Exhibit 10.4

 

EXECUTION COPY

 

THE EXECUTIVE SEVERANCE PLAN

 

FOR ZALE CORPORATION AND ITS AFFILIATES

 

As Amended and Restated Effective September 25, 2013

 

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TABLE OF CONTENTS

 

THE EXECUTIVE SEVERANCE PLAN
FOR ZALE CORPORATION AND ITS AFFILIATES

 

 

 

Page

 

 

ARTICLE I PREAMBLE AND PURPOSE

1

1.1

Preamble

1

1.2

Purpose

1

 

 

 

ARTICLE II DEFINITIONS AND CONSTRUCTION

2

2.1

Definitions

2

2.2

Construction

6

2.3

409A Compliance

6

 

 

 

ARTICLE III SEVERANCE BENEFITS

7

3.1

Severance Benefits

7

3.2

Distributions on Account of Death of the Covered Executive During the Severance
Period

9

3.3

Alternate Plan Terms

9

3.4

Conditions to Payment of Severance Benefits

9

3.5

Reemployment of Covered Executive

10

 

 

 

ARTICLE IV ADMINISTRATION

11

4.1

The Plan Administrator

11

4.2

Powers of Plan Administrator

11

4.3

Appointment of Daily Administrator

11

4.4

Duties of Daily Administrator

11

4.5

Indemnification of Plan Administrator and Daily Administrator

13

4.6

Claims for Benefits

13

4.7

Receipt and Release of Necessary Information

15

4.8

Overpayment and Underpayment of Benefits

15

 

 

 

ARTICLE V OTHER BENEFIT PLANS OF THE COMPANY

17

5.1

Other Plans

17

 

 

 

ARTICLE VI AMENDMENT AND TERMINATION OF THE PLAN

18

6.1

Continuation

18

6.2

Amendment of Plan

18

6.3

Termination of Plan

18

6.4

Termination of Affiliate’s Participation

18

 

 

 

ARTICLE VII MISCELLANEOUS

19

7.1

No Reduction of Employer Rights

19

7.2

Successor to the Company

19

7.3

Provisions Binding

19

 

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THE EXECUTIVE SEVERANCE PLAN
FOR ZALE CORPORATION AND ITS AFFILIATES

 

ARTICLE I
PREAMBLE AND PURPOSE

 

1.1                               Preamble

 

Zale Corporation (the “Company”) previously established The Executive Severance
Plan for Zale Corporation (the “Plan”) to provide “Covered Executives” of the
Company and its “Affiliates” with certain cash severance payments and/or other
benefits in the event of a termination of the employee’s employment as a result
of a “Qualifying Termination,” as such terms are defined herein.

 

By this instrument, the Company amends and restates the Plan effective
September 25, 2013 to comply with applicable changes in the law and make certain
other changes.

 

The Company may adopt one or more trusts to serve as a possible source of funds
for the payment of benefits under the Plan.

 

1.2                               Purpose

 

Through the Plan, the Company intends to provide severance benefits within the
meaning of Department of Labor Regulation section 2510.3-2.  Accordingly, it is
intended that the Plan will not constitute a “qualified plan” subject to the
limitations of section 401(a) of the Internal Revenue Code of 1986, as amended
(the “Code”), nor will it constitute a “funded plan,” for purposes of such
requirements.  It also is intended that the Plan will not qualify as a pension
plan within the meaning of section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”); but, rather, will constitute a
welfare plan within the meaning of section 3(1) of ERISA.

 

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End of Article I

 

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ARTICLE II
DEFINITIONS AND CONSTRUCTION

 

2.1                               Definitions

 

When a word or phrase appears in this Plan with the initial letter capitalized,
and the word or phrase does not commence a sentence, the word or phrase will
generally be a term defined in this Section 2.1.  The following words and
phrases with the initial letter capitalized will have the meaning set forth in
this Section 2.1, unless a different meaning is required by the context in which
the word or phrase is used.

 

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

 

(b)                                 “Base Salary” means the Covered Executive’s
annual gross rate of pay including amounts reduced from the Employee’s
compensation and contributed on the Employee’s behalf as deferrals under any
qualified or other employee benefit plans sponsored by the Employer in effect
immediately prior to a Qualifying Termination.

 

(c)                                  “Board” means the Compensation Committee of
the Board of Directors of the Company, unless the Charter of the Compensation
Committee does not authorize the Compensation Committee to act with respect to a
matter, in which event it will mean the full Board of Directors of the Company.

