1038-00009 · Client 1038 · Diligence

due-diligence-summary-risk-assessment.docx DOCUMENT M&A / Corporate

40 / 83 ← → ✕

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 599 Lexington Avenue, 38th Floor New York, New York 10022

May 16, 2025

MEMORANDUM

TO: Board of Directors, Cascade Retail Holdings Inc.

CC: Margaret "Meg" Alderton, Chief Executive Officer Rajiv Sundaram, Chief Financial Officer Elena Vasquez-Bright, General Counsel Theodore "Ted" Langford, Senior Vice President, Corporate Development

FROM: Harrison Wexford, Responsible Partner, Mergers & Acquisitions Derek Okonkwo, Lead Associate, Mergers & Acquisitions Calderwood & Harkness LLP

RE: Due Diligence Summary and Risk Assessment — Proposed Acquisition of 100% of the Capital Stock of NovaMart Global Inc.

DATE: May 16, 2025 (Pre-Signing Final Version for Board Consideration)

This memorandum constitutes a privileged and confidential attorney-client communication and attorney work product prepared by Calderwood & Harkness LLP for the exclusive use of the Board of Directors and authorized officers of Cascade Retail Holdings Inc. This memorandum is protected from disclosure by the attorney-client privilege, the work product doctrine, and all other applicable protections. This memorandum shall not be distributed or disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.

Right-click to update Table of Contents

I. Executive Summary

This memorandum consolidates and presents the key findings from Calderwood & Harkness LLP's ("C&H" or the "Firm") comprehensive due diligence investigation of NovaMart Global Inc. ("NovaMart" or the "Company") in connection with Cascade Retail Holdings Inc.'s ("Cascade," the "Buyer," or the "Company") proposed acquisition of 100% of NovaMart's outstanding capital stock (the "Acquisition" or the "Transaction"). The aggregate purchase price for the Transaction is One Billion Two Hundred Million Dollars ($1,200,000,000) in an all-cash stock purchase transaction, with no stock consideration component and no earnout or contingent payment mechanism.

The purpose of this memorandum is to provide the Board of Directors of Cascade with a comprehensive summary of our diligence findings across all principal workstreams, an assessment of the risks identified during the investigation, a description of the contractual protections and other mitigants that have been negotiated or are available to address those risks, and our overall recommendation regarding the Transaction. This memorandum is intended to be read in conjunction with the detailed workstream memoranda referenced in Appendix A hereto.

Engagement and Diligence Timeline. Calderwood & Harkness LLP's engagement in connection with the proposed Transaction was opened on January 20, 2025. The Cascade Board of Directors authorized the pursuit of the Acquisition on February 3, 2025. A letter of intent (the "LOI") was executed between Cascade and the Selling Stockholders on February 14, 2025, and substantive due diligence commenced on February 18, 2025 following the opening of NovaMart's virtual data room. The diligence investigation has continued through the date of this memorandum and will continue in the form of bring-down diligence through the anticipated closing of the Transaction.

C&H Transaction Team. The Calderwood & Harkness team advising Cascade on this Transaction includes: Harrison Wexford, Responsible Partner, Mergers & Acquisitions; Beatrice Holloway, Billing Partner, Mergers & Acquisitions; Derek Okonkwo, Lead Associate, Mergers & Acquisitions; Tiffany Rosenthal, Working Associate, Mergers & Acquisitions; Sylvia Hartwell, Specialist Partner, Tax; and Howard Bellamy, Specialist Partner, Antitrust & Competition.

Additional Advisors to Cascade. In addition to C&H, Cascade has engaged the following advisors in connection with the Transaction:

• Hargrove Mead & Co. (investment bank; Christopher Dunleavy, Managing Director) — financial advisory, valuation, and fairness opinion services;

• Whitmore & Paige LLP (accounting and tax advisory; Sandra Chiu, Partner) — accounting, financial, and tax due diligence;

• Whitfield & Crane LLP (outside antitrust counsel; Gabriela Montoya, Partner; 1200 New Hampshire Avenue NW, Suite 500, Washington, DC 20036) — antitrust regulatory counsel, including management of the Hart-Scott-Rodino ("HSR") process and the DOJ Second Request response; and

• Apex Economics LLC (economic consultant; Dr. Henrik Johansson, Managing Director; 900 G Street NW, Suite 700, Washington, DC 20001) — competitive effects analysis and economic modeling in support of antitrust clearance.

Seller's Advisors. The Selling Stockholders are represented by Calloway, Brandt & Loewe LLP (Richard Calloway, Partner, and Simone Adesanya, Partner) as legal counsel. Pemberton Strauss Advisory LLC (Vivian Hong, Managing Director) is serving as the Selling Stockholders' investment bank.

Overall Assessment. Based on our comprehensive due diligence investigation, NovaMart is a well-established online marketplace platform with strong growth characteristics. The Company reported fiscal year 2024 revenue of $891,000,000, EBITDA of $134,000,000, and gross merchandise volume ("GMV") of $6,200,000,000. The NovaMart platform serves approximately 62,400 active sellers and approximately 9.1 million registered buyers. The Company operates a proprietary logistics network, "NovaShip," through 14 fulfillment centers located across nine states, and employs approximately 2,400 individuals.

Our diligence investigation has not uncovered any issues that, individually or in the aggregate, would constitute a basis for recommending that Cascade not proceed with the Acquisition. We have identified several risks — most notably relating to antitrust clearance timing, change of control consent procurement, key employee retention, and a technology license dependency — that warrant careful attention and ongoing management. However, we believe that these risks are addressable through the contractual protections negotiated in the Stock Purchase Agreement (the "SPA"), the representations and warranties insurance policy obtained by Cascade, the escrow arrangement, the post-closing employment agreements and retention pool, and pre-closing remediation efforts.

Valuation Context. The all-cash purchase price of $1,200,000,000 implies a valuation of approximately 8.96x NovaMart's FY2024 EBITDA and approximately 1.35x NovaMart's FY2024 Revenue. These multiples are within the range of comparable transactions in the online marketplace and e-commerce sector, as detailed in the financial analysis prepared by Hargrove Mead & Co.

Strategic Rationale. The Acquisition extends Cascade's reach into the rapidly growing third-party marketplace segment, complementing Cascade's existing retail footprint of approximately 380 brick-and-mortar retail locations and its proprietary e-commerce platform, CascadeDirect.com, which serves approximately 28 million active customers. The combination of Cascade's established customer base and brand recognition with NovaMart's marketplace technology, seller network, and logistics infrastructure is expected to create significant strategic value, including cross-selling opportunities, logistics synergies, and enhanced data analytics capabilities.

II. Transaction Overview

A. Deal Structure

The Transaction is structured as a stock purchase in which Cascade will acquire 100% of the issued and outstanding capital stock of NovaMart from the Selling Stockholders (as defined below) for an aggregate cash purchase price of $1,200,000,000. The stock purchase structure was selected after careful consideration of alternative structures, including an asset purchase and a merger, in light of the parties' respective tax positions, the complexity of NovaMart's contractual relationships, the regulatory environment, and the preferences of the Selling Stockholders. The stock purchase structure provides for the acquisition of NovaMart as a going concern, with all assets, liabilities, contracts, and obligations transferring by operation of law through the change in ownership of the Company's equity.

NovaMart Global Inc. NovaMart is a corporation organized and existing under the laws of the State of Delaware. The Company is headquartered at 1100 Congress Avenue, Suite 800, Austin, Texas 78701. NovaMart's registered agent is Pinnacle Corporate Services Inc., located at 850 New Burton Road, Suite 201, Dover, Delaware 19904. NovaMart's federal employer identification number (EIN) is 84-3291547. The Company was founded in 2016 and has grown to become one of the largest independent online marketplace platforms in the United States, specializing in specialty consumer goods, home décor, artisanal products, and consumer electronics accessories.

Cascade Retail Holdings Inc. Cascade is a corporation organized and existing under the laws of the State of Delaware. The Company is publicly traded on the Nasdaq Stock Market under the ticker symbol "CRHI" and is headquartered at 4500 Elliott Avenue West, Suite 3200, Seattle, Washington 98119. Cascade's registered agent is Capitol Registered Agents LLC, located at 1209 Orange Street, Wilmington, Delaware 19801. Cascade's federal employer identification number (EIN) is 91-2847653.

Purchase Price and Consideration. The aggregate purchase price for 100% of NovaMart's outstanding capital stock is $1,200,000,000, payable entirely in cash at closing. There is no stock consideration component, no earnout or contingent payment mechanism, and no seller financing. The all-cash structure provides certainty of value to the Selling Stockholders and avoids the dilutive effect on Cascade's existing shareholders that would result from a stock-based or mixed-consideration transaction.

Governing Law and Jurisdiction. The SPA is governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice-of-law or conflict-of-law rules or provisions that would cause the application of the laws of any jurisdiction other than Delaware. The parties have agreed to exclusive jurisdiction in the Court of Chancery of the State of Delaware (or, if the Court of Chancery declines to accept jurisdiction, any state or federal court within the State of Delaware) for any disputes arising under or in connection with the SPA.

B. Selling Stockholders

The following table sets forth the ownership of NovaMart's outstanding capital stock by the Selling Stockholders and the approximate pro rata share of the aggregate purchase price allocable to each:

Ridgeline Equity Partners, LP ("Ridgeline"), through its Managing Partner Franklin Osei, has been designated as the Stockholder Representative for purposes of all post-closing matters under the SPA, including indemnification claims, working capital adjustment disputes, escrow releases, and related communications with Cascade. The designation of a single Stockholder Representative is typical for transactions of this nature and provides Cascade with a centralized point of contact for post-closing administration.

We note that the "Other management and employee stockholders" category includes holders of vested stock options that will be exercised (or cashed out) immediately prior to closing in accordance with the procedures set forth in the SPA. The SPA provides for the cancellation of all outstanding NovaMart stock options (whether vested or unvested) at closing, with vested options receiving a per-share cash payment equal to the per-share merger consideration less the applicable exercise price, and unvested options being cancelled without consideration (unless otherwise covered by the retention pool).

C. Key Economic Terms

The following summarizes the key economic terms of the Transaction as negotiated and set forth in the current draft of the SPA:

Escrow. $96,000,000, representing 8% of the aggregate purchase price, will be deposited at closing into an escrow account maintained by Marlowe Asset Management Trust Company, N.A. (Patricia Keane, Vice President, Escrow Services), located at One Liberty Place, 1650 Market Street, Suite 3600, Philadelphia, Pennsylvania 19103. The escrow funds will be held for a period of 24 months following the closing date and will be released to the Selling Stockholders at the end of such period, less any amounts that are subject to pending and unresolved indemnification claims asserted by Cascade prior to the expiration of the escrow period. The escrow serves as a readily accessible and dedicated source of recovery for Cascade in the event of post-closing indemnification claims, without the need to pursue individual Selling Stockholders for collection.

Net Cash to Sellers at Closing. The net cash payable to the Selling Stockholders at closing will be $1,104,000,000 ($1,200,000,000 aggregate purchase price minus the $96,000,000 escrow deposit), subject to the estimated working capital adjustment as calculated in the estimated closing statement to be delivered by NovaMart prior to closing. To the extent that estimated net working capital at closing differs from the working capital target (as described below) by more than the collar amount, the net cash at closing will be adjusted accordingly, with a final true-up within 90 days after closing based on the final closing statement.

Indemnification Cap. The aggregate liability of the Selling Stockholders for indemnification claims under the SPA (other than with respect to breaches of fundamental representations and tax representations, which are subject to separate treatment) is capped at $216,000,000, representing 18% of the aggregate purchase price. This cap represents a heavily negotiated term; the initial Seller proposal was a cap of 10% of deal value ($120,000,000), while Cascade's initial position was 25% ($300,000,000). The 18% cap, in conjunction with the $216,000,000 R&W insurance policy and the $96,000,000 escrow, provides Cascade with robust protection against post-closing losses.

Survival Periods. The representations and warranties set forth in the SPA are subject to the following survival periods:

• General representations and warranties: 24 months from the closing date.

• Fundamental representations (organization, authority, capitalization, title to shares, no brokers): Survive indefinitely.

