FUNDS FLOW MEMORANDUM — DRAFT
CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED — ATTORNEY WORK PRODUCT
Subject: Acquisition of 100% of the Outstanding Capital Stock of NovaMart Global Inc. by Cascade Retail Holdings Inc.
Prepared by: Calderwood & Harkness LLP 599 Lexington Avenue, 38th Floor New York, NY 10022
Authors: Derek Okonkwo, Lead Associate, Mergers & Acquisitions Tiffany Rosenthal, Working Associate, Mergers & Acquisitions Under the supervision of Harrison Wexford, Responsible Partner, Mergers & Acquisitions
Date: May 22, 2025
DRAFT — SUBJECT TO REVISION
Distribution List:
This memorandum is being distributed solely to the following authorized recipients. Recipients are instructed not to forward, copy, or distribute this memorandum to any person not listed below without the prior written authorization of Harrison Wexford or Derek Okonkwo at Calderwood & Harkness LLP.
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I. INTRODUCTION AND PURPOSE
This memorandum sets forth the preliminary flow of funds anticipated at the closing (the "Closing") of the acquisition by Cascade Retail Holdings Inc. ("Cascade" or "CRH"), a Delaware corporation publicly traded on the Nasdaq Global Select Market (ticker: CRHI), of 100% of the issued and outstanding capital stock of NovaMart Global Inc. ("NovaMart" or "NMG"), a Delaware corporation, pursuant to that certain Stock Purchase Agreement, dated as of May 20, 2025 (the "SPA"), by and among Cascade, NovaMart, the Selling Stockholders (as defined therein), and Ridgeline Equity Partners, LP, in its capacity as Stockholder Representative. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the SPA.
The aggregate purchase price for the acquisition is One Billion Two Hundred Million Dollars ($1,200,000,000) (the "Purchase Price"), payable entirely in cash at Closing. There is no stock component, contingent consideration, earnout, or deferred payment obligation associated with the Purchase Price. The Purchase Price is subject to customary post-closing adjustment based on estimated and actual closing working capital, as further described below.
The targeted Closing Date is October 15, 2025, subject to the satisfaction or waiver of the conditions precedent set forth in Article VII of the SPA, principally including clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). The parties filed their respective HSR notification forms on April 11, 2025. On May 8, 2025, the Antitrust Division of the U.S. Department of Justice issued a Request for Additional Information (the "Second Request") to both Cascade and NovaMart. Compliance with the Second Request is ongoing and is expected to be completed such that clearance may be obtained in the September–October 2025 timeframe. The outside date for the Closing (the "Outside Date") is December 31, 2025, as set forth in Section 10.1(b) of the SPA.
This memorandum is a preliminary draft. The final version of this memorandum (the "Final Funds Flow Memorandum") will be prepared immediately prior to the Closing Date and will incorporate the following updates and confirmations:
(a) confirmed payoff amounts from Ashford Savings Bank, N.A. (including per diem interest, breakage costs, and any prepayment premiums, if applicable);
(b) finalized wire instructions from all payees, verified through established callback procedures;
(c) final invoiced amounts from all transaction advisors;
(d) the estimated closing statement and working capital calculation prepared in accordance with the Working Capital Methodology Agreement;
(e) the final capitalization table, as certified by the Secretary of NovaMart, reflecting all outstanding shares and vested stock options as of the Closing Date; and
(f) executed Funds Flow Certificates from authorized officers of Cascade and the Stockholder Representative, confirming agreement to the final funds flow.
All dollar amounts set forth in this memorandum are preliminary estimates and are subject to change based on, among other things: (a) the estimated closing statement and working capital calculation to be delivered pursuant to Section 2.4 of the SPA and the Working Capital Methodology Agreement; (b) final payoff amounts from Ashford Savings Bank, N.A., as set forth in the payoff letter to be delivered not more than three (3) business days prior to Closing; and (c) final invoiced transaction costs from the parties' respective advisors.
The following reference documents are relevant to this memorandum and should be consulted for the terms and conditions governing the matters described herein:
• Stock Purchase Agreement, dated May 20, 2025 (the "SPA");
• Commitment Letter, Reference No. CL-2025-0515-CRNB, dated May 15, 2025 (the "Commitment Letter"), among Cascade, Cornerstone National Bank, N.A., and Caluvori Capital Partners, Inc.;
• Escrow Agreement (form attached as Exhibit G to the SPA), to be entered into at Closing among Cascade, Ridgeline Equity Partners, LP (as Stockholder Representative), and Marlowe Asset Management Trust Company, N.A. (as Escrow Agent);
• Paying Agent Agreement (form attached as Exhibit H to the SPA), to be entered into at Closing between Cascade and Marlowe Asset Management Trust Company, N.A. (as Paying Agent);
• Working Capital Methodology Agreement, attached as Schedule 2.4 to the SPA, setting forth the agreed-upon principles and sample calculation for the determination of estimated and actual closing net working capital.
II. TRANSACTION OVERVIEW
The following is a summary of the key parties, structure, and economic terms of the transaction for reference in connection with the funds flow analysis set forth in this memorandum.
A. Buyer
Cascade Retail Holdings Inc. ("Cascade" or "CRH") 4500 Elliott Avenue West, Suite 3200 Seattle, WA 98119 EIN: 91-2847653
Cascade is a publicly traded Delaware corporation listed on the Nasdaq Global Select Market under the ticker symbol "CRHI." Cascade operates a diversified portfolio of specialty retail and e-commerce businesses across North America and Europe. Cascade's Board of Directors authorized the execution and delivery of the SPA and the consummation of the transactions contemplated thereby at a meeting held on May 18, 2025.
