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

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

MEMORANDUM

April 9, 2025

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

FROM: James Underwood, Calderwood & Harkness LLP

RE: SEC Disclosure Considerations — Settlement of Cascade Retail Holdings Inc. v. Rathore et al., C.A. No. 2025-0198-MTZ (Del. Ch.)

MATTER NO.: 1038-00006

CC: Bernard Crawford, Renata Vasquez, Devon Archer

I. Executive Summary

You have asked us to analyze whether the proposed settlement of the covenant-enforcement and trade-secret litigation currently pending in the Delaware Court of Chancery — Cascade Retail Holdings Inc. v. Rathore et al., C.A. No. 2025-0198-MTZ — requires disclosure by Cascade Retail Holdings Inc. ("CRH" or the "Company") (Nasdaq: CRHL) under applicable federal securities laws. Specifically, this memorandum addresses two disclosure questions: (a) whether CRH is required or should elect to file a Current Report on Form 8-K with the U.S. Securities and Exchange Commission (the "SEC") upon execution of the settlement; and (b) whether and how the settlement should be disclosed and reflected as a subsequent event in CRH's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2025 ("Q1 2025").

The parties are targeting execution of the Standstill and Settlement Agreement (the "Settlement Agreement") on April 14, 2025. Based on the terms negotiated to date, the settlement provides CRH with an aggregate economic recovery of approximately $10,024,500, consisting of a lump-sum cash payment from Verdana Commerce Group, Inc. ("Verdana"), equity forfeitures by the individual defendants, and litigation cost reimbursement, together with significant non-monetary protections including modified restrictive covenants, data-destruction protocols, and an independent compliance monitoring arrangement.

Our overall conclusion is as follows: While the aggregate economic recovery of approximately $10,024,500 may fall below quantitative materiality thresholds when measured against CRH's $6.82 billion annual revenue (fiscal year 2024) and approximately $4.1 billion market capitalization, the qualitative factors surrounding this settlement — including the substantial public awareness of the underlying dispute, the competitive significance of the merchandising division at issue, and the nature of the claims (trade secret misappropriation, coordinated employee departure involving an SVP-level executive and seven senior merchandising professionals) — counsel in favor of voluntary disclosure via a Current Report on Form 8-K under Item 8.01 ("Other Events") and appropriate discussion and recognition in CRH's Q1 2025 Form 10-Q. This memorandum sets forth the analysis supporting that recommendation in detail.

II. Background — Summary of the Litigation and Settlement

A. The Underlying Dispute

In early February 2025, eight senior merchandising employees of CRH, led by former Senior Vice President of Merchandising Priya Rathore, resigned from the Company in a coordinated departure. Each of the departing employees had occupied senior roles within CRH's merchandising division, which generated approximately $2.3 billion in gross merchandise value ("GMV") during fiscal year 2024. The eight individuals — collectively referred to in the litigation as the "Rathore Group" — left CRH to accept positions at Verdana Commerce Group, Inc., a direct competitor of CRH in the retail and e-commerce space. Verdana publicly announced these hires via a press release issued on February 14, 2025, in which Verdana's Chief Executive Officer characterized the additions as "transformative for Verdana's next chapter in category-defining retail innovation."

Upon investigation, CRH discovered evidence indicating that the departures had been orchestrated over a period of months and that certain members of the Rathore Group had accessed and retained proprietary information belonging to CRH, including elements of "Project Ridgeline" — CRH's confidential long-range merchandising strategy — as well as proprietary vendor playbooks, seasonal buying algorithms, private-label sourcing strategies, and the Company's five-year category expansion roadmap. CRH also determined that Verdana's private equity sponsor, Greystone Capital Partners, LP, acting through its Greystone Capital Fund VII, LP ($8.5 billion in committed capital), had funded aggregate sign-on bonuses of approximately $6.2 million to incentivize the Rathore Group's departure from CRH.

On March 5, 2025, CRH filed a Verified Complaint in the Delaware Court of Chancery before Vice Chancellor Margaret T. Zhao, captioned Cascade Retail Holdings Inc. v. Rathore et al., C.A. No. 2025-0198-MTZ. The Verified Complaint asserted five causes of action:

1. Breach of restrictive covenant agreements (against all eight individual defendants);

2. Breach of confidentiality and non-disclosure obligations (against all eight individual defendants);

3. Misappropriation of trade secrets under the Delaware Uniform Trade Secrets Act, 6 Del. C. § 2001 et seq. ("DUTSA") (against all eight individual defendants and Verdana);

4. Tortious interference with contractual relations (against Verdana); and

5. Civil conspiracy (against all defendants).

On March 7, 2025, the Court granted CRH's application for a Temporary Restraining Order ("TRO"), enjoining the individual defendants from using or disclosing CRH's proprietary information and requiring the immediate return of any CRH materials in their possession. In connection with the TRO, CRH was required to post an injunction bond in the amount of $2,500,000, which was obtained through Broadview Surety Corp. (Bond No. BSC-2025-TRO-04419).

Importantly, the underlying dispute has been the subject of significant public attention since its inception. Verdana's February 14, 2025 press release brought the personnel departures to the attention of the market. The subsequent filing of the Verified Complaint and the entry of the TRO are matters of public record in the Delaware Court of Chancery. Industry publications and retail-sector analysts have followed the dispute with interest, given the seniority of the departing employees and the competitive dynamics between CRH and Verdana.

B. Settlement Terms

Following expedited discovery and negotiations facilitated by the Court's case management order, the parties reached a framework agreement on March 20, 2025. A Consent Interim Order was entered by Vice Chancellor Zhao on March 21, 2025, formalizing the standstill while documentation of the comprehensive settlement was finalized during the period from March 24 through April 11, 2025. The Settlement Agreement, in substantially final form, provides for the following terms:

Parties. The Settlement Agreement is among CRH, the eight individual defendants (Priya Rathore, and the seven other former CRH merchandising employees), and Verdana Commerce Group, Inc.

Monetary Recovery. The total economic recovery to CRH under the Settlement Agreement is $10,024,500, broken down as follows:

The lump-sum cash settlement payment of $8,750,000 is payable by Verdana to CRH within thirty (30) days of execution of the Settlement Agreement. The equity forfeitures by Ms. Rathore include both the cancellation of $181,250 in unvested restricted stock units ("RSUs") that would otherwise have continued to vest under her original equity award agreements, and a $181,250 clawback of the final vested tranche of RSUs that had been released to her upon vesting, pursuant to the for-cause clawback provision contained in CRH's Amended and Restated Equity Incentive Plan (effective January 1, 2023). The aggregate equity forfeitures by the remaining seven individual defendants ($487,000) similarly reflect a combination of unvested RSU cancellations and clawback recoveries under the applicable plan provisions.

Non-Monetary Terms. The settlement includes the following non-monetary provisions, which are of significant competitive importance to CRH:

• Modified Restrictive Covenants: Ms. Rathore has agreed to a twelve-month non-competition covenant running through February 6, 2026. The remaining seven individual defendants have agreed to nine-month non-competition covenants running through November 6, 2025. In each case, the non-competition obligations are limited in scope to three specified product categories in which CRH maintains significant market share and proprietary sourcing relationships.

• Employee Non-Solicitation: All eight individual defendants have agreed to eighteen-month employee non-solicitation covenants running through August 6, 2026, prohibiting each defendant from soliciting, recruiting, or inducing any current CRH employee to terminate his or her employment with CRH.

• Vendor Non-Solicitation: All eight individual defendants have agreed to twelve-month vendor non-solicitation covenants covering CRH's top fifty (50) vendors (as identified on a confidential schedule annexed to the Settlement Agreement), prohibiting the defendants from interfering with or attempting to disrupt CRH's vendor relationships during the restricted period.

• Data Return and Destruction Protocol: The Settlement Agreement requires all individual defendants and Verdana to return to CRH, and certify the destruction of, all CRH proprietary information in their possession, custody, or control. Compliance with this obligation is to be verified by a forensic audit conducted by Pinnacle Forensics LLC, an independent digital forensics firm. The cost of the forensic audit is capped at $175,000 and is to be borne entirely by Verdana.

• Independent Compliance Monitor: The Settlement Agreement provides for the appointment of Aldwyn Compliance Solutions LLC as an independent compliance monitor for a twelve-month period. The compliance monitor will oversee the individual defendants' and Verdana's compliance with the modified restrictive covenants, non-solicitation obligations, and data-destruction protocol. The total cost of the compliance monitor engagement is $360,000, to be split 60/40 between Verdana ($216,000) and CRH ($144,000).

Consent Order and Continuing Jurisdiction. The Settlement Agreement contemplates the entry of a Consent Order by Vice Chancellor Zhao in the Delaware Court of Chancery, pursuant to which the Court will retain jurisdiction over the matter for purposes of enforcing the terms of the settlement. This jurisdictional retention provides CRH with a meaningful enforcement mechanism in the event of any breach by the individual defendants or Verdana.

C. CRH's Prior Litigation Contingency Accrual

In the ordinary course of preparing its financial statements for Q1 2025 (the fiscal quarter ended March 31, 2025), CRH accrued $3,500,000 as a litigation contingency liability in connection with this matter. This accrual was established under ASC 450-20 (formerly SFAS No. 5) on the basis that, as of March 31, 2025, a loss contingency was deemed probable and estimable — specifically, CRH estimated that it would incur at least $3,500,000 in legal fees, bond costs, and related expenses in prosecuting the action through a preliminary injunction hearing and, potentially, trial.

With the execution of the Settlement Agreement, the factual predicate for this accrual will change materially. The settlement represents a net favorable outcome for CRH: the total economic recovery of $10,024,500 substantially exceeds the $3,500,000 contingency accrual. The accrual will need to be reversed, and the net settlement gain recognized, in the Q1 2025 financial statements, as discussed in greater detail in Section IV.B below.

III. Form 8-K Disclosure Analysis

A. Overview of 8-K Reporting Obligations

Under the SEC's rules, a registrant is required to file a Current Report on Form 8-K within four (4) business days following the occurrence of specified triggering events enumerated in the form. The purpose of Form 8-K is to ensure that the investing public is promptly informed of material developments affecting the registrant. See Regulation S-K, 17 C.F.R. § 229 et seq.; Form 8-K, General Instruction B.1. In addition to the mandatory triggering events, Form 8-K permits registrants to make voluntary disclosures of events that the registrant deems to be of importance to its security holders, even if such events do not fall within one of the mandatory reporting items.

