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

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CONFIDENTIAL

CALDERWOOD & HARKNESS LLP Counselors at Law

787 Seventh Avenue, 38th Floor New York, New York 10019

Telephone: (212) 554-7000 Facsimile: (212) 554-7001 www.calderwoodharkness.com

March 17, 2025

Matter No. 1003-00003

VIA EMAIL AND OVERNIGHT COURIER

VeloPay Systems, Inc. 1455 Innovation Parkway, Suite 800 Austin, Texas 78759

Attention: Nathan Aldridge, Chief Executive Officer

Danielle Moreau, General Counsel

With a copy to:

Whitford Jessup & Crane LLP 600 Congress Avenue, Suite 2400 Austin, Texas 78701

Attention: Rebecca Thornton-Hayes, Partner

James Okoro, Associate

Re: Notice of Satisfaction of Conditions to Execution of Agreement and Plan of Merger among Harrowgate Private Equity Fund IV LP, Harrowgate Velocity Merger Sub Inc., and VeloPay Systems, Inc.

Dear Mr. Aldridge and Ms. Moreau:

We write on behalf of our client, Harrowgate Private Equity Fund IV LP, a Delaware limited partnership ("HPE Fund IV"), in connection with the proposed acquisition of VeloPay Systems, Inc., a Delaware corporation ("VeloPay" or the "Company"), by HPE Fund IV. As you know, Calderwood & Harkness LLP serves as legal counsel to HPE Fund IV in this transaction.

This letter relates to the Agreement and Plan of Merger (the "Merger Agreement") to be entered into among HPE Fund IV, Harrowgate Velocity Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of HPE Fund IV ("Merger Sub"), and VeloPay. As set forth in the Merger Agreement and as discussed at length among the parties and their respective counsel during the course of negotiations, the transaction is structured as a reverse triangular merger under Section 251 of the Delaware General Corporation Law (the "DGCL"), pursuant to which Merger Sub will merge with and into VeloPay, with VeloPay surviving as a wholly-owned subsidiary of HPE Fund IV (the "Merger"). The aggregate merger consideration payable to the stockholders of VeloPay in the Merger is One Billion Nine Hundred Million Dollars ($1,900,000,000), representing Twenty Dollars ($20.00) per share of VeloPay common stock on a fully diluted, as-converted basis, based on Ninety-Five Million (95,000,000) fully diluted shares outstanding.

The purpose of this letter is to confirm the satisfaction of all conditions precedent to the execution and delivery of the Merger Agreement by HPE Fund IV and Merger Sub, and to confirm HPE Fund IV's readiness to proceed with signing the Merger Agreement and all ancillary transaction documents on March 18, 2025. We address each category of conditions and confirmations in turn below.

1. Confirmation of HPE Fund IV Internal Approvals

We are pleased to confirm that all requisite internal approvals on the part of HPE Fund IV and Merger Sub have been obtained, as follows:

Harrowgate Capital Management IV LLC, a Delaware limited liability company and the sole general partner of HPE Fund IV, has approved the Merger Agreement and all of the transactions contemplated thereby, including the Merger and the payment of the aggregate merger consideration, by written consent dated March 17, 2025 (the "GP Consent"). The GP Consent was executed in accordance with the terms of the Amended and Restated Agreement of Limited Partnership of HPE Fund IV, dated as of September 15, 2021, and is effective immediately. In connection with the GP Consent, Priya Deshmukh, Managing Partner of Fund IV and an authorized signatory of Harrowgate Capital Management IV LLC, has confirmed the authorization of the equity commitment of One Billion One Hundred Forty Million Dollars ($1,140,000,000) to be contributed by HPE Fund IV to fund a portion of the aggregate merger consideration, and has further confirmed her authorization to execute and deliver, on behalf of HPE Fund IV (acting through its general partner), all transaction documents required in connection with the Merger.

In addition, the board of directors (sole director) of Harrowgate Velocity Merger Sub Inc. has adopted resolutions approving the execution and delivery of the Merger Agreement and the consummation of the reverse triangular merger, including the filing of the certificate of merger with the Secretary of State of the State of Delaware, also by written consent dated March 17, 2025. Merger Sub was incorporated in the State of Delaware on February 24, 2025 (Delaware File Number 7291034) with its registered agent designated as Capitol Registered Agents LLC, located at 1209 Orange Street, Wilmington, Delaware 19801. We have confirmed that Merger Sub is currently in good standing under the laws of the State of Delaware, and we will deliver a certificate of good standing from the Delaware Secretary of State dated no earlier than March 17, 2025, as part of the closing deliverables.

Accordingly, all internal approvals required on the part of HPE Fund IV and Merger Sub to authorize the execution and delivery of the Merger Agreement and the consummation of the transactions contemplated thereby have been duly obtained, and no further corporate or partnership action is required.

2. Confirmation of Financing Commitments

HPE Fund IV has secured committed financing that is sufficient, in the aggregate, to fund the full merger consideration, all related transaction costs, and post-closing working capital requirements. The components of the committed financing are as follows:

Debt Financing. On February 14, 2025, HPE Fund IV received an executed commitment letter (Reference: CRE-2025-SPF-0441) (the "Debt Commitment Letter") from Tralvendo National Bank, in its capacity as lead arranger and administrative agent, and Prairie State Bank, N.A., in its capacity as co-arranger (collectively, the "Commitment Parties"), pursuant to which the Commitment Parties have committed to provide the following debt financing facilities in connection with the Merger:

(a) a Five Hundred Million Dollar ($500,000,000) senior secured term loan facility with a seven-year maturity and bearing interest at SOFR plus 375 basis points (the "Term Loan Facility"); and

(b) a Two Hundred Sixty Million Dollar ($260,000,000) senior secured revolving credit facility with a five-year maturity and bearing interest at SOFR plus 325 basis points (the "Revolving Facility" and, together with the Term Loan Facility, the "Debt Facilities").

