EXHIBIT 10.13**EMPLOYMENT AGREEMENT**     THIS EMPLOYMENT AGREEMENT (“Agreement”), dated as of January 5, 2005, is by and between ZaleDelaware, Inc. (the “**Company**”), and Gilbert P. Hollander (the “**Executive**”).     WHEREAS, the Executive and the Company desire to enter into an employment agreement which setsforth the terms and conditions of the Executive’s employment with the Company.     NOW, THEREFORE, in consideration of the foregoing recital, of the mutual covenants set forthherein, and other good and valuable consideration, the receipt and sufficiency of which are herebyacknowledged, the parties agree as follows:     1. Employment. The Executive agrees to continue in the employment of the Company, andthe Company agrees to employ the Executive, on the terms and conditions set forth in thisAgreement. The Executive agrees during the Term (as hereinafter defined) to devote his full timeefforts, skills and abilities to the performance of his duties as stated in this Agreement and tothe furtherance of the Company’s business. As consideration for this Agreement and specifically inconsideration for the promises described in Section 8, the Company promises to provide theExecutive with confidential and proprietary information and trade secrets, the receipt andsufficiency of which the Executive acknowledges, including, without limitation, Trade Secrets (asdefined below) belonging to the Company for use in the performance of the Executive’s duties forthe Company. The Executive’s job title will be Senior Vice President of the Company and Presidentof the Piercing Pagoda Division of the Company and his duties will be those designated from time totime by the Chief Executive Officer (“**CEO**”) and/or Board of Directors of the Company(“**Board**”). The Executive further agrees to serve, without additional compensation, as anofficer or director, or both, of any subsidiary, division or affiliate of the Company or any otherentity in which the Company holds an equity interest, provided, however, that (a) the Company shallindemnify the Executive from liabilities in connection with serving in any such position to thesame extent as his indemnification rights pursuant to the Company’s Certificate of Incorporation,Bylaws and applicable Delaware law, and (b) such other position shall not materially detract fromthe responsibilities of the Executive pursuant to this Section 1 or his ability to perform suchresponsibilities.     2. Compensation.          (a) Base Salary. During the term of the Executive’s employment with the Companypursuant to this Agreement, the Company shall pay to the Executive as compensation for his servicesan annual base salary of not less than $240,000 payable bi-weekly (“**Base Salary**”). TheExecutive’s Base Salary will be payable in arrears in accordance with the Company’s normal payrollprocedures and will be reviewed annually and subject to adjustment at the discretion of the CEOand/or the Board or an authorized committee or representative thereof.
 

 
          (b) Incentive Bonus. The Executive’s incentive compensation program during the termof his employment under this Agreement shall be determined under the Company’s ExecutiveBonus Program, established by the Board in its discretion. The Executive is eligible toreceive up to 75% of his Base Salary in accordance with the terms and conditions of the ExecutiveBonus Program.          (c) Vacation. The Executive shall be entitled to a reasonable vacation of four (4)paid weeks each fiscal year during the term of his employment under this Agreement in accordancewith the Company’s vacation policy. Any additional vacation shall be approved in the solediscretion of the Executive’s supervisor.          (d) Executive Perquisites. The Executive shall be entitled during the term of hisemployment under this Agreement to receive such executive perquisites and fringe and other benefitsas are provided to similarly situated executives and their families under any of the Company’splans and/or programs in effect from time to time and such other benefits as are customarilyavailable to executives of the Company and their families.          (e) Tax Withholding. The Company has the right to deduct from any compensationpayable to the Executive under this Agreement social security (FICA) taxes and all federal, state,municipal or other such taxes or charges as may now be in effect or that may hereafter be enactedor required.     3. Term. Unless sooner terminated pursuant to Section 4 of this Agreement, the termof the Executive’s employment under this Agreement shall commence as of the date hereof and shallcontinue for two and one half (2 1/2) years thereafter up to and including July 31, 2007 (the“**Term**”). Following the expiration of the Term, the Executive’s employment shall continueat-will unless a new employment agreement is negotiated and executed.     4. Early Termination. The Term may be terminated prior to the expiration datespecified in Section 3 under the following circumstances:          (a) Death. The Executive’s employment under this Agreementshall terminate upon the death of the Executive.          (b) Termination for Cause. The Company may terminate the Executive’s employment atany time for “Cause” (as hereinafter defined) by delivering a written termination notice to theExecutive. For purposes of this Agreement, “Cause” shall mean any of the following:          (i) the Executive is convicted of a felony or a crime involving moral turpitude;          (ii) the Executive commits an act constituting fraud, deceit or materialmisrepresentation with respect to the Company;          (iii) the Executive embezzles funds or assets from the Company;