We have reviewed the items enumerated in Form 8-K to identify those that could potentially apply to the execution of the Settlement Agreement. The potentially applicable items include:

• Item 1.01 — Entry into a Material Definitive Agreement

• Item 2.03 — Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement

• Item 7.01 — Regulation FD Disclosure

• Item 8.01 — Other Events

We address each potentially applicable item below, with particular attention to Items 1.01 and 8.01, which present the most significant analytical questions in this context. We note at the outset that Item 2.03 is not triggered here because the Settlement Agreement does not create a direct financial obligation of CRH (CRH is the payee, not the payor, of the principal monetary obligations), and any CRH obligations under the agreement (e.g., the $144,000 share of compliance monitor costs) do not rise to the level of materiality required by Item 2.03. Similarly, Item 7.01 would apply only if CRH intends to make selective disclosures of material nonpublic information to analysts or investors in connection with the settlement; our recommendation, as discussed in Section V.A below, is that CRH avoid any such selective disclosures and instead time all external communications to coincide with or follow the 8-K filing.

B. Item 1.01 — Entry into a Material Definitive Agreement

Item 1.01 of Form 8-K requires disclosure when a registrant enters into a "material definitive agreement not made in the ordinary course of the registrant's business." The instruction to Item 1.01 defines a "material definitive agreement" as an agreement that "provides for obligations that are material to and enforceable against the registrant, or rights that are material to the registrant." Item 1.01 requires disclosure of the date of the agreement, a brief description of the material terms and conditions, and identification of the parties.

The threshold question under Item 1.01 is whether the Settlement Agreement constitutes a "material definitive agreement" within the meaning of the rule. The Settlement Agreement is plainly not made in the ordinary course of CRH's business — CRH is a retail holding company, and the resolution of trade secret and non-compete litigation through a negotiated settlement agreement is not an everyday occurrence in CRH's business operations. The operative question, therefore, is whether the agreement is "material."

Quantitative Analysis. The aggregate economic recovery to CRH under the Settlement Agreement is $10,024,500. Measured against CRH's key financial metrics, this amount is relatively modest:

• As a percentage of CRH's fiscal year 2024 revenue ($6.82 billion): approximately 0.15%;

• As a percentage of CRH's approximate market capitalization ($4.1 billion): approximately 0.24%;

• As a percentage of CRH's merchandising division GMV ($2.3 billion): approximately 0.44%.

Under the traditional quantitative materiality framework applied in the securities law context, an item is generally considered quantitatively material if it represents approximately 5% or more of a key financial metric (such as revenue, net income, total assets, or market capitalization). See SEC Staff Accounting Bulletin No. 99 (discussing the limitations of relying exclusively on quantitative benchmarks, but acknowledging their widespread use as a starting point). All of the foregoing quantitative ratios fall well below the 5% threshold. Standing alone, the monetary terms of the Settlement Agreement do not appear to cross the quantitative materiality threshold.

CRH's obligations under the Settlement Agreement are similarly modest in quantitative terms. CRH's primary financial obligation is its 40% share of the compliance monitor costs ($144,000), together with the indirect cost of returning the $2,500,000 injunction bond upon entry of the Consent Order. Neither of these obligations is material to CRH's financial condition.

Qualitative Analysis. Notwithstanding the quantitative analysis, the SEC has consistently cautioned that materiality cannot be assessed solely by reference to numerical thresholds. See TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976) (information is material if there is "a substantial likelihood that a reasonable shareholder would consider it important in making an investment decision"); SEC Staff Accounting Bulletin No. 99 (identifying qualitative factors that may render a quantitatively small item material). Several qualitative factors could arguably bring the Settlement Agreement within the scope of Item 1.01:

• The Settlement Agreement protects CRH's proprietary merchandising strategies, including Project Ridgeline, which are central to the competitive positioning of CRH's $2.3 billion merchandising division;

• The modified restrictive covenants impose meaningful competitive restrictions on the departing employees and, indirectly, on Verdana, CRH's principal competitor in the relevant product categories;

• The dispute involved the departure of a senior vice president and seven other senior employees, implicating CRH's human capital management and organizational stability;

• The involvement of Greystone Capital Partners, a prominent private equity firm, adds a dimension of competitive intensity to the dispute; and

• The data-destruction and compliance monitoring provisions create ongoing operational obligations for CRH over the next twelve months.

Recommendation. On balance, we conclude that disclosure under Item 1.01 is not strictly required based on the quantitative analysis. The monetary terms of the Settlement Agreement represent a fraction of a percent of CRH's relevant financial metrics, and CRH's obligations under the agreement are de minimis. However, we note that the qualitative factors present a close question, particularly given the competitive significance of the merchandising division and the public profile of the dispute. If CRH elects to disclose the settlement (as we recommend below under Item 8.01), the practical significance of the Item 1.01 analysis is diminished, because the settlement terms will be publicly disclosed in any event.

C. Item 8.01 — Other Events

Item 8.01 of Form 8-K permits a registrant to report, on a voluntary basis, events that the registrant "deems of importance to security holders." Unlike Items 1.01 through 7.01, Item 8.01 does not impose a mandatory reporting obligation; rather, it provides a vehicle for registrants to make timely voluntary disclosures of developments that, while not strictly required, are nevertheless of interest and importance to the market.

We recommend that CRH file a voluntary Current Report on Form 8-K under Item 8.01 disclosing the settlement in summary form. Several factors support this recommendation:

• Public Nature of the Dispute. The underlying dispute has been a matter of public knowledge since Verdana's February 14, 2025 press release announcing the hire of the Rathore Group. The filing of the Verified Complaint and the entry of the TRO are matters of public record in the Delaware Court of Chancery. Market participants — including sell-side analysts covering CRH and institutional investors holding CRHL stock — are aware of the dispute and may have factored it into their assessment of CRH's competitive position and risk profile. The resolution of the dispute is a natural follow-on development that the market will expect CRH to address.

• Potential Analyst and Investor Inquiries. CRH's next quarterly earnings call is expected to occur in mid-May 2025 in connection with the filing of the Q1 2025 Form 10-Q. It is highly likely that analysts will inquire about the status of the litigation and the merchandising leadership transition. Proactive disclosure through a Form 8-K filing in advance of the earnings call allows CRH to control the narrative and provide a complete and accurate account of the settlement on its own terms.

• Competitive Significance. CRH's merchandising division generated $2.3 billion in GMV in fiscal year 2024 and is a core driver of CRH's growth strategy. The settlement protects CRH's proprietary strategies, including Project Ridgeline, and imposes meaningful restrictive covenants on the departing employees. From a qualitative standpoint, a reasonable investor would likely consider the resolution of the dispute — and the protections CRH obtained through the settlement — to be important information.

• Resolution of Litigation Contingency Accrual. The settlement resolves the previously accrued $3,500,000 litigation contingency with a net favorable outcome. The reversal of this accrual and recognition of the net settlement gain will be reflected in CRH's Q1 2025 financial statements, as discussed in Section IV.B below. Proactive disclosure of the settlement in a Form 8-K filing provides appropriate context for the financial statement adjustments that will appear in the 10-Q.

• Securities Class Action Risk Mitigation. Proactive, voluntary disclosure of the settlement reduces the risk that CRH could face allegations — in a potential securities class action or SEC enforcement context — that the Company failed to timely disclose a material event. While we have concluded that the settlement is not quantitatively material, the reputational and competitive significance of the dispute creates a heightened risk profile that is best managed through transparent disclosure.

Recommendation. We recommend that CRH file a voluntary Current Report on Form 8-K under Item 8.01 promptly following execution of the Settlement Agreement. The Form 8-K should disclose the settlement in summary form, referencing the following key elements: (i) the fact that CRH has entered into a settlement resolving the litigation; (ii) the fact that the settlement provides for monetary recovery to CRH; (iii) the modified restrictive covenant obligations imposed on the individual defendants; (iv) the data-destruction protocols, including the independent forensic audit; and (v) the appointment of an independent compliance monitor for a twelve-month period. The appropriate level of detail to be included in the Form 8-K is discussed further in Section III.D below.

D. Level of Detail in 8-K Disclosure

A separate but important question concerns the level of detail that CRH should include in the 8-K disclosure regarding the monetary and non-monetary terms of the settlement. This analysis requires balancing several considerations.

Monetary Terms. CRH must determine whether to disclose specific monetary figures — such as the $8,750,000 lump-sum cash payment from Verdana and the $10,024,500 aggregate recovery — or to describe the settlement in more general terms (e.g., "monetary recovery in favor of CRH"). The following considerations are relevant:

• Regulation S-K Requirements. If CRH were reporting the Settlement Agreement as a material definitive agreement under Item 1.01, it would be required to describe the "material terms and conditions" of the agreement, which would likely include the monetary amounts. Under Item 8.01, however, CRH has somewhat greater discretion regarding the level of detail to include, because Item 8.01 is a voluntary disclosure vehicle.

• Confidentiality Provisions. The Settlement Agreement, as currently drafted, contains confidentiality provisions restricting the parties' public disclosure of the specific financial terms. However, the agreement includes a carve-out permitting disclosures required by applicable law, including disclosures required or permitted under federal securities laws and the rules of the Nasdaq Stock Market. We recommend that CRH confirm with Verdana's counsel (Morgan Chen, Davis Sunderland LLP) that the filing of a Form 8-K disclosing the settlement terms in summary form falls within this carve-out.

• Competitive Sensitivity. Excessive detail regarding the monetary terms of the settlement — particularly the dollar amounts of the equity forfeitures and cost reimbursements — could provide Verdana or other competitors with strategic intelligence regarding CRH's internal compensation structures, litigation cost exposure, and settlement negotiation posture. While this concern is not dispositive, it weighs in favor of disclosing the monetary recovery in general terms rather than providing a line-item breakdown.

Non-Monetary Terms. With respect to the non-monetary terms of the settlement, CRH should disclose the general nature of the modified restrictive covenants (non-compete, non-solicitation), the data-destruction protocol, and the compliance monitoring arrangement, without disclosing the precise category definitions, vendor lists, or other competitively sensitive details that are set forth in the confidential schedules to the Settlement Agreement.

