Exhibit
10.2


SETTLEMENT
AND RELEASE AGREEMENT


This
Settlement and Release Agreement (“Agreement”) is made and entered into
by and among Frank C. Mroczka (“Employee”)
on the one hand, and Zale Corporation and
Zale Delaware, Inc. (collectively, “Zale”
or the “Company”) on the other, hereinafter collectively referred to as
the “Parties.”


RECITALS


WHEREAS, Employee had
been employed by Zale as Senior Vice President of the Company and President of
the Gordon’s Jewelers Division of the Company; and


WHEREAS,
the Parties desire to settle fully and finally, in the manner set forth herein,
all differences between them which have arisen, or which may arise, prior to,
or at the time of, the execution of this Agreement, including, but in no way
limited to, any and all claims and controversies arising out of the employment
relationship between Employee and Zale, and the cessation of Employee’s
employment with Zale, effective January 4, 2007 (the
“Separation Date”).


NOW,
THEREFORE, in consideration of the Recitals and the mutual promises, covenants,
and agreements set forth herein, the Parties covenant and agree as follows:


1.                                       Employee, for
himself and on behalf of his attorneys, heirs, assigns, successors, executors,
and administrators, hereby GENERALLY RELEASES, ACQUITS, AND DISCHARGES Zale
Corporation, Zale Delaware, Inc. and their respective current and former
parent, subsidiary, affiliated, and related corporations, firms, associations,
partnerships, and entities (collectively, all of the Zale entities are referred
to as the “Company Parties”), their successors and assigns, and the
current and former owners, shareholders, directors, officers, employees,
agents, attorneys, representatives, and insurers of said corporations, firms,
associations, partnerships, and entities, and their guardians, successors,
assigns, heirs, executors, and administrators (hereinafter collectively
referred to as the “Releasees”) from and against any and all claims,
complaints, grievances, liabilities, obligations, promises, agreements,
damages, causes of action, rights, debts, demands, controversies, costs,
losses, and expenses (including attorneys’ fees and expenses) whatsoever, under
any municipal, local, state, or federal law, common or statutory — including,
but in no way limited to, claims arising under the Employment Agreement (as
defined below), the Age Discrimination in
Employment Act of 1967, 29 U.S.C. § 621, et seq.,
as amended, Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e, et seq., as amended (including the Civil Rights Act of
1991), the Americans with Disabilities Act of 1990, 42 U.S.C. §§ 12101, et seq., as amended, the Employee Retirement Income Security
Act of 1974, (ERISA), 29 U.S.C. §§ 1001 et seq., as
amended, the Family and Medical Leave Act (“FMLA”), 29 U.S.C. §§ 2601
et seq., as amended, the Labor
Management Relations Act, 29 U.S.C. §§ 141 et seq., as
amended, the Occupational Safety and Health Act (“OSHA”), 29 U.S.C. §§
651 et seq., as amended, the Racketeer
Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961 et seq., as amended, the Sarbanes Oxley Act of 2002, the
Sabine


CONFIDENTIAL SETTLEMENT AND
RELEASE AGREEMENT



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Pilot Doctrine, the American Jobs Creation Act of 2004, the Texas
Workforce Commission Act (“TWCA”), Texas Labor Code §§ 21.001 et seq., as amended, the Texas Pay Day Law, Texas Labor Code
§§ 61.001 et seq., as amended, and/or the Texas
Worker’s Compensation Discrimination Law, Texas Labor Code §§ 451.001 et seq., as amended, or any other claims, including claims
in equity — for any actions or omissions whatsoever, whether known or unknown
and whether connected with the employment relationship between Employee and
Zale, and/or the cessation of Employee’s employment with Zale, or not, which
existed or may have existed prior to, or contemporaneously with, the execution
of this Agreement (collectively, the “Released Claim(s)”).  Furthermore, to the extent permitted by law,
Employee forever waives, releases, and covenants not to sue or file or assist
with suing or filing any complaint or claim against any Releasee with any
court, governmental agency or other entity based on a Released Claim, whether
known or unknown at the time of execution. 
Employee also waives any right to recover from any Releasee in a civil
suit brought by any governmental agency or any other individual on his behalf
with respect to any Released Claim.  This
general release covers both claims that Employee knows about and those he may
not know about, except that it does not release any claims or rights that
Employee may have under the Age Discrimination in Employment Act of 1967 (and
any amendments thereto) that arise after the date Employee signs this
Agreement.  Notwithstanding anything to
the Company contained herein, this release shall not include and shall not
limit or release Employee rights to indemnification from any Company Party as
provided by law, any indemnification agreement or similar agreement by and
between the Company and Employee or the certificates of any Company Party.