B. Target
NovaMart Global Inc. ("NovaMart" or "NMG") 1100 Congress Avenue, Suite 800 Austin, TX 78701 EIN: 84-3291547
NovaMart is a privately held Delaware corporation operating a technology-enabled global marketplace platform for consumer and commercial goods. NovaMart was founded in 2016 by Julian Reeves and Priya Narasimhan and has grown to serve approximately 12 million active users across 28 countries.
C. Selling Stockholders
The following table sets forth the ownership of the issued and outstanding capital stock of NovaMart as of the date of the SPA. The final capitalization table, including any adjustments for vested but unexercised stock options, will be certified by the Secretary of NovaMart at or prior to Closing.
The "Other Management and Employee Stockholders" category comprises approximately twenty-three (23) individuals, including members of NovaMart's executive leadership team and certain key employees who hold vested stock options or restricted stock. Individual allocations within this category will be determined based on the final capitalization table and the treatment of vested stock options (whether by net exercise or cash-out) as determined at Closing in accordance with Section 2.3 of the SPA.
D. Stockholder Representative
Ridgeline Equity Partners, LP, acting through Franklin Osei, Managing Partner, has been designated as the Stockholder Representative under the SPA. In such capacity, Ridgeline Equity Partners, LP is authorized to act on behalf of all Selling Stockholders with respect to post-closing matters, including the administration of the escrow fund and any indemnification claims, as well as the resolution of the post-closing working capital adjustment.
E. Transaction Structure
The transaction is structured as a stock purchase, pursuant to which Cascade will acquire 100% of the issued and outstanding capital stock of NovaMart from the Selling Stockholders. Following the Closing, NovaMart will become a wholly owned subsidiary of Cascade.
F. Economic Terms
The Working Capital Target of $78,500,000 represents the agreed-upon normalized level of NovaMart's net working capital. If the estimated closing net working capital falls within the collar range (i.e., between $73,500,000 and $83,500,000), no pre-closing adjustment to the Purchase Price will be made. Any difference between estimated and actual closing net working capital will be resolved through the post-closing true-up mechanism set forth in Section 2.4 of the SPA and the Working Capital Methodology Agreement. To the extent an adjustment is owed by the Selling Stockholders to Cascade, such amount shall be paid first from the escrow fund, to the extent available and not otherwise subject to pending claims. To the extent an adjustment is owed by Cascade to the Selling Stockholders, Cascade shall pay such amount by wire transfer of immediately available funds within five (5) business days after final determination.
III. SOURCES OF FUNDS
A. Summary of Sources
The Purchase Price of $1,200,000,000 will be funded from the following sources:
The sources listed above are designated exclusively for the funding of the Purchase Price. Transaction costs of approximately $47,300,000 (as described in Section IV.E below) will be funded separately from Cascade's working capital and are not included in the total sources figure of $1,200,000,000. A full reconciliation of all sources and uses, including transaction costs and the payoff of NovaMart's existing indebtedness, is provided in Section VI below.
B. Senior Secured Term Loan B — $750,000,000
Cascade has obtained commitments for a new Senior Secured Term Loan B facility (the "Term Loan B") in an aggregate principal amount of $750,000,000, pursuant to the Commitment Letter dated May 15, 2025 (Reference: CL-2025-0515-CRNB).
Administrative Agent: Cornerstone National Bank, N.A. 227 West Monroe Street Chicago, IL 60606 Contact: Robert Frankel, Senior Vice President, Leveraged Finance
Co-Lead Arranger: Caluvori Capital Partners, Inc. 350 California Street, Suite 1800 San Francisco, CA 94104 Contact: Irene Matsuda, Director
The material terms of the Term Loan B, as set forth in the Commitment Letter and the term sheet attached thereto, are summarized below:
• Interest Rate: Secured Overnight Financing Rate ("SOFR") plus 275 basis points per annum, subject to a SOFR floor of 0.50%
• Maturity: Seven (7) years from the Closing Date
• Amortization: 1.00% per annum of the original principal amount, payable in equal quarterly installments
• Original Issue discount ("OID"): 1.50% of the aggregate principal amount, or $11,250,000
• Net Proceeds at Funding: $738,750,000 (i.e., $750,000,000 less the $11,250,000 OID)
• Security: First-priority lien on substantially all assets of Cascade and its material domestic subsidiaries (including, following the Closing, NovaMart), subject to customary exceptions
• Guarantors: All material domestic subsidiaries of Cascade (including, following the Closing, NovaMart)
The OID of $11,250,000 will be netted from the gross proceeds at the time of funding. Accordingly, Cornerstone National Bank, N.A. will wire $738,750,000 (net of OID) to Cascade's designated operating account on the Closing Date, upon satisfaction of all conditions to funding under the Term Loan B Credit Agreement. The $11,250,000 OID is reflected separately as a financing cost under the Uses of Funds (Section IV.E below). For purposes of the sources and uses reconciliation in this memorandum, the Term Loan B is shown at its gross face amount of $750,000,000 in total sources, with the OID appearing as a corresponding use (financing cost), ensuring that the reconciliation balances.
It is important to note that the SPA does not contain a financing condition. Cascade has represented and warranted in Section 4.6 of the SPA that it has, and at the Closing will have, sufficient committed financing and other sources of immediately available funds to consummate the transactions contemplated by the SPA, including the payment of the Purchase Price and all related fees and expenses. The obligation of Cascade to consummate the Closing is not conditioned upon the availability or receipt of any financing.
