CALDERWOOD & HARKNESS LLP Counselors at Law
1585 Broadway, 34th Floor, New York, NY 10036 Telephone: (212) 554-7000
INTERNAL MEMORANDUM — CONFIDENTIAL
NEW MATTER OPENING MEMORANDUM
June 10, 2022
Date: June 10, 2022
To: Managing Partner's Office / New Business Committee, Calderwood & Harkness LLP
From: Sandra Tung, Partner, M&A Group; Oliver Mackenzie, Partner, M&A Group
Re: New Matter Opening — Meridian Consumer Brands LLC — Proposed Acquisition of Consumer Product Lines from Briarwood Home Essentials, Inc.
Matter No.: 1011-00005
This memorandum is submitted to the Managing Partner's Office and the New Business Committee of Calderwood & Harkness LLP in connection with the opening of a new client matter. The purpose of this memorandum is to provide the Committee with all information necessary to evaluate and approve the firm's representation of Meridian Consumer Brands LLC in the transaction described herein, and to establish the administrative, billing, and staffing framework for the engagement. All information contained herein is strictly confidential and is subject to the firm's internal information barriers and confidentiality policies.
1. Matter Summary
Client: Meridian Consumer Brands LLC, a Delaware limited liability company, with its principal place of business located at 440 Park Avenue South, 18th Floor, New York, NY 10016. The client's federal Employer Identification Number is 83-2947106.
Matter Type: Asset Purchase (Mergers & Acquisitions)
Description of Engagement: Calderwood & Harkness LLP ("C&H" or the "Firm") has been engaged to serve as buyer's counsel to Meridian Consumer Brands LLC ("Meridian" or "MCB" or the "Client") in connection with a proposed asset purchase transaction valued at approximately $95,000,000. The transaction involves the acquisition by Meridian of the "CleanLeaf" branded home cleaning product line and the "PureHaven" branded personal care product line (collectively, the "Acquired Product Lines" or the "Acquired Assets") from Briarwood Home Essentials, Inc. ("Briarwood" or "BHE"), an Ohio corporation headquartered at 1175 Creekside Drive, Suite 400, Columbus, OH 43215 (EIN: 31-1684239). Briarwood is a privately held consumer products company whose sole shareholder is Malcolm Greer.
The parties executed a Letter of Intent on March 28, 2022, which sets forth the principal terms of the proposed transaction on a non-binding basis (with certain binding provisions relating to exclusivity, confidentiality, governing law, and dispute resolution). Due diligence is scheduled to formally commence on June 14, 2022, through a virtual data room hosted on the Pemberton Systems platform.
Governing Law: The transaction will be governed by the laws of the State of New York, consistent with the governing law provisions of the Letter of Intent and the anticipated Asset Purchase Agreement.
Engagement Letter: An engagement letter has been executed concurrently with this memorandum on June 10, 2022, and is addressed to Diana Ressler, General Counsel, Meridian Consumer Brands LLC. A copy of the executed engagement letter is maintained in the matter file. The engagement letter sets forth the scope of the Firm's representation, the applicable fee arrangements, and the terms and conditions of the attorney-client relationship.
2. Client Information
2.1 Client Entity Details
Full Legal Name: Meridian Consumer Brands LLC
Short Name / Matter Alias: Meridian / MCB
Entity Type: Limited liability company organized and existing under the laws of the State of Delaware.
Principal Place of Business / Headquarters: 440 Park Avenue South, 18th Floor, New York, NY 10016
Registered Agent: Ashgrove Services Inc., 28 Liberty Street, New York, NY 10005
Federal Employer Identification Number (EIN): 83-2947106
Client Background: Meridian Consumer Brands LLC is a portfolio company of Lakepoint Capital Partners, LP, a mid-market private equity fund based in Boston, Massachusetts. Meridian was formed in 2017 as a purpose-built acquisition vehicle for the consolidation and operation of consumer brands in the household cleaning, laundry, and personal care segments. Since its formation, Meridian has successfully acquired, integrated, and operated five distinct consumer brands spanning these categories.
Meridian's combined annual revenues across its existing brand portfolio are approximately $620 million, and the company employs over 1,800 individuals across manufacturing, distribution, marketing, and corporate functions in multiple states. Meridian has completed three prior bolt-on acquisitions since its formation, all of which were structured as asset purchases or membership interest purchases. The proposed acquisition of the CleanLeaf and PureHaven product lines from Briarwood represents Meridian's fourth bolt-on acquisition and is consistent with its stated growth strategy of acquiring complementary, eco-friendly consumer product brands with strong retail distribution channels.
Calderwood & Harkness LLP has not previously represented Meridian Consumer Brands LLC. This engagement represents a new client relationship for the Firm. The client was referred to the M&A Group by Thomas Liang, Managing Partner of Lakepoint Capital Partners, LP, with whom Sandra Tung has an existing professional relationship from prior transactions.