Recommendation. We recommend that CRH disclose the material terms of the settlement in summary form in the Form 8-K. This should include either the specific aggregate monetary recovery amount or a general description of the recovery (e.g., "aggregate monetary recovery in excess of $10 million"), depending on the outcome of the confidentiality carve-out analysis. The disclosure should describe the general nature of the modified restrictive covenants — including the duration and scope of the non-compete and non-solicitation obligations, without specifying the precise product category definitions or vendor lists — and should reference the compliance monitoring arrangement. Draft 8-K language is being prepared separately and will be circulated under separate cover, dated April 11, 2025, for review by Ms. Yun-Park and the Company's in-house securities counsel.

IV. Form 10-Q Disclosure Analysis (Q1 2025)

A. Timing Considerations

CRH's fiscal quarter ended on March 31, 2025. As a large accelerated filer, CRH is required to file its Quarterly Report on Form 10-Q within forty (40) days after the end of the fiscal quarter. See Rule 13a-13 under the Securities Exchange Act of 1934; General Instruction A.1 to Form 10-Q. CRH's Q1 2025 Form 10-Q is therefore expected to be filed on or about May 10, 2025 (forty days after March 31, 2025).

The Settlement Agreement is targeted for execution on April 14, 2025 — fourteen days after the close of the fiscal quarter. This timing means that the settlement will occur after the balance sheet date (March 31, 2025) but before the expected filing of the Q1 2025 Form 10-Q (approximately mid-May 2025), making it a post-balance-sheet event that must be evaluated under the applicable accounting standards for subsequent events.

B. ASC 855 — Subsequent Events Analysis

Under Accounting Standards Codification Topic 855 ("ASC 855"), Subsequent Events, a reporting entity is required to evaluate events that occur after the balance sheet date but before the financial statements are issued (or, for non-SEC filers, available to be issued). ASC 855 distinguishes between two types of subsequent events:

• Type I (Recognized) Subsequent Events: Events that provide additional evidence about conditions that existed at the date of the balance sheet, including estimates inherent in the process of preparing financial statements. Type I subsequent events require adjustment of the financial statements to reflect the new information.

• Type II (Nonrecognized) Subsequent Events: Events that provide evidence about conditions that did not exist at the date of the balance sheet but arose subsequent to that date. Type II subsequent events do not require adjustment of the financial statements but may require disclosure in the notes to the financial statements.

The settlement of the Rathore litigation on April 14, 2025 constitutes a Type I (recognized) subsequent event under ASC 855-10. The conditions giving rise to the settlement existed as of the balance sheet date (March 31, 2025). Specifically:

• The litigation was filed on March 5, 2025, well before the balance sheet date;

• The TRO was entered on March 7, 2025;

• The settlement framework was agreed upon on March 20, 2025 — eleven days before the balance sheet date;

• The Consent Interim Order formalizing the standstill was entered by Vice Chancellor Zhao on March 21, 2025;

• During the period from March 24 through April 11, 2025, the parties were engaged solely in the documentation of the settlement terms — the substantive agreement had been reached before the balance sheet date; and

• The only post-balance-sheet activity was the finalization of documentation and formal execution, not the negotiation or agreement on material terms.

Because the settlement provides additional evidence about conditions that existed at the balance sheet date, the Q1 2025 financial statements should be adjusted to reflect the settlement. This is consistent with ASC 855-10-25-1, which provides that an entity shall recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet.

Financial Statement Impact. The following adjustments should be reflected in CRH's Q1 2025 financial statements:

1. Reversal of Litigation Contingency Accrual. The $3,500,000 litigation contingency accrual established in Q1 2025 should be reversed in full, as the settlement outcome is favorable to CRH and no further loss contingency exists.

2. Recognition of Net Settlement Gain. The net gain from the settlement should be recognized. The calculation of the net gain will require coordination with CRH's accounting team and outside auditors, but the preliminary components are as follows:

• Total economic recovery: $10,024,500

• Less: Calderwood & Harkness legal fees allocable to the matter (estimated at approximately $1,850,000 through settlement execution)

• Less: CRH's share of compliance monitor costs ($144,000)

• Less: Any other settlement-related expenses (e.g., CRH's internal legal and administrative costs, Broadview Surety bond premium)

The precise net gain figure will depend on the final accounting for all allocable costs, but it is expected to be a net positive figure on the order of $8,000,000 or more, before tax effects.

3. Coordination with Outside Auditors. CRH should promptly engage Hargrove & Tillett CPA, PLLC, CRH's outside independent registered public accounting firm (lead audit partner: Denise Wheatley), to review the proposed accounting treatment and ensure that the subsequent event recognition is appropriately reflected in the Q1 2025 interim financial statements. This coordination should occur as early as practicable — ideally within one week of settlement execution — to ensure that any questions or issues are resolved well in advance of the 10-Q filing date.

C. MD&A and Legal Proceedings Disclosures

Beyond the financial statement adjustments discussed above, the Q1 2025 Form 10-Q will require narrative disclosure of the settlement in several sections.

Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A). Regulation S-K, Item 303, requires MD&A to discuss "any known trends or uncertainties that have had or that are reasonably likely to have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations." The settlement of the Rathore litigation is a significant event affecting CRH's merchandising division — the Company's largest business unit — and should be discussed in the MD&A section of the Q1 2025 Form 10-Q. The MD&A discussion should address:

• The resolution of the litigation and the general terms of the settlement, including the monetary recovery and the modified restrictive covenants;

• The competitive significance of the settlement in protecting CRH's proprietary merchandising strategies;

• The ongoing compliance monitoring arrangement and its expected impact on operations over the next twelve months; and

• The financial statement impact, including the reversal of the litigation contingency accrual and the recognition of the net settlement gain.

Part II, Item 1 — Legal Proceedings. Part II, Item 1 of Form 10-Q requires disclosure of material pending legal proceedings, including developments since the last periodic report. If CRH disclosed the Rathore litigation as a pending legal proceeding in any prior filing (including in its Annual Report on Form 10-K for fiscal year 2024, if applicable, or in any prior Form 8-K), the Q1 2025 Form 10-Q should update that disclosure to reflect the settlement and the entry of the Consent Order retaining Court jurisdiction for enforcement purposes.

Part II, Item 1A — Risk Factors. CRH should evaluate whether updates to its risk factor disclosures are warranted in light of the settlement. In particular, CRH should consider whether its existing risk factors adequately address:

• The risk of employee attrition and coordinated departures, particularly among senior merchandising and strategy personnel;

• The risk of trade secret misappropriation and the adequacy of CRH's information security and access controls;

• The competitive dynamics in CRH's core merchandising segment, including the presence of well-capitalized competitors backed by private equity sponsors; and

• The risk that CRH's restrictive covenant agreements may prove difficult to enforce, or may require costly litigation to defend.

To the extent that CRH's existing risk factors do not adequately address these topics, CRH should consider adding or updating risk factors in the Q1 2025 Form 10-Q to provide investors with a current and complete picture of the Company's risk profile.

V. Additional Securities Law Considerations

A. Regulation FD

Regulation FD (17 C.F.R. § 243.100 et seq.) prohibits issuers from selectively disclosing material nonpublic information to certain enumerated categories of recipients — including securities analysts, institutional investment managers, and holders of the issuer's securities — unless the disclosure is made simultaneously to the public (in the case of intentional disclosures) or promptly thereafter (in the case of non-intentional disclosures).

The terms of the Settlement Agreement — including the specific monetary recovery, the modified restrictive covenants, and the compliance monitoring arrangement — constitute nonpublic information that could be material to CRH's security holders. CRH must therefore ensure that no selective disclosure of these settlement terms occurs to analysts, institutional investors, or other market participants prior to the public filing of the Form 8-K.

This consideration is particularly important in the present context because analysts covering CRH have been following the Rathore litigation and may contact CRH's investor relations department or management seeking updates on the status of the dispute. If such inquiries are received, CRH personnel should respond by stating only that the Company will provide an update at the appropriate time through its public filings, without disclosing any details of the settlement.

Recommendation. CRH should time any investor or analyst communications regarding the settlement — including any press release, investor relations statement, or other public communication — to coincide with or follow the filing of the Form 8-K. CRH's investor relations team should be briefed on the Regulation FD implications and instructed to refer all inquiries regarding the settlement to a designated spokesperson who is aware of the disclosure timing.

B. Insider Trading Considerations

Until the settlement is publicly disclosed through the filing of the Form 8-K, knowledge of the settlement terms constitutes material nonpublic information ("MNPI") within the meaning of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Any person in possession of this MNPI is prohibited from trading in CRH's securities (Nasdaq: CRHL) until the information has been publicly disseminated and the market has had a reasonable opportunity to absorb it.

The following CRH insiders are known to have knowledge of the settlement terms and should be restricted from trading CRH securities until after public disclosure:

• Marcus Langford, Chief Executive Officer

• Theresa Yun-Park, General Counsel

• Roland Ashby, Chief People Officer

• Martin Cho, Interim Senior Vice President of Merchandising

• Dr. Lorraine Stahl, Chair of the Audit Committee of the Board of Directors

• Other members of the Board of Directors who were briefed on the settlement in connection with the Board's or the Audit Committee's oversight of the litigation

Recommendation. CRH should confirm that its insider trading policy and any applicable blackout or trading restriction windows cover the period through and following the filing of the Form 8-K. If the Company's existing trading window restrictions do not cover this period, CRH should implement a special blackout period or trading restriction notice for all individuals with knowledge of the settlement terms. CRH's compliance function — whether housed within the General Counsel's office or in a separate compliance department — should coordinate the issuance and tracking of these restrictions.

C. Credit Agreement Reporting

Separate from the SEC disclosure obligations analyzed in this memorandum, CRH maintains a $750 million senior unsecured revolving credit facility (the "Revolving Credit Facility"), administered by Keypoint National Bank, N.A. as administrative agent, pursuant to an Amended and Restated Credit Agreement dated as of September 15, 2022 (as subsequently amended). Section 6.02(c) of the Revolving Credit Facility contains a material litigation reporting covenant that requires CRH to notify the administrative agent promptly upon becoming aware of the settlement or resolution of any litigation that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect (as defined in the Credit Agreement) on the Company or its subsidiaries.

