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

engagement-letter-hpe-fund-iv.docx DOCUMENT M&A / Corporate

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PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION

CALDERWOOD & HARKNESS LLP Attorneys at Law

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

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

October 7, 2024

Priya Deshmukh Managing Partner, Fund IV Harrowgate Private Equity Fund IV LP 300 King Street, Suite 4200 Wilmington, Delaware 19801

Re: Engagement of Calderwood & Harkness LLP — Potential Acquisition of VeloPay Systems, Inc.

Matter Number: 1003-00003

Dear Ms. Deshmukh:

1. Introduction and Purpose

Thank you for selecting Calderwood & Harkness LLP ("Calderwood & Harkness" or the "Firm") as your outside legal counsel. We are pleased to confirm that the Firm is being engaged to represent Harrowgate Private Equity Fund IV LP, a Delaware limited partnership ("HPE Fund IV" or the "Client"), in connection with the potential acquisition (whether by merger, stock purchase, or other structure to be determined) of VeloPay Systems, Inc., a Delaware corporation ("VeloPay" or the "Target"). VeloPay is a cloud-based payments processing and financial technology company headquartered in Austin, Texas, that operates a payments processing platform serving mid-market and enterprise customers across a range of industry verticals.

We understand that this potential transaction is of significant strategic importance to HPE Fund IV and the broader Harrowgate platform, and we are committed to providing the highest quality legal representation throughout all phases of the engagement. This letter (the "Engagement Letter") sets forth the terms and conditions of our engagement, including the scope of our representation, staffing, fee arrangements, confidentiality obligations, and other matters governing our relationship with the Client. We ask that you review this Engagement Letter carefully and, if the terms are acceptable, countersign and return the enclosed duplicate copy to confirm your agreement.

2. Scope of Representation

Calderwood & Harkness will serve as primary outside legal counsel to HPE Fund IV in connection with the potential acquisition of VeloPay (the "Transaction"). Our representation will encompass the following areas of legal work, including but not limited to:

(a) Due Diligence. Conducting and coordinating comprehensive legal due diligence on VeloPay and its direct and indirect subsidiaries. Our due diligence review will cover, among other areas: corporate organization and governance (including charter documents, bylaws, organizational consents, and capitalization); material contracts (including customer agreements, vendor and supplier agreements, partnership and channel agreements, and government contracts, if any); intellectual property (including patents, trademarks, copyrights, trade secrets, software licensing, and open-source compliance); litigation and contingent liabilities (including pending and threatened litigation, arbitration, regulatory proceedings, and governmental investigations); regulatory and licensing matters (including state and federal money transmitter licenses, payment card industry compliance, and Bank Secrecy Act / Anti-Money Laundering compliance); employment and benefits (including employment agreements, equity incentive plans, employee benefit plans, ERISA compliance, and workforce classification); tax matters (including federal, state, local, and international tax filings, positions, and liabilities); real property (including leases, owned property, and environmental conditions); insurance coverage; environmental matters; and data privacy and cybersecurity (including compliance with applicable data protection laws, including the California Consumer Privacy Act, the General Data Protection Regulation, and PCI-DSS standards). We will prepare a comprehensive due diligence report summarizing our findings and identifying material legal risks for the Client's consideration.

(b) Transaction Structuring. Advising HPE Fund IV on the optimal transaction structure for the acquisition of VeloPay, including analysis of available merger structures (forward merger, reverse triangular merger, forward triangular merger), direct stock purchase, and other potential structures. Our structuring advice will encompass consideration of tax efficiency (including potential Section 338(h)(10) elections, Section 336(e) elections, and other available tax elections), liability containment, regulatory approval requirements, third-party consent obligations, and the treatment of VeloPay's outstanding equity awards and convertible instruments. We will work closely with the Client's financial advisors and accountants in connection with structuring analysis.

(c) Negotiation and Drafting. Drafting, negotiating, and finalizing the definitive acquisition agreement (whether in the form of a merger agreement, stock purchase agreement, or other form as dictated by the agreed-upon transaction structure) and all ancillary transaction documents. Ancillary documents are expected to include, without limitation: disclosure schedules; stockholder support agreements (including voting agreements and written consents); equity commitment letters from HPE Fund IV's limited partners or co-investors, as applicable; limited guarantees; escrow agreements; rollover equity agreements (if any VeloPay equityholders will roll equity into the post-closing entity); non-competition and non-solicitation agreements with key VeloPay management personnel; transition services agreements; intellectual property assignment and license agreements; and such other instruments as may be required to consummate the Transaction.

(d) Debt Financing. Reviewing and advising on all debt financing documentation in connection with the Transaction, including debt commitment letters, fee letters, credit agreements (including term loan and revolving credit facilities), guarantee and collateral agreements (including pledge agreements, security agreements, and intellectual property security agreements), intercreditor agreements, and any related financing documentation. Our advice will include review of financing conditions, "SunGard" and "certain funds" provisions, flex provisions, and the interplay between the acquisition agreement and the financing documentation. We will coordinate with the Client's financing sources and their counsel as necessary.

(e) Regulatory and Antitrust. Advising on and coordinating all necessary regulatory filings and approvals in connection with the Transaction. This will include: preparation and filing of premerger notification forms under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and management of the HSR review process, including preparation for and response to any Second Request for Additional Information issued by the Federal Trade Commission or the Antitrust Division of the Department of Justice; advising on and coordinating state-level money transmitter change-of-control filings and approvals, as applicable, in those states where VeloPay holds money transmitter licenses; and advising on any foreign regulatory notifications that may be required (including, if applicable, filings under the Investment Canada Act or other foreign investment review regimes). We will coordinate with local counsel in applicable jurisdictions as needed.

(f) Insurance. Advising on the procurement and negotiation of representations and warranties ("R&W") insurance in connection with the Transaction, including review of binder agreements, policy terms and conditions, exclusions, retention structures, and claims procedures. We will also advise on the procurement of directors' and officers' ("D&O") liability tail insurance for VeloPay's pre-closing directors and officers, and on other insurance matters relating to the Transaction, including cyber liability and other specialty insurance considerations.

