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EXHIBIT 10.31
COMPENSATION AND SEVERANCE AGREEMENT
THIS COMPENSATION AND SEVERANCE AGREEMENT (this "Agreement"), made effective as
of the 21st day of March, 2001, by and between RESTORATION HARDWARE, INC., a
corporation incorporated under the laws of Delaware (the "Company"), and ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ ("Officer").
WHEREAS, the Board has determined that it is essential and in the best interest
of the Company and its stockholders to retain the services of Officer and, in
the event of a threat or occurrence of a Change in Control, to ensure Officer's
continued dedication and efforts in such event without undue concern for
Officer's personal financial and employment security; and
WHEREAS, in order to induce Officer to join and remain in the employ of the
Company, particularly in the event of a threat or the occurrence of a Change in
Control, the Company desires to enter into this Agreement with Officer;
NOW, THEREFORE, in consideration of the respective agreements of the parties
contained herein, it is agreed as follows:
1. Integration with Other Agreements. This Agreement is being executed
substantially contemporaneously with a letter dated March 15, 2001 offering
Office employment with the Company ("Offer Letter"), stock option agreements and
notices of grant of stock options referenced in the Offer Letter, agreements to
participate in a preferred stock financing and an agreement to purchase common
stock of the Company as described in the Offer Letter. The provisions of
Sections 11 through 17 of this Agreement shall generally apply with respect to
the offer letter and the stock option agreements and the rights and obligations
thereunder.
2. Definitions.
2.1. Accrued Compensation. "Accrued Compensation" shall mean an amount which
shall include all amounts earned or accrued through the Termination Date (as
hereinafter defined) but not paid as of the Termination Date, including, without
limitation, (i) base salary, (ii) reimbursement for reasonable and necessary
expenses incurred by Officer on behalf of the Company during the period ending
on the Termination Date, and (iii) vacation pay.
2.2. Base Salary Amount. "Base Salary Amount" shall mean, on any date, the
amount of Officer's annual base salary at the rate in effect immediately prior
thereto (or, if greater, the rate in effect immediately before a reduction in
rate that constitutes Good Reason, whichever is greater), and shall include all
amounts of Officer's base salary that are deferred under the qualified and
non-qualified employee benefit plans of the Company or any other agreement or
arrangement.
2.3. Bonus Amount. "Bonus Amount" shall mean the greater of (i) 100% of the last
annual incentive payment paid or payable to Officer prior to the Termination
Date under the Company's cash bonus incentive plan, and (ii) Officer's incentive
target for the fiscal year in which the Change in Control occurs.
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2.4. Cause. A termination of employment is for "Cause" if Officer has been
convicted of a felony involving fraud or dishonesty or the termination is
evidenced by a resolution adopted in good faith by two-thirds of the Board to
the effect that Officer (i) intentionally and continually failed substantially
to perform Officer's reasonably assigned duties with the Company (other than a
failure resulting from Officer's incapacity due to physical or mental illness or
from Officer's assignment of duties that would constitute Good Reason (as
hereinafter defined)), which failure continued for a period of at least thirty
(30) days after a written notice of demand for substantial performance has been
delivered to Officer specifying the manner in which Officer has failed
substantially to perform, or (ii) intentionally engaged in conduct which is
demonstrably and materially injurious to the Company; provided, that no
termination of Officer's employment shall be for Cause as set forth in clause
(ii) above until (a) there shall have been delivered to Officer a copy of a
written notice setting forth that Officer was guilty of the conduct set forth in
clause (ii) and specifying the particulars thereof in detail, and (b) Officer
shall have been provided an opportunity to be heard in person by the Board (with
the assistance of Officer's counsel if Officer so desires). No act, nor failure
to act, on Officer's part shall be considered "intentional" unless Officer has
acted, or failed to act, with a lack of good faith and with a lack of reasonable
belief that Officer's action or failure to act was in the best interest of the
Company.
