1011-00005 · Meridian Consumer Brands LLC · Diligence

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PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT

This memorandum is a privileged and confidential attorney work product prepared by Calderwood & Harkness LLP in connection with the representation of Meridian Consumer Brands LLC. This memorandum is protected by the attorney-client privilege and the work product doctrine and is not intended for disclosure to any third party. Any disclosure, copying, or distribution of this memorandum without the express prior written consent of Calderwood & Harkness LLP is strictly prohibited.

MEMORANDUM

FROM: Naomi Petersen, Associate, Calderwood & Harkness LLP

TO: Sandra Tung, Responsible Partner; Andrew Fitzpatrick, Lead Associate

DATE: August 15, 2022

RE: Due Diligence Memorandum — Real Property & Leases — Proposed Acquisition of CleanLeaf and PureHaven Product Lines from Briarwood Home Essentials, Inc.

MATTER NO.: 1011-00005

CLIENT: Meridian Consumer Brands LLC

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I. Executive Summary

This memorandum summarizes Calderwood & Harkness LLP's review of the real property and lease arrangements associated with the Acquired Assets in connection with the proposed acquisition by Meridian Consumer Brands LLC ("Meridian" or "Buyer") of the CleanLeaf and PureHaven consumer product lines from Briarwood Home Essentials, Inc. ("Briarwood" or "Seller"). The proposed transaction is structured as an asset purchase, with an aggregate purchase price of approximately $95,000,000 (the "Transaction"). The definitive agreement governing the Transaction is expected to take the form of an Asset Purchase Agreement (the "APA"), which is currently under negotiation between the parties and their respective counsel.

Two real property interests are included in, or directly relevant to, the Acquired Assets:

(1) Marysville Manufacturing Facility (Leased). The manufacturing and production facility located at 2800 Industrial Parkway, Marysville, OH 43040 (the "Marysville Facility") is a leased property. Briarwood occupies the Marysville Facility as tenant under a lease agreement with the landlord, Buckeye Industrial Properties LLC ("Buckeye"). The lease contains an anti-assignment provision that requires the prior written consent of Buckeye before the lease may be assigned to Meridian. As of the date of this memorandum, consent has not yet been requested from, or obtained from, Buckeye. The Marysville Facility serves as the primary manufacturing and production site for the approximately 142 active SKUs comprising the CleanLeaf and PureHaven product lines and is therefore essential to Meridian's continued operation of the acquired business following closing.

(2) West Jefferson Distribution Center (Owned). The warehouse and distribution center located at 500 Commerce Boulevard, West Jefferson, OH 43162 (the "West Jefferson Facility") is owned in fee simple by Briarwood and is included in the Acquired Assets as a fee simple real property transfer. No landlord consent is required for this property. Meridian will receive title to the West Jefferson Facility by deed at closing, subject to standard title and survey diligence, which is currently underway.

Key Findings and Recommendations. The most significant diligence finding with respect to real property is the requirement to obtain the prior written consent of Buckeye Industrial Properties LLC for the assignment of the Marysville lease. The lease language governing the consent standard is somewhat ambiguous, and it is not entirely clear whether the consent standard is "reasonably withheld" or whether the landlord retains broader discretion. This issue is discussed in detail in Section III.C below. Failure to obtain Buckeye's consent would prevent the lawful transfer of the Marysville lease to Meridian as part of the Transaction and would constitute a material impediment to Meridian's ability to operate the CleanLeaf and PureHaven product lines post-closing. Calderwood & Harkness LLP recommends that the landlord consent for the Marysville lease be designated as a condition precedent to closing in the APA and that the consent request be submitted to Buckeye promptly.

The West Jefferson Facility presents a lower risk profile, as it is owned outright by Briarwood and will transfer by deed. Standard title, survey, and zoning diligence is proceeding, and no material issues have been identified to date, although certain items remain open as described in Section IV below.

The materials reviewed in connection with this memorandum were obtained from the Pemberton Systems virtual data room established for this Transaction (Project Code: BHE-CleanLeaf-2022), with access commencing on June 14, 2022. Our review was supplemented by responses to diligence requests submitted to Seller's counsel, Caldwell, Pruitt & Shaw LLP (Rachel Underwood, Partner, and David Soo, Associate), received on various dates between June 28, 2022 and August 9, 2022.

This memorandum is current as of August 15, 2022. Certain diligence items remain open as described herein, and supplemental memoranda may be issued as additional information is received.

II. Scope and Methodology

The scope of this memorandum is limited to the real property and lease arrangements directly associated with the Acquired Assets in the proposed Transaction. Specifically, we have undertaken the following review and coordination activities:

Document Review. We reviewed all documents posted to the Pemberton Systems data room (Project Code: BHE-CleanLeaf-2022) under the "Real Property" category (Folder 4.0 and all subfolders), including the following categories of materials:

• Lease agreements, amendments, and modifications;

• Landlord-tenant correspondence, including notices, rent escalation letters, and maintenance requests;

• Property tax records, assessments, and tax payment histories;

• Title documents, including deeds, title commitments, and prior title insurance policies;

• Surveys, including ALTA/NSPS land title surveys and boundary surveys;

• Insurance certificates and declarations pages for property and liability insurance policies;

• Inspection reports, maintenance logs, and capital improvement records;

• Zoning compliance documentation, including certificates of occupancy and zoning confirmations; and

• Environmental reports and correspondence (to the extent available in the data room; environmental matters are addressed in a separate memorandum).

A complete index of the documents reviewed is attached as Exhibit B to this memorandum.

Ohio Real Property Law. We reviewed applicable provisions of Ohio statutory and case law relevant to lease assignment, landlord consent requirements, anti-assignment clauses, the standard of reasonableness applicable to landlord consent, fee simple conveyance requirements, and related matters. Our analysis of Ohio law is incorporated into the relevant sections of this memorandum.

Environmental Coordination. We coordinated with Terrapoint Environmental Group, Inc. ("Terrapoint") (Keith Novak, Project Manager) regarding the Phase I Environmental Site Assessment ("Phase I ESA") for the Marysville Facility. As of the date of this memorandum, the Phase I ESA report has not yet been delivered. We have been informed by Mr. Novak that the report is expected to be completed in early September 2022. (Note: The Phase I ESA report was subsequently delivered on September 2, 2022 as Report No. TEG-2022-0441.) Environmental findings associated with the Marysville Facility, as well as any environmental diligence for the West Jefferson Facility, will be addressed in a separate Environmental Due Diligence Memorandum, which is expected to be issued on or about September 8, 2022.

Financial Coordination. We coordinated with Whitfield Ames LLP (Susan Clearwater, Engagement Partner) regarding financial aspects of the lease obligations associated with the Marysville Facility and the owned real property carrying costs associated with the West Jefferson Facility. Financial diligence findings are addressed in a separate Financial Due Diligence Memorandum.

Exclusions. This memorandum does not cover the following:

• The corporate headquarters lease at 1175 Creekside Drive, Suite 400, Columbus, OH 43215, which is an Excluded Asset to be retained by Briarwood following closing. Briarwood's corporate headquarters supports the entirety of Briarwood's operations, including the retained Commercial Janitorial Services Division, and is not specific to the CleanLeaf or PureHaven product lines.

• Environmental conditions at the Marysville Facility or the West Jefferson Facility, which are addressed in the separate Environmental Due Diligence Memorandum referenced above.

• Personal property, fixtures, equipment, and machinery located at the Marysville Facility and the West Jefferson Facility, which are addressed in the Personal Property and Equipment Due Diligence Memorandum.

• Employee matters, including the approximately 186 transferring employees, which are addressed in the Employment and Benefits Due Diligence Memorandum.

III. Property #1: Marysville Manufacturing Facility (Leased)

A. Property Description

The Marysville Facility is located at 2800 Industrial Parkway, Marysville, OH 43040, in Union County, Ohio. The facility is situated within the Marysville Industrial Park, a multi-parcel industrial development with access to State Route 36 and U.S. Route 33, providing convenient transportation linkages to the Columbus metropolitan area and the broader central Ohio logistics corridor.

Type. The Marysville Facility is a manufacturing and production facility that has been the primary production site for both the CleanLeaf line of home cleaning products and the PureHaven line of personal care products since approximately 2012. The facility includes manufacturing process areas, quality control laboratories, raw material storage, finished goods staging areas, administrative offices, and employee amenities.

Approximate Size. Based on documents reviewed in the data room, the Marysville Facility comprises approximately 185,000 square feet of total building area, allocated approximately as follows:

• Manufacturing and production floor: approximately 112,000 square feet

• Quality control and laboratory space: approximately 8,500 square feet

• Raw materials and finished goods warehousing: approximately 38,000 square feet

• Administrative and office space: approximately 18,500 square feet

• Employee break rooms, locker rooms, and common areas: approximately 8,000 square feet

The facility is situated on a parcel of approximately 14.2 acres and includes four truck-height loading docks, a paved employee parking lot with capacity for approximately 220 vehicles, and dedicated access roads within the industrial park.

Current Use. The Marysville Facility is the primary manufacturing facility for the approximately 142 active SKUs across the CleanLeaf and PureHaven product lines. The facility operates on a two-shift production schedule, Monday through Friday, with periodic weekend production runs during peak demand periods. The facility houses multiple production lines, including liquid filling and packaging lines, aerosol filling and packaging lines, and dry product blending and packaging lines. Based on our review of the data room materials, all production of CleanLeaf and PureHaven products is conducted at the Marysville Facility; no third-party contract manufacturing is currently employed for the product lines.

Employees at Facility. A significant portion of the approximately 186 employees expected to transfer to Meridian in connection with the Transaction are located at or report to the Marysville Facility. Based on our review of the employee roster included in the data room, approximately 134 of the 186 transferring employees are based at the Marysville Facility, including production operators, quality assurance technicians, maintenance personnel, warehouse workers, shift supervisors, and a portion of the administrative and management staff.

B. Lease Terms — Summary

The following summarizes the key commercial terms of the lease for the Marysville Facility based on our review of the original lease agreement and subsequent amendments posted to the Pemberton Systems data room.

Landlord: Buckeye Industrial Properties LLC, a Delaware limited liability company, with its principal office at 77 East Nationwide Boulevard, Suite 200, Columbus, OH 43215. Based on publicly available records, Buckeye Industrial Properties LLC is a privately held real estate investment and management company that owns and operates a portfolio of industrial properties in central Ohio. We have identified the primary contact at Buckeye as Thomas Reinhart, Managing Member, although no direct communications have been made with Buckeye as of the date of this memorandum.

Tenant: Briarwood Home Essentials, Inc., an Ohio corporation.

Original Lease Date: The original lease agreement (the "Original Lease") was executed on April 22, 2010, with a lease commencement date of July 1, 2010. The Original Lease has been amended three times:

• First Amendment to Lease, dated March 15, 2013 (the "First Amendment"), which expanded the leased premises to include an additional approximately 22,000 square feet of warehouse space in the adjacent Building B annex and adjusted the base rent accordingly.

• Second Amendment to Lease, dated November 8, 2016 (the "Second Amendment"), which extended the lease term for an additional five years through June 30, 2026, modified the rent escalation provisions, and updated the landlord's address for notices.

• Third Amendment to Lease, dated February 1, 2020 (the "Third Amendment"), which modified the permitted use clause to include "personal care product manufacturing" in addition to the originally permitted uses, revised certain insurance requirements, and confirmed the tenant's exercise of the first renewal option.

The Original Lease, as modified by the First Amendment, the Second Amendment, and the Third Amendment, is collectively referred to herein as the "Marysville Lease."

Current Term. The current lease term expires on June 30, 2026, representing approximately three years and ten months of remaining term as of the date of this memorandum. The current term reflects the five-year extension effected by the Second Amendment and the first renewal option exercised pursuant to the Third Amendment.

