ESCROW AGREEMENT
Reference No. GT-ESC-2025-07223
Dated as of July 22, 2025
among
HARROWGATE PRIVATE EQUITY FUND IV LP
(as Parent)
NATHAN ALDRIDGE
(as Stockholder Representative)
and
GARRISON TRUST COMPANY
(as Escrow Agent)
Entered into in connection with that certain Agreement and Plan of Merger, dated as of March 18, 2025 (the "Merger Agreement"), among Harrowgate Private Equity Fund IV LP, Harrowgate Velocity Merger Sub Inc., a Delaware corporation ("Merger Sub"), and VeloPay Systems, Inc., a Delaware corporation (the "Company," and following the Effective Time, the "Surviving Corporation")
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This ESCROW AGREEMENT (this "Agreement"), dated as of July 22, 2025, is entered into by and among Harrowgate Private Equity Fund IV LP, a Delaware limited partnership ("Parent"), acting as the parent of the Surviving Corporation (as defined below); Nathan Aldridge, in his capacity as Stockholder Representative (the "Stockholder Representative"); and Garrison Trust Company, a New York trust company (the "Escrow Agent"). Parent, the Stockholder Representative, and the Escrow Agent are each referred to herein as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, Parent, Harrowgate Velocity Merger Sub Inc., a Delaware corporation and wholly-owned subsidiary of Parent ("Merger Sub"), and VeloPay Systems, Inc., a Delaware corporation (the "Company"), entered into that certain Agreement and Plan of Merger, dated as of March 18, 2025 (as the same may be amended, supplemented, or otherwise modified from time to time in accordance with its terms, the "Merger Agreement"), pursuant to which Merger Sub merged with and into the Company, with the Company surviving the merger as a wholly-owned subsidiary of Parent (the "Merger"). The Merger was effected as a reverse triangular merger under Section 251 of the Delaware General Corporation Law (the "DGCL"), with the Company continuing as the surviving corporation following consummation of the Merger (in such capacity, the "Surviving Corporation");
WHEREAS, pursuant to the Merger Agreement, the aggregate merger consideration payable to the stockholders of the Company in connection with the Merger is One Billion Nine Hundred Million Dollars ($1,900,000,000.00), representing Twenty Dollars ($20.00) per share on a fully diluted, as-converted basis across Ninety-Five Million (95,000,000) fully diluted shares of common stock of the Company (the "Aggregate Merger Consideration");
WHEREAS, pursuant to Section 2.10 of the Merger Agreement, the Parties agreed that seven percent (7%) of the Aggregate Merger Consideration, equal to One Hundred Thirty-Three Million Dollars ($133,000,000.00) (the "Escrow Amount"), shall be deposited in escrow at the closing of the Merger (the "Closing") to secure the indemnification obligations of the former stockholders of the Company under Article X of the Merger Agreement;
WHEREAS, the Closing occurred on July 22, 2025, and a Certificate of Merger was duly filed with the Secretary of State of the State of Delaware on such date, at which time the Merger became effective (the "Effective Time");
WHEREAS, Nathan Aldridge was duly appointed as the Stockholder Representative pursuant to that certain Stockholder Representative Agreement, dated as of March 18, 2025 (the "Stockholder Representative Agreement"), to act on behalf of and as the exclusive representative of the former stockholders of the Company for purposes of indemnification, escrow administration, and post-closing dispute resolution under the Merger Agreement, with full power and authority to take any and all actions, give and receive any and all notices, make any and all determinations, and execute any and all documents on behalf of the former stockholders in connection with this Agreement and the indemnification provisions of the Merger Agreement;
WHEREAS, Garrison Trust Company has agreed to serve as Escrow Agent and to hold, invest, and disburse the Escrow Funds (as defined below) in accordance with the terms and conditions set forth in this Agreement; and
WHEREAS, capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual 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 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below:
"Business Day" means any day other than a Saturday, Sunday, or any day on which banking institutions in New York, New York are authorized or required by law, regulation, or executive order to close.
"Claim Notice" has the meaning set forth in Section 4.1 of this Agreement.
"Claim Response" has the meaning set forth in Section 4.2 of this Agreement.
"Claimed Amount" has the meaning set forth in Section 4.1(c) of this Agreement.
"Closing" means the closing of the transactions contemplated by the Merger Agreement, which occurred on July 22, 2025.
"Closing Date" means July 22, 2025, the date on which the Closing occurred.
"Disputed Amount" has the meaning set forth in Section 4.3 of this Agreement.
"Earnings" has the meaning set forth in Section 3.2 of this Agreement.
"Escrow Account" means the segregated escrow account established and maintained by the Escrow Agent pursuant to Section 2.2 of this Agreement, designated as "Garrison Trust Company, as Escrow Agent — Harrowgate / VeloPay Indemnification Escrow" (Reference: GT-ESC-2025-07223).
"Escrow Agent" means Garrison Trust Company, a New York trust company, having its principal office at One Liberty Plaza, 42nd Floor, New York, New York 10006, or any successor escrow agent appointed in accordance with Section 6.4 of this Agreement.
"Escrow Amount" means One Hundred Thirty-Three Million Dollars ($133,000,000.00), being seven percent (7%) of the Aggregate Merger Consideration of One Billion Nine Hundred Million Dollars ($1,900,000,000.00).
"Escrow Funds" means the Escrow Amount, together with any interest, earnings, dividends, income, or other amounts earned thereon while held in the Escrow Account, as such amount may be reduced from time to time by disbursements made in accordance with this Agreement.
"Fee Schedule" has the meaning set forth in Section 7.1 of this Agreement.
"First Release Amount" means Sixty-Six Million Five Hundred Thousand Dollars ($66,500,000.00), being fifty percent (50%) of the original Escrow Amount of One Hundred Thirty-Three Million Dollars ($133,000,000.00).
"First Release Date" means the date that is twelve (12) months after the Closing Date (i.e., July 22, 2026).