2.                                       Employee
acknowledges and agrees that he will keep the negotiations leading to this
Agreement, as well as the terms, amount, and fact of this Agreement STRICTLY
AND COMPLETELY CONFIDENTIAL, and that he will not communicate or otherwise
disclose to any employee of Zale (past, present, or future), or to any member
of the general public, the terms, amounts, copies, or fact of this Agreement,
except as may be required by law or compulsory process; provided, however,
that Employee may make such disclosures to his tax/financial advisors as long as
they agree to keep the information confidential.  If asked about any of such matters, Employee’s
response shall be that he does not care to discuss any of such matters.  In
the event of a breach of the confidentiality provisions set forth in this
paragraph of the Agreement by Employee, Zale may suspend any payments due under
this Agreement pending the outcome of litigation and/or arbitration regarding
such claimed breach of this Agreement by Employee.  The parties agree that this paragraph is a
material inducement to Zale entering into this Agreement.


3.                                       Employee
expressly acknowledges, agrees, and covenants that he will not make any public
or private statements, comments, or communication in any form, oral, written,
or electronic, which in any way could constitute libel, slander, or
disparagement of Zale or any other Releasee or which may be considered to be
derogatory or detrimental to the good name or business reputation of Zale or
any other Releasee; provided, however, that the terms of this paragraph shall
not apply to communications between Employee and his spouse, clergy, or
attorneys, which are subject to a claim of privilege existing under common law,
statute, or rule of procedure.  Employee
specifically agrees not to issue any public statement concerning his employment
at Zale and/or the cessation of such employment.   The parties agree that this



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provision is a material inducement to Zale entering into this
Agreement.  Additionally, the parties
agree that Zale may enforce this paragraph without posting a bond.


4.                                       Employee agrees
that in addition to the cessation of his employment with Zale, he shall cease
from holding any other positions as a director, officer, and/or employee with
Zale and/or any of the Releases, effective on the Separation Date.


5.                                       Employee waives
and releases forever any right and/or rights he may have to seek or obtain
employment, reemployment, and/or reinstatement with Zale and/or its
subsidiaries and agrees not to seek reemployment with any of the same.


6.                                       Employee and
Zale specifically agree that following the execution of this Agreement, neither
Party shall be bound by the terms of that certain Employment Agreement executed
by and between the Parties as of August 1, 2006 (the “Employment Agreement”),
except that Employee shall continue to be bound by all obligations contained in
paragraphs 9, 10, 11, 12 and 13 of the Employment Agreement.


7.                                       Subject to the
terms of paragraph 20 contained herein, effective ten (10) days after the
complete and proper execution of this Agreement by Employee and in exchange for
the general release set forth in this Agreement and other valuable
consideration received by the Parties, the Parties agree as follows:


(a)                                  For
a period of six (6) months from the Separation Date (the “Severance Period”),  Zale will continue to pay Employee his base
salary in effect as of the Separation Date (“Severance Pay”), which
amounts to an aggregate total of One Hundred Fifty Two Thousand Eight Hundred
Thirty Three Dollars and 32/100 cents ($152,833.32), less deductions required
by law, in consideration for the promises, covenants, agreements, and releases
set forth herein.  The Severance Pay
described in this paragraph will be paid to Employee at Zale’s regular pay
periods during the Severance Period pursuant to the direct deposit arrangement
between Employee and Zale in effect as of the Separation Date.


