Exhibit 10.119
INTERCREDITOR AGREEMENT
This Intercreditor Agreement (this “Agreement”), dated as of December 23, 2008
is made by and among Russ Berrie and Company, Inc., a New Jersey corporation
(the “Junior Lender”), Wells Fargo Bank, National Association (with its
participants, successors and assigns, the “Senior Lender”), acting through its
Wells Fargo Business Credit operating division, and The Russ Companies, Inc., a
Delaware corporation (“Company”).
Company now is or hereafter may be indebted to Senior Lender on account of loans
or other extensions of credit or financial accommodations from Senior Lender to
or for the benefit of Company and/or certain of its affiliates and has secured
its indebtedness by granting a lien on its personal property in favor of Senior
Lender.
Company now is or hereafter may also be indebted to Junior Lender on account of
loans or other extensions of credit or financial accommodations from Junior
Lender to Company and has secured its indebtedness by granting a lien on its
personal property in favor of Junior Lender.
As a condition to extending credit to Company, Senior Lender has required the
execution and delivery of this Agreement by Junior Lender.
ACCORDINGLY, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and to induce Senior Lender from time to time to
extend credit to Company, Junior Lender, Senior Lender and Company hereby agree
as follows:
1. Definitions. As used herein, the following terms shall have the meanings set
forth below:
“Bankruptcy Code” is defined in Section 6(c).
“Collateral” means all present and future property and assets of Company
wherever located and however described, together, in each case, with all
proceeds thereof pledged to the Senior Lender to secure the Senior Indebtedness
and/or to the Junior Lender to secure the Junior Indebtedness.
“Control Agent” has the meaning given thereto in Section 14 hereof.
“Control Collateral” means any (a) Collateral which is a Certificated Security,
an Instrument, Investment Property, a Deposit Account (each as defined in the
UCC), or cash, (b) any rights to receive payments under any insurance policy
that constitutes Collateral and with respect to which the Senior Lender (or its
agent) is named as loss payee, (c) any other Collateral as to which a Lien may
be perfected by possession or control by the secured party or its agent, and
(d) any other Collateral with respect to which a secured party must be listed on
a certificate of title in order to perfect the Lien thereon.

 

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“Distribution” means, with respect to any indebtedness, obligation or security
(a) any payment or distribution of cash, securities or other property, by
set-off or otherwise, on account of such indebtedness, obligation or security,
(b) any redemption, purchase or other acquisition of such indebtedness,
obligation or security, or (c) the granting of any Lien to or for the benefit of
the holders of such indebtedness, obligation or security in or upon any property
or interests in property.
“Enforcement Action” means, with respect to the Senior Indebtedness, any demand
for payment or acceleration thereof, the exercise of any rights and remedies
with respect to any Collateral or the commencement or prosecution of enforcement
of any of the rights and remedies under, as applicable, the Senior Loan
Documents, or applicable law, including without limitation the exercise of any
rights of set-off or recoupment, and the exercise of any rights or remedies of
the Senior Lender as a secured creditor under the Uniform Commercial Code of any
applicable jurisdiction or under the Bankruptcy Code.
“Junior Indebtedness” means any and all advances, debts, obligations and
liabilities of Company to Junior Lender pursuant to the Note including without
limitation all principal and interest, fees, expenses, reimbursement obligations
and other amounts payable thereunder.
“Junior Loan Documents” means collectively, the Note and all security agreements
and guaranty agreements related thereto.
“Lien” means any security interest, mortgage, deed of trust, pledge, lien,
charge, encumbrance, title retention agreement or analogous instrument or
device, including the interest of each lessor under any capitalized lease and
the interest of any bondsman under any payment or performance bond, in, of or on
any assets or properties of a person, firm, corporation, limited liability
company or other entity, whether now owned or hereafter acquired and whether
arising by agreement or operation of law.
“Maximum Senior Lien Financing Amount” means as of any date of determination,
such amount not to exceed $30,000,000.00 in aggregate amount at any one time
outstanding under the Senior Loan Documents minus permanent reductions in
revolving loan commitments from time to time in accordance with the Senior
Credit Agreement as in effect as of the date hereof.
“Note” means that certain Secured Promissory Note made by the Company in favor
of Junior Lender in the original principal amount of $19,000,000.
“Notice of Intent” means a written notice from or on behalf of Junior Lender to
Senior Lender stating that an Event of Default under Section III B of the Note
resulting from Company’s breach of Section VIII (Restricted Payments) of the
Note, breach of Section IX (Limitation on Transactions with Affiliates) of the
Note or Section X (Limitations on Compensation) of the Note, has occurred and is
continuing and any applicable cure, notice and grace periods have expired.

