Pottery Barn 2014 Annual Report Download - page 174

limits set forth in this Section 5(b) shall not be subject to the one to one and nine-tenths share ratio described in
Section 3(a) and shall be applied on a one-for-one share ratio basis.
(c) Section 162(m) Performance Restrictions. For purposes of qualifying grants of Restricted Stock or
Restricted Stock Units as “performance-based compensation” under Section 162(m) of the Code, the
Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The
Performance Goals shall be set by the Administrator on or before the latest date permissible to enable the
Restricted Stock or Restricted Stock Units to qualify as “performance-based compensation” under
Section 162(m) of the Code. In granting Restricted Stock or Restricted Stock Units which are intended to qualify
under Section 162(m) of the Code, the Administrator shall follow any procedures determined by it from time to
time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code (e.g.,
in determining the Performance Goals). For Awards intended to comply with the performance-based
compensation exception, the administrator shall not exercise discretion to increase the amount payable
thereunder in contravention of Section 162(m) of the Code.
SECTION 6.
STOCK OPTIONS
Any Stock Option granted under the Plan shall be in such form as the Administrator may from time to time
approve. Stock Options granted under the Plan may be either Incentive Stock Options or Non-Qualified Stock
Options. Incentive Stock Options may be granted only to employees of the Company, its Parent or any
Subsidiary. To the extent that any Option does not qualify as an Incentive Stock Option, it shall be a Non-
Qualified Stock Option.
(a) Stock Option Grants. The Administrator, in its discretion, may grant Stock Options to eligible officers
and key employees of the Company, its Parent or any Subsidiary. Stock Options granted pursuant to this
Section 6(a) shall not include the right to dividends, Dividend Equivalents or other similar distribution rights and
shall be subject to the following terms and conditions and each Stock Option Award Agreement shall contain
such additional terms and conditions, consistent with the terms of the Plan, as the Administrator deems desirable.
(i) Exercise Price. The exercise price per share shall be determined by the Administrator at the
time of grant, but it shall not be less than 100% of the Fair Market Value on the date of grant. If an
employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code)
more than 10% of the combined voting power of all classes of stock of the Company or any parent or
subsidiary corporation and an Incentive Stock Option is granted to such employee, the option price of
such Incentive Stock Option shall be not less than 110% of the Fair Market Value on the grant date.
Notwithstanding the foregoing, a Stock Option (whether an Incentive Stock Option or a Non-Qualified
Stock Option) may be granted with an exercise price lower than the minimum exercise price set forth
above if such Stock Option is granted as a Substitute Award, except as would result in taxation under
Code Section 409A, the loss of Incentive Stock Option status or would violate Applicable Law.
(ii) Option Term. The term of each Stock Option shall be fixed by the Administrator, but no Stock
Option shall be exercisable more than seven (7) years after the date the option is granted. If an
employee owns or is deemed to own more than 10% of the combined voting power of all classes of
stock of the Company or any Parent or Subsidiary and an Incentive Stock Option is granted to such
employee, the term of such option shall be no more than five (5) years from the date of grant.
(iii) Exercisability; Rights of a Stockholder. Stock Options shall become exercisable at such time
or times, whether or not in installments, as shall be determined by the Administrator; provided,
however, that all Stock Options must be exercised within seven (7) years of the date they become
exercisable or they shall automatically expire. The Administrator may, at any time, accelerate the
exercisability of all or any portion of any Stock Option. An optionee shall have the rights of a
stockholder only as to shares acquired upon the exercise of a Stock Option and not as to unexercised
Stock Options.
(iv) Method of Exercise. Stock Options may be exercised in whole or in part, by giving written or
electronic notice of exercise to the Company, specifying the number of shares to be purchased. To the
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