Contract analysis

I. Executive Summary The purpose of this memorandum is to identify and quantify all transfer, documentary stamp, and sales/use taxes arising from the transfer of 100% of the issued and outstanding capital stock of NovaMart Global Inc. ("NovaMart," the "Company," or the "Target") from the Selling Stockholders (as defined below) to Cascade Retail Holdings Inc. ("Cascade," "CRH," or the "Buyer") pursuant to that certain

II. Transaction Overview Set forth below is a summary of the principal terms and structural elements of the transaction that are relevant to the transfer tax analysis contained in this memorandum. Buyer. Cascade Retail Holdings Inc. is a Delaware corporation that is publicly traded on the Nasdaq Stock Market under the ticker symbol "CRHI." Cascade is headquartered at 4500 Elliott Avenue West, Suite 3200, Seattle, Was

III. General Legal Framework — Transfer Taxes on Stock Transfers A. Nature of Transfer Taxes Transfer taxes — also referred to in various jurisdictions as documentary stamp taxes, realty transfer taxes, conveyance fees, stock transfer taxes, recording taxes, and similar excise levies — are taxes imposed by certain states and localities on the transfer of stock, real property, or interests in entities that own real pr

IV. Jurisdiction-by-Jurisdiction Analysis A. Delaware (State of Incorporation of NovaMart and Cascade) Delaware is the state of incorporation of both NovaMart (the Target) and Cascade (the Buyer). We have analyzed two categories of Delaware transfer taxes that are potentially relevant to the transaction.

1. Delaware Stock Transfer Tax (Former 6 Del. C. § 8143). For many decades, Delaware was the only state in the United States that imposed a meaningful stock transfer tax on the transfer of shares of corporate stock. The Delaware stock transfer tax was imposed on the sale, transfer, or assignment of shares of stock of any corporation organized under the laws of the State of Delaware at rates that varied based on the p

2. Delaware Realty Transfer Tax (25 Del. C. § 5401 et seq.). Delaware imposes a realty transfer tax on the transfer of real property located within the State of Delaware. The combined state and county realty transfer tax rate is generally 4% of the value of the real property transferred (with the rate split between the state portion and the county portion, and with the buyer and seller each bearing a portion of the t

1. Texas Stock Transfer Tax. The State of Texas does not impose a stock transfer tax on the transfer, sale, or assignment of shares of corporate stock. There is no Texas statute or regulation that levies a tax directly on stock transfers.

2. Texas Real Estate Transfer Tax. Texas is one of a small number of states that does not impose a general real estate transfer tax or documentary stamp tax on transfers of real property. Texas does not levy a tax on the recording of deeds or other instruments of conveyance. Similarly, Texas does not impose a controlling interest transfer tax on transfers of interests in entities that hold Texas real property. NovaMa

1. California Documentary Transfer Tax (Cal. Rev. & Tax. Code § 11911 et seq.). California imposes a documentary transfer tax on transfers of real property located within the state. The tax is imposed on instruments by which real property is transferred (principally deeds of conveyance) at a base rate of $0.55 per $500 of consideration paid, or fractional part thereof (equivalent to $1.10 per $1,000 of consideration)

2. Application to Stock Transfers. The California documentary transfer tax applies only to transfers of "realty" — that is, deeds and other instruments by which an interest in real property is conveyed. The tax does not apply to transfers of corporate stock, even if the corporation whose stock is being transferred holds real property located in California. Unlike certain other states (such as New Jersey, Pennsylvania

3. NovaMart's California Real Property. NovaMart operates three fulfillment centers in California. Based on our due diligence review, including review of the Real Property Due Diligence Memorandum prepared by Tiffany Rosenthal and the title search reports obtained from Ridgecrest Title Group Inc., NovaMart does not own any real property in California. All three California fulfillment centers are occupied by NovaMart

