Document:

<Page>

                                                                   EXHIBIT 10.12

                               DEPARTMENT 56, INC.
                            1997 STOCK INCENTIVE PLAN
                                  (as amended)

                  1.       PURPOSE.
               The purpose of this Plan is to strengthen Department 56, Inc., a
Delaware corporation (the "Company"), by providing an incentive to its officers,
employees, consultants, directors and advisors and thereby encouraging them to
devote their abilities and industry to the success of the Company's business
enterprise. It is intended that this purpose be achieved by extending to
officers, employees, consultants and directors of the Company and its
Subsidiaries an added long-term incentive for high levels of performance and
unusual efforts through the grant of Incentive Stock Options, Nonqualified Stock
Options, Stock Appreciation Rights, Restricted Stock, Performance Units,
Performance Shares and Dividend Equivalent Rights (as each term is hereinafter
defined).
                  2.       DEFINITIONS.
               For purposes of the Plan:
               2.1         "Adjusted Fair Market Value" means, in the event of a
Change in Control, the greater of (i) the highest price per Share paid to
holders of the Shares in any transaction (or series of transactions)
constituting or resulting in a Change in Control or (ii) the highest Fair Market
Value of a Share during the ninety (90) day period ending on the date of a
Change in Control.

               2.2         "Agreement" means the written agreement between the
Company and an Optionee or Grantee evidencing the grant of an Option or Award
and setting forth the terms and conditions thereof.
               2.3         "Award" means a grant of Restricted Stock, a Stock
Appreciation Right, a Performance Award, a Dividend Equivalent Right or any or
all of them.
               2.4         "Board" means the Board of Directors of the Company.
               2.5         "Cause" means the commission of an act of fraud or
intentional misrepresentation or an act of embezzlement, misappropriation or
conversion of assets or opportunities of the Company or any Subsidiary.
               2.6         "Change in Capitalization" means any increase or
reduction in the number of Shares, or any change (including, but not limited to,
a change in value) in the Shares or exchange of Shares for a different number or
kind of shares or other securities of the Company or another corporation, by
reason of a reclassification, recapitalization, merger, consolidation,
reorganization, spin-off, split-up, issuance of warrants or rights or
debentures, stock dividend, stock split or reverse stock split, cash dividend,
property dividend, combination or exchange of shares, repurchase of shares,
change in corporate structure or otherwise.

<Page>

               2.7         A "Change in Control" shall mean the occurrence
during the term of the Plan of:

                            (a) An acquisition (other than directly from the
                  Company) of any voting securities of the Company (the "Voting
                  Securities") by any 'Person' (as the term person is used for
                  purposes of Section 13(d) or 14(d) of the Exchange Act),
                  immediately after which such Person has 'Beneficial Ownership'
                  (within the meaning of Rule 13d-3 promulgated under the
                  Exchange Act) of fifty-one percent (51%) or more of the
                  combined voting power of the Company's then outstanding Voting
                  Securities; provided, however, in determining whether a Change
                  in Control has occurred, Voting Securities which are acquired
                  in a 'Non-Control Acquisition' (as hereinafter defined) shall
                  not constitute an acquisition which would cause a Change in
                  Control. A 'Non-Control Acquisition' shall mean an acquisition
                  by (i) an employee benefit plan (or a trust forming a part
                  thereof) maintained by (A) the Company or (B) any corporation
                  or other Person of which a majority of its voting power or its
                  voting equity securities or equity interest is owned, directly
                  or indirectly, by the Company (for purposes of this
                  definition, a 'Subsidiary'), (ii) the Company or its
                  Subsidiaries, or (iii) any Person in connection with a
                  'Non-Control Transaction' (as hereinafter defined);
                            (b) The individuals who, as of May 16, 1997, are
                  members of the Board (the "Incumbent Board"), cease for any
                  reason to constitute at least two-thirds of the members of the
                  Board; provided, however, that if the election, or nomination
                  for election by the Company's common stockholders, of any new
                  director was approved by a vote of at least two-thirds of the
                  Incumbent Board, such new director shall, for purposes of this
                  Plan, be considered as a member of the Incumbent Board;
                  provided further, however, that no individual shall be
                  considered a member of the Incumbent Board if such individual
                  initially assumed office as a result of either an actual or
                  threatened 'Election Contest' (as described in Rule 14a-11
                  promulgated under the Exchange Act) or other actual or
                  threatened solicitation of proxies or consents by or on behalf
                  of a Person other than the Board (a "Proxy Contest") including
                  by reason of any agreement intended to avoid or settle any
                  Election Contest or Proxy Contest; or
                            (c) The consummation of:

<Page>

                            (i)  A merger, consolidation or reorganization with
                  or into the Company or in which securities of the Company are
                  issued, unless such merger, consolidation or reorganization is
                  a "Non-Control Transaction." A "Non-Control Transaction" is a
                  merger, consolidation or reorganization with or into the
                  Company or in which securities of the Company are issued where
                                     (A) the stockholders of the Company,
                           immediately before such merger, consolidation or
                           reorganization, own, directly or indirectly
                           immediately following such merger, consolidation or
                           reorganization, at least sixty percent (60%) of the
                           combined voting power of the outstanding voting
                           securities of the corporation resulting from such
                           merger or consolidation or reorganization (the
                           "Surviving Corporation") in substantially the same
                           proportion as their ownership of the Voting
                           Securities immediately before such merger,
                           consolidation or reorganization,
                                     (B) the individuals who were members of the
                           Incumbent Board immediately prior to the execution of
                           the agreement providing for such merger,
                           consolidation or reorganization constitute at least
                           two-thirds of the members of the board of directors
                           of the Surviving Corporation, or a corporation
                           beneficially owning a majority of the Voting
                           Securities of the Surviving Corporation,
                                     (C) no Person other than (1) the Company,
                           (2) any Subsidiary, (3) any employee benefit plan (or
                           any trust forming a part thereof) maintained
                           immediately prior to such merger, consolidation or
                           reorganization by the Company or any Subsidiary, or
                           any (4) Person who, immediately prior to such merger,
                           consolidation or reorganization had Beneficial
                           Ownership of fifty-one percent (51%) or more of the
                           then outstanding Voting Securities owns, directly or
                           indirectly fifty-one percent (51%) or more of the
                           combined voting power of the Surviving Corporation's
                           then outstanding voting securities;
                            (ii)  A complete liquidation or dissolution of the
                  Company; or
                            (iii) The sale or other disposition of all or
                  substantially all of the assets of the Company to any Person
                  (other than a transfer to a Subsidiary).
                  Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of

<Page>

more than the permitted amount of the outstanding Voting Securities as a result
of the acquisition of Voting Securities by the Company which, by reducing the
number of Voting Securities outstanding, increases the proportional number of
shares Beneficially Owned by the Subject Persons, provided that if a Change in
Control would occur (but for the operation of this sentence) as a result of the
acquisition of Voting Securities by the Company, and after such share
acquisition by the Company, the Subject Person becomes the Beneficial Owner of
any additional Voting Securities which increases the percentage of the then
outstanding Voting Securities Beneficially Owned by the Subject Person, then a
Change in Control shall occur.

               2.8         "Code" means the Internal Revenue Code of 1986, as
amended.
               2.9         "Committee" means a committee, as described in
Section 3.1, appointed by the Board from time to time to administer the Plan and
to perform the functions set forth herein.
               2.10        "Company" means Department 56, Inc.
               2.11        "Director" means a director of the Company.
               2.11        "Director Option" means an Option granted pursuant to
Section 6.
               2.12        "Disability" means a physical or mental infirmity
which impairs the Optionee's ability to perform substantially his or her duties
for a period of one hundred eighty (180) consecutive days.
               2.14        "Dividend Equivalent Right" means a right to receive
all or some portion of the cash dividends that are or would be payable with
respect to Shares.
               2.15        "Division" means any of the operating units or
divisions of the Company designated as a Division by the Committee.
               2.16        "Eligible Director" means a Director who is not an
employee of the Company or any Subsidiary.
               2.17        "Eligible Individual" means any Director (other than
an Eligible Director), officer or employee of the Company or a Subsidiary, or
any consultant or advisor who is receiving cash compensation from the Company or
a Subsidiary designated by the Committee as eligible to receive Options or
Awards subject to the conditions set forth herein.
               2.18        "Employee Option" means an Option granted pursuant to
Section 5.
               2.19        "Exchange Act" means the Securities Exchange Act of
1934, as amended.
               2.20        "Fair Market Value" on any date means the average of
the high and low sales prices of the Shares on such date on the principal
national securities exchange on which such Shares are listed or admitted to
trading, or if such Shares are not

<Page>

so listed or admitted to trading, the average of the per Share closing bid price
and per Share closing asked price on such date as quoted on the National
Association of Securities Dealers Automated Quotation System or such other
market in which such prices are regularly quoted, or, if there have been no
published bid or asked quotations with respect to Shares on such date, the Fair
Market Value shall be the value established by the Board in good faith and, in
the case of an Incentive Stock Option, in accordance with Section 422 of the
Code.
               2.21        "Grantee" means a person to whom an Award has been
granted under the Plan.
               2.22        "Incentive Stock Option" means an Option satisfying
the requirements of Section 422 of the Code and designated by the Committee as
an Incentive Stock Option.
               2.23        "Nonemployee Director" means a Director who is a
"nonemployee director" within the meaning of Rule 16b-3 promulgated under the
Exchange Act.
               2.24        "Nonqualified Stock Option" means an Option which is
not an Incentive Stock Option.
               2.25        "Option" means a Nonqualified Stock Option, an
Incentive Stock Option, Director Option, or any or all of them.
               2.26        "Optionee" means a person to whom an Option has been
granted under the Plan.
               2.27        "Outside Director" means a director of the Company
who is an "outside director" within the meaning of Section 162(m) of the Code
and the regulations promulgated thereunder.
               2.28        "Parent" means any corporation which is a parent
corporation (within the meaning of Section 424(e) of the Code) with respect to
the Company.
               2.29        "Performance Awards" means Performance Units,
Performance Shares or either or both of them.
               2.30        "Performance Cycle" means the time period specified
by the Committee at the time a Performance Award is granted during which the
performance of the Company, a Subsidiary or a Division will be measured.
               2.31        "Performance Objectives" has the meaning set forth in
Section 10.1.
               2.32        "Performance Shares" means Shares issued or
transferred to an Eligible Individual under Section 10.3.
               2.33        "Performance Units" means Performance Units granted
to an Eligible Individual under Section 10.2.
               2.34        "Plan" means the Department 56, Inc. 1997 Stock
Incentive Plan, as amended from time to time.

<Page>

               2.35        "Pooling Transaction" means an acquisition of or by
the Company in a transaction which is intended to be treated as a "pooling of
interests" under generally accepted accounting principles.
               2.36        "Restricted Stock" means Shares issued or transferred
to an Eligible Individual pursuant to Section 9.
               2.37        "Shares" means the common stock, par value $.01 per
share, of the Company.
               2.38        "Stock Appreciation Right" means a right to receive
all or some portion of the increase in the value of the Shares as provided in
Section 8 hereof.
               2.39        "Stockholders Agreement" means a stockholders
agreement governing the rights, duties and obligations of present or future
employees or directors, as the case may be, of the Company or its Subsidiaries
with respect to Shares granted or sold to such persons, or issued pursuant to
options or other awards granted to such persons, in such form as is in use by
the Company at the time of exercise of an Option or any part thereof or the
issuance of Shares pursuant to an Award and which the Company elects to require
an Optionee or Grantee to execute in connection with the issuance of Shares.
               2.40        "Subsidiary" means any corporation which is a
subsidiary corporation (within the meaning of Section 424(f) of the Code) with
respect to the Company.
               2.41        "Successor Corporation" means a corporation, or a
parent or subsidiary thereof within the meaning of Section 424(a) of the Code,
which issues or assumes a stock option in a transaction to which Section 424(a)
of the Code applies.
               2.42        "Ten-Percent Stockholder" means an Eligible
Individual, who, at the time an Incentive Stock Option is to be granted to him
or her, owns (within the meaning of Section 422(b)(6) of the Code) stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company, or of a Parent or a Subsidiary.

