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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

TO: Bernard Crawford, Responsible Partner

FROM: James Underwood, Lead Associate

CC: Renata Vasquez, Billing Partner; Devon Archer, Working Associate

DATE: March 26, 2025

RE: Internal Redline Commentary — Key Issues and Anticipated Counterparty Pushback on First Draft of Standstill and Settlement Agreement

MATTER: Cascade Retail Holdings Inc. v. Rathore et al., C.A. No. 2025-0198-MTZ (Del. Ch.)

MATTER NO.: 1038-00006

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I. Executive Summary

On March 24, 2025, Calderwood & Harkness LLP circulated the first draft of the Standstill and Settlement Agreement (the "Settlement Agreement") to Whitfield, Nygaard & Doyle LLP ("WND," counsel to the Rathore Group, led by Catherine Nygaard) and Blackhall & Soren LLP ("Blackhall," counsel to Verdana Commerce Group, Inc. ("Verdana"), led by Gavin Blackhall and Meredith Lau). The first draft was transmitted via secure portal and acknowledged by both firms on the same date.

The first draft implements the settlement framework reached at the conclusion of the March 18, 2025 mediation session before the Honorable Philip Ashford (Ret.), conducted through Meridian ADR Services LLC (Ref. Meridian-2025-0318-CRH). The framework was memorialized in the binding term sheet executed by all parties on March 20, 2025, which sets forth the principal economic and non-economic terms of the settlement and contemplates the preparation, negotiation, and execution of a long-form Settlement Agreement and a stipulated Consent Order to be filed with the Delaware Court of Chancery before Vice Chancellor Michelle T. Zhao.

The purpose of this memorandum is to catalog the principal drafting issues in the first draft, identify areas of expected pushback from WND (on behalf of the eight individual defendants) and Blackhall (on behalf of Verdana), and provide recommended internal positions on each issue. This analysis is intended to prepare the Calderwood & Harkness team for the counterparty markup process and to allow Bernard Crawford, as responsible partner, to evaluate our negotiating posture ahead of the receipt of comments.

We anticipate that comments from WND and Blackhall will be received by approximately March 31, 2025, consistent with the schedule communicated during the mediation. Upon receipt, we will prepare a second draft incorporating agreed revisions and noting areas of continued disagreement for further negotiation. The target execution date remains April 14, 2025.

For purposes of organization, this memorandum addresses seven principal categories of issues:

1. Modified Non-Compete Scope (Exhibit A Issues);

2. Non-Solicitation Provisions;

3. Monetary Settlement Terms;

4. Data Return and Destruction Protocol (Exhibit B Issues);

5. Compliance Monitor Framework (Exhibit D and Related Provisions);

6. Consent Order Mechanics; and

7. Miscellaneous/General Provisions.

Each section below identifies the relevant first draft provisions, analyzes anticipated counterparty positions, and provides our recommended internal approach. Section IX addresses coordination items and open action items requiring attention before and during the markup process. Section X provides a summary recommendation and proposed next steps.

II. Modified Non-Compete Scope (Exhibit A Issues)

The modified non-compete provisions are set forth in Section 3 of the Settlement Agreement and detailed in Exhibit A. These provisions represent the core compromise of the settlement: a narrowing of the original all-retail non-compete (which the defendants challenged as overbroad in their March 15, 2025 opposition to the preliminary injunction) in exchange for the defendants' agreement to comply with enforceable, category-specific restrictions for a defined period. The following sub-issues warrant attention.

A. Product Category Definitions

The first draft defines the three restricted product categories as "home goods," "seasonal décor," and "private-label apparel." These three categories correspond to the CRH merchandising divisions in which the Rathore Group had the most concentrated operational responsibility, and in which CRH maintains the most significant proprietary competitive advantages — including vendor relationships, margin structures, assortment algorithms, and private-label brand strategies.

Anticipated Pushback from WND. We expect WND to argue that the definitions as drafted are too vague and potentially sweep in product areas outside the scope of CRH's legitimate protectable interests. Specifically, WND will likely contend that "home goods" is an umbrella term that could encompass a vast range of merchandise — from furniture and home textiles to kitchen appliances and storage solutions — many of which fall outside the categories in which the Rathore Group possessed confidential information or trade secrets. WND will almost certainly demand that the Settlement Agreement incorporate granular category codes, potentially referencing specific NAICS codes or, alternatively, CRH's own internal category taxonomy, to give the defendants clear notice of what activities are prohibited and what activities are permitted.

Anticipated Pushback from Blackhall (on Verdana's behalf). Verdana's primary concern is operational: broad product category definitions could effectively preclude the Rathore Group from working in any meaningful capacity at Verdana, which operates across categories that overlap substantially with CRH's business. According to publicly available information and the preliminary injunction briefing, there are approximately 28 overlapping product categories between CRH and Verdana. Verdana will argue that overly broad definitions frustrate the purpose of the settlement — which contemplates that the Rathore Group will continue employment at Verdana in non-restricted capacities — and could expose Verdana to compliance risk even if it acts in good faith.

Internal Recommendation. We recommend proposing a defined schedule of specific sub-categories within each of the three umbrella terms, cross-referenced to CRH's internal merchandising category codes. This approach provides the precision that both WND and Blackhall will demand while ensuring that the restrictions are anchored to CRH's actual competitive interests. We should resist any proposal to tie the definitions to NAICS codes, which are designed for statistical classification purposes, not covenant enforcement, and which could be manipulated through creative categorization of business activities. The defined sub-category schedule should be prepared in consultation with Martin Cho (interim SVP, Merchandising) and should cover the specific merchandise lines within home goods, seasonal décor, and private-label apparel that are most directly implicated by the Rathore Group's access to proprietary information.

The category definitions must be sufficiently precise to satisfy the reasonableness standard applied by the Delaware Court of Chancery when evaluating restrictive covenants, while also being broad enough to protect CRH's $2.3 billion merchandising division gross merchandise volume. It is important to recall that the defendants' March 15, 2025 opposition to the preliminary injunction specifically argued that the original 18-month, all-retail non-compete was overbroad under Delaware law and cited FP UC Holdings, LLC v. Hamilton, C.A. No. 2020-0898-JRS (Del. Ch. 2021), and related authorities for the proposition that non-competes must be narrowly tailored to protect legitimate interests. The modified terms — 12 months for Rathore, 9 months for the other seven, limited to three categories — must be defensible as a reasonable compromise. Overly broad category definitions risk undermining this defensibility.

We should prepare the defined sub-category schedule in draft form for internal review by approximately March 29, 2025, so that it is ready for incorporation into the second draft.

B. Duration and Calculation of Restricted Period

The first draft specifies the following restricted periods:

• Sanjay Rathore (Former SVP, Merchandising Operations): 12 months from the resignation date (February 7, 2025) through February 6, 2026.

• Other seven employees: 9-month non-competes from February 7, 2025 through November 6, 2025.

These periods are consistent with the binding term sheet dated March 20, 2025.

Anticipated Pushback from WND. WND may seek tolling credit for the period during which the temporary restraining order ("TRO") was in effect. The TRO was entered on March 7, 2025 and remained in effect through March 21, 2025, when it was replaced by the Consent Interim Order entered by Vice Chancellor Zhao. The Consent Interim Order remains in effect pending execution of the Settlement Agreement and entry of the Consent Order. WND's argument would be that the defendants have already been subject to judicially imposed restraints since March 7, 2025 — a period of nearly three weeks as of the date of this memorandum — and that those days of restraint should count against the duration of the modified non-compete period. In practical terms, WND would argue that Rathore's 12-month period should be deemed to have commenced on March 7, 2025 (the TRO date) rather than February 7, 2025 (the resignation date), or alternatively that the period from March 7, 2025 forward should be credited against the running restricted period, effectively shortening the restriction by the number of days the TRO and Consent Interim Order have been in effect.

Internal Recommendation. We should resist any tolling credit for the TRO or Consent Interim Order periods. The term sheet dated March 20, 2025 expressly specifies that the restricted period runs from the resignation date (February 7, 2025) without any credit for TRO or interim order periods. This provision was the subject of explicit negotiation during the mediation, and the defendants agreed to it as part of the overall settlement framework. Moreover, the TRO and Consent Interim Order imposed broader restraints than the modified non-compete — specifically, the TRO prohibited the defendants from engaging in any merchandising role at Verdana, across all product categories, not merely the three restricted categories under the Settlement Agreement. Because the defendants were subject to broader restrictions during the TRO and Consent Interim Order period, they were not yet complying with the narrower modified covenants, and there is no equitable basis for crediting that period against the modified non-compete term. If WND raises this argument, we should cite the express language of the term sheet and the distinction between the breadth of the TRO and the modified restrictions.

C. Permitted Activities Carve-Outs

The first draft contains narrowly tailored carve-outs from the non-compete restriction. Specifically, the defendants are permitted to perform general management, administrative, or corporate strategy functions at Verdana that do not involve the three restricted product categories. This carve-out is designed to allow the Rathore Group to continue their employment at Verdana in a meaningful capacity while avoiding any direct or indirect involvement in the product categories where CRH's protectable interests are most concentrated.

Anticipated Pushback from WND. WND will likely seek broader carve-outs. In particular, we expect WND to request explicit permission for Rathore to engage in strategic planning at Verdana that "touches on" or "is adjacent to" the restricted categories — for example, enterprise-wide planning discussions that incidentally reference home goods, seasonal décor, or private-label apparel alongside non-restricted categories. WND will argue that excluding Rathore from any meeting or planning process that even mentions a restricted category would render him unable to serve in a senior management capacity at Verdana. WND will also likely seek a general "passive investment" carve-out, permitting the defendants to hold publicly traded equity or fund investments in companies that operate in the restricted categories, provided they do not exercise operational control.

Anticipated Pushback from Blackhall (on Verdana's behalf). Verdana will want clarity that the Rathore Group can participate in Verdana's "transformational growth initiative," which was announced in January 2025 and targets $4 billion in revenue by 2028. This initiative spans multiple product categories, including categories that are not restricted under the Settlement Agreement, and Verdana will argue that the Rathore Group's involvement in non-restricted aspects of the initiative should be expressly permitted. At the same time, Verdana will want to avoid a situation in which the participation of any Rathore Group member in a cross-functional initiative triggers a compliance question simply because the initiative also encompasses restricted categories.

Internal Recommendation. We should accept a "passive investment" carve-out, which is customary in restrictive covenant agreements and does not present meaningful risk to CRH's interests. The carve-out should be defined to permit holdings of up to five percent (5%) of the outstanding equity of any publicly traded company, consistent with market practice.

We should push back firmly on any broadening of the strategic planning carve-out that would permit the defendants, directly or indirectly, to participate in strategic planning, business development, or operational oversight activities related to the three restricted categories. The language in the first draft prohibits "direct or indirect" involvement in restricted categories, and this formulation should be maintained. We should add clarifying language specifying that indirect involvement includes, without limitation, the supervision or management of employees who work in the restricted categories, participation in meetings or planning sessions where restricted-category strategy is discussed or determined, and review or approval of business plans, budgets, or vendor relationships relating to the restricted categories. The concern is not merely that the defendants might personally engage in restricted activities, but that they might use their senior positions at Verdana to influence the direction of Verdana's competing businesses in the restricted categories using CRH's proprietary information and trade secrets.

With respect to Verdana's transformational growth initiative, we can include language clarifying that the defendants may participate in enterprise-wide or cross-functional initiatives at Verdana to the extent that their participation is limited to non-restricted categories and they are effectively walled off from restricted-category components of such initiatives. This provides Verdana with operational flexibility while preserving the integrity of the restrictions.

D. Geographic Scope

The first draft limits the non-compete to the United States, which is consistent with the geographic scope of the original restrictive covenants in the eight employment agreements and the scope specified in the term sheet. The Rathore Group's roles at CRH were domestically focused, and CRH's merchandising operations are concentrated in the United States.

