CALDERWOOD & HARKNESS LLP 599 Lexington Avenue, 38th Floor New York, New York 10022 Telephone: (212) 555-7800 Facsimile: (212) 555-7801 www.calderwoodharkness.com
February 14, 2025
CONFIDENTIAL
Mr. Julian Reeves Founder & Chief Executive Officer NovaMart Global Inc. 1100 Congress Avenue, Suite 800 Austin, Texas 78701
Mr. Franklin Osei Managing Partner Ridgeline Equity Partners, LP 200 Park Avenue South, 14th Floor New York, New York 10003
Ms. Naomi Katzenbach General Partner Brindoval Ventures Fund III, LP 555 Mission Street, Suite 2900 San Francisco, California 94105
cc: Richard Calloway, Esq., Calloway, Brandt & Loewe LLP, 600 Travis Street, Suite 4500, Houston, Texas 77002 (Counsel to NovaMart Global Inc. and the Selling Stockholders)
Amanda Trevino, Esq., General Counsel, NovaMart Global Inc., 1100 Congress Avenue, Suite 800, Austin, Texas 78701
LETTER OF INTENT RE: PROPOSED ACQUISITION OF 100% OF THE ISSUED AND OUTSTANDING CAPITAL STOCK OF NOVAMART GLOBAL INC.
Dear Mr. Reeves, Mr. Osei, and Ms. Katzenbach:
On behalf of our client, Cascade Retail Holdings Inc. ("Cascade" or the "Buyer"), a Delaware corporation whose shares of common stock are listed on the Nasdaq Global Select Market under the ticker symbol "CRHI," with its principal executive offices located at 4500 Elliott Avenue West, Suite 3200, Seattle, Washington 98119, we are pleased to submit this letter of intent (this "LOI" or "Letter") setting forth the principal terms and conditions upon which Cascade proposes to acquire one hundred percent (100%) of the issued and outstanding shares of capital stock (including all classes and series thereof) of NovaMart Global Inc. ("NovaMart" or the "Company"), a Delaware corporation, from the holders of such capital stock (collectively, the "Selling Stockholders" and, together with NovaMart, the "Seller Parties"), in a single-step stock purchase transaction (the "Transaction" or the "Acquisition").
The Board of Directors of Cascade authorized management to pursue this Acquisition at a special meeting held on February 3, 2025, at which the Board determined that the proposed Transaction is in the best interests of Cascade and its stockholders and directed management and its advisors to proceed with submission of this LOI and, upon acceptance, commencement of due diligence and negotiation of definitive transaction documentation.
This LOI is intended to establish a framework for negotiation of a definitive Stock Purchase Agreement (the "SPA" or the "Definitive Agreement") reflecting the terms and conditions described herein and such other terms and conditions as are customary in transactions of this nature and as may be mutually agreed by the parties. Except for Sections 12 (Exclusivity), 13 (Confidentiality), 14 (Expenses), 15 (Non-Binding Nature), 16 (Governing Law), and 17 (Miscellaneous), which are intended to be and shall be legally binding upon execution of this LOI, this LOI does not constitute a binding agreement and shall not create any obligation on the part of any party to consummate the proposed Transaction or to enter into a Definitive Agreement.
In connection with the proposed Transaction, Cascade has engaged the following advisors:
• Legal Counsel: Calderwood & Harkness LLP (Harrison Wexford, Responsible Partner, Mergers & Acquisitions);
• Investment Bank: Hargrove Mead & Co. (Christopher Dunleavy, Managing Director); and
• Accounting/Tax Advisor: Whitmore & Paige LLP (Sandra Chiu, Engagement Partner).
We understand that NovaMart and the Selling Stockholders are represented by:
• Legal Counsel: Calloway, Brandt & Loewe LLP (Richard Calloway, Lead Partner); and
• Financial Advisor: Pemberton Strauss Advisory LLC (Vivian Hong, Senior Managing Director).
The principal terms and conditions of the proposed Transaction are as follows:
Section 1: The Transaction
1.1 Transaction Structure
The Transaction will be structured as a stock purchase pursuant to which Cascade will acquire one hundred percent (100%) of the issued and outstanding shares of capital stock of NovaMart (including all shares of common stock, preferred stock (if any), and any other equity securities or rights convertible into or exercisable for capital stock of NovaMart) from the Selling Stockholders. NovaMart is a corporation duly organized and existing under the laws of the State of Delaware, and the Transaction will be structured as a stock purchase governed by the General Corporation Law of the State of Delaware and such other applicable laws as may be relevant.
Upon the consummation of the Transaction at closing (the "Closing"), NovaMart will become a wholly-owned subsidiary of Cascade. It is Cascade's present intention that, following the Closing, NovaMart will continue to operate as a distinct business unit within the Cascade organization, subject to integration planning to be developed during the pre-closing period and implemented post-closing.
No merger structure (whether forward, reverse, or triangular), asset purchase, or other alternative acquisition structure is contemplated at this time. The parties have determined that a stock purchase structure is recommended for efficiency and operational continuity, particularly with respect to the treatment of NovaMart's existing third-party contracts (including commercial agreements with sellers, buyers, and service providers), permits, licenses (including any state and local business licenses and registrations), franchise tax registrations, and tax attributes (including net operating loss carryforwards, if any, and tax credit carryforwards). The stock purchase structure is also expected to facilitate the continuation of NovaMart's existing real property leases (including the Austin headquarters lease and fourteen fulfillment center leases) and to minimize the need for third-party consents that would otherwise be triggered in an asset acquisition. Notwithstanding the foregoing, the parties acknowledge that the final structure of the Transaction may be modified by mutual agreement in connection with the negotiation of the Definitive Agreement to address tax, regulatory, or other considerations that may arise during due diligence.
