PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
April 10, 2025
MEMORANDUM
FROM: Bernard Crawford, Partner Calderwood & Harkness LLP 1301 K Street NW, Suite 1200 Washington, DC 20005
TO: Board of Directors, Cascade Retail Holdings Inc.
CC: Theresa Yun-Park, General Counsel, Cascade Retail Holdings Inc. Renata Vasquez, Partner, Calderwood & Harkness LLP
RE: Settlement Summary and Recommendation — Cascade Retail Holdings Inc. v. Rathore et al., C.A. No. 2025-0198-MTZ (Del. Ch.)
MATTER NO.: 1038-00006
NOTICE: This memorandum is protected by the attorney-client privilege and constitutes attorney work product prepared in anticipation of litigation and in connection with the provision of legal advice to Cascade Retail Holdings Inc. It is intended solely for the Board of Directors of Cascade Retail Holdings Inc. and should not be disclosed, disseminated, distributed, or copied to any third party without the prior written approval of counsel. Any inadvertent disclosure does not constitute a waiver of any applicable privilege or protection.
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I. Executive Summary
The purpose of this memorandum is to present for the Board's review and approval the material terms of the Standstill and Settlement Agreement (the "Agreement") that has been negotiated among Cascade Retail Holdings Inc. ("CRH" or the "Company"), the eight former merchandising employees led by Priya Rathore (collectively, the "Rathore Group"), and Verdana Commerce Group, Inc. ("Verdana"), in resolution of the action styled Cascade Retail Holdings Inc. v. Rathore et al., C.A. No. 2025-0198-MTZ, currently pending in the Delaware Court of Chancery before Vice Chancellor Margaret T. Zhao (the "Action"). The Agreement represents the culmination of an intensive period of litigation, expedited discovery, mediation, and arms-length negotiation among the parties and their respective counsel since CRH retained Calderwood & Harkness LLP ("C&H") on February 18, 2025.
Calderwood & Harkness LLP recommends that the Board authorize CRH's execution of the Agreement, which is targeted for execution on April 14, 2025, together with the filing of a Stipulation of Settlement and Proposed Consent Order with the Court. As described in detail in this memorandum, we believe the settlement achieves a highly favorable outcome for the Company that appropriately balances the significant strengths of CRH's litigation position against the real risks, costs, and management distractions that continued litigation would entail.
Total Economic Recovery to CRH. The Agreement provides CRH with a total economic recovery of $10,024,500, comprising:
• $8,750,000 in a lump-sum cash settlement payment from Verdana, payable within 30 days of execution;
• $849,500 in equity forfeitures by the departing employees, consisting of $362,500 attributable to Priya Rathore and $487,000 in the aggregate attributable to the remaining seven departing employees; and
• $425,000 in litigation cost reimbursement from Verdana.
Non-Monetary Protections. In addition to the monetary recovery, the Agreement provides CRH with enforceable modified restrictive covenant protections — narrowed in duration and scope from the original contractual terms, but targeted to the three product categories most critical to CRH's competitive position — that will be incorporated into a Court-approved Consent Order subject to the Delaware Court of Chancery's retained enforcement jurisdiction, including the power to hold violators in contempt. The Agreement further provides for a mandatory data return and destruction protocol, verified through an independent forensic audit of Verdana's systems conducted by Pinnacle Forensics LLC at Verdana's expense; the appointment of an independent compliance monitor (Aldwyn Compliance Solutions LLC) for a 12-month term to verify ongoing compliance with all restrictive covenant and data destruction obligations; and mutual non-disparagement provisions among all parties.
The sections that follow set forth the factual background, procedural history, detailed settlement terms, our assessment of the settlement in light of the litigation risks and benefits, the financial impact to CRH, SEC disclosure considerations, closing mechanics and timeline, and our recommendation.
II. Background
A. The Company and Its Merchandising Division
Cascade Retail Holdings Inc. is a Delaware corporation, publicly traded on the Nasdaq Stock Market under the ticker symbol "CRHL," with its principal executive offices located at 2200 Elliott Avenue West, Suite 3400, Seattle, Washington 98119. CRH operates as an omnichannel retail and ecommerce company, maintaining a network of 387 brick-and-mortar retail locations across 34 states, complemented by a robust direct-to-consumer ecommerce platform. For the fiscal year ended December 31, 2024 ("FY2024"), CRH reported consolidated revenue of approximately $6.82 billion. As of February 2025, the Company's market capitalization was approximately $4.1 billion.
CRH's merchandising division is the backbone of the Company's competitive strategy and consumer value proposition. In FY2024, the merchandising division accounted for approximately $2.3 billion in gross merchandise value, making it the single largest driver of CRH's top-line performance and a central pillar of the Company's differentiated market position relative to competitors. The division oversees all aspects of product assortment planning, vendor relationship management, private-label brand development, seasonal buying strategy, and pricing optimization across both the Company's physical retail network and its ecommerce channel.
The merchandising division's strategic importance was further heightened by the October 2024 completion of a five-year strategic category expansion plan known internally as "Project Ridgeline." Project Ridgeline encompassed a comprehensive set of proprietary and highly confidential materials, including vendor negotiation playbooks containing CRH's developed strategies for securing favorable terms from key suppliers; seasonal buying algorithms that reflect years of proprietary data analytics and modeling to optimize purchasing decisions across product categories and geographic markets; private-label sourcing strategies covering the Company's cost structures, factory relationships, and margin targets for its portfolio of owned brands; and a confidential category expansion roadmap identifying new product verticals, market entry timing, and competitive positioning strategies through fiscal year 2029. Project Ridgeline represented a significant investment of management time, analytical resources, and capital, and its contents are among the most competitively sensitive trade secrets within CRH's organization.
B. The Coordinated Departure
On February 7, 2025, at approximately 4:47 PM Pacific Standard Time, eight senior merchandising employees — all members of or reporting to the Company's merchandising leadership team — submitted simultaneous letters of resignation to CRH's Human Resources Department, effective immediately. The coordinated nature of the resignations — identical in timing and substantially similar in format — immediately raised concerns that the departures had been pre-planned and orchestrated. All eight departing employees resigned to join Verdana Commerce Group, Inc., a direct competitor of CRH based in Wilmington, Delaware.
