closing-letter-to-ag.docx

1038-00004 · Calderwood & Harkness LLP · Closing

closing-letter-to-ag.docx DOCUMENT M&A / Corporate

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CALDERWOOD & HARKNESS LLP Attorneys at Law 1201 Third Avenue, Suite 4400 Seattle, WA 98101 Telephone: (206) 555-7200 Facsimile: (206) 555-7201 www.calderwoodharkness.com

August 20, 2024

C&H Matter No.: 1038-00004

Meredith Calloway-Voss, Esq. Lead Assistant Attorney General Consumer Protection Division Office of the Attorney General, State of Washington 800 Fifth Avenue, Suite 2000 Seattle, WA 98104

Re: Assurance of Voluntary Compliance — *In the Matter of Cascade Retail Holdings Inc.*; Civil Investigative Demand dated March 26, 2024

Dear Ms. Calloway-Voss:

We write on behalf of our client, Cascade Retail Holdings Inc. ("CRH" or "Cascade"), a Delaware corporation publicly traded on the Nasdaq Stock Market (ticker symbol: CRHI), with its principal offices located at 4500 Overlake Boulevard, Suite 800, Bellevue, Washington 98004. The purpose of this letter is to confirm the full execution of the Assurance of Voluntary Compliance ("AVC") by and between Cascade Retail Holdings Inc., on the one hand, and the State of Washington, acting through the Office of the Attorney General, on the other hand. The AVC was fully executed as of August 20, 2024, and resolves in its entirety the consumer-protection inquiry initiated by the Civil Investigative Demand issued on March 26, 2024, pursuant to the authority granted under RCW 19.86.110. This letter further memorializes CRH's understanding of, and commitment to, each of the material obligations arising under the AVC, and provides your office with the necessary documentation to complete its files.

Enclosure of Counterpart Signature Pages

Enclosed with this letter please find CRH's executed counterpart signature pages of the AVC, bearing the original signature of Diana Prescott-Levy, General Counsel of Cascade Retail Holdings Inc., who is duly authorized to execute the AVC on behalf of the company. We understand that the AVC was signed on behalf of the State of Washington by you, Meredith Calloway-Voss, in your capacity as Lead Assistant Attorney General, Consumer Protection Division. To the extent your office has not already done so, we respectfully request that the Attorney General's office countersign and return one fully executed copy of the AVC (or, alternatively, a conformed copy bearing both parties' signatures) to our offices at the address above for inclusion in CRH's permanent corporate files. We are happy to coordinate delivery by hand, overnight courier, or electronic transmission, whichever is most convenient for your office.

Confirmation of Financial Commitments and Payment Schedule

CRH acknowledges and confirms the financial commitments set forth in the AVC. For clarity and ease of reference, those commitments are summarized below.

Civil Penalty Payment

Pursuant to Section IV(A) of the AVC, CRH confirms that it will remit the civil penalty in the amount of Seven Hundred Fifty Thousand Dollars ($750,000.00) to the Washington Consumer Protection Account. Payment will be made by certified check or wire transfer within thirty (30) calendar days of the AVC execution date — that is, no later than September 19, 2024. CRH's treasury department has been instructed to prepare the payment, and we will provide your office with wire confirmation or proof of delivery promptly upon remittance.

Investigative Costs Reimbursement

Pursuant to Section IV(B) of the AVC, CRH confirms that it will remit One Hundred Eighty-Five Thousand Dollars ($185,000.00) in reimbursement of the Attorney General's investigative costs incurred in connection with the inquiry. This payment will likewise be remitted within thirty (30) calendar days of the AVC execution date — that is, no later than September 19, 2024 — and will be directed to the account or payee designated by the Attorney General's office. Should your office require a separate payment instrument or specific payment instructions for this reimbursement, we ask that you provide those details to us at your earliest convenience so that CRH can ensure timely compliance.

