Exhibit
10.2


 


EMPLOYMENT SECURITY AGREEMENT


 


This Employment Security Agreement (the “Agreement”),
dated as of June       , 2009, is between
Zale Corporation (“Company”) and the undersigned Executive Vice
President of Company (“Executive”).


 


WHEREAS, in order to achieve its long term
objectives, Company recognizes that it is essential to attract and retain
qualified executives; and


 


WHEREAS, in consideration of Executive’s
valuable service for, and critical contribution to the success of, Company,
Company desires to provide Executive with certain benefits in the event
Executive’s employment is terminated, either in connection with or unrelated to
a Change of Control of Company, on the terms and subject to the conditions set
forth in this Agreement.  Capitalized
terms that are used in this Agreement but not defined in connection with their
use are defined in Article V.


 


NOW, THEREFORE, in
consideration of the promises and of the mutual covenants herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, it is agreed as follows:


 


ARTICLE I

TERMINATION BENEFITS


 


1.1          General Termination Benefits.  If Executive incurs a Qualifying Termination
other than during a Protection Period, he or she will receive the following
termination benefits:


 


(a)           Severance Pay.  Subject to Sections 1.7 and 2.1(a), Executive
will receive Severance Pay, which shall be paid in equal installments, in
accordance with Company’s regular payroll practices and procedures, over a six
(6) month period that commences on the first ordinary payroll payment date that
follows the date that is sixty (60) days after the date on which the Qualifying
Termination is incurred; provided that all unpaid portions of such Severance
Pay shall be distributed to Executive in a lump-sum on the payroll date
immediately preceding March 15 of the calendar year following the calendar year
in which Executive incurs such Qualifying Termination.  In the event that, after such Qualifying
Termination is incurred and Severance Pay under this Section 1.1(a) has
commenced, it is determined that such Qualifying Termination was incurred
during a Protection Period (including as a result of the occurrence of a Change
of Control within six months after such Qualifying Termination), then Executive
shall cease to receive Severance Pay under this Section 1.1(a) and shall be
entitled to additional Severance Pay in accordance with Section 1.2(a).


 


(b)           Accrued
Obligations.  Executive
will be entitled to (i) payment of any earned and unpaid Base Compensation
as of Termination of Employment; (ii) payment of any earned but unused
vacation as of the Termination of Employment, to the extent such vacation pay
is provided under the vacation plan or policy sponsored by Company that is applicable
to Executive; and (iii) any other earned and unpaid obligations as of the
Termination of Employment, including but not limited to any bonus to which
Executive may have become entitled but which has not yet been paid as of
Termination of Employment under the bonus plan or policy sponsored by Company
that is applicable to Executive (the “Accrued Obligations”).  Accrued Obligations 


 

















 


described in clauses (i) and
(ii) above will be paid as part of Executive’s final ordinary payroll
payment from Company for active employment or contemporaneously with such
payment, but in no event later than thirty (30) days after such Termination of
Employment, and Accrued Obligations described in clause (iii) above will
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).


 


(c)           Continued
Welfare Benefits.  Executive
and/or Executive’s dependents will be entitled to elect to continue their
respective health or welfare coverage pursuant to COBRA.  Provided that Executive and/or Executive’s
dependents elect and maintain such COBRA coverage until the expiration of their
eligibility under COBRA, following such expiration, Executive and/or Executive’s
dependents also will be entitled to elect to continue such coverage for the
remainder, if any, of the Severance Period. 
Such health and other welfare benefits will be provided monthly and will
provide the same coverage as available to others who elect coverage pursuant to
COBRA, even though, following the expiration of Executive’s eligibility for
COBRA, it would not be pursuant to COBRA, provided that the continued
participation of Executive and such dependents is possible under the general
terms and provisions of such health or welfare plans.  If Executive’s participation in any such plan
is barred or would result in adverse tax consequences to Executive or Company,
Company will arrange to provide Executive on a monthly basis with benefits
substantially similar to those that Executive otherwise would have been
entitled to receive under such plan or, alternatively at the option of Company,
reimburse Executive on a monthly basis for the reasonable actual costs of
purchasing in the marketplace substantially similar benefits; provided, however, that, in either
case, Executive will pay to Company, or provide a credit against Company’s
reimbursement obligation for, the amount equal to the premiums that Executive
would have been required to pay to maintain such benefits hereunder.


 


During the Severance Period, Executive’s
premiums for coverage provided pursuant to COBRA will be equal to the premiums
Executive paid prior to Termination of Employment.  All premium payments paid by Executive and/or
Executive’s dependents for coverage will be paid directly to the appropriate
insurer or service provider for such benefit (which may be Company).  For the avoidance of doubt, Executive’s
continuation of health and welfare benefits during the Severance Period shall
count against Executive’s continuation of coverage period required under COBRA.


 


Any health or welfare benefits received by or
available to Executive from or in connection with any other employment of
Executive, consultancy arrangement undertaken by Executive or similar source that
are reasonably comparable to, but not necessarily as financially or otherwise
beneficial to Executive as, the benefits provided to Executive by Company at
the time of the Termination of Employment will be deemed the equivalent thereof
and will terminate Company’s obligation under this Section 1.1(c) to
provide health and welfare coverage during the Severance Period: provided,
however, that nothing in this paragraph will limit or terminate
Executive’s or Executive’s dependents’ right to continue any Company group
health plan coverage at Executive’s or such dependent’s cost for the remainder
of the COBRA period.  Executive agrees to
advise Company of the availability of any such subsequent benefit coverages
within 30 days following such availability.


 


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The provisions of this Section 1.1(c) will
not prohibit Company from changing the terms of any benefit programs provided
that any such changes apply to all executives of Company and its Affiliates (e.g., Company may switch insurance
carriers or preferred provider organizations or change coverages).


