1011-00005 · Meridian Consumer Brands LLC · Correspondence

client-update-letter-dormancy.docx DOCUMENT Finance & Banking

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CALDERWOOD & HARKNESS LLP Attorneys at Law

599 Lexington Avenue, 36th Floor New York, New York 10022 Telephone: (212) 554-7000 Facsimile: (212) 554-7001 www.calderwoodharkness.com

January 20, 2023

VIA EMAIL AND FIRST CLASS MAIL

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED COMMUNICATION

Diana Ressler, Esq. General Counsel Meridian Consumer Brands LLC 440 Park Avenue South, 18th Floor New York, New York 10016

Re: Proposed Asset Purchase of CleanLeaf and PureHaven Product Lines from Briarwood Home Essentials, Inc. — Status Update and Dormancy Implications

Matter No.: 1011-00005

Dear Diana:

I am writing on behalf of Calderwood & Harkness LLP in connection with the proposed $95,000,000 asset purchase by Meridian Consumer Brands LLC ("Meridian" or the "Company") of the CleanLeaf and PureHaven consumer product lines (collectively, the "Product Lines") from Briarwood Home Essentials, Inc. ("Briarwood"). The purpose of this letter is threefold: (1) to provide you and your team with a comprehensive update on the current dormant status of the transaction, (2) to identify a number of time-sensitive issues that require the Company's prompt attention, and (3) to outline the strategic options available to Meridian at this juncture.

As you are aware, the last substantive negotiation call between the parties took place on November 18, 2022. Since that call, the only communication between deal counsel was a scheduling proposal sent by our associate, Naomi Petersen, to David Soo at Caldwell, Pruitt & Shaw LLP on December 9, 2022, proposing dates for a follow-up discussion. That email received no response. No formal termination of the Letter of Intent ("LOI") or the Asset Purchase Agreement ("APA") negotiations has occurred, and neither party has communicated a decision to abandon the transaction. As a practical matter, however, the transaction has been effectively dormant since mid-December 2022.

For the reasons set forth in detail below, we recommend that Meridian make a decision on the path forward by no later than mid-February 2023. Several impending deadlines — most critically, the expiration of the Harborview National Bank debt commitment letter on February 5, 2023 — make continued inaction increasingly costly and strategically inadvisable. We address each of the relevant issues in turn.

1. Debt Commitment Letter Expiration — Harborview National Bank, N.A.

The senior secured term loan commitment letter (the "Commitment Letter") between Meridian and Harborview National Bank, N.A. ("Harborview"), providing for a $60,000,000 senior secured term loan facility, was executed on August 5, 2022. Meridian's relationship manager at Harborview is Carolyn Dubois, Senior Vice President, Leveraged Finance. The Commitment Letter was the product of an approximately three-month negotiation process and represented a key milestone in establishing the financing architecture for the proposed acquisition.

By its express terms, the Commitment Letter expires on February 5, 2023 — approximately sixteen (16) days from the date of this letter.

The principal economic terms of the committed facility, as set forth in the Commitment Letter and the accompanying term sheet, include the following:

• Interest Rate: Secured Overnight Financing Rate (SOFR) plus 375 basis points, with a 50 basis point SOFR floor;

• Commitment Fee: 50 basis points per annum on undrawn committed amounts, payable quarterly in arrears;

• Ticking Fee: 25 basis points on the total committed amount, commencing 90 days after the date of the Commitment Letter (as discussed further in Section 2 below); and

• Syndication: The facility was structured to include Pinnacle Credit Partners, LP (contact: Rajan Mehta, Managing Director) as a syndicate participant, with Harborview acting as administrative agent and sole lead arranger.

Upon expiration of the Commitment Letter, Meridian will have no committed debt financing in place for the transaction. If Meridian subsequently determines that it wishes to proceed with the acquisition of the Product Lines, new financing arrangements would need to be negotiated from scratch. While we cannot predict future credit market conditions, we note that the current interest rate environment has shifted meaningfully since August 2022, and any new commitment obtained in the first quarter of 2023 or thereafter could entail materially different — and potentially less favorable — pricing terms, tighter covenants, or reduced lender appetite for leveraged acquisition financing in the consumer products sector.

Additionally, we note that the equity commitment letter from Lakepoint Capital Partners, LP ("Lakepoint"), dated August 12, 2022, providing for a $35,000,000 equity contribution to fund the balance of the purchase price and transaction expenses, should be reviewed carefully for any expiration provisions or conditionality that may be tied to the existence or continued validity of the Harborview debt commitment. It is possible that the Lakepoint equity commitment is subject to a co-termination or cross-default provision linked to the availability of debt financing. We advise that you coordinate with Thomas Liang on this point so that the Company has a complete picture of its financing posture.

In light of the foregoing, we recommend that Meridian promptly determine whether to:

(a) approach Harborview (through Carolyn Dubois) about extending the Commitment Letter beyond February 5, 2023, which extension would likely require payment of a new or additional commitment fee and could result in repricing of the facility;

(b) seek alternative debt financing from other lending institutions, which would require a new credit process with attendant time, cost, and uncertainty; or

(c) allow the Commitment Letter to lapse without taking further action, recognizing that doing so will eliminate the Company's currently committed financing for the acquisition.

We are prepared to assist with any of these alternatives should Meridian wish to proceed.

2. Ticking Fee Accrual

Under the terms of the Harborview Commitment Letter, a ticking fee of 25 basis points per annum on the total $60,000,000 committed facility commenced 90 days after the commitment date — that is, on November 3, 2022. The ticking fee is payable in addition to the 50 basis point commitment fee referenced above and was designed to incentivize timely closing of the financed transaction.

The ticking fee has been accruing continuously since November 3, 2022, and will continue to accrue through the earlier of (i) the expiration of the Commitment Letter on February 5, 2023, or (ii) drawdown of the committed facility at closing.

As of the date of this letter, January 20, 2023, the ticking fee has been running for approximately seventy-eight (78) days. The quantification is as follows:

• Annualized ticking fee: 25 basis points × $60,000,000 = $150,000 per annum

• Daily ticking fee: $150,000 ÷ 365 = approximately $410.96 per day

• Accrued through January 20, 2023 (approximately 78 days): approximately $11,507

• Additional accrual through February 5, 2023 (approximately 16 additional days): approximately $2,055

• Total projected ticking fee through Commitment Letter expiration: approximately $13,562

While this amount is not large relative to the overall transaction size, it represents an ongoing financial obligation that is accruing without any corresponding progress toward closing the acquisition. The ticking fee was negotiated with the expectation that closing would occur within the commitment period, and the continued accrual in a dormant deal context represents, in essence, a sunk cost.

We recommend that Meridian confirm with Priya Anand (Chief Financial Officer) that this ticking fee liability is being properly tracked, accrued, and reflected in the Company's financial records, and that any payment obligations are met in accordance with the terms of the Commitment Letter to avoid a technical default or breach that could complicate the Company's relationship with Harborview.

3. LOI Exclusivity Expiration

The Letter of Intent, dated March 28, 2022, between Meridian and Briarwood contains a binding twelve-month exclusivity provision (Section 5 of the LOI) that is set to expire on March 28, 2023 — approximately sixty-seven (67) days from the date of this letter.

During the exclusivity period, Briarwood (and its sole shareholder and President, Malcolm Greer) is contractually obligated not to, directly or indirectly, solicit, initiate, or encourage any inquiries or proposals from, or negotiate or enter into any agreement with, any third party regarding the sale, disposition, or transfer of all or any portion of the CleanLeaf and PureHaven Product Lines. This exclusivity provision was a critical element of the LOI and provided Meridian with the protected negotiating period necessary to conduct due diligence, negotiate the APA, and arrange financing.

Once the exclusivity period expires on March 28, 2023, Briarwood will be free to engage with other potential acquirers of the Product Lines. Briarwood's financial advisor, Greystone Hobbs & Co. (Philip Tran, Managing Director), could be instructed by Malcolm Greer to initiate a broader, marketed sale process — potentially soliciting competitive bids from strategic and financial buyers in the consumer products space.

We note several important points regarding the structure of the LOI:

• No Break Fee: The LOI does not contain a break fee or termination fee of any kind. Accordingly, neither Meridian nor Briarwood has financial exposure upon the expiration of the exclusivity period. There will be no payment obligation triggered by the lapse of exclusivity.

• Surviving Binding Provisions: Certain provisions of the LOI are designated as binding and survive the expiration of the exclusivity period by their express terms. These include: (i) the confidentiality obligations set forth in Section 7, (ii) the governing law provision (New York law, Section 10), and (iii) the dispute resolution provision requiring arbitration under JAMS rules (Section 11). These provisions will remain in effect in accordance with their stated survival periods regardless of whether the transaction proceeds.

