1003-00003 · Harrowgate Private Equity Fund IV LP · Transaction Documents/Merger Agreement

merger-agreement-execution-version.docx DOCUMENT M&A / Corporate

62 / 78 ← → ✕

Contract analysis Extract to table

AGREEMENT AND PLAN OF MERGER

by and among

HARROWGATE PRIVATE EQUITY FUND IV LP

a Delaware limited partnership

("Parent")

HARROWGATE VELOCITY MERGER SUB INC.

a Delaware corporation

("Merger Sub")

and

VELOPAY SYSTEMS, INC.

a Delaware corporation

(the "Company")

Dated as of March 18, 2025

Right-click to update Table of Contents

RECITALS

WHEREAS, Harrowgate Private Equity Fund IV LP, a Delaware limited partnership ("Parent"), with its principal office at 300 King Street, Suite 4200, Wilmington, Delaware 19801, is a private equity investment fund. Parent's general partner is Harrowgate Capital Management IV LLC, a Delaware limited liability company;

WHEREAS, Harrowgate Velocity Merger Sub Inc., a Delaware corporation ("Merger Sub"), is a direct, wholly-owned subsidiary of Parent, newly incorporated on February 24, 2025, and formed solely for the purpose of effecting the Merger (as defined herein) contemplated by this Agreement and Plan of Merger (this "Agreement"). Merger Sub's registered agent is Capitol Registered Agents LLC, located at 1209 Orange Street, Wilmington, Delaware 19801, and its Delaware file number is 7291034. Since its date of incorporation, Merger Sub has not conducted any business activities other than those incident to its formation and those undertaken in connection with the transactions contemplated by this Agreement;

WHEREAS, VeloPay Systems, Inc., a Delaware corporation (the "Company"), with its principal office at 1455 Innovation Parkway, Suite 800, Austin, Texas 78759, is engaged in the business of payments processing and financial technology services. The Company's Delaware file number is 5748392;

WHEREAS, the boards of directors of the Company and Merger Sub, and the general partner of Parent (Harrowgate Capital Management IV LLC, acting on behalf of Parent), have each duly approved this Agreement and the transactions contemplated hereby, including the Merger, upon the terms and subject to the conditions set forth herein, and have determined that it is advisable and in the best interests of their respective entities and their stockholders, partners, or members, as applicable, to consummate the Merger and the other transactions contemplated hereby;

WHEREAS, the board of directors of the Company (the "Company Board") has (a) determined that this Agreement, the Merger, and the other transactions contemplated hereby are advisable, fair to, and in the best interests of the Company and its stockholders, (b) approved and adopted this Agreement and the transactions contemplated hereby, including the Merger, in accordance with the requirements of the Delaware General Corporation Law (the "DGCL"), and (c) resolved to recommend that the stockholders of the Company approve and adopt this Agreement and the transactions contemplated hereby;

WHEREAS, concurrently with the execution and delivery of this Agreement, stockholders of the Company holding approximately 63.1% of the outstanding shares of Company Common Stock (as defined herein), constituting the requisite stockholder approval for the adoption of this Agreement under Section 251 of the DGCL and the Company's certificate of incorporation, have executed and delivered the Stockholder Support Agreement (as defined herein) and have delivered a Written Consent (as defined herein) approving and adopting this Agreement and the Merger pursuant to Section 228 of the DGCL;

WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to the Company's willingness to enter into this Agreement, Harrowgate Capital Management IV LLC has delivered to the Company the Limited Guarantee (as defined herein) in favor of the Company, guaranteeing certain payment obligations of Parent hereunder, including the Reverse Termination Fee (as defined herein);

WHEREAS, Parent has obtained equity and debt financing commitments, as more fully described herein, as set forth in the Equity Commitment Letter (as defined herein) and the Debt Commitment Letter (as defined herein), respectively, to fund the Aggregate Merger Consideration (as defined herein) and all related fees, costs, and expenses in connection with the transactions contemplated by this Agreement;

WHEREAS, the Parties (as defined herein) desire to make certain representations, warranties, covenants, and agreements in connection with the Merger and to prescribe certain conditions to the consummation of the Merger as set forth herein; and

WHEREAS, for United States federal income tax purposes, the Parties intend that the Merger be treated as a taxable acquisition by Parent of all of the outstanding capital stock of the Company, and the Parties do not intend the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").

NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants, and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE I — DEFINITIONS

Section 1.1 — Definitions

As used in this Agreement, the following terms shall have the meanings set forth below:

"Acquisition Proposal" means any proposal, offer, or indication of interest (other than by Parent, Merger Sub, or any of their respective Affiliates) relating to (a) any merger, consolidation, business combination, recapitalization, liquidation, dissolution, or similar transaction involving the Company or any of its Subsidiaries, (b) any direct or indirect acquisition of assets constituting twenty percent (20%) or more of the consolidated total assets of the Company and its Subsidiaries or to which twenty percent (20%) or more of the consolidated net revenues or net income of the Company and its Subsidiaries are attributable, (c) any direct or indirect acquisition of twenty percent (20%) or more of the outstanding equity securities or voting power of the Company, (d) any tender offer or exchange offer that, if consummated, would result in any Person beneficially owning twenty percent (20%) or more of the outstanding equity securities or voting power of the Company, or (e) any other transaction similar to or having a similar effect to any of the foregoing.

"Adjusted EBITDA" means, with respect to any period, the Company's earnings before interest, taxes, depreciation, and amortization, as adjusted for stock-based compensation expense, acquisition-related costs, restructuring charges, and other non-recurring items, in each case as set forth in the Company's audited or unaudited financial statements for such period, prepared in accordance with the Company's historical accounting practices and consistent with the methodology set forth in Section 1.1(a) of the Company Disclosure Schedules. The Company's Adjusted EBITDA for the fiscal year ended December 31, 2024, was $98,100,000.

"Affiliate" means, with respect to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such Person. For purposes of this definition, "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.

"Aggregate Merger Consideration" means One Billion Nine Hundred Million Dollars ($1,900,000,000) in cash, being the product of the Per Share Merger Consideration multiplied by the number of Fully Diluted Shares.

"Alternative Financing" means any alternative debt financing arrangement obtained by Parent to replace all or any portion of the Debt Financing, on terms and conditions that are not materially less favorable to the Company or the Company Stockholders than the terms set forth in the Debt Commitment Letter (taken as a whole).

"Amended and Restated Bylaws" has the meaning set forth in Section 2.6.

"Amended and Restated Certificate of Incorporation" has the meaning set forth in Section 2.5.

"Business Day" means any day that is not a Saturday, Sunday, or other day on which commercial banking institutions in New York, New York are authorized or required by Law to be closed.

"Burdensome Condition" has the meaning set forth in Section 6.4(d).

"Certificate of Merger" means the certificate of merger to be filed with the Secretary of State of the State of Delaware in connection with the Merger, in accordance with Section 251 of the DGCL.

"Closing" has the meaning set forth in Section 2.2.

"Closing Date" means the date on which the Closing occurs.

"Co-Invest Vehicle" means Harrowgate Velocity Co-Invest LP, a Delaware limited partnership formed on March 14, 2025, with employer identification number 93-2748163, with Harrowgate Capital Management IV LLC as its general partner.

"Code" means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

"Company Board" means the board of directors of the Company, which as of the date hereof consists of Nathan Aldridge (Chair), Sonia Reyes-Watkins, Janet Gould, Kwame Asante, Catherine Lindström, and Philip Rosenthal.

"Company Board Recommendation" means the recommendation of the Company Board that the stockholders of the Company approve and adopt this Agreement and the transactions contemplated hereby, including the Merger.

"Company Board Recommendation Change" means any withdrawal, modification, qualification, or change of the Company Board Recommendation in a manner adverse to Parent, or any public announcement by the Company of an intention to do any of the foregoing, or any recommendation by the Company Board that the stockholders of the Company approve, adopt, or accept any Acquisition Proposal.

"Company Common Stock" means the common stock, par value $0.001 per share, of VeloPay Systems, Inc. As of the date hereof, there are 82,400,000 shares of Company Common Stock issued and outstanding.

"Company Disclosure Schedules" means the disclosure schedules delivered by the Company to Parent and Merger Sub concurrently with the execution and delivery of this Agreement, as the same may be updated in accordance with the terms of this Agreement.

"Company Equity Plans" means, collectively, the VeloPay Systems, Inc. 2017 Equity Incentive Plan, the VeloPay Systems, Inc. 2020 Equity Incentive Plan, and any predecessor or successor equity incentive plans of the Company, together with all award agreements thereunder.

"Company Material Adverse Effect" means any event, change, effect, development, condition, circumstance, or occurrence that, individually or in the aggregate with all other events, changes, effects, developments, conditions, circumstances, or occurrences, has had or would reasonably be expected to have a material adverse effect on (x) the business, financial condition, or results of operations of the Company and its Subsidiaries, taken as a whole, or (y) the ability of the Company to consummate the transactions contemplated by this Agreement; provided, however, that, solely for purposes of clause (x), none of the following (either alone or in combination) shall be deemed to constitute, or shall be taken into account in determining whether there has been or would reasonably be expected to be, a Company Material Adverse Effect:

(i) any epidemic, pandemic, or disease outbreak (including COVID-19 and any mutations or variations thereof, or any future epidemic or pandemic), or any worsening, escalation, or recurrence thereof, or any actions taken by any Governmental Authority or other Person in response thereto;

(ii) the outbreak or escalation of war, armed hostilities, military action, sabotage, terrorism, cyberterrorism, or acts of war (whether or not declared), or any escalation or worsening of any of the foregoing;

(iii) changes in general economic, business, financial, or market conditions (including changes in prevailing interest rates, credit availability, currency exchange rates, commodity prices, or stock market indices), whether in the United States or any other jurisdiction;

(iv) changes or conditions generally affecting the fintech industry, the payments processing industry, the financial services technology industry, or any other industry in which the Company or any of its Subsidiaries operates;

(v) changes in applicable Law or GAAP (or authoritative interpretations thereof), including any changes in Tax Law or regulations;

(vi) any failure by the Company to meet any internal or published projections, forecasts, estimates, budgets, milestones, or predictions of revenue, earnings, cash flow, or other financial or operating metrics for any period (it being understood and agreed that the facts, events, or circumstances underlying, causing, or contributing to such failure may be taken into account in determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur, to the extent such facts, events, or circumstances are not otherwise excluded by clauses (i) through (v) or (vii) hereof); and

(vii) the announcement, pendency, or consummation of the transactions contemplated by this Agreement, including any impact on the relationships, contractual or otherwise, of the Company or any of its Subsidiaries with customers, suppliers, vendors, partners, employees, labor unions, financing sources, Governmental Authorities, or other Persons resulting therefrom;

provided, further, that, with respect to clauses (i) through (v), such event, change, effect, development, condition, circumstance, or occurrence may be taken into account in determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur to the extent it has a disproportionate adverse impact on the Company and its Subsidiaries, taken as a whole, relative to other participants in the industries and markets in which the Company and its Subsidiaries operate.

"Company Options" means outstanding options to purchase shares of Company Common Stock granted pursuant to the Company Equity Plans. As of the date hereof, there are Company Options to purchase an aggregate of 7,600,000 shares of Company Common Stock, with a weighted average exercise price of $12.84 per share.

"Company RSUs" means outstanding restricted stock unit awards granted pursuant to the Company Equity Plans, each representing the right to receive one share of Company Common Stock upon vesting. As of the date hereof, there are 3,200,000 Company RSUs outstanding.

"Company Stockholders" means the holders of shares of Company Common Stock immediately prior to the Effective Time (other than holders of Dissenting Shares, to the extent such holders properly exercise and perfect their appraisal rights).