 


(d)           Outplacement
Services.  Executive
will be entitled to receive outplacement services from an entity selected by
Company for a period of three (3) months, provided that such services do
not commence later than six (6) months following Termination of
Employment.  Company will pay the
outplacement service provider directly for the cost of such outplacement
services.


 


(e)           Equity
Compensation Adjustments.  Any
equity-based compensation awards granted to Executive by Company under an
Equity Plan that vested prior to such Termination of Employment will be
governed by the terms of such awards and such Equity Plan.  Any equity-based compensation awards granted
to Executive by Company under an Equity Plan that are unvested on Termination
of Employment will expire, unless otherwise provided in such awards or such
Equity Plan.  Following his or her
Termination of Employment, Company will not grant Executive any equity-based compensation
awards.


 


(f)            401(k) Plan.  The terms of the 401(k) Plan will govern
Executive’s account balance, if any, under such 401(k) Plan.


 


1.2          Termination Benefits in
Connection with a Change of Control.  If Executive incurs a Qualifying Termination
during a Protection Period, he or she will receive the following termination
benefits:


 


(a)           Severance Pay.  Subject to Sections 1.7 and 2.1(a), Executive
will receive Severance Pay in a single lump-sum within sixty (60) days after
the date on which the Qualifying Termination is incurred.  In the case of a Qualifying Termination that
is incurred during the portion of the Protection Period that precedes the
Change of Control, (i) the amount of Severance Pay payable to Executive
pursuant to this Section 1.2(a) shall be reduced by the amount of any Severance
Pay paid to Executive pursuant to Section 1.1(a) prior to the date the Change
of Control occurs and (ii) such additional Severance Pay shall be paid to
Executive in a single lump-sum within sixty (60) days after the date on which
such Change of Control occurred.


 


(b)           Accrued
Obligations.  Executive
will be entitled to payment of any Accrued Obligations in accordance with the
provisions of Section 1.1(b).


 


(c)           Continued
Welfare Benefits.  Executive
and Executive’s dependents will be entitled to receive health and other welfare
benefits in accordance with the provisions of Section 1.1(c) for the
duration of the Severance Period.


 


(d)           Outplacement
Services.  Executive
will be entitled to receive outplacement services in accordance with the
provisions of Section 1.1(d).


 


(e)           Equity
Compensation Adjustments.  Any
equity-based compensation awards granted to Executive by Company under an
Equity Plan that vested prior to such Termination of Employment will be
governed by the terms of such awards and such Equity Plan.  Any equity-based compensation awards granted
to Executive by Company under an Equity Plan that are unvested on Termination
of Employment will 


 


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vest immediately upon
Termination of Employment, unless otherwise provided in such awards or such
Equity Plan.  Following his or her
Termination of Employment, Company will not grant Executive any equity-based
compensation awards.


 


(f)            401(k) Plan.  The terms of the 401(k) Plan will govern
Executive’s account balance, if any, under such 401(k) Plan.


 


(g)           Conditional
Cap on Severance Pay.  If the
payments to Executive pursuant to this Agreement (when considered with all
other payments made to Executive as a result of a Termination of Employment
that are subject to Section 280G of the Code) (the amount of all such
payments, collectively, the “Parachute Payment”) result in Executive
becoming liable for the payment of any excise taxes pursuant to section 4999 of
the Code (“280G Excise Tax”). 
Executive will receive the greater on an after-tax basis of (i) the
severance benefits payable pursuant to this Section 1.2 or (ii) the
severance benefits payable pursuant to this Section 1.2 as reduced to
avoid imposition of the 280G Excise Tax (the “Conditional Capped Amount”).


 


Not more than fourteen (14) days following
the Termination of Employment Company will notify Executive in writing (A) whether
the severance benefits payable pursuant to this Section 1.2 when added to
any other Parachute Payments payable to Executive exceed an amount equal to
299% (the “299% Amount”) of Executive’s “base amount” as defined in Section 280G(b)(3) of
the Code, (B) the amount that is equal to the 299% Amount, (C) whether
the severance benefit described in Section 1.2(g)(i) or the
Conditional Capped Amount pursuant to section 1.2(g)(ii) is greater on an
after-tax basis and (C) if the Conditional Capped Amount is the greater
amount, the amount that the severance benefits payable pursuant to this Section 1.2
must be reduced to equal such amount.


 


The calculation of the 299% Amount, the
determination of whether the termination benefits described in Section
1.2(g)(i) or the Conditional Capped Amount described in Section 1.2(g)(ii) is
greater on an after-tax basis and, if the Conditional Capped Amount in Section
1.2(g)(ii) is the greater amount, the determination of how much Executive’s
termination benefits must be reduced in order to avoid application of the 280G
Excise Tax will be made by Company’s public accounting firm in accordance with
section 280G of the Code or any successor provision thereto.  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 the Termination
of Employment absent any acceleration of payment.  If the reduction of the amounts payable
hereunder would not result in a reduction of the Parachute Payments to the
Conditional Capped Amount, no amounts payable under this Agreement shall be
reduced pursuant to this provision.  The
costs of obtaining such determination will be borne by Company.


 


1.3          Termination Benefits in
Connection With Disability.  If Executive has a Termination of Employment
as a result of a Disability, he or she will receive the following termination
benefits:


 


(a)           Severance Pay.  Subject to Sections 1.7 and 2.1(a), Executive
will receive Severance Pay, which shall be paid in equal installments, in
accordance with 


 


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Company’s regular payroll
practices and procedures, over a six (6) month period that commences on the
first ordinary payroll payment date that follows the date that is sixty (60)
days after the date on which the Executive has a Termination of Employment as a
result of a Disability; provided that all unpaid portions of such Severance Pay
shall be distributed to Executive in a lump-sum on the payroll date immediately
preceding March 15 of the calendar year following the calendar year in which
such Termination of Employment occurs.


