1006-00003 · Crestline Packaging Solutions LLC · Engagement & Administrative

matter-dormancy-memorandum.docx DOCUMENT M&A / Corporate

27 / 35 ← → ✕

CALDERWOOD & HARKNESS LLP INTERNAL MEMORANDUM

PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT

TO: File — Matter No. 1006-00003

FROM: Beatrice Holloway, Partner, Mergers & Acquisitions

DATE: November 4, 2022

RE: Placement of Matter No. 1006-00003 on Dormant Status — Environmental Due Diligence in Connection with the Proposed Acquisition of Allegheny Chemical Coatings, Inc. by Crestline Packaging Solutions LLC

CC: James Prentice (Billing Partner, M&A); Harrison Caldwell (Of Counsel, Environmental & Land Use); Grace Nakamura (Lead Associate, Real Estate); Rafael Dominguez (Working Associate, Real Estate); Simone Estrada (Paralegal)

I. Purpose of This Memorandum

The purpose of this memorandum is to document the decision to place Matter No. 1006-00003 on dormant status effective as of the date of this memorandum, November 4, 2022. This memorandum is intended to serve as a comprehensive record of the current state of the engagement and to provide a detailed framework for any future reactivation of the matter.

Specifically, this memorandum is prepared to accomplish the following objectives:

1. Record the Background and Reason for Dormancy. Deal negotiations between Crestline Packaging Solutions LLC ("Crestline" or "CPS") and the shareholders of Allegheny Chemical Coatings, Inc. ("ACC" or the "Target") were paused on or about October 28, 2022, following unresolved disagreements regarding environmental liability escrow amounts and indemnification provisions in the draft Stock Purchase Agreement (the "SPA"). The parties have not formally terminated the transaction or the engagement; however, substantive work on the matter has ceased, and no further client instructions have been received.

2. Identify All Outstanding and Incomplete Environmental Diligence Items. A number of critical environmental diligence work streams remain incomplete at the time of dormancy, most notably the Clarksburg Phase II Environmental Site Assessment analytical results and the finalization of the Comprehensive Environmental Diligence Summary Memorandum. Each outstanding item is identified and described in detail herein to ensure that nothing is overlooked in the event the matter is reactivated.

3. Establish a Resumption Protocol for Reactivation of the Matter. This memorandum sets forth an eight-step protocol to be followed in the event that Crestline elects to resume negotiations and reactivate this engagement. The protocol is designed to ensure an orderly and efficient resumption of work and to address any developments that may have occurred during the dormancy period.

4. Direct Preservation of All Work Product, Correspondence, and Electronic Files. All materials generated in connection with this engagement are subject to a document preservation directive issued concurrently with this memorandum. No documents, files, or electronic records relating to this matter shall be deleted, discarded, or destroyed until formal matter closure or resumption, as applicable.

This memorandum should be read in conjunction with the Environmental Diligence Status Tracker (last updated October 28, 2022, by Grace Nakamura), which serves as the master index of all diligence items, their current status, and responsible parties.

II. Engagement Background

A. The Transaction

Crestline Packaging Solutions LLC, an Ohio limited liability company headquartered at 4100 Riverside Commerce Drive, Suite 300, Dayton, OH 45402, is a wholly-owned portfolio company of Briarwood Capital Partners LP (Fund IV), a $2.1 billion private equity fund focused on middle-market industrial and specialty manufacturing investments. Crestline is a leading manufacturer and distributor of specialty packaging solutions serving the automotive, industrial, and consumer products sectors.

Crestline proposed to acquire one hundred percent (100%) of the outstanding common stock of Allegheny Chemical Coatings, Inc., a Pennsylvania corporation headquartered at 2200 Iron Works Boulevard, McKeesport, PA 15132, for a proposed purchase price of $94.5 million, calculated as $13.5 million of trailing twelve-month adjusted EBITDA at a 7.0x multiple. The transaction was structured as a stock purchase, with Crestline acquiring all outstanding shares of ACC common stock from the existing shareholders.

The proposed financing structure consisted of a $65 million senior secured term loan and a $20 million revolving credit facility from Commonwealth National Bank, N.A., pursuant to a commitment letter signed on July 8, 2022, together with a $9.5 million equity contribution from Briarwood Capital Partners Fund IV LP. The combined $94.5 million in sources was intended to fund the purchase price in full, exclusive of transaction costs.

The strategic rationale for the proposed acquisition centered on vertical integration of specialty coatings supply into Crestline's existing packaging operations. Management projections prepared by Crestline and validated by Briarwood's deal team estimated procurement cost savings of approximately $12 million to $15 million annually, to be realized over a three-year integration period, through the internalization of ACC's coating and resin formulation capabilities.

The ownership of ACC's outstanding common stock is divided among the following holders:

• Walter Kessler, Founder and Chairman of the Board — 62%

• Thomas Kessler, President and Chief Executive Officer — 18%

• The Walter G. Kessler Revocable Trust — 12%

• Allegheny Chemical Coatings, Inc. Employee Stock Ownership Plan — 8%

Seller's legal counsel in connection with the proposed transaction is Hargrove, Dalton & Speer LLP, Pittsburgh, Pennsylvania, with Franklin Speer serving as lead partner. Seller's financial advisor is Veltrano Partners LLC, Pittsburgh, Pennsylvania, with Nathan Ashford serving as managing director on the engagement.

The initial draft of the Stock Purchase Agreement was first circulated by Calderwood & Harkness LLP on behalf of Crestline on August 12, 2022. Revised drafts incorporating environmental representations and warranties, indemnification provisions, and related schedules and exhibits were exchanged between the parties through October 2022. Despite multiple rounds of negotiation, the SPA was never executed by the parties.

The original targeted closing date for the transaction was November 30, 2022, within the fourth quarter of 2022. The exclusivity period granted by the Seller pursuant to the Letter of Intent dated June 15, 2022, was set to expire on December 31, 2022. Following the pause in negotiations on or about October 28, 2022, the parties agreed informally to a standstill, with neither party affirmatively terminating the Letter of Intent or the exclusivity arrangement prior to its expiration.

B. The Environmental Diligence Engagement

Calderwood & Harkness LLP was engaged by Crestline Packaging Solutions LLC, through its General Counsel Derek Huang, to perform environmental due diligence services in connection with the proposed acquisition of ACC. The engagement was formalized pursuant to an engagement letter dated July 19, 2022, executed by Mr. Huang on behalf of Crestline and by the undersigned on behalf of Calderwood & Harkness LLP. The matter was opened under Matter No. 1006-00003.

The scope of the engagement, as defined in the engagement letter, encompassed the following principal workstreams:

(i) Oversight and review of Phase I and Phase II Environmental Site Assessments conducted by TerraVerde Environmental Consulting LLC ("TerraVerde") at ACC's four operating facilities;

(ii) Review of environmental permits, compliance history, and regulatory filings for each of ACC's four facilities, including RCRA, Clean Air Act, Clean Water Act, EPCRA/TRI, and applicable state environmental program filings;

(iii) Analysis of environmental representations, warranties, and indemnification provisions in the draft Stock Purchase Agreement, including review of Seller's disclosure schedules and negotiation of revisions thereto;

(iv) Negotiation of environmental risk allocation provisions, including environmental escrow, indemnification caps and baskets, survival periods, and related deal mechanics;

(v) Evaluation of Pollution Legal Liability ("PLL") insurance options as a potential mechanism for bridging environmental risk allocation gaps between the parties; and

(vi) Preparation of a comprehensive environmental diligence summary memorandum for delivery to the client and its financial sponsor.

The Calderwood & Harkness LLP engagement team assigned to this matter consists of the following professionals:

• Beatrice Holloway — Responsible Partner, Mergers & Acquisitions

• James Prentice — Billing Partner, Mergers & Acquisitions

• Harrison Caldwell — Of Counsel, Environmental & Land Use

• Grace Nakamura — Lead Associate, Real Estate

• Rafael Dominguez — Working Associate, Real Estate

• Simone Estrada — Paralegal

Billing for the engagement is on an hourly basis at the following standard rates: partner rate of $895 per hour; of counsel rate of $725 per hour; senior associate rate of $625 per hour; associate rate of $495 per hour; and paralegal rate of $275 per hour. No alternative fee arrangement or fee cap was agreed upon for this engagement.

The environmental consultant retained in connection with the engagement is TerraVerde Environmental Consulting LLC, headquartered in Columbus, Ohio. TerraVerde was retained directly by Crestline under the direction and oversight of Calderwood & Harkness LLP to conduct Phase I Environmental Site Assessments in accordance with the ASTM E1527-21 standard and Phase II Environmental Site Assessments across ACC's four operating facilities. The TerraVerde team assigned to the engagement includes the following individuals:

• Dr. Nina Sorensen, P.E., CHMM — Principal-in-Charge

• Kevin O'Malley, P.G. — Project Manager

• Alicia Reyes, P.G. — Senior Scientist / Phase II Field Lead

C. Target Facilities Covered

The environmental diligence engagement covered all four of ACC's operating facilities, which are described in detail below:

Facility 1: McKeesport Main Plant (Headquarters)

Address: 2200 Iron Works Boulevard, McKeesport, PA 15132

County: Allegheny County, Pennsylvania Parcel ID: 0383-M-00125-0000-00 Acreage: 14.3 acres Tenure: Owned in fee simple by ACC Description: ACC's principal manufacturing facility and corporate headquarters, consisting of multiple manufacturing buildings (Buildings A through E), an office building, outdoor drum storage areas, and associated parking and loading areas. The facility has been in continuous operation as a chemical coatings manufacturing plant since approximately 1958.

Facility 2: Charleroi Specialty Coatings Plant

Address: 450 Industrial Park Road, Charleroi, PA 15022

County: Washington County, Pennsylvania Parcel ID: 120-015-00-03-0018-00 Acreage: 8.7 acres Tenure: Owned in fee simple by ACC Description: A specialty coatings manufacturing facility constructed in 2003 on a greenfield site (former agricultural land). The facility was purpose-built for ACC's high-performance coatings product line and consists of a single manufacturing building, raw materials warehouse, and office space.

Facility 3: Clarksburg Resin Blending Facility

Address: 1875 Route 50 West, Clarksburg, WV 26301

County: Harrison County, West Virginia Parcel ID: 04-0012-0056-0000 Acreage: 5.2 acres Tenure: Leased from Mountainview Properties LLC pursuant to a triple-net lease with a term of January 1, 2015, through December 31, 2029 Description: A resin blending and intermediate materials processing facility consisting of a warehouse building with interior blending and mixing operations, drum and tote storage, and an exterior tank farm for bulk liquid storage. The facility was previously occupied by Valley Freight Lines Inc. prior to ACC's occupancy.

Facility 4: Weirton Warehouse & Distribution Center

Address: 600 Commerce Way, Weirton, WV 26062

County: Hancock County, West Virginia Parcel ID: 07-0304-0012-0000 Acreage: 3.1 acres Tenure: Leased from Northern Panhandle Realty Corp. pursuant to a double-net lease with a term of March 1, 2018, through February 28, 2028 Description: A warehouse and distribution facility used for storage and shipment of finished goods. The site is a former brownfield property that was remediated under West Virginia's Voluntary Remediation and Redevelopment Program ("VRDP"), with a Certificate of Completion issued in September 2015 and recorded deed restrictions and engineering controls in place.

III. Summary of Completed Environmental Diligence Work

The following sections summarize the environmental diligence work that has been completed as of the date of this memorandum. This summary is organized by workstream for ease of reference and is intended to provide a complete accounting of the state of the diligence record as it exists at the time of dormancy.

