Contract analysis

I. Executive Summary This memorandum sets forth our analysis and recommended strategy for the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") premerger notification filing in connection with Harrowgate Private Equity Fund IV LP's ("HPE Fund IV") proposed acquisition of VeloPay Systems, Inc. ("VeloPay" or the "Company") for an aggregate merger consideration of $1,900,000,000 (the "Transaction"). T

II. Transaction Overview A. Parties to the Filing The parties to the HSR filing are as follows: Acquiring Person: Harrowgate Private Equity Fund IV LP • Entity Name: Harrowgate Private Equity Fund IV LP • Jurisdiction: Delaware limited partnership • EIN: 87-4231956 • Principal Office: 300 King Street, Suite 4200, Wilmington, DE 19801 • Fund Size: $6.8 billion (vintage 2022) • General Partner: Harrowgate Capital Manag

III. HPE Fund IV Portfolio and Overlap Analysis A. HPE Fund IV Investment Strategy and Portfolio Harrowgate Private Equity Fund IV LP is a $6.8 billion private equity fund (vintage 2022) managed by Harrowgate Capital Management IV LLC. HPE Fund IV's stated investment strategy focuses on growth equity and leveraged buyout investments in three core sectors: (i) financial services technology ("fintech"), (ii) infrastruc

1. Lumavex Payments Holdings LLC ("ClearBridge") ClearBridge is a provider of payment facilitation (payfac) technology and compliance infrastructure primarily serving software platforms and marketplaces. ClearBridge's technology enables software companies to embed payments functionality into their platforms by providing the underlying payment facilitation licensing, underwriting, and compliance framework. HPE Fund IV

2. Meridian Ledger Technologies Inc. ("Meridian") Meridian is a provider of real-time ledger and core banking technology to digital banks, neobanks, and fintech companies. Its platform enables these entities to manage customer accounts, process internal fund transfers, and maintain regulatory ledger records. HPE Fund IV acquired Meridian in February 2024 for approximately $295 million. Meridian does not operate in th

3. Pinnacle Risk Analytics Corp. ("Pinnacle") Pinnacle is a provider of risk scoring and regulatory compliance analytics software to banks, credit unions, and financial institutions. Its products include credit risk models, BSA/AML transaction monitoring tools, and regulatory reporting automation. HPE Fund IV acquired Pinnacle in July 2024 for approximately $215 million. While Pinnacle's products are sold to financia

IV. Relevant Product Market Definition The definition of the relevant product market is central to the competitive analysis under the HSR Act and the antitrust laws generally. In this section, we analyze the potential product market definitions that the DOJ staff may apply in reviewing the Transaction and recommend a characterization that accurately reflects the competitive dynamics and supports the conclusion that t

1. Interchange-plus processing fees: VeloPay charges merchants a per-transaction fee calculated as a markup over the applicable interchange rate set by the card networks (Pinnacle Enterprises, Hollowell Partners LLC, etc.). This is the largest component of VeloPay's revenue, representing approximately 72% of total revenue in FY2024.

2. SaaS subscription fees: VeloPay offers a suite of value-added software products on a subscription basis, including its analytics dashboard (VeloPay Insights) and its fraud detection and prevention suite (VeloPay Fraud intelligence). SaaS subscription fees represented approximately 19% of total revenue in FY2024.

3. Gateway transaction fees: VeloPay charges a per-transaction fee for use of its payment gateway technology (primarily through its PayStream Gateway subsidiary), which enables merchants to connect to VeloPay's processing platform and to third-party processors. Gateway fees represented approximately 9% of total revenue in FY2024. For FY2024, VeloPay reported total revenue of $412.3 million and Adjusted EBITDA of $98.

V. Relevant Geographic Market Definition A. United States Market VeloPay's payment processing services are offered nationwide across the United States. The Company holds money transmitter licenses in 47 states plus the District of Columbia (the three states in which VeloPay does not currently hold a license — Alaska, Montana, and South Dakota — either do not require a money transmitter license for VeloPay's activitie

VI. Competitive Landscape and Market Concentration Analysis A. Major Competitors in Payment Processing The U.S. electronic payment processing and merchant acquiring market is large, dynamic, and highly fragmented. Total U.S. card payment volume exceeded $10 trillion in 2024, and the broader electronic payment processing market (including ACH, digital wallets, and other electronic payment methods) is substantially lar

VII. Recent DOJ/FTC Enforcement Activity in Payments and Fintech A review of recent antitrust enforcement activity in the payments and fintech sectors provides useful context for assessing the likely DOJ approach to the Transaction. Recent Merger Reviews in the Payments Sector. Over the past five years, the DOJ and FTC have conducted extended reviews of several significant transactions in the payment processing and f

VIII. Second Request Risk Assessment A. Likelihood of Second Request Based on the analysis presented in this memorandum, we assess the overall likelihood of the DOJ issuing a Second Request at approximately 20–30%. This assessment reflects the following factors: Factors Weighing Against a Second Request: • No horizontal overlap: The absence of any horizontal competitive overlap between VeloPay and HPE Fund IV's exist

IX. Filing Preparation and Strategy A. Item 4(c) and 4(d) Documents Item 4(c) Documents. Under the HSR Act and the FTC's rules, the acquiring person must produce with its notification form all documents that were prepared by or for any officer(s) or director(s) of the acquiring person (or of its UPE) for the purpose of evaluating or analyzing the acquisition with respect to market shares, competition, competitors, ma

1. HPE Fund IV Investment Committee Memoranda: Any memoranda or presentations prepared for the HPE Fund IV investment committee that discuss VeloPay's competitive position, market share, competitors, market dynamics, or growth opportunities. These are the most likely source of responsive documents and will require careful review for both responsiveness and privilege.

2. Pendleton Hawkes & Co. Presentations and Analyses: Pendleton Hawkes & Co. (David Constantinou, Managing Director) serves as HPE Fund IV's financial advisor for this Transaction. Any presentations, analyses, or memoranda prepared by Pendleton Hawkes for the HPE Fund IV deal team or investment committee that discuss market shares, competition, or competitive dynamics are responsive. Financial advisor materials frequ

3. Internal HPE Fund IV Deal Team Analyses: Any internal memoranda, spreadsheets, presentations, or communications prepared by Thomas Eriksen, Priya Deshmukh, or other members of the HPE Fund IV deal team that analyze VeloPay's competitive position, market share, or growth potential.

4. Board Presentations: Any presentations made by Thomas Eriksen,