<PAGE>   1

                                                                   EXHIBIT 10.3B


                                ZALE CORPORATION

                          OMNIBUS STOCK INCENTIVE PLAN
                                  July 27, 1994

         1.       PREAMBLE

         The Zale Corporation Stock Option Plan became effective on the
Effective Date (as defined in Section 2(j) below), having been, and having been
deemed to be, approved by a vote of the stockholders of Zale Corporation
pursuant to Sections 6.1(e) and (f) of the Bankruptcy Plan (as defined in
Section 2(a) below). Section 19 of the Stock Option Plan provides that the Board
of Directors of Zale Corporation may amend the Plan at any time, subject to
stockholder approval in certain circumstances. On June 15, 1994, the Board of
Directors adopted an amendment restating the Stock Option Plan in its entirety,
effective on the Effective Date, and renaming it the Zale Corporation Omnibus
Stock Incentive Plan. The restated plan is set forth in this document which
includes any amendments made since that time by the Board and/or the
Stockholders. This Zale Corporation Omnibus Stock Incentive Plan is intended to
promote the interests of the Company and its shareholders by providing officers
and other employees (including directors who are employees) of the Company with
appropriate incentives and rewards to encourage them to enter into and continue
in the employ of the Company and to acquire a proprietary interest in the
long-term success of the Company.

         2.       DEFINITIONS

         As used in the Plan, the following definitions apply to the terms
indicated below:

                  (a) "Bankruptcy Plan" means the Plan of Reorganization under
Chapter 11 of the Bankruptcy Code for the Company and its Affiliated Debtors
dated March 24, 1993, as modified, and confirmed by order, entered May 20, 1993,
of the United States Bankruptcy Court for the Northern District of Texas, Dallas
Division.

                  (b) "Board of Directors" shall mean the Board of Directors of
the Company.

                  (c) "Cause," when used in connection with the termination of a
Participant's employment by the Company, shall mean (i) the willful and
continued failure by the Participant substantially to perform his duties and
obligations to the Company (other than any such failure resulting from his
incapacity due to physical or mental illness) or (ii) the willful engaging by
the Participant in misconduct which is materially injurious to the Company. For
purposes of this Section 2 (c), no act, or failure to act, on a Participant's
part shall be considered "willful" unless done, or omitted to be done, by the
Participant in bad faith and without reasonable belief that his action or
omission was in the best interests of the Company. The Company shall determine
whether a termination of employment is for Cause and shall notify the Committee
of such a determination.

                  (d) "Change in Control" shall mean any of the following
occurrences:

                           (1) any "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act (other than the Company or any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company), is or becomes the "beneficial owner" (as defined in Rule


OMNIBUS STOCK INCENTIVE PLAN                                              PAGE 1
February 1999
<PAGE>   2

13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 50% or more of the combined voting power of the Company's
then outstanding securities;

                           (2) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board, and any
new director (other than a director designated by a person who has entered into
an agreement with the Company to effect a transaction described in clause (1),
(3) or (4) of this definition) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a majority
thereof;

                           (3) the stockholders of the Company approve a merger
or consolidation of the Company with any other entity, other than (i) a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
"person" (as hereinabove defined) acquires more than 50% of the combined voting
power of the Company's then outstanding securities; or

                           (4) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets.

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

                  (f) "Committee" shall mean the Compensation Committee of the
Board of Directors or such other committee as the Board of Directors shall
appoint from time to time to administer the Plan; provided, that the Committee
shall at all times consist of two or more persons, each of whom shall be a
member of the Board of Directors. To the extent required for transactions under
the Plan to qualify for the exemptions available under Rule 16b-3, no person may
serve on the Committee if, during the year preceding such service, he was
granted or awarded equity securities of the Company (including options on such
securities) under the Plan or any other plan of the Company or any affiliate
thereof, other than a plan described in Rule 16b-3(c)(2)(ii). To the extent
required for compensation realized from Incentive Awards under the Plan to be
deductible by the Company pursuant to Section 162(m) of the Code, members of the
Committee (or any subcommittee thereof) shall be "outside directors" within the
meaning of such Section.

                  (g) "Company" shall mean Zale Corporation, a Delaware
corporation, and each of its subsidiaries.

                  (h) "Company Stock" shall mean the common stock of Zale
Corporation.

                  (i) "Disability" shall mean: (1) any physical or mental
condition that would qualify a Participant for a disability benefit under the
long-term disability plan maintained by the Company and applicable to him, or
(2) when used in connection with the exercise of an Incentive Stock Option
following termination of employment, disability within the meaning of Section
22(e)(3) of the Code.


OMNIBUS STOCK INCENTIVE PLAN                                              PAGE 2
February 1999
<PAGE>   3

                  (j) "Effective Date" shall mean July 30, 1993, the effective
date of the Bankruptcy Plan.

                  (k) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.

                  (1) The "Fair Market Value" of a share of Company Stock with
respect to any day shall be the average of the high and low sale prices on the
immediately preceding business day as reported on the New York Stock Exchange or
on a national securities exchange if listed thereon. In the event that the price
of a share of Company Stock shall not be so reported, the Fair Market Value of a
share of Company Stock shall be determined by the Committee in its absolute
discretion.

