1011-00005 · Meridian Consumer Brands LLC · Financing

equity-commitment-letter-review-memo.docx DOCUMENT Finance & Banking

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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT

TO: Sandra Tung, Responsible Partner, M&A Oliver Mackenzie, Billing Partner, M&A

FROM: Andrew Fitzpatrick, Lead Associate, M&A

DATE: August 16, 2022

RE: Review and Analysis of Lakepoint Capital Partners, LP Equity Commitment Letter dated August 12, 2022 — Proposed Acquisition of CleanLeaf and PureHaven Product Lines from Briarwood Home Essentials, Inc.

MATTER NO.: 1011-00005

CLIENT: Meridian Consumer Brands LLC

I. Executive Summary

This memorandum sets forth our analysis of the equity commitment letter (the "ECL") dated August 12, 2022, executed by Lakepoint Capital Partners, LP ("Lakepoint"), a Delaware limited partnership, in favor of Meridian Consumer Brands LLC ("Meridian" or "MCB"), a Delaware limited liability company, in connection with Meridian's proposed acquisition of the CleanLeaf and PureHaven consumer product lines from Briarwood Home Essentials, Inc. ("Briarwood"), an Ohio corporation. Lakepoint is the private equity sponsor of Meridian and maintains its principal offices at 200 Clarendon Street, Suite 3200, Boston, Massachusetts 02116. Lakepoint's Managing Partner is Thomas Liang. Lakepoint's federal employer identification number is 04-3821567.

Pursuant to the ECL, Lakepoint has committed to fund Thirty-Five Million Dollars ($35,000,000) in equity to Meridian to finance a portion of the Ninety-Five Million Dollar ($95,000,000) aggregate purchase price for the acquisition of the CleanLeaf home cleaning product line and the PureHaven personal care product line from Briarwood (the "Transaction"). The equity commitment represents the balance of the purchase price not funded by third-party debt financing. Specifically, the total purchase price of $95,000,000 is to be funded through a combination of (i) a $60,000,000 senior secured term loan commitment from Harborview National Bank, N.A., as set forth in the debt commitment letter dated August 5, 2022 (the "Debt Commitment Letter"), and (ii) the $35,000,000 equity commitment from Lakepoint pursuant to the ECL. The net equity commitment of $35,000,000 thus represents the difference between the aggregate purchase price and the committed debt amount.

The Transaction is structured as an asset purchase. At closing, Meridian will pay $87,000,000 in cash to Briarwood (reflecting the total purchase price of $95,000,000 less an $8,000,000 earnout component that is deferred and payable only upon the achievement of certain Year 1 revenue milestones). Of the $87,000,000 closing cash consideration, $9,500,000 will be deposited into escrow with Atlantic Fiduciary Trust Company to secure Briarwood's indemnification obligations under the Asset Purchase Agreement (the "APA").

This memorandum provides a detailed review of the key terms of the ECL, analyzes the enforcement mechanics available to Meridian, identifies the interplay between the ECL and the Debt Commitment Letter, and highlights certain risk items and open issues that warrant further attention by the deal team. Our overall assessment is that the ECL is generally market-standard for a sponsor-backed acquisition of this size and in this segment. However, certain conditions to funding, the cross-conditionality with the Debt Commitment Letter, the alignment of expiration and long-stop dates, and the sufficiency of the commitment amount to cover ancillary transaction costs warrant careful review and, in some cases, negotiation or clarification. We set forth specific recommendations in Section VII below.

II. Background and Transaction Overview

Meridian Consumer Brands LLC is a Delaware limited liability company and a portfolio company of Lakepoint Capital Partners, LP. Meridian is pursuing the acquisition of two consumer product lines — the CleanLeaf home cleaning line and the PureHaven personal care line — from Briarwood Home Essentials, Inc., an Ohio corporation, pursuant to an asset purchase structure.

The Transaction originated with the execution of a letter of intent (the "LOI") between Meridian and Briarwood on March 28, 2022. Due diligence formally commenced on June 14, 2022, following the completion of preliminary financial and commercial assessments conducted by Meridian's financial advisor, Wavecrest Partners LLC. Steven Marchetti serves as Lead Managing Director and Lena Kowalski serves as Vice President on the Wavecrest engagement. Briarwood is advised by Greystone Hobbs & Co., with Philip Tran serving as Managing Director.

The first draft of the APA was circulated by our firm, Calderwood & Harkness LLP, to Briarwood's counsel, Caldwell, Pruitt & Shaw LLP (lead partner: Rachel Underwood), on July 19, 2022. APA negotiations remain ongoing as of the date of this memorandum.

Purchase Price. The aggregate purchase price for the Acquired Assets is $95,000,000, consisting of the following components:

• Cash at Closing: $87,000,000, payable at the closing of the Transaction (the "Closing"). Of this amount, $9,500,000 will be deposited into an escrow account held by Atlantic Fiduciary Trust Company (officer: Gregory Fenn) to secure Briarwood's post-closing indemnification obligations under the APA. The balance of $77,500,000 will be paid directly to Briarwood (or as otherwise directed by Briarwood) at Closing.

• Earnout: $8,000,000, payable contingent upon the achievement of Year 1 product line revenue of at least $72,000,000, as measured over the twelve-month period following the Closing. The earnout is not funded at Closing and is therefore not included in the sources-and-uses analysis for the financing commitments.

Acquired Assets. The assets to be acquired by Meridian pursuant to the APA include, among other things:

(i) the CleanLeaf and PureHaven brand names, trade names, trademarks, and associated intellectual property;

(ii) approximately 142 active stock-keeping units (SKUs) across both product lines;

(iii) the manufacturing facility lease at 2800 Industrial Parkway, Marysville, Ohio 43040;

(iv) the owned distribution center located at 500 Commerce Boulevard, West Jefferson, Ohio 43162;

(v) twenty-three (23) customer contracts;

(vi) one hundred eighty-six (186) transferring employees;

(vii) inventory with a book value of approximately $14,300,000 as of June 30, 2022; and

(viii) accounts receivable of approximately $9,700,000 as of June 30, 2022.

Excluded Assets. The following assets are excluded from the Transaction and will be retained by Briarwood:

(i) Briarwood's Commercial Janitorial Services Division (the "Retained Business");

(ii) the corporate headquarters lease;

(iii) all cash and cash equivalents of Briarwood; and

(iv) pre-closing tax refunds.

Financing Structure. The Transaction will be financed through a combination of debt and equity as follows:

Key Transaction Principals. Meridian's management team consists of the following individuals: Gareth Holloway (Chief Executive Officer and Managing Member), Priya Anand (Chief Financial Officer), and Diana Ressler (General Counsel). These individuals will serve as the primary points of contact for Transaction-related matters on the Meridian side.

III. Summary of Key Terms of the Equity Commitment Letter

The following summarizes the material provisions of the ECL as executed on August 12, 2022. We have organized our summary by topic and have included analytical commentary where appropriate.

A. Parties. The parties to the ECL are as follows:

• Commitment Party: Lakepoint Capital Partners, LP, a Delaware limited partnership, in its capacity as the equity sponsor and sole funding source for the equity component of the Transaction financing.

• Beneficiary: Meridian Consumer Brands LLC, a Delaware limited liability company, in its capacity as the acquiror of the Acquired Assets.

The ECL was executed on August 12, 2022. The instrument bears the signature of Thomas Liang, Managing Partner of Lakepoint Capital Partners, LP, in his authorized capacity, and was countersigned by Gareth Holloway, CEO & Managing Member of Meridian Consumer Brands LLC, acknowledging receipt and acceptance of the commitment on behalf of Meridian.

B. Commitment Amount

The ECL commits Lakepoint to provide equity funding in the aggregate amount of $35,000,000. This amount represents the difference between the total purchase price of $95,000,000 and the $60,000,000 senior secured term loan commitment from Harborview National Bank, N.A. pursuant to the Debt Commitment Letter dated August 5, 2022.

The equity funding is to be provided in the form of a capital contribution by Lakepoint to Meridian in Meridian's capacity as a Delaware limited liability company. The contribution will be made at or immediately prior to the Closing of the Transaction and will be reflected as an increase in Lakepoint's capital account in Meridian in accordance with the terms of Meridian's limited liability company operating agreement. The specific class or series of membership interests to be issued in connection with the capital contribution is not specified in the ECL and will presumably be governed by the terms of Meridian's operating agreement and any side letter or subscription documentation.

Analytical Note Regarding Sufficiency of Commitment. We note that the $35,000,000 equity commitment, when combined with the $60,000,000 in debt financing, covers the $95,000,000 purchase price on a dollar-for-dollar basis. However, the equity commitment must be sufficient to fund not only (i) the equity portion of the cash-at-closing amount (i.e., $87,000,000 less the $60,000,000 debt draw, or $27,000,000 net equity need at Closing), but also (ii) Transaction costs and expenses (including legal fees, advisory fees, regulatory filing fees, title and survey costs, and other customary closing costs), and (iii) any working capital adjustments that may increase the purchase price or require additional cash at Closing.

If Transaction costs are material — and in a transaction of this size, we would expect aggregate fees and expenses in the range of $2,000,000 to $4,000,000 — the $35,000,000 commitment may need to cover more than the net equity gap between the purchase price and the debt commitment. We recommend clarification with Lakepoint (Thomas Liang) as to whether the $35,000,000 commitment is intended to cover Transaction costs in addition to the purchase price equity component, or whether Meridian has other available cash or liquidity to fund these items separately. This issue is discussed further in Section VI.D below.

C. Purpose and Use of Proceeds

The ECL specifies that the equity contribution is to be used solely to fund the acquisition of the Acquired Assets from Briarwood Home Essentials, Inc. as contemplated by the APA. The instrument contains a "use of proceeds" restriction providing that the committed funds may not be redirected to other Meridian operations, investments, or uses. This restriction is common in equity commitment letters for sponsor-backed transactions and serves to ensure that the committed equity is deployed exclusively for the stated acquisition purpose, thereby protecting the sponsor's investment thesis and maintaining alignment with the negotiated financing structure.

The use-of-proceeds limitation does not, on its face, preclude the application of the equity contribution to Transaction-related costs and expenses that are incidental to the Closing (e.g., legal fees, advisory fees, transfer taxes, and escrow funding). However, as noted above, it would be prudent to confirm that the scope of permissible uses is broad enough to cover these ancillary costs, or to establish an alternative funding source for such items.

D. Conditions to Funding

Lakepoint's obligation to fund the $35,000,000 equity commitment under the ECL is subject to the satisfaction or waiver of the following conditions precedent:

1. Execution of Definitive APA. Execution and delivery of a definitive Asset Purchase Agreement in form and substance satisfactory to Lakepoint. This condition gives Lakepoint a degree of discretion over the final terms of the APA, which is typical in sponsor-backed transactions where the sponsor exercises governance authority over the portfolio company's material agreements. As a practical matter, Lakepoint, through its Managing Partner Thomas Liang, has been actively engaged in the APA negotiation process and is expected to approve the final form of the APA before execution.

2. Simultaneous Debt Funding. Simultaneous funding of the $60,000,000 senior secured term loan by Harborview National Bank, N.A. under the Debt Commitment Letter, or satisfaction of all conditions precedent to such funding such that the debt is available to be drawn at Closing. This condition links Lakepoint's equity funding obligation to the availability of the debt financing and creates a "double conditionality" risk, which is discussed in greater detail in Sections V.B and VI.A below.