While we do not believe that the settlement of the Rathore litigation rises to the level of a Material Adverse Effect under the Credit Agreement (given the favorable outcome and the relatively modest monetary amounts involved), prudence dictates that CRH provide the required notification to Keypoint National Bank. A notification letter addressed to Keypoint is being prepared under separate cover and is expected to be transmitted on April 14, 2025, concurrent with the execution of the Settlement Agreement.

The SEC disclosure analysis set forth in this memorandum is independent of, and in addition to, CRH's notification obligations under the Revolving Credit Facility. The two disclosure regimes involve different standards, different timing requirements, and different recipients, and compliance with one does not satisfy the obligations under the other.

VI. Materiality Assessment — Summary

Having analyzed the relevant SEC disclosure obligations and accounting standards in the preceding sections, we summarize below our overall materiality assessment of the Settlement Agreement.

A. Quantitative Analysis

The following table summarizes the quantitative materiality analysis:

All quantitative ratios fall well below the typical 5% bright-line threshold that is commonly (though not exclusively) used as a starting point for materiality assessments in the securities law context. The settlement is not quantitatively material standing alone. Even when measured against narrower financial metrics — such as Q1 2025 net income or operating income — the settlement recovery, while non-trivial, does not approach the levels at which quantitative materiality would be clearly established.

Conclusion: The settlement is not quantitatively material when viewed in isolation.

B. Qualitative Analysis

Notwithstanding the quantitative analysis, several qualitative factors weigh in favor of treating the settlement as sufficiently significant to warrant disclosure. As noted above, the Supreme Court and the SEC have recognized that a purely quantitative approach to materiality is insufficient and that qualitative factors must also be considered. See TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438 (1976); Basic Inc. v. Levinson, 485 U.S. 224 (1988); SEC Staff Accounting Bulletin No. 99.

Factors Weighing in Favor of Materiality:

• Core Business Impact. The dispute involves CRH's core merchandising division, which is responsible for $2.3 billion in annual GMV and is a central pillar of the Company's growth strategy. The settlement protects CRH's competitive positioning in this critical business unit.

• Trade Secret and Proprietary Information Protection. The settlement secures the return and destruction of CRH's most sensitive proprietary information, including elements of Project Ridgeline (the Company's long-range merchandising strategy), proprietary vendor playbooks, seasonal buying algorithms, private-label sourcing strategies, and CRH's five-year category expansion roadmap. The protection of this information is of strategic importance to CRH's competitive position.

• Public Profile of the Dispute. The dispute has been a matter of public knowledge since Verdana's February 14, 2025 press release. The litigation and TRO are reflected in publicly available court filings. Market participants are aware of the dispute, and the absence of disclosure regarding its resolution could itself raise questions.

• Coordinated Senior-Level Departure. The departure of eight senior employees, including an SVP-level executive, in a coordinated move to a direct competitor is an unusual and noteworthy event that implicates CRH's human capital management and organizational resilience.

• Involvement of Prominent PE Sponsor. The involvement of Greystone Capital Partners, LP — and specifically the payment of $6.2 million in aggregate sign-on bonuses by Greystone Capital Fund VII, LP to incentivize the departures — adds a dimension of competitive intensity and strategic significance to the dispute that a reasonable investor would find relevant.

• Ongoing Compliance Monitoring. The twelve-month independent compliance monitoring arrangement creates an ongoing operational framework for overseeing the individual defendants' and Verdana's compliance with the settlement terms, which will have continuing relevance to CRH's competitive posture during the monitoring period.

• Human Capital and Retention Risk. The dispute and its resolution may be relevant to investor assessments of CRH's ability to retain key talent, particularly in its merchandising function. Human capital disclosures have been an area of increasing focus for the SEC and for institutional investors in recent years.

Factors Weighing Against Materiality:

• Favorable Outcome. The settlement is favorable to CRH: the Company is receiving a net monetary recovery, modified restrictive covenants, data protection measures, and ongoing compliance monitoring. There is no adverse financial impact to CRH from the settlement.

• Modest Monetary Amounts. The absolute dollar amounts involved in the settlement, while not insignificant, are modest relative to CRH's overall financial profile.

• Operational Continuity. CRH's merchandising operations have continued without material disruption under the interim leadership of Vice President Martin Cho. The Company has not reported any adverse operational impacts resulting from the departures.

Conclusion: The qualitative and quantitative factors present a mixed picture. However, when the qualitative factors are weighed together — particularly the competitive importance of the merchandising division, the public profile of the dispute, the strategic significance of the trade secret protections, and the proactive risk management benefits of disclosure — we conclude that the qualitative factors tip the balance in favor of treating the settlement as sufficiently significant to warrant voluntary disclosure.

VII. Recommendations

Based on the foregoing analysis, we make the following recommendations:

1. File a Voluntary 8-K Under Item 8.01. CRH should file a voluntary Current Report on Form 8-K under Item 8.01 ("Other Events") promptly following execution of the Settlement Agreement. The target filing date should be on or before April 18, 2025 — within four (4) business days of the April 14, 2025 target execution date — consistent with the ordinary 8-K filing timeline. The Form 8-K should disclose the settlement in summary form, including the general nature of the monetary recovery, the modified restrictive covenant obligations, the data-destruction protocols, and the compliance monitoring arrangement. Draft 8-K language is being prepared separately and will be circulated for review under separate cover on or about April 11, 2025.

2. Update the Q1 2025 Form 10-Q. CRH should update its Q1 2025 Form 10-Q to reflect the settlement as a recognized subsequent event under ASC 855, including the following components:

• Financial statement adjustment: reversal of the $3,500,000 litigation contingency accrual and recognition of the net settlement gain, with appropriate footnote disclosure of the subsequent event;

• MD&A discussion of the settlement and its impact on the merchandising division and CRH's competitive position;

• Legal Proceedings disclosure update (Part II, Item 1), reflecting the resolution of the Rathore litigation and the entry of the Consent Order; and

• Evaluation of whether risk factor updates are warranted (Part II, Item 1A) regarding employee retention, trade secret protection, and competitive dynamics in the merchandising segment.

3. Coordinate with Hargrove & Tillett CPA, PLLC. CRH should promptly engage its outside independent registered public accounting firm, Hargrove & Tillett CPA, PLLC (lead audit partner: Denise Wheatley), to review the proposed accounting treatment for the settlement, including the subsequent event classification, the reversal of the litigation contingency accrual, and the recognition of the net settlement gain. This coordination should occur in advance of Hargrove & Tillett's quarterly review procedures for the Q1 2025 interim financial statements.

4. Ensure Insider Trading Restrictions. CRH should confirm that its insider trading policy and any applicable blackout or trading restriction windows cover all CRH personnel with knowledge of the settlement terms — including CEO Marcus Langford, General Counsel Theresa Yun-Park, CPO Roland Ashby, Interim SVP Martin Cho, Audit Committee Chair Dr. Lorraine Stahl, and all other informed directors and officers — through and following the filing of the Form 8-K. If the existing trading windows do not cover this period, a special blackout or trading restriction notice should be issued promptly.

5. Manage Regulation FD Compliance. CRH should ensure that no selective disclosure of settlement terms occurs to analysts, institutional investors, or other market participants prior to the filing of the Form 8-K. All external communications regarding the settlement should be timed to coincide with or follow the 8-K filing. CRH's investor relations team should be briefed on these requirements and instructed to refer all inquiries to a designated spokesperson.

6. Review Settlement Agreement Confidentiality Provisions. CRH should confirm, in coordination with Verdana's counsel (Morgan Chen, Davis Sunderland LLP), that the confidentiality provisions of the Settlement Agreement include an adequate carve-out for disclosures required or permitted under federal securities laws and the rules of the Nasdaq Stock Market, such that CRH's filing of the Form 8-K and inclusion of settlement-related disclosures in the Q1 2025 Form 10-Q are expressly permitted under the agreement.

VIII. Conclusion

For the reasons set forth in this memorandum, we recommend that CRH file a voluntary Current Report on Form 8-K under Item 8.01 promptly following execution of the Settlement Agreement and update its Q1 2025 Form 10-Q to reflect the settlement as a recognized subsequent event under ASC 855, with appropriate narrative disclosures in the MD&A, Legal Proceedings, and (as warranted) Risk Factors sections.

While the settlement does not cross quantitative materiality thresholds under any conventional measure — the $10,024,500 aggregate recovery represents approximately 0.15% of CRH's annual revenue and approximately 0.24% of its market capitalization — the qualitative significance of the matter supports voluntary disclosure. The competitive importance of CRH's $2.3 billion merchandising division, the public nature of the underlying dispute, the strategic value of the trade secret protections and restrictive covenants obtained through the settlement, and the proactive risk management benefits of transparent disclosure all weigh in favor of reporting.

We are prepared to coordinate with CRH's in-house securities counsel, outside auditors (Hargrove & Tillett CPA, PLLC), and compliance function on the drafting and filing of the Form 8-K and the preparation of the settlement-related disclosures for the Q1 2025 Form 10-Q. Draft 8-K language will be circulated under separate cover on or about April 11, 2025.

Please do not hesitate to contact me or any member of the Calderwood & Harkness team with any questions regarding this memorandum or the analysis set forth herein.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

James Underwood Associate Calderwood & Harkness LLP 1301 K Street NW, Suite 1200 Washington, DC 20005 Telephone: (202) 555-4800

Email: j.underwood@calderwoodharkness.com

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the addressee and other authorized recipients. Any dissemination, distribution, or copying of this memorandum by any person other than the intended recipient or authorized recipients is strictly prohibited.

