Exhibit 10.89

 

RUSS BERRIE AND COMPANY, INC.
STOCK OPTION AGREEMENT

 

Date of Grant:  June 1, 2004

 

In accordance with the Employment Agreement (the “Employment Agreement”), dated
as of April 9, 2004 between Russ Berrie and Company, Inc., a New Jersey
corporation (together with its successors and assigns, the “Company”) and Andrew
R. Gatto (the “Executive”), the Company does hereby grant to the Executive, as
of the grant date set forth above, pursuant to the 2004 Russ Berrie and Company,
Inc. Stock Option, Restricted and Non-Restricted Stock Plan (the “Plan”), a
stock option (the “Option”) to purchase an aggregate of 100,000 shares of its
Common Stock (stated value $.10 per share) (the “Shares”) at the price of $19.53
per share (the “Option Price”), upon the following terms and conditions.  Unless
otherwise indicated, capitalized terms used but undefined herein shall have the
meanings ascribed to them in the Plan.

 

1.                                       (a)                                 
This Option is intended to be a non-qualified stock option.

 

(b)                                 Except as provided in Sections 2 and 4
below, this Option shall vest and become exercisable ratably over five years
(20% per year) from the Date of Grant, and have a term of ten years from the
Date of Grant, provided, however, the term of exercisability of a vested portion
of the Option shall be subject to the provisions of Section 2 below.

 

2.                                       (a)                                  If
the employment of the Executive under the Employment Agreement is terminated by
the Company without Cause or by reason of the Disability of the Executive, or by
the Executive for Good Reason (each as defined in the Employment Agreement),
whether or not in connection with a change in control, or by reason of the
Executive’s death, any outstanding unexercised portion of this Option, whether
or not vested and/or exercisable on the Termination Date, shall be deemed fully
vested and exercisable and may be exercised for two years after the Termination
Date or the remainder of the ten-year term of the Option, whichever period is
shorter.  The “Termination Date” is the date on which the Executive’s employment
under the Employment Agreement ceases.

 

(b)                                                                                
Upon any Change in Control (as defined in the definition of Good Reason in the
Employment Agreement), any outstanding unexercised portion of this Option,
whether or not vested and/or exercisable on the date of such Change in Control,
shall be deemed fully vested and exercisable.  In the event that holders of
Shares receive cash, securities or other property in respect of their Shares in
connection with a Change in Control, the Company shall use reasonable efforts,
to the extent permissible under the Plan, to enable the Executive (if he so
elects) to exercise this Option at a time and in a fashion that will entitle him
to receive in exchange for any Shares thus acquired the same consideration as is
received in such Change in Control by other holders of Shares.

 

(c)                                                                                 
If the employment of the Executive under the Employment Agreement is terminated
by the Company for Cause or by the Executive without Good Reason (each as
defined in the Employment Agreement), and not due to death or Disability, any
outstanding unexercised unvested portion of this Option will be cancelled and
deemed terminated as of the Termination Date and any unexercised, vested portion
of this Option may be exercised through the earlier of (x) 30 days after the
Termination Date or (y) the 10th anniversary of the Date of Grant.

 

3.               This Option shall be exercised by giving written notice of
exercise to the Company at 111 Bauer Drive, Oakland, NJ  07430 (Attention: Chief
Financial Officer) as follows:

 

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(a)                                                          Method of
Exercise.  In order to exercise this Option in whole or in part, the Executive
shall submit to the Company a writing specifying the whole number of Shares in
respect of which the Option is being exercised and accompanied by payment in
full (or an arrangement for payment in full) in accordance with Section 3(b)
below of the aggregate Option Price of the Shares in respect of which the Option
is being exercised.  The number of Shares for which the Option has thus been
exercised shall then promptly be issued by the Company (the “Option Shares”) and
a certificate for such Shares shall be promptly delivered to the Executive.

