Document:

Filed by Bowne Pure Compliance

Exhibit 10.119

INTERCREDITOR AGREEMENT

This Intercreditor Agreement (this “Agreement”), dated as of December 23, 2008 is made
by and among Russ Berrie and Company, Inc., a New Jersey corporation (the “Junior Lender”),
Wells Fargo Bank, National Association (with its participants, successors and assigns, the
“Senior Lender”), acting through its Wells Fargo Business Credit operating division, and
The Russ Companies, Inc., a Delaware corporation (“Company”).

Company now is or hereafter may be indebted to Senior Lender on account of loans or other
extensions of credit or financial accommodations from Senior Lender to or for the benefit of
Company and/or certain of its affiliates and has secured its indebtedness by granting a lien on its
personal property in favor of Senior Lender.

Company now is or hereafter may also be indebted to Junior Lender on account of loans or other
extensions of credit or financial accommodations from Junior Lender to Company and has secured its
indebtedness by granting a lien on its personal property in favor of Junior Lender.

As a condition to extending credit to Company, Senior Lender has required the execution and
delivery of this Agreement by Junior Lender.

ACCORDINGLY, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and to induce Senior Lender from time to time to extend credit to Company,
Junior Lender, Senior Lender and Company hereby agree as follows:

1. Definitions. As used herein, the following terms shall have the meanings set forth
below:

“Bankruptcy Code” is defined in Section 6(c).

“Collateral” means all present and future property and assets of Company
wherever located and however described, together, in each case, with all proceeds thereof
pledged to the Senior Lender to secure the Senior Indebtedness and/or to the Junior Lender
to secure the Junior Indebtedness.

“Control Agent” has the meaning given thereto in Section 14 hereof.

“Control Collateral” means any (a) Collateral which is a Certificated Security,
an Instrument, Investment Property, a Deposit Account (each as defined in the UCC), or cash,
(b) any rights to receive payments under any insurance policy that constitutes Collateral
and with respect to which the Senior Lender (or its agent) is named as loss payee, (c) any
other Collateral as to which a Lien may be perfected by possession or control by the secured
party or its agent, and (d) any other Collateral with respect to which a secured party must
be listed on a certificate of title in order to perfect the Lien thereon.

 

 

“Distribution” means, with respect to any indebtedness, obligation or security
(a) any payment or distribution of cash, securities or other property, by set-off or
otherwise, on account of such indebtedness, obligation or security, (b) any redemption,
purchase or other acquisition of such indebtedness, obligation or security, or (c) the
granting of any Lien to or for the benefit of the holders of such indebtedness, obligation
or security in or upon any property or interests in property.

“Enforcement Action” means, with respect to the Senior Indebtedness, any demand
for payment or acceleration thereof, the exercise of any rights and remedies with respect to
any Collateral or the commencement or prosecution of enforcement of any of the rights and
remedies under, as applicable, the Senior Loan Documents, or applicable law, including
without limitation the exercise of any rights of set-off or recoupment, and the exercise of
any rights or remedies of the Senior Lender as a secured creditor under the Uniform
Commercial Code of any applicable jurisdiction or under the Bankruptcy Code.

“Junior Indebtedness” means any and all advances, debts, obligations and
liabilities of Company to Junior Lender pursuant to the Note including without limitation
all principal and interest, fees, expenses, reimbursement obligations and other amounts
payable thereunder.

“Junior Loan Documents” means collectively, the Note and all security
agreements and guaranty agreements related thereto.

“Lien” means any security interest, mortgage, deed of trust, pledge, lien,
charge, encumbrance, title retention agreement or analogous instrument or device, including
the interest of each lessor under any capitalized lease and the interest of any bondsman
under any payment or performance bond, in, of or on any assets or properties of a person,
firm, corporation, limited liability company or other entity, whether now owned or hereafter
acquired and whether arising by agreement or operation of law.

“Maximum Senior Lien Financing Amount” means as of any date of determination,
such amount not to exceed $30,000,000.00 in aggregate amount at any one time outstanding
under the Senior Loan Documents minus permanent reductions in revolving loan commitments
from time to time in accordance with the Senior Credit Agreement as in effect as of the date
hereof.

“Note” means that certain Secured Promissory Note made by the Company in favor
of Junior Lender in the original principal amount of $19,000,000.

“Notice of Intent” means a written notice from or on behalf of Junior Lender to
Senior Lender stating that an Event of Default under Section III B of the Note resulting
from Company’s breach of Section VIII (Restricted Payments) of the Note, breach of Section
IX (Limitation on Transactions with Affiliates) of the Note or Section X (Limitations on
Compensation) of the Note, has occurred and is continuing and any applicable cure, notice
and grace periods have expired.

 

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“Payment in Full” or “Paid in Full” means that (a) the Senior
Indebtedness (other than contingent indemnification obligations not yet due and payable) has
been paid and satisfied in full in cash, and (b) any commitment or agreement of Senior
Lender to extend any financial accommodations to Company under the Senior Loan Documents has
been terminated.

“Reorganization Subordination Securities” shall mean any debt or equity
securities of Company or any other Person that are distributed to Junior Lender in respect
of the Junior Indebtedness that, in the case of debt securities, are subordinate and junior
in right as to liens and payment to the Senior Indebtedness (or subordinated and junior in
right of liens and payment to any debt or equity securities issued in substitution of all or
any portion of the Senior Indebtedness) to at least the same extent as the Junior
Indebtedness is subordinated to the Senior Indebtedness under this Agreement.

“Senior Credit Agreement” means that certain Credit and Security Agreement of
even date herewith between Company and Senior Lender, as the same may be modified, amended,
supplemented or restated from time to time.

“Senior Default” means the occurrence and continuance of any Event of Default
under the Senior Credit Agreement.

“Senior Guaranty Agreement” means that certain Guaranty of even date herewith
by Company in favor of Senior Lender, as the same may be modified, amended, supplemented or
restated from time to time.

“Senior Indebtedness” means any and all advances, debts, obligations and
liabilities of Company to Senior Lender, pursuant to the Senior Credit Agreement and the
other Senior Loan Documents including without limitation all principal and interest, fees,
expenses, reimbursement obligations and other amounts payable thereunder now or hereafter
made, incurred or created, provided, however, that the amount of the Senior Indebtedness for
purposes of this Agreement shall be limited to no more than the Maximum Senior Lien
Financing Amount and no advances, debts, obligations and liabilities of Company to Senior
Lender with respect to a borrowing or other extension of credit made after December 21, 2012
shall constitute Senior Indebtedness without the prior written consent of the Junior
Creditor unless an Enforcement Action has commenced in which case, Senior Lender’s
reasonable out of pocket costs and expenses in connection with such Enforcement Action shall
be Senior Indebtedness.

“Senior Loan Documents” means the “Loan Documents”, as such term is defined in
the Senior Guaranty Agreement.

“Senior Security Agreement” means that certain Collateral Pledge Agreement of
even date herewith by Company in favor of Senior Lender, as the same may be modified,
amended, supplemented or restated from time to time.

 

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“Standstill Period” means the period beginning when a Notice of Intent is given
and ending on the first Business Day that is at least 180 days after receipt by Senior
Lender of a Notice of Intent, provided however, that upon the commencement of an Enforcement
Action, the Standstill Period shall be extended until the Senior Indebtedness has been Paid
in Full.

“UCC” shall mean the Uniform Commercial Code as in effect from time to time in
the State of New York.

