1011-00005 · Meridian Consumer Brands LLC · Diligence

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CALDERWOOD & HARKNESS LLP 599 Lexington Avenue, 36th Floor New York, NY 10022

DUE DILIGENCE MEMORANDUM — LITIGATION & REGULATORY

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT

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I. Purpose and Scope

This memorandum summarizes the findings of the litigation and regulatory due diligence review conducted by Calderwood & Harkness LLP in connection with the proposed acquisition by Meridian Consumer Brands LLC (the "Buyer" or "Meridian") of the CleanLeaf home cleaning product line and the PureHaven personal care product line (together, the "Acquired Assets") from Briarwood Home Essentials, Inc. (the "Seller" or "Briarwood"), an Ohio corporation headquartered at 1175 Creekside Drive, Suite 400, Columbus, OH 43215. The proposed transaction is structured as an asset purchase with a purchase price of $95,000,000 (the "Transaction").

The scope of this memorandum encompasses the following areas of inquiry:

(a) pending and threatened litigation involving Briarwood or the Acquired Assets;

(b) product liability claims history for the CleanLeaf and PureHaven product lines;

(d) antitrust filing requirements, including an analysis under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act");

(e) government investigations or inquiries involving Briarwood, its officers, or its directors in connection with the Acquired Assets; and

(f) key regulatory filing gaps identified during the course of our review.

Our review was based on the following sources of information: (i) documents produced by Briarwood in the Pemberton Systems virtual data room established for this transaction (Project Code: BHE-CleanLeaf-2022); (ii) responses to due diligence request lists dated June 14, 2022; (iii) partial disclosure schedules (first draft) delivered by Briarwood on September 28, 2022; (iv) management interviews with Malcolm Greer, President and Sole Shareholder of Briarwood, and Janet Tsao, Vice President of Operations of Briarwood; and (v) representations made by Seller's counsel, Rachel Underwood, Esq. and David Soo, Esq. of Caldwell, Pruitt & Shaw LLP, 41 South High Street, Suite 2800, Columbus, OH 43215.

We note that the disclosure schedules referenced above were received after this memorandum was substantially drafted. Only preliminary information from Briarwood's counsel at Caldwell, Pruitt & Shaw LLP was available at the time of this memorandum's preparation. Accordingly, this memorandum should be supplemented upon our receipt and review of the complete disclosure schedules, particularly the schedules relating to litigation, regulatory compliance, and product liability matters. Any material findings arising from that supplemental review will be addressed in a separate update memorandum or incorporated into the Due Diligence Summary Memorandum.

This memorandum does not address environmental matters, including any issues arising from contamination, hazardous materials, or environmental compliance at Briarwood's facilities. Environmental matters are covered in a separate Environmental Due Diligence Memorandum dated September 8, 2022, which analyzes the Phase I Environmental Site Assessment (Report No. TEG-2022-0441) prepared by Terrapoint Environmental Group, Inc. Readers are referred to that memorandum for a comprehensive discussion of environmental risks and findings.

II. Executive Summary

Set forth below is a summary of the principal findings of our litigation and regulatory due diligence review. Each finding is discussed in greater detail in the sections that follow.

No Material Pending Litigation. We did not identify any material pending litigation against Briarwood or involving the Acquired Assets. Two minor matters were identified, neither of which is material to the Transaction or the Acquired Assets. These matters are described in Section III below.

Modest Product Liability Claims History. The product liability claims history for the CleanLeaf and PureHaven product lines is modest and within industry norms for consumer cleaning and personal care products. No product recalls have occurred for any CleanLeaf or PureHaven stock keeping unit ("SKU"), and no pattern of recurring claims or systemic product defects was identified. The product liability risk profile of the Acquired Assets is low.

HSR Act Filing Not Required. Based on our analysis of the applicable HSR Act thresholds, including the size-of-transaction and size-of-person tests, we have concluded that an HSR Act filing is not required for this Transaction. No pre-closing waiting period applies under the HSR Act. A detailed analysis is provided in Section V below.

Key Regulatory Finding — State Product Registration Gap. Our most significant finding relates to a gap in state product registrations for certain CleanLeaf and PureHaven SKUs. Several states in which products are currently sold lack required product registrations or have registrations that have lapsed without renewal. The gap affects a subset of the approximately 142 active SKUs across both brands. This finding is discussed in detail in Section VI.B below and represents a compliance deficiency that must be remediated either prior to or following the closing of the Transaction.

Warranty Accrual Appears Adequate. Briarwood's accrued product warranty obligations of $620,000, as of the June 30, 2022 reference date, appear adequately reserved based on historical claims data and current open warranty matters. This accrual is among the Assumed Liabilities under the proposed Asset Purchase Agreement (the "APA").

Recommendation. The state product registration gap should be addressed as a pre-closing condition or covenant, or alternatively factored into the indemnification framework in the APA through a specific indemnity or disclosure carve-out. The absence of material litigation is favorable to the Transaction and should provide comfort to the Buyer and its equity sponsor, Lakepoint Capital Partners, LP.

III. Pending Litigation

A. Overview of Litigation Search

In conducting our litigation due diligence, we undertook a comprehensive review of federal and state court dockets. Our search encompassed the following courts, jurisdictions, and databases:

(i) The United States District Court for the Southern District of Ohio and the United States Bankruptcy Court for the Southern District of Ohio;

(ii) Ohio state courts in Franklin County (the county in which Briarwood's corporate headquarters is located), Union County (the location of Briarwood's Marysville manufacturing facility at 2800 Industrial Parkway, Marysville, OH 43040), and Madison County (the location of Briarwood's West Jefferson distribution center at 500 Commerce Boulevard, West Jefferson, OH 43162);

(iii) Nationwide federal court searches conducted through the PACER system, including searches in all ninety-four federal judicial districts;

(iv) Selected state court searches in states identified as material markets for the CleanLeaf and PureHaven product lines, including California, Florida, Texas, New York, Illinois, and Pennsylvania; and

(v) Administrative agency docket searches, including the United States Environmental Protection Agency ("EPA"), the Food and Drug Administration ("FDA"), the Consumer Product Safety Commission ("CPSC"), the Federal Trade Commission ("FTC"), and the Occupational Safety and Health Administration ("OSHA").

In addition to our public records searches, we reviewed the following materials produced by Briarwood in the data room:

(i) Briarwood's internal litigation log, which is maintained by Briarwood's in-house bookkeeper, Marcia Poole, and covers all matters from January 1, 2015 through the date of production;

(ii) Insurance claims records for all commercial general liability and product liability policies in effect during the period from January 1, 2017 through the present, including loss runs provided by Briarwood's insurance broker, Keystone Risk Partners (contact: Paul Bettridge); and

(iii) Representations from Briarwood management during our interviews with Malcolm Greer (conducted on August 4, 2022) and Janet Tsao (conducted on August 4 and August 18, 2022).

A complete list of the docket searches conducted, including the courts, jurisdictions, search parameters, and date ranges, is set forth in Appendix A to this memorandum.

B. Findings — No Material Pending Litigation

Based on our review, no pending lawsuits were identified in which Briarwood is named as a defendant or plaintiff that are material to the Acquired Assets or the Transaction. Briarwood does not appear to be a party to any proceeding, arbitration, or other dispute resolution process that could reasonably be expected to have a material adverse effect on the CleanLeaf or PureHaven product lines or the ongoing operations of the Acquired Assets.

Two minor matters were identified during the course of our review, neither of which is material:

(i) Collection Action Against Former Distributor. Briarwood filed a small-claims collection action in the Franklin County Municipal Court against CleanRight Solutions, LLC, a former distributor, seeking recovery of unpaid invoices in the aggregate amount of approximately $18,000. This matter relates to the Retained Business—specifically, Briarwood's Commercial Janitorial Services Division—and does not involve the CleanLeaf or PureHaven product lines. As such, this collection action pertains to assets and liabilities that are not part of the Acquired Assets and will not be assumed by the Buyer under the proposed APA. The matter remains pending as of the date of this memorandum, though Briarwood's counsel has indicated that settlement discussions are underway.

(ii) Premises Liability Claim at West Jefferson Distribution Center. A slip-and-fall premises liability claim was filed against Briarwood in the Madison County Court of Common Pleas by a delivery driver employed by a third-party logistics provider who alleges that he sustained injuries on the premises of Briarwood's West Jefferson distribution center located at 500 Commerce Boulevard, West Jefferson, OH 43162. The claim is covered by Briarwood's commercial general liability insurance policy issued by Great Lakes Casualty Insurance Company (Policy No. GL-BHE-2021-3887). Briarwood's outside litigation counsel has estimated total exposure, inclusive of defense costs, at under $50,000. No trial date has been set, and the matter is in the early stages of discovery. This claim relates to the physical premises and operations of the distribution center and does not implicate the Acquired Assets in any manner that would be material to the Transaction.

In summary, neither of the two identified matters is material to the Acquired Assets or the Transaction. Neither matter is expected to result in any liability that would be assumed by the Buyer under the proposed APA, and neither presents a risk profile that would warrant special treatment in the Transaction documents.

C. Threatened Litigation

Briarwood management represented during our interviews that no demand letters, cease-and-desist notices, or other communications threatening litigation have been received by Briarwood relating to the CleanLeaf or PureHaven product lines. Malcolm Greer confirmed this representation in his interview on August 4, 2022, and Janet Tsao provided consistent confirmation on the same date.

Our independent review of the data room materials did not reveal any evidence of threatened litigation involving the Acquired Assets. Specifically, we reviewed the general correspondence files, customer complaint files, and regulatory correspondence files produced in the data room and found no demand letters, pre-litigation communications, or other indicia of threatened claims.

We note, however, that our review of threatened litigation is necessarily limited by the completeness of the materials produced in the data room and the accuracy of management's representations. Accordingly, the APA should include a comprehensive representation from the Seller regarding the absence of threatened litigation, with appropriate bring-down conditions at closing.

IV. Product Liability Claims History

A. Scope of Review

We conducted a detailed review of Briarwood's product liability claims history for the CleanLeaf and PureHaven brands. Our review covered the most recent five-year period, from January 1, 2017 through the date of this memorandum. The scope of our review included the following:

(i) Briarwood's product liability claims log, which catalogs all claims, complaints, and inquiries received by Briarwood relating to alleged product defects, personal injury, or property damage arising from the use of CleanLeaf or PureHaven products;

(ii) Insurance claims history and loss runs for Briarwood's product liability insurance policies during the review period, as provided by Keystone Risk Partners;

(iii) Consumer complaint records maintained by Briarwood's customer service department, including records of complaints submitted through retail channels, online platforms, and direct consumer correspondence;

(iv) Product recall records and communications with the CPSC; and

(v) An interview with Janet Tsao, Vice President of Operations, conducted on August 18, 2022, regarding Briarwood's product safety protocols, quality assurance procedures, product recall history, and consumer complaint trends.