 


(b)           Accrued
Obligations.  Executive
will be entitled to payment of any Accrued Obligations in accordance with the
provisions of Section 1.1(b).


 


(c)           Continued
Welfare Benefits.  Executive
and Executive’s dependents will be entitled to receive health and other welfare
benefits in accordance with the provisions of Section 1.1(c) for the
duration of the Severance Period.


 


(d)           Equity
Compensation Adjustments.  Any
equity-based compensation awards granted to Executive by Company under an
Equity Plan that vested prior to such Termination of Employment will be
governed by the terms of such awards and such Equity Plan.  Any equity-based compensation awards granted
to Executive by Company under an Equity Plan that are unvested on Termination
of Employment will expire, unless otherwise provided in such awards or such
Equity Plan.  Following his or her
Termination of Employment, Company will not grant Executive any equity-based
compensation awards.


 


(e)           401(k) Plan.  The terms of the 401(k) Plan will govern
Executive’s account balance, if any, under such 401(k) Plan.


 


1.4          Termination Benefits in
Connection With Death.  If
Executive has a Termination of Employment due to death while employed by
Company, his or her estate will receive the following benefits:


 


(a)           Severance Pay.  Subject to Section 2.1(a), Executive’s estate
will receive Severance Pay, which shall be paid in equal installments, in
accordance with Company’s regular payroll practices and procedures, over a six
(6) month period that commences on the first ordinary payroll payment date that
follows the date that is sixty (60) days after the date on which the Executive
has a Termination of Employment due to death; provided that all unpaid portions
of such Severance Pay shall be distributed to Executive’s estate in a lump-sum
on the payroll date immediately preceding March 15 of the calendar year
following the calendar year in which such Termination of Employment occurs.


 


(b)           Accrued
Obligations.  Executive’s
estate will be entitled to payment of any Accrued Obligations in accordance
with the provisions of Section 1.1(b).


 


(c)           Continued
Welfare Benefits.  Executive’s
dependants will be entitled to continue their health and welfare benefits, if
any, pursuant to COBRA.


 


(d)           Equity
Compensation Adjustments.  Any equity-based
compensation awards granted to Executive by Company under an Equity Plan that
vested prior to such Termination of Employment will be governed by the terms of
such awards and such Equity Plan.  Any
equity-based compensation awards granted to Executive by 


 


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Company under an Equity Plan
that are unvested on Termination of Employment will expire, unless otherwise
provided in such awards or such Equity Plan.


 


(e)           401(k) Plan.  The terms of the 401(k) Plan will govern
Executive’s account balance, if any, under such 401(k) Plan.


 


1.5          Distributions on Account of
Death of Executive During the Severance Period.  If Executive becomes entitled to Severance
Pay pursuant to Section 1.1, 1.2 or 1.3 and dies during the Severance
Period, the following benefits will be payable:


 


(a)           Severance
Pay.  Any remaining Severance Pay
payable to Executive as of the date of his or her death will continue to be
paid to Executive’s estate pursuant to Section 1.1, 1.2 or 1.3, as
applicable.


 


(b)           Accrued
Obligations.  Executive’s
estate will be entitled to payment of any Accrued Obligations unpaid as of the
date of Executive’s death in accordance with the provisions of Section 1.1(b).


 


(c)           Continued
Welfare Benefits.  Executive’s
dependents will be entitled to continue to receive any health or other welfare
benefits that they received immediately prior to the date of Executive’s death
for the remainder of the applicable period, subject to the limitations
contained in Section 1.1(c).


 


(d)           Outplacement
Services.  Any
outplacement service benefits available to Executive pursuant to Section 1.1(d)
or 1.2(d) will cease as of the date of Executive’s death.


 


(e)           Equity
Compensation Adjustments.  Upon
death of Executive, any equity-based compensation awards granted to Executive
by Company under an Equity Plan that vested prior to Executive’s death will be
governed by the terms of such awards and such Equity Plan.  Any equity-based compensation awards granted
to Executive by Company under an Equity Plan that are unvested on Executive’s
death will expire, unless otherwise provided in such awards and such Equity
Plan.


 


(f)            401(k) Plan.  The terms of the 401(k) Plan will govern
Executive’s account balance, if any, under such 401(k) Plan.


 


1.6          Termination Benefits in
Connection With a Termination Other Than a Qualifying Termination.  If Executive has a Termination of Employment
that is not described in Section 1.1, 1.2, 1.3 or 1.4, he or she will
receive the following termination benefits:


 


(a)           Severance
Pay.  Executive will not receive any
Severance Pay.


 


(b)           Accrued
Obligations.  Executive
will be entitled to payment of any Accrued Obligations in accordance with the
provisions of Section 1.1(b).


 


(c)           Continued
Welfare Benefits.  Executive
and Executive’s dependants will be entitled to continue their health and
welfare benefits, if any, pursuant to COBRA.


 


(d)           Equity
Compensation Adjustments.  Any
equity-based compensation awards granted to Executive by Company under an
Equity Plan that vested prior to such Termination of Employment will be
governed by the terms of such awards and such Equity Plan.  Any equity-based compensation awards granted
to Executive by 


 


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Company under an Equity Plan
that are unvested on Termination of Employment will expire, unless otherwise
provided in such awards or such Equity Plan. 
Following his or her Termination of Employment, Company will not grant
Executive any equity-based compensation awards.


 


(e)           401(k) Plan.  The terms of the 401(k) Plan will govern
Executive’s account balance, if any, under such 401(k) Plan.


 


1.7          Code Section 409A.


 


(a)           It is the intention of
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) (collectively, “409A”),
and all provisions of this Agreement will be construed and interpreted in a
manner consistent with 409A.


