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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

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

FROM: Harrison Wexford, Partner, Calderwood & Harkness LLP Derek Okonkwo, Associate, Calderwood & Harkness LLP Tiffany Rosenthal, Associate, Calderwood & Harkness LLP

DATE: March 28, 2025

RE: Enforceability Analysis of Existing NovaMart Global Inc. Non-Competition, Non-Solicitation, and intellectual Property Assignment Agreements — Multi-State Survey

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

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I. Executive Summary

This memorandum presents the results of our comprehensive analysis of the enforceability of existing restrictive covenant agreements—including non-competition, non-solicitation, and intellectual property assignment provisions—currently in place between NovaMart Global Inc. ("NovaMart" or the "Company") and its employees, founders, and key personnel, across all jurisdictions in which NovaMart maintains employees or operations. This analysis has been prepared at the request of Cascade Retail Holdings Inc. ("Cascade") in connection with Cascade's proposed acquisition of one hundred percent (100%) of the outstanding capital stock of NovaMart (the "Transaction").

Transaction Context. Cascade is acquiring all of the outstanding capital stock of NovaMart for an aggregate purchase price of $1,200,000,000 in cash pursuant to an all-cash stock purchase transaction governed by Delaware law. The Stock Purchase Agreement (the "SPA") was executed on May 20, 2025. Diligence commenced on February 18, 2025, and this memorandum reflects the results of our review of the materials produced to date in the virtual data room maintained by NovaMart's counsel, Calloway, Brandt & Loewe LLP.

Structural Significance. Because the Transaction is structured as a stock purchase rather than an asset purchase or merger, NovaMart will survive as a going concern and will remain the employer of its approximately 2,400 employees. As a result, the existing restrictive covenant agreements between NovaMart and its employees should remain in effect by their terms, as there is no change in the employing entity. We note, however, that the Transaction will constitute a "change of control" under many NovaMart contracts, which could trigger certain ancillary provisions, as discussed more fully below.

Key Finding. The enforceability of NovaMart's restrictive covenant agreements varies materially by jurisdiction. California presents the most significant risk to Cascade given California's near-total statutory prohibition on post-employment non-competition agreements. Texas, Washington, Illinois, and each of the other states in which NovaMart has a nexus present distinct enforceability frameworks, each of which is analyzed in detail herein.

NovaMart's Geographic Footprint. NovaMart currently operates fourteen (14) fulfillment centers across nine (9) states: California (3 centers), New Jersey (2 centers), Georgia (2 centers), Florida (2 centers), Ohio (1 center), Illinois (1 center), Pennsylvania (1 center), Tennessee (1 center), and Washington (1 center). NovaMart's corporate headquarters is located in Austin, Texas, at 1100 Congress Avenue, Suite 800. As a result, NovaMart employees are located in at least ten (10) states, each with its own body of restrictive covenant law.

Key Personnel. We have paid specific attention to the agreements with the following individuals, whose continued engagement and the enforceability of whose restrictive covenants are of particular importance to Cascade:

• Julian Reeves — Founder and Chief Executive Officer, holding approximately 18.5% of NovaMart's outstanding capital stock;

• Priya Narasimhan — Co-Founder and Chief Technology Officer, holding approximately 8.3% of NovaMart's outstanding capital stock; and

• Other management and employees holding an aggregate of approximately 9.2% of the outstanding capital stock through vested stock options and restricted stock awards.

Summary of Recommendations. Our principal findings and recommendations are as follows:

(a) California. Non-competition provisions applicable to California-based employees are void under California Business and Professions Code § 16600 and cannot be enforced, regardless of choice-of-law provisions designating the law of another state. Non-solicitation of customer provisions face significant risk of being treated as void under § 16600 as well. Employee non-solicitation provisions are of uncertain enforceability in California. Intellectual property assignment provisions are enforceable, subject to the mandatory carve-out under California Labor Code § 2870 for inventions developed entirely on the employee's own time without employer resources.

(b) Texas. Non-competition and non-solicitation agreements are generally enforceable under Texas law, provided they are ancillary to an otherwise enforceable agreement and are reasonable in scope, duration, and geographic area. Texas courts retain the power to reform overbroad provisions rather than voiding them entirely. NovaMart's Texas-based executive agreements are likely enforceable.

(c) Washington. Non-competition agreements are subject to the Washington Noncompetition Covenants Act (RCW § 49.62), which imposes minimum earnings thresholds, durational limits, and notice requirements. Many fulfillment center employees likely fall below the statutory earnings threshold, rendering their non-competition provisions void. Non-solicitation provisions are governed by common law reasonableness standards and are generally enforceable.

(d) Other Jurisdictions. New Jersey, Georgia, Ohio, Pennsylvania, Tennessee, and Florida each apply common law reasonableness standards or specific statutory frameworks that are generally favorable to enforcement, with certain variations as discussed in the detailed state-by-state analysis below.

We further recommend that the post-closing employment agreements currently being negotiated with Julian Reeves and Priya Narasimhan be drafted to maximize enforceability under all potentially applicable state laws, with particular attention to the Texas and California frameworks, as discussed in Sections VII and X below.

II. Scope of Review and Agreements Analyzed

A. Categories of Agreements Reviewed

In conducting this analysis, we reviewed the following categories of restrictive covenant agreements produced by NovaMart in the virtual data room maintained by Calloway, Brandt & Loewe LLP (Richard Calloway and Simone Adesanya, lead counsel for NovaMart):

1. Executive Non-Competition and Non-Solicitation Agreements. NovaMart has entered into standalone non-competition and non-solicitation agreements with approximately sixteen (16) senior executives. These include agreements with Julian Reeves (CEO), Priya Narasimhan (CTO), Douglas "Doug" Whitfield (CFO), Amanda Trevino (General Counsel), and approximately twelve (12) additional senior executives and vice presidents holding positions in operations, engineering, marketing, logistics, and supply chain management. These standalone agreements were negotiated individually and, while they follow a substantially similar template, contain varying durations (ranging from twelve to twenty-four months post-termination), geographic scopes (generally nationwide), and activity restrictions (generally limited to the online marketplace industry, though some include broader ecommerce technology or retail logistics definitions).

2. Employee Confidentiality, Invention Assignment, and Non-Solicitation Agreements ("CIIA"). NovaMart requires substantially all of its employees—approximately 2,400 individuals—to execute a standard-form Confidentiality, Invention Assignment, and Non-Solicitation Agreement as a condition of employment. The CIIA exists in three principal versions: (i) a Texas-specific version, (ii) a California-specific version, and (iii) an "all other states" version used for employees in New Jersey, Georgia, Ohio, Illinois, Pennsylvania, Tennessee, Florida, and Washington. Each version of the CIIA contains the following core provisions:

(i) Confidentiality and Trade Secret Provisions: Obligations to maintain the confidentiality of NovaMart's proprietary information, trade secrets, business strategies, customer lists, pricing data, algorithms, and other confidential materials during and after employment;

(ii) Invention and IP Assignment Provisions: Assignment to NovaMart of all inventions, discoveries, improvements, works of authorship, and intellectual property conceived, developed, or reduced to practice by the employee during the term of employment and related to NovaMart's business or using NovaMart's resources;

(iii) Non-Solicitation of Employees and Customers Provisions: Restrictions on the employee's ability to solicit NovaMart's employees, contractors, or customers for a specified period following termination of employment; and

(iv) Non-Competition Provisions: In some versions (principally the Texas and "all other states" versions), restrictions on the employee's ability to engage in competitive activities for a specified period following termination. The California version does not include non-competition provisions, consistent with California's prohibition under Business and Professions Code § 16600.

3. Offer Letter Restrictive Covenants. For certain mid-level employees (principally managers and senior individual contributors hired between 2019 and 2023), NovaMart included restrictive covenant language directly in the employee's offer letter rather than in a standalone agreement. These offer letter provisions typically include a non-solicitation of employees covenant (twelve months) and, in some cases, a limited non-competition provision. The offer letter covenants are generally less detailed and less protective than the standalone executive agreements or the CIIA. We identified approximately forty-five (45) employees whose restrictive covenants are contained solely in offer letters.

4. Stock Option Agreement Restrictive Covenants. NovaMart's equity incentive plan and form stock option agreements contain non-competition and non-solicitation provisions applicable to all employees holding vested stock options. These covenants operate as a condition of the option grant and provide that the optionee agrees not to compete with NovaMart or solicit NovaMart's employees or customers for a period of twelve (12) months following termination of employment. Because a portion of the management and employee equity pool (approximately 9.2% of NovaMart's outstanding capital stock in the aggregate) is held through vested options, these covenants apply to a meaningful subset of employees. The stock option agreement covenants provide an additional layer of protection beyond the CIIA and any standalone executive agreement.

5. Contractor and Consultant IP Assignment Agreements. NovaMart has entered into IP and work product assignment agreements with independent contractors and consultants engaged to perform development, design, and other creative or technical work. These agreements assign to NovaMart all intellectual property, work product, deliverables, and inventions created by the contractor in the course of performing services for NovaMart. We reviewed a representative sample of approximately thirty (30) contractor IP assignment agreements, including agreements with contractors who contributed to the development of NovaMart's core search and recommendation algorithms and the NovaShip logistics platform.

B. Key Individuals and Their Agreements

The following individuals have been identified as the key personnel whose restrictive covenant agreements are of greatest significance to Cascade in connection with the Transaction. We summarize below the material terms of each individual's agreements:

Julian Reeves — Founder and Chief Executive Officer. Mr. Reeves is the founder and CEO of NovaMart and holds approximately 18.5% of the Company's outstanding capital stock. His existing NovaMart agreements include: (i) a non-competition covenant of two (2) years following termination of employment, covering the online marketplace industry on a nationwide basis; (ii) a non-solicitation of employees and customers covenant of two (2) years following termination; and (iii) an intellectual property assignment provision covering all inventions conceived or developed during his employment. Mr. Reeves's agreements are governed by Texas law. Mr. Reeves is headquartered in Austin, Texas. Pursuant to the terms currently under negotiation, Mr. Reeves will enter into a new three (3)-year post-closing employment agreement with Cascade providing for an annual base salary of $625,000, a target annual bonus of 75% of base salary, and a grant of 150,000 restricted shares of Cascade common stock.

Priya Narasimhan — Co-Founder and Chief Technology Officer. Ms. Narasimhan is a co-founder of NovaMart and serves as CTO, holding approximately 8.3% of the Company's outstanding capital stock. Her existing NovaMart agreements include: (i) a non-competition covenant of two (2) years following termination, covering both the online marketplace industry and ecommerce technology on a nationwide basis (a scope broader than Mr. Reeves's agreement); (ii) a non-solicitation of employees and customers covenant of two (2) years following termination; and (iii) an intellectual property assignment provision. Her agreements are governed by Texas law. Ms. Narasimhan is primarily based in Austin, Texas, but our diligence review indicates that she spends significant time—estimated at approximately 30-40% of her working time—at NovaMart's three California fulfillment centers, where she oversees technology integration and logistics optimization. This dual-state presence raises critical enforceability issues under California law, as discussed in detail in Sections IV.B and VII.B below. Ms. Narasimhan will enter into a new three (3)-year post-closing employment agreement with Cascade providing for an annual base salary of $575,000, a target annual bonus of 70% of base salary, and a grant of 125,000 restricted shares of Cascade common stock.

Douglas "Doug" Whitfield — Chief Financial Officer. Mr. Whitfield serves as NovaMart's CFO and is based in Austin, Texas. His existing NovaMart agreements include: (i) a non-competition covenant of eighteen (18) months following termination, covering the online marketplace industry on a nationwide basis; and (ii) a non-solicitation of employees and customers covenant of eighteen (18) months following termination. His agreements are governed by Texas law. Mr. Whitfield is not expected to enter into a new post-closing employment agreement; his existing NovaMart agreements will continue in force following the Transaction.

