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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION — ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 1301 K Street NW, Suite 1200 Washington, DC 20005

March 21, 2025

MEMORANDUM

TO: Theresa Yun-Park, General Counsel, Cascade Retail Holdings Inc.

FROM: Bernard Crawford, Responsible Partner, Labor & Employment

RE: Weekly Litigation Status Report #4 — Cascade Retail Holdings Inc. v. Rathore et al., C.A. No. 2025-0198-MTZ (Del. Ch.)

MATTER NUMBER: 1038-00006

COPY: Renata Vasquez (Billing Partner, Calderwood & Harkness LLP — Los Angeles Office)

I. Executive Summary

This memorandum constitutes the fourth weekly status report covering developments in the above-captioned matter during the period of March 15 through March 21, 2025. This has been an exceptionally active and consequential week in the litigation, marked by several critical developments that have fundamentally altered the trajectory of this matter in a manner highly favorable to Cascade Retail Holdings Inc. ("CRH" or the "Company").

During the reporting period, four significant events occurred. First, on March 15, 2025, the individual defendants and Verdana Commerce Group, Inc. ("Verdana") filed their respective opposition briefs to CRH's motion for a preliminary injunction. Second, on March 18, 2025, all parties participated in a full-day mediation session before the Honorable Philip Ashford (Ret.) at Meridian ADR Services LLC in Wilmington, Delaware (Ref. Meridian-2025-0318-CRH). Third, following two additional days of intensive counsel-to-counsel negotiations, the parties reached agreement on a comprehensive settlement framework on March 20, 2025. Fourth, and most recently, the preliminary injunction hearing originally scheduled for today was adjourned by stipulation, and Vice Chancellor Margaret T. Zhao entered a Consent Interim Order maintaining the status quo during the settlement documentation period.

Our overall assessment is that this outcome is highly favorable for CRH. The settlement framework positions the Company to recover total economic value of approximately $10,024,500 — comprising a lump-sum cash payment of $8,750,000 from Verdana, aggregate equity forfeitures of $849,500, and litigation cost reimbursement of $425,000 — while simultaneously securing modified but meaningful restrictive covenant protections in the three product categories most critical to CRH's competitive position. This recovery exceeds the pre-mediation settlement range discussed with the client and avoids the inherent risks of a contested preliminary injunction hearing, where defendants had raised colorable, if not ultimately meritorious, arguments regarding covenant overbreadth.

The matter is now transitioning from an active litigation phase to a settlement documentation phase. Calderwood & Harkness will prepare the initial draft of the Standstill and Settlement Agreement, and the parties have agreed to use best efforts to finalize all documentation and file a proposed Consent Order with the Court of Chancery on or before April 14, 2025.

The sections below provide a detailed account of each development, along with analysis of the settlement terms, budget status, next steps, and residual risk considerations.

II. Procedural Status

A. Current Posture Before the Court

The case remains pending in the Delaware Court of Chancery under Civil Action No. 2025-0198-MTZ, assigned to Vice Chancellor Margaret T. Zhao. As reported in prior weekly updates, CRH filed its Verified Complaint and Emergency Motion for Temporary Restraining Order on March 5, 2025. Vice Chancellor Zhao granted the TRO on March 7, 2025, restraining all eight individual defendants — Priya Rathore, Kevin Ng, Samantha Orloff, Marcus Haines, Diana Chu, Terrence Whitaker, Elena Sato, and Jordan Pemberton — from commencing employment in merchandising roles at Verdana Commerce Group, Inc. for a period of fourteen days. In connection with the TRO, CRH posted an injunction bond of $2,500,000 through Broadview Surety Corp. (Bond No. BSC-2025-TRO-04419).

Following entry of the TRO, the Court set a preliminary injunction hearing for March 21, 2025 and authorized expedited discovery, as described in our prior weekly reports. The parties engaged in compressed briefing on the preliminary injunction, with CRH's opening brief filed on March 10, 2025 (as reported in Weekly Update #2), the defendants' opposition briefs filed on March 15, 2025, and CRH's reply filed on March 17, 2025.

As of today, March 21, 2025, the preliminary injunction hearing has been adjourned by stipulation of all parties. Vice Chancellor Zhao entered a Consent Interim Order this morning that maintains the status quo during the settlement documentation period and retains the Court's ability to restore the matter to the active calendar if the settlement process fails. The specific terms of the Consent Interim Order are discussed in Section IV below.

B. Defendants' Opposition to Preliminary Injunction (Filed March 15, 2025)

On March 15, 2025, two separate opposition briefs were filed with the Court of Chancery.

Individual Defendants' Brief. Whitfield, Nygaard & Doyle LLP ("WND"), through lead partner Catherine Nygaard and associate Travis Beaumont, filed an opposition memorandum on behalf of all eight individual defendants (collectively, the "Rathore Group"). The WND brief advanced three principal arguments against entry of a preliminary injunction. First, WND argued that the restrictive covenants at issue are overbroad under Delaware's reasonableness standard, pointing specifically to the nationwide geographic scope of the covenants, the eighteen-month duration applicable to Rathore, and the "all retail" non-compete scope that WND characterized as effectively preventing the defendants from working in any segment of the retail industry, regardless of its relationship to CRH's core business. Second, WND contended that certain shorter-tenure employees — specifically Diana Chu and Jordan Pemberton, who were employed at CRH for fewer than three years — did not receive adequate independent consideration for the restrictive covenants contained in their employment agreements, as the covenants were imposed as a condition of continued employment rather than at the time of initial hiring. Third, WND argued that the covenants impose undue hardship on the individual defendants, who would be effectively barred from practicing their profession during the covenant period and would face severe financial consequences.

Verdana's Brief. Blackhall & Soren LLP, through lead partner Gavin Blackhall and senior associate Meredith Lau, filed a separate brief on behalf of Verdana Commerce Group, Inc. Verdana's opposition took a somewhat different tack, focusing on three arguments directed at the tortious interference and trade secret claims. First, Verdana denied tortious interference by asserting that Verdana had no knowledge of the specific terms of the defendants' restrictive covenants at the time it recruited the Rathore Group, and that Verdana's recruitment efforts were directed at identifying talented merchandising professionals in the ordinary course of competitive hiring. Second, Verdana challenged the trade secret classification of certain categories of information that CRH alleged had been exfiltrated, arguing that some of the information — particularly customer segmentation data and general market analytics — constituted general industry knowledge rather than protectable trade secrets under the Delaware Uniform Trade Secrets Act ("DUTSA"). Third, Verdana argued that CRH had failed to demonstrate irreparable harm, contending that any competitive injury could be adequately compensated through monetary damages.

Our Assessment. Having carefully reviewed both opposition briefs, our assessment is that the defendants raised colorable arguments on the overbreadth issue that presented non-trivial risk at a contested preliminary injunction hearing. In particular, the nationwide geographic scope and the breadth of the "all retail" non-compete language were the aspects most vulnerable to challenge under Delaware precedent. Courts in the Court of Chancery have historically been willing to blue-pencil overbroad covenants, and there was a genuine possibility that Vice Chancellor Zhao would have narrowed the covenants significantly at the preliminary injunction stage, potentially limiting the non-compete to specific product categories or geographic regions. That said, the defendants' arguments on consideration and undue hardship were considerably weaker, and the strength of the data exfiltration evidence — coupled with the coordinated nature of the departure and the evidence of Verdana's direct recruitment through the Dietrich/Westbrook dinner — significantly bolstered CRH's position on irreparable harm and bad faith, factors that would have weighed heavily in the Court's equitable balancing.

C. CRH Reply Brief (Filed March 17, 2025)

On March 17, 2025, Calderwood & Harkness filed Plaintiff's Reply Memorandum in Further Support of its Motion for Preliminary Injunction. The reply brief was designed to address the defendants' principal arguments while reinforcing the strength of CRH's evidentiary position.

The reply brief was accompanied by two new declarations. First, we submitted the Declaration of Sandra Fielding of Aurelian Investigations Group Inc. Ms. Fielding's declaration provided detailed factual findings from Aurelian's investigation, including evidence of the January 6, 2025 dinner meeting at a private dining room at The Standard Grill in New York City between Warren Dietrich (CEO, Verdana), Elliot Westbrook (Managing Partner, Greystone Capital Partners, LP), and Priya Rathore. The declaration also set forth Aurelian's analysis of encrypted messaging exchanges among the members of the Rathore Group during the period of January 13 through 24, 2025, which revealed coordinated discussions regarding the timing of the group's simultaneous departure from CRH and the onboarding process at Verdana. These messaging exchanges, which were recovered during the expedited discovery process, demonstrated a deliberate and coordinated effort to time the departures to maximize competitive harm to CRH.

Second, we submitted the Declaration of Dr. Franklin Oberg of Veltrano Consulting Group LLC, which set forth a preliminary economic damages analysis. Dr. Oberg's declaration referenced CRH's Merchandising Division gross merchandise value ("GMV") of $2.3 billion in fiscal year 2024 and assessed the competitive threat posed by the Rathore Group's collective knowledge of Project Ridgeline — CRH's proprietary strategic initiative to restructure its private-label and seasonal merchandising operations. Dr. Oberg's preliminary analysis estimated that the potential competitive harm to CRH, if the Rathore Group were permitted to deploy their knowledge of Project Ridgeline at Verdana, could range from $15 million to $30 million over the next two fiscal years, depending on the speed and scope of Verdana's competitive response.

The reply brief directly addressed the defendants' overbreadth arguments by emphasizing the targeted nature of the covenants relative to the departing employees' senior roles and their access to highly sensitive proprietary information. We distinguished the Delaware precedent cited by defendants — principally Kodiak Building Partners, LLC v. Adams and FP UC Holdings, LLC v. Hamilton — by demonstrating that those cases involved junior employees with limited access to trade secrets, whereas each member of the Rathore Group held a senior or executive-level position within CRH's Merchandising Division and had direct access to the Company's most competitively sensitive strategic plans.

III. Mediation Session — March 18, 2025

A. Logistics and Participants

The mediation was conducted on March 18, 2025, at the offices of Meridian ADR Services LLC, located at 200 Continental Drive, Suite 310, Wilmington, Delaware 19803. The session was administered under Meridian reference number Meridian-2025-0318-CRH. The Honorable Philip Ashford (Ret.), a former Superior Court judge with extensive experience in employment and trade secret disputes, served as mediator.