2.2 Key Client Contacts
The following individuals have been identified as key client contacts for purposes of this engagement:
• Gareth Holloway, Chief Executive Officer & Managing Member, Meridian Consumer Brands LLC. Mr. Holloway is the senior executive responsible for overseeing all aspects of Meridian's operations and strategic direction, including M&A activity. Mr. Holloway will serve as the principal business decision-maker on the buyer's side of the transaction.
• Priya Anand, Chief Financial Officer, Meridian Consumer Brands LLC. Ms. Anand oversees all financial, accounting, and treasury functions for Meridian and will be the primary point of contact for financial and economic aspects of the transaction, including purchase price mechanics, working capital adjustments, earnout structuring, and financing arrangements.
• Diana Ressler, General Counsel, Meridian Consumer Brands LLC. Ms. Ressler serves as the company's chief legal officer and is designated as the primary legal contact for all matters arising under this engagement. All substantive legal communications, draft documents, privilege-sensitive materials, and billing inquiries should be directed to Ms. Ressler unless otherwise instructed. Ms. Ressler is the addressee of the Firm's engagement letter dated June 10, 2022.
2.3 Private Equity Sponsor
Full Legal Name: Lakepoint Capital Partners, LP
Entity Type: Limited partnership organized and existing under the laws of the State of Delaware.
Principal Place of Business / Headquarters: 200 Clarendon Street, Suite 3200, Boston, MA 02116
Federal Employer Identification Number (EIN): 04-3821567
Managing Partner: Thomas Liang
Lakepoint Capital Partners, LP ("Lakepoint") is the controlling equity holder of Meridian Consumer Brands LLC. Lakepoint is a mid-market private equity fund focused on investments in consumer products, consumer services, and light manufacturing businesses with enterprise values ranging from $200 million to $1 billion. Lakepoint's investment thesis centers on identifying platform companies with strong brand recognition and pursuing disciplined add-on acquisitions to create scale advantages, expand distribution, and drive operational efficiency.
The Firm's engagement is with Meridian Consumer Brands LLC, not with Lakepoint Capital Partners, LP. However, Lakepoint is identified herein for purposes of conflicts clearance and because Lakepoint will be providing the equity contribution to fund a portion of the purchase price in the proposed transaction. The Firm does not represent Lakepoint in any capacity in connection with this engagement, and Lakepoint has been informed that no attorney-client relationship exists between Lakepoint and Calderwood & Harkness LLP with respect to this matter.
3. Counterparty / Target Information
Full Legal Name: Briarwood Home Essentials, Inc.
Short Name / Matter Alias: Briarwood / BHE
Entity Type: Corporation organized and existing under the laws of the State of Ohio.
Principal Place of Business / Headquarters: 1175 Creekside Drive, Suite 400, Columbus, OH 43215
Registered Agent: Ohio Registered Agent Services, Inc., 50 West Broad Street, Columbus, OH 43215
Federal Employer Identification Number (EIN): 31-1684239
Key Principals:
• Malcolm Greer, President & Sole Shareholder. Mr. Greer is the founder of Briarwood and has served as its sole shareholder and president since the company's inception. Mr. Greer is expected to enter into a non-competition and non-solicitation agreement in connection with the closing of the transaction.
• Janet Tsao, Vice President of Operations. Ms. Tsao oversees Briarwood's manufacturing, supply chain, and distribution operations across all business segments, including the Acquired Product Lines. Ms. Tsao is expected to be a key contact during the due diligence process.
Background: Briarwood Home Essentials, Inc. is a privately held consumer products company founded in 2004 by Malcolm Greer. Briarwood manufactures and distributes eco-friendly home cleaning products and personal care items under two primary brand names: "CleanLeaf" (home cleaning products, including all-purpose cleaners, dish soaps, surface sprays, and laundry detergents) and "PureHaven" (personal care items, including hand soaps, body washes, shampoos, and lotions). Both brands are positioned as environmentally conscious, plant-based alternatives to conventional products and are sold through major national and regional retail channels.
The annual revenue attributable to the CleanLeaf and PureHaven product lines — the assets being sold in the proposed transaction — was approximately $68 million for the fiscal year ended December 31, 2021. Briarwood also operates a separate Commercial Janitorial Services Division, which provides contract janitorial cleaning services and commercial cleaning product distribution to commercial and institutional clients in the Midwest. Briarwood intends to retain its Commercial Janitorial Services Division and the associated assets and contracts, and is selling only the consumer product lines (CleanLeaf and PureHaven) to Meridian. Briarwood will also retain its corporate headquarters lease at 1175 Creekside Drive, Suite 400, Columbus, OH 43215. The separation of the consumer product line from Briarwood's retained business will require careful delineation of acquired and excluded assets, assumed and excluded liabilities, and appropriate transition services arrangements during the post-closing integration period.