Potential Pushback. We do not anticipate pushback on this point, as the United States geographic scope was already agreed in the term sheet and mirrors the original covenants. We note this issue here for completeness and flag it only in the event that WND or Blackhall raises an unanticipated objection.

III. Non-Solicitation Provisions

The Settlement Agreement contains two categories of non-solicitation restrictions: (a) employee non-solicitation and (b) vendor non-solicitation. These are set forth in Section 4 of the Settlement Agreement and supplemented by Exhibit C (the confidential vendor list). The non-solicitation provisions operate independently of the non-compete restrictions and, in the case of the employee non-solicitation, extend beyond the non-compete period.

A. Employee Non-Solicitation (18-Month Term)

The first draft provides that all eight defendants are prohibited from soliciting CRH employees for a period of 18 months from February 7, 2025 through August 6, 2026. The 18-month term reflects the extended risk period identified in CRH's preliminary injunction briefing: the coordinated departure of the Rathore Group, which included eight employees spanning vendor relations, merchandising operations, and category management, demonstrated a pattern of organized recruitment that, if unchecked, could strip CRH of critical institutional knowledge and relationships beyond the immediate departures.

Anticipated Pushback from WND. WND will almost certainly challenge the definition of "solicit" in the first draft. The current language defines solicitation broadly to include any direct or indirect communication encouraging, inducing, or facilitating the departure of a CRH employee. WND will request that the definition be narrowed to "active, targeted solicitation" and will seek exclusions for at least two scenarios: (i) situations in which CRH employees independently and without prompting contact the defendants to inquire about employment opportunities at Verdana or elsewhere, and (ii) situations in which CRH employees respond to generalized, publicly available job postings at Verdana that are not specifically directed at CRH employees.

Internal Recommendation. We should include a carve-out for generalized public job postings (e.g., postings on Verdana's careers website, Westmark Health IT, or third-party job boards) that are not specifically directed at CRH employees or targeted to CRH's employee base. This is a standard and reasonable carve-out that Delaware courts expect to see, and its absence could be used to argue that the restriction is overbroad.

However, we should resist any carve-out for inbound contacts initiated by CRH employees. The factual record in this case demonstrates precisely why such a carve-out is dangerous: the coordinated departure of the Rathore Group was orchestrated through encrypted messaging exchanges between January 13 and January 24, 2025 — a period during which, according to the Pinnacle Forensics report, Rathore and at least four of the other seven defendants communicated via Signal and Meridian Services Inc. regarding departure timing, Verdana compensation packages, and the identification of additional CRH employees who might be receptive to recruitment. In such circumstances, the distinction between an "inbound" contact from a CRH employee and a "solicitation" by a defendant is illusory: the defendants could easily engineer ostensibly inbound contacts through back-channel communications, social interactions, or intermediaries. Permitting such a carve-out would create an enforcement gap that undermines the entire purpose of the non-solicitation provision.

Additionally, we should ensure that the definition of "CRH employee" encompasses any person who was employed by CRH at any time during the 12 months preceding the date of the alleged solicitation. This broader temporal definition is necessary to prevent circumvention through the targeting of recently departed CRH employees — individuals who may still possess current CRH knowledge and relationships and who, if recruited shortly after their departure, could provide many of the same competitive advantages as current employees.

B. Vendor Non-Solicitation (12-Month Term; Top 50 Vendors)

The first draft restricts the defendants from soliciting CRH's top 50 vendors (ranked by aggregate annual spend) for a period of 12 months from February 7, 2025 through February 6, 2026. The identity of the top 50 vendors is set forth in the confidential vendor list attached as Exhibit C to the Settlement Agreement.

Anticipated Pushback from WND/Blackhall. We anticipate three categories of objection:

First, the definition of "solicitation" in the vendor non-solicitation context will be contested. The defendants and Verdana will argue that ordinary competitive dealings with vendors — placing purchase orders, negotiating standard commercial terms, attending industry trade shows — should not constitute prohibited "solicitation." This argument has particular force because Verdana already has existing, pre-settlement vendor relationships with many of the same vendors on the Exhibit C list. Verdana cannot reasonably be expected to cease all business dealings with vendors simply because they also supply CRH.

Second, Blackhall may challenge the accuracy or current relevance of the top 50 vendor list. Vendor rankings can shift over the course of a year, and Blackhall may seek the right to contest the inclusion of specific vendors — for example, vendors with whom Verdana has longer-standing or more significant relationships than CRH, or vendors that have reduced their business with CRH since the departure of the Rathore Group.

Third, both sides should agree that Exhibit C is confidential and filed under seal. The vendor list contains commercially sensitive information that neither CRH nor Verdana would want disclosed publicly.

Internal Recommendation. We should define "solicitation" of vendors to mean actively inducing, encouraging, or facilitating any vendor to (i) terminate, reduce, or materially alter its relationship with CRH, (ii) provide Verdana or the defendants with preferential pricing, terms, or supply priority obtained through knowledge of CRH's confidential vendor negotiation playbooks, pricing structures, or contract terms, or (iii) divert supply capacity or exclusive product lines from CRH to Verdana or any entity affiliated with the defendants. This formulation targets the specific competitive harm that CRH faces without prohibiting Verdana from engaging in ordinary, arms-length commercial dealings with overlapping vendors.

We should accept a mechanism for good-faith disputes regarding specific vendor inclusions on the Exhibit C list. Such disputes should be resolved by the compliance monitor (Aldwyn Compliance Solutions LLC), which will have access to the relevant vendor relationship information from both sides. This approach is preferable to litigation over individual vendor inclusions.

We should confirm that Exhibit C will be filed under seal with the Consent Order, with an appropriate order of confidentiality. Both sides have an interest in maintaining the confidentiality of this information.

Finally, we note that among the eight defendants, Lucia Fernandez-Gill (Former Director, Vendor Relations, Domestic) had the most direct and extensive access to CRH's vendor relationship details, including pricing structures, exclusivity arrangements, and negotiation strategies. Her 12-month vendor non-solicitation is of particular importance to CRH, and we should ensure that the restrictions as applied to her are not diluted in the markup process.

IV. Monetary Settlement Terms

The monetary components of the settlement are set forth in Section 5 of the Settlement Agreement. The total economic recovery to CRH comprises four elements: the lump-sum settlement payment, litigation cost reimbursement, and equity forfeitures applicable to Rathore and the other seven individual defendants. Each element is addressed below.

A. Lump-Sum Payment ($8,750,000)

The first draft provides that Verdana Commerce Group, Inc. shall pay CRH $8,750,000 as a lump-sum settlement payment within 30 calendar days of execution of the Settlement Agreement. Based on the target execution date of April 14, 2025, payment would be due no later than May 14, 2025.

Anticipated Pushback from Blackhall. We expect Blackhall to raise the following objections or requests on Verdana's behalf:

(i) Extended Payment Timeline. Blackhall may seek an extended payment period — 45 or 60 days rather than 30 days — arguing that Verdana requires additional time to arrange the payment through its treasury and obtain any necessary approvals from Greystone Capital Partners, LP, which, as Verdana's majority equity holder and PE sponsor, may have consent rights over disbursements of this magnitude under the Greystone/Verdana stockholders agreement.

(ii) Escrow Arrangement. Blackhall may propose that the $8,750,000 be deposited into a third-party escrow account rather than paid directly to CRH, with release contingent on CRH's compliance with its obligations under the Settlement Agreement (e.g., filing the Consent Order, dismissing the litigation).

(iii) Conditioning on Consent Order Entry. Blackhall may seek language conditioning the payment obligation on the entry of the Consent Order by Vice Chancellor Zhao, arguing that Verdana should not be required to pay until the litigation framework is formalized by the Court.

Internal Recommendation. We should resist extending the payment period beyond 30 days. The term sheet dated March 20, 2025 expressly specifies a 30-day payment window, and this provision was the product of direct negotiation between Gavin Blackhall and Bernard Crawford during the mediation. Departing from an agreed term would require a corresponding concession, and the payment timeline is not a term on which we should yield without receiving meaningful value in return.

We should reject any conditioning of the payment obligation on the entry of the Consent Order by Vice Chancellor Zhao. The obligation to pay should be absolute upon execution of the Settlement Agreement, with the Consent Order filing being a separate obligation governed by its own timeline and mechanics. Conditioning payment on Court action introduces an element of uncertainty that is unacceptable — the Court's schedule is not within the parties' control, and Vice Chancellor Zhao may not enter the Consent Order immediately upon submission.

If Blackhall insists on an escrow arrangement as a condition for closing, we may consider a limited concession: a five-business-day escrow with release tied to written confirmation by both parties that no material breach of the Settlement Agreement has occurred during the escrow period. However, our strong preference remains direct payment, and we should not offer this concession unless Blackhall makes it a significant sticking point.

B. Litigation Cost Reimbursement ($425,000)

The first draft includes Verdana's obligation to reimburse CRH $425,000 toward CRH's litigation costs, payable concurrently with the $8,750,000 settlement payment.

Potential Pushback. Minimal pushback is expected on this term, as it was part of the agreed settlement framework. The $425,000 figure was negotiated during the mediation and reflects a compromise: it represents approximately 23% of CRH's estimated total litigation costs incurred through the mediation.

For reference, CRH's total estimated Calderwood & Harkness fees and expenses through the target settlement execution date are approximately $1,850,000, broken down as follows:

The $425,000 reimbursement is inclusive, and CRH will bear the remaining approximately $1,425,000 in fees and expenses. We should confirm that the Settlement Agreement clearly characterizes the $425,000 as a reimbursement toward litigation costs, without any representation regarding the total amount of CRH's fees or expenses, to avoid any implication that CRH is disclosing the full extent of its legal spend.

C. Equity Forfeitures

The first draft addresses equity forfeitures in Section 5.3, encompassing both Rathore's individual forfeiture and the aggregate forfeiture applicable to the other seven defendants.

Rathore Forfeiture ($362,500). The first draft references Sanjay Rathore's forfeiture of $362,500 in CRH restricted stock units ("RSUs"). This amount comprises:

• Unvested RSUs ($181,250): Twenty-five percent (25%) of the $725,000 RSU grant dated March 15, 2021, representing the fourth and final annual vesting tranche. Three of the four annual tranches vested on schedule (March 15, 2022, March 15, 2023, and March 15, 2024). The fourth tranche was scheduled to vest on March 15, 2025 but was suspended upon the filing of the Verified Complaint and application for TRO.

• Clawback of Final Vested Tranche ($181,250): Clawback of the third vesting tranche (which vested on March 15, 2024) pursuant to the for-cause clawback provision contained in Section 8(c) of the CRH Equity Incentive Plan and incorporated into Rathore's RSU Award Agreement, triggered by Rathore's breach of the restrictive covenants contained in his employment agreement.

Other Seven Defendants — Aggregate Equity Forfeiture ($487,000). The aggregate equity forfeiture for the other seven defendants is $487,000, representing the sum of unvested RSU awards and, where applicable, for-cause clawback amounts, across the individual defendants' respective award agreements.

Total Equity Forfeitures: $849,500.

Anticipated Pushback from WND. We expect significant pushback from WND on the clawback of the final vested tranche for Rathore ($181,250). WND will likely argue as follows:

(i) Only unvested equity should be subject to forfeiture upon settlement. The forfeiture of unvested RSUs is a natural consequence of the termination of the employment relationship and the suspension of vesting — it does not require any finding of breach. The clawback of already-vested equity, by contrast, constitutes an affirmative disgorgement that is punitive in nature and inappropriate in the context of a settlement that includes no admission of wrongdoing.

(ii) The for-cause clawback provision was not triggered because the Settlement Agreement resolves the covenant breach claims without any admission of breach by any defendant. WND will argue that the clawback provision requires a determination of breach, and that the settlement — which expressly disclaims any such determination — cannot serve as the predicate for invoking the clawback.

