MEMORANDUM
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
FROM: Sylvia Hartwell, Specialist Partner, Tax, Calderwood & Harkness LLP
TO: Harrison Wexford, Responsible Partner, M&A, Calderwood & Harkness LLP Derek Okonkwo, Lead Associate, M&A, Calderwood & Harkness LLP Elena Vasquez-Bright, General Counsel, Cascade Retail Holdings Inc. Rajiv Sundaram, CFO, Cascade Retail Holdings Inc.
CC: Beatrice Holloway, Billing Partner, M&A, Calderwood & Harkness LLP Tiffany Rosenthal, Working Associate, M&A, Calderwood & Harkness LLP Sandra Chiu, Engagement Partner, Whitmore & Paige LLP
DATE: May 18, 2025
RE: Transfer Tax Analysis — Acquisition of 100% of the Capital Stock of NovaMart Global Inc. (EIN 84-3291547) by Cascade Retail Holdings Inc. (EIN 91-2847653)
MATTER REFERENCE: Cascade Retail Holdings Inc. — Acquisition of NovaMart Global Inc. / Calderwood & Harkness LLP File No. 2025-0489-MNA
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I. Executive Summary
The purpose of this memorandum is to identify and quantify all transfer, documentary stamp, and sales/use taxes arising from the transfer of 100% of the issued and outstanding capital stock of NovaMart Global Inc. ("NovaMart," the "Company," or the "Target") from the Selling Stockholders (as defined below) to Cascade Retail Holdings Inc. ("Cascade," "CRH," or the "Buyer") pursuant to that certain Stock Purchase Agreement, expected to be dated as of May 20, 2025, by and among Cascade, the Selling Stockholders, and Ridgeline Equity Partners, LP, solely in its capacity as the Stockholder Representative (the "SPA").
The transaction is structured as a stock purchase, in which Cascade will acquire 100% of the issued and outstanding capital stock of NovaMart for an aggregate purchase price of $1,200,000,000, payable entirely in cash at closing, with no earnout component, no stock consideration, and no deferred purchase price obligations (other than the escrow described below and any post-closing working capital adjustment). NovaMart is a Delaware corporation that is privately held and operates a nationwide retail fulfillment and logistics business through 14 fulfillment centers located across 10 states, together with its corporate headquarters in Austin, Texas.
Key Conclusion. Based on our analysis of the transfer tax regimes of each jurisdiction in which NovaMart is incorporated, qualified to do business, or holds real or significant tangible property, we estimate that the aggregate transfer tax liability arising from the stock transfer across all relevant jurisdictions will be approximately $1,200,000. Pursuant to the terms of the SPA, this aggregate transfer tax liability is to be borne equally by the Buyer and the Selling Stockholders, resulting in a cost to each side of approximately $600,000.
The primary sources of transfer tax liability are: (a) the New Jersey controlling interest transfer tax, estimated at approximately $375,000, applicable because NovaMart owns one fulfillment center property in New Jersey; and (b) the Pennsylvania controlling interest transfer tax, estimated at approximately $360,000, applicable because NovaMart owns one fulfillment center property in Pennsylvania. The remaining balance of approximately $65,000 is attributable to miscellaneous filing fees, nominal recording charges, and documentary stamp taxes across various jurisdictions related to ancillary closing documentation and the payoff and release of existing credit facilities.
The SPA provides, in Section 6.10 thereof, that all transfer, documentary, sales, use, stamp, registration, and similar taxes and fees (including any penalties and interest thereon) incurred in connection with the transactions contemplated by the SPA shall be borne equally by the Buyer and the Selling Stockholders. The party legally required to remit such taxes is responsible for filing the applicable return and remitting the tax, and the other party is obligated to reimburse its 50% share promptly after the closing.
This memorandum should be read in conjunction with the following related memoranda and analyses prepared by the Calderwood & Harkness Tax group in connection with this transaction:
(i) the Tax Structure Memorandum (dated May 15, 2025), which addresses the overall tax structuring considerations applicable to the acquisition;
(ii) the Tax Indemnification Provisions Analysis (dated May 16, 2025), which analyzes the tax indemnification provisions of the SPA and their interaction with the general indemnification framework;
(iii) the FIRPTA Compliance Memorandum (dated May 17, 2025), which addresses the withholding and compliance obligations under Sections 1445 and 897 of the Internal Revenue Code of 1986, as amended, in connection with the acquisition of NovaMart stock from certain of the Selling Stockholders; and
(iv) the Real Property Due Diligence Memorandum (prepared by Tiffany Rosenthal, dated May 10, 2025), which catalogs NovaMart's real property interests across all jurisdictions.
II. Transaction Overview
Set forth below is a summary of the principal terms and structural elements of the transaction that are relevant to the transfer tax analysis contained in this memorandum.
Buyer. Cascade Retail Holdings Inc. is a Delaware corporation that is publicly traded on the Nasdaq Stock Market under the ticker symbol "CRHI." Cascade is headquartered at 4500 Elliott Avenue West, Suite 3200, Seattle, Washington 98119. Cascade is a diversified retail holding company engaged in the acquisition, operation, and management of specialty retail, e-commerce, and fulfillment businesses throughout the United States.
Target. NovaMart Global Inc. is a Delaware corporation that is privately held. NovaMart is headquartered at 1100 Congress Avenue, Suite 800, Austin, Texas 78701. NovaMart operates a nationwide retail fulfillment and logistics platform, with 14 fulfillment centers across 10 states and a corporate headquarters in Austin. NovaMart is qualified to do business in Delaware and Texas, as well as in each state in which it operates a fulfillment center.
