1038-00008 · Cascade Retail Holdings · Analyses

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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT

TO: Sandra Tung, Partner, Mergers & Acquisitions, Calderwood & Harkness LLP

FROM: Andrew Fitzpatrick, Associate, Mergers & Acquisitions, Calderwood & Harkness LLP

DATE: May 12, 2025

RE: Deal Structure, Section 1060 Allocation, and Tax Considerations — Divestiture of EverGreen Market Co. LLC by Cascade Retail Holdings Inc. to Ridgeline Consumer Partners LLC

Matter No.: 1038-00008

Client: Cascade Retail Holdings Inc.

This memorandum is protected by the attorney-client privilege and constitutes attorney work product. It is intended solely for the use of Calderwood & Harkness LLP attorneys working on this engagement and the client, Cascade Retail Holdings Inc. Any dissemination, distribution, or copying of this memorandum to persons not authorized to receive it is strictly prohibited.

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 at 4200 Elliott Avenue West, Suite 1500, Seattle, Washington 98119. This memorandum is intended to provide a comprehensive framework for the transactional documentation and to identify areas requiring further analysis or coordination with outside tax counsel and the client's internal tax and finance teams.

Transaction Overview. Cascade, through its wholly owned subsidiary EverGreen Market Co. LLC ("EverGreen" or "EMC"), a Delaware limited liability company (EIN: 93-2615488), will sell substantially all of the assets of the EverGreen Market business to Ridgeline Consumer Partners LLC ("Ridgeline" or "RCP"), a Delaware limited liability company and the operating platform of Summit Grove Capital Partners Fund III, L.P., a $1.4 billion mid-market private equity fund. The EverGreen Market business consists of thirty-four (34) natural and organic grocery stores — twenty-two (22) located in Oregon and twelve (12) located in Northern California — together with one (1) 48,000 square-foot distribution center located in Tualatin, Oregon. The business is operated under the "EverGreen Market" and "EverGreen Naturals" brand names and serves a customer base concentrated in the Pacific Northwest and Northern California regions.

Purchase Price. The aggregate purchase price for the Purchased Assets is Twenty-Five Million Dollars ($25,000,000), payable as follows: (a) cash at closing of Twenty-Two Million Five Hundred Thousand Dollars ($22,500,000), and (b) Two Million Five Hundred Thousand Dollars ($2,500,000) deposited into an indemnity escrow held by Colton Pacific Bank, N.A. as escrow agent for a period of eighteen (18) months following the closing date, subject to release in accordance with the terms of the Escrow Agreement.

Valuation Context. EverGreen's trailing twelve-month ("TTM") revenue is approximately $142,000,000, and its TTM Adjusted EBITDA is approximately $8,200,000. These figures imply an enterprise value-to-EBITDA multiple of approximately 3.05x ($25,000,000 ÷ $8,200,000) and an enterprise value-to-revenue multiple of approximately 0.18x ($25,000,000 ÷ $142,000,000). For context, EverGreen represents approximately 2.09% of Cascade's consolidated TTM revenue of approximately $6,800,000,000. The relatively low valuation multiples reflect the competitive dynamics of the natural and organic grocery sector and certain margin pressures that EverGreen has experienced in recent periods, as well as the carveout nature of the transaction, which introduces transition risk for the buyer.

Transaction Timeline. The parties executed a non-binding Letter of Intent on April 18, 2025. The target date for execution of the definitive Asset Purchase Agreement (the "APA") is June 13, 2025. The estimated closing date is July 18, 2025 (approximately thirty-five (35) days post-signing), with an outside date of September 15, 2025. The period between signing and closing is designed to accommodate landlord consent processes for the thirty-five (35) lease assignments, regulatory filings and compliance matters, and the completion of any remaining due diligence items.

Engagement. Calderwood & Harkness LLP was engaged on May 2, 2025 to represent Cascade as seller in connection with this transaction. The engagement team consists of Sandra Tung (Responsible Partner), Oliver Mackenzie (Billing Partner), Tiffany Rosenthal (Lead Associate), and Andrew Fitzpatrick (Working Associate). Cascade's financial advisor is Bridger Zanthor & Co. LLC, with Elise Fontaine serving as lead managing director. Cascade's outside tax counsel is Archer Whitfield LLP, with Lorraine DeMarco serving as engagement partner. Buyer's counsel is Holloway Breck & Associates LLP, located in Denver, Colorado, with Nathan Ostroff serving as lead partner and Keiko Taniguchi serving as lead associate.

Summary of Key Recommendations. Based on the analysis set forth in this memorandum, the following key recommendations are highlighted for ease of reference and are discussed in greater detail in the sections that follow:

(1) The asset purchase structure is favorable for the buyer and acceptable for the seller given the carveout dynamics of the transaction, the buyer's desire for a stepped-up basis and selective liability assumption, and the relative ease of delineating Purchased Assets from Excluded Assets in this context.

(2) A binding Section 1060 purchase price allocation schedule should be negotiated with Ridgeline and attached as an exhibit to the APA, with both parties covenanting to file consistent IRS Forms 8594 (Asset Acquisition Statement Under Section 1060).

(3) Oregon and California bulk-sale compliance requirements must be addressed prior to closing, although exemptions may be available, particularly with respect to Oregon's large-enterprise exemption under ORS 76.6103(3)(l).

(4) No Hart-Scott-Rodino pre-merger notification filing is required, as the aggregate purchase price of $25,000,000 is well below the 2025 size-of-transaction threshold of $119.5 million.

(5) Specific state tax considerations — including California sales and use tax on inventory and FF&E, Oregon and California income tax apportionment of gain, and Washington B&O tax exclusion analysis — are detailed below and require coordination with Cascade's tax team and Archer Whitfield LLP.

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 Section II.C below. Structurally, a sale of one hundred percent (100%) of the membership interests in EMC to Ridgeline would also be a viable transaction structure. In a membership interest sale, Cascade would transfer all of its membership interests in EMC to Ridgeline, and Ridgeline would acquire the entity as a going concern, with all assets and liabilities transferring by operation of law.

However, the parties have elected an asset purchase structure, and for the reasons set forth below, this structure is appropriate and advisable under the circumstances of this transaction.

Carveout Complexity. The EverGreen Market business is being divested as a carveout from Cascade's broader retail operations. EverGreen currently utilizes certain Cascade shared services, including information technology infrastructure, payroll processing, treasury management, and centralized procurement systems. These shared services will continue to be provided to Ridgeline for a transitional period following closing pursuant to a Transition Services Agreement (the "TSA") to be negotiated and executed concurrently with the APA. An asset purchase structure allows for a significantly cleaner delineation between the Purchased Assets (which transfer to Ridgeline) and the Excluded Assets (which are retained by Cascade), and between the Assumed Liabilities (which Ridgeline will assume at closing) and the Excluded Liabilities (which remain with Cascade). In a membership interest sale, all assets and liabilities of EMC would transfer by default, requiring more complex contractual arrangements to exclude specific assets and liabilities that are intended to remain with Cascade or that relate to shared-service platforms.

Buyer's Preference for Stepped-Up Basis and Liability Limitation. Ridgeline, and its sponsor Summit Grove Capital Partners Fund III, L.P., strongly prefer an asset purchase structure for two principal reasons. First, an asset purchase provides Ridgeline with a stepped-up tax basis in the acquired assets under IRC § 1012, equal to the cost of the assets (i.e., the allocated purchase price). This stepped-up basis generates future depreciation and amortization deductions that reduce Ridgeline's (and its investors') tax liability in post-acquisition periods. By contrast, a membership interest sale would generally result in Ridgeline inheriting EMC's existing (often lower) tax basis in the assets, unless a Section 338(h)(10) election were made, which requires the consent of the seller and entails additional tax costs. Second, an asset purchase allows Ridgeline to avoid successor liability exposure to unknown or contingent pre-closing liabilities. In a membership interest sale, the buyer acquires the entity and all of its liabilities, known and unknown, whereas in an asset purchase, the buyer assumes only those liabilities specifically identified and agreed upon in the APA.

Selective Assumption of Liabilities. The asset purchase structure permits Ridgeline to assume only the specifically designated Assumed Liabilities, which include the following categories:

• Trade payables and accrued liabilities arising in the ordinary course of business, estimated at approximately $3,900,000 as of the anticipated closing date;

• Post-closing obligations under the thirty-four (34) store leases and the one (1) distribution center lease being assigned to Ridgeline;

• Accrued vacation and paid time off obligations for Transferred Employees, estimated at approximately $820,000; and

• All obligations under assigned vendor and supplier contracts arising from and after the closing date.

The following categories of liabilities will be Excluded Liabilities, retained by Cascade and not assumed by Ridgeline:

• All pre-closing litigation, claims, and proceedings, including without limitation any pending or threatened product liability claims arising from products sold by EverGreen prior to the closing date;

• Intercompany payables owed by EMC to Cascade or any Cascade affiliate;

• Long-term debt obligations of EMC or Cascade;

• Pension and other post-employment benefit ("OPEB") obligations, if any;

• All liabilities arising from Excluded Assets; and

• All income, franchise, and similar taxes of Cascade and EMC for pre-closing tax periods.

Excluded Assets. The following categories of assets will be Excluded Assets, retained by Cascade and not transferred to Ridgeline:

• Cash and cash equivalents held by EMC as of the closing date;

• Intercompany receivables owed to EMC by Cascade or any Cascade affiliate;

• Tax refunds and credits attributable to pre-closing tax periods;

• Corporate-level insurance policies maintained by Cascade;

• Cascade shared-service IT systems and infrastructure (subject to the TSA, which will provide Ridgeline with transitional access to such systems); and

• The "Cascade" trade name, trademarks, service marks, and all related intellectual property of Cascade (as distinguished from the "EverGreen Market" and "EverGreen Naturals" brands, which are Purchased Assets).

Purchased Assets. The Purchased Assets to be transferred to Ridgeline at closing include the following:

• Inventory, consisting of grocery products, health and beauty items, vitamins and supplements, and other merchandise, estimated at approximately $6,800,000 at cost;

• Furniture, fixtures, and equipment ("FF&E"), including store fixtures, refrigeration units, point-of-sale systems, shelving, signage, and warehouse equipment, estimated at approximately $4,100,000 net book value;

• Leasehold interests in thirty-four (34) store locations and one (1) distribution center located at 19800 SW Cipole Road, Tualatin, Oregon 97062;

• intellectual property, including the "EverGreen Market" and "EverGreen Naturals" trade names, trademarks, service marks, domain names, social media accounts, and private-label brand names;

• Customer lists, databases, and related marketing materials;

• Vendor and supplier contracts (including twelve (12) key contracts discussed further herein);

• Permits, licenses, and governmental authorizations, to the extent transferable under applicable law; and

• Goodwill associated with the EverGreen Market business.

B. Delaware Law Considerations

The Asset Purchase Agreement will be governed by Delaware law, consistent with the organizational jurisdictions of both Cascade (a Delaware corporation) and EverGreen Market Co. LLC (a Delaware limited liability company). Ridgeline Consumer Partners LLC is also organized under the laws of Delaware. The selection of Delaware law as the governing law is standard for transactions involving Delaware entities and provides the benefit of a well-developed body of case law on matters of corporate governance, contractual interpretation, and the sale of business assets.

Bulk-Sale Provisions. Delaware does not impose a bulk-sale statute. Delaware repealed UCC Article 6 (Bulk Transfers) effective July 1, 1996. Accordingly, no bulk-sale compliance is required under Delaware law. However, the EverGreen Market business operates in Oregon and California, both of which impose certain bulk-sale or related requirements. These are discussed in detail in Section V below.