                  (m) "Incentive Award" shall mean an Option, Tandem SAR,
Stand-Alone SAR, share of Restricted Stock, share of Phantom Stock or Stock
Bonus granted pursuant to the terms of the Plan.

                  (n) "Incentive Stock Option" shall mean an Option that is an
"incentive stock option" within the meaning of Section 422 of the Code.

                  (o) "Issue Date" shall mean the date established by the
Committee on which Certificates representing shares of Restricted Stock shall be
issued by the Company pursuant to the terms of Section 10(e).

                  (p) "Non-Qualified Stock Option" shall mean an Option that is
not an Incentive Stock Option.

                  (q) "Option" shall mean an option to purchase shares of
Company Stock granted pursuant to Section 7.

                  (r) "Participant" shall mean an employee of the Company to
whom an Incentive Award is granted pursuant to the Plan, and, upon his death,
his successors, heirs, executors and administrators, as the case may be.

                  (s) A share of "Phantom Stock" shall mean the right, granted
pursuant to Section 11, to receive in cash the Fair Market Value of a share of
Company Stock.

                  (t) "Plan" shall mean the Zale Corporation Omnibus Stock
Incentive Plan, as it may be amended from time to time.

                  (u) "Plan Agreement" shall mean the written agreement between
the Company and a Participant evidencing an Incentive Award.

                  (v) A share of "Restricted Stock" shall mean a share of
Company Stock which is granted pursuant to the terms of Section 10 hereof and
which is subject to the restrictions set forth in Section 10(c).

                  (w) "Rule 16b-3" shall mean the rule thus designated as
promulgated under the Exchange Act.


OMNIBUS STOCK INCENTIVE PLAN                                              PAGE 3
February 1999
<PAGE>   4

                  (x) "Stand-Alone SAR" shall mean a stock appreciation right
granted pursuant to Section 9 which is not related to any Option.

                  (y) "Stock Bonus" shall mean a bonus payable in shares of
Company Stock granted pursuant to Section 12.

                  (z) "Subsidiary" shall mean any corporation in which, at the
time of reference, the Company owns, directly or indirectly, stock comprising
more than fifty percent of the total combined voting power of all classes of
stock of such corporation.

                  (aa) "Tandem SAR" shall mean a stock appreciation right
granted pursuant to Section 8 which is related to an Option.

                  (bb) "Vesting Date" shall mean the date established by the
Committee on which a share of Restricted Stock or Phantom Stock may vest.

         3.       STOCK SUBJECT TO THE PLAN

                  (a) Shares Available for Awards

                  The total number of shares of Company Stock with respect to
which Incentive Awards may be granted shall not exceed 6,555,000 shares. Such
shares may be authorized but unissued Common Stock or authorized and issued
Common Stock held in the Company's treasury or acquired by the Company for the
purposes of the Plan. The Committee may direct that any stock certificate
evidencing shares issued pursuant to the Plan shall bear a legend setting forth
such restrictions on transferability as may apply to such shares pursuant to the
Plan.

                  The grant of a Tandem SAR shall not reduce the number of
shares of Company Stock with respect to which Incentive Awards may be granted
pursuant to the Plan.

                  (b) Individual Limitation

                  The total number of shares of Company Stock subject to Options
and to Stand-Alone SARS, awarded to any one employee during any fiscal year of
the Company, shall not exceed 600,000 shares. Determinations under the preceding
sentence shall be made in a manner that is consistent with Section 162(m) of the
Code and regulations promulgated thereunder. The provisions of this Section 3(b)
shall not apply in any circumstance with respect to which the Committee
determines that compliance with Section 162(m) of the Code is not necessary.

                  (c) Adjustment for Change in Capitalization

                  If there is any change in the outstanding shares of Company
Stock by reason of a stock dividend or distribution, stock split-up,
recapitalization, combination or exchange of shares, or by reason of any merger,
consolidation, spinoff or other corporate reorganization in which the Company is
the surviving corporation, the number of shares available for issuance both in
the aggregate and with respect to each outstanding Incentive Award, the price
per share under each outstanding Incentive Award, and the limitation set forth
in Section 3(b), shall be proportionately adjusted by the Committee, whose
determination shall be final, binding and conclusive. After any


OMNIBUS STOCK INCENTIVE PLAN                                              PAGE 4
February 1999
<PAGE>   5

adjustment made pursuant to this Section 3(c), the number of shares subject to
each outstanding Incentive Award shall be rounded to the nearest whole number.

                  (d) Re-use of Shares

                  The following shares of Company Stock shall again become
available for Incentive Awards: any shares subject to an Incentive Award that
remain unissued upon the cancellation or termination of such Award for any
reason whatsoever; any shares of Restricted Stock forfeited, provided that any
dividends paid on such shares are also forfeited; and any shares in respect of
which a stock appreciation right is settled for cash.

                  (e) Total Grants for Awards Other than Options

                  The total number of shares of Company Stock with respect to
which Tandem SARs, Stand Alone SARs, shares of Restricted Stock, shares of
Phantom Stock and Stock Bonuses may collectively be granted shall not exceed 10%
of the total number of shares of Company Stock with respect to which all
Incentive Awards have been or may be granted under the Plan.