 

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“Payment in Full” or “Paid in Full” means that (a) the Senior Indebtedness
(other than contingent indemnification obligations not yet due and payable) has
been paid and satisfied in full in cash, and (b) any commitment or agreement of
Senior Lender to extend any financial accommodations to Company under the Senior
Loan Documents has been terminated.
“Reorganization Subordination Securities” shall mean any debt or equity
securities of Company or any other Person that are distributed to Junior Lender
in respect of the Junior Indebtedness that, in the case of debt securities, are
subordinate and junior in right as to liens and payment to the Senior
Indebtedness (or subordinated and junior in right of liens and payment to any
debt or equity securities issued in substitution of all or any portion of the
Senior Indebtedness) to at least the same extent as the Junior Indebtedness is
subordinated to the Senior Indebtedness under this Agreement.
“Senior Credit Agreement” means that certain Credit and Security Agreement of
even date herewith between Company and Senior Lender, as the same may be
modified, amended, supplemented or restated from time to time.
“Senior Default” means the occurrence and continuance of any Event of Default
under the Senior Credit Agreement.
“Senior Guaranty Agreement” means that certain Guaranty of even date herewith by
Company in favor of Senior Lender, as the same may be modified, amended,
supplemented or restated from time to time.
“Senior Indebtedness” means any and all advances, debts, obligations and
liabilities of Company to Senior Lender, pursuant to the Senior Credit Agreement
and the other Senior Loan Documents including without limitation all principal
and interest, fees, expenses, reimbursement obligations and other amounts
payable thereunder now or hereafter made, incurred or created, provided,
however, that the amount of the Senior Indebtedness for purposes of this
Agreement shall be limited to no more than the Maximum Senior Lien Financing
Amount and no advances, debts, obligations and liabilities of Company to Senior
Lender with respect to a borrowing or other extension of credit made after
December 21, 2012 shall constitute Senior Indebtedness without the prior written
consent of the Junior Creditor unless an Enforcement Action has commenced in
which case, Senior Lender’s reasonable out of pocket costs and expenses in
connection with such Enforcement Action shall be Senior Indebtedness.
“Senior Loan Documents” means the “Loan Documents”, as such term is defined in
the Senior Guaranty Agreement.
“Senior Security Agreement” means that certain Collateral Pledge Agreement of
even date herewith by Company in favor of Senior Lender, as the same may be
modified, amended, supplemented or restated from time to time.

 

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“Standstill Period” means the period beginning when a Notice of Intent is given
and ending on the first Business Day that is at least 180 days after receipt by
Senior Lender of a Notice of Intent, provided however, that upon the
commencement of an Enforcement Action, the Standstill Period shall be extended
until the Senior Indebtedness has been Paid in Full.
“UCC” shall mean the Uniform Commercial Code as in effect from time to time in
the State of New York.
2. Subordination.
(a) The payment of all of the Junior Indebtedness is hereby expressly
subordinated and deferred to the extent and in the manner hereinafter set forth,
until Payment in Full of the Senior Indebtedness; and Junior Lender hereby
agrees that (regardless of any priority otherwise available to Junior Lender by
law or by agreement) any Lien which Junior Lender may now hold or may at any
time hereafter acquire in any or all of the Collateral is, shall be and shall
remain fully subordinate for all purposes to any Lien that Senior Lender may now
or hereafter hold in the Collateral. The Junior Indebtedness and any Lien
securing the Junior Indebtedness shall continue to be subordinated to the Senior
Indebtedness even if the Senior Indebtedness is deemed unsecured, under-secured,
subordinated, avoided or disallowed under the Bankruptcy Code or other
applicable law.
(b) Notwithstanding anything herein to the contrary, the Company shall be
permitted to make and the Junior Lender shall be permitted to receive and retain
annual payments provided they Company complies with the following conditions;
(i) The payments are made in and applied in accordance with the terms of the
Junior Loan Documents;
(ii) In computing the amount of such payment, it shall be the excess of the
Availability, as such term is defined in the Senior Loan Documents, less the sum
of the following, all as of April 30 of each year:
(a) $10,000,000;
(b) all outstanding checks;
(c) all accounts payable outstanding more than 60 days from invoice date; and
(d) expenses and liabilities being paid in the ordinary course of business and
without acceleration of sales and without deterioration of working capital;
(iii) There shall not have occurred prior to or as a result of making such
payment, an Event of Default under the Senior Loan Documents; and
(iv) At least ten (10) business days prior to the making of such payment the
Senior Lender shall have received the Company’s audited financial statements for
the prior fiscal year end.

