CONFIDENTIAL — SUBJECT TO FRE 408 AND DEL. R. EVID. 408
STANDSTILL AND SETTLEMENT AGREEMENT
FOURTH DRAFT — NEAR FINAL April 8, 2025 Subject to Final Review by All Parties
Prepared by Calderwood & Harkness LLP Matter No. 1038-00006
STANDSTILL AND SETTLEMENT AGREEMENT
This Standstill and Settlement Agreement (this "Agreement") is entered into as of [●], 2025 (the "Execution Date"), by and among:
Cascade Retail Holdings Inc., a Delaware corporation, with its principal place of business and headquarters at 2200 Elliott Avenue West, Suite 3400, Seattle, Washington 98119 ("Cascade" or "CRH" or the "Company");
Priya Rathore, an individual residing at 14 Harbor Ridge Lane, Bellevue, Washington 98004 ("Rathore");
Derek Linden, an individual ("Linden");
Sonia Kaczmarek, an individual ("Kaczmarek");
Amara Osei, an individual ("Osei");
Brent Halvorsen, an individual ("Halvorsen");
Lucia Fernandez-Gill, an individual ("Fernandez-Gill");
Nathan Tsao, an individual ("Tsao");
Kira Johansson, an individual ("Johansson"; Rathore, Linden, Kaczmarek, Osei, Halvorsen, Fernandez-Gill, Tsao, and Johansson, collectively, the "Individual Defendants" or the "Rathore Group"); and
Verdana Commerce Group, Inc., a Delaware corporation, with its principal place of business and headquarters at 400 Christiana Gateway, Suite 700, Wilmington, Delaware 19801 ("Verdana" or "VCG").
Cascade, the Individual Defendants, and Verdana are sometimes referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS:
A. CRH is a publicly traded omnichannel retail company, the common stock of which is listed and traded on the Nasdaq Global Select Market under the ticker symbol "CRHL." CRH operates a diversified retail platform consisting of three hundred and eighty-seven (387) brick-and-mortar retail locations across thirty-four (34) states and a growing direct-to-consumer ecommerce platform. For the fiscal year ended January 31, 2025 ("FY2024"), CRH reported annual consolidated revenue of approximately Six Billion Eight Hundred Twenty Million Dollars ($6,820,000,000). CRH's merchandising division, which encompasses category management, buying, sourcing, and private-label development, accounted for approximately Two Billion Three Hundred Million Dollars ($2,300,000,000) in gross merchandise value in FY2024 and constitutes a critical component of CRH's competitive strategy and shareholder value proposition;
B. Each Individual Defendant was formerly employed by CRH in a senior merchandising role within CRH's merchandising division. Rathore served as Senior Vice President, Merchandising, having been originally hired as Vice President, Merchandising Strategy on or about June 3, 2019, and subsequently promoted and having served in the Senior Vice President role through February 7, 2025, the date of her resignation. Each of the other Individual Defendants held comparable senior positions within CRH's merchandising organization. In connection with their respective employment, each Individual Defendant entered into an employment agreement with CRH (each, an "Employment Agreement" and collectively, the "Employment Agreements") containing restrictive covenant provisions, including non-competition, non-solicitation of employees, non-solicitation of vendors, and confidentiality obligations. Each Employment Agreement is governed by the laws of the State of Delaware. In the case of Rathore, the operative Employment Agreement is the Amended and Restated Employment Agreement dated March 15, 2021, entered into in connection with Rathore's promotion to the Senior Vice President role;
C. Under their respective Employment Agreements, each Individual Defendant is bound by the following restrictive covenant obligations: (i) non-competition obligations with durations of eighteen (18) months post-termination of employment in the case of Rathore, Linden, and Kaczmarek, and twelve (12) months post-termination of employment in the case of Osei, Halvorsen, Fernandez-Gill, Tsao, and Johansson, in each case with a geographic scope covering the United States; (ii) non-solicitation of employees obligations with durations ranging from eighteen (18) to twenty-four (24) months post-termination of employment; (iii) non-solicitation of vendors obligations; and (iv) perpetual confidentiality obligations covering CRH's proprietary and confidential information, including without limitation trade secrets, business strategies, vendor relationships, sourcing methodologies, customer data, and financial projections;
D. On February 7, 2025 (the "Resignation Date"), all eight (8) Individual Defendants submitted simultaneous resignation letters to CRH, effective immediately, in a coordinated departure from CRH. Each Individual Defendant thereafter accepted employment with Verdana Commerce Group, Inc. Verdana is a Delaware corporation, privately held, with a majority equity interest held by Greystone Capital Partners, LP, a Delaware limited partnership, through Greystone Capital Fund VII, LP. Verdana is a direct competitor of CRH, operating in twenty-eight (28) overlapping product categories across multiple retail channels. In connection with her departure, Rathore accepted the position of President, Merchandising & Strategy at Verdana, a role with responsibilities substantially similar to those she held at CRH;
E. CRH alleges, and the Individual Defendants and Verdana deny, that between approximately January 10, 2025 and February 4, 2025, fourteen thousand three hundred twenty-seven (14,327) files, comprising approximately 2.8 gigabytes (GB) of data, were downloaded from CRH's corporate Aldermere Systems and Pinnacle Health IT environments to personal cloud storage accounts controlled by one or more of the Individual Defendants. CRH alleges that the downloaded materials include, without limitation, materials related to CRH's proprietary five-year strategic category expansion plan known internally as "Project Ridgeline" (completed in October 2024), vendor negotiation term sheets, private-label cost models, seasonal buying algorithms, and customer segmentation data. Each Individual Defendant had access to Project Ridgeline and the other foregoing proprietary information by virtue of his or her senior merchandising role at CRH;
F. On March 5, 2025, CRH filed a Verified Complaint and Motion for Temporary Restraining Order and Preliminary Injunction against the Individual Defendants and Verdana in the Court of Chancery of the State of Delaware, docketed as C.A. No. 2025-0198-MTZ, before Vice Chancellor Margaret T. Zhao (the "Action"). The Action asserted five claims for relief: (1) breach of restrictive covenant against all Individual Defendants; (2) breach of confidentiality obligations against all Individual Defendants; (3) misappropriation of trade secrets under the Delaware Uniform Trade Secrets Act, 6 Del. C. § 2001 et seq. ("DUTSA"), against the Individual Defendants and Verdana; (4) tortious interference with contractual relations against Verdana; and (5) civil conspiracy against the Individual Defendants and Verdana. On March 7, 2025, the Court granted CRH's application for a temporary restraining order (the "TRO"), restraining the Individual Defendants from commencing employment in merchandising roles at Verdana for a period of fourteen (14) days. In connection with the TRO, CRH posted an injunction bond in the amount of Two Million Five Hundred Thousand Dollars ($2,500,000) through Broadview Surety Corp. (Bond No. BSC-2025-TRO-04419);
G. On March 18, 2025, the Parties participated in a mediation session before the Honorable Philip Ashford (Ret.) through Meridian ADR Services LLC (Ref. Meridian-2025-0318-CRH). On March 20, 2025, the Parties reached a framework for settlement of the Action, memorialized in a binding term sheet executed by counsel for each Party. On March 21, 2025, the Court entered a Consent Interim Order adjourning the preliminary injunction hearing then scheduled for March 24, 2025, and maintaining the status quo during the settlement documentation period; and
H. The Parties desire to resolve and settle all disputes, claims, and controversies arising from or related to the matters described in the foregoing Recitals and the Action, on the terms and conditions set forth in this Agreement, without admission of liability, wrongdoing, or fault by any Party, and in consideration of the mutual promises, covenants, and agreements set forth herein.
NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual covenants and agreements contained herein, the Settlement Payment and other consideration described herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
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ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not defined in this Article I shall have the meanings ascribed to them elsewhere in this Agreement.
Section 1.1 "Action" means the civil action captioned Cascade Retail Holdings Inc. v. Rathore et al., C.A. No. 2025-0198-MTZ, filed in the Court of Chancery of the State of Delaware before Vice Chancellor Margaret T. Zhao.
Section 1.2 "Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with such Person. For purposes of this definition, "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. Without limiting the foregoing, a Person shall be deemed to control another Person if the first Person owns, directly or indirectly, fifty percent (50%) or more of the voting equity interests of the second Person.
Section 1.3 "Business Day" means any day other than a Saturday, Sunday, or any day on which banking institutions in the State of Delaware or the State of Washington are authorized or required by law, regulation, or executive order to close.
Section 1.4 "Compliance Monitor" means Aldwyn Compliance Solutions LLC, a Delaware limited liability company, with offices at 1700 Market Street, Suite 2800, Philadelphia, Pennsylvania 19103, or any successor compliance monitor appointed in accordance with Section 5.1.
Section 1.5 "Compliance Monitor Engagement Letter" means the engagement letter between the Compliance Monitor and the Parties, in substantially the form attached hereto as Exhibit D, setting forth the terms and conditions of the Compliance Monitor's engagement.
Section 1.6 "Compliance Monitoring Period" means the twelve (12)-month period commencing on the Execution Date and expiring on the first anniversary of the Execution Date.
Section 1.7 "Confidential Information" means "Confidential Information" as defined in each Individual Defendant's respective Employment Agreement, including without limitation all information, data, documents, materials, and intellectual property relating to (a) Project Ridgeline, including all analyses, reports, presentations, financial models, and strategic plans developed in connection therewith; (b) vendor negotiation playbooks, term sheets, pricing structures, and relationship strategies; (c) seasonal buying algorithms, demand forecasting models, and inventory optimization methodologies; (d) private-label sourcing strategies, cost models, specifications, and supplier agreements; (e) customer segmentation data, purchasing behavior analytics, and loyalty program information; (f) the five-year category expansion roadmap; and (g) any other information that is proprietary to CRH and that derives independent economic value from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.
Section 1.8 "Consent Order" means the consent order to be entered by the Court in substantially the form attached hereto as Schedule 1, incorporating the Modified Non-Compete Obligations, Modified Non-Solicitation Obligations, confidentiality obligations, data destruction obligations, and Compliance Monitor appointment set forth in this Agreement.
Section 1.9 "Cost Reimbursement" has the meaning set forth in Section 3.2.
Section 1.10 "Court" means the Court of Chancery of the State of Delaware.
Section 1.11 "CRH Equity Awards" means all restricted stock unit awards, stock option awards, performance share awards, and other equity-based compensation awards granted to any Individual Defendant under CRH's 2018 Omnibus Equity Incentive Plan, the CRH 2022 Long-Term Incentive Plan, or any other equity compensation plan of CRH, whether vested or unvested as of the Resignation Date.
Section 1.12 "Data Destruction Protocol" means the data return and destruction protocol attached hereto as Exhibit B, including the sworn certification form set forth in Annex 1 thereto.
Section 1.13 "DUTSA" means the Delaware Uniform Trade Secrets Act, 6 Del. C. § 2001 et seq.
Section 1.14 "Effective Date" means the date on which the Consent Order is entered by the Court following submission of the Stipulation of Settlement and Proposed Consent Order by the Parties.
Section 1.15 "Employment Agreements" means, collectively, the individual employment agreements between CRH and each Individual Defendant, as the same may have been amended, restated, or supplemented from time to time, including in the case of Rathore, the Amended and Restated Employment Agreement dated March 15, 2021.
Section 1.16 "Exfiltrated Data" means the fourteen thousand three hundred twenty-seven (14,327) files, comprising approximately 2.8 gigabytes (GB) of data, downloaded from CRH's Aldermere Systems and Pinnacle Health IT environments to personal cloud storage accounts between approximately January 10, 2025 and February 4, 2025, as identified in the forensic analysis conducted by Pinnacle Forensics LLC and documented in the Pinnacle Forensics Preliminary Report dated March 3, 2025.
Section 1.17 "Forensic Auditor" means Pinnacle Forensics LLC, a Maryland limited liability company, with offices at 8700 Georgia Avenue, Suite 300, Silver Spring, Maryland 20910.
Section 1.18 "Greystone" means Greystone Capital Partners, LP, a Delaware limited partnership, and Greystone Capital Fund VII, LP, a Delaware limited partnership, the majority equity holder of Verdana. Greystone is not a party to this Agreement but is referenced herein and is an intended third-party beneficiary solely as set forth in Section 8.3.
