1006-00006 · Client 1006 · Correspondence

letter-apa-transmittal-to-seller-counsel.docx DOCUMENT M&A / Corporate

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CALDERWOOD & HARKNESS LLP

Attorneys at Law

600 Lexington Avenue, 30th Floor New York, New York 10022

Telephone: (212) 540-7000 Facsimile: (212) 540-7001 www.calderwoodharkness.com

May 2, 2025

VIA EMAIL AND Ostrander Technologies R. Feldstein, Esq. Broadmoor Strauss & Kline LLP 600 Grant Street, Suite 4200 Pittsburgh, PA 15219

Re: Acquisition of Substantially All Assets of Allegheny Valley Packaging, Inc. by Crestline Packaging Solutions LLC Calderwood & Harkness Matter No. 1006-00006

Dear Nathan:

As you know, this firm represents Crestline Packaging Solutions LLC, an Ohio limited liability company ("Buyer" or "CPS"), in connection with the proposed acquisition of substantially all of the assets of Allegheny Valley Packaging, Inc., a Pennsylvania corporation ("Seller" or "AVP"). We are pleased to enclose herewith the initial draft of the Asset Purchase Agreement (the "APA") by and among Crestline Packaging Solutions LLC, as Buyer, and Allegheny Valley Packaging, Inc., as Seller, together with the draft ancillary agreements described more fully below. The draft APA has been prepared to reflect the principal terms and conditions set forth in the Letter of Intent dated April 10, 2025, executed between Buyer and Seller (the "LOI"), and incorporates certain findings and considerations arising from Buyer's ongoing due diligence review of AVP's business, assets, and operations.

For ease of your review, we set forth below a summary of the key terms and provisions reflected in the enclosed draft APA. This summary is intended for convenience of reference only and is qualified in its entirety by the terms of the draft APA itself. We encourage you and your client to review the full draft carefully, as the provisions described below are necessarily abbreviated.

Summary of Key Terms Reflected in the Draft APA

1. Transaction Structure

The proposed transaction is structured as an asset purchase in which Buyer will acquire substantially all of the assets of AVP used in or related to the conduct of AVP's corrugated and specialty packaging business (the "Business"). The APA provides that it shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without giving effect to any choice-of-law or conflict-of-law provisions. Venue for any disputes arising under the APA shall lie in the state or federal courts located in the Borough of Manhattan, City of New York, as set forth in the forum selection clause included in Article XII.

2. Purchase Price

The aggregate purchase price payable by Buyer at the Closing is One Hundred Eighty Million Dollars ($180,000,000) in cash (the "Purchase Price"), subject to customary post-closing adjustments for Net Working Capital, Indebtedness, Transaction Expenses, and Cash, each as defined in the APA. The Purchase Price is to be paid by wire transfer of immediately available funds to an account or accounts designated by Seller (or, with respect to the Escrow Amount and amounts required to discharge Indebtedness, to the applicable payoff and escrow accounts) at or prior to the Closing.

3. Escrow. The draft APA provides that Nine Million Dollars ($9,000,000), representing five percent (5%) of the Purchase Price (the "Escrow Amount"), shall be deposited at Closing with Atlantic Fiduciary Trust Company, as escrow agent (the "Escrow Agent"), pursuant to the terms of an Escrow Agreement substantially in the form attached to the APA as Exhibit C. The Escrow Amount is intended to secure Seller's indemnification obligations under Article X of the APA. Subject to deductions for any pending or unresolved indemnification claims, the Escrow Amount (together with any interest or other earnings accrued thereon) shall be released to Seller eighteen (18) months following the Closing Date. The Escrow Agreement sets forth customary provisions regarding the administration of the escrow fund, procedures for claims against the escrow fund, and the resolution of disputed claims.

4. Net Working Capital Adjustment

The APA includes a Net Working Capital adjustment mechanism. The target Net Working Capital is Twelve Million Four Hundred Thousand Dollars ($12,400,000) (the "Target NWC"), which has been derived from AVP's trailing twelve-month average Net Working Capital as set forth in AVP's internally prepared financial statements. Net Working Capital shall be measured as of 11:59 PM Eastern Time on the day immediately preceding the Closing Date and shall be calculated in accordance with United States generally accepted accounting principles ("GAAP") as applied by AVP consistent with past practice, using the same line items, methodologies, and accounting policies as those used in preparing the Reference Balance Sheet attached to the APA as Schedule 1.4.

A de minimis collar of plus or minus Two Hundred Fifty Thousand Dollars (±$250,000) applies to the Net Working Capital adjustment, such that no purchase price adjustment shall be made if the difference between the Closing Net Working Capital and the Target NWC falls within this collar. If the Closing Net Working Capital exceeds the Target NWC by more than $250,000, Buyer shall pay the excess amount (including the full amount of the variance, not only the amount exceeding the collar) to Seller. Conversely, if the Closing Net Working Capital is less than the Target NWC by more than $250,000, Seller shall pay the deficiency amount to Buyer. The draft APA includes a detailed post-closing true-up procedure, including Buyer's preparation and delivery of a Closing Statement, Seller's review and objection period, and a mechanism for resolution of disputes by an independent accounting firm mutually agreed upon by the parties.