1.2 Purchase Price
The aggregate purchase price for one hundred percent (100%) of the issued and outstanding shares of capital stock of NovaMart shall be One Billion Two Hundred Million Dollars ($1,200,000,000) (the "Purchase Price"), payable entirely in cash in immediately available funds at Closing. The Purchase Price shall be paid in United States dollars by wire transfer to accounts designated by the Selling Stockholders (or the Stockholder Representative on their behalf) in accordance with the payment mechanics to be set forth in the Definitive Agreement, including allocation among the Selling Stockholders on a pro rata basis in accordance with their respective ownership percentages as set forth in Section 2 below.
The Purchase Price reflects an all-cash consideration with no stock component, no contingent consideration, and no earnout or similar deferred payment mechanism. Cascade believes that an all-cash offer provides certainty of value to the Selling Stockholders and reflects the most efficient structure for both parties.
The Purchase Price implies the following valuation metrics based on NovaMart's financial performance for fiscal year 2024 ("FY2024"):
• EV/EBITDA Multiple: Approximately 8.96x, based on NovaMart's FY2024 adjusted EBITDA of $134,000,000 (One Hundred Thirty-Four Million Dollars);
• EV/Revenue Multiple: Approximately 1.35x, based on NovaMart's FY2024 net revenue of $891,000,000 (Eight Hundred Ninety-One Million Dollars).
In arriving at the Purchase Price, Cascade has also taken into consideration the following operational metrics of NovaMart as reported by the Company for FY2024:
• Gross Merchandise Value ("GMV"): Approximately $6.2 billion;
• Active Sellers on Platform: Approximately 62,400;
• Registered Buyers: Approximately 9.1 million.
The foregoing valuation metrics are based on information provided by NovaMart to Cascade and its advisors in connection with preliminary discussions prior to the date of this LOI and are subject to verification during due diligence. To the extent that due diligence reveals material discrepancies in the financial or operational data underlying the Purchase Price, the parties may discuss appropriate adjustments in the context of the Definitive Agreement negotiations, although no obligation to adjust the Purchase Price shall arise from this LOI.
1.3 Escrow. At the Closing, eight percent (8%) of the Purchase Price, equal to Ninety-Six Million Dollars ($96,000,000) (the "Escrow Amount"), shall be withheld from the aggregate consideration otherwise payable to the Selling Stockholders and deposited into an escrow account (the "Escrow Account") maintained with an independent third-party escrow agent mutually acceptable to Cascade and the Stockholder Representative (the "Escrow Agent"). The Escrow Account shall be established pursuant to an escrow agreement to be executed at Closing by Cascade, the Stockholder Representative, and the Escrow Agent (the "Escrow Agreement"), the terms of which shall be negotiated in good faith and set forth in the Definitive Agreement or as an exhibit thereto.
The Escrow Amount shall serve as security for the indemnification obligations of the Selling Stockholders under the Definitive Agreement as described in Section 1.5 below. The Escrow Amount shall be held in the Escrow Account for a period of twenty-four (24) months following the Closing Date (the "Escrow Period"). At the expiration of the Escrow Period, any portion of the Escrow Amount not subject to then-pending indemnification claims shall be released to the Stockholder Representative for distribution to the Selling Stockholders on a pro rata basis. Any portion of the Escrow Amount subject to then-pending claims shall continue to be held in escrow until such claims are finally resolved in accordance with the indemnification procedures set forth in the Definitive Agreement. The Escrow Amount shall be invested in short-term, investment-grade instruments or money market funds as directed by the Escrow Agent (or as mutually agreed), and interest or other earnings on the Escrow Amount shall be distributed in accordance with the terms of the Escrow Agreement.
The Escrow Amount shall be the exclusive source of recovery for indemnification claims by Cascade under the Definitive Agreement, except with respect to claims arising from fraud, willful breach, or Fundamental Representations (as defined below), for which Cascade shall have recourse to the Selling Stockholders directly, subject to the applicable caps and limitations set forth in Section 1.5.
1.4 Working Capital Adjustment
The Purchase Price shall be subject to a customary post-closing working capital adjustment mechanism (the "Working Capital Adjustment") to ensure that NovaMart has an appropriate level of net working capital as of the Closing Date. The terms of the Working Capital Adjustment shall be set forth in the Definitive Agreement and shall operate as follows:
(a) Working Capital Target. The parties have agreed upon a preliminary working capital target of Seventy-Eight Million Five Hundred Thousand Dollars ($78,500,000) (the "Working Capital Target"), which represents the estimated net working capital of NovaMart as of the anticipated Closing Date, calculated in a manner consistent with NovaMart's historical accounting policies and practices applied on a basis consistent with the preparation of NovaMart's audited financial statements for FY2024.
(b) Collar. A collar (or "deadband") of plus or minus Five Million Dollars (+/- $5,000,000) shall apply to the Working Capital Adjustment. No true-up payment shall be required unless the actual net working capital of NovaMart as of the Closing Date (as finally determined pursuant to the procedures set forth in the Definitive Agreement) deviates from the Working Capital Target by more than $5,000,000 in either direction. If the deviation exceeds the collar, the full amount of the deviation (calculated from the Working Capital Target, not from the edge of the collar) shall be subject to adjustment.
(c) Methodology. The detailed methodology for calculating net working capital (including the specific line items to be included and excluded) shall be set forth in an exhibit to the Definitive Agreement, which exhibit shall be prepared based on NovaMart's historical accounting policies and shall be subject to good-faith negotiation between the parties and their respective accounting advisors during the diligence and documentation period.
(d) Dispute Resolution. In the event of a dispute regarding the determination of actual net working capital as of the Closing Date, the dispute shall be submitted to an independent accounting firm mutually acceptable to the parties (the "Independent Accountant") for binding resolution, with costs of such resolution to be borne by the party whose position is further from the Independent Accountant's determination, or allocated between the parties in proportion to the extent each party's position differs from the final determination.