Matter No. 1038-00006

Component	Amount
Lump-sum cash settlement payment from Verdana to CRH	$8,750,000
Equity forfeitures by Priya Rathore (unvested RSUs: $181,250; clawback of final vested tranche: $181,250)	$362,500
Aggregate equity forfeitures by remaining seven individual defendants	$487,000
Litigation cost reimbursement from Verdana to CRH	$425,000
Total Economic Recovery to CRH	$10,024,500
Metric	Amount	Settlement as % of Metric
Total Economic Recovery	$10,024,500	—
CRH FY2024 Revenue	$6,820,000,000	~0.15%
CRH Approximate Market Capitalization	$4,100,000,000	~0.24%
Merchandising Division FY2024 GMV	$2,300,000,000	~0.44%

CALDERWOOD & HARKNESS LLP 1301 K Street NW, Suite 1200 Washington, DC 20005
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
MEMORANDUM
April 9, 2025
TO: Theresa Yun-Park, General Counsel, Cascade Retail Holdings Inc.
FROM: James Underwood, Calderwood & Harkness LLP
RE: SEC Disclosure Considerations — Settlement of Cascade Retail Holdings Inc. v. Rathore et al., C.A. No. 2025-0198-MTZ (Del. Ch.)
MATTER NO.: 1038-00006
CC: Bernard Crawford, Renata Vasquez, Devon Archer
I. Executive Summary
You have asked us to analyze whether the proposed settlement of the covenant-enforcement and trade-secret litigation currently pending in the Delaware Court of Chancery — Cascade Retail Holdings Inc. v. Rathore et al., C.A. No. 2025-0198-MTZ — requires disclosure by Cascade Retail Holdings Inc. ("CRH" or the "Company") (Nasdaq: CRHL) under applicable federal securities laws. Specifically, this memorandum addresses two disclosure questions: (a) whether CRH is required or should elect to file a Current Report on Form 8-K with the U.S. Securities and Exchange Commission (the "SEC") upon execution of the settlement; and (b) whether and how the settlement should be disclosed and reflected as a subsequent event in CRH's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2025 ("Q1 2025").
The parties are targeting execution of the Standstill and Settlement Agreement (the "Settlement Agreement") on April 14, 2025. Based on the terms negotiated to date, the settlement provides CRH with an aggregate economic recovery of approximately $10,024,500, consisting of a lump-sum cash payment from Verdana Commerce Group, Inc. ("Verdana"), equity forfeitures by the individual defendants, and litigation cost reimbursement, together with significant non-monetary protections including modified restrictive covenants, data-destruction protocols, and an independent compliance monitoring arrangement.
Our overall conclusion is as follows: While the aggregate economic recovery of approximately $10,024,500 may fall below quantitative materiality thresholds when measured against CRH's $6.82 billion annual revenue (fiscal year 2024) and approximately $4.1 billion market capitalization, the qualitative factors surrounding this settlement — including the substantial public awareness of the underlying dispute, the competitive significance of the merchandising division at issue, and the nature of the claims (trade secret misappropriation, coordinated employee departure involving an SVP-level executive and seven senior merchandising professionals) — counsel in favor of voluntary disclosure via a Current Report on Form 8-K under Item 8.01 ("Other Events") and appropriate discussion and recognition in CRH's Q1 2025 Form 10-Q. This memorandum sets forth the analysis supporting that recommendation in detail.
II. Background — Summary of the Litigation and Settlement
A. The Underlying Dispute
In early February 2025, eight senior merchandising employees of CRH, led by former Senior Vice President of Merchandising Priya Rathore, resigned from the Company in a coordinated departure. Each of the departing employees had occupied senior roles within CRH's merchandising division, which generated approximately $2.3 billion in gross merchandise value ("GMV") during fiscal year 2024. The eight individuals — collectively referred to in the litigation as the "Rathore Group" — left CRH to accept positions at Verdana Commerce Group, Inc., a direct competitor of CRH in the retail and e-commerce space. Verdana publicly announced these hires via a press release issued on February 14, 2025, in which Verdana's Chief Executive Officer characterized the additions as "transformative for Verdana's next chapter in category-defining retail innovation."
Upon investigation, CRH discovered evidence indicating that the departures had been orchestrated over a period of months and that certain members of the Rathore Group had accessed and retained proprietary information belonging to CRH, including elements of "Project Ridgeline" — CRH's confidential long-range merchandising strategy — as well as proprietary vendor playbooks, seasonal buying algorithms, private-label sourcing strategies, and the Company's five-year category expansion roadmap. CRH also determined that Verdana's private equity sponsor, Greystone Capital Partners, LP, acting through its Greystone Capital Fund VII, LP ($8.5 billion in committed capital), had funded aggregate sign-on bonuses of approximately $6.2 million to incentivize the Rathore Group's departure from CRH.
On March 5, 2025, CRH filed a Verified Complaint in the Delaware Court of Chancery before Vice Chancellor Margaret T. Zhao, captioned Cascade Retail Holdings Inc. v. Rathore et al., C.A. No. 2025-0198-MTZ. The Verified Complaint asserted five causes of action:
1. Breach of restrictive covenant agreements (against all eight individual defendants);
2. Breach of confidentiality and non-disclosure obligations (against all eight individual defendants);
3. Misappropriation of trade secrets under the Delaware Uniform Trade Secrets Act, 6 Del. C. § 2001 et seq. ("DUTSA") (against all eight individual defendants and Verdana);
4. Tortious interference with contractual relations (against Verdana); and
5. Civil conspiracy (against all defendants).
On March 7, 2025, the Court granted CRH's application for a Temporary Restraining Order ("TRO"), enjoining the individual defendants from using or disclosing CRH's proprietary information and requiring the immediate return of any CRH materials in their possession. In connection with the TRO, CRH was required to post an injunction bond in the amount of $2,500,000, which was obtained through Broadview Surety Corp. (Bond No. BSC-2025-TRO-04419).
Importantly, the underlying dispute has been the subject of significant public attention since its inception. Verdana's February 14, 2025 press release brought the personnel departures to the attention of the market. The subsequent filing of the Verified Complaint and the entry of the TRO are matters of public record in the Delaware Court of Chancery. Industry publications and retail-sector analysts have followed the dispute with interest, given the seniority of the departing employees and the competitive dynamics between CRH and Verdana.
B. Settlement Terms
Following expedited discovery and negotiations facilitated by the Court's case management order, the parties reached a framework agreement on March 20, 2025. A Consent Interim Order was entered by Vice Chancellor Zhao on March 21, 2025, formalizing the standstill while documentation of the comprehensive settlement was finalized during the period from March 24 through April 11, 2025. The Settlement Agreement, in substantially final form, provides for the following terms:
Parties. The Settlement Agreement is among CRH, the eight individual defendants (Priya Rathore, and the seven other former CRH merchandising employees), and Verdana Commerce Group, Inc.
Monetary Recovery. The total economic recovery to CRH under the Settlement Agreement is $10,024,500, broken down as follows:
The lump-sum cash settlement payment of $8,750,000 is payable by Verdana to CRH within thirty (30) days of execution of the Settlement Agreement. The equity forfeitures by Ms. Rathore include both the cancellation of $181,250 in unvested restricted stock units ("RSUs") that would otherwise have continued to vest under her original equity award agreements, and a $181,250 clawback of the final vested tranche of RSUs that had been released to her upon vesting, pursuant to the for-cause clawback provision contained in CRH's Amended and Restated Equity Incentive Plan (effective January 1, 2023). The aggregate equity forfeitures by the remaining seven individual defendants ($487,000) similarly reflect a combination of unvested RSU cancellations and clawback recoveries under the applicable plan provisions.
Non-Monetary Terms. The settlement includes the following non-monetary provisions, which are of significant competitive importance to CRH:
• Modified Restrictive Covenants: Ms. Rathore has agreed to a twelve-month non-competition covenant running through February 6, 2026. The remaining seven individual defendants have agreed to nine-month non-competition covenants running through November 6, 2025. In each case, the non-competition obligations are limited in scope to three specified product categories in which CRH maintains significant market share and proprietary sourcing relationships.
• Employee Non-Solicitation: All eight individual defendants have agreed to eighteen-month employee non-solicitation covenants running through August 6, 2026, prohibiting each defendant from soliciting, recruiting, or inducing any current CRH employee to terminate his or her employment with CRH.
• Vendor Non-Solicitation: All eight individual defendants have agreed to twelve-month vendor non-solicitation covenants covering CRH's top fifty (50) vendors (as identified on a confidential schedule annexed to the Settlement Agreement), prohibiting the defendants from interfering with or attempting to disrupt CRH's vendor relationships during the restricted period.
• Data Return and Destruction Protocol: The Settlement Agreement requires all individual defendants and Verdana to return to CRH, and certify the destruction of, all CRH proprietary information in their possession, custody, or control. Compliance with this obligation is to be verified by a forensic audit conducted by Pinnacle Forensics LLC, an independent digital forensics firm. The cost of the forensic audit is capped at $175,000 and is to be borne entirely by Verdana.
• Independent Compliance Monitor: The Settlement Agreement provides for the appointment of Aldwyn Compliance Solutions LLC as an independent compliance monitor for a twelve-month period. The compliance monitor will oversee the individual defendants' and Verdana's compliance with the modified restrictive covenants, non-solicitation obligations, and data-destruction protocol. The total cost of the compliance monitor engagement is $360,000, to be split 60/40 between Verdana ($216,000) and CRH ($144,000).
Consent Order and Continuing Jurisdiction. The Settlement Agreement contemplates the entry of a Consent Order by Vice Chancellor Zhao in the Delaware Court of Chancery, pursuant to which the Court will retain jurisdiction over the matter for purposes of enforcing the terms of the settlement. This jurisdictional retention provides CRH with a meaningful enforcement mechanism in the event of any breach by the individual defendants or Verdana.
C. CRH's Prior Litigation Contingency Accrual
In the ordinary course of preparing its financial statements for Q1 2025 (the fiscal quarter ended March 31, 2025), CRH accrued $3,500,000 as a litigation contingency liability in connection with this matter. This accrual was established under ASC 450-20 (formerly SFAS No. 5) on the basis that, as of March 31, 2025, a loss contingency was deemed probable and estimable — specifically, CRH estimated that it would incur at least $3,500,000 in legal fees, bond costs, and related expenses in prosecuting the action through a preliminary injunction hearing and, potentially, trial.
With the execution of the Settlement Agreement, the factual predicate for this accrual will change materially. The settlement represents a net favorable outcome for CRH: the total economic recovery of $10,024,500 substantially exceeds the $3,500,000 contingency accrual. The accrual will need to be reversed, and the net settlement gain recognized, in the Q1 2025 financial statements, as discussed in greater detail in Section IV.B below.
III. Form 8-K Disclosure Analysis
A. Overview of 8-K Reporting Obligations
Under the SEC's rules, a registrant is required to file a Current Report on Form 8-K within four (4) business days following the occurrence of specified triggering events enumerated in the form. The purpose of Form 8-K is to ensure that the investing public is promptly informed of material developments affecting the registrant. See Regulation S-K, 17 C.F.R. § 229 et seq.; Form 8-K, General Instruction B.1. In addition to the mandatory triggering events, Form 8-K permits registrants to make voluntary disclosures of events that the registrant deems to be of importance to its security holders, even if such events do not fall within one of the mandatory reporting items.