Funding Mechanics: Cornerstone National Bank, N.A., as Administrative Agent, will wire $738,750,000 (net of OID) to Cascade's designated operating account at Cornerstone National Bank, N.A., on the Closing Date, upon satisfaction of all conditions to funding under the Term Loan B Credit Agreement (including, without limitation, delivery of executed closing documents, officer's certificates, legal opinions, perfection of security interests, and absence of any default or event of default). The specific wire instructions and account details for this inbound transfer will be confirmed in the Final Funds Flow Memorandum.
C. Revolving Credit Facility Draw — $200,000,000
Cascade maintains an existing $500,000,000 senior secured revolving credit facility (the "Existing Revolver") with Cornerstone National Bank, N.A. as Administrative Agent. The material terms of the Existing Revolver are as follows:
• Aggregate Commitments: $500,000,000
• Interest Rate: SOFR plus 200 basis points per annum
• Maturity: March 2029
• Current Outstanding Balance: Approximately $85,000,000 as of April 30, 2025
• Available Capacity (prior to amendment): Approximately $415,000,000
In connection with the NovaMart acquisition, the parties are negotiating an amendment to the Existing Revolver (the "Revolver Amendment") that will, among other things: (i) permit the acquisition of NovaMart; (ii) permit the incurrence of the Term Loan B and the related liens; (iii) add NovaMart and its subsidiaries as guarantors and grantors under the credit facility; and (iv) authorize a draw of $200,000,000 at or prior to the Closing Date for the purpose of funding a portion of the Purchase Price. The Revolver Amendment is currently in process, and Calderwood & Harkness LLP is working with Cornerstone National Bank's counsel to finalize the terms thereof.
The $200,000,000 draw will be funded by Cornerstone National Bank, N.A. on the Closing Date to Cascade's designated operating account at Cornerstone National Bank, N.A. The draw is subject to satisfaction of all conditions to borrowing under the Existing Revolver (as amended by the Revolver Amendment), including the absence of any default or event of default and the accuracy of customary borrowing-date representations.
D. Cash on Hand — $250,000,000
The remaining $250,000,000 of the Purchase Price will be funded from Cascade's existing balance sheet cash. As of March 31, 2025, Cascade reported unrestricted cash and cash equivalents of approximately $412,000,000. Cascade's management has confirmed that at least $250,000,000 will be available in Cascade's operating account at Cornerstone National Bank, N.A. on the Closing Date, designated for contribution to the Purchase Price.
In addition to the $250,000,000 designated for the Purchase Price, Cascade will need to fund estimated closing-day transaction cost wires of approximately $33,660,000 from its working capital. This amount represents the total estimated transaction costs of approximately $47,300,000, less the HSR filing fee of $2,390,000 (which was prepaid at the time of filing on April 11, 2025) and the Term Loan B OID of $11,250,000 (which will be netted from the gross proceeds at funding and does not require a separate wire). Accordingly, Cascade will need a minimum of approximately $283,660,000 in available cash on the Closing Date to fund both the Purchase Price contribution and closing-day transaction cost wires.
IV. USES OF FUNDS
A. Summary of Uses
The following table summarizes the anticipated uses of funds at Closing:
Important Note Regarding Funding of Non-Purchase-Price Uses: The Ashford Savings Bank payoff and Buyer-side transaction costs are funded from sources distinct from the $1,200,000,000 in Purchase Price sources identified in Section III above. Specifically:
(i) The Ashford Savings Bank payoff of approximately $143,200,000 relates to NovaMart's pre-existing revolving credit facility, which constitutes "Indebtedness" as defined in the SPA. This payoff is economically a NovaMart-level obligation and is reflected in the enterprise value / equity value bridge under the SPA. The SPA provides (in Section 2.5) that NovaMart shall have no Indebtedness at Closing other than as reflected in the estimated closing statement. The payoff is funded from NovaMart's own available cash and/or is effectively a reduction in the equity value delivered to the Selling Stockholders, and does not represent an additional cost to Cascade above the Purchase Price.
(ii) Buyer-side transaction costs of approximately $47,300,000 are funded from Cascade's separate working capital and are not included in the Purchase Price.
A full reconciliation of all sources and uses, demonstrating that sources equal uses across all categories, is set forth in Section VI below.
B. Net Closing Consideration to Selling Stockholders — $1,104,000,000
The net closing consideration payable to the Selling Stockholders at Closing is calculated as follows:
The net closing consideration of $1,104,000,000 is subject to adjustment based on the estimated working capital calculation to be delivered pursuant to Section 2.4 of the SPA and the Working Capital Methodology Agreement. If the estimated closing net working capital differs from the Working Capital Target of $78,500,000 by more than the $5,000,000 collar amount, the Purchase Price will be adjusted on a dollar-for-dollar basis at Closing. Any post-closing true-up between estimated and actual closing net working capital will be resolved through the mechanism set forth in the SPA and the Working Capital Methodology Agreement.
Distribution Mechanics. The net closing consideration will be distributed to the Selling Stockholders through Marlowe Asset Management Trust Company, N.A., acting in its capacity as Paying Agent under the Paying Agent Agreement. Each Selling Stockholder must deliver a properly completed and executed Letter of Transmittal, together with the original stock certificate(s) representing such Selling Stockholder's shares of NovaMart common stock (or, in the case of lost, stolen, or destroyed certificates, a lost certificate affidavit in the form prescribed by the Paying Agent, together with an indemnity bond or other security acceptable to the Paying Agent), to the Paying Agent at or prior to Closing.
