firpta-certificate-request-letter.docx

1003-00004 · Harrowgate Private Equity Fund IV LP · Closing

firpta-certificate-request-letter.docx DOCUMENT M&A / Corporate

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CALDERWOOD & HARKNESS LLP One Liberty Plaza, 55th Floor New York, NY 10006 Telephone: (212) 455-7800 Facsimile: (212) 455-7801 www.calderwoodharkness.com

Matter No. 1003-00004

April 7, 2025

Patricia Okafor General Counsel & Corporate Secretary Pennfield Holdings, Inc. 4500 Commerce Boulevard, Suite 800 Charlotte, NC 28202

Re: Request for FIRPTA Certificate of Non-Foreign Status and IRS Notice — Agreement and Plan of Merger, dated as of April 7, 2025, among Harrowgate Private Equity Fund IV LP, Pinnacle Merger Sub, Inc., and Pennfield Holdings, Inc.

Dear Ms. Okafor:

Calderwood & Harkness LLP represents Harrowgate Private Equity Fund IV LP, a Delaware limited partnership (the "Buyer"), and Pinnacle Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Buyer ("Merger Sub"), in connection with the transactions contemplated by the Agreement and Plan of Merger, dated as of April 7, 2025 (the "Merger Agreement"), among the Buyer, Merger Sub, and Pennfield Holdings, Inc., a Delaware corporation (the "Company"; Nasdaq: PNFD). As you are aware, the Merger Agreement provides for a reverse triangular merger pursuant to which Merger Sub will merge with and into the Company (the "Merger"), with the Company surviving the Merger as a wholly owned subsidiary of the Buyer. The aggregate merger consideration payable to the stockholders of the Company in connection with the Merger is $980,000,000, representing $15.95 per share on a fully diluted basis of 61,450,000 shares of the Company's common stock.

The purpose of this letter is to formally request that the Company deliver certain certificates and notices required under the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA") provisions of the Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury Regulations promulgated thereunder. These deliverables are necessary to facilitate the orderly consummation of the Merger, to ensure compliance with applicable withholding obligations, and to protect the interests of the Company's stockholders who would otherwise be subject to FIRPTA withholding on the merger consideration payable to them. Each of the requests set forth below is described in detail in the following sections.

1. FIRPTA Certificate of Non-Foreign Status (Treasury Regulations § 1.1445-2(c)(3))

1.1 Legal Basis for the Request

Under Section 1445(a) of the Code, a transferee of a United States real property interest ("USRPI") is generally required to deduct and withhold a tax equal to fifteen percent (15%) of the amount realized by a foreign person on the disposition of such USRPI. This withholding obligation applies broadly and, in the absence of an applicable exemption, would require the Buyer and Merger Sub (as transferees) to withhold from the merger consideration payable in connection with the Merger.

Section 1445(b)(2) of the Code provides a critical exemption from the withholding requirement described above. Specifically, Section 1445(b)(2) provides that no withholding is required if the transferor furnishes to the transferee an affidavit (commonly referred to as a "Non-Foreign Affidavit" or a "FIRPTA Certificate") stating, under penalty of perjury, that the transferor is not a "foreign person" as that term is defined in Section 7701(b)(1)(A) of the Code. Treasury Regulations Section 1.1445-2(c)(3) sets forth the specific requirements for such a certification when the transferor is a domestic corporation. Pursuant to that regulation, the certification must include: (i) the corporation's name; (ii) the corporation's address; and (iii) the corporation's U.S. employer identification number, together with a statement that the corporation is not a foreign corporation within the meaning of the Code.

The Merger constitutes a disposition by the stockholders of the Company of their interests in the Company, and the withholding obligation under Section 1445 of the Code may apply at the entity level in certain circumstances in connection with the payment of merger consideration. Delivery of the FIRPTA Certificate by the Company facilitates compliance with these requirements and enables the Buyer and Merger Sub to rely on the exemption from withholding provided by Section 1445(b)(2) of the Code for the benefit of all stockholders of the Company, including those who are United States persons and would not otherwise be subject to FIRPTA withholding.

1.2 Specific Request

In light of the foregoing, we respectfully request that the Company deliver to the Buyer and Merger Sub, at or prior to the closing of the Merger (the "Closing," estimated to occur on or about June 30, 2025), a duly executed certificate of non-foreign status in the form prescribed by Treasury Regulations Section 1.1445-2(c)(3). A draft form of such certificate is attached hereto as Exhibit A for the Company's review and convenience.

The FIRPTA Certificate should include each of the following elements:

(a) The Company's full legal name: Pennfield Holdings, Inc.;

(b) The Company's principal office address: 4500 Commerce Boulevard, Suite 800, Charlotte, NC 28202;

(d) A statement, signed under penalty of perjury by an authorized officer of the Company, that the Company is not a "foreign person" within the meaning of Sections 1445 and 7701 of the Code — that is, a statement confirming that the Company is a domestic corporation organized under the laws of the State of Delaware and is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Code and the Treasury Regulations promulgated thereunder).

We note that the obligation to deliver this FIRPTA Certificate is consistent with the Company's obligations under the Merger Agreement. Specifically, the closing deliverables provisions of the Merger Agreement expressly require the Company to deliver to the Buyer and Merger Sub, as a condition precedent to the Buyer's obligation to consummate the Closing, a duly executed FIRPTA Certificate in accordance with Treasury Regulations Section 1.1445-2(c)(3). We ask that the Company prepare and execute the FIRPTA Certificate substantially in the form attached as Exhibit A, or in such other form as may be mutually agreed upon by the parties and their respective counsel.

