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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT

TO: Elena Vasquez-Bright, General Counsel, Cascade Retail Holdings Inc. Theodore "Ted" Langford, SVP, Corporate Development, Cascade Retail Holdings Inc.

FROM: Derek Okonkwo and Tiffany Rosenthal, Calderwood & Harkness LLP

CC: Harrison Wexford, Responsible Partner, Calderwood & Harkness LLP Beatrice Holloway, Billing Partner, Calderwood & Harkness LLP Sylvia Hartwell, Specialist Partner, Tax, Calderwood & Harkness LLP

DATE: March 31, 2025

RE: Employment and Benefits Due Diligence Memorandum — NovaMart Global Inc. (Project Nova)

MATTER: Cascade Retail Holdings Inc. — Proposed Acquisition of NovaMart Global Inc.

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I. Executive Summary

This memorandum summarizes the results of employment and benefits due diligence conducted by Calderwood & Harkness LLP ("Calderwood & Harkness" or "we") in connection with the proposed acquisition by Cascade Retail Holdings Inc. ("Cascade" or the "Buyer") of 100% of the outstanding capital stock of NovaMart Global Inc. ("NovaMart" or the "Company") for an aggregate purchase price of $1,200,000,000 in cash (the "Transaction"). The Transaction is structured as an all-cash stock purchase governed by the laws of the State of Delaware, pursuant to a Stock Purchase Agreement (the "SPA") currently under negotiation between the parties.

Under the terms of the Transaction, Cascade will acquire all outstanding shares of NovaMart common stock from the following Selling Stockholders: Ridgeline Equity Partners, LP (holding approximately 41.2% of outstanding shares), Brindoval Ventures Fund III, LP (holding approximately 22.8%), Julian Reeves, the Company's founder and Chief Executive Officer (holding approximately 18.5%), Priya Narasimhan, the Company's co-founder and Chief Technology Officer (holding approximately 8.3%), and other management and employee stockholders (holding in the aggregate approximately 9.2%). The pro rata share of the purchase price attributable to each Selling Stockholder will be determined in accordance with the SPA's allocation provisions and the Company's capitalization table on a fully diluted basis.

Because the Transaction is structured as a stock purchase rather than an asset acquisition, NovaMart will remain the employer of record for all of its employees following the closing. Employment relationships will continue by operation of law, and Cascade will not be deemed a "successor employer" in the traditional asset-deal sense. Consequently, the Transaction will not, by itself, trigger a termination or rehiring of NovaMart's workforce. Notwithstanding this continuity, integration planning will require benefit plan harmonization, employee communication, and coordination with Cascade's existing HR infrastructure and benefit programs over a transition period following the closing.

NovaMart currently employs approximately 2,400 employees across its corporate headquarters in Austin, Texas and fourteen (14) fulfillment centers located in nine (9) states (California, New Jersey, Georgia, Ohio, Illinois, Pennsylvania, Tennessee, Florida, and Washington). The Company's workforce is integral to NovaMart's proprietary logistics and fulfillment network, branded as "NovaShip," which constitutes a material component of the Company's competitive value proposition.

Our employment and benefits due diligence commenced on February 18, 2025 and has been conducted on a rolling basis as documents and information have been made available through the NovaMart virtual data room maintained by Calloway, Brandt & Loewe LLP, NovaMart's outside counsel ("Seller's Counsel"). Our principal contacts at Seller's Counsel have been Richard Calloway, partner, and Simone Adesanya, senior associate, who have been responsive to document requests and supplemental information inquiries. We note, however, that certain documents and data remain outstanding as of the date of this memorandum, as identified throughout the body of this report and in the list of reviewed documents set forth in Section XIV below.

Key Diligence Findings. Based on our review of the materials described herein, we have identified the following key findings and areas of concern:

(a) Change of Control Provisions in Executive Agreements. The employment agreements of Julian Reeves (CEO) and Priya Narasimhan (CTO), as well as those of Douglas Whitfield (CFO) and Amanda Trevino (General Counsel), contain change of control provisions that are triggered by the Transaction. These provisions may entitle the executives to severance payments, accelerated vesting of equity awards, and the right to resign for "good reason" following the change of control. For Reeves and Narasimhan, the existing change of control provisions will be superseded by new post-closing employment agreements that have been negotiated as part of the Transaction. The treatment of Whitfield's and Trevino's change of control entitlements requires further analysis and negotiation.

(b) Equity Incentive Plan Treatment. The NovaMart 2016 Equity Incentive Plan (the "Equity Plan") governs outstanding stock options and other equity awards held by management and employees. The Equity Plan contains change of control provisions that may require acceleration and/or cash-out treatment of outstanding options at closing. The aggregate intrinsic value of outstanding options (the spread between the exercise price and the per-share purchase price) represents a material component of the Transaction consideration and must be addressed in the SPA.

(c) Severance Obligations. In addition to the executive agreements discussed above, NovaMart maintains a general severance policy that may be implicated if post-closing workforce reductions are contemplated. Aggregate potential severance exposure requires quantification in connection with integration planning.

(d) 401(k) Plan Compliance. The NovaMart 401(k) Retirement Savings Plan (the "401(k) Plan") appears to be in material compliance with the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the Internal Revenue Code of 1986, as amended (the "Code"). Transition planning will be required to determine whether the 401(k) Plan will be maintained as a standalone plan, merged into Cascade's existing 401(k) plan, or terminated post-closing.

(e) Retention Pool. NovaMart management and Cascade have proposed an $18,000,000 aggregate retention pool for key NovaMart employees (other than Reeves and Narasimhan), payable in two tranches: 50% at closing and 50% on the first anniversary of closing, conditioned on continued employment. The retention arrangements require finalization, including identification of eligible employees, individual allocation amounts, and execution of retention bonus letters.

(f) WARN Act Analysis. If Cascade contemplates any post-closing workforce reductions, facility consolidations, or fulfillment center closures, compliance with the federal Worker Adjustment and Retraining Notification Act ("WARN Act") and applicable state "mini-WARN" statutes will be required. NovaMart's 14 fulfillment centers each employ sufficient numbers of workers to potentially trigger WARN obligations in the event of a plant closing or mass layoff.

Materials Reviewed. In preparing this memorandum, we reviewed the employment and benefits documents provided in the NovaMart data room, including employment agreements for senior executives, the NovaMart employee handbook, benefit plan documents and summary plan descriptions ("SPDs"), Form 5500 filings, the 401(k) Plan document and most recent independent audit report, the Equity Plan and associated option grant records, the Company's severance policy, HR organizational data and payroll summaries, workers' compensation claims history, I-9 compliance records, independent contractor classification documentation, OSHA compliance records, and other materials as set forth in Section XIV below. We also reviewed the relevant sections of the current draft of the SPA and the Seller Disclosure Schedules in draft form.

This memorandum is intended solely for the internal use of Cascade and its advisors in evaluating the Transaction and is protected by the attorney-client privilege and the attorney work product doctrine. It should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.

II. Workforce Overview

A. Employee Headcount and Distribution

Based on the most recent payroll data provided in the NovaMart data room (pay period ending February 28, 2025), the Company employs approximately 2,400 individuals across its corporate headquarters and 14 fulfillment center locations. The workforce distribution is summarized as follows:

Corporate Headquarters — Austin, Texas (1100 Congress Avenue, Suite 800). Approximately 680 employees are based at the Austin headquarters, encompassing the Company's corporate functions including executive management, finance and accounting, legal and compliance, human resources, technology and engineering, product management, marketing, customer experience, and general administrative support. The technology and engineering teams represent the largest functional group at the Austin headquarters, with approximately 270 employees, reflecting the Company's significant investment in its proprietary e-commerce platform and NovaShip logistics technology.

Fulfillment Center Operations. The remaining approximately 1,720 employees are distributed across NovaMart's 14 fulfillment centers in 9 states, as follows:

Fulfillment center employees are primarily engaged in warehouse operations, including receiving, inventory management, picking, packing, shipping, and quality control functions within NovaMart's proprietary NovaShip logistics network. Each fulfillment center is managed by a facility general manager who reports to NovaMart's VP of Operations, Gregory Huang, based at the Austin headquarters. The fulfillment center workforce is integral to NovaMart's competitive differentiation through its proprietary logistics capabilities, and retention of experienced operational staff at these facilities is a significant consideration for the Transaction.

Breakdown by Employment Category. The Company's approximately 2,400 employees are distributed by employment category as follows:

• Full-time employees: Approximately 2,050 (approximately 85%), including all headquarters personnel and a substantial majority of fulfillment center workers.

• Part-time employees: Approximately 230 (approximately 10%), primarily fulfillment center associates working reduced schedules. Part-time employees are generally eligible for a limited subset of NovaMart's benefit programs, as described in Section V below.

• Temporary and seasonal employees: Approximately 120 (approximately 5%), consisting primarily of seasonal fulfillment center workers engaged during peak shopping periods (Q4 holiday season and periodic promotional events). Seasonal headcount can fluctuate significantly; the Company represented in its data room questionnaire responses that seasonal headcount peaked at approximately 450 additional temporary workers during Q4 2024. Temporary employees are generally engaged through Nexus Staffing Solutions, a third-party staffing agency, and are not considered NovaMart employees for benefit plan purposes, though co-employment risk should be monitored.

We note that the headcount figures set forth above are approximate and based on a single payroll snapshot. We recommend that the SPA include a mechanism for an updated employee census to be delivered at or immediately prior to closing, together with a representation from the Selling Stockholders confirming the accuracy of the workforce data as of the closing date.

B. Unionization Status

Based on representations made in the NovaMart data room and confirmed by Seller's Counsel, no employees of the Company are currently represented by any labor union or covered by any collective bargaining agreement. Additionally, based on the data room disclosures and management questionnaire responses, there are no pending union organizing efforts, no petitions filed with the National Labor Relations Board ("NLRB"), and no unfair labor practice charges currently pending against the Company before the NLRB or any state labor relations board.

We note that NovaMart's fulfillment center workforce operates in a sector — warehouse and logistics — that has experienced increasing union organizing activity in recent years, particularly in markets such as California, New Jersey, and the Pacific Northwest. While there is no current organizing activity, Cascade should be aware of this sector trend as it relates to post-closing workforce management. The stock purchase structure does not alter the existing non-union status of the workforce, and no bargaining obligations arise by virtue of the Transaction itself.

C. Independent Contractors

NovaMart engages independent contractors in several capacities, primarily in the following areas: (i) technology development and software engineering, where the Company retains specialized contractors for discrete project-based work on its e-commerce platform; (ii) content creation, including graphic design, copywriting, and marketing content production; and (iii) last-mile delivery services, where the Company engages independent delivery drivers through its NovaShip last-mile program to supplement its in-house logistics capabilities. Based on the data room disclosures, NovaMart currently engages approximately 85 technology contractors, 30 content creation contractors, and approximately 200 last-mile delivery drivers classified as independent contractors.

Misclassification Risk Assessment. We have reviewed a sample of the Company's independent contractor agreements and assessed the classification of these individuals against applicable legal standards, including the IRS common law test (examining the degree of behavioral control, financial control, and type of relationship) and applicable state-specific tests. Our principal areas of concern are as follows:

California ABC Test (AB 5). California's Assembly Bill 5 ("AB 5"), codified at California Labor Code Section 2775, adopted the ABC test for determining worker classification. Under the ABC test, a worker is presumed to be an employee unless the hiring entity can demonstrate that the worker: (A) is free from the control and direction of the hiring entity; (B) performs work that is outside the usual course of the hiring entity's business; and (C) is customarily engaged in an independently established trade, occupation, or business. NovaMart's California-based last-mile delivery drivers present the most significant misclassification risk, as delivery services may be deemed within the usual course of NovaMart's fulfillment and logistics business, potentially failing prong (B) of the ABC test. We have identified approximately 55 last-mile delivery drivers operating in California who may be at risk of reclassification. Reclassification could expose NovaMart to back wages, overtime, meal and rest break penalties, expense reimbursement, employment tax liability, and potential penalties under the California Private Attorneys General Act ("PAGA").

New Jersey ABC Test. New Jersey applies a similar ABC test for purposes of wage and hour and unemployment insurance law, with a strong presumption of employee status. Approximately 30 last-mile delivery drivers are engaged in New Jersey and present analogous misclassification risk.

