Contract analysis

I. QUALIFICATIONS AND BACKGROUND

1. My name is Dr. Franklin Oberg. I hold a Doctor of Philosophy degree in Economics from Northwestern University, where my doctoral research focused on the valuation of intangible assets and the economic analysis of competitive harm in commercial disputes. I also hold a Master of Science degree in Applied Economics from the University of Michigan and a Bachelor of Arts degree in Economics and Mathematics from Carleto

2. I am the Principal and Lead Expert at Veltrano Consulting Group LLC ("Veltrano"), an economic consulting firm located at 200 South Wacker Drive, Suite 3100, Chicago, Illinois 60606. I founded Veltrano in 2009 and have served as its Principal since that date. Veltrano specializes in the quantification of economic damages in complex commercial litigation, with particular emphasis on trade secret misappropriation, re

3. I have over twenty years of experience in economic consulting. Over the course of my career, I have been retained as an expert in more than seventy-five matters involving trade secret and restrictive covenant enforcement disputes. These engagements have included matters involving organized employee departures, misappropriation of proprietary business strategies, and competitive harm analysis across a broad range o

4. I have testified as an expert witness in federal and state courts on multiple occasions. My testimony has been offered and accepted in the United States District Courts for the Northern District of Illinois, the Southern District of New York, the District of Delaware, and the Eastern District of Virginia, as well as in state courts in Delaware, New York, Illinois, California, and Texas. I have previously testified

5. I am a member of the American Economic Association and the National Association of Forensic Economics. I have published articles in peer-reviewed journals on topics including the economic valuation of trade secrets, the quantification of lost profits in competitive harm scenarios, and the application of reasonable royalty methodologies in misappropriation cases. I have also lectured on these topics at continuing l

6. A true and correct copy of my curriculum vitae, which sets forth in detail my educational background, professional experience, publications, and prior expert testimony, is attached hereto as Exhibit 1 and is incorporated by reference into this Declaration.

II. RETENTION AND SCOPE OF ENGAGEMENT

7. I was retained by the law firm of Calderwood & Harkness LLP on behalf of CRH on March 3, 2025, in connection with the above-captioned matter (Calderwood & Harkness Matter Number 1038-00006). My engagement was to provide a preliminary economic damages analysis quantifying the harm to CRH arising from: (a) the coordinated departure of eight senior merchandising employees led by Priya Rathore; (b) the potential misus

8. I understand that my analysis at this stage is intended to inform the Court's consideration of Plaintiff's Motion for Preliminary Injunction. The opinions expressed in this Declaration are preliminary in nature and are subject to revision, supplementation, or amendment upon completion of full discovery in this matter. Additional analysis may be warranted as further factual information becomes available through doc

9. My compensation for this engagement is based on the standard expert engagement rates for Veltrano Consulting Group LLC, which reflect hourly billing rates for myself and my staff. My current hourly rate is $950 per hour; senior associates at Veltrano who have assisted with this analysis are billed at rates ranging from $425 to $625 per hour. My compensation is in no way contingent upon the outcome of this litigati

10. In forming the preliminary opinions set forth in this Declaration, I have reviewed the following materials, among others: (a) The Amended and Restated Employment Agreement of Priya Rathore with CRH, dated March 15, 2021, and the original Employment Agreement of Priya Rathore with CRH, dated June 3, 2019; (b) Employment Agreements between CRH and each of the following individuals: Derek Linden (dated September 12,

11. I have also drawn upon my experience and expertise in economic consulting, damages quantification, and the analysis of competitive harm in trade secret and restrictive covenant disputes. The foregoing list of materials is not exhaustive, and I reserve the right to rely upon additional materials that may be produced or become available during the course of this litigation.