Selling Stockholders. The following persons and entities hold, in the aggregate, 100% of the issued and outstanding capital stock of NovaMart and will sell all of their respective shares to Cascade pursuant to the SPA:
Ridgeline Equity Partners, LP has been designated as the Stockholder Representative under the SPA for purposes of post-closing matters, including the administration of the transfer tax sharing obligations. Franklin Osei, a Managing Director of Ridgeline, serves as the primary contact for the Stockholder Representative.
Transaction Type. The transaction is structured as a 100% stock purchase. It is not an asset purchase and does not involve a statutory merger. No elections under Section 338(g) or Section 338(h)(10) of the Internal Revenue Code have been agreed upon by the parties. As discussed further in Section VIII below, the stock purchase structure is materially favorable from a transfer tax perspective compared to alternative structures.
Purchase Price. The aggregate purchase price for 100% of the NovaMart capital stock is $1,200,000,000, payable entirely in cash at closing, subject to a customary post-closing working capital adjustment. There is no earnout component, no deferred purchase price, and no stock consideration.
Escrow. At closing, $96,000,000 (representing 8% of the aggregate purchase price) will be deposited with Marlowe Asset Management Trust Company, N.A., as escrow agent, pursuant to the Escrow Agreement. The escrow fund will serve as security for the Selling Stockholders' indemnification obligations under the SPA. Accordingly, the net cash payable to the Selling Stockholders at closing is $1,104,000,000, subject to the working capital adjustment and any deductions for transfer tax sharing obligations and other transaction costs to be deducted at closing.
Governing Law. The SPA is governed by the laws of the State of Delaware, without regard to its conflicts of law principles.
Targeted Closing Date. The parties have targeted October 15, 2025 as the closing date, subject to the satisfaction or waiver of all conditions precedent to closing, including receipt of applicable regulatory approvals.
Relevant Jurisdictions for Transfer Tax Analysis. The transfer at issue involves the sale and transfer of 100% of the capital stock of a Delaware corporation. NovaMart holds real and personal property and conducts operations (including through 14 fulfillment centers and its corporate headquarters) across multiple states. The following table summarizes NovaMart's geographic footprint:
Our analysis covers all states in which NovaMart is incorporated, is qualified to do business, or holds real property or significant tangible assets. We have also analyzed the transfer tax implications in New York, where certain of the Selling Stockholders may be resident or where elements of the stock transfer could be deemed to have been effected.
III. General Legal Framework — Transfer Taxes on Stock Transfers
A. Nature of Transfer Taxes
Transfer taxes — also referred to in various jurisdictions as documentary stamp taxes, realty transfer taxes, conveyance fees, stock transfer taxes, recording taxes, and similar excise levies — are taxes imposed by certain states and localities on the transfer of stock, real property, or interests in entities that own real property. These taxes are generally imposed at the time of the transfer, typically measured by the consideration paid or the fair market value of the property or interests transferred, and are separate from and in addition to income taxes that may be payable by the transferor on any gain recognized in connection with the transfer.
The landscape of state and local transfer taxation is complex and varies significantly from jurisdiction to jurisdiction. In the context of corporate acquisitions, the transfer tax implications depend heavily on the structure of the transaction (stock purchase versus asset purchase versus merger), the nature and location of the target company's assets (particularly real property), and the specific provisions of the applicable state and local tax statutes and regulations.
For purposes of this analysis, the principal categories of transfer taxes relevant to the acquisition of NovaMart are as follows:
(i) Stock Transfer Taxes. A limited number of states have historically imposed taxes directly on the transfer of certificates of stock or ownership interests in corporations. The most notable example was the State of Delaware, which maintained a stock transfer tax for many decades before repealing it effective January 1, 2022. The State of New York continues to impose a stock transfer tax, but provides a 100% rebate, effectively reducing the net tax to zero. As a practical matter, stock transfer taxes are rarely a significant cost factor in contemporary M&A transactions.
(ii) Real Estate Transfer Taxes Triggered by Transfers of Controlling Interests ("Controlling Interest Transfer Taxes" or "CITTs"). A number of states and localities impose real estate transfer taxes not only on direct conveyances of real property, but also on transfers of "controlling interests" in entities that directly or indirectly own real property within the jurisdiction. These statutes are designed to prevent taxpayers from avoiding real estate transfer taxes by structuring transactions as sales of entity interests rather than direct sales of real property. The controlling interest thresholds, definitions, and applicable rates vary by jurisdiction. The jurisdictions that impose CITTs and are relevant to this transaction include New Jersey, Pennsylvania, and Washington (though Washington is inapplicable for reasons discussed below).
(iii) Documentary Stamp Taxes. Certain states impose documentary stamp taxes on instruments of transfer, including deeds, stock certificates, promissory notes, and other written instruments. The applicability of these taxes to stock transfer instruments varies by jurisdiction.
In the context of a stock purchase transaction, the transfer tax exposure is generally limited compared to an asset purchase transaction. In an asset purchase, the buyer typically acquires the target's assets directly, which may include real property and other tangible assets that are subject to real estate transfer taxes and documentary stamp taxes in the jurisdictions where the assets are located. In a stock purchase, by contrast, the buyer acquires the stock of the target entity, and no direct transfer of real property or tangible assets occurs — the entity continues to hold its assets, and only the ownership of the entity changes hands. However, CITTs are specifically designed to impose transfer tax liability on stock and entity interest transfers where the effect of the transfer is to change the controlling ownership of an entity that holds real property in the taxing jurisdiction.
B. Key Analytical Questions
In analyzing the transfer tax implications of the acquisition of NovaMart, we have applied the following analytical framework to each relevant jurisdiction:
(1) Does the jurisdiction impose a tax on transfers of corporate stock? If so, what is the rate, and are there exemptions or rebates available?
(2) Does the jurisdiction impose a controlling interest transfer tax on transfers of interests in entities holding real property within the jurisdiction? If so, what is the controlling interest threshold (e.g., 50%, 90%), and what is the applicable rate?
