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EXHIBIT 2.1
AGREEMENT OF MERGER
OF
JAKKS ACQUISITION II, INC.
WITH AND INTO
PENTECH INTERNATIONAL INC.
DATED AS OF MAY 22, 2000
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T A B L E O F C O N T E N T S
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
1. Certain Definitions.............................................1
2. The Constituent Corporations...................................10
3. The Merger.....................................................10
4. Certificate of Incorporation; Bylaws; and
Directors and Officers of the Surviving Corporation............11
5. Purchase Price; Conversion of Shares...........................12
6. Payment Procedures.............................................13
7. Representations and Warranties of Pentech......................16
8. Representations and Warranties of JAKKS........................29
9. Certain Covenants..............................................31
10. Conditions to Closing..........................................38
11. Closing........................................................41
12. Termination....................................................43
13. Miscellaneous..................................................45
</TABLE>
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AGREEMENT OF MERGER
OF
JAKKS ACQUISITION II, INC.
WITH AND INTO
PENTECH INTERNATIONAL INC.
THIS AGREEMENT OF MERGER dated as of May 22, 2000 by and among JAKKS
Pacific, Inc., a Delaware corporation ("JAKKS"), JAKKS Acquisition II, Inc., a
Delaware corporation ("Newco"), and Pentech International Inc., a Delaware
corporation ("Pentech").
W I T N E S S E T H :
WHEREAS, JAKKS desires to acquire the business and assets of Pentech,
subject to its liabilities, and to effect such acquisition, the parties hereto
desire that Newco merge with and into Pentech, so that Pentech shall survive the
merger as a wholly-owned subsidiary of JAKKS, all on the terms and subject to
the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto hereby agree as follows:
1. Certain Definitions.
1.1 "Account" means any account receivable or other right to payment
arising from the sale of merchandise or services in the Business, any loan or
other extension of credit or any other sale, lease, exchange or other
disposition of any Assets by, or for the account of, Pentech or a Subsidiary,
whether or not in the ordinary course of business.
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1.2 "Affiliate" of a Person means another Person directly or indirectly
controlling, controlled by, or under common control with, such Person; for this
purpose, "control" of a Person means the power (whether or not exercised) to
direct the policies, operations or activities of such Person by virtue of the
ownership of, or right to vote or direct the manner of voting of, securities of
such Person, or pursuant to agreement or Law or otherwise.
1.3 "Agreement" means this Agreement of Merger, as amended or
supplemented.
1.4 "Alternative Action" means any action (a) by Pentech's Board of
Directors (i) to withdraw its approval or recommendation of the Merger or (ii)
to modify or to qualify such approval or recommendation in a manner adverse to
JAKKS or which would prevent, impede or materially delay the consummation of the
Merger or (iii) to accept or recommend an Alternative Proposal; or (b) by
Pentech or any Principal Stockholder to enter into any Alternative Agreement.
1.5 "Alternative Agreement" means any contract, letter of intent,
agreement in principle or similar agreement relating to any Alternative
Transaction.
1.6 "Alternative Proposal" means any bid, offer or other proposal
relating to an Alternative Transaction.
1.7 "Alternative Transaction" means (a) any merger, consolidation or
other business combination or reorganization pursuant to which a substantial
portion of the Business or the Assets are sold or otherwise transferred to, or
combined with that or those of, another Person; (b) a transaction as a result of
which any Person (other than Pentech or a Subsidiary) becomes the holder,
directly or indirectly, of securities of Pentech having 30% or more of the
voting power of all voting securities of Pentech; or (c) the acquisition,
directly or indirectly, by another Person of control of Pentech, in each case,
other than the Merger.
1.8 "Assets" means the assets of Pentech or a Subsidiary.
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1.9 "Business" means Pentech's business of designing, developing,
manufacturing, marketing and otherwise dealing and trading in or with pens,
markers, pencils, other writing instruments and activity kits, and all business
activities incidental thereto.
1.10 "Certificate" means a certificate that, immediately prior to the
Effective Time, shall represent outstanding shares of Pentech Common Stock.
1.11 "Certificate of Merger" means the certificate of merger,
substantially in the form of Exhibit A, to be filed pursuant to Section 3.1.
1.12 "Closing" means the closing of the Merger as provided in Section
3.1.
1.13 "Closing Date" means the date of the Closing.
1.14 "Code" means the Internal Revenue Code of 1986, as amended, and the
treasury regulations promulgated thereunder.
1.15 "Consent" means any approval, authorization, consent, ratification,
waiver, exemption or variance by or on behalf of any Person that is not a party
to this Agreement.
1.16 "Constituent Corporation" means Newco or Pentech.
1.17 "DGCL" means the Delaware General Corporation Law, as amended.
1.18 "Dissenting Shares" is defined in Section 5.5.
1.19 "ECRA" means the New Jersey Environmental Cleanup Responsibility
Act.
1.20 "Effective Time" is defined in Section 3.1.
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1.21 "Eligible Option" means any Option to the extent such Option is
exercisable at any time with respect to any shares of Pentech Common Stock
subject thereto at an exercise price less than $1.40 (whether or not such Option
is vested or exercisable at the Effective Time with respect to such shares).
1.22 "Employee Plan" means an employee benefit plan (including a
multi-employer plan) as defined in Section 3(3) of ERISA.
1.23 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.24 "ERISA Affiliate" means Pentech, a Subsidiary and any other Person
that is a trade or business that would be deemed to be, together with Pentech
and the Subsidiaries, a "single employer" within the meaning of Section 414 of
the Code.
1.25 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
1.26 "Fairness Opinion" means an opinion of Business Valuation Services,
Inc. or another investment banking or financial advisory firm reasonably
satisfactory to JAKKS and Pentech to the effect that the Merger Consideration
is, on the date hereof, fair, from a financial point of view, to the holders of
outstanding shares of Pentech common stock.
1.27 "GAAP" means generally accepted accounting principles in the United
States.
1.28 "Governmental Authority" means any United States or foreign
federal, state or local government or governmental authority, agency or
instrumentality; any court or arbitration panel of competent jurisdiction; any
stock exchange or automated inter-dealer quotation system on which any
securities of JAKKS or Pentech are listed, admitted to trading
or included for
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quotation; or any recognized trade or industry association or organization that
establishes policies or standards for, or otherwise regulates or supervises, the
Business or the Assets.
1.29 "Hazardous Material" means any contaminant, pollutant or toxic or
hazardous waste, effluent or other substance or material, including without
limitation any radioactive, explosive, flammable, corrosive or infectious
substance or material, or any substance or material containing friable asbestos,
polychlorinated biphenyls or urea formaldehyde or which is otherwise subject to
any Law, Permit or Order relating to the protection of the environment or human
health or safety.
1.30 "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
1.31 "HSR Form" means a Notification and Report Form for Certain Mergers
and Acquisitions required to be filed pursuant to the HSR Act in connection with
the Merger.
1.32 "Indebtedness" means, as to Pentech and the Subsidiaries on a
consolidated basis (without duplication), (a) indebtedness for borrowed money or
the deferred purchase price of property or services in respect of which any such
Person is liable as obligor; (b) all obligations evidenced by notes, bonds,
debentures or similar instruments; (c) indebtedness secured by any Lien on any
Assets regardless of whether Pentech or any Subsidiary shall have assumed or is
liable as obligor for such indebtedness; (d) obligations of any such Person
under any capital lease; and (e) any other obligation or liability which would
be required under GAAP to be recorded as indebtedness on a consolidated balance
sheet of Pentech and the Subsidiaries.
1.33 "Joint Venture" means the Shanghai Jay Vee Stationery Co., Ltd.
1.34 "Law" means any statute, rule, regulation or ordinance of any
Governmental Authority.
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1.35 "Lease" means a lease by Pentech or a Subsidiary for any Real
Property.
1.36 "License Agreement" means a license, royalty or other agreement
pursuant to which Pentech or a Subsidiary has the right to use or exploit any
Trade Right of another Person.
1.37 "Lien" means any security interest, conditional sale or other title
retention agreement, mortgage, pledge, lien, charge, encumbrance or other
adverse claim or interest.
1.38 "Material Adverse Effect" means a material adverse effect on the
Business, the Assets, or the operations, financial condition or results of
operations of Pentech and the Subsidiaries, taken as a whole.
1.39 "Material Contract" means any material contract to which Pentech or
a Subsidiary is a party or is otherwise subject, including without limitation
(a) any License Agreement; (b) any such contract that provides for any Person,
other than Pentech or a Subsidiary, to use or exploit, or prohibits or limits
such other Person's use of, a Trade Right of Pentech or a Subsidiary; (c) any
Restrictive Agreement; (d) any such contract that prohibits any Person, other
than Pentech or a Subsidiary, from engaging, or curtails or restricts the nature
or scope of such other Person's activities, in any line of business or
geographic territory; or (e) any such contract (i) that relates to (A) a
transaction or series of related transactions involving the expenditure or
receipt by Pentech and the Subsidiaries of an amount in excess of $100,000 or
the transfer of property with a fair market value in excess of $100,000, (B) any
Indebtedness in an amount in excess of $100,000, (C) any Lien on any Assets with
a fair market value in excess of $100,000 or (D) a transaction not in the
ordinary course of business, or (ii) as to which any breach or default
thereunder would have a Material Adverse Effect.
1.40 "Merger" means the statutory merger of the Constituent Corporations
and the related transactions provided for herein.
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1.41 "Merger Consideration" means the cash consideration to be paid on
account of the Merger in respect of (a) the shares of Pentech Common Stock
outstanding at the Effective Time and (b) Eligible Options.
1.42 "Merger Document" means this Agreement and each other agreement,
instrument, certificate or other document to be executed, delivered or filed
pursuant to this Agreement or otherwise in connection with the Merger.
1.43 "NJDEPE" means the New Jersey Department of Environmental
Protection and Energy.
1.44 "Notice" means giving any notice to, or making any declaration or
filing, or registration or recordation, with any Person.
1.45 "Option" means an option or limited stock appreciation right
granted under any Option Plan or Other Option.
1.46 "Option Plan" means one of Pentech's stock option plans listed on
Schedule 1.46.
1.47 "Order" means any judgment, order, writ, decree, award, directive,
ruling or decision of any Governmental Authority.
1.48 "Other Option" means an option, warrant or other right to purchase,
or an outstanding security or instrument convertible into or exchangeable for,
Pentech Common Stock listed on Schedule 7.7.
