Exhibit 10.115
TRANSITION SERVICES AGREEMENT
by and between
THE RUSS COMPANIES, INC.
and
RUSS BERRIE AND COMPANY, INC.
Dated as of December 23, 2008

 

 

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This Transition Services Agreement (this “Agreement”), dated as of December 23,
2008, is entered into by and between Russ Berrie and Company, Inc., a New Jersey
corporation (“Seller”), and The Russ Companies, Inc., a Delaware corporation
(“Buyer”). Buyer and Seller are referred to herein collectively as the “parties”
and individually as a “party.”
RECITALS
WHEREAS, Seller and Buyer entered into a Purchase Agreement, dated as of
December 23, 2008 (the “Purchase Agreement”), pursuant to which Buyer has agreed
to acquire from Seller the Gift Business as defined therein; and
WHEREAS, Seller wishes that Buyer and its Affiliates provide certain support
services and accommodations to Seller and certain of its Affiliates from and
after the Closing under the Purchase Agreement, and Buyer and its Affiliates
wish to provide such services, all as more fully set forth herein.
WHEREAS, Buyer wishes that Seller provide certain support services and
accommodations to Buyer and certain of its Affiliates from and after the Closing
under the Purchase Agreement, and Seller wishes to provide such services, all as
more fully set forth herein.
AGREEMENT
NOW THEREFORE, in consideration of the premises and the mutual covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Specific Definitions. As used in this Agreement, the following terms
have the meanings set forth or referenced below:
“Agreement” means this Transition Services Agreement, as the same may be amended
or supplemented from time to time in accordance with the terms hereof.
“Buyer” has the meaning set forth in the preamble to this Agreement.
“Confidential Information” means any trade secrets or other information which is
confidential, proprietary or otherwise not publicly available, including any
confidential data, know-how or information relating to the business practices,
products, distributors, customers, prospects, suppliers, research and
development, ideas, designs, discoveries, inventions, techniques, equipment,
marketing, sales, methods, manuals, strategies, results of operations or
financial affairs (whether written or oral), and all analyses, compilations,
forecasts, studies or other documents prepared on the basis of such information.

 

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“Direct Hourly Costs” means direct incremental labor and supervision costs,
calculated on an hourly basis. For salaried employees, Direct Hourly Costs shall
equal the result obtained by (i) dividing the relevant individual’s annual base
salary by 52, and (ii) then dividing the result obtained in clause (i) by 40.
“Modification” has the meaning set forth in Section 2.3.
“Proceeding” means any action, arbitration, audit, hearing, investigation,
litigation or suit (whether civil, criminal, administrative, judicial or
investigative, whether formal or informal, whether public or private) commenced,
brought, conducted or heard by or before, or otherwise involving, any
governmental body or arbitrator.
“Purchase Agreement” has the meaning set forth in the preamble to this
Agreement.
“Representatives” means any director, officer, employee, affiliate,
representative (including without limitation, attorneys, accountants and
financial and other advisers) or agents of either party hereto or its
Affiliates.
“Security Regulations” has the meaning set forth in Section 6.3.
“Seller” has the meaning set forth in the preamble to this Agreement.
“Service” or “Services” means (a) the applicable service or services or
accommodations set forth in Section 2.2 below, (b) any other services that are
not listed in Section 2.2 and which Seller and Buyer mutually agree in writing
(pursuant to Section 2.3) to be provided or obtained hereunder, and (c) any
Modifications to a Service or Services provided pursuant to clause (a) or
(b) immediately foregoing to which Buyer and Seller mutually agree in writing
(pursuant to Section 2.3) to be provided or obtained hereunder.
“Service Provider” means (a) Buyer or any Affiliate of Buyer providing to or
obtaining for Seller, or any Affiliate of Seller, a Service pursuant to
Section 2.1 hereof, and/or (b) Seller providing to or obtaining for Buyer, or
any Affiliate of Buyer, a Service pursuant to Section 2.1 hereof,
“Systems” has the meaning set forth in Section 6.3.
“Term” has the meaning set forth in Section 3.1.
“Termination Date” has the meaning set forth in Section 3.1.
Section 1.2 Other Definitional Provisions.
(a) All capitalized terms used herein, but not otherwise defined herein, shall
have the meanings ascribed to such terms in the Purchase Agreement, which
meanings are incorporated herein by reference.

 

