nature of the interest of the applicable related person,
(iii) whether the transaction may involve a conflict of
interest, (iv) whether the transaction involves the provision
of goods or services to the Company that are readily available from
unaffiliated third parties upon better terms, and (v) whether
there are business reasons to enter into the transaction.
The Company and its subsidiaries periodically enter into
transactions with other entities or individuals that are considered
related parties, including certain transactions with entities owned
by, affiliated with, or for the respective benefit of Paul
Marciano, who is an executive and member of the Board of the
Company, and Maurice Marciano, who is also a member of the Board,
and certain of their children (the “Marciano Entities”).
The Company leases warehouse and administrative facilities,
including the Company’s corporate headquarters in Los Angeles,
California, from partnerships affiliated with the Marciano Entities
and certain of their affiliates. There were four of these
leases in effect as of January 30, 2021 with expiration or
option exercise dates ranging from calendar years 2021 to 2025.
On October 7, 2020, the Company and the related party landlord
entered into amendments to the leases for the Company’s corporate
headquarters located in Los Angeles, California (the “Corporate
Headquarters”) and a parking lot adjacent to the Corporate
Headquarters (together, the “Lease Amendments”). The Lease
Amendments provide for: (1) a five-year lease
renewal term ending September 30, 2025, with an
additional five-year renewal option to September 30,
2030 at the Company’s sole discretion; (2) triple net lease
terms with an aggregate annual rent in the amount of approximately
$7.4 million for the first lease year of the renewal term,
subject to an annual 2.5% increase each year thereafter;
(3) 100% rent abatement for the first three
months of the renewal term for the Corporate Headquarters; and
(4) a Company right to reduce the amount of rented space in
the Corporate Headquarters by up to approximately 25% (and
reduce its rent on a pro-rata basis), subject to certain
specified conditions, including a six month notice period
and limits on the specific space that may be reduced. All other
material terms in the previously existing leases for the Corporate
Headquarters and the parking lot adjacent to the Corporate
Headquarters remain the same.
During the fourth quarter of fiscal 2021, the Company agreed with
the related party landlord to receive a two-month rent abatement
related to COVID-19 relief
on its lease for its warehouse and administrative facilities
located in Montreal, Quebec. The monthly lease payment is
CAD$49,000 (US$37,000). All other terms of the existing lease
remain in full force and effect.
The Company is currently in discussions with the related party
landlord for extension of the lease for the office location in
Paris, and in the meantime, this lease is continuing on a
month-to-month basis under the
existing lease terms.
Aggregate lease costs recorded under these four related
party leases for fiscal 2021, fiscal 2020 and fiscal 2019 were
$6.3 million, $5.1 million and $5.0 million,
respectively. The Company believes that the terms of the related
party leases have not been significantly affected by the fact that
the Company and the lessors are related.
Employment of Family Member
Nicolai Marciano, the son of Paul Marciano, is employed by the
Company as Director of Specialty Marketing & Brand
Partnerships. For fiscal 2021, Mr. Nicolai Marciano received
$177,529 in base salary and a $50,000 annual incentive award (paid
in accordance with the Company’s Bonus Plan during the first
quarter of fiscal 2022 with respect to fiscal 2021 performance).
Mr. Nicolai Marciano was entitled to participate during fiscal
2021 in the retirement, health and welfare benefit plans generally
available to other salaried employees of the Company. In addition,
the Company granted Mr. Nicolai Marciano, on
April 13, 2020, 7,200 shares of restricted Company Common
Stock that is scheduled to vest, subject to his continued
employment through the applicable vesting date, in equal 25%
installments on January 5 of 2021, 2022, 2023 and 2024.