Contract analysis

I. Introduction and Engagement Calderwood & Harkness LLP ("Calderwood & Harkness," "we," "our," or "us") has been engaged by Harrowgate Private Equity Fund IV, L.P. ("Harrowgate" or "HPE Fund IV"), a Delaware limited partnership, and Veldran Industries Holdings, Inc. ("Veldran" or the "Company"), a Delaware corporation, to render this opinion (the "Opinion") regarding certain United States federal income tax conseque

II. Summary of the Proposed Transaction A. Overview of the Parties Veldran Industries Holdings, Inc. ("Distributing"): Veldran is a Delaware corporation incorporated on March 14, 2019, Employer Identification Number 86-1920347, with its principal executive offices located at 2400 Commerce Park Drive, Suite 500, Charlotte, North Carolina 28217. Veldran is a diversified industrial products and engineered materials comp

III. Scope, Basis of Opinion, and Documents Reviewed A. Scope This Opinion addresses solely the United States federal income tax consequences of the Spin-Off under Sections 355 and 368(a)(1)(D) of the Code and certain related Code provisions. Specifically, this Opinion addresses whether (i) the Contribution and the Distribution, taken together, qualify as a reorganization under Section 368(a)(1)(D) of the Code, (ii)

1. Draft Representation Letter from Veldran Industries Holdings, Inc. and Harrowgate Private Equity Fund IV, L.P. (second draft dated July 11, 2022) (the "Representation Letter"). Note: The Representation Letter has not been finalized or executed as of the date hereof. Finalization and execution are prerequisites to the delivery of a final Opinion.

2. Certificate of Incorporation of Veldran Industries Holdings, Inc., as currently in effect, including all amendments thereto.

3. Amended and Restated Bylaws of Veldran Industries Holdings, Inc., as currently in effect.

4. Limited Liability Company Agreement of Harrowgate Veldran Holdings LLC, dated as of September 20, 2019, as currently in effect.

5. Amended and Restated Limited Partnership Agreement of Harrowgate Private Equity Fund IV, L.P., dated as of June 15, 2018, as currently in effect.

6. Stock Purchase Agreement, dated as of June 7, 2019, by and among Rennick Industrial Partners Fund II LP, as seller, and Veldran Industries Holdings, Inc., as buyer, relating to the acquisition of 100% of the outstanding capital stock of Kestrel Precision Controls, Inc. (the "Kestrel SPA").

7. Historical federal income tax returns of Veldran Industries Holdings, Inc. (EIN 86-1920347) for tax years 2019, 2020, and 2021, and historical federal income tax returns of Kestrel Precision Controls, Inc. (EIN 58-2847193) for tax years 2017, 2018, 2019, 2020, and 2021, in each case as prepared by Pemberton Rathbone LLP, Veldran's independent auditors and tax-return preparers.

8. First Lien Term Loan B Credit Agreement, dated as of September 20, 2019, by and among Veldran Industries Holdings, Inc., as borrower, the lenders party thereto, and Ashfield National Bank, N.A., as administrative agent, including all amendments, waivers, and supplements thereto.

9. Indenture, dated as of September 20, 2019, by and between Veldran Industries Holdings, Inc. and Colton Trust Company, as trustee, governing the 6.250% Senior Unsecured Notes due 2027, including all supplements thereto.

10. Preliminary valuation analysis prepared by Brackenridge & Co. (dated June 10, 2022), estimating the fair market value of the Precision Flow Solutions Division and the contemplated Meridian entity.

11. Veldran Industries Holdings, Inc. 2019 Equity Incentive Plan, as amended and restated, together with forms of award agreements.

12. Additional documents and information obtained through Calderwood & Harkness's due diligence process, as reflected in our diligence tracker and information request lists dated April 25, 2022 and May 16, 2022, including responses thereto received from Veldran, Harrowgate Capital Advisors LLC, and their respective advisors.

13. Applicable provisions of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Regulations promulgated thereunder, published IRS revenue rulings and revenue procedures, and relevant judicial authority, all as in effect on the date hereof. References herein to Sections of the "Code" or "IRC" are to sections of the Internal Revenue Code of 1986, as amended, and references to "Treasury Regulations" or

IV. Assumptions In rendering this Opinion, we have made the following assumptions, each of which is material to our analysis and conclusions:

1. Transaction Execution. We assume that the Transaction will be consummated in all material respects in the manner described in Section II of this Opinion and in accordance with the terms of the definitive transaction documents, which have not yet been finalized. We assume that no material deviations from the transaction structure as described herein will occur.

2. Representation Letter. We assume that the Representation Letter will be executed in substantially the form of the second draft dated July 11, 2022, and that all representations contained therein will be true, correct, and complete in all material respects both at the time of execution and at the time of the Distribution.

3. Contributed Business. We assume that the Contributed Business will constitute all of the assets and liabilities of the Precision Flow Solutions Division, as such assets and liabilities will be defined and delineated in the Separation Agreement, and that no material assets or liabilities of the Precision Flow Solutions Division will be retained by Veldran following the Contribution.

4. Formation of Meridian. We assume that Meridian will be duly incorporated under the laws of the State of Delaware prior to the Distribution, and that at the time of the Contribution and Distribution, Meridian will have no assets, liabilities, or operations other than those acquired in the Contribution (and any de minimis organizational matters incident to its formation).

