Restoration Hardware 2012 Annual Report Download - page 39

defined in the agreement), he will receive salary continuation for a period of one year from such termination date.
In the event that within 18 months following a change of control of the Company, Mr. Dunaj’s employment is
terminated by us without cause or by Mr. Dunaj within 45 days following certain events, including a relocation
of his principal place of employment by more than 50 miles without his consent, Mr. Dunaj will receive salary
continuation for a period of one year from such termination date plus Mr. Dunaj’s target bonus amount (which
for purposes of his employment agreement is deemed to be $300,000). The agreement provides that the receipt of
this severance is conditioned on Mr. Dunaj’s execution of a release of claims and his compliance with his
proprietary information agreements with us and certain other conditions.
Gary Friedman
We have entered into an advisory services agreement with Mr. Friedman, pursuant to which he will devote
approximately 80% of his business time to providing services to us as assigned by our Chief Executive Officer in
the areas of design, products, store development and merchandising and display. Mr. Friedman has the title of
Creator and Curator, and reports to our Chief Executive Officer. Mr. Friedman will also serve, at the board’s
discretion, as an advisor to our board of directors, have board observer rights and have the honorary title of
Chairman Emeritus. The agreement has a five-year term and is renewable for an additional five-year period.
Non-renewal of the agreement following the first five-year term is deemed a termination without cause (unless
such non-renewal is caused by or results from a termination for cause).
The advisory services agreement provides for a fee for services paid at a rate of $1.1 million annually.
Mr. Friedman will be eligible to earn a minimum annual bonus of $500,000, assuming achievement of annual
performance goals and criteria established by our Chief Executive Officer in good faith following consultation
with Mr. Friedman and approved by our compensation committee (provided that his maximum bonus will be
$400,000 for fiscal 2012).
If Mr. Friedman’s services are terminated by us without cause (as defined in the agreement) or by
Mr. Friedman for good reason (as defined in the agreement), he is entitled to (a) all accrued advisory fees and
benefits through the termination date, (b) termination pay in the amount of $4 million to be paid in 24 equal
monthly cash installments, (c) any earned but unpaid portion of his annual bonus, (d) his vested shares and
options that are still subject to selling restrictions will remain outstanding for two years following the date of
termination (during which time the selling restrictions may lapse in accordance with their terms) and will be
subject to repurchase by us after two years at the then fair market value to the extent that such selling restrictions
remain unlapsed, and (e) any unvested performance-based equity awards that Mr. Friedman may hold shall
remain outstanding and vest according to their terms for a period of two years following the date of termination
and shall be forfeited to the extent unvested after such period.
If Mr. Friedman’s services are terminated by us for cause (as defined in the agreement), he is entitled to all
accrued advisory fees and benefits through the termination date. Upon such termination for cause, certain of
Mr. Friedman’s other equity interests that are either unvested or subject to selling restrictions and repurchase
rights will terminate, expire and be forfeited for no value, or otherwise be subject to repurchase in accordance
with their terms and shall be forfeited to the extent unvested after such period. See “—Compensation Discussion
and Analysis—Long-Term Equity Incentive Compensation.”
Mr. Friedman has agreed that, during the term of his advisory services agreement, he will not directly or
indirectly work for or engage or invest in any competitor. In addition, Mr. Friedman has agreed that, during the
term of his advisory services agreement and for the two year period thereafter, he will not (a) solicit, directly or
through any third party, any employee of ours or (b) use our proprietary information to solicit the business of any
of our material customers or suppliers, or as specified in the advisory services agreement, encourage any of our
suppliers and customers to reduce their business or contractual relationship with us. The agreement also contains
a mutual non-disparagement clause.
The agreement provides for indemnification of Mr. Friedman for claims relating to the service performed by
Mr. Friedman within his authority under and the scope of the service contemplated by the agreement.
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Proxy Statement