(b)                                 During
the Severance Period, Zale will continue to
provide Employee his medical benefits and Medical Expense Reimbursement Plan (“MERP”)
benefits, if any, in effect as of the Separation Date.  Any continued medical insurance and MERP
benefits provided pursuant to this paragraph 7(b) will count in satisfaction of
Employee’s right to continue such benefits pursuant to the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended (“COBRA”).  Employee must elect to continue his benefits
by completing and submitting the COBRA election forms to the Zale COBRA
Administrator. Through the Severance Period, Employee will only be required to
pay the employee portion of the cost of such medical benefits and such cost
will be submitted by Employee to the Zale COBRA Administrator.  After the Severance Period, Employee will
have the right to elect to continue such medical benefits for the remainder of
the COBRA continuation period by paying the full cost of such coverage to Zale’s
COBRA Administrator to the extent provided by and pursuant to the provisions of



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COBRA.  Employee will be provided with a notice of
the interaction of the extended medical insurance benefits under this Agreement
and his COBRA rights following his Separation Date. In the event that
Employee becomes eligible to receive medical and/or MERP benefits from another
employer or source, consultancy or otherwise, during the Severance Period, he
shall promptly notify Zale in writing and Zale’s obligation to provide such
benefits under this Agreement shall cease.


(c)                                  Zale will pay to Employee the value of any
remaining unused vacation time through January 4, 2007.  Zale shall pay to Employee his Supplemental
Executive Retirement Plan (“SERP”) benefit to the extent such benefit
was fully vested as of December 31, 2004, less deductions required by law,
subject to the terms of that certain letter dated December 20, 2006 from Zale
to Employee.  Employee agrees to immediately
return to Zale his employee identification badge, keys, and all Company-owned
equipment and documents and will not maintain copies of the same.  Employee further agrees to return to Zale his
Company-provided automobile no later than March 21, 2007.


(d)                                 Employee
agrees to reconcile his outstanding expenses and advances with Zale within ten
(10) days of the execution of this Agreement, and to pay Zale any outstanding
balance owed after all agreed offsets are taken; provided however, that
Employee authorizes Zale to make any deductions from his compensation,
including his Severance Pay, that are deemed necessary by Zale to comply with
state or federal laws on withholdings, to compensate Zale for property damaged
or property not returned by Employee, and/or to recover advances paid to
Employee.


(e)                                  Zale
shall provide Employee with three (3) months of outplacement services with an
entity designated by Zale.


8.                                       Employee
acknowledges and agrees that for three (3) years after the Separation Date he
shall not, on his own behalf or on behalf of any other person, partnership,
association, corporation, or other entity, directly, indirectly or through a
third party, solicit or in any manner attempt to influence or induce any
employee of Zale or its subsidiaries or affiliates to leave the employment of
Zale or its subsidiaries or affiliates. 
Employee further acknowledges and agrees that he will not at any time
use or disclose to any person, partnership, association, corporation, or other
entity any Trade Secrets (as defined in paragraph 10 herein) or confidential
information obtained while an employee of Zale, including without limitation
the names, contact information, and addresses of Zale employees.  The Parties agree that the restrictions set
forth in this paragraph are severable and independent agreements separated by
good and valuable consideration given for each and is a material inducement to
Zale entering into this Agreement.