A summary table of product liability claims for the review period, presented in anonymized form, is set forth in Appendix B to this memorandum.

B. Findings

Our review of Briarwood's product liability claims history yielded the following findings:

Claims Volume. The total number of product liability claims asserted against Briarwood during the five-year review period for the CleanLeaf and PureHaven brands is limited and consistent with industry norms for consumer household cleaning and personal care products. The claims that were identified involved minor allegations of skin irritation, allergic reactions to certain fragrance or surfactant ingredients, and isolated incidents of packaging defects. All such claims were resolved without formal litigation or with nominal settlements, none of which exceeded $15,000 individually.

No Product Recalls. No product recalls have occurred for any CleanLeaf or PureHaven SKU during the review period or, based on management's representations, at any time in the history of either product line. Briarwood has not been required to file any reports with the CPSC under Section 15 of the Consumer Product Safety Act, and no voluntary recalls have been initiated by Briarwood for any CleanLeaf or PureHaven product.

Consumer Complaints. The volume of consumer complaints received by Briarwood for CleanLeaf and PureHaven products is within industry norms for household cleaning and personal care products. Janet Tsao reported during her interview that Briarwood maintains a consumer complaint log and responds to all complaints within five business days. No systemic or recurring patterns of consumer complaints were identified that would suggest a latent product defect or design flaw.

Insurance Coverage. Briarwood maintains product liability insurance coverage through Great Lakes Casualty Insurance Company (Policy No. PL-BHE-2021-4102), with per-occurrence limits and aggregate limits that appear adequate for the historical claims profile. No claims during the review period have exceeded applicable policy sub-limits, and no coverage disputes have arisen with the insurer.

Warranty Accrual. Briarwood's accrued product warranty obligations stand at $620,000 as of June 30, 2022 (the reference date for purposes of the Transaction). This accrual was established by Briarwood's management in consultation with its independent auditors and reflects estimated future warranty costs for products sold prior to the reference date. Based on our review of historical claims data and current open warranty matters, the $620,000 accrual appears adequately reserved and is not, in our view, materially understated. The warranty accrual is among the Assumed Liabilities that the Buyer will assume under the proposed APA.

C. Risk Assessment

Based on our review, the product liability risk profile of the Acquired Assets is low. We did not identify any pattern of recurring claims, systemic product defects, or latent design issues that would suggest an elevated risk of future product liability exposure. The absence of product recalls and the modest claims history support a favorable assessment of the Acquired Assets from a product liability perspective.

We recommend the inclusion of standard product liability representations and warranties in the APA, covering the accuracy of the product liability claims history, the absence of known product defects, and the adequacy of the warranty accrual. These representations should be subject to a survival period of 24 months following the closing of the Transaction, which is consistent with the general representation survival period contemplated in the current draft of the APA. We do not believe that a longer survival period or a specific indemnity is warranted for product liability matters based on the findings of our review.

V. Antitrust / HSR Act Analysis

A. Hart-Scott-Rodino Applicability

The Transaction is structured as an asset purchase, with the Buyer acquiring the CleanLeaf and PureHaven product lines from the Seller for a purchase price of $95,000,000. Under the HSR Act and the rules promulgated thereunder by the Federal Trade Commission ("FTC"), certain acquisitions of assets or voting securities that exceed specified thresholds require a pre-merger notification filing with the FTC and the Antitrust Division of the Department of Justice ("DOJ"), followed by the observance of a mandatory waiting period before the transaction may be consummated.

We have analyzed the applicability of the HSR Act to the Transaction and conclude that no filing is required. Our analysis of the relevant thresholds is set forth below.

Size-of-Transaction Test. The size-of-transaction test, as adjusted for 2022 pursuant to the FTC's annual revisions, requires that the value of the assets or voting securities to be acquired exceed $101 million (as adjusted effective February 23, 2022). Prior to the February 2022 adjustment, the threshold was $92 million. The purchase price of $95,000,000 falls below the current $101 million threshold as adjusted. However, because the Transaction may have been contemplated or structured during the period when the $92 million threshold was in effect, we have analyzed the Transaction under both thresholds to ensure completeness. Under the $92 million threshold, the purchase price would exceed the size-of-transaction test, and the analysis would turn to the size-of-person test. Under the current $101 million threshold, the size-of-transaction test itself would not be met, and no filing would be required regardless of the size-of-person analysis.

Size-of-Person Test. Even assuming the size-of-transaction test is met (i.e., under the prior $92 million threshold), the HSR Act filing requirement is triggered only if the size-of-person test is also satisfied. The size-of-person test requires that one party to the transaction have total assets or annual net sales of $202 million or more (as adjusted for 2022) and the other party have total assets or annual net sales of $20.2 million or more (as adjusted for 2022). In this case, Briarwood Home Essentials, Inc. is a privately held Ohio corporation with annual revenues attributable to the product lines being sold of approximately $68,000,000 (FY2021). Briarwood, as the Seller, does not meet the upper threshold of $202 million in total assets or annual net sales. While Meridian Consumer Brands LLC (the Buyer) and its parent entity, Lakepoint Capital Partners, LP, may meet the upper threshold, the Seller and the Buyer's combined size-of-person positions do not jointly satisfy the applicable requirements under the HSR Act, as the Seller falls below the relevant thresholds when evaluated on a standalone basis and the size-of-person test requires that both parties meet their respective thresholds.

Conclusion. Based on the foregoing analysis, we conclude that HSR Act filing is not required for this Transaction. No pre-closing waiting period applies under the HSR Act, and no pre-closing notification to the FTC or DOJ is necessary. A detailed HSR Act threshold analysis worksheet is set forth in Appendix C to this memorandum.

B. Other Antitrust Considerations

State Antitrust Filings. We reviewed the antitrust and competition filing requirements of all fifty states and the District of Columbia. No state imposes a mandatory pre-merger notification filing requirement that would be triggered by the Transaction.

Foreign Antitrust and Competition Filings. The Acquired Assets consist exclusively of U.S. domestic operations. Neither the CleanLeaf nor the PureHaven product line is sold outside of the United States, and neither product line generates revenue from exports or foreign sales. Accordingly, no foreign antitrust or competition filings are required in connection with the Transaction.

Market Concentration Analysis. We have performed a preliminary market concentration analysis to assess whether the Transaction could raise substantive antitrust concerns, even in the absence of an HSR filing requirement. Meridian Consumer Brands LLC has combined annual revenues of approximately $620,000,000 across five brands in the household cleaning, laundry, and personal care segments. The acquisition of the CleanLeaf and PureHaven product lines, which together generated approximately $68,000,000 in revenue in FY2021, would increase Meridian's combined revenues to approximately $688,000,000. The household cleaning and personal care product markets in the United States are highly fragmented, with numerous national, regional, and private-label competitors. Based on publicly available market data and our assessment of competitive dynamics, the Transaction does not raise material market concentration concerns, and we do not anticipate any challenge from the FTC or the DOJ on antitrust grounds.

VI. Regulatory Compliance Review

A. Federal Regulatory Status

We reviewed the federal regulatory compliance status of the CleanLeaf and PureHaven product lines across the principal federal agencies that exercise jurisdiction over household cleaning and personal care products. Our findings are summarized below.

EPA / FIFRA. Certain CleanLeaf cleaning products make antimicrobial or disinfectant claims on their product labels and in their marketing materials. Products making such claims are subject to registration with the EPA under the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. §§ 136 et seq. ("FIFRA"). We reviewed the EPA registration files produced in the data room and confirmed that the EPA registrations for all applicable CleanLeaf products bearing antimicrobial or disinfectant claims appear to be current. The registrations are held in the name of Briarwood Home Essentials, Inc. and will need to be transferred or re-registered in the name of the Buyer following the closing of the Transaction. The mechanics of the EPA registration transfer should be addressed in the transition services agreement or the APA, and the timeline for transfer should be coordinated with the EPA's Office of Pesticide Programs.

FDA. The PureHaven personal care product line includes products such as hand soaps, body washes, lotions, and related personal care items that are classified as cosmetics under the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §§ 301 et seq. ("FFDCA"). Cosmetic products are subject to FDA regulations regarding labeling, ingredient disclosure, and manufacturing practices. Our review of the data room materials indicates that Briarwood's PureHaven products are in compliance with applicable FDA cosmetic labeling and ingredient disclosure requirements. We did not identify any FDA warning letters, Form 483 observations, consent decrees, injunctions, or other enforcement actions directed at Briarwood or the PureHaven product line. We note that the FDA does not require pre-market approval for cosmetic products (other than color additives), and Briarwood's compliance posture with respect to the PureHaven line appears consistent with industry practice.

CPSC. We reviewed CPSC databases and Briarwood's internal records and did not identify any recalls, investigations, compliance actions, or Section 15 reports involving any CleanLeaf or PureHaven product. Janet Tsao confirmed during her interview that Briarwood has never been contacted by the CPSC regarding any CleanLeaf or PureHaven product and has never initiated a voluntary recall.

FTC. We reviewed FTC databases and Briarwood's records and did not identify any FTC investigations, civil investigative demands, consent orders, or enforcement actions regarding advertising or marketing claims for either the CleanLeaf or PureHaven brand. Briarwood's advertising and marketing materials for both brands appear to be consistent with FTC guidelines regarding substantiation of advertising claims, including the FTC's Green Guides to the extent applicable to CleanLeaf's environmentally focused product messaging.

B. State Regulatory Status — Key Finding: Registration Gap

Finding. Our review of Briarwood's state-level regulatory compliance records revealed a significant gap in state product registrations for certain CleanLeaf and PureHaven SKUs. Multiple products that are currently being sold in certain states lack required state-level product registrations, or have registrations that were previously obtained but have lapsed without timely renewal.

Regulatory Background. Various states impose separate registration, notification, or licensing requirements for household cleaning products, disinfectants, personal care products, and/or cosmetics sold within their borders. These requirements are distinct from federal EPA and FDA regulations and must be independently satisfied. The specific requirements vary by state and may include product registration, facility registration, ingredient disclosure, labeling compliance, and the payment of annual registration fees. Failure to maintain current registrations can result in regulatory enforcement actions, fines, penalties, mandatory product withdrawal from the market, or stop-sale orders.

Detail. A review of Briarwood's product registration files maintained in the data room revealed that product registrations in several states are either missing entirely (i.e., no registration was ever filed despite the product being sold in the state) or have expired without renewal (i.e., the registration was initially obtained but lapsed due to non-payment of renewal fees or failure to submit required renewal applications). The gap affects a subset of the approximately 142 active SKUs across the CleanLeaf and PureHaven brands. Based on our preliminary analysis, the gap appears to be most acute in states with more robust product registration requirements, though we have not been able to fully catalogue the scope of the issue.

