1003-00003 · Harrowgate Private Equity Fund IV LP · Correspondence

information-statement-cover-letter.docx DOCUMENT M&A / Corporate

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VELOPAY SYSTEMS, INC. 1455 Innovation Parkway, Suite 800 Austin, Texas 78759

April 14, 2025

To the Stockholders of VeloPay Systems, Inc.:

This cover letter accompanies the enclosed Information Statement (the "Information Statement") that is being furnished to you, as a stockholder of VeloPay Systems, Inc., a Delaware corporation ("VeloPay" or the "Company"), pursuant to Section 228(e) of the Delaware General Corporation Law (the "DGCL") and Rule 14c-2 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Information Statement is first being mailed on or about April 14, 2025 to stockholders of record of VeloPay as of the close of business on March 18, 2025 (the "Record Date").

The purpose of this letter and the enclosed Information Statement is to notify you that the Company has entered into an Agreement and Plan of Merger (the "Merger Agreement"), dated as of March 18, 2025, by and among Harrowgate Private Equity Fund IV LP, a Delaware limited partnership ("HPE Fund IV" or "Parent"), Harrowgate Velocity Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and VeloPay Systems, Inc. The Merger Agreement provides for the merger of Merger Sub with and into VeloPay (the "Merger"), with VeloPay continuing as the surviving corporation and becoming a wholly-owned subsidiary of HPE Fund IV. The Merger will be effected as a reverse triangular merger under Section 251 of the DGCL. At the effective time of the Merger, the separate corporate existence of Merger Sub will cease, and VeloPay, as the surviving corporation, will continue its corporate existence under the laws of the State of Delaware as a wholly-owned subsidiary of HPE Fund IV.

Description of the Transaction

Merger Consideration. Pursuant to the terms of the Merger Agreement, at the effective time of the Merger (the "Effective Time"), each share of common stock, par value $0.001 per share, of VeloPay (the "Common Stock") outstanding immediately prior to the Effective Time (other than (i) shares held by the Company as treasury shares, (ii) shares owned directly or indirectly by Parent, Merger Sub, or any of their respective wholly-owned subsidiaries, and (iii) shares held by stockholders who have properly exercised and perfected, and not effectively withdrawn or lost, their appraisal rights under Section 262 of the DGCL (the "Dissenting Shares")) will be automatically cancelled and converted into the right to receive $20.00 per share in cash, without interest and subject to applicable withholding taxes (the "Per Share Merger Consideration").

The aggregate merger consideration to be paid in the Merger is approximately $1,900,000,000 (the "Aggregate Merger Consideration"). The Per Share Merger Consideration of $20.00 was calculated on a fully diluted, as-converted basis by dividing the Aggregate Merger Consideration of $1,900,000,000 by 95,000,000 fully diluted shares of Common Stock. The fully diluted share count of 95,000,000 shares is comprised of the following:

• 82,400,000 shares of Common Stock issued and outstanding as of the date of the Merger Agreement;

• 7,600,000 shares of Common Stock issuable upon exercise of outstanding stock options granted under the Company's 2018 Equity Incentive Plan and 2021 Equity Incentive Plan (with a weighted average exercise price of $12.84 per share);

• 3,200,000 shares of Common Stock issuable upon settlement of outstanding restricted stock units ("RSUs") granted under the Company's equity incentive plans; and

• 1,800,000 shares of Common Stock issuable upon exercise of outstanding warrants issued in connection with the Company's Series C preferred stock financing (with an exercise price of $8.50 per share).

Treatment of Equity Awards

In connection with the Merger, outstanding equity awards of the Company will be treated as follows:

Vested Stock Options. At the Effective Time, each outstanding stock option that is vested and exercisable as of immediately prior to the Effective Time will be cancelled and converted into the right to receive a cash payment equal to the product of (x) the total number of shares of Common Stock subject to such vested stock option and (y) the excess, if any, of the Per Share Merger Consideration of $20.00 over the applicable per share exercise price of such stock option (the "net spread"), without interest and subject to applicable withholding taxes. Any stock option with an exercise price equal to or greater than $20.00 per share will be cancelled at the Effective Time for no consideration.

Unvested Stock Options. At the Effective Time, each outstanding stock option that is unvested as of immediately prior to the Effective Time will be cancelled. Fifty percent (50%) of the shares underlying each such unvested stock option will accelerate and will be paid out in cash at the Effective Time at the net spread (i.e., $20.00 minus the applicable per share exercise price). The remaining fifty percent (50%) of the shares underlying each such unvested stock option will be converted into replacement equity awards of HPE Fund IV on substantially equivalent economic terms, which replacement awards will vest ratably over a twenty-four (24)-month period following the Effective Time, subject to the holder's continued employment or service with the surviving corporation or its affiliates through the applicable vesting dates.

Restricted Stock Units. At the Effective Time, all outstanding RSUs, whether vested or unvested, will be cancelled and converted into the right to receive a lump-sum cash payment equal to the product of (x) the total number of shares of Common Stock subject to such RSU and (y) the Per Share Merger Consideration of $20.00, without interest and subject to applicable withholding taxes. All unvested RSUs will fully accelerate immediately prior to the Effective Time for purposes of this cash-out treatment.

Warrants. At the Effective Time, each outstanding warrant to purchase shares of Common Stock will be cancelled and converted into the right to receive a cash payment equal to the product of (x) the total number of shares of Common Stock subject to such warrant and (y) the excess of the Per Share Merger Consideration of $20.00 over the applicable per share exercise price of $8.50, equaling $11.50 per warrant, without interest and subject to applicable withholding taxes. The aggregate warrant payout is expected to be approximately $20,700,000 (based on 1,800,000 warrants outstanding at $11.50 per warrant).

