PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 787 Seventh Avenue, 38th Floor New York, New York 10019
July 22, 2025
MEMORANDUM
From: Megan Chu, Lead Associate, Mergers & Acquisitions, Calderwood & Harkness LLP
To: Priya Deshmukh, Managing Partner, Fund IV, Harrowgate Capital Management IV LLC Thomas Eriksen, Partner, Head of Financial Technology, Harrowgate Capital Management IV LLC
CC: Sandra Tung, Responsible Partner, Calderwood & Harkness LLP Oliver Mackenzie, Billing Partner, Calderwood & Harkness LLP Derek Okonkwo, Working Associate, Calderwood & Harkness LLP Leonard Cross, Specialist Partner, Tax, Calderwood & Harkness LLP
Re: Post-Closing Integration — Legal Workstreams and Administration Calendar; Acquisition of VeloPay Systems, Inc. by Harrowgate Private Equity Fund IV LP
Matter Number: 1003-00003
CONFIDENTIALITY NOTICE: This memorandum is a privileged and confidential attorney-client communication and attorney work product of Calderwood & Harkness LLP. It is intended solely for the use of the addressees and persons copied herein. This memorandum contains confidential information relating to the legal strategy and post-closing obligations of Harrowgate Capital Management IV LLC and its affiliates. This memorandum is not to be distributed, forwarded, or disclosed to any person or entity outside Harrowgate Capital Management IV LLC without the prior written consent of Calderwood & Harkness LLP.
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I. Executive Summary
We are pleased to confirm that the merger of Harrowgate Velocity Merger Sub Inc. ("Merger Sub") with and into VeloPay Systems, Inc. ("VeloPay" or the "Company") was consummated today, July 22, 2025, pursuant to the Agreement and Plan of Merger, dated as of March 18, 2025 (the "Merger Agreement"), by and among Harrowgate Private Equity Fund IV LP ("HPE Fund IV"), Merger Sub, and VeloPay (the "Merger"). The Certificate of Merger was filed with the Delaware Secretary of State at approximately 9:17 a.m. Eastern Time today, and the Merger became effective at the effective time set forth therein. For reference, VeloPay's Delaware file number is 5748392, and Merger Sub's Delaware file number was 7291034. Pursuant to the reverse triangular merger structure, VeloPay survives the Merger as the surviving corporation (the "Surviving Corporation") and is now a wholly-owned subsidiary of HPE Fund IV.
The aggregate merger consideration of $1,900,000,000 (representing $20.00 per fully diluted share of VeloPay common stock) has been funded and disbursed through Keystone Pacific Transfer Services Inc. (the "Paying Agent") and Garrison Trust Company (the "Escrow Agent"), the latter of which received a deposit of $133,000,000 (representing 7% of the aggregate merger consideration) into escrow at closing. The mechanics of the paying agent and escrow arrangements are discussed in further detail below.
In connection with the closing, VeloPay's existing indebtedness of approximately $113,230,000 (inclusive of accrued and unpaid interest through the closing date) was paid in full to Meridian Commercial Credit Corp. as the administrative agent under VeloPay's prior credit facility. Simultaneously, the following new credit facilities became effective:
• Senior Secured Term Loan: $500,000,000 term loan facility pursuant to the Senior Secured Credit Agreement (dated July 22, 2025) with Tralvendo National Bank, as Administrative Agent and Collateral Agent; and
• Senior Secured Revolving Credit Facility: $260,000,000 revolving credit facility pursuant to the Revolving Credit Agreement (dated July 22, 2025) with Prairie State Bank, N.A., as Administrative Agent, of which approximately $254,700,000 was drawn at closing to fund a portion of the merger consideration and pay transaction expenses.
These facilities, together with the equity contribution from HPE Fund IV (and the rollover contributions from certain members of management), provided the aggregate sources of funds necessary to consummate the Merger and the related transactions.
Purpose of This Memorandum. The purpose of this memorandum is to provide a comprehensive overview of the remaining post-closing legal workstreams that will require attention over the next approximately 18 months, extending through the expiration of the representations and warranties survival period on January 22, 2027 (and in certain cases, beyond that date). Specifically, this memorandum addresses the following principal categories of post-closing integration matters:
(a) Entity rationalization of VeloPay's subsidiary structure;
(b) Completion of outstanding change of control consents and notifications;
(c) Contract novation and assignment matters, including intercompany agreements and credit agreement compliance;
(d) intellectual property assignment confirmations, registration updates, and security interest perfection;
(e) Employment and benefits transition matters, including executive retention, equity compensation plan transition, workforce integration, and Section 280G parachute payment matters;
(f) Regulatory compliance continuity, including money transmitter license follow-up, Investment Canada Act compliance, HSR Act matters, and foreign regulatory considerations;
(g) Directors' and officers' insurance tail policy administration;
(h) Representations and warranties insurance policy administration;
(i) Indemnification and escrow administration, including the escrow release calendar and survival period tracking;
(j) Tax post-closing matters;
(k) Information statement and stockholder communication matters, including the Letter of Transmittal process; and
(l) An integrated responsibility matrix and key dates calendar.
