Document:

Exhibit
10.90

 

RUSS
BERRIE AND COMPANY, INC.

STOCK OPTION AGREEMENT

 

Date of
Grant:  December 15, 2004

 

Russ Berrie and Company, Inc., a New Jersey
corporation (the “Company”), does hereby grant to Michael Levin (the “Optionee”),
as of the date set forth above, a stock option (the “Option”) to purchase an
aggregate of 100,000 shares of its Common Stock (stated value $.10) (the “Stock”)
at the price of $22.21 per share (the “Option Price”), upon the following terms
and conditions.

 

1.                                       (a)                                  Subject to Sections 2 and 4 below, this Option
shall vest and become exercisable ratably over three years (33 1/3% per year)
from the Date of Grant.  In no event may
a vested portion of the Option be exercised later than 10 years from the Date
of Grant, however, the term of exercisability of a vested portion of the Option
shall be subject to the provisions of Section 2 below.

 

(b)                                 The
Compensation Committee of the Board of Directors of the Company (the “Compensation
Committee”) may at any time, in its sole discretion, limit the number of shares
of Stock that the Optionee may purchase by the exercise of this Option on any
particular date or in any year.

 

2.                                      (a)                                   If the Optionee retires after reaching his Normal
Retirement Date (as defined on the date of his retirement under the Russ Berrie
and Company, Inc. 401(k) Plan), any outstanding unexercised portion of this
Option, whether or not vested and/or exercisable on the date he/she retires,
shall be deemed fully vested and exercisable and may be exercised for up to one
(1) year after his retirement or the stated term of the Option, whichever
period is shorter.]

 

(b)                                 If
the Optionee becomes Disabled (as defined in the Employment Agreement dated as
of December 15, 2004 between the Optionee and the Company), any
outstanding unexercised portion of this Option, whether or not vested and/or
exercisable on the date he/she became Disabled (as determined by the Board of
Directors of the Company in good faith), shall be deemed fully vested and
exercisable, and may be exercised by the Optionee or his/her legal
representative or permitted transferee for up to one (1) year from the date he
became Disabled, or the stated term of the Option, whichever period is shorter.

 

(c)                                  In
the event of the death of the Optionee while he/she is employed by the Company,
[or within the one year period provided in paragraph 2(a),] any outstanding
unexercised portion of this Option existing on the date such Optionee’s
employment terminated, whether or not vested and/or exercisable on the date his/her
employment is terminated, shall be deemed fully vested and

 

 

exercisable, and may be
exercised by his estate or his legatee(s) for up to one (1) year after his/her
death or the stated term of the Option, whichever is shorter.

 

(d)                                 Subject
to the last sentence of this paragraph (d), if the Optionee’s employment with
the Company is terminated for any reason other than death, Disability or
retirement, any outstanding unexercised portion of this Option (whether vested
or not) will be cancelled and deemed terminated as of the date of his
termination; provided, however, that if the Optionee’s employment is
terminated by the Company for reasons other than Cause (as defined in the
Employment Agreement dated as of December 15, 2004), any outstanding
unexercised portion of this Option, whether or not vested and/or exercisable on
the date of termination, may be exercised for up to 6 months after the
termination date or the stated term of the Option, whichever period is
shorter.  If the Optionee is also a
Participant under the Company’s Change-in-Control Severance Plan (the “Severance
Plan”), and the terms of this paragraph conflict with the terms of the
Severance Plan, such conflict shall be resolved in accordance with the
provisions of Section 6.7(b) of the Severance Plan.

 

3.                                       This Option shall be exercised by giving written
notice of exercise to the Company at 111 Bauer Drive, Oakland, NJ  07430 (Attention: Chief Financial Officer)
which shall specify the number of shares of Stock to be purchased and which
shall be accompanied by payment in full of the purchase price in cash.

 

4.                                       The number of shares of Stock subject to this
Option and the price to be paid therefore, shall be subject to adjustment as
follows:

 

(a)                                  In
the event of any change in the outstanding Stock by reason of a dissolution or
liquidation of the Company, sale of all or substantially all of the assets of
the Company, merger or consolidation of the Company with or into any other
entity if the Company is the surviving corporation, 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 Compensation Committee may adjust the Option Price or the number of
shares of Stock subject thereto, and any or all other matters deemed
appropriate by the Compensation Committee, including, without limitation,
accelerating the vesting and/or exercise period pertaining to such grant.

 

(b)                                 In
the event of the consummation of a reorganization, merger, share exchange or
consolidation if, in each case following such consummation, the outstanding
shares of Stock are converted into cash, property or securities of any issuer
other than the Company (a “Business Combination”), the Compensation Committee,
in its sole discretion, may provide for (i) the substitution for such Option of
new

 

2

 

awards covering the stock
of a successor corporation (or a parent or subsidiary thereof), with
appropriate adjustments as to the number and kind of shares and exercise
prices, (ii) the acceleration of the vesting and/or exercise period pertaining
to the Option or (iii) (1) the cancellation of any portion of this Option that
is then exercisable and the payment to the holder thereof, in cash or stock, or
any combination thereof, of the value of such Option based upon the price per
share of stock received or to be received by other stockholders of the Company
in connection with the Business Combination, and (2) the cancellation of any
portion of the Option that is not then exercisable.  In the event of any substitution contemplated
by the foregoing clauses, the Option shall continue in the manner and under the
terms so provided.

 

(c)                                  Notwithstanding
the foregoing, in the event that any decision of the Compensation Committee
conflicts with the provisions of the Severance Plan in a manner which adversely
affects the rights of the Optionee, such conflict shall be resolved in
accordance with the provisions of Section 6.7(b) of the Severance Plan.

 

(d)                                 If,
by reason of a change in capitalization described above, Optionee shall be
entitled to new, additional or different shares of stock or securities of the
Company or any other entity in respect of this Option, such new, additional or
different shares shall thereupon be subject to all of the conditions,
restrictions and performance criteria, if any, which were applicable to the
shares of Stock subject to the Option prior to such change in capitalization.

 

5.                                       This Option shall not be assignable or
transferable except by will or by the laws of descent or distribution provided,
however, that the Optionee may transfer all or any portion of this
Option to a member of his Immediate Family(1), a trust for the benefit of the
Optionee or any member of his Immediate Family, partnerships in which the
Optionee or his Immediate Family members and/or trusts are the only partners,
and/or any organization exempt under Section 501(c) of the Internal
Revenue Code of 1986, as amended (the “Code”). 
This Option shall be exercisable only by the Optionee or his permitted
assignee or transferee.

 

(1)                                  For
the purposes of this Agreement, “Immediate Family” shall mean, whether natural,
adopted or step (where applicable), the Optionee’s spouse, parents, children,
siblings, mothers and fathers-in-law, sons and daughters-in-law, and anyone
(other than employees) who shares such person’s home.