The total committed debt financing under the Debt Commitment Letter is Seven Hundred Sixty Million Dollars ($760,000,000). The Debt Commitment Letter remains in full force and effect as of the date hereof. No condition to funding set forth in the Debt Commitment Letter has failed to be satisfied or been waived, no default or event of default has occurred thereunder, and no event has occurred that would give rise to a right of termination on the part of either Commitment Party. Neither HPE Fund IV nor any of its affiliates has received any indication from either Commitment Party that it intends to not perform its obligations under the Debt Commitment Letter.

Equity Financing. On February 14, 2025, Harrowgate Capital Management IV LLC, acting on behalf of HPE Fund IV, executed an equity commitment letter (the "Equity Commitment Letter") committing One Billion One Hundred Forty Million Dollars ($1,140,000,000) in equity capital to fund a portion of the aggregate merger consideration. The equity commitment represents approximately sixty percent (60%) of the aggregate deal value and will be funded from available capital commitments of the limited partners of HPE Fund IV. The Equity Commitment Letter remains in full force and effect as of the date hereof, and no event has occurred that would excuse HPE Fund IV from its funding obligations thereunder.

HPE Fund IV hereby confirms that, taken together, the committed debt financing under the Debt Commitment Letter and the committed equity financing under the Equity Commitment Letter are sufficient to fund the full aggregate merger consideration of $1,900,000,000, as well as all fees, expenses, and other transaction costs anticipated to be incurred in connection with the Merger and the closing thereof.

3. Confirmation of Representations and Warranties Insurance

In connection with the Merger, HPE Fund IV has obtained a buyer-side representations and warranties insurance policy (the "R&W Policy") to provide coverage for losses arising out of breaches of the representations and warranties of VeloPay set forth in the Merger Agreement. The material terms of the R&W Policy are as follows:

Underwriter: Oakbridge Omnivrel Insurance Group (underwriter contact: Neil Carmichael, Senior Vice President)

Policy Number: OFI-RW-2025-03187

Application Date: February 21, 2025

Bind Date: March 10, 2025

Policy Limit: One Hundred Ninety Million Dollars ($190,000,000), representing ten percent (10%) of the aggregate deal value

Retention (Self-Insured Amount): Nineteen Million Dollars ($19,000,000), representing one percent (1%) of the aggregate deal value. Pursuant to the terms of the Merger Agreement, the first Nine Million Five Hundred Thousand Dollars ($9,500,000) of the retention will be borne by the Seller (through indemnification obligations), with the balance of Nine Million Five Hundred Thousand Dollars ($9,500,000) to be borne by the Buyer.

Premium: Five Million Three Hundred Twenty Thousand Dollars ($5,320,000), representing two and eight-tenths percent (2.8%) of the policy limit

Policy Inception: The R&W Policy will incept upon the closing of the Merger.

The R&W insurance placement is complete. All underwriting diligence has been concluded, and no further conditions must be satisfied for the R&W Policy to become effective upon closing. The placement and status of the R&W Policy will not impede the execution of the Merger Agreement or the consummation of the transactions contemplated thereby.

4. Confirmation of VeloPay Board Approval

Calderwood & Harkness LLP has been informed by Whitford Jessup & Crane LLP, counsel to VeloPay, that the Board of Directors of VeloPay Systems, Inc. (the "VeloPay Board") approved the Merger Agreement and the transactions contemplated thereby, including the Merger, and resolved to recommend that the stockholders of VeloPay approve the Merger, at a meeting of the VeloPay Board duly called and held on March 17, 2025.

We understand that the VeloPay Board is comprised of the following six (6) directors, each of whom participated in the meeting at which the foregoing approvals were granted:

(i) Nathan Aldridge, Chairman of the Board and Chief Executive Officer;

(ii) Sonia Reyes-Watkins, Co-Founder and Chief Technology Officer;

(iii) Janet Gould, independent director;

(iv) Kwame Asante, director and representative of Ridgeline Ventures Fund III LP;

(v) Catherine Lindström, director and representative of Apex Growth Partners II LP; and

(vi) Philip Rosenthal, independent director.

In addition, we have been informed that Velthryn Greer & Associates, the financial advisor to VeloPay in connection with the Merger (lead managing director: Patricia Navarro), has delivered to the VeloPay Board its written opinion, dated March 17, 2025, to the effect that, as of such date and based upon and subject to the assumptions, qualifications, and limitations set forth therein, the per-share merger consideration of $20.00 to be received by the holders of VeloPay common stock in the Merger is fair, from a financial point of view, to such holders. We understand that a copy of the fairness opinion will be attached to the disclosure schedules delivered in connection with the Merger Agreement.

5. Stockholder Support Agreement and Written Consent

We confirm that a Stockholder Support Agreement (the "Support Agreement") has been negotiated and is in agreed final form, and will be executed concurrently with the Merger Agreement on March 18, 2025. The parties to the Support Agreement are as follows:

(a) HPE Fund IV (as the acquirer);

(b) Ridgeline Ventures Fund III LP, holder of approximately twenty-two and four-tenths percent (22.4%) of the outstanding common stock of VeloPay;

(c) Apex Growth Partners II LP, holder of approximately sixteen and eight-tenths percent (16.8%) of the outstanding common stock of VeloPay;

(d) Broadleaf Capital Partners LP, holder of approximately six and one-tenth percent (6.1%) of the outstanding common stock of VeloPay;

(e) Nathan Aldridge, holder of approximately fourteen and two-tenths percent (14.2%) of the outstanding common stock of VeloPay; and

(f) Sonia Reyes-Watkins, holder of approximately nine and seven-tenths percent (9.7%) of the outstanding common stock of VeloPay.

Collectively, the stockholders party to the Support Agreement (the "Supporting Stockholders") hold approximately sixty-three and one-tenth percent (63.1%) of the outstanding shares of common stock of VeloPay. This percentage is in excess of the majority of the outstanding shares required to approve the Merger under Section 251(c) of the DGCL and VeloPay's certificate of incorporation, and is accordingly sufficient to approve the Merger by written consent in lieu of a meeting of stockholders pursuant to Section 228 of the DGCL.