1.5 Indemnification. The Definitive Agreement shall contain customary indemnification provisions pursuant to which the Selling Stockholders shall, jointly and severally (or severally based on their respective pro rata shares, as to be negotiated), indemnify, defend, and hold harmless Cascade and its affiliates, and their respective directors, officers, employees, agents, successors, and assigns (collectively, the "Buyer Indemnified Parties"), from and against all losses, damages, liabilities, costs, and expenses (including reasonable attorneys' fees and expenses) arising out of or resulting from:
(a) any breach of or inaccuracy in any representation or warranty made by NovaMart or the Selling Stockholders in the Definitive Agreement;
(b) any breach of or failure to perform any covenant or agreement of NovaMart or the Selling Stockholders in the Definitive Agreement;
(c) any pre-closing tax liabilities of NovaMart; and
(d) such other matters as are customary in transactions of this nature and as may be agreed in the Definitive Agreement.
The following limitations and parameters shall apply to the indemnification obligations of the Selling Stockholders:
• General Indemnification Cap: The aggregate liability of the Selling Stockholders for indemnification claims under the Definitive Agreement (other than claims relating to Fundamental Representations, fraud, or willful breach) shall not exceed eighteen percent (18%) of the Purchase Price, or Two Hundred Sixteen Million Dollars ($216,000,000).
• Survival Period: General representations and warranties of the Selling Stockholders and NovaMart shall survive the Closing for a period of twenty-four (24) months from the Closing Date. Fundamental representations and warranties — including those relating to corporate organization and good standing, authority and enforceability, capitalization, title to shares, and absence of broker conflicts — (collectively, "Fundamental Representations") shall survive the Closing indefinitely. Tax representations and warranties shall survive the Closing until sixty (60) days after the expiration of the applicable statute of limitations (including any extensions or waivers thereof).
• Tax Indemnification: The Selling Stockholders shall indemnify the Buyer Indemnified Parties for all pre-closing tax liabilities of NovaMart without regard to the general indemnification cap described above. The scope, mechanics, and limitations of the tax indemnification shall be set forth in detail in the Definitive Agreement.
• Deductible / Basket: The parties will negotiate in good faith a customary deductible or basket (whether a "tipping" basket or a true deductible) below which indemnification claims may not be asserted, the amount and type of which shall be specified in the Definitive Agreement.
• Representations and Warranties Insurance: Cascade intends to obtain a representations and warranties insurance policy (the "R&W Policy") to supplement the indemnification framework and provide additional coverage for breaches of representations and warranties. The cost of the R&W Policy (including premiums and underwriting fees) shall be borne by Cascade. The terms and conditions of the R&W Policy shall not diminish or replace the indemnification obligations of the Selling Stockholders except to the extent expressly agreed in the Definitive Agreement.
1.6 Termination Fees
The Definitive Agreement shall include the following termination fee provisions:
(a) Reverse Termination Fee. In the event that the Definitive Agreement is terminated by the Selling Stockholders or the Stockholder Representative due to (i) Cascade's failure to consummate the Closing at a time when all conditions to Cascade's obligation to close have been satisfied or waived, or (ii) Cascade's willful and material breach of the Definitive Agreement that gives rise to the termination, Cascade shall pay to the Stockholder Representative (on behalf of the Selling Stockholders) a reverse termination fee equal to two and one-half percent (2.5%) of the Purchase Price, or Thirty Million Dollars ($30,000,000) (the "Reverse Termination Fee"). The Reverse Termination Fee, if payable, shall constitute liquidated damages and shall be the sole and exclusive remedy of the Seller Parties against Cascade in the event of such termination, except in the case of fraud.
(b) Forward Termination Fee. In the event that the Definitive Agreement is terminated by Cascade due to (i) a material breach by NovaMart or the Selling Stockholders of their respective representations, warranties, or covenants under the Definitive Agreement that is not cured within the applicable cure period specified therein, or (ii) NovaMart's or any Selling Stockholder's acceptance of, entry into a definitive agreement with respect to, or consummation of a Superior Proposal (as such term shall be defined in the Definitive Agreement), the Selling Stockholders (severally, in accordance with their respective pro rata shares) shall pay to Cascade a forward termination fee equal to two and one-half percent (2.5%) of the Purchase Price, or Thirty Million Dollars ($30,000,000) (the "Forward Termination Fee"). The Forward Termination Fee, if payable, shall constitute liquidated damages and shall be the sole and exclusive remedy of Cascade against the Seller Parties in the event of such termination, except in the case of fraud.
The specific triggers, conditions, and mechanics of the Reverse Termination Fee and the Forward Termination Fee shall be set forth in detail in the Definitive Agreement.
Section 2: The Selling Stockholders
The capital stock of NovaMart is held by the following principal Selling Stockholders, in the approximate ownership percentages set forth below (with a full capitalization table to be provided as Exhibit A hereto and verified during due diligence):
The foregoing ownership percentages are approximate and based on information provided by NovaMart to Cascade and are subject to verification during due diligence. The ownership percentages are presented on a fully diluted basis, including all shares issuable upon exercise of vested stock options and any other equity awards that will be outstanding as of the Closing Date. The treatment of unvested stock options and other unvested equity awards shall be addressed in the Definitive Agreement.
Ridgeline Equity Partners, LP (acting through its Managing Partner, Franklin Osei) shall serve as the designated representative of the Selling Stockholders (the "Stockholder Representative") for all purposes under the Definitive Agreement, the Escrow Agreement, and all other Transaction documents, including without limitation: (a) negotiation and execution of the Definitive Agreement and ancillary documents on behalf of the Selling Stockholders; (b) receipt and distribution of the Purchase Price (including any amounts released from escrow); (c) management of post-closing indemnification claims and disputes; (d) authorization and direction of the Escrow Agent with respect to the Escrow Account; and (e) such other matters as are customary for a stockholder representative in transactions of this nature. The authority and obligations of the Stockholder Representative shall be set forth in detail in the Definitive Agreement and/or a separate stockholder representative agreement.