• Non-Binding Provisions: The non-binding provisions of the LOI — including the indicative purchase price of $95,000,000, the asset purchase structure, the proposed closing conditions, and the other commercial terms set forth in the term sheet — have no enforceable legal effect and are expressly stated to be subject to the execution of a definitive APA. No party may compel the other to close the transaction based solely on the LOI.

From a strategic standpoint, the expiration of exclusivity is a significant concern. If Briarwood perceives the transaction as dead or unlikely to close, Malcolm Greer may proactively instruct Greystone Hobbs & Co. to test the market for the Product Lines — even before the formal expiration of the exclusivity period. While any such solicitation prior to March 28, 2023 would constitute a breach of the LOI's binding exclusivity provision, the practical remedy available to Meridian in such a scenario (injunctive relief and/or damages) would be limited and time-consuming to pursue. Moreover, once exclusivity does expire, Meridian's competitive leverage to acquire the Product Lines at the negotiated $95,000,000 price (or on other favorable terms) could be materially diminished if competing bidders emerge.

Accordingly, if Meridian intends to pursue the transaction, re-engagement with Briarwood — whether through direct communication with Malcolm Greer or through their counsel, Rachel Underwood at Caldwell, Pruitt & Shaw LLP — well in advance of March 28, 2023 is strongly advisable. Doing so would signal continued interest and could serve as a basis for extending the exclusivity period, if necessary, while negotiations resume.

4. Stale Diligence Risks

Due diligence on the CleanLeaf and PureHaven Product Lines was formally opened on June 14, 2022, when Briarwood granted data room access to Meridian and its advisors via the Pemberton Systems virtual data room platform (project code: BHE-CleanLeaf-2022). Over the course of the following four months, substantial due diligence work was performed across financial, legal, tax, environmental, and operational workstreams. However, given the dormancy of the transaction since mid-December 2022, much of the diligence work product has become materially stale. We address the key areas of concern below.

Financial Diligence. The reference date for the key financial estimates underpinning the preliminary financial diligence was June 30, 2022 — now nearly seven months old. Whitfield Ames LLP (engagement partner: Susan Clearwater), which was engaged by Meridian to perform quality of earnings and net working capital analyses, delivered its preliminary financial diligence memorandum on October 14, 2022. That memorandum was based on data as of mid-2022 and would require material updating if the transaction were to proceed.

Specifically, the following financial data points, all of which informed the preliminary purchase price analysis and the purchase price adjustment mechanisms in the draft APA, are stale and would need to be refreshed to a more current reference date:

• Inventory: Book value of $14,300,000 as reported by Briarwood; net realizable value of $11,800,000 as estimated by Whitfield Ames (see Section 5 below for further discussion of the inventory valuation variance);

• Accounts Receivable: $9,700,000 as of June 30, 2022, including concentration risk analysis by customer;

• Trade Payables: $4,200,000 as of June 30, 2022; and

• Warranty Accrual: $620,000, which Whitfield Ames flagged as potentially understated based on historical warranty claim rates for certain PureHaven SKUs.

Moreover, the valuation analysis prepared by Meridian's financial advisor, Wavecrest Partners LLC (Steven Marchetti, Managing Director, and Lena Kowalski, Vice President), was based on Briarwood's reported fiscal year 2021 revenue of $68,000,000 and EBITDA of $11,200,000 for the combined Product Lines. The proposed purchase price of $95,000,000 implied an enterprise value to EBITDA multiple of approximately 8.48x. Briarwood's fiscal year 2022 results are now available (or will be available imminently), and those results could materially affect the valuation analysis — either positively or negatively. A meaningful decline in FY2022 revenue or EBITDA could call into question the appropriateness of the $95,000,000 purchase price, while improved performance could strengthen the commercial rationale for the acquisition. In either case, an updated analysis would be essential. Briarwood's auditor, Hargrove & Linton, P.C. (engagement partner: Daniel Yee), would need to be coordinated with to obtain updated and audited financial information for the Product Lines.

Environmental Diligence. The Phase I Environmental Site Assessment (Report No. TEG-2022-0441) for the Marysville manufacturing facility (2800 Industrial Parkway, Marysville, OH 43040) was completed on September 2, 2022, by Terrapoint Environmental Group, Inc. (project manager: Keith Novak). That Phase I ESA identified a potential recognized environmental condition ("REC") at the Marysville facility, relating to potential subsurface contamination in the vicinity of a former solvent storage area on the eastern portion of the site. The Phase I report recommended that a Phase II ESA be conducted to evaluate the nature and extent of the potential contamination.

That Phase II investigation was never commenced. The deal stalled before the scope of work, timeline, and cost allocation for the Phase II could be agreed upon between the parties. Environmental conditions at the site may have changed in the intervening months — for better or worse — and a Phase II investigation would be essential before any closing of the acquisition. Proceeding to close without completing the Phase II would expose Meridian to potentially significant environmental liability, and it is highly likely that any representations and warranties insurance policy (see Section 8 below) would exclude coverage for known environmental conditions identified in the Phase I that were not further investigated.

Disclosure Schedules. The disclosure schedules delivered by Briarwood on September 28, 2022 were a first draft only and were expressly designated as partial and subject to completion. Several schedules — including the schedules relating to material contracts, employee benefit plans, and pending or threatened litigation — were incomplete or contained placeholder language. These schedules would require both completion and updating to reflect developments since September 2022.

intellectual Property. The intellectual property due diligence review, conducted by our colleague Andrew Fitzpatrick, identified incomplete trademark renewal filings for several CleanLeaf and PureHaven marks. If those renewals were not addressed by Briarwood in the intervening months, the status of certain trademark registrations may have worsened, potentially resulting in lapsed or abandoned marks that could affect the value of the intellectual property assets being acquired.

Employee Matters. The proposed transaction contemplates the transfer of approximately 186 employees from Briarwood to Meridian, including manufacturing, distribution, sales, and administrative personnel associated with the Product Lines. Prolonged deal dormancy creates meaningful flight risk among key personnel, particularly at the management level. If critical employees depart Briarwood during the dormancy period, the value proposition of the acquisition could be materially impaired. We have no current information regarding employee turnover at Briarwood since November 2022.

5. Unresolved Inventory Valuation Variance

The most significant commercial dispute that contributed to the stalling of deal negotiations is the $2,500,000 inventory valuation variance between Briarwood's reported book value and the net realizable value determined by Meridian's financial diligence advisor.

As noted above, Briarwood reported an inventory book value of $14,300,000 as of June 30, 2022, for the combined CleanLeaf and PureHaven Product Lines. Whitfield Ames LLP's preliminary financial diligence analysis determined that the net realizable value of the same inventory was approximately $11,800,000 — a downward variance of $2,500,000, or approximately 17.5%. The variance was attributable primarily to slow-moving and potentially obsolete SKUs in the PureHaven line, as well as differences in the treatment of raw materials versus finished goods in the NRV calculation.

Our associate Andrew Fitzpatrick raised this issue with David Soo at Caldwell, Pruitt & Shaw LLP via email on October 21, 2022, requesting supporting documentation for Briarwood's inventory valuation methodology and proposing a joint review process — potentially including a joint physical inventory count and an agreed-upon methodology for determining NRV. Briarwood, through its counsel, disputed the methodology used by Whitfield Ames but did not provide any alternative supporting analysis or documentation to substantiate its reported book value.

The issue was discussed at length on the November 18, 2022 negotiation call — the last substantive call between the parties. During that call, Rachel Underwood (on behalf of Briarwood) indicated that Malcolm Greer viewed the inventory valuation as a "deal-level issue" and would not agree to a reduction in purchase price based on what Briarwood characterized as overly conservative accounting assumptions. The call ended without resolution, and no follow-up was scheduled.

The second draft of the APA, circulated by Calderwood & Harkness on September 15, 2022, included a purchase price adjustment mechanism tied to closing inventory (Section 2.4 of the draft APA). However, the parties had not agreed on the methodology for determining closing inventory value — specifically, whether NRV would be calculated based on a "lower of cost or NRV" standard (Meridian's position) or a "cost" standard with limited adjustments for damaged or expired product only (Briarwood's position).