Consumer Restitution Fund

Pursuant to Section IV(C) of the AVC, CRH will establish and fully fund the consumer restitution fund in the aggregate amount of Two Million Eight Hundred Fifty Thousand Dollars ($2,850,000.00), in accordance with the terms, conditions, and administration procedures set forth in the AVC. The fund will be administered within twelve (12) months of the AVC execution date — that is, on or before August 20, 2025. As contemplated by the AVC, the restitution fund will provide refunds or, where refunds are not practicable, store credits to affected consumers who purchased items bearing materially inflated "compare-at," "original," or "was" reference prices during the period from October 15, 2023 through March 15, 2024. CRH is in the process of identifying and compiling transaction-level data for affected consumers and will work in close coordination with your office and the independent compliance reviewer (discussed below) to ensure that the administration of the fund is conducted in a transparent, efficient, and consumer-friendly manner.

Total Financial Commitment

In total, CRH's aggregate financial commitment under the AVC is Three Million Seven Hundred Eighty-Five Thousand Dollars ($3,785,000.00), comprised of the following:

CRH is fully prepared to meet each of these financial obligations within the timeframes specified in the AVC and summarized above.

Commencement of Compliance-Monitoring Period

CRH acknowledges that the twenty-four (24) month compliance-monitoring period established by Section V of the AVC commenced on August 20, 2024, the date of full execution, and will continue through and including August 20, 2026. During this period, CRH is obligated to submit semi-annual compliance reports to the Consumer Protection Division, with the first such report due on or before February 20, 2025, and subsequent reports due at six-month intervals thereafter. CRH's internal compliance team, under the supervision of Terence Ashford, Chief Compliance Officer, has already begun preparing the protocols and reporting templates necessary to ensure timely and comprehensive submission of each report.

CRH further confirms that, effective as of the date of execution of the AVC, all "compare-at," "original," and "was" reference prices displayed by CRH — both on CRH's e-commerce platform at cascaderetail.com and across its one hundred eighty-seven (187) brick-and-mortar retail locations in fourteen (14) western U.S. states — will conform to the 120-day lookback window standard set forth in Section V(C) of the AVC. Specifically, no reference price will be displayed unless the item was offered for sale at that reference price in the ordinary course of business for a reasonably substantial period within the preceding 120 calendar days, as further defined in the AVC. CRH has already implemented system-level changes to its pricing infrastructure and point-of-sale systems to enforce this standard and has communicated the new pricing policy to all relevant personnel, including regional merchandising directors and digital pricing teams.

Independent Compliance Reviewer

Pursuant to Section VI of the AVC, CRH intends to promptly engage Ridgepoint Compliance Solutions Inc. as the independent compliance reviewer designated under the AVC. The primary engagement contact at Ridgepoint is Harold Sung, Engagement Partner, whose offices are located at 700 Stewart Street, Suite 1500, Seattle, Washington 98101. Ridgepoint was selected in accordance with the criteria set forth in the AVC and with the prior non-objection of the Attorney General's office.

Ridgepoint will conduct quarterly audits of CRH's reference-price practices for the full duration of the twenty-four (24) month compliance-monitoring period. The scope of Ridgepoint's audit responsibilities will include, among other things, auditing the algorithmic reference-price model developed and maintained by Praxton Analytics LLC, CRH's third-party pricing analytics vendor, to verify that reference prices generated by the model satisfy the 120-day lookback window standard and other pricing-accuracy requirements set forth in the AVC. Ridgepoint's quarterly audit reports will be made available to the Attorney General's office in accordance with the timeline and procedures specified in the AVC.

CRH will notify the Attorney General's office in writing promptly upon formal execution of the Ridgepoint engagement letter, and will provide a copy of the executed engagement letter for your office's records.

No Admission of Liability

As expressly set forth in Section II of the AVC, CRH enters into the AVC voluntarily and neither admits nor denies any violation of the Washington Consumer Protection Act, RCW 19.86 et seq., or any other statute, regulation, or legal standard. The AVC does not constitute a finding or adjudication of any violation of law by CRH. CRH's agreement to the terms of the AVC is made solely for the purpose of resolving the matters addressed therein and avoiding the expense, burden, and uncertainty of protracted litigation.

