Document:

Exhibit
10.1

SETTLEMENT AND RELEASE AGREEMENT

This Settlement and
Release Agreement (“Agreement”) is made and entered into by and between Sue E.
Gove (“Employee”), and Zale Corporation (“Zale”) hereinafter collectively
referred to as the “Parties.”

RECITALS

WHEREAS, Employee was
employed by Zale as Executive Vice President and Chief Operating Officer of
Zale, served as a director of Zale, and served in other positions with Zale and
its subsidiaries;

WHEREAS, Employee
resigned as Executive Vice President and Chief Operating Officer of Zale, as a
director of Zale, and from any and all other positions that she had with Zale
or its subsidiaries, effective as of March 24, 2006 (the “Separation Date”);
and

WHEREAS, Employee and
Zale desire to settle fully and finally all differences between them which have
arisen, or which may arise, prior to, or at the time of, the execution of this
Agreement, including, but in no way limited to, any and all claims and
controversies arising out of the employment relationship between Employee and
Zale and the cessation of Employee’s employment with Zale;

NOW, THEREFORE, in
consideration of the Recitals and the mutual promises, covenants, and
agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Employee and Zale,
intending to be legally bound, covenant and agree as follows:

1.             (a)  Employee
shall be entitled to receive the following post-termination benefits, and no
others:

(i)            in cash on December 18, 2006,
the sum of $2,340,000 (less customary payroll deductions), consisting of (A)
$1,300,000, representing two times Employee’s base salary on the Separation
Date, and (B) $1,040,000, representing two times Employee’s target bonus on the
Separation Date;

(ii)           through March 31, 2008, Zale will
continue to allow Employee to participate in the medical and dental insurance
plans, Medical Expense Reimbursement Plan (“MERP”), disability plan, executive
car program, life insurance plan, and financial planning program on the same
terms and conditions under which Employee participated in those plans on
September 21, 2005, subject to the provisions of Sections 5(h) and 5(i) of
the Employment Agreement, which sections are incorporated herein by reference;
provided, however, the continued medical insurance provided pursuant to this
Section 1(a)(ii) will count in satisfaction of Employee’s right to continue
such benefits pursuant to the Consolidated Omnibus Budget Reconciliation Act of

 

1985, as amended
and Employee shall pay an amount equal to the “employee portion” of the
premiums during such period, and provided further that employee shall not be
entitled to a new car during such period but shall be entitled to the continued
use of her current car through the expiration of its lease-term;

(iii)          the unvested stock options, restricted
stock and other long-term incentive awards listed on Schedule A hereto will be
deemed to have vested on the Separation Date and all such vested options and
awards involving the exercise of rights will continue to be exercisable for the
remainder of their respective terms, provided, however, that any unvested
restricted stock units that immediately vest will be paid out on January 1,
2007, and other awards shall be delivered promptly to the extent not previously
delivered;

(iv)          1,100 of the performance-based
restricted stock units provided for in Section 3(c)(A) of the Employment
Agreement will be deemed to have vested on the Separation Date and the 1,100
shares of Company common stock attributable thereto will be paid out
January 1, 2007, and the remaining performance-based restricted stock
units shall be forfeited;

(v)           in cash on December 18, 2006,
the lump-sum amount of $275,635.77 (less customary payroll deductions),
representing all amounts due Employee under the terms of the Zale Supplemental
Employee Retirement Plan pursuant to such plan’s terms; and

(vi)          any accrued, but unpaid, salary
(including unpaid vacation pay through the Separation Date), expenses and
benefits as of the Separation Date shall be paid to Employee in accordance with
Zale’s standard payroll and expense reimbursement practices.

In the event of
Employee’s death prior to her receipt in full of the payments and benefits to
which she (or her family) is entitled as described in this Section 1(a), any
such payment or benefit to the extent not made or provided at or prior to the
time of her death shall, except for benefits to her family as provided in the
next sentence, be made to her estate or other legal representative.  Healthcare, dental and welfare benefits to
Employee’s family shall be provided for the period remaining from the date of
death to March 31, 2008 on the same basis as such benefits are provided under
Section 1(a)(ii) prior to Employee’s death. 
Any stock options outstanding at the time of Employee’s death shall
continue to be exercisable for the remainder of their terms.  Any long-term incentive awards that are due
hereunder and not yet paid shall be paid as provided in clauses (iii), (iv) and
(v) above.  In making any of the payments
or taking any of the actions contemplated by this provision or elsewhere in
this Agreement, Zale shall be fully protected in the event that it makes a
payment or takes an action based upon instructions received from Employee’s
executor or other legal representative.

(b)           In addition, Employee and Zale shall
continue to be subject to Sections 6 through 24 of the Employment
Agreement.  The Parties expressly agree
that except for Sections 5(g), 5(h), 5(i), 6 and 7 through 24, which are incorporated
herein by reference and shall be applicable to the provisions of this
Agreement, neither Party shall have any further obligations under the
Employment Agreement.

 2
 

 

2.             Employee, for herself and on behalf
of her attorneys, heirs, assigns, successors, executors, and administrators,
hereby irrevocably (subject to Section 9 of this Agreement) and unconditionally
GENERALLY RELEASES, ACQUITS, AND FOREVER DISCHARGES Zale, its current and
former subsidiary, affiliated, and related corporations, firms, associations,
partnerships, and entities, their successors and assigns, and the current and
former owners, shareholders, directors, officers, employees, agents, attorneys,
representatives, and insurers of said corporations, firms, associations,
partnerships, and entities, and their guardians, successors, assigns, heirs,
executors, and administrators (hereinafter collectively referred to as the “Zale
Releasees”) from any and all claims, complaints, grievances, liabilities,
obligations, promises, agreements, damages, causes of action, rights, debts,
demands, controversies, costs, losses, and expenses (including attorneys’ fees
and expenses) whatsoever, under any municipal, local, state, or federal law,
common or statutory — including, but in no way limited to, claims arising under
the Age Discrimination in Employment Act of 1967, 29 U.S.C. § 621, et seq., as amended, Title VII of the Civil Rights Act of
1964, 42 U.S.C. § 2000e, et seq., as amended (including the Civil Rights Act of
1991), the Americans with Disabilities Act of 1990, 42 U.S.C. §§ 12101, et
seq., as amended, the Employee Retirement Income Security Act of 1974, (ERISA),
29 U.S.C. §§ 1001 et seq., as amended, the Family and Medical Leave Act (“FMLA”),
29 U.S.C. §§ 2601 et seq., as amended, the Labor Management Relations Act, 29
U.S.C. §§ 141 et seq., as amended, the Occupational Safety and Health Act (“OSHA”),
29 U.S.C. §§ 651 et seq., as amended, the Racketeer Influenced and Corrupt
Organizations Act (RICO), 18 U.S.C. §§ 1961 et seq., as amended, the Sarbanes
Oxley Act of 2002, the Sabine Pilot Doctrine, the American Jobs Creation Act of
2004, the Texas Commission on Human Rights Act (“TCHRA”‘), Texas Labor Code §§
1.001 et seq., as amended, the Texas Pay Day
Law, Texas Labor Code §§ 61.001 et seq., as
amended, and/or the Texas Worker’s. Compensation Discrimination Law, Texas
Labor Code §§ 451.001 et seq., as
amended — for any actions or omissions whatsoever, whether known or unknown,
and whether connected with the employment relationship between Employee and
Zale, and/or the cessation of Employee’s employment with Zale, or not, which
existed or may have existed prior to, or contemporaneously with, the execution
of this Agreement (the “Released Claim(s)”). 
Furthermore, to the extent permitted by law, Employee forever waives,
releases, and covenants not to sue or file any complaint or claim against any
Releasee with any court, governmental agency or other entity based on a
Released Claim, whether known or unknown at the time of execution.  Employee also waives any right to recover
from a Zale Releasee in a civil suit brought by any governmental agency or any
other individual on her behalf with respect to any Released Claim.  This release covers both claims that Employee
knows about and those she may not know about, except that it does not waive or
release any rights or claims that she may have under the Age Discrimination in
Employment Act that arise after the date she signs the Agreement.

Notwithstanding
the foregoing, Employee does not release:

(i)            claims that Employee may have
against Zale for reimbursement of ordinary and necessary business expenses
incurred by her during the course of her employment;

(ii)           claims that arise after the effective
date of this Agreement;

 3
 

 

(iii)          any rights Employee may have to enforce
the surviving provisions of the Employment Agreement as specified in Section
1(b) of this Agreement or, subject to the Undertaking Agreement between Zale
and Employee dated as of August 21, 2006 (the “Undertaking Agreement”),  her reservation of rights contained in the
letter dated August 21, 2006;

(iv)          any rights or entitlements that
Employee has under any applicable written plan, policy, program, or written
arrangement of, or other written agreement, including this Agreement, with,
Zale;

(v)           Subject to the Undertaking Agreement,
Employee’s right to be indemnified and to have her expenses reimbursed under
Section 10 of the Employment Agreement, Zale’s Certificate of Incorporation or
Bylaws or under applicable law or pursuant to Zale’s directors’ and officers’
liability insurance policies with respect to liabilities she incurred as an
employee, officer or director of Zale or a subsidiary of Zale; and

(vi)          Employee’s right to contribution as
permitted by law in the event of entry of judgment against her as a result of
any act or failure to act for which she, Zale, a subsidiary of Zale and/or
other officers and directors of either were liable.

Employee acknowledges and
warrants, understanding the truth of said acknowledgment and warranty is
material to the making of this Agreement, that she has not assigned or
otherwise transferred any of the claims released by her through this Agreement,
and she hereby promises to indemnify and hold harmless the Zale Releasees with
respect to any damages, costs or other injuries, including the payment of
attorneys’ fees, which might arise through the assertion of any Released
Claim(s).

3.             (a)           Employee
expressly acknowledges, agrees, and covenants that she will not make any public
or private statements, comments, or communications in any form, oral, written,
or electronic (all of the foregoing, for purposes of this paragraph, “Communications”),
which in any way could constitute libel, slander, false light, or disparagement
of Zale, its subsidiaries, affiliates or parent, its employees, officers,
and/or directors, or which may be considered to be derogatory or detrimental to
its or their good name or business reputation; provided, however, that the
terms of this paragraph shall not (a) apply to Communications between Employee and
clergy or attorneys that are subject to a claim of privilege existing under
common law, statute, or rule of procedure, (b) apply to Communications required
by law or made in response to a valid subpoena or other lawful order compelling
Employee to provide testimony or information, provided, however, that in
responding to a valid subpoena or lawful order, Employee agrees to provide Zale
with advance notice and an opportunity to seek a protective order or other
safeguard for its confidential information, (c) be construed to inhibit or
limit Employee’s ability to cooperate with any investigation by a governmental
or regulatory agency or official, provided, however, that prior to cooperating
Employee agrees to provide Zale with advance notice and an opportunity to seek
a protective order or other safeguard for its confidential information, or (d)
apply to a truthful statement made for the purpose of correcting inaccuracies
or defending her reputation in response to any derogatory or detrimental
statement made by Zale (or any of its affiliates, officers and/or directors) in
a press release or other public statement. 
Employee

 4
 

 

specifically agrees not to issue any public statement
concerning her employment at Zale and/or the cessation of such employment.

Without limiting the
generality of the foregoing or the provisions of Section 9 of the Employment
Agreement, Employee expressly agrees not to discuss, directly or indirectly,
the business and affairs of Zale with any analysts, shareholders or potential
shareholders of Zale, investment bankers or financial advisors, potential
equity investors in Zale, or employees of Zale, or to provide any of the
foregoing any financial or other non-public information regarding Zale, without
the express written consent of Zale, which consent can be withheld for any
reason or for no reason.

(b)           Subject to reasonable preexisting
personal and business commitments, for a period of 24 months following the
Separation Date, Employee agrees to cooperate with Zale following the
termination of her employment by being reasonably available to testify on
behalf of Zale or any subsidiary or affiliate in any action, suit, or
proceeding, whether civil, criminal, administrative, or investigative, and to
assist Zale, or any subsidiary or affiliate, in any such action, suit or
proceeding, by providing information and meeting and consulting with
representatives or counsel to Zale, or any subsidiary or affiliate, as
reasonably requested; provided, however, that in no event shall Employee be
required to provide any cooperation if such cooperation is materially adverse
to her legal interests.  In any event, in any matter subject to this
Section 3(b), Employee shall not be required to act against the best interests
of any new employer or new business venture in which she is a partner or active
participant where the interests of Employee’s new employer or new business
venture are adverse to the interests of Zale and/or any of its subsidiary,
affiliate or related entities.  Zale agrees to provide Employee reasonable
notice, to the extent practicable, in the event her assistance is required and,
to the extent possible, Zale will try to limit Employee’s participation to
regular business hours.  Zale will reimburse Employee for the reasonable
expenses and costs actually incurred by her as a result of providing such
assistance, upon the submission of the appropriate documentation to Zale. 
Such expenses and costs shall include, without limitation, demonstrably lost
wages, travel costs and reasonable legal fees to the extent that she is advised
by counsel reasonably acceptable to Zale that separate representation is
warranted because Employee’s interests are inconsistent with those of Zale such
that Employee cannot be represented by Zale’s legal counsel.  Employee’s
entitlement to reimbursement of such expenses and costs, including reasonable
legal fees, pursuant to this Section 3(b), shall in no way affect Employee’s
rights to be indemnified and/or advanced expenses in accordance with Zale’s
corporate documents, any applicable insurance policy, and/or in accordance with
Section 10 of the Employment Agreement and Section 1(b) of this Agreement.

(c)           For a period of 24 months following
the Separation Date, Employee agrees that she shall not offer assistance or
testimony in any action against Zale or any of its subsidiary, affiliated or
related entities (other than an action against Zale, its subsidiary, affiliated
or related entities and Employee jointly) brought by another entity, individual
or individuals, unless ordered to do so by a court, agency or regulatory
authority, and then only after Employee has given Zale’s General Counsel
written notice, together with all supporting legal papers or documents served
upon her, as promptly as practicable following her receipt of such notice.

 5
 

 

4.             Employee waives and releases forever any right and/or
rights she might have to seek or obtain employment, reemployment, and/or
reinstatement with Zale or its subsidiaries, and agrees not to seek
reemployment with any of same.

5              By entering into this Agreement, neither Party admits,
and each Party specifically denies, any violation of any contract, local,
state, or federal law, common or statutory. 
This Agreement has been entered into in release and compromise of claims
as stated herein and to avoid the expense and burden of dispute resolution.

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

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

8              Employee may revoke this Agreement by hand-delivered
notice to Zale, in writing, within seven (7) days of the date of Employee’s
execution of this Agreement (the “Revocation Period”).  Such revocation will revoke all provisions of
this Agreement, including those in favor of Zale or Employee.  Employee acknowledges and agrees that she
will not receive the benefits provided by this Agreement if she revokes this
Agreement.  Employee also acknowledges
and agrees that if Zale has not received from her notice of her revocation of
this Agreement prior to the expiration of the Revocation Period, Employee will
have forever waived her right to revoke this Agreement and this Agreement shall
thereafter be enforceable and have full force and effect.

9              By executing this Agreement, Employee acknowledges that

(a)           THIS AGREEMENT HAS BEEN REVIEWED WITH
HER BY A REPRESENTATIVE OF ZALE;

(b)           SHE UNDERSTANDS THAT SHE MAY TAKE UP
TO TWENTY-ONE (21) DAYS TO CONSIDER WHETHER OR NOT SHE DESIRES TO ENTER INTO
THIS AGREEMENT;

(c)           SHE HAS BEEN ADVISED BY ZALE TO
CONSULT WITH AN ATTORNEY REGARDING THE TERMS OF THIS AGREEMENT;

 6
 

 

(d)           SHE HAS CONSULTED WITH, OR HAS HAD
SUFFICIENT OPPORTUNITY TO CONSULT WITH, AN ATTORNEY OF HER OWN CHOOSING
REGARDING THE TERMS OF THIS AGREEMENT;

(e)           ANY AND ALL QUESTIONS REGARDING THE
TERMS OF THIS AGREEMENT HAVE BEEN ASKED AND ANSWERED TO HER COMPLETE
SATISFACTION;

(f)            SHE HAS READ THIS AGREEMENT AND FULLY
UNDERSTANDS ITS TERMS AND THEIR IMPORT;

(g)           EXCEPT AS PROVIDED BY THIS AGREEMENT AND
THE SURVIVING PROVISIONS OF THE EMPLOYMENT AGREEMENT AS SPECIFIED IN SECTION 1(b)
OF THIS AGREEMENT, SHE HAS NO CONTRACTUAL RIGHT OR CLAIM TO THE BENEFITS
DESCRIBED HEREIN;

(h)           THE CONSIDERATION PROVIDED FOR HEREIN
IS GOOD AND VALUABLE; and

(i)            SHE IS ENTERING INTO THIS AGREEMENT
VOLUNTARILY, OF HER OWN FREE WILL, AND WITHOUT ANY COERCION, UNDUE INFLUENCE,
THREAT, OR INTIMIDATION OF ANY KIND OR TYPE WHATSOEVER.

 7
 

 

Each of the Parties understands
that by signing this Agreement, such Party may be giving up rights that Party
may have.  Neither Party is required to
sign this Agreement.

Executed in Irving,
Texas, this 8th day of December, 2006.

	
   

  	
  EMPLOYEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Sue E. Gove

  	
   

  
	
   

  	
  Sue E. Gove

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ZALE CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Mary E. Burton

  	
   

  
	
   

  	
  By:  Mary E. Burton

  
	
   

  	
  Title:  President and Chief Executive Officer

  
				

 

 8

 

Schedule A

Options

 

	
  Grant Date

  	
   

  	
  Expiration Date

  	
   

  	
  Grant Type

  	
   

  	
  Exercise Price

  	
   

  	
  Options

  Exercisable

  	
   

  
	
  7/17/2002

  	
   

  	
  7/17/2012

  	
   

  	
  Non-Qualified

  	
   

  	
  $

  	
  14.1450

  	
   

  	
  42,932

  	
   

  
	
  7/17/2002

  	
   

  	
  7/17/2012

  	
   

  	
  Incentive

  	
   

  	
  $

  	
  14.1450

  	
   

  	
  7,068

  	
   

  
	
  7/22/2003

  	
   

  	
  7/22/2013

  	
   

  	
  Non-Qualified

  	
   

  	
  $

  	
  23.2300

  	
   

  	
  55,684

  	
   

  
	
  7/22/2003

  	
   

  	
  7/22/2013

  	
   

  	
  Incentive

  	
   

  	
  $

  	
  23.2300

  	
   

  	
  4,316

  	
   

  
	
  7/21/2004

  	
   

  	
  7/21/2014

  	
   

  	
  Non-Qualified

  	
   

  	
  $

  	
  27.4400

  	
   

  	
  51,355

  	
   

  
	
  7/21/2004

  	
   

  	
  7/21/2014

  	
   

  	
  Incentive

  	
   

  	
  $

  	
  27.4400

  	
   

  	
  3,645

  	
   

  
	
  9/6/2005

  	
   

  	
  9/6/2015

  	
   

  	
  Non-Qualified

  	
   

  	
  $

  	
  27.5200

  	
   

  	
  71,367

  	
   

  
	
  9/5/2005

  	
   

  	
  9/6/2015

  	
   

  	
  Incentive

  	
   

  	
  $

  	
  27.5200

  	
   

  	
  3,633

  	
   

  

 

Restricted Stock

 

	
  Grant Date

  	
   

  	
  No. of Shares

  	
   

  
	
  7/21/2004

  	
   

  	
  12,000

  	
   

  
	
  11/11/2005

  	
   

  	
  15,000Exhibit
10.2

SETTLEMENT AND RELEASE AGREEMENT

This Settlement and
Release Agreement (“Agreement”) is made and entered into by and between Mary L.
Forté (“Employee”), and Zale Corporation (“Zale”) hereinafter collectively
referred to as the “Parties.”

RECITALS

WHEREAS, Employee was
employed by Zale as President and Chief Executive Officer of Zale, served as a
director of Zale, and served in other positions with Zale and its subsidiaries;

WHEREAS, pursuant to that
certain letter, dated January 31, 2006, from Employee to the Company (the “Letter”),
Employee resigned as President and Chief Executive Officer of Zale, as a
director of Zale, and from any and all other positions that she has with Zale
or its subsidiaries, effective as of January 31, 2006 (the “Separation Date”);

WHEREAS, pursuant to the
Letter, the Parties agreed that Employee’s termination of employment on the
Separation Date shall be considered to be “without cause” pursuant to Section
4(c) of that certain Employment Agreement, dated as of September 21, 2005,
between Zale and Employee (the “Employment Agreement”);

WHEREAS, as a result of
the termination of her employment without cause under Section 4(c) of the
Employment Agreement, Employee shall be entitled to certain benefits set forth
in the Employment Agreement, provided that she provide the release required by
Section 5(j) of the Employment Agreement; and

WHEREAS, Employee and
Zale desire to fulfill the requirements of Section 5(j) of the Employment
Agreement and to settle fully and finally, all differences between them which
have arisen, or which may arise, prior to, or at the time of, the execution of
this Agreement, including, but in no way limited to, any and all claims and
controversies arising out of the employment relationship between Employee and
Zale and the cessation of Employee’s employment with Zale;

NOW, THEREFORE, in
consideration of the Recitals and the mutual promises, covenants, and
agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Employee and Zale,
intending to be legally bound, covenant and agree as follows:

1.             (a)  Employee
shall be entitled to receive the following post-termination benefits, and no
others:

(i)            in cash on December 22, 2006, the sum
of $3,600,000 (less customary payroll deductions), consisting of (A)
$1,600,000, representing two times Employee’s base salary on the

 

Separation Date,
and (B) $2,000,000, representing two times Employee’s target bonus on the
Separation Date;

(ii)           through January 31, 2008, Zale will
continue to allow Employee to participate in the medical and dental insurance
plans, Medical Expense Reimbursement Plan (“MERP”), disability plans, executive
car program, life insurance plan, financial planning program on the same terms
and conditions under which Employee participated in those plans on
September 21, 2005, subject to the provisions of Sections 5(h) and 5(i) of
the Employment Agreement, which sections are incorporated herein by reference;
provided, however, the continued medical insurance provided pursuant to this
Section 1(a)(ii) will count in satisfaction of Employee’s right to continue
such benefits pursuant to the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended and Employee shall pay an amount equal to the “employee
portion” of the premiums during such period, and provided further that employee
shall not be entitled to a new car during such period but shall be entitled to
the continued use of her current car through the expiration of its lease term;

(iii)          the unvested stock options, restricted
stock and other long-term incentive awards listed on Schedule A hereto will be
deemed to have vested on the Separation Date and all such vested options and
awards involving the exercise of rights will continue to be exercisable for the
remainder of their respective terms, provided, however, that any unvested
restricted stock units that immediately vest will be paid out on January 1,
2007, and other awards shall be delivered promptly to the extent not previously
delivered;

(iv)          5,000 of the performance-based
restricted stock units provided for in Section 3(c)(A) of the Employment
Agreement will be deemed to have vested on the Separation Date and the 5,000
shares of Zale common stock attributable thereto will be paid out
January 1, 2007, and the remaining performance-based restricted stock
units shall be forfeited;

(v)           in cash on December 22, 2006,
the lump-sum amount of $473,697.13 (less customary payroll deductions),
representing all amounts due Employee under the terms of the Zale Supplemental
Employee Retirement Plan pursuant to such plan’s terms; and

(vi)          any accrued, but unpaid, salary
(including unpaid vacation pay through the Separation Date) and expenses and
benefits as of the Separation Date.

In the event of
Employee’s death prior to her receipt in full of the payments and benefits to
which she (or her family) is entitled as described in this Section 1(a), any
such payment or benefit to the extent not made or provided at or prior to the
time of her death shall, except for benefits to her family as provided in the
next sentence, be made to her estate or other legal representative.  Healthcare, dental and welfare benefits to
Employee’s family shall be provided for the period remaining from the date of death
to January 31, 2008 on the same basis as such benefits are provided under
Section 1(a)(ii) prior to Employee’s death. 
Any stock options outstanding at the time of Employee’s death shall
continue to be exercisable for the remainder of their terms.  Any long-term incentive awards that are due
hereunder and not yet paid shall be paid as provided in clauses (iii), (iv) and
(v) above.  In making any of the payments
or taking any

 2
 

 

of the actions
contemplated by this provision or elsewhere in this Agreement, Zale shall be
fully protected in the event that it makes a payment or takes an action based
upon instructions received from Employee’s executor or other legal
representative.

(b)           In addition, Employee and Zale shall
continue to be subject to Sections 6 through 24 of the Employment
Agreement.  The Parties expressly agree
that except for Sections 5(g), 5(h), 5(i), 6 and 7 through 24, which are
incorporated herein by reference and shall be applicable to the provisions of
this Agreement, neither Party shall have any further obligations under the
Employment Agreement.

2.             Employee,
for herself and on behalf of her attorneys, heirs, assigns, successors,
executors, and administrators, hereby irrevocably (subject to Section 9 of this
Agreement) and unconditionally GENERALLY RELEASES, ACQUITS, AND FOREVER
DISCHARGES Zale, its current and former subsidiary, affiliated, and related
corporations, firms, associations, partnerships, and entities, their successors
and assigns, and the current and former owners, shareholders, directors,
officers, employees, agents, attorneys, representatives, and insurers of said
corporations, firms, associations, partnerships, and entities, and their
guardians, successors, assigns, heirs, executors, and administrators
(hereinafter collectively referred to as the “Zale Releasees”) from any and all
claims, complaints, grievances, liabilities, obligations, promises, agreements,
damages, causes of action, rights, debts, demands, controversies, costs,
losses, and expenses (including attorneys’ fees and expenses) whatsoever, under
any municipal, local, state, or federal law, common or statutory — including,
but in no way limited to, claims arising under the Age Discrimination in
Employment Act of 1967, 29 U.S.C. § 621, et seq., as
amended, Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e, et seq.,
as amended (including the Civil Rights Act of 1991), the Americans with
Disabilities Act of 1990, 42 U.S.C. §§ 12101, et seq., as amended, the Employee
Retirement Income Security Act of 1974, (ERISA), 29 U.S.C. §§ 1001 et seq., as
amended, the Family and Medical Leave Act (“FMLA”), 29 U.S.C. §§ 2601 et seq.,
as amended, the Labor Management Relations Act, 29 U.S.C. §§ 141 et seq., as
amended, the Occupational Safety and Health Act (“OSHA”), 29 U.S.C. §§ 651 et
seq., as amended, the Racketeer Influenced and Corrupt Organizations Act
(RICO), 18 U.S.C. §§ 1961 et seq., as amended, the Sarbanes Oxley Act of 2002,
the Sabine Pilot Doctrine, the American Jobs Creation Act of 2004, the Texas
Commission on Human Rights Act (“TCHRA”‘), Texas Labor Code §§ 1.001 et seq., as amended, the Texas Pay Day Law, Texas Labor Code
§§ 61.001 et seq., as amended, and/or the Texas
Worker’s. Compensation Discrimination Law, Texas Labor Code §§ 451.001 et seq., as amended — for any actions or omissions
whatsoever, whether known or unknown, and whether connected with the employment
relationship between Employee and Zale, and/or the cessation of Employee’s
employment with Zale, or not, which existed or may have existed prior to, or
contemporaneously with, the execution of this Agreement (the “Released Claim(s)”);
provided, however, nothing in this Section 2 shall release any claim for
indemnification, contribution or reimbursement of expenses by Zale (subject to
the undertaking agreement between Employee and Zale) Employee may have relating
to or arising out of the subject matter of the litigations set forth in
Schedule B hereto.  Furthermore, to the
extent permitted by law, Employee forever waives, releases, and covenants not
to sue or file any complaint or claim against any Releasee with any court,
governmental agency or other entity based on a Released Claim, whether known or
unknown at the time of execution. 
Employee also waives any right to recover from a Zale Releasee in a
civil suit brought by any governmental agency or any other individual on her
behalf with respect to any Released Claim. 
This release

 3
 

 

covers both claims that Employee knows about and those
she may not know about, except that it does not waive or release any rights or
claims that she may have under the Age Discrimination in Employment Act that
arise after the date she signs the Agreement.

Notwithstanding
the foregoing, Employee does not release:

(i)            claims that Employee may have
against Zale for reimbursement of ordinary and necessary business expenses
incurred by her during the course of her employment;

(ii)           claims that arise after the effective
date of this Agreement;

(iii)          any rights Employee may have to
enforce the surviving provisions of the Employment Agreement as specified in
Section 1(b) of this Agreement;

(iv)          any rights or entitlements that
Employee has under any applicable written plan, policy, program, or written
arrangement of, or other written agreement, including this Agreement, with,
Zale;

(v)           subject to the Undertaking Agreement
between Zale and Employee dated as of November 17, 2006, claims for which
Employee is entitled to be indemnified under Section 10 of the Employment
Agreement, Zale’s Certificate of Incorporation or Bylaws or under applicable
law or pursuant to Zale’s directors’ and officers’ liability insurance policies
with respect to liabilities she incurred as an employee, officer or director of
Zale or a subsidiary of Zale; and

(vi)          Employee’s right to contribution as
permitted by law in the event of entry of judgment against her as a result of
any act or failure to act for which she, Zale, a subsidiary of Zale and/or
other officers and directors of either were liable.

Employee acknowledges and
warrants, understanding the truth of said acknowledgment and warranty is
material to the making of this Agreement, that she has not assigned or
otherwise transferred any of the claims released by her through this Agreement,
and she hereby promises to indemnify and hold harmless the Zale Releasees with
respect to any damages, costs or other injuries, including the payment of
attorneys’ fees, which might arise through the assertion of any Released
Claim(s).

3.             (a)           Employee
expressly acknowledges, agrees, and covenants that, for a period of 24 months
following the Separation Date, she will not make any public statements,
comments, or communications in any form, oral, written, or electronic (all of
the foregoing, for purposes of this paragraph, “Communications”), which in any
way could constitute libel, slander, false light, or disparagement of Zale, its
subsidiaries, affiliates or parent, its employees, officers, and/or directors,
or which may be considered to be derogatory or detrimental to its or their good
name and business reputation; provided, however, that the terms of this
paragraph shall not (i) apply to Communications between Employee and clergy or
attorneys that are subject to a claim of privilege existing under common law,
statute, or rule of procedure, (ii) apply to Communications required by law or
made in response to a valid subpoena or other lawful order compelling Employee
to provide testimony or information, provided, however, that in

 4
 

 

responding to a
valid subpoena or lawful order, Employee agrees to provide Zale with advance
notice and an opportunity to seek a protective order or other safeguard for its
confidential information, (iii) apply to Communications to the extent necessary
with respect to any litigation, arbitration or mediation involving this
Agreement, including, but not limited to, the enforcement of this Agreement,
(iv) be construed to inhibit or limit Employee’s ability to cooperate with any
investigation by a governmental or regulatory agency or official, provided,
however, that prior to cooperating Employee agrees to provide Zale with advance
notice and an opportunity to seek a protective order or other safeguard for its
confidential information, or (v) apply to a truthful statement made for the
purpose of correcting inaccuracies or defending her reputation in response to
any derogatory or detrimental statement made by Zale (or any of its affiliates,
officers and/or directors) in a press release or other public statement.  Employee specifically agrees not to issue any
public statement concerning her employment at Zale and/or the cessation of such
employment; provided that nothing in this sentence shall apply to any
Communications by Employee regarding her employment with Zale as might
ordinarily be contained in a resume or similar document or customarily be
required during the course of an interview for a job or other business
opportunity.

For the period of 24
months noted in the preceding paragraph and without limiting the generality of
the foregoing or the provisions of Section 9 of the Employment Agreement,
Employee expressly agrees (i) not to discuss, directly or indirectly, the
business and affairs of Zale with a person whom she knows to be a professional
financial analyst then engaged in the analysis of, or reporting on, the
business and affairs of Zale or an investment banker then engaged by, or on
behalf of, Zale and (ii) not to provide any of the foregoing with Trade Secrets
(as defined in Section 9(a) of the Employment Agreement) regarding Zale,
without the express written consent of Zale.

(b)           Subject to reasonable preexisting
personal and business commitments, for a period of 24 months following the
Separation Date, Employee agrees to cooperate with Zale following the
termination of her employment by being reasonably available to testify on
behalf of Zale or any subsidiary or affiliate in any action, suit, or
proceeding, whether civil, criminal, administrative, or investigative, and to
assist Zale, or any subsidiary or affiliate, in any such action, suit or
proceeding, by providing information and meeting and consulting with
representatives or counsel to Zale, or any subsidiary or affiliate, as
reasonably requested; provided, however, that in no event shall Employee be
required to provide any cooperation if such cooperation is materially adverse
to her legal interests.  In any event, in any matter subject to this
Section 3(b), Employee shall not be required to act against the best interests
of any new employer or new business venture in which she is a partner or active
participant where the interests of Employee’s new employer or new business
venture are adverse to the interests of Zale and/or any of its subsidiary,
affiliate or related entities.  Zale agrees to provide Employee reasonable
notice, to the extent practicable, in the event her assistance is required and,
to the extent possible, Zale will try to limit Employee’s participation to
regular business hours.  Zale will reimburse Employee for the reasonable
expenses and costs actually incurred by her as a result of providing such
assistance, upon the submission of the appropriate documentation to Zale. 
Such expenses and costs shall include, without limitation, demonstrably lost
wages, travel costs and reasonable legal fees to the extent that separate
representation is warranted because Employee’s interests are inconsistent with
those of Zale such that Employee cannot be represented by Zale’s legal
counsel.  Employee’s entitlement to reimbursement of such expenses

 5
 

 

and costs, including
reasonable legal fees, pursuant to this Section 3(b), shall in no way affect Employee’s
rights to be indemnified and/or advanced expenses in accordance with Zale’s
corporate documents, any applicable insurance policy, and/or in accordance with
Section 10 of the Employment Agreement and Section 1(b) of this Agreement.

(c)           For a period of 24 months following
the Separation Date, Employee agrees that she shall not offer assistance or
testimony in any action against Zale or any of its subsidiary, affiliated or
related entities (other than an action against Zale, its subsidiary, affiliated
or related entities and Employee jointly) brought by another entity, individual
or individuals, unless ordered to do so by a court, agency or regulatory
authority, and then only after Employee has given Zale’s General Counsel
written notice, together with all supporting legal papers or documents served
upon her, as promptly as practicable following her receipt of such notice.

4.             Employee waives and releases forever any right and/or
rights she might have to seek or obtain employment, reemployment, and/or reinstatement
with Zale or its subsidiaries, and agrees not to seek reemployment with any of
same.

5.             By entering into this Agreement, neither Party admits,
and each Party specifically denies, any violation of any contract, local,
state, or federal law, common or statutory. 
This Agreement has been entered into in release and compromise of claims
as stated herein and to avoid the expense and burden of dispute resolution.

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

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

8.             Employee may revoke this Agreement by hand-delivered
notice to Zale, in writing, within seven (7) days of the date of Employee’s
execution of this Agreement (the “Revocation Period”).  Such revocation will revoke all provisions of
this Agreement, including those in favor of Zale or Employee.  Employee acknowledges and agrees that she
will not receive the benefits provided by this Agreement if she revokes this
Agreement.  Employee also acknowledges
and agrees that if Zale has not received from her notice of her revocation of
this Agreement prior to the expiration of the Revocation Period, Employee will
have forever waived her right to revoke this Agreement and this Agreement shall
thereafter be enforceable and have full force and effect.

 6
 

 

9.             By executing this Agreement, Employee acknowledges that

(a)           THIS AGREEMENT HAS BEEN REVIEWED WITH
HER BY A REPRESENTATIVE OF ZALE;

(b)           SHE UNDERSTANDS THAT SHE MAY TAKE UP
TO TWENTY-ONE (21) DAYS TO CONSIDER WHETHER OR NOT SHE DESIRES TO ENTER INTO
THIS AGREEMENT;

(c)           SHE HAS BEEN ADVISED BY ZALE TO
CONSULT WITH AN ATTORNEY REGARDING THE TERMS OF THIS AGREEMENT;

(d)           SHE HAS CONSULTED WITH, OR HAS HAD
SUFFICIENT OPPORTUNITY TO CONSULT WITH, AN ATTORNEY OF HER OWN CHOOSING
REGARDING THE TERMS OF THIS AGREEMENT;

(e)           ANY AND ALL QUESTIONS REGARDING THE
TERMS OF THIS AGREEMENT HAVE BEEN ASKED AND ANSWERED TO HER COMPLETE
SATISFACTION;

(f)            SHE HAS READ THIS AGREEMENT AND FULLY
UNDERSTANDS ITS TERMS AND THEIR IMPORT;

(g)           EXCEPT AS PROVIDED BY THIS AGREEMENT
AND THE SURVIVING PROVISIONS OF THE EMPLOYMENT AGREEMENT AS SPECIFIED IN
SECTION 1(b) OF THIS AGREEMENT, SHE HAS NO CONTRACTUAL RIGHT OR CLAIM TO THE
BENEFITS DESCRIBED HEREIN;

(h)           THE CONSIDERATION PROVIDED FOR HEREIN
IS GOOD AND VALUABLE; and

(i)            SHE IS ENTERING INTO THIS AGREEMENT
VOLUNTARILY, OF HER OWN FREE WILL, AND WITHOUT ANY COERCION, UNDUE INFLUENCE,
THREAT, OR INTIMIDATION OF ANY KIND OR TYPE WHATSOEVER.

 7
 

 

Each of the Parties understands
that by signing this Agreement, such Party may be giving up rights that Party
may have.  Neither Party is required to
sign this Agreement.

Executed
in Irving, Texas, this 13th day of December, 2006.

	
   

  	
  EMPLOYEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Mary L. Forte

  	
   

  
	
   

  	
  Mary L. Forté

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ZALE CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Mary E. Burton

  	
   

  
	
   

  	
  By: Mary E.
  Burton

  
	
   

  	
  Title: President
  and Chief Executive Officer

  

 

 8
 

 

Schedule A

Options

 

	
  Grant Date

  	
   

  	
  Expiration Date

  	
   

  	
  Grant Type

  	
   

  	
  Exercise Price

  	
   

  	
  Options

  Exercisable

  	
   

  
	
  7/15/1999

  	
   

  	
  7/15/2009

  	
   

  	
  Incentive

  	
   

  	
  $

  	
  21.7500

  	
   

  	
  4,678

  	
   

  
	
  7/15/1999

  	
   

  	
  7/15/2009

  	
   

  	
  Non-Qualified

  	
   

  	
  $

  	
  21.7500

  	
   

  	
  45,322

  	
   

  
	
  7/12/2001

  	
   

  	
  7/12/2011

  	
   

  	
  Non-Qualified

  	
   

  	
  $

  	
  15.8750

  	
   

  	
  5,000

  	
   

  
	
  7/17/2002

  	
   

  	
  7/17/2012

  	
   

  	
  Non-Qualified

  	
   

  	
  $

  	
  14.1450

  	
   

  	
  92,932

  	
   

  
	
  7/17/2002

  	
   

  	
  7/17/2012

  	
   

  	
  Incentive

  	
   

  	
  $

  	
  14.1450

  	
   

  	
  7,068

  	
   

  
	
  7/22/2002

  	
   

  	
  7/22/2012

  	
   

  	
  Non-Qualified

  	
   

  	
  $

  	
  23.2300

  	
   

  	
  195,684

  	
   

  
	
  7/22/2003

  	
   

  	
  7/22/2013

  	
   

  	
  Incentive

  	
   

  	
  $

  	
  23.2300

  	
   

  	
  4,316

  	
   

  
	
  7/21/2004

  	
   

  	
  7/21/2014

  	
   

  	
  Non-Qualified

  	
   

  	
  $

  	
  27.4400

  	
   

  	
  111,355

  	
   

  
	
  7/21/2004

  	
   

  	
  7/21/2014

  	
   

  	
  Incentive

  	
   

  	
  $

  	
  27.4400

  	
   

  	
  3,645

  	
   

  
	
  9/6/2005

  	
   

  	
  9/6/2015

  	
   

  	
  Non-Qualified

  	
   

  	
  $

  	
  27.5200

  	
   

  	
  121,367

  	
   

  
	
  9/6/2005

  	
   

  	
  9/6/2015

  	
   

  	
  Incentive

  	
   

  	
  $

  	
  27.5200

  	
   

  	
  3,633

  	
   

  

 

Restricted Stock

 

	
  Grant Date

  	
   

  	
  No. of Shares

  	
   

  
	
  7/21/2004

  	
   

  	
  25,000

  	
   

  
	
  11/11/2005

  	
   

  	
  25,000

  	
   

  

 

 9
 

 

Schedule B

1.              In re Zale
Corporation Securities Litigation., No. 3:06-CV-1470, filed August
15, 2006, U.S. District Court for the Northern District of Texas

2.             Salvato v. Zale
Corp., No. 3-06 CV 1124-D, filed June 26, 2006, U.S. District Court
for the Northern District of Texas

3.             Connell v.
Zale Corp., No. 06 CV 5995, filed August 7, 2006, U.S. District
Court for the Southern District of New York, now pending in the United States
District Court for the Northern District of Texas.

 10

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