1006-00003 · Crestline Packaging Solutions LLC · Diligence/Phase I Reviews

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PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

MEMORANDUM

MATTER NO.: 1006-00003

TO: Derek Huang, General Counsel, Crestline Packaging Solutions LLC Patricia Okonkwo, VP, Environmental Health & Safety, Crestline Packaging Solutions LLC

FROM: Harrison Caldwell, Of Counsel (Environmental & Land Use), Calderwood & Harkness LLP Grace Nakamura, Lead Associate (Real Estate), Calderwood & Harkness LLP

DATE: August 22, 2022

RE: Phase I Environmental Site Assessment Review and Analysis — McKeesport Main Plant, 2200 Iron Works Boulevard, McKeesport, PA 15132 (Allegheny Chemical Coatings, Inc.)

This memorandum is a privileged and confidential attorney-client communication and constitutes attorney work product prepared in anticipation of litigation and in connection with legal advice provided to Crestline Packaging Solutions LLC. This document is not intended for distribution to any person or entity other than the named recipients without the prior written consent of Calderwood & Harkness LLP.

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I. PURPOSE AND EXECUTIVE SUMMARY

Calderwood & Harkness LLP ("C&H") has reviewed and analyzed the Phase I Environmental Site Assessment ("Phase I ESA") prepared by TerraVerde Environmental Consulting LLC ("TerraVerde") for the McKeesport Main Plant (the "Property" or "Site"), located at 2200 Iron Works Boulevard, McKeesport, Pennsylvania 15132. The McKeesport Main Plant serves as the headquarters and primary manufacturing facility of Allegheny Chemical Coatings, Inc. ("ACC" or the "Target"). This review has been undertaken in connection with Crestline Packaging Solutions LLC's ("Crestline" or "CPS") proposed acquisition of 100% of the outstanding common stock of ACC (the "Transaction").

The Phase I ESA was prepared by TerraVerde and is dated August 15, 2022. It was conducted in accordance with the ASTM E1527-21 standard, entitled "Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process" (the "ASTM Standard" or "Standard"). The TerraVerde engagement was led by Dr. Nina Sorensen, P.E., CHMM, who served as Principal-in-Charge, and Kevin O'Malley, P.G., who served as Project Manager. Both professionals hold appropriate credentials and are qualified to conduct assessments of this nature under the ASTM Standard.

Based on our review and analysis of the Phase I ESA, the associated documentation, and the applicable regulatory framework, we provide the following executive summary of findings:

The Phase I ESA identified two Recognized Environmental Conditions ("RECs") and one Historical Recognized Environmental Condition ("HREC") at the McKeesport facility. No Controlled Recognized Environmental Conditions ("CRECs") were identified.

The identified conditions are summarized as follows:

• REC-1 (Potential Vapor Intrusion Pathway — Building C Mixing Area): TerraVerde documented elevated volatile organic compound ("VOC") readings in indoor air near the Building C mixing area. These readings indicate a potential vapor intrusion pathway from residual subsurface contamination beneath the former underground storage tank ("UST") field. Building C was constructed in the early 1990s directly over or proximate to the former UST field, and the 2001 No Further Action ("NFA") letter issued by the Pennsylvania Department of Environmental Protection ("PA DEP") under the Land Recycling and Environmental Remediation Standards Act (Act 2) addressed soil conditions only and did not evaluate groundwater or soil vapor media. The potential for chlorinated solvent contamination from prior Keystone Metalworks operations further compounds this concern.

• REC-2 (Staining and Stressed Vegetation — Eastern Property Boundary / Outdoor Drum Storage Area): TerraVerde observed visible staining on soil surfaces and stressed, discolored vegetation along the eastern property boundary, adjacent to an unlined stormwater drainage channel. The observed conditions are in the area immediately downgradient of the outdoor drum storage area, which lacks a fully engineered secondary containment system. The unlined drainage channel provides a potential migration pathway for any released materials to travel off-site.

• HREC-1 (1994 Act 2 Release — Former Underground Storage Tanks): A 1994 PA DEP Act 2 release associated with the removal of three underground storage tanks in 1993 was identified. The release was investigated and remediated under the Statewide Health Standard pathway, and PA DEP issued a No Further Action letter in May 2001 certifying that soil conditions met applicable standards. This condition was appropriately classified as an HREC by TerraVerde, as it represents a past release that has been addressed to the satisfaction of the applicable regulatory authority.

Recommendation: Based on the identification of two RECs at the McKeesport facility, C&H recommends that Crestline authorize a Phase II Environmental Site Assessment (subsurface investigation) targeting both REC-1 and REC-2. The Phase II investigation should include sub-slab soil gas sampling, soil borings, groundwater monitoring well installation and sampling, and appropriate laboratory analysis to characterize the nature and extent of any contamination and to evaluate potential vapor intrusion pathways. Specific scope-of-work recommendations are provided in Section VIII of this memorandum.

This memorandum should be read in conjunction with the Comprehensive Environmental Diligence Summary Memorandum (to be finalized upon completion of Phase I reviews for all ACC facilities) and the forthcoming Phase II Scope of Work Review & Comment Letter for the McKeesport facility. Additionally, the reader should reference the separate Spill History and Enforcement Review Memorandum for a detailed analysis of ACC's compliance history and reportable releases.

II. PROPERTY DESCRIPTION

A. Site Identification and Ownership

The McKeesport Main Plant is located at 2200 Iron Works Boulevard, McKeesport, Pennsylvania 15132, within Allegheny County, Pennsylvania. The property is identified in the Allegheny County real property records under Parcel Identification Number 0383-M-00125-0000-00. The total acreage of the property is approximately 14.3 acres.

The property is currently owned in fee simple by Allegheny Chemical Coatings, Inc. ACC has held title to the property since 1987, when it purchased the site from Keystone Metalworks, a now-defunct steel fabrication company. We have not been provided with a copy of the 1987 deed or the purchase and sale agreement from the Keystone Metalworks transaction, and we note the absence of any environmental baseline survey or Phase I ESA from the 1987 property transfer as a data gap identified by TerraVerde. C&H recommends that copies of the 1987 conveyance documents be requested from Seller's counsel to the extent available, as these may contain environmental representations, warranties, or indemnification provisions that could be relevant to the current Transaction.

The property is situated in an area of McKeesport that has historically been characterized by heavy industrial activity, including steel manufacturing, metalworking, and associated chemical processing operations. This broader industrial context is relevant to the environmental assessment because it increases the likelihood of legacy contamination from both on-site and neighboring operations.

B. Improvements and Structures

The McKeesport Main Plant consists of approximately 185,000 square feet of manufacturing space distributed across multiple buildings, designated as Buildings A, B, C, and various ancillary structures. In addition, the facility includes approximately 12,000 square feet of office space housed in an office building that was constructed circa 1955.

The following buildings and structures are of particular relevance to the environmental findings identified in the Phase I ESA:

• Building C (Mixing and Blending Area): Building C is the primary location of ACC's mixing and blending operations for solvent-based coatings. It was constructed in the early 1990s and is situated over or proximate to the area where three underground storage tanks were formerly located (the "former UST field"). Building C is the location of REC-1, as TerraVerde documented elevated indoor air VOC readings within this structure during the site reconnaissance.

• Eastern Property Boundary (Outdoor Drum Storage Area): The outdoor drum storage area is located along the eastern boundary of the property, adjacent to an unlined stormwater drainage channel. This area is used for staging of raw material drums and waste drums and is the location of REC-2, where TerraVerde observed visible staining and stressed vegetation.

• Buildings A and B: These structures house additional manufacturing and storage operations. Buildings A and B are of note in the context of asbestos-containing materials, as discussed in Section VII.A below.

• Office Building: The office building, constructed circa 1955, contains identified lead-based paint on interior and exterior surfaces, as discussed in Section VII.B below.

The buildings and improvements are generally consistent with the industrial use of the property over several decades. TerraVerde noted that the manufacturing buildings have undergone various modifications and expansions over time, and the structural configuration of the buildings — particularly Building C — is relevant to the evaluation of potential vapor intrusion pathways.

C. Current Operations

The McKeesport Main Plant serves as ACC's primary manufacturing facility for the production of solvent-based and epoxy coatings. Operations conducted at the facility include the mixing, blending, and filling of specialty industrial coatings, including epoxy coatings, polyurethane coatings, and solvent-based coatings. These products serve customers in the packaging, automotive, and industrial applications markets. The facility operates on a multiple-shift basis and employs approximately 210 production workers and 45 administrative and management personnel.

The chemicals of concern present on-site and used in ACC's manufacturing operations include, but are not limited to, the following:

• Volatile Organic Compounds ("VOCs"): Toluene, xylene, methyl ethyl ketone ("MEK"), and ethylbenzene are among the primary VOC constituents used as solvents in ACC's coating formulations. These compounds are significant because they are regulated under both federal and state environmental programs and are commonly associated with soil, groundwater, and air quality impacts when released.

• Heavy Metals: Chromium and lead are present at the facility as legacy pigment components from historical coating formulations. While ACC has indicated that current formulations have largely transitioned away from chromium- and lead-based pigments, residual quantities remain in storage and may be present in legacy waste streams and contaminated areas of the facility.

The nature of these operations — particularly the handling, storage, and processing of large quantities of volatile organic solvents — is inherently associated with environmental risk and underscores the importance of the Phase I ESA findings discussed in this memorandum.

D. Regulatory Identifiers

The McKeesport Main Plant operates under the following regulatory permits and identifiers:

The facility's classification as a Large Quantity Generator under RCRA and a major source under the Clean Air Act is significant from a regulatory compliance perspective and indicates the scale and intensity of chemical handling operations conducted at the McKeesport site. The Title V Operating Permit is scheduled to expire on May 31, 2024, and Crestline should anticipate the need to file a timely renewal application and to comply with all applicable conditions of the existing permit during the post-closing transition period. The NPDES stormwater discharge permit is also relevant to REC-2, as contamination in the unlined stormwater drainage channel could implicate permit compliance obligations, as discussed further in Section V.B.3 below.

III. SCOPE OF THE PHASE I ESA

TerraVerde conducted the Phase I ESA in conformance with the requirements of ASTM E1527-21, which defines "good commercial and customary practice" for environmental site assessments of commercial real estate. Adherence to the ASTM Standard is significant because it establishes the framework for a purchaser to qualify for the "innocent landowner," "contiguous property owner," and "bona fide prospective purchaser" defenses to CERCLA liability under 42 U.S.C. §§ 9601(35), 9607(q), and 9607(r). Crestline's ability to avail itself of these defenses post-closing will depend in part on whether appropriate "all appropriate inquiries" were conducted prior to acquisition, and the Phase I ESA is a foundational component of that inquiry.

The scope of TerraVerde's Phase I ESA encompassed the following components:

Records Review. TerraVerde conducted a comprehensive records review, including a search of federal, state, tribal, and local regulatory databases within the standard environmental database search radii prescribed by the ASTM Standard. The database search was conducted by Penrose Solutions ("EDR") and covered the standard range of federal and state databases, including but not limited to: the National Priorities List ("NPL"), CERCLIS/SEMS, RCRA CORRACTS and non-CORRACTS TSD facilities, RCRA generators, ERNS, state-equivalent databases, UST registrations, LUST databases, SWF/LF databases, and institutional control registries. In addition, TerraVerde reviewed historical records, prior environmental site assessments and reports, regulatory correspondence between ACC and PA DEP, and facility documentation provided by ACC through its legal counsel at Hargrove, Dalton & Speer LLP and ACC's Environmental Health & Safety Manager, Carl Johannsen.

Historical Use Information. TerraVerde reviewed a comprehensive suite of historical source materials to evaluate past uses of the property and surrounding areas. This review included historical aerial photographs spanning the period from 1938 through 2022, Trelwick fire insurance maps (where available), city directories, USGS topographic maps, and building department records maintained by the City of McKeesport and Allegheny County. The historical review was critical to understanding the pre-1987 use of the property by Keystone Metalworks and to identifying potential sources of contamination that may predate ACC's ownership.