(g) Tax. Advising on the federal, state, local, and international tax aspects of the Transaction. Our tax advice will cover structural tax analysis and optimization; withholding obligations (including FIRPTA, backup withholding, and state withholding); analysis of potential "excess parachute payments" under Section 280G of the Internal Revenue Code of 1986, as amended, and related excise tax obligations under Section 4999; review of VeloPay's existing tax positions and potential exposure; post-closing tax planning, including integration-related tax planning and analysis of available tax attributes of the Target; and preparation or review of any tax opinions or tax-related closing deliverables.

(h) Closing and Post-Closing. Coordinating the closing process for the Transaction, including preparation of all closing deliverables, officer and secretary certificates, good standing certificates, bring-down opinions, third-party consents and estoppels, required governmental filings (including the certificate of merger with the Delaware Secretary of State), and closing funds flow memoranda. Following closing, we will advise on post-closing obligations, including escrow administration and release procedures, earnout calculations and disputes (if applicable), purchase price adjustment mechanisms, indemnification claims and procedures, and such other post-closing matters as may arise.

Our representation is limited to the Transaction described in this Engagement Letter. Any additional or unrelated matters — including, without limitation, future acquisitions, portfolio company matters, fund formation, or other matters not directly related to the Transaction — would require a separate engagement letter or a written amendment to this Engagement Letter.

This engagement does not encompass advice on investment decisions, business strategy, accounting matters, or financial advisory services. We assume that the Client will retain separate advisors for such matters as it deems appropriate, and we disclaim any responsibility for advice or services outside the scope of our legal engagement as described herein.

3. Engagement Team and Staffing

Calderwood & Harkness has assembled a dedicated team of professionals to serve HPE Fund IV in connection with this Transaction. The following individuals will form the core engagement team:

Sandra Tung — Responsible Partner, Mergers & Acquisitions. Sandra will serve as the lead partner responsible for the overall direction, strategy, and supervision of the engagement. She will be the Client's primary point of contact at the Firm and will be involved in all major aspects of the Transaction, including negotiation of the definitive acquisition agreement, strategic advice on deal structure and process, and oversight of the due diligence workstreams. Sandra brings over twenty years of experience representing private equity sponsors in complex acquisition transactions, including numerous transactions in the financial technology sector.

Oliver Mackenzie — Billing Partner, Mergers & Acquisitions. Oliver will oversee all billing matters for the engagement and will serve as a secondary senior partner resource on the Transaction. Oliver will be available to provide substantive legal advice and to assist with negotiation and strategic matters as needed.

Megan Chu — Lead Associate, Mergers & Acquisitions. Megan will serve as the day-to-day lead associate on the Transaction, managing due diligence coordination, document drafting and revision, and closing preparation and logistics. Megan will be the primary day-to-day point of contact for the Client's deal team on operational and execution matters.

Derek Okonkwo — Working Associate, Mergers & Acquisitions. Derek will assist with due diligence review and analysis, document preparation and markup, regulatory filings, and ancillary workstreams as assigned. Derek will work under the supervision of Megan Chu and Sandra Tung.

Leonard Cross — Specialist Partner, Tax. Leonard will advise on all tax structuring matters, tax due diligence, withholding analysis, Section 280G parachute payment analysis, and related federal, state, local, and international tax matters arising in connection with the Transaction.

Howard Bellamy — Specialist Partner, Antitrust & Competition. Howard will lead the Firm's antitrust and regulatory advice on the Transaction, including HSR Act filing strategy and preparation, Second Request response strategy and coordination (if applicable), coordination with foreign regulatory counsel, and substantive antitrust analysis of the Transaction.

The Firm reserves the right to involve additional partners, counsel, associates, and paraprofessionals as the matter requires to ensure the timely and effective delivery of legal services. We will provide appropriate advance notice to the Client before involving additional professionals in material workstreams. Staffing will be managed at all times to provide effective and efficient representation, and we will leverage junior team members and paraprofessionals for tasks appropriate to their experience level in order to promote cost efficiency.

4. Client Identification and Conflicts

For purposes of this engagement, the "Client" is Harrowgate Private Equity Fund IV LP (EIN: 87-4231956) and, as applicable, its general partner, Harrowgate Capital Management IV LLC (EIN: 87-4231847), and any acquisition subsidiary or special purpose vehicle formed by or on behalf of HPE Fund IV for purposes of consummating the Transaction (collectively with HPE Fund IV, the "Client Entities"). Our duties of loyalty, confidentiality, and competent representation run to the Client Entities as identified herein. For the avoidance of doubt, our representation does not extend to the individual partners, members, or limited partners of HPE Fund IV or Harrowgate Capital Management IV LLC in their individual capacities, nor to any other Harrowgate-affiliated fund or entity, unless separately agreed in writing.

The Firm has conducted a conflicts check in accordance with its standard procedures and the applicable New York Rules of Professional Conduct and has determined that there are no conflicts of interest that would prevent the Firm from undertaking this engagement at this time. The Client acknowledges and agrees that Calderwood & Harkness is a large law firm with many attorneys and many clients, and that the Firm may currently represent, or in the future may undertake the representation of, other clients in matters that are unrelated to this engagement but that may be adverse to one or more of the Client Entities, subject at all times to the Firm's compliance with applicable rules of professional conduct. The Firm will not, without the Client's prior written informed consent, undertake any representation that would create a direct conflict with the Client's interests in this Transaction.

We respectfully request that the Client promptly notify the Firm of any changes to the identity of the Target, transaction counterparties, co-investors, financing sources, or other parties involved in or connected with the Transaction, so that we may conduct supplemental conflicts screening as appropriate. Timely notification will assist us in identifying and addressing any potential conflicts at the earliest possible stage.

5. Fees and Billing Arrangements

5.1 Hourly Rates

Our fees for this engagement will be based on the time expended by Firm personnel at the following standard hourly rates, which reflect the rates currently in effect for professionals in the relevant practice groups:

Paralegal and other legal support staff time, if applicable to this engagement, will be billed at rates to be communicated separately to the Client. We anticipate that paralegal rates will range from $350 to $475 per hour, depending on the seniority and specialization of the individual.

The foregoing rates are subject to annual adjustment, which typically becomes effective on January 1 of each calendar year. Any rate changes will be communicated to the Client in advance of the effective date. Unless the Client objects in writing within fifteen (15) days of receiving notice of a rate adjustment, the new rates will apply to work performed on or after the effective date.

