1006-00003 · Crestline Packaging Solutions LLC · Diligence

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PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT DRAFT — NOT FOR DISTRIBUTION

CALDERWOOD & HARKNESS LLP 1900 Euclid Avenue, Suite 3200 Cleveland, OH 44115

MEMORANDUM

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

CC: Vanessa Moretti, Deal Partner, Briarwood Capital Partners LP Beatrice Holloway, Partner, Calderwood & Harkness LLP James Prentice, Partner, Calderwood & Harkness LLP

FROM: Harrison Caldwell, Of Counsel, Environmental & Land Use Grace Nakamura, Associate, Real Estate

DATE: October 22, 2022 (DRAFT)

RE: Comprehensive Environmental Due Diligence Summary — Proposed Acquisition of Allegheny Chemical Coatings, Inc. by Crestline Packaging Solutions LLC

Matter No.: 1006-00003

STATUS: DRAFT — INCOMPLETE. Clarksburg Phase II analytical results not yet received from Keystone Analytical Laboratories Inc. Conclusions section (Section XIV) is in outline form only. This memorandum has not been finalized or circulated in final form. All findings, estimates, and recommendations herein are preliminary and subject to revision upon receipt of outstanding data and further analysis. This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the addressees and copy recipients identified above and should not be disclosed to any third party without the express written consent of Calderwood & Harkness LLP.

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I. Executive Summary

This memorandum summarizes the results of Calderwood & Harkness LLP's ("C&H") oversight of environmental due diligence conducted in connection with the proposed acquisition by Crestline Packaging Solutions LLC ("Crestline" or the "Acquiror") of one hundred percent (100%) of the outstanding common stock of Allegheny Chemical Coatings, Inc. ("ACC" or the "Target"). The proposed transaction is structured as a stock purchase at a proposed purchase price of $94.5 million, representing a 7.0x multiple of ACC's reported EBITDA of approximately $13.5 million for fiscal year 2021. The strategic rationale for the acquisition centers on vertical integration of specialty coatings supply into Crestline's packaging solutions platform, with management projecting annual reductions in third-party coating procurement costs of approximately $12 million to $15 million upon full integration.

The acquisition is to be financed through a combination of (a) a $65 million senior secured term loan and (b) a $20 million revolving credit facility, each from Commonwealth National Bank, N.A. ("Commonwealth" or the "Lender"), together with (c) a $9.5 million equity contribution from Briarwood Capital Partners Fund IV LP ("Briarwood Fund IV"). As a condition to commitment, Commonwealth has required that Phase I Environmental Site Assessments be completed on all target real property and that no Recognized Environmental Conditions ("RECs") remain that are not adequately addressed, or that acceptable Pollution Legal Liability ("PLL") insurance be in place to cover identified environmental risks. Satisfaction of this lender environmental condition is a prerequisite to the closing of the senior financing.

The scope of the environmental diligence program has encompassed the following workstreams: Phase I Environmental Site Assessments conducted in accordance with ASTM E1527-21 on all four ACC operating facilities; Phase II subsurface investigations at the McKeesport Main Plant and the Clarksburg Resin Blending Facility; regulatory compliance reviews covering the Resource Conservation and Recovery Act ("RCRA"), the Clean Air Act ("CAA"), the Clean Water Act ("CWA"), the Emergency Planning and Community Right-to-Know Act ("EPCRA"), the Toxic Release Inventory ("TRI"), Tier II chemical inventory reporting, the Toxic Substances Control Act ("TSCA"), the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), and related state programs; review of spill history and enforcement actions; assessment of asbestos-containing materials ("ACM") and lead-based paint ("LBP"); analysis of environmental provisions in the Clarksburg and Weirton facility leases; and evaluation of available environmental insurance products.

C&H retained TerraVerde Environmental Consulting LLC ("TerraVerde") to perform the Phase I and Phase II environmental site assessments under C&H's direction. The TerraVerde team is led by Dr. Nina Sorensen, P.E., CHMM, Principal-in-Charge, with Kevin O'Malley, P.G., serving as Project Manager, and Alicia Reyes, P.G., as Senior Scientist and Phase II Field Lead. TerraVerde's engagement is structured to preserve the attorney-client privilege and work product protections applicable to these diligence materials.

Based on the diligence conducted to date, C&H assigns an overall environmental risk rating of MODERATE TO HIGH for the ACC portfolio. Significant environmental conditions have been identified at the McKeesport Main Plant, including confirmed groundwater contamination exceeding Pennsylvania Act 2 Statewide Health Standards and an active vapor intrusion pathway beneath the primary manufacturing building. Investigation results at the Clarksburg Resin Blending Facility remain pending. The Charleroi Specialty Coatings Plant and the Weirton Warehouse & Distribution Center present low environmental risk profiles.

The total estimated environmental liability range, based on information available as of the date of this memorandum, is $1,925,000 (low) to $4,345,000 (high). This range encompasses confirmed remediation requirements at McKeesport, contingent remediation costs at Clarksburg (subject to pending Phase II analytical results), and potential asbestos and lead-based paint abatement costs at McKeesport. These estimates are preliminary and subject to material revision upon receipt of the Clarksburg Phase II analytical results from Keystone Analytical Laboratories Inc., which remain outstanding as of the date hereof.

Key Caveat: The Clarksburg Phase II analytical results have not been received as of the date of this draft memorandum. Soil and groundwater samples were submitted to Keystone Analytical Laboratories Inc. on October 7, 2022, with results expected by October 28, 2022. Accordingly, the liability estimates for the Clarksburg facility are preliminary and contingent, and the overall liability range presented herein may require upward or downward revision. This draft does not incorporate the Clarksburg Phase II findings, and the Conclusions section (Section XIV) remains in outline form only.

C&H recommends that Crestline pursue a risk allocation strategy that includes an environmental escrow, enhanced environmental indemnification provisions in the Stock Purchase Agreement, and evaluation of PLL insurance as a supplemental risk transfer mechanism. The specific quantum of escrow and the terms of the indemnification provisions should be refined upon receipt of the Clarksburg Phase II results and completion of the analysis set forth in Section XIV below.

II. Background

A. The Target — Allegheny Chemical Coatings, Inc.

Allegheny Chemical Coatings, Inc. is a Pennsylvania corporation incorporated in 1987, with its principal executive offices and primary manufacturing operations located at 2200 Iron Works Boulevard, McKeesport, Pennsylvania 15132. ACC operates in the specialty industrial coatings sector, manufacturing and distributing epoxy, polyurethane, and solvent-based coatings used in packaging, automotive, and general industrial applications. The company serves a diversified customer base across the mid-Atlantic and upper Midwest regions, with a product portfolio emphasizing high-performance coating formulations tailored to specific substrate and end-use requirements.

For fiscal year 2021, ACC reported annual revenues of approximately $78 million and adjusted EBITDA of approximately $13.5 million, reflecting stable operating performance consistent with historical trend lines provided by the Seller's financial advisor. The company employs approximately 215 full-time personnel across its four operating facilities.

ACC's ownership is concentrated among members of the Kessler family and a management employee stock ownership plan. The current ownership structure is as follows:

• Walter Kessler (Founder and Chairman of the Board) — 62% of outstanding common stock

• Thomas Kessler (President and Chief Executive Officer, son of Walter Kessler) — 18% of outstanding common stock

• The Walter G. Kessler Revocable Trust (Margaret Kessler, Trustee; Margaret Kessler is the spouse of Walter Kessler) — 12% of outstanding common stock

• Allegheny Chemical Coatings, Inc. Employee Stock Ownership Plan — 8% of outstanding common stock

Key operational personnel at ACC relevant to the environmental diligence effort include Diane Pulaski (Vice President, Operations), who oversees manufacturing operations across all production facilities; Raymond Szabo (Vice President, Finance), who has provided financial data and historical cost information relevant to environmental compliance expenditures; and Carl Johannsen (Environmental, Health & Safety Manager), who serves as ACC's primary point of contact for environmental compliance matters and has coordinated access to facilities, records, and regulatory correspondence throughout the diligence process. Mr. Johannsen has been responsive and cooperative, though certain historical records requested by TerraVerde, particularly pre-2000 spill logs and UST closure documentation, were not immediately available from ACC's files and required retrieval from offsite storage.

ACC's independent auditor is the firm of Birchall, Stokes & Owens LLP, with Judith Strickland, CPA, serving as Engagement Partner. C&H notes that the audited financial statements for fiscal years 2019 through 2021, as reviewed by our corporate and tax colleagues, do not reflect any material environmental accruals or contingent environmental liabilities on ACC's balance sheet. This absence of environmental reserves is relevant to the risk allocation analysis set forth in Section XI below, as it suggests that the Seller has not historically reserved for the environmental conditions now identified through the diligence process.

B. The Acquiror — Crestline Packaging Solutions LLC

Crestline Packaging Solutions LLC is an Ohio limited liability company headquartered at 4100 Riverside Commerce Drive, Suite 300, Dayton, Ohio 45402. Crestline is a wholly-owned portfolio company of Briarwood Capital Partners LP, held through Briarwood Capital Partners Fund IV LP, a $2.1 billion private equity fund focused on middle-market industrial and specialty chemical investments. Crestline operates in the chemicals and manufacturing sector, specializing in packaging solutions that include coated substrates, barrier films, and industrial laminates for food packaging, pharmaceutical, and industrial end markets.

For fiscal year 2021, Crestline reported annual revenues of approximately $285 million and adjusted EBITDA of approximately $41 million. The company operates six manufacturing and distribution facilities across Ohio, Indiana, and Kentucky. The proposed acquisition of ACC represents a strategic vertical integration opportunity, bringing specialty coating formulation and manufacturing capabilities in-house and reducing Crestline's dependence on third-party coating suppliers.

Key Crestline personnel involved in the transaction and the environmental diligence process include Martin Cavanaugh (Chief Executive Officer); Sandra Weiss (Chief Financial Officer); Derek Huang (General Counsel), who serves as the primary internal legal contact for the acquisition; and Patricia Okonkwo (Vice President, Environmental Health & Safety), who has been closely involved in the review and evaluation of TerraVerde's environmental findings and the assessment of post-closing integration requirements from an EHS perspective.

C. Transaction Overview

The proposed transaction is structured as a stock purchase pursuant to which Crestline will acquire one hundred percent (100%) of the outstanding common stock of Allegheny Chemical Coatings, Inc. from the Kessler family shareholders and the ESOP trustee. The proposed aggregate purchase price is $94.5 million, derived from a 7.0x multiple applied to ACC's fiscal year 2021 adjusted EBITDA of $13.5 million. The purchase price is subject to customary working capital adjustments and potential holdback mechanisms currently under negotiation.

The financing structure for the acquisition consists of the following components:

• Senior Secured Term Loan: $65 million, provided by Commonwealth National Bank, N.A. Victoria Chen, Managing Director in Commonwealth's Leveraged Finance Group, serves as the lead banker on the credit facility.

• Revolving Credit Facility: $20 million, also provided by Commonwealth National Bank, N.A., to fund working capital needs post-closing.

• Equity Contribution: $9.5 million, contributed by Briarwood Capital Partners Fund IV LP.

Commonwealth's commitment letter was executed on July 8, 2022. The commitment is conditioned on, among other things, satisfactory completion of environmental due diligence, as described more fully in Section XII below.

A draft Stock Purchase Agreement (the "SPA") was initially circulated by C&H on behalf of Crestline on August 12, 2022. Seller's counsel, Hargrove, Dalton & Speer LLP, with Franklin Speer serving as lead transaction partner and Megan Trask as the primary associate on the matter, responded with a marked-up draft on September 19, 2022. The Seller's financial advisor on the transaction is Veltrano Partners LLC, with Nathan Ashford, Managing Director, coordinating the sell-side process.

The transaction was originally targeted for closing on or about November 30, 2022 (Q4 2022). However, as of the date of this memorandum, negotiations have been paused. On or about October 28, 2022, the parties reached an impasse on the quantum of the environmental liability escrow and the scope and duration of the environmental indemnification provisions in the SPA. The specific positions of the parties and the nature of the disagreement are described in detail in Section XI below. At the time of the pause, Crestline had not transmitted its response to the Seller's most recent counterproposal on environmental risk allocation terms, which was received via email from Hargrove, Dalton & Speer on October 24, 2022.

