Contract analysis

I. Executive Summary This memorandum analyzes the state and local income, franchise, and gross receipts tax consequences arising from the proposed acquisition of VeloPay Systems, Inc. ("VeloPay" or the "Company") by Harrowgate Private Equity Fund IV LP ("HPE Fund IV" or the "Fund"), structured as a reverse triangular merger in which Harrowgate Velocity Merger Sub Inc. ("Merger Sub") will merge with and into VeloPay,

II. Structure of the Transaction and State Tax Characterization A. Transaction Structure Recap The Transaction is structured as a reverse triangular merger under Section 251 of the Delaware General Corporation Law ("DGCL"). The principal structural elements are as follows: • Merger Sub. Harrowgate Velocity Merger Sub Inc. is a Delaware corporation formed on February 24, 2025 (Delaware File Number 7291034; EIN 93-1847

Section 338(h)(10) Conformity Considerations. Although the recommendation in the Tax Structure Memorandum was for taxable stock acquisition treatment without a Section 338(h)(10) election, we note for completeness that if such an election were made, a state-by-state conformity analysis would be required. Most states that impose a corporate income tax conform to the federal Section 338(h)(10) election and would treat

III. Nexus Analysis — Current and Post-Acquisition A. Current VeloPay Nexus Footprint VeloPay's current state tax nexus footprint is extensive and arises from multiple independent bases. Physical Presence Nexus. VeloPay maintains physical offices and employees in two states: • Texas. VeloPay's corporate headquarters is located at 1455 Innovation Parkway, Suite 800, Austin, Texas 78759. VeloPay employs approximately 8

IV. Texas Margin Tax Analysis A. Overview of the Texas Franchise (Margin) Tax Texas imposes a franchise tax on each "taxable entity" that does business in Texas or that is chartered or organized in Texas. Tex. Tax Code Ann. §§ 171.001, 171.0002. The franchise tax is commonly referred to as the "margin tax" because it is computed based on the taxable margin of the entity, which is the lesser of: (i) 70% of total reven

V. Delaware Franchise Tax and Income Tax Considerations A. Delaware Franchise Tax Delaware imposes an annual franchise tax on all corporations incorporated in Delaware, regardless of whether the corporation has any operations, employees, or other activities in Delaware. Del. Code Ann. tit. 8, § 501 et seq. The Delaware franchise tax is a significant compliance obligation for VeloPay and its Delaware-incorporated subs

VI. Colorado State Income Tax Considerations A. Current Colorado Filing Obligations VeloPay maintains an office in Denver, Colorado, and employs approximately 200 individuals there. This physical presence creates clear nexus for Colorado corporate income tax purposes under both traditional physical presence standards and Colorado's economic nexus provisions. Tax Rate. Colorado imposes a flat corporate income tax at a

VII. Multi-State Apportionment Analysis — Impact of Ownership Change A. Apportionment Factor Changes The change in VeloPay's ownership is expected to have a significant impact on VeloPay's state tax apportionment in states that require combined or unitary reporting. Prior to the acquisition, VeloPay files its state tax returns based on its own apportionment factors (or those of its subsidiaries, to the extent include

VIII. Treatment of Merger Consideration and Stockholder-Level State Tax A. State Taxation of VeloPay Stockholders The per-share merger consideration of $20.00 per share will be treated as proceeds from the sale or exchange of VeloPay stock by each stockholder. The state income tax consequences of this stock sale depend on each stockholder's state of residency (for individual stockholders) or state of organization and