PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
PRE-CLOSING TAX COVENANT COMPLIANCE CHECKLIST
NovaMart Global Inc.
Calderwood & Harkness LLP 599 Lexington Avenue, 38th Floor New York, NY 10022
Prepared By: Sylvia Hartwell, Specialist Partner, Tax — Calderwood & Harkness LLP
Assisted By: Derek Okonkwo, Lead Associate, M&A — Calderwood & Harkness LLP; Tiffany Rosenthal, Working Associate, M&A — Calderwood & Harkness LLP
Date: May 22, 2025 (Version 1.0 — Initial Version; to be updated periodically through Closing)
Client: Cascade Retail Holdings Inc. ("Cascade" or "CRH"), 4500 Elliott Avenue West, Suite 3200, Seattle, WA 98119
Matter: Acquisition of 100% of the Outstanding Capital Stock of NovaMart Global Inc. by Cascade Retail Holdings Inc.
DISTRIBUTION: This document is intended solely for the following authorized recipients. Do not distribute, copy, or forward without prior approval of Sylvia Hartwell or Harrison Wexford at Calderwood & Harkness LLP.
•  Elena Vasquez-Bright — General Counsel, Cascade Retail Holdings Inc.
•  Rajiv Sundaram — Chief Financial Officer, Cascade Retail Holdings Inc.
•  Theodore "Ted" Langford — Senior Vice President, Corporate Development, Cascade Retail Holdings Inc.
•  Harrison Wexford — Responsible Partner, M&A, Calderwood & Harkness LLP
•  Sandra Chiu — Engagement Partner, Whitmore & Paige LLP
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I. INTRODUCTION AND PURPOSE
A. Purpose of This Checklist
This Pre-Closing Tax Covenant Compliance Checklist (the "Checklist") has been prepared by Calderwood & Harkness LLP, as outside tax counsel to Cascade Retail Holdings Inc. ("Cascade," "CRH," or the "Buyer"), to track, monitor, and verify NovaMart Global Inc.'s ("NovaMart" or the "Company," EIN: 84-3291547) compliance with its obligations regarding pre-closing tax filings, tax payments, tax-related covenants, and related compliance requirements arising under Section 6.09 of the Stock Purchase Agreement dated May 20, 2025 (the "SPA"). The SPA was entered into among Cascade Retail Holdings Inc. (the "Buyer"), NovaMart Global Inc. (the "Company"), and the Selling Stockholders (as defined therein).
The Selling Stockholders under the SPA consist of the following:
•  Ridgeline Equity Partners, LP — 41.2% of outstanding NovaMart capital stock
•  Brindoval Ventures Fund III, LP — 22.8% of outstanding NovaMart capital stock
•  Julian Reeves — 18.5% of outstanding NovaMart capital stock
•  Priya Narasimhan — 8.3% of outstanding NovaMart capital stock
•  Other management and employee stockholders — 9.2% of outstanding NovaMart capital stock (collectively with the foregoing, the "Sellers" or the "Selling Stockholders")
The Checklist is designed to serve as a centralized, living document that the Cascade deal team, Calderwood & Harkness LLP, and Whitmore & Paige LLP can reference to ensure that: (i) NovaMart satisfies all of its pre-closing tax covenant obligations in a timely manner; (ii) Cascade exercises its review and approval rights with respect to material pre-closing tax returns and tax actions; (iii) NovaMart does not take any prohibited tax actions without first obtaining Cascade's prior written consent; and (iv) all tax-related closing deliverables and conditions are tracked to completion. This Checklist is not a substitute for legal advice and should be read in conjunction with the SPA and the related memoranda referenced herein.
B. Transaction Overview
The transaction contemplated by the SPA involves the acquisition by Cascade Retail Holdings Inc. of 100% of the outstanding capital stock of NovaMart Global Inc. for an aggregate purchase price of $1,200,000,000, payable entirely in cash at closing, subject to customary purchase price adjustments for working capital, indebtedness, and transaction expenses (each as defined in the SPA).
The key dates for the transaction are as follows:
•  Signing Date: May 20, 2025
•  Targeted Closing Date: October 15, 2025
•  Outside Date: December 31, 2025
The pre-closing tax covenant obligations set forth in Section 6.09 of the SPA run from the Signing Date (May 20, 2025) through the Closing Date. Given that the targeted Closing Date is approximately five months from the Signing Date, a number of significant tax filing deadlines — including the FY2024 federal income tax return filing deadline (as extended), multiple state income and franchise tax return filings, and quarterly estimated tax payment dates — will fall within the pre-closing period. This Checklist is intended to provide a comprehensive framework for tracking compliance with all such obligations.
C. Governing Law and Key Parties
Governing Law: The SPA is governed by the laws of the State of Delaware without regard to conflict-of-law principles.
Seller's Counsel: Calloway, Brandt & Loewe LLP (Richard Calloway, Lead Partner; Simone Adesanya, Associate Lead), 600 Travis Street, Suite 4500, Houston, TX 77002.
NovaMart CFO: Douglas "Doug" Whitfield — primary NovaMart contact for tax matters during the pre-closing period.
NovaMart General Counsel: Amanda Trevino — responsible for coordinating NovaMart's compliance with legal obligations under the SPA, including tax covenant compliance certifications.
Buyer's Accounting/Tax Advisor: Whitmore & Paige LLP (Sandra Chiu, Engagement Partner), 100 Federal Street, Suite 2500, Boston, MA 02110 — retained by Cascade to review draft pre-closing tax returns and provide advisory services on tax matters in connection with the transaction.
D. Cross-Reference to Related Documents
This Checklist should be read in conjunction with the following related documents, each of which has been prepared separately:
1.  Tax Due Diligence Memorandum — Summary of tax due diligence findings regarding NovaMart and its subsidiaries, including historical compliance, open audit matters, and identified tax risks.
2.  Tax Structure Memorandum — Analysis of the tax structure of the transaction, including the treatment of the acquisition as a stock purchase for federal income tax purposes.
3.  Tax Indemnification Provisions Analysis Memorandum — Detailed analysis of the tax indemnification provisions in the SPA, including scope, limitations, survival periods, and interplay with the R&W insurance policy.
4.  Transfer Tax Analysis Memorandum — Analysis of transfer taxes applicable to the stock transfer and the allocation of liability between Buyer and Sellers.
5.  FIRPTA Compliance Memorandum — Analysis of FIRPTA withholding obligations and the form of non-foreign person certificate to be delivered at closing.
E. Important Note Regarding Indemnification
The pre-closing tax covenant obligations set forth in Section 6.09 of the SPA are directly tied to the Sellers' tax indemnification obligations. Under the SPA, the Sellers' indemnification for all pre-closing Tax liabilities is uncapped — that is, it is not subject to the general indemnification cap of $216,000,000 that applies to other representations and warranties. Furthermore, the Tax representations and the Sellers' tax indemnification obligations survive until 60 days after expiration of the applicable statute of limitations (including any extensions or waivers thereof). This heightened indemnification regime underscores the importance of rigorous monitoring of NovaMart's pre-closing tax compliance and of Cascade's exercise of its review and consent rights under Section 6.09.