Acknowledgment and Thanks

On behalf of CRH, we wish to express sincere appreciation for the professional, constructive, and cooperative manner in which the Attorney General's Consumer Protection Division approached both the underlying inquiry and the AVC negotiation process. In particular, CRH is grateful for the diligence and professionalism demonstrated by you, Ms. Calloway-Voss; Jordan A. Kittridge, Investigating Assistant Attorney General; and Sandra Pietsch, Investigator, each of whom contributed to a thorough yet fair process. From the initial meet-and-confer session held on May 14, 2024, through the multiple rounds of drafting and negotiation that followed, and ultimately through final execution on today's date, the dialogue between the parties has been substantive, candid, and focused on achieving an outcome that serves the interests of Washington consumers while allowing CRH to implement meaningful, forward-looking compliance improvements. CRH is committed to full and faithful compliance with each of the terms and obligations set forth in the AVC, and looks forward to a continued cooperative relationship with the Attorney General's office throughout the monitoring period and beyond.

Contact Information and Availability

Should you or any member of your team have any questions, require additional documentation, or wish to discuss any aspect of the AVC or CRH's compliance obligations, please do not hesitate to contact the undersigned. Alan Ngo remains the primary point of contact at Calderwood & Harkness LLP for all matters relating to the AVC and CRH's ongoing compliance. Mr. Ngo can be reached at:

Alan Ngo, Partner Calderwood & Harkness LLP 1201 Third Avenue, Suite 4400 Seattle, WA 98101 Telephone: (206) 555-7218

Email: a.ngo@calderwoodharkness.com

In addition, Patrick Gallagher, Lead Associate, is available for day-to-day communications and can be reached at (206) 555-7234 or p.gallagher@calderwoodharkness.com. We are committed to ensuring that all communications with your office are handled promptly and with the same spirit of cooperation that has characterized these proceedings to date.

We trust that the foregoing accurately summarizes CRH's understanding of, and commitment to, its obligations under the AVC. We appreciate your office's attention to this matter and look forward to working with you during the compliance-monitoring period.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Alan Ngo Partner

cc:

Diana Prescott-Levy, General Counsel, Cascade Retail Holdings Inc. Terence Ashford, Chief Compliance Officer, Cascade Retail Holdings Inc. Jordan A. Kittridge, Investigating Assistant Attorney General, Consumer Protection Division, Office of the Attorney General

Enclosure:

Executed counterpart signature pages of the Assurance of Voluntary Compliance (dated August 20, 2024)

Component	Amount
Consumer Restitution Fund	$2,850,000.00
Civil Penalty	$750,000.00
Investigative Costs Reimbursement	$185,000.00
Total	$3,785,000.00

