Exhibit 10.4


 


AMENDMENT
TO THE ZALE CORPORATION

2003 STOCK INCENTIVE PLAN


 


1.                                       By
deleting the existing Section 2(k) and substituting therefor the
following:


 


“(k)                            ‘Incentive
Award’ shall mean an Option, Tandem SAR, Stand-Alone SAR, share of
Restricted Stock, share of Phantom Stock, Stock Bonus, or a Restricted Stock
Unit (each defined herein) granted pursuant to the terms of the Plan.”


 


2.                                       By
adding new Section 2(z), as follows:


 


“(z)                             ‘Performance
Goals’ means the measurable performance objectives, if any, established by
the Committee for a Performance Period that are to be achieved with respect to
an Incentive Award granted to a Participant under the Plan. Performance Goals
may be described in terms of Company-wide objectives or in terms of objectives
that are related to performance of the division, department or function within
the Company in which the Participant receiving the Incentive Award is employed
or on which the Participant’s efforts have the most influence.  The achievement of the Performance Goals
established by the Committee for any Performance Period will be determined
without regard to the effect on such Performance Goals of any acquisition or
disposition by the Company of a trade or business, or of substantially all of
the assets of a trade or business, during the Performance Period and without
regard to any change in accounting standards by the Financial Accounting
Standards Board or any successor entity. The Performance Goals established by
the Committee for any Performance Period under the Plan will consist of one or
more of the following:


 


	
   

  	
  (i)

  	
   

  	
  earnings
  per share and/or growth in earnings per share in relation to target
  objectives;

  
	
   

  	
  (ii)

  	
   

  	
  operating
  cash flow and/or growth in operating cash flow in relation to target
  objectives;

  
	
   

  	
  (iii)

  	
   

  	
  cash
  available in relation to target objectives;

  
	
   

  	
  (iv)

  	
   

  	
  net
  income and/or growth in net income in relation to target objectives;

  
	
   

  	
  (v)

  	
   

  	
  revenue
  and/or growth in revenue in relation to target objectives;

  
	
   

  	
  (vi)

  	
   

  	
  total
  shareholder return (measured as the total of the appreciation of and
  dividends declared on the Common Stock) in relation to target objectives;

  
	
   

  	
  (vii)

  	
   

  	
  return
  on invested capital in relation to target objectives;

  
	
   

  	
  (viii)

  	
   

  	
  return
  on shareholder equity in relation to target objectives;

  
	
   

  	
  (ix)

  	
   

  	
  return
  on assets in relation to target objectives;

  
	
   

  	
  (x)

  	
   

  	
  return
  on common book equity in relation to target objectives;

  
	
   

  	
  (xi)

  	
   

  	
  economic
  value added (relative or absolute); and

  
	
   

  	
  (xiv)

  	
   

  	
  working
  capital targets.

  



 


If the
Committee determines that, as a result of a change in the business, operations,
corporate structure or capital structure of the Company, or the manner in which
the Company conducts its business, or any other events or circumstances, the
Performance Goals are no longer suitable, the Committee may in its discretion
modify such Performance Goals or the related minimum acceptable level of
achievement, in whole or in part, with respect to a period as the Committee
deems appropriate and


 





















 


equitable, except where such action would
result in the loss of the otherwise available exemption of the Incentive Award
under Section 162(m) of the Code. 
In such case, the Committee will not make any modification of the
Performance Goals or minimum acceptable level of achievement.”


 


3.                                       By
adding new Section 2(aa), as follows:


 


“(aa)                      ‘Performance
Period’ means, with respect to an Incentive Award, a period of time within
which the Performance Goals relating to such Incentive Award are to be
measured. The Performance Period will be established by the Committee at the
time the Incentive Award is granted.”


 


4.                                       By
adding new Section 2(bb), as follows:


 


“(bb)                    ‘Restricted
Stock Unit’ refers to a restricted stock unit as described in Section 10A.”


 


5.                                       By
adding new Section 2(cc), as follows:


 


“(cc)                      ‘Stock
Incentive Program’ means a written program established by the Committee,
pursuant to which Incentive Awards are awarded under the Plan under terms,
conditions and restrictions set forth in such written program.”


 


6.                                       By
deleting Section 3(e) and substituting the following:


 


“(e)                            Total Grants for Awards
Other than Options


 


The total
number of shares of Common Stock with respect to which Tandem SARs, Stand Alone
SARs, shares of Restricted Stock, Restricted Stock Units, shares of Phantom
Stock and Stock Bonuses may collectively be granted shall not exceed 30% of the
total number of shares of Common Stock with respect to which all Incentive
Awards have been or may be granted under the Plan.”


 


7.                                       By
deleting the first paragraph of Section 6 and substituting therefor the
following:


 


“The Committee
may grant Options, Tandem SARS, Stand-Alone SARS, shares of Restricted Stock,
shares of Phantom Stock, Stock Bonuses, and Restricted Stock Units in such
amounts and with such terms and conditions as the Committee shall determine,
subject to the provisions of the Plan.”


 


8.                                       By
adding new Section 10A, as follows:


 


“10A.                 Terms and Conditions of Restricted Stock Units


 


A Restricted
Stock Unit shall entitle the Participant to receive, at a specified future
date, a number of shares of Company Stock equal to a specified or determinable
number of Restricted Stock Units granted by the Committee, or, in the Committee’s
sole discretion at the time thereof, an amount equal to the then Fair Market
Value of such shares.  At the time of the grant, the Committee
must determine the target number of


 





















 


Restricted Stock Units subject to a
Restricted Stock Units Incentive Award and (i) the period over which such
Restricted Stock Unit shall vest and in what proportions or (ii) the
Performance Period and the Performance Goals applicable to the determination of
the ultimate settlement of the Restricted Stock Unit.


 


(a)                                  Settlement.  Settlement with respect to Restricted Stock
Units may be made by the Company in shares of Company Stock, or in cash, as
provided in the applicable Plan Agreement or Stock Incentive Program or, in the
absence of such provision, as the Committee may determine in its sole
discretion.


 


(b)                                 Conditions
to Settlement.  Each Restricted Stock
Unit granted under the Plan shall be settled at the end of the vesting period
or Performance Period or upon the occurrence of an event, and in such number of
shares or amount, as the Committee shall specify in the applicable Plan
Agreement or Stock Incentive Program; provided, however, that in no event will payment
occur later than two and one-half (2 1⁄2) months after the later of (i) the
end of the Participant’s first taxable year in which the amount is no longer
subject to a substantial risk of forfeiture, or (ii) the end of the
Company’s first taxable year in which the amount is no longer subject to a
substantial risk of forfeiture.”