All Selling Stockholders shall be required to execute the Definitive Agreement directly or, alternatively, to execute a joinder agreement in form and substance reasonably satisfactory to Cascade that binds such Selling Stockholder to the indemnification obligations, representations and warranties, covenants, and other post-closing obligations of the Selling Stockholders under the Definitive Agreement. Cascade shall not be obligated to consummate the Closing unless joinder agreements have been received from Selling Stockholders holding, in the aggregate, not less than one hundred percent (100%) of the outstanding capital stock of NovaMart.
Section 3: Financing
Cascade represents that it has, or at the time of the Closing will have, sufficient funds available to it to pay the Purchase Price and all related fees, costs, and expenses and to consummate the Transaction on the terms contemplated by this LOI.
Cascade currently expects the Purchase Price to be funded from the following sources:
Transaction costs (including legal fees, advisory fees, financing fees, the HSR filing fee, and other customary closing costs) shall be funded from Cascade's working capital and are not included in the foregoing sources and uses summary.
The Definitive Agreement shall not contain a financing condition. Cascade will bear the risk of obtaining financing sufficient to consummate the Transaction, and the availability of financing shall not be a condition precedent to Cascade's obligation to close. In the Definitive Agreement, Cascade will represent and warrant that it has received committed financing (in the form of executed commitment letters from creditworthy lending institutions) in an aggregate amount sufficient to fund the Purchase Price, all related fees and expenses, and all other amounts required to be paid by Cascade at the Closing. Cascade's commitment letter or letters for the Senior Secured Term Loan B shall be obtained and delivered to NovaMart and the Stockholder Representative prior to the execution of the Definitive Agreement.
Cascade acknowledges that the Selling Stockholders are relying on Cascade's representation regarding the availability of funds and that the absence of a financing condition is a material inducement to the Selling Stockholders' willingness to enter into this LOI and to proceed with the Transaction.
Section 4: Due Diligence
4.1 Scope and Access
Following the execution of this LOI, NovaMart and the Selling Stockholders shall grant Cascade and its authorized advisors — including Calderwood & Harkness LLP (legal), Hargrove Mead & Co. (financial), and Whitmore & Paige LLP (accounting and tax) — prompt, full, and complete access to NovaMart's books and records, financial and accounting records, tax returns and workpapers, corporate governance documents, capitalization records, intellectual property files and registrations, real and personal property records, contracts and agreements, personnel records and employment-related documents, insurance policies, litigation files, regulatory filings and correspondence, data privacy and cybersecurity assessments, and all other information and documentation reasonably requested by Cascade and its advisors (collectively, "Diligence Materials") for purposes of conducting comprehensive due diligence in connection with the proposed Transaction.
NovaMart shall also make its directors, officers, key employees, accountants, and other advisors reasonably available for interviews and discussions with Cascade and its advisors during the due diligence period. Cascade acknowledges that all Diligence Materials and information received in connection with due diligence shall be subject to the terms and conditions of the Mutual Confidentiality and Non-Disclosure Agreement dated February 10, 2025, between Cascade and NovaMart (the "Mutual NDA"), and shall be used by Cascade solely for purposes of evaluating and consummating the Transaction.
Due diligence is expected to commence on February 18, 2025, promptly following the execution of this LOI and in accordance with the Mutual NDA. It is anticipated that NovaMart will populate a virtual data room with Diligence Materials organized by customary diligence categories, and that Cascade's advisors will submit due diligence request lists to NovaMart's counsel and financial advisors promptly following commencement.
Due diligence shall cover all customary areas for a transaction of this nature, including without limitation the following:
(a) Corporate organization, qualification, and good standing;
(b) Capitalization (including stock option plans, outstanding options, warrants, and other equity rights);
(c) Historical and interim financial statements (audited and unaudited), including revenue recognition policies, cost of goods sold, and key financial metrics;
(d) Federal, state, local, and foreign tax compliance, including review of all filed and unfiled tax returns, assessments, audits, and tax-sharing agreements;
(e) intellectual property (including patents, trademarks, copyrights, trade secrets, domain names, software, and technology platforms);
(f) Real property (owned and leased), including all lease agreements for the Austin headquarters and fourteen fulfillment centers;
(g) Environmental compliance and liabilities;
(h) Employment and employee benefits matters, including employment agreements, benefit plans, ERISA compliance, and labor relations;
(i) Pending and threatened litigation, arbitration, and governmental investigations;
(j) Regulatory compliance, including compliance with applicable consumer protection, advertising, and ecommerce regulations;
(k) Material commercial contracts, including seller agreements, buyer terms of service, vendor agreements, and partnership agreements;
(l) Insurance coverage;
(m) Data privacy and cybersecurity, including compliance with applicable data protection laws (e.g., CCPA, state data breach notification laws, and any applicable international data protection regulations), data processing agreements, and information security policies and incident history; and
(n) Such other areas as Cascade and its advisors may reasonably identify during the course of due diligence.
4.2 Clean Team Protocol
The parties acknowledge that Cascade and NovaMart are competitors in certain segments of the online marketplace and ecommerce industry, including through Cascade's "CascadeDirect.com" platform. To ensure compliance with applicable antitrust and competition laws during the pre-closing due diligence and integration planning period, the parties shall enter into a clean team/antitrust protocol agreement (the "Clean Team Agreement") governing the exchange of competitively sensitive information. The Clean Team Agreement shall include appropriate firewalls, restricted access procedures, and designated "clean team" and "dirty team" personnel, such that competitively sensitive information of NovaMart (including pricing data, seller terms, buyer acquisition costs, proprietary algorithms, and competitive strategy documents) is disclosed only to authorized clean team members and outside advisors who are subject to appropriate confidentiality and use restrictions.
Calderwood & Harkness LLP (specifically, Howard Bellamy, a partner in the firm's Antitrust & Competition Practice) and Whitfield & Crane LLP (Gabriela Montoya, Partner, outside antitrust counsel to Cascade) shall coordinate with Calloway, Brandt & Loewe LLP (Richard Calloway) on the development and implementation of the Clean Team Agreement and related procedures. The Clean Team Agreement shall be executed promptly following the execution of this LOI and prior to the commencement of due diligence on February 18, 2025.
