Document:

exv10w18

 

EXHIBIT 10.18

Zale Corporation has requested confidential treatment for certain portions of this document
pursuant to an application for confidential treatment sent to the Securities and Exchange
Commission. Zale Corporation has omitted such portions from this filing and filed them separately
with the Securities and Exchange Commission. Such omissions are designated “[**].”

ZALE CORPORATION BONUS PLAN

(As of August 1, 2006)

Zale Corporation is committed to building and maintaining quality management and to encouraging
maximum focus on business environment. This Plan has been developed to allow all eligible
management the opportunity to receive an annual bonus based on our success.

Payouts under this Plan are intended to constitute “qualified performance-based compensation” for
purposes of Section 162(m) of the Internal Revenue Code.

	 	 	 
	ELIGIBILITY
	 	Management of Zale Corporation, as selected by the
Compensation Committee.

	 	 	 

	MEASURES
	 	The Management Bonus Plan has three Components:

	AND

WEIGHTING
	 	1. Annual Company Performance Bonus is based on the following
performance measures:

	 	 	 	 	 
	 	 	Consolidated	 	Brand
	Organization	 	Net Income	 	Operating Earnings
	Corporate

	 	50%
	 	50%
	Brand
	 	20%
	 	80%

	 	 	 
	 
	 	Consolidated net income and Brand operating earnings targets shall be
established by the Compensation Committee of Zale Corporation’s Board of
Directors (the “Compensation Committee”) on an annual basis prior to the
commencement of a fiscal year, except to the extent permitted by Section
162(m) to be established subsequently.

	 	 	 

	 
	 	Following are the payout percentages:

	 	 	 	 	 	 	 	 	 
	 
	 	•
	 	Threshold/minimum

	 	 	50	%
	 	 	•
	 	Target/Plan

	 	 	100	%
	 	 	•
	 	Stretch

	 	 	200	%

	 	 	 	 	 
	 	2.	  The Quarterly Comparable Store Sales Bonus performance measures are:

[**]

 

 

	 	 	 
	 
	 	3. Stretch Achievement Pool

	 	 	• 10% Net Income over Stretch will be pooled and distributed
based on individual percent payout

	 	 	 

	BONUS OPPORTUNITY
	 	The Compensation Committee shall establish one or more
bonus opportunities between 5% and 150%. The bonus
opportunities may be applicable either to classes of employees,
such as Brand Presidents or to individual employees, as the
Compensation Committee may determine.

	 	 	 

	MAXIMUM PAYOUT
	 	No employee shall be entitled to receive a bonus of more than
$2,000,000 with respect to a fiscal year.

 

 

	 	 	 	 	 
	ADDITIONAL

ELIGIBILITY

REQUIREMENTS
	 	•
	 	Must have joined Zale Corporation in a bonus eligible
position on or before February 1st of the
applicable fiscal year. A pro-rated payout will be based on
earnings in the eligible position through July 31st
of the applicable fiscal year.

	 	 	 	 	 

	 	 	•
	 	Must be actively on payroll, or on an approved leave
of absence, on July 31st of the applicable fiscal
year.

	 	 	 	 	 

	 	 	•
	 	If promoted to bonus eligible position on or before
February 1st of a fiscal year, bonus will be
pro-rated based on earnings in the eligible position through
July 31st of the applicable year.

	 	 	 	 	 

	 	 	•
	 	If changed to non-bonus eligible position after
February 1st of a fiscal year, but on active
payroll on July 31st of the applicable fiscal year,
bonus will be pro-rated based upon earnings in the eligible
position.

	 	 	 	 	 

	 	 	•
	 	Participants terminated due to a broadly based
reduction in force after February 1st of a fiscal
year will be eligible for a pro-rated payout based upon
earnings in a bonus eligible position. Those terminated due
to a broadly based reduction in force before February
1st of a fiscal year and those terminated for any
other reason during the fiscal year will not be eligible to
receive a bonus payout.

	 	 	 	 	 

	 	 	•
	 	In the event of death, approved long-term disability
or approved retirement prior to February 1st of a
fiscal year, a pro-rated payment will be made to the
participant or the participant’s estate based upon earnings in
a bonus eligible position.

	 	 	 	 	 

	 	 	•
	 	Participants will be notified of their eligibility
level at the beginning of the fiscal year or when they become
bonus eligible. A Bonus Participant Agreement in such form
as Zale Corporation shall approve must be signed at that time.