         4.       ADMINISTRATION OF THE PLAN

         The Plan shall be administered by the Committee. The Committee shall
from time to time designate the employees of the Company who shall be granted
Incentive Awards and the amount, type and other features of each Incentive
Award.

         The Committee shall have full authority to administer the Plan,
including authority to interpret and construe any provision of the Plan and the
terms of any Incentive Award issued under it and to adopt such rules and
regulations for administering the Plan as it may deem necessary or appropriate.
The Committee shall determine whether an authorized leave of absence, or absence
in military or government service, shall constitute termination of employment.
Decisions of the Committee shall be final and binding on all parties.
Notwithstanding anything to the contrary contained herein, the Board of
Directors may, in its sole discretion, at any time and from time to time,
resolve to administer the Plan, in which case the term "Committee" as used
herein shall be deemed to mean the Board of Directors.

         The Committee may, in its absolute discretion, without amendment to the
Plan, (i) accelerate the date on which any Option or Stand-Alone SAR granted
under the Plan becomes exercisable, waive or amend the operation of Plan
provisions respecting exercise after termination of employment or otherwise
adjust any of the terms of such Option or Stand-Alone SAR, and (ii) accelerate
the Vesting Date or Issue Date, or waive any condition imposed hereunder, with
respect to any share of Restricted Stock or Phantom Stock or otherwise adjust
any of the terms applicable to such share.

         Absent Stockholder approval, neither the Committee nor the Board of
Directors shall have any authority, with or without the consent of the affected
holders of Incentive Awards, to reprice the Incentive Awards after the date of
their initial grant with a lower exercise price in substitution for the original
exercise price. This paragraph may not be amended, altered or repealed by the
Board of Directors or the Committee without approval of the Stockholders of the
Company.

         No member of the Committee shall be liable for any action, omission or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the


OMNIBUS STOCK INCENTIVE PLAN                                              PAGE 5
February 1999
<PAGE>   6

Committee and each other director or employee of the Company to whom any duty or
power relating to the administration or interpretation of the Plan has been
delegated against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim with the approval of the
Committee) arising out of any action, omission or determination relating to the
Plan, unless, in either case, such action, omission or determination was taken
or made by such member, director or employee in bad faith and without reasonable
belief that it was in the best interests of the Company.

         5.       ELIGIBILITY

         The persons who shall be eligible to receive Incentive Awards pursuant
to the Plan shall be such employees of the Company (including officers of the
Company, whether or not they are directors of the Company) as the Committee
shall select from time to time. Directors who are not employees or officers of
the Company shall not be eligible to receive Incentive Awards under the Plan.

         6.       AWARDS UNDER THE PLAN; PLAN AGREEMENTS

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

         Each Incentive Award granted under the Plan (except an unconditional
Stock Bonus) shall be evidenced by a Plan Agreement which shall contain such
provisions as the Committee may in its sole discretion deem necessary or
desirable. By accepting an Incentive Award, a Participant thereby agrees that
the Award shall be subject to all of the terms and provisions of the Plan and
the applicable Plan Agreement.

         7.       OPTIONS

                  (a) Identification of Options

                  Each Option shall be clearly identified in the applicable Plan
Agreement as either an Incentive Stock Option or a Non-Qualified Stock Option.

                  (b) Exercise Price

                  Each Plan Agreement with respect to an Option shall set forth
the amount (the "option exercise price") payable by the grantee to the Company
upon exercise of the Option. The option exercise price per share shall be
determined by the Committee but shall in no event be less than the Fair Market
Value of a share of Company Stock on the date the Option is granted.

                  (c) Term and Exercise of Options

                           (1) Unless the applicable Plan Agreement provides
otherwise, an Option shall become cumulatively exercisable as to 25% of the
shares covered thereby on each of the first, second, third and fourth
anniversaries of the date of grant. The Committee shall determine the expiration
date of each Option; provided, however, that no Incentive Stock Option shall be


OMNIBUS STOCK INCENTIVE PLAN                                              PAGE 6
February 1999
<PAGE>   7

exercisable more than ten years after the date of grant. Unless the applicable
Plan Agreement provides otherwise, no Option shall be exercisable prior to the
first anniversary of the date of grant.

                           (2) An Option may be exercised for all or any portion
of the shares as to which it is exercisable; provided, that no partial exercise
of an Option shall be for an aggregate exercise price of less than $1,000. The
partial exercise of an Option shall not cause the expiration, termination or
cancellation of the remaining portion thereof.