The following individuals participated in the mediation:

On behalf of CRH:

• Bernard Crawford, Partner, Calderwood & Harkness LLP

• James Underwood, Associate, Calderwood & Harkness LLP

• Theresa Yun-Park, General Counsel, CRH

• Roland Ashby, Senior Vice President — Human Resources, CRH

On behalf of the Individual Defendants (Rathore Group):

• Catherine Nygaard, Partner, Whitfield, Nygaard & Doyle LLP

• Travis Beaumont, Associate, Whitfield, Nygaard & Doyle LLP

• Priya Rathore (attended in person)

• Kevin Ng, Samantha Orloff, Marcus Haines, Diana Chu, Terrence Whitaker, Elena Sato, and Jordan Pemberton (participated by videoconference)

On behalf of Verdana Commerce Group, Inc.:

• Gavin Blackhall, Partner, Blackhall & Soren LLP

• Meredith Lau, Senior Associate, Blackhall & Soren LLP

• Helen Tsoi, General Counsel, Verdana Commerce Group, Inc. (attended in person)

• Warren Dietrich, CEO, Verdana Commerce Group, Inc. (available by telephone)

B. CRH's Mediation Position

In advance of the mediation, Calderwood & Harkness submitted a confidential mediation statement to Mediator Ashford on March 17, 2025, setting forth CRH's litigation position, evidentiary basis, and settlement parameters. The confidential statement was not shared with opposing parties, consistent with Meridian ADR's standard protocols.

CRH's opening position at the mediation reflected the full scope of relief sought in the Verified Complaint and motion for preliminary injunction. Specifically, CRH's initial demand included: (1) full enforcement of the existing restrictive covenant terms for all eight individual defendants, without modification to duration, geographic scope, or industry scope; (2) monetary damages in the range of $15 million to $20 million, reflecting CRH's estimated harm from trade secret misuse, competitive injury, and the premium Verdana paid to acquire the Rathore Group's CRH-derived knowledge and relationships; (3) full forfeiture of all unvested equity awards held by the individual defendants, as well as clawback of certain vested tranches under applicable for-cause clawback provisions; (4) a requirement that Verdana fund an independent forensic audit of its own systems at its own expense, to verify the destruction of all exfiltrated CRH data; and (5) injunctive relief to be incorporated into a court-enforceable consent order with retained jurisdiction.

CRH's fall-back position — which had been previously approved pursuant to the internal strategy memorandum dated March 15, 2025, and confirmed in an email exchange between Crawford and Yun-Park dated March 16, 2025 — allowed for negotiation of modified covenant durations and geographic or category scope, provided that any such modifications were accompanied by: a substantial monetary payment reflecting the value of the knowledge and relationships the defendants took from CRH; a robust data-return, destruction, and compliance-monitoring regime; and a court-enforceable consent order preserving the Court of Chancery's jurisdiction for enforcement purposes.

C. Mediation Dynamics

Mediator Ashford conducted the mediation through shuttle diplomacy, moving between the parties' respective conference rooms over the course of approximately nine hours, from approximately 9:00 a.m. to 6:00 p.m. The mediator met separately with each party multiple times, conveying proposals and counter-proposals, providing his own assessment of the strengths and weaknesses of each side's position, and working to identify areas of potential agreement.

The initial gap between the parties was substantial. Verdana's opening position, communicated through the mediator, proposed a payment of $2,000,000 and an immediate release of all restrictive covenants binding the eight individual defendants, effectively permitting the Rathore Group to begin working in merchandising roles at Verdana immediately and without limitation. CRH rejected this proposal as wholly inadequate, and we communicated to Mediator Ashford that CRH viewed the opening as insufficiently serious given the strength of CRH's evidentiary position.

As the day progressed, Mediator Ashford identified the key leverage points that each party brought to the negotiation:

CRH's Key Leverage Points:

(1) Data Exfiltration Evidence. The forensic report produced by Pinnacle Forensics LLC (Dr. Rajiv Anand) provided concrete, irrefutable evidence that 14,327 files — approximately 2.8 gigabytes of data — had been exfiltrated from CRH's Aldermere Systems and Pinnacle Health IT environments to personal cloud storage accounts between January 10 and February 4, 2025. The exfiltrated materials included Project Ridgeline strategic presentations, vendor negotiation term sheets, private-label cost models, seasonal buying algorithms, customer segmentation data, and ecommerce assortment analytics. This evidence was devastating to the defendants' position and fundamentally undermined Verdana's argument that it had no knowledge of the specific proprietary information being brought to it.

(2) Pre-Departure Coordination Evidence. Aurelian Investigations Group Inc.'s investigative findings demonstrated that the group's departure was not a series of independent career decisions, but rather a coordinated effort orchestrated through direct recruitment by Verdana's CEO and its PE sponsor. The January 6, 2025 dinner meeting between Dietrich, Westbrook, and Rathore, and the subsequent encrypted messaging exchanges among the Rathore Group members regarding coordinated departure timing, painted a compelling picture of deliberate and coordinated raiding.

(3) Sign-On Bonus Evidence. The aggregate $6,200,000 in sign-on bonuses that Verdana paid to the Rathore Group — $1,500,000 to Rathore individually, and $4,700,000 in the aggregate to the other seven members — demonstrated that Verdana valued the team's CRH-acquired knowledge and relationships at a significant premium, further supporting CRH's argument that the departures were motivated by a desire to appropriate CRH's proprietary assets rather than merely to hire talented individuals.

Defendants' Key Leverage Points:

(1) Overbreadth Arguments. As discussed above, the defendants raised colorable arguments regarding the overbreadth of CRH's restrictive covenants that created genuine risk at a contested preliminary injunction hearing. There was a real possibility that Vice Chancellor Zhao would have narrowed the covenants significantly — and potentially more aggressively than the narrowing reflected in the settlement framework — if the matter proceeded to a hearing.

(2) Public Policy Concerns. WND argued effectively that enforcement of CRH's covenants as written would prevent the defendants from working in their field for periods of twelve to eighteen months, raising potential public policy concerns under Delaware law regarding the enforceability of covenants that effectively bar employees from practicing their profession entirely.

(3) Business Disruption and Mutual Incentive. The prolonged litigation posed risks of significant business disruption not only to CRH and its competitive position, but also to Verdana and its private equity sponsor, Greystone Capital Partners. Greystone Capital Fund VII, LP — which has approximately $8.5 billion in committed capital — acquired a majority stake in Verdana in Q3 2023 for an enterprise value of $2.4 billion. The pending litigation and associated uncertainty were creating disruption to Verdana's onboarding and integration plans, particularly in the merchandising function, which was a key component of Greystone's investment thesis. This dynamic created a mutual incentive to resolve the dispute efficiently.

In the late afternoon session, Mediator Ashford proposed a framework that sought to bridge the remaining gap between the parties. The framework centered on modified covenant terms — with reduced durations and narrowed category scope — coupled with a significant monetary payment by Verdana to CRH, a comprehensive data-return and destruction protocol with independent forensic verification, and a court-enforceable consent order with retained jurisdiction. This framework was broadly acceptable to both sides as a basis for continued negotiation, and the parties agreed to continue counsel-to-counsel discussions following the mediation session to attempt to reach agreement on specific terms.

D. Framework Agreement (March 20, 2025)

Following two additional days of intensive counsel-to-counsel negotiation — conducted primarily through telephone calls and email exchanges between Crawford and Underwood (Calderwood & Harkness) on one side, and Nygaard (WND) and Blackhall (Blackhall & Soren) on the other — the parties reached agreement on a comprehensive settlement framework on March 20, 2025. The framework agreement is memorialized in an exchange of counsel correspondence and will be formalized in a definitive Standstill and Settlement Agreement. The principal terms of the framework are summarized below.

1. Modified Non-Compete Obligations

The non-compete covenants applicable to the individual defendants have been modified as follows:

Priya Rathore: The non-compete period has been reduced from the original eighteen-month term to twelve months, running from February 7, 2025 (Rathore's resignation date) through February 6, 2026. The scope has been narrowed from all retail operations to three specific product categories: home goods, seasonal décor, and private-label apparel. Rathore is free to work at Verdana in other merchandising categories — including, for example, general consumer electronics, sporting goods, or grocery — provided that she does not engage in activities related to the three specified categories during the covenant period.

Other Seven Defendants (Ng, Orloff, Haines, Chu, Whitaker, Sato, Pemberton): The non-compete period has been reduced from the original twelve or eighteen months (varying by individual employment agreement) to a uniform nine-month period, running from February 7, 2025 through November 6, 2025. The scope is limited to the same three product categories: home goods, seasonal décor, and private-label apparel.

These modified non-compete terms represent a meaningful concession from CRH's original position, but they protect the product categories most critical to CRH's competitive position and most closely connected to Project Ridgeline.

2. Non-Solicitation of CRH Employees

All eight individual defendants are bound by an eighteen-month non-solicitation of CRH employees, running from February 7, 2025 through August 6, 2026. This provision prohibits the defendants from directly or indirectly soliciting, recruiting, or inducing any CRH employee to leave the Company's employment. The eighteen-month duration was a key priority for CRH, given the Rathore Group's extensive relationships throughout CRH's Merchandising Division and the risk that they could use those relationships to recruit additional CRH talent to Verdana.

3. Non-Solicitation of CRH Vendors

All eight individual defendants are bound by a twelve-month non-solicitation of CRH's top fifty vendors (ranked by annual spend), running from February 7, 2025 through February 6, 2026. This provision prohibits the defendants from directly or indirectly soliciting or contacting any of the specified vendors for the purpose of diverting business away from CRH or leveraging CRH's proprietary vendor relationship information. CRH will provide the list of its top fifty vendors as an exhibit to the settlement agreement. If the list is appended to any filing with the Court of Chancery, it will be filed under seal to protect CRH's confidential vendor relationships.

4. Data Return and Destruction

All exfiltrated CRH data in the possession, custody, or control of any individual defendant or Verdana is to be returned to CRH or certified as destroyed within ten business days of execution of the Standstill and Settlement Agreement. Each individual defendant will be required to execute a certification under penalty of perjury attesting to the complete return or destruction of all CRH data.

In addition, Verdana has agreed to permit an independent forensic audit of its systems — including all devices, servers, email systems, cloud storage accounts, and collaboration platforms used by or accessible to the individual defendants — by Pinnacle Forensics LLC (Dr. Rajiv Anand, lead forensic examiner). The audit will be conducted at Verdana's sole expense, subject to a cost cap of $175,000. The purpose of the audit is to verify that all exfiltrated CRH data has been identified, returned or destroyed, and that no copies or derivative works remain within Verdana's systems. The forensic audit protocol will be set forth in a detailed exhibit to the settlement agreement.

