This GUARANTY (this “ Guaranty
”), dated as of December 23, 2008 is executed and
delivered by each signatory hereto (each a “ Guarantor
” and, collectively, the “ Guarantors ”),
in favor of Russ Berrie and Company, Inc., a New Jersey corporation
(together with its successors and assigns, if any, “
RB ”), in light of the following:
WHEREAS, pursuant to that certain Purchase
Agreement (as amended, restated, supplemented or otherwise modified
from time to time, the “ Acquisition Agreement
”), dated December 23, 2008, between The Russ Companies,
Inc., a Delaware corporation (the “ Company ”)
and RB, as secured party, the Company will purchase all of the
issued and outstanding capital stock of each Sub (as defined in the
Acquisition Agreement) and certain other assets described therein
(the “ Acquisition ”) and in connection
therewith the Company issued to RB a Secured Promissory Note, dated
as of December 23, 2008, in the original principal amount of
$19,000,000 (as amended, restated, supplemented or otherwise
modified from time to time, the “ Note
”).
WHEREAS, pursuant to that certain Subordinated
Security Agreement (as amended, restated, supplemented or otherwise
modified from time to time, the “ Security Agreement
”), dated as of December 23, 2008 among RB, the Company,
and the other grantors party thereto (collectively, the “
Grantors ”), Grantors have agreed, inter alia ,
to secure the Company’s obligations under the
Note.
WHEREAS, the Company and the other Grantors are
party to that certain Credit and Security Agreement of even date
herewith (as amended, restated, supplemented or otherwise modified
from time to time, the “ Financing Agreement ”)
among each of such Grantors as borrowers and Wells Fargo Bank,
National Association, as lender (“ WF
”).
WHEREAS, RB is party to that certain
Intercreditor Agreement (as amended or otherwise modified from time
to time, the “ Subordination Agreement ”), dated
December 23, 2008, between RB and WF, and acknowledged by the
Company.
WHEREAS , the Guarantors (other than The Encore Group,
Inc.) are the direct and indirect subsidiaries of the Company and
will receive substantial benefits from the Acquisition;
WHEREAS , in order to induce RB to enter into the
Acquisition Agreement, each Guarantor has agreed to guaranty the
Guaranteed Obligations (as defined below) pursuant to the terms
hereof.
NOW, THEREFORE , for value received and in consideration of the
foregoing, each Guarantor hereby agrees as follows:
1. Guaranteed Obligations .
Subject to the terms of the Subordination Agreement, each Guarantor
hereby unconditionally and irrevocably guarantees the due and
punctual payment and performance of (a) the principal of and
interest on the Note, when and as due, whether at maturity, by
acceleration, or otherwise, (b) all other obligations of
Company at any time and from time to time under the Acquisition
Agreement and the Note, and (c) without duplication, all
principal, fees, cash, charges, interest, expenses, reimbursement
obligations and all other amounts payable by the Company in
relation to the foregoing and the interest due with respect thereto
(such obligations, to the extent not paid by the Company, being the
“ Guaranteed Obligations ”), and agrees to pay
any and all expenses (including reasonable counsel fees and
expenses) incurred by RB in enforcing any rights with respect to
the Guaranteed Obligations under the Acquisition Agreement, the
Note or hereunder. Without limiting the generality of the
foregoing, Guarantor’s liability shall extend to all amounts
that constitute part of the Guaranteed Obligations and would be
owed by the Company to the RB under the Note and the Acquisition
Agreement but for the fact that they are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization or
similar proceeding involving any Guarantor.
2. Guaranty Absolute .
Subject to the terms of the Subordination Agreement, each Guarantor
guarantees that the Guaranteed Obligations will be paid strictly in
accordance with the terms of the Note, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of RB with respect
thereto. Subject to the terms of the Subordination Agreement, the
obligations of each Guarantor under this Guaranty are independent
of the Guaranteed Obligations, and a separate action or actions may
be brought and prosecuted against each Guarantor to enforce such
obligations, irrespective of whether any action is brought against
the Company or any other Guarantor or whether the Company or any
other Guarantor is joined in any such action or actions. The
liability of each Guarantor under this Guaranty shall be
irrevocable, absolute and unconditional irrespective of, and each
Guarantor hereby irrevocably waives any defenses it may now or
hereafter have in any way relating to, any or all of the
following:
(a) any lack of validity or enforceability
of the Acquisition Agreement, the Note or any agreement or
instrument relating thereto;
(b) any change in the time, manner or place
of payment of, or in any other term of, all or any of the
Guaranteed Obligations, or any other amendment or waiver of or any
consent to departure from the Acquisition Agreement or the Note,
including, without limitation, any increase in the Guaranteed
Obligations resulting from the extension of additional credit to
any Guarantor or otherwise;
(c) any taking, release or amendment or
waiver of or consent to departure from any other guaranty, for all
or any of the Guaranteed Obligations;
(d) any change, restructuring or
termination of the corporate, limited liability company or
partnership structure or existence of the Company or any other
Guarantor; or
(e) any other circumstance (including,
without limitation, any statute of limitations) or any existence of
or reliance on any representation by RB that might otherwise
constitute a defense available to, or
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