Contract analysis

I. Executive Summary The purpose of this memorandum is to analyze Meridian Consumer Brands LLC's ("Meridian" or the "Company") exposure to potential preference avoidance actions under Section 547 of the Bankruptcy Code, 11 U.S.C. § 547, in connection with the Chapter 11 filing of Cascadia Home & Lifestyle Inc. ("Cascadia," "CHL," or the "Debtor"). Cascadia filed its voluntary petition for relief under Chapter 11 of t

II. Background A. The Parties and Their Commercial Relationship Meridian Consumer Brands LLC is a Delaware limited liability company headquartered at 575 Lexington Avenue, 22nd Floor, New York, New York 10022. Meridian is a portfolio company of Briarstone Capital Partners Fund IV, LP ("Briarstone"), which holds an approximately 78% equity interest in Meridian, having acquired the company in 2021 for approximately $68

III. Legal Framework — 11 U.S.C. § 547 A. Elements of a Preference Under § 547(b)

Section 547(b) of the Bankruptcy Code authorizes the trustee (or debtor-in-possession) to avoid any transfer of an interest of the debtor in property if five statutory elements are satisfied. All five elements must be established by the party seeking avoidance. The elements are as follows:

1. The transfer was of an interest of the debtor in property;

2. The transfer was made to or for the benefit of a creditor;

3. The transfer was made for or on account of an antecedent debt owed by the debtor before such transfer was made;

4. The transfer was made while the debtor was insolvent; and

5. The transfer enables the creditor to receive more than it would have received if (a) the case were a case under Chapter 7 of the Bankruptcy Code, (b) the transfer had not been made, and (c) the creditor received payment of such debt to the extent provided by the provisions of the Bankruptcy Code. See 11 U.S.C. § 547(b)(1)–(5). We analyze each element as applied to Meridian's receipt of payments from Cascadia durin

Section 547(c) provides several affirmative defenses to preference avoidance. The burden of proof on these defenses rests with the transferee — i.e., with Meridian. See 11 U.S.C. § 547(g) ("the trustee has the burden of proving the avoidability of a transfer . . . [and] the creditor or party in interest against whom recovery or avoidance is sought has the burden of proving the nonavoidability of a transfer under subs

1. Section 547(c)(1) — Contemporaneous Exchange for New Value. This defense applies to transfers that were intended by the debtor and the creditor to be contemporaneous exchanges for new value given to the debtor, and that were in fact substantially contemporaneous exchanges. 11 U.S.C. § 547(c)(1).

2. Section 547(c)(2) — Ordinary Course of Business. This defense protects transfers made in the ordinary course of business or financial affairs of the debtor and the transferee, or made according to ordinary business terms. 11 U.S.C. § 547(c)(2). This is Meridian's strongest available defense and is discussed in detail in Section V.A below.

3. Section 547(c)(4) — Subsequent New Value. This defense applies to the extent that, after the preferential transfer, the creditor extended new value to or for the benefit of the debtor that remains unpaid or that was not otherwise secured by an unavoidable security interest. 11 U.S.C. § 547(c)(4). This defense is discussed in detail in Section V.B below. In addition to the three principal defenses, we briefly note

Section 547(c)(3) — Purchase Money Security Interest ("PMSI"). This defense protects transfers that create a security interest in property acquired by the debtor to secure new value given to enable the debtor to acquire such property. This defense is designed for secured lending transactions and is inapplicable to Meridian's unsecured trade receivables.

Section 547(c)(9) — Small Preference Threshold. Under Section 547(c)(9), as amended by the Bankruptcy Threshold Adjustment and Technical Corrections Act and as most recently adjusted, a transfer is not avoidable in a case filed by a debtor whose debts are not primarily consumer debts, if the aggregate value of all property that constitutes or is affected by such transfer is less than $7,575. This threshold applies to

IV. Detailed Payment Analysis — Preference Period Transfers A. Summary of Preference-Period Payments The 90-day preference period for purposes of Section 547(b)(4)(A) runs from July 16, 2025 through October 14, 2025 (inclusive of the petition date). During this period, Meridian received a total of approximately $8,430,000 in payments from Cascadia, distributed across fourteen (14) wire transfers. All payments were tr

V. Defense Analysis A. Ordinary Course of Business Defense — § 547(c)(2)

1. Legal Standard. Section 547(c)(2) provides that a transfer is not avoidable to the extent that it was: (A) made in the ordinary course of business or financial affairs of the debtor and the transferee; or (B) made according to ordinary business terms. 11 U.S.C. § 547(c)(2) (emphasis added). This defense is one of the most frequently invoked and litigated defenses in preference law. Prior to the enactment of the Ba

