Exhibit 10.4

ZALE DELAWARE, INC.
409A SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2005

ARTICLE I

ESTABLISHMENT AND PURPOSE

1.1                               Establishment.  Zale Delaware, Inc. (the
“Company”) established the Zale Delaware, Inc. Supplemental Executive Retirement
Plan (the “SERP”), effective September 15, 1995.  Effective December 31, 2004,
the Company amended the SERP to (i) cease benefit accruals and (ii) bifurcate
the SERP into two separate plans, one that is subject to the requirements of
section 409A of the Code (as defined herein) and one that is not.  By this
instrument, the Company desires to amend and restate that portion of the SERP
that is subject to the requirements of section 409A of the Code effective
January 1, 2005 (the “Effective Date”).  Such amended and restated SERP will be
referred to herein as the “Plan.”

1.2                               Purpose. The purpose of the Plan is to provide
eligible executives with the opportunity to receive each year after retirement,
payments equal to a portion of their final average pay.  The Plan is meant to
provide a long-term reward for executives that recognizes their contribution to
the Company’s success throughout their careers.

ARTICLE II

DEFINITIONS

Unless the context otherwise requires, the terms used herein will have the
meanings set forth below:

2.1                               “Affiliate” means a corporation that is a
member of a controlled group of corporations (as defined in section 414(b) of
the Code) that includes the Company, any trade or business (whether or not
incorporated) that is in common control (as defined in section 414(c) of the
Code) with the Company, or any entity that is a member of the same affiliated
service group (as defined in section 414(m) of the Code) as the Company.

2.2                               “Base Salary” means the regular salary paid to
a Participant by the Company, excluding bonuses, benefits under employee benefit
plans, fringe benefits, and any other extra or additional payments made to or
for the benefit of such Participant.  Effective December 31, 2004, benefit
accruals under the Plan have ceased.  Accordingly, no Base Salary earned after
such date will be counted for purposes of the Plan.

2.3                               “Benefit” means the monetary amount to be paid
a vested Participant under the Plan.

2.4                               “Bonus Points” means the number of points
awarded to a Participant under the formula described in Section 4.2.  Effective
December 31, 2004, benefit accruals under the Plan have ceased.  Accordingly, no
Bonus Points will be awarded after such date.

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2.5                               “Bonus Target” means a goal for net income
established each Plan Year by the Compensation Committee.

2.6                               “Change of Control” will be deemed to have
occurred if, subsequent to the Effective Date of this Plan,

(a)                                  any “person” (within the meaning of Section
13(d) of the Exchange Act) becomes the beneficial owner (within the meaning of
Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of
either (i) a majority of the Company’s outstanding Common Stock or (ii)
securities of the Company representing a majority of the combined voting power
of the Company’s then outstanding voting securities, except that there will be
no Change of Control if such person (A) becomes such a beneficial owner solely
as the result of the acquisition of the outstanding Common Stock or other
outstanding voting securities by the Company or (B) is an employee benefit plan
or related trust sponsored or maintained by the Company or any corporation or
other entity controlled by the Company;

(b)                                 during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company cease, at any time after the beginning of such period,
for any reason to constitute a majority of the Board of Directors of the
Company, unless the election of any such new director was nominated, effected,
or ratified by at least two-thirds of the directors still in office who were
directors at the beginning of such two-year period or whose election was
previously so nominated, effected, or ratified;

(c)                                  a reorganization, merger, or consolidation
of the Company with one or more other corporations or other entities, unless, in
any case, (i) at least a majority of the Company’s outstanding Common Stock (or
the equivalent equity security of the other surviving or resulting corporation
or other entity) and at least a majority of the combined voting power of the
Company’s or other surviving or resulting corporation’s or other entity’s
outstanding voting securities are beneficially owned, directly or indirectly,
after such reorganization, merger, or consolidation by all or substantially all
of the persons who were the beneficial owners, respectively, of a majority of
the Company’s outstanding Common Stock and a majority of the combined voting
power of the Company’s then outstanding voting securities immediately before
such reorganization, merger, or consolidation in substantially the same
proportions as their beneficial ownership thereof immediately before such
reorganization, merger or consolidation, and (ii) at least a majority of the
members of the board of directors or other governing body of the Company or the
other corporation or other entity surviving or resulting from such
reorganization, merger, or consolidation were, or were approved by at least
two-thirds of the, members of the Board of Directors of the Company at the time
of the execution of the initial agreement providing for such reorganization,
merger or consolidation;