The eight departing employees, collectively referred to throughout this memorandum and in the litigation as the "Rathore Group," are as follows:
1. Priya Rathore — Former Senior Vice President, Merchandising. Ms. Rathore was employed by CRH from June 3, 2019 through her resignation on February 7, 2025, a tenure of approximately five years and eight months. Ms. Rathore was the most senior merchandising executive at CRH and had overall responsibility for the division's strategy, execution, and personnel. She had direct oversight of Project Ridgeline and was one of fewer than ten individuals with full access to the complete Ridgeline materials. Upon departure, Ms. Rathore accepted the role of President, Merchandising & Strategy at Verdana, a newly created position.
2. Derek Linden — Former Vice President, Hardlines Merchandising. Mr. Linden had been employed by CRH for approximately seven years and was responsible for all merchandising activities across the Company's hardlines product categories, including home improvement, tools, outdoor equipment, and related seasonal goods.
3. Sonia Kaczmarek — Former Vice President, Softlines Merchandising. Ms. Kaczmarek had been employed by CRH for approximately five years and oversaw merchandising for the Company's softlines categories, including apparel, footwear, and accessories, encompassing both national brands and CRH's private-label offerings.
4. Amara Osei — Former Director, Private Label Strategy. Ms. Osei had been employed by CRH for approximately four years and led the Company's private-label brand development and sourcing function, with detailed knowledge of cost structures, factory-level pricing, and margin targets for CRH's owned brand portfolio.
5. Brent Halvorsen — Former Director, Seasonal Planning & Analytics. Mr. Halvorsen had been employed by CRH for approximately six years and managed CRH's proprietary seasonal demand modeling and inventory allocation algorithms, including the predictive analytics components of Project Ridgeline.
6. Lucia Fernandez-Gill — Former Director, Vendor Relations (Domestic). Ms. Fernandez-Gill had been employed by CRH for approximately five years and maintained direct relationships with many of CRH's top domestic vendors, with extensive knowledge of negotiated pricing terms, volume rebate structures, and exclusivity arrangements.
7. Nathan Tsao — Former Senior Manager, eCommerce Merchandising. Mr. Tsao had been employed by CRH for approximately three years and was responsible for digital merchandising strategy, including online assortment planning, dynamic pricing, and ecommerce-specific promotional strategies.
8. Kira Johansson — Former Senior Manager, Category Analytics. Ms. Johansson had been employed by CRH for approximately four years and served as a key analyst supporting data-driven category management decisions, with access to CRH's proprietary customer segmentation and purchasing behavior datasets.
All eight departing employees had executed employment agreements with CRH containing restrictive covenant provisions, each of which was governed by Delaware law. The restrictive covenant provisions varied among the employees based on seniority and role, but generally included: non-competition clauses with durations ranging from 12 to 18 months following termination of employment; non-solicitation of employee clauses with durations ranging from 18 to 24 months; non-solicitation of vendor clauses; and comprehensive confidentiality obligations with no temporal limitation. Ms. Rathore's non-competition period was 18 months, the longest among the group. The remaining seven employees had non-competition periods ranging from 12 to 18 months depending on the specific terms of their respective agreements.
C. Verdana Commerce Group and Greystone Capital Partners
Verdana Commerce Group, Inc. is a Delaware corporation and a privately held omnichannel retailer with estimated FY2024 revenue of approximately $1.9 billion. Verdana directly competes with CRH in 28 overlapping product categories, with its most significant overlap in home goods, apparel, and seasonal décor — precisely the categories at the heart of Project Ridgeline. Verdana maintains a growing network of physical retail locations concentrated in the mid-Atlantic, Southeast, and Southwest regions, along with an ecommerce platform that has seen rapid growth in recent years.
Verdana is majority-owned by Greystone Capital Partners, LP, a large-cap private equity firm. Specifically, Greystone Capital Fund VII, LP — a vintage 2022 fund with approximately $8.5 billion in committed capital — acquired a majority equity stake in Verdana in the third quarter of 2023 at an enterprise value of approximately $2.4 billion. Since the Greystone acquisition, Verdana has pursued an aggressive growth strategy, seeking to expand its market presence and product offerings in direct competition with established players such as CRH.
In January 2025, Verdana publicly announced what it described as a "transformational growth initiative" targeting $4 billion in revenue by 2028 — effectively a doubling of its revenue base within four years. The announcement specifically cited planned expansion into several of CRH's strongest and most profitable product categories, including home goods, seasonal décor, and private-label apparel. The timing of this announcement, occurring just weeks before the coordinated departure of the Rathore Group, strongly suggests that Verdana's growth initiative was predicated at least in part on the expected contributions and proprietary knowledge of the recruited CRH employees.
The compensation packages offered by Verdana to the Rathore Group were extraordinarily generous and underscore the competitive significance Verdana placed on acquiring this team. In the aggregate, Verdana offered the Rathore Group sign-on bonuses totaling $6,200,000, with Ms. Rathore alone receiving a sign-on bonus of $1,500,000. Ms. Rathore's total compensation package at Verdana included a base salary of $650,000, an 80% target annual bonus of $520,000, and 1.5% of Verdana's fully diluted equity — an ownership stake that, at the 2023 Greystone acquisition valuation of $2.4 billion, would represent a notional value of approximately $36 million (subject, of course, to vesting and other conditions). The magnitude of these compensation packages is itself probative of the value Verdana expected to derive from the Rathore Group's knowledge of CRH's proprietary strategies and trade secrets.
D. Discovery of Data Exfiltration
Following the coordinated resignations, CRH engaged Pinnacle Forensics LLC, a nationally recognized digital forensics firm, on February 20, 2025, to conduct forensic imaging and analysis of the departing employees' CRH-issued devices, email accounts, and enterprise application access logs. The engagement was led by Dr. Rajiv Anand, Pinnacle Forensics' Managing Director and a recognized expert in enterprise data forensics.
