Exhibit 10.1

 

Execution Copy

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated January 21, 2008, but
effective as of December 20, 2007 (the “Effective Date”), is by and between ZALE
CORPORATION, a Delaware corporation (the “Company”), and NEAL GOLDBERG
(“Executive”).

 

WHEREAS Executive and Company desire to enter into an employment agreement which
sets forth the terms and conditions for Executive’s continued employment with
the Company;

 

NOW, THEREFORE, in consideration of the foregoing recital and of the mutual
covenants set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

 

1.  EMPLOYMENT; TERM.  (A)  EXECUTIVE AGREES TO ENTER IN THE EMPLOYMENT OF THE
COMPANY, AND THE COMPANY AGREES TO EMPLOY EXECUTIVE, ON THE TERMS AND CONDITIONS
SET FORTH IN THIS AGREEMENT.  THE TERM OF EXECUTIVE’S EMPLOYMENT UNDER THIS
AGREEMENT COMMENCED ON THE EFFECTIVE DATE AND, SUBJECT TO ITS EARLIER
TERMINATION AS PROVIDED IN SECTION 4, WILL CONTINUE THROUGH DECEMBER 19, 2010
(THE “INITIAL TERM”), PROVIDED THAT ON EACH ANNIVERSARY OF THE EFFECTIVE DATE,
THE TERM OF EXECUTIVE’S EMPLOYMENT SHALL AUTOMATICALLY BE EXTENDED FOR AN
ADDITIONAL ONE-YEAR PERIOD (COLLECTIVELY WITH THE INITIAL TERM, THE “TERM”)
UNLESS AT LEAST NINETY (90) DAYS PRIOR TO THE ANNIVERSARY DATE EITHER PARTY
PROVIDES WRITTEN NOTICE OF TERMINATION TO THE OTHER PARTY.

 

2.  POSITION; DUTIES.  DURING THE TERM, EXECUTIVE WILL SERVE AS THE PRESIDENT
AND CHIEF EXECUTIVE OFFICER OF THE COMPANY AND HIS DUTIES WILL BE THOSE
DESIGNATED FROM TIME TO TIME BY THE BOARD OF DIRECTORS OF THE COMPANY (THE
“BOARD”).  IN ADDITION, THE BOARD SHALL USE ITS REASONABLE BEST EFFORTS TO
NOMINATE EXECUTIVE FOR ELECTION AS A DIRECTOR OF THE COMPANY EACH YEAR DURING
THE TERM.  EXECUTIVE AGREES DURING THE TERM TO DEVOTE HIS FULL TIME, EFFORTS,
SKILLS AND ABILITIES TO THE PERFORMANCE OF HIS DUTIES AS DESCRIBED HEREIN AND TO
THE FURTHERANCE OF THE COMPANY’S BUSINESS.  AS CONSIDERATION FOR THIS AGREEMENT
AND SPECIFICALLY IN CONSIDERATION FOR THE PROMISES DESCRIBED IN SECTION 9, THE
COMPANY PROMISES TO PROVIDE EXECUTIVE WITH CONFIDENTIAL AND PROPRIETARY
INFORMATION AND TRADE SECRETS, THE RECEIPT AND SUFFICIENCY OF WHICH EXECUTIVE
ACKNOWLEDGES, INCLUDING, WITHOUT LIMITATION, TRADE SECRETS (AS DEFINED BELOW)
BELONGING TO THE COMPANY FOR USE IN THE PERFORMANCE OF EXECUTIVE’S DUTIES FOR
THE COMPANY.  EXECUTIVE WILL REPORT DIRECTLY TO THE BOARD.  AT THE REQUEST OF
THE BOARD, EXECUTIVE FURTHER AGREES TO SERVE, WITHOUT ADDITIONAL COMPENSATION,
AS AN OFFICER, DIRECTOR OR BOTH OF ANY SUBSIDIARY, DIVISION OR AFFILIATE OF THE
COMPANY OR ANY OTHER ENTITY IN WHICH THE COMPANY HOLDS A CONTROLLING EQUITY
INTEREST, PROVIDED, HOWEVER, THAT (I) THE COMPANY SHALL INDEMNIFY EXECUTIVE FROM
LIABILITIES IN CONNECTION WITH SERVING IN ANY SUCH POSITION TO THE SAME EXTENT
AS HIS INDEMNIFICATION RIGHTS PURSUANT TO THE COMPANY’S CERTIFICATE OF
INCORPORATION, BYLAWS AND APPLICABLE DELAWARE LAW, AND (II) SUCH SERVICE SHALL
NOT

 

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MATERIALLY DETRACT FROM THE RESPONSIBILITIES OF EXECUTIVE TO THE COMPANY AS SET
FORTH HEREIN OR HIS ABILITY TO PERFORM SUCH RESPONSIBILITIES.

 

3.  COMPENSATION.

 

(A)  BASE SALARY.  DURING THE TERM, THE COMPANY WILL PAY TO EXECUTIVE AN ANNUAL
BASE SALARY OF NOT LESS THAN $925,000 (“BASE SALARY”), WHICH WILL BE PAYABLE IN
ARREARS IN ACCORDANCE WITH THE COMPANY’S NORMAL PAYROLL PROCEDURES IN THE AMOUNT
OF $35,576.92 PER BI-WEEKLY PAY PERIOD, AND WILL BE REVIEWED ANNUALLY BY THE
BOARD AND WILL BE SUBJECT TO INCREASES AT THE DISCRETION OF THE BOARD OR AN
AUTHORIZED COMMITTEE OR REPRESENTATIVE THEREOF.  AFTER ANY SUCH INCREASE, THE
TERM “BASE SALARY” AS UTILIZED IN THIS AGREEMENT WILL THEREAFTER REFER TO THE
ADJUSTED AMOUNT.

 

(B)  SIGN-ON BONUS.

 

(I)  THE COMPANY WILL PAY TO THE EXECUTIVE A SIGN-ON CASH BONUS OF EIGHT HUNDRED
THOUSAND DOLLARS ($800,000) (THE “RELOCATION AND SIGNING BONUS”), PAYABLE WITHIN
30 DAYS OF THE EFFECTIVE DATE.  IF THE EXECUTIVE’S EMPLOYMENT WITH THE COMPANY
IS TERMINATED FOR ANY REASON PRIOR TO THE FIRST ANNIVERSARY OF THE EFFECTIVE
DATE, THE EXECUTIVE WILL REPAY THE RELOCATION AND SIGNING BONUS IN ACCORDANCE
WITH THE COMPANY’S STANDARD SIGN-ON BONUS AGREEMENT.

 

(II)  THE COMPANY WILL GRANT TO THE EXECUTIVE ON THE EFFECTIVE DATE (A) AN
OPTION TO PURCHASE THREE HUNDRED THOUSAND (300,000) SHARES OF COMPANY COMMON
STOCK (THE “COMMON STOCK”) WITH AN EXERCISE PRICE EQUAL TO THE FAIR MARKET VALUE
OF THE COMMON STOCK AT THE CLOSE OF MARKET ON THE EFFECTIVE DATE, WHICH SHALL
VEST OVER FOUR YEARS AT A RATE OF 25% OF THE STOCK SUBJECT THERETO ON EACH
ANNIVERSARY OF THE EFFECTIVE DATE; AND (B) TWO HUNDRED FIFTY THOUSAND (250,000)
RESTRICTED STOCK UNITS, WHICH SHALL VEST OVER THREE YEARS AT A RATE OF 33.33% OF
THE UNITS AWARDED HEREIN ON EACH ANNIVERSARY OF THE EFFECTIVE DATE
(COLLECTIVELY, THE “SIGN-ON EQUITY GRANTS”).  SUBJECT TO THE PROVISIONS OF THIS
SUBSECTION, THE SIGN-ON EQUITY GRANTS SHALL BE GOVERNED BY AND SHALL BE SUBJECT
TO THE RULES OF THE EQUITY AND OTHER LONG-TERM INCENTIVE PROGRAMS OF THE COMPANY
UNDER WHICH SUCH GRANTS ARE AUTHORIZED, AND OF THE AWARD AGREEMENTS PURSUANT TO
WHICH SUCH GRANTS ARE MADE.

 

(C)  INCENTIVE BONUS.  DURING THE TERM, EXECUTIVE WILL BE ELIGIBLE TO RECEIVE AN
ANNUAL INCENTIVE BONUS AS DETERMINED UNDER THE COMPANY’S ANNUAL BONUS PROGRAM
(AS MAY BE AMENDED FROM TIME TO TIME) ESTABLISHED BY THE BOARD.  THE ANNUAL
INCENTIVE BONUS FOR EXECUTIVE WILL BE NOT LESS THAN 125% OF EXECUTIVE’S BASE
SALARY (THE “TARGET BONUS”) AND THE MAXIMUM ANNUAL INCENTIVE BONUS WILL BE 200%
OF EXECUTIVE’S BASE SALARY, BASED ON ACHIEVEMENT OF FINANCIAL GOALS AS AGREED TO
IN WRITING BY THE BOARD.  NOTWITHSTANDING THE FOREGOING, EXECUTIVE’S ANNUAL
INCENTIVE BONUS FOR (I) THE PERIOD BEGINNING ON THE EFFECTIVE DATE AND ENDING ON
JUNE 19, 2008 (“PERIOD 1”) SHALL BE NO LESS THAN THE GREATER OF (A) 50% OF THE
TARGET BONUS OR (B) THE ACTUAL ANNUAL INCENTIVE

 

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BONUS EARNED FOR PERIOD 1; AND (II) THE PERIOD BEGINNING ON JUNE 20, 2008 AND
ENDING ON DECEMBER 19, 2008 (“PERIOD 2”) SHALL BE NO LESS THAN THE GREATER OF
(A) 50% OF THE TARGET BONUS, OR (B) THE ACTUAL ANNUAL INCENTIVE BONUS EARNED FOR
PERIOD 2 (EACH, A “GUARANTEED BONUS”).  EXECUTIVE SHALL BE PAID THE GUARANTEED
BONUSES AS FOLLOWS: (1) 50% OF THE TARGET BONUS FOR PERIOD 1 SHALL BE PAID NO
LATER THAN 30 DAYS FOLLOWING JUNE 20, 2008; AND (2) AN AMOUNT EQUAL TO THE
EXCESS OF (I) THE GUARANTEED BONUSES OVER (II) THE AMOUNT PAID PURSUANT TO
CLAUSE (1) OF THIS SENTENCE SHALL BE PAID AS SOON AS ADMINISTRATIVELY POSSIBLE
FOLLOWING DECEMBER 19, 2008 BUT IN NO EVENT LATER THAN MARCH 15, 2009.  FOR THE
PERIOD BEGINNING ON DECEMBER 20, 2008 AND ENDING ON JULY 31, 2009 (“PERIOD 3”),
EXECUTIVE WILL BE ELIGIBLE FOR A PRO-RATA PORTION OF ANY EARNED BONUS FOR FISCAL
YEAR 2009 CORRESPONDING TO PERIOD 3.  EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
IN THIS SECTION 3(C), THE ANNUAL INCENTIVE BONUS WILL BE PAID TO EXECUTIVE IN
ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE ANNUAL BONUS PROGRAM.

 

(D)  OTHER EQUITY AND LONG-TERM INCENTIVE AWARDS.  IN ADDITION TO ALL PREVIOUS
GRANTS OF RESTRICTED STOCK UNITS AND STOCK OPTIONS, EXECUTIVE WILL BE ENTITLED
TO PARTICIPATE IN EQUITY AND OTHER LONG-TERM INCENTIVE AWARD PROGRAMS OF THE
COMPANY, INCLUDING, WITHOUT LIMITATION, THE EQUITY PLAN, ON A BASIS GENERALLY
CONSISTENT WITH THAT OF OTHER SENIOR-LEVEL EXECUTIVES.

 

(E)  VACATION.  EXECUTIVE WILL BE ENTITLED TO AT LEAST FOUR (4) PAID WEEKS (160
HOURS) OF VACATION PER YEAR DURING EACH FISCAL YEAR OF THE TERM OF THIS
AGREEMENT.

 

(F)  EXECUTIVE PERQUISITES; BENEFIT; EXPENSES.

 

(I)  EXECUTIVE WILL BE ENTITLED TO RECEIVE EXECUTIVE PERQUISITES AND FRINGE AND
OTHER BENEFITS ON A BASIS WHICH IS NO LESS FAVORABLE THAN THE BASIS ON WHICH
SUCH PERQUISITES AND BENEFITS ARE PROVIDED TO ANY OTHER SENIOR EXECUTIVE
(INCLUDING FOR THIS PURPOSE, TO THE EXTENT APPLICABLE, EXECUTIVE’S FAMILY) UNDER
ANY OF THE COMPANY’S PLANS, POLICIES, ARRANGEMENTS OR PROGRAMS IN EFFECT FROM
TIME TO TIME (INCLUDING BUT NOT LIMITED TO (A) COVERAGE UNDER THE COMPANY’S
MEDICAL PLANS, (B) THE PROVISION OF EXECUTIVE LIFE INSURANCE AT TWO TIMES THE
EXECUTIVE’S BASE SALARY, (C) PARTICIPATION IN THE COMPANY’S 401(K) SAVINGS AND
INVESTMENT PLAN AFTER ONE YEAR OF QUALIFYING SERVICE, AND (D) THE PROVISION OF
EXECUTIVE LONG-TERM DISABILITY INSURANCE).

 

(II)  THE COMPANY WILL REIMBURSE EXECUTIVE FOR SUCH REASONABLE AND NECESSARY
OUT-OF-POCKET BUSINESS EXPENSES AS MAY BE INCURRED BY HIM IN THE PERFORMANCE OF
HIS DUTIES HEREUNDER DURING THE TERM UPON PRESENTATION OF ITEMIZED EXPENSE
STATEMENTS AND SUCH OTHER SUPPORTING INFORMATION AS MAY BE REQUIRED BY THE
COMPANY.  IN ADDITION, THE COMPANY WILL REIMBURSE EXECUTIVE FOR, OR AT
EXECUTIVE’S REQUEST PAY DIRECTLY ON EXECUTIVE’S BEHALF, THE LEGAL FEES AND OTHER
EXPENSES INCURRED BY HIM IN CONNECTION WITH THE NEGOTIATION AND DRAFTING OF THIS
AGREEMENT IN AN AMOUNT NOT TO EXCEED $25,000 UPON PRODUCTION OF RECEIPTS AND/OR
INVOICES TO THE REASONABLE SATISFACTION OF THE BOARD, AND THE COMPANY

 

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SHALL PAY TO EXECUTIVE TAX GROSS-UP PAYMENTS SO THAT THE NET AMOUNT RETAINED BY
EXECUTIVE AFTER PAYMENT OF ALL APPLICABLE INCOME AND EMPLOYMENT TAXES IS EQUAL
TO THE AGREED AMOUNT TO BE REIMBURSED FOR SUCH LEGAL FEES AND EXPENSES,
PROVIDED, HOWEVER, THAT A GROSS UP PAYMENT SHALL NOT BE MADE WITH RESPECT TO ANY
REIMBURSEMENT TO THE EXTENT THE RELATED EXPENSE IS DEDUCTIBLE OR IS OTHERWISE
EXCLUDABLE FROM EXECUTIVE’S TAXABLE INCOME.  TO THE EXTENT ANY SUCH
REIMBURSEMENTS ARE TAXABLE TO EXECUTIVE (OR ANY LEGAL FEES AND EXPENSES REFERRED
TO IN THE SECOND SENTENCE OF THIS PARAGRAPH), THE AMOUNT OF ANY SUCH EXPENSES
ELIGIBLE FOR REIMBURSEMENT DURING ANY CALENDAR YEAR WILL NOT AFFECT THE AMOUNT
OF ANY SUCH EXPENSES ELIGIBLE FOR REIMBURSEMENT IN ANY OTHER CALENDAR YEAR, AND
ANY SUCH EXPENSES WILL BE REIMBURSED NO LATER THAN THE LAST DAY OF THE CALENDAR
YEAR FOLLOWING THE CALENDAR YEAR IN WHICH SUCH EXPENSES ARE INCURRED.