The APA Issues List and Comparison Chart, dated September 20, 2022, and circulated to all members of the deal team, identified the inventory valuation methodology as one of several material open items. The other principal open items included:

• Indemnification Cap: Meridian's position at 35% of the purchase price ($33,250,000) versus Briarwood's counter-proposal of 20% of the purchase price ($19,000,000);

• Survival Period for Representations and Warranties: Meridian's position of 24 months post-closing versus Briarwood's counter-proposal of 18 months;

• Tipping Basket: $950,000 (agreed in principle), with deductible versus tipping basket mechanics still under discussion; and

• Earnout Revenue Threshold: Meridian proposed a two-year earnout based on achievement of $72,000,000 in annualized revenue for the Product Lines; Briarwood proposed a lower threshold of $65,000,000 with a shorter measurement period.

If the deal is reactivated, the inventory valuation dispute would need to be resolved as a threshold matter, likely requiring a fresh physical inventory count at an agreed-upon date, application of an agreed-upon NRV methodology, and recalculation of the variance. Given the passage of approximately seven months since the June 30, 2022 reference date, the variance will almost certainly have changed — potentially in either direction — as inventory has been manufactured, sold, consumed, or rendered obsolete in the ordinary course of Briarwood's operations.

6. Absence of Landlord Consent — Buckeye Industrial Properties LLC

A critical outstanding condition precedent to closing is the landlord consent required for the assignment of the Marysville facility lease.

The principal manufacturing facility for the CleanLeaf and PureHaven Product Lines is located at 2800 Industrial Parkway, Marysville, Ohio 43040 (the "Marysville Facility"). The Marysville Facility is leased by Briarwood from Buckeye Industrial Properties LLC ("Buckeye Industrial"), with offices at 77 East Nationwide Boulevard, Suite 200, Columbus, Ohio 43215. The lease for the Marysville Facility (the "Marysville Lease") is a triple-net lease with approximately four years remaining on the current term, and it contains a standard provision requiring the prior written consent of the landlord to any assignment of the lease or change of control of the tenant.

Because the proposed transaction is structured as an asset purchase — under which Meridian would acquire the Marysville Lease as part of the Acquired Assets — the transfer of the lease from Briarwood to Meridian would constitute an assignment requiring Buckeye Industrial's consent.

Calderwood & Harkness sent a landlord consent request letter to Buckeye Industrial on October 7, 2022. As of the date of this letter — more than three months after the consent request was sent — no response has been received from Buckeye Industrial. We have not received an acknowledgment of receipt, a request for additional information, a conditional consent, or a denial. The complete silence is noteworthy and concerning.

The Marysville Facility is essential to the manufacturing operations for the Product Lines. The facility supports the production of approximately 142 active SKUs across the CleanLeaf and PureHaven brands, and it houses specialized mixing, filling, and packaging equipment that would be included in the Acquired Assets. Without access to the Marysville Facility (or a suitable alternative), Meridian would be unable to operate the Product Lines following closing.

Failure to obtain landlord consent would constitute a failure to satisfy a condition precedent to closing under Section 7.2(d) of the APA as drafted. This is a material issue that cannot be waived without significant operational risk.

We see the following options for addressing this issue:

(a) Seller Pursuit of Consent. Under the draft APA (Section 6.4), the obligation to obtain landlord consent for the assignment of the Marysville Lease was allocated to Briarwood as a pre-closing covenant of the seller. Meridian could insist that Briarwood fulfill this obligation by contacting Buckeye Industrial directly and pursuing the consent through the existing landlord-tenant relationship.

(b) Follow-Up Correspondence from Calderwood & Harkness. We could send a follow-up letter to Buckeye Industrial on Meridian's behalf, emphasizing the importance of the consent and requesting a response by a specified date.

(c) Assessment of Alternative Manufacturing Arrangements. Meridian could evaluate whether alternative contract manufacturing or co-packing arrangements are feasible as a contingency plan in the event landlord consent cannot be obtained. This would require involvement of the Company's operations team and could have significant cost and timing implications.

(d) Direct Lease Negotiation. Meridian could seek to negotiate a lease termination (of the existing Briarwood lease) and a new direct lease between Meridian and Buckeye Industrial on mutually acceptable terms. This approach would bypass the consent requirement entirely but would add complexity and negotiation time to the transaction.

We also note that the West Jefferson distribution center, located at 500 Commerce Boulevard, West Jefferson, Ohio 43162, is owned by Briarwood in fee and is included in the definition of Acquired Assets under the draft APA. The West Jefferson facility does not present a landlord consent issue.

Finally, we wish to flag a related concern: of the twenty-three (23) customer contracts to be assigned to Meridian as part of the Acquired Assets, seven (7) contain change-of-control or assignment consent provisions requiring the counterparty's prior written consent to assignment. Form consent request letters were prepared by Calderwood & Harkness, dated October 12, 2022, and forwarded to Briarwood's counsel for delivery. However, it is unclear from our records whether those letters were actually sent to the relevant customers. This should be confirmed with Caldwell, Pruitt & Shaw LLP if the deal is reactivated.

7. Regulatory Filing Gap

The Due Diligence Memorandum — Litigation & Regulatory, dated September 12, 2022, prepared by Calderwood & Harkness (principal drafter: Andrew Fitzpatrick; reviewed by Oliver Mackenzie), identified a gap in state-level product registrations for certain CleanLeaf and PureHaven products.

As a threshold matter, we note that a Hart-Scott-Rodino Act pre-merger notification filing is not required for this transaction. The $95,000,000 transaction value falls below the applicable size-of-transaction threshold as adjusted for 2022, and in any event the size-of-person test is not met by Briarwood given its total assets and annual net sales. Accordingly, no federal antitrust filing obligation exists.

However, the regulatory filing gap at the state level is a separate and non-trivial issue. The CleanLeaf and PureHaven Product Lines include household cleaning products and surface treatments that are subject to product registration and labeling requirements in multiple states, including California, New York, Ohio, and several other jurisdictions. The diligence review identified instances in which product registrations had lapsed, were filed under outdated formulations, or had never been completed for certain recently introduced SKUs. The specific products and states affected were detailed in the regulatory gap analysis attached as Exhibit D to the September 12 memorandum.

If not remediated, this regulatory filing gap could expose Meridian to post-closing compliance risk, including potential enforcement actions, product recalls, or limitations on the Company's ability to sell certain products in affected states. Depending on the severity of the gaps, the financial exposure could range from modest administrative remediation costs to more significant operational disruption.

This issue was flagged in the consolidated Due Diligence Summary Memorandum, dated October 3, 2022, which was circulated to Gareth Holloway (CEO & Managing Member), Priya Anand (CFO), Diana Ressler (General Counsel), and Thomas Liang. However, the allocation of remediation responsibility — specifically, whether the regulatory gaps must be cured by Briarwood as a pre-closing obligation, or whether Meridian would assume remediation responsibility post-closing with a corresponding adjustment to the purchase price or escrow allocation — remains an open item for APA negotiation.

8. Representations and Warranties Insurance Status

In connection with the proposed transaction, Meridian engaged Northbridge Risk Advisors LLC ("Northbridge"), through contact Alison Chu (Senior Vice President), to broker a buy-side representations and warranties insurance ("R&W Insurance") policy. Northbridge submitted a preliminary underwriting package to Sentinel Specialty Insurance Company (underwriter: Mark Ellison) on or about October 1, 2022.

Calderwood & Harkness prepared a coverage analysis memorandum, dated October 10, 2022, analyzing the proposed R&W Insurance policy terms, exclusions, and the interaction between the policy and the APA's indemnification provisions. Key parameters of the proposed coverage, as reflected in the preliminary indication, included:

• Policy Limit: Aligned to the 35% indemnification cap under the APA ($33,250,000);

• Retention: $950,000, structured to mirror the tipping basket in the APA;

• Escrow Interaction: The draft APA contemplated a $9,500,000 escrow (10% of purchase price) to be held for a period matching the representation survival period, with claims against the escrow to be exhausted before resort to the R&W Insurance policy;

• Premium: Preliminary indication of approximately 3.0% of the policy limit, subject to underwriting diligence and final terms; and

• Key Exclusions: Expected exclusions for known issues identified in due diligence, including the environmental REC at the Marysville Facility (pending Phase II results) and certain tax matters.

The R&W Insurance policy was never bound due to the stalling of the transaction in November 2022. The preliminary underwriting indication from Sentinel has likely lapsed, and the diligence materials provided to the underwriter are now stale.

If the deal is reactivated, the R&W Insurance underwriting process would need to restart substantially from the beginning. The underwriter would require updated due diligence reports — including, critically, the Phase II Environmental Site Assessment that was never completed. The outstanding Phase II would almost certainly be a coverage exclusion under any R&W policy if the Phase II is not completed prior to binding, meaning that Meridian would bear all environmental risk at the Marysville Facility without insurance backstop. Additionally, Sentinel may or may not be willing to re-engage on this transaction after the extended period of dormancy. If Sentinel declines, alternative R&W Insurance carriers would need to be explored through Northbridge, adding time and potential cost to the process.