4.3 Diligence Timeline
Cascade's objective is to complete the principal due diligence workstreams within eight to ten (8–10) weeks following the commencement of diligence (i.e., targeting substantial completion by late April or early May 2025). The parties acknowledge that the pace and completion of due diligence will depend on the prompt and complete provision of Diligence Materials by NovaMart and the availability of NovaMart's management and advisors for discussions and follow-up inquiries.
The findings of due diligence shall inform the representations, warranties, covenants, and disclosure schedules to be included in the Definitive Agreement. The parties acknowledge that the scope and specificity of the representations and warranties, the nature and extent of any disclosure schedules, and the allocation of risk through the indemnification provisions of the Definitive Agreement will be substantially influenced by the results of Cascade's due diligence review.
Section 5: Definitive Agreement
The parties shall negotiate in good faith toward the preparation and execution of a definitive Stock Purchase Agreement reflecting the terms and conditions set forth in this LOI and such other terms and conditions as are customary in transactions of this nature, including without limitation:
(a) Comprehensive representations and warranties of NovaMart, the Selling Stockholders, and Cascade, covering all customary subject matter areas and qualified by disclosure schedules to be prepared by NovaMart;
(b) Pre-closing covenants of NovaMart regarding the conduct of business between signing and closing, restricting NovaMart's operations to the ordinary course of business consistent with past practice and requiring Cascade's prior written consent for material actions outside the ordinary course (including, without limitation, capital expenditures above specified thresholds, entry into or termination of material contracts, changes to compensation or benefit plans, issuance of equity securities, incurrence of indebtedness, and acquisitions or dispositions of material assets);
(c) Mutual covenants regarding cooperation with respect to regulatory filings (including under the HSR Act), third-party consents, employee matters, and public announcements;
(d) Indemnification provisions consistent with the terms described in Section 1.5 above;
(e) Closing conditions consistent with the terms described in Section 6 below;
(f) Termination rights and fee provisions consistent with the terms described in Section 1.6 above; and
(g) Such other provisions as are customary in stock purchase transactions of this size and nature, including provisions regarding tax matters, confidentiality, non-competition and non-solicitation (to the extent applicable), and dispute resolution.
The Definitive Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflict of laws principles. The Definitive Agreement shall provide that any disputes arising thereunder shall be subject to the exclusive jurisdiction of the Court of Chancery of the State of Delaware (or, if the Court of Chancery declines jurisdiction, the Superior Court of the State of Delaware, or, if neither such court has jurisdiction, the United States District Court for the District of Delaware). Disputes regarding indemnification claims shall be resolved in accordance with the specific procedures to be set forth in the Definitive Agreement, which may include an initial negotiation period, escalation to senior executives, and, if necessary, submission to the exclusive jurisdiction of the Delaware Court of Chancery or to binding arbitration, as the parties may agree.
The parties anticipate that the Definitive Agreement will be in a form suitable for execution (signing) on or about May 2025, subject to the satisfactory completion of due diligence and agreement on all definitive terms. Cascade expects to prepare and circulate an initial draft of the Definitive Agreement to NovaMart's counsel promptly following the substantial completion of its principal due diligence workstreams.
Section 6: Conditions to Closing
The Closing of the Transaction will be subject to the satisfaction or waiver of the following conditions precedent, as well as such other customary conditions as may be set forth in the Definitive Agreement:
(a) HSR Act Clearance. The expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), including any extension of such waiting period resulting from a request for additional information or documentary material (a "Second Request") issued by the Antitrust Division of the United States Department of Justice (the "DOJ") or the Federal Trade Commission (the "FTC").
(b) Accuracy of Representations and Warranties. The representations and warranties of each party set forth in the Definitive Agreement shall be true and correct in all material respects as of the date of the Definitive Agreement and as of the Closing Date (as though made as of the Closing Date), subject to a Material Adverse Effect qualification with respect to non-Fundamental Representations. Fundamental Representations shall be true and correct in all respects (other than de minimis inaccuracies) as of the Closing Date.
(c) Compliance with Covenants. Each party shall have performed and complied with, in all material respects, all covenants and agreements required to be performed or complied with by such party under the Definitive Agreement at or prior to the Closing.
(d) No Material Adverse Effect. Since the date of the Definitive Agreement, there shall not have occurred any event, change, development, circumstance, condition, or effect that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect on NovaMart (as such term shall be defined in the Definitive Agreement, subject to customary carve-outs for general economic conditions, industry-wide conditions, changes in law, and other customary exclusions to be negotiated).
(e) Third-Party Consents. NovaMart shall have obtained all required consents, approvals, and waivers under NovaMart's material contracts that contain change of control provisions, to the extent that the failure to obtain such consents would reasonably be expected to have a Material Adverse Effect. Based on information provided by NovaMart, the parties have identified approximately thirty-four (34) material contracts that contain change of control provisions requiring consent or notice in connection with the Transaction.
(f) No Legal Restraint. No injunction, restraining order, judgment, decree, ruling, or other order issued by any court of competent jurisdiction or governmental authority, and no statute, rule, regulation, or executive order enacted, promulgated, or enforced by any governmental authority, shall be in effect that prohibits, restrains, enjoins, or makes illegal the consummation of the Transaction.
(g) Closing Deliverables. Each party shall have delivered all closing deliverables required under the Definitive Agreement, including without limitation: officer and secretary certificates, certificates of good standing from the State of Delaware and each other jurisdiction in which NovaMart is qualified to do business, a FIRPTA certificate (IRS Form 8288-B or equivalent certification that the Transaction is not subject to withholding under Section 1445 of the Internal Revenue Code), funding of the Escrow Account, payoff of NovaMart's existing credit facility with Ashford Savings Bank, N.A. and release of all related liens and security interests, and such other documents, instruments, and certificates as are customary in stock purchase transactions.
No Financing Condition. For the avoidance of doubt, and as set forth in Section 3 above, the Closing shall not be subject to or conditioned upon Cascade's ability to obtain financing for the Transaction. Cascade shall bear all risk associated with the arrangement, execution, and funding of the financing sources described in Section 3.