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(b) The words “hereof,” “herein,” and “hereunder” and words of similar import,
when used in this Agreement, shall refer to this Agreement as a whole and not to
any particular provision of this Agreement.
(c) The terms defined in the singular shall have a comparable meaning when used
in the plural, and vice versa.
(d) The words “include,” “includes,” and “including” when used in this
Agreement, shall be deemed to be followed by the words “without limitation,”
unless already so followed.
(e) The word “or” is not exclusive.
ARTICLE II
SERVICES
Section 2.1 Provision of Services.
(a) On the terms and conditions of this Agreement, Buyer hereby agrees to
provide, or cause one or more of its Affiliates to provide, Services to Seller
and/or certain of Seller’s Affiliates for the Term of this Agreement, as
described in Section 2.2 below. Buyer shall, and shall cause each Service
Provider to, perform the Services exercising the same degree of care as they
exercise in performing the same or similar Services for their own account, with
priority equal to that provided to their business operations.
(b) On the terms and conditions of this Agreement, Seller hereby agrees to
provide Services to Buyer and/or certain of Buyer’s Affiliates for the Term of
this Agreement, as described in Section 2.2 below. Seller shall perform the
Services exercising the same degree of care as they exercise in performing the
same or similar Services for its own account, with priority equal to that
provided to their business operations.
Section 2.2 Services.
(a) Space Requirements
1. Up to 12 individuals employed by the Seller subsequent to the Closing will be
entitled to the continued use of: their offices, related furniture, personal
computers (with internet access), phones and equipment (as in effect and on the
same basis as prior to the Closing) at the premises located at 111 Bauer Drive,
Oakland, New Jersey 07436 or the replacement facility therefor (the “Oakland
Facility”), including unrestricted access to the Oakland Facility, until
April 1, 2009 (with such extensions as are mutually agreed between the parties).
In lieu of the continued provision of the specific offices occupied by the
designated individual prior to the Closing (or in the event that a replacement
facility is occupied subsequent to the Closing), Buyer may relocate all such
individuals to substantially similar offices in one location in the Oakland
Facility, provided that the remainder of the first sentence hereof is complied
with in full. The use of the Oakland Facility and other Services provided in
this Section 2.2(a)(1), as described above, shall be without charge to the
Seller. Notwithstanding the foregoing, as a condition of these individuals’
access to the Oakland Facility, they will abide by all reasonable rules and
regulations regarding use of the Oakland Facility that were applicable to the
employees of Seller at the Oakland Facility prior to Closing and remain
applicable to employees of Buyer or Buyer Affiliates thereafter, as they may be
reasonably amended by Buyer from time to time.

 

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2. Kids Line Australia Pty Ltd. (“KL Australia”) will be permitted to continue
to occupy the premises located at Banksmeadow, Australia (the “Australian
Facility”) occupied prior to the Closing together with the lessee of the
Australian Facility, Russ Australia Pty Limited (“Russ Australia”) pursuant to
the Service Agreement dated February 21, 2008 between KL Australia and Russ
Australia (the “Service Agreement”), without consideration through and including
January, 2010, and thereafter in accordance with the provisions of the Service
Agreement in existence immediately prior to the Closing for as long as Russ
Australia or any other subsidiary of Buyer occupies the Australian Facility,
provided, that notwithstanding any provision in the Service Agreement to the
contrary, either party will be entitled to modify or terminate the arrangement
and the Service Agreement with 6 month’s prior written notice to the other party
(and neither party will be entitled to modify or terminate the arrangement or
the Service Agreement with less than 6 month’s prior written notice to the other
party, unless the parties mutually agree to such modification or termination.
3. Kids Line UK Limited will be permitted to continue to occupy the premises
located at Stoke Park, Tower Lane, Eastleigh, Hampshire in the United Kingdom
(the “UK Facility”) occupied prior to the Closing together with the lessee of
the UK Facility, Russ Berrie (U.K.) Limited (“Russ UK”), without consideration
through and including April, 2009, and thereafter in accordance with the
arrangements pertaining to the UK Facility immediately prior to the Closing, for
as long as Russ UK or any other subsidiary of Buyer occupies the UK Facility,
provided, that notwithstanding any arrangement in existence immediately prior to
the Closing to the contrary, either party will be entitled to modify or
terminate the arrangement with 6 month’s prior written notice to the other party
(and neither party will be entitled to modify or terminate the arrangement with
less than 6 month’s prior written notice to the other party, unless the parties
mutually agree to such modification or termination).
(b) Access to Records
1. After the Closing and until the date that the Seller files its Annual Report
on Form 10-K for the year ended December 31, 2008 (“the 2008 10-K”) with the
Securities and Exchange Commission (the “SEC”), without charge to the Seller,
Buyer shall provide Seller and its Representatives direct on-line access to the
Seller’s historical financial and business records on any hardware or software
platform transferred to Buyer at Closing (collectively, the “ERP System”), to
enable Seller to prepare its filings with the SEC, periodic financial
statements, closing information required by its auditors and tax returns and/or
deal with tax audits (“Needed Information”).

 