The Firm will exercise professional judgment in staffing this engagement to ensure cost efficiency, including assigning tasks to the most junior-qualified attorney or professional capable of performing the work competently. We will endeavor to minimize duplication of effort and to leverage technology and established precedents where appropriate.

5.2 Success Fee

In addition to the hourly fees described in Section 5.1 above, upon the successful closing of the Transaction (as evidenced by the satisfaction or waiver of all conditions to closing and the consummation of the transactions contemplated by the definitive acquisition agreement), HPE Fund IV shall pay Calderwood & Harkness a success fee (the "Success Fee") in the amount of $1,250,000 (one million two hundred fifty thousand dollars).

The Success Fee shall be earned and payable upon the closing of the Transaction and shall be invoiced separately from the Firm's regular monthly invoices. Payment of the Success Fee shall be due within thirty (30) days of the closing date. The Success Fee, once earned, is non-refundable.

If the Transaction does not close for any reason — whether as a result of a failure to agree on definitive documentation, a failure of conditions to closing, regulatory disapproval, termination of the definitive acquisition agreement, or otherwise — the Success Fee shall not be payable.

The Success Fee is in addition to, and not a credit against, hourly fees, expenses, and disbursements incurred in connection with the engagement. For the avoidance of doubt, payment of the Success Fee does not relieve the Client of its obligation to pay all accrued and outstanding hourly fees and disbursements.

5.3 Expenses and Disbursements

The Client shall reimburse the Firm for all reasonable out-of-pocket expenses and disbursements incurred in connection with this engagement. Such expenses and disbursements may include, without limitation: travel expenses (including airfare, ground transportation, and mileage); lodging and hotel charges; meals incurred in connection with business travel or working sessions; courier and overnight delivery charges; filing fees (including HSR Act filing fees, Secretary of State filing fees, UCC search and filing fees, and similar governmental charges); document reproduction and printing costs; online legal research and database charges (including Westmark Data Systems, Sundial Solutions, EDGAR, and similar services); electronic data room costs; court reporter and transcription fees; and third-party vendor costs incurred at the Client's direction or with the Client's consent (including, for example, local counsel fees, environmental consultants, and intellectual property search firms).

Aggregate expenses and disbursements shall not exceed $250,000 (two hundred fifty thousand dollars) (the "Expense Cap") without the prior written approval of the Client. For purposes of the Expense Cap, filing fees paid directly to government agencies — including, without limitation, HSR Act filing fees payable to the Federal Trade Commission — shall be treated as pass-through charges and shall not count against the Expense Cap, unless otherwise agreed in writing by the parties. We note that the current HSR Act filing fee for transactions of this nature may be substantial and will be communicated to the Client in advance of filing.

Expenses and disbursements will be itemized on the Firm's monthly invoices, with supporting detail provided upon the Client's request.

6. Billing and Payment Terms

Calderwood & Harkness will render invoices to the Client on a monthly basis, with bills typically issued within thirty (30) days after the end of each calendar month. Each invoice will include: (i) a summary of time charges, organized by attorney or professional, with a description of the services rendered; (ii) the applicable hourly rate for each timekeeper; and (iii) a separate schedule of expenses and disbursements incurred during the billing period, with reasonable detail and categorization.

Payment of each invoice is due within thirty (30) days of the date of the invoice. The Firm accepts payment by wire transfer or check, and wire transfer instructions will be provided on each invoice.

Invoices not paid within the thirty (30)-day payment period will accrue interest at a rate of 1.0% per month (twelve percent (12%) per annum), or the maximum rate permitted by applicable law, whichever is lower, calculated from the due date of the invoice until the date full payment is received by the Firm. The accrual of interest on past-due amounts shall not constitute a waiver of any other rights or remedies available to the Firm.

The Client may in good faith dispute any item on an invoice, provided that (a) all undisputed amounts on such invoice are paid within the standard thirty (30)-day payment period, and (b) any disputed items are raised promptly in writing to Oliver Mackenzie, with a reasonably detailed explanation of the basis for the dispute. The parties shall endeavor to resolve any billing disputes in a timely and cooperative manner.

7. Confidentiality

Calderwood & Harkness will maintain the confidentiality of all information received from or on behalf of the Client in connection with this engagement, in accordance with the Firm's professional and ethical obligations under the New York Rules of Professional Conduct and other applicable rules governing attorney conduct. The Firm will not disclose Client confidences or secrets to any third party without the Client's prior written consent, except as may be required by law, court order, subpoena, or applicable rules of professional conduct (including, for example, disclosure necessary to prevent a crime or to respond to allegations in a proceeding concerning the Firm's representation of the Client).

All members of the Firm's engagement team and supporting personnel will be instructed regarding the confidential nature of this engagement and the information received in connection therewith. The Firm maintains appropriate physical, electronic, and procedural safeguards to protect the confidentiality of client information.

The obligations of confidentiality set forth in this Section 7 shall survive the termination or conclusion of this engagement, regardless of the reason for such termination or conclusion, and shall continue in full force and effect indefinitely.

8. Document Retention

The Firm will maintain files, work product, and documents related to this engagement in accordance with Calderwood & Harkness's document retention policy, as in effect from time to time. Files may be maintained in physical, electronic, or other format, at the Firm's discretion.

Client documents and materials provided to the Firm in connection with this engagement will be returned to the Client upon written request, subject to the Firm's right to retain copies of such documents for its own records to the extent required or permitted by applicable rules of professional responsibility, or as the Firm deems reasonably necessary for the protection of its interests.

At the conclusion of the engagement, the Firm may, without further notice to the Client, destroy files and records relating to this engagement after a retention period of ten (10) years from the date of the final invoice rendered in connection with the matter, unless the Client provides written instructions to the contrary prior to the expiration of such retention period. The Client acknowledges that the Firm shall have no obligation to retain files beyond the stated retention period absent such written instructions.

9. Termination of Engagement

Either party may terminate this engagement at any time upon written notice to the other party. Termination by the Client shall be effective upon delivery of written notice to Sandra Tung at the Firm's address set forth above (or such other address as the Firm may designate). Termination by the Firm shall be effective upon delivery of written notice to the Client at the address set forth in Section 11 below (or such other address as the Client may designate), subject to the Firm's compliance with applicable rules of professional conduct governing withdrawal from representation.