Section 1.19 "Modified Non-Compete Obligations" means the modified non-competition obligations applicable to the Individual Defendants as set forth in Article II and detailed in Exhibit A attached hereto.
Section 1.20 "Modified Non-Solicitation Obligations" means the modified non-solicitation of employees and non-solicitation of vendors obligations applicable to the Individual Defendants as set forth in Article II and detailed in Exhibit A attached hereto.
Section 1.21 "Modified Restrictive Covenants" means, collectively, the Modified Non-Compete Obligations and the Modified Non-Solicitation Obligations.
Section 1.22 "Person" means any individual, corporation, partnership, limited partnership, limited liability company, joint venture, trust, estate, association, governmental authority, or other entity.
Section 1.23 "Pinnacle Forensics" means Pinnacle Forensics LLC.
Section 1.24 "Project Ridgeline" means CRH's proprietary five-year strategic category expansion plan, completed in October 2024, including all analyses, financial models, strategic roadmaps, vendor strategies, product development plans, and related documentation developed in connection therewith.
Section 1.25 "Resignation Date" means February 7, 2025, the date on which each Individual Defendant submitted his or her resignation from CRH, effective immediately.
Section 1.26 "Restricted Categories" means (i) home goods, (ii) seasonal décor, and (iii) private-label apparel, as such categories are more specifically defined in Exhibit A.
Section 1.27 "Settlement Payment" has the meaning set forth in Section 3.1, and shall mean the sum of Eight Million Seven Hundred Fifty Thousand Dollars ($8,750,000).
Section 1.28 "Top 50 Vendors" means the fifty (50) vendors identified on the list attached hereto as Exhibit C, representing CRH's top fifty vendors by aggregate spend for FY2024 in the Restricted Categories.
Section 1.29 "TRO" means the temporary restraining order entered by the Court on March 7, 2025, in the Action, restraining the Individual Defendants from commencing employment in merchandising roles at Verdana for a period of fourteen (14) days.
Section 1.30 "Verdana Forensic Audit" means the independent forensic audit of Verdana's information systems to be conducted by the Forensic Auditor as described in Section 4.3 of this Agreement.
ARTICLE II
MODIFIED RESTRICTIVE COVENANTS
Section 2.1 Modified Non-Competition Obligations — Rathore.
(a) Rathore acknowledges and agrees that she shall be subject to a modified non-competition obligation commencing on the Resignation Date (February 7, 2025) and expiring at 11:59 p.m. Eastern Time on February 6, 2026 (a period of twelve (12) months). The modified non-competition obligation set forth in this Section 2.1 replaces and supersedes in its entirety the eighteen (18)-month, United States-wide non-competition covenant contained in Section 7(a) of Rathore's Amended and Restated Employment Agreement dated March 15, 2021.
(b) During the restricted period described in Section 2.1(a), Rathore shall not, directly or indirectly, whether as an employee, officer, director, consultant, independent contractor, advisor, partner, principal, agent, or otherwise, engage in, be employed by, consult for, render services to, or otherwise provide services to any Person in a role that involves responsibility for, or material involvement in, merchandising, sourcing, buying, category management, product development, vendor negotiation, or strategic planning with respect to any of the three Restricted Categories (home goods, seasonal décor, or private-label apparel) within the United States.
(c) For the avoidance of doubt, the modified non-competition obligation set forth in this Section 2.1 is limited in scope to the three Restricted Categories and does not restrict Rathore from engaging in activities related to product categories other than the Restricted Categories, including without limitation general merchandise, electronics, grocery, health and beauty, or other categories that do not fall within the scope of the Restricted Categories as defined in Exhibit A. Rathore may be employed by Verdana or any other Person in a capacity that does not involve responsibility for or material involvement in the Restricted Categories during the restricted period.
(d) Upon the expiration of the twelve (12)-month restricted period on February 6, 2026, Rathore's non-competition obligations under this Agreement and the Employment Agreements shall terminate and be of no further force or effect, and Rathore shall thereafter be free to engage in any business activities without restriction under any non-competition covenant.
Section 2.2 Modified Non-Competition Obligations — Other Individual Defendants.
(a) Each of Linden, Kaczmarek, Osei, Halvorsen, Fernandez-Gill, Tsao, and Johansson acknowledges and agrees that he or she shall be subject to a modified non-competition obligation commencing on the Resignation Date (February 7, 2025) and expiring at 11:59 p.m. Eastern Time on November 6, 2025 (a period of nine (9) months). The modified non-competition obligation set forth in this Section 2.2 replaces and supersedes in its entirety the non-competition covenant contained in each such Individual Defendant's respective Employment Agreement, which ranged from twelve (12) to eighteen (18) months in duration and covered the entirety of the United States.
(b) During the restricted period described in Section 2.2(a), each of Linden, Kaczmarek, Osei, Halvorsen, Fernandez-Gill, Tsao, and Johansson shall not, directly or indirectly, whether as an employee, officer, director, consultant, independent contractor, advisor, partner, principal, agent, or otherwise, engage in, be employed by, consult for, render services to, or otherwise provide services to any Person in a role that involves responsibility for, or material involvement in, merchandising, sourcing, buying, category management, product development, vendor negotiation, or strategic planning with respect to any of the three Restricted Categories (home goods, seasonal décor, or private-label apparel) within the United States.
(c) The same scope limitations set forth in Section 2.1(c) shall apply to the modified non-competition obligations of each of Linden, Kaczmarek, Osei, Halvorsen, Fernandez-Gill, Tsao, and Johansson.
(d) Upon the expiration of the nine (9)-month restricted period on November 6, 2025, the non-competition obligations of each of Linden, Kaczmarek, Osei, Halvorsen, Fernandez-Gill, Tsao, and Johansson under this Agreement and the Employment Agreements shall terminate and be of no further force or effect.
Section 2.3 Modified Non-Solicitation of Employees.
(a) Each of the eight (8) Individual Defendants acknowledges and agrees that he or she shall be subject to an eighteen (18)-month non-solicitation of employees obligation commencing on the Resignation Date (February 7, 2025) and expiring at 11:59 p.m. Eastern Time on August 6, 2026.