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          (iv) the Executive’s use of any alcoholic, controlled or illegal substance or drug atwork or otherwise such that, in the Company’s sole discretion, the Executive’s jobperformance is impaired;          (v) in the Company’s sole discretion, the Executive commits any negligent or willfulact or omission in the performance of his duties or the exercise of his responsibilities; or          (vi) in the Company’s sole discretion, the Executive commits any negligent or willfulact or omission that causes damage (by reason, without limitation, of financial exposure orloss, damage to reputation or goodwill, or exposure to civil or criminal penalties or otherprosecutorial action by any governmental authority) to the Company or any parent orsubsidiary corporation thereof.          or          (c) Termination Without Cause. The Company may also terminate the Executive’semployment at any time for any reason other than for Cause by delivering a written terminationnotice to the Executive.          (d) Termination by the Executive. The Executive may terminate his employment at anytime by delivering a written termination notice to the Company and such termination shall be deemeda “Termination Reason” for any of the following reasons:          (i) a material reduction by the Company in the Executive’s Base Salary unless suchreduction is the result of (A) a business judgment made by the Company in its solediscretion, or (B) the Executive’s failure to meet pre-established and objective performancecriteria;          (ii) Company’s principal executive offices shall be moved to a location outside theDallas/Fort Worth, Texas Metroplex area or the Executive is required to be based anywhereother than the Company’s principal executive offices; and          (iii) the assignment to the Executive by the Company of duties materially inconsistentwith, or the material reduction of the powers and functions associated with, the Executive’sposition, duties, responsibilities and status with the Company or a material adverse changein the Executive’s titles or offices, unless such action is the result of the Executive’sfailure to meet preestablished and objective performance criteria, or in lieu of terminationby the Company of the Executive’s employment for the Executive’s Disability pursuant toSection 4(e) below.          (e) Termination Following Disability. In the event that in the Company’s solediscretion, the Executive becomes mentally or physically impaired or disabled and is unable toperform his 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 (a “DisabilityEvent”), the Company may terminate the Executive’s employment under this Agreement by delivering awritten termination notice to the Executive.
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          (f) Payments/Deductions. Following any expiration or termination of the Executive’semployment under this Agreement, and in addition to any amounts owed pursuant to Section 5 hereof,the Company shall pay to the Executive all amounts earned by the Executivehereunder up to the date of such expiration or termination. The Executive agrees that anyadvances to the Executive by the Company outstanding at the time of the expiration or terminationof the Executive’s employment under this Agreement may be deducted from his wages, including hisfinal paycheck and/or any severance owed to Executive.     5. Rights of Executive Upon Termination. Subject to the Executive’s adherence to theterms of this Agreement, including but not limited to the non-competition, no-hire/non-solicitationand non-disclosure provisions set forth below, the Executive shall be entitled to receive thefollowing benefits in the event his employment is terminated pursuant to Section 4 above prior tothe expiration of the Term specified in Section 3 above.          (a) Death. In the event that the Executive’s employment is terminated upon theoccurrence of his death as provided in Section 4(a), the Company shall continue to pay, inaccordance with its normal payroll procedures, the Base Salary to the Executive’s estate for aperiod of twelve (12) months after the date of the Executive’s death.          (b) Termination for Cause. In the event that the Executive’s employment is terminatedby the Company for Cause as provided in Section 4(b) or by the Executive without a “TerminationReason” as provided in Section 4(d), the Executive shall not thereafter be entitled to any furthercompensation from the Company.          (c) Termination without Cause or by the Executive. In the event the Companyterminates the Executive’s employment without Cause as provided in Section 4(c) or the Executiveterminates his employment for a “Termination Reason” as provided in Sections 4(d)(i), 4(d)(ii) or4(d)(iii), then the Executive shall be entitled to the following:          (i) Severance. The Company shall continue to pay (in accordance with itsnormal payroll procedures) the Base Salary to the Executive (or the Executive’s estate ifthe Executive dies after termination of employment) for the greater of (i) the remainder ofthe Term or (ii) the period for which the Executive would be entitled to severance under theCompany’s severance policy in existence at the time of the Executive’s termination(“**Severance Period**”).          (ii) Benefits. During the first twelve (12) months of the Severance Period orif the Severance Period is less than twelve (12) months, until the end of the SeverancePeriod, the Executive shall continue to receive the fringe benefits provided under Sections2(b) and 2(d) hereof, provided that the continued participation of the Executive under anybenefit plan including, without limitation, group healthcare, dental and life insurance ispossible under the general terms and provisions of such plans. If the Executive’sparticipation in any such plan is barred, the Company shall arrange to provide the Executivewith benefits substantially similar to those which the Executive would otherwise have beenentitled to receive under such plan or, alternatively at the option of the Company,reimburse the Executive for the reasonable actual costs of purchasing in the marketplacesubstantially similar benefits; provided, however, that in either case the Executive shallpay to the
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Company, or provide a credit against the Company’s reimbursement obligation for,the amount equal to the premiums, or portion thereof, that the Executive was required to payto maintain such benefits prior to the date oftermination of employment. Notwithstanding anything to the contrary contained herein,the Executive shall be entitled to participate in the Company’s Executive Car Program ineffect for the Executive immediately prior to the Severance Period only until the earlier of(x) the second anniversary of the Executive’s then current car lease, or (y) the end of theSeverance Period. The Executive shall return any Company vehicle provided to him under theExecutive Car Program to the Company or its designee upon the expiration of his ExecutiveCar Program benefits as described in the foregoing sentence.          (iii) Offset. The payments which would have been due and payable in accordancewith Section 5(c)(i) hereof shall be reduced by an amount equal to any amounts that theExecutive receives in connection with any other employment during the Severance Period. Anyfringe benefits received by or available to the Executive in connection with any otheremployment that are reasonably comparable, but not necessarily as financially or otherwisebeneficial to the Executive as the fringe benefits then being provided by the Companypursuant to Section 5(c)(ii) hereof, shall be deemed to be the equivalent thereof and shallterminate the Company’s responsibility to continue providing the fringe benefits then beingprovided by the Company pursuant to Section 5(c)(ii) hereof.          (d) Termination Following Disability. In the event that the Executive’s employment isterminated due to a Disability Event as provided in Section 4(e), the Executive shall be entitledto continue to receive his salary and benefits (subject to the conditions regarding such benefitsspecified in Section 5(c)(ii) and 5(c)(iii) above) under Section 2 of this Agreement for a periodof twelve (12) months after the date of such termination.          (e) Complete Compensation. Except as specifically provided for in this Section 5 andSection 4(f) above, the Executive shall be entitled to no additional salary, benefits or othercompensation following the termination of his employment.     6. Effect of Change of Control.          (a) If within two (2) years following a “Change of Control” (as hereinafter defined), theExecutive terminates his employment with the Company for Good Reason (as hereinafter defined) orthe Company terminates the Executive’s employment for any reason other than Cause or disability,the Company shall pay to the Executive:          (i) an amount equal to three (3) times the Executive’s Base Salary as of the date oftermination;          (ii) an amount equal to three (3) times the average annual cash bonus paid to theExecutive for the two (2) fiscal years immediately preceding the date of termination;          (iii) all benefits under the Company’s various benefit plans, including grouphealthcare, dental**,**life and the Company’s Executive Car Program for the period equal tothirty-six (36) months from the date of termination, provided that the continuedparticipation
