Restoration Hardware 2014 Annual Report Download - page 110

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NOTE 16—EMPLOYEE BENEFIT PLANS
The Company has a 401(k) plan for its employees who meet certain service and age requirements.
Participants may contribute up to 50% of their salaries limited to the maximum allowed by the Internal Revenue
Service regulations. The Company, at its discretion, may contribute funds to the 401(k) plan. The Company made
no contributions to the 401(k) plan during fiscal 2014, fiscal 2013, or fiscal 2012.
NOTE 17—RELATED PARTY TRANSACTIONS
Reappointment of Gary Friedman as Chairman and Co-Chief Executive Officer
On July 2, 2013, at the time of Mr. Friedman’s reappointment as Chairman of the Company’s Board of
Directors and Co-Chief Executive Officer, Mr. Friedman and Hierarchy, LLC (“Hierarchy”), a newly formed
entity in which Mr. Friedman had a controlling interest, waived all of Home Holdings’ obligations to invest in
Hierarchy and all of Home Holdings’ rights with respect to Hierarchy were canceled, and the Company
subsequently acquired all the outstanding interests of Hierarchy. As a result of the acquisition of Hierarchy, in
fiscal 2013 the Company wrote off all outstanding receivables in connection with certain consulting services
provided to Hierarchy, and recorded a charge of $0.2 million.
Management Agreement
Pursuant to the Amended and Restated Management Services Agreement with certain affiliates of Catterton,
Tower Three and Glenhill, such affiliated entities were to provide services to the Company for general
management, consulting services and other strategic planning functions. The amount of the annual management
fee payable to Catterton, Tower Three and Glenhill under the Amended and Restated Management Services
Agreement was equal to 1.5% of Catterton’s and Tower Three’s invested capital in Home Holdings and 1% of
Glenhill’s invested capital in Home Holdings.
The Amended and Restated Management Services Agreement provided that the term of the agreement ends
upon the consummation of an initial public offering, and that additional fees would be payable upon termination
in connection with an initial public offering. The Company paid additional fees upon such termination in
connection with its initial public offering in fiscal 2012 to Catterton, Tower Three and Glenhill in the amount of
$3.3 million, $3.1 million and $0.6 million, respectively.
In addition to the initial public offering termination fees, the Company recorded management fees of $3.9
million in selling, general and administrative expenses in fiscal 2012, and such management fees were paid by
the Company in fiscal 2012.
NOTE 18—COMMITMENTS AND CONTINGENCIES
Leases
The Company leases certain property consisting of retail and outlet stores, corporate offices, distribution
centers and equipment. Leases expire at various dates through fiscal 2035. The stores, distribution centers and
corporate office leases generally provide that the Company assumes the maintenance and all or a portion of the
property tax obligations on the leased property. Most store leases also provide for minimum annual rent
payments, with provisions for additional rent based on a percentage of sales and for payment of certain expenses.
106