Appraisal Rights. This transaction is structured as an asset sale by a subsidiary, not as a merger of the parent corporation. Accordingly, no appraisal rights are implicated under the Delaware General Corporation Law ("DGCL"). Section 262 of the DGCL provides appraisal rights to stockholders in connection with certain mergers and consolidations, but not in connection with asset sales.

Board Authorization. Section 271 of the DGCL provides that a corporation may sell, lease, or exchange all or substantially all of its property and assets upon such terms and conditions as the board of directors deems expedient, when and as authorized by a resolution adopted by the holders of a majority of the outstanding stock entitled to vote thereon. This provision raises the question of whether the sale of EverGreen's assets constitutes a sale of "substantially all" of Cascade's assets, which would require Cascade stockholder approval in addition to board authorization. Given that EverGreen represents approximately 2.09% of Cascade's consolidated TTM revenue (approximately $142,000,000 out of approximately $6,800,000,000), this sale almost certainly does not constitute a sale of "substantially all" of Cascade's assets under the quantitative and qualitative tests applied by Delaware courts. See Hollinger Inc. v. Hollinger Int'l, Inc., 858 A.2d 342 (Del. Ch. 2004); Katz v. Bregman, 431 A.2d 1274 (Del. Ch. 1981). The EverGreen business is not central to Cascade's core operations (which consist primarily of the Cascade Home & Goods general retail chain and the CascadeDirect.com ecommerce platform), and the divestiture does not represent a fundamental change in the nature of Cascade's business.

Nonetheless, we recommend obtaining resolutions of the Cascade Board of Directors authorizing the transaction as a matter of good corporate practice. These resolutions should be included in (or referenced by) the Seller Officer's Certificate to be delivered at closing as a condition precedent to the buyer's obligation to close. The board resolutions will provide an additional layer of protection against any challenge to the authority of Cascade's officers to execute and deliver the APA and related transaction documents.

C. Entity-Level Considerations for EverGreen Market Co. LLC

EMC is a single-member limited liability company wholly owned by Cascade. Under Treasury Regulation § 301.7701-3(b)(1)(ii), a domestic eligible entity with a single owner is disregarded as an entity separate from its owner for federal income tax purposes, unless the entity has elected to be classified as a corporation by filing Form 8832 (Entity Classification Election) with the Internal Revenue Service. As a disregarded entity, EMC is treated as a division or branch of Cascade for federal income tax purposes, and all of its items of income, deduction, gain, loss, and credit are reported on Cascade's consolidated federal income tax return.

We must confirm with Cascade's internal tax department and with Archer Whitfield LLP (Lorraine DeMarco, engagement partner) whether EMC has at any time made an election under Treasury Regulation § 301.7701-3(c) to be treated as a corporation (commonly referred to as a "check-the-box" election). If no such election has been made, the asset sale will be treated as a direct sale by Cascade for federal income tax purposes, and Cascade will recognize gain or loss on the disposition of each Purchased Asset, determined on an asset-by-asset basis using the Section 1060 allocation.

If EMC has elected to be treated as a corporation, the tax consequences would differ materially. In that scenario, the asset sale would be treated as a sale by a corporate subsidiary, and the gain would be recognized at the EMC level. The after-tax proceeds would then need to be distributed to Cascade, potentially resulting in a second level of tax at the Cascade parent level (although the dividends-received deduction under IRC § 243 would generally eliminate most or all of the second-level tax for a wholly owned subsidiary). Additionally, if EMC were treated as a corporation, the parties could consider a Section 338(h)(10) election, which would recast a sale of membership interests as a deemed asset sale for tax purposes, but this alternative structure would require further analysis and negotiation.

Partnership treatment is not applicable here because EMC has only a single member. A single-member LLC cannot be classified as a partnership for federal income tax purposes under the check-the-box regulations. Accordingly, the only two classifications available are disregarded entity or corporation.

As an action item, we have requested confirmation of EMC's federal tax classification from Cascade's tax department and anticipate receiving this information within the next several business days. This confirmation is critical to the structuring of the transaction and the tax analysis set forth in this memorandum.

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. Reg. § 1.1060-1(b)(1). The sale of substantially all of the assets of the EverGreen Market business — a going concern engaged in the operation of natural and organic grocery stores — unquestionably constitutes a transfer of assets comprising a trade or business, and Ridgeline's basis in the Purchased Assets will be determined by reference to the consideration paid. Accordingly, this transaction qualifies as an applicable asset acquisition subject to Section 1060.

Both the buyer and the seller are required to allocate the aggregate consideration among the acquired assets using the "residual method" prescribed by IRC § 1060 and Treasury Regulation § 1.1060-1(c). The residual method incorporates the seven asset classes set forth in IRC § 338(b)(5) and Treasury Regulation § 1.338-6. Under this method, the aggregate consideration is allocated first to the assets in the lowest-numbered class (Class I), with the excess allocated to the next class, and so on, with any residual amount allocated to Class VII (goodwill and going-concern value). Within each class, the consideration is allocated among the assets in proportion to their fair market values.

The allocation has significant tax consequences for both parties. For the seller, the character of the gain or loss recognized on the sale (ordinary income, capital gain, or Section 1231 gain) depends on the nature of the assets to which the consideration is allocated and the seller's adjusted basis in each asset. For the buyer, the allocation determines the buyer's initial tax basis in each acquired asset and, therefore, the future depreciation and amortization deductions available with respect to each asset.

B. Aggregate Consideration for Allocation Purposes

For purposes of the Section 1060 allocation, the "applicable asset acquisition consideration" includes not only the cash purchase price but also any liabilities assumed by the buyer. The total consideration for allocation purposes is calculated as follows:

Several points regarding the calculation of aggregate consideration warrant discussion.

First, the indemnity escrow of $2,500,000, although held by Colton Pacific Bank, N.A. as escrow agent and subject to potential claims for indemnification during the eighteen-month escrow period, is treated as part of the purchase price for Section 1060 allocation purposes at the time of closing. The full $2,500,000 is included in the seller's amount realized and the buyer's cost basis, regardless of whether some or all of the escrowed funds are ultimately disbursed to the seller or applied to indemnification claims. If indemnification claims are paid from the escrow, the purchase price (and the allocation) may need to be adjusted in the year of such payment.

Second, the treatment of assumed liabilities as additional consideration is required under Treasury Regulation § 1.1060-1(c)(1), which incorporates the rules of Treasury Regulation § 1.338-5. Under these regulations, the buyer's aggregate cost basis in the purchased assets is the sum of the amount paid for the assets and the liabilities assumed by the buyer. Correspondingly, the seller's amount realized includes both the cash received and the liabilities of which the seller is relieved. The approximately $4,720,000 in Assumed Liabilities — consisting of trade payables and accrued liabilities of approximately $3,900,000 and accrued vacation/PTO of approximately $820,000 — increases both the buyer's aggregate cost basis and the seller's total amount realized.

Third, the aggregate consideration figure of approximately $29,720,000 is subject to adjustment based on the post-closing working capital true-up mechanism, which is discussed in Section III.E below. The final purchase price will not be known with certainty until the working capital adjustment is completed, and the allocation schedule will need to be updated accordingly.

C. Asset Classes Under the Residual Method

The residual method requires the allocation of the aggregate consideration among the following seven asset classes, in the order specified:

Class I — Cash and Cash Equivalents. Cash and cash equivalents of EMC are Excluded Assets under the terms of the proposed APA. Accordingly, no portion of the aggregate consideration will be allocated to Class I. The allocation to Class I is zero ($0).

Class II — Actively Traded Personal Property, Certificates of Deposit, and Government Securities. This class includes actively traded personal property as defined in IRC § 1092(d)(1), certificates of deposit, and U.S. government securities. None of the Purchased Assets fall within this category. The allocation to Class II is zero ($0).

Class III — Accounts Receivable, Mortgages, and Credit Card Receivables. This class includes debt instruments, accounts receivable, and similar items. The inclusion of trade receivables among the Purchased Assets is likely to be minimal. EverGreen operates as a retail grocery business, with the majority of its sales transacted on a cash or credit/debit card basis at the point of sale. Most receivables, to the extent they exist, may be intercompany receivables owed by Cascade or its affiliates, which are Excluded Assets. We need to confirm with Steven Halderman (Controller, EMC) and Archer Whitfield LLP whether any third-party trade receivables exist and are included among the Purchased Assets. If trade receivables are included, the amounts are expected to be immaterial, and the fair market value assigned to Class III assets would be correspondingly small.

Class IV — Inventory. This class includes inventory as defined in IRC § 1221(a)(1) — i.e., stock in trade of the taxpayer or other property of a kind that would properly be included in inventory if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of business. EverGreen's inventory, consisting of natural and organic grocery products, health and beauty items, vitamins and supplements, prepared foods, and other merchandise, is estimated at approximately $6,800,000 at cost as of the anticipated closing date. The fair market value of the inventory for allocation purposes may differ from cost, depending on factors such as markdown exposure, slow-moving or obsolete items, and the wholesale replacement cost of the inventory. For purposes of the initial allocation framework, we recommend using cost as a reasonable approximation of fair market value, subject to adjustment based on the results of any physical inventory count conducted at or near closing.

The allocation to Class IV is significant for both parties because gain on the sale of inventory is treated as ordinary income to the seller. For Cascade, the gain on inventory is the excess of the allocated purchase price over Cascade's basis in the inventory (which should approximate cost, assuming no prior write-downs). From the buyer's perspective, a higher allocation to inventory is favorable because the inventory cost will be immediately deductible as cost of goods sold when the inventory is sold in the ordinary course of business following closing.

Class V — All Assets Not in Classes I–IV, VI, or VII. This is a broad residual category that encompasses all tangible and intangible assets not specifically assigned to another class. For purposes of this transaction, the Class V assets include the following:

Furniture, Fixtures, and Equipment. FF&E with an estimated net book value of approximately $4,100,000, including store fixtures, refrigeration and HVAC equipment, point-of-sale terminal hardware, shelving and display cases, signage (interior and exterior), warehouse racking and material-handling equipment at the Tualatin distribution center, and delivery vehicles (if any). The fair market value of the FF&E may exceed or fall below net book value depending on condition, age, and replacement cost. An independent appraisal may be warranted for the larger-value items, particularly refrigeration systems and specialized equipment. For the buyer, FF&E is generally depreciable over five (5) to seven (7) years under the Modified Accelerated Cost Recovery System ("MACRS"), and may be eligible for bonus depreciation under IRC § 168(k), if applicable for the year of acquisition.

Leasehold Interests. The Purchased Assets include the right, title, and interest of EMC in and to thirty-four (34) store leases and one (1) distribution center lease. The thirty-four store leases have an aggregate annual base rent of approximately $11,400,000, with an average remaining lease term of approximately 6.2 years (including renewal option periods, if exercised). The distribution center lease, located at 19800 SW Cipole Road, Tualatin, Oregon 97062, covers approximately 48,000 square feet, has an annual base rent of $576,000, and expires on March 31, 2029 (approximately 3.7 years remaining). Leasehold interests may have above-market or below-market value relative to current market rents, and this differential must be assessed in determining the fair market value for allocation purposes. If a lease has below-market rent (i.e., the contractual rent is lower than prevailing market rents for comparable space), the leasehold interest has a positive fair market value representing the present value of the rent savings over the remaining term. Conversely, if a lease has above-market rent, the leasehold interest may have negative or zero value, and the buyer may effectively be paying a premium to assume an unfavorable lease obligation. An independent real estate appraisal or broker opinion of value may be warranted to establish the fair market value of the leasehold interests. For the buyer, favorable leasehold interests are amortizable as Section 197 intangibles over fifteen (15) years.