Renewal Options. The Marysville Lease originally provided for two consecutive five-year renewal options, exercisable at the tenant's election upon not less than twelve months' prior written notice to the landlord before the expiration of the then-current term. The first renewal option was exercised by Briarwood effective as of the Third Amendment. Accordingly, one five-year renewal option remains available, which, if exercised, would extend the lease term through June 30, 2031. The renewal option is personal to the tenant and is subject to the condition that no event of default exists at the time of exercise. We note that the assignability of the remaining renewal option to Meridian should be confirmed as part of the landlord consent process.

Base Rent. The current annual base rent under the Marysville Lease is $1,221,000 ($101,750 per month), which reflects a rate of approximately $6.60 per square foot per annum. Base rent is subject to annual escalation of 2.5% per annum on each July 1 anniversary of the lease commencement date, as modified by the Second Amendment. The rent escalation provision in the Original Lease was tied to the Consumer Price Index (CPI-U, All Urban Consumers, Midwest Region), with a floor of 2.0% and a cap of 4.0%. The Second Amendment replaced the CPI-based escalation with a fixed annual escalation of 2.5%, effective beginning with the July 1, 2017 escalation date.

Additional Rent / Operating Expenses. The Marysville Lease is structured as a triple-net lease (NNN). In addition to base rent, the tenant is responsible for paying the following costs as additional rent:

• Real Estate Taxes: The tenant is responsible for all real estate taxes, assessments, and governmental charges levied against the leased premises. Real estate taxes are payable directly by the tenant to the applicable taxing authority or, at the landlord's election, reimbursed to the landlord. Based on the most recent tax records reviewed in the data room, annual real estate taxes for the Marysville Facility are approximately $187,400.

• Insurance: The tenant is responsible for obtaining and maintaining all required insurance coverages as described in Section III.E below, at the tenant's sole cost and expense.

• Common Area Maintenance (CAM): The tenant is responsible for its proportionate share of common area maintenance costs for the Marysville Industrial Park, including parking lot maintenance, landscaping, snow removal, and shared utility infrastructure. CAM charges are reconciled annually and are currently estimated at approximately $42,000 per annum, based on the most recent reconciliation statement included in the data room.

• Utilities: The tenant is responsible for all utility costs associated with the leased premises, including electricity, natural gas, water, sewer, and telecommunications services.

Security Deposit. The Marysville Lease requires a security deposit in the amount of $203,500, which represents approximately two months of base rent at the time of lease execution. Based on our review of data room correspondence, Buckeye is currently holding the security deposit. The Marysville Lease provides that the security deposit shall be returned to the tenant within sixty days following the expiration or termination of the lease, less any amounts applied by the landlord against unpaid rent or damages. The treatment of the security deposit in connection with the assignment to Meridian (i.e., whether Buckeye will credit the existing deposit to Meridian's account or whether Meridian will be required to post a new or increased deposit) should be addressed as part of the landlord consent negotiation.

Permitted Use. As amended by the Third Amendment, the permitted use under the Marysville Lease includes "manufacturing, production, storage, packaging, and distribution of consumer home cleaning products and personal care products, and related research, development, quality control, administrative, and ancillary uses." The permitted use is generally consistent with Meridian's intended post-closing operations of the CleanLeaf and PureHaven product lines, although Meridian should confirm that any anticipated changes in product mix or production processes would fall within the scope of the permitted use clause.

C. Assignment and Subletting Provisions

The assignment and subletting provisions of the Marysville Lease are set forth primarily in Section 14 of the Original Lease, as supplemented by additional provisions in the First Amendment and Second Amendment. These provisions are critical to the Transaction because the transfer of the Marysville Lease from Briarwood to Meridian constitutes an "assignment" of the lease for purposes of Section 14.

Anti-Assignment Clause. Section 14.1 of the Marysville Lease provides, in relevant part:

"Tenant shall not assign this Lease, or any interest herein, or sublet the Premises or any part thereof, or permit the use or occupancy of the Premises or any part thereof by any party other than Tenant, without the prior written consent of Landlord."

This provision clearly prohibits Briarwood from assigning the Marysville Lease to Meridian without first obtaining the written consent of Buckeye.

Consent Standard. Section 14.2 of the Original Lease provides the following with respect to the standard governing landlord consent:

"Landlord's consent to any assignment or subletting shall be granted or withheld in Landlord's reasonable discretion, and Landlord shall not unreasonably withhold, condition, or delay such consent; provided, however, that it shall be deemed reasonable for Landlord to withhold consent if (a) the proposed assignee or subtenant does not, in Landlord's reasonable judgment, possess the financial capability to perform the obligations of the Tenant under this Lease, (b) the proposed assignee or subtenant intends to use the Premises for a purpose other than the Permitted Use, (c) an Event of Default exists under this Lease at the time of the request for consent, or (d) the proposed assignment or subletting would violate any applicable law, governmental regulation, or other agreement binding upon Landlord or the Premises."

The inclusion of the "not unreasonably withhold, condition, or delay" standard is favorable to Meridian. However, the qualification in subclauses (a) through (d) provides Buckeye with enumerated grounds upon which withholding of consent would be deemed reasonable. In particular, subclause (a) requires that the proposed assignee demonstrate financial capability to perform the tenant's obligations under the Lease. Calderwood & Harkness LLP recommends that, in connection with the consent request, Meridian be prepared to provide Buckeye with financial statements, a corporate overview, and such other information as Buckeye may reasonably require to evaluate Meridian's financial capability and creditworthiness. Based on our understanding of Meridian's financial position, including the committed $60,000,000 term loan facility from Harborview National Bank, N.A. and Meridian's existing balance sheet, we do not anticipate that Meridian's financial capability should be a material impediment to obtaining consent.

Change of Control Provision. Section 14.3 of the Marysville Lease provides that a "Change of Control" of the tenant shall be deemed an assignment requiring the landlord's prior written consent. "Change of Control" is defined as "(i) any transfer, by sale, merger, consolidation, or otherwise, of more than fifty percent (50%) of the voting equity interests of Tenant, or (ii) the sale or transfer of all or substantially all of the assets of Tenant." While the Transaction is structured as an asset purchase of specific product lines rather than a transfer of "all or substantially all" of Briarwood's assets (since Briarwood is retaining the Commercial Janitorial Services Division), the Change of Control provision may nevertheless be applicable. We recommend that the consent request explicitly address the Change of Control provision and clarify the nature of the Transaction to Buckeye to avoid any ambiguity.

Recapture Right. Section 14.4 of the Marysville Lease grants the landlord a recapture right. Specifically, upon receipt of a request for consent to assignment, Buckeye has the right, exercisable within thirty (30) days of receipt of the request, to terminate the Marysville Lease as of a date specified by Buckeye (not less than ninety (90) days and not more than one hundred eighty (180) days following notice of termination) in lieu of consenting to the assignment. The recapture right is a significant provision and represents a material risk to the Transaction. If Buckeye were to exercise the recapture right, Briarwood would lose its leasehold interest in the Marysville Facility, and Meridian would be unable to acquire the lease as part of the Acquired Assets. We note, however, that the exercise of the recapture right is relatively uncommon in practice where the proposed assignee is creditworthy and intends to continue the same use, as the landlord would lose a paying tenant without a guaranteed replacement. Calderwood & Harkness LLP recommends that the consent request be accompanied by sufficient information about Meridian's creditworthiness and intended use to discourage exercise of the recapture right.

Consent Fee / Transfer Fee. Section 14.5 of the Marysville Lease provides that, as a condition to any consent to assignment, the tenant shall reimburse the landlord for its reasonable out-of-pocket costs and expenses incurred in connection with the review and processing of the assignment request, including reasonable attorneys' fees, in an amount not to exceed $15,000. In addition, Section 14.5 provides that the landlord shall be entitled to receive a transfer fee equal to one-half of one percent (0.5%) of the "Assignment Consideration," defined as the total consideration paid or payable by the assignee to the tenant in connection with the assignment. The application of this transfer fee provision to the Transaction is ambiguous, as the assignment of the Marysville Lease is only one component of the broader asset purchase, and the APA does not allocate a specific portion of the $95,000,000 purchase price to the lease assignment. We recommend that this provision be carefully addressed in the consent negotiation and that the parties agree upon an allocated value for purposes of calculating any transfer fee, or negotiate a fixed lump-sum transfer fee in lieu of the formula-based fee.

Recommendation. Landlord consent must be obtained from Buckeye Industrial Properties LLC prior to closing. Calderwood & Harkness LLP strongly recommends that the consent of Buckeye be identified as a condition precedent to closing in the Asset Purchase Agreement. We further recommend that the consent request be prepared and submitted to Buckeye as soon as practicable, in order to allow adequate time for Buckeye to review the request, evaluate Meridian's financial information, and respond within the thirty-day recapture period and any additional time required for negotiation of consent terms. Based on our experience with similar transactions, the consent process typically requires four to eight weeks from initial request to execution of a consent letter or consent agreement.

(Note: The consent request was subsequently sent to Buckeye Industrial Properties LLC on October 7, 2022. As of the date of the Deal Status Memorandum, no response had been received from Buckeye. This matter remains a critical open item.)

D. Condition and Maintenance Obligations

Tenant Maintenance and Repair. Under the terms of the Marysville Lease, the tenant is responsible for the maintenance, repair, and upkeep of the leased premises, including the building structure, roof, HVAC systems, plumbing, electrical systems, loading docks, parking areas, and landscaping within the tenant's leased area. The landlord's maintenance obligations are limited to structural components of the building (foundation and load-bearing walls) and the common areas of the Marysville Industrial Park. This allocation of maintenance responsibility is consistent with a triple-net lease structure and places the majority of the maintenance burden on the tenant. Meridian should be aware that, as assignee, it will assume these maintenance obligations and should evaluate the current condition of the facility and any deferred maintenance issues.

Capital Improvements and Alterations. Section 8 of the Marysville Lease governs tenant alterations to the leased premises. The tenant may make non-structural alterations costing less than $50,000 per occurrence without landlord consent, provided that the tenant provides written notice to the landlord at least fifteen (15) days prior to commencing the work. Structural alterations, and non-structural alterations costing $50,000 or more, require the landlord's prior written consent, which shall not be unreasonably withheld. All alterations become the property of the landlord upon installation, unless the landlord elects to require the tenant to remove the alterations and restore the premises upon lease expiration or termination.

Based on our review of the data room materials, Briarwood has made several capital improvements to the Marysville Facility during its tenancy, including the installation of a new air handling and ventilation system in the manufacturing area (completed 2018, approximate cost $420,000), the upgrade of the electrical service and power distribution panels (completed 2019, approximate cost $175,000), and the buildout of the quality control laboratory space (completed 2020, approximate cost $230,000). Landlord consent letters for each of these improvements were included in the data room. There are no indications in the data room materials that any of these improvements were made without required landlord consent.

Condition of Facility. The data room contains a facility condition assessment report dated January 2021 prepared by Briarwood's internal facilities management team. The report rates the overall condition of the Marysville Facility as "Good" with some areas rated "Fair," including the original HVAC units serving the office and administrative areas (original 2008 installation, approaching end of useful life) and the asphalt paving in the employee parking lot (showing surface deterioration and cracking). The report estimates that approximately $340,000 in capital maintenance expenditures would be required over the next three to five years to address deferred maintenance items, including HVAC replacement for the office areas (estimated $185,000), parking lot resurfacing (estimated $95,000), and miscellaneous roof repairs (estimated $60,000). Meridian should evaluate whether to seek a seller credit or escrow for these deferred maintenance items as part of the APA negotiation or factor these anticipated costs into its economic analysis of the Transaction.

Environmental Condition. The environmental condition of the Marysville Facility is being separately assessed by Terrapoint Environmental Group, Inc. through a Phase I Environmental Site Assessment. As of the date of this memorandum, the Phase I ESA report has not been received. The results of the Phase I ESA, and any recommendations for further investigation (including a potential Phase II ESA), will be addressed in a separate Environmental Due Diligence Memorandum. We note that the Marysville Facility is used for the manufacture of consumer cleaning products and personal care products, which involves the handling and storage of various chemical raw materials. The environmental implications of these operations, including any issues related to hazardous materials handling, storage, and disposal, are within the scope of the Terrapoint assessment.

