What changed in this filing

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Item 9A. Controls and Procedures

2022-03-30 compared with 2021-03-30 · 27 added, 1236 removed, 149 unchanged (89% of the section changed)

14 unchanged sentences

OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

122 | FORM 10-K

1 unchanged sentence

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Below is detailed biographical information and ages, as of March 24, 2021 for each of our directors and a summary of the qualifications and skills demonstrated by each director’s experience.

Class I Directors

Compensation,

and Corporate

the interim Chief Executive Officer of Cosi.

From February 2014 through March 2016, Mr.

Demilio served as a member of the board of directors and Chairman of the audit committee of The Paslin Company, a private company that designs, assembles and integrates robotic assembly lines for the automotive industry.

Lead Independent

Director since 2009

Board Committees:

Compensation,

and Corporate

Class I Director:

Continuing in office until

the 2022 annual meeting

Mark Demilio has served as a member of our board of directors since September 2009 and currently serves as the board’s Lead Independent Director.

Demilio currently serves as a member of the board of directors and Chairman of the audit committee of SCP Health, a privately-held provider of emergency medicine and hospitalist services through physician staffing and management since September 2015.

Since January 2021, Mr.

Demilio has been serving as a consultant to Spinnaker Medical, a privately held special purpose acquisition company.

Demilio served as a member of the board of directors of Cosi, Inc., a national restaurant chain, from April 2004 to May 2017, served on its audit committee, its compensation committee and its nominating and corporate governance committee, and served for a time as Chairman of the board of directors of Cosi and as the interim Chief Executive Officer of Cosi.

From June 2018 through December 2020, Mr.

Demilio was a member of the board of directors and Chairman of the audit committee of Nurse Assist, a medical device manufacturer and distributer.

From February 2014 through March 2016, Mr.

From December 2000 until his retirement in October 2008, Mr.

Demilio served as the Chief Financial Officer of Magellan Health Services, Inc., a Nasdaq-listed managed specialty healthcare company that managed the delivery of behavioral healthcare treatment services, specialty pharmaceuticals and radiology services.

Demilio has also been the General Counsel for Magellan Health Service, the Chief Financial Officer and General Counsel of Youth Services International, Inc., an attorney specializing in corporate and securities law with the law firms of Miles & Stockbridge and Piper & Marbury, a financial analyst for CareFirst BlueCross BlueShield of Maryland and a certified public accountant with Arthur Andersen LLP.

Qualifications:

Demilio was selected to our board of directors because he possesses particular knowledge and experience in accounting, finance and capital structure, strategic planning and leadership of complex organizations and board practices of other major corporations .

FORM 10-K | 143

Director since 2012

Board Committees:

Class I Director:

Continuing in office until

the 2022 annual meeting

E ri Chaya serves as our President, Chief Creative and Merchandising Officer and Director.

Chaya leads product curation and integration, brand creative and business development for RH Interiors, Modern, Beach House, Ski House, Outdoor, Baby & Child and TEEN, across the Company’s physical, digital and print channels of distribution.

Chaya served as RH’s Co-President, Chief Creative and Merchandising Officer and Director from May 2016 to November 2017, Chief Creative Officer from April 2008 to May 2016 and Vice President of Creative from July 2006 to April 2008.

Chaya has been a member of the board of directors since 2012.

Prior to RH, Ms.

Chaya was a creative director at Goodby, Silverstein and Partners, an international advertising agency, and a creative director at Banana Republic.

Qualifications:

Chaya was selected to our board of directors because of her extensive knowledge and experience in design, product development, brand development, marketing and advertising.

LEONARD SCHLESINGER

Director since 2014

Board Committees:

Class I Director:

Continuing in office until

the 2022 annual meeting

Leonard Schlesinger was appointed to our board of directors in April 2014.

Schlesinger has served as the Baker Foundation Professor of Business Administration at Harvard Business School, a role he returned to in July 2013 after having served as the President of Babson College from July 2008 until July 2013 and having held various positions at public and private companies.

From 1999 to 2007, Dr.

Schlesinger held various executive positions at Limited Brands, Inc.

(now L Brands, Inc.), an NYSE-listed company, including Vice Chairman of the board of directors and Chief Operating Officer.

While at Limited Brands, he was responsible for the operational and financial functions across the enterprise including Express, Limited Stores, Victoria’s Secret Beauty, Bath and Body Works, C.O.

Bigelow, Henri Bendel and the White Barn Candle Company.

Schlesinger also previously served as Executive Vice President and Chief Operating Officer at Au Bon Pain Co., Inc.

and as a director of numerous public and private retail, consumer products and technology companies.

Schlesinger has also held leadership roles at leading MBA and executive education programs and other academic institutions, including twenty years at Harvard Business School where he served as the George Fisher Baker Jr.

Professor of Business Administration.

Schlesinger holds a Doctor of Business Administration from Harvard Business School, an M.B.A.

from Columbia University and a Bachelor of Arts in American Civilization from Brown University.

Qualifications:

Schlesinger was selected to our board of directors because he possesses extensive leadership, operational, financial and business expertise from his significant and broad experience with numerous private and public ret ail companies.

Class II Directors

Director since 2016

Board Committees:

Class II Director:

Continuing in office until

the 2023 annual meeting

Hilary Krane has served on our board of directors since her appointment in June 2016.

Krane is currently Executive Vice President, Chief Administrative Officer and General Counsel for NIKE, Inc.

and has served in executive roles since 2010.

Prior to joining NIKE, Inc., Ms.

Krane was General Counsel and Senior Vice President for Corporate Affairs at Levi Strauss & Co.

from 2006 to 2010.

From 1996 to 2006, she was a partner and assistant general counsel at PricewaterhouseCoopers LLP.

Krane has been a director at the Federal Reserve Bank of San Francisco, Portland Branch since January 2018.

Krane holds a Bachelor of Arts from Stanford University and a J.D.

from the University of Chicago.

Qualifications:

Krane was selected to our board of directors because of her extensive operational, compliance and business experience contributing to the growth and development of innovative and iconic global brands.

144 | FORM 10-K

Director since 2013

Board Committees:

Class II Director:

Continuing in office until

the 2023 annual meeting

Katie Mitic is currently Co-Chief Executive Officer and Co-founder of SomethingElse, Inc., a direct-to-consumer beverage company.

From 2012 to 2017, Ms.

Mitic was the Chief Executive Officer and Co-founder of Sitch, Inc., a startup building innovative mobile consumer products.

Prior to Sitch, Ms.

Mitic served in executive leadership positions at innovative growth companies, including Facebook, Inc.

and Palm, Inc.

As Director of Platform & Mobile Marketing at Facebook, she grew developer products and partnerships globally.

As Senior Vice President, Product Marketing at Palm, she expanded the company’s product lines and international footprint up until its acquisition by Hewlett-Packard.

Earlier in her career, Ms.

Mitic worked at NetDynamics (acquired by Sun Microsystems), where she launched the industry’s first application server, at Four11, where she built the industry-leading email service RocketMail (now Yahoo!

Mail) and at Yahoo!, where she served as Vice President and General Manager.

She currently serves on the board of directors, compensation committee and nominating and governance committee of eBay, Inc.

Additionally she serves as a board member on private and non-profit boards including Headspace, DVx Ventures, and LeanIn.Org.

Mitic received her B.A.

from Stanford University and her M.B.A.

from Harvard Business School.

Qualifications:

Mitic was selected to our board of directors because of her extensive leadership, operational and entrepreneurial experience with innovative growth companies and global consumer technology companies.

Director since 2015

Board Committees:

and Corporate

Class II Director

Continuing in office until

the 2023 annual meeting

Ali Rowghani was appointed to our board of directors on January 22, 2015.

Rowghani i s currently the Managing Director of the YCombinator Continuity Fund, which invests in growth-stage startups.

Rowghani has served in executive leadership positions at innovative growth companies, including Twitter, Inc.

and Pixar Animation Studios, Inc.

At T witter, Mr.

Rowghani was hired as the Company’s first Chief Financial Officer in March 2010, and later served as Chief Operating Officer, with responsibility for business development, pla tform, media, product, and business analytics, from December 2012 to June 2014.

Prior to Twitter, from June 2002 to February 2010, Mr.

Rowghani served in various leadership roles at Pixar, including Chief Financial Officer and Senior Vice President, Strategic Planning, reporting to Pixar founder and President, Ed Catmull.

Rowghani holds a B.A.

in International Relations and an M.B.A.

from Stanford University.

Qualifications:

Rowghani was selected to our board of directors because he possesses extensive operational, financial and leadership experience, and because of his expertise in scaling innovative and high-growth companies.

FORM 10-K | 145

Class III Directors

GARY FRIEDMAN

Chairman and Chief

Executive Officer

Director since 2013

Board Committees:

Class III Director:

Continuing in office until

the 2021 annual meeting

Gary Friedman has served as our Chairman and Chief Executive Officer of the Company, and Founder of the RH brand as we know it today since January 2014.

Previously, Mr.

Friedman served as our Co-Chief Executive Officer and Director from July 2013 to January 2014, and as Chairman and Co-Chief Executive Officer from May 2010 to October 2012.

From October 2012 to July 2013, Mr.

Friedman served as Chairman Emeritus, Creator and Curator on an advisory basis, and as Chief Executive Officer and a member of our board of directors from March 2001 to October 2012, during which time he served as our Chairman from March 2005 to June 2008.

Friedman joined RH from Williams-Sonoma, Inc.

where he spent 14 years serving as President and Chief Operating Officer from May 2000 to March 2001, as Chief Merchandising Officer of Williams-Sonoma, Inc.

and President of Retail from 1995 to 2000, and as Executive Vice President of Williams-Sonoma, Inc.

and President of the Williams-Sonoma and Pottery Barn brands from 1993 to 2000 during which time Mr.

Friedman was responsible for transforming Pottery Barn from a $50 million dollar table top and accessories business, into a billion dollar plus home furnishings lifestyle brand.

Friedman also developed and rolled out the revolutionary Williams-Sonoma Grande Cuisine stores, growing the brand from less than $100 million to almost $1 billion.

Lastly, wh ile at Williams-Sonoma Mr.

Friedman spent several years conceptualizing and developing the West Elm brand which launched shortly after he left the company.

Friedman joined Williams-Sonoma in 1988 as Senior Vice President of Stores and Operations.

Friedman began his retail career in 1977 as a stock-boy at the Gap store in Santa Rosa, California.

He spent eleven years with Gap, and held the positions of Store Manager, District Manager and Regional Manager overseeing 63 stores in Southern California.

Qualifications:

Friedman was selected to our board of directors because of his leadership in re-conceptualizing and developing the RH brand and business into the leading luxury home brand in the North American market, his deep and unmatched expertise in developing and rapidly growing many of the leading consumer brands in the home furnishings space, and his extensive knowledge of building and leading complex multi-branded and multi-channel organizations.

CARLOS ALBERINI

Director since 2010

Board Committees:

Class III Director:

Continuing in office until

the 2021 annual meeting

Car los Alberini has served on our board of directors since June 2010.

Alberini currently serves as a member of the board of directors and Chief Executive Officer of Guess?, Inc., an NYSE-listed specialty retailer of apparel and accessories, since February 2019.

Alberini previously served as the Chairman and Chief Executive Officer of Lucky Brand from February 2014 to February 2019.

Alberini served as our Co-Chief Executive Officer from June 2010 through October 2012 and from July 2013 through January 2014, and he served as our sole Chief Executive Officer from October 2012 through July 2013.

Alberini was President and Chief Operating Officer of Guess from December 2000 to June 2010.

From May 2006 to July 2006, Mr.

Alberini served as Interim Chief Financial Officer of Guess.

Alberini served as a member of the board of directors of Guess from December 2000 to September 2011.

Prior to Guess, Mr.

Alberini served as Senior Vice President and Chief Financial Officer of Footstar, Inc., a retailer of footwear from October 1996 to December 2000.

From May 1995 to October 1996, Mr.

Alberini served as Vice President of Finance and Acting Chief Financial Officer of the Melville Corporation, a retail holding corporation.

From 1987 to 1995, Mr.

Alberini was with The Bon-Ton Stores, Inc., an operator of department stores, in various capacities, including Corporate Controller, Senior Vice President, Chief Financial Officer and Treasurer.

Prior to that, Mr.

Alberini served in various positions at PricewaterhouseCoopers LLP, an audit firm.

Qualifications:

Alberini was selected to our board of directors because he possesses particular knowledge and experience in retail and merchandising, branded consumer goods, accounting, financing and capital finance, board practices of other large retail companies and leadership of complex organizations.

146 | FORM 10-K

KEITH BELLING

Director since 2016

Board Committees:

Class III Director:

Continuing in office until

the 2021 annual meeting

K eith Belling has served on our board of directors since April 2016, and previously served as an advisor to the board of directors from May 2015 to April 2016.

Belling is the founder and Chief Executive Officer of RightRice, a next generation rice brand that launched in February 2019, in Whole Foods Markets nationwide and on Amazon.

Belling is also the co-founder and former Chairman and Chief Executive Officer of popchips, inc.

(“popchips”) a leading better-for-you snack food business that launched in 2007.

He previously served as popchips’ Chief Executive Officer from 2007 through 2012, leading the company to sales and distribution at over 30,000 retail stores across North America and the United Kingdom and served as the Chairman of the Board from 2007 through 2019.

Belling has served as an advisor to several innovative consumer, real estate and technology companies, including Modern Meadow Inc., Olly Nutrition, and LBA Realty LLC.

Belling also has founded other businesses, including e-commerce company AllBusiness.com, a leading small business portal, founded in 2008, where Mr.

Belling formerly served as Chief Executive Officer and which was acquired by NBCi.

Belling was a real estate attorney with Morrison & Foerster LLP, where he represented a diverse clientele including developers and real estate investors.

Qualifications:

Belling was selected to our board because of his experience as a founder, leader, and entrepreneur of several innovative consumer companies, as well as his background and experience in the real estate sector.