 


(b)           To the extent Executive is a
“specified employee,” as defined in Section 409A(a)(2)(B)(i) of the
Code and as determined in good faith by Company, 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 Company
determines that any provision of this Agreement does not comply with 409A,
Company will be entitled  (but will have
no obligation) without Executive’s consent, to amend or modify such provision
to comply with 409A; provided, however,
that such amendment or modification will, to the greatest extent commercially
practicable, maintain the economic value to Executive of such provision.


 


(d)           For purposes of 409A, each
installment of Severance Pay under Sections 1.1(a), 1.3(a) and 1.4(a) will
be deemed to be a separate payment as permitted under Treasury Regulation Section 1.409A-2(b)(2)(iii).


 


(e)           Except
as permitted by Section 409A, the continued benefits provided to Executive
pursuant to this Agreement 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
Agreement 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.


 


(f)            Neither
Executive nor any creditor or beneficiary of Executive will have the right to
subject any deferred compensation (within the meaning of Section 409A) payable
under this Agreement or under any other plan, policy, arrangement or agreement
of or with 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, any deferred compensation 


 


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(within the meaning of
Section 409A) 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.


 


ARTICLE II

EXECUTIVE COVENANTS


 


2.1          Release; Covenants.  As a condition of obtaining benefits under
this Agreement, Executive will be required to (a) within forty-five (45)
days following Termination of Employment execute and deliver to Company a
general release of claims against Company in such form as may be required by
Company and (b) comply with the covenants set forth in this Article II.  In the event that Executive fails to execute
and deliver such general release within such forty-five-day period or revokes
such general release (but only to the extent revocation is permitted under the
terms of such general release), then Executive will forfeit all entitlement to
any payment, benefit or other amount hereunder. 
Executive’s failure to comply with the covenants of this Article II
will be governed by Section 2.7 and Article III.


 


2.2          Confidential Information.  Company promises to disclose to Executive and
Executive acknowledges that in and as a result of his or her employment with
Company, he or she will receive, make use of, acquire, have access to and/or
become familiar with various trade secrets and proprietary and confidential
information of Company and its 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 Company and/or its Affiliates and regularly used
in the operation of its business, and as to which Company and/or its 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:


 


(a)           are secret and not known in
the industry;


 


(b)           give Company or its
Affiliates an advantage over competitors who do not know or use the Trade
Secrets;


 


(c)           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


 


(d)           are valuable, special and
unique assets of Company or its Affiliates, the disclosure of which could cause
substantial injury and loss of profits and goodwill to Company or its
Affiliates.


 


Executive promises not to
use in any way or disclose any of the Trade Secrets, directly or indirectly,
either during or after his or her employment by Company, except as required in
the course of his or her employment, 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 Company, whether prepared by Executive
or otherwise coming into his or her possession, will remain the exclusive
property of Company and may not be removed from the premises of Company under
any circumstances without the prior written consent of Company (except in the
ordinary course of business during Executive’s employment by 


 


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Company), and in any event
must be promptly delivered to Company upon termination of Executive’s
employment with Company.  Executive
agrees that upon 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 Company, Executive will timely notify and promptly provide a
copy of the subpoena, process or other request to Company.  For this purpose, Executive irrevocably
nominates and appoints Company (including any attorney retained by Company), as
his or her 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, will 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 will not render invalid or unenforceable any remaining
restrictions on confidentiality and disclosure. 
Additionally, should an arbitrator or court of competent jurisdiction
determine that the scope of any provision of this Section 2.2 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.


 


2.3          Non-Competition.  As a material inducement for Company’s
promise to provide the trade secrets and proprietary and confidential
information described in Section 2.2, Executive agrees that during the
term of his or her employment with Company and during the applicable Severance
Period specified in Section 5.14, he or she will not, directly or
indirectly, as an employee, consultant or otherwise, compete with Company by
providing services relating to retail or non-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, in whole or in material
part, in the United States, Canada and/or Puerto Rico, (a) engages in the
retail sale of jewelry, including, but not limited to, specialty jewelry
retailers and other retailers having jewelry divisions or departments, or (b) operates
as a vendor of jewelry, including, but not limited to, as a wholesaler,
manufacturer or direct importer of jewelry. 
The restrictions contained in this Section 2.3 will 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,
subject to the terms of Section 2.1, the above restrictions on competition
are completely severable and independent agreements supported by good and
valuable consideration and, as such, will 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 will not render invalid or
unenforceable any remaining restrictions on competition.  Additionally, should an arbitrator or a court
of competent jurisdiction determine that the scope of any provision of this Section 2.3
is too broad to be enforced as written, the parties intend that the arbitrator
or court reform the provision to such narrower scope as it determines to be
reasonable and enforceable.


 


2.4          Agreement Not to Solicit
Employees.  Executive
covenants and agrees that during Executive’s employment with Company and
thereafter during the applicable Severance Period specified in Section 5.14,
Executive will not, on his or her own behalf or on behalf of any other person,
partnership, association, corporation, or other entity, (a) directly,
indirectly, or through a third party hire, cause to be hired or solicit any
employee of Company or its 


 


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Affiliates or (b) in
any manner attempt to influence or induce any employee of Company or its
Affiliates to leave the employment of Company or its Affiliates, nor will he or
she use or disclose to any person, partnership, association, corporation or
other entity any information concerning the names and addresses of any
employees of Company or its Affiliates. 
The restrictions contained in this Section 2.4 will be tolled on a
day-for-day basis for each day during which Executive participates in any
activity in violation of such restriction.


 


The parties agree that,
subject to the terms of Section 2.1, the above restrictions on the
solicitation of employees are completely severable and independent agreements
supported by good and valuable consideration and, as such, will 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 the solicitation
of employees will not render invalid or unenforceable any remaining
restrictions on the solicitation of employees. 
Additionally, should an arbitrator or court of competent jurisdiction
determine that the scope of any provision of this Section 2.4 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.