Dr. Anand's forensic analysis confirmed that a total of 14,327 files, representing approximately 2.8 gigabytes of data, were downloaded from CRH's collaboration environment and Quillon Data Systems platform to personal cloud storage accounts controlled by members of the Rathore Group during the period from January 10, 2025 through February 4, 2025 — a window that corresponds almost exactly to the period of pre-resignation planning described below. The exfiltrated materials included, but were not limited to, the following categories of highly confidential and proprietary information:
• Project Ridgeline presentations, including the full strategic category expansion roadmap through FY2029;
• Vendor negotiation term sheets reflecting CRH's proprietary pricing and margin structures with key suppliers;
• Private-label cost models containing factory-level production costs, landed cost calculations, and target margin analyses for CRH's portfolio of owned brands; and
• Customer segmentation data reflecting CRH's proprietary analysis of its customer base, purchasing patterns, and targeted marketing strategies.
The breadth and specificity of the exfiltrated materials leave little doubt that the data was taken deliberately, with the intent to provide Verdana with a competitive advantage derived from CRH's proprietary information. The timing of the downloads — beginning just four days after the January 6, 2025 recruitment dinner discussed below and continuing through the final business day before the coordinated resignations — further corroborates the premeditated nature of the scheme.
E. Evidence of Pre-Planned Recruitment
In parallel with the forensic analysis, CRH engaged Aurelian Investigations Group Inc. on February 21, 2025, to investigate the circumstances surrounding the coordinated recruitment and departure. The investigation was led by Sandra Fielding, a former federal law enforcement agent and Aurelian's Managing Director of Corporate Investigations.
Ms. Fielding's investigation identified a January 6, 2025 private dinner meeting held at a Manhattan restaurant between three attendees: Warren Dietrich, Chief Executive Officer of Verdana Commerce Group; Elliot Westbrook, Managing Partner of Greystone Capital Partners; and Priya Rathore, then still employed as CRH's Senior Vice President of Merchandising. This meeting preceded by approximately one month the coordinated resignations and appears to have been the precipitating event in the recruitment campaign. The participation of Mr. Westbrook — the senior partner at Greystone overseeing the Verdana portfolio investment — underscores the strategic priority that both Verdana and its private equity sponsor placed on recruiting the CRH merchandising team.
Further investigation revealed encrypted messaging exchanges among the members of the Rathore Group during the period from January 13 through January 24, 2025, in which the participants coordinated the timing of their departures and discussed the logistical details of their simultaneous resignations. The messages were recovered through lawful forensic processes during expedited discovery.
Ms. Rathore executed her offer letter with Verdana on January 27, 2025 — three weeks after the recruitment dinner and while she remained actively employed by CRH in a position of significant trust and access to the Company's most sensitive strategic information. The remaining seven members of the Rathore Group signed their respective offer letters with Verdana between January 28 and February 4, 2025. Throughout this period, all eight individuals continued to perform their duties at CRH, accessing and in some cases downloading confidential Company information, without disclosing to CRH their intentions to depart.
III. Procedural History
A. Engagement of Counsel and Advisors
CRH retained Calderwood & Harkness LLP on February 18, 2025, under Matter No. 1038-00006, to represent the Company in connection with the investigation of and litigation arising from the coordinated departure of the Rathore Group. The C&H engagement team is led by Bernard Crawford, Responsible Partner (Washington, DC office), and Renata Vasquez, Billing Partner (Los Angeles office), with James Underwood serving as Lead Associate and Devon Archer serving as Working Associate.
As noted above, CRH engaged Pinnacle Forensics LLC on February 20, 2025, to conduct forensic imaging and data exfiltration analysis, under the direction of Dr. Rajiv Anand. CRH engaged Aurelian Investigations Group Inc. on February 21, 2025, to investigate the recruitment circumstances, under the direction of Sandra Fielding. On March 3, 2025, CRH retained Veltrano Consulting Group LLC, with Dr. Franklin Oberg as lead consultant, to serve as an economic damages expert for purposes of quantifying the harm to CRH arising from the misappropriation of trade secrets and the breach of the departing employees' restrictive covenant obligations. All three engagements were coordinated through C&H and structured to preserve applicable privileges.
B. Pre-Litigation Efforts
Prior to filing suit, C&H issued cease-and-desist letters on February 25, 2025, directed to three categories of recipients: (a) each of the eight departing employees individually, demanding immediate compliance with their restrictive covenant obligations and the return of all CRH confidential information; (b) Verdana Commerce Group, Inc., directed to the attention of Helen Tsoi, Verdana's General Counsel, demanding that Verdana cease its employment of the Rathore Group in roles that would require or facilitate the use of CRH's confidential information and trade secrets; and (c) Greystone Capital Partners, LP, directed to the attention of Elliot Westbrook, Managing Partner, placing Greystone on notice of its portfolio company's tortious conduct and potential liability exposure.
On February 27, 2025, Whitfield, Nygaard & Doyle LLP, led by partner Catherine Nygaard, entered an appearance on behalf of the Rathore Group — all eight individual defendants. On the same date, Blackhall & Soren LLP, led by founding partner Gavin Blackhall, entered an appearance on behalf of Verdana Commerce Group, Inc. The retention of two prominent Delaware litigation firms on behalf of the defendants underscored the seriousness with which Verdana and the Rathore Group viewed CRH's claims.
Counsel engaged in preliminary discussions during the period from February 27 through March 4, 2025, but were unable to reach any resolution or interim agreement that would have avoided the need for emergency litigation.
C. Litigation Filing and TRO
On March 5, 2025, CRH filed a Verified Complaint and a contemporaneous Motion for Temporary Restraining Order and Preliminary Injunction in the Delaware Court of Chancery. The action was assigned to Vice Chancellor Margaret T. Zhao and docketed as C.A. No. 2025-0198-MTZ. The Verified Complaint asserted five counts:
1. Count I — Breach of Restrictive Covenant (against all eight individual defendants), alleging that each defendant's acceptance of employment with Verdana in merchandising-related roles violated the non-competition provisions of their respective employment agreements with CRH;
2. Count II — Breach of Confidentiality Obligations (against all eight individual defendants), alleging that the defendants' exfiltration of 14,327 files of confidential CRH information to personal cloud storage accounts, and the anticipated disclosure or use of that information at Verdana, constituted a material breach of the confidentiality provisions of their employment agreements;
3. Count III — Misappropriation of Trade Secrets (against all eight individual defendants and Verdana Commerce Group, Inc.), brought under the Delaware Uniform Trade Secrets Act, 6 Del. C. §§ 2001–2009 ("DUTSA"), alleging that the exfiltration and anticipated use of CRH's proprietary trade secret materials, including Project Ridgeline, constituted misappropriation within the meaning of the statute;
4. Count IV — Tortious Interference with Contractual Relations (against Verdana Commerce Group, Inc.), alleging that Verdana knowingly and intentionally induced the Rathore Group to breach their contractual obligations to CRH, including their non-competition, non-solicitation, and confidentiality covenants; and
5. Count V — Civil Conspiracy (against all individual defendants and Verdana Commerce Group, Inc.), alleging that the defendants and Verdana engaged in a concerted scheme to deprive CRH of the benefit of its contractual protections and to misappropriate its trade secrets for Verdana's competitive gain.