1.49 "Paying Agent" means the Person appointed by JAKKS to collect and
cancel certificates representing shares of Pentech Common Stock outstanding at
the Effective Time and to disburse the Merger Consideration.
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1.50 "Payment Fund" is defined in Section 6.1.
1.51 "Pentech Common Stock" means the common stock, par value $.01 per
share, of Pentech.
1.52 "Permit" means any permit, license, certification, qualification,
franchise or privilege issued or granted by any Governmental Authority.
1.53 "Person" includes without limitation a natural person, corporation,
joint stock company, limited liability company, partnership, joint venture,
association, trust, Govern mental Authority, or any group of the foregoing
acting in concert.
1.54 "Plant Closing" means the shut-down and termination of production
and distribution operations of Sawdust Pencil Company in the United States.
1.55 "Principal Stockholder" means a stockholder of Pentech who is a
party to the Voting Agreement.
1.56 "Proceeding" means any action, suit, arbitration, audit,
investigation or other proceeding, at law or in equity, before or by any
Governmental Authority.
1.57 "Real Property" means the real property subject to the Leases.
1.58 "Restrictive Agreement" means an agreement that prohibits or limits
Pentech's or a Subsidiary's use of a Trade Right of another Person or prohibits
Pentech or a Subsidiary from engaging, or curtails or restricts the nature or
scope of Pentech's or a Subsidiary's activities, in any line of business or
geographic territory.
1.59 "SEC" means the U.S. Securities and Exchange Commission.
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1.60 "Securities Act" means the Securities Act of 1933, as amended.
1.61 "Services Agreements" means the Supplemental Services Agreements
between JAKKS and Norman Melnick and David Melnick, respectively, and the
Consulting Agreement between JAKKS and Richard S. Kalin, substantially in the
forms set forth in Exhibits B, C and D, respectively.
1.62 "Stockholder Approval" means the affirmative vote of the holders of
a majority of shares of Pentech Common Stock outstanding on the record date for
the Stockholders' Meeting to adopt this Agreement and to approve the Merger.
1.63 "Stockholders' Meeting" means a special meeting of Pentech's
stockholders (including any postponement or adjournment thereof) to be held,
pursuant to Notice, to consider and vote upon adoption of this Agreement and
approval of the Merger.
1.64 "Subsidiary" means the Joint Venture or a Person listed on Schedule
1.64.
1.65 "Superior Proposal" is defined in Section 10.5.
1.66 "Tax" means any United States or foreign federal, state or local
income, excise, sales, property, withholding, social security or franchise tax
or assessment, and any interest, penalty or fine due thereon or with respect
thereto.
1.67 "Termination Fee" is defined in Section 13.4
1.68 "Trade Right" means a patent, claim of copyright, trademark, trade
name, brand name, service mark, logo, symbol, trade dress or design, or
representation or expression of any thereof, or registration or application for
registration thereof, or any other invention, trade secret, technical
information, know-how, proprietary right or intellectual property.
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1.69 "Voting Agreement" means the Voting and Lock-Up Agreement of even
date herewith among JAKKS, Pentech and certain of its stockholders.
2. The Constituent Corporations.
The name and the jurisdiction of incorporation of each Constituent
Corporation are as follows:
Name Place of Incorporation
---- ----------------------
Pentech International Inc. Delaware
JAKKS Acquisition II, Inc. Delaware
The surviving corporation is Pentech.
3. The Merger.
3.1 Subject to the satisfaction of the conditions set forth in Article
11, Pentech, as the surviving corporation of the Merger, shall file the
Certificate of Merger in accordance with DGCL Section 251(c), and the Merger
shall be effective as of the date and time set forth therein (the "Effective
Time").
3.2 At the Effective Time, Newco shall be merged with and into Pentech,
and the Constituent Corporations shall thereupon become and constitute a single
corporation. Pentech shall be the surviving corporation of the Merger and the
separate existence of Newco shall cease. Except as otherwise provided by Law,
the surviving corporation shall thereupon, without further act or deed, succeed
to all the rights, privileges, immunities, powers and purposes of each of the
Constituent Corporations; acquire all the business, property, franchises, claims
and causes of action and every other asset of each of the Constituent
Corporations; and assume and be subject to all the debts and liabilities of each
of the Constituent Corporations.
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3.3 The directors, officers, employees and agents of JAKKS and Pentech,
as the surviving corporation, shall be authorized, at and after the Effective
Time, to execute and deliver, in the name of Pentech or Newco, any assignments,
bills of sale, deeds or other instruments and to take such other actions as are
reasonably necessary or appropriate to vest in Pentech, as the surviving
corporation, as a result of, or in connection with, the Merger, all right, title
and interest in and to the Assets and to perfect and to confirm the same.
4. Certificate of Incorporation; Bylaws; and Directors and Officers of the
Surviving Corporation.
4.1 At the Effective Time, the Certificate of Incorporation of Pentech
shall continue in full force and effect as the Certificate of Incorporation of
the surviving corporation, unless and until amended or restated in the manner
provided by Law.
4.2 At the Effective Time, the Bylaws of Newco shall continue in full
force and effect as the Bylaws of the surviving corporation, unless and until
revoked or amended in the manner provided by Law, its Certificate of
Incorporation or such Bylaws.
4.3 At the Effective Time, the number of Persons constituting the entire
Board of Directors of the surviving corporation shall be two, and the incumbent
directors of Newco immediately prior to the Effective Time shall thereupon
become the directors of the surviving corporation.
4.4 At the Effective Time, all the incumbent officers of Pentech shall
resign (or be removed) and the incumbent officers of Newco immediately prior to
the Effective Time shall thereupon become the officers of the surviving
corporation.
5. Purchase Price; Conversion of Shares.
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5.1 At the Effective Time, by virtue of the Merger and without any
further act or deed by any Person, each share of common stock of Newco then
outstanding shall be converted into one share of Pentech Common Stock, all of
which shares shall be validly issued, fully paid and nonassessable and shall
thereafter constitute all of the issued and outstanding capital stock of
Pentech, as the surviving corporation.
5.2 Subject to Section 5.5, at the Effective Time, by virtue of the
Merger and without any further act or deed by any Person, each share of Pentech
Common Stock then outstanding (other than any such share owned by Pentech, a
Subsidiary, JAKKS or Newco) shall cease to be outstanding and shall be retired
and cancelled, and the holder of each such share immediately prior to the
Effective Time shall cease forthwith to have any right with respect to any
capital stock of Pentech, as the surviving corporation, or any interest therein
or in the Assets, but shall thereupon become entitled to receive Merger
Consideration in the amount of $1.40 in respect of such share.
5.3 At the Effective Time, by virtue of the Merger and without any
further act or deed by any Person, each share of Pentech Common Stock then
outstanding owned by Pentech, a Subsidiary, JAKKS or Newco shall cease to be
outstanding and shall be retired and cancelled, and no Merger Consideration
shall be payable in respect thereof.
5.4 At the Effective Time, by virtue of the Merger and without any
further act or deed by any Person, each Option outstanding at the Effective Time
shall expire and terminate, and the holder thereof immediately prior to the
Effective Time shall cease forthwith to have any right with respect to any
capital stock of Pentech, as the surviving corporation, or any interest therein
or in the Assets, except that the holder of each Eligible Option shall thereupon
become entitled to receive in respect of each share of Pentech Common Stock
subject to such Eligible Option Merger Consideration in an amount equal to the
excess of $1.40 over the exercise price of such Eligible Option with respect to
such share.
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5.5 Any other provision of this Article 5 notwithstanding, any
outstanding shares of Pentech Common Stock the holder of which asserts and
perfects the right to receive payment for shares pursuant to DGCL Section 262
(the "Dissenting Shares") shall not be subject to the foregoing provisions of
this Article, and the holder thereof shall have only such rights as are granted
to dissenting stockholders under said DGCL Section 262; provided, however, that
Dissenting Shares as to which the holder thereof subsequently withdraws his
demand for payment (or fails to perfect his dissenter's rights) before payment
thereof shall thereupon be subject to Section 5.2 in the same manner as provided
herein for other outstanding shares of Pentech Common Stock (except as to the
time of payment, which shall be as promptly as practicable after withdrawal of
such demand). Pentech shall give to JAKKS prompt notice of any demands received
from holders of Dissenting Shares for payment of the value of such shares, and
JAKKS shall have the exclusive right to conduct all negotiations and proceedings
with respect to any such demands. Pentech shall not, except with the prior
written consent of JAKKS, voluntarily make any payment with respect to, or
compromise or settle, or offer to compromise or settle, any such demand for
payment. The assertion of any demand for payment by a holder of Dissenting
Shares shall not prevent, interfere with or delay the consummation of the Merger
and the other transactions contemplated hereby, except as provided by DGCL
Section 262 or as a court of competent jurisdiction may otherwise Order.
6. Payment Procedures.
6.1 Prior to the Closing Date, JAKKS shall appoint American Stock
Transfer and Trust Company or another Person (reasonably acceptable to Pentech)
to act as the Paying Agent. Prior to or at the Closing, JAKKS shall deposit with
the Paying Agent, in trust for the benefit of the holders of Pentech Common
Stock outstanding at the Effective Time and holders of Eligible Options, cash in
an amount sufficient to pay the Merger Consideration (the "Payment Fund"). The
Paying Agent shall invest the Payment Fund as directed by JAKKS and any
interest, dividends or other income thereon shall be added to and constitute a
portion of the Payment Fund. If at any time the amount of the Payment Fund shall
exceed the amount of the Merger Consideration remaining to be paid, the Paying
Agent shall, upon request by JAKKS, remit to JAKKS cash in an amount less than
or equal to the amount of such excess. If at any time the amount of the Payment
Fund shall be less than the
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amount of the Merger Consideration remaining to be paid, the Paying Agent shall
promptly give to JAKKS Notice to such effect and JAKKS shall promptly deliver to
the Paying Agent funds in an amount equal to or greater than the amount of such
deficiency.