Illinois and Washington. Both Illinois and Washington have adopted worker classification standards that, while not identical to California's ABC test, impose rigorous requirements for establishing independent contractor status. Illinois applies an ABC-like test for certain purposes under the Illinois Employee Classification Act, and Washington's RCW 49.46 and related statutes apply tests that may capture NovaMart's delivery drivers.

Recommendation. We recommend that Cascade conduct an enhanced review of NovaMart's independent contractor classifications, particularly with respect to last-mile delivery drivers in California, New Jersey, Illinois, and Washington. We further recommend that the SPA Seller Disclosure Schedules include a representation identifying all independent contractor relationships and any pending or threatened misclassification claims. Cascade should consider establishing a reserve or requesting a specific indemnity from the Selling Stockholders for pre-closing independent contractor misclassification exposure. We estimate that the potential exposure, in a worst-case scenario involving reclassification of all last-mile delivery drivers in California and New Jersey, could range from approximately $2,500,000 to $6,000,000, inclusive of back wages, penalties, and employment tax liability. This estimate is preliminary and subject to refinement upon further analysis.

D. Foreign Nationals / Immigration

NovaMart employs a number of foreign nationals under various work authorization categories, predominantly within the technology and engineering teams at the Austin headquarters. Based on the data room disclosures, the Company currently sponsors or has sponsored the following visa categories:

• H-1B Specialty Occupation visas: Approximately 42 current H-1B holders, primarily software engineers, data scientists, and product managers at the Austin headquarters.

• L-1 Intracompany Transferee visas: Three (3) current L-1B holders transferred from NovaMart's former development contractor relationships.

• TN visas: Five (5) Canadian and Mexican nationals employed under TN nonimmigrant status.

• Pending PERM Labor Certification Applications: Approximately 14 pending PERM applications for permanent residency sponsorship, at various stages of the process.

• Pending I-140 and I-485 Petitions: Approximately 8 employees with approved or pending I-140 immigrant worker petitions, and 3 employees with pending I-485 adjustment of status applications.

Impact of Change of Control on Immigration Matters. Because NovaMart will remain the employer of record following the stock purchase, the change of control should not, in and of itself, require the filing of new H-1B or L-1 petitions, nor should it invalidate existing work authorization. However, we note the following considerations: (i) if NovaMart's federal employer identification number ("EIN") changes post-closing as a result of corporate restructuring or name change, amended petitions may be required; (ii) any post-closing organizational changes that materially alter the terms and conditions of employment for H-1B holders (including changes in job duties, work location, or compensation below the prevailing wage) may require the filing of amended H-1B petitions; and (iii) pending PERM labor certification applications may be affected if NovaMart's business structure or the job positions being certified change materially post-closing.

I-9 Compliance. NovaMart conducted an internal I-9 audit in Q3 2024, as reflected in the audit summary provided in the data room. The audit covered a random sample of approximately 400 I-9 forms across all locations. The audit identified minor technical deficiencies (e.g., missing or incomplete Section 2 entries, late re-verification) in approximately 6% of the sampled forms. NovaMart represented that it undertook corrective action to remedy the identified deficiencies. We recommend that Cascade request an updated I-9 compliance certification from NovaMart as a closing deliverable and consider whether a more comprehensive I-9 audit is warranted during the post-closing integration process.

III. Executive Employment Agreements

We have reviewed the existing employment agreements of the following senior executives of NovaMart: Julian Reeves (Founder and CEO), Priya Narasimhan (Co-Founder and CTO), Douglas "Doug" Whitfield (CFO), and Amanda Trevino (General Counsel). Set forth below is a summary of the material terms of each agreement, with particular attention to change of control provisions, severance triggers, and post-closing treatment.

A. Julian Reeves — Founder & Chief Executive Officer

Current Employment Agreement. Mr. Reeves is party to an Amended and Restated Executive Employment Agreement with NovaMart dated as of January 15, 2020 (the "Reeves Employment Agreement"). The material terms of the Reeves Employment Agreement are as follows:

• Title: Founder and Chief Executive Officer, reporting to the Board of Directors of NovaMart.

• Term: The agreement has no fixed term and provides for at-will employment, subject to the severance and change of control provisions described below.

• Base Salary: $525,000 per annum, subject to annual review by the Board or its compensation committee. Based on payroll data provided, Mr. Reeves's current base salary has been adjusted to $550,000 effective January 1, 2025.

• Annual Bonus: Mr. Reeves is eligible for an annual performance bonus with a target of 80% of base salary, based on achievement of performance metrics established by the Board. For fiscal year 2024, Mr. Reeves received a bonus of $396,000 (representing approximately 72% of his then-current base salary of $550,000), reflecting partial achievement of the applicable performance targets.

• Equity Holdings: Mr. Reeves holds approximately 18.5% of NovaMart's outstanding common stock on a fully diluted basis. This equity was acquired through a combination of founder's shares and subsequent equity purchases. Mr. Reeves does not hold stock options under the Equity Plan; his entire equity position consists of vested common shares.

• Benefits: Standard executive benefits package, including participation in NovaMart's group health, dental, vision, life, disability, and 401(k) plans. Additionally, Mr. Reeves receives an annual executive wellness allowance of $15,000 and is entitled to Company-paid parking at the Austin headquarters.

Change of Control Provisions. Section 8 of the Reeves Employment Agreement defines "Change of Control" broadly to include, among other events, any transaction or series of transactions resulting in a change of more than 50% of the voting power of NovaMart's outstanding equity securities, or the sale of all or substantially all of NovaMart's assets. Cascade's acquisition of 100% of NovaMart's outstanding common stock clearly constitutes a "Change of Control" under this definition.

Upon a Change of Control, the Reeves Employment Agreement provides for the following:

(i) Single-Trigger Severance Right. Mr. Reeves has the right, exercisable within 90 days following the Change of Control, to resign from his position for "Good Reason" (as defined in the agreement to include, inter alia, a Change of Control itself, without any requirement for a diminution in duties, title, or compensation). If Mr. Reeves exercises this right, he is entitled to receive: (a) a lump-sum severance payment equal to two (2) times his then-current annual base salary; (b) a pro-rated annual bonus for the year of termination; (c) continuation of COBRA health benefits at the Company's expense for 18 months; and (d) full acceleration of any unvested equity awards (though, as noted, Mr. Reeves currently holds only fully vested common shares).

(ii) Equity Acceleration. To the extent Mr. Reeves holds any unvested equity awards at the time of a Change of Control, such awards shall become immediately and fully vested. As noted, this provision is currently moot because all of Mr. Reeves's equity consists of fully vested common stock.

Treatment at Closing. The parties have negotiated that Mr. Reeves's existing Reeves Employment Agreement will be superseded at closing by a new post-closing employment agreement (the "Reeves Post-Closing Agreement") under which Mr. Reeves will continue as President of the NovaMart business unit within Cascade for a period of three (3) years following the closing. By entering into the Reeves Post-Closing Agreement, Mr. Reeves will waive his rights to the Change of Control severance and benefits described above. The material terms of the Reeves Post-Closing Agreement, as negotiated, are as follows:

• Title: President, NovaMart Business Unit, Cascade Retail Holdings Inc., reporting to the Chief Operating Officer of Cascade.

• Term: Three (3) years from the closing date, subject to earlier termination as provided in the agreement.

• Base Salary: $625,000 per annum.

• Annual Bonus: Target bonus of 75% of base salary ($468,750), based on achievement of performance metrics to be established by the Cascade compensation committee in consultation with Mr. Reeves.

• Equity Grant: 150,000 restricted shares of Cascade common stock (Nasdaq: CRHI), vesting ratably over three (3) years (one-third on each anniversary of the closing date), subject to continued employment.

• Restrictive Covenants: The Reeves Post-Closing Agreement will include non-competition, non-solicitation, and IP assignment covenants for a period of two (2) years following termination of employment (subject to enforceability analysis by jurisdiction, as discussed in Section X below).

• Severance Upon Termination Without Cause: If Cascade terminates Mr. Reeves's employment without "Cause" during the three-year term, Mr. Reeves will be entitled to: (a) continued payment of base salary for 12 months; (b) a pro-rated annual bonus for the year of termination; and (c) acceleration of any unvested restricted Cascade shares.

Purchase Price Allocation. The pro rata share of the $1,200,000,000 aggregate purchase price attributable to Mr. Reeves's 18.5% equity stake is approximately $222,000,000 (18.5% × $1,200,000,000). This represents the consideration payable to Mr. Reeves as a Selling Stockholder in exchange for the sale of his NovaMart common stock at closing, subject to any adjustments pursuant to the SPA's working capital and indemnification provisions.

Section 280G Considerations. The aggregate payments and benefits to Mr. Reeves in connection with the Transaction — including the purchase price consideration for his equity (which is not a "parachute payment" because it represents reasonable compensation for equity held as an investor rather than an employee, to the extent it exceeds Mr. Reeves's base amount), the waiver of his existing Change of Control severance rights, and the value of the post-closing equity grant and other compensation — must be analyzed under Section 280G of the Code to determine whether any portion constitutes an "excess parachute payment." This analysis is being conducted separately by Sylvia Hartwell and Sandra Chiu of Whitmore & Paige LLP, and the results will be incorporated into a supplemental memorandum. We note that Mr. Reeves may be a "disqualified individual" within the meaning of Section 280G, and the analysis must account for all payments contingent on or related to the change of control.

B. Priya Narasimhan — Co-Founder & Chief Technology Officer

Current Employment Agreement. Ms. Narasimhan is party to an Amended and Restated Executive Employment Agreement with NovaMart dated as of January 15, 2020 (the "Narasimhan Employment Agreement"). The material terms are as follows:

• Title: Co-Founder and Chief Technology Officer, reporting to the CEO.

• Term: At-will employment, subject to severance and change of control provisions.

• Base Salary: $475,000 per annum, currently adjusted to $500,000 effective January 1, 2025.

• Annual Bonus: Target of 70% of base salary, based on performance metrics.

• Equity Holdings: Ms. Narasimhan holds approximately 8.3% of NovaMart's outstanding common stock on a fully diluted basis, consisting of fully vested common shares acquired through a combination of founder's shares and subsequent equity grants.

• Benefits: Standard executive benefits package, consistent with Mr. Reeves's package, including the $15,000 annual executive wellness allowance.

Change of Control Provisions. Section 8 of the Narasimhan Employment Agreement contains Change of Control provisions substantively identical to those in the Reeves Employment Agreement, including the same broad definition of "Change of Control" and the same single-trigger severance right. Specifically, upon a Change of Control, Ms. Narasimhan has the right to resign for "Good Reason" within 90 days and receive: (a) a lump-sum severance payment equal to two (2) times her then-current annual base salary; (b) a pro-rated annual bonus; (c) COBRA continuation at the Company's expense for 18 months; and (d) full acceleration of any unvested equity awards. The Transaction constitutes a Change of Control under the agreement.

Treatment at Closing. As with Mr. Reeves, the parties have negotiated that Ms. Narasimhan's existing employment agreement will be superseded at closing by a new post-closing employment agreement (the "Narasimhan Post-Closing Agreement") under which she will continue in a senior technology leadership role for a period of three (3) years. The material terms of the Narasimhan Post-Closing Agreement are as follows:

• Title: Chief Technology Officer, NovaMart Business Unit, Cascade Retail Holdings Inc., reporting to the Chief Technology Officer of Cascade.

• Term: Three (3) years from the closing date.

• Base Salary: $575,000 per annum.

• Annual Bonus: Target bonus of 70% of base salary ($402,500), based on performance metrics.

• Equity Grant: 125,000 restricted shares of Cascade common stock (Nasdaq: CRHI), vesting ratably over three (3) years.

• Restrictive Covenants: Non-competition, non-solicitation, and IP assignment covenants for a period of two (2) years following termination.

• Severance Upon Termination Without Cause: Continued base salary for 12 months, pro-rated annual bonus, and acceleration of unvested restricted Cascade shares.

Purchase Price Allocation. The pro rata share of the aggregate purchase price attributable to Ms. Narasimhan's 8.3% equity stake is approximately $99,600,000 (8.3% × $1,200,000,000).

Section 280G Considerations. As with Mr. Reeves, the aggregate payments and benefits to Ms. Narasimhan in connection with the Transaction require Section 280G analysis. Ms. Narasimhan is a "disqualified individual" for Section 280G purposes. The analysis is being conducted by Sylvia Hartwell and Whitmore & Paige LLP.