• Tax representations: Survive until 60 days after the expiration of the applicable statute of limitations (including any extensions or waivers thereof).

These survival periods govern the time within which Cascade must assert indemnification claims based on breaches of the applicable representations and warranties. Claims asserted within the applicable survival period will be preserved even if not finally resolved until after the survival period has expired.

Termination Fees. The SPA provides for reciprocal termination fees of $30,000,000 (representing 2.5% of deal value):

• Forward Termination Fee: $30,000,000 payable by the Selling Stockholders to Cascade if the SPA is terminated as a result of (i) NovaMart's or the Selling Stockholders' material breach of the SPA that is not cured within the applicable cure period, or (ii) the Selling Stockholders' acceptance of a Superior Proposal (as defined in the SPA).

• Reverse Termination Fee: $30,000,000 payable by Cascade to the Selling Stockholders if the SPA is terminated as a result of (i) Cascade's failure to consummate the closing when all conditions to Cascade's obligation to close have been satisfied or waived, or (ii) Cascade's willful breach of the SPA.

Working Capital. The working capital target has been set at $78,500,000, calculated in accordance with the methodology set forth in Annex A to the SPA. A collar of +/- $5,000,000 applies, meaning that no adjustment to the purchase price will be made unless the difference between estimated (or final) net working capital at closing and the target exceeds $5,000,000 in either direction. Amounts outside the collar will be adjusted dollar-for-dollar. The working capital methodology and target were developed in consultation with Whitmore & Paige LLP based on their review of NovaMart's historical working capital levels and seasonal patterns.

D. Financing Sources

Cascade has arranged committed financing sufficient to fund the entire $1,200,000,000 aggregate purchase price plus estimated transaction costs. The sources of funds are as follows:

Term Loan B. Cascade has obtained a commitment letter dated May 15, 2025 (Reference No. CL-2025-0515-CRNB) from Cornerstone National Bank, N.A. (Administrative Agent; Robert Frankel, Managing Director, Leveraged Finance) and Caluvori Capital Partners, Inc. (Co-Lead Arranger; Irene Matsuda, Managing Director) for a senior secured Term Loan B facility in the aggregate principal amount of $750,000,000. The Term Loan B will bear interest at a rate equal to the Secured Overnight Financing Rate ("SOFR") plus 275 basis points, with a 7-year maturity and 1% annual amortization (payable quarterly). The commitment letter contains customary conditions to funding, including the absence of a material adverse effect with respect to NovaMart and the execution and delivery of definitive loan documentation.

Revolving Credit Facility. Cascade intends to draw $200,000,000 under its existing $500,000,000 revolving credit facility with Cornerstone National Bank, N.A. The existing facility bears interest at SOFR plus 200 basis points and matures in March 2029. The revolving credit facility will need to be amended to permit the Acquisition, the incurrence of the Term Loan B facility, and the $200,000,000 draw in connection with the Transaction. We are coordinating with Cascade's banking counsel on the required amendments.

Cash on Hand. Cascade will contribute $250,000,000 from its existing cash reserves to fund a portion of the purchase price. Based on Cascade's most recent balance sheet and cash flow projections provided by Mr. Sundaram's office, Cascade maintains sufficient liquidity to fund this contribution while retaining adequate working capital for ongoing operations.

No Financing Condition. Critically, the SPA does not contain a financing condition. Cascade has represented and warranted in the SPA that it has, or at closing will have, sufficient funds available to consummate the Transaction and pay the aggregate purchase price in full. The absence of a financing condition places the risk of financing failure squarely on Cascade and provides the Selling Stockholders with enhanced deal certainty. From Cascade's perspective, the committed financing is robust: the commitment letter is in place, the revolving credit facility is available, and the cash reserves are confirmed. We do not anticipate any material impediment to the availability of financing at closing.

E. Estimated Transaction Costs (Buyer Side)

The following table summarizes the estimated transaction costs to be incurred by Cascade in connection with the Acquisition:

Transaction costs will be funded from Cascade's working capital and are not included in the $1,200,000,000 aggregate purchase price. We note that the C&H legal fees estimate reflects both the legal advisory work and the due diligence investigation across all workstreams, and is subject to adjustment based on the complexity and duration of the remaining pre-closing workstreams, including the DOJ Second Request response.

F. Timeline

The following summarizes the key dates in the Transaction timeline from engagement through the anticipated closing:

The approximately seven-month period between the anticipated signing date and the Outside Date provides a reasonable window for completion of the DOJ review process and all other pre-closing conditions. We discuss the antitrust timeline in greater detail in Section IV of this memorandum.

III. Due Diligence Workstream Summaries

The following sections summarize the findings from each of the principal due diligence workstreams conducted by Calderwood & Harkness LLP and Cascade's other advisors. Detailed memoranda for each workstream are listed in Appendix A and are available for the Board's review upon request.

A. Corporate Organization and Capitalization

Corporate Organization. NovaMart is duly incorporated, validly existing, and in good standing under the laws of the State of Delaware. The Company maintains its principal offices at 1100 Congress Avenue, Suite 800, Austin, Texas 78701. NovaMart's federal employer identification number is 84-3291547. The Company was founded in 2016 by Julian Reeves and Priya Narasimhan, and has grown over the ensuing nine years into one of the largest independent online marketplace platforms in the United States, with a focus on specialty consumer goods, home décor, artisanal products, and consumer electronics accessories.

We have reviewed NovaMart's certificate of incorporation (as amended and restated), bylaws (as amended and restated), and all stockholder agreements, including the Amended and Restated Stockholders' Agreement dated March 22, 2021, among the Company and its stockholders. We have not identified any unusual governance provisions, super-majority voting requirements, or other structural impediments that would adversely affect the Transaction. The certificate of incorporation authorizes a single class of common stock, with no preferred stock authorized or outstanding. The bylaws are standard for a Delaware corporation of NovaMart's size and nature.

Capitalization. NovaMart's capitalization is clean and straightforward. The Company's outstanding capital stock is held by the five stockholder groups identified in Section II.B above. We have reviewed the Company's stock ledger, stock certificates, option agreements, and all equity incentive plan documentation. The capitalization table has been confirmed by NovaMart's transfer agent, Continental Stocktransfer & Trust, Inc., located at 17 Battery Place, Suite 930, New York, New York 10004. There are no outstanding warrants, convertible notes, or other equity-linked instruments other than the stock options granted under the NovaMart Global Inc. 2018 Equity Incentive Plan, as amended. All outstanding options will be cancelled at closing in accordance with the procedures specified in the SPA.

Subsidiaries. NovaMart has three wholly owned subsidiaries: (i) NovaMart Logistics Inc., a Delaware corporation that operates the NovaShip fulfillment network; (ii) NovaMart Advertising Services LLC, a Delaware limited liability company that manages the Company's seller advertising and sponsored listings business; and (iii) NovaMart Payment Solutions Inc., a Delaware corporation that holds certain payment-related licenses and facilitates payment processing on the platform. We have confirmed that each subsidiary is duly organized, validly existing, and in good standing in its jurisdiction of incorporation or formation. Foreign qualification filings have been reviewed and are current in all states where operations require qualification.

Risk Level: Low. NovaMart has a standard corporate organization with a clean capitalization table, no unusual governance provisions, and properly organized and maintained subsidiaries. We do not anticipate any material corporate or capitalization issues in connection with the Transaction.

B. Material Contracts

Overview. We have conducted a comprehensive review of NovaMart's material contracts, including customer agreements, vendor and supplier agreements, technology licenses, real property leases, employment agreements, financing agreements, insurance policies, and other commercial agreements. In total, the diligence review encompassed approximately 847 contracts uploaded to the data room, of which approximately 312 were identified as material based on the materiality thresholds established in the diligence request list.

Change of Control Provisions. A principal area of focus in our material contracts review was the identification of contracts containing change of control provisions that require consent, notice, or other action in connection with the Transaction. We identified approximately 34 contracts containing such provisions. Failure to obtain the required consents prior to closing could, in certain cases, trigger termination rights in favor of the counterparty, permit the counterparty to renegotiate key terms, or result in a default under the applicable contract.

The following is a summary of the key contracts requiring change of control consent:

Pinnacle Cloud Solutions Inc. — Master Services Agreement. NovaMart's primary cloud hosting and infrastructure provider. Pinnacle, headquartered in Washington State, provides substantially all of NovaMart's cloud computing, data storage, and content delivery services. The Master Services Agreement, dated September 14, 2020, contains a change of control provision requiring Pinnacle's prior written consent to any direct or indirect change in ownership or control of NovaMart. This is a mission-critical contract; the loss of Pinnacle's services would materially disrupt NovaMart's platform operations.

Redline Freight Corp. — Logistics Partnership Agreement. NovaMart's primary third-party logistics and freight carrier for its NovaShip fulfillment network. Redline, headquartered in Georgia, handles a significant portion of NovaMart's outbound shipping and last-mile delivery. The Logistics Partnership Agreement, dated January 8, 2022, contains a change of control provision requiring 60 days' prior written notice and Redline's consent to any change in controlling ownership of NovaMart. Failure to obtain consent could result in early termination of the agreement upon 90 days' notice.

Arcwave Software LLC — Technology License Agreement. NovaMart licenses a proprietary search and recommendation algorithm from Arcwave, a California-based software company. The Technology License Agreement, dated April 3, 2019, as amended on November 15, 2021, contains a change of control provision requiring Arcwave's prior written consent to any change in ownership or control of NovaMart. This license is critical to the functionality of NovaMart's product search and discovery features and is discussed further in Section III.C (Intellectual Property) below.

Congress Tower Partners LP — Office Lease. NovaMart's Austin, Texas headquarters lease at 1100 Congress Avenue, Suite 800. The lease, dated June 1, 2019, with a term expiring May 31, 2029, contains a standard commercial landlord consent provision requiring the landlord's prior written consent to any change of control of the tenant. We do not anticipate difficulty in obtaining landlord consent, but have included this consent in the tracker.

Fulfillment Center Leases. NovaMart leases 14 fulfillment centers across nine states: California (3 locations), New Jersey (2), Georgia (2), Ohio (1), Illinois (1), Pennsylvania (1), Tennessee (1), Florida (2), and Washington (1). Substantially all of these leases contain change of control provisions requiring landlord consent or notice. We have identified the specific requirements for each lease and have included all 14 in the consent tracker.

Stratton Digital Media Inc. — Advertising Revenue Share Agreement. NovaMart's agreement with Stratton for digital advertising placement and revenue sharing on the NovaMart platform. The agreement, dated March 22, 2023, contains a change of control provision requiring 30 days' prior written notice and Stratton's consent.

PayStream Financial Technologies Inc. — Payment Processing Agreement. NovaMart's primary payment processing agreement for buyer transactions on the platform. The agreement, dated August 7, 2020, contains a change of control provision requiring PayStream's prior written consent to any assignment or change of control.

Ashford Savings Bank, N.A. — Revolving Credit Facility. NovaMart's existing $150,000,000 revolving credit facility with Ashford Savings Bank. This facility is to be repaid in full and terminated at closing. While this is not a consent-dependent matter per se, the payoff and lien release process must be coordinated, and a payoff letter must be obtained from Ashford prior to closing. We estimate the outstanding principal plus accrued interest at closing will be approximately $143,200,000.

Additional Contracts. In addition to the contracts described above, the remaining contracts on the consent tracker include various seller partnership agreements, technology vendor agreements, and other commercial arrangements that contain notice or consent requirements triggered by a change of control.

Consent Solicitation Process. We have established a comprehensive change of control consent tracker (summarized in Appendix B) that identifies each contract, the counterparty, the specific consent or notice requirement, the applicable timeline, and the current status of each solicitation. Form consent solicitation letters have been prepared by C&H and reviewed by Calloway, Brandt & Loewe LLP on behalf of the Selling Stockholders. NovaMart and Cascade are working cooperatively to obtain consents prior to the anticipated closing date. The SPA contains customary conditions to closing with respect to material consents, and the parties have agreed on a list of "Required Consents" that must be obtained as a condition to Cascade's obligation to close.