5. Acquired Assets and Excluded Assets

Acquired Assets. The Acquired Assets include substantially all assets owned, held, or used by Seller in the operation of the Business, including without limitation: (a) the owned real property located at the Butler facility (250 Industrial Boulevard, Butler, PA 16001) and the Meadville facility (1480 Conneaut Lake Road, Meadville, PA 16335), together with all improvements, fixtures, and appurtenances thereto; (b) all tangible personal property, including machinery, equipment, tooling, dies, vehicles, furniture, and fixtures; (c) all intellectual property owned or used by AVP in the Business, including trademarks, trade names (other than the Excluded Name, as defined below), patents, copyrights, trade secrets, and domain names; (d) approximately forty-seven (47) material contracts identified on Schedule 2.1(d) to the APA (the "Assumed Contracts"), including customer contracts, supply agreements, equipment leases, and certain license agreements; (e) all accounts receivable and inventory; (f) all permits, licenses, and governmental authorizations to the extent transferable; (g) all books and records (other than Excluded Records); and (h) all goodwill and going concern value associated with the Business.

Excluded Assets. The Excluded Assets include: (a) all cash, cash equivalents, and bank deposits of Seller as of the Closing; (b) all rights to tax refunds, credits, or overpayments attributable to any pre-Closing tax period; (c) Seller's minute books, stock ledgers, corporate seal, and organizational documents (the "Excluded Records"); (d) all of Seller's insurance policies and any rights or claims thereunder (including any insurance proceeds attributable to pre-Closing events); and (e) the corporate name "Allegheny Valley Packaging, Inc." (the "Excluded Name"), subject to a limited, non-exclusive, royalty-free transitional license granted by Seller to Buyer for a period of six (6) months following the Closing Date to permit an orderly transition of signage, business stationery, packaging, and regulatory filings.

6. Assumed Liabilities and Excluded Liabilities

Assumed Liabilities. At the Closing, Buyer will assume only the following liabilities and obligations of Seller (collectively, the "Assumed Liabilities"): (a) trade payables and accrued expenses arising in the ordinary course of business and reflected on the Closing Statement or included in the calculation of Net Working Capital; (b) all post-Closing obligations arising under the Assumed Contracts (to the extent such obligations relate to periods from and after the Closing Date and do not arise from any breach or default by Seller occurring prior to the Closing); (c) post-Closing warranty obligations with respect to products manufactured or sold by the Business prior to the Closing, to the extent set forth in Section 2.3(c) of the APA; and (d) current-period real property taxes and assessments allocable to the period from and after the Closing Date, prorated as of the Closing Date.

Excluded Liabilities. All liabilities and obligations of Seller other than the Assumed Liabilities shall be retained by Seller and constitute "Excluded Liabilities," including without limitation: (a) all pre-Closing indebtedness of Seller, including approximately Fourteen Million Two Hundred Thousand Dollars ($14,200,000) outstanding under AVP's revolving credit facility with Merchants & Traders Bank, N.A. (the "Revolving Facility"), which shall be repaid in full at or prior to the Closing from the proceeds of the Purchase Price; (b) all liabilities for taxes of Seller attributable to any pre-Closing tax period (including any transfer taxes for which Seller is responsible); (c) all pre-Closing product liability claims and litigation; (d) all liabilities relating to Seller's underfunded pension obligations under the Allegheny Valley Packaging, Inc. Defined Benefit Pension Plan, which the parties estimate to be approximately Three Million One Hundred Thousand Dollars ($3,100,000) as of the most recent actuarial valuation; and (e) all Transaction Expenses of Seller, including fees and expenses of Seller's legal, financial, and accounting advisors.

7. Representations and Warranties

The draft APA contains customary and comprehensive representations and warranties of both Seller and Buyer. Seller's representations and warranties address, among other matters, corporate organization, authority, capitalization, financial statements, absence of undisclosed liabilities, absence of certain changes, compliance with laws, material contracts, real property, intellectual property, employee and labor matters, environmental matters, tax matters, insurance, brokers' fees, and absence of litigation. Buyer's representations and warranties address organization, authority, litigation, financing, solvency, and brokers' fees.

The APA provides for the following survival periods for representations and warranties:

(a) General Representations: Eighteen (18) months following the Closing Date.

(b) Fundamental Representations (including representations as to title to the Acquired Assets, corporate authority and due authorization, capitalization, brokers' fees, and taxes): Sixty (60) months following the Closing Date.

(d) Tax Representations: Until sixty (60) days after the expiration of the applicable statute of limitations (including any extensions or waivers thereof) with respect to the underlying tax matter.

Covenants and agreements that by their terms are to be performed at or prior to the Closing shall survive indefinitely, and covenants and agreements that by their terms are to be performed after the Closing shall survive in accordance with their terms.

8. Indemnification. The indemnification provisions of the APA include the following key parameters:

(a) Cap: Seller's aggregate liability for indemnification claims under the APA (other than claims arising from breaches of Fundamental Representations, fraud, or willful misconduct) shall not exceed twenty-five percent (25%) of the Purchase Price, or Forty-Five Million Dollars ($45,000,000) (the "Cap").

(b) Basket: Seller shall have no obligation to indemnify Buyer until the aggregate amount of all Losses exceeds seventy-five hundredths of one percent (0.75%) of the Purchase Price, or One Million Three Hundred Fifty Thousand Dollars ($1,350,000) (the "Basket"). The Basket is structured as a tipping basket, meaning that once the aggregate amount of Losses exceeds the Basket, Buyer shall be entitled to first-dollar recovery of all such Losses from the first dollar, not merely the excess above the Basket threshold.

(c) Mini-Basket (De Minimis Threshold): Individual claims with Losses of less than Fifty Thousand Dollars ($50,000) shall not be counted toward satisfaction of the Basket and shall not otherwise be indemnifiable.

(d) Special Environmental Indemnity: In addition to the general indemnification framework, Seller shall retain specific liability for all pre-Closing environmental conditions (including remediation costs, fines, penalties, and third-party claims) arising at or relating to the Butler facility and the Meadville facility, up to a maximum aggregate amount of Eight Million Dollars ($8,000,000), surviving for thirty-six (36) months following the Closing Date. This special environmental indemnity is not subject to the Basket or the Mini-Basket threshold but is subject to its own separate cap as stated.