"Company Warrants" means outstanding warrants to purchase shares of Company Common Stock. As of the date hereof, there are Company Warrants to purchase an aggregate of 1,800,000 shares of Company Common Stock, with an exercise price of $8.50 per share.

"Confidentiality Agreement" means the Mutual Confidentiality and Non-Disclosure Agreement, dated as of October 14, 2024, between Parent and the Company.

"D&O Tail Policy" has the meaning set forth in Section 6.8(b).

"Debt Commitment Letter" means the commitment letter, dated as of February 14, 2025 (Reference: CRE-2025-SPF-0441), from Tralvendo National Bank and Prairie State Bank, N.A. to Parent, pursuant to which such lenders have committed to provide the Debt Financing, as may be amended, modified, supplemented, or replaced in accordance with the terms of this Agreement.

"Debt Financing" means the debt financing contemplated by the Debt Commitment Letter, consisting of (a) a senior secured term loan facility in an aggregate principal amount of $500,000,000 and (b) a senior secured revolving credit facility in an aggregate committed amount of $260,000,000.

"Deductible" has the meaning set forth in Section 9.4(a).

"DGCL" means the General Corporation Law of the State of Delaware, as amended from time to time.

"Dissenting Shares" has the meaning set forth in Section 3.1(d).

"Effective Time" has the meaning set forth in Section 2.3.

"Equity Commitment Letter" means the equity commitment letter, dated as of February 14, 2025, from Harrowgate Capital Management IV LLC (on behalf of the limited partners of Parent) to the Company, pursuant to which Harrowgate Capital Management IV LLC has committed to cause the funding of $1,140,000,000 in equity contributions to Parent for the purpose of consummating the transactions contemplated by this Agreement.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.

"Escrow Agent" means Garrison Trust Company.

"Escrow Agreement" means the escrow agreement to be entered into at the Closing among Parent, the Stockholder Representative, and the Escrow Agent, substantially in the form attached hereto as Exhibit D (Reference: GT-ESC-2025-07223).

"Escrow Amount" means One Hundred Thirty-Three Million Dollars ($133,000,000), representing seven percent (7%) of the Aggregate Merger Consideration.

"Escrow Fund" means the Escrow Amount deposited with the Escrow Agent at the Closing pursuant to the Escrow Agreement, together with any interest, dividends, gains, or other earnings or income thereon.

"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

"Financing Sources" means the entities that have committed to provide or arrange, or have otherwise entered into agreements in connection with, the Debt Financing or any Alternative Financing, and each of their respective Affiliates and their and their respective Affiliates' officers, directors, employees, agents, representatives, successors, and assigns.

"Fraud" means actual and intentional fraud (and not constructive fraud or negligent misrepresentation) with respect to the making of any representation or warranty set forth in Article IV or Article V of this Agreement, as applicable, involving a knowing and intentional misrepresentation of a material fact with the specific intent to deceive.

"Fully Diluted Shares" means 95,000,000 shares, consisting of the sum of (a) 82,400,000 shares of Company Common Stock issued and outstanding as of the date hereof, plus (b) 7,600,000 shares of Company Common Stock subject to outstanding Company Options (whether vested or unvested), plus (c) 3,200,000 shares of Company Common Stock subject to outstanding Company RSUs (whether vested or unvested), plus (d) 1,800,000 shares of Company Common Stock subject to outstanding Company Warrants.

"Fundamental Representations" means (a) with respect to the Company, the representations and warranties set forth in Section 4.1 (Organization and Qualification), Section 4.2 (Authority; Due Authorization), Section 4.4 (Capitalization), Section 4.5 (Subsidiaries), and Section 4.20 (Brokers and Finders), and (b) with respect to Parent and Merger Sub, the representations and warranties set forth in Section 5.1 (Organization), Section 5.2 (Authority; Due Authorization), and Section 5.7 (Brokers and Finders).

"GAAP" means generally accepted accounting principles in the United States as in effect from time to time, consistently applied.

"Governmental Authority" means any federal, state, provincial, local, municipal, or foreign government, any governmental, quasi-governmental, regulatory, or administrative authority, department, commission, board, bureau, agency, or instrumentality thereof, any court, tribunal, or arbitral body, or any self-regulatory organization.

"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

"Indemnification Cap" has the meaning set forth in Section 9.4(b).

"Information Statement" has the meaning set forth in Section 6.3.

"intellectual Property" means all intellectual property and proprietary rights of any kind, including (a) patents, patent applications, and patent disclosures, (b) trademarks, service marks, trade dress, trade names, logos, corporate names, and domain names, together with all goodwill associated therewith, (c) copyrights and copyrightable works, (d) trade secrets, know-how, inventions, processes, techniques, methods, formulas, algorithms, and confidential information, (e) computer software (including source code, object code, firmware, operating systems, specifications, databases, data, and related documentation), and (f) all registrations, applications, renewals, extensions, continuations, and reissues of any of the foregoing.

"Investment Canada Act" means the Investment Canada Act, R.S.C. 1985, c. 28 (1st Supp.), as amended.

"Knowledge" (including the phrases "to the Knowledge of the Company" and any similar phrases) means the actual knowledge of Nathan Aldridge, Sonia Reyes-Watkins, Marcus Langford, and Danielle Moreau, in each case after reasonable inquiry of the employees directly reporting to such individuals and who would reasonably be expected to have knowledge of the relevant matter.

"Law" means any statute, law, ordinance, regulation, rule, code, executive order, decree, judgment, injunction, order, writ, or other requirement of any Governmental Authority.

"Lien" means any mortgage, pledge, hypothecation, lien, encumbrance, charge, security interest, adverse claim, restriction on transfer, conditional sale or other title retention device or arrangement, right of first refusal, preemptive right, or other similar restriction or encumbrance of any kind.

"Limited Guarantee" means the limited guarantee, dated as of March 18, 2025, made by Harrowgate Capital Management IV LLC in favor of the Company, guaranteeing certain obligations of Parent under this Agreement, including the obligation to pay the Reverse Termination Fee.

"Losses" means any and all damages, losses, liabilities, obligations, claims, demands, judgments, fines, penalties, costs, and expenses (including reasonable and documented attorneys' fees and expenses), but excluding punitive, special, or exemplary damages (except to the extent actually awarded to a third party in connection with a third-party claim).

"Match Period" has the meaning set forth in Section 6.2(e).

"Material Contract" means any Contract to which the Company or any of its Subsidiaries is a party or by which any of them or their respective properties or assets are bound that (a) involves aggregate annual payments or receipts by the Company and its Subsidiaries in excess of $3,000,000, (b) relates to indebtedness for borrowed money in excess of $5,000,000, (c) contains any non-competition, exclusivity, most-favored-nation, or similar restrictive covenant that materially restricts the business of the Company or any of its Subsidiaries, (d) relates to any partnership, joint venture, or strategic alliance, (e) involves the acquisition or disposition of any business (whether by merger, sale of stock, sale of assets, or otherwise) pursuant to which the Company or any of its Subsidiaries has any ongoing obligations, (f) is a material license or sublicense of intellectual Property (other than commercially available, off-the-shelf software licenses with annual fees of less than $250,000), (g) contains any change of control provision that would be triggered by the transactions contemplated by this Agreement, or (h) is otherwise material to the business, financial condition, or results of operations of the Company and its Subsidiaries, taken as a whole.

"Merger" has the meaning set forth in Section 2.1.

"Merger Consideration" means the Per Share Merger Consideration.

"Merger Sub" means Harrowgate Velocity Merger Sub Inc., a Delaware corporation and direct, wholly-owned subsidiary of Parent.

"Order" means any order, judgment, injunction, ruling, writ, decree, stipulation, determination, decision, or award of any Governmental Authority.

"Outside Date" means September 18, 2025, as such date may be extended pursuant to Section 8.1(b).

"Parent" means Harrowgate Private Equity Fund IV LP, a Delaware limited partnership.

"Parent Disclosure Schedules" means the disclosure schedules delivered by Parent and Merger Sub to the Company concurrently with the execution and delivery of this Agreement.

"Parent Indemnified Parties" has the meaning set forth in Section 9.2.

"Parent Material Adverse Effect" means any event, change, effect, development, condition, circumstance, or occurrence that, individually or in the aggregate, would prevent or materially delay the ability of Parent or Merger Sub to consummate the transactions contemplated by this Agreement.

"Parties" means Parent, Merger Sub, and the Company, collectively, and "Party" means any of them individually.

"Paying Agent" means Keystone Pacific Transfer Services Inc.

"Paying Agent Agreement" means the paying agent agreement to be entered into by and among Parent, the Surviving Corporation, and the Paying Agent, substantially in the form attached hereto as Exhibit C.

"Per Share Merger Consideration" means $20.00 per share in cash, without interest, representing the quotient of (a) the Aggregate Merger Consideration ($1,900,000,000) divided by (b) the number of Fully Diluted Shares (95,000,000), subject to adjustment as provided in Section 3.8.

"Permitted Liens" means (a) statutory Liens for current Taxes not yet due and payable or being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP, (b) mechanics', carriers', workers', repairers', and other similar Liens arising or incurred in the ordinary course of business, (c) zoning, entitlement, and other land use and environmental regulations by Governmental Authorities, (d) Liens securing the Company's existing credit facility with Meridian Commercial Credit Corp. (which shall be released at or prior to the Closing), and (e) other imperfections of title, easements, encumbrances, or restrictions that do not, individually or in the aggregate, materially impair the continued use of the applicable property or asset.

"Person" means any individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, Governmental Authority, or other entity.

"R&W Insurance Policy" means the buyer-side representations and warranties insurance policy issued by Oakbridge Omnivrel Insurance Group, Policy Number OFI-RW-2025-03187, bound on March 10, 2025, with a policy limit of $190,000,000 and a retention of $19,000,000.

"Representatives" means, with respect to any Person, such Person's officers, directors, managers, partners (general and limited), members, employees, agents, attorneys, accountants, auditors, financial advisors, investment bankers, consultants, and other advisors and representatives.

"Reverse Termination Fee" means Fifty-Seven Million Dollars ($57,000,000), representing three percent (3%) of the Aggregate Merger Consideration.

"Rollover Agreement" means the rollover agreement attached hereto as Exhibit F, pursuant to which Nathan Aldridge and Sonia Reyes-Watkins have agreed to reinvest a portion of their merger proceeds in the Co-Invest Vehicle simultaneously with the Closing.

"Solvent" means, with respect to any Person, that as of the date of determination, (a) the sum of such Person's assets, at a fair valuation, exceeds the sum of all such Person's debts, (b) such Person has not incurred and does not intend to incur, and does not believe that it will incur, debts beyond its ability to pay such debts as they become due (whether at maturity or otherwise), (c) such Person has sufficient capital to carry on its business and all businesses in which it is about to engage, and (d) such Person is not "insolvent" within the meaning of Section 101(32) of Title 11 of the United States Code.

"Stockholder Indemnified Parties" has the meaning set forth in Section 9.3.

"Stockholder Representative" means Nathan Aldridge, in his capacity as representative of the Company Stockholders for post-Closing matters, as more fully described in Section 9.6 and in the Stockholder Representative Agreement attached hereto as Exhibit G.

"Stockholder Support Agreement" means the support agreement, dated as of March 18, 2025, by and among Parent and certain stockholders of the Company, pursuant to which such stockholders have agreed, among other things, to vote their shares of Company Common Stock in favor of the adoption of this Agreement and against any Acquisition Proposal.