E. Insurance and Indemnification

Tenant Insurance Requirements. Section 10 of the Marysville Lease requires the tenant to obtain and maintain the following insurance coverages throughout the lease term, at the tenant's sole cost and expense:

• Commercial General Liability Insurance: Coverage of not less than $2,000,000 per occurrence and $5,000,000 in the annual aggregate, covering bodily injury, personal injury, and property damage arising from the tenant's occupancy and use of the premises. The policy must name the landlord as an additional insured.

• Property Insurance (All Risk): Coverage of the tenant's personal property, trade fixtures, equipment, and inventory located at the premises, and coverage for the full replacement cost of any tenant improvements and alterations, on an "all risk" or "special form" basis.

• Worker's Compensation Insurance: Coverage as required by Ohio law, including employer's liability coverage with limits of not less than $1,000,000 per occurrence.

• Business Interruption Insurance: Coverage for loss of business income and extra expense, in an amount sufficient to cover the tenant's lost income and continuing expenses for a period of not less than twelve (12) months.

• Umbrella/Excess Liability Insurance: Coverage of not less than $5,000,000 per occurrence and in the aggregate, in excess of the commercial general liability and employer's liability policies.

All insurance policies must be issued by insurers rated not less than "A-, VIII" by A.M. Best Company and must provide that the policies may not be cancelled or materially modified without at least thirty (30) days' prior written notice to the landlord.

Indemnification. Section 11 of the Marysville Lease contains a broad indemnification and hold harmless provision pursuant to which the tenant indemnifies, defends, and holds harmless the landlord from and against any and all claims, damages, losses, liabilities, costs, and expenses (including reasonable attorneys' fees) arising out of or relating to the tenant's use, occupancy, or operation of the premises, except to the extent caused by the landlord's gross negligence or willful misconduct. This indemnification obligation survives the expiration or termination of the lease.

Current Insurance Status. Based on the certificates of insurance posted to the data room, Briarwood currently maintains insurance coverages that meet or exceed the lease requirements. Briarwood's insurance program is underwritten by Brindoval Mutual Insurance Company and administered through Pennfield & Associates Insurance Brokers. The current commercial general liability policy (Policy No. CGL-BHE-2021-0098) provides limits of $3,000,000 per occurrence and $6,000,000 aggregate, which exceeds the lease requirements. Worker's compensation coverage is provided through the Ohio Bureau of Workers' Compensation State Insurance Fund, with an employer's liability endorsement providing limits of $1,000,000 per occurrence.

Post-Closing Insurance Transition. Following closing, Meridian will need to arrange replacement or endorsement of all required insurance policies in Meridian's name, effective as of the closing date. Meridian should coordinate with its insurance broker to ensure that coverage is in place at closing and that certificates of insurance naming Buckeye as additional insured are delivered in connection with the lease assignment. The APA should include a covenant requiring Meridian to obtain and maintain insurance meeting the requirements of the Marysville Lease effective as of the closing date.

F. Default and Termination Provisions

Events of Default. Section 16 of the Marysville Lease sets forth the events that constitute an "Event of Default" by the tenant, including:

(a) Failure to pay base rent or additional rent within ten (10) days after the due date, provided that the tenant shall have received written notice of the delinquency and shall have failed to cure within an additional five (5) business days after receipt of such notice (total cure period of approximately 15 days);

(b) Breach of any non-monetary covenant, condition, or obligation under the Lease, if such breach continues for a period of thirty (30) days after written notice from the landlord; provided that if such breach cannot reasonably be cured within thirty (30) days, the tenant shall not be in default if the tenant commences the cure within the thirty-day period and diligently prosecutes the cure to completion, so long as the cure is completed within ninety (90) days of the original notice;

(c) The filing of a voluntary petition in bankruptcy by the tenant, or the filing of an involuntary petition in bankruptcy against the tenant that is not dismissed within sixty (60) days, or the appointment of a receiver or trustee for the tenant's assets, or the making of a general assignment for the benefit of creditors by the tenant;

(d) The assignment, subletting, or other transfer of the Lease or the premises, or any interest therein, without the prior written consent of the landlord as required by Section 14; and

(e) The abandonment or vacation of the premises by the tenant for a period of thirty (30) consecutive days without the landlord's prior written consent.

Significance of Unauthorized Assignment. As noted in subclause (d) above, an assignment of the Marysville Lease without Buckeye's prior written consent would constitute an Event of Default. This reinforces the critical importance of obtaining landlord consent prior to closing. An unconsented assignment would not only violate the terms of the Lease but would also give Buckeye the right to terminate the Lease and exercise all remedies available to it under the default provisions.

Landlord Remedies. Upon the occurrence of an Event of Default, Section 17 of the Marysville Lease provides the landlord with the following remedies:

• Termination of the Lease upon written notice to the tenant, effective immediately or upon a date specified by the landlord;

• Re-entry and repossession of the premises, with or without termination of the Lease;

• Recovery of all unpaid rent and additional rent accrued through the date of termination;

• Recovery of damages equal to the present value (Discounted at the rate of 6% per annum) of the rent and additional rent that would have been payable for the remainder of the lease term, less the fair market rental value of the premises for such period;

• Recovery of reasonable attorneys' fees and costs of collection; and

• Any other remedies available to the landlord at law or in equity.

Existing Defaults. Based on our review of the data room materials, including landlord correspondence and rent payment records, we have not identified any existing or uncured Events of Default under the Marysville Lease. Briarwood appears to be current on all rent and additional rent obligations and in compliance with the material covenants of the Lease. However, we recommend that a landlord estoppel certificate be obtained in connection with closing to confirm the absence of any existing defaults and to provide Meridian with contractual assurance from Buckeye on this point.

G. Other Material Provisions

Purchase Option. The Marysville Lease does not contain a purchase option or option to acquire the fee interest in the premises. Meridian will have no contractual right to purchase the Marysville Facility under the terms of the Lease.

Right of First Refusal. Section 19.2 of the Marysville Lease grants the tenant a right of first refusal on any proposed sale of the property by the landlord to a third party. If Buckeye receives a bona fide written offer from a third party to purchase the property and desires to accept such offer, Buckeye must first provide written notice to the tenant, together with a copy of the third-party offer. The tenant has thirty (30) days from receipt of the notice to elect to purchase the property on the same terms and conditions as set forth in the third-party offer. If the tenant does not exercise the right of first refusal within the thirty-day period, the landlord may proceed with the sale to the third party on terms no more favorable to the third party than those set forth in the offer. The assignability of this right of first refusal to Meridian should be confirmed as part of the landlord consent process.

Subordination, Non-Disturbance, and Attornment (SNDA). Section 20 of the Marysville Lease contains a subordination provision pursuant to which the tenant agrees that the Lease is and shall be subordinate to any mortgage, deed of trust, or other encumbrance now or hereafter placed upon the property by the landlord, provided that the holder of such mortgage or encumbrance agrees to honor the Lease and the tenant's rights thereunder in the event of a foreclosure or other exercise of remedies (a "non-disturbance" agreement). The data room contains a Subordination, Non-Disturbance, and Attornment Agreement (the "SNDA") dated September 14, 2016, between Briarwood (as tenant), Buckeye (as landlord), and Central Ohio Federal Savings Bank (as lender), which was executed in connection with a refinancing of Buckeye's mortgage on the property. Calderwood & Harkness LLP recommends confirming whether the SNDA remains in effect and whether Central Ohio Federal Savings Bank (or any successor lender) continues to hold a mortgage on the property. If the existing SNDA is no longer in effect or if Buckeye has refinanced with a different lender, Meridian should request a new SNDA from the current mortgagee as part of the consent and closing process.

Estoppel Certificate. Section 21 of the Marysville Lease obligates each party, within fifteen (15) days after written request from the other party, to deliver a written estoppel certificate confirming the following: (i) the Lease is in full force and effect and has not been modified except as stated in the certificate; (ii) the dates through which base rent and additional rent have been paid; (iii) whether any Event of Default exists under the Lease, and if so, the nature of such default; (iv) the amount of any security deposit held by the landlord; and (v) such other matters as may be reasonably requested. Calderwood & Harkness LLP recommends that an estoppel certificate be requested from Buckeye in connection with the closing, both to confirm the status of the Lease and to provide Meridian and its lender with third-party confirmation of the Lease terms.

Hazardous Materials. Section 22 of the Marysville Lease contains provisions governing the use, handling, storage, and disposal of hazardous materials on the premises. The tenant is required to comply with all applicable environmental laws and regulations, to provide the landlord with notice of any release or threat of release of hazardous materials, and to indemnify the landlord against any losses arising from the tenant's use or release of hazardous materials on the premises. A detailed analysis of these provisions and their interaction with the Transaction documents will be included in the separate Environmental Due Diligence Memorandum.

H. Risk Assessment — Marysville Facility

Key Risk: Landlord Consent. The requirement to obtain Buckeye Industrial Properties LLC's consent to the assignment of the Marysville Lease is the most significant risk item identified in our real property due diligence. The Marysville Facility is the sole manufacturing site for the CleanLeaf and PureHaven product lines, and the loss of access to this facility would materially impair — and likely prevent — Meridian's ability to operate the acquired business following closing. There is no readily available alternative manufacturing facility that could be identified and brought online within a reasonable timeframe to replace the Marysville Facility.

We assess the likelihood of obtaining landlord consent as moderate to high, based on the following factors: (i) the consent standard in the Lease (not unreasonably withheld) is favorable to the tenant; (ii) Meridian is expected to be a creditworthy assignee with adequate financial resources; (iii) the intended use of the premises will remain unchanged; and (iv) landlords generally prefer to consent to assignments to creditworthy tenants rather than risk vacancy. However, the following countervailing factors introduce uncertainty: (i) the landlord's recapture right, which allows Buckeye to terminate the Lease in lieu of consenting; (ii) the potential transfer fee, which may require negotiation; (iii) Buckeye's potential interest in negotiating more favorable lease terms as a condition of consent (so-called "consent extortion"); and (iv) the possibility that Buckeye may condition consent on Meridian's agreement to an increased security deposit, personal guarantee, or other credit enhancement.

Recommendation. Calderwood & Harkness LLP recommends the following:

• The APA should include the landlord consent as a condition precedent to closing, both for the benefit of Meridian (which should not be obligated to close without a valid lease) and for the benefit of Briarwood (which should not be exposed to an Event of Default arising from an unconsented assignment).

• Alternative structures should be evaluated and available as contingency measures if consent cannot be obtained on acceptable terms. Potential alternatives include: (a) a sublease from Briarwood to Meridian, which may also require landlord consent under the terms of the Lease; (b) an operating or management arrangement under which Briarwood retains the lease and provides manufacturing services to Meridian pursuant to a contract manufacturing or tolling agreement; or (c) a license or occupancy arrangement under which Meridian occupies the premises under Briarwood's continued tenancy. Each of these alternatives has significant legal, tax, and operational implications and would require further analysis.

• The consent request should be submitted to Buckeye as soon as practicable, accompanied by comprehensive information regarding Meridian's financial condition, business operations, intended use of the premises, and the structure of the Transaction.

Shared-Use Considerations. We note that Briarwood is retaining its Commercial Janitorial Services Division following the Transaction. Based on our review of the data room materials, the Marysville Facility appears to be dedicated exclusively to the CleanLeaf and PureHaven product lines and is not shared with the Commercial Janitorial Services Division. However, this should be confirmed with Seller's counsel. If any portion of the Marysville Facility is used by or allocated to the retained Commercial Janitorial Services Division, the lease assignment will need to address the separation of operations and the potential need for Briarwood to continue to occupy a portion of the premises during a transitional period, which should be addressed in the Transition Services Agreement.