9. Real Property

The APA provides for the conveyance of the following owned real property from Seller to Buyer at the Closing by special warranty deed:

(a) Butler Facility: Located at 250 Industrial Boulevard, Butler, Pennsylvania 16001, consisting of approximately 285,000 square feet of manufacturing, warehousing, and office space situated on approximately 22.5 acres.

(b) Meadville Facility: Located at 1480 Conneaut Lake Road, Meadville, Pennsylvania 16335, consisting of approximately 110,000 square feet of manufacturing and distribution space situated on approximately 8.2 acres.

The Pennsylvania Realty Transfer Tax, currently assessed at a combined state and local rate of two percent (2%) of the value of the real property conveyed, shall be split equally between Buyer and Seller, with each party bearing one percent (1%).

10. Employees and Benefits

The APA provides that Buyer shall extend offers of employment (on terms and conditions substantially comparable to those provided by Seller immediately prior to the Closing, subject to certain adjustments as set forth in Section 7.1 of the APA) to substantially all of the approximately three hundred forty (340) employees of AVP as of the Closing Date. Employees who accept Buyer's offer of employment are referred to in the APA as "Transferred Employees."

Buyer shall assume, as a successor employer, the collective bargaining agreement between AVP and the International Paperworkers Union Local 814 (the "CBA"), which covers approximately one hundred eighty-five (185) hourly production and maintenance employees at the Butler facility. The CBA has a current term expiring on March 31, 2027. The APA requires Seller to cooperate in facilitating such assumption and in providing Buyer with all information reasonably necessary to comply with Buyer's obligations under the CBA.

Buyer shall not assume AVP's 401(k) plan (the Allegheny Valley Packaging, Inc. Employees' Savings Plan). Transferred Employees will be eligible to participate in Buyer's 401(k) plan following the Closing, subject to any applicable eligibility waiting periods, and Buyer will recognize years of service with AVP for purposes of eligibility and vesting under Buyer's benefit plans.

11. Closing Conditions

The obligations of the parties to consummate the Closing are subject to customary closing conditions, including without limitation:

(a) the accuracy of the representations and warranties of each party as of the Closing Date (subject to applicable materiality and Material Adverse Effect qualifiers);

(b) the performance in all material respects of the covenants and agreements of each party required to be performed at or prior to the Closing;

(c) the receipt of all required third-party consents for the Assumed Contracts, which the parties currently estimate to include approximately twelve (12) material contracts requiring counterparty consent, as identified on Schedule 6.2(c) to the APA;

(d) the receipt of a Pennsylvania Bulk Sale Tax Clearance Certificate from the Pennsylvania Department of Revenue, pursuant to 72 P.S. § 7240;

(e) the transfer or re-issuance to Buyer of all material environmental permits, including the Title V Operating Permit for the Butler facility and the NPDES permit for the Meadville facility;

(f) the absence of any order, injunction, or other legal restraint prohibiting the consummation of the transactions contemplated by the APA; and

(g) the delivery of all ancillary agreements, certificates, and other closing deliverables specified in Article VIII of the APA.

We note that, based on our analysis of the applicable filing thresholds under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the current size-of-transaction and size-of-person tests, no HSR Act filing is required in connection with the proposed transaction. We are prepared to discuss this analysis with you in further detail at your convenience.

12. Non-Competition and Non-Solicitation

As a condition to the Closing, Gerald W. Horvath (CEO and principal shareholder of AVP) and Michael G. Horvath (Executive Vice President, Operations, of AVP) shall each execute a Non-Competition and Non-Solicitation Agreement in the forms attached to the APA as Exhibits E-1 and E-2, respectively. The non-competition and non-solicitation covenants contained therein are consistent with the terms summarized in the LOI, and we look forward to Seller's comments with respect to geographic scope, duration, and the scope of restricted activities.

13. Transition Services Agreement

The APA contemplates that at Closing, the parties shall enter into a Transition Services Agreement substantially in the form attached as Exhibit G (the "TSA"), pursuant to which Seller will provide certain transitional services to Buyer for a period of up to one hundred twenty (120) days following the Closing Date. The services to be provided include payroll processing and administration, information technology migration and support, and certain administrative and back-office functions. Seller will provide such services at cost plus a five percent (5%) administrative markup. The TSA includes customary provisions regarding service levels, termination, and indemnification.

14. Termination. The APA may be terminated by either party if the Closing has not occurred on or before September 30, 2025 (the "Outside Date" or "Drop-Dead Date"), provided that the right to terminate shall not be available to any party whose breach of any provision of the APA has been the principal cause of the failure of the Closing to have occurred by such date. The APA also includes customary mutual termination rights and the right of either party to terminate in the event of a material breach by the other party that remains uncured following written notice and the expiration of a specified cure period.

Enclosures

Enclosed with this letter you will find the following documents, each dated May 2, 2025 and in initial draft form:

1. Asset Purchase Agreement (clean draft)

2. Exhibit A — Form of Bill of Sale

3. Exhibit B — Form of Assignment and Assumption Agreement

4. Exhibit C — Form of intellectual Property Assignment Agreement

5. Exhibit D — Form of Escrow Agreement

6. Exhibit E-1 — Form of Non-Competition and Non-Solicitation Agreement (Gerald W. Horvath)

7. Exhibit E-2 — Form of Non-Competition and Non-Solicitation Agreement (Michael G. Horvath)

8. Exhibit G — Form of Transition Services Agreement

Please note that Buyer's Disclosure Schedules are currently in preparation and will be circulated to you separately upon completion. We anticipate delivery of Buyer's Disclosure Schedules within approximately two weeks. Seller's Disclosure Schedules are to be prepared and delivered by Seller and its counsel in accordance with the requirements of the APA, and we respectfully request that you confirm the timeline for delivery of the same at your earliest convenience.