We have reviewed the items enumerated in Form 8-K to identify those that could potentially apply to the execution of the Settlement Agreement. The potentially applicable items include:
• Item 1.01 — Entry into a Material Definitive Agreement
• Item 2.03 — Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement
• Item 7.01 — Regulation FD Disclosure
• Item 8.01 — Other Events
We address each potentially applicable item below, with particular attention to Items 1.01 and 8.01, which present the most significant analytical questions in this context. We note at the outset that Item 2.03 is not triggered here because the Settlement Agreement does not create a direct financial obligation of CRH (CRH is the payee, not the payor, of the principal monetary obligations), and any CRH obligations under the agreement (e.g., the $144,000 share of compliance monitor costs) do not rise to the level of materiality required by Item 2.03. Similarly, Item 7.01 would apply only if CRH intends to make selective disclosures of material nonpublic information to analysts or investors in connection with the settlement; our recommendation, as discussed in Section V.A below, is that CRH avoid any such selective disclosures and instead time all external communications to coincide with or follow the 8-K filing.
B. Item 1.01 — Entry into a Material Definitive Agreement
Item 1.01 of Form 8-K requires disclosure when a registrant enters into a "material definitive agreement not made in the ordinary course of the registrant's business." The instruction to Item 1.01 defines a "material definitive agreement" as an agreement that "provides for obligations that are material to and enforceable against the registrant, or rights that are material to the registrant." Item 1.01 requires disclosure of the date of the agreement, a brief description of the material terms and conditions, and identification of the parties.
The threshold question under Item 1.01 is whether the Settlement Agreement constitutes a "material definitive agreement" within the meaning of the rule. The Settlement Agreement is plainly not made in the ordinary course of CRH's business — CRH is a retail holding company, and the resolution of trade secret and non-compete litigation through a negotiated settlement agreement is not an everyday occurrence in CRH's business operations. The operative question, therefore, is whether the agreement is "material."
Quantitative Analysis. The aggregate economic recovery to CRH under the Settlement Agreement is $10,024,500. Measured against CRH's key financial metrics, this amount is relatively modest:
• As a percentage of CRH's fiscal year 2024 revenue ($6.82 billion): approximately 0.15%;
• As a percentage of CRH's approximate market capitalization ($4.1 billion): approximately 0.24%;
• As a percentage of CRH's merchandising division GMV ($2.3 billion): approximately 0.44%.
Under the traditional quantitative materiality framework applied in the securities law context, an item is generally considered quantitatively material if it represents approximately 5% or more of a key financial metric (such as revenue, net income, total assets, or market capitalization). See SEC Staff Accounting Bulletin No. 99 (discussing the limitations of relying exclusively on quantitative benchmarks, but acknowledging their widespread use as a starting point). All of the foregoing quantitative ratios fall well below the 5% threshold. Standing alone, the monetary terms of the Settlement Agreement do not appear to cross the quantitative materiality threshold.
CRH's obligations under the Settlement Agreement are similarly modest in quantitative terms. CRH's primary financial obligation is its 40% share of the compliance monitor costs ($144,000), together with the indirect cost of returning the $2,500,000 injunction bond upon entry of the Consent Order. Neither of these obligations is material to CRH's financial condition.
Qualitative Analysis. Notwithstanding the quantitative analysis, the SEC has consistently cautioned that materiality cannot be assessed solely by reference to numerical thresholds. See TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976) (information is material if there is "a substantial likelihood that a reasonable shareholder would consider it important in making an investment decision"); SEC Staff Accounting Bulletin No. 99 (identifying qualitative factors that may render a quantitatively small item material). Several qualitative factors could arguably bring the Settlement Agreement within the scope of Item 1.01:
• The Settlement Agreement protects CRH's proprietary merchandising strategies, including Project Ridgeline, which are central to the competitive positioning of CRH's $2.3 billion merchandising division;
• The modified restrictive covenants impose meaningful competitive restrictions on the departing employees and, indirectly, on Verdana, CRH's principal competitor in the relevant product categories;
• The dispute involved the departure of a senior vice president and seven other senior employees, implicating CRH's human capital management and organizational stability;
• The involvement of Greystone Capital Partners, a prominent private equity firm, adds a dimension of competitive intensity to the dispute; and
• The data-destruction and compliance monitoring provisions create ongoing operational obligations for CRH over the next twelve months.
Recommendation. On balance, we conclude that disclosure under Item 1.01 is not strictly required based on the quantitative analysis. The monetary terms of the Settlement Agreement represent a fraction of a percent of CRH's relevant financial metrics, and CRH's obligations under the agreement are de minimis. However, we note that the qualitative factors present a close question, particularly given the competitive significance of the merchandising division and the public profile of the dispute. If CRH elects to disclose the settlement (as we recommend below under Item 8.01), the practical significance of the Item 1.01 analysis is diminished, because the settlement terms will be publicly disclosed in any event.
C. Item 8.01 — Other Events
Item 8.01 of Form 8-K permits a registrant to report, on a voluntary basis, events that the registrant "deems of importance to security holders." Unlike Items 1.01 through 7.01, Item 8.01 does not impose a mandatory reporting obligation; rather, it provides a vehicle for registrants to make timely voluntary disclosures of developments that, while not strictly required, are nevertheless of interest and importance to the market.
We recommend that CRH file a voluntary Current Report on Form 8-K under Item 8.01 disclosing the settlement in summary form. Several factors support this recommendation:
• Public Nature of the Dispute. The underlying dispute has been a matter of public knowledge since Verdana's February 14, 2025 press release announcing the hire of the Rathore Group. The filing of the Verified Complaint and the entry of the TRO are matters of public record in the Delaware Court of Chancery. Market participants — including sell-side analysts covering CRH and institutional investors holding CRHL stock — are aware of the dispute and may have factored it into their assessment of CRH's competitive position and risk profile. The resolution of the dispute is a natural follow-on development that the market will expect CRH to address.
• Potential Analyst and Investor Inquiries. CRH's next quarterly earnings call is expected to occur in mid-May 2025 in connection with the filing of the Q1 2025 Form 10-Q. It is highly likely that analysts will inquire about the status of the litigation and the merchandising leadership transition. Proactive disclosure through a Form 8-K filing in advance of the earnings call allows CRH to control the narrative and provide a complete and accurate account of the settlement on its own terms.
• Competitive Significance. CRH's merchandising division generated $2.3 billion in GMV in fiscal year 2024 and is a core driver of CRH's growth strategy. The settlement protects CRH's proprietary strategies, including Project Ridgeline, and imposes meaningful restrictive covenants on the departing employees. From a qualitative standpoint, a reasonable investor would likely consider the resolution of the dispute — and the protections CRH obtained through the settlement — to be important information.
• Resolution of Litigation Contingency Accrual. The settlement resolves the previously accrued $3,500,000 litigation contingency with a net favorable outcome. The reversal of this accrual and recognition of the net settlement gain will be reflected in CRH's Q1 2025 financial statements, as discussed in Section IV.B below. Proactive disclosure of the settlement in a Form 8-K filing provides appropriate context for the financial statement adjustments that will appear in the 10-Q.
• Securities Class Action Risk Mitigation. Proactive, voluntary disclosure of the settlement reduces the risk that CRH could face allegations — in a potential securities class action or SEC enforcement context — that the Company failed to timely disclose a material event. While we have concluded that the settlement is not quantitatively material, the reputational and competitive significance of the dispute creates a heightened risk profile that is best managed through transparent disclosure.
Recommendation. We recommend that CRH file a voluntary Current Report on Form 8-K under Item 8.01 promptly following execution of the Settlement Agreement. The Form 8-K should disclose the settlement in summary form, referencing the following key elements: (i) the fact that CRH has entered into a settlement resolving the litigation; (ii) the fact that the settlement provides for monetary recovery to CRH; (iii) the modified restrictive covenant obligations imposed on the individual defendants; (iv) the data-destruction protocols, including the independent forensic audit; and (v) the appointment of an independent compliance monitor for a twelve-month period. The appropriate level of detail to be included in the Form 8-K is discussed further in Section III.D below.
D. Level of Detail in 8-K Disclosure
A separate but important question concerns the level of detail that CRH should include in the 8-K disclosure regarding the monetary and non-monetary terms of the settlement. This analysis requires balancing several considerations.
Monetary Terms. CRH must determine whether to disclose specific monetary figures — such as the $8,750,000 lump-sum cash payment from Verdana and the $10,024,500 aggregate recovery — or to describe the settlement in more general terms (e.g., "monetary recovery in favor of CRH"). The following considerations are relevant:
• Regulation S-K Requirements. If CRH were reporting the Settlement Agreement as a material definitive agreement under Item 1.01, it would be required to describe the "material terms and conditions" of the agreement, which would likely include the monetary amounts. Under Item 8.01, however, CRH has somewhat greater discretion regarding the level of detail to include, because Item 8.01 is a voluntary disclosure vehicle.
• Confidentiality Provisions. The Settlement Agreement, as currently drafted, contains confidentiality provisions restricting the parties' public disclosure of the specific financial terms. However, the agreement includes a carve-out permitting disclosures required by applicable law, including disclosures required or permitted under federal securities laws and the rules of the Nasdaq Stock Market. We recommend that CRH confirm with Verdana's counsel (Morgan Chen, Davis Sunderland LLP) that the filing of a Form 8-K disclosing the settlement terms in summary form falls within this carve-out.
• Competitive Sensitivity. Excessive detail regarding the monetary terms of the settlement — particularly the dollar amounts of the equity forfeitures and cost reimbursements — could provide Verdana or other competitors with strategic intelligence regarding CRH's internal compensation structures, litigation cost exposure, and settlement negotiation posture. While this concern is not dispositive, it weighs in favor of disclosing the monetary recovery in general terms rather than providing a line-item breakdown.
Non-Monetary Terms. With respect to the non-monetary terms of the settlement, CRH should disclose the general nature of the modified restrictive covenants (non-compete, non-solicitation), the data-destruction protocol, and the compliance monitoring arrangement, without disclosing the precise category definitions, vendor lists, or other competitively sensitive details that are set forth in the confidential schedules to the Settlement Agreement.