Permits and Licenses. Various permits, licenses, and governmental authorizations required for the operation of the EverGreen Market stores and distribution center, including health department permits, food handler licenses, liquor licenses (to the extent transferable), and business operating permits. These are included in the Purchased Assets to the extent transferable under applicable law, and their fair market value for allocation purposes is likely to be nominal in most cases, with the possible exception of liquor licenses in jurisdictions where such licenses have significant secondary-market value.

Customer Lists and Databases. EverGreen maintains customer loyalty program data, mailing lists, and other customer information that has value to the buyer as a going-concern asset. The fair market value of customer lists is typically established through income-based or market-based valuation methods.

Vendor and Supplier Contracts. The Purchased Assets include EMC's rights under various vendor and supplier contracts, including twelve (12) key contracts identified during due diligence. The most significant of these is the supply agreement with Clearfield Organics Distribution Co., which is EverGreen's largest supplier, representing approximately 18% of cost of goods sold. Other key contracts include the private-label manufacturing agreement with Northstar Foods Co. LLC (under which EverGreen's store-brand products are manufactured) and the POS/inventory management software license with Meridian Commerce Solutions Inc. The fair market value of these contracts depends on whether their terms are above or below current market rates. Contracts with below-market pricing or favorable exclusivity terms would have positive fair market value.

Class VI — Section 197 Intangibles Other Than Goodwill and Going-Concern Value. This class includes all Section 197 intangibles (as defined in IRC § 197(d)) other than goodwill and going-concern value. Section 197 intangibles include, among other things, trademarks, trade names, franchise rights, and customer-based intangibles (to the extent not included in Class V). For purposes of this transaction, the Class VI assets include the following:

Federal Trademark Registrations. EverGreen holds the following active federal trademark registrations with the United States Patent and Trademark Office:

• EVERGREEN MARKET — Registration No. 5,284,331, registered June 12, 2018, covering retail grocery store services and related goods.

• EVERGREEN NATURALS — Registration No. 5,612,074, registered September 3, 2019, covering private-label natural and organic food products.

Domain Names and Digital Assets. The Purchased Assets include the domain names evergreenmarket.com and evergreenmarketco.com, together with all associated website content, social media accounts (including accounts on Northpoint Services Inc., Kestrel Services Inc., X (formerly Fenmore Solutions), and Dunmore & Co.), and digital marketing assets.

Trade Name. The right to use the "EverGreen Market" and "EverGreen Naturals" names in connection with the operation of the business.

All Class VI intangibles acquired by Ridgeline are amortizable over fifteen (15) years under IRC § 197, regardless of their actual useful life. The Section 197 anti-churning rules (IRC § 197(f)(9)) should not apply here because the buyer and seller are unrelated parties. The fair market value of the Class VI intangibles will need to be established through valuation analysis, potentially including a brand valuation study or a multi-period excess earnings method.

Class VII — Goodwill and Going-Concern Value. Under the residual method, the balance of the aggregate consideration remaining after allocation to Classes I through VI is assigned to Class VII, which consists of goodwill and going-concern value. Given the implied 3.05x EV/EBITDA multiple and the total aggregate consideration of approximately $29,720,000 (including assumed liabilities), the residual allocation to goodwill and going-concern value is expected to be substantial. The identifiable tangible and intangible asset values (Classes I through VI) are expected to total significantly less than $29,720,000, with the difference representing the premium paid for the going-concern value of the EverGreen Market business — i.e., the value attributable to the assembled workforce, established customer relationships, operational systems, and market position that enable the business to generate earnings in excess of a normal return on the identifiable assets.

Goodwill allocated to Class VII is amortizable by the buyer over fifteen (15) years under IRC § 197. It is worth noting that goodwill generated internally by a business — as is likely the case for much of EverGreen's goodwill, which was established organically or may have been partially written down following Cascade's acquisition of the EverGreen business from Pacific Provisions Group Inc. in 2019 — typically has a low or zero adjusted tax basis in the seller's hands. Accordingly, the gain on the sale of goodwill is expected to be significant for Cascade.

D. Competing Interests in Allocation

The Section 1060 allocation is a point of negotiation between the buyer and the seller because the allocation has opposite tax effects for the two parties. The key competing interests are as follows:

Seller (Cascade) Preferences. Cascade generally prefers a higher allocation to goodwill and going-concern value (Class VII) and other long-term capital gain assets, and a lower allocation to inventory (Class IV) and depreciable personal property (Class V). The rationale is as follows:

• Gain on the sale of goodwill and going-concern value is treated as long-term capital gain under IRC § 1231 (assuming the assets have been held for more than one year, which is the case here). For a C corporation such as Cascade, the distinction between ordinary income and capital gain is less significant than for individual taxpayers, because C corporations are taxed at the same 21% rate on both ordinary income and capital gains. However, capital gain characterization may still be relevant if Cascade has capital losses from other sources that could offset the capital gain, and capital gain treatment avoids depreciation recapture under IRC § 1245.

• Gain on the sale of inventory is treated as ordinary income. While the 21% corporate rate applies to ordinary income as well, the ordinary income characterization is generally less favorable from a tax-planning perspective.

• Gain on the sale of depreciable personal property (FF&E) is subject to depreciation recapture under IRC § 1245, which recharacterizes as ordinary income the gain attributable to prior depreciation deductions. To the extent the allocated purchase price for FF&E exceeds Cascade's adjusted basis (i.e., original cost less accumulated depreciation), the gain is ordinary income up to the amount of prior depreciation and Section 1231 gain on any excess.

Buyer (Ridgeline) Preferences. Ridgeline generally prefers a higher allocation to assets with shorter depreciable or amortizable lives, such as inventory and FF&E, and a lower allocation to goodwill and Section 197 intangibles, which are amortizable over fifteen (15) years. The rationale is as follows:

• Inventory is immediately deductible as cost of goods sold when the products are sold to customers in the ordinary course, providing an immediate tax benefit to Ridgeline.

• FF&E is depreciable over five (5) to seven (7) years under MACRS, and may be eligible for bonus depreciation under IRC § 168(k), providing accelerated tax deductions in the early years following the acquisition.

• Goodwill and Section 197 intangibles are amortizable over fifteen (15) years on a straight-line basis, resulting in a slower recovery of the tax basis.

• It bears noting that Ridgeline's structure as a PE-backed LLC (with Summit Grove Capital Partners Fund III, L.P. as the ultimate investor) means that the tax benefits of depreciation and amortization flow through to the fund's limited partners, who are the ultimate taxpayers. The value of accelerated deductions to the fund depends on the limited partners' individual tax situations, their marginal tax rates, and the time value of money.

Recommendation. We recommend that the allocation schedule be negotiated as a binding exhibit to the APA, with the final allocation determined by mutual agreement of the parties (or, if the parties cannot agree, by an independent appraisal firm agreed upon by both sides). The APA should include a covenant that both parties will file their respective IRS Forms 8594 consistent with the agreed-upon allocation and will not take any position on any federal, state, or local tax return that is inconsistent with the agreed-upon allocation, except as may be required by a final determination of the Internal Revenue Service or a court of competent jurisdiction. This approach — sometimes referred to as a "lock-step" or "binding allocation" provision — is standard in asset purchase agreements and is expressly contemplated by Treasury Regulation § 1.1060-1(c)(4), which provides that a buyer and seller may agree in writing to allocate the consideration to individual assets.

E. Working Capital Adjustment Impact on Allocation

The APA will include a customary post-closing working capital adjustment mechanism. The parties have agreed upon a Target Net Working Capital of $2,900,000, which is based on the trailing twelve-month average of EMC's net working capital (defined as current assets minus current liabilities, excluding cash and intercompany items). At closing, the purchase price will be calculated using an estimated Net Working Capital amount prepared by the seller. Within ninety (90) days following closing, the buyer will prepare a final Net Working Capital statement, which will be subject to the seller's review and dispute resolution procedures. Any difference between the final Net Working Capital and the Target Net Working Capital, to the extent it exceeds a de minimis collar of $50,000, will result in a dollar-for-dollar adjustment to the purchase price — upward if the final Net Working Capital exceeds the Target, and downward if it falls below.

Any post-closing working capital adjustment will alter the aggregate purchase price and, consequently, the total consideration for Section 1060 allocation purposes. The APA should include mechanics providing that the allocation schedule will be adjusted to reflect the final purchase price as determined after the working capital true-up. The adjustment should be allocated to the asset class or classes most directly affected by the working capital variation — in most cases, this will be Class IV (Inventory) if the adjustment is driven by changes in inventory levels, or Class V (current assets or prepaid expenses) if the adjustment is driven by other working capital components.

We recommend that the APA include a provision requiring the parties to exchange revised allocation schedules within thirty (30) days following the final determination of the working capital adjustment, and to amend their respective IRS Forms 8594 if the adjustment is material.

F. IRS Reporting — Form 8594

Both Cascade and Ridgeline are required to file IRS Form 8594 (Asset Acquisition Statement Under Section 1060) with their respective federal income tax returns for the taxable year in which the closing of the transaction occurs. See IRC § 1060(b); Treas. Reg. § 1.1060-1(e). Form 8594 requires each party to report the total consideration paid or received, the allocation of the consideration among the seven asset classes, and certain other information regarding the transaction. Failure to file Form 8594, or filing an inconsistent allocation, may result in penalties and may increase the risk of IRS audit.

The APA should include a provision requiring mutual cooperation between the parties in the preparation of consistent Forms 8594, including the exchange of draft allocation schedules within ninety (90) days following closing (which aligns with the working capital true-up period). The parties should also covenant that they will file supplemental or amended Forms 8594 in the event of any post-closing adjustments to the purchase price that affect the allocation, such as the working capital adjustment or the release or forfeiture of indemnity escrow amounts.

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 consummating the transaction. The HSR Act applies to transactions that meet certain "size-of-transaction" and "size-of-person" thresholds, which are adjusted annually by the FTC.

2025 Size-of-Transaction Threshold. For transactions closing in calendar year 2025, the minimum size-of-transaction threshold is $119.5 million (as adjusted by the FTC effective February 27, 2025). A transaction is reportable under the HSR Act only if, as a result of the transaction, the acquiring person will hold an aggregate total amount of the acquired person's voting securities, assets, or non-corporate interests valued in excess of $119.5 million, unless an exemption applies. Here, the aggregate purchase price for the EverGreen Market assets is $25,000,000, which is well below the $119.5 million size-of-transaction threshold. Even including the assumed liabilities of approximately $4,720,000, the total consideration of approximately $29,720,000 remains far below the threshold.

No Overlapping Operations. Even if the size-of-transaction test were met, a substantive antitrust analysis reveals no competitive overlap warranting concern. Cascade's core business operations consist of the Cascade Home & Goods general retail chain and the CascadeDirect.com ecommerce platform; Cascade does not operate in the natural or organic specialty grocery segment other than through EverGreen, which is being divested in this transaction. Ridgeline's only other portfolio company in the grocery space is Harvest Table Markets, a chain of twelve (12) natural and organic grocery stores located in Colorado, which was acquired by Ridgeline (through Summit Grove Capital Partners Fund III, L.P.) in 2023 for approximately $14 million. There is no geographic overlap between EverGreen's operations (Oregon and Northern California) and Harvest Table's operations (Colorado). Moreover, the combined market share of EverGreen and Harvest Table in the national natural and organic grocery market is negligible. Accordingly, the transaction raises no horizontal or vertical competition concerns.