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2. After the Closing and for a period consistent with the record-retention
policies and practices of the Gift Entities prior to the Closing, Buyer shall
permit Seller or its Representatives to request information from the Buyer or
its applicable Affiliates pertaining to the Seller’s historical financial and
business records on the ERP System, during normal business hours, to enable
Seller to prepare the Needed Information. Buyer agrees that it or its Affiliates
will provide the information requested (in the form requested) in a timely
fashion to Seller, taking into account the circumstances of the request,
including, but not limited to, reporting deadlines under federal securities
laws. For each item of information requested (the “Requested Information”),
Seller will pay to Buyer the Direct Hourly Costs plus 20% associated with the
provision of such item of Requested Information. Buyer and its Affiliates agree
to cooperate, at the Seller’s request, in transferring all of such Requested
Information to a system established by Seller or maintained for Seller by a
third party.
(c) Personnel
1. Until the date that the Seller files the 2008 10-K with the SEC, the members
of the Seller’s finance group employed by the Buyer as of the Closing Date (the
“Finance Group”) will in good faith, for so long as they remain employed by
Buyer, be made available to the Seller for up to 80% of their time, and other
necessary employees employed by the Buyer as of the Closing Date shall give
their reasonable assistance, in each case in order to enable the Seller to
prepare, complete and file the 2008 10-K, to prepare for the earnings call in
connection therewith, and to support the audit of the Gift Business and related
testing pursuant to the Sarbanes Oxley Act of 2002; provided that such
assistance does not unreasonably interfere with Buyer’s ability to comply with
all financial reporting obligations imposed on it by its senior lender. In
consideration of the foregoing, Seller will pay to Buyer the Direct Hourly Costs
associated with the provision of such services plus 20%.
2. After the date that the Seller files the 2008 10-K, upon the request of
Seller and the agreement of Buyer (in Buyer’s discretion), the reasonable
assistance of the Finance Group and/or other qualified personnel of Buyer will
be provided to the Seller on an as-needed basis in order to enable the Seller to
prepare, complete and file, as applicable, reports and statements required to be
filed by Seller with the SEC under federal securities laws, financial
statements, and closing records required by the consummation of the transactions
contemplated by the Purchase Agreement. In consideration of the foregoing,
Seller will pay to Buyer the Direct Hourly Costs associated with the provision
of such services plus 20%.
3. Up to 3 individuals who, immediately prior to the Closing, were employed by
Russ Consulting Service (Shenzhen) Co., Ltd. (“RCS”) but did work primarily for
Sassy, Inc., will be permitted, following the Closing, to continue such
employment arrangements in accordance with their respective terms, provided,
that notwithstanding any arrangement in existence immediately prior to the
Closing to the contrary, Buyer will not modify or terminate the applicable
arrangement with less than 6 month’s prior written notice to the applicable
individual, unless Buyer and the applicable individual mutually agree to such
modification or termination, or Buyer determines in good faith to terminate the
employment of one or more of these individuals as a result of: (a) such
individual’s material breach of the terms of such individual’s employment
arrangement with RCS, which material breach has not been cured within 10 days of
written notice thereof; (b) in carrying out such individual’s duties, such
individual engages in conduct that constitutes gross neglect, willful
misconduct, or fraud, (c) the individual’s material failure to adhere to any
material written policy of RCS if such individual has not cured such
non-compliance within 10 days of written notice thereof (provided that notice
and an opportunity to cure need not be given for a second offense of the same
nature); (d) the appropriation (or attempted appropriation) of a business
opportunity of RCS, including attempting to secure or securing any personal
profit in connection with any transaction entered into on behalf of RCS; (e) the
misappropriation (or attempted misappropriation) of any of RCS’ funds or
property; or (f) (i) the conviction of, or the entering of a guilty plea or plea
of no contest with respect to a felony or the equivalent thereof, or (ii) the
conviction of, or the entering of a guilty plea or plea of no contest with
respect to any other crime with respect to which imprisonment in excess of
3 days is imposed, or (g) (i) the indictment (or its procedural equivalent) for
a felony or the equivalent thereof, or (ii) the indictment (or its procedural
equivalent) for any other crime with respect to which imprisonment in excess of
60 days is a possible punishment (in the event of such termination, Buyer will
provide Seller with at least 10 days’ prior written notice. Seller will pay to
Buyer the Direct Hourly Costs associated with such arrangements plus 20%.

 

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4. After the date that the Seller files the 2008 10-K, upon the request of Buyer
and the agreement of Seller (in Seller’s discretion), the reasonable assistance
of Guy Paglinco and/or Robert Parks (for so long as either is employed by the
Seller, as applicable) will be provided to the Buyer or its Affiliates on an
as-needed basis in order to enable the Buyer to prepare and complete
consolidated financial statements as well as closing records required by the
consummation of the transactions contemplated by the Purchase Agreement. In
consideration of the foregoing, Buyer will pay to Seller the Direct Hourly Costs
associated with the provision of such services plus 20%.
5. After the date that the Seller files the 2008 10-K, upon the request of Buyer
and the agreement of Seller (in Seller’s discretion), the reasonable assistance
of Anthony Cappiello and Marc Goldfarb (for so long as either is employed by the
Seller, as applicable) will be provided to the Buyer or its Affiliates on an
as-needed basis in order to support the Buyer with respect to certain
operational and legal matters. In consideration of the foregoing, Buyer will pay
to Seller the Direct Hourly Costs associated with the provision of such services
plus 20%.
(d) IT
As of the Closing Date and for a period of 90 days thereafter, Buyer and its
Affiliates will provide to Seller and its Affiliates reasonable access to the IT
professionals of the Buyer or its Affiliates (either members of the Seller’s IT
group employed by the Buyer as of the Closing Date, or other qualified personnel
of Buyer or its Affiliates), on an as-needed basis, to separate data with
respect to Seller’s operations from data with respect to the operation of the
Gift Entities transferred to Buyer at Closing (e.g., separating website data,
creating data extracts of Seller information). In consideration of the
foregoing, Seller will pay to Buyer the Direct Hourly Costs associated with the
provision of such services plus 20%. Any server created to contain such
separated Seller data may be housed in the Oakland Facility without charge to
the Seller, for so long as any employees of the Seller retain office space in
such facility pursuant to Section 2.2(a)(1) hereof.
(e) Employee Benefits
1. With respect to all employee benefit plans other than the medical plan and
any equity plans provided by Russ Berrie U.S. Gift, Inc. (“US Gift”) prior to
the Closing (“Non-Medical Plans”), up to 12 individuals employed by the Seller
subsequent to the Closing (the “Participants”) will be entitled to continued
participation in all such Non-Medical Plans subsequent to the Closing until the
earlier of, with respect to each Participant, (i) the termination of the
employment of such Participant, (ii) such time as Seller enrolls such
Participant in Seller-sponsored Non-Medical Plans, and (iii) the termination of
such Non-Medical Plans by US Gift, provided that subject to the provisions of
Article X of the Purchase Agreement, US Gift will be permitted to terminate any
Non-Medical Plan with 90 days’ prior written notice to the Participants. In
consideration for the foregoing, Seller will reimburse Buyer for all direct
costs incurred by Buyer or US Gift in connection with such participation.