Upon termination of the engagement, the Client shall be obligated to pay all fees, expenses, and disbursements incurred through the effective date of termination, including fees for any work in progress as of such date. The Firm will provide a final invoice to the Client within thirty (30) days of the effective date of termination.

The Success Fee described in Section 5.2 shall not be payable if the engagement is terminated prior to the closing of the Transaction; provided, however, that if the Transaction subsequently closes within twelve (12) months of the effective date of termination and substantially on the terms negotiated during the period of the Firm's engagement, the Success Fee shall become payable upon such closing, and the Client shall remit the Success Fee to the Firm within thirty (30) days of the closing date.

Upon termination, Calderwood & Harkness will take all reasonable steps to protect the Client's interests, including facilitating the orderly transition of the matter to successor counsel designated by the Client, providing copies of relevant files and work product (subject to the Firm's right to retain copies), and cooperating in good faith with successor counsel to minimize disruption to the Client.

10. Limitation of Liability

The Firm's aggregate liability to the Client arising out of or in connection with this engagement, whether based on breach of contract, negligence, or any other theory of liability, shall not exceed the total amount of fees actually paid by the Client to the Firm for services rendered in connection with this matter. In no event shall the Firm be liable to the Client for any consequential, incidental, special, indirect, or punitive damages arising out of or in connection with this engagement, regardless of whether such damages were foreseeable or whether the Firm was advised of the possibility thereof.

The foregoing limitation of liability shall not apply in the case of the Firm's willful misconduct or gross negligence. Nothing in this Section 10 shall be construed to limit any rights or obligations imposed by applicable rules of professional conduct or non-waivable provisions of law.

11. Designation of Client Contact

All communications from Calderwood & Harkness in connection with this engagement shall be directed to:

Priya Deshmukh Managing Partner, Fund IV Harrowgate Capital Management IV LLC (as General Partner of Harrowgate Private Equity Fund IV LP) 300 King Street, Suite 4200 Wilmington, Delaware 19801

Email: pdeshmukh@harrowgatecapital.com

Telephone: (302) 555-4100

With a copy to:

Thomas Eriksen Partner, Head of Financial Technology Harrowgate Capital Management IV LLC 300 King Street, Suite 4200 Wilmington, Delaware 19801

Email: teriksen@harrowgatecapital.com

Telephone: (302) 555-4125

The Client may designate additional or substitute contacts by providing written notice to Sandra Tung at the Firm. Until such notice is received and acknowledged, the Firm shall be entitled to rely on the contact designations set forth above.

12. Governing Law and Dispute Resolution

This Engagement Letter shall be governed by and construed in accordance with the laws of the State of New York, without regard to any conflicts of law principles that would require the application of the laws of any other jurisdiction.

Any dispute, claim, or controversy arising out of or relating to this Engagement Letter or the engagement contemplated hereby, including any dispute regarding the interpretation, enforceability, performance, or breach of this Engagement Letter, shall be resolved by binding arbitration administered by JAMS in New York, New York, in accordance with the JAMS Comprehensive Arbitration Rules and Procedures then in effect. The arbitration shall be conducted before a single arbitrator selected in accordance with such rules. The arbitrator's award shall be final and binding and may be entered as a judgment in any court of competent jurisdiction. Each party shall bear its own costs and attorneys' fees in connection with any arbitration, unless the arbitrator determines that an award of costs and fees to the prevailing party is appropriate.

Each party irrevocably consents to the exclusive jurisdiction and venue of New York, New York, for any proceedings related to this Engagement Letter, including any proceedings to compel arbitration or to enforce an arbitral award.

13. Entire Agreement; Amendments

This Engagement Letter constitutes the entire agreement between Calderwood & Harkness LLP and the Client with respect to the subject matter hereof and supersedes all prior discussions, negotiations, understandings, representations, and agreements, whether written or oral, relating to the engagement described herein. No representations or warranties have been made by either party except as expressly set forth in this Engagement Letter.

No amendment, modification, supplement, or waiver of any provision of this Engagement Letter shall be effective unless made in writing and signed by authorized representatives of both Calderwood & Harkness LLP and the Client. No waiver of any provision of this Engagement Letter shall be deemed a waiver of any other provision, and no waiver shall be effective unless made in writing.

14. Acceptance

We are grateful for the confidence that you and the Harrowgate team have placed in Calderwood & Harkness, and we look forward to working with you on this important transaction. We are confident that the team we have assembled will provide HPE Fund IV with the highest quality legal representation throughout all phases of the Transaction.

Please confirm your acceptance of the terms of this Engagement Letter by executing the enclosed duplicate copy of this letter in the space provided below and returning it to Sandra Tung at the address set forth above, or by email to stung@calderwoodharkness.com. This Engagement Letter shall become effective upon receipt of the fully executed counterpart by the Firm. If we do not receive a signed copy within thirty (30) days of the date hereof, this Engagement Letter shall be deemed withdrawn, unless the parties otherwise agree in writing.

We are available at your convenience to discuss any questions regarding the terms of this Engagement Letter or the engagement generally.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Name: Sandra Tung

Title: Partner

Calderwood & Harkness LLP 787 Seventh Avenue, 38th Floor New York, New York 10019

ACCEPTANCE AND AGREEMENT

The undersigned hereby confirms its acceptance of and agreement to the terms and conditions of this Engagement Letter, effective as of the date set forth below.