Environmental Risk. As noted above, the environmental risk profile of the Marysville Facility will be assessed upon receipt of the Phase I ESA report from Terrapoint Environmental Group, Inc. Until such report is received and reviewed, we are unable to make a final assessment of environmental risk at this property.

IV. Property #2: West Jefferson Distribution Center (Owned)

A. Property Description

The West Jefferson Facility is located at 500 Commerce Boulevard, West Jefferson, OH 43162, in Madison County, Ohio. The facility is situated in an industrial and commercial corridor along Commerce Boulevard with convenient access to Interstate 70, one of the primary east-west freight corridors in the Midwest, and is approximately 25 miles west of downtown Columbus.

Type. The West Jefferson Facility is a warehouse and distribution center that serves as the central hub for the warehousing, staging, and distribution of finished CleanLeaf and PureHaven products to Briarwood's customer accounts.

Approximate Size. Based on data room records, the West Jefferson Facility comprises approximately 128,000 square feet of total building area, allocated approximately as follows:

• High-bay racked warehouse storage: approximately 96,000 square feet

• Shipping and receiving staging area: approximately 18,000 square feet

• Office and administrative space: approximately 9,500 square feet

• Employee break room and common areas: approximately 4,500 square feet

The facility includes twelve truck-height loading docks, two drive-in loading doors, and is situated on a parcel of approximately 11.8 acres. The parcel includes paved truck maneuvering areas, trailer staging/drop yard space, and an employee parking lot with capacity for approximately 85 vehicles.

Current Use. The West Jefferson Facility serves as the central warehousing and distribution facility for finished CleanLeaf and PureHaven products. Products manufactured at the Marysville Facility are transported to the West Jefferson Facility for warehousing and subsequent distribution to Briarwood's customer accounts. Based on data room materials, the West Jefferson Facility ships to the 23 customer accounts under assigned contracts that are included in the Acquired Assets, including major retail and wholesale customers. The facility operates a single shift, Monday through Friday, with additional shifts during peak shipping periods.

Ownership. The West Jefferson Facility is owned in fee simple by Briarwood Home Essentials, Inc. Based on our review of the deed records in the data room, Briarwood acquired the property on March 18, 2014 by General Warranty Deed from JPR Development Co., LLC, recorded in the Madison County Recorder's Office as Instrument No. 201403002874, Book 614, Page 442. The purchase price paid by Briarwood was $4,850,000.

Included in Acquired Assets. The West Jefferson Facility is included in the Acquired Assets and will be conveyed to Meridian by deed at closing. No landlord consent or third-party approval is required for the conveyance, subject to the satisfaction of standard title requirements, the release of any existing mortgages or liens, and the payment of applicable transfer taxes.

B. Title Review

Title Commitment. We have reviewed a preliminary title commitment issued by Fidelity Land Title Agency of Central Ohio (Commitment No. FLT-2022-05177, effective date July 22, 2022), which confirms that title to the West Jefferson Facility is vested in Briarwood Home Essentials, Inc. as fee simple owner of record.

Vesting. Title is vested in "Briarwood Home Essentials, Inc., an Ohio corporation," consistent with Briarwood's corporate formation and good standing in the State of Ohio. We have confirmed that the vesting entity is the same legal entity that is the Seller under the proposed APA.

Recorded Encumbrances. The title commitment identifies the following recorded encumbrances against the property:

(a) Mortgage. First Mortgage and Security Agreement dated March 18, 2014, granted by Briarwood Home Essentials, Inc. in favor of First Heartland Bank & Trust, in the original principal amount of $3,400,000, recorded as Instrument No. 201403002876, Book 614, Page 458. Based on our review of the data room materials, including loan statements and payoff correspondence, the current outstanding balance on this mortgage is approximately $1,870,000 as of June 30, 2022. This mortgage must be released or paid off at closing in order to convey clear title to Meridian. Calderwood & Harkness LLP recommends that Seller's counsel obtain a payoff letter and release commitment from First Heartland Bank & Trust in advance of closing.

(b) Utility Easement. Easement granted to Vireo Holdings ("AEP") for the installation, maintenance, and operation of overhead and underground electrical transmission and distribution facilities, dated September 12, 2003, recorded as Instrument No. 200309001422, Book 578, Page 224. The easement runs along the northern boundary of the parcel and is ten (10) feet in width. This easement is a standard utility easement and is not expected to interfere with the current or planned use of the property.

(c) Drainage Easement. Easement granted to Madison County for stormwater drainage purposes, dated September 12, 2003, recorded as Instrument No. 200309001423, Book 578, Page 229. The easement runs along the eastern boundary of the parcel and is fifteen (15) feet in width. This easement is a standard public drainage easement and is not expected to interfere with the current or planned use of the property.

(d) Restrictive Covenants. Declaration of Covenants, Conditions, and Restrictions for the Commerce Boulevard Industrial Park, dated June 4, 2001, recorded as Instrument No. 200106000988, Book 565, Page 112 (the "CC&Rs"). The CC&Rs impose various restrictions on the use and development of properties within the Commerce Boulevard Industrial Park, including requirements relating to building setbacks, signage, landscaping, exterior appearance, and prohibited uses. Based on our review of the CC&Rs, the current use of the property as a warehouse and distribution center is a permitted use, and we have not identified any provisions of the CC&Rs that would prohibit or restrict Meridian's intended post-closing operations. The CC&Rs also establish a property owners' association (the Commerce Boulevard Industrial Park Property Owners' Association) that collects annual assessments for common area maintenance. Current annual assessments are approximately $8,200 per year.

Recommendation. Calderwood & Harkness LLP recommends the following with respect to title:

• Meridian should obtain an owner's title insurance policy from Fidelity Land Title Agency of Central Ohio (or another nationally recognized title insurer acceptable to Meridian) in an amount equal to the allocated purchase price of the West Jefferson Facility, insuring Meridian's fee simple title to the property subject only to the Permitted Encumbrances as defined in the APA.

• If Harborview National Bank, N.A. requires a lien on the West Jefferson Facility as collateral for the $60,000,000 senior secured term loan facility, a lender's title insurance policy will also need to be obtained in favor of Harborview.

• The existing mortgage in favor of First Heartland Bank & Trust must be released at or prior to closing. Seller's counsel should be instructed to obtain a payoff letter and arrange for the delivery of a recorded release of mortgage at closing.

• The standard utility and drainage easements and the CC&Rs should be included in the Schedule of Permitted Encumbrances under the APA.

C. Survey

Existing Survey. The data room contains an ALTA/NSPS Land Title Survey of the property dated April 2, 2014, prepared by Meridian Surveying & Engineering, Inc. (Survey No. MSE-2014-0322). The survey was prepared in connection with Briarwood's acquisition of the property in 2014 and depicts the property boundaries, building footprint, parking areas, loading docks, easements, setback lines, utility locations, and access points.

Review Findings. Based on our review of the 2014 survey, we have not identified any material boundary disputes, encroachments, or access issues. The building footprint and improvements appear to be located within the property boundaries and comply with the applicable setback requirements under the CC&Rs and the local zoning ordinance. The utility and drainage easements identified in the title commitment are depicted on the survey in locations consistent with the recorded easement documents.

Recommendation. The 2014 survey is more than eight years old as of the date of this memorandum. Calderwood & Harkness LLP recommends that Meridian consider obtaining an updated ALTA/NSPS Land Title Survey, particularly if: (i) Harborview National Bank, N.A. requires a current survey as a condition of its financing; (ii) any improvements or site modifications have been made since 2014 that are not reflected on the existing survey; or (iii) the title insurer is unwilling to provide survey-related endorsements based on the existing survey. We have submitted a diligence request to Seller's counsel to confirm whether any site improvements or modifications have been made since the 2014 survey date.

D. Zoning and Land Use

Zoning Classification. Based on our review of the data room materials and publicly available zoning records from the Village of West Jefferson, the West Jefferson Facility is located in an area zoned "I-1 — Light Industrial District" under the Village of West Jefferson Zoning Ordinance.

Permitted Uses. The I-1 Light Industrial District permits, among other uses, "warehousing, wholesale distribution, and storage of goods and merchandise" as a permitted use by right. No conditional use permit, variance, or special exception is required for the current use of the property as a warehouse and distribution center. We have confirmed that the property's current use is consistent with the I-1 zoning classification.

Certificate of Occupancy. The data room contains a Certificate of Occupancy issued by the Village of West Jefferson Building Department, dated June 10, 2014, authorizing the use of the building as a "warehouse and distribution facility." No subsequent certificates of occupancy or building permits related to changes in use have been identified in the data room.

Building Code Compliance. Based on our review of available data room materials, we have not identified any outstanding building code violations or notices of non-compliance relating to the West Jefferson Facility. However, we have not conducted an independent building code compliance review, and we recommend that Meridian consider engaging a qualified inspector to confirm compliance with current applicable building codes and fire codes, particularly given the age of the facility.

E. Real Property Taxes

Current Assessed Value. Based on the most recent Madison County Auditor's records included in the data room, the West Jefferson Facility has a total assessed value of $3,215,000 (consisting of an assessed land value of approximately $685,000 and an assessed improvement value of approximately $2,530,000), reflecting a tax year 2021 assessment.

Annual Real Property Taxes. Annual real property taxes for the West Jefferson Facility are approximately $74,300, based on the most recent tax bills included in the data room. This amount includes county, village, school district, and special district levies. Based on our review, Briarwood is current on all real property tax payments, with no delinquent or unpaid taxes outstanding.

Pending Tax Appeals. We have not identified any pending tax appeals, tax abatements, or tax incentive agreements relating to the West Jefferson Facility in the data room materials, and Seller's counsel has confirmed in response to our diligence request that no such appeals or agreements are pending or in effect.

Tax Proration at Closing. Real property taxes should be prorated between Briarwood and Meridian as of the closing date, with Briarwood responsible for taxes attributable to the period prior to closing and Meridian responsible for taxes attributable to the period from and after closing. The mechanics of the tax proration (including the basis for proration — calendar year, tax year, or due date — and the treatment of any retroactive adjustments) should be addressed in the APA.

F. Condition and Capital Improvements

Age and Condition. The West Jefferson Facility was originally constructed in 2002 and has been in continuous use as a warehouse and distribution facility since that time. Briarwood has occupied the facility since its acquisition in March 2014. Based on our review of the data room materials, the facility appears to be in generally good condition for a building of its age and use, with routine maintenance and periodic capital improvements having been performed during Briarwood's ownership.

Recent Capital Improvements. The data room contains records of the following capital improvements made by Briarwood:

• LED lighting retrofit throughout the warehouse area (completed 2019, approximate cost $110,000)

• Installation of additional pallet racking to increase warehouse capacity (completed 2020, approximate cost $185,000)

• Replacement of three (3) overhead dock levelers and dock seals (completed 2021, approximate cost $67,000)

• Upgrades to the fire suppression sprinkler system, including new sprinkler heads and updated control panel (completed 2021, approximate cost $93,000)

Condition Assessment. The data room does not contain a formal third-party facility condition assessment for the West Jefferson Facility. Based on our review of maintenance records and Briarwood's internal facilities reports, the following condition items have been noted:

• Roof: The original TPO (thermoplastic polyolefin) membrane roof is approximately 20 years old. Briarwood's internal maintenance records note periodic leak repairs in 2019 and 2021. The estimated remaining useful life of the roof, absent a major repair or replacement, is approximately 3-5 years. Roof replacement is estimated to cost approximately $350,000-$450,000.

• HVAC: The office and break room HVAC systems were replaced in 2017 and are in good working condition. The warehouse heating units (gas-fired radiant heaters) are original to the building and are functional but approaching end of useful life.

• Structural: No structural deficiencies or concerns have been identified in the data room materials. The building is a pre-engineered metal building on a concrete slab foundation, which is typical for this type of industrial facility.

• Loading Docks: Three of the twelve dock levelers were replaced in 2021 (as noted above). The remaining nine dock levelers are original to the building and may require replacement or refurbishment in the near term.

