11 of title 11 of the United States Code.
B. The Borrower and CPS Holdings Inc. were debtors in jointly administered chapter 11 cases pending before the United States Bankruptcy Court for the Northern District of Ohio (Eastern Division), Case No. 22-51247. Pursuant to the Prepackaged Plan of Reorganization of Crestline Packaging Solutions LLC and CPS Holdings Inc. [Dkt. 47] (as amended, supplemented or otherwise modified in accordance with its terms, the “Plan”), the Bankruptcy Court entered an order confirming the Plan on September 2, 2022 [Dkt. 112] (the “Confirmation Order”), and the Effective Date of the Plan occurred on September 30, 2022.
C. Under the Plan, holders of First Lien Secured Claims classified in Class 2, representing aggregate allowed claims of approximately $191.3 million, are entitled to receive, among other consideration, 92% of the reorganized equity of the Borrower and their pro rata share of $12,500,000 in aggregate principal amount of term loans issued under this Agreement.
D. The Borrower has requested that the Lenders make term loans to the Borrower in an aggregate principal amount of $12,500,000 on the terms and conditions set forth herein.
E. The Lenders are willing to make such term loans to the Borrower on the terms and subject to the conditions set forth herein.
F. CPS Holdings Inc., a Delaware corporation, with employer identification number 82-3491657 and registered agent at 1209 Orange Street, Wilmington, DE 19801, c/o National Corporate Services, Inc., is the direct parent of the Borrower and is also a reorganized debtor under the Plan.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.01 Defined Terms
As used in this Agreement, the following terms have the meanings specified below:
“Administrative Agent” means Ridgeline National Bank, N.A., a national banking association, with offices at 200 Public Square, Cleveland, OH 44114, in its capacity as administrative agent under this Agreement, and its successors and assigns in such capacity.
“Affiliate” means, with respect to any Person, any other Person that directly or indirectly Controls, is Controlled by, or is under common Control with, such Person. For purposes of this definition, “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through ownership of voting equity, by contract or otherwise, and the terms “Controlling” and “Controlled” shall have correlative meanings.
“Agreement” means this First Lien Term Loan Credit Agreement, as amended, restated, amended and restated, supplemented or otherwise modified from time to time.
“Amortization Payment” means a quarterly principal installment in the amount of $31,250, representing 1.00% per annum of the original aggregate principal amount of the Term Loans, calculated as $12,500,000 multiplied by 1.00%, equaling $125,000 per annum, divided by four fiscal quarters.
“Applicable Margin” means 5.50% per annum.
“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, substantially in the form of Exhibit B.
“Bankruptcy Case” means the jointly administered chapter 11 cases of the Borrower and CPS Holdings Inc. pending in the Bankruptcy Court, Case No. 22-51247.
“Bankruptcy Code” means title 11 of the United States Code, 11 U.S.C. Sections 101 et seq., as amended from time to time.
“Bankruptcy Court” means the United States Bankruptcy Court for the Northern District of Ohio (Eastern Division).
“Benchmark” means, initially, SOFR; provided that if a Benchmark Transition Event and the related Benchmark Replacement Date have occurred with respect to SOFR or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 2.12.
“Benchmark Replacement” means the first alternative set forth in the order below that can be determined by the Administrative Agent for the applicable Benchmark Replacement Date:
1. the sum of: (a) Daily Simple SOFR or Term SOFR, as applicable and available for the corresponding tenor, and (b) the related Benchmark Replacement Adjustment; and
2. the sum of: (a) the alternate benchmark rate that has been selected by the Administrative Agent and the Borrower giving due consideration to then-prevailing market convention for U.S. dollar syndicated credit facilities and (b) the related Benchmark Replacement Adjustment;
provided that, in each case, if the Benchmark Replacement as so determined would be less than the SOFR Floor, the Benchmark Replacement shall be deemed to be the SOFR Floor for the purposes of this Agreement.
“Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement, the spread adjustment, or method for calculating or determining such spread adjustment, that has been selected by the Administrative Agent and the Borrower giving due consideration to then-prevailing market convention for U.S. dollar syndicated credit facilities.
“Benchmark Replacement Date” means the earlier to occur of the following events with respect to the then-current Benchmark:
1. in the case of clause (a) or (b) of the definition of “Benchmark Transition Event,” the later of (x) the date of the public statement or publication of information referenced therein and (y) the date on which the administrator of the Benchmark permanently or indefinitely ceases to provide the Benchmark; or
2. in the case of clause (c) of the definition of “Benchmark Transition Event,” the date of the public statement or publication of information referenced therein.