Amanda Trevino — General Counsel. Ms. Trevino serves as NovaMart's General Counsel and is based in Austin, Texas. Her existing NovaMart agreements include: (i) a non-competition covenant of twelve (12) months following termination, covering the online marketplace industry on a nationwide basis; and (ii) a non-solicitation of employees and customers covenant of twelve (12) months following termination. Her agreements are governed by Texas law. Ms. Trevino is not expected to enter into a new post-closing employment agreement; her existing NovaMart agreements will continue in force following the Transaction.

Other Senior Executives. Approximately twelve (12) additional vice presidents and senior vice presidents across NovaMart's operations, engineering, marketing, and logistics functions have entered into standalone non-competition and non-solicitation agreements. These agreements contain non-competition durations ranging from twelve (12) to twenty-four (24) months, are generally nationwide in geographic scope, and cover the online marketplace industry. These executives are spread across NovaMart's locations in Texas, California, Washington, New Jersey, and Georgia. An individual-by-individual summary of these agreements, including the duration, scope, geographic area, governing law, and enforceability assessment for each, is set forth in Appendix A to this memorandum.

C. Materials Reviewed

In preparing this memorandum, we reviewed the following materials:

• All restrictive covenant agreements, employment agreements, confidentiality agreements, and intellectual property assignment agreements produced by NovaMart and Calloway, Brandt & Loewe LLP in the virtual data room established for the Transaction;

• NovaMart's standard-form Confidentiality, Invention Assignment, and Non-Solicitation Agreement in its three principal versions: the Texas-specific version, the California-specific version, and the "all other states" version;

• NovaMart's Amended and Restated 2018 Equity Incentive Plan and the form stock option agreement thereunder, including the restrictive covenant provisions contained therein;

• Employee census data and headcount broken down by state, provided by NovaMart's Human Resources department in response to Item 4.07 of the diligence request list served by Calderwood & Harkness LLP on February 17, 2025;

• The individual employment agreements for Julian Reeves and Priya Narasimhan, including all amendments and side letters;

• The draft post-closing employment agreements for Julian Reeves and Priya Narasimhan currently being negotiated by Calderwood & Harkness LLP on behalf of Cascade;

• Relevant state statutes, regulations, and case law in each of the ten (10) jurisdictions in which NovaMart maintains employees, as set forth in Appendix D; and

• Public filings and records related to any prior enforcement actions or disputes involving NovaMart's restrictive covenants (none identified).

A detailed comparison of the three versions of NovaMart's standard-form CIIA is set forth in Appendix C to this memorandum. The employee headcount by state is set forth in Appendix B.

III. Structural Considerations: Stock Purchase and Restrictive Covenant Continuity

A. Impact of Stock Purchase Structure on Existing Agreements

A threshold consideration in any M&A transaction is whether the transaction structure affects the continuity and enforceability of the target company's existing restrictive covenant agreements. The answer depends primarily on whether the target company continues as the same legal entity following the transaction.

In a stock purchase—such as the Transaction contemplated here—the acquirer purchases the outstanding equity securities of the target company. The target company continues as the same legal entity, with the same employer identification number, the same contractual relationships, and the same corporate identity. Only the ownership of the target company's equity changes. As a result, the employer-employee relationship between NovaMart and its employees is not interrupted, and no new employment relationship is created. The existing restrictive covenant agreements between NovaMart and its employees remain in force by their terms, as no party to those agreements has changed.

This is in contrast to an asset purchase, in which the acquirer purchases the target company's assets (including, potentially, the assumption of certain contracts) and the target company's employees typically terminate their employment with the target and commence new employment with the acquirer. In an asset purchase, the existing restrictive covenants may not automatically transfer to the acquirer, and the acquirer may need to obtain new agreements supported by fresh consideration.

Our diligence review confirmed that NovaMart's standard-form CIIA and standalone executive non-competition and non-solicitation agreements do not contain provisions that would terminate or render the restrictive covenants unenforceable upon a change of control of NovaMart. While approximately thirty-four (34) NovaMart contracts across various categories contain change-of-control provisions—including certain vendor agreements, facility leases, and executive severance arrangements—the restrictive covenant agreements themselves are generally not among those that require consent, notice, or renegotiation upon a change of control.

With respect to NovaMart's stock option agreements, the non-competition and non-solicitation provisions contained therein survive the Transaction. Certain option agreements provide for the acceleration of vesting upon a change of control, which will result in the vesting of additional shares at or prior to closing. However, the restrictive covenant provisions in the option agreements operate independently of the vesting provisions and remain in effect regardless of whether vesting has accelerated. We note that the SPA contemplates that all outstanding NovaMart stock options will be cashed out at closing based on the per-share merger consideration less the applicable exercise price, which effectively eliminates the equity relationship but does not, by its terms, terminate the restrictive covenant provisions contained in the option agreements. We recommend that Cascade confirm with NovaMart's counsel that the cancellation of options at closing does not vitiate the consideration supporting the restrictive covenants in the option agreements; in our view, the original consideration (the option grant itself, plus any continued employment) should be sufficient to support the covenants, even after the options are cashed out.

B. Successor Employer Enforceability

As a general matter of law, the acquiring entity in a stock purchase transaction steps into the shoes of the target company as the beneficiary of the target's existing restrictive covenant agreements. Because NovaMart continues as the same legal entity, Cascade—as the new owner of NovaMart—will benefit from the existing restrictive covenants without the need for assignment or novation.

However, there are certain jurisdictional nuances that bear on this analysis:

Fresh Consideration. Some jurisdictions—most notably Illinois, Pennsylvania, and Ohio—have developed case law suggesting that if the nature of the employment relationship materially changes post-acquisition, the employer may need to provide fresh consideration to support the continued enforceability of the existing restrictive covenants. In a stock purchase where the employment relationship continues unchanged, this issue generally does not arise. However, if Cascade materially alters the compensation, title, responsibilities, or reporting structure of NovaMart employees post-closing, there is a risk that courts in these jurisdictions could find that the existing covenants are no longer supported by adequate consideration. This risk is mitigated by the stock purchase structure and by the recommendation, set forth below, that Cascade maintain NovaMart employees' roles and compensation at current levels during the initial transition period.

Post-Closing Employment Agreements. The post-closing employment agreements currently being negotiated with Julian Reeves and Priya Narasimhan will include new restrictive covenants. These new covenants may supersede the existing NovaMart agreements, supplement them, or operate in parallel, depending on the drafting approach. We recommend that the post-closing employment agreements contain express language addressing the relationship between the new covenants and the existing NovaMart agreements—specifically, a provision stating that the new covenants supersede and replace the existing NovaMart covenants in their entirety, to avoid confusion, potential inconsistency, or an argument by the employee that the new agreement invalidated the old agreement but the new agreement is itself unenforceable.

IV. State-by-State Enforceability Analysis

The following analysis addresses the enforceability of NovaMart's restrictive covenant agreements under the laws of each of the ten (10) states in which NovaMart maintains employees or operations. We have organized this analysis beginning with the jurisdictions of greatest significance to the Transaction—Texas (NovaMart's headquarters and the location of its most senior executives), California (the jurisdiction presenting the greatest enforceability risk), and Washington (the location of Cascade's headquarters)—followed by the remaining jurisdictions in order of operational significance.

A. Texas (NovaMart Headquarters — Austin, TX; 1100 Congress Avenue, Suite 800)

1. Applicable Law. Texas law governing the enforceability of covenants not to compete is set forth in the Texas Business and Commerce Code, Section 15.50 et seq. (the "Texas Covenants Act"). Under the Texas Covenants Act, a covenant not to compete is enforceable if it is "ancillary to or part of an otherwise enforceable agreement at the time the agreement is made" and the restraint is "reasonable" as to time, geographic area, and the scope of activity to be restrained. Tex. Bus. & Com. Code § 15.50(a).

The Texas Supreme Court's decision in Fenmore Benefit Group v. Cook, 354 S.W.3d 764 (Tex. 2011), clarified that stock options, bonuses, and other forms of consideration beyond at-will employment can satisfy the "otherwise enforceable agreement" requirement. The court held that the provision of confidential information or trade secrets in the course of employment, combined with the employee's agreement to maintain confidentiality, constitutes an "otherwise enforceable agreement" to which a non-compete may be ancillary. This framework applies to NovaMart's executive agreements, which are ancillary to employment agreements that include confidentiality obligations.

2. Non-Competition Agreements. NovaMart's executive non-competition agreements for Texas-based personnel contain non-competition durations ranging from twelve (12) to twenty-four (24) months, a nationwide geographic scope, and activity restrictions covering the "online marketplace industry" or, in some cases, the broader "online marketplace and ecommerce technology" industry. We assess these provisions as follows:

Duration. Texas courts have consistently upheld non-competition durations of up to two (2) years as reasonable. See, e.g., Fenmore Benefit Group v. Cook, 354 S.W.3d 764 (Tex. 2011) (upholding two-year non-compete); Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844 (Tex. 2009). The twelve- to twenty-four-month durations in NovaMart's agreements fall squarely within the range that Texas courts have found reasonable.

Geographic Scope. Nationwide geographic scope is more commonly scrutinized by Texas courts, which have historically favored geographically limited non-competes. However, Texas courts have recognized that for businesses that operate on a national or global scale—particularly internet-based businesses that are not geographically bounded—a nationwide restriction may be appropriate and reasonable. See, e.g., Gallagher Healthcare Ins. Servs. v. Vogelsang, No. 01-07-00802-CV, 2009 WL 2058607 (Tex. App.—Houston [1st Dist.] 2009, no pet.) (upholding nationwide non-compete for business with national client base). Given that NovaMart operates an online marketplace accessible from and serving customers in all fifty states, a nationwide geographic scope is likely reasonable for its senior executives.

Scope of Activity. The activity restrictions in NovaMart's executive agreements—covering the "online marketplace industry" or "online marketplace and ecommerce technology"—are sufficiently defined to satisfy Texas's specificity requirements. Courts have upheld activity restrictions that are tied to the employer's line of business and the employee's functional area. The broader "ecommerce technology" formulation used in some agreements (including Priya Narasimhan's) could be challenged as overbroad, but Texas's reformation doctrine (discussed below) provides a meaningful backstop.

Reformation Doctrine. A critical feature of Texas non-compete law is the statutory reformation doctrine codified at Texas Business and Commerce Code § 15.51(c). If a court finds that a non-compete is unreasonable in any respect, the court "shall reform the covenant to the extent necessary to cause the limitations contained in the covenant as to time, geographical area, and scope of activity to be restrained to be reasonable and enforce the covenant as reformed." Tex. Bus. & Com. Code § 15.51(c). This mandatory reformation provision substantially reduces the risk that a Texas court would void a NovaMart non-compete outright, even if it found certain aspects to be overbroad.

Key Personnel in Texas. The following key individuals are based in Austin, Texas, and their non-competition agreements are most directly governed by Texas law: Julian Reeves (CEO), Priya Narasimhan (CTO, primary office), Douglas Whitfield (CFO), and Amanda Trevino (General Counsel).

3. Non-Solicitation Agreements. Employee non-solicitation and customer non-solicitation provisions are analyzed under the same framework as non-competition provisions under the Texas Covenants Act. The covenants must be ancillary to an otherwise enforceable agreement and reasonable in scope, duration, and geographic area. NovaMart's executive non-solicitation provisions, which range from twelve (12) to twenty-four (24) months, are within the range that Texas courts have consistently upheld as reasonable.

Texas courts have recognized the protection of customer relationships and the preservation of a stable workforce as legitimate business interests supporting non-solicitation covenants. See, e.g., Rugen v. Interactive Bus. Sys., Inc., 864 S.W.2d 548 (Tex. App.—Dallas 1993, no writ). NovaMart's non-solicitation provisions, which restrict both the solicitation of customers and the solicitation of employees, serve these recognized interests and are likely enforceable under Texas law.

