Contract analysis

I. Executive Summary This memorandum evaluates the availability and, if available, the advisability of a Section 338(h)(10) election under Internal Revenue Code ("IRC" or the "Code") § 338(h)(10) and Treasury Regulations § 1.338(h)(10)-1 in connection with the proposed $980,000,000 take-private acquisition of Pennfield Holdings, Inc. ("Pennfield" or the "Target") by Harrowgate Private Equity Fund IV LP ("HPE Fund IV"

II. Background — Transaction Summary A. Parties and Structure The Transaction involves the following parties and is structured as described below: Buyer. Harrowgate Private Equity Fund IV LP is a Delaware limited partnership (EIN: 87-2263148) organized for the purpose of making private equity investments primarily in the consumer, retail, and services sectors. The general partner of HPE Fund IV is Harrowgate Capital

III. Legal Framework — Section 338(h)(10) Elections A. Statutory and Regulatory Overview

Section 338 of the Internal Revenue Code provides an elective mechanism by which certain stock purchases can be treated, for federal income tax purposes, as if the acquiring corporation had purchased the assets of the target rather than its stock. The election is a tax fiction: notwithstanding that the legal form of the transaction is a stock acquisition, the tax consequences are recast as if the target sold all of i

IV. Analysis — Availability of Section 338(h)(10) for the Pennfield Transaction A. Threshold Issue: Reverse Triangular Merger Is Not a Qualified Stock Purchase The proposed Transaction is structured as a reverse triangular merger under DGCL § 251. Pinnacle Merger Sub, Inc. will merge with and into Pennfield Holdings, Inc., with Pennfield surviving as the Surviving Corporation and becoming an indirect wholly owned sub

Section 338(g) as an Alternative. We note that a regular Section 338(g) election under IRC § 338(a) — which does not require seller consent and does not require the target to be an S corporation or a member of a selling consolidated group — could theoretically be available if the Transaction were restructured as a stock purchase constituting a QSP. However, as discussed in Section VI below, a 338(g) election imposes

V. Hypothetical Advisability Analysis — Step-Up Benefits vs. Tax Costs At the Sponsor's request, we have prepared the following hypothetical analysis of the potential benefits and costs of a Section 338(h)(10) election, assuming arguendo that such an election were available for the Pennfield Transaction. This analysis is intended to inform the Sponsor's understanding of the economic trade-offs involved and to confirm

VI. Comparison with Section 338(g) Election For completeness, we briefly address the alternative of a unilateral Section 338(g) election under IRC § 338(a). Unlike a Section 338(h)(10) election, a Section 338(g) election does not require the consent of the seller or the selling group. It may be made unilaterally by the acquiring corporation with respect to any qualified stock purchase. As discussed above, however, th

VII. Coordination with Other Tax Analysis This memorandum should be read in conjunction with the following related memoranda, each of which addresses a distinct aspect of the Transaction's tax profile: Tax Structure Memorandum (March 28, 2025). The Tax Structure Memorandum, authored by the undersigned and distributed to the same recipient list, addresses the federal income tax consequences of the reverse triangular m

VIII. Conclusion and Recommendation Based on the analysis set forth in this memorandum, we reach the following conclusions: Primary Conclusion. A Section 338(h)(10) election is not available for the proposed acquisition of Pennfield Holdings, Inc. by Harrowgate Private Equity Fund IV LP. The Transaction, as structured, is a reverse triangular merger under DGCL § 251, which does not constitute a "qualified stock purch

IX. Limitations and Disclaimer This memorandum is prepared for the sole benefit of Harrowgate Private Equity Fund IV LP and its affiliates, including Harrowgate Capital Partners LLC and Harrowgate Capital Partners IV GP LLC, in