Site Reconnaissance. A physical inspection of the property was conducted on August 8–9, 2022, by Kevin O'Malley, P.G., Project Manager, and Alicia Reyes, P.G. The site reconnaissance involved a systematic walk-through of the entire property, including interior inspection of all buildings, exterior inspection of storage areas, loading areas, drainage features, and property boundaries. The reconnaissance team utilized a handheld photoionization detector ("PID") to screen for the presence of VOCs in indoor air and in areas of observed staining or potential environmental concern. The site visit was conducted during normal business hours while manufacturing operations were ongoing, which TerraVerde appropriately noted may have affected indoor air readings due to contributions from current operational emissions.

Interviews. TerraVerde conducted interviews with key personnel having knowledge of the property's history, operations, and environmental conditions. Interviewees included Carl Johannsen, ACC's Environmental Health & Safety Manager, who has been employed at the McKeesport facility since 2005; Diane Pulaski, ACC's Vice President of Operations, who has been with the company since 1998; and several long-term site employees who provided information regarding historical operations, chemical use, and any known releases or spills. The interviews were conducted in accordance with the ASTM Standard's requirements for gathering information from owners, operators, and occupants.

User-Provided Information. ACC, through its EHS Manager and legal counsel, provided TerraVerde with historical environmental reports, UST closure documentation (including tank removal records from 1993), PA DEP Act 2 correspondence and filings, the May 2001 NFA letter, environmental permits, compliance records, spill reports, inspection records, and the facility's Asbestos Operations and Maintenance Plan. This information was essential to the evaluation of the HREC and to the assessment of current environmental conditions at the facility.

Limitations and Data Gaps. TerraVerde identified the following limitations and data gaps in the Phase I ESA, which C&H considers to be appropriately disclosed and consistent with the practical realities of assessing a property with a long industrial history:

• Limited information on pre-1987 operations. Because Keystone Metalworks is now defunct and its records are not available, there is limited documentation of the chemicals used, stored, and disposed of at the property during the Keystone Metalworks era. This data gap is particularly significant given the likelihood that steel fabrication operations involved the use of chlorinated solvents (TCE, PCE), cutting oils, degreasers, and metal-finishing chemicals that are persistent environmental contaminants.

• Historical aerial photograph resolution. Some historical aerial photographs from the 1960s and 1970s were of limited resolution, which constrained TerraVerde's ability to identify specific structures, storage areas, or features on the property during that period.

• Absence of environmental baseline survey from 1987 property transfer. No environmental baseline survey or Phase I ESA was conducted in connection with ACC's 1987 purchase of the property from Keystone Metalworks. Consequently, there is no pre-acquisition documentation of environmental conditions at the time ACC took ownership, which limits the ability to distinguish contamination attributable to Keystone Metalworks from contamination attributable to ACC's operations.

C&H considers the TerraVerde Phase I ESA to be a thorough and professionally executed assessment that satisfies the requirements of the ASTM Standard. The identified data gaps are noted but do not, in our view, undermine the overall reliability of TerraVerde's findings and classifications.

IV. HISTORICAL USE AND ENVIRONMENTAL BACKGROUND

A. Pre-1987 Use (Keystone Metalworks Era)

The McKeesport property was operated as a steel fabrication facility by Keystone Metalworks prior to ACC's acquisition of the property in 1987. Keystone Metalworks is now defunct, and limited documentation of its operations, chemical use, and environmental practices has been located during the Phase I ESA process. Based on the information available — including historical aerial photographs, limited city directory records, and information provided by long-term site employees — the property was used for steel fabrication and metalworking operations for several decades prior to ACC's acquisition.

The significance of the Keystone Metalworks era to the current environmental assessment cannot be overstated. Steel fabrication operations of the type conducted at the McKeesport site during the mid-to-late twentieth century commonly involved the use of a range of chemicals with significant environmental implications, including:

• Chlorinated solvents such as trichloroethylene ("TCE") and tetrachloroethylene ("PCE"), which were widely used as metal degreasers in the steel and metalworking industries. TCE and PCE are dense non-aqueous phase liquids ("DNAPLs") that migrate downward through the subsurface, are highly persistent in groundwater, and are known to generate toxic vapors that can migrate into overlying structures through a process known as vapor intrusion. These compounds are classified as probable or known human carcinogens.

• Cutting oils and lubricants, which may contain petroleum hydrocarbons and, in some cases, polychlorinated biphenyls ("PCBs").

• Metal-finishing chemicals, including acids, alkalis, and heavy metal solutions used in plating, pickling, and surface treatment processes.

The limited documentation of Keystone Metalworks' chemical use, storage practices, and environmental incidents represents a material data gap. This gap is particularly relevant to the evaluation of REC-1 (potential vapor intrusion in Building C), as any chlorinated solvent contamination from Keystone Metalworks operations could constitute an additional and distinct source of subsurface VOC contamination that was not assessed during the 1993–2001 Act 2 investigation, which focused on petroleum-related UST releases.

B. UST History and 1994 Act 2 Release

Three underground storage tanks, each with a capacity of 10,000 gallons, were historically present on the property. The USTs were located in the area now referred to as the "former UST field," situated near Building C. The specific contents stored in these tanks are not fully documented in the materials provided to TerraVerde, but the Act 2 filings indicate that the USTs were used for the storage of petroleum products and/or solvents in connection with the facility's operations.

The three USTs were removed in 1993. During the removal process, contaminated soils were identified in the tank excavation areas, indicating that releases had occurred from one or more of the tanks during their operational life. The identification of contaminated soils prompted ACC to open a filing with PA DEP under the Land Recycling and Environmental Remediation Standards Act, commonly known as Act 2 (35 P.S. §§ 6026.101–6026.908). The Act 2 filing was opened in 1994.

Remediation of the contaminated soils was conducted under the Statewide Health Standard pathway, one of three cleanup standards available under Act 2 (the others being the Background Standard and the Site-Specific Standard). The Statewide Health Standard establishes concentration thresholds for individual contaminants in soil and groundwater, derived from risk-based calculations assuming specified exposure scenarios. Remediation under the Statewide Health Standard does not require a site-specific risk assessment but must demonstrate that contaminant concentrations in the attested media meet the applicable numerical standards.

Following completion of the remediation activities, PA DEP issued a No Further Action letter in May 2001, certifying that soil conditions at the former UST field met the Statewide Health Standard. The NFA letter constitutes PA DEP's determination that no further action is required with respect to the attested media (soils) at the specified cleanup standard, subject to the conditions and limitations stated therein.

Critically, the NFA letter applies to soils only and specifically notes that it does not constitute a comprehensive assessment of all environmental media at the site. In particular, the NFA letter does not address groundwater conditions or soil vapor conditions in the vicinity of the former UST field. This limitation is highly significant in light of the elevated indoor air VOC readings documented by TerraVerde in Building C, which was constructed over or proximate to the former UST field during the pendency of the Act 2 investigation.

TerraVerde appropriately classified the 1994 Act 2 release as a Historical Recognized Environmental Condition ("HREC") under the ASTM Standard. As defined by ASTM E1527-21, an HREC is "a past release of any hazardous substances or petroleum products that has occurred in connection with the property and has been addressed to the satisfaction of the applicable regulatory authority or meeting unrestricted use criteria... without subjecting the property to any required controls." The classification as an HREC, rather than a REC, reflects the fact that the release has been remediated and a regulatory closure determination has been obtained. However, as discussed in Sections V and VI below, the limited scope of the NFA letter — addressing soils only and not groundwater or vapor — has given rise to the separate classification of REC-1 for the potential vapor intrusion pathway.

C. ACC Operations (1987–Present)

ACC has operated continuously at the McKeesport Main Plant since acquiring the property from Keystone Metalworks in 1987. Over the course of its more than 35 years of occupancy, ACC has expanded and modified the facility to support its growing manufacturing operations. Of particular note, Building C — the mixing and blending area that is the subject of REC-1 — was constructed in the early 1990s. The timing of this construction is significant because Building C was erected over or near the former UST field after the USTs were removed in 1993 but during the pendency of the Act 2 investigation and remediation that continued through 2001. It is unclear from the available documentation whether any environmental assessment of subsurface conditions was conducted prior to the construction of Building C, or whether any vapor mitigation measures (such as a vapor barrier or sub-slab depressurization system) were incorporated into the building design.

Throughout its operations at the McKeesport facility, ACC has maintained Large Quantity Generator ("LQG") status under RCRA, reflecting the volume of hazardous waste generated by its coating manufacturing operations. ACC's RCRA compliance history at the McKeesport facility appears generally satisfactory based on the documentation provided. The most recent PA DEP RCRA inspection was conducted on April 14, 2021, and resulted in no violations being noted. C&H notes, however, that the absence of cited violations during a routine compliance inspection does not necessarily indicate the absence of conditions that could constitute regulatory violations upon more detailed review; this is particularly relevant to the condition of the outdoor drum storage area discussed in connection with REC-2.

Two reportable spill events have occurred at the McKeesport facility during the last ten years, as detailed in the separate Spill History and Enforcement Review Memorandum. These events are summarized as follows for context:

• June 14, 2017: Approximately 50 gallons of xylene were released from a ruptured transfer hose in the manufacturing area. The release was contained within existing secondary containment structures, was promptly reported to PA DEP, and resulted in a No Further Action determination. This event does not appear to have resulted in a release to the environment.

• February 3, 2020: Approximately 120 gallons of epoxy resin hardener were released to a warehouse floor drain that was connected to the facility's sanitary sewer system. The release was reported to PA DEP and the Allegheny County Health Department. ACC was assessed a fine of $4,500 for the discharge to the sanitary sewer. Corrective actions were completed, including sealing of the floor drain and installation of secondary containment in the area. This event, while resolved, is indicative of the types of operational risks inherent in the facility's manufacturing activities.

D. Surrounding Properties and Off-Site Conditions

The McKeesport facility is located within an industrial and commercial corridor in the City of McKeesport, Allegheny County, Pennsylvania. Surrounding land uses are predominantly industrial and commercial in character. TerraVerde's review did not identify any sensitive receptors — including schools, hospitals, daycare centers, or residential areas — immediately adjacent to the property. The absence of nearby sensitive receptors is a favorable factor in the overall risk assessment, although it does not eliminate the potential for worker exposure or off-site migration concerns associated with the identified RECs.

Of particular note, the McKeesport facility is located within approximately 0.5 miles of the former Irwin Iron & Steel Superfund site. The Irwin Iron & Steel site was listed on the National Priorities List ("NPL") in 1989, a Record of Decision ("ROD") was issued in 1996, and construction of the selected remedy was completed in 2004. Based on available groundwater flow data and topographic analysis, TerraVerde concluded that there is no evidence of a hydrogeological connection between the Irwin Iron & Steel Superfund site and the ACC property. C&H concurs with this assessment based on the information currently available, but notes that if Phase II groundwater sampling at the McKeesport facility reveals unexpected contaminants — particularly metals associated with steel manufacturing operations — further evaluation of potential off-site contribution from the Irwin Iron & Steel site may be warranted. Additionally, the proximity to a Superfund site may create perception risk with lenders and insurance underwriters, even in the absence of a demonstrated hydrogeological connection.

Regarding ACC's community reporting obligations, the McKeesport facility files annual Tier II reports with the Allegheny County Local Emergency Planning Committee ("LEPC") under the Emergency Planning and Community Right-to-Know Act ("EPCRA"). ACC also files annual Toxics Release Inventory ("TRI") Form R reports. For the 2021 reporting year, ACC reported toluene releases of approximately 12,400 pounds and xylene releases of approximately 8,700 pounds. These release quantities are consistent with major source operations involving solvent-based coating manufacturing and do not, in themselves, indicate abnormal or non-compliant operations, but they do underscore the significant quantity of VOCs handled and released at the facility on an ongoing basis.