2. Subordination.

(a) The payment of all of the Junior Indebtedness is hereby expressly subordinated and
deferred to the extent and in the manner hereinafter set forth, until Payment in Full of the Senior
Indebtedness; and Junior Lender hereby agrees that (regardless of any priority otherwise available
to Junior Lender by law or by agreement) any Lien which Junior Lender may now hold or may at any
time hereafter acquire in any or all of the Collateral is, shall be and shall remain fully
subordinate for all purposes to any Lien that Senior Lender may now or hereafter hold in the
Collateral. The Junior Indebtedness and any Lien securing the Junior Indebtedness shall continue
to be subordinated to the Senior Indebtedness even if the Senior Indebtedness is deemed unsecured,
under-secured, subordinated, avoided or disallowed under the Bankruptcy Code or other applicable
law.

(b) Notwithstanding anything herein to the contrary, the Company shall be permitted to make
and the Junior Lender shall be permitted to receive and retain annual payments provided they
Company complies with the following conditions;

(i) The payments are made in and applied in accordance with the terms of the Junior Loan
Documents;

(ii) In computing the amount of such payment, it shall be the excess of the Availability, as
such term is defined in the Senior Loan Documents, less the sum of the following, all as of April
30 of each year:

(a) $10,000,000;

(b) all outstanding checks;

(c) all accounts payable outstanding more than 60 days from invoice date; and

(d) expenses and liabilities being paid in the ordinary course of business and without
acceleration of sales and without deterioration of working capital;

(iii) There shall not have occurred prior to or as a result of making such payment, an Event
of Default under the Senior Loan Documents; and

(iv) At least ten (10) business days prior to the making of such payment the Senior Lender
shall have received the Company’s audited financial statements for the prior fiscal year end.

 

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3. Distributions.

(a) Junior Lender shall not, without Senior Lender’s prior written consent, demand, receive or
accept any payment (whether of principal, interest or otherwise) or Distribution (other than
Reorganization Subordination Securities) in respect of the Junior Indebtedness or exercise any
right of or permit any setoff in respect of the Junior Indebtedness until the Action Date (as
defined in Section 4(a)).

(b) Senior Lender shall not, without Junior Lender’s prior written consent, demand, receive or
accept any payment (whether of principal, interest or otherwise) or Distribution in respect of
indebtedness that is not Senior Indebtedness or exercise any right of or permit any setoff in
respect of indebtedness that is not Senior Indebtedness until the Junior Indebtedness has been paid
and satisfied full in cash.

(c) If Junior Lender receives any Distribution in violation of this Agreement, Junior Lender
will hold the amount so received in trust for Senior Lender and will forthwith turn over such
Distribution to Senior Lender in the form received (except for the endorsement of Junior Lender
where necessary) for application to the Senior Indebtedness (whether or not due), in such order of
application as Senior Lender may deem appropriate. If Junior Lender fails to make any endorsement
required under this Agreement, Senior Lender, or any of its officers or employees or agents on
behalf of Senior Lender, is hereby irrevocably appointed (which appointment is coupled with an
interest) as the attorney-in-fact for Junior Lender (with the right but not the duty) to make such
endorsement in Junior Lender’s name.

(d) If Senior Lender receives any Distribution in violation of this Agreement, Senior Lender
will hold the amount so received in trust for Junior Lender and will forthwith turn over such
Distribution to Junior Lender in the form received (except for the endorsement of Senior Lender
where necessary) for application to the Junior Indebtedness (whether or not due), in such order of
application as Junior Lender may deem appropriate. If Senior Lender fails to make any endorsement
required under this Agreement, Junior Lender, or any of its officers or employees or agents on
behalf of Junior Lender, is hereby irrevocably appointed (which appointment is coupled with an
interest) as the attorney in fact for Senior Lender (with the right but not the duty) to make such
endorsement in Senior Lender’s name.

(e) If all Senior Indebtedness has been Paid In Full, Junior Lender shall be subrogated to the
rights of the holders of such Senior Indebtedness to receive payments and Distributions applicable
to the Senior Indebtedness until all Junior Indebtedness has been paid and satisfied in full in
cash. For purposes of such subrogation, no payments or distribution to Senior Lender as the holder
of Senior Indebtedness of any cash, property or securities or other Distribution to which Junior
Lender would be entitled to except for the provisions of this
Agreement, and no payments pursuant to the provisions of this Agreement to Senior Lender as
the holder of Senior Indebtedness by Junior Lender, shall, as among Company, its creditors other
than Senior Lender as the holder of Senior Indebtedness and Junior Lender, be deemed to be a
payment or Distribution by Company to or on account of the Senior Indebtedness. If any payment or
Distribution to which Junior Lender would otherwise have been entitled but for the provisions of
this Agreement shall have been applied, pursuant to the provisions of this Agreement, to the
payment of all amounts payable under the Senior Indebtedness, then and in such case Junior Lender
shall be entitled to receive from Senior Lender any payments or Distributions received by Senior
Lender in excess of the amount sufficient for the Senior Indebtedness to be Paid In Full.

 

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4. No Action.

(a) Unless and until the earliest of (i) the date upon which the Senior Indebtedness shall
have been Paid in Full, (ii) December 31, 2012 and (iii) if a Standstill Period shall have
commenced, the termination or expiration of such Standstill Period (such earliest date, the “Action
Date”), Junior Lender will not commence any action or proceeding against Company to recover all or
any part of the Junior Indebtedness, will not commence any action or proceeding with respect to the
Collateral, will not join with any creditor in bringing any proceeding against Company under any
bankruptcy, reorganization, readjustment of debt, arrangement of debt receivership, liquidation or
insolvency law or statute of the federal or any state government, will not take possession of, sell
or dispose of, or otherwise deal with, the Collateral, and will not exercise or enforce any other
right or remedy which may be available to Junior Lender with respect to the Collateral.
Notwithstanding the foregoing in this Section 4(a), in the event that Senior Lender shall have
accelerated the maturity of part or all of the Senior Indebtedness, the Junior Lender shall be
permitted to accelerate the maturity of the Junior Debt (provided that Junior Lender shall
simultaneously give notice of such acceleration to Senior Lender); provided, however, that the
Junior Lender may not take any other action described above in this Section 4(a) until the Action
Date.

(b) Without limiting the generality of the foregoing, if a Senior Default has occurred and is
continuing and Company or Senior Lender intends to sell or otherwise dispose of any Collateral to
an unrelated third party outside the ordinary course of business, Junior Lender shall, upon Senior
Lender’s written request, either (i) purchase for cash the Senior Indebtedness for the full amount
thereof or (ii) execute and deliver such instruments as may reasonably be necessary to terminate
and release any Lien Junior Lender has in the Collateral to be sold or otherwise disposed of, so
long as the proceeds of any such sale shall be applied by Senior Lender to repay and permanently
reduce commitments of the Senior Indebtedness and, to the extent such proceeds exceed the amount
necessary for the Senior Indebtedness to be Paid In Full, are promptly paid over to Junior Lender
for application to the payment of Junior Indebtedness. If Junior Lender fails, within ten (10)
days after receipt of such request, to purchase for cash the Senior Indebtedness for the full
amount thereof or to execute and deliver such instruments as may be reasonably necessary to
terminate and release any Lien Junior Lender has in the Collateral to be sold or otherwise disposed
of, Junior Lender shall be deemed to have consented
to such sale or disposition, to have released any Lien it may have in such Collateral and to
have authorized Senior Lender or its agents to file partial releases and any other amendments to
any financing statements naming Junior Lender as secured party with respect to such Collateral so
long as the proceeds of any such sale shall be applied by Senior Lender to repay and permanently
reduce commitments of the Senior Indebtedness and, to the extent such proceeds exceed the amount
necessary for the Senior Indebtedness to be Paid In Full, are promptly paid over to Junior Lender
for application to the payment of Junior Indebtedness.