Calderwood & Harkness Team. The following members of the Calderwood & Harkness team will continue to be responsible for post-closing workstreams, subject to the detailed responsibility matrix set forth in Section XIII below:
• Sandra Tung, Responsible Partner — Overall engagement supervision and oversight of escrow administration and R&W insurance matters;
• Megan Chu, Lead Associate — Day-to-day coordination of all post-closing integration legal workstreams;
• Oliver Mackenzie, Billing Partner — Billing and engagement administration;
• Derek Okonkwo, Working Associate — Change of control consent tracker, IP matters, D&O tail administration, stockholder Letter of Transmittal process, and supporting all other workstreams as assigned;
• Leonard Cross, Specialist Partner, Tax — All post-closing tax matters, including transfer pricing, Section 338(h)(10) election, and equity compensation tax issues.
Harrowgate and VeloPay Contacts. The primary day-to-day contacts for post-closing matters are Priya Deshmukh and Thomas Eriksen at Harrowgate Capital Management IV LLC, and the following members of VeloPay's senior management team:
• Nathan Aldridge, Chief Executive Officer of the Surviving Corporation and Stockholder Representative;
• Danielle Moreau, General Counsel of the Surviving Corporation;
• Marcus Langford, Chief Financial Officer of the Surviving Corporation.
We recommend scheduling a post-closing kickoff call during the week of July 28, 2025 to align on prioritization of the workstreams described herein. In the meantime, the sections that follow provide a detailed discussion of each workstream, the relevant parties responsible, and target timelines for completion.
II. Entity Rationalization
A. Current VeloPay Subsidiary Structure
As a result of the Merger, HPE Fund IV now indirectly owns 100% of the equity interests in VeloPay (the Surviving Corporation) and, through VeloPay, the following subsidiaries. Each of these entities survived the Merger and continues in its current form:
1. VeloPay Processing LLC
• Jurisdiction: Delaware limited liability company
• Function: Operates VeloPay's core payment processing infrastructure, including transaction routing, settlement, and merchant acquiring services
• Sole Member: VeloPay Systems, Inc. (the Surviving Corporation)
• Registered Agent: Capitol Registered Agents LLC, Wilmington, Delaware
2. VeloPay Canada Inc.
• Jurisdiction: Corporation incorporated under the laws of the Province of Ontario, Canada
• Function: Conducts VeloPay's Canadian operations, including payment processing services for Canadian merchants and the Company's Toronto office operations (approximately 180 employees)
• Sole Shareholder: VeloPay Systems, Inc. (the Surviving Corporation)
3. VeloPay Europe, Unipessoal Lda.
• Jurisdiction: Portuguese sociedade unipessoal por quotas de responsabilidade limitada (single-member limited liability company)
• Function: Operates VeloPay's Lisbon-based research and development center and conducts European operations, including payment processing services for European merchants (approximately 110 employees)
• Sole Quotaholder: VeloPay Systems, Inc. (the Surviving Corporation)
4. VeloPay Fraud intelligence Inc.
• Jurisdiction: Delaware corporation
• Function: Operates VeloPay's proprietary fraud detection and analytics SaaS platform, marketed as a standalone product to financial institutions and payment processors
• Sole Stockholder: VeloPay Systems, Inc. (the Surviving Corporation)
• Registered Agent: Capitol Registered Agents LLC, Wilmington, Delaware
5. PayStream Gateway LLC
• Jurisdiction: Delaware limited liability company
• Function: Operates payment gateway technology that enables merchants to accept and process electronic payments; originally a standalone company acquired by VeloPay in 2021 for approximately $45,000,000
• Sole Member: VeloPay Systems, Inc. (the Surviving Corporation)
• Registered Agent: Capitol Registered Agents LLC, Wilmington, Delaware
With respect to Merger Sub (Harrowgate Velocity Merger Sub Inc.), we confirm that this entity ceased to exist upon the effective time of the Merger by operation of law, as the non-surviving constituent corporation in the reverse triangular merger. No further filings or administrative actions are required with respect to Merger Sub.
B. Recommended Entity Rationalization Steps
Calderwood & Harkness recommends undertaking a comprehensive entity rationalization analysis over the next 90 days, with the goal of simplifying VeloPay's subsidiary structure to the extent practicable while maintaining operational, regulatory, and tax efficiencies. Our preliminary recommendations are as follows:
1. Consolidation of Domestic Payment Processing Entities. We recommend evaluating the merger of PayStream Gateway LLC into VeloPay Processing LLC. Both entities operate within VeloPay's payment processing and gateway infrastructure, and consolidating them into a single entity would simplify the corporate structure, reduce administrative burden (including separate state filings, bank accounts, and regulatory registrations), and facilitate a unified contractual framework for payment processing services. Alternatively, both entities could be merged into the Surviving Corporation itself, though this would eliminate the liability separation currently afforded by the subsidiary structure. The preferred approach will depend on the input of the Harrowgate integration team regarding the long-term operational architecture.
