Document:

seaway8k060108ex10b.htm

    
      

      

    

    Exhibit
10-B

    
      EMPLOYMENT AGREEMENT

       

      THIS
EMPLOYMENT AGREEMENT made this 1st day
of June,
2008
(the “Effective Date”), by and between CHRISTOPHER
M. SWARTZ, individually, whose address is 234 Paddock, Watertown,
New York 13601 (hereinafter, at times, referred to as the "Executive"), and
SEAWAY
VALLEY CAPITAL CORPORATION (“Seaway” or the “Company”), a corporation of
the State of Delaware, whose address is 10-18 Park Street, 2nd
Floor, Gouverneur, New York.  Company and Executive shall hereinafter
collectively, at times, be referred to as the "Parties" or individually, at
times, as a "Party" and this Employment Agreement shall hereinafter, at times,
be referred to as the "Agreement."

       

      WHEREAS:

       

      
        	
                A.

              	
                Company
      currently operates retail stores and is also positioned to capitalize on
      the merging of its operations with those of the operations of North
      Country Hospitality, Inc. (together, the
  “Business”);

              

      

       

      
        	
                B.

              	
                Company
      desires to obtain the services of Executive as its employee in the
      capacity of VICE PRESIDENT and CHIEF OPERATING OFFICER, and Executive
      desires to provide services to Company as its employee, in such
      capacities, and in accordance with the terms, conditions and covenants set
      forth in this Agreement; and,

              

      

       

      
        	
                C.

              	
                Company
      would not have provided Executive with the opportunities, information and
      other benefits hereinafter described if Executive had not agreed to
      provide full time and exclusive services (as delimited in Section 1C
      hereof) relative to the Business for Company as specified hereunder for
      the full term hereof and pursuant to the terms, conditions and covenants
      of this Agreement.

              

      

       

      NOW THEREFORE THIS AGREEMENT
WITNESSETH THAT in consideration of the premises and the mutual
covenants, agreements, representations and warranties contained herein, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:

       

      1.           EMPLOYMENT

       

       
A.       Employment

       

      Company
hereby hires and employs Executive to serve as its Vice President and Chief
Operating Officer. Executive shall have those duties and responsibilities as
shall be determined, from time to time, by Company’s Board of
Directors.

       

       
B.       Acceptance

       

      Executive
hereby accepts its employment hereunder, subject to all of the terms,
conditions, and covenants contained in this Agreement.

       

      
        	
                 
      

              	
                C.

              	
                Loyalty

              

      

       

      Subject
to his obligations to those entities identified as “other employment” on Exhibit
A hereto, which Executive covenants will not materially interfere with his
services to the Company,  Executive shall devote his full and
exclusive time relative to the Business, attention and best efforts to the
performance of his duties under this Agreement. During the term of his
employment under this Agreement, Executive shall not at any time or place or to
any extent whatsoever, either directly or indirectly, without the express prior
written consent of Company obtained in each instance, voluntarily engage in any
conduct, litigation, business practice, governmental, regulatory or
administrative agency’s investigation or dispute or in any activity whatsoever
competitive with, adverse to or detrimental to the business or affairs of
Company, whether alone, as a partner, or as a past or present officer, director,
employee, agent, member or shareholder or in any other capacity whatsoever, of
any company or other entity except under, and pursuant to, this Agreement, and
all fees, commissions, or other income attributable to Executive's business
services relative to the Business during the term of this Agreement shall inure
to and belong to and be the sole property of Company, as the case may be,
subject to the terms and conditions set forth below.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      Other
than for activities and those activities directly related to those listed below
in Exhibit A, Executive shall not act as an employee, consultant,
independent contractor or otherwise for any other person, corporation, LLC, LLP,
joint venture, partnership or other entity whatsoever nor conduct any other
business whatsoever during the term of this Agreement without the express
written consent of Company obtained in each instance in advance except as
provided herein. Notwithstanding the foregoing to the contrary, nothing herein
shall prevent Executive from being a passive investor or receiving dividend or
interest income or capital gains from investments, all of which Company
acknowledges it shall have no entitlement to. Furthermore, Executive may serve
as a member of a board of directors or other organization(s) which do not
compete with Company and which do not pose any conflict of interest or
appearance of conflict of interest, and may participate in other professional,
civic, governmental organizations or activities which do not materially affect
Executive’s ability to carry out its full time duties hereunder. Any and all
such activities shall be disclosed to Company’s Board of Directors, in advance,
during the term of this Agreement.

       

       
D.      Location

       

      Executive
shall perform services for Company at such reasonable locations as may be
mutually agreed upon by the Parties from time to time.

       

      2.           RESPONSIBILITIES
OF EXECUTIVE

       

       
A.       Best Efforts

       

      Executive
shall use his best efforts on a full time and regular basis (as delimited in
Section 1C above) to perform those services which are customary and consistent
with Executive’s role with Company, or as otherwise directed by Company’s Board
of Directors and assist Company in a diligent and aggressive manner with the
operation and growth of Company and in obtaining new business, acquisition
targets, technologies, strategic alliances and other growth producing
opportunities.

       

       
B.       Cooperation and Conduct

       

      Executive
shall work with Company to assure that he at all times cooperates with Company
personnel, conducts himself in a manner consistent with the high image,
reputation and credibility of Company and engages in no activities which reflect
adversely on Company.

       

       
C.       Reports

       

      Executive
shall furnish Company, at intervals as reasonably requested by Company, with all
financial reports, budgets, forecasts, and such other information regarding his
business efforts on behalf of Company under this Agreement as Company may
request from time to time.

       

       
D.      Meetings

       

      Executive
shall attend any and all meetings and trade shows as reasonably required by
Company, at Company’s expense.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

       
E.       Compliance with Laws

       

      Executive
shall comply with all applicable federal, state and local laws and regulations
in performing its obligations hereunder.

       

       
F.       Business Practices

       

      Executive
acknowledges Company's corporate policy prohibiting its employees from receiving
or offering any gifts, rebates or other payments in connection with any Company
related business transaction or relationship, and hereby represents and
covenants that he has not made, and will not make, any such payment(s) in
connection with any Company related business transaction or relationship and
will notify Company immediately if any party requests that any such prohibited
payment be made.

       

      3.           SCOPE
AND LIMITATIONS OF EXECUTIVE'S AUTHORITY

       

      A.     Trade
Practices

       

      At no
time shall Executive make any false or misleading representations or engage in
any other unfair or deceptive trade practices with respect to
Company.  Executive shall refrain from communicating any
representations, guarantees or warranties with respect to Company, except such
as are authorized expressly by Company in writing or are set forth in Company's
literature.

       

      B.     Relationship
of the Parties

       

      Executive
acknowledges that he is being engaged hereunder as a full time employee of
Company, as delimited in Section 1C hereof.  Executive shall not
engage in any other commercial venture during the term hereof without Company’s
prior written consent.  Subject to the exclusions specifically set
forth in Section 1 hereof, Executive further acknowledges and agrees that all
income or other earnings which accrue to Executive from his business efforts
relative to the Business on behalf of Company during the term of this Agreement
(and any extension thereof) shall be the sole and exclusive property of Company,
except as may be otherwise agreed upon in writing.

       

      4.           COMPENSATION

       

        
A.     Salary - Cash

       

      Subject
to the terms hereof, the cash compensation to be paid by Company to Executive in
consideration for all services rendered hereunder shall be an annual salary of
ONE HUNDRED TWENTY-FIVE THOUSAND DOLLARS ($125,000.00), U.S.
currency.

       

        
B.     Salary – Cash or Stock

       

      Subject
to the terms hereof, the Company shall pay an additional amount of compensation
to Executive, which shall be an annual amount of Fifty Thousand Dollars
($50,000).  The additional amount shall, at the discretion of the
Board of Directors, be payable either in cash or in immediately-saleable shares
of the Company’s common stock, which shall be valued for this purpose at 85% of
the average of the closing bid prices during the five days preceding
issuance.

       

        
C.     Vacation

       

      Executive
shall be entitled to FOUR (4) WEEKS per annum of paid vacation hereunder, at
times and for duration to be discussed in advance and agreed upon by Company’s
Board of Directors.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

        
D.     Benefit Plans

       

      Executive
shall be entitled to participate in any benefit plan maintained by Employer in
which the Company’s Chief Executive Officer is a participant, pursuant to the
terms and conditions of such plans, if any, if approved by the Board of
Directors and stockholders of Employer. At a minimum, such benefit plans shall
be the same as or similar to those currently provided to other executives of
Company.

