ROLLOVER AGREEMENT
Dated as of March 18, 2025
among
HARROWGATE PRIVATE EQUITY FUND IV LP, a Delaware limited partnership,
HARROWGATE VELOCITY CO-INVEST LP, a Delaware limited partnership,
NATHAN ALDRIDGE, an individual,
and
SONIA REYES-WATKINS, an individual
CONFIDENTIAL TREATMENT REQUESTED
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ROLLOVER AGREEMENT
This ROLLOVER AGREEMENT (this "Agreement") is made and entered into as of March 18, 2025 (the "Agreement Date"), by and among:
(i) Harrowgate Private Equity Fund IV LP, a Delaware limited partnership ("HPE Fund IV");
(ii) Harrowgate Velocity Co-Invest LP, a Delaware limited partnership (the "Co-Invest Vehicle");
(iii) Nathan Aldridge, an individual residing in Austin, Texas ("Aldridge"); and
(iv) Sonia Reyes-Watkins, an individual residing in Austin, Texas ("Reyes-Watkins" and, together with Aldridge, each a "Rollover Participant" and collectively, the "Rollover Participants").
HPE Fund IV, the Co-Invest Vehicle, and the Rollover Participants are each referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, HPE Fund IV, Harrowgate Velocity Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of HPE Fund IV ("Merger Sub"), and VeloPay Systems, Inc., a Delaware corporation (the "Company" or "VeloPay"), have 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, among other things, Merger Sub will merge with and into VeloPay in a reverse triangular merger under Section 251 of the Delaware General Corporation Law (the "DGCL"), with VeloPay surviving as a wholly-owned subsidiary of HPE Fund IV (the "Merger"), and all outstanding shares of common stock of VeloPay (other than shares owned by HPE Fund IV, Merger Sub, or any of their respective affiliates and shares with respect to which appraisal rights have been properly exercised and not withdrawn) will be converted into the right to receive aggregate merger consideration of One Billion Nine Hundred Million Dollars ($1,900,000,000), representing Twenty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 VeloPay common stock;
WHEREAS, the Co-Invest Vehicle is a Delaware limited partnership formed on March 14, 2025, with Harrowgate Capital Management IV LLC, a Delaware limited liability company (the "General Partner"), serving as its general partner, having its registered agent at Capitol Registered Agents LLC, 1209 Orange Street, Wilmington, Delaware 19801, and bearing Employer Identification Number 93-2748163, which Co-Invest Vehicle was formed for the specific purpose of receiving rollover equity contributions from certain members of VeloPay management and co-investing alongside HPE Fund IV in the Surviving Corporation following the consummation of the Merger;
WHEREAS, Nathan Aldridge is the Chief Executive Officer and Co-Founder of VeloPay and is the beneficial owner of approximately 14.2% of the outstanding shares of VeloPay common stock, and Sonia Reyes-Watkins is the Chief Technology Officer and Co-Founder of VeloPay and is the beneficial owner of approximately 9.7% of the outstanding shares of VeloPay common stock, and each Rollover Participant would, upon consummation of the Merger, otherwise be entitled to receive cash merger consideration of Twenty Dollars ($20.00) per share for each share of VeloPay common stock held by such Rollover Participant;
WHEREAS, each Rollover Participant desires to contribute and reinvest a portion of the cash merger consideration otherwise payable to such Rollover Participant pursuant to the Merger Agreement into the Co-Invest Vehicle in exchange for limited partnership interests therein (the "Rollover Interests"), and HPE Fund IV and the Co-Invest Vehicle desire to accept such contributions, in each case on the terms and subject to the conditions set forth herein; and
WHEREAS, the execution and delivery of this Agreement by each of the Rollover Participants is a material inducement to, and a condition of, HPE Fund IV's willingness to enter into the Merger Agreement, and HPE Fund IV would not have entered into the Merger Agreement absent such execution and delivery.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:
Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Merger Agreement.
ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below:
"Closing" means the closing of the Merger as defined in, and in accordance with the terms and conditions of, the Merger Agreement.
"Closing Date" means the date on which the Closing occurs. The anticipated Closing Date is July 22, 2025, although the actual Closing Date shall be determined in accordance with the Merger Agreement and may be earlier or later than such anticipated date.
"Co-Invest Vehicle" means Harrowgate Velocity Co-Invest LP, a Delaware limited partnership.
"Co-Invest Vehicle LPA" means the Limited Partnership Agreement of the Co-Invest Vehicle, substantially in the form to be agreed upon by the Parties prior to the Closing Date, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with its terms.
"Effective Time" means the effective time of the Merger as set forth in the Certificate of Merger filed with the Secretary of State of the State of Delaware in accordance with the Merger Agreement and Section 251 of the DGCL.
"General Partner" means Harrowgate Capital Management IV LLC, a Delaware limited liability company, in its capacity as the general partner of both HPE Fund IV and the Co-Invest Vehicle.
"Merger Agreement" means that certain Agreement and Plan of Merger, dated as of March 18, 2025, by and among HPE Fund IV, Merger Sub, and VeloPay, as the same may be amended, supplemented, or otherwise modified from time to time in accordance with its terms.
"Merger Consideration" means Twenty Dollars ($20.00) per share in cash payable to holders of VeloPay common stock pursuant to and in accordance with the terms and conditions of the Merger Agreement.
"Merger Sub" means Harrowgate Velocity Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of HPE Fund IV.
"Paying Agent" means Keystone Pacific Transfer Services Inc., in its capacity as paying agent under the Merger Agreement.
"Rollover Amount" means, with respect to each Rollover Participant, the dollar amount of Merger Consideration to be contributed to the Co-Invest Vehicle by or on behalf of such Rollover Participant as set forth in Section 2.1 and on Exhibit A attached hereto.