AGREED AND ACCEPTED:

HARROWGATE PRIVATE EQUITY FUND IV LP

By: Harrowgate Capital Management IV LLC,

its General Partner

By: ________

Name: Priya Deshmukh

Title: Managing Partner, Fund IV

Date: ________

Enclosures:

• Duplicate copy of Engagement Letter for countersignature and return to Calderwood & Harkness LLP

Professional Category	Hourly Rate
Partners	$1,650
Counsel	$1,350
Associates	$950

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION
CALDERWOOD & HARKNESS LLP Attorneys at Law
787 Seventh Avenue, 38th Floor New York, New York 10019
Telephone: (212) 554-7000 Facsimile: (212) 554-7001 www.calderwoodharkness.com
October 7, 2024
Priya Deshmukh Managing Partner, Fund IV Harrowgate Private Equity Fund IV LP 300 King Street, Suite 4200 Wilmington, Delaware 19801
Re: Engagement of Calderwood & Harkness LLP — Potential Acquisition of VeloPay Systems, Inc.
Matter Number: 1003-00003
Dear Ms. Deshmukh:
1. Introduction and Purpose
Thank you for selecting Calderwood & Harkness LLP ("Calderwood & Harkness" or the "Firm") as your outside legal counsel. We are pleased to confirm that the Firm is being engaged to represent Harrowgate Private Equity Fund IV LP, a Delaware limited partnership ("HPE Fund IV" or the "Client"), in connection with the potential acquisition (whether by merger, stock purchase, or other structure to be determined) of VeloPay Systems, Inc., a Delaware corporation ("VeloPay" or the "Target"). VeloPay is a cloud-based payments processing and financial technology company headquartered in Austin, Texas, that operates a payments processing platform serving mid-market and enterprise customers across a range of industry verticals.
We understand that this potential transaction is of significant strategic importance to HPE Fund IV and the broader Harrowgate platform, and we are committed to providing the highest quality legal representation throughout all phases of the engagement. This letter (the "Engagement Letter") sets forth the terms and conditions of our engagement, including the scope of our representation, staffing, fee arrangements, confidentiality obligations, and other matters governing our relationship with the Client. We ask that you review this Engagement Letter carefully and, if the terms are acceptable, countersign and return the enclosed duplicate copy to confirm your agreement.
2. Scope of Representation
Calderwood & Harkness will serve as primary outside legal counsel to HPE Fund IV in connection with the potential acquisition of VeloPay (the "Transaction"). Our representation will encompass the following areas of legal work, including but not limited to:
(a) Due Diligence. Conducting and coordinating comprehensive legal due diligence on VeloPay and its direct and indirect subsidiaries. Our due diligence review will cover, among other areas: corporate organization and governance (including charter documents, bylaws, organizational consents, and capitalization); material contracts (including customer agreements, vendor and supplier agreements, partnership and channel agreements, and government contracts, if any); intellectual property (including patents, trademarks, copyrights, trade secrets, software licensing, and open-source compliance); litigation and contingent liabilities (including pending and threatened litigation, arbitration, regulatory proceedings, and governmental investigations); regulatory and licensing matters (including state and federal money transmitter licenses, payment card industry compliance, and Bank Secrecy Act / Anti-Money Laundering compliance); employment and benefits (including employment agreements, equity incentive plans, employee benefit plans, ERISA compliance, and workforce classification); tax matters (including federal, state, local, and international tax filings, positions, and liabilities); real property (including leases, owned property, and environmental conditions); insurance coverage; environmental matters; and data privacy and cybersecurity (including compliance with applicable data protection laws, including the California Consumer Privacy Act, the General Data Protection Regulation, and PCI-DSS standards). We will prepare a comprehensive due diligence report summarizing our findings and identifying material legal risks for the Client's consideration.
(b) Transaction Structuring. Advising HPE Fund IV on the optimal transaction structure for the acquisition of VeloPay, including analysis of available merger structures (forward merger, reverse triangular merger, forward triangular merger), direct stock purchase, and other potential structures. Our structuring advice will encompass consideration of tax efficiency (including potential Section 338(h)(10) elections, Section 336(e) elections, and other available tax elections), liability containment, regulatory approval requirements, third-party consent obligations, and the treatment of VeloPay's outstanding equity awards and convertible instruments. We will work closely with the Client's financial advisors and accountants in connection with structuring analysis.
(c) Negotiation and Drafting. Drafting, negotiating, and finalizing the definitive acquisition agreement (whether in the form of a merger agreement, stock purchase agreement, or other form as dictated by the agreed-upon transaction structure) and all ancillary transaction documents. Ancillary documents are expected to include, without limitation: disclosure schedules; stockholder support agreements (including voting agreements and written consents); equity commitment letters from HPE Fund IV's limited partners or co-investors, as applicable; limited guarantees; escrow agreements; rollover equity agreements (if any VeloPay equityholders will roll equity into the post-closing entity); non-competition and non-solicitation agreements with key VeloPay management personnel; transition services agreements; intellectual property assignment and license agreements; and such other instruments as may be required to consummate the Transaction.
(d) Debt Financing. Reviewing and advising on all debt financing documentation in connection with the Transaction, including debt commitment letters, fee letters, credit agreements (including term loan and revolving credit facilities), guarantee and collateral agreements (including pledge agreements, security agreements, and intellectual property security agreements), intercreditor agreements, and any related financing documentation. Our advice will include review of financing conditions, "SunGard" and "certain funds" provisions, flex provisions, and the interplay between the acquisition agreement and the financing documentation. We will coordinate with the Client's financing sources and their counsel as necessary.
(e) Regulatory and Antitrust. Advising on and coordinating all necessary regulatory filings and approvals in connection with the Transaction. This will include: preparation and filing of premerger notification forms under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and management of the HSR review process, including preparation for and response to any Second Request for Additional Information issued by the Federal Trade Commission or the Antitrust Division of the Department of Justice; advising on and coordinating state-level money transmitter change-of-control filings and approvals, as applicable, in those states where VeloPay holds money transmitter licenses; and advising on any foreign regulatory notifications that may be required (including, if applicable, filings under the Investment Canada Act or other foreign investment review regimes). We will coordinate with local counsel in applicable jurisdictions as needed.
(f) Insurance. Advising on the procurement and negotiation of representations and warranties ("R&W") insurance in connection with the Transaction, including review of binder agreements, policy terms and conditions, exclusions, retention structures, and claims procedures. We will also advise on the procurement of directors' and officers' ("D&O") liability tail insurance for VeloPay's pre-closing directors and officers, and on other insurance matters relating to the Transaction, including cyber liability and other specialty insurance considerations.