3. Satisfaction of APA Closing Conditions. Satisfaction (or waiver by the applicable party) of all conditions to Closing set forth in the APA. Because the APA has not yet been finalized, the specific conditions to Closing are not yet determined. However, based on the current draft circulated on July 19, 2022, we anticipate customary conditions including accuracy of representations and warranties, performance of covenants, delivery of required consents and approvals, and absence of legal impediments to Closing.

4. No Material Adverse Effect. No material adverse effect shall have occurred with respect to Briarwood or the Acquired Assets between the date of the ECL (August 12, 2022) and the Closing date. The MAE condition in the ECL is analyzed in Section VI.B below with particular attention to its alignment with the MAE definition in the APA.

5. Accuracy of Briarwood Representations. The representations and warranties of Briarwood in the APA shall be accurate in all material respects as of the Closing date (or, to the extent such representations speak as of a specific date, as of such date). This condition effectively allows Lakepoint to decline funding if Briarwood's representations have become inaccurate in a manner that would permit Meridian to terminate the APA or refuse to close.

6. Legal Opinions. Delivery by Lakepoint's counsel of customary legal opinions. These opinions will likely address Lakepoint's valid formation, authority, enforceability of the ECL, and non-contravention. As Lakepoint's outside counsel for this Transaction, Calderwood & Harkness LLP may be called upon to deliver or arrange for the delivery of these opinions, and we should begin preparation of the opinion framework in due course.

7. No Legal Proceedings. No legal proceeding shall be pending or threatened by any governmental authority or third party that would enjoin, prohibit, or materially impair the consummation of the Transaction. This condition is customary and typically tracks similar language in the APA's closing conditions.

Analytical Note Regarding Conditionality. The foregoing conditions are, in the aggregate, consistent with market practice for equity commitment letters in sponsor-backed mid-market transactions. However, the condition requiring simultaneous debt funding (Condition 2) warrants particular attention because it creates an interdependency between the equity commitment and the debt commitment that could, in certain scenarios, result in the unwinding of both financing commitments simultaneously. This risk is discussed in detail in Section V.B below.

E. Termination and Expiration

The ECL provides that it will terminate automatically upon the earliest to occur of the following events:

(i) consummation of the Closing (at which point the equity will have been funded and the ECL will have been fully performed);

(ii) valid termination of the APA in accordance with its terms (which will render the ECL moot, as there will be no Transaction to finance);

(iii) mutual written agreement of Lakepoint and Meridian to terminate the ECL; or

(iv) a specified long-stop date (the "ECL Long-Stop Date").

Long-Stop Date Analysis. The ECL Long-Stop Date is a critical provision that establishes the outer boundary of Lakepoint's funding obligation. If the Transaction has not closed by the ECL Long-Stop Date, Lakepoint's obligation to fund the equity commitment will lapse automatically, and Meridian will have no further recourse against Lakepoint for the committed equity.

We must confirm the specific ECL Long-Stop Date and ensure that it is aligned with two other material dates in the Transaction timeline:

• Debt Commitment Expiration: The Debt Commitment Letter from Harborview National Bank, N.A. expires by its terms on February 5, 2023. If the ECL Long-Stop Date falls before February 5, 2023, the equity commitment could expire while the debt commitment remains available — a scenario that would effectively prevent Closing even if debt financing is available. Conversely, if the ECL Long-Stop Date falls after February 5, 2023, the equity commitment would remain outstanding after the debt commitment has expired, but Lakepoint's obligation to fund would likely not be triggered because the condition requiring simultaneous debt funding would not be satisfiable.

• LOI Exclusivity Period: The LOI provides Meridian with an exclusivity period that expires on March 28, 2023. While the exclusivity period is a contractual obligation between Meridian and Briarwood (rather than a financing commitment), the expiration of exclusivity could introduce competitive dynamics that affect the viability of the Transaction.

Recommendation. We recommend confirming that the ECL Long-Stop Date is no earlier than the Debt Commitment Letter expiration date of February 5, 2023, and ideally is coterminous with or extends beyond that date. Both commitment instruments should be aligned in timing to avoid a situation where one commitment expires while the other remains outstanding, creating an imbalance in the financing package.

F. Representations and Warranties of Lakepoint

Lakepoint makes the following representations and warranties in the ECL:

(i) Valid Formation and Good Standing. Lakepoint is a limited partnership duly organized, validly existing, and in good standing under the laws of the State of Delaware.

(ii) Authority. Lakepoint has full power and authority to execute, deliver, and perform its obligations under the ECL. The execution and delivery of the ECL and the performance of Lakepoint's obligations thereunder have been duly authorized by all necessary action on the part of Lakepoint and its general partner.

(iii) Non-Contravention. The execution, delivery, and performance of the ECL do not and will not conflict with or result in a breach of Lakepoint's organizational documents (including its limited partnership agreement) or any material agreement to which Lakepoint is a party.

(iv) Availability of Capital. Lakepoint has, and at Closing will have, committed capital sufficient to fund the $35,000,000 equity commitment. This representation is a critical assurance to Meridian that the equity funding will be available when needed.

(v) Enforceability. The ECL constitutes a legal, valid, and binding obligation of Lakepoint, enforceable against Lakepoint in accordance with its terms, subject to customary enforceability exceptions (including bankruptcy, insolvency, and equitable principles).

These representations are consistent with market practice and provide Meridian with a baseline level of comfort regarding Lakepoint's ability to perform its funding obligation. We note, however, that Calderwood & Harkness LLP has not independently verified Lakepoint's fund size, remaining available capital, or the existence of any competing claims on Lakepoint's committed capital. As Lakepoint is the PE sponsor and our client's parent entity, verification of Lakepoint's capital availability is a business judgment matter for Meridian management, and we defer to Gareth Holloway, Priya Anand, and Diana Ressler on this point. That said, should the deal team desire additional comfort, it would be appropriate to request a letter from Lakepoint's fund administrator or auditor confirming the availability of uncommitted capital in an amount not less than $35,000,000.

G. Transfer and Assignment

The ECL contains the following provisions regarding transfer and assignment:

• Meridian. The ECL is not transferable or assignable by Meridian without Lakepoint's prior written consent. This provision ensures that Lakepoint retains control over the identity of the beneficiary of its equity commitment and prevents Meridian from pledging or assigning the ECL to third parties (including lenders, creditors, or co-investors) without Lakepoint's approval.

• Lakepoint. Lakepoint may assign its obligations under the ECL to an affiliated fund or co-investment vehicle, subject to Meridian's consent (not to be unreasonably withheld), provided that Lakepoint remains primarily liable for the full $35,000,000 commitment notwithstanding any such assignment. This provision allows Lakepoint to allocate a portion of the equity commitment to a co-investment vehicle or parallel fund within the Lakepoint fund complex while maintaining primary liability for the full commitment amount. From Meridian's perspective, the requirement that Lakepoint remain primarily liable provides meaningful protection against the risk that an assignment to a less capitalized affiliate could impair the enforceability of the commitment.

We should confirm whether any co-investment vehicle or affiliated fund assignment is contemplated in connection with this Transaction and, if so, whether the proposed assignee has been identified. If an assignment is anticipated, we should review the organizational documents and capitalization of the proposed assignee to ensure that Meridian's rights under the ECL are not adversely affected.

IV. Enforcement Mechanics

A. Direct Enforcement by Meridian

The ECL grants Meridian the right to seek specific enforcement of Lakepoint's funding obligation, subject to the satisfaction (or waiver) of all conditions precedent to funding set forth in the ECL. Specific performance is designated as the primary remedy available to Meridian in the event that Lakepoint fails to fund the equity commitment at Closing when required to do so.

The ECL provides that monetary damages are available to Meridian only in circumstances where specific performance is not available (e.g., due to the lapse of the ECL Long-Stop Date or the impossibility of closing the Transaction) or where Meridian elects to waive its right to specific performance in favor of a damages claim. This remedial structure — which prioritizes equitable relief over legal remedies — is a favorable provision for Meridian, as it ensures that Meridian can compel the actual funding of the equity commitment at Closing rather than being limited to a damages claim that may be difficult to quantify or collect.

We note that the enforceability of a specific performance remedy is subject to general equitable principles, including the court's discretion in awarding injunctive relief and the adequacy of alternative remedies. Under New York law, which governs the ECL, specific performance is generally available for obligations to pay money only where the legal remedy is inadequate — for example, where the subject matter of the contract is unique or where damages would be difficult to calculate. In the context of an equity commitment letter supporting a time-sensitive acquisition, courts have generally been willing to enforce specific performance provisions, particularly where the commitment letter expressly provides for such relief and the conditions to funding have been satisfied. See, e.g., Hexion Specialty Chemicals, Inc. v. Huntsman Corp., 965 A.2d 715 (Del. Ch. 2008) (analyzing specific performance in the context of a merger agreement and related financing commitments). However, the precedent in this area is highly fact-specific, and the availability of specific performance cannot be assured in all circumstances.

B. Third-Party Beneficiary Rights

The ECL expressly provides that Briarwood Home Essentials, Inc. is not a third-party beneficiary of the ECL and has no right to enforce Lakepoint's obligation to fund the equity commitment. This provision means that Briarwood's sole recourse in the event of a financing failure lies against Meridian under the terms of the APA, not directly against Lakepoint under the ECL.

This structure is standard in sponsor-backed transactions and serves to insulate the PE sponsor from direct claims by the seller. The rationale for this approach is well-established: the sponsor's commitment runs to its portfolio company (the acquiror), and the seller's contractual relationship is with the acquiror under the APA, not with the sponsor. The seller's remedies for a buyer's failure to close — including any reverse break-up fee, specific performance rights, or damages claims — are governed by the APA and are enforceable against the acquiror.

However, the absence of third-party beneficiary rights for Briarwood places heightened importance on the following considerations:

(a) The APA should contain appropriate representations by Meridian regarding the availability of financing, including representations that Meridian has received the ECL and the Debt Commitment Letter, that such commitments are in full force and effect, and that Meridian has no reason to believe that any condition to funding will not be satisfied at Closing.

(b) Meridian should backstop its financing representations through its own covenants in the APA, including covenants to use commercially reasonable efforts to satisfy the conditions to funding under both the ECL and the Debt Commitment Letter.

(c) The APA should address the consequences of a financing failure, including whether Meridian's failure to obtain financing constitutes a breach of the APA (triggering damages or a reverse break-up fee) or merely a failure of a condition to Closing (permitting termination without liability).

We expect that Caldwell, Pruitt & Shaw LLP, on behalf of Briarwood, will focus on these issues during the APA negotiation process, and we should be prepared to address Briarwood's concerns regarding financing certainty in the context of the APA's representations, covenants, and termination provisions.

C. Cap on Liability

The ECL may contain a provision capping Lakepoint's maximum aggregate liability thereunder. In market-standard equity commitment letters, the sponsor's liability is typically capped at the commitment amount itself (here, $35,000,000) plus reasonable enforcement costs and expenses incurred by the beneficiary in compelling performance or recovering damages. We should confirm the specific liability cap, if any, set forth in the ECL.