IV. OVERVIEW OF CRH'S MERCHANDISING BUSINESS AND ECONOMIC SIGNIFICANCE

12. CRH is a publicly traded omnichannel retail company, listed on the Nasdaq Stock Market under the ticker symbol CRHL. In fiscal year 2024, CRH reported total revenue of approximately $6.82 billion. As of February 2025, CRH's approximate market capitalization stood at $4.1 billion. CRH operates 387 brick-and-mortar retail locations across 34 states and maintains a direct-to-consumer ecommerce platform that has expe

13. CRH's merchandising division is a critical driver of the company's overall financial performance. In fiscal year 2024, the merchandising division generated approximately $2.3 billion in gross merchandise value, representing approximately one-third of CRH's total revenue. Based on my review of CRH's internal financial data, the merchandising division consistently generates gross margins and operating margins that

14. The eight members of the Rathore Group collectively possessed over 38 years of combined tenure at CRH. Ms. Rathore herself served as Senior Vice President of Merchandising, the most senior role within the merchandising division, reporting directly to CRH's Chief Operating Officer. The remaining seven members of the Rathore Group held director-level and senior director-level positions within the division, with res

15. The institutional knowledge accumulated by the Rathore Group during their collective tenure at CRH encompasses vendor negotiation playbooks that detail CRH's proprietary approaches to securing favorable terms from key suppliers; seasonal buying algorithms that drive CRH's inventory investment decisions and promotional calendars; private-label sourcing strategies reflecting years of supplier identification, qualif

V. NATURE AND SCOPE OF COMPETITIVE HARM A. Direct Competitive Overlap

16. Verdana Commerce Group, Inc. is a direct competitor of CRH in the retail marketplace. Based on my review of publicly available information, Verdana operates approximately 220 retail locations across 22 states and maintains its own ecommerce platform. My analysis has identified 28 overlapping product categories in which both CRH and Verdana actively compete for consumer spending, including home goods, apparel, sea

17. Verdana's publicly announced growth initiative — targeting a more than doubling of revenue from approximately $1.9 billion to $4 billion by 2028 — specifically cites planned expansion into private-label home goods and seasonal décor. These are among CRH's strongest categories, representing areas where CRH has invested heavily in proprietary sourcing relationships, product development, and marketing infrastructure

18. The recruitment of the entire senior merchandising team from CRH — rather than individual hires — represents a wholesale transplant of competitive intelligence from CRH to Verdana. The Rathore Group members, by virtue of their roles, collectively possess knowledge of CRH's complete merchandising strategy, including its vendor relationships and negotiated terms, its margin structures across product categories, its

19. The preliminary forensic report prepared by Pinnacle Forensics LLC documents the exfiltration of 14,327 files comprising approximately 2.8 gigabytes of data from CRH's Aldermere Systems and Pinnacle Health IT environments to personal cloud storage accounts between January 10, 2025 and February 4, 2025. Based on my review of the categorization of these files, the exfiltrated information falls into four principal c

20. Project Ridgeline Presentations. The exfiltrated files include presentations and supporting documentation for Project Ridgeline, CRH's proprietary five-year strategic category expansion roadmap completed in October 2024. Project Ridgeline details CRH's planned expansion into specific product categories, identifies revenue targets and growth assumptions for each category, sets forth proprietary vendor partnership

21. Vendor Negotiation Term Sheets. The exfiltrated files include term sheets reflecting CRH's proprietary pricing, margin, and promotional terms with key suppliers. These term sheets embody the results of years of negotiation and relationship development between CRH and its vendor base. Access to this information would permit Verdana to approach the same suppliers with knowledge of the specific terms CRH has negotia

22. Private-Label Cost Models. The exfiltrated files include cost models showing CRH's cost structures, manufacturing arrangements, and target margins for its private-label product lines. Private-label products represent a high-margin segment of CRH's merchandising business and are an area where CRH has invested significantly in supplier identification, product design, quality assurance, and brand development. Disclo

23. Customer Segmentation Data. The exfiltrated files include customer segmentation data reflecting purchasing patterns, demographic analyses, and targeted marketing strategies. This data represents a significant investment by CRH in data analytics and market research, and it informs CRH's decisions regarding product assortment, pricing, promotional strategy, and marketing allocation. If utilized by Verdana, this dat