 

(III)  ANY AMOUNTS THAT EXECUTIVE BECOMES ENTITLED TO RECEIVE IN RESPECT OF
TAXES PURSUANT TO THIS SECTION 3(F) SHALL BE PAID TO EXECUTIVE (OR TO THE
APPLICABLE TAX AUTHORITY ON EXECUTIVE’S BEHALF) NOT LATER THAN THE LAST DAY OF
THE CALENDAR YEAR IN THE SAME THE CALENDAR YEAR IN WHICH EXECUTIVE REMITS THE
UNDERLYING TAXES TO THE APPLICABLE TAXING AUTHORITY.

 

(G)  TAX WITHHOLDING.  THE COMPANY HAS THE RIGHT TO DEDUCT FROM ANY COMPENSATION
PAYABLE TO EXECUTIVE UNDER THIS AGREEMENT SOCIAL SECURITY (FICA) TAXES AND ALL
FEDERAL, STATE AND LOCAL INCOME TAXES AND CHARGES AS ARE REQUIRED BY APPLICABLE
LAW AND REGULATIONS.

 

4.  TERMINATION.  SUBJECT TO THE PROVISIONS OF SECTION 5 HEREOF, THE TERM WILL
TERMINATE AS SPECIFIED IN SECTION 1(B) OR, IF EARLIER, UPON EXECUTIVE’S
TERMINATION OF EMPLOYMENT WITH THE COMPANY AS FOLLOWS:

 

(A)  DEATH.  EXECUTIVE’S EMPLOYMENT SHALL TERMINATE UPON THE DEATH OF EXECUTIVE.

 

(B)  TERMINATION FOR CAUSE.  THE COMPANY MAY TERMINATE EXECUTIVE’S EMPLOYMENT AT
ANY TIME FOR CAUSE (AS HEREINAFTER DEFINED) BY DELIVERING A WRITTEN TERMINATION
NOTICE TO EXECUTIVE.  FOR PURPOSES OF THIS AGREEMENT, “CAUSE” SHALL MEAN ANY OF
THE FOLLOWING:

 

(I)  EXECUTIVE’S INDICTMENT FOR A FELONY OR A CRIME INVOLVING MORAL TURPITUDE;

 

(II)  EXECUTIVE’S COMMISSION OF AN ACT CONSTITUTING FRAUD, DECEIT, OR MATERIAL
MISREPRESENTATION WITH RESPECT TO THE COMPANY;

 

(III)  EXECUTIVE’S RECURRENT USE OF ALCOHOL OR PRESCRIBED MEDICATIONS AT WORK OR
OTHERWISE SUCH THAT EXECUTIVE’S JOB PERFORMANCE IS IMPAIRED OR THE USE OF ANY
ILLEGAL SUBSTANCES OR DRUG SUCH THAT, IN THE COMPANY’S SOLE DISCRETION,
EXECUTIVE’S JOB PERFORMANCE IS IMPAIRED;

 

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(IV)  EXECUTIVE’S EMBEZZLEMENT OF COMPANY ASSETS OR FUNDS; OR

 

(V)  EXECUTIVE COMMITS ANY NEGLIGENT OR WILLFUL ACT OR OMISSION THAT CAUSES
MATERIAL DETRIMENT (BY REASON, WITHOUT LIMITATION, OF FINANCIAL EXPOSURE OR
LOSS, DAMAGE TO REPUTATION OR GOODWILL, OR EXPOSURE TO CIVIL DAMAGES OR CRIMINAL
PENALTIES OR OTHER PROSECUTORIAL ACTION BY ANY GOVERNMENTAL AUTHORITY) TO THE
COMPANY OR ANY PARENT OR SUBSIDIARY CORPORATION THEREOF.

 

(C)  TERMINATION WITHOUT CAUSE.  THE COMPANY MAY TERMINATE EXECUTIVE’S
EMPLOYMENT AT ANY TIME FOR ANY REASON OTHER THAN FOR CAUSE IN A TERMINATION THAT
CONSTITUTES A “SEPARATION FROM SERVICE” FOR PURPOSES OF SECTION 409A OF THE CODE
BY DELIVERING A WRITTEN TERMINATION NOTICE TO EXECUTIVE.

 

(D)  TERMINATION BY EXECUTIVE FOR A TERMINATION REASON.  EXECUTIVE MAY TERMINATE
HIS EMPLOYMENT WITH THE COMPANY AT ANY TIME FOR A TERMINATION REASON (AS
HEREINAFTER DEFINED) BY DELIVERING A WRITTEN TERMINATION NOTICE TO THE COMPANY. 
FOR PURPOSES OF THIS AGREEMENT, “TERMINATION REASON” SHALL MEAN ANY OF THE
FOLLOWING:

 

(I)  A MATERIAL REDUCTION BY THE COMPANY IN EXECUTIVE’S BASE SALARY OR BONUS
ELIGIBILITY UNLESS SUCH REDUCTION HAS BEEN AGREED TO IN WRITING BY EXECUTIVE;

 

(II)  THE COMPANY’S PRINCIPAL EXECUTIVE OFFICES SHALL BE MOVED TO A LOCATION
WHICH IS MORE THAN 50 MILES OUTSIDE OF THE DALLAS/FORT WORTH, TEXAS METROPLEX
AREA; OR

 

(III)  THE ASSIGNMENT TO EXECUTIVE BY THE COMPANY OF DUTIES MATERIALLY
INCONSISTENT WITH, OR THE MATERIAL REDUCTION OF THE POWERS AND FUNCTIONS
ASSOCIATED WITH, EXECUTIVE’S POSITIONS, DUTIES, RESPONSIBILITIES AND STATUS WITH
THE COMPANY OR A MATERIAL ADVERSE CHANGE IN EXECUTIVE’S TITLES OR OFFICES, OR HE
NO LONGER REPORTS TO THE BOARD, UNLESS SUCH ACTION IS IN LIEU OF TERMINATION BY
THE COMPANY OF EXECUTIVE’S EMPLOYMENT FOR EXECUTIVE’S DISABILITY PURSUANT TO
SECTION 4(F).

 

IF EXECUTIVE BELIEVES THAT AN EVENT SPECIFIED IN THIS SECTION 4(D) HAS OCCURRED,
EXECUTIVE MUST NOTIFY THE COMPANY OF THAT BELIEF WITHIN NINETY (90) DAYS
FOLLOWING THE OCCURRENCE OF SUCH EVENT.  THE COMPANY WILL HAVE THIRTY (30) DAYS
FOLLOWING RECEIPT OF SUCH NOTICE (SUCH PERIOD, THE “TERMINATION REASON
DESIGNATED PERIOD”) IN WHICH TO EITHER RECTIFY SUCH EVENT, DETERMINE THAT SUCH
AN EVENT EXISTS, OR DETERMINE THAT SUCH AN EVENT DOES NOT EXIST.  IF THE COMPANY
DOES NOT TAKE ANY OF THE FOREGOING ACTIONS WITHIN THE TERMINATION REASON
DESIGNATED PERIOD, EXECUTIVE MAY TERMINATE HIS EMPLOYMENT WITH THE COMPANY
DURING THE FOURTEEN-DAY PERIOD FOLLOWING THE EXPIRATION OF THE TERMINATION
REASON DESIGNATED PERIOD.  IF, DURING THE TERMINATION REASON DESIGNATED PERIOD,
THE COMPANY DETERMINES THAT SUCH AN EVENT EXISTS, THE COMPANY SHALL EITHER

 

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(A) UNDERTAKE TO CURE SUCH EVENT DURING THE TERMINATION REASON DESIGNATED PERIOD
AND PROVIDE EXECUTIVE WITH WRITTEN NOTICE DURING THE TERMINATION REASON
DESIGNATED PERIOD OF THE COMPANY’S DETERMINATION THAT SUCH EVENT HAS BEEN CURED,
OR (B) PROVIDE WRITTEN NOTICE TO EXECUTIVE DURING THE TERMINATION REASON
DESIGNATED PERIOD THAT IT DOES NOT WISH TO CURE SUCH EVENT, IN WHICH CASE
EXECUTIVE MAY TERMINATE HIS EMPLOYMENT DURING THE FOURTEEN (14) DAY PERIOD
FOLLOWING RECEIPT OF THE NOTICE SPECIFIED IN THIS CLAUSE (B).  IF, DURING THE
TERMINATION REASON DESIGNATED PERIOD, THE COMPANY DETERMINES THAT (1) SUCH EVENT
DOES NOT EXIST OR (2) THE COMPANY HAS CURED SUCH EVENT PURSUANT TO CLAUSE (A) OF
THE PRECEDING SENTENCE, THEN (X) EXECUTIVE WILL NOT BE ENTITLED TO RELY ON OR
ASSERT SUCH EVENT AS A TERMINATION REASON, AND (Y) IF EXECUTIVE DISAGREES WITH
THE COMPANY’S DETERMINATION, EXECUTIVE MAY FILE A CLAIM PURSUANT TO SECTION 15
WITHIN THIRTY (30) DAYS AFTER EXECUTIVE’S RECEIPT OF WRITTEN NOTICE OF THE
COMPANY’S DETERMINATION.

 

(E)  TERMINATION BY EXECUTIVE WITHOUT A TERMINATION REASON.  EXECUTIVE MAY
TERMINATE HIS EMPLOYMENT WITH THE COMPANY WITHOUT A TERMINATION REASON UPON
THIRTY (30) DAYS’ PRIOR WRITTEN NOTICE TO THE COMPANY.  IN SUCH INSTANCE, THE
COMPANY MAY ACCELERATE THE EFFECTIVE DATE OF SUCH TERMINATION, BUT EXECUTIVE
SHALL RECEIVE ALL COMPENSATION AND BENEFITS UNDER THIS AGREEMENT, PAYABLE IN
ACCORDANCE WITH THE COMPANY’S NORMAL PAYROLL PROCEDURES, FOR THE FULL THIRTY
(30) DAY NOTICE PERIOD.

 

(F)  TERMINATION FOLLOWING DISABILITY.  IN THE EVENT THAT, IN THE COMPANY’S SOLE
DISCRETION, EXECUTIVE BECOMES UNABLE TO ENGAGE IN ANY SUBSTANTIAL GAINFUL
ACTIVITY BY REASON OF ANY MEDICALLY DETERMINABLE PHYSICAL OR MENTAL IMPAIRMENT
THAT CAN BE EXPECTED TO RESULT IN DEATH OR CAN BE EXPECTED TO LAST FOR A
CONTINUOUS PERIOD OF NOT LESS THAN 12 MONTHS (A “DISABILITY EVENT”), THE COMPANY
MAY TERMINATE EXECUTIVE’S EMPLOYMENT UNDER THIS AGREEMENT BY DELIVERING A
WRITTEN TERMINATION NOTICE TO EXECUTIVE.

 

(G)  PAYMENTS/DEDUCTIONS.  FOLLOWING ANY EXPIRATION OR TERMINATION OF THE TERM,
AND IN ADDITION TO ANY AMOUNTS OWED PURSUANT TO SECTION 5 HEREOF, THE COMPANY
SHALL PAY EXECUTIVE ALL AMOUNTS EARNED BY EXECUTIVE HEREUNDER UP TO THE DATE OF
SUCH EXPIRATION OR TERMINATION.  ANY SUCH AMOUNTS PAID IN RESPECT OF EARNED BUT
UNPAID BASE SALARY OR VACATION SHALL BE PAID AS PART OF EXECUTIVE’S FINAL
ORDINARY PAYROLL PAYMENT FROM THE COMPANY FOR ACTIVE EMPLOYMENT OR
CONTEMPORANEOUSLY WITH SUCH PAYMENT, BUT IN NO EVENT LATER THAN THIRTY (30) DAYS
AFTER SUCH EXPIRATION OR TERMINATION OF THE TERM, AND ANY OTHER SUCH AMOUNTS
SHALL BE PAID IN ACCORDANCE WITH THE TERMS OF THE PLAN, POLICY, AGREEMENT OR
ARRANGEMENT UNDER WHICH THEY AROSE (INCLUDING WITH RESPECT TO TIME OF PAYMENT OR
DISTRIBUTION).  SUBJECT TO SECTION 7(E), EXECUTIVE AGREES THAT ANY ADVANCES TO
EXECUTIVE BY THE COMPANY OUTSTANDING AT THE TIME OF THE EXPIRATION OR
TERMINATION OF THE TERM MAY BE DEDUCTED FROM HIS WAGES, INCLUDING HIS FINAL
PAYCHECK AND/OR ANY SEVERANCE OWED TO EXECUTIVE.

