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MEMORANDUM

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

This memorandum is a privileged and confidential attorney-client communication prepared by Calderwood & Harkness LLP. It is intended solely for the use of the named recipients and authorized personnel of Cascade Retail Holdings Inc. and should not be disclosed to third parties without prior consultation with counsel. Unauthorized disclosure may constitute a waiver of applicable privileges.

I. Executive Summary

The purpose of this memorandum is to provide Cascade Retail Holdings Inc. ("CRH" or "Cascade") with a comprehensive summary of its obligations under the Assurance of Voluntary Compliance ("AVC") executed on August 20, 2024, between CRH and the State of Washington, acting through its Attorney General, Consumer Protection Division. This memorandum is intended to serve as a practical guide for CRH's internal stakeholders as they work to implement the AVC's requirements over the coming months and to avoid any lapses that could trigger stipulated penalties or further enforcement action.

The AVC resolves the consumer-protection inquiry initiated by the Washington Attorney General's Office on March 26, 2024, by means of a Civil Investigative Demand ("CID") issued under RCW 19.86.110. The AG's inquiry concerned CRH's use of "compare-at," "original price," and "was/now" reference pricing on its ecommerce platform (cascaderetail.com) and in its 187 brick-and-mortar retail locations across 14 western U.S. states. Specifically, the AG's investigation focused on the period during which CRH deployed its "Smart Price" promotional program, which relied on an algorithmic reference-price model developed and maintained by Praxton Analytics LLC. As set forth in the AVC, CRH neither admits nor denies any violation of the Washington Consumer Protection Act, RCW 19.86 et seq.

The total financial commitment under the AVC is $3,785,000, consisting of the following three components:

• Consumer Restitution Fund: $2,850,000, to provide refunds or store credits to consumers affected by potentially misleading reference-price displays during the relevant period;

• Civil Penalty: $750,000, payable to the Washington State Consumer Protection Account; and

• AG Investigative Costs Reimbursement: $185,000, to reimburse the Attorney General's Office for costs incurred during the investigation.

In addition to the financial components, the AVC imposes substantive, procedural, and reporting obligations that span a 24-month monitoring period running from August 20, 2024, through August 20, 2026. These obligations include the engagement of an independent compliance reviewer, the recalibration of CRH's algorithmic reference-price model, quarterly external audits, semi-annual compliance reporting to the AG's office, and internal compliance-program enhancements.

This memorandum is organized into the following principal sections: (II) Immediate Financial Obligations; (III) Consumer Restitution Fund — Establishment and Administration; (IV) Engagement of Independent Compliance Reviewer; (V) Revised Pricing-Disclosure Standards; (VI) Semi-Annual Compliance Reporting to the Attorney General; (VII) Internal Compliance-Program Enhancements; (VIII) Consequences of Non-Compliance; (IX) Consolidated Calendar of Key Deadlines; and (X) Open Items and Next Steps.

Calderwood & Harkness stands ready to assist CRH with all phases of implementation. Questions regarding the substance of this memorandum or the AVC itself should be directed to Alan Ngo (responsible partner) or Patrick Gallagher (lead associate) at the contact information provided herein.

II. Immediate Financial Obligations

The AVC requires CRH to make two payments within 30 days of the AVC's execution date. Because the AVC was executed on August 20, 2024, the deadline for both payments is September 19, 2024. Given the significance of timely payment — and the potential consequences of any delay — we address each payment obligation in detail below.

A. Civil Penalty Payment — $750,000

CRH must remit the sum of $750,000 to the Washington State Consumer Protection Account as a civil penalty assessed in connection with the AG's investigation. This payment represents the negotiated penalty amount and is a fixed obligation under the AVC; it is not subject to further negotiation or reduction.

The payment deadline is within 30 days of AVC execution, which falls on September 19, 2024. Payment is to be made by wire transfer or certified check payable to the Office of the Attorney General, Consumer Protection Division, at the following address:

Office of the Attorney General Consumer Protection Division

Attn: Lead Assistant Attorney General Meredith Calloway-Voss

800 Fifth Avenue, Suite 2000 Seattle, WA 98104

We note that this payment constitutes a governmental fine or penalty and is therefore not covered under CRH's directors-and-officers/corporate-liability insurance policy with Elkhorn Mutual Insurance Company (Policy No. ELK-DO-2024-08817). The policy's exclusion for fines, penalties, and punitive damages (Section IV.B.7 of the Policy) squarely applies. CRH should account for this payment as a direct corporate expense. We have confirmed this exclusion with Elkhorn's Claims Counsel, Brenda Whitacre, who concurs that the civil penalty falls outside the scope of coverage.

Recommendation: We recommend that CRH's treasury department initiate the wire transfer no later than September 12, 2024, to allow adequate processing time and to ensure that the payment is received and credited by the AG's office before the September 19 deadline. Any delay in receipt could be construed as a failure to comply with the AVC's terms, potentially triggering the stipulated-penalty provisions discussed in Section VIII below.

B. Reimbursement of Attorney General's Investigative Costs — $185,000

In addition to the civil penalty, CRH must reimburse the Attorney General's Office in the amount of $185,000 for costs incurred during the investigation. This figure was negotiated as part of the overall AVC settlement and encompasses the AG's staffing costs, expert consultants, data-analytics expenses, and other investigative expenditures.

The payment deadline is the same as for the civil penalty: within 30 days of AVC execution, or September 19, 2024. Payment should be made using the same mechanism (wire transfer or certified check) and directed to the same payee and address as set forth in Section II.A above.

Like the civil penalty, the investigative-costs reimbursement is a governmental assessment and is unlikely to be covered under the Elkhorn Mutual insurance policy, although this specific category of payment has not yet been the subject of a formal coverage determination. We recommend that CRH treat this payment as a direct corporate expense and, if CRH wishes, we can raise the question of investigative-costs coverage with Elkhorn separately.

Recommendation: We recommend processing both payments simultaneously on or before September 12, 2024, to simplify administration and ensure timely compliance.

C. Confirmation of Payment

Upon completion of both payments, CRH should retain all proof of payment, including wire-transfer confirmations, receipts, or images of canceled checks. These records should be maintained in CRH's AVC compliance file and made available to Ridgepoint Compliance Solutions Inc. (the independent compliance reviewer) and to Calderwood & Harkness upon request.

Calderwood & Harkness further recommends that CRH send written confirmation of payment to Lead Assistant Attorney General Meredith Calloway-Voss promptly after both payments have been transmitted. This written confirmation serves two purposes: first, it creates a clear paper trail demonstrating CRH's timely compliance with its financial obligations; second, it establishes a tone of good-faith cooperation that will be beneficial throughout the 24-month monitoring period. Calderwood & Harkness can prepare and transmit such confirmation on CRH's behalf if instructed to do so.

III. Consumer Restitution Fund — Establishment and Administration

A. Overview. The largest single financial obligation under the AVC is the establishment of a consumer-restitution fund in the amount of $2,850,000. The purpose of this fund is to provide refunds or store credits to consumers who were affected by potentially misleading reference-price displays during the period from October 15, 2023, through March 15, 2024. This five-month period corresponds to the time during which CRH's "Smart Price" promotional program — built on Praxton Analytics LLC's algorithmic reference-price model — was fully operational across CRH's ecommerce platform and in-store retail locations.

The scope of the AG's concern during this period was substantial. The AG's preliminary analysis identified approximately $214 million in gross merchandise sales during this period that bore potentially misleading reference-price tags. The $2,850,000 restitution fund was negotiated as a reasonable estimate of consumer harm attributable to the inflated reference prices, taking into account the practical difficulties of calculating individualized damages across hundreds of thousands of transactions.

B. Administration Timeline

The fund must be fully administered within 12 months of the AVC execution date — that is, by August 20, 2025. Under the AVC, "fully administered" means that (i) the consumer-notice program has been completed, (ii) consumer claims have been received and processed, and (iii) distributions have been made to verified claimants or escrowed for late-filing claimants who have been granted extensions. Any undistributed funds remaining after the completion of the claims process will be handled in accordance with the AVC's residual-funds provision, which provides for cy pres distribution to a consumer-protection organization designated by the AG's office, subject to CRH's right to propose alternatives.

The 12-month administration window is firm and was a material term of the AVC. CRH should plan its fund-administration timeline accordingly and build in adequate buffers to account for the complexity of the notice, claims, and distribution processes.

C. Key Implementation Steps

We recommend the following implementation steps, each of which should be undertaken promptly in light of the 12-month administration deadline:

1. Fund Establishment. CRH should establish a segregated bank account dedicated exclusively to holding the $2,850,000 restitution fund. The account should be interest-bearing, and any interest earned should be treated as part of the fund available for distribution to claimants. Alternatively, CRH may engage a third-party fund administrator — such as a claims-administration firm experienced in consumer-restitution matters — to hold and administer the fund on CRH's behalf. A third-party administrator can also provide infrastructure for claims intake, verification, and distribution, which may be more efficient than building such capacity in-house. Calderwood & Harkness recommends that the fund account be established (or the administrator engaged) no later than September 30, 2024, to allow adequate time for the notice program and claims process.

2. Consumer Notice Program. The AVC requires CRH to develop and implement a notice program reasonably calculated to inform affected consumers of the availability of refunds or store credits. The notice program should include, at a minimum, the following components:

(a) Direct Email and Mail Notice. CRH should identify affected consumers through its transaction records, including ecommerce orders placed through cascaderetail.com during the October 15, 2023, through March 15, 2024, period and in-store purchases captured through CRH's loyalty-program database. For each identifiable consumer, CRH should send a direct notice — by email for consumers whose email addresses are on file, and by first-class mail for consumers for whom only a physical address is available — informing them of the nature of the restitution program, the process for submitting a claim, and the deadline for doing so.

(b) Website Notice. CRH should post a conspicuous notice on cascaderetail.com — including on the homepage and on a dedicated landing page — describing the restitution program and providing instructions for submitting claims online.

(c) In-Store Signage. CRH should display notices in all 187 retail locations informing customers of the restitution program. Signage should be posted at point-of-sale stations and in other prominent locations within each store.

3. Claims Process. CRH (or its fund administrator) should design a claims-submission and verification process that is straightforward for consumers while incorporating reasonable anti-fraud protections. Claims should be accepted online (via the dedicated landing page on cascaderetail.com) and by mail. CRH should establish a deadline for consumer claims of at least 90 days from the date of initial notice to allow consumers adequate time to respond. We recommend building in an additional 30-day grace period for late-filed claims accompanied by good cause.

4. Distribution. After the claims deadline has passed and claims have been verified, CRH should process refunds (by original payment method or by check) or issue store credits to verified claimants. The choice between refunds and store credits should be guided by the terms of the AVC and by practical considerations; where the AVC permits either form of relief, CRH may wish to offer consumers the option to choose. Distributions should be completed within 60 days of the close of the claims period.

5. Reporting. CRH must track the status of the fund administration and report on it in the semi-annual compliance reports submitted to the AG (discussed in Section VI below). The first two semi-annual reports (due February 20, 2025, and August 20, 2025) should include detailed information on the status of the fund, including the number of notices sent, the number of claims received, the amount distributed, and the amount remaining in the fund.

D. Insurance Coverage Considerations

Coverage for the $2,850,000 restitution fund is currently disputed by Elkhorn Mutual Insurance Company, CRH's D&O/corporate-liability insurer. Elkhorn has reserved its rights under Policy No. ELK-DO-2024-08817, taking the position that the restitution fund may constitute a form of disgorgement or restitution that is excluded from coverage under the policy's "loss" definition. Specifically, Elkhorn's Claims Counsel, Brenda Whitacre, has cited the policy's "ill-gotten gains" exclusion and the exclusion for amounts that represent the return of consideration owed to third parties.