(b) During the restricted period described in Section 2.3(a), no Individual Defendant shall, directly or indirectly, whether on his or her own behalf or on behalf of Verdana or any other Person, solicit, recruit, induce, hire, or encourage, or attempt to solicit, recruit, induce, hire, or encourage, any employee of CRH or any of its Affiliates to terminate his or her employment with CRH or such Affiliate, or to accept employment or a consulting engagement with Verdana or any competitor of CRH.
(c) The following shall not constitute a violation of this Section 2.3: (i) general advertisements or job postings that are not specifically directed at or targeted toward CRH employees, including advertisements published in newspapers, trade journals, online job boards, or social media platforms of general circulation; and (ii) responding to unsolicited inquiries from CRH employees who contact an Individual Defendant or Verdana without any prior direct or indirect solicitation, recruitment, or encouragement by such Individual Defendant or Verdana, provided that the Individual Defendant promptly notifies the Compliance Monitor of any such unsolicited contact by a CRH employee.
Section 2.4 Modified Non-Solicitation of Vendors.
(a) Each of the eight (8) Individual Defendants acknowledges and agrees that he or she shall be subject to a twelve (12)-month non-solicitation of vendors obligation with respect to CRH's Top 50 Vendors (as identified in Exhibit C), commencing on the Resignation Date (February 7, 2025) and expiring at 11:59 p.m. Eastern Time on February 6, 2026.
(b) During the restricted period described in Section 2.4(a), no Individual Defendant shall, directly or indirectly, whether on his or her own behalf or on behalf of Verdana or any other Person, solicit, divert, entice, interfere with, or attempt to solicit, divert, entice, or interfere with CRH's business relationships with any of the Top 50 Vendors, including by encouraging any Top 50 Vendor to reduce, terminate, or materially alter its business relationship with CRH or to redirect volume, pricing, or terms to Verdana or any other competitor of CRH.
(c) Notwithstanding the foregoing, the non-solicitation of vendors obligation set forth in this Section 2.4 shall not prohibit ordinary-course business interactions between any Individual Defendant and any Top 50 Vendor with respect to matters unrelated to the Restricted Categories, provided that such interactions do not involve the use or disclosure of CRH Confidential Information. For the avoidance of doubt, Verdana may conduct business with any Top 50 Vendor through personnel other than the Individual Defendants with respect to any product categories, including the Restricted Categories, subject to the confidentiality provisions of this Agreement.
Section 2.5 Confidentiality Obligations.
(a) Each Individual Defendant hereby reaffirms, acknowledges, and agrees that the perpetual confidentiality obligations contained in his or her respective Employment Agreement remain in full force and effect and are not modified by this Agreement, except to the extent expressly set forth herein. Each Individual Defendant shall continue to be bound by such confidentiality obligations in perpetuity.
(b) Each Individual Defendant specifically acknowledges and agrees that the following constitute Confidential Information of CRH: (i) Project Ridgeline materials, including the five-year strategic category expansion roadmap and all supporting analyses, financial models, and strategic plans; (ii) vendor negotiation playbooks and term sheets; (iii) seasonal buying algorithms and demand forecasting models; (iv) private-label sourcing strategies, cost models, and supplier specifications; (v) private-label product development plans; and (vi) customer segmentation data and purchasing behavior analytics. The foregoing list is illustrative and not exhaustive.
(c) Verdana acknowledges and agrees that it shall not use, disclose, permit the use of, or permit the disclosure of, any CRH Confidential Information, whether obtained directly or indirectly from or through any Individual Defendant or otherwise. Verdana further agrees that it shall take all reasonable measures to prevent the introduction of CRH Confidential Information into its business operations, systems, and processes.
Section 2.6 Verdana Covenants.
(a) Verdana covenants and agrees that during the applicable restricted periods set forth in Sections 2.1 through 2.4, it shall not knowingly assign, direct, instruct, or permit any Individual Defendant to engage in any activities that would constitute a violation of the Modified Non-Compete Obligations or the Modified Non-Solicitation Obligations.
(b) Verdana shall implement and maintain internal compliance procedures reasonably designed to ensure adherence to the obligations set forth in this Article II, including without limitation (i) role restrictions that limit each Individual Defendant's responsibilities to functions that do not involve the Restricted Categories during the applicable non-compete period; (ii) information barriers (commonly referred to as "ethical walls" or "screening mechanisms") designed to prevent any Individual Defendant from accessing Verdana's strategic, sourcing, buying, or category management materials relating to the Restricted Categories during the applicable non-compete period; and (iii) periodic training of relevant Verdana personnel regarding the obligations set forth in this Agreement.
(c) Verdana shall designate an internal compliance officer (the "Verdana Compliance Designee") who shall be responsible for implementing, maintaining, and overseeing the compliance procedures described in Section 2.6(b). The identity of the Verdana Compliance Designee shall be communicated to the Compliance Monitor and to CRH's counsel within ten (10) Business Days of the Execution Date.
Section 2.7 Incorporation into Consent Order.
The Modified Non-Compete Obligations, the Modified Non-Solicitation Obligations, the perpetual confidentiality obligations reaffirmed under Section 2.5, and the Verdana covenants set forth in Section 2.6 shall be incorporated into the Consent Order to be filed with and entered by the Court in substantially the form attached hereto as Schedule 1. The Court shall retain jurisdiction over the Action and the Parties for the purpose of enforcing the terms of the Consent Order, including through civil contempt proceedings, monetary sanctions, or such other relief as the Court may deem appropriate. The Parties consent to such retained jurisdiction and waive any objection thereto.
Section 2.8 Detailed Terms.
The comprehensive terms of the Modified Non-Compete Obligations and the Modified Non-Solicitation Obligations, including detailed definitions of the Restricted Categories, permitted activities, carve-outs, and transition provisions, are set forth in Exhibit A (Modified Restrictive Covenant Terms) attached hereto and incorporated herein by reference. In the event of any conflict between the provisions of this Article II and the provisions of Exhibit A, the provisions of Exhibit A shall control.
ARTICLE III
SETTLEMENT PAYMENT AND MONETARY TERMS
Section 3.1 Settlement Payment.
(a) Within thirty (30) calendar days following the Execution Date, Verdana shall pay to CRH, by wire transfer of immediately available funds in United States dollars to an account designated in writing by CRH, the sum of Eight Million Seven Hundred Fifty Thousand Dollars ($8,750,000) (the "Settlement Payment").