II. SUMMARY OF SPA SECTION 6.09 — PRE-CLOSING TAX COVENANTS
The following is a summary of the principal pre-closing tax covenants set forth in Section 6.09 of the SPA. This summary is provided for convenience of reference and does not purport to be a complete or definitive statement of the parties' obligations. In all cases, the text of Section 6.09 (reproduced in full in Appendix B) controls.
A. Tax Return Filing Obligations
Section 6.09(a) of the SPA provides that, during the period from the Signing Date through the Closing Date, NovaMart shall prepare and timely file (or cause to be prepared and timely filed) all Tax Returns required to be filed by or with respect to NovaMart and its subsidiaries for any Pre-Closing Tax Period. For purposes of this obligation, a "Pre-Closing Tax Period" is defined as any Tax period ending on or before the Closing Date, and the portion of any Straddle Period ending on and including the Closing Date. A "Straddle Period" is defined as any Tax period that begins before and ends after the Closing Date.
All such Tax Returns must be prepared in a manner consistent with NovaMart's past practice (including past practice regarding elections, accounting methods, and reporting positions), unless otherwise required by applicable law. This consistency requirement is a material obligation and is designed to prevent NovaMart from deviating from its historical tax posture during the pre-closing period in a manner that could create unexpected tax liabilities or reduce the value of NovaMart's tax attributes.
Section 6.09(a) further provides that NovaMart shall not, without the prior written consent of Cascade:
(i) change any Tax election;
(ii) amend any previously filed Tax Return;
(iii) settle or compromise any Tax liability;
(iv) surrender any right to a Tax refund; or
(v) take any other action with respect to Taxes that is outside the ordinary course of business.
These consent requirements are discussed in greater detail in Section V of this Checklist.
B. Cascade Review Rights
Section 6.09(b) of the SPA grants Cascade the right to review and comment on all material Pre-Closing Tax Returns prior to their filing. The specific review procedures are as follows:
(i) NovaMart shall provide draft copies of all material Pre-Closing Tax Returns to Cascade (and its advisors, including Whitmore & Paige LLP) for review and comment no later than 30 days prior to the due date for filing such Tax Return (taking into account any applicable extensions).
(ii) If the due date for a Tax Return falls within 30 days of the Closing Date, NovaMart shall provide the draft Tax Return to Cascade as promptly as practicable.
(iii) Cascade shall have 15 business days from receipt of the draft Tax Return to review and provide written comments thereon.
(iv) NovaMart shall consider in good faith all reasonable comments provided by Cascade.
(v) In the event that the parties are unable to resolve any dispute regarding a Pre-Closing Tax Return, the dispute shall be referred to an independent nationally recognized accounting firm mutually agreed by the parties (the "Tax Arbiter"), whose determination shall be final and binding on the parties.
The practical implementation of these review rights is addressed in detail in Section IV of this Checklist.
C. Tax Payment Obligations
Section 6.09(c) of the SPA provides that NovaMart shall timely pay (or cause to be timely paid) all Taxes shown to be due on all Pre-Closing Tax Returns. This obligation encompasses not only final Tax Return payments but also all interim obligations, including quarterly estimated tax installment payments as and when due for Pre-Closing Tax Periods.
NovaMart is expressly prohibited from deferring any Tax payment or requesting any extension of time to pay Taxes without the prior written consent of Cascade. This prohibition is intended to ensure that NovaMart does not create any post-closing tax liabilities that would otherwise have been discharged during the pre-closing period. Cascade's review of estimated tax payment calculations is an important component of this obligation, as underpayment of estimated taxes could result in interest and penalties that would constitute pre-closing Tax liabilities for which the Sellers would bear indemnification responsibility.
D. Cooperation Obligations
Section 6.09(d) of the SPA imposes cooperation obligations on NovaMart with respect to tax matters during the pre-closing period. Specifically, NovaMart shall:
(i) Cooperate fully with Cascade and its advisors (including Calderwood & Harkness LLP and Whitmore & Paige LLP) in connection with all Tax matters relating to NovaMart, including providing access to Tax-related books, records, work papers, and supporting documentation.
(ii) Promptly notify Cascade of any Tax audit, examination, inquiry, claim, or assessment received from any Taxing authority during the pre-closing period. Under the SPA, such notification must be provided within a reasonable time after receipt; as a practical matter, this Checklist establishes a protocol requiring notification within 5 business days of receipt (see Section VI below).
(iii) Refrain from settling, compromising, or otherwise resolving any Tax audit, examination, or claim without the prior written consent of Cascade. This restriction ensures that Cascade has the opportunity to evaluate any proposed settlement and to protect its interests with respect to tax liabilities that could affect NovaMart post-closing.
E. Prohibited Actions Without Buyer Consent
Section 6.09(e) of the SPA sets forth a comprehensive list of actions that NovaMart may not take during the pre-closing period without the prior written consent of Cascade. These prohibited actions are:
(i) Making, changing, or revoking any Tax election;
(ii) Amending any previously filed Tax Return;
(iii) Settling or compromising any Tax liability, audit, or claim;
(iv) Entering into any closing agreement with a Taxing authority;
(v) Surrendering any right to a Tax refund or credit;
(vi) Changing any accounting method for Tax purposes;
(vii) Filing any Tax Return in a manner inconsistent with past practice (unless otherwise required by applicable law); and
(viii) Taking any action that would result in a Tax liability in excess of amounts accrued or reserved in the ordinary course of business.
Each of these prohibited actions is tracked on a monthly basis through the monitoring checklist set forth in Section V of this document. The process for requesting and granting (or withholding) Cascade's consent to any such action is governed by the consent template attached as Appendix C.
III. JURISDICTIONAL TAX FILING AND PAYMENT CHECKLIST
This section provides a jurisdiction-by-jurisdiction checklist of NovaMart's tax filing and payment obligations during the pre-closing period. For each jurisdiction, the checklist identifies the applicable taxing authority, the type of tax return, the applicable tax period, the due date (original and extended), the estimated tax due, and the current status. The status of each item is to be updated on a rolling basis as information is confirmed. Where the status column indicates "To be updated," it reflects that verification from NovaMart's tax department or its outside tax preparers has not yet been received as of the date of this initial version of the Checklist.
A. Federal Income Tax
Taxing Authority: Internal Revenue Service (IRS)
NovaMart EIN: 84-3291547
NovaMart Tax Year End: December 31 (calendar year)
1. FY2024 Federal Income Tax Return (Form 1120)
NovaMart's FY2024 federal income tax return (Form 1120) is one of the most significant pre-closing tax filings. The original due date for a calendar-year corporate taxpayer filing Form 1120 is April 15, 2025. If NovaMart filed a timely extension (Form 7004), the extended due date would be October 15, 2025 — which coincides with the targeted Closing Date.
