STOCKHOLDER REPRESENTATIVE AGREEMENT
Dated as of March 18, 2025
among
HARROWGATE PRIVATE EQUITY FUND IV LP
a Delaware limited partnership
("Parent")
VELOPAY SYSTEMS, INC.
a Delaware corporation
(the "Company")
and
NATHAN ALDRIDGE
an individual
(the "Stockholder Representative")
STOCKHOLDER REPRESENTATIVE AGREEMENT
This STOCKHOLDER REPRESENTATIVE AGREEMENT (this "Agreement") is dated as of March 18, 2025, among Harrowgate Private Equity Fund IV LP, a Delaware limited partnership ("Parent"), VeloPay Systems, Inc., a Delaware corporation (the "Company"), and Nathan Aldridge, an individual (the "Stockholder Representative").
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RECITALS
WHEREAS, Parent, Harrowgate Velocity Merger Sub Inc., a Delaware corporation and wholly-owned subsidiary of Parent ("Merger Sub"), and the Company have entered into that certain Agreement and Plan of Merger dated as of March 18, 2025 (as may be amended, supplemented, or otherwise modified from time to time in accordance with its terms, the "Merger Agreement"), which provides for the merger of Merger Sub with and into the Company (the "Merger"), with the Company surviving the Merger as a wholly-owned subsidiary of Parent, structured as a reverse triangular merger under Section 251 of the Delaware General Corporation Law. Pursuant to the Merger Agreement, the aggregate merger consideration payable in connection with the Merger is 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 95,000,000 fully diluted shares of the Company's common stock (including shares issuable upon the exercise, conversion, or settlement of outstanding stock options, restricted stock units, and warrants);
WHEREAS, the Merger Agreement provides for the deposit of One Hundred Thirty-Three Million Dollars ($133,000,000) (representing seven percent (7%) of the aggregate merger consideration) into an indemnification escrow account (the "Escrow Account") established with Garrison Trust Company, a New York trust company (the "Escrow Agent"), pursuant to an Escrow Agreement (Reference GT-ESC-2025-07223) to be entered into as of the Closing Date among Parent, the Stockholder Representative, and the Escrow Agent (the "Escrow Agreement"). The Escrow Agreement shall provide for a first release of fifty percent (50%) of the escrow funds, representing Sixty-Six Million Five Hundred Thousand Dollars ($66,500,000), at twelve (12) months following the Closing Date, and release of the remainder of the escrow funds at eighteen (18) months following the Closing Date (being January 22, 2027, the expiration of the survival period for representations and warranties under the Merger Agreement), less in each case any amounts subject to pending or unresolved indemnification claims as of the applicable release date;
WHEREAS, the Merger Agreement contemplates the appointment of a representative to act on behalf of the former holders of common stock, stock options, restricted stock units, and warrants of the Company (collectively, the "Stockholders") with respect to, among other things, post-closing indemnification claims, escrow administration, dispute resolution, and certain other matters arising under or in connection with the Merger Agreement and the Escrow Agreement, and the Stockholders desire to appoint Nathan Aldridge, the Company's Chief Executive Officer and Co-Founder (who, as of the date hereof, holds approximately 14.2% of the outstanding common stock of the Company), as the Stockholder Representative, and Nathan Aldridge desires to accept such appointment and to serve as the Stockholder Representative on the terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the execution and delivery of the Merger Agreement, Parent, the Company, and certain stockholders of the Company, including Ridgeline Ventures Fund III LP (holding approximately 22.4% of outstanding VeloPay common stock), Apex Growth Partners II LP (holding approximately 16.8% of outstanding VeloPay common stock), Broadleaf Capital Partners LP (holding approximately 6.1% of outstanding VeloPay common stock), Nathan Aldridge (holding approximately 14.2% of outstanding VeloPay common stock), and Sonia Reyes-Watkins (holding approximately 9.7% of outstanding VeloPay common stock), representing in the aggregate approximately 63.1% of the outstanding shares of VeloPay common stock (collectively, the "Supporting Stockholders"), have entered into that certain Stockholder Support Agreement dated as of March 18, 2025 (the "Stockholder Support Agreement"), pursuant to which, among other things, the Supporting Stockholders have agreed to vote their shares in favor of the Merger and to be bound by the terms and conditions of this Agreement. Additional Stockholders will become bound by this Agreement through the execution and delivery of the Form of Joinder Agreement attached hereto as Exhibit A, or by operation of the terms of the Merger Agreement and the Letter of Transmittal to be submitted to the Paying Agent (as defined herein) in connection with the exchange of shares for merger consideration; and
WHEREAS, capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings ascribed to such terms in the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Defined Terms
As used in this Agreement, the following terms shall have the following meanings:
"Claim Notice" means a written notice delivered by Parent to the Stockholder Representative asserting an indemnification claim against the Stockholders under the indemnification provisions of Article IX of the Merger Agreement, which notice shall set forth in reasonable detail the nature of the claim, the factual basis therefor, and the estimated amount of the claimed losses or damages (to the extent then reasonably determinable).
"Closing" has the meaning assigned to such term in the Merger Agreement.
"Closing Date" has the meaning assigned to such term in the Merger Agreement, which is anticipated to be July 22, 2025.