6.2 JAKKS shall cause the Paying Agent promptly after the Effective
Time to mail to each holder of Pentech Common Stock at the Effective Time (a) a
letter of transmittal, in customary form reasonably acceptable to Pentech and
the Paying Agent, which shall state that (i) such holder is entitled to receive
the Merger Consideration in respect of the shares of Pentech Common Stock so
held by such holder upon surrender of his Certificate or Certificates, as
specified therein, and (ii) such surrender shall be effected, and risk of loss
and title to such Certificate or Certificates shall pass only upon proper
delivery thereof to the Paying Agent, and (b) instructions specifying the place
at which and the manner in which such Certificate or Certificates are so to be
delivered. Upon such surrender of any such Certificate, together which such
letter of transmittal, duly completed and executed in accordance with the
instructions thereto, and the delivery of such other documents as may reasonably
be required by the Paying Agent, the holder of such Certificate shall be
entitled to receive the Merger Consideration payable in respect of the shares of
Pentech Common Stock represented by such Certificate, and the Paying Agent shall
promptly mail a check in such amount to such holder payable to the Person
indicated in the letter of transmittal. No interest shall accrue for the benefit
of, or be payable to, any such holder on account of the Merger Consideration
payable in respect of such shares of Pentech Common Stock. In the event of a
transfer of ownership of any share of Pentech Common Stock which is not
registered in the stock transfer records for the Pentech Common Stock, the
Paying Agent may pay the Merger Consideration and mail a check therefor to the
transferee thereof if the Certificate representing such shares is presented to
the Paying Agent, together with such documents as the Paying Agent may
reasonable request to evidence such transfer and the payment in full of any
applicable stock transfer Taxes.
6.3 Notwithstanding the failure of any Certificate to be surrendered as
hereinabove provided, each such Certificate, from and after the Effective Time,
shall not represent any
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interest in the surviving corporation, or any Assets thereof, but shall
represent only the right of the holder thereof at the Effective Time to receive
the Merger Consideration payable in respect thereof upon surrender of such
Certificate pursuant hereto. The stock transfer books of Pentech shall be closed
immediately at the effective Time and no transfer of shares of Pentech Common
Stock shall be effective or registered thereafter.
6.4 If any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit to such effect by the Person claiming to be the
holder of such Certificate and, if required by JAKKS, the posting by such Person
of a bond in a reasonable and customary amount as an indemnity against any claim
that may be made against it with respect to such Certificate, the Paying Agent
shall pay to such Person the Merger Consideration with respect to the shares
represented by such Certificate.
6.5 Promptly after the Effective Time, the Paying Agent shall pay to
each holder of an Eligible Option the Merger Consideration payable in respect
thereof and mail to such holder at the address shown in the option agreement or
Certificate relating to such Eligible Option a check in such amount payable to
the order of such holder.
6.6 The Paying Agent shall deduct and withhold from the amount of the
Merger Consideration otherwise payable pursuant to this Agreement to any holder
of shares of Pentech Common Stock at the Effective Time or any holder of an
Eligible Option such amounts as it is required to deduct and withhold with
respect to the payment of the Merger Consideration under the Code or any
corresponding provision of any other Law relating to Taxes. To the extent that
any amount is so withheld, such amount shall be deemed for all purposes of this
Agreement to have been paid as part of the Merger Consideration to the holder of
the shares of Pentech Common Stock at the Effective Time or the holder of the
Eligible Option that would otherwise have been entitled actually to receive such
amount.
6.7 None of JAKKS, Pentech, as the surviving corporation, or the Paying
Agent, or any officer, employee or agent thereof, shall be liable to any Person
in respect of any Merger
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Consideration that is delivered to a public official pursuant to any applicable
abandoned property, escheat or similar Law.
6.8 If any portion of the Payment Fund remains undistributed six months
after the Closing Date, the balance thereof shall be delivered to JAKKS or to
the Person designated by JAKKS, and any holder of a Certificate that shall not
have theretofore complied with the provisions of this Article for the surrender
of such Certificate and that shall not have received the Merger Consideration
payable in respect thereof shall thereafter look only to JAKKS for the payment
of such Merger Consideration. Any portion of the Payment Fund remaining
unclaimed by holders of shares of Pentech Common Stock at the Effective Time
five years after the Closing Date (or such earlier date as such amount would
otherwise escheat to or become the property of any Governmental Authority)
shall, to the fullest extent permitted by Law, become the property of Pentech,
as the surviving corporation, free and clear of any claims or interests of any
Person previously entitled thereto.
7. Representations and Warranties of Pentech.
Pentech hereby represents and warrants to JAKKS as follows:
7.1 Pentech is a corporation duly organized, validly existing and in
good standing under the Laws of the State of Delaware and has the full corporate
power and authority to own its Assets and carry on the Business as and in the
places where such Assets are now located or such Business is conducted. Complete
and correct copies of Pentech's Certificate of Incorporation, including all
amendments thereto, certified by the Secretary of State of Delaware, and
Pentech's Bylaws, including all amendments thereto, certified by the Secretary
of Pentech, have been delivered to JAKKS. Pentech is permitted to transact
business as a foreign corporation in each jurisdiction where required under
applicable Law in light of the location or character of its Assets or the
operation of the Business (except where the failure so to be Permitted would not
have Material Adverse Effect), and each such jurisdiction is listed on Schedule
7.1.
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7.2 Pentech has full corporate power and authority to execute and
deliver this Agreement and each other Merger Document to which it is a party and
to assume and perform its obligations hereunder and thereunder. The execution
and delivery of this Agreement and each other Merger Document to which it is a
party by Pentech and the performance of its obligations hereunder and thereunder
have been duly authorized by all requisite corporate action on the part of
Pentech, except for the Stockholder Approval. This Agreement has been, and each
other Merger Document to which it is a party will be, duly executed and
delivered by Pentech, and this Agreement is, and each other Merger Document to
which it is a party, when so executed and delivered, will be, a legally valid
and binding obligation of Pentech, enforceable against it in accordance with
their respective terms, subject to (a) bankruptcy, insolvency, reorganization,
moratorium or other similar Laws now or hereafter in effect relating to
creditors' rights generally and (b) equitable principles limiting the
availability of specific performance, injunctive relief and other equitable
remedies. The execution and delivery of this Agreement by Pentech do not, and
the execution and delivery of each other Merger Document by Pentech and the
performance by Pentech of its obligations hereunder and thereunder will not,
violate any applicable Law or any provision of Pentech's Certificate of
Incorporation or Bylaws, and, except as set forth on Schedule 7.2, do not and
will not conflict with or result in any breach of any condition or provision of,
or constitute a default under, or create or give rise to any adverse right of
termination or cancellation by, or excuse the performance of, any other Person
under, any Material Contract, or result in the creation or imposition of any
Lien upon any of the Assets or have a Material Adverse Effect.
7.3 Pentech has engaged Business Valuation Services, Inc. to render a
Fairness Opinion.
7.4 Pentech's Board of Directors has unanimously (a) determined that
this Agreement and the Merger are advisable and in the best interests of
Pentech and its stockholders, (b) approved this Agreement and the Merger and (c)
adopted resolutions recommending that Pentech's stockholders adopt this
Agreement and approve the Merger and directing that this Agreement and the
Merger be submitted for consideration by, and to the vote of, Pentech's
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stockholders at the Stockholders' Meeting, to be duly called pursuant to Notice
for such purpose, in each case, subject to its receipt of a Fairness Opinion,
and none of the foregoing actions has been rescinded or amended. The holders of
record of Pentech Common Stock on the record date for the Stockholders' Meeting
are the only Persons entitled under applicable Law and Pentech's Certificate of
Incorporation and Bylaws to notice of, and to vote at, the Stockholders'
Meeting. The Stockholder Approval is the only corporate action required to be
effected in order to comply with the corporate approval requirements of DGCL
Section 251. Except for DGCL Section 203, no state takeover or business
combination Law is applicable to this Agreement or the Merger. The approval of
this Agreement and the Merger by Pentech's Board of Directors constitutes
approval thereof for the purposes of DGCL Section 203.
7.5 Except for the filing by Pentech of an HSR Form and the expiration
or early termination of the waiting period under the HSR Act; the filing by
Pentech of the proxy materials relating to the Stockholders' Meeting with the
SEC pursuant to Section 14 of the Exchange Act; the Notice required to be given
or made pursuant to ECRA and the issuance of a negative declaration or
administrative consent order by the NJDEPE; and the filing of the Certificate of
Merger with the Secretary of State of Delaware, and except as set forth on
Schedule 7.5, no Consent of, or Notice to, any Person is required as to Pentech
in connection with its execution and delivery of this Agreement or any other
Merger Document to which it is a party, or the performance of its obligations
hereunder or thereunder, or the consummation of the Merger.
7.6 Schedule 7.6 lists certain Proceedings to which Pentech or a
Subsidiary is a party and claims against Pentech or a Subsidiary. No Proceeding
is pending or, to Pentech's knowledge, threatened against or affecting the
Business, the Assets or Pentech's or any Subsidiary's operations in which an
unfavorable Order would have a Material Adverse Effect, or prohibit, invalidate
or make unlawful, in whole or in part, this Agreement or any other Merger
Document, or the carrying out of the provisions hereof or thereof or the
transactions contemplated hereby or thereby. None of Pentech or any Subsidiary
is in default in respect of any Order, which default would have a Material
Adverse Effect, nor is there any Order enjoining Pentech in respect of, or
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the effect of which is to prohibit or curtail Pentech's performance of, its
obligations under this Agreement or any other Merger Document.