(iii) To the extent the Settlement Agreement provides for the clawback, WND will argue that this treatment effectively penalizes Rathore beyond what was contemplated by the non-compete modification and the monetary settlement payment, and undermines the spirit of the compromise.

Internal Recommendation. We should maintain the position that the for-cause clawback is properly triggered. The filing of the Verified Complaint, supported by the sworn declarations of Marcus Langford (CEO) and Roland Ashby (CPO) and the Pinnacle Forensics preliminary report, establishes a factual record of breach — including data exfiltration, coordinated departure, and solicitation of CRH employees — that satisfies the clawback provision. The Settlement Agreement resolves the claims without requiring an admission of breach, but it does not negate the underlying facts, and the clawback provision does not require a final adjudication of breach, only a factual basis for invoking the for-cause trigger. Moreover, the $362,500 forfeiture figure was expressly included in the binding term sheet dated March 20, 2025, and the defendants agreed to it as part of the overall settlement economics.

That said, we should flag for Bernard Crawford that the clawback amount is a potential negotiating pressure point. WND may be willing to make concessions on other issues — such as the breadth of the product category definitions or the scope of the compliance monitor's access rights — in exchange for a reduction or elimination of the $181,250 vested-tranche clawback. We recommend holding the line on the clawback initially, but recognizing that it may serve as a trade point if negotiations reach an impasse on other issues.

Coordination Notes:

• A letter to Northland Trust Company (CRH's transfer agent) directing the cancellation of the unvested RSU awards and the processing of the clawback will need to be coordinated with the settlement execution date. Assuming execution on April 14, 2025, the letter should be prepared for delivery on or immediately after that date.

• A separate letter to the CRH Compensation Committee, providing a summary of the equity clawback and forfeiture provisions of the Settlement Agreement and requesting formal ratification, should be prepared by approximately April 10, 2025 to allow the Committee to act prior to execution.

D. Total Economic Recovery Reconciliation

The total economic recovery to CRH under the Settlement Agreement is summarized as follows:

All references to total recovery in the Settlement Agreement, the Consent Order, related board materials, and any SEC disclosure documents should consistently state this aggregate figure of $10,024,500. We should verify that no provision of the first draft characterizes the recovery differently or uses a subtotal that could create confusion.

V. Data Return and Destruction Protocol (Exhibit B Issues)

The data return and destruction obligations are set forth in Section 6 of the Settlement Agreement and detailed in Exhibit B (the "Data Return and Destruction Protocol"). These provisions address the disposition of CRH's confidential information and trade secrets that were exfiltrated by the Rathore Group prior to their departure. Given the nature and volume of the exfiltrated data, and its potential strategic value to Verdana, these provisions are among the most consequential in the Settlement Agreement.

A. Scope of Data Covered

The first draft defines "Exfiltrated Data" to include all 14,327 files (approximately 2.8 GB in aggregate) downloaded from CRH's Aldermere Systems and Pinnacle Health IT environments to personal cloud storage accounts between January 10 and February 4, 2025, as identified in the Pinnacle Forensics LLC preliminary report dated March 4, 2025 (the "Pinnacle Report"). The Pinnacle Report documented the systematic downloading activity, which involved transfers to personal Hollowell Health IT, Larkspur Technologies, and Meridian Systems accounts associated with all eight defendants, with the heaviest concentration of downloading activity occurring between January 22 and January 31, 2025.

In addition to the specifically identified files, the first draft defines the scope of covered data to include any copies, derivatives, summaries, notes, or compilations of the Exfiltrated Data, as well as any other CRH Confidential Information (as defined in the defendants' employment agreements) in the possession, custody, or control of the defendants or Verdana.

Anticipated Pushback from WND. WND may challenge the scope of the definition, particularly the inclusion of "derivatives" and "compilations." The defendants may argue that they cannot certify the destruction of information that has been retained only in their personal memory, or that exists in the form of handwritten notes, mental impressions, or general knowledge that is not readily identifiable as CRH-sourced. This is a common objection in trade secret settlement negotiations: defendants resist undertaking obligations they perceive as impossible to fully perform, and which could expose them to contempt or breach-of-certification claims if information later surfaces that arguably constitutes a "derivative" of the Exfiltrated Data.

Internal Recommendation. We should maintain the "derivatives" and "compilations" language, as it is essential to preventing circumvention. Without this language, the defendants could retain the substance of CRH's trade secrets in reformatted or summarized form while certifying that they have destroyed the specific files identified in the Pinnacle Report. However, consistent with standard practice in trade secret settlement agreements, we should add a reasonableness qualifier for information retained only in individuals' unaided memory. Language such as "nothing herein shall require any individual to undergo any procedure to erase or suppress information retained solely in the individual's unaided memory without reference to the Exfiltrated Data or other CRH Confidential Information" is customary and should satisfy WND's objection without meaningfully weakening the protocol. All tangible and electronic copies — including reformatted, summarized, or compiled versions — must remain subject to strict return or destruction obligations.

B. Return/Destruction Timeline

The first draft requires the return or certified destruction of all Exfiltrated Data within 10 business days of execution of the Settlement Agreement. Assuming an April 14, 2025 execution date, the destruction deadline would be approximately April 28, 2025.

Anticipated Pushback from Blackhall. Blackhall may argue that 10 business days is insufficient for Verdana to conduct a thorough and defensible internal sweep of its systems. The concern is legitimate in one respect: the Pinnacle Report documents that at least some of the Exfiltrated Data was transferred from the defendants' personal cloud storage accounts to Verdana's internal systems during the period between the Rathore Group's start dates at Verdana and the entry of the TRO — approximately February 14 through March 7, 2025. During this three-week period, the data may have been disseminated internally at Verdana to other employees, incorporated into presentations or working documents, or stored in shared drives, email attachments, or collaboration platforms. Identifying all repositories of the data across Verdana's systems may require a methodical search that cannot be completed within 10 business days.

Internal Recommendation. We should consider extending the destruction timeline to 15 business days if Blackhall pushes strongly on this point, but only with the following structure: the defendants and Verdana must provide a preliminary certification at 10 business days confirming that (i) all known repositories of Exfiltrated Data have been identified, (ii) a destruction process has been initiated, and (iii) no further dissemination of the data is occurring. A final, comprehensive certification must then be provided at 15 business days (approximately May 5, 2025, based on an April 14 execution date), confirming that destruction is complete. This two-step approach provides Verdana with additional time for a thorough sweep while ensuring that CRH receives timely assurance that the process is underway.

C. Certification Mechanics

The first draft requires each individual defendant to provide a sworn certification of destruction (in the form attached as Annex 1 to Exhibit B), attesting under oath that all Exfiltrated Data in the defendant's possession, custody, or control has been returned to CRH or permanently destroyed. In addition, Verdana's General Counsel, Helen Tsoi, is required to provide a corporate officer certification attesting that Verdana has conducted a diligent search of its systems and has returned or destroyed all Exfiltrated Data and CRH Confidential Information in Verdana's possession, custody, or control.

Anticipated Pushback from WND. Individual defendants may resist providing sworn certifications, which create potential perjury exposure. WND may argue that the settlement is premised on good faith compliance, not adversarial process, and that requiring sworn certifications is unnecessarily punitive. WND may propose alternative formats, such as unsworn affirmations or simple declarations.

Internal Recommendation. Sworn certifications of data destruction are standard in trade secret settlement practice and have been required in analogous Delaware Court of Chancery consent orders. We should maintain this requirement. However, if WND objects to the notarized affidavit format specified in the first draft, we can offer to use the "declaration under penalty of perjury" format pursuant to 28 U.S.C. § 1746, which carries the same legal weight as a sworn statement but does not require a notary. This is a procedural concession that does not affect the substance of the obligation and should resolve the objection.

D. Independent Forensic Audit of Verdana's Systems

The first draft provides for an independent forensic audit of Verdana's systems by Pinnacle Forensics LLC (led by Dr. Rajiv Anand) to verify the completeness and effectiveness of Verdana's data destruction. The audit is to be conducted at Verdana's expense, capped at $175,000.

Anticipated Pushback from Blackhall. We expect Blackhall to raise multiple objections regarding the forensic audit:

(i) Scope of Audit. Verdana will want to limit the audit to specifically identified systems and repositories — those named in the destruction certifications and the Pinnacle Report — rather than permitting a general forensic sweep of all Verdana systems. A general sweep would implicate Verdana's proprietary systems, trade secrets, and confidential business information, and Verdana will argue that it goes far beyond what is necessary to verify the destruction of CRH data.

(ii) Confidentiality Protections. Verdana will demand robust protections ensuring that Pinnacle and CRH are restricted from accessing, reviewing, or retaining any Verdana proprietary systems, data, or information beyond what is strictly necessary to verify the destruction of CRH's Exfiltrated Data. Verdana will be particularly concerned about the risk that a forensic audit could become a vehicle for CRH to obtain competitive intelligence about Verdana's operations.

(iii) Timing. Verdana may want the audit to occur after the destruction certification has been completed and delivered, rather than concurrently with the destruction process. This sequencing would allow Verdana to complete its internal process before subjecting its systems to external review.

(iv) Dispute Resolution. If Pinnacle identifies data during the audit that Verdana claims is its own (i.e., not derived from CRH), a dispute resolution mechanism will be needed. This is a realistic scenario given the 28 overlapping product categories between the two companies — some documents on Verdana's systems may contain information that is similar to CRH's Exfiltrated Data but was independently developed by Verdana.

Internal Recommendation. We should accept reasonable scope limitations on the audit. Specifically, we should agree that the audit will be limited to "systems and repositories identified in the destruction certifications, plus any additional systems identified through reasonable investigation by Pinnacle based on its review of the destruction certifications and the underlying data transfer logs documented in the Pinnacle Report." This formulation gives Pinnacle sufficient latitude to follow the data trail while assuring Verdana that the audit will not become a fishing expedition.

We should agree to a confidentiality and non-use protocol governing the audit process. Pinnacle should be required to execute a confidentiality agreement with Verdana, and any Verdana proprietary data encountered during the audit should be treated as confidential and not shared with CRH, except to the extent necessary to resolve a dispute about whether specific data constitutes CRH's Exfiltrated Data.

On timing, we should agree that the audit will occur within 30 calendar days after delivery of the final destruction certification. This sequencing is reasonable and allows the audit to serve as a verification mechanism rather than a parallel process.

For disputes regarding the provenance of specific data, we propose resolution by the compliance monitor (Aldwyn Compliance Solutions LLC), which will have the necessary context and access to information from both sides. If the monitor is not yet operational at the time of the dispute (the audit may occur before the monitor has fully commenced its engagement), the dispute should be referred to the mediator, the Honorable Philip Ashford (Ret.), for expedited resolution through Meridian ADR Services LLC.

E. Project Ridgeline Materials

A matter of particular significance within the data return and destruction protocol is the treatment of Project Ridgeline materials. Project Ridgeline is CRH's five-year strategic category expansion plan, covering proprietary vendor terms, private-label margin targets, ecommerce assortment algorithms, and competitive positioning strategies across CRH's core merchandising categories. The Project Ridgeline plan was completed in October 2024, and the Rathore Group — particularly Rathore, Fernandez-Gill, and at least three other defendants — had full access to the plan during its development and after its completion.

The first draft treats Project Ridgeline materials as a subset of Exfiltrated Data subject to the general return/destruction protocol. While this is technically correct, we believe that Project Ridgeline merits specific treatment given its strategic importance and its potential relevance to Verdana's operations.

Internal Recommendation. We should include a specific provision in the Settlement Agreement requiring Verdana to affirmatively represent and warrant that it has not used any Project Ridgeline materials, or information derived from such materials, to inform its "transformational growth initiative" (the January 2025 initiative targeting $4 billion in revenue by 2028) or any other strategic planning, business development, or operational activity. The provision should also prohibit Verdana from using Project Ridgeline materials or information at any time in the future.