 

5.  RIGHTS OF EXECUTIVE UPON TERMINATION.  SUBJECT TO EXECUTIVE’S ADHERENCE TO
THE TERMS OF THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO THE NON-COMPETITION,
NO-HIRE/NON-SOLICITATION, NON-DISCLOSURE AND NON-DISPARAGEMENT PROVISIONS

 

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SET FORTH IN SECTIONS 9, 10, 11 AND 12 (SUBJECT TO SECTION 7(E)), EXECUTIVE
SHALL BE ENTITLED TO RECEIVE THE FOLLOWING BENEFITS IN THE EVENT HIS EMPLOYMENT
IS TERMINATED PURSUANT TO SECTION 4 ABOVE OR THE COMPANY TERMINATES EXECUTIVE’S
EMPLOYMENT IN CONNECTION WITH ITS ELECTION NOT TO RENEW THIS AGREEMENT FOR AN
ADDITIONAL TERM AS SPECIFIED IN SECTION 1(B):

 

(A)  DEATH.  IN THE EVENT THAT EXECUTIVE’S EMPLOYMENT IS TERMINATED UPON THE
OCCURRENCE OF HIS DEATH AS PROVIDED IN SECTION 4(A), THE COMPANY SHALL CONTINUE
TO PAY, IN ACCORDANCE WITH AND AT TIMES CONSISTENT WITH ITS NORMAL PAYROLL
PROCEDURES, THE BASE SALARY TO EXECUTIVE’S ESTATE FOR A PERIOD OF TWELVE
(12) MONTHS COMMENCING ON THE FIRST ORDINARY PAYROLL DATE THAT FOLLOWS THE DATE
THAT IS 60 DAYS AFTER THE DATE OF EXECUTIVE’S DEATH.  ALL UNVESTED RESTRICTED
STOCK OR UNITS GRANTED TO EXECUTIVE WILL BE IMMEDIATELY FORFEITED AND ALL
UNVESTED STOCK OPTIONS GRANTED TO EXECUTIVE WILL BE IMMEDIATELY TERMINATED UPON
THE DATE OF EXECUTIVE’S DEATH AND ANY VESTED STOCK OPTIONS WILL REMAIN
EXERCISABLE FOR ONE (1) YEAR AFTER EXECUTIVE’S DATE OF DEATH, SUBJECT TO THE
EARLIER EXPIRATION OF THE TERM OF SUCH STOCK OPTION.  FOR PURPOSES OF THIS
SECTION 5(A) AND ELSEWHERE IN THIS AGREEMENT, STOCK APPRECIATION RIGHTS SHALL BE
TREATED IN THE SAME MANNER AS STOCK OPTIONS.

 

(B)  TERMINATION FOR CAUSE.  IN THE EVENT THAT EXECUTIVE’S EMPLOYMENT IS
TERMINATED BY THE COMPANY FOR CAUSE AS PROVIDED IN SECTION 4(B) EXECUTIVE SHALL
NOT THEREAFTER BE ENTITLED TO ANY FURTHER COMPENSATION FROM THE COMPANY AND ALL
OUTSTANDING STOCK OPTIONS, WHETHER OR NOT VESTED, AND UNVESTED RESTRICTED STOCK
AND UNITS SHALL BE IMMEDIATELY FORFEITED.

 

(C)  TERMINATION BY NON-RENEWAL, WITHOUT CAUSE OR BY EXECUTIVE FOR A TERMINATION
REASON.  IN THE EVENT THAT THE COMPANY TERMINATES EXECUTIVE’S EMPLOYMENT (I) IN
CONNECTION WITH THE COMPANY’S ELECTION OF NON-RENEWAL OF THE TERM AS PROVIDED IN
SECTION 1(B) OR WITHOUT CAUSE AS PROVIDED IN SECTION 4(C) OR EXECUTIVE
TERMINATES HIS EMPLOYMENT FOR A TERMINATION REASON AS PROVIDED IN SECTION 4(D),
AND (II) THE TERMINATION CONSTITUTES A “SEPARATION FROM SERVICE” FOR PURPOSES OF
SECTION 409A OF THE CODE, THEN EXECUTIVE SHALL BE ENTITLED TO THE FOLLOWING:

 

(I)  SEVERANCE.  THE COMPANY SHALL PAY TO EXECUTIVE (OR EXECUTIVE’S ESTATE IF
EXECUTIVE DIES AFTER TERMINATION) AN AMOUNT EQUAL TO THE SUM OF TWO (2) TIMES
EXECUTIVE’S ANNUAL BASE SALARY AS OF THE DATE OF TERMINATION AND TWO (2) TIMES
THE AVERAGE OF THE ANNUAL INCENTIVE BONUS AMOUNT EARNED BY EXECUTIVE WITH
RESPECT TO THE THREE FISCAL YEAR PERIOD PRECEDING THE YEAR IN WHICH THIS
AGREEMENT IS TERMINATED (OR SUCH SHORTER PERIOD AS MAY APPLY IF THIS AGREEMENT
HAS BEEN IN EFFECT FOR LESS THAN THREE YEARS) (HEREINAFTER, THE “SEVERANCE
AMOUNT”); PROVIDED, HOWEVER, THAT FOR PURPOSES OF THIS CALCULATION, THE
RELOCATION AND SIGNING BONUS AND THE GUARANTEED BONUS PAYABLE FOR PERIOD 1 AND
FOR PERIOD 2 SHALL NOT BE UTILIZED AND THE ACTUAL BONUS THAT WOULD HAVE BEEN
EARNED FOR SUCH TIME PERIODS SHALL BE UTILIZED INSTEAD.  THE SEVERANCE AMOUNT
SHALL BE PAYABLE IN EQUAL INSTALLMENTS IN ACCORDANCE WITH AND AT TIMES
CONSISTENT WITH THE COMPANY’S ORDINARY PAYROLL PRACTICES, OVER A TWENTY-FOUR
(24) MONTH

 

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PERIOD (HEREINAFTER, THE “SEVERANCE PERIOD”) COMMENCING ON THE FIRST ORDINARY
PAYROLL PAYMENT DATE THAT FOLLOWS THE DATE THAT IS 60 DAYS AFTER THE DATE OF
TERMINATION OF EXECUTIVE’S EMPLOYMENT.

 

(II)  BENEFITS.  FOR THE DURATION OF THE SEVERANCE PERIOD (I.E., TWENTY-FOUR
(24) MONTHS) COMMENCING ON THE DATE OF TERMINATION OF EXECUTIVE’S EMPLOYMENT,
EXECUTIVE SHALL CONTINUE TO RECEIVE THE FRINGE AND OTHER BENEFITS PROVIDED UNDER
SECTION 3(F)(I) HEREOF ON THE SAME BASIS AS SUCH BENEFITS WERE PROVIDED DURING
EXECUTIVE’S EMPLOYMENT HEREUNDER, PROVIDED THAT THE CONTINUED PARTICIPATION OF
EXECUTIVE UNDER ANY BENEFIT PLAN INCLUDING, WITHOUT LIMITATION, GROUP
HEALTHCARE, DENTAL AND LIFE INSURANCE IS POSSIBLE UNDER THE GENERAL TERMS AND
PROVISIONS OF SUCH PLANS.  SUCH PERIOD OF COVERAGE SHALL COUNT AGAINST
EXECUTIVE’S CONTINUATION OF COVERAGE PERIOD REQUIRED UNDER THE CONSOLIDATED
OMNIBUS BUDGET RECONCILIATION ACT OF 1985, AS AMENDED (“COBRA”).  ALL PREMIUM
PAYMENTS PAID BY EXECUTIVE FOR SUCH CONTINUATION COVERAGE DURING THE SEVERANCE
PERIOD AND FOR ANY SUBSEQUENT COBRA PERIOD SHALL BE PAID DIRECTLY TO THE
APPROPRIATE INSURER OR SERVICE PROVIDER FOR SUCH BENEFIT (WHICH MAY BE THE
COMPANY).  IF EXECUTIVE’S PARTICIPATION IN ANY SUCH PLAN IS BARRED OR WOULD
RESULT IN ADVERSE TAX CONSEQUENCES TO EXECUTIVE OR THE COMPANY, THE COMPANY
SHALL ARRANGE TO PROVIDE EXECUTIVE WITH BENEFITS SUBSTANTIALLY SIMILAR TO THOSE
WHICH EXECUTIVE WOULD OTHERWISE HAVE BEEN ENTITLED TO RECEIVE UNDER SUCH PLAN
OR, ALTERNATIVELY AT THE OPTION OF THE COMPANY, REIMBURSE EXECUTIVE FOR THE
REASONABLE ACTUAL COSTS OF PURCHASING IN THE MARKETPLACE SUBSTANTIALLY SIMILAR
BENEFITS; PROVIDED, HOWEVER, THAT IN EITHER CASE EXECUTIVE SHALL PAY TO THE
COMPANY, OR PROVIDE A CREDIT AGAINST THE COMPANY’S REIMBURSEMENT OBLIGATION FOR,
THE AMOUNT EQUAL TO THE PREMIUMS, OR PORTION THEREOF, THAT EXECUTIVE WAS
REQUIRED TO PAY TO MAINTAIN SUCH BENEFITS PRIOR TO THE DATE OF TERMINATION OF
EMPLOYMENT.  EXCEPT AS PERMITTED BY SECTION 409A OF THE CODE, THE CONTINUED
BENEFITS PROVIDED TO EXECUTIVE PURSUANT TO THIS SECTION 5(C)(II) DURING ANY
CALENDAR YEAR WILL NOT AFFECT THE CONTINUED BENEFITS PROVIDED TO EXECUTIVE IN
ANY OTHER CALENDAR YEAR, AND THE AMOUNT OF ANY COSTS OF PURCHASING BENEFITS
REIMBURSED PURSUANT TO THIS SECTION 5(C)(II) SHALL BE PAID TO EXECUTIVE NO LATER
THAN THE LAST DAY OF THE CALENDAR YEAR FOLLOWING THE CALENDAR YEAR IN WHICH SUCH
COSTS ARE INCURRED BY EXECUTIVE.

 

(III)  EQUITY AND LONG-TERM INCENTIVE AWARDS.  ALL UNVESTED RESTRICTED STOCK OR
UNITS GRANTED TO EXECUTIVE WILL BE IMMEDIATELY FORFEITED AND ALL UNVESTED STOCK
OPTIONS GRANTED TO EXECUTIVE WILL BE IMMEDIATELY TERMINATED UPON SUCH
TERMINATION OF EXECUTIVE’S EMPLOYMENT AND ANY VESTED STOCK OPTIONS GRANTED TO
EXECUTIVE WILL REMAIN EXERCISABLE FOR THREE MONTHS AFTER SUCH TERMINATION OF
EXECUTIVE’S EMPLOYMENT, SUBJECT TO THE EARLIER EXPIRATION OF THE TERM OF SUCH
STOCK OPTION.

 

(IV)  OFFSET.  ANY BENEFITS RECEIVED BY OR AVAILABLE TO EXECUTIVE IN CONNECTION
WITH ANY OTHER EMPLOYMENT OR CONSULTANCY THAT ARE REASONABLY

 

8

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COMPARABLE TO THE BENEFITS THEN BEING PROVIDED BY THE COMPANY PURSUANT TO
SECTION 5(C)(II) HEREOF, SHALL BE DEEMED TO BE THE EQUIVALENT THEREOF AND SHALL
TERMINATE THE COMPANY’S RESPONSIBILITY TO CONTINUE PROVIDING THE BENEFITS THEN
BEING PROVIDED BY THE COMPANY PURSUANT TO SECTION 5(C)(II) HEREOF.

 

(D)  TERMINATION BY EXECUTIVE WITHOUT A TERMINATION REASON.  IN THE EVENT THAT
EXECUTIVE’S EMPLOYMENT IS TERMINATED BY EXECUTIVE WITHOUT A TERMINATION REASON
AS PROVIDED IN SECTION 4(E), EXECUTIVE SHALL RECEIVE ALL PAYMENTS DUE UNDER
SECTION 4(G) AS OF THE TERMINATION DATE AND THEREAFTER SHALL NOT BE ENTITLED TO
ANY FURTHER COMPENSATION FROM THE COMPANY AND ALL OUTSTANDING UNVESTED STOCK
OPTIONS AND ALL UNVESTED RESTRICTED STOCK AND UNITS SHALL BE IMMEDIATELY
FORFEITED.

 

(E)  DISABILITY.  IN THE EVENT THAT EXECUTIVE’S EMPLOYMENT IS TERMINATED DUE TO
A DISABILITY EVENT AS PROVIDED IN SECTION 4(F), EXECUTIVE SHALL BE ENTITLED TO
CONTINUE TO RECEIVE HIS BASE SALARY FOR A PERIOD OF TWELVE (12) MONTHS,
COMMENCING ON THE FIRST ORDINARY PAYROLL DATE THAT FOLLOWS THE DATE THAT IS 60
DAYS AFTER THE DATE OF TERMINATION OF EXECUTIVE’S EMPLOYMENT, AND PAYABLE IN
ACCORDANCE WITH AND AT TIMES CONSISTENT WITH THE COMPANY’S ORDINARY PAYROLL
PRACTICES.  IN ADDITION, EXECUTIVE SHALL BE ENTITLED TO CONTINUE TO RECEIVE THE
FRINGE AND OTHER BENEFITS PROVIDED UNDER SECTION 3(F)(I) HEREOF FOR A PERIOD OF
12 MONTHS, COMMENCING ON THE DATE OF TERMINATION OF EXECUTIVE’S EMPLOYMENT,
SUBJECT TO THE CONDITIONS REGARDING SUCH BENEFITS SPECIFIED IN
SECTION 5(C)(II) AND 5(C)(IV).  ALL UNVESTED RESTRICTED STOCK OR UNITS GRANTED
TO EXECUTIVE WILL BE IMMEDIATELY FORFEITED AND ALL UNVESTED STOCK OPTIONS
GRANTED TO EXECUTIVE WILL BE IMMEDIATELY TERMINATED UPON THE DATE OF SUCH
TERMINATION OF EXECUTIVE’S EMPLOYMENT AND ANY VESTED STOCK OPTIONS WILL REMAIN
EXERCISABLE FOR ONE (1) YEAR AFTER SUCH TERMINATION OF EXECUTIVE’S EMPLOYMENT,
SUBJECT TO THE EARLIER EXPIRATION OF THE TERM OF SUCH STOCK OPTION.