4. IP Assignment Agreements. Intellectual property assignment provisions are fully enforceable under Texas law. Texas does not have a statutory equivalent to California Labor Code § 2870 or Washington RCW § 49.44.140 mandating a carve-out for inventions made entirely on an employee's own time without employer resources. As a matter of contract law, Texas courts enforce IP assignment provisions according to their terms, provided the agreement is supported by adequate consideration. NovaMart's CIIA and executive agreements include IP assignment provisions that are broad and comprehensive, covering all inventions, discoveries, improvements, works of authorship, and intellectual property conceived or developed during the term of employment and related to NovaMart's business. As a best practice, NovaMart's form agreements include a "prior inventions" schedule allowing employees to identify pre-existing intellectual property that is excluded from the assignment, which further supports the enforceability of the provision.

5. Assessment. Risk Level: Low. NovaMart's restrictive covenant agreements for Texas-based personnel are generally enforceable under the Texas Covenants Act. The durations (12-24 months), nationwide geographic scope, and activity restrictions (online marketplace industry) are within the range that Texas courts have upheld. Even if a court were to find any particular provision overbroad, the mandatory reformation doctrine under § 15.51(c) provides a robust backstop. We assess the risk of unenforceability for Texas agreements as low.

B. California (3 Fulfillment Centers; Significant Employee Population)

1. Applicable Law. California law governing the enforceability of restrictive covenants is set forth in California Business and Professions Code § 16600 et seq., as interpreted by the California Supreme Court in Edwards v. Kraft Quill CPAs LLP, 44 Cal. 4th 937 (2008), and as amended by recent legislation including AB 1076 (2020), SB 699 (2023), and AB 1197 (2023). California's legal framework represents the most restrictive regime in the nation with respect to post-employment non-competition agreements and presents the most significant enforceability risk for NovaMart's restrictive covenants.

2. Non-Competition Agreements — Unenforceable. California Business and Professions Code § 16600 provides, in relevant part, that "every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void." The California Supreme Court has interpreted this prohibition broadly. In Edwards v. Kraft Quill CPAs LLP, 44 Cal. 4th 937, 945 (2008), the court held that § 16600 voids any employment agreement that "restrains" an employee from engaging in a "lawful profession, trade, or business of any kind," rejecting the "narrow restraint" or "reasonableness" exception recognized in some other jurisdictions. The court emphasized that California's policy favoring open competition and employee mobility is a "strong public policy" that admits only of the narrow statutory exceptions expressly set forth in the Business and Professions Code.

Statutory Exceptions. Section 16600 is subject to only three narrow statutory exceptions, none of which applies to employee non-competition agreements in the present context:

(a) Sale of Goodwill (§ 16601): A person who sells the goodwill of a business may agree not to carry on a similar business within a specified geographic area. This exception is discussed further below in connection with the stockholder status of Julian Reeves and Priya Narasimhan.

(b) Dissolution of a Partnership (§ 16602): Partners may agree upon the dissolution of a partnership not to carry on a similar business.

(c) Dissolution or Sale of an LLC (§ 16602.5): Members of an LLC may agree upon the dissolution or sale of the LLC not to carry on a similar business.

None of these exceptions applies to an employee non-competition agreement in the employer-employee context.

NovaMart's California Agreements. NovaMart's non-competition provisions in its California-specific CIIA (to the extent any exist) and in any executive agreement governed by or applied to California-based employees are void and unenforceable under § 16600. Our diligence review indicates that NovaMart's California-specific CIIA does not include a non-competition provision, which reflects appropriate compliance with California law. However, several NovaMart executives who are based in or spend significant time working in California are subject to standalone non-competition agreements governed by Texas law, and the enforceability of those provisions as applied to those individuals' California activities is addressed below under the choice-of-law analysis.

Recent Legislative Developments. In 2023, the California Legislature enacted two significant bills that expanded the reach of California's non-compete prohibition:

SB 699 (effective January 1, 2024): SB 699 added new Section 16600.5 to the Business and Professions Code, which provides that any contract that is void under § 16600 is unenforceable "regardless of where and when the contract was signed." The statute further provides that an employer or former employer "shall not attempt to enforce a contract that is void under this chapter regardless of whether the contract was signed and the employment was maintained outside of California." SB 699 creates a private right of action for current, former, or prospective employees who are the subject of an attempt to enforce a void non-compete, and authorizes the recovery of injunctive relief, actual damages, and reasonable attorney's fees.

AB 1197 (effective January 1, 2024): AB 1197 requires employers to notify current employees and former employees who were employed after January 1, 2022, if their employment agreements contain non-compete provisions that are void under § 16600. The notice must be provided in writing and must be individualized.

The practical significance of SB 699 for the Transaction is substantial. Even if a NovaMart executive's non-competition agreement is governed by Texas law and was signed in Texas, SB 699 prohibits the enforcement of that agreement against a person who is a California resident or who performs services in California. An attempt to enforce such an agreement could expose Cascade (as NovaMart's successor) to liability under the new private right of action, including an award of attorney's fees.

Impact on NovaMart's Workforce. NovaMart has approximately 400 to 500 employees at its three California fulfillment centers, based on the employee census data provided through diligence. The non-competition provisions applicable to these employees—whether in the CIIA, offer letters, or stock option agreements—are void under California law. These employees cannot be subject to post-employment non-competition restrictions regardless of the governing law designated in their agreements.

3. Non-Solicitation Agreements — Significant Risk. California's treatment of non-solicitation provisions has become increasingly restrictive in recent years, and the enforceability of such provisions under California law is uncertain and evolving.

Customer Non-Solicitation. California courts have increasingly treated customer non-solicitation provisions as de facto non-competition restrictions that are void under § 16600. In AMN Healthcare, Inc. v. Aya Healthcare Services, Inc., 28 Cal. App. 5th 923 (2018), the California Court of Appeal held that a non-solicitation clause that prohibited a former employee from soliciting the employer's clients was "tantamount to a noncompetition agreement" and therefore void under § 16600. The court reasoned that the restriction effectively prevented the former employee from performing her trade by prohibiting her from contacting the very clients she would need to contact to perform her work. While AMN Healthcare involved specific facts, its rationale has been applied broadly by subsequent courts, and the trend in California case law is toward finding customer non-solicitation provisions void under § 16600.

Employee Non-Solicitation. The enforceability of employee non-solicitation provisions—i.e., restrictions on recruiting or hiring the former employer's personnel—under California law is less settled. Some California courts have distinguished narrow employee non-solicitation covenants from non-competition restrictions, reasoning that a restriction on soliciting former colleagues does not directly restrain the former employee from engaging in his or her profession. See, e.g., Marlowe Corporation v. Cascade Capital Markets, No. C-07-6198 (N.D. Cal. 2009). However, the trend in California law is toward subjecting employee non-solicitation provisions to the same § 16600 analysis, and the enforceability of these provisions is uncertain and fact-dependent.

Recommendation. We recommend that Cascade not rely on the enforceability of any non-solicitation provisions—whether customer non-solicitation or employee non-solicitation—as applied to California-based employees. Instead, we recommend that Cascade protect its interests in NovaMart's customer relationships and workforce stability through other means, including robust trade secret protections under the California Uniform Trade Secrets Act (Cal. Civ. Code §§ 3426 et seq.) and the federal Defend Trade Secrets Act (18 U.S.C. § 1836 et seq.), strong confidentiality agreements, and retention incentives.

4. IP Assignment Agreements — Enforceable with Statutory Limitations. Intellectual property assignment provisions are enforceable in California, subject to the mandatory limitations set forth in California Labor Code § 2870. Section 2870 provides that any provision in an employment agreement that requires an employee to assign inventions to the employer "shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information," except where the invention either:

(a) relates at the time of conception or reduction to practice to the employer's business, or actual or demonstrably anticipated research or development of the employer; or

(b) results from any work performed by the employee for the employer.

Section 2870 further requires that the employment agreement include a notice to the employee setting forth the limitations of § 2870 on the employer's right to require assignment.

Our review of NovaMart's California-specific CIIA confirms that it includes the required § 2870 notice and appropriately carves out inventions that are subject to the § 2870 exemption. The existing California CIIA agreements appear compliant with the statutory requirements.

Copyrightable works created by NovaMart employees within the scope of their employment are "works made for hire" under the Copyright Act (17 U.S.C. § 101) and are owned by NovaMart as employer without the need for an assignment. The IP assignment provisions in the CIIA provide belt-and-suspenders protection for copyrightable works and extend to other forms of intellectual property (patents, trade secrets, know-how) that are not covered by the work-for-hire doctrine.

5. Assessment. Risk Level: High for Non-Competes and Non-Solicitation. Non-competition provisions applicable to California-based employees are void under § 16600 and cannot be enforced. Customer non-solicitation provisions face significant risk of being held void under § 16600 following AMN Healthcare and its progeny. Employee non-solicitation provisions are of uncertain enforceability. IP assignment provisions are enforceable subject to the § 2870 carve-out.

Mitigation. Cascade should rely on trade secret protection under the California Uniform Trade Secrets Act and the Defend Trade Secrets Act, robust confidentiality agreements, and IP assignment provisions—rather than non-competition or non-solicitation covenants—as the primary mechanisms for protecting its interests in NovaMart's proprietary technology, customer relationships, and workforce as to California-based personnel.

C. Washington (1 Fulfillment Center; Cascade Headquarters State)

1. Applicable Law. Washington's law governing non-competition agreements is set forth in the Washington Noncompetition Covenants Act, RCW § 49.62 (the "Washington Act"), which became effective on January 1, 2020. The Washington Act represents a significant legislative intervention in the enforceability of non-competition agreements and imposes specific requirements that must be satisfied for a non-compete to be enforceable.

2. Non-Competition Agreements. Under the Washington Act, a non-competition covenant is enforceable against an employee only if the following conditions are met:

(a) Earnings Threshold. The employee earns more than the applicable annual earnings threshold, which is adjusted annually for inflation. As of 2025, the threshold for employees is approximately $116,594 (adjusted from the original $100,000 base amount). Non-competition covenants applicable to employees earning at or below this threshold are void per se.

(b) Disclosure Requirement. The non-competition covenant must be disclosed in writing to the employee no later than the earlier of: (i) the time of acceptance of the offer of employment, or (ii) a change in the terms of employment that provides additional consideration for the covenant.

(c) Duration Limitation. Non-competition covenants exceeding eighteen (18) months in duration are presumptively unreasonable and unenforceable. This presumption may be overcome only by the employer through clear and convincing evidence.

For independent contractors, the Washington Act imposes a separate, higher earnings threshold—currently approximately $291,486—below which non-competition covenants are void.

Statutory Penalties. If a court or arbitrator finds that a non-competition covenant violates the Washington Act, the employee is entitled to actual damages or a statutory penalty of $5,000, whichever is greater, plus reasonable attorney's fees and costs. This penalty provision creates significant exposure for employers who maintain or attempt to enforce non-competition agreements that do not comply with the Act's requirements.

NovaMart's Washington Employees. NovaMart's fulfillment center employees in Washington include a mix of warehouse associates, logistics coordinators, supervisors, and site management personnel. Many warehouse and logistics employees likely earn below the $116,594 annual threshold, and their non-competition provisions are void under the Washington Act regardless of any other analysis. Senior management and engineering staff at the Washington location who earn above the threshold have potentially enforceable non-competition covenants, provided the disclosure and duration requirements were met at the time of execution.

NovaMart's standard non-competition covenant for Washington employees appears to have a duration of twelve (12) months, which is within the eighteen-month presumptive maximum under the Washington Act. Our diligence review is ongoing as to whether the disclosure requirements were satisfied at the time these agreements were executed. If NovaMart failed to provide the required written disclosure at the time of the employee's acceptance of employment, the covenants may be void irrespective of the employee's earnings level.