 

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2. With respect to the medical plan provided by US Gift prior to the Closing
(“Medical Plan”), (x) Seller will either pay the COBRA premiums of the
Participants with respect thereto (or US Gift shall make such premium payments
and be directly reimbursed therefor by Seller), and (y) US Gift will pay any
medical claims or expenses of the Participants covered by such COBRA premiums
until the earliest of, with respect to each Participant, (i) the termination of
COBRA benefit applicability, (ii) the termination of the employment of such
Participant and (iii) such time as Seller enrolls such Participant in a
Seller-sponsored Medical Plan. In consideration for the foregoing, Seller will
reimburse Buyer for all payments made by Buyer or US Gift in connection
therewith.
Section 2.3 Other Services or Modifications. Subject to the terms and conditions
otherwise set forth herein, (i) Seller may request that Buyer provide additional
Services or that Buyer supplement, modify, substitute or otherwise alter (a
“Modification”) any of the Services or any component thereof, or (ii) Buyer may
request a Modification of Services provided by Seller or any component thereof.
Upon such request, the parties shall discuss in good faith the scope and nature
of such request and related issues regarding Modifications. In the event that
Seller and Buyer mutually agree to the provision by one party to the other of
other Services, as contemplated in clause (b) of the definition of Service under
Section 1.1, or to a Modification by a party to a Service or Services, as
contemplated by clause (c) of the definition of Service under Section 1.1 and
the sentence immediately foregoing, Seller and Buyer agree to complete an
attachment to this Agreement reflecting such additional or modified Services,
including the terms thereof, and such attachment shall be deemed to be a part of
this Agreement, subject to the terms and provisions hereof, as modified by such
attachment.
Section 2.4 No Transfer. Except as required for the provision of Services
hereunder, no party shall be required to cause to be transferred, assigned or
otherwise conveyed to the other party or its Affiliates any third-party licenses
or other agreements, or any software or hardware owned or used by any Service
Providers.
ARTICLE III
TERM OF AGREEMENT
Section 3.1 Term. Subject to Article VII, this Agreement shall commence on the
Closing Date and shall terminate with respect to each Service as set forth in
Section 2.2 above (the “Termination Date”), provided, however, that this
Agreement may be extended with respect to specific Services by agreement of the
parties hereto in writing prior to the Termination Date (with respect to each
Service, the period from the Closing Date to the Termination Date, as it may be
extended in accordance with this Agreement, if applicable), collectively with
any extension, the “Term”).
Section 3.2 Effect of Termination. Neither the termination of this Agreement
with respect to a Service pursuant to Article VII nor the expiration of this
Agreement with respect to a Service pursuant to Section 3.1 shall affect (i) the
liability of a party for breach of this Agreement, (ii) the obligations of a
party to make payments when due hereunder or (iii) the provisions contained in
Articles IV, V, VI, VII, IX, Section 2.4 and this Section 3.2 and the related
definitions, each of which shall survive the termination or expiration of this
Agreement.

 