The Firm does not represent and has not previously represented Briarwood Home Essentials, Inc., Malcolm Greer, or any Briarwood affiliate. Briarwood is the counterparty in this transaction and is separately represented by outside counsel as described in Section 6 below.
4. Transaction Overview
4.1 Transaction Structure
The proposed transaction is structured as an asset purchase. Meridian Consumer Brands LLC, as buyer, will acquire the CleanLeaf and PureHaven consumer product lines and all associated assets (the "Acquired Assets") from Briarwood Home Essentials, Inc., as seller. The transaction is not structured as a stock purchase or merger; rather, Meridian will purchase specified assets and assume specified liabilities pursuant to the terms of a definitive Asset Purchase Agreement (the "APA") to be negotiated and executed by the parties.
Briarwood will retain its Commercial Janitorial Services Division, together with all assets, contracts, employees, and liabilities associated with that division. Briarwood will also retain its corporate headquarters lease at 1175 Creekside Drive, Suite 400, Columbus, Ohio, and such other assets as are designated as "Excluded Assets" in the APA. The retained business and excluded assets will remain the property of Briarwood following the closing and will not transfer to Meridian.
The Acquired Product Lines encompass approximately 142 active stock-keeping units ("SKUs") across both the CleanLeaf and PureHaven brands, spanning multiple product categories and formulations. The delineation between Acquired Assets and Excluded Assets, as well as Assumed Liabilities and Excluded Liabilities, will be set forth in detail in the APA and the accompanying disclosure schedules.
4.2 Purchase Price and Consideration
Aggregate Purchase Price: The aggregate purchase price for the Acquired Assets is $95,000,000 (Ninety-Five Million Dollars), subject to customary purchase price adjustments.
Cash at Closing: Of the aggregate purchase price, $87,000,000 (Eighty-Seven Million Dollars) will be payable in cash at the closing of the transaction. This amount represents the aggregate purchase price of $95,000,000, less the $8,000,000 earnout component described below.
Earnout Component: The purchase price includes an earnout component of $8,000,000 (Eight Million Dollars), payable to Briarwood contingent upon the achievement of a post-closing revenue milestone. Specifically, the earnout will be payable in full if the combined Year 1 revenue (i.e., revenue during the twelve-month period following the closing date) of the Acquired Product Lines equals or exceeds $72,000,000. The specific terms and conditions governing the earnout, including the methodology for calculating Year 1 revenue, the dispute resolution mechanism for earnout disputes, and the buyer's obligations regarding operation of the acquired business during the earnout period, will be negotiated and set forth in the APA. The earnout structure will require careful attention to covenant provisions governing the buyer's operation of the acquired business during the earnout measurement period to mitigate the risk of post-closing earnout disputes.
Escrow Holdback: An amount equal to $9,500,000 (Nine Million Five Hundred Thousand Dollars), representing 10% of the aggregate purchase price, will be deposited into an escrow account at the closing and held in escrow for a period of 24 months following the closing date. The escrow funds will serve as a source of recovery for indemnification claims made by the buyer during the survival period. The escrow will be administered by Atlantic Fiduciary Trust Company, and the terms governing the escrow arrangement will be set forth in a separate Escrow Agreement to be negotiated among the buyer, the seller, and the escrow agent.
4.3 Key Deal Economics
The following table summarizes the key economic terms of the proposed transaction as currently contemplated:
The indemnification basket is structured as a "tipping basket" (also known as a "first-dollar" basket), meaning that once the aggregate amount of indemnifiable losses exceeds the basket threshold of $950,000, the buyer will be entitled to recover all losses from the first dollar, not merely the amount in excess of the basket. This structure provides the buyer with enhanced downside protection relative to a true deductible basket, and is consistent with market norms for middle-market asset purchase transactions in the consumer products sector. The distinction between general representations and warranties (which survive for 24 months from closing) and fundamental representations (which survive indefinitely) will be a negotiation point in the APA, and the Firm will seek to define fundamental representations broadly to include representations regarding authority, organization, capitalization, title to assets, and tax matters, among others.
4.4 Key Assets to Be Acquired
The Acquired Assets in the proposed transaction are expected to include, without limitation, the following:
• intellectual Property: All trademarks, service marks, trade dress, logos, brand names, and associated goodwill relating to the CleanLeaf and PureHaven brands; all product formulation intellectual property, including proprietary formulas, recipes, and trade secrets; and all internet domain names, social media accounts, and digital assets associated with the Acquired Product Lines.
• Inventory: All finished goods, raw materials, work-in-progress, packaging materials, and other inventory related to the Acquired Product Lines. The book value of inventory is estimated at approximately $14,300,000 as of June 30, 2022, and will be subject to a physical inventory count and valuation as of the closing date.
• Accounts Receivable: All trade accounts receivable, notes receivable, and other receivables arising from the sale of CleanLeaf and PureHaven products. The aggregate amount of accounts receivable attributable to the Acquired Product Lines is estimated at approximately $9,700,000 as of June 30, 2022.
