1038-00009 · Client 1038 · Diligence

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PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT

MATERIAL CONTRACTS DUE DILIGENCE MEMORANDUM

NovaMart Global Inc.

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

TO: Theodore ("Ted") Langford, Senior Vice President, Corporate Development, Cascade Retail Holdings Inc.; Elena Vasquez-Bright, General Counsel, Cascade Retail Holdings Inc.

CC: Harrison Wexford, Responsible Partner, Calderwood & Harkness LLP; Beatrice Holloway, Billing Partner, Calderwood & Harkness LLP

DATE: April 11, 2025

RE: Due Diligence Review of Material Commercial Agreements of NovaMart Global Inc. in Connection with the Proposed Acquisition by Cascade Retail Holdings Inc.

MATTER REFERENCE: Cascade Retail Holdings Inc. — Acquisition of NovaMart Global Inc. (Calderwood & Harkness Matter No. 1038-00009)

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I. EXECUTIVE SUMMARY

This memorandum summarizes the results of Calderwood & Harkness LLP's review of the material commercial agreements of NovaMart Global Inc. ("NovaMart," the "Company," or the "Target"), a Delaware corporation headquartered at 1100 Congress Avenue, Suite 800, Austin, Texas 78701, in connection with the proposed acquisition (the "Transaction") of one hundred percent (100%) of NovaMart's outstanding capital stock by Cascade Retail Holdings Inc. ("Cascade," "CRH," or the "Buyer"), a Delaware corporation listed on the Nasdaq Global Select Market (ticker symbol: CRHI), with its principal executive offices located at 4500 Elliott Avenue West, Suite 3200, Seattle, Washington 98119. The contemplated Transaction is structured as an all-cash stock purchase at an aggregate purchase price of One Billion Two Hundred Million Dollars ($1,200,000,000) (the "Purchase Price"), subject to customary working capital and other purchase price adjustments.

Our review covered all material contracts made available by NovaMart and its outside counsel, Calloway, Brandt & Loewe LLP (Richard Calloway, Lead Partner; Simone Adesanya, Associate Lead), in the NovaMart electronic data room (the "Data Room"), hosted on the Crestline Solutions platform (Project Constellation), pursuant to the Cascade Retail Holdings Inc. Due Diligence Request List dated February 17, 2025. The due diligence review period commenced on February 18, 2025, and this memorandum reflects the state of the Data Room and the status of our analysis as of the date hereof.

Key Finding. Approximately thirty-four (34) material commercial agreements have been identified as containing change of control provisions that will be triggered by the proposed all-cash stock purchase transaction, requiring either prior written consent from, or notice to, the applicable counterparty. As discussed in greater detail below, these provisions vary significantly in terms of their consent standards, the consequences of non-compliance, and the degree of risk they present to the successful consummation and post-closing integration of the Transaction.

NovaMart's Business Overview. NovaMart operates the following principal business lines, each of which is supported by the material contracts analyzed in this memorandum:

• Online Marketplace Platform. NovaMart operates a leading online marketplace platform (accessible at www.novamart.com and through the NovaMart mobile application) with approximately 62,400 active sellers and 9.1 million registered buyers as of December 31, 2024. The platform facilitates the sale of consumer goods across multiple categories and generates revenue through marketplace take-rate fees charged to sellers.

• Proprietary Logistics Network (NovaShip). NovaMart operates a proprietary logistics fulfillment network branded as "NovaShip," consisting of fourteen (14) fulfillment centers located across nine (9) states: California (3 facilities), New Jersey (2), Georgia (2), Ohio (1), Illinois (1), Pennsylvania (1), Tennessee (1), Florida (2), and Washington (1). NovaShip provides warehousing, order fulfillment, packaging, and last-mile delivery coordination services for NovaMart marketplace sellers.

• Advertising Revenue Operations. NovaMart monetizes its platform traffic through on-platform sponsored listings, display advertising, and programmatic advertising programs, operated in partnership with Stratton Digital Media Inc.

• Logistics SaaS Services. NovaMart offers its logistics technology stack as a software-as-a-service ("SaaS") solution to third-party retailers and direct-to-consumer brands, generating incremental recurring revenue.

Financial Summary. NovaMart reported the following key financial metrics for the fiscal year ended December 31, 2024 ("FY2024"):

Overall Risk Assessment. Based on our review, the majority of the identified change of control provisions are consent-based rather than automatic termination triggers, which is a favorable finding. However, several provisions present meaningful risk to the Transaction, particularly where the applicable consent standard is at the counterparty's sole discretion or where the consequence of non-compliance includes a right of termination or service suspension. A coordinated consent solicitation effort, conducted jointly by NovaMart management, Calloway, Brandt & Loewe LLP, and Calderwood & Harkness LLP, will be required prior to the closing of the Transaction (the "Closing"). We have identified five (5) contracts that we classify as "Tier 1 — Critical Priority" and three (3) contracts (or groups of contracts) that we classify as "Tier 2 — High Priority," each of which is discussed in detail below in Sections IV and VII of this memorandum.

We note that the single most significant contract risk identified in our review relates to the Technology License Agreement with Arcwave Software LLC, whose consent standard permits Arcwave to withhold consent in its sole discretion if the acquirer qualifies as a "Competitor," a definition that Cascade is likely to satisfy based on its FY2024 revenue and its operation of the CascadeDirect.com ecommerce platform. We recommend that this issue be elevated for discussion with Cascade's deal team and that it be addressed in the representations, conditions, and indemnification provisions of the Stock Purchase Agreement.

II. METHODOLOGY AND SCOPE OF REVIEW

A. Documents Reviewed

Calderwood & Harkness LLP reviewed all contracts classified as "material" by NovaMart management and its counsel, Calloway, Brandt & Loewe LLP, and uploaded to the Data Room in response to the Due Diligence Request List dated February 17, 2025. Specifically, our review focused on the following categories of contracts:

1. All contracts with an annual value exceeding Five Million Dollars ($5,000,000), whether measured by NovaMart's payment obligations, revenue attributable to the contract, or transaction volume facilitated by the contract.

2. All contracts deemed to be of strategic significance to NovaMart's business operations, regardless of dollar value, including technology licenses, intellectual property agreements, key vendor relationships, and joint venture or strategic partnership arrangements.

3. All contracts deemed to be operationally critical to the continued functioning of NovaMart's marketplace platform, NovaShip logistics network, advertising revenue operations, or logistics SaaS services.

4. All credit agreements, loan agreements, indentures, and other financing arrangements.

5. All real property leases for NovaMart's headquarters and fulfillment center facilities.

6. All insurance policies, surety bonds, and letters of credit.

In total, we reviewed approximately eighty-five (85) material commercial agreements. Our review included the underlying executed agreement for each contract, together with all amendments, modifications, side letters, supplements, statements of work, and order forms made available in the Data Room. We cross-referenced the contracts produced in the Data Room against (a) NovaMart's representations contained in the draft disclosure schedules to the Stock Purchase Agreement (as circulated by Calloway, Brandt & Loewe LLP on March 12, 2025), (b) the contract summaries prepared by NovaMart management and uploaded to the Data Room on February 28, 2025 (the "Management Contract Summaries"), and (c) NovaMart's FY2024 annual report and audited financial statements (including the notes thereto) filed with the Securities and Exchange Commission.

We note certain gaps in the Data Room production, which are identified in Section II.C (Limitations) below.

B. Analytical Framework

Our review of each material contract was conducted through the following analytical framework:

1. Identification of Change of Control Provisions. We identified all provisions in each contract that address or are triggered by a change of control, change in control, change of ownership, assignment, transfer, or analogous events. We reviewed defined terms sections carefully, as "change of control" and related concepts are frequently defined terms that may appear under varying nomenclature, including but not limited to "Change of Control," "Change in Control," "Ownership Change," "Transfer of Control," "Change of Management," "Fundamental Change," and similar formulations. We also identified provisions that, while not expressly labeled as "change of control" provisions, would be triggered by the Transaction by virtue of their operative language (e.g., anti-assignment provisions that define "assignment" to include changes in equity ownership, or provisions that prohibit transfers of "direct or indirect" interests in the contracting party).

2. Classification of Provisions by Type. Each identified provision was classified into one or more of the following categories:

(i) Consent Required — The contract requires the counterparty's prior written consent before a change of control may occur or be consummated. Consent standards were further sub-classified as (a) consent not to be unreasonably withheld, conditioned, or delayed ("NUBW Standard"); (b) consent at counterparty's sole discretion ("Sole Discretion Standard"); or (c) consent required with no specified standard.

(ii) Notice Required — The contract requires that the counterparty receive written notice of the change of control, either before or within a specified period after the change of control event, but does not require the counterparty's consent.

(iii) Termination Right Upon Change of Control — The contract grants the counterparty a right to terminate the agreement following a change of control, either as the consequence of a failure to obtain consent or as an independent right triggered by the change of control itself.

(iv) Renegotiation or Repricing Trigger — The contract permits or requires the counterparty to renegotiate pricing, service levels, or other material terms following a change of control.

(v) Acceleration or Payment Trigger — The contract provides for the acceleration of payment obligations, mandatory prepayment, or other financial consequences upon a change of control (most commonly found in credit agreements and financing arrangements).

3. Assessment of Consequences of Non-Compliance. For each contract containing a change of control provision, we assessed the legal and practical consequences that would result from a failure to obtain the required consent or provide the required notice, including termination rights, suspension of services, acceleration of obligations, forfeiture of rights, imposition of penalties, and claims for breach of contract.

4. Identification of Anti-Assignment Provisions Implicated by the Stock Purchase Structure. We paid particular attention to the interaction between the Transaction's stock purchase structure and the anti-assignment provisions found in many of the reviewed contracts. In a stock purchase transaction, as distinguished from an asset purchase or merger, the contracting entity — here, NovaMart — remains unchanged as a corporate entity and continues as a party to all of its existing contracts. The change in ownership occurs at the equity level, not at the contract level. However, many modern commercial contracts define "change of control" broadly to capture changes in equity ownership, effectively treating such changes as tantamount to an assignment of the contract. Where a contract's anti-assignment provision does not extend to equity-level transfers, and the contract does not separately define or address "change of control," the stock purchase structure should not trigger the anti-assignment restriction. We identified and catalogued each contract's treatment of this issue.

C. Limitations. The following limitations apply to the analysis set forth in this memorandum:

1. Data Room Cut-Off. Our review is limited to those contracts that were produced in the Data Room as of the cut-off date of April 7, 2025. NovaMart may have additional material contracts that have not yet been produced, either because they were inadvertently omitted, because NovaMart management did not consider them to be material, or because they were entered into after the cut-off date. We recommend that NovaMart's bring-down certificate at Closing include a representation confirming the completeness of the contract production.

2. State Law Variations. Our legal conclusions regarding the enforceability of specific change of control provisions are subject to the applicable state law governing each contract. The contracts reviewed are governed by the laws of various states, including Delaware, New York, California, Texas, Georgia, Washington, New Jersey, Illinois, Pennsylvania, Tennessee, Ohio, and Florida. While general principles of contract interpretation are broadly consistent across these jurisdictions, specific enforceability questions — particularly those relating to the reasonableness of consent withholding, the scope of anti-assignment provisions in the context of equity transfers, and the availability of equitable remedies — may vary.

3. No Independent Compliance Verification. Calderwood & Harkness LLP has not conducted an independent verification of NovaMart's compliance with the terms and conditions of its material contracts. Our analysis is based on the face of the contracts as produced in the Data Room, supplemented by the Management Contract Summaries and representations made by NovaMart management and Calloway, Brandt & Loewe LLP during due diligence calls conducted on March 5, March 19, and April 2, 2025. To the extent that NovaMart is in breach of, or default under, any material contract as of the date hereof, such breach or default could interact with the change of control provisions in ways not addressed in this memorandum (e.g., a counterparty may be more likely to exercise a termination right upon change of control if there are pre-existing unresolved disputes).

4. Oral Agreements and Course of Dealing. Our review is limited to written agreements. We have not investigated whether any material contractual arrangements exist on the basis of oral agreements, course of dealing, or course of performance that are not reflected in the written documents produced in the Data Room.

5. Regulatory Approvals. This memorandum does not address regulatory approvals (including, without limitation, Hart-Scott-Rodino Act antitrust clearance or any industry-specific regulatory consents) that may be required in connection with the Transaction. Those matters are addressed in a separate Calderwood & Harkness LLP memorandum.