C. Douglas "Doug" Whitfield — Chief Financial Officer

Current Employment Agreement. Mr. Whitfield is party to an Executive Employment Agreement with NovaMart dated as of March 1, 2021 (the "Whitfield Employment Agreement"). Mr. Whitfield was recruited from outside the Company and joined NovaMart following a tenure as Vice President, Finance at a publicly traded retail technology company. The material terms of his agreement are as follows:

• Title: Chief Financial Officer, reporting to the CEO.

• Base Salary: $425,000 per annum, currently adjusted to $450,000 effective January 1, 2025.

• Annual Bonus: Target of 60% of base salary.

• Equity: Mr. Whitfield was granted options to purchase 180,000 shares of NovaMart common stock under the Equity Plan at an exercise price of $12.50 per share, vesting over four years with a one-year cliff (25% vesting on the first anniversary, with the remaining 75% vesting in equal monthly installments over the subsequent 36 months). As of the date of this memorandum, approximately 157,500 of Mr. Whitfield's options are vested.

• Sign-On Bonus: Mr. Whitfield received a one-time sign-on bonus of $150,000 upon commencement of employment, subject to a two-year clawback provision (which has since lapsed).

Change of Control Provisions. Section 7 of the Whitfield Employment Agreement includes a double-trigger change of control provision. Specifically, if within 12 months following a Change of Control (as defined in the agreement, using a definition substantially similar to that in the Reeves and Narasimhan agreements), Mr. Whitfield's employment is terminated by the Company without "Cause" or Mr. Whitfield resigns for "Good Reason" (defined to include a material reduction in title, duties, compensation, or work location), Mr. Whitfield is entitled to: (a) a lump-sum severance payment equal to one (1) times his then-current annual base salary; (b) a pro-rated annual bonus for the year of termination; (c) COBRA continuation at the Company's expense for 12 months; and (d) full acceleration of any then-unvested stock options.

Post-Closing Role and Retention. As of the date of this memorandum, discussions between Cascade and NovaMart management regarding Mr. Whitfield's post-closing role are ongoing. Cascade has indicated that it may wish to consolidate the NovaMart CFO function into Cascade's existing finance organization following a transition period of approximately 6 to 12 months post-closing. If Mr. Whitfield's employment is terminated in connection with such consolidation, his double-trigger change of control severance would be triggered. Based on his current base salary of $450,000, the lump-sum severance payment would be $450,000, plus a pro-rated bonus and accelerated vesting of approximately 22,500 unvested options. Additionally, Mr. Whitfield has been identified as a participant in the $18,000,000 retention pool discussed in Section VI.C below. We recommend that Cascade finalize its plans regarding Mr. Whitfield's post-closing role and communicate them to Mr. Whitfield in a timely manner, ideally before or at closing.

D. Amanda Trevino — General Counsel

Current Employment Agreement. Ms. Trevino is party to an Executive Employment Agreement with NovaMart dated as of September 15, 2019 (the "Trevino Employment Agreement"). The material terms are as follows:

• Title: General Counsel and Corporate Secretary, reporting to the CEO.

• Base Salary: $410,000 per annum, currently adjusted to $430,000 effective January 1, 2025.

• Annual Bonus: Target of 50% of base salary.

• Equity: Ms. Trevino was granted options to purchase 150,000 shares of NovaMart common stock under the Equity Plan at an exercise price of $8.75 per share, vesting over four years with a one-year cliff. As of the date of this memorandum, all of Ms. Trevino's options are fully vested.

Change of Control Provisions. Section 7 of the Trevino Employment Agreement includes a double-trigger change of control provision substantially identical to Mr. Whitfield's, providing for a lump-sum severance payment equal to one (1) times base salary, pro-rated bonus, 12-month COBRA continuation, and acceleration of unvested equity upon a qualifying termination within 12 months following a Change of Control.

Post-Closing Role Considerations. Ms. Trevino's post-closing role presents a unique consideration given that Cascade's legal department is led by Elena Vasquez-Bright, the General Counsel of Cascade, to whom this memorandum is addressed. Integration of NovaMart's legal function into the Cascade legal department will need to be discussed as part of the broader organizational integration plan. If Ms. Trevino's role is eliminated or materially reduced post-closing, her double-trigger change of control severance would be triggered. Based on her current base salary, the severance payment would be $430,000, plus a pro-rated bonus. Ms. Trevino's fully vested options would be treated in accordance with the Equity Plan's change of control provisions and the SPA (see Section IV below).

E. Other Senior Management Employment Agreements

In addition to the four executive agreements described above, we reviewed employment agreements or offer letters for the following senior management personnel:

• Gregory Huang, VP of Operations: Offer letter dated June 1, 2020; base salary of $325,000; target bonus of 40%; options to purchase 75,000 shares at $10.25 per share, vesting over four years; no individual change of control provisions beyond the terms of the Equity Plan and the general severance policy.

• Rachel Sato, VP of Marketing: Offer letter dated November 15, 2021; base salary of $310,000; target bonus of 40%; options to purchase 60,000 shares at $14.00 per share, vesting over four years; no individual change of control provisions.

• Kevin O'Malley, VP of Human Resources: Offer letter dated February 1, 2022; base salary of $295,000; target bonus of 35%; options to purchase 50,000 shares at $15.50 per share, vesting over four years; no individual change of control provisions.

• Lina Chen, VP of Engineering: Offer letter dated April 15, 2021; base salary of $340,000; target bonus of 45%; options to purchase 80,000 shares at $12.50 per share, vesting over four years; no individual change of control provisions.

None of these senior management offer letters contain individual change of control or severance provisions. These individuals are subject to the Equity Plan's change of control provisions (for their outstanding options) and the NovaMart general severance policy (for any post-closing termination). Each has been identified as a participant in the proposed $18,000,000 retention pool.

IV. Equity Incentive Plan and Stock Options

A. NovaMart 2016 Equity Incentive Plan — Overview

NovaMart adopted the NovaMart Global Inc. 2016 Equity Incentive Plan (the "Equity Plan") effective as of July 1, 2016, as subsequently amended on March 15, 2019 (the "First Amendment") and December 1, 2021 (the "Second Amendment"). The Equity Plan was approved by the Board of Directors and the stockholders of NovaMart. The material terms of the Equity Plan, as amended, are as follows:

• Shares Authorized: 3,500,000 shares of NovaMart common stock were initially authorized for issuance under the Equity Plan. The First Amendment increased the share reserve by 1,000,000 shares, and the Second Amendment increased the reserve by an additional 750,000 shares, for a total of 5,250,000 authorized shares.

• Shares Issued: As of the date of this memorandum, options to purchase approximately 3,840,000 shares have been granted under the Equity Plan, of which approximately 2,970,000 are currently outstanding (the remainder having been forfeited, cancelled, or expired). Restricted stock awards covering approximately 210,000 shares have been granted, of which approximately 185,000 are outstanding.

• Shares Remaining: Approximately 1,200,000 shares remain available for future grants under the Equity Plan, though no further grants are anticipated prior to closing.

• Types of Awards: The Equity Plan authorizes the grant of incentive stock options ("ISOs") within the meaning of Section 422 of the Code, non-qualified stock options ("NQSOs"), restricted stock, and restricted stock units ("RSUs").

• Administration: The Equity Plan is administered by the Board of Directors or, if designated, the compensation committee of the Board. Currently, the Board has delegated administration to a three-member compensation committee consisting of two independent directors designated by Ridgeline Equity Partners and one independent director designated by Brindoval Ventures Fund III.

The outstanding equity awards held by management and employees (comprising the approximately 9.2% of NovaMart's common stock held by "other management/employee stockholders" referenced in the Transaction overview, together with any unvested awards) represent a material component of the Transaction consideration and require careful treatment in the SPA.

B. Change of Control Provisions in the Equity Plan

Section 12 of the Equity Plan defines "Change of Control" to include: (a) any merger, consolidation, or similar transaction in which the stockholders of NovaMart immediately prior to such transaction hold less than 50% of the voting power of the surviving entity; (b) any sale, transfer, or other disposition of all or substantially all of NovaMart's assets; and (c) any acquisition by any person or group of more than 50% of the outstanding voting securities of NovaMart. Cascade's acquisition of 100% of NovaMart's outstanding common stock clearly constitutes a "Change of Control" under clause (c) of this definition.

Upon a Change of Control, Section 12(b) of the Equity Plan provides for single-trigger acceleration of all outstanding and unvested options and other equity awards. Specifically, the Plan states:

"Upon the consummation of a Change of Control, all outstanding Options and other Awards that are then unvested shall become immediately and fully vested and exercisable as of immediately prior to the effective time of such Change of Control, without regard to any vesting schedule or performance conditions otherwise applicable to such Options or Awards."

This single-trigger acceleration provision is significant because it means that all unvested options and restricted stock awards will vest immediately upon the closing of the Transaction, regardless of whether any participant's employment is subsequently terminated. This contrasts with a double-trigger structure (which would require both a change of control and a qualifying termination event for acceleration to occur) and results in a higher aggregate cost at closing.

In addition to the automatic acceleration provision, Section 12(c) of the Equity Plan grants the Board or compensation committee discretion to determine the treatment of outstanding awards in connection with a Change of Control, including the ability to: (i) provide for the assumption or substitution of outstanding awards by the acquiring entity; (ii) provide for a cash-out of outstanding options at the closing for an amount equal to the excess (if any) of the per-share Change of Control consideration over the exercise price of such options; or (iii) provide for the cancellation of any "underwater" options (i.e., options with an exercise price equal to or greater than the per-share Change of Control consideration) without payment. The Board's discretion under Section 12(c) is in addition to, and not in lieu of, the automatic acceleration under Section 12(b).

C. Treatment of Outstanding Options at Closing

Based on the option grant ledger and capitalization table provided in the data room, the outstanding vested and unvested options under the Equity Plan are summarized as follows:

For purposes of calculating the per-share purchase price for option payout purposes, the aggregate purchase price of $1,200,000,000 is divided by the total fully diluted shares outstanding. Based on the capitalization table provided by Seller's Counsel, the fully diluted share count is approximately 42,500,000 shares (consisting of approximately 39,530,000 outstanding common shares and approximately 2,970,000 in-the-money options on a treasury stock method basis, together with approximately 185,000 outstanding restricted stock awards that are treated as outstanding shares). The resulting per-share purchase price is approximately $28.24 per share ($1,200,000,000 ÷ 42,500,000 fully diluted shares).

The aggregate intrinsic value (i.e., the "spread") of all outstanding in-the-money options, calculated as the excess of the per-share purchase price over the exercise price for each option, is estimated as follows:

The aggregate intrinsic value of approximately $48,820,800 represents the total cash-out amount payable to option holders at closing if the Board exercises its discretion under Section 12(c) to cash out all outstanding options. This amount would be payable from the aggregate purchase price and would reduce the per-share consideration payable to common stockholders on a dollar-for-dollar basis. The SPA should clearly specify the treatment of outstanding options and the mechanics of the option cash-out, including the source of funds for the option payments and the effect on the per-share consideration.

Withholding and Tax Reporting. Cash-out payments to option holders will be subject to income tax withholding and FICA (Social Security and Medicare) tax withholding. NovaMart, as the employer, will be responsible for withholding applicable taxes from option payout amounts and reporting the income on Forms W-2 for the year of closing. The Company will also be liable for the employer's share of FICA taxes on option payout amounts. We estimate the employer FICA tax liability on the aggregate option payout at approximately $3,735,000 (based on the employer's share of Social Security tax at 6.2% up to the wage base and Medicare tax at 1.45%, plus the Additional Medicare Tax as applicable). This employer FICA cost should be factored into the Transaction economics.

ISO vs. NQSO Distinction. Of the approximately 2,970,000 outstanding options, approximately 1,150,000 are classified as incentive stock options ("ISOs") and approximately 1,820,000 are classified as non-qualified stock options ("NQSOs"). The distinction is significant for tax purposes:

• NQSOs: Upon exercise or cash-out, the spread (excess of fair market value over exercise price) is taxable to the option holder as ordinary income and is subject to income tax withholding and FICA. The Company receives a corresponding compensation deduction under Section 162 of the Code.

