TRALVENDO NATIONAL BANK 100 Federal Street, 30th Floor Boston, Massachusetts 02110
February 14, 2025
Reference: CRE-2025-SPF-0441
Harrowgate Private Equity Fund IV LP 300 King Street, Suite 4200 Wilmington, Delaware 19801
Attention: Priya Deshmukh, Managing Partner, Fund IV
DEBT COMMITMENT LETTER EXECUTION VERSION
Ladies and Gentlemen:
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Section 1: Commitment; Purpose
1.1 Recitals and Background
Reference is made to the proposed acquisition (the "Acquisition") by Harrowgate Private Equity Fund IV LP, a Delaware limited partnership ("you," the "Sponsor," or "HPE Fund IV"), through a newly formed, wholly-owned acquisition subsidiary, Harrowgate Velocity Merger Sub Inc., a Delaware corporation ("Merger Sub"), of VeloPay Systems, Inc., a Delaware corporation (the "Target" or the "Company"), pursuant to a reverse triangular merger in which Merger Sub will merge with and into the Target, with the Target surviving as a wholly-owned subsidiary of HPE Fund IV (the "Surviving Corporation"). The aggregate merger consideration to be paid in connection with the Acquisition is One Billion Nine Hundred Million Dollars ($1,900,000,000), payable entirely in cash to the stockholders of the Target (including approximately One Hundred Thirty-Three Million Dollars ($133,000,000) to be deposited in escrow at closing). The Acquisition will be structured as a reverse triangular merger under Section 251 of the Delaware General Corporation Law (the "DGCL").
We have reviewed a draft of the Agreement and Plan of Merger (the "Merger Agreement") to be entered into among HPE Fund IV, Merger Sub, and the Target, substantially in the form most recently provided to the Commitment Parties (as defined below) on or prior to the date hereof. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Term Sheet attached hereto as Exhibit A or, if not defined therein, in the Merger Agreement, as applicable. The Acquisition, the financing contemplated by this Commitment Letter, the refinancing of the Target's existing indebtedness, the equity contribution by HPE Fund IV, and all related transactions are collectively referred to herein as the "Transactions."
1.2 Commitment
Tralvendo National Bank ("Tralvendo") and Prairie State Bank, N.A. ("Prairie State" and, together with Tralvendo, the "Commitment Parties," the "Initial Lenders," or "we") are pleased to advise HPE Fund IV of the following commitments in connection with the Transactions:
(a) Term Loan Facility. Tralvendo National Bank hereby commits to provide one hundred percent (100%) of a senior secured first lien term loan facility (the "Term Loan Facility") in an aggregate principal amount of Five Hundred Million Dollars ($500,000,000). In connection therewith, Tralvendo National Bank shall act as sole lead arranger, sole bookrunner, and administrative agent for the Term Loan Facility.
(b) Revolving Credit Facility. Prairie State Bank, N.A. hereby commits to provide one hundred percent (100%) of a senior secured first lien revolving credit facility (the "Revolving Credit Facility" and, together with the Term Loan Facility, the "Facilities") in an aggregate principal amount of Two Hundred Sixty Million Dollars ($260,000,000). In connection therewith, Prairie State Bank, N.A. shall act as sole lead arranger, sole bookrunner, and administrative agent for the Revolving Credit Facility.
The total committed debt financing under the Facilities is Seven Hundred Sixty Million Dollars ($760,000,000). The commitments set forth in this Section 1.2 are subject to the terms and conditions of this Commitment Letter, including satisfaction of the Funding Conditions set forth in Section 3 hereof.
1.3 Purpose
The proceeds of the Facilities shall be used as follows:
(a) Term Loan Facility. The proceeds of the Term Loan Facility shall be used on the Closing Date (as defined below): (i) to finance a portion of the Acquisition consideration payable to the stockholders of the Target; (ii) to refinance in full certain existing indebtedness of the Target, including, without limitation, the Target's existing senior secured term loan facility in the outstanding principal amount of approximately One Hundred Twelve Million Dollars ($112,000,000) with Meridian Commercial Credit Corp. (together with all accrued and unpaid interest and fees thereon, the "Existing Credit Facility"); and (iii) to pay fees, costs, and expenses incurred by HPE Fund IV, the Target, and their respective affiliates in connection with the Acquisition, the Facilities, and the other Transactions.
(b) Revolving Credit Facility. The proceeds of the Revolving Credit Facility shall be used: (i) on the Closing Date, to finance a portion of the Acquisition consideration and related Transaction costs (the estimated draw at closing being approximately Two Hundred Fifty-Four Million Seven Hundred Thousand Dollars ($254,700,000)); (ii) following the Closing Date, to provide ongoing working capital for the Target and its subsidiaries; and (iii) for general corporate purposes of the Target and its subsidiaries, in each case subject to the limitations set forth in the definitive Credit Agreement and the other Loan Documents.
For the avoidance of doubt, the proceeds of the Facilities shall not be used, directly or indirectly, for any purpose that would violate Regulations T, U, or X of the Board of Governors of the Federal Reserve System, or for any purpose that would violate applicable anti-corruption laws, anti-money laundering laws, or economic sanctions laws and regulations.
Section 2: The Facilities — Summary of Principal Terms
The following is a summary of the principal terms and conditions of the Facilities. This summary is qualified in its entirety by reference to the Term Sheet attached hereto as Exhibit A, which sets forth additional terms and conditions of the Facilities and is incorporated herein by reference.
2.1 Term Loan Facility
Borrower: VeloPay Systems, Inc. (as the Surviving Corporation in the merger).
Holdings / Parent Guarantor: Harrowgate Private Equity Fund IV LP.
Administrative Agent: Tralvendo National Bank.
Amount: Five Hundred Million Dollars ($500,000,000).
Type: Senior secured first lien term loan.
Maturity: Seven (7) years from the Closing Date (the "Term Loan Maturity Date").
Interest Rate: Term SOFR (as published by CME Group Benchmark Administration Limited, or a successor administrator acceptable to the Administrative Agent) plus three hundred seventy-five (375) basis points per annum, subject to a Term SOFR floor of fifty (50) basis points (0.50%). Interest periods of one, three, or six months (or, if agreed to by all relevant Lenders, twelve months) shall be available at the election of the Borrower. Interest shall be payable on the last day of each interest period and, in the case of any interest period exceeding three months, on each day that occurs every three months after the first day of such interest period.
