REVISED TERM SHEET – SETTLEMENT FRAMEWORK
(Reflecting Negotiated Terms)
Date: March 20, 2025
PRIVILEGED AND CONFIDENTIAL FOR SETTLEMENT PURPOSES ONLY SUBJECT TO FEDERAL RULE OF EVIDENCE 408 AND DELAWARE RULE OF EVIDENCE 408
Reference: Cascade Retail Holdings Inc. v. Rathore et al., C.A. No. 2025-0198-MTZ (Del. Ch.)
Calderwood & Harkness LLP Matter No.: 1038-00006
STATUS NOTATION: This Revised Term Sheet supersedes the Initial Term Sheet dated March 19, 2025 and reflects the framework agreed upon by all parties at the mediation session held on March 18, 2025 before the Honorable Philip Ashford (Ret.) through Meridian ADR Services LLC (Ref. Meridian-2025-0318-CRH). This term sheet is non-binding and is subject to the execution of definitive documentation as more fully described in Section 14 below. In the event of any conflict between this Revised Term Sheet and the Initial Term Sheet dated March 19, 2025, the terms of this Revised Term Sheet shall control. All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the applicable underlying agreements or the Verified Complaint.
1. PARTIES
1.1 Plaintiff. Cascade Retail Holdings Inc. ("CRH" or "Plaintiff"), a corporation duly organized and existing under the laws of the State of Delaware, whose shares of common stock are listed and traded on the Nasdaq Global Select Market under the ticker symbol "CRHL."
Principal Headquarters: 2200 Elliott Avenue West, Suite 3400, Seattle, Washington 98119
Registered Agent (Delaware): Capitol Registered Agents LLC, 1209 Orange Street, Wilmington, Delaware 19801
Federal Employer Identification Number (EIN): 91-2847351
Outside Litigation Counsel: Calderwood & Harkness LLP, 1301 K Street NW, Suite 1200, Washington, DC 20005. Bernard Crawford, Responsible Partner.
In-House Contact: Theresa Yun-Park, General Counsel, Cascade Retail Holdings Inc., 2200 Elliott Avenue West, Suite 3400, Seattle, Washington 98119. Direct: (206) 555-4280. Email: tyunpark@cascaderetail.com.
1.2 Individual Defendants (the "Rathore Group")
The following eight former employees of CRH (collectively, the "Rathore Group" or the "Individual Defendants"), each of whom resigned from CRH effective February 7, 2025:
1. Priya Rathore – Former Senior Vice President, Merchandising
2. Derek Linden – Former Vice President, Hardlines Merchandising
3. Sonia Kaczmarek – Former Vice President, Softlines Merchandising
4. Amara Osei – Former Director, Private Label Strategy
5. Brent Halvorsen – Former Director, Seasonal Planning & Analytics
6. Lucia Fernandez-Gill – Former Director, Vendor Relations (Domestic)
7. Nathan Tsao – Former Senior Manager, eCommerce Merchandising
8. Kira Johansson – Former Senior Manager, Category Analytics
Each member of the Rathore Group is represented by Whitfield, Nygaard & Doyle LLP, 1000 North Market Street, Suite 1500, Wilmington, Delaware 19801. Catherine Nygaard, Lead Partner.
1.3 Corporate Defendant
Verdana Commerce Group, Inc. ("Verdana" or "Corporate Defendant"), a corporation duly organized and existing under the laws of the State of Delaware.
Principal Headquarters: 400 Christiana Gateway, Suite 700, Wilmington, Delaware 19801
Federal Employer Identification Number (EIN): 51-3982647
Private Equity Sponsor: Greystone Capital Partners, LP, acting as majority equity holder of Verdana through its investment vehicle, Greystone Capital Fund VII, LP.
Outside Litigation Counsel: Blackhall & Soren LLP, 300 Delaware Avenue, Suite 900, Wilmington, Delaware 19801. Gavin Blackhall, Lead Partner.
1.4 Note Regarding Greystone Capital Partners, LP
Greystone Capital Partners, LP ("Greystone") is not a named party to this settlement and shall not be a signatory to the definitive Settlement Agreement. Notwithstanding the foregoing, Verdana's obligations hereunder, including without limitation the monetary obligations set forth in Section 5 and the compliance obligations set forth in Sections 3, 4, and 6, are undertaken with the full acknowledgment, knowledge, and support of Greystone in its capacity as Verdana's majority equity holder. For reference purposes:
Principal Office: 680 Park Avenue, 22nd Floor, New York, New York 10065
Managing Partner: Elliot Westbrook
Nothing in this Revised Term Sheet or the definitive Settlement Agreement shall be construed to create any direct obligation, liability, or right of contribution on the part of Greystone, except to the extent Greystone separately guarantees any obligations of Verdana in the definitive documentation.