• Customer Contracts: Twenty-three (23) active customer contracts with major national and regional retailers for the distribution and sale of CleanLeaf and PureHaven products. Of these 23 contracts, seven (7) contain change-of-control provisions or assignment consent requirements that will need to be addressed prior to or at closing. The Firm will review all 23 customer contracts during the due diligence process and will identify and manage the consent process for the seven contracts requiring counterparty consent or notification.
• Real Property — Manufacturing Facility (Leased): Leasehold interest in a manufacturing facility located at 2800 Industrial Parkway, Marysville, OH 43040. This facility is leased from Buckeye Industrial Properties LLC ("Buckeye"), and the lease is subject to a provision requiring landlord consent for assignment. The Firm will coordinate the landlord consent process with Buckeye.
• Real Property — Warehouse/Distribution Center (Owned): Fee simple interest in a warehouse and distribution center located at 500 Commerce Boulevard, West Jefferson, OH 43162. This property is currently owned by Briarwood and is used exclusively for the warehousing and distribution of CleanLeaf and PureHaven products. The property will be included in the Acquired Assets and conveyed to Meridian at the closing by special warranty deed.
• Employees: Approximately 186 employees currently employed by Briarwood in connection with the Acquired Product Lines are expected to transfer to Meridian in connection with the closing. Because the transaction is structured as an asset purchase rather than a stock purchase, the transfer of employees will be accomplished through the issuance of offer letters by Meridian to the transferring employees, rather than through an automatic transfer by operation of law. The Firm's employment/benefits diligence workstream will address employee benefit plan matters, WARN Act compliance, and related employment transition issues.
4.5 Assumed Liabilities
In connection with the acquisition of the Acquired Assets, Meridian will assume certain specified liabilities of Briarwood related to the Acquired Product Lines (the "Assumed Liabilities"). The Assumed Liabilities are expected to include, without limitation, the following:
• Trade Payables: Trade accounts payable and accrued expenses related to the Acquired Product Lines, estimated at approximately $4,200,000 as of June 30, 2022.
• Product Warranty Obligations: Accrued product warranty obligations and reserves attributable to CleanLeaf and PureHaven products sold prior to the closing, estimated at approximately $620,000.
• Post-Closing Contract Obligations: All obligations arising after the closing under the contracts assigned to Meridian as part of the Acquired Assets, including obligations under the assigned customer contracts and the manufacturing facility lease.
All other liabilities of Briarwood, including but not limited to liabilities related to the retained Commercial Janitorial Services Division, pre-closing tax liabilities, pre-closing product liability claims, undisclosed liabilities, and liabilities arising from the excluded assets, will be retained by Briarwood and will constitute "Excluded Liabilities" under the APA. The delineation of Assumed Liabilities and Excluded Liabilities will be a key negotiation point in the APA.
4.6 Financing. The acquisition will be financed through a combination of debt and equity, as follows:
Debt Financing: Meridian has secured a commitment from Harborview National Bank, N.A. ("Harborview"), as lead lender and administrative agent, for a $60,000,000 senior secured term loan to finance a portion of the purchase price. Harborview's principal office is located at One Harborview Plaza, Charlotte, NC 28202, and the relationship manager for this facility is Carolyn Dubois. A debt commitment letter from Harborview was expected at the time of this memorandum and was subsequently executed on August 5, 2022. The term loan bears interest at a rate of SOFR plus 375 basis points. Pinnacle Credit Partners, LP ("Pinnacle"), located at 600 Lexington Avenue, Suite 2100, New York, NY 10022, has been identified as a syndicate participant in the senior secured term loan facility. The key contact at Pinnacle is Rajan Mehta. The Firm will review the debt commitment letter, the definitive credit agreement, and all ancillary loan documents in connection with this engagement.
Equity Contribution: The remaining $35,000,000 of the purchase price will be funded through an equity contribution from Meridian and/or Lakepoint Capital Partners, LP. An equity commitment letter from Lakepoint was expected at the time of this memorandum and was subsequently executed on August 12, 2022. The Firm will review the equity commitment letter and coordinate with Lakepoint's counsel, if any, regarding the terms and conditions of the equity contribution.
4.7 Letter of Intent Status
The parties executed a Letter of Intent (the "LOI") on March 28, 2022. The LOI establishes the framework for the proposed transaction and contains both binding and non-binding provisions, as follows:
Binding Provisions: The following provisions of the LOI are binding upon the parties:
(a) Exclusivity: Briarwood has agreed to a twelve-month exclusivity period during which Briarwood will not solicit, entertain, or accept any competing proposals for the sale of the CleanLeaf or PureHaven product lines. The exclusivity period commenced on March 28, 2022 and expires on March 28, 2023.
(b) Confidentiality: Both parties have agreed to maintain the confidentiality of all non-public information exchanged in connection with the proposed transaction.