"Rollover Interests" means the limited partnership interests in the Co-Invest Vehicle received by each Rollover Participant in exchange for the contribution of such Rollover Participant's Rollover Amount to the Co-Invest Vehicle in accordance with the terms of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"Stockholder Support Agreement" means the Stockholder Support Agreement, dated as of March 18, 2025, by and among HPE Fund IV, Merger Sub, and certain stockholders of VeloPay, including the Rollover Participants.
"Surviving Corporation" means VeloPay Systems, Inc. as the surviving corporation following the consummation of the Merger, as a wholly-owned subsidiary of HPE Fund IV.
"Total Rollover Amount" means Twenty-Three Million Nine Hundred Thousand Dollars ($23,900,000), which is the aggregate of all individual Rollover Amounts as set forth in Section 2.1 and on Exhibit A attached hereto.
Section 1.2 — Interpretation
In this Agreement, unless the context otherwise requires:
(a) The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
(b) Whenever the words "include," "includes," or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation."
(c) The words "hereof," "herein," "hereunder," "hereby," and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement.
(d) References to Articles, Sections, Exhibits, and Schedules are to Articles, Sections, Exhibits, and Schedules of and to this Agreement unless otherwise specified.
(e) The use of the singular form of any word shall include the plural, and the use of the plural form of any word shall include the singular, in each case as the context may require.
(f) References to "dollars" or "$" shall mean United States dollars unless otherwise specified.
(g) References to any statute, rule, or regulation shall include all amendments thereto and any successor statute, rule, or regulation, and all rules and regulations promulgated thereunder.
(h) References to any agreement, contract, or instrument shall include all exhibits, schedules, and annexes thereto and shall refer to such agreement, contract, or instrument as amended, supplemented, or otherwise modified from time to time in accordance with its terms.
(i) The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.
ARTICLE II — ROLLOVER CONTRIBUTIONS
Section 2.1 — Rollover Amounts
Each Rollover Participant agrees to contribute, and hereby irrevocably commits to contribute, the Rollover Amount set forth opposite such Rollover Participant's name in the table below to the Co-Invest Vehicle in accordance with the terms and conditions of this Agreement:
Each Rollover Participant agrees that, immediately prior to or substantially concurrent with the Effective Time, a portion of the cash Merger Consideration otherwise payable to such Rollover Participant in respect of shares of VeloPay common stock held by such Rollover Participant equal to such Rollover Participant's Rollover Amount shall be contributed directly to the Co-Invest Vehicle in the manner set forth in Section 2.2 of this Agreement. The Rollover Amount for each Rollover Participant represents a portion of the aggregate per-share Merger Consideration of Twenty Dollars ($20.00) per share otherwise payable for shares of VeloPay common stock held by such Rollover Participant.
For the avoidance of doubt, each Rollover Participant's remaining Merger Consideration — that is, the total cash Merger Consideration to which such Rollover Participant would be entitled under the Merger Agreement with respect to all shares of VeloPay common stock beneficially owned by such Rollover Participant, less such Rollover Participant's Rollover Amount — shall be paid in cash to such Rollover Participant through the Paying Agent (Keystone Pacific Transfer Services Inc.) in accordance with the terms and conditions of the Merger Agreement and the applicable Letter of Transmittal. A detailed schedule setting forth the shares subject to rollover, the per-share Merger Consideration, the Rollover Amount, and the remaining cash consideration for each Rollover Participant is set forth in Exhibit A attached hereto.
Section 2.2 — Mechanics of Contribution
(a) Direction and Authorization. Each Rollover Participant hereby irrevocably authorizes, directs, and instructs HPE Fund IV (or, as applicable, the Surviving Corporation or the Paying Agent acting on behalf of HPE Fund IV or the Surviving Corporation) to withhold from the cash Merger Consideration otherwise payable to such Rollover Participant at the Effective Time an amount in cash equal to such Rollover Participant's Rollover Amount as set forth in Section 2.1, and to cause such withheld amount to be contributed directly to the Co-Invest Vehicle on behalf of such Rollover Participant at or substantially concurrently with the Closing. Each Rollover Participant acknowledges and agrees that such direction and authorization is irrevocable and shall not be withdrawn, revoked, or modified without the prior written consent of HPE Fund IV and the Co-Invest Vehicle.
(b) Flow of Funds. The Rollover Amounts shall be reflected in the funds flow memorandum to be prepared by the Parties and their respective counsel in connection with the Closing (the "Funds Flow Memorandum"). The Funds Flow Memorandum shall set forth, among other things, the aggregate amount of Twenty-Three Million Nine Hundred Thousand Dollars ($23,900,000) to be directed from the Merger Consideration to the Co-Invest Vehicle on behalf of the Rollover Participants, together with the individual allocations attributable to each Rollover Participant. The Parties shall cooperate in good faith in the preparation and finalization of the Funds Flow Memorandum and shall use commercially reasonable efforts to agree upon the Funds Flow Memorandum no later than five (5) business days prior to the anticipated Closing Date.
(c) Timing. The contribution of each Rollover Amount to the Co-Invest Vehicle shall be deemed to occur immediately prior to or concurrently with the Effective Time, as shall be set forth in the Funds Flow Memorandum. The precise sequence and timing of the contribution relative to the filing of the Certificate of Merger and the effectiveness of the Merger shall be coordinated by the Parties and their respective counsel to ensure compliance with applicable law and the terms of the Merger Agreement.