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of the Executive is possible under the general terms and provisions of suchplans. If the Executive’s participation in any such plan is barred, the Company shallarrange to provide theExecutive with benefits substantially similar to those which the Executive wouldotherwise have been entitled to receive under such plan or, alternatively at the option ofthe Company, reimburse the Executive for the reasonable actual costs of purchasing in themarketplace substantially similar benefits; provided, however, that in either case theExecutive shall pay to the Company, or provide a credit against the Company’s reimbursementobligation for, the amount equal to the premiums, or portion thereof, that the Executive wasrequired to pay to maintain such benefits prior to the date of termination of employment.Further, any insurance or other benefits and benefits coverage provided pursuant heretoshall be limited and reduced to the extent such coverage or benefits areotherwiseprovided by or available from any other employer of the Executive; and          (iv) a lump sum payment equal to the actuarial equivalent (determined by the Company ingood faith with assistance of its accountants or actuaries), of the benefit which would haveaccrued under the Zale Delaware, Inc. Supplemental Executive Retirement Plan(“**SERP**”) if:          (1) the Executive remained a participant in the SERP for the three (3) yearperiod commencing on the first day of the SERP’s plan year (“**Plan Year**”) inwhich the Executive’s employment with the Company terminated (“**MeasurementPeriod**”);          (2) during each Plan Year in the Measurement Period the Executive earnedbenefit points equal to the highest number of the benefit points earned by suchExecutive in a Plan Year during the three (3) year period ending on the last day ofthe Plan Year immediately preceding the Plan Year in which his employment with theCompany terminated; and          (3) the Executive’s final average pay during the Measurement Period is thegreater of his monthly Base Salary on the date of (a) a Potential Change of Control,(b) the Change of Control or (c) the date of his termination of employment.          (b) “Change of Control” shall mean the date as of which:          (i) there shall be consummated:          (1) any consolidation or merger of the Company in which the Company is not thecontinuing or surviving corporation or pursuant to which shares of the Company’scommon stock would be converted into cash, securities or other property, other thana merger of the Company in which the holders of the Company’s common stockimmediately prior to the merger have the same proportionate ownership of commonstock of the surviving corporation immediately after the merger; or          (2) any sale, lease, exchange or other transfer (in one transaction or a seriesof related transactions) of all, or substantially all, of the assets of the Company;
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          (ii) the stockholders of the Company approve any plan or proposal for the liquidationor dissolution of the Company;          (iii) any person (as such term is used in Sections 13(d) and 14(d)(2) of the SecuritiesExchange Act of 1934, as amended (“**Exchange Act**”)), shall become the beneficialowner (within the meaning of Rule 13d-3 under the Exchange Act) of 30% of the Company’soutstanding common stock; or          (iv) during any period of two (2) consecutive years, individuals who at the beginningof such period constitute the entire board of directors of the Company shall cease for anyreason to constitute a majority thereof unless the election, or the nomination for electionby the Company’s stockholders, of each new director was approved by a vote of at leasttwo-thirds of the directors then still in office who were directors at the beginning of theperiod.          (c) “Good Reason” shall mean any of the following actions taken by the Company withoutthe Executive’s written consent after a Change of Control:          (i) the assignment to the Executive by the Company of duties materially inconsistentwith, or the material reduction of the powers and functions associated with, the Executive’sposition, duties, responsibilities and status with the Company immediately prior to a Changeof Control or Potential Change of Control (as defined below), or a material adverse changein the Executive’s titles or offices as in effect immediately prior to a Change of Controlor Potential Change of Control, or any removal of the Executive from or any failure tore-elect the Executive to any of such positions, except in connection with the terminationof his employment (A) by the Company for Disability or Cause or as a result of theExecutive’s death or (B) by the Executive other than for the reasons set forth in thissection (6)(c)(i)-(vii)**;**          (ii) a reduction by the Company in the Executive’s Base Salary as in effect on the dateof a Change of Control or Potential Change of Control;          (iii) the Company’s principal executive offices shall be moved to a location outsidethe Dallas/Fort Worth, Texas Metroplex area;          (iv) the Company shall require the Executive to be based anywhere other than at theCompany’s principal executive offices or the location where the Executive is based on thedate of a Change of Control or Potential Change of Control, or if the Executive agrees tosuch relocation, the Company fails to reimburse the Executive for moving and all otherexpenses incurred with such move;          (v) the Company shall fail to continue in effect any Company-sponsored plan that is ineffect on the date of a Change of Control or Potential Change of Control, that provides (A)incentive or bonus compensation, (B) reimbursement for reasonable expenses incurred by theExecutive in connection with the performance of duties with the Company, and (C) pensionbenefits such as a Code Section 401(k) plan;