Meridian

PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT
This memorandum is a privileged and confidential attorney work product prepared by Calderwood & Harkness LLP in connection with the representation of Meridian Consumer Brands LLC. This memorandum is protected by the attorney-client privilege and the work product doctrine and is not intended for disclosure to any third party. Any disclosure, copying, or distribution of this memorandum without the express prior written consent of Calderwood & Harkness LLP is strictly prohibited.
MEMORANDUM
FROM: Naomi Petersen, Associate, Calderwood & Harkness LLP
TO: Sandra Tung, Responsible Partner; Andrew Fitzpatrick, Lead Associate
DATE: August 15, 2022
RE: Due Diligence Memorandum — Real Property & Leases — Proposed Acquisition of CleanLeaf and PureHaven Product Lines from Briarwood Home Essentials, Inc.
MATTER NO.: 1011-00005
CLIENT: Meridian Consumer Brands LLC
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I. Executive Summary
This memorandum summarizes Calderwood & Harkness LLP's review of the real property and lease arrangements associated with the Acquired Assets in connection with the proposed acquisition by Meridian Consumer Brands LLC ("Meridian" or "Buyer") of the CleanLeaf and PureHaven consumer product lines from Briarwood Home Essentials, Inc. ("Briarwood" or "Seller"). The proposed transaction is structured as an asset purchase, with an aggregate purchase price of approximately $95,000,000 (the "Transaction"). The definitive agreement governing the Transaction is expected to take the form of an Asset Purchase Agreement (the "APA"), which is currently under negotiation between the parties and their respective counsel.
Two real property interests are included in, or directly relevant to, the Acquired Assets:
(1) Marysville Manufacturing Facility (Leased). The manufacturing and production facility located at 2800 Industrial Parkway, Marysville, OH 43040 (the "Marysville Facility") is a leased property. Briarwood occupies the Marysville Facility as tenant under a lease agreement with the landlord, Buckeye Industrial Properties LLC ("Buckeye"). The lease contains an anti-assignment provision that requires the prior written consent of Buckeye before the lease may be assigned to Meridian. As of the date of this memorandum, consent has not yet been requested from, or obtained from, Buckeye. The Marysville Facility serves as the primary manufacturing and production site for the approximately 142 active SKUs comprising the CleanLeaf and PureHaven product lines and is therefore essential to Meridian's continued operation of the acquired business following closing.
(2) West Jefferson Distribution Center (Owned). The warehouse and distribution center located at 500 Commerce Boulevard, West Jefferson, OH 43162 (the "West Jefferson Facility") is owned in fee simple by Briarwood and is included in the Acquired Assets as a fee simple real property transfer. No landlord consent is required for this property. Meridian will receive title to the West Jefferson Facility by deed at closing, subject to standard title and survey diligence, which is currently underway.
Key Findings and Recommendations. The most significant diligence finding with respect to real property is the requirement to obtain the prior written consent of Buckeye Industrial Properties LLC for the assignment of the Marysville lease. The lease language governing the consent standard is somewhat ambiguous, and it is not entirely clear whether the consent standard is "reasonably withheld" or whether the landlord retains broader discretion. This issue is discussed in detail in Section III.C below. Failure to obtain Buckeye's consent would prevent the lawful transfer of the Marysville lease to Meridian as part of the Transaction and would constitute a material impediment to Meridian's ability to operate the CleanLeaf and PureHaven product lines post-closing. Calderwood & Harkness LLP recommends that the landlord consent for the Marysville lease be designated as a condition precedent to closing in the APA and that the consent request be submitted to Buckeye promptly.
The West Jefferson Facility presents a lower risk profile, as it is owned outright by Briarwood and will transfer by deed. Standard title, survey, and zoning diligence is proceeding, and no material issues have been identified to date, although certain items remain open as described in Section IV below.
The materials reviewed in connection with this memorandum were obtained from the Pemberton Systems virtual data room established for this Transaction (Project Code: BHE-CleanLeaf-2022), with access commencing on June 14, 2022. Our review was supplemented by responses to diligence requests submitted to Seller's counsel, Caldwell, Pruitt & Shaw LLP (Rachel Underwood, Partner, and David Soo, Associate), received on various dates between June 28, 2022 and August 9, 2022.
This memorandum is current as of August 15, 2022. Certain diligence items remain open as described herein, and supplemental memoranda may be issued as additional information is received.
II. Scope and Methodology
The scope of this memorandum is limited to the real property and lease arrangements directly associated with the Acquired Assets in the proposed Transaction. Specifically, we have undertaken the following review and coordination activities:
Document Review. We reviewed all documents posted to the Pemberton Systems data room (Project Code: BHE-CleanLeaf-2022) under the "Real Property" category (Folder 4.0 and all subfolders), including the following categories of materials:
• Lease agreements, amendments, and modifications;
• Landlord-tenant correspondence, including notices, rent escalation letters, and maintenance requests;
• Property tax records, assessments, and tax payment histories;
• Title documents, including deeds, title commitments, and prior title insurance policies;
• Surveys, including ALTA/NSPS land title surveys and boundary surveys;
• Insurance certificates and declarations pages for property and liability insurance policies;
• Inspection reports, maintenance logs, and capital improvement records;
• Zoning compliance documentation, including certificates of occupancy and zoning confirmations; and
• Environmental reports and correspondence (to the extent available in the data room; environmental matters are addressed in a separate memorandum).
A complete index of the documents reviewed is attached as Exhibit B to this memorandum.
Ohio Real Property Law. We reviewed applicable provisions of Ohio statutory and case law relevant to lease assignment, landlord consent requirements, anti-assignment clauses, the standard of reasonableness applicable to landlord consent, fee simple conveyance requirements, and related matters. Our analysis of Ohio law is incorporated into the relevant sections of this memorandum.
Environmental Coordination. We coordinated with Terrapoint Environmental Group, Inc. ("Terrapoint") (Keith Novak, Project Manager) regarding the Phase I Environmental Site Assessment ("Phase I ESA") for the Marysville Facility. As of the date of this memorandum, the Phase I ESA report has not yet been delivered. We have been informed by Mr. Novak that the report is expected to be completed in early September 2022. (Note: The Phase I ESA report was subsequently delivered on September 2, 2022 as Report No. TEG-2022-0441.) Environmental findings associated with the Marysville Facility, as well as any environmental diligence for the West Jefferson Facility, will be addressed in a separate Environmental Due Diligence Memorandum, which is expected to be issued on or about September 8, 2022.
Financial Coordination. We coordinated with Whitfield Ames LLP (Susan Clearwater, Engagement Partner) regarding financial aspects of the lease obligations associated with the Marysville Facility and the owned real property carrying costs associated with the West Jefferson Facility. Financial diligence findings are addressed in a separate Financial Due Diligence Memorandum.
Exclusions. This memorandum does not cover the following:
• The corporate headquarters lease at 1175 Creekside Drive, Suite 400, Columbus, OH 43215, which is an Excluded Asset to be retained by Briarwood following closing. Briarwood's corporate headquarters supports the entirety of Briarwood's operations, including the retained Commercial Janitorial Services Division, and is not specific to the CleanLeaf or PureHaven product lines.
• Environmental conditions at the Marysville Facility or the West Jefferson Facility, which are addressed in the separate Environmental Due Diligence Memorandum referenced above.
• Personal property, fixtures, equipment, and machinery located at the Marysville Facility and the West Jefferson Facility, which are addressed in the Personal Property and Equipment Due Diligence Memorandum.
• Employee matters, including the approximately 186 transferring employees, which are addressed in the Employment and Benefits Due Diligence Memorandum.
III. Property #1: Marysville Manufacturing Facility (Leased)
A. Property Description
The Marysville Facility is located at 2800 Industrial Parkway, Marysville, OH 43040, in Union County, Ohio. The facility is situated within the Marysville Industrial Park, a multi-parcel industrial development with access to State Route 36 and U.S. Route 33, providing convenient transportation linkages to the Columbus metropolitan area and the broader central Ohio logistics corridor.
Type. The Marysville Facility is a manufacturing and production facility that has been the primary production site for both the CleanLeaf line of home cleaning products and the PureHaven line of personal care products since approximately 2012. The facility includes manufacturing process areas, quality control laboratories, raw material storage, finished goods staging areas, administrative offices, and employee amenities.
Approximate Size. Based on documents reviewed in the data room, the Marysville Facility comprises approximately 185,000 square feet of total building area, allocated approximately as follows:
• Manufacturing and production floor: approximately 112,000 square feet
• Quality control and laboratory space: approximately 8,500 square feet
• Raw materials and finished goods warehousing: approximately 38,000 square feet
• Administrative and office space: approximately 18,500 square feet
• Employee break rooms, locker rooms, and common areas: approximately 8,000 square feet
The facility is situated on a parcel of approximately 14.2 acres and includes four truck-height loading docks, a paved employee parking lot with capacity for approximately 220 vehicles, and dedicated access roads within the industrial park.
Current Use. The Marysville Facility is the primary manufacturing facility for the approximately 142 active SKUs across the CleanLeaf and PureHaven product lines. The facility operates on a two-shift production schedule, Monday through Friday, with periodic weekend production runs during peak demand periods. The facility houses multiple production lines, including liquid filling and packaging lines, aerosol filling and packaging lines, and dry product blending and packaging lines. Based on our review of the data room materials, all production of CleanLeaf and PureHaven products is conducted at the Marysville Facility; no third-party contract manufacturing is currently employed for the product lines.
Employees at Facility. A significant portion of the approximately 186 employees expected to transfer to Meridian in connection with the Transaction are located at or report to the Marysville Facility. Based on our review of the employee roster included in the data room, approximately 134 of the 186 transferring employees are based at the Marysville Facility, including production operators, quality assurance technicians, maintenance personnel, warehouse workers, shift supervisors, and a portion of the administrative and management staff.
B. Lease Terms — Summary
The following summarizes the key commercial terms of the lease for the Marysville Facility based on our review of the original lease agreement and subsequent amendments posted to the Pemberton Systems data room.
Landlord: Buckeye Industrial Properties LLC, a Delaware limited liability company, with its principal office at 77 East Nationwide Boulevard, Suite 200, Columbus, OH 43215. Based on publicly available records, Buckeye Industrial Properties LLC is a privately held real estate investment and management company that owns and operates a portfolio of industrial properties in central Ohio. We have identified the primary contact at Buckeye as Thomas Reinhart, Managing Member, although no direct communications have been made with Buckeye as of the date of this memorandum.
Tenant: Briarwood Home Essentials, Inc., an Ohio corporation.
Original Lease Date: The original lease agreement (the "Original Lease") was executed on April 22, 2010, with a lease commencement date of July 1, 2010. The Original Lease has been amended three times:
• First Amendment to Lease, dated March 15, 2013 (the "First Amendment"), which expanded the leased premises to include an additional approximately 22,000 square feet of warehouse space in the adjacent Building B annex and adjusted the base rent accordingly.
• Second Amendment to Lease, dated November 8, 2016 (the "Second Amendment"), which extended the lease term for an additional five years through June 30, 2026, modified the rent escalation provisions, and updated the landlord's address for notices.
• Third Amendment to Lease, dated February 1, 2020 (the "Third Amendment"), which modified the permitted use clause to include "personal care product manufacturing" in addition to the originally permitted uses, revised certain insurance requirements, and confirmed the tenant's exercise of the first renewal option.
The Original Lease, as modified by the First Amendment, the Second Amendment, and the Third Amendment, is collectively referred to herein as the "Marysville Lease."
Current Term. The current lease term expires on June 30, 2026, representing approximately three years and ten months of remaining term as of the date of this memorandum. The current term reflects the five-year extension effected by the Second Amendment and the first renewal option exercised pursuant to the Third Amendment.
Renewal Options. The Marysville Lease originally provided for two consecutive five-year renewal options, exercisable at the tenant's election upon not less than twelve months' prior written notice to the landlord before the expiration of the then-current term. The first renewal option was exercised by Briarwood effective as of the Third Amendment. Accordingly, one five-year renewal option remains available, which, if exercised, would extend the lease term through June 30, 2031. The renewal option is personal to the tenant and is subject to the condition that no event of default exists at the time of exercise. We note that the assignability of the remaining renewal option to Meridian should be confirmed as part of the landlord consent process.