EXECUTIVE OFFICERS

Below is a list of the names and ages, as of March 24, 2021, of our executive officers and a description of their business experience.

Gary Friedman

Chairman and Chief Executive Officer

President, Chief Creative and Merchandising Officer

DeMonty Price

President, Chief Operating, Service and Values Officer

David Stanchak

President, Chief Real Estate and Development Officer

Chief Financial Officer

Gary Friedman has served as our Chairman and Chief Executive Officer of the Company, and Founder of the RH brand as we know it today since January 2014.

Previously, Mr.

Friedman served as our Co-Chief Executive Officer and Director from July 2013 to January 2014, and as Chairman and Co-Chief Executive Officer from May 2010 to October 2012.

From October 2012 to July 2013, Mr.

Friedman served as Chairman Emeritus, Creator and Curator on an advisory basis, and as Chief Executive Officer and a member of our Board of Directors from March 2001 to October 2012, during which time he served as our Chairman from March 2005 to June 2008.

Friedman joined RH from Williams-Sonoma, Inc.

where he spent 14 years serving as President and Chief Operating Officer from May 2000 to March 2001, as Chief Merchandising Officer of Williams-Sonoma, Inc.

and President of Retail from 1995 to 2000, and as Executive Vice President of Williams-Sonoma, Inc.

and President of the Williams-Sonoma and Pottery Barn brands from 1993 to 2000 during which time Mr.

Friedman was responsible for transforming Pottery Barn from a $50 million dollar table top and accessories business, into a billion dollar plus home furnishings lifestyle brand.

Friedman also developed and rolled out the revolutionary Williams-Sonoma Grande Cuisine stores, growing the brand from less than $100 million to almost $1 billion.

Lastly, while at Williams-Sonoma Mr.

Friedman spent several years conceptualizing and developing the West Elm brand which launched shortly after he left the company.

Friedman joined Williams-Sonoma in 1988 as Senior Vice President of Stores and Operations.

Friedman began his retail career in 1977 as a stock-boy at the Gap store in Santa Rosa, California.

He spent eleven years with Gap, and held the positions of Store Manager, District Manager and Regional Manager overseeing 63 stores in Southern California.

FORM 10-K | 147

Eri Chaya serves as our President, Chief Creative and Merchandising Officer and Director.

Chaya has been a member of the RH Board of Directors since 2012.

Prior to RH, Ms.

Chaya was a creative director at Goodby, Silverstein and Partners, an international advertising agency, and a creative director at Banana Republic.

DeMonty Price serves as our President, Chief Operating, Service and Values Officer.

Price leads service and operations across the Company’s Galleries, outlets, distribution centers, care centers and home delivery network, as well as ensure a deep commitment to the Company’s values and beliefs throughout the organization.

Price served as Co-President, Chief Operating, Service and Values Officer from May 2016 to November 2017.

Price joined RH in 2002 and served as the Company’s Chief Service and Values Officer from September 2015 to May 2016, and Senior Vice President of Retail Galleries and Operations, and the Company’s Chief Values Officer from June 2006 to September 2015.

Prior to RH, Mr.

Price was with Williams-Sonoma, Inc.

for four years in various field leadership roles, as well as with Gap Inc.

and NIKE, Inc.

David Stanchak serves as our President, Chief Real Estate and Development Officer.

Stanchak leads real estate development, architecture and design for all of the Company’s brands, concepts and facilities domestically and internationally.

Stanchak’s appointment to the Office of the President in November 2017, Mr.

Stanchak served as RH’s Chief Real Estate and Transformation Officer since May 2017 and Chief Real Estate and Development Officer from May 2015 to May 2017.

From 2008 to 2013, Mr.

Stanchak served as Senior Vice President of Dick’s Sporting Goods and as President of Golf Galaxy.

Stanchak has also been the President and owner of Pinpoint Real Estate Company since 1995.

Over his 30-year career in the commercial real estate industry, Mr.

Stanchak has worked as a senior executive, board member, consultant, investor, real estate broker and attorney in all aspects of high-growth, multi-unit retail brand development.

He has had direct responsibility for opening more than 2,500 retail store locations, managing real estate portfolios and deploying in excess of $2 billion for retailers including RH, Dick’s Sporting Goods, Field & Stream, Golf Galaxy, True Runner, DSW, Filene’s Basement, Mike Ditka’s Steakhouse, James Hardie Building Products, Blockbuster Entertainment, Einstein/Noah Bagel Corp.

and Boston Market.

Jack Preston serves as our Chief Financial Officer and leads all financial functions including strategic and financial planning, accounting, treasury, tax, internal audit and investor relations across the Company’s multiple businesses and brands.

Preston served as RH’s Senior Vice President, Finance and Chief Strategy Officer from August 2014 to March 2019, and Senior Vice President, Finance and Strategy from April 2013 to August 2014.

Prior to RH, Mr.

Preston worked for Bank of America Merrill Lynch for over 12 years, where he most recently served as a Director in the consumer and retail investment banking group.

Preston holds a bachelor of commerce degree from the Sauder School of Business at the University of British Columbia.

CODE OF ETHICS & CODE OF BUSINESS CONDUCT

We have adopted a code of ethics for our chief executive officer and senior financial officers.

We have also adopted a code of business conduct applicable to our associates, officers and directors.

Copies of these codes are available on the Investor Relations section of our website, which is located at ir.rh.com , by clicking on “Corporate Governance.” We expect that any amendment to or waiver of the requirements of the code of ethics for our chief executive officer and senior financial officers will be disclosed on our website and any waiver of the requirements of the code of business conduct relating to our executive officers and directors will be promptly disclosed to shareholders, in each case as required by applicable law or NYSE listing requirements.

148 | FORM 10-K

AUDIT COMMITTEE

The audit committee was established for the primary purpose of assisting the board of directors in overseeing the accounting and financial reporting processes of the Company and audits of its financial statements.

The audit committee is responsible for, among other matters:

Appointing, retaining, compensating, evaluating, terminating and overseeing our independent registered public accounting firm;

Delineating relationships between our independent registered public accounting firm and our Company consistent with the rules of the NYSE and requesting information from our independent registered public accounting firm and leadership to determine the presence or absence of a conflict of interest;

Reviewing with our independent registered public accounting firm the scope and results of their audit;

Approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm;

Overseeing the financial reporting process and discussing with leadership and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC;

Reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls and compliance with legal and regulatory requirements;

Establishing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls or auditing matters;

Reviewing and approving related-person transactions.

Our audit committee currently consists of Mr.

Krane and Ms.

Rule 10A-3 of the Exchange Act and NYSE rules require us to have at least three audit committee members, all of whom are independent.

Our board of directors has affirmatively determined that each of Mr.

Krane and Ms.

Mitic meets the definition of “independent director” for purposes of serving on our audit committee under Rule 10A-3 of the Exchange Act and NYSE rules.

In addition, our board of directors has determined that Mr.

Demilio qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K.

Our board of directors has adopted a written charter for the audit committee, which is available on the Investor Relations section of our website, which is located at ir.rh.com , by clicking on “Corporate Governance.” The audit committee conducts an annual self-evaluation of its performance, as set forth in its charter.

DELINQUENT SECTION 16(A) REPORTS

Section 16 of the Exchange Act requires the Company’s directors, executive officers and any person who owns more than 10% of the Company’s common stock to file initial reports of ownership and reports of changes in beneficial ownership with the SEC.

Such persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms that they file.

Except as set forth herein, based solely on its review of the copies of such forms furnished to the Company and written representations from the directors and executive officers, the Company believes that all Section 16(a) filing requirements were met in a timely manner in fiscal 2020.

On July 27, 2020, the Form 4 filed on behalf of Mr.

Alberini to report the grant of restricted stock was filed one business day late due to a third party change to Mr.

Alberini’s EDGAR codes.

FORM 10-K | 149

The information required by this item will be contained in our definitive Proxy Statement for the 2022 Annual Meeting of Stockholders (the “Proxy Statement”) and is incorporated herein by reference.

EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION & ANALYSIS

Executive Summary

We align our executive compensation practices to the business objectives of our Company in order to drive ongoing improvements in our financial performance.

This compensation discussion and analysis (“CD&A”) explains the strategy, design, and decision-making processes of our compensation programs and practices in the fiscal year ended January 30, 2021 (“fiscal 2020”) for our named executive officers.

This CD&A is intended to provide perspective on the compensation information contained in the compensation tables that follow this discussion.

This CD&A also discusses how the fiscal 2020 compensation of our named executive officers aligns with the key goals of our compensation philosophy, namely, attracting and retaining the best talent and driving financial performance.

We also discuss how we use our compensation programs, including equity programs, to encourage an ownership and stakeholder perspective among our named executive officers by providing them with a long-term interest in the growth and financial performance of our Company that aligns with the interests of our shareholders.

We believe that continually analyzing and refining our compensation program enables us to achieve the key goals of our compensation philosophy and supports ongoing improvements in our Company’s financial performance.

STOCK PERFORMANCE

We commenced fiscal 2020 with our common stock price trading at a price near $209 per share and ended the fiscal year with our stock trading at a price near $475 per share.

In each of fiscal 2018, 2019 and 2020, we have deeply focused on capital allocation, optimization of free cash flow and increasing the gross margins of the business.

We believe our executive compensation strategy and structure is strongly aligned with our share price performance.

The following table shows the total shareholder return for our common stock during the five fiscal year periods indicated below.

The first row of the table indicates the cumulative return of an investor purchasing one share of RH common stock at the market close on January 29, 2016 and its value (percentage increase or decrease) at the associated fiscal year ends indicated in the table.

The table then assumes a scenario where $100 was invested at the market close on January 29, 2016 in RH common stock, which is equivalent to 1.62 shares (if fractional shares were permitted), and its value (percentage increase or decrease) at the associated fiscal year ends indicated in the table.

Value of 1 share

Value of a $100 Investment

Percentage Change

150 | FORM 10-K

The following table sets forth, for fiscal 2020, our named executive officers, as defined in Item 402 of Regulation S- K promulgated under the Securities Act of 1933, as amended:

Gary Friedman

Chairman and Chief Executive Officer

Chief Financial Officer

President, Chief Creative and Merchandising Officer and Director

DeMonty Price

President, Chief Operating, Service and Values Officer

David Stanchak

President, Chief Real Estate and Development Officer

We believe that compensation paid to our executive officers should be:

Closely aligned with the performance of the Company, on both a short-term and long-term basis;

Linked to specific, measurable results intended to create value for shareholders;

Transparent, accessible and understandable by all stakeholders to understand what drives our executives;

Tailored to achieve the key goals of our compensation program and philosophy.

Our executive compensation programs are aligned with our shareholders’ interests, with performance-based compensation being tied primarily to our annual earnings before taxes and our long-term stock price performance.

In the case of our Chairman and Chief Executive Officer, we have structured his multi-year stock option award granted during fiscal 2020 to require substantial stock price appreciation from the Company’s share price on the date of grant, as described further below.

Friedman’s base salary has remained unchanged since it was last increased in June 2013 when he returned to the Company, at the time, as our Chairman and Co-Chief Executive Officer.

Friedman’s bonus opportunity was not changed for fiscal 2018, fiscal 2019 or fiscal 2020.

The compensation committee has also continued to focus on balancing the alignment of our executive compensation program with our financial performance, providing incentives for retention purposes, rewarding the continued transformation of the business in fiscal 2020, and tailoring our compensation arrangements to match changes in our executive leadership.

In March 2021, the compensation committee reviewed the Company’s financial results related to the LIP targets, as described further below, set in the prior year and determined that the Company had exceeded the 200% achievement level with respect to the Company’s financial objectives.

As a result, the compensation committee determined that the amount of the payout under the LIP would be set at the maximum level of 200%.

In addition, although the base salaries for our named executive officers were not increased during fiscal 2020 from fiscal 2019 salary levels, in fiscal 2021 we increased the base salaries for certain named executives as discussed further below.

2020 Stock Option Award to Chairman and Chief Executive Officer

On October 18, 2020, the compensation committee granted a stock option to Mr.

Friedman under the 2012 Stock Incentive Plan to purchase 700,000 shares of the Company’s common stock (the “2020 Stock Option Award”), with certain selling restrictions tied to stock price appreciation, with a ten year term and an exercise price of $385.30 per share which was the market price for RH’s common stock effective on the date of the grant.

Selling restrictions attached to the shares only lapse upon the achievement of both certain time-based service period requirements and certain stock price-based performance objectives, as further described below.

The compensation committee believes that the combination of time-based restrictions and performance-based restrictions tied to stock price appreciation creates a strong alignment between Mr.

Friedman and the objectives of the Company’s shareholders.

FORM 10-K | 151

The 2020 Stock Option Award has the same overall time-based and performance-based structure as the multi-year 2017 stock option award made to Mr.

Friedman, except that the stock price performance levels, the exercise price and the number of shares covered by the new award have been adjusted to take into account current market conditions including the RH common stock price and the number of RH shares outstanding.

The 2017 multi-year stock option award structure was implemented as a result of the compensation committee’s extensive efforts to create an award that created strong alignment between Mr.

Friedman and the objectives of the Company’s shareholders.

As the RH stock price substantially exceeded the performance hurdles under the 2017 award granted to Mr.

Friedman, the Board of Directors and the compensation committee concluded that the 2017 award was a successful incentive structure for the Chief Executive Officer using a combination of both time-based and performance-based restrictions.

Mindful of this positive outcome, the 2020 Stock Option Award provides for the continuation of this performance methodology at enhanced price levels that are substantially above the RH stock price at the time of grant.

The chart below summarizes the key considerations and review process undertaken by the compensation committee in connection with the 2020 Stock Option Award:

considerations

in granting the

Friedman last received a multi-year stock option award in fiscal 2017

Friedman did not receive any other equity awards in 2018 or 2019

• The 2020 Stock Option Award is structured as a multi-year award for Mr.

• The performance time period for the 2020 Stock Option Award commences in May 2021, which is the date at which the performance time period for the 2017 award would have been completed and satisfied.