On March 7, 2025, the Court granted CRH's application for an ex parte Temporary Restraining Order, restraining all eight individual defendants from commencing employment at Verdana Commerce Group in any merchandising-related role for a period of 14 days. Vice Chancellor Zhao's order reflected the Court's preliminary assessment that CRH had demonstrated a likelihood of success on the merits and a threat of imminent irreparable harm. In connection with the TRO, CRH posted an injunction bond in the amount of $2,500,000 through Broadview Surety Corp. (Bond No. BSC-2025-TRO-04419).
D. Expedited discovery and PI Proceedings
The preliminary injunction hearing was scheduled by the Court for March 21, 2025. In the interim period, the Court authorized expedited discovery, which was conducted from March 12 through March 18, 2025. During this compressed discovery period, CRH obtained and produced the Pinnacle Forensics report confirming the scope and nature of the data exfiltration, as well as supporting declarations and documentary evidence from the Aurelian investigation.
On March 15, 2025, the defendants filed their opposition to the preliminary injunction. The defense brief principally argued that CRH's restrictive covenants were overbroad and unenforceable under Delaware's reasonableness standard, contending that the covenants were unreasonable in geographic scope (covering all retail activity nationwide), temporal duration (up to 18 months), and activity restriction (barring employment in any role at any competitor, rather than limiting the restriction to narrowly defined competitive functions). The defendants further argued that the non-competition provisions lacked adequate consideration with respect to certain shorter-tenure employees and that CRH had not demonstrated irreparable harm sufficient to justify injunctive relief.
CRH filed its reply memorandum on March 17, 2025, addressing each of the defendants' enforceability arguments and supporting the reply with declarations from Sandra Fielding of Aurelian Investigations Group (detailing the evidence of pre-planned recruitment and coordinated departure) and Dr. Franklin Oberg of Veltrano Consulting Group (opining on the economic harm to CRH from the loss of its proprietary merchandising strategies and trade secrets, with a preliminary damages estimate in the range of $20 million to $35 million).
E. Mediation and Settlement Framework
On March 18, 2025, three days before the scheduled preliminary injunction hearing, the parties participated in a full-day mediated settlement session before the Honorable Philip Ashford (Ret.) through Meridian ADR Services LLC (Reference No. Meridian-2025-0318-CRH). Judge Ashford, a former Vice Chancellor of the Delaware Court of Chancery with extensive experience in restrictive covenant and trade secret disputes, was selected by agreement of the parties as the mediator.
The mediation session was productive, and a settlement framework was reached on March 20, 2025, following additional telephone conferences among counsel and the mediator. The settlement framework addressed the principal issues in the dispute — the scope and duration of the restrictive covenant protections, monetary compensation to CRH, the disposition of the exfiltrated data, and ongoing compliance oversight — at a level of detail sufficient to permit the parties to adjourn the preliminary injunction hearing.
On March 21, 2025 — the date originally scheduled for the preliminary injunction hearing — the parties filed a joint stipulation adjourning the hearing and requesting that the Court enter a Consent Interim Order maintaining the status quo during the period required to document the settlement. Vice Chancellor Zhao entered the Consent Interim Order on the same date, continuing the restraints on the defendants' employment at Verdana in merchandising roles pending further order of the Court or filing of a Stipulation of Settlement.
The settlement documentation period ran from March 24 through April 11, 2025. During this period, drafts of the Agreement and its exhibits were exchanged among C&H (on behalf of CRH), Whitfield, Nygaard & Doyle LLP (on behalf of the Rathore Group), and Blackhall & Soren LLP (on behalf of Verdana). Four complete drafts of the Agreement were circulated, with extensive negotiations on the precise scope of the modified restrictive covenants, the data destruction protocol, the compliance monitoring terms, and the mechanics of the equity forfeitures. The near-final fourth draft, dated April 8, 2025, reflects the consensus of all parties and is enclosed for the Board's review.
IV. Summary of Settlement Terms
Set forth below is a comprehensive summary of the material terms of the Standstill and Settlement Agreement, as reflected in the near-final fourth draft dated April 8, 2025.
A. Modified Non-Competition Obligations
The Agreement provides for modified non-competition obligations that are narrower in both duration and scope than the original contractual terms, but that target the specific product categories most critical to CRH's competitive position.
Priya Rathore. Ms. Rathore's non-competition period is modified from 18 months to 12 months, running from February 7, 2025 (the date of her resignation) through February 6, 2026. During this period, Ms. Rathore is prohibited from serving in any merchandising, strategy, sourcing, or vendor-management capacity at Verdana or any other competitor of CRH with respect to three specific product categories: (i) home goods, (ii) seasonal décor, and (iii) private-label apparel. The restriction is no longer a blanket prohibition on employment at a competing retailer, but is instead limited to roles involving these three defined categories.
Other Seven Employees. The remaining seven members of the Rathore Group — Linden, Kaczmarek, Osei, Halvorsen, Fernandez-Gill, Tsao, and Johansson — are subject to 9-month non-competition periods, reduced from their original contractual terms (which ranged from 12 to 18 months depending on the individual). The 9-month periods run from February 7, 2025 through November 6, 2025, and are subject to the same category-specific limitation covering home goods, seasonal décor, and private-label apparel.
