Pottery Barn 2009 Annual Report Download - page 124

What are performance goals?
Performance goals are goals that require the achievement of a quantifiable metric over an established period of time.
We have designed the plan so that it permits us to pay compensation that qualifies as performance-based under
Section 162(m). This allows the committee to make performance goals applicable to a participant with respect to an
award. At the committee’s discretion, one or more of the following performance goals may apply to an award:
(i) revenue (on an absolute basis or adjusted for currency effects); (ii) cash flow (including operating cash flow or
free cash flow); (iii) cash position; (iv) earnings (which may include earnings before interest and taxes, earnings
before taxes, net earnings or earnings before interest, taxes, depreciation and amortization); (v) earnings per share;
(vi) gross margin; (vii) net income; (viii) operating expenses or operating expenses as a percentage of revenue;
(ix) operating income or net operating income; (x) return on assets or net assets; (xi) return on equity; (xii) return on
sales; (xiii) total shareholder return; (xiv) stock price; (xv) growth in shareholder value relative to the moving
average of the S&P 500 Index, or another index; (xvi) return on capital; (xvii) return on investment;
(xviii) economic value added; (xix) operating margin; (xx) market share; (xxi) overhead or other expense reduction;
(xxii) credit rating; (xxiii) objective customer indicators; (xxiv) improvements in productivity; (xxv) attainment of
objective operating goals; (xxvi) objective employee metrics; (xxvii) return ratios; (xxviii) profit; (xxix) objective
qualitative milestones; or (xxx) other objective financial or other metrics relating to the progress of the company or
to a subsidiary, division or department thereof.
These performance goals may apply to company performance as a whole or, except with respect to shareholder
return metrics, to a region, business unit, affiliate or business segment. The goals may be measured either on an
absolute basis, a per-share basis or relative to a pre-established target, to a previous period’s results or to a
designated comparison group, in each case as specified by the committee. Performance goals may be different
from participant to participant, within or between award periods and from award to award.
Financial performance measures may be determined in accordance with United States Generally Accepted
Accounting Principles (“GAAP”), in accordance with accounting standards established by the International
Accounting Standards Board (“IASB Standards”) or may be adjusted by our committee when established to
exclude or include any items otherwise includable or excludable, respectively, under GAAP or under IASB
Standards.
How are awards under the plan paid out?
Before awards are paid under the plan, the committee must certify that the performance goal for the award has
been satisfied. Awards under the plan are paid in cash, reasonably promptly following the conclusion of the
award period and the committee’s certification that the applicable performance goals have been satisfied. In no
event are the awards paid later than two and one-half months after the conclusion of the fiscal year of the
company in which the award period ends.
What happens if a participant terminates employment before an award is paid?
A participant in the plan is required to be employed through the last day of an award period. A participant may not
receive an award if he or she is not employed with the company on the last day of an award period, unless the
committee specified at the time of grant that the award would be paid in full or on a prorated basis if, before the end
of such award period, the participant dies, becomes disabled, or in the event there is a change in control of the
company (or upon certain terminations of employment within a specified period following a change in control). If
the award is paid in such an event, it will not constitute performance-based compensation for purposes of
Section 162(m). In the event an employee terminates their employment after the last day of an award period but
before the date that an award is paid, the participant will be eligible to receive their award.
How can we amend or terminate the plan?
The Board generally may amend, suspend or terminate the plan at any time and for any reason. Amendments will
be contingent on shareholder approval in the event that the amendment raises the maximum award limit under
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