Additionally, the Project Ridgeline materials should be specifically called out in the DUTSA (Delaware Uniform Trade Secrets Act) trade secret acknowledgment section of the Settlement Agreement (Section 6.5 of the first draft), which requires the defendants and Verdana to acknowledge that certain categories of CRH information constitute trade secrets under Delaware law. Listing Project Ridgeline by name in this section strengthens CRH's position in any future enforcement action.

VI. Compliance Monitor Framework (Exhibit D and Related Provisions)

The compliance monitor provisions are set forth in Section 7 of the Settlement Agreement and detailed in Exhibit D (the form of Compliance Monitor Engagement Letter). The compliance monitor is a central component of the settlement: it provides a mechanism for ongoing verification of the defendants' and Verdana's compliance with the modified covenants and data-destruction obligations, and it creates a structured escalation process for suspected violations.

A. Selection of Monitor — Aldwyn Compliance Solutions LLC

The first draft names Aldwyn Compliance Solutions LLC, a Philadelphia-based compliance consulting firm, as the proposed independent compliance monitor. The selection of Aldwyn was agreed in principle during the March 18 mediation session, and Aldwyn's managing principal has confirmed the firm's availability and willingness to serve in this capacity.

Anticipated Pushback. No pushback is expected on the identity of the monitor, given the parties' agreement during mediation. However, Blackhall may seek to include a provision allowing either party to object to the monitor for cause within a specified period following execution — for example, if a conflict of interest is identified or if the monitor demonstrates bias in the performance of its duties.

Internal Recommendation. We should include a for-cause removal provision, which is standard in compliance monitor engagements. The provision should require 30 days' written notice to all parties and the Court, specifying the grounds for removal. Replacement should be by mutual agreement of the parties or, failing agreement within 15 business days of the removal, by appointment of Vice Chancellor Zhao upon application by either party. The for-cause standard should be defined to include conflicts of interest, demonstrated bias, material failure to perform the monitoring duties, and breach of the confidentiality obligations set forth in the engagement letter.

B. Monitor Term and Scope

The first draft provides for a 12-month engagement, commencing upon execution of the Settlement Agreement (target April 14, 2025) and continuing through April 14, 2026. During this period, the monitor will conduct quarterly verification of compliance with the following obligations:

(i) The modified non-compete restrictions (three restricted product categories);

(ii) The employee non-solicitation restrictions (18-month term, through August 6, 2026);

(iii) The vendor non-solicitation restrictions (12-month term, top 50 vendors, through February 6, 2026); and

(iv) The data return and destruction obligations.

Anticipated Pushback from Blackhall/WND. Both counsel groups will likely seek to limit the monitor's access to Verdana's internal records and to the defendants' personal records. Verdana's position will be that the monitor's verification rights should be confined to:

(i) Reviewing the defendants' job descriptions and reporting lines at Verdana;

(ii) Confirming that the defendants are not engaged in the three restricted product categories; and

(iii) Reviewing vendor contact logs to verify compliance with the vendor non-solicitation — but not extending to general access to Verdana's business operations, financial data, strategic plans, customer information, or other proprietary materials.

Internal Recommendation. The monitor must have access sufficient to verify compliance in a meaningful and substantive way. A monitor who can only review job descriptions and receive written assurances from Verdana's General Counsel will not provide the level of independent verification that the settlement requires. At the same time, we recognize that Verdana has legitimate confidentiality interests and that an overbroad access provision could be used as a basis for challenging the reasonableness of the settlement framework.

We propose a defined "access protocol" to be set forth in the Compliance Monitoring Protocol (a separate procedures annex to the engagement letter, to be finalized by approximately April 11, 2025). The access protocol should include the following elements:

(i) Quarterly Written Reports. The monitor may issue quarterly requests for written reports from Verdana's General Counsel (Helen Tsoi) describing the defendants' current roles, responsibilities, reporting lines, and functional assignments, and certifying compliance with the modified covenants.

(ii) Individual Interviews. The monitor shall have the right to interview each of the eight defendants individually, up to once per quarter, regarding their activities at Verdana and their compliance with the Settlement Agreement. Interviews may be conducted in person or by video conference, at the monitor's discretion.

(iii) Email Keyword Searches. The monitor shall have access to the defendants' Verdana email accounts for purposes of conducting keyword searches related to the three restricted product categories and the top 50 CRH vendors listed in Exhibit C. The keyword list shall be developed by the monitor in consultation with both parties and shall be reasonably tailored to identify potential compliance issues without sweeping in unrelated communications. This is a critical tool — email communications are the most likely channel through which inadvertent or intentional involvement in restricted categories would be documented.

(iv) Organizational Chart Review. The monitor shall have the right to review current organizational charts showing the defendants' reporting lines and functional responsibilities, including any changes to the defendants' positions during the monitoring period.

We should resist granting general access to Verdana's financial data, strategic plans, or operational information beyond what is necessary for compliance verification. The access protocol should include appropriate confidentiality provisions governing the monitor's handling of Verdana information, and any information obtained by the monitor should be used solely for compliance verification purposes and not disclosed to CRH except in the form of compliance reports.

C. Cost Allocation

The total estimated cost of the 12-month compliance monitor engagement is $360,000, based on Aldwyn's proposed fee structure. The cost allocation agreed during mediation is as follows:

No pushback is expected on this allocation, as it was part of the agreed settlement framework. The Compliance Monitor Engagement Letter (Exhibit D) should reflect this allocation and specify quarterly invoicing, with each party responsible for its proportionate share of each quarterly invoice. We should confirm that the engagement letter form in the first draft accurately reflects these terms.

D. Reporting and Escalation

The first draft provides for quarterly compliance reports from Aldwyn to CRH (via Calderwood & Harkness LLP), Verdana (via Blackhall & Soren LLP), and the Rathore Group (via Whitfield, Nygaard & Doyle LLP).

Anticipated Pushback from Blackhall. Blackhall may demand that compliance reports be issued simultaneously to all parties, without any advance review or preview by CRH's counsel. This is a reasonable concern — if CRH receives the reports before Verdana, it could create an informational asymmetry that undermines the perceived neutrality of the monitoring process.

Internal Recommendation. We should accept simultaneous distribution of all compliance reports to all counsel of record. This is a low-cost concession that promotes the credibility and neutrality of the monitoring framework. We should not seek advance access to reports.

In addition, the first draft includes an escalation provision for suspected violations, which we should refine as follows: Upon identifying a suspected violation of the Settlement Agreement or Consent Order, the monitor shall notify all parties and the Court in writing within five (5) business days. The party alleged to have committed the violation shall then have an opportunity to cure within fifteen (15) business days of receiving notice. If the alleged violation is not cured or adequately explained within the 15-business-day cure period, the complaining party may seek contempt or enforcement relief from Vice Chancellor Zhao. This structure provides an opportunity for resolution of potential disputes short of Court intervention while preserving CRH's right to enforce the Consent Order through contempt proceedings if necessary.

E. Letter Agreement re: Information-Sharing and Access

A separate letter agreement among CRH, Verdana, and Aldwyn Compliance Solutions LLC (the "Monitoring Side Letter") will govern the framework for information sharing, access to records, cooperation obligations, and confidentiality protections applicable to the monitoring engagement. The first draft references this letter agreement but does not yet include it as an exhibit to the Settlement Agreement.

Internal Recommendation. We should prepare the Monitoring Side Letter in draft form for circulation with the second draft of the Settlement Agreement. The letter should address, at a minimum: (i) the access protocol described above; (ii) confidentiality obligations of the monitor with respect to both CRH and Verdana proprietary information; (iii) cooperation obligations of the defendants and Verdana; (iv) insurance and indemnification provisions for the monitor; and (v) the process for amendment of the monitoring protocol by mutual agreement. The target completion date for the Monitoring Side Letter is April 11, 2025, to allow for review and comment by all parties before the target execution date.

VII. Consent Order Mechanics

The Consent Order is the judicial instrument through which the key provisions of the Settlement Agreement are incorporated into an order of the Delaware Court of Chancery, giving them the force and effect of a court order and making them enforceable through contempt proceedings. The mechanics of the Consent Order are addressed in Section 8 of the Settlement Agreement.

A. Incorporation of Modified Covenants

The first draft contemplates a stipulated Consent Order to be filed with the Delaware Court of Chancery, incorporating the modified restrictive covenant terms (Exhibit A) and data-destruction obligations (Exhibit B), with the Court retaining jurisdiction for enforcement.

Anticipated Issue. A threshold question is the extent to which the Settlement Agreement's provisions are incorporated into the Consent Order versus remaining as a private contractual agreement. The key tension is as follows:

• CRH's Interest: CRH wants maximum incorporation of substantive provisions into the Consent Order. Incorporation gives CRH the ability to enforce violations through contempt proceedings in the Court of Chancery, which provide more immediate and powerful remedies (including fines, sanctions, and potential incarceration for willful violations) than breach-of-contract claims. Incorporation also underscores the seriousness of the obligations and may deter violations.

• Defendants'/Verdana's Interest: The defendants and Verdana prefer minimal incorporation. A Consent Order is a public judicial document (even if filed partially under seal), and extensive incorporation increases public disclosure of the settlement terms. Moreover, Court oversight through a Consent Order is more burdensome and intrusive than private contractual enforcement — any alleged violation becomes a matter before Vice Chancellor Zhao, rather than a private dispute between the parties.

Internal Recommendation. We recommend the following allocation:

Incorporated into the Consent Order: The modified restrictive covenant terms (non-compete and non-solicitation provisions), the data return and destruction obligations, and the appointment and authority of the compliance monitor. These are the provisions for which contempt enforcement power is most important and for which CRH derives the greatest benefit from Court oversight.

Remaining in the private Settlement Agreement only: The monetary terms — the $8,750,000 settlement payment, the equity forfeitures ($849,500 aggregate), and the $425,000 litigation cost reimbursement. These are contractual obligations enforceable through breach-of-contract claims, and there is no meaningful benefit to incorporating them into the Consent Order. Moreover, public disclosure of the dollar amounts in a Consent Order could create complications for both CRH and Verdana — CRH's SEC filings will address the financial terms on a timeline and in a manner controlled by CRH's disclosure counsel, and premature or uncontrolled disclosure through a public court filing is undesirable.

Devon Archer is preparing a research memorandum on Delaware law governing court-approved consent orders that incorporate restrictive covenants, including the standards for entry of such orders, the scope of permissible incorporation, and the Court's enforcement powers. This memorandum is due approximately April 3, 2025 and will inform the final structure of the Consent Order.

B. Retained Jurisdiction

The first draft provides that Vice Chancellor Zhao retains jurisdiction for enforcement of the Consent Order for the duration of the restrictive covenant periods. The latest-expiring obligation is the 18-month employee non-solicitation, which runs through August 6, 2026. Accordingly, the Court's retained jurisdiction would extend through at least that date, with an additional period to address any enforcement proceedings initiated before the expiration date.

Anticipated Pushback. None expected. Retained jurisdiction clauses are standard in consent decrees entered by the Delaware Court of Chancery, and the parties agreed in the mediation that the Court would retain jurisdiction for enforcement.

C. Dismissal Mechanics

The first draft references a stipulation for dismissal with prejudice to be filed at the conclusion of the 12-month compliance monitor period (April 14, 2026), contingent on full compliance with the Consent Order and Settlement Agreement during the monitoring period.