• ISOs: If held for the requisite statutory holding periods (one year from exercise and two years from grant), the gain on ISOs is taxable to the holder as long-term capital gain, and the Company receives no deduction. However, if the ISOs are cashed out at closing (rather than exercised), the cash-out constitutes a "disqualifying disposition" for ISO purposes, and the spread is taxed as ordinary income to the holder, with corresponding withholding obligations for the Company and a compensation deduction available to the Company.

Because all ISOs will be cashed out at closing (rather than exercised and held), all ISO cash-outs will be disqualifying dispositions and will be treated as ordinary income for tax purposes, subject to the same withholding and deduction treatment as NQSOs.

SPA Provisions. We recommend that the SPA include the following provisions regarding the treatment of Company equity awards: (i) a covenant requiring NovaMart to obtain any necessary Board or compensation committee approvals for the cash-out of outstanding options; (ii) a clear statement that all outstanding options will be cancelled and cashed out at closing for the spread amount, net of applicable withholding taxes; (iii) a representation that all outstanding options are accurately reflected on the option grant ledger and capitalization table set forth in the Seller Disclosure Schedules; and (iv) an indemnification obligation of the Selling Stockholders for any pre-closing tax liabilities or penalties relating to the equity awards.

D. Section 409A Compliance

Section 409A of the Code imposes strict requirements on nonqualified deferred compensation arrangements. Stock options that are granted with an exercise price below the fair market value of the underlying stock at the time of grant ("Discounted options") are treated as deferred compensation subject to Section 409A, and the option holder may be subject to additional taxes, including a 20% penalty tax and interest, upon vesting or exercise.

We have reviewed the option grant records provided in the data room and have compared the exercise prices of options granted under the Equity Plan against contemporaneous fair market value determinations. NovaMart represented, through Seller's Counsel, that all options were granted at exercise prices equal to or greater than the fair market value of NovaMart common stock at the time of grant, as determined by independent valuations (409A valuations) conducted by Evergreen Valuation Group, LLC. We reviewed copies of the most recent three 409A valuation reports (dated March 2022, March 2023, and March 2024) and found them to be consistent with the exercise prices of options granted during the corresponding periods.

Based on our review, we have not identified any options that appear to have been granted at a discount to fair market value. However, we note that we have not conducted an independent valuation of NovaMart common stock and have relied on the representations of NovaMart and its valuation firm. We recommend that the SPA include a representation from the Selling Stockholders that all options under the Equity Plan were granted at fair market value and are in compliance with Section 409A, together with an indemnification provision for any Section 409A liabilities arising from pre-closing option grants.

E. Section 280G / Golden Parachute Analysis

Section 280G of the Code imposes a 20% excise tax (under Section 4999) on "excess parachute payments" received by "disqualified individuals" in connection with a change of control, and denies the payor a deduction for such excess parachute payments. A "parachute payment" is any payment in the nature of compensation that is made to a disqualified individual if (i) the payment is contingent on a change of ownership or control and (ii) the aggregate present value of all such payments equals or exceeds three times the individual's "base amount" (the average annual compensation for the five taxable years preceding the change of control). The "excess parachute payment" is the amount by which the aggregate parachute payments exceed one times the base amount.

Disqualified Individuals. Based on our preliminary analysis, the following individuals are likely "disqualified individuals" for Section 280G purposes (shareholders, officers, or highly compensated employees): Julian Reeves, Priya Narasimhan, Douglas Whitfield, Amanda Trevino, Gregory Huang, Rachel Sato, Kevin O'Malley, and Lina Chen. Additional individuals may also be disqualified individuals based on their compensation levels and shareholder status; the final determination requires a detailed analysis of each individual's base amount and the aggregate parachute payments.

Preliminary Analysis. The principal components of potential parachute payments for each disqualified individual include: (i) accelerated vesting of unvested stock options (the excess of the acceleration value over any consideration paid); (ii) any severance payments contingent on or arising from the change of control; (iii) retention bonus payments under the proposed $18,000,000 retention pool; and (iv) the value of continued employment benefits provided in connection with the change of control (such as COBRA continuation).

For Mr. Reeves, the parachute payment analysis is somewhat simplified because he holds only fully vested common stock (no unvested options to accelerate) and will waive his existing Change of Control severance in favor of the Reeves Post-Closing Agreement. The primary question is whether the post-closing compensation under the Reeves Post-Closing Agreement (including the 150,000 restricted Cascade shares) constitutes a parachute payment to the extent it exceeds reasonable compensation for services to be rendered post-closing. A similar analysis applies to Ms. Narasimhan.

For Mr. Whitfield, Ms. Trevino, and the other executives holding unvested options, the accelerated vesting triggered by the Equity Plan's single-trigger provision constitutes a parachute payment to the extent it is contingent on the change of control. Additionally, any severance payments that these individuals may receive within the 12-month post-closing window under their double-trigger change of control provisions, or any retention bonuses received under the retention pool, must be included in the calculation.

Private Company Exception. NovaMart is a privately held corporation that is not publicly traded. Accordingly, NovaMart may avail itself of the Section 280G "private company exception" provided in Section 280G(b)(5)(B) of the Code, under which parachute payments made by a corporation that is not publicly traded may be exempted from the Section 280G excise tax and deduction disallowance if: (i) the payments are approved by a vote of more than 75% of the outstanding voting stock of the corporation, and (ii) adequate disclosure of all material facts is made to stockholders prior to the vote. If the stockholder vote is obtained, the payments are treated as not constituting parachute payments for Section 280G purposes.

Recommendation. We recommend the following:

(a) Sylvia Hartwell and Sandra Chiu of Whitmore & Paige LLP should complete detailed Section 280G calculations for each disqualified individual, based on final Transaction terms and compensation data, and determine whether any individual's aggregate parachute payments would equal or exceed the three-times-base-amount threshold.

(b) If the Section 280G threshold is exceeded for any disqualified individual, the parties should consider implementing the Section 280G stockholder approval process. Because NovaMart is privately held, the stockholder vote can be obtained from the Selling Stockholders (Ridgeline, Brindoval, Reeves, Narasimhan, and other management stockholders) as a closing deliverable or a condition to closing under the SPA.

(c) Alternatively, the parties may consider structuring payments to reduce or eliminate excess parachute payments — for example, by cutting back certain payments to the safe harbor amount or by allocating a portion of the post-closing compensation as reasonable compensation for services to be rendered rather than as change of control payments.

(d) The SPA should include provisions addressing the Section 280G analysis and stockholder approval process, including a covenant requiring NovaMart to cooperate in obtaining the stockholder vote.

V. Employee Benefit Plans — ERISA and Non-ERISA

A. Summary of Benefit Plans

Based on our review of the data room documents, NovaMart sponsors or maintains the following employee benefit plans, programs, and arrangements:

1. NovaMart Global Inc. 401(k) Retirement Savings Plan (ERISA-qualified plan)

2. NovaMart Global Inc. Group Health Insurance Plan — Medical, Dental, Vision (ERISA welfare plan; fully insured)

3. NovaMart Global Inc. Group Life Insurance and Accidental Death & Dismemberment ("AD&D") Plan (ERISA welfare plan; fully insured)

4. NovaMart Global Inc. Short-Term Disability ("STD") Plan (fully insured)

5. NovaMart Global Inc. Long-Term Disability ("LTD") Plan (ERISA welfare plan; fully insured)

6. NovaMart Global Inc. Health Savings Account ("HSA") Program (employer-contributed)

7. NovaMart Global Inc. Flexible Spending Account ("FSA") Plan (Section 125 cafeteria plan)

8. NovaMart Global Inc. Employee Assistance Program ("EAP")

9. NovaMart Global Inc. Paid Time Off ("PTO") Policy

10. NovaMart Global Inc. Parental Leave Policy (16 weeks paid leave for birth parents, 8 weeks for non-birth parents)

11. NovaMart Global Inc. Tuition Reimbursement Program (up to $5,250 per year for eligible employees)

12. NovaMart Global Inc. Severance Pay Policy (see Section VI below)

13. NovaMart Global Inc. 2016 Equity Incentive Plan (see Section IV above)

14. No formal nonqualified deferred compensation plan identified (see Section V.D below for analysis of informal arrangements)

Each of these plans and programs was reviewed for compliance with applicable ERISA requirements, Code provisions, and other applicable law, as described in the subsections below.

B. NovaMart 401(k) Plan

Plan Identification.

• Plan Name: NovaMart Global Inc. 401(k) Retirement Savings Plan

• Effective Date: January 1, 2017

• Employer Identification Number: 84-3291547

• Plan Number: 001

• Plan Type: Defined contribution plan; individual account plan with 401(k) cash or deferred arrangement and employer matching contributions

• Plan Year: Calendar year (January 1 through December 31)

• Trustee/Recordkeeper: Pinnacle Retirement Services, Inc. (recordkeeper and third-party administrator); National Trust Company of Austin (directed trustee)

Employer Matching Formula and Vesting. The Company makes matching contributions equal to 100% of the first 3% of eligible compensation deferred by each participant, plus 50% of the next 2% of eligible compensation deferred, for a maximum employer match of 4% of eligible compensation. Employer matching contributions are subject to a three-year cliff vesting schedule (0% vested for the first two years of service, 100% vested upon completion of three years of service). Employee elective deferrals are, as required by law, immediately and fully vested at all times.

Eligibility. All employees who have attained age 21 and completed 90 days of service are eligible to participate in the 401(k) Plan. Part-time employees who meet these requirements are also eligible. Temporary and seasonal employees engaged through Nexus Staffing Solutions are not eligible, as they are not considered employees of NovaMart for plan purposes.

Plan Assets. According to the most recent Form 5500 filed for the plan year ending December 31, 2023, the 401(k) Plan held total plan assets of approximately $87,400,000. The data room also contained a plan asset statement as of September 30, 2024, showing total plan assets of approximately $96,200,000. We have not received the Form 5500 for the plan year ending December 31, 2024, as it has not yet been filed (the filing deadline is July 31, 2025, or October 15, 2025 with an automatic extension).

Investment Options. The plan is participant-directed and offers a menu of approximately 22 diversified investment options, including index funds, target-date funds, actively managed equity and fixed-income funds, a stable value fund, and a self-directed brokerage option. The investment menu is reviewed periodically by NovaMart's Investment Committee, which consists of Kevin O'Malley (VP of Human Resources, serving as plan administrator and named fiduciary), Douglas Whitfield (CFO), and one independent director designated by the Board. The Investment Committee has adopted a written Investment Policy Statement ("IPS") dated June 2022, which we reviewed and found to be generally consistent with ERISA fiduciary best practices, though we recommend updating the IPS to reflect current market conditions and any changes to the investment lineup.

Plan Audit. Because the 401(k) Plan had more than 100 eligible participants at the beginning of the 2023 plan year, it is subject to the requirement of an annual independent audit under ERISA Section 103(a)(3)(A) and DOL regulations. We reviewed the independent auditor's report for the plan year ending December 31, 2023, prepared by Loughlin & Associates, CPAs. The auditor issued an unqualified opinion and did not identify any material findings or deficiencies. We recommend requesting the 2024 audit report when it becomes available.

Summary Plan Description. We reviewed the SPD for the 401(k) Plan, dated January 2023. The SPD appears to be generally compliant with ERISA Section 102 disclosure requirements. We note that the SPD has not been updated to reflect changes implemented by the SECURE 2.0 Act of 2022, including provisions relating to automatic enrollment (applicable to plans established after December 29, 2022, and therefore not applicable to this plan), Roth matching contributions, and increased catch-up contribution limits. While SECURE 2.0 does not require immediate SPD amendments for all provisions, we recommend that the SPD be updated to incorporate applicable SECURE 2.0 changes during the post-closing integration process.