•  Original Due Date: April 15, 2025
•  Extended Due Date (if applicable): October 15, 2025
•  Status — Filing: Confirm whether NovaMart's FY2024 Form 1120 has been filed or whether a timely extension (Form 7004) was filed on or before April 15, 2025. [To be updated]
•  Estimated FY2024 Federal Income Tax Liability: $23,800,000
•  Estimated Tax Payments: Confirm that all quarterly estimated tax payments for FY2024 (Q1 through Q4 2024) were timely made in the correct amounts. [To be updated]
•  Cascade Review Right: If the FY2024 Form 1120 has not yet been filed, NovaMart is obligated to provide a draft copy to Cascade (care of Elena Vasquez-Bright), with copies to Sylvia Hartwell at Calderwood & Harkness LLP and Sandra Chiu at Whitmore & Paige LLP, at least 30 days prior to the filing date. Given the extended due date of October 15, 2025, the draft should be delivered to Cascade no later than September 15, 2025 (or, if the extended due date is earlier, 30 days prior thereto).
•  Comment Deadline: Cascade will have 15 business days from receipt of the draft to review and provide written comments.
•  Filing and Payment Confirmation: To be confirmed following Cascade's review and resolution of any comments. [To be updated]
Key Action Item: Calderwood & Harkness LLP to contact Seller's counsel (Calloway, Brandt & Loewe LLP) and NovaMart's CFO (Doug Whitfield) to confirm the current filing status of the FY2024 Form 1120 and whether a valid extension was filed.
2. FY2025 Estimated Tax Payments (Pre-Closing)
NovaMart's FY2025 federal estimated tax payments will fall within the pre-closing period. Under Section 6.09(c) of the SPA, NovaMart is required to timely pay all estimated tax installments as and when due. The quarterly estimated tax payment schedule for FY2025 is as follows:
•  Q1 2025 (due April 15, 2025): Confirm timely payment in the required amount. [To be updated]
•  Q2 2025 (due June 15, 2025): Confirm timely payment in the required amount. This payment falls approximately four weeks after the Signing Date and will be one of the first compliance milestones under the SPA. [To be updated]
•  Q3 2025 (due September 15, 2025): Confirm timely payment in the required amount. This payment falls approximately one month before the targeted Closing Date. [To be updated]
•  Q4 2025 (due December 15, 2025): This payment is only applicable if the Closing occurs after December 15, 2025 (i.e., if the transaction is not consummated by the targeted Closing Date and is instead consummated before the Outside Date of December 31, 2025). If the Closing occurs on or before December 15, 2025, this payment will be the responsibility of Cascade as the post-closing owner.
Key Action Item: Whitmore & Paige LLP to review NovaMart's estimated tax payment calculations for FY2025 to ensure that estimated payments are adequate to avoid underpayment penalties under IRC Section 6655.
3. FY2025 Short-Period / Straddle Period Return
If the Closing occurs mid-year (as expected, given the targeted Closing Date of October 15, 2025), NovaMart's FY2025 tax year will constitute a Straddle Period — a Tax period that begins before and ends after the Closing Date. The SPA provides for specific allocation methodologies for Straddle Period taxes (see Section VII of this Checklist). The FY2025 federal income tax return will be a Straddle Period return, and the allocation of income and deductions between the pre-closing and post-closing portions of the Straddle Period will be determined in accordance with the closing-of-the-books method prescribed by SPA Section 6.09.
Responsible Party / Contact: Doug Whitfield (NovaMart CFO)
Cascade Review Contact: Sandra Chiu (Whitmore & Paige LLP); Sylvia Hartwell (Calderwood & Harkness LLP)
B. Delaware Franchise Tax
Taxing Authority: Delaware Division of Corporations / Delaware Secretary of State
Entity: NovaMart Global Inc. is incorporated in the State of Delaware.
NovaMart is required to file an Annual Report and pay franchise tax to the State of Delaware each year. The Delaware franchise tax for corporations is due on June 1 of each year.
•  FY2025 Annual Report and Franchise Tax: Due June 1, 2025. This due date falls within the pre-closing period and is approaching imminently. NovaMart must ensure that the Annual Report is timely filed and the franchise tax is timely paid.
•  Status — Filing: [To be updated]
•  Status — Payment: [To be updated]
•  Prior-Year Compliance: Confirm that NovaMart is current on all prior-year Delaware franchise tax payments, including any penalties or interest. The Tax Due Diligence Memorandum should be cross-referenced to confirm the absence of any outstanding Delaware franchise tax liabilities.
Key Action Item: Given the proximity of the June 1, 2025 due date, Calderwood & Harkness LLP to immediately confirm with NovaMart's tax department that the Annual Report has been prepared and the franchise tax payment is scheduled.
C. Texas Franchise Tax
Taxing Authority: Texas Comptroller of Public Accounts
NovaMart Headquarters: 1100 Congress Avenue, Suite 800, Austin, TX 78701
Texas does not impose a state income tax on corporations. However, the Texas franchise (margin) tax applies to all entities doing business in the State of Texas. NovaMart, as a Texas-headquartered company, is subject to the Texas franchise tax.
•  FY2024 Texas Franchise Tax Report: Due May 15, 2025. This due date has already passed as of the date of this Checklist (the Signing Date was May 20, 2025, and this Checklist is dated May 22, 2025). Confirm that NovaMart timely filed the FY2024 Texas franchise tax report and timely paid the franchise tax due thereon.
•  Status — Filing: [To be updated]
•  Status — Payment: [To be updated]
•  Cascade Review Right: If the FY2024 Texas franchise tax report was filed before the Signing Date, Cascade's review right under SPA Section 6.09(b) would not apply. However, if the report has not yet been filed or if an extension was obtained, the Cascade review procedures apply.
•  Note: Texas franchise tax is calculated based on a company's margin, which is generally defined as total revenue minus the greater of (a) cost of goods sold, (b) compensation, (c) 30% of total revenue, or (d) $1,000,000. NovaMart's franchise tax return should be reviewed for consistency with prior-year methodologies.
D. State Income / Franchise Tax — Nexus States (Fulfillment Center Operations)
NovaMart operates 14 fulfillment centers across 9 states. In each state where NovaMart maintains a fulfillment center, NovaMart has sufficient nexus to be subject to the applicable state income tax, franchise tax, or other similar tax. The following is a state-by-state checklist for income and franchise tax filings and payments in each nexus state.
1. California (3 Fulfillment Centers)
Taxing Authority: California Franchise Tax Board (FTB)
NovaMart operates three fulfillment centers in the State of California, which is the Company's largest state footprint outside of Texas. California imposes a corporate franchise tax on corporations doing business in the state, with a minimum tax of $800 and an income-based tax rate of 8.84%.