(d) Wire Instructions. The General Partner shall provide wire instructions for the Co-Invest Vehicle's designated bank account to HPE Fund IV, the Paying Agent, and each Rollover Participant no later than three (3) business days prior to the anticipated Closing Date. Such wire instructions shall be in writing and shall be confirmed by the General Partner prior to the Closing. HPE Fund IV and the Paying Agent shall be entitled to rely conclusively on such wire instructions as provided by the General Partner without further inquiry or verification.
Section 2.3 — Issuance of Rollover Interests
In consideration for each Rollover Participant's contribution of their respective Rollover Amount to the Co-Invest Vehicle in accordance with the terms and conditions of this Agreement, the Co-Invest Vehicle shall, at the Closing, issue to each Rollover Participant limited partnership interests in the Co-Invest Vehicle having an aggregate value equal to such Rollover Participant's Rollover Amount. The Rollover Interests issued to each Rollover Participant shall represent such Rollover Participant's limited partnership interest in the Co-Invest Vehicle, determined in accordance with the terms and conditions of the Co-Invest Vehicle LPA.
The Rollover Interests shall be subject in all respects to the terms, conditions, restrictions, and obligations set forth in the Co-Invest Vehicle LPA, including without limitation provisions relating to capital contributions, distributions, allocations of profit and loss, management and governance rights, transfer restrictions, tag-along and drag-along rights, and information rights. Each Rollover Participant shall execute and deliver the Co-Invest Vehicle LPA (or a joinder thereto in the form attached as Exhibit B hereto) at or prior to the Closing in accordance with Section 5.2 of this Agreement, and each Rollover Participant's execution and delivery of such instrument shall be a condition to the issuance of Rollover Interests to such Rollover Participant.
The Rollover Interests shall be issued to each Rollover Participant at the same per-unit price as the limited partnership interests acquired by HPE Fund IV in the Co-Invest Vehicle, such that each Rollover Participant and HPE Fund IV shall participate in the Co-Invest Vehicle on a pari passu economic basis with respect to their respective capital contributions, subject to the terms of the Co-Invest Vehicle LPA (including any carried interest, management fee, or other preferential allocation or distribution rights of the General Partner as set forth therein).
Section 2.4 — Adjustment of Rollover Amounts
The Rollover Amounts set forth in Section 2.1 are fixed as of the date of this Agreement and shall not be subject to adjustment, increase, or decrease except with the prior mutual written consent of HPE Fund IV, the Co-Invest Vehicle, and the applicable Rollover Participant. No Rollover Participant shall have the right to unilaterally increase or decrease its Rollover Amount.
Notwithstanding the foregoing, in the event that the Merger Agreement is amended, modified, or supplemented to change the per-share Merger Consideration from Twenty Dollars ($20.00) per share, the Parties shall promptly negotiate in good faith any corresponding adjustment to the Rollover Amounts. Any such adjustment shall be documented in a written amendment to this Agreement executed by all Parties in accordance with Section 8.3. In the absence of such a written amendment, the Rollover Amounts shall remain as set forth in Section 2.1.
Section 2.5 — Tax Treatment
(a) Intended Tax Treatment. The Parties intend that the contribution of each Rollover Amount to the Co-Invest Vehicle in exchange for the Rollover Interests shall be treated as a taxable exchange for United States federal income tax purposes. Each Rollover Participant acknowledges and agrees that, for United States federal income tax purposes, the contribution of such Rollover Participant's Rollover Amount to the Co-Invest Vehicle shall be treated as a taxable disposition of a portion of such Rollover Participant's shares of VeloPay common stock in exchange for Rollover Interests, and such Rollover Participant will recognize gain or loss on such deemed exchange to the extent applicable under the Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury Regulations promulgated thereunder.
(b) Consistent Reporting. Each Party shall, and shall cause its affiliates to, file all tax returns and reports consistent with the tax treatment described in this Section 2.5, and no Party shall take any position on any tax return, tax proceeding, or otherwise that is inconsistent with such treatment unless required to do so by a final determination (as defined in Section 1313(a) of the Code) of a taxing authority.
(c) Tax Advice. Each Rollover Participant acknowledges that the tax treatment of the Merger and the transactions contemplated hereby, including the contribution of the Rollover Amounts to the Co-Invest Vehicle in exchange for the Rollover Interests, involves complex tax considerations. The tax treatment of the Merger is addressed in the Tax Structure Memorandum prepared by Leonard Cross of Calderwood & Harkness LLP, dated March 15, 2025 (the "Tax Memo"); provided, however, that the Tax Memo is not incorporated into this Agreement by reference and shall not form a part of this Agreement for any purpose. Each Rollover Participant acknowledges and agrees that such Rollover Participant is not relying on HPE Fund IV, the Co-Invest Vehicle, the General Partner, Calderwood & Harkness LLP, or any of their respective affiliates, partners, members, officers, directors, employees, agents, or counsel for tax advice in connection with the transactions contemplated by this Agreement, and each Rollover Participant has had the full opportunity to consult with such Rollover Participant's own independent tax advisors regarding the tax consequences of the transactions contemplated hereby, as more fully set forth in Section 3.6 of this Agreement.
(d) Withholding. HPE Fund IV, the Co-Invest Vehicle, the General Partner, the Surviving Corporation, and the Paying Agent shall be entitled to deduct and withhold from any amounts otherwise payable or issuable pursuant to this Agreement such amounts as are required to be deducted and withheld 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 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.
