Contract analysis

I. Executive Summary This memorandum analyzes the competitive overlap risks and antitrust implications arising from Vaulton Technologies Group, Inc.'s ("Vaulton") announced acquisition of Pinecrest Digital Solutions Inc. ("Pinecrest") and the impact of that transaction on the proposed Master Services Agreement between Pinecrest and Meridian Consumer Brands LLC ("MCB" or the "Company") designated MSA-PDS-MCB-2023 (the

II. Background A. The Proposed MSA with Pinecrest MCB initiated a formal procurement process for IT managed services in early 2023 in connection with a broader strategic review of the Company's technology infrastructure and vendor relationships. On June 12, 2023, MCB's Procurement team, under the direction of Samuel Otieno, Director of Procurement, issued Request for Proposal No. MCB-IT-RFP-2023-006 (the "RFP"), soli

1. Data security standards (scope and specificity of security controls obligations);

2. Liability cap (2× prior 12 months' fees vs. 1× prior 12 months' fees);

3. Termination fee (amount and conditions of early termination payment); and

4. Audit rights (scope, frequency, and cost allocation of MCB's right to audit Pinecrest's operations, security controls, and financial records). No Binding Agreement. It is critical to note that no binding agreement was executed between MCB and Pinecrest at any point. No letters of intent, term sheets, or other preliminary agreements with binding effect were signed. No MCB data was transferred to Pinecrest, and no s

III. Competitive Overlap Analysis A. Vaulton's Existing IT Relationships with MCB's Direct Competitors A central concern arising from the Vaulton-Pinecrest transaction is the fact that Vaulton currently maintains active IT services relationships with at least two companies that are direct competitors of MCB in MCB's core product segments. These relationships are described below.

1. Brightleaf Brands, Inc. Brightleaf Brands, Inc. ("Brightleaf") is a Delaware corporation and a direct competitor of MCB in the household cleaning and personal care product segments. For its fiscal year ended December 31, 2022, Brightleaf reported revenue of approximately $2.1 billion, making it a substantially larger competitor in the categories where its product portfolio overlaps with MCB's. Based on publicly av

2. Kessler Home & Personal Care Corp. Kessler Home & Personal Care Corp. ("Kessler") is a Delaware corporation and a direct competitor of MCB in the personal care and beauty product segments. For its fiscal year ended December 31, 2022, Kessler reported revenue of approximately $890 million. While Kessler is smaller than MCB in aggregate revenue terms, the competitive overlap between the two companies is particularly

IV. Data Security and Competitive intelligence Risks A. MCB Proprietary Data at Risk The Proposed MSA contemplates that Pinecrest (now Vaulton) would host and manage a broad range of MCB's information technology systems and the data residing within those systems. Based on our review of the Proposed MSA's scope of services and the due diligence materials exchanged during the negotiation process, the following categori

V. Antitrust and Competition Law Considerations A. Information Exchange Risks Under Federal Antitrust Law The structural environment created by Vaulton's simultaneous IT service relationships with MCB and MCB's direct competitors raises concerns under federal antitrust law, specifically Section 1 of the Sherman Act (15 U.S.C. § 1) and Section 5 of the Federal Trade Commission Act (15 U.S.C. § 45). Under Section 1 of

VI. Financial Analysis: Cost of Termination A. Sunk Costs MCB has incurred certain costs in connection with the MSA negotiation process that are not recoverable regardless of the termination decision. These sunk costs are summarized as follows: C&H Legal Fees. Calderwood & Harkness LLP has incurred approximately $187,000 in professional fees through the date of this memorandum in connection with the negotiation of th

VII. Alternative Paths Forward We have evaluated three alternative courses of action for MCB's consideration. Our recommended path is set forth in Section VII.A below. Sections VII.B and VII.C describe alternative approaches that we have considered and rejected. A. Terminate MSA Process (Recommended) We recommend that MCB formally terminate the MSA negotiation process with Pinecrest Digital Solutions Inc. (now a whol

1. Formal Termination Notice. C&H will prepare and transmit a formal termination letter to Dunleavy, Proctor & Hale LLP (attention: Carolyn Ostrowski) on behalf of MCB, advising that MCB has elected to discontinue the MSA negotiation process. The letter will cite change-of-control concerns, competitive overlap, and data security risks as the basis for the decision, without providing the level of legal analysis contai

2. Confirmation of No Binding Agreement. The termination letter will confirm that no binding agreement was reached between MCB and Pinecrest at any point, that no letters of intent or preliminary agreements with binding effect were executed, and that neither party has any transition, wind-down, or other obligations to the other in connection with the termination of negotiations.

3. Destruction of Confidential Information. The termination letter will request mutual destruction (or, at the receiving party's option, return) of all confidential information exchanged between the parties during the RFP and negotiation process, in accordance with the confidentiality obligations contained in the parties' mutual non-disclosure agreement executed in connection with the RFP process.

4. Continuation with Corwyn. MCB will continue to operate under its existing month-to-month arrangement with Corwyn Technology Services LLC at the current annual rate of $3,150,000. MCB may, at its discretion, evaluate whether to extend or renegotiate the Corwyn arrangement or to issue a new RFP for IT managed services in 2024 to identify alternative vendors without the competitive overlap concerns presented by Vault

VIII. Recommendation Based on the analysis set forth in this memorandum, Calderwood & Harkness LLP recommends that Meridian Consumer Brands LLC terminate the MSA negotiation process with Pinecrest Digital Solutions Inc. (now a wholly owned subsidiary of Vaulton Technologies Group, Inc.) and formally close the matter. The competitive overlap created by Vaulton's existing IT service relationships with Brightleaf Brands

IX. Next Steps Upon review of this memorandum, we request that the following steps be taken in the order indicated:

1. MCB Management Decision. Meg Thornbury (CEO) and David Halverston (General Counsel) to review this memorandum and confirm their decision regarding termination of the MSA negotiation process. We are available to discuss any questions or concerns by telephone or in person at the addressees' convenience.

2. PE Sponsor Alignment. Karen Lau, Operating Partner at Ashford Capital Management LLC, to review this memorandum and confirm that the recommended course of action is consistent with Ashford's risk tolerance and strategic perspective regarding the MCB investment. To the extent that Ashford's legal or compliance functions wish to review the antitrust analysis, we are available to provide a briefing at Ms. Lau's direc

3. Formal Termination Letter. Upon confirmation of the termination decision by MCB management and the Ashford team, C&H will prepare and transmit a formal termination letter