(d)                                 the sale or other disposition of all or
substantially all of the assets of the Company to one or more other corporations
or other entities, unless the conditions set forth in subclauses (i) and (ii) of
subsection (c) above are satisfied with respect to the acquiring corporation or
other entity (and, as applicable, with

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respect to the time of the initial agreement providing for such sale or other
disposition of assets); or

(e)                                  the dissolution and complete liquidation of
the Company.

2.7                               “Code” means the Internal Revenue Code of
1986, as amended.

2.8                               “Company” means Zale Delaware, Inc.

2.9                               “Compensation Committee” means the
Compensation Committee of the Company.

2.10                        “Disabled” means the inability of a Participant to
perform the duties of his or her position as determined by a physician approved
by the Compensation Committee.

2.11                        “ERISA” means the Employee Retirement Income
Security Act of 1974, as amended.

2.12                        “Final Average Pay” means the average of the monthly
Base Salary received by the Participant from the Company in the sixty (60)-month
period ending immediately prior to the Participant’s retirement or other
termination from the Company. Effective December 31, 2004, benefit accruals
under the Plan have ceased.  Accordingly, no Base Salary earned after such date
will be included for purposes of determining a Participant’s Final Average Pay.

2.13                        “Five Percent Owner” means any person who owns (or
is considered as owning within the meaning of section 318 of the Code) more than
five percent (5%) of the outstanding stock of the Company or an Affiliate or
stock possessing more than five percent (5%) of the total combined voting power
of all stock of the Company or an Affiliate.  The rules of sections 414(b), (c)
and (m) of the Code (the “Controlled Group Rules”) will not apply for purposes
of applying these ownership rules.  Thus, this ownership test will be applied
separately with respect to the Company and each Affiliate.

2.14                        “Key Employee” means any employee or former employee
of the Company or an Affiliate (including any deceased employee) who is:

(a)                                  an officer of the Company or an Affiliate
who is receiving annual compensation within the meaning of Treasury Regulation
section 1.415(c)-2(d)(4)(i.e., W-2 wages plus amounts that would be includible
in wages except for an election under section 125(a) of the Code (regarding
cafeteria plan elections), section 132(f)(4) of the Code (regarding qualified
transportation fringe benefits) or section 402(e)(3) of the Code (regarding
section 401(k) plan deferrals)) of greater than $130,000 (as adjusted under
section 416(i)(1) of the Code for Plan Years beginning after December 31, 2002)
(such limit is $145,000 for 2007);

(b)                                 a Five Percent Owner; or

(c)                                  a One Percent Owner who is receiving annual
compensation within the meaning of Treasury Regulation section
1.415(c)-2(d)(3)(i.e., W-2 wages) of more than $150,000.

The determination of which employees qualify as Key Employees will be based upon
a twelve (12) month period ending on December 31 of each year (i.e., the
identification

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date).  Employees who are Key Employees during such twelve (12) month period
will be treated as Key Employees for the twelve (12) month period beginning on
the first day of the fourth (4th) month following the end of the twelve (12)
month period (i.e., since the identification date is December 31, then the
twelve (12) month period to which it applies will begin on the next following
April 1).

The determination of which employees qualify as Key Employees will be made in
accordance with section 416(i)(1) of the Code and other guidance of general
applicability issued thereunder disregarding the provisions of section 416(i)(5)
of the Code regarding beneficiaries.  For purposes of determining whether an
employee or former employee qualifies as an officer, a Five Percent Owner or a
One Percent Owner, the Company and each Affiliate will be treated as a separate
employer (i.e., the Controlled Group Rules will not apply).  Conversely, for
purposes of determining whether the $130,000 adjusted limit on annual
compensation is met under the officer test described in Section 2.14(a),
compensation received by an employee from the Company and all Affiliates will be
taken into account (i.e., the Controlled Group Rules will apply).  Further, in
determining which employees qualify as officers under the officer test described
in Section 2.14(a), no more than fifty (50) employees of the Company and its
Affiliates (i.e., the Controlled Group Rules will apply) will be treated as
officers.  If the number of officers exceeds fifty (50), the determination of
which employees or former Employees qualify as officers will be determined based
on which employees received the largest annual compensation from the Company and
Affiliates for the Plan Year.