V. IDENTIFIED RECOGNIZED ENVIRONMENTAL CONDITIONS (RECs)

Under the ASTM Standard, a Recognized Environmental Condition is defined as "the presence or likely presence of any hazardous substances or petroleum products in, on, or at a property: (1) due to a release to the environment; (2) under conditions indicative of a release to the environment; or (3) under conditions that pose a material threat of a future release to the environment." The identification of a REC is a significant finding that warrants further investigation and analysis. As discussed below, TerraVerde identified two RECs at the McKeesport facility.

A. REC-1: Potential Vapor Intrusion Pathway — Building C Mixing Area (Former UST Field)

1. Description of Condition. During the site reconnaissance conducted on August 8–9, 2022, TerraVerde documented elevated VOC readings in indoor air within Building C, the mixing and blending building located above or proximate to the former UST field. Specifically, the field team utilized a handheld photoionization detector ("PID") equipped with a 10.6 eV lamp to screen for the presence of VOCs in the indoor air environment within Building C.

PID readings taken during the site visit registered concentrations of 5–12 parts per million ("ppm") in the Building C mixing area. TerraVerde noted that these readings were significantly above typical ambient background levels, which are generally less than 1 ppm in outdoor air and in indoor environments without active chemical operations. TerraVerde further noted that the elevated readings persisted even after accounting for potential contributions from current manufacturing operations, including open containers, mixing equipment, and other potential sources of fugitive VOC emissions in the mixing area. While current operations undoubtedly contribute to indoor air VOC levels in the mixing area, TerraVerde's assessment was that the magnitude and distribution of the PID readings — including elevated readings observed in areas of Building C somewhat removed from active mixing operations — were not fully explained by current operational emissions alone and warranted further evaluation.

TerraVerde also observed that Building C was constructed in the early 1990s, after the removal of the three USTs in 1993 and during the pendency of the Act 2 investigation. The timing of construction raises a significant concern: if residual subsurface contamination remained in the former UST field area at the time of Building C's construction (as is likely, given that the Act 2 remediation was not completed until 2001), the construction process itself may have created preferential vapor migration pathways. Floor penetrations for utilities, utility trenches, expansion joints in the concrete slab, and other features common in industrial construction can serve as conduits through which soil gas — potentially containing VOCs from residual subsurface contamination — can migrate into the overlying building. There is no indication in the available documentation that a vapor barrier or sub-slab ventilation system was installed during the construction of Building C.

2. Basis for REC Classification. TerraVerde's classification of this condition as a REC is well-supported by the following considerations, which C&H has independently evaluated and concurs with:

First, while the 2001 NFA letter issued by PA DEP addressed soil contamination under the Statewide Health Standard, it expressly did not evaluate or make any determination regarding groundwater conditions or soil vapor conditions in the vicinity of the former UST field. The NFA letter therefore provides no assurance that subsurface conditions — including dissolved-phase contamination in groundwater and vapor-phase contamination in soil gas — meet applicable standards or do not pose a risk to human health.

Second, residual subsurface VOC contamination beneath the former UST field may be generating vapors that are migrating upward through the vadose zone and into Building C through the concrete slab. This phenomenon — known as vapor intrusion — is well-documented in the environmental science literature and has been the subject of extensive regulatory guidance at both the federal and state levels. Even relatively low concentrations of VOCs in soil gas can result in indoor air concentrations that exceed applicable screening levels for occupied structures.

Third, the former Keystone Metalworks operations present an additional and potentially distinct source of VOC contamination in the subsurface. Steel fabrication operations commonly involved the use of chlorinated solvents — particularly TCE and PCE — as metal degreasers. These compounds are DNAPLs that can persist in the subsurface for decades, slowly dissolving into groundwater and generating toxic vapors. Critically, the 1993–2001 Act 2 investigation focused on petroleum-related releases associated with the USTs and may not have assessed or addressed chlorinated solvent contamination from Keystone Metalworks operations. If chlorinated solvents are present in the subsurface, they represent a contamination source that was never investigated or remediated.

Fourth, the PID readings documented by TerraVerde, while not definitive evidence of vapor intrusion (PID readings are screening-level measurements that respond to a broad range of organic compounds), provide a reasonable basis to suspect that a release of hazardous substances or petroleum products may be affecting indoor air quality in Building C. Under the ASTM Standard, a REC requires only a "reasonable basis" for concern, and the combination of the former UST field, potential chlorinated solvent legacy, elevated PID readings, and the absence of any prior vapor assessment squarely meets this threshold.

3. Legal and Regulatory Significance. The potential vapor intrusion condition identified in REC-1 carries significant legal and regulatory implications for the Transaction, which C&H summarizes as follows:

PA DEP Act 2 Liability Protection. The 2001 NFA letter provides liability protection under Act 2 for the attested media (soils) at the specified cleanup standard (Statewide Health Standard) only. The NFA letter does not provide protection against claims or regulatory obligations related to groundwater contamination or vapor intrusion. Accordingly, if active vapor intrusion is confirmed through Phase II investigation, ACC (and, post-closing, Crestline as the successor owner) could face affirmative obligations under PA DEP's Land Recycling Program and Vapor Intrusion Guidance to investigate the vapor intrusion pathway, implement mitigation measures (such as sub-slab depressurization systems), and potentially conduct additional subsurface remediation to address the source of the vapor contamination. The costs associated with such obligations could range from relatively modest (installation of a sub-slab depressurization system for a single building) to very substantial (if extensive groundwater remediation is required to address a dissolved-phase plume), depending on the nature and extent of subsurface contamination.

Worker Health and Safety. If workers in Building C are being exposed to VOC vapors at levels that exceed occupational exposure limits ("OELs") established by OSHA or recommended exposure limits ("RELs") established by NIOSH, ACC (and post-closing, Crestline) could face OSHA enforcement actions, employee health claims, and workers' compensation liability. The PID readings documented by TerraVerde (5–12 ppm) are screening-level measurements and cannot be directly compared to compound-specific OELs without speciation analysis; however, they suggest that a more detailed assessment of worker exposure is appropriate. C&H recommends that Crestline's EHS team evaluate whether supplemental industrial hygiene monitoring should be conducted in Building C in parallel with the Phase II investigation.

Lender Requirements. The significance of REC-1 to the Transaction's financing structure cannot be overstated. The commitment letter from Commonwealth National Bank, N.A. (signed July 8, 2022, by Victoria Chen, Managing Director) conditions the Bank's financing — specifically the proposed $65 million term loan and $20 million revolving credit facility — on satisfactory environmental diligence. The lender's environmental condition specifically requires that Phase I ESAs be obtained for all target real property and that the assessments reveal no RECs that are not adequately addressed, or that acceptable Pollution Legal Liability ("PLL") insurance is in place. The identification of two RECs at the McKeesport facility, including the potential vapor intrusion condition, means that this lender condition is currently unmet. Crestline will need to demonstrate to Commonwealth National Bank that the RECs have been "adequately addressed" — through Phase II investigation, remediation, risk management measures, environmental insurance, or a combination thereof — in order to satisfy this financing condition.

4. Recommendation. C&H recommends that a Phase II Environmental Site Assessment be conducted at the McKeesport facility to investigate and characterize REC-1. The recommended scope of work for the Building C / former UST field area is detailed in Section VIII.A.1 below. In summary, the Phase II investigation should include:

• Sub-slab soil gas sampling beneath Building C at multiple locations (including the mixing area, storage areas, and office/break room areas adjacent to the mixing area) to evaluate the vapor intrusion pathway and to determine whether soil vapor concentrations exceed PA DEP vapor intrusion screening levels.

• Installation of temporary monitoring wells (a minimum of three, positioned upgradient, mid-plume, and downgradient of the former UST field) for groundwater sampling, to assess whether dissolved-phase contamination is present in groundwater beneath and downgradient of the former UST field.

• Soil borings in and around the former UST field area to delineate any residual soil contamination that may not have been fully addressed during the Act 2 remediation.

• The analytical suite for all samples should include a full VOC panel (EPA Method 8260), encompassing BTEX compounds (benzene, toluene, ethylbenzene, and xylenes), chlorinated solvents (TCE, PCE, and their degradation products, including cis-1,2-dichloroethylene, trans-1,2-dichloroethylene, and vinyl chloride), and MEK. Petroleum hydrocarbons (diesel range organics and gasoline range organics) and heavy metals (including chromium and lead) should also be analyzed.

The inclusion of chlorinated solvents in the analytical suite is essential, as it will allow the Phase II investigation to evaluate whether subsurface contamination from the former Keystone Metalworks operations — a potential source that was not assessed during the UST-focused Act 2 investigation — is present at the site.

B. REC-2: Staining and Stressed Vegetation — Eastern Property Boundary / Outdoor Drum Storage Area

1. Description of Condition. During the site reconnaissance conducted on August 8–9, 2022, TerraVerde observed visible environmental indicators of a potential release along the eastern property boundary of the McKeesport facility. Specifically, TerraVerde documented the following conditions:

• Soil staining. Visible staining was observed on exposed soil surfaces along the eastern property boundary. The staining appeared as darkened or discolored areas on the soil surface, consistent in appearance with the presence of hydrocarbon or chemical contamination.

• Stressed vegetation. Vegetation along the eastern property boundary was observed to be stressed, discolored, and in some areas absent. The pattern of stressed vegetation was concentrated in the area immediately downgradient of the outdoor drum storage area and extended approximately 60 to 80 feet along the boundary line. The stressed vegetation pattern is consistent with exposure to chemical constituents that inhibit plant growth, such as petroleum hydrocarbons, solvents, or heavy metals.

• Inadequate containment at the drum storage area. The outdoor drum storage area is used for the staging of both raw material drums and waste drums associated with ACC's manufacturing operations. TerraVerde noted that the drum storage area lacks a fully engineered secondary containment system. Drums are stored on a cracked and deteriorated concrete pad that has no curbing or collection sump to contain spills or releases. Several drums in the storage area appeared to have visible residue on their exteriors, suggesting that leakage or spillage has occurred. Minor puddling of unidentified liquid was observed near the base of several drums at the time of the site visit.

• Unlined stormwater drainage channel. An unlined stormwater drainage channel runs along the eastern property boundary, in the immediate vicinity of the observed staining and stressed vegetation. The drainage channel originates on the property and ultimately discharges off-site. This unlined channel represents a potential migration pathway through which any released materials could travel beyond the property boundary, potentially affecting soils, surface water, and groundwater both on-site and off-site.

The spatial relationship between the drum storage area, the observed staining, the stressed vegetation, and the drainage channel is depicted on the Site Map attached hereto as Attachment B. The pattern is consistent with a release or releases from the drum storage area that have migrated downgradient toward and along the eastern property boundary and into the drainage channel.

2. Basis for REC Classification. TerraVerde's classification of this condition as a REC is supported by the following considerations:

The combination of visible soil staining, stressed vegetation, inadequate containment infrastructure, and the presence of an unlined drainage channel providing a direct off-site migration pathway constitutes a reasonable basis to suspect a release or threatened release of hazardous substances or petroleum products at the property. The visual evidence observed during the site reconnaissance is consistent with a release of chemical constituents from drums stored in the outdoor drum storage area, followed by overland migration to the eastern boundary and potential entrainment in the stormwater drainage channel.

TerraVerde's review of historical aerial photographs confirmed that the drum storage area has been in use at its current location since at least the mid-1990s. This extended duration of use — approximately 25 or more years — increases the likelihood that cumulative small releases, drips, and spills have resulted in soil contamination in the storage area and along the migration pathway.

The inadequate condition of the concrete pad and the absence of secondary containment features (curbing, collection sump, impermeable surface) further support the REC classification, as these conditions create an ongoing risk of additional releases. The presence of visible residue on drum exteriors and puddling of unidentified liquids near drum bases at the time of the site visit indicates that releases may be ongoing.

TerraVerde appropriately classified this condition as a REC, and C&H concurs with this classification.