Anticipated Pushback from WND. WND may argue that dismissal should be automatic at the end of the monitor period, absent an affirmative objection by CRH filed within a specified period (e.g., 30 days after delivery of the final compliance monitor report). WND's concern is that the litigation should not remain open indefinitely — if CRH

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
TO: Bernard Crawford, Responsible Partner
FROM: James Underwood, Lead Associate
CC: Renata Vasquez, Billing Partner; Devon Archer, Working Associate
DATE: March 26, 2025
RE: Internal Redline Commentary — Key Issues and Anticipated Counterparty Pushback on First Draft of Standstill and Settlement Agreement
MATTER: Cascade Retail Holdings Inc. v. Rathore et al., C.A. No. 2025-0198-MTZ (Del. Ch.)
MATTER NO.: 1038-00006
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I. Executive Summary
On March 24, 2025, Calderwood & Harkness LLP circulated the first draft of the Standstill and Settlement Agreement (the "Settlement Agreement") to Whitfield, Nygaard & Doyle LLP ("WND," counsel to the Rathore Group, led by Catherine Nygaard) and Blackhall & Soren LLP ("Blackhall," counsel to Verdana Commerce Group, Inc. ("Verdana"), led by Gavin Blackhall and Meredith Lau). The first draft was transmitted via secure portal and acknowledged by both firms on the same date.
The first draft implements the settlement framework reached at the conclusion of the March 18, 2025 mediation session before the Honorable Philip Ashford (Ret.), conducted through Meridian ADR Services LLC (Ref. Meridian-2025-0318-CRH). The framework was memorialized in the binding term sheet executed by all parties on March 20, 2025, which sets forth the principal economic and non-economic terms of the settlement and contemplates the preparation, negotiation, and execution of a long-form Settlement Agreement and a stipulated Consent Order to be filed with the Delaware Court of Chancery before Vice Chancellor Michelle T. Zhao.
The purpose of this memorandum is to catalog the principal drafting issues in the first draft, identify areas of expected pushback from WND (on behalf of the eight individual defendants) and Blackhall (on behalf of Verdana), and provide recommended internal positions on each issue. This analysis is intended to prepare the Calderwood & Harkness team for the counterparty markup process and to allow Bernard Crawford, as responsible partner, to evaluate our negotiating posture ahead of the receipt of comments.
We anticipate that comments from WND and Blackhall will be received by approximately March 31, 2025, consistent with the schedule communicated during the mediation. Upon receipt, we will prepare a second draft incorporating agreed revisions and noting areas of continued disagreement for further negotiation. The target execution date remains April 14, 2025.
For purposes of organization, this memorandum addresses seven principal categories of issues:
1. Modified Non-Compete Scope (Exhibit A Issues);
2. Non-Solicitation Provisions;
3. Monetary Settlement Terms;
4. Data Return and Destruction Protocol (Exhibit B Issues);
5. Compliance Monitor Framework (Exhibit D and Related Provisions);
6. Consent Order Mechanics; and
7. Miscellaneous/General Provisions.
Each section below identifies the relevant first draft provisions, analyzes anticipated counterparty positions, and provides our recommended internal approach. Section IX addresses coordination items and open action items requiring attention before and during the markup process. Section X provides a summary recommendation and proposed next steps.
II. Modified Non-Compete Scope (Exhibit A Issues)
The modified non-compete provisions are set forth in Section 3 of the Settlement Agreement and detailed in Exhibit A. These provisions represent the core compromise of the settlement: a narrowing of the original all-retail non-compete (which the defendants challenged as overbroad in their March 15, 2025 opposition to the preliminary injunction) in exchange for the defendants' agreement to comply with enforceable, category-specific restrictions for a defined period. The following sub-issues warrant attention.
A. Product Category Definitions
The first draft defines the three restricted product categories as "home goods," "seasonal décor," and "private-label apparel." These three categories correspond to the CRH merchandising divisions in which the Rathore Group had the most concentrated operational responsibility, and in which CRH maintains the most significant proprietary competitive advantages — including vendor relationships, margin structures, assortment algorithms, and private-label brand strategies.
Anticipated Pushback from WND. We expect WND to argue that the definitions as drafted are too vague and potentially sweep in product areas outside the scope of CRH's legitimate protectable interests. Specifically, WND will likely contend that "home goods" is an umbrella term that could encompass a vast range of merchandise — from furniture and home textiles to kitchen appliances and storage solutions — many of which fall outside the categories in which the Rathore Group possessed confidential information or trade secrets. WND will almost certainly demand that the Settlement Agreement incorporate granular category codes, potentially referencing specific NAICS codes or, alternatively, CRH's own internal category taxonomy, to give the defendants clear notice of what activities are prohibited and what activities are permitted.
Anticipated Pushback from Blackhall (on Verdana's behalf). Verdana's primary concern is operational: broad product category definitions could effectively preclude the Rathore Group from working in any meaningful capacity at Verdana, which operates across categories that overlap substantially with CRH's business. According to publicly available information and the preliminary injunction briefing, there are approximately 28 overlapping product categories between CRH and Verdana. Verdana will argue that overly broad definitions frustrate the purpose of the settlement — which contemplates that the Rathore Group will continue employment at Verdana in non-restricted capacities — and could expose Verdana to compliance risk even if it acts in good faith.
Internal Recommendation. We recommend proposing a defined schedule of specific sub-categories within each of the three umbrella terms, cross-referenced to CRH's internal merchandising category codes. This approach provides the precision that both WND and Blackhall will demand while ensuring that the restrictions are anchored to CRH's actual competitive interests. We should resist any proposal to tie the definitions to NAICS codes, which are designed for statistical classification purposes, not covenant enforcement, and which could be manipulated through creative categorization of business activities. The defined sub-category schedule should be prepared in consultation with Martin Cho (interim SVP, Merchandising) and should cover the specific merchandise lines within home goods, seasonal décor, and private-label apparel that are most directly implicated by the Rathore Group's access to proprietary information.
The category definitions must be sufficiently precise to satisfy the reasonableness standard applied by the Delaware Court of Chancery when evaluating restrictive covenants, while also being broad enough to protect CRH's $2.3 billion merchandising division gross merchandise volume. It is important to recall that the defendants' March 15, 2025 opposition to the preliminary injunction specifically argued that the original 18-month, all-retail non-compete was overbroad under Delaware law and cited FP UC Holdings, LLC v. Hamilton, C.A. No. 2020-0898-JRS (Del. Ch. 2021), and related authorities for the proposition that non-competes must be narrowly tailored to protect legitimate interests. The modified terms — 12 months for Rathore, 9 months for the other seven, limited to three categories — must be defensible as a reasonable compromise. Overly broad category definitions risk undermining this defensibility.
We should prepare the defined sub-category schedule in draft form for internal review by approximately March 29, 2025, so that it is ready for incorporation into the second draft.
B. Duration and Calculation of Restricted Period
The first draft specifies the following restricted periods:
• Sanjay Rathore (Former SVP, Merchandising Operations): 12 months from the resignation date (February 7, 2025) through February 6, 2026.
• Other seven employees: 9-month non-competes from February 7, 2025 through November 6, 2025.
These periods are consistent with the binding term sheet dated March 20, 2025.
Anticipated Pushback from WND. WND may seek tolling credit for the period during which the temporary restraining order ("TRO") was in effect. The TRO was entered on March 7, 2025 and remained in effect through March 21, 2025, when it was replaced by the Consent Interim Order entered by Vice Chancellor Zhao. The Consent Interim Order remains in effect pending execution of the Settlement Agreement and entry of the Consent Order. WND's argument would be that the defendants have already been subject to judicially imposed restraints since March 7, 2025 — a period of nearly three weeks as of the date of this memorandum — and that those days of restraint should count against the duration of the modified non-compete period. In practical terms, WND would argue that Rathore's 12-month period should be deemed to have commenced on March 7, 2025 (the TRO date) rather than February 7, 2025 (the resignation date), or alternatively that the period from March 7, 2025 forward should be credited against the running restricted period, effectively shortening the restriction by the number of days the TRO and Consent Interim Order have been in effect.
Internal Recommendation. We should resist any tolling credit for the TRO or Consent Interim Order periods. The term sheet dated March 20, 2025 expressly specifies that the restricted period runs from the resignation date (February 7, 2025) without any credit for TRO or interim order periods. This provision was the subject of explicit negotiation during the mediation, and the defendants agreed to it as part of the overall settlement framework. Moreover, the TRO and Consent Interim Order imposed broader restraints than the modified non-compete — specifically, the TRO prohibited the defendants from engaging in any merchandising role at Verdana, across all product categories, not merely the three restricted categories under the Settlement Agreement. Because the defendants were subject to broader restrictions during the TRO and Consent Interim Order period, they were not yet complying with the narrower modified covenants, and there is no equitable basis for crediting that period against the modified non-compete term. If WND raises this argument, we should cite the express language of the term sheet and the distinction between the breadth of the TRO and the modified restrictions.
C. Permitted Activities Carve-Outs
The first draft contains narrowly tailored carve-outs from the non-compete restriction. Specifically, the defendants are permitted to perform general management, administrative, or corporate strategy functions at Verdana that do not involve the three restricted product categories. This carve-out is designed to allow the Rathore Group to continue their employment at Verdana in a meaningful capacity while avoiding any direct or indirect involvement in the product categories where CRH's protectable interests are most concentrated.
Anticipated Pushback from WND. WND will likely seek broader carve-outs. In particular, we expect WND to request explicit permission for Rathore to engage in strategic planning at Verdana that "touches on" or "is adjacent to" the restricted categories — for example, enterprise-wide planning discussions that incidentally reference home goods, seasonal décor, or private-label apparel alongside non-restricted categories. WND will argue that excluding Rathore from any meeting or planning process that even mentions a restricted category would render him unable to serve in a senior management capacity at Verdana. WND will also likely seek a general "passive investment" carve-out, permitting the defendants to hold publicly traded equity or fund investments in companies that operate in the restricted categories, provided they do not exercise operational control.
Anticipated Pushback from Blackhall (on Verdana's behalf). Verdana will want clarity that the Rathore Group can participate in Verdana's "transformational growth initiative," which was announced in January 2025 and targets $4 billion in revenue by 2028. This initiative spans multiple product categories, including categories that are not restricted under the Settlement Agreement, and Verdana will argue that the Rathore Group's involvement in non-restricted aspects of the initiative should be expressly permitted. At the same time, Verdana will want to avoid a situation in which the participation of any Rathore Group member in a cross-functional initiative triggers a compliance question simply because the initiative also encompasses restricted categories.
Internal Recommendation. We should accept a "passive investment" carve-out, which is customary in restrictive covenant agreements and does not present meaningful risk to CRH's interests. The carve-out should be defined to permit holdings of up to five percent (5%) of the outstanding equity of any publicly traded company, consistent with market practice.
We should push back firmly on any broadening of the strategic planning carve-out that would permit the defendants, directly or indirectly, to participate in strategic planning, business development, or operational oversight activities related to the three restricted categories. The language in the first draft prohibits "direct or indirect" involvement in restricted categories, and this formulation should be maintained. We should add clarifying language specifying that indirect involvement includes, without limitation, the supervision or management of employees who work in the restricted categories, participation in meetings or planning sessions where restricted-category strategy is discussed or determined, and review or approval of business plans, budgets, or vendor relationships relating to the restricted categories. The concern is not merely that the defendants might personally engage in restricted activities, but that they might use their senior positions at Verdana to influence the direction of Verdana's competing businesses in the restricted categories using CRH's proprietary information and trade secrets.
With respect to Verdana's transformational growth initiative, we can include language clarifying that the defendants may participate in enterprise-wide or cross-functional initiatives at Verdana to the extent that their participation is limited to non-restricted categories and they are effectively walled off from restricted-category components of such initiatives. This provides Verdana with operational flexibility while preserving the integrity of the restrictions.