2.5. Change in Control. "Change in Control" shall mean any of the following:
(a) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by any
Person (as the term "person" is used for purposes of Section 13 or
14 of the Securities Exchange Act of 1934, as amended (the "1934
Act")) immediately after which such Person has Beneficial
Ownership (as the term "beneficial ownership" is defined under
Rule 13d-3 promulgated under the ▇▇▇▇ ▇▇▇) of fifty percent (50%)
or more of the combined voting power of the Company's then
outstanding Voting Securities; provided, that in determining
whether a Change in Control has occurred, Voting Securities which
are acquired in a Non-Control Acquisition (as hereinafter defined)
shall not constitute an acquisition which would cause a Change in
Control. A "Non-Control Acquisition" shall mean an acquisition by
(i) an employee benefit plan (or a trust forming a part thereof)
maintained by (1) the Company or (2) any corporation or other
Person of which a majority of its voting power or its equity
securities or equity interest is owned directly or indirectly by
the Company (a "Subsidiary"), (ii) the Company or any Subsidiary,
or (iii) any Person in connection with a Non-Control Transaction
(as hereinafter defined);
(b) The individuals who, as of date this Agreement is approved by
the Board, are members of the Board (the "Incumbent Board"), cease
for any reason to constitute at least a majority of the Board;
provided, that if the appointment, election or nomination for
election by the Company's stockholders of any new director was
approved by a vote of at least two-thirds of the Incumbent Board,
such new director shall, for purposes of this Agreement, be
considered a member of the Incumbent Board; and provided, further,
that no individual shall be considered a member of the Incumbent
Board if such individual initially assumed office as a
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result of either an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the ▇▇▇▇ ▇▇▇) or other
actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board (a "Proxy Contest")
including by reason of any agreement intended to avoid or settle
any Election Contest or Proxy Contest;
(c) A merger, consolidation or reorganization involving the
Company, unless such merger, consolidation or reorganization
satisfies the conditions set forth in clauses (1) and (2) below
(any transaction(s) meeting the requirements of clauses (1) and
(1) below being referred to herein as "Non-Control Transactions"):
(1) the stockholders of the Company immediately before such
merger, consolidation or reorganization own, directly or
indirectly, immediately following such merger, consolidation or
reorganization, at least fifty percent (50%) of the combined
voting power of the outstanding voting securities of the
corporation resulting from such merger, consolidation or
reorganization (the "Surviving Corporation") in substantially the
same proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or reorganization;
and
(2) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for
such merger, consolidation or reorganization constitute at least a
majority of the members of the board of directors of the Surviving
Corporation;
(d) A complete liquidation or dissolution of the Company; or
(e) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person
(other than a transfer to a Subsidiary); and
(f) Any other event that at least two-thirds of the Incumbent
Board in its sole discretion shall determine constitutes a Change
in Control.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because any Person (the "Subject Person") acquired Beneficial Ownership
of more than the permitted amount of the outstanding Voting Securities as a
result of the acquisition of Voting Securities by the Company which, by reducing
the number of Voting Securities outstanding, increases the proportional number
of shares Beneficially Owned by the Subject Person; provided, that if a Change
in Control would occur (but for the operation of this sentence) as a result of
the acquisition of Voting Securities by the Company, and after such share
acquisition by the Company the Subject Person becomes the Beneficial Owner of
any additional voting Securities which increases the percentage of the then
outstanding Voting Securities Beneficially Owned by the Subject Person, then a
Change in Control shall occur; provided further that no Change of Control shall
be deemed to have occurred under (a) or (c) merely because individuals and
entities who, individually, as the Effective Date have Beneficial Ownership of
at least 5% of the Voting Securities have, immediately after the transaction
described in (a) or (c) above, Beneficial
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Ownership, in the aggregate, of more than 50% of the Voting Securities of the
Company or successor or parent thereof if both (i) no one such individual or
entity has, immediately after such a transaction, Beneficial Ownership of more
than 50% and (ii) the transaction does not result in the Company or successor or
parent thereof becoming a private company.
Notwithstanding anything contained in this Agreement to the contrary, if
Officer's employment is terminated prior to a Change in Control and the Board
determines that such termination (i) was at the request of a third party who has
indicated an intention or taken steps reasonably calculated to effect a Change
in Control and who subsequently effectuates a Change in Control (a "Third
Party") or (ii) otherwise occurred in connection with, or in anticipation of, a
Change in Control which actually occurs, then, for all purposes of this
Agreement, the date of a Change in Control with respect to Officer shall mean
the date immediately prior to the date of such termination of Officer's
employment.
2.6. Company. The "Company" shall mean Restoration Hardware, Inc. and shall
include its "Successors and Assigns" (as hereinafter defined).
2.7. Disability. "Disability" shall mean a physical or mental infirmity which
either (i) impairs Optionee's ability to substantially perform Optionee's duties
with the Corporation for a period of one hundred eighty (180) consecutive days
or (ii) is expected to so impair Optionee for a period of at least one year or
(iii) entitles Optionee to long-term disability benefits under a long-term
disability policy maintained by the Corporation; provided, that Optionee has not
returned to Optionee's full-time employment prior to the Termination Date as
stated in the Notice of Termination (as hereinafter defined).