Default Rate: Upon the occurrence and during the continuance of an Event of Default, all outstanding obligations under the Term Loan Facility shall bear interest at an additional two hundred (200) basis points per annum above the otherwise applicable rate.
Amortization: One percent (1.00%) per annum of the original principal amount of the Term Loan Facility, payable in equal quarterly installments of One Million Two Hundred Fifty Thousand Dollars ($1,250,000), commencing on the last business day of the first full fiscal quarter ending after the Closing Date. The remaining outstanding principal balance shall be due and payable on the Term Loan Maturity Date.
Optional Prepayment: The Borrower may prepay the Term Loan Facility, in whole or in part, at any time without premium or penalty, subject to (i) customary breakage costs associated with the prepayment of Term SOFR loans on a date other than the last day of the applicable interest period and (ii) a prepayment premium equal to one percent (1.00%) of the principal amount prepaid, applicable only during the first twelve (12) months following the Closing Date (the "Soft Call Protection"). After the expiration of the Soft Call Protection period, prepayments may be made at par. Any partial prepayment shall be in a minimum principal amount of One Million Dollars ($1,000,000) (or such lesser amount as may be outstanding).
Mandatory Prepayment: The Term Loan Facility shall be subject to customary mandatory prepayment provisions, including:
(i) Asset Sales. One hundred percent (100%) of net cash proceeds received by the Borrower or any of its restricted subsidiaries from any non-ordinary course sale, transfer, or other disposition of assets (including equity interests in subsidiaries), subject to customary reinvestment rights permitting the Borrower to reinvest such proceeds in productive assets of a similar nature within three hundred sixty-five (365) days following receipt thereof (or, if the Borrower has committed to reinvest such proceeds within such 365-day period, within an additional one hundred eighty (180) days thereafter).
(ii) Casualty and Condemnation Events. One hundred percent (100%) of net cash proceeds received by the Borrower or any of its restricted subsidiaries from any casualty or condemnation event affecting the collateral, subject to reinvestment rights substantially similar to those described in clause (i) above.
(iii) Debt Issuance Proceeds. One hundred percent (100%) of net cash proceeds received by the Borrower or any of its restricted subsidiaries from the incurrence or issuance of any indebtedness not otherwise permitted under the Credit Agreement.
(iv) Excess Cash Flow Sweep. Beginning with the fiscal year ending on or about December 31, 2026, fifty percent (50%) of Excess Cash Flow (as defined in the Term Sheet) for each fiscal year, stepping down to (A) twenty-five percent (25%) if the first lien net leverage ratio as of the last day of such fiscal year is less than or equal to 4.25:1.00, and (B) zero percent (0%) if the first lien net leverage ratio as of the last day of such fiscal year is less than or equal to 3.25:1.00. The annual excess cash flow prepayment shall be due within ten (10) business days following delivery of the audited financial statements for the applicable fiscal year.
2.2 Revolving Credit Facility
Borrower: VeloPay Systems, Inc. (as the Surviving Corporation).
Holdings / Parent Guarantor: Harrowgate Private Equity Fund IV LP.
Administrative Agent: Prairie State Bank, N.A.
Amount: Two Hundred Sixty Million Dollars ($260,000,000), including a letter of credit subfacility in the aggregate face amount of up to Twenty-Five Million Dollars ($25,000,000) (the "LC Subfacility") and a swingline subfacility in the aggregate principal amount of up to Fifteen Million Dollars ($15,000,000) (the "Swingline Subfacility"). Amounts borrowed under the LC Subfacility and the Swingline Subfacility shall reduce the availability under the Revolving Credit Facility on a dollar-for-dollar basis.
Type: Senior secured first lien revolving credit facility.
Maturity: Five (5) years from the Closing Date (the "Revolving Credit Maturity Date").
Interest Rate: Term SOFR plus three hundred twenty-five (325) basis points per annum, subject to a Term SOFR floor of fifty (50) basis points (0.50%). Interest periods of one, three, or six months shall be available at the election of the Borrower. Interest on revolving credit loans shall be payable on the last day of each interest period and, in the case of any interest period exceeding three months, on each day that occurs every three months after the first day of such interest period. Swingline loans shall bear interest at a rate to be agreed between the Borrower and the swingline lender.
Commitment Fee: Fifty (50) basis points (0.50%) per annum on the daily average unused portion of the Revolving Credit Facility (after giving effect to outstanding letters of credit and swingline loans), payable quarterly in arrears. The commitment fee shall step down to thirty-seven and one-half (37.5) basis points (0.375%) per annum upon the Borrower's achievement of a first lien net leverage ratio of less than or equal to 3.50:1.00 as of the end of any fiscal quarter for which financial statements have been delivered.
LC Fee: A letter of credit participation fee shall be payable to each revolving credit lender in an amount equal to the applicable revolving credit margin (currently three hundred twenty-five (325) basis points) per annum on the daily face amount of each outstanding letter of credit, payable quarterly in arrears. In addition, a fronting fee equal to twelve and one-half (12.5) basis points (0.125%) per annum on the daily face amount of each outstanding letter of credit shall be payable to the applicable issuing bank, payable quarterly in arrears.
2.3 Guarantees
All obligations of the Borrower under the Facilities and the other Loan Documents shall be unconditionally guaranteed on a joint and several basis by HPE Fund IV (in its capacity as Holdings) and each existing and subsequently acquired or organized direct and indirect domestic subsidiary of the Borrower that is a restricted subsidiary (collectively, the "Guarantors"). As of the Closing Date, the Guarantors (in addition to HPE Fund IV) are expected to include, without limitation:
(a) VeloPay Processing LLC, a Delaware limited liability company;
(b) VeloPay Fraud intelligence Inc., a Delaware corporation; and
(c) PayStream Gateway LLC, a Delaware limited liability company.
Any domestic restricted subsidiary acquired or organized after the Closing Date shall be required to become a Guarantor within thirty (30) days of such acquisition or organization (or such longer period as the applicable Administrative Agent may agree in its reasonable discretion), by executing and delivering a joinder agreement to the Guarantee and Collateral Agreement.