1. New Jersey Realty Transfer Fee (N.J.S.A. 46:15-7). New Jersey imposes a realty transfer fee on the recording of deeds and other instruments transferring interests in real property located within the state. The realty transfer fee is imposed at graduated rates on the consideration paid for the real property. For transfers in which the total consideration exceeds $350,000, the fee schedule applies at progressive rat

2. New Jersey Controlling Interest Transfer Tax (N.J.S.A. 46:15-7.2). New Jersey imposes a controlling interest transfer tax on transfers of a "controlling interest" in an entity that directly or indirectly owns or leases real property classified as Class 4A commercial or industrial property in New Jersey. For purposes of the New Jersey CITT, a "controlling interest" is defined as more than 50% of the total interest

3. NovaMart's New Jersey Real Property. NovaMart operates two fulfillment centers in New Jersey. Based on our due diligence review, including the Real Property Due Diligence Memorandum and the title search reports from Ridgecrest Title Group Inc., one of the two New Jersey fulfillment centers is owned by NovaMart in fee simple. The owned fulfillment center is located in central New Jersey (the specific address is set

4. Estimated Tax Calculation. Applying the graduated New Jersey realty transfer fee schedule to the estimated fair market value of approximately $28,000,000, we calculate the estimated New Jersey CITT as follows: The computation applies the progressive rates established under N.J.S.A. 46:15-7 to successive tiers of the consideration allocable to the real property. The general realty transfer fee, the supplemental fee

1. Georgia Real Estate Transfer Tax (O.C.G.A. § 48-6-1). Georgia imposes a real estate transfer tax on the transfer of real property located within the state at a rate of $1.00 per $1,000 of value (equivalent to $0.10 per $100, or 0.1% of the value of the real property transferred). The tax is levied on deeds and other instruments transferring title to real property and is payable at the time the instrument is record

2. NovaMart's Georgia Real Property. NovaMart operates two fulfillment centers in Georgia. Based on our due diligence review, both Georgia fulfillment centers are occupied by NovaMart pursuant to commercial lease agreements with third-party landlords. NovaMart does not own any real property in the State of Georgia. Accordingly, no Georgia real estate transfer tax is triggered by the transfer of NovaMart stock, and no

1. Ohio Real Property Conveyance Fee (O.R.C. § 319.54(G)(3)). Ohio imposes a real property conveyance fee on transfers of real property. The state-level conveyance fee is $4.00 per $1,000 of the value of the real property transferred (equivalent to a rate of 0.4%). In addition, counties are authorized to levy a permissive real property transfer tax at rates of up to $3.00 per $1,000 of value, depending on the county.

2. Ohio Does Not Impose a Controlling Interest Transfer Tax. Ohio does not impose a controlling interest transfer tax on transfers of corporate stock, partnership interests, or other entity interests, even where the entity whose interests are being transferred owns real property located in Ohio. The Ohio real property conveyance fee applies only to direct transfers of real property (i.e., the recording of deeds or ot

3. NovaMart's Ohio Real Property. NovaMart operates one fulfillment center in Ohio. Based on our due diligence review, this fulfillment center is occupied by NovaMart pursuant to a commercial lease with a third-party landlord. NovaMart does not own any real property in Ohio. Conclusion: No Ohio real property conveyance fee or transfer tax applies to the transaction. Estimated Tax: $0. G. Illinois (1 Fulfillment Cente

1. Illinois Real Estate Transfer Tax (35 ILCS 200/31-1 et seq.). Illinois imposes a state-level real estate transfer tax on transfers of real property located within the state at a rate of $0.50 per $500 of value (equivalent to $1.00 per $1,000 of value, or 0.1%). In addition, counties (other than Cook County) may impose a county real estate transfer tax at $0.25 per $500 of value, and Cook County imposes a county tr

2. Controlling Interest Transfer Tax — State Level and City of Chicago. At the state level, Illinois does not impose a specific controlling interest transfer tax on transfers of interests in entities holding Illinois real property. However, the City of Chicago imposes a Chicago Real Property Transfer Tax, codified at Section 3-33 of the Municipal Code of Chicago, which expressly applies to transfers of "controlling i

