4. Exercise.(a) The Options shall be exercised by giving written notice of exercise to the ChiefFinancial Officer of the Company at the Company’s principal executive office, which shallspecify the number of shares of Common Stock to be purchased. The exercise price of theOptions shall be paid in cash or, in the sole discretion of the Committee: (a) by thedelivery of shares of Common Stock of the Company then owned by the Optionee; (b) bydirecting the Company to withhold shares otherwise deliverable upon exercise to satisfy theexercise price; or (c) by delivery of a copy of irrevocable instructions to a broker todeliver promptly to the Company the amount of sale or loan proceeds to pay the exerciseprice, as long as such transaction is not impermissible under Section 13(k) of the ExchangeAct (Section 402 of the Sarbanes-Oxley Act of 2002). To facilitate the foregoing, theCompany may enter into agreements for coordinated procedures with one or more brokeragefirms. The Committee may prescribe any other method of paying the exercise price that itdetermines to be consistent with applicable law and the purpose of the Plan.(b) The Options may be exercised only with respect to full shares of Common Stock.Notwithstanding any other provision of this Agreement, the Options may not be exercised inwhole or in part: (i) unless all requisite approvals and consents of any governmentalauthority of any kind having jurisdiction over the exercise of the Options shall have beensecured; and (ii) unless the issuance of shares of Common Stock upon the exercise of theOptions shall be exempt from registration under applicable U.S. federal and state securitieslaws, and applicable non-U.S. securities laws, or the shares of Common Stock shall have beenregistered under such laws. As a condition to the exercise of this Option, the Company mayrequire the Optionee to make any representation and warranty to the Company as may berequired by applicable laws, rules or regulations.5. Adjustments.(a) The Options or this Agreement shall be subject to adjustment or substitution, asdetermined by the Committee in its sole discretion, as to the number, price or kind of ashare of Common Stock or other consideration subject to the Options, and any and all othermatters deemed appropriate by the Committee, including, without limitation, accelerating thevesting, settlement and/or exercise period pertaining to the Options, or as otherwisedetermined by the Committee to be equitable, in the event of: (i) changes in the outstandingCommon Stock or in the capital structure of the Company by reason of a dissolution orliquidation of the Company, sale of all or substantially all of the assets of the Company,mergers, consolidations or combinations with or into any other entity if the Company is thesurviving entity, stock or extraordinary dividends, stock splits, reversestock splits, stock combinations, rights offerings, statutory share exchanges involvingcapital stock of the Company, reorganizations, recapitalizations, reclassifications,exchanges, spin-offs, dividends in kind, or other relevant changes in capitalization; or(ii) any change in applicable laws or any change in circumstances which results in or wouldresult in any substantial dilution or enlargement of the rights granted to, or availablefor, participants in the Plan, or which otherwise warrants equitable adjustment because, inthe sole discretion of the Committee, it interferes with the intended operation of the Plan.Any adjustments under this Section 5 shall be made in a manner which does not adverselyaffect the exemption provided pursuant to Rule 16b-3 under the Exchange Act and whichotherwise is permissible under Code Section 409A, if applicable. The Company shall give theOptionee notice of any adjustment hereunder and, upon notice, such adjustment shall beconclusive and binding for all purposes.
 
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(b) In connection with a Business Combination, the Committee, in its sole discretion, mayprovide for: (i) the continuation of the Plan and/or the assumption of the Options grantedhereunder by a successor corporation (or a parent or subsidiary thereof); (ii) thesubstitution for the Options of new awards covering the stock of a successor corporation (ora parent or subsidiary thereof), with appropriate adjustments as to the number and kind of shares and exercise prices; (iii) upon 10 days’ advance notice from the Committee to theOptionee, the acceleration of the vesting, settlement and/or exercise period pertaining tothe Options; or (iv) upon 10 days’ advance notice from the Committee to the Optionee, (x)the cancellation of any outstanding portion of the Options that is then exercisable orvested and the payment, in cash or stock, or any combination thereof, of the value of suchportion of the Options based upon the price per share of stock received or to be received byother stockholders of the Company in connection with the Business Combination, and (y) thecancellation of any portion of the Options that is not then exercisable or vested. In theevent of any continuation, assumption or substitution contemplated by the foregoing clauses,the Plan and/or the Options shall continue in the manner and under the terms so provided.(c) If, by reason of a change in capitalization described in this Section 5, the Optioneeshall be entitled to new, additional or different shares of stock or securities of theCompany or any other corporation in respect of his or her Option, in the event that the Plancontinues, such new, additional or different shares shall thereupon be subject to all of theconditions, restrictions and performance criteria which were applicable to the shares ofCommon Stock subject to the Option, as the case may be, prior to such change incapitalization.6. Authority of Committee. Subject to the limitations set forth in the Plan, theCommittee is vested with absolute discretion and authority to interpret the Plan and make alldeterminations necessary or advisable for the administration thereof. Any determination ofthe Committee in the administration of the Plan, as described therein, shall be final,conclusive and binding upon the Optionee and any person claiming under or through theOptionee, including, without limitation, as to any adjustments pursuant to Section 5 hereof.
 