 

(d)                                 “Cause” means the Covered Executive’s:

 

(i)                                     Violation of the Company’s general work
or conduct rules, policies or procedures or local rules;

 

(ii)                                  Indictment for a felony or crime involving
moral turpitude;

 

(iii)                               Commission of an act constituting fraud,
deceit or material misrepresentation with respect to the Company;

 

(iv)                              Recurrent use of alcohol or prescribed
medications at work or otherwise such that, in the Company’s sole discretion,
the Covered Executive’s job performance is impaired;

 

(v)                                 Embezzlement of the Company’s or its
Affiliates’ assets or funds; or

 

(vi)                              Commission of 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 Affiliate.

 

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(e)                                  “Change of Control” means any of the
following occurrences:

 

(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 defined in Rule 13d-3 under the
Securities Exchange Act of 1934, of thirty percent (30%) or more of the voting
stock of the Company;

 

(ii)                                  the majority of the Board of Directors of
the Company consists of individuals other than “incumbent” directors, which term
means members of the Board of Directors of the Company as of the Effective Date;
provided that any person becoming a director after such date whose election or
nomination for election was supported by two-thirds (2/3) 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 distribution of all or substantially all of Company’s assets;

 

(iv)                              all or substantially all of the assets or
business of Company is disposed of pursuant to a merger, consolidation or other
transaction (unless the stockholders of 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 Company immediately prior to such merger, consolidation or other transaction,
all of the voting stock or other ownership interests of the entity or entities,
if any, that succeed to the business of Company); or

 

(v)                                 the Company combines with another company
and is the surviving corporation but, immediately after the combination, the
stockholders of Company immediately prior to the combination hold, directly or
indirectly, fifty percent (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 or any class or classes having general
voting power under ordinary circumstances, in the absence of contingencies, to
elect the directors of a corporation.

 

(f)                                   “COBRA” means the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended.

 

(g)                                  “Code” means the Internal Revenue Code of
1986, as amended from time to time.

 

(h)                                 “Company” means Zale Corporation.

 

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(i)                                     “Covered Executive” means each Employee
who is employed at the director level, or an equivalent position, or above, or
in any position deemed covered by either the Plan Administrator or Daily
Administrator in his sole and absolute discretion.  The term Covered Executive
will not include an Employee who is covered by another severance plan sponsored
by the Company or an Affiliate or who is a party to an agreement with the
Company or an Affiliate that provides for the payment of severance in the event
of a Qualifying Termination in an amount that, in the aggregate, is greater than
the amount provided in Section 3.1(a).

 

(j)                                    “Daily Administrator” means the
individual, department or committee appointed by the Plan Administrator to
handle the day-to-day administration of the Plan.

 

(k)                                 “Effective Date” means September 25, 2013
except as specifically provided otherwise herein.

 

(l)                                     “Employee” means each employee receiving
remuneration, or who is entitled to remuneration, for services rendered to the
Employer, in the legal relationship of employer and employee on a regular
full-time or part-time basis.  The term “Employee” does not include a temporary
employee (i.e., an individual employed for a period that is not expected to
exceed six (6) months) or a consultant, an independent contractor or a leased
employee even if such consultant, independent contractor or leased employee is
subsequently determined by the Employer, the Internal Revenue Service, the
Department of Labor or a court of competent jurisdiction to be a common law
employee of the Employer.  Further, the term “Employee” does not include a
person who is receiving severance pay from the Employer.

 

(m)                             “Employer” means the Company and each Affiliate
that has adopted the Plan as a participating employer.  Unless provided
otherwise by the Company, all Affiliates will be deemed to have adopted the
Plan.  An entity will cease to be a participating employer as of the date such
entity ceases to be an Affiliate or otherwise terminates its participation in
the Plan.

 

(n)                                 “ERISA” means the Employee Retirement Income
Security Act of 1974, as amended from time to time.

 

(o)                                 “Good Reason” means a substantial and
material reduction, as determined by the Plan Administrator in its sole
discretion, in the Covered Executive’s Base Salary, duties, responsibilities or
level or authority or responsibility, but will not include a reduction in
duties, responsibilities or level of authority or responsibility resulting from
gradual store closures.

 

If the Covered Executive believes that an event constituting Good Reason has
occurred, the Covered Executive must notify the Daily Administrator of that
belief within ninety (90) days of the occurrence of the Good Reason event, which
notice will set forth the basis for that belief.  The Daily Administrator will
have thirty (30) days after receipt of such notice (the “Determination Period”)
in which to either rectify such event, determine that an event constituting Good
Reason does not exist, or determine that an event constituting Good Reason
exists.  If the Daily Administrator does not take any of such actions within the
Determination Period, the Covered Executive may terminate his employment with
the Employer for

 

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Good Reason during the fourteen (14) day period following the end of the
Determination Period by giving written notice to the Employer.  If the Daily
Administrator determines that Good Reason does not exist, then (A) the Covered
Executive will not be entitled to rely on or assert such event as constituting
Good Reason, and (B) the Covered Executive may file a claim contesting such
determination and seeking benefits pursuant to Article IV within thirty (30)
days after the Covered Executive’s receipt of written notice of the Daily
Administrator’s determination.  A termination of employment for Good Reason will
be treated as a Qualifying Termination for purposes of the Plan.