Elkhorn has, however, acknowledged coverage for CRH's defense costs incurred in responding to the AG's CID and negotiating the AVC, subject to the policy's $250,000 self-insured retention ("SIR"). To date, Elkhorn has reimbursed defense costs above the SIR, although final reconciliation of defense costs is still pending.

Calderwood & Harkness recommends that CRH continue to press the coverage claim with Elkhorn for the $2,850,000 restitution fund. The question of whether consumer-restitution payments constitute covered "loss" under D&O policies is the subject of significant case law, and there are persuasive arguments in CRH's favor under Washington law. We can assist with this effort as a separate workstream — including, if necessary, filing a coverage action — if CRH desires.

In the interim, CRH should plan to fund the $2,850,000 from its own resources and treat any subsequent insurance recovery as a reimbursement. The AVC's obligations cannot be deferred pending resolution of the insurance-coverage dispute.

IV. Engagement of Independent Compliance Reviewer — Ridgepoint Compliance Solutions Inc.

A. Appointment. One of the core structural requirements of the AVC is the retention of an independent compliance reviewer to audit CRH's pricing practices throughout the 24-month monitoring period from August 20, 2024, through August 20, 2026. The AVC designates Ridgepoint Compliance Solutions Inc. as the independent compliance reviewer, subject to CRH's execution of an engagement letter with Ridgepoint. Ridgepoint was selected through a process in which the AG's office proposed three candidates and CRH selected Ridgepoint from that list.

The engagement partner at Ridgepoint is Harold Sung, whose office is located at 700 Stewart Street, Suite 1500, Seattle, WA 98101. Mr. Sung has extensive experience in retail-pricing compliance matters and has served as an independent monitor in similar AVC and consent-decree engagements in Washington, Oregon, and California.

CRH should execute an engagement letter with Ridgepoint promptly. Calderwood & Harkness recommends that the engagement letter be finalized and executed by no later than September 15, 2024, to allow adequate time for Ridgepoint to plan and conduct the first quarterly audit in November 2024. We have been in preliminary contact with Mr. Sung's office regarding the anticipated scope of the engagement and can assist CRH in negotiating the engagement terms, including fee structure, access protocols, and confidentiality provisions.

B. Scope of Quarterly Audits

Under the AVC, Ridgepoint will conduct quarterly audits of CRH's reference-price practices. Each audit will encompass the following areas:

(a) Review and Testing of the Algorithmic Reference-Price Model. Ridgepoint will review and test the algorithmic reference-price model developed and maintained by Praxton Analytics LLC (principal contact: Dr. Leila Farzan, 2020 Westlake Avenue N, Suite 310, Seattle, WA 98109). This review will include an examination of the algorithm's inputs, logic, and outputs to verify that the model generates reference prices that comply with the AVC's 120-day lookback standard.

(b) SKU Sampling. Ridgepoint will select a statistically significant sample of SKUs across all six product categories specifically identified in the AG's inquiry: women's apparel, men's footwear, home textiles, small kitchen appliances, outdoor furniture, and consumer electronics accessories. For each sampled SKU, Ridgepoint will verify that the displayed reference price corresponds to an actual, bona fide offering price within the preceding 120-day window.

(c) Verification of Reference Prices. Ridgepoint will verify that all displayed "compare-at," "original," or "was" reference prices reflect the actual, bona fide price at which the item was offered for sale in the ordinary course of business during the preceding 120-day lookback window. This verification will be conducted against CRH's transaction records, pricing databases, and other relevant documentation.

(d) Cross-Channel Consistency. Ridgepoint will assess the consistency of pricing disclosures between CRH's ecommerce platform (cascaderetail.com) and its in-store pricing signage and displays. The AG's investigation identified material discrepancies between online and in-store reference prices for identical SKUs, and the AVC requires that CRH's pricing disclosures be consistent across all channels.

C. CRH's Cooperation Obligations

The AVC imposes an affirmative obligation on CRH to cooperate fully with Ridgepoint throughout the monitoring period. Specifically, CRH must provide Ridgepoint with full and unrestricted access to:

• All pricing data, including historical and current reference prices, actual selling prices, and offering-price data;

• The Praxton Analytics algorithm, including its source code, parameters, inputs, and outputs;

• Transaction records, including ecommerce order data and point-of-sale data from all 187 retail locations;

• Internal communications relevant to pricing decisions, including emails, memoranda, and reports involving the marketing, merchandising, and pricing teams; and

• Any other information or documents reasonably requested by Ridgepoint in connection with its audit activities.

To facilitate efficient cooperation, we recommend that Raymond Soo (VP, Marketing & Pricing Strategy) and Terence Ashford (CCO) each designate one or more internal points of contact to serve as liaisons with the Ridgepoint audit team. These liaisons should be individuals with day-to-day knowledge of CRH's pricing practices and the technical infrastructure underlying the reference-price system. The liaisons should be prepared to respond promptly to Ridgepoint's requests for information and to schedule and facilitate on-site audit visits as needed.

Any deficiencies or potential compliance issues identified by Ridgepoint during a quarterly audit should be remediated promptly. CRH should document all remediation efforts, including the nature of the deficiency, the corrective action taken, the date of correction, and the personnel responsible. This documentation will be important for both the semi-annual compliance reports to the AG and for CRH's own internal records.

D. Audit Schedule

Ridgepoint will conduct a total of eight quarterly audits over the 24-month monitoring period, on the following schedule:

The first audit (Q1, November 2024) is particularly significant because it will serve as the initial assessment of CRH's compliance with the recalibrated reference-price standards. A clean first audit report will set a positive tone for the remainder of the monitoring period and demonstrate CRH's good-faith commitment to compliance. Conversely, deficiencies identified in the first audit could draw heightened scrutiny from the AG's office. We therefore strongly encourage CRH to prioritize the implementation of the revised pricing-disclosure standards (discussed in Section V below) well in advance of the Q1 audit.

V. Revised Pricing-Disclosure Standards

A. The 120-Day Lookback Window

The AVC requires that all "compare-at," "original," or "was" reference prices displayed by CRH reflect the actual, bona fide price at which the merchandise was offered for sale in the ordinary course of business for a reasonably substantial period during the immediately preceding 120-day lookback window. This standard is the central substantive requirement of the AVC and will govern CRH's pricing practices for the duration of the monitoring period and, as a practical matter, indefinitely thereafter.

The 120-day lookback standard replaces any prior methodology, including the Praxton Analytics algorithmic model as previously configured. As the AG's investigation revealed, the prior configuration of the "Smart Price" algorithm generated reference prices that, in a significant number of instances, did not correspond to the actual price at which the merchandise had been offered for sale in the ordinary course of business. Specifically, the AG's analysis found that 68.4% of 2,340 sampled SKUs — that is, 1,601 SKUs — displayed reference prices that were inflated by an average of 37.2% above the actual highest offering price during any relevant lookback period. In some cases, the algorithm drew reference-price inputs from manufacturer suggested retail prices ("MSRPs") or competitor prices that CRH itself had never actually charged, rendering the "compare-at" or "was" price misleading to consumers.

The 120-day lookback window was the product of negotiation between CRH and the AG's office. The AG initially demanded a 180-day lookback window, arguing that a longer window was necessary to prevent artificially inflated reference prices based on brief, unsustained offering periods. CRH proposed a 90-day window, contending that a shorter window better reflected the realities of seasonal and promotional pricing in the retail industry. The parties ultimately agreed to a 120-day compromise, which Calderwood & Harkness believes strikes a reasonable balance between consumer protection and CRH's operational needs.

Under the 120-day lookback standard, a reference price may be displayed only if the merchandise was actually offered for sale at that price (or a higher price) for a reasonably substantial period within the 120 days preceding the date on which the reference price is displayed. "Reasonably substantial period" is not defined with mathematical precision in the AVC, but the AG's office has indicated informally that it would generally expect the item to have been offered at the reference price for at least 30 of the 120 days to satisfy this requirement. CRH should err on the side of caution and adopt conservative interpretations of this standard.

B. Channels Covered

The revised pricing-disclosure standards apply to both of CRH's sales channels:

(a) Ecommerce. All product listings on cascaderetail.com that display a reference price — whether labeled as "compare at," "original price," "was," or any functionally equivalent term — must comply with the 120-day lookback standard. This includes product detail pages, search-results pages, category pages, promotional landing pages, email marketing campaigns, and any other digital medium through which CRH displays reference prices to consumers.

(b) In-Store. All pricing signage, shelf tags, hang tags, promotional displays, end-cap signage, and any other in-store pricing communications across all 187 retail locations in 14 western U.S. states must comply with the 120-day lookback standard. Store managers should be trained to identify and remove any non-compliant pricing signage and to report discrepancies through the escalation protocols described in Section VII below.

C. Product Categories

While the AVC's prospective pricing-disclosure standards apply to CRH's entire product assortment on a company-wide basis, particular attention must be given to the six product categories that were specifically identified in the AG's investigation and that formed the basis for the AG's statistical analysis:

1. Women's apparel

2. Men's footwear

3. Home textiles

4. Small kitchen appliances

5. Outdoor furniture

6. Consumer electronics accessories

These six categories accounted for the majority of the AG's sampled SKUs and will likely be the focus of Ridgepoint's quarterly audits as well. CRH should prioritize compliance efforts in these categories and ensure that the recalibrated reference-price algorithm is thoroughly validated for SKUs in each of these categories before the first Ridgepoint audit in November 2024.

D. Implementation Requirements

CRH must take the following steps to implement the revised pricing-disclosure standards:

1. Algorithm Recalibration. CRH must work with Praxton Analytics LLC to recalibrate the "Smart Price" algorithmic reference-price model to comply with the 120-day lookback requirement. The recalibration must ensure that all reference prices generated by the algorithm are derived from actual, verifiable offering-price data within the preceding 120-day window. Specifically, the recalibrated algorithm must:

(a) Draw reference-price inputs exclusively from CRH's own actual offering prices (i.e., prices at which CRH itself offered the merchandise for sale), and not from MSRPs, competitor prices, or other external benchmarks, unless the AVC specifically permits such use;

(b) Apply the 120-day lookback window consistently across all SKUs and product categories;

(c) Incorporate a "reasonably substantial period" filter to ensure that reference prices are not based on fleeting or token offerings; and

(d) Generate an audit trail for each reference price, documenting the offering-price data on which the reference price is based, the dates during which the item was offered at that price, and the date on which the reference price was calculated and displayed.

2. Manual Override Controls. CRH must implement controls to prevent manual overrides that would set reference prices outside the parameters of the recalibrated algorithm. During the AG's investigation, the AG's office identified instances in which CRH's merchandising team manually set reference prices that exceeded the algorithm's outputs, in some cases by substantial margins. The AVC requires that any manual adjustments to reference prices be subject to compliance review and approval before implementation. CRH should build a workflow that requires CCO or compliance-department sign-off on any manual override of an algorithmically generated reference price.

3. Documentation. CRH must maintain contemporaneous records sufficient to demonstrate that each reference price displayed — whether on cascaderetail.com or in-store — was derived from a bona fide offering price within the 120-day lookback period. These records should be organized in a manner that permits efficient retrieval during Ridgepoint's quarterly audits and in the event of any future inquiry by the AG's office. Records should be retained for a minimum of three years beyond the end of the monitoring period (i.e., through at least August 20, 2029).

4. Rollout Timeline. Calderwood & Harkness recommends that the recalibrated pricing standards be fully implemented across all channels — both ecommerce and in-store — by no later than October 1, 2024. This timeline allows approximately six weeks from the date of this memorandum for CRH to complete the algorithm recalibration with Praxton Analytics, update all product listings on cascaderetail.com, and distribute updated pricing signage to all 187 retail locations. While the AVC does not specify an exact implementation date for the revised pricing standards, CRH must have the standards in place before the first Ridgepoint quarterly audit in November 2024, and an October 1 rollout provides a reasonable buffer to identify and correct any issues before the audit commences.