States Affected. The specific states with registration gaps were not fully catalogued in the data room materials produced to date. Briarwood's registration files were incomplete, and in certain cases, registration records for particular states were absent from the data room entirely. During our interview with Janet Tsao on August 18, 2022, she acknowledged that Briarwood's state registration compliance had "fallen behind" in recent years due to resource constraints and changes in administrative personnel. Briarwood management has been asked to provide a complete state-by-state product registration schedule identifying all SKUs sold in each state, the applicable registration requirements, the status of each registration, and any registration renewals that are pending or overdue. As of the date of this memorandum, this schedule has not yet been received.

Risk Assessment. Selling unregistered products in states requiring registration constitutes a violation of applicable state law and could expose the Seller (and, post-closing, the Buyer as successor operator of the product lines) to a range of regulatory enforcement actions, including:

(a) civil penalties and fines, which may be assessed on a per-product, per-day, or per-violation basis depending on the applicable state statute;

(b) mandatory product withdrawal or stop-sale orders requiring the removal of unregistered products from retail shelves and distribution channels within the affected state;

(d) reputational harm and disruption to customer relationships, particularly with large national retail customers who may have contractual requirements regarding regulatory compliance.

While enforcement practices in this area vary significantly by state, and the risk of immediate or aggressive enforcement action appears low based on current regulatory trends, the gap nonetheless represents a meaningful compliance deficiency that must be remediated. The risk is heightened by the fact that the Buyer, as a larger and more visible market participant, may attract greater regulatory scrutiny following the closing of the Transaction.

Scope of Remediation. Curing the registration gap will require a multi-step process, including:

(a) identifying all affected SKUs and the states in which they are currently sold without valid registrations;

(b) determining the specific registration requirements applicable in each state for each affected product category (household cleaning products, disinfectants, personal care products, and cosmetics);

(d) paying applicable registration fees, which may include back-dated fees or penalties for late filing in certain states; and

(e) potentially modifying product labels to meet state-specific labeling requirements that may differ from federal requirements or from the requirements of other states.

Timeline Estimate. Based on our experience with state product registration processes, full remediation of the registration gap could take approximately three to six months, depending on state processing times, the completeness of Briarwood's existing product formulation and labeling documentation, and the responsiveness of state regulatory agencies. Certain states may process registration applications within 30 to 60 days, while others may require 90 days or more, particularly if the application requires review of product formulation data, safety data sheets, or labeling specimens.

Impact on Transaction. The state product registration gap has several implications for the structure and documentation of the Transaction:

Disclosure Schedules. The registration gap should be fully disclosed in the Seller's disclosure schedules as an exception to the representations regarding regulatory compliance. The Seller should be required to prepare and deliver a comprehensive schedule identifying each product, each affected state, and the status of each registration. Until such schedule is delivered and reviewed, the Buyer cannot fully assess the scope of the compliance risk.

Pre-Closing Covenants. We recommend that the APA include a covenant requiring Briarwood to use commercially reasonable efforts to cure the state product registration gaps prior to the closing of the Transaction. At a minimum, the Seller should be required to initiate the registration process in all affected states and to provide evidence of pending applications at or prior to closing.

Indemnification. We recommend that the Transaction team consider whether the regulatory filing gap warrants a specific indemnification obligation from the Seller, separate from and in addition to the general indemnification provisions of the APA. Specifically, consideration should be given to whether losses arising from the registration gap should be excluded from the $950,000 tipping basket (1% of the purchase price) so that the Buyer may recover first-dollar for any such losses. Similarly, consideration should be given to whether the indemnification obligation for registration gap losses should survive for a period longer than the general 24-month representation survival period.

Specific Representation. The Buyer should consider requiring the Seller to provide a specific representation regarding the completeness and currency of all product registrations, rather than relying solely on a general representation regarding compliance with applicable laws and regulations. A specific representation would provide greater clarity regarding the scope of the Seller's obligations and the Buyer's remedies in the event that additional registration gaps are discovered post-closing.

R&W Insurance Implications. This finding should be promptly communicated to the representation and warranty insurance ("R&W Insurance") underwriting process. Northbridge Risk Advisors LLC (contact: Alison Chu) is advising the Buyer on the placement of R&W Insurance for the Transaction, and Sentinel Specialty Insurance Company (contact: Mark Ellison, Underwriter) is the proposed insurer. The registration gap may affect the coverage terms, exclusions, or pricing of the proposed R&W Insurance policy. It is possible that the insurer may seek to exclude losses arising from known registration gaps from coverage, or may require a retention or sub-limit specific to regulatory compliance matters. Early communication with the R&W Insurance team is advisable to avoid surprises during the underwriting process.

C. Other Regulatory Matters

OSHA. We reviewed OSHA inspection records and Briarwood's internal safety records for both the Marysville manufacturing facility (2800 Industrial Parkway, Marysville, OH 43040) and the West Jefferson distribution center (500 Commerce Boulevard, West Jefferson, OH 43162). No material OSHA violations or citations were identified at either facility. Briarwood's internal safety records indicate a workplace safety record that is consistent with industry norms for consumer products manufacturing and distribution operations.

Ohio State Regulatory. We reviewed the records of the Ohio Department of Commerce, the Ohio Department of Agriculture (which has jurisdiction over certain cleaning product registrations in Ohio), and other relevant Ohio state regulatory agencies. No material state-level regulatory actions, enforcement proceedings, consent orders, or compliance directives were identified against Briarwood in Ohio.

Import/Export. The Acquired Assets consist of domestic operations only. The CleanLeaf and PureHaven product lines are manufactured at Briarwood's Marysville facility, distributed from the West Jefferson distribution center, and sold exclusively within the United States. No import or export activities are associated with the Acquired Assets, and accordingly, no material import/export compliance issues were identified. We note that certain raw materials used in the manufacturing of CleanLeaf and PureHaven products may be imported, but the procurement of raw materials is conducted by Briarwood's general procurement function and does not present compliance issues specific to the Acquired Assets.

VII. Government Investigations and Inquiries

During our interviews with Briarwood management, Malcolm Greer and Janet Tsao each represented that no government investigations, subpoenas, civil investigative demands, or inquiries are pending or, to their knowledge, threatened against Briarwood or any of its officers or directors in connection with the CleanLeaf or PureHaven product lines. Mr. Greer, as President and Sole Shareholder of Briarwood, further represented that he is not personally the subject of any government investigation or inquiry relating to the business or operations of Briarwood.

Our independent review of the data room materials did not reveal any evidence of government investigations, subpoenas, civil investigative demands, or inquiries involving Briarwood, the Acquired Assets, or Briarwood's officers or directors. We reviewed the regulatory correspondence files, the general correspondence files, and the legal department files produced in the data room and found no indicia of pending or threatened government action.

We recommend that the APA include a comprehensive representation from the Seller regarding the absence of government investigations, subpoenas, civil investigative demands, and inquiries, with a bring-down condition at closing.

VIII. Insurance Coverage Summary (Litigation-Related)

In connection with our litigation and regulatory due diligence, we reviewed the insurance coverage maintained by Briarwood that is relevant to litigation and product liability exposure. Our findings are summarized below.

Existing Coverage. Briarwood maintains the following insurance policies relevant to this analysis:

(a) Commercial General Liability Insurance — issued by Great Lakes Casualty Insurance Company (Policy No. GL-BHE-2021-3887), providing per-occurrence and aggregate limits of coverage for third-party bodily injury and property damage claims arising from Briarwood's operations;

(b) Product Liability Insurance — issued by Great Lakes Casualty Insurance Company (Policy No. PL-BHE-2021-4102), providing per-occurrence and aggregate limits of coverage for product liability claims arising from the CleanLeaf and PureHaven product lines; and

(c) Directors and Officers ("D&O") Insurance — providing coverage for claims against Briarwood's directors and officers for alleged wrongful acts in their capacity as such.

Adequacy of Coverage. Based on our review, the insurance policies maintained by Briarwood appear to provide adequate coverage for the historical claims levels associated with the Acquired Assets. No claims during the review period have exceeded applicable policy limits or sub-limits, and no coverage disputes with insurers were identified.

Post-Closing Insurance Considerations. Post-closing, Meridian will need to procure its own insurance coverage for the Acquired Assets, including commercial general liability and product liability coverage. Briarwood's existing policies are issued in Briarwood's name and will not extend to post-closing operations conducted by the Buyer. The Buyer's insurance program should be in place prior to or as of the closing date.

Tail Coverage. For pre-closing liabilities — including product liability claims arising from products manufactured or sold prior to the closing of the Transaction — Briarwood should be required to maintain tail or run-off coverage under its existing policies, or to procure a separate run-off policy. The availability and terms of tail coverage should be addressed in the APA, and the cost of such coverage should be allocated between the parties. We recommend that the APA require the Seller to maintain tail coverage for a period of not less than three years following the closing.

IX. Implications for APA and Transaction Documents

The findings of our litigation and regulatory due diligence review have several implications for the drafting and negotiation of the APA and related transaction documents. Our recommendations are set forth below.

A. Representations and Warranties

We recommend the inclusion of comprehensive representations and warranties from the Seller in the APA addressing the following matters:

(a) Absence of Material Litigation. The Seller should represent that, except as disclosed in the applicable disclosure schedule, there is no pending or, to the Seller's knowledge, threatened litigation, arbitration, or administrative proceeding against the Seller or involving the Acquired Assets that would reasonably be expected to have a material adverse effect on the Acquired Assets.

(b) Absence of Government Investigations. The Seller should represent that no government investigations, subpoenas, civil investigative demands, or inquiries are pending or, to the Seller's knowledge, threatened against the Seller, its officers, or its directors in connection with the Acquired Assets.

(c) Compliance with Applicable Laws and Regulations. The Seller should represent that the Acquired Assets, and the operation thereof, are in compliance in all material respects with all applicable federal, state, and local laws, regulations, and orders, including all product registration requirements. The state product registration gap identified in Section VI.B above should be specifically disclosed against this representation in the applicable disclosure schedule.

(d) Product Liability and Warranty Claims History. The Seller should represent that the disclosure schedules contain a complete and accurate summary of all product liability claims, consumer complaints, and warranty claims relating to the CleanLeaf and PureHaven product lines during the review period, and that no product recalls have been initiated or required.

(e) Completeness and Currency of Regulatory Filings and Registrations. The Seller should provide a specific representation (as distinct from the general compliance representation) confirming that all required federal and state product registrations, filings, and licenses for the CleanLeaf and PureHaven product lines are current, complete, and in good standing, or, to the extent any such registrations are not current, that all exceptions have been disclosed.

