Contract analysis

I. Executive Summary The purpose of this memorandum is to provide Cascade Retail Holdings Inc. ("Cascade" or the "Company") with an initial assessment of litigation exposure and an estimated budget for the defense of all three causes of action asserted by Vantor Holdings Corp. ("Vantor") in Vantor Holdings Corp. v. Cascade Retail Holdings Inc., Case No. 21STCV-34872, pending in the Superior Court of California, Count

II. Background and Procedural Posture A. The Parties

1. Cascade Retail Holdings Inc. Cascade Retail Holdings Inc. is a Delaware corporation headquartered at 2200 Elliott Avenue West, Suite 1400, Seattle, Washington 98119. Cascade is publicly traded on the Nasdaq Stock Exchange under the ticker symbol CRHI. For fiscal year 2021, Cascade reported annual revenue of approximately $6.8 billion. As of September 2021, the Company's market capitalization stood at approximately

2. Vantor Holdings Corp. Vantor Holdings Corp. is a California corporation headquartered at 18500 Von Karman Avenue, Suite 600, Irvine, California 92612. Vantor is a privately held wholesale distributor and specialty retailer with approximately $1.1 billion in annual revenue and approximately 85 retail locations concentrated in California, Arizona, Nevada, and Oregon. Vantor's business model centers on exclusive and

3. Plaintiff's Counsel Vantor is represented by Kessler, Brandt & Whitfield LLP, located at 1999 Avenue of the Stars, Suite 2800, Los Angeles, California 90067. The lead attorneys on the matter are: • Martin Kessler, Senior Partner and Lead Trial Attorney • Natalie Whitfield, Partner and Co-Lead • Jason Okafor, Senior Associate Kessler, Brandt & Whitfield is a well-regarded litigation boutique with significant experi

1. Hemsworth Consumer Products LLC Hemsworth Consumer Products LLC is an Oregon limited liability company headquartered at 4720 NW Yeon Avenue, Portland, Oregon 97210. Its Chief Executive Officer is Janet Kohler. Hemsworth manufactures and distributes home goods and kitchen accessories, and is a well-established supplier in the mid-market consumer products space. Vantor and Hemsworth executed an exclusive supply agre

2. Tridale Manufacturing Inc. Tridale Manufacturing Inc. is a Nevada corporation headquartered at 6300 South Pecos Road, Suite 210, Las Vegas, Nevada 89120. Its President is Gregory Fontaine. Tridale manufactures and distributes consumer electronics accessories, including phone cases, chargers, cables, and related items. Vantor and Tridale executed an exclusive supply agreement on January 10, 2020, with a two-year te

3. Orion Lifestyle Brands Corp. Orion Lifestyle Brands Corp. is a California corporation headquartered at 1900 Avenue of the Stars, Suite 1050, Los Angeles, California 90067. Its Chief Executive Officer is Simone Alvarez. Orion manufactures and distributes personal care and wellness products, including skincare, aromatherapy, and nutritional supplement items. Vantor and Orion executed an exclusive supply agreement on

III. Exposure Assessment A. Vantor's Claimed Damages: $87.4 Million Vantor's complaint, supplemented by its initial disclosures served on October 25, 2021, asserts total damages of $87.4 million across the three supplier relationships. The claimed damages are broken down by supplier as follows: Vantor's damages model, as we understand it based on the complaint and initial disclosures, appears to rest on three fundame

1. Lack of Knowledge of Exclusivity Provisions. Cascade contends that it did not have actual knowledge of the specific exclusivity provisions in Vantor's supply agreements with Hemsworth, Tridale, or Orion at the time the new Cascade supply agreements were negotiated and executed. Under California law, knowledge of the existence of the contract at issue is a threshold element of tortious interference with contractual

2. Independent Supplier Action. Each of the three suppliers — Hemsworth, Tridale, and Orion — independently chose to enter into supply agreements with Cascade. Cascade did not employ any inducement, coercion, or improper means to cause the suppliers to breach or terminate their agreements with Vantor. Rather, Cascade offered commercially superior terms: higher annual purchase commitments (Hemsworth: $28.0 million ver

3. Termination-for-Convenience. All three exclusive supply agreements contained termination-for-convenience clauses that permitted either party — including the supplier — to terminate the agreement upon specified notice periods: 90 days for Hemsworth, 60 days for Tridale, and 120 days for Orion. Our understanding, based on preliminary review of the supplier communications, is that each supplier exercised its terminat

4. Failure to Mitigate. As noted above, Vantor has an affirmative obligation under California law to take reasonable steps to mitigate its damages. There is no indication in the complaint, initial disclosures, or any information currently available to us that Vantor made any effort to identify or engage alternative suppliers in the home goods, consumer electronics accessories, or personal care product categories to r

5. Section 17200 Claim Is Duplicative and Subject to Dismissal. Vantor's third cause of action under Cal. Bus. & Prof. Code § 17200 is predicated entirely on the same underlying conduct as the tortious interference claims and does not assert any independent basis for relief. California courts have consistently held that a Section 17200 claim that is wholly derivative of an underlying tort theory and adds no independe