3. Legal and Regulatory Significance. REC-2 presents several categories of legal and regulatory risk that are relevant to the Transaction:

PA DEP Act 2 Remediation Obligations. If the Phase II investigation confirms that soil or groundwater contamination is present in the drum storage area and along the eastern property boundary, the condition could trigger an obligation to file a notice with PA DEP under Act 2 and to investigate and remediate the contamination to applicable cleanup standards. The scope and cost of any required remediation will depend on the nature and extent of contamination, the affected media (soil, groundwater, or both), and the cleanup standard selected. Contamination in the immediate vicinity of the drum storage pad may be relatively localized, but if materials have migrated into the drainage channel and off-site, the scope of investigation and remediation could expand significantly.

Third-Party and CERCLA Liability. If contamination has migrated off-site via the unlined stormwater drainage channel, third-party liability to adjacent property owners and potential federal CERCLA liability could arise. Under CERCLA Section 107, current and former owners and operators of facilities from which hazardous substances have been released are jointly and severally liable for response costs incurred by the government and natural resource damages. As the prospective purchaser of 100% of ACC's stock, Crestline should be aware that it would step into ACC's shoes as the current owner and operator of the facility, and that off-site contamination originating from the drum storage area could expose Crestline to CERCLA liability, contribution claims from third parties, and potentially government enforcement actions.

NPDES Permit Compliance. The unlined stormwater drainage channel is associated with the facility's stormwater management system, and the McKeesport facility holds NPDES Permit No. PA0025631 for stormwater discharge. If the drainage channel is part of the permitted stormwater discharge system, contamination in the channel could constitute a violation of the NPDES permit, exposing ACC (and post-closing, Crestline) to enforcement actions by PA DEP, civil penalties, and requirements to implement corrective measures. Even if the drainage channel is not part of the formally permitted discharge system, any release of pollutants to waters of the Commonwealth through the channel could constitute an unpermitted discharge in violation of the Pennsylvania Clean Streams Law (35 P.S. §§ 691.1–691.1001) and the Clean Water Act (33 U.S.C. §§ 1251–1388).

RCRA Storage Requirements. ACC generates and stores hazardous waste at the McKeesport facility and is classified as a Large Quantity Generator under RCRA. If hazardous waste drums are stored in the outdoor drum storage area — and the Phase I ESA suggests that both raw material and waste drums are staged in this area — the condition of the storage pad may constitute a violation of RCRA regulations governing container storage areas. Under 40 CFR Part 264/265, Subpart I, containers holding hazardous waste must be stored on an impervious surface with adequate containment to prevent releases to the environment. The cracked and deteriorated concrete pad, the absence of curbing and collection sumps, and the evidence of leakage and puddling documented by TerraVerde are inconsistent with these requirements. While ACC's most recent RCRA inspection in April 2021 did not result in cited violations, it is possible that the drum storage area was not the focus of that inspection or that conditions have deteriorated since the inspection was conducted.

4. Recommendation. C&H recommends that a Phase II Environmental Site Assessment be conducted to investigate and characterize REC-2. The recommended scope of work for the eastern property boundary / drum storage area is detailed in Section VIII.A.2 below. In summary, the Phase II investigation should include:

• Soil borings along the eastern boundary in the area of observed staining and stressed vegetation (a minimum of 6–8 borings, spaced to delineate the lateral and vertical extent of any contamination).

• Soil borings within and immediately adjacent to the drum storage pad to assess subsurface conditions beneath and surrounding the storage area.

• Sediment and surface water sampling in the unlined stormwater drainage channel, if accessible and if conditions allow safe sample collection.

• Installation of temporary monitoring wells (a minimum of 2–3) downgradient of the drum storage area to assess groundwater conditions and determine whether contaminants have reached the water table.

• The analytical suite should include VOCs (toluene, xylene, MEK, ethylbenzene), semi-volatile organic compounds ("SVOCs"), heavy metals (chromium, lead), and petroleum hydrocarbons (diesel range organics and gasoline range organics).

In addition to the Phase II investigation, C&H recommends that ACC be requested — through Seller's counsel at Hargrove, Dalton & Speer LLP — to implement immediate interim measures at the drum storage area to prevent further releases, including inspection and consolidation of leaking or damaged drums, cleanup of puddled liquids, and installation of temporary containment measures. These interim measures would serve both to mitigate ongoing risk and to demonstrate responsible action in the event that regulatory scrutiny of the area increases.

VI. IDENTIFIED HISTORICAL RECOGNIZED ENVIRONMENTAL CONDITION (HREC)

A. HREC-1: 1994 Act 2 Release — Former Underground Storage Tanks

1. Description. As discussed in detail in Section IV.B above, the removal of three 10,000-gallon underground storage tanks from the McKeesport property in 1993 resulted in the identification of petroleum-contaminated soils in the former UST field area. The contamination was reported to PA DEP, and an Act 2 filing was opened in 1994. ACC conducted investigation and remediation activities under the Statewide Health Standard pathway, demonstrating through confirmatory sampling that soil contaminant concentrations in the former UST field area met the applicable Statewide Health Standard for the constituents of concern. PA DEP reviewed ACC's submissions and issued a No Further Action letter in May 2001, certifying that soil conditions met the Statewide Health Standard and that no further action was required with respect to the soil contamination at the former UST field.

The remediation and regulatory closure of the 1994 Act 2 release represents a significant component of the McKeesport facility's environmental history and is directly related to the conditions giving rise to REC-1 (potential vapor intrusion in Building C).

2. ASTM Classification. TerraVerde classified the 1994 Act 2 release as a Historical Recognized Environmental Condition ("HREC") under ASTM E1527-21. The ASTM Standard defines an HREC as "a past release of any hazardous substances or petroleum products that has occurred in connection with the property and has been addressed to the satisfaction of the applicable regulatory authority or meeting unrestricted use criteria ... without subjecting the property to any required controls (e.g., property use limitations, activity and use limitations, institutional controls, or engineering controls)." The classification as an HREC, as distinguished from a REC or CREC, is appropriate because:

• The release has been investigated and remediated;

• PA DEP has issued a regulatory closure determination (NFA letter) confirming that no further action is required for the attested media;

• The NFA letter does not impose any ongoing controls (such as institutional controls or engineering controls) on the property; and

• The property is not subject to any activity and use limitations associated with the 2001 NFA letter.

C&H concurs with TerraVerde's classification of this condition as an HREC, with the important caveat discussed below regarding the limited scope of the NFA letter.

3. Legal Analysis. The 2001 NFA letter provides Act 2 liability protection for the specific media and cleanup standard addressed in the filing. Under Act 2, a person who has demonstrated attainment of a cleanup standard at a site is released from further liability for remediation of contamination identified in the Act 2 filing, subject to certain conditions and limitations. This protection runs with the land and benefits not only the remediator but also subsequent purchasers of the property. Accordingly, Crestline, as a prospective purchaser of the property (through the stock acquisition), would benefit from the Act 2 liability protection to the extent of the NFA letter's scope.

However, several important limitations apply:

Scope Limited to Soils. The NFA letter explicitly addresses soil conditions only. It does not constitute a determination regarding groundwater conditions, soil vapor conditions, or any other environmental medium at the property. This is a critical limitation because it means that the Act 2 liability protection does not extend to any groundwater or vapor contamination that may exist in the vicinity of the former UST field, even if such contamination originated from the same releases that gave rise to the soil contamination. This gap is the direct basis for the separate classification of REC-1 (potential vapor intrusion pathway), which addresses the possibility that residual subsurface contamination is generating vapors that are migrating into Building C.

Scope Limited to Statewide Health Standard. The NFA letter certifies attainment of the Statewide Health Standard, which is a risk-based standard predicated on certain assumptions about exposure pathways and land use. If site conditions have materially changed since 2001 — for example, if contaminant concentrations have increased due to continued migration, if new sources of contamination have been identified, or if the land use has changed in a manner that alters the applicable exposure assumptions — the NFA letter may not preclude further regulatory action. In particular, the construction of Building C over the former UST field may have created new exposure pathways (vapor intrusion into an occupied building) that were not contemplated at the time of the Act 2 filing.

Potential for Unassessed Contamination. As discussed in connection with REC-1, the 1993–2001 Act 2 investigation focused on petroleum-related releases associated with the USTs. It is unlikely that the investigation assessed or addressed potential chlorinated solvent contamination from the prior Keystone Metalworks operations. If Phase II investigation reveals contamination attributable to Keystone Metalworks — particularly TCE or PCE — such contamination would fall outside the scope of the 2001 NFA letter entirely, as it would represent a distinct release from a different source.

Recommendation Regarding Act 2 File. C&H recommends that a complete copy of the Act 2 file be obtained from PA DEP to confirm the full scope of the NFA letter, including any conditions, limitations, or qualifications that may not be apparent from the copy provided by ACC. In our experience, NFA letters sometimes contain conditions or limitations that are not obvious from the face of the letter but are set forth in the underlying correspondence, cleanup plan, or attainment demonstration. Obtaining the complete file will allow C&H to provide a definitive analysis of the scope and durability of the Act 2 liability protection.

VII. ADDITIONAL ENVIRONMENTAL CONDITIONS NOTED

In addition to the two RECs and one HREC discussed above, TerraVerde's Phase I ESA noted several additional environmental conditions at the McKeesport facility that, while not classified as RECs under the ASTM Standard, are relevant to the Transaction from a risk allocation, post-closing capital planning, and regulatory compliance perspective. C&H summarizes these conditions below.

A. Asbestos-Containing Materials

TerraVerde's Phase I ESA noted, based on ACC's existing asbestos survey data, that asbestos-containing materials ("ACM") are present at the McKeesport facility. The identified ACM includes the following:

• Pipe insulation in Buildings A and B: Approximately 2,400 linear feet of pipe insulation containing asbestos has been identified. The pipe insulation is primarily located in utility chases, mechanical rooms, and along overhead piping runs in the manufacturing areas.

• Floor tiles in Building A: Approximately 14,000 square feet of vinyl floor tiles containing asbestos have been identified in Building A. The tiles are primarily located in office and administrative areas of Building A and are reported to be in fair to good condition.

ACC has implemented a management-in-place program for the identified ACM, pursuant to an Asbestos Operations & Maintenance ("O&M") Plan dated September 2019. The O&M Plan provides for periodic inspection and monitoring of ACM conditions, training of maintenance personnel who may disturb ACM in the course of their work, labeling and signage, and procedures for managing ACM disturbances during routine maintenance activities. The O&M Plan appears to be consistent with applicable requirements under OSHA's asbestos standards (29 CFR 1926.1101) and EPA's NESHAP regulations (40 CFR Part 61, Subpart M).

In the event that full abatement (removal) of all identified ACM is required — for example, in connection with building renovations, changes in building use, or demolition — the estimated abatement cost ranges from approximately $180,000 to $310,000, depending on the scope of removal, prevailing contractor rates, and waste disposal costs at the time of abatement.

While TerraVerde did not classify ACM as a REC — and C&H concurs that ACM in good condition managed in place is typically considered a de minimis condition under the ASTM Standard — the presence of ACM at the McKeesport facility is relevant to several aspects of the Transaction:

• Post-closing capital expenditure planning: Crestline should account for potential ACM abatement costs in its capital expenditure projections for the McKeesport facility, particularly if building renovations or modifications are contemplated as part of the post-acquisition integration plan.

• Regulatory obligations upon renovation or demolition: If Crestline undertakes renovations or demolition of any portion of Buildings A or B containing ACM, NESHAP notification, survey, and abatement requirements will apply, and the costs and schedule implications should be factored into project planning.

• Transaction risk allocation: The presence of ACM may be an appropriate subject for environmental representations and warranties in the Stock Purchase Agreement and may warrant consideration in the allocation of post-closing environmental responsibility between Seller and Crestline.