The general representations described above should be subject to a 24-month survival period following the closing of the Transaction, consistent with the general representation survival period contemplated in the current draft of the APA. Fundamental representations — including, if designated as fundamental by the parties, the compliance-with-law representation — should survive indefinitely per the current APA draft. We recommend that the designation of the compliance-with-law representation as a fundamental representation be discussed with the Buyer's deal team, as this designation would extend the survival period and remove it from the general indemnification cap and basket.

B. Indemnification

The indemnification framework currently contemplated in the draft APA includes the following key terms:

Given the state product registration gap identified in Section VI.B above, we recommend that the Transaction team consider whether this finding warrants a special indemnity outside the general basket. Specifically, losses arising from the registration gap — including registration fees, penalties, fines, product withdrawal costs, and related remediation expenses — could be carved out of the $950,000 tipping basket so that the Buyer may recover first-dollar for such losses without needing to satisfy the basket threshold. This approach would provide the Buyer with meaningful protection against a known compliance deficiency while preserving the general basket for unknown or unforeseen claims.

Alternatively, if the Seller is unwilling to agree to a basket carve-out, the parties could negotiate a specific indemnification holdback — separate from the general escrow — to fund the remediation of the registration gap. The amount of such holdback would need to be determined based on a more complete assessment of the scope of the gap, which in turn requires the receipt and review of Briarwood's state-by-state registration schedule.

C. Pre-Closing Covenants

We recommend the inclusion of a covenant in the APA requiring the Seller to use commercially reasonable efforts to cure the state product registration gaps prior to the closing of the Transaction. At a minimum, this covenant should require the Seller to:

(a) prepare and deliver to the Buyer a complete schedule of all CleanLeaf and PureHaven SKUs sold in each state, together with the applicable state registration requirements and the current status of each registration;

(b) initiate the registration process in all states where registrations are missing or have lapsed, by preparing and filing registration applications and paying applicable fees;

(d) promptly notify the Buyer of any regulatory communications, enforcement actions, or stop-sale orders received from any state regulatory agency in connection with the registration gap.

D. Closing Conditions

The Transaction team should consider whether full remediation of the state product registration gap should be a condition to closing, or whether it is more appropriately addressed through the indemnification framework. Given the timeline for remediation (estimated at three to six months), requiring full remediation as a closing condition could delay the anticipated closing date. A more practical approach may be to require the Seller to demonstrate meaningful progress toward remediation — such as the filing of all required registration applications — as a closing condition, while addressing residual risk through the indemnification provisions.

This issue should be discussed with Diana Ressler (General Counsel, Meridian), Priya Anand (CFO, Meridian), and the Wavecrest Partners LLC deal team at the next diligence review meeting.

X. Open Items and Further Diligence Required

The following items remain outstanding as of the date of this memorandum and require follow-up:

1. State-by-State Product Registration Schedule. A complete state-by-state product registration schedule has been requested from Briarwood, as described in Section VI.B above. This schedule is critical to assessing the full scope of the registration gap and determining the appropriate remediation strategy and cost estimate. As of the date of this memorandum, the schedule has not been received.

2. Complete Disclosure Schedules. The first draft of Briarwood's disclosure schedules was delivered on September 28, 2022 and is only partially complete. The litigation and regulatory compliance schedules — including the schedules that will list all pending and threatened litigation, government investigations, product liability claims, and regulatory filings — must be reviewed upon receipt. Any material findings from that review will be addressed in a supplemental memorandum.

3. Post-Reference Date Developments. Confirmation should be obtained from Briarwood management regarding any developments in litigation, regulatory matters, or product liability claims that have occurred since the June 30, 2022 reference date. A bring-down certificate or officer's certificate should be required at closing.

4. Coordination with Financial Diligence. We recommend coordination with Whitfield Ames LLP (contact: Susan Clearwater, Engagement Partner) regarding any financial statement implications of the state product registration gap, including potential contingent liabilities, possible fines or penalties, and any required adjustments to Briarwood's financial statements. We note that the inventory valuation variance of $2,500,000 (book value of $14,300,000 versus net realizable value of $11,800,000 per Whitfield Ames's analysis) is addressed in the financial diligence workstream and is not within the scope of this memorandum. However, any litigation or regulatory claims arising from inventory quality issues — including claims that products in inventory are non-compliant with state registration requirements and therefore cannot be sold in certain states — would be relevant to this analysis and should be coordinated between the two workstreams.

5. R&W Insurance Underwriting. The state product registration gap finding should be communicated to Northbridge Risk Advisors LLC (Alison Chu) and Sentinel Specialty Insurance Company (Mark Ellison) as part of the R&W Insurance underwriting process. The impact of this finding on coverage terms, exclusions, and pricing should be assessed promptly.

XI. Conclusion and Recommendations

Based on our litigation and regulatory due diligence review, the overall litigation and regulatory profile of the Acquired Assets is generally favorable to the Transaction. Our principal conclusions and recommendations are as follows:

No Material Litigation. No material pending or threatened litigation was identified against Briarwood or involving the Acquired Assets. The two minor matters identified — a small-claims collection action relating to the Retained Business and a premises liability claim at the West Jefferson distribution center — are not material to the Transaction.

State Product Registration Gap. The key finding requiring attention is the gap in state product registrations for certain CleanLeaf and PureHaven SKUs, as described in detail in Section VI.B above. This gap presents a compliance risk that should be addressed in the APA through full disclosure in the disclosure schedules, pre-closing covenants requiring the Seller to initiate remediation, and a specific indemnification provision (potentially with a basket carve-out) covering losses arising from the registration gap. The Buyer should also require a specific representation from the Seller regarding the completeness and currency of all product registrations.

HSR Filing Not Required. Based on our analysis of the applicable HSR Act thresholds, no filing is required, and no pre-closing waiting period applies.

Low Product Liability Risk. The product liability risk profile of the Acquired Assets is low, with no product recalls, no pattern of recurring claims, and claims volume within industry norms. The $620,000 warranty accrual as of June 30, 2022 appears adequately reserved.

Companion Memoranda. This memorandum should be read in conjunction with the Due Diligence Summary Memorandum (to be dated October 3, 2022) and the other subject-matter diligence memoranda prepared in connection with this matter, including the Environmental Due Diligence Memorandum dated September 8, 2022.

Next Steps. We recommend that the findings summarized in this memorandum be discussed with Diana Ressler (General Counsel, Meridian Consumer Brands LLC), Priya Anand (CFO, Meridian Consumer Brands LLC), and the Wavecrest Partners LLC deal team (Steven Marchetti and Lena Kowalski) at the next scheduled diligence review meeting. In particular, the discussion should address (i) the appropriate treatment of the state product registration gap in the APA, (ii) the impact of the registration gap on the R&W Insurance underwriting, and (iii) any open items identified in Section X above.

We will continue to monitor litigation and regulatory developments relating to the Acquired Assets and will supplement this memorandum as additional information becomes available, including upon receipt of the complete disclosure schedules and the state-by-state product registration schedule from Briarwood.

Appendices and Attachments

The following appendices and attachments are referenced in and accompany this memorandum:

Appendix A: List of Litigation Docket Searches Conducted

Includes a detailed listing of all courts and jurisdictions searched, search parameters employed, party name variations used, and date ranges covered.

Appendix B: Summary Table of Product Liability Claims (2017–2022) — Anonymized

Provides a tabular summary of all product liability claims identified during the review period, including the date of each claim, the product involved (by SKU category, anonymized), the nature of the claim, the amount demanded or reserved, and the resolution status.

Appendix C: HSR Act Threshold Analysis Worksheet

Sets forth the detailed calculations underlying our HSR Act analysis, including the size-of-transaction and size-of-person tests, the applicable threshold amounts as adjusted for 2022, and the financial data relied upon.

Appendix D: State Product Registration Requirements Matrix (Partially Complete)

Provides a state-by-state matrix of product registration requirements applicable to household cleaning products, disinfectants, and personal care products, together with the status of Briarwood's registrations where known. This matrix is partially complete pending receipt of Briarwood's state-by-state registration schedule.

Appendix E: List of Data Room Documents Reviewed

Provides a complete listing of all documents reviewed in the Pemberton Systems virtual data room (Project Code: BHE-CleanLeaf-2022) in connection with this memorandum, identified by Pemberton Systems document index number, document title, and date of production.

Distribution List

This memorandum is being distributed to the following individuals. This memorandum is privileged and confidential, constitutes attorney-client privileged communication and attorney work product, and should not be further distributed or disclosed without the prior written consent of Calderwood & Harkness LLP.

This memorandum has been prepared by Calderwood & Harkness LLP for the exclusive use of our client, Meridian Consumer Brands LLC, in connection with the proposed acquisition of the CleanLeaf and PureHaven product lines from Briarwood Home Essentials, Inc. This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the individuals identified on the distribution list above and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP. This memorandum does not constitute legal advice to any person or entity other than Meridian Consumer Brands LLC.

CALDERWOOD & HARKNESS LLP

Prepared by:

________________________________________

Naomi Petersen Associate, Mergers & Acquisitions

Reviewed by:

________________________________________

Andrew Fitzpatrick Lead Associate, Mergers & Acquisitions

________________________________________

Sandra Tung Responsible Partner, Mergers & Acquisitions

Matter:	Meridian Consumer Brands LLC — Proposed Acquisition of CleanLeaf and PureHaven Product Lines from Briarwood Home Essentials, Inc.
Matter No.:	1011-00005
Date:	September 12, 2022
Prepared by:	Naomi Petersen, Associate, Mergers & Acquisitions
Reviewed by:	Andrew Fitzpatrick, Lead Associate, Mergers & Acquisitions

Sandra Tung, Responsible Partner, Mergers & Acquisitions

Billing Partner:	Oliver Mackenzie
Indemnification Term	Amount / Threshold
Indemnification Cap	$33,250,000 (35% of $95,000,000 purchase price)
Tipping Basket	$950,000 (1% of purchase price)
Escrow Holdback	$9,500,000 (10% of purchase price)
Escrow Agent	Atlantic Fiduciary Trust Company (officer: Gregory Fenn)
Escrow Period	24 months post-closing
Name	Title / Affiliation
Sandra Tung	Responsible Partner, Calderwood & Harkness LLP
Andrew Fitzpatrick	Lead Associate, Calderwood & Harkness LLP
Oliver Mackenzie	Billing Partner, Calderwood & Harkness LLP
Diana Ressler	General Counsel, Meridian Consumer Brands LLC
Priya Anand	CFO, Meridian Consumer Brands LLC
Gareth Holloway	CEO & Managing Member, Meridian Consumer Brands LLC
Thomas Liang	Managing Partner, Lakepoint Capital Partners, LP (via Diana Ressler)