9. Strategic Options

Based on the foregoing analysis, we see three principal strategic options available to Meridian at this juncture. We present each option below, together with the key actions required and associated considerations.

Option A: Reactivation of the Transaction

Under this option, Meridian would re-engage with Briarwood and its counsel, Caldwell, Pruitt & Shaw LLP, to resume negotiations toward execution and closing of the APA. Reactivation would require the following key workstreams:

1. Re-engagement with Briarwood. Initiate direct communication with Malcolm Greer (or through counsel, Rachel Underwood at Caldwell, Pruitt & Shaw LLP) to signal Meridian's continued interest in the acquisition and to propose a revised timeline for completion of negotiations.

2. Debt Financing. Negotiate an extension of the Harborview Commitment Letter (which may require a new commitment fee and potentially revised pricing) or, alternatively, obtain replacement debt financing from another lending institution. This step is urgent given the February 5, 2023 expiration date.

3. Equity Commitment. Confirm with Thomas Liang that the Lakepoint Capital Partners equity commitment ($35,000,000) remains available, valid, and not subject to any cross-default or co-termination provisions triggered by the lapse of the Harborview commitment.

4. Updated Financial Diligence. Re-engage Whitfield Ames LLP (Susan Clearwater) to update the preliminary financial diligence memorandum to reflect a more current reference date and incorporate Briarwood's FY2022 results.

5. Phase II Environmental Site Assessment. Commission Terrapoint Environmental Group, Inc. (Keith Novak) to conduct the Phase II ESA at the Marysville Facility to evaluate the recognized environmental condition identified in the Phase I report.

6. Disclosure Schedules. Request that Briarwood complete and update the disclosure schedules delivered on September 28, 2022, and deliver updated schedules reflecting all material developments since that date.

7. Inventory Valuation Dispute. Propose a resolution framework for the $2,500,000 inventory valuation variance, including a fresh physical inventory count and agreed-upon NRV methodology.

8. Landlord Consent. Re-pursue the landlord consent from Buckeye Industrial Properties LLC for assignment of the Marysville Lease, whether through Briarwood, through direct follow-up from Calderwood & Harkness, or through alternative arrangements.

9. R&W Insurance. Restart the R&W Insurance underwriting process through Northbridge Risk Advisors, with updated diligence materials and, if Sentinel Specialty Insurance Company is unwilling to re-engage, exploration of alternative carriers.

10. Market Valuation. Engage with Wavecrest Partners LLC (Steven Marchetti, Lena Kowalski) to reassess the current market valuation of the Product Lines in light of FY2022 financial results and any changes in the competitive landscape, to confirm that the $95,000,000 purchase price remains supportable.

Timeline: Based on our experience with transactions of this nature, and given the breadth of outstanding workstreams, we estimate a minimum of three to four months from the date of reactivation to reach signing-ready status, assuming prompt re-engagement by both parties and reasonable cooperation from Briarwood and third parties. This estimate does not account for delays that could arise from, among other things, the Phase II environmental investigation, renegotiation of financing terms, or extended commercial negotiations on the open APA issues.

Option B: Formal Termination

Under this option, Meridian would affirmatively terminate further pursuit of the transaction. The key actions required would include:

1. Notice to Briarwood. Send formal written notice to Briarwood (with a copy to Caldwell, Pruitt & Shaw LLP) advising that Meridian has determined not to proceed with the acquisition of the Product Lines and that no further negotiations are contemplated. We note that there is no termination fee, break fee, or other financial obligation payable by Meridian under the LOI in connection with a decision to discontinue negotiations.

2. Data Room Closure. Close out Meridian's access to the Pemberton Systems virtual data room (project code: BHE-CleanLeaf-2022) and confirm that all confidential materials have been handled in accordance with the confidentiality provisions of the LOI.

3. Financing Notifications. Notify Harborview National Bank, N.A. (if the Commitment Letter has not yet expired) that the transaction will not proceed and that Meridian does not intend to draw on the facility. Similarly, notify Lakepoint Capital Partners, LP that the equity commitment will not be called.

4. Insurance Notification. Notify Northbridge Risk Advisors LLC and Sentinel Specialty Insurance Company that the R&W Insurance policy is no longer needed and that the underwriting process should be terminated.

5. Calderwood & Harkness Matter Closure. Wind down the Calderwood & Harkness matter, including archiving of files, preparation of a final billing statement, and return or destruction of confidential materials as required by the LOI's confidentiality provisions.

This option provides certainty and eliminates ongoing costs, but it would forfeit the substantial investment of time, professional fees, and management attention that Meridian has made in the transaction to date.

Option C: Maintain Dormant Posture

Under this option, Meridian would take no affirmative action and would allow the Harborview Commitment Letter, the LOI exclusivity period, and other time-limited provisions to expire on their own terms without further communication to Briarwood or other parties.

This approach preserves a degree of optionality: if Briarwood were to independently re-engage and express interest in completing the transaction, Meridian would be free to resume negotiations at that time. However, this option carries several material risks:

• Briarwood Perception. Briarwood may interpret Meridian's continued silence as disinterest and proactively instruct Greystone Hobbs & Co. (Philip Tran) to pursue alternative acquirers, potentially before the formal expiration of the exclusivity period.

• Stale Diligence. The diligence work product will become increasingly stale with each passing month, increasing the time and cost required for any future reactivation.

• Employee Flight Risk. Key employees at Briarwood associated with the Product Lines may depart given the uncertainty surrounding the transaction, potentially degrading the value of the business being acquired.

• Market Shifts. Market conditions, competitive dynamics, and the macroeconomic environment may shift in ways that alter the attractiveness of the acquisition or the availability and pricing of financing.

Ongoing Cost: Minimal. No active work product is being generated, and Calderwood & Harkness is not currently billing significant hours to the matter. However, the matter remains open on our books, and the ticking fee continues to accrue through February 5, 2023.

10. Recommendation

In light of the analysis set forth above, Calderwood & Harkness recommends that Meridian make a definitive decision on the path forward by no later than mid-February 2023. The most time-critical factor driving this recommendation is the imminent expiration of the Harborview National Bank Commitment Letter on February 5, 2023. Once that commitment lapses, Meridian's financing architecture for the acquisition will need to be rebuilt entirely, adding meaningful time, cost, and execution risk to any reactivation effort.

If Meridian is inclined toward reactivation (Option A), we recommend that the first step be an internal strategy call with you, Gareth Holloway (CEO & Managing Member), Priya Anand (CFO), and Thomas Liang to align on commercial objectives, financing strategy, and negotiation priorities. That internal alignment should be followed promptly by direct outreach to Briarwood — either through Malcolm Greer directly or through Rachel Underwood at Caldwell, Pruitt & Shaw LLP — to gauge Briarwood's current posture and willingness to resume discussions. If reactivation is pursued, we would also recommend scheduling a valuation update session with Wavecrest Partners and a diligence scoping call with Whitfield Ames and Terrapoint Environmental Group within the first two weeks.

If Meridian is inclined toward formal termination (Option B), Calderwood & Harkness can prepare the necessary termination communications, financing notifications, and data room closure instructions promptly. We could have the notice to Briarwood drafted and ready for review within two business days of receiving Meridian's instruction.

The dormant posture (Option C) is, in our assessment, the least advisable course of action given the approaching deadlines and the strategic risks outlined above. While it carries no immediate legal risk, it places Meridian in an increasingly passive position as key protections — including committed financing and exclusivity — expire around it. We do not believe that continued inaction serves the Company's interests.

We recognize that the decision on how to proceed involves significant strategic, financial, and operational considerations that extend beyond the legal issues addressed in this letter. Calderwood & Harkness stands ready to discuss these options with you and your team at your earliest convenience, and we would welcome the opportunity to schedule a call with the broader deal team — including representatives from Wavecrest Partners, Whitfield Ames, and, if appropriate, Harborview — to ensure that all relevant perspectives are considered.

Please note that this letter is provided as legal advice in connection with our engagement by Meridian Consumer Brands LLC and is protected by the attorney-client privilege and the work product doctrine. It should not be disclosed to third parties without the prior written consent of Calderwood & Harkness LLP.