9.                                       Employee agrees
to cooperate fully with Zale, specifically including any attorney or other
consultant retained by Zale, in connection with any pending or future
litigation, arbitration, business, or investigatory matter.  The Parties acknowledge and agree that such



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cooperation may include, but shall in no way be limited to, Employee’s
making himself available for interview by Zale, or any attorney or other
consultant retained by Zale, and providing to Zale any documents in his
possession or under his control.  Zale
agrees to provide Employee with reasonable notice of the need for assistance
when feasible.  Zale additionally agrees
to schedule such assistance in such a manner as not to interfere with any
alternative employment obtained by Employee when possible.


10.                                 Employee acknowledges
that he has had access to and become familiar with various trade secrets and
proprietary and confidential information of Zale, its subsidiaries and
affiliates, including, but not limited to: identities, responsibilities,
contact information, performance and/or compensation levels of employees, costs
and methods of doing business, systems, processes, computer hardware and
software, compilations of information, third-party IT service providers and
other Company vendors, records, sales reports, sales procedures, financial
information, customer requirements, pricing techniques, customer lists, price
lists, information about past, present, pending and/or planned Company
transactions, and other confidential information (collectively, referred to as “Trade
Secrets”) which are owned by Zale, its subsidiaries and/or affiliates and
regularly used in the operation of its business, and as to which Zale, its
subsidiaries and/or affiliates take precautions to prevent dissemination to
persons other than certain directors, officers and employees.  Employee acknowledges and agrees that the
Trade Secrets (1) are secret and not known in the industry; (2) give the
Company or its subsidiaries and/or affiliates an advantage over competitors who
do not know or use the Trade Secrets; (3) 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 (4) are valuable and special and unique
assets of Zale or its subsidiaries and/or affiliates, the disclosure of which
could cause substantial injury and loss of profits and goodwill to Zale or its
subsidiaries and/or affiliates.  


(a)                                  Employee
shall not use in any way or disclose any of the Trade Secrets, directly or
indirectly, at any time in the future, unless the information becomes public
knowledge other than as a result of an unauthorized disclosure by the
Employee.  All files, records, documents,
information, data, and similar items relating to the business of Zale, whether
prepared by Employee or otherwise coming into his possession, will remain the
exclusive property of Zale, and in any event must be promptly delivered to Zale
upon execution of this Agreement.


(b)                                 Employee
agrees that upon his receipt of any formal or informal request, requirement,
subpoena, process, or other action seeking Employee’s direct or indirect
disclosure or production of any Trade Secrets to any entity, agency, tribunal,
or person, in connection with a judicial, administrative or other proceeding,
then Employee shall promptly and timely notify Zale, and promptly and timely
provide a description and, if applicable, hand deliver a copy of such request,
requirement, subpoena, process or other action to Zale.  In all such instances, Employee irrevocably
nominates and appoints Zale (including any attorney retained by Zale) as his
true and lawful attorney-in-fact to act in Employee’s name, place and stead to
perform any act that Employee might perform to defend and protect against any
disclosure of any Trade Secret.  For
purposes of this paragraph 10, this Agreement shall be considered a Trade
Secret.



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11.                                 Employee acknowledges
and agrees that during the Severance Period he shall not, directly or
indirectly, compete with the Company by providing services to any other person,
partnership, association, corporation, or other entity that is in a “Competing
Business.”  As used herein, a “Competing
Business” is any business that engages in whole or in part in the retail sale
of jewelry in the United States, Canada and/or Puerto Rico, including, but not
limited to, specialty jewelry retailers and other retailers having jewelry
divisions or departments, and the Employee’s employment function or affiliation
with the Competing Business is directly or indirectly related to such business
of jewelry. 
The restrictions contained in this paragraph 11 shall be
tolled on a day-for-day basis for each day during which the Employee
participates in any activity in violation of such restrictions.  The parties agree that the above restrictions
on competition are completely severable and independent agreements supported by
good and valuable consideration and, as such, shall survive the termination of
this Agreement for whatever reason.  Additionally,
the parties agree that Zale may enforce this paragraph without posting a bond.