CALDERWOOD & HARKNESS LLP Attorneys at Law 1201 Third Avenue, Suite 4400 Seattle, WA 98101 Telephone: (206) 555-7200 Facsimile: (206) 555-7201 www.calderwoodharkness.com
August 20, 2024
C&H Matter No.: 1038-00004
Meredith Calloway-Voss, Esq. Lead Assistant Attorney General Consumer Protection Division Office of the Attorney General, State of Washington 800 Fifth Avenue, Suite 2000 Seattle, WA 98104
Re: Assurance of Voluntary Compliance — *In the Matter of Cascade Retail Holdings Inc.*; Civil Investigative Demand dated March 26, 2024
Dear Ms. Calloway-Voss:
We write on behalf of our client, Cascade Retail Holdings Inc. ("CRH" or "Cascade"), a Delaware corporation publicly traded on the Nasdaq Stock Market (ticker symbol: CRHI), with its principal offices located at 4500 Overlake Boulevard, Suite 800, Bellevue, Washington 98004. The purpose of this letter is to confirm the full execution of the Assurance of Voluntary Compliance ("AVC") by and between Cascade Retail Holdings Inc., on the one hand, and the State of Washington, acting through the Office of the Attorney General, on the other hand. The AVC was fully executed as of August 20, 2024, and resolves in its entirety the consumer-protection inquiry initiated by the Civil Investigative Demand issued on March 26, 2024, pursuant to the authority granted under RCW 19.86.110. This letter further memorializes CRH's understanding of, and commitment to, each of the material obligations arising under the AVC, and provides your office with the necessary documentation to complete its files.
Enclosure of Counterpart Signature Pages
Enclosed with this letter please find CRH's executed counterpart signature pages of the AVC, bearing the original signature of Diana Prescott-Levy, General Counsel of Cascade Retail Holdings Inc., who is duly authorized to execute the AVC on behalf of the company. We understand that the AVC was signed on behalf of the State of Washington by you, Meredith Calloway-Voss, in your capacity as Lead Assistant Attorney General, Consumer Protection Division. To the extent your office has not already done so, we respectfully request that the Attorney General's office countersign and return one fully executed copy of the AVC (or, alternatively, a conformed copy bearing both parties' signatures) to our offices at the address above for inclusion in CRH's permanent corporate files. We are happy to coordinate delivery by hand, overnight courier, or electronic transmission, whichever is most convenient for your office.
Confirmation of Financial Commitments and Payment Schedule
CRH acknowledges and confirms the financial commitments set forth in the AVC. For clarity and ease of reference, those commitments are summarized below.
Civil Penalty Payment
Pursuant to Section IV(A) of the AVC, CRH confirms that it will remit the civil penalty in the amount of Seven Hundred Fifty Thousand Dollars ($750,000.00) to the Washington Consumer Protection Account. Payment will be made by certified check or wire transfer within thirty (30) calendar days of the AVC execution date — that is, no later than September 19, 2024. CRH's treasury department has been instructed to prepare the payment, and we will provide your office with wire confirmation or proof of delivery promptly upon remittance.
Investigative Costs Reimbursement
Pursuant to Section IV(B) of the AVC, CRH confirms that it will remit One Hundred Eighty-Five Thousand Dollars ($185,000.00) in reimbursement of the Attorney General's investigative costs incurred in connection with the inquiry. This payment will likewise be remitted within thirty (30) calendar days of the AVC execution date — that is, no later than September 19, 2024 — and will be directed to the account or payee designated by the Attorney General's office. Should your office require a separate payment instrument or specific payment instructions for this reimbursement, we ask that you provide those details to us at your earliest convenience so that CRH can ensure timely compliance.
Consumer Restitution Fund
Pursuant to Section IV(C) of the AVC, CRH will establish and fully fund the consumer restitution fund in the aggregate amount of Two Million Eight Hundred Fifty Thousand Dollars ($2,850,000.00), in accordance with the terms, conditions, and administration procedures set forth in the AVC. The fund will be administered within twelve (12) months of the AVC execution date — that is, on or before August 20, 2025. As contemplated by the AVC, the restitution fund will provide refunds or, where refunds are not practicable, store credits to affected consumers who purchased items bearing materially inflated "compare-at," "original," or "was" reference prices during the period from October 15, 2023 through March 15, 2024. CRH is in the process of identifying and compiling transaction-level data for affected consumers and will work in close coordination with your office and the independent compliance reviewer (discussed below) to ensure that the administration of the fund is conducted in a transparent, efficient, and consumer-friendly manner.
Total Financial Commitment
In total, CRH's aggregate financial commitment under the AVC is Three Million Seven Hundred Eighty-Five Thousand Dollars ($3,785,000.00), comprised of the following:
CRH is fully prepared to meet each of these financial obligations within the timeframes specified in the AVC and summarized above.
Commencement of Compliance-Monitoring Period
CRH acknowledges that the twenty-four (24) month compliance-monitoring period established by Section V of the AVC commenced on August 20, 2024, the date of full execution, and will continue through and including August 20, 2026. During this period, CRH is obligated to submit semi-annual compliance reports to the Consumer Protection Division, with the first such report due on or before February 20, 2025, and subsequent reports due at six-month intervals thereafter. CRH's internal compliance team, under the supervision of Terence Ashford, Chief Compliance Officer, has already begun preparing the protocols and reporting templates necessary to ensure timely and comprehensive submission of each report.