Additionally, we should analyze whether the ECL or the APA contains any "reverse break-up fee" or "reverse termination fee" provision. A reverse break-up fee would obligate Lakepoint (or Meridian, funded by Lakepoint) to pay a specified fee to Briarwood in the event that the Transaction fails to close due to a financing failure or a buyer-side breach. We note that the LOI does not contemplate a break fee in either direction. As of the date of this memorandum, we have not identified a reverse break-up fee provision in the ECL, but we should confirm this with the deal team and assess whether Briarwood's counsel may request the inclusion of such a provision during APA negotiations.

The absence of a break fee is discussed as a risk item in Section VI.C below.

D. Dispute Resolution and Governing Law

The ECL is governed by the laws of the State of New York, without regard to conflicts-of-law principles. This choice of law is consistent with the governing law provisions in the LOI and the anticipated governing law provision in the APA, ensuring uniformity across the Transaction documents.

The ECL's dispute resolution mechanism should be confirmed. In our review of the instrument, we anticipate that disputes arising under the ECL will be resolved either through litigation in the courts of the State of New York (or the United States District Court for the Southern District of New York) or through binding arbitration. The specific mechanism should be verified and aligned with the dispute resolution provisions in the APA and the Debt Commitment Letter to avoid the risk of inconsistent proceedings or forum-shopping.

V. Interplay with Debt Commitment Letter

A. Summary of Debt Commitment

The debt component of the Transaction financing is governed by the Debt Commitment Letter dated August 5, 2022, issued by Harborview National Bank, N.A., in its capacity as lead arranger and administrative agent for the proposed senior secured term loan facility. Harborview is headquartered at One Harborview Plaza, Charlotte, North Carolina 28202. The relationship manager for the Transaction is Carolyn Dubois. The syndicate participant in the debt facility is Pinnacle Credit Partners, LP, located at 600 Lexington Avenue, Suite 2100, New York, New York 10022, with Rajan Mehta serving as the primary contact.

The key terms of the Debt Commitment Letter are summarized below:

A detailed analysis of the Debt Commitment Letter was set forth in a separate memorandum dated August 10, 2022, prepared by this office. The present memorandum focuses on the interplay between the ECL and the Debt Commitment Letter and should be read in conjunction with the August 10 memorandum.

B. Coordination of Conditions Precedent

As discussed in Section III.D above, Lakepoint's obligation to fund the equity commitment under the ECL is conditioned, among other things, on the simultaneous funding of the $60,000,000 debt commitment by Harborview National Bank, N.A. under the Debt Commitment Letter. Conversely, based on our review of the Debt Commitment Letter (as detailed in the August 10 memorandum), the Debt Commitment Letter contains a condition to funding that requires evidence of the availability of the equity contribution from Lakepoint in an amount sufficient, when combined with the debt proceeds, to fund the full Transaction consideration and related costs.

This cross-referencing structure creates a "circular conditionality" or "chicken-and-egg" risk: each financing party's obligation to fund is conditioned on the other party's funding (or readiness to fund), and neither party's obligation may become effective if the other party asserts that its own conditions have not been met. In a worst-case scenario, both Lakepoint and Harborview could decline to fund, each pointing to the other's non-performance as the basis for its own refusal.

This risk is not theoretical. In practice, the circular conditionality is typically managed through a simultaneous closing and funding mechanism, in which both the debt and equity are funded contemporaneously at Closing through an escrow or a coordinated wire-transfer process. The closing mechanics in the APA should be drafted to facilitate this simultaneous funding, with appropriate provisions for sequencing, escrow, and confirmation of availability of funds prior to the release of closing documents.

Recommendation. Calderwood & Harkness LLP should ensure that the APA closing conditions, the ECL conditions, and the Debt Commitment Letter conditions are harmonized and internally consistent. Specifically, we should negotiate for provisions that prevent either financing party from using the other's conditionality as a basis for non-performance. This may include (i) requiring each financing party to confirm readiness to fund in writing prior to Closing (e.g., through a "funds flow" confirmation letter), (ii) establishing a simultaneous funding escrow with Atlantic Fiduciary Trust Company or another mutually acceptable escrow agent, and (iii) including in the APA a representation by Meridian that both financing commitments are in full force and effect and that all conditions to funding have been satisfied or waived as of Closing.

C. Timing and Expiration Alignment

The alignment of expiration dates across the Transaction documents is critical to ensuring that the financing package remains intact through Closing. The relevant dates are as follows:

If the Debt Commitment Letter expires on February 5, 2023 and the Transaction has not yet closed, the ECL's condition requiring simultaneous debt funding would no longer be satisfiable (absent an extension of the Debt Commitment Letter), and Lakepoint's equity obligation would effectively fall away. Similarly, if the ECL Long-Stop Date occurs before the Debt Commitment Letter expiration, the equity commitment could lapse while the debt commitment remains available — though the debt commitment's condition on availability of equity would likely also become unsatisfiable.

Recommendation. If the Transaction timeline extends beyond the current anticipated closing window, extensions of both financing commitments must be obtained in parallel. We should coordinate with Harborview National Bank (Carolyn Dubois) and Lakepoint (Thomas Liang) to ensure that any extension requests are submitted and approved on a coordinated basis. The ticking fee under the Debt Commitment Letter (25 bps commencing November 3, 2022) should also be factored into the cost analysis if the Transaction timeline extends.

D. Sources and Uses Reconciliation

The following table sets forth the preliminary sources-and-uses analysis for the Transaction:

Sources:

Uses:

Analytical Note. The sources-and-uses reconciliation above balances on a dollar-for-dollar basis at $95,000,000. However, Transaction costs and expenses — including legal fees payable to Calderwood & Harkness LLP and Caldwell, Pruitt & Shaw LLP, advisory fees payable to Wavecrest Partners LLC and Greystone Hobbs & Co., regulatory filing fees, title and survey costs, transfer taxes, escrow agent fees, and other customary closing costs — are not explicitly covered in the identified sources. Additionally, potential working capital adjustments under the APA could increase or decrease the cash required at Closing.

We should confirm with Lakepoint (Thomas Liang) and Meridian management (Priya Anand, CFO) whether the $35,000,000 equity commitment includes a cushion for fees, costs, and working capital adjustments, or whether Meridian has other available cash or liquidity on its balance sheet to fund these items. If the equity commitment is sized to cover only the purchase price equity gap (approximately $27,000,000 at Closing, with the remaining $8,000,000 designated for the deferred earnout), there may be sufficient headroom within the $35,000,000 commitment to absorb Transaction costs. However, this should be confirmed rather than assumed, particularly in light of the inventory valuation dispute discussed in Section VI.D below.

VI. Key Risk Items and Observations

A. Double Conditionality Risk

As discussed in Sections III.D and V.B above, the mutual cross-conditioning between the ECL and the Debt Commitment Letter represents a structural risk in the Transaction financing architecture. The ECL conditions Lakepoint's equity funding obligation on the simultaneous availability of the Harborview debt, and the Debt Commitment Letter conditions Harborview's lending obligation on the availability of Lakepoint's equity. This circular structure means that a failure by either financing party could cascade into a failure of both commitments.

The practical implications of this risk are significant. If Harborview declines to fund the senior secured term loan — for example, due to a failure of a condition precedent related to environmental diligence findings at the Marysville manufacturing facility, the ongoing inventory valuation dispute between Briarwood and Meridian, or other APA-related conditions — Lakepoint could assert that its own ECL obligation has also fallen away because the condition requiring simultaneous debt funding has not been satisfied. In such a scenario, Meridian would be left without either the debt or the equity financing necessary to close the Transaction, and its sole remedies would be (i) to seek specific performance of the Debt Commitment Letter against Harborview (subject to the terms and conditions of that instrument) and (ii) to seek specific performance of the ECL against Lakepoint (which would be futile if the debt condition has not been satisfied).

Mitigation Strategies. We recommend the following approaches to mitigate the double conditionality risk:

(a) Independent Funding Obligations. To the extent possible, negotiate for the ECL to include a provision requiring Lakepoint to fund the equity commitment regardless of whether the debt financing is simultaneously available, provided that all other conditions to funding have been satisfied. This would decouple the equity commitment from the debt commitment and ensure that at least the equity component of the financing is available at Closing. However, we recognize that this approach may be commercially difficult to achieve, as Lakepoint may be unwilling to fund equity into a Transaction that lacks sufficient debt financing.

(b) Financing Condition as Buyer's Risk. Ensure that the financing condition in the APA is drafted as a buyer's risk — i.e., that Meridian's obligation to close is not conditioned on the receipt of financing, but rather that the availability of financing is a covenant of Meridian (supported by the ECL and Debt Commitment Letter). This structure would prevent Meridian from using a financing failure as a basis for terminating the APA and would preserve Briarwood's remedies (including any reverse break-up fee or damages claim) in the event of a buyer-side financing failure.

(c) Closing Mechanics. Draft the APA closing mechanics to include a simultaneous funding protocol with written confirmations of readiness to fund from both Lakepoint and Harborview prior to the release of closing documents and the consummation of the asset transfer.

B. Material Adverse Effect Condition

The ECL contains a condition precedent requiring that no material adverse effect shall have occurred with respect to Briarwood or the Acquired Assets between the date of the ECL (August 12, 2022) and the Closing date. This MAE condition could, if triggered, excuse Lakepoint from its obligation to fund the equity commitment.

The critical analytical question is whether the MAE definition in the ECL is aligned with the MAE definition in the APA. If the ECL contains a broader MAE definition than the APA — for example, by excluding fewer carve-outs from the definition of "material adverse effect," or by applying a lower materiality threshold — a gap could arise in which Lakepoint could assert that an MAE has occurred for purposes of the ECL (thereby excusing its funding obligation) even though the same event does not constitute an MAE under the APA (and therefore does not entitle Meridian to refuse to close). In such a scenario, Meridian could find itself obligated to close the Transaction under the APA but unable to fund the closing because Lakepoint has declined to provide the equity commitment.

Conversely, if the MAE definition in the ECL is narrower than the APA definition, the risk runs in the opposite direction: Meridian might be entitled to terminate the APA due to an MAE, but Lakepoint's funding obligation would remain in force. While this scenario is less problematic from a financing perspective, it could create confusion regarding the interaction between the ECL and the APA.

Recommendation. We recommend a detailed comparison of the MAE definitions in the ECL and the APA (once the APA is finalized). Ideally, the ECL should incorporate the APA's MAE definition by reference, ensuring that the same standard applies to both the buyer's closing condition and the sponsor's funding condition. Any discrepancies between the two definitions should be flagged for negotiation with Lakepoint.

C. No Break Fee

We note that neither the LOI nor the ECL contains a reverse break-up fee (also referred to as a reverse termination fee). In many sponsor-backed acquisitions, particularly those involving significant financing conditionality, the seller negotiates for a reverse break-up fee as a form of liquidated damages to compensate the seller for the time, cost, and opportunity cost incurred if the buyer fails to close due to a financing failure or other buyer-side breach.

The absence of a reverse break-up fee in the current Transaction documents means that, if Lakepoint declines to fund the equity commitment and the Transaction fails to close, Meridian's remedies against Lakepoint are limited to (i) specific performance of the ECL (which requires the satisfaction of all conditions precedent and may not be available if the conditions have not been met) and (ii) potentially a claim for monetary damages (which would be subject to the ECL's liability cap, if any, and would require proof of actual damages).

From Briarwood's perspective, the absence of a reverse break-up fee is a more significant concern, as Briarwood has no direct enforcement rights against Lakepoint under the ECL (as discussed in Section IV.B above) and would be limited to its remedies against Meridian under the APA. If Meridian lacks sufficient assets or liquidity to satisfy a damages claim, Briarwood could be left without meaningful recourse.