 

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3. Distributions.
(a) Junior Lender shall not, without Senior Lender’s prior written consent,
demand, receive or accept any payment (whether of principal, interest or
otherwise) or Distribution (other than Reorganization Subordination Securities)
in respect of the Junior Indebtedness or exercise any right of or permit any
setoff in respect of the Junior Indebtedness until the Action Date (as defined
in Section 4(a)).
(b) Senior Lender shall not, without Junior Lender’s prior written consent,
demand, receive or accept any payment (whether of principal, interest or
otherwise) or Distribution in respect of indebtedness that is not Senior
Indebtedness or exercise any right of or permit any setoff in respect of
indebtedness that is not Senior Indebtedness until the Junior Indebtedness has
been paid and satisfied full in cash.
(c) If Junior Lender receives any Distribution in violation of this Agreement,
Junior Lender will hold the amount so received in trust for Senior Lender and
will forthwith turn over such Distribution to Senior Lender in the form received
(except for the endorsement of Junior Lender where necessary) for application to
the Senior Indebtedness (whether or not due), in such order of application as
Senior Lender may deem appropriate. If Junior Lender fails to make any
endorsement required under this Agreement, Senior Lender, or any of its officers
or employees or agents on behalf of Senior Lender, is hereby irrevocably
appointed (which appointment is coupled with an interest) as the
attorney-in-fact for Junior Lender (with the right but not the duty) to make
such endorsement in Junior Lender’s name.
(d) If Senior Lender receives any Distribution in violation of this Agreement,
Senior Lender will hold the amount so received in trust for Junior Lender and
will forthwith turn over such Distribution to Junior Lender in the form received
(except for the endorsement of Senior Lender where necessary) for application to
the Junior Indebtedness (whether or not due), in such order of application as
Junior Lender may deem appropriate. If Senior Lender fails to make any
endorsement required under this Agreement, Junior Lender, or any of its officers
or employees or agents on behalf of Junior Lender, is hereby irrevocably
appointed (which appointment is coupled with an interest) as the attorney in
fact for Senior Lender (with the right but not the duty) to make such
endorsement in Senior Lender’s name.
(e) If all Senior Indebtedness has been Paid In Full, Junior Lender shall be
subrogated to the rights of the holders of such Senior Indebtedness to receive
payments and Distributions applicable to the Senior Indebtedness until all
Junior Indebtedness has been paid and satisfied in full in cash. For purposes of
such subrogation, no payments or distribution to Senior Lender as the holder of
Senior Indebtedness of any cash, property or securities or other Distribution to
which Junior Lender would be entitled to except for the provisions of this
Agreement, and no payments pursuant to the provisions of this Agreement to
Senior Lender as the holder of Senior Indebtedness by Junior Lender, shall, as
among Company, its creditors other than Senior Lender as the holder of Senior
Indebtedness and Junior Lender, be deemed to be a payment or Distribution by
Company to or on account of the Senior Indebtedness. If any payment or
Distribution to which Junior Lender would otherwise have been entitled but for
the provisions of this Agreement shall have been applied, pursuant to the
provisions of this Agreement, to the payment of all amounts payable under the
Senior Indebtedness, then and in such case Junior Lender shall be entitled to
receive from Senior Lender any payments or Distributions received by Senior
Lender in excess of the amount sufficient for the Senior Indebtedness to be Paid
In Full.