III. SUMMARY OF MATERIAL CONTRACTS REVIEWED

Our review of the approximately eighty-five (85) material commercial agreements produced in the Data Room yielded the following summary findings:

Of the approximately thirty-four (34) contracts containing change of control provisions, we have classified each according to a priority tier based on the financial significance of the contract, the severity of the consequences of non-compliance, the consent standard applicable to the provision, and the operational criticality of the contractual relationship to NovaMart's business. The priority classifications are summarized in the table below:

The table below provides a summary of all thirty-four (34) contracts with change of control provisions. Detailed analysis of the most significant contracts follows in Section IV. A complete schedule of all thirty-four contracts is provided in Appendix A.

Note: Contract numbering in this table is for reference purposes only and does not correspond to Data Room index numbers. Contracts 7–20 represent the fourteen fulfillment center leases, which are discussed collectively in Section IV.E.7. Contracts 22–47 are summarized in Section IV.G.9 and detailed in Appendix A.

IV. DETAILED ANALYSIS OF KEY MATERIAL CONTRACTS

A. Technology and Cloud Services Agreements

1. Master Services Agreement with Pinnacle Cloud Solutions Inc. Counterparty: Pinnacle Cloud Solutions Inc., a Washington corporation, with its principal offices at 2200 Westlake Avenue North, Seattle, WA 98109 ("Pinnacle Cloud").

Description: This Master Services Agreement, dated December 15, 2022, as amended by Amendment No. 1 dated June 8, 2023, and Amendment No. 2 dated January 22, 2024 (collectively, the "Pinnacle MSA"), governs Pinnacle Cloud's provision of cloud hosting, infrastructure-as-a-service ("IaaS"), data storage, content delivery network ("CDN"), and related managed services for NovaMart's marketplace platform. The Pinnacle MSA is mission-critical to NovaMart's operations: the NovaMart marketplace, including the consumer-facing website, mobile application, seller portal, and all back-end transaction processing and data management systems, is hosted on Pinnacle Cloud's infrastructure. A termination or material disruption of the Pinnacle MSA would effectively render NovaMart's marketplace platform inoperable until an alternative cloud hosting solution could be procured, migrated, and stabilized — a process that NovaMart management estimates would require a minimum of nine (9) to twelve (12) months.

Annual Contract Value: Approximately Thirty-Eight Million Dollars ($38,000,000), consisting of fixed monthly hosting fees of approximately $2.5 million, variable compute and storage usage charges, and managed services fees. NovaMart management has indicated that actual FY2024 spend under the Pinnacle MSA was approximately $38.2 million.

Term: The Pinnacle MSA has an initial term of five (5) years commencing December 15, 2022, and expiring December 14, 2027, with two (2) successive two (2)-year renewal options exercisable by NovaMart upon written notice given not less than one hundred twenty (120) days prior to the expiration of the then-current term.

Change of Control Provision: Section 12.3 of the Pinnacle MSA provides as follows:

"Change of Control. Neither party may assign this Agreement or any rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld, conditioned, or delayed; provided, however, that either party may assign this Agreement without consent to an affiliate or in connection with a merger, reorganization, or sale of all or substantially all of its assets, provided further that for purposes of this Section 12.3, a 'Change of Control' of Customer [NovaMart] shall be deemed to constitute an assignment requiring the prior written consent of Provider [Pinnacle Cloud]. A 'Change of Control' shall mean any transaction or series of related transactions resulting in a change of more than fifty percent (50%) of the outstanding equity interests or voting power of Customer."

Consent under this provision is subject to the "not to be unreasonably withheld, conditioned, or delayed" standard. However, the provision does not define what constitutes "reasonable" grounds for withholding consent, which introduces some ambiguity.

Consequence of Non-Compliance: Section 12.4 of the Pinnacle MSA provides that if a Change of Control occurs without Pinnacle Cloud's prior written consent, Pinnacle Cloud shall have the right to terminate the Pinnacle MSA upon ninety (90) days' prior written notice to NovaMart. Upon termination, NovaMart would be required to pay all outstanding fees through the termination date, together with early termination charges as specified in Exhibit B to the Pinnacle MSA (estimated by NovaMart management at approximately $8 million based on the remaining term).

Non-Compete / Exclusivity: Section 8.1 of the Pinnacle MSA contains a limited exclusivity provision requiring NovaMart to utilize Pinnacle Cloud as its "primary cloud hosting provider" for the NovaMart marketplace platform during the initial five-year term. The exclusivity provision does not prevent NovaMart from using other cloud providers for ancillary or non-marketplace workloads, but it does require that a majority of NovaMart's marketplace compute and storage workload remain on Pinnacle Cloud's infrastructure. This provision may create complications post-Closing if Cascade has existing enterprise cloud hosting arrangements (e.g., with Ridgeway Industries, Crestline Systems, or Aldermere Technologies) that it intends to consolidate with NovaMart's infrastructure.

Assignability: As noted above, no assignment without consent; a Change of Control is treated as an assignment.

Risk Assessment: HIGH. Termination of the Pinnacle MSA would materially disrupt NovaMart's platform operations, potentially rendering the marketplace inoperable for an extended period. The estimated nine-to-twelve-month migration timeline, combined with the $38 million annual contract value and early termination charges, makes this agreement one of the most critical contracts for consent solicitation. Additionally, the exclusivity provision in Section 8.1 warrants post-Closing planning attention.

Recommended Action:

(a) Initiate the consent solicitation process with Pinnacle Cloud promptly upon signing of the Stock Purchase Agreement. Given the NUBW consent standard, we believe the likelihood of obtaining consent is favorable, but early engagement is advisable.

(b) Evaluate whether Cascade's existing cloud vendor relationships create any conflict with the Section 8.1 exclusivity provision, and if so, consider negotiating a modification or waiver of that provision as part of the consent process.

(c) Obtain confirmation from NovaMart management that no events of default or material disputes exist under the Pinnacle MSA that could complicate the consent process.

(d) Confirm that NovaMart's disaster recovery and business continuity plans include adequate provisions for a potential (albeit unlikely) termination of the Pinnacle MSA.

2. Technology License Agreement with Arcwave Software LLC. Counterparty: Arcwave Software LLC, a California limited liability company, with its principal offices at 1600 Seaport Boulevard, Suite 450, Redwood City, CA 94063 ("Arcwave").

Description: This Technology License Agreement, dated March 28, 2022 (the "Arcwave License"), governs NovaMart's license of Arcwave's proprietary search algorithm technology. NovaMart's marketplace search and product recommendation engine — a core feature of the NovaMart platform that directly affects buyer conversion rates, seller visibility, and overall marketplace engagement — relies on Arcwave's core algorithm (the "Arcwave Algorithm"). According to NovaMart's Chief Technology Officer, Dr. Priya Ramanathan, the Arcwave Algorithm is deeply integrated into NovaMart's search infrastructure and is responsible for processing approximately 2.3 billion search queries per month on the NovaMart platform. NovaMart does not currently possess an in-house alternative to the Arcwave Algorithm.

Annual License Fee: The Arcwave License requires NovaMart to pay an annual base license fee of approximately Twelve Million Dollars ($12,000,000), payable in equal quarterly installments, plus per-query usage fees for search queries processed in excess of the base query volume tier specified in Exhibit A to the Arcwave License. NovaMart management estimates that per-query usage fees totaled approximately $4 million to $5 million in FY2024, bringing the total annual cost of the Arcwave License to approximately $16 million to $17 million.

Term: The Arcwave License has a seven (7)-year term commencing March 28, 2022, and expiring March 27, 2029. The Arcwave License does not contain automatic renewal provisions; the parties would need to negotiate a new agreement upon expiration.

Change of Control Provision: Section 15.2 of the Arcwave License provides as follows:

"Change of Control Consent. Licensee [NovaMart] shall not undergo a Change of Control without the prior written consent of Licensor [Arcwave]. For purposes of this Agreement, a 'Change of Control' shall mean any direct or indirect acquisition of a majority of the equity interests of Licensee, or any merger, consolidation, or similar transaction in which Licensee is not the surviving entity or in which the holders of Licensee's equity interests immediately prior to such transaction do not hold a majority of the equity interests of the surviving entity immediately following such transaction. Licensor may withhold its consent in its sole discretion if the acquirer, surviving entity, or any of its affiliates is a Competitor. For all other Change of Control transactions, Licensor's consent shall not be unreasonably withheld. A 'Competitor' shall mean any entity (together with its affiliates) that (i) operates an online marketplace or ecommerce platform and (ii) generates annual ecommerce revenue exceeding One Billion Dollars ($1,000,000,000)."

Consequence of Non-Compliance: Section 15.3 of the Arcwave License provides that if a Change of Control occurs without Arcwave's prior written consent, Arcwave may terminate the Arcwave License upon sixty (60) days' prior written notice to NovaMart. Upon termination (whether for Change of Control or otherwise), Section 15.4 requires NovaMart to cease all use of the Arcwave Algorithm and all Arcwave Confidential Information within one hundred eighty (180) days following the effective date of termination (the "Wind-Down Period"). During the Wind-Down Period, NovaMart may continue to operate the Arcwave Algorithm solely to the extent necessary to transition to an alternative search solution, but NovaMart must pay Arcwave a "Transition Fee" equal to 150% of the then-applicable per-query usage rate for all queries processed during the Wind-Down Period.

IP Restrictions: The Arcwave License grants NovaMart a non-exclusive, non-transferable, non-sublicensable license to use the Arcwave Algorithm in object code form solely in connection with the operation of the NovaMart marketplace platform. NovaMart does not have access to the source code of the Arcwave Algorithm, except through a source code escrow arrangement with Ashgrove Industries (Escrow Agreement No. IM-ESC-2022-4471), under which the source code would be released to NovaMart only upon the occurrence of specified release conditions (Arcwave's bankruptcy, material breach by Arcwave of its support obligations, or discontinuation of the Arcwave Algorithm product line). A Change of Control of NovaMart is not a release condition under the escrow agreement.

Risk Assessment: HIGH. This is the single most significant contract risk identified in our due diligence review. Cascade's FY2024 total revenue was approximately $14.7 billion, and Cascade operates CascadeDirect.com, a direct-to-consumer ecommerce platform that generated approximately $3.2 billion in ecommerce revenue in FY2024. Accordingly, Cascade almost certainly qualifies as a "Competitor" under the Arcwave License definition, meaning that Arcwave may withhold its consent to the Transaction in its sole discretion. If Arcwave withholds consent, NovaMart would be required to cease all use of the Arcwave Algorithm within 180 days following termination — effectively requiring NovaMart to develop or acquire replacement search technology on an accelerated timeline. NovaMart's CTO has indicated that developing an in-house replacement would require a minimum of twelve (12) to eighteen (18) months and a capital investment of approximately $25 million to $35 million, with significant execution risk.

Recommended Action:

(a) Engage Arcwave at the earliest practicable date following the signing of the Stock Purchase Agreement to assess Arcwave's willingness to consent to the Transaction. Given the sole discretion standard applicable to Competitor acquirers, Cascade should be prepared for the possibility that Arcwave may condition its consent on material modifications to the Arcwave License terms, including pricing adjustments, scope limitations, or other concessions.

(b) Assess the likelihood of obtaining consent from Arcwave, including through commercial discussions with Arcwave's management team and through an analysis of Arcwave's competitive interests. It is possible that Arcwave may view a Cascade-owned NovaMart as a more valuable customer (given Cascade's scale and resources) or, alternatively, as a competitive threat.

(c) Evaluate whether NovaMart has, or can develop on an accelerated timeline, in-house replacement search technology sufficient to replace the Arcwave Algorithm. Engage NovaMart's CTO in a technical assessment.

(d) Consider whether the Stock Purchase Agreement should include specific representations from NovaMart's stockholders regarding the Arcwave License, including representations regarding the applicability of the "Competitor" exclusion and the status of NovaMart's relationship with Arcwave. Consider whether obtaining Arcwave's consent should be a condition to Closing.

(e) Evaluate whether the R&W insurance policy (Meridian Specialty Insurance Company, Policy No. MSI-RWI-2025-07832) would provide coverage for losses resulting from the loss of the Arcwave License, including the costs of developing or acquiring replacement technology and any business interruption losses.

(f) As a contingency, identify potential alternative search algorithm providers and evaluate the feasibility and cost of a technology replacement project.

B. Logistics and Supply Chain Agreements

3. Logistics Partnership Agreement with Redline Freight Corp. Counterparty: Redline Freight Corp., a Georgia corporation, with its principal offices at 3000 Peachtree Industrial Boulevard, Suite 100, Duluth, GA 30096 ("Redline Freight").

