1003-00005 · Veldran Industries Holdings · Engagement & Administrative

engagement-letter-hpe-fund-iv.docx DOCUMENT Bankruptcy & Restructuring

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CALDERWOOD & HARKNESS LLP Attorneys at Law

1301 Avenue of the Americas, 40th Floor New York, New York 10019

Telephone: (212) 506-7000 Facsimile: (212) 506-7001 www.calderwoodharkness.com

April 11, 2022

VIA ELECTRONIC MAIL AND HAND DELIVERY

Harrowgate Private Equity Fund IV, L.P. c/o Harrowgate Capital Advisors LLC 600 Lexington Avenue, 38th Floor New York, New York 10022

Attention: Christine Yeung, General Counsel

Re: Engagement of Calderwood & Harkness LLP — Tax Opinion in Connection with the Proposed Spin-Off of Meridian Flow Technologies, Inc. from Veldran Industries Holdings, Inc.

Engagement Number: 1003-00005 Matter Code: HRW-SPIN-001

Dear Ms. Yeung:

1. Introduction and Purpose

Calderwood & Harkness LLP ("Calderwood & Harkness," "we," "us," or the "Firm") is pleased to confirm its engagement by Harrowgate Private Equity Fund IV, L.P. ("HPE Fund IV" or the "Client"), a Delaware limited partnership (EIN: 84-3291067), with its registered address at 1209 Orange Street, Wilmington, Delaware 19801, and its principal office at 600 Lexington Avenue, 38th Floor, New York, New York 10022. We appreciate the confidence that HPE Fund IV and its affiliates have placed in our firm, and we look forward to working with you and your team on this important transaction.

HPE Fund IV is managed by Harrowgate Capital Advisors LLC ("Harrowgate Advisors"), a Delaware limited liability company (EIN: 83-2756891), which serves as the investment advisor to the fund. The general partner of HPE Fund IV is Harrowgate Capital Partners IV GP LLC, a Delaware limited liability company (EIN: 84-3291104). References in this engagement letter to the "Client" shall include, where the context requires, Harrowgate Advisors and the general partner acting on behalf of HPE Fund IV in connection with the matters described herein.

This letter sets forth the terms and conditions under which Calderwood & Harkness will provide legal services to the Client in connection with the proposed tax-free reorganization and spin-off transaction described more fully in Section 2 below (the "Engagement"). This engagement letter, together with the Standard Terms and Conditions of Engagement attached hereto as Schedule A (which are incorporated herein by reference and the substance of which is reflected in the body of this letter), supersedes any prior understandings, communications, or agreements, whether written or oral, between the parties regarding the subject matter hereof, and constitutes the entire agreement between Calderwood & Harkness and the Client with respect to this Engagement.

We ask that you review this letter carefully and, if the terms set forth herein are acceptable, execute and return the enclosed copy to our attention at your earliest convenience. Your signature below will confirm your agreement to the terms of this Engagement.

2. Description of the Proposed Transaction

To provide context for the scope of our engagement, we summarize below our understanding of the proposed transaction based on discussions with your team and our preliminary review of the materials provided to date.

Ownership Structure. HPE Fund IV holds approximately 62.4% of the outstanding shares of common stock of Veldran Industries Holdings, Inc. ("Veldran" or "VIH"), a Delaware corporation (EIN: 86-1920347), incorporated on March 14, 2019, with its registered address at 1209 Orange Street, Wilmington, Delaware 19801, and its principal office at 2400 Commerce Park Drive, Suite 500, Charlotte, North Carolina 28217. HPE Fund IV's equity interest in Veldran is held indirectly through its wholly owned subsidiary, Harrowgate Veldran Holdings LLC ("HVH"), a Delaware limited liability company (EIN: 86-1483920), which is treated as a disregarded entity for U.S. federal income tax purposes. HPE Fund IV's stake comprises 46,488,000 shares out of a total of 74,500,000 shares of Veldran common stock currently outstanding, representing approximately 62.4% of the total outstanding shares. The remaining approximately 37.6% of Veldran common stock is held by management, other institutional investors, and certain co-investors, the identities and holdings of which we will confirm during the course of our engagement.

Veldran's Business Segments. Veldran operates two principal business segments:

(i) the Engineered Coatings Division, which designs, manufactures, and distributes specialty industrial coatings, surface treatment solutions, and related chemical products for the aerospace, automotive, and heavy industrial end markets, and which generated fiscal year 2021 ("FY2021") revenue of approximately $1.52 billion and EBITDA of approximately $285 million; and

(ii) the Precision Flow Solutions Division, which designs, manufactures, and services precision flow control products, including valves, actuators, instrumentation, and related systems for the energy, water infrastructure, and chemical processing end markets, and which generated FY2021 revenue of approximately $820 million and EBITDA of approximately $133 million.

On a consolidated basis, Veldran reported aggregate FY2021 revenue of approximately $2.34 billion and EBITDA of approximately $418 million. We understand that audited financial statements for each segment are prepared by Pemberton Rathbone LLP and will be made available to us during the course of this engagement.

The Proposed Spin-Off. The proposed transaction (the "Spin-Off") contemplates that Veldran, acting as the distributing corporation ("Distributing"), will undertake a two-step divisive reorganization structured as follows:

(a) The Contribution. Veldran will contribute to a newly formed Delaware corporation, Meridian Flow Technologies, Inc. ("Meridian" or "SpinCo"), all of the assets, properties, rights, and interests associated with the Precision Flow Solutions Division (collectively, the "Transferred Assets"), together with the assumption by Meridian of certain allocated liabilities associated with or arising out of the Precision Flow Solutions Division (the "Assumed Liabilities"), in exchange for the issuance to Veldran of all outstanding shares of Meridian common stock (the "Contribution"). The specific assets, liabilities, and contracts to be transferred will be set forth in the Separation Agreement and related conveyance documents.

(b) The Distribution. Immediately following the Contribution, Veldran will distribute 100% of the outstanding shares of Meridian common stock, on a pro rata basis, to the holders of Veldran common stock as of a record date to be established by the Veldran Board of Directors (the "Distribution"). The Distribution is expected to be effected at a ratio of one (1) share of Meridian common stock for each outstanding share of Veldran common stock (a 1:1 distribution ratio). Upon completion of the Distribution, Meridian will be an independent, publicly traded company (or, if not publicly traded, a standalone entity with its own governance and capital structure), and Veldran will retain the Engineered Coatings Division.

Tax-Free Treatment. The Spin-Off is intended to qualify as a tax-free reorganization under Section 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"), and as a tax-free distribution under Section 355 of the Code. If the Spin-Off so qualifies, neither Veldran, Meridian, nor the shareholders of Veldran should recognize gain or loss as a result of the Contribution and Distribution, subject to certain exceptions (including, without limitation, the receipt of boot, if any, and the application of Sections 355(d), 355(e), and 355(g) of the Code).

Meridian Status. We understand that Meridian has not yet been incorporated as of the date of this letter. The planned registered address for Meridian is 1209 Orange Street, Wilmington, Delaware 19801 (care of Penmark Industries, as registered agent), and its planned principal office is 7100 Northlake Parkway, Suite 300, Tucker, Georgia 30084. We anticipate that Meridian will be incorporated in the near term to facilitate planning and the execution of definitive transaction documents.

Anticipated Timeline. Based on our discussions with the Client and the other advisors to the transaction, the target record date and distribution date for the Spin-Off are anticipated in the fourth quarter of 2022 (Q4 2022), subject to the satisfaction of customary conditions, including board approvals, the receipt of necessary tax opinions, the completion of financing arrangements, and other customary closing conditions.

3. Scope of Engagement

3.1 Tax Opinion

Calderwood & Harkness is engaged to render a written tax opinion (the "Tax Opinion") addressed to HPE Fund IV (and, to the extent directed by the Client, to Veldran and the Veldran Board of Directors) concluding that:

(i) the Distribution of Meridian common stock by Veldran to its shareholders "should" qualify as a tax-free distribution under Section 355(a) of the Code, such that no gain or loss is recognized by Veldran or its shareholders (other than with respect to any boot received) as a result of the Distribution; and

(ii) the Contribution of the Transferred Assets by Veldran to Meridian in exchange for Meridian common stock and the assumption of the Assumed Liabilities "should" qualify as a reorganization within the meaning of Section 368(a)(1)(D) of the Code.

The "should" level of comfort represents the second-highest level of assurance customarily employed by major law firms in rendering tax opinions, falling below a "will" opinion (the highest level of assurance, reflecting a conclusion that the relevant tax treatment is virtually certain) but above a "more likely than not" opinion (reflecting a conclusion that the relevant tax treatment is more likely than not to be sustained if challenged). A "should" opinion reflects a conclusion that, in our judgment, the relevant tax treatment is the correct treatment under applicable law, is well-supported by the authorities, and would likely be sustained if challenged, although there is some degree of uncertainty inherent in the analysis.