The Supporting Stockholders have agreed to deliver, concurrently with the signing of the Merger Agreement and the Support Agreement on March 18, 2025, a written consent (the "Written Consent") approving and adopting the Merger Agreement and the Merger, thereby satisfying the stockholder approval condition set forth in the Merger Agreement. Following the delivery of the Written Consent, VeloPay will be obligated to prepare and mail an information statement to all stockholders of record who did not execute the Written Consent, in accordance with Section 228(e) of the DGCL and applicable rules and regulations promulgated by the U.S. Securities and Exchange Commission. Based on discussions with Whitford Jessup & Crane LLP, the anticipated mailing date of the information statement is April 14, 2025.

6. Readiness of Transaction Documents

We confirm that the following transaction documents are in agreed final form, having been the subject of extensive negotiation among the parties and their respective legal counsel, and are ready for execution on March 18, 2025:

1. Agreement and Plan of Merger, among HPE Fund IV, Merger Sub, and VeloPay (including all exhibits and annexes thereto);

2. Disclosure Schedules, consisting of the Buyer Disclosure Schedules delivered by HPE Fund IV and Merger Sub, and the Company Disclosure Schedules delivered by VeloPay;

3. Stockholder Support Agreement, among HPE Fund IV and the Supporting Stockholders identified in Section 5 above;

4. Limited Guarantee, from Harrowgate Capital Management IV LLC in favor of VeloPay, guaranteeing the payment of the reverse termination fee of Fifty-Seven Million Dollars ($57,000,000) and certain other specified obligations of HPE Fund IV under the Merger Agreement;

5. Stockholder Representative Agreement, pursuant to which Nathan Aldridge will be appointed as the Stockholder Representative for purposes of the Merger Agreement and the escrow arrangements contemplated thereby;

6. Rollover Agreement, pursuant to which (a) Nathan Aldridge will contribute and roll over Fourteen Million Two Hundred Thousand Dollars ($14,200,000) of his merger consideration into Harrowgate Velocity Co-Invest LP, a newly formed co-investment vehicle, and (b) Sonia Reyes-Watkins will contribute and roll over Nine Million Seven Hundred Thousand Dollars ($9,700,000) of her merger consideration into Harrowgate Velocity Co-Invest LP, for a total rollover amount of Twenty-Three Million Nine Hundred Thousand Dollars ($23,900,000); and

7. Non-Competition and Non-Solicitation Agreements, to be entered into by each of Nathan Aldridge and Sonia Reyes-Watkins, containing restrictive covenants with a three (3)-year restricted period measured from the closing of the Merger.

For the avoidance of doubt, and for the convenience of the parties, the key economic and structural terms of the final form Merger Agreement are confirmed as follows:

• Per-Share Merger Consideration: $20.00 per share of VeloPay common stock (on a fully diluted, as-converted basis).

• Aggregate Merger Consideration: $1,900,000,000.

• Indemnification Cap: $228,000,000 (representing twelve percent (12%) of the aggregate deal value), subject to the customary exceptions set forth in the Merger Agreement for fraud and willful breach.

• Escrow Amount: $133,000,000 (representing seven percent (7%) of the aggregate deal value), to be deposited with Garrison Trust Company, N.A. as escrow agent at the closing of the Merger. Fifty percent (50%) of the escrow amount (i.e., $66,500,000) shall be released to the Stockholder Representative on behalf of the former stockholders of VeloPay on the first anniversary of the closing date, and the remainder shall be released on the eighteen (18)-month anniversary of the closing date, in each case net of amounts reserved for pending or unresolved indemnification claims.

• Survival Period: The representations and warranties of the parties shall survive the closing of the Merger for a period of eighteen (18) months, subject to customary exceptions for fundamental representations, tax representations, and fraud.

• No-Shop Provision: VeloPay shall be subject to a customary no-shop provision restricting the Company from soliciting, encouraging, or engaging in discussions or negotiations with respect to any alternative acquisition proposal, subject to a fiduciary-out exception that permits the VeloPay Board to engage with an unsolicited superior proposal in compliance with its fiduciary duties. HPE Fund IV shall have a five (5)-business-day match right following receipt of notice from VeloPay of any superior proposal.

• VeloPay Termination Fee: $76,000,000 (representing four percent (4%) of the aggregate deal value), payable by VeloPay to HPE Fund IV in the event of a termination of the Merger Agreement by VeloPay to accept a superior proposal or by HPE Fund IV following a change in the recommendation of the VeloPay Board, in each case as more fully set forth in the Merger Agreement.

• HPE Fund IV Reverse Termination Fee: $57,000,000 (representing three percent (3%) of the aggregate deal value), payable by HPE Fund IV to VeloPay in the event of a termination of the Merger Agreement resulting from a failure to obtain required regulatory clearances or a failure by HPE Fund IV to consummate the Merger when required to do so under the Merger Agreement, in each case as more fully set forth in the Merger Agreement.

• Treatment of Equity Awards: (i) vested and in-the-money stock options outstanding as of immediately prior to the effective time of the Merger shall be cancelled and converted into the right to receive a net cash payment equal to the excess of $20.00 over the applicable exercise price, less applicable tax withholdings; (ii) unvested stock options shall be treated as follows: fifty percent (50%) shall be accelerated and cashed out on the same terms as vested options, and the remaining fifty percent (50%) shall be converted into replacement awards with respect to interests in HPE Fund IV (or a designated affiliate) with a twenty-four (24)-month vesting period from the closing date; (iii) outstanding restricted stock units ("RSUs") shall be fully accelerated and cashed out at $20.00 per unit; and (iv) outstanding warrants shall be cancelled and converted into the right to receive a cash payment of $11.50 per warrant (calculated as $20.00 per-share merger consideration less the $8.50 per-share warrant exercise price).