Section 7: Regulatory Matters / HSR Act
The proposed Transaction will require pre-merger notification and the observance of a waiting period under the HSR Act, given that the Transaction exceeds the applicable size-of-transaction threshold under the HSR Act and applicable regulations promulgated by the FTC. Cascade (as the "acquiring person") and NovaMart (as the "acquired person," filing on behalf of the Selling Stockholders) shall each file the requisite HSR Notification and Report Form with the Antitrust Division of the DOJ and the FTC as promptly as practicable following execution of the Definitive Agreement.
The HSR filing fee applicable to the Transaction, based on the current FTC fee schedule for a transaction with an aggregate value of $1,200,000,000, is Two Million Three Hundred Ninety Thousand Dollars ($2,390,000). The HSR filing fee shall be borne solely by Cascade.
The parties anticipate that the HSR filing will be submitted within ten (10) business days following the execution of the Definitive Agreement, with a target filing date in approximately April 2025 (assuming execution of the SPA on or about May 2025, or earlier if the SPA is executed ahead of the anticipated timeline).
The parties acknowledge that the Transaction may receive a Second Request from the DOJ Antitrust Division given the competitive overlap between Cascade's CascadeDirect.com online marketplace platform and NovaMart's marketplace operations, and the potential concentration effects in certain segments of the online marketplace and ecommerce industry. Cascade commits to use its reasonable best efforts to obtain clearance under the HSR Act, including by promptly responding to any requests for additional information or documentary material, making available appropriate executives and employees for interviews, and cooperating with the reviewing agency. The specific standard of efforts and any limitations on Cascade's obligations with respect to regulatory clearance (including any "hell or high water" provisions or divestiture obligations) shall be set forth in the Definitive Agreement and are subject to negotiation between the parties.
Cascade has engaged the following advisors to support the HSR review process and all regulatory matters related to the Transaction:
• Outside Antitrust Counsel: Whitfield & Crane LLP (Gabriela Montoya, Partner);
• Economic Consultant: Apex Economics LLC (Dr. Henrik Johansson, Senior Economist).
To the extent that other regulatory filings, notifications, or approvals are required in connection with the Transaction (including under any applicable foreign antitrust or investment screening regimes, or any industry-specific regulatory requirements), the parties shall cooperate in good faith to identify and satisfy such requirements. As of the date of this LOI, the parties are not aware of any foreign antitrust or regulatory filing requirements applicable to the Transaction, but this assessment is subject to confirmation during due diligence.
Section 8: Key Employee and Retention Matters
Cascade recognizes that the continued involvement and leadership of NovaMart's founder and key executives is critical to preserving and enhancing the value of NovaMart's business following the Closing. Accordingly, the following employment and retention arrangements are anticipated as conditions to Closing:
Julian Reeves — Founder & Chief Executive Officer. As a condition to the Closing, Cascade and Julian Reeves shall enter into a post-closing employment agreement (the "Reeves Employment Agreement") pursuant to which Mr. Reeves will be employed by NovaMart (as a subsidiary of Cascade) following the Closing on the following principal terms:
• Term: Three (3) years from the Closing Date, subject to renewal and early termination provisions to be negotiated;
• Title: President, NovaMart Division (or such other title as may be mutually agreed);
• Annual Base Salary: $625,000;
• Target Annual Bonus: Seventy-five percent (75%) of base salary, subject to achievement of performance targets to be established by Cascade;
• Equity Grant: 150,000 restricted shares of Cascade common stock, vesting ratably over three (3) years from the Closing Date, subject to continued employment (and such other terms and conditions as are customary under Cascade's equity incentive plan);
• Other Benefits: Participation in Cascade's standard executive benefits program, including health insurance, retirement benefits, and such other perquisites as are customary for senior executives of Cascade.
Priya Narasimhan — Co-Founder & Chief Technology Officer. As a condition to the Closing, Cascade and Priya Narasimhan shall enter into a post-closing employment agreement (the "Narasimhan Employment Agreement") pursuant to which Ms. Narasimhan will be employed by NovaMart (as a subsidiary of Cascade) following the Closing on the following principal terms:
• Term: Three (3) years from the Closing Date, subject to renewal and early termination provisions to be negotiated;
• Title: Chief Technology Officer, NovaMart Division (or such other title as may be mutually agreed);
• Annual Base Salary: $575,000;
• Target Annual Bonus: Seventy percent (70%) of base salary, subject to achievement of performance targets to be established by Cascade;
• Equity Grant: 125,000 restricted shares of Cascade common stock, vesting ratably over three (3) years from the Closing Date, subject to continued employment (and such other terms and conditions as are customary under Cascade's equity incentive plan);
• Other Benefits: Participation in Cascade's standard executive benefits program.
The specific terms of the Reeves Employment Agreement and the Narasimhan Employment Agreement shall be negotiated in good faith between the parties and shall be set forth in definitive employment agreements to be executed at or prior to the Closing.
Retention Pool. In addition to the foregoing employment agreements, Cascade intends to establish a retention pool in the aggregate amount of Eighteen Million Dollars ($18,000,000) (the "Retention Pool") for the benefit of other key NovaMart employees identified by Cascade and NovaMart's management during the pre-closing period. The Retention Pool shall be payable as follows:
• Fifty percent (50%) of each participant's retention award ($9,000,000 in aggregate) shall be payable at the Closing; and
• Fifty percent (50%) of each participant's retention award ($9,000,000 in aggregate) shall be payable on the first anniversary of the Closing Date, subject to the participant's continued employment with NovaMart (or Cascade or any of its affiliates) through such date.
The identity of the Retention Pool participants, the individual award amounts, and the terms and conditions of the retention arrangements shall be determined by mutual agreement of Cascade and NovaMart's management during the pre-closing period. The Retention Pool shall be funded by Cascade from its working capital and shall not reduce the Purchase Price payable to the Selling Stockholders.