2.15                        “Maximum Bonus Target” means the highest goal for
net income established each year by the Compensation Committee. Effective
December 31, 2004, benefit accruals under the Plan have ceased.  Accordingly, no
Maximum Bonus Targets will be established by the Compensation Committee after
such date.

2.16                        “One Percent Owner” means any person who would be
described as a Five Percent Owner if “one percent (1%)” were substituted for
“five percent (5%)” in each place it appears in the definition of Five Percent
Owner set forth in Section 2.13.

2.17                        “Participant” means an executive who participates in
the Plan as provided in Article III.

2.18                        “Plan” means the Zale Delaware, Inc. 409A
Supplemental Executive Retirement Plan set forth in this document, as it may be
amended from time to time.

2.19                        “Plan Year” means August I through July 31.

2.20                        “Year of Service” means a twelve (12)-month period
of continuous service by a Participant for the Company or (to the extent the
Compensation Committee authorizes) an Affiliate of the Company.  Only service
after September 14, 1995 is counted for the purpose of calculating Years of
Service; provided, however, that for any Participant who was employed by the
Company in an eligible position for the entire period from September 14, 1995 to
July 31, 1996, that Participant will be considered to have one (1) full Year of
Service as of July 31, 1996.

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ARTICLE III

ELIGIBILITY

3.1                               Eligibility. The classes of executives who are
designated by the Company as members of the “Management Group” who hold the
office of Corporate Vice President, Division Senior Vice President and all
higher executive offices, are eligible to be Participants in the Plan. 
Effective as of December 31, 2004 benefit accruals under the Plan have been
discontinued and no new executives will be designated by the Company as
Participants in the Plan.  Rather, the only Participants in the Plan will be
those Participants as of December 31, 2004 who were not fully vested in their
Benefit under the Plan.  Those Participants who were fully vested in their
Benefit under the Plan as of December 31, 2004 will be participants in the Zale
Delaware, Inc. Pre-409A Supplemental Executive Retirement Plan.

3.2                               Loss of Eligibility.  If an individual ceases
to be an individual listed in Section 3.1, he or she will no longer participate
in the Plan.  Loss of eligibility will not result in a forfeiture of a
Participant’s Benefit previously earned under the Plan and a former Participant,
pursuant to the terms and conditions of the Plan, may continue to vest in such
Benefit based on Years of Service after loss of eligibility.

ARTICLE IV

DETERMINATION OF BENEFITS

4.1                               Calculation of Benefit.  Each Participant who
is vested as determined in Section 4.3 is entitled to payment of his Benefit at
the time and in the form described in Article V. The Participant’s Benefit will
be monthly payments continuing over the life of the Participant commencing on
the first day of the month immediately following the Participant’s sixty-fifth
(65th) birthday, subject to the provisions of Section 5.5, with the amount of
each payment determined under the following formula:

Bonus Points x Final Average Pay
100

4.2                               Bonus Points.  Each Plan Year prior to January
1, 2005, the Compensation Committee will set a Bonus Target and a Maximum Bonus
Target.  In each Plan Year that the Company achieves at least its Bonus Target,
each Participant will be credited with a number of Bonus Points based on the
following schedule:

(a)                                  No points if below Bonus Target;

(b)                                 One (1) point at Bonus Target;

(c)                                  Two (2) points at fifty percent (50%) of
Maximum Bonus Target; or

(d)                                 Three (3) points at one hundred percent
(100%) of Maximum Bonus Target.

A Participant may accrue from zero (0) to thirty (30) points, depending on
Company performance and the number of Plan Years he or she participates in the
Plan.