 

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5. No Representations or Warranties. Except as set forth in Section 14, Senior Lender
(a) makes no representation or warranty concerning the Collateral or the validity, perfection or
priority of any Lien therein, and (b) shall have no duty to preserve, protect, care for, insure,
take possession of, collect, dispose of or otherwise realize upon any of the Collateral. Except as
set forth in Section 14, in no event shall Senior Lender be deemed Junior Lender’s agent with
respect to the Collateral.

6. Waiver and Consent; Bankruptcy.

(a) Senior Lender shall have no obligation to Junior Lender with respect to the Collateral
except as set forth in Section 14 or the Senior Indebtedness. Senior Lender may (i) exercise
collection rights, (ii) take possession of, sell or dispose of, and otherwise deal with, all or any
portion of the Collateral, (iii) in Senior Lender’s name or in Company’s name, demand, sue for,
collect or receive any money or property at any time payable or receivable on account of, or
securing, any right to payment, or grant any extension to, make any compromise or settlement with
or otherwise agree to waive, modify, amend or change the Senior Indebtedness (including collateral
obligations) of any account Company or other obligor of Company; (iv) prosecute, settle and receive
proceeds on any insurance claims relating to the Collateral, and (v) exercise and enforce any right
or remedy available to Senior Lender with respect to Company and/or the Collateral, whether
available before or after the occurrence of any Senior Default; all without consent of Junior
Lender and without notice to Junior Lender except any notice as specifically required by law. To
the extent it is legally permitted to do so, Senior Lender shall apply the proceeds of the
Collateral against the Senior Indebtedness in any order of application it deems appropriate, and to
the extent there is any excess remaining after such application, then promptly to Junior Lender for
payment of the Junior Indebtedness, or to any other party legally entitled to such proceeds. Junior
Lender hereby waives any and all right to require the marshalling of assets in connection with the
exercise of any of the remedies permitted by applicable law or agreement.

(b) In the event of any receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization or arrangement with creditors, whether or not pursuant to bankruptcy law,
the sale of all or substantially all of the assets of Company, dissolution, liquidation or any
other marshalling of the assets or liabilities of Company, Junior Lender will hold in trust for
Senior Lender and promptly pay over to Senior Lender in the form received (except for the
endorsement of Junior Lender where necessary) for application to the then-existing Senior
Indebtedness, any and all moneys, dividends or other assets (other than
Reorganized Subordination Securities) received in any such proceedings on account of the
Junior Indebtedness, unless and until the Senior Indebtedness has been Paid in Full. If Junior
Lender shall fail to take any such action, Senior Lender, as attorney-in-fact for Junior Lender,
may take such action on Junior Lender’s behalf. Junior Lender will execute and deliver to Senior
Lender such other and further powers-of-attorney or instruments as Senior Lender may request in
order to accomplish the foregoing.

 

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(c) If Company or Company’s estate become the subject of proceedings under Title 11 of the
United States Code (11 U.S.C. § 101 et seq.), as amended, (the “Bankruptcy Code”), and if
Senior Lender desires to permit the use of cash collateral or to provide post-petition financing to
Company and the aggregate amount of such financing and the Senior Indebtedness does not exceed the
Maximum Senior Lien Financing Amount, Junior Lender shall not object to the same or assert that its
interests are not being adequately protected and agrees that adequate notice of such financing to
Junior Lender shall have been provided if Junior Lender receives written notice in accordance with
the Bankruptcy Code. The Junior Lender shall not (i) take any action or vote in any way so as to
directly or indirectly challenge or contest (A) the validity or the enforceability of any of the
Senior Loan Documents or the liens and security interests granted to Senior Lender with respect to
the Senior Indebtedness, (B) the rights and duties of Senior Lender established in the Senior Loan
Documents, or (C) the validity or enforceability of this Agreement; (ii) seek, or acquiesce in any
request, to dismiss any insolvency or other proceeding or to convert an insolvency or other
proceeding under Chapter 11 of the Bankruptcy Code to a case under Chapter 7 of the Bankruptcy
Code; (iii) seek, or acquiesce in any request for, the appointment of a trustee or examiner with
expanded powers for the Company; (iv) propose, vote in favor of or otherwise approve a plan of
reorganization, arrangement or liquidation, or file any motion or pleading in support of any plan
of reorganization, arrangement or liquidation, unless it provides that the Senior Indebtedness is
Paid in Full or unless Senior Lender has approved of the treatment of its claims with respect to
the Senior Indebtedness under such plan; (v) object to the treatment under a plan of reorganization
or arrangement of the claims with respect to the Senior Indebtedness; (vi) seek relief from the
automatic stay of Section 362 of the Bankruptcy Code or any other stay in any insolvency or other
proceeding in respect of any portion of the Collateral, provided, however, that the
Junior Creditor shall be permitted to join in any motion or proceeding filed or commenced by the
Senior Creditor to seek relief from the automatic stay, provided that, notwithstanding the granting
of such relief from the stay as to the Junior Creditor, the Junior Creditor shall be bound by all
of the provisions of this Agreement and shall be prevented from exercising any rights or remedies
with respect to the Collateral, to the extent otherwise provided in this Agreement, until such time
as the Senior Indebtedness has been paid in full; or (vii) directly or indirectly oppose any relief
requested or supported by Senior Lender, including any sale or other disposition of property free
and clear of the liens and security interests of Junior Lender under Section 363(f) of the
Bankruptcy Code or any other similar provision of applicable law. Junior Lender waives any claim it
may now or hereafter have arising out of Senior Lender’s election, in any proceeding instituted
under Chapter 11 of the Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy
Code, and/or any borrowing or a Lien under Section 364 of the Bankruptcy Code by Company, as
debtor-in-possession. To the extent that Senior Lender receives payments on or
proceeds of Collateral which are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law, or equitable cause, then, to the extent
of such payment or proceeds received, the Senior Indebtedness, or part thereof, intended to be
satisfied shall be revived and continue in full force and effect as if such payments or proceeds
had not been received by Senior Lender. Notwithstanding anything in this Subsection 6(c) to the
contrary, as to any matters not provided for in this Subsection 6(c) arising in any proceeding
instituted under Chapter 11 of the Bankruptcy Code by or against the Company, the Junior Lender
shall be permitted to vote its claim.

 

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7. Restrictive Lender; Transfer of Junior Indebtedness; No Amendments.

(a) Junior Lender shall cause each Junior Loan Document that now or hereafter evidences all or
a portion of the Junior Indebtedness to be conspicuously marked as follows:

“This [agreement] [instrument] is subject to the terms of an Intercreditor Agreement
(the “Intercreditor Agreement”) dated as of December 23, 2008 between Russ Berrie and
Company, Inc. (“Junior Lender”) 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 [agreement] [instrument], (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 Junior Lender 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.”

(b) Junior Lender is the lawful holder of the Junior Indebtedness and has not transferred any
interest therein to any other person or entity. Without the prior written consent of Senior Lender,
(which shall not be unreasonably withheld or delayed), Junior Lender will not assign, transfer or
pledge to any other person any of the Junior Indebtedness other than an affiliate of Junior Lender
that assumes Junior Lender’s obligations under this agreement.