 

(p)                                 “Plan” means The Executive Severance Plan
for Zale Corporation and its Affiliates set forth herein and as the same may be
amended from time to time.

 

(q)                                 “Plan Administrator” means the Human
Resources Department of the Company or any other person, committee or entity,
appointed by the Board to hold such position.

 

(r)                                    “Plan Year” means the fiscal year of the
Plan, which will commence on January 1 each year and end on December 31 of such
year.

 

(s)                                   “Qualifying Termination” means:

 

(i)                                     the involuntary Termination of
Employment of a Covered Executive by the Employer for a reason other than Cause;

 

(ii)                                  the Covered Executive’s Termination of
Employment for Good Reason; or

 

(iii)                               the involuntary Termination of Employment a
Covered Executive by the Employer due to the liquidation of the assets of the
Company or any line of business for which the Covered Executive is employed.

 

Further, a Qualifying Termination will not occur by reason of the Termination of
Employment by the Covered Executive by reason of a sale or disposition by the
Company of a unit or facility in which the Covered Executive is employed if
(A) the purchaser or successor extends an offer of employment to the Covered
Executive on terms that include substantially the same (or greater) Base Salary
and which would not require a commute to work that is twenty-five (25) miles
longer than the commute of the Covered Executive as of the date of the sale or
disposition, (B) the Covered Executive accepts other employment with the
purchaser or successor or with any other entity related to such purchaser or
successor, (C) the Termination of Employment is caused by death or disability of
the Covered Executive, or (D) the Termination of Employment occurs in connection
with a transfer from one Affiliate to another Affiliate if the Covered Executive
refuses to make the transfer and, if the transfer requires the Covered Executive
to be based at a location that requires the Covered Executive to commute more
than fifty (50) miles more than his current commute, the Employer or Affiliate
has agreed to pay relocation costs consistent with its general policy.

 

(t)                                    “Senior Executive Officer” means a Senior
Vice President of the Company and/or any officer above a Senior Vice President.

 

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(u)                                 “Severance Pay” means the Covered
Executive’s Base Salary as of the date of the Qualifying Termination or, in the
case of a Termination of Employment for Good Reason, the Covered Executive’s
Base Salary as of the date of the event giving rise to Good Reason if greater.

 

(v)                                 “Severance Period” means the period
described in Section 3.1(a).

 

(w)                               “Termination of Employment” means, the date on
which a Covered Executive ceases to perform services for the Employer.  If the
Covered Executive ceases to perform services for the Employer but continues to
perform services for another Affiliate, he will not incur a Termination of
Employment even if such other Affiliate has not adopted the Plan as an
Employer.  Further, any additional transfer of employment between Affiliates
will not constitute a Termination of Employment.

 

(x)                                 “Year of Service” means a twelve (12) month
period of time for which the Covered Executive has been employed by the Company
or its Affiliates as of the date of the Qualifying Termination, including
periods of time during which the Covered Executive was paid for reasons other
than the performance of duties.  Years of Service must be consecutive to be
counted under the Plan.

 

2.2                               Construction

 

If any provision of the Plan is determined to be for any reason invalid or
unenforceable, the remaining provisions of the Plan will continue in full force
and effect.  All of the provisions of the Plan will be construed and enforced in
accordance with the laws of the State of Texas and will be administered
according to the laws of such state, except as otherwise required by ERISA, the
Code or other applicable federal law. When delivery to the Plan Administrator,
Daily Administrator or the Covered Executive is required under this Plan, such
delivery requirement will be satisfied by delivery to a person or persons
designated by the Plan Administrator, Daily Administrator or the Covered
Executive, as applicable.  Delivery will be deemed to have occurred only when
the form or other communication is actually received.  Headings and subheadings
are for the purpose of reference only and are not to be considered in the
construction of the Plan.  The pronouns “he,” “him” and “his” used in the Plan
will also refer to similar pronouns of the female gender unless otherwise
qualified by the context.

 

2.3                               409A Compliance

 

The Plan is intended to be exempt from the requirements of section 409A of the
Code.  The provisions of the Plan will be construed and administered in a manner
that enables the Plan to satisfy the severance plan exemption under section 409A
of the Code.

 

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End of Article II

 

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ARTICLE III
SEVERANCE BENEFITS

 

3.1                               Severance Benefits

 

A Covered Executive who incurs a Qualifying Termination will, subject to the
limitations contained in the Plan, receive the following severance benefits.

