Harrison,
Thank you for circulating the initial draft of the Stock Purchase Agreement on behalf of Cascade Holdings Group, Inc. It was a thorough and well-organized draft, and we appreciate the effort that went into it. Calloway, Brandt & Loewe LLP has now completed its review on behalf of NovaMart Global Inc., the Selling Stockholders (including Ridgeline Equity Partners, LP and Brindoval Ventures Fund III, LP), and the founder stockholders. Please find attached our redline (NovaMart_SPA_Seller_Redline_04142025.docx), which reflects proposed revisions from the Sellers' and the Company's perspective in tracked changes. Simone Adesanya was the lead drafter on the markup and is available for associate-level discussions with Derek Okonkwo on conforming and mechanical points at their mutual convenience.
I wanted to flag the following substantive areas where the Sellers have material comments so that you and your team can orient around the key open issues before diving into the document.
**1. Indemnification Cap and Structure**
We acknowledge the proposed 18% indemnification cap ($216,000,000) in the draft. Respectfully, the Sellers view this as too high for a stock purchase of a well-run private company at this valuation (approximately 8.96x EBITDA). The Sellers propose reducing the general indemnification cap to 12% of the $1,200,000,000 Purchase Price, or $144,000,000. As you know, the R&W insurance policy placed with Meridian Specialty Insurance Company (Policy No. MSI-RWI-2025-07832) carries a $216,000,000 limit, which should afford Cascade more than adequate protection beyond the direct indemnification cap. The Sellers should not be bearing redundant exposure on top of that coverage. For the avoidance of doubt, the Sellers accept that fundamental representations (organization, authority, capitalization, and title to shares) and tax indemnification remain uncapped or subject to separate treatment as set forth in the redline.
**2. Escrow Amount**
The draft proposes an 8% escrow ($96,000,000), which the Sellers view as excessive, particularly given the availability of the R&W policy and the $12,000,000 self-insured retention. The Sellers propose reducing the escrow to 5% of the Purchase Price ($60,000,000). As a practical matter, tying up $96,000,000 for 24 months post-closing disproportionately affects the founder stockholders — Julian Reeves (18.5%) and Priya Narasimhan (8.3%) — who are rolling into employment with Cascade and whose personal liquidity is materially impacted by the size of the holdback.
**3. Survival Period**
The Sellers accept the 24-month survival period for general representations and warranties. However, the Sellers want to ensure that (a) the bring-down condition at closing is qualified "in all material respects" rather than requiring strict compliance, and (b) the survival period operates as a hard cutoff — no claims may be asserted after expiration regardless of when the underlying facts giving rise to the claim arose. The Sellers accept that fundamental representations survive indefinitely and that tax representations survive until 60 days after expiration of the applicable statute of limitations.
**4. Interim Operating Covenants (Section 6.01)**
The Sellers believe the draft's interim operating covenants are overly restrictive, particularly the consent thresholds for ordinary-course capital expenditures and new vendor contracts. NovaMart operates 14 fulfillment centers and serves approximately 62,400 active sellers and 9.1 million registered buyers. The business requires meaningful operational flexibility between signing and closing. This is especially important given the anticipated HSR timeline — if the parties receive a Second Request, the pre-closing period could extend well into Q3 or Q4 2025, and constraining NovaMart's ability to run the business during that period is not workable. The Sellers propose raising the capital expenditure consent threshold and adding carve-outs for contracts entered into in the ordinary course of business consistent with past practice below specified dollar thresholds, as reflected in the redline.
**5. Working Capital Adjustment**
We acknowledge the $78,500,000 net working capital target and the $5,000,000 collar. The Sellers' position is that the Working Capital Methodology Agreement must be finalized and attached as an exhibit to the SPA before signing, rather than being left to post-signing negotiation. Additionally, the Sellers propose that any post-closing true-up dispute be resolved by an independent accounting firm mutually selected by the parties — we would suggest a Big Four-equivalent firm other than Whitmore & Paige LLP, given Whitmore & Paige's role as Cascade's advisor — rather than having the matter default to the Delaware Court of Chancery.