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ARTICLE IV
PRICING, COSTS AND PAYMENT
Section 4.1 Pricing. Subject to Sections 4.2 and 4.3, each Service rendered
pursuant to this Agreement shall be charged to and payable by the party
receiving such Services monthly in accordance with the provisions of Section 2.2
for such Service.
Section 4.2 Costs. Notwithstanding the provisions of Section 2.2(d), all costs
(including labor costs) incurred by a Service Provider to separate Seller’s
operations from Buyer’s operations (e.g., costs related to data extracts,
database deletions) following the Closing Date, and any costs incurred by Buyer
to disconnect Seller users from systems shall be the responsibility of Buyer to
the extent such costs would have been incurred by Buyer even if Services had not
been provided hereunder. Costs incurred by Buyer to reconfigure suboptimal or
inefficient Buyer operations (e.g., costs related to resizing of databases for
cost effectiveness) will be the responsibility of Buyer.
Section 4.3 Credit Terms. Credit terms will be net thirty (30) days from the
date of receipt of the invoice (itemized by Service) by the relevant party. Each
country in which Services have been rendered shall be billed on a separate
invoice each month. Invoice amounts shall be stated in local currency and
payments shall be made in such local currency. To dispute charges on an invoice,
Seller or Buyer, as applicable, must within twenty (20) days as of the receipt
of the invoice provide notice of and explanation of any such disputed charges.
Within ten (10) days of the receipt of such notice of and explanation of any
disputed charges, Buyer or Seller, as applicable, shall provide the other with
information supporting the charges or, as the case may be, a revised invoice.
Based on the date of the receipt of the original invoice, Seller or Buyer, as
applicable, shall settle the original or the revised invoice in accordance with
the credit terms in this Section 4.3, it being without prejudice to Seller’s and
Buyer’s rights under Section 9.10 and 9.11.
ARTICLE V
WARRANTY AND LIABILITY
Section 5.1 Performance of Services. Each party warrants that it and its
Affiliates shall use commercially reasonable efforts to perform the Services at
a quality substantially consistent with that provided by Seller with respect to
a particular Service prior to the Closing. All claims, requests, actions,
proceedings and notifications directly or indirectly based on or in relation to
this warranty must demonstrate the warranty default and be initiated by a party
within a maximum limitation period of six (6) months following the date of first
occurrence of the default.
Section 5.2 Limitation on Liability. Buyer shall indemnify the Seller
Indemnified Persons against all Damages related to any claims (including third
party claims) arising from or relating to the provision of Services by Buyer or
its Affiliates under this Agreement to the extent that such Damages arise from
the gross negligence or willful misconduct of Buyer, any of its Affiliates or
any of their respective employees, officers or directors. Seller shall indemnify
the Buyer Indemnified Persons against all Damages related to any claims
(including third party claims) arising from or relating to the provision of
Services by Seller under this Agreement to the extent that such Damages arise
from the gross negligence or willful misconduct of Seller or any of its
employees, officers or directors. During the Term of this Agreement, each party
shall name the other, and its Affiliates, as an additional insured on any
general liability insurance maintained by such party to cover the actions of its
employees in providing the Services herein contemplated.

 

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ARTICLE VI
CONFIDENTIALITY
Section 6.1 Confidential Information
(a) In the course of performance under this Agreement, Buyer, its Affiliates and
their respective Representatives may receive or have access to Confidential
Information related to Seller or its Affiliates. Buyer, its Affiliates and their
respective Representatives shall access and use such Confidential Information
only in connection with the performance of Services hereunder, and shall
safeguard such Confidential Information against disclosure to all others to the
same extent Buyer employs in protecting its own confidential information during
the Term and for a period of three (3) years thereafter. The obligations of
Buyer, its Affiliates and their respective Representatives hereunder shall not
apply to any such Confidential Information that (i) at the time of disclosure is
publicly available or after the time of disclosure becomes publicly available
other than as a result of an unauthorized act or omission of Buyer, its
Affiliates or any of their Representatives; (ii) was or becomes available to
Buyer on a non-confidential basis from a source other than Seller, any of
Seller’s Affiliates or any of their Representatives; provided that such source
is not known by Buyer to be bound by a confidentiality agreement with or other
obligations of secrecy to Seller or any of its Affiliates; (iii) is disclosed by
Buyer under compulsion of any applicable Legal Requirements (including in
connection with the registration of securities); provided that Buyer provides
Seller with notice and an opportunity to contest or limit such disclosure with
the applicable entity requiring disclosure, to the extent reasonably
practicable; or (iv) is independently developed by Buyer without access to such
Confidential Information.
(b) In the course of performance under this Agreement, Seller, its Affiliates
and their respective Representatives may receive or have access to Confidential
Information related to Buyer or its Affiliates. Seller, its Affiliates and their
respective Representatives shall access and use such Confidential Information
only in connection with the Services to be performed by Buyer hereunder, and
shall safeguard such Confidential Information to the same extent Seller employs
in protecting its own confidential information against disclosure to all others
during the Term and for a period of three (3) years thereafter. The obligations
of Seller, its Affiliates and their respective Representatives hereunder shall
not apply to any such Confidential Information that (i) at the time of
disclosure is publicly available or after the time of disclosure becomes
publicly available other than as a result of an unauthorized act or omission of
Seller, its Affiliates or any of their Representatives; (ii) was or becomes
available to Seller on a non-confidential basis from a source other than Buyer,
any of its Affiliates or any of their Representatives; provided that such source
is not known by Seller to be bound by a confidentiality agreement with or other
obligations of secrecy to Buyer or any of its Affiliates; (iii) is disclosed by
Seller under compulsion of applicable Legal Requirements (including in
connection with the registration of securities); provided that Seller provides
Buyer with notice and an opportunity to contest or limit such disclosure with
the applicable entity requiring disclosure, to the extent reasonably
practicable; or (iv) is independently developed by Seller without access to such
Confidential Information.