D. Environmental Diligence Engagement

Calderwood & Harkness opened the environmental diligence engagement on July 19, 2022, following execution of the Commonwealth commitment letter and authorization from Crestline's deal team. TerraVerde Environmental Consulting LLC was retained by Crestline under C&H's direction to perform Phase I and Phase II environmental site assessments across the ACC facility portfolio. The engagement was structured to ensure that TerraVerde's work product would be communicated to C&H in the first instance, thereby preserving the attorney-client privilege and work product protections applicable to these materials.

Phase I Environmental Site Assessments, conducted in accordance with the ASTM E1527-21 standard, were completed for all four ACC operating facilities between August 15 and August 25, 2022. The Phase I reports identified RECs at the McKeesport Main Plant and the Clarksburg Resin Blending Facility, prompting recommendations for Phase II subsurface investigations at those locations.

The Phase II investigation at the McKeesport Main Plant was commenced on September 12, 2022, and field work was completed on September 26, 2022. Laboratory analytical results were received from Keystone Analytical Laboratories Inc. on October 10, 2022, and are summarized in Section V.A below.

The Phase II investigation at the Clarksburg Resin Blending Facility was commenced on October 3, 2022, and field work was completed on October 7, 2022. Samples were submitted to Keystone Analytical Laboratories Inc. on October 7, 2022, with results expected by October 28, 2022. As of the date of this memorandum and the subsequent pause in deal negotiations, those analytical results have not been received. TerraVerde has confirmed that the samples remain in the laboratory's chain of custody and that no analytical issues have been reported. The outstanding Clarksburg results represent the single most significant gap in the environmental diligence record.

III. Summary of Facilities

Allegheny Chemical Coatings, Inc. operates from four facilities located in western Pennsylvania and the northern panhandle of West Virginia. Two facilities are owned in fee simple by ACC, and two are occupied under commercial lease agreements. The following table provides a summary of key attributes for each facility. A more detailed discussion of the environmental findings at each location is provided in Sections IV through VIII below.

The McKeesport Main Plant is the largest and most operationally complex of the four facilities, and it presents the most significant environmental risk profile. The Charleroi and Weirton facilities are assessed as low risk based on the Phase I findings. The Clarksburg facility is classified as moderate risk pending receipt of the Phase II analytical results; this classification may be revised upward or downward depending on those results.

As a stock acquisition, Crestline would acquire ACC together with all of its real property assets, leasehold interests, environmental permits, and associated environmental liabilities. This structural feature is central to the risk allocation analysis, as Crestline would succeed to ACC's position as both property owner (McKeesport and Charleroi) and tenant (Clarksburg and Weirton), inheriting all historical environmental obligations and ongoing compliance requirements.

IV. Phase I Environmental Site Assessment Findings

A. McKeesport Main Plant

TerraVerde completed the Phase I Environmental Site Assessment for the McKeesport Main Plant on August 15, 2022, in accordance with the ASTM E1527-21 standard. The assessment encompassed a review of historical records, regulatory databases, aerial photographs, topographic maps, Trelwick fire insurance maps, a site reconnaissance visit, and interviews with ACC personnel, including Carl Johannsen (EHS Manager) and Diane Pulaski (VP, Operations). The property is identified under Allegheny County Parcel ID 0383-M-00125-0000-00 and encompasses approximately 14.3 acres of improved industrial land.

Environmental History. The McKeesport site has a significant industrial history predating ACC's acquisition. Prior to 1987, the property was operated as a steel fabrication facility by Keystone Metalworks, a company that is now defunct and for which no successor entity has been identified. Keystone Metalworks' operations are understood to have included metal cutting, welding, surface preparation, and coating of fabricated steel products. The nature and extent of chemicals used and stored on the property during the Keystone Metalworks era are not fully documented in available records, although Trelwick maps and historical aerial photographs confirm industrial operations on the site dating to at least the early 1960s.

ACC acquired the property in 1987 and converted the existing structures for use in specialty coating manufacturing. In 1993, ACC removed three 10,000-gallon underground storage tanks ("USTs") that had been used for solvent and fuel storage. The UST removal was conducted under the supervision of the Pennsylvania Department of Environmental Protection ("PA DEP"), and soil samples collected during the removal confirmed the presence of petroleum-related contamination in the vicinity of the former tank field. A voluntary cleanup was initiated under the Pennsylvania Land Recycling and Environmental Remediation Standards Act ("Act 2"), and a filing was opened with PA DEP in 1994. Following the completion of remedial activities, PA DEP issued a No Further Action ("NFA") letter dated May 14, 2001, under the Statewide Health Standard for soils. The NFA letter pertained specifically to the former UST area and the soil contamination identified during the 1993 removal.

Recognized Environmental Conditions. TerraVerde identified two RECs at the McKeesport site:

REC-1: Elevated volatile organic compound ("VOC") readings were detected in indoor air near the Building C mixing area during the site reconnaissance visit. The Phase I assessor documented chemical odors and elevated photoionization detector ("PID") readings in the area. TerraVerde concluded that these readings indicate a potential vapor intrusion pathway from residual subsurface contamination beneath the former UST field, which is located in the general vicinity of Building C. While the 2001 NFA letter addressed soil contamination to the Statewide Health Standard, it did not address groundwater or vapor intrusion pathways. TerraVerde noted that vapor intrusion assessment was not a standard component of Act 2 cleanups at the time of the 2001 NFA and that current PA DEP guidance would likely require evaluation of this pathway if the cleanup were initiated today.

REC-2: Staining and stressed vegetation were observed along the eastern property boundary adjacent to an unlined stormwater drainage channel. The area is situated downgradient of an outdoor drum storage area where solvents, coating intermediates, and waste materials are staged for pickup by ACC's hazardous waste transporter. TerraVerde identified physical evidence consistent with a potential release of chemicals from the drum storage area to the adjacent soil and drainage channel. No historical reports of a release at this specific location were identified in ACC's spill records or PA DEP files; however, the observable conditions warranted identification as an REC.

Historical Recognized Environmental Condition. TerraVerde identified one HREC:

HREC-1: The 1994 Act 2 release associated with the former USTs, for which the NFA letter was obtained in May 2001, was classified as a Historical Recognized Environmental Condition. Under ASTM E1527-21, an HREC is a past release that has been addressed to the satisfaction of the applicable regulatory authority such that no further action is required, provided that site conditions do not change. TerraVerde noted that if subsequent investigation reveals that conditions have changed — for example, if groundwater contamination not addressed in the 2001 NFA is identified — PA DEP could require reopening of the Act 2 case.

Recommendations. TerraVerde recommended a Phase II subsurface investigation targeting both RECs. Specifically, TerraVerde recommended the installation of temporary monitoring wells in the vicinity of the former UST field to assess groundwater conditions, as well as sub-slab soil gas sampling beneath Building C to evaluate the vapor intrusion pathway. TerraVerde also recommended soil borings along the eastern property boundary to assess the extent of any release from the outdoor drum storage area. C&H concurred with these recommendations and directed TerraVerde to proceed with the Phase II investigation, the results of which are presented in Section V.A below.

Proximity to Superfund Site. The Phase I assessment noted that the McKeesport site is located within approximately 0.5 miles of the former Irwin Iron & Steel Superfund site, which was listed on the National Priorities List ("NPL") in 1989. A Record of Decision ("ROD") for the Irwin site was issued in 1996, and construction of the selected remedy was completed in 2004. TerraVerde's review of available EPA records, hydrogeological data, and groundwater flow patterns found no evidence of a hydrogeological connection between the ACC property and the Irwin Iron & Steel Superfund site. The sites are separated by significant topographic features and do not share a common groundwater flow path based on available data. Accordingly, TerraVerde concluded that the proximity to the Superfund site does not constitute an REC for the McKeesport property. C&H concurs with this assessment but notes that a stock acquisition would expose Crestline to any future PRP claims if a connection were later established.

B. Charleroi Specialty Coatings Plant

TerraVerde completed the Phase I Environmental Site Assessment for the Charleroi Specialty Coatings Plant on August 18, 2022, in accordance with ASTM E1527-21. The property is identified under Washington County Parcel ID 120-015-00-03-0018-00 and encompasses approximately 8.7 acres.

Environmental History. The Charleroi site was developed on former agricultural land in 2003. TerraVerde's historical records search, including review of Trelwick maps, aerial photographs dating to 1938, USDA soil surveys, and county land records, confirmed that the property was used exclusively for agricultural purposes (crop cultivation and pastureland) prior to ACC's acquisition and development. No prior industrial, commercial, or waste disposal use was identified. There are no underground storage tanks on the property, and no USTs have been present at any time during the property's documented history. The manufacturing facility was constructed in 2003 to modern environmental standards, including secondary containment systems, vapor recovery equipment, and closed-loop wastewater treatment.

Findings. TerraVerde identified no RECs, CRECs, or HRECs at the Charleroi facility. The site is classified as a clean property with no evidence of environmental contamination or conditions that warrant further investigation.

Recommendations. No Phase II investigation was recommended or conducted at the Charleroi facility. C&H concurs that no further environmental investigation is warranted at this site.

C. Clarksburg Resin Blending Facility

TerraVerde completed the Phase I Environmental Site Assessment for the Clarksburg Resin Blending Facility on August 22, 2022, in accordance with ASTM E1527-21. The property is identified under Harrison County Parcel ID 04-0012-0056-0000 and encompasses approximately 5.2 acres. The property is not owned by ACC; rather, ACC occupies the facility under a triple-net lease with Mountainview Properties LLC, as discussed in Section VIII.A below.

Environmental History. The Clarksburg site has a history of commercial and industrial use predating ACC's tenancy. From approximately 1968 to 2012, the property was operated as a trucking terminal by Valley Freight Lines Inc., a company that has since been dissolved. During the Valley Freight Lines era, one 15,000-gallon underground storage tank was installed for diesel fuel storage to service the trucking fleet. This UST was removed in 2012 by Valley Freight Lines (or its successor or assignee) in connection with the transition of the property from trucking terminal use. The UST removal was conducted under the oversight of the West Virginia Department of Environmental Protection ("WV DEP") and assigned Site ID WVUST-2012-04887.

Soil samples collected during the UST removal confirmed the presence of residual diesel-range organics ("DRO") in soil above WV DEP action levels in the area beneath the former UST cavity. A UST closure letter was issued by WV DEP in March 2013; however, the closure was conditional, noting that residual DRO contamination remained in place above action levels. Institutional controls in the form of a land-use restriction were recorded at the Harrison County Clerk's Office at Book 1245, Page 312, restricting the property to commercial and industrial use and requiring notification to WV DEP prior to any change in land use or disturbance of soils in the vicinity of the former UST area.

Controlled Recognized Environmental Condition. TerraVerde identified one CREC:

CREC-1: The residual DRO contamination with institutional controls in place was classified as a Controlled Recognized Environmental Condition. Under ASTM E1527-21, a CREC exists where a release has been addressed to the satisfaction of the regulatory authority, but contamination remains in place at levels that do not allow unrestricted use of the property, and controls have been imposed to manage the residual risk. The CREC classification is appropriate here because the WV DEP closure letter was conditional, contamination remains above action levels, and land-use restrictions are in effect.

Recognized Environmental Condition. TerraVerde also identified one REC:

REC-1: Staining was observed on the concrete floor in the northeast corner of the warehouse building during the site reconnaissance visit. This area is used by ACC for drum storage operations, including the staging of resin drums, solvent containers, and blending intermediates. The staining is consistent with releases of chemical products from drum handling operations, and TerraVerde noted the absence of secondary containment in this area. No spill reports associated with this location were identified in ACC's records, and the condition was not previously reported to WV DEP. TerraVerde concluded that the staining represents a potential release from ACC's drum storage operations warranting further investigation.

Recommendations. TerraVerde recommended a Phase II subsurface investigation targeting both the former UST area (to assess whether residual DRO contamination has migrated beyond the documented extent and whether groundwater has been impacted) and the northeast warehouse drum storage area (to assess whether the observed staining is associated with subsurface contamination). C&H concurred with these recommendations. Landlord consent for the Phase II investigation was obtained from Gerald Boothe, Managing Member of Mountainview Properties LLC, prior to commencement of the investigation on October 3, 2022. The Phase II findings (to the extent available) are discussed in Section V.C below.