CALDERWOOD & HARKNESS LLP 599 Lexington Avenue, 36th Floor New York, NY 10022
DUE DILIGENCE MEMORANDUM — LITIGATION & REGULATORY
PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT
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I. Purpose and Scope
This memorandum summarizes the findings of the litigation and regulatory due diligence review conducted by Calderwood & Harkness LLP in connection with the proposed acquisition by Meridian Consumer Brands LLC (the "Buyer" or "Meridian") of the CleanLeaf home cleaning product line and the PureHaven personal care product line (together, the "Acquired Assets") from Briarwood Home Essentials, Inc. (the "Seller" or "Briarwood"), an Ohio corporation headquartered at 1175 Creekside Drive, Suite 400, Columbus, OH 43215. The proposed transaction is structured as an asset purchase with a purchase price of $95,000,000 (the "Transaction").
The scope of this memorandum encompasses the following areas of inquiry:
(a) pending and threatened litigation involving Briarwood or the Acquired Assets;
(b) product liability claims history for the CleanLeaf and PureHaven product lines;
(c) regulatory compliance status of the Acquired Assets at the federal and state levels;
(d) antitrust filing requirements, including an analysis under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act");
(e) government investigations or inquiries involving Briarwood, its officers, or its directors in connection with the Acquired Assets; and
(f) key regulatory filing gaps identified during the course of our review.
Our review was based on the following sources of information: (i) documents produced by Briarwood in the Pemberton Systems virtual data room established for this transaction (Project Code: BHE-CleanLeaf-2022); (ii) responses to due diligence request lists dated June 14, 2022; (iii) partial disclosure schedules (first draft) delivered by Briarwood on September 28, 2022; (iv) management interviews with Malcolm Greer, President and Sole Shareholder of Briarwood, and Janet Tsao, Vice President of Operations of Briarwood; and (v) representations made by Seller's counsel, Rachel Underwood, Esq. and David Soo, Esq. of Caldwell, Pruitt & Shaw LLP, 41 South High Street, Suite 2800, Columbus, OH 43215.
We note that the disclosure schedules referenced above were received after this memorandum was substantially drafted. Only preliminary information from Briarwood's counsel at Caldwell, Pruitt & Shaw LLP was available at the time of this memorandum's preparation. Accordingly, this memorandum should be supplemented upon our receipt and review of the complete disclosure schedules, particularly the schedules relating to litigation, regulatory compliance, and product liability matters. Any material findings arising from that supplemental review will be addressed in a separate update memorandum or incorporated into the Due Diligence Summary Memorandum.
This memorandum does not address environmental matters, including any issues arising from contamination, hazardous materials, or environmental compliance at Briarwood's facilities. Environmental matters are covered in a separate Environmental Due Diligence Memorandum dated September 8, 2022, which analyzes the Phase I Environmental Site Assessment (Report No. TEG-2022-0441) prepared by Terrapoint Environmental Group, Inc. Readers are referred to that memorandum for a comprehensive discussion of environmental risks and findings.
II. Executive Summary
Set forth below is a summary of the principal findings of our litigation and regulatory due diligence review. Each finding is discussed in greater detail in the sections that follow.
No Material Pending Litigation. We did not identify any material pending litigation against Briarwood or involving the Acquired Assets. Two minor matters were identified, neither of which is material to the Transaction or the Acquired Assets. These matters are described in Section III below.
Modest Product Liability Claims History. The product liability claims history for the CleanLeaf and PureHaven product lines is modest and within industry norms for consumer cleaning and personal care products. No product recalls have occurred for any CleanLeaf or PureHaven stock keeping unit ("SKU"), and no pattern of recurring claims or systemic product defects was identified. The product liability risk profile of the Acquired Assets is low.
HSR Act Filing Not Required. Based on our analysis of the applicable HSR Act thresholds, including the size-of-transaction and size-of-person tests, we have concluded that an HSR Act filing is not required for this Transaction. No pre-closing waiting period applies under the HSR Act. A detailed analysis is provided in Section V below.
Key Regulatory Finding — State Product Registration Gap. Our most significant finding relates to a gap in state product registrations for certain CleanLeaf and PureHaven SKUs. Several states in which products are currently sold lack required product registrations or have registrations that have lapsed without renewal. The gap affects a subset of the approximately 142 active SKUs across both brands. This finding is discussed in detail in Section VI.B below and represents a compliance deficiency that must be remediated either prior to or following the closing of the Transaction.
Warranty Accrual Appears Adequate. Briarwood's accrued product warranty obligations of $620,000, as of the June 30, 2022 reference date, appear adequately reserved based on historical claims data and current open warranty matters. This accrual is among the Assumed Liabilities under the proposed Asset Purchase Agreement (the "APA").
Recommendation. The state product registration gap should be addressed as a pre-closing condition or covenant, or alternatively factored into the indemnification framework in the APA through a specific indemnity or disclosure carve-out. The absence of material litigation is favorable to the Transaction and should provide comfort to the Buyer and its equity sponsor, Lakepoint Capital Partners, LP.
III. Pending Litigation
A. Overview of Litigation Search
In conducting our litigation due diligence, we undertook a comprehensive review of federal and state court dockets. Our search encompassed the following courts, jurisdictions, and databases:
(i) The United States District Court for the Southern District of Ohio and the United States Bankruptcy Court for the Southern District of Ohio;
(ii) Ohio state courts in Franklin County (the county in which Briarwood's corporate headquarters is located), Union County (the location of Briarwood's Marysville manufacturing facility at 2800 Industrial Parkway, Marysville, OH 43040), and Madison County (the location of Briarwood's West Jefferson distribution center at 500 Commerce Boulevard, West Jefferson, OH 43162);
(iii) Nationwide federal court searches conducted through the PACER system, including searches in all ninety-four federal judicial districts;
(iv) Selected state court searches in states identified as material markets for the CleanLeaf and PureHaven product lines, including California, Florida, Texas, New York, Illinois, and Pennsylvania; and
(v) Administrative agency docket searches, including the United States Environmental Protection Agency ("EPA"), the Food and Drug Administration ("FDA"), the Consumer Product Safety Commission ("CPSC"), the Federal Trade Commission ("FTC"), and the Occupational Safety and Health Administration ("OSHA").
In addition to our public records searches, we reviewed the following materials produced by Briarwood in the data room:
(i) Briarwood's internal litigation log, which is maintained by Briarwood's in-house bookkeeper, Marcia Poole, and covers all matters from January 1, 2015 through the date of production;
(ii) Insurance claims records for all commercial general liability and product liability policies in effect during the period from January 1, 2017 through the present, including loss runs provided by Briarwood's insurance broker, Keystone Risk Partners (contact: Paul Bettridge); and
(iii) Representations from Briarwood management during our interviews with Malcolm Greer (conducted on August 4, 2022) and Janet Tsao (conducted on August 4 and August 18, 2022).
A complete list of the docket searches conducted, including the courts, jurisdictions, search parameters, and date ranges, is set forth in Appendix A to this memorandum.
B. Findings — No Material Pending Litigation
Based on our review, no pending lawsuits were identified in which Briarwood is named as a defendant or plaintiff that are material to the Acquired Assets or the Transaction. Briarwood does not appear to be a party to any proceeding, arbitration, or other dispute resolution process that could reasonably be expected to have a material adverse effect on the CleanLeaf or PureHaven product lines or the ongoing operations of the Acquired Assets.
Two minor matters were identified during the course of our review, neither of which is material:
(i) Collection Action Against Former Distributor. Briarwood filed a small-claims collection action in the Franklin County Municipal Court against CleanRight Solutions, LLC, a former distributor, seeking recovery of unpaid invoices in the aggregate amount of approximately $18,000. This matter relates to the Retained Business—specifically, Briarwood's Commercial Janitorial Services Division—and does not involve the CleanLeaf or PureHaven product lines. As such, this collection action pertains to assets and liabilities that are not part of the Acquired Assets and will not be assumed by the Buyer under the proposed APA. The matter remains pending as of the date of this memorandum, though Briarwood's counsel has indicated that settlement discussions are underway.
(ii) Premises Liability Claim at West Jefferson Distribution Center. A slip-and-fall premises liability claim was filed against Briarwood in the Madison County Court of Common Pleas by a delivery driver employed by a third-party logistics provider who alleges that he sustained injuries on the premises of Briarwood's West Jefferson distribution center located at 500 Commerce Boulevard, West Jefferson, OH 43162. The claim is covered by Briarwood's commercial general liability insurance policy issued by Great Lakes Casualty Insurance Company (Policy No. GL-BHE-2021-3887). Briarwood's outside litigation counsel has estimated total exposure, inclusive of defense costs, at under $50,000. No trial date has been set, and the matter is in the early stages of discovery. This claim relates to the physical premises and operations of the distribution center and does not implicate the Acquired Assets in any manner that would be material to the Transaction.
In summary, neither of the two identified matters is material to the Acquired Assets or the Transaction. Neither matter is expected to result in any liability that would be assumed by the Buyer under the proposed APA, and neither presents a risk profile that would warrant special treatment in the Transaction documents.
C. Threatened Litigation
Briarwood management represented during our interviews that no demand letters, cease-and-desist notices, or other communications threatening litigation have been received by Briarwood relating to the CleanLeaf or PureHaven product lines. Malcolm Greer confirmed this representation in his interview on August 4, 2022, and Janet Tsao provided consistent confirmation on the same date.
Our independent review of the data room materials did not reveal any evidence of threatened litigation involving the Acquired Assets. Specifically, we reviewed the general correspondence files, customer complaint files, and regulatory correspondence files produced in the data room and found no demand letters, pre-litigation communications, or other indicia of threatened claims.
We note, however, that our review of threatened litigation is necessarily limited by the completeness of the materials produced in the data room and the accuracy of management's representations. Accordingly, the APA should include a comprehensive representation from the Seller regarding the absence of threatened litigation, with appropriate bring-down conditions at closing.
IV. Product Liability Claims History
A. Scope of Review
We conducted a detailed review of Briarwood's product liability claims history for the CleanLeaf and PureHaven brands. Our review covered the most recent five-year period, from January 1, 2017 through the date of this memorandum. The scope of our review included the following:
(i) Briarwood's product liability claims log, which catalogs all claims, complaints, and inquiries received by Briarwood relating to alleged product defects, personal injury, or property damage arising from the use of CleanLeaf or PureHaven products;
(ii) Insurance claims history and loss runs for Briarwood's product liability insurance policies during the review period, as provided by Keystone Risk Partners;
(iii) Consumer complaint records maintained by Briarwood's customer service department, including records of complaints submitted through retail channels, online platforms, and direct consumer correspondence;
(iv) Product recall records and communications with the CPSC; and
(v) An interview with Janet Tsao, Vice President of Operations, conducted on August 18, 2022, regarding Briarwood's product safety protocols, quality assurance procedures, product recall history, and consumer complaint trends.
A summary table of product liability claims for the review period, presented in anonymized form, is set forth in Appendix B to this memorandum.
B. Findings
Our review of Briarwood's product liability claims history yielded the following findings:
Claims Volume. The total number of product liability claims asserted against Briarwood during the five-year review period for the CleanLeaf and PureHaven brands is limited and consistent with industry norms for consumer household cleaning and personal care products. The claims that were identified involved minor allegations of skin irritation, allergic reactions to certain fragrance or surfactant ingredients, and isolated incidents of packaging defects. All such claims were resolved without formal litigation or with nominal settlements, none of which exceeded $15,000 individually.
No Product Recalls. No product recalls have occurred for any CleanLeaf or PureHaven SKU during the review period or, based on management's representations, at any time in the history of either product line. Briarwood has not been required to file any reports with the CPSC under Section 15 of the Consumer Product Safety Act, and no voluntary recalls have been initiated by Briarwood for any CleanLeaf or PureHaven product.
Consumer Complaints. The volume of consumer complaints received by Briarwood for CleanLeaf and PureHaven products is within industry norms for household cleaning and personal care products. Janet Tsao reported during her interview that Briarwood maintains a consumer complaint log and responds to all complaints within five business days. No systemic or recurring patterns of consumer complaints were identified that would suggest a latent product defect or design flaw.
Insurance Coverage. Briarwood maintains product liability insurance coverage through Great Lakes Casualty Insurance Company (Policy No. PL-BHE-2021-4102), with per-occurrence limits and aggregate limits that appear adequate for the historical claims profile. No claims during the review period have exceeded applicable policy sub-limits, and no coverage disputes have arisen with the insurer.
Warranty Accrual. Briarwood's accrued product warranty obligations stand at $620,000 as of June 30, 2022 (the reference date for purposes of the Transaction). This accrual was established by Briarwood's management in consultation with its independent auditors and reflects estimated future warranty costs for products sold prior to the reference date. Based on our review of historical claims data and current open warranty matters, the $620,000 accrual appears adequately reserved and is not, in our view, materially understated. The warranty accrual is among the Assumed Liabilities that the Buyer will assume under the proposed APA.
C. Risk Assessment
Based on our review, the product liability risk profile of the Acquired Assets is low. We did not identify any pattern of recurring claims, systemic product defects, or latent design issues that would suggest an elevated risk of future product liability exposure. The absence of product recalls and the modest claims history support a favorable assessment of the Acquired Assets from a product liability perspective.
We recommend the inclusion of standard product liability representations and warranties in the APA, covering the accuracy of the product liability claims history, the absence of known product defects, and the adequacy of the warranty accrual. These representations should be subject to a survival period of 24 months following the closing of the Transaction, which is consistent with the general representation survival period contemplated in the current draft of the APA. We do not believe that a longer survival period or a specific indemnity is warranted for product liability matters based on the findings of our review.
V. Antitrust / HSR Act Analysis
A. Hart-Scott-Rodino Applicability
The Transaction is structured as an asset purchase, with the Buyer acquiring the CleanLeaf and PureHaven product lines from the Seller for a purchase price of $95,000,000. Under the HSR Act and the rules promulgated thereunder by the Federal Trade Commission ("FTC"), certain acquisitions of assets or voting securities that exceed specified thresholds require a pre-merger notification filing with the FTC and the Antitrust Division of the Department of Justice ("DOJ"), followed by the observance of a mandatory waiting period before the transaction may be consummated.
We have analyzed the applicability of the HSR Act to the Transaction and conclude that no filing is required. Our analysis of the relevant thresholds is set forth below.
Size-of-Transaction Test. The size-of-transaction test, as adjusted for 2022 pursuant to the FTC's annual revisions, requires that the value of the assets or voting securities to be acquired exceed $101 million (as adjusted effective February 23, 2022). Prior to the February 2022 adjustment, the threshold was $92 million. The purchase price of $95,000,000 falls below the current $101 million threshold as adjusted. However, because the Transaction may have been contemplated or structured during the period when the $92 million threshold was in effect, we have analyzed the Transaction under both thresholds to ensure completeness. Under the $92 million threshold, the purchase price would exceed the size-of-transaction test, and the analysis would turn to the size-of-person test. Under the current $101 million threshold, the size-of-transaction test itself would not be met, and no filing would be required regardless of the size-of-person analysis.
Size-of-Person Test. Even assuming the size-of-transaction test is met (i.e., under the prior $92 million threshold), the HSR Act filing requirement is triggered only if the size-of-person test is also satisfied. The size-of-person test requires that one party to the transaction have total assets or annual net sales of $202 million or more (as adjusted for 2022) and the other party have total assets or annual net sales of $20.2 million or more (as adjusted for 2022). In this case, Briarwood Home Essentials, Inc. is a privately held Ohio corporation with annual revenues attributable to the product lines being sold of approximately $68,000,000 (FY2021). Briarwood, as the Seller, does not meet the upper threshold of $202 million in total assets or annual net sales. While Meridian Consumer Brands LLC (the Buyer) and its parent entity, Lakepoint Capital Partners, LP, may meet the upper threshold, the Seller and the Buyer's combined size-of-person positions do not jointly satisfy the applicable requirements under the HSR Act, as the Seller falls below the relevant thresholds when evaluated on a standalone basis and the size-of-person test requires that both parties meet their respective thresholds.
Conclusion. Based on the foregoing analysis, we conclude that HSR Act filing is not required for this Transaction. No pre-closing waiting period applies under the HSR Act, and no pre-closing notification to the FTC or DOJ is necessary. A detailed HSR Act threshold analysis worksheet is set forth in Appendix C to this memorandum.
B. Other Antitrust Considerations
State Antitrust Filings. We reviewed the antitrust and competition filing requirements of all fifty states and the District of Columbia. No state imposes a mandatory pre-merger notification filing requirement that would be triggered by the Transaction.
Foreign Antitrust and Competition Filings. The Acquired Assets consist exclusively of U.S. domestic operations. Neither the CleanLeaf nor the PureHaven product line is sold outside of the United States, and neither product line generates revenue from exports or foreign sales. Accordingly, no foreign antitrust or competition filings are required in connection with the Transaction.
Market Concentration Analysis. We have performed a preliminary market concentration analysis to assess whether the Transaction could raise substantive antitrust concerns, even in the absence of an HSR filing requirement. Meridian Consumer Brands LLC has combined annual revenues of approximately $620,000,000 across five brands in the household cleaning, laundry, and personal care segments. The acquisition of the CleanLeaf and PureHaven product lines, which together generated approximately $68,000,000 in revenue in FY2021, would increase Meridian's combined revenues to approximately $688,000,000. The household cleaning and personal care product markets in the United States are highly fragmented, with numerous national, regional, and private-label competitors. Based on publicly available market data and our assessment of competitive dynamics, the Transaction does not raise material market concentration concerns, and we do not anticipate any challenge from the FTC or the DOJ on antitrust grounds.
VI. Regulatory Compliance Review
A. Federal Regulatory Status
We reviewed the federal regulatory compliance status of the CleanLeaf and PureHaven product lines across the principal federal agencies that exercise jurisdiction over household cleaning and personal care products. Our findings are summarized below.
EPA / FIFRA. Certain CleanLeaf cleaning products make antimicrobial or disinfectant claims on their product labels and in their marketing materials. Products making such claims are subject to registration with the EPA under the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. §§ 136 et seq. ("FIFRA"). We reviewed the EPA registration files produced in the data room and confirmed that the EPA registrations for all applicable CleanLeaf products bearing antimicrobial or disinfectant claims appear to be current. The registrations are held in the name of Briarwood Home Essentials, Inc. and will need to be transferred or re-registered in the name of the Buyer following the closing of the Transaction. The mechanics of the EPA registration transfer should be addressed in the transition services agreement or the APA, and the timeline for transfer should be coordinated with the EPA's Office of Pesticide Programs.
FDA. The PureHaven personal care product line includes products such as hand soaps, body washes, lotions, and related personal care items that are classified as cosmetics under the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §§ 301 et seq. ("FFDCA"). Cosmetic products are subject to FDA regulations regarding labeling, ingredient disclosure, and manufacturing practices. Our review of the data room materials indicates that Briarwood's PureHaven products are in compliance with applicable FDA cosmetic labeling and ingredient disclosure requirements. We did not identify any FDA warning letters, Form 483 observations, consent decrees, injunctions, or other enforcement actions directed at Briarwood or the PureHaven product line. We note that the FDA does not require pre-market approval for cosmetic products (other than color additives), and Briarwood's compliance posture with respect to the PureHaven line appears consistent with industry practice.
CPSC. We reviewed CPSC databases and Briarwood's internal records and did not identify any recalls, investigations, compliance actions, or Section 15 reports involving any CleanLeaf or PureHaven product. Janet Tsao confirmed during her interview that Briarwood has never been contacted by the CPSC regarding any CleanLeaf or PureHaven product and has never initiated a voluntary recall.
FTC. We reviewed FTC databases and Briarwood's records and did not identify any FTC investigations, civil investigative demands, consent orders, or enforcement actions regarding advertising or marketing claims for either the CleanLeaf or PureHaven brand. Briarwood's advertising and marketing materials for both brands appear to be consistent with FTC guidelines regarding substantiation of advertising claims, including the FTC's Green Guides to the extent applicable to CleanLeaf's environmentally focused product messaging.
B. State Regulatory Status — Key Finding: Registration Gap
Finding. Our review of Briarwood's state-level regulatory compliance records revealed a significant gap in state product registrations for certain CleanLeaf and PureHaven SKUs. Multiple products that are currently being sold in certain states lack required state-level product registrations, or have registrations that were previously obtained but have lapsed without timely renewal.
Regulatory Background. Various states impose separate registration, notification, or licensing requirements for household cleaning products, disinfectants, personal care products, and/or cosmetics sold within their borders. These requirements are distinct from federal EPA and FDA regulations and must be independently satisfied. The specific requirements vary by state and may include product registration, facility registration, ingredient disclosure, labeling compliance, and the payment of annual registration fees. Failure to maintain current registrations can result in regulatory enforcement actions, fines, penalties, mandatory product withdrawal from the market, or stop-sale orders.
Detail. A review of Briarwood's product registration files maintained in the data room revealed that product registrations in several states are either missing entirely (i.e., no registration was ever filed despite the product being sold in the state) or have expired without renewal (i.e., the registration was initially obtained but lapsed due to non-payment of renewal fees or failure to submit required renewal applications). The gap affects a subset of the approximately 142 active SKUs across the CleanLeaf and PureHaven brands. Based on our preliminary analysis, the gap appears to be most acute in states with more robust product registration requirements, though we have not been able to fully catalogue the scope of the issue.