We anticipate that Caldwell, Pruitt & Shaw LLP, on behalf of Briarwood, may raise the issue of a reverse break-up fee during the APA negotiation process. The deal team should be prepared to address this issue and should consult with Lakepoint (Thomas Liang) regarding Lakepoint's willingness to support a reverse break-up fee, either directly (through a separate guarantee or side letter) or indirectly (through a commitment by Meridian, funded by Lakepoint's equity commitment).

D. Sufficiency of Commitment Amount

As discussed in Sections III.B and V.D above, the $35,000,000 equity commitment, when combined with the $60,000,000 in debt financing, covers the $95,000,000 purchase price on a dollar-for-dollar basis. However, the commitment does not explicitly address the following ancillary costs that may require funding at or around Closing:

(i) Transaction Costs. Legal fees (Calderwood & Harkness LLP, Caldwell, Pruitt & Shaw LLP), financial advisory fees (Wavecrest Partners LLC, Greystone Hobbs & Co.), regulatory filing fees (including HSR Act filing fees, if applicable), title and survey costs for the West Jefferson distribution center, transfer taxes, escrow agent fees (Atlantic Fiduciary Trust Company), and other customary closing costs. We estimate aggregate Transaction costs in the range of $2,000,000 to $4,000,000, although a more precise estimate will be available as the APA negotiation process progresses.

(ii) Working Capital Adjustments. The APA is expected to contain a working capital adjustment mechanism pursuant to which the cash-at-closing amount is adjusted upward or downward based on the difference between actual working capital at Closing and a negotiated target working capital amount. If actual working capital is below the target, the purchase price would be reduced, decreasing the equity funding need. If actual working capital exceeds the target, the purchase price would increase, potentially requiring additional equity funding.

(iii) Inventory Valuation Dispute. The due diligence process has identified a $2,500,000 variance between Briarwood's reported inventory book value of $14,300,000 (as of June 30, 2022) and the net realizable value ("NRV") determination of $11,800,000 prepared by Whitfield Ames LLP on behalf of Meridian. If this dispute results in a purchase price reduction, the equity need would decrease. However, if the purchase price remains at $95,000,000 notwithstanding the inventory dispute (e.g., because the parties agree to resolve the dispute through a post-closing adjustment mechanism rather than a pre-closing price reduction), the full $35,000,000 equity commitment will be required for the purchase price, and any incremental costs would need to be funded from other sources.

Recommendation. We recommend confirming with Lakepoint (Thomas Liang) whether additional equity capacity exists beyond the $35,000,000 committed under the ECL and whether the commitment is intended to cover Transaction costs and expenses in addition to the purchase price equity component. If the commitment is sized solely for the purchase price gap, we should identify alternative sources of funding for ancillary costs, including Meridian's existing cash on hand, an increase to the Lakepoint commitment, or an expansion of the Harborview debt facility (subject to the terms of the Debt Commitment Letter).

E. Lakepoint's Capital Availability

As noted in Section III.F above, the ECL contains a representation by Lakepoint that it has, and will have at Closing, committed capital sufficient to fund the $35,000,000 equity obligation. This representation provides Meridian with a contractual assurance of Lakepoint's ability to perform, and a breach of this representation would give rise to a claim by Meridian against Lakepoint.

However, Calderwood & Harkness LLP has not independently verified Lakepoint's fund size, available capital, outstanding commitments to other portfolio companies or pending investments, or the existence of any competing claims on Lakepoint's committed capital. Lakepoint's federal employer identification number is 04-3821567. As Lakepoint is the PE sponsor and our client's parent entity, the verification of Lakepoint's capital availability is fundamentally a business judgment matter for Meridian management. We defer to Gareth Holloway (CEO), Priya Anand (CFO), and Diana Ressler (General Counsel) on this point.

That said, if the deal team desires additional comfort, we could request a confirmation letter from Lakepoint's fund administrator or independent auditor certifying that uncommitted capital in an amount not less than $35,000,000 is available in Lakepoint's fund for deployment in connection with the Transaction. Such a confirmation would supplement the contractual representation in the ECL with independent third-party verification.

VII. Open Items and Recommendations

Based on the analysis set forth in this memorandum, we have identified the following open items and recommendations for the deal team. These items should be addressed promptly in coordination with the ongoing APA negotiation process and the broader Transaction workstream.

1. Confirm ECL Long-Stop Date. Verify the specific ECL Long-Stop Date and confirm alignment with the Harborview Debt Commitment Letter expiration date (February 5, 2023) and the LOI exclusivity period (March 28, 2023). If the ECL expires before the Debt Commitment Letter, the resulting timing gap creates a risk that the equity commitment could lapse while the debt commitment remains available (or vice versa). Ideally, the ECL Long-Stop Date should be coterminous with or extend beyond the Debt Commitment Letter expiration.

2. Harmonize Conditions Precedent. Work with the deal team, Wavecrest Partners LLC (Steven Marchetti, Lena Kowalski), and Lakepoint (Thomas Liang) to ensure that the APA closing conditions, ECL conditions, and Debt Commitment Letter conditions are internally consistent and do not create circular conditionality. Consider implementing a simultaneous funding protocol and requiring written confirmations of readiness to fund from both Lakepoint and Harborview prior to Closing.

3. Clarify Scope of Equity Commitment. Confirm whether the $35,000,000 equity commitment covers only the equity portion of the purchase price or also includes Transaction costs, expenses, and working capital adjustments. If the commitment is sized solely for the purchase price gap, identify alternative funding sources for ancillary costs.

4. Align MAE Definitions. Upon finalization of the APA, conduct a detailed comparison of the MAE definition in the ECL with the MAE definition in the APA. Flag any discrepancies for negotiation with Lakepoint. Ideally, the ECL should incorporate the APA's MAE definition by reference.

5. Confirm No Reverse Break-Up Fee Obligation. Note the absence of a reverse break-up fee in both the LOI and the ECL. Assess whether Briarwood's counsel (Caldwell, Pruitt & Shaw LLP, Rachel Underwood) may request a reverse break-up fee during APA negotiations, and coordinate with Lakepoint on the sponsor's willingness to support such a provision.

6. Review Assignment Provisions. Confirm whether any co-investment vehicle or affiliated fund assignment by Lakepoint is contemplated in connection with the Transaction. If so, review the organizational documents and capitalization of the proposed assignee to ensure that Meridian's rights under the ECL are not adversely affected and that Lakepoint's primary liability is preserved.

7. Coordinate with Debt Commitment Review. Cross-reference the findings in this memorandum with the Debt Commitment Letter Review Memorandum dated August 10, 2022 (separately prepared by this office). Ensure parallel tracking of all financing-related conditions, deadlines, fees (including the ticking fee commencing November 3, 2022), and coordination requirements.

8. Update Client. Prepare a summary memorandum for Diana Ressler (General Counsel) and Priya Anand (CFO) regarding the ECL's key terms and risk items. The client summary should be presented in a format accessible to non-lawyers and should highlight the actionable items requiring management attention or decision. Coordinate with Lakepoint's Thomas Liang on any clarification needed regarding capital availability, commitment scope, and the contemplated co-investment structure, if any.

VIII. Conclusion

The Lakepoint Capital Partners, LP Equity Commitment Letter dated August 12, 2022 is generally consistent with market practice for sponsor-backed asset acquisitions in the mid-market segment. The instrument reflects a straightforward commitment by Lakepoint to fund $35,000,000 in equity to Meridian Consumer Brands LLC to finance a portion of the $95,000,000 aggregate purchase price for the acquisition of the CleanLeaf and PureHaven consumer product lines from Briarwood Home Essentials, Inc.

The $35,000,000 equity commitment, when combined with the $60,000,000 senior secured term loan commitment from Harborview National Bank, N.A. pursuant to the Debt Commitment Letter dated August 5, 2022, provides the full purchase price for the Transaction. The ECL contains conditions to funding, enforcement mechanics, and termination provisions that are generally favorable to Meridian and consistent with the expectations for an equity commitment in a transaction of this nature and size.

However, as detailed in this memorandum, several key risk items and open issues warrant attention by the deal team:

• The cross-conditionality between the ECL and the Debt Commitment Letter creates a structural risk that a failure of either financing commitment could cascade into a failure of both, leaving Meridian without the financing necessary to close the Transaction.

• The alignment of expiration dates across the ECL, the Debt Commitment Letter, and the LOI must be confirmed to ensure that all instruments remain in force through Closing.

• The MAE condition in the ECL should be reviewed for alignment with the APA's MAE definition to avoid gaps in coverage.

• The sufficiency of the $35,000,000 commitment to cover ancillary Transaction costs, working capital adjustments, and the potential impact of the inventory valuation dispute should be confirmed with Lakepoint and Meridian management.

• The absence of a reverse break-up fee should be noted and addressed in the context of APA negotiations with Briarwood's counsel.

Calderwood & Harkness LLP will continue to monitor these items as the APA drafting and negotiation process proceeds. We will coordinate with the broader deal team, including Wavecrest Partners LLC (Steven Marchetti, Lena Kowalski), Meridian management (Gareth Holloway, Priya Anand, Diana Ressler), and Lakepoint (Thomas Liang), to ensure that the financing package is complete, internally consistent, and positioned to support a timely Closing of the Transaction.

We are available to discuss any aspect of this memorandum at your convenience.

This memorandum is a privileged and confidential attorney work product prepared by Calderwood & Harkness LLP for the exclusive use of the addressees identified herein. It is protected by the attorney-client privilege and the work product doctrine and may not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP. This memorandum does not constitute legal advice to any person or entity other than the addressees.

Prepared by:

Andrew Fitzpatrick Lead Associate, Mergers & Acquisitions Calderwood & Harkness LLP 599 Lexington Avenue, 36th Floor New York, New York 10022

Reviewed by:

Sandra Tung Responsible Partner, Mergers & Acquisitions Calderwood & Harkness LLP 599 Lexington Avenue, 36th Floor New York, New York 10022

Distribution: Sandra Tung, Oliver Mackenzie (Internal Calderwood & Harkness LLP Only)

Matter No.: 1011-00005

Source	Amount	Provider
Senior Secured Term Loan	$60,000,000	Harborview National Bank, N.A.
Equity Commitment	$35,000,000	Lakepoint Capital Partners, LP
Total Sources	$95,000,000
Term	Detail
Commitment Amount	$60,000,000
Facility Type	Senior secured term loan
Lead Arranger / Administrative Agent	Harborview National Bank, N.A.
Syndicate Participant	Pinnacle Credit Partners, LP
Interest Rate	SOFR + 375 basis points
Commitment Fee	50 basis points on undrawn amounts
Ticking Fee	25 basis points, commencing 90 days after the commitment date (i.e., commencing November 3, 2022)
Expiration Date	February 5, 2023
Document	Expiration / Long-Stop Date
Debt Commitment Letter	February 5, 2023
Equity Commitment Letter	To be confirmed
LOI Exclusivity Period	March 28, 2023
Source	Amount
Harborview National Bank, N.A. — Senior Secured Term Loan	$60,000,000
Lakepoint Capital Partners, LP — Equity Commitment	$35,000,000
Total Sources	$95,000,000
Use	Amount
Cash at Closing (including $9,500,000 to escrow)	$87,000,000
Earnout (deferred; not funded at Closing)	$8,000,000
Total Uses	$95,000,000

