Contract analysis

I. Executive Summary The purpose of this memorandum is to analyze the federal income tax treatment of the proposed acquisition of VeloPay Systems, Inc. ("VeloPay" or the "Target"), a Delaware corporation, by Harrowgate Private Equity Fund IV LP ("HPE Fund IV" or the "Buyer"), a Delaware limited partnership, for an aggregate purchase price of $1,900,000,000 (the "Transaction"). The Transaction is structured as a rever

II. Transaction Structure Overview A. Description of the Reverse Triangular Merger The Transaction is structured as a reverse triangular merger under Section 251 of the DGCL. The step-by-step mechanics of the merger are as follows:

1. Formation of Merger Sub. HPE Fund IV has formed Merger Sub as a Delaware corporation and wholly-owned subsidiary of HPE Fund IV. Merger Sub was incorporated on February 24, 2025, and has no assets, liabilities, or operations other than those incident to its formation and the consummation of the merger.

2. Merger of Merger Sub with and into VeloPay. Pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), Merger Sub will merge with and into VeloPay at the Effective Time.

3. Cash-Out of VeloPay Equity. At the Effective Time, each outstanding share of VeloPay common stock (82,400,000 shares outstanding as of the date hereof), each in-the-money stock option (7,600,000 options outstanding with a weighted average exercise price of $12.84 per share), each restricted stock unit ("RSU") (3,200,000 RSUs outstanding), and each outstanding warrant (1,800,000 warrants with an exercise price of $

4. VeloPay Survives. VeloPay will survive the merger as a wholly-owned subsidiary of HPE Fund IV. VeloPay will retain its corporate identity, its employer identification number (EIN 82-3019478), and all of its assets, liabilities, contracts, licenses, and permits.

5. Merger Sub Ceases to Exist. Merger Sub will cease to exist at the Effective Time. Its separate corporate existence will merge into and be continued by VeloPay as the surviving corporation. The treatment of equity awards at closing is summarized as follows: • Vested Stock Options: All vested, in-the-money stock options will be cancelled at the Effective Time in exchange for a cash payment equal to the per-share mer

III. Section 368 Reorganization Qualification Analysis A. Overview of Potentially Applicable Reorganization Provisions Under Subchapter C of the Code, certain corporate acquisitions may qualify as tax-free "reorganizations" under Section 368(a)(1), permitting deferral of gain recognition by target stockholders who receive qualifying consideration in the transaction. The two provisions potentially applicable to a reve

Section 368(a)(1)(A) — Statutory Merger. A statutory merger or consolidation of a target with or into an acquiring corporation may qualify as a Type A reorganization, provided that the transaction satisfies the judicially and regulatorily developed requirements of (i) continuity of interest ("COI"), (ii) continuity of business enterprise ("COBE"), and (iii) a valid business purpose. A Type A reorganization permits th

Section 368(a)(2)(E) — Reverse Triangular Merger. Section 368(a)(2)(E) extends Type A reorganization treatment to a reverse subsidiary merger — that is, a transaction in which a subsidiary of the acquiring corporation merges with and into the target, and the target survives. To qualify under Section 368(a)(2)(E), the following specific statutory requirements must be met: (i) The target must survive the merger and hol

Section 368(a)(2)(E) requires that the target, after the merger, hold "substantially all" of its properties and the properties of the merging subsidiary. The IRS has historically interpreted "substantially all" as requiring retention of at least 90% of the fair market value of net assets and at least 70% of the fair market value of gross assets of the target. See Rev. Proc. 77-37, 1977-2 C.B. 568. In the present Tran

IV. Section 338(h)(10) Election Analysis A. Overview of Section 338(h)(10)

Section 338(h)(10) of the Code, together with its implementing regulations, permits a purchasing corporation and the selling consolidated group (or S corporation shareholders, as applicable) to make a joint election to treat a "qualified stock purchase" (within the meaning of Section 338(d)(3)) as a deemed asset sale for federal income tax purposes. When a valid Section 338(h)(10) election is made, the following deem