States Affected. The specific states with registration gaps were not fully catalogued in the data room materials produced to date. Briarwood's registration files were incomplete, and in certain cases, registration records for particular states were absent from the data room entirely. During our interview with Janet Tsao on August 18, 2022, she acknowledged that Briarwood's state registration compliance had "fallen behind" in recent years due to resource constraints and changes in administrative personnel. Briarwood management has been asked to provide a complete state-by-state product registration schedule identifying all SKUs sold in each state, the applicable registration requirements, the status of each registration, and any registration renewals that are pending or overdue. As of the date of this memorandum, this schedule has not yet been received.
Risk Assessment. Selling unregistered products in states requiring registration constitutes a violation of applicable state law and could expose the Seller (and, post-closing, the Buyer as successor operator of the product lines) to a range of regulatory enforcement actions, including:
(a) civil penalties and fines, which may be assessed on a per-product, per-day, or per-violation basis depending on the applicable state statute;
(b) mandatory product withdrawal or stop-sale orders requiring the removal of unregistered products from retail shelves and distribution channels within the affected state;
(c) injunctive relief barring the continued sale of unregistered products until registrations are obtained; and
(d) reputational harm and disruption to customer relationships, particularly with large national retail customers who may have contractual requirements regarding regulatory compliance.
While enforcement practices in this area vary significantly by state, and the risk of immediate or aggressive enforcement action appears low based on current regulatory trends, the gap nonetheless represents a meaningful compliance deficiency that must be remediated. The risk is heightened by the fact that the Buyer, as a larger and more visible market participant, may attract greater regulatory scrutiny following the closing of the Transaction.
Scope of Remediation. Curing the registration gap will require a multi-step process, including:
(a) identifying all affected SKUs and the states in which they are currently sold without valid registrations;
(b) determining the specific registration requirements applicable in each state for each affected product category (household cleaning products, disinfectants, personal care products, and cosmetics);
(c) preparing and filing registration applications with the appropriate state regulatory agencies;
(d) paying applicable registration fees, which may include back-dated fees or penalties for late filing in certain states; and
(e) potentially modifying product labels to meet state-specific labeling requirements that may differ from federal requirements or from the requirements of other states.
Timeline Estimate. Based on our experience with state product registration processes, full remediation of the registration gap could take approximately three to six months, depending on state processing times, the completeness of Briarwood's existing product formulation and labeling documentation, and the responsiveness of state regulatory agencies. Certain states may process registration applications within 30 to 60 days, while others may require 90 days or more, particularly if the application requires review of product formulation data, safety data sheets, or labeling specimens.
Impact on Transaction. The state product registration gap has several implications for the structure and documentation of the Transaction:
Disclosure Schedules. The registration gap should be fully disclosed in the Seller's disclosure schedules as an exception to the representations regarding regulatory compliance. The Seller should be required to prepare and deliver a comprehensive schedule identifying each product, each affected state, and the status of each registration. Until such schedule is delivered and reviewed, the Buyer cannot fully assess the scope of the compliance risk.
Pre-Closing Covenants. We recommend that the APA include a covenant requiring Briarwood to use commercially reasonable efforts to cure the state product registration gaps prior to the closing of the Transaction. At a minimum, the Seller should be required to initiate the registration process in all affected states and to provide evidence of pending applications at or prior to closing.
Indemnification. We recommend that the Transaction team consider whether the regulatory filing gap warrants a specific indemnification obligation from the Seller, separate from and in addition to the general indemnification provisions of the APA. Specifically, consideration should be given to whether losses arising from the registration gap should be excluded from the $950,000 tipping basket (1% of the purchase price) so that the Buyer may recover first-dollar for any such losses. Similarly, consideration should be given to whether the indemnification obligation for registration gap losses should survive for a period longer than the general 24-month representation survival period.
Specific Representation. The Buyer should consider requiring the Seller to provide a specific representation regarding the completeness and currency of all product registrations, rather than relying solely on a general representation regarding compliance with applicable laws and regulations. A specific representation would provide greater clarity regarding the scope of the Seller's obligations and the Buyer's remedies in the event that additional registration gaps are discovered post-closing.
R&W Insurance Implications. This finding should be promptly communicated to the representation and warranty insurance ("R&W Insurance") underwriting process. Northbridge Risk Advisors LLC (contact: Alison Chu) is advising the Buyer on the placement of R&W Insurance for the Transaction, and Sentinel Specialty Insurance Company (contact: Mark Ellison, Underwriter) is the proposed insurer. The registration gap may affect the coverage terms, exclusions, or pricing of the proposed R&W Insurance policy. It is possible that the insurer may seek to exclude losses arising from known registration gaps from coverage, or may require a retention or sub-limit specific to regulatory compliance matters. Early communication with the R&W Insurance team is advisable to avoid surprises during the underwriting process.
C. Other Regulatory Matters
OSHA. We reviewed OSHA inspection records and Briarwood's internal safety records for both the Marysville manufacturing facility (2800 Industrial Parkway, Marysville, OH 43040) and the West Jefferson distribution center (500 Commerce Boulevard, West Jefferson, OH 43162). No material OSHA violations or citations were identified at either facility. Briarwood's internal safety records indicate a workplace safety record that is consistent with industry norms for consumer products manufacturing and distribution operations.
Ohio State Regulatory. We reviewed the records of the Ohio Department of Commerce, the Ohio Department of Agriculture (which has jurisdiction over certain cleaning product registrations in Ohio), and other relevant Ohio state regulatory agencies. No material state-level regulatory actions, enforcement proceedings, consent orders, or compliance directives were identified against Briarwood in Ohio.
Import/Export. The Acquired Assets consist of domestic operations only. The CleanLeaf and PureHaven product lines are manufactured at Briarwood's Marysville facility, distributed from the West Jefferson distribution center, and sold exclusively within the United States. No import or export activities are associated with the Acquired Assets, and accordingly, no material import/export compliance issues were identified. We note that certain raw materials used in the manufacturing of CleanLeaf and PureHaven products may be imported, but the procurement of raw materials is conducted by Briarwood's general procurement function and does not present compliance issues specific to the Acquired Assets.
VII. Government Investigations and Inquiries
During our interviews with Briarwood management, Malcolm Greer and Janet Tsao each represented that no government investigations, subpoenas, civil investigative demands, or inquiries are pending or, to their knowledge, threatened against Briarwood or any of its officers or directors in connection with the CleanLeaf or PureHaven product lines. Mr. Greer, as President and Sole Shareholder of Briarwood, further represented that he is not personally the subject of any government investigation or inquiry relating to the business or operations of Briarwood.
Our independent review of the data room materials did not reveal any evidence of government investigations, subpoenas, civil investigative demands, or inquiries involving Briarwood, the Acquired Assets, or Briarwood's officers or directors. We reviewed the regulatory correspondence files, the general correspondence files, and the legal department files produced in the data room and found no indicia of pending or threatened government action.
We recommend that the APA include a comprehensive representation from the Seller regarding the absence of government investigations, subpoenas, civil investigative demands, and inquiries, with a bring-down condition at closing.
VIII. Insurance Coverage Summary (Litigation-Related)
In connection with our litigation and regulatory due diligence, we reviewed the insurance coverage maintained by Briarwood that is relevant to litigation and product liability exposure. Our findings are summarized below.
Existing Coverage. Briarwood maintains the following insurance policies relevant to this analysis:
(a) Commercial General Liability Insurance — issued by Great Lakes Casualty Insurance Company (Policy No. GL-BHE-2021-3887), providing per-occurrence and aggregate limits of coverage for third-party bodily injury and property damage claims arising from Briarwood's operations;
(b) Product Liability Insurance — issued by Great Lakes Casualty Insurance Company (Policy No. PL-BHE-2021-4102), providing per-occurrence and aggregate limits of coverage for product liability claims arising from the CleanLeaf and PureHaven product lines; and
(c) Directors and Officers ("D&O") Insurance — providing coverage for claims against Briarwood's directors and officers for alleged wrongful acts in their capacity as such.
Adequacy of Coverage. Based on our review, the insurance policies maintained by Briarwood appear to provide adequate coverage for the historical claims levels associated with the Acquired Assets. No claims during the review period have exceeded applicable policy limits or sub-limits, and no coverage disputes with insurers were identified.
Post-Closing Insurance Considerations. Post-closing, Meridian will need to procure its own insurance coverage for the Acquired Assets, including commercial general liability and product liability coverage. Briarwood's existing policies are issued in Briarwood's name and will not extend to post-closing operations conducted by the Buyer. The Buyer's insurance program should be in place prior to or as of the closing date.
Tail Coverage. For pre-closing liabilities — including product liability claims arising from products manufactured or sold prior to the closing of the Transaction — Briarwood should be required to maintain tail or run-off coverage under its existing policies, or to procure a separate run-off policy. The availability and terms of tail coverage should be addressed in the APA, and the cost of such coverage should be allocated between the parties. We recommend that the APA require the Seller to maintain tail coverage for a period of not less than three years following the closing.
IX. Implications for APA and Transaction Documents
The findings of our litigation and regulatory due diligence review have several implications for the drafting and negotiation of the APA and related transaction documents. Our recommendations are set forth below.
A. Representations and Warranties
We recommend the inclusion of comprehensive representations and warranties from the Seller in the APA addressing the following matters:
(a) Absence of Material Litigation. The Seller should represent that, except as disclosed in the applicable disclosure schedule, there is no pending or, to the Seller's knowledge, threatened litigation, arbitration, or administrative proceeding against the Seller or involving the Acquired Assets that would reasonably be expected to have a material adverse effect on the Acquired Assets.
(b) Absence of Government Investigations. The Seller should represent that no government investigations, subpoenas, civil investigative demands, or inquiries are pending or, to the Seller's knowledge, threatened against the Seller, its officers, or its directors in connection with the Acquired Assets.
(c) Compliance with Applicable Laws and Regulations. The Seller should represent that the Acquired Assets, and the operation thereof, are in compliance in all material respects with all applicable federal, state, and local laws, regulations, and orders, including all product registration requirements. The state product registration gap identified in Section VI.B above should be specifically disclosed against this representation in the applicable disclosure schedule.
(d) Product Liability and Warranty Claims History. The Seller should represent that the disclosure schedules contain a complete and accurate summary of all product liability claims, consumer complaints, and warranty claims relating to the CleanLeaf and PureHaven product lines during the review period, and that no product recalls have been initiated or required.