 

6.  EFFECT OF CHANGE OF CONTROL. (A)  IF WITHIN TWO (2) YEARS FOLLOWING A CHANGE
OF CONTROL (AS HEREINAFTER DEFINED), EXECUTIVE TERMINATES HIS EMPLOYMENT WITH
THE COMPANY FOR GOOD REASON (AS HEREINAFTER DEFINED) OR THE COMPANY TERMINATES
EXECUTIVE’S EMPLOYMENT FOR ANY REASON OTHER THAN FOR CAUSE (AS DEFINED IN
SECTION 4(B)) IN A TERMINATION THAT CONSTITUTES A “SEPARATION FROM SERVICE” FOR
PURPOSES OF SECTION 409A OF THE CODE, OR A DISABILITY EVENT, THE COMPANY SHALL
PAY TO, AND PROVIDE FOR, EXECUTIVE THE FOLLOWING PAYMENTS AND BENEFITS:

 

(I)  AN AMOUNT EQUAL TO THREE (3) TIMES THE SUM OF (A) THE EXECUTIVE’S ANNUAL
BASE SALARY AS OF THE DATE OF TERMINATION AND (B) THE AVERAGE ANNUAL INCENTIVE
BONUS PAID TO EXECUTIVE OVER THE PRIOR THREE YEARS (OR SUCH SHORTER PERIOD AS
MAY APPLY IF THIS AGREEMENT HAS BEEN IN EFFECT FOR LESS THAN THREE YEARS) AS OF
THE DATE OF TERMINATION, PAYABLE IN A SINGLE LUMP SUM WITHIN FIFTEEN (15) DAYS
AFTER THE DATE ON WHICH THE GENERAL RELEASE REQUIRED PURSUANT TO SECTION 8 IS
EXECUTED AND DELIVERED TO THE COMPANY AND BECOMES IRREVOCABLE IN ACCORDANCE WITH
ITS TERMS, PROVIDED, HOWEVER, THAT FOR PURPOSES OF THE CALCULATION OF CLAUSE
(B), THE

 

9

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RELOCATION AND SIGNING BONUS SHALL NOT BE UTILIZED AND THE GUARANTEED BONUS
PAYABLE FOR PERIOD 1 AND FOR PERIOD 2 SHALL BE UTILIZED;

 

(II)  ALL BENEFITS UNDER THE COMPANY’S VARIOUS BENEFIT PLANS, INCLUDING GROUP
HEALTHCARE, DENTAL, AND LIFE, FOR THIRTY-SIX (36) MONTHS FROM THE DATE OF
TERMINATION, ON THE SAME BASIS AS SUCH BENEFITS WERE PROVIDED DURING EXECUTIVE’S
EMPLOYMENT HEREUNDER, PROVIDED THAT THE CONTINUED PARTICIPATION OF EXECUTIVE IS
POSSIBLE UNDER THE GENERAL TERMS AND PROVISIONS OF SUCH PLANS.  IF EXECUTIVE’S
PARTICIPATION IN ANY SUCH PLAN IS BARRED OR WOULD RESULT IN ADVERSE TAX
CONSEQUENCES TO EXECUTIVE OR THE COMPANY, THE COMPANY SHALL ARRANGE TO PROVIDE
EXECUTIVE WITH BENEFITS SUBSTANTIALLY SIMILAR TO THOSE WHICH EXECUTIVE WOULD
OTHERWISE HAVE BEEN ENTITLED TO RECEIVE UNDER SUCH PLAN OR, ALTERNATIVELY AT THE
OPTION OF THE COMPANY, REIMBURSE EXECUTIVE FOR THE REASONABLE ACTUAL COSTS OF
PURCHASING IN THE MARKETPLACE SUBSTANTIALLY SIMILAR BENEFITS; PROVIDED, HOWEVER,
THAT IN EITHER CASE EXECUTIVE SHALL PAY TO THE COMPANY, OR PROVIDE A CREDIT
AGAINST THE COMPANY’S REIMBURSEMENT OBLIGATION, FOR THE AMOUNT EQUAL TO THE
PREMIUMS, OR PORTION THEREOF, THAT EXECUTIVE WAS REQUIRED TO PAY TO MAINTAIN
SUCH BENEFITS PRIOR TO THE DATE OF TERMINATION OF EMPLOYMENT.  FURTHER, ANY
INSURANCE OR OTHER BENEFITS AND BENEFITS COVERAGE PROVIDED PURSUANT HERETO SHALL
BE LIMITED AND REDUCED TO THE EXTENT REASONABLY COMPARABLE COVERAGE OR BENEFITS
ARE PROVIDED BY OR AVAILABLE FROM ANY OTHER EMPLOYER OF EXECUTIVE, PROVIDED
FURTHER THAT EXCEPT AS PERMITTED BY SECTION 409A OF THE CODE, THE CONTINUED
BENEFITS PROVIDED TO EXECUTIVE PURSUANT TO THIS SECTION 6(A)(II) DURING ANY
CALENDAR YEAR WILL NOT AFFECT THE CONTINUED BENEFITS PROVIDED TO EXECUTIVE IN
ANY OTHER CALENDAR YEAR, AND THE AMOUNT OF ANY COSTS OF PURCHASING BENEFITS
REIMBURSED PURSUANT TO THIS SECTION 6(A)(II) SHALL BE PAID TO EXECUTIVE NO LATER
THAN THE LAST DAY OF THE CALENDAR YEAR FOLLOWING THE CALENDAR YEAR IN WHICH SUCH
COSTS ARE INCURRED BY EXECUTIVE; AND

 

(III)  ALL UNVESTED RESTRICTED STOCK OR UNITS GRANTED TO EXECUTIVE AND ALL
UNVESTED STOCK OPTIONS GRANTED TO EXECUTIVE WILL BE IMMEDIATELY VESTED AS OF THE
DATE ON WHICH EXECUTIVE’S EMPLOYMENT IS TERMINATED.  FURTHER, ALL VESTED STOCK
OPTIONS GRANTED TO EXECUTIVE, INCLUDING THOSE VESTED BY REASON OF THE PRECEDING
SENTENCE, WILL REMAIN EXERCISABLE FOR NINETY (90) DAYS AFTER SUCH TERMINATION OF
EXECUTIVE’S EMPLOYMENT, SUBJECT TO THE EARLIER EXPIRATION OF THE TERM OF SUCH
STOCK OPTIONS.

 

(B)  CHANGE OF CONTROL.  FOR PURPOSES OF THIS AGREEMENT, “CHANGE OF CONTROL”
MEANS THE EARLIEST TO OCCUR OF THE FOLLOWING:

 

(I)  ANY “PERSON,” AS SUCH TERM IS USED IN SECTIONS 3(A)(9) AND 13(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (“PERSON”), BECOMES A “BENEFICIAL OWNER,” AS
SUCH TERM IS USED IN RULE 13D-3 PROMULGATED UNDER THAT ACT, OF 30% OR MORE OF
THE VOTING STOCK OF THE COMPANY;

 

10

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(II)  THE MAJORITY OF THE BOARD CONSISTS OF INDIVIDUALS OTHER THAN “INCUMBENT”
DIRECTORS, WHICH TERM MEANS THE MEMBERS OF THE BOARD ON THE EFFECTIVE DATE;
PROVIDED THAT ANY PERSON BECOMING A DIRECTOR SUBSEQUENT TO SUCH DATE WHOSE
ELECTION OR NOMINATION FOR ELECTION WAS SUPPORTED BY TWO-THIRDS OF THE DIRECTORS
WHO THEN COMPRISED THE INCUMBENT DIRECTORS WILL BE CONSIDERED TO BE AN INCUMBENT
DIRECTOR;

 

(III)  THE COMPANY ADOPTS ANY PLAN OF LIQUIDATION PROVIDING FOR THE DISTRIBUTION
OF ALL OR SUBSTANTIALLY ALL OF ITS ASSETS;

 

(IV)  ALL OR SUBSTANTIALLY ALL OF THE ASSETS OR BUSINESS OF THE COMPANY IS
DISPOSED OF PURSUANT TO A MERGER, CONSOLIDATION OR OTHER TRANSACTION (UNLESS THE
STOCKHOLDERS OF THE COMPANY IMMEDIATELY PRIOR TO SUCH MERGER, CONSOLIDATION OR
OTHER TRANSACTION BENEFICIALLY OWN, DIRECTLY OR INDIRECTLY, IN SUBSTANTIALLY THE
SAME PROPORTION AS THEY OWNED THE VOTING STOCK OF THE COMPANY, ALL OF THE VOTING
STOCK OR OTHER OWNERSHIP INTERESTS OF THE ENTITY OR ENTITIES, IF ANY, THAT
SUCCEED TO THE BUSINESS OF THE COMPANY); OR

 

(V)  THE COMPANY COMBINES WITH ANOTHER COMPANY AND IS THE SURVIVING CORPORATION
BUT, IMMEDIATELY AFTER THE COMBINATION, THE STOCKHOLDERS OF THE COMPANY
IMMEDIATELY PRIOR TO THE COMBINATION HOLD, DIRECTLY OR INDIRECTLY, 50% OR LESS
OF THE VOTING STOCK OF THE COMBINED COMPANY (THERE BEING EXCLUDED FROM THE
NUMBER OF SHARES HELD BY SUCH STOCKHOLDERS, BUT NOT FROM THE VOTING STOCK OF THE
COMBINED COMPANY, ANY SHARES RECEIVED BY AFFILIATES OF SUCH OTHER COMPANY IN
EXCHANGE FOR STOCK OF SUCH OTHER COMPANY).

 

For purposes of the Change of Control definition, “Company” will include any
entity that succeeds to all or substantially all, of the business of the Company
and “Voting Stock” will mean securities of any class or classes having general
voting power under ordinary circumstances, in the absence of contingencies, to
elect the directors of a corporation.

 

(C)  “GOOD REASON” SHALL MEAN ANY OF THE FOLLOWING ACTIONS TAKEN BY THE COMPANY
WITHOUT EXECUTIVE’S WRITTEN CONSENT AFTER A CHANGE OF CONTROL:

 

(I)  THE ASSIGNMENT TO EXECUTIVE BY THE COMPANY OF DUTIES INCONSISTENT WITH, OR
THE REDUCTION, OTHER THAN DUE SOLELY TO THE FACT THAT THE COMPANY NO LONGER IS A
PUBLICLY TRADED COMPANY, OF THE POWERS AND FUNCTIONS ASSOCIATED WITH,
EXECUTIVE’S POSITION, DUTIES, RESPONSIBILITIES AND STATUS WITH THE COMPANY
IMMEDIATELY PRIOR TO A CHANGE OF CONTROL OR POTENTIAL CHANGE OF CONTROL (AS
DEFINED BELOW), OR A MATERIAL ADVERSE CHANGE IN EXECUTIVE’S TITLES OR OFFICES AS
IN EFFECT IMMEDIATELY PRIOR TO A CHANGE OF CONTROL OR POTENTIAL CHANGE OF
CONTROL, OR ANY REMOVAL OF EXECUTIVE FROM OR ANY FAILURE TO RE-ELECT EXECUTIVE
TO ANY OF SUCH POSITIONS, EXCEPT IN CONNECTION WITH THE TERMINATION OF HIS
EMPLOYMENT (A) BY THE COMPANY FOR A DISABILITY EVENT OR CAUSE OR AS A RESULT OF

 

11

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EXECUTIVE’S DEATH OR (B) BY EXECUTIVE OTHER THAN FOR THE REASONS SET FORTH IN
THIS SECTION 6(C);

 

(II)  A REDUCTION BY THE COMPANY IN EXECUTIVE’S BASE SALARY AS IN EFFECT ON THE
DATE OF A CHANGE OF CONTROL OR POTENTIAL CHANGE OF CONTROL;

 

(III)  THE COMPANY’S PRINCIPAL EXECUTIVE OFFICES SHALL BE MOVED TO A LOCATION
WHICH IS MORE THAN 50 MILES OUTSIDE OF THE DALLAS/FORT WORTH, TEXAS METROPLEX
AREA, OR THE COMPANY SHALL REQUIRE EXECUTIVE TO BE BASED ANYWHERE OTHER THAN AT
THE COMPANY’S PRINCIPAL EXECUTIVE OFFICES, IF SUCH LOCATION IS MORE THAN 50
MILES OUTSIDE OF THE DALLAS/FORT WORTH, TEXAS METROPLEX AREA;

 

(IV)  THE COMPANY SHALL FAIL TO CONTINUE IN EFFECT ANY COMPANY-SPONSORED PLAN
THAT IS IN EFFECT ON THE DATE OF A CHANGE OF CONTROL OR POTENTIAL CHANGE OF
CONTROL (OR REPLACEMENT PLANS THEREFORE THAT IN THE AGGREGATE PROVIDE THE SAME
OR MORE FAVORABLE BENEFITS) THAT PROVIDES (A) INCENTIVE OR BONUS COMPENSATION,
(B) REIMBURSEMENT FOR REASONABLE EXPENSES INCURRED BY EXECUTIVE IN CONNECTION
WITH THE PERFORMANCE OF DUTIES WITH THE COMPANY, AND (C) PENSION BENEFITS SUCH
AS SECTION 401(K) PLAN WITHIN THE MEANING OF THE CODE;

 

(V)  ANY MATERIAL BREACH BY THE COMPANY OF ANY PROVISION OF THIS AGREEMENT; AND

 

(VI)  ANY FAILURE BY THE COMPANY TO OBTAIN THE ASSUMPTION OF THIS AGREEMENT BY
ANY SUCCESSOR OR ASSIGN OF THE COMPANY EFFECTED IN ACCORDANCE WITH THE
PROVISIONS SECTION 17(H).

 

IF EXECUTIVE BELIEVES THAT AN EVENT SPECIFIED IN THIS SECTION 6(C) HAS OCCURRED,
EXECUTIVE MUST NOTIFY THE COMPANY OF THAT BELIEF WITHIN NINETY (90) DAYS
FOLLOWING THE OCCURRENCE OF SUCH EVENT.  THE COMPANY WILL HAVE THIRTY (30) DAYS
FOLLOWING RECEIPT OF SUCH NOTICE (SUCH PERIOD, THE “GOOD REASON DESIGNATED
PERIOD”) IN WHICH TO EITHER RECTIFY SUCH EVENT, DETERMINE THAT SUCH AN EVENT
EXISTS, OR DETERMINE THAT SUCH AN EVENT DOES NOT EXIST.  IF THE COMPANY DOES NOT
TAKE ANY OF THE FOREGOING ACTIONS WITHIN THE GOOD REASON DESIGNATED PERIOD,
EXECUTIVE MAY TERMINATE HIS EMPLOYMENT WITH THE COMPANY DURING THE FOURTEEN-DAY
PERIOD FOLLOWING THE EXPIRATION OF THE GOOD REASON DESIGNATED PERIOD.  IF,
DURING THE GOOD REASON DESIGNATED PERIOD, THE COMPANY DETERMINES THAT SUCH AN
EVENT EXISTS, THE COMPANY SHALL EITHER (A) UNDERTAKE TO CURE SUCH EVENT DURING
THE GOOD REASON DESIGNATED PERIOD AND PROVIDE EXECUTIVE WITH WRITTEN NOTICE
DURING THE GOOD REASON DESIGNATED PERIOD OF THE COMPANY’S DETERMINATION THAT
SUCH EVENT HAS BEEN CURED, OR (B) PROVIDE WRITTEN NOTICE TO EXECUTIVE DURING THE
GOOD REASON DESIGNATED PERIOD THAT IT DOES NOT WISH TO CURE SUCH EVENT, IN WHICH
CASE EXECUTIVE MAY TERMINATE HIS EMPLOYMENT DURING THE FOURTEEN (14) DAY PERIOD
FOLLOWING RECEIPT OF THE

 

12

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NOTICE SPECIFIED IN THIS CLAUSE (B).  IF, DURING THE GOOD REASON DESIGNATED
PERIOD, THE COMPANY DETERMINES THAT (1) SUCH EVENT DOES NOT EXIST OR (2) THE
COMPANY HAS CURED SUCH EVENT PURSUANT TO CLAUSE (A) OF THE PRECEDING SENTENCE,
THEN (X) EXECUTIVE WILL NOT BE ENTITLED TO RELY ON OR ASSERT SUCH EVENT AS A
BASIS FOR A TERMINATION FOR GOOD REASON, AND (Y) IF EXECUTIVE DISAGREES WITH THE
COMPANY’S DETERMINATION, EXECUTIVE MAY FILE A CLAIM PURSUANT TO SECTION 15
WITHIN THIRTY (30) DAYS AFTER EXECUTIVE’S RECEIPT OF WRITTEN NOTICE OF THE
COMPANY’S DETERMINATION.