24. In my professional opinion, the exfiltrated information, if utilized by Verdana, would provide Verdana with a substantial and unearned competitive advantage equivalent to years of independent research, development, and market intelligence gathering. The competitive advantage derived from this information is not merely theoretical; it is directly actionable, providing Verdana with a detailed playbook for competing

25. The compensation packages offered by Verdana to the Rathore Group reflect an extraordinary investment in acquiring the competitive intelligence these individuals carry. The aggregate sign-on bonuses paid by Verdana to the eight members of the Rathore Group total $6,200,000. Ms. Rathore individually received a sign-on bonus of $1,500,000, a base salary of $650,000 (an increase of approximately 34% over her CRH bas

26. The financial resources to fund this recruitment were provided by Greystone Capital Partners, LP through Greystone Capital Fund VII, LP, which acquired Verdana in the third quarter of 2023 for an enterprise value of approximately $2.4 billion. Greystone Capital Fund VII, LP has approximately $8.5 billion in committed capital, providing Verdana with substantial financial backing to execute aggressive growth strate

27. The scale of Verdana's investment in recruiting the Rathore Group is significant as an economic indicator. A rational economic actor would not invest $6,200,000 in aggregate sign-on bonuses — in addition to the ongoing enhanced compensation packages — unless it anticipated a return on that investment far exceeding the cost. The nature of the Rathore Group's roles at CRH and the evidence of data exfiltration stron

VI. PRELIMINARY DAMAGES FRAMEWORK A. Categories of Economic Harm

28. Based on my preliminary analysis, I have identified three primary categories of economic harm that CRH has suffered or is likely to suffer as a result of the defendants' conduct.

29. Lost Profits from Competitive Displacement. The first and most significant category of harm is the lost profits CRH is likely to sustain as a result of Verdana's ability to use CRH's proprietary strategies and vendor terms to capture market share in the 28 overlapping product categories. Verdana's announced growth initiative targets a doubling of revenue by 2028, and the recruitment of CRH's entire senior merchan

30. Diminished Value of Trade Secrets and Confidential Information. The second category of harm is the diminished economic value of CRH's trade secrets and confidential information once disclosed to a direct competitor. Project Ridgeline, the vendor negotiation term sheets, the private-label cost models, and the customer segmentation data each derive their economic value from the fact that they are not generally know

31. Increased Costs and Operational Disruption. The third category of harm encompasses the direct and indirect costs CRH has incurred and will continue to incur as a result of the coordinated departure and data exfiltration. These costs include executive search and replacement costs for eight senior positions within the merchandising division; the costs of revising compromised strategies and renegotiating vendor term

32. To estimate the lost profits attributable to competitive displacement, I apply a "but-for" analysis. This is a well-established methodology in damages quantification that compares the plaintiff's projected financial performance in the "but-for" world — the hypothetical scenario in which the wrongful conduct did not occur — with the plaintiff's projected financial performance in the "actual" world, accounting for

33. The base metric for this analysis is CRH's Merchandising Division GMV of approximately $2.3 billion in fiscal year 2024. Based on my preliminary review, the Rathore Group and the exfiltrated information are directly relevant to the 28 overlapping product categories in which CRH and Verdana compete. Even a modest erosion of market share in these overlapping categories — on the order of 2% to 5% — would yield proje

34. My preliminary estimate of the profit margin impact on the affected GMV, while subject to refinement, supports a preliminary damages range for lost profits that is conservatively in the range of tens of millions of dollars over the applicable restrictive covenant period. This estimate accounts only for the direct displacement effect during the restrictive covenant period and does not include the ongoing competiti

2. Diminished Trade Secret Value Model.

35. To estimate the diminished value of CRH's trade secrets and confidential information, I employ a reasonable royalty and avoided-cost approach. Under this methodology, the damages are estimated based on the cost that a willing licensee would have paid to a willing licensor for the right to use the information in question, or alternatively, the cost that Verdana avoided by acquiring the information through misappro

36. The development cost of Project Ridgeline and the underlying proprietary information represents years of investment by CRH in market research, vendor relationship development, analytical modeling, and strategic planning. Based on my preliminary analysis, CRH's investment in developing this information — including the allocation of executive time, research resources, data analytics capabilities, and external consu