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4.3                               Vesting.  A Participant vests in his or her
Benefit after completing five (5) Years of Service following September 15,
1995.  Service prior to September 15, 1995 does not count as Years of Service. 
However, in its sole and absolute discretion, the Compensation Committee may
accelerate vesting for any Participant.  In the event of a Change of Control,
the Benefits of all Participants will automatically vest irrespective of each
Participant’s Years of Service.  Further, a Participant’s Benefit will become
fully vested if he dies or becomes Disabled while employed by the Company.

ARTICLE V

PAYMENT OF BENEFITS

5.1                               Retirement.  If a Participant retires on or
after attaining age sixty-five (65), Benefits will begin on the first day of the
month after the Participant’s retirement.  Benefits will be paid in the form of
an annuity providing monthly benefits for the life of the Participant.  Payment
of such benefits will be subject to the six (6) month delay applicable to Key
Employees under Section 5.5.

5.2                               Death.  If a Participant dies while actively
employed, the Participant’s surviving spouse will be eligible to begin receiving
the Participant’s Benefit in the form of monthly payments for the life of the
surviving spouse, commencing on the first day of the month following the date
the Participant would have attained age sixty-five (65).  Payment of such
benefits will not be subject to the six (6) month delay applicable to Key
Employees under Section 5.5.  The Benefits payable to the surviving spouse will
have an actuarial value (calculated using the assumptions prescribed in this
Section 5.2) equal to the Benefits that would have been paid to the Participant
commencing at age sixty-five (65), based on the Participant’s Final Average Pay
and Bonus Points as of the earlier of December 31, 2004 or the date of the
Participant’s death.  If the Participant has no surviving spouse, no death
benefits are payable.  Actuarial equivalence will be determined using the
following actuarial assumptions.  The applicable interest rate will be that of
thirty (30)-year Treasury securities as of the first day of the calendar year in
which the Benefits commence.  The mortality assumption will be based on the 1983
group annuity mortality tables.

5.3                               Disability.  If a Participant becomes
Disabled, his Benefit will become payable commencing on the first day of the
month after he attains age sixty-five (65).  Benefits will be paid in the form
of an annuity providing monthly benefits for the life of the Participant.
Payment of such benefits will be subject to the six (6) month delay applicable
to Key Employees under Section 5.5.

5.4                               Other Termination of Service.  If the
employment of a Participant terminates for a reason other than death or
Disability, prior to the date the Participant attains age sixty-five (65), the
payment of his or her vested Benefits, if any, will commence on the first day of
the month immediately after he or she attains age sixty-five (65).  Benefits
will be paid in the form of an annuity providing monthly benefits for the life
of the Participant.  In the event that the Participant terminates employment
within the six (6) month period preceding the date he or she attains age
sixty-five (65), payment of such benefits will be subject to the six (6) month
delay applicable to Key Employees under Section 5.5.

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5.5                               Termination Distributions to Key Employees. 
Distributions under this Plan that are payable to a Key Employee on account of a
termination of employment, including retirement, will be delayed for a period of
six (6) months following such Participant’s termination of employment.  This six
(6) month restriction will not apply with respect to a distribution to a
Participant’s surviving spouse by reason of the death of the Participant.

5.6                               Withholding of Taxes.  The Company will
withhold from Benefit payments made hereunder any taxes required to be withheld
by any law or regulation of the federal, state, or local government.

ARTICLE VI

ADMINISTRATION

6.1                               Authority of Compensation Committee.  The
Compensation Committee will have sole and absolute power and authority to
interpret, construe and administer the Plan.  The Compensation Committee’s
interpretation and construction of the Plan and actions hereunder will be
binding and conclusive on all persons and for all purposes.  The Compensation
Committee may designate certain Company employees to assist in the
administration of the Plan.  In addition, the Compensation Committee may employ
attorneys, accountants, actuaries and other professional advisors to assist the
Compensation Committee in its administration of the Plan.  The Company will pay
the reasonable fees of any such advisor employed by the Compensation Committee. 
To the extent permitted by law, the Compensation Committee, the Board or any
employee of the Company will not be liable to any person for any action taken or
omitted in connection with the interpretation and administration of the Plan
unless attributable to his or her own willful misconduct or lack of good faith.