**6. Termination Fee (Forward)**
We note the 2.5% forward termination fee ($30,000,000) payable by the Sellers if the SPA is terminated due to Seller breach or NovaMart's acceptance of a Superior Proposal. The Sellers accept the concept of a forward break fee but propose that the trigger for Seller breach be limited to willful and material breach, not any uncured breach, mirroring the standard applicable to the reverse termination fee payable by Cascade. The reverse termination fee is also $30,000,000 (2.5%), and the Sellers believe symmetry in the trigger conditions is appropriate.
**7. Representations and Warranties — Specific Comments**
The Sellers have proposed materiality and knowledge qualifiers in a number of representations, including the following:
- *Compliance with Laws* — proposing an "in all material respects" qualifier. - *Information Furnished to Cascade's Lenders* — the Sellers resist providing a broad representation regarding information furnished to Cornerstone National Bank, N.A. and Caluvori Capital Partners, Inc. in connection with the $750,000,000 Term Loan B. The Sellers were not party to those discussions and are not in a position to stand behind the accuracy of information they did not prepare or control. - *Environmental* — proposing knowledge qualifiers given the 14 fulfillment center locations across 9 states. - *Data Privacy and Cybersecurity* — proposing materiality thresholds for incident disclosure obligations.
I also want to note that the Disclosure Schedules are still being prepared by NovaMart (Amanda Trevino and Doug Whitfield are coordinating internally) and will follow under separate cover.
**8. Change of Control Consents**
We acknowledge there are approximately 34 contracts with change of control provisions. The Sellers propose that the failure to obtain any individual third-party consent should not constitute a stand-alone closing condition unless the contract is specifically listed on a schedule of "Material Consents." The Sellers propose limiting the Material Consents schedule to 8–10 of the most critical contracts, including the agreements with Pinnacle Cloud Solutions Inc., Redline Freight Corp., Arcwave Software LLC, and PayStream Financial Technologies Inc. For the remaining consents, the obligation should be one of commercially reasonable efforts, not a hard condition to closing.
**9. Post-Closing Employment Agreements**
Julian Reeves and Priya Narasimhan have reviewed the draft employment agreements. The Sellers note that the non-compete provisions are overly broad, both in geographic scope and in the definitions of restricted activity, and will need to be narrowed. This is particularly important with respect to Priya Narasimhan, who resides and may work in California, where the enforceability of post-employment non-competes is subject to significant statutory restrictions. Detailed comments on the employment agreements will follow separately, but we want to flag this now as a signing-gating item.
**10. Stockholder Representative Provisions**
Ridgeline Equity Partners, LP (through Franklin Osei) is designated as Stockholder Representative. The Sellers propose that the Stockholder Representative have authority to settle indemnification claims up to $5,000,000 without further stockholder approval, with claims above that threshold requiring the consent of holders of a majority of the pre-closing NovaMart shares. The Sellers also propose an expense reserve — either carved out of the escrow or funded separately — for the Stockholder Representative's costs in administering post-closing matters, as detailed in the redline.
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Harrison, I would like to propose that we schedule a principals call — you and me, and potentially client representatives (Ted Langford on your side, and Franklin Osei and/or Amanda Trevino on ours) — later this week or early next week to discuss the key commercial points before the teams begin line-by-line negotiations. It may also make sense to include the parties' investment bankers — Hargrove Mead & Co. and Pemberton Strauss Advisory LLC — on the commercial terms discussion, to the extent that would be productive.
I am confident that the parties can bridge the open issues and move toward an execution-ready SPA on the timeline contemplated by the February 14, 2025 Letter of Intent. In parallel, Simone Adesanya and Derek Okonkwo can begin scheduling associate-level working sessions on the less contentious provisions to keep things moving.
Please let me know your availability, and we will get something on the calendar.
Best regards,
Richard Calloway Partner Calloway, Brandt & Loewe LLP 600 Travis Street, Suite 4500 Houston, TX 77002 T: (713) 555-8200 E: rcalloway@cbllaw.com
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