Conclusion. No HSR Act filing is required for this transaction. Neither the size-of-transaction test nor any secondary test (including the size-of-person thresholds applicable to transactions valued between $119.5 million and $478.0 million) is triggered by this transaction. No waiting period must be observed prior to closing. We recommend noting in the APA that no HSR filing is required, and including a standard covenant that if either party's counsel determines that an HSR filing becomes necessary (e.g., due to an amendment of the transaction terms that increases the consideration above the threshold), the parties will cooperate in making such filing and observing the applicable waiting period.

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 ORS 76.6102 includes any sale not in the ordinary course of the seller's business of more than half of the seller's inventory, as measured by value on the date of the bulk-sale agreement. The sale of substantially all of EverGreen's assets, including inventory with an estimated value of approximately $6,800,000, clearly qualifies as a bulk sale. The inventory being transferred represents effectively all (not merely more than half) of EverGreen's inventory at the Oregon locations.

Compliance Requirements. If the Oregon bulk-sale provisions apply, the following compliance steps are required:

(a) The seller must deliver to the buyer a list of existing creditors, including the names and business addresses of all creditors of the seller and the amounts owed to each, and a schedule of the property to be transferred. This list must be delivered at least ten (10) days before the date of the bulk transfer.

(b) The buyer must give notice to the seller's listed creditors at least forty-five (45) days before taking possession of the assets or paying the consideration, whichever is earlier. The notice must state that a bulk sale is about to be made, provide the name and business address of the seller and buyer, describe the assets to be transferred, and indicate the scheduled date of the transfer.

Exemption Analysis. ORS 76.6103 provides several exemptions from the bulk-sale provisions. The exemptions include transfers made to give security for a pre-existing obligation, general assignments for the benefit of creditors, sales by executors, administrators, receivers, or trustees in insolvency, and certain other categories. None of these exemptions appears to apply to the present transaction on its face.

However, ORS 76.6103(3)(l) provides an exemption for a "sale by an enterprise with assets and debts exceeding $10,000,000." This exemption was enacted to recognize that large enterprises with substantial assets and debts are typically subject to sufficient creditor protections through other mechanisms (such as secured lending agreements, financial reporting requirements, and other contractual covenants) and do not require the additional protection of the bulk-sale notice regime. EverGreen's total assets likely exceed $10,000,000 (inventory alone is approximately $6,800,000, and total Purchased Assets including FF&E, leasehold interests, and intangibles are likely well in excess of $10,000,000), and its total debts (including the Assumed Liabilities of approximately $4,720,000 and any Excluded Liabilities) may also exceed this threshold. If both the assets and debts tests are met, the transaction would be exempt from Oregon's bulk-sale provisions. We recommend confirming the applicability of this exemption with Cascade's team and, specifically, obtaining a certified balance sheet of EMC showing assets and debts in excess of $10,000,000.

Risk of Non-Compliance. If the Oregon bulk-sale provisions apply and the parties fail to comply, creditors of the seller may seek to avoid the transfer to the extent of their claims against the seller. See ORS 76.6105. The buyer could face potential successor liability for the seller's debts, to the extent those debts are not paid from the proceeds of the sale. Non-compliance does not render the sale void ab initio, but it exposes the buyer to claims from the seller's unpaid creditors, which could result in significant liability and litigation costs.

B. California

California repealed UCC Article 6 (Bulk Sales) effective January 1, 2015, pursuant to Assembly Bill 852 (2013 Legislative Session). Accordingly, California no longer imposes the traditional bulk-sale notice requirements that were formerly codified in California Commercial Code §§ 6101–6111.

However, California Revenue and Taxation Code § 6811 imposes a separate requirement applicable to the purchase of a business or stock of goods in bulk. Under this provision, a buyer purchasing a business or stock of goods is required to withhold a sufficient portion of the purchase price to cover any outstanding sales and use tax liability of the seller. The statute is designed to protect the State of California's interest in collecting unpaid sales and use taxes from sellers who might otherwise transfer their assets and disappear without satisfying their tax obligations.

Compliance Requirements. The buyer must notify the California Department of Tax and Fee Administration ("CDTFA," formerly the Board of Equalization) of the proposed bulk sale and request a tax clearance certificate by filing CDTFA Form BOE-466-A (Notice of Bulk Sale/Transfer). The notice must be filed at least twelve (12) business days before the date set for closing or the date on which possession of the assets is transferred to the buyer, whichever is earlier. Upon receipt of the notice, the CDTFA will determine whether the seller has any outstanding sales or use tax liability and will issue either (a) a tax clearance certificate, indicating that no taxes are owed, or (b) a notice of the amount of taxes owed, in which case the buyer must withhold the amount specified from the purchase price pending clearance.

Failure to comply with California Revenue and Taxation Code § 6811 may result in the buyer becoming personally liable as a successor for the seller's unpaid sales and use taxes. This successor liability arises by operation of law and cannot be waived or disclaimed in the APA.

C. Recommendations

Based on the foregoing analysis, we recommend the following actions:

(1) Oregon Bulk-Sale Exemption. Engage Cascade's state tax advisors or Archer Whitfield LLP to confirm the applicability of the large-enterprise exemption under ORS 76.6103(3)(l). If the exemption applies, no further compliance with Oregon's bulk-sale provisions is required. If the exemption does not apply, the parties must build the forty-five (45) day creditor notice period into the pre-closing schedule, which may require adjustment of the estimated closing date of July 18, 2025.

(2) California CDTFA Bulk-Sale Notice. File CDTFA Form BOE-466-A at least twelve (12) business days before the estimated closing date of July 18, 2025. Working backward from the closing date and accounting for weekends and holidays, the filing should be made no later than approximately July 1, 2025. Tiffany Rosenthal (Lead Associate) should coordinate this filing with the closing checklist to ensure timely submission.

(3) APA Provisions. Include representations and warranties in the APA regarding Cascade's payment of all state sales, use, and other taxes, compliance with bulk-sale requirements (if applicable) as a condition to closing, and an indemnification obligation of the seller for any successor liability that may be imposed on the buyer as a result of the seller's failure to pay taxes due prior to closing.

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 liability for either the buyer or the seller. This is a significant simplifying factor for the Oregon portion of the transaction.

B. California

California imposes a statewide sales tax on the sale of tangible personal property, with the base state rate of 7.25% and additional local (county and city) taxes that bring the combined rate to between 7.25% and 10.25%, depending on the jurisdiction in which the sale occurs. The transfer of inventory and FF&E to the twelve (12) California store locations must be analyzed for California sales and use tax purposes.

Inventory. The transfer of grocery inventory associated with the twelve (12) California stores is likely subject to California sales tax. Although the bulk of the inventory consists of food products — which are generally exempt from California sales tax when sold as groceries (as opposed to prepared food, which is taxable) — the sale of inventory in bulk as part of an asset purchase does not qualify for the food exemption because the sale is not a retail sale to an ultimate consumer. However, a further analysis is needed to determine whether any specific exemptions apply to the bulk transfer of grocery inventory in connection with the sale of a business. As a conservative assumption, we should plan for the California-allocated portion of the inventory to be subject to sales tax. The approximately $6,800,000 of total inventory must be allocated between the Oregon stores and the California stores for purposes of determining the California tax base. We anticipate that approximately 35% of the inventory (roughly $2,380,000) is attributable to the twelve (12) California stores, based on the ratio of California stores to total stores (12 out of 34) and assuming roughly proportional inventory levels per store. The actual allocation should be confirmed with Steven Halderman (Controller, EMC) and Patricia Ng (General Manager, EMC) based on a store-by-store inventory analysis.

Occasional Sale Exemption. California Revenue and Taxation Code § 6006.5 provides an exemption from sales tax for "occasional sales" — i.e., sales of tangible personal property by persons not regularly engaged in the business of selling the type of property involved. The purpose of this exemption is to exclude from the sales tax base casual or isolated sales by persons who are not merchants with respect to the type of property being sold. In this case, Cascade and EverGreen are in the business of selling grocery products (i.e., the inventory is held for sale in the ordinary course), and accordingly, the occasional-sale exemption almost certainly does not apply to the transfer of inventory.

However, the occasional-sale exemption may apply to the transfer of FF&E. Cascade and EverGreen are not regularly engaged in the business of selling furniture, fixtures, and equipment; rather, they use the FF&E in the operation of their grocery business. The sale of FF&E in connection with the divestiture of the EverGreen business may qualify as an "occasional sale" within the meaning of Revenue and Taxation Code § 6006.5. If this exemption applies, the transfer of FF&E would not be subject to California sales tax. However, the applicability of the exemption in the context of a bulk asset purchase is not entirely free from doubt, and we recommend confirming this analysis with Cascade's California tax advisors. If the exemption does not apply, the California-allocated portion of the FF&E (estimated at approximately $1,435,000, based on the same proportional allocation methodology described above for inventory) would be subject to sales tax at the applicable rate.

Coordination with Section 1060 Allocation. The Section 1060 purchase price allocation will determine the amounts allocated to inventory and FF&E, which in turn will establish the tax base for California sales and use tax purposes. It is important to coordinate the negotiation of the allocation schedule with the California sales and use tax compliance analysis. A higher allocation to inventory or FF&E increases the potential California sales and use tax liability. This creates an additional dimension to the buyer-seller negotiation over the allocation, because the buyer generally prefers a higher allocation to these asset categories for federal income tax purposes (shorter cost recovery periods) but may bear the California sales and use tax on such amounts.

Recommendation. The APA should include a provision expressly allocating responsibility for California sales and use tax arising from the transfer of Purchased Assets that constitute tangible personal property. Market practice in asset purchases in California typically provides that the buyer bears the sales and use tax on the transfer of tangible personal property, on the theory that the buyer is the "purchaser" subject to the tax and that the stated purchase price is inclusive of the value of the assets but exclusive of transfer taxes. We recommend confirming this allocation of responsibility with Holloway Breck & Associates LLP (Nathan Ostroff) during the APA negotiation.

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 liabilities). A substantial aggregate gain is anticipated for several reasons:

• The goodwill and going-concern value associated with the EverGreen Market business (Class VII) is expected to receive a significant residual allocation, and Cascade's adjusted basis in this goodwill is likely low or zero. To the extent the goodwill was established organically through the operation of the business, it has no tax basis. To the extent goodwill was acquired in connection with Cascade's 2019 acquisition of the EverGreen business from Pacific Provisions Group Inc., it may have been partially or fully amortized or written down for tax purposes in the intervening years.

• The Section 197 intangibles (trademarks, trade names, domain names) also likely have low adjusted basis, having been established organically or amortized following the 2019 acquisition.

• Certain FF&E may generate gain to the extent the allocated purchase price exceeds net book value (after accumulated depreciation), although some items may generate losses if the allocated value is below net book value.

• Inventory gain is expected to be minimal to the extent the allocation approximates cost.

Cascade's federal corporate income tax rate is 21%, applicable to both ordinary income and capital gains. The aggregate federal income tax liability on the gain from the sale will depend on the final allocation and the character of the gain with respect to each asset class.

