EXHIBIT 10.8
ZALE DELAWARE, INC
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(As amended through July 31, 2006)
ARTICLE I
ESTABLISHMENT AND PURPOSE
     1.1 Establishment. Zale Delaware, Inc. (the “Company”) hereby establishes
the Zale Delaware, Inc. Supplemental Executive Retirement Plan (the “Plan’),
effective September 15, 1995.
     1.2 Purpose. The purpose of this 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 shall have the
meanings set forth below:
     2.1 “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.
     2.2 “Benefit” means the monetary amount to be paid a vested Participant
under the Plan.
     2.3 “Bonus Points” means the number of points awarded to a Participant
under the formula described in Section 4.2.
     2.4 “Bonus Target” means a goal for net income established each Plan Year
by the Compensation Committee.
     2.5 “Change of Control” shall 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 (2) securities of the Company representing
a majority of

 

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the combined voting power of the Company’s then outstanding voting securities,
except that there shall be no Change of Control if such person (i) 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 (ii) 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, (1) 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, or 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 (2) 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 (1) and (2) of subsection (c) above are
satisfied with respect to the acquiring corporation or other entity (and, as
applicable, with 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.
     2.6 “Company” means Zale Delaware, Inc.
     2.7 “Compensation Committee” means the Compensation Committee of the
Company.
     2.8 “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.

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     2.9 “Final Average Pay” means the average of the monthly Base Salary
received by the Participant from the Company in the 60-month period ending
immediately prior to the Participant’s retirement or other termination from the
Company.
     2.10 “Maximum Bonus Target” means the highest goal for net income
established each year by the Compensation Committee.
     2.11 “Participant” means an executive who participates in the Plan as
provided in Article III.
     2.12 “Plan” means the Zale Delaware, Inc. Supplemental Executive Retirement
Plan set forth in this document, as it may be amended from time to time.
     2.13 “Plan Year” means August 1 through July 31 except that the first Plan
Year shall commence September 15, 1995 and end July 31, 1996.
     2.14 “Years of Service” means a 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
shall be considered to have one full Year of Service as of July 31, 1996.
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.
     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 shall 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. A 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 shall be monthly payments
continuing over the life of the Participant commencing on the first day of the
month immediately following the Participant’s 65th birthday, with the amount of
each payment determined under the following formula:

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Benefit Points x Final Average Pay
100
If a Participant requests, as allowed in Article V. that his Benefit commence
other than on the first day of the month immediately following the Participant’s
65th birthday, or that his Benefit be paid in a form other than monthly payments
for the life of the Participant, then the Benefit to be paid to the Participant
and, if applicable, his surviving spouse, shall be the actuarial equivalent of
the Benefit payable to the Participant commencing on the first day of the month
immediately following the Participant’s 65th birthday and ending on the last day
of the month in which the Participant dies. Actuarial equivalence shall be
determined using the following actuarial assumptions. The applicable interest
rate shall be that of 30-year Treasury securities as of the first day of the
calendar year in which the Benefits commence. The mortality assumption shall be
based on the 1983 group annuity mortality tables.
     4.2 Benefit Points. Each Plan Year the Compensation Committee shall 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 Benefit Points based on the following schedule:
(a) No points if below Bonus Target;
(b) I point at Bonus Target;
(e) 2 points at 50% of Maximum Bonus Target; or
(d) 3 points at 100% of Maximum Bonus Target.
A Participant may accrue from 0 to 30 points, depending on Company performance
and the number of Plan Years he or she participates in the Plan.
     4.3 Vesting. A Participant vests in his or her Benefit after completing
five 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.
     4.4 Transferred Liability. In addition to the amount, if any, payable to
Max Brown (“Brown”) as provided in Section 4.1 of the Plan, Brown shall also be
entitled to benefits calculated in the following manner: The liability assumed
by the Company from Zale Corporation shall be the initial additional benefit
payable under the Plan. Such amount shall be credited to a bookkeeping account
maintained by the Compensation Committee for the benefit of Brown. Thereafter,
on each July 31, interest shall be credited to such bookkeeping account at the
prime interest rate, plus one percent. The prime interest rate to be used shall
be the prime interest rate as of such July 31 or, if higher, as of the preceding
August 1 as listed in The Wall Street Journal for such date or if The Wall
Street Journal is not published on such date, on the immediately preceding date
on which it was published. As of August 1, 1996, the benefit being assumed by
the Company to be paid pursuant to the Plan was $89,948.91 to be paid in two
annual installments with one half of the amount payable on August 1, 1998 and
the balance of the amount (including interest earned after august 1, 1998)
payable on August 1, 1999, and $102,448.00 to be paid in two annual installments
with one half of the amount payable on