"Indemnification Cap" means Two Hundred Twenty-Eight Million Dollars ($228,000,000.00), being twelve percent (12%) of the Aggregate Merger Consideration of One Billion Nine Hundred Million Dollars ($1,900,000,000.00), as defined in and subject to the terms of the Merger Agreement.
"Joint Written Direction" means a written instruction signed by both Parent and the Stockholder Representative (or their respective authorized representatives as set forth in Exhibit D hereto) directing the Escrow Agent to disburse, invest, or take any other action with respect to the Escrow Funds, in such form as the Escrow Agent may reasonably request.
"Merger Agreement" means that certain Agreement and Plan of Merger, dated as of March 18, 2025, by and among Parent, Merger Sub, and VeloPay Systems, Inc., as the same may be amended, supplemented, or otherwise modified from time to time in accordance with its terms.
"Parent" means Harrowgate Private Equity Fund IV LP, a Delaware limited partnership, having its principal office at 300 King Street, Suite 4200, Wilmington, Delaware 19801.
"Pending Claims" has the meaning set forth in Section 5.2 of this Agreement.
"Pending Claim Reserve" has the meaning set forth in Section 5.2 of this Agreement.
"Permitted Investments" has the meaning set forth in Section 3.3 of this Agreement.
"Second Release Date" means the date that is eighteen (18) months after the Closing Date (i.e., January 22, 2027), which corresponds to the expiration of the survival period for representations and warranties under the Merger Agreement.
"Stockholder Representative" means Nathan Aldridge, acting in his capacity as the duly appointed representative of the former stockholders of VeloPay Systems, Inc. pursuant to the Stockholder Representative Agreement, dated as of March 18, 2025.
"Stockholder Representative Agreement" means that certain Stockholder Representative Agreement, dated as of March 18, 2025, by and among Nathan Aldridge and the stockholders of VeloPay Systems, Inc. party thereto.
"Surviving Corporation" means VeloPay Systems, Inc., a Delaware corporation, as the surviving corporation in the Merger and a wholly-owned subsidiary of Parent.
Section 1.2 — Rules of Construction
Unless the context of this Agreement otherwise requires: (a) the headings of the articles and sections of this Agreement are for convenience of reference only and shall not affect the meaning or interpretation of this Agreement; (b) the words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation"; (c) the word "or" is disjunctive but not exclusive; (d) words in the singular include the plural and vice versa; (e) words importing one gender include the other genders; (f) references to any agreement, document, or instrument mean such agreement, document, or instrument as amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms thereof; (g) references to "herein," "hereof," "hereunder," and similar terms refer to this Agreement as a whole and not to any particular provision of this Agreement; (h) references to any Article, Section, Exhibit, or Schedule are references to the Articles, Sections, Exhibits, or Schedules of this Agreement; (i) references to "$" or "Dollars" mean the lawful currency of the United States of America; (j) references to a "day" or "days" mean calendar days unless "Business Days" is expressly specified; and (k) references to a law or statute include all rules, regulations, orders, and guidance promulgated thereunder.
ARTICLE II — ESTABLISHMENT OF ESCROW
Section 2.1 — Deposit of Escrow Amount
On the Closing Date (July 22, 2025), Parent shall cause to be deposited with the Escrow Agent, by wire transfer of immediately available funds in United States Dollars, the Escrow Amount of One Hundred Thirty-Three Million Dollars ($133,000,000.00). Such wire transfer shall be made to the Escrow Agent's account at Garrison Trust Company in accordance with the wire instructions set forth in Exhibit A attached hereto. The Escrow Amount constitutes a portion of the Aggregate Merger Consideration of One Billion Nine Hundred Million Dollars ($1,900,000,000.00) payable to the former stockholders of VeloPay Systems, Inc. in connection with the Merger, and is being withheld from amounts otherwise payable to such former stockholders at the Closing in order to fund the indemnification escrow contemplated by Section 2.10 of the Merger Agreement. The Escrow Agent hereby acknowledges that the Escrow Agent shall acknowledge receipt of the Escrow Amount in writing (which may be by email) to each of Parent and the Stockholder Representative within one (1) Business Day following the Escrow Agent's actual receipt of such funds. Notwithstanding anything to the contrary in this Agreement, the Escrow Agent shall have no obligation or liability with respect to the Escrow Funds until the Escrow Amount has been actually received by the Escrow Agent and deposited into the Escrow Account.
Section 2.2 — Escrow Account
The Escrow Agent shall hold the Escrow Funds in a segregated escrow account designated as "Garrison Trust Company, as Escrow Agent — Harrowgate / VeloPay Indemnification Escrow" (Reference: GT-ESC-2025-07223) (the "Escrow Account"). The Escrow Funds shall be held, invested, and disbursed solely in accordance with the terms and conditions of this Agreement. The Escrow Agent shall not commingle the Escrow Funds with any other funds or property held by the Escrow Agent or any of its affiliates, whether in its capacity as fiduciary, agent, custodian, or otherwise. The Escrow Account shall at all times be maintained separately from the general assets of the Escrow Agent. The Escrow Agent shall maintain accurate books and records with respect to all transactions relating to the Escrow Account, including all deposits, investments, Earnings, and disbursements, and shall make such books and records available for inspection by Parent and the Stockholder Representative (or their respective authorized representatives) upon reasonable prior written notice during normal business hours.
Section 2.3 — Title and Ownership
The Escrow Funds shall remain the property of the former stockholders of VeloPay Systems, Inc. (for the avoidance of doubt, as determined immediately prior to the Effective Time and as set forth on the allocation schedule attached hereto as Exhibit B), subject to the claims and rights of Parent and the Surviving Corporation pursuant to the indemnification provisions of Article X of the Merger Agreement and this Agreement. For United States federal, state, and local income tax reporting purposes, the former stockholders of VeloPay (through the Stockholder Representative) shall be treated as the owners of the Escrow Funds, and all interest, income, dividends, and other Earnings on the Escrow Funds shall be reported as income of the former stockholders of VeloPay (allocated among them in accordance with their respective pro rata shares set forth in Exhibit B). Neither Parent nor the Surviving Corporation shall have any ownership interest in the Escrow Funds except to the extent that a disbursement of Escrow Funds is made to Parent or its designee in accordance with the terms of this Agreement.