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          (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 anysuccessor or assign of the Company effected in accordance with the provisions of thisSection 6.          (d) “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 byshareholders of which, would constitute a Change of Control;          (ii) proxies for the election of Directors of the Company are solicited by anyone otherthan the Company;          (iii) any person (including, but not limited to, any individual, partnership, jointventure, corporation, association or trust) publicly announces an intention to take or toconsider 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 theBoard and the Board adopts a resolution to the effect that a Potential Change of Control hasoccurred.          (e) In the event that:          (i) the Executive would otherwise be entitled to the compensation and benefitsdescribed in Section 6(a) hereof (“**Compensation Payments**”); and          (ii) the Company determines, based upon the advice of tax counsel selected by theCompany’s independent auditors and acceptable to the Executive, that, as a result of suchCompensation Payments and any other benefits or payments required to be taken into accountunder Code Section 280G(b)(2) (“**Parachute Payments**”), any of such Parachute Paymentswould be reportable by the Company as “excess parachute payments,” such CompensationPayments shall be reduced to the extent necessary to cause the Executive’s ParachutePayments to equal 2.99 times the “base amount” as defined in Code Section 280G(b)(3) withrespect to such Executive. However, such reduction in the Compensation Payments shall bemade only if, in the opinion of the Company, based upon the advice of such tax counsel, itwould result in a larger Parachute Payment to the Executive than payment of the unreducedParachute Payments after deduction of tax imposed on and payable by the Executive underSection 4999 of the Code (“**Excise Tax**”). The value of any non-cash benefits or anydeferred payment or benefit for purposes of this paragraph shall be determined by theCompany’s independent auditors.          (f) Unless the Company determines that any Parachute Payments made hereunder must be reportedas “excess parachute payments” in accordance with Section 6(e) above, neither party shall file anyreturn taking the position that the payment of such benefits constitutes an “excess parachutepayment” within the meaning of Section 280G(b)(1) of the Code.
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          (g) The parties hereto agree that the payments provided under Section 6(a), as may be adjustedpursuant to Section 6(e), are reasonable compensation in light of the Executive’s services renderedto the Company.     7. Complete Release. The Executive acknowledges and agrees that he will not receiveany of the payments described in Sections 5 and 6 above unless the Executive signs and returns tothe Company a full and complete release of any and all claims that the Executive or his estate,heirs or assigns may have against the Company, its subsidiaries and affiliates and its and theirofficers, directors, employees and agents in a form acceptable to and provided by the Company at oraround the time of the Executive’s termination.     8. Non-Competition. As a material inducement for the Company’s promise to provide thetrade secrets and confidential and proprietary information described in Section 10 below, theExecutive agrees that during the Term and for a period of three (3) years from the date ofcessation or termination of the Executive’s employment with the Company for any reason whatsoever,he will not, directly or indirectly, compete with the Company by providing services to any otherperson, 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 theretail sale of jewelry in the United States and/or Puerto Rico, including, but not limited to,specialty jewelry retailers and other retailers having jewelry divisions or departments, and theExecutive’s employment function or affiliation with the Competing Business is directly orindirectly related to such business of jewelry. The restrictions contained in this Section 8 shallbe tolled on a day-for-day basis for each day during which the Executive participates in anyactivity in violation of such restrictions. The parties agree that the above restrictions oncompetition are completely severable and independent agreements supported by good and valuableconsideration and, as such, shall survive the termination of this Agreement for whatever reason.The parties further agree that any invalidity or unenforceability of any one or more of suchrestrictions on competition shall not render invalid or unenforceable any remaining restrictions oncompetition. Additionally, should a court of competent jurisdiction determine that the scope ofany provision of this Section 8 is too broad to be enforced as written, the parties intend that thecourt reform the provision to such narrower scope as it determines to be reasonable andenforceable.     