Post-Closing Consideration for Cascade. Because Cascade is headquartered in Seattle, Washington, there is a possibility that NovaMart employees may be transferred to or relocated to Washington post-closing as part of integration activities. If NovaMart employees who are currently based in other states are relocated to Washington, Washington law may apply to their restrictive covenants prospectively, requiring compliance with the Washington Act's earnings threshold, disclosure, and duration requirements. Cascade should factor this consideration into its integration planning.

3. Non-Solicitation Agreements. The Washington Act expressly excludes non-solicitation agreements from its scope. RCW § 49.62.010(4) provides that "nonsolicitation agreement" means "an agreement between an employer and employee that prohibits or restrains the employee from soliciting or hiring employees of the employer," and the Act's restrictions on non-competition covenants do not apply to nonsolicitation agreements. Accordingly, customer and employee non-solicitation provisions for Washington-based employees are analyzed under common law reasonableness standards rather than under the statutory framework.

Under Washington common law, non-solicitation provisions are enforceable if they are reasonable in scope and duration, are necessary to protect a legitimate business interest (such as customer relationships, trade secrets, or goodwill), and do not impose an undue burden on the employee. See, e.g., Labriola v. Pollard Group, Inc., 152 Wash. 2d 828 (2004) (analyzing reasonableness of restrictive covenants under common law standards). NovaMart's standard non-solicitation provisions for Washington employees, with durations of twelve (12) to twenty-four (24) months, are within the range that Washington courts have upheld as reasonable.

4. IP Assignment Agreements. Washington Revised Code § 49.44.140 provides a statutory carve-out for employee inventions similar to California's § 2870. Under RCW § 49.44.140, an employer may not require an employee to assign any invention for which the employee has not used the employer's equipment, supplies, facilities, or trade secret information, and the invention was developed entirely on the employee's own time, and the invention does not relate directly to the employer's business or actual or demonstrably anticipated research or development, and the invention does not result from any work performed by the employee for the employer. The statute requires that the employment agreement include a notice to the employee of the limitations set forth in § 49.44.140.

Our review of NovaMart's Washington-specific provisions indicates that the required § 49.44.140 notice is included in the version of the CIIA used for Washington employees. The existing agreements appear compliant with the Washington statutory requirements.

5. Assessment. Risk Level: Moderate. Non-competition covenants are enforceable for above-threshold earners in Washington, provided the statutory disclosure and duration requirements were met, but are void for below-threshold employees. Given that many fulfillment center employees may earn below the threshold, a significant portion of NovaMart's Washington workforce is not subject to enforceable non-competition restrictions. Non-solicitation provisions are generally enforceable under common law standards. IP assignment provisions are enforceable with the statutory carve-out under § 49.44.140.

D. New Jersey (2 Fulfillment Centers)

1. Applicable Law. New Jersey does not have a comprehensive statute governing the enforceability of non-competition agreements. Instead, New Jersey courts analyze non-competition agreements under common law reasonableness standards as articulated in Solari Industries, Inc. v. Malady, 55 N.J. 571 (1970), and Whitmyer Brothers, Inc. v. Doyle, 58 N.J. 25 (1971), and their progeny.

Under the New Jersey common law framework, a non-competition agreement is enforceable if it meets a three-part test:

(a) The covenant is necessary to protect a legitimate business interest of the employer, such as trade secrets, confidential information, customer relationships, or the investment in specialized training provided to the employee;

(b) The covenant does not impose an undue hardship on the employee; and

In addition, the covenant must be reasonable in its duration, geographic scope, and scope of restricted activities. The New Jersey Supreme Court has recognized that these factors are interrelated and must be assessed in light of the totality of the circumstances, including the nature of the employer's business, the employee's position, the employee's access to confidential information, and the competitive landscape.

2. Non-Competition Agreements. New Jersey courts are generally willing to enforce non-competition agreements that satisfy the three-part test described above. Importantly for NovaMart's covenants, New Jersey courts have recognized that the geographic scope of a non-competition covenant may appropriately be broader for businesses that operate on a national or internet-based scale. See, e.g., Coskey's Television & Radio Sales & Service, Inc. v. Foti, 253 N.J. Super. 626 (App. Div. 1992). Given that NovaMart operates an online marketplace accessible from all fifty states, a nationwide geographic restriction for senior executives with access to competitive intelligence and customer data is likely reasonable under New Jersey law.

Durations of twelve (12) to twenty-four (24) months are within the range that New Jersey courts have upheld for employees in senior, knowledge-intensive positions. See, e.g., Larkspur Systems, LLC v. Rafferty, No. 19-cv-14536 (D.N.J. 2019) (upholding 18-month non-compete for sales executive).

New Jersey courts are also willing to blue-pencil or reform overbroad non-competition agreements to make them reasonable, rather than voiding them entirely. See Solari Industries, 55 N.J. at 576. This reformation power provides a significant backstop for NovaMart's covenants in the event a court finds any particular aspect to be overbroad.

We note that the New Jersey Legislature has considered, but not enacted, legislation that would restrict or prohibit non-competition agreements. As of the date of this memorandum, no such legislation has been signed into law.

3. Non-Solicitation and IP Assignment. Non-solicitation provisions are analyzed under the same common law reasonableness framework as non-competition agreements and are generally enforceable in New Jersey if they satisfy the Solari Industries three-part test. NovaMart's standard non-solicitation durations (12-24 months) are reasonable.

IP assignment provisions are enforceable under New Jersey contract law. New Jersey does not have a statutory carve-out equivalent to California's § 2870 or Washington's § 49.44.140 for employee inventions created on the employee's own time.

4. Assessment. Risk Level: Low to Moderate. NovaMart's non-competition and non-solicitation agreements are generally enforceable in New Jersey under the common law reasonableness standard. Reformation is available as a backstop for overbroad provisions. IP assignment provisions are fully enforceable. The principal risk is that a court could find the nationwide scope or two-year duration of certain executive covenants to be overbroad for lower-level fulfillment center employees, but this risk is mitigated by the reformation doctrine and by the fact that most fulfillment center employees' covenants are shorter in duration.

E. Georgia (2 Fulfillment Centers)

1. Applicable Law. Georgia's law governing the enforceability of restrictive covenants underwent a significant transformation with the adoption of the Georgia Restrictive Covenants Act, O.C.G.A. § 13-8-50 et seq. (the "Georgia Act"), which became effective on November 3, 2011. The Georgia Act applies to agreements entered into on or after its effective date and provides a more permissive framework for enforcing restrictive covenants than the common law regime that preceded it.

Prior to the Georgia Act, Georgia courts applied an extremely strict approach to non-competition agreements, frequently striking down covenants for minor drafting deficiencies and refusing to reform or blue-pencil overbroad provisions. Under the Georgia Act, this rigid approach has been replaced with a more flexible, employer-friendly framework.

2. Non-Competition Agreements. Under the Georgia Act, a non-competition agreement is enforceable if the restraint is reasonable in time, geographic area, and scope of prohibited activities. The Act does not specify maximum durations or geographic areas, instead deferring to a fact-specific analysis of reasonableness in light of the particular circumstances.

Georgia courts applying the Act have upheld non-competition durations of up to two (2) years as presumptively reasonable for employees in competitive or knowledge-intensive positions. See, e.g., Becham v. Synthes USA, LLC, 482 F. App'x 387 (11th Cir. 2012) (applying Georgia law). NovaMart's standard executive non-compete durations (12-24 months) are well within this range.

With respect to geographic scope, the Georgia Act permits a nationwide restriction where the employer's business is conducted on a national scale. For internet-based or ecommerce businesses like NovaMart, nationwide restrictions are likely enforceable.

Critically, the Georgia Act authorizes courts to modify (i.e., reform or blue-pencil) overbroad restrictive covenants to make them reasonable, rather than voiding them in their entirety. O.C.G.A. § 13-8-54(b). This reformation power provides a meaningful backstop for NovaMart's covenants in Georgia.

3. Non-Solicitation and IP Assignment. Non-solicitation provisions are enforceable under the Georgia Act if reasonable in scope and duration. The Act expressly authorizes covenants restricting the solicitation of customers and employees. O.C.G.A. § 13-8-53(a).

IP assignment provisions are fully enforceable under Georgia contract law. Georgia does not have a statutory carve-out comparable to California's § 2870 or Washington's § 49.44.140.

4. Assessment. Risk Level: Low. NovaMart's restrictive covenant agreements are generally enforceable in Georgia under the Georgia Restrictive Covenants Act, provided the agreements were entered into after the Act's November 2011 effective date. For agreements entered into prior to that date (which may apply to certain long-tenured employees), the stricter pre-Act common law framework may apply. Reformation is available as a backstop. We recommend confirming the execution dates of any pre-2011 agreements as part of the ongoing diligence process.

F. Ohio (1 Fulfillment Center)

1. Applicable Law. Ohio courts analyze non-competition agreements under a common law reasonableness standard established by the Ohio Supreme Court in Raimonde v. Van Vlerah, 42 Ohio St. 2d 21 (1975). Under the Raimonde framework, a non-competition agreement is enforceable if:

(a) The restraint is no greater than is required for the protection of the employer's legitimate business interests, including trade secrets, confidential information, and customer relationships;

(b) The restraint does not impose an undue hardship on the employee; and

Ohio courts consider the totality of the circumstances, including the duration, geographic scope, and scope of restricted activities, in determining whether a non-competition agreement is reasonable.

2. Assessment. NovaMart's standard non-competition and non-solicitation provisions are enforceable in Ohio under the Raimonde framework. Ohio courts will blue-pencil overbroad provisions to make them reasonable rather than voiding them entirely. See Lake Land Employment Grp. of Akron, LLC v. Columber, 101 Ohio St. 3d 242 (2004) (continued employment constitutes sufficient consideration for a non-compete entered into during employment). IP assignment provisions are fully enforceable under Ohio contract law. Ohio does not have a statutory carve-out for employee inventions.

Risk Level: Low.

G. Illinois (1 Fulfillment Center)

1. Applicable Law. Illinois enacted the Illinois Freedom to Work Act (820 ILCS 90/1 et seq.) (the "Illinois FTW Act"), which became effective on January 1, 2022, and was amended in August 2024. The Illinois FTW Act represents a significant legislative reform of Illinois non-compete law and imposes specific requirements that must be satisfied for a non-competition or non-solicitation agreement to be enforceable.

The key requirements of the Illinois FTW Act are as follows:

Earnings Thresholds. Non-competition covenants are enforceable only against employees who earn at least $75,000 per year at the time of the agreement's execution. This threshold increases over time: to $80,000 in 2027, $85,000 in 2032, and $90,000 in 2037. Non-solicitation covenants are enforceable only against employees who earn at least $45,000 per year at the time of execution, with similar escalation provisions.

Adequate Consideration. The agreement must be supported by adequate consideration, which is defined as at least two (2) years of continued employment after the date the agreement is entered into, or other adequate consideration (such as a period of employment plus additional compensation or benefits).

Advisory and Review Requirements. The employer must advise the employee in writing to consult with an attorney prior to entering into the agreement, and the employer must provide the employee with at least fourteen (14) calendar days to review the agreement before signing. If the employer does not provide the 14-day review period, the agreement is voidable by the employee.

Additional Limitations. The Illinois FTW Act prohibits non-competition and non-solicitation agreements with employees who are terminated, furloughed, or laid off as a result of circumstances related to the COVID-19 pandemic or similar conditions, unless the agreement includes adequate consideration independent of continued employment.