5. Monetary Terms

The monetary components of the settlement are as follows:

Lump-Sum Settlement Payment. Verdana Commerce Group, Inc. will pay CRH a lump-sum settlement payment of $8,750,000 within thirty days of execution of the Standstill and Settlement Agreement. Payment will be made by wire transfer to an account designated by CRH.

Rathore Equity Forfeiture. Priya Rathore forfeits one hundred percent of her unvested CRH restricted stock units ("RSUs"). Rathore's RSU grant, dated March 15, 2021, had a total value of $725,000 and was subject to four-year ratable annual vesting at twenty-five percent per year. Three tranches vested on March 15, 2022, March 15, 2023, and March 15, 2024, representing seventy-five percent of the total grant ($543,750 vested). The remaining unvested twenty-five percent ($181,250) is forfeited. Additionally, the final vested tranche ($181,250) is subject to clawback under the for-cause clawback provision of Rathore's Amended and Restated Employment Agreement, triggered by her breach of the restrictive covenant obligations. Total Rathore equity forfeiture: $362,500.

Other Defendants Equity Forfeiture. The remaining seven individual defendants forfeit their unvested equity on a pro rata basis, calculated in accordance with the vesting schedules set forth in their respective employment agreements. The aggregate forfeiture for the seven defendants is $487,000.

Total Equity Forfeitures: $849,500 ($362,500 + $487,000).

Litigation Cost Reimbursement. Verdana will reimburse CRH $425,000 toward litigation costs incurred in this matter. This reimbursement is in addition to the lump-sum settlement payment.

Total Economic Recovery to CRH: $10,024,500, comprising:

Each party otherwise bears its own attorneys' fees and costs incurred in connection with this litigation.

6. Compliance Monitor

The parties have agreed to the appointment of Aldwyn Compliance Solutions LLC, located at 1700 Market Street, Suite 2800, Philadelphia, Pennsylvania 19103, as an independent compliance monitor for a period of twelve months from the execution date of the settlement agreement. Aldwyn will conduct quarterly verification of the defendants' adherence to the modified non-compete obligations, non-solicitation obligations, and data-destruction obligations. The compliance monitor will have the authority to request information from all parties, interview relevant personnel, and conduct limited document reviews as necessary to fulfill its verification mandate.

The estimated cost of the compliance monitoring engagement is $360,000, which will be allocated sixty percent to Verdana ($216,000) and forty percent to CRH ($144,000). The engagement terms, scope of monitoring activities, and reporting protocols will be set forth in a detailed Compliance Monitor Engagement Letter, which will be attached as an exhibit to the settlement agreement.

7. Mutual Non-Disparagement

The settlement agreement will include a standard mutual non-disparagement clause binding all parties — CRH, the eight individual defendants, and Verdana — prohibiting any party from making or publishing any statement that disparages, denigrates, or is intended to harm the reputation, business, or prospects of any other party. The non-disparagement obligation will be subject to customary carve-outs for truthful statements made in response to legal process, regulatory inquiries, or governmental investigations, and for statements made in connection with the enforcement of the settlement agreement.

8. Consent Order

The parties have agreed to file a stipulated consent order with the Delaware Court of Chancery that incorporates the modified restrictive covenant terms and data-destruction obligations set forth in the settlement agreement. The consent order will provide that the Court of Chancery retains jurisdiction over the matter for the purpose of enforcing the terms of the settlement agreement and the consent order for the duration of the applicable covenant periods. Upon entry of the consent order, the existing TRO will be dissolved, and the consent order will supersede the TRO and the Consent Interim Order as the operative court order in this matter.

The filing of the consent order is significant because it provides CRH with a direct enforcement mechanism through the Court of Chancery. In the event of any breach of the modified covenants or data-destruction obligations, CRH will be able to seek enforcement through a contempt proceeding rather than being required to commence a new action. This is a substantial benefit, as enforcement through contempt is generally faster and more efficient than initiating new litigation.

IV. Consent Interim Order (March 21, 2025)

With the settlement framework agreed in principle on March 20, 2025, but the detailed settlement documentation not yet completed, the parties filed a Stipulation and Proposed Consent Interim Order with the Court of Chancery this morning, requesting the adjournment of the preliminary injunction hearing that was scheduled for today. Calderwood & Harkness coordinated with WND and Blackhall & Soren to prepare the stipulation and proposed order yesterday evening, March 20, 2025.

Vice Chancellor Zhao entered the Consent Interim Order today, March 21, 2025. The key provisions of the Consent Interim Order are as follows:

(1) The preliminary injunction hearing is adjourned sine die;

(2) The existing status quo is maintained during the settlement documentation period — specifically, the individual defendants shall refrain from commencing employment in merchandising roles at Verdana in the three specified product categories (home goods, seasonal décor, and private-label apparel) pending finalization of the settlement documentation and entry of the Consent Order;

(3) The parties shall use best efforts to finalize the settlement documentation and file a proposed Consent Order on or before April 14, 2025;

(4) Either party may restore the preliminary injunction hearing to the Court's calendar on five business days' written notice to all parties and the Court if settlement negotiations fail or if either party determines in good faith that the settlement is unlikely to be consummated.

It should be noted that the TRO originally entered on March 7, 2025, technically expired by its own terms fourteen days after entry. However, the Consent Interim Order functionally replaces the TRO with equivalent restraints — now limited to the three specified product categories rather than all merchandising roles — under the parties' voluntary stipulation. From a practical standpoint, the Consent Interim Order provides CRH with the same protective effect as the TRO during the settlement documentation period, while narrowing the restraints in a manner consistent with the settlement framework.

V. Expedited discovery Update

As reported in prior weekly updates, the Court authorized expedited discovery during the TRO period. The expedited discovery was conducted between March 12 and March 18, 2025, and covered document production, forensic imaging, and limited interrogatory responses from the individual defendants and Verdana.

The most significant discovery product was the final forensic report prepared by Pinnacle Forensics LLC, under the supervision of Dr. Rajiv Anand. The final report confirmed the scope of data exfiltration that was preliminarily identified during the TRO proceedings. Specifically, the report documented that 14,327 files — totaling approximately 2.8 gigabytes of data — were downloaded from CRH's Aldermere Systems and Pinnacle Health IT environments to personal cloud storage accounts (including personal Hollowell Health IT and Larkspur Technologies accounts) between January 10 and February 4, 2025. The downloads were conducted by multiple members of the Rathore Group, with the largest volumes attributable to Rathore, Ng, and Orloff.

The categories of exfiltrated files include:

• Project Ridgeline strategic presentations and internal memoranda

• Vendor negotiation term sheets and pricing agreements for CRH's top private-label suppliers

• Private-label cost models, including manufacturing cost breakdowns and margin analyses

• Seasonal buying algorithms used by CRH's merchandising team to optimize assortment planning

• Customer segmentation data derived from CRH's proprietary analytics platform

• Ecommerce assortment analytics, including A/B testing results and conversion data

The Pinnacle Forensics report was instrumental during the mediation, as it provided concrete and irrefutable evidence of the scope of data misappropriation. Mediator Ashford specifically noted during the session that the forensic evidence significantly strengthened CRH's position and made it difficult for the defendants to credibly contest the data exfiltration allegations. The defendants did not produce meaningful counter-evidence during the expedited discovery period, and their responses to CRH's interrogatories were largely non-responsive on the topic of data handling, relying primarily on objections and boilerplate privilege assertions.

VI. Staffing and Budget Update

A. Current Staffing

The following attorneys have been staffed on this matter through the reporting period:

The hours reflected above are approximate and are subject to final time entry review and reconciliation. The current staffing model has been effective in managing the compressed timeline associated with the TRO, expedited discovery, preliminary injunction briefing, mediation preparation, and settlement negotiations. As the matter transitions to the settlement documentation phase, we anticipate that the staffing can be somewhat reduced, with Crawford maintaining overall supervision, Underwood leading the drafting of the settlement agreement and consent order, and Archer handling the supporting exhibits and coordination with outside vendors. Vasquez will continue to be available for strategic guidance as needed.

B. Budget Status

Total fees incurred through March 21, 2025, are estimated at approximately $1,200,000. This estimate is subject to final time entry review and reconciliation, which will be completed during the next billing cycle. As previously noted, the compressed timeline and the intensive nature of the TRO proceedings, expedited discovery, preliminary injunction briefing, mediation preparation and attendance, and post-mediation settlement negotiations have resulted in significant time expenditures during this initial phase.

We estimate that the remaining settlement documentation phase — encompassing drafting, negotiating, and finalizing the Standstill and Settlement Agreement and all exhibits, preparing the Stipulation of Settlement and Proposed Consent Order, coordinating with the compliance monitor, and managing the various corporate and regulatory action items identified in Section VII below — will require approximately $400,000 to $500,000 in additional fees.

Total projected fees through closing of the settlement are therefore estimated at approximately $1,600,000 to $1,700,000. In addition, expenses incurred to date total approximately $308,600, encompassing:

• Pinnacle Forensics LLC (forensic investigation and report)

• Aurelian Investigations Group Inc. (fact investigation)

• Veltrano Consulting Group LLC (economic damages analysis)

• Court filing fees and service of process

• Meridian ADR Services LLC (mediation fees)

• Travel expenses (Washington, DC to Wilmington, DE)

• Other miscellaneous disbursements

The total matter cost through closing is therefore estimated at approximately $1,850,000 (fees plus expenses), before applying the $425,000 litigation cost reimbursement that Verdana will pay to CRH under the settlement terms. On a net basis, after the reimbursement, CRH's out-of-pocket litigation costs are estimated at approximately $1,425,000.

A revised fee estimate memorandum reflecting the settlement documentation phase will be provided separately under cover of a letter from Vasquez.

VII. Next Steps and Action Items

The following action items have been identified for the post-mediation settlement documentation phase:

A. Settlement Documentation (March 24 – April 14, 2025)

1. Initial Draft of Settlement Agreement. Calderwood & Harkness will prepare the first draft of the Standstill and Settlement Agreement and circulate it to Whitfield, Nygaard & Doyle LLP and Blackhall & Soren LLP on or before March 24, 2025. The draft will reflect all terms of the settlement framework as described in Section III.D above.

2. Preparation of Exhibits. The following exhibits will be drafted and attached to the settlement agreement:

(a) Modified Restrictive Covenant Terms (specifying the duration, scope, and product category limitations for each individual defendant);

(b) Data Return and Destruction Protocol (specifying the procedures, timelines, certifications, and forensic audit methodology for the return or destruction of all exfiltrated CRH data);

(d) Form of Compliance Monitor Engagement Letter (Aldwyn Compliance Solutions LLC, including scope of monitoring, quarterly reporting requirements, and cost allocation);

(e) Mutual Non-Disparagement Provisions.