B. Oregon Apportionment

Oregon imposes a corporate income tax (technically, a "corporate excise tax") on the Oregon-apportioned income of corporations doing business in the state. Oregon uses a single-factor apportionment formula based on the taxpayer's sales in Oregon as a percentage of total sales everywhere. See ORS 314.650 et seq. Oregon adopted mandatory single-factor sales apportionment effective for tax years beginning on or after

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT
TO: Sandra Tung, Partner, Mergers & Acquisitions, Calderwood & Harkness LLP
FROM: Andrew Fitzpatrick, Associate, Mergers & Acquisitions, Calderwood & Harkness LLP
DATE: May 12, 2025
RE: Deal Structure, Section 1060 Allocation, and Tax Considerations — Divestiture of EverGreen Market Co. LLC by Cascade Retail Holdings Inc. to Ridgeline Consumer Partners LLC
Matter No.: 1038-00008
Client: Cascade Retail Holdings Inc.
This memorandum is protected by the attorney-client privilege and constitutes attorney work product. It is intended solely for the use of Calderwood & Harkness LLP attorneys working on this engagement and the client, Cascade Retail Holdings Inc. Any dissemination, distribution, or copying of this memorandum to persons not authorized to receive it is strictly prohibited.
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 at 4200 Elliott Avenue West, Suite 1500, Seattle, Washington 98119. This memorandum is intended to provide a comprehensive framework for the transactional documentation and to identify areas requiring further analysis or coordination with outside tax counsel and the client's internal tax and finance teams.
Transaction Overview. Cascade, through its wholly owned subsidiary EverGreen Market Co. LLC ("EverGreen" or "EMC"), a Delaware limited liability company (EIN: 93-2615488), will sell substantially all of the assets of the EverGreen Market business to Ridgeline Consumer Partners LLC ("Ridgeline" or "RCP"), a Delaware limited liability company and the operating platform of Summit Grove Capital Partners Fund III, L.P., a $1.4 billion mid-market private equity fund. The EverGreen Market business consists of thirty-four (34) natural and organic grocery stores — twenty-two (22) located in Oregon and twelve (12) located in Northern California — together with one (1) 48,000 square-foot distribution center located in Tualatin, Oregon. The business is operated under the "EverGreen Market" and "EverGreen Naturals" brand names and serves a customer base concentrated in the Pacific Northwest and Northern California regions.
Purchase Price. The aggregate purchase price for the Purchased Assets is Twenty-Five Million Dollars ($25,000,000), payable as follows: (a) cash at closing of Twenty-Two Million Five Hundred Thousand Dollars ($22,500,000), and (b) Two Million Five Hundred Thousand Dollars ($2,500,000) deposited into an indemnity escrow held by Colton Pacific Bank, N.A. as escrow agent for a period of eighteen (18) months following the closing date, subject to release in accordance with the terms of the Escrow Agreement.
Valuation Context. EverGreen's trailing twelve-month ("TTM") revenue is approximately $142,000,000, and its TTM Adjusted EBITDA is approximately $8,200,000. These figures imply an enterprise value-to-EBITDA multiple of approximately 3.05x ($25,000,000 ÷ $8,200,000) and an enterprise value-to-revenue multiple of approximately 0.18x ($25,000,000 ÷ $142,000,000). For context, EverGreen represents approximately 2.09% of Cascade's consolidated TTM revenue of approximately $6,800,000,000. The relatively low valuation multiples reflect the competitive dynamics of the natural and organic grocery sector and certain margin pressures that EverGreen has experienced in recent periods, as well as the carveout nature of the transaction, which introduces transition risk for the buyer.
Transaction Timeline. The parties executed a non-binding Letter of Intent on April 18, 2025. The target date for execution of the definitive Asset Purchase Agreement (the "APA") is June 13, 2025. The estimated closing date is July 18, 2025 (approximately thirty-five (35) days post-signing), with an outside date of September 15, 2025. The period between signing and closing is designed to accommodate landlord consent processes for the thirty-five (35) lease assignments, regulatory filings and compliance matters, and the completion of any remaining due diligence items.
Engagement. Calderwood & Harkness LLP was engaged on May 2, 2025 to represent Cascade as seller in connection with this transaction. The engagement team consists of Sandra Tung (Responsible Partner), Oliver Mackenzie (Billing Partner), Tiffany Rosenthal (Lead Associate), and Andrew Fitzpatrick (Working Associate). Cascade's financial advisor is Bridger Zanthor & Co. LLC, with Elise Fontaine serving as lead managing director. Cascade's outside tax counsel is Archer Whitfield LLP, with Lorraine DeMarco serving as engagement partner. Buyer's counsel is Holloway Breck & Associates LLP, located in Denver, Colorado, with Nathan Ostroff serving as lead partner and Keiko Taniguchi serving as lead associate.
Summary of Key Recommendations. Based on the analysis set forth in this memorandum, the following key recommendations are highlighted for ease of reference and are discussed in greater detail in the sections that follow:
(1) The asset purchase structure is favorable for the buyer and acceptable for the seller given the carveout dynamics of the transaction, the buyer's desire for a stepped-up basis and selective liability assumption, and the relative ease of delineating Purchased Assets from Excluded Assets in this context.
(2) A binding Section 1060 purchase price allocation schedule should be negotiated with Ridgeline and attached as an exhibit to the APA, with both parties covenanting to file consistent IRS Forms 8594 (Asset Acquisition Statement Under Section 1060).
(3) Oregon and California bulk-sale compliance requirements must be addressed prior to closing, although exemptions may be available, particularly with respect to Oregon's large-enterprise exemption under ORS 76.6103(3)(l).
(4) No Hart-Scott-Rodino pre-merger notification filing is required, as the aggregate purchase price of $25,000,000 is well below the 2025 size-of-transaction threshold of $119.5 million.
(5) Specific state tax considerations — including California sales and use tax on inventory and FF&E, Oregon and California income tax apportionment of gain, and Washington B&O tax exclusion analysis — are detailed below and require coordination with Cascade's tax team and Archer Whitfield LLP.
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 Section II.C below. Structurally, a sale of one hundred percent (100%) of the membership interests in EMC to Ridgeline would also be a viable transaction structure. In a membership interest sale, Cascade would transfer all of its membership interests in EMC to Ridgeline, and Ridgeline would acquire the entity as a going concern, with all assets and liabilities transferring by operation of law.
However, the parties have elected an asset purchase structure, and for the reasons set forth below, this structure is appropriate and advisable under the circumstances of this transaction.
Carveout Complexity. The EverGreen Market business is being divested as a carveout from Cascade's broader retail operations. EverGreen currently utilizes certain Cascade shared services, including information technology infrastructure, payroll processing, treasury management, and centralized procurement systems. These shared services will continue to be provided to Ridgeline for a transitional period following closing pursuant to a Transition Services Agreement (the "TSA") to be negotiated and executed concurrently with the APA. An asset purchase structure allows for a significantly cleaner delineation between the Purchased Assets (which transfer to Ridgeline) and the Excluded Assets (which are retained by Cascade), and between the Assumed Liabilities (which Ridgeline will assume at closing) and the Excluded Liabilities (which remain with Cascade). In a membership interest sale, all assets and liabilities of EMC would transfer by default, requiring more complex contractual arrangements to exclude specific assets and liabilities that are intended to remain with Cascade or that relate to shared-service platforms.
Buyer's Preference for Stepped-Up Basis and Liability Limitation. Ridgeline, and its sponsor Summit Grove Capital Partners Fund III, L.P., strongly prefer an asset purchase structure for two principal reasons. First, an asset purchase provides Ridgeline with a stepped-up tax basis in the acquired assets under IRC § 1012, equal to the cost of the assets (i.e., the allocated purchase price). This stepped-up basis generates future depreciation and amortization deductions that reduce Ridgeline's (and its investors') tax liability in post-acquisition periods. By contrast, a membership interest sale would generally result in Ridgeline inheriting EMC's existing (often lower) tax basis in the assets, unless a Section 338(h)(10) election were made, which requires the consent of the seller and entails additional tax costs. Second, an asset purchase allows Ridgeline to avoid successor liability exposure to unknown or contingent pre-closing liabilities. In a membership interest sale, the buyer acquires the entity and all of its liabilities, known and unknown, whereas in an asset purchase, the buyer assumes only those liabilities specifically identified and agreed upon in the APA.
Selective Assumption of Liabilities. The asset purchase structure permits Ridgeline to assume only the specifically designated Assumed Liabilities, which include the following categories:
• Trade payables and accrued liabilities arising in the ordinary course of business, estimated at approximately $3,900,000 as of the anticipated closing date;
• Post-closing obligations under the thirty-four (34) store leases and the one (1) distribution center lease being assigned to Ridgeline;
• Accrued vacation and paid time off obligations for Transferred Employees, estimated at approximately $820,000; and
• All obligations under assigned vendor and supplier contracts arising from and after the closing date.
The following categories of liabilities will be Excluded Liabilities, retained by Cascade and not assumed by Ridgeline:
• All pre-closing litigation, claims, and proceedings, including without limitation any pending or threatened product liability claims arising from products sold by EverGreen prior to the closing date;
• Intercompany payables owed by EMC to Cascade or any Cascade affiliate;
• Long-term debt obligations of EMC or Cascade;
• Pension and other post-employment benefit ("OPEB") obligations, if any;
• All liabilities arising from Excluded Assets; and
• All income, franchise, and similar taxes of Cascade and EMC for pre-closing tax periods.
Excluded Assets. The following categories of assets will be Excluded Assets, retained by Cascade and not transferred to Ridgeline:
• Cash and cash equivalents held by EMC as of the closing date;
• Intercompany receivables owed to EMC by Cascade or any Cascade affiliate;
• Tax refunds and credits attributable to pre-closing tax periods;
• Corporate-level insurance policies maintained by Cascade;
• Cascade shared-service IT systems and infrastructure (subject to the TSA, which will provide Ridgeline with transitional access to such systems); and
• The "Cascade" trade name, trademarks, service marks, and all related intellectual property of Cascade (as distinguished from the "EverGreen Market" and "EverGreen Naturals" brands, which are Purchased Assets).
Purchased Assets. The Purchased Assets to be transferred to Ridgeline at closing include the following:
• Inventory, consisting of grocery products, health and beauty items, vitamins and supplements, and other merchandise, estimated at approximately $6,800,000 at cost;
• Furniture, fixtures, and equipment ("FF&E"), including store fixtures, refrigeration units, point-of-sale systems, shelving, signage, and warehouse equipment, estimated at approximately $4,100,000 net book value;
• Leasehold interests in thirty-four (34) store locations and one (1) distribution center located at 19800 SW Cipole Road, Tualatin, Oregon 97062;
• intellectual property, including the "EverGreen Market" and "EverGreen Naturals" trade names, trademarks, service marks, domain names, social media accounts, and private-label brand names;
• Customer lists, databases, and related marketing materials;
• Vendor and supplier contracts (including twelve (12) key contracts discussed further herein);
• Permits, licenses, and governmental authorizations, to the extent transferable under applicable law; and
• Goodwill associated with the EverGreen Market business.
B. Delaware Law Considerations
The Asset Purchase Agreement will be governed by Delaware law, consistent with the organizational jurisdictions of both Cascade (a Delaware corporation) and EverGreen Market Co. LLC (a Delaware limited liability company). Ridgeline Consumer Partners LLC is also organized under the laws of Delaware. The selection of Delaware law as the governing law is standard for transactions involving Delaware entities and provides the benefit of a well-developed body of case law on matters of corporate governance, contractual interpretation, and the sale of business assets.
Bulk-Sale Provisions. Delaware does not impose a bulk-sale statute. Delaware repealed UCC Article 6 (Bulk Transfers) effective July 1, 1996. Accordingly, no bulk-sale compliance is required under Delaware law. However, the EverGreen Market business operates in Oregon and California, both of which impose certain bulk-sale or related requirements. These are discussed in detail in Section V below.
Appraisal Rights. This transaction is structured as an asset sale by a subsidiary, not as a merger of the parent corporation. Accordingly, no appraisal rights are implicated under the Delaware General Corporation Law ("DGCL"). Section 262 of the DGCL provides appraisal rights to stockholders in connection with certain mergers and consolidations, but not in connection with asset sales.