Stockholder Approval by Written Consent

The Merger Agreement and the transactions contemplated thereby, including the Merger, were unanimously approved by the Board of Directors of VeloPay (the "Board") on March 17, 2025. Under the DGCL and VeloPay's Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, the affirmative vote or written consent of the holders of a majority of the outstanding shares of Common Stock of VeloPay entitled to vote thereon is required to approve and adopt the Merger Agreement and to approve the Merger.

On March 18, 2025, holders of approximately 63.1% of the outstanding shares of Common Stock of VeloPay as of such date delivered an irrevocable written consent (the "Written Consent") approving and adopting the Merger Agreement and the Merger, pursuant to Section 228 of the DGCL. This constitutes the only stockholder approval required under the DGCL, VeloPay's organizational documents, and the Merger Agreement to consummate the Merger.

The stockholders who delivered the Written Consent, together with their respective ownership percentages of the outstanding shares of Common Stock, are as follows:

In connection with the execution of the Merger Agreement, each of the foregoing stockholders, together with Broadleaf Capital Partners LP (which holds approximately 6.1% of the outstanding shares of Common Stock), entered into a Stockholder Support Agreement with HPE Fund IV, dated as of March 18, 2025 (the "Stockholder Support Agreement"), pursuant to which, among other things, such stockholders agreed to deliver the Written Consent in favor of the adoption of the Merger Agreement and the approval of the Merger. A copy of the Stockholder Support Agreement is attached as Annex B to the enclosed Information Statement.

Because the requisite stockholder approval has been obtained by written consent in lieu of a meeting in accordance with Section 228 of the DGCL, no stockholder meeting will be held to approve the Merger Agreement or the Merger, and no additional stockholder vote or consent is being solicited in connection with the Merger.

Notice Pursuant to DGCL Section 228(e)

This Information Statement is being furnished to you, as a stockholder of VeloPay, in accordance with Section 228(e) of the DGCL, which requires that prompt notice of the taking of corporate action by written consent of stockholders without a meeting be given to those stockholders of record who did not consent in writing to such action. This Information Statement constitutes notice to you of the taking of such corporate action.

No action is required on your part in connection with this Information Statement. This Information Statement is being provided for informational purposes only. This is not a request for, and you are not being asked to deliver, a proxy, consent, or authorization to vote in connection with the Merger or any other matter.

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.

This Information Statement is being furnished to you solely for the purpose of informing you, as required by Section 228(e) of the DGCL and Rule 14c-2 under the Exchange Act, of the corporate action described herein before it takes effect. You are urged to read this cover letter and the enclosed Information Statement carefully and in their entirety.

Fairness Opinion

In connection with the Board's evaluation of the Merger and the Merger Agreement, the Board received a written opinion from Velthryn Greer & Associates ("Velthryn Greer"), VeloPay's financial advisor, dated March 17, 2025, to the effect that, as of the date of such opinion and based upon and subject to the various assumptions, qualifications, limitations, and other matters set forth therein, the Per Share Merger Consideration of $20.00 per share in cash to be received by holders of Common Stock of VeloPay (other than treasury shares, shares owned by Parent or Merger Sub, and Dissenting Shares) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders. The full text of the opinion of Velthryn Greer, which sets forth, among other things, the assumptions made, procedures followed, matters considered, and qualifications and limitations on the review undertaken by Velthryn Greer in connection with the opinion, is attached as Annex C to the enclosed Information Statement. Stockholders are encouraged to read the opinion of Velthryn Greer carefully and in its entirety. A more detailed description of the financial analyses performed by Velthryn Greer in connection with its opinion is set forth in the section of the Information Statement entitled "Special Factors — Opinion of VeloPay's Financial Advisor."

Board Recommendation

After careful consideration, including a thorough review of the terms and conditions of the Merger Agreement, the financial analyses and opinion of Velthryn Greer, and the various factors described in the section of the Information Statement entitled "Special Factors — Reasons for the Merger; Recommendation of the Board," the Board unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of VeloPay and its stockholders. The Board unanimously approved and adopted the Merger Agreement and unanimously recommended that VeloPay's stockholders approve and adopt the Merger Agreement and approve the Merger.

The members of the Board who voted to approve the Merger Agreement and recommend the Merger to VeloPay's stockholders are as follows:

• Nathan Aldridge, Chairman of the Board and Chief Executive Officer

• Sonia Reyes-Watkins, Director and Chief Technology Officer

• Janet Gould, Independent Director

• Kwame Asante, Director (Ridgeline Ventures representative)

• Catherine Lindström, Director (Apex Growth Partners representative)

• Philip Rosenthal, Independent Director

The Board's reasons for approving the Merger and its recommendation are described in greater detail in the enclosed Information Statement.

Transaction Timeline and Expected Closing

The Merger Agreement was executed by the parties thereto on March 18, 2025. The consummation of the Merger is subject to the satisfaction or waiver of certain customary closing conditions, including, among others:

• Hart-Scott-Rodino Antitrust Improvements Act. The expiration or early termination of all applicable waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). The pre-merger notification and report forms required under the HSR Act were filed by the Company and HPE Fund IV with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice on April 2, 2025. The initial 30-day waiting period under the HSR Act is currently scheduled to expire on May 2, 2025, unless earlier terminated or extended by a request for additional information.

• State Money Transmitter Change-of-Control Approvals. VeloPay currently holds money transmitter licenses in forty-seven (47) states and the District of Columbia. Of those jurisdictions, thirty-one (31) states require prior change-of-control approval or notification in connection with a transaction of this nature. Applications for change-of-control approval have been or are being submitted in each such jurisdiction. The Company and HPE Fund IV are working cooperatively to satisfy these state regulatory requirements as promptly as practicable.

• Investment Canada Act Clearance. Receipt of clearance under the Investment Canada Act with respect to VeloPay Canada Inc., the Company's Canadian subsidiary. A notification under the Investment Canada Act was filed on May 1, 2025 with Innovation, Science and Economic Development Canada.