3. Negotiation and Finalization. Following circulation of the initial draft, the parties will negotiate the settlement agreement through iterative drafts, with the target of executing the final agreement on or before April 14, 2025. Calderwood & Harkness will manage the drafting process and coordinate comments from WND and Blackhall & Soren.

4. Compliance Monitor Coordination. Calderwood & Harkness will coordinate directly with Aldwyn Compliance Solutions LLC to finalize the engagement letter and monitoring protocol, including the schedule for quarterly compliance reviews and the reporting format.

5. Consent Order Preparation. Calderwood & Harkness will prepare the Stipulation of Settlement and Proposed Consent Order for filing with the Delaware Court of Chancery, incorporating the modified restrictive covenant terms and data-destruction obligations and requesting that the Court retain jurisdiction for enforcement purposes.

B. Equity and Compensation Actions

1. RSU Forfeiture Documentation. Calderwood & Harkness will calculate and document the RSU forfeitures for Rathore ($362,500) and the remaining seven individual defendants ($487,000 in the aggregate). Detailed memoranda will be prepared for each individual defendant, specifying the applicable grant date, vesting schedule, vested and unvested tranches, and the basis for forfeiture.

2. Transfer Agent Coordination. CRH should coordinate with Northland Trust Company, CRH's transfer agent, regarding the cancellation of all unvested RSU awards for the eight individual defendants. Calderwood & Harkness will prepare the necessary instruction letters for CRH's signature.

3. Compensation Committee Notification. Calderwood & Harkness will prepare a memorandum for submission to the CRH Compensation Committee regarding the equity clawback applicable to Rathore under the for-cause clawback provision of her Amended and Restated Employment Agreement, and the forfeitures applicable to the other individual defendants.

4. Board Resolution. Calderwood & Harkness will prepare a draft board resolution for the CRH Board of Directors ratifying the settlement terms and authorizing the execution of the Standstill and Settlement Agreement on behalf of the Company.

C. Corporate and Regulatory Actions

1. Board Notification. CRH should notify Dr. Lorraine Stahl, Chair of the Audit Committee, and the full Board of Directors of the material terms of the settlement. Calderwood & Harkness will prepare a board memorandum summarizing the settlement terms and recommending approval.

2. SEC Disclosure Analysis. Calderwood & Harkness will analyze CRH's disclosure obligations under the federal securities laws. Specifically, we will assess whether the total economic recovery of $10,024,500 requires disclosure under Form 8-K (Item 8.01, Other Events) or as a subsequent event in CRH's Q1 2025 Form 10-Q. This analysis will take into account the materiality threshold applicable to CRH, considering the Company's annual revenue of approximately $6.82 billion and market capitalization of approximately $4.1 billion. Given the relative size of the recovery to CRH's overall financial position, the recovery is unlikely to be quantitatively material, but qualitative materiality factors — including the nature of the underlying dispute, the involvement of senior personnel, and potential investor interest — may warrant disclosure. We will provide our recommendation in a separate memorandum.

3. Draft 8-K Language. If disclosure is recommended, Calderwood & Harkness will prepare draft language for an 8-K filing describing the settlement in appropriate terms.

4. Credit Facility Notification. CRH should notify Keypoint National Bank, N.A., as administrative agent under CRH's $750 million revolving credit facility, of the settlement resolution. The credit agreement contains a material litigation reporting covenant at Section 6.02(c), which requires CRH to provide notice of material developments in pending litigation. Calderwood & Harkness will prepare a draft notification letter for CRH's review and signature.

5. Auditor Coordination. CRH should coordinate with Hargrove & Tillett CPA, PLLC (Denise Wheatley, lead audit partner) regarding the adjustment to the $3,500,000 pre-settlement litigation contingency accrual currently reflected on CRH's balance sheet. Given the settlement terms, the accrual should be reversed and the net recovery should be recorded as an offset to the accrual and/or as other income, consistent with ASC 450. Calderwood & Harkness can provide supporting documentation and analysis to Hargrove & Tillett as needed.

D. Bond Release

Upon entry of the final Consent Order and dissolution of the TRO, CRH should request the discharge of injunction bond No. BSC-2025-TRO-04419 ($2,500,000) from Broadview Surety Corp. (175 Water Street, Suite 2400, New York, NY 10038). Calderwood & Harkness will prepare the necessary application for discharge and coordinate with the Court and Broadview Surety to effect the release.

E. Status Report to Court

Calderwood & Harkness will provide a status letter to Vice Chancellor Zhao on or about March 28, 2025, confirming the parties' progress on the settlement documentation and reaffirming the parties' commitment to the April 14, 2025 target date for filing the Stipulation of Settlement and Proposed Consent Order.

VIII. Risk Assessment and Residual Considerations

The settlement outcome is, in our assessment, highly favorable for CRH. The total economic recovery of $10,024,500 exceeds the pre-mediation settlement range that we discussed with the client during our strategy session on March 15, 2025. The monetary recovery is complemented by robust non-compete and non-solicitation protections that, while narrower than the original contractual terms, cover the three product categories most critical to CRH's competitive position — home goods, seasonal décor, and private-label apparel — which collectively represent the core of CRH's Merchandising Division operations and the focus of Project Ridgeline. These protections are supported by an independent compliance monitor (Aldwyn Compliance Solutions LLC) and a court-enforceable consent order with retained jurisdiction, providing CRH with meaningful enforcement tools.

The settlement avoids the inherent risks of a contested preliminary injunction hearing, where defendants had raised colorable overbreadth arguments that could have resulted in a more aggressive judicial narrowing of the covenants — potentially limiting the non-compete to a single product category or to a shorter duration than what was achieved through the settlement.

Notwithstanding the favorable outcome, we have identified the following residual risks and considerations that warrant ongoing attention:

(1) Compliance Risk During the Covenant Period. There is an inherent risk that one or more defendants may fail to comply fully with the modified non-compete or non-solicitation obligations during the applicable covenant periods. This risk is mitigated by the Aldwyn Compliance Solutions monitoring regime, which includes quarterly verification reviews, and by the Court of Chancery's retained enforcement jurisdiction, which enables CRH to seek enforcement through a contempt proceeding if a breach is detected. We recommend that CRH designate an internal point of contact — ideally within the Legal or Human Resources department — to serve as a liaison with Aldwyn and to escalate any compliance concerns promptly.

(2) Data Dissemination Risk. There is a risk that some or all of the exfiltrated CRH data may have already been reviewed, analyzed, or disseminated within Verdana prior to the data-destruction deadline. The independent forensic audit by Pinnacle Forensics at Verdana's expense (capped at $175,000) will provide a degree of assurance regarding the destruction of stored data, but it cannot fully eliminate the risk that information derived from the exfiltrated files has already been incorporated into Verdana's strategic planning or communicated orally to Verdana personnel who are not parties to this action. We will work to ensure that the data-destruction protocol is as comprehensive as possible and includes provisions for the identification and destruction of derivative works.

(3) Enforceability Challenge Risk. Although the likelihood is low, there is a theoretical risk that one or more defendants could seek to challenge the enforceability of the modified covenants at a later date, potentially arguing changed circumstances, undue hardship, or other equitable defenses. This risk is significantly reduced by the defendants' voluntary agreement to the modified terms and by the Court of Chancery's imprimatur via the Consent Order. A court-approved consent order carries substantially greater weight than a privately negotiated covenant, and a defendant who agreed to the terms in a court-approved settlement would face a very high burden in seeking to modify or vacate those terms.

We see no residual exposure to CRH on its affirmative claims. The settlement fully resolves all five counts set forth in the Verified Complaint: (I) breach of restrictive covenant; (II) breach of confidentiality obligations; (III) trade secret misappropriation under the Delaware Uniform Trade Secrets Act; (IV) tortious interference with contractual relations; and (V) civil conspiracy. The settlement does not require CRH to release any claims against non-parties, and it does not impose any restrictions on CRH's future business operations.

IX. Conclusion

In summary, the Cascade Retail Holdings Inc. v. Rathore et al. matter has moved from a phase of active contested litigation to a settlement documentation phase following a successful mediation session on March 18, 2025, and a settlement framework agreement reached on March 20, 2025. The settlement framework provides CRH with total economic recovery of $10,024,500, meaningful non-compete and non-solicitation protections in CRH's most critical product categories, a comprehensive data-return and destruction protocol with independent forensic verification, and a court-enforceable consent order with retained jurisdiction.

The target execution date for the Standstill and Settlement Agreement and filing of the Proposed Consent Order with the Delaware Court of Chancery is April 14, 2025. Calderwood & Harkness will prepare the initial draft of the settlement agreement and circulate it to opposing counsel by March 24, 2025.

I will provide Weekly Update #5 on or before March 28, 2025, covering the status of settlement documentation and any other material developments during the upcoming week.

I am available to discuss this report with you and other members of CRH's leadership team at your convenience. Given the significance of the settlement terms and the need for Board approval, I would recommend scheduling a call with Marcus Langford (CEO) to brief him on the settlement terms in advance of the board presentation. Please let me know if you would like me to arrange a time for that discussion.

Bernard Crawford Partner, Labor & Employment Calderwood & Harkness LLP 1301 K Street NW, Suite 1200 Washington, DC 20005 Telephone: (202) 555-4100

Email: bcrawford@calderwoodharkness.com

Matter No. 1038-00006

PRIVILEGE NOTICE: This communication is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the addressee(s) identified above. This memorandum contains the mental impressions, conclusions, opinions, and legal theories of the attorneys at Calderwood & Harkness LLP and constitutes attorney work product prepared in anticipation of litigation. If you have received this communication in error, please notify the sender immediately by telephone at (202) 555-4100 and destroy all copies of this communication. Any unauthorized review, use, disclosure, or distribution of this communication is strictly prohibited.