The following subsidiaries shall be excluded from the Guarantor requirement: (i) any subsidiary designated as an "unrestricted subsidiary" in accordance with the terms of the Credit Agreement (if any); (ii) any subsidiary that qualifies as an "immaterial subsidiary" (defined as any subsidiary that, as of the last day of the most recently ended fiscal quarter, (A) had total assets constituting less than two and one-half percent (2.5%) of the consolidated total assets of the Borrower and its restricted subsidiaries and (B) had total revenue constituting less than two and one-half percent (2.5%) of the consolidated total revenue of the Borrower and its restricted subsidiaries); provided that the aggregate total assets and total revenue of all immaterial subsidiaries shall not exceed five percent (5.0%) of consolidated total assets and five percent (5.0%) of consolidated total revenue, respectively; and (iii) any foreign subsidiary, including, as of the Closing Date, VeloPay Canada Inc., an Ontario, Canada corporation, and VeloPay Europe, Unipessoal Lda., a Portuguese limited liability company.
2.4 Security / Collateral
All obligations under the Facilities shall be secured by a first priority perfected security interest (subject to permitted liens) in substantially all assets of the Borrower and each Guarantor, including, without limitation:
(a) one hundred percent (100%) of the equity interests of each direct domestic subsidiary of the Borrower and each Guarantor;
(b) sixty-five percent (65%) of the voting equity interests and one hundred percent (100%) of the non-voting equity interests of each first-tier foreign subsidiary (as of the Closing Date, VeloPay Canada Inc. and VeloPay Europe, Unipessoal Lda.);
(c) all accounts receivable, chattel paper, deposit accounts, documents, equipment, fixtures, general intangibles (including payment intangibles and software), goods, instruments, intellectual property (including patents, trademarks, copyrights, trade secrets, and domain names), intercompany notes, inventory, investment property, letter-of-credit rights, and supporting obligations; and
(d) all proceeds and products of the foregoing.
The collateral shall be subject to customary exceptions and exclusions consistent with credit facilities of this type, size, and purpose, including, without limitation, exclusions for (i) motor vehicles and other assets subject to certificates of title to the extent a security interest therein cannot be perfected by the filing of a UCC financing statement, (ii) leasehold interests in real property, (iii) any governmental licenses or permits to the extent the grant of a security interest therein would violate applicable law or the terms of such license or permit (after giving effect to applicable anti-assignment override provisions of the Uniform Commercial Code), (iv) letter-of-credit rights (other than as supporting obligations), and (v) any assets to the extent a pledge thereof would result in adverse tax consequences as reasonably determined by the Borrower and the Administrative Agents.
2.5 Intercreditor Arrangements
The Term Loan Facility and the Revolving Credit Facility shall be secured on a pari passu basis by the same collateral. Tralvendo National Bank, in its capacity as administrative agent for the Term Loan Facility (the "Term Loan Agent"), and Prairie State Bank, N.A., in its capacity as administrative agent for the Revolving Credit Facility (the "Revolver Agent"), shall enter into an intercreditor agreement (the "Intercreditor Agreement") on or prior to the Closing Date, in form and substance reasonably satisfactory to the Term Loan Agent, the Revolver Agent, and HPE Fund IV. The Intercreditor Agreement shall govern, among other things, (i) the relative priorities of the liens securing the Facilities, (ii) the allocation and application of collateral proceeds, (iii) the exercise of remedies with respect to the shared collateral, (iv) standstill and cooperation provisions, and (v) customary buy-out and release provisions. The Intercreditor Agreement shall provide that the Term Loan Facility and the Revolving Credit Facility share ratably in the proceeds of the collateral upon any enforcement action or in connection with any bankruptcy or insolvency proceeding.
Section 3: Conditions Precedent to Funding
3.1 Conditions to Initial Funding (Closing Date Conditions)
The commitment of the Commitment Parties to fund the Facilities on the date of the closing of the Acquisition (the "Closing Date") shall be subject solely to the satisfaction (or waiver by the Commitment Parties) of the following conditions precedent (collectively, the "Funding Conditions"). It is understood and agreed that there are no conditions (implied or otherwise) to the commitment of the Commitment Parties to fund the Facilities on the Closing Date, including compliance with the terms of this Commitment Letter or the Term Sheet, other than the Funding Conditions expressly set forth in this Section 3.1. The Funding Conditions are as follows:
(a) Merger Agreement
The Acquisition shall have been consummated, or shall be consummated substantially concurrently with the initial funding of the Facilities on the Closing Date, in all material respects in accordance with the terms of the Merger Agreement, without giving effect to any amendment, modification, supplement, or waiver of any provision of the Merger Agreement that is materially adverse to the interests of the Lenders (in their capacities as such) without the prior written consent of Tralvendo (such consent not to be unreasonably withheld, conditioned, or delayed). For purposes of this clause (a), it is understood and agreed that (i) any reduction in the aggregate merger consideration payable pursuant to the Merger Agreement shall not be deemed materially adverse to the interests of the Lenders so long as such reduction is applied to reduce the equity contribution by HPE Fund IV, (ii) any amendment, modification, supplement, or waiver of any provision of the Merger Agreement that is consented to by HPE Fund IV but that could not reasonably be expected to be materially adverse to the interests of the Lenders shall be permitted without the consent of Tralvendo, and (iii) any amendment to the definition of "Company Material Adverse Effect" in the Merger Agreement that narrows such definition shall be deemed materially adverse to the interests of the Lenders.