Risk Level: Moderate. The consent procurement process involves approximately 34 contracts and requires the cooperation of numerous third-party counterparties, a process that inherently involves some uncertainty. As of the date of this memorandum, consent solicitation letters have been transmitted for the highest-priority contracts, and no counterparty has indicated an unwillingness to consent. However, the process is still in its early stages, and we will continue to monitor and report on progress. The SPA conditions provide Cascade with appropriate protections in the event that critical consents are not obtained.

C. Intellectual Property

IP Portfolio Overview. We have conducted a comprehensive review of NovaMart's intellectual property portfolio, including patents, trademarks, service marks, copyrights, domain names, trade secrets, and open-source software usage. The review was conducted in coordination with C&H's Technology Transactions group and included an assessment of IP ownership, freedom to operate, third-party license dependencies, and open-source compliance.

Patents. NovaMart holds 11 issued U.S. utility patents and 4 pending U.S. patent applications relating to its marketplace platform technology, including aspects of its product discovery algorithms, seller analytics dashboard, and logistics optimization software. We have confirmed that all issued patents are properly assigned to NovaMart and are current in their maintenance fee payments. No material patent infringement claims have been asserted against NovaMart, and our freedom-to-operate analysis has not identified any material third-party patents that are likely to be infringed by NovaMart's current operations.

Trademarks. NovaMart holds federally registered trademarks for "NovaMart" (Reg. No. 5,784,321), "NovaShip" (Reg. No. 5,921,088), "NovaMart Marketplace" (Reg. No. 6,012,445), and several associated logos and design marks. All registrations are current and properly maintained. We have reviewed the trademark portfolio for potential conflicts with Cascade's existing marks and have not identified any material issues.

Domain Names. NovaMart owns and controls the domain names novamart.com, novaship.com, novamartglobal.com, and related variations. All domain registrations are current and properly maintained.

Trade Secrets. NovaMart's trade secrets include proprietary algorithms, seller scoring methodologies, buyer behavior analytics models, pricing optimization tools, and logistics routing algorithms. The Company maintains reasonable measures to protect its trade secrets, including employee confidentiality agreements, restricted access controls, and information security protocols consistent with its SOC 2 Type II certification.

Technology License Agreement with Arcwave Software LLC. As noted in Section III.B above, NovaMart licenses a proprietary search and recommendation algorithm from Arcwave Software LLC pursuant to a Technology License Agreement dated April 3, 2019, as amended on November 15, 2021. The Arcwave algorithm is a key component of NovaMart's product search and discovery functionality, which is central to the buyer experience on the platform. The license agreement contains a change of control provision requiring Arcwave's prior written consent to any change in ownership or control of NovaMart. The loss of this license — whether through failure to obtain consent or through Arcwave's exercise of a termination right — would have a material adverse impact on NovaMart's platform functionality.

We have prioritized the Arcwave consent solicitation in the consent tracker and are coordinating with NovaMart's technology team and Arcwave's business development contacts to initiate discussions. As a contingency, Cascade's technology team has been asked to assess the feasibility and timeline for developing or licensing alternative search algorithm technology in the event that Arcwave consent cannot be obtained or is conditioned on materially different economic terms.

Proprietary Logistics Platform — NovaShip. The NovaShip logistics platform, which powers NovaMart's 14 fulfillment centers, is proprietary to NovaMart. IP ownership for all NovaShip technology, including software, algorithms, processes, and related documentation, has been confirmed as residing with NovaMart Logistics Inc., a wholly owned subsidiary of NovaMart. No third-party IP claims or encumbrances have been identified with respect to the NovaShip platform.

Open-Source Software. NovaMart's technology stack incorporates numerous open-source software components, as is standard practice in the software industry. We have reviewed the Company's open-source software inventory and usage policies. NovaMart employs an automated open-source scanning tool to identify and track open-source components and their associated licenses. Our review has not identified any material copyleft licensing issues (e.g., under the GNU General Public License or similar licenses) that would require disclosure or licensing of NovaMart's proprietary source code. The Company's open-source usage policies and compliance procedures are consistent with industry best practices.

Risk Level: Low to Moderate. NovaMart's IP ownership is generally clean, and the Company's IP portfolio is well-maintained. The principal area of concern is the dependency on the Arcwave search algorithm license and the need to obtain change of control consent from Arcwave. This risk is being actively managed through the consent solicitation process and the development of a technology contingency plan.

D. Real Property

Overview. NovaMart does not own any significant real property. The Company conducts its operations primarily through leased facilities, including its Austin, Texas headquarters and 14 fulfillment centers across nine states. Given the leased nature of substantially all of NovaMart's facilities, the real property diligence workstream focused on the review of lease terms, change of control provisions, lease assignment restrictions, renewal options, and the general condition of the leased premises.

Austin Headquarters. NovaMart's principal office is located at 1100 Congress Avenue, Suite 800, Austin, Texas 78701. The headquarters lease is with Congress Tower Partners LP, with a lease term expiring May 31, 2029, and one five-year renewal option. The lease requires the landlord's prior written consent to any change of control of the tenant. Annual base rent is approximately $2,400,000, with standard escalation provisions.

Fulfillment Centers. NovaMart operates 14 fulfillment centers through its subsidiary, NovaMart Logistics Inc. These facilities are located in the following states: California (3 locations — Ontario, Stockton, and Fresno), New Jersey (2 locations — Edison and Carteret), Georgia (2 locations — Savannah and Austell), Ohio (1 location — Columbus), Illinois (1 location — Romeoville), Pennsylvania (1 location — Carlisle), Tennessee (1 location — Nashville), Florida (2 locations — Orlando and Jacksonville), and Washington (1 location — Kent). The fulfillment centers range in size from approximately 85,000 to 350,000 square feet. Lease terms vary, with expiration dates ranging from 2026 to 2032. Substantially all of the fulfillment center leases contain change of control provisions requiring landlord consent or notice.

Title Insurance. Ridgecrest Title Group Inc. (through its subsidiary, Commonwealth Land & Title Insurance Co.; underwriter contact: Janet Morales) has been engaged to provide title insurance for any NovaMart-owned real property. Given that NovaMart's real property ownership is minimal (limited to certain parcels of ancillary land adjacent to fulfillment centers), the title insurance requirement is correspondingly limited.

Zoning, Title, and Survey. We have reviewed available zoning certifications, title reports, and survey documentation for NovaMart's leased facilities. No material zoning violations, title defects, or survey discrepancies have been identified. The fulfillment center locations are appropriately zoned for warehouse and distribution operations.

Risk Level: Low. NovaMart's real property profile consists primarily of leased facilities, which limits the Company's exposure to typical real property risks such as environmental contamination, title defects, and capital expenditure obligations. The primary real property concern is the procurement of landlord consents under the change of control provisions of the various leases, which is being managed as part of the overall consent solicitation process described in Section III.B.

E. Employment and Benefits

Workforce Overview. NovaMart has approximately 2,400 employees across all locations, including approximately 350 employees at the Austin headquarters and approximately 2,050 employees at the 14 fulfillment centers and other operational locations. The Company's workforce includes full-time, part-time, and temporary employees. NovaMart does not have any collective bargaining agreements with labor unions, and none of its employees are represented by a labor union. We are not aware of any pending or threatened union organizing activities.

Key Executive Employment Agreements. We have reviewed the existing employment agreements for NovaMart's senior management team. The following post-closing employment arrangements have been negotiated as part of the Transaction:

Julian Reeves (Founder & CEO). Mr. Reeves has agreed to enter into a three-year post-closing employment agreement with Cascade on the following terms: base salary of $625,000 per annum; target annual bonus of 75% of base salary (i.e., target of $468,750); and a grant of 150,000 restricted Cascade common shares vesting ratably over three years (50,000 shares per year), commencing on the first anniversary of closing. Mr. Reeves will serve as President of the NovaMart division within Cascade and will report directly to Cascade's CEO, Meg Alderton. The employment agreement contains customary non-competition and non-solicitation covenants for a period of two years following termination of employment.

Priya Narasimhan (Co-Founder & CTO). Ms. Narasimhan has agreed to enter into a three-year post-closing employment agreement with Cascade on the following terms: base salary of $575,000 per annum; target annual bonus of 70% of base salary (i.e., target of $402,500); and a grant of 125,000 restricted Cascade common shares vesting ratably over three years (approximately 41,667 shares per year), commencing on the first anniversary of closing. Ms. Narasimhan will serve as Chief Technology Officer of the NovaMart division and will report to Mr. Reeves and, on a dotted-line basis, to Cascade's enterprise CTO. The employment agreement contains customary non-competition and non-solicitation covenants for a period of two years following termination of employment.

Douglas "Doug" Whitfield (CFO) and Amanda Trevino (General Counsel). We have reviewed the existing employment terms for Mr. Whitfield and Ms. Trevino. No post-closing employment agreements have been negotiated or contemplated for these individuals at this time. Both individuals will be covered by the general retention pool described below. The parties have acknowledged that the roles of NovaMart's CFO and General Counsel may be absorbed into Cascade's existing corporate functions over time, and this transition will be managed post-closing.

Retention Pool. Cascade and the Selling Stockholders have agreed to establish a retention pool of $18,000,000 for key NovaMart employees other than Mr. Reeves and Ms. Narasimhan. The retention pool will be funded by Cascade at closing and will be paid in two equal installments: $9,000,000 at closing and $9,000,000 at the first anniversary of closing, in each case subject to the recipient's continued employment with NovaMart (or Cascade, as applicable) as of the applicable payment date. Individual retention bonus letters will be prepared and distributed to approximately 45 key employees identified by NovaMart management in consultation with Cascade's human resources team. The retention pool is an important mitigant to the risk of key employee departures in the post-closing integration period.

Benefit Plans. We have reviewed NovaMart's employee benefit plans, including the NovaMart Global Inc. 401(k) Plan, the Company's group health and welfare plans (medical, dental, vision, life, and disability insurance), and the NovaMart Global Inc. 2018 Equity Incentive Plan. Our review, conducted in coordination with C&H's ERISA and employee benefits group, has not identified any material violations of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or other applicable benefits laws and regulations. The 401(k) plan is properly maintained, fiduciary duties appear to have been appropriately discharged, and required annual filings (Form 5500) have been timely made. Health and welfare plans provide standard coverage levels for a company of NovaMart's size and nature.

Severance Obligations. Certain change of control severance provisions exist in the employment agreements of approximately 12 senior managers (in addition to Mr. Reeves and Ms. Narasimhan, whose post-closing employment agreements supersede their existing arrangements). If triggered, the aggregate severance obligations for these 12 individuals could total approximately $4,500,000 to $6,000,000. We have reviewed the triggering conditions for these severance provisions and note that, in most cases, the change of control alone does not trigger severance; rather, a "double trigger" requiring both a change of control and a qualifying termination of employment (e.g., termination without cause or resignation for good reason) is required. Accordingly, Cascade's ability to manage post-closing integration without triggering these severance obligations depends in part on its decisions regarding the continued employment and roles of these individuals.

WARN Act Compliance. The Worker Adjustment and Retraining Notification Act (the "WARN Act") and comparable state and local laws require advance notice of certain mass layoffs and plant closings. We have been advised by Cascade management that no immediate workforce reductions are planned in connection with the Acquisition. We have completed a WARN Act compliance analysis for all 14 fulfillment center locations and the Austin headquarters, identifying the applicable notification thresholds and requirements under both federal and state law. Cascade should continue to coordinate with C&H's employment group before making any post-closing decisions regarding workforce reductions to ensure ongoing WARN Act compliance.

Risk Level: Low to Moderate. The retention of key personnel — particularly Mr. Reeves and Ms. Narasimhan, whose knowledge of NovaMart's technology, operations, and seller relationships is critical to preserving deal value — is the principal employment-related risk. The negotiated post-closing employment agreements and the $18,000,000 retention pool are the primary mitigants. The potential aggregate severance exposure of $4.5–$6M for senior managers is manageable but should be factored into post-closing integration planning.

F. Litigation and Regulatory

Pending Litigation. NovaMart is currently a defendant in three pending lawsuits. We have reviewed the complaints, responsive pleadings, and available case materials for each matter:

1. Martinez v. NovaMart Global Inc. (Travis County District Court, Texas; Case No. D-1-GN-24-003782). An employment discrimination claim brought by a former customer service representative alleging wrongful termination based on age. The plaintiff seeks compensatory damages of $175,000 and attorney's fees. The matter is in early stages of discovery. NovaMart's employment litigation counsel has assessed the matter as defensible, with an estimated maximum exposure of approximately $150,000 including attorney's fees and defense costs.