<Page>

                  3.       ADMINISTRATION.
               3.1         The Plan shall be administered by the Committee which
shall hold meetings at such times as may be necessary for the proper
administration of the Plan. The Committee shall keep minutes of its meetings.
Except as provided in Section 3.3, a quorum shall consist of not less than two
members of the Committee and a majority of a quorum may authorize any action.
Any decision or determination reduced to writing and signed by a majority of all
of the members of the Committee shall be as fully effective as if made by a
majority vote at a meeting duly called and held. Except as provided in Section
3.3, the Committee shall consist of at least two (2) Directors and may consist
of the entire Board; PROVIDED, HOWEVER, that (A) except as provided in clause
(B) below, (i) if the Committee consists of less than the entire Board, each
member shall be a Nonemployee Director and (ii) to the extent necessary for any
Option or Award intended to qualify as performance-based compensation under
Section 162(m) of the Code to so qualify, each member of the Committee, whether
or not it consists of the entire Board, shall be an Outside Director and (B) the
Board may, by resolution, authorize a committee consisting of one or more
Directors to make grants of Employee Options to Eligible Individuals who are not
officers of the Company, subject to such restrictions and limitations as the
Board shall set forth in such resolution and as otherwise provided in the Plan.
No member of the Committee shall be liable for any action, failure to act,
determination or interpretation made in good faith with respect to this Plan or
any transaction hereunder, except for liability arising from his or her own
willful misfeasance, gross negligence or reckless disregard of his or her
duties. The Company hereby agrees to indemnify each member of the Committee for
all costs and expenses and, to the extent permitted by applicable law, any
liability incurred in connection with defending against, responding to,
negotiating for the settlement of or otherwise dealing with any claim, cause of
action or dispute of any kind arising in connection with any actions in
administering this Plan or in authorizing or denying authorization to any
transaction hereunder.
               3.2         Subject to the express terms and conditions set forth
herein, the Committee shall have the power from time to time to:
                            (a) determine those Eligible Individuals to whom
                  Employee Options shall be granted under the Plan and the
                  number of such Employee Options to be granted and to prescribe
                  the terms and conditions (which need not be identical) of each
                  such Employee Option, including the purchase price per Share
                  subject to each Employee Option, and make any amendment or
                  modification to any Option Agreement consistent with the terms
                  of the Plan;
                            (b) select those Eligible Individuals to whom Awards
                  shall be granted under the Plan and to determine the number of
                  Stock Appreciation Rights, Performance Units, Performance
                  Shares, Shares of

<Page>

                  Restricted Stock and/or Dividend Equivalent Rights to be
                  granted pursuant to each Award, the terms and conditions of
                  each Award, including the restrictions or Performance
                  Objectives relating to such Units or Shares, the maximum value
                  of each Performance Unit and Performance Share and make any
                  amendment or modification to any Agreement consistent with the
                  terms of the Plan;

                            (c) to construe and interpret the Plan and the
                  Options and Awards granted hereunder and to establish, amend
                  and revoke rules and regulations for the administration of the
                  Plan, including, but not limited to, correcting any defect or
                  supplying any omission, or reconciling any inconsistency in
                  the Plan or in any Agreement, in the manner and to the extent
                  it shall deem necessary or advisable so that the Plan complies
                  with applicable law including Rule 16b-3 under the Exchange
                  Act and the Code to the extent applicable, and otherwise to
                  make the Plan fully effective. All decisions and
                  determinations by the Committee in the exercise of this power
                  shall be final, binding and conclusive upon the Company, its
                  Subsidiaries, the Optionees and Grantees and all other persons
                  having any interest therein;
                            (d) to determine the duration and purposes for
                  leaves of absence which may be granted to an Optionee or
                  Grantee on an individual basis without constituting a
                  termination of employment or service for purposes of the Plan;
                            (e) to exercise its discretion with respect to the
                  powers and rights granted to it as set forth in the Plan; and
                            (f) generally, to exercise such powers and to
                  perform such acts as are deemed necessary or advisable to
                  promote the best interests of the Company with respect to the
                  Plan.
               3.3                  BOARD RESERVATION AND DELEGATION.
                            (a) The Board may, in its discretion, reserve to
                  itself or delegate to another committee of the Board any or
                  all of the authority and responsibility of the Committee with
                  respect to Options and Awards granted hereunder to Eligible
                  Individuals who are not subject to Section 16 of the Exchange
                  Act or Section 162(m) of the Code at the time any such
                  delegated authority or responsibility is exercised. Such other
                  committee may consist of one or more directors who may, but
                  need not be, officers or employees of the Company or any of
                  its Subsidiaries. To the extent that the Board has reserved to
                  itself or delegated the authority and responsibility of the
                  Committee to such other committee, all references to the
                  Committee in the Plan shall be to the Board or to such other
                  committee.

<Page>

                            (b) The Board may, by resolution, authorize a
                  committee (the "Director Option Grant Committee") consisting
                  of one or more directors of the Company to make grants of
                  Director Options which are intended to satisfy the conditions
                  for exemption from Section 16b of the Exchange Act pursuant to
                  Rule 16b-3(d)(3). The authority of the Director Option Grant
                  Committee shall be subject to such restrictions and
                  limitations as the Board shall set forth in such resolution
                  and as otherwise provided in the Plan. References to the term
                  Committee in Section 6 shall be deemed to include the Director
                  Option Grant Committee wherever it is used insofar as it
                  relates to the Committee's authority and responsibility to
                  make grants and establish the terms of Director Options but
                  only to the extent the Director Option Grant Committee is
                  acting within the scope of its authority as established by the
                  Board.
                  4.       STOCK SUBJECT TO THE PLAN; GRANT LIMITATIONS.
               4.1         The maximum number of Shares that may be made the
subject of Options and Awards granted under the Plan is 1,500,000. The
maximum number of Shares that any Eligible Individual may receive during the
term of the Plan in respect of Options and Awards may not exceed 500,000
Shares. The maximum dollar amount of cash or the fair market value of Shares
that any Eligible Individual may receive during the term of the Plan in
respect of Performance Units denominated in dollars may not exceed
$5,000,000. Upon a Change in Capitalization the maximum number of Shares
referred to in the first two sentences of this Section 4.1 shall be adjusted
in number and kind pursuant to Section 13. The Company shall reserve for the
purposes of the Plan, out of its authorized but unissued Shares or out of
Shares held in the Company's treasury, or partly out of each, such number of
Shares as shall be determined by the Board.
               4.2         Upon the granting of an Option or an Award, the
number of Shares available under Section 4.1 for the granting of further Options
and Awards shall be reduced as follows:
                            (a) In connection with the granting of an Option or
                  an Award (other than the granting of a Performance Unit
                  denominated in dollars), the number of Shares shall be reduced
                  by the number of Shares in respect of which the Option or
                  Award is granted or denominated.
                            (b) In connection with the granting of a Performance
                  Unit denominated in dollars, the number of Shares shall be
                  reduced by an amount equal to the quotient of (i) the dollar
                  amount in which the Performance Unit is denominated, divided
                  by (ii) the Fair Market Value of a Share on the date the
                  Performance Unit is granted.
               4.3         Whenever any outstanding Option or Award or portion
thereof expires, is cancelled or is otherwise terminated for any reason without
having

<Page>

been exercised or payment having been made in respect of the entire Option or
Award, the Shares allocable to the expired, cancelled or otherwise terminated
portion of the Option or Award may again be the subject of Options or Awards
granted hereunder.
                  5.       OPTION GRANTS FOR ELIGIBLE INDIVIDUALS.
               5.1         AUTHORITY OF COMMITTEE. Subject to the provisions of
the Plan and to Section 4.1 above, the Committee shall have full and final
authority to select those Eligible Individuals who will receive Employee Options
and the terms and conditions of the grant to such Eligible Individuals shall be
set forth in an Agreement; provided, however, that no person shall receive any
Incentive Stock Options unless he or she is an employee of the Company, a Parent
or a Subsidiary at the time the Incentive Stock Option is granted.
               5.2         PURCHASE PRICE. The purchase price or the manner in
which the purchase price is to be determined for Shares under each Employee
Option shall be determined by the Committee and set forth in the Agreement;
provided, however, that the purchase price per Share under each Employee
Incentive Stock Option shall not be less than 100% of the Fair Market Value of a
Share on the date the Option is granted (110% in the case of an Incentive Stock
Option granted to a Ten-Percent Stockholder).
               5.3         MAXIMUM DURATION. Employee Options granted hereunder
shall be for such term as the Committee shall determine, provided that no Option
shall be exercisable after the expiration of ten (10) years from the date it is
granted (five (5) years in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder). The Committee may, subsequent to the granting of any
Employee Option, extend the term thereof but in no event shall the term as so
extended exceed the maximum term provided for in the preceding sentence.
               5.4         VESTING. Subject to Section 7.4 hereof, each Employee
Option shall become exercisable in such installments (which need not be equal)
and at such times as may be designated by the Committee and set forth in the
Agreement. To the extent not exercised, installments shall accumulate and be
exercisable, in whole or in part, at any time after becoming exercisable, but
not later than the date the Employee Option expires. The Committee may
accelerate the exercisability of any Employee Option or portion thereof at any
time.
               5.5         MODIFICATION OR SUBSTITUTION. The Committee may, in
its discretion, modify outstanding Employee Options or accept the surrender of
outstanding Employee Options (to the extent not exercised) and grant new
Employee Options in substitution for them. Notwithstanding the foregoing, no
modification of an Employee Option shall adversely alter or impair any rights or
obligations under the Employee Option without the Optionee's consent.
                  6.       ELIGIBLE DIRECTOR PROVISIONS.
               6.1         OPTION GRANTS FOR ELIGIBLE DIRECTORS. Subject to the
provisions

<Page>

of the Plan and to Section 4.1, the Committee may grant Director Options to any
Eligible Director on such terms and conditions, including option price,
exercisability and duration, as the Committee in its discretion shall determine.
The Committee shall determine the number of Shares subject to each Director
Option.
              6.2          ELECTION TO RECEIVE SHARES IN LIEU OF DIRECTORS'
FEES.
                            (a) ELECTION. Each Eligible Director may elect, on a
                  form provided for such purpose by the Committee, to have all
                  or any part (but only in 25% increments) of his or her
                  Directors' Fees converted into, and transferred to him or her,
                  in the form of Shares (an "Election"). For purposes of this
                  Section 6.2, "Directors' Fees" means all cash annual retainer
                  and meeting fees payable by the Company to an Eligible
                  Director with respect to services rendered by such Eligible
                  Director.
                            (b) TIME OF ELECTION; EFFECTIVE DATE OF ELECTION. An
                  Eligible Director may make an Election at any time during any
                  particular year during his or her directorship. An Election
                  made on or prior to June 10 shall be effective with respect to
                  Directors' Fees payable on or after July 1 of such year. An
                  Election made on or prior to December 10 shall be effective
                  with respect to Directors' Fees payable on or after January 1
                  of the following year
          .                 (c) SHARES RECEIVED IN LIEU OF FEES. On each date
                  following the effective date of an Election on which
                  Directors' Fees would otherwise be paid (a "Director Payment
                  Date"), the Directors' Fees that an Eligible Director would
                  have received but for his or her Election shall be converted
                  into the right to receive a number of Shares with a Fair
                  Market Value (determined as of the Director Payment Date)
                  equal to 110% of such Directors' Fees. Shares shall be issued
                  by the Company to an Eligible Director who has made an
                  Election as promptly as practicable following each Director
                  Payment Date.
                  (d)           ELECTION EFFECTIVE UNTIL REVOKED. An Eligible
                  Director's Election shall remain effective until revoked. An
                  Eligible Director may revoke his or her Election (a
                  "Revocation") on a form provided for such purpose by the
                  Committee at any time during any particular year during his or
                  her directorship. A Revocation made on or prior to June 10
                  shall be effective with respect to Directors' Fees payable on
                  or after July 1 of such year. A Revocation made on or prior to
                  December 10 shall be effective with respect to Directors' Fees
                  payable on or after January 1 of the following year.