Board Authorization. Section 271 of the DGCL provides that a corporation may sell, lease, or exchange all or substantially all of its property and assets upon such terms and conditions as the board of directors deems expedient, when and as authorized by a resolution adopted by the holders of a majority of the outstanding stock entitled to vote thereon. This provision raises the question of whether the sale of EverGreen's assets constitutes a sale of "substantially all" of Cascade's assets, which would require Cascade stockholder approval in addition to board authorization. Given that EverGreen represents approximately 2.09% of Cascade's consolidated TTM revenue (approximately $142,000,000 out of approximately $6,800,000,000), this sale almost certainly does not constitute a sale of "substantially all" of Cascade's assets under the quantitative and qualitative tests applied by Delaware courts. See Hollinger Inc. v. Hollinger Int'l, Inc., 858 A.2d 342 (Del. Ch. 2004); Katz v. Bregman, 431 A.2d 1274 (Del. Ch. 1981). The EverGreen business is not central to Cascade's core operations (which consist primarily of the Cascade Home & Goods general retail chain and the CascadeDirect.com ecommerce platform), and the divestiture does not represent a fundamental change in the nature of Cascade's business.
Nonetheless, we recommend obtaining resolutions of the Cascade Board of Directors authorizing the transaction as a matter of good corporate practice. These resolutions should be included in (or referenced by) the Seller Officer's Certificate to be delivered at closing as a condition precedent to the buyer's obligation to close. The board resolutions will provide an additional layer of protection against any challenge to the authority of Cascade's officers to execute and deliver the APA and related transaction documents.
C. Entity-Level Considerations for EverGreen Market Co. LLC
EMC is a single-member limited liability company wholly owned by Cascade. Under Treasury Regulation § 301.7701-3(b)(1)(ii), a domestic eligible entity with a single owner is disregarded as an entity separate from its owner for federal income tax purposes, unless the entity has elected to be classified as a corporation by filing Form 8832 (Entity Classification Election) with the Internal Revenue Service. As a disregarded entity, EMC is treated as a division or branch of Cascade for federal income tax purposes, and all of its items of income, deduction, gain, loss, and credit are reported on Cascade's consolidated federal income tax return.
We must confirm with Cascade's internal tax department and with Archer Whitfield LLP (Lorraine DeMarco, engagement partner) whether EMC has at any time made an election under Treasury Regulation § 301.7701-3(c) to be treated as a corporation (commonly referred to as a "check-the-box" election). If no such election has been made, the asset sale will be treated as a direct sale by Cascade for federal income tax purposes, and Cascade will recognize gain or loss on the disposition of each Purchased Asset, determined on an asset-by-asset basis using the Section 1060 allocation.
If EMC has elected to be treated as a corporation, the tax consequences would differ materially. In that scenario, the asset sale would be treated as a sale by a corporate subsidiary, and the gain would be recognized at the EMC level. The after-tax proceeds would then need to be distributed to Cascade, potentially resulting in a second level of tax at the Cascade parent level (although the dividends-received deduction under IRC § 243 would generally eliminate most or all of the second-level tax for a wholly owned subsidiary). Additionally, if EMC were treated as a corporation, the parties could consider a Section 338(h)(10) election, which would recast a sale of membership interests as a deemed asset sale for tax purposes, but this alternative structure would require further analysis and negotiation.
Partnership treatment is not applicable here because EMC has only a single member. A single-member LLC cannot be classified as a partnership for federal income tax purposes under the check-the-box regulations. Accordingly, the only two classifications available are disregarded entity or corporation.
As an action item, we have requested confirmation of EMC's federal tax classification from Cascade's tax department and anticipate receiving this information within the next several business days. This confirmation is critical to the structuring of the transaction and the tax analysis set forth in this memorandum.
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. Reg. § 1.1060-1(b)(1). The sale of substantially all of the assets of the EverGreen Market business — a going concern engaged in the operation of natural and organic grocery stores — unquestionably constitutes a transfer of assets comprising a trade or business, and Ridgeline's basis in the Purchased Assets will be determined by reference to the consideration paid. Accordingly, this transaction qualifies as an applicable asset acquisition subject to Section 1060.
Both the buyer and the seller are required to allocate the aggregate consideration among the acquired assets using the "residual method" prescribed by IRC § 1060 and Treasury Regulation § 1.1060-1(c). The residual method incorporates the seven asset classes set forth in IRC § 338(b)(5) and Treasury Regulation § 1.338-6. Under this method, the aggregate consideration is allocated first to the assets in the lowest-numbered class (Class I), with the excess allocated to the next class, and so on, with any residual amount allocated to Class VII (goodwill and going-concern value). Within each class, the consideration is allocated among the assets in proportion to their fair market values.
The allocation has significant tax consequences for both parties. For the seller, the character of the gain or loss recognized on the sale (ordinary income, capital gain, or Section 1231 gain) depends on the nature of the assets to which the consideration is allocated and the seller's adjusted basis in each asset. For the buyer, the allocation determines the buyer's initial tax basis in each acquired asset and, therefore, the future depreciation and amortization deductions available with respect to each asset.
B. Aggregate Consideration for Allocation Purposes
For purposes of the Section 1060 allocation, the "applicable asset acquisition consideration" includes not only the cash purchase price but also any liabilities assumed by the buyer. The total consideration for allocation purposes is calculated as follows:
Several points regarding the calculation of aggregate consideration warrant discussion.
First, the indemnity escrow of $2,500,000, although held by Colton Pacific Bank, N.A. as escrow agent and subject to potential claims for indemnification during the eighteen-month escrow period, is treated as part of the purchase price for Section 1060 allocation purposes at the time of closing. The full $2,500,000 is included in the seller's amount realized and the buyer's cost basis, regardless of whether some or all of the escrowed funds are ultimately disbursed to the seller or applied to indemnification claims. If indemnification claims are paid from the escrow, the purchase price (and the allocation) may need to be adjusted in the year of such payment.
Second, the treatment of assumed liabilities as additional consideration is required under Treasury Regulation § 1.1060-1(c)(1), which incorporates the rules of Treasury Regulation § 1.338-5. Under these regulations, the buyer's aggregate cost basis in the purchased assets is the sum of the amount paid for the assets and the liabilities assumed by the buyer. Correspondingly, the seller's amount realized includes both the cash received and the liabilities of which the seller is relieved. The approximately $4,720,000 in Assumed Liabilities — consisting of trade payables and accrued liabilities of approximately $3,900,000 and accrued vacation/PTO of approximately $820,000 — increases both the buyer's aggregate cost basis and the seller's total amount realized.
Third, the aggregate consideration figure of approximately $29,720,000 is subject to adjustment based on the post-closing working capital true-up mechanism, which is discussed in Section III.E below. The final purchase price will not be known with certainty until the working capital adjustment is completed, and the allocation schedule will need to be updated accordingly.
C. Asset Classes Under the Residual Method
The residual method requires the allocation of the aggregate consideration among the following seven asset classes, in the order specified:
Class I — Cash and Cash Equivalents. Cash and cash equivalents of EMC are Excluded Assets under the terms of the proposed APA. Accordingly, no portion of the aggregate consideration will be allocated to Class I. The allocation to Class I is zero ($0).
Class II — Actively Traded Personal Property, Certificates of Deposit, and Government Securities. This class includes actively traded personal property as defined in IRC § 1092(d)(1), certificates of deposit, and U.S. government securities. None of the Purchased Assets fall within this category. The allocation to Class II is zero ($0).
Class III — Accounts Receivable, Mortgages, and Credit Card Receivables. This class includes debt instruments, accounts receivable, and similar items. The inclusion of trade receivables among the Purchased Assets is likely to be minimal. EverGreen operates as a retail grocery business, with the majority of its sales transacted on a cash or credit/debit card basis at the point of sale. Most receivables, to the extent they exist, may be intercompany receivables owed by Cascade or its affiliates, which are Excluded Assets. We need to confirm with Steven Halderman (Controller, EMC) and Archer Whitfield LLP whether any third-party trade receivables exist and are included among the Purchased Assets. If trade receivables are included, the amounts are expected to be immaterial, and the fair market value assigned to Class III assets would be correspondingly small.
Class IV — Inventory. This class includes inventory as defined in IRC § 1221(a)(1) — i.e., stock in trade of the taxpayer or other property of a kind that would properly be included in inventory if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of business. EverGreen's inventory, consisting of natural and organic grocery products, health and beauty items, vitamins and supplements, prepared foods, and other merchandise, is estimated at approximately $6,800,000 at cost as of the anticipated closing date. The fair market value of the inventory for allocation purposes may differ from cost, depending on factors such as markdown exposure, slow-moving or obsolete items, and the wholesale replacement cost of the inventory. For purposes of the initial allocation framework, we recommend using cost as a reasonable approximation of fair market value, subject to adjustment based on the results of any physical inventory count conducted at or near closing.
The allocation to Class IV is significant for both parties because gain on the sale of inventory is treated as ordinary income to the seller. For Cascade, the gain on inventory is the excess of the allocated purchase price over Cascade's basis in the inventory (which should approximate cost, assuming no prior write-downs). From the buyer's perspective, a higher allocation to inventory is favorable because the inventory cost will be immediately deductible as cost of goods sold when the inventory is sold in the ordinary course of business following closing.
Class V — All Assets Not in Classes I–IV, VI, or VII. This is a broad residual category that encompasses all tangible and intangible assets not specifically assigned to another class. For purposes of this transaction, the Class V assets include the following:
Furniture, Fixtures, and Equipment. FF&E with an estimated net book value of approximately $4,100,000, including store fixtures, refrigeration and HVAC equipment, point-of-sale terminal hardware, shelving and display cases, signage (interior and exterior), warehouse racking and material-handling equipment at the Tualatin distribution center, and delivery vehicles (if any). The fair market value of the FF&E may exceed or fall below net book value depending on condition, age, and replacement cost. An independent appraisal may be warranted for the larger-value items, particularly refrigeration systems and specialized equipment. For the buyer, FF&E is generally depreciable over five (5) to seven (7) years under the Modified Accelerated Cost Recovery System ("MACRS"), and may be eligible for bonus depreciation under IRC § 168(k), if applicable for the year of acquisition.
Leasehold Interests. The Purchased Assets include the right, title, and interest of EMC in and to thirty-four (34) store leases and one (1) distribution center lease. The thirty-four store leases have an aggregate annual base rent of approximately $11,400,000, with an average remaining lease term of approximately 6.2 years (including renewal option periods, if exercised). The distribution center lease, located at 19800 SW Cipole Road, Tualatin, Oregon 97062, covers approximately 48,000 square feet, has an annual base rent of $576,000, and expires on March 31, 2029 (approximately 3.7 years remaining). Leasehold interests may have above-market or below-market value relative to current market rents, and this differential must be assessed in determining the fair market value for allocation purposes. If a lease has below-market rent (i.e., the contractual rent is lower than prevailing market rents for comparable space), the leasehold interest has a positive fair market value representing the present value of the rent savings over the remaining term. Conversely, if a lease has above-market rent, the leasehold interest may have negative or zero value, and the buyer may effectively be paying a premium to assume an unfavorable lease obligation. An independent real estate appraisal or broker opinion of value may be warranted to establish the fair market value of the leasehold interests. For the buyer, favorable leasehold interests are amortizable as Section 197 intangibles over fifteen (15) years.
Permits and Licenses. Various permits, licenses, and governmental authorizations required for the operation of the EverGreen Market stores and distribution center, including health department permits, food handler licenses, liquor licenses (to the extent transferable), and business operating permits. These are included in the Purchased Assets to the extent transferable under applicable law, and their fair market value for allocation purposes is likely to be nominal in most cases, with the possible exception of liquor licenses in jurisdictions where such licenses have significant secondary-market value.