D. Geographic Scope
The first draft limits the non-compete to the United States, which is consistent with the geographic scope of the original restrictive covenants in the eight employment agreements and the scope specified in the term sheet. The Rathore Group's roles at CRH were domestically focused, and CRH's merchandising operations are concentrated in the United States.
Potential Pushback. We do not anticipate pushback on this point, as the United States geographic scope was already agreed in the term sheet and mirrors the original covenants. We note this issue here for completeness and flag it only in the event that WND or Blackhall raises an unanticipated objection.
III. Non-Solicitation Provisions
The Settlement Agreement contains two categories of non-solicitation restrictions: (a) employee non-solicitation and (b) vendor non-solicitation. These are set forth in Section 4 of the Settlement Agreement and supplemented by Exhibit C (the confidential vendor list). The non-solicitation provisions operate independently of the non-compete restrictions and, in the case of the employee non-solicitation, extend beyond the non-compete period.
A. Employee Non-Solicitation (18-Month Term)
The first draft provides that all eight defendants are prohibited from soliciting CRH employees for a period of 18 months from February 7, 2025 through August 6, 2026. The 18-month term reflects the extended risk period identified in CRH's preliminary injunction briefing: the coordinated departure of the Rathore Group, which included eight employees spanning vendor relations, merchandising operations, and category management, demonstrated a pattern of organized recruitment that, if unchecked, could strip CRH of critical institutional knowledge and relationships beyond the immediate departures.
Anticipated Pushback from WND. WND will almost certainly challenge the definition of "solicit" in the first draft. The current language defines solicitation broadly to include any direct or indirect communication encouraging, inducing, or facilitating the departure of a CRH employee. WND will request that the definition be narrowed to "active, targeted solicitation" and will seek exclusions for at least two scenarios: (i) situations in which CRH employees independently and without prompting contact the defendants to inquire about employment opportunities at Verdana or elsewhere, and (ii) situations in which CRH employees respond to generalized, publicly available job postings at Verdana that are not specifically directed at CRH employees.
Internal Recommendation. We should include a carve-out for generalized public job postings (e.g., postings on Verdana's careers website, Westmark Health IT, or third-party job boards) that are not specifically directed at CRH employees or targeted to CRH's employee base. This is a standard and reasonable carve-out that Delaware courts expect to see, and its absence could be used to argue that the restriction is overbroad.
However, we should resist any carve-out for inbound contacts initiated by CRH employees. The factual record in this case demonstrates precisely why such a carve-out is dangerous: the coordinated departure of the Rathore Group was orchestrated through encrypted messaging exchanges between January 13 and January 24, 2025 — a period during which, according to the Pinnacle Forensics report, Rathore and at least four of the other seven defendants communicated via Signal and Meridian Services Inc. regarding departure timing, Verdana compensation packages, and the identification of additional CRH employees who might be receptive to recruitment. In such circumstances, the distinction between an "inbound" contact from a CRH employee and a "solicitation" by a defendant is illusory: the defendants could easily engineer ostensibly inbound contacts through back-channel communications, social interactions, or intermediaries. Permitting such a carve-out would create an enforcement gap that undermines the entire purpose of the non-solicitation provision.
Additionally, we should ensure that the definition of "CRH employee" encompasses any person who was employed by CRH at any time during the 12 months preceding the date of the alleged solicitation. This broader temporal definition is necessary to prevent circumvention through the targeting of recently departed CRH employees — individuals who may still possess current CRH knowledge and relationships and who, if recruited shortly after their departure, could provide many of the same competitive advantages as current employees.
B. Vendor Non-Solicitation (12-Month Term; Top 50 Vendors)
The first draft restricts the defendants from soliciting CRH's top 50 vendors (ranked by aggregate annual spend) for a period of 12 months from February 7, 2025 through February 6, 2026. The identity of the top 50 vendors is set forth in the confidential vendor list attached as Exhibit C to the Settlement Agreement.
Anticipated Pushback from WND/Blackhall. We anticipate three categories of objection:
First, the definition of "solicitation" in the vendor non-solicitation context will be contested. The defendants and Verdana will argue that ordinary competitive dealings with vendors — placing purchase orders, negotiating standard commercial terms, attending industry trade shows — should not constitute prohibited "solicitation." This argument has particular force because Verdana already has existing, pre-settlement vendor relationships with many of the same vendors on the Exhibit C list. Verdana cannot reasonably be expected to cease all business dealings with vendors simply because they also supply CRH.
Second, Blackhall may challenge the accuracy or current relevance of the top 50 vendor list. Vendor rankings can shift over the course of a year, and Blackhall may seek the right to contest the inclusion of specific vendors — for example, vendors with whom Verdana has longer-standing or more significant relationships than CRH, or vendors that have reduced their business with CRH since the departure of the Rathore Group.
Third, both sides should agree that Exhibit C is confidential and filed under seal. The vendor list contains commercially sensitive information that neither CRH nor Verdana would want disclosed publicly.
Internal Recommendation. We should define "solicitation" of vendors to mean actively inducing, encouraging, or facilitating any vendor to (i) terminate, reduce, or materially alter its relationship with CRH, (ii) provide Verdana or the defendants with preferential pricing, terms, or supply priority obtained through knowledge of CRH's confidential vendor negotiation playbooks, pricing structures, or contract terms, or (iii) divert supply capacity or exclusive product lines from CRH to Verdana or any entity affiliated with the defendants. This formulation targets the specific competitive harm that CRH faces without prohibiting Verdana from engaging in ordinary, arms-length commercial dealings with overlapping vendors.
We should accept a mechanism for good-faith disputes regarding specific vendor inclusions on the Exhibit C list. Such disputes should be resolved by the compliance monitor (Aldwyn Compliance Solutions LLC), which will have access to the relevant vendor relationship information from both sides. This approach is preferable to litigation over individual vendor inclusions.
We should confirm that Exhibit C will be filed under seal with the Consent Order, with an appropriate order of confidentiality. Both sides have an interest in maintaining the confidentiality of this information.
Finally, we note that among the eight defendants, Lucia Fernandez-Gill (Former Director, Vendor Relations, Domestic) had the most direct and extensive access to CRH's vendor relationship details, including pricing structures, exclusivity arrangements, and negotiation strategies. Her 12-month vendor non-solicitation is of particular importance to CRH, and we should ensure that the restrictions as applied to her are not diluted in the markup process.
IV. Monetary Settlement Terms
The monetary components of the settlement are set forth in Section 5 of the Settlement Agreement. The total economic recovery to CRH comprises four elements: the lump-sum settlement payment, litigation cost reimbursement, and equity forfeitures applicable to Rathore and the other seven individual defendants. Each element is addressed below.
A. Lump-Sum Payment ($8,750,000)
The first draft provides that Verdana Commerce Group, Inc. shall pay CRH $8,750,000 as a lump-sum settlement payment within 30 calendar days of execution of the Settlement Agreement. Based on the target execution date of April 14, 2025, payment would be due no later than May 14, 2025.
Anticipated Pushback from Blackhall. We expect Blackhall to raise the following objections or requests on Verdana's behalf:
(i) Extended Payment Timeline. Blackhall may seek an extended payment period — 45 or 60 days rather than 30 days — arguing that Verdana requires additional time to arrange the payment through its treasury and obtain any necessary approvals from Greystone Capital Partners, LP, which, as Verdana's majority equity holder and PE sponsor, may have consent rights over disbursements of this magnitude under the Greystone/Verdana stockholders agreement.
(ii) Escrow Arrangement. Blackhall may propose that the $8,750,000 be deposited into a third-party escrow account rather than paid directly to CRH, with release contingent on CRH's compliance with its obligations under the Settlement Agreement (e.g., filing the Consent Order, dismissing the litigation).
(iii) Conditioning on Consent Order Entry. Blackhall may seek language conditioning the payment obligation on the entry of the Consent Order by Vice Chancellor Zhao, arguing that Verdana should not be required to pay until the litigation framework is formalized by the Court.
Internal Recommendation. We should resist extending the payment period beyond 30 days. The term sheet dated March 20, 2025 expressly specifies a 30-day payment window, and this provision was the product of direct negotiation between Gavin Blackhall and Bernard Crawford during the mediation. Departing from an agreed term would require a corresponding concession, and the payment timeline is not a term on which we should yield without receiving meaningful value in return.
We should reject any conditioning of the payment obligation on the entry of the Consent Order by Vice Chancellor Zhao. The obligation to pay should be absolute upon execution of the Settlement Agreement, with the Consent Order filing being a separate obligation governed by its own timeline and mechanics. Conditioning payment on Court action introduces an element of uncertainty that is unacceptable — the Court's schedule is not within the parties' control, and Vice Chancellor Zhao may not enter the Consent Order immediately upon submission.
If Blackhall insists on an escrow arrangement as a condition for closing, we may consider a limited concession: a five-business-day escrow with release tied to written confirmation by both parties that no material breach of the Settlement Agreement has occurred during the escrow period. However, our strong preference remains direct payment, and we should not offer this concession unless Blackhall makes it a significant sticking point.
B. Litigation Cost Reimbursement ($425,000)
The first draft includes Verdana's obligation to reimburse CRH $425,000 toward CRH's litigation costs, payable concurrently with the $8,750,000 settlement payment.
Potential Pushback. Minimal pushback is expected on this term, as it was part of the agreed settlement framework. The $425,000 figure was negotiated during the mediation and reflects a compromise: it represents approximately 23% of CRH's estimated total litigation costs incurred through the mediation.
For reference, CRH's total estimated Calderwood & Harkness fees and expenses through the target settlement execution date are approximately $1,850,000, broken down as follows:
The $425,000 reimbursement is inclusive, and CRH will bear the remaining approximately $1,425,000 in fees and expenses. We should confirm that the Settlement Agreement clearly characterizes the $425,000 as a reimbursement toward litigation costs, without any representation regarding the total amount of CRH's fees or expenses, to avoid any implication that CRH is disclosing the full extent of its legal spend.
C. Equity Forfeitures
The first draft addresses equity forfeitures in Section 5.3, encompassing both Rathore's individual forfeiture and the aggregate forfeiture applicable to the other seven defendants.
Rathore Forfeiture ($362,500). The first draft references Sanjay Rathore's forfeiture of $362,500 in CRH restricted stock units ("RSUs"). This amount comprises:
• Unvested RSUs ($181,250): Twenty-five percent (25%) of the $725,000 RSU grant dated March 15, 2021, representing the fourth and final annual vesting tranche. Three of the four annual tranches vested on schedule (March 15, 2022, March 15, 2023, and March 15, 2024). The fourth tranche was scheduled to vest on March 15, 2025 but was suspended upon the filing of the Verified Complaint and application for TRO.
• Clawback of Final Vested Tranche ($181,250): Clawback of the third vesting tranche (which vested on March 15, 2024) pursuant to the for-cause clawback provision contained in Section 8(c) of the CRH Equity Incentive Plan and incorporated into Rathore's RSU Award Agreement, triggered by Rathore's breach of the restrictive covenants contained in his employment agreement.
Other Seven Defendants — Aggregate Equity Forfeiture ($487,000). The aggregate equity forfeiture for the other seven defendants is $487,000, representing the sum of unvested RSU awards and, where applicable, for-cause clawback amounts, across the individual defendants' respective award agreements.
Total Equity Forfeitures: $849,500.
Anticipated Pushback from WND. We expect significant pushback from WND on the clawback of the final vested tranche for Rathore ($181,250). WND will likely argue as follows:
(i) Only unvested equity should be subject to forfeiture upon settlement. The forfeiture of unvested RSUs is a natural consequence of the termination of the employment relationship and the suspension of vesting — it does not require any finding of breach. The clawback of already-vested equity, by contrast, constitutes an affirmative disgorgement that is punitive in nature and inappropriate in the context of a settlement that includes no admission of wrongdoing.
(ii) The for-cause clawback provision was not triggered because the Settlement Agreement resolves the covenant breach claims without any admission of breach by any defendant. WND will argue that the clawback provision requires a determination of breach, and that the settlement — which expressly disclaims any such determination — cannot serve as the predicate for invoking the clawback.