•  Form: California corporate income tax return (Form 100)
•  Tax Period: FY2024 (calendar year ending December 31, 2024)
•  Original Due Date: April 15, 2025
•  Extended Due Date (if applicable): October 15, 2025 (if a timely extension was filed)
•  Status — Filing: Confirm whether FY2024 Form 100 has been filed or whether an extension was filed. [To be updated]
•  Status — Estimated Payments: Confirm that all FY2024 and FY2025 estimated tax payments to the California FTB have been timely made. [To be updated]
•  Cascade Review Right: If the FY2024 Form 100 has not yet been filed, Cascade review procedures apply. Draft to be delivered to Cascade at least 30 days prior to the filing date.
•  FY2025 Estimated Tax Payments: Confirm Q1 and Q2 2025 estimated payments to California FTB have been timely made. [To be updated]
2. New Jersey (2 Fulfillment Centers)
Taxing Authority: New Jersey Division of Taxation
NovaMart operates two fulfillment centers in the State of New Jersey. New Jersey imposes a Corporation Business Tax (CBT) on corporations doing business in the state. The CBT rate for taxable income over $1,000,000 is currently 9.0%, with a temporary surtax in effect for certain tax years.
•  Form: Corporation Business Tax return (CBT-100)
•  Tax Period: FY2024 (calendar year ending December 31, 2024)
•  Original Due Date: April 15, 2025
•  Extended Due Date (if applicable): October 15, 2025 (if a timely extension was filed)
•  Status — Filing: [To be updated]
•  Status — Estimated Payments: Confirm timely payment of all FY2024 and FY2025 estimated CBT installments. [To be updated]
•  Cascade Review Right: If the FY2024 CBT-100 has not yet been filed, Cascade review procedures apply.
3. Georgia (2 Fulfillment Centers)
Taxing Authority: Georgia Department of Revenue
NovaMart operates two fulfillment centers in the State of Georgia. Georgia imposes a corporate income tax at a rate of 5.75%.
•  Form: Corporate income tax return (Form 600)
•  Tax Period: FY2024 (calendar year ending December 31, 2024)
•  Original Due Date: April 15, 2025
•  Extended Due Date (if applicable): October 15, 2025 (if a timely extension was filed)
•  Status — Filing: [To be updated]
•  Status — Estimated Payments: Confirm timely payment of all FY2024 and FY2025 estimated tax installments. [To be updated]
•  Cascade Review Right: If the FY2024 Form 600 has not yet been filed, Cascade review procedures apply.
4. Ohio (1 Fulfillment Center)
Taxing Authority: Ohio Department of Taxation
NovaMart operates one fulfillment center in the State of Ohio. Ohio does not impose a traditional corporate income tax. Instead, Ohio levies the Commercial Activity Tax (CAT), which is a tax on gross receipts from business activities in Ohio. The CAT is filed on a quarterly basis (or an annual basis for taxpayers with Ohio gross receipts of $150,000 or less).
•  Form: Commercial Activity Tax (CAT) filings
•  Filing Frequency: Quarterly (for taxpayers with gross receipts exceeding $150,000)
•  Quarterly Due Dates (FY2025):
•  Q1 2025: May 10, 2025
•  Q2 2025: August 10, 2025
•  Q3 2025: November 10, 2025
•  Q4 2025: February 10, 2026
•  Status — Q1 2025 Filing and Payment: Confirm timely filing and payment. [To be updated]
•  Status — Q2-Q3 2025 Filings and Payments: Track as due dates approach. [To be updated]
•  Cascade Review Right: Cascade review procedures apply to material Ohio CAT filings.
5. Illinois (1 Fulfillment Center)
Taxing Authority: Illinois Department of Revenue
NovaMart operates one fulfillment center in the State of Illinois. Illinois imposes a corporate income tax at a rate of 7.0%, plus a Personal Property Tax Replacement Income Tax (replacement tax) at a rate of 2.5%, for a combined effective rate of 9.5%.
•  Form: Corporate income and replacement tax return (IL-1120)
•  Tax Period: FY2024 (calendar year ending December 31, 2024)
•  Original Due Date: April 15, 2025
•  Extended Due Date (if applicable): October 15, 2025 (if a timely extension was filed)
•  Status — Filing: [To be updated]
•  Status — Estimated Payments: Confirm timely payment of all FY2024 and FY2025 estimated tax installments. [To be updated]
•  Cascade Review Right: If the FY2024 IL-1120 has not yet been filed, Cascade review procedures apply.
6. Pennsylvania (1 Fulfillment Center)
Taxing Authority: Pennsylvania Department of Revenue
NovaMart operates one fulfillment center in the Commonwealth of Pennsylvania. Pennsylvania imposes a Corporate Net Income Tax at a rate of 8.99% (note: this rate is scheduled to decrease in future years pursuant to recent legislation).
•  Form: Corporate Net Income Tax return (RCT-101)
•  Tax Period: FY2024 (calendar year ending December 31, 2024)
•  Original Due Date: April 15, 2025
•  Extended Due Date (if applicable): October 15, 2025 (if a timely extension was filed)
•  Status — Filing: [To be updated]
•  Status — Estimated Payments: Confirm timely payment of all FY2024 and FY2025 estimated tax installments. [To be updated]
•  Cascade Review Right: If the FY2024 RCT-101 has not yet been filed, Cascade review procedures apply.
7. Tennessee (1 Fulfillment Center)
Taxing Authority: Tennessee Department of Revenue
NovaMart operates one fulfillment center in the State of Tennessee. Tennessee imposes a franchise tax (based on net worth or the book value of real or tangible personal property owned or used in Tennessee, whichever is greater) and an excise tax (based on net earnings at a rate of 6.5%).
•  Form: Franchise and Excise Tax return (FAE 170)
•  Tax Period: FY2024 (calendar year ending December 31, 2024)
•  Original Due Date: April 15, 2025
•  Extended Due Date (if applicable): October 15, 2025 (if a timely extension was filed)
•  Status — Filing: [To be updated]
•  Status — Estimated Payments: Confirm timely payment of all FY2024 and FY2025 estimated franchise and excise tax installments. [To be updated]
•  Cascade Review Right: If the FY2024 FAE 170 has not yet been filed, Cascade review procedures apply.
8. Florida (2 Fulfillment Centers)
Taxing Authority: Florida Department of Revenue
NovaMart operates two fulfillment centers in the State of Florida. Florida imposes a corporate income tax at a rate of 5.5%.
•  Form: Corporate income tax return (F-1120)
•  Tax Period: FY2024 (calendar year ending December 31, 2024)
•  Original Due Date: April 1, 2025 (Florida due date may differ from federal; confirm)
•  Extended Due Date (if applicable): November 1, 2025 (if a timely extension was filed; Florida allows automatic extension)
•  Status — Filing: [To be updated]
•  Status — Estimated Payments: Confirm timely payment of all FY2024 and FY2025 estimated tax installments. [To be updated]
•  Cascade Review Right: If the FY2024 F-1120 has not yet been filed, Cascade review procedures apply.