Accordingly, the 2020 Stock Option Award provides a continuation of the stock price performance methodology of the 2017 award for four successive performance years commencing in May 2021 through May 2025 at enhanced price levels

• By linking a combination of both a multi-year service period and performance goals for the 2020 Stock Option Award, the committee intends to create incentives for sustained performance over an extended period of time

the performance

• The committee paid particular attention to adopting a mix of performance incentives that would align the award with the long-term interests of the Company’s stockholders.

Friedman cannot realize stock option gains in the absence of material increases in stock price

• The primary performance measure that the committee focused on for the 2020 Stock Option Award was stock price performance, which the committee determined to be a transparent and accessible measure of overall value that is easily understood by the Company’s stockholders and aligns Mr.

Friedman’s compensation with returns experienced by investors

• The committee also considered feedback from the stockholder outreach campaigns conducted by RH regarding the structuring and disclosure of equity awards.

In particular, the compensation committee incorporated into the structure of the 2020 Stock Option Award investor feedback that sought performance metrics as a key component of any new equity award to the Chairman and Chief Executive Officer

considerations

related to the

structure of the

• RH received feedback from investors during the course of its shareholder outreach campaigns that RH should either make yearly awards to Mr.

Friedman or should make clear that the award being granted to Mr.

Friedman is intended to qualify as a multi-year award

• The committee determined to grant the 2020 Stock Option Award as a multi-year grant to be structured as a four-year service arrangement

• The committee structured the award as a multi-year grant tied to a service period of four years which is similar to the equity award granted to Mr.

Friedman in each of 2013 and 2017.

The performance time period for the 2020 Stock Option Award commences in May 2021, which is the date at which the performance time period for the 2017 award would have been completed and satisfied

• Given the multi-year nature of the 2020 Stock Option Award, it is not expected that the committee would grant annual refresh equity awards to Mr.

Friedman until the end of the four-year service period

152 | FORM 10-K

• Our independent compensation consultant provided input and analysis regarding the structure and grant date value of the multi-year award.

The compensation committee also received guidance and counsel from outside legal advisors regarding the legal provisions of the awards

Based upon the above described key considerations and review process, the compensation committee structured the 2020 Stock Option Award to include selling restrictions on the underlying shares, which selling restrictions only lapse upon the achievement of both certain time-based service period requirements and certain stock price-based performance objectives, as further described below.

The compensation committee believes that the combination of time-based restrictions and performance-based restrictions tied to stock price appreciation creates a strong alignment between Mr.

Friedman and the objectives of the Company’s stockholders.

The 2020 Stock Option Award contains the same overall structure as the last multi-year award granted to Mr.

Friedman in 2017 by utilizing both time-based service period requirements and performance-based metrics.

The 2020 Stock Option Award includes RH stock price performance targets of $500, $650 and $800 per share, which represent a substantial premium above the prevailing RH common stock price at the time of the grant.

The 2020 Stock Option Award is the third multi-year stock option award provided to Mr.

Friedman since the 2012 initial public offering, with the previous two awards covering successive four year time periods from 2013 to 2017 and from 2017 to 2021, respectively.

Consistent with this expectation the compensation committee did not grant Mr.

Friedman an additional equity award in fiscal 2018 or fiscal 2019.

Given that the stock price performance metrics for the 2017 Stock Option Award had been achieved, and in order to continue to incentive Mr.

Friedman towards the Company’s long-term strategic and key value driving goals as well as to continue to incentivize Mr.

Friedman to continue to drive the Company’s financial performance, the compensation committee determined to grant Mr.

Friedman the 2020 Stock Option Award to cover the successive four year period upon the expiration of the time-based service requirements of the 2017 Stock Option Award.

The time period for the new award commences in May 2021, which is the date at which the performance time period for the 2017 award would have been completed and satisfied.

The RH stock price has substantially exceeded the performance hurdles under the 2017 award granted to Mr.

The board of directors and the compensation committee concluded that the 2017 award was a successful incentive structure for the CEO using a combination of both time-based restrictions and performance-based restrictions to create strong alignment between the CEO and the Company’s shareholders.

The 2020 Stock Option award provides for the continuation of this performance methodology at enhanced price levels that are substantially above the current RH stock price.

The following table quantifies the stock price appreciation from the date of grant that would be required to achieve each performance target under the 2020 Stock Option Award:

PREMIUM TO GRANT

PRICE TARGET ($)

DATE STOCK PRICE (%)

Exercise Price

Performance Target

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The following chart presents graphically the number of shares that would become unrestricted in each performance measurement year after May 2021 assuming that the various stock performance targets are achieved:

DETAILED TERMS OF THE 2020 STOCK OPTION AWARD

The 2020 Stock Option Award has the same overall time-based and performance-based structure as the 2017 award except that the stock price performance levels, the exercise price and the number of shares covered by the new award have been adjusted to take into account current market conditions including the RH common stock price and the number of RH shares outstanding.

As was the case for the 2017 award, the new award may be exercised at any time, but the selling restrictions on the underlying shares only lapse upon the achievement of both certain time-based service period requirements and stock price performance-based targets, as further described below.

The key terms of the new stock option award are:

Time-Based Restrictions .

The time-based restrictions are measured over a four year service period which will begin in May 2021 on the anniversary of the grant of the 2017 equity award.

The time-based restrictions will lapse on each of the anniversary dates from May 2022 through May 2025 provided (i) Mr.

Friedman remains employed at the end of such service year by RH with the authority, duties, or responsibilities of a chief executive officer at such date, and (ii) the stock price goals have been achieved in such service year as described further below.

Performance-Based Restrictions .

The stock price targets are measured annually over a “performance year” and may lapse as to only one-quarter of the award in each of the first four performance years, with the first performance year being measured from May 2021 through May 2022.

The stock price performance targets for the 2020 Stock Option Award are set at $500 per share, $650 per share and $800 per share.

To achieve any given price target, the Company’s weighted average stock price, measured over a period of the last ten trading days on a volume weighted average price, must remain at or above the performance hurdles stated above for twenty consecutive trading days (i.e., a trailing ten day average minimum price that must be sustained for twenty consecutive trading days (the “twenty day average trading price”)).

These features have the effect of requiring that the stock remain above the target price for a sustained period of time.

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Stock price performance is measured annually over a “performance year,” and the selling restrictions may lapse for up to one-quarter of the award in any given performance year.

The first four performance years for the 2020 Stock Option Award run from May 2021 through May 2022 and then in each successive May to May time period through May 2025.

These performance years have been set to commence after the expiration of the fourth performance year for the 2017 award which occurs in May 2021.

With respect to any given performance year, if the “twenty day average trading price” as described above for RH common stock exceeds $500 per share, $650 per share, or $800 per share during such performance year, then the selling restrictions will lapse as to 58,333 shares, 58,333 shares, and 58,334 shares, respectively, on the last day of such performance year, if Mr.

Friedman remains employed by RH with the authority, duties, or responsibilities of a chief executive officer at such date.

Any share selling restrictions that have not lapsed in any performance year during the first four performance years can lapse if the stock price performance targets are achieved in a successive performance year through the end of the eighth performance year which ends in May 2029, provided Mr.

Friedman continues to satisfy the service requirement through the date the performance target is achieved.

The selling restrictions with respect to any performance year can only lapse if the performance hurdles are satisfied in that particular performance year or a later year (even if such performance hurdles were previously satisfied in a prior performance year).

Any share selling restrictions that have not lapsed by the end of the eighth performance year will thereafter only lapse on the twentieth anniversary of May 2021.

As a result, if the stock price targets are not achieved by the end of the eighth performance year, the underlying shares issuable upon any exercise of the option could not be sold until the twentieth anniversary of May 2021, with RH having certain rights to repurchase such shares at a point in time after exercise using an unsecured promissory note until such twentieth anniversary.

Friedman’s employment with RH is terminated without cause, by Mr.

Friedman for good reason (as such terms are defined in the option award agreement), or for death or disability (as such term is defined in the option award agreement), then any transfer restrictions on shares subject to the 2020 Stock Option Award that would have been eligible to lapse at any time during the twelve-month period following such termination had such termination not occurred will be eligible to lapse based solely upon the achievement of the stated price levels at any point during such twelve-month period.

For further details regarding the option award agreement, refer to the Company’s Current Report on Form 8-K filed on October 21, 2020.

We continue to believe that our executive compensation program, including the compensation of our Chairman and Chief Executive Officer, is clearly structured to reflect the best interests of shareholders and that if we continue to drive improving operational and financial performance investors will be rewarded by stock price appreciation.

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OVERVIEW OF COMPENSATION PROGRAM & PHILOSOPHY

OUR COMPENSATION PROGRAM IS DESIGNED TO DO THE FOLLOWING:

Attract and retain

We focus on attracting and retaining top-caliber, knowledgeable and experienced senior executives

Encourage an ownership and entrepreneurial mindset

Our programs create in our leadership an ownership and entrepreneurial mindset in order to align the annual and long-term strategic goals of our executives with those of our Company and our shareholders, including improvements in shareholder returns

Our programs motivate our executives to achieve superior results for our Company and our shareholders

Reward performance

We pay for performance that is achieved through creativity, the capitalization of unique strategic opportunities and business initiatives, and results in shareholder-aligned financial successes, including improvements in our stock price

Encourage appropriate risk taking

Our programs focus our executives to analyze business initiatives where we seek return on investment that exceeds downside risks

Provide transparent reward systems

Our reward systems are easily understood by our leaders and shareholders

Reinforce the succession planning process

Our programs help leadership to focus on identifying, and help us reward, retain and promote from within, the next generation of senior leadership to achieve the Company’s growth, profitability and other objectives through increased responsibilities and compensation

This compensation philosophy guides the compensation committee in assessing the compensation to be paid to our executives, including our named executive officers.

The compensation committee endeavors to ensure that the total compensation paid to the named executive officers is fair, competitive and consistent with our compensation philosophy.

This compensation philosophy also guides the compensation committee as to the proper allocation among current cash compensation (in the form of annual base salary), short-term compensation (in the form of performance-based, annual cash incentives), and long-term compensation (in the form of equity incentive compensation).

We evaluate both the performance and compensation of our named executive officers annually to ensure that the executive compensation program we implement achieves these goals.

One of our overriding goals informing our compensation philosophy is to create in our leadership an ownership and entrepreneurial mindset in order to align leadership performance with improvements in shareholder returns.

Our compensation programs aim to improve upon this interest alignment through various methods, including the use of stock options for equity grants, the use of long-term price performance targets in the award granted to our Chief Executive Officer and various profit metrics in the bonus plan.

We have implemented executive compensation policies and practices that reinforce our compensation philosophy and align with those commonly-viewed best practices and sound governance principles that we believe are appropriate for us.

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The following chart summarizes these policies and practices:

PRACTICES WE FOLLOW

100% independent directors on our compensation committee

Annual review and approval of our compensation strategy

Independent compensation consultant engaged by our compensation committee

Performance-based cash incentives

Significant portion of executive compensation is either tied to corporate performance directly or indirectly through stock price performance because of the equity component of compensation

We use five year vesting schedules for some of our equity grants (frequently with 20% vesting in each year).

In more recent years, we have shifted our vesting practices to use back-end loaded vesting periods, which we believe motivates our associates and leaders in favor of creating long-term shareholder value on a sustained basis.

With regard to back-end loaded vesting, we often use schedules along these lines:

Our seven-year award structure would generally vest 10% in years one, two and three;

15% in years four and five;

and 20% in years six and seven

Our five-year award structure would generally vest either (i) 15% in years one and two;

20% in year three;

and 25% in years four and five, or (ii) 10% in years one and two;

20% in year three;

and 30% in years four and five

Prohibition on short sales, hedging of stock ownership positions and transactions involving derivatives of our common stock

In May 2018, the board adopted stock ownership guidelines applicable to all directors and executive officers of the Company in order to further align the financial interest of our directors and executive officers with the interest of our investors

Our Chairman and Chief Executive Officer, Mr.

Friedman, has consistently maintained a significant equity ownership interest in the Company and, as of March 24, 2021, beneficially owns approximately 28.0% of the Company’s common stock which, based on the average closing price for RH stock for fiscal 2020, was valued at approximately 1,384.7 times his annual base salary for fiscal 2020 (1) , far above the multiple of six times salary minimum ownership requirement

Broad-based company-sponsored health and retirement benefits programs

B ased on shares owned directly, shares owned indirectly and reported as beneficially owned for Section 16 reporting purposes, and the “in the money” value of stock options, restricted stock and restricted stock units that are no longer subject to vesting or selling restrictions.

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PRACTICES WE AVOID

No “single trigger” change of control benefits

No post-termination retirement- or pension-type non-cash benefits or perquisites for our executive officers that are not available to our associates generally

No hedging or derivative transactions involving our securities by directors, officers, associates or other insiders

We have not repriced or bought out underwater stock options

No acceleration of share vesting generally – instead, we have simple customary levels of severance protection commensurate with a senior position

No tax gross-ups for change of control benefits

No defined value pensions or long term cash incentives like supplemental retirement plans or other forms of long-term deferred compensation

No equity awards for leadership with short-term restrictions or vesting, such as one-, two- or three-year vesting

COMPENSATION COMMITTEE INTERLOCKS & INSIDER PARTICIPATION

No member of the compensation committee has served as one of our officers or been employed as one of our associates at any time.

None of our executive officers serve as a member of the compensation committee of any other company that has an executive officer serving as a member of our board of directors.

None of our executive officers serve as a member of the board of directors of any other company that has an executive officer serving as a member of our compensation committee.

None of our directors or executive officers are members of the same family.

COMPENSATION COMMITTEE REVIEW OF COMPENSATION

Our board of directors has established a compensation committee that is generally responsible for the oversight, implementation and administration of our executive compensation plans and programs.