2.8. Good Reason.
(a) "Good Reason" shall mean the occurrence after a Change in
Control of any of the events or conditions described in
subsections (i) through (viii) hereof:
(i) (A) a change in Officer's status, title, position or
responsibilities which represents a material adverse change from
Officer's status, title, position or responsibilities (including
reporting responsibilities) at any time within ninety (90) days
preceding the date of either such change or a Change in Control or
at any time thereafter, (B) the assignment to Officer of any
duties or responsibilities which are inconsistent with Officer's
status, title, position or responsibilities; or (C) any removal of
Officer from or failure to reappoint or reelect Officer to any of
such offices or positions, except in connection with the
termination of Officer's employment for Disability, Cause, as a
result of Officer's death or by Officer other than for Good
Reason; provided that changes in Officer's responsibilities due to
the fact that the Company or its successor becomes a standalone
private company will not constitute Good Reason so long as Officer
continues as Chief Executive Officer of the Company (or successor
or parent thereof, as the case may be);
(ii) reduction in Officer's base salary to a level below that in
effect at any time within ninety (90) days preceding the date of
such reduction or a Change in Control or at any
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time thereafter (except to the extent such reduction is part of a
comprehensive reduction in salary applicable to employees of the
Company generally so long as the reduction applicable to Officer
is comparable to the reduction applied to other senior executives
of the Company), or any failure to pay or provide Officer any
compensation or benefits, to which Officer is entitled within ten
(10) business days of the later of the date that such compensation
or benefits were due or the date that Officer gives the Company
written demand to the Board for such payment;
(iii) the Company's requiring Officer to be based at any place
that is (A) outside a 40-mile radius from Officer's prior job
location or Officer's residence prior to implementation of such
requirement or a Change in Control and (B) is more than 10 miles
farther from Officer's residence than his prior job location,
except for reasonably required travel on the Company's business
which is not materially greater than prior such required travel;
(iv) the failure by the Company to (A) provide Officer with an
annual bonus opportunity at least equal to that in effect at the
Effective Date or at any time within ninety (90) days preceding
the date of the Change in Control or at any time thereafter, or
(B) provide Officer with compensation and benefits (other than
severance), in the aggregate, substantially equal (in terms of
benefit levels and/or reward opportunities) to those provided for
under each other employee benefit plan, program and practice in
which Officer was participating at any time within the prior
ninety (90) days or within ninety (90) days preceding the date of
the Change in Control or at any time thereafter or which are
provided to other similarly situated executives of the Company,
provided in each case that Officer is not provided with cash
compensation equal to the value of the amount by which such
benefits are reduced;
(v) the insolvency or the filing (by any party, including the
Company) of a petition for bankruptcy of the Company, which
petition is not dismissed within sixty (60) days;
(vi) the failure of the Company to obtain an agreement from any
Successors and Assigns (as hereinafter defined) to assume and
agree to perform this Agreement, as contemplated in Section 6
hereof or any other material breach of this Agreement by the
Company or Successor or Assign.
(b) Any event or condition described in this Section 2.8 which
occurs prior to a Change in Control, but which the Board
determines (i) was at the request of a Third Party, or (ii)
otherwise arose in connection with, or in anticipation of, a
Change in Control which actually occurs, shall constitute Good
Reason for purposes of this Agreement notwithstanding that it
occurred prior to the Change in Control.
(c) Officer's right to terminate Officer's employment pursuant to
this Section 2.8 shall not be affected by Officer's incapacity due
to physical or mental illness. Any change or event that would
otherwise constitute Good Reason under this Section 2.8 shall
constitute Good Reason only with respect to a termination of
employment by Officer within ninety (90) days of the later of (i)
the date of such change or event or (ii) the date
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that Officer receives written notice of such change or event. If
more than one change or event shall occur which alone or in the
aggregate constitutes Good Reason, then for purposes of the
preceding sentence Good Reason shall be deemed to have occurred on
the last such change or event to occur.
2.9. Notice of Termination. "Notice of Termination" shall mean a written notice
from the Company of termination of Officer's employment which indicates the
specific termination provision in this Agreement relied upon and which sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Officer's employment under the provision so indicated.
2.10. Pro-Rata Bonus. "Pro-Rata Bonus" shall mean an amount equal to the Bonus
Amount multiplied by a fraction the numerator of which is the number of days in
the fiscal year through the Termination Date and the denominator of which is
365.
2.11. Successors and Assigns. "Successors and Assigns" shall mean a corporation
or other entity acquiring all or substantially all the assets and business of
the Company (including this Agreement), whether by operation of law or
otherwise.
2.12. Termination Date. "Termination Date" shall mean (i) in the case of
Officer's death, Officer's date of death, (ii) in the case of Good Reason, the
last day of Officer's employment, and (iii) in all other cases, the date
specified in the Notice of Termination; provided, that if Officer's employment
is terminated by the Company or due to Disability, the date specified in the
Notice of Termination shall be at least thirty (30) days from the date the
Notice of Termination is given to Officer; and provided, further, that in the
case of Disability Officer shall not have returned to the full-time performance
of Officer's duties during such period of at least thirty (30) days.