Customer Lists and Databases. EverGreen maintains customer loyalty program data, mailing lists, and other customer information that has value to the buyer as a going-concern asset. The fair market value of customer lists is typically established through income-based or market-based valuation methods.
Vendor and Supplier Contracts. The Purchased Assets include EMC's rights under various vendor and supplier contracts, including twelve (12) key contracts identified during due diligence. The most significant of these is the supply agreement with Clearfield Organics Distribution Co., which is EverGreen's largest supplier, representing approximately 18% of cost of goods sold. Other key contracts include the private-label manufacturing agreement with Northstar Foods Co. LLC (under which EverGreen's store-brand products are manufactured) and the POS/inventory management software license with Meridian Commerce Solutions Inc. The fair market value of these contracts depends on whether their terms are above or below current market rates. Contracts with below-market pricing or favorable exclusivity terms would have positive fair market value.
Class VI — Section 197 Intangibles Other Than Goodwill and Going-Concern Value. This class includes all Section 197 intangibles (as defined in IRC § 197(d)) other than goodwill and going-concern value. Section 197 intangibles include, among other things, trademarks, trade names, franchise rights, and customer-based intangibles (to the extent not included in Class V). For purposes of this transaction, the Class VI assets include the following:
Federal Trademark Registrations. EverGreen holds the following active federal trademark registrations with the United States Patent and Trademark Office:
• EVERGREEN MARKET — Registration No. 5,284,331, registered June 12, 2018, covering retail grocery store services and related goods.
• EVERGREEN NATURALS — Registration No. 5,612,074, registered September 3, 2019, covering private-label natural and organic food products.
Domain Names and Digital Assets. The Purchased Assets include the domain names evergreenmarket.com and evergreenmarketco.com, together with all associated website content, social media accounts (including accounts on Northpoint Services Inc., Kestrel Services Inc., X (formerly Fenmore Solutions), and Dunmore & Co.), and digital marketing assets.
Trade Name. The right to use the "EverGreen Market" and "EverGreen Naturals" names in connection with the operation of the business.
All Class VI intangibles acquired by Ridgeline are amortizable over fifteen (15) years under IRC § 197, regardless of their actual useful life. The Section 197 anti-churning rules (IRC § 197(f)(9)) should not apply here because the buyer and seller are unrelated parties. The fair market value of the Class VI intangibles will need to be established through valuation analysis, potentially including a brand valuation study or a multi-period excess earnings method.
Class VII — Goodwill and Going-Concern Value. Under the residual method, the balance of the aggregate consideration remaining after allocation to Classes I through VI is assigned to Class VII, which consists of goodwill and going-concern value. Given the implied 3.05x EV/EBITDA multiple and the total aggregate consideration of approximately $29,720,000 (including assumed liabilities), the residual allocation to goodwill and going-concern value is expected to be substantial. The identifiable tangible and intangible asset values (Classes I through VI) are expected to total significantly less than $29,720,000, with the difference representing the premium paid for the going-concern value of the EverGreen Market business — i.e., the value attributable to the assembled workforce, established customer relationships, operational systems, and market position that enable the business to generate earnings in excess of a normal return on the identifiable assets.
Goodwill allocated to Class VII is amortizable by the buyer over fifteen (15) years under IRC § 197. It is worth noting that goodwill generated internally by a business — as is likely the case for much of EverGreen's goodwill, which was established organically or may have been partially written down following Cascade's acquisition of the EverGreen business from Pacific Provisions Group Inc. in 2019 — typically has a low or zero adjusted tax basis in the seller's hands. Accordingly, the gain on the sale of goodwill is expected to be significant for Cascade.
D. Competing Interests in Allocation
The Section 1060 allocation is a point of negotiation between the buyer and the seller because the allocation has opposite tax effects for the two parties. The key competing interests are as follows:
Seller (Cascade) Preferences. Cascade generally prefers a higher allocation to goodwill and going-concern value (Class VII) and other long-term capital gain assets, and a lower allocation to inventory (Class IV) and depreciable personal property (Class V). The rationale is as follows:
• Gain on the sale of goodwill and going-concern value is treated as long-term capital gain under IRC § 1231 (assuming the assets have been held for more than one year, which is the case here). For a C corporation such as Cascade, the distinction between ordinary income and capital gain is less significant than for individual taxpayers, because C corporations are taxed at the same 21% rate on both ordinary income and capital gains. However, capital gain characterization may still be relevant if Cascade has capital losses from other sources that could offset the capital gain, and capital gain treatment avoids depreciation recapture under IRC § 1245.
• Gain on the sale of inventory is treated as ordinary income. While the 21% corporate rate applies to ordinary income as well, the ordinary income characterization is generally less favorable from a tax-planning perspective.
• Gain on the sale of depreciable personal property (FF&E) is subject to depreciation recapture under IRC § 1245, which recharacterizes as ordinary income the gain attributable to prior depreciation deductions. To the extent the allocated purchase price for FF&E exceeds Cascade's adjusted basis (i.e., original cost less accumulated depreciation), the gain is ordinary income up to the amount of prior depreciation and Section 1231 gain on any excess.
Buyer (Ridgeline) Preferences. Ridgeline generally prefers a higher allocation to assets with shorter depreciable or amortizable lives, such as inventory and FF&E, and a lower allocation to goodwill and Section 197 intangibles, which are amortizable over fifteen (15) years. The rationale is as follows:
• Inventory is immediately deductible as cost of goods sold when the products are sold to customers in the ordinary course, providing an immediate tax benefit to Ridgeline.
• FF&E is depreciable over five (5) to seven (7) years under MACRS, and may be eligible for bonus depreciation under IRC § 168(k), providing accelerated tax deductions in the early years following the acquisition.
• Goodwill and Section 197 intangibles are amortizable over fifteen (15) years on a straight-line basis, resulting in a slower recovery of the tax basis.
• It bears noting that Ridgeline's structure as a PE-backed LLC (with Summit Grove Capital Partners Fund III, L.P. as the ultimate investor) means that the tax benefits of depreciation and amortization flow through to the fund's limited partners, who are the ultimate taxpayers. The value of accelerated deductions to the fund depends on the limited partners' individual tax situations, their marginal tax rates, and the time value of money.
Recommendation. We recommend that the allocation schedule be negotiated as a binding exhibit to the APA, with the final allocation determined by mutual agreement of the parties (or, if the parties cannot agree, by an independent appraisal firm agreed upon by both sides). The APA should include a covenant that both parties will file their respective IRS Forms 8594 consistent with the agreed-upon allocation and will not take any position on any federal, state, or local tax return that is inconsistent with the agreed-upon allocation, except as may be required by a final determination of the Internal Revenue Service or a court of competent jurisdiction. This approach — sometimes referred to as a "lock-step" or "binding allocation" provision — is standard in asset purchase agreements and is expressly contemplated by Treasury Regulation § 1.1060-1(c)(4), which provides that a buyer and seller may agree in writing to allocate the consideration to individual assets.
E. Working Capital Adjustment Impact on Allocation
The APA will include a customary post-closing working capital adjustment mechanism. The parties have agreed upon a Target Net Working Capital of $2,900,000, which is based on the trailing twelve-month average of EMC's net working capital (defined as current assets minus current liabilities, excluding cash and intercompany items). At closing, the purchase price will be calculated using an estimated Net Working Capital amount prepared by the seller. Within ninety (90) days following closing, the buyer will prepare a final Net Working Capital statement, which will be subject to the seller's review and dispute resolution procedures. Any difference between the final Net Working Capital and the Target Net Working Capital, to the extent it exceeds a de minimis collar of $50,000, will result in a dollar-for-dollar adjustment to the purchase price — upward if the final Net Working Capital exceeds the Target, and downward if it falls below.
Any post-closing working capital adjustment will alter the aggregate purchase price and, consequently, the total consideration for Section 1060 allocation purposes. The APA should include mechanics providing that the allocation schedule will be adjusted to reflect the final purchase price as determined after the working capital true-up. The adjustment should be allocated to the asset class or classes most directly affected by the working capital variation — in most cases, this will be Class IV (Inventory) if the adjustment is driven by changes in inventory levels, or Class V (current assets or prepaid expenses) if the adjustment is driven by other working capital components.
We recommend that the APA include a provision requiring the parties to exchange revised allocation schedules within thirty (30) days following the final determination of the working capital adjustment, and to amend their respective IRS Forms 8594 if the adjustment is material.
F. IRS Reporting — Form 8594
Both Cascade and Ridgeline are required to file IRS Form 8594 (Asset Acquisition Statement Under Section 1060) with their respective federal income tax returns for the taxable year in which the closing of the transaction occurs. See IRC § 1060(b); Treas. Reg. § 1.1060-1(e). Form 8594 requires each party to report the total consideration paid or received, the allocation of the consideration among the seven asset classes, and certain other information regarding the transaction. Failure to file Form 8594, or filing an inconsistent allocation, may result in penalties and may increase the risk of IRS audit.
The APA should include a provision requiring mutual cooperation between the parties in the preparation of consistent Forms 8594, including the exchange of draft allocation schedules within ninety (90) days following closing (which aligns with the working capital true-up period). The parties should also covenant that they will file supplemental or amended Forms 8594 in the event of any post-closing adjustments to the purchase price that affect the allocation, such as the working capital adjustment or the release or forfeiture of indemnity escrow amounts.
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 consummating the transaction. The HSR Act applies to transactions that meet certain "size-of-transaction" and "size-of-person" thresholds, which are adjusted annually by the FTC.
2025 Size-of-Transaction Threshold. For transactions closing in calendar year 2025, the minimum size-of-transaction threshold is $119.5 million (as adjusted by the FTC effective February 27, 2025). A transaction is reportable under the HSR Act only if, as a result of the transaction, the acquiring person will hold an aggregate total amount of the acquired person's voting securities, assets, or non-corporate interests valued in excess of $119.5 million, unless an exemption applies. Here, the aggregate purchase price for the EverGreen Market assets is $25,000,000, which is well below the $119.5 million size-of-transaction threshold. Even including the assumed liabilities of approximately $4,720,000, the total consideration of approximately $29,720,000 remains far below the threshold.
No Overlapping Operations. Even if the size-of-transaction test were met, a substantive antitrust analysis reveals no competitive overlap warranting concern. Cascade's core business operations consist of the Cascade Home & Goods general retail chain and the CascadeDirect.com ecommerce platform; Cascade does not operate in the natural or organic specialty grocery segment other than through EverGreen, which is being divested in this transaction. Ridgeline's only other portfolio company in the grocery space is Harvest Table Markets, a chain of twelve (12) natural and organic grocery stores located in Colorado, which was acquired by Ridgeline (through Summit Grove Capital Partners Fund III, L.P.) in 2023 for approximately $14 million. There is no geographic overlap between EverGreen's operations (Oregon and Northern California) and Harvest Table's operations (Colorado). Moreover, the combined market share of EverGreen and Harvest Table in the national natural and organic grocery market is negligible. Accordingly, the transaction raises no horizontal or vertical competition concerns.
