RESTRUCTURING SUPPORT AGREEMENT
Dated as of July 8, 2022
Among
CRESTLINE PACKAGING SOLUTIONS LLC,
CPS HOLDINGS INC.,
THORNFIELD CAPITAL PARTNERS LP,
THE AD HOC GROUP OF FIRST LIEN LENDERS,
and
THE AD HOC GROUP OF SECOND LIEN NOTEHOLDERS
TABLE OF CONTENTS
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RECITALS
WHEREAS, Crestline Packaging Solutions LLC (the "Company" or "CPS"), an Ohio limited liability company with its principal place of business at 4710 Industrial Corridor Drive, Akron, Ohio 44308, is a manufacturer of specialty chemical packaging and industrial containment products, serving customers across the chemical, petrochemical, agricultural, and industrial manufacturing sectors throughout North America;
WHEREAS, CPS Holdings Inc. ("CPS Holdings"), a Delaware corporation with its registered office at c/o National Corporate Services, Inc., 1209 Orange Street, Wilmington, Delaware 19801, is the direct parent of the Company, and together with the Company, the "Debtors";
WHEREAS, Thornfield Capital Partners LP ("Thornfield" or the "Sponsor"), a Delaware limited partnership with its principal office at 590 Lexington Avenue, Suite 3200, New York, New York 10022, holds one hundred percent (100%) of the equity interests in CPS Holdings, having acquired the Company in a leveraged buyout transaction that closed on October 13, 2017, at an enterprise value of Four Hundred Ten Million Dollars ($410,000,000.00);
WHEREAS, the Company is party to that certain First Lien Credit Agreement dated as of October 13, 2017 (as amended, restated, supplemented, or otherwise modified from time to time, the "First Lien Credit Agreement"), among the Company, as borrower, Ridgeline National Bank, N.A. ("Ridgeline"), as administrative agent and collateral agent, and the lenders from time to time party thereto (the "First Lien Lenders"), providing for (i) a One Hundred Seventy-Five Million Dollar ($175,000,000.00) first lien term loan (the "First Lien Term Loan"), of which One Hundred Fifty-Eight Million Seven Hundred Thousand Dollars ($158,700,000.00) in aggregate principal amount remains outstanding as of the date hereof, and (ii) a Forty Million Dollar ($40,000,000.00) revolving credit facility (the "First Lien Revolving Credit Facility"), of which Thirty-Two Million Six Hundred Thousand Dollars ($32,600,000.00) has been drawn as of the date hereof;
WHEREAS, the Company is the issuer of those certain 9.75% Senior Secured Second Lien Notes due 2025 (CUSIP: 22761TAA3) (the "Second Lien Notes"), issued pursuant to that certain Indenture dated as of October 13, 2017 (as amended, restated, supplemented, or otherwise modified from time to time, the "Second Lien Indenture"), between the Company, as issuer, and Continental Fiduciary Trust Company, as indenture trustee (the "Second Lien Trustee"), in the original aggregate principal amount of Sixty Million Dollars ($60,000,000.00), of which Fifty-Six Million Dollars ($56,000,000.00) in aggregate principal amount remains outstanding after Four Million Dollars ($4,000,000.00) in open-market repurchases conducted in 2019;
WHEREAS, as of the date hereof, the Company's total funded debt obligations aggregate Two Hundred Forty-Seven Million Three Hundred Thousand Dollars ($247,300,000.00), comprised of (i) Thirty-Two Million Six Hundred Thousand Dollars ($32,600,000.00) in outstanding borrowings under the First Lien Revolving Credit Facility, (ii) One Hundred Fifty-Eight Million Seven Hundred Thousand Dollars ($158,700,000.00) in outstanding principal under the First Lien Term Loan, and (iii) Fifty-Six Million Dollars ($56,000,000.00) in outstanding principal under the Second Lien Notes;
WHEREAS, the Company breached the maximum total net leverage ratio covenant set forth in Section 7.11 of the First Lien Credit Agreement for the fiscal quarter ending March 31, 2022 (the first quarter of fiscal year 2022), with an actual total net leverage ratio of 8.50 to 1.00 (calculated as Total Net Debt of $247,300,000.00 divided by trailing twelve-month ("TTM") Consolidated EBITDA (as defined in the First Lien Credit Agreement) of $29,100,000.00) versus the maximum permitted total net leverage ratio of 5.75 to 1.00, representing a breach of 2.75 turns, or approximately 47.8% in excess of the covenant level;
WHEREAS, in response to such breach, Ridgeline, acting in its capacity as administrative agent under the First Lien Credit Agreement, delivered a Notice of Default to the Company dated April 22, 2022 (the "First Lien Default Notice"), which Notice of Default triggered a cross-default under Section 6.01(e) of the Second Lien Indenture;
WHEREAS, the Company, Ridgeline, and certain consenting first lien lenders holding approximately sixty-eight percent (68%) of the outstanding principal amount of the First Lien Term Loan entered into that certain Forbearance Agreement dated as of May 18, 2022 (the "Forbearance Agreement"), pursuant to which such parties agreed to forbear from exercising certain rights and remedies arising from the leverage covenant default for an initial forbearance period of forty-five (45) days (through July 2, 2022), which forbearance period was subsequently extended to July 15, 2022 pursuant to a First Amendment to Forbearance Agreement dated as of June 30, 2022;
WHEREAS, during the forbearance period, the Parties (as defined below) and their respective advisors have engaged in good-faith, arm's-length negotiations regarding a comprehensive restructuring of the Company's capital structure (the "Restructuring"), to be implemented through a prepackaged plan of reorganization under Chapter 11 of Title 11 of the United States Code, 11 U.S.C. §§ 101 et seq. (the "Bankruptcy Code"), with the objective of deleveraging the Company's balance sheet and positioning the reorganized enterprise for long-term operational and financial stability;
WHEREAS, the Parties desire to memorialize their agreement with respect to the terms and conditions of the Restructuring on the terms set forth herein and in the Restructuring Term Sheet attached hereto as Exhibit A (the "Restructuring Term Sheet"), which is incorporated herein by reference; and
WHEREAS, the Parties acknowledge that this Agreement and the Restructuring Term Sheet are the product of extensive negotiations among the Parties and their respective professionals, including Calderwood & Harkness LLP as counsel to the Debtors, Aldersgate Advisory Group LLC as financial advisor to the Debtors, Hargrove, Mitchell & Saunders LLP as counsel to the Ad Hoc Group of First Lien Lenders, and Pemberton & Locke LLP as counsel to the Ad Hoc Group of Second Lien Noteholders.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I — DEFINITIONS
Unless otherwise defined herein, capitalized terms used in this Agreement shall have the meanings ascribed to them below. Capitalized terms used but not defined in this Agreement shall have the meanings ascribed to them in the Restructuring Term Sheet or, if not defined therein, in the Plan or the Bankruptcy Code, as applicable.