9. Washington (1 Fulfillment Center)
Taxing Authority: Washington Department of Revenue
NovaMart operates one fulfillment center in the State of Washington. Washington does not impose a corporate income tax. Instead, Washington imposes a Business & Occupation (B&O) Tax, which is a gross receipts tax. The B&O tax is generally reported on a monthly or quarterly basis, depending on the taxpayer's gross receipts.
•  Form: B&O Tax return (combined excise tax return)
•  Filing Frequency: Monthly or quarterly, depending on volume of B&O tax due
•  Status — Monthly/Quarterly Filings: Confirm that all B&O tax returns for pre-closing periods have been timely filed and all taxes timely paid. [To be updated]
•  Note: Washington's B&O tax applies to the gross receipts of business activities conducted in Washington. NovaMart's fulfillment center operations and any sales attributed to Washington under the state's sourcing rules may generate B&O tax obligations.
•  Cascade Review Right: Cascade review procedures apply to material Washington B&O tax filings.
E. Sales and Use Tax Compliance
NovaMart operates a marketplace platform that collects and remits sales and use taxes in multiple jurisdictions across the United States. As a marketplace facilitator, NovaMart has sales tax collection and remittance obligations in all states that impose a sales tax and have enacted marketplace facilitator laws (which, as of the date of this Checklist, includes substantially all states with a sales tax).
•  General Obligation: Confirm that all sales and use tax returns for pre-closing periods have been timely filed in all applicable jurisdictions and that all sales and use taxes collected have been timely remitted to the appropriate taxing authorities.
•  Physical Nexus States: NovaMart has physical nexus (through its fulfillment center operations) in 9 states. Sales tax filings in these states should be confirmed as current.
•  Economic Nexus / Marketplace Facilitator Obligations: NovaMart may have marketplace facilitator obligations in all states with marketplace facilitator statutes. The scope of these obligations should be confirmed through coordination with NovaMart's tax department.
•  Outstanding Sales Tax Audits or Assessments: Confirm whether there are any open sales tax audits, examinations, or assessments. Cross-reference with the Tax Due Diligence Memorandum and SPA Seller Disclosure Schedules.
•  Status: [To be updated]
F. Employment / Payroll Tax Compliance
NovaMart has approximately 2,400 employees across all locations, including its Austin, Texas headquarters and its 14 fulfillment centers. NovaMart has significant employment and payroll tax filing and payment obligations at both the federal and state levels.
•  Federal Employment Tax Returns:
•  Form 941 (Employer's Quarterly Federal Tax Return): Confirm timely filing for Q1 2025 (due April 30, 2025) and all prior quarters. [To be updated]
•  Form 940 (Employer's Annual Federal Unemployment [FUTA] Tax Return): Confirm timely filing for FY2024 (due January 31, 2025). [To be updated]
•  Confirm timely deposit of all FICA (Social Security and Medicare), FUTA, and federal income tax withholding amounts. [To be updated]
•  State Employment Tax Returns:
•  Confirm timely filing and payment of state unemployment insurance (SUI) tax returns in each state where NovaMart has employees.
•  Confirm timely filing and payment of state income tax withholding returns in each state where NovaMart has employees.
•  [To be updated — state-by-state detail to be compiled]
•  Status: [To be updated]
G. Property Tax
NovaMart owns or leases real property in multiple jurisdictions, including its 14 fulfillment centers and its Austin, Texas headquarters. In addition, NovaMart's fulfillment center equipment, fixtures, and personal property may be subject to personal property tax in various jurisdictions.
•  Real Property Tax: Confirm timely payment of property taxes on all NovaMart-owned and leased real property in each applicable jurisdiction.
•  Personal Property Tax: Confirm timely filing of personal property tax returns and timely payment of personal property taxes on fulfillment center equipment and other business personal property.
•  Note: Property tax due dates and filing requirements vary significantly by jurisdiction. A separate schedule of property tax obligations should be prepared by Whitmore & Paige LLP in coordination with NovaMart's tax department.
•  Status: [To be updated]
IV. CASCADE REVIEW PROCESS AND TIMELINE
A. Protocol for Tax Return Review
Section 6.09(b) of the SPA establishes Cascade's right to review and comment on all material Pre-Closing Tax Returns prior to their filing. This section sets forth the operational protocol for the exercise of that right.
Delivery of Draft Tax Returns:
NovaMart shall deliver draft copies of all material Pre-Closing Tax Returns to the following persons at least 30 days before the applicable due date (or as soon as practicable if fewer than 30 days remain before the filing deadline):
•  Elena Vasquez-Bright, General Counsel, Cascade Retail Holdings Inc.
4500 Elliott Avenue West, Suite 3200, Seattle, WA 98119 [Email to be confirmed]
•  Sylvia Hartwell, Specialist Partner, Tax, Calderwood & Harkness LLP
599 Lexington Avenue, 38th Floor, New York, NY 10022 [Email to be confirmed]
•  Sandra Chiu, Engagement Partner, Whitmore & Paige LLP
100 Federal Street, Suite 2500, Boston, MA 02110 [Email to be confirmed]
Cascade Review Period:
Upon receipt of a draft Tax Return, Cascade (and its advisors) shall have 15 business days to review the draft and provide written comments. All comments shall be delivered in writing to the following persons at NovaMart and Seller's counsel:
•  Douglas "Doug" Whitfield, CFO, NovaMart Global Inc.
1100 Congress Avenue, Suite 800, Austin, TX 78701
•  Amanda Trevino, General Counsel, NovaMart Global Inc.
1100 Congress Avenue, Suite 800, Austin, TX 78701
•  Richard Calloway, Lead Partner, Calloway, Brandt & Loewe LLP
600 Travis Street, Suite 4500, Houston, TX 77002
•  Simone Adesanya, Associate Lead, Calloway, Brandt & Loewe LLP
600 Travis Street, Suite 4500, Houston, TX 77002
Good Faith Negotiation and Dispute Resolution:
NovaMart shall consider in good faith all reasonable comments provided by Cascade. If, after good faith negotiation, the parties are unable to resolve a dispute regarding a Pre-Closing Tax Return, the dispute shall be referred to the Tax Arbiter — an independent nationally recognized accounting firm mutually agreed by the parties. The Tax Arbiter's determination shall be final and binding on the parties, and the costs of the Tax Arbiter shall be borne as set forth in the SPA.
B. Master Schedule of Tax Return Due Dates
A master schedule of all pre-closing tax return due dates is to be maintained and updated by Whitmore & Paige LLP, in coordination with NovaMart's tax department. The master schedule shall be organized in the following format:
Note: The above table is illustrative and will be expanded to include all applicable jurisdictions and tax types (including sales tax, payroll tax, and property tax filings) as information is compiled. Dates are subject to confirmation based on actual extension filings and other factors.