"Subsidiaries" means, with respect to the Company, each of the following entities, all of which are direct or indirect wholly-owned subsidiaries of the Company: VeloPay Processing LLC, a Delaware limited liability company; VeloPay Canada Inc., a corporation organized under the laws of Ontario, Canada; VeloPay Europe Unipessoal Lda., a private limited liability company organized under the laws of Portugal; VeloPay Fraud intelligence Inc., a Delaware corporation; and PayStream Gateway LLC, a Delaware limited liability company; and any other entity that is directly or indirectly owned or controlled by the Company.

"Superior Proposal" means a bona fide written Acquisition Proposal (with all references to "twenty percent (20%)" in the definition of Acquisition Proposal being deemed to be references to "more than fifty percent (50%)" for purposes of this definition) made by a Third Party that the Company Board determines in good faith (after consultation with its financial advisor, Velthryn Greer & Associates, and its outside legal counsel, Whitford Jessup & Crane LLP) to be more favorable to the Company's stockholders from a financial point of view than the Merger and the other transactions contemplated by this Agreement, taking into account all relevant legal, financial, regulatory, timing, and other relevant factors, including the identity of the Person making such proposal, the likelihood of consummation, the financing terms, the conditions to closing, and any revisions to this Agreement proposed by Parent in response thereto during the Match Period.

"Surviving Corporation" means VeloPay Systems, Inc., as the surviving corporation of the Merger.

"Survival Expiration Date" has the meaning set forth in Section 9.1.

"Tax" or "Taxes" means any and all federal, state, provincial, local, foreign, or other taxes of any kind, including income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs, duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other taxes of any kind whatsoever, together with any interest, penalty, addition to tax, or additional amount imposed with respect thereto.

"Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and any amendment thereof.

"Termination Fee" means Seventy-Six Million Dollars ($76,000,000), representing four percent (4%) of the Aggregate Merger Consideration.

"Third Party" means any Person other than Parent, Merger Sub, or any of their respective Affiliates.

"Written Consent" means the written consent of the stockholders of the Company, dated as of March 18, 2025, delivered concurrently with the execution and delivery of this Agreement, approving and adopting this Agreement and the transactions contemplated hereby, including the Merger, pursuant to Section 228 of the DGCL.

Section 1.2 — Interpretation

(a) When a reference is made in this Agreement to an Article, Section, Exhibit, or Schedule, such reference shall be to an Article, Section, Exhibit, or Schedule of or to this Agreement unless otherwise indicated.

(b) The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

(c) Whenever the words "include," "includes," or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation."

(d) The words "hereof," "herein," "hereto," "hereby," and "hereunder" and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement.

(e) The word "or" shall not be exclusive.

(f) All terms defined in this Agreement shall have the defined meanings when used in any document made or delivered pursuant hereto unless otherwise defined therein.

(g) The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms, and to the masculine as well as the feminine and neuter genders of such terms.

(h) Any agreement, instrument, statute, rule, regulation, or order defined or referred to herein means such agreement, instrument, statute, rule, regulation, or order as from time to time amended, modified, supplemented, or replaced (and, in the case of agreements or instruments, all attachments thereto and instruments incorporated therein).

(i) References to "$" or "Dollars" shall mean United States dollars.

(j) References to a Person include such Person's successors and permitted assigns.

(k) The Parties have been represented by legal counsel in the negotiation and preparation of this Agreement, and accordingly any rule of Law or legal decision that would require interpretation of any claimed ambiguities in this Agreement against the Party that drafted it has no application and is expressly waived by the Parties. The provisions of this Agreement shall be interpreted in a reasonable manner to effect the intent of the Parties.

(l) The Exhibits and Schedules identified in this Agreement (including the Company Disclosure Schedules and the Parent Disclosure Schedules) are incorporated herein by reference and made a part hereof.

ARTICLE II — THE MERGER

Section 2.1 — The Merger

Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with Section 251 of the DGCL, at the Effective Time, Merger Sub shall be merged with and into the Company (the "Merger"). As a result of the Merger, the separate corporate existence of Merger Sub shall cease at the Effective Time, and the Company shall continue as the surviving corporation of the Merger (the "Surviving Corporation") and shall become a direct, wholly-owned subsidiary of Parent. The Merger shall constitute a reverse triangular merger, with the Company as the surviving entity. Following the Effective Time, the Surviving Corporation shall possess all of the rights, privileges, powers, and franchises and be subject to all of the restrictions, disabilities, and duties of each of the Company and Merger Sub, all as provided under the DGCL.

Section 2.2 — Closing

The closing of the Merger (the "Closing") shall take place on the second (2nd) Business Day following the date on which the last to be satisfied or waived of the conditions set forth in Article VII (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions at the Closing) shall be satisfied or waived in accordance with this Agreement. The Closing shall take place at the offices of Calderwood & Harkness LLP, 787 Seventh Avenue, 38th Floor, New York, New York 10019, or remotely by means of the electronic exchange of documents and signatures via electronic transmission or other means mutually agreed upon by the Parties, commencing at 10:00 a.m. Eastern Time on the Closing Date, or at such other time, date, or place as may be mutually agreed in writing by the Parties (the date on which the Closing occurs, the "Closing Date").

Section 2.3 — Effective Time

On the Closing Date, the Parties shall cause a Certificate of Merger to be duly executed, verified, acknowledged, and filed with the Secretary of State of the State of Delaware in accordance with the relevant provisions of Section 251 of the DGCL. The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware, or at such subsequent date and time as may be agreed by the Parties and specified in the Certificate of Merger (the time at which the Merger becomes effective, the "Effective Time").

Section 2.4 — Effects of the Merger

The effects of the Merger shall be as provided in this Agreement and in the applicable provisions of the DGCL, including Sections 259, 260, and 261 of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all of the property, rights, privileges, agreements, powers, and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities, and duties of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions, disabilities, and duties of the Surviving Corporation.

Section 2.5 — Certificate of Incorporation of the Surviving Corporation

At the Effective Time, the certificate of incorporation of the Company, as in effect immediately prior to the Effective Time, shall be amended and restated in its entirety to read as set forth in Exhibit A attached hereto (the "Amended and Restated Certificate of Incorporation"), and such Amended and Restated Certificate of Incorporation shall be the certificate of incorporation of the Surviving Corporation until thereafter duly amended in accordance with the terms thereof and the DGCL and this Agreement.

Section 2.6 — Bylaws of the Surviving Corporation

At the Effective Time, the bylaws of the Company, as in effect immediately prior to the Effective Time, shall be amended and restated in their entirety to read as set forth in Exhibit B attached hereto (the "Amended and Restated Bylaws"), and such Amended and Restated Bylaws shall be the bylaws of the Surviving Corporation until thereafter duly amended in accordance with the terms thereof, the certificate of incorporation of the Surviving Corporation, and the DGCL and this Agreement.

Section 2.7 — Directors and Officers of the Surviving Corporation

(a) Directors. The directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified, or until their earlier death, resignation, or removal.

(b) Officers. The officers of the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, each to hold office in accordance with the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified, or until their earlier death, resignation, or removal. As of the date hereof, the officers of the Company are as follows:

(i) Nathan Aldridge — Chief Executive Officer

(ii) Sonia Reyes-Watkins — Chief Technology Officer

(iii) Marcus Langford — Chief Financial Officer

(iv) Danielle Moreau — General Counsel and Secretary

ARTICLE III — CONVERSION OF SECURITIES; TREATMENT OF EQUITY AWARDS

Section 3.1 — Conversion of Shares

At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company, or the holders of any of the following securities:

(a) Merger Sub Capital Stock. Each share of common stock, par value $0.001 per share, of Merger Sub that is issued and outstanding immediately prior to the Effective Time shall be converted into and become one (1) validly issued, fully paid, and nonassessable share of common stock, par value $0.001 per share, of the Surviving Corporation, and shall constitute the only outstanding shares of capital stock of the Surviving Corporation as of the Effective Time. Parent shall be the sole stockholder of the Surviving Corporation. From and after the Effective Time, all certificates representing shares of Merger Sub common stock shall be deemed for all purposes to represent the number of shares of common stock of the Surviving Corporation into which such shares were converted.

(b) Company Common Stock. Each share of Company Common Stock that is issued and outstanding immediately prior to the Effective Time (other than (i) Dissenting Shares (which shall be treated as provided in Section 3.1(d)) and (ii) shares of Company Common Stock held in the treasury of the Company (which shall be treated as provided in Section 3.1(c))) shall be automatically cancelled and extinguished and shall be converted into the right to receive Twenty Dollars ($20.00) in cash, without interest (the "Per Share Merger Consideration"), payable to the holder thereof upon surrender of the certificate or book-entry share representing such share of Company Common Stock in the manner provided in Section 3.5. As of the date hereof, there are 82,400,000 shares of Company Common Stock issued and outstanding.

(c) Treasury Shares. Each share of Company Common Stock that is held in the treasury of the Company or owned by the Company or any direct or indirect wholly-owned Subsidiary of the Company immediately prior to the Effective Time shall be automatically cancelled and extinguished without any conversion thereof and without payment of any consideration therefor, and no payment shall be made with respect thereto.

(d) Dissenting Shares. Notwithstanding any provision of this Agreement to the contrary, shares of Company Common Stock that are issued and outstanding immediately prior to the Effective Time and that are held by any holder who has properly demanded appraisal rights with respect to such shares in accordance with, and who complies in all respects with, the provisions of Section 262 of the DGCL (such shares, "Dissenting Shares") shall not be converted into or represent the right to receive the Per Share Merger Consideration, but instead such holder shall be entitled only to such rights as are granted by Section 262 of the DGCL. Notwithstanding the foregoing, if any holder of Dissenting Shares shall fail to perfect or shall effectively withdraw or lose (through failure to perfect or otherwise) the right to appraisal pursuant to Section 262 of the DGCL, then, as of the later of the Effective Time and the occurrence of such event, such holder's shares shall automatically be deemed to have been converted into and shall represent only the right to receive the Per Share Merger Consideration as provided in Section 3.1(b), without interest thereon. The Company shall give Parent (i) prompt written notice of any demands for appraisal of shares of Company Common Stock received by the Company, any attempted withdrawals of such demands, and any other instruments served pursuant to Section 262 of the DGCL and received by the Company, and (ii) the opportunity to direct all negotiations and proceedings with respect to such demands. The Company shall not, without the prior written consent of Parent, make any payment with respect to, settle, offer to settle, or otherwise negotiate any such demands.

Section 3.2 — Treatment of Company Options

(a) Vested Company Options. At the Effective Time, each Company Option that is vested and exercisable as of immediately prior to the Effective Time (after giving effect to any acceleration of vesting contemplated by Section 3.2(b)) shall be cancelled and extinguished and shall be converted into the right to receive a lump-sum cash payment (without interest) equal to the product of (x) the total number of shares of Company Common Stock subject to such Company Option immediately prior to the Effective Time and (y) the excess, if any, of the Per Share Merger Consideration ($20.00) over the per share exercise price of such Company Option, less any amounts required to be deducted and withheld under applicable Tax Law. The weighted average exercise price of all outstanding Company Options as of the date hereof is $12.84 per share, resulting in a net per-share spread of $7.16 ($20.00 minus $12.84). Any Company Option that has an exercise price per share equal to or greater than the Per Share Merger Consideration ($20.00) shall be cancelled at the Effective Time without the payment of any consideration therefor and shall have no further force or effect.

(b) Unvested Company Options. At the Effective Time, each Company Option that is unvested as of immediately prior to the Effective Time (without giving effect to any acceleration of vesting provided in this Section 3.2(b)) shall be treated as follows:

(i) Accelerated Portion. Fifty percent (50%) of the shares of Company Common Stock subject to such unvested Company Option shall be accelerated and deemed vested as of immediately prior to the Effective Time, and such accelerated portion shall be cancelled and converted into the right to receive a lump-sum cash payment determined in accordance with Section 3.2(a), as if such portion were a vested Company Option.