The Client acknowledges that no private letter ruling from the Internal Revenue Service (the "IRS") will be sought in connection with the Spin-Off. The Tax Opinion is intended to serve as the sole tax assurance for the transaction with respect to the qualification of the Spin-Off under Sections 355 and 368(a)(1)(D) of the Code. We note that the IRS significantly curtailed the issuance of private letter rulings on spin-off transactions effective in 2017 (see Rev. Proc. 2017-52), and it is now standard market practice for transactions of this type to rely solely on tax opinions rendered by outside counsel.

3.2 Key Code Provisions to Be Analyzed

The Tax Opinion will involve a detailed analysis of the following provisions of the Code, the Treasury Regulations promulgated thereunder, published IRS guidance (including Revenue Rulings, Revenue Procedures, and Notices), and relevant judicial authorities:

(a) IRC § 355(a) — Requirements for Tax-Free Distribution. We will analyze whether the Distribution satisfies each of the statutory requirements for tax-free treatment under Section 355(a), including the requirement that the distribution be of stock of a controlled corporation, the requirement that both Distributing and Controlled be engaged in the active conduct of a trade or business immediately after the distribution, and the requirement that the distribution not be used principally as a device for the distribution of earnings and profits.

(b) IRC § 355(a)(1)(B) — Device Test. We will analyze whether the Distribution is "used principally as a device" for the distribution of earnings and profits of Veldran, Meridian, or both, within the meaning of Section 355(a)(1)(B) and the regulations thereunder, including the device and non-device factors set forth in Treasury Regulation § 1.355-2(d).

(c) IRC § 355(b) — Active Trade or Business Requirement. We will analyze whether each of Veldran (post-Distribution) and Meridian (post-Distribution) is engaged in the "active conduct of a trade or business" within the meaning of Section 355(b) of the Code and the regulations thereunder. This analysis will include confirmation that each relevant trade or business has been actively conducted throughout the five-year period ending on the date of the Distribution, as required by Section 355(b)(2)(B).

(d) IRC § 355(b)(2)(C) and (D) — Acquisitions Within the Five-Year Look-Back Period. We will analyze whether any trade or business relied upon for purposes of the active trade or business requirement was acquired in a transaction in which gain or loss was recognized, in whole or in part, during the five-year period ending on the date of the Distribution. This analysis is particularly relevant to Veldran's acquisition of Kestrel Precision Controls, Inc. ("Kestrel") on June 7, 2019, which we understand was a fully taxable acquisition of all outstanding shares of Kestrel common stock. Kestrel was subsequently merged into a subsidiary of Veldran and its operations were integrated into the Precision Flow Solutions Division. We will need to analyze whether the Kestrel acquisition constitutes an acquisition of a trade or business (or a substantial portion thereof) that implicates Section 355(b)(2)(C) or (D), and, if so, whether the relevant trade or business is nonetheless treated as having been actively conducted for the requisite five-year period.

(e) IRC § 355(d) — Disqualified Distribution Analysis. We will analyze whether the Distribution constitutes a "disqualified distribution" within the meaning of Section 355(d). Section 355(d) generally provides that if any person holds "disqualified stock" in either Distributing or Controlled immediately after the distribution, and such stock was acquired by "purchase" within the five-year period preceding the distribution, the distribution may be treated as a taxable event at the corporate level (but not the shareholder level). This analysis will require a detailed examination of the acquisition history of Veldran stock, including HPE Fund IV's acquisition of its controlling stake.

(f) IRC § 355(e) — Anti-Morris Trust / Plan Analysis. We will analyze whether the Distribution is part of a "plan" (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, a 50-percent-or-greater interest in either Distributing or Controlled, within the meaning of Section 355(e) of the Code and Treasury Regulation § 1.355-7. This analysis is of particular significance in light of HPE Fund IV's acquisition of its approximately 62.4% controlling stake in Veldran on September 20, 2019. We will need to determine whether the September 2019 acquisition and the proposed Spin-Off are part of a "plan" within the meaning of Section 355(e) and the safe harbors, presumptions, and plan factors set forth in Treasury Regulation § 1.355-7.

(g) IRC § 355(g) — Distributions Involving Disqualified Investment Corporations. We will analyze whether either Veldran or Meridian constitutes a "disqualified investment corporation" within the meaning of Section 355(g), which would cause the Distribution to be taxable. This analysis will require a review of the fair market values of the investment assets and total assets of each of Veldran (post-Distribution) and Meridian.

(h) IRC § 368(a)(1)(D) — Divisive Reorganization Requirements. We will analyze whether the Contribution qualifies as a reorganization under Section 368(a)(1)(D), including the requirements relating to the transfer of assets by Veldran to Meridian and the distribution of Meridian stock in a transaction that qualifies under Section 355.

(i) Treasury Regulations — Business Purpose and Plan Analysis. In addition to the statutory provisions described above, we will analyze the applicable Treasury Regulations, including, without limitation, Treasury Regulation § 1.355-2(b) (requiring a valid corporate business purpose for the distribution), Treasury Regulation § 1.355-2(d) (device factors and non-device factors), and Treasury Regulation § 1.355-7 (plan analysis and safe harbors under Section 355(e)).

3.3 Related Work Product

In addition to the Tax Opinion itself, Calderwood & Harkness will prepare and deliver the following related work product in connection with this Engagement:

(a) Internal Tax Analysis Memoranda. Calderwood & Harkness will prepare internal memoranda addressing each of the key Code provisions identified in Section 3.2 above, setting forth our detailed analysis, the factual basis for our conclusions, and any areas of uncertainty or risk. These memoranda will serve as the analytical foundation for the Tax Opinion and will be maintained in the engagement file.

(b) Representation Letter. Calderwood & Harkness will prepare and negotiate a comprehensive Representation Letter (the "Representation Letter") to be executed by authorized officers of Veldran and of Harrowgate Advisors (on behalf of HPE Fund IV), upon which the Tax Opinion will be based. The Representation Letter will contain factual representations and covenants relating to the structure and business purpose of the Spin-Off, the historical conduct of the relevant trades or businesses, the acquisition history of Veldran stock, the intended post-Distribution conduct of Veldran and Meridian, and such other matters as we deem necessary or appropriate for purposes of the Tax Opinion.

(c) Tax Provisions for Separation Agreement. Calderwood & Harkness will prepare and negotiate tax-related provisions, including representations, warranties, covenants, and indemnification provisions, for insertion into the Separation Agreement being drafted by Whitfield & Gage LLP, which is serving as corporate counsel to Harrowgate in connection with the Spin-Off. These provisions will address matters such as the preservation of the tax-free status of the Spin-Off, restrictions on post-Distribution transactions that could jeopardize tax-free treatment, and related matters.

(d) Tax Sharing Agreement. Calderwood & Harkness will prepare an outline and key terms for a Tax Sharing Agreement (or Tax Matters Agreement) between Veldran and Meridian, which will govern the allocation of pre-Distribution tax liabilities, the preparation and filing of tax returns, cooperation on tax matters, and the allocation of responsibility for any taxes arising from a failure of the Spin-Off to qualify for tax-free treatment. The drafting and negotiation of the definitive Tax Sharing Agreement may be undertaken by Calderwood & Harkness or by Whitfield & Gage LLP, as directed by the Client.

(e) Tax Review of Financing Documents. Calderwood & Harkness will provide tax-related review and commentary on the credit agreement, indenture covenants, and related financing documents to the extent that such documents contain provisions relevant to the Section 355 analysis, including provisions relating to distributions, debt allocation, and the transfer of assets and liabilities.

3.4 Coordination with Other Advisors

Calderwood & Harkness will coordinate with the following advisors in connection with this Engagement, as necessary and as directed by the Client:

(a) Whitfield & Gage LLP — corporate and M&A counsel to Harrowgate, serving as lead coordinating counsel for the Spin-Off. Whitfield & Gage's offices are located at 51 West 52nd Street, New York, New York 10019. Key contacts at Whitfield & Gage are Nathan Whitfield, Senior Partner; Priya Chandrasekar, Partner, Corporate and Capital Markets; and Ross Halverson, Counsel.

(b) Thornapple McCord LLP — corporate counsel to Veldran (serving as separate counsel to Veldran and its board of directors in connection with the Spin-Off). Thornapple McCord's offices are located at 227 West Trade Street, Suite 2000, Charlotte, North Carolina 28202. Key contacts at Thornapple McCord are Elaine Thornapple, Founding Partner, and David Ochoa, Partner, Corporate and Securities.

(c) Brackenridge & Co. — financial advisor and investment bank to Harrowgate and the Veldran Board of Directors. Brackenridge's offices are located at 383 Madison Avenue, New York, New York 10179. The key contact at Brackenridge is Samuel Ng, Managing Director, Industrials Group.

(d) Pemberton Rathbone LLP — independent auditors and tax-return preparers for Veldran. Pemberton Rathbone's offices are located at One PPG Place, Suite 1600, Pittsburgh, Pennsylvania 15222. Key contacts at Pemberton Rathbone are Lisa Engstrom, Partner, Audit & Assurance, and Harold Weiss, Partner, Tax.