 

3

 

6.                                       Nothing contained in this Agreement shall confer
upon the Optionee any right with respect to continuance of employment by the
Company nor limit in any way the right of the Company to terminate or modify
his employment at any time, with or without Cause.

 

7.                                       If the Company is for any reason required to
withhold any amount under the laws and regulations of the United States, any
jurisdiction thereof or local government with respect to the transfer of Stock
upon exercise of the Option (“Withholding Taxes”), the Optionee or other person
receiving such Stock shall be required to pay the Company the amount of any
such Withholding Taxes.  The Company
shall have the right to require the payment of any such Withholding Taxes
before issuing any Stock hereunder.  In
lieu of all or any part of a cash payment regarding such Withholding Taxes, the
Company may permit a person to cover all or any part of the Withholding Taxes,
through a reduction in the number of shares of Stock delivered to such person
or a delivery or tender to the Company of shares of Stock held by such person,
in each case valued in the same manner as used in computing the Withholding
Taxes under applicable laws.

 

8.                                       The Company shall not be required to issue or
deliver a certificate for shares of Stock hereunder unless the issuance of such
certificate complies with all applicable legal requirements including, without
limitation, compliance with the provisions of applicable state securities laws,
the Securities Act of 1933, as amended (the “Securities Act”), the Securities
Exchange Act of 1934, as amended, and the requirements of the exchanges, if
any, on which the Company’s shares of Common Stock may, at that time, be
listed.

 

9.                                       Notwithstanding anything contained herein to the
contrary, in the event that the disposition of shares of Stock acquired
hereunder is not covered by a then current registration statement under the
Securities Act, and is not otherwise exempt from such registration, such shares
shall be restricted against transfer to the extent required by the Securities
Act and Rule 144 or other regulations thereunder.  The certificates evidencing any of such
shares shall be appropriately amended or have an appropriate legend placed
thereon to reflect their status as restricted securities as aforesaid.

 

10.                                 To the extent that federal laws of the United
States do not otherwise control, this Agreement shall be governed by the laws
of New Jersey, without giving effect to principles of conflicts of laws, and
shall be construed accordingly.

 

11.                                 In the event any provision of this Agreement shall
be held illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining parts of this Agreement, and this Agreement shall be
construed and enforced as if the illegal or invalid provision had not been
included.

 

12.                                 This Agreement shall be binding upon and inure to
the benefit of the successors (including by way of merger), assigns and heirs
of the respective parties.

 

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13.                                 The Optionee shall not be, nor have any of the
rights or privileges of, a stockholder of the Company in respect of any shares
of Stock purchasable upon exercise of the Option granted hereunder unless and
until certificates representing such shares shall have been issued by the
Company.

 

14.                                 The Optionee
acknowledges and agrees that a violation of Section 5 of this Agreement
will cause the Company irreparable injury for which adequate remedy at law is
not available.  Accordingly, the Optionee
agrees that the Company shall be entitled to an injunction, restraining order
or other equitable relief, without the posting of any bond, to prevent the
breach of such Section and to enforce the terms and provisions hereof in
any court of competent jurisdiction in the United States or any state thereof,
in addition to any other remedy to which it may be entitled at law or equity.

 

	
   

  	
  RUSS BERRIE AND
  COMPANY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BY:

  	
  /s/ John D. Wille

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John D. Wille

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  AGREED TO AND ACCEPTED AS OF THE

  DATE OF GRANT SET FORTH ABOVE:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Michael Levin

  	
   

  	
   

  
	
  SIGNATURE - OPTIONEE

  	
   

  
	
  DATE: March 24, 2005

  	
   

  
						

 

5Exhibit 10.92

 

ABLECO
FINANCE LLC

299 Park Avenue, 23rd Floor

New York, New York  10171

 

 

November 23,
2004

 

	
  Russ Berrie and Company, Inc.

  	
   

  
	
  111 Bauer Drive

  	
   

  
	
  Oakland, New Jersey 07436

  	
   

  
	
  Attention:

  	
   

  	
  John D. Wille

  
	
   

  	
   

  	
  Vice President and Chief Financial Officer

  
				

 

Re:
  Financing Commitment

 

Dear John:

 

Russ Berrie
and Company, Inc., a New Jersey corporation (the “Company”),
has advised Ableco Finance LLC (“Ableco”),
that the Company requires financing (i) to acquire all of the outstanding
membership interests, and outstanding warrants to purchase membership
interests, of Kids Line, LLC, a Delaware limited liability company (“Kids Line”) (such acquisition being
referred to herein as the “Acquisition”),
and (ii) to pay fees and expenses related to such acquisition and the
financing contemplated by this commitment letter.

 

Ableco is pleased
to advise you that it (either individually or through its affiliates and
related funds) is willing to provide the Company with a senior secured
financing facility in the aggregate amount of $125,000,000 (the “Financing  Facility”),
substantially on the terms and conditions set forth in the Outline of Terms and
Conditions attached hereto as Exhibit A (the “Term
Sheet”).  The Financing
Facility will consist solely of a term loan (the “Term
Loan”) of $125,000,000. 
The Financing Facility would be guaranteed by each of the Company’s present
and future subsidiaries, including without limitation, Kids Line (all such
subsidiaries, together with the Company, collectively, the “Loan Parties”); provided that any
foreign subsidiary will not be required to be a Loan Party if to do so would
create material adverse tax consequences to the Loan Parties.  The Financing Facility shall be secured by
perfected first priority liens on substantially all now owned or hereafter
acquired assets (including the stock of all subsidiaries, but (x) not more than
65% of the total outstanding voting stock of any foreign subsidiary of the Loan
Parties if hypothecating a greater amount would result in material adverse tax
consequences, and (y) no stock of any foreign subsidiary of the Loan Parties which
is deemed by Ableco, in its reasonable discretion after consultation with the
Company, to be immaterial in

 

 

terms of collateral value,
shall be required) of the Loan Parties as specified in the Term Sheet.  Ableco’s commitment to provide the Financing
Facility is subject in all respects to the satisfaction of the terms and
conditions contained in this commitment letter and in the Term Sheet.

 

The Company,
on behalf of itself and the other Loan Parties, acknowledges that the Term
Sheet does not purport to summarize all the conditions, covenants,
representations, warranties and other provisions which would be contained in
definitive legal documentation for the Financing Facility.  The loan documentation for the Financing
Facility shall include, in addition to the provisions that are summarized in
this commitment letter and the Term Sheet, provisions that are customary for
this type of financing transaction and other provisions that Ableco reasonably
determines to be appropriate in the context of the proposed transaction.