(c) Junior Lender agrees that none of the Junior Loan Documents or any other document,
instrument, or agreement evidencing all or any part of the Junior Indebtedness may be amended,
restated, supplemented or otherwise modified without the prior written consent of Senior Lender
(which shall not be unreasonably withheld or delayed).

 

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8. Continuing Effect. This Agreement shall constitute a continuing agreement of
subordination, and Senior Lender may, without notice to or consent by Junior Lender, modify any
term of Senior Indebtedness in reliance upon this Agreement, subject to the proviso and further
proviso to Section 8(a) . Without limiting the generality of the foregoing, Senior Lender may, at
any time and from time to time, without the consent of or notice to Junior
Lender and without incurring responsibility to Junior Lender or impairing or releasing any of
Senior Lender’s rights or any of Junior Lender’s obligations hereunder:

(a) change the interest rate or change the amount of payment or extend the time for payment or
renew or otherwise alter the terms of any Senior Indebtedness or any instrument evidencing the same
in any manner, provided such extension or renewal of the Maturity Date, as such term is defined
in the Senior Loan Documents, is no later than December 31, 2012 and provided, further in no event
shall the aggregate amount outstanding at any time under the Senior Loan Documents exceed the
Maximum Senior Lien Financing Amount;

(b) sell, exchange, release or otherwise deal with any property at any time securing payment
of Senior Indebtedness or any part thereof;

(c) release anyone liable in any manner for the payment or collection of Senior Indebtedness
or any part thereof;

(d) exercise or refrain from exercising any right against Company or any other person
(including Junior Lender); and

(e) apply any sums received by Senior Lender, by whomsoever paid and however realized, to
Senior Indebtedness in such manner as Senior Lender shall deem appropriate.

9. Termination of Subordination. This Agreement shall continue in full force and
effect, and the obligations and agreements of Junior Lender and Company hereunder shall continue to
be fully operative, until all of the Senior Indebtedness shall have been Paid in Full. If at any
time any payment made or value received with respect to any Senior Indebtedness is rescinded or
must otherwise be returned by Senior Lender upon the insolvency, bankruptcy or reorganization of
Company or otherwise, all as though such payment had not been made or value received, then to the
extent necessary to repay in full, in cash, the Senior Indebtedness, Junior Lender will, following
receipt of written notice from Senior Lender, deliver to Senior Lender any amounts previously
received and then held by Junior Lender on account of, or in any way relating to, the Collateral
(a) which Junior Lender would not have been entitled to accept and retain had this Agreement been
in effect at the time such payments were received by Junior Lender and (b) to the extent any such
payments received by Junior Lender are not otherwise rescinded or must not otherwise be returned by
Junior Lender upon the insolvency, bankruptcy or reorganization of Company or otherwise. Further,
to the extent previously terminated, the Lien in the Collateral created by the Senior Loan
Documents, in favor of Senior Lender, and the rights of Senior Lender under this Agreement shall be
reinstated.

10. No Commitment. None of the provisions of this Agreement shall be deemed or
construed to constitute or imply any commitment or obligation on the part of Senior Lender to make
any future loans or other extensions of credit or financial accommodations to Company.

 

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11. Notice. All notices and other communications hereunder shall be in writing and
shall be (i) personally delivered, (ii) transmitted by registered mail, postage prepaid, or
(iii) transmitted by telecopy, in each case addressed to the party to whom notice is being given at
its address as set forth below:

If to Wells Fargo:

Wells Fargo Bank, National Association

300 Commercial Street

Boston, Massachusetts 02109

Telecopier: (617) 263-6328

Attention: Relationship Manager for Russ Gift Group, Inc.

If to Junior Lender:

Russ Berrie and Company, Inc.

111 Bauer Drive

Oakland, New Jersey 07436

Attention: Marc S. Goldfarb, SVP and General Counsel

Telecopier: (201) 405-7377

or at such other address as may hereafter be designated in writing by that party. All such notices
or other communications shall be deemed to have been given on (i) the date received if delivered
personally, (ii) the date of posting if delivered by mail, or (iii) the date of transmission if
delivered by telecopy.

12. Conflict in Agreements. If the subordination provisions of any instrument
evidencing Junior Indebtedness conflict with the terms of this Agreement, the terms of this
Agreement shall govern the relationship between Senior Lender and Junior Lender.

13. No Waiver. No waiver shall be deemed to be made by Senior Lender of any of its
rights hereunder unless the same shall be in writing signed on behalf of Senior Lender, and each
such waiver, if any, shall be a waiver only with respect to the specific matter or matters to which
the waiver relates and shall in no way impair the rights of Senior Lender or the obligations of
Junior Lender to Senior Lender in any other respect at any time.

 

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14. Limited Agency of Senior Lender for Perfection and Control.

(a) The Junior Lender hereby appoints Senior Lender as its collateral agent (in such capacity,
together with any successor in such capacity appointed by the Senior Lender and the Junior Lender,
the “Control Agent”) for the limited purpose of acting as the agent on behalf of the Senior
Lender and the Junior Lenders with respect to the Control Collateral for purposes of the perfecting
of the liens of such parties on the Control Collateral. The Control Agent accepts such appointment
and agrees to hold the Control Collateral that is part of the Collateral in its possession or
control (or in the possession or control of its agents or bailees) as Control
Agent for the benefit of the Senior Lender and the Junior Lender and any permitted assignee of
any thereof solely for the purpose of perfecting the security interest granted to such parties in
such Control Collateral, subject to the terms and conditions of this Section 14. The
Control Agent, the Senior Lender, and the Junior Lender, hereby agree that, until the Senior
Indebtedness has been Paid in Full, the Senior Lender shall have the sole and exclusive right and
authority to give instructions to, and otherwise direct, the Control Agent in respect of the
Control Collateral or any control agreement with respect to any Control Collateral and the Junior
Lender will not hinder, delay or interfere with the exercise of such rights by the Senior Lender in
any respect. The Company hereby agrees to pay, reimburse, indemnify and hold harmless the Control
Agent, for any losses or claims based on actions taken in its capacity as Control Agent, to the
same extent and on the same terms that it is required to do so for the Senior Lender in accordance
with the Senior Loan Documents. Except as set forth in the next sentence, the Control Agent shall
have no obligation whatsoever to Junior Lenders including, without limitation, any obligation to
assure that the Control Collateral is genuine or owned by Company, any guarantor or one of their
respective subsidiaries or to preserve rights or benefits of any Person except as expressly set
forth in this Section 14. In acting on behalf of the Junior Lender, the duties or
responsibilities of the Control Agent under this Section 14 shall be limited solely (A) to
physically holding the Control Collateral delivered to the Control Agent by Company, or any
subsidiary of such Person as agent for the Junior Lender for purposes of perfecting the lien held
by the Junior Lenders and (B) delivering such collateral, and assigning its interests in the
Landlord Waivers (to the extent permitted under such waivers), as set forth in Section
14(d).

(b) The Senior Lender hereby acknowledges that the Control Agent will obtain “control” under
the UCC over each Deposit Account (as defined in the UCC) as contemplated by the Senior Loan
Documents and the Junior Loan Documents for the benefit of both itself and the Junior Lender
pursuant to the control agreements relating to each respective Deposit Account. The Senior Lender
hereby also acknowledges and agrees that any landlord lien waivers and bailee’s letters obtained by
the Control Agent as contemplated by the Senior Loan Documents (collectively, “Waiver Letters”)
shall also be for the benefit of the Junior Lender. The Junior Lender acknowledges that the Senior
Lender is acting in a similar capacity for the benefit of the Senior Lender under the Senior Loan
Documents.