Transfer Agent. Continental Stocktransfer & Trust, Inc. ("Continental"), 17 Battery Place, Suite 930, New York, NY 10004, serves as the transfer agent and registrar for NovaMart's common stock. Upon receipt of stock certificates and duly executed stock powers from the Paying Agent, Continental will cancel the NovaMart stock certificates surrendered by the Selling Stockholders and update NovaMart's stock ledger to reflect Cascade as the sole stockholder of record of NovaMart.
Pro Rata Allocation of Net Closing Consideration (Preliminary). The following table sets forth the preliminary pro rata allocation of the Purchase Price, escrow holdback, and net closing consideration among the Selling Stockholders, based on the ownership percentages set forth in the SPA:
Notes on the Allocation Table:
(a) The individual allocations among the "Other Management / Employee Stockholders" category (comprising approximately twenty-three individuals) will be determined based on the final capitalization table as certified by the Secretary of NovaMart at or prior to Closing. The final capitalization table will reflect the treatment of all vested stock options, including whether such options are subject to net exercise (with the net spread paid in cash) or cash-out (with the full in-the-money value paid in cash less the aggregate exercise price). The methodology for treating vested stock options is set forth in Section 2.3 of the SPA.
(b) The amounts set forth in the table above may be subject to adjustment based on the estimated working capital adjustment at Closing. Any positive or negative adjustment to the Purchase Price resulting from the estimated working capital calculation will be allocated pro rata among the Selling Stockholders in accordance with their respective ownership percentages. Any post-closing true-up payment will similarly be allocated on a pro rata basis.
(c) The final pro rata allocation schedule will be attached to the Final Funds Flow Memorandum as Exhibit A.
C. Escrow Deposit — $96,000,000
At Closing, an amount equal to $96,000,000 (representing 8% of the Purchase Price) will be deposited by Cascade into an escrow account (the "Escrow Fund") established and maintained by the Escrow Agent in accordance with the terms of the Escrow Agreement.
Escrow Agent: Marlowe Asset Management Trust Company, N.A. One Liberty Place 1650 Market Street, Suite 3600 Philadelphia, PA 19103 Contact: Patricia Keane, Vice President, Escrow Services
Governing Agreement. The Escrow Agreement will be entered into at Closing among Cascade (as Buyer), Ridgeline Equity Partners, LP (as Stockholder Representative, acting on behalf of the Selling Stockholders), and Marlowe Asset Management Trust Company, N.A. (as Escrow Agent). The form of the Escrow Agreement is attached as Exhibit G to the SPA.
Purpose. The Escrow Fund secures the indemnification obligations of the Selling Stockholders under Article IX of the SPA. The Escrow Fund serves as the first source of recovery for Cascade with respect to any indemnifiable Losses (as defined in the SPA) arising from breaches of representations, warranties, covenants, or agreements of the Selling Stockholders or NovaMart under the SPA, subject to the terms and limitations set forth in Article IX.
Release. The Escrow Fund will be released to the Selling Stockholders (pro rata in accordance with their respective ownership percentages) twenty-four (24) months after the Closing Date, net of (i) the aggregate amount of any indemnification claims that have been finally resolved and paid from the Escrow Fund prior to such release date, and (ii) an amount equal to the aggregate amount of any pending but unresolved indemnification claims as of such release date (which amount shall continue to be held in escrow until such claims are finally resolved).
Indemnification Cap and R&W Insurance. The aggregate indemnification obligations of the Selling Stockholders under Article IX of the SPA are subject to an overall cap of $216,000,000 (representing 18% of the Purchase Price) (the "Indemnification Cap"). The Escrow Fund of $96,000,000 covers a portion of this cap. The balance of Cascade's indemnification protection (up to the full Indemnification Cap) is provided by a representations and warranties insurance policy (the "R&W Policy"), the material terms of which are as follows:
• Insurer: Meridian Specialty Insurance Company
• Policy Number: MSI-RWI-2025-07832
• Aggregate Limit of Liability: $216,000,000
• Retention (Self-Insured Amount): $12,000,000
• Named Insured: Cascade Retail Holdings Inc.
• Premium: $5,400,000 (included in Buyer-side transaction costs; see Section IV.E)
The R&W Policy is structured such that Cascade may pursue claims under the policy for covered Losses in excess of the $12,000,000 retention, up to the $216,000,000 aggregate limit, subject to the terms, conditions, and exclusions of the policy. The R&W Policy is intended to supplement, not replace, the Selling Stockholders' indemnification obligations under the SPA and the Escrow Fund.
Investment of Escrow Funds. Funds held in the Escrow Fund will be invested in permitted investments as defined in the Escrow Agreement, which are expected to include money market funds, U.S. Treasury obligations, and other short-term, high-quality investment-grade instruments. All investment income earned on the Escrow Fund will be distributed together with the principal upon release in accordance with the terms of the Escrow Agreement.
D. Payoff — Ashford Savings Bank, N.A. — Approximately $143,200,000
NovaMart is party to an existing $150,000,000 revolving credit facility (the "NovaMart Revolver") with Ashford Savings Bank, N.A. as administrative agent and sole lender. The NovaMart Revolver is secured by a first-priority lien on substantially all of NovaMart's assets. As a condition to Closing, the NovaMart Revolver must be repaid in full and all liens securing the NovaMart Revolver must be released and terminated.
The estimated outstanding principal balance under the NovaMart Revolver at Closing is approximately $143,200,000. The actual payoff amount will include accrued and unpaid interest through the Closing Date, and may also include any applicable breakage costs, prepayment premiums (if any), and administrative fees, as specified in the payoff letter to be delivered by Ashford Savings Bank, N.A. The payoff amount is expected to be confirmed by a payoff letter to be delivered by Ashford Savings Bank, N.A. not more than three (3) business days prior to Closing, with a per diem interest calculation and a good-through date.