We look forward to hearing from you.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Sandra Tung Partner

Direct Telephone: (212) 554-7148

Email: stung@calderwoodharkness.com

cc: Gareth Holloway, CEO & Managing Member, Meridian Consumer Brands LLC Priya Anand, Chief Financial Officer, Meridian Consumer Brands LLC Oliver Mackenzie, Partner, Calderwood & Harkness LLP Andrew Fitzpatrick, Associate, Calderwood & Harkness LLP

CALDERWOOD & HARKNESS LLP Attorneys at Law
599 Lexington Avenue, 36th Floor New York, New York 10022 Telephone: (212) 554-7000 Facsimile: (212) 554-7001 www.calderwoodharkness.com
January 20, 2023
VIA EMAIL AND FIRST CLASS MAIL
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED COMMUNICATION
Diana Ressler, Esq. General Counsel Meridian Consumer Brands LLC 440 Park Avenue South, 18th Floor New York, New York 10016
Re: Proposed Asset Purchase of CleanLeaf and PureHaven Product Lines from Briarwood Home Essentials, Inc. — Status Update and Dormancy Implications
Matter No.: 1011-00005
Dear Diana:
I am writing on behalf of Calderwood & Harkness LLP in connection with the proposed $95,000,000 asset purchase by Meridian Consumer Brands LLC ("Meridian" or the "Company") of the CleanLeaf and PureHaven consumer product lines (collectively, the "Product Lines") from Briarwood Home Essentials, Inc. ("Briarwood"). The purpose of this letter is threefold: (1) to provide you and your team with a comprehensive update on the current dormant status of the transaction, (2) to identify a number of time-sensitive issues that require the Company's prompt attention, and (3) to outline the strategic options available to Meridian at this juncture.
As you are aware, the last substantive negotiation call between the parties took place on November 18, 2022. Since that call, the only communication between deal counsel was a scheduling proposal sent by our associate, Naomi Petersen, to David Soo at Caldwell, Pruitt & Shaw LLP on December 9, 2022, proposing dates for a follow-up discussion. That email received no response. No formal termination of the Letter of Intent ("LOI") or the Asset Purchase Agreement ("APA") negotiations has occurred, and neither party has communicated a decision to abandon the transaction. As a practical matter, however, the transaction has been effectively dormant since mid-December 2022.
For the reasons set forth in detail below, we recommend that Meridian make a decision on the path forward by no later than mid-February 2023. Several impending deadlines — most critically, the expiration of the Harborview National Bank debt commitment letter on February 5, 2023 — make continued inaction increasingly costly and strategically inadvisable. We address each of the relevant issues in turn.
1. Debt Commitment Letter Expiration — Harborview National Bank, N.A.
The senior secured term loan commitment letter (the "Commitment Letter") between Meridian and Harborview National Bank, N.A. ("Harborview"), providing for a $60,000,000 senior secured term loan facility, was executed on August 5, 2022. Meridian's relationship manager at Harborview is Carolyn Dubois, Senior Vice President, Leveraged Finance. The Commitment Letter was the product of an approximately three-month negotiation process and represented a key milestone in establishing the financing architecture for the proposed acquisition.
By its express terms, the Commitment Letter expires on February 5, 2023 — approximately sixteen (16) days from the date of this letter.
The principal economic terms of the committed facility, as set forth in the Commitment Letter and the accompanying term sheet, include the following:
• Interest Rate: Secured Overnight Financing Rate (SOFR) plus 375 basis points, with a 50 basis point SOFR floor;
• Commitment Fee: 50 basis points per annum on undrawn committed amounts, payable quarterly in arrears;
• Ticking Fee: 25 basis points on the total committed amount, commencing 90 days after the date of the Commitment Letter (as discussed further in Section 2 below); and
• Syndication: The facility was structured to include Pinnacle Credit Partners, LP (contact: Rajan Mehta, Managing Director) as a syndicate participant, with Harborview acting as administrative agent and sole lead arranger.
Upon expiration of the Commitment Letter, Meridian will have no committed debt financing in place for the transaction. If Meridian subsequently determines that it wishes to proceed with the acquisition of the Product Lines, new financing arrangements would need to be negotiated from scratch. While we cannot predict future credit market conditions, we note that the current interest rate environment has shifted meaningfully since August 2022, and any new commitment obtained in the first quarter of 2023 or thereafter could entail materially different — and potentially less favorable — pricing terms, tighter covenants, or reduced lender appetite for leveraged acquisition financing in the consumer products sector.
Additionally, we note that the equity commitment letter from Lakepoint Capital Partners, LP ("Lakepoint"), dated August 12, 2022, providing for a $35,000,000 equity contribution to fund the balance of the purchase price and transaction expenses, should be reviewed carefully for any expiration provisions or conditionality that may be tied to the existence or continued validity of the Harborview debt commitment. It is possible that the Lakepoint equity commitment is subject to a co-termination or cross-default provision linked to the availability of debt financing. We advise that you coordinate with Thomas Liang on this point so that the Company has a complete picture of its financing posture.
In light of the foregoing, we recommend that Meridian promptly determine whether to:
(a) approach Harborview (through Carolyn Dubois) about extending the Commitment Letter beyond February 5, 2023, which extension would likely require payment of a new or additional commitment fee and could result in repricing of the facility;
(b) seek alternative debt financing from other lending institutions, which would require a new credit process with attendant time, cost, and uncertainty; or
(c) allow the Commitment Letter to lapse without taking further action, recognizing that doing so will eliminate the Company's currently committed financing for the acquisition.
We are prepared to assist with any of these alternatives should Meridian wish to proceed.
2. Ticking Fee Accrual
Under the terms of the Harborview Commitment Letter, a ticking fee of 25 basis points per annum on the total $60,000,000 committed facility commenced 90 days after the commitment date — that is, on November 3, 2022. The ticking fee is payable in addition to the 50 basis point commitment fee referenced above and was designed to incentivize timely closing of the financed transaction.
The ticking fee has been accruing continuously since November 3, 2022, and will continue to accrue through the earlier of (i) the expiration of the Commitment Letter on February 5, 2023, or (ii) drawdown of the committed facility at closing.
As of the date of this letter, January 20, 2023, the ticking fee has been running for approximately seventy-eight (78) days. The quantification is as follows:
• Annualized ticking fee: 25 basis points × $60,000,000 = $150,000 per annum
• Daily ticking fee: $150,000 ÷ 365 = approximately $410.96 per day
• Accrued through January 20, 2023 (approximately 78 days): approximately $11,507
• Additional accrual through February 5, 2023 (approximately 16 additional days): approximately $2,055
• Total projected ticking fee through Commitment Letter expiration: approximately $13,562
While this amount is not large relative to the overall transaction size, it represents an ongoing financial obligation that is accruing without any corresponding progress toward closing the acquisition. The ticking fee was negotiated with the expectation that closing would occur within the commitment period, and the continued accrual in a dormant deal context represents, in essence, a sunk cost.
We recommend that Meridian confirm with Priya Anand (Chief Financial Officer) that this ticking fee liability is being properly tracked, accrued, and reflected in the Company's financial records, and that any payment obligations are met in accordance with the terms of the Commitment Letter to avoid a technical default or breach that could complicate the Company's relationship with Harborview.
3. LOI Exclusivity Expiration
The Letter of Intent, dated March 28, 2022, between Meridian and Briarwood contains a binding twelve-month exclusivity provision (Section 5 of the LOI) that is set to expire on March 28, 2023 — approximately sixty-seven (67) days from the date of this letter.
During the exclusivity period, Briarwood (and its sole shareholder and President, Malcolm Greer) is contractually obligated not to, directly or indirectly, solicit, initiate, or encourage any inquiries or proposals from, or negotiate or enter into any agreement with, any third party regarding the sale, disposition, or transfer of all or any portion of the CleanLeaf and PureHaven Product Lines. This exclusivity provision was a critical element of the LOI and provided Meridian with the protected negotiating period necessary to conduct due diligence, negotiate the APA, and arrange financing.
Once the exclusivity period expires on March 28, 2023, Briarwood will be free to engage with other potential acquirers of the Product Lines. Briarwood's financial advisor, Greystone Hobbs & Co. (Philip Tran, Managing Director), could be instructed by Malcolm Greer to initiate a broader, marketed sale process — potentially soliciting competitive bids from strategic and financial buyers in the consumer products space.
We note several important points regarding the structure of the LOI:
• No Break Fee: The LOI does not contain a break fee or termination fee of any kind. Accordingly, neither Meridian nor Briarwood has financial exposure upon the expiration of the exclusivity period. There will be no payment obligation triggered by the lapse of exclusivity.
• Surviving Binding Provisions: Certain provisions of the LOI are designated as binding and survive the expiration of the exclusivity period by their express terms. These include: (i) the confidentiality obligations set forth in Section 7, (ii) the governing law provision (New York law, Section 10), and (iii) the dispute resolution provision requiring arbitration under JAMS rules (Section 11). These provisions will remain in effect in accordance with their stated survival periods regardless of whether the transaction proceeds.