Description: This Logistics Partnership Agreement, dated June 1, 2023, as amended by Amendment No. 1 dated November 15, 2023, and Amendment No. 2 dated September 3, 2024 (collectively, the "Redline Agreement"), is NovaMart's master freight and third-party logistics ("3PL") agreement for the NovaShip fulfillment network. Under the Redline Agreement, Redline Freight provides line-haul transportation services (inter-facility freight movements), last-mile delivery services (final-leg delivery to end consumers), and cross-dock services at designated Redline Freight facilities that support NovaMart's fourteen (14) fulfillment centers. Redline Freight is NovaMart's single largest vendor by dollar value and is the backbone of the NovaShip delivery network. NovaMart management has indicated that Redline Freight handles approximately sixty-five percent (65%) of all NovaMart package deliveries by volume.

Annual Contract Value: Approximately Ninety-Five Million Dollars ($95,000,000), based on FY2024 actual spend. The Redline Agreement uses a combination of fixed monthly lane rates (for dedicated line-haul routes), per-package delivery fees (for last-mile deliveries), and fuel surcharges (indexed to the U.S. Department of Energy weekly retail diesel price). NovaMart management has indicated that the current rates under the Redline Agreement are favorable relative to prevailing market benchmarks, reflecting the volume commitments and long-term relationship between the parties.

Term: The Redline Agreement has a three (3)-year initial term commencing June 1, 2023, with automatic one (1)-year renewals unless either party provides written notice of non-renewal at least one hundred eighty (180) days prior to the expiration of the then-current term. The current term expires June 1, 2026, and will automatically renew through June 1, 2027, unless notice of non-renewal is provided by December 1, 2025.

Change of Control Provision: Section 9.4 of the Redline Agreement provides as follows:

"Change of Control Notification and Rate Review. In the event of a Change of Control of either party, the party undergoing such Change of Control shall provide written notice to the other party within thirty (30) days of the closing of such Change of Control transaction. For purposes of this Agreement, a 'Change of Control' shall mean (i) the acquisition by any person or entity of more than fifty percent (50%) of the equity interests or voting power of the applicable party, (ii) any merger, consolidation, or similar transaction in which the applicable party is not the surviving entity, or (iii) the sale of all or substantially all of the assets of the applicable party. Following receipt of a Change of Control notice, the non-changing party shall have the option, exercisable by written notice within sixty (60) days of receipt of the Change of Control notice, to initiate a rate review and renegotiation of the pricing terms set forth in Exhibit C hereto. If the parties are unable to agree on revised pricing terms within ninety (90) days following initiation of the rate review, either party may terminate this Agreement upon one hundred twenty (120) days' prior written notice."

Consequence of Non-Compliance: Section 9.5 of the Redline Agreement provides that the failure of the changing party to provide timely notice of a Change of Control shall constitute a material breach of the Redline Agreement. Upon the occurrence of such material breach, the non-breaching party shall have the right to terminate the Redline Agreement upon thirty (30) days' prior written notice, without regard to the notice and cure provisions of Section 14.2.

Pricing Risk: As noted above, NovaMart management has represented that the current rates under the Redline Agreement are below prevailing market rates, reflecting the parties' volume commitments and established relationship. The rate review and renegotiation mechanism in Section 9.4 creates a risk that Redline Freight will use the Change of Control event as an opportunity to seek rate increases. Based on our review of publicly available logistics industry data and discussions with Cascade's logistics team, we estimate that a market-rate adjustment could increase NovaMart's annual freight and delivery costs by approximately $8 million to $15 million, depending on the categories of services renegotiated and prevailing market conditions at the time of the rate review.

Risk Assessment: HIGH. The combination of the $95 million annual spend, Redline Freight's handling of approximately 65% of NovaMart package deliveries, the renegotiation trigger, and the potential for significant pricing increases makes this agreement a critical priority. While the Redline Agreement does not grant Redline Freight an automatic termination right upon Change of Control (unlike the Pinnacle Cloud MSA or Arcwave License), the renegotiation mechanism and the ultimate termination right if renegotiation fails present meaningful financial and operational risk.

Recommended Action:

(a) Provide timely written notice to Redline Freight within thirty (30) days of the Closing of the Transaction, as required by Section 9.4. Consider whether notice should be provided prior to Closing as a matter of good commercial practice and to allow the rate review process to commence in parallel with the Closing process.

(b) Assess the current competitive landscape for 3PL and freight services to develop alternative provider options as negotiating leverage in the event that Redline Freight seeks to renegotiate rates. Cascade's existing logistics vendor relationships should be evaluated for potential synergies.

(c) Consider whether the Stock Purchase Agreement should require NovaMart to deliver the Change of Control notice to Redline Freight as a pre-Closing covenant, so that the rate review process (and any associated pricing uncertainty) can be substantially resolved before the Closing.

(d) Evaluate the financial impact of potential rate increases on the pro forma financial model for the Transaction, and consider whether a purchase price adjustment mechanism or escrow reserve is appropriate to address pricing renegotiation risk.

C. Advertising and Revenue Agreements

4. Advertising Revenue Share Agreement with Stratton Digital Media Inc. Counterparty: Stratton Digital Media Inc., a New York corporation, with its principal offices at 485 Madison Avenue, 22nd Floor, New York, NY 10022 ("Stratton Digital").

Description: This Advertising Revenue Share Agreement, dated September 1, 2023 (the "Stratton Agreement"), governs NovaMart's primary advertising monetization partnership. Under the Stratton Agreement, Stratton Digital operates NovaMart's on-platform sponsored listings program, display advertising inventory, and programmatic advertising exchange. Stratton Digital provides the technology platform, advertiser demand generation, and ad-serving infrastructure, while NovaMart provides the advertising inventory (i.e., the on-platform ad placements viewed by NovaMart's 9.1 million registered buyers). The advertising revenue generated through the Stratton Agreement represents a significant and high-margin component of NovaMart's total revenue.

Annual Revenue: NovaMart recognized approximately Sixty-Seven Million Dollars ($67,000,000) in advertising revenue attributable to the Stratton Agreement in FY2024. This revenue represented approximately 7.5% of NovaMart's total FY2024 revenue of $891 million and, because advertising revenue carries substantially higher margins than marketplace take-rate revenue, is estimated to contribute disproportionately to NovaMart's EBITDA.

Term: The Stratton Agreement has a five (5)-year initial term commencing September 1, 2023, and expiring August 31, 2028, with one (1) two (2)-year renewal option exercisable by mutual agreement of the parties.

Change of Control Provision: Section 11.1 of the Stratton Agreement provides:

"Change of Control. In the event of a Change of Control of Publisher [NovaMart], Publisher shall provide Media Partner [Stratton Digital] with written notice of such Change of Control not less than forty-five (45) days prior to the closing of the applicable transaction. A 'Change of Control' shall mean the acquisition by any person or group (as such term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) of more than fifty percent (50%) of the outstanding voting equity interests of Publisher. Following a Change of Control, Media Partner shall have the right, exercisable by written notice to Publisher delivered within ninety (90) days following the effective date of the Change of Control, to terminate this Agreement upon one hundred eighty (180) days' prior written notice."

Revenue Share Structure: Under the Stratton Agreement, net advertising revenue (defined as gross advertising revenue less ad-serving costs, fraud chargebacks, and advertiser credits) is split between NovaMart and Stratton Digital on a 70/30 basis, with NovaMart receiving seventy percent (70%) and Stratton Digital receiving thirty percent (30%). The revenue share percentage is subject to adjustment based on annual revenue milestones: if net advertising revenue exceeds $80 million in any contract year, the split adjusts to 75/25 in NovaMart's favor for the incremental revenue above the $80 million threshold.

Exclusivity: Section 4.2 of the Stratton Agreement provides that Stratton Digital shall be the exclusive provider of programmatic display advertising services on the NovaMart platform during the term. The exclusivity provision does not extend to NovaMart's direct-sold sponsored listings (i.e., advertising placements sold directly by NovaMart's in-house advertising sales team to NovaMart marketplace sellers), but does cover all third-party programmatic demand sources.

Risk Assessment: MEDIUM-HIGH. The potential loss of $67 million in annual advertising revenue is significant and would have a material adverse impact on NovaMart's EBITDA. However, the risk is partially mitigated by two factors: first, Stratton Digital's termination right is exercisable only within a ninety (90)-day window following the Change of Control, and the subsequent termination notice period is one hundred eighty (180) days, providing NovaMart with a substantial transition period; and second, Cascade operates its own in-house advertising platform (CascadeAds) for the CascadeDirect.com ecommerce marketplace, which may be capable of absorbing NovaMart's advertising inventory on a post-Closing basis if the Stratton Agreement is terminated.

Recommended Action:

(a) Provide written notice to Stratton Digital not less than forty-five (45) days prior to the anticipated Closing, as required by Section 11.1. Based on the currently targeted Closing date of October 15, 2025, the notice should be transmitted no later than September 1, 2025.

(b) Engage Stratton Digital in discussions regarding the continuation of the advertising partnership following the Transaction. Stratton Digital may view the Transaction favorably if Cascade's scale and buyer traffic are expected to increase the advertising revenue opportunity.

(c) Assess whether Cascade's CascadeAds platform could serve as a replacement for Stratton Digital's services in the event of termination, including the technical integration requirements and the estimated timeline for transition.

(d) Evaluate the financial impact of potential loss of the Stratton Agreement revenue on the pro forma model for the Transaction.

D. Payment Processing Agreements

5. Payment Processing Agreement with PayStream Financial Technologies Inc. Counterparty: PayStream Financial Technologies Inc., a Delaware corporation, with its principal offices at 900 Market Street, Suite 600, Wilmington, DE 19801 ("PayStream").

Description: This Payment Processing Agreement, dated February 15, 2023, as amended by Amendment No. 1 dated August 20, 2023 (collectively, the "PayStream Agreement"), governs PayStream's provision of payment processing and gateway services for all NovaMart marketplace transactions. PayStream provides end-to-end payment acceptance (including credit card, debit card, ACH, digital wallet, and buy-now-pay-later payment methods), real-time fraud screening and risk management, disbursement of seller proceeds to NovaMart marketplace sellers, chargeback management, and compliance with Payment Card Industry Data Security Standard ("PCI DSS") requirements. The PayStream Agreement is essential to NovaMart's ability to process consumer transactions and disburse funds to its approximately 62,400 active sellers.

Annual Transaction Volume: PayStream processes substantially all of NovaMart's Gross Merchandise Value, which totaled approximately Six Billion Two Hundred Million Dollars ($6,200,000,000) in FY2024.

Annual Processing Fees: Approximately Forty-Three Million Dollars ($43,000,000), consisting of a blended per-transaction processing fee (inclusive of card network interchange, assessments, and PayStream's markup), monthly gateway fees, and ancillary service fees for fraud screening and chargeback management. The blended effective processing rate is approximately 0.69% of GMV.

Term: The PayStream Agreement has a four (4)-year initial term commencing February 15, 2023, and expiring February 14, 2027, with one (1) two (2)-year renewal option exercisable by NovaMart upon written notice given not less than ninety (90) days prior to expiration.

Change of Control Provision: Section 14.6 of the PayStream Agreement provides:

"Change of Control. Customer [NovaMart] shall not undergo a Change of Control without the prior written consent of Provider [PayStream], which consent shall not be unreasonably withheld, conditioned, or delayed. A 'Change of Control' means any transaction or series of related transactions resulting in a change of more than fifty percent (50%) of the equity ownership of Customer."

Consequence of Non-Compliance: Section 14.7 of the PayStream Agreement provides that if a Change of Control occurs without PayStream's prior written consent, PayStream may, upon fifteen (15) days' prior written notice, suspend all processing services. If the consent is not obtained within sixty (60) days following such suspension, PayStream may terminate the PayStream Agreement upon an additional thirty (30) days' written notice. Upon termination or suspension, NovaMart must transition to a replacement payment processor at its own expense.

PCI DSS Compliance: Section 7.1 of the PayStream Agreement requires NovaMart to maintain PCI DSS Level 1 compliance certification at all times during the term. NovaMart's most recent PCI DSS Level 1 certification was issued by its Qualified Security Assessor (QSA), CyberShield Compliance Group LLC, on September 15, 2024, and is valid through September 14, 2025. NovaMart management has confirmed that there are no known PCI DSS compliance deficiencies.