 

(D)  “POTENTIAL CHANGE OF CONTROL” SHALL MEAN THE EARLIEST TO OCCUR OF THE
FOLLOWING EVENTS WITHIN SIX MONTHS PRIOR TO A CHANGE OF CONTROL:

 

(I)  THE COMPANY ENTERS INTO AN AGREEMENT THE CONSUMMATION OF WHICH, OR THE
APPROVAL BY STOCKHOLDERS OF WHICH, WOULD CONSTITUTE A CHANGE OF CONTROL;

 

(II)  PROXIES FOR THE ELECTION OF MEMBERS OF THE BOARD ARE SOLICITED BY ANY
PERSON OTHER THAN THE COMPANY;

 

(III)  ANY PERSON (INCLUDING, BUT NOT LIMITED TO, ANY INDIVIDUAL PARTNERSHIP,
JOINT VENTURE, CORPORATION, ASSOCIATION OR TRUST) PUBLICLY ANNOUNCES AN
INTENTION TO TAKE OR TO CONSIDER TAKING ACTIONS WHICH, IF CONSUMMATED, WOULD
CONSTITUTE A CHANGE OF CONTROL; OR

 

(IV)  ANY OTHER EVENT OCCURS WHICH IS DEEMED TO BE A POTENTIAL CHANGE OF CONTROL
BY THE BOARD AND THE BOARD ADOPTS A RESOLUTION TO THE EFFECT THAT A POTENTIAL
CHANGE OF CONTROL HAS OCCURRED.

 

(E)  EXCISE TAX.

 

(I)  GROSS-UP.  IN THE EVENT THAT THE “TOTAL PAYMENTS” (DEFINED BELOW) WOULD BE
SUBJECT TO THE “EXCISE TAX” (DEFINED BELOW) THE COMPANY SHALL PAY TO EXECUTIVE
AN ADDITIONAL AMOUNT (THE “GROSS-UP PAYMENT”) SUCH THAT AFTER PAYMENT BY
EXECUTIVE OF ALL TAXES (INCLUDING ANY EXCISE TAX) IMPOSED UPON THE GROSS-UP
PAYMENT AND ANY INTEREST OR PENALTIES IMPOSED WITH RESPECT TO SUCH TAXES,
EXECUTIVE RETAINS FROM THE GROSS-UP PAYMENT AN AMOUNT EQUAL TO THE EXCISE TAX
IMPOSED UPON THE TOTAL PAYMENTS.

 

(A)  FOR PURPOSES OF DETERMINING WHETHER ANY OF THE TOTAL PAYMENTS WILL BE
SUBJECT TO THE EXCISE TAX AND THE AMOUNT OF SUCH EXCISE TAX, (A) ALL “EXCESS
PARACHUTE PAYMENTS” WITHIN THE MEANING OF SECTION 280G(B)(L) OF THE CODE SHALL
BE TREATED AS SUBJECT TO THE EXCISE TAX UNLESS, IN THE OPINION OF TAX COUNSEL
(DEFINED BELOW), SUCH EXCESS PARACHUTE PAYMENTS (IN WHOLE OR IN PART) REPRESENT
REASONABLE COMPENSATION FOR SERVICES ACTUALLY RENDERED (WITHIN THE MEANING OF
SECTION 280G(B)(4)(B) OF THE CODE) IN EXCESS OF THE BASE AMOUNT (WITHIN THE
MEANING OF

 

13

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SECTION 280G(B)(3) OF THE CODE) ALLOCABLE TO SUCH REASONABLE COMPENSATION, OR
ARE OTHERWISE NOT SUBJECT TO THE EXCISE TAX, AND (B) THE VALUE OF ANY NONCASH
BENEFITS OR ANY DEFERRED PAYMENT OR BENEFIT SHALL BE DETERMINED BY THE AUDITOR
(DEFINED BELOW) IN ACCORDANCE WITH THE PRINCIPLES OF SECTIONS 280G(D)(3) AND
(4) OF THE CODE.  IF THE AUDITOR IS PROHIBITED BY APPLICABLE LAW OR REGULATION
FROM PERFORMING THE DUTIES ASSIGNED TO IT HEREUNDER, THEN A DIFFERENT AUDITOR,
ACCEPTABLE TO BOTH THE COMPANY AND EXECUTIVE, SHALL BE SELECTED.  THE FEES AND
EXPENSES OF TAX COUNSEL AND THE AUDITOR SHALL BE PAID BY THE COMPANY NOT LATER
THAN (A) THE LAST DAY OF THE CALENDAR YEAR AFTER THE CALENDAR YEAR IN WHICH
EXECUTIVE REMITS THE EXCISE TAX TO THE APPLICABLE TAXING AUTHORITY AND/OR
(B) THE LAST DAY OF THE CALENDAR YEAR IN WHICH THE APPLICABLE CONTEST IS
CONCLUDED.

 

(B)  FOR PURPOSES OF DETERMINING THE AMOUNT OF THE GROSS-UP PAYMENT, EXECUTIVE
SHALL BE DEEMED TO PAY FEDERAL INCOME TAX AT THE HIGHEST MARGINAL RATE OF
FEDERAL INCOME TAXATION IN THE CALENDAR YEAR IN WHICH THE GROSS-UP PAYMENT IS TO
BE MADE AND STATE AND LOCAL INCOME TAXES AT THE HIGHEST MARGINAL RATE OF
TAXATION IN THE STATE AND LOCALITY OF EXECUTIVE’S RESIDENCE ON THE DATE OF
TERMINATION (OR IF THERE IS NO DATE OF TERMINATION, THEN THE DATE ON WHICH THE
GROSS-UP PAYMENT IS CALCULATED FOR PURPOSES OF THIS SECTION), NET OF THE MAXIMUM
REDUCTION IN FEDERAL INCOME TAXES WHICH COULD BE OBTAINED FROM DEDUCTION OF SUCH
STATE AND LOCAL TAXES.

 

(C)  NOTWITHSTANDING THE FOREGOING, IF IT SHALL BE DETERMINED THAT EXECUTIVE IS
ENTITLED TO A GROSS-UP PAYMENT, BUT THAT THE TOTAL PAYMENTS WOULD NOT BE SUBJECT
TO THE EXCISE TAX IF THE TOTAL PAYMENTS WERE REDUCED BY AN AMOUNT THAT IS LESS
THAN 10% OF THE PORTION OF THE TOTAL PAYMENTS THAT WOULD BE TREATED AS
“PARACHUTE PAYMENTS” UNDER SECTION 280G OF THE CODE, THEN THE AMOUNTS PAYABLE TO
EXECUTIVE UNDER THIS AGREEMENT SHALL BE REDUCED (BUT NOT BELOW ZERO) TO THAT
MAXIMUM AMOUNT THAT COULD BE PAID TO EXECUTIVE WITHOUT GIVING RISE TO THE EXCISE
TAX (THE “SAFE HARBOR CAP”), AND NO GROSS-UP PAYMENT SHALL BE MADE TO
EXECUTIVE.  FOR PURPOSES OF MAKING THE REDUCTION OF AMOUNTS PAYABLE UNDER THIS
AGREEMENT, SUCH AMOUNTS SHALL BE ELIMINATED IN THE FOLLOWING ORDER:  (1) ANY
CASH COMPENSATION, (2) ANY HEALTH OR WELFARE BENEFITS, (3) ANY EQUITY
COMPENSATION, AND (4) ANY OTHER PAYMENTS HEREUNDER.  REDUCTIONS OF SUCH AMOUNTS
SHALL TAKE PLACE IN THE CHRONOLOGICAL ORDER WITH RESPECT TO WHICH SUCH AMOUNTS
WOULD BE PAID FROM THE DATE OF TERMINATION ABSENT ANY ACCELERATION OF PAYMENT. 
IF THE REDUCTION OF THE AMOUNTS PAYABLE HEREUNDER WOULD NOT RESULT IN A
REDUCTION OF THE TOTAL PAYMENTS TO THE SAFE HARBOR

 

14

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CAP, NO AMOUNTS PAYABLE UNDER THIS AGREEMENT SHALL BE REDUCED PURSUANT TO THIS
PROVISION.

 

(D)  IN THE EVENT THAT THE EXCISE TAX IS SUBSEQUENTLY DETERMINED TO BE LESS THAN
THE AMOUNT TAKEN INTO ACCOUNT HEREUNDER IN CALCULATING THE GROSS-UP PAYMENT,
EXECUTIVE SHALL REPAY TO THE COMPANY, WITHIN FIVE (5) BUSINESS DAYS FOLLOWING
THE TIME THAT THE AMOUNT OF SUCH REDUCTION IN THE EXCISE TAX IS FINALLY
DETERMINED, THE PORTION OF THE GROSS-UP PAYMENT ATTRIBUTABLE TO SUCH REDUCTION
(PLUS THAT PORTION OF THE GROSS-UP PAYMENT ATTRIBUTABLE TO THE EXCISE TAX AND
OTHER TAXES IMPOSED ON THAT PORTION OF THE GROSS-UP PAYMENT BEING REPAID BY THE
EXECUTIVE).  IN THE EVENT THAT THE EXCISE TAX IS DETERMINED TO EXCEED THE AMOUNT
TAKEN INTO ACCOUNT HEREUNDER IN CALCULATING THE GROSS-UP PAYMENT (INCLUDING BY
REASON OF ANY PAYMENT THE EXISTENCE OR AMOUNT OF WHICH CANNOT BE DETERMINED AT
THE TIME OF THE GROSS-UP PAYMENT), THE COMPANY SHALL MAKE AN ADDITIONAL GROSS-UP
PAYMENT IN RESPECT OF SUCH EXCESS WITHIN FIVE (5) BUSINESS DAYS FOLLOWING THE
TIME THAT THE AMOUNT OF SUCH EXCESS IS FINALLY DETERMINED.  THE PROVISIONS OF
SECTION 6(E)(I)(C) REGARDING THE REDUCTION OF THE PAYMENTS UNDER THIS AGREEMENT
TO THE SAFE HARBOR CAP SHALL BE APPLIED TAKING INTO CONSIDERATION THIS
SECTION 6(E)(I)(D).  EXECUTIVE AND THE COMPANY SHALL EACH REASONABLY COOPERATE
WITH THE OTHER IN CONNECTION WITH ANY ADMINISTRATIVE OR JUDICIAL PROCEEDINGS
CONCERNING THE EXISTENCE OR AMOUNT OF LIABILITY FOR EXCISE TAX WITH RESPECT TO
THE TOTAL PAYMENTS.

 

(II)  OTHER TERMS.  AT THE TIME THAT PAYMENTS ARE MADE UNDER SECTION 5(C) OR
6(A) OF THIS AGREEMENT, IF REQUESTED BY EXECUTIVE, THE COMPANY SHALL PROVIDE
EXECUTIVE WITH A WRITTEN STATEMENT SETTING FORTH THE MANNER IN WHICH SUCH
PAYMENTS WERE CALCULATED AND THE BASIS FOR SUCH CALCULATIONS INCLUDING, WITHOUT
LIMITATION, ANY OPINIONS, OR OTHER ADVICE THE COMPANY HAS RECEIVED FROM TAX
COUNSEL, THE AUDITOR OR OTHER ADVISORS OR CONSULTANTS (AND ALL SUCH OPINIONS OR
ADVICE SHALL BE IN WRITING, SHALL BE ATTACHED TO THE STATEMENT AND SHALL
EXPRESSLY STATE THAT EXECUTIVE MAY RELY THEREON).  EXECUTIVE AND THE COMPANY
SHALL EACH REASONABLY COOPERATE WITH THE OTHER IN CONNECTION WITH ANY
ADMINISTRATIVE OR JUDICIAL PROCEEDING CONCERNING THE EXISTENCE OR AMOUNT OF
LIABILITY FOR EXCISE TAX WITH RESPECT TO THE TOTAL PAYMENTS.  NOTWITHSTANDING
ANYTHING HEREIN TO THE CONTRARY, THIS SECTION 6(E) SHALL BE INTERPRETED (AND, IF
DETERMINED BY THE COMPANY TO BE NECESSARY, REFORMED) TO THE EXTENT NECESSARY TO
FULLY COMPLY WITH THE SARBANES-OXLEY ACT; PROVIDED THAT THE CORPORATION AGREES
TO MAINTAIN, TO THE MAXIMUM EXTENT PRACTICABLE, THE ORIGINAL INTENT AND ECONOMIC
BENEFIT TO THE EXECUTIVE OF THE APPLICABLE PROVISION WITHOUT VIOLATING THE
PROVISIONS OF THE SARBANES-OXLEY ACT.

 

15

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(III)  DEFINITIONS.  “TOTAL PAYMENTS” SHALL MEAN THE PAYMENTS AND BENEFITS
RECEIVED OR TO BE RECEIVED BY EXECUTIVE, WHETHER PURSUANT TO THE TERMS OF THIS
AGREEMENT OR ANY OTHER PLAN, ARRANGEMENT OR AGREEMENT, THAT CONSTITUTE
“PARACHUTE PAYMENTS” AS DEFINED IN SECTION 280G OF THE CODE (EXCLUDING THE
GROSS-UP PAYMENT) (“PARACHUTE PAYMENTS”).  FOR THIS PURPOSES, ALL OF THE
PAYMENTS AND BENEFITS RECEIVED BY EXECUTIVE OR TO BE RECEIVED BY EXECUTIVE IN
CONNECTION WITH A CHANGE OF CONTROL OR IN CONNECTION WITH EXECUTIVE’S
TERMINATION OF EMPLOYMENT IN RESPECT OF A CHANGE OF CONTROL (WHETHER PURSUANT TO
THE TERMS OF THIS AGREEMENT OR ANY OTHER PLAN, ARRANGEMENT OR AGREEMENT WITH THE
COMPANY, ANY PERSON WHOSE ACTIONS RESULT IN A CHANGE OF CONTROL OR ANY PERSON
AFFILIATED WITH COMPANY OR SUCH PERSON) SHALL BE TREATED AS PARACHUTE PAYMENTS
UNLESS, IN THE OPINION OF TAX COUNSEL (“TAX COUNSEL”) REASONABLY ACCEPTABLE TO
EXECUTIVE AND SELECTED BY THE ACCOUNTING FIRM WHICH WAS, IMMEDIATELY PRIOR TO
THE CHANGE OF CONTROL, THE COMPANY’S INDEPENDENT AUDITOR (THE “AUDITOR”), SUCH
PAYMENTS OR BENEFITS (IN WHOLE OR IN PART) DO NOT CONSTITUTE PARACHUTE PAYMENTS,
INCLUDING BY REASON OF SECTION 280G(B)(4)(A) OF THE CODE. “EXCISE TAX” SHALL
MEAN THE EXCISE TAX IMPOSED UNDER SECTION 4999 OF THE CODE.