(ii) Replacement Awards. Fifty percent (50%) of the shares of Company Common Stock subject to such unvested Company Option shall be converted into a replacement deferred cash award of Parent (a "Replacement Award"), with the underlying value of such Replacement Award equal to the product of (A) the number of shares subject to such portion and (B) the excess, if any, of the Per Share Merger Consideration ($20.00) over the per share exercise price of such Company Option. Each such Replacement Award shall vest ratably over a twenty-four (24) month period following the Closing Date, with one-twenty-fourth (1/24th) of the Replacement Award vesting on each monthly anniversary of the Closing Date, subject to the holder's continued employment with the Surviving Corporation or any of its Affiliates through the applicable vesting date. Each Replacement Award shall be subject to the same terms and conditions (other than vesting) that applied to the unvested Company Option from which it was derived, to the extent consistent with the foregoing, and shall be subject to the terms and conditions set forth in the applicable replacement award agreement to be entered into between the holder and Parent or the Surviving Corporation.

Section 3.3 — Treatment of Company RSUs

At the Effective Time, each Company RSU that is outstanding immediately prior to the Effective Time (whether vested or unvested) shall be fully accelerated (to the extent then unvested), cancelled, and extinguished, and shall be converted into the right to receive a lump-sum cash payment (without interest) equal to the product of (x) the Per Share Merger Consideration ($20.00) and (y) the number of shares of Company Common Stock subject to such Company RSU immediately prior to the Effective Time, less any amounts required to be deducted and withheld under applicable Tax Law. As of the date hereof, there are 3,200,000 Company RSUs outstanding, resulting in an aggregate Company RSU payout of $64,000,000 (3,200,000 multiplied by $20.00). Payment of the foregoing amounts shall be made through the Surviving Corporation's payroll system promptly following the Effective Time (and in any event within five (5) Business Days following the Closing Date), and shall be subject to all applicable Tax withholding.

Section 3.4 — Treatment of Company Warrants

At the Effective Time, each Company Warrant that is outstanding immediately prior to the Effective Time shall be cancelled and extinguished and shall be converted into the right to receive a lump-sum cash payment (without interest) equal to the product of (x) the total number of shares of Company Common Stock subject to such Company Warrant immediately prior to the Effective Time and (y) the excess of the Per Share Merger Consideration ($20.00) over the per share exercise price of such Company Warrant ($8.50), less any amounts required to be deducted and withheld under applicable Tax Law. As of the date hereof, there are Company Warrants to purchase 1,800,000 shares of Company Common Stock outstanding, with a per share exercise price of $8.50, resulting in a per-share spread of $11.50 ($20.00 minus $8.50) and an aggregate Company Warrant payout of $20,700,000 (1,800,000 multiplied by $11.50). Payment of the foregoing amounts shall be made by the Paying Agent promptly following the Effective Time (and in any event within five (5) Business Days following the Closing Date).

Section 3.5 — Payment Procedures

(a) Paying Agent. Prior to the Effective Time, Parent shall enter into the Paying Agent Agreement with Keystone Pacific Transfer Services Inc., substantially in the form attached hereto as Exhibit C, pursuant to which the Paying Agent shall act as paying agent in connection with the Merger. At or immediately prior to the Effective Time, Parent shall deposit, or cause to be deposited, with the Paying Agent, by wire transfer of immediately available funds, cash in an amount sufficient to pay (i) the aggregate Per Share Merger Consideration payable in respect of all shares of Company Common Stock outstanding immediately prior to the Effective Time (other than the Escrow Amount, which shall be deposited with the Escrow Agent pursuant to Section 3.6, and other than Dissenting Shares and treasury shares), and (ii) the aggregate amounts payable in respect of Company Options (to the extent payable through the Paying Agent), Company RSUs, and Company Warrants pursuant to Sections 3.2, 3.3, and 3.4 (the "Payment Fund"). The Payment Fund shall not be used for any purpose other than as expressly provided in this Agreement.

(b) Letter of Transmittal. As promptly as practicable following the Effective Time, and in no event later than three (3) Business Days after the Closing Date, Parent shall cause the Paying Agent to mail or otherwise deliver to each Person who was, immediately prior to the Effective Time, a holder of record of shares of Company Common Stock entitled to receive the Per Share Merger Consideration pursuant to Section 3.1(b): (i) a letter of transmittal substantially in the form attached hereto as Exhibit C-1 (which shall specify that delivery shall be effected, and risk of loss and title to any certificates evidencing such shares shall pass, only upon proper delivery of such certificates (or affidavits of loss in lieu thereof) to the Paying Agent), and (ii) instructions for use in effecting the surrender of certificates or book-entry shares in exchange for the Per Share Merger Consideration.

(c) Payments. Upon (i) surrender of a certificate representing shares of Company Common Stock to the Paying Agent (or delivery of an affidavit of loss in lieu thereof as provided in Section 3.7) together with a duly completed and validly executed letter of transmittal and such other documents as may be reasonably required by the Paying Agent, or (ii) receipt of an "agent's message" in the case of book-entry shares, together with a duly completed IRS Form W-9 (or applicable IRS Form W-8, as the case may be), the holder of such shares shall be entitled to receive in exchange therefor the Per Share Merger Consideration for each share of Company Common Stock formerly represented by such certificate or book-entry share, less the pro rata portion of the Per Share Merger Consideration withheld for deposit in the Escrow Fund as provided in Section 3.5(d). After the Effective Time, each certificate that previously represented shares of Company Common Stock shall represent only the right to receive the Per Share Merger Consideration (less applicable escrow withholding and Tax withholding).

(d) Escrow Withholding. From the Per Share Merger Consideration otherwise payable to each holder of shares of Company Common Stock (on a pro rata basis across all Company Stockholders), the Paying Agent shall withhold an amount equal to seven percent (7%) of the Per Share Merger Consideration payable in respect of each such share (i.e., $1.40 per share), and such withheld amount shall be deposited with the Escrow Agent (Garrison Trust Company) as part of the Escrow Amount, for an aggregate Escrow Amount of $133,000,000, to be held and disbursed in accordance with the Escrow Agreement. The net cash payable at the Effective Time to each Company Stockholder shall be $18.60 per share ($20.00 minus $1.40), subject to any additional amounts required to be deducted and withheld under applicable Tax Law. For the avoidance of doubt, the Escrow Amount shall be treated as having been received by the Company Stockholders for Tax purposes, and any distribution from the Escrow Fund to the Company Stockholders shall not be treated as additional consideration.

(e) No Further Ownership Rights. From and after the Effective Time, all shares of Company Common Stock that were outstanding immediately prior to the Effective Time shall cease to be outstanding, shall be automatically cancelled and retired, and shall cease to exist, and each holder of a certificate or book-entry share formerly representing any such shares of Company Common Stock shall cease to have any rights with respect thereto, except the right to receive, upon the surrender of such certificate or book-entry share, the Per Share Merger Consideration (less the applicable escrow withholding and any Tax withholding) in accordance with this Section 3.5. The stock transfer books of the Company shall be closed immediately upon the Effective Time, and there shall be no further registration of transfers of shares of Company Common Stock that were outstanding immediately prior to the Effective Time on the records of the Company.

(f) Unclaimed Funds. Any portion of the Payment Fund (including any interest earned thereon) that remains unclaimed and undistributed to holders of shares of Company Common Stock as of the date that is twelve (12) months after the Effective Time shall be delivered by the Paying Agent to the Surviving Corporation upon demand, and any former holder of shares of Company Common Stock who has not theretofore surrendered such holder's certificates or book-entry shares shall thereafter look only to the Surviving Corporation (subject to abandoned property, escheat, or other similar Laws) for payment of the Per Share Merger Consideration to which such holder is entitled. Neither Parent, the Surviving Corporation, Merger Sub, the Paying Agent, nor any other Person shall be liable to any former holder of shares of Company Common Stock for any amount properly delivered to a public official pursuant to any applicable abandoned property, escheat, or similar Law.

(g) Withholding Rights. Each of Parent, Merger Sub, the Surviving Corporation, and the Paying Agent (and their respective agents) shall be entitled to deduct and withhold from any consideration otherwise payable to any Person pursuant to this Article III such amounts as are required to be deducted and withheld with respect to the making of such payment under the Code, or under any provision of applicable state, local, or foreign Tax Law. To the extent that amounts are so deducted and withheld and are remitted to the applicable Governmental Authority, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.

Section 3.6 — Escrow

(a) At the Closing, the Escrow Amount of One Hundred Thirty-Three Million Dollars ($133,000,000) (representing seven percent (7%) of the Aggregate Merger Consideration) shall be deposited with Garrison Trust Company, as Escrow Agent, pursuant to the Escrow Agreement (Reference: GT-ESC-2025-07223), to be held and disbursed in accordance with the terms and conditions of the Escrow Agreement.

(b) The Escrow Fund shall be released as follows:

(i) First Release. Fifty percent (50%) of the Escrow Amount (i.e., $66,500,000), together with fifty percent (50%) of any interest, dividends, gains, or other earnings or income accrued on the Escrow Fund as of such date, shall be released to the Stockholder Representative for further distribution to the Company Stockholders on a pro rata basis on the first (1st) anniversary of the Closing Date (which the Parties anticipate will be on or about July 22, 2026); provided, however, that the amount so released shall be reduced by the aggregate amount of all pending and unresolved indemnification claims (including any reserves for such claims as reasonably determined by the Escrow Agent) asserted by any Parent Indemnified Party prior to such date.

(ii) Second Release. The entire remaining balance of the Escrow Fund (including all accrued and unpaid interest, dividends, gains, or other earnings or income thereon), less the aggregate amount of any pending and unresolved indemnification claims asserted by any Parent Indemnified Party prior to such date, shall be released to the Stockholder Representative for further distribution to the Company Stockholders on a pro rata basis on the date that is eighteen (18) months after the Closing Date (which the Parties anticipate will be on or about January 22, 2027).

(iii) Claims Reserves. Any amounts reserved from either the First Release or the Second Release on account of pending and unresolved indemnification claims shall be released to the Stockholder Representative (for further pro rata distribution to the Company Stockholders) or to the applicable Parent Indemnified Parties, as the case may be, promptly following the final resolution of each such pending claim in accordance with the terms of the Escrow Agreement and Article IX of this Agreement.

(c) Interest earned on the Escrow Fund shall be distributed pro rata with each release described in Section 3.6(b) above. The Escrow Agent shall invest the Escrow Fund in accordance with the investment instructions set forth in the Escrow Agreement.

Section 3.7 — Lost Certificates

In the event that any certificate representing shares of Company Common Stock shall have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the Person claiming such certificate to be lost, stolen, or destroyed and the delivery to the Paying Agent of an indemnity bond in such reasonable and customary amount as the Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such certificate, the Paying Agent shall issue in exchange for such lost, stolen, or destroyed certificate the Per Share Merger Consideration (less applicable escrow withholding and Tax withholding) in accordance with this Article III.

Section 3.8 — Adjustments

If, between the date of this Agreement and the Effective Time, the outstanding shares of Company Common Stock are changed into a different number or class of shares by reason of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Company Common Stock), reclassification, recapitalization, combination, exchange of shares, or similar transaction, the Per Share Merger Consideration shall be equitably adjusted to reflect such stock split, reverse stock split, stock dividend, reclassification, recapitalization, combination, exchange of shares, or similar transaction, so that the holders of Company Common Stock shall receive consideration equivalent to the consideration contemplated by this Agreement. Nothing in this Section 3.8 shall be deemed to permit or authorize any Party to take any action that is otherwise prohibited or restricted by the terms of this Agreement.

