AGREEMENT AND PLAN OF MERGER
dated as of August 11, 2000
by and among
Zale Corporation
Jewelry Expansion Corp.
and
Piercing Pagoda, Inc.
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TABLE OF CONTENTS
Page
ARTICLE I THE OFFER.........................................23
1.01 The Offer..............................................23
1.02 Company Actions.......................................25
1.03 Board of Directors and Committees; Section 14(f)......26
ARTICLE II THE MERGER.......................................27
2.01 The Merger............................................27
2.02 Effective Time........................................27
2.03 Effects of the Merger.................................27
2.04 Certificate of Incorporation and By-Laws..............27
2.05 Directors.............................................27
2.06 Officers..............................................28
2.07 Conversion of Shares..................................28
2.08 Employee Stock Options................................28
2.09 Conversion of Purchaser Common Stock..................28
2.10 Stockholders' Meeting.................................28
2.11 Merger Without Meeting of Stockholders................29
2.12 Closing...............................................29
ARTICLE III DISSENTING SHARES; EXCHANGE OF SHARES...........30
3.01 Dissenting Shares.....................................30
3.02 Exchange of Shares....................................30
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY....31
4.01 Organization..........................................31
4.02 Capitalization; Subsidiaries..........................31
4.03 Authority Relative to this Agreement..................32
4.04 Absence of Certain Changes............................33
4.05 No Undisclosed Liabilities............................33
4.06 Reports...............................................33
4.07 Offer Documents; Proxy Statements; Other Information..34
4.08 Consents and Approvals; No Violation..................34
4.09 Litigation, etc.......................................35
4.10 Title to Properties; Encumbrances.....................35
4.11 Benefit Plans.........................................36
4.12 Compliance With Agreements; Law.......................38
4.13 Patents, Trademarks, Trade Names, etc.................38
4.14 Taxes.................................................39
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER 43
5.01 Organization and Good Standing........................43
5.02 Authority Relative to this Agreement..................43
5.03 Consents and Approvals; No Violation..................44
5.04 Offer Documents; Proxy Statement......................44
5.05 Financing.............................................45
ARTICLE VI COVENANTS........................................45
6.01 Conduct of Business of the Company....................45
6.02 No Solicitation, etc..................................46
6.03 Access to Information.................................49
6.04 Reasonable Best Efforts................................49
6.05 Public Announcements..................................50
6.06 Indemnification; Insurance............................50
6.07 Employment Contracts, Benefits, etc...................51
6.08 Purchase of Shares....................................52
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6.09 Notification of Certain Matters.......................52
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER........53
7.01 Conditions to Each Party's Obligation to Effect the Merger 53
ARTICLE VIII TERMINATION; AMENDMENTS; WAIVER................53
8.01 Termination...........................................53
8.02 Effect of Termination.................................56
8.03 Amendment.............................................57
8.04 Extension; Waiver.....................................57
ARTICLE IX MISCELLANEOUS....................................57
9.01 Survival of Representations and Warranties............57
9.02 Brokerage Fees and Commissions........................58
9.03 Entire Agreement; Assignment..........................58
9.04 Validity..............................................58
9.05 Notices...............................................58
9.06 Governing Law.........................................59
9.07 Descriptive Headings..................................59
9.08 Counterparts..........................................60
9.09 Expenses..............................................60
9.10 Third Party Beneficiaries.............................60
9.11 Certain Definitions...................................60
9.12 Consent to Jurisdiction...............................61
9.13 Construction; Interpretation..........................61
Conditions of the Offer.....................................63
Agreement and Plan of Merger................................66
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 11, 2000, by and among
Piercing Pagoda, Inc., a Delaware corporation (the "Company"), Zale Corporation,
a Delaware corporation ("Parent"), and Jewelry Expansion Corp., a Delaware
corporation and a wholly owned subsidiary of Parent ("Purchaser").
W I T N E S S E T H :
WHEREAS, the Boards of Directors of Parent, Purchaser and the Company
deem it advisable and in the best interests of the respective stockholders of
such corporations to effect the merger of the Purchaser with and into the
Company (the "Merger") upon the terms and subject to the conditions set forth
herein; and
WHEREAS, the respective Boards of Directors of Parent, Purchaser and the
Company have approved the acquisition of the Company by Parent and, in
furtherance of such acquisition, Parent proposes to cause Purchaser to make a
cash tender offer for all of the issued and outstanding shares of common stock,
par value $.01 per share (the "Common Stock"), of the Company, on the terms
specified herein and the Board of Directors of the Company has approved the
tender offer and recommended that it be accepted by the stockholders of the
Company.
WHEREAS, certain stockholders of the Company have indicated their
intention to execute and deliver a Tender and Voting Agreement, in the form
attached hereto as Exhibit A (the "Tender and Voting Agreement"), pursuant to
which, subject to the terms and conditions contained therein, such stockholders
shall tender all Shares owned by them into the Offer and vote their shares of
Common Stock in favor of the transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements hereinafter contained, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
bound hereby the parties hereto agree as follows:
ARTICLE ITHE OFFER
SECTION 1.01 The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Article VIII hereof and so long as none of the events
set forth in Annex A hereto shall have occurred or be continuing,
Purchaser shall, and Parent shall cause Purchaser to, as promptly as
practicable commence (within the meaning of the applicable rules and
regulations of the Securities and Exchange Commission (the "SEC")
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) an offer to purchase for cash (the "Offer") any and all
of the issued and outstanding shares of Common Stock (the "Shares") at a
price of $21.50 per Share, net to
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the seller in cash. For purposes of this Agreement, the term
"Transaction Consideration" shall mean $21.50 per Share in cash or any
higher price as shall be paid in respect of the Shares in the Offer. The
obligations of Purchaser to commence the Offer and to accept for payment
and to pay for any Shares tendered shall be subject to only the
conditions set forth in Annex A hereto (any or all of which may, subject
to the provisions hereof, be waived by Parent or Purchaser, subject to
applicable law). The initial expiration date of the Offer shall be the
20th business day following the commencement of the Offer determined
using Rule 14d-2 under the Exchange Act, unless this Agreement is
terminated in accordance with Article VIII, in which case the Offer
(whether or not previously extended in accordance with the terms hereof)
shall expire on such date of termination. Without the prior written
consent of the Company, Purchaser shall not (i) decrease the Transaction
Consideration, (ii) decrease the number of Shares to be purchased in the
Offer, (iii) change the form of consideration payable in the Offer, (iv)
add to or change the conditions to the Offer set forth in Annex A, (v)
waive the Minimum Condition (as defined in Annex A) or (vi) make any
other change in the terms or conditions of the Offer in any manner
materially adverse to the holders of Shares. Notwithstanding the
foregoing, Purchaser may, without the consent of the Company, (i) extend
the Offer in increments of not more than ten business days each, if at
the then scheduled expiration date of the Offer any of the conditions to
Purchaser's obligation to purchase Shares are not satisfied, until such
time as such conditions are satisfied or waived, (ii) extend the Offer
for any period required by any rule, regulation, interpretation or
position of the SEC or the staff thereof applicable to the Offer and
(iii) make available a subsequent offering period (within the meaning of
Rule 14d-11 under the Exchange Act). Without limiting the right of
Purchaser to extend the Offer, provided that this Agreement shall not
have been terminated in accordance with Article VIII hereof, if the
conditions set forth in Annex A are not satisfied or, to the extent
permitted hereby, waived by Purchaser as of the date the Offer would
otherwise have expired, then, except to the extent that such conditions
are incapable of being satisfied, at the request of the Company
Purchaser will extend the Offer from time to time until the earlier of
the consummation of the Offer or the Final Date (as defined in Section
9.11). Purchaser shall, subject to the terms and conditions of the
Offer, accept for payment Shares validly tendered and not withdrawn
promptly after expiration of the Offer in compliance with Rule 14e-1(c)
promulgated under the Exchange Act.
(b) On the date the Offer is commenced, Parent and Purchaser shall
file with the SEC a Tender Offer Statement on Schedule TO with respect
to the Offer, which shall contain an offer to purchase and a related
letter of transmittal and summary advertisement (such Schedule TO and
the documents included therein pursuant to which the Offer will be made,
together with any amendments or supplements thereto, the "Offer
Documents"). The Company and its counsel shall be given an opportunity
to review the Offer Documents prior to their being filed with the SEC.
Each of Parent, Purchaser and the Company shall promptly correct any
information provided by it for use in the Offer Documents if and to the
extent that such information shall have become
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false or misleading in any material respect, and each of Parent and
Purchaser shall take all steps necessary to amend or supplement the
Offer Documents and to cause the Offer Documents as so amended or
supplemented to be filed with the SEC and to be disseminated to the
Company's stockholders, in each case as and to the extent required by
applicable federal securities laws. Parent and Purchaser shall provide
the Company and its counsel in writing with any comments Parent, the
Purchaser or their counsel may receive from the SEC or its staff with
respect to the Offer Documents promptly after the receipt of such
comments.
SECTION 1.02 Company Actions. Subject to the right of the Board of
Directors of the Company to take action permitted by Section 6.02(b), the
Company hereby consents to the Offer and represents that (a) its Board of
Directors (at a meeting duly called and held) has duly adopted resolutions
unanimously (i) declaring that each of the Offer and the Merger is in the best
interests of the Company and its stockholders and is advisable and fair to the
stockholders of the Company, (ii) approving the Offer and the Merger and
approving this Agreement and the Tender and Voting Agreement, and (iii)
recommending acceptance of the Offer and approval and adoption of the Agreement
by the stockholders of the Company and (b) ING Barings has delivered to the
Company's Board of Directors its opinion that the cash consideration to be
received by the holders of the Common Stock in the Offer and the Merger is fair
to such stockholders from a financial point of view. The Company hereby consents
to the inclusion in the Offer Documents of the recommendation of the Company's
Board of Directors described above in this Section 1.02, and shall not withdraw
or modify such recommendation, except in accordance with Section 6.02(b). The
Company shall provide for inclusion in the Offer Documents any information
reasonably requested by Parent or Purchaser, and to the extent requested by
Parent or Purchaser, the Company shall cooperate in the preparation of the Offer
Documents. As soon as practicable on or prior to the later of (x) as soon as
practicable after the date the Offer Documents are filed with the SEC or (y)
seven business days after the date of this Agreement, the Company shall file
with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 with
respect to the Offer, including an appropriate information statement
("Information Statement") under Rule 14f-1 (such Schedule 14D-9 and Information
Statement, as amended from time to time, the "Schedule 14D-9") and shall mail
the Schedule 14D-9 to the holders of Shares. The Schedule 14D-9 shall contain
the recommendation described above, unless such recommendation has been
withdrawn or modified in accordance with Section 6.02(b). Parent and its counsel
shall be given a reasonable opportunity to review the Schedule 14D-9 prior to
its being filed with the SEC. Each of Parent, Purchaser and the Company shall
promptly correct any information provided by it for use in the Schedule 14D-9 if
and to the extent that such information shall have become false or misleading in
any material respect, and the Company shall take all steps necessary to amend or
supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or
supplemented to be filed with the SEC and to be disseminated to the Company's
stockholders, in each case as and to the extent required by applicable federal
securities laws. The Company shall provide Parent and its counsel in writing
with any comments the Company or its counsel may receive from the SEC or its
staff with respect to the Schedule 14D-9 promptly after the receipt of such
comments. In connection with the Offer, provided that this Agreement shall not
have been terminated in accordance with Article VIII hereof, the Company will,
or will cause its transfer agent to, promptly furnish Purchaser with
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mailing labels, security position listings and any available listing or computer
file containing the names and addresses of the record holders of the Shares as
of the most recent practicable date, and shall furnish Purchaser with such
additional information (including, but not limited to, updated lists of holders
of the Shares and their addresses, mailing labels and lists of security
positions) and assistance as Purchaser or its agents may reasonably request in
communicating the Offer to the stockholders of the Company. Subject to the
requirements of law, and except for such steps as are necessary to disseminate
the Offer Documents, Parent and Purchaser shall hold in confidence the
information contained in any of such labels and lists and the additional
information referred to in the preceding sentence, will use such information
only in connection with the Offer and, if this Agreement is terminated, will
upon request deliver to the Company all copies of such information then in its
possession.
SECTION 1.03 Board of Directors and Committees; Section 14(f).