3. NovaMart's Illinois Real Property. NovaMart operates one fulfillment center in Illinois. Based on our due diligence review, this fulfillment center is located in the suburban Chicago area — specifically, in an unincorporated area of a collar county — and is not located within the corporate limits of the City of Chicago proper. Furthermore, the fulfillment center is occupied by NovaMart pursuant to a commercial lea

1. Pennsylvania Realty Transfer Tax (72 P.S. § 8101-C et seq.). Pennsylvania imposes a realty transfer tax on the transfer of real property located within the Commonwealth. The tax is imposed at a combined state and local rate. The state portion of the realty transfer tax is 1% of the value of the real property transferred. In addition, each county and municipality may impose a local realty transfer tax, which in mos

2. Pennsylvania Controlling Interest Transfer Tax (72 P.S. § 8102-C.3). Pennsylvania imposes a realty transfer tax on transfers of a "controlling interest" in a "real estate company" — that is, an entity that holds an interest in real property located in Pennsylvania. For purposes of the Pennsylvania CITT, a "controlling interest" is defined as the acquisition of 90% or more of the total interests in the entity. This

3. NovaMart's Pennsylvania Real Property. NovaMart operates one fulfillment center in Pennsylvania. Based on our due diligence review, including the Real Property Due Diligence Memorandum and the title search reports from Ridgecrest Title Group Inc., this fulfillment center is owned by NovaMart in fee simple. The property is not subject to a ground lease or similar arrangement; NovaMart holds full fee ownership. Base

4. Estimated Tax Calculation. Applying the combined Pennsylvania realty transfer tax rate of 2% (1% state + 1% local, based on the standard rate applicable in the county where the property is located) to the estimated fair market value of $18,000,000: Estimated Pennsylvania CITT = 2% × $18,000,000 = $360,000 The $360,000 estimated liability consists of $180,000 attributable to the state portion (1%) and $180,000 attr

I. Tennessee (1 Fulfillment Center) NovaMart operates one fulfillment center in the State of Tennessee.

1. Tennessee Real Estate Transfer Tax (Tenn. Code Ann. § 67-4-409). Tennessee imposes a real estate transfer tax on the transfer of real property located within the state at a rate of $0.37 per $100 of value (equivalent to $3.70 per $1,000, or 0.37%). The tax is imposed on the recordation of instruments transferring title to real property. Tennessee does not impose a controlling interest transfer tax on transfers of

2. NovaMart's Tennessee Real Property. NovaMart operates one fulfillment center in Tennessee. Based on our due diligence review, this fulfillment center is occupied by NovaMart pursuant to a commercial lease with a third-party landlord. NovaMart does not own any real property in Tennessee. Conclusion: No Tennessee real estate transfer tax applies to the transaction. Estimated Tax: $0. J. Florida (2 Fulfillment Center

1. Florida Documentary Stamp Tax (Fla. Stat. § 201.02). Florida imposes a documentary stamp tax on deeds and other instruments transferring interests in real property located within the state at a rate of $0.70 per $100 of consideration (equivalent to $7.00 per $1,000, or 0.7%). In addition, Miami-Dade County imposes a county surtax of $0.45 per $100 on certain transfers of real property located within the county. Fl

2. Florida Controlling Interest Transfer Tax. Florida does not impose a controlling interest transfer tax on transfers of corporate stock, partnership interests, or other entity interests in entities that hold Florida real property. The Florida documentary stamp tax on real property transfers applies only to direct conveyances — the recording of deeds or other instruments transferring title to real property.