ARTICLE IV — REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set for

AGREEMENT AND PLAN OF MERGER
by and among
HARROWGATE PRIVATE EQUITY FUND IV LP
a Delaware limited partnership
("Parent")
HARROWGATE VELOCITY MERGER SUB INC.
a Delaware corporation
("Merger Sub")
and
VELOPAY SYSTEMS, INC.
a Delaware corporation
(the "Company")
Dated as of March 18, 2025
TABLE OF CONTENTS
Right-click to update Table of Contents
RECITALS
WHEREAS, Harrowgate Private Equity Fund IV LP, a Delaware limited partnership ("Parent"), with its principal office at 300 King Street, Suite 4200, Wilmington, Delaware 19801, is a private equity investment fund. Parent's general partner is Harrowgate Capital Management IV LLC, a Delaware limited liability company;
WHEREAS, Harrowgate Velocity Merger Sub Inc., a Delaware corporation ("Merger Sub"), is a direct, wholly-owned subsidiary of Parent, newly incorporated on February 24, 2025, and formed solely for the purpose of effecting the Merger (as defined herein) contemplated by this Agreement and Plan of Merger (this "Agreement"). Merger Sub's registered agent is Capitol Registered Agents LLC, located at 1209 Orange Street, Wilmington, Delaware 19801, and its Delaware file number is 7291034. Since its date of incorporation, Merger Sub has not conducted any business activities other than those incident to its formation and those undertaken in connection with the transactions contemplated by this Agreement;
WHEREAS, VeloPay Systems, Inc., a Delaware corporation (the "Company"), with its principal office at 1455 Innovation Parkway, Suite 800, Austin, Texas 78759, is engaged in the business of payments processing and financial technology services. The Company's Delaware file number is 5748392;
WHEREAS, the boards of directors of the Company and Merger Sub, and the general partner of Parent (Harrowgate Capital Management IV LLC, acting on behalf of Parent), have each duly approved this Agreement and the transactions contemplated hereby, including the Merger, upon the terms and subject to the conditions set forth herein, and have determined that it is advisable and in the best interests of their respective entities and their stockholders, partners, or members, as applicable, to consummate the Merger and the other transactions contemplated hereby;
WHEREAS, the board of directors of the Company (the "Company Board") has (a) determined that this Agreement, the Merger, and the other transactions contemplated hereby are advisable, fair to, and in the best interests of the Company and its stockholders, (b) approved and adopted this Agreement and the transactions contemplated hereby, including the Merger, in accordance with the requirements of the Delaware General Corporation Law (the "DGCL"), and (c) resolved to recommend that the stockholders of the Company approve and adopt this Agreement and the transactions contemplated hereby;
WHEREAS, concurrently with the execution and delivery of this Agreement, stockholders of the Company holding approximately 63.1% of the outstanding shares of Company Common Stock (as defined herein), constituting the requisite stockholder approval for the adoption of this Agreement under Section 251 of the DGCL and the Company's certificate of incorporation, have executed and delivered the Stockholder Support Agreement (as defined herein) and have delivered a Written Consent (as defined herein) approving and adopting this Agreement and the Merger pursuant to Section 228 of the DGCL;
WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to the Company's willingness to enter into this Agreement, Harrowgate Capital Management IV LLC has delivered to the Company the Limited Guarantee (as defined herein) in favor of the Company, guaranteeing certain payment obligations of Parent hereunder, including the Reverse Termination Fee (as defined herein);
WHEREAS, Parent has obtained equity and debt financing commitments, as more fully described herein, as set forth in the Equity Commitment Letter (as defined herein) and the Debt Commitment Letter (as defined herein), respectively, to fund the Aggregate Merger Consideration (as defined herein) and all related fees, costs, and expenses in connection with the transactions contemplated by this Agreement;
WHEREAS, the Parties (as defined herein) desire to make certain representations, warranties, covenants, and agreements in connection with the Merger and to prescribe certain conditions to the consummation of the Merger as set forth herein; and
WHEREAS, for United States federal income tax purposes, the Parties intend that the Merger be treated as a taxable acquisition by Parent of all of the outstanding capital stock of the Company, and the Parties do not intend the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants, and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Definitions
As used in this Agreement, the following terms shall have the meanings set forth below:
"Acquisition Proposal" means any proposal, offer, or indication of interest (other than by Parent, Merger Sub, or any of their respective Affiliates) relating to (a) any merger, consolidation, business combination, recapitalization, liquidation, dissolution, or similar transaction involving the Company or any of its Subsidiaries, (b) any direct or indirect acquisition of assets constituting twenty percent (20%) or more of the consolidated total assets of the Company and its Subsidiaries or to which twenty percent (20%) or more of the consolidated net revenues or net income of the Company and its Subsidiaries are attributable, (c) any direct or indirect acquisition of twenty percent (20%) or more of the outstanding equity securities or voting power of the Company, (d) any tender offer or exchange offer that, if consummated, would result in any Person beneficially owning twenty percent (20%) or more of the outstanding equity securities or voting power of the Company, or (e) any other transaction similar to or having a similar effect to any of the foregoing.
"Adjusted EBITDA" means, with respect to any period, the Company's earnings before interest, taxes, depreciation, and amortization, as adjusted for stock-based compensation expense, acquisition-related costs, restructuring charges, and other non-recurring items, in each case as set forth in the Company's audited or unaudited financial statements for such period, prepared in accordance with the Company's historical accounting practices and consistent with the methodology set forth in Section 1.1(a) of the Company Disclosure Schedules. The Company's Adjusted EBITDA for the fiscal year ended December 31, 2024, was $98,100,000.
"Affiliate" means, with respect to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such Person. For purposes of this definition, "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.
"Aggregate Merger Consideration" means One Billion Nine Hundred Million Dollars ($1,900,000,000) in cash, being the product of the Per Share Merger Consideration multiplied by the number of Fully Diluted Shares.
"Alternative Financing" means any alternative debt financing arrangement obtained by Parent to replace all or any portion of the Debt Financing, on terms and conditions that are not materially less favorable to the Company or the Company Stockholders than the terms set forth in the Debt Commitment Letter (taken as a whole).
"Amended and Restated Bylaws" has the meaning set forth in Section 2.6.
"Amended and Restated Certificate of Incorporation" has the meaning set forth in Section 2.5.
"Business Day" means any day that is not a Saturday, Sunday, or other day on which commercial banking institutions in New York, New York are authorized or required by Law to be closed.
"Burdensome Condition" has the meaning set forth in Section 6.4(d).
"Certificate of Merger" means the certificate of merger to be filed with the Secretary of State of the State of Delaware in connection with the Merger, in accordance with Section 251 of the DGCL.
"Closing" has the meaning set forth in Section 2.2.
"Closing Date" means the date on which the Closing occurs.
"Co-Invest Vehicle" means Harrowgate Velocity Co-Invest LP, a Delaware limited partnership formed on March 14, 2025, with employer identification number 93-2748163, with Harrowgate Capital Management IV LLC as its general partner.
"Code" means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.
"Company Board" means the board of directors of the Company, which as of the date hereof consists of Nathan Aldridge (Chair), Sonia Reyes-Watkins, Janet Gould, Kwame Asante, Catherine Lindström, and Philip Rosenthal.
"Company Board Recommendation" means the recommendation of the Company Board that the stockholders of the Company approve and adopt this Agreement and the transactions contemplated hereby, including the Merger.
"Company Board Recommendation Change" means any withdrawal, modification, qualification, or change of the Company Board Recommendation in a manner adverse to Parent, or any public announcement by the Company of an intention to do any of the foregoing, or any recommendation by the Company Board that the stockholders of the Company approve, adopt, or accept any Acquisition Proposal.
"Company Common Stock" means the common stock, par value $0.001 per share, of VeloPay Systems, Inc. As of the date hereof, there are 82,400,000 shares of Company Common Stock issued and outstanding.
"Company Disclosure Schedules" means the disclosure schedules delivered by the Company to Parent and Merger Sub concurrently with the execution and delivery of this Agreement, as the same may be updated in accordance with the terms of this Agreement.
"Company Equity Plans" means, collectively, the VeloPay Systems, Inc. 2017 Equity Incentive Plan, the VeloPay Systems, Inc. 2020 Equity Incentive Plan, and any predecessor or successor equity incentive plans of the Company, together with all award agreements thereunder.
"Company Material Adverse Effect" means any event, change, effect, development, condition, circumstance, or occurrence that, individually or in the aggregate with all other events, changes, effects, developments, conditions, circumstances, or occurrences, has had or would reasonably be expected to have a material adverse effect on (x) the business, financial condition, or results of operations of the Company and its Subsidiaries, taken as a whole, or (y) the ability of the Company to consummate the transactions contemplated by this Agreement; provided, however, that, solely for purposes of clause (x), none of the following (either alone or in combination) shall be deemed to constitute, or shall be taken into account in determining whether there has been or would reasonably be expected to be, a Company Material Adverse Effect:
(i) any epidemic, pandemic, or disease outbreak (including COVID-19 and any mutations or variations thereof, or any future epidemic or pandemic), or any worsening, escalation, or recurrence thereof, or any actions taken by any Governmental Authority or other Person in response thereto;
(ii) the outbreak or escalation of war, armed hostilities, military action, sabotage, terrorism, cyberterrorism, or acts of war (whether or not declared), or any escalation or worsening of any of the foregoing;
(iii) changes in general economic, business, financial, or market conditions (including changes in prevailing interest rates, credit availability, currency exchange rates, commodity prices, or stock market indices), whether in the United States or any other jurisdiction;
(iv) changes or conditions generally affecting the fintech industry, the payments processing industry, the financial services technology industry, or any other industry in which the Company or any of its Subsidiaries operates;
(v) changes in applicable Law or GAAP (or authoritative interpretations thereof), including any changes in Tax Law or regulations;
(vi) any failure by the Company to meet any internal or published projections, forecasts, estimates, budgets, milestones, or predictions of revenue, earnings, cash flow, or other financial or operating metrics for any period (it being understood and agreed that the facts, events, or circumstances underlying, causing, or contributing to such failure may be taken into account in determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur, to the extent such facts, events, or circumstances are not otherwise excluded by clauses (i) through (v) or (vii) hereof); and
(vii) the announcement, pendency, or consummation of the transactions contemplated by this Agreement, including any impact on the relationships, contractual or otherwise, of the Company or any of its Subsidiaries with customers, suppliers, vendors, partners, employees, labor unions, financing sources, Governmental Authorities, or other Persons resulting therefrom;
provided, further, that, with respect to clauses (i) through (v), such event, change, effect, development, condition, circumstance, or occurrence may be taken into account in determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur to the extent it has a disproportionate adverse impact on the Company and its Subsidiaries, taken as a whole, relative to other participants in the industries and markets in which the Company and its Subsidiaries operate.
"Company Options" means outstanding options to purchase shares of Company Common Stock granted pursuant to the Company Equity Plans. As of the date hereof, there are Company Options to purchase an aggregate of 7,600,000 shares of Company Common Stock, with a weighted average exercise price of $12.84 per share.
"Company RSUs" means outstanding restricted stock unit awards granted pursuant to the Company Equity Plans, each representing the right to receive one share of Company Common Stock upon vesting. As of the date hereof, there are 3,200,000 Company RSUs outstanding.
"Company Stockholders" means the holders of shares of Company Common Stock immediately prior to the Effective Time (other than holders of Dissenting Shares, to the extent such holders properly exercise and perfect their appraisal rights).
"Company Warrants" means outstanding warrants to purchase shares of Company Common Stock. As of the date hereof, there are Company Warrants to purchase an aggregate of 1,800,000 shares of Company Common Stock, with an exercise price of $8.50 per share.