Recommendation. We recommend that CRH disclose the material terms of the settlement in summary form in the Form 8-K. This should include either the specific aggregate monetary recovery amount or a general description of the recovery (e.g., "aggregate monetary recovery in excess of $10 million"), depending on the outcome of the confidentiality carve-out analysis. The disclosure should describe the general nature of the modified restrictive covenants — including the duration and scope of the non-compete and non-solicitation obligations, without specifying the precise product category definitions or vendor lists — and should reference the compliance monitoring arrangement. Draft 8-K language is being prepared separately and will be circulated under separate cover, dated April 11, 2025, for review by Ms. Yun-Park and the Company's in-house securities counsel.
IV. Form 10-Q Disclosure Analysis (Q1 2025)
A. Timing Considerations
CRH's fiscal quarter ended on March 31, 2025. As a large accelerated filer, CRH is required to file its Quarterly Report on Form 10-Q within forty (40) days after the end of the fiscal quarter. See Rule 13a-13 under the Securities Exchange Act of 1934; General Instruction A.1 to Form 10-Q. CRH's Q1 2025 Form 10-Q is therefore expected to be filed on or about May 10, 2025 (forty days after March 31, 2025).
The Settlement Agreement is targeted for execution on April 14, 2025 — fourteen days after the close of the fiscal quarter. This timing means that the settlement will occur after the balance sheet date (March 31, 2025) but before the expected filing of the Q1 2025 Form 10-Q (approximately mid-May 2025), making it a post-balance-sheet event that must be evaluated under the applicable accounting standards for subsequent events.
B. ASC 855 — Subsequent Events Analysis
Under Accounting Standards Codification Topic 855 ("ASC 855"), Subsequent Events, a reporting entity is required to evaluate events that occur after the balance sheet date but before the financial statements are issued (or, for non-SEC filers, available to be issued). ASC 855 distinguishes between two types of subsequent events:
• Type I (Recognized) Subsequent Events: Events that provide additional evidence about conditions that existed at the date of the balance sheet, including estimates inherent in the process of preparing financial statements. Type I subsequent events require adjustment of the financial statements to reflect the new information.
• Type II (Nonrecognized) Subsequent Events: Events that provide evidence about conditions that did not exist at the date of the balance sheet but arose subsequent to that date. Type II subsequent events do not require adjustment of the financial statements but may require disclosure in the notes to the financial statements.
The settlement of the Rathore litigation on April 14, 2025 constitutes a Type I (recognized) subsequent event under ASC 855-10. The conditions giving rise to the settlement existed as of the balance sheet date (March 31, 2025). Specifically:
• The litigation was filed on March 5, 2025, well before the balance sheet date;
• The TRO was entered on March 7, 2025;
• The settlement framework was agreed upon on March 20, 2025 — eleven days before the balance sheet date;
• The Consent Interim Order formalizing the standstill was entered by Vice Chancellor Zhao on March 21, 2025;
• During the period from March 24 through April 11, 2025, the parties were engaged solely in the documentation of the settlement terms — the substantive agreement had been reached before the balance sheet date; and
• The only post-balance-sheet activity was the finalization of documentation and formal execution, not the negotiation or agreement on material terms.
Because the settlement provides additional evidence about conditions that existed at the balance sheet date, the Q1 2025 financial statements should be adjusted to reflect the settlement. This is consistent with ASC 855-10-25-1, which provides that an entity shall recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet.
Financial Statement Impact. The following adjustments should be reflected in CRH's Q1 2025 financial statements:
1. Reversal of Litigation Contingency Accrual. The $3,500,000 litigation contingency accrual established in Q1 2025 should be reversed in full, as the settlement outcome is favorable to CRH and no further loss contingency exists.
2. Recognition of Net Settlement Gain. The net gain from the settlement should be recognized. The calculation of the net gain will require coordination with CRH's accounting team and outside auditors, but the preliminary components are as follows:
• Total economic recovery: $10,024,500
• Less: Calderwood & Harkness legal fees allocable to the matter (estimated at approximately $1,850,000 through settlement execution)
• Less: CRH's share of compliance monitor costs ($144,000)
• Less: Any other settlement-related expenses (e.g., CRH's internal legal and administrative costs, Broadview Surety bond premium)
The precise net gain figure will depend on the final accounting for all allocable costs, but it is expected to be a net positive figure on the order of $8,000,000 or more, before tax effects.
3. Coordination with Outside Auditors. CRH should promptly engage Hargrove & Tillett CPA, PLLC, CRH's outside independent registered public accounting firm (lead audit partner: Denise Wheatley), to review the proposed accounting treatment and ensure that the subsequent event recognition is appropriately reflected in the Q1 2025 interim financial statements. This coordination should occur as early as practicable — ideally within one week of settlement execution — to ensure that any questions or issues are resolved well in advance of the 10-Q filing date.
C. MD&A and Legal Proceedings Disclosures
Beyond the financial statement adjustments discussed above, the Q1 2025 Form 10-Q will require narrative disclosure of the settlement in several sections.
Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A). Regulation S-K, Item 303, requires MD&A to discuss "any known trends or uncertainties that have had or that are reasonably likely to have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations." The settlement of the Rathore litigation is a significant event affecting CRH's merchandising division — the Company's largest business unit — and should be discussed in the MD&A section of the Q1 2025 Form 10-Q. The MD&A discussion should address:
• The resolution of the litigation and the general terms of the settlement, including the monetary recovery and the modified restrictive covenants;
• The competitive significance of the settlement in protecting CRH's proprietary merchandising strategies;
• The ongoing compliance monitoring arrangement and its expected impact on operations over the next twelve months; and
• The financial statement impact, including the reversal of the litigation contingency accrual and the recognition of the net settlement gain.
Part II, Item 1 — Legal Proceedings. Part II, Item 1 of Form 10-Q requires disclosure of material pending legal proceedings, including developments since the last periodic report. If CRH disclosed the Rathore litigation as a pending legal proceeding in any prior filing (including in its Annual Report on Form 10-K for fiscal year 2024, if applicable, or in any prior Form 8-K), the Q1 2025 Form 10-Q should update that disclosure to reflect the settlement and the entry of the Consent Order retaining Court jurisdiction for enforcement purposes.
Part II, Item 1A — Risk Factors. CRH should evaluate whether updates to its risk factor disclosures are warranted in light of the settlement. In particular, CRH should consider whether its existing risk factors adequately address:
• The risk of employee attrition and coordinated departures, particularly among senior merchandising and strategy personnel;
• The risk of trade secret misappropriation and the adequacy of CRH's information security and access controls;
• The competitive dynamics in CRH's core merchandising segment, including the presence of well-capitalized competitors backed by private equity sponsors; and
• The risk that CRH's restrictive covenant agreements may prove difficult to enforce, or may require costly litigation to defend.
To the extent that CRH's existing risk factors do not adequately address these topics, CRH should consider adding or updating risk factors in the Q1 2025 Form 10-Q to provide investors with a current and complete picture of the Company's risk profile.
V. Additional Securities Law Considerations
A. Regulation FD
Regulation FD (17 C.F.R. § 243.100 et seq.) prohibits issuers from selectively disclosing material nonpublic information to certain enumerated categories of recipients — including securities analysts, institutional investment managers, and holders of the issuer's securities — unless the disclosure is made simultaneously to the public (in the case of intentional disclosures) or promptly thereafter (in the case of non-intentional disclosures).
The terms of the Settlement Agreement — including the specific monetary recovery, the modified restrictive covenants, and the compliance monitoring arrangement — constitute nonpublic information that could be material to CRH's security holders. CRH must therefore ensure that no selective disclosure of these settlement terms occurs to analysts, institutional investors, or other market participants prior to the public filing of the Form 8-K.
This consideration is particularly important in the present context because analysts covering CRH have been following the Rathore litigation and may contact CRH's investor relations department or management seeking updates on the status of the dispute. If such inquiries are received, CRH personnel should respond by stating only that the Company will provide an update at the appropriate time through its public filings, without disclosing any details of the settlement.
Recommendation. CRH should time any investor or analyst communications regarding the settlement — including any press release, investor relations statement, or other public communication — to coincide with or follow the filing of the Form 8-K. CRH's investor relations team should be briefed on the Regulation FD implications and instructed to refer all inquiries regarding the settlement to a designated spokesperson who is aware of the disclosure timing.
B. Insider Trading Considerations
Until the settlement is publicly disclosed through the filing of the Form 8-K, knowledge of the settlement terms constitutes material nonpublic information ("MNPI") within the meaning of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Any person in possession of this MNPI is prohibited from trading in CRH's securities (Nasdaq: CRHL) until the information has been publicly disseminated and the market has had a reasonable opportunity to absorb it.
The following CRH insiders are known to have knowledge of the settlement terms and should be restricted from trading CRH securities until after public disclosure:
• Marcus Langford, Chief Executive Officer
• Theresa Yun-Park, General Counsel
• Roland Ashby, Chief People Officer
• Martin Cho, Interim Senior Vice President of Merchandising
• Dr. Lorraine Stahl, Chair of the Audit Committee of the Board of Directors
• Other members of the Board of Directors who were briefed on the settlement in connection with the Board's or the Audit Committee's oversight of the litigation
Recommendation. CRH should confirm that its insider trading policy and any applicable blackout or trading restriction windows cover the period through and following the filing of the Form 8-K. If the Company's existing trading window restrictions do not cover this period, CRH should implement a special blackout period or trading restriction notice for all individuals with knowledge of the settlement terms. CRH's compliance function — whether housed within the General Counsel's office or in a separate compliance department — should coordinate the issuance and tracking of these restrictions.
C. Credit Agreement Reporting
Separate from the SEC disclosure obligations analyzed in this memorandum, CRH maintains a $750 million senior unsecured revolving credit facility (the "Revolving Credit Facility"), administered by Keypoint National Bank, N.A. as administrative agent, pursuant to an Amended and Restated Credit Agreement dated as of September 15, 2022 (as subsequently amended). Section 6.02(c) of the Revolving Credit Facility contains a material litigation reporting covenant that requires CRH to notify the administrative agent promptly upon becoming aware of the settlement or resolution of any litigation that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect (as defined in the Credit Agreement) on the Company or its subsidiaries.