ARTICLE III — INVESTMENT OF ESCROW FUNDS
Section 3.1 — Investment Direction
The Escrow Agent shall invest and reinvest the Escrow Funds, including any Earnings thereon, in Permitted Investments as directed jointly by Parent and the Stockholder Representative in a Joint Written Direction delivered to the Escrow Agent. Any such Joint Written Direction shall specify the particular Permitted Investment(s) in which the Escrow Funds are to be invested and the amount to be invested in each such Permitted Investment. In the absence of written investment instructions received by the Escrow Agent at any time, the Escrow Agent shall invest the Escrow Funds in the Permitted Investments described in Section 3.3(a) (money market mutual funds). The Escrow Agent shall have no responsibility for, and shall not be required to provide, investment advice or investment recommendations to any Party.
Section 3.2 — Earnings
All interest, income, dividends, and other earnings on the Escrow Funds (collectively, "Earnings") shall be credited to and become part of the Escrow Funds held in the Escrow Account. Earnings shall be reinvested in Permitted Investments in accordance with Section 3.1 and shall be disbursed as part of the Escrow Funds in accordance with Article IV and Article V of this Agreement. For the avoidance of doubt, all references in this Agreement to the "Escrow Funds" shall include Earnings unless the context clearly requires otherwise.
Section 3.3 — Permitted Investments
The Escrow Agent is authorized to invest the Escrow Funds only in the following investments (collectively, "Permitted Investments"):
(a) Money market mutual funds that invest exclusively in obligations issued or guaranteed by the United States of America or any agency or instrumentality thereof, and that are rated at least "AAAm" (or equivalent) by Standard & Poor's Ratings Services, a division of S&P Global Inc., or "Aaa-mf" (or equivalent) by Moody's Investors Service, Inc., or an equivalent rating by any other nationally recognized statistical rating organization;
(b) Direct obligations of the United States of America or obligations the principal of and interest on which are unconditionally guaranteed by the full faith and credit of the United States of America, in each case maturing within ninety (90) days from the date of acquisition thereof;
(c) Certificates of deposit or time deposits with maturities of ninety (90) days or less from the date of acquisition thereof, issued by any commercial bank that is a member of the Federal Reserve System and has combined capital and surplus of not less than One Billion Dollars ($1,000,000,000.00); and
(d) Such other investments as may be mutually agreed upon in writing by Parent and the Stockholder Representative and communicated to the Escrow Agent in a Joint Written Direction.
The Escrow Agent shall not be liable for any loss incurred on any Permitted Investment, including any loss resulting from a decline in the market value of any Permitted Investment, or from the liquidation of any Permitted Investment prior to its stated maturity in order to make a disbursement required under this Agreement. The Parties acknowledge and agree that the Escrow Agent is not guaranteeing the principal amount of any Permitted Investment. The Escrow Agent may, without liability, liquidate any Permitted Investment at any time as necessary to make disbursements in accordance with this Agreement, and the Escrow Agent shall not be liable for any loss, penalty, or diminution in value arising from any such liquidation.
Section 3.4 — Tax Reporting
The Escrow Agent shall report all Earnings on the Escrow Funds to the Internal Revenue Service (the "IRS") under the tax identification number of the Stockholder Representative (or such other tax identification numbers as the Stockholder Representative may direct in writing, representing the former stockholders of VeloPay Systems, Inc., in each case accompanied by a completed IRS Form W-9 or applicable IRS Form W-8 for each such person). The Escrow Agent shall file or cause to be filed all applicable IRS Forms 1099 and any other tax information returns or statements required under applicable federal, state, or local law with respect to Earnings on the Escrow Funds. The Stockholder Representative shall provide (or cause the former stockholders of VeloPay to provide) to the Escrow Agent a completed and executed IRS Form W-9 (Request for Taxpayer Identification Number and Certification) or applicable IRS Form W-8 (as appropriate) prior to or concurrently with the execution of this Agreement. The Escrow Agent shall be entitled to deduct and withhold from any distribution of Escrow Funds any taxes that the Escrow Agent reasonably determines are required to be deducted and withheld under the Internal Revenue Code of 1986, as amended, or any provision of applicable federal, state, local, or foreign tax law. To the extent that amounts are so deducted and withheld, 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. The Escrow Agent shall have no responsibility for the tax consequences to any Party or any former stockholder of VeloPay arising from the transactions contemplated by this Agreement.
ARTICLE IV — INDEMNIFICATION CLAIMS
Section 4.1 — Claim Notices
If Parent or the Surviving Corporation seeks indemnification from the Escrow Funds pursuant to the indemnification provisions set forth in Article X of the Merger Agreement, Parent shall deliver to the Stockholder Representative and the Escrow Agent a written notice (a "Claim Notice") setting forth the following information in reasonable detail:
(a) the nature and factual basis of the indemnification claim, including a description of the specific acts, omissions, events, or circumstances giving rise to or forming the basis of the claim, in each case with reasonable detail and specificity;
(b) the Section(s) of the Merger Agreement under which the indemnification claim is made, including the specific representations, warranties, covenants, or agreements alleged to have been breached or otherwise giving rise to the claim;
(c) the aggregate amount of Losses (as defined in the Merger Agreement) claimed by Parent or the Surviving Corporation (the "Claimed Amount"), or if the Claimed Amount is not then determinable, a good faith estimate thereof (which estimate shall not limit Parent's right to recover a greater amount upon final determination of the applicable Losses); and
(d) whether the indemnification claim relates to a Third-Party Claim (as defined in the Merger Agreement) or a direct claim by Parent or the Surviving Corporation against the former stockholders of VeloPay, and, in the case of a Third-Party Claim, a description of the relevant third-party claim, proceeding, or demand, together with copies of any material written communications, complaints, or demands received in connection therewith.