VI. Semi-Annual Compliance Reporting to the Attorney General

A. Reporting Obligation

The AVC requires CRH to submit semi-annual compliance reports to the Washington Attorney General's Consumer Protection Division throughout the 24-month monitoring period. These reports serve as CRH's primary mechanism for demonstrating ongoing compliance with the AVC's terms and for keeping the AG's office informed of CRH's progress in implementing the corrective measures described above.

All reports are to be submitted to Lead Assistant Attorney General Meredith Calloway-Voss at the following address:

Office of the Attorney General Consumer Protection Division

Attn: Lead Assistant Attorney General Meredith Calloway-Voss

800 Fifth Avenue, Suite 2000 Seattle, WA 98104

Reports may be submitted in hard copy or, if the AG's office consents, by secure electronic transmission. We recommend confirming the AG's preferred delivery method with Ms. Calloway-Voss in advance of the first report's due date.

B. Report Schedule

A total of four semi-annual reports will be submitted over the 24-month monitoring period, on the following schedule:

The fourth and final report, due August 20, 2026, will coincide with the conclusion of the 24-month monitoring period. Upon successful completion of all four reports and the satisfaction of all other AVC obligations, CRH's compliance obligations under the AVC will be deemed fulfilled.

C. Recommended Report Content

While the AVC provides general guidance on the content of the semi-annual reports, it does not prescribe a rigid format. Calderwood & Harkness recommends that each report include the following components, which together will provide the AG's office with a comprehensive picture of CRH's compliance posture during the relevant period:

(a) Summary of Pricing-Disclosure Practices. A narrative summary of CRH's reference-pricing practices during the reporting period, including a description of the 120-day lookback methodology in effect, any material changes to the Praxton Analytics algorithm, and any significant operational developments affecting pricing disclosures.

(b) Ridgepoint Quarterly Audit Results. A summary of the results of the two Ridgepoint Compliance Solutions quarterly audits conducted during the reporting period. Each summary should describe Ridgepoint's audit methodology, the number and categories of SKUs sampled, any deficiencies or potential compliance issues identified, and CRH's corrective responses. CRH should attach copies of the full Ridgepoint audit reports as appendices to the semi-annual report.

(c) Consumer Restitution Fund Status. For the first two semi-annual reports (Reports 1 and 2), a detailed accounting of the consumer-restitution fund, including the number of consumer notices sent, the number of claims received, the number of claims approved and denied, the total amount distributed to date, and the amount remaining in the fund. The second report (due August 20, 2025) should also confirm the full administration of the fund.

(d) Non-Compliance Incidents and Corrective Actions. A description of any instances of identified non-compliance with the AVC's terms during the reporting period, including the nature of the non-compliance, the date it was identified, the corrective action taken, and the date of correction. Transparency in reporting non-compliance incidents — particularly when they have been promptly identified and remediated — will help maintain a constructive relationship with the AG's office.

(e) Continued Engagement Confirmations. Confirmation that CRH's engagement with Ridgepoint Compliance Solutions and Praxton Analytics LLC remains in effect and that both parties are performing their respective obligations under the AVC.

(f) Officer Attestation. An attestation by CRH's Chief Compliance Officer (Terence Ashford) or General Counsel (Diana Prescott-Levy) certifying that the report is accurate and complete to the best of the attester's knowledge, information, and belief, and that CRH has complied with the material terms of the AVC during the reporting period. The attestation should be signed and dated.

D. Coordination with Calderwood & Harkness

Calderwood & Harkness recommends that CRH submit draft reports to our office for review at least 15 business days before each due date. This lead time will allow us to review the report for legal sufficiency, verify that all required content is included, ensure consistency with prior reports, and flag any issues that may require attention before submission. We can also assist with drafting the reports in whole or in part if CRH prefers.

In addition, Calderwood & Harkness can serve as the transmittal agent, delivering the finalized reports to the AG's office on CRH's behalf and confirming receipt with Ms. Calloway-Voss's office.

VII. Internal Compliance-Program Enhancements

While the AVC's formal requirements focus on external monitoring (Ridgepoint audits) and external reporting (semi-annual reports to the AG), Calderwood & Harkness strongly recommends that CRH also invest in internal compliance-program enhancements. A robust internal compliance infrastructure will not only support CRH's compliance with the AVC but will also reduce the risk of future regulatory inquiries and demonstrate institutional commitment to lawful pricing practices.

A. Training Programs

CRH should implement mandatory compliance training for all personnel involved in pricing decisions, including the following groups:

• Marketing and merchandising teams operating under Raymond Soo's supervision, including category managers, pricing analysts, and promotional-planning personnel;

• Ecommerce product-listing teams responsible for creating and updating product listings on cascaderetail.com, including any personnel who manually set or adjust reference prices in the content management system;

• Store managers and regional managers across all 187 retail locations, who are responsible for implementing pricing signage and displays at the store level and who serve as the front line for identifying and escalating potential pricing-disclosure issues; and

• Any other personnel who exercise discretion or authority over the display of reference prices, including personnel at Praxton Analytics LLC who manage the algorithmic model on CRH's behalf.

The training content should cover, at a minimum, the following topics:

(a) An overview of the legal requirements of the Washington Consumer Protection Act (RCW 19.86) as applied to reference pricing, including the statutory prohibition on unfair or deceptive acts or practices and the specific application of that prohibition to misleading price comparisons;

(b) CRH's specific obligations under the AVC, including the 120-day lookback window, the definition of "actual, bona fide price," the "reasonably substantial period" requirement, and the prohibition on manual overrides outside approved parameters;

(c) Practical guidance on how to identify and escalate potential pricing-disclosure issues, including examples of compliant and non-compliant reference-price displays, common pitfalls, and red flags;

(d) A clear explanation of the consequences of non-compliance, both under the AVC (stipulated penalties of $10,000 per day, potential reopening of the AG's investigation) and under applicable law (civil penalties, injunctive relief, private consumer actions); and

(e) An overview of the Ridgepoint quarterly audit process, including what personnel should expect during an audit and how to respond to Ridgepoint's requests for information.

Recommended Timeline: Calderwood & Harkness recommends that the initial company-wide compliance training be completed by November 1, 2024, in advance of the first Ridgepoint quarterly audit. Training should be documented, and attendance records should be maintained. Annual refresher training should be conducted for all relevant personnel during each year of the monitoring period (i.e., in or around November 2025 for the second year). New hires in pricing-related roles should receive training within 30 days of their start date.

B. Compliance Policies and Procedures

Terence Ashford, as Chief Compliance Officer, should oversee the development or revision of written compliance policies specifically addressing CRH's reference-price practices. If CRH already maintains pricing-related policies, those policies should be updated to reflect the AVC's requirements. If no such policies exist in their current form, they should be developed from scratch. In either case, the policies should incorporate the following elements:

(a) Standard Operating Procedures for Setting and Verifying Reference Prices. Step-by-step procedures for determining reference prices, including the data sources to be consulted, the application of the 120-day lookback window, the verification of "reasonably substantial period" compliance, and the documentation required at each step.

(b) Roles and Responsibilities. A clear delineation of roles and responsibilities for pricing decisions, including the respective roles of the marketing and merchandising teams, the ecommerce team, the compliance department, and Praxton Analytics LLC. The policies should specify who has authority to approve reference prices, who is responsible for monitoring compliance, and who is accountable for addressing identified issues.

(c) Escalation and Reporting Protocols. Procedures for escalating potential pricing-disclosure issues — whether identified internally, by Ridgepoint, or by the AG's office — to the appropriate personnel for investigation and remediation. The protocols should identify the individuals to whom issues should be escalated (e.g., CCO, General Counsel) and the timeframes within which issues must be investigated and resolved.

(d) Record-Retention Requirements. Specifications for the types of records to be retained, the format in which they should be maintained, and the minimum retention period. As noted in Section V.D.3 above, records supporting reference-price compliance should be retained for a minimum of three years beyond the end of the monitoring period.

Calderwood & Harkness is available to review draft compliance policies for legal sufficiency and to provide guidance on best practices in retail-pricing compliance. We recommend that draft policies be completed and circulated for internal review by October 15, 2024, with final policies adopted no later than November 1, 2024.

C. Internal Audit and Monitoring

In addition to Ridgepoint's external quarterly audits, CRH should establish an internal monitoring function within its compliance department to conduct ongoing spot-checks of reference-price accuracy. This internal monitoring serves a dual purpose: first, it enables CRH to identify and remediate compliance issues between quarterly audits, rather than waiting for Ridgepoint discover them; second, it demonstrates to the AG's office that CRH has invested in a proactive, rather than merely reactive, compliance posture.

The internal monitoring function should include the following activities:

• Random sampling of SKUs across all six product categories on a weekly or bi-weekly basis, with verification that displayed reference prices comply with the 120-day lookback standard;

• Periodic comparisons of ecommerce and in-store reference prices for identical SKUs to verify cross-channel consistency;

• Review of manual overrides of algorithmically generated reference prices to ensure compliance with the manual-override controls described in Section V.D.2 above; and

• Documentation of all monitoring activities, findings, and corrective actions.

Internal monitoring findings should be shared with Ridgepoint during each quarterly audit cycle and, as appropriate, reflected in the semi-annual compliance reports submitted to the AG. Where internal monitoring identifies deficiencies, CRH should remediate them promptly and document the remediation in the same manner as for deficiencies identified by Ridgepoint.

VIII. Consequences of Non-Compliance

CRH's leadership should be aware of the consequences that may flow from any failure to comply with the AVC's terms. While we are confident that CRH is committed to full compliance, an understanding of the potential consequences underscores the importance of the implementation steps outlined in this memorandum.

A. Stipulated Penalties

The AVC provides for stipulated penalties of $10,000 per day for any material breach of the AVC's terms. These penalties are designed to incentivize timely and complete compliance and to provide the AG's office with an efficient enforcement mechanism that does not require a full-scale litigation proceeding.

Importantly, the stipulated penalties do not accrue automatically upon a breach. Rather, the AVC provides for a 30-day cure period: the AG must first provide CRH with written notice identifying the alleged material breach, and CRH then has 30 days from receipt of that notice to cure the breach. Stipulated penalties accrue only if CRH fails to cure the breach within the 30-day cure period. Penalties accrue at the rate of $10,000 per day from the expiration of the cure period until the breach is cured or the matter is otherwise resolved.

Given the financial exposure associated with stipulated penalties — which could accumulate rapidly in the event of a prolonged breach — CRH should implement internal processes to ensure that any notice from the AG's office alleging a breach is immediately escalated to the General Counsel and the Chief Compliance Officer. Calderwood & Harkness should be contacted promptly upon receipt of any such notice so that we can assist in evaluating the alleged breach, coordinating the cure, and communicating with the AG's office.

B. Potential for Further Enforcement

A material breach of the AVC could have consequences extending beyond stipulated penalties. Specifically, a breach could result in the AG's office reopening the investigation or initiating a formal enforcement action under RCW 19.86. Such an action could expose CRH to:

• Additional civil penalties under RCW 19.86.140, which authorizes penalties of up to $7,500 per violation (with each deceptive act potentially constituting a separate violation);

• Injunctive relief, including court-ordered restrictions on CRH's pricing practices that could be more onerous than the AVC's requirements;

• Further consumer-restitution obligations; and

• An award of the AG's attorneys' fees and costs in connection with the enforcement proceeding.

Moreover, the no-admission-of-liability provision in the AVC — while protective of CRH in the context of the current resolution — would not necessarily shield CRH from liability findings in a subsequent enforcement proceeding based on new or continuing conduct. The AVC's protections are limited to the specific matters resolved by the AVC; conduct occurring after the AVC's execution date would be evaluated on its own merits and could form the basis for new claims.

