BRING-DOWN DUE DILIGENCE CERTIFICATE
Internal Work Product — Privileged and Confidential Attorney-Client Privilege / Attorney Work Product Doctrine
This document constitutes privileged and confidential attorney work product prepared in anticipation of closing and is protected by the attorney-client privilege and the attorney work product doctrine. This document is not to be disclosed to any third party without the prior written consent of Harrowgate Private Equity Fund IV LP and Calderwood & Harkness LLP.
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I. PURPOSE AND SCOPE OF CERTIFICATE
This Bring-Down Due Diligence Certificate (this "Certificate") memorializes the completion by Calderwood & Harkness LLP ("Calderwood & Harkness" or the "Firm") of bring-down due diligence in connection with the closing (the "Closing") of the reverse triangular merger (the "Merger") of Harrowgate Velocity Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of Harrowgate Private Equity Fund IV LP ("Merger Sub"), with and into VeloPay Systems, Inc., a Delaware corporation (the "Company" or "VeloPay"), pursuant to that certain Agreement and Plan of Merger, dated as of March 18, 2025 (the "Merger Agreement"), by and among Harrowgate Private Equity Fund IV LP, a Delaware limited partnership ("HPE Fund IV" or the "Buyer"), Merger Sub, and the Company. In the Merger, the Company will be the surviving corporation and will become a wholly owned subsidiary of HPE Fund IV.
The purpose of this Certificate is to confirm whether any material changes, developments, adverse events, or other circumstances have occurred with respect to VeloPay and its subsidiaries (collectively, the "Company Group") since the date of execution of the Merger Agreement on March 18, 2025 (the "Signing Date") through the Closing Date of July 22, 2025 (the "Closing Date") that would (a) affect the accuracy of VeloPay's representations and warranties set forth in Article IV of the Merger Agreement, (b) affect the satisfaction of the closing conditions set forth in Article VII of the Merger Agreement, (c) give rise to a Material Adverse Effect (as defined in Section 1.01 of the Merger Agreement), or (d) otherwise affect the advisability of proceeding to Closing. This Certificate additionally confirms the status of all pre-closing deliverables, regulatory approvals, financing commitments, and other conditions precedent to the obligations of the parties to consummate the Merger.
This Certificate is an internal Calderwood & Harkness document prepared solely for the benefit and internal use of HPE Fund IV and its authorized representatives, including Priya Deshmukh (Managing Partner, HPE Fund IV) and Thomas Eriksen (Partner, Head of FinTech, Harrowgate Capital Management IV LLC). This Certificate does not constitute a legal opinion, a certification to any third party, or a guarantee of any kind. No person or entity other than HPE Fund IV and its authorized representatives may rely on this Certificate or the findings set forth herein.
The original Legal Due Diligence Summary Memorandum (the "Pre-Signing Diligence Memo"), prepared by Calderwood & Harkness during the pre-signing phase of the transaction (the virtual data room having been opened on December 12, 2024, and comprehensive legal due diligence having been conducted through March 2025), serves as the baseline against which the bring-down findings contained herein are measured. Additional baseline reference materials include the separate subject-matter diligence memoranda identified in Appendix C hereto.
For reference, the aggregate merger consideration to be paid in the Merger is $1,900,000,000, calculated at $20.00 per share on a fully diluted basis of 95,000,000 shares (inclusive of outstanding common stock, in-the-money stock options, restricted stock units, and warrants), subject to customary adjustments for indebtedness, cash, working capital, and transaction expenses as set forth in Section 2.06 of the Merger Agreement. The transaction is structured as a reverse triangular merger under Section 251 of the Delaware General Corporation Law (the "DGCL"), whereby Merger Sub will merge with and into VeloPay, with VeloPay continuing as the surviving corporation and a wholly owned subsidiary of HPE Fund IV.
II. METHODOLOGY AND DILIGENCE PROCEDURES CONDUCTED
A. Overview of Bring-Down Diligence Process
The bring-down due diligence procedures described in this Certificate were conducted during the period from March 18, 2025 (the Signing Date) through July 21, 2025, the date on which all pre-closing deliverables were completed and confirmed (the "Bring-Down Diligence Period"). The Closing is scheduled to occur on July 22, 2025. The Firm's bring-down diligence efforts were designed to identify any material changes, developments, or adverse events affecting the Company Group during the Bring-Down Diligence Period that could affect the accuracy of the Company's representations and warranties, the satisfaction of the conditions to Closing, or the overall advisability of consummating the Merger.
Throughout the Bring-Down Diligence Period, Calderwood & Harkness coordinated closely with Whitford Jessup & Crane LLP, counsel to VeloPay, through Rebecca Thornton-Hayes (Partner) and James Okoro (Senior Associate), to obtain updated information, supplemental disclosures, and responses to bring-down diligence inquiries. Target's counsel was cooperative and responsive throughout the process, and all supplemental disclosure requests were addressed in a timely manner.
Calderwood & Harkness also coordinated directly with members of VeloPay's senior management team, including Danielle Moreau (General Counsel), Marcus Langford (Chief Financial Officer), Nathan Aldridge (Chief Executive Officer and Chairman of the Board), and Sonia Reyes-Watkins (Chief Technology Officer), to confirm operational, financial, and legal developments during the interim period. Management was accessible and forthcoming in responding to diligence inquiries.
In addition, the Firm engaged internal Calderwood & Harkness specialists, including Leonard Cross (specialist partner, Tax Group) and Howard Bellamy (specialist partner, Antitrust & Competition Group), to provide updated assessments in their respective areas of expertise. The Firm further coordinated with Gordon Strauss of Maplewood & Strauss LLP, counsel to the debt financing sources, to confirm the status of the financing commitments and conditions to funding.