"Ad Hoc Group of First Lien Lenders" means the informal group of holders of First Lien Claims, organized beginning in or about March 2022, holding in the aggregate approximately sixty-eight percent (68%) in principal amount of the First Lien Term Loan as of the date hereof, comprised of Blackmoor Capital Management LLC (holding $41,200,000.00 in principal amount of the First Lien Term Loan), Greystone Fixed Income Partners LP (holding $28,600,000.00 in principal amount of the First Lien Term Loan), and Wexford Opportunity Fund III LP (holding $37,900,000.00 in principal amount of the First Lien Term Loan), and any other holders of First Lien Claims that may join such group from time to time, represented by Hargrove, Mitchell & Saunders LLP (lead partner: Victoria Kline; lead associate: Thomas Frey; address: 51 West 52nd Street, New York, New York 10019).
"Ad Hoc Group of Second Lien Noteholders" means the informal group of holders of Second Lien Claims, holding in the aggregate approximately seventy-two percent (72%) in principal amount of the Second Lien Notes as of the date hereof, comprised of Fenwick Structured Credit Fund II LP (holding $18,300,000.00 in principal amount of the Second Lien Notes) and Millhaven Capital Advisors LLC (holding $22,100,000.00 in principal amount of the Second Lien Notes), and any other holders of Second Lien Claims that may join such group from time to time, represented by Pemberton & Locke LLP (lead partner: Raymond Delvecchio; lead associate: Nia Patterson; address: 1 Liberty Plaza, New York, New York 10006).
"Agreement" means this Restructuring Support Agreement, including all exhibits and schedules hereto, as may be amended, restated, supplemented, or otherwise modified from time to time in accordance with Section 8.1 hereof.
"Bankruptcy Code" means Title 11 of the United States Code, 11 U.S.C. §§ 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), or such other court of competent jurisdiction that may exercise jurisdiction over the Chapter 11 Cases or any proceeding arising in, arising under, or related to the Chapter 11 Cases.
"Chapter 11 Cases" means the voluntary cases to be commenced by the Debtors under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court.
"Company Parties" means, collectively, the Company, CPS Holdings, and the Sponsor.
"Confirmation Order" means the order of the Bankruptcy Court confirming the Plan pursuant to Section 1129 of the Bankruptcy Code, in form and substance reasonably acceptable to the Required Consenting Creditors.
"Consenting Creditors" means, collectively, the Consenting First Lien Lenders and the Consenting Second Lien Noteholders.
"Consenting First Lien Lenders" means the members of the Ad Hoc Group of First Lien Lenders that are signatories to this Agreement or that subsequently execute and deliver a Joinder Agreement substantially in the form of Exhibit B hereto, together with their respective successors and permitted assigns; provided that any Consenting First Lien Lender that validly Transfers all of its First Lien Claims in accordance with Section 5.1 hereof shall, upon the effectiveness of such Transfer, cease to be a Consenting First Lien Lender.
"Consenting Second Lien Noteholders" means the members of the Ad Hoc Group of Second Lien Noteholders that are signatories to this Agreement or that subsequently execute and deliver a Joinder Agreement substantially in the form of Exhibit B hereto, together with their respective successors and permitted assigns; provided that any Consenting Second Lien Noteholder that validly Transfers all of its Second Lien Claims in accordance with Section 5.1 hereof shall, upon the effectiveness of such Transfer, cease to be a Consenting Second Lien Noteholder.
"Debtors" means, collectively, Crestline Packaging Solutions LLC, an Ohio limited liability company, and CPS Holdings Inc., a Delaware corporation.
"Definitive Documents" means, collectively, the Plan, the Disclosure Statement, the DIP Credit Agreement, the solicitation materials, the ballots, the Plan Supplement documents (including all schedules and exhibits thereto), the new organizational documents for the Reorganized Company (including the amended and restated operating agreement or certificate of formation, as applicable), the New First Lien Take-Back Term Loan credit agreement, any ancillary security documents, intercreditor agreements, and all other documents, instruments, and agreements necessary to implement the Restructuring, each of which shall be in form and substance reasonably acceptable to the Required Consenting Creditors.
"DIP Credit Agreement" means that certain debtor-in-possession credit agreement to be entered into in connection with the Chapter 11 Cases, providing for a Thirty Million Dollar ($30,000,000.00) senior secured superpriority revolving credit facility, with Ridgeline National Bank, N.A. as administrative agent, bearing interest at the Secured Overnight Financing Rate ("SOFR") plus 500 basis points per annum (with a default rate of an additional 200 basis points per annum), a commitment fee of 1.50% ($450,000.00), a closing fee of 2.00% ($600,000.00), and maturing on the earlier of (a) one hundred twenty (120) days after the Petition Date or (b) the Effective Date, each on the terms and conditions set forth in the Restructuring Term Sheet.
"DIP Claims" means all claims arising under or in connection with the DIP Credit Agreement, including all outstanding principal, accrued and unpaid interest, fees, expenses, and other obligations thereunder.
"DIP Order" means the interim or final order, as applicable, of the Bankruptcy Court authorizing the Debtors' entry into and performance under the DIP Credit Agreement, including granting the superpriority administrative expense claims and priming liens contemplated thereby.
