Contract analysis

I. Purpose and Executive Summary This memorandum is being delivered on an expedited basis to alert Meridian Consumer Brands LLC ("MCB") to a material development that directly affects the Master Services Agreement currently under negotiation between MCB and Pinecrest Digital Solutions Inc. ("Pinecrest"). The development requires immediate attention and, in our view, warrants an immediate pause of all ongoing negotiat

II. Background A. The Parties and the Proposed MSA Meridian Consumer Brands LLC. MCB is a Delaware limited liability company headquartered at 680 Fifth Avenue, 22nd Floor, New York, NY 10019. MCB is a consumer products and retail company with reported fiscal year 2022 revenue of approximately $1.34 billion. MCB's product portfolio spans household cleaning products, personal care items, and beauty and wellness brands

III. Analysis of Change-of-Control Provision in Draft MSA A. Relevant Contract Language The near-final draft of MSA-PDS-MCB-2023 includes a Change of Control provision that was the subject of negotiation between C&H and DPH and has been agreed upon in principle by the parties. The provision, as reflected in the October 6, 2023 near-final draft, is located in Section 14.3 of the MSA and provides, in relevant part, as

Section 14.3 — Change of Control. In the event that either Party undergoes a Change of Control (as defined herein), the other Party may, at its sole option, terminate this Agreement upon written notice delivered to the Party undergoing the Change of Control within thirty (30) days following the date on which the terminating Party first receives written notice of, or otherwise becomes aware of, the Change of Control e

IV. Data Security and Confidentiality Risk Assessment A. Nature of MCB Data at Risk Under the proposed MSA, Pinecrest would be entrusted with hosting, managing, and processing some of MCB's most competitively sensitive business data. The scope of data that would be within Pinecrest's custody and control includes, but is not limited to, the following categories: Trade Promotion Data. MCB's trade promotion optimization

V. Competitive Overlap Analysis A. Vaulton's Relationships with MCB Competitors The competitive overlap between Vaulton's existing client base and MCB's competitive landscape represents, in C&H's assessment, the most significant risk factor arising from the Vaulton acquisition. Based on publicly available information and industry sources, Vaulton currently maintains active IT services relationships with at least two

VI. Preliminary Antitrust and Regulatory Considerations C&H notes, on a preliminary basis, that the Vaulton acquisition of Pinecrest may itself be subject to regulatory review under applicable antitrust and competition laws. Given the reported $685 million transaction value, the acquisition almost certainly exceeds the filing thresholds established under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as am

VII. Impact on MCB's IT Services Strategy A. Incumbent Vendor Fallback A significant mitigating factor in the current situation is that MCB currently maintains an active, ongoing IT services arrangement with its incumbent vendor, Corwyn Technology Services LLC ("Corwyn"). MCB's relationship with Corwyn is governed by a legacy IT services agreement dated March 1, 2020, which has been extended on a month-to-month basis

VIII. Recommended Next Steps Based on the foregoing analysis, C&H recommends the following immediate and near-term actions:

1. Immediate Pause of Negotiations. MCB should not proceed with any further negotiation sessions, draft exchanges, business principal escalation meetings, or other activities related to the MSA with Pinecrest or its outside counsel, Dunleavy, Proctor & Hale LLP, until the implications of the Vaulton acquisition have been fully assessed and a deliberate strategic decision has been reached. This includes suspending any

2. Formal Communication to Pinecrest's Counsel. C&H recommends sending a formal letter to Carolyn Ostrowski, lead partner at Dunleavy, Proctor & Hale LLP, notifying Pinecrest that MCB is pausing the MSA negotiation pending its assessment of the recently announced Vaulton acquisition and its implications for the proposed engagement. The letter should be drafted in measured and professional terms, without prejudging th

3. Internal Strategy Call. MCB management and Ashford Capital personnel should convene an internal strategy call at the earliest practicable opportunity to discuss the path forward. Recommended participants include David Halverston (General Counsel), Meg Thornbury (Senior Vice President, Operations), Priya Chandrasekaran (Vice President, Information Technology), Karen Lau (Operating Partner, Ashford Capital), and Vin

4. Detailed Competitive Overlap Analysis. C&H will prepare a comprehensive memorandum analyzing the competitive overlap, data isolation risks, and antitrust considerations arising from the Vaulton acquisition in greater detail than is provided in this initial alert memorandum. The detailed memorandum will include an assessment of: (i) the full scope of Vaulton's existing client relationships in the consumer products

5. Communication with Ashford Capital. Given that Ashford Capital Partners Fund IV, LP (through its general partner, Ashford Capital Management LLC) exercises oversight responsibility for MCB and has a fiduciary interest in MCB's strategic decisions, Karen Lau (Operating Partner) and Vincent Driscoll (Managing Partner) should be apprised of this development and consulted on the strategic decision at the earliest oppo

6. Preservation of Rights. MCB should expressly reserve all rights in any communication with Pinecrest, DPH, or any other party in connection with this matter. This includes, without limitation, the right to terminate the negotiation process entirely, the right to re-open discussions with alternative vendors, and the right to invoke any applicable provision of the draft MSA (including the Change of Control provision)

IX. Conclusion The Vaulton acquisition of Pinecrest fundamentally alters the risk profile of the proposed Master Services Agreement. What was a straightforward engagement with a mid-size, independent IT services vendor has become, through no action of MCB, a potential engagement with a subsidiary of one of the largest enterprise technology companies in the United States — a company that simultaneously serves two of M