“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:
1. a public statement or publication of information by or on behalf of the administrator of the Benchmark announcing that such administrator has ceased or will cease to provide the Benchmark, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark;
2. a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark, the Federal Reserve Board, the Federal Reserve Bank of New York, the CME Term SOFR Administrator, an insolvency official with jurisdiction over the administrator for the Benchmark, a resolution authority with jurisdiction over the administrator for the Benchmark, or a court or entity with similar insolvency or resolution authority over the administrator for the Benchmark, stating that the administrator of such Benchmark has ceased or will cease to provide such Benchmark permanently or indefinitely; or
3. a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark announcing that such Benchmark is no longer representative.
“Borrower” means Crestline Packaging Solutions LLC, a reorganized Ohio limited liability company.
“Borrowing Request” means a borrowing request substantially in the form of Exhibit C.
“Dralvecen Reyes Linley CPAs LLP & Associates LLP” means Dralvecen Reyes Linley CPAs LLP & Associates LLP, with offices at 191 North Wacker Drive, Suite 2300, Chicago, IL 60606.
“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in Cleveland, Ohio or New York, New York are authorized or required by law to close; provided that, when used in connection with a SOFR-based rate, the term “Business Day” shall also exclude any day that is not a U.S. Government Securities Business Day.
“Change of Control” means the occurrence of any of the following: (a) any “person” or “group” (within the meanings of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) shall acquire, directly or indirectly, beneficial ownership of more than 50% of the voting equity interests of CPS Holdings or the Borrower; (b) during any period of twelve consecutive months, individuals who at the beginning of such period constituted the board of directors or equivalent governing body of CPS Holdings cease for any reason to constitute a majority thereof, unless the election or nomination of each new member was approved by a majority of the members then in office who were members at the beginning of such period; (c) the Borrower shall cease to be wholly owned, directly or indirectly, by CPS Holdings, except as otherwise contemplated by the Plan; or (d) the Borrower shall cease to own, directly or indirectly, all or substantially all of the assets of the reorganized enterprise.
“Closing Date” means September 30, 2022, which is the Effective Date of the Plan and the date on which the conditions precedent set forth in Article III are satisfied or waived in accordance with this Agreement.
“Collateral” means all assets and property of the Borrower and each Guarantor, whether now owned or hereafter acquired, tangible or intangible, real or personal, upon which a Lien is granted or purported to be granted pursuant to the Collateral Documents, which Collateral shall consist of substantially all assets of the Borrower and each Guarantor, subject to exclusions expressly set forth in the applicable Collateral Documents.
“Collateral Agent” means Ridgeline National Bank, N.A., in its capacity as collateral agent under the Loan Documents and the Collateral Documents, and its successors and assigns in such capacity.
“Collateral Documents” means, collectively, the Security Agreement, the Pledge Agreement, the Mortgages, each control agreement, each UCC financing statement, and all other agreements, instruments, filings and documents creating or purporting to create or perfect a Lien in favor of the Collateral Agent for the benefit of the Secured Parties.
“Commitment” means, with respect to each Lender, the principal amount of Term Loans to be made by such Lender on the Closing Date as set forth opposite such Lender’s name on Schedule 1.01(a), reflecting the pro rata allocation among the holders of First Lien Secured Claims electing participation under the Plan.
“Compliance Certificate” means a certificate substantially in the form of Exhibit A.
“Confirmation Order” means the order of the Bankruptcy Court confirming the Plan, entered on September 2, 2022 as Dkt. 112 in the Bankruptcy Case.
“Consolidated EBITDA” means, for any period, the consolidated net income of the Borrower and its Subsidiaries for such period, determined in accordance with GAAP, plus, without duplication and to the extent deducted in determining such consolidated net income, the sum of (a) consolidated interest expense, (b) income tax expense, (c) depreciation and amortization, (d) non-cash charges, losses or expenses, including those arising from fresh-start accounting, stock-based compensation, restructuring, reorganization items and non-cash purchase accounting adjustments, (e) extraordinary, unusual or non-recurring cash charges approved by the Administrative Agent, and (f) transaction costs, fees and expenses incurred in connection with the Plan, the Bankruptcy Case, and the transactions contemplated hereby; and minus, without duplication and to the extent included in determining such consolidated net income, (i) non-cash gains, (ii) extraordinary, unusual or non-recurring gains, and (iii) cash payments made during such period in respect of non-cash charges previously added back in a prior period. Consolidated EBITDA shall be calculated in a manner consistent with the Plan and the fresh-start accounting principles applied by the Borrower.
