CALDERWOOD & HARKNESS LLP Counselors at Law
1301 Avenue of the Americas, 40th Floor New York, New York 10019
Telephone: (212) 554-8000
Invoice Date: June 15, 2022
SUBMITTED TO:
Christine Yeung General Counsel Harrowgate Capital Advisors LLC 600 Lexington Avenue, 38th Floor New York, New York 10022
Client and Matter Information
Billing Period
Period Covered: April 11, 2022 through June 10, 2022
Summary of Professional Services
During the billing period of April 11, 2022 through June 10, 2022, the firm performed the following professional services in connection with the above-referenced matter:
Engagement Opening and Kick-Off (April 11–18, 2022). Opened engagement files and conducted initial internal conflict reviews. Reviewed background materials provided by Harrowgate Capital Advisors LLC, including the investment thesis, portfolio company organizational charts, and preliminary transaction outlines for the proposed pro rata spin-off of Meridian Flow Technologies, Inc. ("Meridian") from Veldran Industries Holdings, Inc. ("Veldran"). Participated in a kick-off call on April 18, 2022 with representatives of Harrowgate Capital Advisors, Whitfield & Gage LLP (corporate counsel to Harrowgate), and management of Veldran to discuss the proposed transaction structure, timeline, and workstream responsibilities.
Tax Diligence Information Request (April 25, 2022). Prepared and circulated to Whitfield & Gage LLP and Pemberton Rathbone LLP (auditors and tax advisors to Veldran) a comprehensive initial tax diligence information request list covering, among other items, organizational documents, historical federal and state income tax returns, intercompany agreements, prior restructuring documentation, acquisition agreements and related closing documents, employment and compensation arrangements, and intellectual property transfer records relevant to the Section 355 analysis.
Organizational and Historical Tax Return Review (April–May 2022). Received and reviewed organizational documents, including certificates of incorporation, bylaws, operating agreements, and shareholder agreements for Veldran Industries Holdings, Inc. (EIN: 86-1920347), Meridian Flow Technologies, Inc., and Kestrel Precision Controls, Inc. (EIN: 58-2847193). Reviewed federal and state income tax returns for Veldran and its consolidated group for fiscal years 2017 through 2021. Reviewed acquisition documents relating to Veldran's acquisition of Kestrel Precision Controls, Inc., including the stock purchase agreement, ancillary agreements, and tax representations and warranties.
Coordination with Outside Advisors. Engaged in extensive coordination and correspondence with Whitfield & Gage LLP and Pemberton Rathbone LLP regarding the collection and organization of diligence materials, clarification of historical intercompany transactions, and resolution of open diligence items. Participated in multiple working-group calls to discuss the status of the diligence process, preliminary structuring considerations, and the timeline for delivery of the draft tax opinion.
Supplemental Information Request — Kestrel Acquisition (May 16, 2022). Following initial review of the Kestrel Precision Controls acquisition materials, prepared and circulated to Pemberton Rathbone LLP a supplemental information request focused on matters relevant to the analysis under Section 355(b)(2)(C) and (D) of the Code, including the consideration paid in the Kestrel acquisition, the source of funds used in connection therewith, the relationship of Kestrel's business to the active trades or businesses of Veldran and Meridian, and post-acquisition integration steps.
First Draft Representation Letter (May 6, 2022). Prepared and circulated to Harrowgate Capital Advisors and Whitfield & Gage LLP a first draft of the Representation Letter to be executed by officers of Veldran and Meridian in connection with the issuance of the firm's tax opinion. The draft Representation Letter addressed factual representations regarding the transaction structure, business purposes, the absence of a "plan" or series of related transactions within the meaning of Section 355(e), the five-year active trade or business histories of the distributing and controlled corporations, continuity of interest, continuity of business enterprise, and related matters.
First Draft Section 355 Analysis Memorandum (May 20, 2022). Prepared and circulated internally a comprehensive first draft analysis memorandum addressing the qualification of the proposed spin-off transaction under Sections 355 and 368(a)(1)(D) of the Code, including analysis of the statutory requirements (distribution of control, active trade or business, device, business purpose, and continuity of interest), and identification of issues requiring further analysis or additional factual development.
Section 355(b) Active Trade or Business Memorandum (June 1, 2022). Prepared and circulated internally a focused memorandum analyzing the active trade or business requirement under Section 355(b) of the Code as it relates to the Kestrel Precision Controls acquisition, including analysis of whether the acquisition of Kestrel may implicate the prohibition on acquisitions of active trades or businesses in transactions in which gain or loss was recognized under Section 355(b)(2)(C) and (D), and the potential application of Revenue Ruling 2003-18 and related authorities.
Receipt of Preliminary Valuation Ranges (June 10, 2022). Received and conducted an initial review of preliminary valuation ranges prepared by Brackenridge & Co. for Veldran and Meridian, which are relevant to the analysis of the device test, the Section 355(e) "plan" risk assessment, and the distribution of control requirements.