(c) Governing Law: The LOI is governed by the laws of the State of New York.
(d) Dispute Resolution: Any disputes arising under the LOI are to be resolved in accordance with the dispute resolution provisions set forth therein.
Non-Binding Provisions: The following provisions of the LOI are expressly non-binding and subject to negotiation in the context of the definitive APA:
(a) Purchase price and purchase price adjustments;
(b) Transaction structure, including the delineation of Acquired Assets and Excluded Assets;
(c) Closing conditions, including regulatory approvals and third-party consents;
(d) Representations, warranties, covenants, and indemnification provisions.
Break Fee: The LOI does not contain a break fee or termination fee payable by either party.
Due Diligence: Due diligence is scheduled to formally commence on June 14, 2022. Briarwood has established a virtual data room on the Pemberton Systems platform, with the project code BHE-CleanLeaf-2022. Access credentials will be distributed to the C&H engagement team, Wavecrest Partners LLC (buyer's financial advisor), and Whitfield Ames LLP (buyer's accountant) upon commencement of due diligence.
4.8 Regulatory Considerations
The following regulatory and third-party consent matters have been identified in connection with the proposed transaction:
Hart-Scott-Rodino (HSR) Filing: Based on the Firm's preliminary analysis, an HSR filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 is not required for this transaction. The transaction value of $95,000,000 falls below the applicable size-of-transaction threshold as in effect for 2022, and the size-of-person test is not met by Briarwood. This analysis is subject to confirmation during the due diligence process.
Environmental: A Phase I Environmental Site Assessment ("Phase I ESA") will be conducted for the manufacturing facility located at 2800 Industrial Parkway, Marysville, OH 43040. Terrapoint Environmental Group, Inc. has been engaged by the buyer to conduct the Phase I ESA. The Phase I ESA is a standard component of environmental due diligence for manufacturing facilities and is intended to identify any recognized environmental conditions that may affect the value or usability of the facility or give rise to remediation obligations under applicable environmental laws. The results of the Phase I ESA will inform the environmental representations and warranties in the APA and may trigger additional environmental investigation (Phase II ESA) if recognized environmental conditions are identified.
Landlord Consent: The lease for the manufacturing facility at 2800 Industrial Parkway, Marysville, OH 43040 is held by Briarwood and leased from Buckeye Industrial Properties LLC. The lease contains a provision requiring the landlord's prior written consent to any assignment of the lease. Meridian will need to obtain Buckeye's consent to the assignment of the lease in connection with the closing. The Firm will coordinate the landlord consent process, including the preparation and negotiation of any required consent agreements, estoppel certificates, or lease amendments.
Customer Contract Assignment Consents: Of the 23 active customer contracts being transferred as part of the Acquired Assets, seven (7) contain change-of-control provisions, assignment restrictions, or consent-to-assignment requirements that necessitate the counterparty's prior written consent before the contract may be assigned to Meridian. The Firm will identify and catalog these provisions during the contract diligence workstream and will manage the consent process in coordination with the client and seller's counsel.
5. Engagement Team
The following attorneys have been designated as the Calderwood & Harkness LLP engagement team for this matter:
Sandra Tung will supervise all aspects of the representation and serve as the primary relationship partner for Meridian Consumer Brands LLC. Ms. Tung will be the senior attorney responsible for the strategic direction of the engagement, key negotiation points, and all communications with the client's senior management and the private equity sponsor. Ms. Tung has extensive experience in middle-market M&A transactions in the consumer products sector.
Oliver Mackenzie will serve as the billing partner for this engagement and will be responsible for managing all budgeting, billing, and fee arrangement matters. Mr. Mackenzie will oversee the preparation and submission of client invoices, track engagement economics, and serve as the point of contact for any billing inquiries from the client's General Counsel. Mr. Mackenzie will also contribute substantively to the transaction, with a particular focus on financing documentation and indemnification mechanics.
Andrew Fitzpatrick will serve as the lead associate and primary day-to-day manager of the transaction. Mr. Fitzpatrick's responsibilities will include APA drafting, due diligence coordination, management of the disclosure schedule process, counterparty counsel communications with Caldwell, Pruitt & Shaw LLP, and coordination with the buyer's financial and environmental advisors. Mr. Fitzpatrick will serve as the primary point of contact for seller's counsel and will manage all document flow and transaction logistics.
Naomi Petersen will serve as the working associate and will support the engagement across multiple workstreams. Ms. Petersen's responsibilities will include supporting due diligence across all major diligence categories, drafting ancillary transaction documents, conducting legal research on discrete issues as they arise during the transaction, and assisting with the preparation of closing checklists and closing binders.
Additional attorneys or legal professionals (including associates from other practice groups such as Employment & Benefits, intellectual Property, Real Estate, Environmental, or Tax) may be added to the engagement team as needed based on the scope and complexity of issues identified during the due diligence and negotiation process. Any such additions will be made in accordance with the Firm's staffing policies and communicated to the client in advance.