(c) The Senior Lender and the Control Agent shall not have by reason of the Senior Loan
Documents or this Agreement or any other document a fiduciary relationship in respect of any Junior
Lender.

(d) Upon the Payment in Full of the Senior Indebtedness, the Control Agent shall promptly, (i)
deliver to the Junior Lender the Control Collateral together with any necessary endorsements, (ii)
assign all of its rights under the Waiver Letters to the Junior Lender and (iii) take all actions
and deliver all documents and instruments as may be reasonably requested by the Junior Lender to
effect the foregoing; provided, that if a court of competent jurisdiction otherwise directs, the
Control Agent shall comply with such direction in lieu of the foregoing requirements.

 

-12-

 

15. Binding Effect; Miscellaneous. This Agreement shall be binding upon and inure to
the benefit of Junior Lender, Senior Lender, and their respective participants, successors and
assigns, but neither Company nor any other party shall be entitled to rely on or enforce this
Agreement. Junior Lender and Senior Lender each warrant to the other that any purchaser or
transferee of, or successor to, any Lien of the undersigned in any or all of the Collateral will be
given written notice of the subordination effected hereby, before such purchase, transfer or
succession, and that any such purchaser, transferee or successor will be in all respects subject to
and bound by this Agreement. This Agreement cannot be waived or changed or ended, except by a
writing signed by the party to be bound thereby. Section headings herein are included for
convenience of reference only and shall not constitute a part of this Agreement for any other
purpose. This Agreement may be executed in any number of counterparts, each of which shall be an
original, but all of which together shall constitute one instrument. Junior Lender waives notice
of Senior Lender’s acceptance hereof;

16. Governing Law; Consent to Jurisdiction; WAIVER OF JURY TRIAL. This Agreement
shall be governed by and construed in accordance with the substantive laws of the State of New
York. Each party consents to the personal jurisdiction of the state and federal courts located in
the State of New York in connection with any controversy related to this Agreement, waives any
argument that venue in any such forum is not convenient, and agrees that any litigation initiated
by either of them in connection with this Agreement may be venued in either the state or federal
courts located in New York County, New York. THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT.

[Signature pages follow]

 

-13-

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date written
above.

	 	 	 	 	 
	 	RUSS BERRIE AND COMPANY, INC.

 	 
	 	By:  	/s/ Marc Goldfarb
 	 
	 	 	Name:  	Marc Goldfarb 	 
	 	 	Title:  	Senior Vice President 	 

 

 

 

	 	 	 	 	 
	 	WELLS FARGO BANK, NATIONAL ASSOCIATION

 	 
	 	By:  	/s/ Patricia A. Petrin
 	 
	 	 	Name:  	Patricia A. Petrin 	 
	 	 	Title:  	Vice President 	 

 

 

Acknowledgment and Agreement by Company

The undersigned, being the Company referred to in the foregoing Agreement, hereby
(i) acknowledges receipt of a copy thereof, (ii) agrees to all of the terms and provisions thereof,
(iii) agrees to and with Senior Lender that it shall make no payment on the Junior Indebtedness
that Junior Lender would not be entitled to receive under the provisions of the Agreement,
(iv) agrees that any such payment will constitute a default under the Senior Loan Documents, and
(v) agrees to mark its books conspicuously to evidence the subordination of the Junior Indebtedness
effected hereby and (vi) agrees to give The Junior Lender prompt written notice of the acceleration
of the maturity of all or a part of the Senior Indebtedness.

	 	 	 	 	 
	 	THE RUSS COMPANIES, INC.

 	 
	 	By:  	/s/ Richard Snow
 	 
	 	 	Name:  	Richard Snow 	 
	 	 	Title:  	PresidentFiled by Bowne Pure Compliance

Exhibit 10.120 

RUSS BERRIE AND COMPANY, INC.

AMENDED AND RESTATED

CHANGE IN CONTROL SEVERANCE PLAN

The purpose of this Amended and Restated Change in Control Severance Plan (the “Plan”) is to
enable Russ Berrie and Company, Inc., a New Jersey corporation (the “Company”), to offer a form of
income protection to “Participants” (as defined in Section 7.5 below) in the event their employment
with the Company terminates under certain circumstances due to a “Change in Control” (as defined in
Section 7.2 below). Notwithstanding anything herein to the contrary, however, if in connection
with any sale of any substantial line of business of the Company, a Participant employed within
such line of business is offered and accepts employment by the purchaser of such line of business
or its affiliates, no “termination” hereunder shall be deemed to have occurred, no benefits shall
be payable hereunder, and the Participant shall cease to be a Participant hereunder.

ARTICLE I: BENEFITS

1.1 Eligibility for Benefits; Benefits; Payment; and Rights of Participants.

(a) If a Participant’s employment with the Company is terminated by the Company without
“Cause” (as defined in Section 7.1 below) or by the Participant for “Good Reason” (as defined in
Section 7.4 below) (each, a “Qualifying Termination”) during the period commencing six months prior
to and ending two years after a Change in Control, such Participant shall be paid the applicable
“Severance Benefit” (as defined below) and shall receive the additional benefits described in this
Article I. The term “Severance Benefit” shall mean:

	 	(i)	 	if the Qualifying Termination occurs during the
six-month period preceding or the one-year period following the Change
in Control, an amount equal to 150% of the Participant’s “Current Total
Annual Compensation” (as defined in Section 7.3 below); and

	 	(ii)	 	if the Qualifying Termination occurs during the
second year after the Change in Control, an amount equal to 75% of the
Participant’s Current Total Annual Compensation.

(b) Any Participant entitled to a Severance Benefit (in accordance with Section 1.1(a) above)
whose Qualifying Termination occurs within two years after a Change in Control shall receive his
Severance Benefit in the form of a lump-sum payment within 30 business days after his employment
with the Company terminates; any Participant entitled to a Severance Benefit (in accordance with
Section 1.1(a) above) whose Qualifying Termination occurs prior to a Change in Control shall
receive his Severance Benefit in the form of a lump-sum payment six months and one day following
his termination of employment with the Company, provided that a Change in Control occurs during
such period.

 

 

 

(c) Notwithstanding anything herein to the contrary, if the Company determines in good faith
that any Participant is a “specified employee” within the meaning of Section 409A of the Internal
Revenue Code of 1986, as amended, and any regulations or other guidance issued thereunder, or any
successor similar provision, regulations or guidance (“Section
409A”) when payments hereunder are due him, if all or any portion of such payments (whether
alone or in combination with payments from any other plan maintained by the Company) would, in the
good faith opinion of the Company, subject such Participant to the excise tax and/or interest
provisions under Section 409A if paid in full within six months of such Participant’s termination
date, the Company shall reduce the amounts payable to such Participant hereunder (and from any
other plan required to be aggregated with this Change in Control Plan pursuant to Section 409A) to
the maximum amount payable under Section 409A in such six-month period, and all remaining amounts
otherwise payable to such Participant shall be paid (in a lump sum, without interest) to such
Participant on the day which is six months and one day after the Participant’s termination of
employment.