3. Officer Obligations. During the term of this Agreement, and excluding any
periods of vacation and sick leave to which Officer is entitled, Officer agrees
to devote his full time and attention spent on business matters to the business
and affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to Officer by the Company that do not constitute Good
Reason, to use Officer's reasonable best efforts to perform faithfully and
efficiently such responsibilities; provided, that it shall not be a violation of
this Agreement for Officer to, without limitation, (i) serve on corporate, civic
or charitable boards or committees, (ii) deliver lectures, fulfill speaking
engagements or teach at educational institutions, (iii) manage personal
investments and (iv) perform such other activities as the Board may approve, so
long as such activities do not interfere materially with the performance of
Officer's responsibilities as an employee of the Company. It is expressly
understood and agreed that to the extent that any such activities have been
either (i) conducted by Officer and disclosed to the Board prior to the
Effective Date or (ii) approved by the Board prior the date of a Change of
Control, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) shall not thereafter be deemed to interfere
with the performance of Officer's responsibilities to the Company.
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4. Termination of Employment.
4.1. Termination Benefits. If, during the term of this Agreement, Officer's
employment with the Company shall be terminated, Officer shall be entitled to
the following compensation and benefits:
(a) If Officer's employment with the Company shall be terminated
(i) by the Company for Cause or Disability, (ii) by reason of
Officer's death, (iii) due to Officer's retirement pursuant to the
Company's policies applying to executive officers generally, or
(iv) by Officer other than for Good Reason, the Company shall pay
to Officer the Accrued Compensation;
(b) If Officer's employment with the Company shall be terminated
other than as specified in Section 4.1(a) within eighteen (18)
months following a Change in Control, Officer shall be entitled to
the following:
(i) the Company shall pay Officer all Accrued Compensation
and a Pro-Rata Bonus;
(ii) the Company shall pay Officer as severance pay and in
lieu of any further compensation for periods subsequent to
the Termination Date, an amount in cash equal to three (3)
times the sum of (A) the Base Amount and (B) the Bonus
Amount;
(c) If Officer's employment with the Company shall be terminated
other than as specified in Section 4.1(a) or (b) before the second
anniversary of this Agreement, Officer shall be entitled to the
following:
(i) the Company shall pay Officer all Accrued Compensation
and a Pro-Rata Bonus;
(ii) the Company shall pay Officer as severance pay and in
lieu of any further compensation for periods subsequent to
the Termination Date, continuation of Officer's Base Salary
in periodic installments in accordance with the Company's
normal payroll practice, for 24 months following
Termination Date;
(iii) Officer shall be entitled to continue medical benefit
coverage for himself and his eligible dependents until the
later of the date that Officer becomes entitled to medical
benefits from another employer or the end of the period of
Base Salary continuation, subject to Officer's payment of
applicable premiums, if any, at the same rate that would
have applied had Officer remained an officer of the
Company;
(iv) Each stock option granted to Officer by the Company
upon his initial employment (covering an aggregate of
1,400,000 shares), shall automatically
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accelerate and become immediately exercisable (to the
extent outstanding at the time and not previously
exercisable) for fully vested shares and any vesting
repurchase rights with respect to shares previously
acquired thereunder shall lapse;
(v) Each stock option granted to Executive (other than the
options referred to in (iv) above) shall automatically
accelerate and become immediately exercisable (to the
extent outstanding at the time but not otherwise fully
exercisable) for fully vested shares and any vesting
repurchase rights with respect to shares previously
acquired thereunder shall lapse, but in each case solely to
the extent that such options or shares would have vested
during the period of Base Salary continuation, had
Executive remained employed with the company throughout
such period.
(vi) To the extent that stock options that are outstanding
upon such a termination vest solely by reason of (iv) and
(v) above, such options shall not remain exercisable for
longer than three months following termination of
employment.
(d) If Officer's employment with the Company shall be terminated
other than as specified in Section 4.1(a) or (b) on or after the
second anniversary of the Effective Date, Officer shall be
entitled to the following:
(i) the Company shall pay Officer all Accrued Compensation
and a Pro-Rata Bonus;
(ii) the Company shall pay Officer as severance pay and in
lieu of any further compensation for periods subsequent to
the Termination Date, continuation of Officer's Base Salary
in periodic installments in accordance with the Company's
normal payroll practice, until the end of the period that
ends on the later of (i) the fourth anniversary of the
Effective Date or one year after the Termination Date; and
(iii) Officer shall be entitled to continue medical benefit
coverage for himself and his eligible dependents until the
later of the date that Officer becomes entitled to medical
benefits from another employer or the end of the period of
Base Salary continuation, subject to Officer's payment of
applicable premiums, if any, at the same rate that would
have applied had Officer remained an officer of the
Company;
(iv) Each stock option granted to Officer by the Company
upon his initial employment (covering an aggregate of
1,400,000 shares), shall automatically accelerate and
become immediately exercisable (to the extent outstanding
at the time and not previously exercisable) for fully
vested shares and any vesting repurchase rights with
respect to shares previously acquired thereunder shall
lapse;
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(v) Each stock option granted to Executive (other than the
options referred to in (iv) above) shall automatically
accelerate and become immediately exercisable (to the
extent outstanding at the time but not otherwise fully
exercisable) for fully vested shares and any vesting
repurchase rights with respect to shares previously
acquired thereunder shall lapse, but in each case solely to
the extent that such options or shares would have vested
during the period of Base Salary continuation, had
Executive remained employed with the company throughout
such period.
