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Exhibit (d)(5)
ZALE CORPORATION
July 7, 2000
Piercing Pagoda, Inc.
3910 Adler Place
P.O. Box 25007
Lehigh Valley, PA 18002
Attention: Richard H. Penske
Re: Proposed Acquisition (the "Proposed Acquisition") of Piercing
Pagoda, Inc. ("PPI") by Zale Corporation ("Zale")
Ladies and Gentlemen:
Zale and PPI have held preliminary discussions regarding the Proposed
Acquisition, and, as a result, Zale is beginning a due diligence review of PPI.
In connection therewith, Zale has requested that PPI and Richard H. Penske
("Penske") agree to the terms contained in this letter:
1. Negotiation Standstill. From the date hereof through August
15, 2000, PPI and Penske shall not nor shall they authorize or permit any of
PPI's officers, directors, employees, representatives, advisors or agents to
directly or in directly: (a) enter into any agreement or understanding with,
enter into any discussion with, or solicit offers from or enter into
negotiations with, any person or entity, whether solicited or unsolicited, for
the purchase or sale, regardless of structure, of any substantial portion of the
stock or assets of PPI, outside the ordinary course of business, whether by
merger or otherwise (each a "Prohibited Transaction"); (b) furnish to any person
or entity any information with respect to, or otherwise assist, participate in,
cooperate with, facilitate or encourage, any Prohibited Transaction; or (c)
consummate or agree to consummate any Prohibited Transaction in the case of each
of clauses (a), (b) and (c), other than with Zale. In the event PPI or Penske
commits a knowing material breach of the provisions of this Section 1, then PPI
shall immediately make a cash payment to Zale (as liquidated damages) in the
amount of One Million Dollars ($1,000,000). It is Zale's current intention that,
through August 15, 2000 and only with respect to any acquisition opportunity, it
will focus its primary time and attention to the Proposed Acquisition.
2. No Public Announcement. No public announcement (excluding
permitted discussions pursuant to the due diligence to be conducted hereunder)
shall be made by Zale or PPI with regard to the Proposed Acquisition or its
terms without the prior written agreement of Zale or PPI; provided, however,
that each party may make such disclosure if upon advice of counsel it determines
in good faith that it is required to do so by applicable law, court order or
rules of the NASDAQ Stock Market. To the extent reasonably practicable, Zale and
PPI will
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discuss any written public announcements or disclosures concerning the Proposed
Acquisition with one another prior to making such announcement or disclosure.
3. Binding Effect. It is the express intention of Zale, PPI and
Penske that the provisions contained in the letter be binding on each of them
and their respective heirs, representatives, successors and assigns; provided,
however, no party hereto shall have any obligation to consummate the Proposed
Acquisition, except as provided in a definitive merger agreement if and when
executed by Zale and PPI. Nothing herein shall limit or modify the Mutual
Non-Disclosure Agreement dated as of March 28, 2000 between PPI and Zale.
4. Governing Law. The provisions in this letter will be governed
by and construed in accordance with the laws of the State of Delaware.
5. Termination. This letter shall terminate and be of no further
force or effect upon the first to occur of the following:
(a) by mutual written agreement of Zale and PPI;
(b) without action by any party, on August 15, 2000; or
(c) by PPI upon payment of the amount referred to in
Section 1 of this letter.
If the foregoing accurately reflects your understanding with respect to
the subject matter contained herein, please execute the duplicate copy of this
letter and return it to the undersigned as soon as possible. The other copy is
for your records.
Very truly yours,
ZALE CORPORATION
By: /s/ Alan P. Shor
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Title: Chief Operating Officer
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Accepted and agreed to this 7th day of
July, 2000
PIERCING PAGODA, INC.
By: /s/ John Eureyecko
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Title: President
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/s/ Richard H. Penske
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Accepted By: Richard H. Penske
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