Request for Comments and Timing

We respectfully request that Broadmoor Strauss & Kline provide Seller's comments and mark-up of the draft APA and all ancillary documents within ten (10) business days of the date of this letter — that is, on or before Friday, May 16, 2025. Given the number of ancillary agreements and the breadth of the APA, we believe that this timeline affords Seller's counsel sufficient opportunity for a thorough initial review while preserving adequate time for negotiation and execution of the definitive agreements.

As you are aware, the parties remain subject to the sixty (60)-day exclusivity period set forth in Section 5 of the LOI, which expires on June 9, 2025. The parties' mutual objective, as expressed in the LOI, is to negotiate, execute, and deliver the APA and all ancillary agreements on or about June 15, 2025, and to proceed to Closing as promptly as practicable thereafter, subject to the satisfaction or waiver of all closing conditions. We are committed to working diligently toward that timetable and trust that your client shares that objective.

We are available and willing to schedule a call at your earliest convenience to discuss any preliminary questions, structural comments, or other observations that you or your colleagues may have upon your initial review of the enclosed materials. Please do not hesitate to reach out at any time to arrange such a call.

Reservation of Rights

Please be advised that the enclosed draft APA is a working draft and is subject to further negotiation, revision, and amendment by the parties. The circulation of this draft, and any discussions or negotiations relating thereto, do not constitute and shall not be deemed to constitute a binding commitment, agreement, or obligation of Buyer, nor shall any such circulation, discussion, or negotiation be deemed a waiver of any rights, remedies, or positions of Buyer, whether under the LOI, at law, or in equity. All terms and conditions set forth in the enclosed draft remain subject to the final review and approval of Buyer, its board of managers, and its equity sponsor, Ridgeway Capital Partners Fund III, LP.

Due Diligence Status

For your information, Buyer's legal, financial, and environmental due diligence with respect to AVP and the Business remains ongoing. With respect to environmental matters, the Phase I Environmental Site Assessments for both the Butler and Meadville facilities were completed and delivered to Buyer on May 5, 2025. Based on a Recognized Environmental Condition ("REC") identified in the Phase I ESA for the Butler facility — relating to historical solvent use in the corrugator area and potential soil and groundwater impacts — a Phase II environmental assessment of the Butler property was commenced on May 12, 2025. We anticipate receiving the Phase II results within approximately three to four weeks and will advise you of any material findings.

The enclosed draft APA reflects certain due diligence findings identified to date, including provisions relating to the special environmental indemnity discussed above. Buyer expressly reserves the right to modify, supplement, or revise the draft APA and its related schedules and exhibits to reflect additional findings as Buyer's diligence efforts continue. We appreciate Seller's and your firm's continued cooperation in facilitating access to AVP's books, records, personnel, and facilities in connection with this review.

Financial due diligence is being conducted on behalf of Buyer by Hargrove Thornton LLP, under the direction of engagement partner Steven M. Raines. We may separately circulate a request for supplemental financial information arising from that engagement and would appreciate your assistance in coordinating AVP's responses.

Financing Update

For informational purposes, we are pleased to advise that Buyer has secured the financing necessary to consummate the proposed transaction. Specifically, Buyer has obtained (a) a commitment letter dated April 22, 2025 from Pinnacle National Bank, N.A., for a One Hundred Thirty Million Dollar ($130,000,000) incremental term loan facility (the "Debt Commitment"), and (b) an equity commitment letter of the same date from Ridgeway Capital Partners Fund III, LP, for a Fifty Million Dollar ($50,000,000) equity contribution (the "Equity Commitment"). Together, the Debt Commitment and the Equity Commitment provide sufficient funding for the full aggregate Purchase Price and related transaction costs and expenses. Copies of the commitment letters may be made available for your review upon request, subject to customary confidentiality restrictions.

Confidentiality

Please be advised that the enclosed draft APA, the ancillary agreements, and this letter are strictly confidential and are subject to the terms and conditions of the Confidentiality Agreement dated March 15, 2025, between Buyer and Seller, as well as the exclusivity and confidentiality provisions set forth in the LOI. We respectfully request that distribution of the enclosed materials be limited to Seller, its counsel at Broadmoor Strauss & Kline LLP, and its financial advisor, Veltrano Hargrave & Co., and that no further distribution be made without the prior written consent of Buyer.

We very much look forward to working with you and your team toward a timely negotiation and execution of the APA and the consummation of this transaction. Should you have any questions or wish to discuss any aspect of the enclosed materials, please do not hesitate to contact the undersigned or Megan Chu at the contact information set forth below.