(b) CRH shall provide wire transfer instructions (including the name of the receiving bank, ABA routing number, account number, and account name) to Verdana within five (5) Business Days following the Execution Date. Verdana shall be entitled to rely upon wire transfer instructions provided by CRH's counsel, Calderwood & Harkness LLP, on behalf of CRH.
(c) In the event the Settlement Payment is not received by CRH in full within the thirty (30)-calendar-day period specified in Section 3.1(a), interest shall accrue on any unpaid amount at a rate equal to the prime rate published in The Wall Street Journal on the date payment was due, plus two percent (2%) per annum, computed on the basis of a 365-day year and actual days elapsed, from the date payment was due until the date payment is received in full by CRH. Such interest shall be in addition to, and not in lieu of, any other remedies available to CRH under this Agreement or applicable law.
Section 3.2 Litigation Cost Reimbursement.
(a) Within thirty (30) calendar days following the Execution Date, Verdana shall pay to CRH, by wire transfer of immediately available funds to the account designated by CRH pursuant to Section 3.1(b), the sum of Four Hundred Twenty-Five Thousand Dollars ($425,000) as partial reimbursement of CRH's litigation costs and expenses incurred in connection with the Action, including attorneys' fees, expert fees, forensic analysis costs, and related disbursements (the "Cost Reimbursement").
(b) The Cost Reimbursement may, at Verdana's election, be paid together with the Settlement Payment in a single wire transfer, in which case Verdana shall remit a total of Nine Million One Hundred Seventy-Five Thousand Dollars ($9,175,000) to the account designated by CRH, and such single payment shall be deemed to satisfy Verdana's payment obligations under both Section 3.1 and this Section 3.2.
(c) The late payment interest provisions of Section 3.1(c) shall apply, mutatis mutandis, to the Cost Reimbursement.
Section 3.3 Equity Forfeitures — Rathore.
(a) Rathore acknowledges and agrees that she shall forfeit one hundred percent (100%) of her unvested CRH Equity Awards as of the Resignation Date. Rathore further acknowledges and agrees that, pursuant to the for-cause clawback provision contained in Section 7(d) of her Amended and Restated Employment Agreement dated March 15, 2021, which was triggered by her breach of restrictive covenant obligations, the final vested tranche of her restricted stock unit ("RSU") award shall be subject to clawback by CRH.
(b) The total forfeiture and clawback value attributable to Rathore is Three Hundred Sixty-Two Thousand Five Hundred Dollars ($362,500), calculated as follows:
(i) One Hundred Eighty-One Thousand Two Hundred Fifty Dollars ($181,250) in unvested RSUs, representing twenty-five percent (25%) of the Seven Hundred Twenty-Five Thousand Dollar ($725,000) RSU grant dated March 15, 2021, which vested ratably at twenty-five percent (25%) per year over a four-year vesting period. Three of the four annual tranches had vested as of the Resignation Date, leaving the fourth and final tranche unvested and subject to forfeiture; plus
(ii) One Hundred Eighty-One Thousand Two Hundred Fifty Dollars ($181,250) representing the clawback of the third vested tranche of the RSU award, which vested on March 15, 2024, as authorized by the for-cause clawback provision described in Section 3.3(a).
(c) Rathore shall execute all documents and take all actions reasonably necessary to effectuate such forfeiture and clawback, including without limitation (i) delivering to CRH a signed authorization letter directed to CRH's transfer agent, Northland Trust Company, authorizing and directing the cancellation of the applicable shares of CRH common stock; (ii) executing any stock power, transfer form, or other instrument required by Northland Trust Company; and (iii) cooperating with CRH and Northland Trust Company in connection with any administrative steps necessary to complete the forfeiture and clawback within thirty (30) calendar days following the Execution Date.
Section 3.4 Equity Forfeitures — Other Individual Defendants.
(a) Each of Linden, Kaczmarek, Osei, Halvorsen, Fernandez-Gill, Tsao, and Johansson (collectively, the "Other Individual Defendants") acknowledges and agrees to forfeit his or her unvested CRH Equity Awards on a pro rata basis, as calculated in accordance with the individual equity forfeiture schedules set forth in the equity forfeiture schedule incorporated by reference into this Agreement.
(b) The aggregate equity forfeiture for the seven Other Individual Defendants is Four Hundred Eighty-Seven Thousand Dollars ($487,000). The individual forfeiture amounts, which reflect each Other Individual Defendant's equity grant history, vesting schedule, and pro rata forfeiture calculation, are set forth in the equity forfeiture schedules provided under separate cover to each Other Individual Defendant and his or her counsel, and are incorporated herein by reference.
(c) Each Other Individual Defendant shall execute all documents and take all actions reasonably necessary to effectuate such forfeiture, including without limitation delivering to CRH a signed authorization letter directed to Northland Trust Company authorizing and directing the cancellation of the applicable shares of CRH common stock, and cooperating with CRH and Northland Trust Company in connection with any administrative steps necessary to complete the forfeiture within thirty (30) calendar days following the Execution Date.
Section 3.5 Total Economic Recovery Summary.
The Parties acknowledge that the total economic recovery to CRH under this Agreement consists of the following:
The Parties agree that the foregoing economic recovery, together with the non-monetary relief provided in this Agreement (including the Modified Restrictive Covenants, the Compliance Monitor arrangement, the data return and destruction obligations, and the Consent Order), constitute the complete consideration flowing to CRH under this Agreement.
Section 3.6 Tax Treatment.
(a) Each Party shall be solely responsible for any tax obligations, liabilities, and consequences arising from or attributable to the payments, forfeitures, and other transactions contemplated by this Article III, including without limitation any federal, state, or local income, employment, excise, or other taxes.
(b) Verdana shall issue appropriate tax reporting forms, including IRS Form 1099-MISC or such other forms as may be required by applicable law, with respect to the Settlement Payment. Verdana shall provide CRH with a copy of any such tax reporting form contemporaneously with its filing.
(c) CRH shall handle all tax reporting with respect to the equity forfeitures described in Sections 3.3 and 3.4, including the issuance of any corrected IRS Forms W-2, 1099, or other forms as may be required by applicable law.