• Non-Binding Provisions: The non-binding provisions of the LOI — including the indicative purchase price of $95,000,000, the asset purchase structure, the proposed closing conditions, and the other commercial terms set forth in the term sheet — have no enforceable legal effect and are expressly stated to be subject to the execution of a definitive APA. No party may compel the other to close the transaction based solely on the LOI.
From a strategic standpoint, the expiration of exclusivity is a significant concern. If Briarwood perceives the transaction as dead or unlikely to close, Malcolm Greer may proactively instruct Greystone Hobbs & Co. to test the market for the Product Lines — even before the formal expiration of the exclusivity period. While any such solicitation prior to March 28, 2023 would constitute a breach of the LOI's binding exclusivity provision, the practical remedy available to Meridian in such a scenario (injunctive relief and/or damages) would be limited and time-consuming to pursue. Moreover, once exclusivity does expire, Meridian's competitive leverage to acquire the Product Lines at the negotiated $95,000,000 price (or on other favorable terms) could be materially diminished if competing bidders emerge.
Accordingly, if Meridian intends to pursue the transaction, re-engagement with Briarwood — whether through direct communication with Malcolm Greer or through their counsel, Rachel Underwood at Caldwell, Pruitt & Shaw LLP — well in advance of March 28, 2023 is strongly advisable. Doing so would signal continued interest and could serve as a basis for extending the exclusivity period, if necessary, while negotiations resume.
4. Stale Diligence Risks
Due diligence on the CleanLeaf and PureHaven Product Lines was formally opened on June 14, 2022, when Briarwood granted data room access to Meridian and its advisors via the Pemberton Systems virtual data room platform (project code: BHE-CleanLeaf-2022). Over the course of the following four months, substantial due diligence work was performed across financial, legal, tax, environmental, and operational workstreams. However, given the dormancy of the transaction since mid-December 2022, much of the diligence work product has become materially stale. We address the key areas of concern below.
Financial Diligence. The reference date for the key financial estimates underpinning the preliminary financial diligence was June 30, 2022 — now nearly seven months old. Whitfield Ames LLP (engagement partner: Susan Clearwater), which was engaged by Meridian to perform quality of earnings and net working capital analyses, delivered its preliminary financial diligence memorandum on October 14, 2022. That memorandum was based on data as of mid-2022 and would require material updating if the transaction were to proceed.
Specifically, the following financial data points, all of which informed the preliminary purchase price analysis and the purchase price adjustment mechanisms in the draft APA, are stale and would need to be refreshed to a more current reference date:
• Inventory: Book value of $14,300,000 as reported by Briarwood; net realizable value of $11,800,000 as estimated by Whitfield Ames (see Section 5 below for further discussion of the inventory valuation variance);
• Accounts Receivable: $9,700,000 as of June 30, 2022, including concentration risk analysis by customer;
• Trade Payables: $4,200,000 as of June 30, 2022; and
• Warranty Accrual: $620,000, which Whitfield Ames flagged as potentially understated based on historical warranty claim rates for certain PureHaven SKUs.
Moreover, the valuation analysis prepared by Meridian's financial advisor, Wavecrest Partners LLC (Steven Marchetti, Managing Director, and Lena Kowalski, Vice President), was based on Briarwood's reported fiscal year 2021 revenue of $68,000,000 and EBITDA of $11,200,000 for the combined Product Lines. The proposed purchase price of $95,000,000 implied an enterprise value to EBITDA multiple of approximately 8.48x. Briarwood's fiscal year 2022 results are now available (or will be available imminently), and those results could materially affect the valuation analysis — either positively or negatively. A meaningful decline in FY2022 revenue or EBITDA could call into question the appropriateness of the $95,000,000 purchase price, while improved performance could strengthen the commercial rationale for the acquisition. In either case, an updated analysis would be essential. Briarwood's auditor, Hargrove & Linton, P.C. (engagement partner: Daniel Yee), would need to be coordinated with to obtain updated and audited financial information for the Product Lines.
Environmental Diligence. The Phase I Environmental Site Assessment (Report No. TEG-2022-0441) for the Marysville manufacturing facility (2800 Industrial Parkway, Marysville, OH 43040) was completed on September 2, 2022, by Terrapoint Environmental Group, Inc. (project manager: Keith Novak). That Phase I ESA identified a potential recognized environmental condition ("REC") at the Marysville facility, relating to potential subsurface contamination in the vicinity of a former solvent storage area on the eastern portion of the site. The Phase I report recommended that a Phase II ESA be conducted to evaluate the nature and extent of the potential contamination.
That Phase II investigation was never commenced. The deal stalled before the scope of work, timeline, and cost allocation for the Phase II could be agreed upon between the parties. Environmental conditions at the site may have changed in the intervening months — for better or worse — and a Phase II investigation would be essential before any closing of the acquisition. Proceeding to close without completing the Phase II would expose Meridian to potentially significant environmental liability, and it is highly likely that any representations and warranties insurance policy (see Section 8 below) would exclude coverage for known environmental conditions identified in the Phase I that were not further investigated.
Disclosure Schedules. The disclosure schedules delivered by Briarwood on September 28, 2022 were a first draft only and were expressly designated as partial and subject to completion. Several schedules — including the schedules relating to material contracts, employee benefit plans, and pending or threatened litigation — were incomplete or contained placeholder language. These schedules would require both completion and updating to reflect developments since September 2022.
intellectual Property. The intellectual property due diligence review, conducted by our colleague Andrew Fitzpatrick, identified incomplete trademark renewal filings for several CleanLeaf and PureHaven marks. If those renewals were not addressed by Briarwood in the intervening months, the status of certain trademark registrations may have worsened, potentially resulting in lapsed or abandoned marks that could affect the value of the intellectual property assets being acquired.
Employee Matters. The proposed transaction contemplates the transfer of approximately 186 employees from Briarwood to Meridian, including manufacturing, distribution, sales, and administrative personnel associated with the Product Lines. Prolonged deal dormancy creates meaningful flight risk among key personnel, particularly at the management level. If critical employees depart Briarwood during the dormancy period, the value proposition of the acquisition could be materially impaired. We have no current information regarding employee turnover at Briarwood since November 2022.
5. Unresolved Inventory Valuation Variance
The most significant commercial dispute that contributed to the stalling of deal negotiations is the $2,500,000 inventory valuation variance between Briarwood's reported book value and the net realizable value determined by Meridian's financial diligence advisor.
As noted above, Briarwood reported an inventory book value of $14,300,000 as of June 30, 2022, for the combined CleanLeaf and PureHaven Product Lines. Whitfield Ames LLP's preliminary financial diligence analysis determined that the net realizable value of the same inventory was approximately $11,800,000 — a downward variance of $2,500,000, or approximately 17.5%. The variance was attributable primarily to slow-moving and potentially obsolete SKUs in the PureHaven line, as well as differences in the treatment of raw materials versus finished goods in the NRV calculation.
Our associate Andrew Fitzpatrick raised this issue with David Soo at Caldwell, Pruitt & Shaw LLP via email on October 21, 2022, requesting supporting documentation for Briarwood's inventory valuation methodology and proposing a joint review process — potentially including a joint physical inventory count and an agreed-upon methodology for determining NRV. Briarwood, through its counsel, disputed the methodology used by Whitfield Ames but did not provide any alternative supporting analysis or documentation to substantiate its reported book value.
The issue was discussed at length on the November 18, 2022 negotiation call — the last substantive call between the parties. During that call, Rachel Underwood (on behalf of Briarwood) indicated that Malcolm Greer viewed the inventory valuation as a "deal-level issue" and would not agree to a reduction in purchase price based on what Briarwood characterized as overly conservative accounting assumptions. The call ended without resolution, and no follow-up was scheduled.
The second draft of the APA, circulated by Calderwood & Harkness on September 15, 2022, included a purchase price adjustment mechanism tied to closing inventory (Section 2.4 of the draft APA). However, the parties had not agreed on the methodology for determining closing inventory value — specifically, whether NRV would be calculated based on a "lower of cost or NRV" standard (Meridian's position) or a "cost" standard with limited adjustments for damaged or expired product only (Briarwood's position).
The APA Issues List and Comparison Chart, dated September 20, 2022, and circulated to all members of the deal team, identified the inventory valuation methodology as one of several material open items. The other principal open items included:
• Indemnification Cap: Meridian's position at 35% of the purchase price ($33,250,000) versus Briarwood's counter-proposal of 20% of the purchase price ($19,000,000);
