exv10w14



 





Exhibit 10.14




ZALE CORPORATION




CHANGE OF CONTROL AGREEMENT




     This Change of Control Agreement (“Agreement”) dated as of this       day of
August 2004, between Zale Corporation (the “Company”), and                   (the
“Key Employee”).



     WHEREAS, the Company’s Board of Directors has determined that it is in the
best interests of the Company to provide certain benefits to the Key Employee
upon termination of employment as a result of a Change of Control of the
Company; and



     WHEREAS, the severance benefits payable by the Company to the Key Employee
as provided herein are intended to ensure that the Key Employee receives
reasonable compensation given the specific circumstances of the Key Employee’s
employment history with the Company;



     NOW, THEREFORE, the Company adopts this Agreement to evidence the
Company’s commitment to pay severance benefits to the Key Employee if the Key
Employee’s employment with the Company terminates under the circumstances
described herein.



     1. Effect on Other Plans Sponsored by the Company. The benefits payable
under this Agreement are in addition to the coverage and benefits generally
afforded to the Key Employee upon termination from the service of the Company
and any other programs sponsored by the Company including, but not limited to,
the Company’s severance and stock option plans.



     2. Definitions. The capitalized terms used in this Agreement shall have
the meaning set forth below.



     (a) “Annual Compensation” shall mean the Key Employee’s rate of base
salary paid or payable for the Company’s fiscal year by the Company and any
incentive or bonus award paid or payable to the Key Employee for such fiscal
year.



     (b) “Board” shall mean the Board of Directors of Zale Corporation.



     (c) “Cause” shall mean (i) if the Key Employee is a party to a written
employment agreement with the Company, or any parent corporation or subsidiary
corporation thereof, which agreement contains a definition of “for good cause”
or “for cause” (or words of like import) for purposes of termination of
employment thereunder by the Company, or such parent corporation or subsidiary
corporation of the Company, “for good cause” or “for cause” as defined therein;
or (ii) in all other cases: (A) the wanton or willful commission by the Key
Employee of an act, or the wanton or willful omission or failure to act, that
causes substantial damage (by reason, without limitation, of financial exposure
or loss, or damage to reputation or goodwill) to the Company or any parent
corporation or subsidiary corporation thereof; (B) the commission by the Key
Employee of an act of fraud, intentional misrepresentation, embezzlement,
misappropriation or conversion in the performance of such Key Employee’s duties
on behalf of the Company, or any parent corporation or subsidiary corporation
thereof, and (C) conviction of the Key Employee for commission of a felony.



 









 





     (d) “Change of Control” shall mean the date as of which: (i) there shall
be consummated (A) any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
shares of the Company’s common stock would be converted into cash, securities
or other property, other than a merger of the Company in which the holders of
the Company’s common stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (B) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all, of the property and assets of the Company and its
subsidiaries taken as a whole; or (ii) the stockholders of the Company approve
any plan or proposal for the liquidation or dissolution of the Company; or
(iii) any person (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)), shall become
the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act)
of 30% of the Company’s outstanding voting equity securities; or (iv) during
any period of two consecutive years, individuals who at the beginning of such
period constitute the entire board of directors of the Company shall cease for
any reason to constitute a majority thereof unless the election, or the
nomination for election by the Company’s stockholders, of each new director
was approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period.



     (e) “Code” shall mean the Internal Revenue Code of 1986, as amended.



     (f) “Disability” shall mean termination of the Key Employee’s employment
by the Company as a result of the Key Employee’s incapacity due to physical or
mental illness or injury, provided that the Key Employee shall have been absent
from the Key Employee’s duties with the Company on a full-time basis for at
least six consecutive months. The Compensation Committee of the Board shall
make any such determination with respect to a Key Employee hereunder.



     (g) “Good Reason” shall mean any of the following actions taken by the
Company without the Key Employee’s written consent after a Change of Control:




     (i) The assignment to the Key Employee of duties inconsistent with,
or the reduction of the powers and functions associated with, the Key
Employee’s position, duties, responsibilities and status immediately
prior to a Change of Control or Potential Change of Control (as defined
below), or an adverse change in the Key Employee’s titles or offices as
in effect immediately prior to a Change of Control or Potential Change of
Control, or any removal of the Key Employee from or any failure to
re-elect the Key Employee to any of such positions, except in connection
with the termination of the Key Employee’s employment for Disability or
Cause or as a result of the Key Employee’s death or by the Key Employee
other than for Good Reason;




     (ii) A reduction in the Key Employee’s base salary as in effect on
the date of a Change of Control or Potential Change of Control, or as the
same may be increased from time to time during the term of this
Agreement, or the failure to increase (within 12 months of the Key
Employee’s last increase in base salary) the Key Employee’s base salary
after a Change of Control or Potential Chance of Control, unless such
failure is the



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result of (A) a hiring or salary freeze uniformly applied to all
employees or (B) the Key Employee’s failure to meet preestablished and
objective performance criteria;