 

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Section 6.2 Systems Access and Security
(a) To the extent that Seller and/or its Affiliates will be given access to the
computer system(s), infrastructure, databases, software, facilities or networks
of Buyer or Buyer’s Affiliates (“Systems”), such access shall be limited to
access in connection with performance or receipt of the Services. Seller shall
cause its personnel and any personnel of its Affiliates with such access to
comply with the system security policies, standards, procedures and requirements
stated in the system access procedure in effect at the time of such access with
regard to the Systems, in any applicable license agreement or lease agreement in
effect with regard to the Systems, or as otherwise reasonably required by Buyer
or Buyer’s Affiliates (the “Security Regulations”), and will not tamper with,
compromise or circumvent any security or audit measures employed by Buyer or
Buyer’s Affiliates, as applicable.
(b) Seller shall ensure that only those users who are specifically authorized to
gain access to the Systems gain such access and prevent unauthorized
destruction, alteration or loss of information contained therein. If at any time
Seller or any of its Affiliates determine that any personnel of Seller or its
Affiliates has sought to circumvent or has circumvented the Security Regulations
or that unauthorized personnel of Seller or its Affiliates have accessed or may
access the Systems or have engaged in activities designed to obtain unauthorized
access or that may lead to destruction or alteration or loss of data,
information or software, Seller shall promptly terminate the access to the
Systems of the personnel who engaged in those activities and promptly notify
Buyer. On reasonable advance written notice, Buyer and its Representatives may
audit Seller’s and its Affiliates’ use of the Systems.
ARTICLE VII
TERMINATION
Section 7.1 Separate Agreement for Each Service. This Agreement is a master
agreement and shall be construed as a separate and independent agreement for
each and every Service provided under this Agreement. Any termination or
expiration of this Agreement with respect to any Service shall not terminate
this Agreement with respect to any other Service then being provided under this
Agreement.

 

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Section 7.2 Termination by Either Party. Subject to Section 7.1 hereof, each of
Seller or Buyer may upon written notice to the other party terminate as of
right, without any further judiciary formality, this Agreement with respect to
any Service if there has occurred a material breach of this Agreement by the
other party with respect to such Service, unless within such period of 45 days
after receipt of such notice the breaching party remedies the breach or has
initiated a reasonable attempt to remedy the breach. For so long as a material
breach is not remedied and no attempt is made by the breaching party to remedy
such breach, the non-breaching party may choose to suspend, as of right and
without judicial formality, its own performance with respect to such Service,
provided, however, nothing contained in this Section 7.2 shall relieve Seller or
Buyer, as applicable, of its obligations to make the payments due to the other
under Article IV hereof for any Services not the subject of the notice described
in this Section 7.2 or with respect to any Services, even if the subject of the
notice described in this Section 7.2, to the extent such Services were provided
prior to the date of such notice.
Section 7.3 Termination on Payment Default or Bankruptcy. Buyer may terminate as
of right, without any further judiciary formality, this Agreement with respect
to any Service provided by Buyer or its Affiliates, or, at Buyer’s option,
suspend performance of its or its Affiliates’ obligations hereunder with respect
to any Service, in the event (a) of Seller’s failure to pay, or any of Seller’s
Affiliates’ failure to pay, an invoice with respect to such Service on the due
date upon thirty (30) days’ prior written notice to Seller, unless Seller pays
the invoice within such thirty (30)-day period, or (b) Seller files a petition
in bankruptcy, becomes insolvent, makes an assignment for the benefit of
creditors or an arrangement pursuant to any bankruptcy law, discontinues its
business or has a receiver appointed for it. Seller may terminate as of right,
without any further judiciary formality, this Agreement with respect to any
Service provided by Seller or its Affiliates, or at Seller’s option, suspend
performance of its or its Affiliates’ obligations hereunder with respect to any
Service, in the event (a) of Buyer’s failure to pay, or any of Buyer’s
Affiliates’ failure to pay, an invoice with respect to such Service on the due
date upon thirty (30) days’ prior written notice to Buyer, unless Buyer pays the
invoice within such thirty (30)-day period, or (b) Buyer files a petition in
bankruptcy, becomes insolvent, makes an assignment for the benefit of creditors
or an arrangement pursuant to any bankruptcy law, discontinues its business or
has a receiver appointed for it.
Section 7.4 Effect of Termination of Particular Service. Subject to Section 3.2,
upon the expiration of the Term or upon the termination of this Agreement, in
each case, with respect to a particular Service, all rights under this Agreement
of the recipient of such Service to receive such Service will cease but such
termination shall not effect this Agreement with respect to any other Service as
to which the Term of this Agreement has not expired or been terminated.
Section 7.5 Termination by Seller. Upon sixty (60) days’ prior written notice to
Buyer, Seller may terminate as of right, without any further judiciary
formality, this Agreement for any reason with respect to any Service provided by
Buyer or its Affiliates. Seller may request, and the parties hereto may by
mutual agreement cancel, a Service in a shorter period.