(g) Tax. Advising on the federal, state, local, and international tax aspects of the Transaction. Our tax advice will cover structural tax analysis and optimization; withholding obligations (including FIRPTA, backup withholding, and state withholding); analysis of potential "excess parachute payments" under Section 280G of the Internal Revenue Code of 1986, as amended, and related excise tax obligations under Section 4999; review of VeloPay's existing tax positions and potential exposure; post-closing tax planning, including integration-related tax planning and analysis of available tax attributes of the Target; and preparation or review of any tax opinions or tax-related closing deliverables.
(h) Closing and Post-Closing. Coordinating the closing process for the Transaction, including preparation of all closing deliverables, officer and secretary certificates, good standing certificates, bring-down opinions, third-party consents and estoppels, required governmental filings (including the certificate of merger with the Delaware Secretary of State), and closing funds flow memoranda. Following closing, we will advise on post-closing obligations, including escrow administration and release procedures, earnout calculations and disputes (if applicable), purchase price adjustment mechanisms, indemnification claims and procedures, and such other post-closing matters as may arise.
Our representation is limited to the Transaction described in this Engagement Letter. Any additional or unrelated matters — including, without limitation, future acquisitions, portfolio company matters, fund formation, or other matters not directly related to the Transaction — would require a separate engagement letter or a written amendment to this Engagement Letter.
This engagement does not encompass advice on investment decisions, business strategy, accounting matters, or financial advisory services. We assume that the Client will retain separate advisors for such matters as it deems appropriate, and we disclaim any responsibility for advice or services outside the scope of our legal engagement as described herein.
3. Engagement Team and Staffing
Calderwood & Harkness has assembled a dedicated team of professionals to serve HPE Fund IV in connection with this Transaction. The following individuals will form the core engagement team:
Sandra Tung — Responsible Partner, Mergers & Acquisitions. Sandra will serve as the lead partner responsible for the overall direction, strategy, and supervision of the engagement. She will be the Client's primary point of contact at the Firm and will be involved in all major aspects of the Transaction, including negotiation of the definitive acquisition agreement, strategic advice on deal structure and process, and oversight of the due diligence workstreams. Sandra brings over twenty years of experience representing private equity sponsors in complex acquisition transactions, including numerous transactions in the financial technology sector.
Oliver Mackenzie — Billing Partner, Mergers & Acquisitions. Oliver will oversee all billing matters for the engagement and will serve as a secondary senior partner resource on the Transaction. Oliver will be available to provide substantive legal advice and to assist with negotiation and strategic matters as needed.
Megan Chu — Lead Associate, Mergers & Acquisitions. Megan will serve as the day-to-day lead associate on the Transaction, managing due diligence coordination, document drafting and revision, and closing preparation and logistics. Megan will be the primary day-to-day point of contact for the Client's deal team on operational and execution matters.
Derek Okonkwo — Working Associate, Mergers & Acquisitions. Derek will assist with due diligence review and analysis, document preparation and markup, regulatory filings, and ancillary workstreams as assigned. Derek will work under the supervision of Megan Chu and Sandra Tung.
Leonard Cross — Specialist Partner, Tax. Leonard will advise on all tax structuring matters, tax due diligence, withholding analysis, Section 280G parachute payment analysis, and related federal, state, local, and international tax matters arising in connection with the Transaction.
Howard Bellamy — Specialist Partner, Antitrust & Competition. Howard will lead the Firm's antitrust and regulatory advice on the Transaction, including HSR Act filing strategy and preparation, Second Request response strategy and coordination (if applicable), coordination with foreign regulatory counsel, and substantive antitrust analysis of the Transaction.
The Firm reserves the right to involve additional partners, counsel, associates, and paraprofessionals as the matter requires to ensure the timely and effective delivery of legal services. We will provide appropriate advance notice to the Client before involving additional professionals in material workstreams. Staffing will be managed at all times to provide effective and efficient representation, and we will leverage junior team members and paraprofessionals for tasks appropriate to their experience level in order to promote cost efficiency.
4. Client Identification and Conflicts
For purposes of this engagement, the "Client" is Harrowgate Private Equity Fund IV LP (EIN: 87-4231956) and, as applicable, its general partner, Harrowgate Capital Management IV LLC (EIN: 87-4231847), and any acquisition subsidiary or special purpose vehicle formed by or on behalf of HPE Fund IV for purposes of consummating the Transaction (collectively with HPE Fund IV, the "Client Entities"). Our duties of loyalty, confidentiality, and competent representation run to the Client Entities as identified herein. For the avoidance of doubt, our representation does not extend to the individual partners, members, or limited partners of HPE Fund IV or Harrowgate Capital Management IV LLC in their individual capacities, nor to any other Harrowgate-affiliated fund or entity, unless separately agreed in writing.
The Firm has conducted a conflicts check in accordance with its standard procedures and the applicable New York Rules of Professional Conduct and has determined that there are no conflicts of interest that would prevent the Firm from undertaking this engagement at this time. The Client acknowledges and agrees that Calderwood & Harkness is a large law firm with many attorneys and many clients, and that the Firm may currently represent, or in the future may undertake the representation of, other clients in matters that are unrelated to this engagement but that may be adverse to one or more of the Client Entities, subject at all times to the Firm's compliance with applicable rules of professional conduct. The Firm will not, without the Client's prior written informed consent, undertake any representation that would create a direct conflict with the Client's interests in this Transaction.
We respectfully request that the Client promptly notify the Firm of any changes to the identity of the Target, transaction counterparties, co-investors, financing sources, or other parties involved in or connected with the Transaction, so that we may conduct supplemental conflicts screening as appropriate. Timely notification will assist us in identifying and addressing any potential conflicts at the earliest possible stage.
5. Fees and Billing Arrangements
5.1 Hourly Rates
Our fees for this engagement will be based on the time expended by Firm personnel at the following standard hourly rates, which reflect the rates currently in effect for professionals in the relevant practice groups:
Paralegal and other legal support staff time, if applicable to this engagement, will be billed at rates to be communicated separately to the Client. We anticipate that paralegal rates will range from $350 to $475 per hour, depending on the seniority and specialization of the individual.