2. RECITALS / BACKGROUND
The following recitals are intended to provide context for the settlement framework memorialized herein and shall be incorporated, in substantially the form set forth below, into the definitive Settlement Agreement:
A. CRH is a publicly traded omnichannel retail company operating approximately 387 brick-and-mortar retail locations across 34 states, together with a direct-to-consumer ecommerce platform (cascaderetail.com). For its fiscal year ending January 31, 2025 ("FY2024"), CRH reported consolidated revenue of approximately $6.82 billion. As of late February 2025, CRH's market capitalization was approximately $4.1 billion based on the closing price of its common stock on the Nasdaq Global Select Market.
B. CRH's merchandising division is a core strategic function responsible for product assortment, buying, vendor negotiations, private-label development, seasonal planning, and category analytics. In FY2024, the merchandising division accounted for approximately $2.3 billion in gross merchandise value.
C. Between January 28, 2025 and February 4, 2025, each of the eight members of the Rathore Group entered into offer letters and related employment documentation with Verdana Commerce Group, Inc., a direct competitor of CRH in the omnichannel retail sector. Verdana operates approximately 190 retail locations across 22 states and maintains a competing ecommerce platform.
D. On February 7, 2025, at approximately 4:47 PM Pacific Standard Time, all eight members of the Rathore Group submitted simultaneous resignations from their respective positions at CRH. The coordinated timing and manner of these resignations gave rise to CRH's belief that the departures were the product of a concerted recruitment effort by Verdana.
E. Each member of the Rathore Group was, at the time of his or her resignation, bound by an employment agreement (or, in the case of Priya Rathore, an Amended and Restated Employment Agreement dated March 15, 2021) containing restrictive covenant provisions, including non-competition, non-solicitation of employees, non-solicitation of vendors, and confidentiality obligations. All such employment agreements are governed by the laws of the State of Delaware and contain Delaware forum-selection clauses.
F. By virtue of their positions within CRH's merchandising division, the members of the Rathore Group had direct access to, and in many cases were the principal authors or custodians of, CRH's proprietary and confidential information, including without limitation: (i) Project Ridgeline, a confidential five-year category expansion roadmap developed under Priya Rathore's direction; (ii) vendor negotiation playbooks detailing CRH's negotiation strategies, pricing targets, and rebate structures with key suppliers; (iii) proprietary seasonal buying algorithms used by CRH to optimize inventory allocation and markdown cadence; (iv) private-label sourcing strategies, including cost structures, factory relationships, and quality benchmarks; and (v) customer segmentation data and associated analytics.
G. Following the Rathore Group's departures, CRH engaged Pinnacle Forensics LLC ("Pinnacle") to conduct a forensic examination of CRH's information technology systems and, to the extent accessible, the Rathore Group's activities on CRH-provided devices and accounts. Pinnacle's preliminary forensic report confirmed the exfiltration of 14,327 files, totaling approximately 2.8 gigabytes of data, from CRH's systems to personal cloud storage accounts maintained by various members of the Rathore Group. The exfiltration occurred during the period from January 10, 2025 through February 4, 2025, overlapping with the period during which the Rathore Group was negotiating and executing offer letters with Verdana.
H. On March 5, 2025, CRH filed a Verified Complaint in the Court of Chancery of the State of Delaware, captioned Cascade Retail Holdings Inc. v. Rathore et al., C.A. No. 2025-0198-MTZ, assigned to Vice Chancellor Margaret T. Zhao. The Verified Complaint asserts the following causes of action: (1) breach of restrictive covenant agreements against all members of the Rathore Group; (2) breach of confidentiality obligations against all members of the Rathore Group; (3) misappropriation of trade secrets under the Delaware Uniform Trade Secrets Act ("DUTSA"), 6 Del. C. §§ 2001–2009, against all Defendants; (4) tortious interference with contractual relations against Verdana; and (5) civil conspiracy against all Defendants.
I. On March 7, 2025, upon CRH's application and following an ex parte hearing, the Court granted a Temporary Restraining Order (the "TRO") prohibiting the members of the Rathore Group from commencing employment with Verdana in any capacity and directing the preservation of all potentially relevant electronic data. The TRO was entered upon CRH's posting of an injunction bond in the amount of $2,500,000 (Bond No. BSC-2025-TRO-04419) issued by Broadview Surety Corp., 120 Broadway, 35th Floor, New York, New York 10271.
J. The parties participated in a full-day mediation session on March 18, 2025, before the Honorable Philip Ashford (Ret.), conducted under the auspices of Meridian ADR Services LLC (Reference No. Meridian-2025-0318-CRH), at Meridian's offices in Wilmington, Delaware. Following extensive arms-length negotiations facilitated by Judge Ashford, the parties reached a framework for settlement.
K. This Revised Term Sheet, dated March 20, 2025, memorializes the agreed-upon settlement framework and supersedes the Initial Term Sheet dated March 19, 2025. The parties intend to negotiate and execute definitive documentation consistent with the terms set forth herein.
3. MODIFIED RESTRICTIVE COVENANT TERMS
The parties have agreed to the following modifications of the restrictive covenant obligations applicable to each member of the Rathore Group. These modified terms shall supersede the corresponding provisions of each individual's employment agreement and shall be incorporated into the Consent Order to be filed with the Court, as described in Section 8 below.