Base Rent. The current annual base rent under the Marysville Lease is $1,221,000 ($101,750 per month), which reflects a rate of approximately $6.60 per square foot per annum. Base rent is subject to annual escalation of 2.5% per annum on each July 1 anniversary of the lease commencement date, as modified by the Second Amendment. The rent escalation provision in the Original Lease was tied to the Consumer Price Index (CPI-U, All Urban Consumers, Midwest Region), with a floor of 2.0% and a cap of 4.0%. The Second Amendment replaced the CPI-based escalation with a fixed annual escalation of 2.5%, effective beginning with the July 1, 2017 escalation date.
Additional Rent / Operating Expenses. The Marysville Lease is structured as a triple-net lease (NNN). In addition to base rent, the tenant is responsible for paying the following costs as additional rent:
• Real Estate Taxes: The tenant is responsible for all real estate taxes, assessments, and governmental charges levied against the leased premises. Real estate taxes are payable directly by the tenant to the applicable taxing authority or, at the landlord's election, reimbursed to the landlord. Based on the most recent tax records reviewed in the data room, annual real estate taxes for the Marysville Facility are approximately $187,400.
• Insurance: The tenant is responsible for obtaining and maintaining all required insurance coverages as described in Section III.E below, at the tenant's sole cost and expense.
• Common Area Maintenance (CAM): The tenant is responsible for its proportionate share of common area maintenance costs for the Marysville Industrial Park, including parking lot maintenance, landscaping, snow removal, and shared utility infrastructure. CAM charges are reconciled annually and are currently estimated at approximately $42,000 per annum, based on the most recent reconciliation statement included in the data room.
• Utilities: The tenant is responsible for all utility costs associated with the leased premises, including electricity, natural gas, water, sewer, and telecommunications services.
Security Deposit. The Marysville Lease requires a security deposit in the amount of $203,500, which represents approximately two months of base rent at the time of lease execution. Based on our review of data room correspondence, Buckeye is currently holding the security deposit. The Marysville Lease provides that the security deposit shall be returned to the tenant within sixty days following the expiration or termination of the lease, less any amounts applied by the landlord against unpaid rent or damages. The treatment of the security deposit in connection with the assignment to Meridian (i.e., whether Buckeye will credit the existing deposit to Meridian's account or whether Meridian will be required to post a new or increased deposit) should be addressed as part of the landlord consent negotiation.
Permitted Use. As amended by the Third Amendment, the permitted use under the Marysville Lease includes "manufacturing, production, storage, packaging, and distribution of consumer home cleaning products and personal care products, and related research, development, quality control, administrative, and ancillary uses." The permitted use is generally consistent with Meridian's intended post-closing operations of the CleanLeaf and PureHaven product lines, although Meridian should confirm that any anticipated changes in product mix or production processes would fall within the scope of the permitted use clause.
C. Assignment and Subletting Provisions
The assignment and subletting provisions of the Marysville Lease are set forth primarily in Section 14 of the Original Lease, as supplemented by additional provisions in the First Amendment and Second Amendment. These provisions are critical to the Transaction because the transfer of the Marysville Lease from Briarwood to Meridian constitutes an "assignment" of the lease for purposes of Section 14.
Anti-Assignment Clause. Section 14.1 of the Marysville Lease provides, in relevant part:
"Tenant shall not assign this Lease, or any interest herein, or sublet the Premises or any part thereof, or permit the use or occupancy of the Premises or any part thereof by any party other than Tenant, without the prior written consent of Landlord."
This provision clearly prohibits Briarwood from assigning the Marysville Lease to Meridian without first obtaining the written consent of Buckeye.
Consent Standard. Section 14.2 of the Original Lease provides the following with respect to the standard governing landlord consent:
"Landlord's consent to any assignment or subletting shall be granted or withheld in Landlord's reasonable discretion, and Landlord shall not unreasonably withhold, condition, or delay such consent; provided, however, that it shall be deemed reasonable for Landlord to withhold consent if (a) the proposed assignee or subtenant does not, in Landlord's reasonable judgment, possess the financial capability to perform the obligations of the Tenant under this Lease, (b) the proposed assignee or subtenant intends to use the Premises for a purpose other than the Permitted Use, (c) an Event of Default exists under this Lease at the time of the request for consent, or (d) the proposed assignment or subletting would violate any applicable law, governmental regulation, or other agreement binding upon Landlord or the Premises."
The inclusion of the "not unreasonably withhold, condition, or delay" standard is favorable to Meridian. However, the qualification in subclauses (a) through (d) provides Buckeye with enumerated grounds upon which withholding of consent would be deemed reasonable. In particular, subclause (a) requires that the proposed assignee demonstrate financial capability to perform the tenant's obligations under the Lease. Calderwood & Harkness LLP recommends that, in connection with the consent request, Meridian be prepared to provide Buckeye with financial statements, a corporate overview, and such other information as Buckeye may reasonably require to evaluate Meridian's financial capability and creditworthiness. Based on our understanding of Meridian's financial position, including the committed $60,000,000 term loan facility from Harborview National Bank, N.A. and Meridian's existing balance sheet, we do not anticipate that Meridian's financial capability should be a material impediment to obtaining consent.
Change of Control Provision. Section 14.3 of the Marysville Lease provides that a "Change of Control" of the tenant shall be deemed an assignment requiring the landlord's prior written consent. "Change of Control" is defined as "(i) any transfer, by sale, merger, consolidation, or otherwise, of more than fifty percent (50%) of the voting equity interests of Tenant, or (ii) the sale or transfer of all or substantially all of the assets of Tenant." While the Transaction is structured as an asset purchase of specific product lines rather than a transfer of "all or substantially all" of Briarwood's assets (since Briarwood is retaining the Commercial Janitorial Services Division), the Change of Control provision may nevertheless be applicable. We recommend that the consent request explicitly address the Change of Control provision and clarify the nature of the Transaction to Buckeye to avoid any ambiguity.
Recapture Right. Section 14.4 of the Marysville Lease grants the landlord a recapture right. Specifically, upon receipt of a request for consent to assignment, Buckeye has the right, exercisable within thirty (30) days of receipt of the request, to terminate the Marysville Lease as of a date specified by Buckeye (not less than ninety (90) days and not more than one hundred eighty (180) days following notice of termination) in lieu of consenting to the assignment. The recapture right is a significant provision and represents a material risk to the Transaction. If Buckeye were to exercise the recapture right, Briarwood would lose its leasehold interest in the Marysville Facility, and Meridian would be unable to acquire the lease as part of the Acquired Assets. We note, however, that the exercise of the recapture right is relatively uncommon in practice where the proposed assignee is creditworthy and intends to continue the same use, as the landlord would lose a paying tenant without a guaranteed replacement. Calderwood & Harkness LLP recommends that the consent request be accompanied by sufficient information about Meridian's creditworthiness and intended use to discourage exercise of the recapture right.
Consent Fee / Transfer Fee. Section 14.5 of the Marysville Lease provides that, as a condition to any consent to assignment, the tenant shall reimburse the landlord for its reasonable out-of-pocket costs and expenses incurred in connection with the review and processing of the assignment request, including reasonable attorneys' fees, in an amount not to exceed $15,000. In addition, Section 14.5 provides that the landlord shall be entitled to receive a transfer fee equal to one-half of one percent (0.5%) of the "Assignment Consideration," defined as the total consideration paid or payable by the assignee to the tenant in connection with the assignment. The application of this transfer fee provision to the Transaction is ambiguous, as the assignment of the Marysville Lease is only one component of the broader asset purchase, and the APA does not allocate a specific portion of the $95,000,000 purchase price to the lease assignment. We recommend that this provision be carefully addressed in the consent negotiation and that the parties agree upon an allocated value for purposes of calculating any transfer fee, or negotiate a fixed lump-sum transfer fee in lieu of the formula-based fee.
Recommendation. Landlord consent must be obtained from Buckeye Industrial Properties LLC prior to closing. Calderwood & Harkness LLP strongly recommends that the consent of Buckeye be identified as a condition precedent to closing in the Asset Purchase Agreement. We further recommend that the consent request be prepared and submitted to Buckeye as soon as practicable, in order to allow adequate time for Buckeye to review the request, evaluate Meridian's financial information, and respond within the thirty-day recapture period and any additional time required for negotiation of consent terms. Based on our experience with similar transactions, the consent process typically requires four to eight weeks from initial request to execution of a consent letter or consent agreement.
(Note: The consent request was subsequently sent to Buckeye Industrial Properties LLC on October 7, 2022. As of the date of the Deal Status Memorandum, no response had been received from Buckeye. This matter remains a critical open item.)
D. Condition and Maintenance Obligations
Tenant Maintenance and Repair. Under the terms of the Marysville Lease, the tenant is responsible for the maintenance, repair, and upkeep of the leased premises, including the building structure, roof, HVAC systems, plumbing, electrical systems, loading docks, parking areas, and landscaping within the tenant's leased area. The landlord's maintenance obligations are limited to structural components of the building (foundation and load-bearing walls) and the common areas of the Marysville Industrial Park. This allocation of maintenance responsibility is consistent with a triple-net lease structure and places the majority of the maintenance burden on the tenant. Meridian should be aware that, as assignee, it will assume these maintenance obligations and should evaluate the current condition of the facility and any deferred maintenance issues.
Capital Improvements and Alterations. Section 8 of the Marysville Lease governs tenant alterations to the leased premises. The tenant may make non-structural alterations costing less than $50,000 per occurrence without landlord consent, provided that the tenant provides written notice to the landlord at least fifteen (15) days prior to commencing the work. Structural alterations, and non-structural alterations costing $50,000 or more, require the landlord's prior written consent, which shall not be unreasonably withheld. All alterations become the property of the landlord upon installation, unless the landlord elects to require the tenant to remove the alterations and restore the premises upon lease expiration or termination.
Based on our review of the data room materials, Briarwood has made several capital improvements to the Marysville Facility during its tenancy, including the installation of a new air handling and ventilation system in the manufacturing area (completed 2018, approximate cost $420,000), the upgrade of the electrical service and power distribution panels (completed 2019, approximate cost $175,000), and the buildout of the quality control laboratory space (completed 2020, approximate cost $230,000). Landlord consent letters for each of these improvements were included in the data room. There are no indications in the data room materials that any of these improvements were made without required landlord consent.
Condition of Facility. The data room contains a facility condition assessment report dated January 2021 prepared by Briarwood's internal facilities management team. The report rates the overall condition of the Marysville Facility as "Good" with some areas rated "Fair," including the original HVAC units serving the office and administrative areas (original 2008 installation, approaching end of useful life) and the asphalt paving in the employee parking lot (showing surface deterioration and cracking). The report estimates that approximately $340,000 in capital maintenance expenditures would be required over the next three to five years to address deferred maintenance items, including HVAC replacement for the office areas (estimated $185,000), parking lot resurfacing (estimated $95,000), and miscellaneous roof repairs (estimated $60,000). Meridian should evaluate whether to seek a seller credit or escrow for these deferred maintenance items as part of the APA negotiation or factor these anticipated costs into its economic analysis of the Transaction.
Environmental Condition. The environmental condition of the Marysville Facility is being separately assessed by Terrapoint Environmental Group, Inc. through a Phase I Environmental Site Assessment. As of the date of this memorandum, the Phase I ESA report has not been received. The results of the Phase I ESA, and any recommendations for further investigation (including a potential Phase II ESA), will be addressed in a separate Environmental Due Diligence Memorandum. We note that the Marysville Facility is used for the manufacture of consumer cleaning products and personal care products, which involves the handling and storage of various chemical raw materials. The environmental implications of these operations, including any issues related to hazardous materials handling, storage, and disposal, are within the scope of the Terrapoint assessment.