       

        
E.     Health Insurance

       

      Executive
shall be eligible for the same health insurance benefits (for himself, his
spouse and children) as are provided by Company for the Company’s Chief
Executive Officer in accordance with the policy in place for Company, which may
be modified from time to time, in Company’s sole and absolute
discretion.

       

      5.        
   EXECUTIVE'S
BUSINESS EXPENSES

       

      Executive
shall be reimbursed for normal and necessary business expenses incurred in
connection with his business efforts on Company’s behalf hereunder. Said
expenses shall be presented to Company in accordance with its customary policy
for approval and shall be promptly reimbursed.

       

      6.           
TAXES

       

      Company
shall withhold all applicable employment taxes, including Federal and state
income taxes, Social Security and unemployment taxes, disability or any similar
taxes or other payments, with respect to amounts earned or received by Executive
hereunder.

       

      7.           COVENANTS

       

        A. 
    Confidential Information

       

      Executive
acknowledges that during the term of this Agreement and otherwise during the
course of performing services for Company, Executive shall have access to
certain written and non-written information which Company considers confidential
and proprietary ("Confidential Information"). In consideration for Executive
being granted access to such Confidential Information and for the other benefits
hereunder, Executive hereby agrees that, during the term of this Agreement and
thereafter for a period of THREE (3) YEARS, Executive
shall keep secret and retain in strictest confidence, and shall not, without the
prior written consent of Company obtained in each instance, furnish, make
available or disclose to any third party, or use for the benefit of himself or
any third party, any Confidential Information.  As used in this
Paragraph, "Confidential Information" shall mean any information relating to the
business or affairs of Company which is not generally known to the public,
including, but not limited to, product or business plans, improvements and
developments, Company financial statements; customer and potential customer
identities; names and qualifications of Company employees, suppliers; pricing
methodologies and profit margins, including information regarding competitive
bids, business or acquisition strategies,  internal company and
product methodologies and analyses, inventions, copyrightable work or other
proprietary information used or developed by Company in connection with its
business, and the existence and terms of this
Agreement.  Notwithstanding the foregoing, Confidential Information
shall not include any information, which is or becomes in the public domain
through no wrongful act on the part of Executive or its employees or
agents.

       

       
B.      Covenant Not To Compete

       

      In
consideration of the undertak­ings by the Company herein, the Executive
covenants for the benefit of the Company as follows:

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      (a) The “Restricted Period” for
purposes of this Covenant shall commence on the date of this Agreement and shall
continue for a period ending on the date which is three years after the
termination of his employment.

      

      (b) During the Restricted Period the
Executive shall not, directly or indirectly, as an employee, consultant or
principal, through equity ownership or otherwise, for himself or for any other
person, engage in, or assist any other person to engage in, Restricted
Activities.  For purposes hereof, “Restricted Activities” shall mean
the following:

      

      (i)  Directly
or indirectly soliciting, diverting, taking away or attempting to solicit,
divert, or take away any business opportunities which became available to the
Company or its affiliated entities during the Term of this
Agreement.

       

      (ii) Hiring, offering to hire, enticing
away or in any manner persuading or attempting to persuade any person affiliated
(as em­ployee or as independent contractor) with the Company or any
affiliate of the Corporation to discontinue his relation­ship with such
company, or to become employed by any other entity.

       

      (iii) Opening a place of business
located within twenty (20) miles of any place of business owned or operated by
the Company or any affiliated entity during the last year of the Executive’s
employment.

       

       
D.      Equitable Remedies

       

      The
restrictions contained in this Section 7 are necessary for the protection of the
business and goodwill of Company and are considered by the Executive to be
reasonable for such purpose. The Executive acknowledges and agrees that any
breach of this Section 7 is likely to cause Company substantial and irrevocable
damage which is difficult to measure. Therefore, in the event of any such breach
or threatened breach, the Executive agrees and consents that Company, in
addition to such other remedies which may be available, shall have the right to
obtain temporary or permanent injunctive relief (along with reasonable legal
fees and costs provided Company is the prevailing party) restraining such a
breach or threatened breach and the right to specific performance of the
provisions of this Section 7 without the necessity of proof of actual damages.
Executive hereby waives the adequacy of a remedy at law as a defense to such
relief.

       

      8.           DURATION
OF AGREEMENT/TERMINATION/SURVIVAL

       

       
A.      Duration

       

      Except in
the case of earlier termination, as hereinafter specifically provided, the term
(the “Employment Period”) of this Agreement shall be as of the date first above
written (the effective date hereof) through and including ONE (1) YEAR from the
date first above written; provided, however, that after expiration of the
employment period, this Agreement and the Employment Period shall automatically
be renewed each January 1 for successive one-year terms so that the remaining
term of this Agreement and the Employment Period shall continue to be one year
at all times after expiration of the employment period unless the Company or the
Executive delivers written notice to the other party at least SIXTY (60) DAYS
preceding the expiration of the employment period or any one-year extension date
of the intention not to extend the term of this Agreement.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

       
B.      Termination

       

      Either
Executive or Company may terminate this Agreement at will, with or without
cause, at any time during the employment period or any extension term
(hereinafter referred to as the "Termination Date").  If the
termination is without cause, SIXTY (60) DAYS advance written notice must be
provided by the terminating Party to the other Party.  EACH PARTY
ACKNOWLEDGES THAT SUCH TIME PERIOD IS ADEQUATE TO ALLOW IT TO TAKE ALL ACTIONS
REQUIRED TO ADJUST ITS BUSINESS OPERATIONS IN ANTICIPATION OF TERMINATION. If
the termination is for Cause, no advance notice shall be required, but may be
provided at the option of the terminating Party. “Cause” for purposes of this
paragraph shall include, but not necessarily be limited to, the
following:

       

      
        	
                 
      

              	
                (1)

              	
                Termination
      by Executive

              

      

       

      In the
case of termination by Executive, Cause shall exist if Company breaches any
provision of this Agreement or any other agreement to which Executive and
Company are parties.  In the event Executive terminates this contract
for Cause, Executive shall be entitled to compensation based on the remaining
Term provided for herein. If Executive terminates his employment hereunder
without cause, he shall forfeit any remaining salary then payable hereunder for
the remaining duration of the term of this Agreement but shall be entitled to
all compensation due him as of the date of termination.

       

      (2)           Termination
by Company

       

      In the
case of termination by Company, Cause shall exist if Executive acts in any way
damaging or detrimental to the business or business reputation of Company If
Company terminates Executive’s employment hereunder without cause, Executive
shall be entitled all salary payable for the balance of the employment period of
this Agreement. Should Company terminate Executive’s employment hereunder with
cause, Executive shall be entitled to one (1) years salary as severance;
provided, however, that such payment shall not be due to Executive in the event
Executive is terminated for engaging in action which is materially fraudulent
toward the Company or which represents willful disregard of a legitimate
instruction of the Board of Directors.

       

      
        	
                 
      

              	
                (3)

              	
                Additional
      Cause

              

      

       

      Cause
shall exist for termination by either Party if the other Party assigns or
attempts to assign this Agreement, except as permitted hereunder, liquidates or
terminates its business, is adjudicated a bankrupt, makes an assignment for the
benefit of creditors, invokes the provisions of any law for the relief of
debtors.

       

      (4)           Continuation
of Salary

       

      In the
event that, prior to the third anniversary of the date of this Agreement, the
Executive’s employment is terminated for any reason other than termination by
the Executive without cause, and the Executive remains personally liable as a
guarantor of any debts against which the Company is required to indemnify the
Executive under the terms of the Merger Agreement dated April 1, 2008, then,
notwithstanding the termination of employment, the Company will continue to pay
Executive the cash compensation provided for  in Section 4(A) and
Section 4(B) hereof until the earlier of (a) the date on which all such
guarantees are released or the related debts are extinguished or (b) the third
anniversary of the date of this Agreement.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

       
C.      No Representation as to
Tenure

       

      THIS
AGREEMENT IS EXECUTED BY BOTH COMPANY AND EXECUTIVE WITH THE KNOWLEDGE THAT IT
MAY BE TERMINATED OR NOT EXTENDED. EXECUTIVE ACKNOWLEDGES THAT APART FROM THE
TERMS OF THIS AGREEMENT, COMPANY HAS MADE NO REPRESENTATION AS TO THE LENGTH OF
TIME DURING WHICH THIS AGREEMENT WILL REMAIN IN FORCE.

       

       
D.      Survival

       

      ALL
REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS CONTAINED IN THIS
AGREEMENT, OR IN ANY SCHEDULE, CERTIFICATE, DOCUMENT OR STATEMENT DELIVERED
PURSUANT HERETO, SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT AND SHALL BE
DEEMED TO HAVE BEEN RELIED UPON (AND NOT BE AFFECTED IN ANY RESPECT BY) THE
TERMINATION OF THIS AGREEMENT.