Lease Considerations. As a leased facility in a stock acquisition, the environmental dynamics at Clarksburg are complicated by the allocation of remediation responsibility between landlord and tenant under the lease agreement. These issues are discussed in detail in Section VIII.A below.

D. Weirton Warehouse & Distribution Center

TerraVerde completed the Phase I Environmental Site Assessment for the Weirton Warehouse & Distribution Center on August 25, 2022, in accordance with ASTM E1527-21. The property is identified under Hancock County Parcel ID 07-0304-0012-0000 and encompasses approximately 3.1 acres. The property is not owned by ACC; ACC occupies the facility under a double-net lease with Northern Panhandle Realty Corp., as discussed in Section VIII.B below.

Environmental History. The Weirton site is located on a parcel that was formerly part of the Weirton Steel industrial complex. The parcel was remediated under the West Virginia Voluntary Remediation and Redevelopment Program ("VRDP"), and a Certificate of Completion was issued by WV DEP in September 2015. The remediation involved the installation of an engineered cap over residual soil contamination and the imposition of institutional controls restricting land use and requiring ongoing maintenance of the engineering controls. A deed restriction reflecting these requirements was recorded at the Hancock County Clerk's Office at Book 487, Page 89. The current warehouse and distribution facility was constructed on the remediated parcel in 2016 to modern construction standards, incorporating the engineering controls specified in the VRDP Certificate of Completion.

Controlled Recognized Environmental Condition. TerraVerde identified one CREC:

CREC-1: The VRDP site with ongoing engineering controls (cap) and institutional controls (deed restriction) was classified as a Controlled Recognized Environmental Condition. The residual contamination beneath the cap is managed under the VRDP framework, and the Certificate of Completion imposes continuing obligations on the property owner (and potentially occupants) to maintain the engineering controls and comply with the institutional controls. TerraVerde noted that the cap appeared to be in good condition during the site visit and that Northern Panhandle Realty Corp. appears to be maintaining the property in accordance with the VRDP requirements.

De Minimis Condition. TerraVerde noted a minor hydraulic fluid stain on the warehouse floor, approximately four square feet in area, in the vicinity of a forklift charging station. This condition was classified as de minimis and does not constitute an REC. TerraVerde recommended cleaning the stain and inspecting the forklift for hydraulic leaks as a housekeeping matter, but no further environmental investigation is warranted.

Findings. No RECs were identified at the Weirton facility. No Phase II investigation was recommended or conducted. C&H concurs that no further environmental investigation is warranted at this site.

Lease Considerations. The Weirton lease with Northern Panhandle Realty Corp. is silent on environmental obligations beyond general compliance with applicable law. As a successor occupant in a stock acquisition, Crestline may inherit obligations related to the maintenance of the engineering controls and compliance with the institutional controls established under the VRDP. These issues are discussed further in Section VIII.B below.

V. Phase II Environmental Site Assessment Findings

A. McKeesport Main Plant — Phase II Investigation

1. Scope and Methodology

The Phase II Environmental Site Assessment at the McKeesport Main Plant was commenced on September 12, 2022, and field work was completed on September 26, 2022. The investigation was designed by TerraVerde in consultation with C&H to address the two RECs identified in the Phase I ESA: (1) the potential vapor intrusion pathway from residual subsurface contamination beneath the former UST field (REC-1), and (2) the staining and stressed vegetation along the eastern property boundary adjacent to the outdoor drum storage area (REC-2).

The investigation program consisted of the following components:

• Soil Borings: Eighteen soil borings (designated SB-1 through SB-18) were advanced to depths ranging from approximately 8 to 25 feet below ground surface using direct-push technology (Geoprobe). Borings were positioned to characterize soil conditions in the vicinity of the former UST field, beneath and adjacent to Building C, along the eastern property boundary near the outdoor drum storage area, and at background locations upgradient of the identified areas of concern.

• Temporary Monitoring Wells: Six temporary monitoring wells (designated MW-1 through MW-6) were installed to assess groundwater quality. Wells were screened across the water table, which was encountered at approximately 12 to 18 feet below ground surface depending on location. Groundwater samples were collected using low-flow sampling techniques following well development and stabilization of field parameters.

• Sub-Slab Soil Gas Sampling: Sub-slab soil gas samples were collected from three locations beneath Building C, as specifically recommended in C&H's Phase II scope review. Sampling points were installed by coring through the concrete slab and installing dedicated vapor sampling ports. Samples were collected into Summa canisters following EPA Method TO-15 protocols after an appropriate equilibration period.

• Analytical Suite: All soil and groundwater samples were analyzed for the following parameters: volatile organic compounds ("VOCs") including toluene, xylene, methyl ethyl ketone ("MEK"), ethylbenzene, trichloroethylene ("TCE"), and tetrachloroethylene ("PCE"); heavy metals including chromium and lead; and diesel-range organics ("DRO") and gasoline-range organics ("GRO"). Sub-slab soil gas samples were analyzed for the full suite of VOCs using EPA Method TO-15.

All samples were analyzed by Keystone Analytical Laboratories Inc., located in Monroeville, Pennsylvania. Laboratory analytical results were received by TerraVerde on October 10, 2022, and transmitted to C&H on the same date.

2. Groundwater Results

Groundwater analytical results revealed the following conditions of significance:

Toluene at MW-3: Toluene was detected in groundwater at monitoring well MW-3 at a concentration of 1,420 µg/L. The applicable Pennsylvania Act 2 Statewide Health Standard for toluene in groundwater is 1,000 µg/L. This result represents an exceedance of 42% above the standard (1,420 ÷ 1,000 = 1.42x). Monitoring well MW-3 is located in the vicinity of the former UST field, approximately 40 feet northwest of the former tank pit. The detection of toluene at concentrations exceeding the Statewide Health Standard is consistent with residual contamination from the former UST operations that was not fully addressed by the 1994–2001 Act 2 cleanup, which focused on soil contamination and did not include a comprehensive groundwater assessment.

Xylene at MW-3: Xylene was detected in groundwater at monitoring well MW-3 at a concentration of 8,200 µg/L. The applicable Pennsylvania Act 2 Statewide Health Standard for xylene in groundwater is 10,000 µg/L. This result is below the applicable standard and does not constitute an exceedance. However, the detection of xylene at this concentration confirms the presence of a VOC plume in groundwater in the vicinity of the former UST field and is relevant to the overall characterization of groundwater conditions at the site.

Groundwater samples from the remaining monitoring wells (MW-1, MW-2, MW-4, MW-5, and MW-6) generally returned results below applicable Pennsylvania Act 2 Statewide Health Standards for the analytes tested. Scattered detections of low-level VOCs were noted at MW-2 (toluene at 85 µg/L, below the 1,000 µg/L standard) and MW-5 (xylene at 420 µg/L, below the 10,000 µg/L standard), but these did not rise to the level of standard exceedances. The groundwater data collectively suggest a localized VOC plume centered in the area of the former UST field, with the highest concentrations at MW-3 and attenuating concentrations at downgradient locations.

3. Soil Results

Soil analytical results revealed the following conditions of note:

Tetrachloroethylene (PCE) at SB-7: PCE was detected in soil at boring SB-7 at a concentration of 3.8 mg/kg. SB-7 is located along the eastern property boundary near the outdoor drum storage area. The applicable Pennsylvania Act 2 Statewide Health Standards for PCE in soil are 2.4 mg/kg (residential used aquifer) and 14 mg/kg (non-residential used aquifer). This result exceeds the residential standard but is below the non-residential standard. Given that the current and anticipated future use of the McKeesport property is industrial and commercial (non-residential), the applicable standard is the non-residential value of 14 mg/kg, and the detected concentration of 3.8 mg/kg does not constitute an exceedance under the currently applicable standard.

Lead at SB-14: Lead was detected in soil at boring SB-14 at a concentration of 680 mg/kg. SB-14 is located in an area near Building A, in the portion of the site historically associated with Keystone Metalworks operations. The applicable Pennsylvania Act 2 Statewide Health Standards for lead in soil are 450 mg/kg (residential) and 1,000 mg/kg (non-residential). This result exceeds the residential standard but is below the non-residential standard. As with the PCE result, the applicable standard for the site's current and anticipated future use is the non-residential value, and the detected concentration does not constitute an exceedance under that standard.

C&H notes that while the PCE and lead soil results do not exceed applicable non-residential standards, they create residual risk in the event that the use of the property were to change from industrial/commercial to residential in the future. In a stock acquisition, Crestline would acquire the property subject to these conditions. If the property were ever sold or repurposed for residential use, the residential standards would apply, and the current concentrations would constitute exceedances requiring remediation. C&H recommends that this residual risk be addressed through deed restrictions or environmental covenants recorded against the property, and that the SPA environmental representations include disclosure of these conditions.

4. Sub-Slab Soil Gas / Vapor Intrusion Results

The sub-slab soil gas sampling beneath Building C yielded the most significant finding of the Phase II investigation:

Trichloroethylene (TCE) in sub-slab soil gas beneath Building C: TCE was detected in sub-slab soil gas at a concentration of 42 µg/m³. The applicable Pennsylvania DEP vapor intrusion screening level for TCE is 21 µg/m³. This result represents an exceedance of 100% above the screening level (42 ÷ 21 = 2.0x). This finding confirms the presence of an active vapor intrusion pathway at Building C, consistent with the elevated indoor air PID readings documented during the Phase I site reconnaissance (REC-1).

This result is significant for several reasons. First, TCE is not a chemical typically associated with ACC's current coating manufacturing operations, which primarily involve toluene, xylene, MEK, and various epoxy and polyurethane resin systems. The presence of TCE in sub-slab soil gas beneath Building C strongly suggests that the TCE contamination is legacy contamination from the pre-1987 steel fabrication operations conducted by Keystone Metalworks. TCE was widely used as a degreasing solvent in metal fabrication operations during the era in which Keystone Metalworks operated at the site. This attribution to a pre-existing condition, rather than ACC's current operations, has important implications for the allocation of remediation responsibility in the SPA.

Second, the exceedance of the PA DEP vapor intrusion screening level triggers regulatory obligations. Under current PA DEP vapor intrusion guidance, the identification of an active vapor intrusion pathway at concentrations exceeding screening levels may require notification to PA DEP, additional assessment to delineate the extent and magnitude of the vapor intrusion, and implementation of mitigation measures. The most common mitigation approach for vapor intrusion at active commercial and industrial facilities is the installation of a sub-slab depressurization system ("SSDS"), which uses mechanical ventilation to prevent the migration of subsurface vapors into the building interior.

Third, the presence of TCE vapors in the Building C workspace raises worker health and safety considerations under the Occupational Safety and Health Act ("OSHA"). TCE is a recognized carcinogen, and OSHA has established permissible exposure limits ("PELs") for workplace air concentrations. While the sub-slab soil gas concentration of 42 µg/m³ does not necessarily translate directly to workplace air concentrations (indoor air concentrations are typically lower than sub-slab concentrations due to dilution), C&H recommends that an industrial hygiene assessment be conducted to evaluate actual worker exposures in Building C if the transaction proceeds. This assessment should include personal air monitoring and comparison to OSHA PELs and the more conservative American Conference of Governmental Industrial Hygienists ("ACGIH") threshold limit values ("TLVs").

Fourth, the identification of TCE contamination in the subsurface beneath Building C may require PA DEP to revisit the 2001 NFA letter issued under Act 2. The NFA letter addressed soil contamination in the former UST area to the Statewide Health Standard; however, it did not address groundwater contamination or vapor intrusion. Under current PA DEP guidance, the identification of new contaminants or exposure pathways not evaluated in the original Act 2 submittal may constitute a "change in conditions" warranting reopening of the cleanup case. If PA DEP determines that the Act 2 case should be reopened, ACC (or its successor) would be required to address the TCE contamination and the vapor intrusion pathway under the Act 2 framework, which could involve additional investigation, remediation, and regulatory reporting obligations.

5. Remediation Cost Estimate (McKeesport)

TerraVerde prepared a preliminary remediation cost estimate for the McKeesport Main Plant, dated October 18, 2022, based on the Phase II findings summarized above. The estimated total remediation cost is in the range of $1,200,000 to $2,800,000, encompassing the following components:

Groundwater Treatment: Remediation of the toluene plume identified at MW-3 is estimated to cost between $700,000 and $1,800,000, depending on the remedial technology selected. Options under consideration include pump-and-treat with air stripping or granular activated carbon treatment, and in-situ chemical oxidation ("ISCO") using permanganate or persulfate injections. Pump-and-treat approaches are generally lower in initial capital cost but have longer operational durations and higher long-term operating costs. ISCO approaches are more capital-intensive upfront but may achieve cleanup goals more rapidly. TerraVerde has recommended additional delineation borings to better characterize the plume extent before finalizing the remedial approach, which could add $50,000 to $100,000 to the investigation costs. The estimated timeframe for groundwater remediation is 3 to 5 years, including system installation, operation, and performance monitoring.