C. Tracking Log for Cascade Comments
A tracking log shall be maintained to document each instance of Cascade's exercise of its review rights. The tracking log shall include the following information for each draft Tax Return:
This tracking log shall be maintained by Derek Okonkwo (Calderwood & Harkness LLP) and Tiffany Rosenthal (Calderwood & Harkness LLP), with input from Sandra Chiu (Whitmore & Paige LLP) and Elena Vasquez-Bright (Cascade). Updates shall be circulated to the distribution list identified on the cover page of this Checklist at least monthly, or more frequently as Tax Return filing deadlines approach.
V. PROHIBITED ACTIONS REQUIRING BUYER CONSENT — MONITORING CHECKLIST
Section 6.09(e) of the SPA identifies specific actions that NovaMart may not take during the pre-closing period without the prior written consent of Cascade. This section establishes a monitoring framework to track NovaMart's compliance with these prohibitions on an ongoing basis.
The following checklist shall be reviewed and updated on a monthly basis, based on written confirmation from Douglas "Doug" Whitfield (NovaMart CFO). In addition, Amanda Trevino (NovaMart General Counsel) shall provide a quarterly sign-off confirming NovaMart's compliance with all prohibited action restrictions.
Verification Frequency:
•  Monthly Confirmation: Doug Whitfield (NovaMart CFO) to provide a written certification to Cascade (care of Elena Vasquez-Bright) and Calderwood & Harkness LLP (care of Sylvia Hartwell) on or before the 15th day of each calendar month, confirming that no prohibited actions have been taken during the preceding month. The form of monthly certification is attached as Appendix D.
•  Quarterly Sign-Off: Amanda Trevino (NovaMart General Counsel) to provide a quarterly written sign-off, in addition to the monthly CFO certification, confirming NovaMart's compliance with all prohibited action restrictions. The quarterly sign-off shall be provided within 15 days following the end of each calendar quarter (i.e., by July 15, 2025 for Q2 2025, and by October 15, 2025 for Q3 2025, which coincides with the targeted Closing Date).
Cascade Consent Process:
In the event that NovaMart determines that it needs to take any of the prohibited actions listed above, it must first obtain the prior written consent of Cascade. The consent process is as follows:
1.  NovaMart (through Amanda Trevino or Doug Whitfield) shall submit a written request for consent to Cascade (care of Elena Vasquez-Bright), with copies to Sylvia Hartwell and Harrison Wexford at Calderwood & Harkness LLP. The form of consent request is attached as Appendix C.
2.  The consent request shall include a detailed description of the proposed action, the reasons therefor, the estimated Tax impact (if any), and any supporting documentation.
3.  Calderwood & Harkness LLP and Whitmore & Paige LLP shall review the consent request and provide a recommendation to Cascade as to whether consent should be granted or withheld.
4.  Cascade shall respond to the consent request in writing within a reasonable time (which, in the absence of exigent circumstances, should be no more than 10 business days from receipt of the request and all supporting documentation).
5.  If Cascade grants consent, such consent shall be documented in writing and retained in the deal file. If Cascade withholds consent, the reasons therefor shall be communicated to NovaMart and Seller's counsel in writing.
VI. TAX AUDIT AND EXAMINATION MONITORING
A. Notification Obligations
Under Section 6.09(d) of the SPA, NovaMart is obligated to promptly notify Cascade of any Tax audit, examination, inquiry, claim, or assessment received from any Taxing authority during the pre-closing period. For purposes of this Checklist, "prompt" notification is defined as notification within 5 business days of NovaMart's receipt of any such communication from a Taxing authority.
Notification shall be provided to:
•  Elena Vasquez-Bright, General Counsel, Cascade Retail Holdings Inc.
4500 Elliott Avenue West, Suite 3200, Seattle, WA 98119
•  Sylvia Hartwell, Specialist Partner, Tax, Calderwood & Harkness LLP
599 Lexington Avenue, 38th Floor, New York, NY 10022
The notification shall include a copy of the correspondence received from the Taxing authority, a brief description of the nature of the inquiry or claim, the Tax period(s) at issue, and the identity of the NovaMart personnel responsible for responding.
B. Current Open Audits / Examinations
The following table lists all known open Tax audits, examinations, or disputes as identified during the tax due diligence process. This table should be cross-referenced with the Tax Due Diligence Memorandum and the SPA Seller Disclosure Schedules to ensure completeness.
Note: The Tax Due Diligence Memorandum identified certain open matters that are currently under review. This table will be populated with specific information once the due diligence findings are finalized and cross-referenced with the Seller Disclosure Schedules.
All open audit matters are to be monitored on a continuous basis throughout the pre-closing period. Any material development in an existing audit or the commencement of a new audit or examination shall be promptly reported to Cascade and Calderwood & Harkness LLP in accordance with the notification protocol described above.
C. Settlement Restrictions
Under Section 6.09(d) and Section 6.09(e) of the SPA, NovaMart may not settle, compromise, or otherwise resolve any Tax audit, examination, or claim without the prior written consent of Cascade. This restriction applies regardless of the dollar amount of the proposed settlement or the Tax period at issue.
The settlement review process is as follows:
1.  If NovaMart receives a settlement offer or proposes to enter into a compromise with a Taxing authority, NovaMart shall promptly notify Cascade and Calderwood & Harkness LLP.
2.  NovaMart shall provide a copy of the proposed settlement or compromise, together with all relevant correspondence, work papers, and supporting documentation.
3.  Sylvia Hartwell (Calderwood & Harkness LLP) and Sandra Chiu (Whitmore & Paige LLP) shall review the proposed settlement and provide a written recommendation to Cascade as to whether consent should be granted or withheld.
4.  Cascade shall respond to the settlement request in writing, either granting or withholding consent. Cascade's consent shall not be unreasonably withheld, conditioned, or delayed (to the extent such standard is imposed by the SPA).
5.  All settlement approvals and rejections shall be documented in writing and retained in the deal file.
VII. STRADDLE PERIOD TAX ALLOCATION
A. Straddle Period Definition
A "Straddle Period" is defined in the SPA as any Tax period that begins before and ends after the Closing Date. Because the targeted Closing Date is October 15, 2025, and NovaMart is a calendar-year taxpayer, NovaMart's FY2025 tax year (January 1, 2025 through December 31, 2025) will constitute a Straddle Period for federal and most state income tax purposes.
The allocation of Straddle Period taxes between the pre-closing portion and the post-closing portion is a critical element of the transaction's tax economics. The pre-closing portion of Straddle Period taxes is the responsibility of the Sellers (subject to the Sellers' uncapped tax indemnification obligations under the SPA), and the post-closing portion is the responsibility of Cascade as the new owner of NovaMart.