E. Insurance and Indemnification
Tenant Insurance Requirements. Section 10 of the Marysville Lease requires the tenant to obtain and maintain the following insurance coverages throughout the lease term, at the tenant's sole cost and expense:
• Commercial General Liability Insurance: Coverage of not less than $2,000,000 per occurrence and $5,000,000 in the annual aggregate, covering bodily injury, personal injury, and property damage arising from the tenant's occupancy and use of the premises. The policy must name the landlord as an additional insured.
• Property Insurance (All Risk): Coverage of the tenant's personal property, trade fixtures, equipment, and inventory located at the premises, and coverage for the full replacement cost of any tenant improvements and alterations, on an "all risk" or "special form" basis.
• Worker's Compensation Insurance: Coverage as required by Ohio law, including employer's liability coverage with limits of not less than $1,000,000 per occurrence.
• Business Interruption Insurance: Coverage for loss of business income and extra expense, in an amount sufficient to cover the tenant's lost income and continuing expenses for a period of not less than twelve (12) months.
• Umbrella/Excess Liability Insurance: Coverage of not less than $5,000,000 per occurrence and in the aggregate, in excess of the commercial general liability and employer's liability policies.
All insurance policies must be issued by insurers rated not less than "A-, VIII" by A.M. Best Company and must provide that the policies may not be cancelled or materially modified without at least thirty (30) days' prior written notice to the landlord.
Indemnification. Section 11 of the Marysville Lease contains a broad indemnification and hold harmless provision pursuant to which the tenant indemnifies, defends, and holds harmless the landlord from and against any and all claims, damages, losses, liabilities, costs, and expenses (including reasonable attorneys' fees) arising out of or relating to the tenant's use, occupancy, or operation of the premises, except to the extent caused by the landlord's gross negligence or willful misconduct. This indemnification obligation survives the expiration or termination of the lease.
Current Insurance Status. Based on the certificates of insurance posted to the data room, Briarwood currently maintains insurance coverages that meet or exceed the lease requirements. Briarwood's insurance program is underwritten by Brindoval Mutual Insurance Company and administered through Pennfield & Associates Insurance Brokers. The current commercial general liability policy (Policy No. CGL-BHE-2021-0098) provides limits of $3,000,000 per occurrence and $6,000,000 aggregate, which exceeds the lease requirements. Worker's compensation coverage is provided through the Ohio Bureau of Workers' Compensation State Insurance Fund, with an employer's liability endorsement providing limits of $1,000,000 per occurrence.
Post-Closing Insurance Transition. Following closing, Meridian will need to arrange replacement or endorsement of all required insurance policies in Meridian's name, effective as of the closing date. Meridian should coordinate with its insurance broker to ensure that coverage is in place at closing and that certificates of insurance naming Buckeye as additional insured are delivered in connection with the lease assignment. The APA should include a covenant requiring Meridian to obtain and maintain insurance meeting the requirements of the Marysville Lease effective as of the closing date.
F. Default and Termination Provisions
Events of Default. Section 16 of the Marysville Lease sets forth the events that constitute an "Event of Default" by the tenant, including:
(a) Failure to pay base rent or additional rent within ten (10) days after the due date, provided that the tenant shall have received written notice of the delinquency and shall have failed to cure within an additional five (5) business days after receipt of such notice (total cure period of approximately 15 days);
(b) Breach of any non-monetary covenant, condition, or obligation under the Lease, if such breach continues for a period of thirty (30) days after written notice from the landlord; provided that if such breach cannot reasonably be cured within thirty (30) days, the tenant shall not be in default if the tenant commences the cure within the thirty-day period and diligently prosecutes the cure to completion, so long as the cure is completed within ninety (90) days of the original notice;
(c) The filing of a voluntary petition in bankruptcy by the tenant, or the filing of an involuntary petition in bankruptcy against the tenant that is not dismissed within sixty (60) days, or the appointment of a receiver or trustee for the tenant's assets, or the making of a general assignment for the benefit of creditors by the tenant;
(d) The assignment, subletting, or other transfer of the Lease or the premises, or any interest therein, without the prior written consent of the landlord as required by Section 14; and
(e) The abandonment or vacation of the premises by the tenant for a period of thirty (30) consecutive days without the landlord's prior written consent.
Significance of Unauthorized Assignment. As noted in subclause (d) above, an assignment of the Marysville Lease without Buckeye's prior written consent would constitute an Event of Default. This reinforces the critical importance of obtaining landlord consent prior to closing. An unconsented assignment would not only violate the terms of the Lease but would also give Buckeye the right to terminate the Lease and exercise all remedies available to it under the default provisions.
Landlord Remedies. Upon the occurrence of an Event of Default, Section 17 of the Marysville Lease provides the landlord with the following remedies:
• Termination of the Lease upon written notice to the tenant, effective immediately or upon a date specified by the landlord;
• Re-entry and repossession of the premises, with or without termination of the Lease;
• Recovery of all unpaid rent and additional rent accrued through the date of termination;
• Recovery of damages equal to the present value (Discounted at the rate of 6% per annum) of the rent and additional rent that would have been payable for the remainder of the lease term, less the fair market rental value of the premises for such period;
• Recovery of reasonable attorneys' fees and costs of collection; and
• Any other remedies available to the landlord at law or in equity.
Existing Defaults. Based on our review of the data room materials, including landlord correspondence and rent payment records, we have not identified any existing or uncured Events of Default under the Marysville Lease. Briarwood appears to be current on all rent and additional rent obligations and in compliance with the material covenants of the Lease. However, we recommend that a landlord estoppel certificate be obtained in connection with closing to confirm the absence of any existing defaults and to provide Meridian with contractual assurance from Buckeye on this point.
G. Other Material Provisions
Purchase Option. The Marysville Lease does not contain a purchase option or option to acquire the fee interest in the premises. Meridian will have no contractual right to purchase the Marysville Facility under the terms of the Lease.
Right of First Refusal. Section 19.2 of the Marysville Lease grants the tenant a right of first refusal on any proposed sale of the property by the landlord to a third party. If Buckeye receives a bona fide written offer from a third party to purchase the property and desires to accept such offer, Buckeye must first provide written notice to the tenant, together with a copy of the third-party offer. The tenant has thirty (30) days from receipt of the notice to elect to purchase the property on the same terms and conditions as set forth in the third-party offer. If the tenant does not exercise the right of first refusal within the thirty-day period, the landlord may proceed with the sale to the third party on terms no more favorable to the third party than those set forth in the offer. The assignability of this right of first refusal to Meridian should be confirmed as part of the landlord consent process.
Subordination, Non-Disturbance, and Attornment (SNDA). Section 20 of the Marysville Lease contains a subordination provision pursuant to which the tenant agrees that the Lease is and shall be subordinate to any mortgage, deed of trust, or other encumbrance now or hereafter placed upon the property by the landlord, provided that the holder of such mortgage or encumbrance agrees to honor the Lease and the tenant's rights thereunder in the event of a foreclosure or other exercise of remedies (a "non-disturbance" agreement). The data room contains a Subordination, Non-Disturbance, and Attornment Agreement (the "SNDA") dated September 14, 2016, between Briarwood (as tenant), Buckeye (as landlord), and Central Ohio Federal Savings Bank (as lender), which was executed in connection with a refinancing of Buckeye's mortgage on the property. Calderwood & Harkness LLP recommends confirming whether the SNDA remains in effect and whether Central Ohio Federal Savings Bank (or any successor lender) continues to hold a mortgage on the property. If the existing SNDA is no longer in effect or if Buckeye has refinanced with a different lender, Meridian should request a new SNDA from the current mortgagee as part of the consent and closing process.
Estoppel Certificate. Section 21 of the Marysville Lease obligates each party, within fifteen (15) days after written request from the other party, to deliver a written estoppel certificate confirming the following: (i) the Lease is in full force and effect and has not been modified except as stated in the certificate; (ii) the dates through which base rent and additional rent have been paid; (iii) whether any Event of Default exists under the Lease, and if so, the nature of such default; (iv) the amount of any security deposit held by the landlord; and (v) such other matters as may be reasonably requested. Calderwood & Harkness LLP recommends that an estoppel certificate be requested from Buckeye in connection with the closing, both to confirm the status of the Lease and to provide Meridian and its lender with third-party confirmation of the Lease terms.
Hazardous Materials. Section 22 of the Marysville Lease contains provisions governing the use, handling, storage, and disposal of hazardous materials on the premises. The tenant is required to comply with all applicable environmental laws and regulations, to provide the landlord with notice of any release or threat of release of hazardous materials, and to indemnify the landlord against any losses arising from the tenant's use or release of hazardous materials on the premises. A detailed analysis of these provisions and their interaction with the Transaction documents will be included in the separate Environmental Due Diligence Memorandum.
H. Risk Assessment — Marysville Facility
Key Risk: Landlord Consent. The requirement to obtain Buckeye Industrial Properties LLC's consent to the assignment of the Marysville Lease is the most significant risk item identified in our real property due diligence. The Marysville Facility is the sole manufacturing site for the CleanLeaf and PureHaven product lines, and the loss of access to this facility would materially impair — and likely prevent — Meridian's ability to operate the acquired business following closing. There is no readily available alternative manufacturing facility that could be identified and brought online within a reasonable timeframe to replace the Marysville Facility.
We assess the likelihood of obtaining landlord consent as moderate to high, based on the following factors: (i) the consent standard in the Lease (not unreasonably withheld) is favorable to the tenant; (ii) Meridian is expected to be a creditworthy assignee with adequate financial resources; (iii) the intended use of the premises will remain unchanged; and (iv) landlords generally prefer to consent to assignments to creditworthy tenants rather than risk vacancy. However, the following countervailing factors introduce uncertainty: (i) the landlord's recapture right, which allows Buckeye to terminate the Lease in lieu of consenting; (ii) the potential transfer fee, which may require negotiation; (iii) Buckeye's potential interest in negotiating more favorable lease terms as a condition of consent (so-called "consent extortion"); and (iv) the possibility that Buckeye may condition consent on Meridian's agreement to an increased security deposit, personal guarantee, or other credit enhancement.
Recommendation. Calderwood & Harkness LLP recommends the following:
• The APA should include the landlord consent as a condition precedent to closing, both for the benefit of Meridian (which should not be obligated to close without a valid lease) and for the benefit of Briarwood (which should not be exposed to an Event of Default arising from an unconsented assignment).
• Alternative structures should be evaluated and available as contingency measures if consent cannot be obtained on acceptable terms. Potential alternatives include: (a) a sublease from Briarwood to Meridian, which may also require landlord consent under the terms of the Lease; (b) an operating or management arrangement under which Briarwood retains the lease and provides manufacturing services to Meridian pursuant to a contract manufacturing or tolling agreement; or (c) a license or occupancy arrangement under which Meridian occupies the premises under Briarwood's continued tenancy. Each of these alternatives has significant legal, tax, and operational implications and would require further analysis.
• The consent request should be submitted to Buckeye as soon as practicable, accompanied by comprehensive information regarding Meridian's financial condition, business operations, intended use of the premises, and the structure of the Transaction.
Shared-Use Considerations. We note that Briarwood is retaining its Commercial Janitorial Services Division following the Transaction. Based on our review of the data room materials, the Marysville Facility appears to be dedicated exclusively to the CleanLeaf and PureHaven product lines and is not shared with the Commercial Janitorial Services Division. However, this should be confirmed with Seller's counsel. If any portion of the Marysville Facility is used by or allocated to the retained Commercial Janitorial Services Division, the lease assignment will need to address the separation of operations and the potential need for Briarwood to continue to occupy a portion of the premises during a transitional period, which should be addressed in the Transition Services Agreement.