 

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4. No Action.
(a) Unless and until the earliest of (i) the date upon which the Senior
Indebtedness shall have been Paid in Full, (ii) December 31, 2012 and (iii) if a
Standstill Period shall have commenced, the termination or expiration of such
Standstill Period (such earliest date, the “Action Date”), Junior Lender will
not commence any action or proceeding against Company to recover all or any part
of the Junior Indebtedness, will not commence any action or proceeding with
respect to the Collateral, will not join with any creditor in bringing any
proceeding against Company under any bankruptcy, reorganization, readjustment of
debt, arrangement of debt receivership, liquidation or insolvency law or statute
of the federal or any state government, will not take possession of, sell or
dispose of, or otherwise deal with, the Collateral, and will not exercise or
enforce any other right or remedy which may be available to Junior Lender with
respect to the Collateral. Notwithstanding the foregoing in this Section 4(a),
in the event that Senior Lender shall have accelerated the maturity of part or
all of the Senior Indebtedness, the Junior Lender shall be permitted to
accelerate the maturity of the Junior Debt (provided that Junior Lender shall
simultaneously give notice of such acceleration to Senior Lender); provided,
however, that the Junior Lender may not take any other action described above in
this Section 4(a) until the Action Date.
(b) Without limiting the generality of the foregoing, if a Senior Default has
occurred and is continuing and Company or Senior Lender intends to sell or
otherwise dispose of any Collateral to an unrelated third party outside the
ordinary course of business, Junior Lender shall, upon Senior Lender’s written
request, either (i) purchase for cash the Senior Indebtedness for the full
amount thereof or (ii) execute and deliver such instruments as may reasonably be
necessary to terminate and release any Lien Junior Lender has in the Collateral
to be sold or otherwise disposed of, so long as the proceeds of any such sale
shall be applied by Senior Lender to repay and permanently reduce commitments of
the Senior Indebtedness and, to the extent such proceeds exceed the amount
necessary for the Senior Indebtedness to be Paid In Full, are promptly paid over
to Junior Lender for application to the payment of Junior Indebtedness. If
Junior Lender fails, within ten (10) days after receipt of such request, to
purchase for cash the Senior Indebtedness for the full amount thereof or to
execute and deliver such instruments as may be reasonably necessary to terminate
and release any Lien Junior Lender has in the Collateral to be sold or otherwise
disposed of, Junior Lender shall be deemed to have consented to such sale or
disposition, to have released any Lien it may have in such Collateral and to
have authorized Senior Lender or its agents to file partial releases and any
other amendments to any financing statements naming Junior Lender as secured
party with respect to such Collateral so long as the proceeds of any such sale
shall be applied by Senior Lender to repay and permanently reduce commitments of
the Senior Indebtedness and, to the extent such proceeds exceed the amount
necessary for the Senior Indebtedness to be Paid In Full, are promptly paid over
to Junior Lender for application to the payment of Junior Indebtedness.

 

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5. No Representations or Warranties. Except as set forth in Section 14, Senior
Lender (a) makes no representation or warranty concerning the Collateral or the
validity, perfection or priority of any Lien therein, and (b) shall have no duty
to preserve, protect, care for, insure, take possession of, collect, dispose of
or otherwise realize upon any of the Collateral. Except as set forth in
Section 14, in no event shall Senior Lender be deemed Junior Lender’s agent with
respect to the Collateral.
6. Waiver and Consent; Bankruptcy.
(a) Senior Lender shall have no obligation to Junior Lender with respect to the
Collateral except as set forth in Section 14 or the Senior Indebtedness. Senior
Lender may (i) exercise collection rights, (ii) take possession of, sell or
dispose of, and otherwise deal with, all or any portion of the Collateral,
(iii) in Senior Lender’s name or in Company’s name, demand, sue for, collect or
receive any money or property at any time payable or receivable on account of,
or securing, any right to payment, or grant any extension to, make any
compromise or settlement with or otherwise agree to waive, modify, amend or
change the Senior Indebtedness (including collateral obligations) of any account
Company or other obligor of Company; (iv) prosecute, settle and receive proceeds
on any insurance claims relating to the Collateral, and (v) exercise and enforce
any right or remedy available to Senior Lender with respect to Company and/or
the Collateral, whether available before or after the occurrence of any Senior
Default; all without consent of Junior Lender and without notice to Junior
Lender except any notice as specifically required by law. To the extent it is
legally permitted to do so, Senior Lender shall apply the proceeds of the
Collateral against the Senior Indebtedness in any order of application it deems
appropriate, and to the extent there is any excess remaining after such
application, then promptly to Junior Lender for payment of the Junior
Indebtedness, or to any other party legally entitled to such proceeds. Junior
Lender hereby waives any and all right to require the marshalling of assets in
connection with the exercise of any of the remedies permitted by applicable law
or agreement.
(b) In the event of any receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization or arrangement with creditors, whether or
not pursuant to bankruptcy law, the sale of all or substantially all of the
assets of Company, dissolution, liquidation or any other marshalling of the
assets or liabilities of Company, Junior Lender will hold in trust for Senior
Lender and promptly pay over to Senior Lender in the form received (except for
the endorsement of Junior Lender where necessary) for application to the
then-existing Senior Indebtedness, any and all moneys, dividends or other assets
(other than Reorganized Subordination Securities) received in any such
proceedings on account of the Junior Indebtedness, unless and until the Senior
Indebtedness has been Paid in Full. If Junior Lender shall fail to take any such
action, Senior Lender, as attorney-in-fact for Junior Lender, may take such
action on Junior Lender’s behalf. Junior Lender will execute and deliver to
Senior Lender such other and further powers-of-attorney or instruments as Senior
Lender may request in order to accomplish the foregoing.