B. Allocation Method per SPA Section 6.09
Section 6.09 of the SPA prescribes the following allocation methods for Straddle Period taxes:
Taxes Based on Income, Receipts, or Payroll: For any Tax that is imposed on the basis of income, receipts, or payroll (including federal and state income taxes, the Ohio Commercial Activity Tax, the Washington B&O Tax, employment taxes, and similar Taxes), the Straddle Period shall be allocated between the pre-closing portion and the post-closing portion based on a closing-of-the-books method as of the end of the Closing Date. Under this method, NovaMart's books and records are deemed to close at the end of the Closing Date, and income, deductions, credits, and other tax items are allocated to the pre-closing or post-closing portion based on the period in which they were actually earned, incurred, or accrued.
Taxes Imposed on a Periodic Basis: For any Tax that is imposed on a periodic basis and not based on income, receipts, or payroll (including property taxes, franchise taxes measured by net worth or capital, and similar Taxes), the Straddle Period shall be allocated between the pre-closing portion and the post-closing portion on a per diem basis. Under this method, the total tax for the Straddle Period is divided by the total number of days in the Straddle Period, and the resulting daily amount is multiplied by the number of days in the pre-closing portion and the post-closing portion, respectively.
C. Responsibility for Straddle Period Taxes
•  Pre-Closing Straddle Period Taxes: The Sellers are responsible for all Taxes attributable to the pre-closing portion of any Straddle Period. These Taxes are subject to the Sellers' uncapped tax indemnification obligations under the SPA (i.e., they are not subject to the general indemnification cap of $216,000,000) and survive until 60 days after expiration of the applicable statute of limitations.
•  Post-Closing Straddle Period Taxes: Cascade is responsible for all Taxes attributable to the post-closing portion of any Straddle Period.
D. Action Items
1.  Pre-Closing Preparation: Prior to Closing, Calderwood & Harkness LLP and Whitmore & Paige LLP shall coordinate with NovaMart's tax department to establish the procedures and systems necessary to implement the closing-of-the-books method as of the end of the Closing Date. This may include ensuring that NovaMart's accounting systems can generate a trial balance and income statement as of the Closing Date.
2.  Post-Closing Calculations: Promptly following the Closing, Whitmore & Paige LLP shall prepare Straddle Period allocation calculations for all applicable jurisdictions. These calculations shall be reviewed by Calderwood & Harkness LLP and submitted to Cascade for approval before being finalized and shared with Seller's counsel.
3.  Coordination with Seller's Counsel: The Straddle Period allocation methodology is expected to be a topic of discussion with Calloway, Brandt & Loewe LLP (Seller's counsel). Any disputes regarding the Straddle Period allocation shall be resolved in accordance with the dispute resolution procedures set forth in the SPA.
VIII. TRANSFER TAX COMPLIANCE
A. SPA Provision
Section 6.09(f) of the SPA provides that any transfer taxes, documentary stamp taxes, recording fees, or similar taxes or charges arising from the transfer of NovaMart capital stock from the Selling Stockholders to Cascade shall be borne equally by the Buyer and the Sellers on a 50/50 basis.
B. Estimated Transfer Taxes
The estimated total transfer taxes arising from the stock transfer are as follows:
•  Total Estimated Transfer Taxes: $1,200,000
•  Buyer Share (50%): $600,000
•  Seller Share (50%): $600,000
The specific components of the estimated transfer tax liability, broken down by jurisdiction, are set forth in the Transfer Tax Analysis Memorandum (a separate document prepared by Calderwood & Harkness LLP).
C. Applicable Jurisdictions
The identification of all jurisdictions that may impose stock transfer taxes, documentary stamp taxes, or similar levies on the transfer of NovaMart capital stock is an important component of the transfer tax analysis. The applicable jurisdictions are expected to include Delaware (where NovaMart is incorporated) and potentially other states depending on the nature and situs of NovaMart's assets and operations. A complete analysis of applicable jurisdictions is set forth in the Transfer Tax Analysis Memorandum.
D. Filing Obligations
Transfer tax returns and related filings are typically prepared and filed by the Buyer, with the Sellers reimbursing their 50% share of the transfer taxes at or promptly following the Closing. The specific mechanics for the preparation, filing, and payment of transfer tax returns — and for the reimbursement of the Sellers' share — will be addressed in the closing mechanics documentation.
Cross-reference: Transfer Tax Analysis Memorandum (separate document)
IX. FIRPTA COMPLIANCE
A. Requirement
Under Section 1445 of the Internal Revenue Code and Treasury Regulations Section 1.1445-2(b)(2), a transferee of a U.S. real property interest is generally required to withhold 15% of the amount realized on the disposition unless the transferor provides a certification of non-foreign status. Because the acquisition of NovaMart capital stock may constitute an acquisition of a "United States real property interest" (if NovaMart is a "United States real property holding corporation" within the meaning of IRC Section 897), Cascade has required, as a closing deliverable, that NovaMart deliver a FIRPTA non-foreign person certificate at closing.
B. Certificate Details
•  NovaMart EIN: 84-3291547
•  Form of Certificate: The FIRPTA non-foreign person certificate will be in the form required by Treasury Regulations Section 1.1445-2(b)(2). The certificate will confirm that NovaMart Global Inc. is not a "foreign person" within the meaning of Section 1445 of the Internal Revenue Code, that NovaMart is a United States person as defined in Section 7701(a)(30) of the Code, and will set forth NovaMart's name, address, and taxpayer identification number.
•  Delivery: The certificate will be delivered at or prior to the Closing as a closing deliverable under the SPA.
C. Action Items
1.  Eligibility Confirmation: Confirm that NovaMart is eligible to deliver the FIRPTA non-foreign person certificate — i.e., that NovaMart is not a foreign person within the meaning of Section 1445. Based on the tax due diligence, NovaMart is a Delaware corporation and a United States person for federal income tax purposes.
2.  Monitoring for Changes: Monitor for any change in facts prior to closing that could affect NovaMart's eligibility to deliver the certificate (e.g., a change in ownership or organizational structure that could result in NovaMart being treated as a foreign person).
3.  Preparation and Execution: The FIRPTA certificate should be prepared in draft form well in advance of the targeted Closing Date and circulated to all parties for review. The certificate must be duly executed by an authorized officer of NovaMart at closing.
Cross-reference: FIRPTA Compliance Memorandum (separate document)
X. PAYOFF AND TERMINATION OF NOVAMART EXISTING CREDIT FACILITY — TAX IMPLICATIONS
A. Background
NovaMart maintains an existing revolving credit facility with Ashford Savings Bank, N.A. in the aggregate principal amount of $150,000,000 (the "Credit Facility"). Under the terms of the SPA, the Credit Facility is required to be repaid in full and terminated at or prior to the Closing. The estimated payoff amount as of the anticipated Closing Date is approximately $143,200,000 in outstanding principal, plus accrued and unpaid interest through the Closing Date.
B. Tax Implications of Early Termination
The early termination and repayment of the Credit Facility may give rise to certain tax considerations, including the following:
1.  Deferred Financing Costs: If NovaMart capitalized any debt issuance costs or deferred financing costs associated with the Credit Facility, the early termination of the facility may result in the write-off (acceleration of amortization) of any remaining unamortized deferred financing costs. The tax treatment of such a write-off should be confirmed by Whitmore & Paige LLP.