       

      9.      
     ASSIGNMENT

       

      No Party
may assign, transfer or sell all of any of its rights under this Agreement (or
delegate all or any of its obligations hereunder) without the prior written
consent of the other Party. Subject to these restrictions, the provisions of
this Agreement shall be binding upon and inure to the benefit of the Parties,
their successors and permitted assigns.

       

      10.          WAIVER

       

      The
waiver by either Party of any of its rights or any breaches of the other Party
under this Agreement must be in writing to be effective and any such waiver in a
particular instance shall not be construed as a waiver of the same or different
rights or breaches in subsequent instances.  All remedies, rights
undertakings and obligations hereunder shall be cumulative, and none shall
operate as a limitation of any other.

       

      11.          NOTICES

       

      All
notices and demands of any kind which either Company or Executive may be
required or desire to serve upon the other under the terms of this Agreement
shall be in writing and shall be served by personal delivery, by certified
mail-return receipt requested or by commercial courier service, at the addresses
set forth in this Agreement or at such other addresses as may be designated
hereafter by the Parties in writing.  If by personal delivery or
commercial courier, service shall be deemed complete upon the delivery
date.  If by certified mail, service shall be deemed complete upon the
date of the mailing.

       

      12.          EXECUTION

       

      This
Agreement shall become effective only upon its execution by Executive within or
outside the State of New York and its subsequent execution by Company in the
State of New York, as of the Effective Date.

       

      13.          SEVERABILITY

       

      In the
event that any of the provisions of this Agreement or the application of any
such provisions to the Parties hereto with respect to their obligations
hereunder shall be held by a court of competent jurisdiction to be unlawful or
unenforceable, the remaining provisions of this Agreement shall remain in full
force and effect, and shall not be affected, impaired or invalidated in any
manner.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      14.          PARAGRAPH
HEADINGS AND LANGUAGE INTERPRETATIONS

       

      The
paragraph headings contained herein are for reference only and shall not be
considered substantive provisions of this Agreement. The use of a singular or
plural form shall include the other form, and the use of a masculine, feminine
or neuter gender shall include the other genders, as applicable.

       

      15.          ENTIRE AGREEMENT

       

      This
Agreement constitutes the final agreement between the Parties pertaining in any
manner to the subject matter hereof, and contains all of the covenants and
undertakings between the Parties with respect to said subject
matter.  Each party to this Agreement acknowledges that no written or
oral representations, inducements, promises or agreements have been made which
are not embodied herein and the Parties will not rely on any future oral
representations, inducements, promises or agreements unless embodied in a
written amendment hereto.  Any and all prior or contemporaneous,
written or oral agreements between the Parties pertaining in any manner to the
subject matter of this Agreement expressly are superseded and canceled by this
Agreement.  Except as otherwise provided herein, this Agreement may
not be amended, modified or supplemented, except by a written instrument signed
by both parties hereto. IT IS THE INTENTION AND DESIRE OF THE PARTIES THAT THE
EXPRESS PROVISIONS OF THIS AGREEMENT NOT BE SUBJECT TO VARIATION BY IMPLIED
COVENANTS OF ANY KIND.

       

      16.          COUNTERPARTS

       

      This
Agreement may be executed in ONE (1) or more counterparts, each of which will be
deemed to be any original copy of this Agreement and all of which, taken
together, shall be deemed to constitute ONE (1) and the same
Agreement.

       

      17.          CONSENT
TO JURISDICTION

       

      Company
and Executive hereby submit and consent to the exclusive venue and jurisdiction
of the Supreme Court of the State of New York in respect of the interpretation
and enforcement of the provisions of this Agreement, and hereby waive and agree
not to assert as a defense in any action, suit or proceeding for the
interpretation or enforcement of this Agreement, that it is not subject thereto
or that such action, suit or proceeding may not be brought or is not
maintainable in said courts or that this Agreement may not be enforced in or by
said courts or that its property is exempt or immune from execution, that the
suit, action or proceeding is brought in an inconvenient forum, or that the
venue of the suit, action or proceeding is improper. Company and Executive agree
that service of process may be made in any manner permitted by the laws of the
State of New York or the federal laws of the United States in any such action,
suit or proceeding against Company and Executive with respect to this
Agreement.  Company and Executive agree that final judgment (with all
right of appeal having expired or been waived) against it in any such action,
suit or proceeding shall be conclusive and that the other Party is entitled to
enforce such judgment in any other jurisdiction by suit on the judgment, a
certified copy of which shall be conclusive evidence of the fact and amount of
indebtedness arising from such judgment.

       

      18.          ADVICE
OF COUNSEL

       

      THE
PARTIES ACKNOWLEDGE THAT THEY HAVE EACH RECEIVED A COPY OF THIS AGREEMENT, THAT
THEY HAVE READ AND FULLY UNDERSTAND THIS AGREEMENT, AND THAT THEY HAVE BEEN
ADVISED TO SEEK AND HAVE SOUGHT OR WAIVED INDEPENDENT LEGAL COUNSEL OF THEIR
CHOICE TO AID IN THEIR UNDERSTANDING HEREOF.

       

      [SIGNATURES
ON FOLLOWING PAGE]

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      IN WITNESS WHEREOF, the
Parties hereto have caused this Agreement to be executed the day and year first
appearing above by their duly authorized officers, as set forth
below.

       

       

       

      

       

      
        	
                By:

              	
                SEAWAY
      VALLEY CAPITAL CORPORATION

              
	 
      	 
      
	 
      	 
      
	 
      	
                /S/ THOMAS
      SCOZZAFAVA

              
	 
      	
                Thomas
      Scozzafava, CEO, Chairman

              

      

       

       

       

      

       

      
        	
                EXECUTIVE

              
	 
      	 
      
	 
      	 
      
	
                By:

              	
                /S/ CHRISTOPHER SWARTZ

              
	 
      	
                Christopher
      M. Swartz

              
	 
      	
                IndividuallyExhibit 10.6

 

EMPLOYMENT SECURITY AGREEMENT

 

This Employment Security
Agreement (the “Agreement”) is between Zale Corporation (“Company”)
and the undersigned Brand Senior Vice President of Company (“Executive”).

 

WHEREAS, in order to achieve its long-term objectives,
Company recognizes that it is essential to attract and retain qualified
executives; and

 

WHEREAS, in consideration of Executive’s valuable service
for, and critical contribution to the success of, Company, Company desires to
provide Executive with certain benefits in the event Executive’s employment is
terminated, either in connection with or unrelated to a Change of Control of
Company, on the terms and subject to the conditions set forth in this
Agreement.  Capitalized terms that are
used in this Agreement but not defined in connection with their use are defined
in Article V.

 

NOW, THEREFORE, in consideration of the promises and of the
mutual covenants herein contained and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, it is agreed as
follows:

 

ARTICLE I

TERMINATION BENEFITS

 

1.1                               General Termination Benefits.  If Executive incurs a Qualifying Termination
other than during a Protection Period, he or she will receive the following
termination benefits:

 

(a)                                  Severance Pay.  Subject to
Sections 1.5 and 2.1(a), Executive will receive Severance Pay in equal
installments commencing on the first ordinary payroll payment date that follows
the date that is sixty (60) days after the date of Termination of Employment
and thereafter in accordance with and at times consistent with Company’s
ordinary payroll practices.

 

(b)                                 Accrued Obligations. 
Executive will be entitled to (i) payment of any earned and unpaid
Base Compensation as of Termination of Employment; (ii) payment of any
earned but unused vacation as of the Termination of Employment, to the extent
such vacation pay is provided under the vacation plan or policy sponsored by
Company that is applicable to Executive; and (iii) any other earned and
unpaid obligations as of the Termination of Employment, including but not
limited to any bonus to which Executive may have become entitled but which has
not yet been paid as of Termination of Employment under the bonus plan or
policy sponsored by Company that is applicable to Executive (the “Accrued
Obligations”).  Accrued Obligations
described in clauses (i) and (ii) above will be paid as part of
Executive’s final ordinary payroll payment from Company for active employment
or contemporaneously with such payment, but in no event later than thirty (30)
days after such Termination of Employment, and Accrued Obligations described in
clause (iii) above will be paid in accordance with the terms of the plan,
policy, agreement or arrangement under which they arose (including with respect
to time of payment or distribution).