2. Consolidation of VeloPay Fraud intelligence Inc. If the Harrowgate integration team intends to fully integrate VeloPay Fraud intelligence Inc.'s SaaS platform into VeloPay's core product offering (rather than maintaining it as a standalone product), we recommend evaluating the merger of VeloPay Fraud intelligence Inc. into VeloPay Processing LLC or the Surviving Corporation. However, if the Fraud intelligence platform will continue to be marketed and sold as a distinct product to third-party financial institutions, there may be commercial and branding reasons to maintain it as a separate entity. We will defer to Harrowgate's strategic direction on this point.
3. Foreign Subsidiaries. We recommend that VeloPay Canada Inc. and VeloPay Europe, Unipessoal Lda. be maintained as separate legal entities for the foreseeable future. There are compelling regulatory, tax, and operational reasons for this recommendation:
• Regulatory considerations: Both the Canadian and Portuguese operations are subject to local regulatory requirements (including payment services regulations in each jurisdiction) that are most efficiently managed through locally incorporated entities.
• Tax considerations: The use of separate foreign subsidiaries facilitates compliance with international transfer pricing rules and avoids potential adverse tax consequences that could arise from consolidating foreign operations into a U.S. parent entity. Leonard Cross will review the existing transfer pricing arrangements as discussed in Section XI below.
• Operational considerations: Local incorporation facilitates employment relationships with local employees, local banking arrangements, and local customer and vendor relationships in each jurisdiction.
No near-term consolidation of these foreign subsidiaries is recommended.
4. State Qualification Review. In connection with the entity rationalization analysis, Calderwood & Harkness will conduct a comprehensive review of foreign qualification filings for VeloPay and each of its domestic subsidiaries in all states in which they conduct business or are otherwise required to qualify. This review will also encompass an assessment of whether any qualification filings need to be updated to reflect changes in officers, directors, or registered agent information arising from the Merger. We note that Capitol Registered Agents LLC currently serves as the registered agent for all Delaware entities in the VeloPay group, and we will confirm that this arrangement remains in place or is updated as needed.
5. Organizational Documents Update. The Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws of the Surviving Corporation were adopted at the effective time of the Merger in accordance with the Merger Agreement. Calderwood & Harkness will review the organizational documents (operating agreements, certificates of formation, articles of incorporation, and bylaws, as applicable) of each subsidiary to determine whether conforming amendments are necessary to reflect the new ownership structure, updated governance provisions, or any changes arising from the entity rationalization process.
Timeline. We recommend the following timeline for entity rationalization:
• Entity rationalization analysis: To be completed within 90 days of closing (i.e., by October 20, 2025);
• Entity rationalization implementation: To be completed within the subsequent 90 days (i.e., by January 20, 2026), subject to any regulatory or third-party approvals that may be required for specific consolidation transactions.
C. Harrowgate Velocity Co-Invest LP
The co-investment vehicle for this transaction, Harrowgate Velocity Co-Invest LP, was formed on March 14, 2025 as a Delaware limited partnership (EIN: 93-2748163). The general partner of the co-invest vehicle is Harrowgate Capital Management IV LLC. Capitol Registered Agents LLC serves as the registered agent in Delaware.
The co-invest vehicle holds the following rollover equity contributions from members of VeloPay's senior management team:
• Nathan Aldridge (CEO): Rollover equity contribution of $14,200,000
• Sonia Reyes-Watkins (CTO): Rollover equity contribution of $9,700,000
• Total rollover equity: $23,900,000
These rollover contributions were made in connection with the closing of the Merger and are governed by the limited partnership agreement of Harrowgate Velocity Co-Invest LP. Calderwood & Harkness will confirm that the administration of the co-invest vehicle's limited partnership agreement has been transitioned to Harrowgate's fund administration team. Based on our review, there are no outstanding legal action items with respect to the co-invest vehicle at this time, other than the administrative transition noted above.
III. Change of Control Consent Completion
A. Status Summary
The Merger constituted a "change of control" (or similar triggering event, variously defined) under numerous VeloPay agreements, including the Company's prior credit facility with Meridian Commercial Credit Corp. (now paid off and terminated), certain material customer contracts, vendor agreements, technology licenses, and executive employment agreements. Pursuant to Section 6.04 of the Merger Agreement, VeloPay was required to use commercially reasonable efforts to obtain all change of control consents and to provide all required notifications prior to the closing date.
During the pre-closing period, VeloPay's legal team, under the direction of Danielle Moreau, identified 14 material customer contracts requiring either affirmative consent or formal notification in connection with the Merger. In addition, a number of vendor agreements and technology licenses were identified as containing change of control provisions, though these were generally assessed as presenting lower risk due to the availability of substitute vendors or the non-critical nature of the services provided.