Rationale for Modification. The narrowing of the non-competition restrictions in both duration and scope reflects a careful balancing of CRH's interests against the realistic litigation risk that the original contractual terms could be found overbroad and unenforceable under Delaware's reasonableness standard. As discussed in Section V.B below, the defendants raised non-trivial arguments that the original covenants — which broadly restricted any employment at any competitor in any capacity — were unreasonably expansive. By narrowing the restrictions to three specific product categories, the modified covenants address these overbreadth arguments while ensuring that CRH retains enforceable protections in the categories that are most competitively sensitive: the home goods, seasonal décor, and private-label apparel categories that formed the core of Project Ridgeline and that overlap directly with Verdana's publicly announced expansion targets. The modified covenants are, in our assessment, more likely to be upheld and enforced by the Court than the original contractual terms would have been.
B. Non-Solicitation of Employees
All eight defendants agree to an 18-month non-solicitation of CRH employees. The non-solicitation period runs from February 7, 2025 through August 6, 2026. The provision prohibits each defendant from directly or indirectly soliciting, recruiting, hiring, or encouraging any employee of CRH to leave the Company's employment or to accept employment or any other engagement with Verdana or any other entity. The 18-month duration aligns with the upper end of the original contractual non-solicitation terms and was not subject to reduction in the settlement negotiations, reflecting the parties' recognition of CRH's legitimate interest in protecting the stability of its workforce during the transition period.
C. Non-Solicitation of Vendors
All eight defendants agree to a 12-month non-solicitation of CRH's top 50 vendors (ranked by annual spend). The non-solicitation period runs from February 7, 2025 through February 6, 2026. The provision prohibits each defendant from directly or indirectly soliciting, diverting, or attempting to divert any business, orders, or commercial relationship away from CRH with respect to the identified vendors. The list of CRH's top 50 vendors is attached as Exhibit C to the Agreement and will be filed under seal with the Court to preserve the confidentiality of CRH's vendor relationships and spend data.
D. Data Return and Destruction
The Agreement establishes a comprehensive data return and destruction protocol, set forth in detail in Exhibit B to the Agreement.
Return or Destruction Obligation. All exfiltrated data — encompassing the 14,327 files identified by Pinnacle Forensics as well as any additional CRH confidential information in the possession, custody, or control of the defendants or Verdana — must be returned to CRH or certified destroyed within 10 business days of the execution of the Agreement. Each individual defendant and Verdana must provide sworn certifications of compliance with the data return and destruction obligations.
Independent Forensic Audit. Verdana has agreed to permit an independent forensic audit of its information systems, devices, and cloud storage environments by Pinnacle Forensics LLC, to be conducted at Verdana's sole expense, with total costs capped at $175,000. The forensic audit is designed to verify that all CRH confidential information has been completely removed from Verdana's systems and that no copies, derivatives, or summaries of the exfiltrated data remain in Verdana's possession. The audit protocol, including scope, methodology, and reporting obligations, is set forth in Exhibit B.
E. Monetary Terms
The monetary components of the settlement are summarized below:
Cash Settlement Payment. Verdana Commerce Group, Inc. shall pay CRH a lump-sum cash settlement payment of $8,750,000, due within 30 calendar days of the execution of the Agreement. Payment shall be made by wire transfer in immediately available funds to an account designated by CRH.
Equity Forfeitures — Priya Rathore. Ms. Rathore shall forfeit equity awards with an aggregate value of $362,500, consisting of:
(a) $181,250 in unvested restricted stock units ("RSUs") under a CRH equity grant dated March 15, 2021. Ms. Rathore's original RSU grant had a total value of $725,000, subject to a four-year ratable annual vesting schedule (25% vesting on each anniversary of the grant date). As of Ms. Rathore's resignation on February 7, 2025, three of the four annual tranches had vested (the first on March 15, 2022; the second on March 15, 2023; and the third on March 15, 2024). The fourth and final tranche, representing $181,250 of the original $725,000 grant, remained unvested and is forfeited under the terms of the Agreement; and
(b) $181,250 in a clawback of the third vested tranche (the final tranche that vested on March 15, 2024) under the for-cause clawback provision of Ms. Rathore's Amended and Restated Employment Agreement dated September 12, 2022. The clawback provision is triggered by a material breach of restrictive covenant obligations, which Ms. Rathore's conduct constitutes.
Equity Forfeitures — Other Seven Employees. The remaining seven members of the Rathore Group shall forfeit equity awards with an aggregate value of $487,000, calculated on an individual basis according to each employee's respective equity grant schedule, vesting status, and the applicable clawback provisions of their employment agreements. The individual forfeiture amounts are set forth in Exhibit A to the Agreement.
Total Equity Forfeitures. The combined equity forfeitures across all eight departing employees total $849,500 ($362,500 + $487,000).
Litigation Cost Reimbursement. Verdana shall reimburse CRH $425,000 toward CRH's litigation costs, including attorneys' fees and expenses incurred in connection with the prosecution of the Action. This reimbursement is payable concurrently with the cash settlement payment.
Total Economic Recovery to CRH. The total economic recovery to CRH under the Agreement is:
Allocation of Attorneys' Fees. Except for the $425,000 litigation cost reimbursement described above, each party shall bear its own attorneys' fees and costs incurred in connection with the Action and the negotiation and documentation of the Agreement.
F. Independent Compliance Monitor
The parties have agreed to the appointment of Aldwyn Compliance Solutions LLC, a Philadelphia-based compliance monitoring firm, as an independent compliance monitor for a term of 12 months commencing on the date of execution of the Agreement.
Scope of Monitoring. The compliance monitor's mandate encompasses quarterly verification of all defendants' compliance with the modified non-competition obligations, the non-solicitation of employees and vendors provisions, and the data return and destruction obligations set forth in the Agreement and the Consent Order. The monitor will have authority to conduct interviews of relevant personnel, review employment records and organizational charts, and request access to systems and documents as reasonably necessary to verify compliance.
Cost. The estimated total cost of the compliance monitoring engagement is $360,000 over the 12-month term. This cost will be shared between Verdana (60%, or $216,000) and CRH (40%, or $144,000). The cost-sharing arrangement reflects the parties' agreement that both sides have a shared interest in the effective implementation of the settlement terms, while recognizing that the primary burden of compliance falls on the defendants and Verdana.
Governing Documents. The terms of the compliance monitoring engagement are set forth in Exhibit D to the Agreement (form of compliance monitor engagement letter) and a separate Compliance Monitoring Protocol annex that addresses reporting cadence, escalation procedures, confidentiality protections, and the process for resolving disputes regarding the monitor's findings.
