Document:

ZST
DIGITAL NETWORKS, INC.

    

    2010
OMNIBUS INCENTIVE PLAN

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    ZST
DIGITAL NETWORKS, INC.

    2010
OMNIBUS INCENTIVE PLAN

    

    ARTICLE
I

    

    PURPOSE
AND ADOPTION OF THE PLAN

    

    1.01.
    Purpose.  The
purpose of the ZST Digital Networks, Inc. 2010 Omnibus Incentive Plan (as
amended from time to time, the "Plan") is to assist in attracting and retaining
highly competent employees, directors and consultants to act as an incentive in
motivating selected employees, directors and consultants of the Company and its Subsidiaries to
achieve long-term corporate objectives and to enable stock-based and cash-based
incentive awards to qualify as performance-based compensation for purposes of
the tax deduction limitations under Section 162(m) of the Code.

    

    1.02.   
 Adoption and
Term.  The Plan has been approved by the Board to be effective
as of July 23, 2010, subject to the approval of the stockholders of the Company,
which occurred on August 23, 2010 (the “Effective Date”).  The Plan
shall remain in effect until the tenth (10th)
anniversary of the Effective Date, or until terminated by action of the Board,
whichever occurs sooner.

    

    ARTICLE
II

    

    DEFINITIONS

    

    For the
purpose of this Plan, capitalized terms shall have the following
meanings:

    

    2.01.   
 Affiliate
means an entity in which, directly or indirectly through one or more
intermediaries, the Company has at least a fifty percent (50%) ownership
interest or, where permissible under Section 409A of the Code, at least a twenty
percent (20%) ownership interest; provided, however, for purposes of any
grant of an Incentive Stock Option, “Affiliate” means a corporation which, for
purposes of Section 424 of the Code, is a parent or subsidiary of the Company,
directly or indirectly.

    

    2.02.    
Award means any
one or a combination of Non-Qualified Stock Options or Incentive Stock Options
described in Article VI, Stock Appreciation Rights described in Article VI,
Restricted Shares and Restricted Stock Units described in Article VII,
Performance Awards described in Article VIII, other stock-based Awards described
in Article IX, short-term cash incentive Awards described in Article X or any
other Award made under the terms of the Plan.

    

    2.03.    
Award Agreement
means a written agreement between the Company and a Participant or a written
acknowledgment from the Company to a Participant specifically setting forth the
terms and conditions of an Award granted under the Plan.

    
      
         

      

      
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    2.04.     
Award Period
means, with respect to an Award, the period of time, if any, set forth in the
Award Agreement during which specified target performance goals must be achieved
or other conditions set forth in the Award Agreement must be
satisfied.

    

    2.05.     
Beneficiary
means an individual, trust or estate who or which, by a written designation of
the Participant filed with the Company, or if no such written designation is
filed, by operation of law, succeeds to the rights and obligations of the
Participant under the Plan and the Award Agreement upon the Participant's
death.

    

    2.06.     
Board means the
Board of Directors of the Company.

    

    2.07.     
Change in
Control means, and shall be deemed to have occurred upon the occurrence
of, any one of the following events:

    

    (a)     
The acquisition in one or more transactions, other than from the Company, by any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act), other than the Company, an Affiliate or any employee
benefit plan (or related trust) sponsored or maintained by the Company or an
Affiliate, of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of a number of Company Voting Securities in excess of
50% of the Company Voting Securities unless such acquisition has been approved
by the Board;

    

    (b)     
Any election has occurred of persons to the Board that causes two-thirds of the
Board to consist of persons other than (i) persons who were members of the Board
on the effective date of the Plan and (ii) persons who were nominated for
elections as members of the Board at a time when two-thirds of the Board
consisted of persons who were members of the Board on the effective date of the
Plan, provided, however, that any person nominated for election by a Board at
least two-thirds of whom constituted persons described in clauses (i) and/or
(ii) or by persons who were themselves nominated by such Board shall, for this
purpose, be deemed to have been nominated by a Board composed of persons
described in clause (i);

    

    (c)     
The consummation (i.e.
closing) of a reorganization, merger or consolidation involving the Company,
unless, following such reorganization, merger or consolidation, all or
substantially all of the individuals and entities who were the respective
beneficial owners of the Outstanding Common Stock and Company Voting Securities
immediately prior to such reorganization, merger or consolidation, following
such reorganization, merger or consolidation beneficially own, directly or
indirectly, more than 75% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors or trustees,
as the case may be, of the entity resulting from such reorganization, merger or
consolidation in substantially the same proportion as their ownership of the
Outstanding Common Stock and Company Voting Securities immediately prior to such
reorganization, merger or consolidation, as the case may be;

    
      
         

      

      
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    (d)     
The consummation (i.e.
closing) of a sale or other disposition of all or substantially all the assets
of the Company, unless, following such sale or disposition, all or substantially
all of the individuals and entities who were the respective beneficial owners of
the Outstanding Common Stock and Company Voting Securities immediately prior to
such sale or disposition, following such sale or disposition beneficially own,
directly or indirectly, more than 75% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors or
trustees, as the case may be, of the entity purchasing such assets in
substantially the same proportion as their ownership of the Outstanding Common
Stock and Company Voting Securities immediately prior to such sale or
disposition, as the case may be; or

    

    (e)     
a complete liquidation or dissolution of the Company.

    

    2.08.     
Code means the
Internal Revenue Code of 1986, as amended. References to a section of the Code
shall include that section and any comparable section or sections of any future
legislation that amends, supplements or supersedes said section.

    

    2.09.     
Committee means
the Compensation Committee of the Board.

    

    2.10.     
Common Stock
means the common stock of the Company, par value $0.0001 per share.

    

    2.11.     
Company means
ZST Digital Networks, Inc., a Delaware corporation, and its
successors.

    

    2.12.     
Company Voting
Securities means the combined voting power of all outstanding voting
securities of the Company entitled to vote generally in the election of
directors to the Board.

    

    2.13.     
Date of Grant
means the date designated by the Committee as the date as of which it grants an
Award, which shall not be earlier than the date on which the Committee approves
the granting of such Award.

    

    2.14.     
Dividend Equivalent
Account means a bookkeeping account in accordance with under Section
11.17 and related to an Award that is credited with the amount of any cash
dividends or stock distributions that would be payable with respect to the
shares of Common Stock subject to such Awards had such shares been outstanding
shares of Common Stock.

    

    2.15    
  Exchange
Act means the Securities Exchange Act of 1934, as amended.

    

    2.16.  
   Exercise Price means,
with respect to a Stock Appreciation Right, the amount established by the
Committee in the Award Agreement which is to be subtracted from the Fair Market
Value on the date of exercise in order to determine the amount of the payment to
be made to the Participant, as further described in Section
6.02(b).

    
      
         

      

      
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    2.17.     
Fair Market
Value means, as of any applicable date:  (i) if the Common
Stock is listed on a national securities exchange or is authorized for quotation
on the Nasdaq National Market System (“NMS”), the closing sales price of the
Common Stock on the exchange or NMS, as the case may be, on that date, or, if no
sale of the Common Stock occurred on that date, on the next preceding date on
which there was a reported sale; or (ii) if none of the above apply, the closing
bid price as reported by the Nasdaq SmallCap Market on that date, or if no price
was reported for that date, on the next preceding date for which a price was
reported; or (iii) if none of the above apply, the last reported bid price
published in the “pink sheets” or displayed on the National Association of
Securities Dealers, Inc. (“NASD”), Electronic Bulletin Board, as the case may
be; or (iv) if none of the above apply, the fair market value of the Common
Stock as determined under procedures established by the Committee.

    

    2.18.     
Incentive Stock
Option means a stock option within the meaning of Section 422 of the
Code.

    

    2.19.     
Merger means
any merger, reorganization, consolidation, exchange, transfer of assets or other
transaction having similar effect involving the Company.

    

    2.20.     
Non-Qualified Stock
Option means a stock option which is not an Incentive Stock
Option.

    

    2.21     
Non-Vested
Share means shares of the Company Common Stock issued to a Participant in
respect of the non-vested portion of an Option in the event of the early
exercise of such Participant’s Options pursuant to such Participant’s Award
Agreement, as permitted in Section 6.06 below.

    

    2.22.     
Options means
all Non-Qualified Stock Options and Incentive Stock Options granted at any time
under the Plan.

    

    2.23.     
Outstanding Common
Stock means, at any time, the issued and outstanding shares of Common
Stock.

    

    2.24.     
Participant
means a person designated to receive an Award under the Plan in accordance with
Section 5.01.

    

    2.25.     
Performance
Awards means Awards granted in accordance with Article VIII.

    

    2.26.     
Performance
Goals means net sales, units sold or growth in units sold, return on
stockholders' equity, customer satisfaction or retention, return on investment
or working capital, operating income, economic value added (the amount, if any,
by which net operating income after tax exceeds a reference cost of capital),
EBITDA (as net income (loss) before net interest expense, provision (benefit)
for income taxes, and depreciation and amortization), expense targets, net
income, earnings per share, share price, reductions in inventory, inventory
turns, on-time delivery performance, operating efficiency, productivity ratios,
market share or change in market share, any one of which may be measured with
respect to the Company or any one or more of its Subsidiaries and divisions and
either in absolute terms or as compared to another company or companies, and
quantifiable, objective measures of individual performance relevant to the
particular individual's job responsibilities.

    
      
         

      

      
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    2.27.     
Plan has the
meaning given to such term in Section 1.01.

    

    2.28.      Purchase Price, with
respect to Options, shall have the meaning set forth in Section
6.01(b).

    

    2.29.      Restricted Shares
means Common Stock subject to restrictions imposed in connection with Awards
granted under Article VII.

    

    2.30.      Restricted Stock
Unit means
a unit representing the right to receive Common Stock or the value thereof in
the future subject to restrictions imposed in connection with Awards granted
under Article VII.

    

    2.31.      Rule 16b-3 means Rule
16b-3 promulgated by the Securities and Exchange Commission under Section 16 of
the Exchange Act, as the same may be amended from time to time, and any
successor rule.

    

    2.32.      Stock Appreciation
Rights means awards granted in accordance with Article VI.

    

    2.33       Termination of
Service means the voluntary or involuntary termination of a Participant’s
service as an employee, director or consultant with the Company or an Affiliate
for any reason, including death, disability, retirement or as the result of the
divestiture of the Participant's employer or any similar transaction in which
the Participant's employer ceases to be the Company or one of its
Subsidiaries.  Whether entering military or other government service
shall constitute Termination of Service, or whether and when a Termination of
Service shall occur as a result of disability, shall be determined in each case
by the Committee in its sole discretion.

    

    ARTICLE
III

    

    ADMINISTRATION

    

    3.01.      Committee.

    

    (a)     
Duties and
Authority.  The Plan shall be administered by the Committee and
the Committee shall have exclusive and final authority in each determination,
interpretation or other action affecting the Plan and its
Participants.  The Committee shall have the sole discretionary
authority to interpret the Plan, to establish and modify administrative rules
for the Plan, to impose such conditions and restrictions on Awards as it
determines appropriate, and to make all factual determinations with respect to
and take such steps in connection with the Plan and Awards granted hereunder as
it may deem necessary or advisable.  The Committee shall not, however,
have or exercise any discretion that would disqualify amounts payable under
Article X as performance-based compensation for purposes of Section 162(m) of
the Code.  The Committee may delegate such of its powers and authority
under the Plan as it deems appropriate to a subcommittee of the Committee or
designated officers or employees of the Company.  In addition, the
full Board may exercise any of the powers and authority of the Committee under
the Plan. In the event of such delegation of authority or exercise of authority
by the Board, references in the Plan to the Committee shall be deemed to refer,
as appropriate, to the delegate of the Committee or the
Board.  Actions taken by the Committee or any subcommittee thereof,
and any delegation by the Committee to designated officers or employees, under
this Section 3.01 shall comply with Section 16(b) of the Exchange Act, the
performance-based provisions of Section 162(m) of the Code, and the regulations
promulgated under each of such statutory provisions, or the respective
successors to such statutory provisions or regulations, as in effect from time
to time, to the extent applicable.