A. Phase I Environmental Site Assessments

All four Phase I Environmental Site Assessments were completed by TerraVerde Environmental Consulting LLC in August 2022 and subsequently reviewed by Calderwood & Harkness LLP. The findings for each facility are summarized below.

McKeesport Main Plant — Phase I ESA (dated August 15, 2022):

TerraVerde's Phase I ESA for the McKeesport facility identified two Recognized Environmental Conditions ("RECs") and one Historical Recognized Environmental Condition ("HREC"):

REC-1: Elevated volatile organic compound ("VOC") readings and vapor intrusion potential were identified in the vicinity of Building C, associated with residual subsurface contamination beneath the former underground storage tank ("UST") field located on the western portion of the property. The former UST field consisted of four 10,000-gallon steel USTs that stored toluene, xylene, and other organic solvents. The USTs were removed in 1993; however, residual contamination in the form of dissolved-phase VOCs in groundwater and soil vapor has persisted in the subsurface and presents a potential vapor intrusion pathway into Building C.

REC-2: Staining and stressed vegetation were observed along the eastern property boundary, adjacent to an unlined stormwater drainage channel located near the outdoor drum storage area. The staining was consistent with surficial petroleum or solvent impacts, potentially from historical drum handling operations or stormwater runoff containing residual product. The condition warrants further investigation to determine the nature and extent of any contamination and potential impacts to off-site surface water or groundwater.

HREC: A 1994 Act 2 release from former USTs that were removed in 1993 was documented. The Pennsylvania Department of Environmental Protection ("PA DEP") issued a No Further Action ("NFA") letter in May 2001 under the Statewide Health Standard, indicating that the release had been remediated to applicable standards at that time. This condition is classified as an HREC because it has been addressed to the satisfaction of the applicable regulatory authority, although residual contamination may remain in the subsurface at concentrations below regulatory action levels.

Charleroi Specialty Coatings Plant — Phase I ESA (dated August 18, 2022):

TerraVerde's Phase I ESA for the Charleroi facility identified no RECs, Controlled Recognized Environmental Conditions ("CRECs"), or HRECs. The site is considered environmentally clean, consistent with its history as a greenfield development on former agricultural land. The facility was constructed in 2003, and no prior industrial or commercial uses of environmental concern were identified during the historical records review, interviews, or site reconnaissance.

Clarksburg Resin Blending Facility — Phase I ESA (dated August 22, 2022):

TerraVerde's Phase I ESA for the Clarksburg facility identified one CREC and one REC:

CREC: Residual diesel-range organics from an underground storage tank that was removed in 2012 by the prior tenant, Valley Freight Lines Inc. The removal and associated remediation were conducted under the oversight of the West Virginia Department of Environmental Protection ("WV DEP"), Site ID WVUST-2012-04887. A closure letter was issued by WV DEP in March 2013. Institutional controls associated with the closure were recorded at the Harrison County Clerk's Office, Book 1245, Page 312. This condition is classified as a CREC because institutional controls remain in place to manage residual contamination.

REC: Staining on the concrete floor in the northeast corner of the warehouse was observed in the area used for drum storage operations. The staining was dark in color and had an odor consistent with petroleum hydrocarbons or solvents. The condition warrants further investigation to determine whether subsurface contamination has migrated beneath the concrete slab.

Weirton Warehouse & Distribution Center — Phase I ESA (dated August 25, 2022):

TerraVerde's Phase I ESA for the Weirton facility identified one CREC, one de minimis condition, and no RECs:

CREC: The site was remediated under West Virginia's Voluntary Remediation and Redevelopment Program ("VRDP"), and a Certificate of Completion was issued by WV DEP in September 2015. Engineering and institutional controls remain in place to manage residual contamination associated with former industrial operations at the site. A deed restriction memorializing the institutional controls was recorded at the Hancock County Clerk's Office, Book 487, Page 89. Ongoing compliance with the VRDP Certificate conditions is required.

De Minimis Condition: A minor hydraulic fluid stain of approximately four (4) square feet was observed on the warehouse floor near the loading dock. This condition was deemed de minimis and does not constitute a REC.

Calderwood & Harkness LLP prepared and finalized Phase I ESA Review Memoranda for each of the four facilities (McKeesport, Charleroi, Clarksburg, and Weirton), analyzing the findings, assessing the potential environmental liabilities associated with each identified condition, and providing recommendations for further investigation where warranted.

B. Phase II Environmental Site Assessments

Based on the RECs identified in the Phase I ESAs, Phase II Environmental Site Assessments were recommended and conducted at the McKeesport and Clarksburg facilities. Phase II investigations were not recommended and were not conducted at the Charleroi or Weirton facilities.

McKeesport Phase II ESA:

The McKeesport Phase II ESA was commenced by TerraVerde on September 12, 2022. The scope of work included the installation of eighteen (18) soil borings and six (6) temporary monitoring wells across the facility, with a focus on the former UST field area near Building C and the eastern property boundary adjacent to the outdoor drum storage area and stormwater drainage channel. Soil sampling, groundwater sampling, and sub-slab soil gas sampling beneath Building C were conducted. All sampling activities were completed on September 26, 2022, and samples were submitted to Keystone Analytical Laboratories Inc., Monroeville, Pennsylvania, for analysis. Laboratory analytical results were received on October 10, 2022.

Key findings from the McKeesport Phase II ESA are summarized as follows:

• Toluene in Groundwater at MW-3: Detected at a concentration of 1,420 µg/L, exceeding the Pennsylvania Act 2 Statewide Health Standard of 1,000 µg/L by approximately 42%. Monitoring well MW-3 is located approximately 30 feet downgradient of the former UST field, near the northern wall of Building C.

• Xylene in Groundwater at MW-3: Detected at a concentration of 8,200 µg/L. This concentration is below the applicable PA Act 2 Statewide Health Standard of 10,000 µg/L but is elevated and indicates the presence of a significant dissolved-phase plume in the vicinity of the former UST field.

• Tetrachloroethylene (PCE) in Soil at SB-7: Detected at a concentration of 3.8 mg/kg, which exceeds the PA Act 2 residential used aquifer soil standard of 2.4 mg/kg but is below the non-residential standard of 14 mg/kg. Soil boring SB-7 is located adjacent to the former drum staging area on the eastern portion of the property.

• Lead in Soil at SB-14: Detected at a concentration of 680 mg/kg, which exceeds the PA Act 2 residential direct contact soil standard of 450 mg/kg but is below the non-residential standard of 1,000 mg/kg. Soil boring SB-14 is located near the exterior wall of Building A in an area formerly used for paint waste storage.

• Trichloroethylene (TCE) in Sub-Slab Soil Gas Beneath Building C: Detected at a concentration of 42 µg/m³, which exceeds the PA DEP vapor intrusion screening level of 21 µg/m³ by 100%. This finding confirms the vapor intrusion pathway identified in the Phase I ESA as a REC and indicates that vapor mitigation measures are required to protect building occupants.

TerraVerde prepared a preliminary remediation cost estimate dated October 18, 2022, estimating costs of $1.2 million to $2.8 million for groundwater treatment (pump-and-treat or in-situ chemical oxidation) and installation of a vapor mitigation system (sub-slab depressurization) beneath Building C. The range reflects uncertainty in the extent of the dissolved-phase plume and the ultimate remediation approach to be approved by PA DEP.

Calderwood & Harkness LLP prepared and finalized two memoranda addressing the McKeesport Phase II results: (1) a Phase II Results Analysis Memorandum dated October 14, 2022, providing a detailed legal and technical analysis of the findings and their implications for the transaction; and (2) a Vapor Intrusion Risk Assessment Memorandum dated October 16, 2022, focusing specifically on the TCE vapor intrusion pathway and its regulatory, liability, and worker safety implications.

Clarksburg Phase II ESA:

The Clarksburg Phase II ESA was commenced by TerraVerde on October 3, 2022. The scope of work included the installation of eight (8) soil borings and three (3) temporary monitoring wells in the northeast portion of the warehouse building and the adjacent exterior area, targeting the drum storage area staining identified as a REC in the Phase I ESA. Sampling activities were completed on October 7, 2022, and samples were submitted to Keystone Analytical Laboratories Inc. for analysis. Landlord consent for the Phase II investigation was obtained from Gerald Boothe of Mountainview Properties LLC prior to commencement of fieldwork.

As discussed in detail in Section IV below, the analytical results from the Clarksburg Phase II ESA had not been received from Keystone Analytical Laboratories as of the date negotiations were paused on October 28, 2022, and remain outstanding as of the date of this memorandum.

Charleroi and Weirton:

Phase II Environmental Site Assessments were not recommended and were not conducted at the Charleroi Specialty Coatings Plant or the Weirton Warehouse & Distribution Center. No RECs were identified at Charleroi, and the sole CREC at Weirton is managed under an existing VRDP Certificate of Completion with engineering and institutional controls in place. The de minimis hydraulic fluid stain at Weirton did not warrant further investigation.

C. Regulatory Compliance Reviews

Calderwood & Harkness LLP, with the assistance of Harrison Caldwell, completed comprehensive regulatory compliance reviews for all four ACC facilities across the following major environmental regulatory programs:

RCRA Compliance Review:

The RCRA compliance review was completed for all four facilities. The EPA identification numbers and generator status for each facility are as follows:

The most recent PA DEP inspection of the McKeesport facility occurred on April 14, 2021, and resulted in no violations. Review of available inspection records, manifests, biennial reports, and waste characterization records confirmed substantial compliance across all four facilities with applicable RCRA requirements.

Clean Air Act Compliance Review:

The Clean Air Act compliance review was completed for all facilities with air emission sources. The McKeesport facility operates under Title V Operating Permit No. TV-0383-0125, issued on June 1, 2019, with an expiration date of May 31, 2024. ACC is classified as a major source under Title V, with combined hazardous air pollutant ("HAP") emissions of 38.2 tons per year, which exceeds the major source threshold of 25 tons per year. A pending permit modification application was submitted by ACC in March 2022 for the installation of a thermal oxidizer on manufacturing Line 4. This application remains pending with PA DEP as of the date of this memorandum, and its status is identified as an outstanding item in Section IV below.

The Charleroi facility operates under State-Only Air Quality Permit No. 63-00982 and is classified as a minor source. The Clarksburg facility operates under West Virginia Registration Permit No. R13-3201 and is also classified as a minor source. Both facilities were determined to be in compliance with applicable Clean Air Act requirements. The Weirton facility does not have significant air emission sources and is not subject to air permitting.

Clean Water Act / NPDES Compliance Review:

The Clean Water Act compliance review was completed with respect to all facilities with NPDES-permitted discharges. The McKeesport facility operates under NPDES Permit No. PA0025631, which authorizes stormwater discharges from the facility. Review of Discharge Monitoring Reports ("DMRs") identified a total suspended solids ("TSS") exceedance in March 2022, with a reported TSS concentration of 48 mg/L against a permitted limit of 40 mg/L, representing a 20% exceedance. ACC self-reported the exceedance to PA DEP in accordance with its permit requirements. No enforcement action was initiated by PA DEP. ACC implemented corrective actions, including the installation of silt fencing and additional best management practices ("BMPs") at the affected discharge point. No other NPDES compliance issues were identified at any of the four facilities.

EPCRA / TRI / Tier II Reporting Review:

The Emergency Planning and Community Right-to-Know Act ("EPCRA") compliance review was completed. ACC's McKeesport facility is subject to Tier II reporting requirements and Toxics Release Inventory ("TRI") Form R filing obligations. Review of filings confirmed that Tier II reports have been timely submitted to the Allegheny County Local Emergency Planning Committee ("LEPC"), and TRI Form R filings are current. The most recent TRI filings (calendar year 2021) reported the following releases from the McKeesport facility: toluene — 12,400 pounds released; xylene — 8,700 pounds released. No EPCRA compliance deficiencies were identified.