The foregoing rates are subject to annual adjustment, which typically becomes effective on January 1 of each calendar year. Any rate changes will be communicated to the Client in advance of the effective date. Unless the Client objects in writing within fifteen (15) days of receiving notice of a rate adjustment, the new rates will apply to work performed on or after the effective date.
The Firm will exercise professional judgment in staffing this engagement to ensure cost efficiency, including assigning tasks to the most junior-qualified attorney or professional capable of performing the work competently. We will endeavor to minimize duplication of effort and to leverage technology and established precedents where appropriate.
5.2 Success Fee
In addition to the hourly fees described in Section 5.1 above, upon the successful closing of the Transaction (as evidenced by the satisfaction or waiver of all conditions to closing and the consummation of the transactions contemplated by the definitive acquisition agreement), HPE Fund IV shall pay Calderwood & Harkness a success fee (the "Success Fee") in the amount of $1,250,000 (one million two hundred fifty thousand dollars).
The Success Fee shall be earned and payable upon the closing of the Transaction and shall be invoiced separately from the Firm's regular monthly invoices. Payment of the Success Fee shall be due within thirty (30) days of the closing date. The Success Fee, once earned, is non-refundable.
If the Transaction does not close for any reason — whether as a result of a failure to agree on definitive documentation, a failure of conditions to closing, regulatory disapproval, termination of the definitive acquisition agreement, or otherwise — the Success Fee shall not be payable.
The Success Fee is in addition to, and not a credit against, hourly fees, expenses, and disbursements incurred in connection with the engagement. For the avoidance of doubt, payment of the Success Fee does not relieve the Client of its obligation to pay all accrued and outstanding hourly fees and disbursements.
5.3 Expenses and Disbursements
The Client shall reimburse the Firm for all reasonable out-of-pocket expenses and disbursements incurred in connection with this engagement. Such expenses and disbursements may include, without limitation: travel expenses (including airfare, ground transportation, and mileage); lodging and hotel charges; meals incurred in connection with business travel or working sessions; courier and overnight delivery charges; filing fees (including HSR Act filing fees, Secretary of State filing fees, UCC search and filing fees, and similar governmental charges); document reproduction and printing costs; online legal research and database charges (including Westmark Data Systems, Sundial Solutions, EDGAR, and similar services); electronic data room costs; court reporter and transcription fees; and third-party vendor costs incurred at the Client's direction or with the Client's consent (including, for example, local counsel fees, environmental consultants, and intellectual property search firms).
Aggregate expenses and disbursements shall not exceed $250,000 (two hundred fifty thousand dollars) (the "Expense Cap") without the prior written approval of the Client. For purposes of the Expense Cap, filing fees paid directly to government agencies — including, without limitation, HSR Act filing fees payable to the Federal Trade Commission — shall be treated as pass-through charges and shall not count against the Expense Cap, unless otherwise agreed in writing by the parties. We note that the current HSR Act filing fee for transactions of this nature may be substantial and will be communicated to the Client in advance of filing.
Expenses and disbursements will be itemized on the Firm's monthly invoices, with supporting detail provided upon the Client's request.
6. Billing and Payment Terms
Calderwood & Harkness will render invoices to the Client on a monthly basis, with bills typically issued within thirty (30) days after the end of each calendar month. Each invoice will include: (i) a summary of time charges, organized by attorney or professional, with a description of the services rendered; (ii) the applicable hourly rate for each timekeeper; and (iii) a separate schedule of expenses and disbursements incurred during the billing period, with reasonable detail and categorization.
Payment of each invoice is due within thirty (30) days of the date of the invoice. The Firm accepts payment by wire transfer or check, and wire transfer instructions will be provided on each invoice.
Invoices not paid within the thirty (30)-day payment period will accrue interest at a rate of 1.0% per month (twelve percent (12%) per annum), or the maximum rate permitted by applicable law, whichever is lower, calculated from the due date of the invoice until the date full payment is received by the Firm. The accrual of interest on past-due amounts shall not constitute a waiver of any other rights or remedies available to the Firm.
The Client may in good faith dispute any item on an invoice, provided that (a) all undisputed amounts on such invoice are paid within the standard thirty (30)-day payment period, and (b) any disputed items are raised promptly in writing to Oliver Mackenzie, with a reasonably detailed explanation of the basis for the dispute. The parties shall endeavor to resolve any billing disputes in a timely and cooperative manner.
7. Confidentiality
Calderwood & Harkness will maintain the confidentiality of all information received from or on behalf of the Client in connection with this engagement, in accordance with the Firm's professional and ethical obligations under the New York Rules of Professional Conduct and other applicable rules governing attorney conduct. The Firm will not disclose Client confidences or secrets to any third party without the Client's prior written consent, except as may be required by law, court order, subpoena, or applicable rules of professional conduct (including, for example, disclosure necessary to prevent a crime or to respond to allegations in a proceeding concerning the Firm's representation of the Client).
All members of the Firm's engagement team and supporting personnel will be instructed regarding the confidential nature of this engagement and the information received in connection therewith. The Firm maintains appropriate physical, electronic, and procedural safeguards to protect the confidentiality of client information.
The obligations of confidentiality set forth in this Section 7 shall survive the termination or conclusion of this engagement, regardless of the reason for such termination or conclusion, and shall continue in full force and effect indefinitely.
8. Document Retention
The Firm will maintain files, work product, and documents related to this engagement in accordance with Calderwood & Harkness's document retention policy, as in effect from time to time. Files may be maintained in physical, electronic, or other format, at the Firm's discretion.
Client documents and materials provided to the Firm in connection with this engagement will be returned to the Client upon written request, subject to the Firm's right to retain copies of such documents for its own records to the extent required or permitted by applicable rules of professional responsibility, or as the Firm deems reasonably necessary for the protection of its interests.
At the conclusion of the engagement, the Firm may, without further notice to the Client, destroy files and records relating to this engagement after a retention period of ten (10) years from the date of the final invoice rendered in connection with the matter, unless the Client provides written instructions to the contrary prior to the expiration of such retention period. The Client acknowledges that the Firm shall have no obligation to retain files beyond the stated retention period absent such written instructions.