(3) Are there documentary stamp tax requirements applicable to the instruments used to effect the stock transfer (e.g., stock powers, stock purchase agreements, closing documents)?
(4) Does NovaMart own (as opposed to lease) real property in the jurisdiction? If so, what is the estimated fair market value of such real property for purposes of computing any applicable CITT?
(5) Are there exemptions available that could reduce or eliminate any identified transfer tax liability (e.g., exemptions for publicly traded stock, exemptions for transfers of stock in corporations as opposed to partnerships or limited liability companies, de minimis thresholds)?
We address each of these questions on a jurisdiction-by-jurisdiction basis in Section IV below.
IV. Jurisdiction-by-Jurisdiction Analysis
A. Delaware (State of Incorporation of NovaMart and Cascade)
Delaware is the state of incorporation of both NovaMart (the Target) and Cascade (the Buyer). We have analyzed two categories of Delaware transfer taxes that are potentially relevant to the transaction.
1. Delaware Stock Transfer Tax (Former 6 Del. C. § 8143). For many decades, Delaware was the only state in the United States that imposed a meaningful stock transfer tax on the transfer of shares of corporate stock. The Delaware stock transfer tax was imposed on the sale, transfer, or assignment of shares of stock of any corporation organized under the laws of the State of Delaware at rates that varied based on the par value of the shares and the aggregate consideration paid.
However, effective January 1, 2022, the State of Delaware repealed the stock transfer tax in its entirety pursuant to House Bill 219 of the 151st General Assembly, signed into law on June 30, 2021. The repeal was part of a broader legislative effort to enhance Delaware's competitiveness as a jurisdiction of incorporation and to eliminate a tax that was increasingly viewed as an anachronistic burden on corporate transactions.
Because the repeal of the Delaware stock transfer tax became effective prior to the targeted closing date of the transaction, the transfer of NovaMart stock to Cascade will not be subject to the Delaware stock transfer tax.
Conclusion: No Delaware stock transfer tax applies to the transfer of NovaMart stock.
2. Delaware Realty Transfer Tax (25 Del. C. § 5401 et seq.). Delaware imposes a realty transfer tax on the transfer of real property located within the State of Delaware. The combined state and county realty transfer tax rate is generally 4% of the value of the real property transferred (with the rate split between the state portion and the county portion, and with the buyer and seller each bearing a portion of the tax unless otherwise agreed).
Based on our due diligence review, NovaMart does not own or lease any real property in the State of Delaware. NovaMart's sole connection to Delaware is its state of incorporation. NovaMart maintains a registered agent in Delaware — Pinnacle Corporate Services Inc., located at 850 New Burton Road, Suite 201, Dover, Delaware 19904 — but this registered agent office is neither owned nor leased by NovaMart and does not constitute real property of NovaMart.
In addition, Delaware does not currently impose a controlling interest transfer tax on transfers of interests in entities that own real property in Delaware. Accordingly, even if NovaMart held real property in Delaware, the mere transfer of NovaMart stock would not trigger a Delaware realty transfer tax absent a direct conveyance of the real property itself.
Conclusion: No Delaware realty transfer tax liability arises from the transaction.
Estimated Tax: $0.
B. Texas (NovaMart Headquarters; NovaMart Qualified to Do Business)
Texas is the state in which NovaMart maintains its corporate headquarters and is qualified to do business.
1. Texas Stock Transfer Tax. The State of Texas does not impose a stock transfer tax on the transfer, sale, or assignment of shares of corporate stock. There is no Texas statute or regulation that levies a tax directly on stock transfers.
2. Texas Real Estate Transfer Tax. Texas is one of a small number of states that does not impose a general real estate transfer tax or documentary stamp tax on transfers of real property. Texas does not levy a tax on the recording of deeds or other instruments of conveyance. Similarly, Texas does not impose a controlling interest transfer tax on transfers of interests in entities that hold Texas real property.
NovaMart's headquarters is located at 1100 Congress Avenue, Suite 800, Austin, Texas 78701. Based on our due diligence review, NovaMart does not own this property; rather, NovaMart occupies the premises pursuant to a commercial lease agreement with Congress Tower Partners LP as landlord. Because NovaMart does not own real property in Texas and because Texas does not impose any form of transfer tax applicable to this transaction, no Texas transfer tax liability arises.
Conclusion: No Texas transfer tax liability of any kind arises from the transaction.
Estimated Tax: $0.
C. California (3 Fulfillment Centers)
NovaMart operates three fulfillment centers in the State of California.
1. California Documentary Transfer Tax (Cal. Rev. & Tax. Code § 11911 et seq.). California imposes a documentary transfer tax on transfers of real property located within the state. The tax is imposed on instruments by which real property is transferred (principally deeds of conveyance) at a base rate of $0.55 per $500 of consideration paid, or fractional part thereof (equivalent to $1.10 per $1,000 of consideration). In addition to the state documentary transfer tax, counties are authorized to impose a county documentary transfer tax at the same rate, and certain cities (notably the City of Los Angeles, the City and County of San Francisco, and, more recently, the City of San Jose and certain other municipalities) impose supplemental municipal documentary transfer taxes at varying rates.
2. Application to Stock Transfers. The California documentary transfer tax applies only to transfers of "realty" — that is, deeds and other instruments by which an interest in real property is conveyed. The tax does not apply to transfers of corporate stock, even if the corporation whose stock is being transferred holds real property located in California. Unlike certain other states (such as New Jersey, Pennsylvania, and Washington), California does not impose a controlling interest transfer tax on transfers of stock or other entity interests in entities holding California real property.
We note that there have been periodic legislative proposals in California to enact a CITT, but no such legislation has been enacted as of the date of this memorandum.