    
      
         

      

      
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    (b)     
Indemnification.  Each
person who is or shall have been a member of the Board or the Committee, or an
officer or employee of the Company to whom authority was delegated in accordance
with the Plan shall be indemnified and held harmless by the Company against and
from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by such individual in connection with or resulting from any
claim, action, suit, or proceeding to which he or she may be a party or in which
he or she may be involved by reason of any action taken or failure to act under
the Plan and against and from any and all amounts paid by him or her in
settlement thereof, with the Company’s approval, or paid by him or her in
satisfaction of any judgment in any such action, suit, or proceeding against him
or her, provided he or she shall give the Company an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle and
defend it on his or her own behalf; provided, however, that the foregoing
indemnification shall not apply to any loss, cost, liability, or expense that is
a result of his or her own willful misconduct.  The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company’s Certificate of
Incorporation or Bylaws, conferred in a separate agreement with the Company, as
a matter of law, or otherwise, or any power that the Company may have to
indemnify them or hold them harmless.

    

    ARTICLE
IV

    

    SHARES

    

    4.01.     
Number of Shares
Issuable.  The total number of shares initially authorized to
be issued under the Plan shall be Five Hundred Thousand (500,000) shares of Common
Stock.  The foregoing share limit shall be subject to adjustment in
accordance with Section 11.07.  The shares to be offered under the
Plan shall be authorized and unissued Common Stock, or issued Common Stock that
shall have been reacquired by the Company.

    

    4.02.     
Shares Subject to
Terminated Awards.  Common Stock covered by any unexercised
portions of terminated or forfeited Options (including canceled Options) granted
under Article VI, Restricted Stock or Restricted Stock Units forfeited as
provided in Article VII, other stock-based Awards terminated or forfeited as
provided under the Plan, and Common Stock subject to any Awards that are
otherwise surrendered by the Participant may again be subject to new Awards
under the Plan.  Shares of Common Stock surrendered to or withheld by
the Company in payment or satisfaction of the Purchase Price of an Option or tax
withholding obligation with respect to an Award shall be available for the grant
of new Awards under the Plan.  In the event of the exercise of Stock
Appreciation Rights, whether or not granted in tandem with Options, only the
number of shares of Common Stock actually issued in payment of such Stock
Appreciation Rights shall be charged against the number of shares of Common
Stock available for the grant of Awards hereunder.

    
      
         

      

      
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    ARTICLE
V

    

    PARTICIPATION

    

    5.01.     
Eligible
Participants.  Participants in the Plan shall be such
employees, directors and consultants of the Company and its Subsidiaries as the
Committee, in its sole discretion, may designate from time to
time.  The Committee's designation of a Participant in any year shall
not require the Committee to designate such person to receive Awards or grants
in any other year.  The designation of a Participant to receive Awards
or grants under one portion of the Plan does not require the Committee to
include such Participant under other portions of the Plan.  The
Committee shall consider such factors as it deems pertinent in selecting
Participants and in determining the type and amount of their respective
Awards.  Subject to adjustment in accordance with Section 11.07, in
any calendar year, no Participant shall be granted Awards in respect of more
than 1.0 million shares of Common Stock (whether through grants of Options or
Stock Appreciation Rights or other Awards of Common Stock or rights with respect
thereto) or cash-based Awards for more than $1 million.

    

    ARTICLE
VI

    

    STOCK
OPTIONS AND STOCK APPRECIATION RIGHTS

    

    6.01.     
Option
Awards.

    

    (a)     
Grant of
Options.  The Committee may grant, to such Participants as the
Committee may select, Options entitling the Participant to purchase shares of
Common Stock from the Company in such number, at such price, and on such terms
and subject to such conditions, not inconsistent with the terms of this Plan, as
may be established by the Committee.  The terms of any Option granted
under this Plan shall be set forth in an Award Agreement.

    

    (b)     
Purchase Price of
Options.  Subject to the requirements applicable to Incentive
Stock Options under Section 6.01(d), the Purchase Price of each share of Common
Stock which may be purchased upon exercise of any Option granted under the Plan
shall be determined by the Committee; provided, however, that in no event shall
the Purchase Price be less than the Fair Market Value on the Date of
Grant.

    

    (c)     
Designation of
Options.  The Committee shall designate, at the time of the
grant of each Option, the Option as an Incentive Stock Option or a Non-Qualified
Stock Option; provided,
however, that an Option may be designated as an Incentive Stock Option
only if the applicable Participant is an employee of the Company on the Date of
Grant.

    
      
         

      

      
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    (d)     
Special Incentive
Stock Option Rules.  No Participant may be granted Incentive
Stock Options under the Incentive Plan (or any other plans of the Company) that
would result in Incentive Stock Options to purchase shares of Common Stock with
an aggregate Fair Market Value (measured on the Date of Grant) of more than
$100,000 first becoming exercisable by the Participant in any one calendar
year.  Notwithstanding any other provision of the Incentive Plan to
the contrary, the Exercise Price of each Incentive Stock Option shall be equal
to or greater than the Fair Market Value of the Common Stock subject to the
Incentive Stock Option as of the Date of Grant of the Incentive Stock Option;
provided, however, that no Incentive
Stock Option shall be granted to any person who, at the time the Option is
granted, owns stock (including stock owned by application of the constructive
ownership rules in Section 424(d) of the Code) possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company,
unless at the time the Incentive Stock Option is granted the price of the Option
is at least one hundred ten percent (110%) of the Fair Market Value of the
Common Stock subject to the Incentive Stock Option and the Incentive Stock
Option by its terms is not exercisable for more than five years from the Date of
Grant.

    

    (e)     
Rights As a
Stockholder.  A Participant or a transferee of an Option
pursuant to Section 11.04 shall have no rights as a stockholder with respect to
Common Stock covered by an Option until the Participant or transferee shall have
become the holder of record of any such shares, and no adjustment shall be made
for dividends in cash or other property or distributions or other rights with
respect to any such Common Stock for which the record date is prior to the date
on which the Participant or a transferee of the Option shall have become the
holder of record of any such shares covered by the Option; provided, however,
that Participants are entitled to share adjustments to reflect capital changes
under Section 11.07.

    

    6.02.      Stock Appreciation
Rights.

    

    (a)     
Stock Appreciation
Right Awards.  The Committee is authorized to grant to any
Participant one or more Stock Appreciation Rights.  Such Stock
Appreciation Rights may be granted either independent of or in tandem with
Options granted to the same Participant. Stock Appreciation Rights granted in
tandem with Options may be granted simultaneously with, or, in the case of
Non-Qualified Stock Options, subsequent to, the grant to such Participant of the
related Option; provided however, that: (i) any Option covering any share of
Common Stock shall expire and not be exercisable upon the exercise of any Stock
Appreciation Right with respect to the same share, (ii) any Stock Appreciation
Right covering any share of Common Stock shall expire and not be exercisable
upon the exercise of any related Option with respect to the same share, and
(iii) an Option and Stock Appreciation Right covering the same share of Common
Stock may not be exercised simultaneously.  Upon exercise of a Stock
Appreciation Right with respect to a share of Common Stock, the Participant
shall be entitled to receive an amount equal to the excess, if any, of (A) the
Fair Market Value of a share of Common Stock on the date of exercise over (B)
the Exercise Price of such Stock Appreciation Right established in the Award
Agreement, which amount shall be payable as provided in Section
6.02(c).

    

    (b)      Exercise Price. The
Exercise Price established under any Stock Appreciation Right granted under this
Plan shall be determined by the Committee, but in the case of Stock Appreciation
Rights granted in tandem with Options shall not be less than the Purchase Price
of the related Option; provided, however, that in no event shall the Exercise
Price be less than the Fair Market Value on the Date of Grant.  Upon
exercise of Stock Appreciation Rights granted in tandem with options, the number
of shares subject to exercise under any related Option shall automatically be
reduced by the number of shares of Common Stock represented by the Option or
portion thereof which are surrendered as a result of the exercise of such Stock
Appreciation Rights.

    
      
         

      

      
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    (c)     
Payment of Incremental
Value.  Any payment which may become due from the Company by
reason of a Participant's exercise of a Stock Appreciation Right may be paid to
the Participant as determined by the Committee (i) all in cash, (ii) all in
Common Stock, or (iii) in any combination of cash and Common
Stock.  In the event that all or a portion of the payment is made in
Common Stock, the number of shares of Common Stock delivered in satisfaction of
such payment shall be determined by dividing the amount of such payment or
portion thereof by the Fair Market Value on the Exercise Date.  No
fractional share of Common Stock shall be issued to make any payment in respect
of Stock Appreciation Rights; if any fractional share would be issuable, the
combination of cash and Common Stock payable to the Participant shall be
adjusted as directed by the Committee to avoid the issuance of any fractional
share.

    

    6.03.      Terms of Stock Options and
Stock Appreciation Rights.

    

    (a)     
Conditions on
Exercise.  An Award Agreement with respect to Options or Stock
Appreciation Rights may contain such waiting periods, exercise dates and
restrictions on exercise (including, but not limited to, periodic installments)
as may be determined by the Committee at the time of grant.  In the
event the Committee grants an Option or Stock Appreciation Right that would be
subject to Section 409A of the Code, the Committee may include such additional
terms, conditions and restrictions on the exercise of such Option or Stock
Appreciation Right as the Committee deems necessary or advisable in order to
comply with the requirements of Section 409A of the Code.

    

    (b)     
Duration of Options
and Stock Appreciation Rights.  Options and Stock Appreciation
Rights shall terminate upon the first to occur of the following
events:

    

    (i)     
Expiration of the Option or Stock Appreciation Right as provided in the Award
Agreement; or

    

    (ii)     Termination
of the Award in the event of a Participant's disability, Retirement, death or
other Termination of Service as provided in the Award Agreement; or

    

    (iii)    
In the case of an Incentive Stock Option, ten years from the Date of Grant (five
years in certain cases, as described in Section 6.01(d)); or

    

    (iv)    
Solely in the case of a Stock Appreciation Right granted in tandem with an
Option, upon the expiration of the related Option.

    
      
         

      

      
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    (c)      Acceleration or Extension of
Exercise Time.  The Committee, in its sole discretion, shall
have the right (but shall not be obligated), exercisable on or at any time after
the Date of Grant, to permit the exercise of an Option or Stock Appreciation
Right (i) prior to the time such Option or Stock Appreciation Right would become
exercisable under the terms of the Award Agreement, (ii) after the termination
of the Option or Stock Appreciation Right under the terms of the Award
Agreement, or (iii) after the expiration of the Option or Stock Appreciation
Right.