1.2 Additional Benefits. A Participant entitled to receive a Severance Benefit shall
also receive the following additional benefits:

(a) The Company shall cause options to purchase Company stock (“Stock Options”) held by a
Participant that are not fully vested and exercisable on the date of the Qualifying Termination to:

	 	(i)	 	if the Qualifying Termination occurs during the
six months preceding or the first year following the Change in Control,
become fully vested and exercisable as of the date of such Qualifying
Termination (or, if later, as of the date on which the Change in
Control occurred); and

	 	(ii)	 	if the Qualifying Termination occurs during the
second year following the Change in Control, become fully vested and
exercisable as of the date of such Qualifying Termination as to those
Stock Options that would otherwise have vested within one year after
the Qualifying Termination.

(b) The Company shall cause unvested restricted shares of Company stock (the “Restricted
Shares”) held by a Participant on the date of the Qualifying Termination to:

	 	(i)	 	if the Qualifying Termination occurs during the
six months preceding or the first year following the Change in Control,
become fully vested as of the date of such Qualifying Termination (or,
if later, as of the date on which the Change in Control occurred) as to
those Restricted Shares for which the vesting restrictions would
otherwise have lapsed within one year after the Qualifying Termination;
and

	 	(ii)	 	if the Qualifying Termination occurs during the
second year after the Change in Control, become fully vested as of the
date of such Qualifying Termination as to those Restricted Shares for
which the vesting restrictions otherwise would have lapsed within six
months after the Qualifying Termination.

 

2

 

(c) The Company shall for a period of 18 months (in the case of a Qualifying Termination to
which Section 1.1(a)(i) applies) or one year (in the case of a Qualifying Termination to which
Section 1.1(a)(ii) applies) following the Qualifying Termination continue to provide to the
Participant (i) use of an automobile or payment of an automobile allowance in an amount sufficient
to compensate the Participant to substantially the same extent as if the Company continued to
provide the automobile and (ii) medical and other insurance benefits, in each case to the extent
and on substantially the same basis as provided immediately prior to the Qualifying Termination
(disregarding any reduction described in clause (B) of the definition of Good Reason).

1.3 Reduction of Payments. If a Participant’s receipt of any payment and/or
non-monetary benefit under this Plan (including, without limitation, the accelerated vesting of
Stock Options and/or Restricted Shares) (collectively, the “Plan Payments”) would cause him or her
to become subject to the excise tax imposed under Section 4999 of the Internal Revenue Code of
1986, as amended (the “Code”), the Company shall reduce his or her Plan Payments to the extent
necessary to avoid the application of such excise tax if (i) the required reduction does not exceed
10% of the aggregate amount of the Plan Payments and (ii) as a result of such reduction, the net
benefits to the Participant of the Plan Payments as so reduced (after payment of applicable income
taxes) exceeds the net benefit to the Participant of the Plan Payments without such reduction
(after payment of applicable income taxes and excise taxes). If a reduction in Plan Payments to a
Participant in the amount permitted by clause (i) is insufficient to avoid the application of such
excise tax, then the provisions of “Exhibit A,” attached hereto and incorporated herein, shall
apply to that Participant.

1.4 Rights of Participants. Nothing contained herein shall be held or construed to
create any liability or obligation on the Company to retain any Participant in its service or in a
corporate officer position. All Participants shall remain subject to discharge or discipline to
the same extent as if the Plan did not exist.

ARTICLE II: FUNDING

2.1 Funding. The Plan shall be funded out of the general assets of the Company as and
when benefits are payable under the Plan. All Participants shall be solely general creditors of
the Company.

ARTICLE III: ADMINISTRATION OF THE PLAN

3.1 Plan Administrator. The general administration of the Plan shall be placed with
the Compensation Committee of the Board of Directors of the Company (the “Board”) or an
administrative committee appointed by the Board (the “Committee”).

3.2 Reimbursement of Expenses of Committee. The Company shall pay or reimburse the
members of the Committee for all reasonable expenses incurred in connection with their duties
hereunder.

 

3

 

3.3 Action by the Plan Committee. Decisions of the Committee shall be made by a
majority of its members attending a meeting at which a quorum is present (which meeting
may be held telephonically), or by written action in accordance with applicable law. No
member of the Committee may act with respect to a matter which involves only that member.

3.4 Delegation of Authority. The Committee may delegate any and all of its powers and
responsibilities hereunder to other persons by formal resolution filed with and accepted by the
Board. Any such delegation shall not be effective until it is accepted by the Board and the
persons designated and may be rescinded at any time by written notice from the Committee to the
person to whom the delegation is made.

3.5 Retention of Professional Assistance. The Committee may employ such legal
counsel, accountants and other persons as may be required in carrying out its work in connection
with the Plan, and the Company shall pay the fees and expenses of such persons.

3.6 Accounts and Records. The Committee shall maintain such accounts and records
regarding the fiscal and other transactions of the Plan, and such other data as may be required to
carry out its functions under the Plan and to comply with all applicable laws.

3.7 Compliance with Applicable Law. The Company shall be deemed the administrator of
the Plan for the purposes of any applicable law and shall be responsible for the preparation and
filing of any required returns, reports, statements or other filings with appropriate governmental
agencies. The Company shall also be responsible for the preparation and delivery of information to
persons entitled to such information under any applicable law.

3.8 Reimbursement of Expenses. If any contest or dispute shall arise under this Plan
involving termination of a Participant’s employment with the Company or involving the failure or
refusal of the Company to perform fully in accordance with the terms hereof and the Participant
prevails on the merits in such contest or dispute, the Company shall, promptly after the date a
court issues a final order from which no appeal can be taken, or with respect to which the time
period to appeal has expired, reimburse such Participant for all reasonable legal fees and
expenses, if any, paid by the Participant in connection with such contest or dispute (together with
interest in an amount equal to the J.P. Morgan Chase Bank prime rate from time to time in effect,
such interest to begin to accrue on the dates Participant actually paid such fees and expenses
through the date of payment thereof).

ARTICLE IV: AMENDMENT

4.1 Amendment. The Company reserves the right to amend, in whole or in part, any or
all of the provisions of this Plan by action of the Board at any time; provided, that, no such
amendment may reduce the benefits and payments due to any Participant hereunder in the event of a
Qualifying Termination.

 

4

 

ARTICLE V: SUCCESSORS

5.1 Successors. The Company shall require any successor or assignee, whether direct
or indirect, by purchase or otherwise (and whether or not by operation of law), to all or
substantially all the business or assets of the Company, expressly and unconditionally to assume
and agree to perform the Company’s obligations under this Plan, in the same manner and to the same
extent that the Company would be required to perform if no such succession or
assignment had taken place, provided, that, no such assumption and agreement shall be required
from a successor or assignee that becomes obligated for the Company’s obligations hereunder through
a merger, consolidation or otherwise by operation of law. In such event, the term “Company,” as
used in this Plan, shall mean the Company, as applicable, as hereinbefore defined and any successor
or assignee to the business or assets which by reason hereof becomes bound by the terms and
provisions of this Plan. Any payment or benefit to which a Participant has become entitled under
this Plan which remains unpaid at the time of such Participant’s death shall be paid to the estate
of such Participant when it becomes due.