NovaMart currently has approximately 2,400 employees across all of its locations, including its Austin headquarters, fulfillment centers, and other offices. Cascade intends to retain substantially all of NovaMart's employees following the Closing, subject to customary integration planning and organizational assessment.
Section 9: Change of Control Consents
The parties acknowledge that the acquisition of one hundred percent (100%) of the capital stock of NovaMart by Cascade will constitute a "change of control" (or similar triggering event) under approximately thirty-four (34) identified material contracts to which NovaMart is a party. NovaMart has provided Cascade with a preliminary list of such contracts, which include, among others, the following:
(a) Master Services Agreement between NovaMart and Pinnacle Cloud Solutions Inc. (cloud hosting and infrastructure services);
(b) Logistics Partnership Agreement between NovaMart and Redline Freight Corp. (freight, fulfillment, and third-party logistics services);
(c) Technology License Agreement between NovaMart and Arcwave Software LLC (proprietary search algorithm license);
(d) Office Lease Agreement for NovaMart's headquarters at 1100 Congress Avenue, Austin, Texas (landlord: Congress Tower Partners LP);
(e) Fulfillment Center Lease Agreements for NovaMart's fourteen (14) fulfillment center facilities located across nine (9) states;
(f) Advertising Revenue Share Agreement between NovaMart and Stratton Digital Media Inc.;
(g) Payment Processing Agreement between NovaMart and PayStream Financial Technologies Inc.; and
(h) Senior Credit Facility Agreement between NovaMart and Ashford Savings Bank, N.A. ($150,000,000 revolving credit facility — to be repaid in full and terminated at Closing, as described in Section 10 below).
NovaMart shall be responsible for commencing the consent solicitation process for all required change of control consents promptly following execution of the Definitive Agreement, in consultation with and with the reasonable cooperation of Cascade. The parties will work together in good faith to obtain all necessary consents, approvals, and waivers in advance of the Closing. The Definitive Agreement shall include provisions addressing the allocation of responsibility and risk with respect to contracts for which required consents have not been obtained as of the Closing, including any "further assurances" or alternative arrangement provisions as the parties may agree.
Section 10: Payoff of Existing Indebtedness
At the Closing, NovaMart's existing revolving credit facility with Ashford Savings Bank, N.A., in the principal amount of up to One Hundred Fifty Million Dollars ($150,000,000) (the "Existing Credit Facility"), shall be repaid in full (including all outstanding principal, accrued and unpaid interest, and any applicable prepayment premiums, breakage costs, or fees), and the Existing Credit Facility shall be terminated in accordance with its terms. NovaMart shall obtain payoff letters and lien release documentation from Ashford Savings Bank, N.A. in form and substance reasonably satisfactory to Cascade and its counsel, and shall deliver such payoff letters and lien release documentation at the Closing.
All liens, security interests, pledges, mortgages, encumbrances, and other charges granted by NovaMart or any of its subsidiaries to Ashford Savings Bank, N.A. or any agent or lender under the Existing Credit Facility shall be fully released and discharged at the Closing. The proceeds required to repay the Existing Credit Facility shall be funded from the Purchase Price (or otherwise provided by Cascade) at the Closing, and the amount of any outstanding indebtedness under the Existing Credit Facility as of the Closing shall be taken into account in the calculation of the Purchase Price and/or the Working Capital Adjustment, as the parties may agree in the Definitive Agreement.
Section 11: Anticipated Timeline
The parties anticipate the following indicative timeline for the Transaction, which is subject to adjustment based on the progress of due diligence, documentation negotiations, regulatory review, and other developments:
The foregoing timeline is illustrative only and does not create any binding obligation on any party with respect to the timing of any milestone. An illustrative timeline chart is attached hereto as Exhibit B.
If the Closing has not occurred on or before December 31, 2025 (the "Outside Date"), either party may terminate the Definitive Agreement upon written notice to the other party, subject to the termination fee provisions described in Section 1.6 above and any other conditions or limitations set forth in the Definitive Agreement. The Outside Date may be extended by mutual written agreement of the parties. The right to terminate the Definitive Agreement on account of the Outside Date shall not be available to any party whose material breach of the Definitive Agreement has been the principal cause of or resulted in the failure of the Closing to occur on or before the Outside Date.
Section 12: Exclusivity
THIS SECTION 12 IS BINDING UPON EXECUTION OF THIS LOI.
From the date of this LOI through the earlier of (a) the execution and delivery of the Definitive Agreement by all parties or (b) May 31, 2025 (such period, the "Exclusivity Period"), NovaMart and each of the Selling Stockholders agree that they shall not, and shall cause their respective directors, officers, employees, agents, advisors, and representatives not to, directly or indirectly:
(i) solicit, initiate, seek, encourage, or facilitate any inquiry, indication of interest, proposal, or offer from any person or entity (other than Cascade and its representatives) relating to any merger, consolidation, acquisition of all or substantially all of the assets or equity securities of NovaMart, recapitalization, restructuring, or any other transaction the consummation of which would be inconsistent with the Transaction contemplated by this LOI (each, an "Alternative Transaction");
(ii) engage in, continue, or participate in any negotiations, discussions, or communications with, or provide or make available any non-public information (including financial, operational, technical, or other business information) to, any person or entity (other than Cascade and its representatives) in connection with or in furtherance of any Alternative Transaction or any inquiry or proposal that could reasonably be expected to lead to an Alternative Transaction;
(iii) enter into any letter of intent, memorandum of understanding, term sheet, agreement in principle, definitive agreement, or other agreement, understanding, or arrangement (whether written or oral, binding or non-binding) with any person or entity relating to or in connection with an Alternative Transaction; or
(iv) take any other action that would reasonably be expected to lead to or facilitate an Alternative Transaction.
