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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
August 11, 2000 (July 28, 2000)
JAKKS PACIFIC, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-28104 95-4527222
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
22761 Pacific Coast Highway, Malibu, California 90265
(Address of principal executive offices ) (Zip Code)
Registrant's telephone number, including area code: (310) 456-7799
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 28, 2000 (the "Closing Date"), JAKKS Pacific, Inc. ("JAKKS")
acquired Pentech International Inc. ("Pentech") through a statutory merger of a
wholly-owned subsidiary of JAKKS into Pentech (the "Merger"), which became
effective at 4:00 p.m., New York City time, on the Closing Date (the "Effective
Time"). As a result of the Merger, Pentech became a wholly-owned direct
subsidiary of JAKKS and (a) the holders of shares of Pentech common stock
outstanding immediately prior to the Effective Time (all of which were cancelled
at the Effective Time) became entitled to receive $1.60 in cash in respect of
each such share, and (b) the holders of options to purchase Pentech common stock
outstanding immediately prior to the Effective Time (all of which were
terminated at the Effective Time) became entitled to receive an amount in cash
in respect of each share subject to such option equal to the excess, if any, of
$1.60 over the option exercise price for such share.
Prior to the Effective Time, JAKKS had purchased 625,000 shares of
Pentech common stock in open market transactions for an aggregate purchase price
of approximately $808,000. On the Closing Date, JAKKS deposited approximately
$19,117,500 with its paying agent to fund the payment of the merger
consideration for all the other shares of Pentech common stock outstanding
immediately prior to the Effective Time. JAKKS has also deposited with Pentech
approximately $485,000 to fund the payment of the merger consideration in
respect of options outstanding immediately prior to the Effective Time.
At the closing of the Merger, JAKKS entered into agreements with three
individuals (who were directors and executive officers of Pentech) that
provide for them to provide certain services for JAKKS from the Closing Date
until December 31, 2001. The agreements with two of these individuals include
covenants prohibiting them from engaging in certain activities that may be
competitive with JAKKS' business. In these agreements, JAKKS has agreed to pay
to these individuals compensation in an aggregate amount of $450,000, of which
$151,000 was paid on the Closing Date (the "Initial Compensation Payments"), and
that Pentech would forgive a loan to one of these individuals in the amount of
approximately $174,000.
Pursuant to an agreement among Bank of America, N.A. (the "Bank"),
Pentech and certain of its subsidiaries, JAKKS made a cash capital contribution
in the amount of $10,000,000 to Pentech (the "Capital Contribution"), which was
applied to pay down a portion of Pentech's indebtedness to the Bank under
Pentech's Loan and Security Agreement with the Bank.
In addition, it is estimated that JAKKS has incurred or will incur in
connection with the Merger expenses in the amount of approximately $1,100,000,
including without limitation a finder's fee, investment banking advisory fees,
legal and accounting fees and disbursements, paying agent fees and
disbursements, environmental consultants' fees, filing fees, employment taxes
relating to the merger consideration payable in respect of options and printing,
postage and miscellaneous costs and expenses.
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The amount of the merger consideration, the compensation payable to the
individuals engaged by JAKKS and the amount of the Capital Contribution were
determined through arms' length negotiations between JAKKS, on the one hand, and
Pentech, the individuals and the Bank, respectively, on the other hand.
The entire cost of the Merger, including without limitation the merger
consideration, the Capital Contribution, the Initial Compensation Payments and
the fees and expenses incurred by the parties to the Merger, was funded out of
JAKKS' cash reserves.
Pentech designs, produces and markets pens, markers, pencils, other
writing instruments and activity sets under the Pentech trademark or licensed
brands to major store chains, warehouse clubs and other mass market retailers in
the United States. In connection with the Merger, JAKKS acquired Pentech's
assets, consisting primarily of proprietary marks and trade rights; character
licenses; inventory; accounts receivable; certain leased premises and certain
equipment. JAKKS intends to use the acquired equipment, consisting primarily of
tools, molds and other product processing equipment, office equipment and
vehicles that were used in the operation of Pentech's business prior to the
Merger, in the same manner for the immediate future.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
1. Pentech's consolidated financial statements as of
September 30, 1999 and 1998 and for the three years ended
September 30, 1999
-- Not included herein; to be filed by amendment on or before
October 11, 2000.