As of the closing date, the status of consent and notification activities is as follows:
• Consents obtained: 11 of the 14 material customer contracts identified as requiring affirmative consent have been fully consented to by the applicable counterparties.
• Consents outstanding: 3 material customer contracts remain outstanding, as described in Section III.B below.
• Notifications sent: All contracts identified as requiring notification only (as opposed to affirmative consent) have been notified, with the exception of certain lower-priority vendor agreements discussed in Section III.C below.
B. Outstanding Consents — Immediate Priority
The following three material customer contracts remain outstanding with respect to required change of control consents. We have assessed each for risk and recommend the remediation steps described below:
1. Pinnacle National Bancshares, Inc. — Master Services Agreement
• Contract Date: September 12, 2022 (amended March 1, 2024)
• Annual Revenue Attributable: Approximately $18,700,000
• Change of Control Provision: Section 14.2 requires prior written consent of Pinnacle for any "Change of Control" (defined to include any transaction in which a person or group acquires more than 50% of the voting equity of VeloPay). Consent may not be unreasonably withheld.
• Consequence of Non-Consent: Pinnacle has the right to terminate the agreement on 90 days' notice if consent is not obtained within 60 days following the change of control event.
• Current Status: Consent request sent May 22, 2025. Pinnacle's deputy general counsel (Rebecca Thornton) has verbally indicated that consent is forthcoming but subject to internal approval by Pinnacle's technology committee. Follow-up meeting scheduled for August 5, 2025.
• Risk Assessment: Moderate. While Pinnacle has signaled willingness to consent, the 60-day termination trigger window commenced at closing. Failure to obtain consent by September 20, 2025 would enable Pinnacle to exercise its termination right.
• Recommended Remediation: Danielle Moreau to continue direct engagement with Rebecca Thornton at Pinnacle. Calderwood & Harkness (Derek Okonkwo) available to support negotiations if Pinnacle seeks any amendments or concessions as a condition of consent. Target resolution date: August 15, 2025.
2. Overland Mutual Insurance Group — Processing Services Agreement
• Contract Date: February 28, 2023
• Annual Revenue Attributable: Approximately $11,400,000
• Change of Control Provision: Section 9.3 requires that VeloPay provide written notice of any "Change in Control" at least 30 days prior to the effective date thereof and that the counterparty consent in writing, such consent not to be unreasonably withheld, conditioned, or delayed.
• Consequence of Non-Consent: Overland has the right to terminate the agreement on 60 days' written notice following the effective date of the change in control if consent is not obtained.
• Current Status: Notice provided on June 18, 2025 (34 days prior to closing). Consent request sent simultaneously. Overland's legal department (James Whitfield, Associate General Counsel) has requested additional information regarding HPE Fund IV's ownership structure and investment thesis, which was provided on July 10, 2025. Awaiting response.
• Risk Assessment: Moderate. The information request from Overland suggests a willingness to engage but may indicate a desire to renegotiate certain terms. The 60-day termination window commenced at closing.
• Recommended Remediation: Danielle Moreau to follow up with James Whitfield at Overland within one week. Calderwood & Harkness (Derek Okonkwo) to prepare summary of HPE Fund IV's investment track record and commitment to VeloPay's continued operations, to the extent such information can be shared. Target resolution date: August 31, 2025.
3. TransGlobal Payment Networks S.A. — Strategic Partnership Agreement
• Contract Date: July 1, 2021 (as amended November 15, 2023)
• Annual Revenue Attributable: Approximately $8,200,000 (plus revenue-sharing arrangements generating an additional $3,100,000 in estimated annual revenue)
• Change of Control Provision: Section 11.1 provides that in the event of a "Change of Control" of either party, the non-affected party has the right to terminate the agreement on 180 days' notice, exercisable within 120 days of the change of control event.
• Consequence of Non-Consent: This provision is technically a termination right rather than a consent requirement; however, we have included it in this section because the practical effect is similar. TransGlobal can terminate the agreement at any time within the 120-day period following closing (i.e., by November 19, 2025), with termination effective 180 days after notice.
• Current Status: VeloPay notified TransGlobal of the pending Merger on June 2, 2025. TransGlobal's CEO (Michel Delacroix) acknowledged receipt and indicated that TransGlobal would evaluate its options. No formal communication has been received since. The relationship has been productive and there is no current indication that TransGlobal intends to exercise its termination right.
• Risk Assessment: Low to moderate. While the aggregate revenue at stake (approximately $11,300,000 annually) is significant, the relationship appears healthy and there is no commercial motivation for TransGlobal to terminate. However, the 120-day exercise window should be monitored closely.
• Recommended Remediation: Nathan Aldridge and Danielle Moreau to schedule a call or meeting with Michel Delacroix to reaffirm the commitment to the partnership and address any concerns. Calderwood & Harkness available to review any proposed amendments. Target: Confirm TransGlobal's intent not to exercise termination right by September 30, 2025.