3. NovaMart's California Real Property. NovaMart operates three fulfillment centers in California. Based on our due diligence review, including review of the Real Property Due Diligence Memorandum prepared by Tiffany Rosenthal and the title search reports obtained from Ridgecrest Title Group Inc., NovaMart does not own any real property in California. All three California fulfillment centers are occupied by NovaMart pursuant to commercial lease agreements with third-party landlords. Accordingly, even if California imposed a CITT (which it does not), the absence of NovaMart-owned real property in the state would eliminate any potential liability.
Conclusion: No California documentary transfer tax applies to the transaction. There is no stock transfer tax in California, and California does not impose a CITT.
Estimated Tax: $0.
D. New Jersey (2 Fulfillment Centers)
NovaMart operates two fulfillment centers in the State of New Jersey. New Jersey is one of the two jurisdictions in which material transfer tax liability is expected to arise in connection with this transaction.
1. New Jersey Realty Transfer Fee (N.J.S.A. 46:15-7). New Jersey imposes a realty transfer fee on the recording of deeds and other instruments transferring interests in real property located within the state. The realty transfer fee is imposed at graduated rates on the consideration paid for the real property. For transfers in which the total consideration exceeds $350,000, the fee schedule applies at progressive rates, with the highest marginal rate applicable to commercial properties reaching $6.05 per $500 (or $12.10 per $1,000) for consideration exceeding $6,000,000, in addition to a general filing fee and the base realty transfer fee.
2. New Jersey Controlling Interest Transfer Tax (N.J.S.A. 46:15-7.2). New Jersey imposes a controlling interest transfer tax on transfers of a "controlling interest" in an entity that directly or indirectly owns or leases real property classified as Class 4A commercial or industrial property in New Jersey. For purposes of the New Jersey CITT, a "controlling interest" is defined as more than 50% of the total interest in the entity.
The transfer of 100% of the NovaMart stock from the Selling Stockholders to Cascade constitutes a transfer of a controlling interest in NovaMart, which exceeds the 50% threshold by a substantial margin. The New Jersey CITT is imposed at the same graduated rates as the realty transfer fee, calculated based on the "equalized assessed value" of the New Jersey real property held by the entity, or, in certain circumstances, the "consideration allocable" to the New Jersey real property.
For purposes of the CITT, the tax base is determined by reference to the fair market value of the New Jersey real property, which may be established by the equalized assessed value, an appraisal, or such other evidence of value as the New Jersey Division of Taxation may require.
3. NovaMart's New Jersey Real Property. NovaMart operates two fulfillment centers in New Jersey. Based on our due diligence review, including the Real Property Due Diligence Memorandum and the title search reports from Ridgecrest Title Group Inc., one of the two New Jersey fulfillment centers is owned by NovaMart in fee simple. The owned fulfillment center is located in central New Jersey (the specific address is set forth in Appendix A to this memorandum). The second New Jersey fulfillment center is occupied by NovaMart pursuant to a commercial lease with a third-party landlord.
Based on the most recent county tax assessment records and the preliminary appraisal data obtained during due diligence, the estimated fair market value of the NovaMart-owned New Jersey fulfillment center property is approximately $28,000,000. We note that this value is subject to confirmation through an independent appraisal or through formal review of the equalized assessed value, as discussed in Section IX below.
4. Estimated Tax Calculation. Applying the graduated New Jersey realty transfer fee schedule to the estimated fair market value of approximately $28,000,000, we calculate the estimated New Jersey CITT as follows:
The computation applies the progressive rates established under N.J.S.A. 46:15-7 to successive tiers of the consideration allocable to the real property. The general realty transfer fee, the supplemental fee applicable to commercial properties, and the CITT component together yield an estimated total tax in the range of $350,000 to $400,000. For purposes of this memorandum and the estimated closing statement, we use a midpoint estimate of approximately $375,000, which reflects our best estimate based on available data.
We note that New Jersey also imposes a so-called "mansion tax" surcharge on transfers of residential property in excess of $1,000,000. This surcharge is not applicable to the transaction because the NovaMart-owned New Jersey property is classified as commercial/industrial property (Class 4A), not residential property.
Estimated Tax: Approximately $375,000 (midpoint estimate, subject to final confirmation of equalized assessed value).
E. Georgia (2 Fulfillment Centers)
NovaMart operates two fulfillment centers in the State of Georgia.
1. Georgia Real Estate Transfer Tax (O.C.G.A. § 48-6-1). Georgia imposes a real estate transfer tax on the transfer of real property located within the state at a rate of $1.00 per $1,000 of value (equivalent to $0.10 per $100, or 0.1% of the value of the real property transferred). The tax is levied on deeds and other instruments transferring title to real property and is payable at the time the instrument is recorded with the applicable county clerk of superior court.
Importantly, Georgia does not impose a controlling interest transfer tax on transfers of stock or other entity interests in entities that hold Georgia real property. The Georgia real estate transfer tax applies only to direct conveyances of real property, not to indirect changes in ownership resulting from stock or entity interest transfers.
2. NovaMart's Georgia Real Property. NovaMart operates two fulfillment centers in Georgia. Based on our due diligence review, both Georgia fulfillment centers are occupied by NovaMart pursuant to commercial lease agreements with third-party landlords. NovaMart does not own any real property in the State of Georgia. Accordingly, no Georgia real estate transfer tax is triggered by the transfer of NovaMart stock, and no Georgia CITT applies (as Georgia does not impose a CITT).
Conclusion: No Georgia transfer tax applies to the transaction.
Estimated Tax: $0.
F. Ohio (1 Fulfillment Center)
NovaMart operates one fulfillment center in the State of Ohio.