(e) Completeness and Currency of Regulatory Filings and Registrations. The Seller should provide a specific representation (as distinct from the general compliance representation) confirming that all required federal and state product registrations, filings, and licenses for the CleanLeaf and PureHaven product lines are current, complete, and in good standing, or, to the extent any such registrations are not current, that all exceptions have been disclosed.
The general representations described above should be subject to a 24-month survival period following the closing of the Transaction, consistent with the general representation survival period contemplated in the current draft of the APA. Fundamental representations — including, if designated as fundamental by the parties, the compliance-with-law representation — should survive indefinitely per the current APA draft. We recommend that the designation of the compliance-with-law representation as a fundamental representation be discussed with the Buyer's deal team, as this designation would extend the survival period and remove it from the general indemnification cap and basket.
B. Indemnification
The indemnification framework currently contemplated in the draft APA includes the following key terms:
Given the state product registration gap identified in Section VI.B above, we recommend that the Transaction team consider whether this finding warrants a special indemnity outside the general basket. Specifically, losses arising from the registration gap — including registration fees, penalties, fines, product withdrawal costs, and related remediation expenses — could be carved out of the $950,000 tipping basket so that the Buyer may recover first-dollar for such losses without needing to satisfy the basket threshold. This approach would provide the Buyer with meaningful protection against a known compliance deficiency while preserving the general basket for unknown or unforeseen claims.
Alternatively, if the Seller is unwilling to agree to a basket carve-out, the parties could negotiate a specific indemnification holdback — separate from the general escrow — to fund the remediation of the registration gap. The amount of such holdback would need to be determined based on a more complete assessment of the scope of the gap, which in turn requires the receipt and review of Briarwood's state-by-state registration schedule.
C. Pre-Closing Covenants
We recommend the inclusion of a covenant in the APA requiring the Seller to use commercially reasonable efforts to cure the state product registration gaps prior to the closing of the Transaction. At a minimum, this covenant should require the Seller to:
(a) prepare and deliver to the Buyer a complete schedule of all CleanLeaf and PureHaven SKUs sold in each state, together with the applicable state registration requirements and the current status of each registration;
(b) initiate the registration process in all states where registrations are missing or have lapsed, by preparing and filing registration applications and paying applicable fees;
(c) provide the Buyer with copies of all registration applications filed and evidence of pending registrations; and
(d) promptly notify the Buyer of any regulatory communications, enforcement actions, or stop-sale orders received from any state regulatory agency in connection with the registration gap.
D. Closing Conditions
The Transaction team should consider whether full remediation of the state product registration gap should be a condition to closing, or whether it is more appropriately addressed through the indemnification framework. Given the timeline for remediation (estimated at three to six months), requiring full remediation as a closing condition could delay the anticipated closing date. A more practical approach may be to require the Seller to demonstrate meaningful progress toward remediation — such as the filing of all required registration applications — as a closing condition, while addressing residual risk through the indemnification provisions.
This issue should be discussed with Diana Ressler (General Counsel, Meridian), Priya Anand (CFO, Meridian), and the Wavecrest Partners LLC deal team at the next diligence review meeting.
X. Open Items and Further Diligence Required
The following items remain outstanding as of the date of this memorandum and require follow-up:
1.  State-by-State Product Registration Schedule. A complete state-by-state product registration schedule has been requested from Briarwood, as described in Section VI.B above. This schedule is critical to assessing the full scope of the registration gap and determining the appropriate remediation strategy and cost estimate. As of the date of this memorandum, the schedule has not been received.
2.  Complete Disclosure Schedules. The first draft of Briarwood's disclosure schedules was delivered on September 28, 2022 and is only partially complete. The litigation and regulatory compliance schedules — including the schedules that will list all pending and threatened litigation, government investigations, product liability claims, and regulatory filings — must be reviewed upon receipt. Any material findings from that review will be addressed in a supplemental memorandum.
3.  Post-Reference Date Developments. Confirmation should be obtained from Briarwood management regarding any developments in litigation, regulatory matters, or product liability claims that have occurred since the June 30, 2022 reference date. A bring-down certificate or officer's certificate should be required at closing.
4.  Coordination with Financial Diligence. We recommend coordination with Whitfield Ames LLP (contact: Susan Clearwater, Engagement Partner) regarding any financial statement implications of the state product registration gap, including potential contingent liabilities, possible fines or penalties, and any required adjustments to Briarwood's financial statements. We note that the inventory valuation variance of $2,500,000 (book value of $14,300,000 versus net realizable value of $11,800,000 per Whitfield Ames's analysis) is addressed in the financial diligence workstream and is not within the scope of this memorandum. However, any litigation or regulatory claims arising from inventory quality issues — including claims that products in inventory are non-compliant with state registration requirements and therefore cannot be sold in certain states — would be relevant to this analysis and should be coordinated between the two workstreams.
5.  R&W Insurance Underwriting. The state product registration gap finding should be communicated to Northbridge Risk Advisors LLC (Alison Chu) and Sentinel Specialty Insurance Company (Mark Ellison) as part of the R&W Insurance underwriting process. The impact of this finding on coverage terms, exclusions, and pricing should be assessed promptly.
XI. Conclusion and Recommendations
Based on our litigation and regulatory due diligence review, the overall litigation and regulatory profile of the Acquired Assets is generally favorable to the Transaction. Our principal conclusions and recommendations are as follows:
No Material Litigation. No material pending or threatened litigation was identified against Briarwood or involving the Acquired Assets. The two minor matters identified — a small-claims collection action relating to the Retained Business and a premises liability claim at the West Jefferson distribution center — are not material to the Transaction.
State Product Registration Gap. The key finding requiring attention is the gap in state product registrations for certain CleanLeaf and PureHaven SKUs, as described in detail in Section VI.B above. This gap presents a compliance risk that should be addressed in the APA through full disclosure in the disclosure schedules, pre-closing covenants requiring the Seller to initiate remediation, and a specific indemnification provision (potentially with a basket carve-out) covering losses arising from the registration gap. The Buyer should also require a specific representation from the Seller regarding the completeness and currency of all product registrations.
HSR Filing Not Required. Based on our analysis of the applicable HSR Act thresholds, no filing is required, and no pre-closing waiting period applies.
Low Product Liability Risk. The product liability risk profile of the Acquired Assets is low, with no product recalls, no pattern of recurring claims, and claims volume within industry norms. The $620,000 warranty accrual as of June 30, 2022 appears adequately reserved.
Companion Memoranda. This memorandum should be read in conjunction with the Due Diligence Summary Memorandum (to be dated October 3, 2022) and the other subject-matter diligence memoranda prepared in connection with this matter, including the Environmental Due Diligence Memorandum dated September 8, 2022.
Next Steps. We recommend that the findings summarized in this memorandum be discussed with Diana Ressler (General Counsel, Meridian Consumer Brands LLC), Priya Anand (CFO, Meridian Consumer Brands LLC), and the Wavecrest Partners LLC deal team (Steven Marchetti and Lena Kowalski) at the next scheduled diligence review meeting. In particular, the discussion should address (i) the appropriate treatment of the state product registration gap in the APA, (ii) the impact of the registration gap on the R&W Insurance underwriting, and (iii) any open items identified in Section X above.
We will continue to monitor litigation and regulatory developments relating to the Acquired Assets and will supplement this memorandum as additional information becomes available, including upon receipt of the complete disclosure schedules and the state-by-state product registration schedule from Briarwood.
Appendices and Attachments
The following appendices and attachments are referenced in and accompany this memorandum:
Appendix A: List of Litigation Docket Searches Conducted
Includes a detailed listing of all courts and jurisdictions searched, search parameters employed, party name variations used, and date ranges covered.
Appendix B: Summary Table of Product Liability Claims (2017–2022) — Anonymized
Provides a tabular summary of all product liability claims identified during the review period, including the date of each claim, the product involved (by SKU category, anonymized), the nature of the claim, the amount demanded or reserved, and the resolution status.
Appendix C: HSR Act Threshold Analysis Worksheet
Sets forth the detailed calculations underlying our HSR Act analysis, including the size-of-transaction and size-of-person tests, the applicable threshold amounts as adjusted for 2022, and the financial data relied upon.
Appendix D: State Product Registration Requirements Matrix (Partially Complete)
Provides a state-by-state matrix of product registration requirements applicable to household cleaning products, disinfectants, and personal care products, together with the status of Briarwood's registrations where known. This matrix is partially complete pending receipt of Briarwood's state-by-state registration schedule.
Appendix E: List of Data Room Documents Reviewed
Provides a complete listing of all documents reviewed in the Pemberton Systems virtual data room (Project Code: BHE-CleanLeaf-2022) in connection with this memorandum, identified by Pemberton Systems document index number, document title, and date of production.
Distribution List
This memorandum is being distributed to the following individuals. This memorandum is privileged and confidential, constitutes attorney-client privileged communication and attorney work product, and should not be further distributed or disclosed without the prior written consent of Calderwood & Harkness LLP.
This memorandum has been prepared by Calderwood & Harkness LLP for the exclusive use of our client, Meridian Consumer Brands LLC, in connection with the proposed acquisition of the CleanLeaf and PureHaven product lines from Briarwood Home Essentials, Inc. This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the individuals identified on the distribution list above and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP. This memorandum does not constitute legal advice to any person or entity other than Meridian Consumer Brands LLC.
CALDERWOOD & HARKNESS LLP
Prepared by:
________________________________________
Naomi Petersen Associate, Mergers & Acquisitions
Reviewed by:
________________________________________
Andrew Fitzpatrick Lead Associate, Mergers & Acquisitions
________________________________________
Sandra Tung Responsible Partner, Mergers & Acquisitions
Matter: | Meridian Consumer Brands LLC — Proposed Acquisition of CleanLeaf and PureHaven Product Lines from Briarwood Home Essentials, Inc.
Matter No.: | 1011-00005
Date: | September 12, 2022
Prepared by: | Naomi Petersen, Associate, Mergers & Acquisitions
Reviewed by: | Andrew Fitzpatrick, Lead Associate, Mergers & Acquisitions
Sandra Tung, Responsible Partner, Mergers & Acquisitions
Billing Partner: | Oliver Mackenzie
Indemnification Term | Amount / Threshold
Indemnification Cap | $33,250,000 (35% of $95,000,000 purchase price)
Tipping Basket | $950,000 (1% of purchase price)
Escrow Holdback | $9,500,000 (10% of purchase price)
Escrow Agent | Atlantic Fiduciary Trust Company (officer: Gregory Fenn)
Escrow Period | 24 months post-closing
Name | Title / Affiliation
Sandra Tung | Responsible Partner, Calderwood & Harkness LLP
Andrew Fitzpatrick | Lead Associate, Calderwood & Harkness LLP
Oliver Mackenzie | Billing Partner, Calderwood & Harkness LLP
Diana Ressler | General Counsel, Meridian Consumer Brands LLC
Priya Anand | CFO, Meridian Consumer Brands LLC
Gareth Holloway | CEO & Managing Member, Meridian Consumer Brands LLC
Thomas Liang | Managing Partner, Lakepoint Capital Partners, LP (via Diana Ressler)

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