A Claim Notice must be delivered to the Stockholder Representative and the Escrow Agent prior to the expiration of the applicable survival period for the representations and warranties under the Merger Agreement, which survival period expires on the Second Release Date (January 22, 2027, being eighteen (18) months from the Closing Date of July 22, 2025), except to the extent that the Merger Agreement provides for a longer or shorter survival period with respect to any particular representation, warranty, covenant, or agreement (including the Fundamental Representations and Tax Representations as defined in the Merger Agreement, if applicable). For the avoidance of doubt, the delivery of a Claim Notice to the Escrow Agent shall not constitute a direction or instruction to disburse any Escrow Funds from the Escrow Account. Disbursement of Escrow Funds in respect of any indemnification claim shall occur only as expressly provided in Section 4.4 or Section 4.5 of this Agreement.
Section 4.2 — Response to Claim Notice
Within thirty (30) days after receipt of a Claim Notice by the Stockholder Representative (the "Response Period"), the Stockholder Representative shall deliver to Parent and the Escrow Agent a written response (a "Claim Response") that either:
(a) accepts the Claimed Amount in whole, in which case the claim shall constitute an "Accepted Claim" and disbursement of the applicable Claimed Amount shall be made from the Escrow Account in accordance with Section 4.4 of this Agreement; or
(b) disputes the Claimed Amount in whole or in part, setting forth in reasonable detail (i) the specific basis for the dispute, including the reasons why the Stockholder Representative believes that the Claimed Amount (or the disputed portion thereof) is not payable, (ii) the amount (if any) of the Claimed Amount that the Stockholder Representative accepts as payable (the "Accepted Portion"), and (iii) the amount of the Claimed Amount that the Stockholder Representative disputes (the "Disputed Portion").
If the Stockholder Representative fails to deliver a Claim Response to Parent and the Escrow Agent within the thirty (30)-day Response Period, the Stockholder Representative shall be conclusively deemed to have accepted the full Claimed Amount set forth in the applicable Claim Notice, and such claim shall be treated as an Accepted Claim for all purposes of this Agreement. The Escrow Agent shall be entitled to rely on the absence of a timely Claim Response as conclusive evidence that the Claimed Amount has been accepted.
Section 4.3 — Disputed Claims
If the Stockholder Representative timely delivers a Claim Response that disputes all or a portion of a Claimed Amount pursuant to Section 4.2(b), the Claimed Amount (or portion thereof) that is the subject of such dispute (the "Disputed Amount") and any undisputed portion thereof shall be treated as follows:
(a) Any Accepted Portion of the Claimed Amount that is not disputed by the Stockholder Representative shall be treated as an Accepted Claim and shall be disbursed to Parent (or its designee) from the Escrow Account in accordance with Section 4.4 of this Agreement; and
(b) The Disputed Amount shall be retained in the Escrow Account and shall be treated as a "Pending Claim" until the earlier of: (i) the date on which Parent and the Stockholder Representative resolve such dispute by mutual written agreement and deliver to the Escrow Agent a Joint Written Direction specifying the disposition of the Disputed Amount, or (ii) the date on which a final, non-appealable order or judgment of a court of competent jurisdiction is issued directing the disposition of the Disputed Amount, a certified copy of which is delivered to the Escrow Agent in accordance with Section 4.5 of this Agreement.
During the pendency of any Disputed Amount, the Escrow Agent shall retain in the Escrow Account an amount at least equal to the aggregate Disputed Amounts of all Pending Claims then outstanding. The Escrow Agent shall have no duty or obligation to investigate, adjudicate, or otherwise resolve any dispute between Parent and the Stockholder Representative with respect to any Claimed Amount, Disputed Amount, or Pending Claim.
Section 4.4 — Disbursement for Accepted Claims
Upon receipt of either (a) a Joint Written Direction signed by both Parent and the Stockholder Representative confirming the amount of an Accepted Claim and directing the Escrow Agent to disburse funds from the Escrow Account to Parent (or its designee), or (b) evidence satisfactory to the Escrow Agent (acting reasonably) that the thirty (30)-day Response Period has expired without the Stockholder Representative having delivered a timely Claim Response (which evidence may include a certificate of Parent attesting that no Claim Response was received within such period, together with a copy of the applicable Claim Notice and proof of delivery thereof), the Escrow Agent shall, within five (5) Business Days following receipt of such Joint Written Direction or evidence (as applicable), disburse from the Escrow Funds to Parent (or to such other person or account as Parent may designate) an amount equal to the Accepted Claim amount. Such disbursement shall be made by wire transfer of immediately available funds to the account designated by Parent in the applicable Joint Written Direction or, in the case of a deemed acceptance pursuant to Section 4.2, to the account of Parent set forth in Exhibit A-1 hereto (or such other account as Parent may have designated by written notice to the Escrow Agent in accordance with Section 9.2).
Section 4.5 — Disbursement Pursuant to Court Order
Upon receipt by the Escrow Agent of a certified copy of a final, non-appealable order or judgment of a court of competent jurisdiction (including the Court of Chancery of the State of Delaware or the United States District Court for the District of Delaware) directing the disbursement of all or any portion of the Escrow Funds, the Escrow Agent shall, within five (5) Business Days after receipt of such certified copy, disburse the Escrow Funds in accordance with the terms of such order or judgment. The Escrow Agent shall be entitled to rely conclusively upon any such order or judgment without any obligation to inquire into the validity, regularity, or propriety of such order or judgment, or to determine whether any appeal, stay, or other proceeding has been or may be taken with respect thereto, provided that the order or judgment on its face states that it is "final" and "non-appealable" (or words of similar import). If the Escrow Agent has any doubt as to whether a court order is final and non-appealable, the Escrow Agent may refrain from acting until receiving a written opinion of counsel to the presenting Party confirming the finality and non-appealability of such order.
Section 4.6 — Limitations on Claims
The Escrow Funds represent the sole and exclusive source of recovery and recourse for the indemnification obligations of the former stockholders of VeloPay Systems, Inc. under Article X of the Merger Agreement, and neither Parent nor the Surviving Corporation shall have any right to seek indemnification from the former stockholders of VeloPay in excess of the Escrow Funds then held in the Escrow Account, except as expressly provided in the Merger Agreement with respect to claims based on Fraud (as defined in the Merger Agreement), for which the remedies and limitations set forth in Section 10.7 of the Merger Agreement shall apply.