<Page>

                           6.3      LIMITATIONS ON AMENDMENT; MODIFICATION.
The provisions in this Section 6 shall not be amended more than once every six
months, other than to comport with changes in the Code or the rules and
regulations thereunder. No modification of a Director Option shall adversely
alter or impair any rights or obligations under such Director Option without the
Optionee's consent nor shall any modification reduce or have the effect of
reducing the per Share purchase price of any outstanding Director Option.
                  7.       TERMS AND CONDITIONS APPLICABLE TO ALL OPTIONS.
               7.1         NON-TRANSFERABILITY. No Option granted hereunder
shall be transferable by the Optionee to whom granted except 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 or her guardian or legal
representative. The terms of such Option shall be final, binding and conclusive
upon the beneficiaries, executors, administrators, heirs and successors of the
Optionee.
               7.2         METHOD OF EXERCISE. The exercise of an Option shall
be made only by a written notice delivered in person or by mail to the Secretary
of the Company at the Company's principal executive office, specifying the
number of Shares to be purchased and accompanied by payment therefor and
otherwise in accordance with the Agreement pursuant to which the Option was
granted and, unless the Committee determines otherwise, a fully executed
Stockholders Agreement. The purchase price for any Shares purchased pursuant to
the exercise of an Option shall be paid in either of the following forms (or any
combination thereof): (i) cash or (ii) the transfer of Shares to the Company
upon such terms and conditions as determined by the Committee. Notwithstanding
the foregoing, (i) the Committee shall have discretion to determine at the time
of grant of each Employee Option or at any later date (up to and including the
date of exercise) the form of payment acceptable in respect of the exercise of
such Employee Option and (ii) Options may be exercised pursuant to such cashless
exercise procedures which are, from time to time, deemed acceptable by the
Committee. The written notice pursuant to this Section 7.2 may also provide
instructions from the Optionee to the Company that upon receipt of the purchase
price in cash from the Optionee's broker or dealer, designated as such on the
written notice, in payment for any Shares purchased pursuant to the exercise of
an Option, the Company shall issue such Shares directly to the designated broker
or dealer. Any Shares transferred to the Company as payment of the purchase
price under an Option shall be valued at their Fair Market Value on the day
preceding the date of exercise of such Option. If requested by the Committee,
the Optionee shall deliver the Agreement evidencing the Option to the Secretary
of the Company who shall endorse thereon a notation of such exercise and return
such Agreement to the Optionee. No fractional Shares (or cash in lieu thereof)
shall be issued upon exercise of an Option and the number of Shares that may be
purchased upon

<Page>

exercise shall be rounded to the nearest number of whole Shares.
               7.3          RIGHTS OF OPTIONEES. No Optionee shall be deemed for
any purpose to be the owner of any Shares subject to any Option unless and until
(i) the Option shall have been exercised pursuant to the terms thereof, (ii) the
Company shall have issued and delivered the Shares to the Optionee and (iii) the
Optionee's name shall have been entered as a stockholder of record on the books
of the Company. Thereupon, the Optionee shall have full voting, dividend and
other ownership rights with respect to such Shares, subject to such terms and
conditions as may be set forth in the applicable Agreement.
               7.4          EFFECT OF CHANGE IN CONTROL. In the event of a
Change in Control, all Options outstanding on the date of such Change in Control
shall become immediately and fully exercisable. In addition, to the extent set
forth in an Agreement evidencing the grant of an Option, an Optionee will be
permitted to surrender to the Company for cancellation within sixty (60) days
after such Change in Control, any Option or portion of an Option to the extent
not yet exercised and the Optionee will be entitled to receive a cash payment in
an amount equal to the excess, if any, of (x) (A) in the case of a Nonqualified
Stock Option, the greater of (1) the Fair Market Value, on the date preceding
the date of surrender, of the Shares subject to the Option or portion thereof
surrendered or (2) the Adjusted Fair Market Value of the Shares subject to the
Option or portion thereof surrendered or (B) in the case of an Incentive Stock
Option, the Fair Market Value, on the date preceding the date of surrender, of
the Shares subject to the Option or portion thereof surrendered, over (y) the
aggregate purchase price for such Shares under the Option or portion thereof
surrendered. In the event an Optionee's employment with, or service as a
Director of, the Company is terminated by the Company within two years following
a Change in Control each Option held by the Optionee that was exercisable as of
the date of termination of the Optionee's employment or service shall remain
exercisable for a period ending not before the earlier of (A) the first
anniversary of the termination of the Optionee's employment or service or (B)
the expiration of the stated term of the Option.
                  8.       STOCK APPRECIATION RIGHTS. The Committee may, in its
discretion, either alone or in connection with the grant of an Employee Option,
grant Stock Appreciation Rights in accordance with the Plan, the terms and
conditions of which shall be set forth in an Agreement. If granted in connection
with an Employee Option, a Stock Appreciation Right shall cover the same Shares
covered by the Employee Option (or such lesser number of Shares as the Committee
may determine) and shall, except as provided in this Section 8, be subject to
the same terms and conditions as the related Employee Option.
               8.1         TIME OF GRANT.  A Stock Appreciation Right may be
granted (i) at any time if unrelated to an Option, or (ii) if related to an
Employee Option, either at

<Page>

the time of grant, or at any time thereafter during the term of the Option.

               8.2         STOCK APPRECIATION RIGHT RELATED TO AN EMPLOYEE
OPTION.
                    (a) EXERCISE. A Stock Appreciation Right granted in
connection with an Employee Option shall be exercisable at such time or times
and only to the extent that the related Employee Option is exercisable, and will
not be transferable except to the extent the related Employee Option is
transferable. A Stock Appreciation Right granted in connection with an Incentive
Stock Option shall be exercisable only if the Fair Market Value of a Share on
the date of exercise exceeds the purchase price specified in the related
Incentive Stock Option Agreement.
                    (b) AMOUNT PAYABLE. Upon the exercise of a Stock
Appreciation Right related to an Employee Option, the Grantee shall be entitled
to receive an amount determined by multiplying (A) the excess of the Fair Market
Value of a Share on the date preceding the date of exercise of such Stock
Appreciation Right over the per Share purchase price under the related Employee
Option, by (B) the number of Shares as to which such Stock Appreciation Right is
being exercised. Notwithstanding the foregoing, the Committee may limit in any
manner the amount payable with respect to any Stock Appreciation Right by
including such a limit in the Agreement evidencing the Stock Appreciation Right
at the time it is granted.
                    (c) TREATMENT OF RELATED OPTIONS AND STOCK APPRECIATION
RIGHTS UPON EXERCISE. Upon the exercise of a Stock Appreciation Right granted in
connection with an Employee Option, the Employee Option shall be cancelled to
the extent of the number of Shares as to which the Stock Appreciation Right is
exercised, and upon the exercise of an Employee Option granted in connection
with a Stock Appreciation Right or the surrender of such Employee Option
pursuant to Section 7.4, the Stock Appreciation Right shall be cancelled to the
extent of the number of Shares as to which the Employee Option is exercised or
surrendered.
               8.3         STOCK APPRECIATION RIGHT UNRELATED TO AN OPTION. The
Committee may grant to Eligible Individuals Stock Appreciation Rights unrelated
to Options. Stock Appreciation Rights unrelated to Options shall contain such
terms and conditions as to exercisability (subject to Section 8.7), vesting and
duration as the Committee shall determine, but in no event shall they have a
term of greater than ten (10) years. Upon exercise of a Stock Appreciation Right
unrelated to an Option, the Grantee shall be entitled to receive an amount
determined by multiplying (A) the excess of the Fair Market Value of a Share on
the date preceding the date of exercise of such Stock Appreciation Right over
the Fair Market Value of a Share on the date the Stock Appreciation Right was
granted, by (B) the number of Shares as to which the Stock Appreciation Right is
being exercised. Notwithstanding the foregoing, the Committee may limit in any
manner the amount payable with respect to any Stock Appreciation Right by
including such a limit in the Agreement evidencing the Stock Appreciation Right
at

<Page>

the time it is granted.
               8.4         METHOD OF EXERCISE. Stock Appreciation Rights shall
be exercised by a Grantee only by a written notice delivered in person or by
mail to the Secretary of the Company at the Company's principal executive
office, specifying the number of Shares with respect to which the Stock
Appreciation Right is being exercised. If requested by the Committee, the
Grantee shall deliver the Agreement evidencing the Stock Appreciation Right
being exercised and the Agreement evidencing any related Employee Option to the
Secretary of the Company who shall endorse thereon a notation of such exercise
and return such Agreement to the Grantee.
               8.5         FORM OF PAYMENT. Payment of the amount determined
under Sections 8.2(b) or 8.3 may be made in the discretion of the Committee,
solely in whole Shares in a number determined at their Fair Market Value on the
date preceding the date of exercise of the Stock Appreciation Right, or solely
in cash, or in a combination of cash and Shares. If the Committee decides to
make full payment in Shares and the amount payable results in a fractional
Share, payment for the fractional Share will be made in cash.
               8.6         MODIFICATION OR SUBSTITUTION. Subject to the terms of
the Plan, the Committee may modify outstanding Awards of Stock Appreciation
Rights or accept the surrender of outstanding Awards of Stock Appreciation
Rights (to the extent not exercised) and grant new Awards in substitution for
them. Notwithstanding the foregoing, no modification of an Award shall adversely
alter or impair any rights or obligations under the Agreement without the
Grantee's consent.
               8.7         EFFECT OF CHANGE IN CONTROL. In the event of a Change
in Control, all Stock Appreciation Rights shall become immediately and fully
exercisable. Notwithstanding Sections 8.3 and 8.5, to the extent set forth in an
Agreement evidencing the grant of a Stock Appreciation Right unrelated to an
Option, upon the exercise of such a Stock Appreciation Right or any portion
thereof during the sixty (60) day period following a Change in Control, the
amount payable shall be in cash and shall be an amount equal to the excess, if
any, of (A) the greater of (x) the Fair Market Value, on the date preceding the
date of exercise, of the Shares subject to Stock Appreciation Right or portion
thereof exercised and (y) the Adjusted Fair Market Value, on the date preceding
the date of exercise, of the Shares over (B) the aggregate Fair Market Value, on
the date the Stock Appreciation Right was granted, of the Shares subject to the
Stock Appreciation Right or portion thereof exercised. In the event an
Optionee's employment with the Company is terminated by the Company within two
years following a Change in Control each Option held by the Optionee that was
exercisable as of the date of termination of the Optionee's employment or
service shall remain exercisable for a period ending not before the earlier of
(A) the first anniversary of the termination of the Optionee's employment or
service or (B) the expiration of the stated term of the Option.