                           (3) An Option shall be exercised by delivering notice
to the Company's principal office, to the attention of its Secretary, no less
than one business day in advance of the effective date of the proposed exercise.
Such notice shall be accompanied by the applicable Plan Agreement, shall specify
the number of shares of Company Stock with respect to which the Option is being
exercised and the effective date of the proposed exercise and shall be signed by
the Participant or other person then having the right to exercise the Option.
Such notice may be withdrawn at any time prior to the close of business on the
business day immediately preceding the effective date of the proposed exercise.
Payment for shares of Company Stock purchased upon the exercise of an Option
shall be made on the effective date of such exercise by one or a combination of
the following means: (i) in cash, by certified check, bank cashier's check or
wire transfer; (ii) subject to the approval of the Committee, in shares of
Company Stock owned by the Participant for at least six months prior to the date
of exercise and valued at their Fair Market Value on the effective date of such
exercise; or (iii) subject to the approval of the Committee, by such other
provision as the Committee may from time to time authorize. Any payment in
shares of Company Stock shall be effected by the delivery of such shares to the
Secretary of the Company, duly endorsed in blank or accompanied by stock powers
duly executed in blank, together with any other documents and evidences as the
Secretary of the Company shall require.

                           (4) Certificates for shares of Company Stock
purchased upon the exercise of an Option shall be issued in the name of the
Participant or other person entitled to receive such shares, and delivered to
the Participant or such other person as soon as practicable following the
effective date on which the Option is exercised.

                  (d) Limitations on Incentive Stock Options

                           (1) To the extent that the aggregate Fair Market
Value of shares of Company Stock with respect to which Incentive Stock Options
are exercisable for the first time by a Participant during any calendar year
under the Plan and any other stock option plan of the Company (or any
"subsidiary corporation" of the Company within the meaning of Section 424 of the
Code) shall exceed $100,000, or such higher value as may be permitted under
Section 422 of the Code, such Options shall be treated as Non-Qualified Stock
Options. Such Fair Market Value shall be determined as of the date on which each
such Incentive Stock Option is granted.

                           (2) No Incentive Stock Option may be granted to an
individual if, at the time of the proposed grant, such individual owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any of its "subsidiary corporations" (within the meaning
of Section 424 of the Code), unless (i) the exercise price of such Incentive
Stock Option is at least 110% of the Fair Market Value of a share of Company
Stock at the time such Incentive Stock Option is granted and (ii) such Incentive
Stock Option is not exercisable after the expiration of five years from the date
such Incentive Stock Option is granted.


OMNIBUS STOCK INCENTIVE PLAN                                              PAGE 7
February 1999
<PAGE>   8

                  (e) Effect of Termination of Employment

                           (1) Unless the applicable Plan Agreement provides
otherwise, in the event that the employment of a Participant with the Company
shall terminate for any reason other than Cause, Disability or death (i) Options
granted to such Participant, to the extent that they were exercisable at the
time of such termination, shall remain exercisable until the date that is three
months after such termination, on which date they shall expire, and (ii) Options
granted to such Participant, to the extent that they were not exercisable at the
time of such termination, shall expire at the close of business on the date of
such termination. The three-month period described in this Section 7(e)(1) shall
be extended to one year in the event of the Participant's death during such
three-month period. Notwithstanding the foregoing, no Option shall be
exercisable after the expiration of its term.

                           (2) Unless the applicable Plan Agreement provides
otherwise, in the event that the employment of a Participant with the Company
shall terminate on account of the Disability or death of the Participant (i)
Options granted to such Participant, to the extent that they were exercisable at
the time of such termination, shall remain exercisable until the first
anniversary of such termination, on which date they shall expire, and (ii)
Options granted to such Participant, to the extent that they were not
exercisable at the time of such termination, shall expire at the close of
business on the date of such termination; provided, however, that no Option
shall be exercisable after the expiration of its term.

                           (3) In the event of the termination of a
Participant's employment for Cause, all outstanding Options granted to such
Participant shall expire at the commencement of business on the date of such
termination.

                  (f) Acceleration of Exercise Date Upon Change in Control

                  Upon the occurrence of a Change in Control, each Option
granted under the Plan and outstanding at such time shall become fully and
immediately exercisable and shall remain exercisable until its expiration,
termination or cancellation pursuant to the terms of the Plan.

         8.       TANDEM SARS

         The Committee may grant in connection with any Option granted hereunder
one or more Tandem SARS relating to a number of shares of Company Stock less
than or equal to the number of shares of Company Stock subject to the related
Option. A Tandem SAR may be granted at the same time as, or, in the case of a
Non-Qualified Stock Option, subsequent to the time that, its related Option is
granted.

                  (a) Benefit Upon Exercise

                  The exercise of a Tandem SAR with respect to any number of
shares of Company Stock shall entitle the Participant to a cash payment, for
each such share, equal to the excess of (i) the Fair Market Value of a share of
Company Stock on the exercise date over (ii) the option exercise price of the
related Option. Such payment shall be made as soon as practicable after the
effective date of such exercise.


OMNIBUS STOCK INCENTIVE PLAN                                              PAGE 8
February 1999
<PAGE>   9

                  (b) Term and Exercise of Tandem SAR

                           (1) A Tandem SAR shall be exercisable only if and to
the extent that its related Option is exercisable.

                           (2) The exercise of a Tandem SAR with respect to a
number of shares of Company Stock shall cause the immediate and automatic
cancellation of its related Option with respect to an equal number of shares.
The exercise of an Option, or the cancellation, termination or expiration of an
Option (other than pursuant to this Section 8 (b) (2)), with respect to a number
of shares of Company Stock shall cause the automatic and immediate cancellation
of any related Tandem SARS to the extent that the number of shares of Company
Stock remaining subject to such Option is less than the number of shares subject
to such Tandem SARS.