9. Termination of Engagement
Either party may terminate this engagement at any time upon written notice to the other party. Termination by the Client shall be effective upon delivery of written notice to Sandra Tung at the Firm's address set forth above (or such other address as the Firm may designate). Termination by the Firm shall be effective upon delivery of written notice to the Client at the address set forth in Section 11 below (or such other address as the Client may designate), subject to the Firm's compliance with applicable rules of professional conduct governing withdrawal from representation.
Upon termination of the engagement, the Client shall be obligated to pay all fees, expenses, and disbursements incurred through the effective date of termination, including fees for any work in progress as of such date. The Firm will provide a final invoice to the Client within thirty (30) days of the effective date of termination.
The Success Fee described in Section 5.2 shall not be payable if the engagement is terminated prior to the closing of the Transaction; provided, however, that if the Transaction subsequently closes within twelve (12) months of the effective date of termination and substantially on the terms negotiated during the period of the Firm's engagement, the Success Fee shall become payable upon such closing, and the Client shall remit the Success Fee to the Firm within thirty (30) days of the closing date.
Upon termination, Calderwood & Harkness will take all reasonable steps to protect the Client's interests, including facilitating the orderly transition of the matter to successor counsel designated by the Client, providing copies of relevant files and work product (subject to the Firm's right to retain copies), and cooperating in good faith with successor counsel to minimize disruption to the Client.
10. Limitation of Liability
The Firm's aggregate liability to the Client arising out of or in connection with this engagement, whether based on breach of contract, negligence, or any other theory of liability, shall not exceed the total amount of fees actually paid by the Client to the Firm for services rendered in connection with this matter. In no event shall the Firm be liable to the Client for any consequential, incidental, special, indirect, or punitive damages arising out of or in connection with this engagement, regardless of whether such damages were foreseeable or whether the Firm was advised of the possibility thereof.
The foregoing limitation of liability shall not apply in the case of the Firm's willful misconduct or gross negligence. Nothing in this Section 10 shall be construed to limit any rights or obligations imposed by applicable rules of professional conduct or non-waivable provisions of law.
11. Designation of Client Contact
All communications from Calderwood & Harkness in connection with this engagement shall be directed to:
Priya Deshmukh Managing Partner, Fund IV Harrowgate Capital Management IV LLC (as General Partner of Harrowgate Private Equity Fund IV LP) 300 King Street, Suite 4200 Wilmington, Delaware 19801
Email: pdeshmukh@harrowgatecapital.com
Telephone: (302) 555-4100
With a copy to:
Thomas Eriksen Partner, Head of Financial Technology Harrowgate Capital Management IV LLC 300 King Street, Suite 4200 Wilmington, Delaware 19801
Email: teriksen@harrowgatecapital.com
Telephone: (302) 555-4125
The Client may designate additional or substitute contacts by providing written notice to Sandra Tung at the Firm. Until such notice is received and acknowledged, the Firm shall be entitled to rely on the contact designations set forth above.
12. Governing Law and Dispute Resolution
This Engagement Letter shall be governed by and construed in accordance with the laws of the State of New York, without regard to any conflicts of law principles that would require the application of the laws of any other jurisdiction.
Any dispute, claim, or controversy arising out of or relating to this Engagement Letter or the engagement contemplated hereby, including any dispute regarding the interpretation, enforceability, performance, or breach of this Engagement Letter, shall be resolved by binding arbitration administered by JAMS in New York, New York, in accordance with the JAMS Comprehensive Arbitration Rules and Procedures then in effect. The arbitration shall be conducted before a single arbitrator selected in accordance with such rules. The arbitrator's award shall be final and binding and may be entered as a judgment in any court of competent jurisdiction. Each party shall bear its own costs and attorneys' fees in connection with any arbitration, unless the arbitrator determines that an award of costs and fees to the prevailing party is appropriate.
Each party irrevocably consents to the exclusive jurisdiction and venue of New York, New York, for any proceedings related to this Engagement Letter, including any proceedings to compel arbitration or to enforce an arbitral award.
13. Entire Agreement; Amendments
This Engagement Letter constitutes the entire agreement between Calderwood & Harkness LLP and the Client with respect to the subject matter hereof and supersedes all prior discussions, negotiations, understandings, representations, and agreements, whether written or oral, relating to the engagement described herein. No representations or warranties have been made by either party except as expressly set forth in this Engagement Letter.
No amendment, modification, supplement, or waiver of any provision of this Engagement Letter shall be effective unless made in writing and signed by authorized representatives of both Calderwood & Harkness LLP and the Client. No waiver of any provision of this Engagement Letter shall be deemed a waiver of any other provision, and no waiver shall be effective unless made in writing.
14. Acceptance
We are grateful for the confidence that you and the Harrowgate team have placed in Calderwood & Harkness, and we look forward to working with you on this important transaction. We are confident that the team we have assembled will provide HPE Fund IV with the highest quality legal representation throughout all phases of the Transaction.
Please confirm your acceptance of the terms of this Engagement Letter by executing the enclosed duplicate copy of this letter in the space provided below and returning it to Sandra Tung at the address set forth above, or by email to stung@calderwoodharkness.com. This Engagement Letter shall become effective upon receipt of the fully executed counterpart by the Firm. If we do not receive a signed copy within thirty (30) days of the date hereof, this Engagement Letter shall be deemed withdrawn, unless the parties otherwise agree in writing.
We are available at your convenience to discuss any questions regarding the terms of this Engagement Letter or the engagement generally.
Very truly yours,
CALDERWOOD & HARKNESS LLP
CALDERWOOD & HARKNESS LLP
By: ________
Name: Sandra Tung
Title: Partner
Calderwood & Harkness LLP 787 Seventh Avenue, 38th Floor New York, New York 10019
ACCEPTANCE AND AGREEMENT
The undersigned hereby confirms its acceptance of and agreement to the terms and conditions of this Engagement Letter, effective as of the date set forth below.
AGREED AND ACCEPTED:
HARROWGATE PRIVATE EQUITY FUND IV LP
By: Harrowgate Capital Management IV LLC,
its General Partner
By: ________
Name: Priya Deshmukh
Title: Managing Partner, Fund IV
Date: ________
Enclosures:
•  Duplicate copy of Engagement Letter for countersignature and return to Calderwood & Harkness LLP
Professional Category | Hourly Rate
Partners | $1,650
Counsel | $1,350
Associates | $950

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION

CALDERWOOD & HARKNESS LLP

CALDERWOOD & HARKNESS LLP

ACCEPTANCE AND AGREEMENT

AGREED AND ACCEPTED:

HARROWGATE PRIVATE EQUITY FUND IV LP

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