2. Pentech's condensed consolidated balance sheets as of June 30,
2000 and 1999 (unaudited) and condensed consolidated statements
of operations for the nine month period ended June 30, 2000 and
1999 (unaudited)
--Not included herein; to be filed by amendment on or before
October 11, 2000.
(b) Pro Forma Financial Information.
Not included herein; to be filed by amendment on or before October 11,
2000.
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(c) Exhibits.
<TABLE>
<CAPTION>
Number Description
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<S> <C>
2.1 Agreement of Merger dated as of May 22, 2000 among JAKKS
Pacific, Inc., JAKKS Acquisition II, Inc. and Pentech
International Inc.(1)
2.2 First Amendment dated as of July 13, 2000 to Agreement of
Merger(1)
2.3 Voting and Lock-Up Agreement dated May 22, 2000 among JAKKS
Pacific, Inc. and certain stockholders of Pentech International
Inc.(1)
10.1 Loan and Security Agreement dated as of January 13, 1997 among
Pentech International Inc., certain subsidiaries thereof and
Bank of America, N.A. (formerly BankAmerica Business Credit,
Inc.)(2)
10.2 Waiver and First Amendment dated as of January 11, 1999 to Loan
and Security Agreement(3)
10.3 Waiver, Consent and Second Amendment dated as of December 20,
1999 to Loan and Security Agreement(4)
10.4 Consent, Waiver and Third Amendment dated as of July 27, 2000 to
Loan and Security Agreement(1)
23.1 Consent of Ernst & Young LLP(5)
</TABLE>
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(1) Filed herewith
(2) Incorporated by reference to exhibit 10.7 of the Annual Report on
Form 10-K of Pentech International Inc. for its fiscal year ended
September 30, 1996
(3) Incorporated by reference to exhibit 10.5 of the Annual Report on
Form 10-K of Pentech International Inc. for its fiscal year ended
September 30, 1998
(4) Incorporated by reference to exhibit 10.6 of the Annual Report on
Form 10-K of Pentech International Inc. for its fiscal year ended
September 30, 1999
(5) To be filed by amendment
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: August 11, 2000
JAKKS PACIFIC, INC.
By: /s/ Joel M. Bennett
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Joel M. Bennett
Executive Vice President
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
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<S> <C>
2.1 Agreement of Merger dated as of May 22, 2000 among JAKKS
Pacific, Inc., JAKKS Acquisition II, Inc. and Pentech
International Inc.(1)
2.2 First Amendment dated as of July 13, 2000 to Agreement of
Merger(1)
2.3 Voting and Lock-Up Agreement dated May 22, 2000 among JAKKS
Pacific, Inc. and certain stockholders of Pentech International
Inc.(1)
10.1 Loan and Security Agreement dated as of January 13, 1997 among
Pentech International Inc., certain subsidiaries thereof and
Bank of America, N.A. (formerly BankAmerica Business Credit,
Inc.)(2)
10.2 Waiver and First Amendment dated as of January 11, 1999 to Loan
and Security Agreement(3)
10.3 Waiver, Consent and Second Amendment dated as of December 20,
1999 to Loan and Security Agreement(4)
10.4 Consent, Waiver and Third Amendment dated as of July 27, 2000 to
Loan and Security Agreement(1)
23.1 Consent of Ernst & Young LLP(5)
</TABLE>
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(1) Filed herewith
(2) Incorporated by reference to exhibit 10.7 of the Annual Report on
Form 10-K of Pentech International Inc. for its fiscal year ended
September 30, 1996
(3) Incorporated by reference to exhibit 10.5 of the Annual Report on
Form 10-K of Pentech International Inc. for its fiscal year ended
September 30, 1998
(4) Incorporated by reference to exhibit 10.6 of the Annual Report on
Form 10-K of Pentech International Inc. for its fiscal year ended
September 30, 1999
(5) To be filed by amendment