1. Ohio Real Property Conveyance Fee (O.R.C. § 319.54(G)(3)). Ohio imposes a real property conveyance fee on transfers of real property. The state-level conveyance fee is $4.00 per $1,000 of the value of the real property transferred (equivalent to a rate of 0.4%). In addition, counties are authorized to levy a permissive real property transfer tax at rates of up to $3.00 per $1,000 of value, depending on the county. The total combined state and county conveyance fee can reach approximately $7.00 per $1,000 (or 0.7% of value) in certain Ohio counties.
2. Ohio Does Not Impose a Controlling Interest Transfer Tax. Ohio does not impose a controlling interest transfer tax on transfers of corporate stock, partnership interests, or other entity interests, even where the entity whose interests are being transferred owns real property located in Ohio. The Ohio real property conveyance fee applies only to direct transfers of real property (i.e., the recording of deeds or other instruments of conveyance).
3. NovaMart's Ohio Real Property. NovaMart operates one fulfillment center in Ohio. Based on our due diligence review, this fulfillment center is occupied by NovaMart pursuant to a commercial lease with a third-party landlord. NovaMart does not own any real property in Ohio.
Conclusion: No Ohio real property conveyance fee or transfer tax applies to the transaction.
Estimated Tax: $0.
G. Illinois (1 Fulfillment Center)
NovaMart operates one fulfillment center in the State of Illinois.
1. Illinois Real Estate Transfer Tax (35 ILCS 200/31-1 et seq.). Illinois imposes a state-level real estate transfer tax on transfers of real property located within the state at a rate of $0.50 per $500 of value (equivalent to $1.00 per $1,000 of value, or 0.1%). In addition, counties (other than Cook County) may impose a county real estate transfer tax at $0.25 per $500 of value, and Cook County imposes a county transfer tax at $0.25 per $500.
2. Controlling Interest Transfer Tax — State Level and City of Chicago. At the state level, Illinois does not impose a specific controlling interest transfer tax on transfers of interests in entities holding Illinois real property. However, the City of Chicago imposes a Chicago Real Property Transfer Tax, codified at Section 3-33 of the Municipal Code of Chicago, which expressly applies to transfers of "controlling interests" (defined as more than 50% of the total interest) in entities that own real property located within the City of Chicago. The Chicago CITT is imposed at the rate of $3.75 per $500 of the transfer price or fair market value (for residential properties over $1,000,000, the rate is currently higher following recent amendments, but the commercial rate remains relevant for our analysis). This rate translates to $7.50 per $1,000, or 0.75% of value, for commercial property.
3. NovaMart's Illinois Real Property. NovaMart operates one fulfillment center in Illinois. Based on our due diligence review, this fulfillment center is located in the suburban Chicago area — specifically, in an unincorporated area of a collar county — and is not located within the corporate limits of the City of Chicago proper. Furthermore, the fulfillment center is occupied by NovaMart pursuant to a commercial lease with a third-party landlord; NovaMart does not own this property.
Because NovaMart does not own real property in Illinois and because the leased property is not located within the City of Chicago, neither the Illinois state-level real estate transfer tax nor the City of Chicago CITT is applicable to this transaction.
Conclusion: No Illinois state-level real estate transfer tax or City of Chicago CITT applies. No stock transfer tax exists in Illinois.
Estimated Tax: $0.
H. Pennsylvania (1 Fulfillment Center)
NovaMart operates one fulfillment center in the Commonwealth of Pennsylvania. Pennsylvania is the second of the two jurisdictions in which material transfer tax liability is expected to arise in connection with this transaction.
1. Pennsylvania Realty Transfer Tax (72 P.S. § 8101-C et seq.). Pennsylvania imposes a realty transfer tax on the transfer of real property located within the Commonwealth. The tax is imposed at a combined state and local rate. The state portion of the realty transfer tax is 1% of the value of the real property transferred. In addition, each county and municipality may impose a local realty transfer tax, which in most jurisdictions is set at 1% (split between the county and the municipality). Accordingly, the combined state and local realty transfer tax rate is typically 2% of the value of the real property, although the local rate varies by county and municipality.
2. Pennsylvania Controlling Interest Transfer Tax (72 P.S. § 8102-C.3). Pennsylvania imposes a realty transfer tax on transfers of a "controlling interest" in a "real estate company" — that is, an entity that holds an interest in real property located in Pennsylvania. For purposes of the Pennsylvania CITT, a "controlling interest" is defined as the acquisition of 90% or more of the total interests in the entity. This is a notably higher threshold than the 50% threshold applicable in New Jersey and several other CITT jurisdictions.
The transfer of 100% of the NovaMart stock to Cascade clearly exceeds the 90% threshold. NovaMart is a "real estate company" for purposes of the Pennsylvania CITT because it holds an interest in real property located in Pennsylvania (specifically, it owns the Pennsylvania fulfillment center property described below). Accordingly, the Pennsylvania CITT is applicable to this transaction.
The Pennsylvania CITT is imposed at the same combined state and local rate as the realty transfer tax on direct transfers of real property — that is, at a combined rate of approximately 2% (1% state + 1% local, although the precise local rate depends on the county and municipality in which the real property is located). The tax is measured by the "computed value" of the real property held by the entity, which is generally the fair market value of the real property.
3. NovaMart's Pennsylvania Real Property. NovaMart operates one fulfillment center in Pennsylvania. Based on our due diligence review, including the Real Property Due Diligence Memorandum and the title search reports from Ridgecrest Title Group Inc., this fulfillment center is owned by NovaMart in fee simple. The property is not subject to a ground lease or similar arrangement; NovaMart holds full fee ownership.
Based on the most recent county tax assessment records and the preliminary appraisal data obtained during due diligence, the estimated fair market value of the NovaMart-owned Pennsylvania fulfillment center is approximately $18,000,000. As with the New Jersey property, this value is subject to confirmation through independent appraisal, as discussed in Section IX below.