Ongoing Research and Analysis. Conducted ongoing internal research and analysis throughout the billing period regarding Section 355(e) "plan" risk, the device test under Section 355(a)(1)(B), and business purpose considerations, including review of relevant case law, revenue rulings, private letter rulings, and Treasury Regulations.
Professional Fees — Timekeeper Detail
Disbursements and Costs
Total Current Charges
Account Summary
Payment Instructions
Payment is due within thirty (30) days of the date of this invoice. Calderwood & Harkness LLP accepts payment by wire transfer or check as set forth below.
Wire Transfer:
Check Payment:
Please make checks payable to Calderwood & Harkness LLP and mail to:
Calderwood & Harkness LLP 1301 Avenue of the Americas, 40th Floor New York, New York 10019
Attn: Accounts Receivable
Please include Invoice Number 22-7831-001 and Matter Code HRW-SPIN-001 on the check or in accompanying remittance documentation.
Billing Contact
Questions or inquiries regarding this invoice should be directed to:
Sylvia Hartwell, Partner Calderwood & Harkness LLP 1301 Avenue of the Americas, 40th Floor New York, New York 10019 Telephone: (212) 554-8147
Email: shartwell@calderwoodharkness.com
TERMS AND CONDITIONS
Payment of the full amount stated above is due within thirty (30) days of the invoice date. Amounts remaining unpaid after thirty (30) days from the invoice date shall bear interest at the rate of one percent (1.0%) per month (12% per annum), or the maximum rate permitted by applicable law, whichever is less, calculated from the date payment was due until the date payment is received by the firm.
This invoice is rendered pursuant to, and subject to, the terms and conditions set forth in the Engagement Letter between Calderwood & Harkness LLP and Harrowgate Private Equity Fund IV, L.P., dated April 11, 2022, which is incorporated herein by reference. In the event of any conflict between the terms of this invoice and the Engagement Letter, the terms of the Engagement Letter shall control. The scope of the engagement, limitations on the firm's responsibilities, and other material terms governing the attorney-client relationship are set forth in the Engagement Letter and are not repeated here.
CONFIDENTIALITY AND PRIVILEGE NOTICE: This invoice and the information contained herein are confidential, may be subject to the attorney-client privilege and/or attorney work product doctrine, and are intended solely for the use of the addressee. Any unauthorized review, use, disclosure, or distribution is prohibited. If you have received this invoice in error, please notify Calderwood & Harkness LLP immediately at (212) 554-8000 and destroy all copies of the document.
Calderwood & Harkness LLP is a limited liability partnership organized under the laws of the State of New York.
| Invoice Number: | 22-7831-001 | |||
| Engagement Number: | 1003-00005 | |||
| Matter Code: | HRW-SPIN-001 | |||
| Billing Partner: | Sylvia Hartwell | |||
| Responsible Partner: | Leonard Cross | |||
| Payment Terms: | Net 30 Days from Invoice Date | |||
| Federal Tax ID: | 13-4827561 | |||
| Client: | Harrowgate Private Equity Fund IV, L.P. (EIN: 84-3291067) | |||
| Matter Description: | Tax opinion engagement — proposed pro rata spin-off of Meridian Flow Technologies, Inc. from Veldran Industries Holdings, Inc. pursuant to Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended | |||
| Matter Code: | HRW-SPIN-001 | |||
| Timekeeper | Title | Rate ($/hr) | Hours | Amount ($) |
| Leonard Cross | Partner | $1,650.00 | 20.0 | $33,000.00 |
| Sylvia Hartwell | Partner | $1,550.00 | 8.0 | $12,400.00 |
| Garrett Simmons | Senior Associate | $1,050.00 | 70.0 | $73,500.00 |
| Leila Nazari | Associate | $850.00 | 54.0 | $45,900.00 |
| Subtotal Professional Fees | 152.0 | $164,800.00 | ||
| Description | Amount ($) | |||
| Online legal research database charges (Westlaw Tax, Checkpoint, Granite Harbor Solutions) | $155.00 | |||
| Document reproduction and copying charges | $45.00 | |||
| Total Disbursements | $200.00 | |||
| Professional Fees: | $164,800.00 | |||
| Disbursements: | $200.00 | |||
| Total Amount Due This Invoice: | $165,000.00 | |||
| Prior invoices rendered on this matter: | $0.00 | |||
| Prior payments received: | $0.00 |
| Outstanding balance from prior invoices: | $0.00 |
| Current charges (Invoice #22-7831-001): | $165,000.00 |
| Total Amount Due: | $165,000.00 |
| Bank Name: | Greaves Bancorp |
| Bank Address: | 383 Madison Avenue, New York, NY 10179 |
| ABA Routing Number: | 021000021 |
| Account Name: | Calderwood & Harkness LLP — Client Trust Operating Account |
| Account Number: | 8830-4417-2956 |
| SWIFT Code (international): | CHASUS33 |
| Reference: | Invoice #22-7831-001 / Engagement 1003-00005 / Matter HRW-SPIN-001 |