2.  Cancellation of Debt Income (CODI): Because the Credit Facility is being repaid in full at par, there should be no cancellation of debt income under IRC Section 61(a)(11) or Section 108. CODI generally arises only when indebtedness is discharged for less than its face amount, which is not the case here. Confirm that the payoff amount reflects the full outstanding principal and accrued interest.
3.  Deductibility of Accrued Interest: NovaMart should be entitled to a deduction for all interest accrued on the Credit Facility through the Closing Date, subject to the applicable limitations (including any limitations under IRC Section 163(j)). Confirm that the interest accrued through the Closing Date is properly allocated to the pre-closing period for purposes of the Straddle Period allocation.
4.  Prepayment Penalties: Confirm whether the Credit Facility includes any prepayment penalties or breakage costs, and if so, whether such costs are deductible for federal and state income tax purposes.
C. Action Items
•  Whitmore & Paige LLP to review the Credit Facility documentation and confirm the tax treatment of the payoff and termination.
•  Calderwood & Harkness LLP to confirm that the payoff and termination do not give rise to any unintended tax consequences.
•  Coordinate with NovaMart's CFO (Doug Whitfield) to obtain the estimated payoff amount and a breakdown of principal and accrued interest as of the anticipated Closing Date.
XI. SECTION 338(h)(10) ELECTION — CONFIRMATION OF NON-ELECTION
A. SPA Position
The SPA provides that no election under Section 338(h)(10) of the Internal Revenue Code (or any corresponding or similar election under state, local, or non-U.S. Tax law) will be made with respect to the acquisition of NovaMart capital stock. During the negotiation of the SPA, the parties were unable to agree on a step-up pricing allocation that would have made a Section 338(h)(10) election mutually beneficial. Accordingly, the transaction will be treated as a stock purchase for federal income tax purposes.
B. Implications of Non-Election
The decision not to make a Section 338(h)(10) election has the following implications:
1.  No Deemed Asset Sale: The transaction will not be treated as a deemed asset sale for federal income tax purposes. Accordingly, the Selling Stockholders will recognize gain (or loss) on the sale of their NovaMart stock based on the difference between the amount realized and their respective adjusted bases in the stock.
2.  Carryover Tax Basis: NovaMart's historical tax basis in its assets will carry over and remain unchanged after the Closing. Cascade will not receive a stepped-up tax basis in NovaMart's assets.
3.  Preservation of Tax Attributes: NovaMart's tax attributes, including any net operating loss (NOL) carryforwards, tax credit carryforwards, and other tax attributes, will be preserved after the Closing. However, these tax attributes may be subject to limitations under IRC Section 382 as a result of the change in ownership resulting from the transaction. The applicability of Section 382 limitations should be analyzed separately.
C. Action Items
•  Confirm that no party has taken or proposes to take any action that could inadvertently trigger deemed asset sale treatment for the transaction.
•  Monitor for any changes in circumstances that could affect the tax characterization of the transaction as a stock purchase.
•  Separately analyze the application of IRC Section 382 to NovaMart's NOL carryforwards and other tax attributes following the Closing (this analysis is outside the scope of this Checklist but is referenced for completeness).
XII. INTERPLAY WITH TAX INDEMNIFICATION AND R&W INSURANCE
A. Tax Indemnification Under the SPA
The SPA contains a robust tax indemnification regime that provides significant protection to Cascade with respect to pre-closing Tax liabilities. The key features of the Sellers' tax indemnification obligations are as follows:
•  Scope: The Sellers indemnify Cascade and its affiliates (including NovaMart, post-closing) for all Losses arising out of or relating to (i) any Taxes of NovaMart attributable to any Pre-Closing Tax Period (including the pre-closing portion of any Straddle Period), (ii) any breach of the Tax representations set forth in the SPA, and (iii) any breach of the pre-closing tax covenants set forth in Section 6.09.
•  No Cap: The Sellers' tax indemnification is uncapped — it is not subject to the general indemnification cap of $216,000,000 that applies to other representations and warranties.
•  Survival Period: The Tax representations and the Sellers' tax indemnification obligations survive until 60 days after the expiration of the applicable statute of limitations (including any extensions or waivers thereof). This extended survival period provides Cascade with protection for the full period during which a Taxing authority could assert a claim for additional taxes.
•  No Basket / Deductible: Confirm whether the Sellers' tax indemnification is subject to the general indemnification basket or deductible applicable to other indemnification claims. Cross-reference with the Tax Indemnification Provisions Analysis Memorandum for detailed analysis.
B. R&W Insurance
Cascade has obtained a representations and warranties ("R&W") insurance policy in connection with the transaction. The key details of the R&W insurance policy are as follows:
•  Insurer: Meridian Specialty Insurance Company
•  Policy Number: MSI-RWI-2025-07832
•  Policy Limit: $216,000,000
•  Retention (Self-Insured Retention): $12,000,000
•  R&W Insurance Broker: Thomas Ellingsen, Northbridge Risk Advisors LLC
The R&W insurance policy provides coverage for losses arising from breaches of the representations and warranties set forth in the SPA, subject to the terms, conditions, and exclusions of the policy. With respect to Tax matters, the following considerations apply:
1.  Covered Tax Representations: Confirm which Tax representations set forth in the SPA are covered under the R&W policy. R&W policies typically cover Tax representations, but coverage may be subject to certain exclusions (e.g., for transfer pricing, Tax-free reorganizations, or other specific Tax matters).
2.  Excluded Tax Matters: Confirm whether any Tax representations or Tax-related matters are excluded from coverage under the R&W policy. Common exclusions in R&W policies include matters identified during the due diligence process and matters disclosed in the Seller Disclosure Schedules.
3.  Coordination with Seller Indemnification: The uncapped Seller tax indemnification provides primary coverage for pre-closing Tax liabilities. The R&W policy provides supplemental coverage for Tax representation breaches to the extent not excluded from the policy. In practice, Cascade should first look to the Sellers' tax indemnification for recovery of pre-closing Tax liabilities, and should look to the R&W policy only if the Sellers' indemnification is unavailable or insufficient (e.g., due to a dispute over the scope of the indemnification or the financial capacity of the indemnifying parties).
4.  Notice Requirements: The R&W policy may contain specific notice requirements that must be satisfied in order to preserve coverage. Coordinate with Thomas Ellingsen at Northbridge Risk Advisors LLC to ensure that any Tax-related claims are timely reported under the R&W policy.
Cross-reference: Tax Indemnification Provisions Analysis Memorandum (separate document)
XIII. KEY CONTACTS FOR TAX COVENANT COMPLIANCE
The following table identifies the key contacts for tax covenant compliance monitoring during the pre-closing period:
XIV. UPDATE LOG AND VERSION HISTORY
This Checkli