Component	Amount
Verdana lump-sum cash payment	$8,750,000
Rathore equity forfeiture	$362,500
Other defendants equity forfeiture (aggregate)	$487,000
Litigation cost reimbursement	$425,000
Total	$10,024,500
Attorney	Role	Office	Hourly Rate	Approx. Hours (Through 3/21/25)
Bernard Crawford	Responsible Partner	Washington, DC	$1,350/hr	160
Renata Vasquez	Billing Partner	Los Angeles	$1,275/hr	120
James Underwood	Lead Associate	Washington, DC	$785/hr	450
Devon Archer	Working Associate	Washington, DC	$625/hr	580

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION — ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 1301 K Street NW, Suite 1200 Washington, DC 20005
March 21, 2025
MEMORANDUM
TO: Theresa Yun-Park, General Counsel, Cascade Retail Holdings Inc.
FROM: Bernard Crawford, Responsible Partner, Labor & Employment
RE: Weekly Litigation Status Report #4 — Cascade Retail Holdings Inc. v. Rathore et al., C.A. No. 2025-0198-MTZ (Del. Ch.)
MATTER NUMBER: 1038-00006
COPY: Renata Vasquez (Billing Partner, Calderwood & Harkness LLP — Los Angeles Office)
I. Executive Summary
This memorandum constitutes the fourth weekly status report covering developments in the above-captioned matter during the period of March 15 through March 21, 2025. This has been an exceptionally active and consequential week in the litigation, marked by several critical developments that have fundamentally altered the trajectory of this matter in a manner highly favorable to Cascade Retail Holdings Inc. ("CRH" or the "Company").
During the reporting period, four significant events occurred. First, on March 15, 2025, the individual defendants and Verdana Commerce Group, Inc. ("Verdana") filed their respective opposition briefs to CRH's motion for a preliminary injunction. Second, on March 18, 2025, all parties participated in a full-day mediation session before the Honorable Philip Ashford (Ret.) at Meridian ADR Services LLC in Wilmington, Delaware (Ref. Meridian-2025-0318-CRH). Third, following two additional days of intensive counsel-to-counsel negotiations, the parties reached agreement on a comprehensive settlement framework on March 20, 2025. Fourth, and most recently, the preliminary injunction hearing originally scheduled for today was adjourned by stipulation, and Vice Chancellor Margaret T. Zhao entered a Consent Interim Order maintaining the status quo during the settlement documentation period.
Our overall assessment is that this outcome is highly favorable for CRH. The settlement framework positions the Company to recover total economic value of approximately $10,024,500 — comprising a lump-sum cash payment of $8,750,000 from Verdana, aggregate equity forfeitures of $849,500, and litigation cost reimbursement of $425,000 — while simultaneously securing modified but meaningful restrictive covenant protections in the three product categories most critical to CRH's competitive position. This recovery exceeds the pre-mediation settlement range discussed with the client and avoids the inherent risks of a contested preliminary injunction hearing, where defendants had raised colorable, if not ultimately meritorious, arguments regarding covenant overbreadth.
The matter is now transitioning from an active litigation phase to a settlement documentation phase. Calderwood & Harkness will prepare the initial draft of the Standstill and Settlement Agreement, and the parties have agreed to use best efforts to finalize all documentation and file a proposed Consent Order with the Court of Chancery on or before April 14, 2025.
The sections below provide a detailed account of each development, along with analysis of the settlement terms, budget status, next steps, and residual risk considerations.
II. Procedural Status
A. Current Posture Before the Court
The case remains pending in the Delaware Court of Chancery under Civil Action No. 2025-0198-MTZ, assigned to Vice Chancellor Margaret T. Zhao. As reported in prior weekly updates, CRH filed its Verified Complaint and Emergency Motion for Temporary Restraining Order on March 5, 2025. Vice Chancellor Zhao granted the TRO on March 7, 2025, restraining all eight individual defendants — Priya Rathore, Kevin Ng, Samantha Orloff, Marcus Haines, Diana Chu, Terrence Whitaker, Elena Sato, and Jordan Pemberton — from commencing employment in merchandising roles at Verdana Commerce Group, Inc. for a period of fourteen days. In connection with the TRO, CRH posted an injunction bond of $2,500,000 through Broadview Surety Corp. (Bond No. BSC-2025-TRO-04419).
Following entry of the TRO, the Court set a preliminary injunction hearing for March 21, 2025 and authorized expedited discovery, as described in our prior weekly reports. The parties engaged in compressed briefing on the preliminary injunction, with CRH's opening brief filed on March 10, 2025 (as reported in Weekly Update #2), the defendants' opposition briefs filed on March 15, 2025, and CRH's reply filed on March 17, 2025.
As of today, March 21, 2025, the preliminary injunction hearing has been adjourned by stipulation of all parties. Vice Chancellor Zhao entered a Consent Interim Order this morning that maintains the status quo during the settlement documentation period and retains the Court's ability to restore the matter to the active calendar if the settlement process fails. The specific terms of the Consent Interim Order are discussed in Section IV below.
B. Defendants' Opposition to Preliminary Injunction (Filed March 15, 2025)
On March 15, 2025, two separate opposition briefs were filed with the Court of Chancery.
Individual Defendants' Brief. Whitfield, Nygaard & Doyle LLP ("WND"), through lead partner Catherine Nygaard and associate Travis Beaumont, filed an opposition memorandum on behalf of all eight individual defendants (collectively, the "Rathore Group"). The WND brief advanced three principal arguments against entry of a preliminary injunction. First, WND argued that the restrictive covenants at issue are overbroad under Delaware's reasonableness standard, pointing specifically to the nationwide geographic scope of the covenants, the eighteen-month duration applicable to Rathore, and the "all retail" non-compete scope that WND characterized as effectively preventing the defendants from working in any segment of the retail industry, regardless of its relationship to CRH's core business. Second, WND contended that certain shorter-tenure employees — specifically Diana Chu and Jordan Pemberton, who were employed at CRH for fewer than three years — did not receive adequate independent consideration for the restrictive covenants contained in their employment agreements, as the covenants were imposed as a condition of continued employment rather than at the time of initial hiring. Third, WND argued that the covenants impose undue hardship on the individual defendants, who would be effectively barred from practicing their profession during the covenant period and would face severe financial consequences.
Verdana's Brief. Blackhall & Soren LLP, through lead partner Gavin Blackhall and senior associate Meredith Lau, filed a separate brief on behalf of Verdana Commerce Group, Inc. Verdana's opposition took a somewhat different tack, focusing on three arguments directed at the tortious interference and trade secret claims. First, Verdana denied tortious interference by asserting that Verdana had no knowledge of the specific terms of the defendants' restrictive covenants at the time it recruited the Rathore Group, and that Verdana's recruitment efforts were directed at identifying talented merchandising professionals in the ordinary course of competitive hiring. Second, Verdana challenged the trade secret classification of certain categories of information that CRH alleged had been exfiltrated, arguing that some of the information — particularly customer segmentation data and general market analytics — constituted general industry knowledge rather than protectable trade secrets under the Delaware Uniform Trade Secrets Act ("DUTSA"). Third, Verdana argued that CRH had failed to demonstrate irreparable harm, contending that any competitive injury could be adequately compensated through monetary damages.
Our Assessment. Having carefully reviewed both opposition briefs, our assessment is that the defendants raised colorable arguments on the overbreadth issue that presented non-trivial risk at a contested preliminary injunction hearing. In particular, the nationwide geographic scope and the breadth of the "all retail" non-compete language were the aspects most vulnerable to challenge under Delaware precedent. Courts in the Court of Chancery have historically been willing to blue-pencil overbroad covenants, and there was a genuine possibility that Vice Chancellor Zhao would have narrowed the covenants significantly at the preliminary injunction stage, potentially limiting the non-compete to specific product categories or geographic regions. That said, the defendants' arguments on consideration and undue hardship were considerably weaker, and the strength of the data exfiltration evidence — coupled with the coordinated nature of the departure and the evidence of Verdana's direct recruitment through the Dietrich/Westbrook dinner — significantly bolstered CRH's position on irreparable harm and bad faith, factors that would have weighed heavily in the Court's equitable balancing.
C. CRH Reply Brief (Filed March 17, 2025)
On March 17, 2025, Calderwood & Harkness filed Plaintiff's Reply Memorandum in Further Support of its Motion for Preliminary Injunction. The reply brief was designed to address the defendants' principal arguments while reinforcing the strength of CRH's evidentiary position.
The reply brief was accompanied by two new declarations. First, we submitted the Declaration of Sandra Fielding of Aurelian Investigations Group Inc. Ms. Fielding's declaration provided detailed factual findings from Aurelian's investigation, including evidence of the January 6, 2025 dinner meeting at a private dining room at The Standard Grill in New York City between Warren Dietrich (CEO, Verdana), Elliot Westbrook (Managing Partner, Greystone Capital Partners, LP), and Priya Rathore. The declaration also set forth Aurelian's analysis of encrypted messaging exchanges among the members of the Rathore Group during the period of January 13 through 24, 2025, which revealed coordinated discussions regarding the timing of the group's simultaneous departure from CRH and the onboarding process at Verdana. These messaging exchanges, which were recovered during the expedited discovery process, demonstrated a deliberate and coordinated effort to time the departures to maximize competitive harm to CRH.
Second, we submitted the Declaration of Dr. Franklin Oberg of Veltrano Consulting Group LLC, which set forth a preliminary economic damages analysis. Dr. Oberg's declaration referenced CRH's Merchandising Division gross merchandise value ("GMV") of $2.3 billion in fiscal year 2024 and assessed the competitive threat posed by the Rathore Group's collective knowledge of Project Ridgeline — CRH's proprietary strategic initiative to restructure its private-label and seasonal merchandising operations. Dr. Oberg's preliminary analysis estimated that the potential competitive harm to CRH, if the Rathore Group were permitted to deploy their knowledge of Project Ridgeline at Verdana, could range from $15 million to $30 million over the next two fiscal years, depending on the speed and scope of Verdana's competitive response.
The reply brief directly addressed the defendants' overbreadth arguments by emphasizing the targeted nature of the covenants relative to the departing employees' senior roles and their access to highly sensitive proprietary information. We distinguished the Delaware precedent cited by defendants — principally Kodiak Building Partners, LLC v. Adams and FP UC Holdings, LLC v. Hamilton — by demonstrating that those cases involved junior employees with limited access to trade secrets, whereas each member of the Rathore Group held a senior or executive-level position within CRH's Merchandising Division and had direct access to the Company's most competitively sensitive strategic plans.
III. Mediation Session — March 18, 2025
A. Logistics and Participants
The mediation was conducted on March 18, 2025, at the offices of Meridian ADR Services LLC, located at 200 Continental Drive, Suite 310, Wilmington, Delaware 19803. The session was administered under Meridian reference number Meridian-2025-0318-CRH. The Honorable Philip Ashford (Ret.), a former Superior Court judge with extensive experience in employment and trade secret disputes, served as mediator.
The following individuals participated in the mediation:
On behalf of CRH:
• Bernard Crawford, Partner, Calderwood & Harkness LLP