 

(b)                                                         Method of Payment. 
Payment of the aggregate Option Price for Option Shares may be made (i) by
delivery to the Company of cash or a check to the order of the Company and
backed by sufficient funds in an amount equal to the aggregate Option Price of
such Shares; (ii) to the extent that use of this procedure will not result in
any incremental accounting charges to the Company, by authorizing the Company to
withhold Shares that would otherwise be delivered to the Executive having an
aggregate Market Price on the date of exercise equal to the aggregate Option
Price of the Option Shares; (iii) by delivery to the Company of Shares then
owned by the Executive having an aggregate Market Price on the date of delivery
equal to the aggregate Option Price of the Option Shares; or (iv) by any
combination of (i), (ii) or (iii), in each case to the fullest extent
permissible under the Plan.  The Company shall also from time to time make
available to the Executive any “cashless exercise” procedure that it then makes
available to other option holders who are directors and executive officers of
the Company.

 

(c)                                                          Delivery of Shares
in Payment of Option Price.  Payment by delivery of Shares may be effected by
delivering one or more stock certificates or by otherwise delivering Shares to
the Company’s reasonable satisfaction, in each case accompanied by such
endorsements, stock powers, signature guarantees or other documents or
assurances as may reasonably be required by the Company.  If a certificate or
certificates or other documentation representing Shares in excess of the amount
required are delivered, a certificate (or other satisfactory evidence of
ownership) representing the excess number of Shares shall be returned by the
Company.  The Company need not accept fractional Shares.

 

4.               The number and type of securities (or other property) subject
to this Option, the price to be paid therefor, and the other terms of this
Agreement, shall be subject to adjustment as follows:

 

(a)                                                          In the event of any
dissolution or liquidation of the Company, sale of all or substantially all of
the assets of the Company, merger or consolidation of the Company with or into
any other corporation if the Company is the surviving corporation, statutory
share exchange involving capital stock of the Company, reorganization,
recapitalization, reclassification, stock dividend, extraordinary dividend,
stock split, reverse stock split, stock combination, rights offering, spin-off
or other relevant change, the Committee may adjust the aggregate number of
shares of Stock available for awards of options under the Plan, the Option price
of the Option, and any or all other matters deemed appropriate by the Committee
in good faith, including, without limitation, accelerating the vesting and/or
exercise period pertaining to the Option; such adjustment shall be made on a
basis that is no less favorable to the Executive than the adjustment, if any,
made in respect of such event to options held by persons who are directors and
executive officers of the Company is to such holders.

 

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(b)                                                         In connection with a
Business Combination, the Committee, in its sole discretion, may provide for (i)
the continuation of the Plan and/or the assumption of the Option by a successor
corporation (or a parent or subsidiary thereof), (ii) the substitution for the
Option of new awards covering the stock of a successor corporation (or a parent
or subsidiary thereof), with appropriate adjustments as to the number and kind
of shares and exercise prices, (iii) upon 10 days’ advance notice from the
Committee to the Executive, the acceleration of the vesting and/or exercise
period pertaining to the Option or (iv) upon 10 days’ advance notice from the
Committee to the Executive, (x) the cancellation of any outstanding portion of
the Option that is then exercisable and the payment to the holder thereof, in
cash or stock, or any combination thereof, of the value of such portion based
upon the price per share of Stock received or to be received by other
stockholders of the Company in connection with the Business Combination, and (y)
the cancellation of the portion of the Option that is not then exercisable.  In
the event of any continuation, assumption or substitution contemplated by the
foregoing clauses, the Option shall continue in the manner and under the terms
so provided.

 

(c)                                                          If, by reason of
any adjustment to the Option pursuant to the provisions described above, the
Executive shall be entitled to new, additional or different shares of stock or
securities of the Company or any other corporation in respect of the Option,
such new, additional or different shares shall thereupon be subject to all of
the conditions and restrictions which were applicable to the Shares subject to
the Option prior to such adjustment.

 

5.               This Option shall not be assignable or transferable except by
will or by the laws of descent or distribution provided, however, that the
Executive may transfer all or any portion of the Option to a member of his
Immediate Family, a trust for the benefit of the Executive or any member of his
Immediate Family, partnerships in which the Executive or his Immediate Family
members and/or trusts are the only partners, and/or any organization exempt
under Section 501(c) of the Internal Revenue Code of 1986, as amended (the
“Code”).  Subject to the provisions of Section 2, this Option shall be
exercisable only by the Executive or his permitted assignee or transferee.