 

By its
execution hereof and its acceptance of the commitments contained herein, the
Company agrees to indemnify and hold harmless Ableco and each of its affiliates
and the directors, officers, employees and agents of the foregoing (each an “Indemnified Party”) from and against
any and all losses, claims, damages, liabilities or other expenses to which
such Indemnified Party may become subject, insofar as such losses, claims,
damages, liabilities (or actions or other proceedings commenced or threatened
in respect thereof) or other expenses arise out of or in any way relate to or
result from the Acquisition, this commitment letter or the extension of the Financing
Facility contemplated by this commitment letter, or in any way arise from any
use or intended use of this commitment letter or the proceeds of the Financing
Facility, and the Company agrees to reimburse each Indemnified Party for any
reasonable out-of-pocket legal or other expenses incurred in connection with
investigating, defending or participating in any such loss, claim, damage,
liability or action or other proceeding (irrespective of whether such
Indemnified Party is a party to any action or proceeding out of which
indemnified expenses arise), but excluding therefrom all losses, claims,
damages, liabilities or other losses that are finally determined in a
non-appealable decision of a court of competent jurisdiction to have resulted
from the gross negligence or willful misconduct of the Indemnified Party.  In the event of any litigation or dispute
involving the Acquisition, this commitment letter or the Financing Facility, Ableco
shall not be responsible or liable to any Loan Party or any of its affiliates for
any special, indirect, consequential, incidental or punitive damages.

 

In addition, the
Company agrees to reimburse Ableco for all of its reasonable fees and
out-of-pocket expenses (the “Expenses”)
incurred by or on behalf of Ableco in connection with the preparation,
negotiation, execution and delivery of this commitment letter, the Term Sheet
and any and all definitive documentation relating hereto or thereto, including,
without limitation, the reasonable fees and expenses of counsel to Ableco and
the reasonable fees and expenses incurred by Ableco in connection with any due
diligence, collateral reviews, appraisals, valuations, audits and field
examinations.

 

Ableco
acknowledges that it or one of its affiliates has previously received from the
Company a deposit in the amount of $200,000 (the “Deposit”),
to fund the reimbursement of Expenses incurred by or on behalf of Ableco.  Ableco may from time to time request
additional expense deposits if the Expenses exceed or may exceed the Deposit,
and the Company agrees to

 

2

 

provide such additional expense
deposits.  The Deposit will not be
segregated and may be commingled with other funds of Ableco, and the Company
will not be entitled to receive interest on the Deposit.

 

If (a) Ableco
concludes for any reason that it will not make the Financing Facility available
to Company on the terms and conditions set forth in the Term Sheet and so long
as the Company has not previously declined to continue to pursue the Financing,
the unused portion of the Deposit held by Ableco will be promptly returned by Ableco
to the Company, (b) the Company declines to continue pursuing the
Financing Facility and so long as Ableco has not previously declined for any
reason to make the Financing Facility available to Company on the terms and
conditions set forth in the Term Sheet, Ableco shall be entitled to retain any
unused amount of the Deposit, or (c) the Financing Facility is closed and
funded, any unused portion of the Deposit held by Ableco will be returned by Ableco
to the Company.

 

On the date of
execution and delivery hereof, the Company shall pay to Ableco, in immediately
available funds, a non-refundable fee equal to $1,875,000 (the “Commitment Fee”), which fee shall be
earned in full and payable on the date the Company accepts this commitment
letter and the Term Sheet as provided below.

 

In
consideration for Ableco having expended considerable time and expense in
connection with issuing this commitment letter, the Company hereby agrees that
if the Company or any of its affiliates closes or otherwise completes any
alternative financing to the Financing Facility (whether consisting of debt,
equity or a combination thereof) on or prior to January 15, 2006, the
Company shall, on the date of such closing or other completion, pay to Ableco a
break-up fee of $1,875,000 (the “Breakup Fee”),
which fee shall be deemed fully earned and non-refundable, and due and payable,
on such date; provided, however, that Company shall not be obligated to pay such
Breakup Fee if (i) Ableco notifies the Company in writing of its
termination of this commitment letter as provided herein on or before January 15,
2005, or (ii) the Company or any of its subsidiaries closes, on or prior
to January 15, 2005, a financing transaction with Ableco in an original
principal amount no less than $125,000,000. 
Without limiting the generality of any of the foregoing, the payment of
the Breakup Fee shall be in addition to the Company’s obligations to pay the Commitment
Fee, Expenses and indemnification amounts hereunder.

 

In addition,
in consideration of commitment of Ableco hereunder and the time and expense
incurred in the issuance hereof, the Company separately agrees that, until January 15,
2005, it will not (and will cause its respective directors, officers, agents,
representatives, subsidiaries, affiliates, equity holders, investment bankers
and any other person acting on behalf of any of the foregoing, not to),
directly or indirectly, (i) solicit, seek or accept offers, inquiries or
proposals for, or encourage, induce or entertain any offer, inquiry or proposal
to enter into any other transaction that would be an alternative financing to the
Financing Facility (whether consisting of debt, equity or a combination
thereof) (a “Competing Transaction”), (ii) provide,
in connection with or related to a Competing Transaction, non-public or
confidential information to any other person regarding the Company or any of
its subsidiaries, or (iii) conduct any discussions or negotiations, or
enter into any agreement, arrangement or understanding,

 

3

 

regarding a Competing
Transaction.  The Company will promptly
notify Ableco if it receives any offer, inquiry or proposal regarding a
Competing Transaction and the details thereof, and will keep Ableco informed
with respect to each such offer, inquiry or proposal.  The Company will provide Ableco with copies
of all such offers, inquiries or proposals which are in writing.

 

The commitment
by Ableco to provide the Financing Facility shall be subject to (i) the
negotiation, execution and delivery of definitive loan documentation (the “Loan Documents”), in form and
substance reasonably satisfactory to Ableco, (ii) the satisfaction of Ableco
that, since the date hereof, there has not occurred any material adverse change
with respect to the condition, financial or otherwise, business, results of operations,
assets or liabilities of (A) the Company and its subsidiaries (other than
Sassy, Inc. and Kids Line), taken as a whole, (B) Sassy, Inc. or
(C) Kids Line (each, a “Material Adverse Change”),
as determined by Ableco in its reasonable discretion, and (iii) the
conditions set forth in the Term Sheet.  If
at any time Ableco shall determine (in its reasonable discretion) that any
Material Adverse Change has occurred, Ableco may terminate this commitment
letter by giving notice thereof to the Company (subject to the obligation of
the Company to pay all fees, Expenses, and other payment obligations expressly
assumed by the Company hereunder, which shall survive the termination of this
commitment letter).