9. No Hire/Non-Solicitation of Employees. During the Term and for a period of three(3) years after the termination or cessation of his employment with the Company for any reasonwhatsoever, the Executive shall not, on his own behalf or on behalf of any other person,partnership, association, corporation, or other entity, (a) directly, indirectly, or through athird party hire or cause to be hired; (b) directly, indirectly or through a third party solicit;or (c) in any manner attempt to influence or induce any employee of the Company or its subsidiariesor affiliates to leave the employment of the Company or its subsidiaries or affiliates, nor shallhe use or disclose to any person, partnership, association, corporation or other entity anyinformation obtained concerning the names and addresses of the Company’s employees. Therestrictions contained in this Section 9 shall be tolled on a day-for-day basis for each day duringwhich the Executive participates in any activity in violation of such restrictions. The partiesagree that the above restrictions on hiring and solicitation are completely severable andindependent agreements supported by good and valuable consideration and, as such, shall survive thetermination of this Agreement for whatever reason. The parties further agree that any invalidityor unenforceability of any one or more of such restrictions on
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hiring andsolicitation shall not render invalid or unenforceable any remaining restrictions or hiringand solicitation. Additionally, should a court of competent jurisdiction determine that the scopeof any provision of this Section 9 is too broad to be enforced as written, the parties intend thatthe court reform the provision to such narrower scope as it determines to be reasonable andenforceable.     10. Nondisclosure of Trade Secrets. The Company promises to disclose to the Executiveand the Executive acknowledges that in and as a result of his employment by the Company, he willreceive, make use of, acquire, have access to and/or become familiar with various trade secrets andproprietary and confidential information of the Company, its subsidiaries and 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 compensationlevels of employees and other confidential information (collectively, “**Trade Secrets**”)which are owned by the Company, its subsidiaries and/or affiliates and regularly used in theoperation of its business, and as to which the Company, its subsidiaries and/or affiliates takeprecautions to prevent dissemination to persons other than certain directors, officers andemployees. The Executive acknowledges and agrees that the Trade Secrets:          (a) are secret and not known in the industry;          (b) give the Company or its subsidiaries or affiliates an advantage over competitors who donot know or use the Trade Secrets;          (c) are of such value and nature as to make it reasonable and necessary to protect andpreserve the confidentiality and secrecy of the Trade Secrets; and          (d) are valuable, special and unique assets of the Company or its subsidiaries or affiliates,the disclosure of which could cause substantial injury and loss of profits and goodwill to theCompany or its subsidiaries or affiliates.          The Executive promises not to use in any way or disclose any of the Trade Secrets andconfidential and proprietary information, directly or indirectly, either during or after the Term,except as required in the course of his employment under this Agreement, if required in connectionwith a judicial or administrative proceeding, or if the information becomes public knowledge otherthan as a result of an unauthorized disclosure by the Executive. All files, records, documents,information, data and similar items relating to the business of the Company, whether prepared bythe Executive or otherwise coming into his possession, will remain the exclusive property of theCompany and may not be removed from the premises of the Company under any circumstances without theprior written consent of the Company (except in the ordinary course of business during theExecutive’s period of active employment under this Agreement), and in any event must be promptlydelivered to the Company upon termination of the Executive’s employment with the Company. TheExecutive agrees that upon his receipt of any subpoena, process or other request to produce ordivulge, directly or indirectly, any Trade Secrets to any entity, agency, tribunal or person,whether received during or after the term of the Executive’s employment with the Company, theExecutive shall timely notify and promptly hand deliver a copy of the subpoena, process or otherrequest to the Company. For this purpose, the Executive irrevocably nominates and appoints theCompany (including any attorneyretained by the Company), as his true and lawful attorney-in-fact,