3. Florida Documentary Stamp Tax on Stock Transfer Instruments. Florida does not impose a documentary stamp tax specifically on transfers of corporate stock certificates, stock powers, or stock purchase agreements. The documentary stamp tax on obligations to pay money (Fla. Stat. § 201.08) may apply to promissory notes or other instruments evidencing indebtedness, but the SPA and the stock transfer instruments are no

4. NovaMart's Florida Real Property. NovaMart operates two fulfillment centers in Florida. Based on our due diligence review, both Florida fulfillment centers are occupied by NovaMart pursuant to commercial lease agreements with third-party landlords. NovaMart does not own any real property in the State of Florida. Conclusion: No Florida documentary stamp tax or transfer tax applies to the transaction. Estimated Tax:

1. Washington Real Estate Excise Tax ("REET") (RCW 82.45). Washington imposes a Real Estate Excise Tax ("REET") on sales of real property located within the state. Effective January 1, 2020, the REET is imposed at graduated rates based on the selling price of the real property, as follows: • 1.1% on the portion of the selling price up to $525,000; • 1.28% on the portion of the selling price from $525,000.01 to $1,525

2. Washington Controlling Interest Transfer Tax (RCW 82.45.010(3)). Washington's statutory definition of "sale" for REET purposes is broadly construed and expressly includes the transfer of a "controlling interest" (defined as 50% or more of the total interest) in an entity that owns real property in Washington. Accordingly, if NovaMart owned real property in Washington, the transfer of 100% of NovaMart stock to Casc

3. NovaMart's Washington Real Property. NovaMart operates one fulfillment center in Washington. Based on our due diligence review, this fulfillment center is occupied by NovaMart pursuant to a commercial lease with a third-party landlord. NovaMart does not own any real property in the State of Washington. The Washington controlling interest transfer tax provision is not triggered where the entity holds only leased (a

1. New York Stock Transfer Tax (N.Y. Tax Law § 270 et seq.). New York imposes a stock transfer tax on the sale, transfer, delivery, or agreement to sell or transfer shares of stock, or certificates of stock, or certificates of rights to stock, at rates ranging from $0.0125 to $0.05 per share, depending on the selling price per share: • $0.0125 per share if the selling price is less than $5.00 per share; • $0.025 per

2. New York Real Estate Transfer Tax and Controlling Interest Transfer Tax (N.Y. Tax Law § 1402). New York imposes a real estate transfer tax on transfers of interests in real property located within the state, including transfers of "controlling interests" (defined as 50% or more of the total interests) in entities that own real property in New York. The tax is imposed at a rate of $2.00 per $500 of consideration (e

V. Summary Table — Estimated Transfer Tax Liability by Jurisdiction The following table summarizes the estimated transfer tax liability arising from the transaction across all analyzed jurisdictions: The miscellaneous line item of approximately $65,000 covers minor filing fees, nominal recording charges, and documentary stamp taxes in various jurisdictions related to: (a) UCC financing statement filings and amendment

VI. Allocation of Transfer Tax Liability Under the SPA The SPA includes specific provisions governing the allocation and payment of transfer taxes arising from the transaction. Set forth below is a summary of the applicable SPA provisions and their application to the estimated transfer tax liability. SPA Provision. Section 6.10 of the SPA provides, in relevant part, as follows: "All transfer, documentary, sales, use,

VII. Filing and Compliance Obligations A. New Jersey Controlling Interest Transfer Tax Filing The New Jersey CITT return must be filed with the New Jersey Division of Taxation within the prescribed period following the transfer of the controlling interest. The applicable form is NJ Form RTF-1EE (Controlling Interest Transfer Return) or its equivalent, which requires disclosure of the entity whose controlling interest

VIII. Interaction with Other Tax Provisions In analyzing the transfer tax implications of the transaction, it is important to consider the interaction between the transfer tax obligations and other tax provisions of the SPA, as well as the Buyer's representations and warranties insurance policy. We address these interactions below. Tax Indemnification. Article VIII of the SPA provides that the Selling Stockholders sh

IX. Open Items and Recommendations A. Confirmation of NovaMart Real Property Ownership The analysis set forth in this memorandum is based on the due diligence findings regarding NovaMart's owned versus leased real property, as reflected in the Real