 

The Company
represents and warrants that (i) all written information concerning the Company
and its subsidiaries (collectively, the “Information”)
that has been, or is hereafter, made available by, or on behalf of any Loan
Party or its subsidiaries (other than projections of future financial
performance) is, or when delivered shall be, when considered as a whole,
complete and correct in all material respects and does not, or shall not when
delivered, contain any untrue statement of material fact or omit to state a
material fact necessary in order to make the statements contained therein not
misleading in light of the circumstances under which such statements have been
made, and (ii) to the extent that any such Information contains
projections, such projections were prepared in good faith on the basis of (A) assumptions,
methods and tests that are believed by the Loan Parties to be reasonable at the
time such projections were prepared, and (B) information believed by the
Loan Parties to have been accurate based upon the information available to the
Loan Parties at the time such projections were prepared, it being understood
that such projections are subject to uncertainties and no assurance can be
given that the projections will be realized.

 

This
commitment letter is delivered to the Company on the condition that, prior to
its acceptance of this offer and the payment of the Commitment Fee and continuing
thereafter, neither the existence of this commitment letter or the Term Sheet,
nor any of their contents, shall be disclosed by any Loan Party or its
affiliates, except as may be compelled to be disclosed in a judicial or
administrative proceeding, by the rules and regulations of any stock
exchange on which the Company’s securities are traded, or as otherwise required
by law (provided that the Company shall use reasonable efforts, in such event, to
provide Ableco with copies of any disclosure in which reference is made to
Ableco or to the commitment contained herein prior to such disclosure) or, on a
confidential and “need to know” basis, solely to the directors, officers,
employees, advisors and agents of the Company. 
No public announcement referencing Ableco

 

4

 

or to the commitment contained
herein (other than as compelled or required as and to the extent permitted
above) may be made by the Company or its affiliates without Ableco’s prior
written consent, which consent shall not be unreasonably withheld or delayed.  In addition, upon acceptance of this offer
and the payment of the Commitment Fee, the Company may disclose this commitment
letter to the seller parties in the Acquisition and their respective directors,
officers and advisors (other than, in all instances, any person which is or is
part of a financial institution competing with Ableco), but only on a “need to
know” basis and only for purposes of demonstrating the Company’s financing for
the Acquisition.  The Company
acknowledges that Ableco and its affiliates or related funds may now or
hereafter provide financing or obtain other interests in other companies in
respect of which the Loan Parties or their affiliates may be business
competitors, and that neither Ableco nor any of its affiliates or related funds
shall have any obligation to provide to the Loan Parties or any of their
affiliates any confidential information obtained from such other companies.  Ableco, on behalf of itself and its affiliates,
agrees that it will treat as confidential any and all material information
provided to it hereunder by or on behalf of the Company to the extent such
information is identified in writing as being confidential at the time of
delivery; provided, however, that nothing herein shall prevent Ableco or its
affiliates from disclosing any such information (a) pursuant to the order
of any court or administrative agency or in any pending legal or administrative
proceeding, or otherwise as required by applicable law or compulsory legal
process (in which case such person will make reasonable efforts to inform you
promptly thereof), (b) upon the request or demand of any regulatory
authority having jurisdiction over such person or any of its affiliates, (c) to
the extent that such information becomes publicly available other than by
reason of disclosure by such person in violation of the terms hereof, (d) to
such person’s (and such person’s affiliates’) directors, officers, agents,
employees, legal counsel, independent auditors and other experts or agents who
need to know such information and on a confidential basis, (e) to
prospective Lenders who are advised of confidential nature of such information,
(f) received by such person on a non-confidential basis from a source
(other than the Company or one of your affiliates, advisors, members,
directors, employees, agents or other representatives) not known by such person
to be prohibited form disclosing such information to such person by a legal,
contractual or fiduciary obligation or (g) for purposes of establishing a “due
diligence” defense.

 

While Ableco
has provided commitments for the entire amount of the Financing Facility
subject to the terms and conditions of this letter and the Term Sheet, it is
the intent of Ableco to syndicate the Financing Facility and, as a material
inducement to Ableco to issue the commitments set forth herein, the Company has
agreed to cooperate in such syndication process.  Ableco will manage all aspects of such
syndication, including the timing of all offers to potential lenders, the
allocation of commitments and the determination of compensation provided and
titles (such as co-agent, managing agent, etc.).  The Company also agrees that no lender will
receive any compensation (as opposed to expenses and reimbursements) for its
participation in the Financing Facility except as expressly set forth in the
Term Sheet, or except as agreed to and offered by Ableco out of fees and other
charges payable by the Company or its subsidiaries as provided in the Term
Sheet.

 

5

 

The Company
agrees to use commercially reasonable efforts to assist Ableco in forming a
syndicate acceptable to Ableco.  The Company’s
assistance shall include but not be limited to (i) using commercially
reasonable efforts to make senior management and representatives of the Company
available to participate in meetings and to provide information to potential
lenders and participants at such times and places as Ableco may reasonably request;
and (ii) using commercially reasonable efforts to provide to all
information reasonably deemed necessary by Ableco to complete the syndication,
subject to confidentiality agreements in form and substance reasonably
satisfactory to the Company and Ableco.

 

The
obligations of the Company under the fourth, fifth, sixth, seventh, ninth, tenth,
twelfth and thirteenth paragraphs of this commitment letter shall remain
effective notwithstanding any termination of this commitment letter

 

The offer made
by Ableco in this commitment letter shall expire, unless otherwise agreed by Ableco
in writing, at 5:00 p.m. (New York City time) on November 24, 2004,
unless prior thereto Ableco has received (a) a copy of this commitment
letter, signed by the Company, accepting the terms and conditions of this
commitment letter and the Term Sheet, and (b) the Commitment Fee, in
immediately available funds.  The
commitment by Ableco to provide any portion of the Financing Facility shall
expire at 5:00 p.m. (New York City time) on January 15, 2005 (the “Commitment Termination Date”),
unless at or prior to such date definitive loan documentation shall have been
agreed to in writing by all parties and the conditions set forth therein shall
have been satisfied.

 

6

 

Should the
terms and conditions of the offer contained herein meet with your approval,
please indicate your acceptance by signing and returning a copy of this
commitment letter to Ableco and wiring the Commitment Fee, by wire transfer in
immediately available funds, to the following account for Ableco:

 

Citibank, N.A.

ABA Number: 021-000-089

Account
Number: 37839889

Account Name:
Cerberus Partners, L.P.

Attention:
Michael Hisler

Reference:  Ableco/Russ Berrie

 

7

 

This
commitment letter, including the attached Term Sheet, (i) supersedes all
prior discussions, agreements, commitments, arrangements, negotiations or
understandings, whether oral or written, of the parties with respect thereto; (ii) shall
be governed by the law of the State of New York; (iii) shall be binding
upon the parties and their respective successors and assigns; (iv) may not
be relied upon or enforced by any other person or entity; and (v) may be
signed in multiple counterparts and may be delivered by facsimile or other
electronic transmission, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.  If this commitment letter becomes the subject
of a dispute, each of the parties hereto hereby waives its right to trial by
jury.  This commitment letter may be
amended, modified or waived only in a writing signed by each of the parties
hereto.