                             Such Tandem SARS shall be cancelled in the order in
which they became exercisable.

                           (3) A Tandem SAR may be exercised for all or any
portion of the shares as to which it is exercisable; provided, that no partial
exercise of a Tandem SAR shall be for an aggregate exercise price of less than
$1,000. The partial exercise of a Tandem SAR shall not cause the expiration,
termination or cancellation of the remaining portion thereof.

                           (4) No Tandem SAR shall be assignable or transferable
otherwise than together with its related Option.

                           (5) A Tandem SAR shall be exercised by delivering
notice to the Company's principal office, to the attention of its Secretary, no
less than one business day in advance of the effective date of the proposed
exercise. Such notice shall be accompanied by the applicable Plan Agreement,
shall specify the number of shares of Company Stock with respect to which the
Tandem SAR is being exercised and the effective date of the proposed exercise
and shall be signed by the Participant or other person then having the right to
exercise the Option to which the Tandem SAR is related. Such notice may be
withdrawn at any time prior to the close of business on the business day
immediately preceding the effective date of the proposed exercise.

         9.       STAND-ALONE SARS

                  (a) Exercise Price

                  The exercise price per share of a Stand-Alone SAR shall be
determined by the Committee at the time of grant, but shall in no event be less
than the Fair Market Value of a share of Company Stock on the date of grant.

                  (b) Benefit Upon Exercise

                  The exercise of a Stand-Alone SAR with respect to any number
of shares of Company Stock shall entitle the Participant to a cash payment, for
each such share, equal to the excess of (i) the Fair Market Value of a share of
Company Stock on the exercise date over (ii) the exercise price of the
Stand-Alone SAR. Such payments shall be made as soon as practicable.


OMNIBUS STOCK INCENTIVE PLAN                                              PAGE 9
February 1999
<PAGE>   10

                  (c) Term and Exercise of Stand-Alone SARS

                           (1) Unless the applicable Plan Agreement provides
otherwise, a Stand-Alone SAR shall become cumulatively exercisable as to 25
percent of the shares covered thereby on each of the first, second, third and
fourth anniversaries of the date of grant. The Committee shall determine the
expiration date of each Stand-Alone SAR. Unless the applicable Plan Agreement
provides otherwise, no Stand-Alone SAR shall be exercisable prior to the first
anniversary of the date of grant.

                           (2) A Stand-Alone SAR may be exercised for all or any
portion of the shares as to which it is exercisable; provided, that no partial
exercise of a Stand-Alone SAR shall be for an aggregate exercise price of less
than $1,000. The partial exercise of a Stand-Alone SAR shall not cause the
expiration, termination or cancellation of the remaining portion thereof.

                           (3) A Stand-Alone SAR shall be exercised by
delivering notice to the Company's principal office, to the attention of its
Secretary, no less than one business day in advance of the effective date of the
proposed exercise. Such notice shall be accompanied by the applicable Plan
Agreement, shall specify the number of shares of Company Stock with respect to
which the Stand-Alone SAR is being exercised, and the effective date of the
proposed exercise, and shall be signed by the Participant. The Participant may
withdraw such notice at any time prior to the close of business on the business
day immediately preceding the effective date of the proposed exercise.

                  (d) Effect of Termination of Employment

                  The provisions set forth in Section 7 (e) with respect to the
exercise of Options following termination of employment shall apply as well to
such exercise of Stand-Alone SARS.

                  (e) Acceleration of Exercise Date Upon Change in Control

                  Upon the occurrence of a Change in Control, any Stand-Alone
SAR granted under the Plan and outstanding at such time shall become fully and
immediately exercisable and shall remain exercisable until its expiration,
termination or cancellation pursuant to the terms of the Plan.

         10.      RESTRICTED STOCK

                  (a) Issue Date and Vesting Date

                  At the time of the grant of shares of Restricted Stock, the
Committee shall establish an Issue Date or Issue Dates and a Vesting Date or
Vesting Dates with respect to such shares. The Committee may divide such shares
into classes and assign a different Issue Date and/or Vesting Date for each
class. If the grantee is employed by the Company on an Issue Date (which may be
the date of grant), the specified number of shares of Restricted Stock shall be
issued in accordance with the provisions of Section 10(e). Provided that all
conditions to the vesting of a share of Restricted Stock imposed pursuant to
Section 10(b) are satisfied, and except as provided in Section 10(g), upon the
occurrence of the Vesting Date with respect to a share of Restricted Stock, such
share shall vest and the restrictions of Section 10(c) shall cease to apply to
such share.


OMNIBUS STOCK INCENTIVE PLAN                                             PAGE 10
February 1999
<PAGE>   11

                  (b) Conditions to Vesting

                  At the time of the grant of shares of Restricted Stock, the
Committee may impose such restrictions or conditions to the vesting of such
shares as it, in its absolute discretion, deems appropriate. By way of example
and not by way of limitation, the Committee may require, as a condition to the
vesting of any class or classes of shares of Restricted Stock, that the
Participant or the Company achieve such performance goals as the Committee may
specify.