7. Post-Signing Regulatory Milestones

For informational purposes, we set forth below a brief summary of the anticipated post-signing regulatory filing timeline and the principal regulatory approvals and third-party consents that must be obtained prior to closing:

(a) HSR Act Filing. The parties intend to submit their respective pre-merger notification and report forms under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), promptly following the signing of the Merger Agreement. The anticipated filing date is April 2, 2025. The initial thirty (30)-day waiting period under the HSR Act is expected to expire on or about May 2, 2025, unless early termination is granted or a second request is issued by the Federal Trade Commission or the Antitrust Division of the U.S. Department of Justice.

(b) Investment Canada Act. In connection with the indirect acquisition by HPE Fund IV of VeloPay Canada Inc., a wholly-owned subsidiary of VeloPay organized under the laws of Ontario, Canada, a notification under Part IV of the Investment Canada Act will be filed with Innovation, Science and Economic Development Canada. HPE Fund IV and its counsel are preparing the requisite filing materials, and the notification is expected to be submitted promptly following signing.

(c) State Money Transmitter Approvals. VeloPay holds money transmitter licenses in multiple U.S. jurisdictions. Based on the regulatory diligence conducted to date, change-of-control approvals or notifications will be required in thirty-one (31) states in connection with the consummation of the Merger. VeloPay will be responsible for initiating and prosecuting these filings using commercially reasonable efforts, with the cooperation and assistance of HPE Fund IV as contemplated by the Merger Agreement.

(d) Material Customer Contract Consents. Fourteen (14) material customer contracts of VeloPay contain change-of-control provisions that require the consent of the counterparty in connection with the Merger. VeloPay will use commercially reasonable efforts to obtain such consents in accordance with the terms of the Merger Agreement.

The closing of the Merger will be subject to, among other conditions, the receipt of all required regulatory clearances and the satisfaction or waiver of all other closing conditions set forth in the Merger Agreement.

8. Signing Logistics

The proposed signing date for the Merger Agreement and all ancillary transaction documents is March 18, 2025. Signing will be effectuated by the exchange of executed signature pages transmitted via email in portable document format (PDF), with original wet-ink signature pages to follow by overnight courier to the respective parties' counsel.

Megan Chu, lead associate at Calderwood & Harkness LLP, will serve as the coordinating attorney and will be responsible for the collection and distribution of all executed signature pages on behalf of all parties to the Merger Agreement and the ancillary transaction documents. Ms. Chu will circulate execution versions of all transaction documents, together with a comprehensive signature page package and signing checklist, by separate communication later today or tomorrow morning.

The signature pages on behalf of HPE Fund IV will be executed by Priya Deshmukh, in her capacity as Managing Partner of Harrowgate Capital Management IV LLC, the general partner of HPE Fund IV. The signature pages on behalf of Merger Sub will be executed by an authorized officer of Merger Sub designated by HPE Fund IV.

We respectfully request that VeloPay and Whitford Jessup & Crane LLP confirm their readiness to proceed with signing on March 18, 2025, and coordinate the timely delivery of all executed signature pages on behalf of VeloPay and each of the Supporting Stockholders party to the Support Agreement and the Written Consent. Please direct any questions or issues regarding signing logistics to the contacts identified in Section 9 below.

9. Contact Information

All communications regarding signing logistics, the delivery of signature pages, and any questions relating to the execution and delivery of the transaction documents should be directed to the following individuals:

Buyer's Counsel:

Sandra Tung, Partner Calderwood & Harkness LLP 787 Seventh Avenue, 38th Floor New York, New York 10019 Telephone: (212) 554-7142

Email: stung@calderwoodharkness.com

Megan Chu, Lead Associate Calderwood & Harkness LLP 787 Seventh Avenue, 38th Floor New York, New York 10019 Telephone: (212) 554-7365

Email: mchu@calderwoodharkness.com

Client Contacts:

Priya Deshmukh, Managing Partner Harrowgate Capital Management IV LLC 300 King Street, Suite 4200 Wilmington, Delaware 19801 Telephone: (302) 691-4100

Email: pdeshmukh@harrowgatecapital.com

Thomas Eriksen, Partner, Head of Financial Technology Harrowgate Capital Management IV LLC 300 King Street, Suite 4200 Wilmington, Delaware 19801 Telephone: (302) 691-4118

Email: teriksen@harrowgatecapital.com

\* \* \*

HPE Fund IV looks forward to executing the Merger Agreement and all ancillary transaction documents with VeloPay on March 18, 2025, and to proceeding expeditiously toward the satisfaction of the remaining closing conditions and the consummation of the Merger. We appreciate the professionalism and diligence demonstrated by VeloPay's management team and advisors throughout the negotiation process and look forward to continuing to work cooperatively during the pre-closing period.

Please note that this letter is delivered on behalf of HPE Fund IV and is intended solely to confirm the satisfaction of the conditions precedent to signing described herein and HPE Fund IV's readiness to proceed. Nothing in this letter shall constitute, or be deemed to constitute, a waiver of any condition, right, or remedy of HPE Fund IV, Merger Sub, or any of their respective affiliates under the Merger Agreement or any other agreement, whether now existing or hereafter arising, and all such conditions, rights, and remedies are hereby expressly reserved in their entirety.