• Survival Period for Representations and Warranties: Meridian's position of 24 months post-closing versus Briarwood's counter-proposal of 18 months;
• Tipping Basket: $950,000 (agreed in principle), with deductible versus tipping basket mechanics still under discussion; and
• Earnout Revenue Threshold: Meridian proposed a two-year earnout based on achievement of $72,000,000 in annualized revenue for the Product Lines; Briarwood proposed a lower threshold of $65,000,000 with a shorter measurement period.
If the deal is reactivated, the inventory valuation dispute would need to be resolved as a threshold matter, likely requiring a fresh physical inventory count at an agreed-upon date, application of an agreed-upon NRV methodology, and recalculation of the variance. Given the passage of approximately seven months since the June 30, 2022 reference date, the variance will almost certainly have changed — potentially in either direction — as inventory has been manufactured, sold, consumed, or rendered obsolete in the ordinary course of Briarwood's operations.
6. Absence of Landlord Consent — Buckeye Industrial Properties LLC
A critical outstanding condition precedent to closing is the landlord consent required for the assignment of the Marysville facility lease.
The principal manufacturing facility for the CleanLeaf and PureHaven Product Lines is located at 2800 Industrial Parkway, Marysville, Ohio 43040 (the "Marysville Facility"). The Marysville Facility is leased by Briarwood from Buckeye Industrial Properties LLC ("Buckeye Industrial"), with offices at 77 East Nationwide Boulevard, Suite 200, Columbus, Ohio 43215. The lease for the Marysville Facility (the "Marysville Lease") is a triple-net lease with approximately four years remaining on the current term, and it contains a standard provision requiring the prior written consent of the landlord to any assignment of the lease or change of control of the tenant.
Because the proposed transaction is structured as an asset purchase — under which Meridian would acquire the Marysville Lease as part of the Acquired Assets — the transfer of the lease from Briarwood to Meridian would constitute an assignment requiring Buckeye Industrial's consent.
Calderwood & Harkness sent a landlord consent request letter to Buckeye Industrial on October 7, 2022. As of the date of this letter — more than three months after the consent request was sent — no response has been received from Buckeye Industrial. We have not received an acknowledgment of receipt, a request for additional information, a conditional consent, or a denial. The complete silence is noteworthy and concerning.
The Marysville Facility is essential to the manufacturing operations for the Product Lines. The facility supports the production of approximately 142 active SKUs across the CleanLeaf and PureHaven brands, and it houses specialized mixing, filling, and packaging equipment that would be included in the Acquired Assets. Without access to the Marysville Facility (or a suitable alternative), Meridian would be unable to operate the Product Lines following closing.
Failure to obtain landlord consent would constitute a failure to satisfy a condition precedent to closing under Section 7.2(d) of the APA as drafted. This is a material issue that cannot be waived without significant operational risk.
We see the following options for addressing this issue:
(a) Seller Pursuit of Consent. Under the draft APA (Section 6.4), the obligation to obtain landlord consent for the assignment of the Marysville Lease was allocated to Briarwood as a pre-closing covenant of the seller. Meridian could insist that Briarwood fulfill this obligation by contacting Buckeye Industrial directly and pursuing the consent through the existing landlord-tenant relationship.
(b) Follow-Up Correspondence from Calderwood & Harkness. We could send a follow-up letter to Buckeye Industrial on Meridian's behalf, emphasizing the importance of the consent and requesting a response by a specified date.
(c) Assessment of Alternative Manufacturing Arrangements. Meridian could evaluate whether alternative contract manufacturing or co-packing arrangements are feasible as a contingency plan in the event landlord consent cannot be obtained. This would require involvement of the Company's operations team and could have significant cost and timing implications.
(d) Direct Lease Negotiation. Meridian could seek to negotiate a lease termination (of the existing Briarwood lease) and a new direct lease between Meridian and Buckeye Industrial on mutually acceptable terms. This approach would bypass the consent requirement entirely but would add complexity and negotiation time to the transaction.
We also note that the West Jefferson distribution center, located at 500 Commerce Boulevard, West Jefferson, Ohio 43162, is owned by Briarwood in fee and is included in the definition of Acquired Assets under the draft APA. The West Jefferson facility does not present a landlord consent issue.
Finally, we wish to flag a related concern: of the twenty-three (23) customer contracts to be assigned to Meridian as part of the Acquired Assets, seven (7) contain change-of-control or assignment consent provisions requiring the counterparty's prior written consent to assignment. Form consent request letters were prepared by Calderwood & Harkness, dated October 12, 2022, and forwarded to Briarwood's counsel for delivery. However, it is unclear from our records whether those letters were actually sent to the relevant customers. This should be confirmed with Caldwell, Pruitt & Shaw LLP if the deal is reactivated.
7. Regulatory Filing Gap
The Due Diligence Memorandum — Litigation & Regulatory, dated September 12, 2022, prepared by Calderwood & Harkness (principal drafter: Andrew Fitzpatrick; reviewed by Oliver Mackenzie), identified a gap in state-level product registrations for certain CleanLeaf and PureHaven products.
As a threshold matter, we note that a Hart-Scott-Rodino Act pre-merger notification filing is not required for this transaction. The $95,000,000 transaction value falls below the applicable size-of-transaction threshold as adjusted for 2022, and in any event the size-of-person test is not met by Briarwood given its total assets and annual net sales. Accordingly, no federal antitrust filing obligation exists.
However, the regulatory filing gap at the state level is a separate and non-trivial issue. The CleanLeaf and PureHaven Product Lines include household cleaning products and surface treatments that are subject to product registration and labeling requirements in multiple states, including California, New York, Ohio, and several other jurisdictions. The diligence review identified instances in which product registrations had lapsed, were filed under outdated formulations, or had never been completed for certain recently introduced SKUs. The specific products and states affected were detailed in the regulatory gap analysis attached as Exhibit D to the September 12 memorandum.
If not remediated, this regulatory filing gap could expose Meridian to post-closing compliance risk, including potential enforcement actions, product recalls, or limitations on the Company's ability to sell certain products in affected states. Depending on the severity of the gaps, the financial exposure could range from modest administrative remediation costs to more significant operational disruption.
This issue was flagged in the consolidated Due Diligence Summary Memorandum, dated October 3, 2022, which was circulated to Gareth Holloway (CEO & Managing Member), Priya Anand (CFO), Diana Ressler (General Counsel), and Thomas Liang. However, the allocation of remediation responsibility — specifically, whether the regulatory gaps must be cured by Briarwood as a pre-closing obligation, or whether Meridian would assume remediation responsibility post-closing with a corresponding adjustment to the purchase price or escrow allocation — remains an open item for APA negotiation.
8. Representations and Warranties Insurance Status
In connection with the proposed transaction, Meridian engaged Northbridge Risk Advisors LLC ("Northbridge"), through contact Alison Chu (Senior Vice President), to broker a buy-side representations and warranties insurance ("R&W Insurance") policy. Northbridge submitted a preliminary underwriting package to Sentinel Specialty Insurance Company (underwriter: Mark Ellison) on or about October 1, 2022.
Calderwood & Harkness prepared a coverage analysis memorandum, dated October 10, 2022, analyzing the proposed R&W Insurance policy terms, exclusions, and the interaction between the policy and the APA's indemnification provisions. Key parameters of the proposed coverage, as reflected in the preliminary indication, included:
• Policy Limit: Aligned to the 35% indemnification cap under the APA ($33,250,000);
• Retention: $950,000, structured to mirror the tipping basket in the APA;
• Escrow Interaction: The draft APA contemplated a $9,500,000 escrow (10% of purchase price) to be held for a period matching the representation survival period, with claims against the escrow to be exhausted before resort to the R&W Insurance policy;
• Premium: Preliminary indication of approximately 3.0% of the policy limit, subject to underwriting diligence and final terms; and
• Key Exclusions: Expected exclusions for known issues identified in due diligence, including the environmental REC at the Marysville Facility (pending Phase II results) and certain tax matters.
The R&W Insurance policy was never bound due to the stalling of the transaction in November 2022. The preliminary underwriting indication from Sentinel has likely lapsed, and the diligence materials provided to the underwriter are now stale.
If the deal is reactivated, the R&W Insurance underwriting process would need to restart substantially from the beginning. The underwriter would require updated due diligence reports — including, critically, the Phase II Environmental Site Assessment that was never completed. The outstanding Phase II would almost certainly be a coverage exclusion under any R&W policy if the Phase II is not completed prior to binding, meaning that Meridian would bear all environmental risk at the Marysville Facility without insurance backstop. Additionally, Sentinel may or may not be willing to re-engage on this transaction after the extended period of dormancy. If Sentinel declines, alternative R&W Insurance carriers would need to be explored through Northbridge, adding time and potential cost to the process.