 

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(c) If Company or Company’s estate become the subject of proceedings under Title
11 of the United States Code (11 U.S.C. § 101 et seq.), as amended, (the
“Bankruptcy Code”), and if Senior Lender desires to permit the use of cash
collateral or to provide post-petition financing to Company and the aggregate
amount of such financing and the Senior Indebtedness does not exceed the Maximum
Senior Lien Financing Amount, Junior Lender shall not object to the same or
assert that its interests are not being adequately protected and agrees that
adequate notice of such financing to Junior Lender shall have been provided if
Junior Lender receives written notice in accordance with the Bankruptcy Code.
The Junior Lender shall not (i) take any action or vote in any way so as to
directly or indirectly challenge or contest (A) the validity or the
enforceability of any of the Senior Loan Documents or the liens and security
interests granted to Senior Lender with respect to the Senior Indebtedness,
(B) the rights and duties of Senior Lender established in the Senior Loan
Documents, or (C) the validity or enforceability of this Agreement; (ii) seek,
or acquiesce in any request, to dismiss any insolvency or other proceeding or to
convert an insolvency or other proceeding under Chapter 11 of the Bankruptcy
Code to a case under Chapter 7 of the Bankruptcy Code; (iii) seek, or acquiesce
in any request for, the appointment of a trustee or examiner with expanded
powers for the Company; (iv) propose, vote in favor of or otherwise approve a
plan of reorganization, arrangement or liquidation, or file any motion or
pleading in support of any plan of reorganization, arrangement or liquidation,
unless it provides that the Senior Indebtedness is Paid in Full or unless Senior
Lender has approved of the treatment of its claims with respect to the Senior
Indebtedness under such plan; (v) object to the treatment under a plan of
reorganization or arrangement of the claims with respect to the Senior
Indebtedness; (vi) seek relief from the automatic stay of Section 362 of the
Bankruptcy Code or any other stay in any insolvency or other proceeding in
respect of any portion of the Collateral, provided, however, that the Junior
Creditor shall be permitted to join in any motion or proceeding filed or
commenced by the Senior Creditor to seek relief from the automatic stay,
provided that, notwithstanding the granting of such relief from the stay as to
the Junior Creditor, the Junior Creditor shall be bound by all of the provisions
of this Agreement and shall be prevented from exercising any rights or remedies
with respect to the Collateral, to the extent otherwise provided in this
Agreement, until such time as the Senior Indebtedness has been paid in full; or
(vii) directly or indirectly oppose any relief requested or supported by Senior
Lender, including any sale or other disposition of property free and clear of
the liens and security interests of Junior Lender under Section 363(f) of the
Bankruptcy Code or any other similar provision of applicable law. Junior Lender
waives any claim it may now or hereafter have arising out of Senior Lender’s
election, in any proceeding instituted under Chapter 11 of the Bankruptcy Code,
of the application of Section 1111(b)(2) of the Bankruptcy Code, and/or any
borrowing or a Lien under Section 364 of the Bankruptcy Code by Company, as
debtor-in-possession. To the extent that Senior Lender receives payments on or
proceeds of Collateral which are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law, or equitable cause, then, to the extent of such payment or proceeds
received, the Senior Indebtedness, or part thereof, intended to be satisfied
shall be revived and continue in full force and effect as if such payments or
proceeds had not been received by Senior Lender. Notwithstanding anything in
this Subsection 6(c) to the contrary, as to any matters not provided for in this
Subsection 6(c) arising in any proceeding instituted under Chapter 11 of the
Bankruptcy Code by or against the Company, the Junior Lender shall be permitted
to vote its claim.