(a) Subject to the requirements of applicable law, promptly upon
the purchase by Purchaser of Shares pursuant to the Offer and from time
to time thereafter, Purchaser shall be entitled to designate up to such
number of directors, rounded up to the next whole number, on the Board
of Directors of the Company (the "Board") as will give Purchaser
representation on the Board equal to the product of the number of
directors on the Board, after giving effect to such representation, and
the percentage that such number of Shares so purchased bears to the
total number of issued and outstanding Shares, and the Company shall use
its reasonable best efforts to, upon request by Purchaser, promptly, at
the Company's election, either increase the size of the Board or secure
the resignation of such number of directors as is necessary to enable
Purchaser's designees to be elected to the Board and shall cause
Purchaser's designees to be so elected. At such times the Company will
use its reasonable best efforts to cause individuals designated by
Purchaser to constitute the same percentage as is on the Board of (i)
each committee of the Board (other than any committee of the Board
established to take action under this Agreement), (ii) each board of
directors of each subsidiary of the Company designated by Purchaser and
(iii) each committee of each such board. Notwithstanding the foregoing,
the Company shall use its reasonable best efforts to ensure that all of
the members of the Board and its committees and such boards and
committees of the Company's subsidiaries, as of the date hereof who are
not employees of the Company and who are not otherwise affiliated with
Purchaser shall remain members of the Board and such boards and
committees until the Effective Time (as defined in Section 2.02).
(b) The Company's obligations to appoint designees to the Board
shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. The Company shall promptly take all actions
required pursuant to Section 14(f) and Rule 14f-1 in order to fulfill
its obligations under this Section 1.03, including mailing to its
stockholders an Information Statement containing the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 thereunder.
Parent or Purchaser will supply to the Company in writing and be solely
responsible for any information so supplied with respect to any of them
and their nominees,
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officers, directors and affiliates required by Section 14(f) and Rule
14f-1 to be included in the Information Statement.
(c) Following the election or appointment of Purchaser's designees
pursuant to this Section 1.03 and prior to the Effective Time, any
amendment of this Agreement or the Restated Certificate of Incorporation
or By-Laws of the Company, any extension by the Company of the time for
the performance of any of the obligations or other acts of Parent or
Purchaser or waiver of any of the Company's rights hereunder, will
require the concurrence of a majority of the directors of the Company
then in office who are neither designated by Purchaser, employees of the
Company or any of its subsidiaries nor otherwise affiliated with
Purchaser.
SECTION 1.04 Company Board Approval Under Section 203 the General
Corporation Law of the State of Delaware (the "DGCL"). On or prior to the date
hereof, the Company's Board of Directors shall have approved this Agreement and
taken all other necessary actions under Section 203 of the DGCL to cause the
transactions contemplated hereby, not to be governed by such Section 203 of the
DGCL or be subject thereto.
ARTICLE IITHE MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the DGCL, Purchaser shall be merged with and into
the Company as soon as practicable following the satisfaction or waiver, if
permissible, of the conditions set forth in Article VII hereof. Following the
Merger the Company shall continue as the surviving corporation (the "Surviving
Corporation") and the separate corporate existence of Purchaser shall cease.
SECTION 2.02 Effective Time. The Merger shall be consummated, as and
when provided in Section 2.12 hereof, by filing with the Secretary of State of
the State of Delaware a certificate of merger or a certificate of ownership and
merger in such form as is required by, and executed in accordance with, the
relevant provisions of the DGCL (the time of such filing being the "Effective
Time").
SECTION 2.03 Effects of the Merger. The Merger shall have the effects
set forth in Section 259 of the DGCL and from and after the Effective Time, the
Surviving Corporation shall possess all the rights, privileges, powers and
franchises and be subject to all of the restrictions, disabilities, liabilities
and duties of the Company and Purchaser. As of the Effective Time, the Company
shall be a wholly owned subsidiary of Parent.
SECTION 2.04 Certificate of Incorporation and By-Laws. The Restated
Certificate of Incorporation and the By-Laws of the Company shall be the
Certificate of Incorporation and By-Laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by law.
SECTION 2.05 Directors. The directors of Purchaser immediately prior to
the Effective Time shall constitute the Board of Directors of the Surviving
Corporation until their respective successors are duly elected and qualified.
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SECTION 2.06 Officers. The officers of the Company immediately prior to
the Effective Time shall be the officers of the Surviving Corporation until
their respective successors are duly elected and qualified.
SECTION 2.07 Conversion of Shares. Each Share issued and outstanding
immediately prior to the Effective Time (other than Shares held by Parent, the
Company or any subsidiary of Parent or of the Company, which shall be canceled
and retired and cease to exist, and Dissenting Shares (as hereinafter defined))
shall, by virtue of the Merger and without any action on the part of the holder
thereof, shall be converted into the right to receive the Transaction
Consideration in respect of such Shares in cash, payable to the holder thereof,
without interest thereon, upon surrender of the certificate representing such
Share. The Company acknowledges and agrees that payment of the Transaction
Consideration to the stockholders of the Company in respect of the foregoing
conversion of Shares in the Merger shall be subject to applicable withholding
taxes, if any.
SECTION 2.08 Employee Stock Options. Immediately prior to the Effective
Time, all outstanding options to purchase Shares granted by the Company (whether
or not then presently exercisable) (the "Options") will be canceled and in
consideration of such cancellation each holder thereof will be entitled to
receive a payment in cash (subject to any applicable withholding taxes), at the
Effective Time, equal to the product of (i) the total number of Shares subject
to the Option (including Options not currently exercisable) and (ii) the excess,
if any, of the Transaction Consideration over the exercise price per Share
subject to such Option. If and to the extent required by the terms of the plans
governing such Options or pursuant to the terms of any Option granted
thereunder, each of Parent and the Company shall use its reasonable best efforts
to obtain the consent of each holder of outstanding Options to the foregoing
treatment of such Options.
SECTION 2.09 Conversion of Purchaser Common Stock. Each share of common
stock, par value $.01 per share, of Purchaser issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and exchangeable for
one share of common stock of the Surviving Corporation.
SECTION 2.10 Stockholders' Meeting. If required by applicable law, in
order to consummate the Merger, the Company, acting through its Board, shall:
(a) duly call, give notice of, convene and hold a special meeting
(the "Special Meeting") of its stockholders as soon as practicable
following the expiration or termination of the Offer at which this
Agreement shall be submitted to the Company's stockholders for the
purpose of acting on this Agreement;
(b) use its reasonable efforts to prepare and file a preliminary
Proxy Statement with the SEC, and after consultation with Parent, to
respond promptly to comments of the SEC, if any, in connection therewith
and to furnish all information regarding the Company required in the
definitive Proxy Statement and to cause the Proxy Statement to be mailed
to its
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stockholders at the earliest practicable time following the expiration
or termination of the Offer;
(c) Subject to the Board's fiduciary duties under applicable law,
the Board shall recommend that the stockholders of the Company vote in
favor of approval and adoption of this Agreement at the Special Meeting,
and shall cause such recommendation to be included in the Proxy
Statement;
(d) use its reasonable efforts deemed necessary and advisable to
secure the vote of stockholders required by applicable law, the
Company's Restated Certificate of Incorporation and the Company's
By-Laws for adoption of this Agreement by the Company's stockholders.
Parent agrees that, at the Special Meeting, it shall cause all of the
Shares then owned by Parent, Purchaser or any other direct or indirect
subsidiary of Parent to be voted for adoption of this Agreement.
SECTION 2.11 Merger Without Meeting of Stockholders. Notwithstanding the
foregoing, in the event that Purchaser, or any other direct or indirect
subsidiary of Parent, shall acquire at least ninety percent (90%) of the
outstanding Shares, the parties hereto agree, at the request of Parent or
Purchaser, to take all necessary and appropriate action to cause the Merger to
become effective, as soon as practicable after the expiration of the Offer,
without a meeting of stockholders of the Company, in accordance with Section 253
of the DGCL.
SECTION 2.12 Closing. Upon the terms and subject to the conditions
hereof, as soon as practicable after consummation of the Offer and after the
vote of the stockholders of the Company in favor of the approval of this
Agreement has been obtained, if applicable, the Company shall execute in the
manner required by the DGCL and deliver to the Secretary of State of the State
of Delaware a duly executed and verified certificate of merger as required by
the DGCL (or Purchaser shall execute in the manner required by the DGCL and
deliver to the Secretary of State of the State of Delaware a duly executed and
verified certificate of ownership and merger) and the parties shall take such
other and further actions as may be required by law to make the Merger
effective. Prior to the filings referred to in this Section 2.12, a closing (the
"Closing") will be held at the offices of Wolf, Block, Schorr and
Solis-Cohen,LLP, 250 Park Avenue, New York, NY 10177 (or such other place as the
parties may agree) for the purpose of confirming all of the foregoing.
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ARTICLE IIIDISSENTING SHARES; EXCHANGE OF SHARES
SECTION 3.01 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Shares which are issued and outstanding immediately
prior to the Effective Time and which are held by stockholders who object to the
Merger and comply with all of the relevant provisions of Section 262 of the DGCL
(the "Dissenting Shares") shall not be converted into or be exchangeable for the
right to receive the consideration provided in Section 2.07 of this Agreement
but shall instead be entitled to receive payment of the appraised value of such
Shares in accordance with the relevant provisions of such Section 262, unless
and until such holders shall have failed to perfect or shall have effectively
withdrawn or lost their rights to appraisal and payment under the DGCL. If any
such holder shall have so failed to perfect or shall have effectively withdrawn
or lost such right, such holder's Shares shall thereupon be deemed to have been
converted into and to have become exchangeable for, at the Effective Time, the
right to receive the consideration provided in Section 2.07.
SECTION 3.02 Exchange of Shares.
(a) Prior to the Effective Time, Parent shall designate a bank or
trust company or similar entity reasonably acceptable to the Company
which is authorized to exercise corporate trust or stock powers to act
as Exchange Agent in the Merger (the "Exchange Agent"). At the Effective
Time, Parent will provide the Exchange Agent funds necessary to make the
cash payments contemplated by Section 2.07.
(b) Promptly after the Effective Time, Parent shall cause the
Exchange Agent to mail to each record holder, as of the Effective Time,
of an outstanding certificate or certificates which immediately prior to
the Effective Time represented outstanding Shares (the "Certificates"),
one or more forms of a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates
to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificate or payment therefor. Upon surrender to the
Exchange Agent of a Certificate, together with such letter of
transmittal duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor, and Parent shall cause the
Exchange Agent to promptly so pay, cash in an amount equal to the
product of the number of Shares represented by such Certificate
multiplied by the amount of the Transaction Consideration with respect
to Shares, and such Certificate shall then be canceled. No interest will
be paid or accrued on the cash payable upon the surrender of any
Certificate. If payment is to be made to a person other than the person
in whose name the Certificate surrendered is registered, it shall be a
condition of payment that the Certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer and that the
person requesting such payment shall pay transfer or other taxes
required by reason of the payment to a person other than the registered
holder of the Certificate surrendered or establish to the satisfaction
of the Surviving Corporation that such tax has been paid or is not
applicable. Until surrendered in accordance
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with the provisions of this Section 3.02, each Certificate (other than
Certificates representing Shares held by Parent or any subsidiary of
Parent or of the Company and Dissenting Shares) shall represent for all
purposes the right to receive the Transaction Consideration in cash
multiplied by the number of Shares evidenced by such Certificate,
without any interest thereon. Any funds remaining with the Exchange
Agent one year following the Effective Time shall be returned to Parent
after which time former stockholders of the Company, subject to
applicable law, shall look only to Parent for payment of amounts due
hereunder, without interest thereon.
(c) After the Effective Time there shall be no transfers on the
stock transfer books of the Surviving Corporation of the Shares which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation,
they shall be canceled and exchanged for cash as provided in Article II
and this Article III.
ARTICLE IVREPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered to Parent by
the Company prior to the execution of this Agreement, with specific reference to
the section of this Agreement to which the information stated in such disclosure
relates (the "Disclosure Schedule") (provided that any section thereof shall
each be deemed to include all disclosures set forth in other sections of the
Disclosure Schedule as and to the extent the context of such disclosures makes
it readily apparent, if read in the context of such other section, that such
disclosures are applicable to such other section), the Company represents and
warrants to Parent and Purchaser as follows:
SECTION 4.01 Organization. Each of the Company and its subsidiaries is a
corporation or limited liability company duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, and each
such entity has all requisite corporate power and corporate authority (or
limited liability company power and authority, as the case may be) to own,
operate and lease its respective properties and to carry on its businesses as
they are being conducted on the date of this Agreement. The Company and each of
its subsidiaries is duly qualified and in good standing in each jurisdiction in
which the nature of the property owned, leased or operated by it or the nature
of the business conducted by it requires such qualification except for such
failures to be so qualified or in good standing which will not have a Material
Adverse Effect (as defined in Section 9.11 hereof). All such jurisdictions are
identified on Schedule 4.01 of the Disclosure Schedule. The Company has, prior
to the date of this Agreement, made available to Parent complete and correct
copies of the Company's Restated Certificate of Incorporation and the Company's
By-Laws and the comparable governing documents of each of its Significant
Subsidiaries (as defined in Section 4.02), in each case as amended and in full
force and effect as of the date of this Agreement.