B. Specific Diligence Activities
The following specific bring-down due diligence activities were conducted during the Bring-Down Diligence Period:
1. Updated Corporate Records Review. Calderwood & Harkness reviewed updated good standing certificates for VeloPay Systems, Inc. (Delaware Secretary of State, File Number 5748392) and each of its subsidiaries, specifically:
(a) VeloPay Processing LLC, a Delaware limited liability company;
(b) VeloPay Canada Inc., an Ontario (Canada) corporation;
(c) VeloPay Europe, Unipessoal Lda., a Portuguese limited liability company organized under the laws of Portugal;
(d) VeloPay Fraud intelligence Inc., a Delaware corporation; and
(e) PayStream Gateway LLC, a Delaware limited liability company.
Good standing certificates (or the local equivalent) were obtained for each entity in its respective jurisdiction of organization. Updated certificates of authority were also confirmed for jurisdictions in which VeloPay and its domestic subsidiaries are qualified to do business as foreign entities. No adverse findings were identified.
2. Financial Bring-Down. Calderwood & Harkness reviewed VeloPay's unaudited interim financial statements for the first quarter of 2025 (Q1 2025, for the three-month period ended March 31, 2025) and the second quarter of 2025 (Q2 2025, for the three-month period ended June 30, 2025), as prepared by VeloPay's finance team under the supervision of Marcus Langford (CFO). These interim financial statements were compared against VeloPay's audited financial statements for the fiscal year ended December 31, 2024 ("FY2024"), which reflected the following key metrics:
The FY2024 audited financial statements were audited by Vance Thornbury & Co. LLP (engagement partner: Robert Paulsen), and the auditor's report contained an unqualified opinion with no material qualifications or emphasis-of-matter paragraphs. The Firm's review of the interim financial statements focused on identifying any material deterioration in revenue, margins, profitability, liquidity, or leverage relative to the FY2024 baseline.
3. Material Contracts Update. Calderwood & Harkness confirmed the continuing status of all material contracts previously reviewed during the pre-signing diligence phase, including the top 25 customer agreements (by revenue contribution) and all key vendor contracts (including those with processors, acquiring banks, cloud infrastructure providers, and technology licensors). The Firm verified that no material contract terminations, defaults, acceleration events, or substantive modifications had occurred since the Signing Date. Whitford Jessup & Crane LLP provided written confirmation on behalf of VeloPay management that no material contracts had been terminated, materially modified, or placed in default during the Bring-Down Diligence Period.
4. Change of Control Consent Status. Calderwood & Harkness reviewed the final status of all fourteen (14) material customer contracts that were identified during pre-signing diligence as requiring change of control consent or notification in connection with the Merger. The Change of Control Consent Tracker, maintained by Derek Okonkwo throughout the Bring-Down Diligence Period, was reviewed and updated on a rolling basis. As of the Closing Date, all fourteen consents have been obtained or, where the applicable contract required notification rather than affirmative consent, such notifications have been duly made within the contractually specified timeframes. No counterparty exercised any termination or repricing right in response to the change of control notification.
5. Litigation and Contingent Liabilities Update. Calderwood & Harkness searched for new litigation, arbitration proceedings, administrative proceedings, claims, or regulatory inquiries involving VeloPay or any subsidiary that may have been commenced, threatened, or received since the Signing Date. Updated docket searches were conducted across all relevant federal and state courts, as well as applicable arbitral forums. In addition, Danielle Moreau (General Counsel) provided written confirmation that, to her knowledge, no new material litigation, claims, demands, or governmental investigations had been commenced, threatened, or received by the Company Group since March 18, 2025. The Firm also reviewed VeloPay's correspondence files and board minutes for any references to new threatened or pending disputes.
6. Regulatory and Licensing Update. Calderwood & Harkness confirmed the completion of all regulatory filings and approvals required as conditions to Closing, as tracked in the Regulatory Approvals Status Tracker maintained by the deal team. The specific regulatory milestones confirmed are as follows:
(a) Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act"). The initial HSR filing was made on April 2, 2025. A Second Request was issued by the Federal Trade Commission on April 28, 2025. HPE Fund IV and VeloPay certified substantial compliance with the Second Request on June 27, 2025. The applicable waiting period under the HSR Act expired on July 15, 2025, without any further action by the FTC or the Department of Justice Antitrust Division. HSR Transaction Number: 25-0198374. Clearance is confirmed.
(b) Investment Canada Act. A notification under the Investment Canada Act was filed with Innovation, Science and Economic Development Canada on May 1, 2025. Clearance was received on June 3, 2025. No further conditions or undertakings were imposed.
(c) State Money Transmitter Change-of-Control Approvals. VeloPay holds money transmitter licenses in forty-seven (47) states and the District of Columbia. Of these jurisdictions, thirty-one (31) required change-of-control approvals or prior notifications in connection with the Merger. All such approvals were obtained or notifications duly made by July 18, 2025. No jurisdiction denied approval or imposed conditions that would materially affect VeloPay's ability to conduct its business following the Closing.
7. Intellectual Property Update. Calderwood & Harkness confirmed that no new IP assignments, encumbrances, licenses, or material open-source license compliance issues had arisen since the Signing Date. The Firm reviewed VeloPay's patent, trademark, and domain name portfolios and confirmed no new patent applications or trademark filings had been made. No third-party infringement claims or cease-and-desist demands were received during the Bring-Down Diligence Period. The Firm also confirmed that no new concerns had arisen regarding open-source software usage in VeloPay's codebase, including the proprietary VeloPay payments processing platform.
8. Employment and Benefits Update. Calderwood & Harkness confirmed that no material changes had been made to the executive employment agreements of Nathan Aldridge (CEO), Sonia Reyes-Watkins (CTO), Marcus Langford (CFO), or Danielle Moreau (General Counsel) since the Signing Date. The Firm verified that no material employee departures from the senior management team or key technical personnel had occurred, and that no labor disputes, union organizing activities, unfair labor practice charges, or WARN Act-triggering events had arisen during the Bring-Down Diligence Period. VeloPay's total employee headcount remains stable at approximately 1,340 employees across the Company Group's principal offices in Austin, Texas; Denver, Colorado; Toronto, Ontario (Canada); and Lisbon, Portugal.