B. Lead-Based Paint

The McKeesport office building, constructed circa 1955, has been identified as containing lead-based paint ("LBP") on interior and exterior painted surfaces

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
MEMORANDUM
MATTER NO.: 1006-00003
TO: Derek Huang, General Counsel, Crestline Packaging Solutions LLC Patricia Okonkwo, VP, Environmental Health & Safety, Crestline Packaging Solutions LLC
FROM: Harrison Caldwell, Of Counsel (Environmental & Land Use), Calderwood & Harkness LLP Grace Nakamura, Lead Associate (Real Estate), Calderwood & Harkness LLP
DATE: August 22, 2022
RE: Phase I Environmental Site Assessment Review and Analysis — McKeesport Main Plant, 2200 Iron Works Boulevard, McKeesport, PA 15132 (Allegheny Chemical Coatings, Inc.)
This memorandum is a privileged and confidential attorney-client communication and constitutes attorney work product prepared in anticipation of litigation and in connection with legal advice provided to Crestline Packaging Solutions LLC. This document is not intended for distribution to any person or entity other than the named recipients without the prior written consent of Calderwood & Harkness LLP.
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I. PURPOSE AND EXECUTIVE SUMMARY
Calderwood & Harkness LLP ("C&H") has reviewed and analyzed the Phase I Environmental Site Assessment ("Phase I ESA") prepared by TerraVerde Environmental Consulting LLC ("TerraVerde") for the McKeesport Main Plant (the "Property" or "Site"), located at 2200 Iron Works Boulevard, McKeesport, Pennsylvania 15132. The McKeesport Main Plant serves as the headquarters and primary manufacturing facility of Allegheny Chemical Coatings, Inc. ("ACC" or the "Target"). This review has been undertaken in connection with Crestline Packaging Solutions LLC's ("Crestline" or "CPS") proposed acquisition of 100% of the outstanding common stock of ACC (the "Transaction").
The Phase I ESA was prepared by TerraVerde and is dated August 15, 2022. It was conducted in accordance with the ASTM E1527-21 standard, entitled "Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process" (the "ASTM Standard" or "Standard"). The TerraVerde engagement was led by Dr. Nina Sorensen, P.E., CHMM, who served as Principal-in-Charge, and Kevin O'Malley, P.G., who served as Project Manager. Both professionals hold appropriate credentials and are qualified to conduct assessments of this nature under the ASTM Standard.
Based on our review and analysis of the Phase I ESA, the associated documentation, and the applicable regulatory framework, we provide the following executive summary of findings:
The Phase I ESA identified two Recognized Environmental Conditions ("RECs") and one Historical Recognized Environmental Condition ("HREC") at the McKeesport facility. No Controlled Recognized Environmental Conditions ("CRECs") were identified.
The identified conditions are summarized as follows:
• REC-1 (Potential Vapor Intrusion Pathway — Building C Mixing Area): TerraVerde documented elevated volatile organic compound ("VOC") readings in indoor air near the Building C mixing area. These readings indicate a potential vapor intrusion pathway from residual subsurface contamination beneath the former underground storage tank ("UST") field. Building C was constructed in the early 1990s directly over or proximate to the former UST field, and the 2001 No Further Action ("NFA") letter issued by the Pennsylvania Department of Environmental Protection ("PA DEP") under the Land Recycling and Environmental Remediation Standards Act (Act 2) addressed soil conditions only and did not evaluate groundwater or soil vapor media. The potential for chlorinated solvent contamination from prior Keystone Metalworks operations further compounds this concern.
• REC-2 (Staining and Stressed Vegetation — Eastern Property Boundary / Outdoor Drum Storage Area): TerraVerde observed visible staining on soil surfaces and stressed, discolored vegetation along the eastern property boundary, adjacent to an unlined stormwater drainage channel. The observed conditions are in the area immediately downgradient of the outdoor drum storage area, which lacks a fully engineered secondary containment system. The unlined drainage channel provides a potential migration pathway for any released materials to travel off-site.
• HREC-1 (1994 Act 2 Release — Former Underground Storage Tanks): A 1994 PA DEP Act 2 release associated with the removal of three underground storage tanks in 1993 was identified. The release was investigated and remediated under the Statewide Health Standard pathway, and PA DEP issued a No Further Action letter in May 2001 certifying that soil conditions met applicable standards. This condition was appropriately classified as an HREC by TerraVerde, as it represents a past release that has been addressed to the satisfaction of the applicable regulatory authority.
Recommendation: Based on the identification of two RECs at the McKeesport facility, C&H recommends that Crestline authorize a Phase II Environmental Site Assessment (subsurface investigation) targeting both REC-1 and REC-2. The Phase II investigation should include sub-slab soil gas sampling, soil borings, groundwater monitoring well installation and sampling, and appropriate laboratory analysis to characterize the nature and extent of any contamination and to evaluate potential vapor intrusion pathways. Specific scope-of-work recommendations are provided in Section VIII of this memorandum.
This memorandum should be read in conjunction with the Comprehensive Environmental Diligence Summary Memorandum (to be finalized upon completion of Phase I reviews for all ACC facilities) and the forthcoming Phase II Scope of Work Review & Comment Letter for the McKeesport facility. Additionally, the reader should reference the separate Spill History and Enforcement Review Memorandum for a detailed analysis of ACC's compliance history and reportable releases.
II. PROPERTY DESCRIPTION
A. Site Identification and Ownership
The McKeesport Main Plant is located at 2200 Iron Works Boulevard, McKeesport, Pennsylvania 15132, within Allegheny County, Pennsylvania. The property is identified in the Allegheny County real property records under Parcel Identification Number 0383-M-00125-0000-00. The total acreage of the property is approximately 14.3 acres.
The property is currently owned in fee simple by Allegheny Chemical Coatings, Inc. ACC has held title to the property since 1987, when it purchased the site from Keystone Metalworks, a now-defunct steel fabrication company. We have not been provided with a copy of the 1987 deed or the purchase and sale agreement from the Keystone Metalworks transaction, and we note the absence of any environmental baseline survey or Phase I ESA from the 1987 property transfer as a data gap identified by TerraVerde. C&H recommends that copies of the 1987 conveyance documents be requested from Seller's counsel to the extent available, as these may contain environmental representations, warranties, or indemnification provisions that could be relevant to the current Transaction.
The property is situated in an area of McKeesport that has historically been characterized by heavy industrial activity, including steel manufacturing, metalworking, and associated chemical processing operations. This broader industrial context is relevant to the environmental assessment because it increases the likelihood of legacy contamination from both on-site and neighboring operations.
B. Improvements and Structures
The McKeesport Main Plant consists of approximately 185,000 square feet of manufacturing space distributed across multiple buildings, designated as Buildings A, B, C, and various ancillary structures. In addition, the facility includes approximately 12,000 square feet of office space housed in an office building that was constructed circa 1955.
The following buildings and structures are of particular relevance to the environmental findings identified in the Phase I ESA:
• Building C (Mixing and Blending Area): Building C is the primary location of ACC's mixing and blending operations for solvent-based coatings. It was constructed in the early 1990s and is situated over or proximate to the area where three underground storage tanks were formerly located (the "former UST field"). Building C is the location of REC-1, as TerraVerde documented elevated indoor air VOC readings within this structure during the site reconnaissance.
• Eastern Property Boundary (Outdoor Drum Storage Area): The outdoor drum storage area is located along the eastern boundary of the property, adjacent to an unlined stormwater drainage channel. This area is used for staging of raw material drums and waste drums and is the location of REC-2, where TerraVerde observed visible staining and stressed vegetation.
• Buildings A and B: These structures house additional manufacturing and storage operations. Buildings A and B are of note in the context of asbestos-containing materials, as discussed in Section VII.A below.
• Office Building: The office building, constructed circa 1955, contains identified lead-based paint on interior and exterior surfaces, as discussed in Section VII.B below.
The buildings and improvements are generally consistent with the industrial use of the property over several decades. TerraVerde noted that the manufacturing buildings have undergone various modifications and expansions over time, and the structural configuration of the buildings — particularly Building C — is relevant to the evaluation of potential vapor intrusion pathways.
C. Current Operations
The McKeesport Main Plant serves as ACC's primary manufacturing facility for the production of solvent-based and epoxy coatings. Operations conducted at the facility include the mixing, blending, and filling of specialty industrial coatings, including epoxy coatings, polyurethane coatings, and solvent-based coatings. These products serve customers in the packaging, automotive, and industrial applications markets. The facility operates on a multiple-shift basis and employs approximately 210 production workers and 45 administrative and management personnel.
The chemicals of concern present on-site and used in ACC's manufacturing operations include, but are not limited to, the following:
• Volatile Organic Compounds ("VOCs"): Toluene, xylene, methyl ethyl ketone ("MEK"), and ethylbenzene are among the primary VOC constituents used as solvents in ACC's coating formulations. These compounds are significant because they are regulated under both federal and state environmental programs and are commonly associated with soil, groundwater, and air quality impacts when released.
• Heavy Metals: Chromium and lead are present at the facility as legacy pigment components from historical coating formulations. While ACC has indicated that current formulations have largely transitioned away from chromium- and lead-based pigments, residual quantities remain in storage and may be present in legacy waste streams and contaminated areas of the facility.
The nature of these operations — particularly the handling, storage, and processing of large quantities of volatile organic solvents — is inherently associated with environmental risk and underscores the importance of the Phase I ESA findings discussed in this memorandum.
D. Regulatory Identifiers
The McKeesport Main Plant operates under the following regulatory permits and identifiers:
The facility's classification as a Large Quantity Generator under RCRA and a major source under the Clean Air Act is significant from a regulatory compliance perspective and indicates the scale and intensity of chemical handling operations conducted at the McKeesport site. The Title V Operating Permit is scheduled to expire on May 31, 2024, and Crestline should anticipate the need to file a timely renewal application and to comply with all applicable conditions of the existing permit during the post-closing transition period. The NPDES stormwater discharge permit is also relevant to REC-2, as contamination in the unlined stormwater drainage channel could implicate permit compliance obligations, as discussed further in Section V.B.3 below.
III. SCOPE OF THE PHASE I ESA
TerraVerde conducted the Phase I ESA in conformance with the requirements of ASTM E1527-21, which defines "good commercial and customary practice" for environmental site assessments of commercial real estate. Adherence to the ASTM Standard is significant because it establishes the framework for a purchaser to qualify for the "innocent landowner," "contiguous property owner," and "bona fide prospective purchaser" defenses to CERCLA liability under 42 U.S.C. §§ 9601(35), 9607(q), and 9607(r). Crestline's ability to avail itself of these defenses post-closing will depend in part on whether appropriate "all appropriate inquiries" were conducted prior to acquisition, and the Phase I ESA is a foundational component of that inquiry.
The scope of TerraVerde's Phase I ESA encompassed the following components:
Records Review. TerraVerde conducted a comprehensive records review, including a search of federal, state, tribal, and local regulatory databases within the standard environmental database search radii prescribed by the ASTM Standard. The database search was conducted by Penrose Solutions ("EDR") and covered the standard range of federal and state databases, including but not limited to: the National Priorities List ("NPL"), CERCLIS/SEMS, RCRA CORRACTS and non-CORRACTS TSD facilities, RCRA generators, ERNS, state-equivalent databases, UST registrations, LUST databases, SWF/LF databases, and institutional control registries. In addition, TerraVerde reviewed historical records, prior environmental site assessments and reports, regulatory correspondence between ACC and PA DEP, and facility documentation provided by ACC through its legal counsel at Hargrove, Dalton & Speer LLP and ACC's Environmental Health & Safety Manager, Carl Johannsen.
Historical Use Information. TerraVerde reviewed a comprehensive suite of historical source materials to evaluate past uses of the property and surrounding areas. This review included historical aerial photographs spanning the period from 1938 through 2022, Trelwick fire insurance maps (where available), city directories, USGS topographic maps, and building department records maintained by the City of McKeesport and Allegheny County. The historical review was critical to understanding the pre-1987 use of the property by Keystone Metalworks and to identifying potential sources of contamination that may predate ACC's ownership.
Site Reconnaissance. A physical inspection of the property was conducted on August 8–9, 2022, by Kevin O'Malley, P.G., Project Manager, and Alicia Reyes, P.G. The site reconnaissance involved a systematic walk-through of the entire property, including interior inspection of all buildings, exterior inspection of storage areas, loading areas, drainage features, and property boundaries. The reconnaissance team utilized a handheld photoionization detector ("PID") to screen for the presence of VOCs in indoor air and in areas of observed staining or potential environmental concern. The site visit was conducted during normal business hours while manufacturing operations were ongoing, which TerraVerde appropriately noted may have affected indoor air readings due to contributions from current operational emissions.
