Pottery Barn 2011 Annual Report Download - page 147

within 18 months following the change of control Ms. Alber is terminated without cause or voluntarily
terminates her employment for good reason, she will be entitled to certain severance benefits.
The Compensation Committee approved the Management Retention Agreements that were entered into with the
named executive officers so that it can mitigate the risk of not being able to retain our named executive officers
notwithstanding the possibility of an acquisition of the company. The Compensation Committee believes these
arrangements are necessary to ensure that each named executive officer is focused on the company’s goals and
objectives, as well as the best interests of our stockholders, rather than potential personal economic exposure
under these particular circumstances. Additionally, the Compensation Committee believes that these agreements
will provide a smooth transition should the company undergo such an event.
When deciding on the terms of the Management Retention Agreements, the Compensation Committee consulted
with Cook & Co., who provided various suggestions regarding the potential terms of a Management Retention
Agreement based on competitive market data from our proxy peer group. In considering these potential terms,
the Compensation Committee’s objectives were to: (1) assure we would have the continued dedication and
objectivity of our named executive officers, notwithstanding the possibility of a change of control of the
company, thereby aligning the interests of the named executive officers with those of the stockholders in
connection with potentially advantageous offers to acquire the company; and (2) create a total executive
compensation plan that is competitive with our proxy peer group.
None of the executive officers is provided with any type of golden parachute excise tax gross-up. In addition, our
equity compensation plans do not provide for automatic “single trigger” vesting acceleration upon or following a
change of control. We have considered the total potential cost of the change of control protection afforded to our
executive officers and have determined that it is reasonable given the importance of the objectives described
above.
Do our executive officers have severance protection?
As described in the section titled “Employment Contracts and Termination of Employment and Change-of-
Control Arrangements” beginning on page 31, as of the last day of the Company’s 2011 fiscal year, the Company
had entered into severance arrangements with Ms. Alber and Ms. McCollam providing for certain severance
benefits upon the applicable executive’s termination without cause or voluntary termination for good reason. The
Compensation Committee implemented these arrangements to ensure that these two senior executive focus on the
company’s goals and objectives, as well as the best interests of stockholders, rather than potential personal
economic exposure under these particular circumstances. In connection with Ms. McCollam’s retirement
effective March 6, 2012, we entered into a Separation Agreement and General Release with Ms. McCollam under
which she is entitled to receive these severance benefits, a cash payment of $1,300,000 in satisfaction of her
annual bonus, and accelerated vesting of 131,060 stock-settled stock appreciation rights scheduled to vest during
March, April and November of 2012, and 17,579 restricted stock units scheduled to vest in May 2012 in
exchange for a general release of claims in favor of the Company.
Grants of stock-settled stock appreciation rights and restricted stock units made in fiscal 2011 to company
employees, including its named executive officers, include an acceleration feature which provides for the full
acceleration of vesting of such awards in the event of a qualifying retirement, which is defined as leaving the
company’s employment at age 70 or later, with at least fifteen years of service.
Otherwise, except as described above, the named executive officers do not have arrangements that provide them
with specific benefits upon their termination. The Compensation Committee has considered the total potential
cost of the severance benefits to the executive officers and determined them to be reasonable.
Do we provide perquisites to the executive officers?
The company provides executive officers, including the named executive officers, with perquisites and other
personal benefits that the company and the Compensation Committee believe are reasonable and enable the
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