6. Counterparty / Opposing Counsel
Briarwood Home Essentials, Inc. is represented in connection with this transaction by outside counsel as follows:
Seller's Counsel: Caldwell, Pruitt & Shaw LLP, 41 South High Street, Suite 2800, Columbus, OH 43215
Lead Partner: Rachel Underwood. Ms. Underwood is a partner in the M&A practice at Caldwell, Pruitt & Shaw and will serve as the lead partner for Briarwood in this transaction. All substantive legal communications regarding the APA, due diligence, and ancillary transaction documents will be directed to Ms. Underwood or her designee.
Associate: David Soo. Mr. Soo is an associate at Caldwell, Pruitt & Shaw and will support Ms. Underwood in the day-to-day management of the transaction on the seller's side.
Calderwood & Harkness LLP has not identified any conflicts or prior adverse relationships with Caldwell, Pruitt & Shaw LLP in connection with this matter.
7. Other Advisors and Key Third Parties
The following advisors and key third parties have been identified in connection with the proposed transaction. The Firm will coordinate with these parties as necessary throughout the engagement:
Buyer's Financial Advisor — Wavecrest Partners LLC: Wavecrest has been engaged by Meridian to serve as its financial advisor in connection with the proposed acquisition. Wavecrest is providing financial advisory services including valuation analysis, deal structuring advice, and transaction support. Steven Marchetti is the lead managing director, and Lena Kowalski is the vice president assigned to the transaction. The Firm will coordinate closely with Wavecrest on deal economics, purchase price mechanics, and earnout structuring.
Seller's Financial Advisor — Greystone Hobbs & Co.: Greystone Hobbs has been engaged by Briarwood to serve as seller's financial advisor and to manage the sell-side process. Philip Tran is the managing director overseeing the engagement. Communications with Greystone Hobbs will be coordinated through seller's counsel.
Lead Lender — Harborview National Bank, N.A.: Harborview is providing the senior secured term loan facility of $60,000,000 to finance a portion of the purchase price. Carolyn Dubois is the relationship manager. The Firm will review the debt commitment letter, negotiate the definitive credit agreement, and coordinate with Harborview's counsel regarding security documents, intercreditor arrangements, and closing conditions.
Syndicate Lender — Pinnacle Credit Partners, LP: Pinnacle has been identified as a syndicate participant in the senior secured term loan facility. Rajan Mehta is the key contact. Pinnacle's participation terms will be governed by the syndication mechanics set forth in the credit agreement.
Escrow Agent — Atlantic Fiduciary Trust Company: Atlantic Fiduciary Trust Company will serve as the escrow agent for the $9,500,000 escrow holdback. Gregory Fenn is the key contact. The Firm will draft and negotiate the Escrow Agreement in coordination with seller's counsel and the escrow agent.
Buyer's Accountant — Whitfield Ames LLP: Whitfield Ames has been engaged by Meridian to conduct financial and accounting due diligence on the Acquired Product Lines. Susan Clearwater is the engagement partner. The Firm will coordinate with Whitfield Ames on financial diligence findings and quality of earnings analysis, and will incorporate material financial diligence findings into the APA representations, warranties, and disclosure schedules.
Seller's Auditor — Hargrove & Linton, P.C.: Hargrove & Linton serves as Briarwood's independent auditor. Daniel Yee is the engagement partner. The Firm anticipates requesting access to Briarwood's audited financial statements and any management letters or audit findings through the due diligence process.
Environmental Consultant — Terrapoint Environmental Group, Inc.: Terrapoint has been engaged by Meridian to conduct a Phase I Environmental Site Assessment of the manufacturing facility at 2800 Industrial Parkway, Marysville, OH 43040. Keith Novak is the project manager. The Firm will review the Phase I ESA report and coordinate with Terrapoint regarding any recommended further investigation.
R&W Insurance Broker — Northbridge Risk Advisors LLC: Northbridge has been engaged to broker a representations and warranties insurance ("R&W insurance") policy for the transaction. Alison Chu is the key contact. R&W insurance is increasingly standard in middle-market M&A transactions and provides the buyer with additional indemnification protection beyond the seller's contractual indemnification obligations under the APA.
R&W Insurance Carrier (Proposed) — Sentinel Specialty Insurance Company: Sentinel has been identified as the proposed R&W insurance carrier. Mark Ellison is the underwriter. The Firm will work with Northbridge and Sentinel throughout the R&W insurance underwriting process, including providing diligence reports and responding to underwriting inquiries. The issuance of the R&W policy is expected to be a condition to closing.
Facility Landlord — Buckeye Industrial Properties LLC: Buckeye is the landlord of the manufacturing facility at 2800 Industrial Parkway, Marysville, OH 43040. Landlord consent to the assignment of the lease is required in connection with the transaction. The Firm will coordinate the consent process with Buckeye and prepare or review any required consent documentation.