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT
TO: Sandra Tung, Responsible Partner, M&A Oliver Mackenzie, Billing Partner, M&A
FROM: Andrew Fitzpatrick, Lead Associate, M&A
DATE: August 16, 2022
RE: Review and Analysis of Lakepoint Capital Partners, LP Equity Commitment Letter dated August 12, 2022 — Proposed Acquisition of CleanLeaf and PureHaven Product Lines from Briarwood Home Essentials, Inc.
MATTER NO.: 1011-00005
CLIENT: Meridian Consumer Brands LLC
I. Executive Summary
This memorandum sets forth our analysis of the equity commitment letter (the "ECL") dated August 12, 2022, executed by Lakepoint Capital Partners, LP ("Lakepoint"), a Delaware limited partnership, in favor of Meridian Consumer Brands LLC ("Meridian" or "MCB"), a Delaware limited liability company, in connection with Meridian's proposed acquisition of the CleanLeaf and PureHaven consumer product lines from Briarwood Home Essentials, Inc. ("Briarwood"), an Ohio corporation. Lakepoint is the private equity sponsor of Meridian and maintains its principal offices at 200 Clarendon Street, Suite 3200, Boston, Massachusetts 02116. Lakepoint's Managing Partner is Thomas Liang. Lakepoint's federal employer identification number is 04-3821567.
Pursuant to the ECL, Lakepoint has committed to fund Thirty-Five Million Dollars ($35,000,000) in equity to Meridian to finance a portion of the Ninety-Five Million Dollar ($95,000,000) aggregate purchase price for the acquisition of the CleanLeaf home cleaning product line and the PureHaven personal care product line from Briarwood (the "Transaction"). The equity commitment represents the balance of the purchase price not funded by third-party debt financing. Specifically, the total purchase price of $95,000,000 is to be funded through a combination of (i) a $60,000,000 senior secured term loan commitment from Harborview National Bank, N.A., as set forth in the debt commitment letter dated August 5, 2022 (the "Debt Commitment Letter"), and (ii) the $35,000,000 equity commitment from Lakepoint pursuant to the ECL. The net equity commitment of $35,000,000 thus represents the difference between the aggregate purchase price and the committed debt amount.
The Transaction is structured as an asset purchase. At closing, Meridian will pay $87,000,000 in cash to Briarwood (reflecting the total purchase price of $95,000,000 less an $8,000,000 earnout component that is deferred and payable only upon the achievement of certain Year 1 revenue milestones). Of the $87,000,000 closing cash consideration, $9,500,000 will be deposited into escrow with Atlantic Fiduciary Trust Company to secure Briarwood's indemnification obligations under the Asset Purchase Agreement (the "APA").
This memorandum provides a detailed review of the key terms of the ECL, analyzes the enforcement mechanics available to Meridian, identifies the interplay between the ECL and the Debt Commitment Letter, and highlights certain risk items and open issues that warrant further attention by the deal team. Our overall assessment is that the ECL is generally market-standard for a sponsor-backed acquisition of this size and in this segment. However, certain conditions to funding, the cross-conditionality with the Debt Commitment Letter, the alignment of expiration and long-stop dates, and the sufficiency of the commitment amount to cover ancillary transaction costs warrant careful review and, in some cases, negotiation or clarification. We set forth specific recommendations in Section VII below.
II. Background and Transaction Overview
Meridian Consumer Brands LLC is a Delaware limited liability company and a portfolio company of Lakepoint Capital Partners, LP. Meridian is pursuing the acquisition of two consumer product lines — the CleanLeaf home cleaning line and the PureHaven personal care line — from Briarwood Home Essentials, Inc., an Ohio corporation, pursuant to an asset purchase structure.
The Transaction originated with the execution of a letter of intent (the "LOI") between Meridian and Briarwood on March 28, 2022. Due diligence formally commenced on June 14, 2022, following the completion of preliminary financial and commercial assessments conducted by Meridian's financial advisor, Wavecrest Partners LLC. Steven Marchetti serves as Lead Managing Director and Lena Kowalski serves as Vice President on the Wavecrest engagement. Briarwood is advised by Greystone Hobbs & Co., with Philip Tran serving as Managing Director.
The first draft of the APA was circulated by our firm, Calderwood & Harkness LLP, to Briarwood's counsel, Caldwell, Pruitt & Shaw LLP (lead partner: Rachel Underwood), on July 19, 2022. APA negotiations remain ongoing as of the date of this memorandum.
Purchase Price. The aggregate purchase price for the Acquired Assets is $95,000,000, consisting of the following components:
• Cash at Closing: $87,000,000, payable at the closing of the Transaction (the "Closing"). Of this amount, $9,500,000 will be deposited into an escrow account held by Atlantic Fiduciary Trust Company (officer: Gregory Fenn) to secure Briarwood's post-closing indemnification obligations under the APA. The balance of $77,500,000 will be paid directly to Briarwood (or as otherwise directed by Briarwood) at Closing.
• Earnout: $8,000,000, payable contingent upon the achievement of Year 1 product line revenue of at least $72,000,000, as measured over the twelve-month period following the Closing. The earnout is not funded at Closing and is therefore not included in the sources-and-uses analysis for the financing commitments.
Acquired Assets. The assets to be acquired by Meridian pursuant to the APA include, among other things:
(i) the CleanLeaf and PureHaven brand names, trade names, trademarks, and associated intellectual property;
(ii) approximately 142 active stock-keeping units (SKUs) across both product lines;
(iii) the manufacturing facility lease at 2800 Industrial Parkway, Marysville, Ohio 43040;
(iv) the owned distribution center located at 500 Commerce Boulevard, West Jefferson, Ohio 43162;
(v) twenty-three (23) customer contracts;
(vi) one hundred eighty-six (186) transferring employees;
(vii) inventory with a book value of approximately $14,300,000 as of June 30, 2022; and
(viii) accounts receivable of approximately $9,700,000 as of June 30, 2022.
Excluded Assets. The following assets are excluded from the Transaction and will be retained by Briarwood:
(i) Briarwood's Commercial Janitorial Services Division (the "Retained Business");
(ii) the corporate headquarters lease;
(iii) all cash and cash equivalents of Briarwood; and
(iv) pre-closing tax refunds.
Financing Structure. The Transaction will be financed through a combination of debt and equity as follows:
Key Transaction Principals. Meridian's management team consists of the following individuals: Gareth Holloway (Chief Executive Officer and Managing Member), Priya Anand (Chief Financial Officer), and Diana Ressler (General Counsel). These individuals will serve as the primary points of contact for Transaction-related matters on the Meridian side.
III. Summary of Key Terms of the Equity Commitment Letter
The following summarizes the material provisions of the ECL as executed on August 12, 2022. We have organized our summary by topic and have included analytical commentary where appropriate.
A. Parties. The parties to the ECL are as follows:
• Commitment Party: Lakepoint Capital Partners, LP, a Delaware limited partnership, in its capacity as the equity sponsor and sole funding source for the equity component of the Transaction financing.
• Beneficiary: Meridian Consumer Brands LLC, a Delaware limited liability company, in its capacity as the acquiror of the Acquired Assets.
The ECL was executed on August 12, 2022. The instrument bears the signature of Thomas Liang, Managing Partner of Lakepoint Capital Partners, LP, in his authorized capacity, and was countersigned by Gareth Holloway, CEO & Managing Member of Meridian Consumer Brands LLC, acknowledging receipt and acceptance of the commitment on behalf of Meridian.
B. Commitment Amount
The ECL commits Lakepoint to provide equity funding in the aggregate amount of $35,000,000. This amount represents the difference between the total purchase price of $95,000,000 and the $60,000,000 senior secured term loan commitment from Harborview National Bank, N.A. pursuant to the Debt Commitment Letter dated August 5, 2022.
The equity funding is to be provided in the form of a capital contribution by Lakepoint to Meridian in Meridian's capacity as a Delaware limited liability company. The contribution will be made at or immediately prior to the Closing of the Transaction and will be reflected as an increase in Lakepoint's capital account in Meridian in accordance with the terms of Meridian's limited liability company operating agreement. The specific class or series of membership interests to be issued in connection with the capital contribution is not specified in the ECL and will presumably be governed by the terms of Meridian's operating agreement and any side letter or subscription documentation.
Analytical Note Regarding Sufficiency of Commitment. We note that the $35,000,000 equity commitment, when combined with the $60,000,000 in debt financing, covers the $95,000,000 purchase price on a dollar-for-dollar basis. However, the equity commitment must be sufficient to fund not only (i) the equity portion of the cash-at-closing amount (i.e., $87,000,000 less the $60,000,000 debt draw, or $27,000,000 net equity need at Closing), but also (ii) Transaction costs and expenses (including legal fees, advisory fees, regulatory filing fees, title and survey costs, and other customary closing costs), and (iii) any working capital adjustments that may increase the purchase price or require additional cash at Closing.
If Transaction costs are material — and in a transaction of this size, we would expect aggregate fees and expenses in the range of $2,000,000 to $4,000,000 — the $35,000,000 commitment may need to cover more than the net equity gap between the purchase price and the debt commitment. We recommend clarification with Lakepoint (Thomas Liang) as to whether the $35,000,000 commitment is intended to cover Transaction costs in addition to the purchase price equity component, or whether Meridian has other available cash or liquidity to fund these items separately. This issue is discussed further in Section VI.D below.
C. Purpose and Use of Proceeds
The ECL specifies that the equity contribution is to be used solely to fund the acquisition of the Acquired Assets from Briarwood Home Essentials, Inc. as contemplated by the APA. The instrument contains a "use of proceeds" restriction providing that the committed funds may not be redirected to other Meridian operations, investments, or uses. This restriction is common in equity commitment letters for sponsor-backed transactions and serves to ensure that the committed equity is deployed exclusively for the stated acquisition purpose, thereby protecting the sponsor's investment thesis and maintaining alignment with the negotiated financing structure.
The use-of-proceeds limitation does not, on its face, preclude the application of the equity contribution to Transaction-related costs and expenses that are incidental to the Closing (e.g., legal fees, advisory fees, transfer taxes, and escrow funding). However, as noted above, it would be prudent to confirm that the scope of permissible uses is broad enough to cover these ancillary costs, or to establish an alternative funding source for such items.
D. Conditions to Funding
Lakepoint's obligation to fund the $35,000,000 equity commitment under the ECL is subject to the satisfaction or waiver of the following conditions precedent:
1. Execution of Definitive APA. Execution and delivery of a definitive Asset Purchase Agreement in form and substance satisfactory to Lakepoint. This condition gives Lakepoint a degree of discretion over the final terms of the APA, which is typical in sponsor-backed transactions where the sponsor exercises governance authority over the portfolio company's material agreements. As a practical matter, Lakepoint, through its Managing Partner Thomas Liang, has been actively engaged in the APA negotiation process and is expected to approve the final form of the APA before execution.
2. Simultaneous Debt Funding. Simultaneous funding of the $60,000,000 senior secured term loan by Harborview National Bank, N.A. under the Debt Commitment Letter, or satisfaction of all conditions precedent to such funding such that the debt is available to be drawn at Closing. This condition links Lakepoint's equity funding obligation to the availability of the debt financing and creates a "double conditionality" risk, which is discussed in greater detail in Sections V.B and VI.A below.
3. Satisfaction of APA Closing Conditions. Satisfaction (or waiver by the applicable party) of all conditions to Closing set forth in the APA. Because the APA has not yet been finalized, the specific conditions to Closing are not yet determined. However, based on the current draft circulated on July 19, 2022, we anticipate customary conditions including accuracy of representations and warranties, performance of covenants, delivery of required consents and approvals, and absence of legal impediments to Closing.
4. No Material Adverse Effect. No material adverse effect shall have occurred with respect to Briarwood or the Acquired Assets between the date of the ECL (August 12, 2022) and the Closing date. The MAE condition in the ECL is analyzed in Section VI.B below with particular attention to its alignment with the MAE definition in the APA.
