ENVIRONMENTAL DUE DILIGENCE MEMORANDUM
NovaMart Global Inc.
PRIVILEGED & CONFIDENTIAL ATTORNEY WORK PRODUCT / ATTORNEY-CLIENT COMMUNICATION This memorandum has been prepared by Calderwood & Harkness LLP at the request and direction of Cascade Retail Holdings Inc. in connection with proposed litigation or other legal proceedings and is protected from disclosure by the attorney-client privilege and/or the work product doctrine. This document and its contents are not to be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP and Cascade Retail Holdings Inc.
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I. Executive Summary
This memorandum summarizes the results of Calderwood & Harkness LLP's environmental due diligence review of NovaMart Global Inc. ("NovaMart" or the "Company") in connection with the proposed acquisition by Cascade Retail Holdings Inc. ("Cascade" or "CRH") of 100% of NovaMart's outstanding capital stock for a total purchase price of $1,200,000,000 pursuant to the Stock Purchase Agreement (the "SPA"). The environmental due diligence review commenced on February 18, 2025, following execution of the letter of intent, and has been conducted in parallel with the other workstreams of the broader due diligence process.
At the outset, we wish to emphasize the structural significance of the transaction's form for purposes of environmental risk allocation. Because the proposed acquisition is structured as a stock purchase — rather than an asset purchase — Cascade will acquire NovaMart as a going concern and will, as a matter of law, succeed to all of the Company's environmental liabilities, both known and unknown. Unlike an asset transaction, where the buyer may selectively acquire assets and leave behind unwanted environmental obligations, a stock acquisition carries with it the entirety of the target's environmental exposure, including any historical contamination, latent liabilities, and potential successor liability under federal and state environmental statutes. This structural reality underscores the heightened importance of thorough environmental diligence in the present transaction.
The scope of our review encompassed NovaMart's fourteen (14) fulfillment center facilities, collectively known as the "NovaShip" logistics network, located across nine (9) states, as well as the Company's corporate headquarters at 1100 Congress Avenue, Suite 800, Austin, Texas 78701, which is leased Class A office space with minimal environmental exposure. Our review was based on documents produced by NovaMart and its counsel, Calloway, Brandt & Loewe LLP, in response to our Due Diligence Request List dated February 17, 2025, and supplemental document requests issued during the course of our review.
Overall Conclusion. Based on the documents and information reviewed, NovaMart's environmental risk profile is generally low-to-moderate, consistent with warehouse and distribution operations of this type and scale. We have not identified any material environmental liabilities that would be expected to have a Material Adverse Effect (as defined in the SPA) on the transaction or that would, in our assessment, warrant a recommendation against closing. The Company's operations are primarily warehousing, order fulfillment, packaging, and shipping activities, which generate significantly less environmental exposure than manufacturing, chemical processing, or heavy industrial operations.
That said, our review has identified several key risk areas that we recommend be monitored and, in certain cases, addressed through additional diligence or contractual protections prior to closing:
(i) Hazardous Materials Handling. Certain fulfillment centers handle lithium-ion batteries and other materials that present operational and regulatory compliance risks, though NovaMart appears to have implemented appropriate handling and safety protocols.
(ii) Underground Storage Tank — Georgia Facility #1. A historical underground storage tank at NovaMart's sole owned property in Georgia was decommissioned and closed in place in 2019 by the former owner. While a "No Further Action" letter was obtained from the Georgia Environmental Protection Division in August 2020, residual risk exists, including potential reopener provisions.
(iii) Multi-Jurisdictional Compliance. NovaMart operates across nine states with varying environmental regulatory regimes, including the particularly stringent frameworks in California and New Jersey. Ongoing compliance monitoring across these jurisdictions will require attention post-closing.
(iv) Limited Phase I ESA Coverage. Phase I Environmental Site Assessments are available for only three (3) of the fourteen (14) fulfillment center facilities, leaving an information gap regarding historical environmental conditions at the majority of NovaMart's locations.
We recommend that Cascade consider commissioning Phase I Environmental Site Assessments for selected higher-risk facilities prior to closing, as discussed in greater detail in Section XI of this memorandum. Additionally, we note that title insurance is being arranged through Ridgecrest Title Group Inc. (underwriter: Janet Morales) for NovaMart-owned real property, and coordination with the title insurer regarding environmental conditions at the Georgia owned facility is advisable.
The balance of this memorandum provides a detailed analysis of the environmental matters identified during our review, along with our recommendations for addressing the identified risk items.
II. Scope and Methodology
A. Information Reviewed
Our environmental due diligence review was based on our review and analysis of documents and information produced by NovaMart and its counsel, Calloway, Brandt & Loewe LLP (Richard Calloway, partner, and Simone Adesanya, senior associate), in response to the comprehensive Due Diligence Request List dated February 17, 2025, which was prepared by Derek Okonkwo and Tiffany Rosenthal in coordination with the broader Cascade deal team. Supplemental requests for additional documentation were issued on March 5 and March 19, 2025, and responsive materials were provided on a rolling basis through the virtual data room hosted by Crestline Solutions.
The categories of documents and information reviewed in connection with our environmental due diligence include the following:
1. Environmental permits and registrations for all fourteen (14) fulfillment center locations and the Austin, Texas corporate headquarters, including air quality permits, stormwater permits, hazardous materials permits, and hazardous waste generator registrations.
2. Hazardous materials inventories and safety data sheets (SDS) for chemicals and materials stored, used, or handled at each fulfillment center facility.
3. Environmental compliance audit reports, including both internal audits conducted by NovaMart's Environmental Health and Safety ("EHS") team and third-party compliance audits conducted by external consultants.
4. Underground storage tank ("UST") and aboveground storage tank ("AST") registrations, inspection records, closure documentation, and related regulatory correspondence.
5. Spill Prevention, Control, and Countermeasure ("SPCC") plans for applicable facilities, as required under 40 CFR Part 112 of the Clean Water Act.