 

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ARTICLE VIII
ASSIGNMENT
Section 8.1 Assignment by Seller. Seller may not assign this Agreement or
transfer any rights or obligations under this Agreement, in each case by
operation of law or otherwise, to a third party (other than to an Affiliate of
Seller, a buyer of the Seller’s business or a substantial portion thereof, or as
collateral security to any of Seller’s or its Affiliates’ financing sources,
which in each case shall not require such consent) without the prior written
consent of Buyer, which consent, except as otherwise expressly provided herein,
may be granted or withheld by Buyer in its sole discretion. Any attempted
assignment in contravention hereof shall be null and void as of right without
any further judiciary formality.
Section 8.2 Assignment by Buyer. Subject to the provisions of Section 9.2, Buyer
may not assign this Agreement or transfer any rights or obligations under this
Agreement, in each case by operation of law or otherwise, to a third party
(other than to an Affiliate of Buyer, a buyer of the Buyer’s post-Closing
business or a substantial portion thereof, or as collateral security to any of
Buyer’s or its Affiliates’ financing sources, which in each case shall not
require such consent) without the prior written consent of Seller, which
consent, except as otherwise expressly provided herein, may be granted or
withheld by Seller in its sole discretion. Any attempted assignment in
contravention hereof shall be null and void as of right without any further
judiciary formality.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices. All notices and communications hereunder shall be in
writing and shall be deemed to have been duly given when received if served by
personal delivery upon the party for whom it is intended or delivered by
registered or certified mail, return receipt requested, or if sent by telecopier
or email, provided that the telecopy or email is promptly confirmed by telephone
confirmation thereof, to the Person at the address set forth below, or such
other address as may be designated in writing hereafter, in the same manner, by
such Person:
To Buyer:
111 Cloverleaf Drive
Winston-Salem, NC 27103
Attn: Richard Snow
          President
Telecopy: (858) 485-1233
Email: rsnow@the-encore-group.com
With a copy (which shall not constitute notice) to:
Gordon & Rees LLP
101 West Broadway, Suite 2050
San Diego, CA 92101
Attn: Joe Lesko, Esq.
Telecopy: (619) 696-7124
Email: jlesko@gordonrees.com
To Seller:
111 Bauer Drive
Oakland, New Jersey 07436
Attn: Marc S. Goldfarb,
          SVP and General Counsel
Telecopy: (201) 405-7377
Email: mgoldfarb@russberrie.com
With a copy (which shall not constitute notice) to:
Kaye Scholer LLP
425 Park Avenue
New York, New York 10022
Telephone: (212) 836-8201
Telecopy: (212) 836-8211
Email: jigreenberg@kayescholer.com
Attn: Joel I. Greenberg

 

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Section 9.2 Assumption of Agreement. In the event that the Buyer, the Subs or
any of their respective successors or assigns (i) consolidates with or merges
into any other Person and shall not be the continuing or surviving corporation
or entity in such consolidation or merger, or (ii) transfers all or
substantially all of its properties and assets to any Person, then and in either
such case, proper provision shall be made so that the successors and assigns of
Buyer or the Subs, as the case may be, shall expressly assume the obligations of
Buyer and its Affiliates set forth in this Agreement.
Section 9.3 Amendments and Waiver. Any provision of this Agreement may be
amended or waived if such amendment or waiver is in writing and signed, in the
case of an amendment, by Buyer and Seller or, in the case of a waiver, by the
party against whom the waiver is to be effective. No failure or delay by any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law except as otherwise
specifically provided herein.
Section 9.4 Entire Transaction; Representations and Warranties. This Agreement,
and the Purchase Agreement, including all attachments hereto and thereto and the
documents referred to herein and therein, contain the entire agreement among the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters.
All attachments hereto are hereby incorporated by reference and made a part of
this Agreement. Nothing contained in this Agreement shall be deemed to limit the
provisions of Sections 10.6 and/or 10.7 of the Purchase Agreement captioned
“Retention of and Access to Records”.
Section 9.5 Other Rules of Construction. The section and other headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
Section 9.6 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or entity
or any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefore in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons, entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.

 

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Section 9.7 Relationship of Parties. Each party hereto in performing its
obligations and duties hereunder shall be conclusively deemed to be an
independent contractor and not under the control and supervision of the other
party hereto and nothing in this Agreement shall be read to create any agency,
partnership or joint venture of Buyer and Seller or to create any trust or other
fiduciary relationship between them. Neither party is, nor shall hold itself out
to others to be, vested with any power, authority, or right to bind
contractually or to act on behalf of the other party as its broker, agent, or
otherwise for the purpose of committing, selling, conveying, or transferring any
of the other party’s assets or property, contracting for or in the name of the
other party, or making any representation binding upon such other party.
Section 9.8 Authorship. Buyer and Seller agree that the terms and language of
this Agreement were the result of negotiations between Buyer and Seller and, as
a result, there shall be no presumption that any ambiguities in this Agreement
shall be resolved against Buyer, on the one hand, or Seller, on the other hand.
Any controversy over construction of this Agreement shall be decided without
regard to events of authorship.
Section 9.9 Third Party Beneficiaries. This Agreement shall bind and inure to
the benefit of Seller, Buyer and their respective successors and permitted
assigns. This Agreement does not create any rights, claims or benefits inuring
to any person that is not a party nor create or establish any third-party
beneficiary hereto, unless expressly provided herein.
Section 9.10 Counterparts; Signature by Facsimile. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
and all of which shall constitute one and the same Agreement. Delivery of an
executed counterpart of this Agreement by facsimile (including in Adobe Acrobat
format) shall be equally as effective as delivery of an original executed
counterpart thereof.
Section 9.11 Dispute Resolution. Notwithstanding anything to the contrary in
this Agreement, the parties shall attempt to resolve any dispute, controversy,
or claim arising out of, or in connection with, this Agreement (a “Dispute”)
amicably and promptly by negotiations between executives from each party. Either
party may give the other party written notice of any Dispute not resolved in the
normal course of business, in which case, the parties’ executives (vice
president or higher) shall negotiate alone (except for one assistant who is not
an attorney) in good faith to resolve the Dispute within 30 days after such
notice is provided. In the event, however, that (a) the Dispute is not resolved
within such 30-day period (or any extension thereto to which the parties may
mutually agree) or (b) that a meeting between such executives has not occurred
within such 30-day period, then regardless of whether any such good faith
negotiations have actually occurred, either party may bring an action or
proceeding against the other with respect to the subject matter of such Dispute.
Notwithstanding the foregoing, either party may, at any time and without first
engaging in any negotiations with the other party, seek provisional injunctive
relief that may be required to maintain the status quo. The parties hereby
acknowledge and agree that such negotiations shall be deemed to be in the nature
of settlement discussions and that neither the fact that such discussions took
place, nor any statement or conduct of any participant in such discussions,
shall be admissible into evidence in any subsequent litigation or in any
arbitration or other dispute resolution proceeding involving the parties. It is
further understood and agreed that any disclosure in any form, including oral,
by any person participating in such negotiations shall not operate as a waiver
of any privilege, including work product or attorney-client privilege,
applicable to the subject matter thereof.