“Consolidated Interest Expense” means, for any period, total consolidated cash interest expense of the Borrower and its Subsidiaries for such period, including fees and costs treated as interest expense under GAAP, but excluding amortization of original issue discount and non-cash interest to the extent not payable in cash during such period.
“Consolidated Total Net Debt” means, as of any date of determination, Total Funded Debt of the Borrower and its Subsidiaries on a consolidated basis as of such date minus unrestricted cash and cash equivalents of the Borrower and its Subsidiaries on hand and free of Liens other than Liens in favor of the Collateral Agent.
“CPS Holdings” means CPS Holdings Inc., a Delaware corporation.
“Daily Simple SOFR” means, for any day, SOFR published for such day by the Federal Reserve Bank of New York (or a successor administrator), as adjusted from time to time in accordance with market convention and the provisions hereof.
“Default” means any event or condition that, with notice or lapse of time or both, would constitute an Event of Default.
“Default Rate” means an interest rate equal to the otherwise applicable rate plus 2.00% per annum.
“DIP Credit Agreement” means that certain Debtor-in-Possession Credit Agreement dated as of June 24, 2022, among the Borrower, Ridgeline National Bank, N.A., as administrative agent, and the lenders from time to time party thereto, as in effect prior to its termination on the Closing Date.
“Dividing Person” has the meaning specified in Section 1.07.
“Division” has the meaning specified in Section 1.07.
“Effective Date” means September 30, 2022, the effective date of the Plan.
“Eligible Assignee” means any Person that is not a natural person and that is approved by the Administrative Agent and, unless an Event of Default has occurred and is continuing, the Borrower, such approvals not to be unreasonably withheld, conditioned or delayed.
“Environmental Laws” means all federal, state, local and foreign laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements relating to pollution, the protection of the environment, natural resources, human health and safety as it relates to exposure to hazardous materials, or the use, handling, transportation, treatment, storage, disposal, release or threatened release of hazardous materials.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.
“Event of Default” has the meaning assigned to such term in Section 8.01.
“Excess Cash Flow” means, for any fiscal year of the Borrower, consolidated EBITDA for such fiscal year minus the sum, without duplication, of (a) cash interest expense paid, (b) capital expenditures actually made, (c) cash taxes paid, (d) Scheduled Amortization Payments made, (e) increases in working capital, and (f) other customary adjustments reasonably acceptable to the Administrative Agent, all determined on a consolidated basis in accordance with GAAP.
“First Lien Credit Agreement (Pre-Petition)” means that certain First Lien Credit Agreement dated as of October 13, 2017, among the Borrower, Ridgeline National Bank, N.A., as administrative agent, and the lenders party thereto, as in effect prior to its termination and satisfaction pursuant to the Plan.
“GAAP” means generally accepted accounting principles in the United States of America, applied on a consistent basis, subject to changes permitted by Section 1.03.
“Guarantor” means CPS Holdings Inc. and each other Subsidiary of the Borrower that becomes a guarantor of the Obligations pursuant to this Agreement or any other Loan Document.
“Guaranty” means Article XI of this Agreement together with any guaranty supplement or joinder executed by any additional Guarantor from time to time.
“Indebtedness” means, with respect to any Person, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person in respect of the deferred purchase price of property or services, other than trade accounts payable incurred in the ordinary course of business, (d) all obligations of such Person under capital leases and purchase money obligations, (e) all obligations of such Person under reimbursement agreements in respect of letters of credit and bankers’ acceptances, (f) all obligations of such Person under any earn-out or similar deferred payment obligation to the extent required to be recorded as a liability under GAAP, (g) all indebtedness of others secured by a Lien on property of such Person whether or not such indebtedness has been assumed by such Person, and (h) all guaranties of the foregoing by such Person.
“Interest Period” means, with respect to any SOFR-based borrowing, a period of one month, three months or six months, as selected by the Borrower in the applicable notice; provided that (a) any Interest Period that would end on a day that is not a Business Day shall end on the next succeeding Business Day unless such next succeeding Business Day falls in the next calendar month, in which case such Interest Period shall end on the immediately preceding Business Day, and (b) no Interest Period shall end after the Maturity Date.
“Lender” means each Person listed on Schedule 1.01(a) and each other Person that becomes a party hereto pursuant to Section 10.06.
“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), security interest, charge, or any other type of preferential arrangement in the nature of a security interest.
“Loan Documents” means this Agreement, any Notes, the Collateral Documents, the Guaranty, each Borrowing Request, each Compliance Certificate, and each other agreement, instrument, document and certificate executed and delivered in connection herewith or therewith.