4. Estimated Tax Calculation. Applying the combined Pennsylvania realty transfer tax rate of 2% (1% state + 1% local, based on the standard rate applicable in the county where the property is located) to the estimated fair market value of $18,000,000:
Estimated Pennsylvania CITT = 2% × $18,000,000 = $360,000
The $360,000 estimated liability consists of $180,000 attributable to the state portion (1%) and $180,000 attributable to the local portion (1%).
We have reviewed the available exemptions and exclusions under the Pennsylvania realty transfer tax statute, including exemptions for transfers between affiliated entities, transfers to or by governmental bodies, and other specified transactions. Based on our analysis, none of these exemptions are applicable to the stock transfer contemplated by the SPA, and we do not expect the estimated liability to be reduced by the application of any exemption.
Estimated Tax: Approximately $360,000.
I. Tennessee (1 Fulfillment Center)
NovaMart operates one fulfillment center in the State of Tennessee.
1. Tennessee Real Estate Transfer Tax (Tenn. Code Ann. § 67-4-409). Tennessee imposes a real estate transfer tax on the transfer of real property located within the state at a rate of $0.37 per $100 of value (equivalent to $3.70 per $1,000, or 0.37%). The tax is imposed on the recordation of instruments transferring title to real property.
Tennessee does not impose a controlling interest transfer tax on transfers of stock or other entity interests in entities that hold Tennessee real property. The Tennessee real estate transfer tax applies only to direct conveyances of real property.
2. NovaMart's Tennessee Real Property. NovaMart operates one fulfillment center in Tennessee. Based on our due diligence review, this fulfillment center is occupied by NovaMart pursuant to a commercial lease with a third-party landlord. NovaMart does not own any real property in Tennessee.
Conclusion: No Tennessee real estate transfer tax applies to the transaction.
Estimated Tax: $0.
J. Florida (2 Fulfillment Centers)
NovaMart operates two fulfillment centers in the State of Florida.
1. Florida Documentary Stamp Tax (Fla. Stat. § 201.02). Florida imposes a documentary stamp tax on deeds and other instruments transferring interests in real property located within the state at a rate of $0.70 per $100 of consideration (equivalent to $7.00 per $1,000, or 0.7%). In addition, Miami-Dade County imposes a county surtax of $0.45 per $100 on certain transfers of real property located within the county.
Florida also imposes a documentary stamp tax on certain promissory notes and other written obligations to pay money (at a rate of $0.35 per $100), but this tax is applicable to debt instruments, not to stock transfer instruments.
2. Florida Controlling Interest Transfer Tax. Florida does not impose a controlling interest transfer tax on transfers of corporate stock, partnership interests, or other entity interests in entities that hold Florida real property. The Florida documentary stamp tax on real property transfers applies only to direct conveyances — the recording of deeds or other instruments transferring title to real property.
3. Florida Documentary Stamp Tax on Stock Transfer Instruments. Florida does not impose a documentary stamp tax specifically on transfers of corporate stock certificates, stock powers, or stock purchase agreements. The documentary stamp tax on obligations to pay money (Fla. Stat. § 201.08) may apply to promissory notes or other instruments evidencing indebtedness, but the SPA and the stock transfer instruments are not instruments of indebtedness and are not subject to this tax.
4. NovaMart's Florida Real Property. NovaMart operates two fulfillment centers in Florida. Based on our due diligence review, both Florida fulfillment centers are occupied by NovaMart pursuant to commercial lease agreements with third-party landlords. NovaMart does not own any real property in the State of Florida.
Conclusion: No Florida documentary stamp tax or transfer tax applies to the transaction.
Estimated Tax: $0.
K. Washington (1 Fulfillment Center; Cascade Headquarters State)
Washington is the state in which Cascade (the Buyer) maintains its corporate headquarters. NovaMart also operates one fulfillment center in Washington.
1. Washington Real Estate Excise Tax ("REET") (RCW 82.45). Washington imposes a Real Estate Excise Tax ("REET") on sales of real property located within the state. Effective January 1, 2020, the REET is imposed at graduated rates based on the selling price of the real property, as follows:
• 1.1% on the portion of the selling price up to $525,000;
• 1.28% on the portion of the selling price from $525,000.01 to $1,525,000;
• 2.75% on the portion of the selling price from $1,525,000.01 to $3,025,000; and
• 3.0% on the portion of the selling price exceeding $3,025,000.
Local REET rates may also apply, bringing the combined rate to higher levels in certain jurisdictions.
2. Washington Controlling Interest Transfer Tax (RCW 82.45.010(3)). Washington's statutory definition of "sale" for REET purposes is broadly construed and expressly includes the transfer of a "controlling interest" (defined as 50% or more of the total interest) in an entity that owns real property in Washington. Accordingly, if NovaMart owned real property in Washington, the transfer of 100% of NovaMart stock to Cascade would constitute a "sale" for REET purposes and would trigger REET liability measured by the fair market value of the Washington real property.
3. NovaMart's Washington Real Property. NovaMart operates one fulfillment center in Washington. Based on our due diligence review, this fulfillment center is occupied by NovaMart pursuant to a commercial lease with a third-party landlord. NovaMart does not own any real property in the State of Washington. The Washington controlling interest transfer tax provision is not triggered where the entity holds only leased (and not owned) real property in the state.
Cascade's headquarters is located in Washington, but Cascade's ownership of its own headquarters property (if any) is not relevant to the transfer tax analysis, as the transfer taxes at issue relate to the assets of the target entity (NovaMart), not the assets of the acquiring entity.
Conclusion: No Washington REET applies to the transaction because NovaMart does not own real property in Washington.
Estimated Tax: $0.