5. Accuracy of Briarwood Representations. The representations and warranties of Briarwood in the APA shall be accurate in all material respects as of the Closing date (or, to the extent such representations speak as of a specific date, as of such date). This condition effectively allows Lakepoint to decline funding if Briarwood's representations have become inaccurate in a manner that would permit Meridian to terminate the APA or refuse to close.
6. Legal Opinions. Delivery by Lakepoint's counsel of customary legal opinions. These opinions will likely address Lakepoint's valid formation, authority, enforceability of the ECL, and non-contravention. As Lakepoint's outside counsel for this Transaction, Calderwood & Harkness LLP may be called upon to deliver or arrange for the delivery of these opinions, and we should begin preparation of the opinion framework in due course.
7. No Legal Proceedings. No legal proceeding shall be pending or threatened by any governmental authority or third party that would enjoin, prohibit, or materially impair the consummation of the Transaction. This condition is customary and typically tracks similar language in the APA's closing conditions.
Analytical Note Regarding Conditionality. The foregoing conditions are, in the aggregate, consistent with market practice for equity commitment letters in sponsor-backed mid-market transactions. However, the condition requiring simultaneous debt funding (Condition 2) warrants particular attention because it creates an interdependency between the equity commitment and the debt commitment that could, in certain scenarios, result in the unwinding of both financing commitments simultaneously. This risk is discussed in detail in Section V.B below.
E. Termination and Expiration
The ECL provides that it will terminate automatically upon the earliest to occur of the following events:
(i) consummation of the Closing (at which point the equity will have been funded and the ECL will have been fully performed);
(ii) valid termination of the APA in accordance with its terms (which will render the ECL moot, as there will be no Transaction to finance);
(iii) mutual written agreement of Lakepoint and Meridian to terminate the ECL; or
(iv) a specified long-stop date (the "ECL Long-Stop Date").
Long-Stop Date Analysis. The ECL Long-Stop Date is a critical provision that establishes the outer boundary of Lakepoint's funding obligation. If the Transaction has not closed by the ECL Long-Stop Date, Lakepoint's obligation to fund the equity commitment will lapse automatically, and Meridian will have no further recourse against Lakepoint for the committed equity.
We must confirm the specific ECL Long-Stop Date and ensure that it is aligned with two other material dates in the Transaction timeline:
• Debt Commitment Expiration: The Debt Commitment Letter from Harborview National Bank, N.A. expires by its terms on February 5, 2023. If the ECL Long-Stop Date falls before February 5, 2023, the equity commitment could expire while the debt commitment remains available — a scenario that would effectively prevent Closing even if debt financing is available. Conversely, if the ECL Long-Stop Date falls after February 5, 2023, the equity commitment would remain outstanding after the debt commitment has expired, but Lakepoint's obligation to fund would likely not be triggered because the condition requiring simultaneous debt funding would not be satisfiable.
• LOI Exclusivity Period: The LOI provides Meridian with an exclusivity period that expires on March 28, 2023. While the exclusivity period is a contractual obligation between Meridian and Briarwood (rather than a financing commitment), the expiration of exclusivity could introduce competitive dynamics that affect the viability of the Transaction.
Recommendation. We recommend confirming that the ECL Long-Stop Date is no earlier than the Debt Commitment Letter expiration date of February 5, 2023, and ideally is coterminous with or extends beyond that date. Both commitment instruments should be aligned in timing to avoid a situation where one commitment expires while the other remains outstanding, creating an imbalance in the financing package.
F. Representations and Warranties of Lakepoint
Lakepoint makes the following representations and warranties in the ECL:
(i) Valid Formation and Good Standing. Lakepoint is a limited partnership duly organized, validly existing, and in good standing under the laws of the State of Delaware.
(ii) Authority. Lakepoint has full power and authority to execute, deliver, and perform its obligations under the ECL. The execution and delivery of the ECL and the performance of Lakepoint's obligations thereunder have been duly authorized by all necessary action on the part of Lakepoint and its general partner.
(iii) Non-Contravention. The execution, delivery, and performance of the ECL do not and will not conflict with or result in a breach of Lakepoint's organizational documents (including its limited partnership agreement) or any material agreement to which Lakepoint is a party.
(iv) Availability of Capital. Lakepoint has, and at Closing will have, committed capital sufficient to fund the $35,000,000 equity commitment. This representation is a critical assurance to Meridian that the equity funding will be available when needed.
(v) Enforceability. The ECL constitutes a legal, valid, and binding obligation of Lakepoint, enforceable against Lakepoint in accordance with its terms, subject to customary enforceability exceptions (including bankruptcy, insolvency, and equitable principles).
These representations are consistent with market practice and provide Meridian with a baseline level of comfort regarding Lakepoint's ability to perform its funding obligation. We note, however, that Calderwood & Harkness LLP has not independently verified Lakepoint's fund size, remaining available capital, or the existence of any competing claims on Lakepoint's committed capital. As Lakepoint is the PE sponsor and our client's parent entity, verification of Lakepoint's capital availability is a business judgment matter for Meridian management, and we defer to Gareth Holloway, Priya Anand, and Diana Ressler on this point. That said, should the deal team desire additional comfort, it would be appropriate to request a letter from Lakepoint's fund administrator or auditor confirming the availability of uncommitted capital in an amount not less than $35,000,000.
G. Transfer and Assignment
The ECL contains the following provisions regarding transfer and assignment:
• Meridian. The ECL is not transferable or assignable by Meridian without Lakepoint's prior written consent. This provision ensures that Lakepoint retains control over the identity of the beneficiary of its equity commitment and prevents Meridian from pledging or assigning the ECL to third parties (including lenders, creditors, or co-investors) without Lakepoint's approval.
• Lakepoint. Lakepoint may assign its obligations under the ECL to an affiliated fund or co-investment vehicle, subject to Meridian's consent (not to be unreasonably withheld), provided that Lakepoint remains primarily liable for the full $35,000,000 commitment notwithstanding any such assignment. This provision allows Lakepoint to allocate a portion of the equity commitment to a co-investment vehicle or parallel fund within the Lakepoint fund complex while maintaining primary liability for the full commitment amount. From Meridian's perspective, the requirement that Lakepoint remain primarily liable provides meaningful protection against the risk that an assignment to a less capitalized affiliate could impair the enforceability of the commitment.
We should confirm whether any co-investment vehicle or affiliated fund assignment is contemplated in connection with this Transaction and, if so, whether the proposed assignee has been identified. If an assignment is anticipated, we should review the organizational documents and capitalization of the proposed assignee to ensure that Meridian's rights under the ECL are not adversely affected.
IV. Enforcement Mechanics
A. Direct Enforcement by Meridian
The ECL grants Meridian the right to seek specific enforcement of Lakepoint's funding obligation, subject to the satisfaction (or waiver) of all conditions precedent to funding set forth in the ECL. Specific performance is designated as the primary remedy available to Meridian in the event that Lakepoint fails to fund the equity commitment at Closing when required to do so.
The ECL provides that monetary damages are available to Meridian only in circumstances where specific performance is not available (e.g., due to the lapse of the ECL Long-Stop Date or the impossibility of closing the Transaction) or where Meridian elects to waive its right to specific performance in favor of a damages claim. This remedial structure — which prioritizes equitable relief over legal remedies — is a favorable provision for Meridian, as it ensures that Meridian can compel the actual funding of the equity commitment at Closing rather than being limited to a damages claim that may be difficult to quantify or collect.
We note that the enforceability of a specific performance remedy is subject to general equitable principles, including the court's discretion in awarding injunctive relief and the adequacy of alternative remedies. Under New York law, which governs the ECL, specific performance is generally available for obligations to pay money only where the legal remedy is inadequate — for example, where the subject matter of the contract is unique or where damages would be difficult to calculate. In the context of an equity commitment letter supporting a time-sensitive acquisition, courts have generally been willing to enforce specific performance provisions, particularly where the commitment letter expressly provides for such relief and the conditions to funding have been satisfied. See, e.g., Hexion Specialty Chemicals, Inc. v. Huntsman Corp., 965 A.2d 715 (Del. Ch. 2008) (analyzing specific performance in the context of a merger agreement and related financing commitments). However, the precedent in this area is highly fact-specific, and the availability of specific performance cannot be assured in all circumstances.
B. Third-Party Beneficiary Rights
The ECL expressly provides that Briarwood Home Essentials, Inc. is not a third-party beneficiary of the ECL and has no right to enforce Lakepoint's obligation to fund the equity commitment. This provision means that Briarwood's sole recourse in the event of a financing failure lies against Meridian under the terms of the APA, not directly against Lakepoint under the ECL.
This structure is standard in sponsor-backed transactions and serves to insulate the PE sponsor from direct claims by the seller. The rationale for this approach is well-established: the sponsor's commitment runs to its portfolio company (the acquiror), and the seller's contractual relationship is with the acquiror under the APA, not with the sponsor. The seller's remedies for a buyer's failure to close — including any reverse break-up fee, specific performance rights, or damages claims — are governed by the APA and are enforceable against the acquiror.
However, the absence of third-party beneficiary rights for Briarwood places heightened importance on the following considerations:
(a) The APA should contain appropriate representations by Meridian regarding the availability of financing, including representations that Meridian has received the ECL and the Debt Commitment Letter, that such commitments are in full force and effect, and that Meridian has no reason to believe that any condition to funding will not be satisfied at Closing.
(b) Meridian should backstop its financing representations through its own covenants in the APA, including covenants to use commercially reasonable efforts to satisfy the conditions to funding under both the ECL and the Debt Commitment Letter.
(c) The APA should address the consequences of a financing failure, including whether Meridian's failure to obtain financing constitutes a breach of the APA (triggering damages or a reverse break-up fee) or merely a failure of a condition to Closing (permitting termination without liability).
We expect that Caldwell, Pruitt & Shaw LLP, on behalf of Briarwood, will focus on these issues during the APA negotiation process, and we should be prepared to address Briarwood's concerns regarding financing certainty in the context of the APA's representations, covenants, and termination provisions.
C. Cap on Liability
The ECL may contain a provision capping Lakepoint's maximum aggregate liability thereunder. In market-standard equity commitment letters, the sponsor's liability is typically capped at the commitment amount itself (here, $35,000,000) plus reasonable enforcement costs and expenses incurred by the beneficiary in compelling performance or recovering damages. We should confirm the specific liability cap, if any, set forth in the ECL.
Additionally, we should analyze whether the ECL or the APA contains any "reverse break-up fee" or "reverse termination fee" provision. A reverse break-up fee would obligate Lakepoint (or Meridian, funded by Lakepoint) to pay a specified fee to Briarwood in the event that the Transaction fails to close due to a financing failure or a buyer-side breach. We note that the LOI does not contemplate a break fee in either direction. As of the date of this memorandum, we have not identified a reverse break-up fee provision in the ECL, but we should confirm this with the deal team and assess whether Briarwood's counsel may request the inclusion of such a provision during APA negotiations.