12.                                 By entering into this
Agreement, the Parties do not admit, and do specifically deny, any violation of
any contract, local, state, or federal law, common or statutory.  Neither the execution of this Agreement nor
compliance with its terms, nor the consideration provided for herein shall
constitute or be construed as an admission by either party (or any party’s
agents, representatives, attorneys, or employers) of any fault, wrongdoing, or
liability whatsoever, and the Parties acknowledge that all such liability is
expressly denied.  This Agreement has
been entered into in release and compromise of claims as stated herein and to
avoid the expense and burden of dispute resolution.


13.                                 If any provision or
term of this Agreement is held to be illegal, invalid, or unenforceable, such
provision or term shall be fully severable; this Agreement shall be construed
and enforced as if such illegal, invalid, or unenforceable provision had never
comprised part of this Agreement; and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by
the illegal, invalid, or unenforceable provision or by its severance from this
Agreement.  Furthermore, in lieu of each
such illegal, invalid, or unenforceable provision or term there shall be added
automatically as a part of this Agreement another provision or term as similar
to the illegal, invalid, or unenforceable provision as may be possible and that
is legal, valid, and enforceable.


14.                                 This Agreement
constitutes the entire Agreement of the Parties, and supersedes all prior and
contemporaneous negotiations and agreements, oral or written, with respect to
its subject matter, except that this Agreement specifically incorporates
paragraphs 9, 10, 11, 12 and 13 of the Employment Agreement. No
representations, oral or written, are being relied upon by either party in
executing this Agreement other than the express representations of this
Agreement.  This Agreement cannot be
changed or terminated without the express written consent of the Parties.


15.                                 This Agreement shall be exclusively governed by and
construed in accordance with the laws of the State of Texas without regard to
its conflicts of laws provisions, except where preempted by federal law.



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16.                                The Parties agree that any controversy or claim
(including all claims pursuant to common and statutory law) relating to this
Agreement or arising out of or relating to the subject matter of this Agreement
shall 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 shall be
administered by a single neutral arbitrator specializing in employment law and
admitted to practice law in Texas for a minimum of ten (10) years.  Any such arbitration proceeding shall take
place in Dallas County, Texas and shall 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 shall issue a reasoned award explaining the decision, the
reasons for the decision and any damages awarded.  The arbitrator’s decision will be final and
binding.  The judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.  This provision can be enforced
under the Federal Arbitration Act.


(a)                                  As
the sole exception to the exclusive and binding nature of the arbitration
commitment set forth above, the Employee and the Company agree that the Company
shall have the right to initiate an action in a court of competent jurisdiction
in order to request temporary, preliminary and permanent injunctive or other
equitable relief, including specific performance, to enforce the terms of
paragraphs 2, 3, 5, 6, 7, 8, 9, 10, 11, 16, 18 and 19 of this Agreement and paragraphs
9, 10, 11, 12 and 13 of the Employment Agreement without the necessity of
proving inadequacy of legal remedies or irreparable harm or posting bond.  However, nothing in this paragraph 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.


(b)                                 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 in question to
such narrower scope as it determines to be reasonable and enforceable.


(c)                                  In
the event of arbitration under the terms of this Agreement, the fees charged by
AAA and/or the individual arbitrator shall be borne equally by the
Parties.  The Parties shall each bear
their own costs and attorneys’ fees incurred in arbitration; provided,
however, that should a Party to this Agreement sue in court or bring an
arbitration action against the other Party to this Agreement for a breach of
any provision of this Agreement or regarding a dispute arising from the subject
matter of this Agreement, the prevailing Party shall 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.



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(d)                                 Zale
may suspend any payments due under this Agreement pending the outcome of
litigation and/or arbitration regarding a breach of any provision of this
Agreement or regarding a dispute arising from the subject matter of this
Agreement.


17.                                One or more waivers of
a breach of any covenant, term, or provision of this Agreement by any Party shall
not be construed as a waiver of a subsequent breach of the same covenant, term,
or provision, nor shall it be considered a waiver of any other then existing or
subsequent breach of a different covenant, term, or provision.


