Contract analysis

I. Executive Summary This memorandum is an internal, privileged strategy document prepared for the benefit of Crestline Packaging Solutions LLC ("Crestline" or "Buyer") and Briarwood Capital Partners LP ("Briarwood") in connection with the proposed acquisition of Allegheny Chemical Coatings, Inc. ("ACC" or the "Seller"). Its purpose is to analyze the current gap between Crestline's and the Seller's respective environ

II. Background: Environmental Diligence Findings A. Summary of Facilities and Findings ACC operates four facilities across Pennsylvania and West Virginia. Environmental due diligence has been conducted on all four facilities, with varying levels of investigation and varying degrees of environmental concern identified. The following is a summary of each facility and the key environmental findings. Facility 1 — McKeesp

III. Current Negotiation Positions A. Crestline's Position Crestline's current environmental risk allocation position, as set forth in Calderwood & Harkness's letter to Hargrove, Dalton & Speer LLP dated October 20, 2022, is as follows: Environmental Escrow. Crestline has proposed that $4.0 million of the $94.5 million purchase price be held back at closing and deposited into a segregated escrow account maintained by

IV. Analysis of Key Disputed Issues A. Applicable Cleanup Standards — Residential vs. Non-Residential The Seller's principal argument regarding the McKeesport Main Plant is that non-residential cleanup standards should apply under PA Act 2 (the Land Recycling and Environmental Remediation Standards Act, 35 P.S. §§ 6026.101–6026.908), because the site is zoned for industrial use and is currently used exclusively for m

V. Lender Requirements The acquisition financing for this transaction is being provided by Commonwealth National Bank, N.A. ("Commonwealth" or the "Lender"), with Victoria Chen, Managing Director, serving as the lead relationship manager. The commitment letter, executed on July 8, 2022, provides for a $65 million senior secured term loan facility and a $20 million revolving credit facility, subject to customary condi

VI. PLL Insurance as a Bridge Mechanism A. Ironclad Specialty Insurance Company Indicative Terms Calderwood & Harkness, in coordination with Whitfield & Calder Insurance Advisors LLC ("W&C"), has obtained a non-binding indication of interest from Ironclad Specialty Insurance Company ("Ironclad") for a Pollution Legal Liability insurance policy in connection with the proposed acquisition. The indication was procured b

VII. Recommended Negotiation Strategy Based on the foregoing analysis, Calderwood & Harkness recommends that Crestline adopt a tiered negotiation strategy with defined primary and fallback positions, as set forth below. A. Primary Position (Best Case for Crestline) Crestline's primary negotiating position should be maintained as follows: • Environmental Escrow: $4.0 million holdback from the purchase price, deposited