Pottery Barn 2010 Annual Report Download - page 134

What is a dividend equivalent right?
Dividend equivalent rights are credits, payable in cash and granted at the discretion of the committee, to the
account of a participant. The credit is payable in an amount equal to the cash dividends paid on one share for
each share represented by an award held by the participant.
What is a deferred stock award?
A deferred stock award is the right to receive shares of common stock at the end of a specified deferral period
determined by the committee or elected by the participant pursuant to rules set by the committee. The committee
may determine that the right to the award vests based on continued service to us and/or on the achievement of
specific performance goals established by the committee. The committee determines the vesting schedule of
deferred stock awards, subject to the minimum vesting requirements and the permitted Vesting Exceptions
described above. Subject to these requirements, the committee generally has the authority to accelerate the
vesting of any award.
The participant may defer receipt of the shares beyond vesting (for instance, until termination of employment or
other specified time). Deferred stock awards may allow participants to defer income tax until the receipt of the
shares. Refer to the questions and answers below dealing with tax consequences of deferred stock awards.
The shares available for issuance under the plan will be reduced by one and nine-tenths shares for every share
issued subject to a deferred stock award granted on or after the date of shareholder approval of the 2006
amendment and restatement, and if the award is forfeited, canceled or otherwise terminated, the reserve of shares
available for future awards will be replenished by one and nine-tenths shares for every one share subject to the
forfeited, canceled or terminated portion of the award.
The committee will determine the number of shares of deferred stock awards granted to any participant, but no
participant may be granted more than an aggregate of 400,000 shares covered by awards of deferred stock
awards, restricted stock or restricted stock units during any calendar year.
May a participant elect to further defer shares covered by a deferred stock award?
If the committee permits it, a participant may elect to further defer receipt of the shares payable under a deferred
stock award for an additional specified period or until a specified event, if the election is made in accordance
with the requirements of Section 409A of the Internal Revenue Code.
What are performance goals?
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 set performance goals applicable to a participant with respect to an
award. If the committee intends for an award to qualify as performance-based compensation, then, at the
committee’s discretion, one or more of the following performance goals may apply: (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 either the company 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 on an
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