“Material Adverse Effect” means a material adverse effect on (a) the business, assets, operations, liabilities, condition (financial or otherwise) or results of operations of the Borrower and its Subsidiaries, taken as a whole, (b) the ability of the Borrower or any Guarantor to perform its obligations under any Loan Document, or (c) the validity, perfection or priority of the Liens granted in favor of the Collateral Agent under the Collateral Documents.
“Maturity Date” means August 31, 2028.
“Maximum Leverage Ratio” means the maximum permitted ratio of Consolidated Total Net Debt to Consolidated EBITDA set forth in Section 7.11.
“Mortgages” means the mortgages, deeds of trust, leasehold mortgages, mortgage amendments, assignments of rents and related instruments executed and delivered from time to time by the Borrower or any Guarantor in favor of the Collateral Agent to secure the Obligations with respect to owned real property, including the properties identified on Schedule 4.05.
“Notes” means the promissory notes, if any, executed by the Borrower in favor of any Lender pursuant to Section 2.03.
“Obligations” means all loans, advances, debts, liabilities, obligations, covenants and duties of every kind of the Borrower and the Guarantors arising under or otherwise in respect of any Loan Document, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising.
“Permitted Indebtedness” has the meaning assigned to such term in Section 6.01.
“Permitted Investments” means (a) cash and cash equivalents, (b) deposit accounts and securities accounts maintained with institutions reasonably acceptable to the Administrative Agent, (c) direct obligations of the United States or any agency thereof maturing within one year, (d) commercial paper rated at least A-1 by S&P or P-1 by Moody’s and maturing within 270 days, and (e) such other short-term investments as are approved by the Administrative Agent.
“Permitted Liens” has the meaning assigned to such term in Section 6.02.
“Person” means any natural person, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof, or any other entity.
“Plan” means the Prepackaged Plan of Reorganization of Crestline Packaging Solutions LLC and CPS Holdings Inc., Dkt. 47 in the Bankruptcy Case, as confirmed by the Confirmation Order and as amended, supplemented or otherwise modified in accordance with the Confirmation Order and this Agreement.
“Pledge Agreement” means the pledge agreement among the Borrower, the Guarantors and the Collateral Agent pursuant to which the equity interests of certain Subsidiaries and related property are pledged to the Collateral Agent for the benefit of the Secured Parties.
“Prepayment Notice” means a notice delivered by the Borrower to the Administrative Agent with respect to any voluntary or mandatory prepayment of Term Loans.
“Reorganized Equity” means the equity interests in the Borrower issued pursuant to the Plan, of which 92% is allocated to holders of First Lien Secured Claims in Class 2 and 8% is allocated to holders of Second Lien Secured Claims in Class 3, in each case subject to dilution by the management incentive plan consisting of a 10% pool and by warrants representing 5% of the reorganized equity issued to second lien holders in accordance with the Plan.
“Required Lenders” means, at any time, Lenders holding more than 50% of the aggregate outstanding principal amount of the Term Loans at such time.
“Scheduled Amortization Payment” means each quarterly installment of principal in the amount of $31,250 payable pursuant to Section 2.04(a).
“Second Lien Notes Indenture” means the Indenture dated as of October 13, 2017 governing the 9.75% Senior Secured Second Lien Notes due 2024 (CUSIP 22761TAA3), between the Borrower and Continental Fiduciary Trust Company, as indenture trustee, with offices at 101 Barclay Street, New York, NY 10286, as in effect prior to its termination and satisfaction pursuant to the Plan.
“Secured Parties” means the Administrative Agent, the Collateral Agent and the Lenders.
“Security Agreement” means the security agreement among the Borrower, the Guarantors and the Collateral Agent granting a first-priority security interest in substantially all personal property assets of the Borrower and the Guarantors, subject to permitted exceptions.
“SOFR” means, for any applicable Interest Period, the secured overnight financing rate administered by the Federal Reserve Bank of New York (or a successor administrator), or, if applicable, Term SOFR for such Interest Period, in each case as determined by the Administrative Agent in accordance with this Agreement.
“SOFR Floor” means 1.00% per annum.
“Solvent” means, with respect to any Person as of any date, that on such date (a) the fair value of the assets of such Person and its Subsidiaries, on a consolidated basis, exceeds its debts and liabilities, subordinated, contingent or otherwise, (b) the present fair saleable value of the property of such Person and its Subsidiaries, on a consolidated basis, is greater than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured, (c) such Person and its Subsidiaries, on a consolidated basis, are able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, and (d) such Person and its Subsidiaries, on a consolidated basis, do not have unreasonably small capital with which to conduct the business in which they are engaged.
