Pottery Barn 2005 Annual Report Download - page 136

(c) Impact of Transactions. Subject to the provisions of Section 17, if, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company, reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other similar transaction, the outstanding shares
of Stock are increased or decreased or are exchanged for a different number or kind of shares or other securities
of the Company, or additional shares or new or different shares or other securities of the Company or other
non-cash assets are distributed with respect to such shares of Stock or other securities, the Administrator may
make an appropriate or proportionate adjustment in (i) the maximum number of shares reserved for issuance
under the Plan, (ii) the number of Awards that can be granted to any one individual Participant in any calendar
year , (iii) the number and kind of shares or other securities subject to any then outstanding Awards under the
Plan, and (iv) the price for each share subject to any then outstanding Awards under the Plan, without changing
the aggregate exercise price. The adjustment by the Administrator shall be final, binding and conclusive. No
fractional shares of Stock shall be issued under the Plan resulting from any such adjustment.
(d) Substitute Awards. The Administrator may grant Awards under the Plan in substitution for stock and
stock based awards held by employees of another corporation who become employees of the Company or a
Subsidiary as the result of a merger or consolidation of the employing corporation with the Company or a
Subsidiary or the acquisition by the Company or a Subsidiary of property or stock of the employing corporation.
The Administrator may direct that the substitute Awards be granted with such terms and conditions as the
Administrator considers appropriate in the circumstances.
SECTION 4.
ELIGIBILITY
Those persons eligible to participate in the Plan shall be officers, employees and Non-employee Directors of
the Company, its Parent and any Subsidiaries. Selection of Participants shall be made from time to time by the
Administrator, in its sole discretion.
SECTION 5.
CODE SECTION 162(m) LIMITATIONS
(a) Stock Options and SARs. A Participant can receive no more than one million shares of Stock in the
aggregate covered by Stock Options or SARs during any one calendar year, subject to adjustment under
Section 3(c).
(b) Restricted Stock, Restricted Stock Units and Deferred Stock Awards. A Participant can receive grants
covering no more than four hundred thousand shares of Stock in the aggregate covered by Restricted Stock or
Restricted Stock Units during any one calendar year, subject to adjustment under Section 3(c).
(c) Section 162(m) Performance Restrictions. For purposes of qualifying grants of Restricted Stock or
Restricted Stock Units as “performance-based compensation” under Section 162(m) of the Code, the
Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The
Performance Goals shall be set by the Administrator on or before the latest date permissible to enable the
Restricted Stock or Restricted Stock Units to qualify as “performance-based compensation” under
Section 162(m) of the Code. In granting Restricted Stock or Restricted Stock Units which are intended to qualify
under Section 162(m) of the Code, the Administrator shall follow any procedures determined by it from time to
time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code (e.g.,
in determining the Performance Goals).
(d) Changes in Capitalization. The numerical limitations in Sections 5(a) and (b) shall be adjusted
proportionately in connection with any change in the Company’s capitalization as described in Section 3(c).
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