EXHIBIT 10.1

 

DEPARTMENT 56, INC. STOCK OPTION AGREEMENT
FOR OPTIONS UNDER THE 2004 STOCK INCENTIVE PLAN

 

 

Optionee:

 

 

 

Grant Date: 

 

 

 

 

 

 

Number of Shares subject to the Option:

 

 

Exercise Price per Share: 

 

 

1.                                       General.

 

1.1                                 The Company hereby grants to the Optionee,
subject to the terms of this Agreement and the Company’s 2004 Stock Incentive
Plan (the “Plan”), the right and option (the “Option”) to purchase, at the
Exercise Price, the number of Shares set forth above.  The number of Shares and
the Exercise Price are subject to adjustment as provided in Section 10 of the
Plan, which is made a part of this Agreement.  Except as otherwise defined
herein, capitalized terms used in this Agreement shall have the same definitions
as set forth in the Plan.  For purposes of this Agreement, (a) the term “person”
shall mean an individual, a corporation, a partnership, an association, a trust,
a sole proprietorship, a limited liability company, or any other entity or
organization, including a government or governmental agency, instrumentality,
authority, commission or court, (b) the term “Affiliate” of the Company shall
mean any person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Company and
(b) the term “control” shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of any
person, whether through the ownership of equity interests, by contract or
otherwise.

 

1.2                                 This Option is not intended to qualify as an
Incentive Stock Option within the meaning of Section 422 of the Code.

 

1.3                                 The Option shall be exercisable to the
extent and in the manner provided in this Agreement for a period of 10 years
from the date hereof (the “Exercise Term”); provided, however, that the Option
may be terminated earlier as provided in Section 4 or 5.

 

2.                                       Vesting and Exercisability of Options.

 

2.1                                 Vesting.  Subject to the provisions of this
Agreement and the Plan, the Option shall vest and become exercisable
immediately.

 

2.2                                 Timing of Exercise.  The Optionee or the
guardian, executor, administrator or other legal representative (each a “Legal
Representative”) of the Optionee may exercise the Option, in whole or in part,
at any time or from time to time.

 

3.                                       Manner of Exercise and Payment.

 

3.1                                 Subject to the terms and conditions of this
Agreement and the Plan, the Option may be exercised by delivery of written
notice, in person or by mail, to the Secretary of the Company, at the Company’s
principal executive office (or such other address as the Company may from time
to time notify the Optionee in writing). Such notice shall state that the
Optionee is electing to exercise the Option and the underlying number of Shares
being exercised and shall be signed by the Optionee

 

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or, where applicable, by his/her Legal Representative.  The Company may require
proof satisfactory to it as to the right of the Legal Representative to exercise
the Option.

 

3.2                                 The notice of exercise described in
Section 3.1 shall be accompanied by the full purchase price for the underlying
Shares being exercised, such purchase price to be paid by check.  No fewer than
10 Shares may be purchased at any one time upon an exercise of the Option,
unless the number of Shares so purchased constitutes the total number of Shares
then purchasable under the Option.

 

3.3                                 The Optionee shall not be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any Shares
subject to the Option until the conditions in Section 11 of the Plan have been
satisfied.

 

4.                                       Certain Restrictions.

 

4.1                                 Non-transferability.  The Option shall not
be transferable by the Optionee otherwise than by will or the laws of descent
and distribution, and an Option may be exercised during the lifetime of such
Optionee only by the Optionee or his/her Legal Representative.  The terms of
such Option shall be final, binding and conclusive upon the beneficiaries,
executors, administrators, heirs and successors of the Optionee.

 

4.2                                 Employment Termination.  (a)  Except as may
be agreed between the Committee and the Optionee, if the Optionee shall no
longer be employed by the Company or any of its Subsidiaries, for any reason
whatsoever (including by reason of death, permanent disability or adjudicated
incompetency) (“Terminated” or a “Termination”), irrespective of whether the
Optionee receives, in connection with the Termination, any severance or other
payment from the Company or any of its Subsidiaries under any employment
agreement or otherwise, the Option shall terminate and shall be of no further
force or effect from and after the date of such Termination (the “Termination
Date”).

