[sheet: Tracker Overview]
Field | Value
Matter Code | HRW-SPIN-001
Engagement Number | 1003-00005
Client | Harrowgate Private Equity Fund IV, L.P. (EIN 84-3291067)
Portfolio Company | Veldran Industries Holdings, Inc. (EIN 86-1920347)
SpinCo (Planned) | Meridian Flow Technologies, Inc. (not yet incorporated)
Engagement Description | Tax opinion ("should" level) under IRC §§ 355 and 368(a)(1)(D) for proposed pro rata spin-off of Precision Flow Solutions Division into Meridian Flow Technologies, Inc.
Responsible Partner | Leonard Cross
Billing Partner | Sylvia Hartwell
Lead Associate | Garrett Simmons
Working Associate | Leila Nazari
Engagement Opened | April 11, 2022
Kick-off Call | April 18, 2022
Initial Request List Circulated | April 25, 2022
Matter Status | DORMANT — paused indefinitely per client instruction August 22, 2022
Last Updated | August 29, 2022
Coordinating Corporate Counsel (Harrowgate) | Whitfield & Gage LLP — Priya Chandrasekar
Corporate Counsel (Veldran) | Thornapple McCord LLP — David Ochoa
Auditors / Tax Return Preparers (Veldran) | Pemberton Rathbone LLP — Harold Weiss (Tax), Lisa Engstrom (Audit)
Financial Advisor | Brackenridge & Co. — Samuel Ng
Key Client Contacts | Christine Yeung (Harrowgate GC); Philip Crundell (Veldran GC); Rita Subramanian (Veldran CFO)
[sheet: Diligence Requests]
Item # | Category | Sub-Category | Description of Request | Request Date | Source of Request | Requested From | C&H Responsible | Date Received | Review Status | Reviewed By | Notes / Open Issues
1 | Organizational Documents | Veldran | Certificate of Incorporation — Veldran Industries Holdings, Inc. (incorporated March 14, 2019, Delaware) | 2022-04-25 | Initial Request List | Philip Crundell (Veldran) | Garrett Simmons | 2022-05-02 | Complete | Leila Nazari | Confirmed Delaware corporation; incorporated March 14, 2019
2 | Organizational Documents | Veldran | Current bylaws of Veldran Industries Holdings, Inc. | 2022-04-25 | Initial Request List | Philip Crundell (Veldran) | Garrett Simmons | 2022-05-02 | Complete | Leila Nazari
3 | Organizational Documents | Harrowgate Veldran Holdings LLC | Certificate of Formation and Operating Agreement — Harrowgate Veldran Holdings LLC (DE LLC, EIN 86-1483920); wholly owned subsidiary of HPE Fund IV holding 62.4% of Veldran common stock (46,488,000 shares) | 2022-04-25 | Initial Request List | Christine Yeung (Harrowgate) | Garrett Simmons | 2022-05-05 | Complete | Garrett Simmons | Single-member LLC; sole member is HPE Fund IV
4 | Organizational Documents | Harrowgate Entities | Limited Partnership Agreement — Harrowgate Private Equity Fund IV, L.P. (EIN 84-3291067) | 2022-04-25 | Initial Request List | Christine Yeung (Harrowgate) | Garrett Simmons | 2022-05-10 | Complete | Sylvia Hartwell | Vintage 2018; $6.8 billion fund size; GP is Harrowgate Capital Partners IV GP LLC (EIN 84-3291104); Investment Advisor is Harrowgate Capital Advisors LLC (EIN 83-2756891)
5 | Organizational Documents | Harrowgate GP | Operating Agreement — Harrowgate Capital Partners IV GP LLC (EIN 84-3291104) | 2022-04-25 | Initial Request List | Christine Yeung (Harrowgate) | Garrett Simmons | 2022-05-10 | Complete | Sylvia Hartwell
6 | Organizational Documents | Kestrel | Certificate of Incorporation — Kestrel Precision Controls, Inc. (Georgia corporation, EIN 58-2847193; founded February 12, 2003) | 2022-04-25 | Initial Request List | Philip Crundell (Veldran) | Leila Nazari | 2022-05-12 | Complete | Leila Nazari | Confirmed founded February 12, 2003 in Georgia; critical for § 355(b)(2)(D) five-year ATB analysis
