Contract analysis

I. Executive Summary The purpose of this memorandum is to analyze the structuring of the carveout divestiture of the EverGreen Market business as an asset purchase under Delaware law and to address the federal, state, and local tax consequences for the client, Cascade Retail Holdings Inc. ("Cascade" or "CRH"), a Delaware corporation publicly traded on the Nasdaq Global Select Market (ticker: CRHI) and headquartered a

II. Deal Structure — Asset Purchase Rationale A. Choice of Structure: Asset Purchase vs. Membership Interest Sale EverGreen Market Co. LLC is a Delaware limited liability company wholly owned by Cascade. As a single-member LLC, EMC is presumptively a disregarded entity for federal income tax purposes under Treasury Regulation § 301.7701-3(b)(1)(ii), although this classification must be confirmed as discussed in Secti

III. IRC Section 1060 — Purchase Price Allocation A. Overview of Section 1060

Section 1060 of the Internal Revenue Code governs the allocation of the purchase price (and other relevant consideration) in an "applicable asset acquisition." An applicable asset acquisition is defined as any transfer of assets that constitutes a trade or business, and in which the transferee's basis in such assets is determined wholly by reference to the consideration paid for the assets. See IRC § 1060(c); Treas.

IV. Hart-Scott-Rodino Antitrust Analysis The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act," 15 U.S.C. § 18a), requires that parties to certain mergers, acquisitions, and other business combinations file pre-merger notification with the Federal Trade Commission ("FTC") and the Antitrust Division of the Department of Justice ("DOJ") and observe a mandatory waiting period before consumm

V. Bulk-Sale Notice Requirements — Oregon and California A. Oregon Oregon has adopted a modified version of UCC Article 6, codified at ORS Chapter 76 (ORS 76.6101 et seq.). Unlike Delaware, which repealed UCC Article 6 in 1996, Oregon retains its bulk-sale provisions, which impose notice requirements on parties to certain transfers of assets outside the ordinary course of business. Applicability. A "bulk sale" under

VI. Sales and Use Tax on Inventory and FF&E A. Oregon Oregon does not impose a state sales or use tax. Oregon is one of five states (along with Alaska, Delaware, Montana, and New Hampshire) that do not levy a general sales tax. Accordingly, the transfer of inventory and FF&E associated with the twenty-two (22) Oregon store locations and the Tualatin distribution center will not give rise to any sales or use tax liabi

VII. State Income Tax Apportionment — Consequences for Cascade A. Gain on Sale Cascade will recognize gain or loss on the asset sale on an asset-by-asset basis, determined by comparing the allocated purchase price for each Purchased Asset to Cascade's adjusted basis in that asset. As discussed in Section III above, the total consideration for allocation purposes is approximately $29,720,000 (including assumed liabili