"Escrow Account" means the indemnification escrow account established with the Escrow Agent pursuant to the Escrow Agreement (Reference GT-ESC-2025-07223), initially funded at the Closing with One Hundred Thirty-Three Million Dollars ($133,000,000) in cash from the aggregate merger consideration.
"Escrow Agent" means Garrison Trust Company, a New York trust company, with its principal office located at One Liberty Plaza, 42nd Floor, New York, NY 10006. The designated contact person for the Escrow Agent shall be Valerie Drummond, Vice President, Corporate Trust, or such other person as the Escrow Agent may designate in writing from time to time.
"Escrow Agreement" means the Escrow Agreement dated as of the Closing Date, among Parent, the Stockholder Representative, and the Escrow Agent (Reference GT-ESC-2025-07223), as such agreement may be amended, supplemented, or otherwise modified from time to time in accordance with its terms.
"Expense Fund" means the reserve fund established pursuant to Article V hereof in the initial amount of Five Hundred Thousand Dollars ($500,000), to be withheld from the merger consideration at the Closing and set aside in a segregated account maintained by the Stockholder Representative for the purpose of paying expenses, fees, and costs incurred by the Stockholder Representative in fulfilling his duties and exercising his authority under this Agreement.
"Indemnification Cap" means Two Hundred Twenty-Eight Million Dollars ($228,000,000), representing twelve percent (12%) of the aggregate merger consideration of One Billion Nine Hundred Million Dollars ($1,900,000,000), being the maximum aggregate indemnification obligation of the Stockholders under Article IX of the Merger Agreement.
"Letter of Transmittal" means the letter of transmittal in the form prescribed by the Paying Agent, to be executed and delivered by each Stockholder in connection with the exchange of shares for merger consideration following the Closing.
"Merger Agreement" means the Agreement and Plan of Merger dated as of March 18, 2025, among Parent, Merger Sub, and the Company, as such agreement may be amended, supplemented, or otherwise modified from time to time in accordance with its terms.
"Merger Sub" means Harrowgate Velocity Merger Sub Inc., a Delaware corporation and wholly-owned subsidiary of Parent.
"Parent" means Harrowgate Private Equity Fund IV LP, a Delaware limited partnership, with its principal office at 300 King Street, Suite 4200, Wilmington, DE 19801.
"Paying Agent" means Keystone Pacific Transfer Services Inc., with its principal office at 250 Royall Street, Suite 100, Canton, MA 02021. The designated contact person for the Paying Agent shall be Linda Matsumoto, Vice President, Corporate Actions, or such other person as the Paying Agent may designate in writing from time to time.
"Representative Losses" means any and all losses, damages, liabilities, claims, demands, actions, suits, proceedings, judgments, penalties, fines, costs, fees (including reasonable legal fees and expenses of counsel), and expenses of any kind or nature whatsoever incurred by the Stockholder Representative in connection with, arising out of, or relating to the performance or non-performance of his duties, the exercise of his authority, or his status as Stockholder Representative under this Agreement, the Merger Agreement, the Escrow Agreement, or any ancillary agreement or document contemplated hereby or thereby.
"Stockholder Representative" means Nathan Aldridge, an individual residing in Austin, Texas, in his capacity as representative of the Stockholders pursuant to the terms and conditions of this Agreement, and any successor Stockholder Representative appointed in accordance with Article VI hereof.
"Stockholder Support Agreement" has the meaning set forth in the Recitals.
"Stockholders" means the former holders of common stock, stock options, restricted stock units, and warrants of VeloPay Systems, Inc. who received (or are entitled to receive) merger consideration in connection with the Merger, including any such holders who become bound by this Agreement pursuant to the Stockholder Support Agreement, a Joinder Agreement, a Letter of Transmittal, or by operation of the terms of the Merger Agreement.
"Supporting Stockholders" has the meaning set forth in the Recitals.
"Survival Period" means the period commencing on the Closing Date and expiring on the date that is eighteen (18) months following the Closing Date (anticipated to be January 22, 2027), during which the representations and warranties of the Company set forth in the Merger Agreement shall survive for purposes of indemnification claims by Parent, subject to such exceptions and extensions as may be set forth in the Merger Agreement.
"Surviving Corporation" means VeloPay Systems, Inc., as the surviving corporation of the Merger and a wholly-owned subsidiary of Parent following the Closing.
Section 1.2 Construction and Interpretation
Unless the context otherwise requires, for purposes of this Agreement:
(a) The words "hereof," "herein," "hereunder," and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement.
(b) The terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa.
(c) The use of the masculine, feminine, or neuter gender or the singular or plural form of any term shall include the others, as the context may require.
(d) The word "including" (and with correlative meaning, "include" and "includes") means "including, without limitation."
(e) References to any statute, rule, or regulation shall be deemed to refer to such statute, rule, or regulation as amended, supplemented, or otherwise modified from time to time, including by succession of comparable successor statutes, rules, or regulations.
(f) References to any contract, agreement, or instrument shall be deemed to refer to such contract, agreement, or instrument as amended, supplemented, or otherwise modified from time to time in accordance with its terms.
(g) References to "dollars" or "$" shall mean United States dollars.
(h) The table of contents and headings of the Articles and Sections of this Agreement are for convenience of reference only and shall not be deemed to be a part of this Agreement or to affect the meaning or interpretation of any provision hereof.
