Restoration Hardware 2012 Annual Report Download - page 45

The registration rights agreement contains certain restrictions on sale applicable to Mr. Friedman,
Mr. Alberini, Ms. Boone, Mr. Dunaj and certain other employees of the Company that, subject to certain
exceptions, generally have the effect of limiting sales by such holders to a pro rata rate of sell-down
corresponding to sales by Home Holdings, Catterton and Tower Three unless such selling restrictions are waived
in any particular instance or as to any affected stockholder. However, Mr. Friedman will also have a preferential
right to sell up to 10% of the shares offered in our first follow-on public offering, up to $15 million total.
Stockholders Agreement
In connection with our initial public offering, we entered into a stockholders agreement with Home
Holdings. The stockholders agreement (and our certificate of incorporation) provides for a waiver of the
corporate opportunity doctrine with respect to Home Holdings and its affiliates, including the Principal Equity
Holders. If Home Holdings or its affiliates, including the Principal Equity Holders, participate in any such
corporate opportunity, Thomas Mottola and Barry Sternlicht, two of our directors, will also be afforded a waiver
of the corporate opportunity doctrine in connection with any participation by them in any such corporate
opportunity. The stockholders agreement provides that as long as Home Holdings and the Principal Equity
Holders hold at least 30% of the voting power of our outstanding common stock, Home Holdings shall have the
right to nominate two members of our board of directors. Home Holdings also has the right to nominate two
observers to our board of directors. Our board observers have the right to attend and participate in all meetings of
the board of directors in a non-voting, observer capacity. In addition, our board observers generally receive,
concurrently with members of our board of directors, notice of such meetings and a copy of all minutes, consents
and other materials provided to members of our board of directors. For so long as Home Holdings and the
Principal Equity Holders hold at least 30% of the voting power of our outstanding common stock, certain actions
may not be taken without the approval of Home Holdings, including:
• a change of control or the merger or consolidation of us or any of our subsidiaries;
• entering into any contract relating to a joint venture, investment, recapitalization, reorganization or
contract with any other person or the acquisition of any securities or assets of another person (other
than inventory acquired in the ordinary course of business);
• any transfer of a material amount of assets of us or any of our subsidiaries, other than inventory sold in
the ordinary course of business;
• the issuance of any capital stock of us or any of our subsidiaries, other than certain issuances upon the
grant of equity awards;
• the filing of any registration statement by us or any of our subsidiaries, or the commencement of any
public offering by us or any of our subsidiaries, other than in respect of certain equity awards;
• the guarantee, assumption, incurrence or refinancing of indebtedness for borrowed money by us or any
of our subsidiaries or the pledge of, or granting of a security interest in, any of our assets or the assets
of our subsidiaries other than our existing debt (under our revolving line of credit) and trade
indebtedness incurred in the ordinary course of business;
• entering into related party transactions or amending or modifying any existing related party agreement;
• the adoption of a “poison pill” or other material defensive mechanisms not in place as of the
consummation of the Company’s initial public offering;
• the payment, declaration or setting aside of dividends or distributions on our capital stock;
• redemptions or repurchases of our capital stock (other than repurchases of shares from employees upon
termination of employment pursuant to terms of equity grants) or repricing of equity awards;
• any amendment of our certificate of incorporation, bylaws or the terms of our common stock;
• the creation of any new class or series of shares of having rights, preferences or privileges senior to or
on a parity with our common stock;
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Proxy Statement