G. Consent Order and Retained Court Jurisdiction
The modified restrictive covenant terms, data return and destruction obligations, and compliance monitor appointment described above will be incorporated into a Consent Order to be entered by Vice Chancellor Zhao in the Delaware Court of Chancery. The Consent Order mechanism provides CRH with enforcement tools that are meaningfully stronger than those available under a private contractual settlement alone.
Specifically, the Court of Chancery will retain jurisdiction over the Action for the purpose of enforcing the Consent Order, including through contempt proceedings in the event of any violation by the defendants or Verdana. The availability of contempt as a remedy provides a powerful deterrent against non-compliance and eliminates the need for CRH to initiate a separate breach-of-contract action in the event of a violation, which would otherwise entail the delay and expense of new litigation.
Upon successful completion of the 12-month compliance monitoring period — assuming full compliance with all terms of the Consent Order and the Agreement — the parties will file a joint Stipulation for Dismissal with Prejudice, at which time the Court's jurisdiction over the matter will terminate.
H. Mutual Non-Disparagement
The Agreement includes a standard mutual non-disparagement clause, applicable to CRH, each member of the Rathore Group, and Verdana Commerce Group, Inc. The non-disparagement provisions are set forth in Exhibit E to the Agreement. Under these provisions, no party (including their respective officers, directors, employees, and agents) shall make any public statement, written or oral, that disparages, denigrates, or impugns the reputation or business interests of any other party. The non-disparagement obligations are subject to customary carve-outs for truthful statements made in connection with legal proceedings, regulatory inquiries, or as otherwise required by law.
I. Dissolution of TRO and Release of Injunction Bond
Upon entry of the Consent Order by Vice Chancellor Zhao, the existing Temporary Restraining Order issued on March 7, 2025 will be dissolved, as the protections afforded by the Consent Order will supersede the TRO. CRH will then request the discharge of the $2,500,000 injunction bond posted through Broadview Surety Corp. (Bond No. BSC-2025-TRO-04419), which will release the Company from any further obligation under the bond.
V. Assessment of Settlement
A. Strengths of CRH's Litigation Position
CRH entered the settlement negotiations from a position of meaningful strength across several dimensions:
Contractual Clarity. All eight departing employees had executed employment agreements containing clearly drafted restrictive covenant provisions governed by Delaware law. The provisions were specific as to duration, scope of restricted activity, and the categories of protected confidential information. Unlike many restrictive covenant cases, CRH was not burdened by ambiguous contractual language or gaps in the coverage of the applicable restrictions.
Compelling Evidence of Coordination. The evidence of a coordinated, pre-planned departure — including the simultaneous resignations at 4:47 PM on February 7, 2025; the encrypted messaging exchanges among the Rathore Group from January 13 through 24 coordinating departure timing; the January 6 recruitment dinner in New York involving Verdana's CEO and Greystone's Managing Partner; and the sequential signing of Verdana offer letters between January 27 and February 4, 2025 — was unusually powerful and would have been highly persuasive to the Court at a preliminary injunction hearing or trial.
Strong Forensic Evidence. The Pinnacle Forensics analysis documenting the exfiltration of 14,327 files (~2.8 GB) from CRH's systems to personal cloud accounts provided concrete, objective evidence of wrongdoing that went well beyond the typical restrictive covenant dispute. The exfiltrated materials included some of CRH's most competitively sensitive trade secrets, including the full Project Ridgeline materials. This evidence substantially strengthened CRH's DUTSA claims and provided factual support for the conspiracy and tortious interference claims.
Verdana's Public Confirmation. Verdana's own press release on February 14, 2025, publicly confirming the hiring of the Rathore Group, constituted a significant evidentiary admission. The press release described the hiring in terms that emphasized the team's merchandising expertise and its expected contributions to Verdana's growth strategy, supporting CRH's claims that Verdana knowingly and deliberately induced the breach of the restrictive covenants and sought to benefit from the Rathore Group's access to CRH's proprietary information.
TRO Already Granted. Vice Chancellor Zhao's decision to grant the ex parte TRO on March 7, 2025, while not dispositive, was a meaningful signal of the Court's preliminary assessment that CRH had demonstrated a likelihood of success on the merits and a threat of imminent irreparable harm. TRO applications in the Court of Chancery are subject to a demanding standard, and the Court's willingness to grant the restraining order — notwithstanding the significant impact on the individual defendants' employment — reflected the strength of CRH's showing.
B. Risks and Uncertainties
Notwithstanding the strengths of CRH's position, the litigation presented material risks and uncertainties that weighed in favor of a negotiated resolution:
Enforceability of Restrictive Covenants. The defendants' principal argument — that CRH's restrictive covenants were overbroad and unenforceable under Delaware's reasonableness standard — posed a non-trivial risk of partial or full invalidation at the preliminary injunction stage or at trial. Delaware courts apply a fact-intensive reasonableness analysis to restrictive covenants, evaluating whether the restrictions are reasonable in temporal duration, geographic scope, and the breadth of restricted activity, and whether they are necessary to protect a legitimate business interest. The original covenants' broad restriction on any employment at any competitor in any capacity created vulnerability to an argument that the covenants exceeded the scope necessary to protect CRH's legitimate interests. While we believe CRH had strong arguments in favor of enforceability, the outcome of this analysis was not certain, and an adverse ruling at the preliminary injunction hearing could have significantly weakened CRH's bargaining position.
Adequacy of Consideration. With respect to the shorter-tenure employees — particularly Nathan Tsao (3 years) and Kira Johansson (4 years) — the defendants were positioned to argue that the consideration provided for the restrictive covenants at the time of hiring was insufficient or that continued employment did not constitute adequate consideration under Delaware law. While the law in this area is generally favorable to employers, the argument could have complicated the enforceability analysis for these individuals.
Damages Quantification. Trade secret damages are inherently difficult to quantify, particularly in the absence of direct evidence that Verdana had already used or benefited from the exfiltrated information. While Dr. Oberg's preliminary damages estimate ranged from $20 million to $35 million, this estimate reflected the potential economic harm from the loss of CRH's competitive advantage, not proven actual damages. At trial, CRH would have borne the burden of establishing a causal link between the misappropriation and specific, quantifiable harm to CRH — a burden that, while not insurmountable, would have introduced significant uncertainty into the damages calculus.