 

	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
  ABLECO
  FINANCE LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel
  E. Wolf

  	
   

  
	
   

  	
  Name: Daniel
  E. Wolf

  
	
   

  	
  Title:
  Senior Vice President

  

 

Agreed and
accepted on November 24, 2004:

 

RUSS
BERRIE AND COMPANY, INC.

 

	
  By:

  	
  /s/ Andrew
  R. Gatto

  	
   

  
	
   

  	
  Name: Andrew
  R. Gatto

  
	
   

  	
  Title:
  President and Chief Executive Officer

  

 

 

[Signature Page to Commitment Letter]

 

8

 

Exhibit A

 

Russ Berrie and Company, Inc.

 

Outline of Terms and Conditions

 

This Outline of Terms and Conditions is part of the commitment letter,
dated November 23, 2004 (the “Commitment Letter”), addressed to
Russ Berrie and Company, Inc. (“Borrower”) by Ableco Finance LLC (“Ableco”)
and is subject to the terms and conditions of the Commitment Letter.  Capitalized terms used herein shall have the
meanings set forth in the Commitment Letter unless otherwise defined herein.

 

	
  Borrower:

  	
   

  	
  Russ Berrie and Company, Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Guarantors:

  	
   

  	
  All of the Borrower’s present and future subsidiaries; provided,
  however, Guarantors shall not include any foreign subsidiary of
  Borrower if such inclusion shall create material adverse tax consequences.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Lender:

  	
   

  	
  Collectively, Ableco or one or more affiliates thereof, to be
  designated at closing, and other lenders designated by Ableco. Ableco shall
  act as collateral agent for Lender (in such capacity, the “Collateral
  Agent”) and as administrative agent for Lender (in such capacity, the “Administrative
  Agent”, and together with the Collateral Agent, collectively, the “Agents”)).

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Financing Facility:

  	
   

  	
  A term loan in the principal amount of $125,000,000 (the “Term
  Loan”) would be made available on the Closing Date.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Term Loan:

  	
   

  	
  Amount:

  	
   

  	
  $125,000,000 (the “Maximum Commitment”).

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Amortization:

  	
   

  	
  $1,750,000 per quarter.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Beginning with the fiscal year ending December 31, 2005, the Term
  Loan would be reduced pursuant to an annual “excess cash flow sweep” of 75%
  of consolidated excess cash flow until Funded Debt to EBITDA is below 3.0 to
  1.0, at which time it would be reduced to 50% of consolidated excess cash
  flow. Definition of “excess cash flow” to be defined in a manner mutually
  acceptable to Borrower and Lender. In broad terms, the “excess cash flow”
  would be based on EBITDA minus interest expense and loan servicing
  fees, taxes, principal payments on 

  
							

 

A-1

 

	
   

  	
   

  	
   

  	
   

  	
  term loans, dividend payments by Borrower to the extent permitted,
  and net capital expenditures to the extent permitted, and adjusted
  (both positively and negatively) for changes in working capital from the
  prior period. Such “excess cash flow sweep” would be based on Borrower’s and
  its subsidiaries’ results for each fiscal year. Reductions will be applied
  ratably to the principal repayment installments then outstanding.

  

 

	
   

  	
   

  	
  In addition to the amortization outlined above and subject to
  customary thresholds and exceptions, the Term Loan would be reduced by
  (i) 100% of the proceeds of sales of assets (other than proceeds of
  sales, through the fiscal quarter ending March 31, 2005, of buildings
  located in the U.K and Hong Kong (collectively, the “Foreign Buildings”)
  if such sales would entitle Borrower to pay dividends on its common stock as
  provided hereinbelow but in any such event, such exclusion shall be limited
  to the aggregate amount of dividends actually paid by Borrower as so
  permitted, up to $6,250,000), subject to reinvestment provisions to be
  mutually agreed; (ii) 100% of the proceeds of any debt issuance;
  (iii) 100% of the proceeds to Borrower of any equity issuance;
  (iv) 100% of the proceeds of tax refunds received by Borrower (other
  than cash proceeds of tax refunds for the 2004 taxable year if the receipt by
  Borrower thereof entitles Borrower to pay dividends on its common stock as
  provided hereinbelow but in any such event, such exclusion shall be limited
  to the aggregate amount of the dividends actually paid by Borrower as so
  permitted, up to $6,250,000); and (v) 100% of the proceeds of insurance
  and casualty receipts (subject to reinvestment to be mutually agreed) and
  other extraordinary events. Reductions will be applied ratably to the
  principal repayment installments then outstanding.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Maturity Date:

  	
   

  	
  The Financing Facility would be repaid in full and in cash on the
  date which is three (3) years following the Closing Date.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Closing Date:

  	
   

  	
  The date on which all definitive loan documentation satisfactory to
  Lender is executed by Borrower, any Guarantors and Lender, and on which all
  conditions set forth therein have been satisfied or waived by Lender, and the
  Term Loan is advanced to the Borrower (the “Closing Date”).

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Interest Rates:

  	
   

  	
  The Borrower shall be charged interest at the following rates:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Term Loan would bear interest at the rate per annum equal to the
  Reference Rate plus four and one quarter percent (4.25%) or 1, 2, 3 or 6
  month Libor plus seven percent (7.00%). Interest would be payable monthly in
  arrears for Reference Rate borrowings and at the end of the Libor period for
  Libor borrowings but at least quarterly.