7.7 The entire authorized capital stock of Pentech consists of
20,000,000 shares of Pentech Common Stock, of which 12,571,258 shares are
outstanding (and no shares are held in treasury), and 500,000 shares of series
preferred stock, par value $.10 per share, none of which have been issued. All
outstanding shares of Pentech Common Stock are duly authorized, validly issued,
fully paid and nonassessable. Except as set forth on Schedule 7.7, Pentech is
not a party to any voting agreement or trust or other agreement, commitment or
arrangement with respect to the voting or disposition of its capital stock, nor,
to Pentech's knowledge, is there any such trust, agreement, commitment or
arrangement. Except as set forth on Schedule 7.7, Pentech is not prohibited or
restricted from paying any dividend upon or making any other distribution in
respect of its capital stock (other than compliance with the applicable
provisions of the DGCL), nor is Pentech obligated to redeem, purchase or
otherwise acquire, or to pay any dividend upon or make any distribution in
respect of, any of its outstanding capital stock. Except for the Option Plans
(and the Options granted thereunder) and the Other Options, there are no (a)
agreements, commitments or arrangements providing for the issuance or sale of
any of Pentech's capital stock, or (b) any options, warrants or rights to
purchase, or securities or instruments convertible into or exchangeable for, any
of Pentech's capital stock. The Option Plans were duly authorized and adopted by
Pentech (including the approval of Pentech's Board of Directors and
stockholders) and all Options granted under any such Option Plan were properly
granted in accordance therewith and with applicable Law. All Other Options were
duly authorized and granted by all requisite corporate action on the part of
Pentech and in accordance with applicable Law. A sufficient number of shares of
Pentech Common Stock have been duly reserved for issuance upon the exercise of
Options granted under the Option Plans or Other Options, and no other shares of
Pentech's capital stock are reserved for issuance. Schedule 7.7 sets forth a
complete and correct list of all Options outstanding on the date hereof,
including, as to each, the holder thereof, the date of grant thereof, the total
number of shares of Pentech Common Stock subject thereto, the dates on which and
the number of such shares as to which such Option becomes exercisable, and the
exercise price thereof. All shares of Pentech Common Stock
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issuable upon the exercise of Options, if and when issued and delivered in
accordance with the terms thereof, will be duly authorized, validly issued,
fully paid and nonassessable
7.8 Each Subsidiary is a corporation duly organized, validly existing
and in good standing under the Laws of its jurisdiction of incorporation, and
has full corporate power and authority to own its Assets and carry on its
business as and in the places where such Assets are located or such business is
conducted. Complete and correct copies of the certificate or articles of
incorporation or organization of each Subsidiary, including all amendments
thereto, certified by the secretary of state or other appropriate authority of
its jurisdiction of incorporation or organization, and the Bylaws of each
Subsidiary, certified by the corporate secretary or similar officer thereof,
have been delivered to JAKKS. Each Subsidiary is permitted to transact business
as a foreign corporation in each jurisdiction where required under applicable
Law in light of the location or character of its Assets or the operation of its
business (except where the failure so to be Permitted would not have a Material
Adverse Effect), and each such jurisdiction is listed on Schedule 7.8. Except as
set forth on Schedule 7.8, Pentech owns beneficially and of record all of the
outstanding shares of capital stock of each Subsidiary free and clear of all
Liens or any restriction with respect to the voting or disposition thereof
(other than restrictions of general applicability imposed by federal or state
securities Laws), and all such shares are duly authorized, validly issued, fully
paid and nonassessable. Except as set forth on Schedule 7.8, no Subsidiary is
prohibited or restricted from paying any dividend upon or making any other
distribution in respect of its capital stock (other than compliance with the
applicable provisions of the DGCL), nor is any Subsidiary obligated to redeem,
purchase or otherwise acquire, or to pay any dividend upon or make any
distribution in respect of, any of its outstanding capital stock. There are no
(a) agreements, commitments or arrangements providing for the issuance or sale
of any capital stock or any Subsidiary, or (b) any options, warrants or rights
to purchase, or securities or instruments convertible into or exchangeable for,
any capital stock of any Subsidiary. No shares of capital stock of any
Subsidiary are reserved for issuance. None of Pentech or any Subsidiary owns or
has subscribed, or is subject to any obligation, to purchase or otherwise
acquire, directly or indirectly, (a) any capital stock of, or other equity
interest or participation in, or (b) any option, warrant or other right to
purchase, or any security or
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instrument convertible into or exchangeable for, any capital stock of, any
Person, other than a Subsidiary.
7.9 Pentech is required to file reports pursuant to Section 13 of the
Exchange Act, and since January 1, 1997, Pentech has timely filed all reports,
forms, statements and documents required to be filed by it under the Securities
Act, the Exchange Act and any applicable rules of the Nasdaq Stock Market, Inc.,
all of which reports, forms, statements and other documents are in material
compliance with applicable Laws. When filed, none of such reports, forms,
statements and other documents contained any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. Each of the consolidated financial statements
contained in such reports, forms, statements and other documents were prepared
in accordance with GAAP applied on a consistent basis, and each such financial
statement presents fairly in all material respects the consolidated financial
position of Pentech and the Subsidiaries at the dates and their consolidated
results of operations and cash flows for each of the respective periods
indicated. None of Pentech or any Subsidiary has any liability or obligation of
any kind, contingent or otherwise, relating to the Business or its Assets which
would be required under GAAP to be disclosed in a balance sheet or the notes
thereto but which is not reflected on Pentech's consolidated balance sheet at
September 30, 1999 or the notes thereto or set forth on Schedule 7.9, and all of
the liabilities and obligations set forth on such Schedule have arisen in the
ordinary course of business since September 30, 1999.
7.10 Except as set forth on Schedule 7.10, since September 30, 1999,
there has been no material adverse change in the Business or the Assets or
Pentech's or any Subsidiary's operations, financial condition or results of
operations, nor has there been commenced any Proceeding in which an unfavorable
Order would have a Material Adverse Effect, and none of Pentech or any
Subsidiary has:
(a) incurred any damage, destruction or similar loss, whether or
not covered by insurance, materially affecting the Business or the Assets;
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(b) other than in the ordinary course of business, sold, assigned
or transferred any of the Assets or any interest therein;
(c) incurred any Indebtedness or other obligation or liability
relating to the Business or the Assets, except in the ordinary course of
business, or paid, satisfied or discharged any obligation or liability relating
to the Business or the Assets prior to the due date or maturity thereof, except
current obligations and liabilities in the ordinary course of business;
(d) other than in the ordinary course of business, created,
incurred, assumed, granted or suffered to exist any Lien on any of the Assets;
(e) other than in the ordinary course of business, waived any
right of material value or cancelled, forgiven or discharged any debt owed to it
or claim in its favor; or
(f) effected any transaction relating to the Business or the
Assets other than in the ordinary course of business.
7.11 Pentech or a Subsidiary, as the case may be, owns all of the Assets
free and clear of all Liens, except for the Liens listed on Schedule 7.11, all
of which were created in the ordinary course of business. The Assets consisting
of equipment and other tangible property are in sufficiently good operating
condition (normal wear and tear excepted) to be used to conduct the Business.
7.12 Except as set forth on Schedule 7.12, there is no material breach
or default by Pentech or a Subsidiary or, to Pentech's knowledge, by any other
party under any Material Contract, each of which is in full force and effect.
True and complete copies of all Contracts have been delivered or made available
to JAKKS.
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7.13 Except as set forth on Schedule 7.13, inventory included in the
Assets consists solely of merchandise usable or saleable in the ordinary course
of business. Since September 30, 1999, there has been no change in the inventory
reflected in Pentech's consolidated balance sheet at September 30, 1999, except
in the ordinary course of business.
7.14 The Accounts result from bona fide sales to non-Affiliate customers
of Pentech or a Subsidiary in the ordinary course of business.
7.15 Each of Pentech and each Subsidiary has all Permits and all
Consents of Governmental Authorities required for it to conduct the Business as
presently conducted or which it is otherwise required to have under applicable
Law, except such Permits or Consents which the failure to have would not, in the
aggregate, have a Material Adverse Effect, all such Permits and Consents are in
full force and effect and no cancellation or suspension of any thereof is
pending or, to Pentech's knowledge, threatened. Except as set forth on Schedule
7.15, the applicability and validity of each such Permit or Consent will not be
adversely affected by the consummation of the transactions contemplated by this
Agreement. Pentech and each Subsidiary is in compliance with each Law applicable
to it and the Business, including without limitation with respect to
occupational safety, environmental protection and employment practices, except
for such noncompliance which would not, in the aggregate, have a Material
Adverse Effect, and none of them has received any written Notice alleging or
asserting any material violation of or noncompliance with any such Law.
7.16 Schedule 7.16 is a complete and correct list and a brief
description (including, if applicable, date of application, filing or
registration, as the case may be, and the registration and application number)
of each Trade Right relating to the Business, whether or not registered in the
name of or applied for by Pentech or a Subsidiary, in which Pentech or a
Subsidiary has any right or interest, whether through any License Agreement or
otherwise. Except as otherwise listed on Schedule 7.16, none of Pentech or any
Subsidiary is a licensor or a licensee in respect of any such Trade Right. The
Trade Rights listed on Schedule
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7.16 are adequate for Pentech and the Subsidiaries to conduct the Business as
now operated. Except as otherwise set forth on Schedule 7.16, no Trade Right of
Pentech or a Subsidiary relating to the Business conflicts with or infringes on,
and there has been no misappropriation or unauthorized use by Pentech or a
Subsidiary of, any Trade Right of any other Person, and no Trade Right of any
other Person conflicts with or infringes on, and there has been no
misappropriation or unauthorized use by any other Person of, any Trade Right of
Pentech or a Subsidiary.
7.17 Schedule 7.17 sets forth a brief description of the Real Property,
including the area and the current uses thereof. Each Lease is legal, valid and
binding as between Pentech or a Subsidiary, as the case may be, and each other
party thereto, and Pentech or a Subsidiary, as the case may be, is a tenant in
good standing thereunder, free of any material breach or default whatsoever and
quietly enjoys the Real Property subject thereto. None of Pentech or any
Subsidiary has assigned any interest in any Lease or sublet any Real Property,
nor is any Real Property used or occupied by any other Person. The Real Property
is zoned for the purposes for which such Real Property is currently being used.
Pentech or a Subsidiary, as the case may be, has legal and valid occupancy
Permits for the Real Property. No improvement, fixture or equipment on the Real
Property, nor the lease, use or occupancy thereof, is in violation of any
applicable Law. No Real Property (a) is subject to any Law, Order or Lien which
would materially adversely affect its use or value for the purposes now made of
it or (b) has been condemned or otherwise taken, and, to Pentech's knowledge, no
condemnation or other taking of any Real Property is pending or threatened.
7.18 Except as set forth on Schedule 7.18, no Hazardous Material has
been generated, used, stored, treated, released or disposed of at, or
transported to or from, the Real Property or in connection with the Business,
all of which has been conducted in substantial compliance with applicable Law,
and no Law, License, Order or Proceeding applicable to Pentech or any Subsidiary
or any Assets requires any clean-up or remediation or participation in or
contribution to any such clean-up or remediation.