Risk Assessment: HIGH. Payment processing is absolutely mission-critical to NovaMart's marketplace operations. Without an operational payment processor, NovaMart cannot accept buyer payments or disburse funds to sellers — the marketplace would effectively cease to function. The fifteen (15)-day suspension right in Section 14.7 is unusually aggressive and creates an acute risk if consent is not timely obtained. While the NUBW consent standard suggests that consent should be obtainable, the severity of the consequences of non-compliance dictates that this consent be treated as a top priority.

Recommended Action:

(a) Prioritize the consent solicitation with PayStream as one of the first consents to be sought following signing of the Stock Purchase Agreement. Given the fifteen (15)-day suspension timeline, obtaining PayStream's consent well in advance of Closing is essential.

(b) Assess Cascade's existing payment processing relationships as a potential backup in the unlikely event that PayStream consent is not obtained. Transitioning to an alternative payment processor is a complex undertaking requiring significant technical integration work and PCI DSS re-certification, with an estimated minimum timeline of six (6) to nine (9) months.

(c) Verify that NovaMart's PCI DSS Level 1 certification is current and that no compliance issues exist that could complicate the consent process or create independent risks under the PayStream Agreement.

(d) Review the PayStream Agreement's data security, privacy, and breach notification provisions for any additional change-of-control-related implications.

E. Real Property Leases

6. Office Lease — 1100 Congress Avenue, Austin, TX (NovaMart Headquarters). Landlord: Congress Tower Partners LP, a Texas limited partnership, with its general partner being Congress Tower GP LLC ("Landlord").

Description: This Office Lease Agreement, dated December 1, 2020, as amended by First Amendment to Lease dated March 15, 2022 (collectively, the "HQ Lease"), governs NovaMart's lease of its headquarters office space at 1100 Congress Avenue, Suite 800, Austin, Texas 78701. The NovaMart headquarters houses the Company's executive leadership team, corporate development, marketing, product management, engineering (partially — NovaMart also maintains a secondary engineering office in San Francisco), legal, finance, and human resources functions. Approximately 430 NovaMart employees are based at the Austin headquarters.

Annual Rent: Approximately Four Million Two Hundred Thousand Dollars ($4,200,000) on a triple-net basis, inclusive of base rent and estimated common area maintenance charges, real estate taxes, and insurance. The current base rent is $62.00 per rentable square foot per annum, subject to annual escalations of 2.75%.

Term: The HQ Lease has a ten (10)-year initial term commencing January 1, 2021, and expiring December 31, 2030. NovaMart has one (1) five (5)-year renewal option exercisable upon written notice given not less than twelve (12) months prior to the expiration of the initial term.

Square Footage: Approximately 58,000 rentable square feet on the 8th floor of the Congress Tower building.

Change of Control Provision: Section 22.1 of the HQ Lease provides:

"Transfer of Controlling Interest. For purposes of this Lease, a 'Transfer' shall include, in addition to an assignment or subletting, any change of control, merger, consolidation, or transfer of a controlling interest in Tenant [NovaMart]. A 'controlling interest' shall mean the ownership, directly or indirectly, of more than fifty percent (50%) of the voting securities or equity interests of Tenant. Any Transfer (including a transfer of a controlling interest) shall require Landlord's prior written consent, which consent shall not be unreasonably withheld, conditioned, or delayed."

Consequence of Non-Compliance: Section 22.4 of the HQ Lease provides that any Transfer without Landlord's prior written consent shall constitute a default under the Lease. Upon a default, the Landlord has standard lease remedies under Section 23, including the right to terminate the Lease upon thirty (30) days' written notice if the default is not cured within such period, and the right to seek damages.

Risk Assessment: MEDIUM. This is a standard commercial lease change of control provision with a NUBW consent standard. We do not anticipate difficulty in obtaining the Landlord's consent, provided that NovaMart presents Cascade as a creditworthy successor owner. The Austin headquarters is important to NovaMart's operations and talent retention, and the loss of this lease would be disruptive, but the risk of consent denial is low.

Recommended Action:

(a) Include the HQ Lease in the consent solicitation process. Prepare and transmit a consent request letter to Congress Tower Partners LP, including relevant information about Cascade's financial position and creditworthiness.

(b) Review any Landlord financial requirements (e.g., net worth requirements for the tenant or guarantor) that may be triggered by the consent process.

(c) Assess whether Cascade has post-Closing plans to consolidate or relocate NovaMart's headquarters, which could affect the strategy for the consent request.

7. Fulfillment Center Leases (14 Facilities). Overview. NovaMart's NovaShip logistics network operates through fourteen (14) fulfillment centers located across nine (9) states. Each fulfillment center is subject to a separate lease agreement with various landlords. A detailed summary of all fourteen leases is provided in Appendix B. The key parameters of these leases are summarized below:

Change of Control Provisions: Eleven (11) of the fourteen (14) fulfillment center leases contain change of control provisions requiring the landlord's prior written consent. Of these eleven, eight (8) use the NUBW consent standard, while three (3) provide that the landlord's consent may be withheld in the landlord's sole discretion. The three sole-discretion leases are located in California (1 facility — the Riverside, CA facility leased from ProLogis West Coast Industrial Fund II LP), Pennsylvania (1 facility — the Allentown, PA facility leased from Liberty Industrial Partners LLC), and Washington (1 facility — the Kent, WA facility leased from Puget Sound Warehouse Holdings Inc.). Three (3) leases do not contain change of control provisions or require notice only (Ohio, 1 Georgia facility, 1 Florida facility).

Standard Formulations. Most of the fulfillment center leases define "change of control" as a transfer of a "controlling interest" in the tenant, typically defined as more than fifty percent (50%) of the outstanding equity interests or voting power. Several leases also extend the definition to include any merger, consolidation, or reorganization in which the tenant is not the surviving entity. The standard formulations are generally consistent with the HQ Lease provision discussed in Section IV.E.6 above.

Risk Assessment: MEDIUM. A bulk consent solicitation across all fourteen facilities will be required. The risk that any individual landlord will withhold consent is manageable, particularly for the eight leases with NUBW consent standards. The three leases with sole-discretion consent standards present somewhat higher risk, but even in those cases, landlords are generally motivated to maintain occupancy and rental income, particularly in the industrial/warehouse sector where NovaMart's lease terms and creditworthiness (enhanced by Cascade's balance sheet post-Closing) are favorable. The more significant concern is the logistical complexity of coordinating consent requests across fourteen different landlords and ensuring that all consents are obtained in a timely manner. The simultaneous loss of multiple fulfillment centers, while unlikely, would materially disrupt NovaShip operations.

Recommended Action:

(a) Prepare and transmit consent solicitation letters to all fourteen landlords promptly upon signing of the Stock Purchase Agreement. Use a standardized form letter with facility-specific exhibits, tailored to each lease's specific consent provisions.

(b) Prioritize the three facilities where consent may be withheld in the landlord's sole discretion (Riverside, CA; Allentown, PA; Kent, WA). For these facilities, engage the landlords' leasing representatives directly and provide comprehensive information about Cascade's financial position and plans for the facilities.

(c) Assess the renewal terms and expiration dates for all fourteen leases, and identify any leases that are approaching expiration. Two leases (Georgia Facility 2 and Ohio Facility 1) have lease terms expiring in 2026, which may provide Cascade with leverage in the consent process (i.e., the landlord may be motivated to consent in exchange for a lease renewal commitment).

(d) Evaluate alternative warehouse space availability in each market as a contingency in the event that consent is denied for any facility.

(e) Coordinate the fulfillment center lease consent process with the broader NovaShip integration planning effort.

F. Credit Facilities

8. Senior Credit Facility — Ashford Savings Bank, N.A. Counterparty/Lender: Ashford Savings Bank, N.A., a national banking association organized under the laws of the United States and chartered by the Office of the Comptroller of the Currency (OCC Charter No. 71549), with its principal office at 200 Park Avenue, 15th Floor, New York, NY 10166 (the "Lender" or "Ashford"), acting in its capacity as Administrative Agent and sole lender under the Credit Agreement described below.

Description: NovaMart is party to that certain Credit Agreement, dated as of December 10, 2021, as amended by First Amendment to Credit Agreement dated April 22, 2022, Second Amendment to Credit Agreement dated October 5, 2023, and Third Amendment to Credit Agreement dated March 18, 2024 (as so amended, the "Credit Agreement"), by and between NovaMart, as Borrower, and Ashford Savings Bank, N.A., as Administrative Agent and Lender. The Credit Agreement provides for a senior secured revolving credit facility in the aggregate principal amount of One Hundred Fifty Million Dollars ($150,000,000) (the "Revolving Facility"). NovaMart management has indicated that the estimated outstanding principal balance as of the anticipated Closing date will be approximately One Hundred Forty-Three Million Two Hundred Thousand Dollars ($143,200,000), with accrued and unpaid interest estimated at approximately $1.8 million based on the current applicable SOFR-based interest rate of approximately 7.15%.

Maturity: December 10, 2026.

Change of Control Provision: Section 8.01(k) of the Credit Agreement defines "Change of Control" and provides as follows:

"Events of Default. Each of the following shall constitute an 'Event of Default': ... (k) Change of Control. A Change of Control shall have occurred. For purposes of this Agreement, a 'Change of Control' shall mean any transaction or series of related transactions as a result of which any 'person' or 'group' (within the meaning of Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended) shall have acquired, directly or indirectly, beneficial ownership of more than thirty-five percent (35%) of the outstanding equity interests or voting power of the Borrower [NovaMart]."

We note that the Credit Agreement uses a thirty-five percent (35%) threshold, which is lower than the fifty percent (50%) threshold used in most of the other change of control provisions identified in our review. This lower threshold ensures that the acquisition of 100% of NovaMart's outstanding capital stock by Cascade will clearly trigger the Change of Control event of default.

Consequence: Pursuant to Sections 8.01 and 8.02 of the Credit Agreement, upon the occurrence of a Change of Control event of default, all outstanding amounts under the Revolving Facility (including principal, accrued interest, fees, and expenses) shall become immediately due and payable without further notice or demand, all commitments shall automatically terminate, and the Lender shall be entitled to exercise all available remedies under the Credit Agreement, the Security Agreement, and applicable law.

Collateral: The obligations under the Credit Agreement are secured by a first-priority security interest in substantially all of NovaMart's assets, pursuant to that certain Security Agreement, dated as of December 10, 2021 (the "Security Agreement"), by NovaMart in favor of Ashford Savings Bank, N.A., as Administrative Agent. The collateral package includes, without limitation:

(i) All accounts receivable; (ii) All inventory; (iii) All equipment; (iv) All intellectual property (including trademarks, patents, copyrights, and trade secrets); (v) All general intangibles (including contract rights and goodwill); (vi) All deposit accounts (subject to deposit account control agreements with NovaMart's depository banks); (vii) All investment property; and (viii) All proceeds of the foregoing.

Ashford's security interest is perfected by UCC-1 financing statements filed with the Delaware Secretary of State (Filing Nos. 2021-4578923, 2021-4578924) and by intellectual property security agreements recorded with the U.S. Patent and Trademark Office and the U.S. Copyright Office.

Lien Release: In connection with the Closing, NovaMart will need to obtain from Ashford a payoff letter setting forth the total amount required to repay all outstanding obligations in full, together with (a) UCC-3 termination statements terminating all UCC-1 financing statements, (b) releases of all intellectual property liens recorded with the U.S. Patent and Trademark Office and the U.S. Copyright Office, (c) releases of all deposit account control agreements, and (d) such other releases and termination documents as may be necessary to release all liens on NovaMart's assets. The payoff amount (estimated at approximately $145 million including accrued interest and fees) will be included in the transaction funds flow and paid at Closing from the Purchase Price proceeds.