Plan Document Compliance. We reviewed the 401(k) Plan document (restated effective January 1, 2020) and the following amendments: Amendment No. 1 (effective January 1, 2021, adopting provisions of the Setting Every Community Up for Retirement Enhancement Act of 2019 ("SECURE Act")), and Amendment No. 2 (effective January 1, 2023, adopting certain provisions of the SECURE 2.0 Act). The plan appears to be a written, tax-qualified plan under Section 401(a) of the Code. NovaMart has represented that the plan has received a favorable determination letter from the Internal Revenue Service, most recently dated September 12, 2018 (based on the Pre-Approved Plan program through Pinnacle Retirement Services' prototype plan document). We note that certain m

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT
TO: Elena Vasquez-Bright, General Counsel, Cascade Retail Holdings Inc. Theodore "Ted" Langford, SVP, Corporate Development, Cascade Retail Holdings Inc.
FROM: Derek Okonkwo and Tiffany Rosenthal, Calderwood & Harkness LLP
CC: Harrison Wexford, Responsible Partner, Calderwood & Harkness LLP Beatrice Holloway, Billing Partner, Calderwood & Harkness LLP Sylvia Hartwell, Specialist Partner, Tax, Calderwood & Harkness LLP
DATE: March 31, 2025
RE: Employment and Benefits Due Diligence Memorandum — NovaMart Global Inc. (Project Nova)
MATTER: Cascade Retail Holdings Inc. — Proposed Acquisition of NovaMart Global Inc.
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I. Executive Summary
This memorandum summarizes the results of employment and benefits due diligence conducted by Calderwood & Harkness LLP ("Calderwood & Harkness" or "we") in connection with the proposed acquisition by Cascade Retail Holdings Inc. ("Cascade" or the "Buyer") of 100% of the outstanding capital stock of NovaMart Global Inc. ("NovaMart" or the "Company") for an aggregate purchase price of $1,200,000,000 in cash (the "Transaction"). The Transaction is structured as an all-cash stock purchase governed by the laws of the State of Delaware, pursuant to a Stock Purchase Agreement (the "SPA") currently under negotiation between the parties.
Under the terms of the Transaction, Cascade will acquire all outstanding shares of NovaMart common stock from the following Selling Stockholders: Ridgeline Equity Partners, LP (holding approximately 41.2% of outstanding shares), Brindoval Ventures Fund III, LP (holding approximately 22.8%), Julian Reeves, the Company's founder and Chief Executive Officer (holding approximately 18.5%), Priya Narasimhan, the Company's co-founder and Chief Technology Officer (holding approximately 8.3%), and other management and employee stockholders (holding in the aggregate approximately 9.2%). The pro rata share of the purchase price attributable to each Selling Stockholder will be determined in accordance with the SPA's allocation provisions and the Company's capitalization table on a fully diluted basis.
Because the Transaction is structured as a stock purchase rather than an asset acquisition, NovaMart will remain the employer of record for all of its employees following the closing. Employment relationships will continue by operation of law, and Cascade will not be deemed a "successor employer" in the traditional asset-deal sense. Consequently, the Transaction will not, by itself, trigger a termination or rehiring of NovaMart's workforce. Notwithstanding this continuity, integration planning will require benefit plan harmonization, employee communication, and coordination with Cascade's existing HR infrastructure and benefit programs over a transition period following the closing.
NovaMart currently employs approximately 2,400 employees across its corporate headquarters in Austin, Texas and fourteen (14) fulfillment centers located in nine (9) states (California, New Jersey, Georgia, Ohio, Illinois, Pennsylvania, Tennessee, Florida, and Washington). The Company's workforce is integral to NovaMart's proprietary logistics and fulfillment network, branded as "NovaShip," which constitutes a material component of the Company's competitive value proposition.
Our employment and benefits due diligence commenced on February 18, 2025 and has been conducted on a rolling basis as documents and information have been made available through the NovaMart virtual data room maintained by Calloway, Brandt & Loewe LLP, NovaMart's outside counsel ("Seller's Counsel"). Our principal contacts at Seller's Counsel have been Richard Calloway, partner, and Simone Adesanya, senior associate, who have been responsive to document requests and supplemental information inquiries. We note, however, that certain documents and data remain outstanding as of the date of this memorandum, as identified throughout the body of this report and in the list of reviewed documents set forth in Section XIV below.
Key Diligence Findings. Based on our review of the materials described herein, we have identified the following key findings and areas of concern:
(a) Change of Control Provisions in Executive Agreements. The employment agreements of Julian Reeves (CEO) and Priya Narasimhan (CTO), as well as those of Douglas Whitfield (CFO) and Amanda Trevino (General Counsel), contain change of control provisions that are triggered by the Transaction. These provisions may entitle the executives to severance payments, accelerated vesting of equity awards, and the right to resign for "good reason" following the change of control. For Reeves and Narasimhan, the existing change of control provisions will be superseded by new post-closing employment agreements that have been negotiated as part of the Transaction. The treatment of Whitfield's and Trevino's change of control entitlements requires further analysis and negotiation.
(b) Equity Incentive Plan Treatment. The NovaMart 2016 Equity Incentive Plan (the "Equity Plan") governs outstanding stock options and other equity awards held by management and employees. The Equity Plan contains change of control provisions that may require acceleration and/or cash-out treatment of outstanding options at closing. The aggregate intrinsic value of outstanding options (the spread between the exercise price and the per-share purchase price) represents a material component of the Transaction consideration and must be addressed in the SPA.
(c) Severance Obligations. In addition to the executive agreements discussed above, NovaMart maintains a general severance policy that may be implicated if post-closing workforce reductions are contemplated. Aggregate potential severance exposure requires quantification in connection with integration planning.
(d) 401(k) Plan Compliance. The NovaMart 401(k) Retirement Savings Plan (the "401(k) Plan") appears to be in material compliance with the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the Internal Revenue Code of 1986, as amended (the "Code"). Transition planning will be required to determine whether the 401(k) Plan will be maintained as a standalone plan, merged into Cascade's existing 401(k) plan, or terminated post-closing.
(e) Retention Pool. NovaMart management and Cascade have proposed an $18,000,000 aggregate retention pool for key NovaMart employees (other than Reeves and Narasimhan), payable in two tranches: 50% at closing and 50% on the first anniversary of closing, conditioned on continued employment. The retention arrangements require finalization, including identification of eligible employees, individual allocation amounts, and execution of retention bonus letters.
(f) WARN Act Analysis. If Cascade contemplates any post-closing workforce reductions, facility consolidations, or fulfillment center closures, compliance with the federal Worker Adjustment and Retraining Notification Act ("WARN Act") and applicable state "mini-WARN" statutes will be required. NovaMart's 14 fulfillment centers each employ sufficient numbers of workers to potentially trigger WARN obligations in the event of a plant closing or mass layoff.
Materials Reviewed. In preparing this memorandum, we reviewed the employment and benefits documents provided in the NovaMart data room, including employment agreements for senior executives, the NovaMart employee handbook, benefit plan documents and summary plan descriptions ("SPDs"), Form 5500 filings, the 401(k) Plan document and most recent independent audit report, the Equity Plan and associated option grant records, the Company's severance policy, HR organizational data and payroll summaries, workers' compensation claims history, I-9 compliance records, independent contractor classification documentation, OSHA compliance records, and other materials as set forth in Section XIV below. We also reviewed the relevant sections of the current draft of the SPA and the Seller Disclosure Schedules in draft form.
This memorandum is intended solely for the internal use of Cascade and its advisors in evaluating the Transaction and is protected by the attorney-client privilege and the attorney work product doctrine. It should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.
II. Workforce Overview
A. Employee Headcount and Distribution
Based on the most recent payroll data provided in the NovaMart data room (pay period ending February 28, 2025), the Company employs approximately 2,400 individuals across its corporate headquarters and 14 fulfillment center locations. The workforce distribution is summarized as follows:
Corporate Headquarters — Austin, Texas (1100 Congress Avenue, Suite 800). Approximately 680 employees are based at the Austin headquarters, encompassing the Company's corporate functions including executive management, finance and accounting, legal and compliance, human resources, technology and engineering, product management, marketing, customer experience, and general administrative support. The technology and engineering teams represent the largest functional group at the Austin headquarters, with approximately 270 employees, reflecting the Company's significant investment in its proprietary e-commerce platform and NovaShip logistics technology.
Fulfillment Center Operations. The remaining approximately 1,720 employees are distributed across NovaMart's 14 fulfillment centers in 9 states, as follows:
Fulfillment center employees are primarily engaged in warehouse operations, including receiving, inventory management, picking, packing, shipping, and quality control functions within NovaMart's proprietary NovaShip logistics network. Each fulfillment center is managed by a facility general manager who reports to NovaMart's VP of Operations, Gregory Huang, based at the Austin headquarters. The fulfillment center workforce is integral to NovaMart's competitive differentiation through its proprietary logistics capabilities, and retention of experienced operational staff at these facilities is a significant consideration for the Transaction.
Breakdown by Employment Category. The Company's approximately 2,400 employees are distributed by employment category as follows:
• Full-time employees: Approximately 2,050 (approximately 85%), including all headquarters personnel and a substantial majority of fulfillment center workers.
• Part-time employees: Approximately 230 (approximately 10%), primarily fulfillment center associates working reduced schedules. Part-time employees are generally eligible for a limited subset of NovaMart's benefit programs, as described in Section V below.
• Temporary and seasonal employees: Approximately 120 (approximately 5%), consisting primarily of seasonal fulfillment center workers engaged during peak shopping periods (Q4 holiday season and periodic promotional events). Seasonal headcount can fluctuate significantly; the Company represented in its data room questionnaire responses that seasonal headcount peaked at approximately 450 additional temporary workers during Q4 2024. Temporary employees are generally engaged through Nexus Staffing Solutions, a third-party staffing agency, and are not considered NovaMart employees for benefit plan purposes, though co-employment risk should be monitored.
We note that the headcount figures set forth above are approximate and based on a single payroll snapshot. We recommend that the SPA include a mechanism for an updated employee census to be delivered at or immediately prior to closing, together with a representation from the Selling Stockholders confirming the accuracy of the workforce data as of the closing date.
B. Unionization Status
Based on representations made in the NovaMart data room and confirmed by Seller's Counsel, no employees of the Company are currently represented by any labor union or covered by any collective bargaining agreement. Additionally, based on the data room disclosures and management questionnaire responses, there are no pending union organizing efforts, no petitions filed with the National Labor Relations Board ("NLRB"), and no unfair labor practice charges currently pending against the Company before the NLRB or any state labor relations board.
We note that NovaMart's fulfillment center workforce operates in a sector — warehouse and logistics — that has experienced increasing union organizing activity in recent years, particularly in markets such as California, New Jersey, and the Pacific Northwest. While there is no current organizing activity, Cascade should be aware of this sector trend as it relates to post-closing workforce management. The stock purchase structure does not alter the existing non-union status of the workforce, and no bargaining obligations arise by virtue of the Transaction itself.
C. Independent Contractors
NovaMart engages independent contractors in several capacities, primarily in the following areas: (i) technology development and software engineering, where the Company retains specialized contractors for discrete project-based work on its e-commerce platform; (ii) content creation, including graphic design, copywriting, and marketing content production; and (iii) last-mile delivery services, where the Company engages independent delivery drivers through its NovaShip last-mile program to supplement its in-house logistics capabilities. Based on the data room disclosures, NovaMart currently engages approximately 85 technology contractors, 30 content creation contractors, and approximately 200 last-mile delivery drivers classified as independent contractors.
Misclassification Risk Assessment. We have reviewed a sample of the Company's independent contractor agreements and assessed the classification of these individuals against applicable legal standards, including the IRS common law test (examining the degree of behavioral control, financial control, and type of relationship) and applicable state-specific tests. Our principal areas of concern are as follows:
California ABC Test (AB 5). California's Assembly Bill 5 ("AB 5"), codified at California Labor Code Section 2775, adopted the ABC test for determining worker classification. Under the ABC test, a worker is presumed to be an employee unless the hiring entity can demonstrate that the worker: (A) is free from the control and direction of the hiring entity; (B) performs work that is outside the usual course of the hiring entity's business; and (C) is customarily engaged in an independently established trade, occupation, or business. NovaMart's California-based last-mile delivery drivers present the most significant misclassification risk, as delivery services may be deemed within the usual course of NovaMart's fulfillment and logistics business, potentially failing prong (B) of the ABC test. We have identified approximately 55 last-mile delivery drivers operating in California who may be at risk of reclassification. Reclassification could expose NovaMart to back wages, overtime, meal and rest break penalties, expense reimbursement, employment tax liability, and potential penalties under the California Private Attorneys General Act ("PAGA").
New Jersey ABC Test. New Jersey applies a similar ABC test for purposes of wage and hour and unemployment insurance law, with a strong presumption of employee status. Approximately 30 last-mile delivery drivers are engaged in New Jersey and present analogous misclassification risk.
Illinois and Washington. Both Illinois and Washington have adopted worker classification standards that, while not identical to California's ABC test, impose rigorous requirements for establishing independent contractor status. Illinois applies an ABC-like test for certain purposes under the Illinois Employee Classification Act, and Washington's RCW 49.46 and related statutes apply tests that may capture NovaMart's delivery drivers.
Recommendation. We recommend that Cascade conduct an enhanced review of NovaMart's independent contractor classifications, particularly with respect to last-mile delivery drivers in California, New Jersey, Illinois, and Washington. We further recommend that the SPA Seller Disclosure Schedules include a representation identifying all independent contractor relationships and any pending or threatened misclassification claims. Cascade should consider establishing a reserve or requesting a specific indemnity from the Selling Stockholders for pre-closing independent contractor misclassification exposure. We estimate that the potential exposure, in a worst-case scenario involving reclassification of all last-mile delivery drivers in California and New Jersey, could range from approximately $2,500,000 to $6,000,000, inclusive of back wages, penalties, and employment tax liability. This estimate is preliminary and subject to refinement upon further analysis.
D. Foreign Nationals / Immigration
NovaMart employs a number of foreign nationals under various work authorization categories, predominantly within the technology and engineering teams at the Austin headquarters. Based on the data room disclosures, the Company currently sponsors or has sponsored the following visa categories:
• H-1B Specialty Occupation visas: Approximately 42 current H-1B holders, primarily software engineers, data scientists, and product managers at the Austin headquarters.
• L-1 Intracompany Transferee visas: Three (3) current L-1B holders transferred from NovaMart's former development contractor relationships.
• TN visas: Five (5) Canadian and Mexican nationals employed under TN nonimmigrant status.
• Pending PERM Labor Certification Applications: Approximately 14 pending PERM applications for permanent residency sponsorship, at various stages of the process.
• Pending I-140 and I-485 Petitions: Approximately 8 employees with approved or pending I-140 immigrant worker petitions, and 3 employees with pending I-485 adjustment of status applications.
Impact of Change of Control on Immigration Matters. Because NovaMart will remain the employer of record following the stock purchase, the change of control should not, in and of itself, require the filing of new H-1B or L-1 petitions, nor should it invalidate existing work authorization. However, we note the following considerations: (i) if NovaMart's federal employer identification number ("EIN") changes post-closing as a result of corporate restructuring or name change, amended petitions may be required; (ii) any post-closing organizational changes that materially alter the terms and conditions of employment for H-1B holders (including changes in job duties, work location, or compensation below the prevailing wage) may require the filing of amended H-1B petitions; and (iii) pending PERM labor certification applications may be affected if NovaMart's business structure or the job positions being certified change materially post-closing.
I-9 Compliance. NovaMart conducted an internal I-9 audit in Q3 2024, as reflected in the audit summary provided in the data room. The audit covered a random sample of approximately 400 I-9 forms across all locations. The audit identified minor technical deficiencies (e.g., missing or incomplete Section 2 entries, late re-verification) in approximately 6% of the sampled forms. NovaMart represented that it undertook corrective action to remedy the identified deficiencies. We recommend that Cascade request an updated I-9 compliance certification from NovaMart as a closing deliverable and consider whether a more comprehensive I-9 audit is warranted during the post-closing integration process.
III. Executive Employment Agreements
We have reviewed the existing employment agreements of the following senior executives of NovaMart: Julian Reeves (Founder and CEO), Priya Narasimhan (Co-Founder and CTO), Douglas "Doug" Whitfield (CFO), and Amanda Trevino (General Counsel). Set forth below is a summary of the material terms of each agreement, with particular attention to change of control provisions, severance triggers, and post-closing treatment.
A. Julian Reeves — Founder & Chief Executive Officer
Current Employment Agreement. Mr. Reeves is party to an Amended and Restated Executive Employment Agreement with NovaMart dated as of January 15, 2020 (the "Reeves Employment Agreement"). The material terms of the Reeves Employment Agreement are as follows:
• Title: Founder and Chief Executive Officer, reporting to the Board of Directors of NovaMart.
• Term: The agreement has no fixed term and provides for at-will employment, subject to the severance and change of control provisions described below.
• Base Salary: $525,000 per annum, subject to annual review by the Board or its compensation committee. Based on payroll data provided, Mr. Reeves's current base salary has been adjusted to $550,000 effective January 1, 2025.
• Annual Bonus: Mr. Reeves is eligible for an annual performance bonus with a target of 80% of base salary, based on achievement of performance metrics established by the Board. For fiscal year 2024, Mr. Reeves received a bonus of $396,000 (representing approximately 72% of his then-current base salary of $550,000), reflecting partial achievement of the applicable performance targets.
• Equity Holdings: Mr. Reeves holds approximately 18.5% of NovaMart's outstanding common stock on a fully diluted basis. This equity was acquired through a combination of founder's shares and subsequent equity purchases. Mr. Reeves does not hold stock options under the Equity Plan; his entire equity position consists of vested common shares.
• Benefits: Standard executive benefits package, including participation in NovaMart's group health, dental, vision, life, disability, and 401(k) plans. Additionally, Mr. Reeves receives an annual executive wellness allowance of $15,000 and is entitled to Company-paid parking at the Austin headquarters.
Change of Control Provisions. Section 8 of the Reeves Employment Agreement defines "Change of Control" broadly to include, among other events, any transaction or series of transactions resulting in a change of more than 50% of the voting power of NovaMart's outstanding equity securities, or the sale of all or substantially all of NovaMart's assets. Cascade's acquisition of 100% of NovaMart's outstanding common stock clearly constitutes a "Change of Control" under this definition.
Upon a Change of Control, the Reeves Employment Agreement provides for the following:
(i) Single-Trigger Severance Right. Mr. Reeves has the right, exercisable within 90 days following the Change of Control, to resign from his position for "Good Reason" (as defined in the agreement to include, inter alia, a Change of Control itself, without any requirement for a diminution in duties, title, or compensation). If Mr. Reeves exercises this right, he is entitled to receive: (a) a lump-sum severance payment equal to two (2) times his then-current annual base salary; (b) a pro-rated annual bonus for the year of termination; (c) continuation of COBRA health benefits at the Company's expense for 18 months; and (d) full acceleration of any unvested equity awards (though, as noted, Mr. Reeves currently holds only fully vested common shares).
(ii) Equity Acceleration. To the extent Mr. Reeves holds any unvested equity awards at the time of a Change of Control, such awards shall become immediately and fully vested. As noted, this provision is currently moot because all of Mr. Reeves's equity consists of fully vested common stock.
Treatment at Closing. The parties have negotiated that Mr. Reeves's existing Reeves Employment Agreement will be superseded at closing by a new post-closing employment agreement (the "Reeves Post-Closing Agreement") under which Mr. Reeves will continue as President of the NovaMart business unit within Cascade for a period of three (3) years following the closing. By entering into the Reeves Post-Closing Agreement, Mr. Reeves will waive his rights to the Change of Control severance and benefits described above. The material terms of the Reeves Post-Closing Agreement, as negotiated, are as follows:
• Title: President, NovaMart Business Unit, Cascade Retail Holdings Inc., reporting to the Chief Operating Officer of Cascade.
• Term: Three (3) years from the closing date, subject to earlier termination as provided in the agreement.
• Base Salary: $625,000 per annum.
• Annual Bonus: Target bonus of 75% of base salary ($468,750), based on achievement of performance metrics to be established by the Cascade compensation committee in consultation with Mr. Reeves.
• Equity Grant: 150,000 restricted shares of Cascade common stock (Nasdaq: CRHI), vesting ratably over three (3) years (one-third on each anniversary of the closing date), subject to continued employment.
• Restrictive Covenants: The Reeves Post-Closing Agreement will include non-competition, non-solicitation, and IP assignment covenants for a period of two (2) years following termination of employment (subject to enforceability analysis by jurisdiction, as discussed in Section X below).
• Severance Upon Termination Without Cause: If Cascade terminates Mr. Reeves's employment without "Cause" during the three-year term, Mr. Reeves will be entitled to: (a) continued payment of base salary for 12 months; (b) a pro-rated annual bonus for the year of termination; and (c) acceleration of any unvested restricted Cascade shares.
Purchase Price Allocation. The pro rata share of the $1,200,000,000 aggregate purchase price attributable to Mr. Reeves's 18.5% equity stake is approximately $222,000,000 (18.5% × $1,200,000,000). This represents the consideration payable to Mr. Reeves as a Selling Stockholder in exchange for the sale of his NovaMart common stock at closing, subject to any adjustments pursuant to the SPA's working capital and indemnification provisions.
Section 280G Considerations. The aggregate payments and benefits to Mr. Reeves in connection with the Transaction — including the purchase price consideration for his equity (which is not a "parachute payment" because it represents reasonable compensation for equity held as an investor rather than an employee, to the extent it exceeds Mr. Reeves's base amount), the waiver of his existing Change of Control severance rights, and the value of the post-closing equity grant and other compensation — must be analyzed under Section 280G of the Code to determine whether any portion constitutes an "excess parachute payment." This analysis is being conducted separately by Sylvia Hartwell and Sandra Chiu of Whitmore & Paige LLP, and the results will be incorporated into a supplemental memorandum. We note that Mr. Reeves may be a "disqualified individual" within the meaning of Section 280G, and the analysis must account for all payments contingent on or related to the change of control.
B. Priya Narasimhan — Co-Founder & Chief Technology Officer
Current Employment Agreement. Ms. Narasimhan is party to an Amended and Restated Executive Employment Agreement with NovaMart dated as of January 15, 2020 (the "Narasimhan Employment Agreement"). The material terms are as follows:
• Title: Co-Founder and Chief Technology Officer, reporting to the CEO.
• Term: At-will employment, subject to severance and change of control provisions.
• Base Salary: $475,000 per annum, currently adjusted to $500,000 effective January 1, 2025.
• Annual Bonus: Target of 70% of base salary, based on performance metrics.
• Equity Holdings: Ms. Narasimhan holds approximately 8.3% of NovaMart's outstanding common stock on a fully diluted basis, consisting of fully vested common shares acquired through a combination of founder's shares and subsequent equity grants.
• Benefits: Standard executive benefits package, consistent with Mr. Reeves's package, including the $15,000 annual executive wellness allowance.
Change of Control Provisions. Section 8 of the Narasimhan Employment Agreement contains Change of Control provisions substantively identical to those in the Reeves Employment Agreement, including the same broad definition of "Change of Control" and the same single-trigger severance right. Specifically, upon a Change of Control, Ms. Narasimhan has the right to resign for "Good Reason" within 90 days and receive: (a) a lump-sum severance payment equal to two (2) times her then-current annual base salary; (b) a pro-rated annual bonus; (c) COBRA continuation at the Company's expense for 18 months; and (d) full acceleration of any unvested equity awards. The Transaction constitutes a Change of Control under the agreement.
Treatment at Closing. As with Mr. Reeves, the parties have negotiated that Ms. Narasimhan's existing employment agreement will be superseded at closing by a new post-closing employment agreement (the "Narasimhan Post-Closing Agreement") under which she will continue in a senior technology leadership role for a period of three (3) years. The material terms of the Narasimhan Post-Closing Agreement are as follows:
• Title: Chief Technology Officer, NovaMart Business Unit, Cascade Retail Holdings Inc., reporting to the Chief Technology Officer of Cascade.
• Term: Three (3) years from the closing date.
• Base Salary: $575,000 per annum.
• Annual Bonus: Target bonus of 70% of base salary ($402,500), based on performance metrics.
• Equity Grant: 125,000 restricted shares of Cascade common stock (Nasdaq: CRHI), vesting ratably over three (3) years.
• Restrictive Covenants: Non-competition, non-solicitation, and IP assignment covenants for a period of two (2) years following termination.