7 | Organizational Documents | Veldran Subsidiaries | List of all material Veldran subsidiaries with formation documents | 2022-05-03 | Email — Simmons to Chandrasekar (May 3, 2022) | Priya Chandrasekar (Whitfield & Gage) | Garrett Simmons | 2022-05-18 | Complete | Garrett Simmons | Includes all operating subs; Kestrel is wholly owned sub since June 7, 2019
8 | Organizational Documents | Meridian (SpinCo) | Draft Certificate of Incorporation — Meridian Flow Technologies, Inc. (planned Delaware corporation) | 2022-04-25 | Initial Request List | Priya Chandrasekar (Whitfield & Gage) | Garrett Simmons | Outstanding | N/A | SpinCo not yet incorporated as of dormancy; Whitfield & Gage preparing draft
9 | Tax Returns | Veldran — Federal | Federal income tax returns (Forms 1120) — Veldran Industries Holdings, Inc. (EIN 86-1920347) — tax years 2017–2021 | 2022-04-25 | Initial Request List | Harold Weiss (Pemberton Rathbone LLP) | Leila Nazari | 2022-05-23 | Complete | Garrett Simmons | Received via email from Nazari to Weiss (May 9, 2022 request); 2017–2018 returns reflect pre-HPE ownership
10 | Tax Returns | Veldran — State | State income tax returns — Veldran — all filing jurisdictions — tax years 2017–2021 | 2022-04-25 | Initial Request List | Harold Weiss (Pemberton Rathbone LLP) | Leila Nazari | 2022-06-03 | Complete | Leila Nazari | Filings in DE, NC, GA, and 12 other states
11 | Tax Returns | Kestrel — Federal | Federal income tax returns — Kestrel Precision Controls, Inc. (EIN 58-2847193) — tax years 2017–2021 (included in Veldran consolidated from June 7, 2019; separate returns for 2017–June 6, 2019) | 2022-05-09 | Email — Nazari to Weiss (May 9, 2022) | Harold Weiss (Pemberton Rathbone LLP) | Leila Nazari | 2022-05-30 | Complete | Garrett Simmons | Pre-acquisition returns (2017–short period 2019) prepared by prior accounting firm; post-acquisition included in VIH consolidated
12 | Tax Returns | Kestrel — State | State income tax returns — Kestrel — Georgia and other jurisdictions — tax years 2017–2021 | 2022-05-09 | Email — Nazari to Weiss (May 9, 2022) | Harold Weiss (Pemberton Rathbone LLP) | Leila Nazari | 2022-06-08 | In Review | Leila Nazari | Georgia returns received; other state returns partially received; review incomplete at dormancy
13 | Tax Returns | Elections | Copies of all tax elections filed — Veldran and Kestrel — including any § 338 elections in connection with Kestrel acquisition | 2022-04-25 | Initial Request List / Supplemental (May 16, 2022) | Harold Weiss (Pemberton Rathbone LLP) / Philip Crundell (Veldran) | Leila Nazari | 2022-06-15 | Complete | Garrett Simmons | No § 338 election was made for Kestrel acquisition; confirmed taxable stock acquisition
14 | Tax Returns | IRS Correspondence | Copies of any IRS examination reports, correspondence, notices, or closing agreements — Veldran and Kestrel — 2017–present | 2022-04-25 | Initial Request List | Harold Weiss (Pemberton Rathbone LLP) | Leila Nazari | 2022-05-30 | Complete | Leila Nazari | No open IRS examinations; no material correspondence reported
15 | Tax Returns | Extensions | Copies of extension requests (Forms 7004) — Veldran and Kestrel — 2017–2021 | 2022-05-09 | Email — Nazari to Weiss (May 9, 2022) | Harold Weiss (Pemberton Rathbone LLP) | Leila Nazari | 2022-05-30 | Complete | Leila Nazari | All extensions timely filed
16 | Acquisition History | Kestrel Stock Purchase Agreement | Stock Purchase Agreement dated June 7, 2019 — acquisition of Kestrel Precision Controls, Inc. by Veldran from Rennick Industrial Partners Fund II LP (EIN 82-3017564) for $295 million (all cash) | 2022-04-25 | Initial Request List | Philip Crundell (Veldran) | Garrett Simmons | 2022-05-08 | Complete | Garrett Simmons | Taxable stock acquisition; no § 338 election; critical for § 355(b)(2)(C)/(D) analysis