1.3 Consequences of Failure to Deliver

We wish to emphasize the importance of timely delivery of the FIRPTA Certificate. In the event that the Company fails or is unable to deliver the FIRPTA Certificate at or prior to the Closing, the Buyer and/or Merger Sub may be required under Section 1445(a) of the Code to withhold up to fifteen percent (15%) of the amount realized by each stockholder of the Company in connection with the Merger. On an aggregate basis, such withholding could amount to as much as $147,000,000, significantly reducing the net cash merger consideration payable to the Company's stockholders and creating administrative burdens for stockholders who would be required to file for refunds with the Internal Revenue Service (the "IRS").

The Buyer accordingly requests the Company's full cooperation in preparing and delivering the FIRPTA Certificate on a timely basis in order to avoid the imposition of unnecessary withholding that would otherwise reduce the cash merger consideration payable to the Company's stockholders. The Buyer and Merger Sub have no reason to believe that the Company is a foreign person, and delivery of the FIRPTA Certificate should therefore be a straightforward matter.

2. Notice to the IRS Regarding USRPHC Status (Treasury Regulations § 1.897-2(h))

2.1 Legal Basis for the Request

Under Section 897(a) of the Code, gain or loss of a nonresident alien individual or a foreign corporation from the disposition of a USRPI is treated as if such gain or loss were effectively connected with the conduct of a trade or business within the United States. For purposes of Section 897, an interest in a domestic corporation constitutes a USRPI if the corporation is, or has been at any time during the shorter of (i) the five-year period ending on the date of the disposition or (ii) the period during which the taxpayer held such interest, a "United States real property holding corporation" ("USRPHC") within the meaning of Section 897(c)(2) of the Code.

A domestic corporation is classified as a USRPHC if the fair market value of its United States real property interests equals or exceeds fifty percent (50%) of the sum of the aggregate fair market values of (i) its United States real property interests, (ii) its interests in real property located outside the United States, and (iii) any other of its assets which are used or held for use in a trade or business. This determination is made on a testing date basis in accordance with the rules set forth in Treasury Regulations Section 1.897-2(b).

Treasury Regulations Section 1.897-2(h) provides a mechanism by which a domestic corporation may, in connection with a disposition of interests in such corporation, deliver a notice to the IRS stating that interests in the corporation are not USRPIs because the corporation is not, and has not been during the relevant lookback period, a USRPHC. The delivery of such a notice to the IRS, together with the delivery of the FIRPTA Certificate described in Section 1 above, facilitates the exemption from FIRPTA withholding and provides the IRS with the information necessary to verify the non-USRPHC status of the corporation.

2.2 Specific Request

We respectfully request that the Company prepare and deliver to the IRS, at or prior to the Closing, a notice in the form prescribed by Treasury Regulations Section 1.897-2(h) (the "IRS Notice"). A draft form of such IRS Notice is attached hereto as Exhibit B for the Company's review and convenience.

The IRS Notice should include the following statements and information:

(a) A statement that the Company is a domestic corporation organized under the laws of the State of Delaware;

(b) A statement that interests in the Company are not United States real property interests within the meaning of Section 897 of the Code;

(c) A statement that the Company is not, and has not been at any time during the five-year period ending on the date of the Merger, a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code;

(d) The Company's full legal name: Pennfield Holdings, Inc.;

(e) The Company's principal office address: 4500 Commerce Boulevard, Suite 800, Charlotte, NC 28202; and

(f) The Company's U.S. employer identification number (EIN): 82-4917305.

We further request that the Company provide a copy of the executed IRS Notice to Calderwood & Harkness LLP, on behalf of the Buyer and Merger Sub, concurrently with the delivery of such notice to the IRS. This will permit the Buyer's counsel to confirm that the IRS Notice has been duly delivered and to maintain a complete record of all FIRPTA-related deliverables in the closing files for the transaction.

2.3 Alternative — If the Company Is or Has Been a USRPHC

If, upon completion of its analysis, the Company determines that it is, or has been at any time during the applicable five-year lookback period, a USRPHC within the meaning of Section 897(c)(2) of the Code, the Company should promptly notify the Buyer's counsel, Calderwood & Harkness LLP, so that appropriate FIRPTA withholding procedures can be established and implemented prior to the Closing.

In such event, the Buyer and Merger Sub reserve all rights under Section 1445 of the Code and the applicable Treasury Regulations to withhold from the merger consideration any amounts required to be withheld in connection with the disposition of USRPIs. The Buyer would work cooperatively with the Company and its advisors to implement withholding and reporting procedures that comply with applicable law while minimizing disruption to the payment of merger consideration to the Company's stockholders.

We note that the Company's USRPHC analysis should be conducted with particular care given the nature and scope of the Company's operations. As the Buyer understands, Pennfield Holdings operates approximately 209 retail locations, consisting of 187 company-owned stores and 22 outlet locations across 34 states, in addition to the Company's corporate headquarters facility in Charlotte, North Carolina. The Company's analysis of its USRPHC status should account for the fair market value of all real property interests held by the Company (including, without limitation, owned real property, leasehold interests that may constitute USRPIs under applicable Treasury Regulations, and any other interests in real property within the meaning of Section 897 of the Code) relative to the aggregate fair market value of the Company's total assets, including its non-real-property business assets, inventory, intellectual property, and other intangible assets. We anticipate that, given the nature of the Company's business and the composition of its asset base, the Company should be able to demonstrate that it is not, and has not been, a USRPHC during the relevant period; however, this determination ultimately rests with the Company and its tax advisors.