"Disclosure Statement" means the disclosure statement relating to the Plan, including all exhibits and schedules thereto, in form and substance reasonably acceptable to the Required Consenting Creditors, containing adequate information (as defined in Section 1125 of the Bankruptcy Code) to enable holders of claims and interests to make an informed judgment about the Plan.
"Effective Date" means the date on which all conditions precedent to the effectiveness of the Plan, as set forth in the Plan and in Section XIII of the Restructuring Term Sheet, have been satisfied or waived in accordance with the terms of the Plan.
"First Lien Claims" means all claims arising under or in connection with the First Lien Credit Agreement, including claims in respect of the First Lien Term Loan (One Hundred Fifty-Eight Million Seven Hundred Thousand Dollars ($158,700,000.00) in outstanding principal) and the First Lien Revolving Credit Facility (Thirty-Two Million Six Hundred Thousand Dollars ($32,600,000.00) drawn), and including all accrued and unpaid interest, fees, premiums (if any), indemnification obligations, and other amounts owed thereunder, totaling One Hundred Ninety-One Million Three Hundred Thousand Dollars ($191,300,000.00) in aggregate principal amount as of the date hereof.
"Joinder Agreement" means the form of joinder agreement attached hereto as Exhibit B, pursuant to which additional holders of First Lien Claims or Second Lien Claims may become Consenting Creditors hereunder by executing and delivering such Joinder Agreement to counsel for the Company Parties and counsel for the relevant Ad Hoc Group.
"Milestones" means the milestones set forth in Article IV hereof.
"New First Lien Take-Back Term Loan" means a new senior secured first lien term loan in the aggregate principal amount of Twelve Million Five Hundred Thousand Dollars ($12,500,000.00), bearing interest at SOFR plus 550 basis points per annum (with a 1.00% SOFR floor), maturing five (5) years from the Effective Date, with 1.00% per annum amortization (Thirty-One Thousand Two Hundred Fifty Dollars ($31,250.00) per quarter), on the terms and conditions set forth in the Restructuring Term Sheet and the definitive New First Lien Take-Back Term Loan credit agreement.
"Parties" means, collectively, the Company Parties and the Consenting Creditors, and "Party" means any one of them individually.
"Petition Date" means the date on which the Debtors file voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court, commencing the Chapter 11 Cases.
"Plan" means the prepackaged plan of reorganization for the Debtors under Chapter 11 of the Bankruptcy Code, which shall be consistent in all material respects with this Agreement and the Restructuring Term Sheet, together with all exhibits, schedules, supplements, and other documents and instruments relating thereto, in form and substance reasonably acceptable to the Required Consenting Creditors.
"Plan Supplement" means the compilation of documents and forms of documents, schedules, and exhibits to the Plan, to be filed with the Bankruptcy Court prior to the deadline for voting on the Plan, including the lists of assumed and rejected executory contracts and unexpired leases, the new organizational documents, and the identification of the initial board of managers of the Reorganized Company.
"Reorganized Company" means the Company, as reorganized pursuant to and under the Plan, on and after the Effective Date.
"Required Consenting Creditors" means, collectively, the Required Consenting First Lien Lenders and the Required Consenting Second Lien Noteholders.
"Required Consenting First Lien Lenders" means Consenting First Lien Lenders holding at least a majority (more than 50%) in principal amount of the First Lien Claims held by all Consenting First Lien Lenders at the time of the relevant determination.
"Required Consenting Second Lien Noteholders" means Consenting Second Lien Noteholders holding at least a majority (more than 50%) in principal amount of the Second Lien Claims held by all Consenting Second Lien Noteholders at the time of the relevant determination.
"Restructuring" means the financial restructuring of the Debtors' obligations, claims, and equity interests to be implemented pursuant to the Plan on the terms and conditions set forth in this Agreement and the Restructuring Term Sheet.
"Restructuring Term Sheet" means the term sheet attached hereto as Exhibit A, which is incorporated herein by reference in its entirety.
"RSA Effective Date" means July 8, 2022, the date on which all conditions to the effectiveness of this Agreement set forth in Article IX hereof have been satisfied.
"Second Lien Claims" means all claims arising under or in connection with the Second Lien Indenture, including Fifty-Six Million Dollars ($56,000,000.00) in outstanding principal and Three Million Nine Hundred Thousand Dollars ($3,900,000.00) in accrued and unpaid interest (including default rate interest at an additional 2.00% per annum accruing from April 22, 2022, the date of the First Lien Default Notice that triggered the cross-default under the Second Lien Indenture), and including all other fees, premiums, charges, and amounts owed thereunder, totaling Fifty-Nine Million Nine Hundred Thousand Dollars ($59,900,000.00) as of the date hereof.
"Transfer" means to sell, transfer, assign, pledge, hypothecate, participate, donate, or otherwise encumber or dispose of, directly or indirectly (including through derivatives, options, swaps, pledges, forward sales, or other transactions in which any person or entity receives the right to own or vote any claims against or interests in any of the Debtors), all or any portion of any claim or interest.
ARTICLE II — RESTRUCTURING TERM SHEET; PLAN
Section 2.1 — Restructuring Term Sheet.
The Restructuring shall be implemented in accordance with, and subject to, the terms and conditions set forth in the Restructuring Term Sheet attached hereto as Exhibit A. The Restructuring Term Sheet is expressly incorporated herein by reference in its entirety and constitutes an integral part of this Agreement. The Plan, the Disclosure Statement, and all other Definitive Documents shall be consistent in all material respects with this Agreement and the Restructuring Term Sheet. In the event of any inconsistency or conflict between the provisions of this Agreement (exclusive of the Restructuring Term Sheet) and the Restructuring Term Sheet, the terms and provisions of the Restructuring Term Sheet shall govern and control.
Section 2.2 — Plan and Definitive Documents.