17 | Acquisition History | Kestrel Basis Step-Up Computations | Basis step-up analysis and computations for Kestrel assets post-acquisition (if any) | 2022-05-16 | Supplemental Request — Kestrel (May 16, 2022) | Philip Crundell (Veldran) / Harold Weiss (Pemberton Rathbone) | Leila Nazari | 2022-06-20 | Complete | Garrett Simmons | No basis step-up since no § 338 election; Veldran's basis in Kestrel stock = $295M
18 | Acquisition History | Kestrel Five-Year Operating History | Documentation of Kestrel's continuous operation of the precision flow controls business from founding (February 12, 2003) through the acquisition date (June 7, 2019) — needed for § 355(b)(2)(D) safe harbor | 2022-05-16 | Supplemental Request — Kestrel (May 16, 2022) | Philip Crundell (Veldran) | Leila Nazari | 2022-06-25 | Complete | Garrett Simmons | Kestrel continuously operated precision flow controls business from 2003; satisfies § 355(b)(2)(D) — business conducted for full 5-year period by acquired entity
19 | Acquisition History | HPE Fund IV Acquisition of Veldran | Transaction documents for HPE Fund IV's acquisition of 62.4% of Veldran (46,488,000 shares at $40.00/share = $1,859,520,000) on September 20, 2019 — tender offer / merger with Greystone Partners Fund III LP (EIN 81-2683910) as prior controlling shareholder | 2022-04-25 | Initial Request List | Christine Yeung (Harrowgate) / Priya Chandrasekar (Whitfield & Gage) | Garrett Simmons | 2022-05-15 | Complete | Garrett Simmons | Critical for § 355(e) plan analysis; change of control occurred September 20, 2019; ~3 years before anticipated Q4 2022 distribution
20 | Acquisition History | Prescott Co-Investment Documents | Co-investment agreement — Prescott Capital Management LP (EIN 13-4928371; Andrew Kessler, Managing Partner) acquired 15,500,000 shares at $40.00/share ($620,000,000); later sold 4,474,000 shares in secondary offering; current stake 11,026,000 shares / 14.8% | 2022-04-25 | Initial Request List | Christine Yeung (Harrowgate) | Garrett Simmons | 2022-05-15 | Complete | Garrett Simmons | Prescott separately advised by Dunmore Havens & Associates LLC (Irene Salcedo, Principal)
21 | Acquisition History | Pre-Acquisition Spin-Off Discussions | Documentation (or certification of absence) of any discussions, analyses, or plans regarding a potential spin-off or separation of the Precision Flow Solutions Division prior to the September 20, 2019 HPE Fund IV acquisition — needed for § 355(e) plan analysis | 2022-06-28 | § 355(e) Plan Analysis work | Christine Yeung (Harrowgate) / Philip Crundell (Veldran) | Garrett Simmons | Outstanding | Not Started | OPEN ITEM: No response received; factual record supporting absence of pre-acquisition spin-off discussions is thin; critical for § 355(e) opinion
22 | Business Operations | Engineered Coatings Division | Description of active trade or business conducted by Engineered Coatings Division for each of the five years preceding anticipated distribution — FY2021 revenue: $1,520,000,000; EBITDA: $285,000,000 (18.75% margin) | 2022-04-25 | Initial Request List | Philip Crundell (Veldran) / Rita Subramanian (Veldran CFO) | Leila Nazari | 2022-05-25 | Complete | Garrett Simmons | Five-year ATB requirement satisfied; division operated continuously within Veldran since incorporation (March 14, 2019) and predecessor operations before that
23 | Business Operations | Precision Flow Solutions Division | Description of active trade or business conducted by Precision Flow Solutions Division for each of the five years preceding anticipated distribution — FY2021 revenue: $820,000,000; EBITDA: $133,000,000 (16.22% margin); includes Kestrel business (~35% of division revenue, ~$287M) | 2022-04-25 | Initial Request List | Philip Crundell (Veldran) / Sandra Waverly (Div. President) | Leila Nazari | 2022-06-01 | Complete | Garrett Simmons | ATB analysis complicated by Kestrel acquisition (June 7, 2019) within 5-year window; see § 355(b)(2)(C)/(D) analysis