ARTICLE VI: MISCELLANEOUS

6.1 No Duty to Mitigate/Set-off. No Participant entitled to receive a Severance
Benefit shall be required to seek other employment or to attempt in any way to reduce any amounts
payable to him pursuant to this Plan. The Severance Benefit payable hereunder shall not be reduced
by any compensation earned by the Participant as a result of employment by another employer or
otherwise. Subject to Section 6.5, the Company’s obligations to pay the Severance Benefits and to
perform its obligations hereunder shall not be affected by any circumstances including without
limitation, any set off, counterclaim, recoupment, defense or other right which the Company may
have against the Participant.

6.2 Headings. The headings of the Plan are inserted for convenience of reference only
and shall have no effect upon the meaning of the provisions hereof.

6.3 Use of Words. Whenever used in this instrument, a masculine pronoun shall be
deemed to include the masculine and feminine gender, and a singular word shall be deemed to include
the singular or plural, in all cases where the context so requires.

6.4 Controlling Law. The construction and administration of the Plan shall be
governed by the laws of the State of New York (without reference to rules relating to conflicts of
law).

6.5 Withholding. The Company shall have the right to make such provisions as it deems
necessary or appropriate to satisfy any obligations it reasonably believes it may have to withhold
federal, state or local income or other taxes incurred by reason of payments pursuant to this Plan.

6.6 Severability. Should any provision of the Plan be deemed or held to be unlawful
or invalid for any reason, such fact shall not adversely affect the other provisions of the Plan
unless such determination shall render impossible or impracticable the functioning of the Plan, and
in such case, an appropriate provision or provisions shall be adopted so that the Plan may continue
to function properly.

 

5

 

6.7 Rights Under Other Plans, Policies, Practices and Agreements.

(a) Other than as expressly provided herein, the Plan does not supersede any other plans,
policies, and/or practices of the Company.

(b) The Plan supersedes any other change in control severance plans, policies and/or practices
of the Company as to the Participants; provided, that, the Plan shall not supersede any individual
executed agreement or arrangement between a single Participant and the Company in effect on January
1, 2003 or thereafter, which agreement specifically addresses payments or benefits made or provided
upon termination of employment or in connection with a Change in Control (an “Additional
Agreement”). If a Participant is due benefits or payments under both an Additional Agreement and
the Plan and/or where the Plan and the Applicable Additional Agreement have inconsistent or
conflicting terms and conditions, the Participant shall receive the greater of the benefits and
payments, and the more favorable terms and conditions to him, under the Additional Agreement and
the Plan, determined on an item-by-item basis.

ARTICLE VII: DEFINITIONS

7.1 “Cause” shall mean: (A) refusal or repeated failure by a Participant to perform
his or her duties as an employee of the Company; (B) gross negligence or willful misconduct by a
Participant in connection with such Participant’s employment by the Company; (C) misappropriation
or fraud with regard to the Company or its assets; or (D) conviction of, or the pleading of guilty
or nolo contendere to, a felony or, to the extent involving the assets or business of the Company,
a misdemeanor or other criminal offense; which, in the case of clause (A) is not fully remedied (to
the extent reasonably possible to be remedied) within 15 days after the Company gives the
Participant notice thereof.

7.2 “Change in Control” shall mean the occurrence of any of the following: (A) any
“person” (as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) or group (as defined in Rule 13d-5 under the Exchange Act), excluding any
Permitted Holder or any Permitted Group (or the members thereof) becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act) of securities of the Company representing 25% (or
such greater percentage as may then represent the percentage of total combined voting power held by
all Permitted Holders) or more of the total combined voting power of the Company’s then outstanding
securities, other than by reason of receiving a distribution from any person referred to in
clause (vi), (vii), (viii), (ix), (x) or (xi) of the definition of Permitted Holder; (B) as a
result of any proxy solicitation made otherwise than by or on behalf of (x) the Board, (y) one or
more Permitted Holders, or (z) any Permitted Group (or the members thereof), Continuing Directors
to cease to be a majority of the Board (a “Continuing Director” is any member of the Board who
(a) was a member of the Board on January 1, 2003, (b) first became a member of the Board as a
result of or following his election or nomination for election by the Board at a time that
Continuing Directors form a majority of the Board) or (c) first became a member of the Board as a
result of or following his election or nomination for election by the Board with the approval of a
majority of Continuing Directors in office at the time of such appointment or nomination; (C) the
merger, consolidation or other business combination of or by the Company (a “Transaction”), other
than a Transaction immediately following which (x) the stockholders of the Company immediately
prior to the Transaction continue to be the beneficial owners of securities of the Company or other
resulting entity representing more than a majority of the voting power in the Company or other
resulting entity, in substantially the same proportions as their ownership of Company voting
securities immediately prior to the Transaction or (y) Permitted Holders are the beneficial owners
of securities of the resulting entity representing more

 

6

 

than a majority of the voting power in such equity; (D) the sale of all or substantially all of the Company’s assets (it being understood
that a sale following which the Company continues to engage (directly or through any of its
subsidiaries) in either the business conducted by its Gift segment or the Kids Line business shall
not constitute the sale of all or substantially all of the Company’s assets or a Change in
Control), other than a sale immediately following which (x) the stockholders of the Company
immediately prior to the sale are the beneficial owners of securities of the purchasing entity
representing more than a majority of the voting power in the purchasing entity, in substantially
the same proportions as their ownership of Company voting securities immediately prior to the
Transaction or (y) Permitted Holders are the beneficial owners of securities of the purchasing
entity representing more than a majority of the voting power in such equity; (E) a recapitalization
or similar transaction of the Company in which any “person” (as defined in Section 3(a)(9) of the
Exchange Act) or “group” (as defined in Rule 13d-5 under the Exchange Act), excluding any Permitted
Holder or any Permitted Group (or the members thereof) becomes the “beneficial owner” (as defined
in Rule 13d-3 under the Exchange Act) of securities of the Company representing 20% or more of the
total combined voting power of the Company’s then outstanding securities; or (F) the approval by
the shareholders of a plan of liquidation or dissolution of the Company.

7.3 “Current Total Annual Compensation” shall be the sum of the following amounts:
(A) the greater of a Participant’s highest rate of annual salary during the calendar year in which
his employment terminates or such Participant’s highest rate of annual salary during the calendar
year immediately prior to the year of such termination; (B) the greater of a Participant’s annual
bonus compensation (prior to any bonus deferral election) earned in respect of each of the two most
recent calendar years immediately preceding the calendar year in which the Participant’s employment
terminated; and (C) the amount of the Company’s contribution to the Participant’s 401(k) account
for the last full year prior to such termination.

7.4 “Good Reason” shall mean the occurrence of any of the following events after a
Change in Control without the Participant’s express written consent: (A) material diminution in
the importance of a Participant’s position, status or authority as of the date immediately prior to
the Change in Control; (B) a material reduction in a Participant’s aggregate compensation or
benefits; (C) a failure of any successor or assign (whether direct or indirect, by purchase,
merger, consolidation or otherwise) of the Company to assume in writing (or by operation of law in
a merger) the obligations of the Company hereunder as required by Section 5.1; or (D) the Company’s
requiring the Participant to relocate the Participant’s office outside of the metropolitan area in
which it is located immediately prior to the Change in Control (for this purpose, the Northern New
Jersey suburbs shall constitute the “metropolitan area” for Participants whose office is located in
Oakland, New Jersey or elsewhere in the Northern New Jersey suburbs). A termination for Good
Reason shall mean a termination by a Participant effected by written notice given by the
Participant to the Company within 30 days after the occurrence of the Good Reason event, unless the
Company shall, within 15 days after receiving such notice, take such action as is necessary to
fully remedy such Good Reason event and give the Participant written notice thereof, in which case
the Good Reason event shall be deemed to have not occurred.