6.2                               Indemnification of Employees of the Company. 
The Company hereby agrees to indemnify, jointly and severally, the Compensation
Committee and all employees of the Company against any and all claims, losses,
damages or expenses, including counsel fees, incurred by them, and any
liability, including any amounts paid in settlement with their approval arising
from their action or failure to act with respect to any matter relating to the
Plan, except when the same is judicially determined to be attributable to their
willful misconduct or lack of good faith.  The indemnification provided by this
Section 6.2 will survive the termination of the Plan and will be binding on the
Company’s successors and assigns.

6.3                               Cost of Administration.  The cost of this Plan
and the expenses of administering the Plan will be paid by the Company.

ARTICLE VII

CLAIMS PROCEDURE

7.1                               Claim.  Any person claiming a benefit,
requesting an interpretation or ruling under the Plan, or requesting information
under the Plan will present the request in writing to the Compensation
Committee, which will respond in writing as soon as possible.  Claims for
Benefits other than those payable on account of Disability will be resolved
pursuant to

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the following claims procedure.  In the case of a claim for Disability benefits,
such claim will be resolved under the claims procedure applicable to Disability
claims set forth in regulations issued under section 503 of ERISA which are
incorporated herein by this reference.

7.2                               Denial of Claim.  If the claim or request is
denied, the written notice of denial will state:

(a)                                  The reasons for denial, with specific
reference to the Plan provisions on which the denial is based.

(b)                                 A description of any additional material or
information required and an explanation of why it is necessary.

(c)                                  An explanation of the Plan’s claim review
procedure including the claimant’s right to file an action under section 502(a)
of ERISA upon exhaustion of the Plan’s claim review procedure.

7.3                               Review of Claim.  Any person whose claim or
request is denied or who has not received a response within thirty (30) days,
may request review by notice in writing received by the Compensation Committee
within seventy-five (75) days after the date of the notice of denial (or failure
to receive a response).  The claim or request will be reviewed by the
Compensation Committee, who may, but will not be required to, grant the claimant
a hearing.  On review, the claimant may have representation, examine pertinent
documents and submit issues and comments in writing.  The decision on review
will normally be made within sixty (60) days.  If an extension of time is
required for a hearing or other special circumstance, the claimant will be
notified and the time limit will be one hundred twenty (120) days.  The decision
will be in writing, and if the claim is denied, will state the reasons for
denial, will reference the relevant Plan provisions on which the denial is based
and will explain the Plan’s claim review procedure, including the claimant’s
right to file an action under section 502(a) of  ERISA upon exhaustion of the
Plan’s claim review procedure.

7.4                               Appeal of Decision on Review.  If the claimant
does not agree with the decision of the Compensation Committee on review of the
claim, the claimant may appeal the decision of the Compensation Committee to the
Board of Directors of the Company by notice in writing received by the Board of
Directors within seventy-five (75) days after the date of the decision on
review.

7.5                               Final Decision.  The decision on appeal will
normally be made within sixty (60) days.  If an extension of time is required
for a hearing or other special circumstance, the claimant will be notified and
the time limit will be one hundred twenty (120) days.  The decision of the Board
of Directors on appeal will be in writing and, if the claim is denied, will
state the reasons for denial, will reference the relevant Plan provisions and
will advise the claimant of his right to file an action under section 502(a) of
ERISA.  All decisions on appeal will be final and bind all parties concerned.

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ARTICLE VIII

AMENDMENT AND TERMINATION

8.1                               Amendment.  Subject to the consent
requirements of this Section 8.1, the Board of Directors of the Company, on a
favorable vote of at least seventy-five percent (75%) of the directors, will
have the right to amend this Plan at any time and from time to time, including a
retroactive amendment.  Any such amendment will become effective upon the date
stated therein, except as otherwise provided in such amendment.  No amendment
will decrease or restrict Benefits, whether vested or not, earned as of the date
of execution of such amendment without the consent of the affected Participant
or Participants.  Further, no amendment may extend the date that nonvested
benefits would otherwise become vested without the consent of the affected
Participant or Participants.  Any amendment approved by the Board of Directors
may be signed by the Chief Executive Officer or the Secretary of the Company.