24 | Business Operations | Segment Financial Data | Segment-level financial data for Engineered Coatings and Precision Flow Solutions for FY2017–FY2021 — revenue, EBITDA, assets, capital expenditures | 2022-04-25 | Initial Request List | Rita Subramanian (Veldran CFO) / Lisa Engstrom (Pemberton Rathbone) | Leila Nazari | 2022-06-05 | Complete | Leila Nazari | Aggregate FY2021: Revenue $2,340,000,000; EBITDA $418,000,000
25 | Business Operations | Business Purpose Documentation | Internal board materials, strategic plans, management presentations, and other documents articulating the corporate-level business purposes for the proposed spin-off | 2022-07-18 | Business Purpose Memo work | Christine Yeung (Harrowgate) / Jonathan Caldecott (Veldran CEO) | Garrett Simmons | Outstanding | Not Started | OPEN ITEM: Business purpose articulation remains insufficient; two proposed purposes (independent capital allocation, management focus) may be characterized as serving HPE Fund IV's fund-level objectives rather than Veldran corporate-level interests; primary impediment to delivering 'should' level opinion
26 | Business Operations | Post-Spin Business Plans | Pro forma business plans for Veldran (post-spin, Engineered Coatings only) and Meridian (Precision Flow Solutions), including 3-year projections | 2022-04-25 | Initial Request List | Sandra Waverly (Meridian planned CEO) / Derek Okonkwo (Meridian planned CFO) / Rita Subramanian | Leila Nazari | 2022-07-05 | In Review | Leila Nazari | Received preliminary plans; review suspended at dormancy
27 | Business Operations | Employee / Operational Data | Total employee count by division (~8,200 total); planned allocation of employees, facilities, and assets between Veldran and Meridian post-spin | 2022-04-25 | Initial Request List | Philip Crundell (Veldran) | Leila Nazari | 2022-06-10 | Complete | Leila Nazari | ~8,200 employees total; allocation schedule provided
28 | Capital Structure | First Lien Term Loan B Credit Agreement | Credit Agreement — $1,100,000,000 First Lien Term Loan B; Administrative Agent: Ashfield National Bank, N.A. (Margaret Tsao, MD, Leveraged Finance; 100 Federal Street, Boston, MA 02110); syndicate lenders | 2022-04-25 | Initial Request List | Philip Crundell (Veldran) | Garrett Simmons | 2022-05-10 | Complete | Garrett Simmons | Spin-off covenant analysis completed August 2, 2022; lender consent likely required; Ashfield indicated significant negotiation / potential refinancing needed
29 | Capital Structure | Senior Notes Indenture | Indenture — 6.250% Senior Unsecured Notes due 2027; aggregate principal $450,000,000; Trustee: Colton Trust Company (10 South LaSalle Street, Chicago, IL 60603) | 2022-04-25 | Initial Request List | Philip Crundell (Veldran) | Garrett Simmons | 2022-05-10 | Complete | Garrett Simmons | Indenture covenant analysis completed August 3, 2022; no explicit spin-off blocker but asset-sale covenant may be triggered
30 | Capital Structure | Intercreditor / Subordination Agreements | Any intercreditor or subordination agreements between First Lien TLB and Senior Notes | 2022-04-25 | Initial Request List | Philip Crundell (Veldran) | Garrett Simmons | 2022-05-10 | Complete | Garrett Simmons