(iii) To the extent the Settlement Agreement provides for the clawback, WND will argue that this treatment effectively penalizes Rathore beyond what was contemplated by the non-compete modification and the monetary settlement payment, and undermines the spirit of the compromise.
Internal Recommendation. We should maintain the position that the for-cause clawback is properly triggered. The filing of the Verified Complaint, supported by the sworn declarations of Marcus Langford (CEO) and Roland Ashby (CPO) and the Pinnacle Forensics preliminary report, establishes a factual record of breach — including data exfiltration, coordinated departure, and solicitation of CRH employees — that satisfies the clawback provision. The Settlement Agreement resolves the claims without requiring an admission of breach, but it does not negate the underlying facts, and the clawback provision does not require a final adjudication of breach, only a factual basis for invoking the for-cause trigger. Moreover, the $362,500 forfeiture figure was expressly included in the binding term sheet dated March 20, 2025, and the defendants agreed to it as part of the overall settlement economics.
That said, we should flag for Bernard Crawford that the clawback amount is a potential negotiating pressure point. WND may be willing to make concessions on other issues — such as the breadth of the product category definitions or the scope of the compliance monitor's access rights — in exchange for a reduction or elimination of the $181,250 vested-tranche clawback. We recommend holding the line on the clawback initially, but recognizing that it may serve as a trade point if negotiations reach an impasse on other issues.
Coordination Notes:
• A letter to Northland Trust Company (CRH's transfer agent) directing the cancellation of the unvested RSU awards and the processing of the clawback will need to be coordinated with the settlement execution date. Assuming execution on April 14, 2025, the letter should be prepared for delivery on or immediately after that date.
• A separate letter to the CRH Compensation Committee, providing a summary of the equity clawback and forfeiture provisions of the Settlement Agreement and requesting formal ratification, should be prepared by approximately April 10, 2025 to allow the Committee to act prior to execution.
D. Total Economic Recovery Reconciliation
The total economic recovery to CRH under the Settlement Agreement is summarized as follows:
All references to total recovery in the Settlement Agreement, the Consent Order, related board materials, and any SEC disclosure documents should consistently state this aggregate figure of $10,024,500. We should verify that no provision of the first draft characterizes the recovery differently or uses a subtotal that could create confusion.
V. Data Return and Destruction Protocol (Exhibit B Issues)
The data return and destruction obligations are set forth in Section 6 of the Settlement Agreement and detailed in Exhibit B (the "Data Return and Destruction Protocol"). These provisions address the disposition of CRH's confidential information and trade secrets that were exfiltrated by the Rathore Group prior to their departure. Given the nature and volume of the exfiltrated data, and its potential strategic value to Verdana, these provisions are among the most consequential in the Settlement Agreement.
A. Scope of Data Covered
The first draft defines "Exfiltrated Data" to include all 14,327 files (approximately 2.8 GB in aggregate) downloaded from CRH's Aldermere Systems and Pinnacle Health IT environments to personal cloud storage accounts between January 10 and February 4, 2025, as identified in the Pinnacle Forensics LLC preliminary report dated March 4, 2025 (the "Pinnacle Report"). The Pinnacle Report documented the systematic downloading activity, which involved transfers to personal Hollowell Health IT, Larkspur Technologies, and Meridian Systems accounts associated with all eight defendants, with the heaviest concentration of downloading activity occurring between January 22 and January 31, 2025.
In addition to the specifically identified files, the first draft defines the scope of covered data to include any copies, derivatives, summaries, notes, or compilations of the Exfiltrated Data, as well as any other CRH Confidential Information (as defined in the defendants' employment agreements) in the possession, custody, or control of the defendants or Verdana.
Anticipated Pushback from WND. WND may challenge the scope of the definition, particularly the inclusion of "derivatives" and "compilations." The defendants may argue that they cannot certify the destruction of information that has been retained only in their personal memory, or that exists in the form of handwritten notes, mental impressions, or general knowledge that is not readily identifiable as CRH-sourced. This is a common objection in trade secret settlement negotiations: defendants resist undertaking obligations they perceive as impossible to fully perform, and which could expose them to contempt or breach-of-certification claims if information later surfaces that arguably constitutes a "derivative" of the Exfiltrated Data.
Internal Recommendation. We should maintain the "derivatives" and "compilations" language, as it is essential to preventing circumvention. Without this language, the defendants could retain the substance of CRH's trade secrets in reformatted or summarized form while certifying that they have destroyed the specific files identified in the Pinnacle Report. However, consistent with standard practice in trade secret settlement agreements, we should add a reasonableness qualifier for information retained only in individuals' unaided memory. Language such as "nothing herein shall require any individual to undergo any procedure to erase or suppress information retained solely in the individual's unaided memory without reference to the Exfiltrated Data or other CRH Confidential Information" is customary and should satisfy WND's objection without meaningfully weakening the protocol. All tangible and electronic copies — including reformatted, summarized, or compiled versions — must remain subject to strict return or destruction obligations.
B. Return/Destruction Timeline
The first draft requires the return or certified destruction of all Exfiltrated Data within 10 business days of execution of the Settlement Agreement. Assuming an April 14, 2025 execution date, the destruction deadline would be approximately April 28, 2025.
Anticipated Pushback from Blackhall. Blackhall may argue that 10 business days is insufficient for Verdana to conduct a thorough and defensible internal sweep of its systems. The concern is legitimate in one respect: the Pinnacle Report documents that at least some of the Exfiltrated Data was transferred from the defendants' personal cloud storage accounts to Verdana's internal systems during the period between the Rathore Group's start dates at Verdana and the entry of the TRO — approximately February 14 through March 7, 2025. During this three-week period, the data may have been disseminated internally at Verdana to other employees, incorporated into presentations or working documents, or stored in shared drives, email attachments, or collaboration platforms. Identifying all repositories of the data across Verdana's systems may require a methodical search that cannot be completed within 10 business days.
Internal Recommendation. We should consider extending the destruction timeline to 15 business days if Blackhall pushes strongly on this point, but only with the following structure: the defendants and Verdana must provide a preliminary certification at 10 business days confirming that (i) all known repositories of Exfiltrated Data have been identified, (ii) a destruction process has been initiated, and (iii) no further dissemination of the data is occurring. A final, comprehensive certification must then be provided at 15 business days (approximately May 5, 2025, based on an April 14 execution date), confirming that destruction is complete. This two-step approach provides Verdana with additional time for a thorough sweep while ensuring that CRH receives timely assurance that the process is underway.
C. Certification Mechanics
The first draft requires each individual defendant to provide a sworn certification of destruction (in the form attached as Annex 1 to Exhibit B), attesting under oath that all Exfiltrated Data in the defendant's possession, custody, or control has been returned to CRH or permanently destroyed. In addition, Verdana's General Counsel, Helen Tsoi, is required to provide a corporate officer certification attesting that Verdana has conducted a diligent search of its systems and has returned or destroyed all Exfiltrated Data and CRH Confidential Information in Verdana's possession, custody, or control.
Anticipated Pushback from WND. Individual defendants may resist providing sworn certifications, which create potential perjury exposure. WND may argue that the settlement is premised on good faith compliance, not adversarial process, and that requiring sworn certifications is unnecessarily punitive. WND may propose alternative formats, such as unsworn affirmations or simple declarations.
Internal Recommendation. Sworn certifications of data destruction are standard in trade secret settlement practice and have been required in analogous Delaware Court of Chancery consent orders. We should maintain this requirement. However, if WND objects to the notarized affidavit format specified in the first draft, we can offer to use the "declaration under penalty of perjury" format pursuant to 28 U.S.C. § 1746, which carries the same legal weight as a sworn statement but does not require a notary. This is a procedural concession that does not affect the substance of the obligation and should resolve the objection.
D. Independent Forensic Audit of Verdana's Systems
The first draft provides for an independent forensic audit of Verdana's systems by Pinnacle Forensics LLC (led by Dr. Rajiv Anand) to verify the completeness and effectiveness of Verdana's data destruction. The audit is to be conducted at Verdana's expense, capped at $175,000.
Anticipated Pushback from Blackhall. We expect Blackhall to raise multiple objections regarding the forensic audit:
(i) Scope of Audit. Verdana will want to limit the audit to specifically identified systems and repositories — those named in the destruction certifications and the Pinnacle Report — rather than permitting a general forensic sweep of all Verdana systems. A general sweep would implicate Verdana's proprietary systems, trade secrets, and confidential business information, and Verdana will argue that it goes far beyond what is necessary to verify the destruction of CRH data.
(ii) Confidentiality Protections. Verdana will demand robust protections ensuring that Pinnacle and CRH are restricted from accessing, reviewing, or retaining any Verdana proprietary systems, data, or information beyond what is strictly necessary to verify the destruction of CRH's Exfiltrated Data. Verdana will be particularly concerned about the risk that a forensic audit could become a vehicle for CRH to obtain competitive intelligence about Verdana's operations.
(iii) Timing. Verdana may want the audit to occur after the destruction certification has been completed and delivered, rather than concurrently with the destruction process. This sequencing would allow Verdana to complete its internal process before subjecting its systems to external review.
(iv) Dispute Resolution. If Pinnacle identifies data during the audit that Verdana claims is its own (i.e., not derived from CRH), a dispute resolution mechanism will be needed. This is a realistic scenario given the 28 overlapping product categories between the two companies — some documents on Verdana's systems may contain information that is similar to CRH's Exfiltrated Data but was independently developed by Verdana.
Internal Recommendation. We should accept reasonable scope limitations on the audit. Specifically, we should agree that the audit will be limited to "systems and repositories identified in the destruction certifications, plus any additional systems identified through reasonable investigation by Pinnacle based on its review of the destruction certifications and the underlying data transfer logs documented in the Pinnacle Report." This formulation gives Pinnacle sufficient latitude to follow the data trail while assuring Verdana that the audit will not become a fishing expedition.
We should agree to a confidentiality and non-use protocol governing the audit process. Pinnacle should be required to execute a confidentiality agreement with Verdana, and any Verdana proprietary data encountered during the audit should be treated as confidential and not shared with CRH, except to the extent necessary to resolve a dispute about whether specific data constitutes CRH's Exfiltrated Data.
On timing, we should agree that the audit will occur within 30 calendar days after delivery of the final destruction certification. This sequencing is reasonable and allows the audit to serve as a verification mechanism rather than a parallel process.
For disputes regarding the provenance of specific data, we propose resolution by the compliance monitor (Aldwyn Compliance Solutions LLC), which will have the necessary context and access to information from both sides. If the monitor is not yet operational at the time of the dispute (the audit may occur before the monitor has fully commenced its engagement), the dispute should be referred to the mediator, the Honorable Philip Ashford (Ret.), for expedited resolution through Meridian ADR Services LLC.
E. Project Ridgeline Materials
A matter of particular significance within the data return and destruction protocol is the treatment of Project Ridgeline materials. Project Ridgeline is CRH's five-year strategic category expansion plan, covering proprietary vendor terms, private-label margin targets, ecommerce assortment algorithms, and competitive positioning strategies across CRH's core merchandising categories. The Project Ridgeline plan was completed in October 2024, and the Rathore Group — particularly Rathore, Fernandez-Gill, and at least three other defendants — had full access to the plan during its development and after its completion.
The first draft treats Project Ridgeline materials as a subset of Exfiltrated Data subject to the general return/destruction protocol. While this is technically correct, we believe that Project Ridgeline merits specific treatment given its strategic importance and its potential relevance to Verdana's operations.
Internal Recommendation. We should include a specific provision in the Settlement Agreement requiring Verdana to affirmatively represent and warrant that it has not used any Project Ridgeline materials, or information derived from such materials, to inform its "transformational growth initiative" (the January 2025 initiative targeting $4 billion in revenue by 2028) or any other strategic planning, business development, or operational activity. The provision should also prohibit Verdana from using Project Ridgeline materials or information at any time in the future.