Calderwood & Harkness will coordinate with these advisors as necessary to obtain factual information, review documentation, and ensure consistency in the transaction structure and related agreements. Notwithstanding such coordination, Calderwood & Harkness is not responsible for the work product, advice, or conclusions of any of the foregoing advisors, and each such advisor is independently retained by and responsible to its own client or clients.

3.5 Limitations on Scope

The scope of this Engagement is limited to the matters described in Sections 3.1 through 3.4 above. Without limiting the generality of the foregoing, the Engagement does not include:

(a) Representation of any party in any tax controversy, examination, audit, or litigation before the IRS, any state or local taxing authority, or any court, whether arising from the Spin-Off or otherwise;

(b) The rendering of state and local tax opinions with respect to the Spin-Off, provided that Calderwood & Harkness may, at the Client's request and for an additional fee, prepare a summary memorandum identifying key state and local tax considerations (including, without limitation, state-level treatment of spin-offs and potential state-level gain recognition);

(c) Advice on the tax consequences of the Distribution to individual shareholders of Veldran, including the determination of the tax basis of Meridian shares received in the Distribution, the allocation of basis between Veldran and Meridian shares, or the holding period of Meridian shares;

(d) Tax advice to any party other than HPE Fund IV and, to the extent directed by HPE Fund IV, Veldran Industries Holdings, Inc.;

(e) Securities law, corporate law, environmental law, employment law, ERISA, or other non-tax legal advice of any kind.

The Tax Opinion will be based on the provisions of the Internal Revenue Code, Treasury Regulations (including proposed and temporary regulations), published IRS guidance (including Revenue Rulings, Revenue Procedures, Notices, and Announcements), and relevant judicial precedent, in each case as in effect and available on the date of the Tax Opinion. The Tax Opinion will not take into account, and Calderwood & Harkness will have no obligation to update the Tax Opinion to reflect, changes in applicable law, regulations, or judicial interpretation occurring after the date of the Tax Opinion, unless separately engaged to do so.

The Tax Opinion will be based on the factual representations made by Veldran and Harrowgate in the Representation Letter and on such other factual information as we receive in the course of this Engagement. Calderwood & Harkness will not independently verify the accuracy or completeness of the factual representations set forth in the Representation Letter or in other materials provided to us, and we will assume such representations to be true, correct, and complete in all material respects.

4. Engagement Team

The following attorneys have been assigned to this Engagement and will be the primary points of contact for the Client:

Leonard Cross — Responsible Partner, Tax Department. Mr. Cross has been a partner at Calderwood & Harkness since 2010 and has over twenty years of experience advising clients on U.S. federal income tax matters, with a particular focus on corporate spin-offs, split-offs, mergers and acquisitions, and complex reorganizations. Mr. Cross will have overall responsibility for the Engagement, including the supervision of the Tax Opinion and all related work product, and will serve as the primary point of contact for the Client on substantive tax matters.

Sylvia Hartwell — Billing Partner, Tax Department. Ms. Hartwell has been a partner at Calderwood & Harkness since 2014 and focuses her practice on partnership taxation, fund structures, and the tax aspects of private equity transactions. Ms. Hartwell will have responsibility for billing and administrative matters related to the Engagement and will also contribute substantive expertise on issues relating to the flow-through tax treatment of HPE Fund IV and its partners.

Garrett Simmons — Lead Associate, Tax Department. Mr. Simmons is a sixth-year associate in Calderwood & Harkness's Tax Department and has significant experience in tax-free reorganizations, spin-offs, and related matters. Mr. Simmons will serve as the lead associate on the Engagement and will be responsible for the preparation of initial drafts of the Tax Opinion, the Representation Letter, and the internal tax analysis memoranda.

Leila Nazari — Working Associate, Tax Department. Ms. Nazari is a third-year associate in Calderwood & Harkness's Tax Department with experience in corporate tax and transactional tax matters. Ms. Nazari will assist Mr. Simmons in the preparation of research memoranda, document review, and other aspects of the Engagement.

Additional attorneys, paraprofessionals, and other personnel may be assigned to the Engagement from time to time as the Firm deems necessary or appropriate to ensure the timely and efficient completion of the work. The Client will be notified of any material changes to the composition of the engagement team, including the replacement or departure of any of the attorneys named above.

5. Fees and Billing Arrangements

5.1 Hourly Rates

Legal services rendered in connection with this Engagement will be billed on an hourly basis at the following 2022 standard rates for the attorneys assigned to this matter:

Rates for other timekeepers (including other partners, associates, or paraprofessionals) who may work on the matter from time to time will be provided to the Client upon request. All time will be recorded in increments of one-tenth (0.1) of an hour.

The Firm's hourly rates are subject to annual adjustment, typically effective January 1 of each calendar year. The Client will be notified in advance of any changes to the applicable hourly rates. Any adjusted rates will apply to services performed on or after the effective date of the adjustment.

5.2 Fee Estimate

Based on Calderwood & Harkness's experience with spin-off transactions and tax opinion engagements of comparable complexity, the total professional fees for the full Engagement (from commencement through the delivery of a final Tax Opinion and the completion of related work product) are estimated to be in the range of $850,000 to $1,200,000.

This estimate is provided for planning and budgeting purposes only and does not constitute a cap, a fixed fee, a maximum fee, or a guarantee of the total cost of the Engagement. Actual fees may be higher or lower than the estimated range depending on a number of factors, including the complexity of the issues encountered during our analysis, the volume of factual diligence required, the number of drafts of the Tax Opinion and related documents and the rounds of internal and external comment, the responsiveness of other parties and advisors in providing requested information and documentation, the extent of any changes to the transaction structure, unforeseen issues or complications, and other factors beyond our control. We will endeavor to keep the Client informed of the status of fees and to provide updated estimates if it becomes apparent that actual fees are likely to exceed the high end of the estimated range.

The fee estimate set forth above does not include disbursements and out-of-pocket expenses, which will be billed separately as described in Section 5.4 below.

5.3 Billing and Payment Terms

Calderwood & Harkness will render interim invoices to the Client on an approximately monthly basis during periods of active work on the Engagement. Invoices may be rendered more or less frequently depending on the volume and timing of work performed.

All invoices are due and payable within thirty (30) days of the date of the invoice. Payment should be made by wire transfer to Calderwood & Harkness's client trust account, the details of which will be provided on each invoice, or by such other method as may be agreed upon by the parties.

Each invoice will include a summary of hours billed by each timekeeper, the applicable hourly rate for each timekeeper, and a reasonable description of the services performed during the billing period. Detailed time entries will be made available upon request. Calderwood & Harkness will comply with any reasonable billing guidelines or requirements that the Client may provide, to the extent consistent with the Firm's standard billing practices.

Calderwood & Harkness reserves the right to charge interest on any amounts that remain unpaid more than thirty (30) days after the date of the invoice, at a rate of one percent (1%) per month (twelve percent (12%) per annum), or the maximum rate permitted by applicable law, whichever is less. The accrual of interest shall not relieve the Client of its obligation to pay the full amount of the invoice.

5.4 Disbursements and Expenses

In addition to professional fees, the Client will be responsible for the reimbursement of reasonable out-of-pocket expenses and disbursements incurred by Calderwood & Harkness in connection with the Engagement. Such expenses may include, without limitation:

• Travel expenses (including airfare, ground transportation, lodging, and meals) incurred in connection with meetings, closings, or other Engagement-related activities;

• Filing fees and governmental charges;

• Courier, express delivery, and postage charges;

• Charges for computerized legal research databases (including Westlaw, Sundial Solutions, and similar services);

• Document reproduction, printing, and binding costs;

• Long-distance telephone and teleconference charges; and

• Other reasonable out-of-pocket costs directly related to the Engagement.

All expenses will be itemized on the applicable invoice. Calderwood & Harkness will endeavor to manage expenses prudently and will obtain the Client's prior approval for any individual expense expected to exceed $5,000.

6. Client Identification and Dual Representation

The Client for purposes of this Engagement is Harrowgate Private Equity Fund IV, L.P. Calderwood & Harkness's duties of loyalty, confidentiality, and communication run to HPE Fund IV (and, by extension, to Harrowgate Advisors and the general partner acting on behalf of HPE Fund IV). Our engagement is with the fund entity and not with any individual partner, member, officer, or employee of HPE Fund IV, Harrowgate Advisors, or the general partner.

Calderwood & Harkness understands that the Tax Opinion will also be provided for the benefit of Veldran Industries Holdings, Inc., in its capacity as Distributing in the Spin-Off. The Tax Opinion will customarily contain a statement that it may be relied upon by Veldran and its board of directors, subject to the assumptions, qualifications, and limitations set forth therein. To the extent that Calderwood & Harkness's work product is shared with, or relied upon by, Veldran, Calderwood & Harkness acknowledges that it will owe duties consistent with such reliance, including a duty to exercise the same degree of professional care in preparing the Tax Opinion and related work product as it would if Veldran were a direct client of the Firm.