2. Assessment. NovaMart has approximately 15 to 20 employees at its Illinois fulfillment center, based on the employee census data provided through diligence. The enforceability of their restrictive covenants depends on the following factors:

Earnings Thresholds. Fulfillment center employees who earn below $75,000 per year (for non-competes) or $45,000 per year (for non-solicitation) are not subject to enforceable restrictive covenants under the Illinois FTW Act, regardless of any other analysis. We anticipate that a substantial por

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
TO: Elena Vasquez-Bright, General Counsel, Cascade Retail Holdings Inc. Theodore "Ted" Langford, SVP, Corporate Development, Cascade Retail Holdings Inc.
FROM: Harrison Wexford, Partner, Calderwood & Harkness LLP Derek Okonkwo, Associate, Calderwood & Harkness LLP Tiffany Rosenthal, Associate, Calderwood & Harkness LLP
DATE: March 28, 2025
RE: Enforceability Analysis of Existing NovaMart Global Inc. Non-Competition, Non-Solicitation, and intellectual Property Assignment Agreements — Multi-State Survey
MATTER: Cascade Retail Holdings Inc. — Acquisition of NovaMart Global Inc.
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I. Executive Summary
This memorandum presents the results of our comprehensive analysis of the enforceability of existing restrictive covenant agreements—including non-competition, non-solicitation, and intellectual property assignment provisions—currently in place between NovaMart Global Inc. ("NovaMart" or the "Company") and its employees, founders, and key personnel, across all jurisdictions in which NovaMart maintains employees or operations. This analysis has been prepared at the request of Cascade Retail Holdings Inc. ("Cascade") in connection with Cascade's proposed acquisition of one hundred percent (100%) of the outstanding capital stock of NovaMart (the "Transaction").
Transaction Context. Cascade is acquiring all of the outstanding capital stock of NovaMart for an aggregate purchase price of $1,200,000,000 in cash pursuant to an all-cash stock purchase transaction governed by Delaware law. The Stock Purchase Agreement (the "SPA") was executed on May 20, 2025. Diligence commenced on February 18, 2025, and this memorandum reflects the results of our review of the materials produced to date in the virtual data room maintained by NovaMart's counsel, Calloway, Brandt & Loewe LLP.
Structural Significance. Because the Transaction is structured as a stock purchase rather than an asset purchase or merger, NovaMart will survive as a going concern and will remain the employer of its approximately 2,400 employees. As a result, the existing restrictive covenant agreements between NovaMart and its employees should remain in effect by their terms, as there is no change in the employing entity. We note, however, that the Transaction will constitute a "change of control" under many NovaMart contracts, which could trigger certain ancillary provisions, as discussed more fully below.
Key Finding. The enforceability of NovaMart's restrictive covenant agreements varies materially by jurisdiction. California presents the most significant risk to Cascade given California's near-total statutory prohibition on post-employment non-competition agreements. Texas, Washington, Illinois, and each of the other states in which NovaMart has a nexus present distinct enforceability frameworks, each of which is analyzed in detail herein.
NovaMart's Geographic Footprint. NovaMart currently operates fourteen (14) fulfillment centers across nine (9) states: California (3 centers), New Jersey (2 centers), Georgia (2 centers), Florida (2 centers), Ohio (1 center), Illinois (1 center), Pennsylvania (1 center), Tennessee (1 center), and Washington (1 center). NovaMart's corporate headquarters is located in Austin, Texas, at 1100 Congress Avenue, Suite 800. As a result, NovaMart employees are located in at least ten (10) states, each with its own body of restrictive covenant law.
Key Personnel. We have paid specific attention to the agreements with the following individuals, whose continued engagement and the enforceability of whose restrictive covenants are of particular importance to Cascade:
• Julian Reeves — Founder and Chief Executive Officer, holding approximately 18.5% of NovaMart's outstanding capital stock;
• Priya Narasimhan — Co-Founder and Chief Technology Officer, holding approximately 8.3% of NovaMart's outstanding capital stock; and
• Other management and employees holding an aggregate of approximately 9.2% of the outstanding capital stock through vested stock options and restricted stock awards.
Summary of Recommendations. Our principal findings and recommendations are as follows:
(a) California. Non-competition provisions applicable to California-based employees are void under California Business and Professions Code § 16600 and cannot be enforced, regardless of choice-of-law provisions designating the law of another state. Non-solicitation of customer provisions face significant risk of being treated as void under § 16600 as well. Employee non-solicitation provisions are of uncertain enforceability in California. Intellectual property assignment provisions are enforceable, subject to the mandatory carve-out under California Labor Code § 2870 for inventions developed entirely on the employee's own time without employer resources.
(b) Texas. Non-competition and non-solicitation agreements are generally enforceable under Texas law, provided they are ancillary to an otherwise enforceable agreement and are reasonable in scope, duration, and geographic area. Texas courts retain the power to reform overbroad provisions rather than voiding them entirely. NovaMart's Texas-based executive agreements are likely enforceable.
(c) Washington. Non-competition agreements are subject to the Washington Noncompetition Covenants Act (RCW § 49.62), which imposes minimum earnings thresholds, durational limits, and notice requirements. Many fulfillment center employees likely fall below the statutory earnings threshold, rendering their non-competition provisions void. Non-solicitation provisions are governed by common law reasonableness standards and are generally enforceable.
(d) Other Jurisdictions. New Jersey, Georgia, Ohio, Pennsylvania, Tennessee, and Florida each apply common law reasonableness standards or specific statutory frameworks that are generally favorable to enforcement, with certain variations as discussed in the detailed state-by-state analysis below.
We further recommend that the post-closing employment agreements currently being negotiated with Julian Reeves and Priya Narasimhan be drafted to maximize enforceability under all potentially applicable state laws, with particular attention to the Texas and California frameworks, as discussed in Sections VII and X below.
II. Scope of Review and Agreements Analyzed
A. Categories of Agreements Reviewed
In conducting this analysis, we reviewed the following categories of restrictive covenant agreements produced by NovaMart in the virtual data room maintained by Calloway, Brandt & Loewe LLP (Richard Calloway and Simone Adesanya, lead counsel for NovaMart):
1. Executive Non-Competition and Non-Solicitation Agreements. NovaMart has entered into standalone non-competition and non-solicitation agreements with approximately sixteen (16) senior executives. These include agreements with Julian Reeves (CEO), Priya Narasimhan (CTO), Douglas "Doug" Whitfield (CFO), Amanda Trevino (General Counsel), and approximately twelve (12) additional senior executives and vice presidents holding positions in operations, engineering, marketing, logistics, and supply chain management. These standalone agreements were negotiated individually and, while they follow a substantially similar template, contain varying durations (ranging from twelve to twenty-four months post-termination), geographic scopes (generally nationwide), and activity restrictions (generally limited to the online marketplace industry, though some include broader ecommerce technology or retail logistics definitions).
2. Employee Confidentiality, Invention Assignment, and Non-Solicitation Agreements ("CIIA"). NovaMart requires substantially all of its employees—approximately 2,400 individuals—to execute a standard-form Confidentiality, Invention Assignment, and Non-Solicitation Agreement as a condition of employment. The CIIA exists in three principal versions: (i) a Texas-specific version, (ii) a California-specific version, and (iii) an "all other states" version used for employees in New Jersey, Georgia, Ohio, Illinois, Pennsylvania, Tennessee, Florida, and Washington. Each version of the CIIA contains the following core provisions:
(i) Confidentiality and Trade Secret Provisions: Obligations to maintain the confidentiality of NovaMart's proprietary information, trade secrets, business strategies, customer lists, pricing data, algorithms, and other confidential materials during and after employment;
(ii) Invention and IP Assignment Provisions: Assignment to NovaMart of all inventions, discoveries, improvements, works of authorship, and intellectual property conceived, developed, or reduced to practice by the employee during the term of employment and related to NovaMart's business or using NovaMart's resources;
(iii) Non-Solicitation of Employees and Customers Provisions: Restrictions on the employee's ability to solicit NovaMart's employees, contractors, or customers for a specified period following termination of employment; and
(iv) Non-Competition Provisions: In some versions (principally the Texas and "all other states" versions), restrictions on the employee's ability to engage in competitive activities for a specified period following termination. The California version does not include non-competition provisions, consistent with California's prohibition under Business and Professions Code § 16600.
3. Offer Letter Restrictive Covenants. For certain mid-level employees (principally managers and senior individual contributors hired between 2019 and 2023), NovaMart included restrictive covenant language directly in the employee's offer letter rather than in a standalone agreement. These offer letter provisions typically include a non-solicitation of employees covenant (twelve months) and, in some cases, a limited non-competition provision. The offer letter covenants are generally less detailed and less protective than the standalone executive agreements or the CIIA. We identified approximately forty-five (45) employees whose restrictive covenants are contained solely in offer letters.
4. Stock Option Agreement Restrictive Covenants. NovaMart's equity incentive plan and form stock option agreements contain non-competition and non-solicitation provisions applicable to all employees holding vested stock options. These covenants operate as a condition of the option grant and provide that the optionee agrees not to compete with NovaMart or solicit NovaMart's employees or customers for a period of twelve (12) months following termination of employment. Because a portion of the management and employee equity pool (approximately 9.2% of NovaMart's outstanding capital stock in the aggregate) is held through vested options, these covenants apply to a meaningful subset of employees. The stock option agreement covenants provide an additional layer of protection beyond the CIIA and any standalone executive agreement.
5. Contractor and Consultant IP Assignment Agreements. NovaMart has entered into IP and work product assignment agreements with independent contractors and consultants engaged to perform development, design, and other creative or technical work. These agreements assign to NovaMart all intellectual property, work product, deliverables, and inventions created by the contractor in the course of performing services for NovaMart. We reviewed a representative sample of approximately thirty (30) contractor IP assignment agreements, including agreements with contractors who contributed to the development of NovaMart's core search and recommendation algorithms and the NovaShip logistics platform.
B. Key Individuals and Their Agreements
The following individuals have been identified as the key personnel whose restrictive covenant agreements are of greatest significance to Cascade in connection with the Transaction. We summarize below the material terms of each individual's agreements:
Julian Reeves — Founder and Chief Executive Officer. Mr. Reeves is the founder and CEO of NovaMart and holds approximately 18.5% of the Company's outstanding capital stock. His existing NovaMart agreements include: (i) a non-competition covenant of two (2) years following termination of employment, covering the online marketplace industry on a nationwide basis; (ii) a non-solicitation of employees and customers covenant of two (2) years following termination; and (iii) an intellectual property assignment provision covering all inventions conceived or developed during his employment. Mr. Reeves's agreements are governed by Texas law. Mr. Reeves is headquartered in Austin, Texas. Pursuant to the terms currently under negotiation, Mr. Reeves will enter into a new three (3)-year post-closing employment agreement with Cascade providing for an annual base salary of $625,000, a target annual bonus of 75% of base salary, and a grant of 150,000 restricted shares of Cascade common stock.
Priya Narasimhan — Co-Founder and Chief Technology Officer. Ms. Narasimhan is a co-founder of NovaMart and serves as CTO, holding approximately 8.3% of the Company's outstanding capital stock. Her existing NovaMart agreements include: (i) a non-competition covenant of two (2) years following termination, covering both the online marketplace industry and ecommerce technology on a nationwide basis (a scope broader than Mr. Reeves's agreement); (ii) a non-solicitation of employees and customers covenant of two (2) years following termination; and (iii) an intellectual property assignment provision. Her agreements are governed by Texas law. Ms. Narasimhan is primarily based in Austin, Texas, but our diligence review indicates that she spends significant time—estimated at approximately 30-40% of her working time—at NovaMart's three California fulfillment centers, where she oversees technology integration and logistics optimization. This dual-state presence raises critical enforceability issues under California law, as discussed in detail in Sections IV.B and VII.B below. Ms. Narasimhan will enter into a new three (3)-year post-closing employment agreement with Cascade providing for an annual base salary of $575,000, a target annual bonus of 70% of base salary, and a grant of 125,000 restricted shares of Cascade common stock.