8. Conflicts Clearance
A comprehensive conflicts check was conducted on June 8, 2022, in accordance with the Firm's conflicts clearance procedures. The conflicts check was run against all identified parties to the transaction and their known affiliates, including the following:
• Meridian Consumer Brands LLC (client)
• Lakepoint Capital Partners, LP (private equity sponsor of client)
• Briarwood Home Essentials, Inc. (counterparty / seller)
• Malcolm Greer (sole shareholder and president of Briarwood)
• Related entities and affiliates of the foregoing
Clearance Status: Confirmed — no conflicts identified. The Firm has not previously represented any of the parties listed above in any capacity, and no current or former client relationships, adverse representations, or other potential conflicts of interest were identified in connection with the conflicts review.
A separate Conflict Check Memorandum dated June 8, 2022, documenting the scope and results of the conflicts analysis, has been prepared and is maintained in the Firm's conflicts files. A copy of the Conflict Check Memorandum is available for review by the New Business Committee upon request.
9. Billing Arrangements
The billing arrangements for this engagement are governed by the Engagement Letter dated June 10, 2022, addressed to Diana Ressler, General Counsel, Meridian Consumer Brands LLC. A copy of the executed Engagement Letter is maintained in the matter file.
Billing Partner: Oliver Mackenzie has been designated as the billing partner for this matter. Mr. Mackenzie will be responsible for supervising all billing, budgeting, and fee arrangement matters, including the preparation and review of monthly invoices, the monitoring of engagement economics, and the management of any fee-related communications with the client.
Fee Structure: The engagement is subject to standard hourly rate billing, in accordance with the rate schedule set forth in the Engagement Letter. The applicable hourly rates for each member of the engagement team are as set forth in the Engagement Letter, as may be updated from time to time in accordance with the Firm's standard rate adjustment policies.
Client Billing Contact: Diana Ressler, General Counsel, Meridian Consumer Brands LLC, 440 Park Avenue South, 18th Floor, New York, NY 10016. All invoices and billing-related communications should be directed to Ms. Ressler.
Retainer / Advance: As set forth in the Engagement Letter.
Expense Reimbursement: Reasonable out-of-pocket expenses incurred in connection with the engagement, including travel, filing fees, data room access fees, and reproduction costs, will be billed to the client in accordance with the terms of the Engagement Letter.
10. Anticipated Workstreams and Deliverables
The Firm anticipates the following principal workstreams and deliverables in connection with this engagement:
1. Due Diligence. The Firm will conduct comprehensive legal due diligence on the Acquired Assets and the Acquired Product Lines across all major diligence categories, including:
(a) Corporate / Organizational: Review of Briarwood's organizational documents, good standing certificates, board and shareholder resolutions, and authority to consummate the transaction.
(b) Financial: Coordination with Whitfield Ames LLP on financial and accounting due diligence, including review of audited and unaudited financial statements, quality of earnings analysis, and working capital analysis.
(c) Contracts: Review of all material contracts associated with the Acquired Product Lines, including the 23 customer contracts, supply agreements, distribution agreements, co-manufacturing agreements, and any other material commercial agreements.
(d) Real Property: Review of the manufacturing facility lease (Marysville) and fee title to the warehouse/distribution center (West Jefferson), including title review, survey review, and assessment of landlord consent requirements.
(e) intellectual Property: Review of all trademarks, trade dress, formulation IP, domain names, and other intellectual property assets associated with the CleanLeaf and PureHaven brands, including ownership verification, registration status, and freedom-to-operate analysis.
(f) Employment and Benefits: Review of employment agreements, employee benefit plans, collective bargaining agreements (if any), WARN Act compliance, pending employment claims, and transition planning for the approximately 186 transferring employees.
(g) Environmental: Coordination with Terrapoint Environmental Group on the Phase I ESA for the Marysville facility and review of all environmental compliance records, permits, and any known environmental liabilities.
(h) Litigation and Regulatory: Review of all pending or threatened litigation, arbitration, or regulatory proceedings involving Briarwood or the Acquired Product Lines, and review of regulatory compliance history.
(i) Insurance: Review of Briarwood's insurance coverage related to the Acquired Product Lines, including product liability, property, and general commercial liability policies.
(j) Tax: Review of tax compliance matters relating to the Acquired Product Lines, including transfer tax implications, sales and use tax matters, and any tax liens or assessments.
2. Coordination with Financial Advisors and Consultants. The Firm will coordinate closely with Whitfield Ames LLP on financial and accounting diligence and with Terrapoint Environmental Group, Inc. on the Phase I ESA. The Firm will integrate the findings of these advisors into the transaction documentation and negotiate appropriate representations, warranties, and indemnification provisions to address identified risks.