(b) Accuracy of Specified Representations
The representations and warranties designated as "Specified Representations" in the Credit Agreement shall be true and correct in all material respects as of the Closing Date (or, if any such Specified Representation is by its terms qualified by materiality or "material adverse effect," such Specified Representation shall be true and correct in all respects). As used herein, "Specified Representations" means solely the following representations and warranties to be set forth in the Credit Agreement:
(i) organization, existence, and good standing of the Borrower and each Guarantor in their respective jurisdictions of formation;
(ii) due authorization, execution, delivery, and enforceability of the Loan Documents by the Borrower and each Guarantor, and the absence of conflicts with the organizational documents of the Borrower and each Guarantor;
(iii) no use of proceeds of the Facilities in violation of Regulations T, U, or X of the Board of Governors of the Federal Reserve System;
(iv) compliance with (A) the Federal Reserve Act, (B) the Investment Company Act of 1940, as amended, (C) the USA PATRIOT Act (Title III of Pub. L. 107-56), (D) applicable anti-money laundering laws and regulations, and (E) applicable sanctions laws and regulations administered by the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC"), the U.S. Department of State, the United Nations Security Council, the European Union, or His Majesty's Treasury;
(v) solvency of the Borrower and its subsidiaries on a consolidated basis, after giving pro forma effect to the consummation of the Transactions on the Closing Date; and
(vi) the creation, validity, perfection, and priority of the security interests granted pursuant to the Loan Documents in the collateral described in Section 2.4 hereof (subject to permitted liens and customary exceptions).
In addition, the representations and warranties made by the Target in the Merger Agreement that are material to the interests of the Lenders (in their capacities as such) (the "Specified Acquisition Agreement Representations") shall be true and correct, but only to the extent that HPE Fund IV (or Merger Sub) has the right to decline to consummate the Acquisition, or the right to terminate the Merger Agreement, as a result of a failure of such representations and warranties to be true and correct. The parties acknowledge that this condition is intended to ensure that the Lenders receive no less (and no greater) protection with respect to the Target's representations than that received by HPE Fund IV under the Merger Agreement.
(c) No Material Adverse Effect
Since the date of the Merger Agreement, no event, change, circumstance, occurrence, effect, or development shall have occurred that, individually or in the aggregate, has had or would reasonably be expected to have a "Company Material Adverse Effect" as such term is defined in the Merger Agreement (and subject to the same qualifications, exceptions, and carve-outs set forth therein, including, without limitation, carve-outs for (i) pandemics, epidemics, or public health emergencies, (ii) acts of war, armed hostilities, sabotage, terrorism, or military action, (iii) changes in general economic, financial, or market conditions, (iv) industry-wide changes or conditions affecting the payment processing industry generally, (v) changes in applicable law or GAAP (or the authoritative interpretation thereof), (vi) the failure of the Target to meet internal or published projections or forecasts (it being understood that the underlying facts and circumstances giving rise to such failure may be taken into account), and (vii) the announcement or pendency of the Acquisition or the other Transactions).
(d) Financial Statements
Tralvendo shall have received:
(i) the audited consolidated balance sheets and the related audited consolidated statements of income, comprehensive income, stockholders' equity, and cash flows of the Target and its consolidated subsidiaries for each of the three (3) most recently completed fiscal years of the Target ended at least ninety (90) days prior to the Closing Date, prepared in accordance with United States generally accepted accounting principles ("GAAP") and audited by an independent registered public accounting firm of nationally recognized standing, together with the unqualified (or unqualified with emphasis of matter only) reports of such accounting firm thereon. For the avoidance of doubt, based on the Target's fiscal year end of December 31, the audited financial statements for fiscal years ended December 31, 2022, December 31, 2023, and December 31, 2024, are expected to be delivered. The Target's fiscal year 2024 audited financial statements reflect, among other things, the following: revenue of approximately $412,300,000; Adjusted EBITDA (as defined in the Term Sheet) of approximately $98,100,000; net income of approximately $41,700,000; and total assets of approximately $689,400,000; and
(ii) the unaudited interim consolidated balance sheets and the related unaudited interim consolidated statements of income and cash flows of the Target and its consolidated subsidiaries for each fiscal quarter (other than the fourth fiscal quarter of any fiscal year) ended after the date of the most recent audited financial statements delivered pursuant to clause (i) above and at least forty-five (45) days prior to the Closing Date, certified by the chief financial officer of the Target as fairly presenting in all material respects the financial position and results of operations of the Target and its consolidated subsidiaries for the periods and dates covered thereby (subject to the absence of footnotes and normal year-end audit adjustments).
(e) Solvency Certificate
Tralvendo shall have received, on or prior to the Closing Date, a solvency certificate from the chief financial officer of the Borrower (Marcus Langford, Chief Financial Officer of VeloPay Systems, Inc.) substantially in the form set forth in the Term Sheet, certifying that, after giving pro forma effect to the consummation of the Transactions on the Closing Date (including the incurrence of the indebtedness under the Facilities and the payment of the Acquisition consideration, the refinancing of the Existing Credit Facility, and the payment of all fees and expenses in connection therewith), the Borrower and its subsidiaries, on a consolidated basis, are Solvent. For purposes hereof, "Solvent" means that (i) the fair value of the assets of the Borrower and its subsidiaries, on a consolidated basis, exceeds the total amount of their liabilities (including contingent liabilities), (ii) the present fair salable value of the assets of the Borrower and its subsidiaries, on a consolidated basis, is greater than the amount that will be required to pay the probable liability on their existing debts and other liabilities (including contingent liabilities) as they become absolute and matured, (iii) the Borrower and its subsidiaries, on a consolidated basis, are able to pay their debts and other liabilities (including contingent liabilities) as they mature in the normal course of business, and (iv) the Borrower and its subsidiaries, on a consolidated basis, do not have unreasonably small capital with which to conduct their businesses.
(f) Legal Opinions
Tralvendo and Prairie State shall have received customary legal opinions, dated as of the Closing Date, from:
(i) Calderwood & Harkness LLP, counsel to HPE Fund IV and Merger Sub, covering such matters relating to HPE Fund IV, Merger Sub, and the Transactions as are customary for leveraged acquisition financings of this type, including enforceability of the Loan Documents, authorization, no-conflicts, and such other matters as the Administrative Agents may reasonably request; and
(ii) Whitford Jessup & Crane LLP, counsel to the Target, covering such matters relating to the Target and its subsidiaries as are customary for leveraged acquisition financings of this type, including enforceability of the Loan Documents to which the Target or any of its subsidiaries is a party, authorization, no-conflicts, and such other matters as the Administrative Agents may reasonably request;
in each case, in form and substance reasonably satisfactory to the Administrative Agents.