Risk Assessment: HIGH (but expected and manageable). The acceleration and mandatory prepayment provisions of the Credit Agreement are a standard feature of leveraged credit facilities and will be triggered by the Transaction. However, unlike the other Tier 1 contracts identified in this memorandum, the Credit Agreement does not present a "consent" risk — the remedy is economic (mandatory repayment), not operational. The $143.2 million payoff amount will be incorporated into the transaction funds flow, and the lien releases will be obtained at or prior to Closing to ensure that Cascade acquires NovaMart free and c

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
MATERIAL CONTRACTS DUE DILIGENCE MEMORANDUM
NovaMart Global Inc.
FROM: Derek Okonkwo and Tiffany Rosenthal, Calderwood & Harkness LLP
TO: Theodore ("Ted") Langford, Senior Vice President, Corporate Development, Cascade Retail Holdings Inc.; Elena Vasquez-Bright, General Counsel, Cascade Retail Holdings Inc.
CC: Harrison Wexford, Responsible Partner, Calderwood & Harkness LLP; Beatrice Holloway, Billing Partner, Calderwood & Harkness LLP
DATE: April 11, 2025
RE: Due Diligence Review of Material Commercial Agreements of NovaMart Global Inc. in Connection with the Proposed Acquisition by Cascade Retail Holdings Inc.
MATTER REFERENCE: Cascade Retail Holdings Inc. — Acquisition of NovaMart Global Inc. (Calderwood & Harkness Matter No. 1038-00009)
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I. EXECUTIVE SUMMARY
This memorandum summarizes the results of Calderwood & Harkness LLP's review of the material commercial agreements of NovaMart Global Inc. ("NovaMart," the "Company," or the "Target"), a Delaware corporation headquartered at 1100 Congress Avenue, Suite 800, Austin, Texas 78701, in connection with the proposed acquisition (the "Transaction") of one hundred percent (100%) of NovaMart's outstanding capital stock by Cascade Retail Holdings Inc. ("Cascade," "CRH," or the "Buyer"), a Delaware corporation listed on the Nasdaq Global Select Market (ticker symbol: CRHI), with its principal executive offices located at 4500 Elliott Avenue West, Suite 3200, Seattle, Washington 98119. The contemplated Transaction is structured as an all-cash stock purchase at an aggregate purchase price of One Billion Two Hundred Million Dollars ($1,200,000,000) (the "Purchase Price"), subject to customary working capital and other purchase price adjustments.
Our review covered all material contracts made available by NovaMart and its outside counsel, Calloway, Brandt & Loewe LLP (Richard Calloway, Lead Partner; Simone Adesanya, Associate Lead), in the NovaMart electronic data room (the "Data Room"), hosted on the Crestline Solutions platform (Project Constellation), pursuant to the Cascade Retail Holdings Inc. Due Diligence Request List dated February 17, 2025. The due diligence review period commenced on February 18, 2025, and this memorandum reflects the state of the Data Room and the status of our analysis as of the date hereof.
Key Finding. Approximately thirty-four (34) material commercial agreements have been identified as containing change of control provisions that will be triggered by the proposed all-cash stock purchase transaction, requiring either prior written consent from, or notice to, the applicable counterparty. As discussed in greater detail below, these provisions vary significantly in terms of their consent standards, the consequences of non-compliance, and the degree of risk they present to the successful consummation and post-closing integration of the Transaction.
NovaMart's Business Overview. NovaMart operates the following principal business lines, each of which is supported by the material contracts analyzed in this memorandum:
• Online Marketplace Platform. NovaMart operates a leading online marketplace platform (accessible at www.novamart.com and through the NovaMart mobile application) with approximately 62,400 active sellers and 9.1 million registered buyers as of December 31, 2024. The platform facilitates the sale of consumer goods across multiple categories and generates revenue through marketplace take-rate fees charged to sellers.
• Proprietary Logistics Network (NovaShip). NovaMart operates a proprietary logistics fulfillment network branded as "NovaShip," consisting of fourteen (14) fulfillment centers located across nine (9) states: California (3 facilities), New Jersey (2), Georgia (2), Ohio (1), Illinois (1), Pennsylvania (1), Tennessee (1), Florida (2), and Washington (1). NovaShip provides warehousing, order fulfillment, packaging, and last-mile delivery coordination services for NovaMart marketplace sellers.
• Advertising Revenue Operations. NovaMart monetizes its platform traffic through on-platform sponsored listings, display advertising, and programmatic advertising programs, operated in partnership with Stratton Digital Media Inc.
• Logistics SaaS Services. NovaMart offers its logistics technology stack as a software-as-a-service ("SaaS") solution to third-party retailers and direct-to-consumer brands, generating incremental recurring revenue.
Financial Summary. NovaMart reported the following key financial metrics for the fiscal year ended December 31, 2024 ("FY2024"):
Overall Risk Assessment. Based on our review, the majority of the identified change of control provisions are consent-based rather than automatic termination triggers, which is a favorable finding. However, several provisions present meaningful risk to the Transaction, particularly where the applicable consent standard is at the counterparty's sole discretion or where the consequence of non-compliance includes a right of termination or service suspension. A coordinated consent solicitation effort, conducted jointly by NovaMart management, Calloway, Brandt & Loewe LLP, and Calderwood & Harkness LLP, will be required prior to the closing of the Transaction (the "Closing"). We have identified five (5) contracts that we classify as "Tier 1 — Critical Priority" and three (3) contracts (or groups of contracts) that we classify as "Tier 2 — High Priority," each of which is discussed in detail below in Sections IV and VII of this memorandum.
We note that the single most significant contract risk identified in our review relates to the Technology License Agreement with Arcwave Software LLC, whose consent standard permits Arcwave to withhold consent in its sole discretion if the acquirer qualifies as a "Competitor," a definition that Cascade is likely to satisfy based on its FY2024 revenue and its operation of the CascadeDirect.com ecommerce platform. We recommend that this issue be elevated for discussion with Cascade's deal team and that it be addressed in the representations, conditions, and indemnification provisions of the Stock Purchase Agreement.
II. METHODOLOGY AND SCOPE OF REVIEW
A. Documents Reviewed
Calderwood & Harkness LLP reviewed all contracts classified as "material" by NovaMart management and its counsel, Calloway, Brandt & Loewe LLP, and uploaded to the Data Room in response to the Due Diligence Request List dated February 17, 2025. Specifically, our review focused on the following categories of contracts:
1. All contracts with an annual value exceeding Five Million Dollars ($5,000,000), whether measured by NovaMart's payment obligations, revenue attributable to the contract, or transaction volume facilitated by the contract.
2. All contracts deemed to be of strategic significance to NovaMart's business operations, regardless of dollar value, including technology licenses, intellectual property agreements, key vendor relationships, and joint venture or strategic partnership arrangements.
3. All contracts deemed to be operationally critical to the continued functioning of NovaMart's marketplace platform, NovaShip logistics network, advertising revenue operations, or logistics SaaS services.
4. All credit agreements, loan agreements, indentures, and other financing arrangements.
5. All real property leases for NovaMart's headquarters and fulfillment center facilities.
6. All insurance policies, surety bonds, and letters of credit.
In total, we reviewed approximately eighty-five (85) material commercial agreements. Our review included the underlying executed agreement for each contract, together with all amendments, modifications, side letters, supplements, statements of work, and order forms made available in the Data Room. We cross-referenced the contracts produced in the Data Room against (a) NovaMart's representations contained in the draft disclosure schedules to the Stock Purchase Agreement (as circulated by Calloway, Brandt & Loewe LLP on March 12, 2025), (b) the contract summaries prepared by NovaMart management and uploaded to the Data Room on February 28, 2025 (the "Management Contract Summaries"), and (c) NovaMart's FY2024 annual report and audited financial statements (including the notes thereto) filed with the Securities and Exchange Commission.
We note certain gaps in the Data Room production, which are identified in Section II.C (Limitations) below.
B. Analytical Framework
Our review of each material contract was conducted through the following analytical framework:
1. Identification of Change of Control Provisions. We identified all provisions in each contract that address or are triggered by a change of control, change in control, change of ownership, assignment, transfer, or analogous events. We reviewed defined terms sections carefully, as "change of control" and related concepts are frequently defined terms that may appear under varying nomenclature, including but not limited to "Change of Control," "Change in Control," "Ownership Change," "Transfer of Control," "Change of Management," "Fundamental Change," and similar formulations. We also identified provisions that, while not expressly labeled as "change of control" provisions, would be triggered by the Transaction by virtue of their operative language (e.g., anti-assignment provisions that define "assignment" to include changes in equity ownership, or provisions that prohibit transfers of "direct or indirect" interests in the contracting party).
2. Classification of Provisions by Type. Each identified provision was classified into one or more of the following categories:
(i) Consent Required — The contract requires the counterparty's prior written consent before a change of control may occur or be consummated. Consent standards were further sub-classified as (a) consent not to be unreasonably withheld, conditioned, or delayed ("NUBW Standard"); (b) consent at counterparty's sole discretion ("Sole Discretion Standard"); or (c) consent required with no specified standard.
(ii) Notice Required — The contract requires that the counterparty receive written notice of the change of control, either before or within a specified period after the change of control event, but does not require the counterparty's consent.
(iii) Termination Right Upon Change of Control — The contract grants the counterparty a right to terminate the agreement following a change of control, either as the consequence of a failure to obtain consent or as an independent right triggered by the change of control itself.
(iv) Renegotiation or Repricing Trigger — The contract permits or requires the counterparty to renegotiate pricing, service levels, or other material terms following a change of control.
(v) Acceleration or Payment Trigger — The contract provides for the acceleration of payment obligations, mandatory prepayment, or other financial consequences upon a change of control (most commonly found in credit agreements and financing arrangements).
3. Assessment of Consequences of Non-Compliance. For each contract containing a change of control provision, we assessed the legal and practical consequences that would result from a failure to obtain the required consent or provide the required notice, including termination rights, suspension of services, acceleration of obligations, forfeiture of rights, imposition of penalties, and claims for breach of contract.
4. Identification of Anti-Assignment Provisions Implicated by the Stock Purchase Structure. We paid particular attention to the interaction between the Transaction's stock purchase structure and the anti-assignment provisions found in many of the reviewed contracts. In a stock purchase transaction, as distinguished from an asset purchase or merger, the contracting entity — here, NovaMart — remains unchanged as a corporate entity and continues as a party to all of its existing contracts. The change in ownership occurs at the equity level, not at the contract level. However, many modern commercial contracts define "change of control" broadly to capture changes in equity ownership, effectively treating such changes as tantamount to an assignment of the contract. Where a contract's anti-assignment provision does not extend to equity-level transfers, and the contract does not separately define or address "change of control," the stock purchase structure should not trigger the anti-assignment restriction. We identified and catalogued each contract's treatment of this issue.
C. Limitations. The following limitations apply to the analysis set forth in this memorandum:
1. Data Room Cut-Off. Our review is limited to those contracts that were produced in the Data Room as of the cut-off date of April 7, 2025. NovaMart may have additional material contracts that have not yet been produced, either because they were inadvertently omitted, because NovaMart management did not consider them to be material, or because they were entered into after the cut-off date. We recommend that NovaMart's bring-down certificate at Closing include a representation confirming the completeness of the contract production.
2. State Law Variations. Our legal conclusions regarding the enforceability of specific change of control provisions are subject to the applicable state law governing each contract. The contracts reviewed are governed by the laws of various states, including Delaware, New York, California, Texas, Georgia, Washington, New Jersey, Illinois, Pennsylvania, Tennessee, Ohio, and Florida. While general principles of contract interpretation are broadly consistent across these jurisdictions, specific enforceability questions — particularly those relating to the reasonableness of consent withholding, the scope of anti-assignment provisions in the context of equity transfers, and the availability of equitable remedies — may vary.
3. No Independent Compliance Verification. Calderwood & Harkness LLP has not conducted an independent verification of NovaMart's compliance with the terms and conditions of its material contracts. Our analysis is based on the face of the contracts as produced in the Data Room, supplemented by the Management Contract Summaries and representations made by NovaMart management and Calloway, Brandt & Loewe LLP during due diligence calls conducted on March 5, March 19, and April 2, 2025. To the extent that NovaMart is in breach of, or default under, any material contract as of the date hereof, such breach or default could interact with the change of control provisions in ways not addressed in this memorandum (e.g., a counterparty may be more likely to exercise a termination right upon change of control if there are pre-existing unresolved disputes).