2. Okafor v. NovaMart Logistics Inc. (Superior Court of New Jersey, Middlesex County; Docket No. MID-L-002941-24). A wage and hour dispute brought by a former fulfillment center employee alleging unpaid overtime. The plaintiff seeks approximately $85,000 in damages. The matter is in early stages. NovaMart's employment counsel has assessed the case as having low merit, with an estimated maximum exposure of approximately $100,000.

3. Henderson v. NovaMart Global Inc. et al. (U.S. District Court, Northern District of Georgia; Civil Action No. 1:24-cv-04218-TCB). A product liability claim brought by a consumer who purchased a third-party product through the NovaMart marketplace and allegedly sustained personal injuries due to a defective product. The plaintiff has named NovaMart as a defendant along with the third-party seller. The matter is currently in early discovery, with fact depositions scheduled for Q3 2025. NovaMart's product liability counsel has assessed the estimated exposure at less than $500,000, noting that NovaMart's terms of service contain provisions limiting the platform's liability for third-party products, and that the third-party seller's product liability insurance is expected to provide primary coverage.

In the aggregate, the three pending lawsuits present immaterial litigation exposure estimated at less than $850,000 in total. All three matters will be disclosed on the applicable Disclosure Schedules to the SPA and are covered by NovaMart's general indemnification obligations and the R&W insurance policy.

Government Investigations. In the third quarter of 2024, NovaMart received an informal inquiry from the Federal Trade Commission ("FTC") relating to advertising disclosure practices on the NovaMart marketplace platform. The inquiry focused on the transparency of sponsored product listings and the adequacy of disclosures to consumers regarding paid placements. NovaMart provided a comprehensive written response to the FTC's inquiry in October 2024, including documentation of its advertising disclosure policies and practices. As of the date of this memorandum, the FTC has not initiated any formal investigation, issued any civil investigative demands, or taken any further action. NovaMart's regulatory counsel considers the matter to be dormant and anticipates no further FTC action.

State Attorney General Matters. We have not identified any pending or threatened investigations by state attorneys general relating to NovaMart or its operations.

Subpoenas and Civil Investigative Demands. No subpoenas or civil investigative demands are currently outstanding against NovaMart.

Risk Level: Low. The pending litigation matters are individually and collectively immaterial. The FTC informal inquiry appears to have been resolved without further action. All matters will be appropriately disclosed in the SPA Disclosure Schedules and are subject to NovaMart's indemnification obligations.

G. Environmental

Overview. We have reviewed environmental compliance across all 14 of NovaMart's fulfillment center locations and the Austin headquarters. NovaMart's operations are primarily warehouse and distribution in nature, involving the storage, handling, and shipment of consumer goods. The environmental risk profile for such operations is inherently low compared to manufacturing, chemical processing, or heavy industrial operations.

Hazardous Materials. NovaMart's fulfillment operations involve limited use of hazardous materials, confined primarily to batteries (stored as consumer products for shipment) and standard commercial cleaning supplies. The Company maintains appropriate handling and storage protocols for these materials in compliance with applicable federal, state, and local environmental regulations, including the Resource Conservation and Recovery Act ("RCRA") and applicable state analogs.

Underground Storage Tanks. No underground storage tanks ("USTs") have been identified at any of NovaMart's leased facilities. Given the warehouse and distribution nature of the facilities, the absence of USTs is consistent with expectations.

Contamination and Remediation. We have not identified any known contamination, remediation obligations, or environmental enforcement actions relating to NovaMart or any of its leased facilities. NovaMart has represented in response to our diligence requests that it has not received any notices of violation, administrative orders, consent decrees, or other environmental enforcement actions from any federal, state, or local environmental agency.

Phase I Environmental Site Assessments. Phase I environmental site assessments (in accordance with ASTM Standard E1527-21) were not conducted for NovaMart's leased facilities. This decision was made in consultation with Cascade's environmental team based on the nature of NovaMart's operations (warehouse/distribution rather than manufacturing or industrial), the leased (rather than owned) status of the facilities, and the absence of any known environmental issues. The SPA contains customary environmental representations and warranties from the Selling Stockholders, and the environmental risks are further mitigated by the R&W insurance policy and the general indemnification provisions.

Risk Level: Low. NovaMart's warehouse and distribution operations present minimal environmental risk. The absence of owned real property, manufacturing operations, and known contamination issues supports a low-risk assessment.

H. Tax

Overview. Comprehensive tax due diligence has been conducted by Sylvia Hartwell (C&H Tax Partner) and Sandra Chiu (Whitmore & Paige LLP), covering federal, state, and local income taxes, employment taxes, sales and use taxes, property taxes, and the tax implications of the Transaction structure.

Transaction Structure — Tax Considerations. The Transaction is structured as a stock purchase. The parties considered but did not agree to make an election under Section 338(h)(10) of the Internal Revenue Code, which would have treated the stock purchase as a deemed asset purchase for tax purposes, providing Cascade with a stepped-up tax basis in NovaMart's assets. The Selling Stockholders were unwilling to agree to a Section 338(h)(10) election at the proposed purchase price, as such an election would have resulted in additional tax liability at the seller level without a corresponding increase in the purchase price to compensate for the incremental tax burden. Accordingly, the Transaction will be treated as a stock purchase for all federal, state, and local income tax purposes, and NovaMart's existing tax basis in its assets will carry over to Cascade.

Federal Income Tax. NovaMart is a C corporation for federal income tax purposes. The Company's estimated FY2024 federal income tax liability is $23,800,000. This liability is a pre-closing obligation of NovaMart and is subject to the uncapped tax indemnification provided by the Selling Stockholders under the SPA. NovaMart's federal income tax returns for fiscal years 2020 through 2023 have been reviewed; no material audit adjustments, deficiencies, or disputed items have been identified. The IRS has not audited NovaMart's federal income tax returns for any open tax year.

Net Operating Loss Carryforwards. NovaMart has limited federal net operating loss ("NOL") carryforwards of approximately $8,000,000, arising primarily from the Company's early-stage operating losses in fiscal years 2016 through 2018. We have reviewed these NOLs for limitations under Section 382 of the Internal Revenue Code, which restricts the use of NOL carryforwards following an "ownership change." The closing of the Transaction will constitute an ownership change for Section 382 purposes, which will limit Cascade's ability to utilize NovaMart's pre-change NOLs in post-closing periods. However, given the modest amount of the NOLs (~$8M), the Section 382 limitation is not a significant economic issue for the Transaction.

State and Local Taxes. NovaMart has nexus for state income, franchise, and/or sales tax purposes in all states where it operates fulfillment centers: California, New Jersey, Georgia, Ohio, Illinois, Pennsylvania, Tennessee, Florida, and Washington. The Company is also subject to the Texas franchise tax (based on its Austin headquarters) and the Delaware franchise tax (based on its state of incorporation). We have reviewed NovaMart's state income and franchise tax filings for all nexus states and have not identified any material under-filings, under-payments, or disputed items.

Sales Tax Compliance. NovaMart collects and remits sales tax in all states where it has fulfillment centers and in additional states based on economic nexus thresholds established under South Dakota v. Wayfair, Inc., 585 U.S. 162 (2018). Whitmore & Paige LLP has conducted a detailed sales tax compliance review and has not identified any material instances of under-collection or under-remittance of sales tax. NovaMart's sales tax compliance processes are supported by an automated tax calculation and remittance system provided by a nationally recognized sales tax compliance software vendor.

Transfer Pricing. NovaMart has no foreign operations, foreign subsidiaries, or intercompany transactions with non-U.S. entities. Accordingly, transfer pricing is not applicable to NovaMart's operations.

Transfer Taxes. Estimated transfer taxes in connection with the Transaction are approximately $1,200,000. Under the SPA, transfer taxes are to be borne equally by the Buyer and the Selling Stockholders ($600,000 each).

Pre-Closing Tax Returns. Under SPA Section 6.09, NovaMart is obligated to prepare and file all tax returns for periods ending on or before the closing date. Cascade has review and comment rights with respect to all pre-closing tax returns. The Selling Stockholders have agreed not to amend any pre-closing tax return without Cascade's prior written consent.

Tax Indemnification. The Selling Stockholders have agreed to indemnify Cascade for all pre-closing tax liabilities without regard to the general $216,000,000 indemnification cap. This means that the Selling Stockholders' exposure for pre-closing tax liabilities is unlimited. Additionally, the tax representations in the SPA survive until 60 days after the expiration of the applicable statute of limitations (including any extensions or waivers), providing Cascade with an extended window to assert tax-related indemnification claims beyond the 24-month general survival period.

Risk Level: Low to Moderate. No material tax exposures have been identified. The uncapped tax indemnification and extended survival period for tax representations provide strong protection for Cascade against any pre-closing tax liabilities that may materialize post-closing. The limited NOL carryforwards are not a significant value driver, and the Section 382 limitation is not a material economic issue.

I. Insurance

Existing Insurance Program. We have reviewed NovaMart's existing insurance program in coordination with Cascade's risk management team. NovaMart maintains the following categories of insurance coverage: commercial general liability, property insurance, cyber liability, directors and officers liability, errors and omissions (professional liability), and workers' compensation. Coverage levels and terms are generally adequate for a company of NovaMart's size, industry, and operational profile. We have not identified any material gaps in coverage, and NovaMart has not experienced any claims that have exhausted or materially reduced available policy limits.

D&O Tail Policy. As required by the SPA, a six-year "tail" directors and officers liability insurance policy will be procured to cover pre-closing acts and omissions of NovaMart's directors and officers. The tail policy will be provided by Sovereign Assurance Group Ltd. at a premium of $1,800,000, which will be paid by Cascade at closing. This is a standard transaction protection that ensures continued D&O coverage for pre-closing conduct and facilitates the willingness of NovaMart's directors and officers to support the Transaction and provide the certifications and deliverables required at closing.

Representations and Warranties Insurance. Cascade has obtained a buyer-side representations and warranties ("R&W") insurance policy to supplement the contractual indemnification provided by the Selling Stockholders under the SPA. The key terms of the R&W insurance policy are as follows:

• Carrier: Meridian Specialty Insurance Company

• Policy Number: MSI-RWI-2025-07832

• Policy Limit: $216,000,000 (matching the indemnification cap under the SPA)

• Retention (Self-Insured Amount): $12,000,000 (representing 1% of deal value)

• Premium: $5,400,000 (representing 2.5% of the policy limit)

• Broker: Northbridge Risk Advisors LLC (Thomas Ellingsen, Senior Vice President), 125 High Street, Suite 1400, Boston, Massachusetts 02110

The R&W insurance policy provides Cascade with an additional source of recovery for losses arising from breaches of the Selling Stockholders' representations and warranties in the SPA. The policy supplements — but does not replace — the contractual indemnification. Key features of the policy include: (i) coverage extends beyond the 24-month general survival period, with a 3-year policy period for general representations and a 6-year policy period for fundamental and tax representations; (ii) the $12,000,000 retention is the "first dollar" amount that Cascade must absorb before the policy responds (this retention is expected to be satisfied from the escrow or direct Seller indemnification); and (iii) the policy covers breaches of representations and warranties that were unknown to Cascade at the time of closing. Key exclusions from the policy include known matters as of the policy date (i.e., matters disclosed on the SPA Disclosure Schedules), forward-looking projections and forecasts, and purchase price adjustments.

Risk Level: Low. NovaMart's existing insurance program is adequate, and the D&O tail policy and R&W insurance provide meaningful additional protection for Cascade.