L. New York (Location of Certain Selling Stockholders; Not a NovaMart Operating State)
While NovaMart does not operate facilities in the State of New York and is not qualified to do business in New York, we have analyzed the New York transfer tax implications because certain of the Selling Stockholders may be resident in New York and because elements of the stock transfer (including the execution of certain closing documents) could potentially be deemed to have been effected within the State of New York.
1. New York Stock Transfer Tax (N.Y. Tax Law § 270 et seq.). New York imposes a stock transfer tax on the sale, transfer, delivery, or agreement to sell or transfer shares of stock, or certificates of stock, or certificates of rights to stock, at rates ranging from $0.0125 to $0.05 per share, depending on the selling price per share:
• $0.0125 per share if the selling price is less than $5.00 per share;
• $0.025 per share if the selling price is $5.00 or more but less than $10.00 per share;
• $0.0375 per share if the selling price is $10.00 or more but less than $20.00 per share; and
• $0.05 per share if the selling price is $20.00 or more per share.
However, New York Tax Law § 280-a provides for a 100% rebate (or credit) of the stock transfer tax paid. This rebate has been in effect since 1981 and effectively reduces the net New York stock transfer tax to $0. The rebate is available regardless of whether the stock is publicly traded or privately held, and regardless of the amount of the stock transfer tax otherwise due.
NovaMart stock is not publicly traded; the transfer will be effected as a private sale of capital stock. If the transfer is deemed to have been "effected" in New York (e.g., by delivery of stock certificates or stock powers within the state), the stock transfer tax would technically be imposed, but the 100% rebate would eliminate any net liability. The transferor is required to pay the tax and then claim the rebate by filing the appropriate form with the New York State Department of Taxation and Finance.
2. New York Real Estate Transfer Tax and Controlling Interest Transfer Tax (N.Y. Tax Law § 1402). New York imposes a real estate transfer tax on transfers of interests in real property located within the state, including transfers of "controlling interests" (defined as 50% or more of the total interests) in entities that own real property in New York. The tax is imposed at a rate of $2.00 per $500 of consideration (equivalent to $4.00 per $1,000, or 0.4%). In addition, for residential real property with a consideration of $1,000,000 or more, a supplemental "mansion tax" applies at graduated rates.
NovaMart does not own or lease any real property in the State of New York. NovaMart is not qualified to do business in New York. Accordingly, the New York real estate transfer tax and CITT provisions are inapplicable.
Conclusion: No New York transfer tax liability arises from the transaction after application of the 100% stock transfer tax rebate. No New York real estate transfer tax or CITT is applicable.
Estimated Tax: $0 (after 100% rebate).
M. Other Jurisdictions
We have reviewed the transfer tax regimes of all other states and localities in which NovaMart is known to operate, maintain property, or be qualified to do business, based on the information provided to us through due diligence and by NovaMart's management. Based on this review, we confirm that no other state in which NovaMart operates or is qualified to do business imposes a transfer tax, documentary stamp tax, or controlling interest transfer tax that would be triggered by the stock purchase transaction contemplated by the SPA.
With respect to local and municipal taxes, outside of the jurisdictions specifically analyzed above (including, in particular, the City of Chicago CITT analysis, which was determined to be inapplicable), no local or municipal transfer taxes have been identified as applicable based on our diligence regarding the specific locations of NovaMart's owned and leased real property.
We note that our analysis is based on information available as of the date of this memorandum and assumes that NovaMart's real property portfolio has been fully and accurately disclosed during due diligence. If additional NovaMart-owned real property in any jurisdiction is identified prior to closing, we will update this analysis accordingly.
V. Summary Table — Estimated Transfer Tax Liability by Jurisdiction
The following table summarizes the estimated transfer tax liability arising from the transaction across all analyzed jurisdictions:
The miscellaneous line item of approximately $65,000 covers minor filing fees, nominal recording charges, and documentary stamp taxes in various jurisdictions related to: (a) UCC financing statement filings and amendments in connection with the transaction; (b) stock power recordings and ancillary transfer documentation; and (c) costs associated with the payoff and lien release of the existing $150,000,000 revolving credit facility with Ashford Savings Bank, N.A. (the "Existing Credit Facility"), including the filing of UCC-3 termination statements in all jurisdictions in which UCC-1 financing statements were filed in connection with the Existing Credit Facility. These costs are individually modest but collectively amount to an estimated $65,000 in the aggregate.
The remaining balance between the sum of the identified items ($375,000 + $360,000 + $65,000 = $800,000) and the total estimated transfer tax liability of approximately $1,200,000 reflects contingency and rounding adjustments to account for: (i) potential variances in the final equalized assessed values or appraised values of the New Jersey and Pennsylvania properties; (ii) potential supplemental fees or surcharges identified during the filing process; and (iii) miscellaneous nominal costs that may arise in connection with ancillary closing deliverables across multiple jurisdictions.
VI. Allocation of Transfer Tax Liability Under the SPA
The SPA includes specific provisions governing the allocation and payment of transfer taxes arising from the transaction. Set forth below is a summary of the applicable SPA provisions and their application to the estimated transfer tax liability.
SPA Provision. Section 6.10 of the SPA provides, in relevant part, as follows:
"All transfer, documentary, sales, use, stamp, registration, value added, and other such taxes and fees (including any penalties and interest) incurred in connection with the transactions contemplated by this Agreement (collectively, 'Transfer Taxes') shall be borne equally (50/50) by the Buyer, on the one hand, and the Selling Stockholders, on the other hand. The party required by applicable law to file tax returns with respect to such Transfer Taxes shall prepare and timely file (or cause to be filed) such tax returns and shall timely pay (or cause to be paid) the Transfer Taxes shown as due thereon. The other party shall reimburse such filing party for its 50% share of such Transfer Taxes within ten (10) business days after delivery of evidence of such filing and payment."