Spill History and Enforcement Review:

The spill history and enforcement review was completed for all four facilities. Two reportable spills were documented at the McKeesport facility:

(1) On June 14, 2017, a spill of approximately 50 gallons of xylene occurred during a drum transfer operation. The spill was contained on-site, cleaned up using absorbent materials, and reported to PA DEP. PA DEP issued a No Further Action determination following confirmation that the spill had been adequately addressed.

(2) On February 3, 2020, a release of approximately 120 gallons of epoxy resin hardener occurred, with a portion of the release entering a floor drain connected to the sanitary sewer system. The release was reported to PA DEP and the local publicly owned treatment works ("POTW"). PA DEP assessed a civil penalty of $4,500, which ACC paid without contest. ACC implemented corrective actions, including the installation of a floor drain plug and secondary containment around the drum staging area. The corrective actions were completed and documented.

No reportable spills or enforcement actions were identified at the Charleroi, Clarksburg, or Weirton facilities.

D. Lease and Property Environmental Reviews

Clarksburg Lease Environmental Provisions Analysis:

Calderwood & Harkness LLP completed an analysis of the environmental provisions contained in the Mountainview Properties LLC triple-net lease governing the Clarksburg Resin Blending Facility. The analysis addressed ACC's remediation obligations as tenant under the lease, including provisions governing tenant responsibility for environmental conditions caused by tenant operations, landlord consent requirements for subsurface investigations, and indemnification obligations running to the landlord. A landlord consent letter was prepared by Calderwood & Harkness LLP, sent to Gerald Boothe of Mountainview Properties LLC, and obtained prior to the commencement of the Phase II ESA investigation at the Clarksburg facility.

Weirton Lease and VRDP Certificate Review:

Calderwood & Harkness LLP completed an analysis of the Northern Panhandle Realty Corp. double-net lease governing the Weirton Warehouse & Distribution Center, with particular attention to the deed restrictions, engineering controls, and ongoing compliance obligations associated with the WV DEP VRDP Certificate of Completion issued in September 2015. The analysis addressed the allocation of responsibility for ongoing VRDP compliance between landlord and tenant, the impact of the institutional controls on permitted uses of the property, and the potential for successor liability in the event of a change in tenant or property ownership.

E. Transaction Document Review — Environmental Provisions

Calderwood & Harkness LLP undertook extensive work on the environmental provisions of the draft Stock Purchase Agreement, including the following:

Environmental Representations & Warranties (Buyer's Initial Draft): The initial draft of Article IV, Section 4.18 of the SPA (Environmental Matters) was prepared by Harrison Caldwell with input from Beatrice Holloway and circulated to Seller's counsel, Hargrove, Dalton & Speer LLP, as part of the initial draft SPA on August 12, 2022. The representations covered, among other things, compliance with Environmental Laws, Environmental Permits, Hazardous Substances, Environmental Claims, Releases, and Environmental Liabilities, and were drafted broadly in favor of the Buyer.

Redline Comparison of Seller's Response: Seller's counsel submitted a counterproposal to the environmental representations and warranties in late September 2022. Calderwood & Harkness LLP prepared a detailed redline comparison and commentary memorandum identifying the Seller's material deletions, the insertion of knowledge qualifiers (limiting representations to matters "known" to the Seller), the addition of materiality thresholds, and the exclusion of liability for environmental conditions arising prior to 1987. The commentary assessed each modification and provided recommendations for negotiation strategy.

Environmental Indemnification and Escrow Provisions: Calderwood & Harkness LLP drafted the environmental indemnification and escrow provisions for inclusion in the SPA, proposing a $4.0 million environmental escrow funded at closing, an uncapped fundamental environmental indemnity for pre-closing environmental conditions, a seven (7)-year survival period for environmental representations and warranties (as compared to an eighteen (18)-month general survival period), and a carve-out of environmental claims from the $475,000 general representation and warranty basket/deductible applicable to other representations.

Environmental Risk Allocation Negotiation Memorandum (dated October 21, 2022): A comprehensive negotiation analysis memorandum was prepared and circulated to Derek Huang (CPS General Counsel) and Vanessa Moretti (Briarwood Capital Partners, Deal Partner). The memorandum analyzed in detail the gap between the Crestline position ($4.0 million escrow, uncapped indemnity, seven-year survival) and the Seller position ($1.5 million escrow, $3.5 million indemnity cap, three-year survival, $475,000 basket). The escrow gap of $2.5 million was identified as the central point of disagreement, along with the fundamental structural disagreement on whether the environmental indemnity should be capped or uncapped and the significant difference in survival period duration.

Comparative Analysis — Escrow vs. PLL Insurance: Calderwood & Harkness LLP prepared a comparative analysis evaluating a hybrid approach to environmental risk allocation that would combine a reduced escrow amount with a Pollution Legal Liability insurance policy. The analysis utilized the indicative PLL terms provided by Ironclad Specialty Insurance Company as a potential bridge between the parties' positions on the escrow and indemnification provisions.

F. Environmental Insurance Workstream

Calderwood & Harkness LLP, in coordination with Crestline, engaged Whitfield & Calder Insurance Advisors LLC (Douglas Whitfield, Managing Partner; Lauren Petrov, Vice President) to evaluate Pollution Legal Liability insurance options as a potential risk transfer and deal facilitation mechanism. The insurance submission package was transmitted to Whitfield & Calder on or about October 5, 2022, and included the Phase I ESAs for all four facilities, the McKeesport Phase II results, and the draft Comprehensive Environmental Diligence Summary Memorandum.

Ironclad Specialty Insurance Company (underwriter: Sean McAllister) responded with a non-binding indication of interest, the key terms of which were as follows:

• Aggregate Limit: $15,000,000

• Per Occurrence Limit: $10,000,000

• Policy Term: 10 years

• Indicative Annual Premium: $187,500

• Self-Insured Retention: $250,000

Calderwood & Harkness LLP prepared a PLL Coverage Analysis Memorandum dated October 19, 2022, and a Term Sheet Review and Comment Letter dated approximately October 23, 2022, analyzing the indicative terms and identifying the following significant coverage gaps:

(1) Known Conditions Exclusion: The indication contained a broad known conditions exclusion that may exclude coverage for the toluene and TCE contamination identified at the McKeesport facility, which are the most significant environmental liabilities identified in the diligence process. If these conditions are excluded, the PLL policy would provide materially less value as a risk transfer mechanism.

(2) Pre-Existing Contamination Definition: The definition of "pre-existing contamination" in the indication was ambiguous and could be construed to exclude coverage for contamination that was "known or should have been known" at the time of policy inception, which could encompass the Clarksburg drum storage area contamination if confirmed by Phase II results.

(3) Vapor Intrusion Sublimit: The indication included a sublimit for vapor intrusion claims that was significantly lower than the per occurrence limit, which could leave Crestline underinsured for the Building C vapor intrusion condition.

(4) Defense Cost Erosion: Defense costs were structured to erode the policy limits rather than being covered in addition to limits, reducing the effective coverage available for remediation and third-party claims.

A formal PLL application was not submitted, and the underwriting process was paused pending (a) completion of the Clarksburg Phase II data review and (b) a decision by Crestline on whether to resume deal negotiations. The coverage gaps identified in the Term Sheet Review Letter remain unresolved.

G. Fees and Billing

The following summarizes all fees and disbursements incurred in connection with Matter No. 1006-00003 through October 31, 2022:

Calderwood & Harkness LLP Professional Fees:

Less: Billing adjustment credit — ($100.00)

Total C&H Professional Fees (net): $218,740.00

Calderwood & Harkness LLP Disbursements:

TerraVerde Environmental Consulting LLC Fees (billed directly to Crestline):

The final Calderwood & Harkness LLP invoice for this matter, Invoice No. 48217 dated October 31, 2022, in the amount of $67,430.00 (representing September and October 2022 professional fees), was outstanding at the time this memorandum was prepared. The invoice was subsequently paid by Crestline on January 15, 2023. No amounts are currently outstanding on this matter.

IV. Outstanding Items at Time of Dormancy

The following items remain outstanding and incomplete as of the date of dormancy. Each is described with sufficient specificity to enable the engagement team to resume work efficiently in the event the matter is reactivated.

1. Clarksburg Phase II Analytical Results

Soil and groundwater samples collected by TerraVerde (field lead: Alicia Reyes, P.G.) at the Clarksburg Resin Blending Facility on October 7, 2022, were submitted to Keystone Analytical Laboratories Inc. in Monroeville, Pennsylvania, for analysis. The analytical results were expected by October 28, 2022, but were not received before the deal negotiations were paused. TerraVerde has confirmed that the samples remain in laboratory chain of custody at Keystone Analytical Laboratories and have not been discarded. Calderwood & Harkness LLP has not reviewed or analyzed these results. Upon receipt, the results will need to be evaluated against applicable West Virginia action levels and the CREC previously identified in the Phase I ESA.

TerraVerde's preliminary estimate of potential remediation costs, contingent on confirmation of contamination, ranges from $350,000 to $750,000 for soil excavation and off-site disposal, with an additional $150,000 to $400,000 if groundwater impacts are confirmed and require treatment. These estimates are preliminary and are subject to revision based on the actual analytical data.

2. Clarksburg Phase II Results Analysis Memorandum

The Clarksburg Phase II Results Analysis Memorandum cannot be prepared until Keystone Analytical Laboratories delivers the analytical data to TerraVerde and TerraVerde provides its Phase II report and findings. A placeholder has been reserved in the diligence file. Upon receipt of the data, Harrison Caldwell and Grace Nakamura will prepare the analysis memorandum in a format consistent with the McKeesport Phase II Results Analysis Memorandum completed on October 14, 2022.

3. Comprehensive Environmental Diligence Summary Memorandum (Draft)

A draft of the Comprehensive Environmental Diligence Summary Memorandum, dated October 22, 2022, is on file but remains incomplete. The draft incorporates the completed Phase I ESA findings for all four facilities, the McKeesport Phase II results and analysis, the regulatory compliance review findings, the lease environmental provisions analyses, and the environmental insurance evaluation. However, the following sections of the draft remain incomplete:

(a) The Clarksburg Phase II findings have not been incorporated, as the analytical data has not been received.

(b) The conclusions section remains in outline form and has not been drafted in full narrative.

(d) The recommendations section, including the recommended escrow and indemnification structure, has not been finalized.

The draft has not been circulated to the client in final form. The current draft states estimated total environmental liabilities of $1.925 million (low estimate) to $4.345 million (high estimate) based on available data; however, these figures are subject to material revision upon receipt and incorporation of the Clarksburg Phase II results.

4. PLL Insurance Underwriting

As described in Section III.F above, Ironclad Specialty Insurance Company provided a non-binding indication of interest only. No formal PLL insurance application has been submitted. The underwriting process is paused pending (a) completion of the Clarksburg Phase II data review, which will be required by the underwriter as part of a complete submission, and (b) a decision by Crestline on whether to resume deal negotiations. The coverage gaps identified by Calderwood & Harkness LLP in the Term Sheet Review and Comment Letter — including the known conditions exclusion, the vapor intrusion sublimit, pre-existing contamination definition, and defense cost erosion of limits — remain unresolved and will require negotiation with the underwriter if the insurance workstream is reactivated.