4. Oral Agreements and Course of Dealing. Our review is limited to written agreements. We have not investigated whether any material contractual arrangements exist on the basis of oral agreements, course of dealing, or course of performance that are not reflected in the written documents produced in the Data Room.
5. Regulatory Approvals. This memorandum does not address regulatory approvals (including, without limitation, Hart-Scott-Rodino Act antitrust clearance or any industry-specific regulatory consents) that may be required in connection with the Transaction. Those matters are addressed in a separate Calderwood & Harkness LLP memorandum.
III. SUMMARY OF MATERIAL CONTRACTS REVIEWED
Our review of the approximately eighty-five (85) material commercial agreements produced in the Data Room yielded the following summary findings:
Of the approximately thirty-four (34) contracts containing change of control provisions, we have classified each according to a priority tier based on the financial significance of the contract, the severity of the consequences of non-compliance, the consent standard applicable to the provision, and the operational criticality of the contractual relationship to NovaMart's business. The priority classifications are summarized in the table below:
The table below provides a summary of all thirty-four (34) contracts with change of control provisions. Detailed analysis of the most significant contracts follows in Section IV. A complete schedule of all thirty-four contracts is provided in Appendix A.
Note: Contract numbering in this table is for reference purposes only and does not correspond to Data Room index numbers. Contracts 7–20 represent the fourteen fulfillment center leases, which are discussed collectively in Section IV.E.7. Contracts 22–47 are summarized in Section IV.G.9 and detailed in Appendix A.
IV. DETAILED ANALYSIS OF KEY MATERIAL CONTRACTS
A. Technology and Cloud Services Agreements
1. Master Services Agreement with Pinnacle Cloud Solutions Inc. Counterparty: Pinnacle Cloud Solutions Inc., a Washington corporation, with its principal offices at 2200 Westlake Avenue North, Seattle, WA 98109 ("Pinnacle Cloud").
Description: This Master Services Agreement, dated December 15, 2022, as amended by Amendment No. 1 dated June 8, 2023, and Amendment No. 2 dated January 22, 2024 (collectively, the "Pinnacle MSA"), governs Pinnacle Cloud's provision of cloud hosting, infrastructure-as-a-service ("IaaS"), data storage, content delivery network ("CDN"), and related managed services for NovaMart's marketplace platform. The Pinnacle MSA is mission-critical to NovaMart's operations: the NovaMart marketplace, including the consumer-facing website, mobile application, seller portal, and all back-end transaction processing and data management systems, is hosted on Pinnacle Cloud's infrastructure. A termination or material disruption of the Pinnacle MSA would effectively render NovaMart's marketplace platform inoperable until an alternative cloud hosting solution could be procured, migrated, and stabilized — a process that NovaMart management estimates would require a minimum of nine (9) to twelve (12) months.
Annual Contract Value: Approximately Thirty-Eight Million Dollars ($38,000,000), consisting of fixed monthly hosting fees of approximately $2.5 million, variable compute and storage usage charges, and managed services fees. NovaMart management has indicated that actual FY2024 spend under the Pinnacle MSA was approximately $38.2 million.
Term: The Pinnacle MSA has an initial term of five (5) years commencing December 15, 2022, and expiring December 14, 2027, with two (2) successive two (2)-year renewal options exercisable by NovaMart upon written notice given not less than one hundred twenty (120) days prior to the expiration of the then-current term.
Change of Control Provision: Section 12.3 of the Pinnacle MSA provides as follows:
"Change of Control. Neither party may assign this Agreement or any rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld, conditioned, or delayed; provided, however, that either party may assign this Agreement without consent to an affiliate or in connection with a merger, reorganization, or sale of all or substantially all of its assets, provided further that for purposes of this Section 12.3, a 'Change of Control' of Customer [NovaMart] shall be deemed to constitute an assignment requiring the prior written consent of Provider [Pinnacle Cloud]. A 'Change of Control' shall mean any transaction or series of related transactions resulting in a change of more than fifty percent (50%) of the outstanding equity interests or voting power of Customer."
Consent under this provision is subject to the "not to be unreasonably withheld, conditioned, or delayed" standard. However, the provision does not define what constitutes "reasonable" grounds for withholding consent, which introduces some ambiguity.
Consequence of Non-Compliance: Section 12.4 of the Pinnacle MSA provides that if a Change of Control occurs without Pinnacle Cloud's prior written consent, Pinnacle Cloud shall have the right to terminate the Pinnacle MSA upon ninety (90) days' prior written notice to NovaMart. Upon termination, NovaMart would be required to pay all outstanding fees through the termination date, together with early termination charges as specified in Exhibit B to the Pinnacle MSA (estimated by NovaMart management at approximately $8 million based on the remaining term).
Non-Compete / Exclusivity: Section 8.1 of the Pinnacle MSA contains a limited exclusivity provision requiring NovaMart to utilize Pinnacle Cloud as its "primary cloud hosting provider" for the NovaMart marketplace platform during the initial five-year term. The exclusivity provision does not prevent NovaMart from using other cloud providers for ancillary or non-marketplace workloads, but it does require that a majority of NovaMart's marketplace compute and storage workload remain on Pinnacle Cloud's infrastructure. This provision may create complications post-Closing if Cascade has existing enterprise cloud hosting arrangements (e.g., with Ridgeway Industries, Crestline Systems, or Aldermere Technologies) that it intends to consolidate with NovaMart's infrastructure.
Assignability: As noted above, no assignment without consent; a Change of Control is treated as an assignment.
Risk Assessment: HIGH. Termination of the Pinnacle MSA would materially disrupt NovaMart's platform operations, potentially rendering the marketplace inoperable for an extended period. The estimated nine-to-twelve-month migration timeline, combined with the $38 million annual contract value and early termination charges, makes this agreement one of the most critical contracts for consent solicitation. Additionally, the exclusivity provision in Section 8.1 warrants post-Closing planning attention.
Recommended Action:
(a) Initiate the consent solicitation process with Pinnacle Cloud promptly upon signing of the Stock Purchase Agreement. Given the NUBW consent standard, we believe the likelihood of obtaining consent is favorable, but early engagement is advisable.
(b) Evaluate whether Cascade's existing cloud vendor relationships create any conflict with the Section 8.1 exclusivity provision, and if so, consider negotiating a modification or waiver of that provision as part of the consent process.
(c) Obtain confirmation from NovaMart management that no events of default or material disputes exist under the Pinnacle MSA that could complicate the consent process.
(d) Confirm that NovaMart's disaster recovery and business continuity plans include adequate provisions for a potential (albeit unlikely) termination of the Pinnacle MSA.
2. Technology License Agreement with Arcwave Software LLC. Counterparty: Arcwave Software LLC, a California limited liability company, with its principal offices at 1600 Seaport Boulevard, Suite 450, Redwood City, CA 94063 ("Arcwave").
Description: This Technology License Agreement, dated March 28, 2022 (the "Arcwave License"), governs NovaMart's license of Arcwave's proprietary search algorithm technology. NovaMart's marketplace search and product recommendation engine — a core feature of the NovaMart platform that directly affects buyer conversion rates, seller visibility, and overall marketplace engagement — relies on Arcwave's core algorithm (the "Arcwave Algorithm"). According to NovaMart's Chief Technology Officer, Dr. Priya Ramanathan, the Arcwave Algorithm is deeply integrated into NovaMart's search infrastructure and is responsible for processing approximately 2.3 billion search queries per month on the NovaMart platform. NovaMart does not currently possess an in-house alternative to the Arcwave Algorithm.
Annual License Fee: The Arcwave License requires NovaMart to pay an annual base license fee of approximately Twelve Million Dollars ($12,000,000), payable in equal quarterly installments, plus per-query usage fees for search queries processed in excess of the base query volume tier specified in Exhibit A to the Arcwave License. NovaMart management estimates that per-query usage fees totaled approximately $4 million to $5 million in FY2024, bringing the total annual cost of the Arcwave License to approximately $16 million to $17 million.
Term: The Arcwave License has a seven (7)-year term commencing March 28, 2022, and expiring March 27, 2029. The Arcwave License does not contain automatic renewal provisions; the parties would need to negotiate a new agreement upon expiration.
Change of Control Provision: Section 15.2 of the Arcwave License provides as follows:
"Change of Control Consent. Licensee [NovaMart] shall not undergo a Change of Control without the prior written consent of Licensor [Arcwave]. For purposes of this Agreement, a 'Change of Control' shall mean any direct or indirect acquisition of a majority of the equity interests of Licensee, or any merger, consolidation, or similar transaction in which Licensee is not the surviving entity or in which the holders of Licensee's equity interests immediately prior to such transaction do not hold a majority of the equity interests of the surviving entity immediately following such transaction. Licensor may withhold its consent in its sole discretion if the acquirer, surviving entity, or any of its affiliates is a Competitor. For all other Change of Control transactions, Licensor's consent shall not be unreasonably withheld. A 'Competitor' shall mean any entity (together with its affiliates) that (i) operates an online marketplace or ecommerce platform and (ii) generates annual ecommerce revenue exceeding One Billion Dollars ($1,000,000,000)."
Consequence of Non-Compliance: Section 15.3 of the Arcwave License provides that if a Change of Control occurs without Arcwave's prior written consent, Arcwave may terminate the Arcwave License upon sixty (60) days' prior written notice to NovaMart. Upon termination (whether for Change of Control or otherwise), Section 15.4 requires NovaMart to cease all use of the Arcwave Algorithm and all Arcwave Confidential Information within one hundred eighty (180) days following the effective date of termination (the "Wind-Down Period"). During the Wind-Down Period, NovaMart may continue to operate the Arcwave Algorithm solely to the extent necessary to transition to an alternative search solution, but NovaMart must pay Arcwave a "Transition Fee" equal to 150% of the then-applicable per-query usage rate for all queries processed during the Wind-Down Period.
IP Restrictions: The Arcwave License grants NovaMart a non-exclusive, non-transferable, non-sublicensable license to use the Arcwave Algorithm in object code form solely in connection with the operation of the NovaMart marketplace platform. NovaMart does not have access to the source code of the Arcwave Algorithm, except through a source code escrow arrangement with Ashgrove Industries (Escrow Agreement No. IM-ESC-2022-4471), under which the source code would be released to NovaMart only upon the occurrence of specified release conditions (Arcwave's bankruptcy, material breach by Arcwave of its support obligations, or discontinuation of the Arcwave Algorithm product line). A Change of Control of NovaMart is not a release condition under the escrow agreement.
Risk Assessment: HIGH. This is the single most significant contract risk identified in our due diligence review. Cascade's FY2024 total revenue was approximately $14.7 billion, and Cascade operates CascadeDirect.com, a direct-to-consumer ecommerce platform that generated approximately $3.2 billion in ecommerce revenue in FY2024. Accordingly, Cascade almost certainly qualifies as a "Competitor" under the Arcwave License definition, meaning that Arcwave may withhold its consent to the Transaction in its sole discretion. If Arcwave withholds consent, NovaMart would be required to cease all use of the Arcwave Algorithm within 180 days following termination — effectively requiring NovaMart to develop or acquire replacement search technology on an accelerated timeline. NovaMart's CTO has indicated that developing an in-house replacement would require a minimum of twelve (12) to eighteen (18) months and a capital investment of approximately $25 million to $35 million, with significant execution risk.
Recommended Action:
(a) Engage Arcwave at the earliest practicable date following the signing of the Stock Purchase Agreement to assess Arcwave's willingness to consent to the Transaction. Given the sole discretion standard applicable to Competitor acquirers, Cascade should be prepared for the possibility that Arcwave may condition its consent on material modifications to the Arcwave License terms, including pricing adjustments, scope limitations, or other concessions.
(b) Assess the likelihood of obtaining consent from Arcwave, including through commercial discussions with Arcwave's management team and through an analysis of Arcwave's competitive interests. It is possible that Arcwave may view a Cascade-owned NovaMart as a more valuable customer (given Cascade's scale and resources) or, alternatively, as a competitive threat.
(c) Evaluate whether NovaMart has, or can develop on an accelerated timeline, in-house replacement search technology sufficient to replace the Arcwave Algorithm. Engage NovaMart's CTO in a technical assessment.
(d) Consider whether the Stock Purchase Agreement should include specific representations from NovaMart's stockholders regarding the Arcwave License, including representations regarding the applicability of the "Competitor" exclusion and the status of NovaMart's relationship with Arcwave. Consider whether obtaining Arcwave's consent should be a condition to Closing.
(e) Evaluate whether the R&W insurance policy (Meridian Specialty Insurance Company, Policy No. MSI-RWI-2025-07832) would provide coverage for losses resulting from the loss of the Arcwave License, including the costs of developing or acquiring replacement technology and any business interruption losses.
