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Restoration Hardware in Final Proxy Push

With the recent court challenge to the planned Restoration Hardware buyout agreement with Catterton Partners, the retailer has presented recommendations by three independent proxy advisors to support their plan.

Advisor firms RiskMetrics Group (formerly Institutional Shareholder Services or "ISS") Glass Lewis, and Proxy Governance have each issued positive evaluations, according to Restoration Hardware.

In a press release, RH quoted RiskMetrics as saying, in part, "We believe that the merger agreement warrants shareholder support." RH quoted Proxy Governance as declaring, "We believe it unlikely a more favorable alternative would become available to shareholders if the proposed transaction were rejected."

RH director Raymond Hemmig, who chairs the board's compensation committee as well as its independent committee, and has been a director since 1994, said the board was pleased that the separate advisor firms "support our transaction and recognize the independent committee's active role in the process."

The merger-acquisition matter is to be decided by a vote at the special meeting of shareholders set for June 12. One day prior, a hearing is to be held in Marin County (Calif.) superior court in which a dissident group of shareholders will argue to block the proposed buyout. (A similar action by another dissident shareholder was filed in Delaware.)

RH also filed an amended 10-K with the Securities and Exchange Commission that details executive compensation. Part of the form documents "the consideration expected to be received by each of our directors and executive officers in connection with the merger."

About $15.5 million in cash will be received by the 12 executives named, with the largest amounts going to Gary Friedman (chairman and ceo), $6.994 million; Glenn Krevlin (board member since 2001), $6.231 million; and Ray Hemmig, $1.122 million. Not included: the value of any stock in the new parent company destined for the execs.

The value of the proposed Catterton deal, pegged at $4.50 per share, is about $175 million, mostly in cash.

The deal features a $25 million subordinated loan by the new parent firm that will convert to equity upon the closing.

The original Catterton move was countered by an offer from Sears Holdings, which first expressed interest in acquiring Restoration Hardware in June 2007; RH management opted for the revised Catterton bid on Jan. 24, 2008.

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