Exhibit 10.2


 


FORM OF


[AMENDED AND RESTATED]


EMPLOYMENT
SECURITY AGREEMENT(1)


 


This [Amended
and Restated] Employment Security Agreement (the “Agreement”), dated as
of December 22, 2008, 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 an
[eighteen (18)] [twenty-four (24)] 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 


 






(1) Bracketed language indicates
variations among agreements.


 

















 


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 


 


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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.


 


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).


 


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(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 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.


 


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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 Company’s regular payroll practices and procedures, over a
twelve (12) 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
twelve (12) 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.


 


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(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.


 


(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.


 


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(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.


 


1.7                               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 


 


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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 (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 


 


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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 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.


 


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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 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 


 


10

















 


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, 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 


 


11

















 


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,
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.


 


12

















 


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 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.


 


13

















 


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.


 


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 


 


14

















 


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 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).]


 


[“Bonus”
means the amount payable to Executive, if any, under the Zale Corporation Bonus
Plan (or any successor plan providing generally for bonuses to senior
management of Company or its Affiliates) in accordance with the following:


 


	
  UNRELATED TO CHANGE OF

  CONTROL – SECTION 1.1

  	
   

  	
  RELATED TO A CHANGE OF

  CONTROL – SECTION 1.2

  	
   

  	
  DISABILITY OR DEATH –

  SECTIONS 1.3 AND 1.4

  
	
  Average Bonus

  	
   

  	
  Target Bonus

  	
   

  	
  None

  



 


For these purposes, (a) “Average
Bonus” will mean 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); and (b) “Target Bonus”
will 


 


15

















 


mean the targeted annual
incentive bonus as determined under the applicable Bonus Plan as established by
Company’s Board of Directors for the fiscal year in which the Termination of
Employment occurs.]


 


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 30% 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 30% of the 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 


 


16

















 


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.


 


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 


 


17

















 


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 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;


 


18

















 


(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.


 


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.


 


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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.


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

  
	
  [1.5] [2] years

  	
   

  	
  3 years

  	
   

  	
  1 year

  



 


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


 


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


 


	
  ZALE CORPORATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXECUTIVE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
					



 


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