5. Environmental Escrow / Indemnification Negotiations

The last substantive exchange between the parties on the environmental risk allocation provisions occurred on October 24, 2022, when Seller's counsel, Franklin Speer of Hargrove, Dalton & Speer LLP, transmitted the Seller's counterproposal via email. The Seller's counterproposal included the following terms:

• Environmental escrow: $1,500,000

• Environmental indemnification cap: $3,500,000

• Survival period for environmental representations: 3 years

• Basket/deductible: $475,000 (environmental claims not carved out)

Crestline's response to the Seller's counterproposal was not sent before the negotiations were paused. The principal areas of disagreement between the parties remain as follows:

• Escrow Amount: $2,500,000 gap ($4,000,000 requested by Crestline vs. $1,500,000 offered by Seller)

• Indemnification Structure: Crestline's position is uncapped fundamental environmental indemnity for pre-closing conditions; Seller's position is a $3,500,000 cap

• Survival Period: Crestline's position is 7 years; Seller's position is 3 years

• Basket/Deductible Carve-Out: Crestline's position is that environmental claims should be carved out from the $475,000 general basket; Seller's position is that they should be included

The disagreement on these environmental risk allocation provisions was identified by the client as the primary reason that negotiations were paused on October 28, 2022.

6. Title V Permit Modification — McKeesport Thermal Oxidizer

ACC submitted an application to PA DEP in March 2022 for a modification to its Title V Operating Permit (No. TV-0383-0125) to authorize the installation and operation of a thermal oxidizer on manufacturing Line 4 at the McKeesport facility. The issuance of this permit modification would affect the facility's operational capacity, capital expenditure requirements, and compliance obligations post-closing. The status of this application was unknown as of the date of dormancy. Calderwood & Harkness LLP flagged this item as a post-closing compliance consideration but did not track the application to resolution prior to the pause in negotiations. Upon resumption, the status of this pending permit modification should be confirmed with PA DEP and assessed for its impact on the transaction.

7. Asbestos and Lead-Based Paint Management Plans

The McKeesport facility, which was originally constructed in approximately 1955 and has been expanded and renovated multiple times, contains identified asbestos-containing materials ("ACM") and lead-based paint ("LBP"):

Asbestos-Containing Materials: ACM was identified in pipe insulation in Buildings A and B (estimated 2,400 linear feet) and in floor tiles in Building A (estimated 14,000 square feet). ACC maintains a management-in-place approach pursuant to an Asbestos Operations and Maintenance ("O&M") Plan dated September 2019. The ACM is reported to be in fair to good condition and is being managed in place. TerraVerde's estimated cost for full abatement, if required, ranges from $180,000 to $310,000.

Lead-Based Paint: LBP was identified on interior and exterior painted surfaces of the McKeesport office building pursuant to a 2019 lead-based paint survey. ACC maintains a management-in-place approach consistent with the survey recommendations. TerraVerde's estimated cost for full abatement, if required, ranges from $45,000 to $85,000.

Calderwood & Harkness LLP flagged the need for updated condition assessments of the ACM and LBP to confirm that the materials remain in stable condition and that ACC's management-in-place programs are being properly implemented. However, updated assessments were not commissioned before the negotiations were paused. ACC's existing management-in-place programs are understood to be ongoing.

8. Lender Environmental Diligence Condition

The commitment letter from Commonwealth National Bank, N.A. (Victoria Chen, Managing Director), signed on July 8, 2022, conditions the bank's obligation to fund the $65 million senior secured term loan and $20 million revolving credit facility on, among other things, satisfactory environmental diligence. Specifically, the commitment letter requires Phase I ESAs on all target real property with no RECs that are not adequately addressed, or, alternatively, the placement of acceptable Pollution Legal Liability insurance. As of the date of dormancy, RECs have been identified at both the McKeesport and Clarksburg facilities, and neither condition precedent has been satisfied. The McKeesport RECs have been investigated through the Phase II ESA process but remediation has not been undertaken or committed to, and the PLL insurance underwriting remains incomplete. The status of the commitment letter during the dormancy period is unknown and should be confirmed with Commonwealth National Bank upon any resumption of the transaction.

V. Environmental Liability Summary (Current Estimates)

Based on the environmental diligence work completed as of the date of this memorandum, the estimated range of environmental liabilities associated with ACC's four operating facilities is summarized in the table below. These estimates are preliminary and are subject to material revision upon receipt and analysis of the Clarksburg Phase II analytical results and any further assessment or changed conditions at the facilities.

Important Caveats: The estimates set forth above reflect the best available information as of the date of this memorandum and are subject to the following limitations and qualifications:

(a) The Clarksburg Phase II analytical results have not been received and are not reflected in the above estimates other than as a contingency based on TerraVerde's preliminary assumptions. Actual contamination at Clarksburg may be more or less extensive than assumed.

(b) The McKeesport remediation cost estimates are based on TerraVerde's preliminary assessment and have not been refined through a formal Remedial Investigation / Feasibility Study or approved by PA DEP. Actual remediation costs may differ materially based on the remediation approach selected, the extent of contamination delineation, and regulatory requirements.

(c) The asbestos and lead-based paint abatement cost estimates assume full removal. If management-in-place approaches continue to be acceptable and the materials remain in stable condition, actual costs may be limited to ongoing O&M expenses rather than full abatement.

(d) The estimates do not include potential third-party liability, natural resource damages, regulatory penalties, or any costs associated with ongoing VRDP compliance at the Weirton facility, none of which have been quantified.

VI. Reason for Dormancy

Deal negotiations between Crestline Packaging Solutions LLC and the shareholders of Allegheny Chemical Coatings, Inc. were paused on or about October 28, 2022. The primary cause of the pause was the inability of the parties to reach agreement on purchase price adjustments and transaction document provisions related to identified environmental liabilities. Specifically, the parties were unable to bridge the gap on the following environmental risk allocation provisions in the draft Stock Purchase Agreement:

(a) Environmental Escrow Amount: Crestline requested a $4,000,000 environmental escrow funded at closing to secure post-closing environmental indemnification obligations. The Seller offered a $1,500,000 escrow, resulting in a $2,500,000 gap between the parties' positions.

(b) Environmental Indemnification Cap: Crestline's position was that the Seller's environmental indemnification obligation for pre-closing environmental conditions should be uncapped — that is, the Seller should bear full responsibility for pre-closing environmental liabilities without a dollar limitation. The Seller proposed a $3,500,000 cap on its total environmental indemnification obligation.