6. Records of any releases, spills, or environmental incidents at any NovaMart facility, including internal incident reports, fire department reports, and notifications to regulatory agencies.
7. Environmental insurance policies, endorsements, and coverage summaries, to the extent maintained by NovaMart.
8. Correspondence with federal, state, and local environmental regulatory agencies, including any notices of violation, consent orders, administrative orders, enforcement actions, information requests, and informal inquiries.
9. Phase I Environmental Site Assessment reports prepared in accordance with ASTM Standard E1527-21 (or predecessor standards), to the extent available in the data room.
10. Lease agreements for the fulfillment centers and the Austin headquarters, reviewed in coordination with the Real Property Due Diligence Memorandum prepared by the real property workstream for purposes of identifying environmental liability allocation provisions, landlord environmental obligations, and change of control requirements.
11. NovaMart's internal Environmental Health and Safety ("EHS") policies and procedures, including training records, incident response protocols, and management system documentation.
A complete index of all environmental documents reviewed is set forth in Appendix C to this memorandum.
B. Limitations. The following limitations apply to our environmental due diligence review and should be considered in evaluating the conclusions and recommendations set forth herein:
No Independent Testing or Inspection. Calderwood & Harkness LLP did not conduct, and was not engaged to conduct, any independent environmental testing, sampling, site inspections, or physical assessments of any NovaMart facility. Our review was a legal and documentary review only. We have not retained environmental engineers, geologists, or other technical consultants to perform field investigations. Physical conditions at any NovaMart facility may differ materially from those described in the documents reviewed.
No Phase I or Phase II ESAs Commissioned by Cascade. As of the date of this memorandum, Cascade has not commissioned Phase I or Phase II Environmental Site Assessments for any NovaMart facility. Our analysis is therefore based on the limited Phase I ESAs available in the data room (covering only three of fourteen facilities) and on NovaMart's own representations and documentation. We have included a recommendation regarding the commissioning of additional Phase I ESAs in Section XI of this memorandum.
Reliance on NovaMart-Provided Information. All factual information contained in this memorandum is based on documents and data produced by NovaMart through its counsel, Calloway, Brandt & Loewe LLP, and on representations made by NovaMart's management during the due diligence process. We have not independently verified the accuracy, completeness, or currency of such information. The environmental representations and warranties to be made by NovaMart in the SPA, together with the indemnification framework agreed upon by the parties, provide contractual protections against inaccuracies or omissions in the information provided.
Contractual Protections. We note that the following contractual protections, which are described in greater detail in the SPA Negotiation Memorandum and the Insurance Due Diligence Memorandum, are relevant to the environmental risk allocation:
• Indemnification Cap: The SPA provides for an indemnification cap of $216,000,000, representing 18% of the $1,200,000,000 purchase price, applicable to general representations and warranties including environmental representations.
• Survival Period: General representations and warranties, including environmental representations, survive for a period of twenty-four (24) months following the closing date. Fundamental representations survive for a longer period.
• R&W Insurance: Cascade has obtained a representations and warranties insurance policy from Meridian Specialty Insurance Company, Policy No. MSI-RWI-2025-07832, providing coverage of $216,000,000 in aggregate with a retention (self-insured amount) of $12,000,000. This policy is expected to provide additional coverage for breaches of environmental representations in the SPA, subject to the policy's terms, conditions, and exclusions.
• Escrow: A $96,000,000 escrow fund (representing 8% of the deal value) will be held by Marlowe Asset Management Trust Company, N.A. (Patricia Keane, trust officer) as security for indemnification claims, including potential environmental claims.
These contractual protections do not eliminate environmental risk but do provide meaningful financial backstops to Cascade in the event that environmental liabilities materialize post-closing.
III. Overview of NovaMart's Operations and Environmental Profile
A. Nature of Operations
NovaMart Global Inc. is an online marketplace platform that connects consumers with specialty consumer goods, home décor, artisanal products, and consumer electronics accessories. Critically, NovaMart is not a manufacturer, and the Company does not engage in manufacturing, chemical processing, refining, or other heavy industrial operations that typically generate significant environmental liabilities. The Company's primary physical operations consist of warehousing, order fulfillment, packaging, and shipping, conducted through its proprietary "NovaShip" logistics network of fourteen fulfillment centers.
The Company's corporate headquarters is located at 1100 Congress Avenue, Suite 800, Austin, Texas 78701. This is Class A office space leased from Congress Tower Partners LP under a commercial office lease. The headquarters is used solely for administrative, corporate, and management functions. Given that the headquarters is limited to office use, the environmental exposure associated with this location is minimal, and we have not identified any environmental concerns related to the Austin headquarters.
The fourteen NovaShip fulfillment centers are spread across nine states and collectively handle the receipt, storage, packaging, and shipment of consumer goods ordered through the NovaMart platform. The product categories handled at these facilities — specialty consumer goods, home décor items, artisanal products, and consumer electronics accessories — do not, in general, involve the use, generation, or disposal of significant quantities of hazardous substances, with the notable exception of lithium-ion batteries contained in consumer electronics accessories, which are discussed separately in Section IV.B of this memorandum.
NovaMart employs approximately 2,400 individuals across all locations, including both salaried corporate employees at the Austin headquarters and hourly warehouse and fulfillment workers at the NovaShip facilities. The Company maintains an internal Environmental Health and Safety ("EHS") function staffed by a Director of EHS and regional compliance coordinators who oversee compliance with environmental, health, and safety requirements at the fulfillment center level.
B. Fulfillment Center Locations
The following table summarizes the fourteen NovaShip fulfillment centers, organized by state. A more detailed version of this table, including full street addresses, landlord names (for leased facilities), applicable environmental permits, and Phase I ESA availability, is set forth in Appendix A.