(g) Organizational and Authorization Documents
Tralvendo and Prairie State shall have received:
(i) certified copies of the organizational documents (certificate of incorporation or formation, bylaws, limited partnership agreement, limited liability company agreement, or comparable governing documents, as applicable) of the Borrower, HPE Fund IV, Merger Sub, and each Guarantor;
(ii) certificates of good standing (or equivalent) for the Borrower, HPE Fund IV, Merger Sub, and each Guarantor from their respective jurisdictions of formation, dated no more than thirty (30) days prior to the Closing Date;
(iii) resolutions (or equivalent authorization) of the board of directors, board of managers, partners, or other governing body of the Borrower, HPE Fund IV, Merger Sub, and each Guarantor, authorizing the execution, delivery, and performance of the Loan Documents to which each such entity is a party, certified by the secretary or other appropriate officer of each such entity; and
(iv) officer's certificates and incumbency certificates with respect to the authorized signatories of the Borrower, HPE Fund IV, Merger Sub, and each Guarantor, in form and substance reasonably satisfactory to the Administrative Agents.
(h) Collateral and Guarantee Documentation
The Commitment Parties shall have received executed counterparts of:
(i) the Guarantee and Collateral Agreement, substantially in the form contemplated by the Term Sheet, duly executed by the Borrower, HPE Fund IV, and each Guarantor;
(ii) UCC-1 financing statements (and equivalent filings in each applicable jurisdiction) in proper form for filing in all jurisdictions necessary to perfect the security interests granted pursuant to the Guarantee and Collateral Agreement and the other Loan Documents;
(iii) pledge agreements and stock powers (or equivalent instruments) evidencing the pledge of the equity interests described in Section 2.4 hereof; and
(iv) such other documents, instruments, and agreements as may be reasonably necessary to create and perfect first priority security interests in the collateral in favor of the Administrative Agents (for the benefit of the Lenders), including, without limitation, intellectual property security agreements, deposit account control agreements, and securities account control agreements (provided that the execution and delivery of control agreements shall not be a condition precedent to funding on the Closing Date but shall be delivered within ninety (90) days following the Closing Date or such later date as the applicable Administrative Agent may agree).
(i) Payoff of Existing Indebtedness
The Commitment Parties shall have received evidence, in form and substance reasonably satisfactory to Tralvendo, of the repayment in full and termination of all outstanding obligations under the Existing Credit Facility with Meridian Commercial Credit Corp. The estimated payoff amount as of the anticipated Closing Date is approximately One Hundred Thirteen Million Two Hundred Thirty Thousand Dollars ($113,230,000), consisting of approximately One Hundred Twelve Million Dollars ($112,000,000) in outstanding principal plus approximately One Million Two Hundred Thirty Thousand Dollars ($1,230,000) in accrued and unpaid interest and fees. Such evidence shall include:
(i) a payoff letter from Meridian Commercial Credit Corp. (or its agent) in form and substance reasonably satisfactory to Tralvendo, setting forth the aggregate payoff amount and wire instructions for the payment thereof, and confirming that, upon receipt of such payoff amount, all commitments under the Existing Credit Facility will be terminated and all liens and security interests securing the Existing Credit Facility will be released; and
(ii) a commitment by Meridian Commercial Credit Corp. (or its agent) to deliver UCC-3 termination statements and other lien releases (including intellectual property lien releases) promptly following receipt of the payoff amount, or, alternatively, authorization for the Commitment Parties to file such termination statements on behalf of Meridian Commercial Credit Corp.
(j) Fees and Expenses
HPE Fund IV shall have paid (or shall substantially concurrently pay) all fees then due and payable under the separate Fee Letter dated as of the date hereof (the "Fee Letter") between HPE Fund IV and the Commitment Parties, and shall have reimbursed (or shall substantially concurrently reimburse) the Commitment Parties for all reasonable and documented out-of-pocket expenses then invoiced and payable in connection with the Facilities, including, without limitation, the fees and disbursements of Maplewood & Strauss LLP, counsel to the Commitment Parties.
(k) Insurance. Tralvendo and Prairie State shall have received evidence of insurance coverage for the Borrower and its subsidiaries, in amounts, on terms, and with carriers reasonably satisfactory to the Administrative Agents, together with endorsements naming the applicable Administrative Agent as additional insured (with respect to liability policies) and loss payee or mortgagee (with respect to property and casualty policies), as applicable, in form and substance reasonably satisfactory to the Administrative Agents.
(l) KYC / Patriot Act
At least three (3) business days prior to the Closing Date, Tralvendo and Prairie State shall have received all documentation and other information required under applicable "know your customer" and anti-money laundering rules and regulations, including, without limitation, the USA PATRIOT Act (Title III of Pub. L. 107-56), the Bank Secrecy Act (31 U.S.C. §§ 5311 et seq.), and the regulations promulgated thereunder by the Financial Crimes Enforcement Network, to the extent such documentation and information was requested in writing by the Commitment Parties at least ten (10) business days prior to the Closing Date. Without limiting the foregoing, if the Borrower qualifies as a "legal entity customer" under the Beneficial Ownership Regulation (31 C.F.R. § 1010.230), the Commitment Parties shall have received a beneficial ownership certification in relation to the Borrower at least three (3) business days prior to the Closing Date.
3.2 Certain Funds / SunGard Provisions
The parties hereby expressly acknowledge and agree that the Funding Conditions set forth in Section 3.1 above are the sole and exclusive conditions to the obligations of the Commitment Parties to fund the Facilities on the Closing Date. The Commitment Parties hereby agree that the availability of the Facilities on the Closing Date shall not be subject to any condition not expressly set forth in this Commitment Letter or the Term Sheet, including, for the avoidance of doubt:
(a) any condition relating to the completion of the syndication of all or any portion of the Facilities;
(b) any condition relating to the receipt or completion of any information package, confidential information memorandum, or financial model;
(c) any condition relating to the negotiation, execution, or delivery of the definitive Credit Agreement or any other Loan Document (other than the Guarantee and Collateral Agreement, the delivery of which is a Funding Condition pursuant to Section 3.1(h)); and
(d) any condition relating to the absence of any pending or threatened litigation against the Target or its subsidiaries (other than as may be reflected in the condition set forth in Section 3.1(c) relating to the absence of a Company Material Adverse Effect).