9. Strategic Options
Based on the foregoing analysis, we see three principal strategic options available to Meridian at this juncture. We present each option below, together with the key actions required and associated considerations.
Option A: Reactivation of the Transaction
Under this option, Meridian would re-engage with Briarwood and its counsel, Caldwell, Pruitt & Shaw LLP, to resume negotiations toward execution and closing of the APA. Reactivation would require the following key workstreams:
1. Re-engagement with Briarwood. Initiate direct communication with Malcolm Greer (or through counsel, Rachel Underwood at Caldwell, Pruitt & Shaw LLP) to signal Meridian's continued interest in the acquisition and to propose a revised timeline for completion of negotiations.
2. Debt Financing. Negotiate an extension of the Harborview Commitment Letter (which may require a new commitment fee and potentially revised pricing) or, alternatively, obtain replacement debt financing from another lending institution. This step is urgent given the February 5, 2023 expiration date.
3. Equity Commitment. Confirm with Thomas Liang that the Lakepoint Capital Partners equity commitment ($35,000,000) remains available, valid, and not subject to any cross-default or co-termination provisions triggered by the lapse of the Harborview commitment.
4. Updated Financial Diligence. Re-engage Whitfield Ames LLP (Susan Clearwater) to update the preliminary financial diligence memorandum to reflect a more current reference date and incorporate Briarwood's FY2022 results.
5. Phase II Environmental Site Assessment. Commission Terrapoint Environmental Group, Inc. (Keith Novak) to conduct the Phase II ESA at the Marysville Facility to evaluate the recognized environmental condition identified in the Phase I report.
6. Disclosure Schedules. Request that Briarwood complete and update the disclosure schedules delivered on September 28, 2022, and deliver updated schedules reflecting all material developments since that date.
7. Inventory Valuation Dispute. Propose a resolution framework for the $2,500,000 inventory valuation variance, including a fresh physical inventory count and agreed-upon NRV methodology.
8. Landlord Consent. Re-pursue the landlord consent from Buckeye Industrial Properties LLC for assignment of the Marysville Lease, whether through Briarwood, through direct follow-up from Calderwood & Harkness, or through alternative arrangements.
9. R&W Insurance. Restart the R&W Insurance underwriting process through Northbridge Risk Advisors, with updated diligence materials and, if Sentinel Specialty Insurance Company is unwilling to re-engage, exploration of alternative carriers.
10. Market Valuation. Engage with Wavecrest Partners LLC (Steven Marchetti, Lena Kowalski) to reassess the current market valuation of the Product Lines in light of FY2022 financial results and any changes in the competitive landscape, to confirm that the $95,000,000 purchase price remains supportable.
Timeline: Based on our experience with transactions of this nature, and given the breadth of outstanding workstreams, we estimate a minimum of three to four months from the date of reactivation to reach signing-ready status, assuming prompt re-engagement by both parties and reasonable cooperation from Briarwood and third parties. This estimate does not account for delays that could arise from, among other things, the Phase II environmental investigation, renegotiation of financing terms, or extended commercial negotiations on the open APA issues.
Option B: Formal Termination
Under this option, Meridian would affirmatively terminate further pursuit of the transaction. The key actions required would include:
1. Notice to Briarwood. Send formal written notice to Briarwood (with a copy to Caldwell, Pruitt & Shaw LLP) advising that Meridian has determined not to proceed with the acquisition of the Product Lines and that no further negotiations are contemplated. We note that there is no termination fee, break fee, or other financial obligation payable by Meridian under the LOI in connection with a decision to discontinue negotiations.
2. Data Room Closure. Close out Meridian's access to the Pemberton Systems virtual data room (project code: BHE-CleanLeaf-2022) and confirm that all confidential materials have been handled in accordance with the confidentiality provisions of the LOI.
3. Financing Notifications. Notify Harborview National Bank, N.A. (if the Commitment Letter has not yet expired) that the transaction will not proceed and that Meridian does not intend to draw on the facility. Similarly, notify Lakepoint Capital Partners, LP that the equity commitment will not be called.
4. Insurance Notification. Notify Northbridge Risk Advisors LLC and Sentinel Specialty Insurance Company that the R&W Insurance policy is no longer needed and that the underwriting process should be terminated.
5. Calderwood & Harkness Matter Closure. Wind down the Calderwood & Harkness matter, including archiving of files, preparation of a final billing statement, and return or destruction of confidential materials as required by the LOI's confidentiality provisions.
This option provides certainty and eliminates ongoing costs, but it would forfeit the substantial investment of time, professional fees, and management attention that Meridian has made in the transaction to date.
Option C: Maintain Dormant Posture
Under this option, Meridian would take no affirmative action and would allow the Harborview Commitment Letter, the LOI exclusivity period, and other time-limited provisions to expire on their own terms without further communication to Briarwood or other parties.
This approach preserves a degree of optionality: if Briarwood were to independently re-engage and express interest in completing the transaction, Meridian would be free to resume negotiations at that time. However, this option carries several material risks:
• Briarwood Perception. Briarwood may interpret Meridian's continued silence as disinterest and proactively instruct Greystone Hobbs & Co. (Philip Tran) to pursue alternative acquirers, potentially before the formal expiration of the exclusivity period.
• Stale Diligence. The diligence work product will become increasingly stale with each passing month, increasing the time and cost required for any future reactivation.
• Employee Flight Risk. Key employees at Briarwood associated with the Product Lines may depart given the uncertainty surrounding the transaction, potentially degrading the value of the business being acquired.
• Market Shifts. Market conditions, competitive dynamics, and the macroeconomic environment may shift in ways that alter the attractiveness of the acquisition or the availability and pricing of financing.
Ongoing Cost: Minimal. No active work product is being generated, and Calderwood & Harkness is not currently billing significant hours to the matter. However, the matter remains open on our books, and the ticking fee continues to accrue through February 5, 2023.
10. Recommendation
In light of the analysis set forth above, Calderwood & Harkness recommends that Meridian make a definitive decision on the path forward by no later than mid-February 2023. The most time-critical factor driving this recommendation is the imminent expiration of the Harborview National Bank Commitment Letter on February 5, 2023. Once that commitment lapses, Meridian's financing architecture for the acquisition will need to be rebuilt entirely, adding meaningful time, cost, and execution risk to any reactivation effort.
If Meridian is inclined toward reactivation (Option A), we recommend that the first step be an internal strategy call with you, Gareth Holloway (CEO & Managing Member), Priya Anand (CFO), and Thomas Liang to align on commercial objectives, financing strategy, and negotiation priorities. That internal alignment should be followed promptly by direct outreach to Briarwood — either through Malcolm Greer directly or through Rachel Underwood at Caldwell, Pruitt & Shaw LLP — to gauge Briarwood's current posture and willingness to resume discussions. If reactivation is pursued, we would also recommend scheduling a valuation update session with Wavecrest Partners and a diligence scoping call with Whitfield Ames and Terrapoint Environmental Group within the first two weeks.
If Meridian is inclined toward formal termination (Option B), Calderwood & Harkness can prepare the necessary termination communications, financing notifications, and data room closure instructions promptly. We could have the notice to Briarwood drafted and ready for review within two business days of receiving Meridian's instruction.
The dormant posture (Option C) is, in our assessment, the least advisable course of action given the approaching deadlines and the strategic risks outlined above. While it carries no immediate legal risk, it places Meridian in an increasingly passive position as key protections — including committed financing and exclusivity — expire around it. We do not believe that continued inaction serves the Company's interests.
We recognize that the decision on how to proceed involves significant strategic, financial, and operational considerations that extend beyond the legal issues addressed in this letter. Calderwood & Harkness stands ready to discuss these options with you and your team at your earliest convenience, and we would welcome the opportunity to schedule a call with the broader deal team — including representatives from Wavecrest Partners, Whitfield Ames, and, if appropriate, Harborview — to ensure that all relevant perspectives are considered.
Please note that this letter is provided as legal advice in connection with our engagement by Meridian Consumer Brands LLC and is protected by the attorney-client privilege and the work product doctrine. It should not be disclosed to third parties without the prior written consent of Calderwood & Harkness LLP.
We look forward to hearing from you.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Sandra Tung Partner
Direct Telephone: (212) 554-7148
Email: stung@calderwoodharkness.com
cc: Gareth Holloway, CEO & Managing Member, Meridian Consumer Brands LLC Priya Anand, Chief Financial Officer, Meridian Consumer Brands LLC Oliver Mackenzie, Partner, Calderwood & Harkness LLP Andrew Fitzpatrick, Associate, Calderwood & Harkness LLP

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