(vi) To the extent that stock options that are outstanding
upon such a termination vest solely by reason of (iv) and
(v) above, such options shall not remain exercisable for
longer than three months following termination of
employment.
(e) The amounts provided for in Sections 4.1(a) and 4.1(b)(i), and
(ii) shall be paid in a single lump sum cash payment within thirty
(30) days after the Termination Date (or earlier, if required by
applicable law).
(f) Officer shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment
or otherwise, and no such payment shall be offset or reduced by
the amount of any compensation or benefits provided to Officer in
any subsequent employment.
4.2. Other Benefit Policies. The severance pay and benefits provided for in
Section 4.1 shall be in lieu of any other severance or termination pay to which
Officer may be entitled under any Company severance or termination plan,
program, practice or arrangement. The Officer's entitlement to any other
compensation or benefits shall be determined in accordance with the Company's
employee benefit plans and other applicable programs, policies and practices
then in effect. The Company may condition the payment to Officer of severance
benefits pursuant to Section 4.1(b)(ii), 4(c)(ii) or 4(d)(ii) upon Officer's
delivery of a reasonable form of release in favor of the Company containing
customary terms and conditions for the release of employment related claims.
Nothing in this Agreement shall alter Officer's status as an "at will" employee
of the Company.
4.3 Notice of Termination. Any purported termination of Officer's employment by
the Company shall be communicated by Notice of Termination to Officer. For
purposes of this Agreement, no such purported termination shall be effective
without such Notice of Termination.
5. Change in Control Option Acceleration. In the event of a Change in Control,
each stock option granted to Officer by the Company), shall automatically
accelerate and become immediately exercisable (to the extent outstanding at the
time and not previously exercisable and whether or not the option will be
assumed by a successor (or parent) or otherwise continued) for fully vested
shares and any vesting repurchase rights with respect to shares previously
acquired thereunder shall lapse. If the option is not assumed or otherwise
continued following the Change
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in Control, the option shall become exercisable for fully vested shares
immediately before the Change in Control.
6. Excise Tax Payments.
6.1 In the event that any payment or benefit (within the meaning of Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code")) to
Officer or for Officer's benefit, paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise in connection
with, or arising out of, Officer's employment with the Company or a Change in
Control (a "Payment" or "Payments"), would be subject to the excise tax imposed
by Code Section 4999, or any interest or penalties are incurred by Officer with
respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
Officer will be entitled to receive an additional payment (a "Gross-Up Payment")
in an amount such that after payment by Officer of all taxes (including any
interest or penalties (other than interest and penalties imposed by reason of
Officer's failure to file timely a tax return or pay taxes shown due on
Officer's return) imposed with respect to such taxes and the Excise Tax),
including any Excise Tax imposed upon the Gross-Up Payment, Officer retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
6.2 An initial determination as to whether a Gross-Up Payment is required
pursuant to this Agreement and the amount of such Gross-Up Payment shall be made
by the Company. The Company shall provide its determination (the
"Determination"), together with detailed supporting calculations and
documentation, to Officer within fifteen (15) days of the Termination Date, if
applicable, or such other time as requested by Officer (provided Officer
reasonably believes that any of the Payments may be subject to the Excise Tax).
If requested by Officer, the Company shall furnish Officer, at the Company's
expense, with an opinion reasonably acceptable to Officer from the Company's
accounting firm (or an accounting firm of equivalent stature reasonably
acceptable to Officer) that there is a reasonable basis for the Determination.
Any Gross-Up Payment determined pursuant to this Section 6.2 shall be paid by
the Company to Officer within five (5) days of receipt of the Determination.
6.3 As a result of the uncertainty in the application of Sections 4999 and 280G
of the Code, it is possible that a Gross-Up Payment (or a portion thereof) will
be paid which should not have been paid (an "Excess Payment") or a Gross-Up
Payment (or a portion thereof) which should have been paid will not have been
paid (an "Underpayment").
(a) An Underpayment shall be deemed to have occurred (i) upon
notice (formal or informal) to Officer from any governmental
taxing authority that Officer's tax liability (whether in respect
of Officer's current taxable year or in respect of any prior
taxable year) may be increased by reason of the imposition of the
Excise Tax on a Payment or Payments with respect to which the
Company has failed to make a sufficient Gross-Up Payment, (ii)
upon a determination by a court, or (iii) by reason of
determination by the Company (which shall include the position
taken by the Company, together with its consolidated group, on its
federal income tax return). If an Underpayment
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occurs, Officer shall promptly notify the Company and the Company
shall promptly, but in any event at least five (5) days prior to
the date on which the applicable government taxing authority has
requested payment, pay to Officer an additional Gross-Up Payment
equal to the amount of the Underpayment plus any interest and
penalties (other than interest and penalties imposed by reason of
Officer's failure to file timely a tax return or pay taxes shown
due on Officer's return) imposed on the Underpayment.