9. Tax Status Update. Calderwood & Harkness coordinated with Leonard Cross (specialist partner, Tax Group) to confirm that no material changes in VeloPay's tax positions had occurred since the Signing Date. Mr. Cross confirmed that no new IRS audits, state or local tax audits, assessments, or deficiency notices had been commenced or received by the Company Group during the Bring-Down Diligence Period. The FIRPTA certificate previously prepared by VeloPay, certifying that VeloPay is not a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Internal Revenue Code, was confirmed to remain accurate as of the Closing Date. Transfer pricing arrangements and net operating loss carryforward positions were confirmed to be unchanged.
10. Insurance Update. Calderwood & Harkness confirmed that the representations and warranties insurance policy issued by Oakbridge Omnivrel Insurance Group (Policy No. OFI-RW-2025-03187) with a policy limit of $190,000,000 remains bound and in effect, with an inception date of July 22, 2025 (the Closing Date). The Firm further confirmed that the directors' and officers' liability tail insurance policy issued by Continental Shield Insurance Company (Policy No. CSI-DOT-2025-4821), providing a six-year tail period with a premium of $2,150,000, has been placed through Greystone Risk Advisors LLC (Stephen Hargrave, Senior Vice President). Both policies were confirmed to be in compliance with the requirements of the Merger Agreement, including the insurance covenants set forth in Section 6.07 thereof.
11. Data Room Supplemental Review. Calderwood & Harkness reviewed all supplemental materials uploaded to the VeloPay virtual data room (hosted by Crestline Solutions, project code "VeloProject") between March 18, 2025 and July 21, 2025. The data room activity log was reviewed to identify all new uploads and modifications during the Bring-Down Diligence Period. Supplemental materials were organized by diligence category and reviewed by the appropriate Calderwood & Harkness team members and specialists. A complete list of supplemental materials reviewed is set forth in Appendix A hereto.
12. Lien and UCC Searches. Calderwood & Harkness conducted updated Uniform Commercial Code ("UCC") filing searches, federal and state tax lien searches, and judgment lien searches in Delaware, Texas, Colorado, and all other relevant jurisdictions for VeloPay and each of its domestic subsidiaries (VeloPay Processing LLC, VeloPay Fraud intelligence Inc., and PayStream Gateway LLC). The updated searches confirmed that no new liens, encumbrances, or security interests had been filed against the assets of any member of the Company Group other than the existing liens in favor of Meridian Commercial Credit Corp. in connection with the Company's existing credit facility, which are to be released at Closing upon repayment of outstanding indebtedness. Calderwood & Harkness confirmed receipt of a payoff letter from Meridian Commercial Credit Corp. (contact: Brian Castellano, Senior Vice President, Loan Administration), dated July 18, 2025, in the approximate aggregate amount of $113,230,000 (consisting of $112,000,000 in outstanding principal and approximately $1,230,000 in accrued and unpaid interest through the anticipated payoff date), together with Meridian's commitment to promptly file UCC-3 termination statements and deliver executed lien releases upon receipt of payment in full.
III. BRING-DOWN FINDINGS BY DILIGENCE CATEGORY
Set forth below are Calderwood & Harkness's findings with respect to each principal diligence category, based upon the bring-down due diligence procedures described in Section II above.
A. Corporate and Organizational
VeloPay Systems, Inc. and each of its subsidiaries remain in good standing (or the local equivalent) in their respective jurisdictions of organization as of the dates of the most recently obtained good standing certificates and confirmations. No amendments to VeloPay's Amended and Restated Certificate of Incorporation or Amended and Restated Bylaws have been effected since the Signing Date, other than the new Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws of VeloPay (as the surviving corporation) that are to be filed with the Delaware Secretary of State and adopted, respectively, at the effective time of the Merger, in accordance with the terms of the Merger Agreement.
VeloPay's capitalization remains as represented in Section 4.03 of the Merger Agreement and the corresponding disclosure schedules, specifically:
No new issuances of equity securities, stock options, warrants, restricted stock units, convertible instruments, or other rights to acquire equity securities of VeloPay have occurred since the Signing Date. VeloPay has complied with the restrictions on equity issuances set forth in the interim operating covenants of Section 5.01 of the Merger Agreement.
The composition of VeloPay's Board of Directors remains unchanged, consisting of the following six members: Nathan Aldridge (Chair), Sonia Reyes-Watkins, Janet Gould, Kwame Asante, Catherine Lindström, and Philip Rosenthal. No resignations, removals, or new appointments to the Board have occurred during the Bring-Down Diligence Period.
Finding: No material changes identified.
B. Financial Condition
Calderwood & Harkness reviewed VeloPay's unaudited interim financial statements for Q1 2025 and Q2 2025. Revenue and Adjusted EBITDA through the first half of 2025 are tracking consistent with the FY2024 annualized run rate. Specifically, FY2024 revenue was $412.3 million and Adjusted EBITDA was $98.1 million (representing an Adjusted EBITDA margin of approximately 23.79%). The Q1 2025 and Q2 2025 interim financials, while unaudited, reflect no material deterioration in the Company's revenue trajectory, margin profile, or earnings performance relative to the FY2024 baseline.
No material deterioration in the financial condition, results of operations, or business of VeloPay and its subsidiaries, taken as a whole, has been identified during the Bring-Down Diligence Period. There has been no material adverse change in VeloPay's liquidity position, working capital, accounts receivable aging, or customer payment patterns.
