Exhibit
10.5


ZALE DELAWARE, INC.

PRE-409A SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2005


ARTICLE I


ESTABLISHMENT AND PURPOSE


1.1                                 Establishment.  Zale
Delaware, Inc. (the “Company”) established the Zale Delaware, Inc. Supplemental
Executive Retirement Plan (the “SERP”), effective September 15, 1995.  Effective December 31, 2004, the Company
amended the SERP to (i) cease benefit accruals and (ii) bifurcate the SERP into
two separate plans, one that is subject to the requirements of section 409A of the
Code (as defined herein) and one that is not. 
By this instrument, the Company desires to amend and restate that
portion of the SERP that is not subject to the requirements of section 409A of
the Code.  Such amended and restated SERP
will be referred to herein as the “Plan.”


1.2                                 Purpose. The purpose of the Plan is to provide eligible executives with the
opportunity to receive each year after retirement, payments equal to a portion
of their final average pay.  The Plan is
meant to provide a long-term reward for executives that recognizes their
contribution to the Company’s success throughout their careers.


ARTICLE II


DEFINITIONS


Unless the context otherwise requires, the terms used
herein will have the meanings set forth below:


2.1                                 “Base
Salary” means the regular salary paid to a Participant by the Company, excluding bonuses, benefits under employee benefit plans,
fringe benefits, and any other extra or additional payments made to or for the
benefit of such Participant.  Effective
December 31, 2004, benefit accruals under the Plan have ceased.  Accordingly, no Base Salary earned after such
date will be counted for purposes of the Plan.


2.2                                 “Benefit”
means the monetary amount to be paid a vested Participant under the Plan.


2.3                                 “Bonus
Points” means the number of points awarded to a Participant under the
formula described in Section 4.2. 
Effective December 31, 2004, benefit accruals under the Plan have ceased.  Accordingly, no Bonus Points will be awarded
after such date.


2.4                                 “Bonus
Target” means a goal for net income established each Plan Year by the
Compensation Committee.


2.5                                 “Change
of Control” will be deemed to have occurred if, subsequent to the Effective
Date of this Plan,













(a)                                  any
“person” (within the meaning of Section 13(d) of the Exchange Act) becomes the
beneficial owner (within the meaning of Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of either (1) a majority of the Company’s
outstanding Common Stock or (2) securities of the Company representing a
majority of the combined voting power of the Company’s then outstanding voting
securities, except that there will be no Change of Control if such person (i)
becomes such a beneficial owner solely as the result of the acquisition of the
outstanding Common Stock or other outstanding voting securities by the Company
or (ii) is an employee benefit plan or related trust sponsored or maintained by
the Company or any corporation or other entity controlled by the Company;


(b)                                 during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company cease, at any time after the beginning of such period,
for any reason to constitute a majority of the Board of Directors of the
Company, unless the election of any such new director was nominated, effected,
or ratified by at least two-thirds of the directors still in office who were
directors at the beginning of such two-year period or whose election was
previously so nominated, effected, or ratified;


(c)                                  a reorganization, merger, or consolidation of
the Company with one or more other corporations or other entities, unless, in
any case, (1) at least a majority of the Company’s outstanding Common Stock (or
the equivalent equity security of the other surviving or resulting corporation
or other entity) and at least a majority of the combined voting power of the
Company’s or other surviving or resulting corporation’s or other entity’s
outstanding voting securities are beneficially owned, directly or indirectly,
after such reorganization, merger, or consolidation by all or substantially all
of the persons who were the beneficial owners, respectively, of a majority of
the Company’s outstanding Common Stock and a majority of the combined voting
power of the Company’s then outstanding voting securities immediately before
such reorganization, merger, or consolidation in substantially the same
proportions as their beneficial ownership thereof immediately before such
reorganization, merger or consolidation, and (2) at least a majority of the
members of the board of directors or other governing body of the Company or the
other corporation or other entity surviving or resulting from such
reorganization, merger, or consolidation were, or were approved by at least two-thirds
of the, members of the Board of Directors of the Company at the time of the
execution of the initial agreement providing for such reorganization, merger or
consolidation;


(d)                                 the sale or other disposition of all or
substantially all of the assets of the Company to one or more other
corporations or other entities, unless the conditions set forth in subclauses
(1) and (2) of subsection (c) above are satisfied with respect to the acquiring
corporation or other entity (and, as applicable, with respect to the time of
the initial agreement providing for such sale or other disposition of assets);
or


(e)                                  the dissolution and complete liquidation of
the Company.