We would appreciate your written confirmation of receipt of this letter and VeloPay's readiness to proceed at your earliest convenience.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Sandra Tung Partner

On behalf of Harrowgate Private Equity Fund IV LP

Enclosures: None. Execution versions of all transaction documents will be circulated separately for signing on March 18, 2025.

cc:

Priya Deshmukh, Harrowgate Capital Management IV LLC Thomas Eriksen, Harrowgate Capital Management IV LLC Oliver Mackenzie, Calderwood & Harkness LLP David Constantinou, Pendleton Hawkes & Co. Rebecca Thornton-Hayes, Whitford Jessup & Crane LLP James Okoro, Whitford Jessup & Crane LLP

CONFIDENTIAL
CALDERWOOD & HARKNESS LLP Counselors at Law
787 Seventh Avenue, 38th Floor New York, New York 10019
Telephone: (212) 554-7000 Facsimile: (212) 554-7001 www.calderwoodharkness.com
March 17, 2025
Matter No. 1003-00003
VIA EMAIL AND OVERNIGHT COURIER
VeloPay Systems, Inc. 1455 Innovation Parkway, Suite 800 Austin, Texas 78759
Attention: Nathan Aldridge, Chief Executive Officer
Danielle Moreau, General Counsel
With a copy to:
Whitford Jessup & Crane LLP 600 Congress Avenue, Suite 2400 Austin, Texas 78701
Attention: Rebecca Thornton-Hayes, Partner
James Okoro, Associate
Re: Notice of Satisfaction of Conditions to Execution of Agreement and Plan of Merger among Harrowgate Private Equity Fund IV LP, Harrowgate Velocity Merger Sub Inc., and VeloPay Systems, Inc.
Dear Mr. Aldridge and Ms. Moreau:
We write on behalf of our client, Harrowgate Private Equity Fund IV LP, a Delaware limited partnership ("HPE Fund IV"), in connection with the proposed acquisition of VeloPay Systems, Inc., a Delaware corporation ("VeloPay" or the "Company"), by HPE Fund IV. As you know, Calderwood & Harkness LLP serves as legal counsel to HPE Fund IV in this transaction.
This letter relates to the Agreement and Plan of Merger (the "Merger Agreement") to be entered into among HPE Fund IV, Harrowgate Velocity Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of HPE Fund IV ("Merger Sub"), and VeloPay. As set forth in the Merger Agreement and as discussed at length among the parties and their respective counsel during the course of negotiations, the transaction is structured as a reverse triangular merger under Section 251 of the Delaware General Corporation Law (the "DGCL"), pursuant to which Merger Sub will merge with and into VeloPay, with VeloPay surviving as a wholly-owned subsidiary of HPE Fund IV (the "Merger"). The aggregate merger consideration payable to the stockholders of VeloPay in the Merger is One Billion Nine Hundred Million Dollars ($1,900,000,000), representing Twenty Dollars ($20.00) per share of VeloPay common stock on a fully diluted, as-converted basis, based on Ninety-Five Million (95,000,000) fully diluted shares outstanding.
The purpose of this letter is to confirm the satisfaction of all conditions precedent to the execution and delivery of the Merger Agreement by HPE Fund IV and Merger Sub, and to confirm HPE Fund IV's readiness to proceed with signing the Merger Agreement and all ancillary transaction documents on March 18, 2025. We address each category of conditions and confirmations in turn below.
1. Confirmation of HPE Fund IV Internal Approvals
We are pleased to confirm that all requisite internal approvals on the part of HPE Fund IV and Merger Sub have been obtained, as follows:
Harrowgate Capital Management IV LLC, a Delaware limited liability company and the sole general partner of HPE Fund IV, has approved the Merger Agreement and all of the transactions contemplated thereby, including the Merger and the payment of the aggregate merger consideration, by written consent dated March 17, 2025 (the "GP Consent"). The GP Consent was executed in accordance with the terms of the Amended and Restated Agreement of Limited Partnership of HPE Fund IV, dated as of September 15, 2021, and is effective immediately. In connection with the GP Consent, Priya Deshmukh, Managing Partner of Fund IV and an authorized signatory of Harrowgate Capital Management IV LLC, has confirmed the authorization of the equity commitment of One Billion One Hundred Forty Million Dollars ($1,140,000,000) to be contributed by HPE Fund IV to fund a portion of the aggregate merger consideration, and has further confirmed her authorization to execute and deliver, on behalf of HPE Fund IV (acting through its general partner), all transaction documents required in connection with the Merger.
In addition, the board of directors (sole director) of Harrowgate Velocity Merger Sub Inc. has adopted resolutions approving the execution and delivery of the Merger Agreement and the consummation of the reverse triangular merger, including the filing of the certificate of merger with the Secretary of State of the State of Delaware, also by written consent dated March 17, 2025. Merger Sub was incorporated in the State of Delaware on February 24, 2025 (Delaware File Number 7291034) with its registered agent designated as Capitol Registered Agents LLC, located at 1209 Orange Street, Wilmington, Delaware 19801. We have confirmed that Merger Sub is currently in good standing under the laws of the State of Delaware, and we will deliver a certificate of good standing from the Delaware Secretary of State dated no earlier than March 17, 2025, as part of the closing deliverables.
Accordingly, all internal approvals required on the part of HPE Fund IV and Merger Sub to authorize the execution and delivery of the Merger Agreement and the consummation of the transactions contemplated thereby have been duly obtained, and no further corporate or partnership action is required.
2. Confirmation of Financing Commitments
HPE Fund IV has secured committed financing that is sufficient, in the aggregate, to fund the full merger consideration, all related transaction costs, and post-closing working capital requirements. The components of the committed financing are as follows:
Debt Financing. On February 14, 2025, HPE Fund IV received an executed commitment letter (Reference: CRE-2025-SPF-0441) (the "Debt Commitment Letter") from Tralvendo National Bank, in its capacity as lead arranger and administrative agent, and Prairie State Bank, N.A., in its capacity as co-arranger (collectively, the "Commitment Parties"), pursuant to which the Commitment Parties have committed to provide the following debt financing facilities in connection with the Merger:
(a) a Five Hundred Million Dollar ($500,000,000) senior secured term loan facility with a seven-year maturity and bearing interest at SOFR plus 375 basis points (the "Term Loan Facility"); and
