Pottery Barn 2014 Annual Report Download - page 116

Stock-Settled Stock Appreciation Rights
A stock-settled stock appreciation right is an award that allows the recipient to receive the appreciation in fair
market value between the date of the grant and the exercise date for the number of shares as to which the right is
exercised, which is payable only in shares of our common stock. Thus, a stock appreciation right will have value
only if the shares increase in value after the date of grant. The increased appreciation will be paid with shares of
our common stock of equivalent value. The committee determines the terms of the stock appreciation right,
including when the right becomes exercisable. The same expiration rules that apply to options generally also
apply to stock appreciation rights. The committee will determine the number of shares covered by each stock
appreciation right, but the committee may not grant more than an aggregate of 1,000,000 shares covered by stock
appreciation rights or options 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 a stock appreciation right granted under the plan,
regardless of the number of shares used to settle the award upon exercise, 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.
A stock appreciation right granted under the plan generally cannot be exercised until it vests. The committee
establishes the vesting schedule of each stock appreciation right at the time of grant. Stock appreciation rights
granted under the amended and restated Incentive Plan expire at the times established by the committee, but not
later than seven years after the grant date.
Upon the grant of an award of stock appreciation rights, the recipient will receive an award agreement that
specifies the terms and conditions of the award, including the number of shares subject to the stock appreciation
right and the terms, conditions and restrictions related to the award.
Exercise Price of a Stock Appreciation Right
The exercise price of the shares subject to each stock appreciation right 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 stock appreciation right.
The fair market value of shares covered by a stock appreciation right is calculated as the closing price of our
stock on the trading day prior to the grant date. Notwithstanding the above, the exercise price of the shares
subject to a stock appreciation right may be less than the minimum exercise price set forth above if the stock
appreciation right 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 or violate applicable law.
Dividend and Dividend Equivalent Rights
Dividend equivalent rights are credits, payable in cash or stock and granted at the discretion of the committee
(and having such terms approved by 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, which at the discretion of the committee may be deemed reinvested in additional shares of stock
covered by an award. Stock options and stock appreciation rights shall not be eligible to receive dividends,
dividend equivalent rights or any other similar distribution rights. Dividend equivalent rights payable in stock on
or after the date of the 2015 Annual Meeting will reduce the number of shares available for issuance under the
plan by one and nine-tenths shares for every share payable thereunder.
Dividends payable with respect to a restricted stock award that is subject to performance conditions and dividend
equivalent rights with respect to a restricted stock unit award that is subject to performance conditions shall be
held in escrow or deemed reinvested in additional shares of restricted stock or additional restricted stock units, as
applicable, until the achievement of the applicable performance conditions and shall be otherwise subject to the
same terms and conditions applicable to the award.
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