3.1 Non-Competition – Priya Rathore
(a) Duration. The non-competition restriction applicable to Priya Rathore shall run for a period of twelve (12) months from her date of resignation, commencing on February 7, 2025 and expiring at 11:59 PM Eastern Time on February 6, 2026. This represents a reduction from the eighteen (18) month non-competition period set forth in Section 7(a) of Rathore's Amended and Restated Employment Agreement dated March 15, 2021 (the "Rathore Employment Agreement").
(b) Scope Limitation. During the non-competition period, Rathore shall be restricted from performing services in a merchandising, buying, sourcing, category management, or strategic planning capacity at any Competing Retailer (as defined in the Rathore Employment Agreement), provided that such restriction shall be limited to the following three product categories (the "Restricted Categories"):
(i) home goods (including home furnishings, kitchenware, home décor, and related subcategories as customarily understood in the retail industry);
(ii) seasonal décor (including holiday, outdoor, and event-related seasonal merchandise); and
(iii) private-label apparel (including store-brand and exclusive-label apparel lines developed or managed by CRH).
This scope limitation represents a narrowing from the original covenant set forth in Section 7(a) of the Rathore Employment Agreement, which covered all retail categories across the United States without product-category limitation.
(c) Geographic Scope. The geographic scope of the non-competition restriction shall remain the United States, consistent with Section 7(a)(ii) of the Rathore Employment Agreement.
(d) Permitted Activities at Verdana. Notwithstanding the foregoing, Rathore may commence or continue employment with Verdana during the non-competition period in any capacity that does not involve the performance of services in merchandising, buying, sourcing, category management, or strategic planning with respect to any of the three Restricted Categories. By way of example and not limitation, Rathore may serve in a general corporate, operations, or supply-chain capacity at Verdana to the extent such activities do not involve the Restricted Categories.
3.2 Non-Competition – Other Seven Employees (Linden, Kaczmarek, Osei, Halvorsen, Fernandez-Gill, Tsao, Johansson)
(a) Duration. The non-competition restriction applicable to each of Derek Linden, Sonia Kaczmarek, Amara Osei, Brent Halvorsen, Lucia Fernandez-Gill, Nathan Tsao, and Kira Johansson shall run for a period of nine (9) months from the date of resignation, commencing on February 7, 2025 and expiring at 11:59 PM Eastern Time on November 6, 2025. This represents a reduction from the original non-competition periods applicable to each such individual, which ranged from twelve (12) to eighteen (18) months, as specified in their respective employment agreements.
(b) Scope Limitation. During the non-competition period, each of the seven individuals identified in this Section 3.2 shall be restricted from performing services in a merchandising, buying, sourcing, category management, or strategic planning capacity at any Competing Retailer with respect to the same three Restricted Categories identified in Section 3.1(b):
(i) home goods;
(ii) seasonal décor; and
(iii) private-label apparel.
(c) Geographic Scope. The geographic scope of the non-competition restriction applicable to each such individual shall remain the United States, consistent with the original employment agreements.
(d) Permitted Activities at Verdana. Each of the seven individuals may commence or continue employment with Verdana during the applicable non-competition period in any capacity that does not involve the performance of services in merchandising, buying, sourcing, category management, or strategic planning with respect to any of the three Restricted Categories, on the same basis as described in Section 3.1(d) with respect to Rathore.
3.3 Non-Solicitation of Employees
(a) Applicability. The non-solicitation of employees restriction shall apply to all eight (8) members of the Rathore Group.
(b) Duration. The non-solicitation of employees restriction shall run for a period of eighteen (18) months from the date of resignation, commencing on February 7, 2025 and expiring at 11:59 PM Eastern Time on August 6, 2026.
(c) Scope. During the non-solicitation period, no member of the Rathore Group shall, directly or indirectly, solicit, recruit, encourage, or induce any employee of CRH to terminate his or her employment with CRH or to accept employment with Verdana or any other entity, or otherwise hire or attempt to hire any employee of CRH.
(d) Clarification Regarding Unsolicited Inquiries. For the avoidance of doubt, the prohibition set forth in this Section 3.3 applies to solicitation initiated by any member of the Rathore Group. It does not prohibit any member of the Rathore Group from responding to unsolicited, inbound employment inquiries initiated by CRH employees, provided that such response does not constitute an indirect solicitation or recruitment effort. General postings of employment opportunities on public job boards, corporate websites, or social media platforms by Verdana shall not, by themselves, constitute solicitation by any member of the Rathore Group.
3.4 Non-Solicitation of Vendors
(a) Applicability. The non-solicitation of vendors restriction shall apply to all eight (8) members of the Rathore Group.
(b) Duration. The non-solicitation of vendors restriction shall run for a period of twelve (12) months from the date of resignation, commencing on February 7, 2025 and expiring at 11:59 PM Eastern Time on February 6, 2026.