 

(a)                                 Severance Period.  The Covered Executive
will be entitled to the payment of Severance Pay (i.e., the continuation of his
Base Pay) over the Severance Period set forth below:

 

COVERED EXECUTIVE

 

SEVERANCE PERIOD

Senior Executive Officers

 

Six (6) months if less than One Year of Service and One (1) Year following one
year of service

All other Covered Executives

 

One (1) week per Year of Service up to a maximum of twenty-six (26) weeks, with
a minimum of twelve (12) weeks

 

Such Severance Pay will be paid in installments commencing as of the date of the
Qualifying Termination pursuant to the Employer’s ordinary payroll schedule for
the duration of the Severance Period; provided, however, that if the Covered
Executive’s Qualifying Termination occurs within twenty-four (24) months
following a Change of Control, such Severance Pay will be paid in a single lump
sum.  Further, in the event a Covered Executive has incurred Qualifying
Termination and is receiving Severance Pay pursuant to this Section 3.1 and a
Change of Control occurs, the remainder of such payments will be accelerated and
paid to Executive in a lump sum on the next scheduled pay date.  All payments
pursuant to the Plan will be taxable as ordinary income when received and
subject to appropriate withholding of income taxes and reported on Form W-2.

 

The total Severance Payment amount will be reduced to recover any outstanding
financial obligations the Covered Executive has to the Employer or any
Affiliate. For this purpose, financial obligations include, but are not limited
to, advances, loans, paid time off deficits, credit card balances, and
replacement costs for unreturned Employer property, materials and records. 
Further the payment of Severance Pay is expressly contingent upon the return of
all Employer property and, if requested in writing by the Employer, confirmation
in writing of such return by the Covered Executive.

 

Except as otherwise provided herein, a Covered Executive who incurs a Qualifying
Termination will have formally terminated his employment relationship with the
Employer as of the date of such Termination of Employment and will not be deemed
to be an Employee at any time during the Severance Period or thereafter.

 

(b)                                 Other Accrued Obligations.  The Covered
Executive will be entitled to payment of all accrued Base Salary, accrued time
off which is payable upon termination, if

 

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any, and any other accrued and unpaid obligations as of the date of the
Qualifying Termination.  Such accrued obligations will be included and paid as
part of the Covered Executive’s final paycheck from the Employer.

 

(c)                                  Continued Medical Benefits.  During the
Severance Period, the Covered Executive and his dependents will be entitled to
Employer-provided continued coverage under any medical, dental, vision and life
insurance benefit programs maintained by the Employer in which such persons were
participating immediately prior to the date of the Termination of Employment
subject, in the case of insurance benefits to the permissibility of such
continuation of coverage under any applicable insurance, stop-loss or similar
policies (which the Employer will use reasonable efforts to obtain).  During the
Severance Period, the Employer will be responsible for paying the cost of such
continuation coverage subject to the Covered Executive’s payment of the
customary employee premiums for such coverage; provided, however, that that to
the extent required to comply with the applicable nondiscrimination requirements
under the Code, including, but not limited to section 105(h) of the Code, all or
a portion of the cost of such coverage will be imputed to the Covered Executive
as wages and reported on Form W-2.  At the end of the Severance Period, the
Covered Executive and his dependents will be eligible to elect to continue such
coverages pursuant to COBRA but will be responsible for paying the entire cost
of such coverage on an after-tax basis pursuant to COBRA in accordance with the
applicable administrative procedures under such benefit programs for the payment
of premiums.  Any coverage provided pursuant to this Section 3.1(c) will be
terminated or limited to the extent substantially comparable coverage is
otherwise provided by (or available from or under) any other employer of the
Covered Executive or his spouse.  The Covered Executive must notify the Daily
Administrator of the availability of any such other employer benefit coverages
within thirty (30) days following availability.

 

The provisions of this Section 3.1(c) will not prohibit the Company from
changing the terms of such medical, dental, vision or life insurance benefit
programs provided that any such changes apply generally to the senior management
of the Company and its Affiliates (e.g., the Company may switch insurance
carriers or preferred provider organizations).

 

(d)                                 Outplacement Services.  For a period of
three (3) months following the date of the Qualifying Termination, the Covered
Executive will be entitled to receive outplacement services, such as resume
preparation, presentation skill assessment and career counseling.  No cash
payment will be made in lieu of outplacements services under this Plan.

 

(e)                                  Benefits Are Not Duplicative.  To the
extent that a Covered Executive is entitled to severance pay or similar benefits
as a result of a Covered Termination pursuant to another agreement with, or plan
of, the Company or an Affiliate, a court order, an arbitration award or other
arrangement, the Severance Pay provided for hereunder shall be reduced on a
dollar-for-dollar basis by any severance pay or similar benefits received, or to
be received, by the Covered Employee pursuant to such other agreement, plan,
order, award or other arrangement.

