Pottery Barn 2010 Annual Report Download - page 131

What are the limits on the committee’s ability to vest and accelerate awards?
The committee generally has the sole discretion to determine and/or modify the vesting provisions of each award.
However, awards of restricted stock, restricted stock units and deferred stock awards (together, these are called
“full value awards”) typically are subject to certain “minimum vesting requirements” under the plan. The
minimum vesting requirements generally require that grants of full value 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 (or, for
awards granted to non-employee directors, the earlier of one year from the date of grant or the day before the
next regularly scheduled annual meeting).
Certain “Vesting Exceptions” to the minimum vesting requirements apply, however:
The committee may grant full value awards resulting in the issuance of shares of up to 5% of the maximum
aggregate number of shares of stock authorized for issuance under the plan (the “5% Limit”) to employees or
non-employee directors without respect to the minimum vesting requirements in the plan. Also, awards granted
to non-employee directors pursuant to a formula approved by the Board do not count towards the 5% Limit and
are not subject to the minimum vesting requirements.
In addition, the committee’s ability to discretionarily accelerate the vesting of full value awards, and the vesting
in full of options and stock appreciation rights, is subject to the 5% Limit, except that the committee may
discretionarily accelerate awards without regard to the 5% Limit: (i) in connection with a merger or similar
transaction under the plan (including an additional or subsequent event, such as termination following such a
transaction); (ii) a participant’s death or disability; or (iii) a participant’s retirement. The committee may
accelerate the vesting of full value awards such that the minimum vesting requirements still must be met, without
such vesting acceleration counting toward the 5% Limit.
The 5% Limit is considered one aggregate limit applying to the discretionary vesting acceleration of awards to
the granting of full value awards to employees or non-employee directors without respect to the plan’s minimum
vesting requirements.
What awards may non-employee directors receive?
Non-employee directors are eligible for any of the awards available under the plan. In addition, our
non-employee directors will receive annual awards under the non-employee director award program portion of
the plan in connection with their service on our Board. The plan provides that such annual awards may be of any
type available under the plan as determined by the committee.
Pursuant to the non-employee director award program portion of the plan and by subsequent Board resolution,
each new non-employee director will receive such awards as the committee determines, upon his or her election
to the Board and annually thereafter on the date of our Annual Meeting, provided that he or she has then served
as a non-employee director for at least three months. It is expected that in fiscal 2011, these awards will consist
of restricted stock units; however, the fiscal 2011 grants to our non-employee directors have not yet been
determined. Subject to the terms of the plan, the committee determines the other terms and conditions applicable
to the awards. Please see “How are the directors compensated?” on page 8 for a description of awards granted to
our non-employee directors for fiscal 2010.
What is a stock option?
A stock option is the right to acquire shares of our common stock at a fixed exercise price for a fixed period of
time. Under the plan, the committee may grant nonqualified stock options and incentive stock options. Our
practice has been to grant nonqualified stock options under the plan. The committee will determine the number of
shares covered by each option, but the committee may not grant more than an aggregate of 1,000,000 shares
covered by options or stock appreciation rights to any one person during any calendar year. The shares available
for issuance under the plan will be reduced by one share for every share subject to an option granted under the
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