Pottery Barn 2011 Annual Report Download - page 128

Conduct (including its provisions relating to confidential information and non-solicitation), such executive not
accepting employment with one of our competitors, and such executive’s continued non-disparagement of us. In
the event that the severance payments and other benefits payable to an executive under a retention agreement
constitute a “parachute payment” under Section 280G of the U.S. tax code and would be subject to the applicable
excise tax, then the executive’s severance payments and other benefits will be either (i) delivered in full or
(ii) delivered to a lesser extent such that no portion of the benefits are subject to the excise tax, whichever results
in the receipt by such executive on an after-tax basis of the greatest amount of benefits.
For purposes of the management retention agreement, “cause” means: (i) an act of dishonesty made by the
executive in connection with his or her responsibilities as an employee; (ii) the executive’s conviction of or plea
of nolo contendere to, a felony or any crime involving fraud, embezzlement or any other act of moral turpitude;
(iii) the executive’s gross misconduct; (iv) the executive’s unauthorized use or disclosure of any proprietary
information or trade secrets of the company or any other party to whom the executive owes an obligation of
nondisclosure as a result of the executive’s relationship with the company; (v) the executive’s willful breach of
any obligations under any written agreement or covenant with the company or breach of the company’s
Corporate Code of Conduct; or (vi) the executive’s continued failure to perform his or her employment duties
after he or she has received a written demand of performance which specifically sets forth the factual basis for
the belief that the executive has not substantially performed his or her duties and has failed to cure such
non-performance within 30 days after receiving such notice.
For purposes of the management retention agreement, “change of control” means the occurrence of any of the
following events: (i) a change in the ownership of the company which occurs on the date that any one person, or
more than one person acting as a group, (“Person”) acquires ownership of the stock of the company that, together
with the stock held by such Person, constitutes more than 50% of the total voting power of the stock of the
company; provided, however, that for purposes of this subsection (i), the acquisition of additional stock by any
one Person, who is considered to own more than 50% of the total voting power of the stock of the company will
not be considered a change of control; or (ii) a change in the effective control of the company which occurs on
the date that a majority of members of the Board of Directors is replaced during any 12-month period by
directors whose appointment or election is not endorsed by a majority of the members of the Board of Directors
prior to the date of the appointment or election; provided, however, that for purposes of this subsection (ii), if any
Person is considered to effectively control the company, the acquisition of additional control of the company by
the same Person will not be considered a change of control; or (iii) a change in the ownership of a substantial
portion of the company’s assets which occurs on the date that any Person acquires (or has acquired during the
12-month period ending on the date of the most recent acquisition by such person or persons) assets from the
company that have a total gross fair market value equal to or more than 50% of the total gross fair market value
of all of the assets of the company immediately prior to such acquisition or acquisitions; provided, however, that
for purposes of this subsection (iii), the following will not constitute a change in the ownership of a substantial
portion of the company’s assets: (A) a transfer to an entity that is controlled by the company’s stockholders
immediately after the transfer, or (B) a transfer of assets by the company to: (1) a stockholder of the company
(immediately before the asset transfer) in exchange for or with respect to the company’s stock, (2) an entity, 50%
or more of the total value or voting power of which is owned, directly or indirectly, by the company, (3) a
Person, that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding
stock of the company, or (4) an entity, at least 50% of the total value or voting power of which is owned, directly
or indirectly, by a Person. For purposes of this subsection (iii), gross fair market value means the value of the
assets of the company, or the value of the assets being disposed of, determined without regard to any liabilities
associated with such assets. For purposes of this definition, persons will be considered to be acting as a group if
they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or
similar business transaction with the company. Notwithstanding the foregoing, a transaction shall not be deemed
a change of control unless the transaction qualifies as a change in the ownership of the company, change in the
effective control of the company or a change in the ownership of a substantial portion of the company’s assets,
each within the meaning of Section 409A.
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