(i) No provision of this Agreement shall be interpreted or construed against any party hereto solely because such party or its legal representative drafted such provision.
(j) References to "days" shall mean calendar days unless otherwise specified.
(k) When calculating a period of time, the day of the act, event, or default from which the period begins to run shall not be included, and the last day of the period shall be included unless it is not a Business Day, in which event the period shall extend to the next succeeding Business Day.
ARTICLE II
APPOINTMENT AND ACCEPTANCE
Section 2.1 Appointment of Stockholder Representative
(a) Each Stockholder, by virtue of (i) executing the Stockholder Support Agreement, (ii) executing a Joinder Agreement substantially in the form attached hereto as Exhibit A, or (iii) accepting merger consideration (including, without limitation, by submitting a Letter of Transmittal to the Paying Agent in connection with the exchange of shares for merger consideration), hereby irrevocably constitutes and appoints Nathan Aldridge as the Stockholder Representative, with full power and authority to act on behalf of such Stockholder in the manner and to the extent set forth in this Agreement.
(b) The appointment of the Stockholder Representative hereunder is coupled with an interest, is irrevocable, and shall not be affected by, nor shall it terminate upon, the death, disability, incapacity, dissolution, liquidation, winding up, or bankruptcy of any Stockholder or any other event that, under applicable law, might otherwise terminate an ordinary agency. No Stockholder shall have the right to revoke the authority of the Stockholder Representative individually; provided, however, that nothing in this Section 2.1(b) shall be construed to limit the right of Stockholders holding a majority-in-interest of the aggregate merger consideration to remove the Stockholder Representative in accordance with Section 6.2 hereof.
(c) The Stockholder Representative's authority hereunder shall become effective as of the Closing Date (anticipated to be July 22, 2025) and shall continue in full force and effect until the later of (i) the date that is eighteen (18) months following the Closing Date (anticipated to be January 22, 2027, being the expiration of the Survival Period) and (ii) the date on which all pending claims under the Merger Agreement, the Escrow Agreement, and any ancillary agreement have been finally resolved and all amounts due and owing under the Escrow Agreement have been distributed in accordance with their terms (the "Termination Date"). Notwithstanding the foregoing, the Stockholder Representative's right to indemnification under Article IV hereof and the obligation of the Stockholders to indemnify the Stockholder Representative shall survive the Termination Date.
Section 2.2 Acceptance
Nathan Aldridge hereby accepts the appointment as Stockholder Representative and agrees to perform the duties and exercise the authority set forth in this Agreement, subject to the terms, conditions, and limitations contained herein. Nathan Aldridge acknowledges that he has read and understands the terms of this Agreement, the Merger Agreement, and the Escrow Agreement, and that he is willing and able to devote such time and attention as is reasonably necessary to fulfill the duties contemplated hereby.
Section 2.3 Agency and Authority
(a) The Stockholder Representative is hereby constituted and appointed as the true and lawful agent and attorney-in-fact of each Stockholder, with full power of substitution and resubstitution, to act in the name, place, and stead of each Stockholder with respect to all matters described in this Agreement, including, without limitation, the powers and duties set forth in Article III hereof.
(b) Parent, the Surviving Corporation, the Escrow Agent, the Paying Agent, and each other party to the Merger Agreement, the Escrow Agreement, or any ancillary agreement shall be entitled to rely conclusively and without independent inquiry upon the actions, decisions, consents, approvals, instructions, notices, and other communications of the Stockholder Representative as being the actions, decisions, consents, approvals, instructions, notices, and other communications of the Stockholders. Neither Parent, the Surviving Corporation, the Escrow Agent, the Paying Agent, nor any other such party shall have any obligation to inquire into the authority of the Stockholder Representative or to verify that any action taken by the Stockholder Representative has been authorized by the Stockholders.
(c) All actions taken, decisions made, consents given, and instructions delivered by the Stockholder Representative pursuant to this Agreement shall be final and binding upon all Stockholders and their successors, assigns, heirs, executors, administrators, and personal representatives, and no Stockholder shall have the right to object to, dissent from, protest, or otherwise contest any such action, decision, consent, or instruction, except to the extent arising from the Stockholder Representative's fraud, willful misconduct, or gross negligence.
ARTICLE III
POWERS AND DUTIES OF THE STOCKHOLDER REPRESENTATIVE
Section 3.1 Indemnification Claims
(a) The Stockholder Representative shall have full power and authority, on behalf of and for the account of the Stockholders, to receive, review, and respond to all Claim Notices delivered by Parent under the indemnification provisions of Article IX of the Merger Agreement. The Stockholder Representative shall review each Claim Notice with reasonable diligence and, to the extent he deems appropriate, investigate the facts and circumstances underlying such claim, consult with legal counsel and other advisors, and take such other actions as he deems advisable in connection therewith.
(b) The Stockholder Representative shall have full power and authority, on behalf of and for the account of the Stockholders, to negotiate, contest, defend, settle, compromise, or consent to the entry of any judgment with respect to any indemnification claim asserted by Parent, whether such claim relates to a breach of representations and warranties, a breach of covenants, or any other matter for which indemnification may be sought under the Merger Agreement, including, without limitation, any claim within or up to the Indemnification Cap of Two Hundred Twenty-Eight Million Dollars ($228,000,000). The Stockholder Representative may, in his sole discretion, determine whether to accept, reject, or negotiate any particular claim, and no Stockholder shall have any independent right to negotiate, settle, or resolve any indemnification claim asserted by Parent.
