Document:

Filed by Bowne Pure Compliance

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

 

 

 

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.

 

1

 

“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.

 

2

 

(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.

 

3

 

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”).

 

4

 

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%.

 

5

 

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.

 

6

 

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.

 

7

 

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.

 

8

 

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.

 

9

 

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.

 

10

 

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.

 

11

 

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

 

12

 

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.

 

13

 

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.

 

14

 

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.

 

15

 

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.

 

16

 

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 AgreementFiled by Bowne Pure Compliance

Exhibit 10.116

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), APPLICABLE STATE SECURITIES LAWS, OR APPLICABLE LAWS OF ANY
FOREIGN JURISDICTION. THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO
DISTRIBUTION OR RESALE, AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, RENOUNCED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS AND IN THE ABSENCE OF COMPLIANCE
WITH APPLICABLE LAWS OF ANY FOREIGN JURISDICTION, OR AN APPLICABLE EXEMPTION FROM SUCH
REQUIREMENTS.

THIS NOTE IS SUBJECT TO THE TERMS OF AN INTERCREDITOR AGREEMENT (THE “INTERCREDITOR
AGREEMENT”) DATED AS OF DECEMBER 23, 2008 BETWEEN HOLDER (DEFINED BELOW) 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 NOTE, (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 HOLDER 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.

			
	 	 	 
	U.S. $19,000,000
	 	New York, New York

December 23, 2008

THE RUSS COMPANIES, INC.

Secured Promissory Note

FOR VALUE RECEIVED, the undersigned, THE RUSS COMPANIES, INC., a Delaware corporation (the
“Company”), hereby promises to pay to Russ Berrie and Company, Inc., or registered assigns
(in either case, the “Holder”), (i) the principal amount of U.S. $19,000,000, payable on
December 23, 2013 (the “Maturity Date”), (ii) interest at a rate of 6% per year on the
unpaid principal of this Note, compounded annually, payable on the Maturity Date, and (iii) in the
case of (i) and (ii), interest at a rate of 7% per year on overdue principal and, to the extent
legally enforceable, overdue interest. Interest shall be calculated on the basis of a 360 day year
consisting of 12 30-day months. If the Company fails to pay any royalties pursuant to the License
Agreement, dated December 23, 2008, between the Company and RB Trademark Holdco, LLC, a Delaware
limited liability company, the rate of interest on this Note shall be increased to 7% per annum for
so long as any such royalties remain unpaid.

 

 

 

The Holder is entitled to the benefits of a Guaranty, dated as of December 23, 2008 (as
amended, restated, supplemented or otherwise modified from time to time, the “Guaranty”)
with respect to the obligations under this Note executed by The Encore Group, Inc., Russ Berrie
U.S. Gift, Inc., Russ Berrie and Company Investments, Inc., Russ Berrie and Company Properties,
Inc., and Russplus, Inc. (each individually a “Guarantor” and collectively, the
“Guarantors”) and such Guaranty shall be secured by liens on the assets of each of such
Guarantors pursuant to security agreements entered into between each of such Guarantors and the
Holder. The Company’s obligations under this Note are further secured pursuant the Security
Agreement (as defined in clause XV below) as further set forth below.

All payments of principal and interest shall be made on the date(s) required pursuant to this
Note in lawful money of the United States of America and shall be made by wire transfer of
immediately available funds to an account designated by the Holder or at the principal office of
the Holder or such other place as may be designated in writing by the Holder to the Company.

The Company may, without premium or penalty, at any time and from time to time, upon three
business days prior written notice to the Holder, prepay all or any integral multiple of $1,000,000
of the outstanding principal balance due under this Note, provided that each such prepayment is
accompanied by all accrued but unpaid interest on this Note calculated to the date of such
prepayment.

On or before April 30 in each year, the Company shall prepay the Note in an amount equal to
the excess, if any, of (x) the maximum amount available to be borrowed under the Credit and
Security Agreement, dated as of December 23, 2008 (calculated in the manner set forth in the
Intercreditor Agreement so long as such Intercreditor Agreement is in effect), among the Company
and the other borrowers named therein and Senior Lender (as amended, restated, refinanced,
supplemented or otherwise modified from time to time, any such indebtedness thereunder, the
“Senior Indebtedness”) during April of that year over (y) $10,000,000; any such prepayment
shall be applied first to the payment of accrued but unpaid interest on this Note and the balance,
if any, to principal of this Note. Concurrently with any such prepayment, or on or before April 30
of each year in which there is no such prepayment, the Company shall deliver to the Holder a
certificate of its chief financial officer setting forth the calculation of the amount, if any, to be prepaid in reasonable
detail.

 

2

 

This Note has been duly authorized and issued pursuant to a Purchase Agreement, dated as of
December 23, 2008 (as the same may be amended or otherwise modified from time to time, the
“Purchase Agreement”), between the Holder and the Company.