Payoff Mechanics. At Closing, a wire transfer in the amount specified in the payoff letter will be sent to Ashford Savings Bank, N.A. in accordance with the wire instructions set forth in the payoff letter. Upon receipt of the payoff amount, Ashford Savings Bank, N.A. will deliver the following to NovaMart and/or Cascade:
(a) UCC-3 termination statements terminating all UCC financing statements filed by or on behalf of Ashford Savings Bank, N.A. against NovaMart and its subsidiaries;
(b) releases and terminations of all mortgages, deeds of trust, and other security instruments in favor of Ashford Savings Bank, N.A.;
(c) termination of the credit agreement governing the NovaMart Revolver; and
(d) such other instruments and documents as may be reasonably necessary to evidence the termination of all liens and security interests in favor of Ashford Savings Bank, N.A.
Important Note on Economic Treatment. The payoff of the NovaMart Revolver is funded from NovaMart's own available cash and/or is effectively a reduction of NovaMart's enterprise value. It does not represent an additional cost to Cascade above the Purchase Price. The SPA provides in Section 2.5 that NovaMart shall have no Indebtedness (as defined therein) at Closing other than as set forth in the estimated closing statement. The treatment of the NovaMart Revolver payoff is consistent with the enterprise value / equity value bridge contemplated by the SPA, in which the Purchase Price of $1,200,000,000 reflects the equity value of NovaMart on a cash-free, debt-free basis, subject to the working capital adjustment. The Ashford Savings Bank payoff is included in this funds flow memorandum for completeness, as it is a closing-day fund flow item that must be coordinated and sequenced with the other closing-day wires.
E. Estimated Transaction Costs — Approximately $47,300,000
The estimated Buyer-side transaction costs in connection with the Closing are approximately $47,300,000 in the aggregate. These costs will be funded from Cascade's working capital, separate and apart from the $1,200,000,000 in Purchase Price sources described in Section III above. The following table sets forth the itemized breakdown of estimated Buyer-side transaction costs:
Notes on Transaction Costs:
(a) HSR Filing Fee. The HSR Act filing fee of $2,390,000 was paid by Cascade at the time of the HSR notification filing on April 11, 2025. This amount has already been disbursed and will not require a closing-day wire transfer. It is included in the total estimated transaction costs for reconciliation purposes only.
(b) Term Loan B OID. The original issue discount of $11,250,000 on the Term Loan B will be netted from the gross proceeds at the time of funding by Cornerstone National Bank, N.A. Cornerstone will fund $738,750,000 net to Cascade's designated operating account. No separate wire transfer is required for the OID amount. Like the HSR filing fee, the OID is included in the total estimated transaction costs for reconciliation purposes.
(c) Closing-Day Transaction Cost Wires. Excluding the HSR filing fee (pre-paid) and the Term Loan B OID (netted), the actual closing-day wire transfers for Buyer-side transaction costs will total approximately $33,660,000 (calculated as $47,300,000 less $2,390,000 less $11,250,000).
(d) Seller-Side Transaction Costs. The transaction costs of the Selling Stockholders and their advisors — including legal fees payable to Calloway, Brandt & Loewe LLP (Sellers' legal counsel), financial advisory fees payable to Pemberton Strauss Advisory LLC (Sellers' financial advisor), and any other Seller-side costs — are the sole responsibility of the Selling Stockholders and are not reflected in this funds flow memorandum. The Selling Stockholders will pay their respective transaction costs from their closing proceeds.
(e) Transfer Taxes. Estimated transfer taxes in connection with the stock purchase are approximately $1,200,000 in the aggregate. Pursuant to Section 8.7 of the SPA, transfer taxes are borne equally by the Buyer and the Selling Stockholders, with Cascade responsible for $600,000 and the Selling Stockholders collectively responsible for $600,000. Cascade's $600,000 share of transfer taxes is included within the "Miscellaneous" line item in the table above.
(f) Miscellaneous. The "Miscellaneous" line item of $760,000 includes, among other items: (i) Cascade's $600,000 share of transfer taxes; (ii) title insurance premiums payable to Ridgecrest Title Group Inc. in connection with any real property owned by NovaMart; (iii) filing fees payable to the Delaware Secretary of State; and (iv) other incidental costs. A detailed breakdown of this line item will be provided in the Final Funds Flow Memorandum.
V. PRELIMINARY WIRE INSTRUCTIONS
IMPORTANT NOTICE: All wire instructions set forth in this Section V are preliminary and are provided for planning and coordination purposes only. Each payee and recipient must confirm its wire instructions in writing to Calderwood & Harkness LLP prior to Closing. All wire instructions will be subject to verification through established callback procedures in accordance with the parties' anti-fraud protocols. Final confirmed wire instructions will be included in the Final Funds Flow Memorandum and will be attached thereto as Exhibit B.
A. Inbound Wires to Cascade
The following inbound wires will fund a portion of the Purchase Price sources to Cascade's designated operating account on the Closing Date:
Cascade's cash on hand of $250,000,000 is presumed to be already on deposit in the same operating account at Cornerstone National Bank, N.A. on the Closing Date and does not require a separate wire transfer. Following receipt of the inbound wires and including the cash on hand, the Cascade operating account will hold aggregate available funds of at least $1,188,750,000 for disbursement of Purchase Price components. The additional approximately $33,660,000 needed for closing-day transaction cost wires will also need to be available in the same or a related Cascade account.
B. Outbound Wires from Cascade
The following outbound wires will be initiated by Cascade from its operating account at Cornerstone National Bank, N.A. on the Closing Date. Wire instructions for each payee are preliminary and subject to confirmation.