	 	 	 	 	 

	 	 	•
	 	A participant who received an overall “IR” rating for
the previous fiscal year will not be eligible. The last
performance rating on file will determine eligibility to
receive the Management Bonus.

 

 

	 	 	 	 	 
	ADMINISTRATION
	 	•
	 	Management, for purposes of eligibility for participation
in this plan, shall include the Chief Executive Officer, President,
any vice president, any director level, and any manager level
employee (or the equivalents thereto even if designated by a
different title) of Zale Corporation and its subsidiaries.

	 	 	 	 	 

	 	 	•
	 	The Compensation Committee may, at its sole discretion,
adjust bonus awards to reflect special or unusual circumstances of
any individual or individuals

	 	 	 	 	 

	 	 	•
	 	Any employee on an approved leave of absence may, at the
Compensation Committee’s sole discretion, have his or her bonus
reduced, pro rata, to reflect the period of absence.

	 	 	 	 	 

	 	 	•
	 	All bonuses pursuant to this plan must be approved by the
Compensation Committee.

	 	 	 	 	 

	 	 	•
	 	Payouts will occur within 60 days following the end of the
fiscal year to which the bonuses were earned.

	 	 	 	 	 

	 	 	•
	 	At its election, prior, during or following completion of a
fiscal year, the Compensation Committee may pay bonuses with
respect to such fiscal year in Zale Corporation common stock.

	 	 	 	 	 

	 	 	•
	 	This plan may be implemented using one or more documents
designated for classes of employees or individual employees

	 	 	 	 	 

	 	 	•
	 	This plan shall be interpreted and administered in a manner
consistent with the awards hereunder constituting “qualified
performance-based compensation” for purposes of Section 162(m) of
the Internal Revenue Code.

	 	 	 	 	 

	 	 	Zale Corporation reserves the right to amend, modify, suspend or
terminate this plan and payouts hereunder in its sole discretion,
provided that stockholder approval shall be sought with respect to
any amendment that, absent stockholder approval, would negatively
impact the status of payouts under this plan for purposes of
Section 162(m) of the Internal Revenue Code.
	 	 	 	 	 

	 	 	Nothing in this plan shall be construed as a contract of employment.exv10w21

 

Exhibit 10.21

BASE SALARY AND TARGET BONUS

FOR THE NAMED EXECUTIVE OFFICERS

     The following table sets forth the annual base salaries and of the Chief Executive
Officer and the four other most highly compensated executive officers of Zale Corporation (the
“Company”) for the fiscal year ending July 31, 2006, and the target bonus for each such executive
officer under the Company’s executive bonus program as a percentage of annual base salary.

	 	 	 	 	 	 	 	 	 
	Name	 	Base Salary	 	Target Bonus %
	Mary E. Burton
	 	$	850,000	 	 	 	125	%
	President and Chief Executive Officer
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	George R. Mihalko, Jr.
	 	$	650,000	 	 	 	0	%
	Acting Chief Administrative Officer and Acting
Chief Financial Officer
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	John A. Zimmermann
	 	$	400,000	 	 	 	75	%
	Group President and President, Zale North America
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Gilbert P. Hollander
	 	$	300,000	 	 	 	60	%
	Group Senior Vice President and President,
Corporate Sourcing/Piercing Pagoda
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Frank C. Mroczka
	 	$	300,000	 	 	 	45	%
	Senior Vice President and President, Gordon’s Jewelers
	 	 	 	 	 	 	 	 

     For additional information regarding the compensation of the Company’s executive officers,
please refer to the information under the heading “Executive and Director Compensation” in the
Company’s Definitive Proxy Statement on Schedule 14A, which has been filed with the Securities and
Exchange Commissionexv10w1

 

Exhibit 10.1

EIGHTH AMENDMENT TO RESTATED

CREDIT AND SECURITY AGREEMENT

     THIS EIGHTH AMENDMENT TO RESTATED CREDIT AND SECURITY AGREEMENT (the “Eighth Amendment”) by
and between EDUCATIONAL DEVELOPMENT CORPORATION, a Delaware corporation, as borrower (the
“Company”), and ARVEST BANK, as lender (the “Bank”), is entered into effective as of the
30th day of June, 2006.