ARTICLE III — REPRESENTATIONS AND WARRANTIES OF THE ROLLOVER PARTICIPANTS
Each Rollover Participant, severally and not jointly, hereby represents and warrants to HPE Fund IV and the Co-Invest Vehicle as follows:
Section 3.1 — Authorization
Such Rollover Participant has full legal capacity and authority to execute and deliver this Agreement and to perform such Rollover Participant's obligations hereunder. This Agreement has been duly executed and delivered by such Rollover Participant and constitutes the legal, valid, and binding obligation of such Rollover Participant, enforceable against such Rollover Participant in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and similar laws of general applicability relating to or affecting creditors' rights generally, and to general equitable principles (whether considered in a proceeding in equity or at law) (collectively, the "Enforceability Exceptions").
Section 3.2 — Ownership of VeloPay Shares
(a) Nathan Aldridge represents and warrants that he is the beneficial owner of approximately 14.2% of the outstanding shares of VeloPay common stock, and that such shares are owned by him free and clear of all liens, pledges, charges, security interests, mortgages, encumbrances, options, rights of first refusal, preemptive rights, and other restrictions or limitations of any kind (collectively, "Liens"), other than (i) restrictions arising under the Merger Agreement, (ii) restrictions arising under that certain Stockholder Support Agreement, dated as of March 18, 2025, to which Aldridge is a party, (iii) restrictions on transfer under applicable federal and state securities laws, and (iv) restrictions arising under VeloPay's certificate of incorporation, bylaws, or any stockholder agreement to which Aldridge is a party as of the date hereof.
(b) Sonia Reyes-Watkins represents and warrants that she is the beneficial owner of approximately 9.7% of the outstanding shares of VeloPay common stock, and that such shares are owned by her free and clear of all Liens, other than (i) restrictions arising under the Merger Agreement, (ii) restrictions arising under that certain Stockholder Support Agreement, dated as of March 18, 2025, to which Reyes-Watkins is a party, (iii) restrictions on transfer under applicable federal and state securities laws, and (iv) restrictions arising under VeloPay's certificate of incorporation, bylaws, or any stockholder agreement to which Reyes-Watkins is a party as of the date hereof.
(c) Each Rollover Participant represents and warrants that, as of the date hereof, such Rollover Participant does not own, beneficially or of record, any equity securities of VeloPay or any rights to acquire equity securities of VeloPay other than shares of VeloPay common stock and any options, restricted stock units, or other equity awards disclosed to HPE Fund IV prior to the date hereof. Other than the voting and disposition provisions of the Stockholder Support Agreement and this Agreement, no Rollover Participant is a party to any voting agreement, voting trust, proxy, or other arrangement with respect to any shares of VeloPay common stock.
Section 3.3 — Investment Representations
Each Rollover Participant represents and warrants to HPE Fund IV and the Co-Invest Vehicle as follows:
(a) Investment Intent. Such Rollover Participant is acquiring the Rollover Interests solely for such Rollover Participant's own account for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or any applicable state securities law. Such Rollover Participant does not have any contract, undertaking, agreement, or arrangement with any person to sell, transfer, or grant participations to such person or to any third person with respect to any of the Rollover Interests.
(b) Accredited Investor Status. Such Rollover Participant is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D under the Securities Act by reason of such Rollover Participant's individual net worth (or joint net worth with such Rollover Participant's spouse) exceeding One Million Dollars ($1,000,000), exclusive of the value of such Rollover Participant's primary residence, or by reason of such Rollover Participant's individual income exceeding Two Hundred Thousand Dollars ($200,000) in each of the two most recent calendar years (or joint income with such Rollover Participant's spouse exceeding Three Hundred Thousand Dollars ($300,000) in each of such years) and a reasonable expectation of reaching the same income level in the current year.
(c) Sophistication and Information. Such Rollover Participant has received, reviewed, and considered all information regarding the Co-Invest Vehicle, HPE Fund IV, the Surviving Corporation, and the transactions contemplated hereby that such Rollover Participant has deemed necessary or appropriate to make an informed investment decision with respect to the acquisition of the Rollover Interests. Such Rollover Participant has had a reasonable opportunity to ask questions and receive answers from the General Partner and HPE Fund IV concerning the Co-Invest Vehicle, the Surviving Corporation, and the terms and conditions of the Rollover Interests, and all such questions have been answered to the satisfaction of such Rollover Participant. Such Rollover Participant has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the investment in the Rollover Interests.
(d) Restricted Securities. Such Rollover Participant understands and acknowledges that (i) the Rollover Interests have not been registered under the Securities Act or under any state securities laws, (ii) the Rollover Interests are being offered and sold in reliance on exemptions from the registration requirements of the Securities Act and applicable state securities laws, (iii) the Rollover Interests will constitute "restricted securities" within the meaning of Rule 144 under the Securities Act, and (iv) the Rollover Interests may not be sold, transferred, pledged, hypothecated, or otherwise disposed of except in compliance with the Securities Act, applicable state securities laws, and the transfer restrictions set forth in the Co-Invest Vehicle LPA.
(e) Risk of Loss. Such Rollover Participant understands that an investment in the Rollover Interests involves substantial risks, including the risk of a complete loss of such Rollover Participant's investment. Such Rollover Participant is financially able to bear the economic risk of such investment for an indefinite period of time and has no need for liquidity with respect to such investment.
Section 3.4 — No Conflicts
The execution, delivery, and performance by such Rollover Participant of this Agreement, and the consummation by such Rollover Participant of the transactions contemplated hereby, do not and will not (a) violate, conflict with, or result in a breach of or default under any provision of any agreement, contract, instrument, order, judgment, decree, or ruling to which such Rollover Participant is a party or by which such Rollover Participant or any of such Rollover Participant's assets or properties are bound, (b) violate any law, statute, regulation, ordinance, or rule of any governmental authority applicable to such Rollover Participant, or (c) require any consent, approval, authorization, order, registration, qualification, or filing of or with any governmental authority or any other person, except for any such consents, approvals, authorizations, orders, registrations, qualifications, or filings that have been obtained or made prior to the date hereof or that will be obtained or made prior to the Closing Date.