Notwithstanding anything herein to the contrary, aggregate disbursements from the Escrow Account to Parent or its designees for indemnification claims shall not exceed the Escrow Amount (inclusive of Earnings thereon), and in no event shall the aggregate indemnification liability of any individual former stockholder of VeloPay exceed such former stockholder's pro rata share (as set forth on Exhibit B hereto) of the Indemnification Cap of Two Hundred Twenty-Eight Million Dollars ($228,000,000.00), all as more fully set forth in Article X of the Merger Agreement.
The Parties acknowledge that in connection with the Merger, Parent has obtained a buyer-side representations and warranties insurance policy issued by Oakbridge Omnivrel Insurance Group, LLC (Policy No. OFI-RW-2025-03187) (the "R&W Insurance Policy"), with a policy limit of One Hundred Ninety Million Dollars ($190,000,000.00) and a retention of Nineteen Million Dollars ($19,000,000.00), the first Nine Million Five Hundred Thousand Dollars ($9,500,000.00) of which retention is to be borne by the former stockholders of VeloPay through the indemnification obligations secured by the Escrow Account (the "Seller Retention"), with the remaining Nine Million Five Hundred Thousand Dollars ($9,500,000.00) to be borne by Parent (the "Buyer Retention"). Claims by Parent under the R&W Insurance Policy are separate from and in addition to Parent's rights to the Escrow Funds under this Agreement, but the retention structure under the R&W Insurance Policy interrelates with the Escrow Account in that the Seller Retention constitutes the first layer of the former stockholders' indemnification exposure. The provisions of the Merger Agreement governing coordination between the Escrow Account and the R&W Insurance Policy (including Section 10.8 of the Merger Agreement) shall control the allocation and priority of indemnification claims as between the Escrow Funds and the R&W Insurance Policy. The Escrow Agent shall have no responsibility for, and shall not be required to interpret or apply the terms of, the R&W Insurance Policy or any provisions of the Merger Agreement relating thereto.
ARTICLE V — SCHEDULED RELEASES OF ESCROW FUNDS
Section 5.1 — First Release (12-Month Release)
On the First Release Date (July 22, 2026, being twelve (12) months after the Closing Date), the Escrow Agent shall release and disburse to the Stockholder Representative (for distribution to the former stockholders of VeloPay Systems, Inc., pro rata in accordance with the allocation schedule attached hereto as Exhibit B and in accordance with the terms of the Merger Agreement) an amount (the "First Release") equal to:
(i) Sixty-Six Million Five Hundred Thousand Dollars ($66,500,000.00) (the "First Release Amount," being fifty percent (50%) of the original Escrow Amount of One Hundred Thirty-Three Million Dollars ($133,000,000.00));
less
(ii) the aggregate amount of all Pending Claims (i.e., Disputed Amounts for which resolution has not yet occurred pursuant to Section 4.3) outstanding as of the First Release Date;
less
(iii) the aggregate amount of all Accepted Claims that have been paid from the Escrow Account to Parent, or that are then payable to Parent from the Escrow Account (including any Accepted Claims for which the five (5) Business Day disbursement period under Section 4.4 has not yet elapsed), as of the First Release Date;
plus
(iv) a proportionate share of the Earnings attributable to the First Release Amount, after giving effect to the deductions described in clauses (ii) and (iii) above.
If the aggregate amount of Pending Claims and paid or payable Accepted Claims as of the First Release Date equals or exceeds the First Release Amount (including Earnings), then no funds shall be released to the Stockholder Representative on the First Release Date, and the excess Pending Claims amount shall continue to be retained in the Escrow Account. Any amounts not released to the Stockholder Representative on the First Release Date by reason of the foregoing shall be released to the Stockholder Representative on the Second Release Date (subject to the provisions of Section 5.2), or upon the earlier resolution of the applicable Pending Claims, as applicable.
Disbursement of the First Release to the Stockholder Representative shall be made by wire transfer of immediately available funds to the account designated by the Stockholder Representative as set forth in Exhibit A-2 hereto (or such other account as the Stockholder Representative may have designated by written notice to the Escrow Agent in accordance with Section 9.2).
Not later than five (5) Business Days prior to the First Release Date, Parent and the Stockholder Representative shall each deliver to the Escrow Agent a certificate (which may be a Joint Written Direction) setting forth in reasonable detail the aggregate amount of Pending Claims, Accepted Claims paid or payable, and any other information reasonably necessary for the Escrow Agent to calculate the First Release amount. If the Escrow Agent does not receive such certificate(s) by three (3) Business Days prior to the First Release Date, the Escrow Agent shall be entitled to delay the First Release until it receives the information necessary to calculate the disbursement amount, and the Escrow Agent shall not be liable for any delay resulting from the failure of any Party to provide such information.
Section 5.2 — Second Release (18-Month Release / Final Release)
On the Second Release Date (January 22, 2027, being eighteen (18) months after the Closing Date, and coinciding with the expiration of the survival period for the representations and warranties of the Company under the Merger Agreement), the Escrow Agent shall release and disburse to the Stockholder Representative (for distribution to the former stockholders of VeloPay Systems, Inc., pro rata in accordance with Exhibit B and the Merger Agreement) the entire remaining balance of the Escrow Funds then held in the Escrow Account, including all Earnings thereon;
less the aggregate amount of all Pending Claims outstanding as of the Second Release Date, which amount shall continue to be retained in the Escrow Account as a reserve (the "Pending Claim Reserve").
The "Pending Claims" as of any date shall mean all indemnification claims for which a Claim Notice has been timely delivered to the Escrow Agent and the Stockholder Representative prior to or on such date and which have not been finally resolved as of such date by (i) payment as Accepted Claims, (ii) Joint Written Direction, (iii) final court order, or (iv) withdrawal by Parent.