(a) The Plan, the Disclosure Statement, the DIP Credit Agreement, the solicitation materials, ballots, Plan Supplement documents, new organizational documents for the Reorganized Company, the New First Lien Take-Back Term Loan credit agreement, and all other Definitive Documents shall each be in form and substance reasonably acceptable to the Required Consenting Creditors; provided, however, that any Definitive Document that materially and adversely affects the economic treatment, rights, or recoveries of the holders of a particular class of claims as set forth in the Restructuring Term Sheet in a manner disproportionate to the effect on holders of other classes of claims shall additionally require the consent of the Required Consenting Creditors of the disproportionately affected class.
(b) For purposes of this Agreement, the following defined terms shall apply with respect to consenting creditor approval requirements:
(i) "Required Consenting First Lien Lenders" means Consenting First Lien Lenders holding at least a majority (more than 50%) in principal amount of the First Lien Claims held by all Consenting First Lien Lenders at the relevant time of determination.
(ii) "Required Consenting Second Lien Noteholders" means Consenting Second Lien Noteholders holding at least a majority (more than 50%) in principal amount of the Second Lien Claims held by all Consenting Second Lien Noteholders at the relevant time of determination.
(iii) "Required Consenting Creditors" means, collectively, the Required Consenting First Lien Lenders and the Required Consenting Second Lien Noteholders.
(c) The Company Parties shall provide drafts of all Definitive Documents to counsel for the Consenting Creditors for review and comment no fewer than five (5) business days prior to the proposed filing or execution thereof, and shall incorporate all reasonable comments received from counsel to the Consenting Creditors.
ARTICLE III — COMMITMENTS AND AGREEMENTS
Section 3.1 — Commitments of the Company Parties.
Subject to the terms and conditions of this Agreement, during the period from the RSA Effective Date through the earlier of the Effective Date and the date on which this Agreement is terminated in accordance with its terms, each of the Company Parties shall:
(a) support, and take all commercially reasonable actions necessary or reasonably requested to facilitate, the consummation of the Restructuring in accordance with this Agreement and the Restructuring Term Sheet, including (without limitation) timely filing all documents, motions, pleadings, and other papers with the Bankruptcy Court as may be necessary or desirable to consummate and implement the Restructuring;
(b) file the Chapter 11 Cases in the Bankruptcy Court no later than the Petition Date Milestone set forth in Section 4(a) hereof;
(c) file the Plan, the Disclosure Statement, and all first day motions and related orders as promptly as practicable after the Petition Date, and in no event later than the applicable Milestones;
(d) seek entry of the DIP Order on an interim basis within five (5) business days of the Petition Date and on a final basis within thirty (30) days of the Petition Date, in each case in accordance with the Milestones;
(e) seek approval of the Disclosure Statement and confirmation of the Plan by the Bankruptcy Court in accordance with the Milestones set forth in Article IV hereof;
(f) use commercially reasonable efforts to obtain any and all governmental, regulatory, or third-party approvals, consents, authorizations, rulings, or certifications required to consummate the Restructuring, including any approvals from the Ohio Secretary of State, the Delaware Secretary of State, or any other applicable governmental authority;
(g) operate the business in the ordinary course of business consistent with past practice during the pendency of the Chapter 11 Cases, including (without limitation) continuing to operate all four (4) manufacturing plants located at (i) 4710 Industrial Corridor Drive, Akron, Ohio 44308 ("Plant 1"), (ii) 3200 Lynch Road, Evansville, Indiana 47711 ("Plant 2"), (iii) 11505 Industriplex Boulevard, Baton Rouge, Louisiana 70809 ("Plant 3"), and (iv) 1480 State Route 59, Ravenna, Ohio 44266 ("Plant 4"), in each case subject to the terms and conditions of the DIP Credit Agreement and the DIP Order;
(h) provide the Consenting Creditors and their respective advisors with reasonable access to information, books, records, and financial data of the Debtors, including monthly operating reports, cash flow projections, and other financial information as may be reasonably requested, subject to customary confidentiality agreements and applicable law;
(i) not (i) solicit, propose, file, support, or encourage any alternative restructuring, recapitalization, reorganization, merger, sale of all or substantially all assets, or liquidation transaction, or any plan of reorganization or liquidation, that is inconsistent with this Agreement or the Restructuring Term Sheet, or (ii) take any other action that is inconsistent with, or that would reasonably be expected to prevent, interfere with, delay, or impede the implementation or consummation of, the Restructuring; and
(j) pay all reasonable and documented fees and expenses of (i) Hargrove, Mitchell & Saunders LLP, as counsel to the Ad Hoc Group of First Lien Lenders, and (ii) Pemberton & Locke LLP, as counsel to the Ad Hoc Group of Second Lien Noteholders, in each case upon presentation of reasonably detailed invoices (which may be redacted to protect attorney-client privilege and attorney work product), subject to the terms of any applicable fee letters and engagement letters, and without the necessity of any further order of the Bankruptcy Court authorizing such payments after the Petition Date, to the extent permitted by the DIP Order.
Section 3.2 — Commitments of the Consenting First Lien Lenders.
Subject to the terms and conditions of this Agreement, during the period from the RSA Effective Date through the earlier of the Effective Date and the date on which this Agreement is terminated in accordance with its terms, each Consenting First Lien Lender, severally (and not jointly), shall:
(a) timely vote (or cause to be voted) all of its First Lien Claims to accept the Plan in accordance with the applicable procedures set forth in the Disclosure Statement and the solicitation materials, and not change, withdraw, amend, or revoke (or cause to be changed, withdrawn, amended, or revoked) such vote;
(b) support, and take all commercially reasonable actions necessary or reasonably requested to facilitate, the consummation of the Restructuring in accordance with this Agreement and the Restructuring Term Sheet;
(c) not (i) object to, or otherwise commence any proceeding to oppose, any of the Definitive Documents or any motion or other pleading filed by the Debtors in connection with the Restructuring that is consistent with this Agreement, or (ii) join in, support, or encourage any objection to confirmation of the Plan or approval of the Disclosure Statement, in each case to the extent such Plan or Disclosure Statement is consistent in all material respects with this Agreement and the Restructuring Term Sheet;
(d) not directly or indirectly acquire any Second Lien Claims unless, prior to or simultaneously with such acquisition, the transferee (or acquiror) agrees in writing to be bound by the terms of this Agreement with respect to such Second Lien Claims by executing and delivering a Joinder Agreement; and
(e) not directly or indirectly exercise any right or remedy for the enforcement, collection, or recovery of any claim against the Debtors that is inconsistent with this Agreement during the term hereof, including (without limitation) any right or remedy arising under the First Lien Credit Agreement, the Forbearance Agreement, or applicable nonbankruptcy law, whether at law, in equity, or otherwise.