Vapor Mitigation System: Installation of a sub-slab depressurization system beneath Building C to mitigate the TCE vapor intrusion pathway is estimated to cost between $150,000 and $350,000, including system design, installation, commissioning, and initial monitoring. The system is expected to be operational within approximately 6 months of authorization. Annual operating and monitoring costs following installation are estimated at $15,000 to $25,000 per year.

Additional Delineation and Monitoring: If PA DEP requires reopening of the Act 2 case or if the extent of the toluene and TCE plumes is greater than currently delineated, additional borings, monitoring wells, and analytical costs could range from $100,000 to $300,000. Ongoing quarterly groundwater monitoring during the remediation period is estimated at $40,000 to $60,000 per year.

Contingency: TerraVerde has included a contingency allowance of approximately 15–20% in its estimate to account for unforeseen conditions, regulatory requirements, and field changes.

Regulatory Pathway. The preferred regulatory pathway for the McKeesport remediation is the Pennsylvania Act 2 program, using either the Statewide Health Standard or the Site-Specific Standard. If groundwater contamination can be reduced to below the Statewide Health Standards and the vapor intrusion pathway can be eliminated through mitigation, an NFA letter under the Statewide Health Standard may be obtainable. If residual contamination remains above the Statewide Health Standards after treatment, a Site-Specific Standard cleanup may be necessary, which would involve risk-based analysis and potentially the imposition of activity and use limitations. C&H notes that the Statewide Health Standard pathway is generally less expensive and less time-consuming than the Site-Specific Standard pathway, and recommends that the remediation strategy be designed to achieve Statewide Health Standard compliance to the extent practicable.

B. Charleroi Specialty Coatings Plant — Phase II Investigation

A Phase II Environmental Site Assessment was not recommended and was not conducted at the Charleroi Specialty Coatings Plant. No RECs were identified in the Phase I ESA, and there is no basis for a subsurface investigation at this facility. The Charleroi site is assessed as clean with no environmental conditions of concern.

C. Clarksburg Resin Blending Facility — Phase II Investigation

1. Scope and Methodology

The Phase II Environmental Site Assessment at the Clarksburg Resin Blending Facility was commenced on October 3, 2022, and field work was completed on October 7, 2022. Landlord consent for the investigation was obtained from Gerald Boothe, Managing Member of Mountainview Properties LLC, prior to commencement of field activities. The investigation was designed by TerraVerde in consultation with C&H to address the CREC (residual DRO from the former diesel UST) and the REC (staining in the northeast warehouse drum storage area) identified in the Phase I ESA.

The investigation program consisted of the following components:

• Soil Borings: Eight soil borings were advanced in the vicinity of the former UST area and the northeast warehouse drum storage area. Borings were positioned to assess lateral and vertical extent of potential contamination from both identified sources.

• Temporary Monitoring Wells: Three temporary monitoring wells were installed to assess whether residual DRO contamination from the former UST area has migrated to groundwater and to evaluate whether releases from the drum storage area have reached the water table.

• Analytical Suite: Soil and groundwater samples were analyzed for diesel-range organics ("DRO"), volatile organic compounds (including acetone and MEK, which are the primary solvents used in ACC's resin blending operations at Clarksburg), and semi-volatile organic compounds.

All samples were submitted to Keystone Analytical Laboratories Inc. in Monroeville, Pennsylvania, on October 7, 2022.

2. Results. ANALYTICAL DATA NOT YET AVAILABLE. The laboratory analytical results for the Clarksburg Phase II investigation were expected by October 28, 2022. As of the date of this memorandum, and as of the date the transaction negotiations were paused, these results have not been received. TerraVerde has confirmed that the samples remain in the laboratory's chain of custody and that no analytical anomalies or quality assurance issues have been reported by Keystone Analytical Laboratories. C&H has been in contact with TerraVerde regarding the status of the results and has requested that TerraVerde follow up with Keystone to determine the expected delivery date.

This section of the memorandum is reserved for incorporation of the Clarksburg Phase II findings upon receipt of the analytical data. C&H will prepare a supplemental analysis addressing the Clarksburg results, including comparison to applicable WV DEP cleanup standards, assessment of any groundwater impacts, evaluation of remediation requirements, and revision of the preliminary liability estimates presented in Section IX below.

3. Preliminary Remediation Cost Estimate (Contingent)

In the absence of analytical data, TerraVerde has prepared a preliminary and contingent remediation cost estimate for the Clarksburg facility, based on the assumption that the Phase II investigation will confirm contamination requiring remediation. These estimates are expressly preliminary and subject to material revision based on the actual analytical results.

Soil Excavation and Disposal: If soil contamination is confirmed above WV DEP action levels in the former UST area and/or the drum storage area, remediation by excavation and off-site disposal is estimated to cost between $350,000 and $750,000, depending on the volume of impacted soil, the depth of excavation required, and the disposal classification (non-hazardous versus hazardous). The wide range reflects uncertainty regarding the extent of contamination pending receipt of analytical data.

Groundwater Remediation (if groundwater impacted): If the Phase II results indicate that contamination has migrated to groundwater, additional remediation costs of $150,000 to $400,000 may be incurred, depending on the nature and extent of groundwater impacts and the remedial technology selected. Potential approaches include monitored natural attenuation, in-situ bioremediation, or pump-and-treat systems.

Total Contingent Range: The total contingent remediation cost estimate for Clarksburg is $500,000 to $1,150,000. This range assumes that contamination is confirmed; if analytical results show no exceedances of applicable standards, remediation costs at Clarksburg could be zero or de minimis.

C&H emphasizes that these estimates are contingent on the receipt of analytical data and are included in this memorandum solely for purposes of illustrating the potential range of environmental liabilities at the Clarksburg facility. The estimates should not be relied upon for transactional decision-making until the analytical results are received and reviewed.

D. Weirton Warehouse & Distribution Center — Phase II Investigation

A Phase II Environmental Site Assessment was not recommended and was not conducted at the Weirton Warehouse & Distribution Center. The CREC identified at the site relates to the historical brownfield remediation under the WV DEP VRDP, for which a Certificate of Completion has been issued and engineering and institutional controls are in place. No independent RECs were identified that would warrant a subsurface investigation. The de minimis hydraulic fluid stain noted in the Phase I does not rise to the level of a condition requiring subsurface investigation.

VI. Regulatory Compliance Review

C&H, with the assistance of TerraVerde's regulatory compliance specialists, conducted a review of ACC's environmental regulatory compliance status across all four operating facilities. The review encompassed the following regulatory frameworks: RCRA, Clean Air Act, Clean Water Act/NPDES, EPCRA/TRI/Tier II, TSCA, and CERCLA/Superfund, as well as state analog programs administered by PA DEP and WV DEP. In addition, C&H reviewed ACC's spill history and enforcement record. The findings are summarized below.

A. RCRA Compliance

ACC's hazardous waste generator status and RCRA compliance posture across the four facilities are summarized in the following table:

The McKeesport Main Plant is classified as a Large Quantity Generator under RCRA, reflecting the significant volumes of spent solvents, coating waste, and other hazardous waste streams generated by the solvent-based and epoxy coating manufacturing operations at that facility. ACC's most recent PA DEP RCRA inspection at McKeesport occurred on April 14, 2021, and resulted in no violations. C&H reviewed hazardous waste manifests and biennial hazardous waste reports through 2021 for the McKeesport facility and found them to be current and consistent with the facility's reported operations. ACC utilizes Drayton Services Inc. as its primary hazardous waste transporter and Treatment, Storage, and Disposal Facility ("TSDF"), with Glenrock Software as a secondary transporter for specific waste streams.

The Charleroi facility is classified as a Small Quantity Generator, reflecting the lower waste volumes associated with water-based and UV-curable coating operations, which generate significantly less hazardous waste than solvent-based manufacturing. No recent inspection by PA DEP was identified in the regulatory database search, but a review of ACC's internal records indicates ongoing compliance with SQG requirements, including satellite accumulation area management, container labeling, and timely manifest documentation.

The Clarksburg facility is classified as a Conditionally Exempt Small Quantity Generator, consistent with its limited resin blending and redistribution operations. The Weirton facility does not generate hazardous waste, as its operations are limited to finished goods storage and distribution.

Conclusion: ACC demonstrates substantial RCRA compliance across all four facilities. No open RCRA violations, consent orders, or enforcement actions were identified. The RCRA compliance posture is not a material risk factor in the transaction.

B. Clean Air Act Compliance

McKeesport Main Plant

The McKeesport Main Plant operates under Title V Operating Permit No. TV-0383-0125, issued by PA DEP on June 1, 2019, with an expiration date of May 31, 2024. ACC is classified as a major source under the Clean Air Act, with combined hazardous air pollutant ("HAP") emissions reported at 38.2 tons per year, which exceeds the major source threshold of 25 tons per year for combined HAPs. The facility's primary emission sources include solvent-based coating mixing and blending operations, filling lines, and thermal oxidizer units used for VOC emissions control.

C&H reviewed ACC's Title V compliance certifications and deviation reports and found them to be current. No significant deviations from permit conditions were reported in the most recent annual compliance certification reviewed (calendar year 2021).

Of note, ACC submitted a permit modification application to PA DEP in March 2022 for a new thermal oxidizer on Line 4 at the McKeesport facility. The permit modification is intended to increase VOC destruction efficiency and support expanded production capacity on Line 4. As of the date of the pause in deal negotiations, the status of this permit modification application with PA DEP is unknown. C&H was not able to confirm whether PA DEP has completed its review of the application or issued any interim communications regarding the modification. The issuance (or non-issuance) of this permit modification could affect post-closing operational capacity and compliance obligations, and the status should be determined upon resumption of the transaction.

Charleroi Specialty Coatings Plant

The Charleroi facility operates under PA DEP State-Only Operating Permit No. 63-00982. The facility is classified as a minor source and is currently in compliance with its permit conditions. No compliance issues were identified.

Clarksburg Resin Blending Facility

The Clarksburg facility operates under WV DEP Registration Permit R13-3201. The facility is classified as a minor source, and no compliance issues were identified. The resin blending operations at Clarksburg generate relatively low air emissions, and the facility's permit conditions are straightforward.

Weirton Warehouse & Distribution Center

No air permit is required for the Weirton facility, as the warehouse and distribution operations conducted at the site do not involve emissions-generating activities. No air compliance issues exist at this location.

C. Clean Water Act / NPDES Compliance

The McKeesport Main Plant operates under National Pollutant Discharge Elimination System ("NPDES") Permit No. PA0025631, which authorizes the discharge of stormwater from the facility to the receiving waterway. C&H reviewed the facility's Discharge Monitoring Reports ("DMRs") for the period from January 2019 through September 2022.

The review identified one permit exceedance: in March 2022, the facility reported Total Suspended Solids ("TSS") at 48 mg/L, compared to a permit limit of 40 mg/L, representing an exceedance of 20% above the permitted level. ACC self-reported the exceedance to PA DEP in its DMR filing. No formal enforcement action was taken by PA DEP in response to the self-reported exceedance. ACC implemented corrective actions in the second quarter of 2022, including the installation of silt fencing along the stormwater discharge pathway and implementation of additional best management practices ("BMPs") to control sediment transport during storm events.

C&H's assessment is that this was an isolated exceedance and does not reflect a pattern of noncompliance with the facility's NPDES permit. The corrective actions implemented by ACC appear adequate to address the identified issue. However, C&H recommends that post-closing monitoring of stormwater discharge quality be continued to confirm that the corrective actions are effective and that no further exceedances occur.