Environmental Risk. As noted above, the environmental risk profile of the Marysville Facility will be assessed upon receipt of the Phase I ESA report from Terrapoint Environmental Group, Inc. Until such report is received and reviewed, we are unable to make a final assessment of environmental risk at this property.
IV. Property #2: West Jefferson Distribution Center (Owned)
A. Property Description
The West Jefferson Facility is located at 500 Commerce Boulevard, West Jefferson, OH 43162, in Madison County, Ohio. The facility is situated in an industrial and commercial corridor along Commerce Boulevard with convenient access to Interstate 70, one of the primary east-west freight corridors in the Midwest, and is approximately 25 miles west of downtown Columbus.
Type. The West Jefferson Facility is a warehouse and distribution center that serves as the central hub for the warehousing, staging, and distribution of finished CleanLeaf and PureHaven products to Briarwood's customer accounts.
Approximate Size. Based on data room records, the West Jefferson Facility comprises approximately 128,000 square feet of total building area, allocated approximately as follows:
• High-bay racked warehouse storage: approximately 96,000 square feet
• Shipping and receiving staging area: approximately 18,000 square feet
• Office and administrative space: approximately 9,500 square feet
• Employee break room and common areas: approximately 4,500 square feet
The facility includes twelve truck-height loading docks, two drive-in loading doors, and is situated on a parcel of approximately 11.8 acres. The parcel includes paved truck maneuvering areas, trailer staging/drop yard space, and an employee parking lot with capacity for approximately 85 vehicles.
Current Use. The West Jefferson Facility serves as the central warehousing and distribution facility for finished CleanLeaf and PureHaven products. Products manufactured at the Marysville Facility are transported to the West Jefferson Facility for warehousing and subsequent distribution to Briarwood's customer accounts. Based on data room materials, the West Jefferson Facility ships to the 23 customer accounts under assigned contracts that are included in the Acquired Assets, including major retail and wholesale customers. The facility operates a single shift, Monday through Friday, with additional shifts during peak shipping periods.
Ownership. The West Jefferson Facility is owned in fee simple by Briarwood Home Essentials, Inc. Based on our review of the deed records in the data room, Briarwood acquired the property on March 18, 2014 by General Warranty Deed from JPR Development Co., LLC, recorded in the Madison County Recorder's Office as Instrument No. 201403002874, Book 614, Page 442. The purchase price paid by Briarwood was $4,850,000.
Included in Acquired Assets. The West Jefferson Facility is included in the Acquired Assets and will be conveyed to Meridian by deed at closing. No landlord consent or third-party approval is required for the conveyance, subject to the satisfaction of standard title requirements, the release of any existing mortgages or liens, and the payment of applicable transfer taxes.
B. Title Review
Title Commitment. We have reviewed a preliminary title commitment issued by Fidelity Land Title Agency of Central Ohio (Commitment No. FLT-2022-05177, effective date July 22, 2022), which confirms that title to the West Jefferson Facility is vested in Briarwood Home Essentials, Inc. as fee simple owner of record.
Vesting. Title is vested in "Briarwood Home Essentials, Inc., an Ohio corporation," consistent with Briarwood's corporate formation and good standing in the State of Ohio. We have confirmed that the vesting entity is the same legal entity that is the Seller under the proposed APA.
Recorded Encumbrances. The title commitment identifies the following recorded encumbrances against the property:
(a) Mortgage. First Mortgage and Security Agreement dated March 18, 2014, granted by Briarwood Home Essentials, Inc. in favor of First Heartland Bank & Trust, in the original principal amount of $3,400,000, recorded as Instrument No. 201403002876, Book 614, Page 458. Based on our review of the data room materials, including loan statements and payoff correspondence, the current outstanding balance on this mortgage is approximately $1,870,000 as of June 30, 2022. This mortgage must be released or paid off at closing in order to convey clear title to Meridian. Calderwood & Harkness LLP recommends that Seller's counsel obtain a payoff letter and release commitment from First Heartland Bank & Trust in advance of closing.
(b) Utility Easement. Easement granted to Vireo Holdings ("AEP") for the installation, maintenance, and operation of overhead and underground electrical transmission and distribution facilities, dated September 12, 2003, recorded as Instrument No. 200309001422, Book 578, Page 224. The easement runs along the northern boundary of the parcel and is ten (10) feet in width. This easement is a standard utility easement and is not expected to interfere with the current or planned use of the property.
(c) Drainage Easement. Easement granted to Madison County for stormwater drainage purposes, dated September 12, 2003, recorded as Instrument No. 200309001423, Book 578, Page 229. The easement runs along the eastern boundary of the parcel and is fifteen (15) feet in width. This easement is a standard public drainage easement and is not expected to interfere with the current or planned use of the property.
(d) Restrictive Covenants. Declaration of Covenants, Conditions, and Restrictions for the Commerce Boulevard Industrial Park, dated June 4, 2001, recorded as Instrument No. 200106000988, Book 565, Page 112 (the "CC&Rs"). The CC&Rs impose various restrictions on the use and development of properties within the Commerce Boulevard Industrial Park, including requirements relating to building setbacks, signage, landscaping, exterior appearance, and prohibited uses. Based on our review of the CC&Rs, the current use of the property as a warehouse and distribution center is a permitted use, and we have not identified any provisions of the CC&Rs that would prohibit or restrict Meridian's intended post-closing operations. The CC&Rs also establish a property owners' association (the Commerce Boulevard Industrial Park Property Owners' Association) that collects annual assessments for common area maintenance. Current annual assessments are approximately $8,200 per year.
Recommendation. Calderwood & Harkness LLP recommends the following with respect to title:
• Meridian should obtain an owner's title insurance policy from Fidelity Land Title Agency of Central Ohio (or another nationally recognized title insurer acceptable to Meridian) in an amount equal to the allocated purchase price of the West Jefferson Facility, insuring Meridian's fee simple title to the property subject only to the Permitted Encumbrances as defined in the APA.
• If Harborview National Bank, N.A. requires a lien on the West Jefferson Facility as collateral for the $60,000,000 senior secured term loan facility, a lender's title insurance policy will also need to be obtained in favor of Harborview.
• The existing mortgage in favor of First Heartland Bank & Trust must be released at or prior to closing. Seller's counsel should be instructed to obtain a payoff letter and arrange for the delivery of a recorded release of mortgage at closing.
• The standard utility and drainage easements and the CC&Rs should be included in the Schedule of Permitted Encumbrances under the APA.
C. Survey
Existing Survey. The data room contains an ALTA/NSPS Land Title Survey of the property dated April 2, 2014, prepared by Meridian Surveying & Engineering, Inc. (Survey No. MSE-2014-0322). The survey was prepared in connection with Briarwood's acquisition of the property in 2014 and depicts the property boundaries, building footprint, parking areas, loading docks, easements, setback lines, utility locations, and access points.
Review Findings. Based on our review of the 2014 survey, we have not identified any material boundary disputes, encroachments, or access issues. The building footprint and improvements appear to be located within the property boundaries and comply with the applicable setback requirements under the CC&Rs and the local zoning ordinance. The utility and drainage easements identified in the title commitment are depicted on the survey in locations consistent with the recorded easement documents.
Recommendation. The 2014 survey is more than eight years old as of the date of this memorandum. Calderwood & Harkness LLP recommends that Meridian consider obtaining an updated ALTA/NSPS Land Title Survey, particularly if: (i) Harborview National Bank, N.A. requires a current survey as a condition of its financing; (ii) any improvements or site modifications have been made since 2014 that are not reflected on the existing survey; or (iii) the title insurer is unwilling to provide survey-related endorsements based on the existing survey. We have submitted a diligence request to Seller's counsel to confirm whether any site improvements or modifications have been made since the 2014 survey date.
D. Zoning and Land Use
Zoning Classification. Based on our review of the data room materials and publicly available zoning records from the Village of West Jefferson, the West Jefferson Facility is located in an area zoned "I-1 — Light Industrial District" under the Village of West Jefferson Zoning Ordinance.
Permitted Uses. The I-1 Light Industrial District permits, among other uses, "warehousing, wholesale distribution, and storage of goods and merchandise" as a permitted use by right. No conditional use permit, variance, or special exception is required for the current use of the property as a warehouse and distribution center. We have confirmed that the property's current use is consistent with the I-1 zoning classification.
Certificate of Occupancy. The data room contains a Certificate of Occupancy issued by the Village of West Jefferson Building Department, dated June 10, 2014, authorizing the use of the building as a "warehouse and distribution facility." No subsequent certificates of occupancy or building permits related to changes in use have been identified in the data room.
Building Code Compliance. Based on our review of available data room materials, we have not identified any outstanding building code violations or notices of non-compliance relating to the West Jefferson Facility. However, we have not conducted an independent building code compliance review, and we recommend that Meridian consider engaging a qualified inspector to confirm compliance with current applicable building codes and fire codes, particularly given the age of the facility.
E. Real Property Taxes
Current Assessed Value. Based on the most recent Madison County Auditor's records included in the data room, the West Jefferson Facility has a total assessed value of $3,215,000 (consisting of an assessed land value of approximately $685,000 and an assessed improvement value of approximately $2,530,000), reflecting a tax year 2021 assessment.
Annual Real Property Taxes. Annual real property taxes for the West Jefferson Facility are approximately $74,300, based on the most recent tax bills included in the data room. This amount includes county, village, school district, and special district levies. Based on our review, Briarwood is current on all real property tax payments, with no delinquent or unpaid taxes outstanding.
Pending Tax Appeals. We have not identified any pending tax appeals, tax abatements, or tax incentive agreements relating to the West Jefferson Facility in the data room materials, and Seller's counsel has confirmed in response to our diligence request that no such appeals or agreements are pending or in effect.
Tax Proration at Closing. Real property taxes should be prorated between Briarwood and Meridian as of the closing date, with Briarwood responsible for taxes attributable to the period prior to closing and Meridian responsible for taxes attributable to the period from and after closing. The mechanics of the tax proration (including the basis for proration — calendar year, tax year, or due date — and the treatment of any retroactive adjustments) should be addressed in the APA.
F. Condition and Capital Improvements
Age and Condition. The West Jefferson Facility was originally constructed in 2002 and has been in continuous use as a warehouse and distribution facility since that time. Briarwood has occupied the facility since its acquisition in March 2014. Based on our review of the data room materials, the facility appears to be in generally good condition for a building of its age and use, with routine maintenance and periodic capital improvements having been performed during Briarwood's ownership.
Recent Capital Improvements. The data room contains records of the following capital improvements made by Briarwood:
• LED lighting retrofit throughout the warehouse area (completed 2019, approximate cost $110,000)
• Installation of additional pallet racking to increase warehouse capacity (completed 2020, approximate cost $185,000)
• Replacement of three (3) overhead dock levelers and dock seals (completed 2021, approximate cost $67,000)
• Upgrades to the fire suppression sprinkler system, including new sprinkler heads and updated control panel (completed 2021, approximate cost $93,000)
Condition Assessment. The data room does not contain a formal third-party facility condition assessment for the West Jefferson Facility. Based on our review of maintenance records and Briarwood's internal facilities reports, the following condition items have been noted:
• Roof: The original TPO (thermoplastic polyolefin) membrane roof is approximately 20 years old. Briarwood's internal maintenance records note periodic leak repairs in 2019 and 2021. The estimated remaining useful life of the roof, absent a major repair or replacement, is approximately 3-5 years. Roof replacement is estimated to cost approximately $350,000-$450,000.
• HVAC: The office and break room HVAC systems were replaced in 2017 and are in good working condition. The warehouse heating units (gas-fired radiant heaters) are original to the building and are functional but approaching end of useful life.
• Structural: No structural deficiencies or concerns have been identified in the data room materials. The building is a pre-engineered metal building on a concrete slab foundation, which is typical for this type of industrial facility.
• Loading Docks: Three of the twelve dock levelers were replaced in 2021 (as noted above). The remaining nine dock levelers are original to the building and may require replacement or refurbishment in the near term.
Meridian

PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT

MEMORANDUM

MATTER NO.: 1011-00005

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