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


2.7                                 “Company” means Zale Delaware, Inc.


2.8                                 “Compensation Committee” means the
Compensation Committee of the Company.



 2
 









2.9                                 “Disabled” means the inability of a
Participant to perform the duties of his or her position as determined by a
physician approved by the Compensation Committee.


2.10                           “ERISA” means the Employee Retirement
Income Security Act of 1974, as amended.


2.11                           “Final Average Pay” means the average
of the monthly Base Salary received by the Participant from the Company in the
60-month period ending immediately prior to the Participant’s retirement or
other termination from the Company. Effective December 31, 2004, benefit
accruals under the Plan ceased. 
Accordingly, no Base Salary earned after such date will be included for
purposes of determining a Participant’s Final Average Pay.


2.12                           “Maximum Bonus Target” means the
highest goal for net income established each year by the Compensation
Committee.  Effective December 31, 2004,
benefit accruals under the Plan ceased. 
Accordingly, no Maximum Bonus Targets will be established by the Compensation
Committee after such date.


2.13                           “Participant” means an executive who
participates in the Plan as provided in Article III.


2.14                           “Plan” means the Zale Delaware, Inc. Pre-409A
Supplemental Executive Retirement Plan set forth in this document, as it may be
amended from time to time.


2.15                           “Plan Year” means August I through
July 31.


2.16                           “Years of Service” means a 12-month
period of continuous service by a Participant for the Company or (to the extent
the Compensation Committee authorizes) an affiliate of the Company.  Only service after September 14, 1995 is
counted for the purpose of calculating Years of Service; provided, however,
that for any Participant who was employed by the Company in an eligible position
for the entire period from September 14, 1995 to July 31, 1996, that
Participant will be considered to have one full Year of Service as of July 31,
1996.


ARTICLE III


ELIGIBILITY


3.1                                 Eligibility. The classes of executives who are designated by the Company as
members of the “Management Group” who hold the office of Corporate Vice
President, Division Senior Vice President and all higher executive offices, are
eligible to be Participants in the Plan. 
Effective as of December 31, 2004 benefit accruals under the Plan have
been discontinued and no new executives will be designated by the Company as
Participants in the Plan.  Rather, the
only Participants in the Plan will be those Participants as of December 31,
2004 who were fully vested in their Benefit under the Plan.  Those Participants who were not fully vested
in their Benefit under the Plan as of December 31, 2004 will be participants in
the Zale Delaware, Inc. 409A Supplemental Executive Retirement Plan.


3.2                                 Loss of Eligibility.  If
an individual ceases to be an individual listed in Section 3.1, he or she will
no longer participate in the Plan.  Loss
of eligibility will not result in a forfeiture of a Participant’s Benefit previously
earned under the Plan and such Benefit will be paid to the Participant pursuant
to the terms hereof.



 3
 









ARTICLE IV


DETERMINATION OF BENEFITS


4.1                                 Calculation of Benefit.  Each
Participant who is vested as determined in Section 4.3 is entitled to payment
of his Benefit at the time and in the form described in Article V. The
Participant’s Benefit will be monthly payments continuing over the life of the
Participant commencing on the first day of the month immediately following the
Participant’s 65th birthday, with the amount of each payment determined under
the following formula:


Bonus Points x Final Average Pay

100


If a Participant requests,
as allowed in Article V, that his Benefit commence other than on the first day
of the month immediately following the Participant’s 65th birthday, or that his
Benefit be paid in a form other than monthly payments for the life of the Participant,
then the Benefit to be paid to the Participant and, if applicable, his
surviving spouse, will be the actuarial equivalent of the Benefit payable to
the Participant commencing on the first day of the month immediately following
the Participant’s 65th birthday and ending on the last day of the month in
which the Participant dies.  Actuarial
equivalence will be determined using the following actuarial assumptions.  The applicable interest rate will be that of
30-year Treasury securities as of the first day of the calendar year in which
the Benefits commence.  The mortality
assumption will be based on the 1983 group annuity mortality tables.