Interviews. TerraVerde conducted interviews with key personnel having knowledge of the property's history, operations, and environmental conditions. Interviewees included Carl Johannsen, ACC's Environmental Health & Safety Manager, who has been employed at the McKeesport facility since 2005; Diane Pulaski, ACC's Vice President of Operations, who has been with the company since 1998; and several long-term site employees who provided information regarding historical operations, chemical use, and any known releases or spills. The interviews were conducted in accordance with the ASTM Standard's requirements for gathering information from owners, operators, and occupants.
User-Provided Information. ACC, through its EHS Manager and legal counsel, provided TerraVerde with historical environmental reports, UST closure documentation (including tank removal records from 1993), PA DEP Act 2 correspondence and filings, the May 2001 NFA letter, environmental permits, compliance records, spill reports, inspection records, and the facility's Asbestos Operations and Maintenance Plan. This information was essential to the evaluation of the HREC and to the assessment of current environmental conditions at the facility.
Limitations and Data Gaps. TerraVerde identified the following limitations and data gaps in the Phase I ESA, which C&H considers to be appropriately disclosed and consistent with the practical realities of assessing a property with a long industrial history:
• Limited information on pre-1987 operations. Because Keystone Metalworks is now defunct and its records are not available, there is limited documentation of the chemicals used, stored, and disposed of at the property during the Keystone Metalworks era. This data gap is particularly significant given the likelihood that steel fabrication operations involved the use of chlorinated solvents (TCE, PCE), cutting oils, degreasers, and metal-finishing chemicals that are persistent environmental contaminants.
• Historical aerial photograph resolution. Some historical aerial photographs from the 1960s and 1970s were of limited resolution, which constrained TerraVerde's ability to identify specific structures, storage areas, or features on the property during that period.
• Absence of environmental baseline survey from 1987 property transfer. No environmental baseline survey or Phase I ESA was conducted in connection with ACC's 1987 purchase of the property from Keystone Metalworks. Consequently, there is no pre-acquisition documentation of environmental conditions at the time ACC took ownership, which limits the ability to distinguish contamination attributable to Keystone Metalworks from contamination attributable to ACC's operations.
C&H considers the TerraVerde Phase I ESA to be a thorough and professionally executed assessment that satisfies the requirements of the ASTM Standard. The identified data gaps are noted but do not, in our view, undermine the overall reliability of TerraVerde's findings and classifications.
IV. HISTORICAL USE AND ENVIRONMENTAL BACKGROUND
A. Pre-1987 Use (Keystone Metalworks Era)
The McKeesport property was operated as a steel fabrication facility by Keystone Metalworks prior to ACC's acquisition of the property in 1987. Keystone Metalworks is now defunct, and limited documentation of its operations, chemical use, and environmental practices has been located during the Phase I ESA process. Based on the information available — including historical aerial photographs, limited city directory records, and information provided by long-term site employees — the property was used for steel fabrication and metalworking operations for several decades prior to ACC's acquisition.
The significance of the Keystone Metalworks era to the current environmental assessment cannot be overstated. Steel fabrication operations of the type conducted at the McKeesport site during the mid-to-late twentieth century commonly involved the use of a range of chemicals with significant environmental implications, including:
• Chlorinated solvents such as trichloroethylene ("TCE") and tetrachloroethylene ("PCE"), which were widely used as metal degreasers in the steel and metalworking industries. TCE and PCE are dense non-aqueous phase liquids ("DNAPLs") that migrate downward through the subsurface, are highly persistent in groundwater, and are known to generate toxic vapors that can migrate into overlying structures through a process known as vapor intrusion. These compounds are classified as probable or known human carcinogens.
• Cutting oils and lubricants, which may contain petroleum hydrocarbons and, in some cases, polychlorinated biphenyls ("PCBs").
• Metal-finishing chemicals, including acids, alkalis, and heavy metal solutions used in plating, pickling, and surface treatment processes.
The limited documentation of Keystone Metalworks' chemical use, storage practices, and environmental incidents represents a material data gap. This gap is particularly relevant to the evaluation of REC-1 (potential vapor intrusion in Building C), as any chlorinated solvent contamination from Keystone Metalworks operations could constitute an additional and distinct source of subsurface VOC contamination that was not assessed during the 1993–2001 Act 2 investigation, which focused on petroleum-related UST releases.
B. UST History and 1994 Act 2 Release
Three underground storage tanks, each with a capacity of 10,000 gallons, were historically present on the property. The USTs were located in the area now referred to as the "former UST field," situated near Building C. The specific contents stored in these tanks are not fully documented in the materials provided to TerraVerde, but the Act 2 filings indicate that the USTs were used for the storage of petroleum products and/or solvents in connection with the facility's operations.
The three USTs were removed in 1993. During the removal process, contaminated soils were identified in the tank excavation areas, indicating that releases had occurred from one or more of the tanks during their operational life. The identification of contaminated soils prompted ACC to open a filing with PA DEP under the Land Recycling and Environmental Remediation Standards Act, commonly known as Act 2 (35 P.S. §§ 6026.101–6026.908). The Act 2 filing was opened in 1994.
Remediation of the contaminated soils was conducted under the Statewide Health Standard pathway, one of three cleanup standards available under Act 2 (the others being the Background Standard and the Site-Specific Standard). The Statewide Health Standard establishes concentration thresholds for individual contaminants in soil and groundwater, derived from risk-based calculations assuming specified exposure scenarios. Remediation under the Statewide Health Standard does not require a site-specific risk assessment but must demonstrate that contaminant concentrations in the attested media meet the applicable numerical standards.
Following completion of the remediation activities, PA DEP issued a No Further Action letter in May 2001, certifying that soil conditions at the former UST field met the Statewide Health Standard. The NFA letter constitutes PA DEP's determination that no further action is required with respect to the attested media (soils) at the specified cleanup standard, subject to the conditions and limitations stated therein.
Critically, the NFA letter applies to soils only and specifically notes that it does not constitute a comprehensive assessment of all environmental media at the site. In particular, the NFA letter does not address groundwater conditions or soil vapor conditions in the vicinity of the former UST field. This limitation is highly significant in light of the elevated indoor air VOC readings documented by TerraVerde in Building C, which was constructed over or proximate to the former UST field during the pendency of the Act 2 investigation.
TerraVerde appropriately classified the 1994 Act 2 release as a Historical Recognized Environmental Condition ("HREC") under the ASTM Standard. As defined by ASTM E1527-21, an HREC is "a past release of any hazardous substances or petroleum products that has occurred in connection with the property and has been addressed to the satisfaction of the applicable regulatory authority or meeting unrestricted use criteria... without subjecting the property to any required controls." The classification as an HREC, rather than a REC, reflects the fact that the release has been remediated and a regulatory closure determination has been obtained. However, as discussed in Sections V and VI below, the limited scope of the NFA letter — addressing soils only and not groundwater or vapor — has given rise to the separate classification of REC-1 for the potential vapor intrusion pathway.
C. ACC Operations (1987–Present)
ACC has operated continuously at the McKeesport Main Plant since acquiring the property from Keystone Metalworks in 1987. Over the course of its more than 35 years of occupancy, ACC has expanded and modified the facility to support its growing manufacturing operations. Of particular note, Building C — the mixing and blending area that is the subject of REC-1 — was constructed in the early 1990s. The timing of this construction is significant because Building C was erected over or near the former UST field after the USTs were removed in 1993 but during the pendency of the Act 2 investigation and remediation that continued through 2001. It is unclear from the available documentation whether any environmental assessment of subsurface conditions was conducted prior to the construction of Building C, or whether any vapor mitigation measures (such as a vapor barrier or sub-slab depressurization system) were incorporated into the building design.
Throughout its operations at the McKeesport facility, ACC has maintained Large Quantity Generator ("LQG") status under RCRA, reflecting the volume of hazardous waste generated by its coating manufacturing operations. ACC's RCRA compliance history at the McKeesport facility appears generally satisfactory based on the documentation provided. The most recent PA DEP RCRA inspection was conducted on April 14, 2021, and resulted in no violations being noted. C&H notes, however, that the absence of cited violations during a routine compliance inspection does not necessarily indicate the absence of conditions that could constitute regulatory violations upon more detailed review; this is particularly relevant to the condition of the outdoor drum storage area discussed in connection with REC-2.
Two reportable spill events have occurred at the McKeesport facility during the last ten years, as detailed in the separate Spill History and Enforcement Review Memorandum. These events are summarized as follows for context:
• June 14, 2017: Approximately 50 gallons of xylene were released from a ruptured transfer hose in the manufacturing area. The release was contained within existing secondary containment structures, was promptly reported to PA DEP, and resulted in a No Further Action determination. This event does not appear to have resulted in a release to the environment.
• February 3, 2020: Approximately 120 gallons of epoxy resin hardener were released to a warehouse floor drain that was connected to the facility's sanitary sewer system. The release was reported to PA DEP and the Allegheny County Health Department. ACC was assessed a fine of $4,500 for the discharge to the sanitary sewer. Corrective actions were completed, including sealing of the floor drain and installation of secondary containment in the area. This event, while resolved, is indicative of the types of operational risks inherent in the facility's manufacturing activities.
D. Surrounding Properties and Off-Site Conditions
The McKeesport facility is located within an industrial and commercial corridor in the City of McKeesport, Allegheny County, Pennsylvania. Surrounding land uses are predominantly industrial and commercial in character. TerraVerde's review did not identify any sensitive receptors — including schools, hospitals, daycare centers, or residential areas — immediately adjacent to the property. The absence of nearby sensitive receptors is a favorable factor in the overall risk assessment, although it does not eliminate the potential for worker exposure or off-site migration concerns associated with the identified RECs.
Of particular note, the McKeesport facility is located within approximately 0.5 miles of the former Irwin Iron & Steel Superfund site. The Irwin Iron & Steel site was listed on the National Priorities List ("NPL") in 1989, a Record of Decision ("ROD") was issued in 1996, and construction of the selected remedy was completed in 2004. Based on available groundwater flow data and topographic analysis, TerraVerde concluded that there is no evidence of a hydrogeological connection between the Irwin Iron & Steel Superfund site and the ACC property. C&H concurs with this assessment based on the information currently available, but notes that if Phase II groundwater sampling at the McKeesport facility reveals unexpected contaminants — particularly metals associated with steel manufacturing operations — further evaluation of potential off-site contribution from the Irwin Iron & Steel site may be warranted. Additionally, the proximity to a Superfund site may create perception risk with lenders and insurance underwriters, even in the absence of a demonstrated hydrogeological connection.
Regarding ACC's community reporting obligations, the McKeesport facility files annual Tier II reports with the Allegheny County Local Emergency Planning Committee ("LEPC") under the Emergency Planning and Community Right-to-Know Act ("EPCRA"). ACC also files annual Toxics Release Inventory ("TRI") Form R reports. For the 2021 reporting year, ACC reported toluene releases of approximately 12,400 pounds and xylene releases of approximately 8,700 pounds. These release quantities are consistent with major source operations involving solvent-based coating manufacturing and do not, in themselves, indicate abnormal or non-compliant operations, but they do underscore the significant quantity of VOCs handled and released at the facility on an ongoing basis.
V. IDENTIFIED RECOGNIZED ENVIRONMENTAL CONDITIONS (RECs)
Under the ASTM Standard, a Recognized Environmental Condition is defined as "the presence or likely presence of any hazardous substances or petroleum products in, on, or at a property: (1) due to a release to the environment; (2) under conditions indicative of a release to the environment; or (3) under conditions that pose a material threat of a future release to the environment." The identification of a REC is a significant finding that warrants further investigation and analysis. As discussed below, TerraVerde identified two RECs at the McKeesport facility.