CALDERWOOD & HARKNESS LLP INTERNAL MEMORANDUM
PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT
TO: File — Matter No. 1006-00003
FROM: Beatrice Holloway, Partner, Mergers & Acquisitions
DATE: November 4, 2022
RE: Placement of Matter No. 1006-00003 on Dormant Status — Environmental Due Diligence in Connection with the Proposed Acquisition of Allegheny Chemical Coatings, Inc. by Crestline Packaging Solutions LLC
CC: James Prentice (Billing Partner, M&A); Harrison Caldwell (Of Counsel, Environmental & Land Use); Grace Nakamura (Lead Associate, Real Estate); Rafael Dominguez (Working Associate, Real Estate); Simone Estrada (Paralegal)
I. Purpose of This Memorandum
The purpose of this memorandum is to document the decision to place Matter No. 1006-00003 on dormant status effective as of the date of this memorandum, November 4, 2022. This memorandum is intended to serve as a comprehensive record of the current state of the engagement and to provide a detailed framework for any future reactivation of the matter.
Specifically, this memorandum is prepared to accomplish the following objectives:
1. Record the Background and Reason for Dormancy. Deal negotiations between Crestline Packaging Solutions LLC ("Crestline" or "CPS") and the shareholders of Allegheny Chemical Coatings, Inc. ("ACC" or the "Target") were paused on or about October 28, 2022, following unresolved disagreements regarding environmental liability escrow amounts and indemnification provisions in the draft Stock Purchase Agreement (the "SPA"). The parties have not formally terminated the transaction or the engagement; however, substantive work on the matter has ceased, and no further client instructions have been received.
2. Identify All Outstanding and Incomplete Environmental Diligence Items. A number of critical environmental diligence work streams remain incomplete at the time of dormancy, most notably the Clarksburg Phase II Environmental Site Assessment analytical results and the finalization of the Comprehensive Environmental Diligence Summary Memorandum. Each outstanding item is identified and described in detail herein to ensure that nothing is overlooked in the event the matter is reactivated.
3. Establish a Resumption Protocol for Reactivation of the Matter. This memorandum sets forth an eight-step protocol to be followed in the event that Crestline elects to resume negotiations and reactivate this engagement. The protocol is designed to ensure an orderly and efficient resumption of work and to address any developments that may have occurred during the dormancy period.
4. Direct Preservation of All Work Product, Correspondence, and Electronic Files. All materials generated in connection with this engagement are subject to a document preservation directive issued concurrently with this memorandum. No documents, files, or electronic records relating to this matter shall be deleted, discarded, or destroyed until formal matter closure or resumption, as applicable.
This memorandum should be read in conjunction with the Environmental Diligence Status Tracker (last updated October 28, 2022, by Grace Nakamura), which serves as the master index of all diligence items, their current status, and responsible parties.
II. Engagement Background
A. The Transaction
Crestline Packaging Solutions LLC, an Ohio limited liability company headquartered at 4100 Riverside Commerce Drive, Suite 300, Dayton, OH 45402, is a wholly-owned portfolio company of Briarwood Capital Partners LP (Fund IV), a $2.1 billion private equity fund focused on middle-market industrial and specialty manufacturing investments. Crestline is a leading manufacturer and distributor of specialty packaging solutions serving the automotive, industrial, and consumer products sectors.
Crestline proposed to acquire one hundred percent (100%) of the outstanding common stock of Allegheny Chemical Coatings, Inc., a Pennsylvania corporation headquartered at 2200 Iron Works Boulevard, McKeesport, PA 15132, for a proposed purchase price of $94.5 million, calculated as $13.5 million of trailing twelve-month adjusted EBITDA at a 7.0x multiple. The transaction was structured as a stock purchase, with Crestline acquiring all outstanding shares of ACC common stock from the existing shareholders.
The proposed financing structure consisted of a $65 million senior secured term loan and a $20 million revolving credit facility from Commonwealth National Bank, N.A., pursuant to a commitment letter signed on July 8, 2022, together with a $9.5 million equity contribution from Briarwood Capital Partners Fund IV LP. The combined $94.5 million in sources was intended to fund the purchase price in full, exclusive of transaction costs.
The strategic rationale for the proposed acquisition centered on vertical integration of specialty coatings supply into Crestline's existing packaging operations. Management projections prepared by Crestline and validated by Briarwood's deal team estimated procurement cost savings of approximately $12 million to $15 million annually, to be realized over a three-year integration period, through the internalization of ACC's coating and resin formulation capabilities.
The ownership of ACC's outstanding common stock is divided among the following holders:
• Walter Kessler, Founder and Chairman of the Board — 62%
• Thomas Kessler, President and Chief Executive Officer — 18%
• The Walter G. Kessler Revocable Trust — 12%
• Allegheny Chemical Coatings, Inc. Employee Stock Ownership Plan — 8%
Seller's legal counsel in connection with the proposed transaction is Hargrove, Dalton & Speer LLP, Pittsburgh, Pennsylvania, with Franklin Speer serving as lead partner. Seller's financial advisor is Veltrano Partners LLC, Pittsburgh, Pennsylvania, with Nathan Ashford serving as managing director on the engagement.
The initial draft of the Stock Purchase Agreement was first circulated by Calderwood & Harkness LLP on behalf of Crestline on August 12, 2022. Revised drafts incorporating environmental representations and warranties, indemnification provisions, and related schedules and exhibits were exchanged between the parties through October 2022. Despite multiple rounds of negotiation, the SPA was never executed by the parties.
The original targeted closing date for the transaction was November 30, 2022, within the fourth quarter of 2022. The exclusivity period granted by the Seller pursuant to the Letter of Intent dated June 15, 2022, was set to expire on December 31, 2022. Following the pause in negotiations on or about October 28, 2022, the parties agreed informally to a standstill, with neither party affirmatively terminating the Letter of Intent or the exclusivity arrangement prior to its expiration.
B. The Environmental Diligence Engagement
Calderwood & Harkness LLP was engaged by Crestline Packaging Solutions LLC, through its General Counsel Derek Huang, to perform environmental due diligence services in connection with the proposed acquisition of ACC. The engagement was formalized pursuant to an engagement letter dated July 19, 2022, executed by Mr. Huang on behalf of Crestline and by the undersigned on behalf of Calderwood & Harkness LLP. The matter was opened under Matter No. 1006-00003.
The scope of the engagement, as defined in the engagement letter, encompassed the following principal workstreams:
(i) Oversight and review of Phase I and Phase II Environmental Site Assessments conducted by TerraVerde Environmental Consulting LLC ("TerraVerde") at ACC's four operating facilities;
(ii) Review of environmental permits, compliance history, and regulatory filings for each of ACC's four facilities, including RCRA, Clean Air Act, Clean Water Act, EPCRA/TRI, and applicable state environmental program filings;
(iii) Analysis of environmental representations, warranties, and indemnification provisions in the draft Stock Purchase Agreement, including review of Seller's disclosure schedules and negotiation of revisions thereto;
(iv) Negotiation of environmental risk allocation provisions, including environmental escrow, indemnification caps and baskets, survival periods, and related deal mechanics;
(v) Evaluation of Pollution Legal Liability ("PLL") insurance options as a potential mechanism for bridging environmental risk allocation gaps between the parties; and
(vi) Preparation of a comprehensive environmental diligence summary memorandum for delivery to the client and its financial sponsor.
The Calderwood & Harkness LLP engagement team assigned to this matter consists of the following professionals:
• Beatrice Holloway — Responsible Partner, Mergers & Acquisitions
• James Prentice — Billing Partner, Mergers & Acquisitions
• Harrison Caldwell — Of Counsel, Environmental & Land Use
• Grace Nakamura — Lead Associate, Real Estate
• Rafael Dominguez — Working Associate, Real Estate
• Simone Estrada — Paralegal
Billing for the engagement is on an hourly basis at the following standard rates: partner rate of $895 per hour; of counsel rate of $725 per hour; senior associate rate of $625 per hour; associate rate of $495 per hour; and paralegal rate of $275 per hour. No alternative fee arrangement or fee cap was agreed upon for this engagement.
The environmental consultant retained in connection with the engagement is TerraVerde Environmental Consulting LLC, headquartered in Columbus, Ohio. TerraVerde was retained directly by Crestline under the direction and oversight of Calderwood & Harkness LLP to conduct Phase I Environmental Site Assessments in accordance with the ASTM E1527-21 standard and Phase II Environmental Site Assessments across ACC's four operating facilities. The TerraVerde team assigned to the engagement includes the following individuals:
• Dr. Nina Sorensen, P.E., CHMM — Principal-in-Charge
• Kevin O'Malley, P.G. — Project Manager
• Alicia Reyes, P.G. — Senior Scientist / Phase II Field Lead
C. Target Facilities Covered
The environmental diligence engagement covered all four of ACC's operating facilities, which are described in detail below:
Facility 1: McKeesport Main Plant (Headquarters)
Address: 2200 Iron Works Boulevard, McKeesport, PA 15132
County: Allegheny County, Pennsylvania Parcel ID: 0383-M-00125-0000-00 Acreage: 14.3 acres Tenure: Owned in fee simple by ACC Description: ACC's principal manufacturing facility and corporate headquarters, consisting of multiple manufacturing buildings (Buildings A through E), an office building, outdoor drum storage areas, and associated parking and loading areas. The facility has been in continuous operation as a chemical coatings manufacturing plant since approximately 1958.
Facility 2: Charleroi Specialty Coatings Plant
Address: 450 Industrial Park Road, Charleroi, PA 15022
County: Washington County, Pennsylvania Parcel ID: 120-015-00-03-0018-00 Acreage: 8.7 acres Tenure: Owned in fee simple by ACC Description: A specialty coatings manufacturing facility constructed in 2003 on a greenfield site (former agricultural land). The facility was purpose-built for ACC's high-performance coatings product line and consists of a single manufacturing building, raw materials warehouse, and office space.
Facility 3: Clarksburg Resin Blending Facility
Address: 1875 Route 50 West, Clarksburg, WV 26301
County: Harrison County, West Virginia Parcel ID: 04-0012-0056-0000 Acreage: 5.2 acres Tenure: Leased from Mountainview Properties LLC pursuant to a triple-net lease with a term of January 1, 2015, through December 31, 2029 Description: A resin blending and intermediate materials processing facility consisting of a warehouse building with interior blending and mixing operations, drum and tote storage, and an exterior tank farm for bulk liquid storage. The facility was previously occupied by Valley Freight Lines Inc. prior to ACC's occupancy.
Facility 4: Weirton Warehouse & Distribution Center
Address: 600 Commerce Way, Weirton, WV 26062
County: Hancock County, West Virginia Parcel ID: 07-0304-0012-0000 Acreage: 3.1 acres Tenure: Leased from Northern Panhandle Realty Corp. pursuant to a double-net lease with a term of March 1, 2018, through February 28, 2028 Description: A warehouse and distribution facility used for storage and shipment of finished goods. The site is a former brownfield property that was remediated under West Virginia's Voluntary Remediation and Redevelopment Program ("VRDP"), with a Certificate of Completion issued in September 2015 and recorded deed restrictions and engineering controls in place.
III. Summary of Completed Environmental Diligence Work
The following sections summarize the environmental diligence work that has been completed as of the date of this memorandum. This summary is organized by workstream for ease of reference and is intended to provide a complete accounting of the state of the diligence record as it exists at the time of dormancy.
A. Phase I Environmental Site Assessments
All four Phase I Environmental Site Assessments were completed by TerraVerde Environmental Consulting LLC in August 2022 and subsequently reviewed by Calderwood & Harkness LLP. The findings for each facility are summarized below.
McKeesport Main Plant — Phase I ESA (dated August 15, 2022):
TerraVerde's Phase I ESA for the McKeesport facility identified two Recognized Environmental Conditions ("RECs") and one Historical Recognized Environmental Condition ("HREC"):
REC-1: Elevated volatile organic compound ("VOC") readings and vapor intrusion potential were identified in the vicinity of Building C, associated with residual subsurface contamination beneath the former underground storage tank ("UST") field located on the western portion of the property. The former UST field consisted of four 10,000-gallon steel USTs that stored toluene, xylene, and other organic solvents. The USTs were removed in 1993; however, residual contamination in the form of dissolved-phase VOCs in groundwater and soil vapor has persisted in the subsurface and presents a potential vapor intrusion pathway into Building C.
REC-2: Staining and stressed vegetation were observed along the eastern property boundary, adjacent to an unlined stormwater drainage channel located near the outdoor drum storage area. The staining was consistent with surficial petroleum or solvent impacts, potentially from historical drum handling operations or stormwater runoff containing residual product. The condition warrants further investigation to determine the nature and extent of any contamination and potential impacts to off-site surface water or groundwater.
HREC: A 1994 Act 2 release from former USTs that were removed in 1993 was documented. The Pennsylvania Department of Environmental Protection ("PA DEP") issued a No Further Action ("NFA") letter in May 2001 under the Statewide Health Standard, indicating that the release had been remediated to applicable standards at that time. This condition is classified as an HREC because it has been addressed to the satisfaction of the applicable regulatory authority, although residual contamination may remain in the subsurface at concentrations below regulatory action levels.