• James Underwood, Associate, Calderwood & Harkness LLP
• Theresa Yun-Park, General Counsel, CRH
• Roland Ashby, Senior Vice President — Human Resources, CRH
On behalf of the Individual Defendants (Rathore Group):
• Catherine Nygaard, Partner, Whitfield, Nygaard & Doyle LLP
• Travis Beaumont, Associate, Whitfield, Nygaard & Doyle LLP
• Priya Rathore (attended in person)
• Kevin Ng, Samantha Orloff, Marcus Haines, Diana Chu, Terrence Whitaker, Elena Sato, and Jordan Pemberton (participated by videoconference)
On behalf of Verdana Commerce Group, Inc.:
• Gavin Blackhall, Partner, Blackhall & Soren LLP
• Meredith Lau, Senior Associate, Blackhall & Soren LLP
• Helen Tsoi, General Counsel, Verdana Commerce Group, Inc. (attended in person)
• Warren Dietrich, CEO, Verdana Commerce Group, Inc. (available by telephone)
B. CRH's Mediation Position
In advance of the mediation, Calderwood & Harkness submitted a confidential mediation statement to Mediator Ashford on March 17, 2025, setting forth CRH's litigation position, evidentiary basis, and settlement parameters. The confidential statement was not shared with opposing parties, consistent with Meridian ADR's standard protocols.
CRH's opening position at the mediation reflected the full scope of relief sought in the Verified Complaint and motion for preliminary injunction. Specifically, CRH's initial demand included: (1) full enforcement of the existing restrictive covenant terms for all eight individual defendants, without modification to duration, geographic scope, or industry scope; (2) monetary damages in the range of $15 million to $20 million, reflecting CRH's estimated harm from trade secret misuse, competitive injury, and the premium Verdana paid to acquire the Rathore Group's CRH-derived knowledge and relationships; (3) full forfeiture of all unvested equity awards held by the individual defendants, as well as clawback of certain vested tranches under applicable for-cause clawback provisions; (4) a requirement that Verdana fund an independent forensic audit of its own systems at its own expense, to verify the destruction of all exfiltrated CRH data; and (5) injunctive relief to be incorporated into a court-enforceable consent order with retained jurisdiction.
CRH's fall-back position — which had been previously approved pursuant to the internal strategy memorandum dated March 15, 2025, and confirmed in an email exchange between Crawford and Yun-Park dated March 16, 2025 — allowed for negotiation of modified covenant durations and geographic or category scope, provided that any such modifications were accompanied by: a substantial monetary payment reflecting the value of the knowledge and relationships the defendants took from CRH; a robust data-return, destruction, and compliance-monitoring regime; and a court-enforceable consent order preserving the Court of Chancery's jurisdiction for enforcement purposes.
C. Mediation Dynamics
Mediator Ashford conducted the mediation through shuttle diplomacy, moving between the parties' respective conference rooms over the course of approximately nine hours, from approximately 9:00 a.m. to 6:00 p.m. The mediator met separately with each party multiple times, conveying proposals and counter-proposals, providing his own assessment of the strengths and weaknesses of each side's position, and working to identify areas of potential agreement.
The initial gap between the parties was substantial. Verdana's opening position, communicated through the mediator, proposed a payment of $2,000,000 and an immediate release of all restrictive covenants binding the eight individual defendants, effectively permitting the Rathore Group to begin working in merchandising roles at Verdana immediately and without limitation. CRH rejected this proposal as wholly inadequate, and we communicated to Mediator Ashford that CRH viewed the opening as insufficiently serious given the strength of CRH's evidentiary position.
As the day progressed, Mediator Ashford identified the key leverage points that each party brought to the negotiation:
CRH's Key Leverage Points:
(1) Data Exfiltration Evidence. The forensic report produced by Pinnacle Forensics LLC (Dr. Rajiv Anand) provided concrete, irrefutable evidence that 14,327 files — approximately 2.8 gigabytes of data — had been exfiltrated from CRH's Aldermere Systems and Pinnacle Health IT environments to personal cloud storage accounts between January 10 and February 4, 2025. The exfiltrated materials included Project Ridgeline strategic presentations, vendor negotiation term sheets, private-label cost models, seasonal buying algorithms, customer segmentation data, and ecommerce assortment analytics. This evidence was devastating to the defendants' position and fundamentally undermined Verdana's argument that it had no knowledge of the specific proprietary information being brought to it.
(2) Pre-Departure Coordination Evidence. Aurelian Investigations Group Inc.'s investigative findings demonstrated that the group's departure was not a series of independent career decisions, but rather a coordinated effort orchestrated through direct recruitment by Verdana's CEO and its PE sponsor. The January 6, 2025 dinner meeting between Dietrich, Westbrook, and Rathore, and the subsequent encrypted messaging exchanges among the Rathore Group members regarding coordinated departure timing, painted a compelling picture of deliberate and coordinated raiding.
(3) Sign-On Bonus Evidence. The aggregate $6,200,000 in sign-on bonuses that Verdana paid to the Rathore Group — $1,500,000 to Rathore individually, and $4,700,000 in the aggregate to the other seven members — demonstrated that Verdana valued the team's CRH-acquired knowledge and relationships at a significant premium, further supporting CRH's argument that the departures were motivated by a desire to appropriate CRH's proprietary assets rather than merely to hire talented individuals.
Defendants' Key Leverage Points:
(1) Overbreadth Arguments. As discussed above, the defendants raised colorable arguments regarding the overbreadth of CRH's restrictive covenants that created genuine risk at a contested preliminary injunction hearing. There was a real possibility that Vice Chancellor Zhao would have narrowed the covenants significantly — and potentially more aggressively than the narrowing reflected in the settlement framework — if the matter proceeded to a hearing.
(2) Public Policy Concerns. WND argued effectively that enforcement of CRH's covenants as written would prevent the defendants from working in their field for periods of twelve to eighteen months, raising potential public policy concerns under Delaware law regarding the enforceability of covenants that effectively bar employees from practicing their profession entirely.
(3) Business Disruption and Mutual Incentive. The prolonged litigation posed risks of significant business disruption not only to CRH and its competitive position, but also to Verdana and its private equity sponsor, Greystone Capital Partners. Greystone Capital Fund VII, LP — which has approximately $8.5 billion in committed capital — acquired a majority stake in Verdana in Q3 2023 for an enterprise value of $2.4 billion. The pending litigation and associated uncertainty were creating disruption to Verdana's onboarding and integration plans, particularly in the merchandising function, which was a key component of Greystone's investment thesis. This dynamic created a mutual incentive to resolve the dispute efficiently.
In the late afternoon session, Mediator Ashford proposed a framework that sought to bridge the remaining gap between the parties. The framework centered on modified covenant terms — with reduced durations and narrowed category scope — coupled with a significant monetary payment by Verdana to CRH, a comprehensive data-return and destruction protocol with independent forensic verification, and a court-enforceable consent order with retained jurisdiction. This framework was broadly acceptable to both sides as a basis for continued negotiation, and the parties agreed to continue counsel-to-counsel discussions following the mediation session to attempt to reach agreement on specific terms.
D. Framework Agreement (March 20, 2025)
Following two additional days of intensive counsel-to-counsel negotiation — conducted primarily through telephone calls and email exchanges between Crawford and Underwood (Calderwood & Harkness) on one side, and Nygaard (WND) and Blackhall (Blackhall & Soren) on the other — the parties reached agreement on a comprehensive settlement framework on March 20, 2025. The framework agreement is memorialized in an exchange of counsel correspondence and will be formalized in a definitive Standstill and Settlement Agreement. The principal terms of the framework are summarized below.
1. Modified Non-Compete Obligations
The non-compete covenants applicable to the individual defendants have been modified as follows:
Priya Rathore: The non-compete period has been reduced from the original eighteen-month term to twelve months, running from February 7, 2025 (Rathore's resignation date) through February 6, 2026. The scope has been narrowed from all retail operations to three specific product categories: home goods, seasonal décor, and private-label apparel. Rathore is free to work at Verdana in other merchandising categories — including, for example, general consumer electronics, sporting goods, or grocery — provided that she does not engage in activities related to the three specified categories during the covenant period.
Other Seven Defendants (Ng, Orloff, Haines, Chu, Whitaker, Sato, Pemberton): The non-compete period has been reduced from the original twelve or eighteen months (varying by individual employment agreement) to a uniform nine-month period, running from February 7, 2025 through November 6, 2025. The scope is limited to the same three product categories: home goods, seasonal décor, and private-label apparel.
These modified non-compete terms represent a meaningful concession from CRH's original position, but they protect the product categories most critical to CRH's competitive position and most closely connected to Project Ridgeline.
2. Non-Solicitation of CRH Employees
All eight individual defendants are bound by an eighteen-month non-solicitation of CRH employees, running from February 7, 2025 through August 6, 2026. This provision prohibits the defendants from directly or indirectly soliciting, recruiting, or inducing any CRH employee to leave the Company's employment. The eighteen-month duration was a key priority for CRH, given the Rathore Group's extensive relationships throughout CRH's Merchandising Division and the risk that they could use those relationships to recruit additional CRH talent to Verdana.
3. Non-Solicitation of CRH Vendors
All eight individual defendants are bound by a twelve-month non-solicitation of CRH's top fifty vendors (ranked by annual spend), running from February 7, 2025 through February 6, 2026. This provision prohibits the defendants from directly or indirectly soliciting or contacting any of the specified vendors for the purpose of diverting business away from CRH or leveraging CRH's proprietary vendor relationship information. CRH will provide the list of its top fifty vendors as an exhibit to the settlement agreement. If the list is appended to any filing with the Court of Chancery, it will be filed under seal to protect CRH's confidential vendor relationships.
4. Data Return and Destruction
All exfiltrated CRH data in the possession, custody, or control of any individual defendant or Verdana is to be returned to CRH or certified as destroyed within ten business days of execution of the Standstill and Settlement Agreement. Each individual defendant will be required to execute a certification under penalty of perjury attesting to the complete return or destruction of all CRH data.
In addition, Verdana has agreed to permit an independent forensic audit of its systems — including all devices, servers, email systems, cloud storage accounts, and collaboration platforms used by or accessible to the individual defendants — by Pinnacle Forensics LLC (Dr. Rajiv Anand, lead forensic examiner). The audit will be conducted at Verdana's sole expense, subject to a cost cap of $175,000. The purpose of the audit is to verify that all exfiltrated CRH data has been identified, returned or destroyed, and that no copies or derivative works remain within Verdana's systems. The forensic audit protocol will be set forth in a detailed exhibit to the settlement agreement.
5. Monetary Terms
The monetary components of the settlement are as follows:
Lump-Sum Settlement Payment. Verdana Commerce Group, Inc. will pay CRH a lump-sum settlement payment of $8,750,000 within thirty days of execution of the Standstill and Settlement Agreement. Payment will be made by wire transfer to an account designated by CRH.
Rathore Equity Forfeiture. Priya Rathore forfeits one hundred percent of her unvested CRH restricted stock units ("RSUs"). Rathore's RSU grant, dated March 15, 2021, had a total value of $725,000 and was subject to four-year ratable annual vesting at twenty-five percent per year. Three tranches vested on March 15, 2022, March 15, 2023, and March 15, 2024, representing seventy-five percent of the total grant ($543,750 vested). The remaining unvested twenty-five percent ($181,250) is forfeited. Additionally, the final vested tranche ($181,250) is subject to clawback under the for-cause clawback provision of Rathore's Amended and Restated Employment Agreement, triggered by her breach of the restrictive covenant obligations. Total Rathore equity forfeiture: $362,500.
Other Defendants Equity Forfeiture. The remaining seven individual defendants forfeit their unvested equity on a pro rata basis, calculated in accordance with the vesting schedules set forth in their respective employment agreements. The aggregate forfeiture for the seven defendants is $487,000.
Total Equity Forfeitures: $849,500 ($362,500 + $487,000).
Litigation Cost Reimbursement. Verdana will reimburse CRH $425,000 toward litigation costs incurred in this matter. This reimbursement is in addition to the lump-sum settlement payment.
Total Economic Recovery to CRH: $10,024,500, comprising:
Each party otherwise bears its own attorneys' fees and costs incurred in connection with this litigation.
6. Compliance Monitor
The parties have agreed to the appointment of Aldwyn Compliance Solutions LLC, located at 1700 Market Street, Suite 2800, Philadelphia, Pennsylvania 19103, as an independent compliance monitor for a period of twelve months from the execution date of the settlement agreement. Aldwyn will conduct quarterly verification of the defendants' adherence to the modified non-compete obligations, non-solicitation obligations, and data-destruction obligations. The compliance monitor will have the authority to request information from all parties, interview relevant personnel, and conduct limited document reviews as necessary to fulfill its verification mandate.
The estimated cost of the compliance monitoring engagement is $360,000, which will be allocated sixty percent to Verdana ($216,000) and forty percent to CRH ($144,000). The engagement terms, scope of monitoring activities, and reporting protocols will be set forth in a detailed Compliance Monitor Engagement Letter, which will be attached as an exhibit to the settlement agreement.
7. Mutual Non-Disparagement
The settlement agreement will include a standard mutual non-disparagement clause binding all parties — CRH, the eight individual defendants, and Verdana — prohibiting any party from making or publishing any statement that disparages, denigrates, or is intended to harm the reputation, business, or prospects of any other party. The non-disparagement obligation will be subject to customary carve-outs for truthful statements made in response to legal process, regulatory inquiries, or governmental investigations, and for statements made in connection with the enforcement of the settlement agreement.
8. Consent Order
The parties have agreed to file a stipulated consent order with the Delaware Court of Chancery that incorporates the modified restrictive covenant terms and data-destruction obligations set forth in the settlement agreement. The consent order will provide that the Court of Chancery retains jurisdiction over the matter for the purpose of enforcing the terms of the settlement agreement and the consent order for the duration of the applicable covenant periods. Upon entry of the consent order, the existing TRO will be dissolved, and the consent order will supersede the TRO and the Consent Interim Order as the operative court order in this matter.
The filing of the consent order is significant because it provides CRH with a direct enforcement mechanism through the Court of Chancery. In the event of any breach of the modified covenants or data-destruction obligations, CRH will be able to seek enforcement through a contempt proceeding rather than being required to commence a new action. This is a substantial benefit, as enforcement through contempt is generally faster and more efficient than initiating new litigation.
IV. Consent Interim Order (March 21, 2025)
With the settlement framework agreed in principle on March 20, 2025, but the detailed settlement documentation not yet completed, the parties filed a Stipulation and Proposed Consent Interim Order with the Court of Chancery this morning, requesting the adjournment of the preliminary injunction hearing that was scheduled for today. Calderwood & Harkness coordinated with WND and Blackhall & Soren to prepare the stipulation and proposed order yesterday evening, March 20, 2025.
Vice Chancellor Zhao entered the Consent Interim Order today, March 21, 2025. The key provisions of the Consent Interim Order are as follows:
(1) The preliminary injunction hearing is adjourned sine die;
(2) The existing status quo is maintained during the settlement documentation period — specifically, the individual defendants shall refrain from commencing employment in merchandising roles at Verdana in the three specified product categories (home goods, seasonal décor, and private-label apparel) pending finalization of the settlement documentation and entry of the Consent Order;
(3) The parties shall use best efforts to finalize the settlement documentation and file a proposed Consent Order on or before April 14, 2025;
(4) Either party may restore the preliminary injunction hearing to the Court's calendar on five business days' written notice to all parties and the Court if settlement negotiations fail or if either party determines in good faith that the settlement is unlikely to be consummated.
It should be noted that the TRO originally entered on March 7, 2025, technically expired by its own terms fourteen days after entry. However, the Consent Interim Order functionally replaces the TRO with equivalent restraints — now limited to the three specified product categories rather than all merchandising roles — under the parties' voluntary stipulation. From a practical standpoint, the Consent Interim Order provides CRH with the same protective effect as the TRO during the settlement documentation period, while narrowing the restraints in a manner consistent with the settlement framework.
V. Expedited discovery Update
As reported in prior weekly updates, the Court authorized expedited discovery during the TRO period. The expedited discovery was conducted between March 12 and March 18, 2025, and covered document production, forensic imaging, and limited interrogatory responses from the individual defendants and Verdana.
The most significant discovery product was the final forensic report prepared by Pinnacle Forensics LLC, under the supervision of Dr. Rajiv Anand. The final report confirmed the scope of data exfiltration that was preliminarily identified during the TRO proceedings. Specifically, the report documented that 14,327 files — totaling approximately 2.8 gigabytes of data — were downloaded from CRH's Aldermere Systems and Pinnacle Health IT environments to personal cloud storage accounts (including personal Hollowell Health IT and Larkspur Technologies accounts) between January 10 and February 4, 2025. The downloads were conducted by multiple members of the Rathore Group, with the largest volumes attributable to Rathore, Ng, and Orloff.
The categories of exfiltrated files include:
• Project Ridgeline strategic presentations and internal memoranda
• Vendor negotiation term sheets and pricing agreements for CRH's top private-label suppliers
• Private-label cost models, including manufacturing cost breakdowns and margin analyses
• Seasonal buying algorithms used by CRH's merchandising team to optimize assortment planning
• Customer segmentation data derived from CRH's proprietary analytics platform
• Ecommerce assortment analytics, including A/B testing results and conversion data
The Pinnacle Forensics report was instrumental during the mediation, as it provided concrete and irrefutable evidence of the scope of data misappropriation. Mediator Ashford specifically noted during the session that the forensic evidence significantly strengthened CRH's position and made it difficult for the defendants to credibly contest the data exfiltration allegations. The defendants did not produce meaningful counter-evidence during the expedited discovery period, and their responses to CRH's interrogatories were largely non-responsive on the topic of data handling, relying primarily on objections and boilerplate privilege assertions.
VI. Staffing and Budget Update
A. Current Staffing
The following attorneys have been staffed on this matter through the reporting period:
The hours reflected above are approximate and are subject to final time entry review and reconciliation. The current staffing model has been effective in managing the compressed timeline associated with the TRO, expedited discovery, preliminary injunction briefing, mediation preparation, and settlement negotiations. As the matter transitions to the settlement documentation phase, we anticipate that the staffing can be somewhat reduced, with Crawford maintaining overall supervision, Underwood leading the drafting of the settlement agreement and consent order, and Archer handling the supporting exhibits and coordination with outside vendors. Vasquez will continue to be available for strategic guidance as needed.
B. Budget Status
Total fees incurred through March 21, 2025, are estimated at approximately $1,200,000. This estimate is subject to final time entry review and reconciliation, which will be completed during the next billing cycle. As previously noted, the compressed timeline and the intensive nature of the TRO proceedings, expedited discovery, preliminary injunction briefing, mediation preparation and attendance, and post-mediation settlement negotiations have resulted in significant time expenditures during this initial phase.
We estimate that the remaining settlement documentation phase — encompassing drafting, negotiating, and finalizing the Standstill and Settlement Agreement and all exhibits, preparing the Stipulation of Settlement and Proposed Consent Order, coordinating with the compliance monitor, and managing the various corporate and regulatory action items identified in Section VII below — will require approximately $400,000 to $500,000 in additional fees.
Total projected fees through closing of the settlement are therefore estimated at approximately $1,600,000 to $1,700,000. In addition, expenses incurred to date total approximately $308,600, encompassing:
• Pinnacle Forensics LLC (forensic investigation and report)
• Aurelian Investigations Group Inc. (fact investigation)
• Veltrano Consulting Group LLC (economic damages analysis)
• Court filing fees and service of process
• Meridian ADR Services LLC (mediation fees)
• Travel expenses (Washington, DC to Wilmington, DE)
• Other miscellaneous disbursements
The total matter cost through closing is therefore estimated at approximately $1,850,000 (fees plus expenses), before applying the $425,000 litigation cost reimbursement that Verdana will pay to CRH under the settlement terms. On a net basis, after the reimbursement, CRH's out-of-pocket litigation costs are estimated at approximately $1,425,000.
A revised fee estimate memorandum reflecting the settlement documentation phase will be provided separately under cover of a letter from Vasquez.
VII. Next Steps and Action Items
The following action items have been identified for the post-mediation settlement documentation phase:
A. Settlement Documentation (March 24 – April 14, 2025)
1. Initial Draft of Settlement Agreement. Calderwood & Harkness will prepare the first draft of the Standstill and Settlement Agreement and circulate it to Whitfield, Nygaard & Doyle LLP and Blackhall & Soren LLP on or before March 24, 2025. The draft will reflect all terms of the settlement framework as described in Section III.D above.
2. Preparation of Exhibits. The following exhibits will be drafted and attached to the settlement agreement:
(a) Modified Restrictive Covenant Terms (specifying the duration, scope, and product category limitations for each individual defendant);
(b) Data Return and Destruction Protocol (specifying the procedures, timelines, certifications, and forensic audit methodology for the return or destruction of all exfiltrated CRH data);
(c) List of Top 50 CRH Vendors (ranked by annual spend; redacted version to be prepared for any court filing);