Conclusion. No HSR Act filing is required for this transaction. Neither the size-of-transaction test nor any secondary test (including the size-of-person thresholds applicable to transactions valued between $119.5 million and $478.0 million) is triggered by this transaction. No waiting period must be observed prior to closing. We recommend noting in the APA that no HSR filing is required, and including a standard covenant that if either party's counsel determines that an HSR filing becomes necessary (e.g., due to an amendment of the transaction terms that increases the consideration above the threshold), the parties will cooperate in making such filing and observing the applicable waiting period.
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 ORS 76.6102 includes any sale not in the ordinary course of the seller's business of more than half of the seller's inventory, as measured by value on the date of the bulk-sale agreement. The sale of substantially all of EverGreen's assets, including inventory with an estimated value of approximately $6,800,000, clearly qualifies as a bulk sale. The inventory being transferred represents effectively all (not merely more than half) of EverGreen's inventory at the Oregon locations.
Compliance Requirements. If the Oregon bulk-sale provisions apply, the following compliance steps are required:
(a) The seller must deliver to the buyer a list of existing creditors, including the names and business addresses of all creditors of the seller and the amounts owed to each, and a schedule of the property to be transferred. This list must be delivered at least ten (10) days before the date of the bulk transfer.
(b) The buyer must give notice to the seller's listed creditors at least forty-five (45) days before taking possession of the assets or paying the consideration, whichever is earlier. The notice must state that a bulk sale is about to be made, provide the name and business address of the seller and buyer, describe the assets to be transferred, and indicate the scheduled date of the transfer.
Exemption Analysis. ORS 76.6103 provides several exemptions from the bulk-sale provisions. The exemptions include transfers made to give security for a pre-existing obligation, general assignments for the benefit of creditors, sales by executors, administrators, receivers, or trustees in insolvency, and certain other categories. None of these exemptions appears to apply to the present transaction on its face.
However, ORS 76.6103(3)(l) provides an exemption for a "sale by an enterprise with assets and debts exceeding $10,000,000." This exemption was enacted to recognize that large enterprises with substantial assets and debts are typically subject to sufficient creditor protections through other mechanisms (such as secured lending agreements, financial reporting requirements, and other contractual covenants) and do not require the additional protection of the bulk-sale notice regime. EverGreen's total assets likely exceed $10,000,000 (inventory alone is approximately $6,800,000, and total Purchased Assets including FF&E, leasehold interests, and intangibles are likely well in excess of $10,000,000), and its total debts (including the Assumed Liabilities of approximately $4,720,000 and any Excluded Liabilities) may also exceed this threshold. If both the assets and debts tests are met, the transaction would be exempt from Oregon's bulk-sale provisions. We recommend confirming the applicability of this exemption with Cascade's team and, specifically, obtaining a certified balance sheet of EMC showing assets and debts in excess of $10,000,000.
Risk of Non-Compliance. If the Oregon bulk-sale provisions apply and the parties fail to comply, creditors of the seller may seek to avoid the transfer to the extent of their claims against the seller. See ORS 76.6105. The buyer could face potential successor liability for the seller's debts, to the extent those debts are not paid from the proceeds of the sale. Non-compliance does not render the sale void ab initio, but it exposes the buyer to claims from the seller's unpaid creditors, which could result in significant liability and litigation costs.
B. California
California repealed UCC Article 6 (Bulk Sales) effective January 1, 2015, pursuant to Assembly Bill 852 (2013 Legislative Session). Accordingly, California no longer imposes the traditional bulk-sale notice requirements that were formerly codified in California Commercial Code §§ 6101–6111.
However, California Revenue and Taxation Code § 6811 imposes a separate requirement applicable to the purchase of a business or stock of goods in bulk. Under this provision, a buyer purchasing a business or stock of goods is required to withhold a sufficient portion of the purchase price to cover any outstanding sales and use tax liability of the seller. The statute is designed to protect the State of California's interest in collecting unpaid sales and use taxes from sellers who might otherwise transfer their assets and disappear without satisfying their tax obligations.
Compliance Requirements. The buyer must notify the California Department of Tax and Fee Administration ("CDTFA," formerly the Board of Equalization) of the proposed bulk sale and request a tax clearance certificate by filing CDTFA Form BOE-466-A (Notice of Bulk Sale/Transfer). The notice must be filed at least twelve (12) business days before the date set for closing or the date on which possession of the assets is transferred to the buyer, whichever is earlier. Upon receipt of the notice, the CDTFA will determine whether the seller has any outstanding sales or use tax liability and will issue either (a) a tax clearance certificate, indicating that no taxes are owed, or (b) a notice of the amount of taxes owed, in which case the buyer must withhold the amount specified from the purchase price pending clearance.
Failure to comply with California Revenue and Taxation Code § 6811 may result in the buyer becoming personally liable as a successor for the seller's unpaid sales and use taxes. This successor liability arises by operation of law and cannot be waived or disclaimed in the APA.
C. Recommendations
Based on the foregoing analysis, we recommend the following actions:
(1) Oregon Bulk-Sale Exemption. Engage Cascade's state tax advisors or Archer Whitfield LLP to confirm the applicability of the large-enterprise exemption under ORS 76.6103(3)(l). If the exemption applies, no further compliance with Oregon's bulk-sale provisions is required. If the exemption does not apply, the parties must build the forty-five (45) day creditor notice period into the pre-closing schedule, which may require adjustment of the estimated closing date of July 18, 2025.
(2) California CDTFA Bulk-Sale Notice. File CDTFA Form BOE-466-A at least twelve (12) business days before the estimated closing date of July 18, 2025. Working backward from the closing date and accounting for weekends and holidays, the filing should be made no later than approximately July 1, 2025. Tiffany Rosenthal (Lead Associate) should coordinate this filing with the closing checklist to ensure timely submission.
(3) APA Provisions. Include representations and warranties in the APA regarding Cascade's payment of all state sales, use, and other taxes, compliance with bulk-sale requirements (if applicable) as a condition to closing, and an indemnification obligation of the seller for any successor liability that may be imposed on the buyer as a result of the seller's failure to pay taxes due prior to closing.
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 liability for either the buyer or the seller. This is a significant simplifying factor for the Oregon portion of the transaction.
B. California
California imposes a statewide sales tax on the sale of tangible personal property, with the base state rate of 7.25% and additional local (county and city) taxes that bring the combined rate to between 7.25% and 10.25%, depending on the jurisdiction in which the sale occurs. The transfer of inventory and FF&E to the twelve (12) California store locations must be analyzed for California sales and use tax purposes.
Inventory. The transfer of grocery inventory associated with the twelve (12) California stores is likely subject to California sales tax. Although the bulk of the inventory consists of food products — which are generally exempt from California sales tax when sold as groceries (as opposed to prepared food, which is taxable) — the sale of inventory in bulk as part of an asset purchase does not qualify for the food exemption because the sale is not a retail sale to an ultimate consumer. However, a further analysis is needed to determine whether any specific exemptions apply to the bulk transfer of grocery inventory in connection with the sale of a business. As a conservative assumption, we should plan for the California-allocated portion of the inventory to be subject to sales tax. The approximately $6,800,000 of total inventory must be allocated between the Oregon stores and the California stores for purposes of determining the California tax base. We anticipate that approximately 35% of the inventory (roughly $2,380,000) is attributable to the twelve (12) California stores, based on the ratio of California stores to total stores (12 out of 34) and assuming roughly proportional inventory levels per store. The actual allocation should be confirmed with Steven Halderman (Controller, EMC) and Patricia Ng (General Manager, EMC) based on a store-by-store inventory analysis.
Occasional Sale Exemption. California Revenue and Taxation Code § 6006.5 provides an exemption from sales tax for "occasional sales" — i.e., sales of tangible personal property by persons not regularly engaged in the business of selling the type of property involved. The purpose of this exemption is to exclude from the sales tax base casual or isolated sales by persons who are not merchants with respect to the type of property being sold. In this case, Cascade and EverGreen are in the business of selling grocery products (i.e., the inventory is held for sale in the ordinary course), and accordingly, the occasional-sale exemption almost certainly does not apply to the transfer of inventory.
However, the occasional-sale exemption may apply to the transfer of FF&E. Cascade and EverGreen are not regularly engaged in the business of selling furniture, fixtures, and equipment; rather, they use the FF&E in the operation of their grocery business. The sale of FF&E in connection with the divestiture of the EverGreen business may qualify as an "occasional sale" within the meaning of Revenue and Taxation Code § 6006.5. If this exemption applies, the transfer of FF&E would not be subject to California sales tax. However, the applicability of the exemption in the context of a bulk asset purchase is not entirely free from doubt, and we recommend confirming this analysis with Cascade's California tax advisors. If the exemption does not apply, the California-allocated portion of the FF&E (estimated at approximately $1,435,000, based on the same proportional allocation methodology described above for inventory) would be subject to sales tax at the applicable rate.
Coordination with Section 1060 Allocation. The Section 1060 purchase price allocation will determine the amounts allocated to inventory and FF&E, which in turn will establish the tax base for California sales and use tax purposes. It is important to coordinate the negotiation of the allocation schedule with the California sales and use tax compliance analysis. A higher allocation to inventory or FF&E increases the potential California sales and use tax liability. This creates an additional dimension to the buyer-seller negotiation over the allocation, because the buyer generally prefers a higher allocation to these asset categories for federal income tax purposes (shorter cost recovery periods) but may bear the California sales and use tax on such amounts.
Recommendation. The APA should include a provision expressly allocating responsibility for California sales and use tax arising from the transfer of Purchased Assets that constitute tangible personal property. Market practice in asset purchases in California typically provides that the buyer bears the sales and use tax on the transfer of tangible personal property, on the theory that the buyer is the "purchaser" subject to the tax and that the stated purchase price is inclusive of the value of the assets but exclusive of transfer taxes. We recommend confirming this allocation of responsibility with Holloway Breck & Associates LLP (Nathan Ostroff) during the APA negotiation.
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 liabilities). A substantial aggregate gain is anticipated for several reasons:
• The goodwill and going-concern value associated with the EverGreen Market business (Class VII) is expected to receive a significant residual allocation, and Cascade's adjusted basis in this goodwill is likely low or zero. To the extent the goodwill was established organically through the operation of the business, it has no tax basis. To the extent goodwill was acquired in connection with Cascade's 2019 acquisition of the EverGreen business from Pacific Provisions Group Inc., it may have been partially or fully amortized or written down for tax purposes in the intervening years.
• The Section 197 intangibles (trademarks, trade names, domain names) also likely have low adjusted basis, having been established organically or amortized following the 2019 acquisition.
• Certain FF&E may generate gain to the extent the allocated purchase price exceeds net book value (after accumulated depreciation), although some items may generate losses if the allocated value is below net book value.
• Inventory gain is expected to be minimal to the extent the allocation approximates cost.
Cascade's federal corporate income tax rate is 21%, applicable to both ordinary income and capital gains. The aggregate federal income tax liability on the gain from the sale will depend on the final allocation and the character of the gain with respect to each asset class.
B. Oregon Apportionment
Oregon imposes a corporate income tax (technically, a "corporate excise tax") on the Oregon-apportioned income of corporations doing business in the state. Oregon uses a single-factor apportionment formula based on the taxpayer's sales in Oregon as a percentage of total sales everywhere. See ORS 314.650 et seq. Oregon adopted mandatory single-factor sales apportionment effective for tax years beginning on or after

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