 

(IV)  ANY GROSS-UP PAYMENT THAT EXECUTIVE BECOMES ENTITLED TO RECEIVE PURSUANT
TO THIS SECTION 6(E) SHALL BE PAID TO EXECUTIVE NOT LATER THAN THE LAST DAY OF
THE CALENDAR YEAR AFTER THE CALENDAR YEAR IN WHICH EXECUTIVE REMITS THE
UNDERLYING TAXES TO THE APPLICABLE TAXING AUTHORITY.

 

7.  TIME OF PAYMENT; SECTION 409A.  (A)  IT IS THE INTENTION OF THE COMPANY AND
EXECUTIVE THAT THE PROVISIONS OF THIS AGREEMENT COMPLY WITH SECTION 409A OF THE
CODE AND THE RULES, REGULATIONS AND OTHER AUTHORITIES PROMULGATED THEREUNDER
(INCLUDING THE TRANSITION RULES THEREOF) AND ALL PROVISIONS OF THIS AGREEMENT
WILL BE CONSTRUED AND INTERPRETED IN A MANNER CONSISTENT WITH SECTION 409A OF
THE CODE.

 

(B)  TO THE EXTENT EXECUTIVE IS A “SPECIFIED EMPLOYEE,” AS DEFINED IN
SECTION 409A(A)(2)(B)(I) OF THE CODE, NOTWITHSTANDING THE TIMING OF PAYMENT
PROVIDED IN ANY OTHER SECTION OF THIS AGREEMENT, NO PAYMENT, DISTRIBUTION OR
BENEFIT UNDER THIS AGREEMENT THAT CONSTITUTES A DISTRIBUTION OF DEFERRED
COMPENSATION (WITHIN THE MEANING OF TREASURY REGULATION SECTION 1.409A-1(B))
UPON SEPARATION FROM SERVICE (WITHIN THE MEANING OF TREASURY REGULATION
SECTION 1.409A-1(H)), AFTER TAKING INTO ACCOUNT ALL AVAILABLE EXEMPTIONS, THAT
WOULD OTHERWISE BE PAYABLE DURING THE SIX-MONTH PERIOD AFTER SEPARATION FROM
SERVICE, WILL BE MADE DURING SUCH SIX-MONTH PERIOD, AND ANY SUCH PAYMENT,
DISTRIBUTION OR BENEFIT WILL INSTEAD BE PAID ON THE FIRST BUSINESS DAY AFTER
SUCH SIX-MONTH PERIOD.

 

(C)  IN THE EVENT THAT THE COMPANY DETERMINES THAT ANY PROVISION OF THIS
AGREEMENT DOES NOT COMPLY WITH SECTION 409A OF THE CODE, THE COMPANY WILL BE
ENTITLED, WITHOUT EXECUTIVE’S CONSENT, TO AMEND OR MODIFY SUCH PROVISION TO
COMPLY WITH SECTION 409A OF THE CODE; PROVIDED, HOWEVER, THAT SUCH AMENDMENT OR
MODIFICATION WILL,

 

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TO THE GREATEST EXTENT COMMERCIALLY PRACTICABLE, MAINTAIN THE ECONOMIC VALUE TO
EXECUTIVE OF SUCH PROVISION.

 

(D)  FOR PURPOSES OF SECTION 409A OF THE CODE, EACH INSTALLMENT OF BASE SALARY
OR THE SEVERANCE AMOUNT UNDER SECTIONS 5(A) AND 5(C)(I) WILL BE DEEMED TO BE A
SEPARATE PAYMENT AS PERMITTED UNDER TREASURY REGULATION
SECTION 1.409A-2(B)(2)(III).

 

(E)  NEITHER EXECUTIVE NOR ANY CREDITOR OR BENEFICIARY OF EXECUTIVE SHALL HAVE
THE RIGHT TO SUBJECT ANY DEFERRED COMPENSATION (WITHIN MEANING OF SECTION 409A
OF THE CODE) PAYABLE UNDER THIS AGREEMENT OR UNDER ANY OTHER PLAN, POLICY,
ARRANGEMENT OR AGREEMENT OF OR WITH THE COMPANY OR ANY AFFILIATE THEREOF (THIS
AGREEMENT AND SUCH OTHER PLANS, POLICIES, ARRANGEMENTS AND AGREEMENTS, THE
“COMPANY PLANS”) TO ANY ANTICIPATION, ALIENATION, SALE, TRANSFER, ASSIGNMENT,
PLEDGE, ENCUMBRANCE, ATTACHMENT OR GARNISHMENT.  EXCEPT AS PERMITTED BY
SECTION 409A OF THE CODE, ANY DEFERRED COMPENSATION (WITHIN THE MEANING OF
SECTION 409A OF THE CODE) PAYABLE TO OR FOR THE BENEFIT OF EXECUTIVE UNDER ANY
COMPANY PLAN MAY NOT BE REDUCED BY, OR OFFSET AGAINST, ANY AMOUNT OWING BY
EXECUTIVE TO THE COMPANY OR ANY AFFILIATE THEREOF.

 

(F)  NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, IF ANY PAYMENT,
DISTRIBUTION OR PROVISION OF A BENEFIT BY THE COMPANY TO OR FOR THE BENEFIT OF
EXECUTIVE, WHETHER PAID OR PAYABLE, DISTRIBUTED OR DISTRIBUTABLE OR PROVIDED OR
TO BE PROVIDED PURSUANT TO THE TERMS OF THIS AGREEMENT OR OTHERWISE (A
“PAYMENT”), WOULD BE SUBJECT TO AN ADDITIONAL TAX PURSUANT TO SECTION 409A OF
THE CODE THAT WOULD NOT HAVE BEEN IMPOSED ABSENT SUCH PAYMENT, OR ANY INTEREST
OR PENALTIES WITH RESPECT TO SUCH ADDITIONAL TAX ARE OTHERWISE IMPOSED PURSUANT
TO SECTION 409A OF THE CODE (SUCH ADDITIONAL TAX, TOGETHER WITH ANY SUCH
INTEREST OR PENALTIES, ARE HEREINAFTER COLLECTIVELY REFERRED TO AS THE
“ADDITIONAL TAXES”), THE COMPANY SHALL PAY TO EXECUTIVE AN ADDITIONAL PAYMENT (A
“409A GROSS-UP PAYMENT”) IN AN AMOUNT SUCH THAT AFTER PAYMENT BY EXECUTIVE OF
ALL ADDITIONAL TAXES, INCLUDING ANY INCOME TAXES AND ADDITIONAL TAXES IMPOSED ON
ANY 409A GROSS-UP PAYMENT, EXECUTIVE RETAINS AN AMOUNT OF THE 409A GROSS-UP
PAYMENT (TAKING INTO ACCOUNT ANY SIMILAR GROSS-UP PAYMENTS TO EXECUTIVE UNDER
ANY STOCK INCENTIVE OR OTHER BENEFIT PLAN OR PROGRAM OF THE COMPANY) EQUAL TO
THE ADDITIONAL TAXES IMPOSED UPON THE PAYMENTS.  THE COMPANY AND EXECUTIVE SHALL
MAKE AN INITIAL DETERMINATION AS TO WHETHER A 409A GROSS-UP PAYMENT IS REQUIRED
AND THE AMOUNT OF ANY SUCH 409A GROSS-UP PAYMENT.  EXECUTIVE SHALL NOTIFY THE
COMPANY IN WRITING OF ANY CLAIM BY THE INTERNAL REVENUE SERVICE WHICH, IF
SUCCESSFUL, WOULD REQUIRE THE COMPANY TO MAKE A 409A GROSS-UP PAYMENT (OR A 409A
GROSS-UP PAYMENT IN EXCESS OF THAT, IF ANY, INITIALLY DETERMINED BY THE COMPANY
AND EXECUTIVE) WITHIN TEN BUSINESS DAYS AFTER THE RECEIPT OF SUCH CLAIM.  THE
COMPANY SHALL NOTIFY EXECUTIVE IN WRITING AT LEAST TEN BUSINESS DAYS PRIOR TO
THE DUE DATE OF ANY RESPONSE REQUIRED WITH RESPECT TO SUCH CLAIM IF IT PLANS TO
CONTEST THE CLAIM.  IF THE COMPANY DECIDES TO CONTEST SUCH CLAIM, EXECUTIVE
SHALL COOPERATE FULLY WITH THE COMPANY IN SUCH ACTION; PROVIDED, HOWEVER, THE
COMPANY SHALL BEAR AND PAY DIRECTLY OR INDIRECTLY ALL COSTS AND EXPENSES
(INCLUDING ADDITIONAL INTEREST AND PENALTIES) INCURRED IN CONNECTION WITH SUCH
ACTION AND SHALL INDEMNIFY AND HOLD EXECUTIVE HARMLESS, ON AN AFTER-TAX BASIS,
FOR ANY ADDITIONAL TAXES OR INCOME TAX, INCLUDING INTEREST AND PENALTIES WITH
RESPECT THERETO, IMPOSED AS A RESULT OF THE COMPANY’S ACTION.  IF, AS A RESULT
OF THE COMPANY’S ACTION WITH RESPECT TO A CLAIM,

 

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EXECUTIVE RECEIVES A REFUND OF ANY AMOUNT PAID BY THE COMPANY WITH RESPECT TO
SUCH CLAIM, EXECUTIVE SHALL PROMPTLY PAY SUCH REFUND TO THE COMPANY, BUT IN NO
EVENT LATER THAN THIRTY (30) DAYS AFTER EXECUTIVE RECEIVES SUCH REFUND.  IF THE
COMPANY FAILS TO TIMELY NOTIFY EXECUTIVE WHETHER IT WILL CONTEST SUCH CLAIM OR
THE COMPANY DETERMINES NOT TO CONTEST SUCH CLAIM, THEN THE COMPANY SHALL
IMMEDIATELY PAY TO EXECUTIVE THE PORTION OF SUCH CLAIM, IF ANY, WHICH IT HAS NOT
PREVIOUSLY PAID TO EXECUTIVE.  ANY 409A GROSS-UP PAYMENT OR OTHER AMOUNTS IN
RESPECT OF TAXES, INTEREST OR PENALTIES THAT EXECUTIVE BECOMES ENTITLED TO
RECEIVE PURSUANT TO THIS SECTION 7(F) SHALL BE PAID TO EXECUTIVE (OR TO THE
APPLICABLE TAXING AUTHORITY ON EXECUTIVE’S BEHALF) NOT LATER THAN THE LAST DAY
OF THE CALENDAR YEAR AFTER THE CALENDAR YEAR IN WHICH EXECUTIVE REMITS THE
UNDERLING TAXES TO THE APPLICABLE TAXING AUTHORITY.  ANY AMOUNTS THAT EXECUTIVE
BECOMES ENTITLED TO RECEIVE IN RESPECT OF COSTS AND EXPENSES INCURRED IN
CONNECTION WITH A CONTEST PURSUANT TO THIS SECTION 7(F) SHALL BE PAID NOT LATER
THAN (A) THE LAST DAY OF THE CALENDAR YEAR AFTER THE CALENDAR YEAR IN WHICH
EXECUTIVE REMITS THE UNDERLYING TAXES TO THE APPLICABLE TAXING AUTHORITY AND
(B) THE LAST DAY OF THE CALENDAR YEAR IN WHICH THE APPLICABLE CONTEST IS
CONCLUDED.

 

8.  COMPLETE RELEASE.  AS A CONDITION OF OBTAINING BENEFITS UNDER THIS
AGREEMENT, EXECUTIVE WILL BE REQUIRED TO, WITHIN FORTY-FIVE (45) DAYS FOLLOWING
HIS TERMINATION OF EMPLOYMENT, EXECUTE AND DELIVER A FULL AND COMPLETE RELEASE
OF ANY AND ALL CLAIMS RELATED TO HIS EMPLOYMENT OR TERMINATION OF EMPLOYMENT
THAT EXECUTIVE OR HIS ESTATE, HEIRS OR ASSIGNS MAY HAVE AGAINST THE COMPANY, ITS
SUBSIDIARIES AND AFFILIATES AND ITS AND THEIR OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS IN A FORM ACCEPTABLE TO THE COMPANY.  IN THE EVENT THAT EXECUTIVE FAILS
TO EXECUTE AND DELIVER SUCH GENERAL RELEASE WITHIN SUCH FORTY-FIVE (45) DAY
PERIOD OR REVOKES SUCH GENERAL RELEASE (BUT ONLY TO THE EXTENT REVOCATION IS
PERMITTED UNDER THE TERMS OF SUCH GENERAL RELEASE), EXECUTIVE WILL FORFEIT ALL
ENTITLEMENT TO ANY PAYMENT, BENEFIT OR OTHER AMOUNT HEREUNDER.