     (iii) Company’s principal executive offices shall be moved to a
location outside Dallas County, Texas;




     (iv) The Key Employee shall be required to be based anywhere other
than at the Company’s principal executive offices or the location where
the Key Employee is based on the date of a Change of Control, or
Potential Change of Control, or if the Key Employee agrees to such
relocation, the Company fails to reimburse the Key Employee for moving
and all other expenses incurred with such move;




     (v) The Company shall fail to continue in effect any
employer-sponsored plan or benefit that is in effect on the date of the a
Change of Control or Potential Change of Control that provides (A)
incentive or bonus compensation, (B) fringe benefits such as vacation,
medical benefits, life insurance and accident insurance, (C)
reimbursement for reasonable expenses incurred by the Key Employee in
connection with the performance of duties with the Company, and (D)
pension benefits such as a Code Section 401(k) plan;




     (vi) Any material breach by the Company of any provision of this
Agreement; and




     (vii) Any failure by the Company to obtain the assumption of this
Agreement by any successor or assign of the Company effected in
accordance with the provisions of Section 6.



     (h) “Potential Change of Control” shall mean the date as of which (i) the
Company enters into an agreement the consummation of which, or the approval by
shareholders of which, would constitute a Change of Control; (ii) proxies for
the election of Directors of the Company are solicited by anyone other than the
Company; (iii) any person (including, but not limited to, any individual,
partnership, joint venture, corporation, association or trust) publicly
announces an intention to take or to consider taking actions which, if
consummated, would constitute a Change of Control; or (iv) any other event
occurs which is deemed to be a Potential Change of Control by the Board and the
Board adopts a resolution to the effect that a Potential Change of Control has
occurred.



     3. Term. The term of this Agreement shall be for the one-year period
commencing on the date of this Agreement and shall continue in effect for each
successive one-year period thereafter unless terminated in accordance with this
paragraph. This Agreement shall terminate upon the earliest of (a) the date of
termination of the Key Employee’s employment by the Company if no benefits are
payable hereunder; (b) the date the Company satisfies its obligation, if any,
to make payments and provide benefits to the Key Employee pursuant to this
Agreement; and (c) the termination of this Agreement in accordance with the
provisions of Section 12 prior to the date the Key Employee terminates
employment with the Company.



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     4. Termination of Employment Following Change of Control. (a) Except as
otherwise provided under Section 4(b), below, if within two years following a
Change of Control the Key Employee terminates employment with the Company for
Good Reason or the Company terminates the Key Employee’s employment for any
reason other than Cause or Disability, the Company shall pay or provide to the
Key Employee the following benefits:



     (i) an amount equal to three times the Key Employee’s average Annual
Compensation for any fiscal year beginning with or within the three-year period
terminating on the date of termination of the Key Employee’s employment, which
amount shall be paid to the Key Employee in cash on or before the fifth day
following the date of termination;



     (ii) for a period of three years following the date of termination of
employment, the Key Employee and anyone entitled to claim under or through the
Key Employee shall be entitled to all benefits under the group health care
plan, dental care plan, life or other insurance or death benefit plan, or other
present of future similar group employee benefit plan or program with respect
to which key executives are eligible to participate at the date of a Change of
Control, to the same extent as if the Key Employee had continued to be an
employee during such period and such benefits shall, to the extent not fully
paid under any such plan or program, be paid by the Company; and



     (iii) a lump sum payment equal to the actuarial equivalent (determined by
the Company in good faith with the assistance of its accountants or actuaries)
of the benefit that would have accrued under the Zale Delaware, Inc.
Supplemental Executive Retirement Plan (“SERP”) if (a) the Key Employee
remained a participant in the SERP for the three-year period commencing on the
first day of the SERP’s plan year (“Plan Year”) in which the Key Employee’s
employment with the Company terminated (“Measurement Period”), (b ) during each
Plan Year in the Measurement Period the Key Employee earned Benefit Points
equal to the highest number of Benefit Points earned by such Key Employee in a
Plan Year during the three-year period ending on the last day of the Plan Year
immediately preceding the Plan Year in which the Key Employee’s employment with
the Company terminated, and ( c) the Key Employee’s Final Average Pay during
the Measurement Period is the greater of the Key Employee’s monthly Base Salary
on the date of (1) a Potential Change of Control, (2) the Change of Control or
(3) the date of the Key Employee’s termination of employment.