Notwithstanding the foregoing, Veldran is separately represented by Thornapple McCord LLP as its corporate counsel in connection with the Spin-Off. Calderwood & Harkness will not serve as corporate counsel to Veldran and will not be responsible for advising Veldran on corporate, securities, or other non-tax matters. Veldran should continue to rely on Thornapple McCord LLP and its other advisors for such matters.

To the extent that any conflict of interest arises between the interests of HPE Fund IV and Veldran in connection with the tax analysis or the preparation of the Tax Opinion — including, without limitation, any conflict relating to the allocation of tax liabilities between Veldran and Meridian, the terms of the Tax Sharing Agreement, or the interpretation of factual representations — Calderwood & Harkness will promptly notify the Client and, if appropriate, Thornapple McCord LLP on behalf of Veldran. In such event, Calderwood & Harkness may be required to withdraw from the dual representation and may continue to represent only HPE Fund IV, subject to the applicable rules of professional conduct. If a conflict cannot be resolved to the satisfaction of all affected parties, Calderwood & Harkness may be required to withdraw from the Engagement entirely, in which case the provisions of Section 9 (Termination) shall apply.

7. Confidentiality

Calderwood & Harkness will maintain the confidentiality of all non-public information, documents, and communications provided by or on behalf of the Client in connection with this Engagement, in accordance with the Firm's professional obligations and the applicable rules of professional conduct, including the New York Rules of Professional Conduct.

The Client acknowledges and agrees that the Tax Opinion and related work product prepared by Calderwood & Harkness may need to be shared with the following parties in connection with the Spin-Off, and consents to such disclosure:

(a) Whitfield & Gage LLP, in its capacity as corporate counsel to Harrowgate;

(b) Thornapple McCord LLP, in its capacity as corporate counsel to Veldran;

(d) Pemberton Rathbone LLP, in its capacity as independent auditors and tax-return preparers for Veldran;

(e) Officers, directors, and authorized employees of Veldran, Meridian (upon its formation), Harrowgate Advisors, and the general partner, in each case on a need-to-know basis in connection with the Spin-Off;

(f) Ashfield National Bank, N.A., in its capacity as administrative agent under Veldran's existing credit facilities, to the extent that disclosure of the Tax Opinion or related materials is required or contemplated by the terms of the applicable credit agreement; and

(g) Colton Trust Company, in its capacity as indenture trustee under Veldran's outstanding indentures, to the extent that disclosure of the Tax Opinion or related materials is required or contemplated by the terms of the applicable indenture.

Any disclosure of the Tax Opinion or related work product to parties other than those identified above, or for purposes other than those described herein, shall require the prior written consent of Calderwood & Harkness. The Client agrees to use commercially reasonable efforts to ensure that any recipient of the Tax Opinion or related work product maintains the confidentiality of such materials and does not further distribute or disclose them without Calderwood & Harkness's prior written consent.

8. Document Retention

Calderwood & Harkness will retain all files, documents, and work product relating to this Engagement in accordance with the Firm's standard document retention policies. Under such policies, client files are generally retained for a period of ten (10) years following the close or termination of the Engagement, after which the Firm reserves the right to destroy or dispose of such files without further notice to the Client, unless the Client has provided specific written instructions to the contrary.

The Client is encouraged to maintain its own copies of all documents, correspondence, work product, and other materials provided by or received from Calderwood & Harkness in connection with this Engagement. Upon the close or termination of the Engagement, the Client may request that the Firm transfer copies of the engagement files to the Client or to successor counsel, and Calderwood & Harkness will comply with such request in a timely manner, subject to the Firm's right to retain copies for its own records and to assert any applicable lien for unpaid fees and expenses.

9. Termination

Either party may terminate this Engagement upon thirty (30) days' prior written notice to the other party, delivered to the addresses set forth in this letter (or to such other address as may be designated in writing by the applicable party). Termination of the Engagement shall not relieve the Client of its obligation to pay all fees, expenses, and disbursements incurred by Calderwood & Harkness through the effective date of termination, and all such amounts shall become due and payable upon the effective date of termination.

In addition to termination upon notice, Calderwood & Harkness may withdraw from this Engagement at any time if such withdrawal is required by the applicable rules of professional conduct, including, without limitation, in the event that (a) a conflict of interest arises that cannot be resolved through appropriate measures; (b) the Client fails to fulfill a material obligation under this engagement letter, including the obligation to pay invoices in a timely manner; (c) the Client engages in conduct that renders the continued representation unreasonably difficult; or (d) other circumstances arise that, in the Firm's reasonable judgment, make continued representation impracticable or ethically impermissible.

Upon termination or withdrawal, Calderwood & Harkness will cooperate in good faith in the transition of the matter to successor counsel designated by the Client, including by providing copies of relevant files and work product (subject to the Client's payment of all outstanding fees and expenses and the Firm's right to assert any applicable lien), and by making the engagement team available for reasonable consultation during the transition period.

10. No Guarantee of Outcome

Calderwood & Harkness makes no guarantee or assurance regarding the outcome of the tax analysis, the conclusions that will be reached in the Tax Opinion, or the treatment of the Spin-Off by the IRS or any court. The rendering of the Tax Opinion at a "should" level of comfort reflects our best professional judgment based on the law, regulations, and authorities in effect at the time, and on the factual representations provided to us; however, it is not a guarantee that the IRS will not challenge the Spin-Off's qualification under Sections 355 and 368(a)(1)(D) of the Code, nor is it a guarantee that a court would sustain the tax-free treatment of the Spin-Off if such treatment were challenged by the IRS.

The Tax Opinion will contain customary qualifications, assumptions, and limitations, including reliance on the accuracy and completeness of factual representations in the Representation Letter, and the assumption that the Spin-Off will be consummated in accordance with the transaction documents as described to us. Changes to the facts, the transaction structure, or applicable law could affect the conclusions reached in the Tax Opinion. The Client acknowledges that it has been advised of the inherent limitations of a tax opinion and of the risk that the IRS could take a contrary position.

11. Governing Law and Dispute Resolution

This engagement letter shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to principles of conflicts of law that would require the application of the laws of another jurisdiction.

Any dispute, controversy, or claim arising out of or relating to this engagement letter, the Engagement, or the services provided hereunder, including any claim for breach of contract, professional malpractice, or breach of fiduciary duty, shall be resolved through binding arbitration conducted in New York, New York, in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. The arbitration shall be conducted before a single arbitrator selected by mutual agreement of the parties or, if the parties are unable to agree, in accordance with the selection procedures of the American Arbitration Association. The arbitrator's decision shall be final and binding and may be entered as a judgment in any court of competent jurisdiction. Each party shall bear its own costs and attorneys' fees in connection with any arbitration, unless the arbitrator determines otherwise.

12. Acceptance and Execution

If the foregoing terms are acceptable to you, please indicate your agreement by signing and returning a copy of this letter to the undersigned. We are prepared to commence work promptly upon receipt of the fully executed engagement letter.

We very much look forward to working with you, Ms. Yeung, and the entire Harrowgate team on this transaction. Please do not hesitate to contact Leonard Cross at (212) 506-7150 or leonard.cross@calderwoodharkness.com, or Sylvia Hartwell at (212) 506-7225 or sylvia.hartwell@calderwoodharkness.com, with any questions regarding this engagement letter or the scope of our services.

•

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Name: Leonard Cross

Title: Partner (Responsible Partner)

Date: April 11, 2022

By: ________

Name: Sylvia Hartwell

Title: Partner (Billing Partner)

Date: April 11, 2022

AGREED AND ACCEPTED

By its execution below, Harrowgate Private Equity Fund IV, L.P. confirms its agreement to the terms and conditions set forth in this engagement letter and authorizes Calderwood & Harkness LLP to commence the Engagement described herein.

HARROWGATE PRIVATE EQUITY FUND IV, L.P.