     WITNESSETH:

     WHEREAS, pursuant to the Restated Credit and Security Agreement dated as of June 30, 1999, as
amended by the First Amendment thereto dated as of June 30, 2000, as further amended by the Second
Amendment thereto dated as of June 30, 2001, as further amended by the Third Amendment thereto
dated as of June 30, 2002, as further amended by the Fourth Amendment thereto dated as of June 30,
2003, as further amended by the Fifth Amendment thereto dated as of June 30, 2004, as further
amended by the Seventh Amendment thereto dated as of September 2, 2005 (collectively the “Restated
Credit Agreement”), the Bank extended a Five Million and No/100 Dollars ($5,000,000.00) revolving
line of credit (the “Revolving Credit Loan”) to the Company until June 30, 2006, upon the terms and
conditions therein set forth, the Revolving Credit Loan being secured by the Collateral defined and
described in Section 7.1 of the Restated Credit Agreement and in the Security Agreement more
particularly described and defined therein; and

     WHEREAS, the Company has requested the Bank to (i) extend and renew the maximum principal
amount of the Revolving Credit Loan ($5,000,000.00) for one (1) additional year until the extended
maturity of June 30, 2007, and (ii) issue (through one or more third party issuing correspondent
bank(s) as selected by the Bank) from time to time on the account of the Company certain standby
and commercial letters of credit and permit loan advances hereunder in order to enable to Company
to make certain subordinated secured loans to third party entities in connection with and to
facilitate the Company’s acquisition of similar books of business and/or the assets of similarly
situated book distributors from time to time; and

     WHEREAS, subject to the terms, provisions and conditions hereinafter set forth, the Bank is
willing to so amend and modify the Revolving Credit Loan facility established pursuant to the
Restated Credit Agreement in the maximum principal amount of $5,000,000.00 until the extended
maturity date of June 30, 2007, to provide for the issuance of standby and commercial letters of
credit on behalf of the Company and permit loan advances to enable the Company to make junior
secured loans from time to time to third party entities in connection with and to facilitate the
Company’s acquisition of similar books of business and/or the assets of similarly situated book
distributors from time to time;

     NOW, THEREFORE, for good and valuable consideration and for the extension and amendment of the
Restated Credit Agreement, the Company and the Bank hereby agree as follows:

     1. The maturity date of the Revolving Credit Loan shall be extended for one (1) year until
June 30, 2007, and Revolving Credit Loan advances shall be evidenced by that certain replacement
Revolving Credit Note of even date herewith in the original principal amount of

 

 

Five Million and No/100 Dollars ($5,000,000.00) payable to the order of the Bank and bearing
interest at a variable annual rate equal from day to day to Prime Rate (as therein defined) minus
three-quarters of one percentage point (0.75%). A replacement Revolving Credit Note issued by the
Company and payable to the order of the Bank shall be delivered at the closing of this Eighth
Amendment (the “Replacement Note”).

     2. Section 2.1 (Revolving Credit Loans) of the Restated Credit Agreement is amended in its
entirety to read as follows:

“Revolving Credit Loans. The Bank agrees, upon the terms and subject to the
conditions hereinafter set forth, to make loans (‘Revolving Credit Loans”)
to the Company from the Closing Date until June 30, 2007, in such amounts as
may from time to time be requested by the Company so long as the sum of (i)
the aggregate principal amount of all Revolving Loans outstanding and unpaid
plus (ii) the aggregate unfunded amount of outstanding and unexpired letters
of credit issued hereunder by the Bank or on the Bank’s behalf as a
co-applicant with the Company through a third party correspondent issuing
bank as selected by the Bank for the account of the Company does not at any
time exceed the lesser of the Borrowing Base (hereinafter defined) or
$5,000,000.”