As reflected in the table above, thirteen of the fourteen fulfillment centers are leased, with only one facility — Georgia Facility #1 — owned outright by NovaMart. The preponderance of leased facilities is significant from an environmental liability perspective, as the allocation of environmental obligations between landlord and tenant is governed by the terms of the respective lease agreements. Environmental liability allocation under these leases varies; some leases impose broad environmental indemnification obligations on the tenant (NovaMart), while others allocate pre-existing contamination responsibility to the landlord. A detailed review of the environmental provisions in each lease is addressed in the Real Property Due Diligence Memorandum prepared by the real property workstream.
The Georgia Facility #1, as the only facility owned by NovaMart, presents the most direct environmental liability exposure for Cascade as the successor owner. This is the property for which title insurance is being arranged through Ridgecrest Title Group Inc. (underwriter: Janet Morales), and it is also the facility at which the historical underground storage tank discussed in Section V.B was located.
C. Applicable Environmental Regulatory Framework
NovaMart's operations are subject to a complex matrix of federal, state, and local environmental laws and regulations. While the Company's warehousing and distribution activities generate less regulatory exposure than manufacturing or chemical processing operations, compliance with the following regulatory frameworks is required across the NovaShip network:
Federal Regulations:
• Resource Conservation and Recovery Act (RCRA): Governs the generation, transportation, treatment, storage, and disposal of hazardous waste. NovaMart's fulfillment centers generate limited quantities of hazardous waste and operate as conditionally exempt small quantity generators (CESQGs) or small quantity generators (SQGs) under RCRA.
• Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA / Superfund): Imposes liability for the cleanup of contaminated properties and for response costs incurred in connection with releases of hazardous substances. CERCLA liability is strict, joint and several, and retroactive, and may attach to current and former owners and operators of contaminated sites.
• Clean Air Act (CAA): Regulates emissions of air pollutants from stationary and mobile sources. NovaMart's air emissions are limited primarily to backup diesel generators at certain facilities, which may require minor source permits or registrations.
• Clean Water Act (CWA): Regulates the discharge of pollutants into waters of the United States. NovaMart's facilities discharge domestic wastewater to public sanitary sewer systems and are subject to stormwater management requirements under state-administered general permits.
• Toxic Substances Control Act (TSCA): Regulates the manufacture, importation, processing, distribution, use, and disposal of chemical substances. While NovaMart does not manufacture chemical substances, certain products distributed through the NovaShip network may be subject to TSCA requirements.
• Emergency Planning and Community Right-to-Know Act (EPCRA): Requires facilities that store or use hazardous chemicals above specified threshold quantities to submit annual Tier II inventory reports to state and local authorities and to participate in local emergency planning processes.
• Occupational Safety and Health Act (OSHA): While not an environmental statute per se, OSHA regulates workplace safety and health, including the handling and storage of hazardous chemicals, and overlaps significantly with environmental compliance in the warehouse context.
State-Specific Regulations:
NovaMart operates in nine states, each of which has its own environmental regulatory framework. While a comprehensive survey of each state's environmental laws is beyond the scope of this memorandum, we note the following jurisdictions of particular relevance:
• California: NovaMart's three California facilities are subject to regulation by the California Department of Toxic Substances Control ("DTSC"), the California Environmental Protection Agency ("CalEPA"), and local air quality management districts, including the South Coast Air Quality Management District ("SCAQMD"). California's environmental laws are among the most stringent in the nation and include unique requirements such as Proposition 65 (the Safe Drinking Water and Toxic Enforcement Act of 1986), which requires businesses to provide warnings about significant exposures to chemicals that cause cancer, birth defects, or other reproductive harm. Additionally, California's hazardous waste regulations are more expansive than federal RCRA requirements, classifying certain waste streams as hazardous that would not be regulated as such under federal law.
• New Jersey: NovaMart's two New Jersey facilities are subject to regulation by the New Jersey Department of Environmental Protection ("NJDEP"). New Jersey's environmental laws include the Industrial Site Recovery Act ("ISRA"), which requires certain environmental investigation and remediation obligations to be triggered upon the closing, transfer, or cessation of operations at an industrial establishment. The potential applicability of ISRA to the proposed transaction is analyzed in detail in Section VIII of this memorandum. New Jersey also has particularly stringent soil and groundwater cleanup standards and an aggressive enforcement posture regarding contaminated sites.
• Washington: NovaMart's Washington facility is subject to the Model Toxics Control Act ("MTCA"), Washington's primary hazardous waste cleanup statute, which imposes strict liability for the cleanup of contaminated properties and is administered by the Washington Department of Ecology.
In addition to state-level environmental agencies, NovaMart's facilities are subject to local regulatory requirements, including fire department hazardous materials permits and business plans in applicable jurisdictions. These local permits are particularly relevant for facilities that store lithium-ion batteries or maintain diesel fuel storage tanks.
IV. Hazardous Materials Handling and Storage
A. Types of Hazardous Materials On-Site
NovaMart's fulfillment center operations involve limited use of hazardous materials compared to manufacturing or chemical processing operations. Based on our review of the Company's hazardous materials inventories, safety data sheets ("SDS"), and Tier II reports, the following categories of hazardous materials are present at NovaShip fulfillment centers:
• Lithium-Ion Batteries: A significant volume of lithium-ion batteries passes through the fulfillment network as a component of consumer electronics accessories stored, packed, and shipped by NovaMart. These batteries are subject to U.S. Department of Transportation ("DOT") hazardous materials shipping regulations under 49 CFR Parts 171 through 180, as well as RCRA universal waste rules when spent or damaged. The handling of lithium-ion batteries presents unique operational risks, including the potential for thermal runaway events, and is discussed in detail in Section IV.B below.
• Cleaning and Maintenance Chemicals: Standard janitorial and maintenance supplies, including floor cleaning agents, degreasers, and general-purpose cleaning products. These materials are present in relatively small quantities and are consistent with typical commercial warehouse operations. SDS records for these materials were reviewed and did not reveal any unusual or particularly hazardous substances.