Charleroi Specialty Coatings Plant — Phase I ESA (dated August 18, 2022):
TerraVerde's Phase I ESA for the Charleroi facility identified no RECs, Controlled Recognized Environmental Conditions ("CRECs"), or HRECs. The site is considered environmentally clean, consistent with its history as a greenfield development on former agricultural land. The facility was constructed in 2003, and no prior industrial or commercial uses of environmental concern were identified during the historical records review, interviews, or site reconnaissance.
Clarksburg Resin Blending Facility — Phase I ESA (dated August 22, 2022):
TerraVerde's Phase I ESA for the Clarksburg facility identified one CREC and one REC:
CREC: Residual diesel-range organics from an underground storage tank that was removed in 2012 by the prior tenant, Valley Freight Lines Inc. The removal and associated remediation were conducted under the oversight of the West Virginia Department of Environmental Protection ("WV DEP"), Site ID WVUST-2012-04887. A closure letter was issued by WV DEP in March 2013. Institutional controls associated with the closure were recorded at the Harrison County Clerk's Office, Book 1245, Page 312. This condition is classified as a CREC because institutional controls remain in place to manage residual contamination.
REC: Staining on the concrete floor in the northeast corner of the warehouse was observed in the area used for drum storage operations. The staining was dark in color and had an odor consistent with petroleum hydrocarbons or solvents. The condition warrants further investigation to determine whether subsurface contamination has migrated beneath the concrete slab.
Weirton Warehouse & Distribution Center — Phase I ESA (dated August 25, 2022):
TerraVerde's Phase I ESA for the Weirton facility identified one CREC, one de minimis condition, and no RECs:
CREC: The site was remediated under West Virginia's Voluntary Remediation and Redevelopment Program ("VRDP"), and a Certificate of Completion was issued by WV DEP in September 2015. Engineering and institutional controls remain in place to manage residual contamination associated with former industrial operations at the site. A deed restriction memorializing the institutional controls was recorded at the Hancock County Clerk's Office, Book 487, Page 89. Ongoing compliance with the VRDP Certificate conditions is required.
De Minimis Condition: A minor hydraulic fluid stain of approximately four (4) square feet was observed on the warehouse floor near the loading dock. This condition was deemed de minimis and does not constitute a REC.
Calderwood & Harkness LLP prepared and finalized Phase I ESA Review Memoranda for each of the four facilities (McKeesport, Charleroi, Clarksburg, and Weirton), analyzing the findings, assessing the potential environmental liabilities associated with each identified condition, and providing recommendations for further investigation where warranted.
B. Phase II Environmental Site Assessments
Based on the RECs identified in the Phase I ESAs, Phase II Environmental Site Assessments were recommended and conducted at the McKeesport and Clarksburg facilities. Phase II investigations were not recommended and were not conducted at the Charleroi or Weirton facilities.
McKeesport Phase II ESA:
The McKeesport Phase II ESA was commenced by TerraVerde on September 12, 2022. The scope of work included the installation of eighteen (18) soil borings and six (6) temporary monitoring wells across the facility, with a focus on the former UST field area near Building C and the eastern property boundary adjacent to the outdoor drum storage area and stormwater drainage channel. Soil sampling, groundwater sampling, and sub-slab soil gas sampling beneath Building C were conducted. All sampling activities were completed on September 26, 2022, and samples were submitted to Keystone Analytical Laboratories Inc., Monroeville, Pennsylvania, for analysis. Laboratory analytical results were received on October 10, 2022.
Key findings from the McKeesport Phase II ESA are summarized as follows:
• Toluene in Groundwater at MW-3: Detected at a concentration of 1,420 µg/L, exceeding the Pennsylvania Act 2 Statewide Health Standard of 1,000 µg/L by approximately 42%. Monitoring well MW-3 is located approximately 30 feet downgradient of the former UST field, near the northern wall of Building C.
• Xylene in Groundwater at MW-3: Detected at a concentration of 8,200 µg/L. This concentration is below the applicable PA Act 2 Statewide Health Standard of 10,000 µg/L but is elevated and indicates the presence of a significant dissolved-phase plume in the vicinity of the former UST field.
• Tetrachloroethylene (PCE) in Soil at SB-7: Detected at a concentration of 3.8 mg/kg, which exceeds the PA Act 2 residential used aquifer soil standard of 2.4 mg/kg but is below the non-residential standard of 14 mg/kg. Soil boring SB-7 is located adjacent to the former drum staging area on the eastern portion of the property.
• Lead in Soil at SB-14: Detected at a concentration of 680 mg/kg, which exceeds the PA Act 2 residential direct contact soil standard of 450 mg/kg but is below the non-residential standard of 1,000 mg/kg. Soil boring SB-14 is located near the exterior wall of Building A in an area formerly used for paint waste storage.
• Trichloroethylene (TCE) in Sub-Slab Soil Gas Beneath Building C: Detected at a concentration of 42 µg/m³, which exceeds the PA DEP vapor intrusion screening level of 21 µg/m³ by 100%. This finding confirms the vapor intrusion pathway identified in the Phase I ESA as a REC and indicates that vapor mitigation measures are required to protect building occupants.
TerraVerde prepared a preliminary remediation cost estimate dated October 18, 2022, estimating costs of $1.2 million to $2.8 million for groundwater treatment (pump-and-treat or in-situ chemical oxidation) and installation of a vapor mitigation system (sub-slab depressurization) beneath Building C. The range reflects uncertainty in the extent of the dissolved-phase plume and the ultimate remediation approach to be approved by PA DEP.
Calderwood & Harkness LLP prepared and finalized two memoranda addressing the McKeesport Phase II results: (1) a Phase II Results Analysis Memorandum dated October 14, 2022, providing a detailed legal and technical analysis of the findings and their implications for the transaction; and (2) a Vapor Intrusion Risk Assessment Memorandum dated October 16, 2022, focusing specifically on the TCE vapor intrusion pathway and its regulatory, liability, and worker safety implications.
Clarksburg Phase II ESA:
The Clarksburg Phase II ESA was commenced by TerraVerde on October 3, 2022. The scope of work included the installation of eight (8) soil borings and three (3) temporary monitoring wells in the northeast portion of the warehouse building and the adjacent exterior area, targeting the drum storage area staining identified as a REC in the Phase I ESA. Sampling activities were completed on October 7, 2022, and samples were submitted to Keystone Analytical Laboratories Inc. for analysis. Landlord consent for the Phase II investigation was obtained from Gerald Boothe of Mountainview Properties LLC prior to commencement of fieldwork.
As discussed in detail in Section IV below, the analytical results from the Clarksburg Phase II ESA had not been received from Keystone Analytical Laboratories as of the date negotiations were paused on October 28, 2022, and remain outstanding as of the date of this memorandum.
Charleroi and Weirton:
Phase II Environmental Site Assessments were not recommended and were not conducted at the Charleroi Specialty Coatings Plant or the Weirton Warehouse & Distribution Center. No RECs were identified at Charleroi, and the sole CREC at Weirton is managed under an existing VRDP Certificate of Completion with engineering and institutional controls in place. The de minimis hydraulic fluid stain at Weirton did not warrant further investigation.
C. Regulatory Compliance Reviews
Calderwood & Harkness LLP, with the assistance of Harrison Caldwell, completed comprehensive regulatory compliance reviews for all four ACC facilities across the following major environmental regulatory programs:
RCRA Compliance Review:
The RCRA compliance review was completed for all four facilities. The EPA identification numbers and generator status for each facility are as follows:
The most recent PA DEP inspection of the McKeesport facility occurred on April 14, 2021, and resulted in no violations. Review of available inspection records, manifests, biennial reports, and waste characterization records confirmed substantial compliance across all four facilities with applicable RCRA requirements.
Clean Air Act Compliance Review:
The Clean Air Act compliance review was completed for all facilities with air emission sources. The McKeesport facility operates under Title V Operating Permit No. TV-0383-0125, issued on June 1, 2019, with an expiration date of May 31, 2024. ACC is classified as a major source under Title V, with combined hazardous air pollutant ("HAP") emissions of 38.2 tons per year, which exceeds the major source threshold of 25 tons per year. A pending permit modification application was submitted by ACC in March 2022 for the installation of a thermal oxidizer on manufacturing Line 4. This application remains pending with PA DEP as of the date of this memorandum, and its status is identified as an outstanding item in Section IV below.
The Charleroi facility operates under State-Only Air Quality Permit No. 63-00982 and is classified as a minor source. The Clarksburg facility operates under West Virginia Registration Permit No. R13-3201 and is also classified as a minor source. Both facilities were determined to be in compliance with applicable Clean Air Act requirements. The Weirton facility does not have significant air emission sources and is not subject to air permitting.
Clean Water Act / NPDES Compliance Review:
The Clean Water Act compliance review was completed with respect to all facilities with NPDES-permitted discharges. The McKeesport facility operates under NPDES Permit No. PA0025631, which authorizes stormwater discharges from the facility. Review of Discharge Monitoring Reports ("DMRs") identified a total suspended solids ("TSS") exceedance in March 2022, with a reported TSS concentration of 48 mg/L against a permitted limit of 40 mg/L, representing a 20% exceedance. ACC self-reported the exceedance to PA DEP in accordance with its permit requirements. No enforcement action was initiated by PA DEP. ACC implemented corrective actions, including the installation of silt fencing and additional best management practices ("BMPs") at the affected discharge point. No other NPDES compliance issues were identified at any of the four facilities.
EPCRA / TRI / Tier II Reporting Review:
The Emergency Planning and Community Right-to-Know Act ("EPCRA") compliance review was completed. ACC's McKeesport facility is subject to Tier II reporting requirements and Toxics Release Inventory ("TRI") Form R filing obligations. Review of filings confirmed that Tier II reports have been timely submitted to the Allegheny County Local Emergency Planning Committee ("LEPC"), and TRI Form R filings are current. The most recent TRI filings (calendar year 2021) reported the following releases from the McKeesport facility: toluene — 12,400 pounds released; xylene — 8,700 pounds released. No EPCRA compliance deficiencies were identified.
Spill History and Enforcement Review:
The spill history and enforcement review was completed for all four facilities. Two reportable spills were documented at the McKeesport facility:
(1) On June 14, 2017, a spill of approximately 50 gallons of xylene occurred during a drum transfer operation. The spill was contained on-site, cleaned up using absorbent materials, and reported to PA DEP. PA DEP issued a No Further Action determination following confirmation that the spill had been adequately addressed.
(2) On February 3, 2020, a release of approximately 120 gallons of epoxy resin hardener occurred, with a portion of the release entering a floor drain connected to the sanitary sewer system. The release was reported to PA DEP and the local publicly owned treatment works ("POTW"). PA DEP assessed a civil penalty of $4,500, which ACC paid without contest. ACC implemented corrective actions, including the installation of a floor drain plug and secondary containment around the drum staging area. The corrective actions were completed and documented.
No reportable spills or enforcement actions were identified at the Charleroi, Clarksburg, or Weirton facilities.
D. Lease and Property Environmental Reviews
Clarksburg Lease Environmental Provisions Analysis:
Calderwood & Harkness LLP completed an analysis of the environmental provisions contained in the Mountainview Properties LLC triple-net lease governing the Clarksburg Resin Blending Facility. The analysis addressed ACC's remediation obligations as tenant under the lease, including provisions governing tenant responsibility for environmental conditions caused by tenant operations, landlord consent requirements for subsurface investigations, and indemnification obligations running to the landlord. A landlord consent letter was prepared by Calderwood & Harkness LLP, sent to Gerald Boothe of Mountainview Properties LLC, and obtained prior to the commencement of the Phase II ESA investigation at the Clarksburg facility.
Weirton Lease and VRDP Certificate Review:
Calderwood & Harkness LLP completed an analysis of the Northern Panhandle Realty Corp. double-net lease governing the Weirton Warehouse & Distribution Center, with particular attention to the deed restrictions, engineering controls, and ongoing compliance obligations associated with the WV DEP VRDP Certificate of Completion issued in September 2015. The analysis addressed the allocation of responsibility for ongoing VRDP compliance between landlord and tenant, the impact of the institutional controls on permitted uses of the property, and the potential for successor liability in the event of a change in tenant or property ownership.
E. Transaction Document Review — Environmental Provisions
Calderwood & Harkness LLP undertook extensive work on the environmental provisions of the draft Stock Purchase Agreement, including the following:
Environmental Representations & Warranties (Buyer's Initial Draft): The initial draft of Article IV, Section 4.18 of the SPA (Environmental Matters) was prepared by Harrison Caldwell with input from Beatrice Holloway and circulated to Seller's counsel, Hargrove, Dalton & Speer LLP, as part of the initial draft SPA on August 12, 2022. The representations covered, among other things, compliance with Environmental Laws, Environmental Permits, Hazardous Substances, Environmental Claims, Releases, and Environmental Liabilities, and were drafted broadly in favor of the Buyer.