The compensation committee engages in the following, either together with the board of directors as a whole or as a committee, making recommendations to the board of directors regarding approval, as necessary:

Annually review and approve the Company’s corporate goals and objectives relevant to compensation of the Chief Executive Officer;

Evaluate the Chief Executive Officer’s performance in light of such goals and objectives;

Determine and approve the Chief Executive Officer’s compensation level based on this evaluation;

In addition, the compensation committee annually reviews the following:

Annual base salary levels;

Annual incentive compensation levels;

Long-term incentive compensation levels;

Any supplemental or special benefits

Ensure that appropriate overall corporate performance measures and goals are set and determine the extent to which the established goals have been achieved and any related compensation earned;

Determine the appropriateness of, and in some cases retain, a compensation consultant to offer advice for the consideration of the compensation committee and consider the independence of such consultant in accordance with applicable SEC and NYSE rules;

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Perform other necessary tasks related to the implementation and administration of executive compensation plans and programs.

The compensation committee’s annual review of executive compensation generally occurs within the timeframe of April to June of each year.

COMPENSATION LEVEL SETTING PROCESS

Our compensation committee reviews the following, among other factors, when determining compensation:

The individual’s performance and contributions to financial objectives;

Equity awards previously granted to the executive, which includes amounts of such awards that remain unvested or are under selling restrictions and therefore continue to incentivize future performance;

Individual leadership, expectations, expertise, skill, and knowledge;

Overall compensation, including base salary and bonus opportunity, as a whole;

Analyses of competitive market compensation practices and labor market conditions;

Alignment with the long-term business strategy of the Company;

Retention and succession planning;

Input from senior leadership, including our Chairman and Chief Executive Officer;

Input from an independent compensation consultant.

As we are headquartered in the San Francisco Bay Area, which is a highly dynamic and competitive market for talent, we seek to provide competitive compensation practices for our senior leadership in order to attract and retain the best available talent.

To set a competitive, reasonable and appropriate level of compensation, the board of directors and the compensation committee take a holistic approach and considers all relevant factors to the compensation decision being made in any given year.

The board of directors’ and the compensation committee’s approach to evaluating these factors is subjective, not formulaic, and may place more or less weight on a particular factor when determining a particular executive officer’s compensation.

ROLE OF LEADERSHIP IN DETERMINING EXECUTIVE COMPENSATION

In determining the total compensation for each executive officer, the board of directors and the compensation committee consider the specific recommendations of our Chairman and Chief Executive Officer (other than with respect to his own compensation) and may consider input from other senior members of leadership.

Our Chairman and Chief Executive Officer plays a significant role in the compensation setting process for the other named executive officers by:

Evaluating their performance;

Discussing the role and responsibilities of the relevant executive officer within the Company and the expected future contributions of the executive officer;

Considering retention and succession planning;

Recommending business performance targets and establishing objectives;

Recommending salary levels, bonuses and equity awards.

Our Chairman and Chief Executive Officer annually reviews the compensation paid to other named executive officers over the fiscal year through presentations to the compensation committee, either as a committee or together with the board of directors as a whole, and provides his recommendations regarding the compensation to be paid to such persons during

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the next year.

Following a review of such recommendations, the board of directors or the compensation committee, after reviewing the other factors and input as discussed above, takes action regarding such compensation recommendations as it deems appropriate.

The board of directors and the compensation committee also consider input from our Chairman and Chief Executive Officer, as well as our Chief Financial Officer and certain of our Presidents, when setting financial objectives for our performance-based incentive program.

Our executive compensation program is designed to reward successful annual performance while encouraging long-term value creation for our shareholders.

Short- and long-term incentive compensation is subject to rigorous, objective, at-risk performance hurdles across our performance metrics and performance periods, which the compensation committee intends to be an incentive to leadership to drive Company performance and encourage prudent risk management consistent with the Company’s financial and strategic goals.

ROLE OF COMPENSATION CONSULTANTS

The compensation committee has periodically engaged compensation consultants to assist the committee in assessing compensation market conditions.

Commencing in January 2017, Mercer was engaged by the compensation committee to provide evaluations and recommendations concerning our executive and board compensation programs and to advise the compensation committee with respect to structuring our compensation plans to achieve our business objectives.

Mercer has continued to provide evaluations and recommendations concerning our executive and board compensation programs and to advise the compensation committee with respect to structuring our compensation plans to achieve our business objectives for fiscal 2017 through fiscal 2020.

In fiscal 2020, Mercer provided support to the compensation committee in connection with equity awards and compensation for our leadership and in particular in connection with the structuring and details of the multi-year equity award to our Chairman and Chief Executive Officer.

The compensation committee has considered the independence of Mercer in accordance with applicable SEC and NYSE rules.

Although Mercer worked with leadership to develop plans that support our business objectives while carrying out its duties for the compensation committee, Mercer was retained by and reports directly to the compensation committee and does not provide any other services to the Company other than those approved by the compensation committee that would not constitute a conflict of interest or that would not otherwise compromise their independence.

ANALYSES OF COMPETITIVE MARKET PRACTICES

Due to the unique nature of our Company and the lack of direct industry competitors, we do not engage in a formal benchmarking process in setting compensation.

Instead, we consider from time to time, as the compensation committee deems appropriate, an array of available data and information in order to assess the competitiveness of our compensation program and philosophy, including market information concerning local and national market compensation practices that are determined to be relevant to the Company.

Given the location of our corporate headquarters in the San Francisco Bay Area, we pay close attention to the opportunities that exist for executives at other growth companies, both inside and outside the retail industry, located in the San Francisco Bay Area, including public companies, as well as private companies that could be candidates for an initial public offering in the future.

We conducted a comprehensive review of market compensation practices for executive officer compensation in fiscal 2016 and then again conducted reviews in relation to our review of our Chief Executive Officer’s compensation at the respective time of setting each of his fiscal 2017 multi-year equity grant and at the time of setting his fiscal 2020 multi-year equity grant.

At such times, the compensation committee reviewed the compensation practices of a number of companies, including companies of similar size to us, companies that have out-performed the market consistently in terms of growth and return measures, other brand and retail companies, particularly specialty retail companies, and companies in the technology sector.

In addition, the compensation committee reviewed data related to a number of companies with headquarters located on the West Coast (in particular, in the San Francisco Bay Area), regardless of size, because we believe such companies located on the West Coast have unique hiring and compensation practices, which are important for us to consider given the location of our headquarters and the talent pool from which we hire our executive and other associates.

In addition, Mercer also provided the compensation committee with data from their own review of proxy information.

The result of this analysis is a comprehensive review of the elements of compensation and practices that are determined to be relevant in setting compensation for our executive officers.

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In connection with the comprehensive review of market compensation practices, the Company and the compensation committee consider the executive compensation practices and the market data only as reference points in the review of the Company’s compensation practices, but do not benchmark or use market data in order to set compensation for the executive officers and other executives of the Company.

EXECUTIVE COMPENSATION COMPONENTS

The principal components of our compensation program for our named executive officers are summarized in the chart below, which is followed by a detailed explanation of the principal components of our compensation program for our named executive officers.

In determining our named executive officers’ overall compensation program, the compensation committee and the board of directors, as applicable, each considers how a particular component motivates performance and promotes retention and sound long-term decision-making.

COMPENSATION ELEMENTS

Annual base salary

Compensate for services rendered during the fiscal year

Performance-based annual cash incentives

Motivate and reward our named executive officers for specific annual financial and/or operational goals and objectives

Long-term equity incentive compensation

Attract and retain our named executive officers and align the financial rewards paid to our named executive officers with our long-term performance and the financial interests of our shareholders

Perquisites and other personal benefits

Provide a competitive level of perquisites to better enable us to attract and retain superior associates for key positions

Employment agreements;

severance and change of control benefits

Promote stability and continuity of senior leadership

Annual Base Salary

We provide our named executive officers with an annual base salary to compensate them for services rendered during the fiscal year.

The base salary for each of the named executive officers is guided by a variety of factors, which may include market information regarding salary levels for positions that are deemed relevant for comparison purposes, as well as such individual’s work experience, personal performance, responsibilities and other considerations, including internal alignment.

The relative weight given to each factor is not specifically quantified and varies with each individual at the discretion of the compensation committee and/or the board of directors.

Each named executive officer’s base salary is typically reviewed annually and is adjusted from time to time on the following bases:

evaluation of the executive officer’s personal performance for the year;

the recommendations of our Chairman and Chief Executive Officer (other than with respect to his own base salary);

the Company’s performance for the year;

the competitive marketplace for executives in comparable positions, including market information regarding salary levels for positions that are deemed relevant for comparison purposes;

and, in the case of increases in base salary other than on an annual basis, an individual’s exceptional performance, or increased responsibilities.

As part of their review, the compensation committee in particular considered, in addition to other factors listed above, our financial performance in 2020 and continued focus on multiple long-term key strategies, including transforming our real estate platform, expanding our product offering and increasing our market share, architecting a new operating platform, elevating the customer experience, increasing operating margins, optimizing the allocation of capital in the business and maximizing cash flow, and pursuing international expansion.

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In April 2020 as part of our organizational changes and expense reductions in response to business conditions resulting from the COVID-19 pandemic, we implemented a 100% salary reduction for our named executive officers.

In May 2020, we ended such salary reductions and in September 2020 we made “catch up” payments to our named executive officers to recoup the amount of their salary that would have otherwise been paid during fiscal 2020 absent the salary reduction.

We did not implement annual salary increases for our named executive officers during fiscal 2020 but made “catch up” payments to named executive officers during March 2021 to recoup the amount of salary increases that would otherwise have been payable from July 2020.

For purposes of calculating bonuses under our LIP each named executive officer’s eligible base salary compensation for 2020 includes the effect of any such retroactive salary increase.

The base salaries of our named executives for fiscal 2019 and for fiscal 2020 set forth in the table below reflect the amount of these retroactive salary increases.

Gary Friedman

DeMonty Price

David Stanchak

Performance-Based Annual Cash Incentives

We have adopted the Leadership Incentive Program, or “LIP,” which is a cash-based incentive compensation program designed to motivate and reward annual performance for eligible associates, including our named executive officers.

The compensation committee considers annually whether LIP bonus targets should be established for the year and, if so, approves the group of associates eligible to participate in the LIP for that year.

The LIP includes various incentive levels based on the participant’s position with the Company.

Cash bonuses under the LIP link a significant portion of the named executive officer’s total cash compensation to our overall performance.

The LIP bonus for our named executive officers is based on achievement of financial objectives, rather than individual performance, in order to focus the entire senior leadership team on the attainment of enterprise-wide financial objectives.

Each named executive officer is provided a target bonus amount equal to a percentage of the eligible portion of such officer’s base salary (which eligible portion is based on the salary earned during the fiscal year).

The target bonus amount is based on the Company meeting the target achievement level for the relevant financial objectives.

The compensation committee and/or the board of directors establishes the target achievement level at which 100% of such participant’s target bonus will be paid (the “100% Achievement Level”), the minimum threshold achievement level at which 20% of the participant’s target bonus will be paid (the “20% Achievement Level”) and the achievement level at which 200% of the participant’s target bonus will be paid (the “200% Achievement Level”).

The exact amount of the bonus payable under the LIP is based on the level of achievement of such financial objectives, with the bonus amount increasing for each named executive officer as a percentage of the eligible portion of such officer’s base salary to the extent the achievement of such financial objectives for the fiscal year exceeds the 100% Achievement Level, and with the bonus amount decreasing as a percentage of base salary to the extent the achievement of such financial objectives for the fiscal year is below the 100% Achievement Level (but above the 20% Achievement Level).

The compensation committee also may adopt separate minimum or maximum payout amounts for certain individuals under the LIP.

The LIP is structured so that no bonuses are paid under the LIP unless we meet the 20% Achievement Level.

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The compensation committee, either as a committee or with the board of directors as a whole, sets the financial objectives each year under the LIP, and the payment and amount of any bonus depends upon whether we achieve at least a certain percentage of the financial objectives under the LIP (at least 20% for fiscal 2020).

The compensation committee, either as a committee or with the board of directors as a whole, generally establishes such objectives for the Company at levels that it believes can be reasonably achieved with strong performance over the fiscal year.

In making the determination of minimum and target levels, the compensation committee and/or the board of directors may consider the specific circumstances facing our Company during the year and our strategic plan for the year.

The compensation committee and the board of directors have discretion to interpret the LIP’s performance objectives in light of relevant factors both internal and external to the Company, and to adjust the amount paid under the LIP accordingly.

The compensation committee and the board of directors exercise such discretion based on business judgment, taking into account both recurring and extraordinary factors affecting performance of the Company as well as other relevant factors.

The compensation committee may consult the board of directors, as deemed necessary, with respect to material issues concerning the administration of the LIP, including interpretations of the terms of the LIP.

For fiscal 2020, the performance metric for the LIP was based on adjusted net income (“Adjusted Income”), which we define as consolidated net income before taxes, adjusted for the impact of certain non-recurring and other items that we do not consider representative of our ongoing operating performance.

We believe that Adjusted Income provides meaningful information regarding the performance of our business and facilitates a meaningful evaluation of operating results on a comparable basis with historical results.

We do not adjust for depreciation or amortization.

Therefore, Adjusted Income indirectly reflects the Company’s capital use and capital expenditures, which are important factors of our long-term business strategy.

We believe the use of Adjusted Income is relevant in assessing overall performance of the Company and aligns this performance metric with the interests of shareholders.

Our leadership uses this non-GAAP financial measure in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter.

For fiscal 2020, the compensation committee approved the following targets under the LIP:

ACHIEVEMENT LEVEL

ADJUSTED INCOME

CHANGE FROM FISCAL 2019

increase of approximately $110 million

increase of approximately $111 million

increase of approximately $139 million

In fiscal 2020, LIP targets were established based upon the Company’s operating plans and objectives for fiscal 2020, which in turn were formulated in part based upon the results for fiscal 2019.

The compensation committee sets the LIP targets with the objective of encouraging the leadership team to drive financial performance based upon the Company’s operating plan and financial objectives for the year in question.

The following table sets forth the bonus targets as a percentage of the eligible portion of the executive’s base salary under the LIP in fiscal 2019 for our executive officers at the 20% Achievement Level, the 100% Achievement Level and the 200% Achievement Level.