SECTION 4.02 Capitalization; Subsidiaries. The authorized capital stock
of the Company consists of 15,000,000 Shares and 3,000,000 shares of preferred
stock, par value $0.01 per share ("Preferred Stock"). As of the date hereof
there were (a) 8,941,239 Shares issued and outstanding, (b) no shares of
Preferred Stock issued and outstanding
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and no series of Preferred Stock has been established, (c) 254,150 Shares were
held in the Company's treasury, (d) no shares of capital stock of the Company
were held by the Company's subsidiaries, and (e) 934,423 Shares were reserved
for future issuance as of the date hereof pursuant to Options then currently
outstanding (including the currently non-exercisable portions thereof). Section
4.02 of the Disclosure Schedule sets forth a complete and accurate list of (i)
the number of outstanding Options, (ii) the number of Shares which can be
acquired upon the exercise of all outstanding Options, respectively, and (iii)
the exercise price of each outstanding Option. Except as set forth in Section
4.02 of the Disclosure Schedule, since March 31, 2000, the Company (i) has not
issued any Shares other than upon the exercise of Options, (ii) has granted no
Options to purchase shares of Common Stock under the Company Benefit Plans (as
defined in Section 4.11) to the Executive Officers (as defined in Section 9.11),
(iii) has not granted any stock option, stock incentive, stock purchase,
restricted stock, stock appreciation right, phantom stock or other similar award
to any of the Executive Officers and (iv) has not split, combined or
reclassified any of its shares of capital stock. Except as set forth in Section
4.02 of the Disclosure Schedule, there are no outstanding options, warrants,
calls, subscriptions or other rights or other agreements or commitments
obligating the Company or any of its subsidiaries to issue, transfer or sell any
shares of capital stock of the Company or any of its subsidiaries. The Company
has no outstanding bonds, debentures, notes or other obligations entitling the
holders thereof to vote (or which are convertible into or exercisable for
securities having the right to vote) with the holders of Shares on any matter.
There are no outstanding obligations of the Company or any of its subsidiaries
to repurchase, redeem or otherwise acquire any shares of capital stock of the
Company. All issued and outstanding Shares are validly issued, fully paid and
nonassessable and are not subject to, and were not issued in violation of,
preemptive rights. There are no voting trusts or other agreements or
understandings to which the Company is a party with respect to the voting of the
capital stock of the Company or any of its subsidiaries.
The only "Significant Subsidiaries" (as such term is defined in Rule
1-02 of Regulation S-X of the SEC ("Significant Subsidiaries") of the Company
are those named in the Company Filings (as defined in Section 4.06). All of the
outstanding shares of capital stock of the Company's subsidiaries are owned,
directly or indirectly, by the Company free and clear of all liens, claims,
options, charges, security interests or other legal and equitable rights and
encumbrances of whatsoever nature. All issued and outstanding shares of capital
stock of the Company's subsidiaries are validly issued, fully paid and
nonassessable and are not subject to, and were not issued in violation of,
preemptive rights.
SECTION 4.03 Authority Relative to this Agreement. The Company has full
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and, subject, in the case of the Merger, to the
adoption of this Agreement by the stockholders of the Company, if required, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions so contemplated (other than, in the case of the
Merger, the adoption of this Agreement by the holders of Shares representing a
majority of the votes which may be cast by holders
<PAGE>
of Shares). This Agreement has been duly and validly executed and delivered by
the Company and, assuming this Agreement has been duly authorized, executed and
delivered by each of Parent and Purchaser, this Agreement constitutes a valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except that (i) enforcement may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws, now or hereafter in effect, affecting creditors' rights generally and (ii)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
SECTION 4.04 Absence of Certain Changes. Since March 31, 2000, (a)
neither the Company nor any of its subsidiaries has suffered any change or
changes in the financial condition or business, results of operations, or assets
which has resulted or would be likely to result in a Material Adverse Effect,
(b) the Company and its subsidiaries have conducted their business only in the
ordinary course of business and in a manner consistent with past practice, and
(c) neither the Company nor any of its subsidiaries has taken any action that,
if taken after the date of this Agreement, would constitute a breach of the
covenants set forth in Section 6.01.
SECTION 4.05 No Undisclosed Liabilities. Except to the extent accrued
or reserved in the Company's financial statements (including the notes and
schedules thereto) included in the Company Filings and publicly available prior
to the date of this Agreement and as set forth in the Disclosure Schedule,
neither the Company nor any of its subsidiaries has any liabilities or
obligations of any nature, whether accrued, contingent, absolute or otherwise,
except for those arising in the ordinary course of business consistent with past
practice and that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company.
SECTION 4.06 Reports. The Company has filed all required forms, reports
and documents (including all prospectuses and all registration statements) with
the SEC required to be filed by it with respect to all periods commencing on or
after January 1, 1997 pursuant to the federal securities laws and the SEC rules
and regulations thereunder, all of which have complied in all material respects
with all applicable requirements of the Securities Act of 1933 (the "Securities
Act") and the Exchange Act, and the rules and regulations promulgated thereunder
(the "Company Filings"). None of such Company Filings, (excluding the financial
statements included therein, which are dealt with in the following paragraph),
nor any amendment or supplement thereto, at the time filed contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
The consolidated balance sheets and the related consolidated statements
of income, retained earnings and changes in financial position (including the
related notes and schedules thereto) of the Company included in the Company
Filings and the balance sheet of the Company as of June 30, 2000 and the
statement(s) of income and cash flows of the Company for the three months ended
June 30, 2000 previously provided to Parent (the "June 30 Financial
Statements"), present fairly in all material respects the consolidated financial
position of the Company as of their respective dates, and the results of
consolidated operations and consolidated cash flows for the periods presented
<PAGE>
therein, all in conformity with generally accepted accounting principles applied
on a consistent basis, except (i) as otherwise noted therein, (ii) in the case
of quarterly financial statements for the quarter ended June 30, 2000, for
non-material year-end audit adjustments and (iii) in the case of the quarterly
financial statements to the extent they may not include footnotes or may be
condensed or summary financial statements.
SECTION 4.07 Offer Documents; Proxy Statements; Other Information.
Neither the Schedule 14D-9 nor any of the information relating to the Company
and its subsidiaries supplied in writing by the Company specifically for
inclusion in the Offer Documents, including any amendments or supplements
thereto will at the respective times the Schedule 14D-9, Offer Documents or any
amendments or supplements thereto are filed with the SEC, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Schedule 14D-9
will comply in all material respects with the Exchange Act and the rules and
regulations promulgated thereunder. If a Proxy Statement is required for the
consummation of the Merger under applicable law, the Proxy Statement will comply
in all material respects with the Exchange Act and the rules and regulations
promulgated thereunder and, at the time any such Proxy Statement is mailed to
stockholders of the Company and at the time of any meeting of stockholders of
the Company, such Proxy Statement will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances, under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied in
writing by Parent or Purchaser specifically for inclusion in the Proxy Statement
and no representation is made by the Company with respect to any Proxy Statement
or other document filed with the SEC or mailed to stockholders of the Company at
any time after the Board Transition Date (as defined in Section 6.01). The
letter to stockholders, notice of meeting, proxy statement and form of proxy, or
the information statement, as the case may be, to be distributed to stockholders
in connection with the Merger, or any schedules required to be filed with the
SEC in connection therewith are collectively referred to herein as the "Proxy
Statement".
SECTION 4.08 Consents and Approvals; No Violation. Neither the execution
and delivery of this Agreement by the Company nor the consummation of the
transactions contemplated hereby will (i) conflict with or result in any breach
of any provision of the respective Restated Certificate of Incorporation or
By-Laws (or other similar governing documents) of the Company or any of its
subsidiaries, (ii) require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority or
body, except (A) in connection with the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), (B) pursuant to the Securities Act and
the Exchange Act or the rules and requirements of The Nasdaq National Market
System, (C) the filing of a certificate of merger (or certificate of ownership
and merger) pursuant to the DGCL, (D) filings under state securities, "Blue-Sky"
or takeover laws or in connection with maintaining the good standing and
qualification of the Surviving Corporation following the Effective Time or (E)
where the failure to obtain such consent, approval, authorization or permit, or
to make such filing or notification, would not in the aggregate when taken
together with all such other failures have a Material Adverse Effect; (iii)
result in a default (or give rise to any right of
<PAGE>
termination, unilateral modification or amendment, cancellation or acceleration)
under any of the terms, conditions or provisions of any note, license, agreement
or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which the Company, any of its subsidiaries or any
of their respective assets may be bound, except for such defaults (or rights of
termination, unilateral modification or amendment, cancellation or acceleration)
as to which requisite waivers or consents have been obtained prior to the date
Shares are first accepted for payment under the Offer or which in the aggregate
would not have a Material Adverse Effect; or (iv) violate any order, writ,
injunction, decree, judgment, ordinance, statute, rule or regulation applicable
to the Company, any of its subsidiaries or any of their respective properties or
businesses, except for violations (other than of orders, writs, injunctions or
decrees issued against the Company or any of its subsidiaries or naming the
Company or any of its subsidiaries as a party) which would not in the aggregate
have a Material Adverse Effect.
SECTION 4.09 Litigation, etc. Section 4.09 of the Disclosure Schedule
sets forth all claims, actions or proceedings pending or, to the knowledge of
the Company, threatened against the Company or any of its subsidiaries or their
respective properties or businesses before any Governmental Authority (as
defined in Section 9.11 hereof) with respect to which there is a reasonable
likelihood of an adverse determination which would have a Material Adverse
Effect. To the Company's knowledge, Section 4.09 of the Disclosure Schedule sets
forth all pending actions or proceedings to which the Company or any of its
subsidiaries is a party. Neither the Company nor any of its subsidiaries nor any
of their respective properties or businesses is subject to any outstanding
order, writ, judgment, stipulation, award, injunction or decree or, to the
knowledge of the Company, any investigation or inquiry by, any Governmental
Authority issued against the Company or any of its subsidiaries or naming the
Company or any of its subsidiaries as a party which has or would have a Material
Adverse Effect.
SECTION 4.10 Title to Properties; Encumbrances. The Company and each of
its subsidiaries has good title to all properties, interests in properties and
assets (real and personal) reflected in the consolidated balance sheet of the
Company at March 31, 2000 (except properties, interests in properties and assets
sold or otherwise disposed of in the ordinary course of business since March 31,
2000) free and clear of all mortgages, liens, pledges, charges or encumbrances
of any kind or character, except liens for current taxes not yet due and payable
and except for such mortgages, liens, pledges, charges or encumbrances which
would not in the aggregate have a Material Adverse Effect. All leases of real
property leased for the use or benefit of the Company or any of its subsidiaries
to which the Company or any of its subsidiaries is a party, and all amendments
and modifications thereto, are in full force and effect, and there exists no
default under any such lease by the Company or any of its subsidiaries, nor any
event which, with notice or lapse of time or both, would constitute a default
thereunder by the Company or any subsidiary except as would not have a Material
Adverse Effect. The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement will not cause a
default under any such leases, except for the need for those consents as set
forth in Section 4.10 of the Disclosure Schedule or as would not have a Material
Adverse Effect.
<PAGE>
SECTION 4.11 Benefit Plans; Labor Relations. The Company has provided in Section
4.11 of the Disclosure Schedule a complete and accurate list as of the date of
this Agreement of all Company Benefit Plans (as defined herein).
(a) With respect to each employee benefit plan (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), and any material bonus, pension, profit sharing, compensation,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, restricted stock, phantom stock, retirement, vacation, employment,
severance, termination, disability, death benefit, hospitalization or insurance,
plan, agreement, trust, fund, policy or arrangement (all of the foregoing being
herein called the "Company Benefit Plans"), maintained or contributed to by the
Company or any of its subsidiaries, the Company has made available, to the
extent applicable, to Parent a true and correct copy of (i) the most recent
annual report (Form 5500) filed with the Internal Revenue Service, including all
schedules and attachments, (ii) such Company Benefit Plan, including all
amendments, (iii) each trust agreement and group annuity contract, if any,
relating to such Company Benefit Plan, (iv) all service provider agreements,
insurance contracts or agreements with investment managers in so far as each of
the foregoing relates to Company Benefit Plans, (v) the current summary plan
description of each Company Benefit Plan subject to ERISA, and any similar
descriptions of any other Company Benefit Plan, and (vi) if applicable, the most
recent favorable determination letter from the Internal Revenue Service with
respect to such Company Benefit Plan.
(b) With respect to the Company Benefit Plans, individually and in
the aggregate, no event has occurred, and to the knowledge of the Company, there
exists no condition or set of circumstances in connection with which the Company
or any of its subsidiaries would be subject to any liability that is reasonably
likely to have a Material Adverse Effect (except liability for benefit claims
and funding obligations payable in the ordinary course), under ERISA, the Code
(as defined in Section 4.14(e)) or any other applicable law.