By: Harrowgate Capital Partners IV GP LLC, its General Partner

By: ________

Name: Christine Yeung

Title: General Counsel, Harrowgate Capital Advisors LLC

(Authorized Signatory)

Date: April 11, 2022

Enclosures:

Schedule A: Standard Terms and Conditions of Engagement (the substantive terms of which are reflected in the body of this engagement letter and incorporated herein by reference)

No additional enclosures.

cc: Nathan Whitfield, Esq. — Whitfield & Gage LLP (via email) Leonard Cross — Calderwood & Harkness LLP (file copy) Sylvia Hartwell — Calderwood & Harkness LLP (file copy)

Timekeeper	Title	2022 Hourly Rate
Leonard Cross	Partner	$1,650
Sylvia Hartwell	Partner	$1,550
Garrett Simmons	Senior Associate	$1,050
Leila Nazari	Associate	$850

CALDERWOOD & HARKNESS LLP Attorneys at Law
1301 Avenue of the Americas, 40th Floor New York, New York 10019
Telephone: (212) 506-7000 Facsimile: (212) 506-7001 www.calderwoodharkness.com
April 11, 2022
VIA ELECTRONIC MAIL AND HAND DELIVERY
Harrowgate Private Equity Fund IV, L.P. c/o Harrowgate Capital Advisors LLC 600 Lexington Avenue, 38th Floor New York, New York 10022
Attention: Christine Yeung, General Counsel
Re: Engagement of Calderwood & Harkness LLP — Tax Opinion in Connection with the Proposed Spin-Off of Meridian Flow Technologies, Inc. from Veldran Industries Holdings, Inc.
Engagement Number: 1003-00005 Matter Code: HRW-SPIN-001
Dear Ms. Yeung:
1. Introduction and Purpose
Calderwood & Harkness LLP ("Calderwood & Harkness," "we," "us," or the "Firm") is pleased to confirm its engagement by Harrowgate Private Equity Fund IV, L.P. ("HPE Fund IV" or the "Client"), a Delaware limited partnership (EIN: 84-3291067), with its registered address at 1209 Orange Street, Wilmington, Delaware 19801, and its principal office at 600 Lexington Avenue, 38th Floor, New York, New York 10022. We appreciate the confidence that HPE Fund IV and its affiliates have placed in our firm, and we look forward to working with you and your team on this important transaction.
HPE Fund IV is managed by Harrowgate Capital Advisors LLC ("Harrowgate Advisors"), a Delaware limited liability company (EIN: 83-2756891), which serves as the investment advisor to the fund. The general partner of HPE Fund IV is Harrowgate Capital Partners IV GP LLC, a Delaware limited liability company (EIN: 84-3291104). References in this engagement letter to the "Client" shall include, where the context requires, Harrowgate Advisors and the general partner acting on behalf of HPE Fund IV in connection with the matters described herein.
This letter sets forth the terms and conditions under which Calderwood & Harkness will provide legal services to the Client in connection with the proposed tax-free reorganization and spin-off transaction described more fully in Section 2 below (the "Engagement"). This engagement letter, together with the Standard Terms and Conditions of Engagement attached hereto as Schedule A (which are incorporated herein by reference and the substance of which is reflected in the body of this letter), supersedes any prior understandings, communications, or agreements, whether written or oral, between the parties regarding the subject matter hereof, and constitutes the entire agreement between Calderwood & Harkness and the Client with respect to this Engagement.
We ask that you review this letter carefully and, if the terms set forth herein are acceptable, execute and return the enclosed copy to our attention at your earliest convenience. Your signature below will confirm your agreement to the terms of this Engagement.
2. Description of the Proposed Transaction
To provide context for the scope of our engagement, we summarize below our understanding of the proposed transaction based on discussions with your team and our preliminary review of the materials provided to date.
Ownership Structure. HPE Fund IV holds approximately 62.4% of the outstanding shares of common stock of Veldran Industries Holdings, Inc. ("Veldran" or "VIH"), a Delaware corporation (EIN: 86-1920347), incorporated on March 14, 2019, with its registered address at 1209 Orange Street, Wilmington, Delaware 19801, and its principal office at 2400 Commerce Park Drive, Suite 500, Charlotte, North Carolina 28217. HPE Fund IV's equity interest in Veldran is held indirectly through its wholly owned subsidiary, Harrowgate Veldran Holdings LLC ("HVH"), a Delaware limited liability company (EIN: 86-1483920), which is treated as a disregarded entity for U.S. federal income tax purposes. HPE Fund IV's stake comprises 46,488,000 shares out of a total of 74,500,000 shares of Veldran common stock currently outstanding, representing approximately 62.4% of the total outstanding shares. The remaining approximately 37.6% of Veldran common stock is held by management, other institutional investors, and certain co-investors, the identities and holdings of which we will confirm during the course of our engagement.
Veldran's Business Segments. Veldran operates two principal business segments:
(i) the Engineered Coatings Division, which designs, manufactures, and distributes specialty industrial coatings, surface treatment solutions, and related chemical products for the aerospace, automotive, and heavy industrial end markets, and which generated fiscal year 2021 ("FY2021") revenue of approximately $1.52 billion and EBITDA of approximately $285 million; and
(ii) the Precision Flow Solutions Division, which designs, manufactures, and services precision flow control products, including valves, actuators, instrumentation, and related systems for the energy, water infrastructure, and chemical processing end markets, and which generated FY2021 revenue of approximately $820 million and EBITDA of approximately $133 million.
On a consolidated basis, Veldran reported aggregate FY2021 revenue of approximately $2.34 billion and EBITDA of approximately $418 million. We understand that audited financial statements for each segment are prepared by Pemberton Rathbone LLP and will be made available to us during the course of this engagement.
The Proposed Spin-Off. The proposed transaction (the "Spin-Off") contemplates that Veldran, acting as the distributing corporation ("Distributing"), will undertake a two-step divisive reorganization structured as follows:
(a) The Contribution. Veldran will contribute to a newly formed Delaware corporation, Meridian Flow Technologies, Inc. ("Meridian" or "SpinCo"), all of the assets, properties, rights, and interests associated with the Precision Flow Solutions Division (collectively, the "Transferred Assets"), together with the assumption by Meridian of certain allocated liabilities associated with or arising out of the Precision Flow Solutions Division (the "Assumed Liabilities"), in exchange for the issuance to Veldran of all outstanding shares of Meridian common stock (the "Contribution"). The specific assets, liabilities, and contracts to be transferred will be set forth in the Separation Agreement and related conveyance documents.
(b) The Distribution. Immediately following the Contribution, Veldran will distribute 100% of the outstanding shares of Meridian common stock, on a pro rata basis, to the holders of Veldran common stock as of a record date to be established by the Veldran Board of Directors (the "Distribution"). The Distribution is expected to be effected at a ratio of one (1) share of Meridian common stock for each outstanding share of Veldran common stock (a 1:1 distribution ratio). Upon completion of the Distribution, Meridian will be an independent, publicly traded company (or, if not publicly traded, a standalone entity with its own governance and capital structure), and Veldran will retain the Engineered Coatings Division.
Tax-Free Treatment. The Spin-Off is intended to qualify as a tax-free reorganization under Section 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"), and as a tax-free distribution under Section 355 of the Code. If the Spin-Off so qualifies, neither Veldran, Meridian, nor the shareholders of Veldran should recognize gain or loss as a result of the Contribution and Distribution, subject to certain exceptions (including, without limitation, the receipt of boot, if any, and the application of Sections 355(d), 355(e), and 355(g) of the Code).
Meridian Status. We understand that Meridian has not yet been incorporated as of the date of this letter. The planned registered address for Meridian is 1209 Orange Street, Wilmington, Delaware 19801 (care of Penmark Industries, as registered agent), and its planned principal office is 7100 Northlake Parkway, Suite 300, Tucker, Georgia 30084. We anticipate that Meridian will be incorporated in the near term to facilitate planning and the execution of definitive transaction documents.
Anticipated Timeline. Based on our discussions with the Client and the other advisors to the transaction, the target record date and distribution date for the Spin-Off are anticipated in the fourth quarter of 2022 (Q4 2022), subject to the satisfaction of customary conditions, including board approvals, the receipt of necessary tax opinions, the completion of financing arrangements, and other customary closing conditions.
3. Scope of Engagement
3.1 Tax Opinion
Calderwood & Harkness is engaged to render a written tax opinion (the "Tax Opinion") addressed to HPE Fund IV (and, to the extent directed by the Client, to Veldran and the Veldran Board of Directors) concluding that:
(i) the Distribution of Meridian common stock by Veldran to its shareholders "should" qualify as a tax-free distribution under Section 355(a) of the Code, such that no gain or loss is recognized by Veldran or its shareholders (other than with respect to any boot received) as a result of the Distribution; and
(ii) the Contribution of the Transferred Assets by Veldran to Meridian in exchange for Meridian common stock and the assumption of the Assumed Liabilities "should" qualify as a reorganization within the meaning of Section 368(a)(1)(D) of the Code.
The "should" level of comfort represents the second-highest level of assurance customarily employed by major law firms in rendering tax opinions, falling below a "will" opinion (the highest level of assurance, reflecting a conclusion that the relevant tax treatment is virtually certain) but above a "more likely than not" opinion (reflecting a conclusion that the relevant tax treatment is more likely than not to be sustained if challenged). A "should" opinion reflects a conclusion that, in our judgment, the relevant tax treatment is the correct treatment under applicable law, is well-supported by the authorities, and would likely be sustained if challenged, although there is some degree of uncertainty inherent in the analysis.