37. My preliminary estimate of the avoided development costs to Verdana is in the millions of dollars. This estimate is necessarily preliminary at this stage, as a more precise quantification will require detailed analysis of CRH's actual expenditures in developing the proprietary information, the time horizon over which these expenditures were incurred, and the scope of the information that Verdana has accessed and

3. Operational Disruption Costs.

38. I have also identified direct costs that CRH has already incurred or anticipates incurring as a result of the coordinated departure and data exfiltration. These costs include, but are not limited to: (a) Executive search and recruitment costs associated with replacing eight senior positions within the merchandising division, including retained search firm fees, candidate screening and assessment costs, and reloca

39. These operational disruption costs are currently estimated to total several million dollars and will be refined as actual expenditures are documented and additional information becomes available through discovery. C. Preliminary Damages Range

40. While a full damages calculation cannot be completed at this stage due to the preliminary nature of the analysis and the need for additional discovery, it is my preliminary opinion that the total economic harm to CRH from the coordinated departure of the Rathore Group, the breach of restrictive covenant obligations, and the misappropriation and potential use of CRH's trade secrets and confidential information is

41. The irreparable nature of much of this harm — particularly the permanent loss of trade secret value once proprietary information has been disclosed to and reviewed by a direct competitor — underscores the point that monetary damages alone may not adequately compensate CRH for the injury it has sustained and will continue to sustain absent injunctive relief. This conclusion is elaborated further in Section VII bel

VII. IRREPARABLE HARM — ECONOMIC PERSPECTIVE

42. From an economic standpoint, the harm to CRH is particularly difficult to quantify with precision and, in significant part, irreparable for the following reasons.

43. Trade Secret Disclosure Is Irreversible. Once Project Ridgeline materials, vendor negotiation term sheets, private-label cost models, and customer segmentation data are in Verdana's possession and have been reviewed by Verdana's personnel, the competitive advantage derived from the secrecy of that information cannot be restored — even if the information is subsequently returned or destroyed. The knowledge gained

44. Market Share Loss Compounds Over Time. Competitive displacement in the retail merchandising context has cascading effects that extend well beyond the initial period of lost sales. When a competitor captures market share through the use of misappropriated strategies, the effects compound in several ways. Vendor relationships that shift to the competitor become entrenched over time, making it increasingly difficult

45. Head Start Advantage. Even if the restrictive covenant period is ultimately enforced and the Rathore Group is eventually prohibited from working for Verdana in the overlapping product categories, a temporary period during which the Rathore Group operates in merchandising roles at Verdana using CRH's proprietary information creates a durable competitive advantage that persists beyond any restrictive covenant perio

46. Difficulty of Post Hoc Attribution. Once Verdana implements strategies derived from CRH's proprietary information, it becomes exceedingly difficult after the fact to isolate and quantify which of Verdana's competitive gains are attributable to the misappropriated information and which are attributable to Verdana's independent efforts. This is a well-recognized challenge in trade secret damages cases. The commingl

47. For these reasons, I conclude from an economic perspective that preliminary injunctive relief is necessary to prevent harm to CRH that cannot be adequately compensated through monetary damages alone. The longer the Rathore Group is permitted to operate in their roles at Verdana with access to CRH's proprietary information, the greater and more irreversible the economic harm to CRH becomes.

VIII. CONSIDERATION OF DEFENDANTS' POTENTIAL ARGUMENTS

48. I have considered the potential argument that enforcement of the restrictive covenants as written would impose disproportionate economic harm on the Individual Defendants. In evaluating this argument, I note the following.

49. The members of the Rathore Group were well compensated during their tenure at CRH. Ms. Rathore received a base salary of $485,000, a target annual bonus of $290,000, and a restricted stock unit grant valued at $725,000 with four-year ratable vesting commencing March 15, 2021. The remaining seven members of the Rathore Group received annual salaries ranging from $192,000 to $340,000, with corresponding equity comp