(b) a Two Hundred Sixty Million Dollar ($260,000,000) senior secured revolving credit facility with a five-year maturity and bearing interest at SOFR plus 325 basis points (the "Revolving Facility" and, together with the Term Loan Facility, the "Debt Facilities").
The total committed debt financing under the Debt Commitment Letter is Seven Hundred Sixty Million Dollars ($760,000,000). The Debt Commitment Letter remains in full force and effect as of the date hereof. No condition to funding set forth in the Debt Commitment Letter has failed to be satisfied or been waived, no default or event of default has occurred thereunder, and no event has occurred that would give rise to a right of termination on the part of either Commitment Party. Neither HPE Fund IV nor any of its affiliates has received any indication from either Commitment Party that it intends to not perform its obligations under the Debt Commitment Letter.
Equity Financing. On February 14, 2025, Harrowgate Capital Management IV LLC, acting on behalf of HPE Fund IV, executed an equity commitment letter (the "Equity Commitment Letter") committing One Billion One Hundred Forty Million Dollars ($1,140,000,000) in equity capital to fund a portion of the aggregate merger consideration. The equity commitment represents approximately sixty percent (60%) of the aggregate deal value and will be funded from available capital commitments of the limited partners of HPE Fund IV. The Equity Commitment Letter remains in full force and effect as of the date hereof, and no event has occurred that would excuse HPE Fund IV from its funding obligations thereunder.
HPE Fund IV hereby confirms that, taken together, the committed debt financing under the Debt Commitment Letter and the committed equity financing under the Equity Commitment Letter are sufficient to fund the full aggregate merger consideration of $1,900,000,000, as well as all fees, expenses, and other transaction costs anticipated to be incurred in connection with the Merger and the closing thereof.
3. Confirmation of Representations and Warranties Insurance
In connection with the Merger, HPE Fund IV has obtained a buyer-side representations and warranties insurance policy (the "R&W Policy") to provide coverage for losses arising out of breaches of the representations and warranties of VeloPay set forth in the Merger Agreement. The material terms of the R&W Policy are as follows:
Underwriter: Oakbridge Omnivrel Insurance Group (underwriter contact: Neil Carmichael, Senior Vice President)
Policy Number: OFI-RW-2025-03187
Application Date: February 21, 2025
Bind Date: March 10, 2025
Policy Limit: One Hundred Ninety Million Dollars ($190,000,000), representing ten percent (10%) of the aggregate deal value
Retention (Self-Insured Amount): Nineteen Million Dollars ($19,000,000), representing one percent (1%) of the aggregate deal value. Pursuant to the terms of the Merger Agreement, the first Nine Million Five Hundred Thousand Dollars ($9,500,000) of the retention will be borne by the Seller (through indemnification obligations), with the balance of Nine Million Five Hundred Thousand Dollars ($9,500,000) to be borne by the Buyer.
Premium: Five Million Three Hundred Twenty Thousand Dollars ($5,320,000), representing two and eight-tenths percent (2.8%) of the policy limit
Policy Inception: The R&W Policy will incept upon the closing of the Merger.
The R&W insurance placement is complete. All underwriting diligence has been concluded, and no further conditions must be satisfied for the R&W Policy to become effective upon closing. The placement and status of the R&W Policy will not impede the execution of the Merger Agreement or the consummation of the transactions contemplated thereby.
4. Confirmation of VeloPay Board Approval
Calderwood & Harkness LLP has been informed by Whitford Jessup & Crane LLP, counsel to VeloPay, that the Board of Directors of VeloPay Systems, Inc. (the "VeloPay Board") approved the Merger Agreement and the transactions contemplated thereby, including the Merger, and resolved to recommend that the stockholders of VeloPay approve the Merger, at a meeting of the VeloPay Board duly called and held on March 17, 2025.
We understand that the VeloPay Board is comprised of the following six (6) directors, each of whom participated in the meeting at which the foregoing approvals were granted:
(i) Nathan Aldridge, Chairman of the Board and Chief Executive Officer;
(ii) Sonia Reyes-Watkins, Co-Founder and Chief Technology Officer;
(iii) Janet Gould, independent director;
(iv) Kwame Asante, director and representative of Ridgeline Ventures Fund III LP;
(v) Catherine Lindström, director and representative of Apex Growth Partners II LP; and
(vi) Philip Rosenthal, independent director.
In addition, we have been informed that Velthryn Greer & Associates, the financial advisor to VeloPay in connection with the Merger (lead managing director: Patricia Navarro), has delivered to the VeloPay Board its written opinion, dated March 17, 2025, to the effect that, as of such date and based upon and subject to the assumptions, qualifications, and limitations set forth therein, the per-share merger consideration of $20.00 to be received by the holders of VeloPay common stock in the Merger is fair, from a financial point of view, to such holders. We understand that a copy of the fairness opinion will be attached to the disclosure schedules delivered in connection with the Merger Agreement.
5. Stockholder Support Agreement and Written Consent
We confirm that a Stockholder Support Agreement (the "Support Agreement") has been negotiated and is in agreed final form, and will be executed concurrently with the Merger Agreement on March 18, 2025. The parties to the Support Agreement are as follows:
(a) HPE Fund IV (as the acquirer);
(b) Ridgeline Ventures Fund III LP, holder of approximately twenty-two and four-tenths percent (22.4%) of the outstanding common stock of VeloPay;
(c) Apex Growth Partners II LP, holder of approximately sixteen and eight-tenths percent (16.8%) of the outstanding common stock of VeloPay;
(d) Broadleaf Capital Partners LP, holder of approximately six and one-tenth percent (6.1%) of the outstanding common stock of VeloPay;
(e) Nathan Aldridge, holder of approximately fourteen and two-tenths percent (14.2%) of the outstanding common stock of VeloPay; and
(f) Sonia Reyes-Watkins, holder of approximately nine and seven-tenths percent (9.7%) of the outstanding common stock of VeloPay.
Collectively, the stockholders party to the Support Agreement (the "Supporting Stockholders") hold approximately sixty-three and one-tenth percent (63.1%) of the outstanding shares of common stock of VeloPay. This percentage is in excess of the majority of the outstanding shares required to approve the Merger under Section 251(c) of the DGCL and VeloPay's certificate of incorporation, and is accordingly sufficient to approve the Merger by written consent in lieu of a meeting of stockholders pursuant to Section 228 of the DGCL.