The absence of a break fee is discussed as a risk item in Section VI.C below.
D. Dispute Resolution and Governing Law
The ECL is governed by the laws of the State of New York, without regard to conflicts-of-law principles. This choice of law is consistent with the governing law provisions in the LOI and the anticipated governing law provision in the APA, ensuring uniformity across the Transaction documents.
The ECL's dispute resolution mechanism should be confirmed. In our review of the instrument, we anticipate that disputes arising under the ECL will be resolved either through litigation in the courts of the State of New York (or the United States District Court for the Southern District of New York) or through binding arbitration. The specific mechanism should be verified and aligned with the dispute resolution provisions in the APA and the Debt Commitment Letter to avoid the risk of inconsistent proceedings or forum-shopping.
V. Interplay with Debt Commitment Letter
A. Summary of Debt Commitment
The debt component of the Transaction financing is governed by the Debt Commitment Letter dated August 5, 2022, issued by Harborview National Bank, N.A., in its capacity as lead arranger and administrative agent for the proposed senior secured term loan facility. Harborview is headquartered at One Harborview Plaza, Charlotte, North Carolina 28202. The relationship manager for the Transaction is Carolyn Dubois. The syndicate participant in the debt facility is Pinnacle Credit Partners, LP, located at 600 Lexington Avenue, Suite 2100, New York, New York 10022, with Rajan Mehta serving as the primary contact.
The key terms of the Debt Commitment Letter are summarized below:
A detailed analysis of the Debt Commitment Letter was set forth in a separate memorandum dated August 10, 2022, prepared by this office. The present memorandum focuses on the interplay between the ECL and the Debt Commitment Letter and should be read in conjunction with the August 10 memorandum.
B. Coordination of Conditions Precedent
As discussed in Section III.D above, Lakepoint's obligation to fund the equity commitment under the ECL is conditioned, among other things, on the simultaneous funding of the $60,000,000 debt commitment by Harborview National Bank, N.A. under the Debt Commitment Letter. Conversely, based on our review of the Debt Commitment Letter (as detailed in the August 10 memorandum), the Debt Commitment Letter contains a condition to funding that requires evidence of the availability of the equity contribution from Lakepoint in an amount sufficient, when combined with the debt proceeds, to fund the full Transaction consideration and related costs.
This cross-referencing structure creates a "circular conditionality" or "chicken-and-egg" risk: each financing party's obligation to fund is conditioned on the other party's funding (or readiness to fund), and neither party's obligation may become effective if the other party asserts that its own conditions have not been met. In a worst-case scenario, both Lakepoint and Harborview could decline to fund, each pointing to the other's non-performance as the basis for its own refusal.
This risk is not theoretical. In practice, the circular conditionality is typically managed through a simultaneous closing and funding mechanism, in which both the debt and equity are funded contemporaneously at Closing through an escrow or a coordinated wire-transfer process. The closing mechanics in the APA should be drafted to facilitate this simultaneous funding, with appropriate provisions for sequencing, escrow, and confirmation of availability of funds prior to the release of closing documents.
Recommendation. Calderwood & Harkness LLP should ensure that the APA closing conditions, the ECL conditions, and the Debt Commitment Letter conditions are harmonized and internally consistent. Specifically, we should negotiate for provisions that prevent either financing party from using the other's conditionality as a basis for non-performance. This may include (i) requiring each financing party to confirm readiness to fund in writing prior to Closing (e.g., through a "funds flow" confirmation letter), (ii) establishing a simultaneous funding escrow with Atlantic Fiduciary Trust Company or another mutually acceptable escrow agent, and (iii) including in the APA a representation by Meridian that both financing commitments are in full force and effect and that all conditions to funding have been satisfied or waived as of Closing.
C. Timing and Expiration Alignment
The alignment of expiration dates across the Transaction documents is critical to ensuring that the financing package remains intact through Closing. The relevant dates are as follows:
If the Debt Commitment Letter expires on February 5, 2023 and the Transaction has not yet closed, the ECL's condition requiring simultaneous debt funding would no longer be satisfiable (absent an extension of the Debt Commitment Letter), and Lakepoint's equity obligation would effectively fall away. Similarly, if the ECL Long-Stop Date occurs before the Debt Commitment Letter expiration, the equity commitment could lapse while the debt commitment remains available — though the debt commitment's condition on availability of equity would likely also become unsatisfiable.
Recommendation. If the Transaction timeline extends beyond the current anticipated closing window, extensions of both financing commitments must be obtained in parallel. We should coordinate with Harborview National Bank (Carolyn Dubois) and Lakepoint (Thomas Liang) to ensure that any extension requests are submitted and approved on a coordinated basis. The ticking fee under the Debt Commitment Letter (25 bps commencing November 3, 2022) should also be factored into the cost analysis if the Transaction timeline extends.
D. Sources and Uses Reconciliation
The following table sets forth the preliminary sources-and-uses analysis for the Transaction:
Sources:
Uses:
Analytical Note. The sources-and-uses reconciliation above balances on a dollar-for-dollar basis at $95,000,000. However, Transaction costs and expenses — including legal fees payable to Calderwood & Harkness LLP and Caldwell, Pruitt & Shaw LLP, advisory fees payable to Wavecrest Partners LLC and Greystone Hobbs & Co., regulatory filing fees, title and survey costs, transfer taxes, escrow agent fees, and other customary closing costs — are not explicitly covered in the identified sources. Additionally, potential working capital adjustments under the APA could increase or decrease the cash required at Closing.
We should confirm with Lakepoint (Thomas Liang) and Meridian management (Priya Anand, CFO) whether the $35,000,000 equity commitment includes a cushion for fees, costs, and working capital adjustments, or whether Meridian has other available cash or liquidity on its balance sheet to fund these items. If the equity commitment is sized to cover only the purchase price equity gap (approximately $27,000,000 at Closing, with the remaining $8,000,000 designated for the deferred earnout), there may be sufficient headroom within the $35,000,000 commitment to absorb Transaction costs. However, this should be confirmed rather than assumed, particularly in light of the inventory valuation dispute discussed in Section VI.D below.
VI. Key Risk Items and Observations
A. Double Conditionality Risk
As discussed in Sections III.D and V.B above, the mutual cross-conditioning between the ECL and the Debt Commitment Letter represents a structural risk in the Transaction financing architecture. The ECL conditions Lakepoint's equity funding obligation on the simultaneous availability of the Harborview debt, and the Debt Commitment Letter conditions Harborview's lending obligation on the availability of Lakepoint's equity. This circular structure means that a failure by either financing party could cascade into a failure of both commitments.
The practical implications of this risk are significant. If Harborview declines to fund the senior secured term loan — for example, due to a failure of a condition precedent related to environmental diligence findings at the Marysville manufacturing facility, the ongoing inventory valuation dispute between Briarwood and Meridian, or other APA-related conditions — Lakepoint could assert that its own ECL obligation has also fallen away because the condition requiring simultaneous debt funding has not been satisfied. In such a scenario, Meridian would be left without either the debt or the equity financing necessary to close the Transaction, and its sole remedies would be (i) to seek specific performance of the Debt Commitment Letter against Harborview (subject to the terms and conditions of that instrument) and (ii) to seek specific performance of the ECL against Lakepoint (which would be futile if the debt condition has not been satisfied).
Mitigation Strategies. We recommend the following approaches to mitigate the double conditionality risk:
(a) Independent Funding Obligations. To the extent possible, negotiate for the ECL to include a provision requiring Lakepoint to fund the equity commitment regardless of whether the debt financing is simultaneously available, provided that all other conditions to funding have been satisfied. This would decouple the equity commitment from the debt commitment and ensure that at least the equity component of the financing is available at Closing. However, we recognize that this approach may be commercially difficult to achieve, as Lakepoint may be unwilling to fund equity into a Transaction that lacks sufficient debt financing.
(b) Financing Condition as Buyer's Risk. Ensure that the financing condition in the APA is drafted as a buyer's risk — i.e., that Meridian's obligation to close is not conditioned on the receipt of financing, but rather that the availability of financing is a covenant of Meridian (supported by the ECL and Debt Commitment Letter). This structure would prevent Meridian from using a financing failure as a basis for terminating the APA and would preserve Briarwood's remedies (including any reverse break-up fee or damages claim) in the event of a buyer-side financing failure.
(c) Closing Mechanics. Draft the APA closing mechanics to include a simultaneous funding protocol with written confirmations of readiness to fund from both Lakepoint and Harborview prior to the release of closing documents and the consummation of the asset transfer.
B. Material Adverse Effect Condition
The ECL contains a condition precedent requiring that no material adverse effect shall have occurred with respect to Briarwood or the Acquired Assets between the date of the ECL (August 12, 2022) and the Closing date. This MAE condition could, if triggered, excuse Lakepoint from its obligation to fund the equity commitment.
The critical analytical question is whether the MAE definition in the ECL is aligned with the MAE definition in the APA. If the ECL contains a broader MAE definition than the APA — for example, by excluding fewer carve-outs from the definition of "material adverse effect," or by applying a lower materiality threshold — a gap could arise in which Lakepoint could assert that an MAE has occurred for purposes of the ECL (thereby excusing its funding obligation) even though the same event does not constitute an MAE under the APA (and therefore does not entitle Meridian to refuse to close). In such a scenario, Meridian could find itself obligated to close the Transaction under the APA but unable to fund the closing because Lakepoint has declined to provide the equity commitment.
Conversely, if the MAE definition in the ECL is narrower than the APA definition, the risk runs in the opposite direction: Meridian might be entitled to terminate the APA due to an MAE, but Lakepoint's funding obligation would remain in force. While this scenario is less problematic from a financing perspective, it could create confusion regarding the interaction between the ECL and the APA.
Recommendation. We recommend a detailed comparison of the MAE definitions in the ECL and the APA (once the APA is finalized). Ideally, the ECL should incorporate the APA's MAE definition by reference, ensuring that the same standard applies to both the buyer's closing condition and the sponsor's funding condition. Any discrepancies between the two definitions should be flagged for negotiation with Lakepoint.
C. No Break Fee
We note that neither the LOI nor the ECL contains a reverse break-up fee (also referred to as a reverse termination fee). In many sponsor-backed acquisitions, particularly those involving significant financing conditionality, the seller negotiates for a reverse break-up fee as a form of liquidated damages to compensate the seller for the time, cost, and opportunity cost incurred if the buyer fails to close due to a financing failure or other buyer-side breach.
The absence of a reverse break-up fee in the current Transaction documents means that, if Lakepoint declines to fund the equity commitment and the Transaction fails to close, Meridian's remedies against Lakepoint are limited to (i) specific performance of the ECL (which requires the satisfaction of all conditions precedent and may not be available if the conditions have not been met) and (ii) potentially a claim for monetary damages (which would be subject to the ECL's liability cap, if any, and would require proof of actual damages).