  

 

A-2

 

	
   

  	
   

  	
  As used herein, “Reference Rate” would be defined as the rate
  of interest publicly announced from time to time by JPMorgan Chase Bank in
  New York, New York as its reference rate, base rate or prime rate, provided
  that at no time would the Reference Rate referred to above be less than four
  and three quarters percent (4.75%). As used herein, “Libor” would be
  defined as the London Interbank Rate, provided that at no time would the
  Libor rate referred to above be less than one and three-quarters percent
  (1.75%). All interest and fees would be computed on the basis of a year of
  360 days for the actual days elapsed. If any Event of Default occurs and
  is continuing, interest would accrue at a rate per annum equal to two percent
  (2.00%) above the rate previously applicable to such obligation, payable on
  demand.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Use of Proceeds:

  	
   

  	
  To be used by Borrower to (i) fund a portion of the purchase
  price for the acquisition (“Acquisition”) by Borrower of all of the
  outstanding membership interests of Kids Line, LLC, a Delaware limited
  liability company (“Target”) and all outstanding warrants to purchase
  membership interests of Target; and (ii) pay fees and expenses
  associated with the Acquisition and the Financing Facility.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Prepayment Penalties:

  	
   

  	
  The Borrower may prepay the Term Loan at its option without
  prepayment penalties.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Collateral:

  	
   

  	
  As collateral for all obligations of the Loan Parties to Lender and
  Agents, Lender and Agents would have a first priority security interest in
  all existing and future assets of Borrower and Guarantors, whether tangible
  or intangible, real or personal (subject to negotiated exceptions),
  including, but not limited to cash and cash equivalents, accounts receivable,
  inventories, other current assets, investments (capital stock and loans and
  accounts receivable), property, plant and equipment, fixtures, leaseholds,
  documents, general intangibles, chattel paper, instruments, investment
  property, commercial tort claims, deposit accounts, securities accounts,
  letter-of-credit rights, trademarks, tradenames, copyrights, patents and
  other intellectual property and all other assets, including, without
  limitation a pledge of all of the stock of all subsidiaries of Borrower;
  provided, however, that Lender will limit the pledge of stock of foreign subsidiaries
  to 65% if material tax consequences would result from greater pledge, and no
  pledge will be required with respect to stock of foreign subsidiaries deemed
  by the Collateral Agent, in its reasonable discretion, to be immaterial in
  terms of collateral value. Notwithstanding the foregoing, the Collateral will
  not include assets as to which the Collateral Agent shall determine in its
  reasonable discretion that the cost of obtaining a security interest are
  excessive in relation to the value of the security to be afforded thereby.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  As additional collateral for all such obligations of the Loan Parties
  to Lender and Agents, at closing, Borrower shall deliver to Collateral Agent
  an evergreen irrevocable standby letter of credit, issued by an issuer satisfactory
  to Collateral Agent in its discretion, in an amount equal to $10,000,000,
  drawable, inter  alia, upon an event of default under the Loan
  Documents (as defined below) or upon the failure of the issuer thereof to
  extend the expiry of the

  

 

A-3

 

	
   

  	
   

  	
  thereof, and otherwise satisfactory to Collateral Agent and Lender in
  their discretion (the “Backup Letter of Credit”). Collateral Agent
  will release the Backup Letter of Credit at such time that the quarterly
  measurement of the ratio of consolidated funded debt to consolidated trailing
  twelve month EBITDA of Borrower and its Subsidiaries (the “Funded Debt
  Ratio”) shall first be reported to Administrative Agent pursuant to the
  Loan Documents as being less than 3.00:1. Provided no event of default shall
  have occurred for the period from the Closing Date until the first
  anniversary thereof, Collateral Agent, for the account of Lenders, would
  reimburse Borrower for (i) the letter of credit fee assessed, for such
  period, on the Borrower by the issuer of the Backup Letter of Credit which is
  solely in the nature of an unused fee for the availability of funds under the
  Backup Letter of Credit, up to a maximum amount of $125,000, and
  (ii) reasonable attorney’s fees incurred by the Borrower during such
  period, in connection with the Backup Letter of Credit, up to a maximum
  amount of $5,000. Notwithstanding the foregoing, Collateral Agent would not
  be obligated to reimburse Borrower for any other fees, expenses of Borrower or
  such issuer, Borrower’s obligations for reimbursement of drawings under the
  Backup Letter of Credit, indemnity obligations or any other fees, costs or
  expenses in connection with Backup Letter of Credit.

  
	
   

  	
   

  	
   

  
	
  Fees:

  	
   

  	
  Closing Fee:

  	
   

  	
  Two and three quarters percent (2.75%) of the Maximum Commitment,
  less any Commitment Fee actually paid, would be fully earned, non-refundable
  and payable at closing.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Breakup Fee:

  	
   

  	
  One and one-half percent (1.50%) of the Maximum Commitment, payable
  as provided in the Commitment Letter.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Commitment Fee:

  	
   

  	
  One and one-half percent (1.50%) of the Maximum Commitment which is
  fully earned, non-refundable and payable upon acceptance of this Commitment
  Letter.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Loan Servicing Fee:

  	
   

  	
  $10,000 per month, fully-earned, non-refundable and payable quarterly
  in advance.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Field Examination Fee:

  	
   

  	
  $1,750 per day per examiner plus reasonable out of pocket expenses
  and charges of third party appraisers and professionals employed by Lender to
  review, audit and monitor the Borrower’s and its subsidiaries’ assets.

  

 

A-4

 

	
  Expenses:

  	
   

  	
  Borrower would pay on demand all reasonable fees and expenses of
  Agent and Lender (including legal fees, audit fees, search fees, filing fees,
  and documentation fees, and expenses in excess of the Expense Deposit),
  incurred in connection with the Commitment Letter and this Outline of Terms
  and the transactions contemplated by the Commitment Letter and this Outline
  of Terms.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Conditions:

  	
   

  	
  Loan documents in connection with the Financing Facility would
  include customary conditions precedent, including but not limited to:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
						

 

	
   

  	
   

  	
  (i)

  	
   

  	
  Reasonable satisfaction of Lender, in its sole discretion, with the
  results of its investigation of the terms, capital structure and all tax,
  ERISA, environmental, litigation, regulatory, contractual obligations and
  other legal matters relating to Borrower and its subsidiaries, and their
  respective assets, liabilities and businesses. Such investigation will
  include, but would not be limited to, (1) background checks on senior
  management, and (2) satisfactory resolution of the comments and other
  inquiries made by the Securities and Exchange Commission (“SEC”) with
  respect to the Borrower’s Form 10-K for the 2003 fiscal year,
  whether by letter dated October 13, 2004 or any other communication
  (which resolution would be deemed satisfactory through the Borrower’s
  confirmation at the closing that the SEC has made no further inquiries with
  respect thereto following the Borrower’s response letter to the SEC dated
  November 3, 2004).