The Client acknowledges that no private letter ruling from the Internal Revenue Service (the "IRS") will be sought in connection with the Spin-Off. The Tax Opinion is intended to serve as the sole tax assurance for the transaction with respect to the qualification of the Spin-Off under Sections 355 and 368(a)(1)(D) of the Code. We note that the IRS significantly curtailed the issuance of private letter rulings on spin-off transactions effective in 2017 (see Rev. Proc. 2017-52), and it is now standard market practice for transactions of this type to rely solely on tax opinions rendered by outside counsel.
3.2 Key Code Provisions to Be Analyzed
The Tax Opinion will involve a detailed analysis of the following provisions of the Code, the Treasury Regulations promulgated thereunder, published IRS guidance (including Revenue Rulings, Revenue Procedures, and Notices), and relevant judicial authorities:
(a) IRC § 355(a) — Requirements for Tax-Free Distribution. We will analyze whether the Distribution satisfies each of the statutory requirements for tax-free treatment under Section 355(a), including the requirement that the distribution be of stock of a controlled corporation, the requirement that both Distributing and Controlled be engaged in the active conduct of a trade or business immediately after the distribution, and the requirement that the distribution not be used principally as a device for the distribution of earnings and profits.
(b) IRC § 355(a)(1)(B) — Device Test. We will analyze whether the Distribution is "used principally as a device" for the distribution of earnings and profits of Veldran, Meridian, or both, within the meaning of Section 355(a)(1)(B) and the regulations thereunder, including the device and non-device factors set forth in Treasury Regulation § 1.355-2(d).
(c) IRC § 355(b) — Active Trade or Business Requirement. We will analyze whether each of Veldran (post-Distribution) and Meridian (post-Distribution) is engaged in the "active conduct of a trade or business" within the meaning of Section 355(b) of the Code and the regulations thereunder. This analysis will include confirmation that each relevant trade or business has been actively conducted throughout the five-year period ending on the date of the Distribution, as required by Section 355(b)(2)(B).
(d) IRC § 355(b)(2)(C) and (D) — Acquisitions Within the Five-Year Look-Back Period. We will analyze whether any trade or business relied upon for purposes of the active trade or business requirement was acquired in a transaction in which gain or loss was recognized, in whole or in part, during the five-year period ending on the date of the Distribution. This analysis is particularly relevant to Veldran's acquisition of Kestrel Precision Controls, Inc. ("Kestrel") on June 7, 2019, which we understand was a fully taxable acquisition of all outstanding shares of Kestrel common stock. Kestrel was subsequently merged into a subsidiary of Veldran and its operations were integrated into the Precision Flow Solutions Division. We will need to analyze whether the Kestrel acquisition constitutes an acquisition of a trade or business (or a substantial portion thereof) that implicates Section 355(b)(2)(C) or (D), and, if so, whether the relevant trade or business is nonetheless treated as having been actively conducted for the requisite five-year period.
(e) IRC § 355(d) — Disqualified Distribution Analysis. We will analyze whether the Distribution constitutes a "disqualified distribution" within the meaning of Section 355(d). Section 355(d) generally provides that if any person holds "disqualified stock" in either Distributing or Controlled immediately after the distribution, and such stock was acquired by "purchase" within the five-year period preceding the distribution, the distribution may be treated as a taxable event at the corporate level (but not the shareholder level). This analysis will require a detailed examination of the acquisition history of Veldran stock, including HPE Fund IV's acquisition of its controlling stake.
(f) IRC § 355(e) — Anti-Morris Trust / Plan Analysis. We will analyze whether the Distribution is part of a "plan" (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, a 50-percent-or-greater interest in either Distributing or Controlled, within the meaning of Section 355(e) of the Code and Treasury Regulation § 1.355-7. This analysis is of particular significance in light of HPE Fund IV's acquisition of its approximately 62.4% controlling stake in Veldran on September 20, 2019. We will need to determine whether the September 2019 acquisition and the proposed Spin-Off are part of a "plan" within the meaning of Section 355(e) and the safe harbors, presumptions, and plan factors set forth in Treasury Regulation § 1.355-7.
(g) IRC § 355(g) — Distributions Involving Disqualified Investment Corporations. We will analyze whether either Veldran or Meridian constitutes a "disqualified investment corporation" within the meaning of Section 355(g), which would cause the Distribution to be taxable. This analysis will require a review of the fair market values of the investment assets and total assets of each of Veldran (post-Distribution) and Meridian.
(h) IRC § 368(a)(1)(D) — Divisive Reorganization Requirements. We will analyze whether the Contribution qualifies as a reorganization under Section 368(a)(1)(D), including the requirements relating to the transfer of assets by Veldran to Meridian and the distribution of Meridian stock in a transaction that qualifies under Section 355.
(i) Treasury Regulations — Business Purpose and Plan Analysis. In addition to the statutory provisions described above, we will analyze the applicable Treasury Regulations, including, without limitation, Treasury Regulation § 1.355-2(b) (requiring a valid corporate business purpose for the distribution), Treasury Regulation § 1.355-2(d) (device factors and non-device factors), and Treasury Regulation § 1.355-7 (plan analysis and safe harbors under Section 355(e)).
3.3 Related Work Product
In addition to the Tax Opinion itself, Calderwood & Harkness will prepare and deliver the following related work product in connection with this Engagement:
(a) Internal Tax Analysis Memoranda. Calderwood & Harkness will prepare internal memoranda addressing each of the key Code provisions identified in Section 3.2 above, setting forth our detailed analysis, the factual basis for our conclusions, and any areas of uncertainty or risk. These memoranda will serve as the analytical foundation for the Tax Opinion and will be maintained in the engagement file.
(b) Representation Letter. Calderwood & Harkness will prepare and negotiate a comprehensive Representation Letter (the "Representation Letter") to be executed by authorized officers of Veldran and of Harrowgate Advisors (on behalf of HPE Fund IV), upon which the Tax Opinion will be based. The Representation Letter will contain factual representations and covenants relating to the structure and business purpose of the Spin-Off, the historical conduct of the relevant trades or businesses, the acquisition history of Veldran stock, the intended post-Distribution conduct of Veldran and Meridian, and such other matters as we deem necessary or appropriate for purposes of the Tax Opinion.
(c) Tax Provisions for Separation Agreement. Calderwood & Harkness will prepare and negotiate tax-related provisions, including representations, warranties, covenants, and indemnification provisions, for insertion into the Separation Agreement being drafted by Whitfield & Gage LLP, which is serving as corporate counsel to Harrowgate in connection with the Spin-Off. These provisions will address matters such as the preservation of the tax-free status of the Spin-Off, restrictions on post-Distribution transactions that could jeopardize tax-free treatment, and related matters.
(d) Tax Sharing Agreement. Calderwood & Harkness will prepare an outline and key terms for a Tax Sharing Agreement (or Tax Matters Agreement) between Veldran and Meridian, which will govern the allocation of pre-Distribution tax liabilities, the preparation and filing of tax returns, cooperation on tax matters, and the allocation of responsibility for any taxes arising from a failure of the Spin-Off to qualify for tax-free treatment. The drafting and negotiation of the definitive Tax Sharing Agreement may be undertaken by Calderwood & Harkness or by Whitfield & Gage LLP, as directed by the Client.
(e) Tax Review of Financing Documents. Calderwood & Harkness will provide tax-related review and commentary on the credit agreement, indenture covenants, and related financing documents to the extent that such documents contain provisions relevant to the Section 355 analysis, including provisions relating to distributions, debt allocation, and the transfer of assets and liabilities.
3.4 Coordination with Other Advisors
Calderwood & Harkness will coordinate with the following advisors in connection with this Engagement, as necessary and as directed by the Client:
(a) Whitfield & Gage LLP — corporate and M&A counsel to Harrowgate, serving as lead coordinating counsel for the Spin-Off. Whitfield & Gage's offices are located at 51 West 52nd Street, New York, New York 10019. Key contacts at Whitfield & Gage are Nathan Whitfield, Senior Partner; Priya Chandrasekar, Partner, Corporate and Capital Markets; and Ross Halverson, Counsel.
(b) Thornapple McCord LLP — corporate counsel to Veldran (serving as separate counsel to Veldran and its board of directors in connection with the Spin-Off). Thornapple McCord's offices are located at 227 West Trade Street, Suite 2000, Charlotte, North Carolina 28202. Key contacts at Thornapple McCord are Elaine Thornapple, Founding Partner, and David Ochoa, Partner, Corporate and Securities.
(c) Brackenridge & Co. — financial advisor and investment bank to Harrowgate and the Veldran Board of Directors. Brackenridge's offices are located at 383 Madison Avenue, New York, New York 10179. The key contact at Brackenridge is Samuel Ng, Managing Director, Industrials Group.
(d) Pemberton Rathbone LLP — independent auditors and tax-return preparers for Veldran. Pemberton Rathbone's offices are located at One PPG Place, Suite 1600, Pittsburgh, Pennsylvania 15222. Key contacts at Pemberton Rathbone are Lisa Engstrom, Partner, Audit & Assurance, and Harold Weiss, Partner, Tax.
Calderwood & Harkness will coordinate with these advisors as necessary to obtain factual information, review documentation, and ensure consistency in the transaction structure and related agreements. Notwithstanding such coordination, Calderwood & Harkness is not responsible for the work product, advice, or conclusions of any of the foregoing advisors, and each such advisor is independently retained by and responsible to its own client or clients.