4.2                                 Bonus Points.  Each
Plan Year prior to January 1, 2005, the Compensation Committee will set a Bonus
Target and a Maximum Bonus Target.  In
each Plan Year that the Company achieves at least its Bonus Target, each
Participant will be credited with a number of Bonus Points based on the
following schedule:


(a)                                  No points if below Bonus Target;


(b)                                 1 point at Bonus Target;


(c)                                  2 points at 50% of Maximum Bonus Target; or


(d)                                 3 points at 100% of Maximum Bonus Target.


A Participant may accrue
from 0 to 30 points, depending on Company performance and the number of Plan
Years he or she participates in the Plan.


4.3                                 Vesting.  A Participant vests in his or
her Benefit after completing five Years of Service following September 15,
1995.  Service prior to September 15,
1995 does not count as Years of Service. 
However, in its sole and absolute discretion, the Compensation Committee
may accelerate vesting for any Participant. 
In the event of a Change of Control, the Benefits of all Participants
will automatically vest irrespective of each Participant’s Years of
Service.  Further, a Participant’s
Benefit will become fully vested if he dies or becomes Disabled while employed
by the Company.  All Participants in the
Plan were fully vested in their Benefit as of December 31, 2004, based on their
Years of Service performed after September 15, 1995.



 4
 









ARTICLE V


PAYMENT OF BENEFITS


5.1                                 Retirement.  If a Participant retires on or
after attaining age 65, Benefits will begin on the first day of the month after
the Participant’s retirement.  The normal
form of payment is an annuity providing monthly benefits for the life of the
Participant.  If the Participant retires
after attaining age 62, but before attaining age 65, the Compensation
Committee, in its sole and absolute discretion, may authorize payments
commencing as of the first day of any month after the Participant’s retirement.  Section 5.5 of the Plan sets forth the forms
of payment under which a Participant’s Benefits may be paid.


5.2                                 Death.  If a Participant dies while
actively employed, the Participant’s surviving spouse will be eligible to begin
receiving the Participant’s Benefit in the form of monthly payments for the
life of the surviving spouse, commencing on the first day of the month
following the date the Participant would have attained age 65.  In its sole and absolute discretion, the Compensation
Committee may authorize payments to the Participant’s surviving spouse
commencing on an earlier date.  The
Benefits payable to the surviving spouse will have an actuarial value
(calculated using the assumptions prescribed in Section 4.1) equal to the
Benefits that would have been paid to the Participant commencing at age 65,
based on the Participant’s Final Average Pay and Bonus Points as of the earlier
of December 31, 2004 or the date of the Participant’s death.  If the Participant has no surviving spouse,
no death benefits are payable. Section 5.5 of the Plan sets forth the forms of
payment under which a Participant’s Benefits may be paid.


5.3                                 Disability.  If a Participant becomes
Disabled, his Benefit will become payable commencing on the first day of the
month after his or her Company-provided disability benefits cease. Section 5.5
of the Plan sets forth the forms of payment under which a Participant’s
Benefits may be paid.


5.4                                 Other Termination of Service.  If
the employment of a Participant terminates for a reason other than death or
Disability, prior to the date the Participant attains age 62, the payment of
his or her vested Benefits, if any, will commence on the first day of the month
immediately after he or she attains age 65, unless the Compensation Committee,
in its sole and absolute discretion, elects to commence payments on an earlier
date.  Section 5.5 of the Plan sets forth
the forms of payment under which a Participant’s Benefits may be paid.


5.5                                 Form of Payment.  The
normal form of payment of the Benefit is monthly payments for the life of the
Participant.  If the Participant prefers,
he or she may elect to receive the Benefit in the form of a joint and survivor
annuity calculated as provided in Section 4.1. A joint and survivor annuity is
a form of payment providing monthly payments for the life of the Participant,
followed by payments to the Participant’s surviving spouse, if any, after the
Participant’s death for the remainder of the surviving spouse’s life, equal to
50% of the monthly amount payable during the life of the Participant.  In addition, the Compensation Committee, in
its sole and absolute discretion, may elect to pay a Participant’s benefit in
the form of a lump sum.


5.6                                 Withholding of Taxes.  The
Company will withhold from Benefit payments made hereunder any taxes required
to be withheld by any law or regulation of the federal, state, or local
government.