31 | Capital Structure | Pro Forma Capital Structure — Meridian | Planned post-spin capital structure for Meridian Flow Technologies, Inc., including any new debt financing contemplated | 2022-04-25 | Initial Request List | Samuel Ng (Brackenridge & Co.) / Rita Subramanian (Veldran) | Garrett Simmons | Outstanding | N/A | OPEN ITEM: Brackenridge & Co. preliminary valuation received June 10, 2022 (estimated Meridian FMV: $1,396.5M–$1,702.4M based on 10.5×–12.8× EV/EBITDA); full capital structure not finalized prior to dormancy
32 | Capital Structure | Shareholder Records | Stockholder list — Veldran Industries Holdings, Inc.: 74,500,000 shares outstanding; HPE Fund IV (via HVH): 46,488,000 shares (62.4%); Prescott Capital: 11,026,000 shares (14.8%); Management: 3,948,500 shares (5.3%); Public float: 13,037,500 shares (17.5%) | 2022-04-25 | Initial Request List | Philip Crundell (Veldran) | Leila Nazari | 2022-05-15 | Complete | Garrett Simmons | 100,000,000 shares authorized; 74,500,000 outstanding; distribution ratio 1:1 (one Meridian share per Veldran share)
33 | Equity Incentive Plans | Equity Incentive Plan Documents | Veldran equity incentive plan documents, award agreements, and schedule of outstanding equity awards held by management stockholders (5.3% / 3,948,500 shares) | 2022-04-25 | Initial Request List | Philip Crundell (Veldran) | Leila Nazari | 2022-06-02 | Complete | Leila Nazari | Awards held by officers and directors; treatment in spin-off to be addressed in Separation Agreement
34 | Equity Incentive Plans | Treatment of Awards in Spin-Off | Analysis of proposed treatment of outstanding equity awards (options, RSUs) in connection with the spin-off — adjustment methodology | 2022-04-25 | Initial Request List | Priya Chandrasekar (Whitfield & Gage) / Philip Crundell (Veldran) | Leila Nazari | Outstanding | N/A | OPEN ITEM: Whitfield & Gage to propose treatment; not finalized prior to dormancy
35 | Valuation | Brackenridge & Co. Preliminary Valuation | Preliminary valuation ranges for Meridian Flow Technologies, Inc. — received from Brackenridge & Co. (Samuel Ng, MD, Industrials Group; 383 Madison Avenue, New York, NY 10179) | 2022-06-10 | Requested separately | Samuel Ng (Brackenridge & Co.) | Garrett Simmons | 2022-06-10 | Complete | Leonard Cross | Estimated Meridian FMV: $1,396.5M (low: $133M × 10.5) to $1,702.4M (high: $133M × 12.8); Veldran basis in PFS Division assets ~$800M; estimated built-in gain: $596.5M–$902.4M; § 355(e) tax at risk at 21%: $125.3M–$189.5M
36 | Valuation | Tax Basis in Precision Flow Division Assets | Schedule of Veldran's adjusted tax basis in all assets of the Precision Flow Solutions Division (including Kestrel stock basis of $295M) | 2022-06-10 | Supplemental request following valuation receipt | Rita Subramanian (Veldran CFO) / Harold Weiss (Pemberton Rathbone) | Leila Nazari | 2022-07-01 | In Review | Garrett Simmons | Estimated aggregate basis ~$800M; review incomplete — some asset-by-asset detail outstanding at dormancy
37 | Intercompany Agreements | Intercompany Agreements | All intercompany agreements between Veldran and Kestrel / Precision Flow Solutions Division entities | 2022-04-25 | Initial Request List | Philip Crundell (Veldran) | Leila Nazari | 2022-05-20 | Complete | Leila Nazari | Standard intercompany services and cost-sharing agreements; to be terminated or replaced at spin-off
38 | Transaction Documents (Drafts) | Separation Agreement | Draft Separation Agreement (being prepared by Whitfield & Gage LLP); Calderwood & Harkness preparing Tax Matters provisions for insertion | 2022-04-25 | Initial Request List | Priya Chandrasekar (Whitfield & Gage) | Garrett Simmons | Outstanding | N/A | OPEN ITEM: C&H prepared draft Tax Matters provisions (July 28, 2022) and draft Tax Sharing Agreement outline (August 4, 2022); full Separation Agreement not completed prior to dormancy