Section 3.5 — No Brokers
Such Rollover Participant has not incurred, and will not incur, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or the transactions contemplated hereby, and no broker, finder, or agent has been retained by or on behalf of such Rollover Participant in connection herewith. Such Rollover Participant acknowledges that VeloPay has engaged Meridian Peak Advisory Group as its financial advisor in connection with the Merger, and that any fees or commissions payable to Meridian Peak Advisory Group are the responsibility of VeloPay in accordance with the terms of its engagement letter and shall not be the responsibility of such Rollover Participant.
Section 3.6 — Tax Advice
Such Rollover Participant acknowledges that (a) such Rollover Participant has had the opportunity to consult with, and has consulted with or has had a reasonable opportunity to consult with, such Rollover Participant's own independent tax, legal, and financial advisors regarding the tax consequences of the transactions contemplated by this Agreement, including the contribution of the Rollover Amount to the Co-Invest Vehicle in exchange for Rollover Interests, and (b) such Rollover Participant is not relying on HPE Fund IV, the Co-Invest Vehicle, the General Partner, or any of their respective affiliates, partners, members, officers, directors, employees, agents, or counsel (including Calderwood & Harkness LLP) for tax advice. Each Rollover Participant understands that the tax treatment of the transactions contemplated hereby may be complex and uncertain, and that neither HPE Fund IV, the Co-Invest Vehicle, the General Partner, nor any of their respective counsel has made, or is making, any representation or warranty regarding the tax treatment of the transactions contemplated hereby.
ARTICLE IV — REPRESENTATIONS AND WARRANTIES OF HPE FUND IV AND THE CO-INVEST VEHICLE
Each of HPE Fund IV and the Co-Invest Vehicle hereby represents and warrants to each Rollover Participant as follows:
Section 4.1 — Organization and Authority
(a) HPE Fund IV is a limited partnership duly organized, validly existing, and in good standing under the laws of the State of Delaware, with its principal place of business at 300 King Street, Suite 4200, Wilmington, Delaware 19801, and bearing Employer Identification Number 87-4231956. HPE Fund IV has the requisite limited partnership power and authority to enter into this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby.
(b) The Co-Invest Vehicle is a limited partnership duly organized, validly existing, and in good standing under the laws of the State of Delaware, bearing Employer Identification Number 93-2748163. The Co-Invest Vehicle has the requisite limited partnership power and authority to enter into this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby.
(c) The General Partner, Harrowgate Capital Management IV LLC, is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware, bearing Employer Identification Number 87-4231847. The General Partner has the requisite limited liability company power and authority to act on behalf of HPE Fund IV and the Co-Invest Vehicle in connection with this Agreement and the transactions contemplated hereby.
Section 4.2 — Authorization; Binding Obligation
The execution, delivery, and performance of this Agreement by HPE Fund IV and the Co-Invest Vehicle, and the consummation of the transactions contemplated hereby, have been duly authorized by all necessary partnership action on the part of HPE Fund IV and the Co-Invest Vehicle and all necessary limited liability company action on the part of the General Partner. No other partnership, limited liability company, or other organizational proceedings on the part of HPE Fund IV, the Co-Invest Vehicle, or the General Partner are necessary to authorize the execution, delivery, and performance of this Agreement or the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by HPE Fund IV and the Co-Invest Vehicle and constitutes the legal, valid, and binding obligation of each of HPE Fund IV and the Co-Invest Vehicle, enforceable against each in accordance with its terms, subject to the Enforceability Exceptions.
Section 4.3 — Issuance of Rollover Interests
The Rollover Interests, when issued and delivered to the Rollover Participants in accordance with the terms and conditions of this Agreement and the Co-Invest Vehicle LPA, will be duly authorized, validly issued, and fully paid (to the extent applicable to limited partnership interests), and will be free and clear of all Liens, other than (a) restrictions on transfer arising under the Securities Act and applicable state securities laws, (b) restrictions on transfer and other limitations set forth in the Co-Invest Vehicle LPA, and (c) Liens created or suffered by the Rollover Participants. The issuance of the Rollover Interests will not be subject to any preemptive right, right of first refusal, or similar right of any person, except as may be set forth in the Co-Invest Vehicle LPA.
Section 4.4 — No Conflicts
The execution, delivery, and performance by HPE Fund IV and the Co-Invest Vehicle of this Agreement, and the consummation by HPE Fund IV and the Co-Invest Vehicle of the transactions contemplated hereby, do not and will not (a) conflict with or violate the certificate of limited partnership, limited partnership agreement, certificate of formation, limited liability company agreement, or other organizational documents of HPE Fund IV, the Co-Invest Vehicle, or the General Partner, (b) violate, conflict with, or result in a breach of or default under any provision of any agreement, contract, instrument, order, judgment, decree, or ruling to which HPE Fund IV or the Co-Invest Vehicle is a party or by which HPE Fund IV, the Co-Invest Vehicle, or any of their respective assets or properties are bound, or (c) violate any law, statute, regulation, ordinance, or rule of any governmental authority applicable to HPE Fund IV or the Co-Invest Vehicle, except, in the case of clauses (b) and (c), for violations, conflicts, breaches, or defaults that would not, individually or in the aggregate, reasonably be expected to prevent or materially delay the ability of HPE Fund IV or the Co-Invest Vehicle to consummate the transactions contemplated by this Agreement.