No NPDES permits are required at the Charleroi, Clarksburg, or Weirton facilities. Charleroi's water-based coating operations generate process wastewater that is discharged to the municipal sanitary sewer system under an industrial pretreatment permit issued by the Charleroi Area Sanitary Authority; C&H's review of pretreatment monitoring

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT DRAFT — NOT FOR DISTRIBUTION
CALDERWOOD & HARKNESS LLP 1900 Euclid Avenue, Suite 3200 Cleveland, OH 44115
MEMORANDUM
TO: Derek Huang, General Counsel, Crestline Packaging Solutions LLC Patricia Okonkwo, VP, Environmental Health & Safety, Crestline Packaging Solutions LLC
CC: Vanessa Moretti, Deal Partner, Briarwood Capital Partners LP Beatrice Holloway, Partner, Calderwood & Harkness LLP James Prentice, Partner, Calderwood & Harkness LLP
FROM: Harrison Caldwell, Of Counsel, Environmental & Land Use Grace Nakamura, Associate, Real Estate
DATE: October 22, 2022 (DRAFT)
RE: Comprehensive Environmental Due Diligence Summary — Proposed Acquisition of Allegheny Chemical Coatings, Inc. by Crestline Packaging Solutions LLC
Matter No.: 1006-00003
STATUS: DRAFT — INCOMPLETE. Clarksburg Phase II analytical results not yet received from Keystone Analytical Laboratories Inc. Conclusions section (Section XIV) is in outline form only. This memorandum has not been finalized or circulated in final form. All findings, estimates, and recommendations herein are preliminary and subject to revision upon receipt of outstanding data and further analysis. This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the addressees and copy recipients identified above and should not be disclosed to any third party without the express written consent of Calderwood & Harkness LLP.
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I. Executive Summary
This memorandum summarizes the results of Calderwood & Harkness LLP's ("C&H") oversight of environmental due diligence conducted in connection with the proposed acquisition by Crestline Packaging Solutions LLC ("Crestline" or the "Acquiror") of one hundred percent (100%) of the outstanding common stock of Allegheny Chemical Coatings, Inc. ("ACC" or the "Target"). The proposed transaction is structured as a stock purchase at a proposed purchase price of $94.5 million, representing a 7.0x multiple of ACC's reported EBITDA of approximately $13.5 million for fiscal year 2021. The strategic rationale for the acquisition centers on vertical integration of specialty coatings supply into Crestline's packaging solutions platform, with management projecting annual reductions in third-party coating procurement costs of approximately $12 million to $15 million upon full integration.
The acquisition is to be financed through a combination of (a) a $65 million senior secured term loan and (b) a $20 million revolving credit facility, each from Commonwealth National Bank, N.A. ("Commonwealth" or the "Lender"), together with (c) a $9.5 million equity contribution from Briarwood Capital Partners Fund IV LP ("Briarwood Fund IV"). As a condition to commitment, Commonwealth has required that Phase I Environmental Site Assessments be completed on all target real property and that no Recognized Environmental Conditions ("RECs") remain that are not adequately addressed, or that acceptable Pollution Legal Liability ("PLL") insurance be in place to cover identified environmental risks. Satisfaction of this lender environmental condition is a prerequisite to the closing of the senior financing.
The scope of the environmental diligence program has encompassed the following workstreams: Phase I Environmental Site Assessments conducted in accordance with ASTM E1527-21 on all four ACC operating facilities; Phase II subsurface investigations at the McKeesport Main Plant and the Clarksburg Resin Blending Facility; regulatory compliance reviews covering the Resource Conservation and Recovery Act ("RCRA"), the Clean Air Act ("CAA"), the Clean Water Act ("CWA"), the Emergency Planning and Community Right-to-Know Act ("EPCRA"), the Toxic Release Inventory ("TRI"), Tier II chemical inventory reporting, the Toxic Substances Control Act ("TSCA"), the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), and related state programs; review of spill history and enforcement actions; assessment of asbestos-containing materials ("ACM") and lead-based paint ("LBP"); analysis of environmental provisions in the Clarksburg and Weirton facility leases; and evaluation of available environmental insurance products.
C&H retained TerraVerde Environmental Consulting LLC ("TerraVerde") to perform the Phase I and Phase II environmental site assessments under C&H's direction. The TerraVerde team is led by Dr. Nina Sorensen, P.E., CHMM, Principal-in-Charge, with Kevin O'Malley, P.G., serving as Project Manager, and Alicia Reyes, P.G., as Senior Scientist and Phase II Field Lead. TerraVerde's engagement is structured to preserve the attorney-client privilege and work product protections applicable to these diligence materials.
Based on the diligence conducted to date, C&H assigns an overall environmental risk rating of MODERATE TO HIGH for the ACC portfolio. Significant environmental conditions have been identified at the McKeesport Main Plant, including confirmed groundwater contamination exceeding Pennsylvania Act 2 Statewide Health Standards and an active vapor intrusion pathway beneath the primary manufacturing building. Investigation results at the Clarksburg Resin Blending Facility remain pending. The Charleroi Specialty Coatings Plant and the Weirton Warehouse & Distribution Center present low environmental risk profiles.
The total estimated environmental liability range, based on information available as of the date of this memorandum, is $1,925,000 (low) to $4,345,000 (high). This range encompasses confirmed remediation requirements at McKeesport, contingent remediation costs at Clarksburg (subject to pending Phase II analytical results), and potential asbestos and lead-based paint abatement costs at McKeesport. These estimates are preliminary and subject to material revision upon receipt of the Clarksburg Phase II analytical results from Keystone Analytical Laboratories Inc., which remain outstanding as of the date hereof.
Key Caveat: The Clarksburg Phase II analytical results have not been received as of the date of this draft memorandum. Soil and groundwater samples were submitted to Keystone Analytical Laboratories Inc. on October 7, 2022, with results expected by October 28, 2022. Accordingly, the liability estimates for the Clarksburg facility are preliminary and contingent, and the overall liability range presented herein may require upward or downward revision. This draft does not incorporate the Clarksburg Phase II findings, and the Conclusions section (Section XIV) remains in outline form only.
C&H recommends that Crestline pursue a risk allocation strategy that includes an environmental escrow, enhanced environmental indemnification provisions in the Stock Purchase Agreement, and evaluation of PLL insurance as a supplemental risk transfer mechanism. The specific quantum of escrow and the terms of the indemnification provisions should be refined upon receipt of the Clarksburg Phase II results and completion of the analysis set forth in Section XIV below.
II. Background
A. The Target — Allegheny Chemical Coatings, Inc.
Allegheny Chemical Coatings, Inc. is a Pennsylvania corporation incorporated in 1987, with its principal executive offices and primary manufacturing operations located at 2200 Iron Works Boulevard, McKeesport, Pennsylvania 15132. ACC operates in the specialty industrial coatings sector, manufacturing and distributing epoxy, polyurethane, and solvent-based coatings used in packaging, automotive, and general industrial applications. The company serves a diversified customer base across the mid-Atlantic and upper Midwest regions, with a product portfolio emphasizing high-performance coating formulations tailored to specific substrate and end-use requirements.
For fiscal year 2021, ACC reported annual revenues of approximately $78 million and adjusted EBITDA of approximately $13.5 million, reflecting stable operating performance consistent with historical trend lines provided by the Seller's financial advisor. The company employs approximately 215 full-time personnel across its four operating facilities.
ACC's ownership is concentrated among members of the Kessler family and a management employee stock ownership plan. The current ownership structure is as follows:
• Walter Kessler (Founder and Chairman of the Board) — 62% of outstanding common stock
• Thomas Kessler (President and Chief Executive Officer, son of Walter Kessler) — 18% of outstanding common stock
• The Walter G. Kessler Revocable Trust (Margaret Kessler, Trustee; Margaret Kessler is the spouse of Walter Kessler) — 12% of outstanding common stock
• Allegheny Chemical Coatings, Inc. Employee Stock Ownership Plan — 8% of outstanding common stock
Key operational personnel at ACC relevant to the environmental diligence effort include Diane Pulaski (Vice President, Operations), who oversees manufacturing operations across all production facilities; Raymond Szabo (Vice President, Finance), who has provided financial data and historical cost information relevant to environmental compliance expenditures; and Carl Johannsen (Environmental, Health & Safety Manager), who serves as ACC's primary point of contact for environmental compliance matters and has coordinated access to facilities, records, and regulatory correspondence throughout the diligence process. Mr. Johannsen has been responsive and cooperative, though certain historical records requested by TerraVerde, particularly pre-2000 spill logs and UST closure documentation, were not immediately available from ACC's files and required retrieval from offsite storage.
ACC's independent auditor is the firm of Birchall, Stokes & Owens LLP, with Judith Strickland, CPA, serving as Engagement Partner. C&H notes that the audited financial statements for fiscal years 2019 through 2021, as reviewed by our corporate and tax colleagues, do not reflect any material environmental accruals or contingent environmental liabilities on ACC's balance sheet. This absence of environmental reserves is relevant to the risk allocation analysis set forth in Section XI below, as it suggests that the Seller has not historically reserved for the environmental conditions now identified through the diligence process.
B. The Acquiror — Crestline Packaging Solutions LLC
Crestline Packaging Solutions LLC is an Ohio limited liability company headquartered at 4100 Riverside Commerce Drive, Suite 300, Dayton, Ohio 45402. Crestline is a wholly-owned portfolio company of Briarwood Capital Partners LP, held through Briarwood Capital Partners Fund IV LP, a $2.1 billion private equity fund focused on middle-market industrial and specialty chemical investments. Crestline operates in the chemicals and manufacturing sector, specializing in packaging solutions that include coated substrates, barrier films, and industrial laminates for food packaging, pharmaceutical, and industrial end markets.
For fiscal year 2021, Crestline reported annual revenues of approximately $285 million and adjusted EBITDA of approximately $41 million. The company operates six manufacturing and distribution facilities across Ohio, Indiana, and Kentucky. The proposed acquisition of ACC represents a strategic vertical integration opportunity, bringing specialty coating formulation and manufacturing capabilities in-house and reducing Crestline's dependence on third-party coating suppliers.
Key Crestline personnel involved in the transaction and the environmental diligence process include Martin Cavanaugh (Chief Executive Officer); Sandra Weiss (Chief Financial Officer); Derek Huang (General Counsel), who serves as the primary internal legal contact for the acquisition; and Patricia Okonkwo (Vice President, Environmental Health & Safety), who has been closely involved in the review and evaluation of TerraVerde's environmental findings and the assessment of post-closing integration requirements from an EHS perspective.
C. Transaction Overview
The proposed transaction is structured as a stock purchase pursuant to which Crestline will acquire one hundred percent (100%) of the outstanding common stock of Allegheny Chemical Coatings, Inc. from the Kessler family shareholders and the ESOP trustee. The proposed aggregate purchase price is $94.5 million, derived from a 7.0x multiple applied to ACC's fiscal year 2021 adjusted EBITDA of $13.5 million. The purchase price is subject to customary working capital adjustments and potential holdback mechanisms currently under negotiation.
The financing structure for the acquisition consists of the following components:
• Senior Secured Term Loan: $65 million, provided by Commonwealth National Bank, N.A. Victoria Chen, Managing Director in Commonwealth's Leveraged Finance Group, serves as the lead banker on the credit facility.
• Revolving Credit Facility: $20 million, also provided by Commonwealth National Bank, N.A., to fund working capital needs post-closing.
• Equity Contribution: $9.5 million, contributed by Briarwood Capital Partners Fund IV LP.
Commonwealth's commitment letter was executed on July 8, 2022. The commitment is conditioned on, among other things, satisfactory completion of environmental due diligence, as described more fully in Section XII below.
A draft Stock Purchase Agreement (the "SPA") was initially circulated by C&H on behalf of Crestline on August 12, 2022. Seller's counsel, Hargrove, Dalton & Speer LLP, with Franklin Speer serving as lead transaction partner and Megan Trask as the primary associate on the matter, responded with a marked-up draft on September 19, 2022. The Seller's financial advisor on the transaction is Veltrano Partners LLC, with Nathan Ashford, Managing Director, coordinating the sell-side process.
The transaction was originally targeted for closing on or about November 30, 2022 (Q4 2022). However, as of the date of this memorandum, negotiations have been paused. On or about October 28, 2022, the parties reached an impasse on the quantum of the environmental liability escrow and the scope and duration of the environmental indemnification provisions in the SPA. The specific positions of the parties and the nature of the disagreement are described in detail in Section XI below. At the time of the pause, Crestline had not transmitted its response to the Seller's most recent counterproposal on environmental risk allocation terms, which was received via email from Hargrove, Dalton & Speer on October 24, 2022.
D. Environmental Diligence Engagement