VeloPay's existing term loan indebtedness of $112,000,000 with Meridian Commercial Credit Corp. remains outstanding as of the date hereof and will be repaid in full at Closing pursuant to the payoff letter dated July 18, 2025. The cash and cash equivalents position of VeloPay and its subsidiaries was confirmed at approximately $53,800,000 as of the most recent balance sheet date available near-Closing, which is consistent with the amounts reflected in the estimated closing statement delivered by VeloPay pursuant to Section 2.06 of the Merger Agreement.
VeloPay's annualized gross payment volume continues to be approximately $87 billion, processed across a merchant base of approximately 14,000 merchants. No material loss of merchant accounts or processing volume has been reported during the Bring-Down Diligence Period.
Based on the foregoing, no Material Adverse Effect (as defined in Section 1.01 of the Merger Agreement) on the business, financial condition, or results of operations of VeloPay and its subsidiaries, taken as a whole, has occurred since the Signing Date.
Finding: No material changes identified.
C. Material Contracts and Change of Control Consents
All fourteen (14) material customer contracts identified during pre-signing diligence as requiring change of control consent or notification in connection with the Merger have been fully addressed. In each instance, the required consent has been obtained or the contractually required notification has been properly and timely delivered, as confirmed by the Change of Control Consent Tracker and verified through direct communication with Whitford Jessup & Crane LLP.
No termination notices have been received from any material customer or material vendor of VeloPay or any of its subsidiaries since the Signing Date. No counterparty to any material contract has exercised any right of termination, suspension, modification, or repricing in connection with, or as a result of, the consummation of the Merger.
No material contract amendments, waivers, or modifications have been entered into by VeloPay or any of its subsidiaries since the Signing Date that were not previously disclosed to HPE Fund IV or reflected in the supplemental disclosure schedule updates delivered on May 15, 2025 and July 10, 2025. VeloPay has operated within the restrictions on contract execution and modification set forth in the interim operating covenants of Section 5.01 of the Merger Agreement.
Finding: No material changes identified.
D. Litigation and Contingent Liabilities
No new material litigation, arbitration, or administrative proceedings have been filed against VeloPay or any subsidiary of VeloPay since the Signing Date. Updated federal and state court docket searches, as well as administrative proceeding searches, returned no new filings involving any member of the Company Group that would be material to the business, financial condition, or operations of VeloPay and its subsidiaries, taken as a whole.
No material developments have occurred in any previously identified litigation or regulatory matters described in the disclosure schedules to the Merger Agreement. All such matters remain in the same posture as reported in the Pre-Signing Diligence Memo and the supplemental disclosure schedules.
No new governmental investigations, subpoenas, civil investigative demands, or regulatory inquiries have been received by VeloPay or any of its subsidiaries during the Bring-Down Diligence Period. Danielle Moreau (General Counsel) provided written confirmation to this effect on July 20, 2025.
Finding: No material changes identified.
E. Regulatory and Licensing
All regulatory approvals required as conditions to Closing under Article VII of the Merger Agreement have been obtained. The specific regulatory milestones are confirmed as follows:
HSR Act. HPE Fund IV and VeloPay filed their respective HSR notification forms on April 2, 2025. The Federal Trade Commission issued a Second Request to both parties on April 28, 2025. Both parties certified substantial compliance with the Second Request on June 27, 2025. The applicable waiting period under the HSR Act expired at 11:59 p.m. Eastern Time on July 15, 2025, without the FTC or the Antitrust Division of the Department of Justice taking any action to challenge or impose conditions on the Merger. HSR Transaction Number: 25-0198374. Howard Bellamy (specialist partner, Antitrust & Competition Group) confirmed that HSR clearance has been obtained and that no outstanding antitrust-related conditions, commitments, or concerns remain.
Investment Canada Act. A notification under the Investment Canada Act was filed with Innovation, Science and Economic Development Canada on May 1, 2025, in connection with the indirect acquisition of VeloPay Canada Inc. by HPE Fund IV. Clearance was received on June 3, 2025. No conditions, undertakings, or commitments were imposed as a condition to clearance.
State Money Transmitter Licenses. VeloPay holds money transmitter licenses in forty-seven (47) states and the District of Columbia. Thirty-one (31) of these jurisdictions required prior change-of-control approval or notification in connection with the Merger. All required approvals were obtained and all required notifications were made by July 18, 2025. No jurisdiction denied or conditioned its approval, and no jurisdiction imposed restrictions or conditions that would materially affect VeloPay's ability to continue conducting its money transmission business following the Closing.
VeloPay's PCI-DSS (Payment Card Industry Data Security Standard) compliance status was confirmed current as of the most recent assessment. VeloPay Canada Inc.'s regulatory status with applicable Ontario and Canadian federal regulators was confirmed. VeloPay Europe, Unipessoal Lda.'s regulatory status under Portuguese and European Union payments regulations was confirmed. No new regulatory inquiries, examinations, or compliance issues were identified during the Bring-Down Diligence Period with respect to any member of the Company Group.
Finding: No material changes identified. All regulatory closing conditions have been satisfied.
F. Intellectual Property
No new material IP encumbrances, assignments, exclusive license grants, or license disputes affecting VeloPay's intellectual property portfolio have arisen since the Signing Date. VeloPay's patent portfolio, trademark registrations, domain names, and proprietary technology assets remain as previously reported in the intellectual Property Due Diligence Memorandum prepared during the pre-signing phase. The intellectual property of PayStream Gateway LLC, which was acquired by VeloPay in 2021 for approximately $45,000,000, remains intact and unencumbered (other than permitted liens under VeloPay's existing credit facility, which will be released at Closing).
No new patent applications or trademark filings have been made by VeloPay or any subsidiary since the Signing Date. No infringement claims, opposition proceedings, or challenges to VeloPay's intellectual property rights have been received or threatened during the Bring-Down Diligence Period.
Open-source software usage within VeloPay's technology stack was reviewed, and no new compliance concerns were identified. VeloPay's open-source policy and compliance procedures remain in effect.