(c) Scope. During the non-solicitation of vendors period, no member of the Rathore Group shall, directly or indirectly, solicit, divert, or interfere with CRH's business relationships with any of CRH's top fifty (50) vendors (ranked by aggregate spend during CRH's FY2024), as identified in a confidential schedule to be prepared by CRH and attached as Exhibit C to the definitive Settlement Agreement. Such solicitation, diversion, or interference includes, without limitation, contacting such vendors to offer or negotiate terms on behalf of Verdana, sharing CRH-derived pricing or negotiation information with such vendors, or otherwise leveraging relationships developed during the Rathore Group member's employment with CRH to redirect vendor business to Verdana.
(d) Clarification Regarding Pre-Existing Verdana Vendor Relationships. The prohibition set forth in this Section 3.4 does not prohibit Verdana from engaging in ordinary-course vendor relationships with any of the vendors listed on Exhibit C, to the extent that such relationships were in existence prior to February 7, 2025. The restriction applies only to affirmative solicitation, diversion, or interference by a member of the Rathore Group leveraging CRH-derived relationships, information, or goodwill. The burden of demonstrating the pre-existing nature of any such vendor relationship shall rest with Verdana.
3.5 Confidentiality Obligations
(a) Continuation of Existing Obligations. All existing perpetual confidentiality obligations set forth in the respective employment agreements of each member of the Rathore Group shall remain in full force and effect. These confidentiality obligations are not modified, waived, or released by this settlement, and each member of the Rathore Group acknowledges his or her continuing obligations thereunder.
(b) Specific Trade Secret Acknowledgment. Each of the eight members of the Rathore Group, and Verdana, specifically acknowledges and agrees that the following categories of CRH information constitute trade secrets and confidential information of CRH, as defined under the Delaware Uniform Trade Secrets Act and the applicable employment agreements:
(i) Project Ridgeline materials, including all drafts, analyses, projections, market assessments, and strategic recommendations prepared in connection with CRH's five-year category expansion roadmap;
(ii) vendor negotiation term sheets, including pricing targets, rebate structures, volume commitments, and negotiation strategies;
(iii) private-label cost models, including factory-level cost data, margin analyses, and sourcing benchmarks;
(iv) seasonal buying algorithms, including the proprietary models used by CRH to forecast demand, allocate inventory, and optimize markdown timing; and
(v) customer segmentation data, including behavioral analytics, purchasing profiles, and loyalty program data.
4. DATA RETURN AND DESTRUCTION
4.1 Obligation to Return or Destroy CRH Data
Each of the eight members of the Rathore Group shall return to CRH, or certify the complete and irrevocable destruction of, all CRH data, documents, files, and materials (in any format, whether electronic, physical, or otherwise) in their possession, custody, or control within ten (10) business days following the date of execution of the definitive Settlement Agreement. This obligation encompasses, without limitation, all files stored on personal devices, personal email accounts, personal cloud storage accounts (including but not limited to Hollowell Health IT, Larkspur Technologies, Meridian Systems, and Cobalt Ridge Systems), USB drives, external hard drives, printed or photocopied documents, handwritten notes, and any other medium in which CRH data may reside.
In addition, Verdana Commerce Group, Inc. shall certify that no CRH data, documents, files, or materials have been integrated into, uploaded to, or otherwise incorporated into Verdana's systems, processes, work product, vendor negotiations, strategic plans, or any other aspect of Verdana's business operations. This certification shall be provided by Verdana's General Counsel and shall be in a form acceptable to CRH's counsel.
4.2 Independent Forensic Audit
(a) Engagement. Verdana shall permit, and shall cause each member of the Rathore Group to cooperate with, an independent forensic audit conducted by Pinnacle Forensics LLC ("Pinnacle"), the same forensic firm previously engaged by CRH in connection with its investigation of the data exfiltration. The engagement lead for the forensic audit shall be Dr. Rajiv Anand, a principal of Pinnacle.
(b) Scope of Audit. The scope of the forensic audit shall include, but not be limited to:
(i) verification that all 14,327 files (totaling approximately 2.8 gigabytes) identified in Pinnacle's preliminary forensic report as having been exfiltrated from CRH systems have been returned to CRH or permanently destroyed;
(ii) examination of Verdana's information technology systems, including servers, workstations, shared drives, email systems, and cloud-based storage platforms, to confirm that no copies, derivatives, summaries, or adaptations of CRH data exist within Verdana's environment;
(iii) examination of the personal devices and personal accounts of each member of the Rathore Group, to the extent reasonably necessary to verify compliance with the data return and destruction obligations; and
(iv) preparation of a written report summarizing the findings of the audit, to be delivered to counsel for all parties.
(c) Cost. The cost of the independent forensic audit shall be borne entirely by Verdana, subject to a cap of One Hundred Seventy-Five Thousand Dollars ($175,000). In the event that the actual cost of the audit exceeds $175,000, the parties shall confer in good faith regarding allocation of the excess costs.
(d) Timeline. The forensic audit shall commence within five (5) business days following execution of the definitive Settlement Agreement and shall be completed within thirty (30) business days of commencement.