The foregoing provisions are intended to provide the Sponsor with certainty of funding in connection with the Acquisition and shall be construed in a manner consistent with precedent established in In re Sungard Data Systems, Inc. and related market practice.
Section 4: Syndication
4.1 Syndication Rights
Each of Tralvendo National Bank and Prairie State Bank, N.A. reserves the right, prior to and/or after the execution of the definitive Credit Agreement, to syndicate all or a portion of its respective commitment under the applicable Facility to one or more banks, financial institutions, or other institutional lenders that are reasonably acceptable to HPE Fund IV (such consent not to be unreasonably withheld, conditioned, or delayed) (each, an "Additional Lender" or "Syndication Participant"); provided that HPE Fund IV's consent shall not be required with respect to (i) any assignment or syndication to an affiliate of a Commitment Party that is a bank or financial institution or (ii) any assignment or syndication occurring during the continuance of an Event of Default.
HPE Fund IV agrees to use commercially reasonable efforts to assist the Commitment Parties in completing a syndication of the Facilities that is reasonably satisfactory to the Commitment Parties. Such assistance shall include, without limitation:
(a) providing to the Commitment Parties, and causing the Target to provide (to the extent consistent with the Merger Agreement and any applicable confidentiality agreement), all financial and other information regarding the Target and its subsidiaries reasonably requested by the Commitment Parties in connection with the syndication;
(b) using commercially reasonable efforts to cause the Target's senior management team (including, without limitation, the Target's Chief Executive Officer and Chief Financial Officer) to participate in a reasonable number of meetings, conference calls, and presentations with prospective Additional Lenders, at times and locations reasonably agreed by HPE Fund IV and the Commitment Parties;
(c) cooperating with the efforts of the Commitment Parties to obtain, at HPE Fund IV's expense, a corporate credit rating from each of Moody's Investors Service, Inc. and S&P Global Ratings for the Borrower and a rating for each of the Facilities; and
(d) using commercially reasonable efforts to ensure that the syndication efforts benefit from the existing banking relationships of HPE Fund IV and the Target.
Tralvendo National Bank will act as sole lead arranger and sole bookrunner for the Term Loan Facility, and Prairie State Bank, N.A. will act as sole lead arranger and sole bookrunner for the Revolving Credit Facility. No additional agents, co-agents, arrangers, bookrunners, or managers shall be appointed, and no other titles shall be awarded, without the prior written consent of the Commitment Parties (in their sole discretion) and HPE Fund IV (such consent not to be unreasonably withheld).
Notwithstanding anything to the contrary herein, no syndication, assignment, or participation shall relieve any Commitment Party of its commitment obligations hereunder. Until the completion of a successful syndication, the Commitment Parties shall retain sole responsibility for the funded commitment under their respective Facilities and shall be obligated to fund the full amount of their respective commitments on the Closing Date in accordance with the terms of this Commitment Letter, regardless of whether any syndication has been completed.
4.2 Information Package
HPE Fund IV agrees to provide, and to cause the Target to provide (to the extent consistent with the Merger Agreement and any applicable confidentiality agreement), to the Commitment Parties such financial and other information regarding the Target and its subsidiaries as is customary and reasonably necessary for the syndication of credit facilities of this type, including, without limitation:
(a) a confidential information memorandum (the "CIM") describing the Target, its business, the industry in which it operates, and the Transactions, in form and substance reasonably satisfactory to the Commitment Parties;
(b) a detailed financial model reflecting the Target's historical and projected financial performance, in form and substance reasonably satisfactory to the Commitment Parties; and
(c) such other information and documentation as may be reasonably requested by the Commitment Parties or prospective Additional Lenders in connection with the syndication process.
HPE Fund IV acknowledges that the Commitment Parties may share the CIM, financial model, and other information relating to the Facilities and the Transactions with prospective Additional Lenders, subject to customary confidentiality arrangements.
4.3 Clear Market
HPE Fund IV agrees that, from the date hereof until the earlier of (a) the date on which a successful syndication of the Facilities has been completed (as determined by the Commitment Parties in their reasonable discretion) and (b) the date that is sixty (60) days following the Closing Date, HPE Fund IV will not, and will not permit any of its controlled affiliates to, syndicate or issue, attempt to syndicate or issue, or announce or authorize the announcement of the syndication or issuance of, any debt facilities, debt securities, commercial loans, or other credit facilities of or relating to the Borrower or any of its subsidiaries (other than the Facilities contemplated hereby), without the prior written consent of the Commitment Parties (in their sole discretion). This clear-market period is intended to facilitate the orderly syndication of the Facilities and to prevent competing debt instruments from disrupting the syndication process.
Section 5: Fee Letter
Reference is hereby made to the separate Fee Letter dated as of the date hereof (the "Fee Letter") between HPE Fund IV and the Commitment Parties, setting forth certain fees payable by HPE Fund IV to the Commitment Parties in connection with the Facilities. The Fee Letter has been executed concurrently with this Commitment Letter as of February 14, 2025. The terms and conditions of the Fee Letter are incorporated herein by reference and shall constitute binding obligations of HPE Fund IV. The fees payable under the Fee Letter include, among others, arrangement fees, upfront fees, and annual administrative agent fees, in each case in the amounts and at the times specified therein. The Fee Letter is confidential and shall be subject to the confidentiality provisions set forth in Section 9 hereof.
Section 6: Term Sheet
The principal terms and conditions of the Facilities are set forth in the Summary of Terms and Conditions attached hereto as Exhibit A (the "Term Sheet"). The Term Sheet is an integral part of this Commitment Letter and is incorporated herein by reference in its entirety. In the event of any inconsistency between the provisions of this Commitment Letter and the provisions of the Term Sheet, the provisions of the Term Sheet shall control with respect to the terms and conditions of the Facilities (and the provisions of this Commitment Letter shall control with respect to all other matters). The definitive Credit Agreement and the other Loan Documents shall contain the terms and conditions set forth in the Term Sheet, together with such additional terms, conditions, representations, warranties, covenants, and events of default as are customary for senior secured credit facilities of this type, size, and purpose, and consistent with the Documentation Principles set forth in Section 7 hereof.