7.19 Pentech has duly filed all Tax and information returns and reports
required to have been filed by it to the date hereof, each of which is complete
and correct in all material
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respects and Pentech has paid all Taxes due to any Governmental Authority
required to have been paid by it and has created sufficient reserves or made
provision for all Taxes accrued but not yet due and payable by it. Pentech has
paid to the proper Governmental Authorities all customs, duties and similar or
related charges required to be paid by it with respect to the importation of
goods into the United States. No Governmental Authority is now asserting or, to
Pentech's knowledge, threatening to assert any deficiency or assessment for
additional Taxes with respect to Pentech, nor, to Pentech's knowledge, is there
any basis for any such deficiency or assessment. Pentech has not been audited by
any Governmental Authority with respect to any fiscal year, and, to Pentech's
knowledge, no such audit has been threatened or proposed. Pentech has not waived
or consented to any tolling of any limitation period with respect to any Tax
liability. Pentech and the Subsidiaries, other than the Joint Venture, are,
for federal income tax purposes, members of an affiliated group, which includes
no other Person, and no Subsidiary, other than the Joint Venture, files any
separate return with respect to any Tax. Pentech has delivered to JAKKS complete
and correct copies of the Tax returns of Pentech for each of its three most
recently ended fiscal years and any subsequent period for which a return was
filed.
7.20 Schedule 7.20 sets forth a complete and correct list of all
Employee Plans either maintained or to which contributions have been made by any
ERISA Affiliate and all contributions made to each such Employee Plan for each
of the three most recently ended fiscal years of Pentech. Except as set forth on
Schedule 7.20, no ERISA Affiliate has any liability on account of any such
Employee Plan for (a) contributions accruing under any such Employee Plan with
respect to periods prior to the date hereof; (b) fiduciary breaches by any ERISA
Affiliate, any employee of any ERISA Affiliate or any other Person under ERISA
or any other applicable Law; or (c) income Taxes by reason of non-qualification
of any such Employee Plan. With respect to each such Employee Plan, Pentech has
delivered or made available to JAKKS copies of (i) the plan, related trust
documents and amendments thereto, (ii) the most recent summary plan description
and annual report, and (iii) the most recent actuarial valuation. No event has
occurred for which, and there exists no condition or set of circumstances under
which, (A) any ERISA Affiliate or any such Employee Plan could be subject to any
material liability under Section 502(i) of ERISA or Section 4975 of the Code, or
(B) any ERISA Affiliate could incur
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any liability with respect to any such Employee Plan that is a multi-employer
plan, other than the payment of Pension Benefit Guaranty Corporation premiums
and contributions. With respect to each such Employee Plan, (I) each ERISA
Affiliate is in compliance in all material respects with the requirements
prescribed by all applicable Laws, including without limitation ERISA and the
Code, and Orders, and (II) there is no Proceeding (other than routine claims for
benefits) pending or, to Pentech's knowledge, threatened, with respect to any
such Employee Plan or against the assets of any such Employee Plan.
7.21 Except as set forth on Schedule 7.21, none of Pentech or any
Subsidiary is a party to any collective bargaining, union representation or
other labor contract or arrangement; none of Pentech or any Subsidiary has
received any Notice from any labor union or group of employees that such union
or group represents or intends to represent any of the employees of Pentech or
any Subsidiary; and, to Pentech's knowledge, no strike or work interruption by
any of its or any Subsidiary's employees is planned, under consideration,
threatened or imminent. At no time during the past five years has Pentech or any
Subsidiary experienced any strikes, work stoppages or demands for collective
bargaining by any union or labor organization or any other group of employees,
or been involved in or the subject of any grievance, dispute or controversy by
or with any union or labor organization or any other group of employees or any
pending or threatened Proceedings based on or related to any employment
grievance, dispute or controversy or received any Notice of any of the
foregoing.
7.22 Except in connection with the Plant Closing or as set forth on
Schedule 7.22, to Pentech's knowledge, no employee intends to terminate his or
her employment relationship with Pentech or any Subsidiary by reason of the
Merger or otherwise. Except as set forth on Schedule 7.22, no director, officer
or employee of, or consultant to, Pentech or a Subsidiary is or will become
entitled to receive any severance pay or any additional compensation or benefit
on account of this Agreement or the Merger, nor shall entering into this
Agreement or the consummation of the Merger result in the acceleration of the
time of vesting or payment of any compensation or benefit, except as provided in
Section 5.4. Except as set forth on Schedule 7.22, no Affiliate of Pentech or
any Subsidiary or any relative, associate or agent thereof has any
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interest in any Assets, including without limitation any contract for the
furnishing of services by, or rental of real or personal property from or to, or
requiring payments to, any such Affiliate.
7.23 Schedule 7.23 sets forth all memberships in resort, recreational or
entertainment facilities or organizations owned or paid for, or the dues for
which are borne, by Pentech or any Subsidiary and all vehicles, apartments and
other facilities owned, leased or operated by Pentech or any Subsidiary and not
listed on any other Schedule hereto. Pentech has delivered to JAKKS complete and
correct copies of all agreements referred to on Schedule 7.23.
7.24 Schedule 7.24 is a complete and correct list of the names and
addresses of the ten largest suppliers and ten largest customers of Pentech and
the Subsidiaries during Pentech's fiscal year ended September 30, 1999 and the
total sales to or purchases from such customers or suppliers made by Pentech and
the Subsidiaries during such fiscal year. No supplier or customer of Pentech and
the Subsidiaries representing in excess of 5% of their aggregate purchases or
sales during such fiscal year has advised Pentech or any Subsidiary, formally or
informally, that it intends to terminate, discontinue or substantially reduce
its business with Pentech or any Subsidiary by reason of the Merger or
otherwise.
7.25 All insurance maintained by Pentech or any Subsidiary is in full
force and effect. To Pentech's knowledge, no insurer intends to cancel or refuse
to renew any such insurance and there is no basis for any such cancellation or
non-renewal. No insurer has disputed or, to Pentech's knowledge, intends to
dispute any claim made under any policy and, to Pentech's knowledge, no event
has occurred and no circumstance exists which would excuse the performance by
any insurer of any of its obligations under any such policy with respect to such
claim. None of Pentech or any Subsidiary has been refused any insurance for
which it has applied, nor has any insurance carried by Pentech or any Subsidiary
been cancelled (other than at the request of Pentech or a Subsidiary).
7.26 Except as set forth on Schedule 7.26, (a) none of Pentech or any
Subsidiary, or any Affiliate thereof, has employed or engaged any Person to act
as a broker, finder or other
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intermediary in connection with the transactions contemplated hereby, and (b) no
Person is entitled to any fee, commission or other compensation relating to any
such employment or engagement by Pentech or any Subsidiary.
7.27 No representation or warranty by Pentech in this Agreement or any
other Merger Document contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained herein or
therein, in the light of the circumstances under which they were made, not
misleading.
8. Representations and Warranties of JAKKS.
JAKKS hereby represents and warrants to Pentech as follows:
8.1 Each of JAKKS and Newco is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware, and each
has full corporate power and authority to own its assets and carry on its
business as and in the places where such assets are located or such business is
conducted. Complete and correct copies of JAKKS' and Newco's respective
Certificates of Incorporation, including all amendments thereto, certified by
the Secretary of State of Delaware, and their respective Bylaws, including all
amendments thereto, certified by the secretaries of JAKKS and Newco,
respectively, have been delivered to Pentech. Newco has not conducted any
business to date (other than in connection with its organization and entering
into this Agreement) and is not required to have a Permit to transact business
as a foreign corporation in any jurisdiction. JAKKS owns beneficially and of
record all of the outstanding shares of Newco's capital stock free and clear of
all Liens or any restriction with respect to the voting or disposition thereof
(other than restrictions of general applicability imposed by federal or state
securities Laws), and all such shares are duly authorized, validly issued, fully
paid and nonassessable.
8.2 Each of JAKKS and Newco has full corporate power and authority to
execute and deliver this Agreement and each other Merger Document to which it is
a party and to assume and
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perform its obligations hereunder and thereunder. The execution and delivery of
this Agreement and each other Merger Document to which it is a party by JAKKS
and Newco and the performance of their respective obligations hereunder and
thereunder have been duly authorized by all requisite corporate action on the
part of each of them (including without limitation the adoption of this
Agreement and the approval of the Merger by JAKKS, as the sole stockholder of
Newco). This Agreement has been, and each other Merger Document to which it is a
party will be, duly executed and delivered by JAKKS and Newco, respectively, and
this Agreement is, and each other Merger Document to which it is a party, when
so executed and delivered, will be, a legally valid and binding obligation of
JAKKS and Newco, respectively, enforceable against each of them in accordance
with their respective terms, subject to (a) bankruptcy, insolvency,
reorganization, moratorium or other similar Laws now or hereafter in effect
relating to creditors' rights generally, and (b) equitable principles limiting
the availability of specific performance, injunctive relief and other equitable
remedies. The execution and delivery of this Agreement by JAKKS and Newco do
not, and the execution and delivery of each other Merger Document by JAKKS and
Newco and the performance by JAKKS and Newco of their respective obligations
hereunder and thereunder will not, violate any applicable Law or any provision
of their respective Certificates of Incorporation or Bylaws and do not and will
not conflict with or result in any breach of any condition or provision of, or
constitute a default under, or create or give rise to any adverse right of
termination or cancellation by, or excuse the performance of, any other Person,
or result in the creation or imposition of any Lien upon either of them or any
of their respective assets or the acceleration of the maturity or date of
payment or other performance of any obligation of either of them.
8.3 Except for the filing by JAKKS of an HSR Form and the expiration or
early termination of the waiting period under the HSR Act; the Notice required
to be given or made pursuant to ECRA and the issuance of a negative declaration
or administrative consent order by the NJDEPE; and the filing of the Certificate
of Merger with the Secretary of State of Delaware, no Consent of, or Notice to,
any Person is required as to JAKKS or Newco in connection with its execution and
delivery of this Agreement or any other Merger Document to which it is a party,
or the performance of its obligations hereunder or thereunder, or the
consummation of the Merger.
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8.4 No Proceeding is pending, or, to JAKKS' knowledge, threatened
against or affecting the business, assets or operations of JAKKS or Newco in
which an unfavorable Order would prohibit, invalidate or make unlawful, in whole
or in part, this Agreement or any other Merger Document, or the carrying out of
the provisions hereof or thereof or the transactions contemplated hereby or
thereby. There is no Order enjoining JAKKS or Newco in respect of, or the effect
of which is to prohibit or curtail their performance of, their respective
obligations under this Agreement or any other Merger Document.