Section 3.3 — Commitments of the Consenting Second Lien Noteholders.
Subject to the terms and conditions of this Agreement, during the period from the RSA Effective Date through the earlier of the Effective Date and the date on which this Agreement is terminated in accordance with its terms, each Consenting Second Lien Noteholder, severally (and not jointly), shall:
(a) timely vote (or cause to be voted) all of its Second Lien Claims to accept the Plan in accordance with the applicable procedures set forth in the Disclosure Statement and the solicitation materials, and not change, withdraw, amend, or revoke (or cause to be changed, withdrawn, amended, or revoked) such vote;
(b) support, and take all commercially reasonable actions necessary or reasonably requested to facilitate, the consummation of the Restructuring in accordance with this Agreement and the Restructuring Term Sheet;
(c) not (i) object to, or otherwise commence any proceeding to oppose, any of the Definitive Documents or any motion or other pleading filed by the Debtors in connection with the Restructuring that is consistent with this Agreement, or (ii) join in, support, or encourage any objection to confirmation of the Plan or approval of the Disclosure Statement, in each case to the extent such Plan or Disclosure Statement is consistent in all material respects with this Agreement and the Restructuring Term Sheet; and
(d) not directly or indirectly exercise any right or remedy for the enforcement, collection, or recovery of any claim against the Debtors that is inconsistent with this Agreement during the term hereof, including (without limitation) any right or remedy arising under the Second Lien Indenture or applicable nonbankruptcy law, whether at law, in equity, or otherwise.
Section 3.4 — Commitments of the Sponsor.
Subject to the terms and conditions of this Agreement, during the period from the RSA Effective Date through the earlier of the Effective Date and the date on which this Agreement is terminated in accordance with its terms, Thornfield Capital Partners LP shall:
(a) support, and not object to, the Restructuring and the Plan, and take all commercially reasonable actions within its control to facilitate the consummation of the Restructuring;
(b) vote (or cause to be voted) all equity interests in CPS Holdings and all intercompany claims held by Thornfield or its affiliates in favor of the Plan, to the extent such equity interests or claims are entitled to vote under the Plan and the Bankruptcy Code;
(c) acknowledge and agree that all existing equity interests in CPS Holdings held by Thornfield shall be cancelled and extinguished on the Effective Date pursuant to the Plan, with no distribution, payment, or other recovery to Thornfield or its affiliates on account of such equity interests, and Thornfield hereby consents to such treatment;
(d) cooperate in good faith with the Debtors and the Consenting Creditors to consummate the Restructuring, including (without limitation) providing access to information, records, and personnel as may be reasonably requested, executing and delivering any documents or instruments reasonably necessary to implement the Plan, and supporting any motions or other pleadings filed in connection with the Chapter 11 Cases that are consistent with this Agreement; and
(e) not seek, solicit, propose, support, or encourage any alternative restructuring, recapitalization, reorganization, merger, sale, or liquidation proposal or plan that is inconsistent with this Agreement or the Restructuring Term Sheet, and not take any action that would reasonably be expected to prevent, interfere with, delay, or impede the implementation or consummation of the Restructuring.
Section 3.5 — Additional Agreements.
(a) Notwithstanding anything to the contrary herein, nothing in this Agreement shall require any Party to take any action that would (i) breach or be inconsistent with applicable law, including any fiduciary duties owed by the directors, managers, or officers of the Company Parties under applicable state or federal law, or (ii) result in the commission of a fraud or other illegal act.
(b) Each Party acknowledges that the agreements contained herein are not, and shall not be deemed to be, a solicitation of a vote for or against any plan of reorganization. The acceptance of the Plan by each Consenting Creditor will not be solicited until such Consenting Creditor has received the Disclosure Statement and related solicitation materials, in each case as approved by the Bankruptcy Court. Nothing contained in this Agreement shall be construed as a waiver of any Party's right to object to the adequacy of the Disclosure Statement.
ARTICLE IV — MILESTONES
The Restructuring shall be implemented in accordance with the following milestones (each, a "Milestone"), each of which may be extended only with the prior written consent of the Required Consenting Creditors (which consent shall not be unreasonably withheld, conditioned, or delayed):
(a) Petition Date Milestone. The Debtors shall file voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court no later than July 31, 2022.
(b) Interim DIP Order Milestone. The Bankruptcy Court shall have entered an interim order (the "Interim DIP Order") approving the DIP Credit Agreement on an interim basis no later than five (5) business days after the Petition Date.
(c) Final DIP Order Milestone. The Bankruptcy Court shall have entered a final order (the "Final DIP Order") approving the DIP Credit Agreement on a final basis no later than thirty (30) days after the Petition Date.
(d) Disclosure Statement Approval Milestone. The Bankruptcy Court shall have entered an order approving the Disclosure Statement as containing adequate information pursuant to Section 1125 of the Bankruptcy Code no later than forty-five (45) days after the Petition Date.
(e) Plan Confirmation Milestone. The Bankruptcy Court shall have entered the Confirmation Order confirming the Plan pursuant to Section 1129 of the Bankruptcy Code no later than ninety (90) days after the Petition Date.
(f) Effective Date Milestone. The Effective Date shall have occurred no later than fifteen (15) business days after entry of the Confirmation Order.
Failure by the Debtors to satisfy any Milestone within the time period specified above (as may be extended by the Required Consenting Creditors) shall give rise to a termination right in favor of the applicable Parties as set forth in Article VII hereof.