While we do not believe that the settlement of the Rathore litigation rises to the level of a Material Adverse Effect under the Credit Agreement (given the favorable outcome and the relatively modest monetary amounts involved), prudence dictates that CRH provide the required notification to Keypoint National Bank. A notification letter addressed to Keypoint is being prepared under separate cover and is expected to be transmitted on April 14, 2025, concurrent with the execution of the Settlement Agreement.
The SEC disclosure analysis set forth in this memorandum is independent of, and in addition to, CRH's notification obligations under the Revolving Credit Facility. The two disclosure regimes involve different standards, different timing requirements, and different recipients, and compliance with one does not satisfy the obligations under the other.
VI. Materiality Assessment — Summary
Having analyzed the relevant SEC disclosure obligations and accounting standards in the preceding sections, we summarize below our overall materiality assessment of the Settlement Agreement.
A. Quantitative Analysis
The following table summarizes the quantitative materiality analysis:
All quantitative ratios fall well below the typical 5% bright-line threshold that is commonly (though not exclusively) used as a starting point for materiality assessments in the securities law context. The settlement is not quantitatively material standing alone. Even when measured against narrower financial metrics — such as Q1 2025 net income or operating income — the settlement recovery, while non-trivial, does not approach the levels at which quantitative materiality would be clearly established.
Conclusion: The settlement is not quantitatively material when viewed in isolation.
B. Qualitative Analysis
Notwithstanding the quantitative analysis, several qualitative factors weigh in favor of treating the settlement as sufficiently significant to warrant disclosure. As noted above, the Supreme Court and the SEC have recognized that a purely quantitative approach to materiality is insufficient and that qualitative factors must also be considered. See TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438 (1976); Basic Inc. v. Levinson, 485 U.S. 224 (1988); SEC Staff Accounting Bulletin No. 99.
Factors Weighing in Favor of Materiality:
• Core Business Impact. The dispute involves CRH's core merchandising division, which is responsible for $2.3 billion in annual GMV and is a central pillar of the Company's growth strategy. The settlement protects CRH's competitive positioning in this critical business unit.
• Trade Secret and Proprietary Information Protection. The settlement secures the return and destruction of CRH's most sensitive proprietary information, including elements of Project Ridgeline (the Company's long-range merchandising strategy), proprietary vendor playbooks, seasonal buying algorithms, private-label sourcing strategies, and CRH's five-year category expansion roadmap. The protection of this information is of strategic importance to CRH's competitive position.
• Public Profile of the Dispute. The dispute has been a matter of public knowledge since Verdana's February 14, 2025 press release. The litigation and TRO are reflected in publicly available court filings. Market participants are aware of the dispute, and the absence of disclosure regarding its resolution could itself raise questions.
• Coordinated Senior-Level Departure. The departure of eight senior employees, including an SVP-level executive, in a coordinated move to a direct competitor is an unusual and noteworthy event that implicates CRH's human capital management and organizational resilience.
• Involvement of Prominent PE Sponsor. The involvement of Greystone Capital Partners, LP — and specifically the payment of $6.2 million in aggregate sign-on bonuses by Greystone Capital Fund VII, LP to incentivize the departures — adds a dimension of competitive intensity and strategic significance to the dispute that a reasonable investor would find relevant.
• Ongoing Compliance Monitoring. The twelve-month independent compliance monitoring arrangement creates an ongoing operational framework for overseeing the individual defendants' and Verdana's compliance with the settlement terms, which will have continuing relevance to CRH's competitive posture during the monitoring period.
• Human Capital and Retention Risk. The dispute and its resolution may be relevant to investor assessments of CRH's ability to retain key talent, particularly in its merchandising function. Human capital disclosures have been an area of increasing focus for the SEC and for institutional investors in recent years.
Factors Weighing Against Materiality:
• Favorable Outcome. The settlement is favorable to CRH: the Company is receiving a net monetary recovery, modified restrictive covenants, data protection measures, and ongoing compliance monitoring. There is no adverse financial impact to CRH from the settlement.
• Modest Monetary Amounts. The absolute dollar amounts involved in the settlement, while not insignificant, are modest relative to CRH's overall financial profile.
• Operational Continuity. CRH's merchandising operations have continued without material disruption under the interim leadership of Vice President Martin Cho. The Company has not reported any adverse operational impacts resulting from the departures.
Conclusion: The qualitative and quantitative factors present a mixed picture. However, when the qualitative factors are weighed together — particularly the competitive importance of the merchandising division, the public profile of the dispute, the strategic significance of the trade secret protections, and the proactive risk management benefits of disclosure — we conclude that the qualitative factors tip the balance in favor of treating the settlement as sufficiently significant to warrant voluntary disclosure.
VII. Recommendations
Based on the foregoing analysis, we make the following recommendations:
1. File a Voluntary 8-K Under Item 8.01. CRH should file a voluntary Current Report on Form 8-K under Item 8.01 ("Other Events") promptly following execution of the Settlement Agreement. The target filing date should be on or before April 18, 2025 — within four (4) business days of the April 14, 2025 target execution date — consistent with the ordinary 8-K filing timeline. The Form 8-K should disclose the settlement in summary form, including the general nature of the monetary recovery, the modified restrictive covenant obligations, the data-destruction protocols, and the compliance monitoring arrangement. Draft 8-K language is being prepared separately and will be circulated for review under separate cover on or about April 11, 2025.
2. Update the Q1 2025 Form 10-Q. CRH should update its Q1 2025 Form 10-Q to reflect the settlement as a recognized subsequent event under ASC 855, including the following components:
• Financial statement adjustment: reversal of the $3,500,000 litigation contingency accrual and recognition of the net settlement gain, with appropriate footnote disclosure of the subsequent event;
• MD&A discussion of the settlement and its impact on the merchandising division and CRH's competitive position;
• Legal Proceedings disclosure update (Part II, Item 1), reflecting the resolution of the Rathore litigation and the entry of the Consent Order; and
• Evaluation of whether risk factor updates are warranted (Part II, Item 1A) regarding employee retention, trade secret protection, and competitive dynamics in the merchandising segment.
3. Coordinate with Hargrove & Tillett CPA, PLLC. CRH should promptly engage its outside independent registered public accounting firm, Hargrove & Tillett CPA, PLLC (lead audit partner: Denise Wheatley), to review the proposed accounting treatment for the settlement, including the subsequent event classification, the reversal of the litigation contingency accrual, and the recognition of the net settlement gain. This coordination should occur in advance of Hargrove & Tillett's quarterly review procedures for the Q1 2025 interim financial statements.
4. Ensure Insider Trading Restrictions. CRH should confirm that its insider trading policy and any applicable blackout or trading restriction windows cover all CRH personnel with knowledge of the settlement terms — including CEO Marcus Langford, General Counsel Theresa Yun-Park, CPO Roland Ashby, Interim SVP Martin Cho, Audit Committee Chair Dr. Lorraine Stahl, and all other informed directors and officers — through and following the filing of the Form 8-K. If the existing trading windows do not cover this period, a special blackout or trading restriction notice should be issued promptly.
5. Manage Regulation FD Compliance. CRH should ensure that no selective disclosure of settlement terms occurs to analysts, institutional investors, or other market participants prior to the filing of the Form 8-K. All external communications regarding the settlement should be timed to coincide with or follow the 8-K filing. CRH's investor relations team should be briefed on these requirements and instructed to refer all inquiries to a designated spokesperson.
6. Review Settlement Agreement Confidentiality Provisions. CRH should confirm, in coordination with Verdana's counsel (Morgan Chen, Davis Sunderland LLP), that the confidentiality provisions of the Settlement Agreement include an adequate carve-out for disclosures required or permitted under federal securities laws and the rules of the Nasdaq Stock Market, such that CRH's filing of the Form 8-K and inclusion of settlement-related disclosures in the Q1 2025 Form 10-Q are expressly permitted under the agreement.
VIII. Conclusion
For the reasons set forth in this memorandum, we recommend that CRH file a voluntary Current Report on Form 8-K under Item 8.01 promptly following execution of the Settlement Agreement and update its Q1 2025 Form 10-Q to reflect the settlement as a recognized subsequent event under ASC 855, with appropriate narrative disclosures in the MD&A, Legal Proceedings, and (as warranted) Risk Factors sections.
While the settlement does not cross quantitative materiality thresholds under any conventional measure — the $10,024,500 aggregate recovery represents approximately 0.15% of CRH's annual revenue and approximately 0.24% of its market capitalization — the qualitative significance of the matter supports voluntary disclosure. The competitive importance of CRH's $2.3 billion merchandising division, the public nature of the underlying dispute, the strategic value of the trade secret protections and restrictive covenants obtained through the settlement, and the proactive risk management benefits of transparent disclosure all weigh in favor of reporting.
We are prepared to coordinate with CRH's in-house securities counsel, outside auditors (Hargrove & Tillett CPA, PLLC), and compliance function on the drafting and filing of the Form 8-K and the preparation of the settlement-related disclosures for the Q1 2025 Form 10-Q. Draft 8-K language will be circulated under separate cover on or about April 11, 2025.
Please do not hesitate to contact me or any member of the Calderwood & Harkness team with any questions regarding this memorandum or the analysis set forth herein.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
James Underwood Associate Calderwood & Harkness LLP 1301 K Street NW, Suite 1200 Washington, DC 20005 Telephone: (202) 555-4800
Email: j.underwood@calderwoodharkness.com
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the addressee and other authorized recipients. Any dissemination, distribution, or copying of this memorandum by any person other than the intended recipient or authorized recipients is strictly prohibited.
Matter No. 1038-00006
Component | Amount
Lump-sum cash settlement payment from Verdana to CRH | $8,750,000
Equity forfeitures by Priya Rathore (unvested RSUs: $181,250; clawback of final vested tranche: $181,250) | $362,500
Aggregate equity forfeitures by remaining seven individual defendants | $487,000
Litigation cost reimbursement from Verdana to CRH | $425,000
Total Economic Recovery to CRH | $10,024,500
Metric | Amount | Settlement as % of Metric
Total Economic Recovery | $10,024,500 | —
CRH FY2024 Revenue | $6,820,000,000 | ~0.15%
CRH Approximate Market Capitalization | $4,100,000,000 | ~0.24%
Merchandising Division FY2024 GMV | $2,300,000,000 | ~0.44%

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

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT

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MATTER NO.: 1038-00006

CALDERWOOD & HARKNESS LLP

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