• Diesel Fuel: Several fulfillment centers maintain diesel fuel for backup emergency generators. Diesel fuel is typically stored in aboveground storage tanks (ASTs) ranging from 500 to 2,000 gallons in capacity. Diesel fuel storage is subject to SPCC plan requirements when aggregate aboveground oil storage capacity at a facility exceeds 1,320 gallons.
• Paints, Adhesives, and Solvents: Small quantities of paints, adhesives, and solvents are used for routine facility maintenance purposes, including building upkeep, equipment maintenance, and minor repair work. Quantities are consistent with normal commercial facility operations and do not approach thresholds that would trigger additional regulatory requirements.
• Propane: Several facilities utilize propane-powered forklifts for warehouse operations. Propane cylinders are stored on-site at these facilities in compliance with applicable fire code and OSHA requirements. NovaMart's records indicate that propane storage quantities are within the exemption thresholds for most hazardous materials reporting requirements.
NovaMart maintains hazardous materials business plans at applicable facilities and submits annual Tier II inventory reports as required by EPCRA Section 312 to state emergency response commissions and local emergency planning committees. Based on our review of the most recent Tier II reports for the 2023 and 2024 reporting years, NovaMart appears to be in compliance with EPCRA reporting obligations.
B. Lithium-Ion Battery Handling
The handling and storage of lithium-ion batteries within the NovaShip logistics network represents the most significant hazardous materials-related risk identified during our environmental due diligence review. While lithium-ion batteries are ubiquitous in consumer electronics and are not classified as hazardous waste under RCRA when in their undamaged, usable state, they present unique operational and safety risks, including the potential for thermal runaway — a condition in which a battery cell enters an uncontrollable, self-heating state that can result in fire, explosion, or the release of toxic gases.
NovaMart handles a significant volume of lithium-ion batteries as part of its consumer electronics accessories inventory. These batteries are received at fulfillment centers from third-party sellers, stored in warehouse inventory, and subsequently packaged and shipped to consumers. The Company has implemented the following battery safety protocols, as documented in its internal EHS procedures and confirmed through review of facility inspection records:
• Segregated battery storage areas within fulfillment centers, separated from other inventory and from ignition sources, with appropriate temperature and humidity controls.
• Fire suppression systems specifically designed for lithium-ion battery fires, including both sprinkler systems and portable fire extinguishing equipment rated for lithium battery fires.
• Employee training programs covering lithium-ion battery safety, including identification of damaged or defective batteries, proper handling and storage procedures, and emergency response protocols.
• A designated hazmat compliance officer responsible for ensuring compliance with DOT shipping regulations for lithium-ion batteries under 49 CFR Parts 171 through 180, including proper classification, packaging, marking, labeling, and documentation requirements.
2023 Thermal Event — California Facility #2. Our review identified one incident involving lithium-ion batteries at the NovaMart California Facility #2 in 2023. According to internal incident reports and a fire department incident report on file in the data room, a small thermal event occurred involving a pallet of lithium-ion battery inventory in the warehouse. The incident was contained on-site by NovaMart's fire suppression system and on-site emergency response team, with assistance from the local fire department. No release of hazardous substances to the environment was reported, and no regulatory enforcement action was taken in connection with the incident. The fire department incident report classified the event as a minor incident with no injuries and no structural damage to the facility.
While this incident was resolved without material consequence, it illustrates the inherent operational risk associated with large-scale lithium-ion battery handling. We recommend that Cascade confirm the adequacy of insurance coverage for battery-related incidents, including fire, property damage, business interruption, and environmental contamination arising from thermal runaway events. This recommendation is cross-referenced to the Insurance Due Diligence Memorandum being prepared by the insurance workstream.
C. Spill Prevention and Response
NovaMart maintains Spill Prevention, Control, and Countermeasure ("SPCC") plans at fulfillment center facilities where the aggregate aboveground oil storage capacity exceeds 1,320 gallons, as required by the Clean Water Act and implementing regulations at 40 CFR Part 112. SPCC plans are principally applicable at facilities with larger diesel-fueled emergency generators. Based on our review of the SPCC plans produced in the data room, these plans appear to be current and to address the required elements, including facility diagrams, spill prediction and prevention measures, containment and diversionary structures, inspection and testing protocols, and response procedures.
Our review of NovaMart's spill and release records for the past five years identified no reportable spills or releases at any facility, with one exception: a minor diesel fuel spill of approximately fifteen (15) gallons at the Tennessee Facility #1 in 2022. According to NovaMart's internal incident log, the spill occurred during a routine fuel delivery and was cleaned up immediately by facility personnel. The incident report indicates that the spill was confined to the concrete secondary containment area around the AST and did not reach soil or groundwater. No notification to the Tennessee Department of Environment and Conservation was required under applicable reporting thresholds, and no regulatory follow-up occurred.
The absence of significant spill history across fourteen active facilities over a five-year period is consistent with NovaMart's characterization of its operations as low-risk from an environmental perspective, and it supports the overall low-to-moderate risk assessment reflected in this memorandum.
V. Underground and Aboveground Storage Tanks
A. Aboveground Storage Tanks (ASTs)
Several NovaMart fulfillment centers maintain diesel aboveground storage tanks ("ASTs") for the purpose of fueling backup emergency generators. Based on our review of tank registration documents, inspection records, and SPCC plans, the ASTs at NovaMart facilities range in capacity from approximately 500 gallons to 2,000 gallons and are used exclusively for diesel fuel storage.
All ASTs reviewed appear to be in compliance with applicable federal and state regulations governing aboveground storage of petroleum products. Tank inspection records provided in the data room, covering the most recent three-year period, showed no deficiencies, leaks, or failures. Secondary containment measures — including concrete berms, dikes, and/or containment pallets — are in place at all AST locations in compliance with SPCC plan requirements and applicable state regulations. Tank integrity testing records were available for the larger ASTs and did not reveal any concerns.