    

    6.04.      Exercise
Procedures.  Each Option and Stock Appreciation Right granted
under the Plan shall be exercised under such procedures and by such methods as
the Board may establish or approve from time to time.  The Purchase
Price of shares purchased upon exercise of an Option granted under the Plan
shall be paid in full in cash by the Participant pursuant to the Award
Agreement; provided, however, that the Committee may (but shall not be required
to) permit payment to be made (a) by delivery to the Company of shares of Common
Stock held by the Participant, (b) by a “net exercise” method under which the
Company reduces the number of shares of Common Stock issued upon exercise by the
largest whole number of shares with a Fair Market Value that does not exceed the
aggregate Exercise Price, or (c) such other consideration as the Committee deems
appropriate and in compliance with applicable law (including payment under an
arrangement constituting a brokerage transaction as permitted under the
provisions of Regulation T applicable to cashless exercises promulgated by the
Federal Reserve Board, unless prohibited by Section 402 of the Sarbanes-Oxley
Act of 2002).  In the event that any Common Stock shall be transferred
to the Company to satisfy all or any part of the Purchase Price, the part of the
Purchase Price deemed to have been satisfied by such transfer of Common Stock
shall be equal to the product derived by multiplying the Fair Market Value as of
the date of exercise times the number of shares of Common Stock transferred to
the Company.  The Participant may not transfer to the Company in
satisfaction of the Purchase Price any fractional share of Common
Stock.  Any part of the Purchase Price paid in cash upon the exercise
of any Option shall be added to the general funds of the Company and may be used
for any proper corporate purpose.  Unless the Committee shall
otherwise determine, any Common Stock transferred to the Company as payment of
all or part of the Purchase Price upon the exercise of any Option shall be held
as treasury shares.

    

    6.05.     
Change in
Control.  Unless otherwise provided by the Committee in the
applicable Award Agreement, in the event of a Change in Control, no accelerated
vesting of any Options or Stock Appreciation Rights outstanding on the date of
such Change in Control shall occur.

    

    6.06       Early
Exercise.  An Option may, but need not, include a provision by
which the Participant may elect to exercise the Option in whole or in part prior
to the date the Option is fully vested.  The provision may be included
in the Award Agreement at the time of grant of the Option or may be added to the
Award Agreement by amendment at a later time.  In the event of an
early exercise of an Option, any shares of Common Stock received shall be
subject to a special repurchase right in favor of the Company with terms
established by the Board.  The Board shall determine the time and/or
the event that causes the repurchase right to terminate and fully vest the
Common Stock in the Participant.  Alternatively, in the sole
discretion of the Board, one or more Participants may be granted stock purchase
rights allowing them to purchase shares of Common Stock outright, subject to
conditions and restrictions as the Board may determine.

    
      
         

      

      
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    ARTICLE
VII

    

    RESTRICTED
SHARES AND RESTRICTED STOCK UNITS

    

    7.01.      Award of Restricted Stock
and Restricted Stock Units. The
Committee may grant to any Participant an Award of Restricted Shares consisting
of a specified number of shares of Common Stock issued to the Participant
subject to such terms, conditions and forfeiture and transfer restrictions,
whether based on performance standards, periods of service, retention by the
Participant of ownership of specified shares of Common Stock or other criteria,
as the Committee shall establish.  The Committee may also grant
Restricted Stock Units representing the right to receive shares of Common Stock
in the future subject to such terms, conditions and restrictions, whether based
on performance standards, periods of service, retention by the Participant of
ownership of specified shares of Common Stock or other criteria, as the
Committee shall establish.  With respect to performance-based Awards
of Restricted Shares or Restricted Stock Units intended to qualify as
"performance-based" compensation for purposes of Section 162(m) of the Code,
performance targets will consist of specified levels of one or more of the
Performance Goals.  The terms of any Restricted Share and Restricted
Stock Unit Awards granted under this Plan shall be set forth in an Award
Agreement which shall contain provisions determined by the Committee and not
inconsistent with this Plan.

    

    7.02       Restricted
Shares.

    

    (a)      Issuance of Restricted
Shares.  As soon as practicable after the Date of Grant of a
Restricted Share Award by the Committee, the Company shall cause to be
transferred on the books of the Company, or its agent, Common Stock, registered
on behalf of the Participant, evidencing the Restricted Shares covered by the
Award, but subject to forfeiture to the Company as of the Date of Grant if an
Award Agreement with respect to the Restricted Shares covered by the Award is
not duly executed by the Participant and timely returned to the
Company.  All Common Stock covered by Awards under this Article VII
shall be subject to the restrictions, terms and conditions contained in the Plan
and the Award Agreement entered into by the Participant.  Until the
lapse or release of all restrictions applicable to an Award of Restricted
Shares, the share certificates representing such Restricted Shares may be held
in custody by the Company, its designee, or, if the certificates bear a
restrictive legend, by the Participant.  Upon the lapse or release of
all restrictions with respect to an Award as described in Section 7.02(d), one
or more share certificates, registered in the name of the Participant, for an
appropriate number of shares as provided in Section 7.02(d), free of any
restrictions set forth in the Plan and the Award Agreement shall be delivered to
the Participant.

    

    (b)      Stockholder
Rights.  Beginning on the Date of Grant of the Restricted Share
Award and subject to execution of the Award Agreement as provided in Section
7.02(a), the Participant shall become a stockholder of the Company with respect
to all shares subject to the Award Agreement and shall have all of the rights of
a stockholder, including, but not limited to, the right to vote such shares and
the right to receive dividends; provided, however, that any Common Stock
distributed as a dividend or otherwise with respect to any Restricted Shares as
to which the restrictions have not yet lapsed, shall be subject to the same
restrictions as such Restricted Shares and held or restricted as provided in
Section 7.02(a).

    
      
         

      

      
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    (c)     
Restriction on
Transferability.  None of the Restricted Shares may be assigned
or transferred (other than by will or the laws of descent and distribution, or
to an inter vivos trust with respect to which the Participant is treated as the
owner under Sections 671 through 677 of the Code, except to the extent that
Section 16 of the Exchange Act limits a Participant's right to make such
transfers), pledged or sold prior to lapse of the restrictions applicable
thereto.

    

    (d)     
Delivery of Shares
Upon Vesting.  Upon expiration or earlier termination of the
forfeiture period without a forfeiture and the satisfaction of or release from
any other conditions prescribed by the Committee, or at such earlier time as
provided under the provisions of Section 7.04, the restrictions applicable to
the Restricted Shares shall lapse.  As promptly as administratively
feasible thereafter, subject to the requirements of Section 11.05, the Company
shall deliver to the Participant or, in case of the Participant's death, to the
Participant's Beneficiary, one or more share certificates for the appropriate
number of shares of Common Stock, free of all such restrictions, except for any
restrictions that may be imposed by law.

    

    (e)     
Forfeiture of
Restricted Shares.  Subject to Sections 7.02(f) and 7.04, all
Restricted Shares shall be forfeited and returned to the Company and all rights
of the Participant with respect to such Restricted Shares shall terminate unless
the Participant continues in the service of the Company or an Affiliate as an
employee until the expiration of the forfeiture period for such Restricted
Shares and satisfies any and all other conditions set forth in the Award
Agreement.  The Committee shall determine the forfeiture period (which
may, but need not, lapse in installments) and any other terms and conditions
applicable with respect to any Restricted Share Award.

    

    (f)     
Waiver of Forfeiture
Period.  Notwithstanding anything contained in this Article VII
to the contrary, the Committee may, in its sole discretion, waive the forfeiture
period and any other conditions set forth in any Award Agreement under
appropriate circumstances (including the death, disability or Retirement of the
Participant or a material change in circumstances arising after the date of an
Award) and subject to such terms and conditions (including forfeiture of a
proportionate number of the Restricted Shares) as the Committee shall deem
appropriate.

    

    7.03.      Restricted Stock
Units. 

    

    (a)     
Settlement of
Restricted Stock Units.  Payments shall be made to Participants
with respect to their Restricted Stock Units as soon as practicable after the
Committee has determined that the terms and conditions applicable to such Award
have been satisfied or at a later date if distribution has been
deferred.  Payments to Participants with respect to Restricted Stock
Units shall be made in the form of Common Stock, or cash or a combination of
both, as the Committee may determine.  The amount of any cash to be
paid in lieu of Common Stock shall be determined on the basis of the Fair Market
Value of the Common Stock on the date any such payment is
processed.  As to shares of Common Stock which constitute all or any
part of such payment, the Committee may impose such restrictions concerning
their transferability and/or their forfeiture as may be provided in the
applicable Award Agreement or as the Committee may otherwise determine, provided
such determination is made on or before the date certificates for such shares
are first delivered to the applicable Participant.

    
      
         

      

      
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    (b)      Shareholder
Rights.  Until the lapse or release of all restrictions
applicable to an Award of Restricted Stock Units, no shares of Common Stock
shall be issued in respect of such Awards and no Participant shall have any
rights as a shareholder of the Company with respect to the shares of Common
Stock covered by such Award of Restricted Stock Units.

    

    (c)      Waiver of Forfeiture
Period.  Notwithstanding anything contained in this Section
7.03 to the contrary, the Committee may, in its sole discretion, waive the
forfeiture period and any other conditions set forth in any Award Agreement
under appropriate circumstances (including the death, disability or retirement
of the Participant or a material change in circumstances arising after the date
of an Award) and subject to such terms and conditions (including forfeiture of a
proportionate number of shares issuable upon settlement of the Restricted Stock
Units constituting an Award) as the Committee shall deem
appropriate.

    

    (d)      Deferral of
Payment.  If approved by the Committee and set forth in the
applicable Award Agreement, a Participant may elect to defer the amount payable
with respect to the Participant’s Restricted Stock Units in accordance with such
terms as may be established by the Committee, subject to the requirements of
Section 409A of the Code.

    

    7.04       Change in
Control.  Unless otherwise provided by the Committee in the
applicable Award Agreement, no acceleration of the termination of any of the
restrictions applicable to Restricted Shares and Restricted Stock Unit Awards
shall occur in the event of a Change in Control.

    

    ARTICLE
VIII

    

    PERFORMANCE
AWARDS

    

    8.01.      Performance
Awards.

    

    (a)     
Award Periods and
Calculations of Potential Incentive Amounts.  The Committee may
grant Performance Awards to Participants.  A Performance Award shall
consist of the right to receive a payment (measured by the Fair Market Value of
a specified number of shares of Common Stock, increases in such Fair Market
Value during the Award Period and/or a fixed cash amount) contingent upon the
extent to which certain predetermined performance targets have been met during
an Award Period.  The Award Period shall be two or more fiscal or
calendar years as determined by the Committee.  The Committee, in its
discretion and under such terms as it deems appropriate, may permit newly
eligible Participants, such as those who are promoted or newly hired, to receive
Performance Awards after an Award Period has commenced.

    
      
         

      

      
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    (b)      Performance
Targets.  Subject to Section 11.18, the performance targets
applicable to a Performance Award may include such goals related to the
performance of the Company or, where relevant, any one or more of its
Subsidiaries or divisions and/or the performance of a Participant as may be
established by the Committee in its discretion.  In the case of
Performance Awards to "covered employees" (as defined in Section 162(m) of the
Code), the targets will be limited to specified levels of one or more of the
Performance Goals.  The performance targets established by the
Committee may vary for different Award Periods and need not be the same for each
Participant receiving a Performance Award in an Award Period.

    

    (c)      Earning Performance
Awards.  The Committee, at or as soon as practicable after the
Date of Grant, shall prescribe a formula to determine the percentage of the
Performance Award to be earned based upon the degree of attainment of the
applicable performance targets.

    

    (d)      Payment of Earned
Performance Awards.  Subject to the requirements of Section
11.05, payments of earned Performance Awards shall be made in cash or Common
Stock, or a combination of cash and Common Stock, in the discretion of the
Committee.  The Committee, in its sole discretion, may define, and set
forth in the applicable Award Agreement, such terms and conditions with respect
to the payment of earned Performance Awards as it may deem
desirable.