Any amounts retained as a Pending Claim Reserve shall continue to be held by the Escrow Agent in the Escrow Account, invested in Permitted Investments in accordance with Article III, until the final resolution of each such Pending Claim, at which point:
(a) the amount of any Accepted Claim (whether by agreement or deemed acceptance) or the amount directed by a final, non-appealable court order shall be disbursed to Parent (or its designee) in accordance with Section 4.4 or Section 4.5 of this Agreement, as applicable; and
(b) the remaining balance (if any) of the Pending Claim Reserve attributable to the resolved Pending Claim (including any Earnings on such amount) shall promptly, and in any event within five (5) Business Days following such resolution, be released and disbursed to the Stockholder Representative (for distribution to the former stockholders of VeloPay, pro rata in accordance with Exhibit B).
The Escrow Agent's duties and obligations under this Agreement shall terminate upon the disbursement of all Escrow Funds from the Escrow Account, including all Pending Claim Reserves, in accordance with this Agreement, subject to the survival of certain provisions as set forth in Section 10.1.
Section 5.3 — No Release in Excess of Escrow Funds
In no event shall the Escrow Agent be required to disburse funds in an amount exceeding the Escrow Funds then held in the Escrow Account. If the aggregate amount of all disbursements otherwise required to be made under this Agreement at any time exceeds the Escrow Funds then available in the Escrow Account, the Escrow Agent shall disburse only such amounts as are then available and shall have no liability for any deficiency.
Section 5.4 — Pro Rata Distributions
All distributions to the Stockholder Representative under this Article V shall be made for the account of the former stockholders of VeloPay Systems, Inc. and shall be distributed by the Stockholder Representative to the former stockholders pro rata in accordance with each such former stockholder's respective share of the Aggregate Merger Consideration as set forth in the allocation schedule attached hereto as Exhibit B. The Escrow Agent shall have no duty or obligation to verify or monitor the Stockholder Representative's distribution of funds to the former stockholders, and the Escrow Agent shall be fully discharged from its obligations upon disbursement of the applicable amounts to the Stockholder Representative.
ARTICLE VI — DUTIES, RIGHTS, AND PROTECTIONS OF ESCROW AGENT
Section 6.1 — Duties of Escrow Agent
The Escrow Agent shall act in accordance with this Agreement and shall have no duties or obligations other than those expressly set forth herein. The Escrow Agent is acting solely as a stakeholder and custodian, and is not a party to, and has no duties, obligations, or liabilities under, the Merger Agreement, the Stockholder Representative Agreement, or any other agreement or instrument referenced herein (other than this Agreement). The Escrow Agent's sole responsibility is to hold, invest, and disburse the Escrow Funds in accordance with the express terms of this Agreement. Without limiting the generality of the foregoing:
(a) The Escrow Agent shall not be required to determine whether the conditions precedent to any disbursement have been satisfied or whether any facts or circumstances exist that would give rise to or support an indemnification claim under the Merger Agreement, other than confirming receipt of the applicable Joint Written Direction, deemed acceptance, or court order as specified in Article IV of this Agreement.
(b) The Escrow Agent shall not be required to interpret or construe any provision of the Merger Agreement, the Stockholder Representative Agreement, or any other agreement, instrument, or document, or to make any determination as to the meaning, applicability, or enforceability of any such provision.
(c) The Escrow Agent may rely upon, and shall not be liable for acting or refraining from acting upon, any written notice, instruction, certificate, statement, request, consent, agreement, or other document believed by it in good faith to be genuine and to have been signed, sent, or presented by the proper party or parties. The Escrow Agent shall have no obligation to verify or investigate the accuracy, completeness, or authenticity of any such document.
(d) The Escrow Agent may execute any of its duties hereunder through officers, agents, attorneys, custodians, or nominees appointed with due care.
Section 6.2 — Standard of Care; Limitation of Liability
The Escrow Agent shall not be liable for any action taken or omitted to be taken by it in good faith and in accordance with the terms of this Agreement, except to the extent that such action or omission is determined by a court of competent jurisdiction in a final, non-appealable judgment to have resulted from the Escrow Agent's own willful misconduct, gross negligence, or bad faith. In no event shall the Escrow Agent be liable for any indirect, consequential, incidental, special, exemplary, or punitive damages of any kind, regardless of whether the Escrow Agent has been advised of the possibility of such damages. The Escrow Agent shall have no liability for any loss arising from the default, bankruptcy, or insolvency of any depository, bank, investment issuer, or counterparty with which Escrow Funds are deposited or invested in accordance with this Agreement or the instructions of the other Parties. The Escrow Agent shall not be required to expend or risk its own funds or otherwise incur any financial liability or obligation in the performance of its duties under this Agreement.
Section 6.3 — Reliance on Counsel
The Escrow Agent may, at any time and from time to time, consult with legal counsel of its own selection (who may be counsel to the Escrow Agent in other matters), and the advice or opinion of such counsel shall constitute full and complete authorization and protection with respect to any action taken or omitted by the Escrow Agent in good faith and in accordance with such advice or opinion. The reasonable fees and expenses of such counsel shall be reimbursed by Parent in accordance with Section 7.2.
Section 6.4 — Resignation and Removal
The Escrow Agent may resign at any time by providing not less than thirty (30) days' prior written notice to Parent and the Stockholder Representative. Parent and the Stockholder Representative may jointly remove the Escrow Agent at any time by delivering a Joint Written Direction to the Escrow Agent providing not less than thirty (30) days' prior written notice of such removal. Upon any resignation or removal, a successor escrow agent shall be appointed jointly by Parent and the Stockholder Representative within thirty (30) days following the effective date of such resignation or removal. If Parent and the Stockholder Representative are unable to agree upon a successor escrow agent within such thirty (30)-day period, the Escrow Agent may petition a court of competent jurisdiction (including the Court of Chancery of the State of Delaware) for the appointment of a successor escrow agent, and the reasonable costs and expenses of any such proceeding (including reasonable attorneys' fees) shall be borne equally by Parent and the Stockholder Representative. Upon the appointment of a successor escrow agent and the delivery of the Escrow Funds to such successor, the resigning or removed Escrow Agent shall be fully discharged from any and all further obligations under this Agreement; provided that the provisions of Article VI, Article VII, and Article VIII shall survive any such resignation or removal with respect to actions taken or omitted by the Escrow Agent during the period of its service.