Harrison Wexford, Partner Calderwood & Harkness LLP 600 Lexington Avenue, 30th Floor New York, NY 10022 Telephone: (212) 540-7145

Email: hwexford@calderwoodharkness.com

Megan Chu, Associate Calderwood & Harkness LLP 600 Lexington Avenue, 30th Floor New York, NY 10022 Telephone: (212) 540-7263

Email: mchu@calderwoodharkness.com

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Harrison Wexford Partner

Megan Chu, Associate (Contact as noted above)

Enclosures (as described above)

cc (via email):

Sandra K. Liu, General Counsel, Crestline Packaging Solutions LLC Priya Mehta, Chief Financial Officer, Crestline Packaging Solutions LLC Carolyn J. Ng, Esq., Broadmoor Strauss & Kline LLP

CALDERWOOD & HARKNESS LLP
Attorneys at Law
600 Lexington Avenue, 30th Floor New York, New York 10022
Telephone: (212) 540-7000 Facsimile: (212) 540-7001 www.calderwoodharkness.com
May 2, 2025
VIA EMAIL AND Ostrander Technologies R. Feldstein, Esq. Broadmoor Strauss & Kline LLP 600 Grant Street, Suite 4200 Pittsburgh, PA 15219
Re: Acquisition of Substantially All Assets of Allegheny Valley Packaging, Inc. by Crestline Packaging Solutions LLC Calderwood & Harkness Matter No. 1006-00006
Dear Nathan:
As you know, this firm represents Crestline Packaging Solutions LLC, an Ohio limited liability company ("Buyer" or "CPS"), in connection with the proposed acquisition of substantially all of the assets of Allegheny Valley Packaging, Inc., a Pennsylvania corporation ("Seller" or "AVP"). We are pleased to enclose herewith the initial draft of the Asset Purchase Agreement (the "APA") by and among Crestline Packaging Solutions LLC, as Buyer, and Allegheny Valley Packaging, Inc., as Seller, together with the draft ancillary agreements described more fully below. The draft APA has been prepared to reflect the principal terms and conditions set forth in the Letter of Intent dated April 10, 2025, executed between Buyer and Seller (the "LOI"), and incorporates certain findings and considerations arising from Buyer's ongoing due diligence review of AVP's business, assets, and operations.
For ease of your review, we set forth below a summary of the key terms and provisions reflected in the enclosed draft APA. This summary is intended for convenience of reference only and is qualified in its entirety by the terms of the draft APA itself. We encourage you and your client to review the full draft carefully, as the provisions described below are necessarily abbreviated.
Summary of Key Terms Reflected in the Draft APA
1. Transaction Structure
The proposed transaction is structured as an asset purchase in which Buyer will acquire substantially all of the assets of AVP used in or related to the conduct of AVP's corrugated and specialty packaging business (the "Business"). The APA provides that it shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without giving effect to any choice-of-law or conflict-of-law provisions. Venue for any disputes arising under the APA shall lie in the state or federal courts located in the Borough of Manhattan, City of New York, as set forth in the forum selection clause included in Article XII.
2. Purchase Price
The aggregate purchase price payable by Buyer at the Closing is One Hundred Eighty Million Dollars ($180,000,000) in cash (the "Purchase Price"), subject to customary post-closing adjustments for Net Working Capital, Indebtedness, Transaction Expenses, and Cash, each as defined in the APA. The Purchase Price is to be paid by wire transfer of immediately available funds to an account or accounts designated by Seller (or, with respect to the Escrow Amount and amounts required to discharge Indebtedness, to the applicable payoff and escrow accounts) at or prior to the Closing.
3. Escrow. The draft APA provides that Nine Million Dollars ($9,000,000), representing five percent (5%) of the Purchase Price (the "Escrow Amount"), shall be deposited at Closing with Atlantic Fiduciary Trust Company, as escrow agent (the "Escrow Agent"), pursuant to the terms of an Escrow Agreement substantially in the form attached to the APA as Exhibit C. The Escrow Amount is intended to secure Seller's indemnification obligations under Article X of the APA. Subject to deductions for any pending or unresolved indemnification claims, the Escrow Amount (together with any interest or other earnings accrued thereon) shall be released to Seller eighteen (18) months following the Closing Date. The Escrow Agreement sets forth customary provisions regarding the administration of the escrow fund, procedures for claims against the escrow fund, and the resolution of disputed claims.
4. Net Working Capital Adjustment
The APA includes a Net Working Capital adjustment mechanism. The target Net Working Capital is Twelve Million Four Hundred Thousand Dollars ($12,400,000) (the "Target NWC"), which has been derived from AVP's trailing twelve-month average Net Working Capital as set forth in AVP's internally prepared financial statements. Net Working Capital shall be measured as of 11:59 PM Eastern Time on the day immediately preceding the Closing Date and shall be calculated in accordance with United States generally accepted accounting principles ("GAAP") as applied by AVP consistent with past practice, using the same line items, methodologies, and accounting policies as those used in preparing the Reference Balance Sheet attached to the APA as Schedule 1.4.
A de minimis collar of plus or minus Two Hundred Fifty Thousand Dollars (±$250,000) applies to the Net Working Capital adjustment, such that no purchase price adjustment shall be made if the difference between the Closing Net Working Capital and the Target NWC falls within this collar. If the Closing Net Working Capital exceeds the Target NWC by more than $250,000, Buyer shall pay the excess amount (including the full amount of the variance, not only the amount exceeding the collar) to Seller. Conversely, if the Closing Net Working Capital is less than the Target NWC by more than $250,000, Seller shall pay the deficiency amount to Buyer. The draft APA includes a detailed post-closing true-up procedure, including Buyer's preparation and delivery of a Closing Statement, Seller's review and objection period, and a mechanism for resolution of disputes by an independent accounting firm mutually agreed upon by the parties.
5. Acquired Assets and Excluded Assets