For each of the above outstanding consents, Calderwood & Harkness has assigned responsibility as follows: Danielle Moreau and the VeloPay legal team will take the lead on counterparty engagement, with Derek Okonkwo providing legal support, drafting assistance, and negotiation strategy as needed. Megan Chu will supervise and escalate to Sandra Tung or Priya Deshmukh as warranted.
We note that the Merger Agreement required commercially reasonable efforts to obtain these consents prior to closing; now that the Merger has been consummated, the obligation to pursue these consents has effectively shifted to VeloPay as a portfolio company of HPE Fund IV. None of the outstanding consents was a condition to closing, and the failure to obtain any individual consent does not, in our assessment, present a material risk to VeloPay's business continuity or overall revenue, provided that remediation efforts are pursued diligently.
C. Notification-Only Provisions
A number of VeloPay's commercial agreements contain provisions requiring notification of a change of control event, without requiring the counterparty's affirmative consent. For these contracts, VeloPay prepared template notification letters in consultation with Calderwood & Harkness, and distributed them to the identified counterparties during the pre-closing period.
We have confirmed that all material notification-only provisions identified in the pre-closing change of control analysis have been satisfied. However, we recommend that Danielle Moreau's team conduct a final review of VeloPay's contract database to confirm that no additional contracts requiring notification were inadvertently omitted during the pre-closing process. Any remaining notifications should be sent within 10 business days.
D. Ongoing Monitoring
Derek Okonkwo will continue to maintain the Change of Control Consent Tracker (maintained in Excel format and shared via the Calderwood & Harkness secure document portal) through the completion of the consent process for all 14 material customer contracts and any additional contracts identified post-closing. The tracker includes, for each contract, the counterparty name, contract date, nature of the change of control provision, status of consent or notification, date of last communication, responsible party, and target resolution date. We will provide updated versions of the tracker to the Harrowgate team on a bi-weekly basis, or more frequently as developments warrant, until all outstanding consents have been resolved.
IV. Contract Novation and Assignment
A. Contracts Requiring Formal Novation or Assignment
As discussed in the Executive Summary above, the Merger was structured as a reverse triangular merger in which VeloPay survives as the contracting party. One of the principal benefits of this structure is that VeloPay, as the surviving corporation, remains the same legal entity that is a party to all of its existing contracts. As a matter of Delaware corporate law, the Merger effects a change of ownership of VeloPay's equity (from VeloPay's former stockholders to HPE Fund IV), but VeloPay itself — as a corporate entity — continues in existence without interruption.
As a result, the vast majority of VeloPay's contracts do not technically require assignment, novation, or any other formal documentation to remain in effect following the Merger. VeloPay continues to be the named party to each contract, and no assignment by operation of law has occurred.
Notwithstanding the foregoing, certain counterparties may request or require formal documentation reflecting VeloPay's new ownership structure, particularly in the context of:
• Government contracts or contracts with public-sector entities that require disclosure of ultimate beneficial ownership;
• Contracts with sophisticated financial institution counterparties that maintain internal records of counterparty ownership structures;
• Contracts that include broad anti-assignment provisions that may be interpreted to encompass indirect changes of control (though, as noted, the reverse triangular merger structure was selected in part to mitigate this risk).
Calderwood & Harkness will prepare template novation and acknowledgment letters that can be used by VeloPay's legal team to respond to counterparty requests on an as-needed basis. We recommend that Danielle Moreau proactively identify any contracts for which such documentation may be necessary or advisable and coordinate with Derek Okonkwo on preparation and distribution.
B. Intercompany Agreements
Calderwood & Harkness will conduct a comprehensive review and update of the intercompany agreements among VeloPay and its subsidiaries. The following categories of intercompany agreements are anticipated to require review:
• Intercompany services agreements: Agreements pursuant to which VeloPay provides management, administrative, technology, and other shared services to VeloPay Processing LLC, VeloPay Canada Inc., VeloPay Europe Unipessoal Lda., VeloPay Fraud intelligence Inc., and PayStream Gateway LLC.
• Intercompany licensing agreements: Agreements pursuant to which intellectual property owned by one entity is licensed to another entity within the VeloPay group for use in its operations.
• Intercompany loan agreements: Any outstanding intercompany indebtedness, including any notes or advances between VeloPay and its subsidiaries.
• Transfer pricing agreements: Agreements governing the pricing of intercompany transactions between VeloPay and its foreign subsidiaries, including VeloPay Canada Inc. (Ontario) and VeloPay Europe, Unipessoal Lda. (Portugal).
Each of these agreements will need to be reviewed to confirm that they remain appropriate and legally effective in the post-acquisition structure, and to identify any amendments that may be needed in connection with the entity rationalization process described in Section II.B above.