(d) Form of Compliance Monitor Engagement Letter (Aldwyn Compliance Solutions LLC, including scope of monitoring, quarterly reporting requirements, and cost allocation);
(e) Mutual Non-Disparagement Provisions.
3. Negotiation and Finalization. Following circulation of the initial draft, the parties will negotiate the settlement agreement through iterative drafts, with the target of executing the final agreement on or before April 14, 2025. Calderwood & Harkness will manage the drafting process and coordinate comments from WND and Blackhall & Soren.
4. Compliance Monitor Coordination. Calderwood & Harkness will coordinate directly with Aldwyn Compliance Solutions LLC to finalize the engagement letter and monitoring protocol, including the schedule for quarterly compliance reviews and the reporting format.
5. Consent Order Preparation. Calderwood & Harkness will prepare the Stipulation of Settlement and Proposed Consent Order for filing with the Delaware Court of Chancery, incorporating the modified restrictive covenant terms and data-destruction obligations and requesting that the Court retain jurisdiction for enforcement purposes.
B. Equity and Compensation Actions
1. RSU Forfeiture Documentation. Calderwood & Harkness will calculate and document the RSU forfeitures for Rathore ($362,500) and the remaining seven individual defendants ($487,000 in the aggregate). Detailed memoranda will be prepared for each individual defendant, specifying the applicable grant date, vesting schedule, vested and unvested tranches, and the basis for forfeiture.
2. Transfer Agent Coordination. CRH should coordinate with Northland Trust Company, CRH's transfer agent, regarding the cancellation of all unvested RSU awards for the eight individual defendants. Calderwood & Harkness will prepare the necessary instruction letters for CRH's signature.
3. Compensation Committee Notification. Calderwood & Harkness will prepare a memorandum for submission to the CRH Compensation Committee regarding the equity clawback applicable to Rathore under the for-cause clawback provision of her Amended and Restated Employment Agreement, and the forfeitures applicable to the other individual defendants.
4. Board Resolution. Calderwood & Harkness will prepare a draft board resolution for the CRH Board of Directors ratifying the settlement terms and authorizing the execution of the Standstill and Settlement Agreement on behalf of the Company.
C. Corporate and Regulatory Actions
1. Board Notification. CRH should notify Dr. Lorraine Stahl, Chair of the Audit Committee, and the full Board of Directors of the material terms of the settlement. Calderwood & Harkness will prepare a board memorandum summarizing the settlement terms and recommending approval.
2. SEC Disclosure Analysis. Calderwood & Harkness will analyze CRH's disclosure obligations under the federal securities laws. Specifically, we will assess whether the total economic recovery of $10,024,500 requires disclosure under Form 8-K (Item 8.01, Other Events) or as a subsequent event in CRH's Q1 2025 Form 10-Q. This analysis will take into account the materiality threshold applicable to CRH, considering the Company's annual revenue of approximately $6.82 billion and market capitalization of approximately $4.1 billion. Given the relative size of the recovery to CRH's overall financial position, the recovery is unlikely to be quantitatively material, but qualitative materiality factors — including the nature of the underlying dispute, the involvement of senior personnel, and potential investor interest — may warrant disclosure. We will provide our recommendation in a separate memorandum.
3. Draft 8-K Language. If disclosure is recommended, Calderwood & Harkness will prepare draft language for an 8-K filing describing the settlement in appropriate terms.
4. Credit Facility Notification. CRH should notify Keypoint National Bank, N.A., as administrative agent under CRH's $750 million revolving credit facility, of the settlement resolution. The credit agreement contains a material litigation reporting covenant at Section 6.02(c), which requires CRH to provide notice of material developments in pending litigation. Calderwood & Harkness will prepare a draft notification letter for CRH's review and signature.
5. Auditor Coordination. CRH should coordinate with Hargrove & Tillett CPA, PLLC (Denise Wheatley, lead audit partner) regarding the adjustment to the $3,500,000 pre-settlement litigation contingency accrual currently reflected on CRH's balance sheet. Given the settlement terms, the accrual should be reversed and the net recovery should be recorded as an offset to the accrual and/or as other income, consistent with ASC 450. Calderwood & Harkness can provide supporting documentation and analysis to Hargrove & Tillett as needed.
D. Bond Release
Upon entry of the final Consent Order and dissolution of the TRO, CRH should request the discharge of injunction bond No. BSC-2025-TRO-04419 ($2,500,000) from Broadview Surety Corp. (175 Water Street, Suite 2400, New York, NY 10038). Calderwood & Harkness will prepare the necessary application for discharge and coordinate with the Court and Broadview Surety to effect the release.
E. Status Report to Court
Calderwood & Harkness will provide a status letter to Vice Chancellor Zhao on or about March 28, 2025, confirming the parties' progress on the settlement documentation and reaffirming the parties' commitment to the April 14, 2025 target date for filing the Stipulation of Settlement and Proposed Consent Order.
VIII. Risk Assessment and Residual Considerations
The settlement outcome is, in our assessment, highly favorable for CRH. The total economic recovery of $10,024,500 exceeds the pre-mediation settlement range that we discussed with the client during our strategy session on March 15, 2025. The monetary recovery is complemented by robust non-compete and non-solicitation protections that, while narrower than the original contractual terms, cover the three product categories most critical to CRH's competitive position — home goods, seasonal décor, and private-label apparel — which collectively represent the core of CRH's Merchandising Division operations and the focus of Project Ridgeline. These protections are supported by an independent compliance monitor (Aldwyn Compliance Solutions LLC) and a court-enforceable consent order with retained jurisdiction, providing CRH with meaningful enforcement tools.
The settlement avoids the inherent risks of a contested preliminary injunction hearing, where defendants had raised colorable overbreadth arguments that could have resulted in a more aggressive judicial narrowing of the covenants — potentially limiting the non-compete to a single product category or to a shorter duration than what was achieved through the settlement.
Notwithstanding the favorable outcome, we have identified the following residual risks and considerations that warrant ongoing attention:
(1) Compliance Risk During the Covenant Period. There is an inherent risk that one or more defendants may fail to comply fully with the modified non-compete or non-solicitation obligations during the applicable covenant periods. This risk is mitigated by the Aldwyn Compliance Solutions monitoring regime, which includes quarterly verification reviews, and by the Court of Chancery's retained enforcement jurisdiction, which enables CRH to seek enforcement through a contempt proceeding if a breach is detected. We recommend that CRH designate an internal point of contact — ideally within the Legal or Human Resources department — to serve as a liaison with Aldwyn and to escalate any compliance concerns promptly.
(2) Data Dissemination Risk. There is a risk that some or all of the exfiltrated CRH data may have already been reviewed, analyzed, or disseminated within Verdana prior to the data-destruction deadline. The independent forensic audit by Pinnacle Forensics at Verdana's expense (capped at $175,000) will provide a degree of assurance regarding the destruction of stored data, but it cannot fully eliminate the risk that information derived from the exfiltrated files has already been incorporated into Verdana's strategic planning or communicated orally to Verdana personnel who are not parties to this action. We will work to ensure that the data-destruction protocol is as comprehensive as possible and includes provisions for the identification and destruction of derivative works.
(3) Enforceability Challenge Risk. Although the likelihood is low, there is a theoretical risk that one or more defendants could seek to challenge the enforceability of the modified covenants at a later date, potentially arguing changed circumstances, undue hardship, or other equitable defenses. This risk is significantly reduced by the defendants' voluntary agreement to the modified terms and by the Court of Chancery's imprimatur via the Consent Order. A court-approved consent order carries substantially greater weight than a privately negotiated covenant, and a defendant who agreed to the terms in a court-approved settlement would face a very high burden in seeking to modify or vacate those terms.
We see no residual exposure to CRH on its affirmative claims. The settlement fully resolves all five counts set forth in the Verified Complaint: (I) breach of restrictive covenant; (II) breach of confidentiality obligations; (III) trade secret misappropriation under the Delaware Uniform Trade Secrets Act; (IV) tortious interference with contractual relations; and (V) civil conspiracy. The settlement does not require CRH to release any claims against non-parties, and it does not impose any restrictions on CRH's future business operations.
IX. Conclusion
In summary, the Cascade Retail Holdings Inc. v. Rathore et al. matter has moved from a phase of active contested litigation to a settlement documentation phase following a successful mediation session on March 18, 2025, and a settlement framework agreement reached on March 20, 2025. The settlement framework provides CRH with total economic recovery of $10,024,500, meaningful non-compete and non-solicitation protections in CRH's most critical product categories, a comprehensive data-return and destruction protocol with independent forensic verification, and a court-enforceable consent order with retained jurisdiction.
The target execution date for the Standstill and Settlement Agreement and filing of the Proposed Consent Order with the Delaware Court of Chancery is April 14, 2025. Calderwood & Harkness will prepare the initial draft of the settlement agreement and circulate it to opposing counsel by March 24, 2025.
I will provide Weekly Update #5 on or before March 28, 2025, covering the status of settlement documentation and any other material developments during the upcoming week.
I am available to discuss this report with you and other members of CRH's leadership team at your convenience. Given the significance of the settlement terms and the need for Board approval, I would recommend scheduling a call with Marcus Langford (CEO) to brief him on the settlement terms in advance of the board presentation. Please let me know if you would like me to arrange a time for that discussion.
Bernard Crawford Partner, Labor & Employment Calderwood & Harkness LLP 1301 K Street NW, Suite 1200 Washington, DC 20005 Telephone: (202) 555-4100
Email: bcrawford@calderwoodharkness.com
Matter No. 1038-00006
PRIVILEGE NOTICE: This communication is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the addressee(s) identified above. This memorandum contains the mental impressions, conclusions, opinions, and legal theories of the attorneys at Calderwood & Harkness LLP and constitutes attorney work product prepared in anticipation of litigation. If you have received this communication in error, please notify the sender immediately by telephone at (202) 555-4100 and destroy all copies of this communication. Any unauthorized review, use, disclosure, or distribution of this communication is strictly prohibited.
Component | Amount
Verdana lump-sum cash payment | $8,750,000
Rathore equity forfeiture | $362,500
Other defendants equity forfeiture (aggregate) | $487,000
Litigation cost reimbursement | $425,000
Total | $10,024,500
Attorney | Role | Office | Hourly Rate | Approx. Hours (Through 3/21/25)
Bernard Crawford | Responsible Partner | Washington, DC | $1,350/hr | 160
Renata Vasquez | Billing Partner | Los Angeles | $1,275/hr | 120
James Underwood | Lead Associate | Washington, DC | $785/hr | 450
Devon Archer | Working Associate | Washington, DC | $625/hr | 580

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION — ATTORNEY WORK PRODUCT

MEMORANDUM

MATTER NUMBER: 1038-00006

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