3. Form and Timing of Delivery

The FIRPTA Certificate described in Section 1 above and the IRS Notice described in Section 2 above (or, in the alternative, written confirmation of the Company's USRPHC status and proposed alternative withholding arrangements) should be delivered no later than two (2) business days prior to the Closing Date. For reference, the estimated Closing Date is June 30, 2025, and the Outside Date under the Merger Agreement is September 30, 2025. Accordingly, absent a change in the anticipated Closing Date, we would expect delivery of the requested documents on or before June 26, 2025.

Each certificate and notice should be executed by an authorized officer of the Company. We suggest that the FIRPTA Certificate and IRS Notice be executed by either Patricia Okafor, General Counsel & Corporate Secretary, or Derek Simmons, Chief Financial Officer, each of whom we understand to be duly authorized officers of the Company.

The executed originals of the FIRPTA Certificate and a copy of the IRS Notice should be delivered in counterpart to each of the following:

(a) Calderwood & Harkness LLP One Liberty Plaza, 55th Floor New York, NY 10006

Attention: Oliver Mackenzie

(b) Harrowgate Private Equity Fund IV LP 1200 Market Street, Suite 3100 Wilmington, DE 19801

Attention: Jonah Whitfield

Please note that we are also providing a copy of this request letter to the Company's outside counsel, Calloway, Briggs & Harmon LLP (Attention: Janet Alcorn), 900 Third Avenue, 30th Floor, New York, NY 10022, for coordination purposes. We would welcome the opportunity to coordinate directly with Ms. Alcorn and her team on the preparation and finalization of these deliverables to ensure that all parties are aligned on the form and substance of the FIRPTA Certificate and IRS Notice.

4. Merger Agreement Reference

As noted above, the specific closing deliverable provisions of the Merger Agreement require the Company to deliver to the Buyer and Merger Sub, as a condition precedent to the Buyer's and Merger Sub's obligation to consummate the Closing, a properly executed FIRPTA Certificate in compliance with Treasury Regulations Section 1.1445-2(c)(3) and a duly prepared and delivered IRS Notice in compliance with Treasury Regulations Section 1.897-2(h). We draw your attention to these provisions and respectfully remind the Company of its contractual obligations in this regard.

We further note that the delivery of the FIRPTA Certificate and IRS Notice is identified as an open action item on the Closing Checklist & Conditions Tracker maintained by Calderwood & Harkness LLP in connection with Project Summit (the internal code name for this transaction). We will continue to track this item and will follow up with the Company and its counsel as the Closing Date approaches to confirm timely completion.

Nothing in this letter shall be construed as a waiver of, or limitation on, any rights of the Buyer or Merger Sub under the Merger Agreement, applicable law, or otherwise. The Buyer and Merger Sub expressly reserve all rights under the Merger Agreement, including, without limitation: (i) the right to require delivery of the FIRPTA Certificate and IRS Notice as a condition to Closing; (ii) the right to withhold from the aggregate merger consideration any amounts required to be deducted and withheld under the Code, the Treasury Regulations, or any other applicable federal, state, local, or non-U.S. tax law; and (iii) all rights and remedies available to the Buyer and Merger Sub in the event of a breach by the Company of its obligations under the Merger Agreement with respect to tax-related deliverables.

5. Coordination with Tax Advisors

We suggest that the Company coordinate with its independent tax advisor, Crestline Tax Advisors LLC (Alan Fitzgerald, Managing Director; 300 South Brevard Street, Suite 1500, Charlotte, NC 28202), and its independent auditor, Pemberton & Associates LLP (Kevin Tarrant Corporation, Lead Audit Partner), in preparing the USRPHC analysis referenced in Section 2.3 above and in finalizing the FIRPTA Certificate and IRS Notice. In particular, the USRPHC determination requires a careful analysis of the fair market values of the Company's assets, and we believe that the Company's tax advisor and auditor are well positioned to assist with this analysis and to provide any supporting documentation that may be necessary.

We also wish to advise that Sylvia Hartwell, Specialist Partner in the Tax Group at Calderwood & Harkness LLP, is available to discuss the form and substance of the requested certificates and notices with the Company's advisors, including Mr. Fitzgerald at Crestline Tax Advisors and Ms. Alcorn at Calloway, Briggs & Harmon. Ms. Hartwell can be reached at (212) 455-7845 or shartwell@calderwoodharkness.com. We believe that early coordination among the parties' respective tax advisors will facilitate the efficient preparation and timely delivery of these FIRPTA-related deliverables.

We respectfully request that you provide prompt confirmation of your receipt of this letter and the Company's anticipated timeline for delivery of the FIRPTA Certificate and IRS Notice. We are prepared to provide draft forms of both the FIRPTA Certificate and the IRS Notice for the Company's review and comment, and we have enclosed initial drafts of each as Exhibits A and B to this letter. Should the Company wish to propose alternative forms for these documents, we are happy to review and discuss any such proposals with the Company's counsel and tax advisors.

