AGREEMENT OF MERGER
OF
JAKKS ACQUISITION II, INC.
WITH AND INTO
PENTECH INTERNATIONAL INC.
Dated as of May 22, 2000
T A B L E O F C O N T E N T S
Section Page
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
<PAGE>
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.
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.
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.
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 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.
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.
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.
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, Governmental 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.
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.
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.
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.
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.
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 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 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 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.
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
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 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 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
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;
(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.
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 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 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 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 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 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 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.
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:
(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. 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 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;
(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);
(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 aysical inventory of the
Assets, to inspect the Real Property, to examine the books and records
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
concernedwith 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 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 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;
(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;
(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;
(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;
(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.
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.
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
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 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 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
nterest 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.
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.
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.
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)
A:\APPENDIX.A