 

(c)                                 Continued Welfare Benefits.  Executive and/or Executive’s dependents will
be entitled to elect to continue their respective health or welfare coverage
pursuant to COBRA.  Provided that
Executive and/or Executive’s dependents elect and 

 

 

maintain such COBRA coverage until the expiration of
their eligibility under COBRA, following such expiration, Executive and/or
Executive’s dependents also will be entitled to elect to continue such coverage
for the remainder, if any, of the Severance Period.  Such health and other welfare benefits will
be provided monthly and will provide the same coverage as available to others
who elect coverage pursuant to COBRA, even though, following the expiration of
Executive’s eligibility for COBRA, it would not be pursuant to COBRA, provided
that the continued participation of Executive and such dependents is possible
under the general terms and provisions of such health or welfare plans.  If Executive’s participation in any such plan
is barred or would result in adverse tax consequences to Executive or Company,
Company will arrange to provide Executive on a monthly basis with benefits
substantially similar to those that Executive otherwise would have been
entitled to receive under such plan or, alternatively at the
option of Company, reimburse Executive on a monthly basis for the reasonable
actual costs of purchasing in the marketplace substantially similar benefits; provided,
however, that, in either case, Executive will pay to
Company, or provide a credit against Company’s reimbursement obligation for,
the amount equal to the premiums that Executive would have been required to pay
to maintain such benefits hereunder.

 

During the Severance Period, Executive’s premiums for coverage provided
pursuant to COBRA will be equal to the premiums Executive paid prior to
Termination of Employment.  Thereafter,
Executive’s premiums will be equal to the amount required to continue such
coverage pursuant to COBRA.  All premium
payments paid by Executive and/or Executive’s dependents for coverage will be
paid directly to the appropriate insurer or service provider for such benefit
(which may be Company).  For the
avoidance of doubt, Executive’s continuation of health and welfare benefits during
the Severance Period shall count against Executive’s continuation of coverage
period required under COBRA.

 

Any health or welfare benefits received by or available to Executive
from or in connection with any other employment of Executive, consultancy arrangement
undertaken by Executive or similar source that are reasonably comparable to,
but not necessarily as financially or otherwise beneficial to Executive as, the
benefits provided to Executive by Company at the time of the Termination of
Employment will be deemed the equivalent thereof and will terminate Company’s
obligation under this Section 1.1(c) to provide health and welfare
coverage during the Severance Period; provided, however, that
nothing in this paragraph will limit or terminate Executive’s or Executive’s
dependents’ right to continue any Company group health plan coverage at
Executive’s or such dependent’s cost for the remainder of the COBRA
period.  Executive agrees to advise
Company of the availability of any such subsequent benefit coverages within 30
days following such availability.

 

The provisions of this Section 1.1(c) will
not prohibit Company from changing the terms of any benefit programs provided
that any such changes apply to all executives of Company and its Affiliates (e.g., Company may switch insurance carriers or preferred
provider organizations or change coverages).

 

2

 

(d)                                Outplacement Services.  Executive will be entitled to receive
outplacement services from an entity selected by Company for a period of three (3) months,
provided that such services do not commence later than six (6) months
following Termination of Employment. 
Company will pay the outplacement service provider directly for the cost
of such outplacement services.

 

(e)                                 Equity Compensation Adjustments.  Any equity-based compensation awards granted
to Executive by Company under an Equity Plan that vested prior to such
Termination of Employment will be governed by the terms of such awards and such
Equity Plan.  Any equity-based
compensation awards granted to Executive by Company under an Equity Plan that
are unvested on Termination of Employment will expire, unless otherwise
provided in such awards or such Equity Plan. 
Following his or her Termination of Employment, Company will not grant
Executive any equity-based compensation awards.

 

(f)                                    401(k) Plan.  The
terms of the 401(k) Plan will govern Executive’s account balance, if any,
under such 401(k) Plan.

 

1.2                               Termination Benefits in Connection with a Change of Control.  If Executive incurs a Qualifying Termination
during a Protection Period, he or she will receive the following termination
benefits:

 

(a)                                  Severance Pay.  Subject to
Sections 1.5 and 2.1(a), Executive will receive Severance Pay in a single lump-sum within fifteen (15) days after the date on which the general
release required pursuant to Section 2.1(a) is executed and delivered
to Company and becomes irrevocable in accordance with its terms.  Any
Severance Pay payable pursuant to this Section 1.2(a) will be reduced
to the extent that Executive previously received any Severance Pay pursuant to Section 1.1(a).

 

(b)                                 Accrued Obligations. 
Executive will be entitled to payment of any Accrued Obligations in
accordance with the provisions of Section 1.1(b).

 

(c)                                 Continued Welfare Benefits.  Executive and Executive’s dependents will be
entitled to receive health and other welfare benefits in accordance with the
provisions of Section 1.1(c) for the duration of the Severance
Period.

 

(d)                                Outplacement Services.  Executive will be entitled to receive
outplacement services in accordance with the provisions of Section 1.1(d).

 

(e)                                 Equity Compensation Adjustments.  Any equity-based compensation awards granted
to Executive by Company under an Equity Plan that vested prior to such
Termination of Employment will be governed by the terms of such awards and such
Equity Plan.  Any equity-based
compensation awards granted to Executive by Company under an Equity Plan that
are unvested on Termination of Employment will vest immediately upon
Termination of Employment, unless otherwise provided in such awards or such
Equity Plan.  Following his or her
Termination of Employment, Company will not grant Executive any equity-based
compensation awards.

 

3

 

(f)                                   401(k) Plan.  The
terms of the 401(k) Plan will govern Executive’s account balance, if any,
under such 401(k) Plan.

 

(g)                                Conditional Cap on Severance Pay. If the payments to
Executive pursuant to this Agreement (when considered with all other payments
made to Executive as a result of a Termination of Employment that are subject
to Section 280G of the Code) (the amount of all such payments,
collectively, the “Parachute Payment”) result in Executive becoming
liable for the payment of any excise taxes pursuant to section 4999 of the Code
(“280G Excise Tax”), Executive will receive the greater on an after-tax
basis of (i) the severance benefits payable pursuant to this Section 1.2
or (ii) the severance benefits payable pursuant to this Section 1.2
as reduced to avoid imposition of the 280G Excise Tax (the “Conditional
Capped Amount”).

 

Not more than fourteen (14) days following the Termination of
Employment, Company will notify Executive in writing (A) whether the
severance benefits payable pursuant to this Section 1.2 when added to any
other Parachute Payments payable to Executive exceed an amount equal to 299%
(the “299% Amount”) of Executive’s “base amount” as defined in Section 280G(b)(3) of
the Code, (B) the amount that is equal to the 299% Amount, (C) whether
the severance benefit described in Section 1.2(g)(i) or the
Conditional Capped Amount pursuant to section 1.2(g)(ii) is greater on an
after-tax basis and (C) if the Conditional Capped Amount is the greater
amount, the amount that the severance benefits payable pursuant to this Section 1.2
must be reduced to equal such amount.

 

The calculation of the 299%
Amount, the determination of whether the termination benefits described in Section 1.2(g)(i) or
the Conditional Capped Amount described in Section 1.2(g)(ii) is
greater on an after-tax basis and, if the Conditional Capped Amount in Section 1.2(g)(ii) is
the greater amount, the determination of how much Executive’s termination
benefits must be reduced in order to avoid application of the 280G Excise Tax
will be made by Company’s public accounting firm in accordance with section
280G of the Code or any successor provision thereto.  The costs of
obtaining such determination will be borne by Company.

 

1.3                               Distributions on Account of Death of Executive During the Severance
Period.  If Executive becomes entitled
to Severance Pay pursuant to Section 1.1 or 1.2 and dies during the
Severance Period, the following benefits will be payable:

 

(a)                                  Severance Pay.  Any
remaining Severance Pay payable to Executive as of the date of his or her death
will continue to be paid to Executive’s estate pursuant to Section 1.1 or
1.2, as applicable.

 

(b)                                 Accrued Obligations. 
Executive’s estate will be entitled to payment of any Accrued
Obligations unpaid as of the date of Executive’s death in accordance with the
provisions of Section 1.1(b).

 

(c)                                 Continued Welfare Benefits.  Executive’s dependents will be entitled to
continue to receive any health or other welfare benefits that they received 

 

4

 

immediately prior to the date of Executive’s death
for the remainder of the applicable period, subject to the limitations
contained in Section 1.1(c).

 

(d)                                 Outplacement Services.  Any outplacement service benefits available to
Executive pursuant to Section 1.1(d) or 1.2(d) will cease as of
the date of Executive’s death.