Section 7: Documentation Principles
The definitive Credit Agreement and the other Loan Documents (including, without limitation, the Guarantee and Collateral Agreement, the Intercreditor Agreement, and any ancillary security documents) shall be prepared, negotiated, and finalized on the basis of, and shall contain terms and conditions consistent with, (a) the Term Sheet attached hereto as Exhibit A and (b) market precedent for leveraged acquisition financings of this type, size, and purpose (collectively, the "Documentation Principles").
Tralvendo National Bank shall serve as the lead documentation party responsible for the preparation of the initial drafts of the definitive Credit Agreement and the other Loan Documents. Maplewood & Strauss LLP (One International Place, Suite 3600, Boston, Massachusetts 02110; Attention: Gordon Strauss) shall serve as counsel to the Commitment Parties in connection with the preparation, negotiation, and finalization of the definitive Loan Documents. HPE Fund IV and the Target (following the Closing Date) shall be represented by Calderwood & Harkness LLP (787 Seventh Avenue, 38th Floor, New York, New York 10019; Attention: Sandra Tung, Responsible Partner, M&A). The parties hereto shall negotiate in good faith and use their commercially reasonable efforts to finalize and execute the definitive Credit Agreement and the other Loan Documents as promptly as practicable and, in any event, prior to the Closing Date.
Notwithstanding the foregoing, the definitive Loan Documents shall not include any term or condition that (i) is inconsistent with the Term Sheet (unless agreed by all parties), (ii) would impose any additional condition to the availability of the Facilities on the Closing Date that is not set forth in Section 3 of this Commitment Letter, or (iii) would be more restrictive to the Borrower than the terms and conditions set forth in the Term Sheet, unless such term or condition is customary for credit facilities of this type, size, and purpose and is agreed to by the parties in good faith.
Section 8: Indemnification and Expenses
8.1 Indemnification
HPE Fund IV agrees to indemnify, defend, and hold harmless each Commitment Party and each of its affiliates, and their respective officers, directors, partners, members, employees, agents, advisors, and controlling persons (each, an "Indemnified Person"), from and against any and all losses, claims, damages, liabilities, and expenses (including, without limitation, the reasonable and documented fees, disbursements, and other charges of one primary counsel and, if necessary, one local counsel in each relevant jurisdiction, and one specialist counsel for each relevant specialty, for all Indemnified Persons, taken as a whole, and, in the case of any actual or perceived conflict of interest, one additional counsel for each group of similarly situated Indemnified Persons), arising out of, resulting from, or in any way connected with (a) this Commitment Letter, the Fee Letter, the Term Sheet, or any of the other Loan Documents, (b) the Facilities, the use of proceeds thereof, or any commitment, loan, letter of credit, or other financial accommodation extended pursuant thereto, (c) the Acquisition, the Merger Agreement, or any of the other Transactions, or (d) any claim, litigation, investigation, or proceeding (whether or not such Indemnified Person is a party thereto and whether or not such claim, litigation, investigation, or proceeding is brought by or on behalf of HPE Fund IV or any of its affiliates) relating to any of the foregoing; provided, however, that such indemnity shall not, as to any Indemnified Person, be available to the extent that such losses, claims, damages, liabilities, or expenses are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from (i) the gross negligence, bad faith, or willful misconduct of such Indemnified Person (or any of its related Indemnified Persons) or (ii) a material breach of the obligations of such Indemnified Person (or any of its related Indemnified Persons) under this Commitment Letter, the Fee Letter, or any Loan Document.
8.2 Expenses
Whether or not the Facilities are funded or the definitive Loan Documents are executed, HPE Fund IV agrees to reimburse the Commitment Parties for all reasonable and documented out-of-pocket costs and expenses incurred in connection with the Facilities, the syndication thereof, and the preparation, negotiation, execution, and administration of this Commitment Letter, the Fee Letter, the Term Sheet, the definitive Credit Agreement, and the other Loan Documents, including, without limitation:
(a) the fees, disbursements, and other charges of Maplewood & Strauss LLP, as counsel to the Commitment Parties;
(b) reasonable travel, lodging, and related expenses incurred by the Commitment Parties and their advisors in connection with due diligence, site visits, lender meetings, and syndication activities;
(c) due diligence expenses, including fees and expenses of consultants, appraisers, and other third-party advisors retained by the Commitment Parties;
(d) costs associated with the preparation, printing, and distribution of the CIM and other syndication materials;
(e) UCC, lien, judgment, and other search fees, filing fees, and recording fees; and
(f) all other reasonable and documented out-of-pocket expenses incurred by the Commitment Parties in connection with the Transactions.
Invoices for such expenses shall be submitted to HPE Fund IV at least three (3) business days prior to the Closing Date (to the extent reasonably practicable) and shall be payable on the Closing Date (or, if the Closing Date does not occur, within thirty (30) days following demand therefor).
Section 9: Confidentiality
This Commitment Letter, the Fee Letter, and the Term Sheet are confidential and, except for disclosure to the officers, directors, employees, affiliates, members, partners, accountants, attorneys (including Calderwood & Harkness LLP), and financial and other professional advisors (including Pendleton Hawkes & Co.) of HPE Fund IV (collectively, "Permitted Recipients") who are informed of the confidential nature of such documents, shall not be disclosed by HPE Fund IV to any other person or entity without the prior written consent of the Commitment Parties, in each case on a need-to-know basis. HPE Fund IV shall be responsible for compliance by its Permitted Recipients with the confidentiality obligations of this Section 9.
Notwithstanding the foregoing, HPE Fund IV may, without the consent of the Commitment Parties:
(a) disclose the existence and terms of this Commitment Letter and the Term Sheet (but not the Fee Letter) to the Target and the Target's counsel (Whitford Jessup & Crane LLP) and financial advisor (Velthryn Greer & Associates), in each case to the extent reasonably necessary in connection with the Merger Agreement and the consummation of the Acquisition;
(b) file or disclose this Commitment Letter and the Term Sheet (but not the Fee Letter) as required by applicable law, regulation, or legal process, including, without limitation, as an exhibit to the Merger Agreement or any filing made with the U.S. Securities and Exchange Commission or any other governmental authority; provided that HPE Fund IV shall use commercially reasonable efforts to notify the Commitment Parties of any such required disclosure in advance thereof and to seek confidential treatment for any sensitive commercial terms to the extent permitted by applicable law; and
(c) disclose the existence and general terms of this Commitment Letter to rating agencies in connection with the rating process described in Section 4.1 hereof.