 


2.5          Nondisparagement.  Executive covenants and agrees that he or she
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 Company, its Affiliates, 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 will not (a) apply to
Communications between Executive and his or her spouse, 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 (subject to the provisions of Section 2.2);
or (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 other judicial or legal actions (subject to the provisions of Section 2.2).  Executive specifically agrees not to issue
any public statement concerning his or her employment by Company and/or the
cessation of such employment.


 


2.6          Reasonableness of
Restrictions.  Executive
agrees that Executive and Company are engaged in a highly competitive business
and, due to Executive’s position with Company and the nature of Executive’s
work, Executive’s engaging in any business that is competitive with that of
Company will cause Company great and irreparable harm.  Executive represents and warrants that the
time, scope and geographic area restricted by the foregoing Sections 2.2, 2.3,
2.4 and 2.5 pertaining to confidential information, non-competition, non-solicitation,
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 2.2, 2.3, 2.4 and 2.5
pertaining to confidential information, non-competition, non-solicitation, and
non-disparagement are not outweighed by either the hardship to Executive or any
injury likely to the public.  If any
arbitrator or court determines that any portion of this Article II is
invalid or unenforceable, the remainder of this Article II will not
thereby be affected and will be given full effect without regard to the invalid
provisions.  If any court construes any
of the provisions of this Article II, or any part thereof, to be
unreasonable because of the duration or scope of such provision, 


 


10

















 


such
court will have the power to reduce the duration or scope of such provision and
to enforce such provision as so reduced.


 


2.7          Enforcement.  Upon Executive’s employment with an entity
that is not an Affiliate of Company (a “Successor Employer”) during the
period that the provisions of this Article II remain in effect, Executive
will provide such Successor Employer with a copy of this Agreement and will
notify Company of such employment within thirty (30) days thereof.  Executive agrees that in the event of a
breach of the terms and conditions of this Article II by Executive,
Company will be entitled, if it so elects, to institute and prosecute
proceedings pursuant to Article III, either in law or in equity, against
Executive, to obtain damages for any such breach, or to enjoin Executive from
any conduct in violation of this Article II.  In the event Company seeks an injunction or
restraining order against Executive for breach of this Article II,
Executive waives any requirement that Company post bond in connection with such
request for relief.


 


2.8          Recoupment.  Executive acknowledges and agrees that
Company’s remedies at law for a breach or threatened breach of any of the
provisions of this Article II of the Agreement would be inadequate and, in
recognition of this fact, Executive agrees that, in the event of such a breach
or threatened breach, in addition to any remedies at law, Executive shall
forfeit all payments otherwise due under the Agreement and shall return to
Company any Severance Pay made to Executive prior to such forfeiture.


 


ARTICLE III

DISPUTE RESOLUTION


 


3.1          Arbitration.  Company and Executive agree that any
controversy or claim (including all claims pursuant to common and statutory
law) relating to this Agreement or arising out of or relating to the subject
matter of this Agreement or Executive’s employment by Company will be resolved
exclusively through binding arbitration. 
Subject to the terms and any exceptions provided in this Agreement, the
parties each waive the right to a jury trial and waive the right to adjudicate
their disputes under this Agreement outside the arbitration forum provided for
in this Agreement.  The arbitration will
be administered by a single neutral arbitrator admitted to practice law in
Texas for a minimum of ten years.  Any
such arbitration proceeding will take place in Dallas County, Texas and will be
administered by the American Arbitration Association (“AAA”) Dallas
office in accordance with its then-current applicable rules and
procedures.  The arbitrator will have the
authority to award the same remedies, damages and costs that a court could
award.  The arbitrator will 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.  This
provision can be enforced under the Federal Arbitration Act.


 


3.2          Entitlement to Injunctive
Relief.  As the sole exception to the
exclusive and binding nature of the arbitration commitment set forth above,
Executive and Company agree that Company will have the right to initiate an
action in any state or federal court of competent jurisdiction in Dallas
County, Texas in order to request temporary, preliminary and permanent
injunctive or other equitable relief, including, without limitation, specific
performance, to enforce the terms of Sections 2.2, 2.3, 2.4, or 2.5 above,
without the necessity of proving inadequacy of legal remedies or irreparable
harm or posting bond; provided, however, that if Executive is engaging in
activities prohibited by Section 2.2, 2.3, 2.4 or 2.5 above, outside of
Dallas County, Texas, the parties hereby agree that the Company may, at its
sole option, bring an action in any court of competent jurisdiction.  Nothing herein shall prevent the Company from
pursuing the same injunctive or equitable relief in the arbitration proceedings.  Moreover, 


 


11

















 


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.


 


3.3          Limitation of Scope.  Should a court of competent jurisdiction
determine that the scope of the arbitration and related provisions of this
Agreement are 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.


 


3.4          Payments Pending Litigation
and/or Arbitration.  In the case
of a Qualifying Termination other than during a Protection Period, upon the
material violation of any of the provisions of this Agreement or a dispute
regarding the subject matter of this Agreement, Company shall cease payment of
all Severance Pay and severance benefits pending the outcome of litigation
and/or arbitration on such issues pursuant to this Article III.  In the case of a Qualifying Termination
during a Protection Period, upon the material violation of any of the
provisions of this Agreement or a dispute regarding the subject matter of this
Agreement, Company shall continue payment of all Severance Pay and severance
benefits pending the outcome of litigation and/or arbitration pursuant to this Article Ill
subject to being reimbursed if so ordered in any such litigation or
arbitration.


 


3.5          Fees and Expenses.  If Company or Executive sues in court or brings
an arbitration action against the other for a breach of any provision of this
Agreement or regarding any dispute arising from the subject matter of this
Agreement, the prevailing party will be entitled to recover its attorneys’
fees, court costs, arbitration expenses, and its portion of the fees charged by
AAA and/or the individual arbitrator, as applicable, regardless of which party
initiated the proceedings.  If there is
no prevailing party, the fees charged by AAA and/or the individual arbitrator
will be borne equally by Company and Executive, and Company and Executive will
each bear their own costs and attorneys’ fees incurred in arbitration.  In the event that Executive prevails on at
least one material issue, Executive will be deemed to be the prevailing party; provided,
however, that if Executive does not prevail on at least one material
issue, the Company shall be deemed to be the prevailing party.