 

9.  NON-COMPETITION.  AS A MATERIAL INDUCEMENT FOR THE COMPANY’S PROMISE TO
PROVIDE THE TRADE SECRETS AND CONFIDENTIAL AND PROPRIETARY INFORMATION DESCRIBED
IN SECTION 11 BELOW, EXECUTIVE AGREES THAT DURING THE TERM AND FOR A PERIOD
EQUAL TO THE APPLICABLE PERIOD IN WHICH EXECUTIVE RECEIVES SEVERANCE PAYMENTS
UNDER THIS AGREEMENT FROM THE DATE OF CESSATION OR TERMINATION OF EXECUTIVE’S
EMPLOYMENT WITH THE COMPANY FOR ANY REASON WHATSOEVER, HE WILL NOT, DIRECTLY OR
INDIRECTLY, COMPETE WITH THE COMPANY BY PROVIDING SERVICES RELATING TO RETAIL
SALES OF JEWELRY TO ANY OTHER PERSON, PARTNERSHIP, ASSOCIATION, CORPORATION, OR
OTHER ENTITY THAT IS IN A “COMPETING BUSINESS.” AS USED HEREIN, A “COMPETING
BUSINESS” IS ANY BUSINESS THAT ENGAGES IN WHOLE OR IN MATERIAL PART IN THE
RETAIL SALE OF JEWELRY IN THE UNITED STATES, CANADA AND/OR PUERTO RICO,
INCLUDING, BUT NOT LIMITED TO, SPECIALTY JEWELRY RETAILERS AND OTHER RETAILERS
HAVING JEWELRY DIVISIONS OR DEPARTMENTS.  THE RESTRICTIONS CONTAINED IN THIS
SECTION 9 SHALL BE TOLLED ON A DAY-FOR-DAY BASIS FOR EACH DAY DURING WHICH
EXECUTIVE PARTICIPATES IN ANY ACTIVITY IN VIOLATION OF SUCH RESTRICTIONS.  THE
PARTIES AGREE THAT THE ABOVE RESTRICTIONS ON COMPETITION ARE COMPLETELY
SEVERABLE AND INDEPENDENT AGREEMENTS SUPPORTED BY GOOD AND VALUABLE
CONSIDERATION AND, AS SUCH, SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT FOR
WHATEVER REASON.  THE PARTIES FURTHER AGREE THAT ANY INVALIDITY OR
UNENFORCEABILITY OF ANY ONE OR MORE OF SUCH RESTRICTIONS ON COMPETITION SHALL
NOT RENDER INVALID OR UNENFORCEABLE ANY REMAINING RESTRICTIONS ON COMPETITION. 
ADDITIONALLY, SHOULD A COURT OF COMPETENT

 

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JURISDICTION DETERMINE THAT THE SCOPE OF ANY PROVISION OF THIS SECTION 9 IS TOO
BROAD TO BE ENFORCED AS WRITTEN, THE PARTIES INTEND THAT THE COURT REFORM THE
PROVISION TO SUCH NARROWER SCOPE AS IT DETERMINES TO BE REASONABLE AND
ENFORCEABLE.

 

10.  NON-SOLICITATION OF EMPLOYEES.  DURING THE TERM AND FOR A PERIOD OF TWO
(2) YEARS AFTER THE TERMINATION OR CESSATION OF HIS EMPLOYMENT WITH THE COMPANY
FOR ANY REASON WHATSOEVER, EXECUTIVE SHALL NOT, ON HIS OWN BEHALF OR ON BEHALF
OF ANY OTHER PERSON, PARTNERSHIP, ASSOCIATION, CORPORATION, OR OTHER ENTITY,
(A) DIRECTLY, INDIRECTLY, OR THROUGH A THIRD PARTY, SOLICIT ANY EMPLOYEE OF THE
COMPANY OR ITS SUBSIDIARIES OR AFFILIATES OR (B) IN ANY MANNER ATTEMPT TO
INFLUENCE OR INDUCE ANY EMPLOYEE OF THE COMPANY OR ITS SUBSIDIARIES OR
AFFILIATES TO LEAVE THE EMPLOYMENT OF THE COMPANY OR ITS SUBSIDIARIES OR
AFFILIATES, NOR SHALL HE USE OR DISCLOSE TO ANY PERSON, PARTNERSHIP,
ASSOCIATION, CORPORATION OR OTHER ENTITY ANY INFORMATION OBTAINED CONCERNING THE
NAMES AND ADDRESSES OF THE COMPANY’S EMPLOYEES.  THE RESTRICTIONS CONTAINED IN
THIS SECTION 10 SHALL BE TOLLED ON A DAY-FOR-DAY BASIS FOR EACH DAY DURING WHICH
EXECUTIVE PARTICIPATES IN ANY ACTIVITY IN VIOLATION OF SUCH RESTRICTIONS.  THE
PARTIES AGREE THAT THE ABOVE RESTRICTIONS ON HIRING AND SOLICITATION ARE
COMPLETELY SEVERABLE AND INDEPENDENT AGREEMENTS SUPPORTED BY GOOD AND VALUABLE
CONSIDERATION AND, AS SUCH, SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT FOR
WHATEVER REASON.  THE PARTIES FURTHER AGREE THAT ANY INVALIDITY OR
UNENFORCEABILITY OF ANY ONE OR MORE OF SUCH RESTRICTIONS ON HIRING AND
SOLICITATION SHALL NOT RENDER INVALID OR UNENFORCEABLE ANY REMAINING
RESTRICTIONS ON HIRING AND SOLICITATION.  ADDITIONALLY, SHOULD A COURT OF
COMPETENT JURISDICTION DETERMINE THAT THE SCOPE OF ANY PROVISION OF THIS
SECTION 10 IS TOO BROAD TO BE ENFORCED AS WRITTEN, THE PARTIES INTEND THAT THE
COURT REFORM THE PROVISION TO SUCH NARROWER SCOPE AS IT DETERMINES TO BE
REASONABLE AND ENFORCEABLE.

 

11.  NONDISCLOSURE OF TRADE SECRETS. THE COMPANY PROMISES TO DISCLOSE TO
EXECUTIVE AND EXECUTIVE ACKNOWLEDGES THAT IN AND AS A RESULT OF HIS EMPLOYMENT
WITH THE COMPANY, HE WILL RECEIVE, MAKE USE OF, ACQUIRE, HAVE ACCESS TO AND/OR
BECOME FAMILIAR WITH VARIOUS TRADE SECRETS AND PROPRIETARY AND CONFIDENTIAL
INFORMATION OF THE COMPANY, ITS SUBSIDIARIES AND AFFILIATES, INCLUDING, BUT NOT
LIMITED TO, PROCESSES, COMPUTER PROGRAMS, COMPILATIONS OF INFORMATION, RECORDS,
FINANCIAL INFORMATION, SALES REPORTS, SALES PROCEDURES, CUSTOMER REQUIREMENTS,
PRICING TECHNIQUES, CUSTOMER LISTS, METHODS OF DOING BUSINESS, IDENTITIES,
LOCATIONS, PERFORMANCE AND COMPENSATION LEVELS OF EMPLOYEES AND OTHER
CONFIDENTIAL INFORMATION WHICH ARE OWNED BY THE COMPANY, ITS SUBSIDIARIES AND/OR
AFFILIATES AND REGULARLY USED IN THE OPERATION OF ITS BUSINESS, AND AS TO WHICH
THE COMPANY, ITS SUBSIDIARIES AND/OR AFFILIATES TAKE PRECAUTIONS TO PREVENT
DISSEMINATION TO PERSONS OTHER THAN CERTAIN DIRECTORS, OFFICERS AND EMPLOYEES
(COLLECTIVELY, “TRADE SECRETS”).  EXECUTIVE ACKNOWLEDGES AND AGREES THAT THE
TRADE SECRETS:

 

(I)  ARE SECRET AND NOT KNOWN IN THE INDUSTRY;

 

(II)  GIVE THE COMPANY OR ITS SUBSIDIARIES OR AFFILIATES AN ADVANTAGE OVER
COMPETITORS WHO DO NOT KNOW OR USE THE TRADE SECRETS;

 

(III)  ARE OF SUCH VALUE AND NATURE AS TO MAKE IT REASONABLE AND NECESSARY TO
PROTECT AND PRESERVE THE CONFIDENTIALITY AND SECRECY OF THE TRADE SECRETS; AND

 

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(IV)  ARE VALUABLE, SPECIAL AND UNIQUE ASSETS OF THE COMPANY OR ITS SUBSIDIARIES
OR AFFILIATES, THE DISCLOSURE OF WHICH COULD CAUSE SUBSTANTIAL INJURY AND LOSS
OF PROFITS AND GOODWILL TO THE COMPANY OR ITS SUBSIDIARIES OR AFFILIATES.

 

Executive promises not to use in any way or disclose any of the Trade Secrets,
directly or indirectly, either during or after the Term, except as required in
the course of his employment under this Agreement, if required in connection
with a judicial or administrative proceeding, or if the information becomes
public knowledge other than as a result of an unauthorized disclosure by
Executive.  All files, records, documents, information, data compilations and
similar items containing non-public and confidential information relating to the
business of the Company, whether prepared by Executive or otherwise coming into
his possession, will remain the exclusive property of the Company and may not be
removed from the premises of the Company under any circumstances without the
prior written consent of the Company (except in the ordinary course of business
during Executive’s period of active employment under this Agreement), and in any
event must be promptly delivered to the Company upon termination of Executive’s
employment with the Company.  Executive agrees that upon his receipt of any
subpoena, process or other request to produce or divulge, directly or
indirectly, any Trade Secrets to any entity, agency, tribunal or person, whether
received during or after the term of Executive’s employment with the Company,
Executive shall timely notify and promptly provide a copy of the subpoena,
process or other request to the Company.  For this purpose, Executive
irrevocably nominates and appoints the Company (including any attorney retained
by the Company), as his true and lawful attorney-in-fact, to act in Executive’s
name, place and stead to perform any reasonable and prudent act that Executive
might perform to defend and protect against any disclosure of any Trade Secrets.

 

The parties agree that the above restrictions on confidentiality and disclosure
are completely severable and independent agreements supported by good and
valuable consideration and, as such, shall survive the termination of this
Agreement for whatever reason.  The parties further agree that any invalidity or
unenforceability of any one or more of such restrictions on confidentiality and
disclosure shall not render invalid or unenforceable any remaining restrictions
on confidentiality and disclosure.  Additionally, should a court of competent
jurisdiction determine that the scope of any provision of this Section 11 is too
broad to be enforced as written, the parties intend that the court reform the
provision to such narrower scope as it determines to be reasonable and
enforceable.

 

12.  NON-DISPARAGEMENT.  EXECUTIVE EXPRESSLY ACKNOWLEDGES, AGREES, AND COVENANTS
THAT HE WILL NOT MAKE ANY PUBLIC OR PRIVATE STATEMENTS, COMMENTS, OR
COMMUNICATIONS IN ANY FORM, ORAL, WRITTEN, OR ELECTRONIC (ALL OF THE FOREGOING,
FOR PURPOSES OF THIS PARAGRAPH, “COMMUNICATIONS”), WHICH IN ANY WAY COULD
CONSTITUTE LIBEL, SLANDER, OR DISPARAGEMENT OF THE COMPANY, ITS SUBSIDIARIES,
AFFILIATES OR PARENT, ITS AND/OR THEIR EMPLOYEES, OFFICERS, AND/OR DIRECTORS, OR
WHICH MAY BE CONSIDERED TO BE DEROGATORY OR DETRIMENTAL TO ITS OR THEIR GOOD
NAME OR BUSINESS; PROVIDED, HOWEVER, THAT THE TERMS OF THIS PARAGRAPH SHALL NOT
(A) APPLY TO COMMUNICATIONS BETWEEN EXECUTIVE AND HIS SPOUSE,

 

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CLERGY, OR ATTORNEYS, WHICH ARE SUBJECT TO A CLAIM OF PRIVILEGE EXISTING UNDER
COMMON LAW, STATUTE, OR RULE OF PROCEDURE; (B) APPLY TO COMMUNICATIONS REQUIRED
BY LAW OR MADE IN RESPONSE TO A VALID SUBPOENA OR OTHER LAWFUL ORDER COMPELLING
EXECUTIVE TO PROVIDE TESTIMONY OR INFORMATION; PROVIDED, HOWEVER, THAT IN
RESPONDING TO A VALID SUBPOENA OR OTHER LAWFUL ORDER, EXECUTIVE AGREES TO
PROVIDE THE COMPANY WITH ADVANCE NOTICE AND AN OPPORTUNITY TO SEEK A PROTECTIVE
ORDER OR OTHER SAFEGUARD FOR ITS CONFIDENTIAL INFORMATION; (C) BE CONSTRUED TO
INHIBIT OR LIMIT EXECUTIVE’S ABILITY TO INITIATE OR COOPERATE WITH ANY
INVESTIGATION BY A GOVERNMENTAL OR REGULATORY AGENCY OR OFFICIAL; OR
(D) PROHIBIT EXECUTIVE FROM RESPONDING TO ANY DEROGATORY OR INACCURATE STATEMENT
CONTAINED IN A PRESS RELEASE OF THE COMPANY CONCERNING EXECUTIVE FOR THE PURPOSE
OF CORRECTING SUCH INACCURACIES OR DEFENDING HIS REPUTATION.  EXECUTIVE
SPECIFICALLY AGREES NOT TO ISSUE ANY PUBLIC STATEMENT CONCERNING HIS EMPLOYMENT
AT ZALE AND/OR THE CESSATION OF SUCH EMPLOYMENT.

 

13.  EXECUTIVE REPRESENTATIONS AND AGREEMENTS.  EXECUTIVE AGREES THAT EXECUTIVE
AND THE COMPANY ARE ENGAGED IN A HIGHLY COMPETITIVE BUSINESS AND, DUE TO
EXECUTIVE’S POSITION WITH THE COMPANY AND THE NATURE OF EXECUTIVE’S WORK,
EXECUTIVE’S ENGAGING IN ANY BUSINESS WHICH IS COMPETITIVE WITH THAT OF THE
COMPANY WILL CAUSE THE COMPANY GREAT AND IRREPARABLE HARM.  EXECUTIVE REPRESENTS
AND WARRANTS THAT THE TIME, SCOPE AND GEOGRAPHIC AREA RESTRICTED BY THE
FOREGOING SECTIONS 9, 10, 11, AND 12 PERTAINING TO NO HIRE/NON-SOLICITATION,
NON-COMPETITION, CONFIDENTIALITY AND NONDISCLOSURE, AND NON-DISPARAGEMENT ARE
REASONABLE, THAT THE ENFORCEMENT OF THE RESTRICTIONS CONTAINED IN SUCH SECTIONS
WOULD NOT BE UNDULY BURDENSOME TO EXECUTIVE, AND THAT EXECUTIVE WILL BE ABLE TO
EARN A REASONABLE LIVING WHILE ABIDING BY THE TERMS INCLUDED HEREIN.  EXECUTIVE
AGREES THAT THE RESTRAINTS CREATED BY THE COVENANTS IN SECTIONS 9, 10, 11, AND
12 PERTAINING TO NO HIRE/NON-SOLICITATION, NON-COMPETITION, CONFIDENTIALITY AND
NONDISCLOSURE, AND NON-DISPARAGEMENT ARE NO GREATER THAN NECESSARY TO PROTECT
THE LEGITIMATE INTERESTS OF THE COMPANY, INCLUDING ITS CONFIDENTIAL BUSINESS OR
PROPRIETARY INFORMATION AND TRADE SECRETS, INCLUDING BUT NOT LIMITED TO, THE
TRADE SECRETS.  SIMILARLY, EXECUTIVE AGREES THAT THE NEED OF THE COMPANY FOR THE
PROTECTION AFFORDED BY THE COVENANTS OF SECTIONS 9, 10, 11, AND 12 PERTAINING TO
NO HIRE/NON-SOLICITATION, NON-COMPETITION, CONFIDENTIALITY AND NONDISCLOSURE,
AND NON-DISPARAGEMENT ARE NOT OUTWEIGHED BY EITHER THE HARDSHIP TO EXECUTIVE OR
ANY INJURY LIKELY TO THE PUBLIC.  SUBJECT TO SECTION 7(E), EXECUTIVE AGREES THAT
ANY BREACH BY HIM OF SECTIONS 9, 10, 11, AND 12 PERTAINING TO NO
HIRE/NON-SOLICITATION, NON-COMPETITION, CONFIDENTIALITY AND NONDISCLOSURE AND
NON-DISPARAGEMENT WILL ENTITLE THE COMPANY TO DISCONTINUE ANY PAYMENTS SPECIFIED
IN SECTIONS 3, 5 OR 6 ABOVE, FOR WHICH EXECUTIVE MIGHT BE ELIGIBLE BASED ON THE
TERMS OF THOSE SECTIONS AND TO ANY OTHER REMEDY AVAILABLE AT LAW OR IN EQUITY. 
NOTWITHSTANDING THE SUSPENSION OR DISCONTINUATION OF ANY SUCH PAYMENTS,
EXECUTIVE AGREES THAT THE COMPANY IS ENTITLED TO INSIST ON FULL COMPLIANCE BY
EXECUTIVE WITH THE FULL TERMS, INCLUDING TIME PERIODS, DESCRIBED IN HIS PROMISES
NOT TO HIRE/SOLICIT, COMPETE, DISCLOSE CONFIDENTIAL INFORMATION OR TRADE SECRETS
OR DISPARAGE.  ANY DELAY BY THE COMPANY IN DISCONTINUING PAYMENT SHALL NOT BE
CONSTRUED AS A WAIVER OF ANY RIGHTS TO DISCONTINUE PAYMENT.