We note that AST regulatory requirements vary by state. California, in particular, has adopted Aboveground Petroleum Storage Act ("APSA") requirements administered by local Certified Unified Program Agencies ("CUPAs"), which require registration, monitoring, and financial responsibility demonstrations for aboveground petroleum storage. NovaMart's California facilities appear to be registered with the applicable CUPAs and in compliance with APSA requirements.
B. Underground Storage Tanks (USTs)
Our review identified one underground storage tank ("UST") at a NovaMart facility. This UST is located at the Georgia Facility #1 — the sole facility owned by NovaMart — and represents the most significant discrete environmental issue identified during our due diligence review.
Description and History. The UST is a historical tank that was used for diesel fuel storage, with a reported capacity of 4,000 gallons. The UST was not installed by NovaMart; rather, it was present on the property when NovaMart acquired the Georgia Facility #1 in 2020 from the prior owner. According to the documentation reviewed, the UST was decommissioned and closed in place in 2019 by the previous property owner, prior to NovaMart's acquisition. "Closed in place" means that the tank was emptied, cleaned, and filled with an inert material (typically sand, concrete slurry, or foam) rather than being physically excavated and removed from the ground.
Closure Documentation. The data room contained a tank closure report prepared by the former owner's environmental consultant, which documented the decommissioning and closure-in-place procedure, including tank cleaning, filling, and associated soil sampling. Limited soil sampling was conducted at the time of closure to assess whether releases from the UST had impacted surrounding soils.
Soil Sampling Results. The soil sampling conducted at the time of the 2019 closure revealed low-level residual petroleum hydrocarbons (total petroleum hydrocarbons — "TPH") in soils immediately surrounding the UST. However, the reported concentrations were below the applicable Georgia Environmental Protection Division ("GA EPD") residential and commercial risk-based screening levels. No volatile organic compounds ("VOCs") or other contaminants of concern were detected at levels exceeding applicable regulatory thresholds. Groundwater sampling was not conducted as part of the closure, as the closure report noted that groundwater was not encountered during soil boring activities.
GA EPD "No Further Action" Letter. Following NovaMart's acquisition of the property in 2020, NovaMart submitted the closure documentation to the GA EPD. The GA EPD issued a "No Further Action" ("NFA") letter dated August 2020, indicating that, based on the information provided, no further investigation or corrective action was required at the site with respect to the former UST.
Risk Assessment. Based on the foregoing, we assess the residual environmental risk associated with the Georgia Facility #1 UST as low, for the following reasons: (i) the UST was decommissioned and closed in compliance with applicable Georgia regulations; (ii) soil sampling showed residual contamination below risk-based screening levels; and (iii) the GA EPD issued an NFA letter confirming that no further action was required.
However, we note the following caveats and residual concerns:
• Reopener Provisions. NFA letters issued by the GA EPD may be subject to reopener provisions that allow the agency to require additional investigation or remediation if new information comes to light — for example, if previously unknown contamination is discovered, if conditions change (such as a change in property use from commercial to residential), or if applicable regulatory standards are revised. We have not yet reviewed the full text of the NFA letter to determine whether it contains specific reopener language or conditions. We recommend obtaining and carefully reviewing the complete NFA letter, including any conditions, limitations, or reopener provisions.
• Closure-in-Place Limitations. Because the UST was closed in place rather than removed, the tank itself remains in the ground. While this is an accepted and common closure method, it means that any future construction, excavation, or subsurface disturbance at the location of the former UST could encounter the closed tank and potentially require additional regulatory action.
• No Groundwater Assessment. The absence of groundwater sampling at the time of closure leaves some uncertainty regarding whether petroleum hydrocarbons may have migrated to groundwater. While the soil sampling results were below screening levels and groundwater was reportedly not encountered during the soil borings, this is an area of residual uncertainty.
Title Insurance Coordination. Because Georgia Facility #1 is owned by NovaMart and title insurance is being arranged through Ridgecrest Title Group Inc. (Janet Morales, underwriter), we recommend coordinating with the title insurer regarding any title endorsement or exclusion that may be applicable in connection with the historical UST. Some title insurance policies contain exclusions or exceptions for environmental contamination, and it is important to understand the scope of the title policy's coverage (or lack thereof) with respect to this issue.
No Other USTs. No other underground storage tanks were identified at any of the remaining thirteen NovaMart fulfillment centers or at the Austin headquarters. Several landlord representation letters and lease provisions confirmed the absence of USTs at leased locations, and environmental database reports did not reveal any UST registrations associated with the other NovaMart facilities.
VI. Environmental Permits and Regulatory Compliance
A. Air Quality Permits
NovaMart's fulfillment center operations do not involve manufacturing processes, combustion sources, or other activities that would typically require major source air quality permits under the Clean Air Act or state air quality programs. The Company's air emissions are limited primarily to backup diesel emergency generators at certain facilities.
Minor source air permits or registrations are held for backup diesel generators at facilities in California, New Jersey, and Illinois, where state and local regulations require permitting of stationary internal combustion engines. In California, the facilities are subject to the permitting requirements of the South Coast Air Quality Management District ("SCAQMD") and/or other applicable local air districts. Based on our review of the permits and associated records produced in the data room, these permits appear to be current and in good standing, with no expired permits or overdue renewal applications identified.
NovaMart has represented that the backup generators at its facilities are operated only during emergency power outages and for periodic testing and maintenance, consistent with the operating limitations typically imposed by emergency generator permits. No exceedances of operating hour limitations or emission standards were identified in the records reviewed.
No notices of violation related to air emissions were identified at any NovaMart facility. The Company's air quality compliance posture appears to be consistent with what would be expected for warehouse and distribution operations with limited stationary source emissions.
B. Water / Wastewater Permits
NovaMart's fulfillment centers discharge only domestic wastewater (i.e., sanitary sewer flows from restrooms, break rooms, and similar employee facilities) to municipal sanitary sewer systems under applicable sewer use ordinances. The Company does not generate industrial process wastewater, and no industrial wastewater pretreatment permits are required.