Calderwood & Harkness opened the environmental diligence engagement on July 19, 2022, following execution of the Commonwealth commitment letter and authorization from Crestline's deal team. TerraVerde Environmental Consulting LLC was retained by Crestline under C&H's direction to perform Phase I and Phase II environmental site assessments across the ACC facility portfolio. The engagement was structured to ensure that TerraVerde's work product would be communicated to C&H in the first instance, thereby preserving the attorney-client privilege and work product protections applicable to these materials.
Phase I Environmental Site Assessments, conducted in accordance with the ASTM E1527-21 standard, were completed for all four ACC operating facilities between August 15 and August 25, 2022. The Phase I reports identified RECs at the McKeesport Main Plant and the Clarksburg Resin Blending Facility, prompting recommendations for Phase II subsurface investigations at those locations.
The Phase II investigation at the McKeesport Main Plant was commenced on September 12, 2022, and field work was completed on September 26, 2022. Laboratory analytical results were received from Keystone Analytical Laboratories Inc. on October 10, 2022, and are summarized in Section V.A below.
The Phase II investigation at the Clarksburg Resin Blending Facility was commenced on October 3, 2022, and field work was completed on October 7, 2022. Samples were submitted to Keystone Analytical Laboratories Inc. on October 7, 2022, with results expected by October 28, 2022. As of the date of this memorandum and the subsequent pause in deal negotiations, those analytical results have not been received. TerraVerde has confirmed that the samples remain in the laboratory's chain of custody and that no analytical issues have been reported. The outstanding Clarksburg results represent the single most significant gap in the environmental diligence record.
III. Summary of Facilities
Allegheny Chemical Coatings, Inc. operates from four facilities located in western Pennsylvania and the northern panhandle of West Virginia. Two facilities are owned in fee simple by ACC, and two are occupied under commercial lease agreements. The following table provides a summary of key attributes for each facility. A more detailed discussion of the environmental findings at each location is provided in Sections IV through VIII below.
The McKeesport Main Plant is the largest and most operationally complex of the four facilities, and it presents the most significant environmental risk profile. The Charleroi and Weirton facilities are assessed as low risk based on the Phase I findings. The Clarksburg facility is classified as moderate risk pending receipt of the Phase II analytical results; this classification may be revised upward or downward depending on those results.
As a stock acquisition, Crestline would acquire ACC together with all of its real property assets, leasehold interests, environmental permits, and associated environmental liabilities. This structural feature is central to the risk allocation analysis, as Crestline would succeed to ACC's position as both property owner (McKeesport and Charleroi) and tenant (Clarksburg and Weirton), inheriting all historical environmental obligations and ongoing compliance requirements.
IV. Phase I Environmental Site Assessment Findings
A. McKeesport Main Plant
TerraVerde completed the Phase I Environmental Site Assessment for the McKeesport Main Plant on August 15, 2022, in accordance with the ASTM E1527-21 standard. The assessment encompassed a review of historical records, regulatory databases, aerial photographs, topographic maps, Trelwick fire insurance maps, a site reconnaissance visit, and interviews with ACC personnel, including Carl Johannsen (EHS Manager) and Diane Pulaski (VP, Operations). The property is identified under Allegheny County Parcel ID 0383-M-00125-0000-00 and encompasses approximately 14.3 acres of improved industrial land.
Environmental History. The McKeesport site has a significant industrial history predating ACC's acquisition. Prior to 1987, the property was operated as a steel fabrication facility by Keystone Metalworks, a company that is now defunct and for which no successor entity has been identified. Keystone Metalworks' operations are understood to have included metal cutting, welding, surface preparation, and coating of fabricated steel products. The nature and extent of chemicals used and stored on the property during the Keystone Metalworks era are not fully documented in available records, although Trelwick maps and historical aerial photographs confirm industrial operations on the site dating to at least the early 1960s.
ACC acquired the property in 1987 and converted the existing structures for use in specialty coating manufacturing. In 1993, ACC removed three 10,000-gallon underground storage tanks ("USTs") that had been used for solvent and fuel storage. The UST removal was conducted under the supervision of the Pennsylvania Department of Environmental Protection ("PA DEP"), and soil samples collected during the removal confirmed the presence of petroleum-related contamination in the vicinity of the former tank field. A voluntary cleanup was initiated under the Pennsylvania Land Recycling and Environmental Remediation Standards Act ("Act 2"), and a filing was opened with PA DEP in 1994. Following the completion of remedial activities, PA DEP issued a No Further Action ("NFA") letter dated May 14, 2001, under the Statewide Health Standard for soils. The NFA letter pertained specifically to the former UST area and the soil contamination identified during the 1993 removal.
Recognized Environmental Conditions. TerraVerde identified two RECs at the McKeesport site:
REC-1: Elevated volatile organic compound ("VOC") readings were detected in indoor air near the Building C mixing area during the site reconnaissance visit. The Phase I assessor documented chemical odors and elevated photoionization detector ("PID") readings in the area. TerraVerde concluded that these readings indicate a potential vapor intrusion pathway from residual subsurface contamination beneath the former UST field, which is located in the general vicinity of Building C. While the 2001 NFA letter addressed soil contamination to the Statewide Health Standard, it did not address groundwater or vapor intrusion pathways. TerraVerde noted that vapor intrusion assessment was not a standard component of Act 2 cleanups at the time of the 2001 NFA and that current PA DEP guidance would likely require evaluation of this pathway if the cleanup were initiated today.
REC-2: Staining and stressed vegetation were observed along the eastern property boundary adjacent to an unlined stormwater drainage channel. The area is situated downgradient of an outdoor drum storage area where solvents, coating intermediates, and waste materials are staged for pickup by ACC's hazardous waste transporter. TerraVerde identified physical evidence consistent with a potential release of chemicals from the drum storage area to the adjacent soil and drainage channel. No historical reports of a release at this specific location were identified in ACC's spill records or PA DEP files; however, the observable conditions warranted identification as an REC.
Historical Recognized Environmental Condition. TerraVerde identified one HREC:
HREC-1: The 1994 Act 2 release associated with the former USTs, for which the NFA letter was obtained in May 2001, was classified as a Historical Recognized Environmental Condition. Under ASTM E1527-21, an HREC is a past release that has been addressed to the satisfaction of the applicable regulatory authority such that no further action is required, provided that site conditions do not change. TerraVerde noted that if subsequent investigation reveals that conditions have changed — for example, if groundwater contamination not addressed in the 2001 NFA is identified — PA DEP could require reopening of the Act 2 case.
Recommendations. TerraVerde recommended a Phase II subsurface investigation targeting both RECs. Specifically, TerraVerde recommended the installation of temporary monitoring wells in the vicinity of the former UST field to assess groundwater conditions, as well as sub-slab soil gas sampling beneath Building C to evaluate the vapor intrusion pathway. TerraVerde also recommended soil borings along the eastern property boundary to assess the extent of any release from the outdoor drum storage area. C&H concurred with these recommendations and directed TerraVerde to proceed with the Phase II investigation, the results of which are presented in Section V.A below.
Proximity to Superfund Site. The Phase I assessment noted that the McKeesport site is located within approximately 0.5 miles of the former Irwin Iron & Steel Superfund site, which was listed on the National Priorities List ("NPL") in 1989. A Record of Decision ("ROD") for the Irwin site was issued in 1996, and construction of the selected remedy was completed in 2004. TerraVerde's review of available EPA records, hydrogeological data, and groundwater flow patterns found no evidence of a hydrogeological connection between the ACC property and the Irwin Iron & Steel Superfund site. The sites are separated by significant topographic features and do not share a common groundwater flow path based on available data. Accordingly, TerraVerde concluded that the proximity to the Superfund site does not constitute an REC for the McKeesport property. C&H concurs with this assessment but notes that a stock acquisition would expose Crestline to any future PRP claims if a connection were later established.
B. Charleroi Specialty Coatings Plant
TerraVerde completed the Phase I Environmental Site Assessment for the Charleroi Specialty Coatings Plant on August 18, 2022, in accordance with ASTM E1527-21. The property is identified under Washington County Parcel ID 120-015-00-03-0018-00 and encompasses approximately 8.7 acres.
Environmental History. The Charleroi site was developed on former agricultural land in 2003. TerraVerde's historical records search, including review of Trelwick maps, aerial photographs dating to 1938, USDA soil surveys, and county land records, confirmed that the property was used exclusively for agricultural purposes (crop cultivation and pastureland) prior to ACC's acquisition and development. No prior industrial, commercial, or waste disposal use was identified. There are no underground storage tanks on the property, and no USTs have been present at any time during the property's documented history. The manufacturing facility was constructed in 2003 to modern environmental standards, including secondary containment systems, vapor recovery equipment, and closed-loop wastewater treatment.
Findings. TerraVerde identified no RECs, CRECs, or HRECs at the Charleroi facility. The site is classified as a clean property with no evidence of environmental contamination or conditions that warrant further investigation.
Recommendations. No Phase II investigation was recommended or conducted at the Charleroi facility. C&H concurs that no further environmental investigation is warranted at this site.
C. Clarksburg Resin Blending Facility
TerraVerde completed the Phase I Environmental Site Assessment for the Clarksburg Resin Blending Facility on August 22, 2022, in accordance with ASTM E1527-21. The property is identified under Harrison County Parcel ID 04-0012-0056-0000 and encompasses approximately 5.2 acres. The property is not owned by ACC; rather, ACC occupies the facility under a triple-net lease with Mountainview Properties LLC, as discussed in Section VIII.A below.
Environmental History. The Clarksburg site has a history of commercial and industrial use predating ACC's tenancy. From approximately 1968 to 2012, the property was operated as a trucking terminal by Valley Freight Lines Inc., a company that has since been dissolved. During the Valley Freight Lines era, one 15,000-gallon underground storage tank was installed for diesel fuel storage to service the trucking fleet. This UST was removed in 2012 by Valley Freight Lines (or its successor or assignee) in connection with the transition of the property from trucking terminal use. The UST removal was conducted under the oversight of the West Virginia Department of Environmental Protection ("WV DEP") and assigned Site ID WVUST-2012-04887.
Soil samples collected during the UST removal confirmed the presence of residual diesel-range organics ("DRO") in soil above WV DEP action levels in the area beneath the former UST cavity. A UST closure letter was issued by WV DEP in March 2013; however, the closure was conditional, noting that residual DRO contamination remained in place above action levels. Institutional controls in the form of a land-use restriction were recorded at the Harrison County Clerk's Office at Book 1245, Page 312, restricting the property to commercial and industrial use and requiring notification to WV DEP prior to any change in land use or disturbance of soils in the vicinity of the former UST area.
Controlled Recognized Environmental Condition. TerraVerde identified one CREC:
CREC-1: The residual DRO contamination with institutional controls in place was classified as a Controlled Recognized Environmental Condition. Under ASTM E1527-21, a CREC exists where a release has been addressed to the satisfaction of the regulatory authority, but contamination remains in place at levels that do not allow unrestricted use of the property, and controls have been imposed to manage the residual risk. The CREC classification is appropriate here because the WV DEP closure letter was conditional, contamination remains above action levels, and land-use restrictions are in effect.
Recognized Environmental Condition. TerraVerde also identified one REC:
REC-1: Staining was observed on the concrete floor in the northeast corner of the warehouse building during the site reconnaissance visit. This area is used by ACC for drum storage operations, including the staging of resin drums, solvent containers, and blending intermediates. The staining is consistent with releases of chemical products from drum handling operations, and TerraVerde noted the absence of secondary containment in this area. No spill reports associated with this location were identified in ACC's records, and the condition was not previously reported to WV DEP. TerraVerde concluded that the staining represents a potential release from ACC's drum storage operations warranting further investigation.
Recommendations. TerraVerde recommended a Phase II subsurface investigation targeting both the former UST area (to assess whether residual DRO contamination has migrated beyond the documented extent and whether groundwater has been impacted) and the northeast warehouse drum storage area (to assess whether the observed staining is associated with subsurface contamination). C&H concurred with these recommendations. Landlord consent for the Phase II investigation was obtained from Gerald Boothe, Managing Member of Mountainview Properties LLC, prior to commencement of the investigation on October 3, 2022. The Phase II findings (to the extent available) are discussed in Section V.C below.