8.5 Neither JAKKS nor Newco has employed or engaged any Person to act as
a broker, finder or other intermediary in connection with the transactions
contemplated hereby, and no Person is entitled to any fee, commission or other
compensation relating to any such employment or engagement by JAKKS or Newco.
8.6 JAKKS has reserved cash sufficient to pay the Merger Consideration.
8.7 No representation or warranty by JAKKS in this Agreement or in any
other Merger Document contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained herein or
therein, in the light of the circumstances under which they were made, not
misleading.
9. Certain Covenants.
9.1 From and after the date hereof and until the Closing or the
termination of this Agreement, the parties hereto shall use their respective
commercially reasonable best efforts, and shall cooperate with each other, to
cause the consummation of the Merger in accordance with the terms and conditions
hereof, including without limitation giving any Notice to or obtaining the
Consent of any Governmental Authority, or any other Person with respect to any
Material Contract, in each case, by reason of the Merger. In particular, Pentech
and JAKKS shall use their respective commercially reasonable best efforts:
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(a) to obtain the environmental audit report(s) referred to in
Section 10.2(e), to give any Notice required under ECRA and to obtain any
Consent of the NJDEPE required to permit the consummation of the Merger
thereunder; and
(b) to file HSR Forms under the HSR Act as soon as practicable
after the date hereof and to obtain early termination of the waiting period,
including without limitation filing such additional documents and furnishing
such additional information as the Federal Trade Commission or the Antitrust
Division of the Department of Justice may request; provided that no provision
hereof shall require JAKKS or Pentech to divest any business or assets or to
hold any business or assets separate. The filing fees payable in respect of the
filing of the HSR Forms shall be payable by JAKKS.
9.2 As soon as practicable after Pentech's receipt of a Fairness
Opinion, Pentech shall prepare and file with the SEC preliminary proxy materials
relating to the Stockholders' Meeting, including the Notice of such meeting,
proxy statement and form of proxy, in accordance with the applicable provisions
of the Exchange Act, shall use its best efforts to file with the SEC such
additional documents and furnish to the SEC such additional information as the
SEC may request and otherwise respond to the SEC's comments, if any, on the
preliminary proxy materials and any such other documents or information. Pentech
shall make such changes in the proxy materials as are appropriate based on the
SEC's comments, if any, and shall cause the proxy materials to comply as to form
in all material respects with the requirements of the Exchange Act and shall
prepare and file definitive proxy materials in accordance with the applicable
provisions of the Exchange Act. Pentech shall provide to JAKKS a draft of any
proxy materials or other document to be filed with the SEC in connection with
the Stockholders' Meeting or the Merger and advise it of any information to be
furnished to the SEC at a reasonably sufficient time in advance in order to
allow JAKKS to review the same and give to Pentech any comments or suggestions
it may have thereon. Pentech shall also furnish to JAKKS copies of any
correspondence to or from the SEC relating to the proxy materials and advise
JAKKS of the SEC's comments, if any, thereon, and shall confer with JAKKS as to
the appropriate response thereto.
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Pentech shall pay the filing fee, if any, applicable to the filing of the proxy
materials with the SEC. JAKKS shall cooperate with Pentech in connection with
the preparation and filing of the proxy materials and in responding to any SEC
comments thereon, and shall provide to Pentech, at Pentech's request, any
information required to be included in the proxy materials (including in any
amendment or supplement thereto) in accordance with the Exchange Act and so that
the definitive proxy materials shall not at any time prior to or at the
Effective Time contain any misstatement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
9.3 Pentech shall take all actions required to call, give Notice of, and
hold the Stockholders' Meeting as soon as reasonably practicable after the date
hereof, including printing and mailing definitive proxy materials. Pentech shall
also take all lawful actions to solicit the Stockholder Approval, including
without limitation including in the definitive proxy materials the
recommendation of Pentech's Board of Directors in favor of the adoption of this
Agreement and the approval of the Merger, unless such recommendation or the
inclusion thereof in the definitive proxy materials would cause any of Pentech's
directors to breach his fiduciary duty or cause Pentech or any of its directors,
officers, employees or agents to violate any applicable Law.
9.4 From and after the date hereof, none of Pentech, any Subsidiary, any
Principal Stockholder, any Affiliate thereof, or any director, officer, employee
or other agent or representative of any of them, shall, directly or indirectly,
accept or solicit any inquiry, offer or proposal from any Person other than
JAKKS with respect to any transaction involving any sale or other disposition of
the Business or any Assets (other than in the ordinary course of business) or
any capital stock of Pentech or any Subsidiary. Pentech shall promptly advise
JAKKS of the receipt of any such inquiry, offer or proposal and the material
terms thereof.
9.5 Pentech shall not take any Alternative Action, except, subject to
the provisions of this Section and the payment of the Termination Fee, if
applicable, with respect to any Alternative Proposal that (a) is made in
writing, (b) Pentech's Board of Directors determines in good faith in the
exercise of its business judgment is reasonably capable of being completed on
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the terms proposed and if so completed would result in an Alternative
Transaction that, from a financial point of view, would be superior and more
beneficial to Pentech's stockholders than the Merger, and (c) Pentech's Board of
Directors determines in good faith that its failure to consider such Alternative
Proposal or to withdraw, modify or qualify its approval or recommendation of the
Merger would cause it to violate its fiduciary duties under applicable Law (a
"Superior Proposal"). Prior to entering into any negotiations or discussions
with any other Person with respect to, or furnishing confidential information or
otherwise responding to, any Superior Proposal, Pentech shall enter into a
confidentiality agreement with such Person (which agreement may not include any
provision granting to such Person an exclusive right to negotiate with Pentech
with respect to an Alternative Transaction). No provision hereof shall preclude
Pentech or its Board of Directors from complying with the requirements of Rule
14d-9 or Rule 14e-2 under the Exchange Act with regard to the Merger or any
Alternative Proposal. Subject to Pentech's compliance with the conditions of
this Section 9.5, prior to obtaining the Stockholder Approval, Pentech's Board
of Directors may withdraw its approval or recommendation of the Merger, or
modify or qualify such approval or recommendation, or approve or recommend a
Superior Proposal if Pentech shall give to JAKKS written Notice thereof at least
five (5) business days prior thereto. Unless this Agreement is terminated in
accordance with Article 12 prior to the Stockholders' Meeting, notwithstanding
Pentech's receipt of any Alternative Proposal or any Alternative Action, Pentech
shall hold the Stockholders' Meeting and call for a vote of its stockholders for
the adoption of this Agreement and the approval of the Merger.
9.6 Except as set forth on Schedule 9.6, from and after the date hereof
and until the Closing, except as otherwise provided elsewhere herein or as JAKKS
may otherwise consent (which consent may not be unreasonably withheld), Pentech
and each Subsidiary shall:
(a) conduct the Business in ordinary course;
(b) use commercially reasonable best efforts to preserve the
Business and Assets and maintain their respective relationships with customers
and other Persons with which they have material business dealings;
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(c) not enter into any Restrictive Agreement;
(d) not (i) sell, lease, transfer or dispose of any material
Asset, other than sales of merchandise from inventory in the ordinary course of
business or the disposal of defective, obsolete or otherwise unusable Assets or
(ii) terminate any Material Contract, except upon expiration of the term thereof
as provided therein;
(e) use commercially reasonable best efforts to maintain all
required Permits and Consents and to comply with all applicable Orders;
(f) use commercially reasonable best efforts to maintain in full
force and effect (or to replace on substantially equivalent terms) all currently
applicable insurance;
(g) except as required under any agreement applicable to Pentech
or a Subsidiary or in the ordinary course of business consistent with its past
practices, not increase the compensation or other employment benefits payable to
or for the benefit of any employee, or enter into, adopt or modify any Employee
Plan or other agreement, plan, commitment or arrangement to provide to any
employee or other Person any deferred compensation, retirement, severance or
other similar payment or benefit;
(h) not make any loan or advance or otherwise extend any credit
to any director or officer of Pentech or a Subsidiary or any Affiliate of any
such director or officer;
(i) not amend its certificate or articles of incorporation or
organization or Bylaws;
(j) not merge or consolidate with any other Person or purchase or
otherwise acquire any securities of, or other equity interest or participation
in, any Person (other than a Subsidiary);
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(k) other than pursuant to Pentech's current credit facility, not
incur or assume any Indebtedness in an amount in excess of $250,000;
(l) not purchase or otherwise acquire any securities of, or make
any other investment in, any Person or enter into or create any joint venture;
(m) not acquire (other than in the ordinary course of business)
the business or assets, substantially as a whole, of any other Person, or make
any capital expenditure in excess of $250,000;
(n) not declare, set aside or pay any dividend or make any other
distribution in cash, securities or other property, on or in respect of any
capital stock (other than a cash dividend or distribution by any Subsidiary to
Pentech or any other Subsidiary);
(o) not split or reverse-split any capital stock or effect any
other recapitalization or capital reorganization, or issue or reserve for
issuance any capital stock, other than upon the exercise of an Option
outstanding on the date hereof in accordance with the terms thereof, or issue or
grant any option, warrant or right to purchase, or security or instrument
convertible into or exercisable for, any capital stock; or
(p) enter into, adopt or assume any agreement, commitment or
arrangement which obligates Pentech or any Subsidiary to act or to refrain from
acting in violation of, or in a manner inconsistent with, any of the foregoing.
9.7 From and after the date hereof and until the Closing, Pentech shall
furnish to JAKKS such information with respect to the Business and Assets as
JAKKS may from time to time reasonably request and shall permit JAKKS and its
authorized representatives access, at a mutually-agreeable time during regular
business hours and upon reasonable Notice, to conduct a physical inventory of
the Assets, to inspect the Real Property, to examine the books and records
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<PAGE> 38
of Pentech or any Subsidiary and to make inquiries of responsible Persons
designated by Pentech with respect thereto; provided that any information so
disclosed to JAKKS shall not constitute an additional representation or warranty
of Pentech beyond those expressly set forth in Article 7; and provided further
that all such information shall be subject to Section 9.9.
9.8 From and after the date hereof and until the Closing, no party
hereto shall make any press release or other public announcement with respect to
this Agreement or the Merger, without the prior written consent of the other
parties (which consent shall not be unreasonably withheld), unless such
announcement is required by Law, in which case the other parties shall be given
Notice of such requirement prior to such announcement and the parties shall
consult with each other as to the scope and substance of such disclosure.
9.9 JAKKS and Newco acknowledge that certain information relating to or
concerned with the Business and the affairs of Pentech and the Subsidiaries,
including without limitation all Trade Rights, product information, customer and
supplier lists, marketing and sales data, personnel and financing and Tax
matters is proprietary and that its confidentiality is absolutely essential to
the operation of the Business. Until the Closing, such information shall be
subject to that certain Confidentiality and Non-Disclosure Agreement dated as of
November 19, 1999 to which the parties hereby agree to be bound and which is
incorporated herein by this reference.
9.10 From and after the Effective Time, JAKKS shall:
(a) cause Pentech, as the surviving corporation to, and Pentech,
as the surviving corporation shall, subject to any condition or limitation
provided by DGCL Section 145 or other applicable Law, indemnify each Person who
at any time prior to the Effective Time shall have been a director or officer of
Pentech or a Subsidiary and hold each such Person harmless from and against any
loss, liability, obligation, damage or expense, including reasonable attorneys'
fees and disbursements, which any of them may suffer or incur in connection with
any claim or Proceeding against any of them based upon or resulting from any act
or omission occurring at or prior to the Effective Time, including any acts or
omissions in connection with
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this Agreement or the Merger, in the same manner and to the same extent as is
provided in the certificate or articles of incorporation or organization, Bylaws
and any indemnification agreement of Pentech or a Subsidiary, as applicable, on
the date hereof;
(b) cause Pentech's Bylaws at all times during the six-year
period following the Closing Date to include provision for such indemnification
and a provision regarding the elimination or limitation of liability of all such
Persons in the manner and to the extent provided in the certificate or articles
of incorporation or organization, or the Bylaws of Pentech or a Subsidiary, as
applicable; and
(c) cause to be maintained throughout such six-year period
directors' and officers' liability insurance substantially equivalent to that
provided to such Persons by Pentech on the date hereof.
10. Conditions to Closing.
10.1 The obligation of the parties hereto to consummate the Merger in
accordance herewith shall be subject to the satisfaction (or waiver) at the
Effective Time of each of the following conditions:
(a) Pentech shall have received a Fairness Opinion;
(b) the Stockholder Approval shall have been obtained and be in
effect;
(c) the waiting period under the HSR Act shall have expired or
been terminated;
(d) no Order or Law shall be in effect which (i) makes illegal or
prohibits consummation of the Merger or (ii) would have a Material Adverse
Effect, and no Proceeding
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which could result in the enactment or adoption of any such Law or the issuance
of any such Order shall be pending;
(e) except for the filing of the Certificate of Merger, each
Consent of, or Notice to, any Governmental Authority required for the
consummation of the Merger and for the surviving corporation to conduct the
Business, including without limitation any Order or other action by the NJDEPE
under ECRA, shall have been obtained or given; and
(f) the Services Agreements shall have been executed and
delivered by the respective parties thereto.
10.2 The obligation of JAKKS and Newco to consummate the Merger in
accordance herewith shall also be subject to the satisfaction (or waiver) at the
Effective Time of each of the following conditions:
(a) each of the representations and warranties made by Pentech
herein that is qualified as to Material Adverse Effect shall be true, and each
of the representations and warranties made by Pentech herein that is not so
qualified shall be true in all material respects, at and as of the Effective
Time;
(b) Pentech shall have, in all material respects, performed and
complied with all obligations and conditions to be performed or complied with by
it hereunder;
(c) since the date of this Agreement, no event shall have
occurred and no circumstances shall have existed which has had or would have a
Material Adverse Effect;
(d) each holder of an Option that does not by its terms or
pursuant to the Option Plan under which it is granted terminate at the Effective
Time shall have executed and delivered to JAKKS an agreement terminating such
Option at the Effective Time;
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(e) JAKKS shall have received environmental audit report(s) from
environmental engineering or consulting firm(s) reasonably satisfactory to JAKKS
and Pentech (i) confirming that there is no material likelihood that the
aggregate cost of environmental site remediation or clean-up at any Real
Property or other facility or site (including without limitation for the
treatment, storage or disposal of Hazardous Materials and underground storage
tanks) listed on Schedule 7.17 or Schedule 7.18 located in the State of New
Jersey would exceed $75,000, and (ii) not indicating that there is any other
material environmental liability associated with any such Real Property or other
facility or site;
(f) JAKKS shall have received an opinion of Grotta, Glassman &
Hoffman, P.A., in form and substance reasonably satisfactory to JAKKS, to the
effect that Pentech has complied in all material respects with applicable Laws
relating to ERISA, labor and employment matters and confirming in substance
Pentech's representations and warranties in Sections 7.20, 7.21 and 7.22; and
(g) Pentech and the Subsidiaries shall execute and/or deliver at
the Closing all the documents so to be executed and/or delivered by them and
take all other actions at the Closing required to be taken by them pursuant to
Article 11.
10.3 The obligation of Pentech to consummate the Merger in accordance
herewith shall also be subject to the satisfaction (or waiver) prior to or at
the Closing of each of the following conditions:
(a) each of the representations and warranties made by JAKKS
herein shall be true in all material respects at and as of the Effective Time;
(b) JAKKS shall have, in all material respects, performed and
complied with all obligations and conditions to be performed or complied with by
it hereunder;
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(c) JAKKS shall have obtained the Consent of Bank of America,
N.A., as required under Pentech's current credit facility or shall have
satisfied and discharged all outstanding monetary obligations under such
facility; and
(d) JAKKS and Newco shall execute and/or deliver at the Closing
all the documents so to be executed and/or delivered by them and take all other
actions at the Closing required to be taken by them pursuant to Article 11.
11. Closing.
11.1 The Closing shall be held at the offices of Feder, Kaszovitz,
Isaacson, Weber, Skala & Bass LLP, 750 Lexington Avenue, New York, New York
10022 on the earliest practicable date, and in any event on or before the second
business day, after the satisfaction (or waiver) or all conditions to closing
provided in Article 10 (other than any condition which, by its terms, is to be
satisfied at the Closing), or at such other place or on such other date, and at
such time, as the parties hereto may agree. The execution and/or delivery of
each document to be executed and/or delivered at the Closing and each other
action to be taken at the Closing shall be subject to the condition that every
other document to be executed and/or delivered at the Closing is so executed
and/or delivered and every other action to be taken at the Closing is so taken,
and all such documents and actions shall be deemed to be executed and/or
delivered or taken, as the case may be, simultaneously.
11.2 At the Closing, Pentech shall:
(a) deliver to JAKKS the resignations, effective at the Effective
Time, of all of the respective directors and officers immediately prior to the
Effective Time of Pentech and each Subsidiary;
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(b) deliver to JAKKS a certificate of Pentech's chief executive
officer and chief financial officer to the effect that the conditions set forth
in Section 10.2 have been satisfied;
(c) deliver to JAKKS the agreements referred to in Section
10.2(d); and
(d) deliver to JAKKS such other agreements, instruments,
certificates and documents as JAKKS may reasonably request to effect the
consummation of the Merger.
11.3 At the Closing, JAKKS shall:
(a) cause the Certificate of Merger to be filed with the
Secretary of State of Delaware;
(b) deliver to the Paying Agent written Notice of the
effectiveness of the Merger, authorizing the Paying Agent to pay the Merger
Consideration;
(c) deliver to Pentech a certificate of JAKKS' chief executive
officer and chief financial officer to the effect that the conditions set forth
in Section 10.3 have been satisfied; and
(d) deliver to Pentech such other agreements, instruments,
certificates and documents as Pentech may reasonably request to effect the
consummation of the Merger.
12. Termination.
12.1 This Agreement may be terminated at any time prior to the
Closing:
(a) by the mutual agreement of JAKKS and Pentech;
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(b) by Pentech, if Pentech shall not have received a Fairness
Opinion on or before July 31, 2000;
(c) if the Closing shall not have occurred on or before November
30, 2000, or such later date to which JAKKS and Pentech may agree, by JAKKS or
Pentech, upon written Notice to such effect to the other;
(d) by JAKKS or Pentech at any time after the Stockholders'
Meeting, if the Stockholder Approval is not obtained;
(e) by JAKKS, if (i) there shall be any material breach of any
representation or warranty by, or any failure to perform any material covenant
or other obligation of, Pentech, and, unless such breach or failure is incapable
of being cured within a period of 30 days after the giving of written Notice
thereof to the breaching or defaulting party, JAKKS gives such Notice to such
party and such breach or failure shall not be cured within 30 days of the giving
of such Notice, upon written Notice of termination to Pentech; or (ii) an
Alternative Action shall have been taken;
(f) by Pentech, if (i) there shall be any material breach of any
representation or warranty by, or any failure to perform any material covenant
or other obligation of, JAKKS or Newco, and, unless such breach or failure is
incapable of being cured within a period of 30 days after the giving of written
Notice thereof to the breaching or defaulting party, Pentech gives such Notice
to such party and such breach or failure shall not be cured within 30 days of
the giving of such Notice, upon written Notice of termination to JAKKS; or (ii)
an Alternative Action shall have been taken with respect to a Superior Proposal
and Pentech shall have paid the Termination Fee to JAKKS.
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12.2 Subject to the rights of the other parties hereto, either
Constituent Corporation may, by resolution of its Board of Directors, abandon
the Merger prior to the Effective Time, notwithstanding that the stockholders of
either Constituent Corporation shall have approved and authorized the same.
12.3 Upon termination of this Agreement pursuant to Section 12.1, all
obligations of the parties shall terminate except those under Sections 12.4 and
12.5 and Article 13; provided that, except as provided in Section 12.5, no such
termination shall relieve any party hereto of any liability to any other party
by reason of any breach of or default under this Agreement.
12.4 If (a) this Agreement is terminated by JAKKS pursuant to Section
12.1(d) because any Principal Stockholder shall have failed to vote his shares
of Pentech Common Stock in favor of the Merger at the Stockholders' Meeting or
otherwise made any material misrepresentation or failed in any material respect
to comply with his obligations pursuant to the Voting Agreement, or pursuant to
Section 12.1(e)(ii); or (b) Pentech terminates this Agreement pursuant to
Section 12.1(f)(ii), Pentech shall pay to JAKKS a termination fee in the amount
of $1,000,000 (the "Termination Fee") within 15 days of such termination.
12.5 The Termination Fee shall constitute liquidated damages to JAKKS in
respect of all losses, liabilities, damages and expenses suffered or incurred by
JAKKS by reason of the termination of this Agreement or the failure of Pentech
to close the Merger under the circumstances referred to in Section 12.4 and
shall be in lieu of any other remedy or relief otherwise available to JAKKS by
reason thereof. The parties hereto acknowledge that it would be impracticable to
ascertain the amount of all losses, liabilities, damages and expenses (including
all legal fees and expenses relating to the Merger) that would be suffered or
incurred by JAKKS under the circumstances described in Section 12.4 and that the
amount of the Termination Fee represents a fair and reasonable estimate of such
losses, liabilities, damages and expenses and provides a reasonable and certain
amount to compensate JAKKS therefor.
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13. Miscellaneous.
13.1 Termination of Representations and Warranties. No representation or
warranty of any party hereto shall survive the Effective Time.
13.2 Limitation of Authority. Except as expressly provided herein, no
provision hereof shall be deemed to create any partnership, joint venture or
joint enterprise or association among the parties hereto, or to authorize or to
empower any party hereto to act on behalf of, obligate or bind any other party
hereto.
13.3 Fees and Expenses. Except as otherwise expressly provided herein,
each party hereto shall bear such fees and expenses as may be incurred by it in
connection with this Agreement and the Merger.
13.4 Notices. Any Notice or demand required or permitted to be given or
made hereunder to or upon any party hereto shall be deemed to have been duly
given or made for all purposes if (a) in writing and sent by (i) messenger or an
overnight courier service against receipt, or (ii) certified or registered mail,
postage paid, return receipt requested, or (b) sent by telegram, telecopy, telex
or similar electronic means, provided that a written copy thereof is sent on the
same day by postage-paid first-class mail, to such party at the following
address:
to JAKKS or Newco at: 22761 Pacific Coast Highway
Malibu, California 90265
Attn: President
Fax: (310) 317-8527
with a copy to: Feder, Kaszovitz, Isaacson,
Weber, Skala & Bass LLP
750 Lexington Avenue
New York, New York 10022
Attn: Murray L. Skala, Esq.
Fax: (212) 888-7776
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to Pentech at: Pentech International Inc.
195 Carter Drive
Edison, New Jersey 08817
Attn: President
Fax: (732) 287-3127
with copies to: Kalin & Associates, P.C.
1 Penn Plaza, Suite 1425
250 West 34th Street
New York, New York 10119
Attn: Richard S. Kalin, Esq.
Fax: (212) 239-8401
and
Camhy Karlinsky & Stein LLP
1740 Broadway, 16th Floor
New York, New York 10019-4315
Attn: Alan I. Annex, Esq.
Fax: (212) 977-8389
or such other address as any party hereto may at any time, or from time to time,
direct by Notice given to the other parties in accordance with this Section.
Except as otherwise expressly provided herein, the date of giving or making of
any such Notice or demand shall be, in the case of clause (a)(i), the date of
the receipt; in the case of clause (a)(ii), five business days after such Notice
or demand is sent; and, in the case of clause (b), the business day next
following the date such Notice or demand is sent.
13.5 Amendment. At any time prior to the Effective Time and
notwithstanding that the Stockholder Approval has been obtained, JAKKS and
Pentech may amend this Agreement, if such amendment is authorized and approved
by the respective Boards of Directors of the Constituent Corporations; provided
that, after the Stockholder Approval is obtained, no such amendment may be made
which is prohibited or which would require further action by Pentech's
stockholders, pursuant to DGCL section 251(d) or other applicable Law; and
provided further that no such amendment shall, unless each Principal Stockholder
agrees or otherwise consents in writing
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thereto, impose any additional obligation on such Principal Stockholder, as
such, or deprive such Principal Stockholder of any right, power or privilege,
other than as provided herein prior to such amendment. No amendment of this
Agreement shall be valid or effective, unless in writing and signed by or on
behalf JAKKS and Pentech.
13.6 Waiver. No course of dealing or omission or delay on the part of
any party hereto in asserting or exercising any right hereunder shall constitute
or operate as a waiver of any such right. No waiver of any provision hereof
shall be effective, unless in writing and signed by or on behalf of the party to
be charged therewith. No waiver shall be deemed a continuing waiver or waiver in
respect of any other or subsequent breach or default, unless expressly so stated
in writing.
13.7 Governing Law. This Agreement shall be governed by, and interpreted
and enforced in accordance with, the Laws of the State of Delaware without
regard to principles of choice of Law or conflict of Laws.
13.8 Jurisdiction. Each of the parties hereto hereby irrevocably
consents and submits to the jurisdiction of the Supreme Court of the State of
New York and the United States District Court for the Southern District of New
York in connection with any Proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby, waives any objection to venue
in the County of New York, State of New York, or such District, and agrees that
service of any summons, complaint, Notice or other process relating to such
Proceeding may be effected in the manner provided by clause (a)(ii) of
Section 13.4.
13.9 Remedies. In the event of any actual or prospective breach or
default by any party hereto, any other party hereto shall be entitled to
equitable relief, including remedies in the nature of rescission, injunction and
specific performance. Except as otherwise expressly provided in Section 13.5,
All remedies hereunder are cumulative and not exclusive, and nothing herein
shall be deemed to prohibit or limit any party from pursuing any other remedy or
relief
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available at law or in equity for such actual or prospective breach or default,
including the recovery of damages.
13.10 Severability. The provisions hereof are severable and in the event
that any provision of this Agreement shall be determined to be invalid or
unenforceable in any respect by a court of competent jurisdiction, the remaining
provisions hereof shall not be affected, but shall, subject to the discretion of
such court, remain in full force and effect, and any invalid or unenforceable
provision shall be deemed, without further action on the part of the parties
hereto, amended and limited to the extent necessary to render the same valid and
enforceable.
13.11 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and which together shall constitute one and
the same agreement.
13.12 Further Assurances. Each party hereto shall cooperate with the
other parties hereto and shall promptly execute, deliver, file or record such
agreements, instruments, certificates and other documents and perform such other
and further acts as any other party hereto may reasonably request or as may
otherwise be reasonably necessary or proper, to consummate and perfect the
transactions contemplated hereby.
13.13 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns. Except as provided in Section 10.10, this Agreement is not intended,
and shall not be deemed, to create or confer any right or interest for the
benefit of any Person not a party hereto.
13.14 Assignment. This Agreement, and each right, interest and
obligation hereunder, may not be assigned by any party hereto without the prior
written consent of the other parties hereto, and any purported assignment
without such consent shall be void and without effect.
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13.15 Titles and Captions. The titles and captions of the Articles and
Sections of this Agreement are for convenience of reference only and do not in
any way define or interpret the intent of the parties or modify or otherwise
affect any of the provisions hereof.
13.16 Grammatical Conventions. Whenever the context so requires, each
pronoun or verb used herein shall be construed in the singular or the plural
sense and each capitalized term defined herein and each pronoun used herein
shall be construed in the masculine, feminine or neuter sense.
13.17 Knowledge. The qualification or limitation of any statement made
herein to a party's "knowledge" or to a matter "known" to a party refers to the
actual knowledge (but not imputed or constructive knowledge) of the directors,
officers and operational managers of such party, after reasonable due inquiry.
13.18 References. The terms "herein," "hereto," "hereof," "hereby" and
"hereunder," and other terms of similar import, refer to this Agreement as a
whole, and not to any Article, Section or other part hereof.
13.19 No Presumptions. Each party hereto acknowledges that it has
participated, with the advice of counsel, in the preparation of this Agreement.
No party hereto is entitled to any presumption with respect to the
interpretation of any provision hereof or the resolution of any alleged
ambiguity herein based on any claim that any other party hereto drafted or
controlled the drafting of this Agreement.
13.20 Incorporation by Reference. The Exhibits and Schedules hereto are
an integral part of this Agreement and are incorporated in their entirety herein
by this reference.
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13.21 Entire Agreement. This Agreement embodies the entire agreement of
the parties hereto with respect to the subject matter hereof and supersedes any
prior agreement, commitment or arrangement relating thereto.
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IN WITNESS WHEREOF, JAKKS and the Constituent Corporations, by their
respective duly authorized officers, and the Principal Stockholders have duly
executed this Agreement as of the date set forth in the Preamble hereto.
PENTECH INTERNATIONAL INC. JAKKS PACIFIC, INC.
By: /s/ DAVID MELNICK By: /s/ JACK FRIEDMAN
----------------------------- ------------------------------------
Name: David Melnick Name: Jack Friedman
Title: Chief Executive Officer Title: Chairman (Chief Executive
Officer)
JAKKS ACQUISITION II, INC.
By: /s/ JACK FRIEDMAN
------------------------------------
Name: Jack Friedman
Title: President (Chief Executive
Officer)
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INDEX TO EXHIBITS AND SCHEDULES
Exhibit A Form of Certificate of Merger
Exhibit B Norman Melnick Services Agreement
Exhibit C David Melnick Services Agreement
Exhibit D Richard S. Kalin Consulting Agreement
Schedule 1.46 Option Plans
Schedule 1.64 Subsidiaries
Schedule 7.1 Foreign Qualification
Schedule 7.2 Authority
Schedule 7.5 Consents and Notices
Schedule 7.6 Proceedings
Schedule 7.7 Capitalization
Schedule 7.8 Subsidiaries
Schedule 7.9 Liabilities
Schedule 7.10 Material Adverse Changes
Schedule 7.11 Liens
Schedule 7.12 Significant Contracts
Schedule 7.13 Inventory - Exceptions
Schedule 7.15 Permits and Consents - Exceptions
Schedule 7.16 Trade Rights
Schedule 7.17 Real Property
Schedule 7.18 Hazardous Material
Schedule 7.19 Taxes, Customs and Duties
Schedule 7.20 Employee Plans
Schedule 7.21 Labor
Schedule 7.22 Employees, Etc.
Schedule 7.23 Benefits
Schedule 7.24 Suppliers and Customers
Schedule 7.26 Brokers - Exceptions
Schedule 9.6 Exceptions from Ordinary Course
Exhibits and schedules omitted. JAKKS agrees to furnish supplementally to the
Securities and Exchange Commission, upon request, a copy of any such exhibit or
schedule.