3.5 Limitations on Scope
The scope of this Engagement is limited to the matters described in Sections 3.1 through 3.4 above. Without limiting the generality of the foregoing, the Engagement does not include:
(a) Representation of any party in any tax controversy, examination, audit, or litigation before the IRS, any state or local taxing authority, or any court, whether arising from the Spin-Off or otherwise;
(b) The rendering of state and local tax opinions with respect to the Spin-Off, provided that Calderwood & Harkness may, at the Client's request and for an additional fee, prepare a summary memorandum identifying key state and local tax considerations (including, without limitation, state-level treatment of spin-offs and potential state-level gain recognition);
(c) Advice on the tax consequences of the Distribution to individual shareholders of Veldran, including the determination of the tax basis of Meridian shares received in the Distribution, the allocation of basis between Veldran and Meridian shares, or the holding period of Meridian shares;
(d) Tax advice to any party other than HPE Fund IV and, to the extent directed by HPE Fund IV, Veldran Industries Holdings, Inc.;
(e) Securities law, corporate law, environmental law, employment law, ERISA, or other non-tax legal advice of any kind.
The Tax Opinion will be based on the provisions of the Internal Revenue Code, Treasury Regulations (including proposed and temporary regulations), published IRS guidance (including Revenue Rulings, Revenue Procedures, Notices, and Announcements), and relevant judicial precedent, in each case as in effect and available on the date of the Tax Opinion. The Tax Opinion will not take into account, and Calderwood & Harkness will have no obligation to update the Tax Opinion to reflect, changes in applicable law, regulations, or judicial interpretation occurring after the date of the Tax Opinion, unless separately engaged to do so.
The Tax Opinion will be based on the factual representations made by Veldran and Harrowgate in the Representation Letter and on such other factual information as we receive in the course of this Engagement. Calderwood & Harkness will not independently verify the accuracy or completeness of the factual representations set forth in the Representation Letter or in other materials provided to us, and we will assume such representations to be true, correct, and complete in all material respects.
4. Engagement Team
The following attorneys have been assigned to this Engagement and will be the primary points of contact for the Client:
Leonard Cross — Responsible Partner, Tax Department. Mr. Cross has been a partner at Calderwood & Harkness since 2010 and has over twenty years of experience advising clients on U.S. federal income tax matters, with a particular focus on corporate spin-offs, split-offs, mergers and acquisitions, and complex reorganizations. Mr. Cross will have overall responsibility for the Engagement, including the supervision of the Tax Opinion and all related work product, and will serve as the primary point of contact for the Client on substantive tax matters.
Sylvia Hartwell — Billing Partner, Tax Department. Ms. Hartwell has been a partner at Calderwood & Harkness since 2014 and focuses her practice on partnership taxation, fund structures, and the tax aspects of private equity transactions. Ms. Hartwell will have responsibility for billing and administrative matters related to the Engagement and will also contribute substantive expertise on issues relating to the flow-through tax treatment of HPE Fund IV and its partners.
Garrett Simmons — Lead Associate, Tax Department. Mr. Simmons is a sixth-year associate in Calderwood & Harkness's Tax Department and has significant experience in tax-free reorganizations, spin-offs, and related matters. Mr. Simmons will serve as the lead associate on the Engagement and will be responsible for the preparation of initial drafts of the Tax Opinion, the Representation Letter, and the internal tax analysis memoranda.
Leila Nazari — Working Associate, Tax Department. Ms. Nazari is a third-year associate in Calderwood & Harkness's Tax Department with experience in corporate tax and transactional tax matters. Ms. Nazari will assist Mr. Simmons in the preparation of research memoranda, document review, and other aspects of the Engagement.
Additional attorneys, paraprofessionals, and other personnel may be assigned to the Engagement from time to time as the Firm deems necessary or appropriate to ensure the timely and efficient completion of the work. The Client will be notified of any material changes to the composition of the engagement team, including the replacement or departure of any of the attorneys named above.
5. Fees and Billing Arrangements
5.1 Hourly Rates
Legal services rendered in connection with this Engagement will be billed on an hourly basis at the following 2022 standard rates for the attorneys assigned to this matter:
Rates for other timekeepers (including other partners, associates, or paraprofessionals) who may work on the matter from time to time will be provided to the Client upon request. All time will be recorded in increments of one-tenth (0.1) of an hour.
The Firm's hourly rates are subject to annual adjustment, typically effective January 1 of each calendar year. The Client will be notified in advance of any changes to the applicable hourly rates. Any adjusted rates will apply to services performed on or after the effective date of the adjustment.
5.2 Fee Estimate
Based on Calderwood & Harkness's experience with spin-off transactions and tax opinion engagements of comparable complexity, the total professional fees for the full Engagement (from commencement through the delivery of a final Tax Opinion and the completion of related work product) are estimated to be in the range of $850,000 to $1,200,000.
This estimate is provided for planning and budgeting purposes only and does not constitute a cap, a fixed fee, a maximum fee, or a guarantee of the total cost of the Engagement. Actual fees may be higher or lower than the estimated range depending on a number of factors, including the complexity of the issues encountered during our analysis, the volume of factual diligence required, the number of drafts of the Tax Opinion and related documents and the rounds of internal and external comment, the responsiveness of other parties and advisors in providing requested information and documentation, the extent of any changes to the transaction structure, unforeseen issues or complications, and other factors beyond our control. We will endeavor to keep the Client informed of the status of fees and to provide updated estimates if it becomes apparent that actual fees are likely to exceed the high end of the estimated range.
The fee estimate set forth above does not include disbursements and out-of-pocket expenses, which will be billed separately as described in Section 5.4 below.
5.3 Billing and Payment Terms
Calderwood & Harkness will render interim invoices to the Client on an approximately monthly basis during periods of active work on the Engagement. Invoices may be rendered more or less frequently depending on the volume and timing of work performed.
All invoices are due and payable within thirty (30) days of the date of the invoice. Payment should be made by wire transfer to Calderwood & Harkness's client trust account, the details of which will be provided on each invoice, or by such other method as may be agreed upon by the parties.
Each invoice will include a summary of hours billed by each timekeeper, the applicable hourly rate for each timekeeper, and a reasonable description of the services performed during the billing period. Detailed time entries will be made available upon request. Calderwood & Harkness will comply with any reasonable billing guidelines or requirements that the Client may provide, to the extent consistent with the Firm's standard billing practices.
Calderwood & Harkness reserves the right to charge interest on any amounts that remain unpaid more than thirty (30) days after the date of the invoice, at a rate of one percent (1%) per month (twelve percent (12%) per annum), or the maximum rate permitted by applicable law, whichever is less. The accrual of interest shall not relieve the Client of its obligation to pay the full amount of the invoice.
5.4 Disbursements and Expenses
In addition to professional fees, the Client will be responsible for the reimbursement of reasonable out-of-pocket expenses and disbursements incurred by Calderwood & Harkness in connection with the Engagement. Such expenses may include, without limitation:
•  Travel expenses (including airfare, ground transportation, lodging, and meals) incurred in connection with meetings, closings, or other Engagement-related activities;
•  Filing fees and governmental charges;
•  Courier, express delivery, and postage charges;
•  Charges for computerized legal research databases (including Westlaw, Sundial Solutions, and similar services);
•  Document reproduction, printing, and binding costs;
•  Long-distance telephone and teleconference charges; and
•  Other reasonable out-of-pocket costs directly related to the Engagement.
All expenses will be itemized on the applicable invoice. Calderwood & Harkness will endeavor to manage expenses prudently and will obtain the Client's prior approval for any individual expense expected to exceed $5,000.
6. Client Identification and Dual Representation
The Client for purposes of this Engagement is Harrowgate Private Equity Fund IV, L.P. Calderwood & Harkness's duties of loyalty, confidentiality, and communication run to HPE Fund IV (and, by extension, to Harrowgate Advisors and the general partner acting on behalf of HPE Fund IV). Our engagement is with the fund entity and not with any individual partner, member, officer, or employee of HPE Fund IV, Harrowgate Advisors, or the general partner.
Calderwood & Harkness understands that the Tax Opinion will also be provided for the benefit of Veldran Industries Holdings, Inc., in its capacity as Distributing in the Spin-Off. The Tax Opinion will customarily contain a statement that it may be relied upon by Veldran and its board of directors, subject to the assumptions, qualifications, and limitations set forth therein. To the extent that Calderwood & Harkness's work product is shared with, or relied upon by, Veldran, Calderwood & Harkness acknowledges that it will owe duties consistent with such reliance, including a duty to exercise the same degree of professional care in preparing the Tax Opinion and related work product as it would if Veldran were a direct client of the Firm.