(f) As a contingency, identify potential alternative search algorithm providers and evaluate the feasibility and cost of a technology replacement project.
B. Logistics and Supply Chain Agreements
3. Logistics Partnership Agreement with Redline Freight Corp. Counterparty: Redline Freight Corp., a Georgia corporation, with its principal offices at 3000 Peachtree Industrial Boulevard, Suite 100, Duluth, GA 30096 ("Redline Freight").
Description: This Logistics Partnership Agreement, dated June 1, 2023, as amended by Amendment No. 1 dated November 15, 2023, and Amendment No. 2 dated September 3, 2024 (collectively, the "Redline Agreement"), is NovaMart's master freight and third-party logistics ("3PL") agreement for the NovaShip fulfillment network. Under the Redline Agreement, Redline Freight provides line-haul transportation services (inter-facility freight movements), last-mile delivery services (final-leg delivery to end consumers), and cross-dock services at designated Redline Freight facilities that support NovaMart's fourteen (14) fulfillment centers. Redline Freight is NovaMart's single largest vendor by dollar value and is the backbone of the NovaShip delivery network. NovaMart management has indicated that Redline Freight handles approximately sixty-five percent (65%) of all NovaMart package deliveries by volume.
Annual Contract Value: Approximately Ninety-Five Million Dollars ($95,000,000), based on FY2024 actual spend. The Redline Agreement uses a combination of fixed monthly lane rates (for dedicated line-haul routes), per-package delivery fees (for last-mile deliveries), and fuel surcharges (indexed to the U.S. Department of Energy weekly retail diesel price). NovaMart management has indicated that the current rates under the Redline Agreement are favorable relative to prevailing market benchmarks, reflecting the volume commitments and long-term relationship between the parties.
Term: The Redline Agreement has a three (3)-year initial term commencing June 1, 2023, with automatic one (1)-year renewals unless either party provides written notice of non-renewal at least one hundred eighty (180) days prior to the expiration of the then-current term. The current term expires June 1, 2026, and will automatically renew through June 1, 2027, unless notice of non-renewal is provided by December 1, 2025.
Change of Control Provision: Section 9.4 of the Redline Agreement provides as follows:
"Change of Control Notification and Rate Review. In the event of a Change of Control of either party, the party undergoing such Change of Control shall provide written notice to the other party within thirty (30) days of the closing of such Change of Control transaction. For purposes of this Agreement, a 'Change of Control' shall mean (i) the acquisition by any person or entity of more than fifty percent (50%) of the equity interests or voting power of the applicable party, (ii) any merger, consolidation, or similar transaction in which the applicable party is not the surviving entity, or (iii) the sale of all or substantially all of the assets of the applicable party. Following receipt of a Change of Control notice, the non-changing party shall have the option, exercisable by written notice within sixty (60) days of receipt of the Change of Control notice, to initiate a rate review and renegotiation of the pricing terms set forth in Exhibit C hereto. If the parties are unable to agree on revised pricing terms within ninety (90) days following initiation of the rate review, either party may terminate this Agreement upon one hundred twenty (120) days' prior written notice."
Consequence of Non-Compliance: Section 9.5 of the Redline Agreement provides that the failure of the changing party to provide timely notice of a Change of Control shall constitute a material breach of the Redline Agreement. Upon the occurrence of such material breach, the non-breaching party shall have the right to terminate the Redline Agreement upon thirty (30) days' prior written notice, without regard to the notice and cure provisions of Section 14.2.
Pricing Risk: As noted above, NovaMart management has represented that the current rates under the Redline Agreement are below prevailing market rates, reflecting the parties' volume commitments and established relationship. The rate review and renegotiation mechanism in Section 9.4 creates a risk that Redline Freight will use the Change of Control event as an opportunity to seek rate increases. Based on our review of publicly available logistics industry data and discussions with Cascade's logistics team, we estimate that a market-rate adjustment could increase NovaMart's annual freight and delivery costs by approximately $8 million to $15 million, depending on the categories of services renegotiated and prevailing market conditions at the time of the rate review.
Risk Assessment: HIGH. The combination of the $95 million annual spend, Redline Freight's handling of approximately 65% of NovaMart package deliveries, the renegotiation trigger, and the potential for significant pricing increases makes this agreement a critical priority. While the Redline Agreement does not grant Redline Freight an automatic termination right upon Change of Control (unlike the Pinnacle Cloud MSA or Arcwave License), the renegotiation mechanism and the ultimate termination right if renegotiation fails present meaningful financial and operational risk.
Recommended Action:
(a) Provide timely written notice to Redline Freight within thirty (30) days of the Closing of the Transaction, as required by Section 9.4. Consider whether notice should be provided prior to Closing as a matter of good commercial practice and to allow the rate review process to commence in parallel with the Closing process.
(b) Assess the current competitive landscape for 3PL and freight services to develop alternative provider options as negotiating leverage in the event that Redline Freight seeks to renegotiate rates. Cascade's existing logistics vendor relationships should be evaluated for potential synergies.
(c) Consider whether the Stock Purchase Agreement should require NovaMart to deliver the Change of Control notice to Redline Freight as a pre-Closing covenant, so that the rate review process (and any associated pricing uncertainty) can be substantially resolved before the Closing.
(d) Evaluate the financial impact of potential rate increases on the pro forma financial model for the Transaction, and consider whether a purchase price adjustment mechanism or escrow reserve is appropriate to address pricing renegotiation risk.
C. Advertising and Revenue Agreements
4. Advertising Revenue Share Agreement with Stratton Digital Media Inc. Counterparty: Stratton Digital Media Inc., a New York corporation, with its principal offices at 485 Madison Avenue, 22nd Floor, New York, NY 10022 ("Stratton Digital").
Description: This Advertising Revenue Share Agreement, dated September 1, 2023 (the "Stratton Agreement"), governs NovaMart's primary advertising monetization partnership. Under the Stratton Agreement, Stratton Digital operates NovaMart's on-platform sponsored listings program, display advertising inventory, and programmatic advertising exchange. Stratton Digital provides the technology platform, advertiser demand generation, and ad-serving infrastructure, while NovaMart provides the advertising inventory (i.e., the on-platform ad placements viewed by NovaMart's 9.1 million registered buyers). The advertising revenue generated through the Stratton Agreement represents a significant and high-margin component of NovaMart's total revenue.
Annual Revenue: NovaMart recognized approximately Sixty-Seven Million Dollars ($67,000,000) in advertising revenue attributable to the Stratton Agreement in FY2024. This revenue represented approximately 7.5% of NovaMart's total FY2024 revenue of $891 million and, because advertising revenue carries substantially higher margins than marketplace take-rate revenue, is estimated to contribute disproportionately to NovaMart's EBITDA.
Term: The Stratton Agreement has a five (5)-year initial term commencing September 1, 2023, and expiring August 31, 2028, with one (1) two (2)-year renewal option exercisable by mutual agreement of the parties.
Change of Control Provision: Section 11.1 of the Stratton Agreement provides:
"Change of Control. In the event of a Change of Control of Publisher [NovaMart], Publisher shall provide Media Partner [Stratton Digital] with written notice of such Change of Control not less than forty-five (45) days prior to the closing of the applicable transaction. A 'Change of Control' shall mean the acquisition by any person or group (as such term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) of more than fifty percent (50%) of the outstanding voting equity interests of Publisher. Following a Change of Control, Media Partner shall have the right, exercisable by written notice to Publisher delivered within ninety (90) days following the effective date of the Change of Control, to terminate this Agreement upon one hundred eighty (180) days' prior written notice."
Revenue Share Structure: Under the Stratton Agreement, net advertising revenue (defined as gross advertising revenue less ad-serving costs, fraud chargebacks, and advertiser credits) is split between NovaMart and Stratton Digital on a 70/30 basis, with NovaMart receiving seventy percent (70%) and Stratton Digital receiving thirty percent (30%). The revenue share percentage is subject to adjustment based on annual revenue milestones: if net advertising revenue exceeds $80 million in any contract year, the split adjusts to 75/25 in NovaMart's favor for the incremental revenue above the $80 million threshold.
Exclusivity: Section 4.2 of the Stratton Agreement provides that Stratton Digital shall be the exclusive provider of programmatic display advertising services on the NovaMart platform during the term. The exclusivity provision does not extend to NovaMart's direct-sold sponsored listings (i.e., advertising placements sold directly by NovaMart's in-house advertising sales team to NovaMart marketplace sellers), but does cover all third-party programmatic demand sources.
Risk Assessment: MEDIUM-HIGH. The potential loss of $67 million in annual advertising revenue is significant and would have a material adverse impact on NovaMart's EBITDA. However, the risk is partially mitigated by two factors: first, Stratton Digital's termination right is exercisable only within a ninety (90)-day window following the Change of Control, and the subsequent termination notice period is one hundred eighty (180) days, providing NovaMart with a substantial transition period; and second, Cascade operates its own in-house advertising platform (CascadeAds) for the CascadeDirect.com ecommerce marketplace, which may be capable of absorbing NovaMart's advertising inventory on a post-Closing basis if the Stratton Agreement is terminated.
Recommended Action:
(a) Provide written notice to Stratton Digital not less than forty-five (45) days prior to the anticipated Closing, as required by Section 11.1. Based on the currently targeted Closing date of October 15, 2025, the notice should be transmitted no later than September 1, 2025.
(b) Engage Stratton Digital in discussions regarding the continuation of the advertising partnership following the Transaction. Stratton Digital may view the Transaction favorably if Cascade's scale and buyer traffic are expected to increase the advertising revenue opportunity.
(c) Assess whether Cascade's CascadeAds platform could serve as a replacement for Stratton Digital's services in the event of termination, including the technical integration requirements and the estimated timeline for transition.
(d) Evaluate the financial impact of potential loss of the Stratton Agreement revenue on the pro forma model for the Transaction.
D. Payment Processing Agreements
5. Payment Processing Agreement with PayStream Financial Technologies Inc. Counterparty: PayStream Financial Technologies Inc., a Delaware corporation, with its principal offices at 900 Market Street, Suite 600, Wilmington, DE 19801 ("PayStream").
Description: This Payment Processing Agreement, dated February 15, 2023, as amended by Amendment No. 1 dated August 20, 2023 (collectively, the "PayStream Agreement"), governs PayStream's provision of payment processing and gateway services for all NovaMart marketplace transactions. PayStream provides end-to-end payment acceptance (including credit card, debit card, ACH, digital wallet, and buy-now-pay-later payment methods), real-time fraud screening and risk management, disbursement of seller proceeds to NovaMart marketplace sellers, chargeback management, and compliance with Payment Card Industry Data Security Standard ("PCI DSS") requirements. The PayStream Agreement is essential to NovaMart's ability to process consumer transactions and disburse funds to its approximately 62,400 active sellers.
Annual Transaction Volume: PayStream processes substantially all of NovaMart's Gross Merchandise Value, which totaled approximately Six Billion Two Hundred Million Dollars ($6,200,000,000) in FY2024.
Annual Processing Fees: Approximately Forty-Three Million Dollars ($43,000,000), consisting of a blended per-transaction processing fee (inclusive of card network interchange, assessments, and PayStream's markup), monthly gateway fees, and ancillary service fees for fraud screening and chargeback management. The blended effective processing rate is approximately 0.69% of GMV.
Term: The PayStream Agreement has a four (4)-year initial term commencing February 15, 2023, and expiring February 14, 2027, with one (1) two (2)-year renewal option exercisable by NovaMart upon written notice given not less than ninety (90) days prior to expiration.
Change of Control Provision: Section 14.6 of the PayStream Agreement provides:
"Change of Control. Customer [NovaMart] shall not undergo a Change of Control without the prior written consent of Provider [PayStream], which consent shall not be unreasonably withheld, conditioned, or delayed. A 'Change of Control' means any transaction or series of related transactions resulting in a change of more than fifty percent (50%) of the equity ownership of Customer."
Consequence of Non-Compliance: Section 14.7 of the PayStream Agreement provides that if a Change of Control occurs without PayStream's prior written consent, PayStream may, upon fifteen (15) days' prior written notice, suspend all processing services. If the consent is not obtained within sixty (60) days following such suspension, PayStream may terminate the PayStream Agreement upon an additional thirty (30) days' written notice. Upon termination or suspension, NovaMart must transition to a replacement payment processor at its own expense.
PCI DSS Compliance: Section 7.1 of the PayStream Agreement requires NovaMart to maintain PCI DSS Level 1 compliance certification at all times during the term. NovaMart's most recent PCI DSS Level 1 certification was issued by its Qualified Security Assessor (QSA), CyberShield Compliance Group LLC, on September 15, 2024, and is valid through September 14, 2025. NovaMart management has confirmed that there are no known PCI DSS compliance deficiencies.