"Confidentiality Agreement" means the Mutual Confidentiality and Non-Disclosure Agreement, dated as of October 14, 2024, between Parent and the Company.
"D&O Tail Policy" has the meaning set forth in Section 6.8(b).
"Debt Commitment Letter" means the commitment letter, dated as of February 14, 2025 (Reference: CRE-2025-SPF-0441), from Tralvendo National Bank and Prairie State Bank, N.A. to Parent, pursuant to which such lenders have committed to provide the Debt Financing, as may be amended, modified, supplemented, or replaced in accordance with the terms of this Agreement.
"Debt Financing" means the debt financing contemplated by the Debt Commitment Letter, consisting of (a) a senior secured term loan facility in an aggregate principal amount of $500,000,000 and (b) a senior secured revolving credit facility in an aggregate committed amount of $260,000,000.
"Deductible" has the meaning set forth in Section 9.4(a).
"DGCL" means the General Corporation Law of the State of Delaware, as amended from time to time.
"Dissenting Shares" has the meaning set forth in Section 3.1(d).
"Effective Time" has the meaning set forth in Section 2.3.
"Equity Commitment Letter" means the equity commitment letter, dated as of February 14, 2025, from Harrowgate Capital Management IV LLC (on behalf of the limited partners of Parent) to the Company, pursuant to which Harrowgate Capital Management IV LLC has committed to cause the funding of $1,140,000,000 in equity contributions to Parent for the purpose of consummating the transactions contemplated by this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Escrow Agent" means Garrison Trust Company.
"Escrow Agreement" means the escrow agreement to be entered into at the Closing among Parent, the Stockholder Representative, and the Escrow Agent, substantially in the form attached hereto as Exhibit D (Reference: GT-ESC-2025-07223).
"Escrow Amount" means One Hundred Thirty-Three Million Dollars ($133,000,000), representing seven percent (7%) of the Aggregate Merger Consideration.
"Escrow Fund" means the Escrow Amount deposited with the Escrow Agent at the Closing pursuant to the Escrow Agreement, together with any interest, dividends, gains, or other earnings or income thereon.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
"Financing Sources" means the entities that have committed to provide or arrange, or have otherwise entered into agreements in connection with, the Debt Financing or any Alternative Financing, and each of their respective Affiliates and their and their respective Affiliates' officers, directors, employees, agents, representatives, successors, and assigns.
"Fraud" means actual and intentional fraud (and not constructive fraud or negligent misrepresentation) with respect to the making of any representation or warranty set forth in Article IV or Article V of this Agreement, as applicable, involving a knowing and intentional misrepresentation of a material fact with the specific intent to deceive.
"Fully Diluted Shares" means 95,000,000 shares, consisting of the sum of (a) 82,400,000 shares of Company Common Stock issued and outstanding as of the date hereof, plus (b) 7,600,000 shares of Company Common Stock subject to outstanding Company Options (whether vested or unvested), plus (c) 3,200,000 shares of Company Common Stock subject to outstanding Company RSUs (whether vested or unvested), plus (d) 1,800,000 shares of Company Common Stock subject to outstanding Company Warrants.
"Fundamental Representations" means (a) with respect to the Company, the representations and warranties set forth in Section 4.1 (Organization and Qualification), Section 4.2 (Authority; Due Authorization), Section 4.4 (Capitalization), Section 4.5 (Subsidiaries), and Section 4.20 (Brokers and Finders), and (b) with respect to Parent and Merger Sub, the representations and warranties set forth in Section 5.1 (Organization), Section 5.2 (Authority; Due Authorization), and Section 5.7 (Brokers and Finders).
"GAAP" means generally accepted accounting principles in the United States as in effect from time to time, consistently applied.
"Governmental Authority" means any federal, state, provincial, local, municipal, or foreign government, any governmental, quasi-governmental, regulatory, or administrative authority, department, commission, board, bureau, agency, or instrumentality thereof, any court, tribunal, or arbitral body, or any self-regulatory organization.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnification Cap" has the meaning set forth in Section 9.4(b).
"Information Statement" has the meaning set forth in Section 6.3.
"intellectual Property" means all intellectual property and proprietary rights of any kind, including (a) patents, patent applications, and patent disclosures, (b) trademarks, service marks, trade dress, trade names, logos, corporate names, and domain names, together with all goodwill associated therewith, (c) copyrights and copyrightable works, (d) trade secrets, know-how, inventions, processes, techniques, methods, formulas, algorithms, and confidential information, (e) computer software (including source code, object code, firmware, operating systems, specifications, databases, data, and related documentation), and (f) all registrations, applications, renewals, extensions, continuations, and reissues of any of the foregoing.
"Investment Canada Act" means the Investment Canada Act, R.S.C. 1985, c. 28 (1st Supp.), as amended.
"Knowledge" (including the phrases "to the Knowledge of the Company" and any similar phrases) means the actual knowledge of Nathan Aldridge, Sonia Reyes-Watkins, Marcus Langford, and Danielle Moreau, in each case after reasonable inquiry of the employees directly reporting to such individuals and who would reasonably be expected to have knowledge of the relevant matter.
"Law" means any statute, law, ordinance, regulation, rule, code, executive order, decree, judgment, injunction, order, writ, or other requirement of any Governmental Authority.
"Lien" means any mortgage, pledge, hypothecation, lien, encumbrance, charge, security interest, adverse claim, restriction on transfer, conditional sale or other title retention device or arrangement, right of first refusal, preemptive right, or other similar restriction or encumbrance of any kind.
"Limited Guarantee" means the limited guarantee, dated as of March 18, 2025, made by Harrowgate Capital Management IV LLC in favor of the Company, guaranteeing certain obligations of Parent under this Agreement, including the obligation to pay the Reverse Termination Fee.
"Losses" means any and all damages, losses, liabilities, obligations, claims, demands, judgments, fines, penalties, costs, and expenses (including reasonable and documented attorneys' fees and expenses), but excluding punitive, special, or exemplary damages (except to the extent actually awarded to a third party in connection with a third-party claim).
"Match Period" has the meaning set forth in Section 6.2(e).
"Material Contract" means any Contract to which the Company or any of its Subsidiaries is a party or by which any of them or their respective properties or assets are bound that (a) involves aggregate annual payments or receipts by the Company and its Subsidiaries in excess of $3,000,000, (b) relates to indebtedness for borrowed money in excess of $5,000,000, (c) contains any non-competition, exclusivity, most-favored-nation, or similar restrictive covenant that materially restricts the business of the Company or any of its Subsidiaries, (d) relates to any partnership, joint venture, or strategic alliance, (e) involves the acquisition or disposition of any business (whether by merger, sale of stock, sale of assets, or otherwise) pursuant to which the Company or any of its Subsidiaries has any ongoing obligations, (f) is a material license or sublicense of intellectual Property (other than commercially available, off-the-shelf software licenses with annual fees of less than $250,000), (g) contains any change of control provision that would be triggered by the transactions contemplated by this Agreement, or (h) is otherwise material to the business, financial condition, or results of operations of the Company and its Subsidiaries, taken as a whole.
"Merger" has the meaning set forth in Section 2.1.
"Merger Consideration" means the Per Share Merger Consideration.
"Merger Sub" means Harrowgate Velocity Merger Sub Inc., a Delaware corporation and direct, wholly-owned subsidiary of Parent.
"Order" means any order, judgment, injunction, ruling, writ, decree, stipulation, determination, decision, or award of any Governmental Authority.
"Outside Date" means September 18, 2025, as such date may be extended pursuant to Section 8.1(b).
"Parent" means Harrowgate Private Equity Fund IV LP, a Delaware limited partnership.
"Parent Disclosure Schedules" means the disclosure schedules delivered by Parent and Merger Sub to the Company concurrently with the execution and delivery of this Agreement.
"Parent Indemnified Parties" has the meaning set forth in Section 9.2.
"Parent Material Adverse Effect" means any event, change, effect, development, condition, circumstance, or occurrence that, individually or in the aggregate, would prevent or materially delay the ability of Parent or Merger Sub to consummate the transactions contemplated by this Agreement.
"Parties" means Parent, Merger Sub, and the Company, collectively, and "Party" means any of them individually.
"Paying Agent" means Keystone Pacific Transfer Services Inc.
"Paying Agent Agreement" means the paying agent agreement to be entered into by and among Parent, the Surviving Corporation, and the Paying Agent, substantially in the form attached hereto as Exhibit C.
"Per Share Merger Consideration" means $20.00 per share in cash, without interest, representing the quotient of (a) the Aggregate Merger Consideration ($1,900,000,000) divided by (b) the number of Fully Diluted Shares (95,000,000), subject to adjustment as provided in Section 3.8.
"Permitted Liens" means (a) statutory Liens for current Taxes not yet due and payable or being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP, (b) mechanics', carriers', workers', repairers', and other similar Liens arising or incurred in the ordinary course of business, (c) zoning, entitlement, and other land use and environmental regulations by Governmental Authorities, (d) Liens securing the Company's existing credit facility with Meridian Commercial Credit Corp. (which shall be released at or prior to the Closing), and (e) other imperfections of title, easements, encumbrances, or restrictions that do not, individually or in the aggregate, materially impair the continued use of the applicable property or asset.
"Person" means any individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, Governmental Authority, or other entity.
"R&W Insurance Policy" means the buyer-side representations and warranties insurance policy issued by Oakbridge Omnivrel Insurance Group, Policy Number OFI-RW-2025-03187, bound on March 10, 2025, with a policy limit of $190,000,000 and a retention of $19,000,000.
"Representatives" means, with respect to any Person, such Person's officers, directors, managers, partners (general and limited), members, employees, agents, attorneys, accountants, auditors, financial advisors, investment bankers, consultants, and other advisors and representatives.
"Reverse Termination Fee" means Fifty-Seven Million Dollars ($57,000,000), representing three percent (3%) of the Aggregate Merger Consideration.
"Rollover Agreement" means the rollover agreement attached hereto as Exhibit F, pursuant to which Nathan Aldridge and Sonia Reyes-Watkins have agreed to reinvest a portion of their merger proceeds in the Co-Invest Vehicle simultaneously with the Closing.
"Solvent" means, with respect to any Person, that as of the date of determination, (a) the sum of such Person's assets, at a fair valuation, exceeds the sum of all such Person's debts, (b) such Person has not incurred and does not intend to incur, and does not believe that it will incur, debts beyond its ability to pay such debts as they become due (whether at maturity or otherwise), (c) such Person has sufficient capital to carry on its business and all businesses in which it is about to engage, and (d) such Person is not "insolvent" within the meaning of Section 101(32) of Title 11 of the United States Code.
"Stockholder Indemnified Parties" has the meaning set forth in Section 9.3.
"Stockholder Representative" means Nathan Aldridge, in his capacity as representative of the Company Stockholders for post-Closing matters, as more fully described in Section 9.6 and in the Stockholder Representative Agreement attached hereto as Exhibit G.
"Stockholder Support Agreement" means the support agreement, dated as of March 18, 2025, by and among Parent and certain stockholders of the Company, pursuant to which such stockholders have agreed, among other things, to vote their shares of Company Common Stock in favor of the adoption of this Agreement and against any Acquisition Proposal.
"Subsidiaries" means, with respect to the Company, each of the following entities, all of which are direct or indirect wholly-owned subsidiaries of the Company: VeloPay Processing LLC, a Delaware limited liability company; VeloPay Canada Inc., a corporation organized under the laws of Ontario, Canada; VeloPay Europe Unipessoal Lda., a private limited liability company organized under the laws of Portugal; VeloPay Fraud intelligence Inc., a Delaware corporation; and PayStream Gateway LLC, a Delaware limited liability company; and any other entity that is directly or indirectly owned or controlled by the Company.