Notwithstanding the foregoing, Veldran is separately represented by Thornapple McCord LLP as its corporate counsel in connection with the Spin-Off. Calderwood & Harkness will not serve as corporate counsel to Veldran and will not be responsible for advising Veldran on corporate, securities, or other non-tax matters. Veldran should continue to rely on Thornapple McCord LLP and its other advisors for such matters.
To the extent that any conflict of interest arises between the interests of HPE Fund IV and Veldran in connection with the tax analysis or the preparation of the Tax Opinion — including, without limitation, any conflict relating to the allocation of tax liabilities between Veldran and Meridian, the terms of the Tax Sharing Agreement, or the interpretation of factual representations — Calderwood & Harkness will promptly notify the Client and, if appropriate, Thornapple McCord LLP on behalf of Veldran. In such event, Calderwood & Harkness may be required to withdraw from the dual representation and may continue to represent only HPE Fund IV, subject to the applicable rules of professional conduct. If a conflict cannot be resolved to the satisfaction of all affected parties, Calderwood & Harkness may be required to withdraw from the Engagement entirely, in which case the provisions of Section 9 (Termination) shall apply.
7. Confidentiality
Calderwood & Harkness will maintain the confidentiality of all non-public information, documents, and communications provided by or on behalf of the Client in connection with this Engagement, in accordance with the Firm's professional obligations and the applicable rules of professional conduct, including the New York Rules of Professional Conduct.
The Client acknowledges and agrees that the Tax Opinion and related work product prepared by Calderwood & Harkness may need to be shared with the following parties in connection with the Spin-Off, and consents to such disclosure:
(a) Whitfield & Gage LLP, in its capacity as corporate counsel to Harrowgate;
(b) Thornapple McCord LLP, in its capacity as corporate counsel to Veldran;
(c) Brackenridge & Co., in its capacity as financial advisor to Harrowgate and the Veldran Board;
(d) Pemberton Rathbone LLP, in its capacity as independent auditors and tax-return preparers for Veldran;
(e) Officers, directors, and authorized employees of Veldran, Meridian (upon its formation), Harrowgate Advisors, and the general partner, in each case on a need-to-know basis in connection with the Spin-Off;
(f) Ashfield National Bank, N.A., in its capacity as administrative agent under Veldran's existing credit facilities, to the extent that disclosure of the Tax Opinion or related materials is required or contemplated by the terms of the applicable credit agreement; and
(g) Colton Trust Company, in its capacity as indenture trustee under Veldran's outstanding indentures, to the extent that disclosure of the Tax Opinion or related materials is required or contemplated by the terms of the applicable indenture.
Any disclosure of the Tax Opinion or related work product to parties other than those identified above, or for purposes other than those described herein, shall require the prior written consent of Calderwood & Harkness. The Client agrees to use commercially reasonable efforts to ensure that any recipient of the Tax Opinion or related work product maintains the confidentiality of such materials and does not further distribute or disclose them without Calderwood & Harkness's prior written consent.
8. Document Retention
Calderwood & Harkness will retain all files, documents, and work product relating to this Engagement in accordance with the Firm's standard document retention policies. Under such policies, client files are generally retained for a period of ten (10) years following the close or termination of the Engagement, after which the Firm reserves the right to destroy or dispose of such files without further notice to the Client, unless the Client has provided specific written instructions to the contrary.
The Client is encouraged to maintain its own copies of all documents, correspondence, work product, and other materials provided by or received from Calderwood & Harkness in connection with this Engagement. Upon the close or termination of the Engagement, the Client may request that the Firm transfer copies of the engagement files to the Client or to successor counsel, and Calderwood & Harkness will comply with such request in a timely manner, subject to the Firm's right to retain copies for its own records and to assert any applicable lien for unpaid fees and expenses.
9. Termination
Either party may terminate this Engagement upon thirty (30) days' prior written notice to the other party, delivered to the addresses set forth in this letter (or to such other address as may be designated in writing by the applicable party). Termination of the Engagement shall not relieve the Client of its obligation to pay all fees, expenses, and disbursements incurred by Calderwood & Harkness through the effective date of termination, and all such amounts shall become due and payable upon the effective date of termination.
In addition to termination upon notice, Calderwood & Harkness may withdraw from this Engagement at any time if such withdrawal is required by the applicable rules of professional conduct, including, without limitation, in the event that (a) a conflict of interest arises that cannot be resolved through appropriate measures; (b) the Client fails to fulfill a material obligation under this engagement letter, including the obligation to pay invoices in a timely manner; (c) the Client engages in conduct that renders the continued representation unreasonably difficult; or (d) other circumstances arise that, in the Firm's reasonable judgment, make continued representation impracticable or ethically impermissible.
Upon termination or withdrawal, Calderwood & Harkness will cooperate in good faith in the transition of the matter to successor counsel designated by the Client, including by providing copies of relevant files and work product (subject to the Client's payment of all outstanding fees and expenses and the Firm's right to assert any applicable lien), and by making the engagement team available for reasonable consultation during the transition period.
10. No Guarantee of Outcome
Calderwood & Harkness makes no guarantee or assurance regarding the outcome of the tax analysis, the conclusions that will be reached in the Tax Opinion, or the treatment of the Spin-Off by the IRS or any court. The rendering of the Tax Opinion at a "should" level of comfort reflects our best professional judgment based on the law, regulations, and authorities in effect at the time, and on the factual representations provided to us; however, it is not a guarantee that the IRS will not challenge the Spin-Off's qualification under Sections 355 and 368(a)(1)(D) of the Code, nor is it a guarantee that a court would sustain the tax-free treatment of the Spin-Off if such treatment were challenged by the IRS.
The Tax Opinion will contain customary qualifications, assumptions, and limitations, including reliance on the accuracy and completeness of factual representations in the Representation Letter, and the assumption that the Spin-Off will be consummated in accordance with the transaction documents as described to us. Changes to the facts, the transaction structure, or applicable law could affect the conclusions reached in the Tax Opinion. The Client acknowledges that it has been advised of the inherent limitations of a tax opinion and of the risk that the IRS could take a contrary position.
11. Governing Law and Dispute Resolution
This engagement letter shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to principles of conflicts of law that would require the application of the laws of another jurisdiction.
Any dispute, controversy, or claim arising out of or relating to this engagement letter, the Engagement, or the services provided hereunder, including any claim for breach of contract, professional malpractice, or breach of fiduciary duty, shall be resolved through binding arbitration conducted in New York, New York, in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. The arbitration shall be conducted before a single arbitrator selected by mutual agreement of the parties or, if the parties are unable to agree, in accordance with the selection procedures of the American Arbitration Association. The arbitrator's decision shall be final and binding and may be entered as a judgment in any court of competent jurisdiction. Each party shall bear its own costs and attorneys' fees in connection with any arbitration, unless the arbitrator determines otherwise.
12. Acceptance and Execution
If the foregoing terms are acceptable to you, please indicate your agreement by signing and returning a copy of this letter to the undersigned. We are prepared to commence work promptly upon receipt of the fully executed engagement letter.
We very much look forward to working with you, Ms. Yeung, and the entire Harrowgate team on this transaction. Please do not hesitate to contact Leonard Cross at (212) 506-7150 or leonard.cross@calderwoodharkness.com, or Sylvia Hartwell at (212) 506-7225 or sylvia.hartwell@calderwoodharkness.com, with any questions regarding this engagement letter or the scope of our services.
•            
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Name: Leonard Cross
Title: Partner (Responsible Partner)
Date: April 11, 2022
By: ________
Name: Sylvia Hartwell
Title: Partner (Billing Partner)
Date: April 11, 2022
AGREED AND ACCEPTED
By its execution below, Harrowgate Private Equity Fund IV, L.P. confirms its agreement to the terms and conditions set forth in this engagement letter and authorizes Calderwood & Harkness LLP to commence the Engagement described herein.
HARROWGATE PRIVATE EQUITY FUND IV, L.P.
By: Harrowgate Capital Partners IV GP LLC, its General Partner
By: ________
Name: Christine Yeung
Title: General Counsel, Harrowgate Capital Advisors LLC
(Authorized Signatory)
Date: April 11, 2022
Enclosures:
Schedule A: Standard Terms and Conditions of Engagement (the substantive terms of which are reflected in the body of this engagement letter and incorporated herein by reference)
No additional enclosures.
cc: Nathan Whitfield, Esq. — Whitfield & Gage LLP (via email) Leonard Cross — Calderwood & Harkness LLP (file copy) Sylvia Hartwell — Calderwood & Harkness LLP (file copy)
Timekeeper | Title | 2022 Hourly Rate
Leonard Cross | Partner | $1,650
Sylvia Hartwell | Partner | $1,550
Garrett Simmons | Senior Associate | $1,050
Leila Nazari | Associate | $850

CALDERWOOD & HARKNESS LLP Attorneys at Law

VIA ELECTRONIC MAIL AND HAND DELIVERY

CALDERWOOD & HARKNESS LLP

AGREED AND ACCEPTED

HARROWGATE PRIVATE EQUITY FUND IV, L.P.

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