 

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3.2                               Distributions on Account of Death of the
Covered Executive During the Severance Period

 

If a Covered Executive dies during the Severance Period specified in
Section 3.1(a), the following benefits will be payable:

 

(a)                                 Severance Pay.  Any remaining Severance Pay
payable to the Covered Executive as of the date of his death will continue to be
paid to the Covered Executive’s estate pursuant to Section 3.1(a).

 

(b)                                 Other Accrued Obligations.  Any unpaid Base
Salary, time off and any other accrued and unpaid obligations that remain
outstanding as of the date of the Covered Executive’s death will be paid to the
Covered Executive’s estate pursuant to Section 3.1(b).

 

(c)                                  Continued Medical Benefits.  The Covered
Executive’s dependents will be entitled to continue their coverage under any
medical, dental, vision and life insurance benefit programs maintained by the
Employer in which such persons were participating immediately prior to the date
of the Covered Executive’s death pursuant to the provisions of
Section 3.1(c) (i.e., to the extent that the Covered Executive dies within the
Severance Period, such Employer provided coverage will continue to be provided
to the Covered Executive’s dependents for the remainder of the Severance
Period).  Such dependents also will be entitled to elect to continue their
medical, dental or vision benefits coverages pursuant COBRA following the end of
the Severance Period.

 

(d)                                 Outplacement Services.  Any outplacement
service benefits payable to the Covered Executive pursuant to
Section 3.1(d) will cease as of the date of the Covered Executive’s death.

 

3.3                               Alternate Plan Terms

 

In connection with a Qualifying Termination, the Chief Executive Officer or Head
of the Human Resources Department of the Company reserve the right to modify the
terms of this Plan with respect to any Covered Executive (e.g., to provide
different benefits than those set forth herein).  Such modified terms will be
set forth in the Covered Executive’s Severance Agreement and General Release
described in Section 3.4 or in such other form as determined by the Chief
Executive Officer or Head of Human Resources Department in their sole and
absolute discretion.

 

3.4                               Conditions to Payment of Severance Benefits

 

As a condition of obtaining severance benefits under the Plan, the Employer may
require the Covered Executive to execute a Severance Agreement and General
Release in a form customarily used by the Employer.  Such Severance Agreement
and General Release may to the extent permitted by applicable law contain
restrictive covenants regarding non-competition, confidentiality,
non-disparagement and non-solicitation as well as a general release of claims
against the Employer and its Affiliates.

 

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3.5                               Reemployment of Covered Executive.

 

If the Covered Executive is reemployed by the Employer, during the Severance
Period and the amount of the Employee’s Base Pay for such new position is less
than his Severance Pay, then such Employee will continue to receive Severance
Pay equal to the amount of the difference between the Base Pay for the new
position and the Severance Pay for the remainder of the Severance Period. 
Conversely, if the Covered Executive is reemployed by the Employer, during the
Severance Period and the Base Pay for such new position is more than his
Severance Pay, then payment of such Severance Pay will cease.

 

In all cases, the continued medical benefits and outplacement services described
in Sections 3.1(c) and 3.1(d) will cease upon the Covered Executive’s
reemployment with the Employer.

 

 

 

End of Article III

 

 

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ARTICLE IV
ADMINISTRATION

 

4.1                               The Plan Administrator

 

The overall administration of the Plan will be the responsibility of the Plan
Administrator.

 

4.2                               Powers of Plan Administrator

 

The Plan Administrator will have sole and absolute discretion regarding the
exercise of its powers and duties under the Plan.  In order to effectuate the
purposes of the Plan, the Plan Administrator will have the following powers and
duties:

 

(a)                                 To appoint the Daily Administrator;

 

(b)                                 To review and render decisions respecting a
denial of a claim for benefits under the Plan;

 

(c)                                  To construe the Plan and to make equitable
adjustments for any mistakes or errors made in the administration of the Plan;
and

 

(d)                                 To determine and resolve, in its sole and
absolute discretion, all questions relating to the administration of the Plan
and any trust established to secure the assets of the Plan:

 

(i)                                     when differences of opinion arise
between the Company, an Affiliate, the Daily Administrator, the trustee, a
Covered Executive, or any of them, and

 

(ii)                                  whenever it is deemed advisable to
determine such questions in order to promote the uniform and nondiscriminatory
administration of the Plan for the greatest benefit of all parties concerned.

 

The foregoing list of express powers is not intended to be either complete or
conclusive, and the Plan Administrator will, in addition, have such powers as it
may reasonably determine to be necessary or appropriate in the performance of
its powers and duties under the Plan.

 

4.3                               Appointment of Daily Administrator

 

The Plan Administrator will appoint the Daily Administrator, who will have the
responsibility and duty to administer the Plan on a daily basis.  The Plan
Administrator may remove the Daily Administrator with or without cause at any
time.  The Daily Administrator may resign upon written notice to the Plan
Administrator.  If the Plan Administrator does not appoint an individual,
department or committee to serve as the Daily Administrator, the Plan
Administrator will be the Daily Administrator.