 

(e)                                 Equity Compensation Adjustments.  Upon
death of Executive, any equity-based compensation awards granted to
Executive by Company under an Equity Plan that vested prior to Executive’s
death will be governed by the terms of such awards and such Equity Plan.  Any equity-based compensation awards granted
to Executive by Company under an Equity Plan that are unvested on Executive’s
death will expire, unless otherwise provided in such awards and such Equity
Plan.

 

(f)                                   401(k) Plan.  The terms of the 401(k) Plan will govern
Executive’s account balance, if any, under such 401(k) Plan.

 

1.4                            Termination
Benefits in Connection With a Termination Other Than a Qualifying Termination.  If
Executive has a Termination of Employment that is not described in Section 1.1
or 1.2, including due to death or Disability, he or she will receive the
following termination benefits:

 

(a)                                  Severance Pay. 
Executive will not receive any Severance Pay.

 

(b)                                 Accrued Obligations. 
Executive or Executive’s estate, as applicable, will be entitled to
payment of any Accrued Obligations in accordance with the provisions of Section 1.1(b).

 

(c)                                 Continued
Welfare Benefits.  Executive
and/or Executive’s dependants, as applicable, will be entitled to continue
their health and welfare benefits, if any, pursuant to COBRA.

 

(d)                                 Equity Compensation Adjustments.  Any equity-based compensation awards granted to
Executive by Company under an Equity Plan that vested prior to such Termination
of Employment will be governed by the terms of such awards and such Equity
Plan.  Any equity-based compensation
awards granted to Executive by Company under an Equity Plan that are unvested
on Termination of Employment will expire, unless otherwise provided in such
awards or such Equity Plan.  Following
his or her Termination of Employment, Company will not grant Executive any
equity-based compensation awards.

 

(e)                                 401(k) Plan.  The terms of the 401(k) Plan will govern
Executive’s account balance, if any, under such 401(k) Plan.

 

1.5                            Code Section 409A.

 

(a)                                  It is the
intention of Company and Executive that the provisions of this Agreement comply
with Section 409A of the Code and the rules, regulations and other
authorities promulgated thereunder (including the transition rules thereof)

 

5

 

(collectively, “409A”), and all provisions of
this Agreement will be construed and interpreted in a manner consistent with
409A.

 

(b)                                 To the extent
Executive is a “specified employee,” as defined in Section 409A(a)(2)(B)(i) of
the Code and as determined in good faith by Company, notwithstanding the timing
of payment provided in any other Section of this Agreement, no payment,
distribution or benefit under this Agreement that constitutes a distribution of
deferred compensation (within the meaning of Treasury Regulation Section 1.409A-1(b))
upon separation from service (within the meaning of Treasury Regulation Section 1.409A-1(h)),
after taking into account all available exemptions, that would otherwise be
payable during the six-month period after separation from service will be made
during such six-month period, and any such payment, distribution or benefit
will instead be paid on the first business day after such six-month period.

 

(c)                                  In the event
that Company determines that any provision of this Agreement does not comply
with 409A, Company will be entitled, without Executive’s consent, to amend or
modify such provision to comply with 409A; provided, however,
that such amendment or modification will, to the greatest extent commercially
practicable, maintain the economic value to Executive of such provision.

 

(d)                                 For purposes of
409A, each installment of Severance Pay under Section 1.1(a) will be
deemed to be a separate payment as permitted under Treasury Regulation Section 1.409A-2(b)(2)(iii).

 

ARTICLE II

EXECUTIVE COVENANTS

 

2.1                               Release;
Covenants.  As a
condition of obtaining benefits under this Agreement, Executive will be
required to (a) within forty-five (45) days following Termination of
Employment execute and deliver to Company a general release
of claims against Company in such form as may be required by Company  and (b) comply with the covenants set forth in this Article II.  In
the event that Executive fails to execute and deliver such general release
within such forty-five-day period or revokes such general release (but only to
the extent revocation is permitted under the terms of such general release),
then Executive will forfeit all entitlement to any payment, benefit or other
amount hereunder.  Executive’s failure to
comply with the covenants of this Article II will be governed by Section 2.7
and Article III.

 

2.2                               Confidential
Information.  Company promises to disclose to Executive and Executive acknowledges
that in and as a result of his or her employment with Company, he or she will
receive, make use of, acquire, have access to and/or become familiar with
various trade secrets and proprietary and confidential information of Company
and its Affiliates, including, but not limited to, processes, computer
programs, compilations of information, records, financial information, sales
reports, sales procedures, customer requirements, pricing techniques, customer
lists, methods of doing business, identities, locations, performance and
compensation levels of employees and other confidential information which are
owned by Company and/or its Affiliates and regularly used in the operation of
its business, and as to which Company and/or its Affiliates take precautions to
prevent dissemination to persons other than certain directors, officers and
employees 

 

6

 

(collectively, “Trade Secrets”).  Executive acknowledges and agrees that the
Trade Secrets:

 

(a)                                 are secret and not known in the industry;

 

(b)                                give Company or its Affiliates an advantage over competitors who do not
know or use the Trade Secrets;

 

(c)                                 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

 

(d)                                are valuable, special and unique assets of Company or its Affiliates,
the disclosure of which could cause substantial injury and loss of profits and
goodwill to Company or its Affiliates.

 

Executive promises
not to use in any way or disclose any of the Trade Secrets, directly or
indirectly, either during or after his or her employment by Company, except as
required in the course of his or her employment, if required in connection with
a judicial or administrative proceeding, or if the information becomes public
knowledge other than as a result of an unauthorized disclosure by
Executive.  All files, records,
documents, information, data compilations and similar items containing
non-public and confidential information relating to the business of Company,
whether prepared by Executive or otherwise coming into his or her possession,
will remain the exclusive property of Company and may not be removed from the
premises of Company under any circumstances without the prior written consent
of Company (except in the ordinary course of business during Executive’s
employment by Company), and in any event must be promptly delivered to Company
upon termination of Executive’s employment with Company.  Executive agrees that upon receipt of any
subpoena, process or other request to produce or divulge, directly or
indirectly, any Trade Secrets to any entity, agency, tribunal or person,
whether received during or after the term of Executive’s employment with
Company, Executive will timely notify and promptly provide a copy of the
subpoena, process or other request to Company. 
For this purpose, Executive irrevocably nominates and appoints Company
(including any attorney retained by Company), as his or her true and lawful
attorney-in-fact, to act in Executive’s name, place and stead to perform any
reasonable and prudent act that Executive might perform to defend and protect
against any disclosure of any Trade Secrets.

 

The parties agree that the above restrictions
on confidentiality and disclosure are completely severable and independent
agreements supported by good and valuable consideration and, as such, will
survive the termination of this Agreement for whatever reason. The parties
further agree that any invalidity or unenforceability of any one or more of
such restrictions on confidentiality and disclosure will not render invalid or
unenforceable any remaining restrictions on confidentiality and disclosure.
Additionally, should an arbitrator or court of competent jurisdiction determine
that the scope of any provision of this Section 2.2 is too broad to be
enforced as written, the parties intend that the court reform the provision to
such narrower scope as it determines to be reasonable and enforceable.

 

2.3                               Non-Competition.  As a material inducement for Company’s
promise to provide the trade secrets and proprietary and confidential
information described in Section 2.2, Executive agrees that during the
term of his or her employment with Company and 

 

7

 

during the applicable Severance Period specified in Section 5.14,
he or she will not, directly or indirectly, as an employee, consultant or
otherwise, compete with Company by providing services relating to retail or
non-retail sales of jewelry 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, in whole or in material
part, in the United States, Canada and/or Puerto Rico, (a) engages in the
retail sale of jewelry, including, but not limited to, specialty jewelry
retailers and other retailers having jewelry divisions or departments, or (b) operates
as a vendor of jewelry, including, but not limited to, as a wholesaler, manufacturer
or direct importer of jewelry.  The
restrictions contained in this Section 2.3 will be tolled on a day-for-day
basis for each day during which Executive participates in any activity in
violation of such restrictions.

 

The parties agree that, subject to the terms of
Section 2.1, the above restrictions on competition are completely
severable and independent agreements supported by good and valuable
consideration and, as such, will survive the termination of this Agreement for
whatever reason. The parties further agree that any invalidity or
unenforceability of any one or more of such restrictions on competition will
not render invalid or unenforceable any remaining restrictions on competition.
Additionally, should an arbitrator or a court of competent jurisdiction
determine that the scope of any provision of this Section 2.3 is too broad
to be enforced as written, the parties intend that the arbitrator or court
reform the provision to such narrower scope as it determines to be reasonable
and enforceable.

 

2.4                               Agreement
Not to Solicit Employees.  Executive
covenants and agrees that during Executive’s employment with Company and
thereafter during the applicable Severance Period specified in Section 5.14,
Executive will not, on his or her own behalf or on behalf of any other
person, partnership, association, corporation, or other entity, (a) directly,
indirectly, or through a third party hire, cause to be hired or solicit any
employee of Company or its Affiliates or (b) in any manner attempt to
influence or induce any employee of Company or its Affiliates to leave the
employment of Company or its Affiliates, nor will he or she use or disclose to
any person, partnership, association, corporation or other entity any
information concerning the names and addresses of any employees of Company or
its Affiliates.  The restrictions
contained in this Section 2.4 will be tolled on a day-for-day basis for
each day during which Executive participates in any activity in violation of
such restriction.

 

The
parties agree that, subject to the terms of Section 2.1, the above
restrictions on the solicitation of employees are completely severable and
independent agreements supported by good and valuable consideration and, as
such, will survive the termination of this Agreement for whatever reason. The
parties further agree that any invalidity or unenforceability of any one or
more of such restrictions on the solicitation of employees will not render
invalid or unenforceable any remaining restrictions on the solicitation of employees.
Additionally, should an arbitrator or court of competent jurisdiction determine
that the scope of any provision of this Section 2.4 is too broad to be
enforced as written, the parties intend that the court reform the provision to
such narrower scope as it determines to be reasonable and enforceable.

 

2.5                               Nondisparagement.  Executive
covenants and agrees that he or 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, or disparagement of Company, its 

 

8

 

Affiliates, its and/or their employees, officers,
and/or directors, or which may be considered to be derogatory or detrimental to
its or their good name or business; provided, however, that the
terms of this paragraph will not (a) apply to Communications between
Executive and his or her spouse, clergy, or attorneys, which 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 Executive to provide
testimony or information (subject to the provisions of Section 2.2); or (c) be
construed to inhibit or limit Executive’s ability to initiate or cooperate with
any investigation by a governmental or regulatory agency or official or other
judicial or legal actions (subject to the provisions of Section 2.2).  Executive specifically agrees not to issue
any public statement concerning his or her employment by Company and/or the
cessation of such employment.

 

2.6                               Reasonableness of Restrictions.  Executive agrees that Executive and Company
are engaged in a highly competitive business and, due to Executive’s position
with Company and the nature of Executive’s work, Executive’s engaging in any
business that is competitive with that of Company will cause Company great and
irreparable harm.  Executive represents
and warrants that the time, scope and geographic area restricted by the
foregoing Sections 2.2, 2.3, 2.4 and 2.5 pertaining to confidential
information, non-competition, non-solicitation, and non-disparagement are
reasonable, that the enforcement of the restrictions contained in such Sections
would not be unduly burdensome to Executive, and that Executive will be able to
earn a reasonable living while abiding by the terms included herein.  Executive agrees that the restraints created
by the covenants in Sections 2.2, 2.3, 2.4 and 2.5 pertaining to confidential
information, non-competition, non-solicitation, and non-disparagement are not
outweighed by either the hardship to Executive or any injury likely to the
public.  If any arbitrator or court
determines that any portion of this Article II is invalid or
unenforceable, the remainder of this Article II will not thereby be
affected and will be given full effect without regard to the invalid
provisions.  If any court construes any
of the provisions of this Article II, or any part thereof, to be
unreasonable because of the duration or scope of such provision, such court
will have the power to reduce the duration or scope of such provision and to
enforce such provision as so reduced.

 

2.7                               Enforcement.  Upon Executive’s employment with an entity
that is not an Affiliate of Company (a “Successor Employer”) during the
period that the provisions of this Article II remain in effect, Executive
will provide such Successor Employer with a copy of this Agreement and will
notify Company of such employment within thirty (30) days thereof.  Executive agrees that in the event of a
breach of the terms and conditions of this Article II by Executive,
Company will be entitled, if it so elects, to institute and prosecute
proceedings pursuant to Article III, either in law or in equity, against
Executive, to obtain damages for any such breach, or to enjoin Executive from
any conduct in violation of this Article II.  In the event Company seeks an injunction or
restraining order against Executive for breach of this Article II,
Executive waives any requirement that Company post bond in connection with such
request for relief.

 

ARTICLE III

DISPUTE RESOLUTION

 

3.1                               Arbitration.  Company and
Executive 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 or Executive’s employment by 

 

9

 

Company will 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 will be administered by a
single neutral arbitrator admitted to practice law in Texas for a minimum of
ten years.  Any such arbitration
proceeding will take place in Dallas County, Texas and will 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 will 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.  This provision can be enforced
under the Federal Arbitration Act.

 

3.2                               Entitlement
to Injunctive Relief.  As the sole exception to the
exclusive and binding nature of the arbitration commitment set forth above,
Executive and Company agree that Company will have the right to initiate an
action in any state or federal court of competent jurisdiction in Dallas
County, Texas in order to request temporary, preliminary and permanent
injunctive or other equitable relief, including, without limitation, specific
performance, to enforce the terms of Sections 2.2, 2.3, 2.4, or 2.5 above,
without the necessity of proving inadequacy of legal remedies or irreparable
harm or posting bond; provided, however, that if Executive is
engaging in activities prohibited by Section 2.2, 2.3, 2.4 or 2.5 above,
outside of Dallas County, Texas, the parties hereby agree that the Company may,
at its sole option, bring an action in any court of competent
jurisdiction.  Nothing herein shall
prevent the Company from pursuing the same injunctive or equitable relief in
the arbitration proceedings.  Moreover,
nothing in this section 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.

 

3.3                               Limitation
of Scope.  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 to such narrower scope as it determines to
be reasonable and enforceable.

 

3.4                               Payments
Pending Litigation and/or Arbitration.  In the case of a Qualifying Termination other
than during a Protection Period, upon the material violation of any of the
provisions of this Agreement or a dispute regarding the subject matter of this
Agreement, Company shall cease payment of all Severance Pay and severance
benefits pending the outcome of litigation and/or arbitration on such issues
pursuant to this Article III.  In
the case of a Qualifying Termination during a Protection Period, upon the
material violation of any of the provisions of this Agreement or a dispute
regarding the subject matter of this Agreement, Company shall continue payment
of all Severance Pay and severance benefits pending the outcome of litigation and/or
arbitration pursuant to this Article III, subject to being reimbursed if
so ordered in any such litigation or arbitration.

 

3.5                               Fees
and Expenses.

 

(a)                                  If Company or
Executive sues in court or brings an arbitration action against the other for a
breach of any provision of this Agreement or regarding any dispute arising from
the subject matter of this Agreement, the prevailing party will be entitled to
recover its attorneys’ fees, court costs, arbitration expenses, and its 

 

10

 

portion of the fees charged by AAA and/or the individual arbitrator, as
applicable, regardless of which party initiated the proceedings.  If there is no prevailing party, the fees
charged by AAA and/or the individual arbitrator will be borne equally by
Company and Executive, and Company and Executive will each bear their own costs
and attorneys’ fees incurred in arbitration. 
In the event that Executive prevails on at least one material issue,
Executive will be deemed to be the prevailing party; provided, however, that if
Executive does not prevail on at least one material issue, the Company shall be
deemed to be the prevailing party.

 

3.6                               Right
of Offset.  If
Executive is at any time indebted to Company, or otherwise obligated to pay money
to Company for any reason, Company, at its election, may offset amounts
otherwise payable to Executive under this Agreement against any such
indebtedness or amounts due from Executive to Company, to the extent permitted
by law.

 

3.7                               Other
Matters and Acknowledgement. 
All proceedings conducted pursuant to this agreement to arbitrate,
including any order, decision or award of the arbitrator, will be kept
confidential by all parties except to the extent necessary to enforce the
award.  EXECUTIVE ACKNOWLEDGES THAT, BY
SIGNING THIS AGREEMENT, EXECUTIVE IS WAIVING ANY RIGHT THAT EXECUTIVE MAY HAVE
TO A JURY TRIAL OR A COURT TRIAL OF ANY EMPLOYMENT-RELATED CLAIM ALLEGED BY
EXECUTIVE.

 

ARTICLE IV

MISCELLANEOUS PROVISIONS

 

4.1                               Executive
Acknowledgement.  Executive
is entering into this Agreement of his or her own free will.  Executive acknowledges that he or she has had
adequate opportunity to review this Agreement and consult with counsel of his
or her own choosing.  Executive
represents that he or she has read and understands this Agreement, he or she is
fully aware of this Agreement’s legal effect and has not acted in reliance upon
any statements made by Company other than those set forth in writing in the
Agreement.