ARTICLE V — TRANSFER PROVISIONS
Section 5.1 — Transfers by Consenting Creditors.
(a) Each Consenting Creditor hereby covenants and agrees that, during the term of this Agreement, it shall not Transfer any of its First Lien Claims or Second Lien Claims, as applicable, unless the following conditions are satisfied:
(i) The proposed transferee executes and delivers a Joinder Agreement substantially in the form attached hereto as Exhibit B, pursuant to which such transferee agrees to be bound by all of the terms and conditions of this Agreement applicable to the transferor with respect to the transferred claims;
(ii) Such Joinder Agreement is delivered to (A) counsel for the Company Parties (Calderwood & Harkness LLP, Attn: Colette Whitman), (B) counsel for the Ad Hoc Group of First Lien Lenders (Hargrove, Mitchell & Saunders LLP, Attn: Victoria Kline), if the Transfer involves First Lien Claims, and (C) counsel for the Ad Hoc Group of Second Lien Noteholders (Pemberton & Locke LLP, Attn: Raymond Delvecchio), if the Transfer involves Second Lien Claims; and
(iii) Such Transfer is made in compliance with applicable securities laws and the terms of the First Lien Credit Agreement or the Second Lien Indenture, as applicable.
(b) Upon the execution and delivery of a Joinder Agreement in accordance with this Section 5.1, the transferee shall automatically and without any further action be deemed a Consenting Creditor for all purposes under this Agreement with respect to the transferred claims, and the transferor shall be deemed to have relinquished its rights and been released from its obligations under this Agreement solely with respect to the transferred claims.
(c) Any Transfer made in violation of this Section 5.1 shall be deemed void ab initio, and the Company Parties and the other Consenting Creditors shall have no obligation to recognize any such purported Transfer or to deal with any purported transferee as a Consenting Creditor.
(d) Notwithstanding the foregoing, the restrictions on Transfer set forth in this Section 5.1 shall not apply to (i) the granting of a security interest, lien, or encumbrance in favor of a bank or broker-dealer holding custody of any claims, in each case in the ordinary course of business and that would not prevent or delay the performance by such Consenting Creditor of its obligations under this Agreement, or (ii) the settlement of trades that were pending as of the RSA Effective Date, provided that the transferee in any such settlement executes and delivers a Joinder Agreement.
Section 5.2 — Transfers by the Sponsor.
Thornfield shall not Transfer any equity interests in CPS Holdings during the term of this Agreement without the prior written consent of the Required Consenting Creditors. Any purported Transfer in violation of this Section 5.2 shall be void ab initio.
ARTICLE VI — REPRESENTATIONS AND WARRANTIES
Section 6.1 — Representations and Warranties of the Company Parties.
Each of the Company Parties hereby represents and warrants to the Consenting Creditors, as of the RSA Effective Date, as follows:
(a) Organization and Good Standing. Each Company Party is duly organized, validly existing, and in good standing under the laws of its respective jurisdiction of organization, as follows: the Company is a limited liability company organized under the laws of the State of Ohio; CPS Holdings is a corporation organized under the laws of the State of Delaware; and Thornfield is a limited partnership organized under the laws of the State of Delaware. Each Company Party has all requisite power and authority to own, lease, and operate its properties and to carry on its business as presently conducted.
(b) Authorization. The execution, delivery, and performance of this Agreement by each Company Party has been duly authorized by all necessary corporate, limited liability company, or partnership action (as applicable), including any required approvals of the board of managers or directors, and no further consent, approval, or authorization of any person or entity is required in connection therewith, except as may be required by the Bankruptcy Court.
(c) Binding Obligation. This Agreement constitutes the legal, valid, and binding obligation of each Company Party, enforceable against each Company Party in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors' rights generally, (ii) general principles of equity (whether considered in a proceeding at law or in equity), and (iii) the approval of the Bankruptcy Court to the extent required under the Bankruptcy Code.
(d) No Conflict. The execution, delivery, and performance of this Agreement by each Company Party does not and will not (i) violate, conflict with, or result in a breach of or default under any provision of its organizational documents, (ii) violate, conflict with, or result in a breach of or default under any material contract, agreement, instrument, or obligation to which it is a party or by which it or its properties are bound, or (iii) violate any material law, statute, regulation, order, judgment, or decree applicable to it, in each case of clauses (ii) and (iii), except as may arise in connection with the filing of the Chapter 11 Cases or the consummation of the Restructuring.
(e) Disclosure of Material Information. The Company has disclosed to the Consenting Creditors and their respective advisors all material information reasonably necessary to evaluate the Restructuring, including (without limitation) the Company's FY2021 revenue of Three Hundred Twelve Million Six Hundred Thousand Dollars ($312,600,000.00), FY2021 EBITDA of Thirty-Eight Million Four Hundred Thousand Dollars ($38,400,000.00), and TTM Q1 2022 EBITDA of Twenty-Nine Million One Hundred Thousand Dollars ($29,100,000.00). To the knowledge of the Company Parties, no material information has been withheld from the Consenting Creditors that would be reasonably likely to affect their decision to enter into this Agreement.
Section 6.2 — Representations and Warranties of the Consenting Creditors.
Each Consenting Creditor, severally (and not jointly), hereby represents and warrants to the Company Parties, as of the RSA Effective Date (or, if applicable, as of the date on which such Consenting Creditor executes a Joinder Agreement), as follows:
(a) Ownership of Claims. Such Consenting Creditor is the legal owner, beneficial owner, or investment advisor or manager for the legal or beneficial owner of the claims set forth on its signature page hereto or in its Joinder Agreement, as applicable, and has full power and authority to vote, transfer, and dispose of such claims, subject to the terms of this Agreement.
(b) Authorization. The execution, delivery, and performance of this Agreement by such Consenting Creditor has been duly authorized by all necessary corporate, partnership, limited liability company, or other organizational action, and no further consent, approval, or authorization of any person or entity is required in connection therewith.