39 | Transaction Documents (Drafts) | Distribution Agreement / Contribution Steps | Detailed step plan for the Contribution (transfer of PFS Division assets and liabilities to Meridian in exchange for Meridian stock and assumption of liabilities) and the Distribution (pro rata distribution of 100% of Meridian common stock to Veldran shareholders) | 2022-04-25 | Initial Request List | Priya Chandrasekar (Whitfield & Gage) | Garrett Simmons | Outstanding | N/A | OPEN ITEM: Step plan not finalized; SpinCo not yet incorporated
40 | Representation Letter | Draft Representation Letter | Representation Letter for execution by Veldran officers (Jonathan Caldecott, CEO; Rita Subramanian, CFO) and Harrowgate (Diana Fenn, Managing Partner & CIO) — basis for tax opinion | 2022-05-06 | C&H work product | Philip Crundell (Veldran) / Christine Yeung (Harrowgate) | Garrett Simmons | N/A — C&H drafting | In Review | Leonard Cross | First draft May 6, 2022; second draft (redline) July 11, 2022; not finalized at dormancy; key open issues: business purpose representations, § 355(e) plan representations
STATUS SUMMARY
Complete | 28
In Review | 4
Outstanding / Not Started | 7
N/A | 1
TOTAL ITEMS | 40
[sheet: Status Summary]
Category | Total Items | Complete | In Review | Outstanding | N/A
Organizational Documents | 8 | 7 | 0 | 1 | 0
Tax Returns | 7 | 6 | 1 | 0 | 0
Acquisition History | 6 | 5 | 0 | 1 | 0
Business Operations | 6 | 4 | 1 | 1 | 0
Capital Structure | 5 | 3 | 0 | 1 | 1
Equity Incentive Plans | 2 | 1 | 0 | 1 | 0
Valuation | 2 | 1 | 1 | 0 | 0
Intercompany Agreements | 1 | 1 | 0 | 0 | 0
Transaction Documents (Drafts) | 2 | 0 | 0 | 2 | 0
Representation Letter | 1 | 0 | 1 | 0 | 0
TOTAL | 40 | 28 | 4 | 7 | 1
[sheet: Key Open Items]
Priority | Item # | Description | Tax Issue Implicated | Status at Dormancy | Risk / Impact | Action Required for Reactivation
High | 25 | Business purpose documentation — internal board materials and strategic plans articulating corporate-level (not fund-level) business purposes for the spin-off | Business Purpose (Treas. Reg. § 1.355-2(b)) | Outstanding — no adequate corporate-level business purpose articulated; two proposed purposes (independent capital allocation; management focus) may be characterized as HPE Fund IV fund-level objectives (LP capital return / monetization) | Primary impediment to delivering 'should' level opinion; IRS could challenge if purpose is driven by PE sponsor liquidity needs | Schedule sessions with Veldran management (Jonathan Caldecott, Sandra Waverly) to develop concrete operational-level justifications independent of Harrowgate's fund objectives
High | 21 | Documentation / certification of absence of pre-acquisition discussions regarding a spin-off prior to September 20, 2019 HPE Fund IV acquisition | § 355(e) 'Plan' Analysis (Treas. Reg. § 1.355-7) | Outstanding — no response received; factual record is thin | If spin-off is part of a plan including the September 2019 change of control, Veldran would recognize gain of $596.5M–$902.4M; tax at risk: $125.3M–$189.5M at 21% rate | Obtain written certifications from Marcus Adler, Diana Fenn (Harrowgate) and former Greystone Partners Fund III LP representatives confirming no pre-acquisition spin-off discussions
High | 38 | Separation Agreement — full document including Tax Matters provisions and Tax Sharing Agreement | Overall transaction structure | Outstanding — C&H prepared Tax Matters provisions (July 28, 2022) and Tax Sharing Agreement outline (August 4, 2022); Whitfield & Gage had not completed full Separation Agreement | Cannot finalize opinion without complete transaction documents | Whitfield & Gage (Priya Chandrasekar) to complete drafting; coordinate with Thornapple McCord (David Ochoa) on Veldran-side review