 

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7. Restrictive Lender; Transfer of Junior Indebtedness; No Amendments.
(a) Junior Lender shall cause each Junior Loan Document that now or hereafter
evidences all or a portion of the Junior Indebtedness to be conspicuously marked
as follows:
“This [agreement] [instrument] is subject to the terms of an Intercreditor
Agreement (the “Intercreditor Agreement”) dated as of December 23, 2008 between
Russ Berrie and Company, Inc. (“Junior Lender”) and Wells Fargo Bank, National
Association (“Senior Lender”), acting through its Wells Fargo Business Credit
operating division, which Intercreditor Agreement is incorporated herein by
reference. Notwithstanding any statement to the contrary in this [agreement]
[instrument], (i) no payment on account of principal, interest, fees or other
amounts shall become due or be paid except in accordance with the terms of the
Intercreditor Agreement, and (ii) any security interest, lien, pledge or
encumbrance granted to Junior Lender shall be subordinate to the security
interest, lien, pledge or encumbrance granted to Senior Lender and shall be
enforceable only in accordance with the terms of the Intercreditor Agreement.”
(b) Junior Lender is the lawful holder of the Junior Indebtedness and has not
transferred any interest therein to any other person or entity. Without the
prior written consent of Senior Lender, (which shall not be unreasonably
withheld or delayed), Junior Lender will not assign, transfer or pledge to any
other person any of the Junior Indebtedness other than an affiliate of Junior
Lender that assumes Junior Lender’s obligations under this agreement.
(c) Junior Lender agrees that none of the Junior Loan Documents or any other
document, instrument, or agreement evidencing all or any part of the Junior
Indebtedness may be amended, restated, supplemented or otherwise modified
without the prior written consent of Senior Lender (which shall not be
unreasonably withheld or delayed).

 

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8. Continuing Effect. This Agreement shall constitute a continuing agreement of
subordination, and Senior Lender may, without notice to or consent by Junior
Lender, modify any term of Senior Indebtedness in reliance upon this Agreement,
subject to the proviso and further proviso to Section 8(a) . Without limiting
the generality of the foregoing, Senior Lender may, at any time and from time to
time, without the consent of or notice to Junior Lender and without incurring
responsibility to Junior Lender or impairing or releasing any of Senior Lender’s
rights or any of Junior Lender’s obligations hereunder:
(a) change the interest rate or change the amount of payment or extend the time
for payment or renew or otherwise alter the terms of any Senior Indebtedness or
any instrument evidencing the same in any manner, provided such extension or
renewal of the Maturity Date, as such term is defined in the Senior Loan
Documents, is no later than December 31, 2012 and provided, further in no event
shall the aggregate amount outstanding at any time under the Senior Loan
Documents exceed the Maximum Senior Lien Financing Amount;
(b) sell, exchange, release or otherwise deal with any property at any time
securing payment of Senior Indebtedness or any part thereof;
(c) release anyone liable in any manner for the payment or collection of Senior
Indebtedness or any part thereof;
(d) exercise or refrain from exercising any right against Company or any other
person (including Junior Lender); and
(e) apply any sums received by Senior Lender, by whomsoever paid and however
realized, to Senior Indebtedness in such manner as Senior Lender shall deem
appropriate.
9. Termination of Subordination. This Agreement shall continue in full force and
effect, and the obligations and agreements of Junior Lender and Company
hereunder shall continue to be fully operative, until all of the Senior
Indebtedness shall have been Paid in Full. If at any time any payment made or
value received with respect to any Senior Indebtedness is rescinded or must
otherwise be returned by Senior Lender upon the insolvency, bankruptcy or
reorganization of Company or otherwise, all as though such payment had not been
made or value received, then to the extent necessary to repay in full, in cash,
the Senior Indebtedness, Junior Lender will, following receipt of written notice
from Senior Lender, deliver to Senior Lender any amounts previously received and
then held by Junior Lender on account of, or in any way relating to, the
Collateral (a) which Junior Lender would not have been entitled to accept and
retain had this Agreement been in effect at the time such payments were received
by Junior Lender and (b) to the extent any such payments received by Junior
Lender are not otherwise rescinded or must not otherwise be returned by Junior
Lender upon the insolvency, bankruptcy or reorganization of Company or
otherwise. Further, to the extent previously terminated, the Lien in the
Collateral created by the Senior Loan Documents, in favor of Senior Lender, and
the rights of Senior Lender under this Agreement shall be reinstated.
10. No Commitment. None of the provisions of this Agreement shall be deemed or
construed to constitute or imply any commitment or obligation on the part of
Senior Lender to make any future loans or other extensions of credit or
financial accommodations to Company.