During its annual review of the LIP and bonus targets for the executive officers for fiscal 2020, the compensation committee determined not to make any changes to the bonus targets as a percentage of the eligible portion of the executive’s base salary for Mr.

Friedman, Mr.

Price and Mr.

Stanchak from such targets for fiscal 2019.

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In March 2021, the compensation committee reviewed our financial results related to the LIP targets set in the prior year, and determined that the Company had exceeded the 200% Achievement Level with respect to the Company’s financial objectives and determined that the amount of the payout under the LIP would be set at the maximum level of 200%.

In fiscal 2020, the Company substantially exceeded its targets under the LIP due to the Company’s ongoing acceleration in financial performance.

The compensation committee determined that Adjusted Income for fiscal 2020 for purposes of the LIP was approximately $620.5 million, which was 24% above the 200% achievement threshold target of $500 million.

Consistent with the definition of Adjusted Income used in the LIP program, the $620.5 million amount reflected the compensation committee’s determination that certain other extraordinary or non-recurring items should also be excluded from determining Adjusted Income for purposes of the LIP.

The $620.5 million represents a 64% year-over-year increase from prior year results.

The compensation committee has approved payment of the bonuses earned under the LIP for our named executive officers subject to continuing employment through the payment date as follows:

ELIGIBLE PORTION

AS % OF ELIGIBLE

UNDER THE LIP

OF BASE SALARY

Gary Friedman

DeMonty Price

David Stanchak

The LIP provides substantial variation in compensation from year to year based upon the achievement of financial performance objectives, as reflected in the table below.

In prior years, we have paid bonuses under the LIP based on financial performance that has exceeded targets and partially met targets, and we have not paid bonuses under the LIP when the Company has not met targets.

Achievement level

Long-Term Equity Incentive Compensation

We believe that providing long-term incentives as a component of compensation helps us to attract and retain our named executive officers.

These incentives also align the financial rewards paid to our named executive officers with our long-term performance, thereby encouraging our named executive officers to focus on our long-term performance goals.

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In April 2020, the compensation committee performed its annual review of executive compensation, including a review of the Company’s annual share usage, or “burn rate,” and equity use as they relate to equity grants for executive officers to determine if such grants were appropriate and in line with our compensation philosophy and objectives.

The compensation committee also took into consideration (i) Mr.

Friedman’s recommendations, other than with respect to his own compensation, (ii) the competitive environment for executive talent in the San Francisco Bay Area, (iii) each executive officer’s current equity holdings and the present value thereof and (iv) our continued desire to align its executive officers’ long-term interests with those of our shareholders.

The compensation committee’s determinations regarding equity grants for executive officers for fiscal 2020 were also influenced by the desire to provide additional retention incentives to the Company’s executive officers, and the level of awards approved by the compensation committee took into account this desire to include a retention feature in the awards.

The compensation committee’s determinations regarding equity grants for associates for fiscal 2020 were also influenced by the desire to manage the annual share usage, or “burn rate,” and thus the compensation committee elected to substantially limit new equity grants to existing associates, to new hires, and with respect to promotions in fiscal 2020.

In fiscal 2020, the compensation committee reviewed the grants of equity awards to the executive officers.

As described above in “—Executive Summary—2020 Stock Option Award to Chairman and Chief Executive Officer,” based on the compensation committee’s review in fiscal 2019 and fiscal 2020 of the long-term equity incentive compensation of our Chairman and Chief Executive Officer, Mr.

Friedman, on October 17, 2020 the compensation committee determined to award Mr.

Friedman the 2020 Stock Option Award as a multi-year option award consistent with the methodology and structure used by the compensation committee with respect to Mr.

Friedman’s last multi-year option award in fiscal 2017.

The compensation committee’s determination was based on a review of a variety of factors and on the input of independent compensation consultants.

The factors considered by the compensation committee included:

Friedman received a multi-year stock option award in each of fiscal 2013 and 2017 but had not received any subsequent equity awards including in fiscal 2018 or fiscal 2019, and his base salary remained unchanged during this time period;

his bonus level opportunity as a percentage of base salary remained unchanged for fiscal 2018, fiscal 2019 and fiscal 2020.

The compensation committee requested that our independent compensation consultant evaluate the employment agreement for Mr.

Friedman and evaluate a possible multi-year equity award structure consistent with the methodology used for his award in fiscal 2017 in order to promote retention and reward stockholder value creation.

Our independent compensation consultant additionally performed a review of market compensation practices and market data of long-term incentive awards to chief executive officers as a reference point for its review of a potential equity award for Mr.

The compensation committee also considered the feedback from stockholders from stockholder outreach campaigns over the last three years regarding the structuring and disclosure of equity awards as well as stockholder feedback concerning the use of performance metrics in the prior award to the Chairman and Chief Executive Officer.

In fiscal 2020, the compensation committee determined to make additional equity awards to the other named executive officers.

The compensation committee approved grants of stock options to the named executive officers, as follows:

STOCK OPTIONS

RESTRICTED STOCK UNITS

Gary Friedman

DeMonty Price

David Stanchak

(1) The stock option was granted at an exercise price of $385.30 per share, the fair market value of our common stock on October 18, 2020, the date of grant.

The option was fully vested on the date of grant, but the shares underlying the option are subject to selling restrictions that only lapse upon the achievement of both certain time-based service period requirements and certain stock price-based performance objectives.

The option expires on the 10 year anniversary of the date of grant.

See “—Executive Summary—2020 Stock Option Award to Chairman and Chief Executive Officer” for a detailed explanation of the vesting and other provisions of this option award.

(2) The stock options were granted at an exercise price of $154.82 per share, the fair market value of our common stock on April 29, 2020, the date of grant.

The options vest on each anniversary of the date of grant with 10% of the options on each of years 1, 2 and 3, 15% of the options on each of years 4 and 5 and 20% of the options on each of years 6 and 7, and expire in 10 years, subject to the named executive officer's continued service with the Company.

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For fiscal 2020, we primarily used stock options in our equity grants, in lieu of “full value” awards such as restricted stock units, as part of our long-term equity incentive plan.

As a high-growth company, we believe the use of stock options creates strong alignment with our executives with regard to the expectation of shareholders for the Company to exceed and increase its value over time.

At the same time, we have historically granted some “full value” awards and believe that such awards can be an appropriate alternative as our share price has increased substantially since the IPO and in that context a full value award allows for the grant of a lower number of shares than a stock option award which can result in a grant of restricted stock units being an appropriate equity award structure in some instances.

For fiscal 2020, we used back-end loaded seven-year vesting periods for most of our equity awards rather than five-year vesting periods.

We believe these longer vesting periods motivates our associates and executives to take a sustainable approach in creating long-term shareholder value and allow for these equity awards to create a retention structure over a seven year period as opposed to a shorter timeframe.

Perquisites and Other Personal Benefits

We provide certain named executive officers with perquisites and other personal benefits that we and the compensation committee believe are reasonable and consistent with our overall compensation program to better enable us to attract and retain superior associates for key positions.

We generally provide our named executive officers a car allowance, which is adjusted from time to time based on expenses incurred by our executive officers in connection with their travel to local retail locations and expenses related to fuel, tolls and parking.

The compensation committee periodically reviews the levels of perquisites and other personal benefits provided to the named executive officers.

The Company implemented various actions to promote the health and safety of its employees, including its named executive officers in the context of the COVID-19 pandemic.

As part of these efforts, the Company retained services of various third party medical resources to assist the Company and its executives with respect to medical and health matters during the pandemic, including with respect to COVID-19 risk management, health assessment, testing and preventive measures.

Such third-party services, including concierge medical services for certain of our named executive officers, were paid for by the Company.

The named executive officers may not defer any component of any annual incentive bonus earned and do not participate in another nonqualified deferred compensation plan.

Likewise, the Company does not maintain any defined benefit pension plans for its associates.

However, our named executive officers are eligible to participate in the Company’s 401(k) savings plan, as well as the Company’s group health and welfare plans, on the same terms and conditions as other Company associates.

It has been our practice to provide key executive officers with relocation benefits in connection with their initial hiring by our Company.

In some instances, newly hired key executives are provided a signing or guaranteed minimum bonus in order to assist with their transition into the Company and the San Francisco Bay Area or for other reasons.

However, relocation incentives or benefits may be subject to repayment if the executive does not remain with the Company for the period of time specified in his or her offer documents.

None of our named executive officers received such benefits in fiscal 2020.

In addition, from time to time, the compensation committee may approve cash bonuses outside of the LIP on a discretionary basis for reasons such as individual performance or in connection with an executive officer’s initial employment arrangement with the Company or other events, and such bonus awards may overlap with bonus awards paid under the LIP.

Payments of discretionary bonuses to our named executive officers, if any, are disclosed in the “Bonus” column of the Summary Compensation Table in this Annual Report on Form 10-K.

None of our named executive officers received a discretionary bonus in fiscal 2020.

Employment Agreements;

Severance and Change of Control Benefits

We have entered into agreements with certain key associates, including certain of the named executive officers, which agreements provide severance benefits in the event of certain terminations of employment.

These severance protection agreements are designed to promote stability and continuity of senior leadership.

Information regarding amounts that would be payable under such agreements for the named executive officers is provided under the heading “—Potential Payments Upon Termination and Change in Control” below.

None of our employment agreements or other policies have tax gross-up features.

In the event that any termination payments made to our Chairman and Chief Executive Officer are deemed under Section 280G of the U.S.

Internal Revenue Code of 1986, as amended (the “Code”), to constitute excess parachute payments subject to an excise tax, then such payments will be payable either (i) in full or (ii) as to such lesser amount that would result in no portion of such payments being subject to the excise tax, and our Chairman and Chief Executive Officer will receive the greater, on an after-tax basis, of (i) or (ii) above, as determined by an independent accountant or tax advisor selected by our Chairman and Chief Executive Officer and paid for by the Company.

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RISK CONSIDERATIONS IN OUR COMPENSATION PROGRAM

We conducted an assessment of the Company’s compensation policies and practices for its associates and concluded that these policies and practices as currently designed are appropriately weighted among base salaries and short- and long-term incentives such that the Company’s associates are not encouraged to take excessive risks.

The compensation committee believes that such compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

In reaching this conclusion, the compensation committee reviewed the compensation elements that comprise our compensation program, as well as the objectives that each item is designed to encourage, as described above under “—Executive Compensation Components.”

Anti-Hedging Practices

Our insider trading policy provides that no person employed by us or director may hedge ownership of our stock by engaging in short sales or purchasing and selling derivative securities related to our stock.

Clawback Provisions

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), public companies will be required to adopt a policy to recover certain compensation in the event of a material accounting restatement.

The Company will adopt a clawback policy as required by Dodd-Frank when final regulations are provided by the SEC and the NYSE and become effective.

Stock Ownership by Executives

In May 2018, our board of directors adopted stock ownership guidelines applicable to all directors and executive officers of the Company in order to further align the financial interest of our directors and executive officers with the interest of our investors.

See “Corporate Governance—Director & Executive Stock Ownership Guidelines.”

Our Chairman and Chief Executive Officer, Mr.

Friedman, has consistently maintained a significant equity ownership interest in the Company and, as of March 24, 2021, beneficially owns approximately 28.0% of the Company’s common stock which, based on the average closing price for RH stock for fiscal 2020, was valued at approximately 1,384.7 times his annual base salary for fiscal 2020, far above the multiple of six times salary minimum ownership requirement.

Additional information regarding the shareholdings of our other named executive officers and directors is set forth in this Annual Report on Form 10-K in the section entitled “Security Ownership of Top Shareholders & Leadership.”

Tax Deductibility

Section 162(m) of the Internal Revenue Code (“Section 162(m)”) limits the amount that we may deduct for compensation paid to certain of our executive officers to $1,000,000 per person in any year.

Prior to December 22, 2017, when the Tax Cuts and Jobs Act of 2017 (“TCJA”) was signed into law, compensation that qualified as “performance-based” was excluded for purposes of calculating the amount of compensation subject to the $1,000,000 limit.

Under the TCJA, this “performance-based” exception is repealed for taxable years beginning after December 31, 2017, except with respect to certain “grandfathered” compensation.

The compensation committee reviews and considers the deductibility of executive compensation under Section 162(m) when determining the compensation of the Company’s executive officers.

However, the compensation committee retains the flexibility and discretion to approve compensation that is nondeductible under Section 162(m) as a means to ensure competitive levels of total compensation for our executive officers and promote varying corporate goals.

In any event, the compensation committee intends to maintain an approach to executive officer compensation that strongly links pay to performance, and promotes the attraction and retention of qualified executives, but will also take into account tax-effectiveness of different compensation alternatives as it selects the right compensation mix.

CEO Pay Relative to Median Pay of Our Associates

The compensation for our Chief Executive Officer in fiscal 2020 ($178,007,868 as disclosed in the 2020 Summary Compensation Table further below) was approximately 5,087 times the median of the annual “total compensation,” as defined by Item 402(u) of Regulation S-K, of persons employed by us whom we refer to as associates ($34,994).

Total compensation includes base salary, bonus compensation, equity awards and other perquisites and allowances.

Our Chief Executive Officer to median associate pay ratio is calculated in accordance with Item 402(u) of Regulation S-K and represents a reasonable estimate calculated in accordance with SEC regulations and guidance.

We identified the median associate by examining the gross wages reflected in our payroll records as reported to the Internal Revenue Service on Form W-2 for all individuals, excluding our Chief Executive Officer, who were employed by us on December 31, 2020.

We included all associates, whether employed on a full-time, part-time, temporary or seasonal basis, but we excluded all non-US employees.

employees accounted for less than 5% of our total employee population.

We did not make

FORM 10-K | 167

any assumptions, adjustments, or estimates with respect to payroll compensation amounts.

After identifying the median associate based on total W-2 payroll compensation, we calculated annual total compensation for such associate using the same methodology we use for our named executive officers as set forth in the 2020 Summary Compensation Table.