• Other Customary Conditions. The consummation of the Merger is also subject to additional customary closing conditions, including (i) the accuracy of the representations and warranties of each party contained in the Merger Agreement (subject to customary materiality and material adverse effect qualifiers), (ii) compliance in all material respects by each party with its covenants and agreements contained in the Merger Agreement, (iii) the absence of any law, order, injunction, or decree issued by any governmental authority of competent jurisdiction prohibiting or enjoining the consummation of the Merger, and (iv) delivery of customary officer's certificates.

No stockholder vote condition remains outstanding, as the Written Consent has been validly delivered and constitutes the requisite stockholder approval under the DGCL and VeloPay's organizational documents.

The Company currently anticipates that the Merger will be consummated during the third quarter of 2025, subject to the satisfaction or waiver of all remaining closing conditions. There can be no assurance, however, as to when, or if, all of the closing conditions will be satisfied or waived, or that the Merger will be completed.

In accordance with the DGCL, the Information Statement must be mailed at least twenty (20) calendar days before the earliest date on which the corporate action taken by written consent may become effective. Accordingly, the corporate action taken by the Written Consent (i.e., the approval and adoption of the Merger Agreement and approval of the Merger) will become effective no earlier than twenty (20) calendar days following the mailing of this Information Statement.

Key Terms of the Merger Agreement (Summary)

Set forth below is a brief summary of certain key terms of the Merger Agreement. This summary does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is attached as Annex A to the enclosed Information Statement and is incorporated herein by reference. Stockholders are urged to read the Merger Agreement carefully and in its entirety.

No-Shop Provision. The Merger Agreement contains a "no-shop" restriction that, from and after the date of the Merger Agreement through the earlier of the Effective Time or the termination of the Merger Agreement in accordance with its terms, restricts VeloPay and its subsidiaries, and their respective directors, officers, employees, agents, advisors, and other representatives, from directly or indirectly soliciting, initiating, or knowingly facilitating or encouraging any inquiries or proposals that constitute, or could reasonably be expected to lead to, a competing proposal for an acquisition of VeloPay.

Notwithstanding the foregoing, the Merger Agreement contains a customary "fiduciary out" exception that permits the Board to engage with, provide information to, and conduct negotiations with, any third party that has submitted an unsolicited bona fide written proposal that the Board determines in good faith, after consultation with its financial advisors and outside legal counsel, constitutes or could reasonably be expected to result in a "Superior Proposal" (as defined in the Merger Agreement), if the Board determines in good faith, after consultation with outside legal counsel, that the failure to take such actions would be inconsistent with the directors' fiduciary duties under applicable law.

If the Board determines that it has received a Superior Proposal and desires to terminate the Merger Agreement in order to enter into a definitive agreement with respect to such Superior Proposal, VeloPay must first provide HPE Fund IV with written notice of its intention to do so and afford HPE Fund IV a period of five (5) business days (the "Match Period") to propose amendments or modifications to the terms and conditions of the Merger Agreement. The Board must consider any such proposed amendments or modifications in good faith before it may terminate the Merger Agreement to accept the Superior Proposal.

Termination Fees. In the event that VeloPay terminates the Merger Agreement in order to accept a Superior Proposal (or under certain other specified circumstances described in the Merger Agreement), VeloPay is required to pay to HPE Fund IV a termination fee of $76,000,000 (the "Company Termination Fee"), which represents approximately 4.0% of the Aggregate Merger Consideration of $1,900,000,000. The Company Termination Fee is payable in immediately available funds by wire transfer within two (2) business days following such termination.

In the event that HPE Fund IV or Merger Sub fails to consummate the Merger due to a failure to obtain the debt financing contemplated by the Debt Commitment Letter (a "Financing Failure"), HPE Fund IV is required to pay to VeloPay a reverse termination fee of $57,000,000 (the "Reverse Termination Fee"), which represents approximately 3.0% of the Aggregate Merger Consideration. The Reverse Termination Fee is payable in immediately available funds by wire transfer within two (2) business days following such termination. Payment of the Reverse Termination Fee is guaranteed by Harrowgate Private Equity Management LLC, the management company of HPE Fund IV, pursuant to a Limited Guarantee dated March 18, 2025.

Indemnification and Escrow

At the closing of the Merger, $133,000,000 (the "Escrow Amount"), representing approximately 7.0% of the Aggregate Merger Consideration, will be deposited into an escrow account established with Garrison Trust Company, as escrow agent (the "Escrow Agent"), to secure certain post-closing indemnification obligations of the former stockholders of VeloPay under the Merger Agreement. The indemnification obligations of the former stockholders are subject to a cap of $228,000,000 (the "Indemnification Cap"), representing approximately 12.0% of the Aggregate Merger Consideration.

The representations and warranties contained in the Merger Agreement (other than certain "fundamental representations," which survive until the expiration of the applicable statute of limitations) will survive for a period of eighteen (18) months following the closing of the Merger. Fifty percent (50%) of the Escrow Amount ($66,500,000) will be released to the former stockholders at twelve (12) months after the closing of the Merger, and the remaining fifty percent (50%) will be released at eighteen (18) months after the closing of the Merger, in each case less any amounts subject to pending or unresolved indemnification claims as of the applicable release date.

Material Adverse Effect

The consummation of the Merger is conditioned upon the absence, since the date of the Merger Agreement, of any event, change, circumstance, occurrence, effect, development, condition, or state of facts that has had, or would reasonably be expected to have, individually or in the aggregate, a "Material Adverse Effect" on VeloPay. The occurrence of a Material Adverse Effect with respect to VeloPay between the date of the Merger Agreement and the Effective Time would permit HPE Fund IV not to consummate the Merger.