 

If any portion of the Option is exercisable pursuant to Section 2.1 hereof on
the Termination Date, the last day on which the Terminated Optionee (or the
Legal Representative) may exercise the Option shall be as follows:

 

(1) In the event the Termination is the result of the Optionee’s resignation
(other than “Retirement” as defined below), the last day on which the Option may
be exercised (and after which day the Option shall terminate and be of no
further force or effect) shall be the ninetieth (90th) day following the
Termination Date; provided, however, that in the event the Optionee dies during
the period between the Termination Date and the last day of Option
exercisability as set forth in this clause 4.2(a)(1), then the Legal
Representative may exercise the Option at any time until and through (but not
after) the three-hundred-sixty-fifth (365th) day after the date of the
Optionee’s death.

 

(2) In the event the Termination is the result of the Optionee’s “Retirement”
(being the Optionee’s resignation from employment or the Company’s termination
of employment without Cause, in either case, at such time as the Optionee is age
sixty (60) or greater), the last day on which the Option may be exercised (and
after which day the Option shall terminate and be of no further force or effect)
shall be the tenth (10th) anniversary of the Grant Date of the Option; provided,
however, that in the event the Optionee dies during the period between the
Termination Date and the last day of Option exercisability as set forth in this

 

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clause 4.2(a)(2), then the Legal Representative may exercise the Option at any
time until and through (but not after) the three-hundred-sixty-fifth (365th) day
after the date of the Optionee’s death.

 

(3) In the event the Termination is the result of the Optionee’s death while
employed by the Company or one of its Affiliates, the Legal Representative may
exercise the Option at any time within three-hundred-sixty-five (365) days after
the date of the Optionee’s death (and after such 365th day the Option shall
terminate and be of no further force or effect).

 

(4) In the event the Termination is the result of the Company’s dismissal
without Cause of the Optionee from employment (other than due to Retirement),
the last day on which the Option may be exercised (and after which day the
Option shall terminate and be of no further force or effect) shall be the later
(the “Later Day”) of (x) the last day in respect of which the Optionee is paid
severance following the Termination Date (e.g., the end of the severance period)
and (y) the ninetieth (90th) day following the Termination Date; provided,
however, that in the event the Optionee dies during the period between the
Termination Date and the last day of Option exercisability as set forth in this
clause 4.2(a)(4), then the Legal Representative may exercise the Option at any
time until and through (but not after) the three-hundred-sixty-fifth (365th) day
after the date of the Optionee’s death.

 

(5) In the event the Termination is the result of the Company’s dismissal with
Cause of the Optionee from employment, the last day on which the Option may be
exercised (and after which day the Option shall terminate and be of no further
force or effect) shall be the Termination Date.

 

(b)          For purposes of this Section 4.2, the term “Cause” shall mean the
Company’s determination that the Optionee shall have committed one or more of
the following: fraud, material and deliberate injury or attempted injury to the
business or a fellow employee or customer in the line of work, breach of any law
or Company policy which presents the reasonable likelihood of a material adverse
impact to the Company’s business or its reputation, material competition with
the Company (including solicitation of its employees or customers), willful
breach of duty, habitual neglect, or habitual absenteeism, or substantial
dependence on or addiction to alcohol or any controlled substance.

 

5.                                       Prohibition Against Certain Activities.

 

5.1                                 Restricted Activities. The Optionee
understands that the Company is granting to the Optionee an option to purchase
Shares to reward the Optionee for the Optionee’s future efforts and loyalty to
the Company and its Affiliates by giving the Optionee the opportunity to
participate in the potential future appreciation of the Company.  Accordingly,
the Optionee agrees that: (a) s/he will not at any time during his/her
employment with the Company or any Affiliate, or after any Termination, directly
or indirectly disclose or furnish to any other person or use for his/her own or
any other person’s account any confidential or proprietary knowledge or any
other information which is not a matter of public knowledge obtained during the
entire course of his/her employment with, or other performance of services for,
the Company or any Affiliate or any predecessor of any of the foregoing, no
matter from where or in what manner the Optionee may have acquired such
knowledge or information, and s/he shall retain all such knowledge and
information in trust for the benefit of the Company, its Affiliates and the
successors and assigns of any of them; (b) if s/he is

 