Section 6.5 — Conflicting Instructions; Interpleader
If at any time the Escrow Agent receives conflicting instructions from Parent and the Stockholder Representative with respect to the Escrow Funds, or if the Escrow Agent is uncertain as to how to proceed under any provision of this Agreement, the Escrow Agent shall be entitled, in its sole discretion, to:
(a) refrain from taking any action (other than continuing to hold and invest the Escrow Funds in accordance with this Agreement) until such time as the conflicting instructions or uncertainty are resolved by receipt of either (i) a Joint Written Direction from Parent and the Stockholder Representative, or (ii) a final, non-appealable order of a court of competent jurisdiction; or
(b) file an interpleader action or similar proceeding in a court of competent jurisdiction (including the Court of Chancery of the State of Delaware) and deposit the Escrow Funds with such court, and upon such deposit, the Escrow Agent shall be fully released and discharged from any and all further obligations under this Agreement (except with respect to the survival provisions set forth in Section 10.1).
The reasonable costs and expenses of any interpleader action or similar proceeding commenced by the Escrow Agent pursuant to this Section 6.5 (including reasonable attorneys' fees and court costs) shall be borne equally by Parent and the Stockholder Representative, and the Escrow Agent shall be entitled to reimbursement of such costs and expenses from the Escrow Funds (to the extent not paid directly by Parent and the Stockholder Representative) prior to any deposit with the court. The Escrow Agent shall not be liable for any delay in acting or failure to act resulting from the circumstances described in this Section 6.5.
ARTICLE VII — ESCROW AGENT COMPENSATION AND EXPENSES
Section 7.1 — Fees
The Escrow Agent shall be entitled to compensation for its services under this Agreement in accordance with the fee schedule attached hereto as Exhibit C (the "Fee Schedule"). All fees of the Escrow Agent shall be payable by Parent, as and when due in accordance with the Fee Schedule. The fees of the Escrow Agent shall not be paid from, or charged against, the Escrow Funds, except as expressly provided in Section 7.3.
Section 7.2 — Expense Reimbursement
In addition to the fees set forth in the Fee Schedule, Parent shall reimburse the Escrow Agent for all reasonable and documented out-of-pocket expenses incurred by the Escrow Agent in connection with the performance of its duties under this Agreement, including the reasonable fees and disbursements of legal counsel retained by the Escrow Agent pursuant to Section 6.3, and the reasonable costs and expenses of any proceedings commenced pursuant to Section 6.4 or Section 6.5. The Escrow Agent shall provide Parent with reasonable documentation of any such expenses upon request.
Section 7.3 — Lien
The Escrow Agent shall have a prior lien on the Escrow Funds for its unpaid fees and unreimbursed expenses hereunder; provided, however, that the Escrow Agent shall give Parent and the Stockholder Representative at least ten (10) Business Days' prior written notice before exercising any such lien. The Escrow Agent shall not exercise any such lien to the extent that such fees or expenses have been paid or are then being paid by Parent in accordance with this Article VII. The Parties agree that the Escrow Agent's lien shall be subordinate to the rights of Parent and the Stockholder Representative with respect to disbursements made in accordance with Article IV and Article V of this Agreement, and the Escrow Agent agrees not to exercise its lien in a manner that would prevent or delay any disbursement required to be made pursuant to Article IV or Article V.
ARTICLE VIII — INDEMNIFICATION OF ESCROW AGENT
Section 8.1 — Indemnification by Parent and Stockholder Representative
Parent and the Stockholder Representative (the latter solely in his capacity as representative of the former stockholders of VeloPay Systems, Inc., and not in his individual capacity), jointly and severally, shall indemnify, defend, and hold harmless the Escrow Agent and its officers, directors, employees, agents, and affiliates (collectively, the "Escrow Agent Indemnified Parties") from and against any and all losses, damages, claims, liabilities, judgments, penalties, costs, and expenses (including reasonable attorneys' fees and the costs of investigation and defense) (collectively, "Escrow Agent Losses") arising out of or in connection with the Escrow Agent's acceptance of its appointment as Escrow Agent hereunder or the performance of its duties under this Agreement, including any Escrow Agent Losses arising out of or in connection with any litigation, claim, demand, investigation, or proceeding relating to this Agreement, the Escrow Funds, or the Escrow Agent's actions or omissions hereunder; except, in each case, to the extent that any such Escrow Agent Losses are determined by a court of competent jurisdiction in a final, non-appealable judgment to have resulted from the Escrow Agent's own willful misconduct, gross negligence, or bad faith.
Notwithstanding the foregoing, the Stockholder Representative's indemnification obligations under this Section 8.1 shall be satisfied solely from the Escrow Funds then held in the Escrow Account and shall not constitute a personal obligation of the Stockholder Representative in his individual capacity or of any individual former stockholder of VeloPay Systems, Inc. In no event shall any former stockholder of VeloPay be required to make any contribution or payment in respect of the indemnification obligations set forth in this Section 8.1 other than through the Escrow Funds. Parent's indemnification obligations under this Section 8.1 are primary and shall not be conditioned upon any prior recovery from or claim against the Escrow Funds.