 

6.               Subject to the limitations set forth in the Plan, the Committee
is vested with absolute discretion and authority to interpret the Plan and make
all determinations necessary or advisable for the administration thereof.  Any
determination of the Committee in the administration of the Plan, as described
therein, shall be final, conclusive and binding upon the Executive and any
person claiming under or through the Executive, including, without limitation,
as to any adjustments pursuant to Section 4 hereof.

 

7.               Nothing contained in the Plan or this Agreement shall confer
upon the Executive any right with respect to continuance of employment by any
Participating Company nor limit in any way the right of the Company to terminate
or modify his employment at any time, with or without cause.

 

8.               If the Company is for any reason required to withhold any
amount under the tax laws or regulations of the United States, any jurisdiction
thereof or local government with respect to the transfer of Option Shares upon
exercise of the Option (“Withholding Taxes”), the Executive or other person
receiving such Shares shall be required to pay the Company the amount of any
such Withholding Taxes, such payment to be made in any of the fashions
authorized under Section 3(b) above.

 

9.               The Company shall not be required to issue or deliver a
certificate for Option Shares unless the issuance and delivery of such
certificate complies with all applicable legal requirements including, without
limitation, compliance with the provisions of applicable state securities laws,
the Securities Act of 1933, as amended (the “Securities Act”), the Securities
Exchange Act of 1934, as amended, and the requirements of the exchanges, if any,
on which the Company’s shares of Common Stock may, at that time, be listed;
provided, however, that the Company shall use reasonable efforts to satisfy, as
promptly as possible, any condition (other than those in the Executive’s
control) that would permit such issuance or delivery.

 

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10.         Notwithstanding anything contained in the Plan or herein to the
contrary, in the event that the disposition of Option Shares is not covered by a
then current registration statement under the Securities Act, and is not
otherwise exempt from such registration, such Option Shares shall be restricted
against transfer to the extent required by the Securities Act and Rule 144 or
other regulations thereunder.  The certificates evidencing any of such Option
Shares shall be appropriately amended or have an appropriate legend placed
thereon to reflect their status as restricted securities as aforesaid.

 

11.         The provisions of Sections 9, 10, 11(A), 12, 14, 16, and 19 of the
Employment Agreement shall be deemed incorporated into this Agreement as if
fully set forth herein.  Any claims or disputes arising out of, or relating to,
this Agreement shall be deemed “Disputes” to which Section 11(B) of the
Employment Agreement applies.

 

12.         The Executive shall not be, nor have any of the rights or privileges
of, a stockholder of the Company in respect of any Shares purchasable upon
exercise of the Option granted hereunder unless and until certificates
representing such shares shall have been issued by the Company.

 

13.         The Company shall, upon and to the extent of any written request
from the Executive, use reasonable efforts to assure that all Option Shares
shall upon issuance and delivery, be (i) fully registered (at the Company’s
expense) under the Securities Act, for both issuance and resale, (ii) registered
or qualified (at the Company’s expense) under such state securities laws as the
Executive may reasonably request, for issuance and resale and (iii) listed on a
national securities exchange or eligible for sale on the NASDAQ National Market
and that all such shares, upon issuance, shall be validly issued, fully paid and
nonassessable.  The Company shall at all times reserve and keep available
sufficient Shares to satisfy the requirements of this Agreement and shall pay
all original issue taxes with respect to the issuance of Option Shares upon
exercise of the Option and all other fees and expenses incurred in connection
connection therewith.

 

14.         “Market Price”, when used with respect to the price of a Share on a
particular day, shall mean the closing price for which a Share is purchased that
day (or, if no purchases have been made on such day, on the most recent
preceding day on which such a purchase occurred) on the principal national
securities exchange or national market system on which Shares are then listed or
eligible for sale (or, if Shares are not then listed or eligible for sale on any
such exchange or market system, the price as determined by agreement between the
Parties or, in the absence of such agreement, the price as determined
reasonably, and in good faith, by the Board).

 

 

RUSS BERRIE AND COMPANY, INC.

 

 

 

 

BY:

 /s/ John Wille

 

 

Name:

John Wille

 

Title:

Vice President and
Chief Financial Officer

 

AGREED TO AND ACCEPTED AS OF THE
DATE OF GRANT SET FORTH ABOVE:

/s/ Andrew Gatto

 

ANDREW R. GATTO

 

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