Note: The outbound wires listed above include both Purchase Price disbursements (wires #1 and #2, totaling $1,200,000,000) and non-Purchase-Price disbursements (wires #3 through #9). The Ashford Savings Bank payoff (wire #3) will be funded as described in Section IV.D. Transaction cost wires (#4 through #9) will be funded from Cascade working capital as described in Section IV.E.
C. Outbound Wires from Paying Agent (Marlowe Asset Management Trust Company, N.A.)
Upon receipt of $1,104,000,000 in the Paying Agent account and confirmation that the Closing has been consummated, and upon receipt of properly completed and executed Letters of Transmittal and original stock certificates (or lost certificate affidavits with indemnity bonds) from each Selling Stockholder, Marlowe Asset Management Trust Company, N.A. (as Paying Agent) will distribute the net closing consideration to the Selling Stockholders as follows:
The individual wire instructions for each member of the "Other Management / Employee Stockholders" category will be provided by each such stockholder in his or her Letter of Transmittal. The Paying Agent will not distribute any portion of the net closing consideration to any Selling Stockholder until it has received a properly completed Letter of Transmittal and the stock certificates (or lost certificate affidavit) for such stockholder's shares.
VI. RECONCILIATION OF SOURCES AND USES
A. Purchase Price Reconciliation
The following table demonstrates that the identified Purchase Price sources of $1,200,000,000 exactly match the Purchase Price uses of $1,200,000,000, with no variance:
The Purchase Price reconciliation above confirms that the three identified sources — the Term Loan B, the Revolving Credit Facility draw, and Cascade's cash on hand — are sufficient to fund the Purchase Price in its entirety, as allocated between the net closing consideration to the Selling Stockholders and the escrow deposit.
B. Full Reconciliation (Including Transaction Costs and NovaMart Debt Payoff)
The following table presents a comprehensive reconciliation of all closing-day fund flows, including the Purchase Price, the payoff of NovaMart's existing indebtedness, and Buyer-side transaction costs. This reconciliation demonstrates that all sources of funds are matched to all uses of funds, with no unaccounted-for variance.
Explanatory Notes on the Full Reconciliation:
(a) The Ashford Savings Bank payoff is shown in the full reconciliation for completeness, as it represents a closing-day fund flow that must be coordinated and sequenced with the other closing wires. However, this payoff is economically a NovaMart-level obligation that is reflected in the enterprise value / equity value bridge under the SPA. It is not an additional cost to Cascade above the Purchase Price of $1,200,000,000. The "NovaMart Cash / Enterprise Value Adjustment" line item on the sources side of the reconciliation reflects this economic reality — the funds used to pay off the Ashford Savings Bank facility are, in substance, NovaMart funds that reduce the enterprise value delivered to Cascade, rather than Cascade funds deployed in addition to the Purchase Price.
(b) The working capital adjustment mechanism (Working Capital Target of $78,500,000, with a ±$5,000,000 collar) will capture any differences between estimated and actual closing working capital, including any impact from the Ashford Savings Bank payoff on the net working capital position. The working capital adjustment is expected to be determined and settled post-closing in accordance with the timeline and procedures set forth in the SPA and the Working Capital Methodology Agreement.
(c) The Buyer-side transaction costs of approximately $47,300,000 include the HSR filing fee ($2,390,000, pre-paid) and the Term Loan B OID ($11,250,000, netted from proceeds). The actual closing-day transaction cost wires will be approximately $33,660,000.
(d) All amounts denoted with a tilde (~) are estimates and are subject to change. Final amounts will be confirmed in the Final Funds Flow Memorandum.
VII. TIMING AND SEQUENCING OF CLOSING-DAY FUND FLOWS
The following sets forth the anticipated timing and sequencing of fund flows at and around the Closing Date. The parties should coordinate closely in advance of the Closing Date to ensure that all conditions to funding, closing deliverables, and wire instructions are confirmed and in order. Calderwood & Harkness LLP will serve as the primary coordinator of the funds flow process and will maintain a real-time tracking log of all wire transfers on the Closing Date.
A. Pre-Closing (T-1 or Earlier)
The following actions should be completed on or before the business day immediately preceding the Closing Date ("T-1"), or earlier as indicated:
1. Confirm Wire Instructions (T-5 business days). Obtain and confirm in writing all wire instructions from each payee and recipient, including Marlowe Asset Management Trust Company, N.A. (for both the Paying Agent account and the Escrow account), Ashford Savings Bank, N.A., all transaction advisors, and all Selling Stockholders. All wire instructions will be subject to verification through established callback procedures in accordance with anti-fraud protocols maintained by each wiring bank.
2. Obtain Payoff Letter (T-3 business days). Obtain an executed payoff letter from Ashford Savings Bank, N.A. (through Sellers' counsel, Calloway, Brandt & Loewe LLP) setting forth the exact payoff amount, including outstanding principal, accrued and unpaid interest calculated through the anticipated Closing Date, per diem interest, any breakage costs or prepayment premiums, and the good-through date for the payoff. The payoff letter should include confirmed wire instructions for the payoff wire and should provide for the delivery of UCC termination statements and lien releases upon receipt of the payoff amount.
3. Confirm Term Loan B Conditions to Funding (Prior to Closing). Confirm that all conditions to funding under the Term Loan B Credit Agreement have been satisfied or waived, including the execution and delivery of the Credit Agreement, the Guarantee and Collateral Agreement, legal opinions, officer's certificates, solvency certificates, and any other conditions set forth in the conditions precedent section of the Credit Agreement. Coordinate with Cornerstone National Bank, N.A. (Robert Frankel) to confirm that the Administrative Agent is prepared to fund on the Closing Date.