Douglas "Doug" Whitfield — Chief Financial Officer. Mr. Whitfield serves as NovaMart's CFO and is based in Austin, Texas. His existing NovaMart agreements include: (i) a non-competition covenant of eighteen (18) months following termination, covering the online marketplace industry on a nationwide basis; and (ii) a non-solicitation of employees and customers covenant of eighteen (18) months following termination. His agreements are governed by Texas law. Mr. Whitfield is not expected to enter into a new post-closing employment agreement; his existing NovaMart agreements will continue in force following the Transaction.
Amanda Trevino — General Counsel. Ms. Trevino serves as NovaMart's General Counsel and is based in Austin, Texas. Her existing NovaMart agreements include: (i) a non-competition covenant of twelve (12) months following termination, covering the online marketplace industry on a nationwide basis; and (ii) a non-solicitation of employees and customers covenant of twelve (12) months following termination. Her agreements are governed by Texas law. Ms. Trevino is not expected to enter into a new post-closing employment agreement; her existing NovaMart agreements will continue in force following the Transaction.
Other Senior Executives. Approximately twelve (12) additional vice presidents and senior vice presidents across NovaMart's operations, engineering, marketing, and logistics functions have entered into standalone non-competition and non-solicitation agreements. These agreements contain non-competition durations ranging from twelve (12) to twenty-four (24) months, are generally nationwide in geographic scope, and cover the online marketplace industry. These executives are spread across NovaMart's locations in Texas, California, Washington, New Jersey, and Georgia. An individual-by-individual summary of these agreements, including the duration, scope, geographic area, governing law, and enforceability assessment for each, is set forth in Appendix A to this memorandum.
C. Materials Reviewed
In preparing this memorandum, we reviewed the following materials:
• All restrictive covenant agreements, employment agreements, confidentiality agreements, and intellectual property assignment agreements produced by NovaMart and Calloway, Brandt & Loewe LLP in the virtual data room established for the Transaction;
• NovaMart's standard-form Confidentiality, Invention Assignment, and Non-Solicitation Agreement in its three principal versions: the Texas-specific version, the California-specific version, and the "all other states" version;
• NovaMart's Amended and Restated 2018 Equity Incentive Plan and the form stock option agreement thereunder, including the restrictive covenant provisions contained therein;
• Employee census data and headcount broken down by state, provided by NovaMart's Human Resources department in response to Item 4.07 of the diligence request list served by Calderwood & Harkness LLP on February 17, 2025;
• The individual employment agreements for Julian Reeves and Priya Narasimhan, including all amendments and side letters;
• The draft post-closing employment agreements for Julian Reeves and Priya Narasimhan currently being negotiated by Calderwood & Harkness LLP on behalf of Cascade;
• Relevant state statutes, regulations, and case law in each of the ten (10) jurisdictions in which NovaMart maintains employees, as set forth in Appendix D; and
• Public filings and records related to any prior enforcement actions or disputes involving NovaMart's restrictive covenants (none identified).
A detailed comparison of the three versions of NovaMart's standard-form CIIA is set forth in Appendix C to this memorandum. The employee headcount by state is set forth in Appendix B.
III. Structural Considerations: Stock Purchase and Restrictive Covenant Continuity
A. Impact of Stock Purchase Structure on Existing Agreements
A threshold consideration in any M&A transaction is whether the transaction structure affects the continuity and enforceability of the target company's existing restrictive covenant agreements. The answer depends primarily on whether the target company continues as the same legal entity following the transaction.
In a stock purchase—such as the Transaction contemplated here—the acquirer purchases the outstanding equity securities of the target company. The target company continues as the same legal entity, with the same employer identification number, the same contractual relationships, and the same corporate identity. Only the ownership of the target company's equity changes. As a result, the employer-employee relationship between NovaMart and its employees is not interrupted, and no new employment relationship is created. The existing restrictive covenant agreements between NovaMart and its employees remain in force by their terms, as no party to those agreements has changed.
This is in contrast to an asset purchase, in which the acquirer purchases the target company's assets (including, potentially, the assumption of certain contracts) and the target company's employees typically terminate their employment with the target and commence new employment with the acquirer. In an asset purchase, the existing restrictive covenants may not automatically transfer to the acquirer, and the acquirer may need to obtain new agreements supported by fresh consideration.
Our diligence review confirmed that NovaMart's standard-form CIIA and standalone executive non-competition and non-solicitation agreements do not contain provisions that would terminate or render the restrictive covenants unenforceable upon a change of control of NovaMart. While approximately thirty-four (34) NovaMart contracts across various categories contain change-of-control provisions—including certain vendor agreements, facility leases, and executive severance arrangements—the restrictive covenant agreements themselves are generally not among those that require consent, notice, or renegotiation upon a change of control.
With respect to NovaMart's stock option agreements, the non-competition and non-solicitation provisions contained therein survive the Transaction. Certain option agreements provide for the acceleration of vesting upon a change of control, which will result in the vesting of additional shares at or prior to closing. However, the restrictive covenant provisions in the option agreements operate independently of the vesting provisions and remain in effect regardless of whether vesting has accelerated. We note that the SPA contemplates that all outstanding NovaMart stock options will be cashed out at closing based on the per-share merger consideration less the applicable exercise price, which effectively eliminates the equity relationship but does not, by its terms, terminate the restrictive covenant provisions contained in the option agreements. We recommend that Cascade confirm with NovaMart's counsel that the cancellation of options at closing does not vitiate the consideration supporting the restrictive covenants in the option agreements; in our view, the original consideration (the option grant itself, plus any continued employment) should be sufficient to support the covenants, even after the options are cashed out.
B. Successor Employer Enforceability
As a general matter of law, the acquiring entity in a stock purchase transaction steps into the shoes of the target company as the beneficiary of the target's existing restrictive covenant agreements. Because NovaMart continues as the same legal entity, Cascade—as the new owner of NovaMart—will benefit from the existing restrictive covenants without the need for assignment or novation.
However, there are certain jurisdictional nuances that bear on this analysis:
Fresh Consideration. Some jurisdictions—most notably Illinois, Pennsylvania, and Ohio—have developed case law suggesting that if the nature of the employment relationship materially changes post-acquisition, the employer may need to provide fresh consideration to support the continued enforceability of the existing restrictive covenants. In a stock purchase where the employment relationship continues unchanged, this issue generally does not arise. However, if Cascade materially alters the compensation, title, responsibilities, or reporting structure of NovaMart employees post-closing, there is a risk that courts in these jurisdictions could find that the existing covenants are no longer supported by adequate consideration. This risk is mitigated by the stock purchase structure and by the recommendation, set forth below, that Cascade maintain NovaMart employees' roles and compensation at current levels during the initial transition period.
Post-Closing Employment Agreements. The post-closing employment agreements currently being negotiated with Julian Reeves and Priya Narasimhan will include new restrictive covenants. These new covenants may supersede the existing NovaMart agreements, supplement them, or operate in parallel, depending on the drafting approach. We recommend that the post-closing employment agreements contain express language addressing the relationship between the new covenants and the existing NovaMart agreements—specifically, a provision stating that the new covenants supersede and replace the existing NovaMart covenants in their entirety, to avoid confusion, potential inconsistency, or an argument by the employee that the new agreement invalidated the old agreement but the new agreement is itself unenforceable.
IV. State-by-State Enforceability Analysis
The following analysis addresses the enforceability of NovaMart's restrictive covenant agreements under the laws of each of the ten (10) states in which NovaMart maintains employees or operations. We have organized this analysis beginning with the jurisdictions of greatest significance to the Transaction—Texas (NovaMart's headquarters and the location of its most senior executives), California (the jurisdiction presenting the greatest enforceability risk), and Washington (the location of Cascade's headquarters)—followed by the remaining jurisdictions in order of operational significance.
A. Texas (NovaMart Headquarters — Austin, TX; 1100 Congress Avenue, Suite 800)
1. Applicable Law. Texas law governing the enforceability of covenants not to compete is set forth in the Texas Business and Commerce Code, Section 15.50 et seq. (the "Texas Covenants Act"). Under the Texas Covenants Act, a covenant not to compete is enforceable if it is "ancillary to or part of an otherwise enforceable agreement at the time the agreement is made" and the restraint is "reasonable" as to time, geographic area, and the scope of activity to be restrained. Tex. Bus. & Com. Code § 15.50(a).
The Texas Supreme Court's decision in Fenmore Benefit Group v. Cook, 354 S.W.3d 764 (Tex. 2011), clarified that stock options, bonuses, and other forms of consideration beyond at-will employment can satisfy the "otherwise enforceable agreement" requirement. The court held that the provision of confidential information or trade secrets in the course of employment, combined with the employee's agreement to maintain confidentiality, constitutes an "otherwise enforceable agreement" to which a non-compete may be ancillary. This framework applies to NovaMart's executive agreements, which are ancillary to employment agreements that include confidentiality obligations.
2. Non-Competition Agreements. NovaMart's executive non-competition agreements for Texas-based personnel contain non-competition durations ranging from twelve (12) to twenty-four (24) months, a nationwide geographic scope, and activity restrictions covering the "online marketplace industry" or, in some cases, the broader "online marketplace and ecommerce technology" industry. We assess these provisions as follows:
Duration. Texas courts have consistently upheld non-competition durations of up to two (2) years as reasonable. See, e.g., Fenmore Benefit Group v. Cook, 354 S.W.3d 764 (Tex. 2011) (upholding two-year non-compete); Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844 (Tex. 2009). The twelve- to twenty-four-month durations in NovaMart's agreements fall squarely within the range that Texas courts have found reasonable.
Geographic Scope. Nationwide geographic scope is more commonly scrutinized by Texas courts, which have historically favored geographically limited non-competes. However, Texas courts have recognized that for businesses that operate on a national or global scale—particularly internet-based businesses that are not geographically bounded—a nationwide restriction may be appropriate and reasonable. See, e.g., Gallagher Healthcare Ins. Servs. v. Vogelsang, No. 01-07-00802-CV, 2009 WL 2058607 (Tex. App.—Houston [1st Dist.] 2009, no pet.) (upholding nationwide non-compete for business with national client base). Given that NovaMart operates an online marketplace accessible from and serving customers in all fifty states, a nationwide geographic scope is likely reasonable for its senior executives.
Scope of Activity. The activity restrictions in NovaMart's executive agreements—covering the "online marketplace industry" or "online marketplace and ecommerce technology"—are sufficiently defined to satisfy Texas's specificity requirements. Courts have upheld activity restrictions that are tied to the employer's line of business and the employee's functional area. The broader "ecommerce technology" formulation used in some agreements (including Priya Narasimhan's) could be challenged as overbroad, but Texas's reformation doctrine (discussed below) provides a meaningful backstop.
Reformation Doctrine. A critical feature of Texas non-compete law is the statutory reformation doctrine codified at Texas Business and Commerce Code § 15.51(c). If a court finds that a non-compete is unreasonable in any respect, the court "shall reform the covenant to the extent necessary to cause the limitations contained in the covenant as to time, geographical area, and scope of activity to be restrained to be reasonable and enforce the covenant as reformed." Tex. Bus. & Com. Code § 15.51(c). This mandatory reformation provision substantially reduces the risk that a Texas court would void a NovaMart non-compete outright, even if it found certain aspects to be overbroad.
Key Personnel in Texas. The following key individuals are based in Austin, Texas, and their non-competition agreements are most directly governed by Texas law: Julian Reeves (CEO), Priya Narasimhan (CTO, primary office), Douglas Whitfield (CFO), and Amanda Trevino (General Counsel).
3. Non-Solicitation Agreements. Employee non-solicitation and customer non-solicitation provisions are analyzed under the same framework as non-competition provisions under the Texas Covenants Act. The covenants must be ancillary to an otherwise enforceable agreement and reasonable in scope, duration, and geographic area. NovaMart's executive non-solicitation provisions, which range from twelve (12) to twenty-four (24) months, are within the range that Texas courts have consistently upheld as reasonable.