The definition of "Material Adverse Effect" in the Merger Agreement includes customary carve-outs and exceptions for, among other things: (a) the effects of pandemics, epidemics, or other public health emergencies; (b) acts of war, armed hostilities, sabotage, terrorism, or military action; (c) changes in general economic, financial, or capital market conditions; (d) changes, events, or developments generally affecting the fintech, payments, or financial services industries; (e) changes in applicable law, regulation, or the interpretation thereof; (f) changes in United States generally accepted accounting principles ("GAAP") or applicable regulatory accounting principles; (g) the announcement or pendency of the Merger or the other transactions contemplated by the Merger Agreement; and (h) any failure by VeloPay to meet published analyst estimates or internal projections (provided that the underlying causes of such failure may be considered in determining whether a Material Adverse Effect has occurred).

Financing

The Aggregate Merger Consideration, together with related transaction fees and expenses, will be funded through a combination of the following sources:

The senior secured term loan facility is being arranged by Tralvendo National Bank as lead arranger and administrative agent, with a seven (7)-year maturity and bearing interest at the Secured Overnight Financing Rate ("SOFR") plus 375 basis points per annum. The senior secured revolving credit facility is being arranged by Prairie State Bank, N.A. as lead arranger and administrative agent, with a five (5)-year maturity and bearing interest at SOFR plus 325 basis points per annum.

HPE Fund IV's financing commitments were obtained pursuant to (i) a Debt Commitment Letter, dated as of February 14, 2025, from Tralvendo National Bank and Prairie State Bank, N.A., and (ii) an Equity Commitment Letter, dated as of February 14, 2025, from Harrowgate Private Equity Fund IV LP. Copies of the Debt Commitment Letter and the Equity Commitment Letter are described in the enclosed Information Statement.

In connection with the closing of the Merger, VeloPay's existing $112,000,000 senior secured credit facility with Meridian Commercial Credit Corp. (the "Existing Credit Facility") will be refinanced and repaid in full from the proceeds of the new financing facilities described above. Upon such repayment, all liens and security interests granted under the Existing Credit Facility will be released.

Appraisal Rights

Under Section 262 of the DGCL, if the Merger is consummated, stockholders of VeloPay who did not consent in writing to the Merger and who comply with all of the applicable requirements of Section 262 of the DGCL will be entitled to exercise appraisal rights and, in lieu of receiving the Per Share Merger Consideration, to petition the Delaware Court of Chancery for a judicial determination of the fair value of their shares of Common Stock as of immediately prior to the Effective Time (exclusive of any element of value arising from the accomplishment or expectation of the Merger).

Stockholders considering whether to exercise appraisal rights should be aware that the fair value of their shares as determined by the Delaware Court of Chancery could be more than, equal to, or less than the Per Share Merger Consideration of $20.00. The enclosed Information Statement contains a detailed description of the procedures that must be followed in order to properly demand, perfect, and exercise appraisal rights under Section 262 of the DGCL, including strict compliance requirements and timing deadlines that must be satisfied. In addition, the full text of Section 262 of the DGCL is reproduced in Annex D to the enclosed Information Statement.

Stockholders are urged to read the Information Statement carefully for a complete description of the procedures to perfect appraisal rights. Failure to follow the procedures set forth in Section 262 of the DGCL precisely could result in the loss of appraisal rights. Stockholders who wish to exercise appraisal rights are also encouraged to consult their own legal advisors before taking any action.

Where to Find Additional Information

You are encouraged to read the enclosed Information Statement in its entirety, including all annexes thereto, which contain important and detailed information about the Merger, the Merger Agreement, the background of the transaction, the Board's reasons for approving the Merger, the fairness opinion rendered by Velthryn Greer & Associates, and the financial analyses performed by Velthryn Greer in connection with its opinion. The following annexes are included with the Information Statement:

• Annex A — Agreement and Plan of Merger, dated as of March 18, 2025

• Annex B — Stockholder Support Agreement, dated as of March 18, 2025

• Annex C — Fairness Opinion of Velthryn Greer & Associates, dated March 17, 2025

• Annex D — Section 262 of the Delaware General Corporation Law

If you have any additional questions about the Merger, the Merger Agreement, the Information Statement, or related matters, or if you need additional copies of the Information Statement, please contact:

Danielle Moreau General Counsel VeloPay Systems, Inc. 1455 Innovation Parkway, Suite 800 Austin, Texas 78759 Telephone: (512) 555-4200

Email: dmoreau@velopaysystems.com

Whitford Jessup & Crane LLP Outside Counsel to VeloPay Systems, Inc. 600 Congress Avenue, Suite 2400 Austin, Texas 78701

Attention: Rebecca Thornton-Hayes

Telephone: (512) 555-7800

Email: rthornton-hayes@wjclaw.com

On behalf of the Board of Directors of VeloPay Systems, Inc., we thank you for your continued support of VeloPay Systems, Inc.

Sincerely,

VELOPAY SYSTEMS, INC.

By: ________

Nathan Aldridge Chairman of the Board of Directors and Chief Executive Officer

Date: April 14, 2025

Enclosure: Information Statement of VeloPay Systems, Inc. dated April 14, 2025 (including Annexes A through D)

Consenting Stockholder	Shares Held	Percentage of Outstanding Shares
Ridgeline Ventures Fund III LP	18,457,600	22.4%
Apex Growth Partners II LP	13,843,200	16.8%
Nathan Aldridge (CEO & Co-Founder)	11,700,800	14.2%
Sonia Reyes-Watkins (CTO & Co-Founder)	7,992,800	9.7%
Total	51,994,400	63.1%
Source	Amount	Approximate % of Deal Value
Equity contribution from HPE Fund IV	$1,140,000,000	60.0%
Senior secured term loan facility (Tralvendo National Bank)	$500,000,000	26.3%
Senior secured revolving credit facility (Prairie State Bank, N.A.)	$260,000,000	13.7%
VeloPay cash on hand	$53,800,000	—