(d) No Party makes any representation or warranty to any other Party regarding the tax treatment or consequences of the Settlement Payment, the Cost Reimbursement, the equity forfeitures, or any other aspect of this Agreement. Each Party acknowledges that it has been advised to consult with its own tax advisors regarding the tax implications of this Agreement.
Section 3.7 No Other Monetary Obligations.
Except as expressly provided in this Agreement, each Party shall bear its own attorneys' fees, costs, disbursements, and expenses incurred in connection with the Action, the mediation, the settlement negotiations, and the preparation, negotiation, and execution of this Agreement. No Party shall have any monetary obligation to any other Party arising from the matters that are the subject of this Agreement, except as expressly set forth herein.
ARTICLE IV
DATA RETURN AND DESTRUCTION
Section 4.1 Obligation to Return or Destroy.
(a) Within ten (10) Business Days following the Execution Date, each Individual Defendant shall return to CRH, or certify the complete destruction of, all Exfiltrated Data and any other CRH Confidential Information in his or her possession, custody, or control, regardless of the medium on which such information is stored, including without limitation hard copies, electronic copies, copies stored on personal computers, laptops, tablets, mobile devices, external hard drives, USB drives, memory cards, personal cloud storage accounts (including but not limited to Hollowell Health IT, Larkspur Technologies, Meridian Systems, Cobalt Ridge Systems, and any other cloud storage service), email accounts (whether personal or professional), and any other storage medium.
(b) The obligation set forth in Section 4.1(a) extends to all copies, summaries, extracts, compilations, analyses, notes, memoranda, reports, derivative works, and any other materials that incorporate, reference, or are based upon CRH Confidential Information, in whole or in part.
(c) Each Individual Defendant shall follow the step-by-step procedures set forth in the Data Destruction Protocol (Exhibit B) in carrying out the obligations under this Section 4.1.
Section 4.2 Certification of Destruction.
(a) Upon completion of the data return or destruction process described in Section 4.1, each Individual Defendant shall execute and deliver to CRH a sworn certification in the form attached as Annex 1 to Exhibit B, confirming under penalty of perjury that (i) all CRH Confidential Information (including Exfiltrated Data) that was in his or her possession, custody, or control has been returned to CRH or permanently destroyed; (ii) no copies, summaries, extracts, compilations, analyses, notes, memoranda, reports, derivative works, or other materials incorporating CRH Confidential Information have been retained; and (iii) no CRH Confidential Information has been transferred, transmitted, or disclosed to any Person other than as may have been identified in the forensic analysis conducted by Pinnacle Forensics.
(b) Verdana shall execute and deliver to CRH a certification signed by an authorized corporate officer of Verdana, confirming under oath that (i) Verdana has not received, does not possess, and has not used any Exfiltrated Data or CRH Confidential Information obtained from or through the Individual Defendants; (ii) Verdana has conducted a reasonable internal investigation and has found no evidence that CRH Confidential Information has been introduced into Verdana's business operations, systems, or processes; and (iii) Verdana has implemented reasonable measures to prevent the introduction of CRH Confidential Information into its business.
(c) The individual sworn certifications and the Verdana corporate officer certification shall be delivered to CRH's counsel, Calderwood & Harkness LLP, with copies to the Compliance Monitor, within the ten (10)-Business Day period specified in Section 4.1(a).
Section 4.3 Verdana Forensic Audit.
(a) Verdana shall permit and cooperate with an independent forensic audit of its information systems by the Forensic Auditor (Pinnacle Forensics LLC) to verify compliance with the data return and destruction obligations set forth in this Article IV and to confirm that no CRH Confidential Information resides on Verdana's systems (the "Verdana Forensic Audit").
(b) The Verdana Forensic Audit shall be conducted within thirty (30) calendar days following the Execution Date. The Forensic Auditor shall use commercially reasonable efforts to complete the audit within such thirty (30)-day period, provided that if additional time is required due to the scope or complexity of Verdana's systems, the Forensic Auditor may extend the audit period by up to an additional fifteen (15) calendar days upon written notice to all Parties.
(c) The scope of the Verdana Forensic Audit shall include, at a minimum, examination of the following: (i) Verdana's corporate servers (including all file servers, application servers, and database servers); (ii) Verdana's cloud storage environments (including Ashgrove Software, Westvale Services Inc., and any other enterprise cloud platforms); (iii) Verdana's email systems (including all enterprise email accounts used by any Individual Defendant); (iv) all laptops, desktop computers, mobile devices, and other hardware devices issued to or used by any Individual Defendant in connection with his or her employment at Verdana; and (v) any personal devices used by any Individual Defendant to access Verdana's systems. The Forensic Auditor shall search for the presence of CRH Confidential Information using hash value matching, keyword searches, metadata analysis, and such other forensic methodologies as the Forensic Auditor deems appropriate.
(d) The cost of the Verdana Forensic Audit, including the Forensic Auditor's professional fees, travel expenses, and related costs, shall be borne entirely by Verdana, subject to a cap of One Hundred Seventy-Five Thousand Dollars ($175,000). In the event the Forensic Auditor's fees and expenses exceed such cap, the Parties shall negotiate in good faith regarding the allocation of any excess costs.
(e) The engagement of Pinnacle Forensics for the Verdana Forensic Audit shall be governed by a separate engagement letter between Verdana and Pinnacle Forensics, with CRH as a named beneficiary entitled to receive the Forensic Auditor's final audit report, including all findings, conclusions, and recommendations. Dr. Rajiv Anand of Pinnacle Forensics shall serve as the engagement lead for the Verdana Forensic Audit.
(f) The Forensic Auditor shall deliver its final report to counsel for all Parties and to the Compliance Monitor within ten (10) Business Days following the completion of the audit. The final report shall set forth in reasonable detail the Forensic Auditor's findings, including a description of the systems examined, the forensic methodologies employed, any CRH Confidential Information identified, and the Forensic Auditor's conclusions regarding compliance or non-compliance.
Section 4.4 Consequences of Non-Compliance.
(a) In the event the Verdana Forensic Audit reveals the presence of any CRH Confidential Information on Verdana's information systems, Verdana shall immediately (and in no event later than five (5) Business Days following receipt of the Forensic Auditor's report) quarantine and destroy such information under the direct supervision of the Forensic Auditor, and shall provide written confirmation of such destruction to the Forensic Auditor, the Compliance Monitor, and counsel for CRH.