For the purposes of this Note, the term “Subsidiary” shall mean any corporation or other
entity of which securities or other interests having the power to elect a majority of that
corporation’s or other entity’s board of directors or similar governing body, or otherwise having
the power to direct the business and policies of that corporation or other entity (other than
securities or other interests having such power only upon the happening of a contingency that has
not occurred) are held by the Company or one or more of its Subsidiaries.

I. Subordination. The Holder agrees that payments of all indebtedness hereunder shall
to the extent and manner set forth in the Intercreditor Agreement be subordinate and junior in
right of payment to the payment of the Senior Indebtedness of Senior Lender.

II. Effect of Subordination. Subject to the rights, if any, of the Senior Lender under
this Section II to receive cash, securities or other properties otherwise payable or deliverable to
the Holder of this Note as set forth in the Intercreditor Agreement, nothing contained in this
Section II shall impair, as between the Company and the Holder, the obligation of the Company,
subject to the terms and conditions hereof, to pay to the Holder the principal hereof and interest
hereon as and when the same become due and payable, or shall prevent the Holder of this Note, upon
default hereunder, from exercising all rights, powers and remedies otherwise provided herein or by
applicable law.

 

3

 

III. Events of Default.

The entire unpaid principal amount of this Note, together with all accrued interest thereon,
shall, at the option of the Holder exercised by written notice to the Company, or automatically and
without any such notice in the case of (E) or (F) below forthwith become and be due and payable if
any one or more of the following events of default (each, an “Event of Default”) shall have
occurred (for any reason whatsoever and whether such happening shall be voluntary or involuntary or
come about or be effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any administrative or governmental
body) and be continuing beyond the expiration of any applicable cure period:

A. if default shall be made in the due and punctual payment of the principal of, or any
interest on, this Note when and as the same shall become due and payable, whether at maturity, by
acceleration or otherwise;

B. if default shall be made in the performance or observance of the provisions of this Note or
of any provision of the Security Agreement, and if such default is solely with respect to delivery
of financial information is not cured within twenty (20) days;

C. if any Guarantor defaults in the performance or observance of the covenants contained in
the Guaranty or any security agreement entered into by any Guarantor to secure its obligations
pursuant to the Guaranty; and, provided it is a non-monetary default, such default is not cured
within ten (10) days;

D. if the Company or any Guarantor (i) fails to make any payment when due (whether by
scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of that
certain Amended and Restated Subordinated Promissory Note of even date made by The Encore Group,
Inc. in the original principal amount of $500,000 payable to Eldridge C. Hanes (the “Hanes
Note”), any Senior Indebtedness or other indebtedness for borrowed money in the outstanding
principal amount that exceeds individually or in the aggregate $100,000, or (ii) fails to observe
or perform any other agreement or condition relating to any such indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the
effect of which default or other event is to cause the holder or holders or the beneficiary or
beneficiaries of such indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries), with the giving of notice if required, such indebtedness to be
demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or
otherwise), or an offer to repurchase, prepay, defease or redeem such indebtedness to be made,
prior to its stated maturity, or cash collateral in respect thereof to be demanded;

 

4

 

E. if:

1. an involuntary proceeding shall be commenced or an involuntary petition shall be filed
seeking (i) liquidation, reorganization or other relief in respect of the Company or any Guarantor
or their respective debts, or of a substantial part of its assets, under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for
the Company or for the whole or a substantial part of its assets,

2. the Company or any Guarantor shall (i) voluntarily commence any proceeding or file any
petition seeking liquidation, reorganization or other relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition
described in clause (i) above, (iii) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for the Company or any Guarantor
or for the whole or a substantial part of its assets, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a general assignment
for the benefit of creditors or (vi) take any action for the purpose of effecting any of the
foregoing; or

3. any court of competent jurisdiction shall assume custody or control of the Company or any
Guarantor or of the whole or any substantial part of its assets and such custody or control shall
not be terminated or stayed within 60 days from the date of assumption of such custody or control;

F. if a court of competent jurisdiction shall enter an order, judgment or decree appointing a
receiver of the Company or any Guarantor or of the whole or any substantial part of its assets, or
approving a petition filed against it seeking reorganization or arrangement of the Company or any
Guarantor under the Federal bankruptcy laws or any other applicable law or statute of the United
States of America or any State, district or territory thereof, without consent as contemplated by
(E)(2) above;

G. if the Company or any Guarantor shall sell substantially all of its assets, the
stockholders of the Company or such Guarantor owning collectively on the date of issuance hereof a
majority of the Company’s or such Guarantor’s, as applicable capital stock shall sell to one or
more third parties more than 50% of the Company’s or such Guarantor’s, as applicable, outstanding
capital stock or the Company or such Guarantor shall consummate a merger or consolidation
subsequent to which the stockholders of the Company or such Guarantor, as applicable, prior to such
transaction do not own at least 50% of the equity interests of the surviving entity thereof, unless
in any such case, concurrently therewith, the outstanding amount of principal, accrued but unpaid
interest and any and all other amounts payable under this Note are repaid in full in cash;