J. Data Privacy and Cybersecurity

Data Processing Overview. NovaMart processes personal data for approximately 9.1 million registered buyers and approximately 62,400 active sellers on its marketplace platform. The categories of personal data processed include names, email addresses, physical addresses, telephone numbers, payment card information (processed through PayStream Financial Technologies Inc.), purchase history, browsing behavior, and seller business information (including tax identification numbers and banking information). The volume and sensitivity of this data make data privacy and cybersecurity a significant area of focus for the dili

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 599 Lexington Avenue, 38th Floor New York, New York 10022
May 16, 2025
MEMORANDUM
TO: Board of Directors, Cascade Retail Holdings Inc.
CC: Margaret "Meg" Alderton, Chief Executive Officer Rajiv Sundaram, Chief Financial Officer Elena Vasquez-Bright, General Counsel Theodore "Ted" Langford, Senior Vice President, Corporate Development
FROM: Harrison Wexford, Responsible Partner, Mergers & Acquisitions Derek Okonkwo, Lead Associate, Mergers & Acquisitions Calderwood & Harkness LLP
RE: Due Diligence Summary and Risk Assessment — Proposed Acquisition of 100% of the Capital Stock of NovaMart Global Inc.
DATE: May 16, 2025 (Pre-Signing Final Version for Board Consideration)
This memorandum constitutes a privileged and confidential attorney-client communication and attorney work product prepared by Calderwood & Harkness LLP for the exclusive use of the Board of Directors and authorized officers of Cascade Retail Holdings Inc. This memorandum is protected from disclosure by the attorney-client privilege, the work product doctrine, and all other applicable protections. This memorandum shall not be distributed or disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.
Right-click to update Table of Contents
I. Executive Summary
This memorandum consolidates and presents the key findings from Calderwood & Harkness LLP's ("C&H" or the "Firm") comprehensive due diligence investigation of NovaMart Global Inc. ("NovaMart" or the "Company") in connection with Cascade Retail Holdings Inc.'s ("Cascade," the "Buyer," or the "Company") proposed acquisition of 100% of NovaMart's outstanding capital stock (the "Acquisition" or the "Transaction"). The aggregate purchase price for the Transaction is One Billion Two Hundred Million Dollars ($1,200,000,000) in an all-cash stock purchase transaction, with no stock consideration component and no earnout or contingent payment mechanism.
The purpose of this memorandum is to provide the Board of Directors of Cascade with a comprehensive summary of our diligence findings across all principal workstreams, an assessment of the risks identified during the investigation, a description of the contractual protections and other mitigants that have been negotiated or are available to address those risks, and our overall recommendation regarding the Transaction. This memorandum is intended to be read in conjunction with the detailed workstream memoranda referenced in Appendix A hereto.
Engagement and Diligence Timeline. Calderwood & Harkness LLP's engagement in connection with the proposed Transaction was opened on January 20, 2025. The Cascade Board of Directors authorized the pursuit of the Acquisition on February 3, 2025. A letter of intent (the "LOI") was executed between Cascade and the Selling Stockholders on February 14, 2025, and substantive due diligence commenced on February 18, 2025 following the opening of NovaMart's virtual data room. The diligence investigation has continued through the date of this memorandum and will continue in the form of bring-down diligence through the anticipated closing of the Transaction.
C&H Transaction Team. The Calderwood & Harkness team advising Cascade on this Transaction includes: Harrison Wexford, Responsible Partner, Mergers & Acquisitions; Beatrice Holloway, Billing Partner, Mergers & Acquisitions; Derek Okonkwo, Lead Associate, Mergers & Acquisitions; Tiffany Rosenthal, Working Associate, Mergers & Acquisitions; Sylvia Hartwell, Specialist Partner, Tax; and Howard Bellamy, Specialist Partner, Antitrust & Competition.
Additional Advisors to Cascade. In addition to C&H, Cascade has engaged the following advisors in connection with the Transaction:
• Hargrove Mead & Co. (investment bank; Christopher Dunleavy, Managing Director) — financial advisory, valuation, and fairness opinion services;
• Whitmore & Paige LLP (accounting and tax advisory; Sandra Chiu, Partner) — accounting, financial, and tax due diligence;
• Whitfield & Crane LLP (outside antitrust counsel; Gabriela Montoya, Partner; 1200 New Hampshire Avenue NW, Suite 500, Washington, DC 20036) — antitrust regulatory counsel, including management of the Hart-Scott-Rodino ("HSR") process and the DOJ Second Request response; and
• Apex Economics LLC (economic consultant; Dr. Henrik Johansson, Managing Director; 900 G Street NW, Suite 700, Washington, DC 20001) — competitive effects analysis and economic modeling in support of antitrust clearance.
Seller's Advisors. The Selling Stockholders are represented by Calloway, Brandt & Loewe LLP (Richard Calloway, Partner, and Simone Adesanya, Partner) as legal counsel. Pemberton Strauss Advisory LLC (Vivian Hong, Managing Director) is serving as the Selling Stockholders' investment bank.
Overall Assessment. Based on our comprehensive due diligence investigation, NovaMart is a well-established online marketplace platform with strong growth characteristics. The Company reported fiscal year 2024 revenue of $891,000,000, EBITDA of $134,000,000, and gross merchandise volume ("GMV") of $6,200,000,000. The NovaMart platform serves approximately 62,400 active sellers and approximately 9.1 million registered buyers. The Company operates a proprietary logistics network, "NovaShip," through 14 fulfillment centers located across nine states, and employs approximately 2,400 individuals.
Our diligence investigation has not uncovered any issues that, individually or in the aggregate, would constitute a basis for recommending that Cascade not proceed with the Acquisition. We have identified several risks — most notably relating to antitrust clearance timing, change of control consent procurement, key employee retention, and a technology license dependency — that warrant careful attention and ongoing management. However, we believe that these risks are addressable through the contractual protections negotiated in the Stock Purchase Agreement (the "SPA"), the representations and warranties insurance policy obtained by Cascade, the escrow arrangement, the post-closing employment agreements and retention pool, and pre-closing remediation efforts.
Valuation Context. The all-cash purchase price of $1,200,000,000 implies a valuation of approximately 8.96x NovaMart's FY2024 EBITDA and approximately 1.35x NovaMart's FY2024 Revenue. These multiples are within the range of comparable transactions in the online marketplace and e-commerce sector, as detailed in the financial analysis prepared by Hargrove Mead & Co.
Strategic Rationale. The Acquisition extends Cascade's reach into the rapidly growing third-party marketplace segment, complementing Cascade's existing retail footprint of approximately 380 brick-and-mortar retail locations and its proprietary e-commerce platform, CascadeDirect.com, which serves approximately 28 million active customers. The combination of Cascade's established customer base and brand recognition with NovaMart's marketplace technology, seller network, and logistics infrastructure is expected to create significant strategic value, including cross-selling opportunities, logistics synergies, and enhanced data analytics capabilities.
II. Transaction Overview
A. Deal Structure
The Transaction is structured as a stock purchase in which Cascade will acquire 100% of the issued and outstanding capital stock of NovaMart from the Selling Stockholders (as defined below) for an aggregate cash purchase price of $1,200,000,000. The stock purchase structure was selected after careful consideration of alternative structures, including an asset purchase and a merger, in light of the parties' respective tax positions, the complexity of NovaMart's contractual relationships, the regulatory environment, and the preferences of the Selling Stockholders. The stock purchase structure provides for the acquisition of NovaMart as a going concern, with all assets, liabilities, contracts, and obligations transferring by operation of law through the change in ownership of the Company's equity.
NovaMart Global Inc. NovaMart is a corporation organized and existing under the laws of the State of Delaware. The Company is headquartered at 1100 Congress Avenue, Suite 800, Austin, Texas 78701. NovaMart's registered agent is Pinnacle Corporate Services Inc., located at 850 New Burton Road, Suite 201, Dover, Delaware 19904. NovaMart's federal employer identification number (EIN) is 84-3291547. The Company was founded in 2016 and has grown to become one of the largest independent online marketplace platforms in the United States, specializing in specialty consumer goods, home décor, artisanal products, and consumer electronics accessories.
Cascade Retail Holdings Inc. Cascade is a corporation organized and existing under the laws of the State of Delaware. The Company is publicly traded on the Nasdaq Stock Market under the ticker symbol "CRHI" and is headquartered at 4500 Elliott Avenue West, Suite 3200, Seattle, Washington 98119. Cascade's registered agent is Capitol Registered Agents LLC, located at 1209 Orange Street, Wilmington, Delaware 19801. Cascade's federal employer identification number (EIN) is 91-2847653.
Purchase Price and Consideration. The aggregate purchase price for 100% of NovaMart's outstanding capital stock is $1,200,000,000, payable entirely in cash at closing. There is no stock consideration component, no earnout or contingent payment mechanism, and no seller financing. The all-cash structure provides certainty of value to the Selling Stockholders and avoids the dilutive effect on Cascade's existing shareholders that would result from a stock-based or mixed-consideration transaction.
Governing Law and Jurisdiction. The SPA is governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice-of-law or conflict-of-law rules or provisions that would cause the application of the laws of any jurisdiction other than Delaware. The parties have agreed to exclusive jurisdiction in the Court of Chancery of the State of Delaware (or, if the Court of Chancery declines to accept jurisdiction, any state or federal court within the State of Delaware) for any disputes arising under or in connection with the SPA.
B. Selling Stockholders
The following table sets forth the ownership of NovaMart's outstanding capital stock by the Selling Stockholders and the approximate pro rata share of the aggregate purchase price allocable to each:
Ridgeline Equity Partners, LP ("Ridgeline"), through its Managing Partner Franklin Osei, has been designated as the Stockholder Representative for purposes of all post-closing matters under the SPA, including indemnification claims, working capital adjustment disputes, escrow releases, and related communications with Cascade. The designation of a single Stockholder Representative is typical for transactions of this nature and provides Cascade with a centralized point of contact for post-closing administration.
We note that the "Other management and employee stockholders" category includes holders of vested stock options that will be exercised (or cashed out) immediately prior to closing in accordance with the procedures set forth in the SPA. The SPA provides for the cancellation of all outstanding NovaMart stock options (whether vested or unvested) at closing, with vested options receiving a per-share cash payment equal to the per-share merger consideration less the applicable exercise price, and unvested options being cancelled without consideration (unless otherwise covered by the retention pool).
C. Key Economic Terms
The following summarizes the key economic terms of the Transaction as negotiated and set forth in the current draft of the SPA:
Escrow. $96,000,000, representing 8% of the aggregate purchase price, will be deposited at closing into an escrow account maintained by Marlowe Asset Management Trust Company, N.A. (Patricia Keane, Vice President, Escrow Services), located at One Liberty Place, 1650 Market Street, Suite 3600, Philadelphia, Pennsylvania 19103. The escrow funds will be held for a period of 24 months following the closing date and will be released to the Selling Stockholders at the end of such period, less any amounts that are subject to pending and unresolved indemnification claims asserted by Cascade prior to the expiration of the escrow period. The escrow serves as a readily accessible and dedicated source of recovery for Cascade in the event of post-closing indemnification claims, without the need to pursue individual Selling Stockholders for collection.
Net Cash to Sellers at Closing. The net cash payable to the Selling Stockholders at closing will be $1,104,000,000 ($1,200,000,000 aggregate purchase price minus the $96,000,000 escrow deposit), subject to the estimated working capital adjustment as calculated in the estimated closing statement to be delivered by NovaMart prior to closing. To the extent that estimated net working capital at closing differs from the working capital target (as described below) by more than the collar amount, the net cash at closing will be adjusted accordingly, with a final true-up within 90 days after closing based on the final closing statement.
Indemnification Cap. The aggregate liability of the Selling Stockholders for indemnification claims under the SPA (other than with respect to breaches of fundamental representations and tax representations, which are subject to separate treatment) is capped at $216,000,000, representing 18% of the aggregate purchase price. This cap represents a heavily negotiated term; the initial Seller proposal was a cap of 10% of deal value ($120,000,000), while Cascade's initial position was 25% ($300,000,000). The 18% cap, in conjunction with the $216,000,000 R&W insurance policy and the $96,000,000 escrow, provides Cascade with robust protection against post-closing losses.
Survival Periods. The representations and warranties set forth in the SPA are subject to the following survival periods:
• General representations and warranties: 24 months from the closing date.
• Fundamental representations (organization, authority, capitalization, title to shares, no brokers): Survive indefinitely.
• Tax representations: Survive until 60 days after the expiration of the applicable statute of limitations (including any extensions or waivers thereof).
These survival periods govern the time within which Cascade must assert indemnification claims based on breaches of the applicable representations and warranties. Claims asserted within the applicable survival period will be preserved even if not finally resolved until after the survival period has expired.