 


3.6          Right of Offset.  If Executive is at any time indebted to
Company, or otherwise obligated to pay money to Company for any reason,
Company, at its election, may offset amounts otherwise payable to Executive
under this Agreement against any such indebtedness or amounts due from
Executive to Company, to the extent permitted by law.


 


3.7          Other Matters and
Acknowledgement.  All
proceedings conducted pursuant to this agreement to arbitrate, including any
order, decision or award of the arbitrator, will be kept confidential by all
parties except to the extent necessary to enforce the award.  EXECUTIVE ACKNOWLEDGES THAT, BY SIGNING THIS
AGREEMENT, EXECUTIVE IS WAIVING ANY RIGHT THAT EXECUTIVE MAY HAVE TO A
JURY TRIAL OR A COURT TRIAL OF ANY EMPLOYMENT-RELATED CLAIM ALLEGED BY
EXECUTIVE.


 


ARTICLE IV

MISCELLANEOUS PROVISIONS


 


4.1          Executive Acknowledgement.  Executive is entering into this Agreement of
his or her own free will.  Executive
acknowledges that he or she has had adequate opportunity to review this
Agreement and consult with counsel of his or her own choosing.  Executive represents that he or she has read
and understands this Agreement, he or she is fully aware of this 


 


12

















 


Agreement’s legal effect and
has not acted in reliance upon any statements made by Company other than those
set forth in writing in the Agreement.


 


4.2          At Will Employment.  Notwithstanding any provision in this
Agreement to the contrary, Executive hereby acknowledges and agrees that
Executive’s employment with Company is for an unspecified duration and
constitutes “at-will” employment, and Executive further acknowledges and agrees
that this employment relationship may be terminated at any time, with or
without Cause or for any or no Cause, at the option either of Company or
Executive.


 


4.3          Successors and Assigns.  The rights and obligations of Company under
this Agreement will inure to the benefit of and will be binding upon the
successors and assigns of Company. 
Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation, sale of assets or otherwise) to all or
substantially all of the business and/or assets of Company, by a written
agreement in form and substance reasonably satisfactory to Executive, to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that Company would be required to perform it if no such succession
had taken place.  This Agreement is
personal to Executive and without the prior written consent of Company is not
assignable by Executive otherwise than by will or the laws of descent and distribution.  This Agreement will inure to the benefit of
and be enforceable by Executive’s personal and legal representatives,
executors, administrators, heirs, distributes, devisees and legatees.


 


4.4          Amendment.  This agreement may be amended or terminated
at any time by Company, by a resolution of the Board of Directors of Company or
the Compensation Committee thereof, the substance of which is promptly
communicated to Executive; provided that, without the written consent of
Executive, no such termination of this Agreement or amendment reducing any
benefits provided hereunder shall be effective prior to the expiration of the
one-year anniversary of the adoption of such resolution; and provided, further,
that without the written consent of Executive, no amendment or termination
shall become effective during a Protection Period.  No amendment or termination shall affect any
vested rights or benefits to which Executive is entitled at the effective time
of such amendment or termination. 
Otherwise, the Agreement may be amended or terminated only as provided
in Section 1.7 or by an instrument in writing signed by Company and
Executive.


 


4.5          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 will be fully severable; this
Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a portion of this Agreement; and
the remaining provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal, invalid or unenforceable provision or
by its severance from this Agreement. 
Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as part of this Agreement a
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.


 


4.6          Integration.  The provisions of this Agreement constitute
the entire and complete understanding and agreement between the parties with
respect to the subject matter hereof, and supersede all prior and
contemporaneous oral and written agreements, representations and understandings
of the parties, including without limitation The Executive Severance Plan for
Zale Corporation and its Affiliates and any Change of Control Agreement or
employment agreement (including any offer letter) between Executive and
Company, which are hereby terminated with respect to Executive.


 


13
















 


4.7          Choice of Law; Forum
Selection.  THIS
AGREEMENT WILL BE EXCLUSIVELY GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS
OF TEXAS OR ANY OTHER JURISDICTION, AND, WHERE APPLICABLE, THE LAWS OF THE
UNITED STATES.


 


The parties hereby agree
that any action to enforce the arbitrator’s award shall be filed exclusively in
a state or federal court of competent jurisdiction in Dallas County, Texas and
the parties hereby consent to the exclusive jurisdiction of such court; provided,
however, that nothing herein shall preclude the parties’ rights to
conduct collection activities in the courts of any jurisdiction with respect to
the order or judgment entered upon the arbitrator’s award by the Texas court.


 


4.8          Survival.  The provisions of Article II, Article III,
this Article IV and Article V will survive the termination of this
Agreement.  The existence of any claim or
cause of action of Executive against the Company, whether predicated on this
Agreement or otherwise, will 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 Article II.


 


4.9          No Waiver.  No waiver by either party at any time of any
breach by the other party of, or compliance with, any condition or provision of
this Agreement to be performed by the other party will be deemed a waiver of
similar or dissimilar provisions or conditions at any time.


 


4.10        Notice.  For all purposes of this Agreement, all
communications required or permitted to be given under this Agreement will be
in writing and will be deemed to have been duly given when hand delivered or
dispatched by electronic facsimile transmission (with receipt thereof
confirmed), or five business days after having been mailed by United States
registered or certified mail, return receipt requested, postage prepaid, or two
business days after having been sent by a nationally recognized overnight
courier service, addressed to Company at its principal executive office, to
Company’s General Counsel, and to Executive at Executive’s principal residence,
or to such other address as any party may have furnished to the other in
writing, except that notices of change of address will be effective only upon
receipt.