 

4.4                               Duties of Daily Administrator

 

The Daily Administrator will have sole and absolute discretion regarding the
exercise of its powers and duties under the Plan.  The Daily Administrator will
have the following powers and duties:

 

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(a)                                 To direct the administration of the Plan in
accordance with the provisions herein set forth;

 

(b)                                 To adopt rules of procedure and regulations
necessary for the administration of the Plan, provided such rules are not in
consistent with the terms of the Plan;

 

(c)                                  To determine all questions with regard to
rights of Covered Executives and dependents under the Plan including, but not
limited to, questions involving eligibility of an Employee to participate in the
Plan and the amount of a Covered Executive’s benefits;

 

(d)                                 To make all final determinations and
computations concerning the benefits to which the Covered Executive or his
estate is entitled under the Plan;

 

(e)                                  To enforce the terms of the Plan and any
rules and regulations adopted by the Plan Administrator;

 

(f)                                   To review and render decisions respecting
a claim for a benefit under the Plan;

 

(g)                                  To furnish the Employer with information
that the Employer may require for tax or other purposes;

 

(h)                                 To engage the service of counsel (who may,
if appropriate, be counsel for the Employer), actuaries, and agents whom it may
deem advisable to assist it with the performance of its duties;

 

(i)                                     To prescribe procedures to be followed
by Covered Executives in obtaining benefits;

 

(j)                                    To receive from the Employer and from
Covered Executives such information as is necessary for the proper
administration of the Plan;

 

(k)                                 To create and maintain such records and
forms as are required for the efficient administration of the Plan;

 

(l)                                     To make all initial determinations and
computations concerning the benefits to which any Covered Executive is entitled
under the Plan;

 

(m)                             To give the trustee of any trust established to
serve as a source of funds under the Plan specific directions in writing with
respect to:

 

(i)                                     making distribution payments, giving the
names of the payees, specifying the amounts to be paid and the time or times
when payments will be made; and

 

(ii)                                  making any other payments which the
trustee is not by the terms of the trust agreement authorized to make without a
direction in writing by the Daily Administrator;

 

(n)                                 To comply with all applicable lawful
reporting and disclosure requirements of ERISA;

 

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(o)                                 To comply (or transfer responsibility for
compliance to the trustee) with all applicable federal income tax withholding
requirements for benefit distributions; and

 

(p)                                 To construe the Plan, in its sole and
absolute discretion, and make equitable adjustments for any errors made in the
administration of the Plan.

 

The foregoing list of express duties is not intended to be either complete or
conclusive, and the Daily Administrator will, in addition, exercise such other
powers and perform such other duties as it may deem necessary, desirable,
advisable or proper for the supervision and administration of the Plan.

 

4.5                               Indemnification of Plan Administrator and
Daily Administrator

 

To the extent not covered by insurance, or if there is a failure to provide full
insurance coverage for any reason, and to the extent permissible under corporate
charters, by-laws and other applicable laws and regulations, the Company agrees
to hold harmless and indemnify the Plan Administrator and Daily Administrator
against any and all claims and causes of action by or on behalf of any and all
parties whomsoever, and all losses therefrom, including, without limitation,
costs of defense and reasonable attorneys’ fees, based upon or arising out of
any act or omission relating to or in connection with the Plan other than losses
resulting from the Plan Administrator’s, or any such person’s commission of
fraud or willful misconduct.

 

4.6                               Claims for Benefits.

 

(a)                                 Initial Claim.  In the event that a Covered
Executive or his estate claims (a “claimant”) to be eligible for benefits, or
claims any rights under the Plan or seeks to challenge the validity or terms of
the Severance Agreement and General Release described in Section 3.4, such
claimant must file a written claim with the Daily Administrator.  Likewise, any
claimant who feels unfairly treated as a result of the administration of the
Plan must file a written claim, setting forth the basis of the claim, with the
Daily Administrator.  In connection with the determination of a claim, or in
connection with review of a denied claim, the claimant may examine the Plan and
any other pertinent documents generally available to Covered Executives that are
specifically related to the claim.

 

A written notice of the disposition of any such claim will be delivered to the
claimant within ninety (90) days after the claim is filed with the Daily
Administrator.  Such notice will refer, if appropriate, to pertinent provisions
of the Plan, will set forth in writing the reasons for denial of the claim if a
claim is denied (including references to any pertinent provisions of the Plan)
and, where appropriate, will describe any additional material or information
necessary for the claimant to perfect the claim and an explanation of why such
material or information is necessary.  If the claim is denied, in whole or in
part, the claimant will also be notified of the Plan’s claim review procedure
and the time limits applicable to such procedure, including the claimant’s right
to arbitration following an adverse benefit determination on review as provided
below.  All benefits provided in the Plan as a result of the disposition of a
claim will be paid as soon as practicable following receipt of proof of
entitlement, if requested.

