Pottery Barn 2005 Annual Report Download - page 101

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option granted to a 10% shareholder, the exercise price cannot be less than 110% of the fair market value on the
date of grant of the shares covered by the option.
When can an option be exercised?
An option granted under the plan generally cannot be exercised until it vests. The committee establishes the
vesting schedule of each option at the time of grant. Options granted under the plan expire at the times
established by the committee, but not later than 10 years after the grant date (and not later than 5 years after the
grant date in the case of an incentive stock option granted to an optionee who is a 10% shareholder). Except as
the committee may otherwise provide, stock options generally may be exercised, to the extent vested, for 90 days
after the optionee ceases to provide services to us for any reason other than death or disability. If the optionee
ceases to provide services to us as a result of his or her death or disability, or the optionee dies within 30 days
after the optionee ceases to be an employee, the option generally may be exercised, to the extent vested, for 180
days after the optionee’s death or date of termination as a result of disability.
How can optionees pay us for the exercise price of an option?
The exercise price of each option granted under the plan may be paid by any of the methods included in a
participant’s option agreement. Such methods may include payment by (i) cash, (ii) certified or bank check,
(iii) through the tender of shares that are already owned by the participant, (iv) through a cashless exercise, or
(v) through a net exercise. The participant must pay any taxes we are required to withhold at the time of exercise.
If permitted by the committee, such taxes may be paid through the withholding of shares issued as a result of an
award’s exercise.
What is restricted stock?
Restricted stock awards are shares of our common stock granted to participants subject to vesting in accordance
with the terms and conditions established by the committee. Awards of restricted stock may be granted at no cost
to the participant. The committee will determine the number of shares of restricted stock granted to any
participant, but no participant may be granted more than an aggregate of 400,000 shares covered by awards of
restricted stock, restricted stock units or deferred stock awards during any calendar year.
How does restricted stock vest?
Vesting of restricted stock awards may be based on the achievement of performance goals established by the
committee or on continued service to us. The shares available for issuance under the plan will be reduced by one
and nine-tenths shares for every one share issued subject to a restricted stock award that is granted with a
purchase or exercise price of less than 100% of fair market value after the date of this amendment and
restatement, and if such an award is forfeited, canceled or otherwise terminated without vesting, the reserve of
shares available for future awards will be replenished as to one and nine-tenths shares for every one share subject
to the forfeited, canceled or terminated portion of the award.
The committee determines the vesting schedule of restricted stock awards. However, the amended and restated
plan requires that future grants of restricted stock awards will vest in full no earlier than three years from the
award grant date if the award will vest based solely on continued service to us, and no earlier than one year from
the award grant date if the award will not vest based solely on continued service to us. Subject to the minimum
vesting requirements, the committee generally has the authority to accelerate the vesting of any award. However,
regardless of the minimum vesting requirement, the vesting of any award can be accelerated as a result of a
merger or similar corporate event.
What is a restricted stock unit?
Restricted stock units are essentially the same as awards of restricted stock, except that instead of the shares
being issued immediately and then being subject to forfeit or repurchase until vested, the shares or other
payments for the award are not actually issued unless and until the award vests. Awards of restricted stock units
may be granted at no cost to the participant. The committee will determine the number of restricted stock units
13
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