C. Importance of Timely Performance

Given the severity of the stipulated penalties ($10,000 per day), the potential for further enforcement action, and the significant reputational risk associated with a public finding of non-compliance with a consumer-protection AVC, strict adherence to all AVC deadlines and substantive requirements is essential. CRH should treat each deadline in the consolidated calendar (Section IX) as a firm, non-negotiable commitment and should build internal processes and redundancies to prevent any inadvertent lapse.

Calderwood & Harkness will maintain its own tracking calendar and will provide advance reminders to CRH's compliance team as key deadlines approach. However, the primary responsibility for timely performance rests with CRH's internal teams, and we encourage the General Counsel and CCO to assign clear ownership for each obligation.

IX. Consolidated Calendar of Key Deadlines

The following table consolidates all material deadlines arising from the AVC and from Calderwood & Harkness's implementation recommendations. CRH should incorporate these deadlines into its internal compliance calendar and assign responsibility to the appropriate personnel and departments.

X. Open Items and Next Steps

The following items require near-term attention and decision-making by CRH. We request that the General Counsel and CCO review these items and advise Calderwood & Harkness of CRH's preferred course of action so that we may proceed accordingly.

1. Elkhorn Insurance Coverage. As discussed in Section III.D above, coverage for the $2,850,000 consumer-restitution fund remains disputed by Elkhorn Mutual Insurance Company, which has reserved its rights under Policy No. ELK-DO-2024-08817. Elkhorn's Claims Counsel, Brenda Whitacre, has acknowledged coverage for defense costs subject to the $250,000 self-insured retention; to date, defense costs above the SIR in the amount of $201,095 have been reimbursed, subject to final reconciliation. However, the more significant coverage question — whether the restitution fund constitutes covered "loss" under the policy — remains unresolved. Calderwood & Harkness recommends continued and active engagement with Elkhorn to resolve this question, including the preparation of a formal coverage-demand letter supported by applicable case law. If CRH wishes, we can pursue this as a separate workstream, including, if necessary, initiating a coverage action against Elkhorn. Please advise whether CRH would like us to proceed on this front.

2. Praxton Analytics Coordination. CRH should engage Dr. Leila Farzan at Praxton Analytics LLC promptly to begin the algorithm-recalibration process in accordance with the 120-day lookback standard. Given the October 1, 2024, target date for rollout of the revised pricing standards, the recalibration work should commence immediately. Raymond Soo should coordinate directly with Dr. Farzan's team to define the recalibration specifications, and CRH's IT department should be prepared to implement the recalibrated model in the ecommerce content management system and in the in-store pricing infrastructure. Calderwood & Harkness can review the recalibration specifications for consistency with the AVC's requirements if CRH so desires.

3. Ridgepoint Engagement. As noted in Section IV.A above, CRH should finalize the scope-of-work and engagement terms with Harold Sung at Ridgepoint Compliance Solutions by September 15, 2024. Key terms to be negotiated include Ridgepoint's fee structure (which will be borne by CRH under the AVC), the access protocols for pricing data and internal communications, confidentiality protections for CRH's proprietary business information, and the format and timing of Ridgepoint's quarterly audit reports. Calderwood & Harkness has been in preliminary contact with Mr. Sung's office and can assist with the engagement-letter negotiations.

4. Restitution Fund Administrator. CRH should determine whether it will administer the consumer-restitution fund internally or retain a third-party claims administrator. An internal approach may be more cost-effective but will require CRH to build or adapt claims-intake and verification infrastructure, which may divert resources from other compliance priorities. An external administrator offers turnkey capabilities but at additional cost. If CRH elects to retain a third-party administrator, the selection process should begin immediately to meet the September 30 deadline for fund establishment. Calderwood & Harkness can provide recommendations for experienced claims-administration firms if helpful.

5. Board and Public Disclosure. CRH should coordinate with its outside auditors, Whitfield & Crane LLP, and its investor-relations team regarding any required disclosures in CRH's SEC filings related to the AVC financial commitments. The $3,785,000 total financial commitment, together with the ongoing monitoring obligations and the disputed insurance-coverage question, may require disclosure in CRH's next quarterly report on Form 10-Q and/or its annual report on Form 10-K, depending on the materiality assessment. In addition, CRH should consider whether any current-report filing on Form 8-K is warranted. Calderwood & Harkness's securities-law colleagues are available to assist with the disclosure analysis if CRH would find that helpful.

6. Calderwood & Harkness Continuing Role. Calderwood & Harkness is available to assist CRH with all of the implementation tasks outlined in this memorandum, including but not limited to: review and drafting of semi-annual compliance reports; coordination with Ridgepoint Compliance Solutions; review of recalibrated pricing-algorithm specifications for AVC compliance; Elkhorn insurance-coverage negotiations or litigation; communications with the AG's office; and review of internal compliance policies and training materials. Please direct all questions and instructions to Alan Ngo (responsible partner) or Patrick Gallagher (lead associate) at the contact information below.

XI. Conclusion

The AVC executed on August 20, 2024, resolves the Washington Attorney General's consumer-protection inquiry into CRH's reference-pricing practices on favorable terms: CRH has made no admission of liability, and the resolution avoids the substantial additional exposure that would have attended a formal enforcement proceeding under RCW 19.86. The AG's investigation had identified significant statistical evidence of reference-price inflation across thousands of SKUs and hundreds of millions of dollars in gross merchandise sales. A litigated enforcement action could have resulted in significantly higher penalties, broader injunctive relief, and reputational harm that would have been difficult to quantify.

That said, the AVC imposes substantial obligations that will require sustained institutional commitment over the next 24 months. The $3,785,000 total financial commitment — comprising the $2,850,000 consumer-restitution fund, the $750,000 civil penalty, and the $185,000 investigative-costs reimbursement — represents a significant but manageable expenditure. More importantly, the prospective compliance obligations — including the engagement of Ridgepoint Compliance Solutions as an independent compliance reviewer, the recalibration of the Praxton Analytics pricing algorithm, eight quarterly external audits, four semi-annual compliance reports to the AG, and comprehensive internal training and policy development — will require coordinated effort across multiple CRH departments and business units.

Prompt and thorough implementation of all AVC obligations is essential. The stipulated penalties for non-compliance ($10,000 per day for uncured material breaches) create meaningful financial exposure, and a finding of non-compliance would undermine the goodwill that CRH has built with the AG's office through the cooperative resolution of this matter. We urge CRH to treat the deadlines set forth in the consolidated calendar in Section IX as firm commitments and to begin implementation immediately.

Calderwood & Harkness appreciates the opportunity to continue advising Cascade Retail Holdings Inc. on this matter and looks forward to supporting the implementation process. We are confident that, with diligent execution, CRH will successfully navigate the monitoring period and emerge with strengthened pricing-compliance practices that will serve the company well beyond the AVC's term.

Please do not hesitate to contact us with any questions or to discuss the next steps outlined in this memorandum.

Calderwood & Harkness LLP

Alan Ngo, Partner Patrick Gallagher, Associate 1201 Third Avenue, Suite 4400 Seattle, WA 98101

C&H Matter No. 1038-00004

This memorandum is a privileged and confidential attorney-client communication and attorney work product. It is intended solely for the use of the named recipients and authorized personnel of Cascade Retail Holdings Inc. Unauthorized disclosure, distribution, or copying of this memorandum or any portion thereof is strictly prohibited. If you have received this memorandum in error, please notify Calderwood & Harkness LLP immediately and destroy all copies.

Date:	August 22, 2024
From:	Alan Ngo, Partner, and Patrick Gallagher, Associate — Calderwood & Harkness LLP, 1201 Third Avenue, Suite 4400, Seattle, WA 98101
To:	Diana Prescott-Levy, General Counsel; Terence Ashford, Chief Compliance Officer; Raymond Soo, VP, Marketing & Pricing Strategy — Cascade Retail Holdings Inc., 4500 Overlake Boulevard, Suite 800, Bellevue, WA 98004
Re:	Assurance of Voluntary Compliance — Compliance Obligations and Implementation Roadmap (C&H Matter No. 1038-00004)
Audit	Target Month	Period Covered
Q1	November 2024	August 20 – October 31, 2024
Q2	February 2025	November 1, 2024 – January 31, 2025
Q3	May 2025	February 1 – April 30, 2025
Q4	August 2025	May 1 – July 31, 2025
Q5	November 2025	August 1 – October 31, 2025
Q6	February 2026	November 1, 2025 – January 31, 2026
Q7	May 2026	February 1 – April 30, 2026
Q8 (Final)	August 2026	May 1 – July 31, 2026
Report No.	Period Covered	Due Date
1	August 20, 2024 – February 19, 2025	February 20, 2025
2	February 20, 2025 – August 19, 2025	August 20, 2025
3	August 20, 2025 – February 19, 2026	February 20, 2026
4	February 20, 2026 – August 19, 2026	August 20, 2026 (final report)
Deadline	Obligation	Responsible Party / Notes
September 15, 2024	Execute engagement letter with Ridgepoint Compliance Solutions Inc.	CRH (CCO / General Counsel); coordinate with C&H for engagement-letter review
September 19, 2024	Pay $750,000 civil penalty to WA Consumer Protection Account	CRH Treasury; initiate by September 12 to allow processing time
September 19, 2024	Pay $185,000 AG investigative costs reimbursement	CRH Treasury; process simultaneously with civil penalty
September 30, 2024	Establish segregated consumer-restitution fund account ($2,850,000)	CRH Treasury / General Counsel; select third-party administrator if applicable
October 1, 2024	Complete recalibration and rollout of revised reference-price standards (120-day lookback) across ecommerce and all 187 stores	Raymond Soo / Praxton Analytics LLC / IT; ensure all channels compliant before Q1 audit
November 1, 2024	Complete initial company-wide compliance training	Terence Ashford / HR; document attendance and maintain records

November 2024	First Ridgepoint quarterly audit (Q1: covering August 20 – October 31, 2024)	Ridgepoint / Harold Sung; CRH liaisons provide full access and cooperation
February 2025	Second Ridgepoint quarterly audit (Q2: covering November 1, 2024 – January 31, 2025)	Ridgepoint
February 20, 2025	First semi-annual compliance report to AG (covering August 20, 2024 – February 19, 2025)	CRH (with C&H review); submit draft to C&H by January 29, 2025
May 2025	Third Ridgepoint quarterly audit (Q3: covering February 1 – April 30, 2025)	Ridgepoint
August 2025	Fourth Ridgepoint quarterly audit (Q4: covering May 1 – July 31, 2025)	Ridgepoint
August 20, 2025	Second semi-annual compliance report to AG (covering February 20 – August 19, 2025)	CRH (with C&H review); submit draft to C&H by July 30, 2025
August 20, 2025	Deadline for full administration of consumer restitution fund	CRH / Fund Administrator; all distributions completed or escrowed
November 2025	Fifth Ridgepoint quarterly audit (Q5: covering August 1 – October 31, 2025)	Ridgepoint
February 2026	Sixth Ridgepoint quarterly audit (Q6: covering November 1, 2025 – January 31, 2026)	Ridgepoint
February 20, 2026	Third semi-annual compliance report to AG (covering August 20, 2025 – February 19, 2026)	CRH (with C&H review); submit draft to C&H by January 29, 2026
May 2026	Seventh Ridgepoint quarterly audit (Q7: covering February 1 – April 30, 2026)	Ridgepoint
August 2026	Eighth and final Ridgepoint quarterly audit (Q8: covering May 1 – July 31, 2026)	Ridgepoint
August 20, 2026	Fourth and final semi-annual compliance report to AG (covering February 20 – August 19, 2026); conclusion of 24-month monitoring period	CRH (with C&H review); submit draft to C&H by July 30, 2026