In particular, Leonard Cross will review the existing transfer pricing agreements between VeloPay and VeloPay Canada Inc. and between VeloPay and VeloPay Europe, Unipessoal Lda. to confirm that the intercompany pricing methodologies comply with applicable transfer pricing rules (including the arm's-length standard under Section 482 of the Internal Revenue Code and the OECD Transfer Pricing Guidelines) in light of the post-acquisition corporate structure. Any adjustments to transfer pricing arrangements will be coordinated with the tax workstream discussed in Section XI.
C. Credit Agreement Compliance
The new credit facilities are now in effect, and VeloPay (as Borrower) and HPE Fund IV (as Holdings) are subject to the terms and conditions of the following agreements:
• Senior Secured Credit Agreement (dated July 22, 2025) among VeloPay Systems, Inc. (as Borrower), Harrowgate Private Equity Fund IV LP (as Holdings), the lenders party thereto, and Tralvendo National Bank (as Administrative Agent and Collateral Agent) — providing for a $500,000,000 term loan facility; and
• Revolving Credit Agreement (dated July 22, 2025) among VeloPay Systems, Inc. (as Borrower), Harrowgate Private Equity Fund IV LP (as Holdings), the lenders party thereto, and Prairie State Bank, N.A. (as Administrative Agent) — providing for a $260,000,000 revolving credit facility.
Guarantee and Collateral Agreement. In connection with the credit facilities, VeloPay's domestic subsidiaries — VeloPay Processing LLC, VeloPay Fraud intelligence Inc., and PayStream Gateway LLC — have each executed the Guarantee and Collateral Agreement dated July 22, 2025, pursuant to which they have (a) guaranteed all obligations under both credit facilities and (b) pledged substantially all of their assets as collateral to secure such obligations.
Calderwood & Harkness will take the following immediate post-closing actions with respect to the credit facilities:
1. Perfection of Security Interests. We will confirm that all UCC-1 financing statements have been filed in the appropriate jurisdictions to perfect the lenders' security interests in the collateral pledged by VeloPay and its domestic subsidiaries. To the extent that VeloPay or its subsidiaries own registered intellectual property (patents, trademarks, or copyrights), we will also confirm that IP security interest filings have been made with the United States Patent and Trademark Office ("USPTO") and/or the United States Copyright Office, as applicable and as required by the Guarantee and Collateral Agreement. Coordination with lender counsel (Maplewood & Strauss LLP, Gordon Strauss) will be required for this workstream, as discussed further in Section V.C.
2. Lien Releases from Prior Lender. We will confirm receipt of UCC-3 termination statements and lien release documentation from Meridian Commercial Credit Corp. (contact: Brian Castellano) reflecting the termination of all security interests held by Meridian in connection with the prior credit facility, which was paid off in full at closing. The payoff amount of approximately $113,230,000 (inclusive of accrued interest through the closing date) was wired to Meridian's account at closing. Until we have confirmed receipt of all termination statements and lien releases, we will flag this as an open item.
3. Credit Agreement Post-Closing Deliverables. The credit agreements may contain post-closing deliverable requirements (e.g., delivery of financial statements, officer's certificates, insurance certificates, opinions of counsel, or additional security interest filings) that must be satisfied within specified periods following the closing date. Calderwood & Harkness will review the credit agreements and identify all post-closing deliverables, prepare a compliance checklist, and coordinate with Marcus Langford to ensure timely delivery.
4. Ongoing Covenant Compliance. On an ongoing basis, VeloPay will be subject to affirmative and negative covenants under the credit agreements, including financial reporting covenants, restrictions on subsidiary formation and disposition, limitations on indebtedness and liens, and restrictions on fundamental changes and asset sales. Calderwood & Harkness will be available to advise on covenant compliance as questions arise, particularly in connection with the entity rationalization process (which may involve mergers or dissolutions of subsidiaries that could implicate negative covenants).
V. Intellectual Property Matters
A. IP Assignment Confirmations
Because the Merger was structured as a reverse triangular merger in which VeloPay survives, no transfer of intellectual property occurred by operation of the merger itself. All intellectual property assets of VeloPay and its subsidiaries remain with their respective owning entities. This is an important advantage of the reverse triangular merger structure and was among the considerations in selecting this transaction form.
Notwithstanding the foregoing, Calderwood & Harkness recommends the following post-closing IP confirmation steps:
1. PayStream Gateway LLC IP Chain of Title. PayStream Gateway LLC was acquired by VeloPay in 2021 for approximately $45,000,000. As part of that acquisition, the intellectual property assets of the acquired business (including payment gateway software, trade secrets, and related technology) were assigned to PayStream Gateway LLC. Calderwood & Harkness will review the IP assignment agreements executed in connection with the 2021 acquisition to confirm that (a) all intellectual property was properly assigned to PayStream Gateway LLC (or VeloPay, as applicable), (b) all assignments were properly recorded with the USPTO and/or Copyright Office where required, and (c) there are no gaps or deficiencies in the chain of title that could present issues for the new lenders or for any future disposition of these assets.