3. Drafting and Negotiation of Definitive Transaction Documents. The Firm will prepare, negotiate, and finalize the following transaction documents (the list is illustrative and may be expanded as the transaction progresses):
(a) Asset Purchase Agreement (APA), including all exhibits and disclosure schedules;
(b) Bill of Sale;
(c) Assignment and Assumption Agreement;
(d) intellectual Property Assignment Agreement;
(e) Transition Services Agreement (to address the separation of the consumer product line from Briarwood's retained Commercial Janitorial Services Division);
(f) Escrow Agreement (among Meridian, Briarwood, and Atlantic Fiduciary Trust Company);
(g) Non-Competition and Non-Solicitation Agreement (to be entered into by Malcolm Greer);
(h) Any additional ancillary documents required to consummate the transaction.
4. Review of Financing Documentation. The Firm will review the debt commitment letter issued by Harborview National Bank, N.A. and the equity commitment letter issued by Lakepoint Capital Partners, LP, and will advise the client regarding the terms and conditions of the financing, including any financing conditions to the closing of the transaction.
5. Representations and Warranties Insurance. The Firm will support the R&W insurance process, working with Northbridge Risk Advisors LLC (broker) and Sentinel Specialty Insurance Company (proposed carrier). This will include providing due diligence reports to the underwriter, responding to underwriting inquiries, negotiating policy terms and exclusions, and coordinating the issuance of the R&W policy in connection with the closing.
6. Third-Party Consent Process. The Firm will manage the landlord consent process with Buckeye Industrial Properties LLC for the assignment of the manufacturing facility lease, and will coordinate the customer contract consent process for the seven customer contracts that contain change-of-control or assignment consent provisions.
7. Disclosure Schedule Review and Negotiation. The Firm will work with the client to review, comment upon, and negotiate the seller's disclosure schedules, which will qualify the representations and warranties set forth in the APA.
8. Pre-Closing and Closing Mechanics. The Firm will manage all pre-closing and closing deliverables, including the preparation of closing checklists, bring-down certificates, officer's certificates, third-party consents, and other customary closing documents. The Firm will coordinate the closing process and the post-closing distribution of executed documents and closing binders.
11. Anticipated Timeline
The following is a preliminary timeline for the proposed transaction. All dates are approximate and subject to change based on diligence findings, negotiation progress, financing timelines, and other factors:
The LOI exclusivity period runs through March 28, 2023, providing the parties with a substantial window in which to complete due diligence, negotiate the definitive transaction documents, satisfy closing conditions, and consummate the transaction. The closing target will be determined based on diligence findings, the progress of APA negotiations, the financing timeline, and the completion of the third-party consent process.
12. File and Data Room Information
The following administrative information has been established for this matter:
Calderwood & Harkness LLP Matter Number: 1011-00005. All time entries, expense entries, and correspondence related to this engagement should be recorded under this matter number.
Virtual Data Room: The buyer's due diligence will be conducted through a virtual data room hosted on the Pemberton Systems platform. The project code for the data room is BHE-CleanLeaf-2022. Access credentials will be distributed to authorized members of the C&H engagement team, Wavecrest Partners LLC, and Whitfield Ames LLP upon commencement of due diligence on June 14, 2022. All data room access is subject to the confidentiality obligations set forth in the LOI and any separate confidentiality or non-disclosure agreements executed in connection with the transaction.
APA Working Title: The definitive transaction agreement will be titled "Asset Purchase Agreement by and between Meridian Consumer Brands LLC and Briarwood Home Essentials, Inc." The APA will be the principal definitive agreement governing the proposed transaction, and all ancillary transaction documents will be referenced as exhibits or schedules to, or delivered in connection with, the APA.
LOI Reference: Letter of Intent dated March 28, 2022, by and between Meridian Consumer Brands LLC and Briarwood Home Essentials, Inc. A copy of the executed LOI is maintained in the matter file.
Document Management: All transaction documents, due diligence materials, correspondence, memoranda, and work product related to this engagement will be maintained in accordance with the Firm's document retention and information management policies. Privileged and confidential work product will be clearly marked as such and maintained in a restricted-access file within the Firm's document management system.
13. Authorization and Signatures
This New Matter Opening Memorandum is submitted for the review and approval of the Managing Partner's Office and the New Business Committee of Calderwood & Harkness LLP. The undersigned partners confirm that (i) the conflicts check has been completed and no conflicts have been identified, (ii) an engagement letter has been executed with the client, (iii) the client has been informed of and agreed to the applicable fee arrangements, and (iv) the engagement falls within the scope of the Firm's practice and competencies.
We respectfully request approval to open this matter and proceed with the representation described herein.
RESPONSIBLE PARTNER
By: ________
Name: Sandra Tung
Title: Partner, M&A Group
Calderwood & Harkness LLP
Date: ________
BILLING PARTNER
By: ________
Name: Oliver Mackenzie
Title: Partner, M&A Group
Calderwood & Harkness LLP