Finding: No material changes identified.
G. Employment and Benefits
No material changes have been made to the executive employment agreements of Nathan Aldridge (CEO), Sonia Reyes-Watkins (CTO), Marcus Langford (CFO), or Danielle Moreau (General Counsel) since the Signing Date. Each such agreement remains in effect in accordance with its terms.
The treatment of equity compensation awards at Closing has been confirmed and is consistent with the provisions of Section 2.04 of the Merger Agreement, as summarized below:
(a) Vested Stock Options. All vested and exercisable stock options outstanding immediately prior to the effective time of the Merger will be cancelled and converted into the right to receive a cash payment equal to the product of (i) $20.00 (the Per Share Merger Consideration) minus the applicable per-share exercise price, multiplied by (ii) the number of shares of Company common stock subject to such option, less applicable tax withholdings.
(b) Unvested Stock Options. Fifty percent (50%) of all unvested stock options outstanding immediately prior to the effective time will vest and be treated in the same manner as vested stock options described in clause (a) above. The remaining fifty percent (50%) of unvested stock options will be converted into replacement equity awards of HPE Fund IV (through Harrowgate Velocity Co-Invest LP), vesting ratably over a twenty-four (24) month period following the Closing, subject to continued employment.
(c) Restricted Stock Units (RSUs). All unvested RSUs outstanding immediately prior to the effective time of the Merger will fully accelerate and vest, and each such RSU will be cancelled and converted into the right to receive $20.00 per share in cash, less applicable tax withholdings.
(d) Warrants. All outstanding warrants to purchase shares of Company common stock (1,800,000 warrants with an exercise price of $8.50 per share) will be cancelled at the effective time and converted into the right to receive a cash payment equal to $11.50 per warrant ($20.00 minus $8.50), for an aggregate warrant cash-out amount of $20,700,000.
The Section 280G parachute payment analysis with respect to "disqualified individuals" (as defined in Section 280G(c) of the Internal Revenue Code) has been confirmed current by Leonard Cross (specialist partner, Tax Group). The analysis reflects that VeloPay obtained stockholder approval of certain compensatory payments and benefits in accordance with the safe harbor provisions of Section 280G(b)(5) of the Internal Revenue Code, as contemplated by Section 6.11 of the Merger Agreement.
No material workforce reductions, layoffs, furloughs, or WARN Act-triggering events have occurred during the Bring-Down Diligence Period. No union organizing activities, collective bargaining demands, or unfair labor practice charges have been reported. Employee headcount remains stable at approximately 1,340 across VeloPay's principal offices.
Finding: No material changes identified.
H. Tax. Leonard Cross (specialist partner, Tax Group) has confirmed the following with respect to VeloPay's tax status during the Bring-Down Diligence Period:
(a) No new IRS audits, state or local tax audits, tax assessments, or deficiency notices have been commenced or received by VeloPay or any subsidiary since the Signing Date.
(b) Transfer pricing arrangements between VeloPay and its foreign subsidiaries, VeloPay Canada Inc. and VeloPay Europe, Unipessoal Lda., remain unchanged and are consistent with the arrangements described in the Tax Due Diligence Memorandum.
(c) VeloPay's net operating loss ("NOL") carryforward positions remain unchanged and are available in the amounts previously reported.
(d) The FIRPTA certificate delivered by VeloPay, certifying that VeloPay is not a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Internal Revenue Code, has been confirmed to remain accurate as of the Closing Date. HPE Fund IV (through Merger Sub) will not be required to withhold any amount under FIRPTA in connection with the payment of the merger consideration.
No material changes in VeloPay's overall tax posture, positions, or exposure have been identified during the Bring-Down Diligence Period.
Finding: No material changes identified.
I. Insurance. The representations and warranties insurance policy and the directors' and officers' tail insurance policy are confirmed as follows:
R&W Insurance Policy. Oakbridge Omnivrel Insurance Group; Policy No. OFI-RW-2025-03187; aggregate limit of liability: $190,000,000; retention: $19,000,000 (of which the first $9,500,000 is borne by the Seller (through the stockholder representative) pursuant to the indemnification provisions of the Merger Agreement, and the remaining $9,500,000 is borne by the Buyer before the R&W policy attaches); total premium: $5,320,000 (paid by HPE Fund IV); policy inception date: July 22, 2025 (the Closing Date). The policy has been confirmed as bound and effective by the insurer.
D&O Tail Insurance Policy. Continental Shield Insurance Company; Policy No. CSI-DOT-2025-4821; six-year tail period commencing on the Closing Date; total premium: $2,150,000 (paid by VeloPay prior to Closing in accordance with Section 6.07 of the Merger Agreement); placed through Greystone Risk Advisors LLC (Stephen Hargrave, Senior Vice President). The policy has been confirmed as placed and effective.
No changes to VeloPay's existing general liability, property, cyber, or other insurance coverage have occurred during the Bring-Down Diligence Period that would constitute a breach of the interim operating covenants set forth in Section 5.01(b)(xiv) of the Merger Agreement.
Finding: No material changes identified.
J. Debt and Liens
Updated UCC filing searches, federal and state tax lien searches, and judgment lien searches were conducted in Delaware, Texas, Colorado, and all other relevant jurisdictions for VeloPay and each of its domestic subsidiaries. The results of these updated searches confirmed that no new liens, encumbrances, security interests, or other adverse claims have been filed or recorded against the assets of any member of the Company Group since the Signing Date, other than the existing liens in favor of Meridian Commercial Credit Corp. under VeloPay's existing credit facility.