<Page>

                  9.       RESTRICTED STOCK.
               9.1         GRANT. The Committee may grant to Eligible
Individuals Awards of Restricted Stock, and may issue Shares of Restricted Stock
in payment in respect of vested Performance Units (as hereinafter provided in
Section 10.2), which shall be evidenced by an Agreement between the Company and
the Grantee. Each Agreement shall contain such restrictions, terms and
conditions as the Committee may, in its discretion, determine and (without
limiting the generality of the foregoing) such Agreements may require that an
appropriate legend be placed on Share certificates. Awards of Restricted Stock
shall be subject to the terms and provisions set forth below in this Section 9.
               9.2         RIGHTS OF GRANTEE. Shares of Restricted Stock granted
pursuant to an Award hereunder shall be issued in the name of the Grantee as
soon as reasonably practicable after the Award is granted provided that the
Grantee has executed an Agreement evidencing the Award, the appropriate blank
stock powers and, in the discretion of the Committee, an escrow agreement and
any other documents which the Committee may require as a condition to the
issuance of such Shares. If a Grantee shall fail to execute the Agreement
evidencing a Restricted Stock Award, the appropriate blank stock powers and, in
the discretion of the Committee, an escrow agreement and any other documents
which the Committee may require within the time period prescribed by the
Committee at the time the Award is granted, the Award shall be null and void. At
the discretion of the Committee, Shares issued in connection with a Restricted
Stock Award shall be deposited together with the stock powers with an escrow
agent (which may be the Company) designated by the Committee. Unless the
Committee determines otherwise and as set forth in the Agreement, upon delivery
of the Shares to the escrow agent, the Grantee shall have all of the rights of a
stockholder with respect to such Shares, including the right to vote the Shares
and to receive all dividends or other distributions paid or made with respect to
the Shares.
               9.3         NON-TRANSFERABILITY. Until the restrictions upon the
Shares of Restricted Stock awarded to a Grantee shall have lapsed in the manner
set forth in Section 9.4, such Shares shall not be sold, transferred or
otherwise disposed of and shall not be pledged or otherwise hypothecated, nor
shall they be delivered to the Grantee.
               9.4         LAPSE OF RESTRICTIONS.
                    (a) GENERALLY. Restrictions upon Shares of Restricted Stock
awarded hereunder shall lapse at such time or times and on such terms and
conditions as the Committee may determine, which restrictions shall be set forth
in the Agreement evidencing the Award.
                    (b) EFFECT OF CHANGE IN CONTROL. The Committee shall
determine at the time of the grant of an Award of Restricted Stock the extent to
which, if any, the restrictions upon Shares of Restricted Stock shall lapse upon
a Change in

<Page>

Control. The Agreement evidencing the Award shall set forth such provisions.
               9.5         MODIFICATION OR SUBSTITUTION. Subject to the terms of
the Plan, the Committee may modify outstanding Awards of Restricted Stock or
accept the surrender of outstanding Shares of Restricted Stock (to the extent
the restrictions on such Shares have not yet lapsed) and grant new Awards in
substitution for them. Notwithstanding the foregoing, no modification of an
Award shall adversely alter or impair any rights or obligations under the
Agreement without the Grantee's consent.
               9.6         TREATMENT OF DIVIDENDS. At the time an Award of
Shares of Restricted Stock is granted, the Committee may, in its discretion,
determine that the payment to the Grantee of dividends, or a specified portion
thereof, declared or paid on such Shares by the Company shall be (i) deferred
until the lapsing of the restrictions imposed upon such Shares and (ii) held by
the Company for the account of the Grantee until such time. In the event that
dividends are to be deferred, the Committee shall determine whether such
dividends are to be reinvested in Shares (which shall be held as additional
Shares of Restricted Stock) or held in cash. If deferred dividends are to be
held in cash, there may be credited at the end of each year (or portion thereof)
interest on the amount of the account at the beginning of the year at a rate per
annum as the Committee, in its discretion, may determine. Payment of deferred
dividends in respect of Shares of Restricted Stock (whether held in cash or as
additional Shares of Restricted Stock), together with interest accrued thereon,
if any, shall be made upon the lapsing of restrictions imposed on the Shares in
respect of which the deferred dividends were paid, and any dividends deferred
(together with any interest accrued thereon) in respect of any Shares of
Restricted Stock shall be forfeited upon the forfeiture of such Shares.

               9.7         DELIVERY OF SHARES.  Upon the lapse of the
restrictions on Shares of Restricted Stock, the Committee shall cause a stock
certificate to be delivered to the Grantee with respect to such Shares, free of
all restrictions hereunder.

<Page>

                  10.      PERFORMANCE AWARDS.
               10.1                 (a) PERFORMANCE OBJECTIVES. Performance
Objectives for Performance Awards may be expressed in terms of (i) earnings per
Share, (ii) pre-tax profits, (iii) operating income, (iv) EBIT, (v) EBITDA, (vi)
net earnings, (vii) return on equity or assets, (viii) revenues or (ix) any
combination of the foregoing. Performance Objectives may be in respect of the
performance of the Company and its Subsidiaries (which may be on a consolidated
basis), a Subsidiary or a Division. Performance Objectives may be absolute or
relative and may be expressed in terms of a progression within a specified
range. The Performance Objectives with respect to a Performance Cycle shall be
established in writing by the Committee by the earlier of (i) the date on which
a quarter of the Performance Cycle has elapsed or (ii) the date which is 90 days
after the commencement of the Performance Cycle, and in any event while the
performance relating to the Performance Objectives remain substantially
uncertain. At the time of the granting of a Performance Award and to the extent
permitted under Section 162(m) of the Code and the regulations thereunder, the
Committee may provide for the manner in which the Performance Objectives will be
measured to reflect the impact of specified corporate transactions,
extraordinary events, accounting changes and other similar events.
                                    (b) DETERMINATION OF PERFORMANCE.  Prior to
the vesting, payment, settlement or lapsing of any restrictions with respect to
any Performance Award made to a Grantee who is subject to Section 162(m) of the
Code, the Committee shall certify in writing that the applicable Performance
Objectives have been satisfied.
               10.2        PERFORMANCE UNITS. The Committee, in its discretion,
may grant Awards of Performance Units to Eligible Individuals, the terms and
conditions of which shall be set forth in an Agreement between the Company and
the Grantee. Performance Units may be denominated in Shares or a specified
dollar amount and, contingent upon the attainment of specified Performance
Objectives within the Performance Cycle, represent the right to receive payment
as provided in Section 10.2(b) of (i) in the case of Share-denominated
Performance Units, the Fair Market Value of a Share on the date the Performance
Unit was granted, the date the Performance Unit became vested or any other date
specified by the Committee, (ii) in the case of dollar-denominated Performance
Units, the specified dollar amount or (iii) a percentage (which may be more than
100%) of the amount described in clause (i) or (ii) depending on the level of
Performance Objective attainment; PROVIDED, HOWEVER, that the Committee may at
the time a Performance Unit is granted, specify a maximum amount payable in
respect of a vested Performance Unit. Each Agreement shall specify the number of
the Performance Units to which it relates, the Performance Objectives which must
be satisfied in order for the Performance Units to vest and the Performance
Cycle within which such Performance Objectives must be satisfied.

<Page>

                    (a) VESTING AND FORFEITURE. Subject to Section 10.1(b) and
10.4, a Grantee shall become vested with respect to the Performance Units to the
extent that the Performance Objectives set forth in the Agreement are satisfied
for the Performance Cycle.
                    (b) PAYMENT OF AWARDS. Payment to Grantees in respect of
vested Performance Units shall be made within sixty (60) days after the last day
of the Performance Cycle to which such Award relates unless the Agreement
evidencing the Award provides for the deferral of payment, in which event the
terms and conditions of the deferral shall be set forth in the Agreement.
Subject to Section 10.4, such payments may be made entirely in Shares valued at
their Fair Market Value as of the day preceding the date of payment or such
other date specified by the Committee, entirely in cash, or in such combination
of Shares and cash as the Committee in its discretion, shall determine at any
time prior to such payment; PROVIDED, HOWEVER, that if the Committee in its
discretion determines to make such payment entirely or partially in Shares of
Restricted Stock, the Committee must determine the extent to which such payment
will be in Shares of Restricted Stock and the terms of such Restricted Stock at
the time the Award is granted.
               10.3        PERFORMANCE SHARES. The Committee, in its discretion,
may grant Awards of Performance Shares to Eligible Individuals, the terms and
conditions of which shall be set forth in an Agreement between the Company
and the Grantee. Each Agreement may require that an appropriate legend be
placed on Share certificates. Awards of Performance Shares shall be subject
to the following terms and provisions:
                    (a) RIGHTS OF GRANTEE. The Committee shall provide at the
time an Award of Performance Shares is made, the time or times at which the
actual Shares represented by such Award shall be issued in the name of the
Grantee; PROVIDED, HOWEVER, that no Performance Shares shall be issued until the
Grantee has executed an Agreement evidencing the Award, the appropriate blank
stock powers and, in the discretion of the Committee, an escrow agreement and
any other documents which the Committee may require as a condition to the
issuance of such Performance Shares. If a Grantee shall fail to execute the
Agreement evidencing an Award of Performance Shares, the appropriate blank stock
powers and, in the discretion of the Committee, an escrow agreement and any
other documents which the Committee may require within the time period
prescribed by the Committee at the time the Award is granted, the Award shall be
null and void. At the discretion of the Committee, Shares issued in connection
with an Award of Performance Shares shall be deposited together with the stock
powers with an escrow agent (which may be the Company) designated by the
Committee. Except as restricted by the terms of the Agreement, upon delivery of
the Shares to the escrow agent, the Grantee shall have, in the discretion of the
Committee, all of the rights of a stockholder with respect to such Shares,
including the right to vote the Shares and to receive all dividends or other
distributions paid or made with respect to the Shares.