ARTICLE V — COVENANTS
Section 5.1 — Cooperation
Each Party shall use commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper, or desirable, or advisable under applicable law, to consummate and make effective the transactions contemplated by this Agreement as promptly as practicable, including the execution and delivery of all instruments, agreements, certificates, and other documents reasonably requested by any other Party in furtherance of the transactions contemplated hereby. Without limiting the generality of the foregoing, each Party shall cooperate with the other Parties in the preparation, execution, and delivery of the Funds Flow Memorandum, the Co-Invest Vehicle LPA, joinders thereto, and any other ancillary documents or instruments reasonably necessary to give effect to the transactions contemplated by this Agreement.
Section 5.2 — Co-Invest Vehicle LPA
(a) Each Rollover Participant hereby covenants and agrees that such Rollover Participant shall execute and deliver the Co-Invest Vehicle LPA (or a joinder thereto substantially in the form attached hereto as Exhibit B) no later than the Closing Date. The General Partner shall deliver or make available to each Rollover Participant a substantially final form of the Co-Invest Vehicle LPA no later than twenty (20) business days prior to the anticipated Closing Date. Each Rollover Participant shall have a reasonable period of time, but in no event fewer than ten (10) business days following receipt thereof, to review the Co-Invest Vehicle LPA with such Rollover Participant's own counsel and advisors.
(b) The Co-Invest Vehicle LPA shall contain customary terms and conditions for co-investment vehicles established in connection with leveraged buyout transactions sponsored by private equity funds, including, without limitation, provisions relating to:
(i) capital contributions and capital accounts;
(ii) allocations of profits, losses, income, gain, deduction, and credit;
(iii) distributions (including tax distributions and waterfall distributions);
(iv) management, governance, and consent rights of the General Partner and the limited partners;
(v) restrictions on the transfer of limited partnership interests, including rights of first refusal, consent requirements, and customary exceptions for permitted transfers;
(vi) tag-along and drag-along rights;
(vii) information rights, including the right to receive periodic financial statements and tax information;
(viii) indemnification and exculpation of the General Partner;
(ix) dissolution and winding up; and
(x) amendment procedures.
(c) In the event of any conflict between the terms of this Agreement and the terms of the Co-Invest Vehicle LPA with respect to the Rollover Interests or the Rollover Participants' limited partnership interests in the Co-Invest Vehicle, the terms of the Co-Invest Vehicle LPA shall control, except with respect to the Rollover Amounts and the mechanics of the contribution set forth in this Article II, which shall be governed by this Agreement.
Section 5.3 — Confidentiality
(a) Each Rollover Participant shall maintain the confidentiality of the existence and terms of this Agreement, the Co-Invest Vehicle LPA, and all non-public information relating to HPE Fund IV, the Co-Invest Vehicle, and the transactions contemplated hereby (collectively, "Confidential Information"), and shall not disclose any Confidential Information to any person other than such Rollover Participant's legal counsel, tax advisors, financial advisors, and immediate family members who have a need to know and who agree to be bound by confidentiality obligations at least as restrictive as those set forth in this Section 5.3, except as may be (i) required by applicable law, regulation, legal process, or governmental order (in which case such Rollover Participant shall provide prior written notice to HPE Fund IV to the extent legally permissible), or (ii) consented to in writing by HPE Fund IV.
(b) The obligations of this Section 5.3 are in addition to, and not in limitation of, any confidentiality obligations of the Rollover Participants under that certain Mutual Confidentiality and Non-Disclosure Agreement between HPE Fund IV and VeloPay, dated October 14, 2024 (the "NDA"), to the extent such NDA is applicable to the Rollover Participants. In the event of any conflict between the terms of this Section 5.3 and the terms of the NDA, the more restrictive provision shall control.
Section 5.4 — Stockholder Support Agreement and Written Consent
(a) Each Rollover Participant acknowledges and confirms that, concurrently with the execution and delivery of this Agreement, such Rollover Participant is executing and delivering the Stockholder Support Agreement, dated as of March 18, 2025, by and among HPE Fund IV, Merger Sub, and such Rollover Participant, pursuant to which, among other things, such Rollover Participant has agreed to vote (or cause to be voted) all shares of VeloPay common stock beneficially owned by such Rollover Participant in favor of the adoption of the Merger Agreement and approval of the Merger, and against any competing transaction.
(b) Each Rollover Participant further acknowledges and confirms that such Rollover Participant has delivered, concurrently with the execution of this Agreement, a written consent approving the Merger Agreement and the Merger in accordance with Section 228 of the DGCL. Aldridge (representing approximately 14.2% of outstanding VeloPay common stock) and Reyes-Watkins (representing approximately 9.7% of outstanding VeloPay common stock) are among the stockholders whose written consents, together with the written consents of Ridgeline Ventures Fund III LP (representing approximately 22.4%), Apex Growth Partners II LP (representing approximately 16.8%), and Broadleaf Capital Partners LP (representing approximately 6.1%), collectively constitute the approval of stockholders holding approximately 69.2% of the outstanding shares of VeloPay common stock, which exceeds the simple majority required under the DGCL and VeloPay's certificate of incorporation for approval of the Merger.
Section 5.5 — Non-Competition Agreements
Each Rollover Participant acknowledges and agrees that, concurrently with or prior to the Closing, such Rollover Participant shall execute and deliver a Non-Competition and Non-Solicitation Agreement with HPE Fund IV and the Surviving Corporation (each, a "Non-Competition Agreement"), which Non-Competition Agreement shall contain customary restrictive covenants, including non-competition, non-solicitation of customers, and non-solicitation of employees provisions, in each case for a period of three (3) years from the Closing Date, in form and substance reasonably satisfactory to HPE Fund IV. The execution and delivery of such Non-Competition Agreement by each Rollover Participant shall be a condition to the obligation of HPE Fund IV and the Co-Invest Vehicle to consummate the transactions contemplated hereby with respect to such Rollover Participant, as set forth in Section 6.2.