Acquired Assets. The Acquired Assets include substantially all assets owned, held, or used by Seller in the operation of the Business, including without limitation: (a) the owned real property located at the Butler facility (250 Industrial Boulevard, Butler, PA 16001) and the Meadville facility (1480 Conneaut Lake Road, Meadville, PA 16335), together with all improvements, fixtures, and appurtenances thereto; (b) all tangible personal property, including machinery, equipment, tooling, dies, vehicles, furniture, and fixtures; (c) all intellectual property owned or used by AVP in the Business, including trademarks, trade names (other than the Excluded Name, as defined below), patents, copyrights, trade secrets, and domain names; (d) approximately forty-seven (47) material contracts identified on Schedule 2.1(d) to the APA (the "Assumed Contracts"), including customer contracts, supply agreements, equipment leases, and certain license agreements; (e) all accounts receivable and inventory; (f) all permits, licenses, and governmental authorizations to the extent transferable; (g) all books and records (other than Excluded Records); and (h) all goodwill and going concern value associated with the Business.
Excluded Assets. The Excluded Assets include: (a) all cash, cash equivalents, and bank deposits of Seller as of the Closing; (b) all rights to tax refunds, credits, or overpayments attributable to any pre-Closing tax period; (c) Seller's minute books, stock ledgers, corporate seal, and organizational documents (the "Excluded Records"); (d) all of Seller's insurance policies and any rights or claims thereunder (including any insurance proceeds attributable to pre-Closing events); and (e) the corporate name "Allegheny Valley Packaging, Inc." (the "Excluded Name"), subject to a limited, non-exclusive, royalty-free transitional license granted by Seller to Buyer for a period of six (6) months following the Closing Date to permit an orderly transition of signage, business stationery, packaging, and regulatory filings.
6. Assumed Liabilities and Excluded Liabilities
Assumed Liabilities. At the Closing, Buyer will assume only the following liabilities and obligations of Seller (collectively, the "Assumed Liabilities"): (a) trade payables and accrued expenses arising in the ordinary course of business and reflected on the Closing Statement or included in the calculation of Net Working Capital; (b) all post-Closing obligations arising under the Assumed Contracts (to the extent such obligations relate to periods from and after the Closing Date and do not arise from any breach or default by Seller occurring prior to the Closing); (c) post-Closing warranty obligations with respect to products manufactured or sold by the Business prior to the Closing, to the extent set forth in Section 2.3(c) of the APA; and (d) current-period real property taxes and assessments allocable to the period from and after the Closing Date, prorated as of the Closing Date.
Excluded Liabilities. All liabilities and obligations of Seller other than the Assumed Liabilities shall be retained by Seller and constitute "Excluded Liabilities," including without limitation: (a) all pre-Closing indebtedness of Seller, including approximately Fourteen Million Two Hundred Thousand Dollars ($14,200,000) outstanding under AVP's revolving credit facility with Merchants & Traders Bank, N.A. (the "Revolving Facility"), which shall be repaid in full at or prior to the Closing from the proceeds of the Purchase Price; (b) all liabilities for taxes of Seller attributable to any pre-Closing tax period (including any transfer taxes for which Seller is responsible); (c) all pre-Closing product liability claims and litigation; (d) all liabilities relating to Seller's underfunded pension obligations under the Allegheny Valley Packaging, Inc. Defined Benefit Pension Plan, which the parties estimate to be approximately Three Million One Hundred Thousand Dollars ($3,100,000) as of the most recent actuarial valuation; and (e) all Transaction Expenses of Seller, including fees and expenses of Seller's legal, financial, and accounting advisors.
7. Representations and Warranties
The draft APA contains customary and comprehensive representations and warranties of both Seller and Buyer. Seller's representations and warranties address, among other matters, corporate organization, authority, capitalization, financial statements, absence of undisclosed liabilities, absence of certain changes, compliance with laws, material contracts, real property, intellectual property, employee and labor matters, environmental matters, tax matters, insurance, brokers' fees, and absence of litigation. Buyer's representations and warranties address organization, authority, litigation, financing, solvency, and brokers' fees.
The APA provides for the following survival periods for representations and warranties:
(a) General Representations: Eighteen (18) months following the Closing Date.
(b) Fundamental Representations (including representations as to title to the Acquired Assets, corporate authority and due authorization, capitalization, brokers' fees, and taxes): Sixty (60) months following the Closing Date.
(c) Environmental Representations: Thirty-six (36) months following the Closing Date.
(d) Tax Representations: Until sixty (60) days after the expiration of the applicable statute of limitations (including any extensions or waivers thereof) with respect to the underlying tax matter.
Covenants and agreements that by their terms are to be performed at or prior to the Closing shall survive indefinitely, and covenants and agreements that by their terms are to be performed after the Closing shall survive in accordance with their terms.
8. Indemnification. The indemnification provisions of the APA include the following key parameters:
(a) Cap: Seller's aggregate liability for indemnification claims under the APA (other than claims arising from breaches of Fundamental Representations, fraud, or willful misconduct) shall not exceed twenty-five percent (25%) of the Purchase Price, or Forty-Five Million Dollars ($45,000,000) (the "Cap").
(b) Basket: Seller shall have no obligation to indemnify Buyer until the aggregate amount of all Losses exceeds seventy-five hundredths of one percent (0.75%) of the Purchase Price, or One Million Three Hundred Fifty Thousand Dollars ($1,350,000) (the "Basket"). The Basket is structured as a tipping basket, meaning that once the aggregate amount of Losses exceeds the Basket, Buyer shall be entitled to first-dollar recovery of all such Losses from the first dollar, not merely the excess above the Basket threshold.
(c) Mini-Basket (De Minimis Threshold): Individual claims with Losses of less than Fifty Thousand Dollars ($50,000) shall not be counted toward satisfaction of the Basket and shall not otherwise be indemnifiable.