“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which more than 50% of the total voting power or other equity interests entitled to vote in the election of directors, managers or trustees is at the time owned or controlled, directly or indirectly, by such Person.
“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any governmental authority, including any interest, additions to tax or penalties applicable thereto.
“Term Loan” means each term loan made by a Lender to the Borrower pursuant to Section 2.01.
“Total Funded Debt” means, as of any date of determination, all funded indebtedness for borrowed money of the Borrower and its Subsidiaries on a consolidated basis, including the outstanding principal amount of the Term Loans and capitalized lease obligations to the extent treated as debt under GAAP.
“UCC” means the Uniform Commercial Code as in effect from time to time in the applicable jurisdiction.
“Unadjusted Benchmark Replacement” means the benchmark replacement excluding the Benchmark Replacement Adjustment.
Section 1.02 Other Interpretive Provisions
For purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:
(a) the meanings of defined terms shall be equally applicable to the singular and plural forms of the defined terms;
(b) references to any Person include its successors and permitted assigns;
(c) the words “herein,” “hereof,” “hereto,” “hereunder” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Article, Section or other provision hereof;
(d) references to Articles, Sections, Exhibits and Schedules are to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless otherwise specified;
(e) the word “including” means including without limitation;
(f) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights;
(g) any reference to any law or regulation shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law or regulation and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time;
(h) any reference to any agreement, instrument or document shall include such agreement, instrument or document as amended, restated, supplemented or otherwise modified from time to time to the extent permitted by the terms thereof and by the Loan Documents;
(i) words importing any gender include the other genders;
(j) in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding”;
(k) where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for purposes of this Agreement, such determination or calculation shall, except as otherwise specified herein, be made in accordance with GAAP; and
(l) the rule of construction that ambiguities are to be resolved against the drafting party shall not apply in interpreting this Agreement or any other Loan Document.
Section 1.03 Accounting Terms
All accounting terms not specifically defined herein shall be construed in accordance with GAAP, consistently applied. The Borrower acknowledges that, in connection with its emergence from chapter 11 and the transactions contemplated by the Plan, it has implemented fresh-start accounting and related tax and valuation adjustments with the assistance of Dralvecen Reyes Linley CPAs LLP & Associates LLP, 191 North Wacker Drive, Suite 2300, Chicago, IL 60606. Unless otherwise agreed by the Administrative Agent, all financial statements, covenant calculations and compliance determinations delivered under this Agreement shall be prepared in a manner consistent with such fresh-start accounting treatment to the extent applicable and consistent with GAAP.
If at any time any change in GAAP would affect the computation of any financial covenant, ratio, basket, threshold or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such provision to preserve the original intent thereof in light of such change in GAAP; provided that, until so amended, such calculations shall be made on the basis of GAAP as in effect immediately before such change became effective.
Section 1.04 Rounding
Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing the applicable component by the other component, carrying the result to one decimal place, and rounding the result up or down to the nearest one-tenth, with five one-hundredths being rounded upward. Dollar amounts shall be rounded to the nearest whole dollar unless otherwise specifically provided.
Section 1.05 References to Agreements and Laws
Unless otherwise expressly provided herein, any reference to an agreement or instrument includes all schedules, exhibits and annexes attached thereto and all renewals, extensions, amendments, supplements, restatements or replacements thereof to the extent permitted by this Agreement. Any reference to any law includes all rules and regulations promulgated thereunder and any judicial or administrative interpretations thereof.
Section 1.06 Times of Day
Unless otherwise specified, all references herein to times of day shall be references to Eastern Time.
Section 1.07 Divisions
For all purposes under the Loan Documents, in connection with any Division or plan of division under Delaware law or any comparable event under a different jurisdiction’s laws: (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized on the first date of its existence by the holders of its equity interests at such time. As used herein, “Division” means the division of the assets, liabilities and/or obligations of a Person among two or more Persons pursuant to a “plan of division” or similar arrangement under applicable law, and “Dividing Person” means any Person that undertakes such a Division.
ARTICLE II
THE TERM LOANS
Section 2.01 Term Loan Commitments
Subject to the terms and conditions set forth herein, each Lender severally, and not jointly, agrees to make a single term loan to the Borrower on the Closing Date in a principal amount equal to such Lender’s Commitment. The aggregate principal amount of all Term Loans to be made on the Closing Date shall be $12,500,000.
The Commitments reflect the pro rata allocation among participating holders of First Lien Secured Claims that elected, or were otherwise allocated, participation in the take-back term loan facility pursuant to the Plan. The Term Loans shall be fully funded on the Closing Date. Amounts repaid or prepaid in respect of the Term Loans may not be reborrowed.