Section 5.6 — Transfer Restrictions
From the date of this Agreement until the Closing or the earlier termination of this Agreement in accordance with Article VII, no Rollover Participant shall, directly or indirectly, sell, transfer, assign, pledge, hypothecate, encumber, grant any option or right to purchase, or otherwise dispose of (collectively, "Transfer"), or enter into any agreement, arrangement, or understanding to Transfer, any shares of VeloPay common stock or any interest therein, if such Transfer would cause such Rollover Participant to be unable to fulfill such Rollover Participant's obligations under this Agreement, including the obligation to contribute such Rollover Participant's Rollover Amount at the Closing. Notwithstanding the foregoing, nothing in this Section 5.6 shall prohibit any Transfer that is expressly permitted under the Merger Agreement or the Stockholder Support Agreement, including Transfers to permitted transferees who agree in writing to be bound by the terms and conditions of this Agreement.
Section 5.7 — Further Assurances
Each Party shall, from time to time after the date hereof, execute and deliver such additional instruments, documents, conveyances, agreements, and other writings, and shall take such further actions, as may be reasonably requested by any other Party to carry out, evidence, and confirm the intended purposes of this Agreement and the transactions contemplated hereby, in each case at the expense of the requesting Party (except as otherwise provided in Section 8.12).
ARTICLE VI — CONDITIONS TO CLOSING
Section 6.1 — Conditions to the Obligations of All Parties
The obligation of each Party to consummate the transactions contemplated by this Agreement at the Closing is subject to the satisfaction (or, to the extent permitted by applicable law, waiver by all Parties) of each of the following conditions:
(a) Consummation of the Merger. The Closing of the Merger shall have occurred, or shall be occurring substantially simultaneously, in accordance with the terms and conditions of the Merger Agreement. For the avoidance of doubt, the transactions contemplated by this Agreement are contingent upon and conditioned upon the consummation of the Merger, and no Rollover Participant shall be required to contribute any Rollover Amount unless and until the Merger is consummated.
(b) No Injunction or Prohibition. No governmental authority of competent jurisdiction shall have enacted, issued, promulgated, enforced, or entered any law, statute, rule, regulation, executive order, decree, injunction, or other order (whether temporary, preliminary, or permanent) that is in effect and that prohibits, enjoins, or otherwise restricts the consummation of the transactions contemplated by this Agreement.
Section 6.2 — Conditions to the Obligations of HPE Fund IV and the Co-Invest Vehicle
The obligation of HPE Fund IV and the Co-Invest Vehicle to consummate the transactions contemplated by this Agreement at the Closing is subject to the satisfaction (or waiver by HPE Fund IV in its sole discretion) of each of the following additional conditions:
(a) Representations and Warranties. Each representation and warranty of the Rollover Participants set forth in Article III of this Agreement shall be true and correct in all material respects (without giving effect to any materiality or similar qualification contained therein) as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except for representations and warranties that by their terms address matters only as of a specified date, which shall be true and correct in all material respects as of such specified date).
(b) Performance of Obligations. Each Rollover Participant shall have performed and complied with, in all material respects, all covenants and obligations required by this Agreement to be performed or complied with by such Rollover Participant at or prior to the Closing.
(c) Execution of Co-Invest Vehicle LPA. Each Rollover Participant shall have executed and delivered the Co-Invest Vehicle LPA, or a joinder thereto substantially in the form attached hereto as Exhibit B, to the General Partner.
(d) Non-Competition Agreements. Each Rollover Participant shall have executed and delivered a Non-Competition and Non-Solicitation Agreement with HPE Fund IV and the Surviving Corporation in form and substance reasonably satisfactory to HPE Fund IV.
Section 6.3 — Conditions to the Obligations of the Rollover Participants
The obligation of each Rollover Participant to consummate the transactions contemplated by this Agreement at the Closing is subject to the satisfaction (or waiver by such Rollover Participant) of each of the following additional conditions:
(a) Representations and Warranties. Each representation and warranty of HPE Fund IV and the Co-Invest Vehicle set forth in Article IV of this Agreement shall be true and correct in all material respects (without giving effect to any materiality or similar qualification contained therein) as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except for representations and warranties that by their terms address matters only as of a specified date, which shall be true and correct in all material respects as of such specified date).
(b) Performance of Obligations. HPE Fund IV and the Co-Invest Vehicle shall have performed and complied with, in all material respects, all covenants and obligations required by this Agreement to be performed or complied with by HPE Fund IV and the Co-Invest Vehicle at or prior to the Closing.
(c) Execution of Co-Invest Vehicle LPA. The General Partner shall have executed and delivered the Co-Invest Vehicle LPA.
Section 6.4 — Frustration of Conditions
No Party may rely on the failure of any condition set forth in this Article VI to be satisfied if such failure was caused by such Party's failure to use commercially reasonable efforts to consummate the transactions contemplated by this Agreement, as required by, and subject to the terms of, Section 5.1.
