Contract analysis

I. Purpose of This Letter Calderwood & Harkness LLP serves as outside litigation counsel to Cascade Retail Holdings Inc. ("CRH" or the "Company") in connection with the enforcement of restrictive covenant, confidentiality, and trade-secret protections against eight former senior merchandising employees (collectively, the "Rathore Group") and a direct competitor, Verdana Commerce Group, Inc. ("Verdana"). This engageme

II. Background of the Matter A. The Coordinated Departure On February 7, 2025, at approximately 4:47 PM Pacific Standard Time, eight senior employees of CRH's merchandising division submitted simultaneous resignation letters to CRH's Chief Human Resources Officer, each stating that the resignation was effective immediately. The near-identical timing and substantially similar language of the resignation letters strong

1. Derek Linden — Vice President, Hardlines Merchandising. Mr. Linden served CRH for approximately seven years and was responsible for hardlines category strategy and vendor negotiations across CRH's hardware, outdoor living, and home improvement product lines.

2. Sonia Kaczmarek — Vice President, Softlines Merchandising. Ms. Kaczmarek served CRH for approximately five years and oversaw softlines category management, including CRH's growing private-label apparel and home textiles portfolios.

3. Amara Osei — Director, Private Label Strategy. Ms. Osei served CRH for approximately four years and was responsible for the development and execution of CRH's private-label sourcing and brand strategy, including margin optimization models and supplier relationship management for CRH's proprietary brands.

4. Brent Halvorsen — Director, Seasonal Planning & Analytics. Mr. Halvorsen served CRH for approximately six years and managed CRH's seasonal buying algorithms, demand forecasting models, and inventory allocation systems.

5. Lucia Fernandez-Gill — Director, Vendor Relations (Domestic). Ms. Fernandez-Gill served CRH for approximately five years and was the primary relationship manager for CRH's top 150 domestic vendors, with direct knowledge of negotiated pricing, rebate structures, and promotional allowances.

6. Nathan Tsao — Senior Manager, eCommerce Merchandising. Mr. Tsao served CRH for approximately three years and managed product assortment, pricing strategy, and promotional planning for CRH's eCommerce platform.

7. Kira Johansson — Senior Manager, Category Analytics. Ms. Johansson served CRH for approximately four years and developed and maintained CRH's category performance models, competitive benchmarking data, and customer segmentation analytics. All eight members of the Rathore Group have accepted employment positions at Verdana Commerce Group, Inc., a direct competitor of CRH headquartered in Wilmington, Delaware. On Fe

III. Litigation Actions Taken and Planned A. Pre-Litigation Steps Calderwood & Harkness LLP was formally engaged by CRH on February 18, 2025, following an initial consultation with CRH General Counsel Theresa Yun-Park and a review of the relevant employment agreements and preliminary forensic findings. The engagement encompasses all aspects of the litigation, including the prosecution of CRH's affirmative claims, def

1. Each of the eight departing employees individually, demanding that they immediately cease and desist from any further use or disclosure of CRH's confidential information and trade secrets, return all CRH property and data in their possession, and honor their restrictive covenant obligations;

2. Verdana Commerce Group, Inc. (to the attention of General Counsel Helen Tsoi), demanding that Verdana immediately halt the employment of the Rathore Group in any capacity that would result in the use or disclosure of CRH's trade secrets or confidential information, and that Verdana preserve all documents and communications related to the recruitment, hiring, and onboarding of the Rathore Group; and

3. Greystone Capital Partners, LP (to the attention of Managing Partner Elliot Westbrook), given Greystone's majority ownership of Verdana and the direct participation of Mr. Westbrook in the January 6, 2025 dinner meeting with Ms. Rathore. On February 27, 2025, Whitfield, Nygaard & Doyle LLP, a Delaware litigation firm with offices in Wilmington, entered an appearance on behalf of all eight members of the Rathore Gr

1. Breach of Restrictive Covenant (Non-Competition) — Against all eight individual defendants, for accepting employment with a direct competitor in violation of their respective non-competition covenants;

2. Breach of Confidentiality Obligations — Against all eight individual defendants, for misappropriating and disclosing CRH's Confidential Information (as defined in their respective employment agreements) by downloading proprietary files to personal cloud storage accounts and, upon information and belief, providing such materials to Verdana;

3. Misappropriation of Trade Secrets — Under the Delaware Uniform Trade Secrets Act, 6 Del. C. §§ 2001–2009 ("DUTSA"), against all eight individual defendants and Verdana, for the misappropriation of CRH's trade secrets, including Project Ridgeline materials, vendor negotiation strategies, private-label cost models, and seasonal buying algorithms;

4. Tortious Interference with Contractual Relations — Against Verdana, for knowingly inducing the Rathore Group to breach their restrictive covenant obligations and confidentiality agreements with CRH; and

5. Civil Conspiracy — Against all eight individual defendants and Verdana, for engaging in a coordinated scheme to misappropriate CRH's trade secrets and proprietary information for the benefit of Verdana and to the detriment of CRH. Contemporaneously with the filing of the Verified Complaint, CRH will move for a Temporary Restraining Order and Preliminary Injunction seeking the following emergency relief: • An order

IV. Estimated Litigation Costs Given the scope, complexity, and accelerated nature of this litigation, the Audit Committee should be aware that the matter will involve substantial legal fees and related expenses. The Calderwood & Harkness billing rates applicable to this matter are as follows: The matter involves emergency proceedings requiring accelerated timelines and significant associate hours for briefing, disco

V. Litigation Contingency Accrual Recommendation A. ASC 450 Analysis Under ASC 450-20 (Contingencies — Loss Contingencies), an entity is required to accrue an estimated loss by a charge to income when two conditions are met: (1) information available prior to the issuance of the financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the finan

VI. Recommendations to the Audit Committee In light of the foregoing, Calderwood & Harkness respectfully recommends that the Audit Committee take note of and, as appropriate, act upon the following items:

1. Litigation Contingency Accrual: Coordinate with CRH's outside auditors, Hargrove & Tillett CPA, PLLC, regarding the establishment of a $3,500,000 litigation contingency accrual in connection with the Company's Q1 2025 financial statements, and ensure that the accrual is appropriately reflected in the Company's financial reporting.

2. Ongoing Litigation Monitoring: Monitor the litigation on an ongoing basis for developments that could materially alter the contingency assessment, including but not limited to the outcome of the TRO and preliminary injunction motions, the assertion of counterclaims by any defendant, the initiation and progress of settlement discussions, and any material ruling or order of the Court of Chancery.

3. SEC Disclosure Obligations: Assess and address the Company's disclosure obligations under applicable SEC rules and regulations, including the appropriate treatment of this litigation matter in the Company's upcoming 10-Q filing for Q1 2025 and any required 8-K filings.

4. Credit Agreement Reporting: Evaluate whether the material litigation reporting covenant contained in Section 6.02(c) of the Company's revolving credit facility with Keypoint National Bank, N.A. is triggered by this matter, and ensure that any required notifications are provided in a timely manner.

5. Privilege Protection: Maintain rigorous privilege protections for all communications regarding this matter, including communications among and between the Audit Committee, CRH management, CRH's General Counsel, Calderwood & Harkness, and CRH's outside auditors. All documents and communications related to this matter should be clearly marked as privileged and confidential, and distribution should be limited to thos

VII. Closing I am available to discuss this matter with you and the full Audit Committee at your earliest convenience. Given the filing of the Verified Complaint and TRO motion scheduled for March 5, 2025, I would welcome the opportunity to speak with you before that date to address any questions or concerns you may have. All communications regarding this matter should be treated as privileged and confidential under