MEMORANDUM
PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
This memorandum is a privileged and confidential attorney-client communication prepared by Calderwood & Harkness LLP. It is intended solely for the use of the named recipients and authorized personnel of Cascade Retail Holdings Inc. and should not be disclosed to third parties without prior consultation with counsel. Unauthorized disclosure may constitute a waiver of applicable privileges.
I. Executive Summary
The purpose of this memorandum is to provide Cascade Retail Holdings Inc. ("CRH" or "Cascade") with a comprehensive summary of its obligations under the Assurance of Voluntary Compliance ("AVC") executed on August 20, 2024, between CRH and the State of Washington, acting through its Attorney General, Consumer Protection Division. This memorandum is intended to serve as a practical guide for CRH's internal stakeholders as they work to implement the AVC's requirements over the coming months and to avoid any lapses that could trigger stipulated penalties or further enforcement action.
The AVC resolves the consumer-protection inquiry initiated by the Washington Attorney General's Office on March 26, 2024, by means of a Civil Investigative Demand ("CID") issued under RCW 19.86.110. The AG's inquiry concerned CRH's use of "compare-at," "original price," and "was/now" reference pricing on its ecommerce platform (cascaderetail.com) and in its 187 brick-and-mortar retail locations across 14 western U.S. states. Specifically, the AG's investigation focused on the period during which CRH deployed its "Smart Price" promotional program, which relied on an algorithmic reference-price model developed and maintained by Praxton Analytics LLC. As set forth in the AVC, CRH neither admits nor denies any violation of the Washington Consumer Protection Act, RCW 19.86 et seq.
The total financial commitment under the AVC is $3,785,000, consisting of the following three components:
•  Consumer Restitution Fund: $2,850,000, to provide refunds or store credits to consumers affected by potentially misleading reference-price displays during the relevant period;
•  Civil Penalty: $750,000, payable to the Washington State Consumer Protection Account; and
•  AG Investigative Costs Reimbursement: $185,000, to reimburse the Attorney General's Office for costs incurred during the investigation.
In addition to the financial components, the AVC imposes substantive, procedural, and reporting obligations that span a 24-month monitoring period running from August 20, 2024, through August 20, 2026. These obligations include the engagement of an independent compliance reviewer, the recalibration of CRH's algorithmic reference-price model, quarterly external audits, semi-annual compliance reporting to the AG's office, and internal compliance-program enhancements.
This memorandum is organized into the following principal sections: (II) Immediate Financial Obligations; (III) Consumer Restitution Fund — Establishment and Administration; (IV) Engagement of Independent Compliance Reviewer; (V) Revised Pricing-Disclosure Standards; (VI) Semi-Annual Compliance Reporting to the Attorney General; (VII) Internal Compliance-Program Enhancements; (VIII) Consequences of Non-Compliance; (IX) Consolidated Calendar of Key Deadlines; and (X) Open Items and Next Steps.
Calderwood & Harkness stands ready to assist CRH with all phases of implementation. Questions regarding the substance of this memorandum or the AVC itself should be directed to Alan Ngo (responsible partner) or Patrick Gallagher (lead associate) at the contact information provided herein.
II. Immediate Financial Obligations
The AVC requires CRH to make two payments within 30 days of the AVC's execution date. Because the AVC was executed on August 20, 2024, the deadline for both payments is September 19, 2024. Given the significance of timely payment — and the potential consequences of any delay — we address each payment obligation in detail below.
A. Civil Penalty Payment — $750,000
CRH must remit the sum of $750,000 to the Washington State Consumer Protection Account as a civil penalty assessed in connection with the AG's investigation. This payment represents the negotiated penalty amount and is a fixed obligation under the AVC; it is not subject to further negotiation or reduction.
The payment deadline is within 30 days of AVC execution, which falls on September 19, 2024. Payment is to be made by wire transfer or certified check payable to the Office of the Attorney General, Consumer Protection Division, at the following address:
Office of the Attorney General Consumer Protection Division
Attn: Lead Assistant Attorney General Meredith Calloway-Voss
800 Fifth Avenue, Suite 2000 Seattle, WA 98104
We note that this payment constitutes a governmental fine or penalty and is therefore not covered under CRH's directors-and-officers/corporate-liability insurance policy with Elkhorn Mutual Insurance Company (Policy No. ELK-DO-2024-08817). The policy's exclusion for fines, penalties, and punitive damages (Section IV.B.7 of the Policy) squarely applies. CRH should account for this payment as a direct corporate expense. We have confirmed this exclusion with Elkhorn's Claims Counsel, Brenda Whitacre, who concurs that the civil penalty falls outside the scope of coverage.
Recommendation: We recommend that CRH's treasury department initiate the wire transfer no later than September 12, 2024, to allow adequate processing time and to ensure that the payment is received and credited by the AG's office before the September 19 deadline. Any delay in receipt could be construed as a failure to comply with the AVC's terms, potentially triggering the stipulated-penalty provisions discussed in Section VIII below.
B. Reimbursement of Attorney General's Investigative Costs — $185,000
In addition to the civil penalty, CRH must reimburse the Attorney General's Office in the amount of $185,000 for costs incurred during the investigation. This figure was negotiated as part of the overall AVC settlement and encompasses the AG's staffing costs, expert consultants, data-analytics expenses, and other investigative expenditures.
The payment deadline is the same as for the civil penalty: within 30 days of AVC execution, or September 19, 2024. Payment should be made using the same mechanism (wire transfer or certified check) and directed to the same payee and address as set forth in Section II.A above.
Like the civil penalty, the investigative-costs reimbursement is a governmental assessment and is unlikely to be covered under the Elkhorn Mutual insurance policy, although this specific category of payment has not yet been the subject of a formal coverage determination. We recommend that CRH treat this payment as a direct corporate expense and, if CRH wishes, we can raise the question of investigative-costs coverage with Elkhorn separately.
Recommendation: We recommend processing both payments simultaneously on or before September 12, 2024, to simplify administration and ensure timely compliance.
C. Confirmation of Payment
Upon completion of both payments, CRH should retain all proof of payment, including wire-transfer confirmations, receipts, or images of canceled checks. These records should be maintained in CRH's AVC compliance file and made available to Ridgepoint Compliance Solutions Inc. (the independent compliance reviewer) and to Calderwood & Harkness upon request.
Calderwood & Harkness further recommends that CRH send written confirmation of payment to Lead Assistant Attorney General Meredith Calloway-Voss promptly after both payments have been transmitted. This written confirmation serves two purposes: first, it creates a clear paper trail demonstrating CRH's timely compliance with its financial obligations; second, it establishes a tone of good-faith cooperation that will be beneficial throughout the 24-month monitoring period. Calderwood & Harkness can prepare and transmit such confirmation on CRH's behalf if instructed to do so.
III. Consumer Restitution Fund — Establishment and Administration
A. Overview.  The largest single financial obligation under the AVC is the establishment of a consumer-restitution fund in the amount of $2,850,000. The purpose of this fund is to provide refunds or store credits to consumers who were affected by potentially misleading reference-price displays during the period from October 15, 2023, through March 15, 2024. This five-month period corresponds to the time during which CRH's "Smart Price" promotional program — built on Praxton Analytics LLC's algorithmic reference-price model — was fully operational across CRH's ecommerce platform and in-store retail locations.
The scope of the AG's concern during this period was substantial. The AG's preliminary analysis identified approximately $214 million in gross merchandise sales during this period that bore potentially misleading reference-price tags. The $2,850,000 restitution fund was negotiated as a reasonable estimate of consumer harm attributable to the inflated reference prices, taking into account the practical difficulties of calculating individualized damages across hundreds of thousands of transactions.
B. Administration Timeline
The fund must be fully administered within 12 months of the AVC execution date — that is, by August 20, 2025. Under the AVC, "fully administered" means that (i) the consumer-notice program has been completed, (ii) consumer claims have been received and processed, and (iii) distributions have been made to verified claimants or escrowed for late-filing claimants who have been granted extensions. Any undistributed funds remaining after the completion of the claims process will be handled in accordance with the AVC's residual-funds provision, which provides for cy pres distribution to a consumer-protection organization designated by the AG's office, subject to CRH's right to propose alternatives.
The 12-month administration window is firm and was a material term of the AVC. CRH should plan its fund-administration timeline accordingly and build in adequate buffers to account for the complexity of the notice, claims, and distribution processes.
C. Key Implementation Steps
We recommend the following implementation steps, each of which should be undertaken promptly in light of the 12-month administration deadline:
1. Fund Establishment. CRH should establish a segregated bank account dedicated exclusively to holding the $2,850,000 restitution fund. The account should be interest-bearing, and any interest earned should be treated as part of the fund available for distribution to claimants. Alternatively, CRH may engage a third-party fund administrator — such as a claims-administration firm experienced in consumer-restitution matters — to hold and administer the fund on CRH's behalf. A third-party administrator can also provide infrastructure for claims intake, verification, and distribution, which may be more efficient than building such capacity in-house. Calderwood & Harkness recommends that the fund account be established (or the administrator engaged) no later than September 30, 2024, to allow adequate time for the notice program and claims process.
2. Consumer Notice Program. The AVC requires CRH to develop and implement a notice program reasonably calculated to inform affected consumers of the availability of refunds or store credits. The notice program should include, at a minimum, the following components:
(a) Direct Email and Mail Notice. CRH should identify affected consumers through its transaction records, including ecommerce orders placed through cascaderetail.com during the October 15, 2023, through March 15, 2024, period and in-store purchases captured through CRH's loyalty-program database. For each identifiable consumer, CRH should send a direct notice — by email for consumers whose email addresses are on file, and by first-class mail for consumers for whom only a physical address is available — informing them of the nature of the restitution program, the process for submitting a claim, and the deadline for doing so.
(b) Website Notice. CRH should post a conspicuous notice on cascaderetail.com — including on the homepage and on a dedicated landing page — describing the restitution program and providing instructions for submitting claims online.
(c) In-Store Signage. CRH should display notices in all 187 retail locations informing customers of the restitution program. Signage should be posted at point-of-sale stations and in other prominent locations within each store.
3. Claims Process. CRH (or its fund administrator) should design a claims-submission and verification process that is straightforward for consumers while incorporating reasonable anti-fraud protections. Claims should be accepted online (via the dedicated landing page on cascaderetail.com) and by mail. CRH should establish a deadline for consumer claims of at least 90 days from the date of initial notice to allow consumers adequate time to respond. We recommend building in an additional 30-day grace period for late-filed claims accompanied by good cause.
4. Distribution. After the claims deadline has passed and claims have been verified, CRH should process refunds (by original payment method or by check) or issue store credits to verified claimants. The choice between refunds and store credits should be guided by the terms of the AVC and by practical considerations; where the AVC permits either form of relief, CRH may wish to offer consumers the option to choose. Distributions should be completed within 60 days of the close of the claims period.
5. Reporting. CRH must track the status of the fund administration and report on it in the semi-annual compliance reports submitted to the AG (discussed in Section VI below). The first two semi-annual reports (due February 20, 2025, and August 20, 2025) should include detailed information on the status of the fund, including the number of notices sent, the number of claims received, the amount distributed, and the amount remaining in the fund.
D. Insurance Coverage Considerations
Coverage for the $2,850,000 restitution fund is currently disputed by Elkhorn Mutual Insurance Company, CRH's D&O/corporate-liability insurer. Elkhorn has reserved its rights under Policy No. ELK-DO-2024-08817, taking the position that the restitution fund may constitute a form of disgorgement or restitution that is excluded from coverage under the policy's "loss" definition. Specifically, Elkhorn's Claims Counsel, Brenda Whitacre, has cited the policy's "ill-gotten gains" exclusion and the exclusion for amounts that represent the return of consideration owed to third parties.