Cost and Management Distraction. Continued litigation through trial would have entailed substantial additional cost — we estimate an additional $3 million to $5 million in legal fees and expert costs — and would have consumed significant attention from CRH's senior management during a period when the merchandising division requires focused leadership. Interim SVP Martin Cho has been managing the division's operations since the Rathore Group's departure, but the demands of trial preparation, depositions, and expert discovery would have further strained management resources during a critical transition period.
Risk of Public Disclosure. Prolonged litigation carried the risk that highly sensitive details of Project Ridgeline and CRH's proprietary merchandising strategies could become part of the public record through court filings, deposition transcripts, or trial testimony. While the Court of Chancery is generally receptive to sealing orders in trade secret cases, no seal is absolute, and the risk of even partial disclosure of these materials in a public forum was a concern.
C. Why Settlement Is in CRH's Interest
In light of the foregoing, C&H believes that the proposed settlement is in CRH's best interest for the following reasons:
Favorable Economic Outcome. The total economic recovery of $10,024,500 substantially exceeds the pre-settlement litigation contingency accrual of $3,500,000, which was established in Q1 2025 based on a range-of-outcomes analysis reflecting both the strengths of CRH's claims and the risks of an adverse enforceability ruling. The recovery represents a significant and certain economic benefit to the Company, as opposed to the uncertain and potentially protracted path to a trial judgment.
Targeted Covenant Protections. While the modified restrictive covenants are narrower than the original contractual terms, they are specifically targeted to the three product categories — home goods, seasonal décor, and private-label apparel — that are most competitively sensitive and that overlap most directly with Verdana's announced growth initiative. In our assessment, the modified covenants provide CRH with more meaningful and enforceable protection in the areas that matter most than the original broader covenants would have provided, given the risk that the original covenants could have been struck down as overbroad.
Superior Enforcement Mechanisms. The incorporation of the settlement terms into a Court-approved Consent Order, with retained Court of Chancery jurisdiction for enforcement through contempt proceedings, provides CRH with enforcement tools that are superior to those that would have been available through a judgment obtained after full trial. A breach of the Consent Order can be prosecuted through a streamlined contempt proceeding before Vice Chancellor Zhao, without the need for CRH to initiate and prosecute a separate breach-of-contract action.
Data Destruction with Verification. The mandatory data return and destruction protocol, verified through an independent forensic audit of Verdana's systems at Verdana's expense, directly addresses the immediate competitive harm posed by the data exfiltration. The forensic audit by Pinnacle Forensics — the same firm that identified the exfiltration — provides a high degree of assurance that all CRH confidential information will be removed from Verdana's possession.
Ongoing Compliance Oversight. The 12-month independent compliance monitoring engagement provides CRH with a structured mechanism for ongoing verification of the defendants' and Verdana's compliance during the most critical period of the competitive transition — the period when the risk of misuse of CRH's proprietary information is highest.
Avoidance of Adverse Precedent. An adverse ruling on the enforceability of CRH's restrictive covenants — particularly a published opinion from the Court of Chancery — could have established negative precedent that would undermine the enforceability of similar restrictive covenant provisions in CRH's employment agreements with hundreds of other employees. Settlement avoids this risk entirely.
Refocus on Business Operations. Settlement enables CRH to move past this dispute and refocus its management attention and resources on rebuilding the merchandising division's leadership team, executing on the Project Ridgeline strategy, and maintaining the Company's competitive position in the marketplace.
VI. Financial Impact Summary
Inflows to CRH
The settlement generates the following inflows to the Company:
Costs Borne by CRH
CRH's costs in connection with the investigation, litigation, and settlement are as follows:
Calderwood & Harkness LLP Legal Fees and Expenses. Estimated total C&H legal fees and expenses through the closing of the settlement are approximately $1,850,000, broken down as follows:
The expenses figure includes amounts paid to Pinnacle Forensics LLC, Aurelian Investigations Group Inc., and Veltrano Consulting Group LLC for their respective engagements.
CRH Share of Compliance Monitor Cost. CRH's 40% share of the estimated $360,000 compliance monitoring cost is $144,000.
Net Recovery
After deducting CRH's estimated costs, the net economic recovery to the Company is as follows:
Litigation Contingency Accrual
The pre-settlement Q1 2025 litigation contingency accrual of $3,500,000, which was established to reflect a range-of-outcomes analysis for the pending litigation, should be revised in consultation with Hargrove & Tillett CPA, PLLC — CRH's outside auditors, with lead engagement partner Denise Wheatley — to reflect the favorable settlement outcome. The accrual may be reversed or adjusted as appropriate under ASC 450 (Contingencies) and any applicable gain contingency recognition standards.
Credit Agreement Reporting
CRH is subject to certain reporting obligations under its $750 million revolving credit facility with Keypoint National Bank, N.A., as administrative agent. Pursuant to Section 6.02(c) of the Credit Agreement, which requires notification to the administrative agent of any material litigation developments, a notification will be submitted to Keypoint National Bank confirming the settlement resolution and certifying that the matter does not constitute or give rise to a continuing Material Adverse Effect (as defined in the Credit Agreement).
VII. SEC Disclosure Considerations
A separate memorandum dated April 9, 2025, prepared by C&H in consultation with CRH's General Counsel, Theresa Yun-Park, analyzes in detail whether the settlement of the Action requires or warrants disclosure under the federal securities laws. The key considerations are summarized here for the Board's reference.
Quantitative Analysis. Measured against CRH's FY2024 consolidated revenue of $6.82 billion and its approximate $4.1 billion market capitalization as of February 2025, the total settlement value of $10,024,500 falls below the quantitative materiality thresholds typically applied by the SEC and courts — generally in the range of 5% to 10% of net income, total assets, or other relevant financial metrics. On a purely quantitative basis, the settlement is unlikely to be considered material.