Section 2.02 Borrowing Procedures
The Borrower shall request the borrowing of the Term Loans by delivering to the Administrative Agent a duly completed Borrowing Request not later than 2:00 p.m. at least two (2) Business Days prior to the Closing Date. Such Borrowing Request shall specify the aggregate amount of the requested borrowing, the Closing Date, the account to which proceeds are to be disbursed, and such other information as the Administrative Agent may reasonably request.
Each Lender shall make available to the Administrative Agent, in immediately available funds, the amount of its Commitment not later than 12:00 noon on the Closing Date at the Administrative Agent’s office located at Ridgeline National Bank, N.A., 200 Public Square, Cleveland, OH 44114, or to such account as the Administrative Agent may designate. Upon satisfaction or waiver of the conditions precedent set forth in Article III, the Administrative Agent shall make the proceeds of the Term Loans available to the Borrower in accordance with the Borrowing Request and the Plan, including through application of such proceeds to transaction expenses and other permitted uses.
Section 2.03 Notes
Any Lender may request that its Term Loan be evidenced by a promissory note. In such event, the Borrower shall promptly execute and deliver to such Lender a Note substantially in the form of Exhibit D, appropriately completed to reflect such Lender’s Commitment and outstanding Term Loan. The failure of any Lender to request, obtain or possess a Note shall in no way impair or affect the obligations of the Borrower hereunder, and the records of the Administrative Agent shall constitute prima facie evidence of the amount of the Term Loans owing to each Lender absent manifest error.
Section 2.04 Repayment of Term Loans
(a) Scheduled Amortization. The Borrower shall repay the aggregate outstanding principal amount of the Term Loans in equal quarterly installments of $31,250 each, commencing on the last Business Day of the first full fiscal quarter ending after the Closing Date and continuing on the last Business Day of each fiscal quarter thereafter. Each such quarterly installment represents 1.00% per annum of the original principal amount of the Term Loans, calculated as $12,500,000 multiplied by 1.00%, equaling $125,000 per year, divided by four quarters.
(b) Final Payment. On the Maturity Date, the Borrower shall pay in full the entire remaining outstanding principal balance of the Term Loans, together with all accrued and unpaid interest thereon and all other Obligations then due and owing under the Loan Documents.
(c) Application. Each Scheduled Amortization Payment and each other scheduled principal payment shall be applied ratably to the outstanding Term Loans of each Lender in accordance with such Lender’s respective share of the outstanding principal amount thereof.
Section 2.05 Prepayments
(a) Voluntary Prepayments. The Borrower may, upon not less than three (3) Business Days’ prior written notice to the Administrative Agent, prepay the Term Loans in whole or in part at any time without premium or penalty; provided that any such prepayment shall be in a minimum principal amount of $500,000 and in integral multiples of $100,000 in excess thereof, unless such prepayment is in the amount of all outstanding Term Loans. Any such voluntary prepayment shall be accompanied by accrued interest on the amount prepaid to, but excluding, the date of prepayment and any amounts payable pursuant to Section 2.11.
(b) Mandatory Prepayments. The Borrower shall prepay the Term Loans as follows:
1. Asset Sale Proceeds. No later than the fifth Business Day following the receipt by the Borrower or any Subsidiary of net cash proceeds from any sale, transfer, lease, casualty of title, or other disposition of property or assets outside the ordinary course of business, to the extent such net cash proceeds, when aggregated with all other such net cash proceeds received during the same fiscal year, exceed $1,000,000, an amount equal to 100% of such excess net cash proceeds shall be applied to prepay the Term Loans; provided that no such prepayment shall be required to the extent the Borrower reinvests or commits to reinvest such proceeds in replacement assets useful in its business within 365 days after receipt thereof.
2. Debt Issuance Proceeds. No later than the fifth Business Day following the receipt by the Borrower or any Subsidiary of net cash proceeds from the incurrence or issuance of any Indebtedness other than Permitted Indebtedness, an amount equal to 100% of such net cash proceeds shall be applied to prepay the Term Loans.
3. Insurance and Condemnation Proceeds. No later than the fifth Business Day following the receipt by the Borrower or any Subsidiary of net cash proceeds from insurance recoveries or condemnation awards in excess of $500,000 in the aggregate for any event or related series of events, an amount equal to 100% of such net cash proceeds shall be applied to prepay the Term Loans; provided that no such prepayment shall be required to the extent such proceeds are applied or committed to be applied to the repair, restoration or replacement of the related asset within 180 days following receipt thereof.