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Terminated, s/he will not for two years following the Termination directly or
indirectly solicit for employment, including without limitation recommending to
any subsequent employer the solicitation for employment of, any person who at
the time of the solicitation is employed by the Company or any Affiliate  (a
“Dept. 56 Employee”) (it being understood that, if the Optionee becomes
affiliated with another person (the “Successor”) and the Successor solicits for
employment a Dept. 56 Employee, it shall not constitute a solicitation hereunder
if the Optionee does not solicit, recommend to the Successor, or otherwise bring
to the attention of the Successor, the Dept. 56 Employee); and (c) s/he will not
at any time during his/her employment or after any Termination publish any
statement or make any statement (under circumstances reasonably likely to become
public or that s/he might reasonably expect to become public) critical of the
Company or any Affiliate, or in any way adversely affecting or otherwise
maligning the business or reputation of the Company or any of its Affiliates or
any of their respective officers, directors or employees (any activity described
in clause (a), (b) or (c) of this sentence being herein referred to as a
“Prohibited Activity”).  In addition, accordingly, the Optionee agrees that s/he
will not at any time during his/her employment with the Company or any Affiliate
or the twelve (12) months thereafter (including any period following Termination
during or in respect of which s/he is receiving any severance payment) engage in
any Competitive Activity (as defined below) anywhere in the world (including,
without limitation, anywhere in the United States of America, the United
Kingdom, Hong Kong, China or Taiwan).

 

The term “Competitive Activity” shall mean engaging in any of the following
activities:  (a) directly or indirectly through one or more intermediaries
controlling any Competitor (as defined below) or owning any equity or debt
interests in any Competitor (other than equity or debt interests which are
publicly traded and do not exceed 2% of the particular class of interests
outstanding); (b) directly or indirectly soliciting, diverting, taking away,
appropriating or otherwise interfering with any of the employees or customers of
the Company or any Affiliate; or (c) employment by (including serving as an
officer or director of), or providing consulting or other services to, any
Competitor.  The term “Competitor” means any person who derives significant
revenues, income or reputational gain from producing, selling, designing,
dealing or otherwise conducting commercial activity in, with or pertaining to,
miniature decorative or collectible buildings or coordinated “village”
accessories, figurines or general decorative giftware products.

 

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5.2                                 Right to Terminate Option; Disgorgement. 
The Optionee understands that the Company is granting to the Optionee an option
to purchase Shares to reward the Optionee for the Optionee’s future efforts and
loyalty to the Company and its Affiliates by giving the Optionee the opportunity
to participate in the potential future appreciation of the Company. 
Accordingly, if the Optionee: (a) engages in any Prohibited Activity; (b)
engages in any Competitive Activity; or (c) is convicted of a crime against the
Company or any Affiliate, then, in addition to any other rights and remedies
available to the Company, the Company shall be entitled, in its sole discretion,
to terminate the Option, which shall then be of no further force or effect.

 

The Optionee further understands that if he/she is found to have violated any
provision of Section 5.1 after he/she exercises the Option, the Company has the
right to demand repayment of (and the Optionee shall be obligated upon such
written demand to repay) all of Optionee’s after-tax profit realized from the
exercise of the Option (including any net cash proceeds from the sale of Shares
acquired through exercise of the Option and any Shares held by the Optionee
acquired through exercise of the Option).

 

6.                                       Specific Performance.  The parties
hereto acknowledge that there will be no adequate remedy at law for a violation
of any of the provisions of this Agreement and that, in addition to any other
remedies which may be available, all of the provisions of this Agreement shall
be specifically enforceable in accordance with their respective terms.

 

7.                                       Withholding.  Prior to the issuance of
any Shares to the Optionee hereunder, the Optionee shall remit to the Company
the full amount of any applicable Withholding Taxes.  The Company shall have the
right to deduct from any distribution of cash to the Optionee any amount
necessary in satisfaction of any applicable Withholding Taxes.

 

8.                                       Entire Agreement.  This Agreement and
the Plan constitute the entire agreement, and supersede all prior agreements and
understandings, oral and written, between the parties hereto with respect to the
subject matter hereof.

 

9.                                       Choice of Law.  This Agreement shall be
interpreted under the laws of the State of New York (except with respect to
matters of employment law, which shall be interpreted under the laws of the
State of Minnesota), entirely independent of the forum in which the Agreement or
any part of it may come up for construction, interpretation or enforcement.

 

10.                                 Acknowledgment.  The Optionee hereby
acknowledges prior receipt of a copy of the Plan and agrees to be bound by all
the terms and provisions thereof as the same may be amended from time to time. 
The Optionee hereby acknowledges that s/he has reviewed the Plan and this
Agreement and understands his/her rights and obligations thereunder and
hereunder.  The Optionee also acknowledges that s/he has been provided with such
information concerning the Company, the Plan and this Agreement as s/he and
his/her advisors have requested.

 

 

DEPARTMENT 56, INC.

 

 

By:

 

 

 

 

 

 

 

[Name]

 

 

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