Restoration Hardware (RSTO)

each outstanding option to purchase shares of our common stock, whether vested or unvested, will be canceled and shall be exchanged for a cash payment to be made no later than the end of the first payroll cycle following the effective time of the Merger (without interest, and less any required withholding tax) equal to the product of (i) the excess of $4.50 over the exercise price per share under such option and (ii) the number of shares subject to such option;

each restricted stock unit, which entitles the holder thereof to shares of common stock upon the vesting of such unit, shall either (i) be assumed with a comparable equity award of Parent or (ii) be replaced with a cash incentive program of the Company, which in either case preserves the compensation element of such restricted stock units existing at the effective time and the vesting terms of the restricted stock units and, in the case of (ii) above, provides for subsequent payout in cash on each subsequent vesting date of an amount equal to the product of (A) the number of shares previously subject to such restricted stock unit that then vest and (B) $4.50, less any required withholding tax; and

notwithstanding the foregoing, restricted stock units granted to the Company’s non-employee directors fully vest in connection with the Merger by their terms, and restricted stock units granted to Mr. Friedman fully vest in connection with the Merger pursuant to Mr. Friedman’s employment agreement with the Company.