Pottery Barn 2007 Annual Report Download - page 109

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Must eligible employees participate in the exchange program?
No, eligible employees will not be required to participate in the exchange program. Participation in the exchange
program is voluntary.
How long will eligible employees have to decide whether to participate in the exchange program?
Eligible employees will have an election period of at least 20 business days from the start of the exchange
program in which to determine whether they wish to participate.
How will restricted stock units granted in connection with the exchange program vest?
Restricted stock units issued in the exchange program will vest on the basis of the participant’s continued
employment with us. The vesting schedule of the restricted stock units will be determined on a grant-by-grant
basis, based on the vesting schedule of the eligible awards that the restricted stock units replace. None of the
restricted stock units will be vested on the date of grant. The restricted stock units will be scheduled to vest in
equal annual installments over the remaining vesting schedule (rounded up to the next full year) of the exchanged
award. No restricted stock units will be scheduled to vest earlier than one year from their date of grant, and no
restricted stock units will be scheduled to vest earlier than the vesting dates of the exchanged awards. The annual
vesting date will be the anniversary of the grant date of the restricted stock units.
What is an example of the new vesting schedule?
For example, assume that an eligible participant elects to exchange the following eligible award:
Type of Award Number of Shares Subject to Award Vesting Schedule
SSAR 480 96 Shares on May 27, 2006
96 Shares on May 27, 2007
96 Shares on May 27, 2008
96 Shares on May 27, 2009
96 Shares on May 27, 2010
Assume that on January 8, 2009 (approximately 20 business days after the start of the exchange program), the
participant surrenders the underwater SSAR and receives the following replacement award:
Type of Award Number of Shares Subject to Award Vesting Schedule
RSU 100 0 Shares on January 8, 2009 (the grant date)
50 Shares on January 8, 2010
50 Shares on January 8, 2011
The surrendered SSAR was scheduled to fully vest on May 27, 2010, which is 16 months from the January 8,
2009 replacement restricted stock unit grant date in this example. In order to determine the vesting schedule for
the replacement restricted stock units, the remaining months in the surrendered SSAR’s vesting schedule are
rounded up to the nearest full year. In this case, that is two years. None of the restricted stock units will be vested
on the date of grant. Fifty percent of the restricted stock units vest on the first anniversary of the replacement
restricted stock unit grant date and the remaining 50% vest one year later, subject to the participant remaining
employed with us through the respective vesting date.
What terms and conditions will apply to the restricted stock units?
Restricted stock units issued in the exchange program will be granted pursuant to the 2001 Long-Term Incentive
Plan. Each restricted stock unit represents an unfunded right to receive one share of our common stock on a fixed
date in the future, which generally is the date on which the restricted stock unit vests. A participant is not
required to pay any monetary consideration to receive shares of our common stock upon settlement of his or her
restricted stock units. However, under U.S. federal tax law currently in effect, employees generally will
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