18.                                By executing this
Agreement, Employee acknowledges that (a) this Agreement has been reviewed with
him by a representative of Zale; (b) he has had at least twenty-one (21)
days to consider the terms of this Agreement and has considered its terms for
that period of time or has knowingly and voluntarily waived his right to do so;
(c) he has been advised by Zale to consult with an attorney regarding the terms
of this Agreement; (d) he has consulted with, or has had sufficient opportunity
to consult with, an attorney of his own choosing regarding the terms of this
Agreement; (e) any and all questions regarding the terms of this Agreement have
been asked and answered to his complete satisfaction; (f) he has read this
Agreement and fully understands its terms and their import; (g) except as
provided by this Agreement, he has no contractual right or claim to the
benefits described herein; (h) the consideration provided for herein is good
and valuable; and (i) he is entering into this Agreement voluntarily, of his
own free will, and without any coercion, undue influence, threat, or
intimidation of any kind or type whatsoever.


19.                                By executing this
Agreement, Employee acknowledges that he (i) is not relying upon any
statements, understandings, representations, expectations, or agreements other
than those expressly set forth in this Agreement;  (ii) has made his own investigation of the
facts and is relying solely upon his own knowledge and the advice of his own
legal counsel; and (iii) knowingly waives any claim that this Agreement was
induced by any misrepresentation or nondisclosure and any right to rescind or
avoid this Agreement based upon presently existing facts, known or
unknown.  The Parties stipulate that each
Party is relying upon these representations and warranties in entering into this
Agreement.  These representations and
warranties shall survive the execution of this Agreement.


20.                                Employee may revoke
this Agreement, in writing, by hand delivered notice to Zale’s Senior Vice
President of Human Resources, Mary Ann Doran, within seven (7) days of the date
of Employee’s execution of this Agreement, and the Agreement shall not become
effective and enforceable until such period has expired (the “Revocation
Period”).  Employee acknowledges and
agrees that he will not receive the benefits provided by this Agreement if he
revokes this Agreement.  Employee also
acknowledges and agrees that if Zale has not received his notice of revocation
of this Agreement prior to the expiration of the Revocation Period, Employee
will have forever waived his right to revoke this Agreement, and this Agreement
shall thereafter be enforceable and have full force and effect.


21.                                Any term or provision
of this Agreement which must survive the termination of this Agreement in order
to be effective shall so survive such termination including, without



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limitation, the terms and provisions of paragraphs 2, 3, 4, 5, 6, 8, 9,
10, 11, 12, 13, 14, 15, 16, 17, 18 and 19.


THIS
AGREEMENT CONTAINS A PROVISION REQUIRING THE PARTIES TO RESOLVE ANY DISPUTES BY
ARBITRATION.


EXECUTED
in Flower Mound, Texas on this 21day of February, 2007.


	
  Date: 2/21/07

  	
   

  	
  /s/ Frank C. Mroczka

  	
   

  	
   

  
	
   

  	
   

  	
  FRANK C. MROCZKA

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  



 


EXECUTED in Irving, Texas on this 21st day of February, 2007.


	
  

  	
   

  	
  ZALE CORPORATION

  
	
   

  	
   

  	
   

  
	
  Date: 2/21/07

  	
  By:

  	
  /s/ Mary Ann Doran

  	
   

  
	
   

  	
   

  	
  Its:

  	
  SVP, Human
  Resources

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
						



 


EXECUTED in Irving, Texas on this  21st day
of February, 2007.


	
  

  	
   

  	
  ZALE DELAWARE, INC.

  
	
   

  	
   

  	
   

  
	
  Date: 2/21/07

  	
  By:

  	
  /s/ Mary Ann Doran

  	
   

  
	
   

  	
   

  	
  Its:

  	
    SVP,
  Human Resources

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
						



 



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