This request is made without prejudice to any other rights or remedies of the Buyer or Merger Sub under the Merger Agreement or applicable law. We appreciate the Company's attention to this matter and look forward to working cooperatively with you and your colleagues to ensure the timely completion of all FIRPTA-related deliverables in advance of the Closing.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Oliver Mackenzie, Partner One Liberty Plaza, 55th Floor New York, NY 10006 Telephone: (212) 455-7812

Email: omackenzie@calderwoodharkness.com

cc:

Jonah Whitfield, Principal, Harrowgate Capital Partners LLC

Rebecca Talmadge, Partner, Harrowgate Capital Partners LLC

Sylvia Hartwell, Partner, Calderwood & Harkness LLP (Tax)

Janet Alcorn, Calloway, Briggs & Harmon LLP (counsel to the Company and the Special Committee)

Alan Fitzgerald, Crestline Tax Advisors LLC (Company's tax advisor)

Enclosures:

(1) Draft Form of FIRPTA Certificate (Non-Foreign Affidavit) (Exhibit A)

(2) Draft Form of IRS Notice under Treasury Regulations Section 1.897-2(h) (Exhibit B)

EXHIBIT A

DRAFT FORM OF FIRPTA CERTIFICATE (Non-Foreign Affidavit)

CERTIFICATE OF NON-FOREIGN STATUS PURSUANT TO TREASURY REGULATIONS SECTION 1.1445-2(c)(3)

Section 1445 of the Internal Revenue Code of 1986, as amended (the "Code"), provides that a transferee of a United States real property interest must withhold tax if the transferor is a foreign person. For purposes of informing Harrowgate Private Equity Fund IV LP, a Delaware limited partnership (the "Buyer"), and Pinnacle Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Buyer ("Merger Sub"), that withholding of tax is not required upon the disposition of interests in Pennfield Holdings, Inc., a Delaware corporation (the "Company"), in connection with the merger (the "Merger") of Merger Sub with and into the Company pursuant to the Agreement and Plan of Merger, dated as of April 7, 2025, among the Buyer, Merger Sub, and the Company (the "Merger Agreement"), the undersigned hereby certifies, on behalf of the Company, the following:

1. The Company is not a foreign corporation, foreign partnership, foreign trust, or foreign estate, as those terms are defined in the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder. The Company is a corporation duly organized and existing under the laws of the State of Delaware.

2. The Company's U.S. employer identification number (EIN) is 82-4917305.

3. The Company's principal office address is:

Pennfield Holdings, Inc. 4500 Commerce Boulevard, Suite 800 Charlotte, NC 28202

4. The Company understands that this certification may be disclosed to the Internal Revenue Service by the Buyer or Merger Sub, and that any false statement contained herein could be punished by fine, imprisonment, or both.

The Company understands that the Buyer and Merger Sub are relying on this certification in determining that withholding is not required under Section 1445 of the Code in connection with the Merger.

Under penalty of perjury, I declare that I have examined this certification and, to the best of my knowledge and belief, it is true, correct, and complete.

PENNFIELD HOLDINGS, INC.

By: ________

Name: ________

Title: ________

Date: ________

EXHIBIT B

DRAFT FORM OF IRS NOTICE UNDER TREASURY REGULATIONS SECTION 1.897-2(h)

NOTICE TO THE INTERNAL REVENUE SERVICE PURSUANT TO TREASURY REGULATIONS SECTION 1.897-2(h)

Notice is hereby provided to the Internal Revenue Service (the "IRS"), in accordance with Treasury Regulations Section 1.897-2(h), of the following facts and determinations with respect to Pennfield Holdings, Inc., a Delaware corporation (the "Company"):

1. Identity of the Corporation. The Company's full legal name is Pennfield Holdings, Inc. The Company is a domestic corporation duly organized and existing under the laws of the State of Delaware. The Company's U.S. employer identification number (EIN) is 82-4917305. The Company's principal office address is:

Pennfield Holdings, Inc. 4500 Commerce Boulevard, Suite 800 Charlotte, NC 28202

2. Non-USRPHC Status. The Company is not, and has not been at any time during the five-year period ending on the date hereof, a United States real property holding corporation ("USRPHC") within the meaning of Section 897(c)(2) of the Internal Revenue Code of 1986, as amended (the "Code"). Specifically, the fair market value of the Company's United States real property interests has not, at any time during such five-year period, equaled or exceeded fifty percent (50%) of the sum of the aggregate fair market values of (i) the Company's United States real property interests, (ii) the Company's interests in real property located outside the United States, and (iii) the Company's other assets used or held for use in a trade or business.

3. Interests in the Company Are Not USRPIs. Because the Company is not and has not been a USRPHC within the meaning of Section 897(c)(2) of the Code during the applicable testing period, interests in the Company are not United States real property interests within the meaning of Section 897(c)(1) of the Code.

4. Transaction. This notice is provided in connection with the merger (the "Merger") of Pinnacle Merger Sub, Inc., a Delaware corporation (EIN: 93-4081562) and a wholly owned subsidiary of Harrowgate Private Equity Fund IV LP, a Delaware limited partnership, with and into the Company, pursuant to the Agreement and Plan of Merger, dated as of April 7, 2025, among Harrowgate Private Equity Fund IV LP, Pinnacle Merger Sub, Inc., and the Company.

This notice is made under penalty of perjury. The undersigned, a duly authorized officer of the Company, declares that the statements set forth in this notice are, to the best of the undersigned's knowledge and belief, true, correct, and complete.

PENNFIELD HOLDINGS, INC.