High | 39 | Step plan for Contribution and Distribution — including incorporation of Meridian Flow Technologies, Inc. | § 368(a)(1)(D) reorganization / § 355 distribution mechanics | Outstanding — SpinCo not yet incorporated; planned registered address: 1209 Orange Street, Wilmington, DE 19801; planned principal office: 7100 Northlake Parkway, Suite 300, Tucker, GA 30084 | Cannot complete reorganization analysis or finalize opinion without definitive step plan | Incorporate Meridian; finalize Contribution asset/liability schedule; confirm distribution mechanics (1:1 ratio, 74,500,000 shares)
Medium | 31 | Pro forma capital structure for Meridian — including any new debt financing | § 355 analysis (debt allocation, continuity of business enterprise) | Outstanding — Brackenridge & Co. provided preliminary valuation but full capital structure not finalized | Potential impact on § 355 analysis if significant new debt is incurred by Meridian in connection with spin-off | Coordinate with Brackenridge & Co. (Samuel Ng) and Veldran CFO (Rita Subramanian)
Medium | 34 | Treatment of outstanding equity incentive awards in spin-off | Equity compensation tax consequences | Outstanding — Whitfield & Gage to propose treatment | Affects management stockholders (5.3% / 3,948,500 shares) | Whitfield & Gage to propose adjustment methodology; C&H to analyze tax consequences
Medium | 36 | Detailed schedule of Veldran's adjusted tax basis in Precision Flow Division assets | Built-in gain computation; § 355(e) tax at risk calculation | In Review — aggregate basis estimated at ~$800M but asset-by-asset detail incomplete | Determines magnitude of gain and tax at risk if § 355(e) applies | Complete asset-level basis schedule with Pemberton Rathbone (Harold Weiss)
Medium | 12 | Kestrel state income tax returns — full set for all jurisdictions | State conformity analysis | In Review — Georgia returns received; other state returns partially received | Needed for state-level § 355 conformity analysis (NC, GA, DE, others) | Follow up with Pemberton Rathbone (Harold Weiss) for remaining state returns
Low | 8 | Draft Certificate of Incorporation — Meridian Flow Technologies, Inc. | SpinCo formation | Outstanding — SpinCo not yet incorporated | Precondition for transaction but not blocking current analysis | To be prepared by Whitfield & Gage upon reactivation
[sheet: Timeline]
Date | Event / Milestone | Responsible Party | Notes
2003-02-12 | Kestrel Precision Controls, Inc. founded (Georgia) | N/A | Relevant to § 355(b)(2)(D) five-year ATB analysis
2019-03-14 | Veldran Industries Holdings, Inc. incorporated (Delaware) | N/A
2019-06-07 | Kestrel Acquisition closes — Veldran acquires 100% of Kestrel from Rennick Industrial Partners Fund II LP for $295M cash | N/A | Taxable stock acquisition; no § 338 election; within 5-year look-back; § 355(b)(2)(C) issue
2019-09-20 | HPE Fund IV acquires 62.4% of Veldran (46,488,000 shares at $40.00/share = $1,859,520,000) via tender offer / merger; Greystone Partners Fund III LP exits; Prescott co-invests $620M | N/A | Change of control; § 355(e) trigger event; ~3 years before anticipated Q4 2022 distribution
2022-04-11 | Calderwood & Harkness engagement opened; engagement letter executed | Leonard Cross / Sylvia Hartwell | Engagement No. 1003-00005; Matter Code HRW-SPIN-001
2022-04-18 | Kick-off call — Harrowgate, Whitfield & Gage, Calderwood & Harkness | Garrett Simmons (summary memo) | Attendees: Cross, Hartwell, Simmons, Nazari (C&H); Yeung, Fenn, Rourke (Harrowgate); Chandrasekar, Halverson (W&G)
2022-04-25 | Initial Tax Diligence Information Request List circulated | Garrett Simmons / Leila Nazari | Sent to Crundell, Subramanian (Veldran); Chandrasekar (W&G)