4. Confirm Revolver Amendment and Conditions to Draw (Prior to Closing). Confirm that the Revolver Amendment has been fully executed by all parties and that all conditions to the $200,000,000 draw under the Existing Revolver (as amended) have been satisfied, including delivery of a borrowing notice in accordance with the terms of the credit facility.
5. Confirm Estimated Closing Statement and Working Capital Calculation (T-3 business days). Confirm that the estimated closing statement and working capital calculation have been prepared, reviewed, and either agreed upon by the parties or delivered in accordance with the requirements of the SPA. Coordinate with Whitmore & Paige LLP (Sandra Chiu) and NovaMart's CFO (Doug Whitfield) to ensure that any outstanding issues with the estimated closing statement have been resolved.
6. Confirm Receipt of Letters of Transmittal and Stock Certificates (T-2 business days). Confirm with the Paying Agent (Patricia Keane at Marlowe Asset Management Trust Company, N.A.) and the Transfer Agent (Continental Stocktransfer & Trust, Inc.) that all Letters of Transmittal and stock certificates (or lost certificate affidavits with indemnity bonds) have been received from each Selling Stockholder. To the extent any Letters of Transmittal or stock certificates remain outstanding, coordinate with Sellers' counsel (Calloway, Brandt & Loewe LLP) to ensure delivery prior to Closing.
7. Bring-Down Confirmation (T-1). Conduct a final bring-down confirmation of all wire instruction details with each payee and recipient. Verify that all bank account information, ABA routing numbers, account numbers, and reference information are current and accurate. Complete callback verifications for all high-value wires.
B. Closing Day Sequence
On the Closing Date, the fund flows will be executed in the following sequence. Each step should be completed and confirmed before proceeding to the next step, to the extent practicable. Calderwood & Harkness LLP will coordinate the sequencing and will maintain real-time communication with all parties via a designated conference bridge and/or secure messaging platform.
Step 1 — Financing Drawdown. Cornerstone National Bank, N.A. funds the following amounts to Cascade's designated operating account at Cornerstone National Bank, N.A.:
(a) Term Loan B net proceeds of $738,750,000 (gross $750,000,000 less $11,250,000 OID); and
(b) Revolving Credit Facility draw of $200,000,000.
Cascade's treasury department (Rajiv Sundaram) will confirm receipt of both wire transfers and notify Calderwood & Harkness LLP (Derek Okonkwo) upon confirmation. Following receipt of the financing proceeds and including the $250,000,000 of cash on hand, the Cascade operating account should reflect available funds of at least $1,188,750,000 designated for the Purchase Price, plus approximately $33,660,000 in additional working capital designated for closing-day transaction cost wires.
Step 2 — Escrow Funding. Cascade initiates a wire transfer of $96,000,000 to the escrow account at Marlowe Asset Management Trust Company, N.A., in accordance with the confirmed wire instructions. Patricia Keane at Marlowe Asset Management Trust Company, N.A. will confirm receipt of the escrow deposit and provide written confirmation to Calderwood & Harkness LLP and Cascade.
Step 3 — Paying Agent Funding. Cascade initiates a wire transfer of $1,104,000,000 to the Paying Agent account at Marlowe Asset Management Trust Company, N.A., in accordance with the confirmed wire instructions. Patricia Keane will confirm receipt and provide written confirmation to Calderwood & Harkness LLP and Cascade. The Paying Agent will hold such funds pending the completion of the Closing and confirmation that all conditions have been satisfied.
Step 4 — NovaMart Debt Payoff. A wire transfer of approximately $143,200,000 (or such other amount as specified in the payoff letter) is sent to Ashford Savings Bank, N.A. in accordance with the wire instructions set forth in the executed payoff letter. Upon receipt of the payoff wire, Ashford Savings Bank, N.A. will deliver (or cause to be delivered) UCC-3 termination statements and lien releases as set forth in the payoff letter. Confirmation of receipt of the payoff wire and commitment to deliver release documentation will be obtained from Ashford Savings Bank, N.A. (through Sellers' counsel).
Step 5 — Transaction Cost Payments. Cascade initiates wire transfers for the following closing-day transaction cost payments:
(a) Calderwood & Harkness LLP — $8,200,000 (legal fees);
(b) Hargrove Mead & Co. — $14,400,000 (financial advisory fee);
(c) Whitmore & Paige LLP — $3,100,000 (accounting/tax advisory);
(d) Northbridge Risk Advisors LLC — $5,400,000 (R&W insurance premium for Meridian Specialty Insurance Company, Policy No. MSI-RWI-2025-07832);
(e) Sovereign Assurance Group Ltd. — $1,800,000 (D&O tail insurance premium, via insurance broker); and
(f) Miscellaneous payees — $760,000 (title insurance, transfer taxes, filing fees, etc.; individual wires to be itemized in the Final Funds Flow Memorandum).
Note: The HSR filing fee of $2,390,000 was pre-paid at the time of filing on April 11, 2025, and does not require a closing-day wire. The Term Loan B OID of $11,250,000 was netted from gross proceeds at funding in Step 1 and does not require a separate wire. Total closing-day transaction cost wires under this Step 5 are approximately $33,660,000.