 

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(b)                                 Request for Review.  Within ninety (90) days
after delivery of written notice of the Daily Administrator’s disposition of the
claim, the claimant may file with the Plan Administrator a written request for
review of his claim.  In connection with the request for review, the claimant
will be entitled, at the claimants’ expense, to be represented by counsel and
will be given, upon request and free of charge, reasonable access to all
pertinent documents for the preparation of his claim.  If the claimant does not
file a written request for review within ninety (90) days after receiving
written notice of the Daily Administrator’s disposition of the claim, the
claimant will be deemed to have accepted the Daily Administrator’s written
disposition, unless the claimant was physically or mentally incapacitated so as
to be unable to request review within the ninety (90) day period.

 

(c)                                  Decision on Review.  After delivery to the
Plan Administrator of a written application for review of his claim, the Plan
Administrator will review the claim taking into account all comments, documents,
records and other information submitted by the claimant regarding the claim
without regard to whether such information was considered in the initial benefit
determination.  The Plan Administrator will notify the claimant of its decision
by personal delivery or by certified or registered mail to his last known
address in the records of the Employer.

 

A decision on review of the claim will be made by the Plan Administrator within
sixty (60) days.  If special circumstances require an extension of the ninety
(90) day period, the Plan Administrator will so notify the claimant and a
decision will be rendered within one hundred twenty (120) days of receipt of the
request for review.

 

The decision of the Plan Administrator will be in writing and will include the
reasons for the decision presented in a manner calculated to be understood by
the claimant and will contain references to all relevant Plan provisions on
which the decision was based.  Such decision will also advise the claimant that
he may receive upon request, and free of charge, reasonable access to and copies
of all documents, records and other information relevant to his claim and will
inform the claimant of his right to file arbitration in the case of an adverse
decision regarding his appeal.  Subject to the right to arbitration, the
decision of the Plan Administrator will be final and conclusive.

 

(d)                                 Arbitration.  In the event that the claims
procedure described in this Section 4.6 does not result in an outcome thought by
the claimant to be in accordance with the Plan document, he may appeal to a
third party neutral arbitrator.  The claimant must appeal to an arbitrator
within sixty (60) days after receiving the Plan Administrator’s denial or deemed
denial of his request for review and before bringing suit in court.  The
arbitration will be conducted pursuant to the American Arbitration Association
(“AAA”) Rules on Employee Benefit Claims.

 

The arbitrator will be mutually selected by the claimant and the Plan
Administrator from a list of arbitrators who are experienced in severance plan
benefit matters that is provided by the AAA.  If the parties are unable to agree
on the selection of an arbitrator within ten (10) days of receiving the list
from the AAA, the AAA will appoint an arbitrator.  The arbitrator’s review will
be limited to interpretation of the Plan document in the context of the
particular facts involved.

 

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The claimant, the Plan Administrator and the Employer agree to accept the award
of the arbitrator as binding, and all exercises of power by the arbitrator
hereunder will be final, conclusive and binding on all interested parties,
unless found by a court of competent jurisdiction, in a final judgment that is
no longer subject to review or appeal, to be arbitrary and capricious.  The
claimant, Plan Administrator and the Employer agree that the venue for the
arbitration will be in Dallas, Texas.  The costs of arbitration will be paid by
the Employer; the costs of legal representation for the claimant or witness
costs for the claimant will be borne by the claimant; provided, that, as part of
his award, the arbitrator may require the Employer to reimburse the claimant for
all or a portion of such amounts.

 

The following discovery may be conducted by the parties: interrogatories,
demands to produce documents, requests for admissions and oral depositions.  The
arbitrator will resolve any discovery disputes by such pre-hearing conferences
as may be needed.  The Employer, Plan Administrator and claimant agree that the
arbitrator will have the power of subpoena process as provided by law. 
Disagreements concerning the scope of depositions or document production, its
reasonableness and enforcement of discovery requests will be subject to
agreement by the Employer and the claimant or will be resolved by the
arbitrator.  All discovery requests will be subject to the proprietary rights
and rights of privilege and other protections granted by applicable law to the
Employer and the claimant and the arbitrator will adopt procedures to protect
such rights.  With respect to any dispute, the Employer, Plan Administrator and
the claimant agree that all discovery activities will be expressly limited to
matters directly relevant to the dispute and the arbitrator will be required to
fully enforce this requirement.

 

The arbitrator will have no power to add to, subtract from, or modify any of the
terms of the Plan, or to change or add to any benefits provided by the Plan, or
to waive or fail to apply any requirements of eligibility for a benefit under
the Plan.  Nonetheless, the arbitrator will have absolute discretion in the
exercise of its powers in the Plan.  Arbitration decisions will not establish
binding precedent with respect to the administration or operation of the Plan.