     3. A new Section 2.8 (Letters of Credit) is added to the Restated Credit Agreement to read in
its entirety as follows:

“2.8 Letters of Credit. Upon Company’s application from time to time
by use of Bank’s (or a third party correspondent issuing bank selected by the Bank)
standard form Letter of Credit Application Agreement, and subject to the terms and
provisions therein and herein set forth, Bank agrees to issue, or obtain the
issuance by a third party correspondent issuing bank selected by the Bank, standby
or commercial letters of credit on behalf of Company and the Bank, as co-applicants,
under the Revolving Credit Loans, provided that (i) no letters of credit will be
issued on behalf of or on the account of Company with an expiry date later than June
30, 2007, and (ii) no letter of credit will be issued on behalf of or for the
account of Company if at the time of issuance the sum of the outstanding amount of
all Revolving Credit Loans as evidenced by the Revolving Note, plus the unfunded
amount of issued but unexpired Letters of Credit together with the face amount of
the requested letter of credit, would exceed the Borrowing Base then in effect. If
any letter of credit is drawn upon at any time, each amount drawn, whether a full or
partial draw thereon, shall be reflected by Bank as an advance on the Revolving Note
effective as of the date of the issuing banking institution’s (whether the Bank or a
correspondent bank issuing such letter of credit as selected by the Bank) honoring
the sight draft. If any letter of credit or letters of credit remain outstanding on
June 30, 2007, Bank may, at its option, make a Revolving Credit Loan in an amount
equal to the aggregate face amount of such letter(s) of credit to purchase a
certificate of deposit to be held by Bank as additional security for the
Indebtedness. In consideration of Bank’s agreement to issue standby letters of
credit hereunder, Company agrees to pay to Bank letter of credit fees equal to
___percentage points (___%) per annum

-2-

 

on the face amount of each letter of credit together with Bank’s standard
letter of credit processing fees and including, without limitation, all such
charges, commissions and issuance and processing fees assessed by any third party
correspondent bank selected by the Bank to issue such applicable letter of credit),
which such charges, commissions and fees shall be due and payable at the time of
issuance of each applicable letter of credit.

     4. Section 5.10 (Contingent Liabilities; Advances) of the Restated Credit Agreement is amended
to modify clause (iv) thereof to read as follows:

“(iv) loan, agree to loan or advance money to any Person in an aggregate
amount of $25,000 or more at any time; provided, however, this clause (iv)
shall not preclude Company from advancing junior secured loans to third
party entities in order to facilitate the Company’s acquisition of certain
books of business or assets of similarly situated book distributors;”.

     5. The remaining terms, provisions and conditions set forth in the Restated Credit Agreement
shall remain in full force and effect for all purposes. The Company restates, confirms and
ratifies the warranties, covenants and representations set forth therein and further represents to
the Bank that no defaults or Events of Default exist under the Restated Credit Agreement as of the
date hereof. The Company further confirms, ratifies, continues, grants and re-grants to and in
favor of the Bank, as secured party, a continuous and continuing first and prior security interest
in all of the items and types of Collateral more particularly described in Section 7.1 of the
Restated Credit Agreement and in Section 2 of the Security Agreement described therein without any
interruption thereof, as security and collateral for the $5,000,000.00 Replacement Note, as the
same may be extended, renewed, rearranged, substituted, exchanged, replaced, consolidated or
otherwise modified from time to time, all of which such terms and provisions are incorporated
herein by reference with the same force and effect as if set forth and restated herein verbatim.

     6. The Company represents and warrants to the Bank that it is a corporation duly organized and
validly existing and in good standing under the laws of the State of Delaware and that the Company
is duly licensed, qualified and in good standing under the laws of the State of Oklahoma as a
foreign corporation. The Company will not change the jurisdiction or state of its incorporation or
otherwise re-incorporate without prior notification thereof to the Bank, including authorization to
the Bank to file amended or supplemental financing statements and execution by the Company of such
supplemental or amended security agreements and/or financing statements as deemed appropriate by
the Bank.

     7. The Company agrees to pay the Bank’s legal fees incurred in connection with the
negotiation, preparation and closing of this Eighth Amendment.

-3-

 

     IN WITNESS WHEREOF, this Eighth Amendment is executed and delivered to the Bank in Tulsa,
Oklahoma, by the undersigned duly authorized corporate officer of the Company, which officer has
full power and authority to do so on behalf and in the name of the Company by virtue of all
necessary corporate action of the Board of Directors of the Company, effective as of the
30th day of June, 2006.

	 	 	 	 	 	 	 
	 	 	EDUCATIONAL DEVELOPMENT	 	 
	 	 	CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	 
	 	 
	 

	 	 
	 	 

Randall White
	 	 
	 

	 	 	 	President	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	“Company”	 	 

-4-

 

	 	 	 	 	 	 	 
	 	 	ARVEST BANK	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	 
	 	 
	 

	 	 
	 	 

Dennis Colvard
	 	 
	 

	 	 	 	Senior Vice President	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	“Bank”	 	 

-5-

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