The payoff letter from Meridian Commercial Credit Corp. (contact: Brian Castellano, Senior Vice President, Loan Administration), dated July 18, 2025, confirms that the aggregate amount required to satisfy all outstanding obligations under VeloPay's existing credit facility is approximately $113,230,000, consisting of $112,000,000 in outstanding term loan principal and approximately $1,230,000 in accrued and unpaid interest calculated through the anticipated payoff date of July 22, 2025. The payoff letter includes Meridian's commitment to (i) file UCC-3 termination statements with respect to all UCC-1 financing statements filed by or on behalf of Meridian against VeloPay and its subsidiaries, and (ii) deliver executed releases of all liens and security interests held by Meridian, in each case promptly following receipt of payment in full.
A solvency certificate is to be delivered by Marcus Langford (CFO) at Closing, certifying the solvency of the surviving corporation and its subsidiaries on a consolidated basis immediately following the consummation of the Merger and the related financing transactions, in accordance with the requirements of Section 7.02(h) of the Merger Agreement.
Finding: No material changes identified.
IV. STATUS OF DISCLOSURE SCHEDULES
Whitford Jessup & Crane LLP, on behalf of VeloPay, delivered supplemental updates to the disclosure schedules to the Merger Agreement on two occasions during the Bring-Down Diligence Period:
(a) A first set of supplemental disclosure schedule updates was delivered on May 15, 2025, covering developments through approximately mid-May 2025.
(b) A second set of supplemental disclosure schedule updates was delivered on July 10, 2025, covering developments through early July 2025 and providing updated information across all applicable disclosure schedule categories.
Calderwood & Harkness reviewed each set of supplemental disclosure schedule updates in detail. The supplemental disclosures were analyzed to determine whether any information contained therein, either individually or in the aggregate, would give rise to a breach of any representation or warranty of VeloPay set forth in Article IV of the Merger Agreement that would, individually or in the aggregate, reasonably be expected to constitute a Material Adverse Effect (as defined in Section 1.01 of the Merger Agreement) or otherwise result in a failure of any closing condition set forth in Section 7.02 of the Merger Agreement. Based on our review, the supplemental disclosures do not contain any information that would give rise to such a breach or closing condition failure.
Calderwood & Harkness communicated its findings with respect to the supplemental disclosure schedule updates to Priya Deshmukh (Managing Partner, HPE Fund IV) and Thomas Eriksen (Partner, Head of FinTech, Harrowgate Capital Management IV LLC) in a memorandum delivered on July 11, 2025.
HPE Fund IV's own disclosure schedules (the "Buyer's Schedules") delivered as of the Signing Date have been confirmed to remain current and accurate in all material respects as of the Closing Date. No updates to the Buyer's Schedules are required.
V. ANTITRUST AND REGULATORY CLOSING CONDITION CONFIRMATION
Calderwood & Harkness confirms that all regulatory closing conditions set forth in Article VII of the Merger Agreement have been satisfied as of the Closing Date. Specifically:
(a) HSR Act Clearance. The waiting period (as extended by the Second Request) under the HSR Act expired on July 15, 2025, without further action by the Federal Trade Commission or the Antitrust Division of the U.S. Department of Justice. No consent decree, hold-separate order, or other antitrust-related condition was imposed in connection with the clearance. HSR Transaction Number: 25-0198374.
(b) Investment Canada Act Clearance. Clearance under the Investment Canada Act was received on June 3, 2025, without conditions or undertakings.
(c) State Money Transmitter Change-of-Control Approvals. All thirty-one (31) required state money transmitter change-of-control approvals or notifications were completed by July 18, 2025, without any denial, material condition, or restriction.
No governmental order, preliminary or permanent injunction, temporary restraining order, decree, ruling, or other judicial or administrative action is pending or, to the knowledge of Calderwood & Harkness, threatened that would restrain, enjoin, prevent, or prohibit the consummation of the Merger or any of the transactions contemplated by the Merger Agreement.
Howard Bellamy (specialist partner, Antitrust & Competition Group, Calderwood & Harkness) has confirmed that there are no outstanding antitrust-related concerns, commitments, or conditions that would affect the ability of the parties to consummate the Merger on the Closing Date.
VI. FINANCING CONFIRMATION
Calderwood & Harkness confirms the following with respect to the financing commitments for the Merger:
Debt Financing. The Debt Commitment Letter issued by Tralvendo National Bank and Prairie State Bank, N.A. (Reference No. CRE-2025-SPF-0441), dated February 14, 2025, remains in full force and effect as of the Closing Date. No amendments, modifications, waivers, or supplements to the Debt Commitment Letter have been executed since its original date. The commitments thereunder have not been terminated, reduced, or withdrawn.
Equity Financing. The Equity Commitment Letter issued by Harrowgate Capital Management IV LLC, dated February 14, 2025, committing $1,140,000,000 of equity capital to fund the Merger, remains in full force and effect as of the Closing Date. No amendments, modifications, or waivers to the Equity Commitment Letter have been executed since its original date.
The aggregate financing sources confirmed for the Closing are as follows:
The total sources are sufficient to fund the aggregate merger consideration of $1,900,000,000, the repayment of VeloPay's existing indebtedness of approximately $113,230,000, the payment of estimated transaction expenses, and the funding of any other amounts required at Closing, with the revolving credit facility providing additional availability for post-closing working capital needs.
Gordon Strauss of Maplewood & Strauss LLP, counsel to the lenders, confirmed on July 21, 2025 that all conditions to the obligation of the lenders to fund under the Credit Agreement (including the conditions set forth in the conditions precedent provisions thereof) have been satisfied or are expected to be satisfied at or prior to the Closing. The execution versions of the Credit Agreement, the Guarantee and Collateral Agreement, and the Intercreditor Agreement have been finalized and confirmed for execution at Closing.
The Funds Flow Memorandum, dated July 21, 2025, has been finalized and circulated to all parties and their respective counsel. Wire instructions for all funding parties, the paying agent, the escrow agent, Meridian Commercial Credit Corp. (payoff), and all other payment recipients have been confirmed and verified.