2022-05-06 | First Draft Representation Letter circulated | Garrett Simmons | To Veldran management and Whitfield & Gage
2022-05-09 | Email — Nazari to Weiss (Pemberton Rathbone) requesting Veldran and Kestrel tax returns 2017–2021 | Leila Nazari
2022-05-16 | Supplemental Information Request — Kestrel Acquisition | Garrett Simmons | Detailed Kestrel diligence for § 355(b)(2)(C)/(D)
2022-05-20 | First Draft § 355 Analysis Memorandum (internal) | Garrett Simmons / Leila Nazari | Reviewed by Leonard Cross
2022-06-01 | § 355(b) Active Trade or Business Analysis Memo — Kestrel issue identified | Leila Nazari | Kestrel within 5-year window; § 355(b)(2)(D) safe harbor appears satisfied
2022-06-10 | Brackenridge & Co. preliminary valuation ranges received | Samuel Ng (Brackenridge) | Meridian FMV: $1,396.5M–$1,702.4M
2022-06-15 | Interim Invoice #22-7831-001 — $165,000 | Sylvia Hartwell (billing)
2022-06-28 | § 355(e) Plan Analysis Memo — first draft (internal) | Garrett Simmons | Reviewed by Cross and Hartwell; preliminary conclusion favorable but factual record thin
2022-07-11 | Second Draft Representation Letter (redline) circulated | Garrett Simmons / Leonard Cross | Key changes: revised business purpose reps, Kestrel ATB detail, § 355(e) plan reps
2022-07-18 | Business Purpose Memorandum — first draft (internal) | Garrett Simmons / Leila Nazari | Flagged weakness in business purpose articulation
2022-07-22 | Email — Cross to Yeung re: business purpose articulation concerns | Leonard Cross | Recommends call with Veldran management to develop corporate-level justifications
2022-07-25 | Device Test Analysis Memo (internal) | Leila Nazari | Pro rata distribution and 62.4% controlling stake are device factors; manageable if robust business purposes established
2022-08-01 | Interim Invoice #22-7831-002 — $145,000 | Sylvia Hartwell (billing)
2022-08-05 | First Draft Tax Opinion Letter circulated to Harrowgate GC and Whitfield & Gage | Leonard Cross | Draft; not for reliance; open issues: business purpose, § 355(e), Rep Letter
2022-08-15 | Conference call — business purpose and market timing concerns raised | Garrett Simmons (summary memo) | Adler: market conditions unfavorable; Cross: business purpose is primary impediment; Caldecott: difficulty articulating purposes independent of HPE objectives; Adler suggests pause
2022-08-22 | Harrowgate announces indefinite pause — email from Christine Yeung to Leonard Cross | Christine Yeung | Reasons: market conditions, business purpose concerns, lender consent uncertainty (Ashfield National Bank)
2022-08-29 | Matter marked DORMANT; final time entries recorded | Garrett Simmons / Leonard Cross / Sylvia Hartwell | Total WIP: $487,350; Billed: $310,000; Unbilled WIP: $177,350
[sheet: Billing Summary]
Timekeeper | Role | Hourly Rate | Total Hours | Total Fees | Notes
Leonard Cross | Responsible Partner | $1,650 | 62 | $102,300 | 62 × $1,650
Sylvia Hartwell | Billing Partner | $1,550 | 28 | $43,400 | 28 × $1,550
Garrett Simmons | Lead Associate (6th year) | $1,050 | 210 | $220,500 | 210 × $1,050
Leila Nazari | Working Associate (3rd year) | $850 | 142.5 | $121,125 | 142.5 × $850
TOTAL | 442.5 | $487,325 | Calculated total; billing system rounds to $487,350 ($25 rounding adjustment)
Total WIP Accrued (per billing system) | $487,350
Invoice #22-7831-001 (June 15, 2022) | $165,000
Invoice #22-7831-002 (August 1, 2022) | $145,000
Total Billed | $310,000 | $165,000 + $145,000
Unbilled WIP at Dormancy | $177,350 | $487,350 − $310,000
Estimated Fee Range for Full Opinion Delivery | $850,000–$1,200,000 | Per engagement letter; ~40.6%–57.3% of range utilized before dormancy