Allocation of Estimated Total Liability. Based on the estimated aggregate transfer tax liability of approximately $1,200,000:
• Cascade's share (50%): $600,000
• Selling Stockholders' share (50%): $600,000
Mechanism of Payment and Reimbursement. Under Section 6.10, the party that is legally obligated under applicable law to remit the applicable transfer tax is responsible for filing the return and paying the tax to the applicable taxing authority. The other party is then obligated to reimburse its 50% share within ten (10) business days after delivery of evidence of the filing and payment.
In practice, the filing and payment obligations for the two principal transfer tax liabilities are as follows:
• New Jersey CITT (~$375,000): Under New Jersey law, the obligation to file the controlling interest transfer tax return and pay the tax may fall on the entity whose controlling interest is transferred (NovaMart) and/or on the transferee (Cascade). Following closing, NovaMart will be a wholly-owned subsidiary of Cascade, and Cascade will therefore control the filing and payment process. Cascade will file the return and pay the tax, and the Selling Stockholders will reimburse Cascade for 50% of the amount paid.
• Pennsylvania CITT (~$360,000): Under Pennsylvania law, the filing obligation for the controlling interest transfer tax generally falls on both the entity holding the real property (NovaMart) and the transferee. As with New Jersey, Cascade will control the filing and payment process following closing, with reimbursement from the Selling Stockholders for their 50% share.
Coordination with the Stockholder Representative. Ridgeline Equity Partners, LP, acting through Franklin Osei as the designated Stockholder Representative, will coordinate with Cascade on behalf of the Selling Stockholders for the Sellers' share of the transfer tax liability. Under the SPA, the Stockholder Representative has authority to act on behalf of the Selling Stockholders in connection with post-closing tax matters, including the reimbursement of transfer taxes.
Treatment in the Funds Flow. The Selling Stockholders' share of the estimated transfer taxes (approximately $600,000) may be deducted from the closing consideration payable to the Selling Stockholders at closing, or alternatively, may be funded separately by the Stockholder Representative following closing. The treatment of this item should be coordinated with the Funds Flow Memorandum (prepared by the M&A deal team) and confirmed with the Stockholder Representative prior to closing. We recommend that the Selling Stockholders' share be deducted from the closing consideration to the extent practicable, in order to avoid the administrative burden of post-closing reimbursement for amounts that are known and estimable as of the closing date.
VII. Filing and Compliance Obligations
A. New Jersey Controlling Interest Transfer Tax Filing
The New Jersey CITT return must be filed with the New Jersey Division of Taxation within the prescribed period following the transfer of the controlling interest. The applicable form is NJ Form RTF-1EE (Controlling Interest Transfer Return) or its equivalent, which requires disclosure of the entity whose controlling interest is transferred, the parties to the transfer, the New Jersey real property held by the entity, the fair market value or equalized assessed value of the property, and the computation of the tax due.
The filing obligation generally applies to both the entity whose controlling interest is transferred (NovaMart) and the acquiring entity (Cascade). In practice, given that NovaMart will become a wholly-owned subsidiary of Cascade following closing, Cascade will be responsible for coordinating the preparation and filing of the NJ CITT return.
The NJ CITT return is generally required to be filed within 90 days of the date of the transfer (i.e., the closing date). Assuming a closing date of October 15, 2025, the filing deadline would fall on or about January 13, 2026. The tax is due at the time of filing.
The return must be accompanied by supporting documentation, including the SPA (or relevant excerpts), evidence of the controlling interest transfer, a description and valuation of the New Jersey real property, and such other information as the Division of Taxation may require.
B. Pennsylvania Controlling Interest Transfer Tax Filing
The Pennsylvania CITT return must be filed with the Pennsylvania Department of Revenue and, in certain cases, with the recorder of deeds in the county where the real property is located. The applicable form is PA Form REV-183 (Realty Transfer Tax Statement of Value) or its equivalent for controlling interest transfers, together with any supplemental forms required by the county.
The filing obligation applies to the entity owning the Pennsylvania real property (NovaMart) and/or the transferee (Cascade). The return is generally required to be filed within 30 days of the date of the transfer (i.e., the closing date). Assuming a closing date of October 15, 2025, the filing deadline would fall on or about November 14, 2025. Given the shorter filing window in Pennsylvania compared to New Jersey, we recommend that the draft Pennsylvania CITT return be substantially complete prior to closing so that it can be finalized and filed promptly following closing.
The Pennsylvania filing must be accompanied by the Statement of Value form, the SPA (or relevant excerpts), a description of the entity and its Pennsylvania real property, and the computation of the tax due. The tax is payable at the time of filing.
C. Other Filing Obligations
New York Stock Transfer Tax. If the transfer of NovaMart stock is deemed to have been effected in New York (e.g., because certain closing documents are executed or delivered within the State of New York), the New York stock transfer tax will technically be imposed, and tax stamps will be required. The transferor would be required to pay the tax and then file a claim for the 100% rebate with the New York State Department of Taxation and Finance. The rebate is processed by the State and returned to the taxpayer. As a practical matter, given the complexity of the rebate process and the lack of any net tax liability, we recommend confirming whether any closing deliverables will be executed or delivered in New York, and if so, preparing the necessary stock transfer tax stamps and rebate claim.
UCC Termination Statement Filings. In connection with the payoff of the Existing Credit Facility with Ashford Savings Bank, N.A. at or prior to closing, UCC-3 termination statements will need to be filed in all jurisdictions in which UCC-1 financing statements were filed in connection with the Existing Credit Facility. While UCC termination statement filings are not transfer taxes per se, the associated filing fees (typically $20 to $50 per filing, depending on the jurisdiction) are included in the miscellaneous estimate set forth in Section V above. The filing of UCC-3 termination statements is being coordinated by the M&A deal team and by counsel to Ashford Savings Bank, N.A.