4.3 Certification. (a) Individual Certifications. Each member of the Rathore Group shall execute and deliver a sworn certification, under penalty of perjury, attesting to the complete return or destruction of all CRH data, documents, files, and materials in his or her possession, custody, or control. The form of such certification shall be mutually agreed upon by counsel for the parties and attached as an exhibit to the definitive Settlement Agreement.
(b) Corporate Officer Certification. Verdana's General Counsel, Helen Tsoi, shall execute and deliver a corporate officer certification, in a form acceptable to CRH's counsel, attesting to Verdana's compliance with the data-related obligations set forth in this Section 4.
(c) Attachment to Settlement Agreement. All certifications delivered pursuant to this Section 4.3 shall be attached as exhibits to the definitive Settlement Agreement and, to the extent required for enforcement purposes, referenced in the Consent Order filed with the Court.
5. MONETARY TERMS
5.1 Settlement Cash Payment
Verdana Commerce Group, Inc. shall pay to Cascade Retail Holdings Inc. a lump-sum settlement payment in the amount of Eight Million Seven Hundred Fifty Thousand Dollars ($8,750,000) (the "Settlement Cash Payment"), payable within thirty (30) calendar days following the date of execution of the definitive Settlement Agreement.
Payment shall be made by wire transfer of immediately available funds to a bank account designated in writing by CRH's counsel. Wire instructions shall be provided by Calderwood & Harkness LLP no later than five (5) business days following execution of the definitive Settlement Agreement.
In the event that the Settlement Cash Payment is not received by CRH within the thirty (30) calendar day payment period, interest shall accrue on all unpaid amounts at the rate of one and one-half percent (1.5%) per month (or the maximum rate permitted by applicable law, if less), calculated from the due date until the date of receipt.
5.2 Equity Forfeitures – Priya Rathore
(a) Forfeiture of Unvested RSUs. Priya Rathore shall forfeit one hundred percent (100%) of her unvested restricted stock units ("RSUs") granted by CRH. The details of Rathore's RSU grant are as follows:
• Grant Date: March 15, 2021
• Total Grant Value: $725,000 (based on the grant-date fair market value)
• Vesting Schedule: Four-year ratable annual vesting, with twenty-five percent (25%) of the grant vesting on each anniversary of the grant date
• Tranches Vested Prior to Resignation:
• 25% vested on March 15, 2022 ($181,250)
• 25% vested on March 15, 2023 ($181,250)
• 25% vested on March 15, 2024 ($181,250)
• Total Vested: 75% ($543,750)
• Unvested at Resignation (February 7, 2025): 25% ($181,250), with the final vesting date of March 15, 2025 not yet having occurred
(b) Clawback of Final Vested Tranche. In addition to the forfeiture of unvested RSUs described above, Rathore agrees to the clawback of the final vested tranche of her RSU grant in the amount of One Hundred Eighty-One Thousand Two Hundred Fifty Dollars ($181,250). This clawback is triggered pursuant to the for-cause clawback provision set forth in Section 9(d) of the Rathore Employment Agreement, which provides for the recovery of equity compensation vested within the twelve (12) months preceding a breach of restrictive covenants. The parties agree that Rathore's breach of the non-competition and confidentiality provisions of the Rathore Employment Agreement constitutes "cause" for purposes of the clawback provision.
(c) Total Rathore Forfeiture. The total equity forfeiture by Priya Rathore shall be Three Hundred Sixty-Two Thousand Five Hundred Dollars ($362,500), consisting of $181,250 in unvested RSUs and $181,250 in clawed-back vested RSUs.
(d) Transfer Agent Instructions. CRH shall instruct its transfer agent, Northland Trust Company, 55 Water Street, New York, New York 10041, to cancel the applicable RSU awards and to make such adjustments to CRH's stock records as are necessary to effectuate the foregoing forfeitures.
5.3 Equity Forfeitures – Other Seven Employees
Each of the other seven departing employees (Derek Linden, Sonia Kaczmarek, Amara Osei, Brent Halvorsen, Lucia Fernandez-Gill, Nathan Tsao, and Kira Johansson) shall forfeit all unvested equity awards (including RSUs and stock options, as applicable) on a pro rata basis in accordance with their individual equity grant schedules. The aggregate value of such forfeitures for the seven employees is Four Hundred Eighty-Seven Thousand Dollars ($487,000). Individual breakdowns of the equity forfeitures for each employee shall be set forth in a schedule to the definitive Settlement Agreement, to be prepared by CRH's equity compensation administrator and verified by each affected individual.
5.4 Total Economic Recovery Summary
The following table summarizes the total economic recovery to CRH under the terms of this settlement framework:
The foregoing amounts do not include the costs of the forensic audit (Section 4.2), compliance monitor (Section 6), or other non-cash components of the settlement, all of which provide additional value to CRH.