VELOPAY SYSTEMS, INC. 1455 Innovation Parkway, Suite 800 Austin, Texas 78759
April 14, 2025
To the Stockholders of VeloPay Systems, Inc.:
This cover letter accompanies the enclosed Information Statement (the "Information Statement") that is being furnished to you, as a stockholder of VeloPay Systems, Inc., a Delaware corporation ("VeloPay" or the "Company"), pursuant to Section 228(e) of the Delaware General Corporation Law (the "DGCL") and Rule 14c-2 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Information Statement is first being mailed on or about April 14, 2025 to stockholders of record of VeloPay as of the close of business on March 18, 2025 (the "Record Date").
The purpose of this letter and the enclosed Information Statement is to notify you that the Company has entered into an Agreement and Plan of Merger (the "Merger Agreement"), dated as of March 18, 2025, by and among Harrowgate Private Equity Fund IV LP, a Delaware limited partnership ("HPE Fund IV" or "Parent"), Harrowgate Velocity Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and VeloPay Systems, Inc. The Merger Agreement provides for the merger of Merger Sub with and into VeloPay (the "Merger"), with VeloPay continuing as the surviving corporation and becoming a wholly-owned subsidiary of HPE Fund IV. The Merger will be effected as a reverse triangular merger under Section 251 of the DGCL. At the effective time of the Merger, the separate corporate existence of Merger Sub will cease, and VeloPay, as the surviving corporation, will continue its corporate existence under the laws of the State of Delaware as a wholly-owned subsidiary of HPE Fund IV.
Description of the Transaction
Merger Consideration.  Pursuant to the terms of the Merger Agreement, at the effective time of the Merger (the "Effective Time"), each share of common stock, par value $0.001 per share, of VeloPay (the "Common Stock") outstanding immediately prior to the Effective Time (other than (i) shares held by the Company as treasury shares, (ii) shares owned directly or indirectly by Parent, Merger Sub, or any of their respective wholly-owned subsidiaries, and (iii) shares held by stockholders who have properly exercised and perfected, and not effectively withdrawn or lost, their appraisal rights under Section 262 of the DGCL (the "Dissenting Shares")) will be automatically cancelled and converted into the right to receive $20.00 per share in cash, without interest and subject to applicable withholding taxes (the "Per Share Merger Consideration").
The aggregate merger consideration to be paid in the Merger is approximately $1,900,000,000 (the "Aggregate Merger Consideration"). The Per Share Merger Consideration of $20.00 was calculated on a fully diluted, as-converted basis by dividing the Aggregate Merger Consideration of $1,900,000,000 by 95,000,000 fully diluted shares of Common Stock. The fully diluted share count of 95,000,000 shares is comprised of the following:
•  82,400,000 shares of Common Stock issued and outstanding as of the date of the Merger Agreement;
•  7,600,000 shares of Common Stock issuable upon exercise of outstanding stock options granted under the Company's 2018 Equity Incentive Plan and 2021 Equity Incentive Plan (with a weighted average exercise price of $12.84 per share);
•  3,200,000 shares of Common Stock issuable upon settlement of outstanding restricted stock units ("RSUs") granted under the Company's equity incentive plans; and
•  1,800,000 shares of Common Stock issuable upon exercise of outstanding warrants issued in connection with the Company's Series C preferred stock financing (with an exercise price of $8.50 per share).
Treatment of Equity Awards
In connection with the Merger, outstanding equity awards of the Company will be treated as follows:
Vested Stock Options. At the Effective Time, each outstanding stock option that is vested and exercisable as of immediately prior to the Effective Time will be cancelled and converted into the right to receive a cash payment equal to the product of (x) the total number of shares of Common Stock subject to such vested stock option and (y) the excess, if any, of the Per Share Merger Consideration of $20.00 over the applicable per share exercise price of such stock option (the "net spread"), without interest and subject to applicable withholding taxes. Any stock option with an exercise price equal to or greater than $20.00 per share will be cancelled at the Effective Time for no consideration.
Unvested Stock Options. At the Effective Time, each outstanding stock option that is unvested as of immediately prior to the Effective Time will be cancelled. Fifty percent (50%) of the shares underlying each such unvested stock option will accelerate and will be paid out in cash at the Effective Time at the net spread (i.e., $20.00 minus the applicable per share exercise price). The remaining fifty percent (50%) of the shares underlying each such unvested stock option will be converted into replacement equity awards of HPE Fund IV on substantially equivalent economic terms, which replacement awards will vest ratably over a twenty-four (24)-month period following the Effective Time, subject to the holder's continued employment or service with the surviving corporation or its affiliates through the applicable vesting dates.
Restricted Stock Units. At the Effective Time, all outstanding RSUs, whether vested or unvested, will be cancelled and converted into the right to receive a lump-sum cash payment equal to the product of (x) the total number of shares of Common Stock subject to such RSU and (y) the Per Share Merger Consideration of $20.00, without interest and subject to applicable withholding taxes. All unvested RSUs will fully accelerate immediately prior to the Effective Time for purposes of this cash-out treatment.
Warrants. At the Effective Time, each outstanding warrant to purchase shares of Common Stock will be cancelled and converted into the right to receive a cash payment equal to the product of (x) the total number of shares of Common Stock subject to such warrant and (y) the excess of the Per Share Merger Consideration of $20.00 over the applicable per share exercise price of $8.50, equaling $11.50 per warrant, without interest and subject to applicable withholding taxes. The aggregate warrant payout is expected to be approximately $20,700,000 (based on 1,800,000 warrants outstanding at $11.50 per warrant).
Stockholder Approval by Written Consent
The Merger Agreement and the transactions contemplated thereby, including the Merger, were unanimously approved by the Board of Directors of VeloPay (the "Board") on March 17, 2025. Under the DGCL and VeloPay's Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, the affirmative vote or written consent of the holders of a majority of the outstanding shares of Common Stock of VeloPay entitled to vote thereon is required to approve and adopt the Merger Agreement and to approve the Merger.