 


4.11        Counterparts.  This Agreement may be executed in several
counterparts, each of which will be deemed to be an original, but all of which
together will constitute one and the same Agreement.


 


4.12        Construction.  This Agreement is deemed to be drafted
equally by both Executive and Company and will be construed as a whole and
according to its fair meaning.  Any
presumption or principle that the language of this Agreement is to be construed
against any party will not apply.  The
headings in this Agreement are only for convenience and are not intended to
affect construction or interpretation. 
Any references to paragraphs, subparagraphs, sections, subsections or
clauses are to those parts of this Agreement, unless the context clearly
indicates to the contrary.  Also, unless
the context clearly indicates to the contrary, (a) the plural includes the
singular and the singular includes the plural; (b) “and” and “or” are each
used both conjunctively and disjunctively; (c) “any,” “all,” “each,” or “every”
means “any and all”, and “each and every”; (d) “includes” and “including”
are each used without limitation; (e) “herein,” “hereof,” “hereunder” and
other similar compounds of the word “here” refer to the entire Agreement and
not to any particular paragraph, subparagraph, section or subsection; and (f) all
pronouns and any variations thereof will be deemed to refer 


 


14

















 


to
the masculine, feminine, neuter; singular or plural as the identity of the
entities or persons referred to may require.


 


4.13        No Mitigation.  Except as provided in Sections 1.1(c), 1.2(c) or
1.3(c) (regarding continued welfare benefits), in no event will Executive
be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to Executive under any of the provisions of
this Agreement and such amounts will not be reduced whether or not Executive
obtains other employment.


 


4.14        Withholding.  Company may deduct and withhold from any
amounts payable under this Agreement such Federal, state, local, foreign or
other taxes as are required to be withheld pursuant to any applicable law or
regulation.


 


ARTICLE V

DEFINITIONS


 


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


 


5.2          “Base Compensation”
means Executive’s gross base salary at the time of his or her Termination of
Employment before reduction by any pre-tax contributions to the 401(k) Plan
or any other benefit plan maintained by the Company or its Affiliates or any
other deductions of any nature.


 


5.3          “Bonus”
means the average of the annual incentive bonus amount earned by Executive
under the applicable Bonus Plan as established by Company’s Board of Directors
with respect to the three fiscal years preceding the fiscal year in which the
Termination of Employment occurs (or such lesser period of Executive’s
employment with the Company and its Affiliates).


 


5.4          “Cause”
means (a) Executive’s indictment for a felony or a crime involving moral
turpitude; (b) Executive’s commission of an act constituting fraud, deceit
or material misrepresentation with respect to Company; (c) Executive’s
recurrent use of alcohol or prescribed medications at work or otherwise such
that, in Company’s sole discretion; Executive’s job performance is impaired or
the use of any illegal substances or drug such that, in Company’s sole
discretion.  Executive’s job performance
is impaired; (d) Executive’s embezzlement of Company’s or its Affiliates’
assets or funds; and (e) Executive’s commission of any negligent or
willful act or omission that, in the cases of clauses (b), (d) and (e) of
this Section 5.4, 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 Company or any Affiliate.


 


5.5          “Change of Control”
means any of the following occurrences:


 


(a)           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 50% or more of the voting
stock of Company; provided, however, a Change in Control
shall not be deemed to occur solely because any person acquires beneficial
ownership of more than 50% of the 


 


15

















 


voting stock of the Company
as a result of the acquisition of voting stock by the Company which reduces the
amount of Company voting stock outstanding; provided further, that if after
such acquisition by the Company such person becomes the beneficial owner of
additional Company voting stock that increases the percentage of outstanding
Company voting stock beneficially owned by such person, a Change in Control of
the Company shall then occur;


 


(b)           the majority of the Board of
Directors of Company consists of individuals other than “incumbent” directors,
which term means the members of the Board of Directors on the date hereof;
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;


 


(c)           Company adopts any plan of
liquidation providing for the distribution of all or substantially all of its
assets;


 


(d)           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


 


(e)           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, 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 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.


 


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


 


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


 


5.8          “Disability”
means, in Company’s sole discretion, Executive becomes mentally or physically
impaired or disabled such that he or she is unable to perform his or her duties
and responsibilities hereunder for a period of at least one hundred twenty
(120) days in the aggregate during any one hundred fifty (150) consecutive day
period.


 


5.9          “Equity Plan”
means any equity plan, agreement or arrangement maintained or sponsored by
Company in which Executive is a participant.


 


16

















 


5.10        “401(k) Plan”
means the Zale Corporation Savings and Investment Plan or any other qualified
retirement plan with a cash or deferred arrangement that is maintained or
sponsored by Company or any Affiliate in which Executive is a participant.


 


5.11        “Protection Period”
means the period beginning on the date that is six months prior to the
occurrence of a Change of Control and ending twenty-four (24) months following
the occurrence of a Change of Control.


 


5.12        “Qualifying Termination”


 


(a)           In the case of any
Termination of Employment other than during a Protection Period, ‘‘Qualifying
Termination” shall mean:


 


(i)            the Termination of
Employment of Executive by Company for any reason other than Cause, Disability,
or death; or


 


(ii)           the Termination of
Employment of Executive by Executive for any of the following reasons:


 


(A)                          a material
reduction by Company in Executive’s base salary or bonus eligibility unless
similar reductions apply to senior executives of Company and its subsidiaries
generally;


 


(B)                            relocation of
Company’s principal executive offices outside the Dallas/Fort Worth, Texas
Metroplex; or


 


(C)                            the assignment
to Executive by 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 Company or a material adverse change
in Executive’s titles or offices, unless such action is in lieu of termination
by Company of Executive’s employment due to Disability.