(b) In the event the Verdana Forensic Audit reveals the presence of CRH Confidential Information, the Compliance Monitor shall investigate the circumstances under which such information came to be present on Verdana's systems and shall report its findings to all Parties and, if requested by CRH, to the Court.
(c) Any material non-compliance with this Article IV, including without limitation the failure to return or destroy CRH Confidential Information within the time periods specified herein, the provision of a false or misleading certification, or the deliberate concealment of CRH Confidential Information, shall constitute a material breach of this Agreement and shall entitle CRH to seek enforcement through the Court pursuant to the Consent Order, including through civil contempt proceedings, injunctive relief, and such other remedies as may be available at law or in equity.
Section 4.5 Detailed Procedures.
The step-by-step procedures for the return and destruction of CRH Confidential Information, the technical specifications for data destruction (including standards for secure deletion, overwriting, and physical destruction of storage media), and the forms of sworn certification are set forth in Exhibit B (Data Return and Destruction Protocol) attached hereto and incorporated herein by reference.
ARTICLE V
COMPLIANCE MONITOR
Section 5.1 Appointment.
(a) The Parties agree to the appointment of Aldwyn Compliance Solutions LLC, a Delaware limited liability company, located at 1700 Market Street, Suite 2800, Philadelphia, Pennsylvania 19103, as the independent compliance monitor (the "Compliance Monitor") for the purpose of monitoring and verifying compliance by the Individual Defendants and Verdana with the obligations set forth in this Agreement.
(b) The Compliance Monitor shall be engaged pursuant to the Compliance Monitor Engagement Letter in substantially the form attached hereto as Exhibit D. The Parties shall execute, or cause to be executed, the Compliance Monitor Engagement Letter within five (5) Business Days following the Execution Date.
(c) The Compliance Monitor's engagement shall commence on the Execution Date and shall continue for a period of twelve (12) months (the "Compliance Monitoring Period"), expiring on the first anniversary of the Execution Date. In the event a compliance investigation or audit is pending at the expiration of the Compliance Monitoring Period, the Compliance Monitor's engagement shall be automatically extended for such additional period as is reasonably necessary to complete such investigation or audit, but in no event longer than ninety (90) additional days.
Section 5.2 Scope of Monitoring.
(a) The Compliance Monitor shall conduct quarterly verification of compliance by the Individual Defendants and Verdana with the following obligations:
(i) The Modified Non-Compete Obligations set forth in Sections 2.1 and 2.2 and Exhibit A;
(ii) The Modified Non-Solicitation Obligations set forth in Sections 2.3 and 2.4 and Exhibit A;
(iii) The data return and destruction obligations set forth in Article IV and Exhibit B, including verification that no CRH Confidential Information has been retained or reintroduced into Verdana's systems following the completion of the Verdana Forensic Audit;
(iv) The perpetual confidentiality obligations reaffirmed under Section 2.5; and
(v) The Verdana covenants set forth in Section 2.6, including verification that Verdana has implemented and is maintaining appropriate role restrictions and information barriers.
(b) The quarterly monitoring reviews shall be conducted during the first, fourth, seventh, and tenth months of the Compliance Monitoring Period, or at such other times as the Compliance Monitor deems appropriate in its reasonable professional judgment. Each quarterly review shall be completed within thirty (30) calendar days of its commencement.
(c) Monitoring procedures shall be conducted in accordance with the Compliance Monitoring Protocol, a detailed procedures annex to be finalized by the Compliance Monitor in consultation with the Parties within thirty (30) calendar days following the Execution Date and appended to the Compliance Monitor Engagement Letter.
Section 5.3 Access and Cooperation.
(a) Each Individual Defendant and Verdana shall cooperate fully and in good faith with the Compliance Monitor in connection with the performance of the Compliance Monitor's duties, including by providing reasonable access to relevant records, documents, data, personnel, and information as the Compliance Monitor may reasonably request. Without limiting the generality of the foregoing, the Individual Defendants and Verdana shall (i) respond promptly to written inquiries from the Compliance Monitor; (ii) make relevant personnel available for interviews at reasonable times and upon reasonable notice; (iii) provide access to relevant organizational charts, role descriptions, and reporting structures; and (iv) permit the Compliance Monitor to conduct on-site visits at Verdana's offices upon reasonable prior notice.
(b) CRH shall likewise cooperate with the Compliance Monitor as reasonably requested, including by providing information regarding CRH's organizational structure, personnel, vendors, and business operations as may be necessary for the Compliance Monitor to fulfill its duties. CRH shall designate a liaison (the "CRH Compliance Liaison") who shall serve as the primary point of contact between CRH and the Compliance Monitor.
(c) The terms of information sharing, access, cooperation, and confidentiality protections applicable to the Compliance Monitor's engagement shall be set forth in a separate letter agreement among CRH, Verdana, and the Compliance Monitor, to be executed within ten (10) Business Days following the Execution Date.
Section 5.4 Reporting.
(a) The Compliance Monitor shall deliver quarterly written reports (each, a "Quarterly Report") to counsel for each Party:
(i) Calderwood & Harkness LLP, Attention: Bernard Crawford, 1301 K Street NW, Suite 1200, Washington, DC 20005 (counsel for CRH);
(ii) Whitfield, Nygaard & Doyle LLP, Attention: Catherine Nygaard, 1000 North Market Street, Suite 1500, Wilmington, DE 19801 (counsel for the Individual Defendants); and
(iii) Blackhall & Soren LLP, Attention: Gavin Blackhall, 300 Delaware Avenue, Suite 900, Wilmington, DE 19801 (counsel for Verdana).
(b) Each Quarterly Report shall set forth in reasonable detail the Compliance Monitor's findings with respect to each area of monitoring described in Section 5.2, including a description of the monitoring procedures employed, the information reviewed, the personnel interviewed, and the Compliance Monitor's conclusions regarding compliance or non-compliance.
(c) If requested by any Party, the Compliance Monitor shall submit any Quarterly Report to the Court, under seal, for the Court's review. The Parties shall cooperate in seeking appropriate confidentiality protections with respect to any Quarterly Reports filed with the Court.