No National Pollutant Discharge Elimination System ("NPDES") permits are required for NovaMart's operations, as the facilities do not discharge process wastewater or other pollutants directly to surface waters. The Company's wastewater discharges are limited to domestic sanitary flows, which are managed through connections to municipal wastewater treatment systems.
With respect to stormwater management, NovaMart's larger fulfillment centers are subject to stormwater general permits in applicable states. These permits require the preparation and implementation of Stormwater Pollution Prevention Plans ("SWPPPs") that identify potential pollutant sources, describe best management practices ("BMPs") for stormwater management, and establish inspection and monitoring protocols. Based on our review, SWPPPs are in place at the larger NovaMart facilities, and the Company appears to be conducting required stormwater inspections and monitoring.
No water quality violations or notices of noncompliance related to wastewater or stormwater management were identified at any NovaMart facility.
C. Waste Management
Solid Waste. NovaMart's fulfillment centers generate standard commercial solid waste, including cardboard, packaging materials, pallets, and general office and facility waste. Solid waste is handled through contracts with municipal or private waste haulers and disposed of at permitted municipal solid waste landfills. NovaMart has implemented recycling programs at its facilities for cardboard, paper, and certain plastics, which is consistent with industry practice for warehouse and distribution operations and with waste reduction requirements in certain states, particularly California.
Hazardous Waste. Based on our review of NovaMart's hazardous waste generator registrations and manifests, the Company's fulfillment center facilities operate as either conditionally exempt small quantity generators ("CESQGs") or small quantity generators ("SQGs") under RCRA. No NovaMart facility has been identified as a large quantity generator ("LQG") of hazardous waste. The hazardous waste generated at these facilities consists primarily of spent batteries, used solvents from facility maintenance, and small quantities of other maintenance-related wastes. The low hazardous waste generation rates are consistent with the non-manufacturing nature of NovaMart's operations.
Universal Waste. NovaMart manages universal waste streams — including spent batteries (both lithium-ion and other battery chemistries), fluorescent lamps, and mercury-containing devices — under applicable federal and state universal waste rules. Universal waste is accumulated, stored, and shipped to permitted recyclers and disposal facilities in compliance with applicable regulations. Universal waste management practices were documented in the EHS procedures reviewed in the data room.
Waste Manifests and Disposal Records. We reviewed hazardous waste manifests and disposal records for the most recent three-year period (2022–2024) for all NovaMart facilities. No irregularities, discrepancies, or compliance concerns were identified. All manifests appeared to be properly completed, and disposal facilities identified on the manifests are permitted facilities with no known enforcement issues.
E-Waste. NovaMart has implemented an electronic waste ("e-waste") recycling program at its California facilities, consistent with the requirements of the California Department of Resources Recycling and Recovery ("CalRecycle") and the state's Electronic Waste Recycling Act. E-waste generated at non-California facilities is managed through voluntary recycling programs.
D. Compliance History
Our review of NovaMart's environmental compliance history, based on documents produced in the data room and searches of publicly available regulatory databases, revealed a strong compliance record across all fourteen fulfillment center facilities and the Austin headquarters. The key findings are as follows:
• No Outstanding Notices of Violation. No outstanding notices of violation ("NOVs"), consent orders, administrative orders, or enforcement actions from any federal, state, or local environmental agency were identified at any NovaMart facility as of the date of this memorandum.
• No Pending or Threatened Environmental Litigation. NovaMart has represented that there is no pending or threatened environmental litigation against the Company. Our review of publicly available court dockets and regulatory enforcement databases did not reveal any contrary information.
• NJDEP Informal Inquiry (2024). One informal inquiry from the New Jersey Department of Environmental Protection ("NJDEP") was identified in the data room. In 2024, NJDEP contacted NovaMart regarding stormwater management practices at NJ Facility #1. According to the correspondence on file, NovaMart provided the requested documentation (including a copy of the facility's SWPPP and recent inspection records) in a timely manner, and NJDEP took no further action. The matter appears to have been resolved informally without the issuance of a notice of violation or any other enforcement action.
• No Superfund (CERCLA) Involvement. No NovaMart facility is listed on the National Priorities List ("NPL") or on any state equivalent contaminated sites list. NovaMart has not been identified as a potentially responsible party ("PRP") at any Superfund site or other contaminated property. No information requests, demand letters, or other CERCLA-related correspondence was identified in the data room.
• No Off-Site Contamination Claims. No claims, demands, or allegations from third parties regarding off-site contamination or environmental damage attributable to NovaMart's operations were identified.
Overall, NovaMart's environmental compliance history is clean and unremarkable, consistent with the Company's characterization of its operations as low-risk warehouse and distribution activities. The absence of any enforcement actions, pending litigation, or Superfund involvement is a positive indicator of the Company's environmental management practices.
VII. Environmental Site Assessments and Historical Property Conditions
A. Phase I ESAs on File
Phase I Environmental Site Assessments ("Phase I ESAs") are the standard initial screening tool used to identify recognized environmental conditions ("RECs") — the presence or likely presence of hazardous substances or petroleum products in, on, or at a property — based on historical land use research, regulatory database reviews, site reconnaissance, and interviews. Phase I ESAs are conducted in accordance with ASTM International Standard E1527-21 (or its predecessors) and are a prerequisite for the "innocent landowner" defense under CERCLA.
Our review of the NovaMart data room identified Phase I ESAs for only three (3) of the fourteen (14) NovaShip fulfillment center facilities:
1. Georgia Facility #1 (Owned Property). A Phase I ESA dated February 2020 was prepared in connection with NovaMart's acquisition of the property from the prior owner. The assessment was conducted by a qualified environmental professional and generally followed the ASTM E1527-13 standard (the version in effect at the time). The Phase I ESA identified the historical underground storage tank discussed in Section V.B of this memorandum as a recognized environmental condition ("REC"). No other RECs, controlled recognized environmental conditions ("CRECs"), or historical recognized environmental conditions ("HRECs") were identified. The REC associated with the UST was subsequently resolved by the decommissioning and closure of the UST and the issuance of the GA EPD NFA letter in August 2020.