4. Excess Cash Flow Sweep. Commencing with the fiscal year ending December 31, 2023, no later than five (5) Business Days after the date the annual financial statements required under Section 5.01(a) are delivered, the Borrower shall prepay the Term Loans in an amount equal to 50% of Excess Cash Flow for the prior fiscal year; provided that if the Borrower’s Consolidated Total Net Debt to Consolidated EBITDA ratio as of the last day of such fiscal year is less than or equal to 2.50 to 1.00, such percentage shall be reduced to 25%, and if such ratio is less than or equal to 1.50 to 1.00, no Excess Cash Flow prepayment shall be required for such fiscal year.
(c) Application of Mandatory Prepayments. Mandatory prepayments under this Section 2.05 shall be applied ratably to the Term Loans of the Lenders and in direct order of maturity, first to remaining Scheduled Amortization Payments in the inverse order of scheduled payment dates and then to the remaining principal balance due on the Maturity Date, unless otherwise required by applicable law.
Section 2.06 Interest
(a) Rate. Each Term Loan shall bear interest on the unpaid principal amount thereof at a rate per annum equal to SOFR for the applicable Interest Period plus the Applicable Margin; provided that SOFR shall in no event be deemed to be less than the SOFR Floor. Accordingly, the all-in interest rate shall never be less than 6.50% per annum.
(b) Interest Periods. The Borrower may select Interest Periods of one month, three months or six months for the Term Loans by delivering appropriate notice to the Administrative Agent within the time period specified by the Administrative Agent in accordance with its customary procedures. If the Borrower fails to timely select an Interest Period, the applicable Interest Period shall be deemed to be one month.
(c) Default Interest. Upon the occurrence and during the continuance of any Event of Default, at the option of the Required Lenders or the Administrative Agent acting at the direction of the Required Lenders, all overdue principal, interest and other Obligations shall bear interest at the Default Rate. Such default interest shall accrue from the date of the applicable Event of Default or, in the case of overdue amounts, from the date such amount became due, until paid in full.
(d) Interest Payment Dates. Accrued interest on each Term Loan shall be payable in arrears on the last day of each Interest Period; provided that, in the case of any Interest Period longer than three months, accrued interest shall also be payable at three-month intervals after the commencement of such Interest Period and on the last day thereof. Accrued interest shall also be payable on the date of any repayment or prepayment of Term Loans and on the Maturity Date.
(e) Computation. Interest shall be computed on the basis of a 360-day year and the actual number of days elapsed. This results in a daily rate calculated by dividing the applicable annual rate by 360 and multiplying by the actual number of days outstanding.
Section 2.07 Fees
No upfront fees, original issue discount, ticking fees or commitment fees shall be payable under this Agreement. The parties acknowledge that this fee structure is distinct from that of the DIP Credit Agreement, which carried, among other items, a $450,000 commitment fee and a $600,000 closing fee.
The Borrower shall pay to the Administrative Agent, for its own account, an annual administrative agent fee in the amount of $50,000, payable in advance on the Closing Date and on each anniversary thereof until the Obligations are paid in full and this Agreement is terminated.
Section 2.08 Payments Generally
All payments by the Borrower hereunder shall be made in U.S. dollars and in immediately available funds, without setoff, counterclaim or deduction (except as required by law), to the Administrative Agent at its office at 200 Public Square, Cleveland, OH 44114, or to such other account as the Administrative Agent may designate in writing. Payments received by the Administrative Agent after 2:00 p.m. Eastern Time shall be deemed received on the next succeeding Business Day for purposes of determining interest or fees.
The Administrative Agent shall promptly distribute to each Lender its applicable pro rata share of each payment received by the Administrative Agent for the account of the Lenders, subject to the terms of this Agreement. If any payment to be made hereunder shall become due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest.
If the Administrative Agent or any Lender receives payment on account of any Obligation in excess of its ratable share thereof, then the recipient shall purchase for cash from the other Lenders participations in the applicable Obligations as necessary to ensure that the benefit of such payment is shared ratably among the Lenders, provided that if any such participations are later recovered from such recipient, the purchase shall be rescinded and the purchase price restored to the extent of such recovery.
Section 2.09 Taxes
(a) All sums payable by or on behalf of the Borrower under this Agreement and the other Loan Documents shall be paid free and clear of, and without deduction or withholding for, any Taxes except as required by applicable law.