                  (c) Restrictions on Transfer Prior to Vesting

                  Prior to the vesting of a share of Restricted Stock, no
transfer of a Participant's rights with respect to such share, whether voluntary
or involuntary, by operation of law or otherwise, shall be permitted.
Immediately upon any attempt to transfer such rights, such share, and all of the
rights related thereto, shall be forfeited by the Participant.

                  (d) Dividends on Restricted Stock

                  The Committee in its discretion may require that any dividends
paid on shares of Restricted Stock shall be held in escrow until all
restrictions on such shares have lapsed.

                  (e) Issuance of Certificates

                           (1) Reasonably promptly after the Issue Date with
respect to shares of Restricted Stock, the Company shall cause to be issued a
stock certificate, registered in the name of the Participant to whom such shares
were granted, evidencing such shares; provided, that the Company shall not cause
such a stock certificate to be issued unless it has received a stock power duly
endorsed in blank with respect to such shares. Each such stock certificate shall
bear the following legend:

                  The transferability of this certificate and the shares of
                  stock represented hereby are subject to the restrictions,
                  terms and conditions (including forfeiture provisions and
                  restrictions against transfer) contained in the Zale
                  Corporation Omnibus Stock Incentive Plan and a Plan Agreement
                  entered into between the registered owner of such shares and
                  Zale Corporation. A copy of the Plan and Agreement is on file
                  in the office of the Secretary of Zale Corporation, 901 West
                  Walnut Hill Lane, Irving, Texas 75038-1003.

Such legend shall not be removed until such shares vest pursuant to the terms
hereof.

                           (2) Each certificate issued pursuant to this Section
10(e), together with the stock powers relating to the shares of Restricted Stock
evidenced by such certificate, shall be held by the Company unless the Committee
determines otherwise.


OMNIBUS STOCK INCENTIVE PLAN                                             PAGE 11
February 1999
<PAGE>   12

                  (f) Consequences of Vesting

                  Upon the vesting of a share of Restricted Stock pursuant to
the terms hereof, the restrictions of Section 10(c) shall cease to apply to such
share. Reasonably promptly after a share of Restricted Stock vests, the Company
shall cause to be delivered to the Participant to whom such shares were granted,
a certificate evidencing such share, free of the legend set forth in Section
10(e).

                  (g) Effect of Termination of Employment

                           (1) Subject to such other provision as the Committee
may set forth in the applicable Plan Agreement, and to the Committee's amendment
authority pursuant to Section 4, during the 90 days following termination of a
Participant's employment for any reason other than Cause, the Company shall have
the right to require the return of any shares to which restrictions on
transferability apply, in exchange for which the Company shall repay to the
Participant (or the Participant's estate) any amount paid by the Participant for
such shares. In the event that the Company requires such a return of shares, it
shall also have the right to require the return of all dividends paid on such
shares, whether by termination of any escrow arrangement under which such
dividends are held or otherwise.

                           (2) In the event of the termination of a
Participant's employment for Cause, all shares of Restricted Stock granted to
such Participant which have not vested as of the date of such termination shall
immediately be returned to the Company, together with any dividends paid on such
shares, in return for which the Company shall repay to the Participant any
amount paid for such shares.

                  (h) Effect of Change in Control

                  Upon the occurrence of a Change in Control, all outstanding
shares of Restricted Stock which have not theretofore vested shall immediately
vest.

         11.      PHANTOM STOCK

                  (a) Vesting Date

                  At the time of the grant of shares of Phantom Stock, the
Committee shall establish a Vesting Date or Vesting Dates with respect to such
shares. The Committee may divide such shares into classes and assign a different
Vesting Date for each class. Provided that all conditions to the vesting of a
share of Phantom Stock imposed pursuant to Section 11(c) are satisfied, and
except as provided in Section 11(d), upon the occurrence of the Vesting Date
with respect to a share of Phantom Stock, such share shall vest.

                  (b) Benefit Upon Vesting

                  Upon the vesting of a share of Phantom Stock, the Participant
shall be entitled to receive in cash, within 30 days of the date on which such
share vests, an amount equal to the sum of (i) the Fair Market Value of a share
of Company Stock on the date on which such share of Phantom Stock vests and (ii)
the aggregate amount of cash dividends paid with respect to a share


OMNIBUS STOCK INCENTIVE PLAN                                             PAGE 12
February 1999
<PAGE>   13

of Company Stock during the period commencing on the date on which the share of
Phantom Stock was granted and terminating on the date on which such share vests.

                  (c) Conditions to Vesting

                  At the time of the grant of shares of Phantom Stock, the
Committee may impose such restrictions or conditions to the vesting of such
shares as it, in its absolute discretion, deems appropriate. By way of example
and not by way of limitation, the Committee may require, as a condition to the
vesting of any class or classes of shares of Phantom Stock, that the Participant
or the Company achieve such performance goals as the Committee may specify.