    

    8.02.      Termination of
Service.  In the event of a Participant’s Termination of
Service during an Award Period, the Participant’s Performance Awards shall be
forfeited except as may otherwise be provided in the applicable Award
Agreement.

    

    8.03.      Change in
Control.  Unless otherwise provided by the Committee in the
applicable Award Agreement, in the event of a Change in Control, no accelerated
vesting of any Performance Awards outstanding on the date of such Change in
Control shall occur.

    

    ARTICLE
IX

    

    OTHER
STOCK-BASED AWARDS

    

    9.01.      Grant of Other Stock-Based
Awards.  Other stock-based awards, consisting of stock purchase
rights (with or without loans to Participants by the Company containing such
terms as the Committee shall determine), Awards of Common Stock, or Awards
valued in whole or in part by reference to, or otherwise based on, Common Stock,
may be granted either alone or in addition to or in conjunction with other
Awards under the Plan. Subject to the provisions of the Plan, the Committee
shall have sole and complete authority to determine the persons to whom and the
time or times at which such Awards shall be made, the number of shares of Common
Stock to be granted pursuant to such Awards, and all other conditions of the
Awards.  Any such Award shall be confirmed by an Award Agreement
executed by the Committee and the Participant, which Award Agreement shall
contain such provisions as the Committee determines to be necessary or
appropriate to carry out the intent of this Plan with respect to such
Award.

    

    9.02.      Terms of Other Stock-Based
Awards.  In addition to the terms and conditions specified in
the Award Agreement, Awards made pursuant to this Article IX shall be subject to
the following:

    
      
         

      

      
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    (a)      Any
Common Stock subject to Awards made under this Article IX may not be sold,
assigned, transferred, pledged or otherwise encumbered prior to the date on
which the shares are issued, or, if later, the date on which any applicable
restriction, performance or deferral period lapses; and

    

    (b)      If
specified by the Committee in the Award Agreement, the recipient of an Award
under this Article IX shall be entitled to receive, currently or on a deferred
basis, interest or dividends or dividend equivalents with respect to the Common
Stock or other securities covered by the Award; and

    

    (c)      The
Award Agreement with respect to any Award shall contain provisions dealing with
the disposition of such Award in the event of a Termination of Service prior to
the exercise, payment or other settlement of such Award, whether such
termination occurs because of Retirement, disability, death or other reason,
with such provisions to take account of the specific nature and purpose of the
Award.

    

    ARTICLE
X

    

    SHORT-TERM
CASH INCENTIVE AWARDS

    

    10.01.    Eligibility.  Executive
officers of the Company who are from time to time determined by the Committee to
be "covered employees" for purposes of Section 162(m) of the Code will be
eligible to receive short-term cash incentive awards under this Article
X.

    

    10.02.    Awards.

    

    (a)      Performance
Targets.  The Committee shall establish objective performance
targets based on specified levels of one or more of the Performance
Goals.  Such performance targets shall be established by the Committee
on a timely basis to ensure that the targets are considered "preestablished" for
purposes of Section 162(m) of the Code.

    

    (b)      Amounts of
Awards.  In conjunction with the establishment of performance
targets for a fiscal year or such other short-term performance period
established by the Committee, the Committee shall adopt an objective formula (on
the basis of percentages of Participants' salaries, shares in a bonus pool or
otherwise) for computing the respective amounts payable under the Plan to
Participants if and to the extent that the performance targets are
attained.  Such formula shall comply with the requirements applicable
to performance-based compensation plans under Section 162(m) of the Code and, to
the extent based on percentages of a bonus pool, such percentages shall not
exceed 100% in the aggregate.

    

    (c)      Payment of
Awards.  Awards will be payable to Participants in cash each
year upon prior written certification by the Committee of attainment of the
specified performance targets for the preceding fiscal year or other applicable
performance period.

    
      
         

      

      
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    (d)      Negative
Discretion.  Notwithstanding the attainment by the Company of
the specified performance targets, the Committee shall have the discretion,
which need not be exercised uniformly among the Participants, to reduce or
eliminate the award that would be otherwise paid.

    

    (e)      Guidelines.  The
Committee may adopt from time to time written policies for its implementation of
this Article X.  Such guidelines shall reflect the intention of the
Company that all payments hereunder qualify as performance-based compensation
under Section 162(m) of the Code.

    

    (f)       Non-Exclusive
Arrangement.  The adoption and operation of this Article X
shall not preclude the Board or the Committee from approving other short-term
incentive compensation arrangements for the benefit of individuals who are
Participants hereunder as the Board or Committee, as the case may be, deems
appropriate and in the best of the Company.

    

    ARTICLE
XI

    

    TERMS
APPLICABLE GENERALLY TO AWARDS

    GRANTED
UNDER THE PLAN

    

    11.01.    Plan Provisions Control
Award Terms.  Except as provided in Section 11.16, the terms of
the Plan shall govern all Awards granted under the Plan, and in no event shall
the Committee have the power to grant any Award under the Plan which is contrary
to any of the provisions of the Plan.  In the event any provision of
any Award granted under the Plan shall conflict with any term in the Plan as
constituted on the Date of Grant of such Award, the term in the Plan as
constituted on the Date of Grant of such Award shall control.  Except
as provided in Section 11.03 and Section 11.07, the terms of any Award granted
under the Plan may not be changed after the Date of Grant of such Award so as to
materially decrease the value of the Award without the express written approval
of the holder.

    

    11.02.    Award
Agreement.  No person shall have any rights under any Award
granted under the Plan unless and until the Company and the Participant to whom
such Award shall have been granted shall have executed and delivered an Award
Agreement or received any other Award acknowledgment authorized by the Committee
expressly granting the Award to such person and containing provisions setting
forth the terms of the Award.

    

    11.03.    Modification of Award After
Grant.  No Award granted under the Plan to a Participant may be
modified (unless such modification does not materially decrease the value of the
Award) after the Date of Grant except by express written agreement between the
Company and the Participant, provided that any such change (a) shall not be
inconsistent with the terms of the Plan, and (b) shall be approved by the
Committee.

    
      
         

      

      
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    11.04.    Limitation on
Transfer.  Except as provided in Section 7.01(c) in the case of
Restricted Shares, a Participant's rights and interest under the Plan may not be
assigned or transferred other than by will or the laws of descent and
distribution, and during the lifetime of a Participant, only the Participant
personally (or the Participant's personal representative) may exercise rights
under the Plan.  The Participant's Beneficiary may exercise the
Participant's rights to the extent they are exercisable under the Plan following
the death of the Participant. Notwithstanding the foregoing, to the extent
permitted under Section 16(b) of the Exchange Act with respect to Participants
subject to such Section, the Committee may grant Non-Qualified Stock Options
that are transferable, without payment of consideration, to immediate family
members of the Participant or to trusts or partnerships for such family members,
and the Committee may also amend outstanding Non-Qualified Stock Options to
provide for such transferability.

    

    11.05.    Taxes.  The
Company shall be entitled, if the Committee deems it necessary or desirable, to
withhold (or secure payment from the Participant in lieu of withholding) the
amount of any withholding or other tax required by law to be withheld or paid by
the Company with respect to any amount payable and/or shares issuable under such
Participant's Award, or with respect to any income recognized upon a
disqualifying disposition of shares received pursuant to the exercise of an
Incentive Stock Option, and the Company may defer payment or issuance of the
cash or shares upon exercise or vesting of an Award unless indemnified to its
satisfaction against any liability for any such tax. The amount of such
withholding or tax payment shall be determined by the Committee and shall be
payable by the Participant at such time as the Committee determines in
accordance with the following rules:

    

    (a)      The
Participant shall have the right to elect to meet his or her withholding
requirement (i) by having withheld from such Award at the appropriate time that
number of shares of Common Stock, rounded down to the nearest whole share, whose
Fair Market Value is equal to the amount of withholding taxes due, (ii) by
direct payment to the Company in cash of the amount of any taxes required to be
withheld with respect to such Award or (iii) by a combination of shares and
cash.

    

    (b)      In
the case of Participants who are subject to Section 16 of the Exchange Act, the
Committee may impose such limitations and restrictions as it deems necessary or
appropriate with respect to the delivery or withholding of shares of Common
Stock to meet tax withholding obligations.

    

    11.06.    Surrender of Awards;
Authorization of Repricing.  Any Award granted under the Plan
may be surrendered to the Company for cancellation on such terms as the
Committee and the holder approve.  Without requiring shareholder
approval, the Committee may substitute a new Award under this Plan in connection
with the surrender by the Participant of an equity compensation award previously
granted under this Plan or any other plan sponsored by the Company, including
the substitution or grant of (i) an Option or Stock Appreciation Right with a
lower exercise price than the Option or Stock Appreciation Right being
surrendered, (ii) a different type of Award upon the surrender or cancellation
of an Option or Stock Appreciation Right with an exercise price above the Fair
Market Value of the underlying Common Stock on the date of such substitution or
grant, or (iii) any other Award constituting a repricing of an Option or Stock
Appreciation Right.

    
      
         

      

      
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    11.07.    Adjustments to Reflect
Capital Changes.

    

    (a)      Recapitalization.  In
the event of any corporate event or transaction (including, but not limited to,
a change in the Common Stock or the capitalization of the Company) such as a
merger, consolidation, reorganization, recapitalization, separation, partial or
complete liquidation, stock dividend, stock split, reverse stock split, split
up, spin-off, or other distribution of stock or property of the Company, a
combination or exchange of Common Stock, dividend in kind, or other like change
in capital structure, number of outstanding shares of Common Stock, distribution
(other than normal cash dividends) to shareholders of the Company, or any
similar corporate event or transaction, the Committee, in order to prevent
dilution or enlargement of Participants’ rights under this Plan, shall make
equitable and appropriate adjustments and substitutions, as applicable, to or of
the number and kind of shares subject to outstanding Awards, the Purchase Price
or Exercise Price for such shares, the number and kind of shares available for
future issuance under the Plan and the maximum number of shares in respect of
which Awards can be made to any Participant in any calendar year, and other
determinations applicable to outstanding Awards.  The Committee shall
have the power and sole discretion to determine the amount of the adjustment to
be made in each case.

    

    (b)      Merger.  In
the event that the Company is a party to a Merger, outstanding Awards shall be
subject to the agreement of merger or reorganization.  Such agreement
may provide, without limitation, for the continuation of outstanding Awards by
the Company (if the Company is a surviving corporation), for their assumption by
the surviving corporation or its parent or subsidiary, for the substitution by
the surviving corporation or its parent or subsidiary of its own awards for such
Awards, for accelerated vesting and accelerated expiration, or for settlement in
cash or cash equivalents.

    

    (c)      Options to Purchase Shares
or Stock of Acquired Companies.  After any Merger in which the
Company or an Affiliate shall be a surviving corporation, the Committee may
grant substituted options under the provisions of the Plan, pursuant to Section
424 of the Code, replacing old options granted under a plan of another party to
the Merger whose shares or stock subject to the old options may no longer be
issued following the Merger.  The foregoing adjustments and manner of
application of the foregoing provisions shall be determined by the Committee in
its sole discretion.  Any such adjustments may provide for the
elimination of any fractional shares which might otherwise become subject to any
Options.

    

    11.08.    No Right to Continued
Service.  No person shall have any claim of right to be granted
an Award under this Plan. Neither the Plan nor any action taken hereunder shall
be construed as giving any Participant any right to be retained in the service
of the Company or any of its Subsidiaries.

    

    11.09.    Awards Not Includable for
Benefit Purposes.  Payments received by a Participant pursuant
to the provisions of the Plan shall not be included in the determination of
benefits under any pension, group insurance or other benefit plan applicable to
the Participant which is maintained by the Company or any of its Subsidiaries,
except as may be provided under the terms of such plans or determined by the
Board.