H. upon the consummation of the Company’s or any Subsidiary’s or Guarantor’s initial public
offering of its capital stock;

I. any Guarantor repudiates or purports to revoke the Guarantor’s Guaranty, or fails to
perform any obligation under such Guaranty or any other Guarantor ceases to exist for any reason;
or

J. the Security Agreement shall for any reason fail or cease to create a valid and perfected
lien in favor of the Holder on any collateral purported to be covered thereby.

 

5

 

IV. Remedies. In case any one or more of the Events of Default specified above shall
have occurred and be continuing, the Holder may proceed to protect and enforce its rights either by
suit in equity and/or by action at law, whether for the specific performance of any covenant or
agreement contained in this Note or in aid of the exercise of any power granted in this Note, or
the holder of this Note may proceed to enforce the payment of all sums due upon this Note or to
enforce any other legal or equitable right of the holder of this Note (including exercising rights
under the Guaranty or the Security Agreement). No remedy herein conferred upon the holder hereof
is intended to be exclusive of any other remedy and each and every such remedy shall be cumulative
and shall be in addition to every other remedy given hereunder or now or hereafter existing at law
or in equity or by statute or otherwise.

V. Attorneys’ Fees. If the indebtedness represented by this Note or any part thereof
is collected in bankruptcy, receivership or other judicial proceedings or if this Note is placed in
the hands of attorneys for collection after default, the Company agrees to pay, in addition to the
principal and interest payable hereunder, reasonable attorneys’ fees and costs incurred by the
Holder.

VI. Notices. Any notice, other communication or payment required or permitted
hereunder shall be in writing and shall be deemed to have been given upon delivery to the address
provided pursuant to the Purchase Agreement.

VII. Financial Information. For so long as indebtedness under this Note is
outstanding, the Holder shall have the right to receive such financial statements and financial
information of and concerning the Company and the Subsidiaries as Holder may from time to time
reasonably request. The Company shall deliver Holder copies of any financial information supplied
to any holder of Senior Indebtedness at the time such information is provided to such other
parties.

VIII. Restricted Payments. For so long as any indebtedness under this Note is
outstanding, the Company shall not, and shall not permit any of its Subsidiaries to, declare, make
or pay any dividends (in cash, property or obligations) on, or other payments or distributions on
account of, or the setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any class of capital stock
of the Company or any Subsidiary, except that wholly-owned Subsidiaries may declare, make or pay
dividends to the Company or another wholly-owned Subsidiary of the Company.

 

6

 

IX. Limitation on Transactions with Affiliates. For so long as any indebtedness under
this Note is outstanding, the Company shall not, and shall not permit any of its Subsidiaries to,
enter into or permit to exist any transaction (including, without limitation, the purchase, sale,
lease or exchange of any property, the rendering of any service, or a merger or consolidation),
with any Affiliate (as defined in the Purchase Agreement) of the Company or any Subsidiary (an
“Affiliate Transaction”) unless such Affiliate Transaction is in the ordinary course of the
business of the Company and its Subsidiaries and is on fair and reasonable terms that are not less
favorable to Company and its Subsidiaries than those that would be obtainable at the time in an
arm’s-length transaction with a person who is not such an Affiliate. In the event that Company or
any Subsidiary proposes to enter into any Affiliate Transaction and Holder does not believe such
Affiliate Transaction is an arm’s-length transaction then Company shall be permitted to retain an
industry expert acceptable to the Holder (at Company’s sole expense), and if such expert concludes
in writing that such Affiliated Transaction is an arms-length transaction then Company may proceed
with such transaction without Holder’s further consent.

X. Limitations on Compensation. Until such time as the Retained IP (as defined in the
Purchase Agreement) is purchased by Company and paid for in full, (X) the total individual cash
compensation (directly or indirectly), and any reimbursements or benefits thereunder, of Richard
Snow or Eldridge C. Hanes as set forth in each of their respective employment agreements in effect
on the date hereof (which may not be amended or modified without the prior consent of Holder) shall
not be increased without the prior written consent of the Holder. For purposes of this Section X,
total compensation includes all forms of compensation, including, but not limited to, base salary,
commissions, bonuses, incentive compensation, non-customary relocation or other expenses, and/or
fees for service in affiliated or related companies (other than with respect to the Affiliate
Transactions listed on Schedule 4.19 of the Purchase Agreement). In the event that Company
requests an increase above the any amount permitted by this Section 10 and the Holder rejects any
such request, Company shall be permitted to retain a compensation consultant acceptable to the
Holder (at Company’s sole expense), and such consultant’s final conclusion shall be binding on
Company and Holder; provided, that consultant shall not have the ability to decrease any such
salary below the amounts set forth in the respective employment agreements of Richard Snow and
Eldridge C. Hanes.