On March 18, 2025, holders of approximately 63.1% of the outstanding shares of Common Stock of VeloPay as of such date delivered an irrevocable written consent (the "Written Consent") approving and adopting the Merger Agreement and the Merger, pursuant to Section 228 of the DGCL. This constitutes the only stockholder approval required under the DGCL, VeloPay's organizational documents, and the Merger Agreement to consummate the Merger.
The stockholders who delivered the Written Consent, together with their respective ownership percentages of the outstanding shares of Common Stock, are as follows:
In connection with the execution of the Merger Agreement, each of the foregoing stockholders, together with Broadleaf Capital Partners LP (which holds approximately 6.1% of the outstanding shares of Common Stock), entered into a Stockholder Support Agreement with HPE Fund IV, dated as of March 18, 2025 (the "Stockholder Support Agreement"), pursuant to which, among other things, such stockholders agreed to deliver the Written Consent in favor of the adoption of the Merger Agreement and the approval of the Merger. A copy of the Stockholder Support Agreement is attached as Annex B to the enclosed Information Statement.
Because the requisite stockholder approval has been obtained by written consent in lieu of a meeting in accordance with Section 228 of the DGCL, no stockholder meeting will be held to approve the Merger Agreement or the Merger, and no additional stockholder vote or consent is being solicited in connection with the Merger.
Notice Pursuant to DGCL Section 228(e)
This Information Statement is being furnished to you, as a stockholder of VeloPay, in accordance with Section 228(e) of the DGCL, which requires that prompt notice of the taking of corporate action by written consent of stockholders without a meeting be given to those stockholders of record who did not consent in writing to such action. This Information Statement constitutes notice to you of the taking of such corporate action.
No action is required on your part in connection with this Information Statement. This Information Statement is being provided for informational purposes only. This is not a request for, and you are not being asked to deliver, a proxy, consent, or authorization to vote in connection with the Merger or any other matter.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
This Information Statement is being furnished to you solely for the purpose of informing you, as required by Section 228(e) of the DGCL and Rule 14c-2 under the Exchange Act, of the corporate action described herein before it takes effect. You are urged to read this cover letter and the enclosed Information Statement carefully and in their entirety.
Fairness Opinion
In connection with the Board's evaluation of the Merger and the Merger Agreement, the Board received a written opinion from Velthryn Greer & Associates ("Velthryn Greer"), VeloPay's financial advisor, dated March 17, 2025, to the effect that, as of the date of such opinion and based upon and subject to the various assumptions, qualifications, limitations, and other matters set forth therein, the Per Share Merger Consideration of $20.00 per share in cash to be received by holders of Common Stock of VeloPay (other than treasury shares, shares owned by Parent or Merger Sub, and Dissenting Shares) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders. The full text of the opinion of Velthryn Greer, which sets forth, among other things, the assumptions made, procedures followed, matters considered, and qualifications and limitations on the review undertaken by Velthryn Greer in connection with the opinion, is attached as Annex C to the enclosed Information Statement. Stockholders are encouraged to read the opinion of Velthryn Greer carefully and in its entirety. A more detailed description of the financial analyses performed by Velthryn Greer in connection with its opinion is set forth in the section of the Information Statement entitled "Special Factors — Opinion of VeloPay's Financial Advisor."
Board Recommendation
After careful consideration, including a thorough review of the terms and conditions of the Merger Agreement, the financial analyses and opinion of Velthryn Greer, and the various factors described in the section of the Information Statement entitled "Special Factors — Reasons for the Merger; Recommendation of the Board," the Board unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of VeloPay and its stockholders. The Board unanimously approved and adopted the Merger Agreement and unanimously recommended that VeloPay's stockholders approve and adopt the Merger Agreement and approve the Merger.
The members of the Board who voted to approve the Merger Agreement and recommend the Merger to VeloPay's stockholders are as follows:
•  Nathan Aldridge, Chairman of the Board and Chief Executive Officer
•  Sonia Reyes-Watkins, Director and Chief Technology Officer
•  Janet Gould, Independent Director
•  Kwame Asante, Director (Ridgeline Ventures representative)
•  Catherine Lindström, Director (Apex Growth Partners representative)
•  Philip Rosenthal, Independent Director
The Board's reasons for approving the Merger and its recommendation are described in greater detail in the enclosed Information Statement.
Transaction Timeline and Expected Closing
The Merger Agreement was executed by the parties thereto on March 18, 2025. The consummation of the Merger is subject to the satisfaction or waiver of certain customary closing conditions, including, among others:
•  Hart-Scott-Rodino Antitrust Improvements Act. The expiration or early termination of all applicable waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). The pre-merger notification and report forms required under the HSR Act were filed by the Company and HPE Fund IV with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice on April 2, 2025. The initial 30-day waiting period under the HSR Act is currently scheduled to expire on May 2, 2025, unless earlier terminated or extended by a request for additional information.
•  State Money Transmitter Change-of-Control Approvals. VeloPay currently holds money transmitter licenses in forty-seven (47) states and the District of Columbia. Of those jurisdictions, thirty-one (31) states require prior change-of-control approval or notification in connection with a transaction of this nature. Applications for change-of-control approval have been or are being submitted in each such jurisdiction. The Company and HPE Fund IV are working cooperatively to satisfy these state regulatory requirements as promptly as practicable.
•  Investment Canada Act Clearance. Receipt of clearance under the Investment Canada Act with respect to VeloPay Canada Inc., the Company's Canadian subsidiary. A notification under the Investment Canada Act was filed on May 1, 2025 with Innovation, Science and Economic Development Canada.