5. Pro Rata Distribution. We assume that the Distribution will be effected on a pro rata basis to all holders of Veldran common stock on the Record Date, in the ratio of one share of Meridian common stock for each share of Veldran common stock held, and that no shareholder will receive any consideration in the Distribution other than Meridian common stock.

6. No Change in Law. We assume that no changes in applicable law, Treasury Regulations, IRS published rulings, or judicial authority will occur between the date hereof and the date of the Distribution that would materially affect the analysis set forth herein.

7. Financial Data. We assume the accuracy and completeness of all financial data provided to us, including the FY2021 segment financial data for the Engineered Coatings Division and the Precision Flow Solutions Division, the estimated adjusted tax basis of the Contributed Business assets, and the preliminary valuation prepared by Brackenridge & Co.

8. Debt Consents. We assume that any required consents, waivers, or amendments under the First Lien Term Loan B Credit Agreement and the 6.250% Senior Unsecured Notes indenture will be obtained on terms that do not alter the structure, terms, or tax analysis of the Transaction as described herein.

9. No Other Transactions. We assume that, other than the Contribution and the Distribution as described herein (and any internal reorganization steps that may be necessary to effectuate the transfer of the Contributed Business to Meridian), no other transaction, event, or series of transactions or events will occur that would, alone or in combination with the Spin-Off, cause the Distribution to fail to qualify for ta

V. Discussion and Analysis A. Qualification as a Reorganization Under IRC § 368(a)(1)(D)

Section 368(a)(1)(D) of the Code provides that a transfer by a corporation of part or all of its assets to another corporation qualifies as a "reorganization" if, immediately after the transfer, the transferor corporation (or one or more of its shareholders, including shareholders who were shareholders immediately before the transfer) is in "control" of the transferee corporation within the meaning of Section 368(c)

Section 355(a) of the Code provides that, if certain requirements are met, a distribution by a corporation (the "distributing corporation") to its shareholders of stock of a corporation that the distributing corporation controls (the "controlled corporation") is not treated as a distribution of property to which Section 301 applies, and no gain or loss is recognized by the shareholders on the receipt of such stock. T

1. Control Requirement — § 355(a)(1)(A) and § 368(c)

Section 355(a)(1)(A) of the Code requires that the distributing corporation distribute stock of a controlled corporation. "Control" is defined by reference to Section 368(c), which, as noted above, requires ownership of stock possessing at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the total number of shares of all other classes of stock. In the proposed

2. Active Trade or Business Requirement — § 355(b)

Section 355(b)(1) of the Code provides that a distribution qualifies under Section 355(a) only if both the distributing corporation (and any applicable "separate affiliated group" member) and the controlled corporation are engaged, immediately after the distribution, in the "active conduct of a trade or business." Section 355(b)(2) further provides that a corporation is treated as engaged in the active conduct of a t

Section 355(b)(2)(C) Issue. Under Section 355(b)(2)(C) of the Code, a trade or business is not treated as meeting the five-year active conduct requirement if, during the five-year period ending on the date of the Distribution, the trade or business was acquired in a transaction in which gain or loss was recognized in whole or in part. The Kestrel Acquisition was a taxable stock acquisition in which the selling shareh

Section 355(b)(2)(D) Safe Harbor. Section 355(b)(2)(D) of the Code provides a safe harbor to the prohibition in Section 355(b)(2)(C). Under this safe harbor, a trade or business that was acquired in a taxable transaction within the five-year period will nevertheless be treated as satisfying the five-year active conduct requirement if such trade or business had been conducted by the acquired corporation (or its predec

3. Device Test — § 355(a)(1)(B)

Section 355(a)(1)(B) of the Code provides that a distribution does not qualify for tax-free treatment under Section 355(a) if the transaction was used principally as a "device" for the distribution of the earnings and profits of the distributing corporation or the controlled corporation, or both. The device test is a facts-and-circumstances analysis, and Treasury Regulations Section 1.355-2(d) identifies certain fact

4. Distribution of All Stock — § 355(a)(1)(D)

Section 355(a)(1)(D) of the Code requires that, in a distribution described in Section 355(a), the distributing corporation distribute all of the stock and securities of the controlled corporation held by it immediately before the distribution, or distribute an amount of stock constituting control within the meaning of Section 368(c) and the Secretary is satisfied that the retention of stock by the distributing corpo

5. Business Purpose Treasury Regulations Section 1.355-2(b)(1) provides that Section 355 applies to a distribution only if the distribution is carried out for one or more corporate business purposes. A "corporate business purpose" is a real and substantial non-federal-tax purpose germane to the business of the distributing corporation, the controlled corporation, or the affiliated group (as defined in Section 1504(a)

Section 355(d) of the Code provides that, if a distribution to which Section 355 (or so much of Section 356 as relates to Section 355) applies is a "disqualified distribution," the distributing corporation shall be treated as having recognized gain on the distribution equal to the excess of the fair market value of the controlled corporation's stock over the distributing corporation's adjusted basis in such stock. A

Section 355(e) of the Code, commonly referred to as the "anti-Morris Trust" provision, provides that if a distribution to which Section 355 applies is part of a "plan (or series of related transactions)" pursuant to which one or more persons acquire, directly or indirectly, stock representing a 50-percent or greater interest (within the meaning of Section 355(d)(4)) in the distributing corporation or any controlled c