CRH further confirms that, effective as of the date of execution of the AVC, all "compare-at," "original," and "was" reference prices displayed by CRH — both on CRH's e-commerce platform at cascaderetail.com and across its one hundred eighty-seven (187) brick-and-mortar retail locations in fourteen (14) western U.S. states — will conform to the 120-day lookback window standard set forth in Section V(C) of the AVC. Specifically, no reference price will be displayed unless the item was offered for sale at that reference price in the ordinary course of business for a reasonably substantial period within the preceding 120 calendar days, as further defined in the AVC. CRH has already implemented system-level changes to its pricing infrastructure and point-of-sale systems to enforce this standard and has communicated the new pricing policy to all relevant personnel, including regional merchandising directors and digital pricing teams.
Independent Compliance Reviewer
Pursuant to Section VI of the AVC, CRH intends to promptly engage Ridgepoint Compliance Solutions Inc. as the independent compliance reviewer designated under the AVC. The primary engagement contact at Ridgepoint is Harold Sung, Engagement Partner, whose offices are located at 700 Stewart Street, Suite 1500, Seattle, Washington 98101. Ridgepoint was selected in accordance with the criteria set forth in the AVC and with the prior non-objection of the Attorney General's office.
Ridgepoint will conduct quarterly audits of CRH's reference-price practices for the full duration of the twenty-four (24) month compliance-monitoring period. The scope of Ridgepoint's audit responsibilities will include, among other things, auditing the algorithmic reference-price model developed and maintained by Praxton Analytics LLC, CRH's third-party pricing analytics vendor, to verify that reference prices generated by the model satisfy the 120-day lookback window standard and other pricing-accuracy requirements set forth in the AVC. Ridgepoint's quarterly audit reports will be made available to the Attorney General's office in accordance with the timeline and procedures specified in the AVC.
CRH will notify the Attorney General's office in writing promptly upon formal execution of the Ridgepoint engagement letter, and will provide a copy of the executed engagement letter for your office's records.
No Admission of Liability
As expressly set forth in Section II of the AVC, CRH enters into the AVC voluntarily and neither admits nor denies any violation of the Washington Consumer Protection Act, RCW 19.86 et seq., or any other statute, regulation, or legal standard. The AVC does not constitute a finding or adjudication of any violation of law by CRH. CRH's agreement to the terms of the AVC is made solely for the purpose of resolving the matters addressed therein and avoiding the expense, burden, and uncertainty of protracted litigation.
Acknowledgment and Thanks
On behalf of CRH, we wish to express sincere appreciation for the professional, constructive, and cooperative manner in which the Attorney General's Consumer Protection Division approached both the underlying inquiry and the AVC negotiation process. In particular, CRH is grateful for the diligence and professionalism demonstrated by you, Ms. Calloway-Voss; Jordan A. Kittridge, Investigating Assistant Attorney General; and Sandra Pietsch, Investigator, each of whom contributed to a thorough yet fair process. From the initial meet-and-confer session held on May 14, 2024, through the multiple rounds of drafting and negotiation that followed, and ultimately through final execution on today's date, the dialogue between the parties has been substantive, candid, and focused on achieving an outcome that serves the interests of Washington consumers while allowing CRH to implement meaningful, forward-looking compliance improvements. CRH is committed to full and faithful compliance with each of the terms and obligations set forth in the AVC, and looks forward to a continued cooperative relationship with the Attorney General's office throughout the monitoring period and beyond.
Contact Information and Availability
Should you or any member of your team have any questions, require additional documentation, or wish to discuss any aspect of the AVC or CRH's compliance obligations, please do not hesitate to contact the undersigned. Alan Ngo remains the primary point of contact at Calderwood & Harkness LLP for all matters relating to the AVC and CRH's ongoing compliance. Mr. Ngo can be reached at:
Alan Ngo, Partner Calderwood & Harkness LLP 1201 Third Avenue, Suite 4400 Seattle, WA 98101 Telephone: (206) 555-7218
Email: a.ngo@calderwoodharkness.com
In addition, Patrick Gallagher, Lead Associate, is available for day-to-day communications and can be reached at (206) 555-7234 or p.gallagher@calderwoodharkness.com. We are committed to ensuring that all communications with your office are handled promptly and with the same spirit of cooperation that has characterized these proceedings to date.
We trust that the foregoing accurately summarizes CRH's understanding of, and commitment to, its obligations under the AVC. We appreciate your office's attention to this matter and look forward to working with you during the compliance-monitoring period.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Alan Ngo Partner
cc:
Diana Prescott-Levy, General Counsel, Cascade Retail Holdings Inc. Terence Ashford, Chief Compliance Officer, Cascade Retail Holdings Inc. Jordan A. Kittridge, Investigating Assistant Attorney General, Consumer Protection Division, Office of the Attorney General
Enclosure:
Executed counterpart signature pages of the Assurance of Voluntary Compliance (dated August 20, 2024)
Component | Amount
Consumer Restitution Fund | $2,850,000.00
Civil Penalty | $750,000.00
Investigative Costs Reimbursement | $185,000.00
Total | $3,785,000.00

CALDERWOOD & HARKNESS LLP

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