• Severance Upon Termination Without Cause: Continued base salary for 12 months, pro-rated annual bonus, and acceleration of unvested restricted Cascade shares.
Purchase Price Allocation. The pro rata share of the aggregate purchase price attributable to Ms. Narasimhan's 8.3% equity stake is approximately $99,600,000 (8.3% × $1,200,000,000).
Section 280G Considerations. As with Mr. Reeves, the aggregate payments and benefits to Ms. Narasimhan in connection with the Transaction require Section 280G analysis. Ms. Narasimhan is a "disqualified individual" for Section 280G purposes. The analysis is being conducted by Sylvia Hartwell and Whitmore & Paige LLP.
C. Douglas "Doug" Whitfield — Chief Financial Officer
Current Employment Agreement. Mr. Whitfield is party to an Executive Employment Agreement with NovaMart dated as of March 1, 2021 (the "Whitfield Employment Agreement"). Mr. Whitfield was recruited from outside the Company and joined NovaMart following a tenure as Vice President, Finance at a publicly traded retail technology company. The material terms of his agreement are as follows:
• Title: Chief Financial Officer, reporting to the CEO.
• Base Salary: $425,000 per annum, currently adjusted to $450,000 effective January 1, 2025.
• Annual Bonus: Target of 60% of base salary.
• Equity: Mr. Whitfield was granted options to purchase 180,000 shares of NovaMart common stock under the Equity Plan at an exercise price of $12.50 per share, vesting over four years with a one-year cliff (25% vesting on the first anniversary, with the remaining 75% vesting in equal monthly installments over the subsequent 36 months). As of the date of this memorandum, approximately 157,500 of Mr. Whitfield's options are vested.
• Sign-On Bonus: Mr. Whitfield received a one-time sign-on bonus of $150,000 upon commencement of employment, subject to a two-year clawback provision (which has since lapsed).
Change of Control Provisions. Section 7 of the Whitfield Employment Agreement includes a double-trigger change of control provision. Specifically, if within 12 months following a Change of Control (as defined in the agreement, using a definition substantially similar to that in the Reeves and Narasimhan agreements), Mr. Whitfield's employment is terminated by the Company without "Cause" or Mr. Whitfield resigns for "Good Reason" (defined to include a material reduction in title, duties, compensation, or work location), Mr. Whitfield is entitled to: (a) a lump-sum severance payment equal to one (1) times his then-current annual base salary; (b) a pro-rated annual bonus for the year of termination; (c) COBRA continuation at the Company's expense for 12 months; and (d) full acceleration of any then-unvested stock options.
Post-Closing Role and Retention. As of the date of this memorandum, discussions between Cascade and NovaMart management regarding Mr. Whitfield's post-closing role are ongoing. Cascade has indicated that it may wish to consolidate the NovaMart CFO function into Cascade's existing finance organization following a transition period of approximately 6 to 12 months post-closing. If Mr. Whitfield's employment is terminated in connection with such consolidation, his double-trigger change of control severance would be triggered. Based on his current base salary of $450,000, the lump-sum severance payment would be $450,000, plus a pro-rated bonus and accelerated vesting of approximately 22,500 unvested options. Additionally, Mr. Whitfield has been identified as a participant in the $18,000,000 retention pool discussed in Section VI.C below. We recommend that Cascade finalize its plans regarding Mr. Whitfield's post-closing role and communicate them to Mr. Whitfield in a timely manner, ideally before or at closing.
D. Amanda Trevino — General Counsel
Current Employment Agreement. Ms. Trevino is party to an Executive Employment Agreement with NovaMart dated as of September 15, 2019 (the "Trevino Employment Agreement"). The material terms are as follows:
• Title: General Counsel and Corporate Secretary, reporting to the CEO.
• Base Salary: $410,000 per annum, currently adjusted to $430,000 effective January 1, 2025.
• Annual Bonus: Target of 50% of base salary.
• Equity: Ms. Trevino was granted options to purchase 150,000 shares of NovaMart common stock under the Equity Plan at an exercise price of $8.75 per share, vesting over four years with a one-year cliff. As of the date of this memorandum, all of Ms. Trevino's options are fully vested.
Change of Control Provisions. Section 7 of the Trevino Employment Agreement includes a double-trigger change of control provision substantially identical to Mr. Whitfield's, providing for a lump-sum severance payment equal to one (1) times base salary, pro-rated bonus, 12-month COBRA continuation, and acceleration of unvested equity upon a qualifying termination within 12 months following a Change of Control.
Post-Closing Role Considerations. Ms. Trevino's post-closing role presents a unique consideration given that Cascade's legal department is led by Elena Vasquez-Bright, the General Counsel of Cascade, to whom this memorandum is addressed. Integration of NovaMart's legal function into the Cascade legal department will need to be discussed as part of the broader organizational integration plan. If Ms. Trevino's role is eliminated or materially reduced post-closing, her double-trigger change of control severance would be triggered. Based on her current base salary, the severance payment would be $430,000, plus a pro-rated bonus. Ms. Trevino's fully vested options would be treated in accordance with the Equity Plan's change of control provisions and the SPA (see Section IV below).
E. Other Senior Management Employment Agreements
In addition to the four executive agreements described above, we reviewed employment agreements or offer letters for the following senior management personnel:
• Gregory Huang, VP of Operations: Offer letter dated June 1, 2020; base salary of $325,000; target bonus of 40%; options to purchase 75,000 shares at $10.25 per share, vesting over four years; no individual change of control provisions beyond the terms of the Equity Plan and the general severance policy.
• Rachel Sato, VP of Marketing: Offer letter dated November 15, 2021; base salary of $310,000; target bonus of 40%; options to purchase 60,000 shares at $14.00 per share, vesting over four years; no individual change of control provisions.
• Kevin O'Malley, VP of Human Resources: Offer letter dated February 1, 2022; base salary of $295,000; target bonus of 35%; options to purchase 50,000 shares at $15.50 per share, vesting over four years; no individual change of control provisions.
• Lina Chen, VP of Engineering: Offer letter dated April 15, 2021; base salary of $340,000; target bonus of 45%; options to purchase 80,000 shares at $12.50 per share, vesting over four years; no individual change of control provisions.
None of these senior management offer letters contain individual change of control or severance provisions. These individuals are subject to the Equity Plan's change of control provisions (for their outstanding options) and the NovaMart general severance policy (for any post-closing termination). Each has been identified as a participant in the proposed $18,000,000 retention pool.
IV. Equity Incentive Plan and Stock Options
A. NovaMart 2016 Equity Incentive Plan — Overview
NovaMart adopted the NovaMart Global Inc. 2016 Equity Incentive Plan (the "Equity Plan") effective as of July 1, 2016, as subsequently amended on March 15, 2019 (the "First Amendment") and December 1, 2021 (the "Second Amendment"). The Equity Plan was approved by the Board of Directors and the stockholders of NovaMart. The material terms of the Equity Plan, as amended, are as follows:
• Shares Authorized: 3,500,000 shares of NovaMart common stock were initially authorized for issuance under the Equity Plan. The First Amendment increased the share reserve by 1,000,000 shares, and the Second Amendment increased the reserve by an additional 750,000 shares, for a total of 5,250,000 authorized shares.
• Shares Issued: As of the date of this memorandum, options to purchase approximately 3,840,000 shares have been granted under the Equity Plan, of which approximately 2,970,000 are currently outstanding (the remainder having been forfeited, cancelled, or expired). Restricted stock awards covering approximately 210,000 shares have been granted, of which approximately 185,000 are outstanding.
• Shares Remaining: Approximately 1,200,000 shares remain available for future grants under the Equity Plan, though no further grants are anticipated prior to closing.
• Types of Awards: The Equity Plan authorizes the grant of incentive stock options ("ISOs") within the meaning of Section 422 of the Code, non-qualified stock options ("NQSOs"), restricted stock, and restricted stock units ("RSUs").
• Administration: The Equity Plan is administered by the Board of Directors or, if designated, the compensation committee of the Board. Currently, the Board has delegated administration to a three-member compensation committee consisting of two independent directors designated by Ridgeline Equity Partners and one independent director designated by Brindoval Ventures Fund III.
The outstanding equity awards held by management and employees (comprising the approximately 9.2% of NovaMart's common stock held by "other management/employee stockholders" referenced in the Transaction overview, together with any unvested awards) represent a material component of the Transaction consideration and require careful treatment in the SPA.
B. Change of Control Provisions in the Equity Plan
Section 12 of the Equity Plan defines "Change of Control" to include: (a) any merger, consolidation, or similar transaction in which the stockholders of NovaMart immediately prior to such transaction hold less than 50% of the voting power of the surviving entity; (b) any sale, transfer, or other disposition of all or substantially all of NovaMart's assets; and (c) any acquisition by any person or group of more than 50% of the outstanding voting securities of NovaMart. Cascade's acquisition of 100% of NovaMart's outstanding common stock clearly constitutes a "Change of Control" under clause (c) of this definition.
Upon a Change of Control, Section 12(b) of the Equity Plan provides for single-trigger acceleration of all outstanding and unvested options and other equity awards. Specifically, the Plan states:
"Upon the consummation of a Change of Control, all outstanding Options and other Awards that are then unvested shall become immediately and fully vested and exercisable as of immediately prior to the effective time of such Change of Control, without regard to any vesting schedule or performance conditions otherwise applicable to such Options or Awards."
This single-trigger acceleration provision is significant because it means that all unvested options and restricted stock awards will vest immediately upon the closing of the Transaction, regardless of whether any participant's employment is subsequently terminated. This contrasts with a double-trigger structure (which would require both a change of control and a qualifying termination event for acceleration to occur) and results in a higher aggregate cost at closing.
In addition to the automatic acceleration provision, Section 12(c) of the Equity Plan grants the Board or compensation committee discretion to determine the treatment of outstanding awards in connection with a Change of Control, including the ability to: (i) provide for the assumption or substitution of outstanding awards by the acquiring entity; (ii) provide for a cash-out of outstanding options at the closing for an amount equal to the excess (if any) of the per-share Change of Control consideration over the exercise price of such options; or (iii) provide for the cancellation of any "underwater" options (i.e., options with an exercise price equal to or greater than the per-share Change of Control consideration) without payment. The Board's discretion under Section 12(c) is in addition to, and not in lieu of, the automatic acceleration under Section 12(b).
C. Treatment of Outstanding Options at Closing
Based on the option grant ledger and capitalization table provided in the data room, the outstanding vested and unvested options under the Equity Plan are summarized as follows:
For purposes of calculating the per-share purchase price for option payout purposes, the aggregate purchase price of $1,200,000,000 is divided by the total fully diluted shares outstanding. Based on the capitalization table provided by Seller's Counsel, the fully diluted share count is approximately 42,500,000 shares (consisting of approximately 39,530,000 outstanding common shares and approximately 2,970,000 in-the-money options on a treasury stock method basis, together with approximately 185,000 outstanding restricted stock awards that are treated as outstanding shares). The resulting per-share purchase price is approximately $28.24 per share ($1,200,000,000 ÷ 42,500,000 fully diluted shares).
The aggregate intrinsic value (i.e., the "spread") of all outstanding in-the-money options, calculated as the excess of the per-share purchase price over the exercise price for each option, is estimated as follows:
The aggregate intrinsic value of approximately $48,820,800 represents the total cash-out amount payable to option holders at closing if the Board exercises its discretion under Section 12(c) to cash out all outstanding options. This amount would be payable from the aggregate purchase price and would reduce the per-share consideration payable to common stockholders on a dollar-for-dollar basis. The SPA should clearly specify the treatment of outstanding options and the mechanics of the option cash-out, including the source of funds for the option payments and the effect on the per-share consideration.
Withholding and Tax Reporting. Cash-out payments to option holders will be subject to income tax withholding and FICA (Social Security and Medicare) tax withholding. NovaMart, as the employer, will be responsible for withholding applicable taxes from option payout amounts and reporting the income on Forms W-2 for the year of closing. The Company will also be liable for the employer's share of FICA taxes on option payout amounts. We estimate the employer FICA tax liability on the aggregate option payout at approximately $3,735,000 (based on the employer's share of Social Security tax at 6.2% up to the wage base and Medicare tax at 1.45%, plus the Additional Medicare Tax as applicable). This employer FICA cost should be factored into the Transaction economics.
ISO vs. NQSO Distinction. Of the approximately 2,970,000 outstanding options, approximately 1,150,000 are classified as incentive stock options ("ISOs") and approximately 1,820,000 are classified as non-qualified stock options ("NQSOs"). The distinction is significant for tax purposes:
• NQSOs: Upon exercise or cash-out, the spread (excess of fair market value over exercise price) is taxable to the option holder as ordinary income and is subject to income tax withholding and FICA. The Company receives a corresponding compensation deduction under Section 162 of the Code.
• ISOs: If held for the requisite statutory holding periods (one year from exercise and two years from grant), the gain on ISOs is taxable to the holder as long-term capital gain, and the Company receives no deduction. However, if the ISOs are cashed out at closing (rather than exercised), the cash-out constitutes a "disqualifying disposition" for ISO purposes, and the spread is taxed as ordinary income to the holder, with corresponding withholding obligations for the Company and a compensation deduction available to the Company.
Because all ISOs will be cashed out at closing (rather than exercised and held), all ISO cash-outs will be disqualifying dispositions and will be treated as ordinary income for tax purposes, subject to the same withholding and deduction treatment as NQSOs.
SPA Provisions. We recommend that the SPA include the following provisions regarding the treatment of Company equity awards: (i) a covenant requiring NovaMart to obtain any necessary Board or compensation committee approvals for the cash-out of outstanding options; (ii) a clear statement that all outstanding options will be cancelled and cashed out at closing for the spread amount, net of applicable withholding taxes; (iii) a representation that all outstanding options are accurately reflected on the option grant ledger and capitalization table set forth in the Seller Disclosure Schedules; and (iv) an indemnification obligation of the Selling Stockholders for any pre-closing tax liabilities or penalties relating to the equity awards.
D. Section 409A Compliance
Section 409A of the Code imposes strict requirements on nonqualified deferred compensation arrangements. Stock options that are granted with an exercise price below the fair market value of the underlying stock at the time of grant ("Discounted options") are treated as deferred compensation subject to Section 409A, and the option holder may be subject to additional taxes, including a 20% penalty tax and interest, upon vesting or exercise.
We have reviewed the option grant records provided in the data room and have compared the exercise prices of options granted under the Equity Plan against contemporaneous fair market value determinations. NovaMart represented, through Seller's Counsel, that all options were granted at exercise prices equal to or greater than the fair market value of NovaMart common stock at the time of grant, as determined by independent valuations (409A valuations) conducted by Evergreen Valuation Group, LLC. We reviewed copies of the most recent three 409A valuation reports (dated March 2022, March 2023, and March 2024) and found them to be consistent with the exercise prices of options granted during the corresponding periods.
Based on our review, we have not identified any options that appear to have been granted at a discount to fair market value. However, we note that we have not conducted an independent valuation of NovaMart common stock and have relied on the representations of NovaMart and its valuation firm. We recommend that the SPA include a representation from the Selling Stockholders that all options under the Equity Plan were granted at fair market value and are in compliance with Section 409A, together with an indemnification provision for any Section 409A liabilities arising from pre-closing option grants.
E. Section 280G / Golden Parachute Analysis
Section 280G of the Code imposes a 20% excise tax (under Section 4999) on "excess parachute payments" received by "disqualified individuals" in connection with a change of control, and denies the payor a deduction for such excess parachute payments. A "parachute payment" is any payment in the nature of compensation that is made to a disqualified individual if (i) the payment is contingent on a change of ownership or control and (ii) the aggregate present value of all such payments equals or exceeds three times the individual's "base amount" (the average annual compensation for the five taxable years preceding the change of control). The "excess parachute payment" is the amount by which the aggregate parachute payments exceed one times the base amount.
Disqualified Individuals. Based on our preliminary analysis, the following individuals are likely "disqualified individuals" for Section 280G purposes (shareholders, officers, or highly compensated employees): Julian Reeves, Priya Narasimhan, Douglas Whitfield, Amanda Trevino, Gregory Huang, Rachel Sato, Kevin O'Malley, and Lina Chen. Additional individuals may also be disqualified individuals based on their compensation levels and shareholder status; the final determination requires a detailed analysis of each individual's base amount and the aggregate parachute payments.
Preliminary Analysis. The principal components of potential parachute payments for each disqualified individual include: (i) accelerated vesting of unvested stock options (the excess of the acceleration value over any consideration paid); (ii) any severance payments contingent on or arising from the change of control; (iii) retention bonus payments under the proposed $18,000,000 retention pool; and (iv) the value of continued employment benefits provided in connection with the change of control (such as COBRA continuation).
For Mr. Reeves, the parachute payment analysis is somewhat simplified because he holds only fully vested common stock (no unvested options to accelerate) and will waive his existing Change of Control severance in favor of the Reeves Post-Closing Agreement. The primary question is whether the post-closing compensation under the Reeves Post-Closing Agreement (including the 150,000 restricted Cascade shares) constitutes a parachute payment to the extent it exceeds reasonable compensation for services to be rendered post-closing. A similar analysis applies to Ms. Narasimhan.
For Mr. Whitfield, Ms. Trevino, and the other executives holding unvested options, the accelerated vesting triggered by the Equity Plan's single-trigger provision constitutes a parachute payment to the extent it is contingent on the change of control. Additionally, any severance payments that these individuals may receive within the 12-month post-closing window under their double-trigger change of control provisions, or any retention bonuses received under the retention pool, must be included in the calculation.
Private Company Exception. NovaMart is a privately held corporation that is not publicly traded. Accordingly, NovaMart may avail itself of the Section 280G "private company exception" provided in Section 280G(b)(5)(B) of the Code, under which parachute payments made by a corporation that is not publicly traded may be exempted from the Section 280G excise tax and deduction disallowance if: (i) the payments are approved by a vote of more than 75% of the outstanding voting stock of the corporation, and (ii) adequate disclosure of all material facts is made to stockholders prior to the vote. If the stockholder vote is obtained, the payments are treated as not constituting parachute payments for Section 280G purposes.
Recommendation. We recommend the following:
(a) Sylvia Hartwell and Sandra Chiu of Whitmore & Paige LLP should complete detailed Section 280G calculations for each disqualified individual, based on final Transaction terms and compensation data, and determine whether any individual's aggregate parachute payments would equal or exceed the three-times-base-amount threshold.
(b) If the Section 280G threshold is exceeded for any disqualified individual, the parties should consider implementing the Section 280G stockholder approval process. Because NovaMart is privately held, the stockholder vote can be obtained from the Selling Stockholders (Ridgeline, Brindoval, Reeves, Narasimhan, and other management stockholders) as a closing deliverable or a condition to closing under the SPA.
(c) Alternatively, the parties may consider structuring payments to reduce or eliminate excess parachute payments — for example, by cutting back certain payments to the safe harbor amount or by allocating a portion of the post-closing compensation as reasonable compensation for services to be rendered rather than as change of control payments.
(d) The SPA should include provisions addressing the Section 280G analysis and stockholder approval process, including a covenant requiring NovaMart to cooperate in obtaining the stockholder vote.
V. Employee Benefit Plans — ERISA and Non-ERISA
A. Summary of Benefit Plans
Based on our review of the data room documents, NovaMart sponsors or maintains the following employee benefit plans, programs, and arrangements:
1. NovaMart Global Inc. 401(k) Retirement Savings Plan (ERISA-qualified plan)
2. NovaMart Global Inc. Group Health Insurance Plan — Medical, Dental, Vision (ERISA welfare plan; fully insured)
3. NovaMart Global Inc. Group Life Insurance and Accidental Death & Dismemberment ("AD&D") Plan (ERISA welfare plan; fully insured)
4. NovaMart Global Inc. Short-Term Disability ("STD") Plan (fully insured)
5. NovaMart Global Inc. Long-Term Disability ("LTD") Plan (ERISA welfare plan; fully insured)
6. NovaMart Global Inc. Health Savings Account ("HSA") Program (employer-contributed)
7. NovaMart Global Inc. Flexible Spending Account ("FSA") Plan (Section 125 cafeteria plan)
8. NovaMart Global Inc. Employee Assistance Program ("EAP")
9. NovaMart Global Inc. Paid Time Off ("PTO") Policy
10. NovaMart Global Inc. Parental Leave Policy (16 weeks paid leave for birth parents, 8 weeks for non-birth parents)
11. NovaMart Global Inc. Tuition Reimbursement Program (up to $5,250 per year for eligible employees)
12. NovaMart Global Inc. Severance Pay Policy (see Section VI below)
13. NovaMart Global Inc. 2016 Equity Incentive Plan (see Section IV above)
14. No formal nonqualified deferred compensation plan identified (see Section V.D below for analysis of informal arrangements)
Each of these plans and programs was reviewed for compliance with applicable ERISA requirements, Code provisions, and other applicable law, as described in the subsections below.
B. NovaMart 401(k) Plan
Plan Identification.
• Plan Name: NovaMart Global Inc. 401(k) Retirement Savings Plan
• Effective Date: January 1, 2017
• Employer Identification Number: 84-3291547
• Plan Number: 001
• Plan Type: Defined contribution plan; individual account plan with 401(k) cash or deferred arrangement and employer matching contributions
• Plan Year: Calendar year (January 1 through December 31)
• Trustee/Recordkeeper: Pinnacle Retirement Services, Inc. (recordkeeper and third-party administrator); National Trust Company of Austin (directed trustee)
Employer Matching Formula and Vesting. The Company makes matching contributions equal to 100% of the first 3% of eligible compensation deferred by each participant, plus 50% of the next 2% of eligible compensation deferred, for a maximum employer match of 4% of eligible compensation. Employer matching contributions are subject to a three-year cliff vesting schedule (0% vested for the first two years of service, 100% vested upon completion of three years of service). Employee elective deferrals are, as required by law, immediately and fully vested at all times.
Eligibility. All employees who have attained age 21 and completed 90 days of service are eligible to participate in the 401(k) Plan. Part-time employees who meet these requirements are also eligible. Temporary and seasonal employees engaged through Nexus Staffing Solutions are not eligible, as they are not considered employees of NovaMart for plan purposes.
Plan Assets. According to the most recent Form 5500 filed for the plan year ending December 31, 2023, the 401(k) Plan held total plan assets of approximately $87,400,000. The data room also contained a plan asset statement as of September 30, 2024, showing total plan assets of approximately $96,200,000. We have not received the Form 5500 for the plan year ending December 31, 2024, as it has not yet been filed (the filing deadline is July 31, 2025, or October 15, 2025 with an automatic extension).
Investment Options. The plan is participant-directed and offers a menu of approximately 22 diversified investment options, including index funds, target-date funds, actively managed equity and fixed-income funds, a stable value fund, and a self-directed brokerage option. The investment menu is reviewed periodically by NovaMart's Investment Committee, which consists of Kevin O'Malley (VP of Human Resources, serving as plan administrator and named fiduciary), Douglas Whitfield (CFO), and one independent director designated by the Board. The Investment Committee has adopted a written Investment Policy Statement ("IPS") dated June 2022, which we reviewed and found to be generally consistent with ERISA fiduciary best practices, though we recommend updating the IPS to reflect current market conditions and any changes to the investment lineup.
Plan Audit. Because the 401(k) Plan had more than 100 eligible participants at the beginning of the 2023 plan year, it is subject to the requirement of an annual independent audit under ERISA Section 103(a)(3)(A) and DOL regulations. We reviewed the independent auditor's report for the plan year ending December 31, 2023, prepared by Loughlin & Associates, CPAs. The auditor issued an unqualified opinion and did not identify any material findings or deficiencies. We recommend requesting the 2024 audit report when it becomes available.
Summary Plan Description. We reviewed the SPD for the 401(k) Plan, dated January 2023. The SPD appears to be generally compliant with ERISA Section 102 disclosure requirements. We note that the SPD has not been updated to reflect changes implemented by the SECURE 2.0 Act of 2022, including provisions relating to automatic enrollment (applicable to plans established after December 29, 2022, and therefore not applicable to this plan), Roth matching contributions, and increased catch-up contribution limits. While SECURE 2.0 does not require immediate SPD amendments for all provisions, we recommend that the SPD be updated to incorporate applicable SECURE 2.0 changes during the post-closing integration process.
Plan Document Compliance. We reviewed the 401(k) Plan document (restated effective January 1, 2020) and the following amendments: Amendment No. 1 (effective January 1, 2021, adopting provisions of the Setting Every Community Up for Retirement Enhancement Act of 2019 ("SECURE Act")), and Amendment No. 2 (effective January 1, 2023, adopting certain provisions of the SECURE 2.0 Act). The plan appears to be a written, tax-qualified plan under Section 401(a) of the Code. NovaMart has represented that the plan has received a favorable determination letter from the Internal Revenue Service, most recently dated September 12, 2018 (based on the Pre-Approved Plan program through Pinnacle Retirement Services' prototype plan document). We note that certain m

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