7.5 “Participant” shall mean such individuals as may from time to time be designated
as such by the Board or a duly authorized committee thereof.

 

7

 

7.6 “Permitted Group” means a group, as defined in Rule 13d-5 under the Exchange Act,
in which the Permitted Holders that are members of such group have (x) beneficial ownership of
voting securities of the Company having a majority of the voting power of all voting securities of
the Company that are beneficially owned by members of the group and (y) the power to direct the
voting of a majority of the voting securities of the Company held by all members of the group.

7.7 “Permitted Holder” shall mean (i) the Company; (ii) any subsidiary of the Company;
(iii) any employee benefit plan sponsored or maintained by the Company; (iv) Angelica Berrie;
(v) any lineal descendent of Russell Berrie; (vi) the Estate of Russell Berrie; (vii) The Russell
Berrie 2001 Annuity Trust; (viii) The Russell Berrie 1999 Charitable Remainder Trust; (ix) The
Russell Berrie 2002A Trust; (x) The Russell Berrie Foundation, a New Jersey Nonprofit Corporation;
(xi) any trust created pursuant to the terms of the instruments governing or creating any of the
persons referred to in clauses (vi), (vii), (viii), (ix) and (x); and (xii) any fiduciary of any of
the persons referred to in clauses (vi), (vii), (viii), (ix), (x) and (xi) acting in his or her
capacity as such.

7.8 “year” shall mean the period from any day in a calendar year to the same day in
the immediately succeeding calendar year.

 

8

 

Exhibit A

Gross-Up. This Exhibit A shall apply to a Participant only as provided by the last
sentence of Section 1.3 of the Plan; “Affected Participant” shall mean any Participant to which
this Exhibit A so applies.

(a) For purposes of this Exhibit A, the following terms shall have the following meanings:

“Payment” shall mean any payment or distribution (or acceleration of benefits) by
the Company to or for the benefit of the Affected Participant (whether paid or
payable or distributed or distributable (or accelerated) pursuant to the terms of
this Plan or otherwise, but determined without regard to any additional payments
required under this Exhibit A). In addition, “Payment” shall also include the
amount of income deemed to be received by the Affected Participant as a result of
the acceleration of the exercisability of any of the Affected Participant’s options
to purchase stock of the Company, the acceleration of the lapse of restrictions on
restricted stock of the Company held by the Affected Participant or the acceleration
of payment from any deferral plan.

“Excise Tax” shall mean the excise tax imposed by Section 4999 of the Code, or any
interest or penalties incurred by the Affected Participant with respect to such
excise tax.

“Income Tax” shall mean all taxes other than the Excise Tax (including any interest
or penalties imposed with respect to such taxes) including, without limitation, any
income and employment taxes imposed by any United States federal (including (i) FICA
and Medicare taxes, and (ii) the tax resulting from the loss of any federal
deductions or exemptions which would have been available to the Affected Participant
but for receipt of the Payment), state or local government.

(b) In the event it shall be determined in accordance with this Exhibit A that a Payment is
subject to an Excise Tax, then the Affected Participant shall be entitled to receive an additional
payment (a “Gross-Up Payment”) in an amount such that after payment by the Affected Participant of
Income Tax and Excise Tax imposed upon the Gross-Up Payment, the Affected Participant retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.

(c) All determinations required to be made under this Exhibit A, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by the public accounting firm that is
retained by the Company as of the date immediately prior to a Change in Control or, if such
accounting firm fails to agree to perform the functions contemplated by this Exhibit A, an
accounting firm of national reputation designated by the Company (in either case, the “Accounting
Firm”), which shall provide detailed supporting calculations both to the Company and to the
Affected Participant within 20 business days of the receipt of notice from

 

A-1

 

the Affected Participant
that there has been a Plan Payment, or such earlier time as is requested
by the Company (collectively, the “Determination”). All fees and expenses of the Accounting
Firm with respect to the matters contemplated by this Exhibit A shall be borne by the Company. Any
Gross-Up Payment, as determined pursuant to this Exhibit A, shall be paid by the Company to the
Affected Participant within ten days of the Determination. If the Accounting Firm determines that
no Excise Tax is payable, the Affected Participant may request the Accounting Firm to furnish the
Affected Participant with a written opinion that there is a reasonable basis for that
determination. The Determination by the Accounting Firm shall be binding upon the Company and the
Affected Participant, except as provided in paragraph (d) below. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the Determination, it is possible that
Gross-Up Payments which will not have been made by the Company should have been made
(“Underpayment”), consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to paragraph (d) below and the Affected Participant
is thereafter required to make payment of any Excise Tax or Income Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Affected Participant.

(d) The Affected Participant shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Company of the Gross-Up
Payment or the Underpayment. Such notification shall be given as soon as practicable but no later
than five business days after the Affected Participant is informed in writing of such claim and
shall include copies of all communications received from the Internal Revenue Service and apprize
the Company of the nature of such claim and the date on which such claim is requested to be paid.
The Affected Participant shall not pay such claim prior to the expiration of the 30-day period
following the date on which such notice is given to the Company. If the Company notifies the
Affected Participant in writing prior to the expiration of such period that it desires to contest
such claim, the Affected Participant shall not pay such claim unless directed to do so by the
Company and:

(i) give the Company any information reasonably requested by the Company
relating to such claim and provide the Company with copies of all communications
received from the Internal Revenue Service or other taxing authority with respect to
such claim, or served on it in any related litigation, upon receipt,

(ii) take such action in connection with contesting such claim as the Company
shall from time to time direct, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably selected by the
Company,

(iii) cooperate with the Company in good faith in order effectively to contest
such claim, and

(iv) permit the Company to control any proceeding relating to such claim;

 

A-2

 

provided, however, that the Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest and shall indemnify and
hold the Affected Participant harmless, on an after-tax basis, for any Excise Tax or Income Tax
imposed as a result of such representation and payment of costs and expenses. Without limitation
on the foregoing provisions of this paragraph (d), the Company shall control all proceedings taken
in connection with such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing authority in respect
to such claim and may, at its sole option, either direct the Affected Participant to pay the tax
claimed and sue for a refund or contest the claim in any permissible manner, and the Affected
Participant shall prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided further, that if the Company directs the Affected Participant to pay such claim
and sue for a refund, the Company shall advance the amount of such payment to the Affected
Participant on an interest-free basis and shall indemnify and hold the Affected Participant
harmless, on an after-tax basis, from any Excise Tax or Income Tax imposed with respect to such
advance or with respect to any imputed income with respect to such advance. Furthermore, the
Company’s control of the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder or an Underpayment and the Affected Participant shall be
entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority, provided that such action by the Affected Participant does
not affect the Company’s ability to settle or contest issues with respect to which a Gross-Up
Payment would be payable or an Underpayment.

(e) If, after the receipt by the Affected Participant of an amount advanced by the Company
pursuant to paragraph (d) above, the Affected Participant receives any refund with respect to such
claim, the Affected Participant shall promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after payment of taxes applicable thereto).
If, after the receipt by the Affected Participant of an amount advanced by the Company pursuant to
paragraph (d) above, the proceedings contemplated by paragraph (d) above, result in a final
determination not subject to further review or appeal to the effect that the Affected Participant
is not be entitled to any refund with respect to such claims then such advance shall be forgiven
and shall not be required to be repaid.

 

A-3

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