Elkhorn has, however, acknowledged coverage for CRH's defense costs incurred in responding to the AG's CID and negotiating the AVC, subject to the policy's $250,000 self-insured retention ("SIR"). To date, Elkhorn has reimbursed defense costs above the SIR, although final reconciliation of defense costs is still pending.
Calderwood & Harkness recommends that CRH continue to press the coverage claim with Elkhorn for the $2,850,000 restitution fund. The question of whether consumer-restitution payments constitute covered "loss" under D&O policies is the subject of significant case law, and there are persuasive arguments in CRH's favor under Washington law. We can assist with this effort as a separate workstream — including, if necessary, filing a coverage action — if CRH desires.
In the interim, CRH should plan to fund the $2,850,000 from its own resources and treat any subsequent insurance recovery as a reimbursement. The AVC's obligations cannot be deferred pending resolution of the insurance-coverage dispute.
IV. Engagement of Independent Compliance Reviewer — Ridgepoint Compliance Solutions Inc.
A. Appointment.  One of the core structural requirements of the AVC is the retention of an independent compliance reviewer to audit CRH's pricing practices throughout the 24-month monitoring period from August 20, 2024, through August 20, 2026. The AVC designates Ridgepoint Compliance Solutions Inc. as the independent compliance reviewer, subject to CRH's execution of an engagement letter with Ridgepoint. Ridgepoint was selected through a process in which the AG's office proposed three candidates and CRH selected Ridgepoint from that list.
The engagement partner at Ridgepoint is Harold Sung, whose office is located at 700 Stewart Street, Suite 1500, Seattle, WA 98101. Mr. Sung has extensive experience in retail-pricing compliance matters and has served as an independent monitor in similar AVC and consent-decree engagements in Washington, Oregon, and California.
CRH should execute an engagement letter with Ridgepoint promptly. Calderwood & Harkness recommends that the engagement letter be finalized and executed by no later than September 15, 2024, to allow adequate time for Ridgepoint to plan and conduct the first quarterly audit in November 2024. We have been in preliminary contact with Mr. Sung's office regarding the anticipated scope of the engagement and can assist CRH in negotiating the engagement terms, including fee structure, access protocols, and confidentiality provisions.
B. Scope of Quarterly Audits
Under the AVC, Ridgepoint will conduct quarterly audits of CRH's reference-price practices. Each audit will encompass the following areas:
(a) Review and Testing of the Algorithmic Reference-Price Model. Ridgepoint will review and test the algorithmic reference-price model developed and maintained by Praxton Analytics LLC (principal contact: Dr. Leila Farzan, 2020 Westlake Avenue N, Suite 310, Seattle, WA 98109). This review will include an examination of the algorithm's inputs, logic, and outputs to verify that the model generates reference prices that comply with the AVC's 120-day lookback standard.
(b) SKU Sampling. Ridgepoint will select a statistically significant sample of SKUs across all six product categories specifically identified in the AG's inquiry: women's apparel, men's footwear, home textiles, small kitchen appliances, outdoor furniture, and consumer electronics accessories. For each sampled SKU, Ridgepoint will verify that the displayed reference price corresponds to an actual, bona fide offering price within the preceding 120-day window.
(c) Verification of Reference Prices. Ridgepoint will verify that all displayed "compare-at," "original," or "was" reference prices reflect the actual, bona fide price at which the item was offered for sale in the ordinary course of business during the preceding 120-day lookback window. This verification will be conducted against CRH's transaction records, pricing databases, and other relevant documentation.
(d) Cross-Channel Consistency. Ridgepoint will assess the consistency of pricing disclosures between CRH's ecommerce platform (cascaderetail.com) and its in-store pricing signage and displays. The AG's investigation identified material discrepancies between online and in-store reference prices for identical SKUs, and the AVC requires that CRH's pricing disclosures be consistent across all channels.
C. CRH's Cooperation Obligations
The AVC imposes an affirmative obligation on CRH to cooperate fully with Ridgepoint throughout the monitoring period. Specifically, CRH must provide Ridgepoint with full and unrestricted access to:
•  All pricing data, including historical and current reference prices, actual selling prices, and offering-price data;
•  The Praxton Analytics algorithm, including its source code, parameters, inputs, and outputs;
•  Transaction records, including ecommerce order data and point-of-sale data from all 187 retail locations;
•  Internal communications relevant to pricing decisions, including emails, memoranda, and reports involving the marketing, merchandising, and pricing teams; and
•  Any other information or documents reasonably requested by Ridgepoint in connection with its audit activities.
To facilitate efficient cooperation, we recommend that Raymond Soo (VP, Marketing & Pricing Strategy) and Terence Ashford (CCO) each designate one or more internal points of contact to serve as liaisons with the Ridgepoint audit team. These liaisons should be individuals with day-to-day knowledge of CRH's pricing practices and the technical infrastructure underlying the reference-price system. The liaisons should be prepared to respond promptly to Ridgepoint's requests for information and to schedule and facilitate on-site audit visits as needed.
Any deficiencies or potential compliance issues identified by Ridgepoint during a quarterly audit should be remediated promptly. CRH should document all remediation efforts, including the nature of the deficiency, the corrective action taken, the date of correction, and the personnel responsible. This documentation will be important for both the semi-annual compliance reports to the AG and for CRH's own internal records.
D. Audit Schedule
Ridgepoint will conduct a total of eight quarterly audits over the 24-month monitoring period, on the following schedule:
The first audit (Q1, November 2024) is particularly significant because it will serve as the initial assessment of CRH's compliance with the recalibrated reference-price standards. A clean first audit report will set a positive tone for the remainder of the monitoring period and demonstrate CRH's good-faith commitment to compliance. Conversely, deficiencies identified in the first audit could draw heightened scrutiny from the AG's office. We therefore strongly encourage CRH to prioritize the implementation of the revised pricing-disclosure standards (discussed in Section V below) well in advance of the Q1 audit.
V. Revised Pricing-Disclosure Standards
A. The 120-Day Lookback Window
The AVC requires that all "compare-at," "original," or "was" reference prices displayed by CRH reflect the actual, bona fide price at which the merchandise was offered for sale in the ordinary course of business for a reasonably substantial period during the immediately preceding 120-day lookback window. This standard is the central substantive requirement of the AVC and will govern CRH's pricing practices for the duration of the monitoring period and, as a practical matter, indefinitely thereafter.
The 120-day lookback standard replaces any prior methodology, including the Praxton Analytics algorithmic model as previously configured. As the AG's investigation revealed, the prior configuration of the "Smart Price" algorithm generated reference prices that, in a significant number of instances, did not correspond to the actual price at which the merchandise had been offered for sale in the ordinary course of business. Specifically, the AG's analysis found that 68.4% of 2,340 sampled SKUs — that is, 1,601 SKUs — displayed reference prices that were inflated by an average of 37.2% above the actual highest offering price during any relevant lookback period. In some cases, the algorithm drew reference-price inputs from manufacturer suggested retail prices ("MSRPs") or competitor prices that CRH itself had never actually charged, rendering the "compare-at" or "was" price misleading to consumers.
The 120-day lookback window was the product of negotiation between CRH and the AG's office. The AG initially demanded a 180-day lookback window, arguing that a longer window was necessary to prevent artificially inflated reference prices based on brief, unsustained offering periods. CRH proposed a 90-day window, contending that a shorter window better reflected the realities of seasonal and promotional pricing in the retail industry. The parties ultimately agreed to a 120-day compromise, which Calderwood & Harkness believes strikes a reasonable balance between consumer protection and CRH's operational needs.
Under the 120-day lookback standard, a reference price may be displayed only if the merchandise was actually offered for sale at that price (or a higher price) for a reasonably substantial period within the 120 days preceding the date on which the reference price is displayed. "Reasonably substantial period" is not defined with mathematical precision in the AVC, but the AG's office has indicated informally that it would generally expect the item to have been offered at the reference price for at least 30 of the 120 days to satisfy this requirement. CRH should err on the side of caution and adopt conservative interpretations of this standard.
B. Channels Covered
The revised pricing-disclosure standards apply to both of CRH's sales channels:
(a) Ecommerce. All product listings on cascaderetail.com that display a reference price — whether labeled as "compare at," "original price," "was," or any functionally equivalent term — must comply with the 120-day lookback standard. This includes product detail pages, search-results pages, category pages, promotional landing pages, email marketing campaigns, and any other digital medium through which CRH displays reference prices to consumers.
(b) In-Store. All pricing signage, shelf tags, hang tags, promotional displays, end-cap signage, and any other in-store pricing communications across all 187 retail locations in 14 western U.S. states must comply with the 120-day lookback standard. Store managers should be trained to identify and remove any non-compliant pricing signage and to report discrepancies through the escalation protocols described in Section VII below.
C. Product Categories
While the AVC's prospective pricing-disclosure standards apply to CRH's entire product assortment on a company-wide basis, particular attention must be given to the six product categories that were specifically identified in the AG's investigation and that formed the basis for the AG's statistical analysis:
1.  Women's apparel
2.  Men's footwear
3.  Home textiles
4.  Small kitchen appliances
5.  Outdoor furniture
6.  Consumer electronics accessories
These six categories accounted for the majority of the AG's sampled SKUs and will likely be the focus of Ridgepoint's quarterly audits as well. CRH should prioritize compliance efforts in these categories and ensure that the recalibrated reference-price algorithm is thoroughly validated for SKUs in each of these categories before the first Ridgepoint audit in November 2024.
D. Implementation Requirements
CRH must take the following steps to implement the revised pricing-disclosure standards:
1. Algorithm Recalibration. CRH must work with Praxton Analytics LLC to recalibrate the "Smart Price" algorithmic reference-price model to comply with the 120-day lookback requirement. The recalibration must ensure that all reference prices generated by the algorithm are derived from actual, verifiable offering-price data within the preceding 120-day window. Specifically, the recalibrated algorithm must:
(a) Draw reference-price inputs exclusively from CRH's own actual offering prices (i.e., prices at which CRH itself offered the merchandise for sale), and not from MSRPs, competitor prices, or other external benchmarks, unless the AVC specifically permits such use;
(b) Apply the 120-day lookback window consistently across all SKUs and product categories;
(c) Incorporate a "reasonably substantial period" filter to ensure that reference prices are not based on fleeting or token offerings; and
(d) Generate an audit trail for each reference price, documenting the offering-price data on which the reference price is based, the dates during which the item was offered at that price, and the date on which the reference price was calculated and displayed.
2. Manual Override Controls. CRH must implement controls to prevent manual overrides that would set reference prices outside the parameters of the recalibrated algorithm. During the AG's investigation, the AG's office identified instances in which CRH's merchandising team manually set reference prices that exceeded the algorithm's outputs, in some cases by substantial margins. The AVC requires that any manual adjustments to reference prices be subject to compliance review and approval before implementation. CRH should build a workflow that requires CCO or compliance-department sign-off on any manual override of an algorithmically generated reference price.
3. Documentation. CRH must maintain contemporaneous records sufficient to demonstrate that each reference price displayed — whether on cascaderetail.com or in-store — was derived from a bona fide offering price within the 120-day lookback period. These records should be organized in a manner that permits efficient retrieval during Ridgepoint's quarterly audits and in the event of any future inquiry by the AG's office. Records should be retained for a minimum of three years beyond the end of the monitoring period (i.e., through at least August 20, 2029).