(c) The Stockholder Representative shall have the authority to engage legal counsel (including Whitford Jessup & Crane LLP) and other advisors, including accountants, financial advisors, and expert witnesses, on behalf of the Stockholders in connection with the review, defense, negotiation, and resolution of indemnification claims. The fees and expenses of such counsel and advisors shall be paid from the Expense Fund or, if the Expense Fund is insufficient, in accordance with Section 5.3 hereof.
(d) The Stockholder Representative shall use reasonable efforts to provide notice to the Stockholders of material indemnification claims, which for purposes of this Section 3.1(d) shall mean (i) any individual Claim Notice asserting claimed losses or damages in excess of Five Million Dollars ($5,000,000), or (ii) Claim Notices asserting, in the aggregate, claimed losses or damages in excess of Fifteen Million Dollars ($15,000,000). Such notice shall be provided within fifteen (15) Business Days following receipt of the applicable Claim Notice; provided, however, that the failure of the Stockholder Representative to provide any such notice shall not affect the validity of any action taken by the Stockholder Representative, shall not give rise to any liability of the Stockholder Representative to any Stockholder, and shall not limit or otherwise affect the Stockholder Representative's authority hereunder.
Section 3.2 Escrow Administration
(a) The Stockholder Representative shall have full power and authority to act as the representative of the Stockholders under the Escrow Agreement (Reference GT-ESC-2025-07223) with Garrison Trust Company. In such capacity, the Stockholder Representative shall exercise all rights and perform all obligations of the "Stockholder Representative" (or any comparable term) under the Escrow Agreement.
(b) The Stockholder Representative shall have the authority to deliver joint instructions (together with Parent, as required by the Escrow Agreement) to the Escrow Agent regarding the release, retention, disbursement, or investment of funds held in the Escrow Account, and to take all other actions under the Escrow Agreement that require the action or consent of the Stockholder Representative.
(c) The Stockholder Representative shall have the authority to consent to, or object to, any release of funds from the Escrow Account, including (i) the scheduled release of Sixty-Six Million Five Hundred Thousand Dollars ($66,500,000) (representing fifty percent (50%) of the initial escrow deposit) at twelve (12) months following the Closing Date, and (ii) the scheduled release of the remaining balance of the Escrow Account (less amounts subject to pending or unresolved claims) at eighteen (18) months following the Closing Date (anticipated to be January 22, 2027).
(d) The Stockholder Representative shall have the authority to contest, dispute, or challenge any claim by Parent that would reduce the amount of escrow funds available for release or distribution to the Stockholders, and to take all actions reasonably necessary to protect the interests of the Stockholders with respect to the Escrow Account, including, without limitation, initiating or participating in arbitration, mediation, or other dispute resolution proceedings relating to the Escrow Account.
Section 3.3 Post-Closing Adjustments
(a) The Stockholder Representative shall have full power and authority to review, evaluate, and dispute any post-closing working capital adjustment, purchase price adjustment, or other similar adjustment calculation delivered by Parent or the Surviving Corporation pursuant to the Merger Agreement.
(b) The Stockholder Representative may engage independent accountants, financial advisors, or other professionals to review and analyze any such adjustment calculations on behalf of the Stockholders, and the fees and expenses of such professionals shall be paid from the Expense Fund or, if the Expense Fund is insufficient, in accordance with Section 5.3 hereof.
(c) The Stockholder Representative shall have the authority to negotiate and resolve any disputes relating to post-closing adjustments, including by agreement with Parent or by submission of such disputes to the independent accounting firm or other dispute resolution mechanism specified in the Merger Agreement, and any such resolution shall be binding on all Stockholders.
Section 3.4 Dispute Resolution
(a) The Stockholder Representative shall have full power and authority, on behalf of and for the account of the Stockholders, to pursue, prosecute, defend, appeal, or settle any dispute, claim, action, suit, or proceeding arising under or in connection with the Merger Agreement, the Escrow Agreement, or any ancillary agreement, document, or instrument executed in connection therewith.
(b) The Stockholder Representative may submit any such dispute to arbitration, mediation, or litigation, as contemplated by the dispute resolution provisions of the applicable agreement, and may retain legal counsel and other advisors in connection therewith.
(c) The Stockholder Representative shall have the authority to bind the Stockholders to any settlement, compromise, consent order, or other resolution of any such dispute, and no Stockholder shall have any independent right to pursue, settle, or otherwise resolve any such dispute, except with the prior written consent of the Stockholder Representative.
Section 3.5 Tax Matters
The Stockholder Representative shall have full power and authority to act on behalf of the Stockholders with respect to any tax-related matters arising under or in connection with the Merger Agreement, including, without limitation:
(a) reviewing and responding to any tax withholding determinations made by Parent, the Surviving Corporation, or the Paying Agent;
(b) coordinating the collection and submission of IRS Forms W-9 or other applicable tax forms from the Stockholders as may be required in connection with the payment of merger consideration;
(c) reviewing and responding to any matters relating to compliance with the Foreign Investment in Real Property Tax Act of 1980, as amended ("FIRPTA"), including reviewing FIRPTA certificates and related documentation;
(d) acting as the representative of the Stockholders with respect to any tax audits, examinations, or inquiries relating to the Company or the transactions contemplated by the Merger Agreement to the extent affecting the Stockholders; and
(e) taking such other actions with respect to tax matters as the Stockholder Representative may deem reasonably necessary or advisable in connection with the transactions contemplated by the Merger Agreement and the protection of the interests of the Stockholders.