     (b) In the event that (i) the Key Employee would otherwise be entitled to
the compensation and benefits described in Section 4(a) hereof (“Compensation
Payments”), and (ii) the Company determines, based upon the advice of tax
counsel selected by the Company’s audit committee and acceptable to the Key
Employee, that, as a result of such Compensation Payments and any other
benefits or payments required to be taken into account under Code Section
280G(b)(2) (“Parachute Payments”), any of such Parachute Payments would be
reportable by the company as “excess parachute payments,” such Compensation
Payments shall be reduced to the extent necessary to cause the Key Employee’s
Parachute Payments to equal 2.99 times the “base amount” as defined in Code
Section 280G(b)(3) with respect to such Key Employee. However, such reduction
in the Compensation Payments shall be made only if, in the opinion of such tax
counsel, it would result in a larger Parachute Payment to the Key Employee than
payment of the unreduced Parachute Payments after deduction of the tax imposed
on and payable by the Key Employee under Section 4999 of the Code. The value of
any non-cash benefits or any deferred



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payment or benefit for purposes of this paragraph shall be determined by
the Company’s tax counsel selected by the Company’s audit committee.



     (c) The parties hereto agree that the payments provided under Section 4(a)
or (b) above, as the case may be, are reasonable compensation in light of the
Key Employee’s services rendered to the Company and that neither party shall
contest the payment of such benefits as constituting an “excess parachute
payment” within the meaning of Section 280G(b)(1) of the Code.



     (d) Unless the Company determines that any Parachute Payments made
hereunder must be reported as “excess parachute payments” in accordance with
Section 4(b) above, neither party shall file any return taking the position
that the payment of such benefits constitutes an “excess parachute payment”
within the meaning of Section 280G(b)(1) of the Code.



     5. No Obligation to Mitigate Damages. The Key Employee shall not be
required to mitigate damages or the amount of any payment provided for under
this Agreement by seeking other employment or otherwise, nor shall the amount
of any payment provided for under this Agreement be reduced by any compensation
earned by the Key Employee as the result of employment by another employer
after the Key Employee’s termination, or otherwise.



     6. Successor to the Company. The Company will require any successor or
assign (whether direct or indirect, by purchase, exchange, lease, merger,
consolidation or otherwise) to all or substantially all of the property and
assets of the Company and its subsidiaries taken as whole, expressly,
absolutely and unconditionally to assume and agree to perform the obligations
of the Company under this Agreement in the same manner and to the same extent
that the Company would be required to perform such obligations if no such
succession or assignment had taken place.



     7. Miscellaneous. No provisions of this Agreement may be waived or
modified unless such waiver or modification is agreed to in a writing signed by
the Key Employee and the Company. No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this Agreement.
This Agreement shall be governed by and construed in accordance with the laws
of the State of Delaware.



     8. Validity. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.



     9. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.



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     10. Agreement Not an Employment Contract. This Agreement shall not be
deemed to constitute an employment contract between the Company and the Key
Employee, and nothing herein shall be deemed to give the Key Employee the right
to continue in the employ of the Company or interfere with the right of the
Company to discharge the Key Employee at any time.



     11. Legal Fees and Expenses. The Company shall pay all legal fees,
expenses and damages which the Key Employee may incur as a result of the Key
Employee’s instituting legal action to enforce the rights hereunder, or in the
event the Company contests the validity, enforceability or the Key Employee’s
interpretation of, or determinations under, this Agreement. If the Key Employee
is the prevailing party or recovers any damages in such action, the key
Employee shall be entitled to receive in addition thereto pre-judgment and
post-judgment interest on the amount of such damages.



     12. Amendment and Termination. This Agreement may be amended or
terminated at any time by the Company, or by resolution of the Board or a
committee thereof, provided that without the written consent of the Key
Employee, no termination or amendment reducing the severance benefits provided
hereunder shall be effective prior to the expiration of the applicable one-year
term of this Agreement described in Section 3 during which the Board resolution
is adopted. Further, no amendment or termination shall be effective during a
one-year term commencing on the date of a Potential Change of Control of the
Company without the consent of the Key Employee or the two-year term of this
Agreement commencing on the date of a Change of Control of the Company without
the consent of the Key Employee. No amendment or termination shall affect any
rights or benefits that the Key Employee is entitled to at the time of such
amendment or termination.



     13. Funding of Benefits. The benefits payable to the Key Employee
hereunder shall not be funded in any manner and shall be paid by the Company
out of its general assets, which assets are subject to the claims of the
Company’s creditors.



     14. Withholding. There shall be deducted from the payment of any benefit
due under this Agreement (a) the amount of any uncontested indebtedness,
obligation, or liability which the Key Employee has acknowledged in writing as
owing to the Company or any subsidiary of the Company, which has been agreed to
by the Key Employee, and (b) the amount of any tax required by any governmental
authority to be withheld and paid over by the Company to such governmental
authority for the account of the Key Employee.



     15. Assignment. Unless required by court order, the Key Employee shall
not have any rights to sell, assign, transfer, encumber, or otherwise convey
the right to receive the payment of any benefit due hereunder, which payment
and the rights thereto are expressly declared to be nonassignable and
nontransferable. Any attempt to do so shall be null and void and of no effect.



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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:
	 	 
	

	 	

	 
	 	 
	 
	 	 
	KEY EMPLOYEE

	 
	 	 
	By:
	 	 
	

	 	

	Name:
	 	 
	

	 	 
	Title:
	 	 








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