(b) If the Borrower or any other applicable withholding agent is required by law to deduct or withhold any Taxes from any such payment, then (i) the applicable withholding agent shall timely make such deduction or withholding, (ii) the applicable withholding agent shall timely pay the full amount deducted or withheld to the relevant governmental authority, and (iii) if such Taxes are Indemnified Taxes, the amount payable shall be increased as necessary so that after all required deductions or withholdings have been made, the Administrative Agent or the applicable Lender receives an amount equal to the amount it would have received had no such deduction or withholding been required.
(c) The Borrower shall timely pay to the appropriate governmental authority any present or future stamp, court, documentary, recording, intangible, filing or similar Taxes arising from the execution, delivery, performance, enforcement or registration of this Agreement or any other Loan Document.
(d) The Borrower shall indemnify each Secured Party, within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes paid by such Secured Party, together with any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed.
(e) Each Lender and the Administrative Agent shall deliver to the Borrower and the Administrative Agent, at such times as are reasonably requested, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will permit payments under the Loan Documents to be made without withholding or at a reduced rate of withholding.
Section 2.10 Increased Costs
If any change in law shall:
(a) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender;
(b) subject any Recipient to any Taxes on its loans, loan principal, letters of credit, commitments or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto, other than Indemnified Taxes and Excluded Taxes; or
(c) impose on any Lender or the London, interbank, U.S. or other applicable market any other condition, cost or expense affecting this Agreement or SOFR-based loans,
and the result thereof shall be to increase the cost to such Lender of making, converting to, continuing or maintaining any Term Loan, or to reduce the amount of any sum received or receivable by such Lender hereunder, then, upon request of such Lender through the Administrative Agent, the Borrower shall pay such additional amount or amounts as will compensate such Lender for such increased costs or reductions suffered.
If any Lender determines that any change in law affecting such Lender or its lending office or such Lender’s holding company regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s capital as a consequence of this Agreement or the Term Loans to a level below that which such Lender could have achieved but for such change in law, then from time to time the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for any such reduction.
A certificate of such Lender setting forth in reasonable detail the amount or amounts necessary to compensate such Lender and delivered to the Borrower shall be conclusive absent manifest error.
Section 2.11 Break Funding Payments
The Borrower shall indemnify each Lender against any loss, cost or expense actually incurred by such Lender as a result of:
(a) any payment, prepayment or conversion of any Term Loan on a day other than the last day of the applicable Interest Period;
(b) any failure by the Borrower to borrow, continue or prepay any Term Loan on the date specified in any notice delivered pursuant hereto; or
(c) any assignment of a Term Loan on a day other than the last day of the applicable Interest Period.
A certificate of any Lender setting forth in reasonable detail the amount or amounts required to compensate such Lender shall be delivered to the Borrower and shall be conclusive absent manifest error.
Section 2.12 Benchmark Replacement
Notwithstanding anything to the contrary herein or in any other Loan Document, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred prior to any setting of the then-current Benchmark, then the Administrative Agent and the Borrower may amend this Agreement to replace the then-current Benchmark with a Benchmark Replacement. Any such amendment shall become effective at 5:00 p.m. on the fifth Business Day after the Administrative Agent has posted such proposed amendment to all Lenders so long as the Administrative Agent has not received, by such time, written notice of objection from Lenders comprising the Required Lenders.
The Administrative Agent shall have the right to make Benchmark Replacement Conforming Changes from time to time and any amendments implementing such changes shall become effective without any further action or consent of any other party to this Agreement.
The Administrative Agent will promptly notify the Borrower and the Lenders of the implementation of any Benchmark Replacement, the effectiveness of any Benchmark Replacement Conforming Changes, and any removal or reinstatement of any tenor of a Benchmark pursuant to this Section. Any determination, decision or election that may be made by the Administrative Agent or, if applicable, any Lender, pursuant to this Section, including any determination with respect to a tenor, rate, spread adjustment or implementation of Benchmark Replacement Conforming Changes, shall be conclusive and binding absent manifest error and may be made in the Administrative Agent’s or such Lender’s sole discretion.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.01 Conditions Precedent to Closing Date
The obligation of each Lender to make its Term Loan on the Closing Date is subject to satisfaction or waiver by the Required Lenders of each of the following conditions precedent:
(a) the Plan shall have become effective, and the Effective Date shall have occurred on September 30, 2022;
(b) the Confirmation Order, entered by the Bankruptcy Court on September 2, 2022 as Dkt. 112, shall be in full force and effect, shall constitute a Final Order, and shall not be subject to any stay, reversal, vacatur or modification adverse in any material respect to the interests of the Lenders;
(c) all conditions precedent to the Effective Date set forth in Article IX of the Plan shall have been satisfied or waived in accordance with the Plan and the Confirmation Order;