VII. PRE-CLOSING DELIVERABLES STATUS
All pre-closing deliverables required under the Merger Agreement have been confirmed as completed as of July 21, 2025, per the Master Closing Checklist maintained by Megan Chu and Derek Okonkwo. The following key deliverables have been confirmed as received, executed, or prepared for delivery at Closing:
(a) Officer's Certificate of VeloPay (Section 7.02(c) of the Merger Agreement): Executed by Nathan Aldridge, Chief Executive Officer of VeloPay, certifying the accuracy of VeloPay's representations and warranties and compliance with covenants as of the Closing Date. Status: Received.
(b) Secretary's Certificate of VeloPay: Executed by Danielle Moreau, General Counsel and Secretary of VeloPay, certifying the incumbency and authority of VeloPay's officers, attaching copies of resolutions of the Board of Directors and stockholders of VeloPay approving the Merger, and certifying the Company's organizational documents. Status: Received.
(c) Good Standing Certificates: Certificates of good standing (or the local equivalent) for VeloPay and each of its subsidiaries from the applicable Secretary of State or comparable authority. Status: Received for all entities.
(d) Payoff Letter — Meridian Commercial Credit Corp.: Payoff letter dated July 18, 2025, confirming the aggregate payoff amount of approximately $113,230,000 and commitment to deliver UCC-3 termination statements and lien releases. Status: Received.
(e) FIRPTA Certificate: Certificate of VeloPay confirming non-U.S. real property holding corporation status under Section 897(c)(2) of the Internal Revenue Code. Status: Received.
(f) Solvency Certificate: To be delivered at Closing by Marcus Langford (CFO), certifying the solvency of the surviving corporation and its subsidiaries on a consolidated basis immediately following the Closing and the related financing transactions. Status: To be delivered at Closing.
(g) Escrow Agreement: Executed by all parties, including Garrison Trust Company as escrow agent (contact: Valerie Drummond, Vice President, Corporate Trust; escrow reference: GT-ESC-2025-07223). Status: Confirmed executed.
(h) Paying Agent Agreement: Executed by Keystone Pacific Transfer Services Inc. as paying agent (contact: Linda Matsumoto, Senior Managing Director). Status: Confirmed executed.
(i) Stockholder Representative Agreement: Executed by Nathan Aldridge, in his capacity as the stockholder representative under Article IX of the Merger Agreement, on behalf of the former stockholders of VeloPay. Status: Executed.
(j) Non-Competition Agreements: Executed by Nathan Aldridge and Sonia Reyes-Watkins, in accordance with Section 7.02(g) of the Merger Agreement, containing customary non-competition and non-solicitation covenants for a period of three years following the Closing. Status: Executed.
(k) Rollover Agreement: Executed by Nathan Aldridge (rollover amount: $14,200,000) and Sonia Reyes-Watkins (rollover amount: $9,700,000), for an aggregate rollover equity investment of $23,900,000 into Harrowgate Velocity Co-Invest LP. Status: Executed.
(l) Credit Agreement, Guarantee and Collateral Agreement, and Intercreditor Agreement: Execution versions finalized and confirmed for execution at Closing. Status: Confirmed for Closing execution.
(m) Amended and Restated Certificate of Incorporation and Bylaws of VeloPay (Surviving Corporation): Prepared for filing with the Delaware Secretary of State and adoption at the effective time of the Merger, respectively. Status: Prepared.
(n) Certificate of Merger: Prepared for filing with the Delaware Secretary of State on July 22, 2025. Status: Prepared for filing.
No material pre-closing deliverables remain outstanding or unresolved as of the date hereof. The solvency certificate referenced in clause (f) above is to be delivered at Closing and is confirmed for delivery.
VIII. CERTIFICATION
Based upon the bring-down due diligence procedures described in this Certificate, Calderwood & Harkness LLP confirms the following as of July 22, 2025:
1. No Material Adverse Effect. No material changes to the business, operations, financial condition, assets, liabilities, or prospects of VeloPay Systems, Inc. or any of its subsidiaries have been identified since the Signing Date of March 18, 2025 that would constitute, or would reasonably be expected to give rise to, a Material Adverse Effect as defined in Section 1.01 of the Merger Agreement.
2. Accuracy of Representations and Warranties. No facts, events, circumstances, or developments have come to the attention of Calderwood & Harkness LLP during the course of the bring-down due diligence that would cause any representation or warranty of VeloPay set forth in Article IV of the Merger Agreement to be inaccurate in any material respect as of the Closing Date (giving effect to the supplemental disclosure schedule updates delivered by Whitford Jessup & Crane LLP on behalf of VeloPay on May 15, 2025 and July 10, 2025, and applying the materiality, Material Adverse Effect, and other qualifiers contained in such representations and warranties).
3. Regulatory Approvals Obtained. All regulatory approvals required as conditions to Closing under Article VII of the Merger Agreement have been obtained, including HSR Act clearance (July 15, 2025), Investment Canada Act clearance (June 3, 2025), and all state money transmitter change-of-control approvals (completed July 18, 2025). No governmental order, injunction, or proceeding is pending or threatened that would restrain, enjoin, or prohibit consummation of the Merger.
4. Pre-Closing Deliverables Completed. All pre-closing deliverables required under the Merger Agreement have been completed or are confirmed for delivery at Closing, as set forth in Section VII of this Certificate.
5. Financing Commitments in Effect. The Debt Commitment Letter and the Equity Commitment Letter remain in full force and effect, and all conditions to the obligation of the lenders to fund under the Credit Agreement have been satisfied or are expected to be satisfied at Closing. The aggregate financing sources are sufficient to fund the merger consideration, the repayment of VeloPay's existing indebtedness, the payment of estimated transaction expenses, and all other amounts required at Closing.
6. Recommendation to Proceed. Based on the foregoing, Calderwood & Harkness LLP recommends that HPE Fund IV proceed to Closing of the Merger on July 22, 2025.