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August 1, 1999) payable on August 1, 2000. The payments to be made to Brown
under the Plan will be paid wider the foregoing payment schedules, but the
amounts payable will include interest earned under the Executive Deferred
Compensation Plan through January 3, 1997, and interest earned under the Plan
from January 3, 1997 to the date of payment.
ARTICLE V
PAYMENT OF BENEFITS
     5.1 Retirement. If a Participant retires on or after attaining age 65,
benefits will begin on the first day of the month after the Participant’s
retirement. The normal form of payment is an annuity providing monthly benefits
for the life of the Participant. If the Participant retires after attaining age
62, hut before attaining age 65, the Compensation Committee, in its sole and
absolute discretion, may authorize payments commencing as of the first day of
any month after the Participant’s retirement.
     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 65. In its sole and absolute discretion, the Compensation Committee
may authorize payments to the Participant’s surviving spouse commencing on an
earlier date. The Benefits payable to the surviving spouse shall have an
actuarial value (calculated using the assumptions prescribed in Section 4.1)
equal to the Benefits that would have been paid to the Participant commencing at
age 65, based on the Participant’s Final Average Pay and Bonus Points as of the
date of the Participant’s death. If the Participant has no surviving spouse, no
death benefits are payable.
     5.3 Disability. If a Participant becomes Disabled, his Benefit will become
payable commencing on the first day of the month after his or her
Company-provided disability benefits cease.
     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 62, 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 65, unless the Compensation Committee, in its sole and absolute discretion,
elects to commence payments on an earlier date.
     5.5 Form of Payment. The normal form of payment of the Benefit is monthly
payments for the life of the Participant. If the Participant prefers, he or she
may elect to receive the Benefit in the form of a joint and survivor annuity
calculated as provided in Section 4.1. A joint and survivor annuity is a form of
payment providing monthly payments for the life of the Participant, followed by
payments to the Participant’s surviving spouse, if any, after the Participant’s
death for the remainder of the surviving spouse’s life, equal to 50% of the
monthly amount payable during the life of the Participant.
     5.6 Withholding of Taxes. The Company shall withhold from payments made
hereunder any taxes required to be withheld by any law or regulation of the
federal, state, or local government.

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ARTICLE VI
ADMINISTRATION
     6.1 Authority of Compensation Committee. The Compensation Committee shall
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 shall 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 shall 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 shall not he
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 or 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 arty and all claims, losses, damages or
expenses, including, counsel fees, incurred by them, and any Liability,
including any amounts paid in settlement with theft 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 shall survive the termination of the Plan and shall 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 shall 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 shall present
the request in writing to the Compensation Committee, which shall respond in
writing as soon as possible.
     7.2 Denial of Claim. If the claim or request is denied, the written notice
of denial shall 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.

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     (c) An explanation 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. The claim or request shall be reviewed
by the Compensation Committee, who may, but shall 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 shall normally be made within sixty (60) days. If an extension of time is
required for a hearing or other special circumstance, the claimant shall be
notified and the time limit shall be one hundred twenty (120) days. The decision
shall be in writing; shall state the reasons for denial and shall reference the
relevant plan provisions.
     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 shall normally be made within
sixty (60) days. If an extension of time is required for a hearing or other
special circumstance, the claimant shall be notified and the time limit shall be
one hundred twenty (120) days. The decision of the Board of Directors on appeal
shall be in writing and shall state the reasons for denial and shall reference
the relevant Plan provisions. All decisions on appeal shall be final and bind
all parties concerned.
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 75% of the
directors, shall have the right to amend this Plan at any time and from time to
time, including a retroactive amendment. Any such amendment shall become
effective upon the date stated therein, except as otherwise provided in such
amendment. No amendment shall 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 75% of at least the directors, may terminate the Plan in its entirety at
any time. In such event each Participant shall become fully vested in his
Benefit earned as of the date of termination.

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ARTICLE IX
GENERAL PROVISIONS
     9.1 Rights Against the Company. The Plan shall not be deemed to constitute
a contract between the Company and any Participant. Nothing contained in the
Plan shall 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 shall constitute an
“unfunded plan” for purposes of the Internal Revenue Code of 1986, as amended
(the “Code”) and, to the extent applicable, Title I of the Employee Retirement
Income Security Act of 1974, as amended, and that any employee or spouse of an
employee eligible to receive benefits under the Plan shall 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.
     9.3 Payment Due to an Individual Who is Incapable of Managing His or Her
Affairs. If the Compensation Committee shall find 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 shall 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 shall be a complete
discharge of the liabilities of the Company under this Plan, and the Company
shall 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
shall 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 shall be
void.
     9.5 Severability. In the event that any provision of this Plan shall be
declared illegal or invalid for any reason, said illegality or invalidity shall
not affect the remaining provisions of this Plan but shall be fully severable
and this Plan shall 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 shall include the plural or the plural
may be read as the singular. When used herein, the masculine gender includes the
feminine gender.

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9.7 Governing Law. The validity and effect of this Plan, and the rights and
obligations of all persons affected hereby, shall 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 23 day of
February, 1996, effective as of the 15th day of September, 1995.

     
 
  ZALE DELAWARE, INC.

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