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7. Transferability. The Options shall not be transferable except by will or by the lawsof descent or distribution and shall be exercisable, during the Optionee’s lifetime, subjectto the provisions of Section 3, only by the Optionee. Notwithstanding the foregoing, theCommittee in its sole discretion may permit the transferability of the Options by the Optioneeto a member of his/her Immediate Family or trusts for the benefit of such persons, orpartnerships, corporations, limited liability companies or other entities owned solely by suchpersons, including trusts for such persons. The Optionee acknowledges and agrees that aviolation of this Section 7 will cause the Company irreparable injury for which adequateremedy at law is not available. Accordingly, the Optionee agrees that the Company shall beentitled to an injunction, restraining order or other equitable relief, without the posting ofany bond, to prevent the breach of this Section 7 and to enforce the terms and provisionshereof in any court of competent jurisdiction in the United States or any state thereof, inaddition to any other remedy to which it may be entitled at law or equity.8. No Right to Continued Employment. Nothing contained in the Plan or this Agreementshall confer upon the Optionee any right with respect to continuance of employment or serviceby any Participating Company nor limit in any way the right of any Participating Company toterminate or modify the employment or retention of the Optionee at any time, with or withoutCause. By accepting the Options, the Optionee expressly acknowledges that there is noobligation on the part of any Participating Company to continue the Plan and/or grant anyadditional Awards to the Optionee.9. No Rights as Stockholder. The Optionee shall have no voting or other rights as astockholder of the Company with respect to the shares of Common Stock underlying the Optionsuntil the exercise of the Options and the issuance of a certificate or certificates to him orher for shares of Common Stock in respect thereof. No adjustment shall be made for dividendsor other rights for which the record date is prior to the issuance of such certificate orcertificates.10. Limitations on Delivery of Certificates. The Company shall not be required to issueor deliver a certificate for Common Stock hereunder unless the issuance of such certificatecomplies with all applicable legal requirements including, without limitation, compliance withthe provisions of applicable state securities laws, the Securities Act of 1933, as amended(the “Securities Act”), the Securities Exchange Act of 1934, as amended, and the requirementsof the exchanges, if any, on which the Company’s shares of Common Stock may, at that time, belisted.11. Disposition of Common Stock. Notwithstanding anything contained in the Plan orherein to the contrary, in the event that the disposition of any shares of Common Stockacquired pursuant to the exercise of all or a portion of the Options is not covered by a thencurrent registration statement under the Securities Act, and is not otherwise exempt from suchregistration, such shares shall be restricted against transfer to the extent required by theSecurities Act and Rule 144 or other regulations thereunder. The certificates evidencing anyof such shares shall be appropriately amended or have an appropriate legend placed thereon toreflect their status as restricted securities as aforesaid.
 
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12. Withholding. Whenever any portion of the Options are exercised, the Optionee shall berequired to remit to the applicable Participating Company an amount sufficient to satisfy theemployer’s statutory U.S. federal, state and local and non-U.S. tax withholding requirementswith respect thereto (“Withholding Taxes”). Such remittance may be required prior to theissuance of any shares of Common Stock to the Optionee. Notwithstanding the foregoing, theCommittee may, in its sole discretion, in lieu of all or any portion of a cash payment inrespect of Withholding Taxes, permit the Optionee to elect to have the Company withhold CommonStock (or allow the return of Common Stock) having an aggregate Fair Market Value, determinedon the date the obligation to withhold or pay such taxes arises, equal to the amount (orportion thereof) required to be withheld. Any fraction of a share of Common Stock which wouldbe required to satisfy the Optionee’s Withholding Tax obligation shall be disregarded and theremaining amount due shall be paid in cash by the Optionee.13. Miscellaneous. (a) Notices. All notices and other communications required or permitted by thisAgreement shall be in writing and shall be deemed given to a party when: (a) delivered tothe appropriate address by hand or by nationally recognized overnight courier service (costsprepaid); (b) sent by facsimile or e-mail with confirmation of transmission by thetransmitting equipment; or (c) received or rejected by the addressee, if sent by certifiedmail, return receipt requested, in each case to the following addresses, facsimile numbersor e-mail addresses and marked to the attention of the person (by name or title) designatedbelow (or to such other address, facsimile number, e-mail address or person as a party maydesignate by notice to the other party):if to the Company, to it at:Russ Berrie and Company, Inc.1800 Valley RoadWayne, New Jersey 07470Attention: Corporate SecretaryFax no.: 201-405-7377