If NovaMart or any Selling Stockholder (or any of their respective directors, officers, employees, agents, advisors, or representatives) receives any unsolicited inquiry, indication of interest, proposal, or offer from any third party regarding a potential Alternative Transaction during the Exclusivity Period, NovaMart shall promptly (and in any event within two (2) business days) notify Cascade in writing of the receipt of such inquiry, indication of interest, proposal, or offer, including the identity of the person or entity making such inquiry or proposal and the material terms and conditions thereof.
The Exclusivity Period may be extended by mutual written agreement of the parties. Notwithstanding the foregoing, if Cascade has not submitted a draft of the Definitive Agreement to NovaMart's counsel on or before April 30, 2025, or if Cascade has failed to pursue due diligence and documentation negotiations in good faith, NovaMart shall have the right to terminate the Exclusivity Period upon ten (10) days' prior written notice to Cascade.
Section 13: Confidentiality
THIS SECTION 13 IS BINDING UPON EXECUTION OF THIS LOI.
The terms and conditions of this LOI, the existence and substance of the discussions and negotiations between the parties regarding the proposed Transaction, and all information exchanged between the parties in connection herewith are confidential and are subject to the terms and conditions of the Mutual Confidentiality and Non-Disclosure Agreement dated February 10, 2025, between Cascade and NovaMart (the "Mutual NDA"), which is incorporated herein by reference. To the extent of any conflict between the confidentiality provisions of this LOI and the Mutual NDA, the more restrictive provision shall govern.
Neither Cascade, NovaMart, nor any Selling Stockholder shall make (or authorize or permit any of their respective directors, officers, employees, agents, advisors, or representatives to make) any public announcement, press release, or other public disclosure regarding the proposed Transaction or the existence or terms of this LOI without the prior written consent of the other parties, which consent shall not be unreasonably withheld, conditioned, or delayed. Notwithstanding the foregoing, the parties acknowledge that Cascade, as a publicly listed company, may be required to disclose the existence or terms of the proposed Transaction or this LOI pursuant to applicable securities laws and regulations (including Regulation FD under the Securities Exchange Act of 1934, as amended, or Form 8-K disclosure requirements), in which case Cascade shall provide NovaMart and the Stockholder Representative with reasonable advance notice and a reasonable opportunity to review and comment on the proposed disclosure prior to its publication.
Section 14: Expenses
THIS SECTION 14 IS BINDING UPON EXECUTION OF THIS LOI.
Except as otherwise expressly provided in this LOI or the Definitive Agreement, each party shall bear and be solely responsible for its own costs and expenses incurred in connection with the proposed Transaction, including the fees and expenses of its legal counsel, financial advisors, accountants, and other advisors and consultants.
Notwithstanding the foregoing:
(a) HSR Filing Fee. The HSR filing fee of $2,390,000 (or such other amount as may apply under the FTC's then-current fee schedule) shall be borne solely by Cascade.
(b) Transfer Taxes. Any transfer taxes, stamp duties, stock transfer taxes, or similar taxes arising from the transfer of NovaMart's capital stock from the Selling Stockholders to Cascade at the Closing shall be borne equally by Cascade, on the one hand, and the Selling Stockholders, on the other hand (estimated at approximately $1,200,000 in total; approximately $600,000 per side). The allocation and payment mechanics for transfer taxes shall be set forth in the Definitive Agreement.
Section 15: Non-Binding Nature
THIS SECTION 15 IS BINDING UPON EXECUTION OF THIS LOI.
Except for Section 12 (Exclusivity), Section 13 (Confidentiality), Section 14 (Expenses), this Section 15 (Non-Binding Nature), Section 16 (Governing Law), and Section 17 (Miscellaneous), each of which is intended to be and shall be legally binding upon execution of this LOI, this LOI does not constitute a binding agreement and does not create any legal or equitable obligation on the part of any party to consummate the proposed Transaction or to enter into a Definitive Agreement. The non-binding provisions of this LOI are intended solely to set forth the principal terms and conditions upon which the parties are willing to negotiate in good faith toward a definitive transaction.
No binding obligation to consummate the Transaction shall arise unless and until a definitive Stock Purchase Agreement, in form and substance satisfactory to all parties, has been duly executed and delivered by Cascade, NovaMart, the Stockholder Representative, and all Selling Stockholders (or holders of joinder agreements binding them thereto). The parties acknowledge and agree that the terms set forth in the non-binding sections of this LOI are subject to further negotiation, modification, and refinement during the course of due diligence and the negotiation of definitive documentation, and that no party shall have any liability to any other party for the failure to reach agreement on a Definitive Agreement, except with respect to the binding provisions of this LOI.
Section 16: Governing Law
THIS SECTION 16 IS BINDING UPON EXECUTION OF THIS LOI.
This LOI and any disputes, claims, or controversies arising out of or relating to this LOI, including the negotiation, execution, interpretation, performance, or enforcement of this LOI, shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice of law or conflict of laws rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.
Any disputes arising out of or relating to the binding provisions of this LOI shall be subject to the exclusive jurisdiction of the Court of Chancery of the State of Delaware (or, if the Court of Chancery declines jurisdiction, the Superior Court of the State of Delaware, or, if neither such court has jurisdiction, the United States District Court for the District of Delaware). Each party hereby irrevocably submits to the personal jurisdiction of such courts and waives any objection to venue or jurisdiction therein, including any objection based on the doctrine of forum non conveniens.
Section 17: Miscellaneous
THIS SECTION 17 IS BINDING UPON EXECUTION OF THIS LOI.
17.1 Counterparts. This LOI may be executed in one or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. Execution and delivery of this LOI by electronic signature (including via Brightwater Software, Ashford Health IT, or PDF) or by facsimile shall be deemed to be, and shall have the same legal force and effect as, execution and delivery of an original signed counterpart.
17.2 Entire Understanding. This LOI constitutes the entire understanding and agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous discussions, negotiations, understandings, term sheets, and agreements (whether written or oral) between the parties with respect to the proposed Transaction, except for the Mutual Confidentiality and Non-Disclosure Agreement dated February 10, 2025, which shall remain in full force and effect in accordance with its terms and which is incorporated herein by reference.