Section 3.6 Amendments and Waivers
(a) The Stockholder Representative shall have the authority, on behalf of the Stockholders, to agree to any amendments, modifications, supplements, or waivers of the Merger Agreement, the Escrow Agreement, or any ancillary document, agreement, or instrument executed in connection therewith, to the extent that such amendments, modifications, supplements, or waivers affect the post-closing rights, obligations, or interests of the Stockholders, without the need for the consent, approval, or ratification of any individual Stockholder or group of Stockholders.
(b) Notwithstanding anything to the contrary in Section 3.6(a), the Stockholder Representative shall not, without the prior written consent of Stockholders holding a majority-in-interest of the aggregate merger consideration (determined by reference to each Stockholder's pro rata share thereof):
(i) agree to any amendment, modification, or waiver that would increase the aggregate indemnification liability of the Stockholders beyond the Indemnification Cap of Two Hundred Twenty-Eight Million Dollars ($228,000,000);
(ii) agree to any amendment, modification, or waiver that would extend the Survival Period beyond eighteen (18) months following the Closing Date (i.e., beyond the anticipated expiration date of January 22, 2027); or
(iii) consent to the release of escrow funds from the Escrow Account to Parent in excess of amounts properly claimed in accordance with the terms of the Merger Agreement and the Escrow Agreement.
Section 3.7 Communications and Notices
(a) The Stockholder Representative shall have the authority to receive all notices, communications, deliveries, requests, demands, consents, approvals, and other correspondence under the Merger Agreement, the Escrow Agreement, and any ancillary agreement on behalf of the Stockholders. All notices from Parent, the Surviving Corporation, the Escrow Agent, the Paying Agent, or any other party under any such agreement that are intended for, directed to, or required to be delivered to the Stockholders shall be directed exclusively to the Stockholder Representative, and delivery to the Stockholder Representative shall constitute effective delivery to all Stockholders for all purposes.
(b) The notice address for the Stockholder Representative shall be:
Nathan Aldridge c/o VeloPay Systems, Inc. 1455 Innovation Parkway, Suite 800 Austin, TX 78759
with a copy (which shall not constitute notice) to:
Whitford Jessup & Crane LLP 600 Congress Avenue, Suite 2400 Austin, TX 78701
Attention: Rebecca Thornton-Hayes
(c) The Stockholder Representative may change his notice address at any time by providing written notice of such change to Parent, the Surviving Corporation, the Escrow Agent, and the Paying Agent in accordance with the notice provisions of this Agreement and the applicable ancillary agreements.
Section 3.8 Engagement of Advisors
(a) The Stockholder Representative shall have the authority to retain and consult with legal counsel (including, without limitation, Whitford Jessup & Crane LLP), accountants, financial advisors, investment bankers, valuation consultants, expert witnesses, and other professionals as the Stockholder Representative may deem reasonably necessary or advisable in connection with the performance of his duties and the exercise of his authority under this Agreement.
(b) All costs, fees, and expenses of such advisors and professionals shall be paid from the Expense Fund. If the Expense Fund is insufficient to cover such costs, fees, and expenses, the Stockholder Representative may seek payment thereof in accordance with Section 5.3 hereof, including by requesting pro rata contributions from the Stockholders or by requesting that additional amounts be retained from escrow releases to replenish the Expense Fund.
(c) The Stockholder Representative shall not be liable for any action taken or omitted in good faith reliance on the advice of any such counsel, accountant, financial advisor, or other professional.
Section 3.9 Access to Information
(a) Parent and the Surviving Corporation shall provide the Stockholder Representative with reasonable access during normal business hours, upon reasonable prior written notice, to the books, records, files, documents, correspondence, contracts, and other information of the Surviving Corporation (including financial records, accounting workpapers, tax returns, and corporate records) as is reasonably necessary for the Stockholder Representative to perform his duties and exercise his authority under this Agreement, including, without limitation, in connection with the review and evaluation of indemnification claims, post-closing adjustment calculations, and other matters contemplated hereby.
(b) The obligations of Parent and the Surviving Corporation under this Section 3.9 shall be subject to (i) the Stockholder Representative's compliance with the confidentiality obligations set forth in Section 8.2 hereof, (ii) any restrictions on access that may be required by applicable law or regulation, (iii) the preservation of any attorney-client privilege or other applicable privilege or immunity, and (iv) reasonable limitations as to timing and scope so as not to unreasonably interfere with the normal business operations of the Surviving Corporation.
(c) Nothing in this Section 3.9 shall be construed to require Parent or the Surviving Corporation to provide the Stockholder Representative with access to any information that is not relevant to the matters for which the Stockholder Representative has been appointed or that is subject to a confidentiality obligation owed to a third party, unless such third party consents to such disclosure.