 


If Executive believes that an event specified
in this Section 5.12(a)(ii) has occurred.  Executive must notify Company of that belief
within ninety (90) days following the occurrence of such event.  Company will have thirty (30) days following
receipt of such notice (such period, the “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
Company does not take any of the foregoing actions within the Designated Period, Executive may terminate his or her employment with Company
during the fourteen-day period following the expiration of the Designated
Period.  If, during the Designated
Period, Company determines that such an event exists Company shall either (A) undertake
to cure such event during the Designated Period and provide Executive with
written notice during the Designated Period of Company’s determination that
such event has been cured, or (B) provide written notice to Executive
during the Designated Period that it does not wish to cure such event, in which
case, Executive may terminate his or her employment during the fourteen-day
period following receipt of the notice specified in this clause (B).  If, during the Designated Period, Company
determines that (1) such event does not exist or (2) Company has
cured such event pursuant to clause (A) of the preceding sentence, then (x) Executive
will not be entitled to rely on 


 


17

















 


or assert such event as a basis for a
Qualifying Termination; and (y) if Executive disagrees with Company’s
determination, Executive may file a claim pursuant to Article III within
thirty (30) days after Executive’s receipt of written notice of Company’s
determination.


 


(b)           In the case of any Termination of Employment during
a Protection Period, “Qualifying Termination” shall mean:


 


(i)            the Termination of
Employment of Executive by Company for any reason other than Cause, Disability,
or death; or


 


(ii)           the Termination of
Employment of Executive by Executive for any of the following reasons:


 


(A)                          the assignment
to Executive by Company of duties inconsistent with, or the reduction, other
than due solely to the fact that 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 a material adverse change in Executive’s titles or offices as in
effect immediately prior to a Change of Control, or any removal of Executive
from or any failure to re-elect Executive to any of such positions, except, in
each of the foregoing cases, in connection with Termination of Employment by
Company due to Cause, Disability, or death;


 


(B)                            a reduction by
Company in Executive’s base salary or bonus eligibility as in effect on the
date of a Change of Control;


 


(C)                            relocation of
Company’s principal executive offices outside the Dallas/Fort Worth, Texas
Metroplex;


 


(D)                           Company’s
requirement that Executive be based anywhere other than at Company’s principal
executive offices in the Dallas/Fort Worth, Texas Metroplex area, or if
Executive agrees to a relocation outside the area, Company’s failure to
reimburse Executive for moving and all other expenses incurred with such move;


 


(E)                             Company’s failure
to continue in effect any Company-sponsored plan that is in effect on the date
of a Change of Control (or replacement plans therefore that in the aggregate
provide substantially the same or more favorable benefits) that is either a
401(k) Plan or provides incentive or bonus compensation or reimbursement
for reasonable expenses incurred by Executive in connection with the
performance of duties with Company;


 


(F)                             any material
breach by Company of any provision of this Agreement; or


 


(G)                            any failure by Company
to obtain the assumption of this Agreement by any successor or assign of
Company.


 


18

















 


If Executive believes that an event specified
in this Section 5.12(b)(ii) has occurred, Executive must notify Company
of that belief within ninety (90) days following the occurrence of such
event.  Company will have thirty (30)
days following receipt of such notice (such period, the “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 Company does not take any of the foregoing actions within the
Designated Period, Executive may terminate his or her employment with Company
during the fourteen-day period following the expiration of the Designated
Period.  If, during the Designated
Period, Company determines that such an event exists Company shall either (A) undertake
to cure such event during the Designated Period and provide Executive with
written notice during the Designated Period of Company’s determination that
such event has been cured, or (B) provide written notice to Executive
during the Designated Period that it does not wish to cure such event, in which
case, Executive may terminate his or her employment during the fourteen-day
period following receipt of the notice specified in this clause (B).  If, during the Designated Period, Company
determines that (1) such event does not exist or (2) 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
Qualifying Termination, and (y) if Executive disagrees with Company’s
determination, Executive may file a claim pursuant to Article III within
thirty (30) days after Executive’s receipt of written notice of Company’s
determination.


 


(c)           Notwithstanding anything to
the contrary contained herein, for purposes of Section 1.2, a Qualifying
Termination shall occur only to the extent that Executive incurs a “separation
from service” with Company within the meaning of Treasury Regulation Section 1.409A-1(h).


 


(d)           In the event that Executive
is employed by a subsidiary of Company, including Zale Delaware, Inc., and
not Company, for purposes of the term “Qualifying Termination,” “Company” will
include such subsidiary.


 


5.13        “Severance Pay”
means cash severance payments in an amount equal to the product of (a) the
sum of Executive’s Base Compensation as of Termination of Employment and, in
the cases of Sections 1.1 and 1.2, Bonus (as specified in Section 5.3),
and (b) the applicable Severance Period specified in Section 5.14 provided, however,
that in the event of payment under Sections 1.3 or 1.4, the amount of any
payment received by Executive pursuant to any death or disability plan or
insurance maintained by Company on Executive’s behalf shall be deducted from
any amounts payable pursuant to this Agreement.


 


19

















 


5.14        “Severance Period”
means the following period, based on whether Executive’s Qualifying Termination
is during a Protection Period or due to Disability or death:


 


	
  QUALIFYING TERMINATION

  OTHER THAN DURING A

  PROTECTION PERIOD -

  SECTION 1.1

  	
   

  	
  QUALIFYING TERMINATION

  DURING A PROTECTION

  PERIOD - SECTION 1.2

  	
   

  	
  TERMINATION OF

  EMPLOYMENT DUE TO

  DISABILITY OR DEATH - 

  SECTIONS 1.3 AND 1.4

  
	
  6 months

  	
   

  	
  3 years

  	
   

  	
  6 months

  



 


5.15        “Termination of
Employment” means the date on which Executive ceases to perform
duties for Company or its Affiliate(s).


 


20

















 


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


 


ZALE
CORPORATION


 


 


	
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