**Exhibit 10.89**

 

**RUSS BERRIE AND COMPANY, INC.STOCK OPTION AGREEMENT**

 

**Date of Grant:  June 1, 2004**

 

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

 

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

 

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

 

2.                                       (a)                                  If the employment of the Executive under theEmployment Agreement is terminated by the Company without Cause or by reason ofthe Disability of the Executive, or by the Executive for Good Reason (each asdefined in the Employment Agreement), whether or not in connection with achange in control, or by reason of the Executive’s death, any outstandingunexercised portion of this Option, whether or not vested and/or exercisable onthe Termination Date, shall be deemed fully vested and exercisable and may beexercised for two years after the Termination Date or the remainder of theten-year term of the Option, whichever period is shorter.  The “Termination Date” is the date on whichthe Executive’s employment under the Employment Agreement ceases.

 

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

 

(c)                                                                                  Ifthe employment of the Executive under the Employment Agreement is terminated bythe Company for Cause or by the Executive without Good Reason (each as definedin the Employment Agreement), and not due to death or Disability, anyoutstanding unexercised unvested portion of this Option will be cancelled anddeemed terminated as of the Termination Date and any unexercised, vestedportion of this Option may be exercised through the earlier of (x) 30 daysafter the Termination Date or (y) the 10th anniversary of the Date of Grant.

 

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

 

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(a)                                                          Methodof Exercise.  In order to exercise thisOption in whole or in part, the Executive shall submit to the Company a writingspecifying the whole number of Shares in respect of which the Option is beingexercised and accompanied by payment in full (or an arrangement for payment infull) in accordance with Section 3(b) below of the aggregate Option Price ofthe Shares in respect of which the Option is being exercised.  The number of Shares for which the Optionhas thus been exercised shall then promptly be issued by the Company (the“Option Shares”) and a certificate for such Shares shall be promptly deliveredto the Executive.

 

(b)                                                         Methodof Payment.  Payment of the aggregateOption Price for Option Shares may be made (i) by delivery to the Company ofcash or a check to the order of the Company and backed by sufficient funds inan amount equal to the aggregate Option Price of such Shares; (ii) to theextent that use of this procedure will not result in any incremental accountingcharges to the Company, by authorizing the Company to withhold Shares thatwould otherwise be delivered to the Executive having an aggregate Market Priceon the date of exercise equal to the aggregate Option Price of the OptionShares; (iii) by delivery to the Company of Shares then owned by the Executivehaving an aggregate Market Price on the date of delivery equal to the aggregateOption Price of the Option Shares; or (iv) by any combination of (i), (ii) or(iii), in each case to the fullest extent permissible under the Plan.  The Company shall also from time to timemake available to the Executive any “cashless exercise” procedure that it thenmakes available to other option holders who are directors and executiveofficers of the Company.

 

(c)                                                          Deliveryof Shares in Payment of Option Price. Payment by delivery of Shares may be effected by delivering one or morestock certificates or by otherwise delivering Shares to the Company’sreasonable satisfaction, in each case accompanied by such endorsements, stockpowers, signature guarantees or other documents or assurances as may reasonablybe required by the Company.  If acertificate or certificates or other documentation representing Shares inexcess of the amount required are delivered, a certificate (or other satisfactoryevidence of ownership) representing the excess number of Shares shall bereturned by the Company.  The Companyneed not accept fractional Shares.

 

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

 

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

 

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(b)                                                         Inconnection with a Business Combination, the Committee, in its sole discretion,may provide for (i) the continuation of the Plan and/or the assumption of theOption by a successor corporation (or a parent or subsidiary thereof), (ii) thesubstitution for the Option of new awards covering the stock of a successorcorporation (or a parent or subsidiary thereof), with appropriate adjustmentsas to the number and kind of shares and exercise prices, (iii) upon 10 days’advance notice from the Committee to the Executive, the acceleration of thevesting and/or exercise period pertaining to the Option or (iv) upon 10 days’advance notice from the Committee to the Executive, (x) the cancellation of anyoutstanding portion of the Option that is then exercisable and the payment tothe holder thereof, in cash or stock, or any combination thereof, of the valueof such portion based upon the price per share of Stock received or to bereceived by other stockholders of the Company in connection with the BusinessCombination, and (y) the cancellation of the portion of the Option that is notthen exercisable.  In the event of anycontinuation, assumption or substitution contemplated by the foregoing clauses,the Option shall continue in the manner and under the terms so provided.

 

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

 

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

 

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

 

7.               Nothing contained in the Plan or thisAgreement shall confer upon the Executive any right with respect to continuanceof employment by any Participating Company nor limit in any way the right ofthe Company to terminate or modify his employment at any time, with or withoutcause.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 
|   | RUSS  BERRIE AND COMPANY, INC. |
|--------|--------------------------------|
|   |                           |   |
|   | **BY**:                        |  /s/ John Wille |   |
|   | **Name**:                      | John Wille |
|   | **Title**:                     | Vice President and  Chief Financial Officer |

 

AGREED TO AND ACCEPTED AS OF THEDATE OF GRANT SET FORTH ABOVE:
| /s/ Andrew Gatto |   |
|------------------|--------|
| ANDREW R. GATTO  |

 

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