V. Recommended Tax Treatment: Taxable Stock Acquisition A. Characterization of the Merger for Federal Tax Purposes Based on the analysis set forth in Sections III and IV above, the reverse triangular merger will be treated for federal income tax purposes as a taxable acquisition of VeloPay stock by HPE Fund IV. The merger does not qualify as a tax-free reorganization under Section 368, and no Section 338 election wil

Section 382 Limitation. VeloPay's pre-existing NOL carryforwards will become subject to the Section 382 annual limitation as a result of the ownership change at closing. This limitation restricts the annual utilization of pre-change NOLs and is discussed in detail in Section VI below. Mitigation Strategies. Several strategies may mitigate the disadvantages of the carryover basis regime: (a) Post-Closing Check-the-box

VI. Section 382 Limitation on Net Operating Loss Carryforwards A. Ownership Change Analysis

Section 382 of the Code imposes an annual limitation on the use of a loss corporation's pre-change NOLs following an "ownership change." An ownership change occurs when the percentage of stock owned by one or more "5-percent shareholders" (within the meaning of Section 382(g)) increases by more than 50 percentage points over the lowest percentage owned by such shareholders during the applicable three-year testing per

Section 382 Limitation = Equity Value of the Loss Corporation Immediately Before the Ownership Change × Applicable Long-Term Tax-Exempt Rate Equity Value. The "value of the old loss corporation" for Section 382 purposes is generally the fair market value of the loss corporation's stock (including preferred stock) immediately before the ownership change. See Section 382(e)(1). In the context of a cash acquisition, the

Section 382 Limitation = $1,900,000,000 × 4.75% = ~$90,250,000 per year This annual limitation caps the amount of pre-change NOLs that VeloPay may use in any single post-change taxable year to offset its taxable income. Pre-change NOLs in excess of the annual limitation carry forward to subsequent years (subject to the general NOL carryforward rules), but the annual cap applies each year. Built-In Gain / Built-In Los

1. Obtain Final NOL Carryforward Amounts. Request from Vance Thornbury & Co. LLP (VeloPay's independent auditor; engagement partner Robert Paulsen) and VeloPay's internal tax team final, confirmed NOL carryforward amounts as of the last day of the pre-closing taxable year, including a breakdown by year of origin and any applicable Section 382 limitations from prior ownership changes (if any).

2. Calculate Precise Section 382 Limitation. Upon confirmation of the closing date, determine the applicable long-term tax-exempt rate for the month of closing (expected July 2025) and calculate the precise annual Section 382 limitation.

3. Perform NUBIG/NUBIL Analysis. Following the closing, perform a detailed NUBIG/NUBIL analysis based on the fair market values and adjusted tax bases of VeloPay's assets as of the ownership change date. This analysis will determine whether any incremental Section 382 limitation is available with respect to recognized built-in gains during the five-year recognition period.

4. Coordinate Post-Closing Compliance. Work with Leonard Cross and the Calderwood & Harkness tax team to ensure proper post-closing compliance with Section 382, including tracking of pre-change NOL utilization, maintenance of the Section 382 limitation schedule, and preparation of any required disclosures on VeloPay's post-closing tax returns.

VII. Treatment of the Rollover Equity A. Structure of the Rollover Two members of VeloPay's founding management team — Nathan Aldridge (Founder and CEO) and Sonia Reyes-Watkins (Founder and CTO) — will make rollover equity investments alongside HPE Fund IV in the surviving corporation. Mr. Aldridge will roll over $14,200,000 and Ms. Reyes-Watkins will roll over $9,700,000, for a combined rollover investment of $23,90

VIII. Treatment of Equity Awards for Tax Purposes A. Stock Options Vested Stock Options. All vested, in-the-money stock options will be cancelled at the Effective Time in exchange for the Option Spread Payment. There are 7,600,000 stock options outstanding with a weighted average exercise price of $12.84 per share, yielding an average per-option spread of $7.16 ($20.00 minus $12.84). For compensatory stock options —