Qualitative Analysis. However, the SEC's materiality framework — as articulated in SAB No. 99 and related guidance — requires consideration of qualitative factors in addition to quantitative thresholds. Several qualitative factors weigh in favor of voluntary disclosure in this case:
• The departures were already publicly known, having been confirmed by Verdana's February 14, 2025 press release, and the filing of the Action in the Court of Chancery is a matter of public record;
• The dispute involves allegations of trade secret misappropriation that, if true, could have a material impact on CRH's competitive position and future earnings in its merchandising division;
• The settlement includes significant non-monetary terms — including modified restrictive covenants, a compliance monitor, and data destruction obligations — that may be of interest to investors evaluating CRH's ability to protect its proprietary assets and retain key personnel; and
• Failure to disclose a favorable settlement resolution that reverses a previously accrued $3.5 million litigation contingency could itself raise questions about the completeness of CRH's periodic disclosures.
Preparation of Disclosure Materials. In light of these considerations, draft 8-K disclosure language has been prepared and is available for the Board's review. The draft describes the settlement at a high level without disclosing competitively sensitive details (such as the Project Ridgeline materials, the vendor list, or specific covenant terms). A decision on the timing and scope of any SEC disclosure should be coordinated between Theresa Yun-Park and Dr. Lorraine Stahl, Chair of the Audit Committee, with input from C&H.
VIII. Closing Mechanics and Timeline
Target Execution Date
The target execution date for the Agreement is April 14, 2025. The Agreement requires the signatures of 10 parties: CRH (through an authorized officer), each of the eight individual defendants, and Verdana Commerce Group, Inc.
Filings Upon Execution
Promptly following execution of the Agreement, the following filings and submissions will be made:
• Stipulation of Settlement and Proposed Consent Order will be filed with the Delaware Court of Chancery for Vice Chancellor Zhao's review and entry;
• Motion to Dissolve TRO will be filed upon entry of the Consent Order, requesting dissolution of the March 7, 2025 Temporary Restraining Order; and
• Joint letter to Vice Chancellor Zhao transmitting the filing and requesting a conference (if necessary) to address any questions regarding the Consent Order.
Post-Execution Actions
The following actions will be taken following execution of the Agreement:
Monitoring Period
The 12-month compliance monitoring period will run from April 14, 2025 through April 14, 2026. During this period, Aldwyn Compliance Solutions LLC will conduct quarterly compliance reviews and report its findings to the parties and, as appropriate, to the Court.
Key Covenant Expiration Dates
The following dates mark the expiration of the modified restrictive covenant obligations:
• November 6, 2025: Expiration of the 9-month non-competition obligations for the seven non-Rathore employees (Linden, Kaczmarek, Osei, Halvorsen, Fernandez-Gill, Tsao, and Johansson). Following this date, these individuals will be free to serve in merchandising roles at Verdana, subject to the continuing non-solicitation and confidentiality obligations.
• February 6, 2026: Expiration of Priya Rathore's 12-month non-competition obligation. Also the expiration date for the 12-month vendor non-solicitation obligation applicable to all eight defendants.
• August 6, 2026: Expiration of the 18-month employee non-solicitation obligation applicable to all eight defendants.
Dismissal
A Stipulation for Dismissal with Prejudice will be filed at the conclusion of the 12-month compliance monitoring period, contingent on full compliance by all defendants and Verdana with the terms of the Consent Order and the Settlement Agreement. If the compliance monitor identifies a material violation during the monitoring period, CRH reserves the right to pursue enforcement through contempt proceedings before Vice Chancellor Zhao prior to any dismissal.
IX. Recommendation
Based on the foregoing analysis, and having carefully considered the strengths of CRH's litigation position, the risks and uncertainties inherent in continued litigation, the total economic recovery achieved, and the non-monetary protections secured through the Agreement, Calderwood & Harkness LLP recommends that the Board of Directors authorize the officers of Cascade Retail Holdings Inc. to execute the Standstill and Settlement Agreement and all related documents on terms substantially consistent with those described in this memorandum.
The proposed settlement achieves a total economic recovery of $10,024,500 — nearly three times the pre-settlement litigation contingency accrual — while securing enforceable, Court-backed protections for CRH's most competitively sensitive trade secrets and business relationships during the critical transition period. The settlement avoids the substantial costs, management distraction, and litigation risks associated with continued prosecution of the Action through trial, and eliminates the possibility of an adverse ruling on covenant enforceability that could have broader implications for CRH's employment agreements with its workforce.
A draft Board resolution ratifying the settlement terms, authorizing the equity forfeitures, and empowering designated officers to execute the Agreement and related documents has been prepared by C&H and is enclosed for the Board's consideration. The draft resolution is dated April 14, 2025, corresponding to the target execution date, and may be adopted by the Board at any time on or before that date.
Counsel is available at the Board's convenience to answer any questions the Board may have regarding the terms, risks, or execution mechanics of the Agreement, including by telephone or in person prior to or at the Board's next regularly scheduled or special meeting. We can be reached through the contact information set forth below.
X. Enclosures / Attachments Referenced
The following documents are enclosed with or accompany this memorandum for the Board's review:
1. Standstill and Settlement Agreement — Fourth Draft (Near-Final), dated April 8, 2025
2. Exhibit A: Modified Restrictive Covenant Terms (setting forth the modified non-competition, non-solicitation, and confidentiality obligations applicable to each of the eight individual defendants, with individual equity forfeiture calculations)
3. Exhibit B: Data Return and Destruction Protocol (setting forth the procedures for return, destruction, and certification of all CRH confidential information, and the scope and methodology of the independent forensic audit)
4. Exhibit C: List of Top 50 CRH Vendors by Annual Spend (Redacted) (identifying the vendors subject to the 12-month non-solicitation obligation, to be filed under seal)
5. Exhibit D: Form of Compliance Monitor Engagement Letter — Aldwyn Compliance Solutions LLC (setting forth the terms of the compliance monitor's engagement, including scope, reporting obligations, and fee schedule)
6. Exhibit E: Mutual Non-Disparagement Provisions (setting forth the non-disparagement obligations applicable to CRH, the Rathore Group, and Verdana)
7. Proposed Consent Order (to be filed with the Delaware Court of Chancery upon execution of the Agreement)
8. Draft Board Resolution — Ratification of Equity Forfeiture and Settlement Terms (dated April 14, 2025)
9. Memorandum re: SEC Disclosure Considerations, dated April 9, 2025