ARTICLE IV
LIMITATION OF LIABILITY; INDEMNIFICATION OF STOCKHOLDER REPRESENTATIVE
Section 4.1 Standard of Care
(a) The Stockholder Representative shall not be liable to any Stockholder, or to any other person, for any act taken or omission made in good faith and in the exercise of reasonable judgment in connection with the performance of his duties or the exercise of his authority under this Agreement, and the Stockholder Representative shall not be liable for any error of judgment, negligence, oversight, or mistake of law or fact, except to the extent that such act, omission, error, negligence, oversight, or mistake is determined by a court of competent jurisdiction (in a final and non-appealable judgment) to have resulted from the Stockholder Representative's fraud, willful misconduct, or gross negligence.
(b) The Stockholder Representative shall have no obligation to take any particular action or make any particular decision with respect to any matter within the scope of his authority hereunder and shall be entitled to exercise his judgment and discretion in determining the course of action that he believes to be in the best interests of the Stockholders as a whole. The Stockholder Representative shall not be required to take any action that he believes in good faith would expose him to personal liability or would be contrary to applicable law.
Section 4.2 Indemnification of Stockholder Representative by Stockholders
(a) Each Stockholder, severally and not jointly, in proportion to such Stockholder's pro rata share of the aggregate merger consideration (determined by reference to the percentage of the aggregate merger consideration to which such Stockholder is entitled), hereby agrees to indemnify, defend, and hold harmless the Stockholder Representative from and against any and all Representative Losses incurred by the Stockholder Representative in connection with, arising out of, or relating to the performance of his duties or the exercise of his authority under this Agreement, the Merger Agreement, the Escrow Agreement, or any ancillary agreement, except to the extent that such Representative Losses are determined by a court of competent jurisdiction (in a final and non-appealable judgment) to have resulted from the Stockholder Representative's fraud, willful misconduct, or gross negligence.
(b) The Stockholder Representative may satisfy indemnification obligations arising under this Section 4.2 first from the Expense Fund (to the extent funds are available therein) before seeking contribution from individual Stockholders. The Stockholder Representative shall not be required to exhaust the Expense Fund before seeking contribution from individual Stockholders if the Stockholder Representative reasonably determines that the Expense Fund is or will be insufficient to cover the anticipated Representative Losses.
(c) The indemnification obligations of the Stockholders under this Section 4.2 shall survive the termination of this Agreement and the expiration of the Survival Period, and shall remain in full force and effect until all Representative Losses subject to indemnification hereunder have been fully satisfied.
Section 4.3 No Personal Liability
(a) Nathan Aldridge shall have no personal liability to any Stockholder, to Parent, to the Surviving Corporation, to the Escrow Agent, to the Paying Agent, or to any other person, for any act taken or omission made in his capacity as Stockholder Representative, except to the extent that such act or omission is determined by a court of competent jurisdiction (in a final and non-appealable judgment) to have resulted from the Stockholder Representative's fraud, willful misconduct, or gross negligence.
(b) The Stockholder Representative is acting in a representative capacity only and shall not be deemed a fiduciary, trustee, or agent of any individual Stockholder for any purpose. No Stockholder shall have any claim against the Stockholder Representative for any act taken or decision made in accordance with the terms of this Agreement, and each Stockholder hereby waives any and all claims against the Stockholder Representative to the fullest extent permitted by applicable law, except as expressly set forth in this Article IV.
(c) Without limiting the generality of the foregoing, the Stockholder Representative shall not be personally liable for the outcome or result of any indemnification claim, escrow dispute, purchase price adjustment, tax matter, or other proceeding, regardless of the amount involved, and the Stockholders' sole remedy for any such outcome or result shall be as set forth in the Merger Agreement and the Escrow Agreement.
Section 4.4 Reliance
(a) The Stockholder Representative may rely, and shall be fully protected in relying, upon any notice, certificate, statement, instrument, opinion, report, document, order, judgment, decree, or other writing or communication believed by him in good faith to be genuine and to have been properly made, signed, sent, or delivered by the proper person or entity.
(b) The Stockholder Representative may rely upon the advice of legal counsel (including Whitford Jessup & Crane LLP), accountants, financial advisors, and other professionals retained pursuant to Section 3.8 hereof, and shall not be liable for any action taken or omitted in good faith in accordance with such advice, whether or not such advice subsequently proves to be incorrect or incomplete.
(c) The Stockholder Representative shall not be required to independently investigate or verify the accuracy or completeness of any information provided by Parent, the Surviving Corporation, the Escrow Agent, or any other person, and may assume the accuracy and completeness of such information for all purposes unless the Stockholder Representative has actual knowledge to the contrary.
ARTICLE V
EXPENSE FUND
Section 5.1 Establishment and Funding
(a) At the Closing, Five Hundred Thousand Dollars ($500,000) shall be withheld from the aggregate merger consideration otherwise payable to the Stockholders (with each Stockholder bearing a pro rata share of such withholding in proportion to such Stockholder's share of the aggregate merger consideration) and shall be deposited into a segregated bank account maintained by the Stockholder Representative in his capacity as such (the "Expense Fund"). The Paying Agent shall withhold such amount from the merger consideration and remit it to the Stockholder Representative in accordance with the instructions provided by the Stockholder Representative prior to or concurrently with the Closing.
(b) The Expense Fund shall be held by the Stockholder Representative in a segregated account at a nationally recognized financial institution selected by the Stockholder Representative, and shall be maintained separately from the personal funds of the Stockholder Representative. The Stockholder Representative shall have sole signatory authority over the Expense Fund account and shall not be required to invest the Expense Fund or to generate any return thereon, although the Stockholder Representative may, in his discretion, invest the Expense Fund in cash equivalents or short-term money market instruments. Any interest or other earnings on the Expense Fund shall be added to and become part of the Expense Fund.