(b) An Excess Payment shall be deemed to have occurred upon a
Final Determination (as hereinafter defined) that the Excise Tax
shall not be imposed upon a Payment or Payments (or portion
thereof) with respect to which Officer had previously received a
Gross-Up Payment. A "Final Determination" shall be deemed to have
occurred when Officer has received from the applicable government
taxing authority a refund of taxes or other reduction in Officer's
tax liability by reason of the Excise Payment and upon either (i)
the date a determination is made by, or an agreement is entered
into with, the applicable governmental taxing authority which
finally and conclusively binds Officer and such taxing authority,
or in the event that a claim is brought before a court of
competent jurisdiction, the date upon which a final determination
has been made by such court and either all appeals have been taken
and finally resolved or the time for all appeals has expired or
(ii) the statute of limitations with respect to Officer's
applicable tax return has expired. If an Excess Payment is
determined to have been made, the amount of the Excess Payment
shall be treated as a loan by the Company to Officer, which loan
Officer must repay to the Company together with interest at the
applicable federal rate under Code Section 7872(f)(2); provided,
that no loan shall be deemed to have been made and no amount will
be payable by Officer to the Company unless, and only to the
extent that, the deemed loan and payment would either reduce the
amount on which Officer is subject to tax under Code Section 4999
or generate a refund of tax imposed under Code Section 4999.
6.4 Notwithstanding anything contained in this Agreement to the contrary, in the
event that, according to the Determination, an Excise Tax will be imposed on any
Payment or Payments, the Company shall pay to the applicable government taxing
authorities, as Excise Tax withholding, the amount of the Excise Tax that the
Company has actually withheld from the Payment or Payments.
7. Cooperation. Notwithstanding anything to the contrary contained herein,
payment of the amounts specified in Section 4.1(b)(ii) hereof is conditional
upon Officer cooperating with the Company in connection with any Change of
Control or proposed Change of Control and all matters relating to Officer's
employment with the Company and assisting the Company as reasonably requested in
transitioning Officer's responsibilities to Officer's replacement as well as
upon Officer refraining from doing or saying anything derogatory about the
Company or its businesses or personnel; provided, that Officer shall not be
required to perform any duties or take any action that would constitute Good
Reason.
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8. Confidential Information. Officer shall hold in confidence for the benefit of
the Company all secret or confidential information, knowledge or data relating
to the Company and its businesses, which shall have been obtained by Officer
prior to in the course of Officer's employment by the Company and which was not
and is not be public knowledge (other than by acts by Officer in violation of
this Agreement) ("Confidential Information"). Whether before or after
termination of the Officer's employment with the Company, Officer shall not,
without the prior written consent of the Company, communicate or divulge any
Confidential Information, other than to the Company and to those persons or
entities designated by the Company or as otherwise is reasonably necessary for
Officer to carry out his or her responsibilities as an executive of the Company.
In no event shall an asserted violation of the provisions of this Section 8
constitute a basis for deferring or withholding any amounts otherwise payable to
Officer under this Agreement.
9. Non-Solicitation.
9.1. Non-Solicitation. Officer agrees that from the date hereof to the sooner to
occur of (i) the end of the twelfth month following the Date of Termination or
(ii) the second anniversary of the date of the Change in Control, Officer will
not:
(a) Solicit, raid, entice or induce, either directly or through a
third party, any employee of the Company to be employed by another
person;
(b) Assist a competitor or other employer in taking such action.
(c) Directly or indirectly work for or make a significant
investment in a Competitor including by becoming an employee,
officer, director, consultant, stockholder, partner, consultant or
other similar arrangement, unless and solely to the extent that
Officer can demonstrate that any action that otherwise would
contravene this Section 9.1(c) was done without use in any way of
Confidential Information; provided, that nothing in this Agreement
shall be deemed to prohibit Officer from owning not more than five
percent (5%) of any class of publicly traded securities of a
Competitor. "Competitor" shall mean (a) a retail company,
including without limitation, a subsidiary or business unit of
such company, where an aggregate of 25% or more of its revenue
(including revenue of any subsidiary or business unit) is derived
from the home furnishings business, including without limitation,
lighting, floor covering, furniture, hardware and tools, or hard
goods business or (b) a manufacturer, supplier or other vendor
that has a material vendor relationship with the Company.
No violation of this section 9.1 shall occur by reason of the hiring of an
employee of the Company where the employee initiates the employment discussions
or responds to a general solicitation.