 

14.  SEVERABILITY.  IF ANY PROVISION OF THIS AGREEMENT IS HELD TO BE ILLEGAL,
INVALID OR UNENFORCEABLE UNDER PRESENT OR FUTURE LAWS EFFECTIVE DURING THE TERM
OF THIS AGREEMENT, SUCH PROVISION SHALL BE FULLY SEVERABLE AND THIS AGREEMENT
SHALL BE CONSTRUED

 

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AND ENFORCED AS IF SUCH ILLEGAL, INVALID OR UNENFORCEABLE PROVISION NEVER
CONSTITUTED A PART OF THIS AGREEMENT; AND THE REMAINING PROVISIONS OF THIS
AGREEMENT SHALL REMAIN IN FULL FORCE AND EFFECT AND SHALL NOT BE AFFECTED BY THE
ILLEGAL, INVALID OR UNENFORCEABLE PROVISION OR BY ITS SEVERANCE HEREFROM. 
FURTHERMORE, IN LIEU OF SUCH ILLEGAL, INVALID OR UNENFORCEABLE PROVISION, THERE
SHALL BE ADDED AS PART OF THIS AGREEMENT, A PROVISION AS SIMILAR IN ITS TERMS TO
SUCH ILLEGAL, INVALID OR ENFORCEABLE PROVISION AS MAY BE POSSIBLE AND BE LEGAL,
VALID AND ENFORCEABLE.

 

15.  ARBITRATION.  (A)  THE PARTIES AGREE THAT ANY CONTROVERSY OR CLAIM
(INCLUDING ALL CLAIMS PURSUANT TO COMMON AND STATUTORY LAW) RELATING TO THIS
AGREEMENT OR ARISING OUT OF EXECUTIVE’S EMPLOYMENT WITH THE COMPANY, SHALL BE
RESOLVED EXCLUSIVELY THROUGH ARBITRATION PURSUANT TO THE NATIONAL RULES FOR THE
RESOLUTION OF EMPLOYMENT DISPUTES OF THE AMERICAN ARBITRATION ASSOCIATION
(“AAA”).  ANY SUCH ARBITRATION PROCEEDING SHALL TAKE PLACE IN DALLAS COUNTY,
TEXAS.  ALL DISPUTES SHALL BE RESOLVED BY A SINGLE ARBITRATOR.  THE ARBITRATOR
WILL HAVE THE AUTHORITY TO AWARD THE SAME REMEDIES, DAMAGES AND COSTS THAT A
COURT COULD AWARD.  THE ARBITRATOR SHALL ISSUE A REASONED AWARD EXPLAINING THE
DECISION, THE REASONS FOR THE DECISION AND ANY DAMAGES AWARDED.  THE
ARBITRATOR’S DECISION WILL BE FINAL AND BINDING.  THE JUDGMENT ON THE AWARD
RENDERED BY THE ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING JURISDICTION
THEREOF.  THIS PROVISION CAN BE ENFORCED UNDER THE FEDERAL ARBITRATION ACT.

 

(B)  AS THE SOLE EXCEPTION TO THE EXCLUSIVE AND BINDING NATURE OF THE
ARBITRATION COMMITMENT SET FORTH ABOVE, EXECUTIVE AND THE COMPANY AGREE THAT THE
COMPANY SHALL HAVE THE RIGHT TO INITIATE AN ACTION IN A COURT OF COMPETENT
JURISDICTION IN ORDER TO REQUEST TEMPORARY, PRELIMINARY AND PERMANENT INJUNCTIVE
OR OTHER EQUITABLE RELIEF, INCLUDING, WITHOUT LIMITATION, SPECIFIC PERFORMANCE,
TO ENFORCE THE TERMS OF SECTIONS 9, 10, 11, 12 OR 13, ABOVE, WITHOUT THE
NECESSITY OF PROVING INADEQUACY OF LEGAL REMEDIES OR IRREPARABLE HARM OR POSTING
BOND.  HOWEVER, NOTHING IN THIS SECTION SHOULD BE CONSTRUED TO CONSTITUTE A
WAIVER OF THE PARTIES’ RIGHTS AND OBLIGATIONS TO ARBITRATE REGARDING MATTERS
OTHER THAN THOSE SPECIFICALLY ADDRESSED IN THIS PARAGRAPH.

 

(C)  SHOULD A COURT OF COMPETENT JURISDICTION DETERMINE THAT THE SCOPE OF ANY
PROVISION OF THIS SECTION 15 IS TOO BROAD TO BE ENFORCED AS WRITTEN, THE PARTIES
INTEND THAT THE COURT REFORM THE PROVISION TO SUCH NARROWER SCOPE AS IT
DETERMINES TO BE REASONABLE AND ENFORCEABLE.

 

16.  SURVIVAL.  EXECUTIVE ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, INCLUDING
BUT NOT LIMITED TO SECTIONS 9, 10, 11, 12, 13, 14, 15, 17, AND 17(C), SHALL
SURVIVE THE TERMINATION OF EXECUTIVE’S EMPLOYMENT UNDER THIS AGREEMENT FOR
WHATEVER REASON.  THE EXISTENCE OF ANY CLAIM OR CAUSE OF ACTION OF EXECUTIVE
AGAINST THE COMPANY, WHETHER PREDICATED ON THIS AGREEMENT OR OTHERWISE, SHALL
NOT CONSTITUTE A DEFENSE TO THE ENFORCEMENT BY THE COMPANY OF THE COVENANTS OF
EXECUTIVE CONTAINED IN THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO THOSE
CONTAINED IN SECTIONS 9, 10, 11, 12, 13, AND 15.

 

17.  MISCELLANEOUS.  (A)  NOTICES.  ANY NOTICES, CONSENTS, DEMANDS, REQUESTS,
APPROVALS AND OTHER COMMUNICATIONS TO BE GIVEN UNDER THIS AGREEMENT BY EITHER
PARTY TO THE OTHER MUST BE IN WRITING AND MUST BE EITHER:

 

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(I)  PERSONALLY DELIVERED;

 

(II)  MAILED BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID WITH RETURN
RECEIPT REQUESTED;

 

(III)  DELIVERED BY OVERNIGHT EXPRESS DELIVERY SERVICE OR SAME-DAY LOCAL COURIER
SERVICE; OR

 

(IV)  DELIVERED BY TELEX OR FACSIMILE TRANSMISSION, TO THE ADDRESS SET FORTH
BELOW, OR TO SUCH OTHER ADDRESS AS MAY BE DESIGNATED BY THE PARTIES FROM TIME TO
TIME IN ACCORDANCE WITH THIS SECTION 17:

 

If to the Company:

 

Zale Corporation
901 W. Walnut Hill Lane
Irving, Texas 75038
Attention: General Counsel

 

 

 

If to Executive:

 

Neal Goldberg
18 Whalen Court
West Orange, NJ 07052-3679

 

 

 

cc:

 

Hollis Gonerka Bart, Esq.
Withers Bergman LLP
430 Park Avenue, 10th Floor
New York, NY 10022

 

Notices delivered personally or by overnight express delivery service or by
local courier service are deemed given as of actual receipt.  Notices mailed
within the continental United States are deemed given three (3) business days
after mailing.  Notices delivered by telex or facsimile transmission are deemed
given upon receipt by the sender of the answer back (in the case of a telex) or
transmission confirmation (in the case of a facsimile transmission).

 

(B)  ENTIRE AGREEMENT.  THIS AGREEMENT AND EACH OF THE AGREEMENTS, PLAN AND
PROGRAMS REFERENCED HEREIN SUPERSEDES ANY AND ALL OTHER AGREEMENTS, EITHER ORAL
OR WRITTEN, BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER OF THIS
AGREEMENT AND CONTAINS ALL OF THE COVENANTS AND AGREEMENTS BETWEEN THE PARTIES
WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT.

 

(C)  MODIFICATION.  NO CHANGE OR MODIFICATION OF THIS AGREEMENT IS VALID OR
BINDING UPON THE PARTIES, NOR WILL ANY WAIVER OF ANY TERM OR CONDITION IN THE
FUTURE BE SO BINDING, UNLESS THE CHANGE OR MODIFICATION OR WAIVER IS IN WRITING
AND SIGNED BY THE PARTIES TO THIS AGREEMENT.

 

(D)  GOVERNING LAW AND VENUE.  THE PARTIES ACKNOWLEDGE AND AGREE THAT THIS
AGREEMENT AND THE OBLIGATIONS AND UNDERTAKINGS OF THE PARTIES UNDER THIS
AGREEMENT WILL BE PERFORMABLE IN IRVING, DALLAS COUNTY, TEXAS.  THIS AGREEMENT
IS GOVERNED BY,

 

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and construed in accordance with, the laws of the State of Texas. If any action
is brought to enforce or interpret this Agreement, venue for the action will be
in Dallas County, Texas.

 

(E)  NO MITIGATION.  EXCEPT AS PROVIDED IN SECTIONS 5(C)(II), 5(E), AND
6(A)(II) (REGARDING CONTINUED WELFARE BENEFITS), IN NO EVENT SHALL EXECUTIVE BE
OBLIGATED TO SEEK OTHER EMPLOYMENT OR TO TAKE ANY OTHER ACTION TO MITIGATE THE
AMOUNTS PAYABLE TO EXECUTIVE UNDER ANY OF THE PROVISIONS OF THIS AGREEMENT, NOR
SHALL THE AMOUNT OF ANY PAYMENT HEREUNDER BE REDUCED BY ANY COMPENSATION EARNED
AS A RESULT OF EXECUTIVE’S EMPLOYMENT BY ANOTHER EMPLOYER

 

(F)  COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN COUNTERPARTS, EACH OF
WHICH CONSTITUTES AN ORIGINAL, BUT ALL OF WHICH CONSTITUTES ONE DOCUMENT.

 

(G)  COSTS.  IF ANY ACTION AT LAW OR IN EQUITY IS NECESSARY TO ENFORCE OR
INTERPRET THE TERMS OF THIS AGREEMENT DURING EXECUTIVE’S LIFETIME, EACH PARTY
SHALL BEAR ITS OWN COSTS AND EXPENSES UNLESS EXECUTIVE PREVAILS ON AT LEAST ONE
MAJOR ISSUE, IN WHICH CASE EXECUTIVE’S COSTS SHALL BE BORNE BY THE COMPANY.  NO
AMOUNT OF ANY SUCH COSTS PAID BY THE COMPANY ON BEHALF OF EXECUTIVE IN ANY
CALENDAR YEAR WILL AFFECT THE AMOUNT OF ANY SUCH COSTS TO BE PAID BY THE COMPANY
ON BEHALF OF EXECUTIVE IN ANY OTHER CALENDAR YEAR, AND ANY REIMBURSEMENTS PAID
TO EXECUTIVE FOR SUCH COSTS SHALL BE PAID NO LATER THAN THE LAST DAY OF THE
CALENDAR YEAR NEXT FOLLOWING THE CALENDAR YEAR IN WHICH SUCH COSTS ARE INCURRED.

 

(H)  ESTATE.  IF EXECUTIVE DIES PRIOR TO THE EXPIRATION OF THE TERM OR DURING A
PERIOD WHEN MONIES ARE OWING TO HIM, ANY MONIES THAT MAY BE DUE HIM FROM THE
COMPANY UNDER THIS AGREEMENT AS OF THE DATE OF HIS DEATH SHALL BE PAID TO HIS
ESTATE AND AS WHEN OTHERWISE PAYABLE.

 

(I)  ASSIGNMENT.  THE COMPANY SHALL HAVE THE RIGHT TO ASSIGN THIS AGREEMENT TO
ITS SUCCESSORS OR ASSIGNS.  THE TERMS “SUCCESSORS” AND “ASSIGNS” SHALL INCLUDE
ANY PERSON, CORPORATION, PARTNERSHIP OR OTHER ENTITY THAT BUYS ALL OR
SUBSTANTIALLY ALL OF THE COMPANY’S ASSETS OR ALL OF ITS STOCK, OR WITH WHICH THE
COMPANY MERGES OR CONSOLIDATES.  THE RIGHTS, DUTIES AND BENEFITS TO EXECUTIVE
HEREUNDER ARE PERSONAL TO HIM, AND NO SUCH RIGHT OR BENEFIT MAY BE ASSIGNED BY
HIM.

 

(J)  BINDING EFFECT.  THIS AGREEMENT IS BINDING UPON THE PARTIES HERETO,
TOGETHER WITH THEIR RESPECTIVE EXECUTORS, ADMINISTRATORS, SUCCESSORS, PERSONAL
REPRESENTATIVES, HEIRS AND PERMITTED ASSIGNS.

 

(K)  WAIVER OF BREACH.  THE WAIVER BY THE COMPANY OR EXECUTIVE OF A BREACH OF
ANY PROVISION OF THIS AGREEMENT BY EXECUTIVE OR THE COMPANY MAY NOT OPERATE OR
BE CONSTRUED AS A WAIVER OF ANY SUBSEQUENT BREACH.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

 

 

 

EXECUTIVE,

 

 

 

By

 

 

 

Name: Neal Goldberg

 

 

 

 

 

ZALE CORPORATION,

 

 

 

By

 

 

 

Name: John B. Lowe, Jr.

 

 

Title:   Chairman of the Board

 

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