 

4.7                               Receipt and Release of Necessary Information

 

In implementing the terms of the Plan, the Plan Administrator and Daily
Administrator, as applicable, may, without the consent of or notice to any
person, release to or obtain from any insuring entity or other organization or
person any information, with respect to any person, that the Plan Administrator
or Daily Administrator deems to be necessary for such purposes.  Any Covered
Executive or estate claiming benefits under the Plan will furnish to the Plan
Administrator or Daily Administrator, as applicable, such information as may be
necessary to determine eligibility for and amount of benefit, as a condition of
claiming and receiving such benefit.

 

4.8                               Overpayment and Underpayment of Benefits

 

The Daily Administrator may adopt, in its sole and absolute discretion, whatever
rules, procedures and accounting practices are appropriate in providing for the
collection of any overpayment of benefits.  If a Covered Executive or his estate
receives an

 

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underpayment of benefits, the Daily Administrator will direct that payment be
made as soon as practicable to make up for the underpayment.  If an overpayment
is made to a Covered Executive or his estate, for whatever reason, the Daily
Administrator may, in its sole and absolute discretion, withhold payment of any
further benefits under the Plan until the overpayment has been collected or may
require repayment of benefits paid under the Plan without regard to further
benefits to which the Covered Executive or his estate may be entitled.

 

End of Article IV

 

 

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ARTICLE V
OTHER BENEFIT PLANS OF THE COMPANY

 

5.1                               Other Plans

 

Nothing contained in the Plan will prevent a Covered Executive prior to his
death, or a Covered Executive’s estate, spouse or dependents after such Covered
Executive’s death, from receiving, in addition to any payments provided for
under the Plan, any payments provided for under any other plan or benefit
program of the Employer, or which would otherwise be payable or distributable to
him, his estate, surviving spouse or dependents under any plan or policy of the
Employer or otherwise.  Nothing in the Plan will be construed as preventing the
Company or any of its Affiliates from establishing any other or different plans
providing for current or deferred compensation for employees and/or members of
the Board.

 

End of Article V

 

 

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ARTICLE VI
AMENDMENT AND TERMINATION OF THE PLAN

 

6.1                               Continuation

 

The Company intends to continue the Plan indefinitely, but nevertheless assumes
no contractual obligation beyond the promise to pay the benefits described in
the Plan.

 

6.2                               Amendment of Plan

 

The Company reserves the right in its sole and absolute discretion to amend the
Plan in any respect at any time.

 

6.3                               Termination of Plan

 

The Company may terminate or suspend the Plan in whole or in part at any time.

 

6.4                               Termination of Affiliate’s Participation

 

The Company may terminate an Affiliate’s participation in the Plan at any time
by providing written notice to the Affiliate.  The effective date of any such
termination will be the later of the date specified in the notice of the
termination of participation or the date on which the Daily Administrator can
administratively implement such termination.

 

6.5                               Limitation on Termination Right

 

Notwithstanding the foregoing or any other provision hereof, the Company and its
Affiliates may not reduce the benefits payable upon a Qualifying Termination
subsequent to its occurrence.

 

End of Article VI

 

 

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ARTICLE VII
MISCELLANEOUS

 

7.1                               No Contract of Employment

 

Nothing contained in the Plan will be construed as a contract of employment
between the Employer and a Covered Executive, or as a right of any Covered
Executive to continue in the employment of the Employer, or as a limitation of
the right of the Employer to discharge any of its Covered Executives, with or
without cause.

 

7.2                              Successor to the Company

 

The Company will require any successor or assign (whether direct or indirect, by
purchase, exchange, lease, merger, consolidation, or otherwise) to all or
substantially all of the property and assets of the Company and its Affiliates
taken as a whole to expressly assume the Plan and to agree to perform under this
Plan in the same manner and to the same extent that the Company and its
Affiliates would be required to perform it if no such succession had taken
place.  This Section 7.2 will not require any successor or assign of an
Affiliate (whether direct or indirect, by purchase, exchange, lease, merger,
consolidation or otherwise) to all or substantially all of the property and
assets of such Affiliate to continue the Plan.

 

7.3                               Provisions Binding

 

All of the provisions of the Plan will be binding upon the Company and its
Affiliates and any successor to the Company or any such Affiliate.  Likewise,
the provisions of the Plan will be binding upon all persons who will be entitled
to any benefit hereunder, their heirs and personal representatives.

 

End of Article VII

 

 

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IN WITNESS WHEREOF, this Plan has been executed effective as of September 25,
2013, except as specifically provided otherwise herein.

 

 

ZALE CORPORATION

 

 

 

 

 

By:

/s/ Theo Killion

 

 

Chief Executive Officer

 

 

 

 

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