(c) Each of the Company Benefit Plans has been operated and
administered in accordance with its terms and all applicable federal and state
laws and regulations, including, but not limited to, ERISA and the Code, except
for such failures to so operate and administer which, individually or in the
aggregate, would not be likely to have a Material Adverse Effect.
(d) Each Company Benefit Plan intended to satisfy the requirements
of a "qualified plan" under Code ss. 401(a) has received a favorable
determination letter from the Internal Revenue Service and the Company and its
subsidiaries are not aware of any facts or circumstances that could adversely
affect the qualified status of such Company Benefit Plan.
(e) With respect to each Company Benefit Plan, all contributions
(including all employer contributions and employee salary reduction
contributions) which are due have been made within the time period prescribed by
ERISA and all contributions for any period prior to the earlier of the Board
Transition Date or the Effective Time which are not yet due have been paid or
accrued in accordance with the past custom and practices of the Company and its
subsidiaries. All premiums or other payments for all
<PAGE>
periods ending prior to the earlier of the Board Transition Date or
the Effective Time have been made with respect to each Company Benefit Plan
which is an "employee welfare plan" as defined in ERISA.
(f) The requirements of Part 6 of Subtitle B of Title I of ERISA
and Code ss. 4980B ("COBRA") have been satisfied with respect to each Company
Benefit Plan subject to COBRA. Neither the Company nor any of its subsidiaries
maintains, nor is any of them obligated to provide benefits under, any life,
medical or health plan which provides benefits to retired or other terminated
employees other than in accordance with COBRA.
(g) Neither the Company nor any of its subsidiaries has at any time
contributed or had an obligation to contribute to any "multiple employer plan"
or "multiemployer plan" as defined in ERISA and the Code. No Company Benefit
Plan is subject to Title IV of ERISA.
(h) No employer securities, employer real property or other
employer property is included in the assets of any Company Benefit Plan.
(i) Section 4.11(i) of the Disclosure Schedule sets forth all
agreements of the Company and its subsidiaries that would be affected by a
change of control of the Company or any of its subsidiaries, including, without
limitation, any agreement with any Executive Officer or other key employee of
the Company or any of its subsidiaries the benefits of which are contingent, or
the terms of which are materially altered, upon the occurrence of a transaction
involving the Company or any of its subsidiaries of the nature contemplated by
this Agreement, or any Company Benefit Plan, any of the benefits of which will
be increased, or the vesting of benefits will be accelerated, by the occurrence
of a transaction involving the Company or any of its subsidiaries of the nature
contemplated by this Agreement or the value of any benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
(j) Except as disclosed in Section 4.11(j) of the Disclosure Schedule or as
provided for in this Agreement, since March 31, 2000, neither the Company nor
any of its subsidiaries has become a party to any oral or written (i) consulting
agreement, (ii) union or collective bargaining agreement, or (iii) agreement
with respect to any employee of the Company providing any term of employment or
compensation guarantee, or (iv) has approved or adopted any Company Benefit
Plan.
(k) There is no (i) unfair labor practice, labor dispute (other
than routine individual grievances) or labor arbitration proceeding pending or,
to the knowledge of the Company, threatened against the Company or any of its
subsidiaries relating to their businesses, (ii) to the knowledge of the Company,
activity or proceeding by a labor union or representative thereof to organize
any employees of the Company or any of its subsidiaries, or (iii) lockouts,
strikes, slowdowns, work stoppages or, to the knowledge of the Company, threats
thereof by or with respect to such employees, except for such matters which,
individually or in the aggregate, would not have or be likely to have a Material
Adverse Effect. The Company is in compliance with all applicable laws and
regulations regarding employment, employment practices, terms and conditions of
<PAGE>
employment and wages, except for such noncompliance which, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect.
SECTION 4.12 Compliance With Agreements; Law. Neither the Company nor
any of its subsidiaries is in conflict with, or in default, breach or violation
of (i) any term, provision or condition of (A) its Restated Certificate of
Incorporation or By-Laws (or similar charter documents) or (B) any note,
license, agreement or other instrument or obligation to which the Company or any
of its subsidiaries is a party or by which the Company, any of its subsidiaries
or any of their respective assets may be bound ("agreement"), or (ii) any
judgment, order, writ, injunction, decree, stipulation, award, law, ordinance,
rule or regulation of any Governmental Authority (including, but not limited to,
any law, ordinance, rule or regulation relating to the protection of the
environment), except for such conflicts, defaults violations or breaches in the
case of clauses (i)(B) and (ii) which in the aggregate do not and would not
reasonably be expected to have a Material Adverse Effect. To the knowledge of
the Company, no other party to any such agreement is, or, based on existing
facts and circumstances, with the passage of time will be, in default or
violation of any such agreement except for possible violations of such
agreements which will not have a Material Adverse Effect. The Company and all of
its subsidiaries are in possession of all licenses, permits and other
governmental authorizations necessary to conduct all businesses conducted by the
Company and its subsidiaries except where the failure to hold such licenses,
permits and other governmental authorizations would not in the aggregate have a
Material Adverse Effect. As of the date hereof, no suspension or cancellation of
any of such licenses, permits, or governmental authorizations is pending or, to
the knowledge of the Company, threatened, except where the suspension or
cancellation of, would not, individually or in the aggregate, be likely to have
a Material Adverse Effect.
SECTION 4.13 Patents, Trademarks, Trade Names, etc. The Company or one
of its subsidiaries owns, or is licensed or otherwise entitled to use, all
patents, trademarks, trade names, service marks, copyrights, applications for
any of the foregoing, together with all other technology, know-how, tangible or
intangible proprietary information or material and formulae in the countries to
which such apply, that are used in the business of the Company and its
subsidiaries as currently conducted (the "Company Intellectual Property"). No
claims with respect to the Company Intellectual Property have been asserted or,
to the knowledge of the Company, threatened by any person, nor does the Company
or any of its subsidiaries know of any valid grounds for any bona fide claims,
(i) to the effect that the sale or use of any product or process as now used or
offered by the Company or any subsidiary infringes on any copyright, trade
secret, patent or other intellectual property right of any person, (ii) against
the use by the Company or any of its subsidiaries of any Company Intellectual
Property for the operation of the business of the Company and its subsidiaries
as currently conducted or presently contemplated or (iii) challenging or
questioning the validity or effectiveness of any of the Company Intellectual
Property. Neither the Company nor any of its subsidiaries is, or as a result of
the execution, delivery or performance of the Company's obligations hereunder
will be, in violation of, or lose any rights pursuant to, any license or
agreement in connection with Company Intellectual Property. Except as set forth
in Section 4.13 of the Disclosure Schedule, no owned Company Intellectual
Property is subject to any outstanding order, judgment, decree, stipulation or
agreement restricting in any material manner the licensing thereof by the
Company or any of its subsidiaries. Except as set forth in
<PAGE>
Section 4.13 of the Disclosure Schedule, neither the Company nor any of its
subsidiaries has entered into any agreement to indemnify any other person
against any charge of infringement based upon such person's manufacture, sale or
use of any product, service or process incorporating any Company Intellectual
Property.
SECTION 4.14 Taxes.
(a) Each of the Company and its subsidiaries has filed all Tax Returns that
it was required to file. All such Tax Returns were correct and
complete in all material respects. All material Taxes owed by any of
the Company and its subsidiaries (whether or not shown on any Tax
Return) have been paid. None of the Company and its subsidiaries
currently is the beneficiary of any extension of time within which to
file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where any of the Company and its subsidiaries does not
file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no security interests on any of the assets of
any of the Company and its subsidiaries that arose in connection with
any failure (or alleged failure) to pay any Tax.
(b) Each of the Company and its subsidiaries has withheld and paid, in all
material respects, all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.
(c) No director or officer (or employee responsible for Tax matters) of any
of the Company and its subsidiaries expects any authority to assess
any additional Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax Liability of
any of the Company and its subsidiaries either (A) claimed or raised
by any authority in writing or (B) as to which any of the directors
and officers (and employees responsible for Tax matters) of the
Company and its subsidiaries has knowledge based upon personal contact
with any agent of such authority. Section 4.14(c) of the Disclosure
Schedule lists all jurisdictions in which the Company and its
subsidiaries filed Tax Returns relating to federal, state, local, and
foreign income tax for taxable periods ended on or after March 31,
1998, and indicates those Tax Returns that have been audited, and
indicates those Tax Returns that currently are the subject of audit.
The Company has made available to the Purchaser correct and complete
copies of all federal, state, local and foreign income Tax Returns,
examination reports, and statements of deficiencies assessed against
or agreed to by any of the Company and its subsidiaries since December
31, 1997.
(d) None of the Company and its subsidiaries has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency, which waiver or agreement is
currently in effect.
(e) None of the Company and its subsidiaries has filed a consent under
Section 341(f) of the Internal Revenue Code of 1986 (the "Code")
concerning collapsible corporations. None of the Company and its
subsidiaries has made
<PAGE>
any payments, is obligated to make any payments, or is a party to
any agreement that under certain circumstances could obligate it to make
any payments that will not be deductible under Section 280G of the Code.
None of the Company and its subsidiaries has been a "United States real
property holding corporation" (as defined in Section 897(c)(2) of the
Code) during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code. Each of the Company and its subsidiaries has disclosed on
its federal income Tax Returns all positions taken therein that could
give rise to a substantial understatement of federal income Tax within
the meaning of Section 6662 of the Code including disclosure of listed
transactions under Temporary Regulation ss. 1.6601-4T. None of the
Company and its subsidiaries is a party to any Tax allocation or sharing
agreement. None of the Company and its subsidiaries (A) has been a
member of an "affiliated group" (as defined in Section 1504(a) of the
Code, or any similar group defined under a similar provision of state,
local or foreign law) filing a consolidated federal income Tax Return
(other than a group the common parent of which was the Company) or (B)
has any liability for the Taxes of any person (other than any of the
Company and its subsidiaries) under Treasury Regulation ss.1.1502-6 (or
any similar provision of state, local, or foreign law), as a transferee
or successor, by contract, or otherwise.
(f) Section 4.14(f) of the Disclosure Schedule sets forth the
following information with respect to each of the Company and its
subsidiaries (or, in the case of clause (B) below, with respect to each
of the subsidiaries) as of the most recent practicable date: (A) summary
deferred tax analysis for the year ended March 31, 2000; (B) the amount,
for federal income tax purposes, of any net operating loss, net capital
loss, unused investment or other credit, unused foreign tax, or excess
charitable contribution allocable to the Company or subsidiary; and (C)
the amount of any deferred gain or loss allocable to the Company or
subsidiary arising out of any "deferred intercompany transaction" (as
defined in Treasury Regulation ss.1.1502-13).
(g) The unpaid Taxes of the Company and its subsidiaries (A) did
not, as of the most recent fiscal month end, exceed in any material
respect the reserve for Tax liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book
and Tax income) set forth on the face of the most recent balance sheet
(rather than in any notes thereto) and (B) do not exceed in any
material respect that reserve as adjusted for the passage of time
through the earlier of the Board Transition Date or the Effective Time
in accordance with the past custom and practice of the Company and its
subsidiaries in filing their Tax Returns.
(h) For purposes of this Agreement, (i) "Tax" means any federal,
state, local, or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental (including taxes under Section 59A of the Code),
customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative
or add-on minimum,
<PAGE>
estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not, and (ii) "Tax
Return" shall mean any report, return, document, declaration, claim for
refund, information return, or other information or filing relating to
Taxes, including any schedule or attachment thereto, and including any
amendment thereof.
SECTION 4.15 Insurance Policies. The Company and all of its subsidiaries
have obtained and maintained in full force and effect the insurance policies set
forth and summarized on Section 4.15 of the Disclosure Schedule.
SECTION 4.16 Required Vote of Company Stockholders. Unless the Merger may
be consummated in accordance with Section 253 of the DGCL, the only vote of the
stockholders of the Company required for adoption of this Agreement and the
transactions contemplated hereby, is the affirmative vote of the holders of a
majority of the outstanding Shares.
