EXHIBIT 10.18
Zale Corporation has requested confidential treatment for certain portions of
this document pursuant to an application for confidential treatment sent to the
Securities and Exchange Commission. Zale Corporation has omitted such portions
from this filing and filed them separately with the Securities and Exchange
Commission. Such omissions are designated “[**].”
ZALE CORPORATION BONUS PLAN
(As of August 1, 2006)
Zale Corporation is committed to building and maintaining quality management and
to encouraging maximum focus on business environment. This Plan has been
developed to allow all eligible management the opportunity to receive an annual
bonus based on our success.
Payouts under this Plan are intended to constitute “qualified performance-based
compensation” for purposes of Section 162(m) of the Internal Revenue Code.

      ELIGIBILITY  
Management of Zale Corporation, as selected by the Compensation Committee.
   
 
MEASURES  
The Management Bonus Plan has three Components:
AND
WEIGHTING  
1. Annual Company Performance Bonus is based on the following performance
measures:

              Consolidated   Brand Organization   Net Income   Operating
Earnings
Corporate
  50%   50% Brand   20%   80%

         
Consolidated net income and Brand operating earnings targets shall be
established by the Compensation Committee of Zale Corporation’s Board of
Directors (the “Compensation Committee”) on an annual basis prior to the
commencement of a fiscal year, except to the extent permitted by Section 162(m)
to be established subsequently.
   
 
   
Following are the payout percentages:

                      •  
Threshold/minimum
    50 %     •  
Target/Plan
    100 %     •  
Stretch
    200 %

            2.
  The Quarterly Comparable Store Sales Bonus performance measures are:

[**]

 

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3. Stretch Achievement Pool
   
• 10% Net Income over Stretch will be pooled and distributed based on individual
percent payout
   
 
BONUS OPPORTUNITY  
The Compensation Committee shall establish one or more bonus opportunities
between 5% and 150%. The bonus opportunities may be applicable either to classes
of employees, such as Brand Presidents or to individual employees, as the
Compensation Committee may determine.
   
 
MAXIMUM PAYOUT  
No employee shall be entitled to receive a bonus of more than $2,000,000 with
respect to a fiscal year.

 

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          ADDITIONAL
ELIGIBILITY
REQUIREMENTS   •  
Must have joined Zale Corporation in a bonus eligible position on or before
February 1st of the applicable fiscal year. A pro-rated payout will be based on
earnings in the eligible position through July 31st of the applicable fiscal
year.
       
 
    •  
Must be actively on payroll, or on an approved leave of absence, on July 31st of
the applicable fiscal year.
       
 
    •  
If promoted to bonus eligible position on or before February 1st of a fiscal
year, bonus will be pro-rated based on earnings in the eligible position through
July 31st of the applicable year.
       
 
    •  
If changed to non-bonus eligible position after February 1st of a fiscal year,
but on active payroll on July 31st of the applicable fiscal year, bonus will be
pro-rated based upon earnings in the eligible position.
       
 
    •  
Participants terminated due to a broadly based reduction in force after February
1st of a fiscal year will be eligible for a pro-rated payout based upon earnings
in a bonus eligible position. Those terminated due to a broadly based reduction
in force before February 1st of a fiscal year and those terminated for any other
reason during the fiscal year will not be eligible to receive a bonus payout.
       
 
    •  
In the event of death, approved long-term disability or approved retirement
prior to February 1st of a fiscal year, a pro-rated payment will be made to the
participant or the participant’s estate based upon earnings in a bonus eligible
position.
       
 
    •  
Participants will be notified of their eligibility level at the beginning of the
fiscal year or when they become bonus eligible. A Bonus Participant Agreement in
such form as Zale Corporation shall approve must be signed at that time.
       
 
    •  
A participant who received an overall “IR” rating for the previous fiscal year
will not be eligible. The last performance rating on file will determine
eligibility to receive the Management Bonus.

 

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          ADMINISTRATION   •  
Management, for purposes of eligibility for participation in this plan, shall
include the Chief Executive Officer, President, any vice president, any director
level, and any manager level employee (or the equivalents thereto even if
designated by a different title) of Zale Corporation and its subsidiaries.
       
 
    •  
The Compensation Committee may, at its sole discretion, adjust bonus awards to
reflect special or unusual circumstances of any individual or individuals
       
 
    •  
Any employee on an approved leave of absence may, at the Compensation
Committee’s sole discretion, have his or her bonus reduced, pro rata, to reflect
the period of absence.
       
 
    •  
All bonuses pursuant to this plan must be approved by the Compensation
Committee.
       
 
    •  
Payouts will occur within 60 days following the end of the fiscal year to which
the bonuses were earned.
       
 
    •  
At its election, prior, during or following completion of a fiscal year, the
Compensation Committee may pay bonuses with respect to such fiscal year in Zale
Corporation common stock.
       
 
    •  
This plan may be implemented using one or more documents designated for classes
of employees or individual employees
       
 
    •  
This plan shall be interpreted and administered in a manner consistent with the
awards hereunder constituting “qualified performance-based compensation” for
purposes of Section 162(m) of the Internal Revenue Code.
       
 
    Zale Corporation reserves the right to amend, modify, suspend or terminate
this plan and payouts hereunder in its sole discretion, provided that
stockholder approval shall be sought with respect to any amendment that, absent
stockholder approval, would negatively impact the status of payouts under this
plan for purposes of Section 162(m) of the Internal Revenue Code.        
 
    Nothing in this plan shall be construed as a contract of employment.