The Commitment Parties agree to treat all non-public information provided by or on behalf of HPE Fund IV, the Target, and their respective affiliates, in connection with the Transactions and the Facilities, as confidential information and to handle such information in accordance with the Commitment Parties' customary policies and practices for the handling of confidential information of this nature, including limiting disclosure to officers, directors, employees, agents, and advisors of the Commitment Parties who are involved in the Transactions and who have been informed of the confidential nature of such information; provided that the Commitment Parties may disclose such information (i) to prospective Additional Lenders in connection with the syndication process, subject to customary confidentiality agreements, (ii) as required by applicable law, regulation, or legal process, and (iii) to their respective regulatory authorities upon request.
Section 10: Limitation of Liability
In no event shall any Commitment Party, any Additional Lender, or any Indemnified Person be liable to HPE Fund IV, the Borrower, any Guarantor, or any other person for any special, indirect, consequential, incidental, or punitive damages (including, without limitation, any loss of profits, business, or anticipated savings) arising out of or in connection with this Commitment Letter, the Fee Letter, the Term Sheet, the Facilities, any Loan Document, or the Transactions, regardless of whether such damages are based on contract, tort, strict liability, or any other theory and regardless of whether any Commitment Party or any Indemnified Person has been advised of the possibility of such damages.
HPE Fund IV acknowledges and agrees that the Commitment Parties and their respective affiliates may be engaged in a broad range of financial services and transactions in the ordinary course of their businesses, and that the Commitment Parties and their affiliates may have, or may in the future have, economic interests that conflict with the interests of HPE Fund IV, the Borrower, the Target, or their respective affiliates in connection with the Transactions. HPE Fund IV agrees that the Commitment Parties shall have no obligation to disclose such interests and that the Commitment Parties shall have no liability to HPE Fund IV or any other person as a result of such interests, except as may otherwise be provided by applicable law. HPE Fund IV further acknowledges that the Commitment Parties are acting solely in their capacity as lenders, arrangers, and agents in connection with the Facilities and do not owe any fiduciary, advisory, or other duty to HPE Fund IV, the Borrower, the Target, or any stockholder or affiliate thereof, except as may be expressly set forth herein.
Section 11: Assignments
No party hereto may assign or transfer any of its rights or obligations under this Commitment Letter without the prior written consent of each of the other parties hereto, and any purported assignment or transfer without such consent shall be null and void; provided, however, that each Commitment Party may assign all or a portion of its respective commitments under the applicable Facility to one or more Additional Lenders in accordance with the syndication provisions set forth in Section 4 hereof, subject to the approval rights of HPE Fund IV expressly set forth therein. Any such assignment in connection with the syndication process shall not require the separate consent of HPE Fund IV under this Section 11, it being understood that the approval rights set forth in Section 4.1 shall govern.
Section 12: Termination / Expiration
The commitments of the Commitment Parties hereunder, and the agreements of the Commitment Parties to provide the Facilities on the terms and conditions set forth herein, shall automatically expire and terminate at 5:00 p.m. (New York City time) on the earliest of:
(a) the date that is nine (9) months after the date of the Merger Agreement (i.e., the "Outside Date" under the Merger Agreement, or such later date as such Outside Date may be extended in accordance with the terms of the Merger Agreement), if the Closing Date has not occurred by such date;
(b) the closing of the Acquisition without the use of the Facilities contemplated hereby;
(c) the termination of the Merger Agreement in accordance with its terms, whether by mutual agreement of the parties thereto, by the exercise of a termination right by HPE Fund IV or the Target, or otherwise; and
(d) the delivery of written notice by HPE Fund IV to the Commitment Parties terminating this Commitment Letter.
Upon the expiration or termination of the commitments hereunder, the obligations of the parties under this Commitment Letter shall terminate and be of no further force or effect, except that the provisions of Section 8 (Indemnification and Expenses), Section 9 (Confidentiality), Section 10 (Limitation of Liability), and Section 14 (Governing Law; Jurisdiction; Waiver of Jury Trial) shall survive any such expiration or termination and shall remain in full force and effect in accordance with their terms.
Section 13: Acceptance
This Commitment Letter is delivered to HPE Fund IV on the understanding and agreement that this Commitment Letter must be accepted by HPE Fund IV by executing and delivering a countersigned copy of this Commitment Letter to Tralvendo National Bank (Attention: Andrew Birchfield, Managing Director, Sponsor Finance; email: abirchfield@crestmarkbank.com) no later than 11:59 p.m. (New York City time) on February 21, 2025, after which time the commitments and agreements of the Commitment Parties set forth herein shall automatically expire and be of no further force or effect, unless such deadline is extended in writing by the Commitment Parties in their sole discretion.
Upon acceptance by HPE Fund IV in accordance with this Section 13, this Commitment Letter (together with the Fee Letter and the Term Sheet) shall constitute a binding agreement among HPE Fund IV and the Commitment Parties with respect to the subject matter hereof, enforceable in accordance with its terms, subject to the Funding Conditions set forth in Section 3 and the other terms and conditions set forth herein.
Section 14: Governing Law; Jurisdiction; Waiver of Jury Trial
This Commitment Letter, and all claims, controversies, and causes of action (whether in contract, tort, or otherwise) arising out of or relating to this Commitment Letter or the negotiation, execution, performance, or enforcement hereof, shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to principles of conflicts of law that would result in the application of the laws of any other jurisdiction (other than Sections 5-1401 and 5-1402 of the New York General Obligations Law).
Each party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Supreme Court of the State of New York sitting in the Borough of Manhattan, New York, New York, and the United States District Court for the Southern District of New York, and any appellate courts from any thereof, in any action or proceeding arising out of or relating to this Commitment Letter, the Fee Letter, or the Transactions, and each party hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York state court or, to the fullest extent permitted by applicable law, in such United States federal court. Each party hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Commitment Letter, the Fee Letter, or the Transactions in any court referred to in the preceding paragraph, and the defense of an inconvenient forum to the maintenance of any such action or proceeding in any such court.
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS COMMITMEN