 

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11. Notice. All notices and other communications hereunder shall be in writing
and shall be (i) personally delivered, (ii) transmitted by registered mail,
postage prepaid, or (iii) transmitted by telecopy, in each case addressed to the
party to whom notice is being given at its address as set forth below:
If to Wells Fargo:
Wells Fargo Bank, National Association
300 Commercial Street
Boston, Massachusetts 02109
Telecopier: (617) 263-6328
Attention: Relationship Manager for Russ Gift Group, Inc.
If to Junior Lender:
Russ Berrie and Company, Inc.
111 Bauer Drive
Oakland, New Jersey 07436
Attention: Marc S. Goldfarb, SVP and General Counsel
Telecopier: (201) 405-7377
or at such other address as may hereafter be designated in writing by that
party. All such notices or other communications shall be deemed to have been
given on (i) the date received if delivered personally, (ii) the date of posting
if delivered by mail, or (iii) the date of transmission if delivered by
telecopy.
12. Conflict in Agreements. If the subordination provisions of any instrument
evidencing Junior Indebtedness conflict with the terms of this Agreement, the
terms of this Agreement shall govern the relationship between Senior Lender and
Junior Lender.
13. No Waiver. No waiver shall be deemed to be made by Senior Lender of any of
its rights hereunder unless the same shall be in writing signed on behalf of
Senior Lender, and each such waiver, if any, shall be a waiver only with respect
to the specific matter or matters to which the waiver relates and shall in no
way impair the rights of Senior Lender or the obligations of Junior Lender to
Senior Lender in any other respect at any time.

 

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14. Limited Agency of Senior Lender for Perfection and Control.
(a) The Junior Lender hereby appoints Senior Lender as its collateral agent (in
such capacity, together with any successor in such capacity appointed by the
Senior Lender and the Junior Lender, the “Control Agent”) for the limited
purpose of acting as the agent on behalf of the Senior Lender and the Junior
Lenders with respect to the Control Collateral for purposes of the perfecting of
the liens of such parties on the Control Collateral. The Control Agent accepts
such appointment and agrees to hold the Control Collateral that is part of the
Collateral in its possession or control (or in the possession or control of its
agents or bailees) as Control Agent for the benefit of the Senior Lender and the
Junior Lender and any permitted assignee of any thereof solely for the purpose
of perfecting the security interest granted to such parties in such Control
Collateral, subject to the terms and conditions of this Section 14. The Control
Agent, the Senior Lender, and the Junior Lender, hereby agree that, until the
Senior Indebtedness has been Paid in Full, the Senior Lender shall have the sole
and exclusive right and authority to give instructions to, and otherwise direct,
the Control Agent in respect of the Control Collateral or any control agreement
with respect to any Control Collateral and the Junior Lender will not hinder,
delay or interfere with the exercise of such rights by the Senior Lender in any
respect. The Company hereby agrees to pay, reimburse, indemnify and hold
harmless the Control Agent, for any losses or claims based on actions taken in
its capacity as Control Agent, to the same extent and on the same terms that it
is required to do so for the Senior Lender in accordance with the Senior Loan
Documents. Except as set forth in the next sentence, the Control Agent shall
have no obligation whatsoever to Junior Lenders including, without limitation,
any obligation to assure that the Control Collateral is genuine or owned by
Company, any guarantor or one of their respective subsidiaries or to preserve
rights or benefits of any Person except as expressly set forth in this
Section 14. In acting on behalf of the Junior Lender, the duties or
responsibilities of the Control Agent under this Section 14 shall be limited
solely (A) to physically holding the Control Collateral delivered to the Control
Agent by Company, or any subsidiary of such Person as agent for the Junior
Lender for purposes of perfecting the lien held by the Junior Lenders and
(B) delivering such collateral, and assigning its interests in the Landlord
Waivers (to the extent permitted under such waivers), as set forth in Section
14(d).
(b) The Senior Lender hereby acknowledges that the Control Agent will obtain
“control” under the UCC over each Deposit Account (as defined in the UCC) as
contemplated by the Senior Loan Documents and the Junior Loan Documents for the
benefit of both itself and the Junior Lender pursuant to the control agreements
relating to each respective Deposit Account. The Senior Lender hereby also
acknowledges and agrees that any landlord lien waivers and bailee’s letters
obtained by the Control Agent as contemplated by the Senior Loan Documents
(collectively, “Waiver Letters”) shall also be for the benefit of the Junior
Lender. The Junior Lender acknowledges that the Senior Lender is acting in a
similar capacity for the benefit of the Senior Lender under the Senior Loan
Documents.
(c) The Senior Lender and the Control Agent shall not have by reason of the
Senior Loan Documents or this Agreement or any other document a fiduciary
relationship in respect of any Junior Lender.
(d) Upon the Payment in Full of the Senior Indebtedness, the Control Agent shall
promptly, (i) deliver to the Junior Lender the Control Collateral together with
any necessary endorsements, (ii) assign all of its rights under the Waiver
Letters to the Junior Lender and (iii) take all actions and deliver all
documents and instruments as may be reasonably requested by the Junior Lender to
effect the foregoing; provided, that if a court of competent jurisdiction
otherwise directs, the Control Agent shall comply with such direction in lieu of
the foregoing requirements.