 5
 









ARTICLE VI


ADMINISTRATION


6.1                                 Authority of Compensation Committee.  The
Compensation Committee will have sole and absolute power and authority to
interpret, construe and administer the Plan. 
The Compensation Committee’s interpretation and construction of the Plan
and actions hereunder will be binding and conclusive on all persons and for all
purposes.  The Compensation Committee may
designate certain Company employees to assist in the administration of the
Plan.  In addition, the Compensation
Committee may employ attorneys, accountants, actuaries and other professional
advisors to assist the Compensation Committee in its administration of the
Plan.  The Company will pay the
reasonable fees of any such advisor employed by the Compensation
Committee.  To the extent permitted by
law, the Compensation Committee, the Board or any employee of the Company will not
be liable to any person for any action taken or omitted in connection with the
interpretation and administration of the Plan unless attributable to his or her
own willful misconduct or lack of good faith.


6.2                                 Indemnification of Employees of the Company.  The
Company hereby agrees to indemnify, jointly and severally, the Compensation
Committee and all employees of the Company against any and all claims, losses,
damages or expenses, including counsel fees, incurred by them, and any
liability, including any amounts paid in settlement with their approval arising
from their action or failure to act with respect to any matter relating to the
Plan, except when the same is judicially determined to be attributable to their
willful misconduct or lack of good faith. 
The indemnification provided by this Section 6.2 will survive the
termination of the Plan and will be binding on the Company’s successors and
assigns.


6.3                                 Cost of Administration.  The
cost of this Plan and the expenses of administering the Plan will be paid by
the Company.


ARTICLE VII


CLAIMS PROCEDURE


7.1                                 Claim.  Any person claiming a benefit,
requesting an interpretation or ruling under the Plan, or requesting
information under the Plan will present the request in writing to the
Compensation Committee, which will respond in writing as soon as possible.  Claims for Benefits other than those payable
on account of Disability will be resolved pursuant to the following claims
procedure.  In the case of a claim for
Disability benefits, such claim will be resolved under the claims procedure applicable
to Disability claims set forth in regulations issued under section 503 of ERISA
which are incorporated herein by this reference.


7.2                                 Denial of Claim.  If
the claim or request is denied, the written notice of denial will state:


(a)                                  The reasons for denial, with specific reference
to the Plan provisions on which the denial is based.


(b)                                 A description of any additional material or
information required and an explanation of why it is necessary.



 6
 









(c)                                  An explanation of the Plan’s claim review
procedure including the claimant’s right to file an action under section 502(a)
of ERISA upon exhaustion of the Plan’s claim review procedure.


7.3                                 Review of Claim.  Any
person whose claim or request is denied or who has not received a response
within thirty (30) days, may request review by notice in writing received by
the Compensation Committee within seventy-five (75) days after the date of the
notice of denial (or failure to receive a response).  The claim or request will be reviewed by the
Compensation Committee, who may, but will not be required to, grant the
claimant a hearing.  On review, the
claimant may have representation, examine pertinent documents and submit issues
and comments in writing.  The decision on
review will normally be made within sixty (60) days.  If an extension of time is required for a
hearing or other special circumstance, the claimant will be notified and the
time limit will be one hundred twenty (120) days.  The decision will be in writing, and if the
claim is denied, will state the reasons for denial, will reference the relevant
Plan provisions on which the denial is based and will explain the Plan’s claim
review procedure, including the claimant’s right to file an action under
section 502(a) of ERISA upon exhaustion of the Plan’s claim review procedure.


7.4                                 Appeal of Decision on Review.  If
the claimant does not agree with the decision of the Compensation Committee on
review of the claim, the claimant may appeal the decision of the Compensation
Committee to the Board of Directors of the Company by notice in writing
received by the Board of Directors within seventy-five (75) days after the date
of the decision on review.


7.5                                 Final Decision.  The
decision on appeal will normally be made within sixty (60) days.  If an extension of time is required for a
hearing or other special circumstance, the claimant will be notified and the
time limit will be one hundred twenty (120) days.  The decision of the Board of Directors on
appeal will be in writing and, if the claim is denied, will state the reasons
for denial, will reference the relevant Plan provisions and will advise the
claimant of his right to file an action under section 502(a) of ERISA.  All decisions on appeal will be final and
bind all parties concerned.