By: ________

Name: ________

Title: ________

Date: ________

This notice should be delivered to the Internal Revenue Service at the address prescribed by Treasury Regulations Section 1.897-2(h)(2) and applicable IRS guidance, including:

Internal Revenue Service Philadelphia Service Center Philadelphia, PA 19255-0215 (or such other address as may be specified by the IRS for the filing of notices under Treasury Regulations Section 1.897-2(h))

CALDERWOOD & HARKNESS LLP One Liberty Plaza, 55th Floor New York, NY 10006 Telephone: (212) 455-7800 Facsimile: (212) 455-7801 www.calderwoodharkness.com
Matter No. 1003-00004
April 7, 2025
Patricia Okafor General Counsel & Corporate Secretary Pennfield Holdings, Inc. 4500 Commerce Boulevard, Suite 800 Charlotte, NC 28202
Re: Request for FIRPTA Certificate of Non-Foreign Status and IRS Notice — Agreement and Plan of Merger, dated as of April 7, 2025, among Harrowgate Private Equity Fund IV LP, Pinnacle Merger Sub, Inc., and Pennfield Holdings, Inc.
Dear Ms. Okafor:
Calderwood & Harkness LLP represents Harrowgate Private Equity Fund IV LP, a Delaware limited partnership (the "Buyer"), and Pinnacle Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Buyer ("Merger Sub"), in connection with the transactions contemplated by the Agreement and Plan of Merger, dated as of April 7, 2025 (the "Merger Agreement"), among the Buyer, Merger Sub, and Pennfield Holdings, Inc., a Delaware corporation (the "Company"; Nasdaq: PNFD). As you are aware, the Merger Agreement provides for a reverse triangular merger pursuant to which Merger Sub will merge with and into the Company (the "Merger"), with the Company surviving the Merger as a wholly owned subsidiary of the Buyer. The aggregate merger consideration payable to the stockholders of the Company in connection with the Merger is $980,000,000, representing $15.95 per share on a fully diluted basis of 61,450,000 shares of the Company's common stock.
The purpose of this letter is to formally request that the Company deliver certain certificates and notices required under the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA") provisions of the Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury Regulations promulgated thereunder. These deliverables are necessary to facilitate the orderly consummation of the Merger, to ensure compliance with applicable withholding obligations, and to protect the interests of the Company's stockholders who would otherwise be subject to FIRPTA withholding on the merger consideration payable to them. Each of the requests set forth below is described in detail in the following sections.
1. FIRPTA Certificate of Non-Foreign Status (Treasury Regulations § 1.1445-2(c)(3))
1.1 Legal Basis for the Request
Under Section 1445(a) of the Code, a transferee of a United States real property interest ("USRPI") is generally required to deduct and withhold a tax equal to fifteen percent (15%) of the amount realized by a foreign person on the disposition of such USRPI. This withholding obligation applies broadly and, in the absence of an applicable exemption, would require the Buyer and Merger Sub (as transferees) to withhold from the merger consideration payable in connection with the Merger.
Section 1445(b)(2) of the Code provides a critical exemption from the withholding requirement described above. Specifically, Section 1445(b)(2) provides that no withholding is required if the transferor furnishes to the transferee an affidavit (commonly referred to as a "Non-Foreign Affidavit" or a "FIRPTA Certificate") stating, under penalty of perjury, that the transferor is not a "foreign person" as that term is defined in Section 7701(b)(1)(A) of the Code. Treasury Regulations Section 1.1445-2(c)(3) sets forth the specific requirements for such a certification when the transferor is a domestic corporation. Pursuant to that regulation, the certification must include: (i) the corporation's name; (ii) the corporation's address; and (iii) the corporation's U.S. employer identification number, together with a statement that the corporation is not a foreign corporation within the meaning of the Code.
The Merger constitutes a disposition by the stockholders of the Company of their interests in the Company, and the withholding obligation under Section 1445 of the Code may apply at the entity level in certain circumstances in connection with the payment of merger consideration. Delivery of the FIRPTA Certificate by the Company facilitates compliance with these requirements and enables the Buyer and Merger Sub to rely on the exemption from withholding provided by Section 1445(b)(2) of the Code for the benefit of all stockholders of the Company, including those who are United States persons and would not otherwise be subject to FIRPTA withholding.
1.2 Specific Request
In light of the foregoing, we respectfully request that the Company deliver to the Buyer and Merger Sub, at or prior to the closing of the Merger (the "Closing," estimated to occur on or about June 30, 2025), a duly executed certificate of non-foreign status in the form prescribed by Treasury Regulations Section 1.1445-2(c)(3). A draft form of such certificate is attached hereto as Exhibit A for the Company's review and convenience.
The FIRPTA Certificate should include each of the following elements:
(a) The Company's full legal name: Pennfield Holdings, Inc.;
(b) The Company's principal office address: 4500 Commerce Boulevard, Suite 800, Charlotte, NC 28202;
(c) The Company's U.S. employer identification number (EIN): 82-4917305; and
(d) A statement, signed under penalty of perjury by an authorized officer of the Company, that the Company is not a "foreign person" within the meaning of Sections 1445 and 7701 of the Code — that is, a statement confirming that the Company is a domestic corporation organized under the laws of the State of Delaware and is not a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Code and the Treasury Regulations promulgated thereunder).
We note that the obligation to deliver this FIRPTA Certificate is consistent with the Company's obligations under the Merger Agreement. Specifically, the closing deliverables provisions of the Merger Agreement expressly require the Company to deliver to the Buyer and Merger Sub, as a condition precedent to the Buyer's obligation to consummate the Closing, a duly executed FIRPTA Certificate in accordance with Treasury Regulations Section 1.1445-2(c)(3). We ask that the Company prepare and execute the FIRPTA Certificate substantially in the form attached as Exhibit A, or in such other form as may be mutually agreed upon by the parties and their respective counsel.