 

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15. Binding Effect; Miscellaneous. This Agreement shall be binding upon and
inure to the benefit of Junior Lender, Senior Lender, and their respective
participants, successors and assigns, but neither Company nor any other party
shall be entitled to rely on or enforce this Agreement. Junior Lender and Senior
Lender each warrant to the other that any purchaser or transferee of, or
successor to, any Lien of the undersigned in any or all of the Collateral will
be given written notice of the subordination effected hereby, before such
purchase, transfer or succession, and that any such purchaser, transferee or
successor will be in all respects subject to and bound by this Agreement. This
Agreement cannot be waived or changed or ended, except by a writing signed by
the party to be bound thereby. Section headings herein are included for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument. Junior Lender waives notice of Senior Lender’s
acceptance hereof;
16. Governing Law; Consent to Jurisdiction; WAIVER OF JURY TRIAL. This Agreement
shall be governed by and construed in accordance with the substantive laws of
the State of New York. Each party consents to the personal jurisdiction of the
state and federal courts located in the State of New York in connection with any
controversy related to this Agreement, waives any argument that venue in any
such forum is not convenient, and agrees that any litigation initiated by either
of them in connection with this Agreement may be venued in either the state or
federal courts located in New York County, New York. THE PARTIES WAIVE ANY RIGHT
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR PERTAINING TO THIS
AGREEMENT.
[Signature pages follow]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date written above.

            RUSS BERRIE AND COMPANY, INC.
      By:   /s/ Marc Goldfarb         Name:   Marc Goldfarb        Title:  
Senior Vice President   

 

 

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            WELLS FARGO BANK, NATIONAL ASSOCIATION
      By:   /s/ Patricia A. Petrin         Name:   Patricia A. Petrin       
Title:   Vice President   

 

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Acknowledgment and Agreement by Company
The undersigned, being the Company referred to in the foregoing Agreement,
hereby (i) acknowledges receipt of a copy thereof, (ii) agrees to all of the
terms and provisions thereof, (iii) agrees to and with Senior Lender that it
shall make no payment on the Junior Indebtedness that Junior Lender would not be
entitled to receive under the provisions of the Agreement, (iv) agrees that any
such payment will constitute a default under the Senior Loan Documents, and
(v) agrees to mark its books conspicuously to evidence the subordination of the
Junior Indebtedness effected hereby and (vi) agrees to give The Junior Lender
prompt written notice of the acceleration of the maturity of all or a part of
the Senior Indebtedness.

            THE RUSS COMPANIES, INC.
      By:   /s/ Richard Snow         Name:   Richard Snow        Title:  
President