5.5 Litigation Cost Reimbursement
Verdana shall reimburse CRH in the amount of Four Hundred Twenty-Five Thousand Dollars ($425,000) toward CRH's litigation costs incurred in connection with this matter, including but not limited to court filing fees, injunction bond premiums, forensic investigation costs, and document review expenses. The litigation cost reimbursement shall be payable concurrently with the Settlement Cash Payment described in Section 5.1 (i.e., within thirty (30) calendar days following execution of the definitive Settlement Agreement), by wire transfer to the same account designated by CRH. The same late-payment interest provisions set forth in Section 5.1 shall apply to the litigation cost reimbursement.
5.6 Attorneys' Fees
Except as expressly provided in Section 5.5 above, each party shall bear its own attorneys' fees, costs, and expenses incurred in connection with this matter, including fees incurred in connection with the Verified Complaint, the TRO application, the mediation, and the negotiation and execution of the definitive Settlement Agreement. Nothing in this Section 5.6 shall affect any party's right to recover attorneys' fees in connection with the enforcement of the Consent Order or any breach of the definitive Settlement Agreement, to the extent such recovery is available under applicable law or the terms of the definitive documentation.
6. COMPLIANCE MONITOR
6.1 Appointment. The parties agree to the joint appointment of Aldwyn Compliance Solutions LLC ("Aldwyn" or the "Monitor") as an independent compliance monitor to verify and report on the Rathore Group's and Verdana's compliance with the restrictive covenant and data-related obligations set forth in Sections 3 and 4 of this Revised Term Sheet. Aldwyn's principal office is located at 1700 Market Street, Suite 2800, Philadelphia, Pennsylvania 19103. The appointment of Aldwyn was jointly proposed during the mediation and is acceptable to all parties and their respective counsel.
6.2 Term. The compliance monitor engagement shall commence on the date of execution of the definitive Settlement Agreement (target execution date: April 14, 2025) and shall continue for a period of twelve (12) months thereafter (the "Monitor Period"). Upon expiration of the Monitor Period, the Monitor's engagement shall terminate automatically unless extended by mutual written agreement of all parties.
6.3 Scope of Monitoring Activities
During the Monitor Period, Aldwyn shall undertake the following monitoring activities:
(a) Quarterly Verification of Non-Compete Compliance. On a quarterly basis, the Monitor shall verify compliance by each member of the Rathore Group with the modified non-competition obligations set forth in Sections 3.1 and 3.2, including by reviewing the job titles, responsibilities, and functional assignments of each member of the Rathore Group at Verdana and confirming that no member of the Rathore Group is performing services in a merchandising, buying, sourcing, category management, or strategic planning capacity with respect to any of the three Restricted Categories.
(b) Quarterly Verification of Non-Solicitation Compliance. On a quarterly basis, the Monitor shall verify compliance by each member of the Rathore Group with the non-solicitation of employees and non-solicitation of vendors obligations set forth in Sections 3.3 and 3.4, including by reviewing relevant communications and conducting interviews as necessary to confirm that no prohibited solicitation activity has occurred.
(c) Verification of Data Return and Destruction. The Monitor shall verify that the data return and destruction obligations set forth in Section 4 have been fully satisfied, which verification may include review of the Pinnacle forensic audit report and certifications delivered pursuant to Section 4.3.
(d) Written Reports. The Monitor shall deliver written reports to counsel for all parties on a quarterly basis, summarizing its monitoring activities, findings, and any identified compliance concerns. Such reports shall be delivered within fifteen (15) business days following the end of each calendar quarter during the Monitor Period.
(e) Investigative Authority. The Monitor shall have the authority to interview employees of CRH and Verdana (including members of the Rathore Group), review organizational charts and reporting structures, review job descriptions and functional responsibilities, and access relevant non-privileged records maintained by CRH, Verdana, or any member of the Rathore Group, in each case to the extent reasonably necessary to carry out its monitoring responsibilities. All parties shall cooperate fully and in good faith with the Monitor's reasonable requests for information and access.
6.4 Cost Allocation
The total estimated cost of the compliance monitor engagement is Three Hundred Sixty Thousand Dollars ($360,000) for the twelve-month Monitor Period. Such costs shall be allocated between the parties as follows:
• Verdana's share: 60% = $216,000
• CRH's share: 40% = $144,000
The Monitor shall invoice the parties on a quarterly basis. Each party shall pay its respective share of each quarterly invoice directly to Aldwyn within thirty (30) days of receipt. In the event that the actual cost of the Monitor engagement exceeds $360,000, the parties shall confer in good faith regarding allocation of excess costs, applying the same 60/40 allocation unless otherwise agreed.
6.5 Engagement Letter
The form of the compliance monitor engagement letter between Aldwyn and the parties shall be substantially agreed upon prior to execution of the definitive Settlement Agreement and shall be attached as Exhibit D to the definitive Settlement Agreement. The engagement letter shall set forth, among other things, the Monitor's scope of authority, reporting obligations, confidentiality obligations, indemnification provisions, and conflict-of-interest protocols.