A. REC-1: Potential Vapor Intrusion Pathway — Building C Mixing Area (Former UST Field)
1. Description of Condition. During the site reconnaissance conducted on August 8–9, 2022, TerraVerde documented elevated VOC readings in indoor air within Building C, the mixing and blending building located above or proximate to the former UST field. Specifically, the field team utilized a handheld photoionization detector ("PID") equipped with a 10.6 eV lamp to screen for the presence of VOCs in the indoor air environment within Building C.
PID readings taken during the site visit registered concentrations of 5–12 parts per million ("ppm") in the Building C mixing area. TerraVerde noted that these readings were significantly above typical ambient background levels, which are generally less than 1 ppm in outdoor air and in indoor environments without active chemical operations. TerraVerde further noted that the elevated readings persisted even after accounting for potential contributions from current manufacturing operations, including open containers, mixing equipment, and other potential sources of fugitive VOC emissions in the mixing area. While current operations undoubtedly contribute to indoor air VOC levels in the mixing area, TerraVerde's assessment was that the magnitude and distribution of the PID readings — including elevated readings observed in areas of Building C somewhat removed from active mixing operations — were not fully explained by current operational emissions alone and warranted further evaluation.
TerraVerde also observed that Building C was constructed in the early 1990s, after the removal of the three USTs in 1993 and during the pendency of the Act 2 investigation. The timing of construction raises a significant concern: if residual subsurface contamination remained in the former UST field area at the time of Building C's construction (as is likely, given that the Act 2 remediation was not completed until 2001), the construction process itself may have created preferential vapor migration pathways. Floor penetrations for utilities, utility trenches, expansion joints in the concrete slab, and other features common in industrial construction can serve as conduits through which soil gas — potentially containing VOCs from residual subsurface contamination — can migrate into the overlying building. There is no indication in the available documentation that a vapor barrier or sub-slab ventilation system was installed during the construction of Building C.
2. Basis for REC Classification. TerraVerde's classification of this condition as a REC is well-supported by the following considerations, which C&H has independently evaluated and concurs with:
First, while the 2001 NFA letter issued by PA DEP addressed soil contamination under the Statewide Health Standard, it expressly did not evaluate or make any determination regarding groundwater conditions or soil vapor conditions in the vicinity of the former UST field. The NFA letter therefore provides no assurance that subsurface conditions — including dissolved-phase contamination in groundwater and vapor-phase contamination in soil gas — meet applicable standards or do not pose a risk to human health.
Second, residual subsurface VOC contamination beneath the former UST field may be generating vapors that are migrating upward through the vadose zone and into Building C through the concrete slab. This phenomenon — known as vapor intrusion — is well-documented in the environmental science literature and has been the subject of extensive regulatory guidance at both the federal and state levels. Even relatively low concentrations of VOCs in soil gas can result in indoor air concentrations that exceed applicable screening levels for occupied structures.
Third, the former Keystone Metalworks operations present an additional and potentially distinct source of VOC contamination in the subsurface. Steel fabrication operations commonly involved the use of chlorinated solvents — particularly TCE and PCE — as metal degreasers. These compounds are DNAPLs that can persist in the subsurface for decades, slowly dissolving into groundwater and generating toxic vapors. Critically, the 1993–2001 Act 2 investigation focused on petroleum-related releases associated with the USTs and may not have assessed or addressed chlorinated solvent contamination from Keystone Metalworks operations. If chlorinated solvents are present in the subsurface, they represent a contamination source that was never investigated or remediated.
Fourth, the PID readings documented by TerraVerde, while not definitive evidence of vapor intrusion (PID readings are screening-level measurements that respond to a broad range of organic compounds), provide a reasonable basis to suspect that a release of hazardous substances or petroleum products may be affecting indoor air quality in Building C. Under the ASTM Standard, a REC requires only a "reasonable basis" for concern, and the combination of the former UST field, potential chlorinated solvent legacy, elevated PID readings, and the absence of any prior vapor assessment squarely meets this threshold.
3. Legal and Regulatory Significance. The potential vapor intrusion condition identified in REC-1 carries significant legal and regulatory implications for the Transaction, which C&H summarizes as follows:
PA DEP Act 2 Liability Protection. The 2001 NFA letter provides liability protection under Act 2 for the attested media (soils) at the specified cleanup standard (Statewide Health Standard) only. The NFA letter does not provide protection against claims or regulatory obligations related to groundwater contamination or vapor intrusion. Accordingly, if active vapor intrusion is confirmed through Phase II investigation, ACC (and, post-closing, Crestline as the successor owner) could face affirmative obligations under PA DEP's Land Recycling Program and Vapor Intrusion Guidance to investigate the vapor intrusion pathway, implement mitigation measures (such as sub-slab depressurization systems), and potentially conduct additional subsurface remediation to address the source of the vapor contamination. The costs associated with such obligations could range from relatively modest (installation of a sub-slab depressurization system for a single building) to very substantial (if extensive groundwater remediation is required to address a dissolved-phase plume), depending on the nature and extent of subsurface contamination.
Worker Health and Safety. If workers in Building C are being exposed to VOC vapors at levels that exceed occupational exposure limits ("OELs") established by OSHA or recommended exposure limits ("RELs") established by NIOSH, ACC (and post-closing, Crestline) could face OSHA enforcement actions, employee health claims, and workers' compensation liability. The PID readings documented by TerraVerde (5–12 ppm) are screening-level measurements and cannot be directly compared to compound-specific OELs without speciation analysis; however, they suggest that a more detailed assessment of worker exposure is appropriate. C&H recommends that Crestline's EHS team evaluate whether supplemental industrial hygiene monitoring should be conducted in Building C in parallel with the Phase II investigation.
Lender Requirements. The significance of REC-1 to the Transaction's financing structure cannot be overstated. The commitment letter from Commonwealth National Bank, N.A. (signed July 8, 2022, by Victoria Chen, Managing Director) conditions the Bank's financing — specifically the proposed $65 million term loan and $20 million revolving credit facility — on satisfactory environmental diligence. The lender's environmental condition specifically requires that Phase I ESAs be obtained for all target real property and that the assessments reveal no RECs that are not adequately addressed, or that acceptable Pollution Legal Liability ("PLL") insurance is in place. The identification of two RECs at the McKeesport facility, including the potential vapor intrusion condition, means that this lender condition is currently unmet. Crestline will need to demonstrate to Commonwealth National Bank that the RECs have been "adequately addressed" — through Phase II investigation, remediation, risk management measures, environmental insurance, or a combination thereof — in order to satisfy this financing condition.
4. Recommendation. C&H recommends that a Phase II Environmental Site Assessment be conducted at the McKeesport facility to investigate and characterize REC-1. The recommended scope of work for the Building C / former UST field area is detailed in Section VIII.A.1 below. In summary, the Phase II investigation should include:
• Sub-slab soil gas sampling beneath Building C at multiple locations (including the mixing area, storage areas, and office/break room areas adjacent to the mixing area) to evaluate the vapor intrusion pathway and to determine whether soil vapor concentrations exceed PA DEP vapor intrusion screening levels.
• Installation of temporary monitoring wells (a minimum of three, positioned upgradient, mid-plume, and downgradient of the former UST field) for groundwater sampling, to assess whether dissolved-phase contamination is present in groundwater beneath and downgradient of the former UST field.
• Soil borings in and around the former UST field area to delineate any residual soil contamination that may not have been fully addressed during the Act 2 remediation.
• The analytical suite for all samples should include a full VOC panel (EPA Method 8260), encompassing BTEX compounds (benzene, toluene, ethylbenzene, and xylenes), chlorinated solvents (TCE, PCE, and their degradation products, including cis-1,2-dichloroethylene, trans-1,2-dichloroethylene, and vinyl chloride), and MEK. Petroleum hydrocarbons (diesel range organics and gasoline range organics) and heavy metals (including chromium and lead) should also be analyzed.
The inclusion of chlorinated solvents in the analytical suite is essential, as it will allow the Phase II investigation to evaluate whether subsurface contamination from the former Keystone Metalworks operations — a potential source that was not assessed during the UST-focused Act 2 investigation — is present at the site.
B. REC-2: Staining and Stressed Vegetation — Eastern Property Boundary / Outdoor Drum Storage Area
1. Description of Condition. During the site reconnaissance conducted on August 8–9, 2022, TerraVerde observed visible environmental indicators of a potential release along the eastern property boundary of the McKeesport facility. Specifically, TerraVerde documented the following conditions:
• Soil staining. Visible staining was observed on exposed soil surfaces along the eastern property boundary. The staining appeared as darkened or discolored areas on the soil surface, consistent in appearance with the presence of hydrocarbon or chemical contamination.
• Stressed vegetation. Vegetation along the eastern property boundary was observed to be stressed, discolored, and in some areas absent. The pattern of stressed vegetation was concentrated in the area immediately downgradient of the outdoor drum storage area and extended approximately 60 to 80 feet along the boundary line. The stressed vegetation pattern is consistent with exposure to chemical constituents that inhibit plant growth, such as petroleum hydrocarbons, solvents, or heavy metals.
• Inadequate containment at the drum storage area. The outdoor drum storage area is used for the staging of both raw material drums and waste drums associated with ACC's manufacturing operations. TerraVerde noted that the drum storage area lacks a fully engineered secondary containment system. Drums are stored on a cracked and deteriorated concrete pad that has no curbing or collection sump to contain spills or releases. Several drums in the storage area appeared to have visible residue on their exteriors, suggesting that leakage or spillage has occurred. Minor puddling of unidentified liquid was observed near the base of several drums at the time of the site visit.
• Unlined stormwater drainage channel. An unlined stormwater drainage channel runs along the eastern property boundary, in the immediate vicinity of the observed staining and stressed vegetation. The drainage channel originates on the property and ultimately discharges off-site. This unlined channel represents a potential migration pathway through which any released materials could travel beyond the property boundary, potentially affecting soils, surface water, and groundwater both on-site and off-site.
The spatial relationship between the drum storage area, the observed staining, the stressed vegetation, and the drainage channel is depicted on the Site Map attached hereto as Attachment B. The pattern is consistent with a release or releases from the drum storage area that have migrated downgradient toward and along the eastern property boundary and into the drainage channel.
2. Basis for REC Classification. TerraVerde's classification of this condition as a REC is supported by the following considerations:
The combination of visible soil staining, stressed vegetation, inadequate containment infrastructure, and the presence of an unlined drainage channel providing a direct off-site migration pathway constitutes a reasonable basis to suspect a release or threatened release of hazardous substances or petroleum products at the property. The visual evidence observed during the site reconnaissance is consistent with a release of chemical constituents from drums stored in the outdoor drum storage area, followed by overland migration to the eastern boundary and potential entrainment in the stormwater drainage channel.
TerraVerde's review of historical aerial photographs confirmed that the drum storage area has been in use at its current location since at least the mid-1990s. This extended duration of use — approximately 25 or more years — increases the likelihood that cumulative small releases, drips, and spills have resulted in soil contamination in the storage area and along the migration pathway.
The inadequate condition of the concrete pad and the absence of secondary containment features (curbing, collection sump, impermeable surface) further support the REC classification, as these conditions create an ongoing risk of additional releases. The presence of visible residue on drum exteriors and puddling of unidentified liquids near drum bases at the time of the site visit indicates that releases may be ongoing.
TerraVerde appropriately classified this condition as a REC, and C&H concurs with this classification.
3. Legal and Regulatory Significance. REC-2 presents several categories of legal and regulatory risk that are relevant to the Transaction:
PA DEP Act 2 Remediation Obligations. If the Phase II investigation confirms that soil or groundwater contamination is present in the drum storage area and along the eastern property boundary, the condition could trigger an obligation to file a notice with PA DEP under Act 2 and to investigate and remediate the contamination to applicable cleanup standards. The scope and cost of any required remediation will depend on the nature and extent of contamination, the affected media (soil, groundwater, or both), and the cleanup standard selected. Contamination in the immediate vicinity of the drum storage pad may be relatively localized, but if materials have migrated into the drainage channel and off-site, the scope of investigation and remediation could expand significantly.
Third-Party and CERCLA Liability. If contamination has migrated off-site via the unlined stormwater drainage channel, third-party liability to adjacent property owners and potential federal CERCLA liability could arise. Under CERCLA Section 107, current and former owners and operators of facilities from which hazardous substances have been released are jointly and severally liable for response costs incurred by the government and natural resource damages. As the prospective purchaser of 100% of ACC's stock, Crestline should be aware that it would step into ACC's shoes as the current owner and operator of the facility, and that off-site contamination originating from the drum storage area could expose Crestline to CERCLA liability, contribution claims from third parties, and potentially government enforcement actions.
NPDES Permit Compliance. The unlined stormwater drainage channel is associated with the facility's stormwater management system, and the McKeesport facility holds NPDES Permit No. PA0025631 for stormwater discharge. If the drainage channel is part of the permitted stormwater discharge system, contamination in the channel could constitute a violation of the NPDES permit, exposing ACC (and post-closing, Crestline) to enforcement actions by PA DEP, civil penalties, and requirements to implement corrective measures. Even if the drainage channel is not part of the formally permitted discharge system, any release of pollutants to waters of the Commonwealth through the channel could constitute an unpermitted discharge in violation of the Pennsylvania Clean Streams Law (35 P.S. §§ 691.1–691.1001) and the Clean Water Act (33 U.S.C. §§ 1251–1388).
RCRA Storage Requirements. ACC generates and stores hazardous waste at the McKeesport facility and is classified as a Large Quantity Generator under RCRA. If hazardous waste drums are stored in the outdoor drum storage area — and the Phase I ESA suggests that both raw material and waste drums are staged in this area — the condition of the storage pad may constitute a violation of RCRA regulations governing container storage areas. Under 40 CFR Part 264/265, Subpart I, containers holding hazardous waste must be stored on an impervious surface with adequate containment to prevent releases to the environment. The cracked and deteriorated concrete pad, the absence of curbing and collection sumps, and the evidence of leakage and puddling documented by TerraVerde are inconsistent with these requirements. While ACC's most recent RCRA inspection in April 2021 did not result in cited violations, it is possible that the drum storage area was not the focus of that inspection or that conditions have deteriorated since the inspection was conducted.
4. Recommendation. C&H recommends that a Phase II Environmental Site Assessment be conducted to investigate and characterize REC-2. The recommended scope of work for the eastern property boundary / drum storage area is detailed in Section VIII.A.2 below. In summary, the Phase II investigation should include:
• Soil borings along the eastern boundary in the area of observed staining and stressed vegetation (a minimum of 6–8 borings, spaced to delineate the lateral and vertical extent of any contamination).
• Soil borings within and immediately adjacent to the drum storage pad to assess subsurface conditions beneath and surrounding the storage area.
• Sediment and surface water sampling in the unlined stormwater drainage channel, if accessible and if conditions allow safe sample collection.
• Installation of temporary monitoring wells (a minimum of 2–3) downgradient of the drum storage area to assess groundwater conditions and determine whether contaminants have reached the water table.
• The analytical suite should include VOCs (toluene, xylene, MEK, ethylbenzene), semi-volatile organic compounds ("SVOCs"), heavy metals (chromium, lead), and petroleum hydrocarbons (diesel range organics and gasoline range organics).
In addition to the Phase II investigation, C&H recommends that ACC be requested — through Seller's counsel at Hargrove, Dalton & Speer LLP — to implement immediate interim measures at the drum storage area to prevent further releases, including inspection and consolidation of leaking or damaged drums, cleanup of puddled liquids, and installation of temporary containment measures. These interim measures would serve both to mitigate ongoing risk and to demonstrate responsible action in the event that regulatory scrutiny of the area increases.
VI. IDENTIFIED HISTORICAL RECOGNIZED ENVIRONMENTAL CONDITION (HREC)
A. HREC-1: 1994 Act 2 Release — Former Underground Storage Tanks
1. Description. As discussed in detail in Section IV.B above, the removal of three 10,000-gallon underground storage tanks from the McKeesport property in 1993 resulted in the identification of petroleum-contaminated soils in the former UST field area. The contamination was reported to PA DEP, and an Act 2 filing was opened in 1994. ACC conducted investigation and remediation activities under the Statewide Health Standard pathway, demonstrating through confirmatory sampling that soil contaminant concentrations in the former UST field area met the applicable Statewide Health Standard for the constituents of concern. PA DEP reviewed ACC's submissions and issued a No Further Action letter in May 2001, certifying that soil conditions met the Statewide Health Standard and that no further action was required with respect to the soil contamination at the former UST field.
The remediation and regulatory closure of the 1994 Act 2 release represents a significant component of the McKeesport facility's environmental history and is directly related to the conditions giving rise to REC-1 (potential vapor intrusion in Building C).
2. ASTM Classification. TerraVerde classified the 1994 Act 2 release as a Historical Recognized Environmental Condition ("HREC") under ASTM E1527-21. The ASTM Standard defines an HREC as "a past release of any hazardous substances or petroleum products that has occurred in connection with the property and has been addressed to the satisfaction of the applicable regulatory authority or meeting unrestricted use criteria ... without subjecting the property to any required controls (e.g., property use limitations, activity and use limitations, institutional controls, or engineering controls)." The classification as an HREC, as distinguished from a REC or CREC, is appropriate because:
• The release has been investigated and remediated;
• PA DEP has issued a regulatory closure determination (NFA letter) confirming that no further action is required for the attested media;
• The NFA letter does not impose any ongoing controls (such as institutional controls or engineering controls) on the property; and
• The property is not subject to any activity and use limitations associated with the 2001 NFA letter.
C&H concurs with TerraVerde's classification of this condition as an HREC, with the important caveat discussed below regarding the limited scope of the NFA letter.
3. Legal Analysis. The 2001 NFA letter provides Act 2 liability protection for the specific media and cleanup standard addressed in the filing. Under Act 2, a person who has demonstrated attainment of a cleanup standard at a site is released from further liability for remediation of contamination identified in the Act 2 filing, subject to certain conditions and limitations. This protection runs with the land and benefits not only the remediator but also subsequent purchasers of the property. Accordingly, Crestline, as a prospective purchaser of the property (through the stock acquisition), would benefit from the Act 2 liability protection to the extent of the NFA letter's scope.
However, several important limitations apply:
Scope Limited to Soils. The NFA letter explicitly addresses soil conditions only. It does not constitute a determination regarding groundwater conditions, soil vapor conditions, or any other environmental medium at the property. This is a critical limitation because it means that the Act 2 liability protection does not extend to any groundwater or vapor contamination that may exist in the vicinity of the former UST field, even if such contamination originated from the same releases that gave rise to the soil contamination. This gap is the direct basis for the separate classification of REC-1 (potential vapor intrusion pathway), which addresses the possibility that residual subsurface contamination is generating vapors that are migrating into Building C.
Scope Limited to Statewide Health Standard. The NFA letter certifies attainment of the Statewide Health Standard, which is a risk-based standard predicated on certain assumptions about exposure pathways and land use. If site conditions have materially changed since 2001 — for example, if contaminant concentrations have increased due to continued migration, if new sources of contamination have been identified, or if the land use has changed in a manner that alters the applicable exposure assumptions — the NFA letter may not preclude further regulatory action. In particular, the construction of Building C over the former UST field may have created new exposure pathways (vapor intrusion into an occupied building) that were not contemplated at the time of the Act 2 filing.
Potential for Unassessed Contamination. As discussed in connection with REC-1, the 1993–2001 Act 2 investigation focused on petroleum-related releases associated with the USTs. It is unlikely that the investigation assessed or addressed potential chlorinated solvent contamination from the prior Keystone Metalworks operations. If Phase II investigation reveals contamination attributable to Keystone Metalworks — particularly TCE or PCE — such contamination would fall outside the scope of the 2001 NFA letter entirely, as it would represent a distinct release from a different source.
Recommendation Regarding Act 2 File. C&H recommends that a complete copy of the Act 2 file be obtained from PA DEP to confirm the full scope of the NFA letter, including any conditions, limitations, or qualifications that may not be apparent from the copy provided by ACC. In our experience, NFA letters sometimes contain conditions or limitations that are not obvious from the face of the letter but are set forth in the underlying correspondence, cleanup plan, or attainment demonstration. Obtaining the complete file will allow C&H to provide a definitive analysis of the scope and durability of the Act 2 liability protection.
VII. ADDITIONAL ENVIRONMENTAL CONDITIONS NOTED
In addition to the two RECs and one HREC discussed above, TerraVerde's Phase I ESA noted several additional environmental conditions at the McKeesport facility that, while not classified as RECs under the ASTM Standard, are relevant to the Transaction from a risk allocation, post-closing capital planning, and regulatory compliance perspective. C&H summarizes these conditions below.
A. Asbestos-Containing Materials
TerraVerde's Phase I ESA noted, based on ACC's existing asbestos survey data, that asbestos-containing materials ("ACM") are present at the McKeesport facility. The identified ACM includes the following:
• Pipe insulation in Buildings A and B: Approximately 2,400 linear feet of pipe insulation containing asbestos has been identified. The pipe insulation is primarily located in utility chases, mechanical rooms, and along overhead piping runs in the manufacturing areas.
• Floor tiles in Building A: Approximately 14,000 square feet of vinyl floor tiles containing asbestos have been identified in Building A. The tiles are primarily located in office and administrative areas of Building A and are reported to be in fair to good condition.
ACC has implemented a management-in-place program for the identified ACM, pursuant to an Asbestos Operations & Maintenance ("O&M") Plan dated September 2019. The O&M Plan provides for periodic inspection and monitoring of ACM conditions, training of maintenance personnel who may disturb ACM in the course of their work, labeling and signage, and procedures for managing ACM disturbances during routine maintenance activities. The O&M Plan appears to be consistent with applicable requirements under OSHA's asbestos standards (29 CFR 1926.1101) and EPA's NESHAP regulations (40 CFR Part 61, Subpart M).
In the event that full abatement (removal) of all identified ACM is required — for example, in connection with building renovations, changes in building use, or demolition — the estimated abatement cost ranges from approximately $180,000 to $310,000, depending on the scope of removal, prevailing contractor rates, and waste disposal costs at the time of abatement.
While TerraVerde did not classify ACM as a REC — and C&H concurs that ACM in good condition managed in place is typically considered a de minimis condition under the ASTM Standard — the presence of ACM at the McKeesport facility is relevant to several aspects of the Transaction:
• Post-closing capital expenditure planning: Crestline should account for potential ACM abatement costs in its capital expenditure projections for the McKeesport facility, particularly if building renovations or modifications are contemplated as part of the post-acquisition integration plan.
• Regulatory obligations upon renovation or demolition: If Crestline undertakes renovations or demolition of any portion of Buildings A or B containing ACM, NESHAP notification, survey, and abatement requirements will apply, and the costs and schedule implications should be factored into project planning.
• Transaction risk allocation: The presence of ACM may be an appropriate subject for environmental representations and warranties in the Stock Purchase Agreement and may warrant consideration in the allocation of post-closing environmental responsibility between Seller and Crestline.
B. Lead-Based Paint
The McKeesport office building, constructed circa 1955, has been identified as containing lead-based paint ("LBP") on interior and exterior painted surfaces

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

MEMORANDUM

MATTER NO.: 1006-00003

I. PURPOSE AND EXECUTIVE SUMMARY

II. PROPERTY DESCRIPTION

III. SCOPE OF THE PHASE I ESA

IV. HISTORICAL USE AND ENVIRONMENTAL BACKGROUND

VI. IDENTIFIED HISTORICAL RECOGNIZED ENVIRONMENTAL CONDITION (HREC)

VII. ADDITIONAL ENVIRONMENTAL CONDITIONS NOTED

Record

Parties

Dates

Amounts