                  (d) Effect of Termination of Employment

                           (1) Subject to such other provision as the Committee
may set forth in the applicable Plan Agreement and to the Committee's amendment
authority pursuant to Section 4, shares of Phantom Stock that have not vested,
together with any dividends credited on such shares, shall be forfeited upon the
Participant's termination of employment for any reason other than Cause.

                           (2) In the event of the termination of a
Participant's employment for Cause, all shares of Phantom Stock granted to such
Participant which have not vested as of the date of such termination shall
immediately be forfeited, together with any dividends credited on such shares.

                  (e) Effect of Change in Control

                  Upon the occurrence of a Change in Control all outstanding
shares of Phantom Stock which have not theretofore vested shall immediately
vest.

         12.      STOCK BONUSES

         In the event that the Committee grants a Stock Bonus, a certificate for
the shares of Company Stock comprising such Stock Bonus shall be issued in the
name of the Participant to whom such grant was made and delivered to such
Participant as soon as practicable after the date on which such Stock Bonus is
payable.

         13.      RIGHTS AS A STOCKHOLDER

         No person shall have any rights as a stockholder with respect to any
shares of Company Stock covered by or relating to any Incentive Award until the
date of issuance of a stock certificate with respect to such shares.

         Except as otherwise expressly provided in Section 3(c), no adjustment
to any Incentive Award shall be made for dividends or other rights for which the
record date occurs prior to the date such stock certificate is issued.

         14.      NO SPECIAL EMPLOYMENT RIGHTS; NO RIGHT TO INCENTIVE AWARD

         Nothing contained in the Plan or any Plan Agreement shall confer upon
any Participant any right with respect to the continuation of employment by the
Company or interfere in any way with


OMNIBUS STOCK INCENTIVE PLAN                                             PAGE 13
February 1999
<PAGE>   14

the right of the Company, subject to the terms of any separate employment
agreement to the contrary, at any time to terminate such employment or to
increase or decrease the compensation of the Participant.

         No person shall have any claim or right to receive an Incentive Award
hereunder. The Committee's granting of an Incentive Award to a Participant at
any time shall neither require the Committee to grant any other Incentive Award
to such Participant or other person at any time nor preclude the Committee from
making subsequent grants to such Participant or any other person.

         15.      SECURITIES MATTERS

                  (a) The Company shall be under no obligation to effect the
registration pursuant to the Securities Act of 1933 of any interests in the Plan
or any shares of Company Stock to be issued hereunder or to effect similar
compliance under any state laws. Notwithstanding anything herein to the
contrary, the Company shall not be obligated to cause to be issued or delivered
any certificates evidencing shares of Company Stock pursuant to the Plan unless
and until the Company is advised by its counsel that the issuance and delivery
of such certificates is in compliance with all applicable laws, regulations of
governmental authority and the requirements of the New York Stock Exchange and
any other securities exchange on which shares of Company Stock are traded. The
Committee may require, as a condition of the issuance and delivery of
certificates evidencing shares of Company Stock pursuant to the terms hereof,
that the recipient of such shares make such covenants, agreements and
representations, and that such certificates bear such legends, as the Committee,
in its sole discretion, deems necessary or desirable.

                  (b) The transfer of any shares of Company Stock hereunder
shall be effective only at such time as counsel to the Company shall have
determined that the issuance and delivery of such shares is in compliance with
all applicable laws, regulations of governmental authority and the requirements
of the New York Stock Exchange and any other securities exchange on which shares
of Company Stock are traded. The Committee may, in its sole discretion, defer
the effectiveness of any transfer of shares of Company stock hereunder in order
to allow the issuance of such shares to be made pursuant to registration or an
exemption from registration or other methods for compliance available under
federal or state securities laws. The Committee shall inform the Participant in
writing of its decision to defer the effectiveness of a transfer. During the
period of such a deferral in connection with the exercise of an Option, the
Participant may, by written notice, withdraw such exercise and obtain the refund
of any amount paid with respect thereto.

         16.      WITHHOLDING TAXES

         Whenever cash is to be paid pursuant to an Incentive Award, the Company
shall have the right to deduct therefrom an amount sufficient to satisfy any
federal, state and local withholding tax requirements related thereto.

         Whenever shares of Company Stock are to be delivered pursuant to an
Incentive Award, the Company shall have the right to require the Participant to
remit to the Company in cash an amount sufficient to satisfy any federal, state
and local withholding tax requirements related thereto. With the approval of the
Committee, which it shall have sole discretion to grant, a Participant may
satisfy the foregoing requirement by electing to have the Company withhold from
delivery shares of Company Stock having a value equal to the amount of tax to be
withheld. Such shares shall be valued at their Fair Market Value on the date as
of which the amount of tax to be


OMNIBUS STOCK INCENTIVE PLAN                                             PAGE 14
February 1999
<PAGE>   15

withheld is determined (the "Tax Date"). Fractional share amounts shall be
settled in cash. Such a withholding election may be made with respect to all or
any portion of the shares to be delivered pursuant to an Incentive Award. To the
extent required for such a withholding of stock to qualify for the exemption
available under Rule 16b-3, such an election by a grantee whose transactions in
Common Stock are subject to Section 16(b) of the Exchange Act shall be: (a)
subject to the approval of the Committee in its sole discretion; (b)
irrevocable; (c) made no sooner than six months after the grant of the award
with respect to which the election is made; and (d) made at least six months
prior to the Tax Date unless such withholding election is in connection with
exercise of an Option and both the election and the exercise occur prior to the
Tax Date in a "window period" of ten business days beginning on the third day
following release of the Company's quarterly or annual summary statement of
sales and earnings.