4. Rollout Timeline. Calderwood & Harkness recommends that the recalibrated pricing standards be fully implemented across all channels — both ecommerce and in-store — by no later than October 1, 2024. This timeline allows approximately six weeks from the date of this memorandum for CRH to complete the algorithm recalibration with Praxton Analytics, update all product listings on cascaderetail.com, and distribute updated pricing signage to all 187 retail locations. While the AVC does not specify an exact implementation date for the revised pricing standards, CRH must have the standards in place before the first Ridgepoint quarterly audit in November 2024, and an October 1 rollout provides a reasonable buffer to identify and correct any issues before the audit commences.
VI. Semi-Annual Compliance Reporting to the Attorney General
A. Reporting Obligation
The AVC requires CRH to submit semi-annual compliance reports to the Washington Attorney General's Consumer Protection Division throughout the 24-month monitoring period. These reports serve as CRH's primary mechanism for demonstrating ongoing compliance with the AVC's terms and for keeping the AG's office informed of CRH's progress in implementing the corrective measures described above.
All reports are to be submitted to Lead Assistant Attorney General Meredith Calloway-Voss at the following address:
Office of the Attorney General Consumer Protection Division
Attn: Lead Assistant Attorney General Meredith Calloway-Voss
800 Fifth Avenue, Suite 2000 Seattle, WA 98104
Reports may be submitted in hard copy or, if the AG's office consents, by secure electronic transmission. We recommend confirming the AG's preferred delivery method with Ms. Calloway-Voss in advance of the first report's due date.
B. Report Schedule
A total of four semi-annual reports will be submitted over the 24-month monitoring period, on the following schedule:
The fourth and final report, due August 20, 2026, will coincide with the conclusion of the 24-month monitoring period. Upon successful completion of all four reports and the satisfaction of all other AVC obligations, CRH's compliance obligations under the AVC will be deemed fulfilled.
C. Recommended Report Content
While the AVC provides general guidance on the content of the semi-annual reports, it does not prescribe a rigid format. Calderwood & Harkness recommends that each report include the following components, which together will provide the AG's office with a comprehensive picture of CRH's compliance posture during the relevant period:
(a) Summary of Pricing-Disclosure Practices. A narrative summary of CRH's reference-pricing practices during the reporting period, including a description of the 120-day lookback methodology in effect, any material changes to the Praxton Analytics algorithm, and any significant operational developments affecting pricing disclosures.
(b) Ridgepoint Quarterly Audit Results. A summary of the results of the two Ridgepoint Compliance Solutions quarterly audits conducted during the reporting period. Each summary should describe Ridgepoint's audit methodology, the number and categories of SKUs sampled, any deficiencies or potential compliance issues identified, and CRH's corrective responses. CRH should attach copies of the full Ridgepoint audit reports as appendices to the semi-annual report.
(c) Consumer Restitution Fund Status. For the first two semi-annual reports (Reports 1 and 2), a detailed accounting of the consumer-restitution fund, including the number of consumer notices sent, the number of claims received, the number of claims approved and denied, the total amount distributed to date, and the amount remaining in the fund. The second report (due August 20, 2025) should also confirm the full administration of the fund.
(d) Non-Compliance Incidents and Corrective Actions. A description of any instances of identified non-compliance with the AVC's terms during the reporting period, including the nature of the non-compliance, the date it was identified, the corrective action taken, and the date of correction. Transparency in reporting non-compliance incidents — particularly when they have been promptly identified and remediated — will help maintain a constructive relationship with the AG's office.
(e) Continued Engagement Confirmations. Confirmation that CRH's engagement with Ridgepoint Compliance Solutions and Praxton Analytics LLC remains in effect and that both parties are performing their respective obligations under the AVC.
(f) Officer Attestation. An attestation by CRH's Chief Compliance Officer (Terence Ashford) or General Counsel (Diana Prescott-Levy) certifying that the report is accurate and complete to the best of the attester's knowledge, information, and belief, and that CRH has complied with the material terms of the AVC during the reporting period. The attestation should be signed and dated.
D. Coordination with Calderwood & Harkness
Calderwood & Harkness recommends that CRH submit draft reports to our office for review at least 15 business days before each due date. This lead time will allow us to review the report for legal sufficiency, verify that all required content is included, ensure consistency with prior reports, and flag any issues that may require attention before submission. We can also assist with drafting the reports in whole or in part if CRH prefers.
In addition, Calderwood & Harkness can serve as the transmittal agent, delivering the finalized reports to the AG's office on CRH's behalf and confirming receipt with Ms. Calloway-Voss's office.
VII. Internal Compliance-Program Enhancements
While the AVC's formal requirements focus on external monitoring (Ridgepoint audits) and external reporting (semi-annual reports to the AG), Calderwood & Harkness strongly recommends that CRH also invest in internal compliance-program enhancements. A robust internal compliance infrastructure will not only support CRH's compliance with the AVC but will also reduce the risk of future regulatory inquiries and demonstrate institutional commitment to lawful pricing practices.
A. Training Programs
CRH should implement mandatory compliance training for all personnel involved in pricing decisions, including the following groups:
•  Marketing and merchandising teams operating under Raymond Soo's supervision, including category managers, pricing analysts, and promotional-planning personnel;
•  Ecommerce product-listing teams responsible for creating and updating product listings on cascaderetail.com, including any personnel who manually set or adjust reference prices in the content management system;
•  Store managers and regional managers across all 187 retail locations, who are responsible for implementing pricing signage and displays at the store level and who serve as the front line for identifying and escalating potential pricing-disclosure issues; and
•  Any other personnel who exercise discretion or authority over the display of reference prices, including personnel at Praxton Analytics LLC who manage the algorithmic model on CRH's behalf.
The training content should cover, at a minimum, the following topics:
(a) An overview of the legal requirements of the Washington Consumer Protection Act (RCW 19.86) as applied to reference pricing, including the statutory prohibition on unfair or deceptive acts or practices and the specific application of that prohibition to misleading price comparisons;
(b) CRH's specific obligations under the AVC, including the 120-day lookback window, the definition of "actual, bona fide price," the "reasonably substantial period" requirement, and the prohibition on manual overrides outside approved parameters;
(c) Practical guidance on how to identify and escalate potential pricing-disclosure issues, including examples of compliant and non-compliant reference-price displays, common pitfalls, and red flags;
(d) A clear explanation of the consequences of non-compliance, both under the AVC (stipulated penalties of $10,000 per day, potential reopening of the AG's investigation) and under applicable law (civil penalties, injunctive relief, private consumer actions); and
(e) An overview of the Ridgepoint quarterly audit process, including what personnel should expect during an audit and how to respond to Ridgepoint's requests for information.
Recommended Timeline: Calderwood & Harkness recommends that the initial company-wide compliance training be completed by November 1, 2024, in advance of the first Ridgepoint quarterly audit. Training should be documented, and attendance records should be maintained. Annual refresher training should be conducted for all relevant personnel during each year of the monitoring period (i.e., in or around November 2025 for the second year). New hires in pricing-related roles should receive training within 30 days of their start date.
B. Compliance Policies and Procedures
Terence Ashford, as Chief Compliance Officer, should oversee the development or revision of written compliance policies specifically addressing CRH's reference-price practices. If CRH already maintains pricing-related policies, those policies should be updated to reflect the AVC's requirements. If no such policies exist in their current form, they should be developed from scratch. In either case, the policies should incorporate the following elements:
(a) Standard Operating Procedures for Setting and Verifying Reference Prices. Step-by-step procedures for determining reference prices, including the data sources to be consulted, the application of the 120-day lookback window, the verification of "reasonably substantial period" compliance, and the documentation required at each step.
(b) Roles and Responsibilities. A clear delineation of roles and responsibilities for pricing decisions, including the respective roles of the marketing and merchandising teams, the ecommerce team, the compliance department, and Praxton Analytics LLC. The policies should specify who has authority to approve reference prices, who is responsible for monitoring compliance, and who is accountable for addressing identified issues.
(c) Escalation and Reporting Protocols. Procedures for escalating potential pricing-disclosure issues — whether identified internally, by Ridgepoint, or by the AG's office — to the appropriate personnel for investigation and remediation. The protocols should identify the individuals to whom issues should be escalated (e.g., CCO, General Counsel) and the timeframes within which issues must be investigated and resolved.
(d) Record-Retention Requirements. Specifications for the types of records to be retained, the format in which they should be maintained, and the minimum retention period. As noted in Section V.D.3 above, records supporting reference-price compliance should be retained for a minimum of three years beyond the end of the monitoring period.
Calderwood & Harkness is available to review draft compliance policies for legal sufficiency and to provide guidance on best practices in retail-pricing compliance. We recommend that draft policies be completed and circulated for internal review by October 15, 2024, with final policies adopted no later than November 1, 2024.
C. Internal Audit and Monitoring
In addition to Ridgepoint's external quarterly audits, CRH should establish an internal monitoring function within its compliance department to conduct ongoing spot-checks of reference-price accuracy. This internal monitoring serves a dual purpose: first, it enables CRH to identify and remediate compliance issues between quarterly audits, rather than waiting for Ridgepoint discover them; second, it demonstrates to the AG's office that CRH has invested in a proactive, rather than merely reactive, compliance posture.
The internal monitoring function should include the following activities:
•  Random sampling of SKUs across all six product categories on a weekly or bi-weekly basis, with verification that displayed reference prices comply with the 120-day lookback standard;
•  Periodic comparisons of ecommerce and in-store reference prices for identical SKUs to verify cross-channel consistency;
•  Review of manual overrides of algorithmically generated reference prices to ensure compliance with the manual-override controls described in Section V.D.2 above; and
•  Documentation of all monitoring activities, findings, and corrective actions.
Internal monitoring findings should be shared with Ridgepoint during each quarterly audit cycle and, as appropriate, reflected in the semi-annual compliance reports submitted to the AG. Where internal monitoring identifies deficiencies, CRH should remediate them promptly and document the remediation in the same manner as for deficiencies identified by Ridgepoint.
VIII. Consequences of Non-Compliance
CRH's leadership should be aware of the consequences that may flow from any failure to comply with the AVC's terms. While we are confident that CRH is committed to full compliance, an understanding of the potential consequences underscores the importance of the implementation steps outlined in this memorandum.
A. Stipulated Penalties
The AVC provides for stipulated penalties of $10,000 per day for any material breach of the AVC's terms. These penalties are designed to incentivize timely and complete compliance and to provide the AG's office with an efficient enforcement mechanism that does not require a full-scale litigation proceeding.
Importantly, the stipulated penalties do not accrue automatically upon a breach. Rather, the AVC provides for a 30-day cure period: the AG must first provide CRH with written notice identifying the alleged material breach, and CRH then has 30 days from receipt of that notice to cure the breach. Stipulated penalties accrue only if CRH fails to cure the breach within the 30-day cure period. Penalties accrue at the rate of $10,000 per day from the expiration of the cure period until the breach is cured or the matter is otherwise resolved.
Given the financial exposure associated with stipulated penalties — which could accumulate rapidly in the event of a prolonged breach — CRH should implement internal processes to ensure that any notice from the AG's office alleging a breach is immediately escalated to the General Counsel and the Chief Compliance Officer. Calderwood & Harkness should be contacted promptly upon receipt of any such notice so that we can assist in evaluating the alleged breach, coordinating the cure, and communicating with the AG's office.
B. Potential for Further Enforcement