Redline Comparison of Seller's Response: Seller's counsel submitted a counterproposal to the environmental representations and warranties in late September 2022. Calderwood & Harkness LLP prepared a detailed redline comparison and commentary memorandum identifying the Seller's material deletions, the insertion of knowledge qualifiers (limiting representations to matters "known" to the Seller), the addition of materiality thresholds, and the exclusion of liability for environmental conditions arising prior to 1987. The commentary assessed each modification and provided recommendations for negotiation strategy.
Environmental Indemnification and Escrow Provisions: Calderwood & Harkness LLP drafted the environmental indemnification and escrow provisions for inclusion in the SPA, proposing a $4.0 million environmental escrow funded at closing, an uncapped fundamental environmental indemnity for pre-closing environmental conditions, a seven (7)-year survival period for environmental representations and warranties (as compared to an eighteen (18)-month general survival period), and a carve-out of environmental claims from the $475,000 general representation and warranty basket/deductible applicable to other representations.
Environmental Risk Allocation Negotiation Memorandum (dated October 21, 2022): A comprehensive negotiation analysis memorandum was prepared and circulated to Derek Huang (CPS General Counsel) and Vanessa Moretti (Briarwood Capital Partners, Deal Partner). The memorandum analyzed in detail the gap between the Crestline position ($4.0 million escrow, uncapped indemnity, seven-year survival) and the Seller position ($1.5 million escrow, $3.5 million indemnity cap, three-year survival, $475,000 basket). The escrow gap of $2.5 million was identified as the central point of disagreement, along with the fundamental structural disagreement on whether the environmental indemnity should be capped or uncapped and the significant difference in survival period duration.
Comparative Analysis — Escrow vs. PLL Insurance: Calderwood & Harkness LLP prepared a comparative analysis evaluating a hybrid approach to environmental risk allocation that would combine a reduced escrow amount with a Pollution Legal Liability insurance policy. The analysis utilized the indicative PLL terms provided by Ironclad Specialty Insurance Company as a potential bridge between the parties' positions on the escrow and indemnification provisions.
F. Environmental Insurance Workstream
Calderwood & Harkness LLP, in coordination with Crestline, engaged Whitfield & Calder Insurance Advisors LLC (Douglas Whitfield, Managing Partner; Lauren Petrov, Vice President) to evaluate Pollution Legal Liability insurance options as a potential risk transfer and deal facilitation mechanism. The insurance submission package was transmitted to Whitfield & Calder on or about October 5, 2022, and included the Phase I ESAs for all four facilities, the McKeesport Phase II results, and the draft Comprehensive Environmental Diligence Summary Memorandum.
Ironclad Specialty Insurance Company (underwriter: Sean McAllister) responded with a non-binding indication of interest, the key terms of which were as follows:
• Aggregate Limit: $15,000,000
• Per Occurrence Limit: $10,000,000
• Policy Term: 10 years
• Indicative Annual Premium: $187,500
• Self-Insured Retention: $250,000
Calderwood & Harkness LLP prepared a PLL Coverage Analysis Memorandum dated October 19, 2022, and a Term Sheet Review and Comment Letter dated approximately October 23, 2022, analyzing the indicative terms and identifying the following significant coverage gaps:
(1) Known Conditions Exclusion: The indication contained a broad known conditions exclusion that may exclude coverage for the toluene and TCE contamination identified at the McKeesport facility, which are the most significant environmental liabilities identified in the diligence process. If these conditions are excluded, the PLL policy would provide materially less value as a risk transfer mechanism.
(2) Pre-Existing Contamination Definition: The definition of "pre-existing contamination" in the indication was ambiguous and could be construed to exclude coverage for contamination that was "known or should have been known" at the time of policy inception, which could encompass the Clarksburg drum storage area contamination if confirmed by Phase II results.
(3) Vapor Intrusion Sublimit: The indication included a sublimit for vapor intrusion claims that was significantly lower than the per occurrence limit, which could leave Crestline underinsured for the Building C vapor intrusion condition.
(4) Defense Cost Erosion: Defense costs were structured to erode the policy limits rather than being covered in addition to limits, reducing the effective coverage available for remediation and third-party claims.
A formal PLL application was not submitted, and the underwriting process was paused pending (a) completion of the Clarksburg Phase II data review and (b) a decision by Crestline on whether to resume deal negotiations. The coverage gaps identified in the Term Sheet Review Letter remain unresolved.
G. Fees and Billing
The following summarizes all fees and disbursements incurred in connection with Matter No. 1006-00003 through October 31, 2022:
Calderwood & Harkness LLP Professional Fees:
Less: Billing adjustment credit — ($100.00)
Total C&H Professional Fees (net): $218,740.00
Calderwood & Harkness LLP Disbursements:
TerraVerde Environmental Consulting LLC Fees (billed directly to Crestline):
The final Calderwood & Harkness LLP invoice for this matter, Invoice No. 48217 dated October 31, 2022, in the amount of $67,430.00 (representing September and October 2022 professional fees), was outstanding at the time this memorandum was prepared. The invoice was subsequently paid by Crestline on January 15, 2023. No amounts are currently outstanding on this matter.
IV. Outstanding Items at Time of Dormancy
The following items remain outstanding and incomplete as of the date of dormancy. Each is described with sufficient specificity to enable the engagement team to resume work efficiently in the event the matter is reactivated.
1. Clarksburg Phase II Analytical Results
Soil and groundwater samples collected by TerraVerde (field lead: Alicia Reyes, P.G.) at the Clarksburg Resin Blending Facility on October 7, 2022, were submitted to Keystone Analytical Laboratories Inc. in Monroeville, Pennsylvania, for analysis. The analytical results were expected by October 28, 2022, but were not received before the deal negotiations were paused. TerraVerde has confirmed that the samples remain in laboratory chain of custody at Keystone Analytical Laboratories and have not been discarded. Calderwood & Harkness LLP has not reviewed or analyzed these results. Upon receipt, the results will need to be evaluated against applicable West Virginia action levels and the CREC previously identified in the Phase I ESA.
TerraVerde's preliminary estimate of potential remediation costs, contingent on confirmation of contamination, ranges from $350,000 to $750,000 for soil excavation and off-site disposal, with an additional $150,000 to $400,000 if groundwater impacts are confirmed and require treatment. These estimates are preliminary and are subject to revision based on the actual analytical data.
2. Clarksburg Phase II Results Analysis Memorandum
The Clarksburg Phase II Results Analysis Memorandum cannot be prepared until Keystone Analytical Laboratories delivers the analytical data to TerraVerde and TerraVerde provides its Phase II report and findings. A placeholder has been reserved in the diligence file. Upon receipt of the data, Harrison Caldwell and Grace Nakamura will prepare the analysis memorandum in a format consistent with the McKeesport Phase II Results Analysis Memorandum completed on October 14, 2022.
3. Comprehensive Environmental Diligence Summary Memorandum (Draft)
A draft of the Comprehensive Environmental Diligence Summary Memorandum, dated October 22, 2022, is on file but remains incomplete. The draft incorporates the completed Phase I ESA findings for all four facilities, the McKeesport Phase II results and analysis, the regulatory compliance review findings, the lease environmental provisions analyses, and the environmental insurance evaluation. However, the following sections of the draft remain incomplete:
(a) The Clarksburg Phase II findings have not been incorporated, as the analytical data has not been received.
(b) The conclusions section remains in outline form and has not been drafted in full narrative.
(c) The environmental liability summary table requires updating to incorporate the Clarksburg Phase II data.
(d) The recommendations section, including the recommended escrow and indemnification structure, has not been finalized.
The draft has not been circulated to the client in final form. The current draft states estimated total environmental liabilities of $1.925 million (low estimate) to $4.345 million (high estimate) based on available data; however, these figures are subject to material revision upon receipt and incorporation of the Clarksburg Phase II results.
4. PLL Insurance Underwriting
As described in Section III.F above, Ironclad Specialty Insurance Company provided a non-binding indication of interest only. No formal PLL insurance application has been submitted. The underwriting process is paused pending (a) completion of the Clarksburg Phase II data review, which will be required by the underwriter as part of a complete submission, and (b) a decision by Crestline on whether to resume deal negotiations. The coverage gaps identified by Calderwood & Harkness LLP in the Term Sheet Review and Comment Letter — including the known conditions exclusion, the vapor intrusion sublimit, pre-existing contamination definition, and defense cost erosion of limits — remain unresolved and will require negotiation with the underwriter if the insurance workstream is reactivated.
5. Environmental Escrow / Indemnification Negotiations
The last substantive exchange between the parties on the environmental risk allocation provisions occurred on October 24, 2022, when Seller's counsel, Franklin Speer of Hargrove, Dalton & Speer LLP, transmitted the Seller's counterproposal via email. The Seller's counterproposal included the following terms:
• Environmental escrow: $1,500,000
• Environmental indemnification cap: $3,500,000
• Survival period for environmental representations: 3 years
• Basket/deductible: $475,000 (environmental claims not carved out)
Crestline's response to the Seller's counterproposal was not sent before the negotiations were paused. The principal areas of disagreement between the parties remain as follows:
• Escrow Amount: $2,500,000 gap ($4,000,000 requested by Crestline vs. $1,500,000 offered by Seller)
• Indemnification Structure: Crestline's position is uncapped fundamental environmental indemnity for pre-closing conditions; Seller's position is a $3,500,000 cap
• Survival Period: Crestline's position is 7 years; Seller's position is 3 years
• Basket/Deductible Carve-Out: Crestline's position is that environmental claims should be carved out from the $475,000 general basket; Seller's position is that they should be included
The disagreement on these environmental risk allocation provisions was identified by the client as the primary reason that negotiations were paused on October 28, 2022.
6. Title V Permit Modification — McKeesport Thermal Oxidizer
ACC submitted an application to PA DEP in March 2022 for a modification to its Title V Operating Permit (No. TV-0383-0125) to authorize the installation and operation of a thermal oxidizer on manufacturing Line 4 at the McKeesport facility. The issuance of this permit modification would affect the facility's operational capacity, capital expenditure requirements, and compliance obligations post-closing. The status of this application was unknown as of the date of dormancy. Calderwood & Harkness LLP flagged this item as a post-closing compliance consideration but did not track the application to resolution prior to the pause in negotiations. Upon resumption, the status of this pending permit modification should be confirmed with PA DEP and assessed for its impact on the transaction.
7. Asbestos and Lead-Based Paint Management Plans
The McKeesport facility, which was originally constructed in approximately 1955 and has been expanded and renovated multiple times, contains identified asbestos-containing materials ("ACM") and lead-based paint ("LBP"):
Asbestos-Containing Materials: ACM was identified in pipe insulation in Buildings A and B (estimated 2,400 linear feet) and in floor tiles in Building A (estimated 14,000 square feet). ACC maintains a management-in-place approach pursuant to an Asbestos Operations and Maintenance ("O&M") Plan dated September 2019. The ACM is reported to be in fair to good condition and is being managed in place. TerraVerde's estimated cost for full abatement, if required, ranges from $180,000 to $310,000.
Lead-Based Paint: LBP was identified on interior and exterior painted surfaces of the McKeesport office building pursuant to a 2019 lead-based paint survey. ACC maintains a management-in-place approach consistent with the survey recommendations. TerraVerde's estimated cost for full abatement, if required, ranges from $45,000 to $85,000.
Calderwood & Harkness LLP flagged the need for updated condition assessments of the ACM and LBP to confirm that the materials remain in stable condition and that ACC's management-in-place programs are being properly implemented. However, updated assessments were not commissioned before the negotiations were paused. ACC's existing management-in-place programs are understood to be ongoing.
8. Lender Environmental Diligence Condition
The commitment letter from Commonwealth National Bank, N.A. (Victoria Chen, Managing Director), signed on July 8, 2022, conditions the bank's obligation to fund the $65 million senior secured term loan and $20 million revolving credit facility on, among other things, satisfactory environmental diligence. Specifically, the commitment letter requires Phase I ESAs on all target real property with no RECs that are not adequately addressed, or, alternatively, the placement of acceptable Pollution Legal Liability insurance. As of the date of dormancy, RECs have been identified at both the McKeesport and Clarksburg facilities, and neither condition precedent has been satisfied. The McKeesport RECs have been investigated through the Phase II ESA process but remediation has not been undertaken or committed to, and the PLL insurance underwriting remains incomplete. The status of the commitment letter during the dormancy period is unknown and should be confirmed with Commonwealth National Bank upon any resumption of the transaction.
V. Environmental Liability Summary (Current Estimates)
