Contract analysis

I. Executive Summary This memorandum summarizes the results of our due diligence review of all pending, threatened, and historical litigation, regulatory inquiries, governmental investigations, and other contingent liabilities identified in connection with Harrowgate Private Equity Fund IV LP's ("HPE Fund IV" or the "Buyer") proposed acquisition of VeloPay Systems, Inc. ("VeloPay" or the "Company") and its subsidiari

II. Methodology and Diligence Scope A. Document and Data Sources Reviewed Our litigation and contingent liabilities due diligence comprised a comprehensive review of the following categories of documents, data, and information sources: Data Room Materials. We reviewed all materials made available in the VeloPay electronic data room hosted on DealVault, which was opened on December 12, 2024. Specific data room categor

III. Pending Litigation We have identified seven (7) pending litigation matters and one (1) threatened claim involving VeloPay and its subsidiaries. Each matter is described in detail below, organized by subject-matter category. A. Merchant Disputes — Contract Claims

1. Pinnacle Retail Solutions, Inc. v. VeloPay Systems, Inc. Forum: 200th Judicial District Court, Travis County, Texas (Cause No. D-1-GN-24-003487) Date Filed: April 12, 2024 Nature of Claim: Pinnacle Retail Solutions, Inc. ("Pinnacle"), a mid-market e-commerce retailer, filed this action alleging breach of contract arising under a Merchant Processing Agreement dated September 1, 2021 between Pinnacle and VeloPay. Pi

2. GreenLeaf Commerce LLC v. VeloPay Processing LLC Forum: United States District Court, District of Colorado (Case No. 1:23-cv-02891-RPM) Date Filed: October 17, 2023 Nature of Claim: GreenLeaf Commerce LLC ("GreenLeaf"), an online marketplace operator, filed this action alleging breach of contract and negligence arising from VeloPay Processing LLC's ("VeloPay Processing") alleged failure to properly settle payment

3. Delgado v. VeloPay Systems, Inc. Forum: 419th Judicial District Court, Travis County, Texas (Cause No. D-1-GN-24-005102); Texas Workforce Commission Charge of Discrimination No. 22-2024-01847 Date Filed: July 23, 2024 (state court petition); Texas Workforce Commission charge filed April 15, 2024 Nature of Claim: Maria Delgado, a former Senior Compliance Analyst employed by VeloPay from March 2020 to January 2024,

4. Consolidated Wage-and-Hour Matter — FLSA Collective Action Forum: United States District Court, Western District of Texas, Austin Division (Case No. 1:23-cv-01265-DAE) Date Filed: September 5, 2023 Nature of Claim: This is a collective action brought under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 216(b), and the Texas Payday Law, alleging that VeloPay misclassified certain customer support representative

5. Transact Digital Innovations LLC v. VeloPay Systems, Inc. and VeloPay Fraud intelligence Inc. Forum: United States District Court, Eastern District of Texas, marshall Division (Case No. 2:24-cv-00312-JRG) Date Filed: May 8, 2024 Nature of Claim: Transact Digital Innovations LLC ("Transact Digital"), a non-practicing entity, filed this patent infringement action alleging that VeloPay's fraud detection and risk scor

6. SwiftSettle Technologies, Inc. — Threatened Trade Secret Claim Nature of Claim: On August 14, 2024, VeloPay received a cease-and-desist letter from Velmoran Brooks LLP, counsel for SwiftSettle Technologies, Inc. ("SwiftSettle"), a competitor in the payment processing technology space. The letter alleges that Dr. Ethan Voss, a former senior engineer at SwiftSettle who was hired by VeloPay Fraud intelligence Inc. in

7. DataRoute Networks Inc. v. PayStream Gateway LLC Forum: United States District Court, District of Delaware (Case No. 1:20-cv-01547-MN) Date Filed: November 3, 2020 Nature of Claim: DataRoute Networks Inc. ("DataRoute") filed this action against PayStream Gateway LLC ("PayStream") prior to VeloPay's acquisition of PayStream in 2021. DataRoute alleges that PayStream breached a Technology Licensing Agreement dated Ja

IV. Regulatory Inquiries and Governmental Matters We have identified several regulatory inquiries, governmental investigations, and related matters affecting VeloPay and its subsidiaries. The most significant of these — the CFPB Civil Investigative Demand — warrants particular attention by the HPE Fund IV deal team. A. State Regulatory Inquiries — Money Transmitter Compliance

8. New York Department of Financial Services Examination Nature: The New York Department of Financial Services ("NYDFS") conducted a routine safety and soundness examination of VeloPay's money transmitter operations in the State of New York during the period from April through August 2024. The examination was conducted pursuant to NYDFS's supervisory authority over licensed money transmitters under the New York Banki

9. California Department of Financial Protection and Innovation Inquiry Nature: In February 2024, the California Department of Financial Protection and Innovation ("DFPI") initiated an informal inquiry regarding VeloPay's compliance with certain consumer notification requirements under the California Money Transmission Act (Cal. Fin. Code § 2000 et seq.) and related regulations. The inquiry was prompted by a consumer

10. CFPB Civil Investigative Demand Date Received: January 18, 2024 Nature: The Consumer Financial Protection Bureau ("CFPB") issued a Civil Investigative Demand ("CID") to VeloPay Systems, Inc. pursuant to Section 1052 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. § 5562). The CID relates to the CFPB's investigation of VeloPay's disclosure practices regarding processing fees charged to

11. IRS Examination — VeloPay Systems, Inc. Tax Years Under Examination: Fiscal years ended December 31, 2021 and December 31, 2022 Nature: The Internal Revenue Service initiated an examination of VeloPay's federal income tax returns for the 2021 and 2022 tax years. The examination was assigned to IRS Large Business and International Division and is being conducted by Revenue Agent Patricia Woo. Based on information

12. Data Security Incident — 2023 Nature: In June 2023, VeloPay's information security team detected unauthorized access to a non-production database environment within VeloPay's cloud infrastructure. The affected database contained certain merchant contact information, including merchant representative names, business email addresses, business phone numbers, and business mailing addresses. Critically, the compromise

V. Contingent Liabilities (Non-Litigation) In addition to the pending litigation and regulatory matters described in Sections III and IV above, we have identified the following categories of contingent liabilities affecting VeloPay and its subsidiaries. A. Indemnification Obligations VeloPay has standard indemnification obligations in favor of its directors and officers pursuant to Article VIII of its Amended and Res