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to act in the Executive’sname, place and stead to perform any act that the Executive might perform to defend and protectagainst any disclosure of any Trade Secrets.     The parties agree that the above restrictions on confidentiality and disclosure are completelyseverable and independent agreements supported by good and valuable consideration and, as such,shall survive the termination of this Agreement for whatever reason. The parties further agreethat any invalidity or unenforceability of any one or more of such restrictions on confidentialityand disclosure shall not render invalid or unenforceable any remaining restrictions onconfidentiality and disclosure. Additionally, should a court of competent jurisdiction determinethat the scope of any provision of this Section 10 is too broad to be enforced as written, theparties intend that the court reform the provision to such narrower scope as it determines to bereasonable and enforceable.     11. Executive Representations and Agreements. The Executive agrees that the Executiveand the Company are engaged in a highly competitive business and, due to the Executive’s positionwith the Company and the nature of the Executive’s work, the Executive’s engaging in any businesswhich is competitive with that of the Company will cause the Company great and irreparable harm.The Executive represents and warrants that the time, scope and geographic area restricted by theforegoing paragraph(s) pertaining to no hire/non-solicitation, non-competition, confidentiality andnondisclosure are reasonable, that the enforcement of the restrictions contained in the foregoingparagraphs would not be unduly burdensome to the Executive, and that the Executive will be able toearn a reasonable living while abiding by the terms included herein. The Executive agrees that therestraints created by the covenants in the foregoing paragraph(s) pertaining to nohire/non-solicitation, non-competition, confidentiality and nondisclosure are no greater thannecessary to protect the legitimate interests of the Company, including its confidential businessor proprietary information and trade secrets, including but not limited to, the Trade Secrets.Similarly, the Executive agrees that the need of the Company for the protection afforded by thecovenants of the foregoing paragraphs pertaining to no hire/non-solicitation, non-competition,confidentiality and nondisclosure are not outweighed by either the hardship to the Executive or anyinjury likely to the public. The Executive agrees that any breach by him of the foregoingprovisions pertaining to no hire/non-solicitation, non-competition, confidentiality andnondisclosure will entitle the Company to discontinue any payments specified in Sections 2, 5 or 6,above, for which the Executive might be eligible based on the terms of those Sections.Notwithstanding the suspension or discontinuation of any such payments, the Executive agrees thatthe Company is entitled to insist on full compliance by the Executive with the full terms,including time periods, described in his promises not to hire/solicit, compete or discloseconfidential information or Trade Secrets. Any delay by the Company in discontinuing payment shallnot be construed as a waiver of any rights to discontinue payment.     12. Severability. If any provision of this Agreement is held to be illegal, invalidor unenforceable under present or future laws effective during the term of this Agreement, suchprovision shall be fully severable and this Agreement shall be construed and enforced as if suchillegal, invalid or unenforceable provision never constituted a part of this Agreement; and theremaining provisions of this Agreement shall remain in full force and effect and shall not beaffected by the illegal, invalid or unenforceable provision or by its severance here from.Furthermore, in lieu of such illegal, invalid or unenforceable provision, there shall be added aspart of this Agreement, a
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provisionas similar in its terms to such illegal, invalid or enforceable provision as may be possibleand be legal, valid and enforceable.     13. Arbitration.          (a) The parties agree that any controversy or claim (including all claims pursuant to commonand statutory law) relating to this Agreement or arising out of the Executive’s employment with theCompany, shall be resolved exclusively through arbitration pursuant to the National Rules for theResolution of Employment Disputes of the American Arbitration Association (“AAA”). Any sucharbitration proceeding shall take place in Dallas County, Texas. All disputes shall be resolved bya single arbitrator. The arbitrator will have the authority to award the same remedies, damagesand costs that a court could award. The arbitrator shall issue a reasoned award explaining thedecision, the reasons for the decision and any damages awarded. The arbitrator’s decision will befinal and binding. The judgment on the award rendered by the arbitrator may be entered in anycourt having jurisdiction thereof. This provision can be enforced under the Federal ArbitrationAct.          (b) As the sole exception to the exclusive and binding nature of the arbitration commitmentset forth above, the Executive and the Company agree that the Company shall have the right toinitiate an action in a court of competent jurisdiction in order to request temporary, preliminaryand permanent injunctive or other equitable relief, including, without limitation, specificperformance, to enforce the terms of Sections 8, 9, 10 or 11 or above without the necessity ofproving inadequacy of legal remedies or irreparable harm or posting bond. However, nothing in thissection should be construed to constitute a waiver of the parties’ rights and obligations toarbitrate regarding matters other than those specifically addressed in this paragraph.          (c) Should a court of competent jurisdiction determine that the scope of any provision of thisSection 13 is too broad to be enforced as written, the parties intend that the court reform theprovision to such narrower scope as it determines to be reasonable and enforceable.     14. Survival. The Executive acknowledges and agrees that this Agreement, including butnot limited to Sections 8, 9, 10, 11, 12, 13, 15(a) and 15(d), shall survive the termination of theExecutive’s employment under this Agreement for whatever reason. The existence of any claim orcause of action of the Executive against the Company, whether predicated on this Agreement orotherwise, shall not constitute a defense to the enforcement by the Company of the covenants of theExecutive contained in this Agreement, including but not limited to those contained in Sections 8,9, 10, 11 and 13.     15. Miscellaneous.          (a) Notices. Any notices, consents, demands, requests, approvals and othercommunications to be given under this Agreement by either party to the other must be in writing andmust be either:          (i) personally delivered;          (ii) mailed by registered or certified mail, postage prepaid with return receiptrequested;
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          (iii) delivered by overnight express delivery service or same-day local courierservice; or          (iv) delivered by telex or facsimile transmission, to the address set forth below, orto such other address as may be designated by the parties from time to time in accordancewith this Section 15(a):   If to the Company: Zale Delaware, Inc.  901 W. Walnut Hill Lane  Irving, Texas 75038  Attention:Chief Executive Officer   with a copy to: General Counsel   If to Executive: Mr. Gilbert P. Hollander  4528 Banyan Lane  Dallas, Texas 75287     Notices delivered personally or by overnight express delivery service or by local courierservice are deemed given as of actual receipt. Notices mailed within the continental United Statesare deemed given three business days after mailing. Notices delivered by telex or facsimiletransmission are deemed given upon receipt by the sender of the answer back (in the case of atelex) or transmission confirmation (in the case of a facsimile transmission).          (b) Entire Agreement. This Agreement supersedes any and all other agreements, eitheroral or written, between the parties with respect to the subject matter of this Agreement andcontains all of the covenants and agreements between the parties with respect to the subject matterof this Agreement.          (c) Modification. No change or modification of this Agreement is valid or bindingupon the parties, nor will any waiver of any term or condition in the future be so binding, unlessthe change or modification or waiver is in writing and signed by the parties to this Agreement.          (d) Governing Law and Venue. The parties acknowledge and agree that this Agreementand the obligations and undertakings of the parties under this Agreement will be performable inIrving, Dallas County, Texas. This Agreement is governed by, and construed in accordance with, thelaws of the State of Texas. If any action is brought to enforce or interpret this Agreement, venuefor the action will be in Dallas County, Texas.          (e) Counterparts. This Agreement may be executed in counterparts, each of whichconstitutes an original, but all of which constitutes one document.          (f) Costs. If any action at law or in equity is necessary to enforce or interpret theterms of this Agreement, each party shall bear its own costs and expenses.
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          (g) Estate. If the Executive dies prior to the expiration of the Term or during aperiod when monies are owing to him, any monies that may be due him from the Company under thisAgreement as of the date of his death shall be paid to his estate and as when otherwise payable.          (h) Assignment. The Company shall have the right to assign this Agreement to itssuccessors or assigns. The terms “successors” and “assigns” shall include any person, corporation,partnership or other entity that buys all or substantially all of the Company’s assets or all ofits stock, or with which the Company merges or consolidates. The rights, duties and benefits tothe Executive hereunder are personal to him, and no such right or benefit may be assigned by him.          (i) Binding Effect. This Agreement is binding upon the parties hereto, together withtheir respective executors, administrators, successors, personal representatives, heirs andpermitted assigns.          (j) Waiver of Breach. The waiver by the Company or the Executive of a breach of anyprovision of this Agreement by the Executive or the Company may not operate or be construed as awaiver of any subsequent breach.     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first abovewritten.         By: /s/Gilbert P. Hollander    Gilbert P. Hollander           ZALE DELAWARE, INC.           By: /s/Mary L. Forté    Its: Chief Executive Officer
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