Based on the environmental diligence work completed as of the date of this memorandum, the estimated range of environmental liabilities associated with ACC's four operating facilities is summarized in the table below. These estimates are preliminary and are subject to material revision upon receipt and analysis of the Clarksburg Phase II analytical results and any further assessment or changed conditions at the facilities.
Important Caveats: The estimates set forth above reflect the best available information as of the date of this memorandum and are subject to the following limitations and qualifications:
(a) The Clarksburg Phase II analytical results have not been received and are not reflected in the above estimates other than as a contingency based on TerraVerde's preliminary assumptions. Actual contamination at Clarksburg may be more or less extensive than assumed.
(b) The McKeesport remediation cost estimates are based on TerraVerde's preliminary assessment and have not been refined through a formal Remedial Investigation / Feasibility Study or approved by PA DEP. Actual remediation costs may differ materially based on the remediation approach selected, the extent of contamination delineation, and regulatory requirements.
(c) The asbestos and lead-based paint abatement cost estimates assume full removal. If management-in-place approaches continue to be acceptable and the materials remain in stable condition, actual costs may be limited to ongoing O&M expenses rather than full abatement.
(d) The estimates do not include potential third-party liability, natural resource damages, regulatory penalties, or any costs associated with ongoing VRDP compliance at the Weirton facility, none of which have been quantified.
VI. Reason for Dormancy
Deal negotiations between Crestline Packaging Solutions LLC and the shareholders of Allegheny Chemical Coatings, Inc. were paused on or about October 28, 2022. The primary cause of the pause was the inability of the parties to reach agreement on purchase price adjustments and transaction document provisions related to identified environmental liabilities. Specifically, the parties were unable to bridge the gap on the following environmental risk allocation provisions in the draft Stock Purchase Agreement:
(a) Environmental Escrow Amount: Crestline requested a $4,000,000 environmental escrow funded at closing to secure post-closing environmental indemnification obligations. The Seller offered a $1,500,000 escrow, resulting in a $2,500,000 gap between the parties' positions.
(b) Environmental Indemnification Cap: Crestline's position was that the Seller's environmental indemnification obligation for pre-closing environmental conditions should be uncapped — that is, the Seller should bear full responsibility for pre-closing environmental liabilities without a dollar limitation. The Seller proposed a $3,500,000 cap on its total environmental indemnification obligation.
(c) Survival Period: Crestline proposed a seven (7)-year survival period for the environmental representations and warranties, reflecting the latent nature of environmental liabilities and the time required to identify, investigate, and remediate environmental contamination. The Seller proposed a three (3)-year survival period.
No formal termination of the transaction or the engagement has occurred. The exclusivity period under the Letter of Intent expired on December 31, 2022, but the parties agreed informally to a standstill, with neither party affirmatively terminating the Letter of Intent or pursuing alternative transactions during the standstill period.
Client contact Derek Huang, General Counsel of Crestline Packaging Solutions LLC, confirmed verbally on October 31, 2022, that Crestline wishes to preserve all work product and keep the Calderwood & Harkness LLP engagement in hold status pending a decision by Crestline and Briarwood Capital Partners on whether to resume negotiations with the ACC shareholders. Mr. Huang indicated that no definitive timeline for such a decision had been established.
Briarwood Capital Partners LP (Vanessa Moretti, Deal Partner) was informed of the matter status and the dormancy placement via email from the undersigned dated November 2, 2022.
VII. Resumption Protocol
In the event that Crestline Packaging Solutions LLC elects to resume negotiations for the acquisition of Allegheny Chemical Coatings, Inc. and reactivate this engagement, the following eight-step protocol shall govern the resumption of work on Matter No. 1006-00003. The protocol is designed to ensure that all necessary procedural, legal, and substantive steps are taken in an orderly manner and that no material issues are overlooked following what may be an extended period of dormancy.
Step 1 — Reconfirm Engagement Scope. The responsible partner (Beatrice Holloway) shall contact Derek Huang, General Counsel of Crestline Packaging Solutions LLC, to reconfirm the scope of the environmental diligence engagement, determine whether any changes to the transaction structure, participants, or financing arrangements have occurred during the dormancy period, and identify any updated engagement terms or fee arrangements. To the extent that the transaction structure has changed (e.g., from a stock purchase to an asset purchase), the engagement scope and diligence approach may require corresponding adjustments.
Step 2 — Updated Conflict Check. The engagement team shall run a fresh conflict check through Calderwood & Harkness LLP's conflicts management system to ensure that no new conflicts of interest have arisen during the dormancy period. The conflict check should encompass all existing parties to the transaction as well as any new parties that may have entered the deal, including any new equity co-investors, replacement lenders, or additional sellers or selling entities. Results of the updated conflict check shall be documented in the matter file.
Step 3 — Retrieve Clarksburg Phase II Results. Harrison Caldwell or Grace Nakamura shall contact TerraVerde Environmental Consulting LLC (Dr. Nina Sorensen, P.E., CHMM) to confirm the continued availability of the TerraVerde engagement team and to retrieve the Clarksburg Phase II analytical results from Keystone Analytical Laboratories Inc. Chain-of-custody integrity and analytical validity of the samples shall be confirmed with both TerraVerde and Keystone Analytical Laboratories. If the samples have exceeded their applicable holding times or if chain-of-custody integrity has been compromised, resampling may be required. Upon receipt of valid analytical data, the Clarksburg Phase II Results Analysis Memorandum shall be prepared in a format consistent with the McKeesport Phase II memorandum.
Step 4 — Request Updated Environmental Records from ACC. Calderwood & Harkness LLP shall transmit a formal request to Seller's counsel (Franklin Speer, Hargrove, Dalton & Speer LLP) for updated environmental records and information for all four ACC operating facilities covering the entire dormancy period from October 2022 through the date of resumption. The request shall cover, at a minimum, the following categories of information:
(a) Any new releases, spills, or discharges of hazardous substances or petroleum products;
(b) Any regulatory inspections, notices of violation, consent orders, or enforcement actions;
(c) Any permit applications, modifications, renewals, or revocations;
(d) Any changes in operations, processes, raw materials, or waste streams;
(e) Any environmental claims, lawsuits, or citizen complaints;
(f) Any changes in facility ownership, tenancy, or lease terms; and
(g) Any updates to the ACM and LBP management programs.
Step 5 — Reassess Remediation Cost Estimates. In coordination with TerraVerde, the engagement team shall reassess the remediation cost estimates for all identified environmental conditions in light of (a) any changed site conditions during the dormancy period, (b) any updated regulatory standards under the Pennsylvania Act 2 program or West Virginia action levels that may have been promulgated during dormancy, (c) new data from the Clarksburg Phase II analytical results, and (d) any other relevant new information. Revised estimates shall be incorporated into the Comprehensive Environmental Diligence Summary Memorandum.
Step 6 — Re-engage Environmental Insurance Advisors. The engagement team shall contact Whitfield & Calder Insurance Advisors LLC (Douglas Whitfield, Managing Partner; Lauren Petrov, Vice President) and Ironclad Specialty Insurance Company (Sean McAllister, underwriter) to determine whether PLL insurance coverage remains available on terms comparable to the prior non-binding indication of interest. The underwriting submission shall be updated with the Clarksburg Phase II data, any new environmental information obtained during the dormancy period, and any revised remediation cost estimates. The previously identified coverage gaps shall be addressed in renewed negotiations with the underwriter.
Step 7 — Coordinate with Acquisition Lender. The engagement team shall coordinate with Crestline's financing counsel to contact Commonwealth National Bank, N.A. (Victoria Chen, Managing Director) to determine the status of the $65 million senior secured term loan and $20 million revolving credit facility commitment letter signed on July 8, 2022. The team shall ascertain whether the commitment letter remains in effect or has expired, whether any updated environmental diligence conditions or requirements have been imposed, and whether the lender requires any additional environmental information or assurances as a condition to funding.
Step 8 — Revised Budget Estimate. Beatrice Holloway shall prepare and circulate to Derek Huang (CPS General Counsel) and Patricia Okonkwo (CPS VP, Environmental Health & Safety) a revised budget estimate for the completion of remaining environmental diligence work. The budget estimate shall encompass the following work streams: (a) Clarksburg Phase II analysis and memorandum preparation; (b) finalization of the Comprehensive Environmental Diligence Summary Memorandum; (c) completion of the PLL insurance evaluation and underwriting process; (d) updated remediation cost assessment; (e) any renewed environmental risk allocation negotiation support; and (f) any additional diligence necessitated by developments during the dormancy period.
VIII. Document Preservation Directive
All work product, correspondence, electronic files, and physical documents related to Matter No. 1006-00003 are to be preserved in their current state, without alteration, deletion, or destruction, effective immediately and continuing until formal matter closure or resumption, as applicable.
A separate Document Preservation and Hold Notice is being issued concurrently with this memorandum to all members of the Calderwood & Harkness LLP engagement team: Beatrice Holloway, James Prentice, Harrison Caldwell, Grace Nakamura, Rafael Dominguez, and Simone Estrada. Each team member is required to acknowledge receipt of the Document Preservation and Hold Notice in writing and to comply with its terms.
The preservation obligation applies to all communications and documents exchanged with or relating to the following parties and entities in connection with Matter No. 1006-00003:
• Crestline Packaging Solutions LLC
• Briarwood Capital Partners LP
• Allegheny Chemical Coatings, Inc.
• TerraVerde Environmental Consulting LLC
• Hargrove, Dalton & Speer LLP
• Whitfield & Calder Insurance Advisors LLC
• Ironclad Specialty Insurance Company
• Commonwealth National Bank, N.A.
• Keystone Analytical Laboratories Inc.
• Mountainview Properties LLC
• Northern Panhandle Realty Corp.
• Any other third parties with whom communications were exchanged in connection with this matter
Without limitation, the preservation obligation extends to email communications, memoranda, draft documents, final documents, research files, notes, spreadsheets, financial models, site photographs, maps, laboratory reports, regulatory filings, permit documents, lease documents, insurance submissions, and any other materials, whether in electronic or physical form, that relate to this matter.
No documents, files, or electronic records relating to this matter shall be deleted, discarded, or destroyed until formal matter closure or resumption, as applicable, and only then in accordance with Calderwood & Harkness LLP's standard document retention policies and any applicable legal hold obligations.
The Environmental Diligence Status Tracker, last updated on October 28, 2022, by Grace Nakamura, serves as the master index of all diligence items, their current status, and responsible parties. This tracker should be consulted as the starting point upon any resumption of the matter and is preserved as part of the matter file.
IX. Current Engagement Status and Contact Information
The following summarizes the current engagement status and key contact information for Matter No. 1006-00003 as of the date of this memorandum:
Matter Status: Dormant, effective November 4, 2022.
Client Primary Contact:
Derek Huang General Counsel Crestline Packaging Solutions LLC 4100 Riverside Commerce Drive, Suite 300 Dayton, OH 45402
Sponsor Contact:
Vanessa Moretti Deal Partner Briarwood Capital Partners LP 712 Lexington Avenue, 18th Floor New York, NY 10065
Client EHS Contact:
Patricia Okonkwo Vice President, Environmental Health & Safety Crestline Packaging Solutions LLC 4100 Riverside Commerce Drive, Suite 300 Dayton, OH 45402
C&H Responsible Partner:
Beatrice Holloway Partner, Mergers & Acquisitions Calderwood & Harkness LLP 1900 Euclid Avenue, Suite 3200 Cleveland, OH 44115
C&H Billing Partner:
James Prentice Partner, Mergers & Acquisitions Calderwood & Harkness LLP 1900 Euclid Avenue, Suite 3200 Cleveland, OH 44115
Any inquiries regarding this matter during the dormancy period should be directed to Beatrice Holloway at the contact information set forth above.
Beatrice Holloway
Partner, Mergers & Acquisitions Calderwood & Harkness LLP 1900 Euclid Avenue, Suite 3200 Cleveland, OH 44115
This memorandum constitutes attorney work product and is protected by the attorney-client privilege. It is intended solely for internal use by Calderwood & Harkness LLP personnel assigned to Matter No. 1006-00003 and is not to be distributed to any third party without the express written consent of the responsible partner.
Facility | EPA ID | Generator Status
McKeesport | PAD-098-721-445 | Large Quantity Generator (LQG)
Charleroi | PAD-112-583-667 | Small Quantity Generator (SQG)
Clarksburg | WVD-054-319-882 | Conditionally Exempt Small Quantity Generator (CESQG)
Weirton | N/A | Not a generator
Timekeeper | Role | Hours | Rate | Total
Beatrice Holloway | Partner, M&A | 42.5 | $895/hr | $38,037.50
James Prentice | Partner, M&A |

CALDERWOOD & HARKNESS LLP INTERNAL MEMORANDUM

PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT

Record

Parties

Dates

Amounts