Exhibit 10.1


 


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


 





















 


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 


 


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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 


 


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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;


 


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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 


 


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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





















 


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





















 


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





















 


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




















(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, 


 


16





















 


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, 


 


17





















 


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 


 


18





















 


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


 


 


19
















 


(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, 


 


20





















 


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 


 


21





















 


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.


 


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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:


 


(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:  cc:

  	
  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

  	
  /s/
  Neal Goldberg

  	
   

  
	
   

  	
  Name:
  Neal Goldberg

  
	
   

  	
   

  



 


 


	
   

  	
  ZALE
  CORPORATION,

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  John B. Lowe, Jr.

  	
   

  
	
   

  	
  Name:
  John B. Lowe, Jr.

  
	
   

  	
  Title:
  Chairman of the Board

  



 


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