SECTION 4.17 Material Contracts. (a) The Disclosure Schedule contains a
list of the following types of contracts and agreements to which the Company or
any of its subsidiaries is a party (such contracts, agreements and arrangements
as are required to be set forth in the Disclosure Schedule being the "Material
Contracts"):
(i) each contract and agreement which (A) is likely to involve
consideration of more than $25,000, in the aggregate, during the calendar
year ending December 31, 2000, (B) is likely to involve consideration of
more than $50,000, in the aggregate, over the remaining term of such
contract, and which, in either case, cannot be canceled by the Company or
any of its subsidiaries without penalty or further payment and without
more than 90 days' notice;
(ii) all material broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing, consulting and advertising contracts and agreements to which
the Company or, to the knowledge of the Company, any of its subsidiaries
is a party;
(iii)all management contracts (excluding contracts for employment)
and contracts with other consultants, including any contracts involving
the payment of royalties or other amounts calculated based upon the
revenues or income of the Company or any of its subsidiaries or income or
revenues related to any product of the Company or any of its subsidiaries
to which the Company or any of its subsidiaries is a party;
(iv) all contracts and agreements evidencing indebtedness for
borrowed money;
(v) all material contracts and agreements with any Governmental
Authority to which the Company or to the knowledge of the Company, any
of its subsidiaries is a party;
<PAGE>
(vi) all contracts and agreements that limit, or purport to limit,
the ability of the Company or any of its subsidiaries to compete in any
line of business or with any person or entity or in any geographic area or
during any period of time;
(vii)all material contracts or arrangements that result in any person
or entity holding a power of attorney from the Company or, to the
knowledge of the Company, any of its subsidiaries that relates to the
Company, any of its subsidiaries or their respective businesses; and
(viii) all other contracts and agreements, whether or not made in the
ordinary course of business, the absence of which would have a Material
Adverse Effect.
(b) Except as would not be reasonably likely to have a Material Adverse
Effect, (i) each Material Contract is a legal, valid and binding agreement, and
the Company is not in default of any of the Material Contracts; and none of the
Material Contracts has been canceled by the other party; (ii) to the Company's
knowledge, no other party is in breach or violation of, or default under, any
Material Contract; (iii) the Company and its subsidiaries are not in receipt of
any claim of default under any such agreement; and (iv) neither the execution of
this Agreement nor the consummation of any transactions contemplated hereby
shall constitute default, give rise to cancellation rights, or otherwise
adversely affect any of the Company's rights under any Material Contract. The
Company has furnished or made available to Parent true and complete copies of
all Material Contracts, including any amendments thereto.
SECTION 4.18 No Interference. Since March 31, 2000, none of the officers
or directors of the Company or any of its subsidiaries have contacted (i) any
vendor or supplier of the Company or its subsidiaries, or any other entity with
whom the Company or any of its subsidiaries has a material commercial
relationship concerning the transfer of such person's existing relationship with
the Company to another business entity which would compete with the Company or
the Surviving Corporation or (ii) any employee of the Company or its
subsidiaries concerning the termination of such employee's employment with the
Company and their employment with another business entity which would compete
with the Company or the Surviving Corporation.
SECTION 4.19 Opinion of Financial Adviser. The Board of Directors of the
Company has received a written opinion of ING Barings to the effect that, as of
the date of this Agreement, the proposed consideration to be received, in the
Offer and the Merger, taken together, by the holders of Shares in the Offer and
the Merger is fair to such holders of Shares from a financial point of view (the
"Opinion"). The Company hereby represents that it has been authorized by ING
Barings to permit the inclusion of the Opinion and references thereto, subject
to customary prior review and consent by ING Barings, in the Offering Documents.
SECTION 4.20 State Takeover Statutes. The Board of Directors of the
Company has taken all necessary action so that the restrictions contained in
Section 203 of the DGCL applicable to a "business combination" (as defined in
Section 203) will not apply to the execution, delivery or performance of this
Agreement, the Tender and Voting
<PAGE>
Agreement, or to the Offer, the Merger or the transactions contemplated
hereby and thereby.
SECTION 4.21 Environmental. Except as described in Section 4.21 of the
Disclosure Schedule, (a) the Company is in compliance with all applicable
Environmental Laws (as defined in Section 9.11) except where the failure to be
in compliance would not be reasonably expected to have a Material Adverse
Effect, (b) to the knowledge of the Company, none of the properties currently
owned, leased or operated by the Company are contaminated with any Hazardous
Substance (as defined in Section 9.11 hereof) that require remediation under
applicable Environmental Laws, (c) the Company has not received any written
notice that it is liable for any contamination by Hazardous Substances at any
site containing Hazardous Substances generated, transported, stored, treated or
disposed of by the Company, (d) there is not pending or, to the knowledge of the
Company, threatened any investigation, claim or lien with respect to the Company
or any of its subsidiaries under any Environmental Law, (e) the Company is in
compliance with all permits, licenses and other authorizations required under
any Environmental Law ("Environmental Permits") and, to the knowledge of the
Company, all past non-compliance with Environmental Laws or Environmental
Permits has been resolved without any pending, ongoing or future obligation,
costs or liability, except in the case of any of the above, where the failure to
be in compliance would not reasonably be expected to have a Material Adverse
Effect; and (f) neither the execution of this Agreement nor the consummation of
the transactions contemplated hereby will require any investigation, remediation
or other action with respect to Hazardous Substances, or any prior notice to or
prior consent of any Governmental Authority, pursuant to any applicable
Environmental Law or Environmental Permit where the failure to give such notice
or obtain such consent would reasonably be likely to have a Material Adverse
Effect.
ARTICLE VREPRESENTATIONS AND WARRANTIESOF PARENT AND PURCHASER
Parent and Purchaser represent and warrant to the Company as follows:
SECTION 5.01 Organization and Good Standing. Each of Parent and
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation.
SECTION 5.02 Authority Relative to this Agreement. Each of Parent and
Purchaser has full corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by Parent and Purchaser, and Parent as the sole stockholder
of Purchaser, and no other corporate proceedings on the part of Parent or
Purchaser are necessary to authorize this Agreement, or commence the Offer or to
consummate the transactions contemplated by this Agreement (including the
Offer). This Agreement has been duly and validly executed and delivered by each
of Parent and Purchaser and, assuming this Agreement has been duly authorized,
executed and delivered by the Company, this Agreement constitutes a
<PAGE>
valid and binding agreement of each of Parent and Purchaser, enforceable against
each of Parent and Purchaser in accordance with its terms, except that (i)
enforcement may be subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws, now or hereafter in effect, affecting
creditors' rights generally and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
SECTION 5.03 Consents and Approvals; No Violation. Neither the execution
and delivery of this Agreement by Parent and Purchaser nor the consummation of
the transactions contemplated hereby will (i) conflict with or result in any
breach of any provision or the respective Certificate of Incorporation or
By-Laws (or other similar governing documents) of Parent or any of its
subsidiaries, (ii) require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority or
body, except (x) those set forth in clauses (A) through (E) of Section 4.08
hereof or (y) where failure to obtain such consent, approval, authorization or
permit, or to make such filing or notification, would not in the aggregate when
taken together with all such other failures have a material adverse effect on
the financial condition, assets, liabilities, business or results of operations
of Parent and its subsidiaries taken as a whole or adversely affect or impair
the ability of Parent or Purchaser to perform their respective obligations
hereunder; (iii) result in a default (or give rise to any right of termination,
unilateral modification or amendment, cancellation or acceleration) under any of
the terms, conditions or provisions of any note, license, agreement or other
instrument or obligation to which the Parent or any of its subsidiaries is a
party, except for such defaults (or rights of termination, unilateral
modification or amendment, cancellation or acceleration) which in the aggregate
would not have a material adverse effect on the financial condition, assets,
liabilities, business or results of operations of Parent and its subsidiaries
taken as a whole or adversely affect or impair the ability of Parent or
Purchaser to perform their respective obligations hereunder; or (iv) violate any
order, writ, injunction, decree, judgment, ordinance, statute, rule or
regulation applicable to Parent, any of its subsidiaries or any of their
respective properties or businesses, except for violations (other than of
orders, writs, injunctions or decrees) which would not have a material adverse
effect on the financial condition, assets, liabilities, business or results of
operations of Parent and its subsidiaries taken as a whole or adversely affect
or impair the ability of Parent or Purchaser to perform their respective
obligations hereunder.
SECTION 5.04 Offer Documents; Proxy Statement. The Offer Documents and
any amendments or supplements thereto, and the Offer will comply in all material
respects with the Exchange Act. None of the information contained in the Offer
Documents, including any amendments or supplements thereto, will at the
respective times the Offer Documents or any amendments or supplements thereto,
are filed with the SEC contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation is made by Parent with
respect to information supplied by the Company specifically for inclusion in the
Offer Documents. None of the information supplied by Parent and its affiliates
specifically for inclusion in the Proxy Statement will, at the time the Proxy
Statement is mailed, or, at the time of the Special Meeting or at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact
<PAGE>
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
SECTION 5.05 Financing. Parent has the funds, either from its available
cash and cash equivalents or from borrowings under its existing credit
facilities, necessary to consummate the Offer and the Merger and the
transactions contemplated thereby.
ARTICLE VICOVENANTS
SECTION 6.01 Conduct of Business of the Company. Except as
contemplated by this Agreement, during the period from the date of this
Agreement to such time at which directors of the Company affiliated with or
designated by Parent or Purchaser shall constitute a majority of the Board (such
time, the "Board Transition Date"), the Company and its subsidiaries will each
conduct its operations according to its ordinary course of business, in a manner
consistent with past practice. Without limiting the generality of the foregoing,
and except as otherwise contemplated by this Agreement, neither the Company nor
any of its subsidiaries will, prior to the Board Transition Date, without the
prior written consent of Parent (i) issue, sell or pledge, or authorize or
propose the issuance, sale or pledge of (A) additional shares of capital stock
of any class of the Company (other than shares of Common Stock that may be
issued pursuant to the Company's Employee Stock Purchase Plan in connection with
amounts withheld on or before August 4, 2000) or its subsidiaries, or securities
convertible into or exchangeable for any such shares, or any options, warrants,
calls, subscriptions or other rights to acquire any such shares or other
convertible or exchangeable securities, other than such issuance of Shares
pursuant to the exercise of Options outstanding on the date hereof, or (B) any
other securities in respect of, in lieu of or in substitution for, Shares
outstanding on the date hereof, (ii) purchase, repurchase, redeem or otherwise
acquire, or propose to purchase, repurchase, redeem or otherwise acquire, any
outstanding shares of capital stock of the Company, (iii) declare, set aside or
pay any dividend or distribution on any Shares, or redeem or otherwise acquire
any shares of capital stock of the Company, (iv) propose or adopt any amendments
to its Restated Certificate of Incorporation or By-Laws (v) issue, sell, pledge,
dispose of, grant, encumber, or authorize the issuance, sale, pledge,
disposition, grant or encumbrance of any material assets of the Company or any
subsidiary, except in the ordinary course of business and in a manner consistent
with past practice; (vi) reclassify, combine, split, subdivide any of its
capital stock; (vii) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets or any other business
combination) any corporation, partnership, other business organization or any
division thereof or any material amount of assets, other than pending
acquisitions or minority investments, in each case publicly announced prior to
the date hereof, or, with respect to the acquisition of assets, in the ordinary
course of business consistent with past practice, (viii) incur any indebtedness
for borrowed money or issue any debt securities or assume, guarantee or endorse,
or otherwise become responsible for, the obligations of any person, or make any
loans or advances, except in the ordinary course of business and in a manner
consistent with past practice; (ix) authorize, or make any commitment with
respect to (A) any capital expenditures in excess of $250,000 in the aggregate
per month, (B) any single capital expenditure which is in excess of $50,000 or
<PAGE>
(C) any single capital project that is reasonably likely to cost $75,000
or more in the aggregate for the Company and the subsidiaries taken as a whole,
(D) make or direct to be made any capital investments or equity investments in
any entity, other than investments in any wholly owned subsidiary, or (E) enter
into or amend any contract, agreement, commitment or arrangement with respect to
any matter set forth in this Section 6.01(ix); (x) increase the compensation
payable or to become payable or the benefits provided to its directors, officers
or employees, except for increases in the ordinary course of business and
consistent with past practice in salaries or wages of employees of the Company
or any subsidiary who are not directors or Executive Officers of the Company, or
grant any severance or termination pay to, or enter into any employment or
severance agreement with, any director, officer or other employee of the Company
or of any subsidiary, or establish, adopt, enter into or amend any collective
bargaining, plan or agreement or Company Benefit Plan for the benefit of any
director, officer or employee; (xi) take any action, other than actions in the
ordinary course of business and consistent with past practice or as required by
law, with respect to accounting policies or procedures; (xii) make any tax
election or settle or compromise any United States federal, state, local or
other non-United States income tax liability, except in the ordinary course of
business and in a manner consistent with past practice; (xiii) pay, discharge or
satisfy any claim, liability or obligation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business and in a manner consistent with
past practice, of liabilities reflected or reserved against in the Company's
balance sheet for the year ended March 31, 2000 or subsequently incurred in the
ordinary course of business and consistent with past practice; (xiv) amend,
modify or consent to the termination of any Material Contract of the Company, or
amend, waive, modify or consent to the termination of the Company's or any
subsidiary's rights thereunder, other than in the ordinary course of business
and consistent with past practice; (xv) commence or settle any material
litigation, suit, claim, action, proceeding or investigation; (xvi) (A) grant,
confer or award any option, warrant, securities convertible into or exercisable
for securities having the right to vote or any call, subscription or other right
or agreement to acquire any shares of its capital stock or take any action to
cause to be exercisable any otherwise unexercisable option under any Company
Benefit Plan (except as otherwise specifically required by the terms of such
unexercisable options or as otherwise set forth in this Agreement), (B)
accelerate or waive any or all of the goals, restrictions or conditions imposed
under, or (C) issue, sell, grant or award any shares of capital stock or any
right to acquire shares of capital stock under any Company Benefit Plan other
than pursuant to the exercise of outstanding options; or (xvii) agree in writing
or otherwise to take any of the foregoing actions.