COMPENSATION COMMITTEE REPORT

The information contained in the following report of the Company’s compensation committee is not considered to be “soliciting material,” “filed” or incorporated by reference in any past or future filing by the Company under the Exchange Act or the Securities Act of 1933, as amended, unless and only to the extent that the Company specifically incorporates it by reference.

The compensation committee has reviewed and discussed the Compensation Discussion and Analysis set forth above with our senior leadership.

Based on its review and discussions, the compensation committee recommended to our board of directors that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.

Submitted by the compensation committee of the board of directors of RH:

Leonard Schlesinger (Chairman)

COMPENSATION OF NAMED EXECUTIVE OFFICERS

Summary Compensation Table

The following table shows the compensation earned by our named executive officers in fiscal 2020, fiscal 2019 and fiscal 2018.

INCENTIVE PLAN

PRINCIPAL POSITION

COMPENSATION(2)

COMPENSATION(4)

Gary Friedman

Chairman and CEO

Jack Preston (6)

Chief Financial Officer

President, CCO,

CMO & Director

DeMonty Price

Chief Operating, Service and Values Officer

David Stanchak

Chief Real Estate and Development Officer

(1) Salary amounts for certain of our named executive officers reflect “catch up” payments to named executive officers during March 2021 to recoup the amount of salary increases that would otherwise have been payable from July 2020.

(2) Reflects the cash awards that our named executive officers received under our LIP for fiscal 2020, fiscal 2019 and fiscal 2018 performance, as applicable.

(3) Reflects the aggregate grant date fair value of the awards made in fiscal 2020, fiscal 2019 and fiscal 2018, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock-Based Compensation (“FASB ASC 718”) rather than the amount paid to or realized by the named executive officer.

See Note 18— Stock-Based Compensation in our consolidated financial statements within Part II of this Annual Report on Form 10-K.

(4) Reflects perquisites to the named executive officers in the form of car allowances, except as otherwise noted.

(5) In fiscal 2020, represents $12,000 in the form of a car allowance and $13,879 in imputed income related to Mr.

Friedman’s personal use of corporate aircraft.

Preston was appointed as Chief Financial Officer on March 5, 2019 and was not a named executive officer prior to fiscal 2019.

As a result, no disclosure is made for fiscal 2018 in accordance with SEC rules.

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(7) In fiscal 2020, $25,000 of such amount represents third-party concierge medical services for such named executive officer.

(8) In fiscal 2020, represents $12,000 in the form of a car allowance and $5,502 in imputed income related to Mr.

Stanchak’s limited personal use of corporate aircraft during the COVID-19 pandemic.

For a description of actions taken by the compensation committee with respect to base salaries of our named executive officers for fiscal 2020, please see section entitled “—Compensation Discussion & Analysis—Annual Base Salary” above.

For a description of the material terms of the named executive officers’ employment agreements, please see the section entitled “—Compensation Discussion & Analysis—Employment Agreements” above.

For a description of our Non-Equity Incentive Plan Compensation, please see the section entitled “—Compensation Discussion & Analysis—Performance-Based Annual Cash Incentives” above.

For the compensation committee’s determination of awards under the LIP for our named executive officers for fiscal 2020, please see the section entitled “—Compensation Discussion & Analysis—Performance-Based Annual Cash Incentives” above.

For the vesting schedules of outstanding equity awards and additional information concerning outstanding equity awards, please see “—Outstanding Equity Awards at Fiscal Year-End” below.

Grants of Plan-Based Awards

As further described above in the Compensation Discussion and Analysis section of this Annual Report on Form 10-K, the named executive officers are eligible to receive an annual cash bonus based on a percentage of their base salary under our LIP.

Our Company’s financial objectives with respect to the LIP are established each year and the payment and the amount of any bonus depend upon whether our Company achieves those performance goals.

The specific amount any participant could receive depends on the level of our performance.

The amounts shown in these columns for the named executive officers are based on the following assumptions:

In the “threshold” column, the amount for each named executive officer reflects the minimum bonus that would be awarded if we reach the 20% achievement level of our financial objectives, which is the minimum achievement level required for bonus payouts under the LIP.

In the “target” column, the amount for each named executive officer reflects the bonus amount that would be awarded if we reach the 100% achievement level of our financial objectives.

In the “maximum” column, the amount for each named executive officer reflects the bonus that would be awarded if we reach the 200% achievement level of our financial objectives.

The following table provides information on the possible payouts under our LIP for fiscal 2020 based on certain assumptions about the achievement of performance objectives for our Company and the individual named executive officer at various levels.

The following table does not set forth the actual bonuses awarded to the named executive officers for fiscal 2020 under the LIP.

The actual bonuses awarded to the named executive officers for fiscal 2020 are reported in the Summary Compensation Table above under the column entitled “Non-Equity Incentive Plan Compensation.”

ESTIMATED FUTURE PAYOUTS UNDER

NON-EQUITY INCENTIVE PLAN AWARDS(1)

OPTION AWARDS(2)

Gary Friedman

DeMonty Price

David Stanchak

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(1) Target awards as a percentage of the eligible portion of base salary for the named executive officers are set forth in the section entitled “—Compensation Discussion & Analysis—Performance-Based Annual Cash Awards” above.

(2) For stock option awards, reflects the aggregate grant date fair value of the awards made in fiscal 2020, computed in accordance with FASB ASC 718.

See Note 18— Stock-Based Compensation in our consolidated financial statements within Part II of this Annual Report on Form 10-K.

Amounts shown do not reflect compensation actually received or that may be realized in the future by the named executive officer.

The grant date fair value for stock option awards was approximately $90.42 on April 29, 2020.

See “—Executive Summary—2020 Stock Option Award to Chairman and Chief Executive Officer” for a detailed explanation of the vesting and other provisions of the option award grated to Mr.

Friedman on October 18, 2020.

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table shows all outstanding stock options and stock awards held by the named executive officers as of January 30, 2021 the last day of fiscal 2020.

STOCK OPTION AWARDS

RESTRICTED SHARE AWARDS

NUMBER OF SECURITIES

UNDERLYING UNEXERCISED

SHARES OR UNITS THAT HAVE

NOT YET VESTED

UNEXERCISABLE

Gary Friedman

DeMonty Price

David Stanchak

(1) Calculated by multiplying the number of unvested stock awards by $475.36, the fair market value of the Company’s common stock on January 29, 2021, the last trading day of fiscal 2020.

(2) Represents options granted to Mr.

Friedman under our 2012 Stock Incentive Plan on May 2, 2017.

These options are fully vested but the underlying shares are subject to selling restrictions that only lapse upon the achievement of both certain stock price-based performance objectives and certain time-based service period requirements.

As of January 30, 2021, 250,000 of these options were subject to selling restrictions.

(3) Represents options granted to Mr.

Friedman under our 2012 Stock Incentive Plan on October 18, 2020.

See “—Executive Summary—2020 Stock Option Award to Chairman and Chief Executive Officer” for a detailed explanation of the vesting and other provisions of this option award.

As of January 30, 2021, 700,000 of these options were subject to selling restrictions.

(4) Represents options granted on April 21, 2016.

Subject to continuous service, these options will be fully vested on April 21, 2021.

(5) Represents options granted on June 27, 2016.

Subject to continuous service, these options will be fully vested on June 27, 2021.

FORM 10-K | 171

(6) Represents options granted on April 2, 2019.

Subject to continuous service, these options vest on each anniversary of the date of grant with 10% of the total options granted on each of years 2 and 3, 15% of the total options granted on each of years 4 and 5, and 20% of the total options granted on each of years 6 and 7, and will be fully vested on April 2, 2026.

(7) Represents options granted on April 29, 2020.

Subject to continuous service, these options vest on each anniversary of the date of grant with 10% of the total options granted on each of years 1, 2 and 3, 15% of the total options granted on each of years 4 and 5, and 20% of the total options granted on each of years 6 and 7, and will be fully vested on April 29, 2027.

(8) Represents options granted on May 4, 2016.

Subject to continuous service, these options will be fully vested on May 4, 2021.

(9) Represents options granted on June 6, 2018.

Subject to continuous service, these options vest on each anniversary of the date of grant with 10,000 options on each of years 3 and 4, and 20,000 on year 5, and will be fully vested on June 6, 2023.

(10) Represents options granted on August 29, 2017.

Subject to continuous service, these options vest on each anniversary of the date of grant with 5,000 options on each of years 4 and 5, and will be fully vested on August 29, 2022.

(11) Represents options granted on June 6, 2018.

Subject to continuous service, these options vest on each anniversary of the date of grant with 5,000 options on each of years 3 and 4, and 10,000 on year 5, and will be fully vested on June 6, 2023.

(12) Represents options granted on July 19, 2019.

Subject to continuous service, these options vest and become exercisable as to 25% of the options on each remaining anniversary of the grant date, and will be fully vested on July 19, 2024.

(13) Represents restricted stock units granted on April 21, 2016.

Subject to continuous service, these restricted stock units will be fully vested on June 16, 2021.

(14) Represents restricted stock units granted on May 4, 2016.

Subject to continuous service, these restricted stock units will be fully vested on May 4, 2021.

OPTIONS EXERCISED, UNITS VESTED & STOCK VESTED

The following table shows all restricted stock units or stock awards that vested in fiscal 2020.

The named executive officers did not exercise any stock options in fiscal 2020.

RESTRICTED STOCK AWARDS

RESTRICTED STOCK

UNITS ON VESTING

Gary Friedman

DeMonty Price

David Stanchak

BURN RATE & DILUTION

We calculate our “burn rate” using the total number of equity awards (full value stock awards and stock options) granted under our stock incentive plan during the current fiscal year as a percentage of the total number of common shares outstanding as of the prior fiscal year.

Our fiscal 2020 burn rate was 9.2%.

We believe that understanding our use of equity under our stock incentive plan (including our annual burn rate) requires understanding the impact of our recent share repurchase programs on the potential dilution to our shareholders from awards of stock-based incentive compensation, which we call our “overhang.” As a result, we analyze our equity metrics as a percentage of both the total number of common shares outstanding and the total number of pro forma common shares outstanding, which takes into account the effect of our share repurchase programs on our total number of common shares outstanding.

Our pro forma overhang for fiscal 2020 based on the pro forma common shares outstanding was 19.8%.

Our overhang for fiscal 2020 based on the total number of common shares outstanding was 42.9%.

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We calculate our overhang as the total number of shares to be issued under outstanding equity awards (including any unexercised and unvested outstanding awards), plus shares available for issuance under our equity plans as a percentage of the total number of common shares outstanding.

Our pro forma overhang takes into account the effect of the Company’s share repurchase programs by using the total number of common shares outstanding prior to the Company’s share repurchases (as of fiscal 2016) and includes the actual issuance of common stock via equity instruments through the current fiscal year end period.

FISCAL 2020 (POST REPURCHASE ACTIVITY)

(PRE-REPURCHASE

FISCAL 2020 SHARES

Shares to be Issued under Outstanding Options & RSUs

Shares Available for Issuance

Shares Outstanding

(1) Pro forma fiscal 2020 shares outstanding is equal to the total shares outstanding as of fiscal 2016 (which is used in order to exclude the Company’s share repurchase activity under the board-approved share repurchase programs during fiscal 2017, fiscal 2018 and fiscal 2019), plus the issuance of (i) 3,051,600 shares during fiscal 2017 through fiscal 2020 as a result of the exercise of stock options and vested RSUs, (ii) 1,553,636 shares during fiscal 2019 and fiscal 2020 related to warrants and (iii) 42 shares related to the early conversion of certain convertible senior notes, minus the repurchase of 3,400 shares from former associates and 17 shares received upon the settlement of convertible senior notes.

PENSION BENEFITS

None of our named executive officers received any pension benefits during fiscal 2020.

NONQUALIFIED DEFERRED COMPENSATION

None of our named executive officers contributed to or received earnings from a nonqualified deferred compensation plan during fiscal 2020.

EMPLOYMENT & OTHER COMPENSATION AGREEMENTS

We have entered into employment agreements with the following named executive officers.

Gary Friedman

We have entered into an employment agreement with Mr.

Friedman, our Chairman and Chief Executive Officer.

Friedman’s employment agreement provides for an annual base salary of at least $1.25 million.

Friedman’s employment is 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 salary and vacation pay through the termination date, (b) severance payments totaling $20 million, less withholdings, paid on our regular payroll schedule over the 24 months following the termination date, (c) any earned but unpaid portion of his annual bonus, (d) a pro-rata amount (based on the number of days Mr.

Friedman was employed during the fiscal year through the termination date) of Mr.

Friedman’s target bonus for the applicable fiscal year in which termination of employment occurs, to be paid at the same time and in the same form as Mr.

Friedman’s annual bonus would otherwise be paid, (e) subject to his timely election under COBRA, continuation of medical benefits for 24 months following the termination date, subject to Mr.

Friedman’s payment of applicable premiums at the same rate that would have been applied had he remained an executive officer of our Company, paid for by us to the same extent that we paid for his health insurance prior to termination, (f) 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 (g) any unvested

FORM 10-K | 173

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.

Friedman’s employment agreement also provides that in the event he receives payments that would be subject to an excise tax, he would receive the greater of either (i) the payment in full or (ii) such lesser amount which would result in no portion of such payments being subject to the excise tax, on an after-tax basis.

Friedman’s services are terminated by us for cause (as defined in the agreement), he is entitled to all accrued salary and vacation pay 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 & Analysis—Long-Term Equity Incentive Compensation.”

Friedman has agreed that, during his employment with us or during the term when he is receiving continued payment from us after termination of his employment as described above, he will not directly or indirectly work for or engage or invest in any competitor.

In addition, Mr.

Friedman has agreed that, during his employment with us and for the two year period thereafter, he will not (a) solicit, directly or through any third party, any associate 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 employment 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.

Eri Chaya, DeMonty Price, David Stanchak and Jack Preston

On March 29, 2018, we entered into compensation protection agreements with each of Ms.

Price and Mr.

On March 29, 2019, we entered into a compensation protection agreement with Mr.