2. Application — Subjective (Course of Dealing) Analysis. The foundation of Meridian's ordinary course defense is the comparison between Cascadia's historical payment patterns and its payment patterns during the 90-day preference period. Based on our preliminary analysis: Contractual Payment Terms: Net 60 (with an optional 2% discount at Net 15, rarely utilized by Cascadia). Historical Average Payment Timing (24-Mont

3. Application — Objective (Industry Standards) Analysis. Even if the subjective prong were challenged as to any particular payment, Meridian should be able to establish the objective prong — that the payments were made "according to ordinary business terms" in the consumer products / retail trade industry. The relevant industry for purposes of this analysis is the market for consumer products sold to national retail

4. Strength Assessment. We assess the ordinary course of business defense as strong for the substantial majority of the fourteen preference-period payments. The key factors supporting this assessment are: • The narrow variance between historical payment timing (Net 53) and preference-period payment timing (Net 58) — only 5 days; • The direction of the variance — payments slowed during the preference period, not accel

1. Legal Standard. Section 547(c)(4) provides that a transfer is not avoidable to the extent that, after such transfer, the creditor gave new value to or for the benefit of the debtor that: (A) is not secured by an otherwise unavoidable security interest; and (B) on account of which new value the debtor did not make an otherwise unavoidable transfer to or for the benefit of such creditor. 11 U.S.C. § 547(c)(4). The p

2. Application to Meridian's Payments. Meridian continued to ship goods to Cascadia in substantial volume throughout the preference period. As a major supplier providing household cleaning products, personal care items, and small kitchen appliances, Meridian's monthly shipment volume to Cascadia averaged approximately $4.8 million per month in the months leading up to the bankruptcy filing. Even as Cascadia's financi

Section 503(b)(9) Administrative Claim: Meridian has asserted a claim for administrative expense priority under Section 503(b)(9) for approximately $1,847,200 in goods received by the Debtor within the 20 days preceding the petition date (i.e., between September 24, 2025 and October 14, 2025). These shipments were received by the Debtor very late in the preference period and remain entirely unpaid. These post-transfe

3. Quantification (Preliminary). A detailed shipment-by-shipment schedule will be prepared and included as Appendix B to this memorandum upon receipt and reconciliation of the relevant shipping and delivery records. For each of the fourteen preferential payments, we will identify all subsequent shipments of goods and calculate the net new value offset. Based on the preliminary information available — specifically, Me

1. Legal Standard. Section 547(c)(1) provides that a transfer is not avoidable to the extent that it was: (A) intended by the debtor and the creditor to or for whose benefit such transfer was made to be a contemporaneous exchange for new value given to the debtor; and (B) in fact a substantially contemporaneous exchange. 11 U.S.C. § 547(c)(1). This defense is designed to protect transactions where the parties intende

2. Application to Meridian's Payments. Meridian's trade terms with Cascadia are Net 60 — not COD or payment-on-delivery. The trade relationship was structured as a credit arrangement, with invoices rendered upon or shortly after delivery and payment expected within 60 days. This credit arrangement reflects the parties' intent to operate on open-account credit terms rather than on a contemporaneous exchange basis. Mos

1. Section 547(c)(9) — De Minimis Transfers. As noted in Section III.B above, Section 547(c)(9) provides a safe harbor for aggregate transfers below $7,575 in cases involving non-consumer debts. Meridian's individual payments range from approximately $215,000 to $1,275,000, and the aggregate payments total approximately $8,430,000. This defense is not applicable to any of Meridian's preference-period payments.

2. Earmarking Doctrine. The earmarking doctrine provides that a transfer is not a preference if the funds used to make the payment were "earmarked" by a third party to pay a specific creditor — that is, the funds never became part of the debtor's estate because they were designated by a third-party source specifically for the creditor's benefit. Under this doctrine, the payment does not constitute a "transfer of an i

VI. Quantification of Net Preference Exposure A. Summary Exposure Table The following table summarizes Meridian's estimated gross and net preference exposure, incorporating the defenses analyzed above: We emphasize that these estimates are preliminary and are subject to meaningful refinement as we complete the detailed payment-by-payment and shipment-by-shipment analysis. The net exposure range could shift in either

VII. Interaction with Other Claims and Strategies A. Coordination with § 503(b)(9) Administrative Claim Meridian has asserted a claim for administrative expense priority under Section 503(b)(9) of the Bankruptcy Code in the amount of $1,847,200, representing the value of goods received by Cascadia within the 20 days immediately preceding the petition date (September 24, 2025 through October 14, 2025). Section 503(b)(

VIII. Document Preservation and Information Gathering A. Immediate Document Preservation Steps Prompt and comprehensive document preservation is essential to support Meridian's preference defenses. The ordinary course defense, in particular, depends on the availability of detailed historical payment records that establish the baseline course of dealing between Meridian and Cascadia. Similarly, the new value defense r