Risk Assessment: HIGH. Payment processing is absolutely mission-critical to NovaMart's marketplace operations. Without an operational payment processor, NovaMart cannot accept buyer payments or disburse funds to sellers — the marketplace would effectively cease to function. The fifteen (15)-day suspension right in Section 14.7 is unusually aggressive and creates an acute risk if consent is not timely obtained. While the NUBW consent standard suggests that consent should be obtainable, the severity of the consequences of non-compliance dictates that this consent be treated as a top priority.
Recommended Action:
(a) Prioritize the consent solicitation with PayStream as one of the first consents to be sought following signing of the Stock Purchase Agreement. Given the fifteen (15)-day suspension timeline, obtaining PayStream's consent well in advance of Closing is essential.
(b) Assess Cascade's existing payment processing relationships as a potential backup in the unlikely event that PayStream consent is not obtained. Transitioning to an alternative payment processor is a complex undertaking requiring significant technical integration work and PCI DSS re-certification, with an estimated minimum timeline of six (6) to nine (9) months.
(c) Verify that NovaMart's PCI DSS Level 1 certification is current and that no compliance issues exist that could complicate the consent process or create independent risks under the PayStream Agreement.
(d) Review the PayStream Agreement's data security, privacy, and breach notification provisions for any additional change-of-control-related implications.
E. Real Property Leases
6. Office Lease — 1100 Congress Avenue, Austin, TX (NovaMart Headquarters). Landlord: Congress Tower Partners LP, a Texas limited partnership, with its general partner being Congress Tower GP LLC ("Landlord").
Description: This Office Lease Agreement, dated December 1, 2020, as amended by First Amendment to Lease dated March 15, 2022 (collectively, the "HQ Lease"), governs NovaMart's lease of its headquarters office space at 1100 Congress Avenue, Suite 800, Austin, Texas 78701. The NovaMart headquarters houses the Company's executive leadership team, corporate development, marketing, product management, engineering (partially — NovaMart also maintains a secondary engineering office in San Francisco), legal, finance, and human resources functions. Approximately 430 NovaMart employees are based at the Austin headquarters.
Annual Rent: Approximately Four Million Two Hundred Thousand Dollars ($4,200,000) on a triple-net basis, inclusive of base rent and estimated common area maintenance charges, real estate taxes, and insurance. The current base rent is $62.00 per rentable square foot per annum, subject to annual escalations of 2.75%.
Term: The HQ Lease has a ten (10)-year initial term commencing January 1, 2021, and expiring December 31, 2030. NovaMart has one (1) five (5)-year renewal option exercisable upon written notice given not less than twelve (12) months prior to the expiration of the initial term.
Square Footage: Approximately 58,000 rentable square feet on the 8th floor of the Congress Tower building.
Change of Control Provision: Section 22.1 of the HQ Lease provides:
"Transfer of Controlling Interest. For purposes of this Lease, a 'Transfer' shall include, in addition to an assignment or subletting, any change of control, merger, consolidation, or transfer of a controlling interest in Tenant [NovaMart]. A 'controlling interest' shall mean the ownership, directly or indirectly, of more than fifty percent (50%) of the voting securities or equity interests of Tenant. Any Transfer (including a transfer of a controlling interest) shall require Landlord's prior written consent, which consent shall not be unreasonably withheld, conditioned, or delayed."
Consequence of Non-Compliance: Section 22.4 of the HQ Lease provides that any Transfer without Landlord's prior written consent shall constitute a default under the Lease. Upon a default, the Landlord has standard lease remedies under Section 23, including the right to terminate the Lease upon thirty (30) days' written notice if the default is not cured within such period, and the right to seek damages.
Risk Assessment: MEDIUM. This is a standard commercial lease change of control provision with a NUBW consent standard. We do not anticipate difficulty in obtaining the Landlord's consent, provided that NovaMart presents Cascade as a creditworthy successor owner. The Austin headquarters is important to NovaMart's operations and talent retention, and the loss of this lease would be disruptive, but the risk of consent denial is low.
Recommended Action:
(a) Include the HQ Lease in the consent solicitation process. Prepare and transmit a consent request letter to Congress Tower Partners LP, including relevant information about Cascade's financial position and creditworthiness.
(b) Review any Landlord financial requirements (e.g., net worth requirements for the tenant or guarantor) that may be triggered by the consent process.
(c) Assess whether Cascade has post-Closing plans to consolidate or relocate NovaMart's headquarters, which could affect the strategy for the consent request.
7. Fulfillment Center Leases (14 Facilities). Overview. NovaMart's NovaShip logistics network operates through fourteen (14) fulfillment centers located across nine (9) states. Each fulfillment center is subject to a separate lease agreement with various landlords. A detailed summary of all fourteen leases is provided in Appendix B. The key parameters of these leases are summarized below:
Change of Control Provisions: Eleven (11) of the fourteen (14) fulfillment center leases contain change of control provisions requiring the landlord's prior written consent. Of these eleven, eight (8) use the NUBW consent standard, while three (3) provide that the landlord's consent may be withheld in the landlord's sole discretion. The three sole-discretion leases are located in California (1 facility — the Riverside, CA facility leased from ProLogis West Coast Industrial Fund II LP), Pennsylvania (1 facility — the Allentown, PA facility leased from Liberty Industrial Partners LLC), and Washington (1 facility — the Kent, WA facility leased from Puget Sound Warehouse Holdings Inc.). Three (3) leases do not contain change of control provisions or require notice only (Ohio, 1 Georgia facility, 1 Florida facility).
Standard Formulations. Most of the fulfillment center leases define "change of control" as a transfer of a "controlling interest" in the tenant, typically defined as more than fifty percent (50%) of the outstanding equity interests or voting power. Several leases also extend the definition to include any merger, consolidation, or reorganization in which the tenant is not the surviving entity. The standard formulations are generally consistent with the HQ Lease provision discussed in Section IV.E.6 above.
Risk Assessment: MEDIUM. A bulk consent solicitation across all fourteen facilities will be required. The risk that any individual landlord will withhold consent is manageable, particularly for the eight leases with NUBW consent standards. The three leases with sole-discretion consent standards present somewhat higher risk, but even in those cases, landlords are generally motivated to maintain occupancy and rental income, particularly in the industrial/warehouse sector where NovaMart's lease terms and creditworthiness (enhanced by Cascade's balance sheet post-Closing) are favorable. The more significant concern is the logistical complexity of coordinating consent requests across fourteen different landlords and ensuring that all consents are obtained in a timely manner. The simultaneous loss of multiple fulfillment centers, while unlikely, would materially disrupt NovaShip operations.
Recommended Action:
(a) Prepare and transmit consent solicitation letters to all fourteen landlords promptly upon signing of the Stock Purchase Agreement. Use a standardized form letter with facility-specific exhibits, tailored to each lease's specific consent provisions.
(b) Prioritize the three facilities where consent may be withheld in the landlord's sole discretion (Riverside, CA; Allentown, PA; Kent, WA). For these facilities, engage the landlords' leasing representatives directly and provide comprehensive information about Cascade's financial position and plans for the facilities.
(c) Assess the renewal terms and expiration dates for all fourteen leases, and identify any leases that are approaching expiration. Two leases (Georgia Facility 2 and Ohio Facility 1) have lease terms expiring in 2026, which may provide Cascade with leverage in the consent process (i.e., the landlord may be motivated to consent in exchange for a lease renewal commitment).
(d) Evaluate alternative warehouse space availability in each market as a contingency in the event that consent is denied for any facility.
(e) Coordinate the fulfillment center lease consent process with the broader NovaShip integration planning effort.
F. Credit Facilities
8. Senior Credit Facility — Ashford Savings Bank, N.A. Counterparty/Lender: Ashford Savings Bank, N.A., a national banking association organized under the laws of the United States and chartered by the Office of the Comptroller of the Currency (OCC Charter No. 71549), with its principal office at 200 Park Avenue, 15th Floor, New York, NY 10166 (the "Lender" or "Ashford"), acting in its capacity as Administrative Agent and sole lender under the Credit Agreement described below.
Description: NovaMart is party to that certain Credit Agreement, dated as of December 10, 2021, as amended by First Amendment to Credit Agreement dated April 22, 2022, Second Amendment to Credit Agreement dated October 5, 2023, and Third Amendment to Credit Agreement dated March 18, 2024 (as so amended, the "Credit Agreement"), by and between NovaMart, as Borrower, and Ashford Savings Bank, N.A., as Administrative Agent and Lender. The Credit Agreement provides for a senior secured revolving credit facility in the aggregate principal amount of One Hundred Fifty Million Dollars ($150,000,000) (the "Revolving Facility"). NovaMart management has indicated that the estimated outstanding principal balance as of the anticipated Closing date will be approximately One Hundred Forty-Three Million Two Hundred Thousand Dollars ($143,200,000), with accrued and unpaid interest estimated at approximately $1.8 million based on the current applicable SOFR-based interest rate of approximately 7.15%.
Maturity: December 10, 2026.
Change of Control Provision: Section 8.01(k) of the Credit Agreement defines "Change of Control" and provides as follows:
"Events of Default. Each of the following shall constitute an 'Event of Default': ... (k) Change of Control. A Change of Control shall have occurred. For purposes of this Agreement, a 'Change of Control' shall mean any transaction or series of related transactions as a result of which any 'person' or 'group' (within the meaning of Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended) shall have acquired, directly or indirectly, beneficial ownership of more than thirty-five percent (35%) of the outstanding equity interests or voting power of the Borrower [NovaMart]."
We note that the Credit Agreement uses a thirty-five percent (35%) threshold, which is lower than the fifty percent (50%) threshold used in most of the other change of control provisions identified in our review. This lower threshold ensures that the acquisition of 100% of NovaMart's outstanding capital stock by Cascade will clearly trigger the Change of Control event of default.
Consequence: Pursuant to Sections 8.01 and 8.02 of the Credit Agreement, upon the occurrence of a Change of Control event of default, all outstanding amounts under the Revolving Facility (including principal, accrued interest, fees, and expenses) shall become immediately due and payable without further notice or demand, all commitments shall automatically terminate, and the Lender shall be entitled to exercise all available remedies under the Credit Agreement, the Security Agreement, and applicable law.
Collateral: The obligations under the Credit Agreement are secured by a first-priority security interest in substantially all of NovaMart's assets, pursuant to that certain Security Agreement, dated as of December 10, 2021 (the "Security Agreement"), by NovaMart in favor of Ashford Savings Bank, N.A., as Administrative Agent. The collateral package includes, without limitation:
(i) All accounts receivable; (ii) All inventory; (iii) All equipment; (iv) All intellectual property (including trademarks, patents, copyrights, and trade secrets); (v) All general intangibles (including contract rights and goodwill); (vi) All deposit accounts (subject to deposit account control agreements with NovaMart's depository banks); (vii) All investment property; and (viii) All proceeds of the foregoing.
Ashford's security interest is perfected by UCC-1 financing statements filed with the Delaware Secretary of State (Filing Nos. 2021-4578923, 2021-4578924) and by intellectual property security agreements recorded with the U.S. Patent and Trademark Office and the U.S. Copyright Office.
Lien Release: In connection with the Closing, NovaMart will need to obtain from Ashford a payoff letter setting forth the total amount required to repay all outstanding obligations in full, together with (a) UCC-3 termination statements terminating all UCC-1 financing statements, (b) releases of all intellectual property liens recorded with the U.S. Patent and Trademark Office and the U.S. Copyright Office, (c) releases of all deposit account control agreements, and (d) such other releases and termination documents as may be necessary to release all liens on NovaMart's assets. The payoff amount (estimated at approximately $145 million including accrued interest and fees) will be included in the transaction funds flow and paid at Closing from the Purchase Price proceeds.
Risk Assessment: HIGH (but expected and manageable). The acceleration and mandatory prepayment provisions of the Credit Agreement are a standard feature of leveraged credit facilities and will be triggered by the Transaction. However, unlike the other Tier 1 contracts identified in this memorandum, the Credit Agreement does not present a "consent" risk — the remedy is economic (mandatory repayment), not operational. The $143.2 million payoff amount will be incorporated into the transaction funds flow, and the lien releases will be obtained at or prior to Closing to ensure that Cascade acquires NovaMart free and c

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MATERIAL CONTRACTS DUE DILIGENCE MEMORANDUM

I. EXECUTIVE SUMMARY

II. METHODOLOGY AND SCOPE OF REVIEW

III. SUMMARY OF MATERIAL CONTRACTS REVIEWED

IV. DETAILED ANALYSIS OF KEY MATERIAL CONTRACTS

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