2. Employee and Contractor IP Assignment Agreements. VeloPay employs approximately 1,340 individuals across its Austin, Texas headquarters, Denver, Colorado office, Toronto, Ontario office, and Lisbon, Portugal office. In addition, VeloPay engages a number of independent contractors who contribute to the development of VeloPay's technology platform. Calderwood & Harkness recommends that VeloPay's legal team confirm that all employees and contractors have executed IP assignment agreements (or, in the case of employees, that such provisions are included in their employment agreements) that assign to VeloPay or the applicable subsidiary all intellectual property rights in work product created in the course of their employment or engagement. This is particularly important for the engineering teams in Toronto and Lisbon, where local law may impose different requirements regarding IP assignment.
Any gaps identified in the IP assignment framework should be remediated promptly, both to satisfy the representations made in the Merger Agreement regarding IP ownership and to ensure compliance with the Guarantee and Collateral Agreement, under which IP assets have been pledged as collateral.
B. Patent, Trademark, and Domain Name Administration
1. USPTO Ownership Records. While the Merger did not technically transfer ownership of any registered patents or trademarks (because VeloPay continues as the surviving entity), Calderwood & Harkness will review the records at the USPTO to determine whether any updates are advisable to reflect HPE Fund IV's indirect beneficial ownership of VeloPay. In our experience, it is generally not necessary to file new ownership documentation with the USPTO in connection with an indirect change of control, but we will confirm this on a case-by-case basis for each registered patent and trademark in the VeloPay portfolio.
2. Domain Name Registrations. Calderwood & Harkness recommends that Danielle Moreau's team review all domain name registrations held by VeloPay and its subsidiaries to ensure that (a) administrative and technical contact information is current, (b) registrations are set to auto-renew, and (c) domain name ownership records are consistent with the applicable legal entity. Any domain names registered in the names of individual employees (rather than in the name of VeloPay or a subsidiary) should be transferred to the appropriate corporate entity.
3. Open-Source Software Compliance. No new action is required at closing with respect to VeloPay's use of open-source software within its cloud-native payment processing platform. However, we note that ongoing monitoring of open-source usage is essential to mitigate the risk of license compliance issues (including copyleft obligations that could require disclosure of proprietary source code). VeloPay's engineering and legal teams should continue to maintain their open-source compliance program, including regular audits of open-source components incorporated into VeloPay's products, consistent with the practices represented during due diligence.
C. IP Security Interests
As described in Section IV.C above, the Guarantee and Collateral Agreement requires that VeloPay and its domestic subsidiaries pledge their intellectual property assets as collateral to secure the obligations under the new credit facilities. Calderwood & Harkness will coordinate with lender counsel (Maplewood & Strauss LLP; lead contact: Gordon Strauss) to confirm the filing of intellectual property security interests with the following offices:
• USPTO: Security interest filings covering registered patents and trademarks owned by VeloPay and its domestic subsidiaries;
• United States Copyright Office: Security interest filings covering registered copyrights owned by VeloPay and its domestic subsidiaries.
These filings are necessary to perfect the lenders' security interests in registered IP assets and are typically required to be completed within a specified period following closing (often 30, 60, or 90 days). We will review the Guarantee and Collateral Agreement to confirm the applicable deadline and ensure timely completion of all required filings.
VI. Employment and Benefits Transition
A. Executive Retention and Restrictive Covenants
The following members of VeloPay's senior executive team are continuing in their roles with the Surviving Corporation following the closing of the Merger:
1. Nathan Aldridge, Chief Executive Officer
Mr. Aldridge will continue to serve as CEO of the Surviving Corporation. In connection with the Merger, Mr. Aldridge entered into a new employment agreement and a separate non-competition and non-solicitation agreement, each effective as of the closing date. The non-competition and non-solicitation agreement has a term of three (3) years from the closing date (i.e., through July 22, 2028) and restricts Mr. Aldridge from (a) competing with VeloPay's business, (b) soliciting VeloPay's customers, and (c) soliciting or hiring VeloPay's employees, in each case within the geographic markets in which VeloPay operates. Mr. Aldridge has rolled over $14,200,000 of his merger consideration into Harrowgate Velocity Co-Invest LP, aligning his economic interests with those of HPE Fund IV.
2. Sonia Reyes-Watkins, Chief Technology Officer
Ms. Reyes-Watkins will continue to serve as CTO of the Surviving Corporation. She has entered into a new employment agreement and a separate non-competition and non-solicitation agreement on terms substantially similar to those of Mr. Aldridge, with a term of three (3) years from the closing date (through July 22, 2028). Ms. Reyes-Watkins has rolled over $9,700,000 of her merger consideration into Harrowgate Velocity Co-Invest LP.
3. Marcus Langford, Chief Financial Officer
Mr. Langford will continue to serve as CFO of the Surviving Corporation. He delivered the solvency certificate required under the Merger Agreement in connection with the closing. Mr. Langford held approximately 1.3% of the outstanding VeloPay common stock prior to the Merger and received approximately $24,700,000 in merger consideration (subject to applicable taxes and withholding). His employment agreement has been confirmed to be consistent with the post-closing structure.
