Contract analysis

I. Executive Summary The purpose of this memorandum is to provide Crestline Packaging Solutions LLC ("Crestline" or "CPS") and its private equity sponsor, Briarwood Capital Partners LP ("Briarwood"), with a detailed comparative analysis of two principal mechanisms available to allocate and transfer environmental risk in connection with the proposed stock purchase acquisition of Allegheny Chemical Coatings, Inc. ("ACC

II. Background A. Transaction Overview Crestline Packaging Solutions LLC. Crestline is an Ohio limited liability company headquartered at 4100 Riverside Commerce Drive, Suite 300, Dayton, Ohio 45402. Crestline is a wholly-owned portfolio company of Briarwood Capital Partners LP, operating through Briarwood's Fund IV, which has aggregate committed capital of approximately $2.1 billion. Crestline reported annual revenu

III. Contractual Environmental Escrow and Indemnification — Analysis A. Crestline's Proposed Terms (Calderwood & Harkness Draft) Crestline's proposed environmental protection terms, as set forth in the Calderwood & Harkness draft SPA circulated on August 12, 2022, and refined through subsequent markup exchanges, include the following principal elements: Environmental Escrow. A $4,000,000 holdback from the purchase pr

1. The McKeesport facility has a 2001 NFA letter from PA DEP, which the Seller contends demonstrates that the facility's environmental conditions have been previously investigated and resolved to the satisfaction of the regulatory agency.

2. The Charleroi facility is demonstrably clean, with no identified environmental conditions.

3. The contamination at the Clarksburg facility (residual DRO from a former UST) is pre-existing — attributable to the prior tenant, Valley Freight Lines Inc. — and is not contamination caused by ACC. The Seller contends that ACC should not bear responsibility for this legacy condition.

4. The Weirton facility has received a VRDP Certificate of Completion, and ongoing VRDP obligations are the responsibility of the property owner (Northern Panhandle Realty Corp.), not ACC.

5. The total estimated environmental liabilities at the low end of the range ($1,925,000) are significantly below Crestline's proposed $4,000,000 escrow, which the Seller characterizes as excessive and punitive. Response to Seller's Rationale. While we acknowledge that certain of the Seller's factual assertions are accurate, the Seller's proposed terms do not adequately address the environmental risk profile of this

IV. Pollution Legal Liability Insurance — Analysis A. Summary of Ironclad Specialty Indicative Terms Ironclad Specialty Insurance Company, domiciled in Hartford, Connecticut, has provided a non-binding indication of interest for a Pollution Legal Liability insurance policy through Whitfield & Calder Insurance Advisors LLC, a specialty environmental insurance brokerage located at 227 West Monroe Street, Suite 1800, Ch

1. Known Conditions Exclusion Ironclad's indication includes a "known conditions" exclusion, which is standard in the PLL insurance market. This exclusion provides that the policy does not cover contamination conditions that were known to the insured at the time of policy inception. The rationale underlying the exclusion is that insurance is designed to transfer the risk of uncertain, fortuitous events — not to cover

2. Pre-Existing Contamination Definition Distinct from but related to the known-conditions exclusion, the PLL policy's definition of "pre-existing contamination condition" determines whether contamination that existed before the policy inception date but was unknown to the insured at inception is covered. Ironclad's indication defines "pre-existing condition" broadly, and coverage for pre-existing unknown conditions

3. Vapor Intrusion Sublimit Ironclad's indication includes a vapor intrusion sublimit, the specific amount of which was not stated in the indication. In the current PLL market, vapor intrusion sublimits are common and are typically set at 25% to 50% of the per-occurrence limit. Applied to the $10,000,000 per-occurrence limit in the Ironclad indication, this would result in a vapor intrusion sublimit of approximately

4. Defense Cost Erosion Ironclad's indication states that defense costs are "within limits" — meaning that the costs of defending covered claims erode the $15,000,000 aggregate limit and the $10,000,000 per-occurrence limit. This is in contrast to "defense costs outside limits" policies, where defense costs are paid in addition to the stated limits. In a complex environmental remediation scenario involving regulatory

5. Exclusions for Fines, Penalties, and Intentional Acts Standard PLL policies exclude coverage for fines and penalties that are not insurable under applicable law, as well as losses arising from intentional or willful acts by the insured. These exclusions are inherent features of liability insurance and are generally non-negotiable. Application to This Transaction. ACC's operational history includes a February 2020

6. Leased Property Complications Two of ACC's four facilities — Clarksburg and Weirton — are leased properties. The PLL policy must schedule these facilities as "covered locations" in order for environmental conditions at those sites to be eligible for coverage. However, the leased nature of these properties introduces several complications. Clarksburg (Mountainview Properties LLC, Gerald Boothe, Landlord). The Mount