(c) Binding Obligation. This Agreement constitutes the legal, valid, and binding obligation of such Consenting Creditor, enforceable against such Consenting Creditor in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors' rights generally and general principles of equity (whether considered in a proceeding at law or in equity).
(d) Independent Analysis. Such Consenting Creditor has made its own independent analysis and decision to enter into this Agreement, based upon such information and advice as such Consenting Creditor has deemed appropriate, and is not relying on any representation, warranty, or statement of any other Party (other than the representations and warranties expressly set forth in this Agreement) in making such decision.
Section 6.3 — Representations and Warranties of the Sponsor.
Thornfield Capital Partners LP hereby represents and warrants to the Consenting Creditors, as of the RSA Effective Date, as follows:
(a) Organization and Good Standing. Thornfield Capital Partners LP is a limited partnership duly organized, validly existing, and in good standing under the laws of the State of Delaware, and has all requisite partnership power and authority to execute, deliver, and perform its obligations under this Agreement.
(b) Authorization. The execution of this Agreement by Julian Ashford, Managing Partner, or Rebecca Strand, Deal Partner for CPS, on behalf of Thornfield has been duly authorized by all necessary partnership action pursuant to the partnership agreement of Thornfield Capital Partners LP, and no further consent, approval, or authorization of any person or entity (including any limited partners or advisory committee) is required in connection therewith.
ARTICLE VII — TERMINATION
Section 7.1 — Termination by the Company Parties.
The Company Parties may terminate this Agreement as to all Parties upon five (5) business days' prior written notice delivered to counsel for the Consenting First Lien Lenders and counsel for the Consenting Second Lien Noteholders upon the occurrence of any of the following events:
(a) the failure to achieve any Milestone set forth in Article IV hereof within the time period specified therein (as may be extended), unless such failure is the direct result of a breach by the Company Parties of their obligations under this Agreement;
(b) the entry of an order by the Bankruptcy Court dismissing any of the Chapter 11 Cases or converting any of the Chapter 11 Cases to a case under Chapter 7 of the Bankruptcy Code;
(c) the entry of an order by the Bankruptcy Court appointing a Chapter 11 trustee in any of the Chapter 11 Cases, or appointing an examiner with expanded powers beyond those set forth in Section 1106(a)(3) and (4) of the Bankruptcy Code;
(d) a material breach by any of the Consenting Creditors of their respective obligations under this Agreement that remains uncured for ten (10) business days after the delivery of written notice of such breach by the Company Parties to counsel for the breaching Consenting Creditor(s), specifying in reasonable detail the nature of such breach; provided that the Company Parties shall not have the right to terminate this Agreement under this clause (d) if the breach is by Consenting Creditors holding claims representing less than a majority of the aggregate principal amount of First Lien Claims or Second Lien Claims, as applicable, held by all Consenting Creditors of the applicable class; and
(e) the board of managers of the Company determines, in good faith, based upon the advice of counsel (after consultation with Calderwood & Harkness LLP as debtor's counsel and such other legal counsel as the board of managers may deem appropriate), that continued performance by the Company Parties under this Agreement would be inconsistent with the proper exercise of its fiduciary duties under applicable law (the "Fiduciary Out"); provided that the Company Parties shall provide prompt written notice of any such determination to counsel for the Consenting Creditors, including a description of the basis for such determination.
Section 7.2 — Termination by the Required Consenting First Lien Lenders.
The Required Consenting First Lien Lenders may terminate this Agreement as to all Parties upon five (5) business days' prior written notice delivered to counsel for the Company Parties and counsel for the Consenting Second Lien Noteholders upon the occurrence of any of the following events:
(a) the failure to achieve any Milestone set forth in Article IV hereof within the time period specified therein (as may be extended);
(b) a material breach by the Company Parties or the Consenting Second Lien Noteholders of their respective obligations under this Agreement that remains uncured for ten (10) business days after the delivery of written notice of such breach by the Required Consenting First Lien Lenders to counsel for the breaching Party or Parties, specifying in reasonable detail the nature of such breach;
(c) the entry of an order by the Bankruptcy Court approving any modification, amendment, or supplement to the Plan or the Disclosure Statement in a manner that is not reasonably acceptable to the Required Consenting First Lien Lenders, including (without limitation) any modification to the classification, treatment, or recovery of First Lien Claims;
(d) the occurrence of an event of default under the DIP Credit Agreement that has not been waived or cured within any applicable cure period provided thereunder;
(e) the filing, support, or solicitation by any of the Company Parties of any alternative plan of reorganization, restructuring proposal, or other transaction that is inconsistent with this Agreement or the Restructuring Term Sheet; and
(f) the failure of the Bankruptcy Court to enter the Confirmation Order within ninety (90) days of the Petition Date (as such date may be extended in accordance with Article IV hereof).
Section 7.3 — Termination by the Required Consenting Second Lien Noteholders.
The Required Consenting Second Lien Noteholders may terminate this Agreement as to all Parties upon five (5) business days' prior written notice delivered to counsel for the Company Parties and counsel for the Consenting First Lien Lenders upon the occurrence of any of the following events:
(a) the failure to achieve any Milestone set forth in Article IV hereof within the time period specified therein (as may be extended);
(b) a material breach by the Company Parties or the Consenting First Lien Lenders of their respective obligations under this Agreement that remains uncured for ten (10) business days after the delivery of written notice of such breach by the Required Consenting Second Lien Noteholders to counsel for the breaching Party or Parties, specifying in reasonable detail the nature of such breach;
(c) the entry of an order by the Bankruptcy Court approving any modification, amendment, or supplement to the treatment of Class 3 (Second Lien Secured Claims) under the Plan in a manner that is not reasonably acceptable to the Required Consenting Second Lien Noteholders, including (without limitation) any modification to the percentage of equity or warrants allocated to holders of Second Lien Claims or any change to the strike price or other material terms of the warrants; and
(d) the filing, support, or solicitation by any of the Company Parties of any alternative plan of reorganization, restructuring proposal, or other transaction that is inconsistent with this Agreement or the Restructuring Term Sheet.
Section 7.4 — Mutual Termination.