8.2                               Termination of the Plan.  The Company has
established this Plan with the bona fide intention and expectation that it will
deem it advisable to continue it in effect.  However, the Board of Directors of
the Company, on a favorable vote of seventy-five percent (75%) of at least the
directors, may terminate the Plan in its entirety at any time.  In such event
each Participant will become fully vested in his Benefit earned as of the date
of termination.

Effective as of December 31, 2006, the Plan will terminate and all Participants
will be fully vested in their Benefits as of such date.  Pursuant to the
requirements of regulations issued under section 409A of the Code, no Benefits
will be paid to Participants for the twelve (12)-month period following such
termination (other than those Benefits that would be paid pursuant to the terms
of the Plan without regard to the termination) and all Benefits will be paid in
their entirety by the twenty-fourth (24th) month following such termination
(i.e., the Plan will be liquidated during the thirteen (13)-month to twenty-four
(24)-month period following the effective date of its termination).  Further,
the Company will not maintain another plan that would be aggregated with the
Plan under section 409A of the Code for the three (3)-year period following such
termination.

ARTICLE IX

GENERAL PROVISIONS

9.1                               Rights Against the Company.  The Plan will not
be deemed to constitute a contract between the Company and any Participant. 
Nothing contained in the Plan will be deemed to interfere with the right of the
Company to terminate any Participant at any time, without regard to the effect
such termination may have on any rights under the Plan.

9.2                               Funding.  The Company intends that the Plan
will constitute an “unfunded plan” for purposes of the Code and, to the extent
applicable, Title I of ERISA, and that any employee or spouse of an employee
eligible to receive benefits under the Plan will have the status of an unsecured
general creditor of the Company as to the benefits provided pursuant to the Plan
or assets identified specifically by the Company as a reserve for the discharge
of its obligations under the Plan.

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9.3                               Payment Due to an Individual Who is Incapable
of Managing His or Her Affairs.  If the Compensation Committee finds that any
person to whom any payment is payable under the Plan is unable to care for his
or her affairs because of mental or physical illness, accident, or death, or is
a minor, any payment due (unless a prior claim therefor will have been made by a
duly appointed guardian, committee or other legal representative) may be paid to
the spouse, a child, a parent, a brother or sister or any person deemed by the
Compensation Committee, in its sole discretion, to have incurred expenses for
such person otherwise entitled to payment, in such manner and proportions as the
Compensation Committee may determine.  Such payments will be a complete
discharge of the liabilities of the Company under this Plan, and the Company
will have no further obligation to see to the application of any money so paid.

9.4                               Spendthrift Clause.  No right, title or
interest of any kind in the Plan will be transferable or assignable by any
Participant or surviving spouse of a Participant or be subject to alienation,
anticipation, encumbrance, garnishment, attachment, execution or levy of any
kind, whether voluntary or involuntary, nor subject to the debts, contracts,
liabilities, engagements, or torts of the Participant or surviving spouse.  Any
attempt to alienate, anticipate, encumber, sell, transfer, assign, pledge,
garnish, attach or otherwise subject to legal or equitable process or encumber
or dispose of any interest in the Plan will be void.

9.5                               Severability.  In the event that any provision
of this Plan will be declared illegal or invalid for any reason, said illegality
or invalidity will not affect the remaining provisions of this Plan but will be
fully severable and this Plan will be construed and enforced as if said illegal
or invalid provision had never been inserted herein.

9.6                               Construction.  The article and section
headings and numbers are included only for convenience of reference and are not
to be taken as limiting or extending the meaning of any of the terms and
provisions of this Plan.  Whenever appropriate, words used in the singular will
include the plural or the plural may be read as the singular.  When used herein,
the masculine gender includes the feminine gender.

9.7                               Governing Law.  The validity and effect of
this Plan, and the rights and obligations of all persons affected hereby, will
be construed and determined in accordance with the laws of the State of Texas.

IN WITNESS WHEREOF, the Company has executed this Plan on the 24th day of May,
2007, to reflect the Plan as amended and restated effective January 1, 2005.

ZALE DELAWARE INC.

 

 

 

 

 

By

/s/ Mary Ann Doran

 

 

Mary Ann Doran

 

 

 

SVP, Human Resources

 

 

(Title)

 

 

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