Texas courts have recognized the protection of customer relationships and the preservation of a stable workforce as legitimate business interests supporting non-solicitation covenants. See, e.g., Rugen v. Interactive Bus. Sys., Inc., 864 S.W.2d 548 (Tex. App.—Dallas 1993, no writ). NovaMart's non-solicitation provisions, which restrict both the solicitation of customers and the solicitation of employees, serve these recognized interests and are likely enforceable under Texas law.
4. IP Assignment Agreements. Intellectual property assignment provisions are fully enforceable under Texas law. Texas does not have a statutory equivalent to California Labor Code § 2870 or Washington RCW § 49.44.140 mandating a carve-out for inventions made entirely on an employee's own time without employer resources. As a matter of contract law, Texas courts enforce IP assignment provisions according to their terms, provided the agreement is supported by adequate consideration. NovaMart's CIIA and executive agreements include IP assignment provisions that are broad and comprehensive, covering all inventions, discoveries, improvements, works of authorship, and intellectual property conceived or developed during the term of employment and related to NovaMart's business. As a best practice, NovaMart's form agreements include a "prior inventions" schedule allowing employees to identify pre-existing intellectual property that is excluded from the assignment, which further supports the enforceability of the provision.
5. Assessment. Risk Level: Low. NovaMart's restrictive covenant agreements for Texas-based personnel are generally enforceable under the Texas Covenants Act. The durations (12-24 months), nationwide geographic scope, and activity restrictions (online marketplace industry) are within the range that Texas courts have upheld. Even if a court were to find any particular provision overbroad, the mandatory reformation doctrine under § 15.51(c) provides a robust backstop. We assess the risk of unenforceability for Texas agreements as low.
B. California (3 Fulfillment Centers; Significant Employee Population)
1. Applicable Law. California law governing the enforceability of restrictive covenants is set forth in California Business and Professions Code § 16600 et seq., as interpreted by the California Supreme Court in Edwards v. Kraft Quill CPAs LLP, 44 Cal. 4th 937 (2008), and as amended by recent legislation including AB 1076 (2020), SB 699 (2023), and AB 1197 (2023). California's legal framework represents the most restrictive regime in the nation with respect to post-employment non-competition agreements and presents the most significant enforceability risk for NovaMart's restrictive covenants.
2. Non-Competition Agreements — Unenforceable. California Business and Professions Code § 16600 provides, in relevant part, that "every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void." The California Supreme Court has interpreted this prohibition broadly. In Edwards v. Kraft Quill CPAs LLP, 44 Cal. 4th 937, 945 (2008), the court held that § 16600 voids any employment agreement that "restrains" an employee from engaging in a "lawful profession, trade, or business of any kind," rejecting the "narrow restraint" or "reasonableness" exception recognized in some other jurisdictions. The court emphasized that California's policy favoring open competition and employee mobility is a "strong public policy" that admits only of the narrow statutory exceptions expressly set forth in the Business and Professions Code.
Statutory Exceptions. Section 16600 is subject to only three narrow statutory exceptions, none of which applies to employee non-competition agreements in the present context:
(a) Sale of Goodwill (§ 16601): A person who sells the goodwill of a business may agree not to carry on a similar business within a specified geographic area. This exception is discussed further below in connection with the stockholder status of Julian Reeves and Priya Narasimhan.
(b) Dissolution of a Partnership (§ 16602): Partners may agree upon the dissolution of a partnership not to carry on a similar business.
(c) Dissolution or Sale of an LLC (§ 16602.5): Members of an LLC may agree upon the dissolution or sale of the LLC not to carry on a similar business.
None of these exceptions applies to an employee non-competition agreement in the employer-employee context.
NovaMart's California Agreements. NovaMart's non-competition provisions in its California-specific CIIA (to the extent any exist) and in any executive agreement governed by or applied to California-based employees are void and unenforceable under § 16600. Our diligence review indicates that NovaMart's California-specific CIIA does not include a non-competition provision, which reflects appropriate compliance with California law. However, several NovaMart executives who are based in or spend significant time working in California are subject to standalone non-competition agreements governed by Texas law, and the enforceability of those provisions as applied to those individuals' California activities is addressed below under the choice-of-law analysis.
Recent Legislative Developments. In 2023, the California Legislature enacted two significant bills that expanded the reach of California's non-compete prohibition:
SB 699 (effective January 1, 2024): SB 699 added new Section 16600.5 to the Business and Professions Code, which provides that any contract that is void under § 16600 is unenforceable "regardless of where and when the contract was signed." The statute further provides that an employer or former employer "shall not attempt to enforce a contract that is void under this chapter regardless of whether the contract was signed and the employment was maintained outside of California." SB 699 creates a private right of action for current, former, or prospective employees who are the subject of an attempt to enforce a void non-compete, and authorizes the recovery of injunctive relief, actual damages, and reasonable attorney's fees.
AB 1197 (effective January 1, 2024): AB 1197 requires employers to notify current employees and former employees who were employed after January 1, 2022, if their employment agreements contain non-compete provisions that are void under § 16600. The notice must be provided in writing and must be individualized.
The practical significance of SB 699 for the Transaction is substantial. Even if a NovaMart executive's non-competition agreement is governed by Texas law and was signed in Texas, SB 699 prohibits the enforcement of that agreement against a person who is a California resident or who performs services in California. An attempt to enforce such an agreement could expose Cascade (as NovaMart's successor) to liability under the new private right of action, including an award of attorney's fees.
Impact on NovaMart's Workforce. NovaMart has approximately 400 to 500 employees at its three California fulfillment centers, based on the employee census data provided through diligence. The non-competition provisions applicable to these employees—whether in the CIIA, offer letters, or stock option agreements—are void under California law. These employees cannot be subject to post-employment non-competition restrictions regardless of the governing law designated in their agreements.
3. Non-Solicitation Agreements — Significant Risk. California's treatment of non-solicitation provisions has become increasingly restrictive in recent years, and the enforceability of such provisions under California law is uncertain and evolving.
Customer Non-Solicitation. California courts have increasingly treated customer non-solicitation provisions as de facto non-competition restrictions that are void under § 16600. In AMN Healthcare, Inc. v. Aya Healthcare Services, Inc., 28 Cal. App. 5th 923 (2018), the California Court of Appeal held that a non-solicitation clause that prohibited a former employee from soliciting the employer's clients was "tantamount to a noncompetition agreement" and therefore void under § 16600. The court reasoned that the restriction effectively prevented the former employee from performing her trade by prohibiting her from contacting the very clients she would need to contact to perform her work. While AMN Healthcare involved specific facts, its rationale has been applied broadly by subsequent courts, and the trend in California case law is toward finding customer non-solicitation provisions void under § 16600.
Employee Non-Solicitation. The enforceability of employee non-solicitation provisions—i.e., restrictions on recruiting or hiring the former employer's personnel—under California law is less settled. Some California courts have distinguished narrow employee non-solicitation covenants from non-competition restrictions, reasoning that a restriction on soliciting former colleagues does not directly restrain the former employee from engaging in his or her profession. See, e.g., Marlowe Corporation v. Cascade Capital Markets, No. C-07-6198 (N.D. Cal. 2009). However, the trend in California law is toward subjecting employee non-solicitation provisions to the same § 16600 analysis, and the enforceability of these provisions is uncertain and fact-dependent.
Recommendation. We recommend that Cascade not rely on the enforceability of any non-solicitation provisions—whether customer non-solicitation or employee non-solicitation—as applied to California-based employees. Instead, we recommend that Cascade protect its interests in NovaMart's customer relationships and workforce stability through other means, including robust trade secret protections under the California Uniform Trade Secrets Act (Cal. Civ. Code §§ 3426 et seq.) and the federal Defend Trade Secrets Act (18 U.S.C. § 1836 et seq.), strong confidentiality agreements, and retention incentives.
4. IP Assignment Agreements — Enforceable with Statutory Limitations. Intellectual property assignment provisions are enforceable in California, subject to the mandatory limitations set forth in California Labor Code § 2870. Section 2870 provides that any provision in an employment agreement that requires an employee to assign inventions to the employer "shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information," except where the invention either:
(a) relates at the time of conception or reduction to practice to the employer's business, or actual or demonstrably anticipated research or development of the employer; or
(b) results from any work performed by the employee for the employer.
Section 2870 further requires that the employment agreement include a notice to the employee setting forth the limitations of § 2870 on the employer's right to require assignment.
Our review of NovaMart's California-specific CIIA confirms that it includes the required § 2870 notice and appropriately carves out inventions that are subject to the § 2870 exemption. The existing California CIIA agreements appear compliant with the statutory requirements.
Copyrightable works created by NovaMart employees within the scope of their employment are "works made for hire" under the Copyright Act (17 U.S.C. § 101) and are owned by NovaMart as employer without the need for an assignment. The IP assignment provisions in the CIIA provide belt-and-suspenders protection for copyrightable works and extend to other forms of intellectual property (patents, trade secrets, know-how) that are not covered by the work-for-hire doctrine.
5. Assessment. Risk Level: High for Non-Competes and Non-Solicitation. Non-competition provisions applicable to California-based employees are void under § 16600 and cannot be enforced. Customer non-solicitation provisions face significant risk of being held void under § 16600 following AMN Healthcare and its progeny. Employee non-solicitation provisions are of uncertain enforceability. IP assignment provisions are enforceable subject to the § 2870 carve-out.
Mitigation. Cascade should rely on trade secret protection under the California Uniform Trade Secrets Act and the Defend Trade Secrets Act, robust confidentiality agreements, and IP assignment provisions—rather than non-competition or non-solicitation covenants—as the primary mechanisms for protecting its interests in NovaMart's proprietary technology, customer relationships, and workforce as to California-based personnel.
C. Washington (1 Fulfillment Center; Cascade Headquarters State)
1. Applicable Law. Washington's law governing non-competition agreements is set forth in the Washington Noncompetition Covenants Act, RCW § 49.62 (the "Washington Act"), which became effective on January 1, 2020. The Washington Act represents a significant legislative intervention in the enforceability of non-competition agreements and imposes specific requirements that must be satisfied for a non-compete to be enforceable.
2. Non-Competition Agreements. Under the Washington Act, a non-competition covenant is enforceable against an employee only if the following conditions are met:
(a) Earnings Threshold. The employee earns more than the applicable annual earnings threshold, which is adjusted annually for inflation. As of 2025, the threshold for employees is approximately $116,594 (adjusted from the original $100,000 base amount). Non-competition covenants applicable to employees earning at or below this threshold are void per se.
(b) Disclosure Requirement. The non-competition covenant must be disclosed in writing to the employee no later than the earlier of: (i) the time of acceptance of the offer of employment, or (ii) a change in the terms of employment that provides additional consideration for the covenant.
(c) Duration Limitation. Non-competition covenants exceeding eighteen (18) months in duration are presumptively unreasonable and unenforceable. This presumption may be overcome only by the employer through clear and convincing evidence.
For independent contractors, the Washington Act imposes a separate, higher earnings threshold—currently approximately $291,486—below which non-competition covenants are void.
Statutory Penalties. If a court or arbitrator finds that a non-competition covenant violates the Washington Act, the employee is entitled to actual damages or a statutory penalty of $5,000, whichever is greater, plus reasonable attorney's fees and costs. This penalty provision creates significant exposure for employers who maintain or attempt to enforce non-competition agreements that do not comply with the Act's requirements.
NovaMart's Washington Employees. NovaMart's fulfillment center employees in Washington include a mix of warehouse associates, logistics coordinators, supervisors, and site management personnel. Many warehouse and logistics employees likely earn below the $116,594 annual threshold, and their non-competition provisions are void under the Washington Act regardless of any other analysis. Senior management and engineering staff at the Washington location who earn above the threshold have potentially enforceable non-competition covenants, provided the disclosure and duration requirements were met at the time of execution.