ARTICLE VII — TERMINATION
Section 7.1 — Termination Events
This Agreement shall automatically terminate, without any action or further notice required by or on behalf of any Party, upon the earliest to occur of:
(a) the valid termination of the Merger Agreement in accordance with its terms, whether due to the exercise of a fiduciary out by the VeloPay board of directors, the failure of any condition to the Closing of the Merger, the expiration of the outside date specified in the Merger Agreement, a material breach of the Merger Agreement by any party thereto, or otherwise;
(b) the mutual written consent of HPE Fund IV and each Rollover Participant, evidenced by a written instrument executed by HPE Fund IV and each Rollover Participant; or
(c) thirty (30) days following the delivery of written notice from any Party to the other Parties if the Closing has not occurred by the outside date (the "Outside Date") specified in the Merger Agreement, as such Outside Date may be extended in accordance with the terms of the Merger Agreement; provided that the right to terminate pursuant to this clause (c) shall not be available to any Party whose breach of or failure to perform any of its obligations under this Agreement shall have been the cause of, or shall have resulted in, the failure of the Closing to have occurred by such date.
Section 7.2 — Effect of Termination
(a) Upon the termination of this Agreement in accordance with Section 7.1, this Agreement shall become void and shall have no further force or effect, and no Party shall have any liability or obligation to any other Party arising out of or relating to this Agreement or the transactions contemplated hereby, except that:
(i) this Section 7.2 and Article VIII (Miscellaneous) shall survive the termination of this Agreement and shall remain in full force and effect following such termination; and
(ii) no termination of this Agreement shall relieve any Party from liability for any willful or intentional breach of this Agreement occurring prior to such termination, and the non-breaching Party shall be entitled to all rights and remedies available at law or in equity with respect to any such willful or intentional breach.
(b) For the avoidance of doubt, upon termination of this Agreement, each Rollover Participant shall be entitled to receive the full Merger Consideration of Twenty Dollars ($20.00) per share with respect to all shares of VeloPay common stock beneficially owned by such Rollover Participant, without any reduction for any Rollover Amount, subject in all respects to the terms and conditions of the Merger Agreement (to the extent the Merger is consummated). The Parties acknowledge and agree that the consummation of the Merger following a termination of this Agreement is not contemplated and, in the event the Merger is consummated notwithstanding the termination of this Agreement, the treatment of the Merger Consideration payable to the Rollover Participants shall be governed solely by the Merger Agreement.
ARTICLE VIII — MISCELLANEOUS
Section 8.1 — Notices
All notices, requests, claims, demands, consents, and other communications under this Agreement shall be in writing and shall be deemed duly given, made, or received (i) on the date of delivery if delivered in person or by hand delivery, (ii) on the first business day following the date of dispatch if sent by a nationally recognized overnight courier service (with tracking and proof of delivery), or (iii) on the date of transmission if sent by electronic mail (with confirmation of receipt by the recipient, which confirmation may be by electronic mail) prior to 5:00 p.m. Eastern Time on a business day, or on the next business day if transmitted after 5:00 p.m. Eastern Time on a business day or on a day that is not a business day, in each case to the Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 8.1):
If to HPE Fund IV or the Co-Invest Vehicle:
Harrowgate Private Equity Fund IV LP Harrowgate Velocity Co-Invest LP c/o Harrowgate Capital Management IV LLC 300 King Street, Suite 4200 Wilmington, Delaware 19801
Attention: Priya Deshmukh, Managing Partner
Email: p.deshmukh@harrowgatecapital.com
with a copy to (which shall not constitute notice):
Calderwood & Harkness LLP 787 Seventh Avenue, 38th Floor New York, New York 10019
Attention: Sandra Tung
Email: stung@calderwoodharkness.com
If to Nathan Aldridge:
Nathan Aldridge [Address on file with VeloPay Systems, Inc.] Austin, Texas
Email: [personal email on file]
with a copy to (which shall not constitute notice):
Whitford Jessup & Crane LLP 600 Congress Avenue, Suite 2400 Austin, Texas 78701
Attention: Rebecca Thornton-Hayes
Email: rthorntonhayes@whitfordjessup.com
If to Sonia Reyes-Watkins:
Sonia Reyes-Watkins [Address on file with VeloPay Systems, Inc.] Austin, Texas
Email: [personal email on file]
with a copy to (which shall not constitute notice):
Whitford Jessup & Crane LLP 600 Congress Avenue, Suite 2400 Austin, Texas 78701
Attention: Rebecca Thornton-Hayes
Email: rthorntonhayes@whitfordjessup.com
Section 8.2 — Entire Agreement
This Agreement, together with the Merger Agreement, the Stockholder Support Agreement, the Co-Invest Vehicle LPA (when executed), the Non-Competition and Non-Solicitation Agreements (when executed), and any exhibits and schedules hereto and thereto, constitutes the entire agreement among the Parties with respect to the subject matter hereof and thereof and supersedes all prior and contemporaneous agreements, understandings, negotiations, discussions, and representations, whether written or oral, with respect to such subject matter. No Party has relied on any promise, representation, or warranty, express or implied, that is not set forth in this Agreement or the other agreements referenced in this Section 8.2 in entering into this Agreement.
Section 8.3 — Amendment and Waiver
(a) No amendment, modification, or supplement to this Agreement shall be effective unless it is in writing and signed by HPE Fund IV, the Co-Invest Vehicle (acting through the General Partner), and each Rollover Participant.
(b) No waiver of any provision of this Agreement, and no consent to any departure from the terms of any provision of this Agreement, shall be effective unless it is in writing and signed by the Party against whom enforcement of such waiver or consent is sought. 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. The rights and remedies provided in this Agreement are cumulative and not exclusive of any other rights or remedies provided by law.
Section 8.4 — Assignment
No Party may assign or delegate any of its rights or obligations under this Agreement without the prior written consent of the other Parties; provided, however, that HPE Fund IV may, without the consent of any other Party, assign any or all of its rights and obligations under this Agreement to any affiliate of HPE Fund IV; provided, further, that no such assignment shall relieve HPE Fund IV of any of its obligations hereunder. Any purported assignment in violation of this Section 8.4 shall be null and void and of no force or effect.