Section 5.2 Use of Expense Fund
The Stockholder Representative may use the Expense Fund to pay the following expenses, fees, and costs reasonably incurred by the Stockholder Representative in connection with the performance of his duties and the exercise of his authority under this Agreement:
(a) legal fees and expenses of counsel retained pursuant to Section 3.8 hereof, including the fees and expenses of Whitford Jessup & Crane LLP;
(b) accounting fees and expenses of accountants retained in connection with post-closing adjustment disputes or other matters;
(c) fees and expenses of financial advisors, valuation consultants, expert witnesses, and other professionals;
(d) reasonable travel expenses, communication expenses, and other out-of-pocket costs incurred by the Stockholder Representative in connection with the performance of his duties, including travel to meet with Parent, the Surviving Corporation, the Escrow Agent, or legal counsel;
(e) filing fees, court costs, arbitration fees, and other costs associated with dispute resolution proceedings;
(f) costs of providing notices, communications, and reports to the Stockholders; and
(g) any other costs, fees, or expenses reasonably incurred by the Stockholder Representative in connection with indemnification claims, escrow administration, dispute resolution, and other duties and responsibilities under this Agreement.
Section 5.3 Replenishment
(a) If the Expense Fund is exhausted or is insufficient to cover the expenses, fees, and costs incurred or reasonably anticipated to be incurred by the Stockholder Representative in connection with the performance of his duties hereunder, the Stockholder Representative may, at his election:
(i) request pro rata contributions from the Stockholders, with each Stockholder's share of such contributions determined by reference to such Stockholder's percentage of the aggregate merger consideration. Each Stockholder shall make such contribution within thirty (30) days following receipt of the Stockholder Representative's written request therefor, which request shall include a reasonably detailed description of the expenses for which such contribution is sought; or
(ii) request that additional amounts be retained from escrow releases otherwise distributable to the Stockholders, in order to replenish the Expense Fund, subject to the terms and conditions of the Escrow Agreement.
(b) No Stockholder's obligation to contribute to the Expense Fund under this Section 5.3 shall exceed, in the aggregate, an amount equal to such Stockholder's pro rata share of One Million Dollars ($1,000,000) (inclusive of such Stockholder's initial pro rata share of the original $500,000 Expense Fund), unless such Stockholder otherwise consents in writing.
Section 5.4 Distribution of Remaining Balance
Upon the final resolution of all matters for which the Stockholder Representative has been appointed hereunder, including the expiration of the Survival Period, the resolution of all pending indemnification claims, the completion of all escrow distributions, and the resolution of all disputes arising under or in connection with the Merger Agreement, the Escrow Agreement, and any ancillary agreement, the Stockholder Representative shall distribute any remaining balance in the Expense Fund (including any interest or earnings thereon) to the Stockholders on a pro rata basis in proportion to each Stockholder's share of the aggregate merger consideration, within sixty (60) days following the date on which all such matters have been finally resolved. The Stockholder Representative shall provide an accounting of all amounts disbursed from the Expense Fund to the Stockholders concurrently with or promptly following such distribution.
ARTICLE VI
SUCCESSOR STOCKHOLDER REPRESENTATIVE
Section 6.1 Resignation
(a) The Stockholder Representative may resign at any time upon not less than thirty (30) days' prior written notice to Parent and to each Stockholder. If providing written notice to each Stockholder is impracticable (due to the number of Stockholders, the unavailability of current contact information, or other reasonable circumstances), notice to Stockholders holding a majority-in-interest of the aggregate merger consideration shall be sufficient.
(b) Any such resignation shall not become effective until a successor Stockholder Representative has been duly appointed in accordance with Section 6.3 hereof and has accepted such appointment. Until such time, the resigning Stockholder Representative shall continue to serve and to perform his duties and exercise his authority hereunder.
Section 6.2 Removal
(a) The Stockholder Representative may be removed at any time by the written consent or vote of Stockholders holding a majority-in-interest of the aggregate merger consideration. Any such removal shall require not less than thirty (30) days' prior written notice to the Stockholder Representative and to Parent, and shall specify the effective date of such removal, which effective date shall not be earlier than the date on which a successor Stockholder Representative has been appointed in accordance with Section 6.3 hereof and has accepted such appointment.
(b) Removal of the Stockholder Representative shall not affect the rights of the removed Stockholder Representative to indemnification under Article IV hereof with respect to acts taken or omissions made prior to the effective date of removal.
Section 6.3 Appointment of Successor
(a) In the event of the resignation, removal, death, or incapacity of the Stockholder Representative, a successor Stockholder Representative shall be appointed by the written consent or vote of Stockholders holding a majority-in-interest of the aggregate merger consideration. Such appointment shall be made as promptly as reasonably practicable following the occurrence of the event giving rise to the vacancy.
(b) If no successor Stockholder Representative is appointed within sixty (60) days following the date of the resignation, removal, death, or incapacity of the Stockholder Representative, then Sonia Reyes-Watkins (the Company's Chief Technology Officer and Co-Founder, holding approximately 9.7% of the outstanding common stock of the Company as of the date hereof) shall automatically be deemed the successor Stockholder Representative, without the need for any further action by the Stockholders, Parent, or any other person. Sonia Reyes-Watkins has consented to serve in such capacity, if so called upon, by execution of a consent delivered concurrently herewith.