This Agreement may be terminated at any time by mutual written consent of the Company Parties, the Required Consenting First Lien Lenders, and the Required Consenting Second Lien Noteholders.
Section 7.5 — Automatic Termination.
This Agreement shall terminate automatically, without any further action required by any Party, upon the occurrence of the Effective Date of the Plan, at which time all obligations of the Parties hereunder shall be deemed to have been fully performed, satisfied, and discharged.
Section 7.6 — Effect of Termination.
(a) Upon the termination of this Agreement in accordance with this Article VII, all obligations of the Parties under this Agreement shall immediately cease and be of no further force or effect, and no Party shall have any continuing liability or obligation to any other Party under this Agreement, except as follows:
(i) No Party shall have any liability for the termination of this Agreement, except to the extent that such termination resulted from a willful and material breach of this Agreement by such Party;
(ii) All voting obligations of the Consenting Creditors under this Agreement shall immediately cease, and any ballots or votes previously cast by any Consenting Creditor may be, and shall be deemed to be, withdrawn, revoked, and invalidated, and the Debtors shall not use or rely upon any such votes for any purpose;
(iii) The following provisions shall survive the termination of this Agreement: this Section 7.6 (Effect of Termination), Article X (Governing Law; Jurisdiction), Section 11.2 (Entire Agreement), Section 11.3 (No Third-Party Beneficiaries), Section 11.4 (Severability), Section 11.5 (Counterparts), Section 11.6 (Headings), Section 11.8 (Relationship Among Parties), and Section 11.9 (Reservation of Rights); and
(iv) The Company Parties' obligation to pay the reasonable and documented fees and expenses of counsel to the Ad Hoc Groups pursuant to Section 3.1(j) that have accrued through the date of termination shall survive termination.
(b) Termination of this Agreement shall be without prejudice to any rights or claims of any Party arising prior to such termination, including any claims for breach of this Agreement.
ARTICLE VIII — AMENDMENTS AND WAIVERS
Section 8.1 — Amendments.
This Agreement (including the Restructuring Term Sheet and all exhibits hereto) may be modified, amended, or supplemented only by a writing signed by each of the following: (a) the Company Parties, (b) the Required Consenting First Lien Lenders, and (c) the Required Consenting Second Lien Noteholders; provided, however, that any amendment that adversely affects the treatment, classification, rights, or recoveries of any class of claims or interests under the Plan or the Restructuring Term Sheet in a manner that is different from or disproportionate to the effect on holders of other classes of claims or interests shall additionally require the written consent of the Required Consenting Creditors of each such adversely and disproportionately affected class; and provided, further, that any amendment that adversely affects the rights or obligations of any individual Consenting Creditor in a manner that is different from or disproportionate to the effect on other Consenting Creditors of the same class shall require the prior written consent of such individually affected Consenting Creditor.
Section 8.2 — Waivers.
Any Milestone, condition, or other provision of this Agreement may be waived in a writing signed by the Party or Parties for whose benefit such Milestone, condition, or provision exists. Any such waiver shall be effective only in the specific instance and for the specific purpose for which it is given, and shall not constitute a waiver of any other Milestone, condition, or provision.
ARTICLE IX — EFFECTIVENESS
This Agreement shall become effective and binding on all Parties (such date, the "RSA Effective Date") upon the satisfaction of each of the following conditions:
(a) execution and delivery of a counterpart signature page to this Agreement by each of the Company Parties, specifically Crestline Packaging Solutions LLC and CPS Holdings Inc.;
(b) execution and delivery of a counterpart signature page to this Agreement by Thornfield Capital Partners LP;
(c) execution and delivery of counterpart signature pages to this Agreement by Consenting First Lien Lenders holding, in the aggregate, at least sixty-six and two-thirds percent (66⅔%) of the aggregate principal amount of the First Lien Term Loan held by all first lien lenders that execute and deliver this Agreement on the RSA Effective Date; and
(d) execution and delivery of counterpart signature pages to this Agreement by Consenting Second Lien Noteholders holding, in the aggregate, at least sixty-six and two-thirds percent (66⅔%) of the aggregate principal amount of the Second Lien Notes held by all second lien noteholders that execute and deliver this Agreement on the RSA Effective Date.
The Parties acknowledge and confirm that, as of the date first written above, each of the foregoing conditions has been satisfied.
ARTICLE X — GOVERNING LAW; JURISDICTION
Section 10.1 — Governing Law. This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York, without regard to any conflict of laws principles that would require or permit the application of the laws of any other jurisdiction; provided, however, that Sections 5-1401 and 5-1402 of the New York General Obligations Law shall apply.
Section 10.2 — Jurisdiction. Each Party hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of (a) the Bankruptcy Court (to the extent that the Chapter 11 Cases have been commenced and are pending) or (b) prior to the commencement of the Chapter 11 Cases, the United States District Court for the Southern District of New York and the courts of the State of New York sitting in the Borough of Manhattan, in any action, suit, or proceeding arising out of or relating to this Agreement, and each Party hereby irrevocably and unconditionally agrees that all claims in respect of such action, suit, or proceeding may be heard and determined in such courts. Each Party agrees not to commence any action, suit, or proceeding relating hereto except in such courts and agrees that a final judgment in any such action, suit, or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each Party irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of venue of any action, suit, or proceeding arising out of or relating to this Agreement in any court referred to in this Section 10.2, and the defense of an inconvenient forum to the maintenance of any such action, suit, or proceeding in any such court.
Section 10.3 — Waiver of Jury Trial. EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT, OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.3.
ARTICLE XI — MISCELLANEOUS PROVISIONS
Section 11.1 — Notices.
All notices, requests, demands, consents, and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) one (1) business day after being sent by recognized overnight courier service (charges prepaid), or (c) when sent by electronic mail (with confirmation of receipt), addressed as follows (or at such other address as any Party may designate from time to time by written notice in accordance with this Section 11.1):
If to the Company Parties:
Crestline Packaging Solutions LLC 4710 Industrial Corridor Drive Akron, Ohio 44308