Step 6 — Paying Agent Distributions. Upon confirmation that the Closing has been consummated (including confirmation that all closing deliverables have been exchanged, all conditions have been satisfied or waived, and the signature pages to all closing documents have been released), Marlowe Asset Management Trust Company, N.A. (as Paying Agent) distributes the net closing consideration of $1,104,000,000 to the individual Selling Stockholders in accordance with the pro rata allocation table set forth in Section IV.B above and the confirmed individual wire instructions provided in each Selling Stockholder's Letter of Transmittal. The Paying Agent will initiate the following wires:
(a) Ridgeline Equity Partners, LP — $454,848,000;
(b) Brindoval Ventures Fund III, LP — $251,712,000;
(c) Julian Reeves — $204,240,000;
(d) Priya Narasimhan — $91,632,000; and
(e) Other Management / Employee Stockholders — $101,568,000 in the aggregate (distributed among approximately twenty-three individual wires per the final allocation schedule and individual Letters of Transmittal).
Step 7 — Confirmation. All parties confirm receipt of funds. Upon confirmation of receipt by all payees and recipients, Calderwood & Harkness LLP will circulate a written confirmation memorandum to all parties, and the Closing will be deemed effective as of the date and time specified in the SPA.
C. Post-Closing
The following matters will be addressed following the Closing:
1. Cancellation of Stock Certificates. Continental Stocktransfer & Trust, Inc. will cancel all NovaMart stock certificates surrendered by the Selling Stockholders and will update NovaMart's stock ledger to reflect Cascade Retail Holdings Inc. as the sole stockholder of record of all issued and outstanding shares of NovaMart common stock.
2. Post-Closing Working Capital Adjustment. The post-closing working capital adjustment will be calculated within the timeframe specified in Section 2.4 of the SPA and the Working Capital Methodology Agreement. NovaMart's actual closing net working capital will be determined and compared to the estimated closing net working capital used for purposes of the Closing. If the actual closing net working capital differs from the estimated closing net working capital, a true-up payment will be made: (a) if actual exceeds estimated, by Cascade to the Selling Stockholders (via the Stockholder Representative); or (b) if estimated exceeds actual, by the Selling Stockholders (from the escrow fund, to the extent available and not subject to pending claims, or by direct payment) to Cascade. The true-up payment will be made within five (5) business days after final determination of actual closing net working capital, in accordance with the procedures set forth in the SPA.
3. Escrow Fund Administration. The Escrow Fund of $96,000,000 will be held by Marlowe Asset Management Trust Company, N.A. (as Escrow Agent) for a period of twenty-four (24) months following the Closing Date. During the escrow period, the Escrow Agent will invest the escrowed funds in permitted investments as defined in the Escrow Agreement. At the end of the twenty-four-month period, the Escrow Fund (including accumulated investment income, if any) will be released to the Selling Stockholders (pro rata), net of any amounts that have been paid out in satisfaction of resolved indemnification claims and any amounts that are reserved against pending but unresolved indemnification claims. Any reserved amounts will continue to be held in escrow until the applicable claims are finally resolved.
VIII. KEY ASSUMPTIONS AND OPEN ITEMS
A. Assumptions
This memorandum is based on the following assumptions, each of which must be verified and confirmed prior to the preparation of the Final Funds Flow Memorandum:
1. Closing Conditions. All conditions precedent to the Closing set forth in Article VII of the SPA will have been satisfied or waived prior to or on the Closing Date, including, without limitation, HSR Act clearance. Based on counsel's current assessment, HSR clearance is expected to be obtained in the September–October 2025 timeframe, following compliance with the Second Request issued on May 8, 2025. However, the timing of HSR clearance is inherently uncertain and is subject to the review process of the Antitrust Division of the U.S. Department of Justice.
2. Material Contract Consents. All required change of control consents under NovaMart's approximately thirty-four (34) material contracts (as identified in Section 3.4(a) of the NovaMart Disclosure Schedules) will have been obtained or waived to the extent constituting a condition to Closing under Section 7.2(d) of the SPA.
3. Financing Documentation. The Term Loan B Credit Agreement and the related Guarantee and Collateral Agreement will have been executed and delivered by all parties thereto, and all conditions to funding set forth therein will have been satisfied, prior to the Closing Date.
4. Revolver Amendment. The Revolver Amendment will have been executed and delivered by all parties thereto, and all conditions to the $200,000,000 draw thereunder will have been satisfied, prior to the Closing Date.
5. Cascade Cash Position. Cascade will have sufficient cash on hand in its operating account at Cornerstone National Bank, N.A. on the Closing Date to fund its obligations, including at least $250,000,000 designated for the Purchase Price contribution and approximately $33,660,000 for closing-day transaction cost wires (exclusive of the pre-paid HSR filing fee and the netted OID).
6. Working Capital Within Collar. NovaMart's estimated net working capital at Closing will be within the $5,000,000 collar of the $78,500,000 Working Capital Target (i.e., between $73,500,000 and $83,500,000), such that no pre-closing adjustment to the Purchase Price is required. Any difference between estimated and actual closing net working capital will be resolved post-closing through the true-up mechanism described in the SPA and the Working Capital Methodology Agreement.
7. Ashford Savings Bank Payoff. The Ashford Savings Bank payoff amount is estimated at approximately $143,200,000 and will be confirmed by an executed payoff letter to be delivered by Ashford Savings Bank, N.A. not more than three (3) business days prior to the Closing Date. The actual payoff amount may differ from this estimate based on changes in the outstanding balance, accrued interest, and any applicable breakage costs or prepayment premiums.
B. Open Items Requiring Resolution Before Final Funds Flow
The following items remain open as of the date of this memorandum and must be resolved prior to the preparation and circulation of the Final Funds Flow Memorandum. Calderwood & Harkness LLP will track these items and coordinate with the responsible parties to ensure timely resolution.