The Supporting Stockholders have agreed to deliver, concurrently with the signing of the Merger Agreement and the Support Agreement on March 18, 2025, a written consent (the "Written Consent") approving and adopting the Merger Agreement and the Merger, thereby satisfying the stockholder approval condition set forth in the Merger Agreement. Following the delivery of the Written Consent, VeloPay will be obligated to prepare and mail an information statement to all stockholders of record who did not execute the Written Consent, in accordance with Section 228(e) of the DGCL and applicable rules and regulations promulgated by the U.S. Securities and Exchange Commission. Based on discussions with Whitford Jessup & Crane LLP, the anticipated mailing date of the information statement is April 14, 2025.
6. Readiness of Transaction Documents
We confirm that the following transaction documents are in agreed final form, having been the subject of extensive negotiation among the parties and their respective legal counsel, and are ready for execution on March 18, 2025:
1.  Agreement and Plan of Merger, among HPE Fund IV, Merger Sub, and VeloPay (including all exhibits and annexes thereto);
2.  Disclosure Schedules, consisting of the Buyer Disclosure Schedules delivered by HPE Fund IV and Merger Sub, and the Company Disclosure Schedules delivered by VeloPay;
3.  Stockholder Support Agreement, among HPE Fund IV and the Supporting Stockholders identified in Section 5 above;
4.  Limited Guarantee, from Harrowgate Capital Management IV LLC in favor of VeloPay, guaranteeing the payment of the reverse termination fee of Fifty-Seven Million Dollars ($57,000,000) and certain other specified obligations of HPE Fund IV under the Merger Agreement;
5.  Stockholder Representative Agreement, pursuant to which Nathan Aldridge will be appointed as the Stockholder Representative for purposes of the Merger Agreement and the escrow arrangements contemplated thereby;
6.  Rollover Agreement, pursuant to which (a) Nathan Aldridge will contribute and roll over Fourteen Million Two Hundred Thousand Dollars ($14,200,000) of his merger consideration into Harrowgate Velocity Co-Invest LP, a newly formed co-investment vehicle, and (b) Sonia Reyes-Watkins will contribute and roll over Nine Million Seven Hundred Thousand Dollars ($9,700,000) of her merger consideration into Harrowgate Velocity Co-Invest LP, for a total rollover amount of Twenty-Three Million Nine Hundred Thousand Dollars ($23,900,000); and
7.  Non-Competition and Non-Solicitation Agreements, to be entered into by each of Nathan Aldridge and Sonia Reyes-Watkins, containing restrictive covenants with a three (3)-year restricted period measured from the closing of the Merger.
For the avoidance of doubt, and for the convenience of the parties, the key economic and structural terms of the final form Merger Agreement are confirmed as follows:
•  Per-Share Merger Consideration: $20.00 per share of VeloPay common stock (on a fully diluted, as-converted basis).
•  Aggregate Merger Consideration: $1,900,000,000.
•  Indemnification Cap: $228,000,000 (representing twelve percent (12%) of the aggregate deal value), subject to the customary exceptions set forth in the Merger Agreement for fraud and willful breach.
•  Escrow Amount: $133,000,000 (representing seven percent (7%) of the aggregate deal value), to be deposited with Garrison Trust Company, N.A. as escrow agent at the closing of the Merger. Fifty percent (50%) of the escrow amount (i.e., $66,500,000) shall be released to the Stockholder Representative on behalf of the former stockholders of VeloPay on the first anniversary of the closing date, and the remainder shall be released on the eighteen (18)-month anniversary of the closing date, in each case net of amounts reserved for pending or unresolved indemnification claims.
•  Survival Period: The representations and warranties of the parties shall survive the closing of the Merger for a period of eighteen (18) months, subject to customary exceptions for fundamental representations, tax representations, and fraud.
•  No-Shop Provision: VeloPay shall be subject to a customary no-shop provision restricting the Company from soliciting, encouraging, or engaging in discussions or negotiations with respect to any alternative acquisition proposal, subject to a fiduciary-out exception that permits the VeloPay Board to engage with an unsolicited superior proposal in compliance with its fiduciary duties. HPE Fund IV shall have a five (5)-business-day match right following receipt of notice from VeloPay of any superior proposal.
•  VeloPay Termination Fee: $76,000,000 (representing four percent (4%) of the aggregate deal value), payable by VeloPay to HPE Fund IV in the event of a termination of the Merger Agreement by VeloPay to accept a superior proposal or by HPE Fund IV following a change in the recommendation of the VeloPay Board, in each case as more fully set forth in the Merger Agreement.
•  HPE Fund IV Reverse Termination Fee: $57,000,000 (representing three percent (3%) of the aggregate deal value), payable by HPE Fund IV to VeloPay in the event of a termination of the Merger Agreement resulting from a failure to obtain required regulatory clearances or a failure by HPE Fund IV to consummate the Merger when required to do so under the Merger Agreement, in each case as more fully set forth in the Merger Agreement.
•  Treatment of Equity Awards: (i) vested and in-the-money stock options outstanding as of immediately prior to the effective time of the Merger shall be cancelled and converted into the right to receive a net cash payment equal to the excess of $20.00 over the applicable exercise price, less applicable tax withholdings; (ii) unvested stock options shall be treated as follows: fifty percent (50%) shall be accelerated and cashed out on the same terms as vested options, and the remaining fifty percent (50%) shall be converted into replacement awards with respect to interests in HPE Fund IV (or a designated affiliate) with a twenty-four (24)-month vesting period from the closing date; (iii) outstanding restricted stock units ("RSUs") shall be fully accelerated and cashed out at $20.00 per unit; and (iv) outstanding warrants shall be cancelled and converted into the right to receive a cash payment of $11.50 per warrant (calculated as $20.00 per-share merger consideration less the $8.50 per-share warrant exercise price).