<Page>

                    (b) NON-TRANSFERABILITY. Until any restrictions upon the
Performance Shares awarded to a Grantee shall have lapsed in the manner set
forth in Sections 10.3(c) or 10.4, such Performance Shares shall not be sold,
transferred or otherwise disposed of and shall not be pledged or otherwise
hypothecated, nor shall they be delivered to the Grantee. The Committee may also
impose such other restrictions and conditions on the Performance Shares, if any,
as it deems appropriate.
                    (c) LAPSE OF RESTRICTIONS. Subject to Sections 10.1(b) or
10.4, restrictions upon Performance Shares awarded hereunder shall lapse and
such Performance Shares shall become vested at such time or times and on such
terms, conditions and satisfaction of Performance Objectives as the Committee
may, in its discretion, determine at the time an Award is granted.
                    (d) TREATMENT OF DIVIDENDS. At the time the Award of
Performance Shares is granted, the Committee may, in its discretion, determine
that the payment to the Grantee of dividends, or a specified portion thereof,
declared or paid on actual Shares represented by such Award which have been
issued by the Company to the Grantee shall be (i) deferred until the lapsing of
the restrictions imposed upon such Performance Shares and (ii) held by the
Company for the account of the Grantee until such time. In the event that
dividends are to be deferred, the Committee shall determine whether such
dividends are to be reinvested in shares of Stock (which shall be held as
additional Performance Shares) or held in cash. If deferred dividends are to be
held in cash, there may be credited at the end of each year (or portion thereof)
interest on the amount of the account at the beginning of the year at a rate per
annum as the Committee, in its discretion, may determine. Payment of deferred
dividends in respect of Performance Shares (whether held in cash or in
additional Performance Shares), together with interest accrued thereon, if any,
shall be made upon the lapsing of restrictions imposed on the Performance Shares
in respect of which the deferred dividends were paid, and any dividends deferred
(together with any interest accrued thereon) in respect of any Performance
Shares shall be forfeited upon the forfeiture of such Performance Shares.
                    (e) DELIVERY OF SHARES. Upon the lapse of the restrictions
on Performance Shares awarded hereunder, the Committee shall cause a stock
certificate to be delivered to the Grantee with respect to such Shares, free of
all restrictions hereunder.
               10.4        EFFECT OF CHANGE IN CONTROL.  In the event of a
Change in Control:
                    (a) With respect to Performance Units, the Grantee shall (i)
become vested in a percentage of Performance Units as determined by the
Committee at the time of the Award of such Performance Units and as set forth in
the Agreement and (ii) be entitled to receive in respect of all Performance
Units which become vested as a result of a Change in Control, a cash payment
within ten (10) days after such Change in

<Page>

Control in an amount as determined by the Committee at the time of the Award of
such Performance Unit and as set forth in the Agreement.
                    (b) With respect to Performance Shares, restrictions shall
lapse immediately on all or a portion of the Performance Shares as determined by
the Committee at the time of the Award of such Performance Shares and as set
forth in the Agreement.
                    (c) The Agreements evidencing Performance Shares and
Performance Units shall provide for the treatment of such Awards (or portions
thereof) which do not become vested as the result of a Change in Control,
including, but not limited to, provisions for the adjustment of applicable
Performance Objectives.
               10.5        MODIFICATION OR SUBSTITUTION. Subject to the terms of
the Plan, the Committee may modify outstanding Performance Awards or accept the
surrender of outstanding Performance Awards and grant new Performance Awards in
substitution for them. Notwithstanding the foregoing, no modification of a
Performance Award shall adversely alter or impair any rights or obligations
under the Agreement without the Grantee's consent.
                  11.      DIVIDEND EQUIVALENT RIGHTS.
                           Dividend Equivalent Rights may be granted to Eligible
Individuals and Eligible Directors in tandem with an Option or Award or as a
separate Award. The terms and conditions applicable to each Dividend
Equivalent Right shall be specified in the Agreement under which the Dividend
Equivalent Right is granted. Amounts payable in respect of Dividend Equivalent
Rights may be payable currently or deferred until the lapsing of restrictions on
such Dividend Equivalent Rights or until the vesting, exercise, payment,
settlement or other lapse of restrictions on the Option or Award to which the
Dividend Equivalent Rights relate. In the event that the amount payable in
respect of Dividend Equivalent Rights are to be deferred, the Committee shall
determine whether such amounts are to be held in cash or reinvested in Shares or
deemed (notionally) to be reinvested in Shares. If amounts payable in respect of
Dividend Equivalent Rights are to be held in cash, there may be credited at the
end of each year (or portion thereof) interest on the amount of the account at
the beginning of the year at a rate per annum as the Committee, in its
discretion, may determine. Dividend Equivalent Rights may be settled in cash or
Shares or a combination thereof, in a single installment or multiple
installments.

<Page>

                  12.      EFFECT OF A TERMINATION OF EMPLOYMENT.
               The Agreement evidencing the grant of each Option and each Award
shall set forth the terms and conditions applicable to such Option or Award upon
a termination of the employment or service (or other change in the status) of
the Optionee or Grantee by the Company, a Subsidiary or a Division (including a
termination or change by reason of the sale of a Subsidiary or a Division),
which, except for Director Options, shall be as the Committee may, in its
discretion, determine at the time the Option or Award is granted or thereafter.
                  13.      ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
                    (a) In the event of a Change in Capitalization, the
Committee shall conclusively determine the appropriate adjustments, if any, to
(i) the maximum number and class of Shares or other stock or securities with
respect to which Options or Awards may be granted under the Plan, (ii) the
maximum number and class of Shares or other stock or securities with respect to
which Options or Awards may be granted to any Eligible Individual during the
term of the Plan, (iii) the number and class of Shares or other stock or
securities which are subject to outstanding Options or Awards granted under the
Plan and the purchase price therefor, if applicable, and (iv) the number and
class of Shares or other securities in respect of which Director Options are to
be granted under Section 6.
                    (b) Any such adjustment in the Shares or other stock or
securities subject to outstanding Incentive Stock Options (including any
adjustments in the purchase price) shall be made in such manner as not to
constitute a modification as defined by Section 424(h)(3) of the Code and only
to the extent otherwise permitted by Sections 422 and 424 of the Code.
                    (c) If, by reason of a Change in Capitalization, a Grantee
of an Award shall be entitled to, or an Optionee shall be entitled to exercise
an Option with respect to, new, additional or different shares of stock or
securities, such new additional or different shares shall thereupon be subject
to all of the conditions, restrictions and performance criteria which were
applicable to the Shares subject to the Award or Option, as the case may be,
prior to such Change in Capitalization.
                  14.      EFFECT OF CERTAIN TRANSACTIONS. Subject to Sections
7.4, 8.7, 9.4(b) and 10.4 or as otherwise provided in an Agreement, in the
event of (i) the liquidation or dissolution of the Company or (ii) a merger
or consolidation of the Company (a "Transaction"), the Plan and the Options
and Awards issued hereunder shall continue in effect in accordance with their
respective terms, except that following a Transaction each Optionee and
Grantee shall be entitled to receive in respect of each Share subject to any
outstanding Options or Awards, as the case may be, upon exercise of any
Option or payment or transfer in respect of any Award, the same number and
kind of stock, securities, cash, property, or other consideration that each
holder of a Share was entitled

<Page>

to receive in the Transaction in respect of a Share; PROVIDED, HOWEVER, that
such stock, securities, cash, property, or other consideration shall remain
subject to all of the conditions, restrictions and performance criteria which
were applicable to the Options and Awards prior to such Transaction.
                  15.      INTERPRETATION.
               (a) The Plan is intended to comply with Rule 16b-3 promulgated
under the Exchange Act and the Committee shall interpret and administer the
provisions of the Plan or any Agreement in a manner consistent therewith. Any
provisions inconsistent with such Rule shall be inoperative and shall not affect
the validity of the Plan.
               (b) Unless otherwise expressly stated in the relevant Agreement,
each Option, Stock Appreciation Right and Performance Award granted under the
Plan is intended to be performance-based compensation within the meaning of
Section 162(m)(4)(C) of the Code. The Committee shall not be entitled to
exercise any discretion otherwise authorized hereunder with respect to such
Options or Awards if the ability to exercise such discretion or the exercise of
such discretion itself would cause the compensation attributable to such Options
or Awards to fail to qualify as performance-based compensation.
                  16.      POOLING TRANSACTIONS.
                           Notwithstanding anything contained in the Plan or any
Agreement to the contrary, in the event of a Change in Control which is intended
to constitute a Pooling Transaction, the Committee shall take such
actions, if any, as are specifically recommended by an independent accounting
firm retained by the Company to the extent reasonably necessary in order to
assure that the Pooling Transaction will qualify as such, including but not
limited to (i) deferring the vesting, exercise, payment, settlement or lapsing
of restrictions with respect to any Option or Award, (ii) providing that the
payment or settlement in respect of any Option or Award be made in the form of
cash, Shares or securities of a successor or acquirer of the Company, or a
combination of the foregoing and (iii) providing for the extension of the term
of any Option or Award to the extent necessary to accommodate the foregoing, but
not beyond the maximum term permitted for any Option or Award.
                  17.      TERMINATION AND AMENDMENT OF THE PLAN.
               The Plan shall terminate on the day preceding the tenth
anniversary of the date of its adoption by the Board and no Option or Award may
be granted thereafter. The Board may sooner terminate the Plan and the Board may
at any time and from time to time amend, modify or suspend the Plan; provided,
however, that:
                    (a) no such amendment, modification, suspension or
termination shall impair or adversely alter any Options or Awards theretofore
granted under the Plan, except with the consent of the Optionee or Grantee, nor

<Page>

shall any amendment, modification, suspension or termination deprive any
Optionee or Grantee of any Shares which he or she may have acquired through or
as a result of the Plan; and
                    (b) to the extent necessary under applicable law, no
amendment shall be effective unless approved by the stockholders of the Company
in accordance with applicable law.
                  18.      NON-EXCLUSIVITY OF THE PLAN.
               The adoption of the Plan by the Board shall not be construed as
amending, modifying or rescinding any previously approved incentive arrangement
or as creating any limitations on the power of the Board to adopt such other
incentive arrangements as it may deem desirable, including, without limitation,
the granting of stock options otherwise than under the Plan, and such
arrangements may be either applicable generally or only in specific cases.
                  19.      LIMITATION OF LIABILITY.
               As illustrative of the limitations of liability of the Company,
but not intended to be exhaustive thereof, nothing in the Plan shall be
construed to:
                           (i) give any person any right to be granted an Option
 or Award other than at the sole discretion of the Committee;
                          (ii) give any person any rights whatsoever with
respect to Shares except as specifically provided in the Plan;
                         (iii) limit in any way the right of the Company to
terminate the employment of any person at any time; or
                          (iv) be evidence of any agreement or understanding,
expressed or implied, that the Company will employ any person at any particular
rate of compensation or for any particular period of time.
                  20.      REGULATIONS AND OTHER APPROVALS; GOVERNING LAW.
               20.1        Except as to matters of federal law, this Plan and
the rights of all persons claiming hereunder shall be construed and determined
in accordance with the laws of the State of Delaware without giving effect to
conflicts of law principles.
               20.2        The obligation of the Company to sell or deliver
Shares with respect to Options and Awards granted under the Plan shall be
subject to all applicable laws, rules and regulations, including all applicable
federal and state securities laws, and the obtaining of all such approvals by
governmental agencies as may be deemed necessary or appropriate by the
Committee.
               20.3        The Board may make such changes as may be necessary
or appropriate to comply with the rules and regulations of any government
authority, or to obtain for Eligible Individuals granted Incentive Stock Options
the tax benefits under the applicable provisions of the Code and regulations
promulgated thereunder.
               20.4        (a) Each Option and Award is subject to the
requirement that, if at any time the Committee determines, in its discretion,
that the listing, registration