    
      
         

      

      
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    11.10.    Governing
Law.  All determinations made and actions taken pursuant to the
Plan shall be governed by the laws of Delaware and construed in
accordance therewith.

    

    11.11.    No Strict
Construction.  No rule of strict construction shall be implied
against the Company, the Committee, or any other person in the interpretation of
any of the terms of the Plan, any Award granted under the Plan or any rule or
procedure established by the Committee.

    

    11.12.    Compliance with Rule
16b-3.  It is intended that, unless the Committee determines
otherwise, Awards under the Plan be eligible for exemption under Rule
16b-3.  The Board is authorized to amend the Plan and to make any such
modifications to Award Agreements to comply with Rule 16b-3, as it may be
amended from time to time, and to make any other such amendments or
modifications as it deems necessary or appropriate to better accomplish the
purposes of the Plan in light of any amendments made to Rule 16b-3.

    

    11.13.    Captions.  The
captions (i.e., all Section headings) used in the Plan are for convenience only,
do not constitute a part of the Plan, and shall not be deemed to limit,
characterize or affect in any way any provisions of the Plan, and all provisions
of the Plan shall be construed as if no captions have been used in the
Plan.

    

    11.14.    Severability.  Whenever
possible, each provision in the Plan and every Award at any time granted under
the Plan shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of the Plan or any Award at any time
granted under the Plan shall be held to be prohibited by or invalid under
applicable law, then (a) such provision shall be deemed amended to accomplish
the objectives of the provision as originally written to the fullest extent
permitted by law and (b) all other provisions of the Plan and every other Award
at any time granted under the Plan shall remain in full force and
effect.

    

    11.15.    Amendment and
Termination.

    

    (a)      Amendment.  The
Board shall have complete power and authority to amend the Plan at any time;
provided, however, that the Board shall not, without the requisite affirmative
approval of stockholders of the Company, make any amendment which requires
stockholder approval under the Code or under any other applicable law or rule of
any stock exchange which lists Common Stock or Company Voting
Securities.  No termination or amendment of the Plan may, without the
consent of the Participant to whom any Award shall theretofore have been granted
under the Plan, adversely affect the right of such individual under such
Award.

    

    (b)      Termination.  The
Board shall have the right and the power to terminate the Plan at any time. No
Award shall be granted under the Plan after the termination of the Plan, but the
termination of the Plan shall not have any other effect and any Award
outstanding at the time of the termination of the Plan may be exercised after
termination of the Plan at any time prior to the expiration date of such Award
to the same extent such Award would have been exercisable had the Plan not
terminated.

    
      
         

      

      
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    11.16.    Foreign Qualified
Awards.  Awards under the Plan may be granted to such employees
of the Company and its Subsidiaries who are residing in foreign jurisdictions as
the Committee in its sole discretion may determine from time to time. The
Committee may adopt such supplements to the Plan as may be necessary or
appropriate to comply with the applicable laws of such foreign jurisdictions and
to afford Participants favorable treatment under such laws; provided, however,
that no Award shall be granted under any such supplement with terms or
conditions inconsistent with the provision set forth in the Plan.

    

    11.17.    Dividend
Equivalents.  For any Award granted under the Plan, the
Committee shall have the discretion, upon the Date of Grant or thereafter, to
establish a Dividend Equivalent Account with respect to the Award, and the
applicable Award Agreement or an amendment thereto shall confirm such
establishment.  If a Dividend Equivalent Account is established, the
following terms shall apply:

    

    (a)      Terms and
Conditions.  Dividend Equivalent Accounts shall be subject to
such terms and conditions as the Committee shall determine and as shall be set
forth in the applicable Award Agreement.  Such terms and conditions
may include, without limitation, for the Participant’s Account to be credited as
of the record date of each cash dividend on the Common Stock with an amount
equal to the cash dividends which would be paid with respect to the number of
shares of Common Stock then covered by the related Award if such shares of
Common Stock had been owned of record by the Participant on such record
date.

    

    (b)      Unfunded
Obligation.  Dividend Equivalent Accounts shall be established
and maintained only on the books and records of the Company and no assets or
funds of the Company shall be set aside, placed in trust, removed from the
claims of the Company's general creditors, or otherwise made available until
such amounts are actually payable as provided hereunder.

    

    11.18     Adjustment of Performance
Goals and Targets.  Notwithstanding any provision of the Plan
to the contrary, the Committee shall have the authority to adjust any
Performance Goal, performance target or other performance-based criteria
established with respect to any Award under the Plan if circumstances occur
(including, but not limited to, unusual or nonrecurring events, changes in tax
laws or accounting principles or practices or changed business or economic
conditions) that cause any such Performance Goal, performance target or
performance-based criteria to be inappropriate in the judgment of the Committee;
provided, that with respect to any Award that is intended to qualify for the
"performance-based compensation" exception under Section 162(m) of the Code and
the regulations thereunder, any adjustment by the Committee shall be consistent
with the requirements of Section 162(m) and the regulations
thereunder.

    

    11.19     Legality of
Issuance.  Notwithstanding any provision of this Plan or any
applicable Award Agreement to the contrary, the Committee shall have the sole
discretion to impose such conditions, restrictions and limitations (including
suspending exercises of Options or Stock Appreciation Rights and the tolling of
any applicable exercise period during such suspension) on the issuance of Common
Stock with respect to any Award unless and until the Committee determines that
such issuance complies with (i) any applicable registration requirements under
the Securities Act of 1933, as amended, or the Committee has determined that an
exemption therefrom is available, (ii) any applicable listing requirement of any
stock exchange on which the Common Stock is listed, (iii) any applicable Company
policy or administrative rules, and (iv) any other applicable provision of
state, federal or foreign law, including foreign securities laws where
applicable.

    
      
         

      

      
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    11.20     Restrictions on
Transfer.  Regardless of whether the offering and sale of
Common Stock under the Plan have been registered under the Securities Act of
1933, as amended, or have been registered or qualified under the securities laws
of any state, the Company may impose restrictions upon the sale, pledge, or
other transfer of such Common Stock (including the placement of appropriate
legends on stock certificates) if, in the judgment of the Company and its
counsel, such restrictions are necessary or desirable to achieve compliance with
the provisions of the Securities Act of 1933, as amended, the securities laws of
any state, the United States or any other applicable foreign law.

    

    11.21     Further
Assurances.  As a condition to receipt of any Award under the
Plan, a Participant shall agree, upon demand of the Company, to do all acts and
execute, deliver and perform all additional documents, instruments and
agreements which may be reasonably required by the Company, to implement the
provisions and purposes of the Plan.

    
      
         

      

      
        22Unassociated Document

    

      Exhibit
10.10

      

      BRANDING
AGREEMENT

      

      THIS BRANDING AGREEMENT (the
“Agreement”), effective as of August 5, 2010, is entered into by and between
Coach, Inc., a Maryland corporation having its principal office and place of
business at 516 West 34th Street,
New York, New York 10001 (“Coach”), and Reed Krakoff, an individual whose
business address is c/o Coach, Inc., 516 West 34th Street,
New York, New York 10001 (“Reed Krakoff”), collectively referred to herein as
the parties.

       

      WHEREAS, Coach, a leading marketer of
modern classic American accessories, seeks to develop and market lines of
products under the name, likeness, image, and reputation of Reed Krakoff;
and

       

      WHEREAS, Reed Krakoff, who serves as
President, Executive Creative Director of Coach, agrees to the use of his name,
on the terms set forth herein, by Coach to develop and market lines of products
under the name, likeness, image, and/or reputation of Reed Krakoff and seeks to
convey to Coach all rights, consents, permissions, grants, and any other means
necessary to enable Coach to develop and market said lines;

       

      NOW, THEREFORE, in consideration of the
foregoing premises and the mutual covenants herein contained, the parties agree
as follows:

       

      
        	
                I.

              	
                DEFINTIONS

              

      

       

      In this
Agreement, unless the context otherwise requires, the following capitalized
terms shall be defined as stated herein:

       

       “Assumed
MOI” shall mean, with respect to any product bearing the Reed Krakoff Brand that
is sold at retail locations that are not Reed Krakoff Brand retail operations
but are operated by Coach or any of its other affiliates, three (3) percent of
the FOB cost paid to the manufacturer of such product by Coach or its applicable
affiliate.

       

      “Cumulative
MOI” shall mean the aggregate MOI for all Fiscal Years since the launch of the
Reed Krakoff Brand.

       

      “Employment
Agreement” shall mean the Employment Agreement, dated June 1, 2003, between Reed
Krakoff and Coach (as amended, modified or supplemented from time to
time).

       

      “Fiscal
Quarter” shall mean Coach’s accounting quarter period, which ends on the
Saturday closest to June 30th,
September 30th,
December 31st and
March 31st in each
calendar year.

       

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      

       

       “Fiscal
Year” shall mean Coach’s accounting year period, which ends on the Saturday
closest to June 30th in each
calendar year.  For example Fiscal Year 2010 begins on Sunday, June
28, 2009 and ends on Saturday, July 3, 2010.

       

       “Future
Employment Agreement” shall mean any future employment agreement between Reed
Krakoff and Coach or any affiliate or successor company to Coach, which may
either be in addition to or a replacement of the current Employment
Agreement.

       

      “LIBOR”
shall mean the London Inter-Bank Offer Rate as published in the Wall Street
Journal.

       

      “Licensing
Income” shall mean all amounts paid to Coach and its affiliates by licensees of
the Reed Krakoff Brand or Reed Krakoff Name.

       

      “Measured
Operating Income”,  or “MOI”, shall mean, per Fiscal Year, the actual
Operating Income (including Licensing Income) of the division or subsidiary of
Coach that operates the Reed Krakoff Brand plus Assumed MOI for such Fiscal Year
less: (i) any
Usage Payment accrued for such Fiscal Year, (ii) a shared service fee deduction
of ten (10) percent of the Net Sales of products and services marketed and sold
under the Reed Krakoff Brand and (iii) a cost of capital deduction equal to
Coach’s capital contributions to launching the Reed Krakoff Brand times a rate
of interest of LIBOR plus two-tenths (0.2) of a percent from the respective
date(s) of such contribution(s).

       

      “Net
Sales” shall mean the gross sales of products and services marketed and sold
under the Reed Krakoff Brand by or through the division or subsidiary of Coach
that operates the Reed Krakoff Brand (and any buyer of the Reed Krakoff Brand in
accordance with Section IV.6) to retailers and end-use consumers, excluding
amounts received for shipping charges, sales, excise, or other taxes, and less
any allowances, discounts, returns, and amounts for uncollected accounts
receivable.

       

      “Nice
Classifications” shall mean the classification of goods and services for the
purpose of registering trademarks and service marks under the Nice Agreement
Concerning the International Classification of Goods and Services for the
Purposes of the Registration of Marks.

       

      “Operating
Income” shall mean Net Sales less all direct sales
costs and operating expenses, other than Usage Payments, incurred in connection
with marketing and selling products and services under the Reed Krakoff
Brand.  For the avoidance of doubt Operating Income shall (i) be
calculated in a consistent manner to all other Coach operating divisions, (ii)
not include as an expense any Usage Payments, (iii) include allocation for
occupancies as consistently applied by Coach across its divisions and (iv) not
include any deduction for indirect costs or overhead (including any costs for
Coach central services / headquarters personnel).

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      

       

      “Positive
Cumulative MOI” shall mean Cumulative MOI to the extent in excess of zero (0) US
Dollars.

       

      “Pre-Usage
Payment MOI” shall mean, per Fiscal Year, MOI before the accrual of any Usage
Payment for such Fiscal Year.