Additionally, the Project Ridgeline materials should be specifically called out in the DUTSA (Delaware Uniform Trade Secrets Act) trade secret acknowledgment section of the Settlement Agreement (Section 6.5 of the first draft), which requires the defendants and Verdana to acknowledge that certain categories of CRH information constitute trade secrets under Delaware law. Listing Project Ridgeline by name in this section strengthens CRH's position in any future enforcement action.
VI. Compliance Monitor Framework (Exhibit D and Related Provisions)
The compliance monitor provisions are set forth in Section 7 of the Settlement Agreement and detailed in Exhibit D (the form of Compliance Monitor Engagement Letter). The compliance monitor is a central component of the settlement: it provides a mechanism for ongoing verification of the defendants' and Verdana's compliance with the modified covenants and data-destruction obligations, and it creates a structured escalation process for suspected violations.
A. Selection of Monitor — Aldwyn Compliance Solutions LLC
The first draft names Aldwyn Compliance Solutions LLC, a Philadelphia-based compliance consulting firm, as the proposed independent compliance monitor. The selection of Aldwyn was agreed in principle during the March 18 mediation session, and Aldwyn's managing principal has confirmed the firm's availability and willingness to serve in this capacity.
Anticipated Pushback. No pushback is expected on the identity of the monitor, given the parties' agreement during mediation. However, Blackhall may seek to include a provision allowing either party to object to the monitor for cause within a specified period following execution — for example, if a conflict of interest is identified or if the monitor demonstrates bias in the performance of its duties.
Internal Recommendation. We should include a for-cause removal provision, which is standard in compliance monitor engagements. The provision should require 30 days' written notice to all parties and the Court, specifying the grounds for removal. Replacement should be by mutual agreement of the parties or, failing agreement within 15 business days of the removal, by appointment of Vice Chancellor Zhao upon application by either party. The for-cause standard should be defined to include conflicts of interest, demonstrated bias, material failure to perform the monitoring duties, and breach of the confidentiality obligations set forth in the engagement letter.
B. Monitor Term and Scope
The first draft provides for a 12-month engagement, commencing upon execution of the Settlement Agreement (target April 14, 2025) and continuing through April 14, 2026. During this period, the monitor will conduct quarterly verification of compliance with the following obligations:
(i) The modified non-compete restrictions (three restricted product categories);
(ii) The employee non-solicitation restrictions (18-month term, through August 6, 2026);
(iii) The vendor non-solicitation restrictions (12-month term, top 50 vendors, through February 6, 2026); and
(iv) The data return and destruction obligations.
Anticipated Pushback from Blackhall/WND. Both counsel groups will likely seek to limit the monitor's access to Verdana's internal records and to the defendants' personal records. Verdana's position will be that the monitor's verification rights should be confined to:
(i) Reviewing the defendants' job descriptions and reporting lines at Verdana;
(ii) Confirming that the defendants are not engaged in the three restricted product categories; and
(iii) Reviewing vendor contact logs to verify compliance with the vendor non-solicitation — but not extending to general access to Verdana's business operations, financial data, strategic plans, customer information, or other proprietary materials.
Internal Recommendation. The monitor must have access sufficient to verify compliance in a meaningful and substantive way. A monitor who can only review job descriptions and receive written assurances from Verdana's General Counsel will not provide the level of independent verification that the settlement requires. At the same time, we recognize that Verdana has legitimate confidentiality interests and that an overbroad access provision could be used as a basis for challenging the reasonableness of the settlement framework.
We propose a defined "access protocol" to be set forth in the Compliance Monitoring Protocol (a separate procedures annex to the engagement letter, to be finalized by approximately April 11, 2025). The access protocol should include the following elements:
(i) Quarterly Written Reports. The monitor may issue quarterly requests for written reports from Verdana's General Counsel (Helen Tsoi) describing the defendants' current roles, responsibilities, reporting lines, and functional assignments, and certifying compliance with the modified covenants.
(ii) Individual Interviews. The monitor shall have the right to interview each of the eight defendants individually, up to once per quarter, regarding their activities at Verdana and their compliance with the Settlement Agreement. Interviews may be conducted in person or by video conference, at the monitor's discretion.
(iii) Email Keyword Searches. The monitor shall have access to the defendants' Verdana email accounts for purposes of conducting keyword searches related to the three restricted product categories and the top 50 CRH vendors listed in Exhibit C. The keyword list shall be developed by the monitor in consultation with both parties and shall be reasonably tailored to identify potential compliance issues without sweeping in unrelated communications. This is a critical tool — email communications are the most likely channel through which inadvertent or intentional involvement in restricted categories would be documented.
(iv) Organizational Chart Review. The monitor shall have the right to review current organizational charts showing the defendants' reporting lines and functional responsibilities, including any changes to the defendants' positions during the monitoring period.
We should resist granting general access to Verdana's financial data, strategic plans, or operational information beyond what is necessary for compliance verification. The access protocol should include appropriate confidentiality provisions governing the monitor's handling of Verdana information, and any information obtained by the monitor should be used solely for compliance verification purposes and not disclosed to CRH except in the form of compliance reports.
C. Cost Allocation
The total estimated cost of the 12-month compliance monitor engagement is $360,000, based on Aldwyn's proposed fee structure. The cost allocation agreed during mediation is as follows:
No pushback is expected on this allocation, as it was part of the agreed settlement framework. The Compliance Monitor Engagement Letter (Exhibit D) should reflect this allocation and specify quarterly invoicing, with each party responsible for its proportionate share of each quarterly invoice. We should confirm that the engagement letter form in the first draft accurately reflects these terms.
D. Reporting and Escalation
The first draft provides for quarterly compliance reports from Aldwyn to CRH (via Calderwood & Harkness LLP), Verdana (via Blackhall & Soren LLP), and the Rathore Group (via Whitfield, Nygaard & Doyle LLP).
Anticipated Pushback from Blackhall. Blackhall may demand that compliance reports be issued simultaneously to all parties, without any advance review or preview by CRH's counsel. This is a reasonable concern — if CRH receives the reports before Verdana, it could create an informational asymmetry that undermines the perceived neutrality of the monitoring process.
Internal Recommendation. We should accept simultaneous distribution of all compliance reports to all counsel of record. This is a low-cost concession that promotes the credibility and neutrality of the monitoring framework. We should not seek advance access to reports.
In addition, the first draft includes an escalation provision for suspected violations, which we should refine as follows: Upon identifying a suspected violation of the Settlement Agreement or Consent Order, the monitor shall notify all parties and the Court in writing within five (5) business days. The party alleged to have committed the violation shall then have an opportunity to cure within fifteen (15) business days of receiving notice. If the alleged violation is not cured or adequately explained within the 15-business-day cure period, the complaining party may seek contempt or enforcement relief from Vice Chancellor Zhao. This structure provides an opportunity for resolution of potential disputes short of Court intervention while preserving CRH's right to enforce the Consent Order through contempt proceedings if necessary.
E. Letter Agreement re: Information-Sharing and Access
A separate letter agreement among CRH, Verdana, and Aldwyn Compliance Solutions LLC (the "Monitoring Side Letter") will govern the framework for information sharing, access to records, cooperation obligations, and confidentiality protections applicable to the monitoring engagement. The first draft references this letter agreement but does not yet include it as an exhibit to the Settlement Agreement.
Internal Recommendation. We should prepare the Monitoring Side Letter in draft form for circulation with the second draft of the Settlement Agreement. The letter should address, at a minimum: (i) the access protocol described above; (ii) confidentiality obligations of the monitor with respect to both CRH and Verdana proprietary information; (iii) cooperation obligations of the defendants and Verdana; (iv) insurance and indemnification provisions for the monitor; and (v) the process for amendment of the monitoring protocol by mutual agreement. The target completion date for the Monitoring Side Letter is April 11, 2025, to allow for review and comment by all parties before the target execution date.
VII. Consent Order Mechanics
The Consent Order is the judicial instrument through which the key provisions of the Settlement Agreement are incorporated into an order of the Delaware Court of Chancery, giving them the force and effect of a court order and making them enforceable through contempt proceedings. The mechanics of the Consent Order are addressed in Section 8 of the Settlement Agreement.
A. Incorporation of Modified Covenants
The first draft contemplates a stipulated Consent Order to be filed with the Delaware Court of Chancery, incorporating the modified restrictive covenant terms (Exhibit A) and data-destruction obligations (Exhibit B), with the Court retaining jurisdiction for enforcement.
Anticipated Issue. A threshold question is the extent to which the Settlement Agreement's provisions are incorporated into the Consent Order versus remaining as a private contractual agreement. The key tension is as follows:
• CRH's Interest: CRH wants maximum incorporation of substantive provisions into the Consent Order. Incorporation gives CRH the ability to enforce violations through contempt proceedings in the Court of Chancery, which provide more immediate and powerful remedies (including fines, sanctions, and potential incarceration for willful violations) than breach-of-contract claims. Incorporation also underscores the seriousness of the obligations and may deter violations.
• Defendants'/Verdana's Interest: The defendants and Verdana prefer minimal incorporation. A Consent Order is a public judicial document (even if filed partially under seal), and extensive incorporation increases public disclosure of the settlement terms. Moreover, Court oversight through a Consent Order is more burdensome and intrusive than private contractual enforcement — any alleged violation becomes a matter before Vice Chancellor Zhao, rather than a private dispute between the parties.
Internal Recommendation. We recommend the following allocation:
Incorporated into the Consent Order: The modified restrictive covenant terms (non-compete and non-solicitation provisions), the data return and destruction obligations, and the appointment and authority of the compliance monitor. These are the provisions for which contempt enforcement power is most important and for which CRH derives the greatest benefit from Court oversight.
Remaining in the private Settlement Agreement only: The monetary terms — the $8,750,000 settlement payment, the equity forfeitures ($849,500 aggregate), and the $425,000 litigation cost reimbursement. These are contractual obligations enforceable through breach-of-contract claims, and there is no meaningful benefit to incorporating them into the Consent Order. Moreover, public disclosure of the dollar amounts in a Consent Order could create complications for both CRH and Verdana — CRH's SEC filings will address the financial terms on a timeline and in a manner controlled by CRH's disclosure counsel, and premature or uncontrolled disclosure through a public court filing is undesirable.
Devon Archer is preparing a research memorandum on Delaware law governing court-approved consent orders that incorporate restrictive covenants, including the standards for entry of such orders, the scope of permissible incorporation, and the Court's enforcement powers. This memorandum is due approximately April 3, 2025 and will inform the final structure of the Consent Order.
B. Retained Jurisdiction
The first draft provides that Vice Chancellor Zhao retains jurisdiction for enforcement of the Consent Order for the duration of the restrictive covenant periods. The latest-expiring obligation is the 18-month employee non-solicitation, which runs through August 6, 2026. Accordingly, the Court's retained jurisdiction would extend through at least that date, with an additional period to address any enforcement proceedings initiated before the expiration date.
Anticipated Pushback. None expected. Retained jurisdiction clauses are standard in consent decrees entered by the Delaware Court of Chancery, and the parties agreed in the mediation that the Court would retain jurisdiction for enforcement.
C. Dismissal Mechanics
The first draft references a stipulation for dismissal with prejudice to be filed at the conclusion of the 12-month compliance monitor period (April 14, 2026), contingent on full compliance with the Consent Order and Settlement Agreement during the monitoring period.
Anticipated Pushback from WND. WND may argue that dismissal should be automatic at the end of the monitor period, absent an affirmative objection by CRH filed within a specified period (e.g., 30 days after delivery of the final compliance monitor report). WND's concern is that the litigation should not remain open indefinitely — if CRH

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MATTER NO.: 1038-00006

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