1.3 Consequences of Failure to Deliver
We wish to emphasize the importance of timely delivery of the FIRPTA Certificate. In the event that the Company fails or is unable to deliver the FIRPTA Certificate at or prior to the Closing, the Buyer and/or Merger Sub may be required under Section 1445(a) of the Code to withhold up to fifteen percent (15%) of the amount realized by each stockholder of the Company in connection with the Merger. On an aggregate basis, such withholding could amount to as much as $147,000,000, significantly reducing the net cash merger consideration payable to the Company's stockholders and creating administrative burdens for stockholders who would be required to file for refunds with the Internal Revenue Service (the "IRS").
The Buyer accordingly requests the Company's full cooperation in preparing and delivering the FIRPTA Certificate on a timely basis in order to avoid the imposition of unnecessary withholding that would otherwise reduce the cash merger consideration payable to the Company's stockholders. The Buyer and Merger Sub have no reason to believe that the Company is a foreign person, and delivery of the FIRPTA Certificate should therefore be a straightforward matter.
2. Notice to the IRS Regarding USRPHC Status (Treasury Regulations § 1.897-2(h))
2.1 Legal Basis for the Request
Under Section 897(a) of the Code, gain or loss of a nonresident alien individual or a foreign corporation from the disposition of a USRPI is treated as if such gain or loss were effectively connected with the conduct of a trade or business within the United States. For purposes of Section 897, an interest in a domestic corporation constitutes a USRPI if the corporation is, or has been at any time during the shorter of (i) the five-year period ending on the date of the disposition or (ii) the period during which the taxpayer held such interest, a "United States real property holding corporation" ("USRPHC") within the meaning of Section 897(c)(2) of the Code.
A domestic corporation is classified as a USRPHC if the fair market value of its United States real property interests equals or exceeds fifty percent (50%) of the sum of the aggregate fair market values of (i) its United States real property interests, (ii) its interests in real property located outside the United States, and (iii) any other of its assets which are used or held for use in a trade or business. This determination is made on a testing date basis in accordance with the rules set forth in Treasury Regulations Section 1.897-2(b).
Treasury Regulations Section 1.897-2(h) provides a mechanism by which a domestic corporation may, in connection with a disposition of interests in such corporation, deliver a notice to the IRS stating that interests in the corporation are not USRPIs because the corporation is not, and has not been during the relevant lookback period, a USRPHC. The delivery of such a notice to the IRS, together with the delivery of the FIRPTA Certificate described in Section 1 above, facilitates the exemption from FIRPTA withholding and provides the IRS with the information necessary to verify the non-USRPHC status of the corporation.
2.2 Specific Request
We respectfully request that the Company prepare and deliver to the IRS, at or prior to the Closing, a notice in the form prescribed by Treasury Regulations Section 1.897-2(h) (the "IRS Notice"). A draft form of such IRS Notice is attached hereto as Exhibit B for the Company's review and convenience.
The IRS Notice should include the following statements and information:
(a) A statement that the Company is a domestic corporation organized under the laws of the State of Delaware;
(b) A statement that interests in the Company are not United States real property interests within the meaning of Section 897 of the Code;
(c) A statement that the Company is not, and has not been at any time during the five-year period ending on the date of the Merger, a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code;
(d) The Company's full legal name: Pennfield Holdings, Inc.;
(e) The Company's principal office address: 4500 Commerce Boulevard, Suite 800, Charlotte, NC 28202; and
(f) The Company's U.S. employer identification number (EIN): 82-4917305.
We further request that the Company provide a copy of the executed IRS Notice to Calderwood & Harkness LLP, on behalf of the Buyer and Merger Sub, concurrently with the delivery of such notice to the IRS. This will permit the Buyer's counsel to confirm that the IRS Notice has been duly delivered and to maintain a complete record of all FIRPTA-related deliverables in the closing files for the transaction.
2.3 Alternative — If the Company Is or Has Been a USRPHC
If, upon completion of its analysis, the Company determines that it is, or has been at any time during the applicable five-year lookback period, a USRPHC within the meaning of Section 897(c)(2) of the Code, the Company should promptly notify the Buyer's counsel, Calderwood & Harkness LLP, so that appropriate FIRPTA withholding procedures can be established and implemented prior to the Closing.
In such event, the Buyer and Merger Sub reserve all rights under Section 1445 of the Code and the applicable Treasury Regulations to withhold from the merger consideration any amounts required to be withheld in connection with the disposition of USRPIs. The Buyer would work cooperatively with the Company and its advisors to implement withholding and reporting procedures that comply with applicable law while minimizing disruption to the payment of merger consideration to the Company's stockholders.
