Pottery Barn 2005 Annual Report Download - page 99

Finally, the amended and restated plan provides that the performance goals that the administrative committee
may apply to an award may apply to either the company, one of our business units, a product line or specific
markets. The administrative committee’s evaluation of performance goals shall be appropriately adjusted to
exclude any extraordinary non-recurring items or the effect of any changes in accounting principles affecting our
(or the applicable business unit’s) reported results.
The changes will help us to achieve our goal of attracting, retaining and motivating our talented employees. The
amended and restated plan will also help us to increase shareholder value by giving us the expanded ability to
link some of the vesting of awards to our performance and, as noted above, may help us avoid adverse
accounting treatment that could be imposed with respect to awards that may be paid in cash. We should also be
able to receive a federal income tax deduction for certain compensation paid under the plan.
How many shares are available for issuance under the amended and restated plan?
The plan initially allowed for the grant of up to 5,000,000 shares of our common stock and an additional
3,500,000 shares were authorized in May 2004, for a total of 8,500,000 shares. As of March 24, 2006, 5,878,846
of these reserved shares were subject to outstanding options and 1,643,315 of these reserved shares remained
available for grant. The amended and restated plan will increase the number of shares reserved for grant by
6,000,000 shares, plus any shares that remain available for issuance in our 1993 Stock Option Plan and our 2000
Nonqualified Stock Option Plan as of March 15, 2006, up to a maximum of 705,743 shares, plus any shares
subject to outstanding options under these plans that subsequently expire unexercised, up to a maximum of
754,160 shares. No future awards will be granted under the 1993 Stock Option Plan or the 2000 Nonqualified
Stock Option Plan.
The amended and restated plan no longer will provide that no more than 30% of the shares available under the
plan may be issued as restricted stock or deferred stock awards. Instead, the shares now 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, restricted stock unit or deferred 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. Currently, issuances under these
awards reduce the pool of shares available for future issuance by only one share for each share subject to the
award. Shares subject to stock options and stock appreciation rights reduce the pool of shares available for future
grant by one share for every share subject to the award. When a stock appreciation right is exercised, all shares
subject to the exercised portion of the stock appreciation right (and not just the number of shares paid out under
the award) will reduce the reserve of shares available for future issuance under the plan on a one to one basis.
Shares used to pay the exercise price of a stock option or used to satisfy tax withholding obligations shall not
become available for future grant under the plan. Any payout of dividend equivalents will not reduce the number
of shares available for issuance under the plan, because such awards are payable in cash. Similarly, the forfeiture
of dividend equivalents will not increase the number of shares available for issuance under the plan.
SUMMARY OF THE AMENDED AND RESTATED PLAN
The following questions and answers provide a summary of the principal features of the amended and restated
plan and its operation. This summary is qualified in its entirety by the 2001 Long-Term Incentive Plan attached
hereto as Exhibit A.
What types of awards are available under the plan?
We may grant the following types of incentive awards under the plan: (i) stock options; (ii) restricted stock;
(iii) restricted stock units; (iv) stock appreciation rights that are settled in shares; and (v) deferred stock awards.
Who administers the plan?
A committee of at least two non-employee members of our Board administers the plan. To make grants to our
officers or directors, the members of the committee must qualify as “non-employee directors” under Rule 16b-3
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