       

      The “Reed
Krakoff Brand” shall mean the brand of products and services in the Specified
Classifications developed and marketed by Coach under the Reed Krakoff Name, and
any derivation and combination thereof, pursuant to this Agreement.

       

      The “Reed
Krakoff Name” shall mean the name Reed Krakoff, and all derivations and
combinations thereof (including, but not limited to, the names “Reed” and
“Krakoff” and the initials “RK”).

       

      “Specified
Classifications” shall mean the Nice Classifications listed in Section II.2)
hereof.

       

      “Usage
Payments” shall mean Coach’s monetary payments to Reed Krakoff pursuant to the
terms and conditions of this Agreement.

       

      
        	
                II. 

              	
                GRANT OF
      RIGHTS

              

      

       

      Reed
Krakoff, his affiliates, successors, and assigns, grant Coach the following
exclusive rights, in perpetuity:

       

      
        	
                 
      

              	
                1)

              	
                The
      right to develop and market one or more lines of products and
      services  in the Specified Classifications under the Reed
      Krakoff Name;

              

      

       

      
        	
                 
      

              	
                2)

              	
                The
      right to register, in Coach’s name and solely for Coach’s ownership, the
      Reed Krakoff Name, including REED and the RK Logos, as trademarks and
      trade dress worldwide in the following Nice
    Classifications:

              

      

       

      
        
          
            	
                    Class
      3:

                  	
                    Cosmetics,
      Perfumes, Body and Hair Lotions, Make-Up

                  
	
                    Class
      4:

                  	
                    Candles

                  
	
                    Class
      8:

                  	
                    Silverware
      and Cutlery

                  
	
                    Class
      9:

                  	
                    Eyewear,
      Sunglasses, Glasses Frames and Cases

                  
	
                    Class
      14:

                  	
                    Jewelry,
      Watches, Keyrings

                  
	
                    Class
      16:

                  	
                    Paper
      and Cardboard Products like Stationery, Playing Cards, Daily Planners
      etc.

                  
	
                    Class
      18:

                  	
                    All
      Leather Goods, including Handbags, Briefcases, Travel Bags, Wallets,
      Purses, Small Leather Goods, etc.

                  
	
                    Class
      20:

                  	
                    Furniture
      and Picture Frames

                  
	
                    Class
      21:

                  	
                    Tabletop
      Categories, including Glassware, Dinnerware, Ceramics and
      Woodenware

                  

          

        

      

      

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      

      
        
          	
                  Class
      24:

                	
                  Fabrics
      for the manufacture of Clothing, Shoes and Bags, Household Furnishings,
      Bed and Table Linens and Towels

                
	
                  Class
      25:

                	
                  Men’s,
      Women’s, and Children’s Clothing, Accessories and Shoes

                
	
                  Class
      34:

                	
                  Smokers
      Accessories such as Ashtrays and Cigarette Holders

                
	
                  Class
      35:

                	
                  Advertising
      and Business (Services)

                
	
                  Class
      42:

                	
                  Design
      Services for others in the field of Fashion

                
	
                  Class
      43:

                	
                  Hotels;
      Restaurants;

                

        

      

      

      
        	
                 
      

              	
                3)

              	
                The
      right to use the Reed Krakoff Name for all commercial purposes related to
      the development, promotion, marketing, distribution, sale, and any other
      use or exploitation of the Reed Krakoff Brand.  Reed Krakoff,
      his affiliates, successors, and assigns will acknowledge that all images
      and personal likenesses of Reed Krakoff captured and used by Coach and its
      affiliates in connection with the Reed Krakoff Brand while he is employed
      by Coach and its affiliates, and all intellectual property created and
      developed by Coach and its affiliates in connection with the Reed Krakoff
      Brand, will upon creation become the property of Coach;
  and

              

      

       

      
        	
                 
      

              	
                4)

              	
                The
      right to take any action in Coach’s and/or Reed Krakoff’s name to protect
      any of the rights granted to Coach
hereunder.

              

      

       

      Coach
shall not use or authorize the use of the Reed Krakoff name in any indecent or
disreputable manner. 

      

      Except as
provided in the preceding paragraph, Coach’s exercise of its rights stated above
will be at its sole discretion, and Reed Krakoff shall not assert any claim
against Coach for any damages, loss of goodwill, loss of profits, or
compensation in connection with Coach’s exercise of its rights as stated above,
and in a manner consistent with that set forth above.

       

      
        	
                III. 

              	
                COOPERATION AND
      FORBEARANCE

              

      

       

      Reed
Krakoff, his affiliates, successors, and assigns agree to provide Coach, at no
cost except as provided in Section XIV, with any and all consents, agreements,
assignments, licenses, grants, rights, assistance, appointments, support, and
any other means Coach may request in connection with the exercise of the rights
granted to Coach in this Agreement, including but not limited to the
following:

       

      
        	
                 
      

              	
                1)

              	
                Consents
      to register in Coach’s name and for Coach’s sole ownership the Reed
      Krakoff Name, as trademarks and trade dress, worldwide in the Specified
      Classifications;

              

      

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

       

      
        	
                 
      

              	
                2)

              	
                Agreements
      not to interpose any objection to the registration, ownership, and use by
      Coach of the Reed Krakoff Name as trademarks, trade dress, and trade names
      worldwide in the Specified
Classifications;

              

      

       

      
        	
                 
      

              	
                3)

              	
                Powers
      of Attorney allowing Coach to execute on Reed Krakoff’s behalf all
      documents related to: (i) the administration of the trademarks, trade
      dress, trade names, copyrights, design patents and all other rights
      related to the Reed Krakoff Brand, (ii) the development and marketing of
      the Reed Krakoff Brand; and (iii) the exercise of any and all rights
      related to the Reed Krakoff Brand;

              

      

       

      
        	
                 
      

              	
                4)

              	
                Licenses
      and assignments to Coach of all trademarks, trade dress, trade names and
      design patents bearing the Reed Krakoff Name, that Reed Krakoff, or any
      business entity which is now or hereafter owned or controlled, directly or
      indirectly by Reed Krakoff, has developed or owns or may hereafter develop
      or own;

              

      

       

      
        	
                 
      

              	
                5)

              	
                Licenses
      and assignments to Coach of all images and likenesses of Reed Krakoff
      captured and used by Coach and its affiliates while he is employed by
      Coach and its affiliates, and all other copyrightable materials created
      and developed by Coach and its affiliates in connection with the
      development and marketing of the Reed Krakoff
  Brand;

              

      

       

      
        	
                 
      

              	
                6)

              	
                Any
      and all supporting documentation relating to the enforcement of the rights
      granted to Coach hereunder.

              

      

       

      Reed
Krakoff, his affiliates, successors, and assigns agree to forbear from engaging,
directly or indirectly, in any competition with the Reed Krakoff Brand, as
follows:

       

      
        	
                 
      

              	
                a)

              	
                Using
      the Reed Krakoff Name in any commercial capacity for products and services
      in the Specified Classifications;

              

      

       

      
        	
                 
      

              	
                b)

              	
                Permitting
      any other person, firm, corporation, or business (other than Coach) to use
      the Reed Krakoff Name in any commercial capacity for products and services
      in the Specified Classifications.

              

      

       

      
        	
                 
      

              	
                c)

              	
                The
      restrictions and forbearance provided for in this Section III shall
      include coupling the Reed Krakoff Name and the term “by”, “with” or “for”
      with any other trademark, brand or
name.

              

      

       

      Notwithstanding
anything to the contrary contained in this Agreement, Reed Krakoff may use his
name, either personally or through any other entity with which he is affiliated,
(a) for noncommercial purposes, (b) in connection with products and services not
in the Specified Classifications, and (c) in advertising materials in connection
with products and services in the Specified Classifications, but only (in the
case of this clause (c)) if his name is used descriptively, in the context of a
complete sentence or descriptive phrase, in a font no larger or more distinct
than the surrounding words in that sentence or phrase, and not on clothes,
labels, hang-tags, or product packaging.

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      

       

      
        	
                IV.

              	
                COMPENSATION

              

      

       

      Coach
will make Usage Payments to Reed Krakoff under the following terms and
conditions:

       

      
        	
                 
      

              	
                1)

              	
                Usage
      Payment During Employment:  For each Fiscal Year during which
      Reed Krakoff is employed by Coach, Reed Krakoff will be entitled to a
      payment (a “Usage Payment”) for each Fiscal Year during which Coach
      operates the Reed Krakoff Brand in an amount equal to the Pre-Usage
      Payment MOI for such Fiscal Year times the Usage Percentage; provided that
      MOI (i.e., after the
      accrual of such Usage Payment) equals or exceeds twenty (20) million US
      Dollars.  The “Usage Percentage” shall be as
      follows:

              

      

       

      
        	
                 
      

              	
                A)

              	
                For
      an initial term commencing on the date hereof and ending the earlier of
      (i) Fiscal Year 2024 or (ii) four Fiscal Years after the first Fiscal Year
      the Reed Krakoff Brand has achieved a Positive Cumulative MOI (the
      “Initial Period”), the Usage Percentage shall be ten (10)
      percent;

              

      

       

      
        	
                 
      

              	
                B)

              	
                After
      the Initial Period, the Usage Percentage will be reduced by two (2)
      percent beginning with the first Fiscal Year of each subsequent four (4)
      Fiscal Year period, provided that the Usage Percentage will never be
      reduced below four (4) percent.

              

      

       

      For
example, if Fiscal Year 2015 is the first Fiscal Year that the Reed Krakoff
Brand achieves a Positive Cumulative MOI, the Usage Percentage would be ten (10)
percent through the end of Fiscal Year 2019.  The Usage Percentage
would then be reduced to eight (8) percent for Fiscal Year 2020 through the end
of Fiscal Year 2023.  The Usage Percentage would then be reduced to
six (6) percent for Fiscal Year 2024 through the end of Fiscal Year
2027.

       

      
        	
                 
      

              	
                2)

              	
                Usage
      Payment Post Employment: For each of the first fifteen (15) Fiscal Years
      beginning with the first Fiscal Year after Reed Krakoff’s employment at
      Coach terminates, Reed Krakoff will be entitled to a Usage Payment for
      each Fiscal Year during which Coach operates the Reed Krakoff Brand in an
      amount equal to two (2) percent of Pre-Usage Payment-MOI; provided that
      MOI (i.e., after the
      accrual of such Usage Payment) equals or exceeds twenty (20) million US
      Dollars.  Thereafter, Reed Krakoff will not be entitled to any
      Usage Payment.

              

      

       

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      

       

      
        	
                 
      

              	
                3)

              	
                Notwithstanding
      any of the foregoing, the Usage Payments that Reed Krakoff is entitled to
      under the provisions of this Section IV will only accrue to the extent MOI
      for such Fiscal Year equals or exceeds Twenty (20) million US
      Dollars.  In other words, the Usage Payment amount in any Fiscal
      Year will be adjusted downward such that the Usage Payment that accrues in
      such Fiscal Year does not cause MOI to be less than Twenty (20) million US
      Dollars for such Fiscal Year.

              

      

       

      
        	
                 
      

              	
                4)

              	
                Notwithstanding
      any of the foregoing, the Usage Payments that Reed Krakoff is entitled to
      under the provisions of this Section IV shall not be payable in cash until
      the earlier of (a) the Reed Krakoff Brand achieves a Positive Cumulative
      MOI or (b) Coach experiences a Change in Control.  All Usage
      Payments not yet paid in cash to Reed Krakoff shall be carried forward and
      shall accrue interest at the annual rate Coach receives on its cash based
      investments.  Such accrued interest shall be paid along with the
      Usage Payments pursuant to the terms and conditions of this Section
      IV.  A “Change in Control” shall be deemed to have occurred if
      any “person” or “group” (as such terms are used in Sections 13(d) and
      14(d) of the Exchange Act of 1934 (the “Exchange Act”)) is or becomes the
      beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange
      Act), directly or indirectly, of voting stock or equity interests of Coach
      representing more than 50% of the total outstanding voting stock or equity
      interests of Coach.