We note that the Company's USRPHC analysis should be conducted with particular care given the nature and scope of the Company's operations. As the Buyer understands, Pennfield Holdings operates approximately 209 retail locations, consisting of 187 company-owned stores and 22 outlet locations across 34 states, in addition to the Company's corporate headquarters facility in Charlotte, North Carolina. The Company's analysis of its USRPHC status should account for the fair market value of all real property interests held by the Company (including, without limitation, owned real property, leasehold interests that may constitute USRPIs under applicable Treasury Regulations, and any other interests in real property within the meaning of Section 897 of the Code) relative to the aggregate fair market value of the Company's total assets, including its non-real-property business assets, inventory, intellectual property, and other intangible assets. We anticipate that, given the nature of the Company's business and the composition of its asset base, the Company should be able to demonstrate that it is not, and has not been, a USRPHC during the relevant period; however, this determination ultimately rests with the Company and its tax advisors.
3. Form and Timing of Delivery
The FIRPTA Certificate described in Section 1 above and the IRS Notice described in Section 2 above (or, in the alternative, written confirmation of the Company's USRPHC status and proposed alternative withholding arrangements) should be delivered no later than two (2) business days prior to the Closing Date. For reference, the estimated Closing Date is June 30, 2025, and the Outside Date under the Merger Agreement is September 30, 2025. Accordingly, absent a change in the anticipated Closing Date, we would expect delivery of the requested documents on or before June 26, 2025.
Each certificate and notice should be executed by an authorized officer of the Company. We suggest that the FIRPTA Certificate and IRS Notice be executed by either Patricia Okafor, General Counsel & Corporate Secretary, or Derek Simmons, Chief Financial Officer, each of whom we understand to be duly authorized officers of the Company.
The executed originals of the FIRPTA Certificate and a copy of the IRS Notice should be delivered in counterpart to each of the following:
(a) Calderwood & Harkness LLP One Liberty Plaza, 55th Floor New York, NY 10006
Attention: Oliver Mackenzie
(b) Harrowgate Private Equity Fund IV LP 1200 Market Street, Suite 3100 Wilmington, DE 19801
Attention: Jonah Whitfield
Please note that we are also providing a copy of this request letter to the Company's outside counsel, Calloway, Briggs & Harmon LLP (Attention: Janet Alcorn), 900 Third Avenue, 30th Floor, New York, NY 10022, for coordination purposes. We would welcome the opportunity to coordinate directly with Ms. Alcorn and her team on the preparation and finalization of these deliverables to ensure that all parties are aligned on the form and substance of the FIRPTA Certificate and IRS Notice.
4. Merger Agreement Reference
As noted above, the specific closing deliverable provisions of the Merger Agreement require the Company to deliver to the Buyer and Merger Sub, as a condition precedent to the Buyer's and Merger Sub's obligation to consummate the Closing, a properly executed FIRPTA Certificate in compliance with Treasury Regulations Section 1.1445-2(c)(3) and a duly prepared and delivered IRS Notice in compliance with Treasury Regulations Section 1.897-2(h). We draw your attention to these provisions and respectfully remind the Company of its contractual obligations in this regard.
We further note that the delivery of the FIRPTA Certificate and IRS Notice is identified as an open action item on the Closing Checklist & Conditions Tracker maintained by Calderwood & Harkness LLP in connection with Project Summit (the internal code name for this transaction). We will continue to track this item and will follow up with the Company and its counsel as the Closing Date approaches to confirm timely completion.
Nothing in this letter shall be construed as a waiver of, or limitation on, any rights of the Buyer or Merger Sub under the Merger Agreement, applicable law, or otherwise. The Buyer and Merger Sub expressly reserve all rights under the Merger Agreement, including, without limitation: (i) the right to require delivery of the FIRPTA Certificate and IRS Notice as a condition to Closing; (ii) the right to withhold from the aggregate merger consideration any amounts required to be deducted and withheld under the Code, the Treasury Regulations, or any other applicable federal, state, local, or non-U.S. tax law; and (iii) all rights and remedies available to the Buyer and Merger Sub in the event of a breach by the Company of its obligations under the Merger Agreement with respect to tax-related deliverables.
5. Coordination with Tax Advisors
We suggest that the Company coordinate with its independent tax advisor, Crestline Tax Advisors LLC (Alan Fitzgerald, Managing Director; 300 South Brevard Street, Suite 1500, Charlotte, NC 28202), and its independent auditor, Pemberton & Associates LLP (Kevin Tarrant Corporation, Lead Audit Partner), in preparing the USRPHC analysis referenced in Section 2.3 above and in finalizing the FIRPTA Certificate and IRS Notice. In particular, the USRPHC determination requires a careful analysis of the fair market values of the Company's assets, and we believe that the Company's tax advisor and auditor are well positioned to assist with this analysis and to provide any supporting documentation that may be necessary.
We also wish to advise that Sylvia Hartwell, Specialist Partner in the Tax Group at Calderwood & Harkness LLP, is available to discuss the form and substance of the requested certificates and notices with the Company's advisors, including Mr. Fitzgerald at Crestline Tax Advisors and Ms. Alcorn at Calloway, Briggs & Harmon. Ms. Hartwell can be reached at (212) 455-7845 or shartwell@calderwoodharkness.com. We believe that early coordination among the parties' respective tax advisors will facilitate the efficient preparation and timely delivery of these FIRPTA-related deliverables.
We respectfully request that you provide prompt confirmation of your receipt of this letter and the Company's anticipated timeline for delivery of the FIRPTA Certificate and IRS Notice. We are prepared to provide draft forms of both the FIRPTA Certificate and the IRS Notice for the Company's review and comment, and we have enclosed initial drafts of each as Exhibits A and B to this letter. Should the Company wish to propose alternative forms for these documents, we are happy to review and discuss any such proposals with the Company's counsel and tax advisors.