ARTICLE IX — NOTICES AND WIRE INSTRUCTIONS
Section 9.1 — Notices
All notices, requests, instructions, consents, demands, and other communications under this Agreement shall be in writing and shall be deemed duly given and effective: (a) when delivered personally; (b) when sent by electronic mail (with written confirmation of receipt by the receiving party, which confirmation may be by return email); (c) one (1) Business Day after being sent by nationally recognized overnight courier service (with confirmation of delivery); or (d) three (3) Business Days after being mailed by certified or registered mail, return receipt requested, postage prepaid, in each case addressed to the parties at the following addresses (or at such other addresses as a party may designate by written notice to the other parties in accordance with this Section 9.1):
If to Parent:
Harrowgate Private Equity Fund IV LP 300 King Street, Suite 4200 Wilmington, DE 19801
Attention: Priya Deshmukh, Managing Partner
Email: pdeshmukh@harrowgatecapital.com
With a copy to (which shall not constitute notice):
Calderwood & Harkness LLP 787 Seventh Avenue, 38th Floor New York, NY 10019
Attention: Sandra Tung
Email: stung@calderwoodharkness.com
If to the Stockholder Representative:
Nathan Aldridge c/o VeloPay Systems, Inc. 1455 Innovation Parkway, Suite 800 Austin, TX 78759
Attention: Nathan Aldridge, Stockholder Representative
Email: naldridge@velopaysystems.com
With a copy to (which shall not constitute notice):
Whitford Jessup & Crane LLP 600 Congress Avenue, Suite 2400 Austin, TX 78701
Attention: Rebecca Thornton-Hayes
Email: rthorntonhayes@wjclaw.com
If to the Escrow Agent:
Garrison Trust Company One Liberty Plaza, 42nd Floor New York, NY 10006
Attention: Valerie Drummond, Vice President, Corporate Trust
Reference: GT-ESC-2025-07223
Email: vdrummond@garrisontrust.com
Any party may change its address or email for purposes of this Section 9.1 by providing written notice to the other parties in accordance with this Section 9.1, which notice shall be effective upon receipt.
Section 9.2 — Wire Instructions
Wire instructions for the disbursement of Escrow Funds to Parent shall be as set forth in Exhibit A-1 attached hereto. Wire instructions for the disbursement of Escrow Funds to the Stockholder Representative shall be as set forth in Exhibit A-2 attached hereto. Either Parent or the Stockholder Representative may change its wire instructions by delivering a written notice to the Escrow Agent and the other Party at least five (5) Business Days prior to any disbursement for which such changed wire instructions are to be used. No change in wire instructions shall be effective until the Escrow Agent has confirmed receipt of such written notice and has completed its internal verification procedures.
The Escrow Agent shall confirm any wire transfer instructions received by telephone callback to the authorized persons at the telephone numbers set forth in Exhibit D attached hereto (the "Authorized Persons List"). In the event that the Escrow Agent is unable to confirm wire transfer instructions through telephone callback to an authorized person, the Escrow Agent may, in its sole discretion, delay the applicable disbursement until such confirmation is obtained, and the Escrow Agent shall not be liable for any delay resulting therefrom. Each of Parent and the Stockholder Representative may update its authorized persons on the Authorized Persons List by delivering a written notice signed by an existing authorized person to the Escrow Agent.
ARTICLE X — TERMINATION
Section 10.1 — Termination
This Agreement shall terminate upon the earlier of: (a) the date on which all Escrow Funds (including all Pending Claim Reserves) have been disbursed in full from the Escrow Account in accordance with the terms of this Agreement; or (b) the date on which a Joint Written Direction is delivered to the Escrow Agent directing the termination of this Agreement and the disbursement of all remaining Escrow Funds from the Escrow Account in accordance with the instructions set forth in such Joint Written Direction.
Notwithstanding the foregoing, the provisions of Article VI (Duties, Rights, and Protections of Escrow Agent), Article VII (Escrow Agent Compensation and Expenses), and Article VIII (Indemnification of Escrow Agent) shall survive the termination of this Agreement and shall continue in full force and effect with respect to the Escrow Agent's actions, omissions, rights, and entitlements arising during or in connection with the term of this Agreement.
Section 10.2 — Continuing Obligations
The rights and obligations of the Parties with respect to any Pending Claims and related Pending Claim Reserves shall survive any scheduled release date (including the First Release Date and the Second Release Date) and shall continue in full force and effect until all such Pending Claims have been finally resolved (whether by Joint Written Direction, deemed acceptance, final court order, or otherwise) and all Escrow Funds related thereto have been disbursed in accordance with this Agreement. The investment, reporting, and other administrative obligations of the Escrow Agent under this Agreement shall continue with respect to any Pending Claim Reserves until such reserves have been fully disbursed.
ARTICLE XI — GENERAL PROVISIONS
Section 11.1 — Governing Law
This Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of the State of Delaware, without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.
Section 11.2 — Jurisdiction; Venue
Each of the Parties hereby irrevocably submits to the exclusive jurisdiction of the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware declines to accept jurisdiction, the Superior Court of the State of Delaware (Complex Commercial Litigation Division) or the United States District Court for the District of Delaware) for the adjudication of any dispute or claim arising out of or relating to this Agreement or the transactions contemplated hereby, and hereby irrevocably waives, and agrees not to assert in any suit, action, or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action, or proceeding is improper or inconvenient. Each of the Parties hereby irrevocably waives any objection to the laying of venue of any suit, action, or proceeding arising out of this Agreement in any such court, and any defense of inconvenient forum in connection with any such suit, action, or proceeding. Each of the Parties agrees that service of process may be made upon it in the manner provided for notices in Section 9.1, and that such service shall constitute valid and sufficient service of process for all purposes.
Section 11.3 — Waiver of Jury Trial
EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE ESCROW FUNDS, OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT, OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.3.
Section 11.4 — Entire Agreement
This Agreement, together with the Merger Agreement, the Stockholder Representative Agreement, and the Exhibits and Schedules attached hereto and thereto, constitutes the entire agreement among the Parties with respect to the subject matter hereof and the establishment, maintenance, investment, and disbursement of the Escrow Funds, and supersedes all prior negotiations, representations, warranties, commitments, offers, agreements, and understandings, whether written or oral, with respect thereto.
Section 11.5 — Amendments and Waivers
This Agreement may be amended, modified, or supplemented only by a written instrument duly executed and delivered by each of Parent, the Stockholder Representative, and the Escrow Agent. No waiver of any provision of this Agreement, and no consent to any departure therefrom, shall be effective unless in writing and signed by the Party granting such waiver or consent. No failure or delay by any Party in exercising any right, power, or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power, or privilege.