9.2. Remedies. Officer agrees that any breach or threatened breach by Officer of
Section 9.1 will entitle the Company, in addition to any other legal remedies
available to it, to apply to any court
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of competent jurisdiction to enjoin the breach or threatened breach, it being
acknowledged and agreed that any such material breach will cause irreparable
injury to the Company and that any damages will not provide adequate remedies to
the Company.
10. Exclusive Remedy. Officer's right to the compensation and benefits to which
he may become entitled pursuant to Section 4.1 shall be Officer's sole and
exclusive remedy for any termination of Officer's employment. The payments,
severance benefits and severance protections provided to Officer pursuant to
this Agreement are provided in lieu of any severance payments, severance
benefits and severance protections provided in any other plan or policy of the
Company, except as may be expressly provided in a written agreement between the
Company and Officer entered into after the date of this Agreement.
Notwithstanding the foregoing, nothing in this Agreement shall prevent or limit
Officer's continuing or future participation in any benefit, bonus, incentive or
other plan or program provided by the Company (except for any severance or
termination policies, plans, programs or practices) and for which Officer may
qualify, nor shall anything herein limit or reduce such rights as Officer may
have under any other agreements with the Company (except for any severance or
termination agreement). Amounts which are vested benefits or which Officer is
otherwise entitled to receive under any plan or program of the Company shall be
payable in accordance with such plan or program, except as explicitly modified
by this Agreement.
11. Successors; Binding Agreement.
11.1. This Agreement shall be binding upon and shall inure to the benefit of the
Company and its Successors and Assigns, and the Company shall require any
Successors and Assigns to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place.
11.2. Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by Officer or Officer's beneficiaries or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by Officer's legal
personal representative.
12. Notice. Notices and all other communications provided for in this Agreement
(including the Notice of Termination) shall be in writing and shall be deemed to
have been duly given when personally delivered or sent by certified mail, return
receipt requested, postage prepaid, addressed to the respective addresses last
given by each party to the other; provided, that all notices to the Company
shall be directed to the attention of the Board with a copy to the Secretary of
the Company. All notices and communications shall be deemed to have been
received on the date of delivery thereof or on the third business day after the
mailing thereof, except that notice of change of address shall be effective only
upon receipt.
13. Settlement of Claims. Except as expressly provided herein, the Company's
obligation to make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense or
other right which the Company may have against Officer
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or others, provided that all amounts payable hereunder shall be subject to all
applicable tax withholding.
14. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by Officer and the Company. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreement or representation,
oral or otherwise, express or implied, with respect to the subject matter hereof
has been made by either party that is not expressly set forth in this Agreement.
15. Governing Law; Arbitration
(a) The Company and Officer agree that any existing or future
dispute, controversy, claim or action ("dispute" or "claim") arising out of the
hiring or employment of Officer by the Company, the termination of that
employment, or arising under this Agreement shall be resolved by final and
binding arbitration. Such arbitration shall occur in accordance with the
National Rules for the Resolution of Employment Disputes of the American
Arbitration Association.
(b) Scope of Disputes and Claims to Be Arbitrated Company and
Officer understand and agree that this Agreement shall apply to any and all
disputes arising from or relating to Officer's hiring, employment with or
termination of employment by the Company or arising under this Agreement. This
agreement to arbitrate applies to disputes arising in tort or contract, pursuant
to statute, regulation or otherwise, now in existence or which may in the future
be enacted, amended or judicially recognized, including but not limited to the
following:
(i) claims for fraudulent inducement of contract or breach of
contract or contractual obligation, whether such alleged
contract or obligation be oral, written, express, or
implied by fact or law;
(ii) claims of fraud, or wrongful termination, including
violation of public policy and constructive discharge;
(iii) claims of discrimination or harassment under any and all
state and federal statutes that prohibit discrimination in
employment, as well as claims for violation of any other
state or federal statute except as set forth below;
(iv) claims of non-payment or incorrect payment of wages,
commissions, bonuses, severance, Officer fringe benefits,
stock options and the like, whether such claims be pursuant
to alleged express or implied contract or obligation,
equity, the California Labor Code, the Fair Labor Standards
Act, the Officer Retirement Income Securities Act, and any
other local, state or federal law concerning wages,
compensation or Officer benefits;
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(v) claims for infliction of emotional distress,
misrepresentation, interference with contract or
prospective economic advantage, violation of public policy,
defamation, unfair business practices, and any other tort
or tort-like causes of action relating to or arising from
the employment relationship or the formation or termination
thereof; and
(vi) claims arising out of or relating to the grant, exercise,
vesting and/or issuance of equity in the Company or options
to purchase equity in the Company.