         17.      NOTIFICATION OF ELECTION UNDER SECTION 83(b) OF THE CODE

         If any Participant shall, in connection with the acquisition of shares
of Company Stock under the Plan, make the election permitted under Section 83(b)
of the Code (i.e., an election to include in gross income in the year of
transfer the amounts specified in Section 83(b)), such Participant shall notify
the Company of such election within 10 days of filing notice of the election
with the Internal Revenue Service, in addition to any filing and notification
required pursuant to regulations issued under the authority of Code Section
83(b).

         18.      NOTIFICATION UPON DISQUALIFYING DISPOSITION UNDER SECTION
                  421(b) OF THE CODE

         Each Plan Agreement with respect to an Incentive Stock Option shall
require the Participant to notify the Company of any disposition of shares of
Company Stock issued pursuant to the exercise of such Option under the
circumstances described in Section 421(b) of the Code (relating to certain
disqualifying dispositions), within 10 days of such disposition.

         19.      AMENDMENT OR TERMINATION OF THE PLAN

         The Board of Directors may, at any time, suspend or terminate the Plan
or revise or amend it in any respect whatsoever; provided, however, that
stockholder approval shall be required if and to the extent required by Rule
16b-3 or by any comparable or successor exemption under which the Board of
Directors believes it is appropriate for the Plan to qualify, or if and to the
extent the Board of Directors determines that such approval is appropriate for
purposes of satisfying Section 162 (m) or 422 of the Code. Incentive Awards may
be granted under the Plan prior to the receipt of such shareholder approval but
each such grant shall be subject in its entirety to such approval and no award
may be exercised, vested or otherwise satisfied prior to the receipt of such
approval. Nothing herein shall restrict the Committee's ability to exercise its
discretionary authority pursuant to Section 4, which discretion may be exercised
without amendment to the Plan. No action hereunder may, without the consent of a
Participant, reduce the Participant's rights under any outstanding Incentive
Award.

         20.      NO OBLIGATION TO EXERCISE

         The grant to a Participant of an Option, Tandem SAR or Stand-Alone SAR
shall impose no obligation upon such Participant to exercise such Option, Tandem
SAR or Stand-Alone SAR.


OMNIBUS STOCK INCENTIVE PLAN                                             PAGE 15
February 1999
<PAGE>   16

         21.      TRANSFERS UPON DEATH; NONASSIGNABILITY

         Upon the death of a Participant outstanding Incentive Awards granted to
such Participant may be exercised only by the executor or administrator of the
Participant's estate or by a person who shall have acquired the right to such
exercise by will or by the laws of descent and distribution. No transfer of an
Incentive Award by will or the laws of descent and distribution shall be
effective to bind the Company unless the Committee shall have been furnished
with (a) written notice thereof and with a copy of the will and/or such evidence
as the Committee may deem necessary to establish the validity of the transfer
and (b) an agreement by the transferee to comply with all the terms and
conditions of the Incentive Award that are or would have been applicable to the
Participant and to be bound by the acknowledgments made by the Participant in
connection with the grant of the Incentive Award.

         During a Participant's lifetime, the Committee may permit the transfer,
assignment or other encumbrance of an outstanding Option or outstanding shares
of Restricted Stock unless (y) such Option is an Incentive Stock Option and the
Committee and the Participant intend that it shall retain such status, or (z)
the award is meant to qualify for the exemptions available under Rule 16b-3 and
the Committee and the Participant intend that it shall continue to so qualify.

         22.      EXPENSES AND RECEIPTS

         The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Incentive Award will be used for
general corporate purposes.

         23.      FAILURE TO COMPLY

         In addition to the remedies of the Company elsewhere provided for
herein, failure by a Participant (or beneficiary) to comply with any of the
terms and conditions of the Plan or the applicable Plan Agreement, unless such
failure is remedied by such Participant (or beneficiary) within ten days after
notice of such failure by the Committee, shall be grounds for the cancellation
and forfeiture of such Incentive Award, in whole or in part, as the Committee,
in its absolute discretion, may determine.

         24.      EFFECTIVE DATE AND TERM OF PLAN

         The Plan became effective on the Effective Date. Unless earlier
terminated by the Board of Directors, the right to grant Incentive Awards under
the Plan will terminate on the tenth anniversary of the Effective Date.
Incentive Awards outstanding at Plan termination will remain in effect according
to their terms and the provisions of the Plan.

         25.      APPLICABLE LAW

         Except to the extent preempted by any applicable federal law, the Plan
will be construed and administered in accordance with the laws of the State of
Texas, without reference to the principles of conflicts of law.



OMNIBUS STOCK INCENTIVE PLAN                                             PAGE 16
February 1999