Contract analysis

I. Executive Summary The purpose of this memorandum is to outline Cascade Retail Holdings Inc.'s ("CRH" or the "Company") strategic negotiating framework for the anticipated Assurance of Voluntary Compliance ("AVC") with the Washington State Attorney General's Consumer Protection Division (the "AG" or the "Division"). This memorandum follows the May 14, 2024 meet-and-confer between Calderwood & Harkness LLP ("C&H") c

II. Background and Procedural History A. The AG's Inquiry On March 26, 2024, the Washington Attorney General's Consumer Protection Division issued a Civil Investigative Demand ("CID") to Cascade Retail Holdings Inc. pursuant to RCW 19.86.110. The CID was served on CRH's registered agent and promptly forwarded to in-house counsel. The CID contained twenty-three (23) document requests and fourteen (14) interrogatories,

III. Legal Framework A. Washington Consumer Protection Act — RCW 19.86 The Washington Consumer Protection Act ("CPA"), codified at RCW 19.86 et seq., is the primary statutory authority governing the AG's inquiry and the anticipated AVC. The CPA is a broadly drafted consumer-protection statute that provides the AG with significant enforcement tools. RCW 19.86.020 is the central prohibition, declaring that "[u]nfair me

IV. Recommended Negotiating Positions on Key AVC Terms Set forth below are our recommended positions on each of the principal terms we anticipate the AG will include in its draft AVC. For each term, we have identified the AG's expected position, CRH's opening position, CRH's target or fallback position, and our assessment of the likely outcome. A. No Admission of Liability CRH's Position: This term is non-negotiable

I. Stipulated Penalties for Breach Stipulated penalty provisions are standard in AVCs and serve as an enforcement mechanism to incentivize compliance. These provisions specify a per-day penalty that begins to accrue if CRH breaches any term of the AVC. AG's Expected Position: We anticipate that the AG will propose stipulated penalties in the range of $15,000 to $25,000 per day for any breach of the AVC's terms. CRH's

V. Total Financial Exposure Analysis A. Summary of Projected Settlement Range The table below summarizes CRH's projected financial exposure under the AVC across the three principal financial components (consumer restitution fund, civil penalty, and AG investigative costs), along with CRH's recommended negotiating positions and the AG's expected demands. Based on this analysis, we recommend a target for total financia

VI. Tactical Recommendations A. Sequencing of Negotiations We recommend that CRH allow the AG to circulate its draft AVC first, rather than submitting CRH's own proposed terms proactively. The AG indicated at the May 14 meet-and-confer that it expects to circulate draft AVC terms within the next several weeks — we estimate by approximately June 12, 2024. By allowing the AG to present its draft first, CRH gains severa