7. MUTUAL NON-DISPARAGEMENT
The definitive Settlement Agreement shall contain a mutual non-disparagement clause, the material terms of which shall be as follows:
(a) Applicable Persons. The non-disparagement obligations shall apply to (i) CRH, and its officers, directors, and authorized spokespersons; (ii) each member of the Rathore Group, individually; and (iii) Verdana, and its officers, directors, and authorized spokespersons. Each party and covered individual shall refrain from making or publishing any statement, whether oral, written, or electronic, that disparages, defames, or reflects adversely upon the business, operations, management, reputation, products, services, or personnel of any other party.
(b) Carve-Out for Legally Required Statements. The non-disparagement obligations shall not restrict or prohibit any truthful statement required by law, regulation, subpoena, or court order, including without limitation statements made in connection with any governmental investigation, regulatory inquiry, securities filing, or judicial proceeding.
(c) Carve-Out for Regulatory Communications. The non-disparagement obligations shall not restrict or prohibit communications with any federal, state, or local regulatory authority, including without limitation the Securities and Exchange Commission, the U.S. Department of Justice, the Federal Trade Commission, and any state attorney general.
(d) Detailed Provisions. Detailed non-disparagement provisions, including remedies for breach, shall be set forth in Exhibit E to the definitive Settlement Agreement.
8. COURT FILINGS AND CONSENT ORDER
8.1 Consent Order
The parties shall jointly prepare, execute, and file with the Court of Chancery of the State of Delaware (C.A. No. 2025-0198-MTZ) a Stipulation of Settlement and Proposed Consent Order (the "Consent Order"). The Consent Order shall incorporate the modified restrictive covenant terms set forth in Sections 3.1 through 3.4 of this Revised Term Sheet, the data return and destruction obligations set forth in Section 4, and such other terms as may be appropriate. The Consent Order shall expressly provide for the retention of the Court's jurisdiction over the parties for the purpose of enforcing the terms of the Consent Order, including the authority to initiate contempt proceedings in the event of any violation thereof.
8.2 Dissolution of TRO
Upon entry of the Consent Order by the Court, the parties shall file a joint stipulation consenting to the dissolution of the existing Temporary Restraining Order granted by Vice Chancellor Zhao on March 7, 2025. The dissolution of the TRO shall be effective upon entry of the Consent Order, which shall supersede and replace the TRO with the modified restrictive covenant terms and compliance obligations set forth herein.
8.3 Release of Injunction Bond
Upon dissolution of the TRO as described in Section 8.2, CRH shall promptly instruct Broadview Surety Corp. to discharge and release injunction bond No. BSC-2025-TRO-04419 in the amount of $2,500,000. CRH's counsel shall prepare and deliver the bond discharge letter in a form acceptable to Broadview Surety Corp.
8.4 Dismissal. Following the conclusion of the twelve (12) month compliance monitor period described in Section 6.2, and subject to confirmation by the Monitor of full compliance with all obligations under the Settlement Agreement and Consent Order, the parties shall jointly file a Stipulation for Dismissal with Prejudice of all claims and counterclaims in C.A. No. 2025-0198-MTZ. The Stipulation for Dismissal shall be held in escrow by CRH's counsel, Calderwood & Harkness LLP, during the Monitor Period and shall be filed with the Court only upon satisfaction of the conditions described in this Section 8.4. In the event the Monitor identifies a material compliance failure during the Monitor Period, the parties shall confer regarding appropriate remedial measures before any Stipulation for Dismissal is filed.
9. RELEASES
9.1 CRH Release
Upon execution of the definitive Settlement Agreement and receipt in full of both (a) the Settlement Cash Payment of $8,750,000 pursuant to Section 5.1, and (b) the litigation cost reimbursement of $425,000 pursuant to Section 5.5, CRH shall release and forever discharge each member of the Rathore Group and Verdana from all claims, causes of action, demands, damages, liabilities, and obligations asserted in the Verified Complaint (Counts I through V), including without limitation claims for breach of restrictive covenant, breach of confidentiality obligations, misappropriation of trade secrets under DUTSA, tortious interference with contractual relations, and civil conspiracy.
The CRH release is subject to and conditioned upon: (a) the continuing effectiveness and enforceability of the modified restrictive covenants set forth in Sections 3.1 through 3.4; (b) the data return and destruction obligations set forth in Section 4; and (c) continued compliance by each member of the Rathore Group and Verdana with all obligations under the Settlement Agreement and Consent Order, as verified by the compliance monitor pursuant to Section 6.
For the avoidance of doubt, the CRH release shall not become effective until CRH has received full payment of the Settlement Cash Payment ($8,750,000) and the litigation cost reimbursement ($425,000) in accordance with Sections 5.1 and 5.5.
9.2 Rathore Group / Verdana Release
Upon execution of the definitive Settlement Agreement, each member of the Rathore Group and Verdana shall release and forever discharge CRH, and its officers, directors, employees, agents, successors, and assigns, from any and all counterclaims, cross-claims, demands, damages, liabilities, and obligations arising from or related to the enforcement action initiated by CRH, the circumstances of the Rathore Group's departures from CRH, the application for and grant of the TRO, and any other matters relating to the subject matter of C.A. No. 2025-0198-MTZ.