(d) In the event the Compliance Monitor identifies a suspected violation of any obligation set forth in this Agreement, the Compliance Monitor shall promptly (and in any event within five (5) Business Days of such identification) notify counsel for all Parties in writing, specifying the nature of the suspected violation and the basis for the Compliance Monitor's determination. The Party alleged to be in violation shall have ten (10) Business Days following receipt of such notice to cure the violation or to provide the Compliance Monitor with a written explanation demonstrating that no violation has occurred. If the suspected violation is not cured or satisfactorily explained within the ten (10)-Business Day cure period, the Compliance Monitor shall report the violation to the Court by filing a report under seal, with copies to counsel for all Parties.
Section 5.5 Cost Allocation.
(a) The total estimated cost of the Compliance Monitor's engagement for the Compliance Monitoring Period is Three Hundred Sixty Thousand Dollars ($360,000), inclusive of professional fees, out-of-pocket expenses, and administrative costs. The actual cost may vary based on the scope and complexity of the monitoring activities, provided that neither Party's share of actual costs shall exceed 120% of its estimated allocation without the prior written consent of such Party or an order of the Court.
(b) Verdana shall bear sixty percent (60%) of the Compliance Monitor's fees and expenses, representing an estimated Two Hundred Sixteen Thousand Dollars ($216,000).
(c) CRH shall bear forty percent (40%) of the Compliance Monitor's fees and expenses, representing an estimated One Hundred Forty-Four Thousand Dollars ($144,000).
(d) Payments to the Compliance Monitor shall be made in accordance with the billing and payment terms set forth in the Compliance Monitor Engagement Letter. The Compliance Monitor shall submit monthly invoices to both Verdana and CRH (or their respective counsel), allocated in accordance with the 60/40 cost-sharing arrangement.
Section 5.6 Independence.
(a) The Compliance Monitor shall act as an independent third party retained for the benefit of the Parties and the Court. The Compliance Monitor shall not be deemed an agent, employee, fiduciary, or representative of any Party, and no Party shall have the authority to direct or control the Compliance Monitor's professional activities or conclusions.
(b) The Compliance Monitor's determinations, findings, conclusions, and recommendations regarding compliance or non-compliance shall be advisory in nature and shall not be binding on the Court or any Party. Notwithstanding the foregoing, the Court may give such weight to the Compliance Monitor's findings as the Court deems appropriate in connection with any enforcement proceedings.
(c) The Compliance Monitor shall maintain its independence throughout the Compliance Monitoring Period and shall promptly disclose to all Parties and the Court any circumstances that could reasonably be expected to impair its independence or objectivity.
ARTICLE VI
CONSENT ORDER AND COURT PROCEEDINGS
Section 6.1 Filing of Consent Order.
Within five (5) Business Days following the Execution Date, the Parties shall jointly prepare and submit to the Court a Stipulation of Settlement and Proposed Consent Order in substantially the form attached hereto as Schedule 1. The Stipulation shall be signed by counsel for each Party and shall request that the Court enter the Proposed Consent Order. The Proposed Consent Order shall incorporate the Modified Non-Compete Obligations, the Modified Non-Solicitation Obligations, the perpetual confidentiality obligations, the data destruction obligations, the Compliance Monitor appointment, and such other provisions of this Agreement as are appropriate for judicial enforcement.
Section 6.2 Retained Jurisdiction.
(a) The Consent Order shall provide that the Court shall retain jurisdiction over the Action and the Parties for the purpose of (i) enforcing the terms of the Consent Order and this Agreement; (ii) resolving any disputes arising under or in connection with this Agreement; (iii) adjudicating any application for a finding of contempt; (iv) modifying or vacating the Consent Order upon application by any Party and for good cause shown; and (v) entering such further orders as may be necessary or appropriate to effectuate the purposes of this Agreement.
(b) The Court's retained jurisdiction shall continue through the later of (i) the expiration of all Modified Restrictive Covenant periods (including the eighteen (18)-month non-solicitation of employees obligation expiring on August 6, 2026), and (ii) the conclusion of the Compliance Monitoring Period (including any extensions thereof pursuant to Section 5.1(c)).
(c) Each Party irrevocably consents to such retained jurisdiction and waives any objection to the Court's exercise of jurisdiction for the purposes described in this Section 6.2.
Section 6.3 Dissolution of TRO.
(a) Concurrently with the filing of the Stipulation and Proposed Consent Order pursuant to Section 6.1, CRH shall file a Motion to Dissolve the Temporary Restraining Order entered by the Court on March 7, 2025, on the grounds that the Consent Order, upon entry, shall supersede the TRO and provide the appropriate framework for enforcement of the Parties' obligations.
(b) Upon entry of the Consent Order by the Court, CRH shall promptly take all necessary steps to obtain the release of the injunction bond posted in connection with the TRO (Bond No. BSC-2025-TRO-04419, in the amount of Two Million Five Hundred Thousand Dollars ($2,500,000), issued by Broadview Surety Corp.), including filing any required motions or stipulations with the Court and providing any notices required by Broadview Surety Corp.
Section 6.4 Dismissal.
(a) Upon the expiration of the Compliance Monitoring Period and confirmation of full compliance by all Parties with the terms of this Agreement and the Consent Order (as evidenced by the Compliance Monitor's final Quarterly Report or such other certification as the Court may require), the Parties shall jointly file a Stipulation for Dismissal with Prejudice of the Action, with each Party bearing its own costs and attorneys' fees except as otherwise provided in this Agreement.
(b) In the event of a material breach of this Agreement or the Consent Order during the Compliance Monitoring Period that remains uncured following the applicable cure period set forth in Section 13.1, CRH shall have the right to oppose the filing of a Stipulation for Dismissal and to seek enforcement of the Consent Order through the Court, including through contempt proceedings and such other relief as may be available.
(c) The filing of the Stipulation for Dismissal with Prejudice shall not affect the survival of the provisions of this Agreement that, by their terms, survive the termination or dismissal of the Action, including the perpetual confidentiality obligations, the releases set forth in Article VIII, the non-disparagement obligations set forth in Article IX, and the confidentiality of settlement provisions set forth in Article X.