"Superior Proposal" means a bona fide written Acquisition Proposal (with all references to "twenty percent (20%)" in the definition of Acquisition Proposal being deemed to be references to "more than fifty percent (50%)" for purposes of this definition) made by a Third Party that the Company Board determines in good faith (after consultation with its financial advisor, Velthryn Greer & Associates, and its outside legal counsel, Whitford Jessup & Crane LLP) to be more favorable to the Company's stockholders from a financial point of view than the Merger and the other transactions contemplated by this Agreement, taking into account all relevant legal, financial, regulatory, timing, and other relevant factors, including the identity of the Person making such proposal, the likelihood of consummation, the financing terms, the conditions to closing, and any revisions to this Agreement proposed by Parent in response thereto during the Match Period.
"Surviving Corporation" means VeloPay Systems, Inc., as the surviving corporation of the Merger.
"Survival Expiration Date" has the meaning set forth in Section 9.1.
"Tax" or "Taxes" means any and all federal, state, provincial, local, foreign, or other taxes of any kind, including income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs, duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other taxes of any kind whatsoever, together with any interest, penalty, addition to tax, or additional amount imposed with respect thereto.
"Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and any amendment thereof.
"Termination Fee" means Seventy-Six Million Dollars ($76,000,000), representing four percent (4%) of the Aggregate Merger Consideration.
"Third Party" means any Person other than Parent, Merger Sub, or any of their respective Affiliates.
"Written Consent" means the written consent of the stockholders of the Company, dated as of March 18, 2025, delivered concurrently with the execution and delivery of this Agreement, approving and adopting this Agreement and the transactions contemplated hereby, including the Merger, pursuant to Section 228 of the DGCL.
Section 1.2 — Interpretation
(a) When a reference is made in this Agreement to an Article, Section, Exhibit, or Schedule, such reference shall be to an Article, Section, Exhibit, or Schedule of or to this Agreement unless otherwise indicated.
(b) The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
(c) Whenever the words "include," "includes," or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation."
(d) The words "hereof," "herein," "hereto," "hereby," and "hereunder" and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement.
(e) The word "or" shall not be exclusive.
(f) All terms defined in this Agreement shall have the defined meanings when used in any document made or delivered pursuant hereto unless otherwise defined therein.
(g) The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms, and to the masculine as well as the feminine and neuter genders of such terms.
(h) Any agreement, instrument, statute, rule, regulation, or order defined or referred to herein means such agreement, instrument, statute, rule, regulation, or order as from time to time amended, modified, supplemented, or replaced (and, in the case of agreements or instruments, all attachments thereto and instruments incorporated therein).
(i) References to "$" or "Dollars" shall mean United States dollars.
(j) References to a Person include such Person's successors and permitted assigns.
(k) The Parties have been represented by legal counsel in the negotiation and preparation of this Agreement, and accordingly any rule of Law or legal decision that would require interpretation of any claimed ambiguities in this Agreement against the Party that drafted it has no application and is expressly waived by the Parties. The provisions of this Agreement shall be interpreted in a reasonable manner to effect the intent of the Parties.
(l) The Exhibits and Schedules identified in this Agreement (including the Company Disclosure Schedules and the Parent Disclosure Schedules) are incorporated herein by reference and made a part hereof.
ARTICLE II — THE MERGER
Section 2.1 — The Merger
Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with Section 251 of the DGCL, at the Effective Time, Merger Sub shall be merged with and into the Company (the "Merger"). As a result of the Merger, the separate corporate existence of Merger Sub shall cease at the Effective Time, and the Company shall continue as the surviving corporation of the Merger (the "Surviving Corporation") and shall become a direct, wholly-owned subsidiary of Parent. The Merger shall constitute a reverse triangular merger, with the Company as the surviving entity. Following the Effective Time, the Surviving Corporation shall possess all of the rights, privileges, powers, and franchises and be subject to all of the restrictions, disabilities, and duties of each of the Company and Merger Sub, all as provided under the DGCL.
Section 2.2 — Closing
The closing of the Merger (the "Closing") shall take place on the second (2nd) Business Day following the date on which the last to be satisfied or waived of the conditions set forth in Article VII (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions at the Closing) shall be satisfied or waived in accordance with this Agreement. The Closing shall take place at the offices of Calderwood & Harkness LLP, 787 Seventh Avenue, 38th Floor, New York, New York 10019, or remotely by means of the electronic exchange of documents and signatures via electronic transmission or other means mutually agreed upon by the Parties, commencing at 10:00 a.m. Eastern Time on the Closing Date, or at such other time, date, or place as may be mutually agreed in writing by the Parties (the date on which the Closing occurs, the "Closing Date").
Section 2.3 — Effective Time
On the Closing Date, the Parties shall cause a Certificate of Merger to be duly executed, verified, acknowledged, and filed with the Secretary of State of the State of Delaware in accordance with the relevant provisions of Section 251 of the DGCL. The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware, or at such subsequent date and time as may be agreed by the Parties and specified in the Certificate of Merger (the time at which the Merger becomes effective, the "Effective Time").
Section 2.4 — Effects of the Merger
The effects of the Merger shall be as provided in this Agreement and in the applicable provisions of the DGCL, including Sections 259, 260, and 261 of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all of the property, rights, privileges, agreements, powers, and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities, and duties of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions, disabilities, and duties of the Surviving Corporation.
Section 2.5 — Certificate of Incorporation of the Surviving Corporation
At the Effective Time, the certificate of incorporation of the Company, as in effect immediately prior to the Effective Time, shall be amended and restated in its entirety to read as set forth in Exhibit A attached hereto (the "Amended and Restated Certificate of Incorporation"), and such Amended and Restated Certificate of Incorporation shall be the certificate of incorporation of the Surviving Corporation until thereafter duly amended in accordance with the terms thereof and the DGCL and this Agreement.
Section 2.6 — Bylaws of the Surviving Corporation
At the Effective Time, the bylaws of the Company, as in effect immediately prior to the Effective Time, shall be amended and restated in their entirety to read as set forth in Exhibit B attached hereto (the "Amended and Restated Bylaws"), and such Amended and Restated Bylaws shall be the bylaws of the Surviving Corporation until thereafter duly amended in accordance with the terms thereof, the certificate of incorporation of the Surviving Corporation, and the DGCL and this Agreement.
Section 2.7 — Directors and Officers of the Surviving Corporation
(a) Directors. The directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified, or until their earlier death, resignation, or removal.
(b) Officers. The officers of the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, each to hold office in accordance with the Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified, or until their earlier death, resignation, or removal. As of the date hereof, the officers of the Company are as follows:
(i) Nathan Aldridge — Chief Executive Officer
(ii) Sonia Reyes-Watkins — Chief Technology Officer
(iii) Marcus Langford — Chief Financial Officer
(iv) Danielle Moreau — General Counsel and Secretary
ARTICLE III — CONVERSION OF SECURITIES; TREATMENT OF EQUITY AWARDS
Section 3.1 — Conversion of Shares
At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company, or the holders of any of the following securities:
(a) Merger Sub Capital Stock. Each share of common stock, par value $0.001 per share, of Merger Sub that is issued and outstanding immediately prior to the Effective Time shall be converted into and become one (1) validly issued, fully paid, and nonassessable share of common stock, par value $0.001 per share, of the Surviving Corporation, and shall constitute the only outstanding shares of capital stock of the Surviving Corporation as of the Effective Time. Parent shall be the sole stockholder of the Surviving Corporation. From and after the Effective Time, all certificates representing shares of Merger Sub common stock shall be deemed for all purposes to represent the number of shares of common stock of the Surviving Corporation into which such shares were converted.
(b) Company Common Stock. Each share of Company Common Stock that is issued and outstanding immediately prior to the Effective Time (other than (i) Dissenting Shares (which shall be treated as provided in Section 3.1(d)) and (ii) shares of Company Common Stock held in the treasury of the Company (which shall be treated as provided in Section 3.1(c))) shall be automatically cancelled and extinguished and shall be converted into the right to receive Twenty Dollars ($20.00) in cash, without interest (the "Per Share Merger Consideration"), payable to the holder thereof upon surrender of the certificate or book-entry share representing such share of Company Common Stock in the manner provided in Section 3.5. As of the date hereof, there are 82,400,000 shares of Company Common Stock issued and outstanding.
(c) Treasury Shares. Each share of Company Common Stock that is held in the treasury of the Company or owned by the Company or any direct or indirect wholly-owned Subsidiary of the Company immediately prior to the Effective Time shall be automatically cancelled and extinguished without any conversion thereof and without payment of any consideration therefor, and no payment shall be made with respect thereto.
(d) Dissenting Shares. Notwithstanding any provision of this Agreement to the contrary, shares of Company Common Stock that are issued and outstanding immediately prior to the Effective Time and that are held by any holder who has properly demanded appraisal rights with respect to such shares in accordance with, and who complies in all respects with, the provisions of Section 262 of the DGCL (such shares, "Dissenting Shares") shall not be converted into or represent the right to receive the Per Share Merger Consideration, but instead such holder shall be entitled only to such rights as are granted by Section 262 of the DGCL. Notwithstanding the foregoing, if any holder of Dissenting Shares shall fail to perfect or shall effectively withdraw or lose (through failure to perfect or otherwise) the right to appraisal pursuant to Section 262 of the DGCL, then, as of the later of the Effective Time and the occurrence of such event, such holder's shares shall automatically be deemed to have been converted into and shall represent only the right to receive the Per Share Merger Consideration as provided in Section 3.1(b), without interest thereon. The Company shall give Parent (i) prompt written notice of any demands for appraisal of shares of Company Common Stock received by the Company, any attempted withdrawals of such demands, and any other instruments served pursuant to Section 262 of the DGCL and received by the Company, and (ii) the opportunity to direct all negotiations and proceedings with respect to such demands. The Company shall not, without the prior written consent of Parent, make any payment with respect to, settle, offer to settle, or otherwise negotiate any such demands.
Section 3.2 — Treatment of Company Options
(a) Vested Company Options. At the Effective Time, each Company Option that is vested and exercisable as of immediately prior to the Effective Time (after giving effect to any acceleration of vesting contemplated by Section 3.2(b)) shall be cancelled and extinguished and shall be converted into the right to receive a lump-sum cash payment (without interest) equal to the product of (x) the total number of shares of Company Common Stock subject to such Company Option immediately prior to the Effective Time and (y) the excess, if any, of the Per Share Merger Consideration ($20.00) over the per share exercise price of such Company Option, less any amounts required to be deducted and withheld under applicable Tax Law. The weighted average exercise price of all outstanding Company Options as of the date hereof is $12.84 per share, resulting in a net per-share spread of $7.16 ($20.00 minus $12.84). Any Company Option that has an exercise price per share equal to or greater than the Per Share Merger Consideration ($20.00) shall be cancelled at the Effective Time without the payment of any consideration therefor and shall have no further force or effect.
(b) Unvested Company Options. At the Effective Time, each Company Option that is unvested as of immediately prior to the Effective Time (without giving effect to any acceleration of vesting provided in this Section 3.2(b)) shall be treated as follows:
(i) Accelerated Portion. Fifty percent (50%) of the shares of Company Common Stock subject to such unvested Company Option shall be accelerated and deemed vested as of immediately prior to the Effective Time, and such accelerated portion shall be cancelled and converted into the right to receive a lump-sum cash payment determined in accordance with Section 3.2(a), as if such portion were a vested Company Option.