SECTION 6.02 No Solicitation, etc.
(a) From the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement (and payment by the
Company of amounts, if any, due and payable prior to the termination of
this Agreement in connection with such termination pursuant to Section
8.01(e)(iii)), the Company and its subsidiaries shall not (and shall
direct all of their respective officers, directors, agents or
affiliates, including without limitation any investment banker,
attorney, or accountant retained by the Company or its subsidiaries not
to) directly or indirectly (i) solicit, engage in
<PAGE>
discussions or negotiate with any person (whether such discussions or
negotiations are initiated by the Company or otherwise) or take any
other action intended or designed to facilitate the efforts of any
person (other than Parent) including initiating, soliciting or
encouraging any inquiries or the making or implementation of any
proposal or offer relating to the possible acquisition of the Company
(including, without limitation, any proposal or offer to the
stockholders of the Company and whether by way of merger, purchase of
capital stock, purchase of assets or otherwise) or any material portion
of its capital stock or assets (with any such efforts by any such
person, including a firm proposal to make such an acquisition, to be
referred to as an "Alternative Acquisition"), (ii) provide any
information with respect to the Company or afford access to the
properties, books or records of the Company to any person, other than
Parent, relating to a possible Alternative Acquisition by any person,
other than Parent, or otherwise facilitate or assist the making of any
proposal or offer relating to an Alternate Acquisition, (iii) enter into
an agreement with any person, other than Parent, contemplating or
providing for a possible Alternative Acquisition, or (iv) make or
authorize any statement, recommendation or solicitation in support of
any possible Alternative Acquisition by any person, other than by
Parent. Notwithstanding the foregoing, prior to the acceptance for
payment of Shares pursuant to the Offer the Company may, to the extent
required by the fiduciary obligations of the Board, as determined in
good faith by a majority of the disinterested members thereof after
consultation with outside counsel, in response to an unsolicited bona
fide written proposal for an Alternative Acquisition ("Alternative
Acquisition Proposal") that was made by a person whom the Board
determines, in good faith after consultation with outside counsel and an
independent financial advisor, to be reasonably capable of consummating
a Superior Company Proposal (as defined in Section 6.02(e)), that did
not result from a breach of this Section 6.02(a), (x) furnish
information with respect to the Company to the person or group making
such Alternative Acquisition Proposal and its representatives pursuant
to a confidentiality agreement no less restrictive than the terms of the
Mutual Nondisclosure Agreement and (y) participate in discussions and
negotiations with such person or group and its representatives regarding
such Alternative Acquisition Proposal; provided, that, at least one (1)
business day prior to taking the actions contemplated in (x) and (y)
above (except that the Company shall have the right during such period
to negotiate a confidentiality agreement with the person or group making
such Alternative Acquisition Proposal and its representatives that is no
less favorable to the Company than the Mutual Nondisclosure Agreement),
the Company shall provide Parent with written notice of its right to
take such action and the identity of the person making such Alternative
Acquisition Proposal. Subject to the foregoing provisions of this
Section 6.02, the Company shall, and shall cause its directors,
officers, employees, agents and representatives to, cease immediately
and cause to be terminated all discussions and negotiations regarding
any proposal that constitutes, or may reasonably be expected to lead to,
an Alternative Acquisition Proposal.
(b) Neither the Board nor any committee thereof shall (i)
withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Parent or
<PAGE>
Purchaser, the approval or recommendation by the Board or any such
committee of this Agreement, the Offer or the Merger, (ii) approve any
letter of intent, agreement in principle, acquisition agreement or
similar agreement relating to any Alternative Acquisition Proposal or
(iii) approve or recommend, or propose to approve or recommend, any
Alternative Acquisition Proposal. Notwithstanding the foregoing, if,
prior to the acceptance for payment of Shares pursuant to the Offer, the
Board receives a Superior Company Proposal and a majority of the
disinterested directors of the Company determine in good faith, after
consultation with outside counsel, that it is required to do so in order
to comply with their fiduciary obligations, the Board may withdraw its
approval or recommendation of the Offer, the Merger and this Agreement
and, in connection therewith, approve or recommend such Superior Company
Proposal.
(c) The Company shall advise Parent orally and in writing promptly
(in no event more than 24 hours after the receipt thereof) of any
Alternative Acquisition Proposal or any inquiry with respect to or that
would be reasonably likely to lead to any Alternative Acquisition
Proposal, the identity of the person or group making any such
Alternative Acquisition Proposal or inquiry and the material terms of
any such Alternative Acquisition Proposal or inquiry. The Company shall
(i) keep Parent fully informed of the status, including any change to
the details, of any such Alternative Acquisition Proposal or inquiry and
(ii) provide to Parent promptly after receipt or delivery thereof with
copies of all material correspondence and other written material sent or
provided to the Company from any third party in connection with any
Alternative Acquisition Proposal or sent or provided by the Company to
any third party in connection with any Alternative Acquisition Proposal.
(d) Nothing contained in this Section 6.02 shall prohibit the
Company from taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from
making any required disclosure to the Company's stockholders if, in the
good faith judgment of the Board, after consultation with outside
counsel, failure so to disclose could be inconsistent with its
obligations under applicable Law.
(e) For purposes of this Agreement, "Superior Company Proposal"
means any bona fide, written proposal not solicited, initiated or
encouraged in violation of this Section 6.02 made by a third party to
acquire all or substantially all the equity securities or assets of the
Company, pursuant to a tender or exchange offer, a merger, a
consolidation, a liquidation or dissolution, a recapitalization or a
sale of all or substantially all its assets, (i) on terms which a
majority of the disinterested directors of the Company determines, after
consultation with its outside counsel and an independent financial
advisor, in its good faith judgment to represent superior value, from a
financial point of view for the holders of Shares than the Offer and the
Merger, taking into account at the time of such determination all the
terms and conditions of such proposal and this Agreement (including any
proposal by Parent to amend the terms of this Agreement, the Offer and
the Merger) and
<PAGE>
(ii) that is reasonably likely to be consummated without undue delay,
taking into account all financial, regulatory, legal and other aspects
of such proposal.
SECTION 6.03 Access to Information.
(a) Upon reasonable prior notice to the Company, the Company will
give Parent and its authorized representatives reasonable access during
normal business hours to the plants, offices, warehouses and other
facilities and to the books and records of it and its subsidiaries, will
permit Parent to make such reasonable inspections during normal business
hours as it may reasonably request and will cause its officers and those
of its subsidiaries to furnish Parent with such financial and operating
data and other information with respect to the business and properties
of the Company and its subsidiaries as Parent may from time to time
reasonably request; provided, however, that all such access and
inspections shall be coordinated by Parent with a designee of the
Company and shall be conducted in such manner so as not to unduly
interfere with the normal business operations of the Company or any of
its subsidiaries. The Company shall use best efforts to make
representatives of its independent accountants available for discussions
with Parent's authorized representatives as they may from time to time
reasonably request.
(b) All information received by Parent and its representatives
pursuant to this Section 6.03 will be subject to the Mutual
Non-Disclosure Agreement dated as of March 28, 2000 between Parent and
the Company.
(c) No investigation pursuant to this Section 6.03 (c) shall affect
any representation or warranty in this Agreement of any party hereto or
any condition to the obligations of the parties hereto or any condition
to the Offer.
SECTION 6.04 Reasonable Best Efforts. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to promptly effect
all necessary filings under the HSR Act and use its reasonable best efforts to
secure all government clearances (including by taking all reasonable steps to
avoid or set aside any preliminary or permanent injunction or other order of any
federal or state court of competent jurisdiction or other governmental
authority). Each of the parties hereto further agrees to use its reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all other things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement. In particular, Parent and the Company will use their respective
reasonable efforts to obtain all other consents, authorizations, orders and
approvals required in connection with, and waivers of any violations, breaches
and defaults that may be caused by, the consummation of the Merger or the other
transactions contemplated by this Agreement, other than consents,
authorizations, orders, approvals and waivers the failure to obtain which would
not (A) be material to the consummation of the Merger or the other transactions
contemplated by this Agreement or (B) have a Material Adverse Effect. In case at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement, the proper officers and directors
of each party to this Agreement shall take all such necessary action, including,
without limitation, providing for the sale or other disposition or the holding
separate (through the
<PAGE>
establishment of a trust or otherwise) of particular assets or categories of
assets, or businesses, of the Company or any of its subsidiaries.
SECTION 6.05 Public Announcements. Parent and the Company will consult
with each other before issuing any press release or otherwise making any public
statements with respect to the Offer or the Merger and shall not issue any such
press release or make any such public statement without the prior consent of the
other party, except as may be required by law or by obligations pursuant to any
listing agreement with any national securities exchanges or the National
Association of Securities Dealers, Inc., in which case Parent or Company, as the
case may be, will use its reasonable efforts to provide the other party with a
reasonable time to comment on such release or statement in advance of its
issuance.
SECTION 6.06 Indemnification; Insurance.
(a) Notwithstanding anything to the contrary in Section 2.04,
Parent and Purchaser agree that all rights to indemnification existing
in favor, and all limitations on the personal liability of, each present
and former director, officer, employee or agent of the Company or any of
its subsidiaries or a director, officer, employee, agent or trustee of
any employee benefit plan for employees of the Company or any of its
subsidiaries, and each person who is or was then serving in any such
capacity (or any person who is or was then serving any other corporation
or entity in any such capacity at the request of the Company)
(individually, an "Indemnified Party" and collectively, the "Indemnified
Parties") provided for in the Company's Restated Certificate of
Incorporation or By-Laws or similar organizational documents of any
Company subsidiary as in effect on the date of this Agreement with
respect to matters occurring prior to the Effective Time shall survive
the Merger and shall continue in full force and effect for a period of
not less than six (6) years from the Effective Time; provided, however,
that all rights to indemnification in respect of any claim for
indemnification for losses, damages or liabilities of any kind or nature
incurred which is asserted or made within such period shall continue
until the final disposition of such claim; provided, further, however,
that the Surviving Corporation shall not be liable for any settlement
effected pursuant to such indemnification provisions without its written
consent (which consent shall not be unreasonably withheld or delayed);
and provided further, that, in the event that any claim or claims for
indemnification are asserted or made within such six-year period, all
rights to indemnification in respect of any such claim or claims shall
continue until the disposition of any and all such claims. The
Indemnified Parties as a group may retain only one law firm (plus local
counsel, if applicable) to represent them with respect to any single
action at the expense of the indemnifying person unless there is, under
applicable standards of professional conduct, a material conflict on any
significant issue between the positions of any two or more Indemnified
Parties, in which case each Indemnified Party with respect to whom such
a conflict exists (or group of such Indemnified Parties who among them
have no such conflict) may retain one separate law firm . Any legal
counsel referred to in the preceding sentence shall be reasonably
satisfactory to the indemnifying person, and the indemnifying person
shall pay the reasonable
<PAGE>
fees and expenses of such legal counsel promptly after statements
therefor are received.
(b) For a period of six (6) years after the Effective Time, Parent
and the Surviving Corporation shall cause to be maintained in effect,
the current directors' and officers' liability insurance covering each
Indemnified Party who is currently covered by the Company's directors'
and officers' liability insurance with respect to claims arising from
facts or events which occurred at or prior to the Effective Time, or may
substitute such other insurance as the Surviving Corporation or Parent
may substitute therefor which insurance shall not be materially less
favorable than such insurance maintained in effect by the Company on the
date hereof in terms of coverage and amounts; provided however, that in
no event shall the Surviving Corporation be required to expend pursuant
to this Section 6.06(b) more than an amount per year equal to 150% of
current annual premiums paid by the Company for such insurance (which
premiums the Company represents and warrants to be $103,000 per annum in
the aggregate).
(c) This Section 6.06 shall survive the closing of the transactions
contemplated hereby, is intended to benefit the Company, the Surviving
Corporation and each of the Indemnified Parties (each of whom shall be
entitled to enforce this Section 6.06 against Parent or the Surviving
Corporation, as the case may be) and shall be binding on all successors
and assigns of Parent and the Surviving Corporation.