This request is made without prejudice to any other rights or remedies of the Buyer or Merger Sub under the Merger Agreement or applicable law. We appreciate the Company's attention to this matter and look forward to working cooperatively with you and your colleagues to ensure the timely completion of all FIRPTA-related deliverables in advance of the Closing.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Oliver Mackenzie, Partner One Liberty Plaza, 55th Floor New York, NY 10006 Telephone: (212) 455-7812
Email: omackenzie@calderwoodharkness.com
cc:
Jonah Whitfield, Principal, Harrowgate Capital Partners LLC
Rebecca Talmadge, Partner, Harrowgate Capital Partners LLC
Sylvia Hartwell, Partner, Calderwood & Harkness LLP (Tax)
Janet Alcorn, Calloway, Briggs & Harmon LLP (counsel to the Company and the Special Committee)
Alan Fitzgerald, Crestline Tax Advisors LLC (Company's tax advisor)
Enclosures:
(1) Draft Form of FIRPTA Certificate (Non-Foreign Affidavit) (Exhibit A)
(2) Draft Form of IRS Notice under Treasury Regulations Section 1.897-2(h) (Exhibit B)
EXHIBIT A
DRAFT FORM OF FIRPTA CERTIFICATE (Non-Foreign Affidavit)
CERTIFICATE OF NON-FOREIGN STATUS PURSUANT TO TREASURY REGULATIONS SECTION 1.1445-2(c)(3)
Section 1445 of the Internal Revenue Code of 1986, as amended (the "Code"), provides that a transferee of a United States real property interest must withhold tax if the transferor is a foreign person. For purposes of informing Harrowgate Private Equity Fund IV LP, a Delaware limited partnership (the "Buyer"), and Pinnacle Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Buyer ("Merger Sub"), that withholding of tax is not required upon the disposition of interests in Pennfield Holdings, Inc., a Delaware corporation (the "Company"), in connection with the merger (the "Merger") of Merger Sub with and into the Company pursuant to the Agreement and Plan of Merger, dated as of April 7, 2025, among the Buyer, Merger Sub, and the Company (the "Merger Agreement"), the undersigned hereby certifies, on behalf of the Company, the following:
1.  The Company is not a foreign corporation, foreign partnership, foreign trust, or foreign estate, as those terms are defined in the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder. The Company is a corporation duly organized and existing under the laws of the State of Delaware.
2.  The Company's U.S. employer identification number (EIN) is 82-4917305.
3.  The Company's principal office address is:
Pennfield Holdings, Inc. 4500 Commerce Boulevard, Suite 800 Charlotte, NC 28202
4.  The Company understands that this certification may be disclosed to the Internal Revenue Service by the Buyer or Merger Sub, and that any false statement contained herein could be punished by fine, imprisonment, or both.
The Company understands that the Buyer and Merger Sub are relying on this certification in determining that withholding is not required under Section 1445 of the Code in connection with the Merger.
Under penalty of perjury, I declare that I have examined this certification and, to the best of my knowledge and belief, it is true, correct, and complete.
PENNFIELD HOLDINGS, INC.
By: ________
Name: ________
Title: ________
Date: ________
EXHIBIT B
DRAFT FORM OF IRS NOTICE UNDER TREASURY REGULATIONS SECTION 1.897-2(h)
NOTICE TO THE INTERNAL REVENUE SERVICE PURSUANT TO TREASURY REGULATIONS SECTION 1.897-2(h)
Notice is hereby provided to the Internal Revenue Service (the "IRS"), in accordance with Treasury Regulations Section 1.897-2(h), of the following facts and determinations with respect to Pennfield Holdings, Inc., a Delaware corporation (the "Company"):
1.  Identity of the Corporation. The Company's full legal name is Pennfield Holdings, Inc. The Company is a domestic corporation duly organized and existing under the laws of the State of Delaware. The Company's U.S. employer identification number (EIN) is 82-4917305. The Company's principal office address is:
Pennfield Holdings, Inc. 4500 Commerce Boulevard, Suite 800 Charlotte, NC 28202
2.  Non-USRPHC Status. The Company is not, and has not been at any time during the five-year period ending on the date hereof, a United States real property holding corporation ("USRPHC") within the meaning of Section 897(c)(2) of the Internal Revenue Code of 1986, as amended (the "Code"). Specifically, the fair market value of the Company's United States real property interests has not, at any time during such five-year period, equaled or exceeded fifty percent (50%) of the sum of the aggregate fair market values of (i) the Company's United States real property interests, (ii) the Company's interests in real property located outside the United States, and (iii) the Company's other assets used or held for use in a trade or business.
3.  Interests in the Company Are Not USRPIs. Because the Company is not and has not been a USRPHC within the meaning of Section 897(c)(2) of the Code during the applicable testing period, interests in the Company are not United States real property interests within the meaning of Section 897(c)(1) of the Code.
4.  Transaction. This notice is provided in connection with the merger (the "Merger") of Pinnacle Merger Sub, Inc., a Delaware corporation (EIN: 93-4081562) and a wholly owned subsidiary of Harrowgate Private Equity Fund IV LP, a Delaware limited partnership, with and into the Company, pursuant to the Agreement and Plan of Merger, dated as of April 7, 2025, among Harrowgate Private Equity Fund IV LP, Pinnacle Merger Sub, Inc., and the Company.
This notice is made under penalty of perjury. The undersigned, a duly authorized officer of the Company, declares that the statements set forth in this notice are, to the best of the undersigned's knowledge and belief, true, correct, and complete.
PENNFIELD HOLDINGS, INC.
By: ________
Name: ________
Title: ________
Date: ________
This notice should be delivered to the Internal Revenue Service at the address prescribed by Treasury Regulations Section 1.897-2(h)(2) and applicable IRS guidance, including:
Internal Revenue Service Philadelphia Service Center Philadelphia, PA 19255-0215 (or such other address as may be specified by the IRS for the filing of notices under Treasury Regulations Section 1.897-2(h))

CALDERWOOD & HARKNESS LLP

EXHIBIT A

PENNFIELD HOLDINGS, INC.

EXHIBIT B

PENNFIELD HOLDINGS, INC.

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