ARTICLE VIII


AMENDMENT AND TERMINATION


8.1                                 Amendment.  Subject to the consent
requirements of this Section 8.1, the Board of Directors of the Company, on a
favorable vote of at least 75% of the directors, will have the right to amend
this Plan at any time and from time to time, including a retroactive
amendment.  Any such amendment will become
effective upon the date stated therein, except as otherwise provided in such
amendment.  No amendment will decrease or
restrict Benefits, whether vested or not, earned as of the date of execution of
such amendment without the consent of the affected Participant or
Participants.  Further, no amendment may
extend the date that nonvested benefits would otherwise become vested without
the consent of the affected Participant or Participants.  Any amendment approved by the Board of Directors
may be signed by the Chief Executive Officer or the Secretary of the Company.


8.2                                 Termination of the Plan.  The
Company has established this Plan with the bona fide intention and expectation
that it will deem it advisable to continue it in effect.  However, the Board of Directors of the
Company, on a favorable vote of 75% of at least the directors, may



 7
 









terminate
the Plan in its entirety at any time.  In
such event each Participant will become fully vested in his Benefit earned as
of the date of termination.


ARTICLE IX


GENERAL PROVISIONS


9.1                                 Rights Against the Company.  The
Plan will not be deemed to constitute a contract between the Company and any
Participant.  Nothing contained in the
Plan will be deemed to interfere with the right of the Company to terminate any
Participant at any time, without regard to the effect such termination may have
on any rights under the Plan.


9.2                                 Funding.  The Company intends that the
Plan will constitute an “unfunded plan” for purposes of the Code and, to the
extent applicable, Title I of ERISA, and that any employee or spouse of an
employee eligible to receive benefits under the Plan will have the status of an
unsecured general creditor of the Company as to the benefits provided pursuant
to the Plan or assets identified specifically by the Company as a reserve for
the discharge of its obligations under the Plan.


9.3                                 Payment Due to an Individual Who is Incapable
of Managing His or Her Affairs.  If the Compensation Committee finds that any
person to whom any payment is payable under the Plan is unable to care for his
or her affairs because of mental or physical illness, accident, or death, or is
a minor, any payment due (unless a prior claim therefor will have been made by
a duly appointed guardian, committee or other legal representative) may be paid
to the spouse, a child, a parent, a brother or sister or any person deemed by
the Compensation Committee, in its sole discretion, to have incurred expenses
for such person otherwise entitled to payment, in such manner and proportions
as the Compensation Committee may determine. 
Such payments will be a complete discharge of the liabilities of the
Company under this Plan, and the Company will have no further obligation to see
to the application of any money so paid.


9.4                                 Spendthrift Clause.  No
right, title or interest of any kind in the Plan will be transferable or
assignable by any Participant or surviving spouse of a Participant or be
subject to alienation, anticipation, encumbrance, garnishment, attachment,
execution or levy of any kind, whether voluntary or involuntary, nor subject to
the debts, contracts, liabilities, engagements, or torts of the Participant or
surviving spouse.  Any attempt to
alienate, anticipate, encumber, sell, transfer, assign, pledge, garnish, attach
or otherwise subject to legal or equitable process or encumber or dispose of
any interest in the Plan will be void.


9.5                                 Severability.  In
the event that any provision of this Plan will be declared illegal or invalid
for any reason, said illegality or invalidity will not affect the remaining
provisions of this Plan but will be fully severable and this Plan will be
construed and enforced as if said illegal or invalid provision had never been
inserted herein.


9.6                                 Construction.  The
article and section headings and numbers are included only for convenience of
reference and are not to be taken as limiting or extending the meaning of any
of the terms and provisions of this Plan. 
Whenever appropriate, words used in the singular will include the plural
or the plural may be read as the singular. 
When used herein, the masculine gender includes the feminine gender.



 8
 









9.7                                 Governing Law.  The
validity and effect of this Plan, and the rights and obligations of all persons
affected hereby, will be construed and determined in accordance with the laws
of the State of Texas.


IN WITNESS WHEREOF, the
Company has executed this Plan on the 24th day of May, 2007, to reflect the
Plan as amended and restated effective January 1, 2005.


	
  

  	
  ZALE
  DELAWARE INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Mary Ann
  Doran

  
	
   

  	
   

  	
  Mary Ann Doran

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SVP, Human
  Resources

  
	
   

  	
   

  	
  (Title)

  



 



 9