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)

  	
   

  	
  Each of Borrower and its subsidiaries is in good standing in its
  state of incorporation and qualified to do business in other states where it
  has material Collateral.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (iii)

  	
   

  	
  Completion of all loan documentation to Lender’s satisfaction in its
  sole discretion. The UCC financing statements, fixture filings, deeds of
  trust, mortgages or leasehold mortgages and related documents regarding the
  collateral (as applicable) have been filed or recorded in all appropriate
  jurisdictions. Lender has received written notification reflecting the same.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (iv)

  	
   

  	
  Lender’s satisfaction with the amounts and terms of Borrower’s and
  the Guarantors’ other indebtedness. The Borrower will be permitted to have
  (i) a reimbursement obligation in favor of the issuer of the Backup
  Letter of Credit, which reimbursement obligation may be secured by cash
  collateral in an amount not exceeding $11,000,000 (the “Backup Letter of
  Credit Cash Collateral”), and (ii) an unsecured facility for
  commercial letters of credit in a maximum amount of $20,000,000 (subject to a
  sub-limit of $4,000,000 for commercial letters of credit for the account of
  Borrower’s UK and other foreign subsidiaries) (the “Letter of Credit Facility”).
  Notwithstanding the foregoing, at closing, Borrower will have terminated its
  existing line of credit

  

 

A-5

 

	
   

  	
   

  	
   

  	
   

  	
  with Bank of New York for revolving advances, and no amounts shall be
  outstanding thereunder.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (v)

  	
   

  	
  An opinion from Borrowers’ and Guarantors’ outside counsel
  (including, without limitation, local counsel), and from outside counsel to
  the sellers under the Acquisition, as to such matters as Lender may
  reasonably request.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (vi)

  	
   

  	
  Execution and delivery of such appropriate legal documentation
  (including, without limitation, inter-lender arrangements among the lenders
  and customary documents, instruments, security agreements, mortgages, deeds
  of trust, intercompany subordination agreements, guarantees, landlord
  waivers, collateral access agreements, verifications, litigation searches and
  good standing certificates (collectively, the “Loan Documents”)) as
  required by, and in form and substance reasonably acceptable to, the Lender and
  its counsel.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (vii)

  	
   

  	
  All obligations of Borrower to Lender would be secured by a
  perfected, first priority, security interest in the Collateral granted to
  Lender under the Loan Documents, and Lender shall have received UCC,
  intellectual property, tax and judgment lien searches and other appropriate
  evidence evidencing the absence of any other liens or mortgages on the
  Collateral (other than the Backup Letter of Credit Cash Collateral, and
  customary liens which are reasonably acceptable to the Collateral Agent).

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (viii)

  	
   

  	
  There exists no claim, action, suit, investigation, litigation or
  proceeding (including, without limitation, shareholder or derivative
  litigation) pending or threatened in any court or before any arbitrator or
  governmental authority which relates to the Acquisition or the Financing
  Facility or which, in the opinion of Lender, has any reasonable likelihood of
  having a material adverse effect (A) on the condition (financial or
  other), business, operations, assets or liabilities of (1) Borrower and
  its subsidiaries (other than Sassy, Inc. and Target), taken as a whole,
  (2) Sassy, Inc., or (3) Target, or (B) on the ability of
  the Borrower and its subsidiaries to perform their obligations under the Loan
  Documents, or (C) on the ability of Lender to enforce the Loan
  Documents.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ix)

  	
   

  	
  At Closing, Borrower would have cash of no less than $40,000,000
  after payment of the purchase consideration for the Acquisition, after paying
  all transaction fees and expenses related to the Acquisition and the
  Financing Facility, and after payment (or funding a reserve for the payment)
  of the quarterly dividend of $0.30 per common share of Borrower’s common
  stock, declared on November 3, 2004 and payable on December 3, 2004
  to shareholders of record as of November 19, 2004.

  

 

A-6

 

	
   

  	
   

  	
  (x)

  	
   

  	
  Borrower and its subsidiaries are in compliance with all applicable
  requirements of law, including, without limitation, Regulations T, U and X of
  the Board of Governors of the Federal Reserve System.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (xi)

  	
   

  	
  On the closing date, no default or event of default would exist under
  the loan documents.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (xii)

  	
   

  	
  All necessary governmental, shareholder, and third-party approvals
  and/or consents in connection with the Acquisition and the Financing Facility
  have been obtained and remain in effect.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (xiii)

  	
   

  	
  Borrower and its subsidiaries shall continue to have in effect such
  insurance as previously disclosed to Collateral Agent; such insurance to
  include liability insurance for which Lender would be named as an additional
  insured and property insurance with respect to the Collateral for which
  Lender would be named a loss payee.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (xiv)

  	
   

  	
  Borrower has paid to Lender all fees and expenses then owing to Lender,
  including all loan origination costs, which include, but not be limited to,
  audit fees, attorney’s fees, search fees, title fees, documentation and
  filing fees.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (xv)

  	
   

  	
  Lender has received such financial and other information regarding
  Borrower as Lender may reasonably request.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (xvi)

  	
   

  	
  No Material Adverse Change has occurred.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (xvii)

  	
   

  	
  The Acquisition shall be funded with cash of Borrower of at least
  $9,500,000.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (xviii)

  	
   

  	
  Borrower shall have consummated the Acquisition pursuant to a
  purchase and sale agreement between Borrower and the sellers under the
  Acquisition in form and substance reasonably satisfactory to Lender and its
  counsel (without any further amendment or modification thereto that is
  materially adverse to Borrower without the consent of Lender). All conditions
  precedent to the obligations of the Borrower to the consummation of the
  Acquisition shall have been satisfied (or, with the prior written consent of
  the Lender, waived) in the sole judgment of the Lender.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (xix)

  	
   

  	
  The aggregate purchase price for Target is not to exceed $128,000,000
  (excluding the earnout consideration) and aggregate fees and closing costs,
  including those payable to Lender, are not to exceed an additional
  $6,500,000.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (xx)

  	
   

  	
  Subordination by the applicable sellers under the Acquisition, of all
  rights to earnout consideration and any other deferred or contingent
  consideration payable by Borrower or its subsidiaries in connection with the
  Acquisition, in favor of prior right of payment owing to

  

 

A-7

 

	
   

  	
   

  	
   

  	
   

  	
  Lender and Agents under the Financing Facility, and on such other
  terms as are satisfactory to Lender at its discretion.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Representations and

  Warranties:

  	
   

  	
  Usual representations and warranties, including, but not limited to,
  corporate existence and good standing, authority to enter into loan
  documentation, governmental approvals, non-violation of other agreements,
  financial statements, litigation, compliance with environmental, pension and
  other laws, taxes, insurance, absence of material adverse change, absence of
  default or unmatured default and priority of Lender’s liens.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Covenants:

  	
   

  	
  Customary affirmative, negative and financial covenants, including,
  but not limited to, provision of financial statements and other customary
  reporting with respect to sales, accounts receivable, inventory and payables,
  defaults and unmatured defaults and other information, compliance with laws,
  inspection of properties, books and records (which shall in all events occur
  at most twice per fiscal year, unless an event of default shall have occurred
  and be continuing), maintenance of insurance, limitations with respect to
  liens and encumbrances, dividends and retirement of capital stock, guarantees,
  sales of assets, consolidations and mergers, investments, capital
  expenditures, restricted payments, loans and advances, indebtedness,
  transactions with affiliates, and prepayment of other indebtedness, and
  compliance with pension, environmental and other laws.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Borrower and its subsidiaries shall be required to maintain, as at
  the end of each month, unrestricted and unencumbered cash in deposit accounts
  (“Unrestricted Cash”) in the minimum amounts set forth below opposite
  the Funded Debt Ratio for the fiscal quarter most recently reported pursuant
  to the Loan Documents (and if such reporting has not been timely delivered to
  Agents, the minimum Unrestricted Cash balance shall be $40,000,000):