A material breach of the AVC could have consequences extending beyond stipulated penalties. Specifically, a breach could result in the AG's office reopening the investigation or initiating a formal enforcement action under RCW 19.86. Such an action could expose CRH to:
•  Additional civil penalties under RCW 19.86.140, which authorizes penalties of up to $7,500 per violation (with each deceptive act potentially constituting a separate violation);
•  Injunctive relief, including court-ordered restrictions on CRH's pricing practices that could be more onerous than the AVC's requirements;
•  Further consumer-restitution obligations; and
•  An award of the AG's attorneys' fees and costs in connection with the enforcement proceeding.
Moreover, the no-admission-of-liability provision in the AVC — while protective of CRH in the context of the current resolution — would not necessarily shield CRH from liability findings in a subsequent enforcement proceeding based on new or continuing conduct. The AVC's protections are limited to the specific matters resolved by the AVC; conduct occurring after the AVC's execution date would be evaluated on its own merits and could form the basis for new claims.
C. Importance of Timely Performance
Given the severity of the stipulated penalties ($10,000 per day), the potential for further enforcement action, and the significant reputational risk associated with a public finding of non-compliance with a consumer-protection AVC, strict adherence to all AVC deadlines and substantive requirements is essential. CRH should treat each deadline in the consolidated calendar (Section IX) as a firm, non-negotiable commitment and should build internal processes and redundancies to prevent any inadvertent lapse.
Calderwood & Harkness will maintain its own tracking calendar and will provide advance reminders to CRH's compliance team as key deadlines approach. However, the primary responsibility for timely performance rests with CRH's internal teams, and we encourage the General Counsel and CCO to assign clear ownership for each obligation.
IX. Consolidated Calendar of Key Deadlines
The following table consolidates all material deadlines arising from the AVC and from Calderwood & Harkness's implementation recommendations. CRH should incorporate these deadlines into its internal compliance calendar and assign responsibility to the appropriate personnel and departments.
X. Open Items and Next Steps
The following items require near-term attention and decision-making by CRH. We request that the General Counsel and CCO review these items and advise Calderwood & Harkness of CRH's preferred course of action so that we may proceed accordingly.
1. Elkhorn Insurance Coverage. As discussed in Section III.D above, coverage for the $2,850,000 consumer-restitution fund remains disputed by Elkhorn Mutual Insurance Company, which has reserved its rights under Policy No. ELK-DO-2024-08817. Elkhorn's Claims Counsel, Brenda Whitacre, has acknowledged coverage for defense costs subject to the $250,000 self-insured retention; to date, defense costs above the SIR in the amount of $201,095 have been reimbursed, subject to final reconciliation. However, the more significant coverage question — whether the restitution fund constitutes covered "loss" under the policy — remains unresolved. Calderwood & Harkness recommends continued and active engagement with Elkhorn to resolve this question, including the preparation of a formal coverage-demand letter supported by applicable case law. If CRH wishes, we can pursue this as a separate workstream, including, if necessary, initiating a coverage action against Elkhorn. Please advise whether CRH would like us to proceed on this front.
2. Praxton Analytics Coordination. CRH should engage Dr. Leila Farzan at Praxton Analytics LLC promptly to begin the algorithm-recalibration process in accordance with the 120-day lookback standard. Given the October 1, 2024, target date for rollout of the revised pricing standards, the recalibration work should commence immediately. Raymond Soo should coordinate directly with Dr. Farzan's team to define the recalibration specifications, and CRH's IT department should be prepared to implement the recalibrated model in the ecommerce content management system and in the in-store pricing infrastructure. Calderwood & Harkness can review the recalibration specifications for consistency with the AVC's requirements if CRH so desires.
3. Ridgepoint Engagement. As noted in Section IV.A above, CRH should finalize the scope-of-work and engagement terms with Harold Sung at Ridgepoint Compliance Solutions by September 15, 2024. Key terms to be negotiated include Ridgepoint's fee structure (which will be borne by CRH under the AVC), the access protocols for pricing data and internal communications, confidentiality protections for CRH's proprietary business information, and the format and timing of Ridgepoint's quarterly audit reports. Calderwood & Harkness has been in preliminary contact with Mr. Sung's office and can assist with the engagement-letter negotiations.
4. Restitution Fund Administrator. CRH should determine whether it will administer the consumer-restitution fund internally or retain a third-party claims administrator. An internal approach may be more cost-effective but will require CRH to build or adapt claims-intake and verification infrastructure, which may divert resources from other compliance priorities. An external administrator offers turnkey capabilities but at additional cost. If CRH elects to retain a third-party administrator, the selection process should begin immediately to meet the September 30 deadline for fund establishment. Calderwood & Harkness can provide recommendations for experienced claims-administration firms if helpful.
5. Board and Public Disclosure. CRH should coordinate with its outside auditors, Whitfield & Crane LLP, and its investor-relations team regarding any required disclosures in CRH's SEC filings related to the AVC financial commitments. The $3,785,000 total financial commitment, together with the ongoing monitoring obligations and the disputed insurance-coverage question, may require disclosure in CRH's next quarterly report on Form 10-Q and/or its annual report on Form 10-K, depending on the materiality assessment. In addition, CRH should consider whether any current-report filing on Form 8-K is warranted. Calderwood & Harkness's securities-law colleagues are available to assist with the disclosure analysis if CRH would find that helpful.
6. Calderwood & Harkness Continuing Role. Calderwood & Harkness is available to assist CRH with all of the implementation tasks outlined in this memorandum, including but not limited to: review and drafting of semi-annual compliance reports; coordination with Ridgepoint Compliance Solutions; review of recalibrated pricing-algorithm specifications for AVC compliance; Elkhorn insurance-coverage negotiations or litigation; communications with the AG's office; and review of internal compliance policies and training materials. Please direct all questions and instructions to Alan Ngo (responsible partner) or Patrick Gallagher (lead associate) at the contact information below.
XI. Conclusion
The AVC executed on August 20, 2024, resolves the Washington Attorney General's consumer-protection inquiry into CRH's reference-pricing practices on favorable terms: CRH has made no admission of liability, and the resolution avoids the substantial additional exposure that would have attended a formal enforcement proceeding under RCW 19.86. The AG's investigation had identified significant statistical evidence of reference-price inflation across thousands of SKUs and hundreds of millions of dollars in gross merchandise sales. A litigated enforcement action could have resulted in significantly higher penalties, broader injunctive relief, and reputational harm that would have been difficult to quantify.
That said, the AVC imposes substantial obligations that will require sustained institutional commitment over the next 24 months. The $3,785,000 total financial commitment — comprising the $2,850,000 consumer-restitution fund, the $750,000 civil penalty, and the $185,000 investigative-costs reimbursement — represents a significant but manageable expenditure. More importantly, the prospective compliance obligations — including the engagement of Ridgepoint Compliance Solutions as an independent compliance reviewer, the recalibration of the Praxton Analytics pricing algorithm, eight quarterly external audits, four semi-annual compliance reports to the AG, and comprehensive internal training and policy development — will require coordinated effort across multiple CRH departments and business units.
Prompt and thorough implementation of all AVC obligations is essential. The stipulated penalties for non-compliance ($10,000 per day for uncured material breaches) create meaningful financial exposure, and a finding of non-compliance would undermine the goodwill that CRH has built with the AG's office through the cooperative resolution of this matter. We urge CRH to treat the deadlines set forth in the consolidated calendar in Section IX as firm commitments and to begin implementation immediately.
Calderwood & Harkness appreciates the opportunity to continue advising Cascade Retail Holdings Inc. on this matter and looks forward to supporting the implementation process. We are confident that, with diligent execution, CRH will successfully navigate the monitoring period and emerge with strengthened pricing-compliance practices that will serve the company well beyond the AVC's term.
Please do not hesitate to contact us with any questions or to discuss the next steps outlined in this memorandum.
Calderwood & Harkness LLP
Alan Ngo, Partner Patrick Gallagher, Associate 1201 Third Avenue, Suite 4400 Seattle, WA 98101
C&H Matter No. 1038-00004
This memorandum is a privileged and confidential attorney-client communication and attorney work product. It is intended solely for the use of the named recipients and authorized personnel of Cascade Retail Holdings Inc. Unauthorized disclosure, distribution, or copying of this memorandum or any portion thereof is strictly prohibited. If you have received this memorandum in error, please notify Calderwood & Harkness LLP immediately and destroy all copies.
Date: | August 22, 2024
From: | Alan Ngo, Partner, and Patrick Gallagher, Associate — Calderwood & Harkness LLP, 1201 Third Avenue, Suite 4400, Seattle, WA 98101
To: | Diana Prescott-Levy, General Counsel; Terence Ashford, Chief Compliance Officer; Raymond Soo, VP, Marketing & Pricing Strategy — Cascade Retail Holdings Inc., 4500 Overlake Boulevard, Suite 800, Bellevue, WA 98004
Re: | Assurance of Voluntary Compliance — Compliance Obligations and Implementation Roadmap (C&H Matter No. 1038-00004)
Audit | Target Month | Period Covered
Q1 | November 2024 | August 20 – October 31, 2024
Q2 | February 2025 | November 1, 2024 – January 31, 2025
Q3 | May 2025 | February 1 – April 30, 2025
Q4 | August 2025 | May 1 – July 31, 2025
Q5 | November 2025 | August 1 – October 31, 2025
Q6 | February 2026 | November 1, 2025 – January 31, 2026
Q7 | May 2026 | February 1 – April 30, 2026
Q8 (Final) | August 2026 | May 1 – July 31, 2026
Report No. | Period Covered | Due Date
1 | August 20, 2024 – February 19, 2025 | February 20, 2025
2 | February 20, 2025 – August 19, 2025 | August 20, 2025
3 | August 20, 2025 – February 19, 2026 | February 20, 2026
4 | February 20, 2026 – August 19, 2026 | August 20, 2026 (final report)
Deadline | Obligation | Responsible Party / Notes
September 15, 2024 | Execute engagement letter with Ridgepoint Compliance Solutions Inc. | CRH (CCO / General Counsel); coordinate with C&H for engagement-letter review
September 19, 2024 | Pay $750,000 civil penalty to WA Consumer Protection Account | CRH Treasury; initiate by September 12 to allow processing time
September 19, 2024 | Pay $185,000 AG investigative costs reimbursement | CRH Treasury; process simultaneously with civil penalty
September 30, 2024 | Establish segregated consumer-restitution fund account ($2,850,000) | CRH Treasury / General Counsel; select third-party administrator if applicable
October 1, 2024 | Complete recalibration and rollout of revised reference-price standards (120-day lookback) across ecommerce and all 187 stores | Raymond Soo / Praxton Analytics LLC / IT; ensure all channels compliant before Q1 audit
November 1, 2024 | Complete initial company-wide compliance training | Terence Ashford / HR; document attendance and maintain records
November 2024 | First Ridgepoint quarterly audit (Q1: covering August 20 – October 31, 2024) | Ridgepoint / Harold Sung; CRH liaisons provide full access and cooperation
February 2025 | Second Ridgepoint quarterly audit (Q2: covering November 1, 2024 – January 31, 2025) | Ridgepoint
February 20, 2025 | First semi-annual compliance report to AG (covering August 20, 2024 – February 19, 2025) | CRH (with C&H review); submit draft to C&H by January 29, 2025
May 2025 | Third Ridgepoint quarterly audit (Q3: covering February 1 – April 30, 2025) | Ridgepoint
August 2025 | Fourth Ridgepoint quarterly audit (Q4: covering May 1 – July 31, 2025) | Ridgepoint
August 20, 2025 | Second semi-annual compliance report to AG (covering February 20 – August 19, 2025) | CRH (with C&H review); submit draft to C&H by July 30, 2025
August 20, 2025 | Deadline for full administration of consumer restitution fund | CRH / Fund Administrator; all distributions completed or escrowed
November 2025 | Fifth Ridgepoint quarterly audit (Q5: covering August 1 – October 31, 2025) | Ridgepoint
February 2026 | Sixth Ridgepoint quarterly audit (Q6: covering November 1, 2025 – January 31, 2026) | Ridgepoint
February 20, 2026 | Third semi-annual compliance report to AG (covering August 20, 2025 – February 19, 2026) | CRH (with C&H review); submit draft to C&H by January 29, 2026
May 2026 | Seventh Ridgepoint quarterly audit (Q7: covering February 1 – April 30, 2026) | Ridgepoint
August 2026 | Eighth and final Ridgepoint quarterly audit (Q8: covering May 1 – July 31, 2026) | Ridgepoint
August 20, 2026 | Fourth and final semi-annual compliance report to AG (covering February 20 – August 19, 2026); conclusion of 24-month monitoring period | CRH (with C&H review); submit draft to C&H by July 30, 2026

MEMORANDUM

PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

Record

Parties

Dates

Amounts