(d) Special Environmental Indemnity: In addition to the general indemnification framework, Seller shall retain specific liability for all pre-Closing environmental conditions (including remediation costs, fines, penalties, and third-party claims) arising at or relating to the Butler facility and the Meadville facility, up to a maximum aggregate amount of Eight Million Dollars ($8,000,000), surviving for thirty-six (36) months following the Closing Date. This special environmental indemnity is not subject to the Basket or the Mini-Basket threshold but is subject to its own separate cap as stated.
9. Real Property
The APA provides for the conveyance of the following owned real property from Seller to Buyer at the Closing by special warranty deed:
(a) Butler Facility: Located at 250 Industrial Boulevard, Butler, Pennsylvania 16001, consisting of approximately 285,000 square feet of manufacturing, warehousing, and office space situated on approximately 22.5 acres.
(b) Meadville Facility: Located at 1480 Conneaut Lake Road, Meadville, Pennsylvania 16335, consisting of approximately 110,000 square feet of manufacturing and distribution space situated on approximately 8.2 acres.
The Pennsylvania Realty Transfer Tax, currently assessed at a combined state and local rate of two percent (2%) of the value of the real property conveyed, shall be split equally between Buyer and Seller, with each party bearing one percent (1%).
10. Employees and Benefits
The APA provides that Buyer shall extend offers of employment (on terms and conditions substantially comparable to those provided by Seller immediately prior to the Closing, subject to certain adjustments as set forth in Section 7.1 of the APA) to substantially all of the approximately three hundred forty (340) employees of AVP as of the Closing Date. Employees who accept Buyer's offer of employment are referred to in the APA as "Transferred Employees."
Buyer shall assume, as a successor employer, the collective bargaining agreement between AVP and the International Paperworkers Union Local 814 (the "CBA"), which covers approximately one hundred eighty-five (185) hourly production and maintenance employees at the Butler facility. The CBA has a current term expiring on March 31, 2027. The APA requires Seller to cooperate in facilitating such assumption and in providing Buyer with all information reasonably necessary to comply with Buyer's obligations under the CBA.
Buyer shall not assume AVP's 401(k) plan (the Allegheny Valley Packaging, Inc. Employees' Savings Plan). Transferred Employees will be eligible to participate in Buyer's 401(k) plan following the Closing, subject to any applicable eligibility waiting periods, and Buyer will recognize years of service with AVP for purposes of eligibility and vesting under Buyer's benefit plans.
11. Closing Conditions
The obligations of the parties to consummate the Closing are subject to customary closing conditions, including without limitation:
(a) the accuracy of the representations and warranties of each party as of the Closing Date (subject to applicable materiality and Material Adverse Effect qualifiers);
(b) the performance in all material respects of the covenants and agreements of each party required to be performed at or prior to the Closing;
(c) the receipt of all required third-party consents for the Assumed Contracts, which the parties currently estimate to include approximately twelve (12) material contracts requiring counterparty consent, as identified on Schedule 6.2(c) to the APA;
(d) the receipt of a Pennsylvania Bulk Sale Tax Clearance Certificate from the Pennsylvania Department of Revenue, pursuant to 72 P.S. § 7240;
(e) the transfer or re-issuance to Buyer of all material environmental permits, including the Title V Operating Permit for the Butler facility and the NPDES permit for the Meadville facility;
(f) the absence of any order, injunction, or other legal restraint prohibiting the consummation of the transactions contemplated by the APA; and
(g) the delivery of all ancillary agreements, certificates, and other closing deliverables specified in Article VIII of the APA.
We note that, based on our analysis of the applicable filing thresholds under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the current size-of-transaction and size-of-person tests, no HSR Act filing is required in connection with the proposed transaction. We are prepared to discuss this analysis with you in further detail at your convenience.
12. Non-Competition and Non-Solicitation
As a condition to the Closing, Gerald W. Horvath (CEO and principal shareholder of AVP) and Michael G. Horvath (Executive Vice President, Operations, of AVP) shall each execute a Non-Competition and Non-Solicitation Agreement in the forms attached to the APA as Exhibits E-1 and E-2, respectively. The non-competition and non-solicitation covenants contained therein are consistent with the terms summarized in the LOI, and we look forward to Seller's comments with respect to geographic scope, duration, and the scope of restricted activities.
13. Transition Services Agreement
The APA contemplates that at Closing, the parties shall enter into a Transition Services Agreement substantially in the form attached as Exhibit G (the "TSA"), pursuant to which Seller will provide certain transitional services to Buyer for a period of up to one hundred twenty (120) days following the Closing Date. The services to be provided include payroll processing and administration, information technology migration and support, and certain administrative and back-office functions. Seller will provide such services at cost plus a five percent (5%) administrative markup. The TSA includes customary provisions regarding service levels, termination, and indemnification.
14. Termination. The APA may be terminated by either party if the Closing has not occurred on or before September 30, 2025 (the "Outside Date" or "Drop-Dead Date"), provided that the right to terminate shall not be available to any party whose breach of any provision of the APA has been the principal cause of the failure of the Closing to have occurred by such date. The APA also includes customary mutual termination rights and the right of either party to terminate in the event of a material breach by the other party that remains uncured following written notice and the expiration of a specified cure period.
Enclosures
Enclosed with this letter you will find the following documents, each dated May 2, 2025 and in initial draft form:
1. Asset Purchase Agreement (clean draft)
2. Exhibit A — Form of Bill of Sale
3. Exhibit B — Form of Assignment and Assumption Agreement
4. Exhibit C — Form of intellectual Property Assignment Agreement
5. Exhibit D — Form of Escrow Agreement
6. Exhibit E-1 — Form of Non-Competition and Non-Solicitation Agreement (Gerald W. Horvath)
7. Exhibit E-2 — Form of Non-Competition and Non-Solicitation Agreement (Michael G. Horvath)
8. Exhibit G — Form of Transition Services Agreement