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Funded
  Debt Ratio

  	
   

  	
  Minimum Unrestricted Cash

  
	
   

  	
   

  	
  Equal to or greater than 2.75:1

  	
   

  	
  $

  	
   40,000,000

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Less than
  2:75:1, but equal to or 

  greater than 2.50:1

  	
   

  	
  $

  	
   30,000,000

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Less than
  2:50:1, but equal to or

  greater than 2.00:1

  	
   

  	
  $

  	
   20,000,000

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Less than 2.00:1

  	
   

  	
  $

  	
   0

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  provided, however, that for purposes
  of the foregoing requirement, the amount available to be drawn under the
  Backup Letter of Credit shall be applied to and treated as Borrower’s
  Unrestricted Cash. The Loan Documents shall provide for the repatriation of
  cash in deposit accounts held by foreign subsidiaries of the Borrower and
  deposit thereof in deposit accounts in the United States with respect to
  which Agents and Lender have a perfected 

  
								

 

A-8

 

	
   

  	
   

  	
  first-priority security interest, either: (i) upon notice by
  Collateral Agent at any time after December 31, 2005, to the extent that
  such repatriation shall not cause material adverse tax consequences to the
  Loan Parties, or (ii) upon the occurrence and continuance of an event of
  default under the Loan Documents, notwithstanding adverse tax consequences,
  if any, to the Loan Parties.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  During the term of the Financing Facility, Borrower shall be
  permitted to pay dividends on shares of its common stock in an aggregate
  amount not to exceed $6,250,000 per fiscal quarter, but only to the extent
  that each of the following conditions is satisfied: (i) neither an event
  of default, nor an event which, with the giving of notice, passage of time or
  both, would result in an event of default, has occurred and is continuing
  immediately prior to such payment, or would result from such payment (and,
  without limitation of the foregoing, all financial covenants must be
  satisfied both prior to and immediately following such payment),
  (ii) except with respect to dividends to be paid in the fiscal quarter
  ending March 31, 2005 or June 30, 2005, Borrower shall meet or
  exceed budgeted consolidated EBITDA (set for each fiscal quarter, and not on
  a trailing twelve month basis) for the fiscal quarter immediately preceding
  the fiscal quarter in which such payment is to be made, (iii) with
  respect to dividends to be paid in the fiscal quarter ending March 31,
  2005, Borrower or its applicable subsidiaries shall have completed, prior to
  March 31, 2005, sales of the Foreign Buildings for consideration
  entirely consisting of cash, and Borrower shall have received prior to
  March 31, 2005 aggregate net cash proceeds therefrom of at least
  $7,000,000, and (iv) with respect to dividends to be paid in the fiscal
  quarter ending June 30, 2005, Borrower shall have received, prior to
  payment of such dividends, tax refunds for the 2004 taxable year in cash in
  an amount of at least $8,000,000.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Financial covenants would include (i) minimum trailing twelve
  month consolidated EBITDA of Borrower and its subsidiaries, (ii) minimum
  trailing twelve month EBITDA of Kids Line, LLC and Sassy, Inc.,
  (iii) maximum Funded Debt Ratio, and (iv) maximum capital
  expenditures, all as determined by Lender, in amounts or levels as set forth
  in Schedule A attached hereto, to be measured as of the end of
  the period set forth in Schedule A (and in addition, in the case
  of minimum trailing twelve month EBITDA of Kids Line, LLC and
  Sassy, Inc., measured monthly through the end of the 2005 fiscal year
  and tested at the levels applicable to the fiscal quarter in which such month
  occurs). In addition, financial covenants shall also include a minimum fixed
  charge coverage ratio of Borrower and its subsidiaries, in amounts or levels,
  and measured as of such times, as shall be mutually agreed upon by Borrower
  and Lender.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Financial reporting would include: (i) annual, audited,
  financial statements, delivered within 90 days of the end of the applicable
  fiscal year, (ii) quarterly, internally prepared, financial statements,
  delivered within 45 days of the end of the applicable fiscal quarter,
  (iii) monthly, internally prepared, financial statements, delivered
  within 30 days of the end of the applicable month, (iv) detailed aging
  of the accounts receivable of Borrower and its subsidiaries as 

  

 

A-9

 

	
   

  	
   

  	
  at the end of each month, delivered within 30 days of the end of the
  applicable month, (v) a summary monthly inventory report as at the end
  of each month, delivered within 30 days of the end of the applicable month,
  (vi) detailed aging of the accounts payable of Borrower and its
  subsidiaries as at the end of each month, delivered within 30 days of the end
  of the applicable month, (vii) Unrestricted Cash of Borrower and each of
  its subsidiaries, detailing as at the end of each month, the Unrestricted
  Cash balance by deposit account, the entity holding the deposit accounts, and
  the location of the deposit accounts, to be delivered within 30 days of the
  end of the applicable month, (viii) an annual financial budget,
  delivered no later than February 15 of the fiscal year in which such
  budget relates, and (ix) other reporting as reasonably required by
  Lender.

  
	
   

  	
   

  	
   

  
	
  Cash Management:

  	
   

  	
  All collections (including all proceeds of accounts, inventory and
  other Collateral) of the Loan Parties shall be deposited in lockbox accounts
  under the control of the Administrative Agent. All funds deposited in such
  lockbox accounts shall be transferred on each business day to a concentration
  account under the control of the Administrative Agent; provided that
  Administrative Agent shall not at any time have control of any deposit
  account exclusively used to make payroll payments. If no event of default has
  occurred and is continuing, amounts in such concentration account shall be
  available to the Company and, if an event of default has occurred and is
  continuing, such amounts can be applied to outstanding obligations owed under
  the Financing Facility.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Events of Default:

  	
   

  	
  Usual events of default, including, but not limited to, defaults
  relating to payment, cross-default, violation of covenants, breach of
  representations or warranties, bankruptcy or insolvency, judgment, ERISA,
  environmental, change of control and other events of default which are
  customary in facilities of this nature.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Governing Law:

  	
   

  	
  All documentation in connection with the Financing Facility would be
  governed by the laws of the state of New York.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Assignments and

  Participations:

  	
   

  	
  Lender would be permitted to assign its rights and obligations with
  respect to the Financing Facility, or any part thereof, to any person or
  entity. Lender would be permitted to grant or sell participations in such
  rights and obligations, or any part thereof, to any person or entity.

  

 

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