7. Post-Signing Regulatory Milestones
For informational purposes, we set forth below a brief summary of the anticipated post-signing regulatory filing timeline and the principal regulatory approvals and third-party consents that must be obtained prior to closing:
(a) HSR Act Filing. The parties intend to submit their respective pre-merger notification and report forms under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), promptly following the signing of the Merger Agreement. The anticipated filing date is April 2, 2025. The initial thirty (30)-day waiting period under the HSR Act is expected to expire on or about May 2, 2025, unless early termination is granted or a second request is issued by the Federal Trade Commission or the Antitrust Division of the U.S. Department of Justice.
(b) Investment Canada Act. In connection with the indirect acquisition by HPE Fund IV of VeloPay Canada Inc., a wholly-owned subsidiary of VeloPay organized under the laws of Ontario, Canada, a notification under Part IV of the Investment Canada Act will be filed with Innovation, Science and Economic Development Canada. HPE Fund IV and its counsel are preparing the requisite filing materials, and the notification is expected to be submitted promptly following signing.
(c) State Money Transmitter Approvals. VeloPay holds money transmitter licenses in multiple U.S. jurisdictions. Based on the regulatory diligence conducted to date, change-of-control approvals or notifications will be required in thirty-one (31) states in connection with the consummation of the Merger. VeloPay will be responsible for initiating and prosecuting these filings using commercially reasonable efforts, with the cooperation and assistance of HPE Fund IV as contemplated by the Merger Agreement.
(d) Material Customer Contract Consents. Fourteen (14) material customer contracts of VeloPay contain change-of-control provisions that require the consent of the counterparty in connection with the Merger. VeloPay will use commercially reasonable efforts to obtain such consents in accordance with the terms of the Merger Agreement.
The closing of the Merger will be subject to, among other conditions, the receipt of all required regulatory clearances and the satisfaction or waiver of all other closing conditions set forth in the Merger Agreement.
8. Signing Logistics
The proposed signing date for the Merger Agreement and all ancillary transaction documents is March 18, 2025. Signing will be effectuated by the exchange of executed signature pages transmitted via email in portable document format (PDF), with original wet-ink signature pages to follow by overnight courier to the respective parties' counsel.
Megan Chu, lead associate at Calderwood & Harkness LLP, will serve as the coordinating attorney and will be responsible for the collection and distribution of all executed signature pages on behalf of all parties to the Merger Agreement and the ancillary transaction documents. Ms. Chu will circulate execution versions of all transaction documents, together with a comprehensive signature page package and signing checklist, by separate communication later today or tomorrow morning.
The signature pages on behalf of HPE Fund IV will be executed by Priya Deshmukh, in her capacity as Managing Partner of Harrowgate Capital Management IV LLC, the general partner of HPE Fund IV. The signature pages on behalf of Merger Sub will be executed by an authorized officer of Merger Sub designated by HPE Fund IV.
We respectfully request that VeloPay and Whitford Jessup & Crane LLP confirm their readiness to proceed with signing on March 18, 2025, and coordinate the timely delivery of all executed signature pages on behalf of VeloPay and each of the Supporting Stockholders party to the Support Agreement and the Written Consent. Please direct any questions or issues regarding signing logistics to the contacts identified in Section 9 below.
9. Contact Information
All communications regarding signing logistics, the delivery of signature pages, and any questions relating to the execution and delivery of the transaction documents should be directed to the following individuals:
Buyer's Counsel:
Sandra Tung, Partner Calderwood & Harkness LLP 787 Seventh Avenue, 38th Floor New York, New York 10019 Telephone: (212) 554-7142
Email: stung@calderwoodharkness.com
Megan Chu, Lead Associate Calderwood & Harkness LLP 787 Seventh Avenue, 38th Floor New York, New York 10019 Telephone: (212) 554-7365
Email: mchu@calderwoodharkness.com
Client Contacts:
Priya Deshmukh, Managing Partner Harrowgate Capital Management IV LLC 300 King Street, Suite 4200 Wilmington, Delaware 19801 Telephone: (302) 691-4100
Email: pdeshmukh@harrowgatecapital.com
Thomas Eriksen, Partner, Head of Financial Technology Harrowgate Capital Management IV LLC 300 King Street, Suite 4200 Wilmington, Delaware 19801 Telephone: (302) 691-4118
Email: teriksen@harrowgatecapital.com
\* \* \*
HPE Fund IV looks forward to executing the Merger Agreement and all ancillary transaction documents with VeloPay on March 18, 2025, and to proceeding expeditiously toward the satisfaction of the remaining closing conditions and the consummation of the Merger. We appreciate the professionalism and diligence demonstrated by VeloPay's management team and advisors throughout the negotiation process and look forward to continuing to work cooperatively during the pre-closing period.
Please note that this letter is delivered on behalf of HPE Fund IV and is intended solely to confirm the satisfaction of the conditions precedent to signing described herein and HPE Fund IV's readiness to proceed. Nothing in this letter shall constitute, or be deemed to constitute, a waiver of any condition, right, or remedy of HPE Fund IV, Merger Sub, or any of their respective affiliates under the Merger Agreement or any other agreement, whether now existing or hereafter arising, and all such conditions, rights, and remedies are hereby expressly reserved in their entirety.
We would appreciate your written confirmation of receipt of this letter and VeloPay's readiness to proceed at your earliest convenience.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Sandra Tung Partner
On behalf of Harrowgate Private Equity Fund IV LP
Enclosures: None. Execution versions of all transaction documents will be circulated separately for signing on March 18, 2025.
cc:
Priya Deshmukh, Harrowgate Capital Management IV LLC Thomas Eriksen, Harrowgate Capital Management IV LLC Oliver Mackenzie, Calderwood & Harkness LLP David Constantinou, Pendleton Hawkes & Co. Rebecca Thornton-Hayes, Whitford Jessup & Crane LLP James Okoro, Whitford Jessup & Crane LLP

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