Contract analysis

I. Introduction and Purpose This firm represents Crestline Packaging Solutions LLC, an Ohio limited liability company ("Crestline" or the "Buyer"), in connection with the proposed acquisition of one hundred percent (100%) of the outstanding common stock of Allegheny Chemical Coatings, Inc. ("ACC" or the "Company"), a Pennsylvania corporation, pursuant to the draft Stock Purchase Agreement circulated by your firm on A

II. Scope of Environmental Due Diligence TerraVerde conducted Phase I Environmental Site Assessments at all four of ACC's operating facilities. At two of those facilities — where Recognized Environmental Conditions ("RECs") were identified during the Phase I process — TerraVerde subsequently conducted Phase II subsurface investigations involving the installation of soil borings and temporary monitoring wells, the col

III. Summary of Phase I Environmental Site Assessment Findings A. McKeesport Main Plant The Phase I ESA for the McKeesport Main Plant, dated August 15, 2022, identified two Recognized Environmental Conditions and one Historical Recognized Environmental Condition. These findings are summarized as follows: REC-1: Potential Vapor Intrusion Pathway — Former UST Field / Building C. TerraVerde identified elevated volatile

IV. Phase II Environmental Site Assessment Findings — McKeesport Main Plant A. Investigation Scope Based on the RECs identified during the Phase I ESA, TerraVerde conducted a Phase II Environmental Site Assessment at the McKeesport Main Plant. The Phase II investigation commenced on September 12, 2022, with field sampling activities completed on September 26, 2022. The investigation was designed to characterize the n

V. Phase II Investigation — Clarksburg (Status Pending) TerraVerde initiated the Phase II Environmental Site Assessment at the Clarksburg Resin Blending Facility on October 3, 2022. The investigation scope included the installation of eight (8) soil borings and three (3) temporary monitoring wells in the vicinity of the REC identified during the Phase I assessment (the staining in the northeast corner of the warehous

VI. Additional Environmental Conditions and Liabilities In addition to the subsurface contamination conditions identified through the Phase I and Phase II assessments, TerraVerde's due diligence identified several additional environmental conditions and regulatory compliance matters at ACC's facilities that contribute to the overall environmental risk profile of the target and are relevant to the purchase price prote

VII. Aggregate Environmental Liability Estimate Based on TerraVerde's preliminary remediation cost estimate for the McKeesport Main Plant (dated October 18, 2022) and the additional condition assessments described above, Crestline has prepared the following summary of aggregate estimated environmental liabilities across all ACC facilities: Crestline emphasizes that these estimates are preliminary in nature and are su

VIII. Crestline's Position on Environmental Risk Allocation In light of the environmental findings described above, Crestline sets forth the following position regarding the allocation of environmental risk in the SPA. Crestline believes that these provisions are necessary and appropriate given the nature, magnitude, and uncertainty of the identified environmental liabilities, and that they represent reasonable and m

IX. Impact on Financing Conditions Crestline notes that the resolution of environmental risk allocation in the SPA is not solely a commercial matter between the parties, but is also directly connected to the satisfaction of conditions to Crestline's acquisition financing. Commonwealth National Bank, N.A. ("Commonwealth"), the agent bank under the proposed Sixty-Five Million Dollar ($65,000,000) senior secured term lo

X. Pollution Legal Liability Insurance Crestline is evaluating Pollution Legal Liability ("PLL") insurance as a potential supplemental risk transfer mechanism in connection with the identified environmental conditions at ACC's facilities. An indicative, non-binding term sheet has been received from Ironclad Specialty Insurance Company (Hartford, Connecticut), placed through Whitfield & Calder Insurance Advisors LLC,

XI. Request for Response In light of the foregoing, Crestline respectfully requests that Hargrove, Dalton & Speer LLP, on behalf of the Seller and ACC, provide a substantive written response and counterproposal addressing the following matters:

1. The establishment of an environmental escrow in the amount of Four Million Dollars ($4,000,000), funded from the purchase price at closing, with release mechanics tied to remediation milestones and regulatory closure, as described in Section VIII.A;

2. The inclusion of a Special Environmental Indemnity in the SPA covering all pre-closing environmental conditions, which indemnity should be uncapped and carved out from the general representation basket/deductible of $475,000, as described in Section VIII.B;

3. A seven (7) year survival period for all environmental representations and warranties and for the Special Environmental Indemnity, commencing on the closing date, as described in Section VIII.C; and

4. The scope and qualification of environmental representations and warranties in Article IV, Section 4.18 of the draft SPA, including the withdrawal of the knowledge qualifiers and materiality thresholds proposed in the Seller's counterproposal, as described in Section VIII.D. Crestline requests that the Seller provide its response within ten (10) business days of the date of this letter — that is, by no later than

XII. Reservation of Rights Crestline Packaging Solutions LLC reserves all of its rights, remedies, claims, and defenses under the draft Stock Purchase Agreement, the exclusivity agreement between the parties dated June 30, 2022, and applicable law, including but not limited to the right to decline to proceed with the transaction if the environmental risk allocation matters addressed in this letter are not resolved to

XIII. Closing We appreciate your attention to these matters and look forward to receiving the Seller's substantive response within the timeframe requested. Should you wish to discuss any of the foregoing in advance of providing a written response, please do not hesitate to contact me directly. Very truly yours, CALDERWOOD & HARKNESS LLP By: ________ Beatrice Holloway, Partner Direct Telephone: (216) 555-8140 Email: b

1. TerraVerde Environmental Consulting LLC, Phase I Environmental Site Assessment — McKeesport Main Plant, 2200 Iron Works Boulevard, McKeesport, PA 15132 (dated August 15, 2022)

2. TerraVerde Environmental Consulting LLC, Phase I Environmental Site Assessment — Clarksburg Resin Blending Facility, 1875 Route 50 West, Clarksburg, WV 26301 (dated August 22, 2022)

3. TerraVerde Environmental Consulting LLC, Phase II Environmental Site Assessment Report — McKeesport Main Plant, 2200 Iron Works Boulevard, McKeesport, PA 15132 (draft, dated October 2022)

4. TerraVerde Environmental Consulting LLC, Preliminary Remediation Cost Estimate — McKeesport Main Plant (dated October 18, 2022)

5. Calderwood & Harkness LLP, Vapor Intrusion Risk Assessment Memorandum (dated October 16, 2022)

6. Summary Table of Phase II Analytical Results with Applicable Regulatory Standards (prepared by TerraVerde Environmental Consulting LLC) Liability Component | Low Estimate | High Estimate McKeesport Remediation (groundwater treatment: pump-and-treat or in-situ chemical oxidation; vapor mitigation: sub-slab depressurization system) | $1,200,000 | $2,800,000 Clarksburg Remediation (soil excavation and off-site dispos