Termination Fees. The SPA provides for reciprocal termination fees of $30,000,000 (representing 2.5% of deal value):
• Forward Termination Fee: $30,000,000 payable by the Selling Stockholders to Cascade if the SPA is terminated as a result of (i) NovaMart's or the Selling Stockholders' material breach of the SPA that is not cured within the applicable cure period, or (ii) the Selling Stockholders' acceptance of a Superior Proposal (as defined in the SPA).
• Reverse Termination Fee: $30,000,000 payable by Cascade to the Selling Stockholders if the SPA is terminated as a result of (i) Cascade's failure to consummate the closing when all conditions to Cascade's obligation to close have been satisfied or waived, or (ii) Cascade's willful breach of the SPA.
Working Capital. The working capital target has been set at $78,500,000, calculated in accordance with the methodology set forth in Annex A to the SPA. A collar of +/- $5,000,000 applies, meaning that no adjustment to the purchase price will be made unless the difference between estimated (or final) net working capital at closing and the target exceeds $5,000,000 in either direction. Amounts outside the collar will be adjusted dollar-for-dollar. The working capital methodology and target were developed in consultation with Whitmore & Paige LLP based on their review of NovaMart's historical working capital levels and seasonal patterns.
D. Financing Sources
Cascade has arranged committed financing sufficient to fund the entire $1,200,000,000 aggregate purchase price plus estimated transaction costs. The sources of funds are as follows:
Term Loan B. Cascade has obtained a commitment letter dated May 15, 2025 (Reference No. CL-2025-0515-CRNB) from Cornerstone National Bank, N.A. (Administrative Agent; Robert Frankel, Managing Director, Leveraged Finance) and Caluvori Capital Partners, Inc. (Co-Lead Arranger; Irene Matsuda, Managing Director) for a senior secured Term Loan B facility in the aggregate principal amount of $750,000,000. The Term Loan B will bear interest at a rate equal to the Secured Overnight Financing Rate ("SOFR") plus 275 basis points, with a 7-year maturity and 1% annual amortization (payable quarterly). The commitment letter contains customary conditions to funding, including the absence of a material adverse effect with respect to NovaMart and the execution and delivery of definitive loan documentation.
Revolving Credit Facility. Cascade intends to draw $200,000,000 under its existing $500,000,000 revolving credit facility with Cornerstone National Bank, N.A. The existing facility bears interest at SOFR plus 200 basis points and matures in March 2029. The revolving credit facility will need to be amended to permit the Acquisition, the incurrence of the Term Loan B facility, and the $200,000,000 draw in connection with the Transaction. We are coordinating with Cascade's banking counsel on the required amendments.
Cash on Hand. Cascade will contribute $250,000,000 from its existing cash reserves to fund a portion of the purchase price. Based on Cascade's most recent balance sheet and cash flow projections provided by Mr. Sundaram's office, Cascade maintains sufficient liquidity to fund this contribution while retaining adequate working capital for ongoing operations.
No Financing Condition. Critically, the SPA does not contain a financing condition. Cascade has represented and warranted in the SPA that it has, or at closing will have, sufficient funds available to consummate the Transaction and pay the aggregate purchase price in full. The absence of a financing condition places the risk of financing failure squarely on Cascade and provides the Selling Stockholders with enhanced deal certainty. From Cascade's perspective, the committed financing is robust: the commitment letter is in place, the revolving credit facility is available, and the cash reserves are confirmed. We do not anticipate any material impediment to the availability of financing at closing.
E. Estimated Transaction Costs (Buyer Side)
The following table summarizes the estimated transaction costs to be incurred by Cascade in connection with the Acquisition:
Transaction costs will be funded from Cascade's working capital and are not included in the $1,200,000,000 aggregate purchase price. We note that the C&H legal fees estimate reflects both the legal advisory work and the due diligence investigation across all workstreams, and is subject to adjustment based on the complexity and duration of the remaining pre-closing workstreams, including the DOJ Second Request response.
F. Timeline
The following summarizes the key dates in the Transaction timeline from engagement through the anticipated closing:
The approximately seven-month period between the anticipated signing date and the Outside Date provides a reasonable window for completion of the DOJ review process and all other pre-closing conditions. We discuss the antitrust timeline in greater detail in Section IV of this memorandum.
III. Due Diligence Workstream Summaries
The following sections summarize the findings from each of the principal due diligence workstreams conducted by Calderwood & Harkness LLP and Cascade's other advisors. Detailed memoranda for each workstream are listed in Appendix A and are available for the Board's review upon request.
A. Corporate Organization and Capitalization
Corporate Organization. NovaMart is duly incorporated, validly existing, and in good standing under the laws of the State of Delaware. The Company maintains its principal offices at 1100 Congress Avenue, Suite 800, Austin, Texas 78701. NovaMart's federal employer identification number is 84-3291547. The Company was founded in 2016 by Julian Reeves and Priya Narasimhan, and has grown over the ensuing nine years into one of the largest independent online marketplace platforms in the United States, with a focus on specialty consumer goods, home décor, artisanal products, and consumer electronics accessories.
We have reviewed NovaMart's certificate of incorporation (as amended and restated), bylaws (as amended and restated), and all stockholder agreements, including the Amended and Restated Stockholders' Agreement dated March 22, 2021, among the Company and its stockholders. We have not identified any unusual governance provisions, super-majority voting requirements, or other structural impediments that would adversely affect the Transaction. The certificate of incorporation authorizes a single class of common stock, with no preferred stock authorized or outstanding. The bylaws are standard for a Delaware corporation of NovaMart's size and nature.
Capitalization. NovaMart's capitalization is clean and straightforward. The Company's outstanding capital stock is held by the five stockholder groups identified in Section II.B above. We have reviewed the Company's stock ledger, stock certificates, option agreements, and all equity incentive plan documentation. The capitalization table has been confirmed by NovaMart's transfer agent, Continental Stocktransfer & Trust, Inc., located at 17 Battery Place, Suite 930, New York, New York 10004. There are no outstanding warrants, convertible notes, or other equity-linked instruments other than the stock options granted under the NovaMart Global Inc. 2018 Equity Incentive Plan, as amended. All outstanding options will be cancelled at closing in accordance with the procedures specified in the SPA.
Subsidiaries. NovaMart has three wholly owned subsidiaries: (i) NovaMart Logistics Inc., a Delaware corporation that operates the NovaShip fulfillment network; (ii) NovaMart Advertising Services LLC, a Delaware limited liability company that manages the Company's seller advertising and sponsored listings business; and (iii) NovaMart Payment Solutions Inc., a Delaware corporation that holds certain payment-related licenses and facilitates payment processing on the platform. We have confirmed that each subsidiary is duly organized, validly existing, and in good standing in its jurisdiction of incorporation or formation. Foreign qualification filings have been reviewed and are current in all states where operations require qualification.
Risk Level: Low. NovaMart has a standard corporate organization with a clean capitalization table, no unusual governance provisions, and properly organized and maintained subsidiaries. We do not anticipate any material corporate or capitalization issues in connection with the Transaction.
B. Material Contracts
Overview. We have conducted a comprehensive review of NovaMart's material contracts, including customer agreements, vendor and supplier agreements, technology licenses, real property leases, employment agreements, financing agreements, insurance policies, and other commercial agreements. In total, the diligence review encompassed approximately 847 contracts uploaded to the data room, of which approximately 312 were identified as material based on the materiality thresholds established in the diligence request list.
Change of Control Provisions. A principal area of focus in our material contracts review was the identification of contracts containing change of control provisions that require consent, notice, or other action in connection with the Transaction. We identified approximately 34 contracts containing such provisions. Failure to obtain the required consents prior to closing could, in certain cases, trigger termination rights in favor of the counterparty, permit the counterparty to renegotiate key terms, or result in a default under the applicable contract.
The following is a summary of the key contracts requiring change of control consent:
Pinnacle Cloud Solutions Inc. — Master Services Agreement. NovaMart's primary cloud hosting and infrastructure provider. Pinnacle, headquartered in Washington State, provides substantially all of NovaMart's cloud computing, data storage, and content delivery services. The Master Services Agreement, dated September 14, 2020, contains a change of control provision requiring Pinnacle's prior written consent to any direct or indirect change in ownership or control of NovaMart. This is a mission-critical contract; the loss of Pinnacle's services would materially disrupt NovaMart's platform operations.
Redline Freight Corp. — Logistics Partnership Agreement. NovaMart's primary third-party logistics and freight carrier for its NovaShip fulfillment network. Redline, headquartered in Georgia, handles a significant portion of NovaMart's outbound shipping and last-mile delivery. The Logistics Partnership Agreement, dated January 8, 2022, contains a change of control provision requiring 60 days' prior written notice and Redline's consent to any change in controlling ownership of NovaMart. Failure to obtain consent could result in early termination of the agreement upon 90 days' notice.
Arcwave Software LLC — Technology License Agreement. NovaMart licenses a proprietary search and recommendation algorithm from Arcwave, a California-based software company. The Technology License Agreement, dated April 3, 2019, as amended on November 15, 2021, contains a change of control provision requiring Arcwave's prior written consent to any change in ownership or control of NovaMart. This license is critical to the functionality of NovaMart's product search and discovery features and is discussed further in Section III.C (Intellectual Property) below.
Congress Tower Partners LP — Office Lease. NovaMart's Austin, Texas headquarters lease at 1100 Congress Avenue, Suite 800. The lease, dated June 1, 2019, with a term expiring May 31, 2029, contains a standard commercial landlord consent provision requiring the landlord's prior written consent to any change of control of the tenant. We do not anticipate difficulty in obtaining landlord consent, but have included this consent in the tracker.
Fulfillment Center Leases. NovaMart leases 14 fulfillment centers across nine states: California (3 locations), New Jersey (2), Georgia (2), Ohio (1), Illinois (1), Pennsylvania (1), Tennessee (1), Florida (2), and Washington (1). Substantially all of these leases contain change of control provisions requiring landlord consent or notice. We have identified the specific requirements for each lease and have included all 14 in the consent tracker.
Stratton Digital Media Inc. — Advertising Revenue Share Agreement. NovaMart's agreement with Stratton for digital advertising placement and revenue sharing on the NovaMart platform. The agreement, dated March 22, 2023, contains a change of control provision requiring 30 days' prior written notice and Stratton's consent.
PayStream Financial Technologies Inc. — Payment Processing Agreement. NovaMart's primary payment processing agreement for buyer transactions on the platform. The agreement, dated August 7, 2020, contains a change of control provision requiring PayStream's prior written consent to any assignment or change of control.
Ashford Savings Bank, N.A. — Revolving Credit Facility. NovaMart's existing $150,000,000 revolving credit facility with Ashford Savings Bank. This facility is to be repaid in full and terminated at closing. While this is not a consent-dependent matter per se, the payoff and lien release process must be coordinated, and a payoff letter must be obtained from Ashford prior to closing. We estimate the outstanding principal plus accrued interest at closing will be approximately $143,200,000.
Additional Contracts. In addition to the contracts described above, the remaining contracts on the consent tracker include various seller partnership agreements, technology vendor agreements, and other commercial arrangements that contain notice or consent requirements triggered by a change of control.
Consent Solicitation Process. We have established a comprehensive change of control consent tracker (summarized in Appendix B) that identifies each contract, the counterparty, the specific consent or notice requirement, the applicable timeline, and the current status of each solicitation. Form consent solicitation letters have been prepared by C&H and reviewed by Calloway, Brandt & Loewe LLP on behalf of the Selling Stockholders. NovaMart and Cascade are working cooperatively to obtain consents prior to the anticipated closing date. The SPA contains customary conditions to closing with respect to material consents, and the parties have agreed on a list of "Required Consents" that must be obtained as a condition to Cascade's obligation to close.
Risk Level: Moderate. The consent procurement process involves approximately 34 contracts and requires the cooperation of numerous third-party counterparties, a process that inherently involves some uncertainty. As of the date of this memorandum, consent solicitation letters have been transmitted for the highest-priority contracts, and no counterparty has indicated an unwillingness to consent. However, the process is still in its early stages, and we will continue to monitor and report on progress. The SPA conditions provide Cascade with appropriate protections in the event that critical consents are not obtained.