•  Other Customary Conditions. The consummation of the Merger is also subject to additional customary closing conditions, including (i) the accuracy of the representations and warranties of each party contained in the Merger Agreement (subject to customary materiality and material adverse effect qualifiers), (ii) compliance in all material respects by each party with its covenants and agreements contained in the Merger Agreement, (iii) the absence of any law, order, injunction, or decree issued by any governmental authority of competent jurisdiction prohibiting or enjoining the consummation of the Merger, and (iv) delivery of customary officer's certificates.
No stockholder vote condition remains outstanding, as the Written Consent has been validly delivered and constitutes the requisite stockholder approval under the DGCL and VeloPay's organizational documents.
The Company currently anticipates that the Merger will be consummated during the third quarter of 2025, subject to the satisfaction or waiver of all remaining closing conditions. There can be no assurance, however, as to when, or if, all of the closing conditions will be satisfied or waived, or that the Merger will be completed.
In accordance with the DGCL, the Information Statement must be mailed at least twenty (20) calendar days before the earliest date on which the corporate action taken by written consent may become effective. Accordingly, the corporate action taken by the Written Consent (i.e., the approval and adoption of the Merger Agreement and approval of the Merger) will become effective no earlier than twenty (20) calendar days following the mailing of this Information Statement.
Key Terms of the Merger Agreement (Summary)
Set forth below is a brief summary of certain key terms of the Merger Agreement. This summary does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is attached as Annex A to the enclosed Information Statement and is incorporated herein by reference. Stockholders are urged to read the Merger Agreement carefully and in its entirety.
No-Shop Provision.  The Merger Agreement contains a "no-shop" restriction that, from and after the date of the Merger Agreement through the earlier of the Effective Time or the termination of the Merger Agreement in accordance with its terms, restricts VeloPay and its subsidiaries, and their respective directors, officers, employees, agents, advisors, and other representatives, from directly or indirectly soliciting, initiating, or knowingly facilitating or encouraging any inquiries or proposals that constitute, or could reasonably be expected to lead to, a competing proposal for an acquisition of VeloPay.
Notwithstanding the foregoing, the Merger Agreement contains a customary "fiduciary out" exception that permits the Board to engage with, provide information to, and conduct negotiations with, any third party that has submitted an unsolicited bona fide written proposal that the Board determines in good faith, after consultation with its financial advisors and outside legal counsel, constitutes or could reasonably be expected to result in a "Superior Proposal" (as defined in the Merger Agreement), if the Board determines in good faith, after consultation with outside legal counsel, that the failure to take such actions would be inconsistent with the directors' fiduciary duties under applicable law.
If the Board determines that it has received a Superior Proposal and desires to terminate the Merger Agreement in order to enter into a definitive agreement with respect to such Superior Proposal, VeloPay must first provide HPE Fund IV with written notice of its intention to do so and afford HPE Fund IV a period of five (5) business days (the "Match Period") to propose amendments or modifications to the terms and conditions of the Merger Agreement. The Board must consider any such proposed amendments or modifications in good faith before it may terminate the Merger Agreement to accept the Superior Proposal.
Termination Fees.  In the event that VeloPay terminates the Merger Agreement in order to accept a Superior Proposal (or under certain other specified circumstances described in the Merger Agreement), VeloPay is required to pay to HPE Fund IV a termination fee of $76,000,000 (the "Company Termination Fee"), which represents approximately 4.0% of the Aggregate Merger Consideration of $1,900,000,000. The Company Termination Fee is payable in immediately available funds by wire transfer within two (2) business days following such termination.
In the event that HPE Fund IV or Merger Sub fails to consummate the Merger due to a failure to obtain the debt financing contemplated by the Debt Commitment Letter (a "Financing Failure"), HPE Fund IV is required to pay to VeloPay a reverse termination fee of $57,000,000 (the "Reverse Termination Fee"), which represents approximately 3.0% of the Aggregate Merger Consideration. The Reverse Termination Fee is payable in immediately available funds by wire transfer within two (2) business days following such termination. Payment of the Reverse Termination Fee is guaranteed by Harrowgate Private Equity Management LLC, the management company of HPE Fund IV, pursuant to a Limited Guarantee dated March 18, 2025.
Indemnification and Escrow
At the closing of the Merger, $133,000,000 (the "Escrow Amount"), representing approximately 7.0% of the Aggregate Merger Consideration, will be deposited into an escrow account established with Garrison Trust Company, as escrow agent (the "Escrow Agent"), to secure certain post-closing indemnification obligations of the former stockholders of VeloPay under the Merger Agreement. The indemnification obligations of the former stockholders are subject to a cap of $228,000,000 (the "Indemnification Cap"), representing approximately 12.0% of the Aggregate Merger Consideration.
The representations and warranties contained in the Merger Agreement (other than certain "fundamental representations," which survive until the expiration of the applicable statute of limitations) will survive for a period of eighteen (18) months following the closing of the Merger. Fifty percent (50%) of the Escrow Amount ($66,500,000) will be released to the former stockholders at twelve (12) months after the closing of the Merger, and the remaining fifty percent (50%) will be released at eighteen (18) months after the closing of the Merger, in each case less any amounts subject to pending or unresolved indemnification claims as of the applicable release date.
Material Adverse Effect
The consummation of the Merger is conditioned upon the absence, since the date of the Merger Agreement, of any event, change, circumstance, occurrence, effect, development, condition, or state of facts that has had, or would reasonably be expected to have, individually or in the aggregate, a "Material Adverse Effect" on VeloPay. The occurrence of a Material Adverse Effect with respect to VeloPay between the date of the Merger Agreement and the Effective Time would permit HPE Fund IV not to consummate the Merger.