(c) Company and Officer understand and agree that except for such
limited post-arbitration judicial review as may be permitted by law, arbitration
of such disputes, as provided for herein, shall be the sole and exclusive
mechanism for resolving any and all existing and future disputes, and that no
other forum for dispute resolution will be available to either party . The only
exceptions are the claims identified below, which may be resolved in any
appropriate fora, including courts of law, as required by the laws then in
effect:
(i) claims for benefits under the workers' compensation,
unemployment insurance and state disability insurance laws;
(ii) claims concerning the validity, infringement or
enforceability of any trade secret, patent right,
copyright, trademark, or any other intellectual or
confidential property right held or sought by the Company.
(d) Decision of Arbitrator Binding; Waiver of Trial Before Court,
Jury or Government Agency Company and Officer understand and agree that
arbitration shall be instead of a trial before a court or jury, or a hearing
before a government agency. Company and Officer understand and agree that the
decision of the arbitrator shall be final and binding on both the Company and
Officer, and it shall provide the exclusive remedy(ies) for resolving any and
all disputes between the Company and Officer, as provided herein, and it shall
be enforceable by any court having proper jurisdiction.
COMPANY AND OFFICER FURTHER UNDERSTAND AND AGREE THAT BY SIGNING
THIS AGREEMENT, EACH IS EXPRESSLY WAIVING ANY AND ALL RIGHTS TO A
TRIAL BEFORE A COURT OR JURY OR BEFORE A GOVERNMENT AGENCY
REGARDING ANY DISPUTE OR CLAIM WHICH EACH NOW HAS OR MAY IN THE
FUTURE HAVE, AS PROVIDED FOR HEREIN.
(e) Place of Arbitration Company and Officer understand and agree
that arbitration of disputes provided for herein shall take place in San
Francisco, California. If, at the time the dispute in question arises, Officer
lives and works more than one hundred (100) miles from San Francisco,
California, then Officer has the option of requesting that the arbitration take
place in the county in which the Company has an office that is nearest to
Officer's residence at the time the dispute in question arises.
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(f) Costs of Arbitration Company and Officer understand and agree
that the arbitrator's fee will be borne solely by the Company. Additionally, the
Company will bear all other costs related to the arbitration, assuming such
costs are not expenses that the Officer would be required to bear if he were
bringing an action in a court of law. The Company and Officer shall each bear
their own attorneys' fees incurred in connection with the arbitration, and the
arbitrator will not have authority to award attorneys' fees unless a statue at
issue in the dispute or other appropriate law authorizes the award of attorneys'
fees to the prevailing party, in which case the arbitrator shall have the
authority to make an award of attorneys' fees as permitted by the applicable
statute.
(g) Governing Law/Applicable Procedures Company and Officer
understand and agree that this Agreement, including the obligation to arbitrate,
and its validity, construction and performance shall be governed by the laws of
the State of California without regard to conflict of law principles. The
parties specifically intend that this Agreement and the provision of benefits
hereunder shall not constitute an "employee benefit plan" subject to any of the
provisions of the Employee Retirement Income Security Act of 1974, as amended.
the Further, the arbitration shall be conducted in accordance with the National
Rules for the Resolution of Employment Disputes of the American Arbitration
Association.
(h) Written Arbitration Decision Company and Officer understand
and agree that, in any arbitration arising from this agreement to arbitrate, the
arbitrator will be required to issue a written arbitration decision that clearly
sets forth the essential findings on which that award is based.
(i) Preservation of Remedies Company and Officer understand and
agree that, in any arbitration arising from this agreement to arbitrate, the
Officer and the Company will preserve all remedies to which he or she would
otherwise be entitled in a court of law, except as limited under the terms of
this Agreement.
(j) Necessary Minimum Standard of Discovery Company and Officer
understand and agree that, in any arbitration arising from this agreement to
arbitrate, the Company and Officer will be entitled to discovery in accordance
with the provisions of California Code of Civil Procedure Section 1283(a).
(k) Knowing and Voluntary Agreement to Arbitrate Company and
Officer have been advised to consult with attorneys of their own choosing before
agreeing to arbitrate, and have had an opportunity to do so.
COMPANY AND OFFICER HAVE READ THIS AGREEMENT TO ARBITRATE
CAREFULLY AND UNDERSTAND THAT BY SIGNING IT, EACH IS WAIVING ALL
RIGHTS TO A TRIAL OR HEARING BEFORE A COURT OR JURY OR GOVERNMENT
AGENCY OF ANY AND ALL DISPUTES AS PROVIDED FOR HEREIN.
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16. Severability. The provisions of this Agreement shall be deemed severable,
and the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof.
17. Entire Agreement. This Agreement (together with the Offer Letter, to the
extent amended prior hereto, and documents referenced herein and in the Offer
Letter) constitutes the entire agreement between the parties hereto and
supersedes all prior agreements, if any, understandings and arrangements, oral
or otherwise, between the parties hereto with respect to the subject matter
hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized officer and Officer has executed this Agreement as of the day
and year first above written.
RESTORATION HARDWARE, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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Name:
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Title:
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OFFICER
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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Signature
Print Name:
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