<Page>

or qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or Award or the
issuance of Shares, no Options or Awards shall be granted or payment made or
Shares issued, in whole or in part, unless listing, registration, qualification,
consent or approval has been effected or obtained free of any conditions as
acceptable to the Committee.
                           (b) Notwithstanding anything to the contrary
contained in the Plan or any Agreement, as a prerequisite to the granting,
vesting, payment, settlement or lapsing of restrictions with respect to an
Option or Award, the Committee may require the Optionee or Grantee, as the case
may be, to execute and deliver a Stockholders Agreement in a form acceptable to
the Committee.
               20.5        Notwithstanding anything contained in the Plan or any
Agreement to the contrary, in the event that the disposition of Shares acquired
pursuant to the Plan is not covered by a then current registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), and is not
otherwise exempt from such registration, such Shares shall be restricted against
transfer to the extent required by the Securities Act and Rule 144 or other
regulations thereunder. The Committee may require any individual receiving
Shares pursuant to an Option or Award granted under the Plan, as a condition
precedent to receipt of such Shares, to represent and warrant to the Company in
writing that the Shares acquired by such individual are acquired without a view
to any distribution thereof and will not be sold or transferred other than
pursuant to an effective registration thereof under said Act or pursuant to an
exemption applicable under the Securities Act or the rules and regulations
promulgated thereunder. The certificates evidencing any of such Shares shall be
appropriately amended to reflect their status as restricted securities as
aforesaid.
                  21.      MISCELLANEOUS.
               21.1        MULTIPLE AGREEMENTS. The terms of each Option or
Award may differ from other Options or Awards granted under the Plan at the same
time, or at some other time. The Committee may also grant more than one Option
or Award to a given Eligible Individual during the term of the Plan, either in
addition to, or in substitution for, one or more Options or Awards previously
granted to that Eligible Individual.
               21.2        WITHHOLDING OF TAXES.
                    (a) At such times as an Optionee or Grantee recognizes
taxable income in connection with the receipt of Shares or cash hereunder (a
"Taxable Event"), the Optionee or Grantee shall pay to the Company an amount
equal to the federal, state and local income taxes and other amounts as may be
required by law to be withheld by the Company in connection with the Taxable
Event (the "Withholding

<Page>

Taxes") prior to the issuance, or release from escrow, of such Shares or the
payment of such cash. The Company shall have the right to deduct from any
payment of cash to an Optionee or Grantee an amount equal to the Withholding
Taxes in satisfaction of the obligation to pay Withholding Taxes. In
satisfaction of the obligation to pay Withholding Taxes to the Company, the
Optionee or Grantee may make a written election (the "Tax Election"), which may
be accepted or rejected in the discretion of the Committee, to have withheld a
portion of the Shares then issuable to him or her having an aggregate Fair
Market Value equal to the Withholding Taxes; PROVIDED, HOWEVER, that the
Committee, by resolution, may provide that all Tax Elections related to Options
granted prior to the revocation of such resolution (by all or only specified
Optionees as set forth in such resolution) will be deemed to have been approved
without any subsequent action by the Committee.
                    (b) If an Optionee makes a disposition, within the meaning
of Section 424(c) of the Code and regulations promulgated thereunder, of any
Share or Shares issued to such Optionee pursuant to the exercise of an Incentive
Stock Option within the two-year period commencing on the day after the date of
the grant or within the one-year period commencing on the day after the date of
transfer of such Share or Shares to the Optionee pursuant to such exercise, the
Optionee shall, within ten (10) days of such disposition, notify the Company
thereof, by delivery of written notice to the Company at its principal executive
office.
                    (c) The Committee shall have the authority, at the time of
grant of an Option or Award under the Plan or at any time thereafter, to award
tax bonuses to designated Optionees or Grantees, to be paid upon their exercise
of Employee Options or payment in respect of Awards granted hereunder. The
amount of any such payments shall be determined by the Committee. The Committee
shall have full authority in its absolute discretion to determine the amount of
any such tax bonus and the terms and conditions affecting the vesting and
payment thereof.
                  22.      EFFECTIVE DATE. The effective date of the Plan shall
be as determined by the Board, subject only to the approval by the
affirmative vote of the holders of a majority of the securities of the
Company present, or represented, and entitled to vote at a meeting of
stockholders duly held in accordance with the applicable laws of the State of
Delaware within twelve (12) months of the adoption of the Plan by the Board.[Department 56, Inc. Letterhead] 

[Date]

[Name
of Officer]

[Address] 

Dear
________________________: 

        In
recognition of your contributions to Department 56, Inc. ("DFS" or the "Company") and the Company's desire to assure your continued services in your current position in the
event of a pending or actual Change in Control (as defined) of DFS, the Company's Board of Directors is pleased to offer you the Change of Control protection outlined in this letter agreement
("Agreement"). 

        1.    Term Of Agreement.    The Term of this Agreement shall commence on the date of this letter (the "Effective
Date") and end on the third anniversary of such date (the "Original Term"). The Original Term shall be automatically renewed for successive one-year terms (the "Renewal Terms") unless at
least 180 days prior to the expiration of the Original Term or any Renewal Term, either of us notifies the other in writing that you or we are electing to terminate this Agreement at the end of
the then current Term. "Term" shall mean the Original Term and all Renewal Terms. If a Change in Control occurs during the Term, the Term shall not expire earlier than two years from the date of the
Change in Control. 

        2.    Entitlement to Severance Benefits.    

        (a)    Cash Severance Benefit.    In the event your employment terminates (a "Termination") (1) for any reason
whatsoever (other than due to death, disability, retirement, or an involuntary termination for Cause) within one year following an Unapproved Change in Control or (2) without Cause or for Good
Reason (other than due to death, disability or retirement), in either case within two years following an Approved Change in Control, you shall be entitled to receive the sum of the following, payable
in a cash lump sum no later than 15 days after the Termination date: (i) Base Salary through the Termination date; (ii) an amount equal to 200% of the sum of (x) your Base
Salary; plus (y) the highest annual cash
bonus earned by you during the most recent 3 years, and (iii) pro rata annual incentive award at target for the year in which the Termination occurs. 

        (b)    Other Severance Benefits.    In addition to the benefits provided in Section 2(a), you shall also be
entitled to the following: (i) elimination of all restrictions on any restricted or deferred stock awards outstanding on the Termination date; (ii) immediate vesting of all outstanding
stock options and the right to exercise such stock options for 24 months (or the remainder of the exercise period, if less); (iii) immediate vesting of all restricted or deferred stock
awards and non-qualified retirement benefits; (iv) continued participation in all DFS welfare benefit plans at the same benefit level at which you were participating on the
Termination date for a period of 24 months unless and until the date or dates you receive substantially equivalent coverage from a subsequent employer. 

        (c)    Section 280(G) Gross-Up Protection.    In the event you become entitled to payments, all or
a portion of which become subject to tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any other similar tax, but not income tax of any
nature)("Excise Tax"), DFS shall pay you an additional amount ("Gross-Up Payment") such that the amount retained by you after reduction for any Excise Tax (including penalties or interest
thereon) equals the amount to be paid to you by DFS hereunder prior to the imposition of such Excise Tax ("Total Payments"), provided that in the event
the amount to be retained after imposition of the Excise tax is equal to or exceeds 80% of the Total Payments, no such Gross-Up payment shall be made to you by DFS. The amount of the
Gross-Up Payment shall be calculated by DFS' independent auditors. In the event that such Gross-Up Payment is finally determined to be less than the amount of any Excise Tax,
DFS shall pay an additional amount to you in respect of such deficiency (including any interest and penalties). In the event that such Gross-Up Payment is finally determined to exceed the
amount of any Excise Tax, you must promptly repay the entire amount of such excess Gross-Up Payment to DFS. 

 

        (d)    No Mitigation; No Offset.    In the event of any Termination, you shall be under no obligation to seek other
employment; and no amounts due to you under this Agreement shall be subject to offset due to any remuneration attributable to subsequent employment that you may obtain. 

        (e)    Exclusivity of Severance Payments; Release.    Except as provided in this Section 2, upon any
Termination of your employment during the Term, you shall not be entitled to any severance payments or severance benefits from DFS or any payments by DFS on account of any claim by you of wrongful
termination, including claims under any federal, state or local human and civil rights or labor laws. Termination payments and benefits made to you are conditioned upon your execution of a release
agreement, in a form reasonably satisfactory to DFS, releasing any and all claims arising out of your employment (other
than enforcement of this Agreement), any rights under DFS's incentive compensation and employee benefit plans, and any claim for any non-employment related tort for personal injury. 

        3.    Definitions.    For purposes of this Agreement, the following terms shall have the meanings ascribed to them. 

        (a)  An
"Approved Change in Control" is any Change in Control that is approved by the DFS Board of Directors in force immediately prior to the Change in Control. 

        (b)  "Base
Salary" means the annualized rate of pay in effect on the Termination date, provided that if a reduction in Base Salary is the basis for a Termination for Good
Reason, then "Base Salary" shall mean the rate of pay in effect immediately prior to such reduction. 

        (c)  "Cause"
shall exist if: (i) you are convicted of, or plead nolo contendere to, any felony which materially and
adversely impacts DFS' financial condition or reputation, (ii) you engage in conduct that constitutes willful gross neglect or willful gross misconduct in carrying out your duties which
materially and adversely impacts DFS' financial condition or reputation, or (iii) you violate Section 4 of this Agreement. 

        (d)  A
"Change in Control" shall be deemed to occur upon any of the following: (i) acquisition by any one "person" (as such term is defined in §3(a)(9) of
the Securities and Exchange Act of 1934, as amended, and used in §13(d) and 14(d) thereof, including "group" as defined in §13(d) thereof) of 20% or more of DFS' voting shares,
(ii) directors elected to the Board over any 24 month period not nominated by the DFS Nominating Committee represent 30% or more of the total number of directors constituting the Board
at the beginning of the period (for these purposes, a director "not nominated by the DFS Nominating Committee" shall include, without limitation, any individual(s) whose nomination results from an
actual or threatened proxy contest or whose initial assumption of office as a director occurs as a result of an actual or threatened proxy contest or other actual or threatened solicitation or
execution of proxies or consents by or on behalf of any "person(s)" other than the Company or the Board); (iii) any merger, consolidation or other corporate combination upon the completion of
which DFS shares do not represent more than 50% of the combined voting power of the resulting entity; and (iv) upon the sale of all or substantially all of the consolidated assets of DFS, other
than a distribution to shareholders. 

        (e)  "Confidential
Information" shall mean all information concerning the business of DFS relating to any of their products, product development, trade secrets, customers,
suppliers, finances, and business plans and strategies. Excluded from the definition of "Confidential Information" is information (i) that is or becomes part of the public domain, other than
through your breach of this Agreement, or (ii) regarding DFS' business or industry properly acquired by you in the course of your career as an employee in DFS' industry and independent of your 

2

 

employment by DFS. For this purpose, information known or available generally within the trade or industry of DFS shall be deemed to be known or available to the public. 

        (f)    "Good
Reason" shall mean your termination of your employment based upon one or more of the following events (except as a result of a prior termination): (i) any
material change in your position or responsibilities or assignment of duties materially inconsistent with your status prior to the Change of Control; (ii) any decrease in your Base Salary,
target annual incentive or long term incentive award opportunity, or equity grants; (iii) any breach of the terms of this Agreement by DFS after receipt of written notice from you and a
reasonable opportunity to cure such breach; (iv) DFS fails to obtain any successor entity's assumption of its obligations to you hereunder; or (v) upon relocation of you to a location
more than 50 miles from our current headquarters. 

        (g)  An
"Unapproved Change in Control" is any Change in Control that is not approved by the DFS Board of Directors in force immediately prior to the Change in Control. 