XI. Hanes Note. Company shall not permit the principal amount of the Hanes Note to be
increased without the prior written consent of Holder.

 

7

 

XII. Assignment. The Holder may assign, transfer, pledge or grant a security interest
in its rights in whole or in part under this Note to any person with the prior written consent of
the Company, which shall not be unreasonably withheld
or delayed (it would not be unreasonable for the Company to withhold its consent to a transfer
of this Note to a direct competitor of the Company’s gift business). In order to facilitate such
an assignment of this Note, the Holder may request that the Note be reissued in different
denominations to its transferee(s) and in connection with any such request, shall surrender this
Note to the Company for reissuance or cancellation, as applicable. The Company shall, at its
expense, promptly execute and deliver one or more new Notes of like tenor payable to the order of
the Holder’s transferee(s). This Note may not be assigned by the Company without the prior written
consent of the Holder.

XIII. Financial and Business Information.

A. For so long as any obligations under this Note remain outstanding, the Company will deliver
to the Holder, as soon as practicable after the end of each of the first three fiscal quarters of
the Company, and in any event within 30 days thereafter, one copy of an unaudited consolidated
balance sheet of the Company and its Subsidiaries as at the close of such quarter, and the related
unaudited consolidated statements of income and changes in financial position of the Company for
such quarter and, in the case of the second and third quarters, for the portion of the fiscal year
ending with such quarter, setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year. Such financial statements shall be prepared by
the Company in accordance with GAAP and accompanied by the certification of the Company’s chief
executive officer or chief financial officer that such financial statements are complete and
correct and present fairly the consolidated financial position, results of operations and changes
in financial position of the Company and its Subsidiaries as at the end of such quarter and for
such year-to-date period, as the case may be.

B. For so long as any obligations under this Note remain outstanding, the Company will deliver
to the Holder as soon as practicable after the end of each fiscal year of the Company, and in any
event within 90 days thereafter, one copy of:

(i) an audited consolidated balance sheet of the Company and its Subsidiaries
as at the end of such year, and

(ii) audited consolidated statements of income, retained earnings and changes
in financial position of the Company and its Subsidiaries for such year;

setting forth in each case in comparative form the figures for the corresponding periods in the
previous fiscal year; all prepared in accordance with GAAP, and which audited financial statements
shall be accompanied by an opinion thereon of the independent certified public accountants
regularly retained by the Company, or
any other firm of independent certified public accountants of recognized national standing selected
by the Company.

C. Promptly after learning of any default in connection with the Senior Indebtedness or the
Hanes Note, the Company shall provide written notice of such default to the Holder (including an
explanation of the default and the circumstances surrounding such default), together with such
other information as the Holder shall request.

 

8

 

XIV. Set-off. This Note is subject to set-off in accordance with the provisions of
Section 11.11 of the Purchase Agreement.

XV. Waivers; Governing Law; Jurisdiction. The Company hereby waives presentment,
demand for performance, notice of non-performance, protest, notice of protest and notice of
dishonor. No delay on the part of the Holder in exercising any right hereunder shall operate as a
waiver of such right or any other right. This Note is being delivered in and shall be construed in
accordance with the laws of the State of New York, without regard to the conflicts of laws
provisions thereof. Any action or proceeding arising out of or relating to this Note 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 the Company irrevocably submits to
the jurisdiction of each such court in any such action or 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
action or proceeding shall be heard and determined only in any such court and agrees not to bring
any action or proceeding arising out of or relating to this Note in any other court. Process in
any action or proceeding referred to in the first sentence of this Section may be served on any
party anywhere in the world.

 

9

 

XVI. Amendment. Any term of this Note may be amended only with the written consent of
the Company and the Holder. Any such amendment shall be binding upon each future holder of this
Note, and the Company.

XVII. Security for Obligations. The obligations of the Company pursuant to this Note
are secured by a Security Agreement, dated as of the date hereof (as amended, restated,
supplemented or otherwise modified from time to time, the “Security Agreement”). Reference
is hereby made to the Security Agreement for a description of the assets in which a security
interest has been granted, the nature and extent of the security, the obligations secured by the
Security Agreement, the entities granting a lien and security interest on their assets, the terms
and conditions upon which the security interest was granted and the rights of the Holder in respect
thereof.

	 	 	 	 	 
	 	THE RUSS COMPANIES, INC.

 	 
	 	By:  	/s/ Richard Snow
 	 
	 	 	Name:  	Richard Snow 	 
	 	 	Title:  	President 	 

 

10

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00151-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00151-of-00352.parquet"}]]