C. Intellectual Property
IP Portfolio Overview. We have conducted a comprehensive review of NovaMart's intellectual property portfolio, including patents, trademarks, service marks, copyrights, domain names, trade secrets, and open-source software usage. The review was conducted in coordination with C&H's Technology Transactions group and included an assessment of IP ownership, freedom to operate, third-party license dependencies, and open-source compliance.
Patents. NovaMart holds 11 issued U.S. utility patents and 4 pending U.S. patent applications relating to its marketplace platform technology, including aspects of its product discovery algorithms, seller analytics dashboard, and logistics optimization software. We have confirmed that all issued patents are properly assigned to NovaMart and are current in their maintenance fee payments. No material patent infringement claims have been asserted against NovaMart, and our freedom-to-operate analysis has not identified any material third-party patents that are likely to be infringed by NovaMart's current operations.
Trademarks. NovaMart holds federally registered trademarks for "NovaMart" (Reg. No. 5,784,321), "NovaShip" (Reg. No. 5,921,088), "NovaMart Marketplace" (Reg. No. 6,012,445), and several associated logos and design marks. All registrations are current and properly maintained. We have reviewed the trademark portfolio for potential conflicts with Cascade's existing marks and have not identified any material issues.
Domain Names. NovaMart owns and controls the domain names novamart.com, novaship.com, novamartglobal.com, and related variations. All domain registrations are current and properly maintained.
Trade Secrets. NovaMart's trade secrets include proprietary algorithms, seller scoring methodologies, buyer behavior analytics models, pricing optimization tools, and logistics routing algorithms. The Company maintains reasonable measures to protect its trade secrets, including employee confidentiality agreements, restricted access controls, and information security protocols consistent with its SOC 2 Type II certification.
Technology License Agreement with Arcwave Software LLC. As noted in Section III.B above, NovaMart licenses a proprietary search and recommendation algorithm from Arcwave Software LLC pursuant to a Technology License Agreement dated April 3, 2019, as amended on November 15, 2021. The Arcwave algorithm is a key component of NovaMart's product search and discovery functionality, which is central to the buyer experience on the platform. The license agreement contains a change of control provision requiring Arcwave's prior written consent to any change in ownership or control of NovaMart. The loss of this license — whether through failure to obtain consent or through Arcwave's exercise of a termination right — would have a material adverse impact on NovaMart's platform functionality.
We have prioritized the Arcwave consent solicitation in the consent tracker and are coordinating with NovaMart's technology team and Arcwave's business development contacts to initiate discussions. As a contingency, Cascade's technology team has been asked to assess the feasibility and timeline for developing or licensing alternative search algorithm technology in the event that Arcwave consent cannot be obtained or is conditioned on materially different economic terms.
Proprietary Logistics Platform — NovaShip. The NovaShip logistics platform, which powers NovaMart's 14 fulfillment centers, is proprietary to NovaMart. IP ownership for all NovaShip technology, including software, algorithms, processes, and related documentation, has been confirmed as residing with NovaMart Logistics Inc., a wholly owned subsidiary of NovaMart. No third-party IP claims or encumbrances have been identified with respect to the NovaShip platform.
Open-Source Software. NovaMart's technology stack incorporates numerous open-source software components, as is standard practice in the software industry. We have reviewed the Company's open-source software inventory and usage policies. NovaMart employs an automated open-source scanning tool to identify and track open-source components and their associated licenses. Our review has not identified any material copyleft licensing issues (e.g., under the GNU General Public License or similar licenses) that would require disclosure or licensing of NovaMart's proprietary source code. The Company's open-source usage policies and compliance procedures are consistent with industry best practices.
Risk Level: Low to Moderate. NovaMart's IP ownership is generally clean, and the Company's IP portfolio is well-maintained. The principal area of concern is the dependency on the Arcwave search algorithm license and the need to obtain change of control consent from Arcwave. This risk is being actively managed through the consent solicitation process and the development of a technology contingency plan.
D. Real Property
Overview. NovaMart does not own any significant real property. The Company conducts its operations primarily through leased facilities, including its Austin, Texas headquarters and 14 fulfillment centers across nine states. Given the leased nature of substantially all of NovaMart's facilities, the real property diligence workstream focused on the review of lease terms, change of control provisions, lease assignment restrictions, renewal options, and the general condition of the leased premises.
Austin Headquarters. NovaMart's principal office is located at 1100 Congress Avenue, Suite 800, Austin, Texas 78701. The headquarters lease is with Congress Tower Partners LP, with a lease term expiring May 31, 2029, and one five-year renewal option. The lease requires the landlord's prior written consent to any change of control of the tenant. Annual base rent is approximately $2,400,000, with standard escalation provisions.
Fulfillment Centers. NovaMart operates 14 fulfillment centers through its subsidiary, NovaMart Logistics Inc. These facilities are located in the following states: California (3 locations — Ontario, Stockton, and Fresno), New Jersey (2 locations — Edison and Carteret), Georgia (2 locations — Savannah and Austell), Ohio (1 location — Columbus), Illinois (1 location — Romeoville), Pennsylvania (1 location — Carlisle), Tennessee (1 location — Nashville), Florida (2 locations — Orlando and Jacksonville), and Washington (1 location — Kent). The fulfillment centers range in size from approximately 85,000 to 350,000 square feet. Lease terms vary, with expiration dates ranging from 2026 to 2032. Substantially all of the fulfillment center leases contain change of control provisions requiring landlord consent or notice.
Title Insurance. Ridgecrest Title Group Inc. (through its subsidiary, Commonwealth Land & Title Insurance Co.; underwriter contact: Janet Morales) has been engaged to provide title insurance for any NovaMart-owned real property. Given that NovaMart's real property ownership is minimal (limited to certain parcels of ancillary land adjacent to fulfillment centers), the title insurance requirement is correspondingly limited.
Zoning, Title, and Survey. We have reviewed available zoning certifications, title reports, and survey documentation for NovaMart's leased facilities. No material zoning violations, title defects, or survey discrepancies have been identified. The fulfillment center locations are appropriately zoned for warehouse and distribution operations.
Risk Level: Low. NovaMart's real property profile consists primarily of leased facilities, which limits the Company's exposure to typical real property risks such as environmental contamination, title defects, and capital expenditure obligations. The primary real property concern is the procurement of landlord consents under the change of control provisions of the various leases, which is being managed as part of the overall consent solicitation process described in Section III.B.
E. Employment and Benefits
Workforce Overview. NovaMart has approximately 2,400 employees across all locations, including approximately 350 employees at the Austin headquarters and approximately 2,050 employees at the 14 fulfillment centers and other operational locations. The Company's workforce includes full-time, part-time, and temporary employees. NovaMart does not have any collective bargaining agreements with labor unions, and none of its employees are represented by a labor union. We are not aware of any pending or threatened union organizing activities.
Key Executive Employment Agreements. We have reviewed the existing employment agreements for NovaMart's senior management team. The following post-closing employment arrangements have been negotiated as part of the Transaction:
Julian Reeves (Founder & CEO). Mr. Reeves has agreed to enter into a three-year post-closing employment agreement with Cascade on the following terms: base salary of $625,000 per annum; target annual bonus of 75% of base salary (i.e., target of $468,750); and a grant of 150,000 restricted Cascade common shares vesting ratably over three years (50,000 shares per year), commencing on the first anniversary of closing. Mr. Reeves will serve as President of the NovaMart division within Cascade and will report directly to Cascade's CEO, Meg Alderton. The employment agreement contains customary non-competition and non-solicitation covenants for a period of two years following termination of employment.
Priya Narasimhan (Co-Founder & CTO). Ms. Narasimhan has agreed to enter into a three-year post-closing employment agreement with Cascade on the following terms: base salary of $575,000 per annum; target annual bonus of 70% of base salary (i.e., target of $402,500); and a grant of 125,000 restricted Cascade common shares vesting ratably over three years (approximately 41,667 shares per year), commencing on the first anniversary of closing. Ms. Narasimhan will serve as Chief Technology Officer of the NovaMart division and will report to Mr. Reeves and, on a dotted-line basis, to Cascade's enterprise CTO. The employment agreement contains customary non-competition and non-solicitation covenants for a period of two years following termination of employment.
Douglas "Doug" Whitfield (CFO) and Amanda Trevino (General Counsel). We have reviewed the existing employment terms for Mr. Whitfield and Ms. Trevino. No post-closing employment agreements have been negotiated or contemplated for these individuals at this time. Both individuals will be covered by the general retention pool described below. The parties have acknowledged that the roles of NovaMart's CFO and General Counsel may be absorbed into Cascade's existing corporate functions over time, and this transition will be managed post-closing.
Retention Pool. Cascade and the Selling Stockholders have agreed to establish a retention pool of $18,000,000 for key NovaMart employees other than Mr. Reeves and Ms. Narasimhan. The retention pool will be funded by Cascade at closing and will be paid in two equal installments: $9,000,000 at closing and $9,000,000 at the first anniversary of closing, in each case subject to the recipient's continued employment with NovaMart (or Cascade, as applicable) as of the applicable payment date. Individual retention bonus letters will be prepared and distributed to approximately 45 key employees identified by NovaMart management in consultation with Cascade's human resources team. The retention pool is an important mitigant to the risk of key employee departures in the post-closing integration period.
Benefit Plans. We have reviewed NovaMart's employee benefit plans, including the NovaMart Global Inc. 401(k) Plan, the Company's group health and welfare plans (medical, dental, vision, life, and disability insurance), and the NovaMart Global Inc. 2018 Equity Incentive Plan. Our review, conducted in coordination with C&H's ERISA and employee benefits group, has not identified any material violations of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or other applicable benefits laws and regulations. The 401(k) plan is properly maintained, fiduciary duties appear to have been appropriately discharged, and required annual filings (Form 5500) have been timely made. Health and welfare plans provide standard coverage levels for a company of NovaMart's size and nature.
Severance Obligations. Certain change of control severance provisions exist in the employment agreements of approximately 12 senior managers (in addition to Mr. Reeves and Ms. Narasimhan, whose post-closing employment agreements supersede their existing arrangements). If triggered, the aggregate severance obligations for these 12 individuals could total approximately $4,500,000 to $6,000,000. We have reviewed the triggering conditions for these severance provisions and note that, in most cases, the change of control alone does not trigger severance; rather, a "double trigger" requiring both a change of control and a qualifying termination of employment (e.g., termination without cause or resignation for good reason) is required. Accordingly, Cascade's ability to manage post-closing integration without triggering these severance obligations depends in part on its decisions regarding the continued employment and roles of these individuals.
WARN Act Compliance. The Worker Adjustment and Retraining Notification Act (the "WARN Act") and comparable state and local laws require advance notice of certain mass layoffs and plant closings. We have been advised by Cascade management that no immediate workforce reductions are planned in connection with the Acquisition. We have completed a WARN Act compliance analysis for all 14 fulfillment center locations and the Austin headquarters, identifying the applicable notification thresholds and requirements under both federal and state law. Cascade should continue to coordinate with C&H's employment group before making any post-closing decisions regarding workforce reductions to ensure ongoing WARN Act compliance.
Risk Level: Low to Moderate. The retention of key personnel — particularly Mr. Reeves and Ms. Narasimhan, whose knowledge of NovaMart's technology, operations, and seller relationships is critical to preserving deal value — is the principal employment-related risk. The negotiated post-closing employment agreements and the $18,000,000 retention pool are the primary mitigants. The potential aggregate severance exposure of $4.5–$6M for senior managers is manageable but should be factored into post-closing integration planning.
F. Litigation and Regulatory
Pending Litigation. NovaMart is currently a defendant in three pending lawsuits. We have reviewed the complaints, responsive pleadings, and available case materials for each matter:
1. Martinez v. NovaMart Global Inc. (Travis County District Court, Texas; Case No. D-1-GN-24-003782). An employment discrimination claim brought by a former customer service representative alleging wrongful termination based on age. The plaintiff seeks compensatory damages of $175,000 and attorney's fees. The matter is in early stages of discovery. NovaMart's employment litigation counsel has assessed the matter as defensible, with an estimated maximum exposure of approximately $150,000 including attorney's fees and defense costs.
2. Okafor v. NovaMart Logistics Inc. (Superior Court of New Jersey, Middlesex County; Docket No. MID-L-002941-24). A wage and hour dispute brought by a former fulfillment center employee alleging unpaid overtime. The plaintiff seeks approximately $85,000 in damages. The matter is in early stages. NovaMart's employment counsel has assessed the case as having low merit, with an estimated maximum exposure of approximately $100,000.
3. Henderson v. NovaMart Global Inc. et al. (U.S. District Court, Northern District of Georgia; Civil Action No. 1:24-cv-04218-TCB). A product liability claim brought by a consumer who purchased a third-party product through the NovaMart marketplace and allegedly sustained personal injuries due to a defective product. The plaintiff has named NovaMart as a defendant along with the third-party seller. The matter is currently in early discovery, with fact depositions scheduled for Q3 2025. NovaMart's product liability counsel has assessed the estimated exposure at less than $500,000, noting that NovaMart's terms of service contain provisions limiting the platform's liability for third-party products, and that the third-party seller's product liability insurance is expected to provide primary coverage.
In the aggregate, the three pending lawsuits present immaterial litigation exposure estimated at less than $850,000 in total. All three matters will be disclosed on the applicable Disclosure Schedules to the SPA and are covered by NovaMart's general indemnification obligations and the R&W insurance policy.
Government Investigations. In the third quarter of 2024, NovaMart received an informal inquiry from the Federal Trade Commission ("FTC") relating to advertising disclosure practices on the NovaMart marketplace platform. The inquiry focused on the transparency of sponsored product listings and the adequacy of disclosures to consumers regarding paid placements. NovaMart provided a comprehensive written response to the FTC's inquiry in October 2024, including documentation of its advertising disclosure policies and practices. As of the date of this memorandum, the FTC has not initiated any formal investigation, issued any civil investigative demands, or taken any further action. NovaMart's regulatory counsel considers the matter to be dormant and anticipates no further FTC action.
State Attorney General Matters. We have not identified any pending or threatened investigations by state attorneys general relating to NovaMart or its operations.
Subpoenas and Civil Investigative Demands. No subpoenas or civil investigative demands are currently outstanding against NovaMart.
Risk Level: Low. The pending litigation matters are individually and collectively immaterial. The FTC informal inquiry appears to have been resolved without further action. All matters will be appropriately disclosed in the SPA Disclosure Schedules and are subject to NovaMart's indemnification obligations.
G. Environmental
Overview. We have reviewed environmental compliance across all 14 of NovaMart's fulfillment center locations and the Austin headquarters. NovaMart's operations are primarily warehouse and distribution in nature, involving the storage, handling, and shipment of consumer goods. The environmental risk profile for such operations is inherently low compared to manufacturing, chemical processing, or heavy industrial operations.
Hazardous Materials. NovaMart's fulfillment operations involve limited use of hazardous materials, confined primarily to batteries (stored as consumer products for shipment) and standard commercial cleaning supplies. The Company maintains appropriate handling and storage protocols for these materials in compliance with applicable federal, state, and local environmental regulations, including the Resource Conservation and Recovery Act ("RCRA") and applicable state analogs.
Underground Storage Tanks. No underground storage tanks ("USTs") have been identified at any of NovaMart's leased facilities. Given the warehouse and distribution nature of the facilities, the absence of USTs is consistent with expectations.
Contamination and Remediation. We have not identified any known contamination, remediation obligations, or environmental enforcement actions relating to NovaMart or any of its leased facilities. NovaMart has represented in response to our diligence requests that it has not received any notices of violation, administrative orders, consent decrees, or other environmental enforcement actions from any federal, state, or local environmental agency.
Phase I Environmental Site Assessments. Phase I environmental site assessments (in accordance with ASTM Standard E1527-21) were not conducted for NovaMart's leased facilities. This decision was made in consultation with Cascade's environmental team based on the nature of NovaMart's operations (warehouse/distribution rather than manufacturing or industrial), the leased (rather than owned) status of the facilities, and the absence of any known environmental issues. The SPA contains customary environmental representations and warranties from the Selling Stockholders, and the environmental risks are further mitigated by the R&W insurance policy and the general indemnification provisions.
Risk Level: Low. NovaMart's warehouse and distribution operations present minimal environmental risk. The absence of owned real property, manufacturing operations, and known contamination issues supports a low-risk assessment.
H. Tax
Overview. Comprehensive tax due diligence has been conducted by Sylvia Hartwell (C&H Tax Partner) and Sandra Chiu (Whitmore & Paige LLP), covering federal, state, and local income taxes, employment taxes, sales and use taxes, property taxes, and the tax implications of the Transaction structure.
Transaction Structure — Tax Considerations. The Transaction is structured as a stock purchase. The parties considered but did not agree to make an election under Section 338(h)(10) of the Internal Revenue Code, which would have treated the stock purchase as a deemed asset purchase for tax purposes, providing Cascade with a stepped-up tax basis in NovaMart's assets. The Selling Stockholders were unwilling to agree to a Section 338(h)(10) election at the proposed purchase price, as such an election would have resulted in additional tax liability at the seller level without a corresponding increase in the purchase price to compensate for the incremental tax burden. Accordingly, the Transaction will be treated as a stock purchase for all federal, state, and local income tax purposes, and NovaMart's existing tax basis in its assets will carry over to Cascade.
Federal Income Tax. NovaMart is a C corporation for federal income tax purposes. The Company's estimated FY2024 federal income tax liability is $23,800,000. This liability is a pre-closing obligation of NovaMart and is subject to the uncapped tax indemnification provided by the Selling Stockholders under the SPA. NovaMart's federal income tax returns for fiscal years 2020 through 2023 have been reviewed; no material audit adjustments, deficiencies, or disputed items have been identified. The IRS has not audited NovaMart's federal income tax returns for any open tax year.
Net Operating Loss Carryforwards. NovaMart has limited federal net operating loss ("NOL") carryforwards of approximately $8,000,000, arising primarily from the Company's early-stage operating losses in fiscal years 2016 through 2018. We have reviewed these NOLs for limitations under Section 382 of the Internal Revenue Code, which restricts the use of NOL carryforwards following an "ownership change." The closing of the Transaction will constitute an ownership change for Section 382 purposes, which will limit Cascade's ability to utilize NovaMart's pre-change NOLs in post-closing periods. However, given the modest amount of the NOLs (~$8M), the Section 382 limitation is not a significant economic issue for the Transaction.
State and Local Taxes. NovaMart has nexus for state income, franchise, and/or sales tax purposes in all states where it operates fulfillment centers: California, New Jersey, Georgia, Ohio, Illinois, Pennsylvania, Tennessee, Florida, and Washington. The Company is also subject to the Texas franchise tax (based on its Austin headquarters) and the Delaware franchise tax (based on its state of incorporation). We have reviewed NovaMart's state income and franchise tax filings for all nexus states and have not identified any material under-filings, under-payments, or disputed items.
Sales Tax Compliance. NovaMart collects and remits sales tax in all states where it has fulfillment centers and in additional states based on economic nexus thresholds established under South Dakota v. Wayfair, Inc., 585 U.S. 162 (2018). Whitmore & Paige LLP has conducted a detailed sales tax compliance review and has not identified any material instances of under-collection or under-remittance of sales tax. NovaMart's sales tax compliance processes are supported by an automated tax calculation and remittance system provided by a nationally recognized sales tax compliance software vendor.
Transfer Pricing. NovaMart has no foreign operations, foreign subsidiaries, or intercompany transactions with non-U.S. entities. Accordingly, transfer pricing is not applicable to NovaMart's operations.
Transfer Taxes. Estimated transfer taxes in connection with the Transaction are approximately $1,200,000. Under the SPA, transfer taxes are to be borne equally by the Buyer and the Selling Stockholders ($600,000 each).
Pre-Closing Tax Returns. Under SPA Section 6.09, NovaMart is obligated to prepare and file all tax returns for periods ending on or before the closing date. Cascade has review and comment rights with respect to all pre-closing tax returns. The Selling Stockholders have agreed not to amend any pre-closing tax return without Cascade's prior written consent.
Tax Indemnification. The Selling Stockholders have agreed to indemnify Cascade for all pre-closing tax liabilities without regard to the general $216,000,000 indemnification cap. This means that the Selling Stockholders' exposure for pre-closing tax liabilities is unlimited. Additionally, the tax representations in the SPA survive until 60 days after the expiration of the applicable statute of limitations (including any extensions or waivers), providing Cascade with an extended window to assert tax-related indemnification claims beyond the 24-month general survival period.
Risk Level: Low to Moderate. No material tax exposures have been identified. The uncapped tax indemnification and extended survival period for tax representations provide strong protection for Cascade against any pre-closing tax liabilities that may materialize post-closing. The limited NOL carryforwards are not a significant value driver, and the Section 382 limitation is not a material economic issue.
I. Insurance
Existing Insurance Program. We have reviewed NovaMart's existing insurance program in coordination with Cascade's risk management team. NovaMart maintains the following categories of insurance coverage: commercial general liability, property insurance, cyber liability, directors and officers liability, errors and omissions (professional liability), and workers' compensation. Coverage levels and terms are generally adequate for a company of NovaMart's size, industry, and operational profile. We have not identified any material gaps in coverage, and NovaMart has not experienced any claims that have exhausted or materially reduced available policy limits.
D&O Tail Policy. As required by the SPA, a six-year "tail" directors and officers liability insurance policy will be procured to cover pre-closing acts and omissions of NovaMart's directors and officers. The tail policy will be provided by Sovereign Assurance Group Ltd. at a premium of $1,800,000, which will be paid by Cascade at closing. This is a standard transaction protection that ensures continued D&O coverage for pre-closing conduct and facilitates the willingness of NovaMart's directors and officers to support the Transaction and provide the certifications and deliverables required at closing.
Representations and Warranties Insurance. Cascade has obtained a buyer-side representations and warranties ("R&W") insurance policy to supplement the contractual indemnification provided by the Selling Stockholders under the SPA. The key terms of the R&W insurance policy are as follows:
• Carrier: Meridian Specialty Insurance Company
• Policy Number: MSI-RWI-2025-07832
• Policy Limit: $216,000,000 (matching the indemnification cap under the SPA)
• Retention (Self-Insured Amount): $12,000,000 (representing 1% of deal value)
• Premium: $5,400,000 (representing 2.5% of the policy limit)
• Broker: Northbridge Risk Advisors LLC (Thomas Ellingsen, Senior Vice President), 125 High Street, Suite 1400, Boston, Massachusetts 02110
The R&W insurance policy provides Cascade with an additional source of recovery for losses arising from breaches of the Selling Stockholders' representations and warranties in the SPA. The policy supplements — but does not replace — the contractual indemnification. Key features of the policy include: (i) coverage extends beyond the 24-month general survival period, with a 3-year policy period for general representations and a 6-year policy period for fundamental and tax representations; (ii) the $12,000,000 retention is the "first dollar" amount that Cascade must absorb before the policy responds (this retention is expected to be satisfied from the escrow or direct Seller indemnification); and (iii) the policy covers breaches of representations and warranties that were unknown to Cascade at the time of closing. Key exclusions from the policy include known matters as of the policy date (i.e., matters disclosed on the SPA Disclosure Schedules), forward-looking projections and forecasts, and purchase price adjustments.
Risk Level: Low. NovaMart's existing insurance program is adequate, and the D&O tail policy and R&W insurance provide meaningful additional protection for Cascade.
J. Data Privacy and Cybersecurity
Data Processing Overview. NovaMart processes personal data for approximately 9.1 million registered buyers and approximately 62,400 active sellers on its marketplace platform. The categories of personal data processed include names, email addresses, physical addresses, telephone numbers, payment card information (processed through PayStream Financial Technologies Inc.), purchase history, browsing behavior, and seller business information (including tax identification numbers and banking information). The volume and sensitivity of this data make data privacy and cybersecurity a significant area of focus for the dili

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

MEMORANDUM

Record

Parties

Dates

Amounts