        4.    Non-Disclosure; Non-Solicitation; Non-Disparagement.    

        (a)  During
the Term and thereafter, you shall not, without DFS' prior written consent disclose to anyone (except in good faith in the ordinary course of business) or make
use of any Confidential Information except in the performance of your duties hereunder or when required to do so by law. In the event that you are so ordered, you shall give prompt written notice to
DFS sufficient to allow DFS the opportunity to object to or otherwise resist such order. 

        (b)  During
the Term and for a period of 24 months thereafter, you shall not, without DFS' prior written consent, solicit for employment, whether directly or
indirectly, any person who at the time is employed by DFS or any affiliate. 

        (c)  You
agree that, during the Term and thereafter (including following any Termination for any reason) you will not make statements or representations, or otherwise
communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage or be damaging to DFS or its respective officers, directors,
employees, advisors, businesses or reputations. Notwithstanding the foregoing, nothing in this Agreement shall preclude you from making truthful statements or disclosures that are required by
applicable law, regulation or legal process. 

        5.    Resolution of Disputes.    Any controversy or claim arising out of or relating to this Agreement or any breach
or asserted breach hereof shall be resolved by binding arbitration, to be held at an office closest to DFS' principal offices in accordance with the rules and procedures of the American Arbitration
Association. Judgment upon the award rendered by the arbitrator(s) may be entered in any court of
competent jurisdiction. Pending the resolution of any arbitration or court proceeding, DFS shall continue payment of all amounts and benefits due you hereunder. All reasonable costs and expenses of
any arbitration or court proceeding (including fees and disbursements of counsel) shall be promptly paid on your behalf by DFS; provided, however, that no such expense reimbursement shall be made if
and to the extent the arbitrator(s) determine(s) that any of your litigation assertions or defenses were in bad faith or frivolous. 

        6.    Effect of Agreement on Other Benefits.    Except as specifically provided in this Agreement, the existence of
this Agreement shall not be interpreted to prohibit or restrict your participation in any other employee benefit or other plans or programs in which you currently participate. 

        7.    Not an Employment Agreement.    This Agreement is not a contract of employment between you and DFS. DFS may
terminate you at any time, subject to the terms of any employment agreement between you and DFS that may then be in effect. 

3

 

        8.    Assignability; Binding Nature.    This Agreement shall be binding upon and inure to the benefit of the parties
and their respective successors, heirs (as applies to you) and permitted assigns. DFS agrees that in the event of a sale or transfer of assets, it shall take whatever action it legally can to cause
such assignee or transferee to expressly assume DFS's liabilities, obligations and duties hereunder. 

        9.    Governing Law/Jurisdiction.    This Agreement shall be governed by and construed and interpreted in accordance
with the laws of Minnesota without reference to principles of conflict of laws. 

        Please
acknowledge your acceptance of the terms of this Agreement by executing below and returning a copy to DFS. 

	 	 	DEPARTMENT 56, INC.
	

 	
 	

By:	
 	

    

	 	 	Name:	 	 
	 	 	Title:	 	 
	

 	
 	

Accepted:
	

 	
 	

 [Name]

4

[Department 56, Inc. Letterhead] 

[Date]

[Name
of Officer]

[Address] 

Dear
________________________: 

        In
recognition of your contributions to Department 56, Inc. ("DFS" or the "Company") and the Company's desire to assure your continued services in your current position in the
event of a pending or actual Change in Control (as defined) of DFS, the Company's Board of Directors is pleased to offer you the Change of Control protection outlined in this letter agreement
("Agreement"). 

        1.    Term Of Agreement.    The Term of this Agreement shall commence on the date of this letter (the "Effective
Date") and end on the third anniversary of such date (the "Original Term"). The Original Term shall be automatically renewed for successive one-year terms (the "Renewal Terms") unless at
least 180 days prior to the expiration of the Original Term or any Renewal Term, either of us notifies the other in writing that you or we are electing to terminate this Agreement at the end of
the then current Term. "Term" shall mean the Original Term and all Renewal Terms. If a Change in Control occurs during the Term, the Term shall not expire earlier than two years from the date of the
Change in Control. 

        2.    Entitlement to Severance Benefits.    

        (a)    Cash Severance Benefit.    In the event your employment terminates (a "Termination") (1) for any reason
whatsoever (other than due to death, disability, retirement, or an involuntary termination for Cause) within one year following an Unapproved Change in Control or (2) without Cause or for Good
Reason (other than due to death, disability or retirement), in either case within two years following an Approved Change in Control, you shall be entitled to receive the sum of the following, payable
in a cash lump sum no later than 15 days after the Termination date: (i) Base Salary through the Termination date; (ii) an amount equal to 150% of the sum of (x) your Base
Salary; plus (y) the highest annual cash bonus earned by you during the most recent 3 years, and (iii) pro rata annual incentive award at target for the year in which the
Termination occurs. 

        (b)    Other Severance Benefits.    In addition to the benefits provided in Section 2(a), you shall also be
entitled to the following: (i) elimination of all restrictions on any restricted or deferred stock awards outstanding on the Termination date; (ii) immediate vesting of all outstanding
stock options and the right to exercise such stock options for 24 months (or the remainder of the exercise period, if less); (iii) immediate vesting of all restricted or deferred stock
awards and non-qualified retirement benefits; (iv) continued participation in all DFS welfare benefit plans at the same benefit level at which you were participating on the
Termination date for a period of 24 months unless and until the date or dates you receive substantially equivalent coverage from a subsequent employer. 

        (c)    Section 280(G) Gross-Up Protection.    In the event you become entitled to payments, all or
a portion of which become subject to tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any other similar tax, but not income tax of any
nature)("Excise Tax"), DFS shall pay you an additional amount ("Gross-Up Payment") such that the amount retained by you after reduction for any Excise Tax (including penalties or interest
thereon) equals the amount to be paid to you by DFS hereunder prior to the imposition of such Excise Tax ("Total Payments"), provided that in the event
the amount to be retained after imposition of the Excise tax is equal to or exceeds 80% of the Total Payments, no such Gross-Up payment shall be made to you by DFS. The amount of the
Gross-Up Payment shall be calculated by DFS' independent auditors. In the event that such Gross-Up Payment is finally determined to be less than the amount of any Excise Tax,
DFS shall pay an additional amount to you in respect of such deficiency (including any interest and penalties). In the event that such Gross-Up Payment is finally determined to exceed the
amount of any Excise Tax, you must promptly repay the entire amount of such excess Gross-Up Payment to DFS. 

 

        (d)    No Mitigation; No Offset.    In the event of any Termination, you shall be under no obligation to seek other
employment; and no amounts due to you under this Agreement shall be subject to offset due to any remuneration attributable to subsequent employment that you may obtain. 

        (e)    Exclusivity of Severance Payments; Release.    Except as provided in this Section 2, upon any
Termination of your employment during the Term, you shall not be entitled to any severance payments or severance benefits from DFS or any payments by DFS on account of any claim by you of wrongful
termination, including claims under any federal, state or local human and civil rights or labor laws. Termination payments and benefits made to you are conditioned upon your execution of a release
agreement, in a form reasonably satisfactory to DFS, releasing any and all claims arising out of your employment (other than enforcement of this Agreement), any rights under DFS's incentive
compensation and employee benefit plans, and any claim for any non-employment related tort for personal injury. 

        3.    Definitions.    For purposes of this Agreement, the following terms shall have the meanings ascribed to them. 

        (a)  An
"Approved Change in Control" is any Change in Control that is approved by the DFS Board of Directors in force immediately prior to the Change in Control. 

        (b)  "Base
Salary" means the annualized rate of pay in effect on the Termination date, provided that if a reduction in Base Salary is the basis for a Termination for Good
Reason, then "Base Salary" shall mean the rate of pay in effect immediately prior to such reduction. 

        (c)  "Cause"
shall exist if: (i) you are convicted of, or plead nolo contendere to, any felony which materially and
adversely impacts DFS' financial condition or reputation, (ii) you engage in conduct that constitutes willful gross neglect or willful gross misconduct in carrying out your duties which
materially and adversely impacts DFS' financial condition or reputation, or (iii) you violate Section 4 of this Agreement. 

        (d)  A
"Change in Control" shall be deemed to occur upon any of the following: (i) acquisition by any one "person" (as such term is defined in §3(a)(9) of
the Securities and Exchange Act of 1934, as amended, and used in §13(d) and 14(d) thereof, including "group" as defined in §13(d) thereof) of 20% or more of DFS' voting shares,
(ii) directors elected to the Board over any 24 month period not nominated by the DFS Nominating Committee represent 30% or more of the total number of directors constituting the Board
at the beginning of the period (for these purposes, a director "not nominated by the DFS Nominating Committee" shall include, without limitation, any individual(s) whose nomination results from an
actual or threatened proxy contest or whose initial assumption of office as a director occurs as a result of an actual or threatened proxy contest or other actual or threatened solicitation or
execution of proxies or consents by or on behalf of any "person(s)" other than the Company or the Board); (iii) any merger, consolidation or other corporate combination upon the completion of
which DFS shares do not represent more than 50% of the combined voting power of the resulting entity; and (iv) upon the sale of all or substantially all of the consolidated assets of DFS, other
than a distribution to shareholders. 

        (e)  "Confidential
Information" shall mean all information concerning the business of DFS relating to any of their products, product development, trade secrets, customers,
suppliers, finances, and business plans and strategies. Excluded from the definition of "Confidential Information" is information (i) that is or becomes part of the public domain, other than
through your breach of this Agreement, or (ii) regarding DFS' business or industry properly acquired by you in the course of your career as an employee in DFS' industry and independent of your 

2

 

employment by DFS. For this purpose, information known or available generally within the trade or industry of DFS shall be deemed to be known or available to the public. 

        (f)    "Good
Reason" shall mean your termination of your employment based upon one or more of the following events (except as a result of a prior termination): (i) any
material change in your position or responsibilities or assignment of duties materially inconsistent with your status prior to the Change of Control; (ii) any decrease in your Base Salary or
target annual incentive; (iii) any breach of the terms of this Agreement by DFS after receipt of written notice from you and a reasonable opportunity to cure such breach; (iv) DFS fails
to obtain any successor entity's assumption of its obligations to you hereunder; or (v) upon relocation of you to a location more than 50 miles from our current headquarters. 

        (g)  An
"Unapproved Change in Control" is any Change in Control that is not approved by the DFS Board of Directors in force immediately prior to the Change in Control. 

        4.    Non-Disclosure; Non-Solicitation; Non-Disparagement.    

        (a)  During
the Term and thereafter, you shall not, without DFS' prior written consent disclose to anyone (except in good faith in the ordinary course of business) or make
use of any Confidential Information except in the performance of your duties hereunder or when required to do so by law. In the event that you are so ordered, you shall give prompt written notice to
DFS sufficient to allow DFS the opportunity to object to or otherwise resist such order. 

        (b)  During
the Term and for a period of 24 months thereafter, you shall not, without DFS' prior written consent, solicit for employment, whether directly or
indirectly, any person who at the time is employed by DFS or any affiliate. 

        (c)  You
agree that, during the Term and thereafter (including following any Termination for any reason) you will not make statements or representations, or otherwise
communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage or be damaging to DFS or its respective officers, directors,
employees, advisors, businesses or reputations. Notwithstanding the foregoing, nothing in this Agreement shall preclude you from making truthful statements or disclosures that are required by
applicable law, regulation or legal process. 