 

4.2                               At Will
Employment. 
Notwithstanding any provision in this Agreement to the contrary,
Executive hereby acknowledges and agrees that Executive’s employment with
Company is for an unspecified duration and constitutes “at-will” employment,
and Executive further acknowledges and agrees that this employment relationship
may be terminated at any time, with or without Cause or for any or no Cause, at
the option either of Company or Executive.

 

4.3                               Successors and Assigns. The rights
and obligations of Company under this Agreement will inure to the benefit of
and will be binding upon the successors and assigns of Company. Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation, sale of assets or otherwise) to all or substantially all of the
business and/or assets of Company, by a written agreement in form and substance
reasonably satisfactory to Executive, to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that Company would be
required to perform it if no such succession had taken place.  This Agreement is personal to Executive and
without the prior written consent of Company is not assignable by Executive
otherwise than by will or the laws of descent and distribution.  This Agreement will inure to the benefit of
and be enforceable by Executive’s personal and legal representatives,
executors, administrators, heirs, distributes, devisees and legatees.

 

11

 

4.4                               Amendment.  Except as provided in Section 1.5, this
Agreement will not be modified, changed or in any way amended except by an
instrument in writing signed by Company and Executive.

 

4.5                               Severability.  If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws effective
during the term of this Agreement, such provision will be fully severable; this
Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a portion of this Agreement; and
the remaining provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal, invalid or unenforceable provision or
by its severance from this Agreement. 
Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as part of this Agreement a
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.

 

4.6                               Integration. The provisions of this
Agreement constitute the entire and complete understanding and agreement
between the parties with respect to the subject matter hereof, and supersede
all prior and contemporaneous oral and written agreements, representations and
understandings of the parties, including without limitation The Executive
Severance Plan for Zale Corporation and its Affiliates and any Change of
Control Agreement or employment agreement (including any offer letter) between
Executive and Company, which are hereby terminated with respect to Executive.

 

4.7                               Choice of Law; Forum Selection. THIS AGREEMENT
WILL BE EXCLUSIVELY GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF TEXAS WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS OF
TEXAS OR ANY OTHER JURISDICTION, AND, WHERE APPLICABLE, THE LAWS OF THE UNITED
STATES.

 

The parties hereby agree that any action to enforce the arbitrator’s
award shall be filed exclusively in a state or federal court of competent
jurisdiction in Dallas County, Texas and the parties hereby consent to the exclusive
jurisdiction of such court; provided, however, that nothing
herein shall preclude the parties’ rights to conduct collection activities in the
courts of any jurisdiction with respect to the order or judgment entered upon
the arbitrator’s award by the Texas court.

 

4.8                               Survival.  The provisions of Article II, Article III,
this Article IV and Article V will survive the termination of this
Agreement.  The existence of any claim or
cause of action of Executive against the Company, whether predicated on this
Agreement or otherwise, will not constitute a defense to the enforcement by the
Company of the covenants of Executive contained in this Agreement, including
but not limited to those contained in Article II.

 

4.9                               No Waiver.  No waiver by either party at any time of any
breach by the other party of, or compliance with, any condition or provision of
this Agreement to be performed by the other party will be deemed a waiver of
similar or dissimilar provisions or conditions at any time.

 

4.10                        Notice. For all purposes of this
Agreement, all communications required or permitted to be given under this
Agreement will be in writing and will be deemed to have been duly given when
hand delivered or dispatched by electronic facsimile transmission (with 

 

12

 

receipt thereof confirmed), or five business days
after having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid, or two business days after having been sent
by a nationally recognized overnight courier service, addressed to Company at
its principal executive office, to Company’s General Counsel, and to Executive
at Executive’s principal residence, or to such other address as any party may
have furnished to the other in writing, except that notices of change of
address will be effective only upon receipt.

 

4.11                        Counterparts. This
Agreement may be executed in several counterparts, each of which will be deemed
to be an original, but all of which together will constitute one and the same
Agreement.

 

4.12                        Construction. This Agreement is deemed to
be drafted equally by both Executive and Company and will be construed as a
whole and according to its fair meaning. 
Any presumption or principle that the language of this Agreement is to
be construed against any party will not apply. The headings in this Agreement
are only for convenience and are not intended to affect construction or
interpretation.  Any references to
paragraphs, subparagraphs, sections, subsections or clauses are to those parts
of this Agreement, unless the context clearly indicates to the contrary.  Also, unless the context clearly indicates to
the contrary, (a) the plural includes the singular and the singular
includes the plural; (b) “and” and “or” are each used both conjunctively
and disjunctively; (c) “any,” “all,” “each,” or “every” means “any and all”,
and “each and every”; (d) “includes” and “including” are each used without
limitation; (e) “herein,” “hereof,” “hereunder” and other similar
compounds of the word “here” refer to the entire Agreement and not to any
particular paragraph, subparagraph, section or subsection; and (f) all
pronouns and any variations thereof will be deemed to refer to the masculine,
feminine, neuter, singular or plural as the identity of the entities or persons
referred to may require.

 

4.13                        No Mitigation.  Except as provided in Sections 1.1(c) or
1.2(c) (regarding continued welfare benefits), in no event will Executive
be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to Executive under any of the provisions of
this Agreement and such amounts will not be reduced whether or not Executive
obtains other employment.

 

4.14                        Withholding.  Company may deduct and withhold from any amounts
payable under this Agreement such Federal, state, local, foreign or other taxes
as are required to be withheld pursuant to any applicable law or regulation.

 

ARTICLE V

DEFINITIONS

 

5.1                               “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 Company, any trade or business (whether or not
incorporated) that is in common control (as defined in section 414(c) of
the Code) with Company, or any entity that is a member of the same affiliated
service group (as defined in section 414(m) of the Code) as Company.

 

5.2                               “Base Compensation” means Executive’s gross base salary at
the time of his or her Termination of Employment before reduction by any
pre-tax contributions to the 401(k) 

 

13

 

Plan or any other benefit plan maintained by the
Company or its Affiliates or any other deductions of any nature.

 

5.3                               “Bonus” means the average of the annual incentive bonus
amount earned by Executive under the applicable Bonus Plan as established by
Company’s Board of Directors with respect to the three fiscal years preceding
the fiscal year in which the Termination of Employment occurs (or such lesser
period of Executive’s employment with the Company and its Affiliates).

 

5.4                               “Cause” means (a) Executive’s indictment for a felony or
a crime involving moral turpitude; (b) Executive’s commission of an act
constituting fraud, deceit or material misrepresentation with respect to
Company; (c) Executive’s recurrent use of alcohol or prescribed
medications at work or otherwise such that, in Company’s sole discretion,
Executive’s job performance is impaired or the use of any illegal substances or
drug such that, in Company’s sole discretion, Executive’s job performance is
impaired; (d) Executive’s embezzlement of Company’s or its Affiliates’
assets or funds; and (e) Executive’s commission of any negligent or
willful act or omission that, in the cases of clauses (b), (d) and (e) of
this Section 5.4, causes material detriment (by reason, without
limitation, of financial exposure or loss, damage to reputation or goodwill, or
exposure to civil damages or criminal penalties or other prosecutorial action
by any governmental authority) to Company or any Affiliate.

 

5.5                               “Change of Control” means any of the following occurrences:

 

(a)                                  any “person,”
as such term is used in Sections 3(a)(9) and 13(d) of the Securities
Exchange Act of 1934 (“Person”),
becomes a “beneficial owner,” as such term is used in Rule 13d-3 promulgated
under that Act, of 30% or more of the voting stock of Company; provided,
however, a Change in Control shall not be deemed to occur solely because any
person acquires beneficial ownership of more than 30% of the voting stock of
the Company as a result of the acquisition of voting stock by the Company which
reduces the amount of Company voting stock outstanding; provided further, that
if after such acquisition by the Company such person becomes the beneficial
owner of additional Company voting stock that increases the percentage of
outstanding Company voting stock beneficially owned by such person, a Change in
Control of the Company shall then occur;

 

(b)                                the majority of
the Board of Directors of Company consists of individuals other than “incumbent”
directors, which term means the members of the Board of Directors on the date
hereof; provided that any person becoming a director subsequent to such date
whose election or nomination for election was supported by two-thirds of the
directors who then comprised the incumbent directors will be considered to be
an incumbent director;

 

(c)                                 Company adopts
any plan of liquidation providing for the distribution of all or substantially
all of its assets;

 

(d)                                 all or
substantially all of the assets or business of Company is disposed of pursuant
to a merger, consolidation or other transaction (unless the stockholders of
Company immediately prior to such merger, consolidation or other transaction
beneficially own, directly or indirectly, in substantially the same proportion
as they owned the voting stock of Company, all of the voting stock or other
ownership 

 

14

 

interests of the entity or entities, if any, that
succeed to the business of Company); or

 

(e)                                 Company
combines with another company and is the surviving corporation but, immediately
after the combination, the stockholders of Company immediately prior to the
combination hold, directly or indirectly, 50% or less of the voting stock of
the combined company (there being excluded from the number of shares held by
such stockholders, but not from the voting stock of the combined company, any
shares received by affiliates of such, other company in exchange for stock of
such other company).