Please note that Buyer's Disclosure Schedules are currently in preparation and will be circulated to you separately upon completion. We anticipate delivery of Buyer's Disclosure Schedules within approximately two weeks. Seller's Disclosure Schedules are to be prepared and delivered by Seller and its counsel in accordance with the requirements of the APA, and we respectfully request that you confirm the timeline for delivery of the same at your earliest convenience.
Request for Comments and Timing
We respectfully request that Broadmoor Strauss & Kline provide Seller's comments and mark-up of the draft APA and all ancillary documents within ten (10) business days of the date of this letter — that is, on or before Friday, May 16, 2025. Given the number of ancillary agreements and the breadth of the APA, we believe that this timeline affords Seller's counsel sufficient opportunity for a thorough initial review while preserving adequate time for negotiation and execution of the definitive agreements.
As you are aware, the parties remain subject to the sixty (60)-day exclusivity period set forth in Section 5 of the LOI, which expires on June 9, 2025. The parties' mutual objective, as expressed in the LOI, is to negotiate, execute, and deliver the APA and all ancillary agreements on or about June 15, 2025, and to proceed to Closing as promptly as practicable thereafter, subject to the satisfaction or waiver of all closing conditions. We are committed to working diligently toward that timetable and trust that your client shares that objective.
We are available and willing to schedule a call at your earliest convenience to discuss any preliminary questions, structural comments, or other observations that you or your colleagues may have upon your initial review of the enclosed materials. Please do not hesitate to reach out at any time to arrange such a call.
Reservation of Rights
Please be advised that the enclosed draft APA is a working draft and is subject to further negotiation, revision, and amendment by the parties. The circulation of this draft, and any discussions or negotiations relating thereto, do not constitute and shall not be deemed to constitute a binding commitment, agreement, or obligation of Buyer, nor shall any such circulation, discussion, or negotiation be deemed a waiver of any rights, remedies, or positions of Buyer, whether under the LOI, at law, or in equity. All terms and conditions set forth in the enclosed draft remain subject to the final review and approval of Buyer, its board of managers, and its equity sponsor, Ridgeway Capital Partners Fund III, LP.
Due Diligence Status
For your information, Buyer's legal, financial, and environmental due diligence with respect to AVP and the Business remains ongoing. With respect to environmental matters, the Phase I Environmental Site Assessments for both the Butler and Meadville facilities were completed and delivered to Buyer on May 5, 2025. Based on a Recognized Environmental Condition ("REC") identified in the Phase I ESA for the Butler facility — relating to historical solvent use in the corrugator area and potential soil and groundwater impacts — a Phase II environmental assessment of the Butler property was commenced on May 12, 2025. We anticipate receiving the Phase II results within approximately three to four weeks and will advise you of any material findings.
The enclosed draft APA reflects certain due diligence findings identified to date, including provisions relating to the special environmental indemnity discussed above. Buyer expressly reserves the right to modify, supplement, or revise the draft APA and its related schedules and exhibits to reflect additional findings as Buyer's diligence efforts continue. We appreciate Seller's and your firm's continued cooperation in facilitating access to AVP's books, records, personnel, and facilities in connection with this review.
Financial due diligence is being conducted on behalf of Buyer by Hargrove Thornton LLP, under the direction of engagement partner Steven M. Raines. We may separately circulate a request for supplemental financial information arising from that engagement and would appreciate your assistance in coordinating AVP's responses.
Financing Update
For informational purposes, we are pleased to advise that Buyer has secured the financing necessary to consummate the proposed transaction. Specifically, Buyer has obtained (a) a commitment letter dated April 22, 2025 from Pinnacle National Bank, N.A., for a One Hundred Thirty Million Dollar ($130,000,000) incremental term loan facility (the "Debt Commitment"), and (b) an equity commitment letter of the same date from Ridgeway Capital Partners Fund III, LP, for a Fifty Million Dollar ($50,000,000) equity contribution (the "Equity Commitment"). Together, the Debt Commitment and the Equity Commitment provide sufficient funding for the full aggregate Purchase Price and related transaction costs and expenses. Copies of the commitment letters may be made available for your review upon request, subject to customary confidentiality restrictions.
Confidentiality
Please be advised that the enclosed draft APA, the ancillary agreements, and this letter are strictly confidential and are subject to the terms and conditions of the Confidentiality Agreement dated March 15, 2025, between Buyer and Seller, as well as the exclusivity and confidentiality provisions set forth in the LOI. We respectfully request that distribution of the enclosed materials be limited to Seller, its counsel at Broadmoor Strauss & Kline LLP, and its financial advisor, Veltrano Hargrave & Co., and that no further distribution be made without the prior written consent of Buyer.
We very much look forward to working with you and your team toward a timely negotiation and execution of the APA and the consummation of this transaction. Should you have any questions or wish to discuss any aspect of the enclosed materials, please do not hesitate to contact the undersigned or Megan Chu at the contact information set forth below.
Harrison Wexford, Partner Calderwood & Harkness LLP 600 Lexington Avenue, 30th Floor New York, NY 10022 Telephone: (212) 540-7145
Email: hwexford@calderwoodharkness.com
Megan Chu, Associate Calderwood & Harkness LLP 600 Lexington Avenue, 30th Floor New York, NY 10022 Telephone: (212) 540-7263
Email: mchu@calderwoodharkness.com
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Harrison Wexford Partner
Megan Chu, Associate (Contact as noted above)
Enclosures (as described above)
cc (via email):
Sandra K. Liu, General Counsel, Crestline Packaging Solutions LLC Priya Mehta, Chief Financial Officer, Crestline Packaging Solutions LLC Carolyn J. Ng, Esq., Broadmoor Strauss & Kline LLP

CALDERWOOD & HARKNESS LLP

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