 

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Section 9.12 GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF FORUM;
WAIVER OF TRIAL BY JURY. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW. Any Proceeding arising out of or relating to this Agreement
may be brought in the courts of the State of New York, or, if it has or can
acquire jurisdiction, in the United States District Court for the Southern
District of New York, and each of the parties irrevocably submits to the
exclusive jurisdiction of each such court in any such Proceeding, waives any
objection it may now or hereafter have to venue or to convenience of forum,
agrees that all claims in respect of the Proceeding shall be heard and
determined only in any such court and agrees not to bring any Proceeding arising
out of or relating to this Agreement in any other court. The parties agree that
either or both of them may file a copy of this paragraph with any court as
written evidence of the knowing, voluntary and bargained agreement between the
parties irrevocably to waive any objections to venue or to convenience of forum.
Process in any Proceeding referred to in the first sentence of this Section may
be served on any party anywhere in the world.
Section 9.13 Force Majeure. Neither party, nor any of its respective Affiliates,
shall be held responsible for failure or delay in delivery of Services
hereunder, nor shall any party or any of its respective Affiliates be held
responsible for failure or delay in receiving Services hereunder, if such
failure or delay is due to an act of God or public enemy, war, terrorism,
government acts or regulations, administrative acts or decisions, fire, flood,
embargo, quarantine, epidemic, labor strike or work stoppage by workers,
accident, unusually severe weather or other cause similar or dissimilar to the
foregoing, beyond their control (each such event, a “Force Majeure”).
If the performance of this Agreement by either Seller, on the one hand, or
Buyer, on the other hand, hereunder is prevented, restricted or interfered with
by reason of a Force Majeure event, the party whose performance is so affected,
upon giving prompt notice to the other party, shall be excused from such
performance to the extent of such Force Majeure event; provided, however, that
the parties so affected shall take all reasonable steps to avoid or remove such
causes of nonperformance and shall continue performance hereunder with dispatch
whenever such causes are removed.
Section 9.14 Seller’s Affiliates. Each of the Affiliates of Seller, identified
in writing by Seller to Buyer, may exercise any of Seller’s rights hereunder or
perform any of Seller’s agreements, covenants and obligations hereunder;
provided, however, that Seller fully and unconditionally guarantees the due and
punctual performance and observance of each and every such agreement, covenant
and obligation.
Section 9.15 Fulfillment of Obligations. Any obligation of any party to any
other party under this Agreement, which obligation is performed, satisfied or
fulfilled by an Affiliate of such party, shall be deemed to have been performed,
satisfied or fulfilled by such party.

 

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Section 9.16 Responsibility for Affiliates. Each party shall be responsible for
its Affiliates’ compliance with the terms and conditions of this Agreement.
Section 9.17 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to alter or affect
the meaning or interpretation of any of the provisions hereof.
Section 9.18 Public Disclosure. Notwithstanding anything herein to the contrary,
each of the parties to this Agreement hereby agrees with the other parties
hereto that, except as may be required to comply with the requirements of any
applicable Legal Requirement (including in connection with the registration of
securities) or the rules and regulations of each stock exchange upon which the
securities of one of the parties is listed, in which case the disclosing party
will give the other parties hereto advance notice of the release, no press
release or similar public announcement or communication shall ever, whether
prior to or subsequent to the Closing, be made or caused to be made concerning
the execution or performance of this Agreement unless specifically approved in
advance by all parties hereto.

 

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IN WITNESS WHEREOF, the parties have executed or caused this Agreement to be
executed as of the date first written above.

            THE RUSS COMPANIES, INC.
      By:   /s/ Richard Snow         Name:   Richard Snow        Title:  
President        RUSS BERRIE AND COMPANY, INC.
      By:   /s/ Bruce G. Crain         Name:   Bruce G. Crain        Title:  
President and Chief Executive Officer   

Transition Services Agreement