(c) Any successor Stockholder Representative appointed in accordance with this Section 6.3 shall have all of the rights, powers, authority, duties, and obligations of the Stockholder Representative under this Agreement, the Merger Agreement, the Escrow Agreement, and any ancillary agreement, as if originally named herein.
(d) The Stockholder Representative or the person effecting the appointment of a successor (as applicable) shall provide written notice of the identity and contact information of any successor Stockholder Representative to Parent, the Surviving Corporation, the Escrow Agent (Garrison Trust Company, One Liberty Plaza, 42nd Floor, New York, NY 10006, Attention: Valerie Drummond, VP, Corporate Trust; Reference: GT-ESC-2025-07223), and the Paying Agent (Keystone Pacific Transfer Services Inc., 250 Royall Street, Suite 100, Canton, MA 02021, Attention: Linda Matsumoto, VP, Corporate Actions) within five (5) Business Days following such appointment.
Section 6.4 Transition
Upon the effectiveness of any succession contemplated by this Article VI, the outgoing Stockholder Representative shall promptly (and in any event within ten (10) Business Days) deliver to the successor Stockholder Representative:
(a) all books, records, files, documents, correspondence, agreements, and other materials held by the outgoing Stockholder Representative in connection with the performance of his duties under this Agreement;
(b) all funds held by the outgoing Stockholder Representative, including the then-current balance of the Expense Fund, together with an accounting of all amounts received and disbursed from the Expense Fund during the outgoing Stockholder Representative's tenure;
(c) a summary of all pending matters, including any unresolved indemnification claims, pending disputes, and scheduled escrow releases; and
(d) such other information and assistance as the successor Stockholder Representative may reasonably request in order to assume the duties and responsibilities of the Stockholder Representative hereunder.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.1 Representations of Parent
Parent hereby represents and warrants to the Stockholder Representative and to the Company as follows:
(a) Organization and Good Standing. Parent is a limited partnership duly organized, validly existing, and in good standing under the laws of the State of Delaware and has all requisite limited partnership power and authority to carry on its business as currently conducted.
(b) Power and Authority. Parent has full limited partnership power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution, delivery, and performance of this Agreement by Parent have been duly authorized by all necessary limited partnership action on the part of Parent, including any required approval of Harrowgate Capital Management IV LLC, its general partner.
(c) Binding Obligation. This Agreement has been duly executed and delivered by Parent and constitutes the legal, valid, and binding obligation of Parent, enforceable against Parent in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and to general principles of equity (whether considered in a proceeding at law or in equity).
(d) No Conflicts. The execution, delivery, and performance of this Agreement by Parent does not and will not (i) conflict with or violate the organizational documents of Parent or its general partner, (ii) conflict with or violate any applicable law, rule, regulation, order, judgment, or decree, or (iii) result in any breach of or constitute a default under any material contract or agreement to which Parent is a party or by which Parent or any of its assets are bound.
Section 7.2 Representations of the Company
The Company hereby represents and warrants to the Stockholder Representative and to Parent as follows:
(a) Organization and Good Standing. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as currently conducted.
(b) Power and Authority. The Company has full corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution, delivery, and performance of this Agreement by the Company have been duly authorized by all necessary corporate action on the part of the Company, including any required approval of the Company's Board of Directors.
(c) Binding Obligation. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid, and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and to general principles of equity (whether considered in a proceeding at law or in equity).
(d) No Conflicts. The execution, delivery, and performance of this Agreement by the Company does not and will not (i) conflict with or violate the certificate of incorporation, bylaws, or other organizational documents of the Company, (ii) conflict with or violate any applicable law, rule, regulation, order, judgment, or decree, or (iii) result in any breach of or constitute a default under any material contract or agreement to which the Company is a party or by which the Company or any of its assets are bound.
Section 7.3 Representations of the Stockholder Representative
Nathan Aldridge hereby represents and warrants to Parent and to the Company as follows:
(a) Legal Capacity. Nathan Aldridge has the legal capacity, competence, and authority to enter into this Agreement and to perform his obligations hereunder. Nathan Aldridge is of legal age and is not subject to any legal disability, guardianship, conservatorship, or other restriction that would prevent him from performing his duties as Stockholder Representative.
(b) Status. Nathan Aldridge is the Chief Executive Officer and Co-Founder of VeloPay Systems, Inc. and is the holder of approximately 14.2% of the outstanding shares of common stock of the Company as of the date hereof.
(c) Acceptance. Nathan Aldridge accepts the appointment as Stockholder Representative and agrees to be bound by all of the terms, conditions, and provisions of this Agreement. Nathan Aldridge has reviewed and understands the terms of this Agreement, the Merger Agreement, and the Escrow Agreement, and has had the opportunity to consult with legal counsel regarding the same.
(d) No Conflicts. The execution, delivery, and performance of this Agreement by Nathan Aldridge does not and will not conflict with or violate any applicable law, rule, regulation, order, judgment, or decree, or result in any breach of or constitute a default under any contract, agreement, or other obligation to which Nathan Aldridge is a party or by which he is bound.