Pottery Barn 2014 Annual Report Download - page 114

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. The aggregate grant date fair value of all awards
granted to any non-employee director during a calendar year (excluding awards made at the election of a non-
employee director in lieu of all or a portion of annual and committee cash retainers) shall not exceed $500,000.
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. It is expected that in fiscal 2015, these
awards will consist of restricted stock units. Subject to the terms of the plan, the committee determines the other
terms and conditions applicable to the awards. Please see “Director Compensation” on page 11 for a description
of awards granted to our non-employee directors for fiscal 2014 and the automatic grants expected for fiscal
2015.
Stock Options
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
plan, and if the award expires or becomes unexercisable without having been exercised in full, the reserve of
shares available for future awards will be replenished by one share for every one share subject to the expired or
forfeited portion of the award.
Exercise Price of an Option
The exercise price of the shares subject to each option is set by the committee, but cannot be less than 100% of the
fair market value on the date of grant of the shares covered by the option. The fair market value of shares covered
by an option is calculated as the closing price of our stock on the trading day prior to the grant date. With respect to
an incentive stock option granted to a stockholder who holds more than 10% of the combined voting power of all
classes of stock of the company or any parent or subsidiary, the exercise price cannot be less than 110% of the fair
market value on the date of grant. Notwithstanding the above, the exercise price of the shares subject to an option
may be less than the minimum exercise price set forth above if the stock option is granted as a substitute award in
connection with a merger or acquisition, but only to the extent such exercise price does not result in taxation under
Section 409A, the loss of incentive stock option status or violate applicable law.
Option Exercises
An option granted under the plan generally cannot be exercised until it vests. The committee establishes the vesting
schedule of each option at the time of grant. Options granted under the amended and restated plan expire at the
times established by the committee, but not later than seven years after the grant date (and not later than five years
after the grant date in the case of an incentive stock option granted to an optionee who is a stockholder who holds
more than 10% of the combined voting power of all classes of stock of the company or any parent or subsidiary).
Except as the committee may otherwise provide, stock options generally may be exercised, to the extent vested, at
any time prior to the earlier of the expiration date of the option or 90 days from the date the optionee ceases to
provide services to us for any reason other than death or disability. If the optionee ceases to provide services to us as
a result of his or her death or disability, or the optionee dies within 30 days after the optionee ceases to be an
employee, the option generally may be exercised, to the extent vested, at any time prior to the earlier of the
expiration date of the option or 180 days from the optionee’s death or date of termination as a result of disability.
Payment for the Exercise Price of an Option
The exercise price of each option granted under the plan may be paid by any of the methods included in a
participant’s option agreement. Such methods may include payment by (i) cash, (ii) certified or bank check,
22