9.3 Carve-Outs. The releases set forth in Sections 9.1 and 9.2 do not extend to, and expressly exclude, any claims, causes of action, or remedies arising from or related to a breach of the definitive Settlement Agreement itself, a violation of the Consent Order, or any obligation created by or arising under the definitive Settlement Agreement or the Consent Order. Nothing in this Section 9 shall be construed to limit any party's right to seek enforcement of the Settlement Agreement or Consent Order, or to seek contempt sanctions or other relief from the Court in connection with any breach or violation thereof.
10. REPRESENTATIONS AND WARRANTIES
In connection with this settlement framework, each party makes the following representations and warranties, which shall be incorporated into the definitive Settlement Agreement:
(a) Rathore Group Representations. Each member of the Rathore Group individually represents and warrants that, other than disclosures to Verdana, he or she has not disclosed, transmitted, or made available any CRH confidential information or trade secrets to any third party. Each member of the Rathore Group further represents and warrants that, to his or her knowledge, no CRH confidential information or trade secrets have been shared with any person or entity other than Verdana in connection with the events giving rise to this litigation.
(b) Verdana Representations. Verdana Commerce Group, Inc. represents and warrants that it has not used, incorporated, relied upon, or otherwise exploited any CRH confidential information or trade secrets in any business process, strategic plan, vendor negotiation, product development activity, category management decision, or other aspect of Verdana's operations. Verdana further represents and warrants that, upon completion of the data return and destruction protocol set forth in Section 4, Verdana's systems and records will contain no CRH confidential information or trade secrets.
(c) CRH Representations. Cascade Retail Holdings Inc. represents and warrants that it has the full corporate power and authority to enter into the Settlement Agreement, that the terms of this settlement framework have been reviewed and authorized by CRH's Board of Directors, and that the execution, delivery, and performance of the Settlement Agreement will not violate or conflict with any provision of CRH's certificate of incorporation, bylaws, or any material agreement to which CRH is a party.
(d) Independent Counsel. Each party and each member of the Rathore Group represents and warrants that he, she, or it has been advised by independent legal counsel in connection with the negotiation and execution of this Revised Term Sheet and the contemplated definitive Settlement Agreement, and that each party and individual has had full opportunity to review and consider the terms hereof.
11. DEFINITIVE DOCUMENTATION
11.1 Required Documents
The parties agree that the definitive documentation necessary to implement the settlement framework set forth in this Revised Term Sheet shall consist of the following:
1. Standstill and Settlement Agreement (execution version)
2. Exhibit A: Modified Restrictive Covenant Terms (incorporating Sections 3.1 through 3.5)
3. Exhibit B: Data Return and Destruction Protocol (incorporating Section 4)
4. Exhibit C: List of Top 50 CRH Vendors (by aggregate FY2024 spend) (confidential; to be filed under seal or in redacted form with the Court)
5. Exhibit D: Form of Compliance Monitor Engagement Letter (Aldwyn Compliance Solutions LLC)
6. Exhibit E: Mutual Non-Disparagement Provisions
7. Stipulation of Settlement and Proposed Consent Order (for filing with the Delaware Court of Chancery)
8. Motion to Dissolve TRO (for filing with the Delaware Court of Chancery upon entry of the Consent Order)
9. Letter to Broadview Surety Corp. re: Discharge of Injunction Bond No. BSC-2025-TRO-04419
10. Letter to Northland Trust Company re: Cancellation of RSU Awards
11. Stipulation for Dismissal with Prejudice (to be held in escrow by Calderwood & Harkness LLP and filed upon completion of the Monitor Period, subject to Section 8.4)
11.2 Documentation Timeline
The parties agree to the following target timeline for the preparation, negotiation, and execution of the definitive documentation:
• March 24, 2025: Calderwood & Harkness LLP, as counsel for CRH, shall prepare and circulate the first draft of the Standstill and Settlement Agreement and all related exhibits and ancillary documents.
• Comment Period: Each party's counsel shall have five (5) business days from the date of circulation of each draft to provide written comments.
• Target Execution Date: April 14, 2025.
The parties acknowledge that the foregoing timeline is a good-faith estimate and that delays may occur due to the complexity of the definitive documentation. Each party agrees to use commercially reasonable efforts to adhere to the target timeline.
Counsel Contacts for Documentation:
For CRH: Bernard Crawford / James Underwood Calderwood & Harkness LLP 1301 K Street NW, Suite 1200 Washington, DC 20005 Tel: (202) 555-8100
Email: bcrawford@calderwoodharkness.com / junderwood@calderwoodharkness.com
For the Rathore Group: Catherine Nygaard / Travis Beaumont Whitfield, Nygaard & Doyle LLP 1000 North Market Street, Suite 1500 Wilmington, DE 19801 Tel: (302) 555-6400
Email: cnygaard@wndlaw.com / tbeaumont@wndlaw.com