IV. Insurance Coverage Analysis A. Applicable Policy Cascade maintains a commercial general liability insurance policy with Pinnacle National Insurance Co. ("Pinnacle"), located at 120 Broadway, Suite 3500, New York, New York 10271. The applicable policy is identified as Policy No. PNG-CGL-2021-04487. The senior claims adjuster assigned to this matter is Leonard Furman. On September 20, 2021, Douglas Carmichael submi

V. Estimated Litigation Budget A. Assumptions The budget estimates set forth below are based on the following assumptions regarding the scope and trajectory of the Action: • The case proceeds through trial in the Superior Court of California, County of Los Angeles, before a jury. • discovery will be extensive, given the breadth of Project Atlas (encompassing communications regarding 25 potential new suppliers across

VI. Total Economic Exposure Summary The following table integrates the damages exposure analysis from Section III with the defense cost estimates from Section V to present Cascade's total economic exposure under the three principal scenarios: The net-of-insurance defense cost figures assume that Pinnacle National Insurance Co. reimburses a meaningful portion of defense costs under its duty-to-defend obligations. The

VII. Recommendations and Next Steps Based on the foregoing exposure assessment and budget analysis, we recommend the following actions:

1. Pursue Aggressive Defense Posture. Cascade's strong defenses on knowledge, independent supplier action, and termination-for-convenience warrant a vigorous defense strategy. We recommend that Cascade contest each of Vantor's claims actively, pursue dispositive motion practice to eliminate the Section 17200 claim and potentially the prospective economic advantage claim, and prepare for trial on the remaining tortiou

2. Issue Litigation Hold Notices. Litigation hold notices should be issued to all relevant Cascade custodians no later than the target date of December 10, 2021. Custodians to receive hold notices include, but are not limited to, Annika Bergström, Lena Torvik, David Pruitt, Margaret Prumvane, Raj Subramanian, and all members of the Project Atlas team. C&H will prepare the hold notice for Cascade's review and will coo

3. Retain E-discovery Vendor. We recommend engaging Krane Investigations LLC to begin the document collection and processing work as promptly as practicable. Given the anticipated volume of over 400,000 documents and the likelihood that the joint discovery plan will require document productions to commence in early 2022, early engagement of the e-discovery vendor is important to ensure that Cascade is prepared to mee

4. Engage Damages Expert. We recommend that Cascade authorize the retention of a qualified economics and damages consulting firm to rebut Vantor's $87.4 million damages claim and to prepare an alternative damages analysis. Yuki Nakamura is currently preparing a retention recommendation memorandum identifying candidate firms, assessing their qualifications and track records in complex commercial damages cases, and rec

5. Secure Insurance Coverage Acknowledgment. We recommend continuing active engagement with Leonard Furman at Pinnacle National Insurance Co. to secure a formal written acknowledgment of Pinnacle's duty to defend under CGL Policy No. PNG-CGL-2021-04487. In addition, we recommend that Cascade begin submitting defense cost invoices to Pinnacle on a rolling monthly basis to establish the reimbursement framework and to c

6. Prepare for Joint discovery Plan. The scheduling order is anticipated to be entered in January 2022. We will coordinate with Wortham & Adair LLP on local practice requirements applicable in Los Angeles County Superior Court, including meet-and-confer obligations, discovery cutoff timelines, and any standing orders of Judge Delgado. We will also begin drafting proposed discovery requests and preparing responses to

7. Analyze the 14 Project Atlas Emails. This is a priority internal task. We have assigned Carlos Espinoza and Yuki Nakamura to prepare a detailed memorandum analyzing each of the 14 Project Atlas emails that reference Vantor's supplier relationships. The memorandum will assess the content, context, and author/recipients of each email; evaluate the risk that each email poses with respect to the knowledge element of V

8. Evaluate Early Settlement Overture. While we recommend proceeding with an aggressive defense, it may be prudent to assess at the appropriate time whether informal discussions with Kessler, Brandt & Whitfield LLP regarding early resolution of the Action are appropriate. Given the substantial gap between Vantor's $87.4 million claim and Cascade's assessed provable damages of $6.1 million to $11.3 million, there may

9. Board and Management Reporting. We recommend that David Pruitt advise whether Margaret Prumvane (CEO) and the Board of Directors require periodic litigation updates regarding the Action. Given Cascade's public company status, regular communication with senior management and the Board is advisable, both to ensure informed decision-making and to support compliance with any applicable disclosure obligations. We furth

10. Budget Review. We recommend scheduling quarterly budget reviews to track actual defense costs against the estimates set forth in this memorandum. These reviews will enable Cascade to identify any cost variances early and to make informed decisions about resource allocation as the litigation progresses. C&H will provide quarterly budget reports that include a comparison of actual costs to estimated costs by phase,

VIII. Conclusion In summary, Cascade has meritorious defenses to all three of Vantor's claims. Vantor's total damages claim of $87.4 million is substantially overstated, resting on speculative renewal assumptions, inflated projection periods, and a failure to account for mitigation. Our preliminary assessment