(d) In the event the Surviving Corporation or Parent or any of
their respective successors or assigns (i) consolidates with or merges
into any other person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger, or (ii) transfers
all or substantially all of its properties and assets to any person,
then, and in each such case, proper provision shall be made so that the
successors and assigns of Parent or the Surviving Corporation, as the
case may be, assume the obligations set forth in this Section 6.06.
SECTION 6.07 Employment Contracts, Benefits, etc.
(a) Parent agrees that following the Board Transition Date it will
cause the Company or the Surviving Corporation, as the case may be, to
comply with the applicable terms and provisions of the employment,
retirement, termination, severance and similar agreements and
arrangements with officers or other employees of the Company and its
subsidiaries which are in effect on the Board Transition Date, if any.
The Company will not enter into any such agreement after the date hereof
without Parent's prior written consent.
(b) Parent agrees that following the Effective Time it will, or
will cause the Surviving Corporation and its subsidiaries to, continue
to maintain the employee benefit plans (including bonus plans) for
employees and former employees of the Company and its subsidiaries which
are in effect on the
<PAGE>
Board Transition Date, or other plans that, in the aggregate, provide
benefits that are substantially the same as or no less favorable to such
employees than the benefits currently in effect with respect to such
employees, or, in the alternative, the benefit plans in place for
similarly situated employees of Parent; provided that, subject to
applicable law the Company's employees shall receive full credit under
such plans for years of service to the Company and shall not be subject
to any waiting periods under such plans. Parent agrees that the
Company's employees may be fully vested under the Company's
401(k)/Profit Sharing Plan by the Effective Time. Parent agrees to
provide retention and severance consistent with Parent's severance plan
and retention policies and additional benefits in accordance with
Schedule 6.07.
SECTION 6.08 Purchase of Shares. Except pursuant to the Offer, neither
Parent nor Purchaser nor any subsidiary or affiliate of Parent shall acquire
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act)
of any Shares without the prior written consent of the Company.
SECTION 6.09 Notification of Certain Matters.
(a) The Company shall give prompt notice to Parent, and Parent and
Purchaser shall give prompt notice to the Company, of (i) the occurrence
or nonoccurrence of any event the occurrence or nonoccurrence of which
would be likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at or
prior to the Effective Time, (ii) any failure of the Company, Parent or
Purchaser, as the case may be, to comply with or satisfy in all material
respects any covenant, condition or agreement to be complied with or
satisfied by it hereunder, (iii) any notice or other communication from
any third party alleging that the consent of such third party is
required in connection with the transactions contemplated by this
Agreement, or (iv) any Material Adverse Effect or material adverse
effect on the financial condition, assets, liabilities, business or
results of operations of Parent and its subsidiaries taken as a whole.
(b) The Company shall confer on a regular and frequent basis with
Parent with respect to the Company's and its subsidiaries' business and
operations and other matters relevant to the Merger, and Parent and the
Company shall promptly advise the other, orally and in writing, of any
change or event, including, without limitation, any complaint,
investigation or hearing by any Governmental Authority (or communication
indicating the same may be contemplated) or the institution or threat of
litigation, having, or which would reasonably be expected to have a
Material Adverse Effect or a material adverse effect on the financial
condition, assets, liabilities, business or results of operations of
Parent and its subsidiaries taken as a whole.
<PAGE>
ARTICLE VIICONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.01 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger are subject to the
satisfaction or waiver, where permissible, prior to the Effective Time of the
following conditions:
(a) This Agreement shall have been adopted by the affirmative vote
of the stockholders of the Company at the Special Meeting by the
requisite vote in accordance with applicable law, if such vote is
required by applicable law;
(b) All regulatory approvals required to consummate the
transactions contemplated hereby shall have been obtained and shall
remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired;
(c) No statute, rule or regulation shall have been enacted or
promulgated by any governmental authority which prohibits the
consummation of the Merger; and
(d) There shall be no order or injunction of a United States
Federal or state court of competent jurisdiction in effect precluding
consummation of the Merger.
(e) Purchaser shall have purchased Shares validly tendered and not
withdrawn pursuant to the Offer.
ARTICLE VIIITERMINATION; AMENDMENTS; WAIVER
SECTION 8.01 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time notwithstanding approval
thereof by the stockholders of the Company, but prior to the Effective Time:
(a) by mutual written consent of Parent and the Company;
(b) by Parent if an occurrence or circumstance (except where
Parent's or Purchaser's failure to fulfill any of their respective
obligations under this Agreement is the cause of or resulted in such
occurrence or circumstance or except where there has been a material
breach of any material representation or warranty on the part of Parent
or Purchaser which has not been cured) has rendered the conditions set
forth in Annex A hereto incapable of being satisfied, and (i) Purchaser
shall have failed to commence the Offer after the date of this Agreement
or (ii) the Offer shall have been terminated or shall have expired
without Purchaser having purchased any Shares pursuant to the Offer;
<PAGE>
(c) by either Parent or the Company if any court of competent
jurisdiction or other Governmental Authority within the United States
shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the Merger
and such order, decree, ruling or other action shall have become final
and nonappealable;
(d) by Parent prior to the purchase of Shares pursuant to the
Offer, if (i) Purchaser shall discover that any representation or
warranty made by the Company in this Agreement is untrue at the time
such representation or warranty was made or (except for those
representations and warranties made as of a particular date which need
only be true and correct as of such date) shall not be true and correct
as of the date of consummation of the Offer, except where the failure to
be so true and correct would not have a Material Adverse Effect,
provided that if any such failure to be so true and correct is capable
of being cured prior to the Final Date as defined in Section 9.11, then
Parent and Purchaser may not terminate this Agreement under this
paragraph (d) until the Final Date, (ii) there shall have been a breach
of any covenant or agreement on the part of the Company under this
Agreement resulting in a Material Adverse Effect which shall not be
capable of being cured prior to the Final Date, (iii) the Board of
Directors or any committee thereof (x) fails to recommend approval and
adoption of this Agreement and the Merger by the stockholders of the
Company or withdraws or amends or modifies in a manner adverse to Parent
and Purchaser its recommendation or approval in respect of this
Agreement, the Offer or the Merger or (y) makes any recommendation with
respect to an Alternative Acquisition other than a recommendation to
reject such Alternative Acquisition or shall have resolved to do any of
the foregoing or (iv) there shall not have been validly tendered and not
withdrawn prior to the expiration of the Offer at least a majority of
the Shares, on a fully diluted basis, and on or prior to such date a
person shall have made a written Alternative Acquisition Proposal to the
Company and not withdrawn such proposal;
<PAGE>
(e) by the Company, if (i) the Company shall discover that any
representation or warranty made by Parent or Purchaser in this Agreement
is untrue at the time such representation or warranty was made or
(except for those representations and warranties made as of a particular
date which need only be true and correct as of such date) shall not be
true and correct as of the date of consummation of the Offer, except
where the failure to be so true and correct would not materially
adversely affect (or materially delay) the consummation of the Offer or
the Merger, provided that if any such failure to be so true and correct
is capable of being cured prior to the Final Date, then the Company may
not terminate this Agreement under this paragraph (e) until the Final
Date and unless at such time the matter has not been cured or (ii) there
shall have been a material breach of any covenant or agreement in this
Agreement on the part of Parent or Purchaser which materially adversely
affects (or materially delays) the consummation of the Offer or the
Merger which shall not be capable of being cured prior to the Final
Date, or (iii) such termination is necessary to allow the Company to
enter into an agreement with respect to an Alternative Acquisition
Proposal in compliance with Section 6.02(b) (provided that the
termination described in this clause (iii) shall not be effective unless
and until the Company shall have paid to Parent in full the fee and
expense reimbursement described in Section 8.02(b)); or
(f) by the Company if there shall not have been a material breach
of any representation, warranty, covenant or agreement on the part of
the Company which has not been cured and (i) Purchaser shall have failed
to commence the Offer within the time required by Section 1.01(a)
hereof, (ii) the Offer shall have been terminated or shall have expired
without the Purchaser having purchased any Shares pursuant to the Offer
or (iii) Purchaser shall have failed to pay for Shares pursuant to the
Offer prior to the Final Date.
SECTION 8.02 Effect of Termination.
(a) In the event of the termination and abandonment of this Agreement
pursuant to Section 8.01 hereof, this Agreement shall forthwith become
void, without liability on the part of any party hereto except as provided
in this Section 8.02 and Sections 6.03(b) and 9.09 and the last sentence
of Section 1.02, and except that nothing herein shall relieve any party
from liability for any breach of this Agreement. Notwithstanding the
foregoing, neither Parent or Purchaser, on the one hand, nor the Company,
on the other hand, shall have any rights with respect to the recovery of
expenses, except as provided for in Sections 8.02(b)(i) and 8.02(b)(ii),
respectively.
(b)(i) If Parent or Purchaser shall have terminated this Agreement
pursuant to Section 8.01(d)(i) or 8.01(d)(ii), 8.01(d)(iii), or the
Company shall have terminated this Agreement pursuant to Section
8.01(e)(iii), then the Company shall promptly reimburse Parent for all
documented out-of-pocket expenses of Parent and its subsidiaries, up to an
amount of $1,000,000, incurred in connection with the transactions
contemplated hereby.
<PAGE>
(ii) If the Company shall have terminated this Agreement pursuant to
Section 8.01(e)(i), 8.01(e)(ii) or 8.01(f)(i), then Parent shall promptly
reimburse the Company for all documented out-of-pocket expenses of Company
and its subsidiaries, up to an amount of $1,000,000, incurred in
connection with the transactions contemplated hereby.
(iii)If Parent or Purchaser shall have terminated this Agreement
pursuant to Section 8.01(d)(iii) or the Company shall have terminated this
Agreement pursuant to Section 8.01(e)(iii), then in any such case the
Company shall, (i) in the event of any such termination by Parent or
Purchaser within one business day after the date of such termination, or
(ii) in the event of any such termination by the Company, prior to such
termination and as a condition to the effectiveness of such termination,
pay Parent a termination fee of $5,000,000. In no event will the amounts
received by Parent pursuant to this Section 8.02(b)(iii) and Section
8.02(b)(i) exceed, in the aggregate, $6,000,000.
(iv) Notwithstanding any other provision hereof, no fee or expense
reimbursement shall be paid pursuant to this Section 8.02(b) to any party
who shall be in material breach of its obligations hereunder. For purposes
of this clause (iv), Parent and Purchaser shall be deemed a single party.
SECTION 8.03 Amendment. This Agreement may be amended by action taken by
or on behalf of the Boards of Directors of the Company (excluding any
representative of Parent or any subsidiary of Parent), Parent and Purchaser at
any time before or after adoption of this Agreement by the stockholders of the
Company but, after any such approval, no amendment shall be made which decreases
the Transaction Consideration or otherwise adversely affects such stockholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of all the parties.
SECTION 8.04 Extension; Waiver. Subject to Section 1.01 hereof, at any
time prior to the Effective Time, the parties hereto, by action taken by or on
behalf of the respective Boards of Directors of the Company (excluding any
representative of Parent or any subsidiary of Parent), Parent and Purchaser, may
(i) extend the time for the performance of any of the obligations or other acts
of any other applicable party hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein by any other applicable party or
in any document, certificate or writing delivered pursuant hereto by any other
applicable party or (iii) waive compliance with any of the agreements of any
other applicable party or with any conditions to its own obligations. Any
agreement on the part of any other applicable party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE IXMISCELLANEOUS
SECTION 9.01 Survival of Representations and Warranties. The
representations and warranties made in this Agreement shall not survive beyond
the Effective Time. This Section 9.01 shall not limit any covenant or agreement
of the parties hereto, which by its terms contemplates performance after the
Effective Time.
<PAGE>
SECTION 9.02 Brokerage Fees and Commissions. Except for ING Barings, the Company
hereby represents and warrants to Parent with respect to the Company, Parent
hereby represents and warrants to the Company with respect to Parent and
Purchaser, that no person is entitled to receive from the Company or Parent,
respectively, or any of their respective subsidiaries or affiliates, any
investment banking, brokerage or finder's fee or fees for financial consulting
or advisory services in connection with this Agreement or the transactions
contemplated hereby.
SECTION 9.03 Entire Agreement; Assignment. This Agreement (a) constitutes
the entire agreement among the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral (other than the agreement referred to in Section 6.03(b) hereof), among the
parties or any of them with respect to the subject matter hereof, (b) shall be
binding upon the parties hereto and their successors and permitted assigns and
(c) shall not be assigned by operation of law or otherwise, provided that Parent
or Purchaser may assign its respective rights and obligations to any wholly
owned, direct or indirect, subsidiary of Parent, but no such assignment shall
relieve Parent of its obligations hereunder. It is understood and agreed that
either Parent, Purchaser or any other direct wholly owned subsidiary of Parent
may commence the Offer or purchase Shares thereunder (in which event, references
herein to (and similar to) Purchaser purchasing Shares shall be deemed
appropriately modified).