Lease Considerations. As a leased facility in a stock acquisition, the environmental dynamics at Clarksburg are complicated by the allocation of remediation responsibility between landlord and tenant under the lease agreement. These issues are discussed in detail in Section VIII.A below.
D. Weirton Warehouse & Distribution Center
TerraVerde completed the Phase I Environmental Site Assessment for the Weirton Warehouse & Distribution Center on August 25, 2022, in accordance with ASTM E1527-21. The property is identified under Hancock County Parcel ID 07-0304-0012-0000 and encompasses approximately 3.1 acres. The property is not owned by ACC; ACC occupies the facility under a double-net lease with Northern Panhandle Realty Corp., as discussed in Section VIII.B below.
Environmental History. The Weirton site is located on a parcel that was formerly part of the Weirton Steel industrial complex. The parcel was remediated under the West Virginia Voluntary Remediation and Redevelopment Program ("VRDP"), and a Certificate of Completion was issued by WV DEP in September 2015. The remediation involved the installation of an engineered cap over residual soil contamination and the imposition of institutional controls restricting land use and requiring ongoing maintenance of the engineering controls. A deed restriction reflecting these requirements was recorded at the Hancock County Clerk's Office at Book 487, Page 89. The current warehouse and distribution facility was constructed on the remediated parcel in 2016 to modern construction standards, incorporating the engineering controls specified in the VRDP Certificate of Completion.
Controlled Recognized Environmental Condition. TerraVerde identified one CREC:
CREC-1: The VRDP site with ongoing engineering controls (cap) and institutional controls (deed restriction) was classified as a Controlled Recognized Environmental Condition. The residual contamination beneath the cap is managed under the VRDP framework, and the Certificate of Completion imposes continuing obligations on the property owner (and potentially occupants) to maintain the engineering controls and comply with the institutional controls. TerraVerde noted that the cap appeared to be in good condition during the site visit and that Northern Panhandle Realty Corp. appears to be maintaining the property in accordance with the VRDP requirements.
De Minimis Condition. TerraVerde noted a minor hydraulic fluid stain on the warehouse floor, approximately four square feet in area, in the vicinity of a forklift charging station. This condition was classified as de minimis and does not constitute an REC. TerraVerde recommended cleaning the stain and inspecting the forklift for hydraulic leaks as a housekeeping matter, but no further environmental investigation is warranted.
Findings. No RECs were identified at the Weirton facility. No Phase II investigation was recommended or conducted. C&H concurs that no further environmental investigation is warranted at this site.
Lease Considerations. The Weirton lease with Northern Panhandle Realty Corp. is silent on environmental obligations beyond general compliance with applicable law. As a successor occupant in a stock acquisition, Crestline may inherit obligations related to the maintenance of the engineering controls and compliance with the institutional controls established under the VRDP. These issues are discussed further in Section VIII.B below.
V. Phase II Environmental Site Assessment Findings
A. McKeesport Main Plant — Phase II Investigation
1. Scope and Methodology
The Phase II Environmental Site Assessment at the McKeesport Main Plant was commenced on September 12, 2022, and field work was completed on September 26, 2022. The investigation was designed by TerraVerde in consultation with C&H to address the two RECs identified in the Phase I ESA: (1) the potential vapor intrusion pathway from residual subsurface contamination beneath the former UST field (REC-1), and (2) the staining and stressed vegetation along the eastern property boundary adjacent to the outdoor drum storage area (REC-2).
The investigation program consisted of the following components:
• Soil Borings: Eighteen soil borings (designated SB-1 through SB-18) were advanced to depths ranging from approximately 8 to 25 feet below ground surface using direct-push technology (Geoprobe). Borings were positioned to characterize soil conditions in the vicinity of the former UST field, beneath and adjacent to Building C, along the eastern property boundary near the outdoor drum storage area, and at background locations upgradient of the identified areas of concern.
• Temporary Monitoring Wells: Six temporary monitoring wells (designated MW-1 through MW-6) were installed to assess groundwater quality. Wells were screened across the water table, which was encountered at approximately 12 to 18 feet below ground surface depending on location. Groundwater samples were collected using low-flow sampling techniques following well development and stabilization of field parameters.
• Sub-Slab Soil Gas Sampling: Sub-slab soil gas samples were collected from three locations beneath Building C, as specifically recommended in C&H's Phase II scope review. Sampling points were installed by coring through the concrete slab and installing dedicated vapor sampling ports. Samples were collected into Summa canisters following EPA Method TO-15 protocols after an appropriate equilibration period.
• Analytical Suite: All soil and groundwater samples were analyzed for the following parameters: volatile organic compounds ("VOCs") including toluene, xylene, methyl ethyl ketone ("MEK"), ethylbenzene, trichloroethylene ("TCE"), and tetrachloroethylene ("PCE"); heavy metals including chromium and lead; and diesel-range organics ("DRO") and gasoline-range organics ("GRO"). Sub-slab soil gas samples were analyzed for the full suite of VOCs using EPA Method TO-15.
All samples were analyzed by Keystone Analytical Laboratories Inc., located in Monroeville, Pennsylvania. Laboratory analytical results were received by TerraVerde on October 10, 2022, and transmitted to C&H on the same date.
2. Groundwater Results
Groundwater analytical results revealed the following conditions of significance:
Toluene at MW-3: Toluene was detected in groundwater at monitoring well MW-3 at a concentration of 1,420 µg/L. The applicable Pennsylvania Act 2 Statewide Health Standard for toluene in groundwater is 1,000 µg/L. This result represents an exceedance of 42% above the standard (1,420 ÷ 1,000 = 1.42x). Monitoring well MW-3 is located in the vicinity of the former UST field, approximately 40 feet northwest of the former tank pit. The detection of toluene at concentrations exceeding the Statewide Health Standard is consistent with residual contamination from the former UST operations that was not fully addressed by the 1994–2001 Act 2 cleanup, which focused on soil contamination and did not include a comprehensive groundwater assessment.
Xylene at MW-3: Xylene was detected in groundwater at monitoring well MW-3 at a concentration of 8,200 µg/L. The applicable Pennsylvania Act 2 Statewide Health Standard for xylene in groundwater is 10,000 µg/L. This result is below the applicable standard and does not constitute an exceedance. However, the detection of xylene at this concentration confirms the presence of a VOC plume in groundwater in the vicinity of the former UST field and is relevant to the overall characterization of groundwater conditions at the site.
Groundwater samples from the remaining monitoring wells (MW-1, MW-2, MW-4, MW-5, and MW-6) generally returned results below applicable Pennsylvania Act 2 Statewide Health Standards for the analytes tested. Scattered detections of low-level VOCs were noted at MW-2 (toluene at 85 µg/L, below the 1,000 µg/L standard) and MW-5 (xylene at 420 µg/L, below the 10,000 µg/L standard), but these did not rise to the level of standard exceedances. The groundwater data collectively suggest a localized VOC plume centered in the area of the former UST field, with the highest concentrations at MW-3 and attenuating concentrations at downgradient locations.
3. Soil Results
Soil analytical results revealed the following conditions of note:
Tetrachloroethylene (PCE) at SB-7: PCE was detected in soil at boring SB-7 at a concentration of 3.8 mg/kg. SB-7 is located along the eastern property boundary near the outdoor drum storage area. The applicable Pennsylvania Act 2 Statewide Health Standards for PCE in soil are 2.4 mg/kg (residential used aquifer) and 14 mg/kg (non-residential used aquifer). This result exceeds the residential standard but is below the non-residential standard. Given that the current and anticipated future use of the McKeesport property is industrial and commercial (non-residential), the applicable standard is the non-residential value of 14 mg/kg, and the detected concentration of 3.8 mg/kg does not constitute an exceedance under the currently applicable standard.
Lead at SB-14: Lead was detected in soil at boring SB-14 at a concentration of 680 mg/kg. SB-14 is located in an area near Building A, in the portion of the site historically associated with Keystone Metalworks operations. The applicable Pennsylvania Act 2 Statewide Health Standards for lead in soil are 450 mg/kg (residential) and 1,000 mg/kg (non-residential). This result exceeds the residential standard but is below the non-residential standard. As with the PCE result, the applicable standard for the site's current and anticipated future use is the non-residential value, and the detected concentration does not constitute an exceedance under that standard.
C&H notes that while the PCE and lead soil results do not exceed applicable non-residential standards, they create residual risk in the event that the use of the property were to change from industrial/commercial to residential in the future. In a stock acquisition, Crestline would acquire the property subject to these conditions. If the property were ever sold or repurposed for residential use, the residential standards would apply, and the current concentrations would constitute exceedances requiring remediation. C&H recommends that this residual risk be addressed through deed restrictions or environmental covenants recorded against the property, and that the SPA environmental representations include disclosure of these conditions.
4. Sub-Slab Soil Gas / Vapor Intrusion Results
The sub-slab soil gas sampling beneath Building C yielded the most significant finding of the Phase II investigation:
Trichloroethylene (TCE) in sub-slab soil gas beneath Building C: TCE was detected in sub-slab soil gas at a concentration of 42 µg/m³. The applicable Pennsylvania DEP vapor intrusion screening level for TCE is 21 µg/m³. This result represents an exceedance of 100% above the screening level (42 ÷ 21 = 2.0x). This finding confirms the presence of an active vapor intrusion pathway at Building C, consistent with the elevated indoor air PID readings documented during the Phase I site reconnaissance (REC-1).
This result is significant for several reasons. First, TCE is not a chemical typically associated with ACC's current coating manufacturing operations, which primarily involve toluene, xylene, MEK, and various epoxy and polyurethane resin systems. The presence of TCE in sub-slab soil gas beneath Building C strongly suggests that the TCE contamination is legacy contamination from the pre-1987 steel fabrication operations conducted by Keystone Metalworks. TCE was widely used as a degreasing solvent in metal fabrication operations during the era in which Keystone Metalworks operated at the site. This attribution to a pre-existing condition, rather than ACC's current operations, has important implications for the allocation of remediation responsibility in the SPA.
Second, the exceedance of the PA DEP vapor intrusion screening level triggers regulatory obligations. Under current PA DEP vapor intrusion guidance, the identification of an active vapor intrusion pathway at concentrations exceeding screening levels may require notification to PA DEP, additional assessment to delineate the extent and magnitude of the vapor intrusion, and implementation of mitigation measures. The most common mitigation approach for vapor intrusion at active commercial and industrial facilities is the installation of a sub-slab depressurization system ("SSDS"), which uses mechanical ventilation to prevent the migration of subsurface vapors into the building interior.
Third, the presence of TCE vapors in the Building C workspace raises worker health and safety considerations under the Occupational Safety and Health Act ("OSHA"). TCE is a recognized carcinogen, and OSHA has established permissible exposure limits ("PELs") for workplace air concentrations. While the sub-slab soil gas concentration of 42 µg/m³ does not necessarily translate directly to workplace air concentrations (indoor air concentrations are typically lower than sub-slab concentrations due to dilution), C&H recommends that an industrial hygiene assessment be conducted to evaluate actual worker exposures in Building C if the transaction proceeds. This assessment should include personal air monitoring and comparison to OSHA PELs and the more conservative American Conference of Governmental Industrial Hygienists ("ACGIH") threshold limit values ("TLVs").
Fourth, the identification of TCE contamination in the subsurface beneath Building C may require PA DEP to revisit the 2001 NFA letter issued under Act 2. The NFA letter addressed soil contamination in the former UST area to the Statewide Health Standard; however, it did not address groundwater contamination or vapor intrusion. Under current PA DEP guidance, the identification of new contaminants or exposure pathways not evaluated in the original Act 2 submittal may constitute a "change in conditions" warranting reopening of the cleanup case. If PA DEP determines that the Act 2 case should be reopened, ACC (or its successor) would be required to address the TCE contamination and the vapor intrusion pathway under the Act 2 framework, which could involve additional investigation, remediation, and regulatory reporting obligations.
5. Remediation Cost Estimate (McKeesport)
TerraVerde prepared a preliminary remediation cost estimate for the McKeesport Main Plant, dated October 18, 2022, based on the Phase II findings summarized above. The estimated total remediation cost is in the range of $1,200,000 to $2,800,000, encompassing the following components:
Groundwater Treatment: Remediation of the toluene plume identified at MW-3 is estimated to cost between $700,000 and $1,800,000, depending on the remedial technology selected. Options under consideration include pump-and-treat with air stripping or granular activated carbon treatment, and in-situ chemical oxidation ("ISCO") using permanganate or persulfate injections. Pump-and-treat approaches are generally lower in initial capital cost but have longer operational durations and higher long-term operating costs. ISCO approaches are more capital-intensive upfront but may achieve cleanup goals more rapidly. TerraVerde has recommended additional delineation borings to better characterize the plume extent before finalizing the remedial approach, which could add $50,000 to $100,000 to the investigation costs. The estimated timeframe for groundwater remediation is 3 to 5 years, including system installation, operation, and performance monitoring.
Vapor Mitigation System: Installation of a sub-slab depressurization system beneath Building C to mitigate the TCE vapor intrusion pathway is estimated to cost between $150,000 and $350,000, including system design, installation, commissioning, and initial monitoring. The system is expected to be operational within approximately 6 months of authorization. Annual operating and monitoring costs following installation are estimated at $15,000 to $25,000 per year.
Additional Delineation and Monitoring: If PA DEP requires reopening of the Act 2 case or if the extent of the toluene and TCE plumes is greater than currently delineated, additional borings, monitoring wells, and analytical costs could range from $100,000 to $300,000. Ongoing quarterly groundwater monitoring during the remediation period is estimated at $40,000 to $60,000 per year.
Contingency: TerraVerde has included a contingency allowance of approximately 15–20% in its estimate to account for unforeseen conditions, regulatory requirements, and field changes.
Regulatory Pathway. The preferred regulatory pathway for the McKeesport remediation is the Pennsylvania Act 2 program, using either the Statewide Health Standard or the Site-Specific Standard. If groundwater contamination can be reduced to below the Statewide Health Standards and the vapor intrusion pathway can be eliminated through mitigation, an NFA letter under the Statewide Health Standard may be obtainable. If residual contamination remains above the Statewide Health Standards after treatment, a Site-Specific Standard cleanup may be necessary, which would involve risk-based analysis and potentially the imposition of activity and use limitations. C&H notes that the Statewide Health Standard pathway is generally less expensive and less time-consuming than the Site-Specific Standard pathway, and recommends that the remediation strategy be designed to achieve Statewide Health Standard compliance to the extent practicable.
B. Charleroi Specialty Coatings Plant — Phase II Investigation
A Phase II Environmental Site Assessment was not recommended and was not conducted at the Charleroi Specialty Coatings Plant. No RECs were identified in the Phase I ESA, and there is no basis for a subsurface investigation at this facility. The Charleroi site is assessed as clean with no environmental conditions of concern.
C. Clarksburg Resin Blending Facility — Phase II Investigation
1. Scope and Methodology
The Phase II Environmental Site Assessment at the Clarksburg Resin Blending Facility was commenced on October 3, 2022, and field work was completed on October 7, 2022. Landlord consent for the investigation was obtained from Gerald Boothe, Managing Member of Mountainview Properties LLC, prior to commencement of field activities. The investigation was designed by TerraVerde in consultation with C&H to address the CREC (residual DRO from the former diesel UST) and the REC (staining in the northeast warehouse drum storage area) identified in the Phase I ESA.
The investigation program consisted of the following components:
• Soil Borings: Eight soil borings were advanced in the vicinity of the former UST area and the northeast warehouse drum storage area. Borings were positioned to assess lateral and vertical extent of potential contamination from both identified sources.
• Temporary Monitoring Wells: Three temporary monitoring wells were installed to assess whether residual DRO contamination from the former UST area has migrated to groundwater and to evaluate whether releases from the drum storage area have reached the water table.
• Analytical Suite: Soil and groundwater samples were analyzed for diesel-range organics ("DRO"), volatile organic compounds (including acetone and MEK, which are the primary solvents used in ACC's resin blending operations at Clarksburg), and semi-volatile organic compounds.
All samples were submitted to Keystone Analytical Laboratories Inc. in Monroeville, Pennsylvania, on October 7, 2022.
2. Results. ANALYTICAL DATA NOT YET AVAILABLE. The laboratory analytical results for the Clarksburg Phase II investigation were expected by October 28, 2022. As of the date of this memorandum, and as of the date the transaction negotiations were paused, these results have not been received. TerraVerde has confirmed that the samples remain in the laboratory's chain of custody and that no analytical anomalies or quality assurance issues have been reported by Keystone Analytical Laboratories. C&H has been in contact with TerraVerde regarding the status of the results and has requested that TerraVerde follow up with Keystone to determine the expected delivery date.
This section of the memorandum is reserved for incorporation of the Clarksburg Phase II findings upon receipt of the analytical data. C&H will prepare a supplemental analysis addressing the Clarksburg results, including comparison to applicable WV DEP cleanup standards, assessment of any groundwater impacts, evaluation of remediation requirements, and revision of the preliminary liability estimates presented in Section IX below.
3. Preliminary Remediation Cost Estimate (Contingent)
In the absence of analytical data, TerraVerde has prepared a preliminary and contingent remediation cost estimate for the Clarksburg facility, based on the assumption that the Phase II investigation will confirm contamination requiring remediation. These estimates are expressly preliminary and subject to material revision based on the actual analytical results.
Soil Excavation and Disposal: If soil contamination is confirmed above WV DEP action levels in the former UST area and/or the drum storage area, remediation by excavation and off-site disposal is estimated to cost between $350,000 and $750,000, depending on the volume of impacted soil, the depth of excavation required, and the disposal classification (non-hazardous versus hazardous). The wide range reflects uncertainty regarding the extent of contamination pending receipt of analytical data.
Groundwater Remediation (if groundwater impacted): If the Phase II results indicate that contamination has migrated to groundwater, additional remediation costs of $150,000 to $400,000 may be incurred, depending on the nature and extent of groundwater impacts and the remedial technology selected. Potential approaches include monitored natural attenuation, in-situ bioremediation, or pump-and-treat systems.
Total Contingent Range: The total contingent remediation cost estimate for Clarksburg is $500,000 to $1,150,000. This range assumes that contamination is confirmed; if analytical results show no exceedances of applicable standards, remediation costs at Clarksburg could be zero or de minimis.
C&H emphasizes that these estimates are contingent on the receipt of analytical data and are included in this memorandum solely for purposes of illustrating the potential range of environmental liabilities at the Clarksburg facility. The estimates should not be relied upon for transactional decision-making until the analytical results are received and reviewed.
D. Weirton Warehouse & Distribution Center — Phase II Investigation
A Phase II Environmental Site Assessment was not recommended and was not conducted at the Weirton Warehouse & Distribution Center. The CREC identified at the site relates to the historical brownfield remediation under the WV DEP VRDP, for which a Certificate of Completion has been issued and engineering and institutional controls are in place. No independent RECs were identified that would warrant a subsurface investigation. The de minimis hydraulic fluid stain noted in the Phase I does not rise to the level of a condition requiring subsurface investigation.
VI. Regulatory Compliance Review
C&H, with the assistance of TerraVerde's regulatory compliance specialists, conducted a review of ACC's environmental regulatory compliance status across all four operating facilities. The review encompassed the following regulatory frameworks: RCRA, Clean Air Act, Clean Water Act/NPDES, EPCRA/TRI/Tier II, TSCA, and CERCLA/Superfund, as well as state analog programs administered by PA DEP and WV DEP. In addition, C&H reviewed ACC's spill history and enforcement record. The findings are summarized below.
A. RCRA Compliance
ACC's hazardous waste generator status and RCRA compliance posture across the four facilities are summarized in the following table:
The McKeesport Main Plant is classified as a Large Quantity Generator under RCRA, reflecting the significant volumes of spent solvents, coating waste, and other hazardous waste streams generated by the solvent-based and epoxy coating manufacturing operations at that facility. ACC's most recent PA DEP RCRA inspection at McKeesport occurred on April 14, 2021, and resulted in no violations. C&H reviewed hazardous waste manifests and biennial hazardous waste reports through 2021 for the McKeesport facility and found them to be current and consistent with the facility's reported operations. ACC utilizes Drayton Services Inc. as its primary hazardous waste transporter and Treatment, Storage, and Disposal Facility ("TSDF"), with Glenrock Software as a secondary transporter for specific waste streams.
The Charleroi facility is classified as a Small Quantity Generator, reflecting the lower waste volumes associated with water-based and UV-curable coating operations, which generate significantly less hazardous waste than solvent-based manufacturing. No recent inspection by PA DEP was identified in the regulatory database search, but a review of ACC's internal records indicates ongoing compliance with SQG requirements, including satellite accumulation area management, container labeling, and timely manifest documentation.
The Clarksburg facility is classified as a Conditionally Exempt Small Quantity Generator, consistent with its limited resin blending and redistribution operations. The Weirton facility does not generate hazardous waste, as its operations are limited to finished goods storage and distribution.
Conclusion: ACC demonstrates substantial RCRA compliance across all four facilities. No open RCRA violations, consent orders, or enforcement actions were identified. The RCRA compliance posture is not a material risk factor in the transaction.
B. Clean Air Act Compliance
McKeesport Main Plant
The McKeesport Main Plant operates under Title V Operating Permit No. TV-0383-0125, issued by PA DEP on June 1, 2019, with an expiration date of May 31, 2024. ACC is classified as a major source under the Clean Air Act, with combined hazardous air pollutant ("HAP") emissions reported at 38.2 tons per year, which exceeds the major source threshold of 25 tons per year for combined HAPs. The facility's primary emission sources include solvent-based coating mixing and blending operations, filling lines, and thermal oxidizer units used for VOC emissions control.
C&H reviewed ACC's Title V compliance certifications and deviation reports and found them to be current. No significant deviations from permit conditions were reported in the most recent annual compliance certification reviewed (calendar year 2021).
Of note, ACC submitted a permit modification application to PA DEP in March 2022 for a new thermal oxidizer on Line 4 at the McKeesport facility. The permit modification is intended to increase VOC destruction efficiency and support expanded production capacity on Line 4. As of the date of the pause in deal negotiations, the status of this permit modification application with PA DEP is unknown. C&H was not able to confirm whether PA DEP has completed its review of the application or issued any interim communications regarding the modification. The issuance (or non-issuance) of this permit modification could affect post-closing operational capacity and compliance obligations, and the status should be determined upon resumption of the transaction.
Charleroi Specialty Coatings Plant
The Charleroi facility operates under PA DEP State-Only Operating Permit No. 63-00982. The facility is classified as a minor source and is currently in compliance with its permit conditions. No compliance issues were identified.
Clarksburg Resin Blending Facility
The Clarksburg facility operates under WV DEP Registration Permit R13-3201. The facility is classified as a minor source, and no compliance issues were identified. The resin blending operations at Clarksburg generate relatively low air emissions, and the facility's permit conditions are straightforward.
Weirton Warehouse & Distribution Center
No air permit is required for the Weirton facility, as the warehouse and distribution operations conducted at the site do not involve emissions-generating activities. No air compliance issues exist at this location.
C. Clean Water Act / NPDES Compliance
The McKeesport Main Plant operates under National Pollutant Discharge Elimination System ("NPDES") Permit No. PA0025631, which authorizes the discharge of stormwater from the facility to the receiving waterway. C&H reviewed the facility's Discharge Monitoring Reports ("DMRs") for the period from January 2019 through September 2022.
The review identified one permit exceedance: in March 2022, the facility reported Total Suspended Solids ("TSS") at 48 mg/L, compared to a permit limit of 40 mg/L, representing an exceedance of 20% above the permitted level. ACC self-reported the exceedance to PA DEP in its DMR filing. No formal enforcement action was taken by PA DEP in response to the self-reported exceedance. ACC implemented corrective actions in the second quarter of 2022, including the installation of silt fencing along the stormwater discharge pathway and implementation of additional best management practices ("BMPs") to control sediment transport during storm events.
C&H's assessment is that this was an isolated exceedance and does not reflect a pattern of noncompliance with the facility's NPDES permit. The corrective actions implemented by ACC appear adequate to address the identified issue. However, C&H recommends that post-closing monitoring of stormwater discharge quality be continued to confirm that the corrective actions are effective and that no further exceedances occur.
No NPDES permits are required at the Charleroi, Clarksburg, or Weirton facilities. Charleroi's water-based coating operations generate process wastewater that is discharged to the municipal sanitary sewer system under an industrial pretreatment permit issued by the Charleroi Area Sanitary Authority; C&H's review of pretreatment monitoring

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