The definition of "Material Adverse Effect" in the Merger Agreement includes customary carve-outs and exceptions for, among other things: (a) the effects of pandemics, epidemics, or other public health emergencies; (b) acts of war, armed hostilities, sabotage, terrorism, or military action; (c) changes in general economic, financial, or capital market conditions; (d) changes, events, or developments generally affecting the fintech, payments, or financial services industries; (e) changes in applicable law, regulation, or the interpretation thereof; (f) changes in United States generally accepted accounting principles ("GAAP") or applicable regulatory accounting principles; (g) the announcement or pendency of the Merger or the other transactions contemplated by the Merger Agreement; and (h) any failure by VeloPay to meet published analyst estimates or internal projections (provided that the underlying causes of such failure may be considered in determining whether a Material Adverse Effect has occurred).
Financing
The Aggregate Merger Consideration, together with related transaction fees and expenses, will be funded through a combination of the following sources:
The senior secured term loan facility is being arranged by Tralvendo National Bank as lead arranger and administrative agent, with a seven (7)-year maturity and bearing interest at the Secured Overnight Financing Rate ("SOFR") plus 375 basis points per annum. The senior secured revolving credit facility is being arranged by Prairie State Bank, N.A. as lead arranger and administrative agent, with a five (5)-year maturity and bearing interest at SOFR plus 325 basis points per annum.
HPE Fund IV's financing commitments were obtained pursuant to (i) a Debt Commitment Letter, dated as of February 14, 2025, from Tralvendo National Bank and Prairie State Bank, N.A., and (ii) an Equity Commitment Letter, dated as of February 14, 2025, from Harrowgate Private Equity Fund IV LP. Copies of the Debt Commitment Letter and the Equity Commitment Letter are described in the enclosed Information Statement.
In connection with the closing of the Merger, VeloPay's existing $112,000,000 senior secured credit facility with Meridian Commercial Credit Corp. (the "Existing Credit Facility") will be refinanced and repaid in full from the proceeds of the new financing facilities described above. Upon such repayment, all liens and security interests granted under the Existing Credit Facility will be released.
Appraisal Rights
Under Section 262 of the DGCL, if the Merger is consummated, stockholders of VeloPay who did not consent in writing to the Merger and who comply with all of the applicable requirements of Section 262 of the DGCL will be entitled to exercise appraisal rights and, in lieu of receiving the Per Share Merger Consideration, to petition the Delaware Court of Chancery for a judicial determination of the fair value of their shares of Common Stock as of immediately prior to the Effective Time (exclusive of any element of value arising from the accomplishment or expectation of the Merger).
Stockholders considering whether to exercise appraisal rights should be aware that the fair value of their shares as determined by the Delaware Court of Chancery could be more than, equal to, or less than the Per Share Merger Consideration of $20.00. The enclosed Information Statement contains a detailed description of the procedures that must be followed in order to properly demand, perfect, and exercise appraisal rights under Section 262 of the DGCL, including strict compliance requirements and timing deadlines that must be satisfied. In addition, the full text of Section 262 of the DGCL is reproduced in Annex D to the enclosed Information Statement.
Stockholders are urged to read the Information Statement carefully for a complete description of the procedures to perfect appraisal rights. Failure to follow the procedures set forth in Section 262 of the DGCL precisely could result in the loss of appraisal rights. Stockholders who wish to exercise appraisal rights are also encouraged to consult their own legal advisors before taking any action.
Where to Find Additional Information
You are encouraged to read the enclosed Information Statement in its entirety, including all annexes thereto, which contain important and detailed information about the Merger, the Merger Agreement, the background of the transaction, the Board's reasons for approving the Merger, the fairness opinion rendered by Velthryn Greer & Associates, and the financial analyses performed by Velthryn Greer in connection with its opinion. The following annexes are included with the Information Statement:
•  Annex A — Agreement and Plan of Merger, dated as of March 18, 2025
•  Annex B — Stockholder Support Agreement, dated as of March 18, 2025
•  Annex C — Fairness Opinion of Velthryn Greer & Associates, dated March 17, 2025
•  Annex D — Section 262 of the Delaware General Corporation Law
If you have any additional questions about the Merger, the Merger Agreement, the Information Statement, or related matters, or if you need additional copies of the Information Statement, please contact:
Danielle Moreau General Counsel VeloPay Systems, Inc. 1455 Innovation Parkway, Suite 800 Austin, Texas 78759 Telephone: (512) 555-4200
Email: dmoreau@velopaysystems.com
or
Whitford Jessup & Crane LLP Outside Counsel to VeloPay Systems, Inc. 600 Congress Avenue, Suite 2400 Austin, Texas 78701
Attention: Rebecca Thornton-Hayes
Telephone: (512) 555-7800
Email: rthornton-hayes@wjclaw.com
On behalf of the Board of Directors of VeloPay Systems, Inc., we thank you for your continued support of VeloPay Systems, Inc.
Sincerely,
VELOPAY SYSTEMS, INC.
By: ________
Nathan Aldridge Chairman of the Board of Directors and Chief Executive Officer
Date: April 14, 2025
Enclosure: Information Statement of VeloPay Systems, Inc. dated April 14, 2025 (including Annexes A through D)
Consenting Stockholder | Shares Held | Percentage of Outstanding Shares
Ridgeline Ventures Fund III LP | 18,457,600 | 22.4%
Apex Growth Partners II LP | 13,843,200 | 16.8%
Nathan Aldridge (CEO & Co-Founder) | 11,700,800 | 14.2%
Sonia Reyes-Watkins (CTO & Co-Founder) | 7,992,800 | 9.7%
Total | 51,994,400 | 63.1%
Source | Amount | Approximate % of Deal Value
Equity contribution from HPE Fund IV | $1,140,000,000 | 60.0%
Senior secured term loan facility (Tralvendo National Bank) | $500,000,000 | 26.3%
Senior secured revolving credit facility (Prairie State Bank, N.A.) | $260,000,000 | 13.7%
VeloPay cash on hand | $53,800,000 | —

VELOPAY SYSTEMS, INC. 1455 Innovation Parkway, Suite 800 Austin, Texas 78759

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.

VELOPAY SYSTEMS, INC.

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