(ii) Replacement Awards. Fifty percent (50%) of the shares of Company Common Stock subject to such unvested Company Option shall be converted into a replacement deferred cash award of Parent (a "Replacement Award"), with the underlying value of such Replacement Award equal to the product of (A) the number of shares subject to such portion and (B) the excess, if any, of the Per Share Merger Consideration ($20.00) over the per share exercise price of such Company Option. Each such Replacement Award shall vest ratably over a twenty-four (24) month period following the Closing Date, with one-twenty-fourth (1/24th) of the Replacement Award vesting on each monthly anniversary of the Closing Date, subject to the holder's continued employment with the Surviving Corporation or any of its Affiliates through the applicable vesting date. Each Replacement Award shall be subject to the same terms and conditions (other than vesting) that applied to the unvested Company Option from which it was derived, to the extent consistent with the foregoing, and shall be subject to the terms and conditions set forth in the applicable replacement award agreement to be entered into between the holder and Parent or the Surviving Corporation.
Section 3.3 — Treatment of Company RSUs
At the Effective Time, each Company RSU that is outstanding immediately prior to the Effective Time (whether vested or unvested) shall be fully accelerated (to the extent then unvested), cancelled, and extinguished, and shall be converted into the right to receive a lump-sum cash payment (without interest) equal to the product of (x) the Per Share Merger Consideration ($20.00) and (y) the number of shares of Company Common Stock subject to such Company RSU immediately prior to the Effective Time, less any amounts required to be deducted and withheld under applicable Tax Law. As of the date hereof, there are 3,200,000 Company RSUs outstanding, resulting in an aggregate Company RSU payout of $64,000,000 (3,200,000 multiplied by $20.00). Payment of the foregoing amounts shall be made through the Surviving Corporation's payroll system promptly following the Effective Time (and in any event within five (5) Business Days following the Closing Date), and shall be subject to all applicable Tax withholding.
Section 3.4 — Treatment of Company Warrants
At the Effective Time, each Company Warrant that is outstanding immediately prior to the Effective Time shall be cancelled and extinguished and shall be converted into the right to receive a lump-sum cash payment (without interest) equal to the product of (x) the total number of shares of Company Common Stock subject to such Company Warrant immediately prior to the Effective Time and (y) the excess of the Per Share Merger Consideration ($20.00) over the per share exercise price of such Company Warrant ($8.50), less any amounts required to be deducted and withheld under applicable Tax Law. As of the date hereof, there are Company Warrants to purchase 1,800,000 shares of Company Common Stock outstanding, with a per share exercise price of $8.50, resulting in a per-share spread of $11.50 ($20.00 minus $8.50) and an aggregate Company Warrant payout of $20,700,000 (1,800,000 multiplied by $11.50). Payment of the foregoing amounts shall be made by the Paying Agent promptly following the Effective Time (and in any event within five (5) Business Days following the Closing Date).
Section 3.5 — Payment Procedures
(a) Paying Agent. Prior to the Effective Time, Parent shall enter into the Paying Agent Agreement with Keystone Pacific Transfer Services Inc., substantially in the form attached hereto as Exhibit C, pursuant to which the Paying Agent shall act as paying agent in connection with the Merger. At or immediately prior to the Effective Time, Parent shall deposit, or cause to be deposited, with the Paying Agent, by wire transfer of immediately available funds, cash in an amount sufficient to pay (i) the aggregate Per Share Merger Consideration payable in respect of all shares of Company Common Stock outstanding immediately prior to the Effective Time (other than the Escrow Amount, which shall be deposited with the Escrow Agent pursuant to Section 3.6, and other than Dissenting Shares and treasury shares), and (ii) the aggregate amounts payable in respect of Company Options (to the extent payable through the Paying Agent), Company RSUs, and Company Warrants pursuant to Sections 3.2, 3.3, and 3.4 (the "Payment Fund"). The Payment Fund shall not be used for any purpose other than as expressly provided in this Agreement.
(b) Letter of Transmittal. As promptly as practicable following the Effective Time, and in no event later than three (3) Business Days after the Closing Date, Parent shall cause the Paying Agent to mail or otherwise deliver to each Person who was, immediately prior to the Effective Time, a holder of record of shares of Company Common Stock entitled to receive the Per Share Merger Consideration pursuant to Section 3.1(b): (i) a letter of transmittal substantially in the form attached hereto as Exhibit C-1 (which shall specify that delivery shall be effected, and risk of loss and title to any certificates evidencing such shares shall pass, only upon proper delivery of such certificates (or affidavits of loss in lieu thereof) to the Paying Agent), and (ii) instructions for use in effecting the surrender of certificates or book-entry shares in exchange for the Per Share Merger Consideration.
(c) Payments. Upon (i) surrender of a certificate representing shares of Company Common Stock to the Paying Agent (or delivery of an affidavit of loss in lieu thereof as provided in Section 3.7) together with a duly completed and validly executed letter of transmittal and such other documents as may be reasonably required by the Paying Agent, or (ii) receipt of an "agent's message" in the case of book-entry shares, together with a duly completed IRS Form W-9 (or applicable IRS Form W-8, as the case may be), the holder of such shares shall be entitled to receive in exchange therefor the Per Share Merger Consideration for each share of Company Common Stock formerly represented by such certificate or book-entry share, less the pro rata portion of the Per Share Merger Consideration withheld for deposit in the Escrow Fund as provided in Section 3.5(d). After the Effective Time, each certificate that previously represented shares of Company Common Stock shall represent only the right to receive the Per Share Merger Consideration (less applicable escrow withholding and Tax withholding).
(d) Escrow Withholding. From the Per Share Merger Consideration otherwise payable to each holder of shares of Company Common Stock (on a pro rata basis across all Company Stockholders), the Paying Agent shall withhold an amount equal to seven percent (7%) of the Per Share Merger Consideration payable in respect of each such share (i.e., $1.40 per share), and such withheld amount shall be deposited with the Escrow Agent (Garrison Trust Company) as part of the Escrow Amount, for an aggregate Escrow Amount of $133,000,000, to be held and disbursed in accordance with the Escrow Agreement. The net cash payable at the Effective Time to each Company Stockholder shall be $18.60 per share ($20.00 minus $1.40), subject to any additional amounts required to be deducted and withheld under applicable Tax Law. For the avoidance of doubt, the Escrow Amount shall be treated as having been received by the Company Stockholders for Tax purposes, and any distribution from the Escrow Fund to the Company Stockholders shall not be treated as additional consideration.
(e) No Further Ownership Rights. From and after the Effective Time, all shares of Company Common Stock that were outstanding immediately prior to the Effective Time shall cease to be outstanding, shall be automatically cancelled and retired, and shall cease to exist, and each holder of a certificate or book-entry share formerly representing any such shares of Company Common Stock shall cease to have any rights with respect thereto, except the right to receive, upon the surrender of such certificate or book-entry share, the Per Share Merger Consideration (less the applicable escrow withholding and any Tax withholding) in accordance with this Section 3.5. The stock transfer books of the Company shall be closed immediately upon the Effective Time, and there shall be no further registration of transfers of shares of Company Common Stock that were outstanding immediately prior to the Effective Time on the records of the Company.
(f) Unclaimed Funds. Any portion of the Payment Fund (including any interest earned thereon) that remains unclaimed and undistributed to holders of shares of Company Common Stock as of the date that is twelve (12) months after the Effective Time shall be delivered by the Paying Agent to the Surviving Corporation upon demand, and any former holder of shares of Company Common Stock who has not theretofore surrendered such holder's certificates or book-entry shares shall thereafter look only to the Surviving Corporation (subject to abandoned property, escheat, or other similar Laws) for payment of the Per Share Merger Consideration to which such holder is entitled. Neither Parent, the Surviving Corporation, Merger Sub, the Paying Agent, nor any other Person shall be liable to any former holder of shares of Company Common Stock for any amount properly delivered to a public official pursuant to any applicable abandoned property, escheat, or similar Law.
(g) Withholding Rights. Each of Parent, Merger Sub, the Surviving Corporation, and the Paying Agent (and their respective agents) shall be entitled to deduct and withhold from any consideration otherwise payable to any Person pursuant to this Article III such amounts as are required to be deducted and withheld with respect to the making of such payment under the Code, or under any provision of applicable state, local, or foreign Tax Law. To the extent that amounts are so deducted and withheld and are remitted to the applicable Governmental Authority, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.
Section 3.6 — Escrow
(a) At the Closing, the Escrow Amount of One Hundred Thirty-Three Million Dollars ($133,000,000) (representing seven percent (7%) of the Aggregate Merger Consideration) shall be deposited with Garrison Trust Company, as Escrow Agent, pursuant to the Escrow Agreement (Reference: GT-ESC-2025-07223), to be held and disbursed in accordance with the terms and conditions of the Escrow Agreement.
(b) The Escrow Fund shall be released as follows:
(i) First Release. Fifty percent (50%) of the Escrow Amount (i.e., $66,500,000), together with fifty percent (50%) of any interest, dividends, gains, or other earnings or income accrued on the Escrow Fund as of such date, shall be released to the Stockholder Representative for further distribution to the Company Stockholders on a pro rata basis on the first (1st) anniversary of the Closing Date (which the Parties anticipate will be on or about July 22, 2026); provided, however, that the amount so released shall be reduced by the aggregate amount of all pending and unresolved indemnification claims (including any reserves for such claims as reasonably determined by the Escrow Agent) asserted by any Parent Indemnified Party prior to such date.
(ii) Second Release. The entire remaining balance of the Escrow Fund (including all accrued and unpaid interest, dividends, gains, or other earnings or income thereon), less the aggregate amount of any pending and unresolved indemnification claims asserted by any Parent Indemnified Party prior to such date, shall be released to the Stockholder Representative for further distribution to the Company Stockholders on a pro rata basis on the date that is eighteen (18) months after the Closing Date (which the Parties anticipate will be on or about January 22, 2027).
(iii) Claims Reserves. Any amounts reserved from either the First Release or the Second Release on account of pending and unresolved indemnification claims shall be released to the Stockholder Representative (for further pro rata distribution to the Company Stockholders) or to the applicable Parent Indemnified Parties, as the case may be, promptly following the final resolution of each such pending claim in accordance with the terms of the Escrow Agreement and Article IX of this Agreement.
(c) Interest earned on the Escrow Fund shall be distributed pro rata with each release described in Section 3.6(b) above. The Escrow Agent shall invest the Escrow Fund in accordance with the investment instructions set forth in the Escrow Agreement.
Section 3.7 — Lost Certificates
In the event that any certificate representing shares of Company Common Stock shall have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the Person claiming such certificate to be lost, stolen, or destroyed and the delivery to the Paying Agent of an indemnity bond in such reasonable and customary amount as the Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such certificate, the Paying Agent shall issue in exchange for such lost, stolen, or destroyed certificate the Per Share Merger Consideration (less applicable escrow withholding and Tax withholding) in accordance with this Article III.
Section 3.8 — Adjustments
If, between the date of this Agreement and the Effective Time, the outstanding shares of Company Common Stock are changed into a different number or class of shares by reason of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Company Common Stock), reclassification, recapitalization, combination, exchange of shares, or similar transaction, the Per Share Merger Consideration shall be equitably adjusted to reflect such stock split, reverse stock split, stock dividend, reclassification, recapitalization, combination, exchange of shares, or similar transaction, so that the holders of Company Common Stock shall receive consideration equivalent to the consideration contemplated by this Agreement. Nothing in this Section 3.8 shall be deemed to permit or authorize any Party to take any action that is otherwise prohibited or restricted by the terms of this Agreement.
ARTICLE IV — REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set for

AGREEMENT AND PLAN OF MERGER

HARROWGATE PRIVATE EQUITY FUND IV LP

HARROWGATE VELOCITY MERGER SUB INC.

VELOPAY SYSTEMS, INC.

TABLE OF CONTENTS

RECITALS

Record

Parties

Dates

Amounts