4. Danielle Moreau, General Counsel
Ms. Moreau will continue to serve as General Counsel of the Surviving Corporation. She held approximately 0.6% of the outstanding VeloPay common stock prior to the Merger and received approximately $11,400,000 in merger consideration (subject to applicable taxes and withholding). Her employment agreement has been confirmed to be consistent with the post-closing structure.
Calderwood & Harkness has reviewed the executed employment agreements and restrictive covenant agreements for each of the four executives and confirms that they are in effect and consistent with the terms negotiated in connection with the Merger Agreement. Copies of all executed agreements are maintained in the closing file.
B. Equity Compensation Plan Transition
At the effective time of the Merger, the treatment of VeloPay's outstanding equity awards was consummated in accordance with Article III of the Merger Agreement, as follows:
1. Vested Stock Options. All vested and outstanding stock options to acquire shares of VeloPay common stock were cancelled and converted into the right to receive a cash payment equal to the product of (x) the total number of shares subject to such vested option and (y) the excess, if any, of $20.00 (the per share merger consideration) over the exercise price of such option, without interest and subject to applicable tax withholding. Options with an exercise price equal to or greater than $20.00 were cancelled for no consideration.
2. Unvested Stock Options. All unvested and outstanding stock options were cancelled. Fifty percent (50%) of the shares subject to each unvested option were accelerated and treated as vested options (and cashed out at closing on the same basis described above). The remaining fifty percent (50%) of the shares subject to each unvested option were converted into HPE Fund IV replacement awards, which will vest ratably over a 24-month period from the closing date, subject to the holder's continued employment with VeloPay or a subsidiary. Calderwood & Harkness will prepare the replacement award agreements and vesting schedules for these awards and coordinate with Marcus Langford on distribution to affected employees.
3. Restricted Stock Units (RSUs). All outstanding unvested RSUs covering an aggregate of 3,200,000 shares of VeloPay common stock were accelerated in full at the effective time and converted into the right to receive a cash payment equal to $20.00 per share, without interest and subject to applicable tax withholding, representing aggregate consideration of $64,000,000.
4. Warrants. All outstanding warrants to purchase shares of VeloPay common stock covering an aggregate of 1,800,000 shares were cancelled and converted into the right to receive a cash payment equal to $11.50 per warrant (representing the excess of the $20.00 per share merger consideration over the $8.50 per share exercise price), without interest and subject to applicable tax withholding, representing aggregate consideration of $20,700,000.
Post-Closing Action Items:
(a) Replacement Option Award Administration: Calderwood & Harkness will prepare the individual award agreements and vesting schedules for the HPE Fund IV replacement awards issued to holders of the 50% of unvested options that were not accelerated at closing. These replacement awards will be subject to time-based vesting over a 24-month period (with 50% vesting on the first anniversary of closing and 50% vesting on the second anniversary of closing, or such other vesting schedule as specified in the award agreements). We will coordinate with Leonard Cross on the tax treatment of these awards, including Section 409A compliance considerations.
(b) Termination of VeloPay Equity Compensation Plans: The VeloPay 2018 Equity Incentive Plan and any predecessor equity compensation plans should be formally terminated with respect to future grants, to the extent not already terminated by operation of the Merger Agreement. Calderwood & Harkness will prepare any necessary board or stockholder resolutions to effect this termination.
(c) Final Disbursement Coordination: Calderwood & Harkness will coordinate with Keystone Pacific Transfer Services Inc. (contact: Linda Matsumoto, Vice President, Corporate Actions) on the final disbursement of merger consideration to holders of stock options, RSUs, and warrants. Any amounts subject to tax withholding will be deducted prior to disbursement. We will also coordinate with VeloPay's payroll department to ensure proper W-2 and 1099 reporting for all equity compensation payments.
C. Workforce Integration
VeloPay employs approximately 1,340 individuals across the following four locations:
Based on discussions with the Harrowgate integration team during the pre-closing period, no workforce reduction is currently planned in connection with the Merger. We recommend that Thomas Eriksen confirm this with the Harrowgate integration team and communicate any changes in plans promptly, as workforce reductions could trigger additional legal requirements (including WARN Act obligations in the United States, Ontario Employment Standards Act notice requirements in Canada, and Portuguese labor law protections in Portugal).
Canadian Employees. Calderwood & Harkness will review the employment contracts of VeloPay Canada Inc. employees to confirm compliance with the Ontario Employment Standards Act, 2000 and any other applicable Canadian employment legislation. In particular, we will assess whether any employment contracts contain change of control provisions that may entitle employees to enhanced severance, constructive dismissal claims, or other benefits as a result of the Merger. While the Merger constitutes an indirect change of control of VeloPay Canada Inc. (through the change of ownership of its parent, VeloPay), the analysis will depend on the specific terms of each employment contract and applicable Canadian law.