Caveats and Limitations. This Certificate is based upon the information and documentation made available to Calderwood & Harkness LLP during the Bring-Down Diligence Period by VeloPay, VeloPay's counsel, VeloPay's management, and other sources, as well as the Firm's reasonable inquiry as described herein. This Certificate does not constitute a guarantee, assurance, or certification that no undisclosed matters exist that could affect VeloPay, its subsidiaries, or the transactions contemplated by the Merger Agreement. The Firm has relied upon the accuracy and completeness of the information provided by VeloPay and its representatives and has not independently verified all such information.
This Certificate is provided solely for the internal use of Harrowgate Private Equity Fund IV LP and its authorized representatives. This Certificate does not constitute a legal opinion and does not create any rights in favor of, or any obligation or liability to, any third party, including VeloPay, its stockholders, lenders, insurers, or any other person or entity. This Certificate may not be disclosed to, or relied upon by, any third party without the prior written consent of Calderwood & Harkness LLP.
IX. SIGNATURE BLOCK
The undersigned, being duly authorized, have executed this Bring-Down Due Diligence Certificate as of the date first set forth above.
CALDERWOOD & HARKNESS LLP
By: ________
Name: Sandra Tung
Title: Partner, Mergers & Acquisitions
Responsible Partner
Date: July 22, 2025
By: ________
Name: Megan Chu
Title: Associate, Mergers & Acquisitions
Lead Associate
Date: July 22, 2025
APPENDIX A
List of Documents and Sources Reviewed in Bring-Down Diligence
The following is a non-exhaustive list of documents and sources reviewed by Calderwood & Harkness LLP during the Bring-Down Diligence Period in connection with the preparation of this Certificate:
1. VeloPay Systems, Inc. — Unaudited Interim Financial Statements for the Three Months Ended March 31, 2025 (Q1 2025).
2. VeloPay Systems, Inc. — Unaudited Interim Financial Statements for the Three Months Ended June 30, 2025 (Q2 2025).
3. VeloPay Systems, Inc. — Audited Financial Statements for the Fiscal Year Ended December 31, 2024 (FY2024), as audited by Vance Thornbury & Co. LLP.
4. Supplemental Disclosure Schedule Updates delivered by Whitford Jessup & Crane LLP on behalf of VeloPay, dated May 15, 2025.
5. Supplemental Disclosure Schedule Updates delivered by Whitford Jessup & Crane LLP on behalf of VeloPay, dated July 10, 2025.
6. Updated Certificates of Good Standing (or local equivalent) for VeloPay Systems, Inc. (Delaware), VeloPay Processing LLC (Delaware), VeloPay Canada Inc. (Ontario, Canada), VeloPay Europe, Unipessoal Lda. (Portugal), VeloPay Fraud intelligence Inc. (Delaware), and PayStream Gateway LLC (Delaware).
7. Updated UCC, federal and state tax lien, and judgment lien search results for VeloPay and each domestic subsidiary in Delaware, Texas, Colorado, and other relevant jurisdictions.
8. Payoff Letter from Meridian Commercial Credit Corp. (Brian Castellano), dated July 18, 2025.
9. All supplemental materials uploaded to the VeloPay virtual data room (Crestline Solutions, project code "VeloProject") between March 18, 2025 and July 21, 2025, together with the data room activity log.
10. Correspondence with Whitford Jessup & Crane LLP (Rebecca Thornton-Hayes, James Okoro) regarding bring-down diligence inquiries and supplemental information requests.
11. Correspondence with Danielle Moreau (General Counsel, VeloPay) and Marcus Langford (CFO, VeloPay) regarding litigation confirmations, financial updates, and operational matters.
12. HSR Act clearance confirmation documentation, including Second Request compliance certification (June 27, 2025) and expiration of waiting period (July 15, 2025); HSR Transaction Number 25-0198374.
13. Investment Canada Act clearance confirmation (June 3, 2025).
14. State money transmitter change-of-control approval confirmations and notification receipts (completed July 18, 2025) across thirty-one (31) jurisdictions.
15. Change of Control Consent Tracker maintained by Derek Okonkwo, as updated through July 21, 2025.
16. Regulatory Approvals Status Tracker maintained by the deal team, as updated through July 21, 2025.
17. R&W Insurance Policy binding confirmation — Oakbridge Omnivrel Insurance Group, Policy No. OFI-RW-2025-03187.
18. D&O Tail Insurance Policy placement confirmation — Continental Shield Insurance Company, Policy No. CSI-DOT-2025-4821.
19. Debt Commitment Letter — Tralvendo National Bank and Prairie State Bank, N.A., Reference CRE-2025-SPF-0441, dated February 14, 2025.
20. Equity Commitment Letter — Harrowgate Capital Management IV LLC, dated February 14, 2025.
21. Confirmation from Gordon Strauss (Maplewood & Strauss LLP) regarding satisfaction of conditions to funding under the Credit Agreement.
22. Funds Flow Memorandum, dated July 21, 2025.
23. Master Closing Checklist maintained by Megan Chu and Derek Okonkwo, as updated through July 21, 2025.
24. VeloPay Board of Directors meeting minutes for the period March 18, 2025 through July 21, 2025.
25. Memorandum from Leonard Cross (Calderwood & Harkness, Tax) regarding updated tax status of VeloPay and its subsidiaries.
26. Memorandum from Howard Bellamy (Calderwood & Harkness, Antitrust & Competition) regarding antitrust clearance confirmation and absence of outstanding concerns.
APPENDIX B
Persons Contacted During Bring-Down Diligence
The following individuals were contacted by Calderwood & Harkness LLP during the Bring-Down Diligence Period in connection with the bring-down due diligence procedures described in this Certificate:
Additional Calderwood & Harkness personnel who contributed to the bring-down diligence process include members of the Firm's corporate, regulatory, employment, and intellectual property practice groups, as well as paralegal and document review support staff.