              

      

       

      
        	
                 
      

              	
                5)

              	
                Commencing
      with the Fiscal Year in which the Reed Krakoff Brand first achieves a
      Positive Cumulative MOI, all current and deferred Usage Payments and
      interest accrued thereon will be paid within Sixty (60) days of the end of
      the applicable Fiscal Year in an amount not to exceed such Fiscal Year’s
      Positive Cumulative MOI.  All current and deferred Usage
      Payments and interest accrued thereon will be paid simultaneously with the
      occurrence of the Change in
Control.

              

      

       

      
        	
                 
      

              	
                6)

              	
                If
      Coach sells the Reed Krakoff Brand, (a) the net proceeds of such sale
      shall be treated at Net Sales for purposes of calculating MOI and
      Cumulative MOI under this Agreement and (b) Coach will require that the
      buyer will have a continuing obligation to make Usage Payments on the
      terms set forth in this Agreement (and that Krakoff will have enforceable
      rights against such buyer) on sales by such buyer of products and services
      marketed and sold under the Reed Krakoff
Brand.

              

      

      

      
        	
                 
      

              	
                7)

              	
                For
      purposes of illustration and not based on any forecast or plan, the
      following table sets forth hypothetical results and Usage Payments for a
      five-Fiscal-Year period, assuming Reed Krakoff’s continued employment at
      Coach during this period (in
thousands):

              

      

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

       

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                	 
      	 	
                                                        2013

                                                      	 	 	
                                                        2014

                                                      	 	 	
                                                        2015

                                                      	 	 	
                                                        2016

                                                      	 	 	
                                                        2017

                                                      	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                        MOI
      (Pre-Usage Fee)*

                                                      	 	 	14,920	 	 	 	17,980	 	 	 	22,000	 	 	 	26,840	 	 	 	31,500	 
	
                                                        Usage
      Fee (10% of net, 9.1% before usage)

                                                      	 	 	-	 	 	 	-	 	 	 	2,000	 	 	 	2,440	 	 	 	2,864	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                        MOI
      (After Usage Fee)

                                                      	 	 	14,920	 	 	 	17,980	 	 	 	20,000	 	 	 	24,400	 	 	 	28,636	 
	
                                                        Cumulative
      MOI

                                                      	 	 	(46,000	)	 	 	(28,020	)	 	 	(8,020	)	 	 	16,380	 	 	 	45,016	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                        Accrued
      Usage Fee

                                                      	 	 	-	 	 	 	-	 	 	 	2,000	 	 	 	-	 	 	 	-	 
	
                                                        Interest
      on Unpaid Usage Fee Carried Forward from Prior Year

                                                      	 	 	-	 	 	 	-	 	 	 	-	 	 	 	40	 	 	 	-	 
	
                                                        Total
      Accrued and Unpaid Usage Payments + Interest

                                                      	 	 	-	 	 	 	-	 	 	 	2,000	 	 	 	40	 	 	 	-	 
	
                                                        Cumulative
      Accrual at Year End

                                                      	 	 	 	 	 	 	 	 	 	 	2,000	 	 	 	2,040	 	 	 	-	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                        Cash
      Payment

                                                      	 	$	-	 	 	$	-	 	 	$	-	 	 	$	4,480	 	 	$	2,864	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                        *
      RK operating income less shared service fee and cost of
      capital.

                                                      	 	 	 

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

       

      The above
table assumes that the interest Coach realizes on its cash balances in all
periods is 2%.

       

      In this
example, the Usage Percentage would be reduced to 8% of MOI beginning in Fiscal
Year 2020.

       

      
        	
                V. 

              	
                BUY-OUT
      OPTION

              

      

       

      Commencing
with Fiscal Year 2015, if Reed Krakoff is not employed by Coach, he may purchase
from Coach the rights granted to Coach in this Agreement and be released from
the forbearance obligations stated in this Agreement (the “Buy-Out Option”), if
(i) Net Sales of the Reed Krakoff Brand are less than Twenty Five (25) million
US Dollars annually for the prior Fiscal Year, and (ii) Net Sales for such
Fiscal Year are less than eighty (80) percent of the average Net Sales for the
prior three (3) years.  The “Purchase Price” will be the higher of (i)
two (2) times the prior twelve (12) months Net Sales or (ii) the percentage of
the Cumulative Operating Losses of the Reed Krakoff Brand set forth
below:

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      

       

      
        
          	
                  Time From Cessation of
      Reed Krakoff Employment

                	
                  Purchase
      Price

                
	
                  and
      Closing of the Buy-Out Option

                	 
      
	 
      	 
      
	
                  Within
      12 months

                	
                  100%
      of Cumulative Operating Loss

                
	
                  After
      12 months but before 24 months

                	
                  75%
      of Cumulative Operating Loss

                
	
                  After
      24 months but before 36 months

                	
                  50%
      of Cumulative Operating Loss

                
	
                  After
      36 months but before 48 months

                	
                  25%
      of Cumulative Operating Loss

                
	
                  After
      48 months

                	
                  0%

                

        

      

       

      VI.              REPRESENTATIONS AND
WARRANTIES

       

      Reed
Krakoff hereby represents and warrants that:

       

      
        	
                 
      

              	
                1)

              	
                He
      is free to enter into and perform fully under this
      Agreement.  There is no agreement or understanding to which he
      is a party or to which he is bound which conflicts with the provisions of
      this Agreement.

              

      

       

      
        	
                 
      

              	
                2)

              	
                He
      has not previously sold, assigned, licensed or otherwise transferred all
      or any portion of the rights granted to Coach pursuant to this Agreement
      to any other person.

              

      

       

      Coach
hereby represents and warrants that:

       

                      a)           Authorization.  Coach
has all requisite corporate power and authority to execute and deliver this
Agreement and perform its obligations hereunder.  This Agreement has
been duly and validly executed and delivered by Coach and (assuming the
execution and delivery by Reed Krakoff) this Agreement constitutes the valid and
binding obligation of Coach, enforceable against it in accordance with its
terms.

      

      b)           Organization.  Coach is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland.

      

      c)           No
Conflicts.  None
of the execution and delivery by Coach of this Agreement, the consummation by
Coach of the transactions contemplated hereby, or compliance by Coach with any
of the provisions hereof does or will conflict with, or result in any violation
of or default (with or without notice or lapse of time, or both) under: (i) any
provision of the certificate of incorporation or bylaws of Coach; (ii) any
contract to which Coach is a party or by which any of the properties or assets
of Coach are bound; (iii) any order of any governmental authority applicable to
Coach or by which any of the properties or assets of Coach are bound; or (iv)
any applicable law.

      

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

       

      d)           No
Consent.  No
consent, waiver, approval, order, permit or authorization of, or declaration or
filing with, or notification to, any person or governmental authority is
required on the part of Coach in connection with the execution, delivery or
performance by Coach of this Agreement or the consummation by Coach of the
transactions contemplated hereby.

      

      
        	
                VII. 

              	
                INDEMNIFICATION

              

      

       

      Reed
Krakoff, his affiliates, successors, and assigns shall protect, indemnify, and
save harmless Coach, its affiliates, officers, directors, employees, agents,
successors, and assigns against any and all liabilities, claims, damages,
penalties, causes of action, costs, and expenses including reasonable attorneys’
fees, arising out of the breach of any representation, warranty, covenant, or
agreement contained herein.

       

      Coach,
its affiliates, successors, and assigns shall protect, indemnify, and save
harmless Reed Krakoff, agents, successors, and assigns against any and all
liabilities, claims, damages, penalties, causes of action, costs, and expenses
including reasonable attorneys’ fees, arising out of the breach of any
representation, warranty, covenant, or agreement contained herein, or in
connection with any action brought by a third-party naming or involving Reed
Krakoff relating to the Reed Krakoff Brand and the Reed Krakoff Brand, and/or
Coach’s exercise of the rights granted hereunder.

       

      
        	
                VIII. 

              	
                REMEDIES FOR BREACH OF
      CONTRACT

              

      

       

      In the
event of a breach or threatened breach of any of the covenants or agreements
made by Reed Krakoff hereunder, Coach shall have the right, without the
necessity of proving any actual damages, to obtain temporary or permanent
injunctive or mandatory relief in a court of competent jurisdiction, it being
the intention of the parties to this Agreement that the covenants and agreements
of Reed Krakoff hereunder be specifically enforced to the maximum extent
permitted by law.

       

      If Coach
is awarded damages, pursuant to a final, nonappealable arbitration award, as a
result of any breach by Reed Krakoff of any of his representations, warranties
or covenants contained in this Agreement or his Employment Agreement, Coach
shall have the right, in addition to any and all rights and remedies that it has
against Reed Krakoff by reason of same, to set off the amount of such award
against any sums payable to Reed Krakoff hereunder.

       

      
        	
                IX. 

              	
                AUDIT
      RIGHTS

              

      

       

      Reed
Krakoff will have the right, exercisable once per Fiscal Year within sixty (60)
days after Coach presents Reed Krakoff with its calculation of the Usage
Payments for such year, to audit the books and records of Coach relating to the
Reed Krakoff Brand for up to the past three (3) Fiscal Years in order to verify
any accounting related to this Agreement.  If the audit results in an
increase in the Usage Payment payable to Reed Krakoff in respect of any Fiscal
Year, such amount shall be paid with interest at the rate of two (2) percentage
points above the Prime Rate of interest as reported in The Wall Street
Journal on the date the audit is completed.   If the audit
results in an increase in the Usage Payment payable to Reed Krakoff in respect
of any Fiscal Year of more than three (3) percent, Coach will also pay for the
cost of the Audit.

       

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

       

      
        	
                X. 

              	
                CLAW-BACKS; PAYMENTS;
      TAXES; REPORTS AND RECORDS.

              

      

       

      (a)           Claw-backs.  In
the event that Reed Krakoff (i) violates the forbearance covenants set forth in
Section III of this Agreement, (ii) violates any of the covenants set forth in
Section 9(a) or 9(b) of the Employment Agreement (or comparable covenants in any
Future Employment Agreement), or (iii) materially violates any of the covenants
set forth in Section 9(c), 9(e) or 9(f) of the Employment Agreement (or
comparable covenants in any Future Employment Agreement), Reed Krakoff shall, in
addition to any other remedy which may be available to Coach at law or in equity
or pursuant to the Employment Agreement, any Future Employment Agreement or
otherwise, (a) forfeit his right to receive any future Usage Fees and (b) be
required to pay to the Company an amount equal to all Usage Fees that he has
received during the 12 month period immediately preceding (or at any time after)
the date that he first breaches such covenant.

       

      (b)           Payments in U.S.
Currency.  All payments due under this Agreement shall be paid
in cash to Reed Krakoff and all payments shall be made in United States
currency.  Conversion of foreign currency to U.S. dollars shall be
made at the conversion rate used by Coach in the preparation of its financial
statements.

       

      (c)           Taxes.  All
payments due to Reed Krakoff hereunder shall be paid in full without deduction
of taxes or other fees which may be imposed by any government, and any such
taxes or other fees imposed by any government shall be paid by
Coach.  Notwithstanding anything else to the contrary, Coach will not
be responsible for any tax gross-up for Reed if payments are deemed ordinary
income under this Agreement.