 

For purposes of the Change of Control
definition, “Company” will include any entity that succeeds to all or
substantially all, of the business of Company and “voting stock” will mean
securities of any class or classes having general voting power under ordinary
circumstances, in the absence of contingencies, to elect the directors of a
corporation.

 

5.6                               “COBRA” means the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended.

 

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

 

5.8                               “Disability” means, in
Company’s sole discretion, Executive becomes mentally or physically impaired or
disabled such that he or she is unable to perform his or her duties and
responsibilities hereunder for a period of at least one hundred twenty (120)
days in the aggregate during any one hundred fifty (150) consecutive day period.

 

5.9                               “Equity Plan” means any equity plan, agreement or arrangement
maintained or sponsored by Company in which Executive is a participant.

 

5.10                        “401(k) Plan” means the Zale Corporation Savings and
Investment Plan or any other qualified retirement plan with a cash or deferred
arrangement that is maintained or sponsored by Company or any Affiliate in
which Executive is a participant.

 

5.11                        “Protection Period” means the period beginning on the date
that is six months prior to the occurrence of a Change of Control and ending
twenty-four (24) months following the occurrence of a Change of Control.

 

5.12                        “Qualifying Termination”

 

(a)                                  In the case of
any Termination of Employment other than during a Protection Period, “Qualifying
Termination” shall mean:

 

(i)                                    the Termination
of Employment of Executive by Company for any reason other than Cause,
Disability, or death; or

 

(ii)                                 the Termination
of Employment of Executive by Executive for any of the following reasons:

 

(A)                              a material
reduction by Company in Executive’s base salary or bonus eligibility unless
similar reductions apply to 

 

15

 

senior executives of Company and its subsidiaries
generally;

 

(B)                               relocation of
Company’s principal executive offices outside the Dallas/Fort Worth, Texas
Metroplex; or

 

(C)                               the assignment
to Executive by Company of duties materially inconsistent with, or the material
reduction of the powers and functions associated with, Executive’s positions, duties,
responsibilities and status with Company or a material adverse change in
Executive’s titles or offices, unless such action is in lieu of termination by
Company of Executive’s employment due to Disability.

 

If Executive believes that an event specified in this Section 5.12(a)(ii) has
occurred, Executive must notify Company of that belief within ninety (90) days
following the occurrence of such event. 
Company will have thirty (30) days following receipt of such notice
(such period, the “Designated Period”) in which to either rectify such event,
determine that such an event exists, or determine that such an event does not
exist.  If Company does not take any of
the foregoing actions within the Designated Period, Executive may terminate his
or her employment with Company during the fourteen-day period following the
expiration of the Designated Period.  If,
during the Designated Period, Company determines that such an event exists
Company shall either (A) undertake to cure such event during the
Designated Period and provide Executive with written notice during the
Designated Period of Company’s determination that such event has been cured, or
(B) provide written notice to Executive during the Designated Period that
it does not wish to cure such event, in which case, Executive may terminate his
or her employment during the fourteen-day period following receipt of the
notice specified in this clause (B).  If,
during the Designated Period, Company determines that (1) such event does
not exist or (2) Company has cured such event pursuant to clause (A) of
the preceding sentence, then (x) Executive will not be entitled to rely on
or assert such event as a basis for a Qualifying Termination, and (y) if
Executive disagrees with Company’s determination, Executive may file a claim
pursuant to Article III within thirty (30) days after Executive’s receipt
of written notice of Company’s determination.

 

(b)                                In the case of
any Termination of Employment during a Protection Period, “Qualifying
Termination” shall mean:

 

(i)                                    the Termination
of Employment of Executive by Company for any reason other than Cause,
Disability, or death; or

 

(ii)                                 the Termination
of Employment of Executive by Executive for any of the following reasons:

 

16

 

(A)                              the assignment
to Executive by Company of duties inconsistent with, or the reduction, other
than due solely to the fact that Company no longer is a publicly traded
company, of the powers and functions associated with Executive’s position,
duties, responsibilities and status with the Company immediately prior to a
Change of Control, or a material adverse change in Executive’s titles or
offices as in effect immediately prior to a Change of Control, or any removal
of Executive from or any failure to re-elect Executive to any of such
positions, except, in each of the foregoing cases, in connection with
Termination of Employment by Company due to Cause, Disability, or death;

 

(B)                                a reduction by
Company in Executive’s base salary or bonus eligibility as in effect on the
date of a Change of Control;

 

(C)                               relocation of
Company’s principal executive offices outside the Dallas/Fort Worth, Texas
Metroplex;

 

(D)                              Company’s
requirement that Executive be based anywhere other than at Company’s principal
executive offices in the Dallas/Fort Worth, Texas Metroplex area, or if
Executive agrees to a relocation outside the area, Company’s failure to
reimburse Executive for moving and all other expenses incurred with such move;

 

(E)                                Company’s
failure to continue in effect any Company-sponsored plan that is in effect on
the date of a Change of Control (or replacement plans therefore that in the
aggregate provide substantially the same or more favorable benefits) that is
either a 401(k) Plan or provides incentive or bonus compensation or
reimbursement for reasonable expenses incurred by Executive in connection with
the performance of duties with Company;

 

(F)                                 any material
breach by Company of any provision of this Agreement; or

 

(G)                               any failure by
Company to obtain the assumption of this Agreement by any successor or assign
of Company.

 

If Executive believes that
an event specified in this Section 5.12(b)(ii) has occurred,
Executive must notify Company of that belief within ninety (90) days following
the occurrence of such event.  Company
will have thirty (30) days following receipt of such notice (such period, the “Designated
Period”) in which to either rectify such event, determine that such an event
exists, or determine that such an event does not exist.  If Company does 

 

17

 

not take any of the
foregoing actions within the Designated Period, Executive may terminate his or
her employment with Company during the fourteen-day period following the
expiration of the Designated Period.  If,
during the Designated Period, Company determines that such an event exists
Company shall either (A) undertake to cure such event during the
Designated Period and provide Executive with written notice during the
Designated Period of Company’s determination that such event has been cured, or
(B) provide written notice to Executive during the Designated Period that
it does not wish to cure such event, in which case, Executive may terminate his
or her employment during the fourteen-day period following receipt of the
notice specified in this clause (B).  If,
during the Designated Period, Company determines that (1) such event does
not exist or (2) Company has cured such event pursuant to clause (A) of
the preceding sentence, then (x) Executive will not be entitled to rely on
or assert such event as a basis for a Qualifying Termination, and (y) if
Executive disagrees with Company’s determination, Executive may file a claim
pursuant to Article III within thirty (30) days after Executive’s receipt
of written notice of Company’s determination.

 

(c)                                  Notwithstanding
anything to the contrary contained herein, for purposes of Section 1.2, a
Qualifying Termination shall occur only to the extent that Executive incurs a “separation
from service” with Company within the meaning of Treasury Regulation Section 1.409A-1(h).

 

(d)                                In the event
that Executive is employed by a subsidiary of Company, including Zale Delaware, Inc.,
and not Company, for purposes of the term “Qualifying Termination,” “Company”
will include such subsidiary.

 

5.13                        “Severance Pay” means cash severance payments in an amount
equal to the product of (a) the sum of Executive’s Base Compensation as of
Termination of Employment and Bonus (as specified in Section 5.3), and (b) the
applicable Severance Period specified in Section 5.14.

 

5.14                        “Severance Period” means the following period, based on
whether Executive’s Qualifying Termination is during a Protection Period:

 

	
  QUALIFYING TERMINATION

  OTHER THAN DURING A

  PROTECTION PERIOD -

  SECTION 1.1

  	
   

  	
  QUALIFYING TERMINATION

  DURING A PROTECTION

  PERIOD - SECTION 1.2

  	
   

  
	
  1 years

  	
   

  	
  1.5 years

  	
   

  

 

5.15                        “Termination of Employment” means the date on which Executive
ceases to perform duties for Company or its Affiliate(s).

 

18

 

IN WITNESS WHEREOF, the parties
have executed this Agreement as of the         
day of                           ,
200      .

 

ZALE CORPORATION

 

	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXECUTIVE

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
							

 

19

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