2. California Facility #1 (Leased). A Phase I ESA dated 2021 was identified in the data room. This ESA was provided by the landlord and appears to have been prepared in connection with the landlord's financing or insurance requirements. The assessment identified no RECs, CRECs, or HRECs at the property. The Phase I ESA noted that the property had been used for commercial warehouse purposes since its original construction and had no history of industrial use, underground storage tanks, or other environmental concerns.
3. New Jersey Facility #1 (Leased). A Phase I ESA dated 2022 was identified in the data room. This ESA was similarly provided by the landlord. The assessment identified no RECs or CRECs. The Phase I ESA noted the property's location in a historically industrial area and discussed the environmental histories of several nearby properties, but found no evidence that contamination from neighboring sites had impacted the NovaMart-leased property. The environmental professional classified the industrial history of the surrounding area as an HREC — an historical recognized environmental condition that has been addressed to the satisfaction of the applicable regulatory authority — based on the completion of remediation at nearby properties.
Phase I ESAs Not Available for Remaining Facilities. Phase I ESAs were not available in the NovaMart data room for the remaining eleven (11) fulfillment center facilities. It is possible that landlords at some of these facilities possess Phase I ESAs that were prepared in connection with the landlords' acquisitions, financing, or insurance requirements, but these were not produced to the data room. Calloway, Brandt & Loewe LLP has represented that NovaMart requested Phase I ESAs from all landlords as part of the document collection process, but not all landlords provided responsive materials.
The absence of Phase I ESAs for the majority of NovaMart's facilities represents an information gap in our environmental due diligence. Without Phase I ESAs, we are unable to make a definitive assessment of historical environmental conditions at these properties or to confirm the absence of recognized environmental conditions. This gap is partially mitigated by the desktop environmental database review discussed in Section VII.B below, as well as by the environmental representations and warranties to be provided by NovaMart in the SPA and the protections afforded by the R&W insurance policy.
Recommendation. We recommend that Cascade consider commissioning updated Phase I ESAs for selected higher-risk facilities prior to closing. The facilities we would prioritize for Phase I ESAs are: (i) NJ Facility #2, based on its proximity to a former dry cleaning operation on a known contaminated site (discussed below); (ii) the older California facilities (CA Facility #1, which has been operational since 2019) and the Florida facilities, based on the general environmental risk profiles of these jurisdictions and the age of the facilities. Alternatively, if Cascade determines that the cost and timeline for additional Phase I ESAs are not warranted prior to closing, reliance on the SPA environmental representations, indemnification protections, the $96,000,000 escrow fund, and the Meridian R&W insurance policy may provide adequate contractual protection.
B. Historical Land Use Concerns
In the absence of comprehensive Phase I ESA coverage, we conducted a desktop review of historical land use for all fourteen fulfillment center locations using commercially available environmental database reports. These database reports compile information from federal, state, and local environmental regulatory databases, including the EPA's Envirofacts database, state contaminated sites databases, underground storage tank registries, and other public records. While environmental database reports are a useful screening tool, they are not a substitute for a full Phase I ESA and do not include physical site reconnaissance, historical aerial photograph review, or interviews with knowledgeable parties.
Our desktop review identified the following items of note:
NJ Facility #2 — Adjacent Former Dry Cleaning Operation. The environmental database report for NJ Facility #2 revealed that the property is located adjacent to a former dry cleaning establishment. The dry cleaner site is listed on the New Jersey Known Contaminated Sites List ("KCSL"), indicating that contamination has been identified at the site and that investigation or remediation may be ongoing or required. Dry cleaning operations are commonly associated with contamination by chlorinated solvents, including tetrachloroethylene ("PCE") and trichloroethylene ("TCE"), which are persistent groundwater contaminants and can migrate significant distances in the subsurface.
No evidence was identified that contamination from the adjacent dry cleaner has migrated to NovaMart's leased property. However, the proximity of a known contaminated site raises a potential concern regarding vapor intrusion — the migration of volatile organic compound vapors from contaminated soil or groundwater through building foundations and into indoor air spaces. Vapor intrusion is a recognized exposure pathway that has been the subject of increasing regulatory attention in New Jersey and nationally.
We recommend that Cascade consider requesting an indoor air quality assessment or vapor intrusion screening at NJ Facility #2, or alternatively, that a Phase I ESA be commissioned for this facility with specific attention to the vapor intrusion pathway. The cost of such an assessment would be modest relative to the potential liability if contamination is ultimately found to have impacted the NovaMart property.
Georgia Facility #2 (Leased). The Georgia Facility #2 is located in an industrial park with multiple tenants. The environmental database report did not identify any specific environmental concerns associated with NovaMart's portion of the industrial park. The industrial park is not listed on any state or federal contaminated sites database. While the industrial park setting presents a generally higher baseline environmental risk than a standalone commercial facility, we did not identify any particular issues warranting further investigation at this time.
Remaining Facilities. The desktop environmental database review did not identify any material historical land use concerns for the remaining fulfillment center locations. The properties are generally located in commercial or industrial zones with unremarkable environmental histories, and none are located on or immediately adjacent to known contaminated sites (with the exception of NJ Facility #2, as discussed above).
VIII. New Jersey ISRA Analysis
New Jersey's Industrial Site Recovery Act ("ISRA"), N.J.S.A. 13:1K-6 et seq., is a unique regulatory program that requires owners and operators of "industrial establishments" to conduct environmental investigation and, if necessary, remediation upon the occurrence of certain triggering events, including the closing, terminating, or transferring of operations or ownership at the industrial establishment. ISRA is administered by the NJDEP and applies to facilities engaged in operations classified under specified North American Industry Classification System ("NAICS") codes (formerly Standard Industrial Classification, or "SIC" codes), including certain wholesale trade and warehousing operations.