The compensation committee determined to offer these compensation protection agreements to each of these executive officers in order to provide uniform severance protection terms for each such executive officer.

The effect of the compensation protection agreements is to supersede any other compensation severance arrangements previously in place for any such executive officer.

The compensation protection agreements provide each of the foregoing executive officers with severance if the executive’s employment is terminated by us without cause (as defined in the agreement), or by the executive for good reason (as defined in the agreement).

In the event of such termination and subject to the executive’s execution and nonrevocation of a release of claims and continued compliance with the restrictive covenants described herein, the executive is entitled to:

(a) all accrued base salary through the termination date;

(b) any earned and unpaid portion of the annual bonus for the year prior to year in which such termination occurs;

(c) to the extent bonuses have been paid for the year prior to the year in which the termination takes place (or no such bonus was paid at all), a prorated bonus based on the number of days the executive is employed in the year of termination based on our actual performance and if applicable, on executive’s individual performance at the midpoint of the applicable range;

(d) severance payments equal to 12 months base salary, less withholdings, paid on our regular payroll schedule following the termination date;

and (e) subject to the executive’s timely election under COBRA, payment of a portion of the executive’s COBRA premiums at the same rate that would have been applied had the executive remained employed by us, paid for by us to the same extent that we paid for the executive’s health insurance prior to termination, for 12 months following the termination date (or if earlier, when the executive becomes eligible for similar coverage from another employer).

The compensation protection agreements also provide that in the event the executive receives payments that would be subject to an excise tax, the executive would receive a lesser amount which would result in no portion of such payments being subject to the excise tax.

Each executive has agreed that during employment with us, the executive will not directly or indirectly work for or engage or invest in any competitor.

Each has also agreed that during employment with us and the 12 months following employment, the executive will not solicit, directly or through any third party any business from any of our material customers or suppliers or encourage any of our customers or suppliers to reduce their business or contractual relationship with us.

Each executive will also cooperate with us following termination of employment in the defense of any action brought by a third party against us that relates to the executive’s employment with us.

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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

Gary Friedman

The information below describes and quantifies certain compensation that would have been paid to Chief Executive Officer in the event of his termination of employment or a change in control, assuming such event was effective at January 30, 2021, the last day of our 2020 fiscal year, and based on fiscal 2020 compensation.

TERMINATION WITHOUT CAUSE

BENEFITS AND PAYMENTS

OR RESIGNATION WITH GOOD REASON

Severance pursuant to employment agreement (1)

Intrinsic value of equity (3)

Health coverage total benefits (4)

(1) Payable over 24 months.

(2) Corresponds to Mr.

Friedman’s annual bonus amount for fiscal 2020.

(3) Performance-based option awards where the shares underlying the option are subject to selling restrictions shall continue to have such selling restrictions lapse according to the performance terms for a period of one or two years following such termination, as applicable.

In the case of Mr.

Friedman’s 2017 stock option award, in the event Mr.

Friedman is terminated on January 30, 2021, the selling restrictions applicable to this award would lapse in full (assuming, in the case of the 2017 stock option award, that the stock price performance targets set forth in the 2017 award are met within the one year time period following such termination).

The value shown includes the value of such options held by Mr.

Friedman that he would receive if the stock price hurdles are achieved on such termination date.

This value is based on the excess of $475.36, the closing price of our common stock on January 29, 2021, the last trading day of fiscal 2020, over the exercise price of such options, multiplied by the number of shares that could be exercisable assuming that the selling restrictions lapsed on such termination date.

In the case of Mr.

Friedman’s 2020 stock option award, in the event Mr.

Friedman is terminated on January 30, 2021, the selling restrictions applicable to this award would lapse in full (assuming, in the case of the 2020 stock option award, that the stock price performance targets set forth in the 2020 award are met within the one year time period following such termination).

The value shown includes the value of such options held by Mr.

Friedman that he would receive if the stock price hurdles are achieved on such termination date.

(4) Continuation of medical benefits for 24 months following the termination date, subject to his payment of applicable COBRA premiums at the same rate that would have been applied had he remained an executive officer of the Company, paid for by us to the same extent that we paid for his health insurance prior to termination.

Jack Preston, Eri Chaya, DeMonty Price and David Stanchak

The information below describes and quantifies certain compensation that would have been paid to Mr.

Price and Mr.

Stanchak under the compensation protection agreements in the event of his or her termination of employment or a change in control, assuming such event was effective at January 30, 2021, the last day of our 2020 fiscal year, and based on fiscal 2020 compensation.

TERMINATION WITHOUT CAUSE OR RESIGNATION

WITH GOOD REASON

BENEFITS AND PAYMENTS

Salary continuation (1)

Health coverage total benefits (3)

(1) This amount reflects salary continuation at each such executive officer’s current salary rate paid over twelve months.

(2) Corresponds to each such executive officer’s annual bonus amount for fiscal 2020 that such executive officer would be entitled to receive if still employed on the date in 2020 that bonuses are actually paid.

(3) Continuation of medical benefits for twelve months following the termination date, subject to the payment of applicable COBRA premiums by such executive officer at the same rate that would have been applied had he or she remained an executive officer of the Company, paid for by us to the same extent that we paid for his or her health insurance prior to termination.

FORM 10-K | 175

COMPENSATION OF DIRECTORS

We compensate all non-employee members of our board of directors as follows:

ANNUAL COMPENSATION

Annual cash retainer

$135,000 annual cash (paid quarterly in advance)

Lead Independent Director

$30,000 annual cash (paid quarterly in advance) (1)

Audit committee chairman

$80,000 annual cash (paid quarterly in advance)

Audit committee member

$25,000 annual cash (paid quarterly in advance)

Compensation committee chairman

$75,000 annual cash (paid quarterly in advance)

Compensation committee member

$20,000 annual cash (paid quarterly in advance)

Nominating & corporate governance committee chairman

$25,000 annual cash (paid quarterly in advance)

Nominating & corporate governance committee member

$15,000 annual cash (paid quarterly in advance)

Board meeting attendance fees

Not Applicable

Annual equity grant of restricted stock

Aggregate value of $125,000 (2)

(1) In March 2016, upon his appointment as Lead Independent Director, Mr.

Demilio received a stock option for 20,000 shares, which vests in five equal installments over five years, subject to his continuing service as the Lead Independent Director.

In May 2020, in connection with his service as Lead Independent Director, Mr.

Demilio received a refresh stock option for 30,000 shares, which vests in five equal installments over five years, subject to his continuous service as the Lead Independent Director.

(2) Based on the average closing price of our common stock on the date of grant, determined using the closing prices for the ten consecutive trading days prior to and inclusive of the date of grant, which shares vest in full on the one-year anniversary of the date of grant.

Grants are made for service for the period between the annual meeting of shareholders for the fiscal year in which the grant was made and the annual meeting of shareholders for the following fiscal year.

Annual equity grants described above are granted on the date of the annual meeting of shareholders each year.

Friedman and Ms.

Chaya, as current officers of the Company, did not receive any compensation for board service for fiscal 2020.

All directors receive reimbursement for reasonable out-of-pocket expenses incurred in connection with meetings of our board of directors.

The following table shows the compensation earned by all non-employee directors during fiscal 2020:

STOCK AWARDS (1)

Carlos Alberini

Keith Belling

Leonard Schlesinger

(1) Reflects the aggregate grant date fair value of the awards of restricted stock made in fiscal 2020, computed in accordance with FASB ASC 718.

See Note 18— Stock-Based Compensation in our consolidated financial statements within Part II of this Annual Report on Form 10-K.

Amounts shown do not reflect compensation actually received or that may be realized in the future by the director.

176 | FORM 10-K

At January 30, 2021, the last day of our 2020 fiscal year, the aggregate number of unvested restricted stock awards and unexercised stock options held by each of our directors during fiscal 2020, other than Mr.

Friedman and Ms.

Chaya, is set forth below.

Information regarding equity awards held by Mr.

Friedman and Ms.

Chaya is set forth in the table entitled “Outstanding Equity Awards at Fiscal Year-End” in this Annual Report on Form 10-K in the section titled “Executive Compensation.”

RESTRICTED STOCK(1)

STOCK OPTIONS

Carlos Alberini

Keith Belling

Leonard Schlesinger

(1) All restricted stock awards listed above vest as to 100% of the shares on July 22, 2021.

Demilio was granted options to purchase 20,000 shares of stock in connection with his appointment as Lead Independent Director on March 9, 2016.

Such options vested pro rata over five years such that they were fully vested on March 9, 2021.

Demilio was granted options to purchase 30,000 shares of stock on May 5, 2020.

Such options vest pro rata over five years such that they will be fully vested on May 5, 2025, subject to Mr.

Demilio’s continued service as Lead Independent Director.

The information required by this item will be contained in our Proxy Statement and is incorporated herein by reference.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

SECURITY OWNERSHIP OF TOP SHAREHOLDERS & LEADERSHIP

The following table sets forth information as of March 24, 2021, regarding the beneficial ownership of our common stock by:

each person or group who is known by us to own beneficially more than 5% of our outstanding shares of our common stock;

each of our named executive officers;

each of our current directors;

and all of our current executive officers and directors as a group.

Beneficial ownership for the purposes of the following table is determined in accordance with the rules and regulations of the SEC.

Percentage of beneficial ownership is based on 20,996,817 shares of common stock outstanding as of March 24, 2021.

Except as disclosed in the footnotes to this table and subject to applicable community property laws, we believe that each shareholder identified in the table possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the shareholder.

Unless otherwise indicated in the table or footnotes below, the address for each beneficial owner is c/o RH, 15 Koch Road, Corte Madera, CA 94925.

FORM 10-K | 177

Gary Friedman (2)

FMR LLC (3) 245 Summer Street, Boston, MA 02210

Rowe Price Associates, Inc.

Pratt Street, Baltimore, MD 21202

BlackRock, Inc.

(5) 55 East 52 nd Street, New York, NY 10055

Berkshire Hathaway Inc.

(6) 3555 Farnam Street, Omaha, NE 68131

The Vanguard Group (7) 100 Vanguard Blvd., Malvern, PA 19355

D1 Capital Partners L.P.

(8) 9 West 57th Street, 36th Floor, New York, NY 10019

Miller Value Partners, LLC (9) One South Street, Suite 2550, Baltimore, MD 21202

The Goldman Sachs Group, Inc.

(10) 200 West Street, New York, NY 10282

Carlos Alberini (11)

Keith Belling (12)

Eri Chaya (13)

Mark Demilio (14)

Hilary Krane (15)

Katie Mitic (16)

Jack Preston (17)

DeMonty Price (18)

Ali Rowghani (19)

Leonard Schlesinger (20)

David Stanchak (21)

All current executive officers and directors as a group (12 persons) (22)

* Represents beneficial ownership of less than 1% of our outstanding common stock.

(1) Under the rules of the SEC, our named executive officers include our principal executive officer, principal financial officer and the next three most highly compensated executive officers.

(2) Includes 5,576,826 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of March 24, 2021.

As of March 24, 2021, 950,000 of these options are subject to selling restrictions.

(3) Based on the Schedule 13G/A filed by FMR LLC on February 8, 202 1.

(4) Based on the Schedule 13G/A filed by T.

Rowe Price Associates, Inc.

on February 16, 2021.

(5) Based on the Schedule 13G/A filed by BlackRock, Inc.

on February 1 , 202 1.

(6) Based on the Schedule 13G/A filed by Warren E.

Buffett on behalf of himself and Berkshire Hathaway Inc.

Buffett may be deemed to control), National Indemnity Company and Precision Castparts Corp., and Berkshire Hathaway Consolidated Pension Plan Master Trust, as a group, on February 16, 2021.

Buffett, Berkshire Hathaway Inc.

and GEICO Corporation are each a parent holding company.

National Indemnity Company is an insurance company, while Precision Castparts Corp.

Master Trust and Berkshire Hathaway Consolidated Pension Plan Master Trust are employee benefit plans.

(7) Based on the Schedule 13G/A filed by Vanguard Group, Inc.

on February 1 0, 202 1.

(8) Based on the Schedule 13G filed by D1 Capital Partners, L.P.

and Daniel Sundheim on February 16, 2021.

Per the Schedule 14G filed by D1 Capital Partners, L.P.

and Daniel Sundheim, Mr.

Sundheim may be deemed to beneficially own the reported securities by virtue of the fact that he indirectly controls the D1 Capital Partners, L.P.

(9) Based on the Schedule 13G/A filed by Miller Value Partners, LLC on February 14 , 2019 .

(10) Based on the Schedule 13G/A filed by The Goldman Sachs Group, Inc.

on February 12 , 2019 .

(11) Includes 456 restricted stock awards that vest on July 22, 2021.

(12) Includes 456 restricted stock awards that vest on July 22, 2021.

(13) Includes 351,600 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of March 24, 2021 and 12,500 restricted stock units that vest on May 4, 2021.

178 | FORM 10-K

(14) I ncludes 41,106 shares of common stock held by various family trusts established by Mr.

Demilio , 26,000 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of March 24, 2021 and 456 restricted stock awards that vest on July 22, 2021.

(15) Includes 456 restricted stock awards that vest on July 22, 2021.

(16) Includes 456 restricted stock awards that vest on July 22, 2021.

(17) Includes 82,750 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of March 24, 2021.

(18) Includes 179,000 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of March 24, 2021 and 6,500 restricted stock units that vest on May 4, 2021.

(19) Includes 6,953 shares of common stock held by the Rowghani Keshavarz Living Trust and 456 restricted stock awards that vest on July 22, 2021.

(20) Includes 456 restricted stock awards that vest on July 22, 2021.

(21) Includes 182,000 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of March 24, 2021.

(22) Includes 6,398,176 shares of common stock our executive officers and directors have a right to acquire upon the exercise of options that are exercisable within 60 days of March 24, 2021, 3,192 restricted stock awards that vest on July 22, 2021 and 19,000 restricted stock units that vest on May 4, 2021.