NovaMart's standard non-competition covenant for Washington employees appears to have a duration of twelve (12) months, which is within the eighteen-month presumptive maximum under the Washington Act. Our diligence review is ongoing as to whether the disclosure requirements were satisfied at the time these agreements were executed. If NovaMart failed to provide the required written disclosure at the time of the employee's acceptance of employment, the covenants may be void irrespective of the employee's earnings level.
Post-Closing Consideration for Cascade. Because Cascade is headquartered in Seattle, Washington, there is a possibility that NovaMart employees may be transferred to or relocated to Washington post-closing as part of integration activities. If NovaMart employees who are currently based in other states are relocated to Washington, Washington law may apply to their restrictive covenants prospectively, requiring compliance with the Washington Act's earnings threshold, disclosure, and duration requirements. Cascade should factor this consideration into its integration planning.
3. Non-Solicitation Agreements. The Washington Act expressly excludes non-solicitation agreements from its scope. RCW § 49.62.010(4) provides that "nonsolicitation agreement" means "an agreement between an employer and employee that prohibits or restrains the employee from soliciting or hiring employees of the employer," and the Act's restrictions on non-competition covenants do not apply to nonsolicitation agreements. Accordingly, customer and employee non-solicitation provisions for Washington-based employees are analyzed under common law reasonableness standards rather than under the statutory framework.
Under Washington common law, non-solicitation provisions are enforceable if they are reasonable in scope and duration, are necessary to protect a legitimate business interest (such as customer relationships, trade secrets, or goodwill), and do not impose an undue burden on the employee. See, e.g., Labriola v. Pollard Group, Inc., 152 Wash. 2d 828 (2004) (analyzing reasonableness of restrictive covenants under common law standards). NovaMart's standard non-solicitation provisions for Washington employees, with durations of twelve (12) to twenty-four (24) months, are within the range that Washington courts have upheld as reasonable.
4. IP Assignment Agreements. Washington Revised Code § 49.44.140 provides a statutory carve-out for employee inventions similar to California's § 2870. Under RCW § 49.44.140, an employer may not require an employee to assign any invention for which the employee has not used the employer's equipment, supplies, facilities, or trade secret information, and the invention was developed entirely on the employee's own time, and the invention does not relate directly to the employer's business or actual or demonstrably anticipated research or development, and the invention does not result from any work performed by the employee for the employer. The statute requires that the employment agreement include a notice to the employee of the limitations set forth in § 49.44.140.
Our review of NovaMart's Washington-specific provisions indicates that the required § 49.44.140 notice is included in the version of the CIIA used for Washington employees. The existing agreements appear compliant with the Washington statutory requirements.
5. Assessment. Risk Level: Moderate. Non-competition covenants are enforceable for above-threshold earners in Washington, provided the statutory disclosure and duration requirements were met, but are void for below-threshold employees. Given that many fulfillment center employees may earn below the threshold, a significant portion of NovaMart's Washington workforce is not subject to enforceable non-competition restrictions. Non-solicitation provisions are generally enforceable under common law standards. IP assignment provisions are enforceable with the statutory carve-out under § 49.44.140.
D. New Jersey (2 Fulfillment Centers)
1. Applicable Law. New Jersey does not have a comprehensive statute governing the enforceability of non-competition agreements. Instead, New Jersey courts analyze non-competition agreements under common law reasonableness standards as articulated in Solari Industries, Inc. v. Malady, 55 N.J. 571 (1970), and Whitmyer Brothers, Inc. v. Doyle, 58 N.J. 25 (1971), and their progeny.
Under the New Jersey common law framework, a non-competition agreement is enforceable if it meets a three-part test:
(a) The covenant is necessary to protect a legitimate business interest of the employer, such as trade secrets, confidential information, customer relationships, or the investment in specialized training provided to the employee;
(b) The covenant does not impose an undue hardship on the employee; and
(c) The covenant is not injurious to the public interest.
In addition, the covenant must be reasonable in its duration, geographic scope, and scope of restricted activities. The New Jersey Supreme Court has recognized that these factors are interrelated and must be assessed in light of the totality of the circumstances, including the nature of the employer's business, the employee's position, the employee's access to confidential information, and the competitive landscape.
2. Non-Competition Agreements. New Jersey courts are generally willing to enforce non-competition agreements that satisfy the three-part test described above. Importantly for NovaMart's covenants, New Jersey courts have recognized that the geographic scope of a non-competition covenant may appropriately be broader for businesses that operate on a national or internet-based scale. See, e.g., Coskey's Television & Radio Sales & Service, Inc. v. Foti, 253 N.J. Super. 626 (App. Div. 1992). Given that NovaMart operates an online marketplace accessible from all fifty states, a nationwide geographic restriction for senior executives with access to competitive intelligence and customer data is likely reasonable under New Jersey law.
Durations of twelve (12) to twenty-four (24) months are within the range that New Jersey courts have upheld for employees in senior, knowledge-intensive positions. See, e.g., Larkspur Systems, LLC v. Rafferty, No. 19-cv-14536 (D.N.J. 2019) (upholding 18-month non-compete for sales executive).
New Jersey courts are also willing to blue-pencil or reform overbroad non-competition agreements to make them reasonable, rather than voiding them entirely. See Solari Industries, 55 N.J. at 576. This reformation power provides a significant backstop for NovaMart's covenants in the event a court finds any particular aspect to be overbroad.
We note that the New Jersey Legislature has considered, but not enacted, legislation that would restrict or prohibit non-competition agreements. As of the date of this memorandum, no such legislation has been signed into law.
3. Non-Solicitation and IP Assignment. Non-solicitation provisions are analyzed under the same common law reasonableness framework as non-competition agreements and are generally enforceable in New Jersey if they satisfy the Solari Industries three-part test. NovaMart's standard non-solicitation durations (12-24 months) are reasonable.
IP assignment provisions are enforceable under New Jersey contract law. New Jersey does not have a statutory carve-out equivalent to California's § 2870 or Washington's § 49.44.140 for employee inventions created on the employee's own time.
4. Assessment. Risk Level: Low to Moderate. NovaMart's non-competition and non-solicitation agreements are generally enforceable in New Jersey under the common law reasonableness standard. Reformation is available as a backstop for overbroad provisions. IP assignment provisions are fully enforceable. The principal risk is that a court could find the nationwide scope or two-year duration of certain executive covenants to be overbroad for lower-level fulfillment center employees, but this risk is mitigated by the reformation doctrine and by the fact that most fulfillment center employees' covenants are shorter in duration.
E. Georgia (2 Fulfillment Centers)
1. Applicable Law. Georgia's law governing the enforceability of restrictive covenants underwent a significant transformation with the adoption of the Georgia Restrictive Covenants Act, O.C.G.A. § 13-8-50 et seq. (the "Georgia Act"), which became effective on November 3, 2011. The Georgia Act applies to agreements entered into on or after its effective date and provides a more permissive framework for enforcing restrictive covenants than the common law regime that preceded it.
Prior to the Georgia Act, Georgia courts applied an extremely strict approach to non-competition agreements, frequently striking down covenants for minor drafting deficiencies and refusing to reform or blue-pencil overbroad provisions. Under the Georgia Act, this rigid approach has been replaced with a more flexible, employer-friendly framework.
2. Non-Competition Agreements. Under the Georgia Act, a non-competition agreement is enforceable if the restraint is reasonable in time, geographic area, and scope of prohibited activities. The Act does not specify maximum durations or geographic areas, instead deferring to a fact-specific analysis of reasonableness in light of the particular circumstances.
Georgia courts applying the Act have upheld non-competition durations of up to two (2) years as presumptively reasonable for employees in competitive or knowledge-intensive positions. See, e.g., Becham v. Synthes USA, LLC, 482 F. App'x 387 (11th Cir. 2012) (applying Georgia law). NovaMart's standard executive non-compete durations (12-24 months) are well within this range.
With respect to geographic scope, the Georgia Act permits a nationwide restriction where the employer's business is conducted on a national scale. For internet-based or ecommerce businesses like NovaMart, nationwide restrictions are likely enforceable.
Critically, the Georgia Act authorizes courts to modify (i.e., reform or blue-pencil) overbroad restrictive covenants to make them reasonable, rather than voiding them in their entirety. O.C.G.A. § 13-8-54(b). This reformation power provides a meaningful backstop for NovaMart's covenants in Georgia.
3. Non-Solicitation and IP Assignment. Non-solicitation provisions are enforceable under the Georgia Act if reasonable in scope and duration. The Act expressly authorizes covenants restricting the solicitation of customers and employees. O.C.G.A. § 13-8-53(a).
IP assignment provisions are fully enforceable under Georgia contract law. Georgia does not have a statutory carve-out comparable to California's § 2870 or Washington's § 49.44.140.
4. Assessment. Risk Level: Low. NovaMart's restrictive covenant agreements are generally enforceable in Georgia under the Georgia Restrictive Covenants Act, provided the agreements were entered into after the Act's November 2011 effective date. For agreements entered into prior to that date (which may apply to certain long-tenured employees), the stricter pre-Act common law framework may apply. Reformation is available as a backstop. We recommend confirming the execution dates of any pre-2011 agreements as part of the ongoing diligence process.
F. Ohio (1 Fulfillment Center)
1. Applicable Law. Ohio courts analyze non-competition agreements under a common law reasonableness standard established by the Ohio Supreme Court in Raimonde v. Van Vlerah, 42 Ohio St. 2d 21 (1975). Under the Raimonde framework, a non-competition agreement is enforceable if:
(a) The restraint is no greater than is required for the protection of the employer's legitimate business interests, including trade secrets, confidential information, and customer relationships;
(b) The restraint does not impose an undue hardship on the employee; and
(c) The restraint is not injurious to the public.
Ohio courts consider the totality of the circumstances, including the duration, geographic scope, and scope of restricted activities, in determining whether a non-competition agreement is reasonable.
2. Assessment. NovaMart's standard non-competition and non-solicitation provisions are enforceable in Ohio under the Raimonde framework. Ohio courts will blue-pencil overbroad provisions to make them reasonable rather than voiding them entirely. See Lake Land Employment Grp. of Akron, LLC v. Columber, 101 Ohio St. 3d 242 (2004) (continued employment constitutes sufficient consideration for a non-compete entered into during employment). IP assignment provisions are fully enforceable under Ohio contract law. Ohio does not have a statutory carve-out for employee inventions.
Risk Level: Low.
G. Illinois (1 Fulfillment Center)
1. Applicable Law. Illinois enacted the Illinois Freedom to Work Act (820 ILCS 90/1 et seq.) (the "Illinois FTW Act"), which became effective on January 1, 2022, and was amended in August 2024. The Illinois FTW Act represents a significant legislative reform of Illinois non-compete law and imposes specific requirements that must be satisfied for a non-competition or non-solicitation agreement to be enforceable.
The key requirements of the Illinois FTW Act are as follows:
Earnings Thresholds. Non-competition covenants are enforceable only against employees who earn at least $75,000 per year at the time of the agreement's execution. This threshold increases over time: to $80,000 in 2027, $85,000 in 2032, and $90,000 in 2037. Non-solicitation covenants are enforceable only against employees who earn at least $45,000 per year at the time of execution, with similar escalation provisions.
Adequate Consideration. The agreement must be supported by adequate consideration, which is defined as at least two (2) years of continued employment after the date the agreement is entered into, or other adequate consideration (such as a period of employment plus additional compensation or benefits).
Advisory and Review Requirements. The employer must advise the employee in writing to consult with an attorney prior to entering into the agreement, and the employer must provide the employee with at least fourteen (14) calendar days to review the agreement before signing. If the employer does not provide the 14-day review period, the agreement is voidable by the employee.
Additional Limitations. The Illinois FTW Act prohibits non-competition and non-solicitation agreements with employees who are terminated, furloughed, or laid off as a result of circumstances related to the COVID-19 pandemic or similar conditions, unless the agreement includes adequate consideration independent of continued employment.
2. Assessment. NovaMart has approximately 15 to 20 employees at its Illinois fulfillment center, based on the employee census data provided through diligence. The enforceability of their restrictive covenants depends on the following factors:
Earnings Thresholds. Fulfillment center employees who earn below $75,000 per year (for non-competes) or $45,000 per year (for non-solicitation) are not subject to enforceable restrictive covenants under the Illinois FTW Act, regardless of any other analysis. We anticipate that a substantial por

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