        5.    Resolution of Disputes.    Any controversy or claim arising out of or relating to this Agreement or any breach
or asserted breach hereof shall be resolved by binding arbitration, to be held at an office closest to DFS' principal offices in accordance with the rules and procedures of the American Arbitration
Association. Judgment upon the award rendered by the arbitrator(s) may be entered in any court of competent jurisdiction. Pending the resolution of any arbitration or court proceeding, DFS shall
continue payment of all amounts and benefits due you hereunder. All reasonable costs and expenses of any arbitration or court proceeding (including fees and disbursements of counsel) shall be promptly
paid on your behalf by DFS; provided, however, that no such expense reimbursement shall be made if and to the extent the arbitrator(s) determine(s) that any of your litigation assertions or defenses
were in bad faith or frivolous. 

        6.    Effect of Agreement on Other Benefits.    Except as specifically provided in this Agreement, the existence of
this Agreement shall not be interpreted to prohibit or restrict your participation in any other employee benefit or other plans or programs in which you currently participate. 

        7.    Not an Employment Agreement.    This Agreement is not a contract of employment between you and DFS. DFS may
terminate you at any time, subject to the terms of any employment agreement between you and DFS that may then be in effect. 

        8.    Assignability; Binding Nature.    This Agreement shall be binding upon and inure to the benefit of the parties
and their respective successors, heirs (as applies to you) and permitted assigns. DFS 

3

 

agrees that in the event of a sale or transfer of assets, it shall take whatever action it legally can to cause such assignee or transferee to expressly assume DFS's liabilities, obligations and
duties hereunder. 

        9.    Governing Law/Jurisdiction.    This Agreement shall be governed by and construed and interpreted in accordance
with the laws of Minnesota without reference to principles of conflict of laws. 

        Please
acknowledge your acceptance of the terms of this Agreement by executing below and returning a copy to DFS. 

	 	 	DEPARTMENT 56, INC.
	

 	
 	

By:	
 	

    

	 	 	Name:	 	 
	 	 	Title:	 	 
	

 	
 	

Accepted:
	

 	
 	

 [Name]

4

[Department 56, Inc. Letterhead] 

[Date]

Dear
Ms. Engel: 

        In
recognition of your contributions to Department 56, Inc. ("DFS" or the "Company") and the Company's desire to assure your continued services in your current position in the
event of a pending or actual Change in Control (as defined) of DFS, the Company's Board of Directors is pleased to offer you the Change of Control protection outlined in this letter agreement
("Agreement"). 

        1.    Term Of Agreement.    The Term of this Agreement shall commence on the date of this letter (the "Effective
Date") and end on the third anniversary of such date (the "Original Term"). The Original Term shall be automatically renewed for successive one-year terms (the "Renewal Terms") unless at
least 180 days prior to the expiration of the Original Term or any Renewal Term, either of us notifies the other in writing that you or we are electing to terminate this Agreement at the end of
the then current Term. "Term" shall mean the Original Term and all Renewal Terms. If a Change in Control occurs during the Term, the Term shall not expire earlier than two years from the date of the
Change in Control. 

        2.    Entitlement to Severance Benefits.    

        (a)    Cash Severance Benefit.    In the event your employment terminates (a "Termination") or for any reason
whatsoever (other than due to death, disability, retirement, or an involuntary termination for Cause) within one year following a Change in Control, you shall be entitled to receive the sum of the
following, payable in a cash lump sum no later than 15 days after the Termination date: (i) Base Salary through the Termination date; (ii) an amount equal to 299% of the sum of
(x) your Base Salary; plus (y) the maximum annual cash bonus for which you are eligible in the year of the Change in Control, and (iii) pro rata annual incentive award at target
for the year in which the Termination occurs. 

        (b)    Other Severance Benefits.    In addition to the benefits provided in Section 2(a), you shall also be
entitled to the following: (i) elimination of all restrictions on any restricted or deferred stock awards outstanding on the Termination date; (ii) immediate vesting of all outstanding
stock options and the right to exercise such stock options for 36 months (or the remainder of the exercise period, if less);
(iii) immediate vesting of all restricted or deferred stock awards and non-qualified retirement benefits; (iv) continued participation in all DFS welfare benefit plans at the
same benefit level at which you were participating on the Termination date for a period of 36 months unless or until the date or dates you receive substantially equivalent coverage from a
subsequent employer; and (v) reimbursement of all expenses relating to your relocation to New York City, including without limitation, an amount equal to the difference, if any, of
(1) the tax basis of your primary residence located in the Minneapolis-St. Paul metropolitan area minus (2) the net proceeds you receive relating to the sale of such primary
residence. 

        (c)    Section 280(G) Gross-Up Protection.    In the event you become entitled to payments which
become subject to tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any other similar tax, but not income tax of any nature)("Excise Tax"), DFS
shall pay you an additional amount ("Gross-Up Payment") such that the amount retained by you after reduction for any Excise Tax (including penalties or interest thereon) equals the amount
to be paid to you hereunder prior to the imposition of such Excise Tax. The amount of the Gross-Up Payment shall be calculated by DFS' independent auditors. In the event that such
Gross-Up Payment is ultimately determined to be less than the amount of any Excise Tax, DFS shall pay an additional amount to you in respect of such deficiency (including any interest and
penalties). In the event that such Gross-Up Payment is ultimately determined to exceed the amount of any Excise Tax, you must promptly repay the entire amount of such excess
Gross-Up Payment to DFS. 

        (d)    No Mitigation; No Offset.    In the event of any Termination, you shall be under no obligation to seek other
employment; and no amounts due to you under this Agreement shall be 

 

subject to offset due to any remuneration attributable to subsequent employment that you may obtain. 

        (e)    Exclusivity of Severance Payments; Release.    Except as provided in this Section 2, upon any
Termination of your employment during the Term, you shall not be entitled to any severance payments or severance benefits from DFS or any payments by DFS on account of any claim by you of wrongful
termination, including claims under any federal, state or local human and civil rights or labor laws. Termination payments and benefits made to you are conditioned upon your execution of a release
agreement, in a form reasonably satisfactory to DFS, releasing any and all claims arising out of your employment (other than enforcement of this Agreement), any rights under DFS's incentive
compensation and employee benefit plans, and any claim for any non-employment related tort for personal injury. 

        3.    Definitions.    For purposes of this Agreement, the following terms shall have the meanings ascribed to them. 

        (a)  "Base
Salary" means the annualized rate of pay in effect on the Termination date, provided that if a reduction in Base Salary is the basis for a Termination for Good
Reason, then "Base Salary" shall mean the rate of pay in effect immediately prior to such reduction. 

        (b)  "Cause"
shall exist if: (i) you are convicted of, or plead nolo contendere to, any felony which materially and
adversely impacts DFS' financial condition or reputation, (ii) you engage in conduct that constitutes willful gross neglect or willful gross misconduct in carrying out your duties which
materially and adversely impacts DFS' financial condition or reputation, or (iii) you violate Section 4 of this Agreement. 

        (c)  A
"Change in Control" shall be deemed to occur upon any of the following: (i) acquisition by any one "person" (as such term is defined in §3(a)(9) of
the Securities and Exchange Act of 1934, as amended, and used in §13(d) and 14(d) thereof, including "group" as defined in §13(d) thereof) of 20% or more of DFS' voting shares;
(ii) directors elected to the Board over any 24 month period not nominated by the DFS Nominating Committee represent 30% or more of the total number of directors constituting the Board
at the beginning of the period (for these purposes, a director "not nominated by the DFS Nominating Committee" shall include, without limitation, any individual(s) whose nomination results from an
actual or threatened proxy contest or whose initial assumption of office as a director occurs as a result of an actual or threatened proxy contest or other actual or threatened solicitation or
execution of proxies or consents by or on behalf of any "person(s)" other than the Company or the Board); (iii) any merger, consolidation or other corporate combination upon the completion of
which DFS shares do not represent more than 50% of the combined voting power of the resulting entity; and (iv) upon the sale of all or substantially all of the consolidated assets of DFS, other
than a distribution to shareholders. 

        (d)  "Confidential
Information" shall mean all information concerning the business of DFS relating to any of their products, product development, trade secrets, customers,
suppliers, finances, and business plans and strategies. Excluded from the definition of "Confidential Information" is information (i) that is or becomes part of the public domain, other than
through your breach of this Agreement, or (ii) regarding DFS' business or industry properly acquired by you in the course of your career as an employee in DFS' industry and independent of your
employment by DFS. For this purpose, information known or available generally within the trade or industry of DFS shall be deemed to be known or available to the public. 

        4.    Non-Disclosure; Non-Solicitation; Non-Disparagement.    

        (a)  During
the Term and thereafter, you shall not, without DFS' prior written consent disclose to anyone (except in good faith in the ordinary course of business) or make
use of any 

2

 

Confidential Information except in the performance of your duties hereunder or when required to do so by law. In the event that you are so ordered, you shall give prompt written notice to DFS
sufficient to allow DFS the opportunity to object to or otherwise resist such order. 

        (b)  During
the Term and for a period of 24 months thereafter, you shall not, without DFS' prior written consent, solicit for employment, whether directly or
indirectly, any person who at the time is employed by DFS or any affiliate. 

        (c)  You
agree that, during the Term and thereafter (including following any Termination for any reason) you will not make statements or representations, or otherwise
communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage or be damaging to DFS or its respective officers, directors,
employees, advisors, businesses or reputations. Notwithstanding the foregoing, nothing in this Agreement shall preclude you from making truthful statements or disclosures that are required by
applicable law, regulation or legal process. 

        5.    Resolution of Disputes.    Any controversy or claim arising out of or relating to this Agreement or any breach
or asserted breach hereof shall be resolved by binding arbitration, to be held at an office closest to DFS' principal offices in accordance with the rules and procedures of the American Arbitration
Association. Judgment upon the award rendered by the arbitrator(s) may be entered in any court of competent jurisdiction. Pending the resolution of any arbitration or court proceeding, DFS shall
continue payment of all amounts and benefits due you hereunder. All reasonable costs and expenses of any arbitration or court proceeding (including fees and disbursements of counsel) shall be promptly
paid on your behalf by DFS; provided, however, that no such expense reimbursement shall be made if and to the extent the arbitrator(s) determine(s) that any of your litigation assertions or defenses
were in bad faith or frivolous. 

        6.    Effect of Agreement on Other Benefits.    Except as specifically provided in this Agreement, the existence of
this Agreement shall not be interpreted to prohibit or restrict your participation in any other employee benefit or other plans or programs in which you currently participate. 

        7.    Not an Employment Agreement.    This Agreement is not a contract of employment between you and DFS. DFS may
terminate you at any time, subject to the terms of any employment agreement between you and DFS that may then be in effect. 

        8.    Assignability; Binding Nature.    This Agreement shall be binding upon and inure to the benefit of the parties
and their respective successors, heirs (as applies to you) and permitted assigns. DFS agrees that in the event of a sale or transfer of assets, it shall take whatever action it legally can to cause
such assignee or transferee to expressly assume DFS's liabilities, obligations and duties hereunder. 

        9.    Governing Law/Jurisdiction.    This Agreement shall be governed by and construed and interpreted in accordance
with the laws of Minnesota without reference to principles of conflict of laws. 

        Please
acknowledge your acceptance of the terms of this Agreement by executing below and returning a copy to DFS. 

	 	 	DEPARTMENT 56, INC.
	

 	
 	

By:	
 	

    

	 	 	Name:	 	 
	 	 	Title:	 	 
	

 	
 	

Accepted:
	

 	
 	

 Susan E. Engel

3

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00035-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00035-of-00352.parquet"}]]