Restoration Hardware 2015 Annual Report Download - page 94

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In connection with the Reorganization, the Board of Directors adopted the Restoration Hardware 2012 Stock Incentive Plan (the
“Stock Incentive Plan”). The Stock Incentive Plan provides for the grant of incentive stock options to the Company’s employees, non-
qualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, cash-based awards
and any combination thereof to the Company’s employees, directors and consultants and the Company’s parent and subsidiary
corporations’ employees, directors and consultants. In connection with the Reorganization, the Board of Directors granted options to
purchase 1,264,036 shares of the Company’s common stock to employees of the Company under the Stock Incentive Plan, which
options were fully vested upon the completion of the initial public offering, with a weighted-average exercise price equal to $26.50 per
share.
In addition, in connection with the Reorganization, the Board of Directors granted an aggregate of 40,623 restricted stock
awards to certain of the Company’s directors under the Stock Incentive Plan. Such restricted stock awards vested in full on
January 31, 2013.
In connection with the grants under the Option Plan and the Stock Incentive Plan, the Company recorded a non-cash
compensation charge at the Reorganization of $52.0 million related to these awards in fiscal 2012.
On July 2, 2013, in connection with Mr. Friedman’s reappointment as Chairman and Co-Chief Executive Officer, the Company
granted a stock option to Mr. Friedman under the 2012 Stock Incentive Plan to purchase 1,000,000 shares of its common stock, with
an exercise price of $75.43, which is equal to the closing price of the Company’s common stock on the date of grant. This option was
fully vested as of the date of grant but any shares issued upon exercise of the option will be subject to selling restrictions which are
scheduled to lapse in three equal installments on the third, fourth and fifth anniversaries of the grant date. The fully vested option
resulted in a one-time non-cash stock-based compensation charge of $33.7 million in fiscal 2013.
As of January 31, 2015, there were a total of 13,442,519 shares issuable under the Option Plan and Stock Incentive Plan. On
February 2, 2015, an additional 797,851 shares became issuable under the Stock Incentive Plan in accordance with the Stock Incentive
Plan evergreen provision, increasing the total number of shares issuable under the Option Plan and Stock Incentive Plan to
14,240,370. Awards under the plans reduce the number of shares available for future issuance. Cancellations and forfeitures of awards
previously granted under the Stock Incentive Plan increase the number of shares available for future issuance. Cancellations and
forfeitures of awards previously granted under the Option Plan are immediately retired and are no longer available for future issuance.
The number of shares available for future issuance under the Stock Incentive Plan as of January 30, 2016 was 2,151,580. There are no
more shares available for issuance under the Option Plan. Shares issued as a result of award exercises under the Option Plan and Stock
Incentive Plan will be funded with the issuance of new shares.
On February 1, 2016, an additional 811,666 shares became issuable under the Stock Incentive Plan in accordance with the Stock
Incentive Plan evergreen provision.
2012 Stock Option Plan and 2012 Stock Incentive Plan—Stock Options
A summary of stock option activity under the Option Plan and the Stock Incentive Plan for fiscal 2015 is as follows:
Options
Weighted-Average
Exercise Price
Outstanding—January 31, 2015 ...................................... 6,716,306 $ 51.26
Granted ...................................................................... 687,600 89.75
Exercised ................................................................... (610,641) 42.09
Cancelled ................................................................... (257,692) 62.96
Outstanding—January 30, 2016 ...................................... 6,535,573 $ 55.71
The fair value of stock options issued was estimated on the date of grant using the following assumptions:
Year Ended
January 30,
2016
January 31,
2015
February 1,
2014
Expected volatility .......................................................... 37.7% 39.7 % 39.7%
Expected life (years) ....................................................... 6.5 6.5 6.7
Risk-free interest rate ...................................................... 1.8% 2.0 % 1.9%
Dividend yield ................................................................ — — —