EQUITY COMPENSATION PLAN INFORMATION

The following table gives information about the Company’s common stock that may be issued upon the exercise of options, warrants and rights under all of the Company’s existing equity compensation plans as of January 30, 2021:

EQUITY COMPENSATION PLAN INFORMATION

SECURITIES TO BE

AVERAGE EXERCISE

ISSUED UPON EXERCISE

NUMBER OF SECURITIES

OF OUTSTANDING

OPTIONS, WARRANTS

AVAILABLE FOR

PLAN CATEGORY

FUTURE ISSUANCE (1)

Equity compensation plans approved by security holders

Equity compensation plans not approved by security holders

(1) Excludes securities reflected in column entitled “Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights.”

(2) Calculated without taking into account 92,250 shares underlying restricted stock units that will become issuable as those units vest, without any cash consideration or other payment required for such shares.

(3) Excludes 419,908 shares available for issuance as of February 1, 2021 pursuant to the evergreen provision of our 2012 Stock Incentive Plan.

The information required by this item will be contained in our Proxy Statement and is incorporated herein by reference.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

TIME SHARING AGREEMENT FOR CORPORATE AIRCRAFT

On March 27, 2015, Restoration Hardware, Inc., a wholly-owned subsidiary of the Company, entered into an Aircraft Time Sharing Agreement (the “Time Sharing Agreement”) with Gary Friedman, its Chief Executive Officer.

The Time Sharing Agreement governs use of any aircraft owned or leased by the Company (“Corporate Aircraft”) by Mr.

Friedman for personal trips and provides that Mr.

Friedman will lease such Corporate Aircraft and pay Restoration Hardware, Inc.

an amount equal to the aggregate actual expenses of each personal use flight based on the variable costs of the flight, with the amount of such lease payments not to exceed the maximum payment level established under Federal Aviation Administration rules.

Friedman maintains a deposit with the Company to be used towards payment of amounts due under the Time Sharing Agreement.

On March 29, 2016, the parties entered into an Amended and Restated Time Sharing Agreement on substantially the same terms and conditions as the prior agreement.

FORM 10-K | 179

REPAYMENT BY RH OF PROMISSORY NOTE ISSUED TO CARLOS ALBERINI

On December 21, 2020, we repaid in full the promissory note issued to Mr.

Alberini in 2014.

As previously reported, such promissory note was issued to Mr.

Alberini in connection with our repurchase of 238,290 shares of common stock that had previously been awarded to Mr.

Alberini, who resigned from his position as our Co-Chief Executive Officer in January 2014.

The repurchase was made pursuant to the terms of our 2012 Equity Replacement Plan, which provides that we may repurchase from our former employees any shares subject to selling restrictions under such plan.

The total repayment amount of such promissory on December 21, 2020, was approximately $16.1 million, representing the principal amount of the promissory note of approximately $15.5 million plus approximately $0.6 million of accrued interest.

DIRECTOR & OFFICER INDEMNIFICATION & LIMITATION OF LIABILITY

Our bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by the Delaware General Corporation Law (the “DGCL”), subject to certain exceptions contained in our bylaws.

In addition, our certificate of incorporation provides that our directors will not be liable for monetary damages for breach of fiduciary duty.

We entered into indemnification agreements with each of our executive officers and directors.

The indemnification agreements provide the executive officers and directors with contractual rights to indemnification, expense advancement and reimbursement, to the fullest extent permitted under the DGCL, subject to certain exceptions contained in those agreements.

There is no pending litigation or proceeding naming any of our directors or officers to which indemnification is being sought, and we are not aware of any pending litigation that may result in claims for indemnification by any director or officer.

EMPLOYMENT AGREEMENTS

We have entered into employment agreements with our executive officers.

For more information regarding these agreements, see “Employment and Other Compensation Agreements” in Item 11 (Executive Compensation) of this Part III of Form 10-K.

EQUITY GRANTS

We have made certain equity grants to members of our named executive officers, including our Chairman and Chief Executive Officer.

For more information regarding these grants, see “Compensation Discussion & Analysis” and “Compensation of Named Executive Officers” in Item 11 (Executive Compensation) of this Part III of Form 10-K.

OUR POLICY REGARDING RELATED PARTY TRANSACTIONS

We have a written policy with respect to related party transactions.

Under our related party transaction policies and procedures, a “Related Party Transaction” is any financial transaction, arrangement or relationship (or series of similar transactions, arrangements or relationships) in which we or any of our subsidiaries is a participant and in which a Related Party has or will have a direct or indirect interest, other than any transactions, arrangements or relationships in which the aggregate amount involved will not or may not be expected to exceed $120,000 in any calendar year, subject to certain exceptions.

A “Related Party” is any of our executive officers, directors or director nominees, any shareholder directly or indirectly beneficially owning in excess of 5% of our stock or securities exchangeable for our stock, or any immediate family member of any of the foregoing persons.

180 | FORM 10-K

Pursuant to our related person transaction policies and procedures, any Related Party Transaction must be reviewed by the audit committee.

In connection with its review of a Related Party Transaction, the audit committee may take into account, among other factors it deems appropriate, whether the Related Party Transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related party’s interest in the Related Party Transaction.

Leadership shall present to the audit committee the following information, to the extent relevant, with respect to actual or potential Related Party Transactions:

A general description of the transaction(s), including the material terms and conditions;

The name of the related party and the basis on which such person or entity is a related party;

The related party’s interest in the transaction(s), including the related party’s position or relationship with, or ownership of, any entity that is a party to or has an interest in the transaction(s);

The approximate dollar value of the transaction(s), and the approximate dollar value of the related party’s interest in the transaction(s) without regard to amount of profit or loss;

In the case of a lease or other transaction providing for periodic payments or installments, the aggregate amount of all periodic payments or installments expected to be made;

In the case of indebtedness, the aggregate amount of principal to be outstanding and the rate or amount of interest to be payable on such indebtedness;

Any other material information regarding the transaction(s) or the related party’s interest in the transaction(s).

We are not aware of any related party transaction since the beginning of the 2020 fiscal year required to be reported under our related party transaction policies and procedures or applicable SEC rules for which our policies and procedures did not require review or for which such policies and procedures were not followed.

BOARD INDEPENDENCE

In accordance with our Corporate Governance Guidelines, the board of directors affirmatively determines that each independent director has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company) and meets the standards for independence as defined by applicable law and the rules of the NYSE.

Our board of directors undertook its annual review of the independence of our directors and considered whether any director has a material relationship with us that could compromise that director’s ability to exercise independent judgment in carrying out that director’s responsibilities.

Our board of directors affirmatively determined that each of Mr.

Alberini, Mr.

Rowghani and Dr.

Schlesinger is an “independent director,” as defined under the applicable rules of the NYSE and the SEC, and that the other members of the board are not independent.

The board’s independence determination was based on information provided by our current directors.

In particular, in making its determination that Mr.

Alberini is an independent director, the board of directors considered that under the rules of the NYSE and the SEC, Mr.

Alberini could be deemed independent for membership on the board of directors after February 2017 given that his prior service as the Company’s Co-Chief Executive Officer and Chief Executive Officer had occurred more than three years prior to such date.

In addition, after February 2019, Mr.

Alberini also meets the enhanced independence standard for a director who has not served as an employee of the Company for more than five years.

In reaching its conclusions regarding the independence of Mr.

Alberini, the board of directors further considered Mr.

Alberini’s time away from the management of RH, the fact that he had served as the chief executive officer of Lucky Brands, and the fact that he subsequently left Lucky Brands and is now serving as the chief executive officer of Guess?, Inc., a publicly traded company, listed on the NYSE, along with other prior and existing relationships between the Company and Mr.

Further, the board of directors determined that each member of the board of directors’ audit committee, compensation committee and nominating and corporate governance committee satisfies independence standards applicable to each committee on which he or she serves.

Although the board of directors determined that Mr.

Alberini is an independent director under the applicable rules of the NYSE and the SEC, the board of directors has elected not to appoint Mr.

Alberini to any of the committees of the Company that are required under applicable rules of the NYSE or SEC to be composed entirely of independent directors.

FORM 10-K | 181

The information required by this item will be contained in our Proxy Statement and is incorporated herein by reference.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S FEES

We regularly review the services and fees from our independent registered public accounting firm, PwC.

These services and fees are also reviewed with the audit committee annually.

In accordance with standard policy, PwC periodically rotates the individuals who are responsible for the Company’s audit.

In addition to performing the audit of the Company’s consolidated financial statements, PwC provided various other services during fiscal 2020 and fiscal 2019.

The Company’s audit committee has determined that PwC’s provision of these services, which are described below, does not impair PwC’s independence with respect to the Company.

The aggregate fees billed for fiscal 2020 and fiscal 2019 for each of the following categories of services are as follows:

FEES BILLED TO THE COMPANY

Audit fees (1)

Audit related fees (2)

(1) Includes fees for audit services principally related to the year-end examination and the quarterly reviews of the Company’s consolidated financial statements, consultation on matters that arise during a review or audit, review of SEC filings, and audit procedures related to leadership’s implementation of new accounting systems.

(2) Includes fees that are for assurance and related services other than those included in audit fees above.

In fiscal 2019, these services were primarily related to debt offering and SEC comment letter services.

(3) Includes fees for tax compliance and advice.

POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The audit committee’s policy is to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm.

These services may include audit services, audit-related services, tax services and other services.

The independent registered public accounting firm and leadership are required to periodically report to the audit committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, and the fees for the services performed to date.

All of the services relating to the fees described in the table above were approved by the audit committee in accordance with the audit committee’s pre-approval policy.

The information required by this item will be contained in our Proxy Statement and is incorporated herein by reference.

FORM 10-K | 123

4 unchanged sentences

Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements

Consolidated Balance Sheets as of January 30, 2021 and February 1, 2020

Consolidated Statements of Income for the fiscal years ended January 30, 2021, February 1, 2020 and February 2, 2019

Consolidated Statements of Comprehensive Income for the fiscal years ended January 30, 2021, February 1, 2020 and February 2, 2019

Consolidated Statements of Stockholders’ Equity (Deficit) for the fiscal years ended January 30, 2021, February 1, 2020 and February 2, 2019

Consolidated Statements of Cash Flows for the fiscal years ended January 30, 2021, February 1, 2020 and February 2, 2019

Consolidated Balance Sheets as of January 29, 2022 and January 30, 2021

Consolidated Statements of Income for the fiscal years ended January 29, 2022, January 30, 2021 and February 1, 2020

Consolidated Statements of Comprehensive Income for the fiscal years ended January 29, 2022, January 30, 2021 and February 1, 2020

Consolidated Statements of Stockholders’ Equity (Deficit) for the fiscal years ended January 29, 2022, January 30, 2021 and February 1, 2020

Consolidated Statements of Cash Flows for the fiscal years ended January 29, 2022, January 30, 2021 and February 1, 2020

Notes to the Consolidated Financial Statements

6 unchanged sentences

EXHIBIT INDEX

INCORPORATED BY REFERENCE

39 unchanged sentences

June 19, 2018

184 | FORM 10-K

EXHIBIT INDEX

FORM 10-K | 125

INCORPORATED BY REFERENCE

12 unchanged sentences

March 30, 2016

Eleventh Amended and Restated Credit Agreement dated as of June 28, 2017 among Restoration Hardware, Inc., as lead borrower, various other subsidiaries of RH named therein as borrowers, the guarantors party thereto, the lenders party thereto and Bank of America, N.A.

as administrative agent and collateral agent.

First Amendment to Eleventh Amended and Restated Credit Agreement, dated June 12, 2018, among Restoration Hardware, Inc., as lead borrower, various other subsidiaries of RH named therein as borrowers, the guarantors party thereto, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent.

June 12, 2018

Consent and Second Amendment to Eleventh Amended and Restated Credit Agreement, dated November 23, 2018, among Restoration Hardware, Inc., as lead borrower, various other subsidiaries of RH named therein as borrowers, the guarantors party thereto, the lenders party thereto and Bank of America, N.A.

as administrative agent and collateral agent.

November 23, 2018

Third Amendment to Eleventh Amended and Restated Credit Agreement, dated April 4, 2019, among Restoration Hardware, Inc., as lead borrower, various other subsidiaries of RH named therein as borrowers, the guarantors party thereto, the lenders party thereto and Bank of America, N.A.

as administrative agent and collateral agent.

April 5, 2019

EXHIBIT INDEX

FORM 10-K | 185

INCORPORATED BY REFERENCE

EXHIBIT DESCRIPTION

Credit Agreement, dated as of July 7, 2017, among Restoration Hardware, Inc., as lead borrower, various other subsidiaries of RH named therein as borrowers, the guarantors party thereto, the lenders party thereto and Wilmington Trust, National Association as administrative agent and collateral agent.

5 unchanged sentences

April 16, 2019

Twelfth Amended and Restated Credit Agreement, dated as of July 29, 2021, by and among Restoration Hardware, Inc., as lead borrower, various other subsidiaries of RH named therein as borrowers, the guarantors party thereto, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent .

July 30, 2021

Term Loan Credit Agreement dated as of October 20, 2021, by and among Restoration Hardware, Inc.

as the borrower, the lenders party thereto and Bank of America, N.A.

as administrative agent and collateral agent.

October 25, 2021

126 | FORM 10-K

EXHIBIT INDEX

INCORPORATED BY REFERENCE

EXHIBIT DESCRIPTION

Notice of Stock Option Award and Stock Option Award Agreement by and between RH and Gary Friedman dated as of October 18, 2020.

14 unchanged sentences

Inline XBRL Taxonomy Extension Label Linkbase Document

186 | FORM 10-K

EXHIBIT INDEX

INCORPORATED BY REFERENCE

EXHIBIT DESCRIPTION

Inline XBRL Taxonomy Extension Presentation Linkbase Document

19 unchanged sentences

(Principal Executive Officer)

/s/ Glenda Citragno

/s/ Christina Hargarten

/s/ Carlos Alberini

Glenda Citragno

Christina Hargarten

Carlos Alberini

SVP, Chief Accounting Officer

Chief Accounting Officer

(Principal Accounting Officer)

10 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures