Document:

Exhibit
10.2

SETTLEMENT
AND RELEASE AGREEMENT

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

RECITALS

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

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

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

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

CONFIDENTIAL SETTLEMENT AND
RELEASE AGREEMENT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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16.                                The Parties agree that any controversy or claim
(including all claims pursuant to common and statutory law) relating to this
Agreement or arising out of or relating to the subject matter of this Agreement
shall be resolved exclusively through binding arbitration.  Subject to the terms and any exceptions
provided in this Agreement, the parties each waive the right to a jury trial
and waive the right to adjudicate their disputes under this Agreement outside
the arbitration forum provided for in this Agreement.  The arbitration shall be
administered by a single neutral arbitrator specializing in employment law and
admitted to practice law in Texas for a minimum of ten (10) years.  Any such arbitration proceeding shall take
place in Dallas County, Texas and shall be administered by the American
Arbitration Association (“AAA”)-Dallas office in accordance with its
then-current applicable rules and procedures. 
The arbitrator will have the authority to award the same remedies,
damages and costs that a court could award. 
The arbitrator shall issue a reasoned award explaining the decision, the
reasons for the decision and any damages awarded.  The arbitrator’s decision will be final and
binding.  The judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.  This provision can be enforced
under the Federal Arbitration Act.

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

(b)                                 Should
a court of competent jurisdiction determine that the scope of the arbitration
and related provisions of this Agreement are too broad to be enforced as
written, the Parties intend that the court reform the provision in question to
such narrower scope as it determines to be reasonable and enforceable.

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

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

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

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

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

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

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

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

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

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

	
  Date: 2/21/07

  	
   

  	
  /s/ Frank C. Mroczka

  	
   

  	
   

  
	
   

  	
   

  	
  FRANK C. MROCZKA

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

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

	
  

  	
   

  	
  ZALE CORPORATION

  
	
   

  	
   

  	
   

  
	
  Date: 2/21/07

  	
  By:

  	
  /s/ Mary Ann Doran

  	
   

  
	
   

  	
   

  	
  Its:

  	
  SVP, Human
  Resources

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
						

 

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

	
  

  	
   

  	
  ZALE DELAWARE, INC.

  
	
   

  	
   

  	
   

  
	
  Date: 2/21/07

  	
  By:

  	
  /s/ Mary Ann Doran

  	
   

  
	
   

  	
   

  	
  Its:

  	
    SVP,
  Human Resources

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
						

 

 9Exhibit
10.4

ZALE DELAWARE, INC.

409A SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2005

ARTICLE I

ESTABLISHMENT AND PURPOSE

1.1                               Establishment.  Zale Delaware, Inc. (the “Company”)
established the Zale Delaware, Inc. Supplemental Executive Retirement Plan (the
“SERP”), effective September 15, 1995. 
Effective December 31, 2004, the Company amended the SERP to (i) cease
benefit accruals and (ii) bifurcate the SERP into two separate plans, one that
is subject to the requirements of section 409A of the Code (as defined herein)
and one that is not.  By this instrument,
the Company desires to amend and restate that portion of the SERP that is
subject to the requirements of section 409A of the Code effective
January 1, 2005 (the “Effective Date”). 
Such amended and restated SERP will be referred to herein as the “Plan.”

1.2                               Purpose.
The purpose of the Plan is to provide eligible executives with the opportunity
to receive each year after retirement, payments equal to a portion of their
final average pay.  The Plan is meant to
provide a long-term reward for executives that recognizes their contribution to
the Company’s success throughout their careers.

ARTICLE II

DEFINITIONS

Unless the context otherwise requires, the terms used
herein will have the meanings set forth below:

2.1                               “Affiliate” means a corporation that is a member of a
controlled group of corporations (as defined in section 414(b) of the Code)
that includes the Company, any trade or business (whether or not incorporated)
that is in common control (as defined in section 414(c) of the Code) with the
Company, or any entity that is a member of the same affiliated service group
(as defined in section 414(m) of the Code) as the Company.

2.2                               “Base Salary” means the regular salary paid to a Participant
by the Company, excluding bonuses, benefits under
employee benefit plans, fringe benefits, and any other extra or additional
payments made to or for the benefit of such Participant.  Effective December 31, 2004, benefit
accruals under the Plan have ceased. 
Accordingly, no Base Salary earned after such date will be counted for
purposes of the Plan.

2.3                               “Benefit” means the monetary amount to be paid a vested
Participant under the Plan.

2.4                               “Bonus Points” means the number of points awarded to a
Participant under the formula described in Section 4.2.  Effective December 31, 2004, benefit accruals
under the Plan have ceased.  Accordingly,
no Bonus Points will be awarded after such date.

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2.5                               “Bonus Target” means a goal for net income established each
Plan Year by the Compensation Committee.

2.6                               “Change of Control” will be deemed to have occurred if,
subsequent to the Effective Date of this Plan,

(a)                                  any
“person” (within the meaning of Section 13(d) of the Exchange Act) becomes the
beneficial owner (within the meaning of Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of either (i) a majority of the Company’s
outstanding Common Stock or (ii) securities of the Company representing a
majority of the combined voting power of the Company’s then outstanding voting
securities, except that there will be no Change of Control if such person (A)
becomes such a beneficial owner solely as the result of the acquisition of the
outstanding Common Stock or other outstanding voting securities by the Company
or (B) is an employee benefit plan or related trust sponsored or maintained by
the Company or any corporation or other entity controlled by the Company;

(b)                                 during
any period of two consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of the Company cease, at any time
after the beginning of such period, for any reason to constitute a majority of
the Board of Directors of the Company, unless the election of any such new
director was nominated, effected, or ratified by at least two-thirds of the
directors still in office who were directors at the beginning of such two-year
period or whose election was previously so nominated, effected, or ratified;

(c)                                  a
reorganization, merger, or consolidation of the Company with one or more other
corporations or other entities, unless, in any case, (i) at least a majority of
the Company’s outstanding Common Stock (or the equivalent equity security of
the other surviving or resulting corporation or other entity) and at least a
majority of the combined voting power of the Company’s or other surviving or
resulting corporation’s or other entity’s outstanding voting securities are
beneficially owned, directly or indirectly, after such reorganization, merger,
or consolidation by all or substantially all of the persons who were the
beneficial owners, respectively, of a majority of the Company’s outstanding
Common Stock and a majority of the combined voting power of the Company’s then
outstanding voting securities immediately before such reorganization, merger,
or consolidation in substantially the same proportions as their beneficial
ownership thereof immediately before such reorganization, merger or
consolidation, and (ii) at least a majority of the members of the board of
directors or other governing body of the Company or the other corporation or
other entity surviving or resulting from such reorganization, merger, or
consolidation were, or were approved by at least two-thirds of the, members of
the Board of Directors of the Company at the time of the execution of the
initial agreement providing for such reorganization, merger or consolidation;

(d)                                 the
sale or other disposition of all or substantially all of the assets of the
Company to one or more other corporations or other entities, unless the
conditions set forth in subclauses (i) and (ii) of subsection (c) above are
satisfied with respect to the acquiring corporation or other entity (and, as
applicable, with

 2
 

respect to the
time of the initial agreement providing for such sale or other disposition of
assets); or

(e)                                  the
dissolution and complete liquidation of the Company.

2.7                               
“Code” means the Internal Revenue Code
of 1986, as amended.

2.8                               “Company” means Zale Delaware, Inc.

2.9                               “Compensation Committee” means the Compensation Committee of
the Company.

2.10                        “Disabled” means the inability of a Participant to perform
the duties of his or her position as determined by a physician approved by the
Compensation Committee.

2.11                        “ERISA” means the Employee Retirement Income Security Act of
1974, as amended.

2.12                        “Final Average Pay” means the average of the monthly Base
Salary received by the Participant from the Company in the sixty (60)-month
period ending immediately prior to the Participant’s retirement or other
termination from the Company. Effective December 31, 2004, benefit
accruals under the Plan have ceased. 
Accordingly, no Base Salary earned after such date will be included for
purposes of determining a Participant’s Final Average Pay.

2.13                        “Five Percent Owner” means any person who owns (or is
considered as owning within the meaning of section 318 of the Code) more than
five percent (5%) of the outstanding stock of the Company or an Affiliate or
stock possessing more than five percent (5%) of the total combined voting power
of all stock of the Company or an Affiliate. 
The rules of sections 414(b), (c) and (m) of the Code (the “Controlled Group Rules”) will not apply for purposes of
applying these ownership rules.  Thus,
this ownership test will be applied separately with respect to the Company and
each Affiliate.

2.14                        “Key Employee” means any employee or former employee of the Company
or an Affiliate (including any deceased employee) who is:

(a)                                  an
officer of the Company or an Affiliate who is receiving annual compensation
within the meaning of Treasury Regulation section 1.415(c)-2(d)(4)(i.e., W-2 wages plus amounts that would be includible in
wages except for an election under section 125(a) of the Code (regarding
cafeteria plan elections), section 132(f)(4) of the Code (regarding qualified
transportation fringe benefits) or section 402(e)(3) of the Code (regarding
section 401(k) plan deferrals)) of greater than $130,000 (as adjusted under
section 416(i)(1) of the Code for Plan Years beginning after December 31, 2002)
(such limit is $145,000 for 2007);

(b)                                 a
Five Percent Owner; or

(c)                                  a
One Percent Owner who is receiving annual compensation within the meaning of
Treasury Regulation section 1.415(c)-2(d)(3)(i.e.,
W-2 wages) of more than $150,000.

The determination of which employees qualify as Key
Employees will be based upon a twelve (12) month period ending on December 31
of each year (i.e., the identification

 3
 

date). 
Employees who are Key Employees during such twelve (12) month period
will be treated as Key Employees for the twelve (12) month period beginning on
the first day of the fourth (4th) month following the end of the twelve
(12) month period (i.e., since the
identification date is December 31, then the twelve (12) month period to
which it applies will begin on the next following April 1).

The determination of which employees qualify as Key
Employees will be made in accordance with section 416(i)(1) of the Code and
other guidance of general applicability issued thereunder disregarding the
provisions of section 416(i)(5) of the Code regarding beneficiaries.  For purposes of determining whether an
employee or former employee qualifies as an officer, a Five Percent Owner or a
One Percent Owner, the Company and each Affiliate will be treated as a separate
employer (i.e., the Controlled Group Rules will
not apply).  Conversely, for purposes of
determining whether the $130,000 adjusted limit on annual compensation is met
under the officer test described in Section 2.14(a), compensation received by
an employee from the Company and all Affiliates will be taken into account (i.e., the Controlled Group Rules will apply).  Further, in determining which employees
qualify as officers under the officer test described in Section 2.14(a), no
more than fifty (50) employees of the Company and its Affiliates (i.e., the Controlled Group Rules will apply) will be treated
as officers.  If the number of officers
exceeds fifty (50), the determination of which employees or former Employees qualify
as officers will be determined based on which employees received the largest
annual compensation from the Company and Affiliates for the Plan Year.

2.15                        “Maximum Bonus Target” means the highest goal for net income
established each year by the Compensation Committee. Effective December 31,
2004, benefit accruals under the Plan have ceased.  Accordingly, no Maximum Bonus Targets will be
established by the Compensation Committee after such date.

2.16                        “One Percent Owner” means any person who would be described
as a Five Percent Owner if “one percent (1%)” were substituted for “five
percent (5%)” in each place it appears in the definition of Five Percent Owner
set forth in Section 2.13.

2.17                        “Participant” means an executive who participates in the Plan
as provided in Article III.

2.18                        “Plan” means the Zale Delaware, Inc. 409A Supplemental
Executive Retirement Plan set forth in this document, as it may be amended from
time to time.

2.19                        “Plan Year” means August I through July 31.

2.20                        “Year of Service” means a twelve (12)-month period of
continuous service by a Participant for the Company or (to the extent the
Compensation Committee authorizes) an Affiliate of the Company.  Only service after September 14, 1995 is
counted for the purpose of calculating Years of Service; provided, however,
that for any Participant who was employed by the Company in an eligible
position for the entire period from September 14, 1995 to July 31, 1996, that
Participant will be considered to have one (1) full Year of Service as of July
31, 1996.

 4
 

ARTICLE III

ELIGIBILITY

3.1                               Eligibility.
The classes of executives who are designated by the Company as members of the “Management
Group” who hold the office of Corporate Vice President, Division Senior Vice
President and all higher executive offices, are eligible to be Participants in the
Plan.  Effective as of December 31, 2004
benefit accruals under the Plan have been discontinued and no new executives
will be designated by the Company as Participants in the Plan.  Rather, the only Participants in the Plan
will be those Participants as of December 31, 2004 who were not fully vested in
their Benefit under the Plan.  Those
Participants who were fully vested in their Benefit under the Plan as of
December 31, 2004 will be participants in the Zale Delaware, Inc. Pre-409A
Supplemental Executive Retirement Plan.

3.2                               Loss
of Eligibility.  If an individual
ceases to be an individual listed in Section 3.1, he or she will no longer
participate in the Plan.  Loss of
eligibility will not result in a forfeiture of a Participant’s Benefit
previously earned under the Plan and a former Participant, pursuant to the
terms and conditions of the Plan, may continue to vest in such Benefit based on
Years of Service after loss of eligibility.

ARTICLE IV

DETERMINATION OF BENEFITS

4.1                               Calculation
of Benefit.  Each Participant who is
vested as determined in Section 4.3 is entitled to payment of his Benefit
at the time and in the form described in Article V. The Participant’s
Benefit will be monthly payments continuing over the life of the Participant
commencing on the first day of the month immediately following the Participant’s
sixty-fifth (65th)
birthday, subject to the provisions of Section 5.5, with the amount of each
payment determined under the following formula:

Bonus Points x Final Average Pay

100

4.2                               Bonus
Points.  Each Plan Year prior to
January 1, 2005, the Compensation Committee will set a Bonus Target and a
Maximum Bonus Target.  In each Plan Year
that the Company achieves at least its Bonus Target, each Participant will be
credited with a number of Bonus Points based on the following schedule:

(a)                                  No
points if below Bonus Target;

(b)                                 One
(1) point at Bonus Target;

(c)                                  Two
(2) points at fifty percent (50%) of Maximum Bonus Target; or

(d)                                 Three
(3) points at one hundred percent (100%) of Maximum Bonus Target.

A Participant may accrue from zero (0) to thirty (30)
points, depending on Company performance and the number of Plan Years he or she
participates in the Plan.

 5
 

4.3                               Vesting.  A Participant vests in his or her Benefit
after completing five (5) Years of Service following September 15, 1995.  Service prior to September 15, 1995 does not
count as Years of Service.  However, in
its sole and absolute discretion, the Compensation Committee may accelerate
vesting for any Participant.  In the
event of a Change of Control, the Benefits of all Participants will
automatically vest irrespective of each Participant’s Years of Service.  Further, a Participant’s Benefit will become
fully vested if he dies or becomes Disabled while employed by the Company.

ARTICLE V

PAYMENT OF BENEFITS

5.1                               Retirement.  If a Participant retires on or after
attaining age sixty-five (65), Benefits will begin on the first day of the
month after the Participant’s retirement. 
Benefits will be paid in the form of an annuity providing monthly benefits
for the life of the Participant.  Payment
of such benefits will be subject to the six (6) month delay applicable to Key
Employees under Section 5.5.

5.2                               Death.  If a Participant dies while actively
employed, the Participant’s surviving spouse will be eligible to begin
receiving the Participant’s Benefit in the form of monthly payments for the
life of the surviving spouse, commencing on the first day of the month
following the date the Participant would have attained age sixty-five (65).  Payment of such benefits will not be subject
to the six (6) month delay applicable to Key Employees under Section 5.5.  The Benefits payable to the surviving spouse
will have an actuarial value (calculated using the assumptions prescribed in this
Section 5.2) equal to the Benefits that would have been paid to the Participant
commencing at age sixty-five (65), based on the Participant’s Final Average Pay
and Bonus Points as of the earlier of December 31, 2004 or the date of the
Participant’s death.  If the Participant has
no surviving spouse, no death benefits are payable.  Actuarial equivalence will be determined
using the following actuarial assumptions. 
The applicable interest rate will be that of thirty (30)-year Treasury
securities as of the first day of the calendar year in which the Benefits
commence.  The mortality assumption will
be based on the 1983 group annuity mortality tables.

5.3                               Disability.  If a Participant becomes Disabled, his
Benefit will become payable commencing on the first day of the month after he
attains age sixty-five (65).  Benefits
will be paid in the form of an annuity providing monthly benefits for the life
of the Participant. Payment of such benefits will be subject to the six (6)
month delay applicable to Key Employees under Section 5.5.

5.4                               Other
Termination of Service.  If the
employment of a Participant terminates for a reason other than death or
Disability, prior to the date the Participant attains age sixty-five (65), the
payment of his or her vested Benefits, if any, will commence on the first day
of the month immediately after he or she attains age sixty-five (65).  Benefits will be paid in the form of an
annuity providing monthly benefits for the life of the Participant.  In the event that the Participant terminates
employment within the six (6) month period preceding the date he or she attains
age sixty-five (65), payment of such benefits will be subject to the six (6)
month delay applicable to Key Employees under Section 5.5.

 6
 

5.5                               Termination Distributions to Key Employees.  Distributions under this Plan that are
payable to a Key Employee on account of a termination of employment, including retirement,
will be delayed for a period of six (6) months following such Participant’s termination
of employment.  This six (6) month
restriction will not apply with respect to a distribution to a Participant’s
surviving spouse by reason of the death of the Participant.

5.6                               Withholding
of Taxes.  The Company will withhold
from Benefit payments made hereunder any taxes required to be withheld by any
law or regulation of the federal, state, or local government.

ARTICLE VI

ADMINISTRATION

6.1                               Authority
of Compensation Committee.  The
Compensation Committee will have sole and absolute power and authority to
interpret, construe and administer the Plan.  The Compensation Committee’s interpretation
and construction of the Plan and actions hereunder will be binding and
conclusive on all persons and for all purposes. 
The Compensation Committee may designate certain Company employees to
assist in the administration of the Plan. 
In addition, the Compensation Committee may employ attorneys,
accountants, actuaries and other professional advisors to assist the
Compensation Committee in its administration of the Plan.  The Company will pay the reasonable fees of any
such advisor employed by the Compensation Committee.  To the extent permitted by law, the
Compensation Committee, the Board or any employee of the Company will not be
liable to any person for any action taken or omitted in connection with the
interpretation and administration of the Plan unless attributable to his or her
own willful misconduct or lack of good faith.

6.2                               Indemnification
of Employees of the Company.  The
Company hereby agrees to indemnify, jointly and severally, the Compensation
Committee and all employees of the Company against any and all claims, losses,
damages or expenses, including counsel fees, incurred by them, and any
liability, including any amounts paid in settlement with their approval arising
from their action or failure to act with respect to any matter relating to the
Plan, except when the same is judicially determined to be attributable to their
willful misconduct or lack of good faith. 
The indemnification provided by this Section 6.2 will survive the
termination of the Plan and will be binding on the Company’s successors and
assigns.

6.3                               Cost
of Administration.  The cost of this
Plan and the expenses of administering the Plan will be paid by the Company.

ARTICLE VII

CLAIMS PROCEDURE

7.1                               Claim.  Any person claiming a benefit, requesting an
interpretation or ruling under the Plan, or requesting information under the
Plan will present the request in writing to the Compensation Committee, which
will respond in writing as soon as possible. 
Claims for Benefits other than those payable on account of Disability
will be resolved pursuant to

 7
 

the following claims procedure.  In the case of a claim for Disability
benefits, such claim will be resolved under the claims procedure applicable to
Disability claims set forth in regulations issued under section 503 of ERISA
which are incorporated herein by this reference.

7.2                               Denial
of Claim.  If the claim or request is
denied, the written notice of denial will state:

(a)                                  The
reasons for denial, with specific reference to the Plan provisions on which the
denial is based.

(b)                                 A
description of any additional material or information required and an
explanation of why it is necessary.

(c)                                  An
explanation of the Plan’s claim review procedure including the claimant’s right
to file an action under section 502(a) of ERISA upon exhaustion of the Plan’s
claim review procedure.

7.3                               Review
of Claim.  Any person whose claim or
request is denied or who has not received a response within thirty (30) days,
may request review by notice in writing received by the Compensation Committee
within seventy-five (75) days after the date of the notice of denial (or
failure to receive a response).  The
claim or request will be reviewed by the Compensation Committee, who may, but
will not be required to, grant the claimant a hearing.  On review, the claimant may have
representation, examine pertinent documents and submit issues and comments in
writing.  The decision on review will
normally be made within sixty (60) days. 
If an extension of time is required for a hearing or other special
circumstance, the claimant will be notified and the time limit will be one
hundred twenty (120) days.  The decision
will be in writing, and if the claim is denied, will state the reasons for
denial, will reference the relevant Plan provisions on which the denial is
based and will explain the Plan’s claim review procedure, including the
claimant’s right to file an action under section 502(a) of  ERISA upon exhaustion of the Plan’s claim
review procedure.

7.4                               Appeal
of Decision on Review.  If the claimant
does not agree with the decision of the Compensation Committee on review of the
claim, the claimant may appeal the decision of the Compensation Committee to
the Board of Directors of the Company by notice in writing received by the
Board of Directors within seventy-five (75) days after the date of the decision
on review.

7.5                               Final
Decision.  The decision on appeal
will normally be made within sixty (60) days. 
If an extension of time is required for a hearing or other special
circumstance, the claimant will be notified and the time limit will be one
hundred twenty (120) days.  The decision
of the Board of Directors on appeal will be in writing and, if the claim is
denied, will state the reasons for denial, will reference the relevant Plan
provisions and will advise the claimant of his right to file an action under
section 502(a) of ERISA.  All decisions
on appeal will be final and bind all parties concerned.

 8
 

ARTICLE VIII

AMENDMENT AND TERMINATION

8.1                               Amendment.  Subject to the consent requirements of this
Section 8.1, the Board of Directors of the Company, on a favorable vote of at
least seventy-five percent (75%) of the directors, will have the right to amend
this Plan at any time and from time to time, including a retroactive
amendment.  Any such amendment will
become effective upon the date stated therein, except as otherwise provided in
such amendment.  No amendment will
decrease or restrict Benefits, whether vested or not, earned as of the date of
execution of such amendment without the consent of the affected Participant or
Participants.  Further, no amendment may
extend the date that nonvested benefits would otherwise become vested without
the consent of the affected Participant or Participants.  Any amendment approved by the Board of
Directors may be signed by the Chief Executive Officer or the Secretary of the
Company.

8.2                               Termination
of the Plan.  The Company has
established this Plan with the bona fide intention and expectation that it will
deem it advisable to continue it in effect. 
However, the Board of Directors of the Company, on a favorable vote of seventy-five
percent (75%) of at least the directors, may terminate the Plan in its entirety
at any time.  In such event each
Participant will become fully vested in his Benefit earned as of the date of
termination.