From Briarwood's perspective, the absence of a reverse break-up fee is a more significant concern, as Briarwood has no direct enforcement rights against Lakepoint under the ECL (as discussed in Section IV.B above) and would be limited to its remedies against Meridian under the APA. If Meridian lacks sufficient assets or liquidity to satisfy a damages claim, Briarwood could be left without meaningful recourse.
We anticipate that Caldwell, Pruitt & Shaw LLP, on behalf of Briarwood, may raise the issue of a reverse break-up fee during the APA negotiation process. The deal team should be prepared to address this issue and should consult with Lakepoint (Thomas Liang) regarding Lakepoint's willingness to support a reverse break-up fee, either directly (through a separate guarantee or side letter) or indirectly (through a commitment by Meridian, funded by Lakepoint's equity commitment).
D. Sufficiency of Commitment Amount
As discussed in Sections III.B and V.D above, the $35,000,000 equity commitment, when combined with the $60,000,000 in debt financing, covers the $95,000,000 purchase price on a dollar-for-dollar basis. However, the commitment does not explicitly address the following ancillary costs that may require funding at or around Closing:
(i) Transaction Costs. Legal fees (Calderwood & Harkness LLP, Caldwell, Pruitt & Shaw LLP), financial advisory fees (Wavecrest Partners LLC, Greystone Hobbs & Co.), regulatory filing fees (including HSR Act filing fees, if applicable), title and survey costs for the West Jefferson distribution center, transfer taxes, escrow agent fees (Atlantic Fiduciary Trust Company), and other customary closing costs. We estimate aggregate Transaction costs in the range of $2,000,000 to $4,000,000, although a more precise estimate will be available as the APA negotiation process progresses.
(ii) Working Capital Adjustments. The APA is expected to contain a working capital adjustment mechanism pursuant to which the cash-at-closing amount is adjusted upward or downward based on the difference between actual working capital at Closing and a negotiated target working capital amount. If actual working capital is below the target, the purchase price would be reduced, decreasing the equity funding need. If actual working capital exceeds the target, the purchase price would increase, potentially requiring additional equity funding.
(iii) Inventory Valuation Dispute. The due diligence process has identified a $2,500,000 variance between Briarwood's reported inventory book value of $14,300,000 (as of June 30, 2022) and the net realizable value ("NRV") determination of $11,800,000 prepared by Whitfield Ames LLP on behalf of Meridian. If this dispute results in a purchase price reduction, the equity need would decrease. However, if the purchase price remains at $95,000,000 notwithstanding the inventory dispute (e.g., because the parties agree to resolve the dispute through a post-closing adjustment mechanism rather than a pre-closing price reduction), the full $35,000,000 equity commitment will be required for the purchase price, and any incremental costs would need to be funded from other sources.
Recommendation. We recommend confirming with Lakepoint (Thomas Liang) whether additional equity capacity exists beyond the $35,000,000 committed under the ECL and whether the commitment is intended to cover Transaction costs and expenses in addition to the purchase price equity component. If the commitment is sized solely for the purchase price gap, we should identify alternative sources of funding for ancillary costs, including Meridian's existing cash on hand, an increase to the Lakepoint commitment, or an expansion of the Harborview debt facility (subject to the terms of the Debt Commitment Letter).
E. Lakepoint's Capital Availability
As noted in Section III.F above, the ECL contains a representation by Lakepoint that it has, and will have at Closing, committed capital sufficient to fund the $35,000,000 equity obligation. This representation provides Meridian with a contractual assurance of Lakepoint's ability to perform, and a breach of this representation would give rise to a claim by Meridian against Lakepoint.
However, Calderwood & Harkness LLP has not independently verified Lakepoint's fund size, available capital, outstanding commitments to other portfolio companies or pending investments, or the existence of any competing claims on Lakepoint's committed capital. Lakepoint's federal employer identification number is 04-3821567. As Lakepoint is the PE sponsor and our client's parent entity, the verification of Lakepoint's capital availability is fundamentally a business judgment matter for Meridian management. We defer to Gareth Holloway (CEO), Priya Anand (CFO), and Diana Ressler (General Counsel) on this point.
That said, if the deal team desires additional comfort, we could request a confirmation letter from Lakepoint's fund administrator or independent auditor certifying that uncommitted capital in an amount not less than $35,000,000 is available in Lakepoint's fund for deployment in connection with the Transaction. Such a confirmation would supplement the contractual representation in the ECL with independent third-party verification.
VII. Open Items and Recommendations
Based on the analysis set forth in this memorandum, we have identified the following open items and recommendations for the deal team. These items should be addressed promptly in coordination with the ongoing APA negotiation process and the broader Transaction workstream.
1. Confirm ECL Long-Stop Date. Verify the specific ECL Long-Stop Date and confirm alignment with the Harborview Debt Commitment Letter expiration date (February 5, 2023) and the LOI exclusivity period (March 28, 2023). If the ECL expires before the Debt Commitment Letter, the resulting timing gap creates a risk that the equity commitment could lapse while the debt commitment remains available (or vice versa). Ideally, the ECL Long-Stop Date should be coterminous with or extend beyond the Debt Commitment Letter expiration.
2. Harmonize Conditions Precedent. Work with the deal team, Wavecrest Partners LLC (Steven Marchetti, Lena Kowalski), and Lakepoint (Thomas Liang) to ensure that the APA closing conditions, ECL conditions, and Debt Commitment Letter conditions are internally consistent and do not create circular conditionality. Consider implementing a simultaneous funding protocol and requiring written confirmations of readiness to fund from both Lakepoint and Harborview prior to Closing.
3. Clarify Scope of Equity Commitment. Confirm whether the $35,000,000 equity commitment covers only the equity portion of the purchase price or also includes Transaction costs, expenses, and working capital adjustments. If the commitment is sized solely for the purchase price gap, identify alternative funding sources for ancillary costs.
4. Align MAE Definitions. Upon finalization of the APA, conduct a detailed comparison of the MAE definition in the ECL with the MAE definition in the APA. Flag any discrepancies for negotiation with Lakepoint. Ideally, the ECL should incorporate the APA's MAE definition by reference.
5. Confirm No Reverse Break-Up Fee Obligation. Note the absence of a reverse break-up fee in both the LOI and the ECL. Assess whether Briarwood's counsel (Caldwell, Pruitt & Shaw LLP, Rachel Underwood) may request a reverse break-up fee during APA negotiations, and coordinate with Lakepoint on the sponsor's willingness to support such a provision.
6. Review Assignment Provisions. Confirm whether any co-investment vehicle or affiliated fund assignment by Lakepoint is contemplated in connection with the Transaction. If so, review the organizational documents and capitalization of the proposed assignee to ensure that Meridian's rights under the ECL are not adversely affected and that Lakepoint's primary liability is preserved.
7. Coordinate with Debt Commitment Review. Cross-reference the findings in this memorandum with the Debt Commitment Letter Review Memorandum dated August 10, 2022 (separately prepared by this office). Ensure parallel tracking of all financing-related conditions, deadlines, fees (including the ticking fee commencing November 3, 2022), and coordination requirements.
8. Update Client. Prepare a summary memorandum for Diana Ressler (General Counsel) and Priya Anand (CFO) regarding the ECL's key terms and risk items. The client summary should be presented in a format accessible to non-lawyers and should highlight the actionable items requiring management attention or decision. Coordinate with Lakepoint's Thomas Liang on any clarification needed regarding capital availability, commitment scope, and the contemplated co-investment structure, if any.
VIII. Conclusion
The Lakepoint Capital Partners, LP Equity Commitment Letter dated August 12, 2022 is generally consistent with market practice for sponsor-backed asset acquisitions in the mid-market segment. The instrument reflects a straightforward commitment by Lakepoint to fund $35,000,000 in equity to Meridian Consumer Brands LLC to finance a portion of the $95,000,000 aggregate purchase price for the acquisition of the CleanLeaf and PureHaven consumer product lines from Briarwood Home Essentials, Inc.
The $35,000,000 equity commitment, when combined with the $60,000,000 senior secured term loan commitment from Harborview National Bank, N.A. pursuant to the Debt Commitment Letter dated August 5, 2022, provides the full purchase price for the Transaction. The ECL contains conditions to funding, enforcement mechanics, and termination provisions that are generally favorable to Meridian and consistent with the expectations for an equity commitment in a transaction of this nature and size.
However, as detailed in this memorandum, several key risk items and open issues warrant attention by the deal team:
• The cross-conditionality between the ECL and the Debt Commitment Letter creates a structural risk that a failure of either financing commitment could cascade into a failure of both, leaving Meridian without the financing necessary to close the Transaction.
• The alignment of expiration dates across the ECL, the Debt Commitment Letter, and the LOI must be confirmed to ensure that all instruments remain in force through Closing.
• The MAE condition in the ECL should be reviewed for alignment with the APA's MAE definition to avoid gaps in coverage.
• The sufficiency of the $35,000,000 commitment to cover ancillary Transaction costs, working capital adjustments, and the potential impact of the inventory valuation dispute should be confirmed with Lakepoint and Meridian management.
• The absence of a reverse break-up fee should be noted and addressed in the context of APA negotiations with Briarwood's counsel.
Calderwood & Harkness LLP will continue to monitor these items as the APA drafting and negotiation process proceeds. We will coordinate with the broader deal team, including Wavecrest Partners LLC (Steven Marchetti, Lena Kowalski), Meridian management (Gareth Holloway, Priya Anand, Diana Ressler), and Lakepoint (Thomas Liang), to ensure that the financing package is complete, internally consistent, and positioned to support a timely Closing of the Transaction.
We are available to discuss any aspect of this memorandum at your convenience.
This memorandum is a privileged and confidential attorney work product prepared by Calderwood & Harkness LLP for the exclusive use of the addressees identified herein. It is protected by the attorney-client privilege and the work product doctrine and may not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP. This memorandum does not constitute legal advice to any person or entity other than the addressees.
Prepared by:
Andrew Fitzpatrick Lead Associate, Mergers & Acquisitions Calderwood & Harkness LLP 599 Lexington Avenue, 36th Floor New York, New York 10022
Reviewed by:
Sandra Tung Responsible Partner, Mergers & Acquisitions Calderwood & Harkness LLP 599 Lexington Avenue, 36th Floor New York, New York 10022
Distribution: Sandra Tung, Oliver Mackenzie (Internal Calderwood & Harkness LLP Only)
Matter No.: 1011-00005
Source | Amount | Provider
Senior Secured Term Loan | $60,000,000 | Harborview National Bank, N.A.
Equity Commitment | $35,000,000 | Lakepoint Capital Partners, LP
Total Sources | $95,000,000
Term | Detail
Commitment Amount | $60,000,000
Facility Type | Senior secured term loan
Lead Arranger / Administrative Agent | Harborview National Bank, N.A.
Syndicate Participant | Pinnacle Credit Partners, LP
Interest Rate | SOFR + 375 basis points
Commitment Fee | 50 basis points on undrawn amounts
Ticking Fee | 25 basis points, commencing 90 days after the commitment date (i.e., commencing November 3, 2022)
Expiration Date | February 5, 2023
Document | Expiration / Long-Stop Date
Debt Commitment Letter | February 5, 2023
Equity Commitment Letter | To be confirmed
LOI Exclusivity Period | March 28, 2023
Source | Amount
Harborview National Bank, N.A. — Senior Secured Term Loan | $60,000,000
Lakepoint Capital Partners, LP — Equity Commitment | $35,000,000
Total Sources | $95,000,000
Use | Amount
Cash at Closing (including $9,500,000 to escrow) | $87,000,000
Earnout (deferred; not funded at Closing) | $8,000,000
Total Uses | $95,000,000

MEMORANDUM

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT

MATTER NO.: 1011-00005

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