Applicability to NovaMart's NJ Facilities. NovaMart's two New Jersey fulfillment centers are primarily engaged in warehousing and distribution operations. These operations fall within SIC codes 5000 through 5199 (wholesale trade/warehousing), which are among the industry categories subject to ISRA. Accordingly, both NJ Facility #1 and NJ Facility #2 qualify as "industrial establishments" for purposes of ISRA.
Whether the Transaction Triggers ISRA. The critical question is whether the proposed acquisition of NovaMart by Cascade constitutes a "triggering event" under ISRA. ISRA is triggered by, among other events, the "closing, terminating, or transferring" of operations at an industrial establishment, or a change in ownership of the industrial establishment.
Because the proposed transaction is structured as a stock purchase — in which Cascade will acquire 100% of the outstanding capital stock of NovaMart as an entity — rather than an asset purchase, NovaMart as the entity holding the leases for the NJ facilities will continue in existence as a going concern. There will be no transfer of the industrial establishment itself; rather, the ownership of NovaMart's equity interests will change hands. Under established NJDEP guidance and case law, a stock transfer does not, in and of itself, constitute a transfer of an industrial establishment that would trigger ISRA.
Accordingly, we conclude that ISRA is likely not triggered by the proposed stock purchase transaction. This conclusion is consistent with the prevailing interpretation of ISRA and with NJDEP's guidance on the applicability of ISRA to stock transfers.
Caveat — Lease Provisions. Notwithstanding the foregoing analysis, we note an important caveat. Certain NJ commercial leases include contractual provisions that require the tenant to comply with ISRA obligations upon a change of control, even where ISRA would not otherwise be triggered as a matter of law. These lease-based ISRA provisions effectively create a contractual ISRA obligation that may be broader than the statutory requirement. If either NJ Facility #1 or NJ Facility #2 has a lease containing such a provision, NovaMart could be contractually obligated to conduct ISRA compliance activities (e.g., filing a General Information Notice, conducting a Preliminary Assessment, or obtaining a Negative Declaration) in connection with the closing of the transaction.
We cross-reference this issue to the Material Contracts Due Diligence Memorandum and the Change of Control Consent Tracker, which identify approximately thirty-four (34) NovaMart contracts containing change of control provisions. The NJ facility leases should be reviewed specifically for ISRA-related obligations, and if such obligations exist, the landlord consent process should be coordinated to address ISRA compliance requirements and timelines.
Recommendation. We recommend that the real property workstream confirm the lease language for NJ Facilities #1 and #2 with respect to ISRA-related obligations and evaluate whether the landlord consent process should expressly address ISRA compliance. If ISRA compliance is contractually required, the timeline and cost of ISRA activities should be factored into the closing schedule and the parties' respective pre-closing obligations under the SPA.
IX. Environmental Insurance Coverage
As part of our environmental due diligence, we reviewed NovaMart's existing insurance program for environmental coverage, in coordination with the Insurance Due Diligence Memorandum being prepared by the insurance workstream.
No Standalone Environmental Policy. NovaMart does not currently carry a standalone environmental impairment liability ("EIL") or pollution legal liability ("PLL") insurance policy. This is not unusual for companies engaged in warehouse and distribution operations, which are generally considered lower-risk from an environmental insurance perspective. However, it does mean that NovaMart's only environmental insurance coverage is limited to what may be available under its general liability policy.
General Liability Policy — Pollution Exclusion. NovaMart's commercial general liability ("CGL") policy, like most modern CGL policies, contains a standard pollution exclusion that broadly excludes coverage for bodily injury and property damage arising out of the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, or escape of pollutants. The policy contains a limited exception for "sudden and accidental" pollution events, which may provide some coverage for acute, unexpected pollution incidents (e.g., a sudden spill) but would not cover gradual contamination, pre-existing conditions, or environmental cleanup obligations.
Recommendation. Given the environmental conditions identified during our due diligence — particularly the historical UST at the Georgia owned property and the proximity of NJ Facility #2 to a known contaminated site — we recommend that Cascade evaluate the procurement of a pollution legal liability ("PLL") insurance policy for NovaMart's facilities post-closing. A PLL policy would provide first-party and third-party coverage for environmental liabilities, including cleanup costs, third-party bodily injury and property damage claims, and defense costs arising from pollution conditions at or emanating from covered facilities. The cost of PLL insurance for warehouse and distribution operations is generally reasonable, and a policy could be tailored to cover the specific facilities and environmental conditions of concern.
R&W Insurance — Environmental Coverage. The representations and warranties insurance policy obtained by Cascade from Meridian Specialty Insurance Company (Policy No. MSI-RWI-2025-07832, with a limit of $216,000,000 and a retention of $12,000,000) may provide coverage for breaches of environmental representations and warranties in the SPA. R&W insurance policies vary in their treatment of environmental matters; some policies include broad coverage for environmental representation breaches, while others contain exclusions or limitations for known environmental conditions, pre-existing contamination, or specific categories of environmental liabilities (e.g., CERCLA liability, cleanup costs, or asbestos-related claims).
We recommend confirming with Northbridge Risk Advisors LLC (Thomas Ellingsen, the R&W insurance broker) the precise scope of environmental coverage under the Meridian policy, including: (i) whether breaches of environmental representations are covered without exclusion or limitation; (ii) whether the policy contains any specific environmental exclusions (e.g., for known contamination, asbestos, lead-based paint, or mold); (iii) whether the policy covers cleanup costs and remediation expenses, in addition to third-party claims; and (iv) whether the known environmental conditions identified in this memorandum (the Georgia UST and the adjacent NJ dry cleaner site) are excluded from coverage as "known" issues.
X. Change of Control Considerations — Environmental Permits and Obligations
As part of o