Effective as of December 31, 2006, the Plan will
terminate and all Participants will be fully vested in their Benefits as of
such date.  Pursuant to the requirements
of regulations issued under section 409A of the Code, no Benefits will be paid
to Participants for the twelve (12)-month period following such termination
(other than those Benefits that would be paid pursuant to the terms of the Plan
without regard to the termination) and all Benefits will be paid in their
entirety by the twenty-fourth (24th) month following such termination (i.e., the Plan will be liquidated during the thirteen (13)-month
to twenty-four (24)-month period following the effective date of its
termination).  Further, the Company will
not maintain another plan that would be aggregated with the Plan under section
409A of the Code for the three (3)-year period following such termination.

ARTICLE IX

GENERAL PROVISIONS

9.1                               Rights
Against the Company.  The Plan will
not be deemed to constitute a contract between the Company and any
Participant.  Nothing contained in the
Plan will be deemed to interfere with the right of the Company to terminate any
Participant at any time, without regard to the effect such termination may have
on any rights under the Plan.

9.2                               Funding.  The Company intends that the Plan will
constitute an “unfunded plan” for purposes of the Code and, to the extent
applicable, Title I of ERISA, and that any employee or spouse of an employee
eligible to receive benefits under the Plan will have the status of an
unsecured general creditor of the Company as to the benefits provided pursuant
to the Plan or assets identified specifically by the Company as a reserve for
the discharge of its obligations under the Plan.

 9
 

9.3                               Payment
Due to an Individual Who is Incapable of Managing His or Her Affairs.  If the Compensation Committee finds that any
person to whom any payment is payable under the Plan is unable to care for his
or her affairs because of mental or physical illness, accident, or death, or is
a minor, any payment due (unless a prior claim therefor will have been made by
a duly appointed guardian, committee or other legal representative) may be paid
to the spouse, a child, a parent, a brother or sister or any person deemed by
the Compensation Committee, in its sole discretion, to have incurred expenses
for such person otherwise entitled to payment, in such manner and proportions
as the Compensation Committee may determine. 
Such payments will be a complete discharge of the liabilities of the
Company under this Plan, and the Company will have no further obligation to see
to the application of any money so paid.

9.4                               Spendthrift
Clause.  No right, title or interest
of any kind in the Plan will be transferable or assignable by any Participant
or surviving spouse of a Participant or be subject to alienation, anticipation,
encumbrance, garnishment, attachment, execution or levy of any kind, whether
voluntary or involuntary, nor subject to the debts, contracts, liabilities,
engagements, or torts of the Participant or surviving spouse.  Any attempt to alienate, anticipate,
encumber, sell, transfer, assign, pledge, garnish, attach or otherwise subject
to legal or equitable process or encumber or dispose of any interest in the Plan
will be void.

9.5                               Severability.  In the event that any provision of this Plan
will be declared illegal or invalid for any reason, said illegality or
invalidity will not affect the remaining provisions of this Plan but will be
fully severable and this Plan will be construed and enforced as if said illegal
or invalid provision had never been inserted herein.

9.6                               Construction.  The article and section headings and numbers
are included only for convenience of reference and are not to be taken as
limiting or extending the meaning of any of the terms and provisions of this
Plan.  Whenever appropriate, words used
in the singular will include the plural or the plural may be read as the
singular.  When used herein, the masculine
gender includes the feminine gender.

9.7                               Governing
Law.  The validity and effect of this
Plan, and the rights and obligations of all persons affected hereby, will be
construed and determined in accordance with the laws of the State of Texas.

IN WITNESS WHEREOF, the
Company has executed this Plan on the 24th day of May, 2007, to reflect the
Plan as amended and restated effective January 1, 2005.

	
  

  	
  ZALE
  DELAWARE INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Mary Ann
  Doran

  	
   

  
	
   

  	
  Mary Ann Doran

  
	
   

  	
   

  
	
   

  	
  SVP, Human
  Resources

  	
   

  
	
   

  	
  (Title)

  	
   

  
					

 

 10

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