SECTION 9.04 Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
SECTION 9.05 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person or by next-day courier, or by facsimile
transmission with confirmation of receipt to the respective parties as follows:
If to Parent or Purchaser:
Zale Corporation
961 West Walnut Hill Lane
Irving, TX 75038-1003
Attention: Alan Shor
Facsimile No.: (972) 580-5336
<PAGE>
with a copy to:
Zale Corporation
901 West Walnut Hill Lane
Irving, TX 75038-1003
Attention: Susan Lanigan
Facsimile No.: (972) 580-5336
and a copy to:
Troutman Sanders LLP
600 Peachtree Street, NE
Suite 5200
Atlanta, GA 30308-2216
Attention: W. Brinkley Dickerson, Jr.
Facsimile No.: (404) 885-3900
If to the Company:
Piercing Pagoda, Inc.
3910 Adler Place
Lehigh Valley, PA 18002-5007
Attention: President
Facsimile No.: (610) 694-9077
with a copy to:
Wolf, Block, Schorr and Solis-Cohen LLP
1650 Arch Street, 22nd Floor
Philadelphia, PA 19103
Attention: Jason M. Shargel
Facsimile No.: (215) 977-2334
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof). Any such notice shall be effective upon receipt, if personally
delivered or sent by facsimile transmission, or one day after delivery to a
courier for next-day delivery. Nothing in this Section 9.05 shall be deemed to
constitute consent to the manner and address for service of process in
connection with any legal proceeding (including litigation arising out of or in
connection with this Agreement), which service shall be effected as required by
applicable law.
SECTION 9.06 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.07 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning of interpretation of this Agreement.
<PAGE>
SECTION 9.08 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 9.09 Expenses. Subject to Section 8.02(b), all costs and expenses
incurred in connection with the transactions contemplated by this Agreement
shall be paid by the party incurring such expenses.
SECTION 9.10 Third Party Beneficiaries. Except for Sections 2.08, 6.06 and
6.07 which are intended to confer third party beneficiary rights on the persons
referred to therein, this Agreement is not intended to, and does not, create any
rights or benefits of any person other than the parties hereto.
SECTION 9.11 Certain Definitions.
(a) "Governmental Authority" means any United States federal, state,
county or local or other governmental, regulatory or administrative
authority, agency, instrumentality or commission or any court, tribunal or
judicial or arbitral body.
(b) "subsidiary" shall mean, when used with reference to an entity,
any corporation or other entity, a majority of the outstanding voting
securities of which are owned directly or indirectly by such entity.
(c) "Material Adverse Effect" shall mean any adverse change in the
financial condition, assets, liabilities, business or results of
operations of the Company and its subsidiaries which is material to the
Company and its subsidiaries taken as a whole or the ability of the
Company to perform its obligations under this Agreement or to consummate
the transactions contemplated hereby, excluding any changes relating to
general economic or conditions affecting at any time the Company or any of
its subsidiaries or the industry or industries in which any of them
operate. Notwithstanding the foregoing, the Company may, at its option,
include in the Disclosure Schedules items which would not have a Material
Adverse Effect within the meaning of the previous sentence, and such
inclusion shall not be deemed to be an acknowledgment by the Company that
such items would have a Material Adverse Effect or further define the
meaning of such term for purposes of this Agreement.
(d) "person" shall include individuals, corporations, partnerships,
limited liability companies, trusts, other entities and groups.
(e) "knowledge of the Company" shall be deemed to include only the
actual knowledge after reasonable inquiry of the directors and Executive
Officers of the Company.
(f) "Executive Officer" shall mean these individuals listed in Annex
B to this Agreement.
<PAGE>
(g) "Final Date" shall mean December 31, 2000.
(h) "Environmental Law" shall mean any United States federal, state,
local or non-United States laws relating to (i) releases or threatened
releases of Hazardous Substances or material containing Hazardous
Substances, (ii) the manufacture, handling, transport, use, treatment,
storage or disposal of Hazardous Substances or materials containing
Hazardous Substances, or (iii) pollution or protection of the environment,
health or natural resources.
(i) "Hazardous Substances" shall mean (i) those substances defined in
or regulated as hazardous or toxic substances, material or wastes under
the following United States federal statutes and their state counterparts,
as each may be amended from time to time, and all regulations thereunder:
the Hazardous Materials Transportation Act, the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response, Compensation and
Liability Act, the Clean Water Act, the Safe Drinking Water Act, the
Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide Act
and the Clean Air Act, (ii) petroleum and petroleum products, including
crude oil and any fractions thereof, (iii) natural gas, synthetic gas, and
any mixtures thereof, (iv) polychlorinated biphenyls, asbestos and radon,
(v) any other contaminant, and (vi) any substance, material or waste
regulated as a hazardous or toxic substance, material or waste by any
Governmental Authority pursuant to any Environmental Law.
SECTION 9.12 Consent to Jurisdiction. Each of Parent, Purchaser and the
Company irrevocably submits to the exclusive jurisdiction of (a) the courts of
the State of Delaware, and (b) the United States District Court for the District
of Delaware for the purposes of any suit, action or other proceeding arising out
of this Agreement or any transaction contemplated hereby. Parent and Purchaser
irrevocably designate, appoint and empower Troutman Sanders LLP (Attention: W.
Brinkley Dickerson, Jr., Esquire) Bank of America Plaza, 600 Peachtree Street,
N.E. - Suite 5200, Atlanta, Georgia 30308, and the Company hereby irrevocably
designates, appoints and empowers Wolf, Block, Schorr and Solis-Cohen LLP
(Attention: Jason M. Shargel, Esquire) 1650 Arch Street, 22nd Floor,
Philadelphia, PA 19103, in each case as its true and lawful agent and
attorney-in-fact in its name, place and stead to receive and accept on its
behalf service of process in any action, suit or proceeding in Pennsylvania with
respect to any matters as to which it has submitted to jurisdiction as set forth
in the immediately preceding sentence.
SECTION 9.13 Construction; Interpretation. The parties hereby agree that
any rule of law or any legal decision that would require interpretation of any
claimed ambiguities in this Agreement against the party that drafted it has no
application and is expressly waived.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed under seal on its behalf by its officers thereunto duly authorized, all
as of the day and year first above written.
ZALE CORPORATION
By: /s/ Beryl Raff
Name: Beryl Raff
Title: President/CEO
JEWELRY EXPANSION CORP.
By: /s/ Alan P. Shor
Name: Alan P. Shor
Title: President
PIERCING PAGODA, INC.
By: /s/ John F. Eureyecko
Name: John F. Eureyecko
Title: President
<PAGE>
ANNEX A
to
Agreement and Plan of Merger1
Conditions of the Offer. Notwithstanding any other provisions of the Offer
or the Merger Agreement, Purchaser shall not be required to accept for payment
or, subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) under the Exchange Act (relating to a bidder's obligation to pay for or
return tendered securities promptly after the termination or withdrawal of such
bidder's offer) to pay for any Shares tendered pursuant to the Offer, and may
extend, terminate or amend the Offer, unless (i) there are validly tendered and
not withdrawn immediately prior to the expiration date of the Offer a number of
Shares, which when added to the Shares then beneficially owned by Parent
represent at least a majority of the total number of Shares outstanding on a
fully diluted basis (the "Minimum Condition"), (ii) the waiting period (and any
extension thereof) under the HSR Act applicable to the purchase of Shares
pursuant to the Offer shall have expired or been terminated and all regulatory
approvals required to consummate the Offer and the Merger shall have been
obtained and shall remain in full force and effect or (iii) at any time on or
after the date of the Agreement and prior to the expiration of the Offer any of
the following conditions exists:
(a) there shall be instituted or pending any suit, action or
proceeding by any Governmental Authority which seeks to (i) restrain or
prohibit the making or consummation of the Offer or the Merger or (ii)
restrain or prohibit the performance of the Merger Agreement; (iii)
restrain or prohibit Parent's ownership of all or any portion of the
business and assets of the Company and its subsidiaries, or to compel
Parent or its affiliates to dispose of or hold separate all or any
portion of the business or assets of the Company; or (iv) impose or
confirm any limitation on the ability of Parent or Purchaser or any
affiliate of Parent or Purchaser to exercise effectively full rights of
ownership of any Shares, including, without limitation, the right to
vote any Shares acquired by Purchaser pursuant to the Offer or otherwise
on all matters properly presented to the Company's shareholders; or
(b) there shall have been any statute, rule, regulation, legislation
or interpretation enacted, promulgated, amended, issued or deemed
applicable to (i) Parent, the Company or any subsidiary or affiliate of
Parent or the Company or (ii) any of the transactions contemplated by the
Agreement, by any United States or non United States legislative body or
Governmental Authority with appropriate jurisdiction, other than the
routine application of the waiting period provisions of the HSR Act and in
the other countries where a merger filing was necessary or advisable, to
the Offer or the Merger, that is reasonably likely to result, directly or
<PAGE>
indirectly in any of the consequences referred to in clauses (i) through
(iv) of paragraph (a) above;
(c) (i) any representation or warranty made by the Company in the
Merger Agreement that is qualified as to Material Adverse Effect is untrue
at the time such representation or warranty was made or shall not be true
and correct as of the date of consummation of the Offer (except for those
representations and warranties made as of a particular date which need
only be true and correct as of such date) or (ii) any representations or
warranties made by the Company in the Merger Agreement that are not so
qualified as to Material Adverse Effect shall not be true or correct in
all respects as of the date of consummation of the Offer (except for those
representations and warranties made as of a particular date which need
only be true and correct as of such date), unless the failure of all such
representations and warranties in this clause (ii) to be true and correct,
individually or in the aggregate, has had or would reasonably be expected
to have a Material Adverse Effect; or
(d) there shall have been a breach in any material respect by the
Company (which breach has not been cured in all material respects) of any
of its covenants or agreements contained in the Merger Agreement, except
for any such breaches or failures to perform that would not have a
Material Adverse Effect; or
(e) the Merger Agreement shall have been terminated in accordance
with its terms; or
(f) the Company's Board of Directors or any committee thereof will
have withdrawn or modified (including by amendment of the Schedule 14D-9)
in a manner adverse to Parent or Purchaser its approval or recommendation
of the Offer, the Merger Agreement or the Merger, or will have recommended
to the Company's stockholders any Alternative Acquisition Proposal or will
have adopted any resolution to effect any of the foregoing which, in the
sole judgment of Purchaser in any such case, and regardless of the
circumstances (including any action or omission by Purchaser) giving rise
to any such condition, makes it inadvisable to proceed with such
acceptance or payment; or
(g) any Person (other than Parent or any of its subsidiaries)
acquires beneficial ownership (as defined in Rule 13d-3 promulgated under
the Securities Exchange Act of 1934), of at least 25% of the outstanding
voting securities of the Company or is granted by the Company or any
shareholder of the Company that is a party to the Tender and Voting
Agreement any option or right to acquire at least 15% of such voting
securities (as used herein, "Person" shall include any corporation,
individual, partnership, limited liability company, trust, other entity or
group (as defined in the Exchange Act), other than Parent or any of its
affiliates (as defined in the Exchange Act)); or
(h) Since the date of this Agreement, any change shall have occurred
which has, or could reasonably be expected to have, a Material Adverse
Effect; or
<PAGE>
(i) there shall be in effect a declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States.
which, in the reasonable judgment of Parent or Purchaser in any such case, and
regardless of the circumstances giving rise to any such condition, makes it
inadvisable to proceed with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Purchaser and Parent
and, subject to Section 1.01(a) of the Merger Agreement, may be asserted by
Purchaser and Parent regardless of the circumstances giving rise to such
condition or may be waived by Purchaser or Parent in whole or in part at any
time and from time to time in its sole discretion, subject in each case to the
terms of the Merger Agreement. The failure by Purchaser or Parent at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right, each such right shall be deemed an ongoing right and may be asserted at
any time and from time to time and the waiver of any such right with respect to
particular facts and circumstances shall not be deemed to be a waiver with
respect to any other facts and circumstances.
<PAGE>
ANNEX B
Agreement and Plan of Merger
EXECUTIVE OFFICERS
Richard H. Penske...............Chief Executive Officer
John F. EureyeckoPresident, Chief Operating Officer and Secretary
Sharon J. ZondagSenior Vice President - Store Operations
Barry R. ClauserSenior Vice President - Merchandise Operations
Gilbert P. HollanderSenior Vice President of Merchandise Purchasing
Brandon R. Lehman.............................Treasurer
Lisa E. Sankovsky..........Vice President - Real Estate
Richard J. McKeonDirector of Management Information Systems
Christopher J. Barone..............Corporate Controller