       

      (d)           Books.  Coach
shall keep full, true and accurate books of account containing all particulars
that may be necessary for the purpose of showing the amounts payable to Reed
Krakoff hereunder and to enable the reports provided under Section X.(d) to be
verified.  Said books of account shall be kept at Coach’s principal
place of business.

       

      (e)           Reports.  Coach,
within forty-five (45) days after March 31, June 30, September 30 and December
31 of each year, shall deliver to Reed Krakoff a true and accurate report,
giving such particulars of the business conducted by Coach, its affiliates and
its sublicensees during the preceding three-month period under this Agreement as
shall be pertinent to an accounting of Usage Payments hereunder as shown in
Exhibit A hereto. Without limiting the generality of the foregoing, these
reports shall include at least the following:

       

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

      

       

      (i)           MOI
for the preceding Fiscal Quarter, with reasonable detail regarding how such MOI
and how Operating Income for such Fiscal Quarter was calculated;

       

      (ii)           Cumulative
MOI as of the end of the preceding Fiscal Quarter, with reasonable detail
regarding how such Cumulative MOI (including any cost of capital deduction) was
calculated;

       

      (iii)           for
each product that accounts for more than 5% of Net Sales of products sold under
the Reed Krakoff Brand, the number of units of such product sold and the amount
of Net Sales realized on sales of such products;

       

      (iv)           the
amount of all deductions applied in calculating Net Sales, broken down as in
clause (iii) to the extent applicable;

       

      (v)           the
names and addresses of all licensees of the Reed Krakoff Brand; and

       

      (vi)           all
license revenue by licensee and country.

       

      
        	
                XI. 

              	
                ACKNOWLEDGEMENTS AND
      AGREEMENTS

              

      

       

      Coach and
Reed Krakoff acknowledge and agree as follows:

       

      
        	
                 
      

              	
                1)

              	
                Coach
      will be required to disclose, via an 8-K filing, this Agreement within
      four business days of its execution and to file a copy of this Agreement
      (and any future amendments hereto) with the Securities and Exchange
      Commission with its next annual/quarterly report on Form 10-K or 10-Q, at
      which time this Agreement shall become a public
  document;

              

      

       

      
        	
                 
      

              	
                2)

              	
                All
      intellectual property, including but not limited to all trademarks, trade
      dress, trade names, copyrights, and patents developed and created in
      connection with the development and marketing of the Reed Krakoff Brand
      shall be owned solely by Coach; and

              

      

       

      
        	
                 
      

              	
                3)

              	
                Neither
      party may transfer, assign, or license any and all of its rights hereunder
      without the prior written consent of the other party, except that Coach
      may transfer, assign or license any of such rights to any wholly-owned
      subsidiary of Coach without the consent of Reed
  Krakoff.

              

      

       

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

      
        	
                XII. 

              	
                NOTICES

              

      

       

      All
notices or other communications required or contemplated hereunder shall be in
writing and shall be deemed given when delivered in person or five (5) days
after sent, postage prepaid, by registered mail, as follows:

       

      
        	
                 
      

              	
                (a)

              	
                if
      to the Coach, addressed as follows:

              

      

       

      Coach,
Inc.

      516 West
34th
Street

      New York,
New York 10001

      Attention:  General
Counsel

       

      
        	
                 
      

              	
                (b)

              	
                if
      to Reed Krakoff, addressed first mentioned
  above.

              

      

       

      Reed
Krakoff

      c/o
Coach, Inc.

      516 West
34th
Street

      New York,
New York 10001

      

      With a
copy to:

      

      George W.
Lloyd

      Goodwin|Procter
LLP

      53 State
Street

      Boston,
Massachusetts 02109

       

      
        	
                XIII. 

              	
                BINDING
      EFFECT

              

      

       

      This
agreement shall be binding upon and inure to the benefit of the successors and
permitted assigns of the parties hereto.

       

      
        	
                XIV. 

              	
                ARBITRATION AND
      EQUITABLE REMEDIES

              

      

       

      Any
controversy, claim or dispute arising out of or relating to this Agreement or
breach thereof shall be settled by binding arbitration in accordance with the
rules of the American Arbitration Association, by three
arbitrators.  Each party shall appoint one arbitrator.  If
within fifteen (15) days after receipt of the first party’s notification of the
appointment of an arbitrator, the other party has not notified the first party
of the name of the arbitrator it appoints, the second arbitrator shall be
appointed by the American Arbitration Association.  The two (2)
arbitrators thus appointed shall choose the third arbitrator who will act as the
presiding arbitrator of the tribunal.  If they fail to agree on the
appointment of such third arbitrator within fifteen (15) days after the
appointment of the second arbitrator, then the third arbitrator shall be
appointed by the  American Arbitration Association as soon as possible
thereafter.  Judgment upon any award so rendered may be entered in any
court having jurisdiction thereof.  The arbitration shall be held in
New York, New York.

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

      

      Notice of
arbitration shall be sufficient if made or given in accordance with the
provisions of Section XII of this Agreement.  The parties shall each
bear their respective costs of making reference to arbitration.  The
costs of making the arbitral award (including the arbitrators’ fees and
expenses) shall be borne equally by the parties; provided, however, that in the
event of a postponement, the party requesting the postponement of the
arbitration hearing shall bear the postponement fee charge by the arbitral
tribunal.  Except as otherwise provided for in this Agreement, the
parties agree that the award of the arbitral tribunal will be the sole and
exclusive remedy between them regarding all matters arising out of this
Agreement, and no recourse shall be made to any court, except to solely enforce
a final arbitral award.  The party, which by its refusal, obliges the
other to go to court for enforcement will bear all costs incurred.

       

      Notwithstanding
anything in the foregoing to the contrary, Coach shall have the right to bring
an action before a court of competent jurisdiction for the purpose of seeking
injunctive, mandatory, or other relief with respect to any alleged violation of
the provisions of this Agreement, and any ancillary matters related to such
claim for relief may similarly be resolved by such court.

       

      
        	
                XV. 

              	
                Section
      409A

              

      

       

      Coach and Reed Krakoff acknowledge and
agree that, to the extent applicable, this Agreement shall be interpreted in
accordance with, and Coach and Reed Krakoff agree to use best efforts to achieve
timely compliance with, Section 409A of the Internal Revenue Code and the
Department of Treasury Regulations and other interpretive guidance issued
thereunder (collectively, “Section
409A”), including without
limitation any such regulations or other guidance that may be issued after the
date hereof.  Coach and Reed Krakoff intend for the payments to be
made hereunder to constitute “short term deferrals” for purposes of Section 409A
and the Agreement shall be interpreted in accordance with that
intent.  Notwithstanding any provision of this Agreement to the
contrary, in the event that Coach determines that any compensation payable or
provided to Reed Krakoff under this Agreement may be subject to Section 409A,
Coach may adopt (without any obligation to do so or to indemnify Reed Krakoff
for failure to do so) such limited amendments to this Agreement and appropriate
policies and procedures, including amendments and policies with retroactive
effect, that Coach reasonably determines are necessary or appropriate to (a)
exempt the compensation and benefits payable under this Agreement from Section
409A and/or preserve the intended tax treatment of the compensation and benefits
provided with respect to this Agreement or (b) comply with the requirements of
Section 409A; provided, however, that the foregoing shall not
reduce the total compensation to which Reed Krakoff is entitled
hereunder.  Notwithstanding anything herein to the
contrary, if at the time of Reed Krakoff’s separation from service with Coach he
is a “specified employee” as defined in Section 409A (and any related
regulations or other pronouncements thereunder) and to the extent that any
payment that Reed Krakoff becomes entitled to under this Agreement on account of
his separation from service would be considered deferred compensation subject to
the 20% additional tax imposed by Section 409A, such payment shall be delayed
(without any reduction in such payments ultimately paid or provided to him)
until the date that is six months following his separation from service (or the
earliest date as is permitted under Section 409A).  In such event, the
first payment made after such delay shall include a catch-up payment covering
amounts that would otherwise have been paid during such six-month (or shorter)
period.

       

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

       

      
        	
                XVI. 

              	
                RELATIONSHIP OF
      PARTIES

              

      

       

      This
Agreement shall not create nor be considered to create the relationship of
master and servant, principal and agent, partnership or joint venture between
the parties hereto, and neither party shall be liable for any obligation,
liability, representation, negligent act or omission to act on the part of the
other except as expressly set forth herein.

       

      
        	
                XVII. 

              	
                GOVERNING
      LAW

              

      

       

      This
Agreement shall be construed and governed in accordance with the laws of the
State of New York without regard to choice of law provisions.  Any and
all matters of dispute arising out of, or in any way connected with this
Agreement or the relationship between the Parties hereto, are subject to
determination only by the Federal or State courts or American Arbitration
Association located in the State of New York, within the County of New
York.  The parties hereby consent and submit to the jurisdiction of
such courts or arbitration forums which the parties acknowledge and agree are
convenient forums in which to litigate any such action.  The parties
waive any right to transfer any such action to any other forum or court and
agree to be bound by the judgment rendered by such courts or arbitration
forums.

       

      
        	
                XVIII. 

              	
                SEVERABILITY

              

      

       

      Provisions
of this Agreement are severable, and if any provision shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such provision, or part thereof, in such
jurisdiction and shall not in any manner affect such provision, or part thereof,
in any other jurisdiction, or any other provision in this Agreement in any
jurisdiction.

       

      
        	
                XIX. 

              	
                WAIVER

              

      

       

      The
failure of either party at any time to require the performance by the other of
any term, provision, covenant, or condition hereof shall in no way affect its
right to enforce the same or any other term, provision, covenant, or condition
hereof; nor shall failure of either party to act with respect to any breach or
violation of any term, provision, covenant, or condition of this Agreement by
the other party be taken, held, or construed to be a waiver of any subsequent
breach or violation thereof or as a waiver of the term, provision, covenant, or
condition itself.

       

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

       

      
        	
                XX. 

              	
                LEGAL
      FEES

              

      

       

      Coach
shall be responsible for its own legal costs and expenses in connection with the
drafting and negotiation of this Agreement and shall reimburse Reed Krakoff for
the reasonable fees and expenses of counsel in connection with the drafting and
negotiation of this Agreement, any amendment, waiver, or other modification
hereof, and any request by Coach for any action or consent by Reed Krakoff under
this Agreement.

       

      
        	
                XXI. 

              	
                ENTIRE
      AGREEMENT

              

      

       

      This
Agreement contains the entire agreement between the parties hereto with respect
to the transactions contemplated hereby and may not be changed or modified other
than by a written instrument executed by both parties.  Except as
stated herein, neither party may, nor shall have the power to assign or transfer
this Agreement or any rights or obligations hereunder or claims arising
hereunder, without the prior written consent of the other party.  Any
attempt to assign or transfer this Agreement in violation of this Section shall
be void and of no force and effect.  The descriptive headings and
captions in this Agreement are for convenience only and shall not affect the
meaning or construction of any provisions hereof.

       

      
        	
                XXII. 

              	
                COUNTERPARTS

              

      

       

      This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

       

      
        
           

        

        
          16

          
            

          

        

        
           

        

      

      IN WITNESS WHEREOF, the parties have
executed this Agreement or caused this Agreement to be executed by their duly
authorized representatives as of the effective date stated above.

       

      

       

      

       

      _____________________________

      Reed Krakoff

      Individually

      

       

      COACH, INC.

       

      

       

      By:           _______________________

      Name:

      Title:

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

      Exhibit
A

      

      

      Quarterly
Report

      

      

      [To
come.]

      
        
           

        

        
          18

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