Document:

Exhibit 10.2

 

CONSULTING AGREEMENT

 

THIS CONSULTING AGREEMENT (the
“Agreement”), dated as of April 15, 2008, but effective as of December 19,
2007 (the “Effective Date”), is by and between ZALE
CORPORATION, a Delaware corporate (“Company”), and MARY ELIZABETH BURTON (“Consultant”).

 

BACKGROUND:

 

WHEREAS, Company
desires to retain Consultant to provide certain services to Company, and
Consultant desires to provide such services to Company, all subject to and in accordance
with the terms and conditions contained herein.

 

NOW, THEREFORE, FOR AND IN CONSIDERATION
of the premise, the mutual promises, covenants and agreements contain herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:

 

1.                                     Services.  Subject to the terms and conditions set forth
in this Agreement, Company hereby retains Consultant to provide to Company
certain consulting services as required by the Chief Executive Officer from
time to time (the “Services”), and Consultant agrees to render the Services to
Company.  Consultant shall perform the
Services upon the specific request of, and in accordance with the directions
of, Company in each instance.

 

2.                                     Obligations of Consultant.  In her performance of the Services hereunder,
Consultant shall at all times comply with and abide by the terms and conditions
set forth in this Agreement and all applicable policies and procedures of
Company.  Consultant shall further
perform the Services in accordance with all applicable laws, rules and
regulations and by following and applying the highest professional guidelines
and standards.

 

3.                                     Compensation.  Subject to the terms and conditions set forth
in this Agreement, and as full and complete compensation for the Services,
Company shall pay to Consultant, and Consultant shall accept, an annual fee of
$150,000 each year during the Term.  Each
annual fee shall be paid in twelve (12) equal monthly payments on or before the
last day of the month.

 

4.                                     Independent Consultant.  Both Consultant and Company, in the
performance of this Agreement, will be acting in their own separate capacities
and not as agents, employees, partners, joint venturers or associates of one
another.  It is expressly understood and
agreed that Consultant is an independent contractor of Company in all manners
and respects and that Consultant is not authorized to bind Company to any
liability or obligation or to represent that she has any such authority.  Consultant shall be solely responsible for all
of her withholding taxes, social security taxes, unemployment taxes, and
workers’ compensation insurance premiums.

 

 

5.                                     Term and Termination.

 

(a)                                  Unless
sooner terminated pursuant to the terms hereof, this Agreement shall commence
as of the Effective Date and continue for a period of two (2) years (the “Term”).

 

(b)                                 Notwithstanding
anything else contained herein to the contrary, and in addition to any other
rights and remedies available at law, in equity or hereunder, either party
hereto may cancel and terminate this Agreement if the other party fails to
correct or cure any material breach hereunder within thirty (30) days after it
receives written notice of such breach from the non-breaching party.

 

6.                                     Non-Disparagement.  Consultant expressly acknowledges, agrees,
and covenants that she will not make any public or private statements,
comments, or communications in any form, oral, written, or electronic (all of
the foregoing, for purposes of this paragraph, “Communications”), which in any
way could constitute libel, slander, or disparagement of the Company, its
subsidiaries, affiliates or parent, its and/or their current or former 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 shall not (a) apply to Communications between
Consultant and 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 Consultant to provide testimony or information; (c) be
construed to inhibit or limit Consultant’s ability to initiate or cooperate
with any investigation by a governmental or regulatory agency or official;
provided, further, that with  respect to
Sections 6 (b) and (c), Consultant agrees to provide the Company with
advance notice and an opportunity to seek a protective order or other safeguard
for its confidential information.  Consultant
specifically agrees not to issue any public statement concerning her engagement
with the Company and/or the termination of such engagement.

 

7.                                     Non-Competition.  In acknowledgment of her continuing
obligations under that certain employment agreement dated October 12,
2006, by and between the Company and Consultant and as a material inducement
for the Company’s promise to provide the trade secrets and confidential and
proprietary information described in Section 9 below, Consultant agrees
that during the Term and for a period of eighteen (18) months from the date of expiration
or termination of this Agreement for any reason whatsoever, she will not,
directly or indirectly, compete with the Company by providing services relating
to 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 engages in whole or in material
part in the retail sale of jewelry in the United States, Canada and/or Puerto
Rico, including, but not limited to, specialty jewelry retailers and other
retailers having jewelry divisions or departments.  The restrictions contained in this Section 7
shall be tolled on a day-for-day basis for each day during which Consultant participates
in any activity in violation of such restrictions.  The parties agree that the above restrictions
on competition are completely severable and independent agreements supported by
good and valuable consideration and, as such, shall survive the expiration or 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 shall 

 

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not render
invalid or unenforceable any remaining restrictions on competition.  Additionally, should a court of competent
jurisdiction determine that the scope of any provision of this Section 7
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.

 

8.                                     No Hire/Non-Solicitation of Employees.  In acknowledgment of her continuing
obligations under that certain Employment Agreement dated October 12,
2006, by and between the Company and Consultant, and as a material inducement
for the Company’s promise to provide the trade secrets and confidential proprietary
information discussed in Section 9 below, Consultant agrees that during
the Term and for a period of three (3) years after the expiration or termination
of this Agreement for any reason whatsoever, Consultant shall not, on 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 the Company or its subsidiaries or
affiliates; or (b) in any manner attempt to influence or induce any
employee of the Company or its subsidiaries or affiliates to leave the
employment of the Company or its subsidiaries or affiliates; or (c) use or
disclose to any person, partnership, association, corporation or other entity
any information obtained concerning the names and addresses of the Company’s
employees.  The restrictions contained in
this Section 8 shall be tolled on a day-for-day basis for each day during
which Consultant participates in any activity in violation of such
restrictions.  The parties agree that the
above restrictions on hiring and solicitation are completely severable and
independent agreements supported by good and valuable consideration and, as
such, shall survive the expiration or 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 hiring and solicitation shall not render invalid or
unenforceable any remaining restrictions on hiring and solicitation.  Additionally,
should a court of competent jurisdiction determine that the scope of any
provision of this Section 8 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.

 

9.                                     Nondisclosure of Trade Secrets.  Consultant acknowledges that in and as a
result of her prior employment by the Company and the provision of Services under
the terms of this Agreement, she has had access to and become familiar with and
will receive, make use of, acquire, have access to and/or become familiar with
various trade secrets and proprietary and confidential information of the
Company, its subsidiaries and 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 that are owned by the Company, its subsidiaries and/or affiliates
and regularly used in the operation of its business, and as to which the
Company, its subsidiaries and/or affiliates take precautions to prevent
dissemination to persons other than certain directors, officers and employees
(collectively, “Trade Secrets”). 
Consultant acknowledges and agrees that the Trade Secrets:

 

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

 

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

 

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(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 the Company or its subsidiaries or
affiliates, the disclosure of which could cause substantial injury and loss of
profits and goodwill to the Company or its subsidiaries or affiliates.

 

Consultant
promises not to use in any way or disclose any of the Trade Secrets, directly
or indirectly, either during or after the Term, except as required in the
course of her engagement under this Agreement, 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
Consultant.  All files, records,
documents, information, data compilations and similar items containing
non-public and confidential information relating to the business of the
Company, whether prepared by Consultant or otherwise coming into her
possession, will remain the exclusive property of the Company and may not be
removed from the premises of the Company under any circumstances without the
prior written consent of the Company (except in the ordinary course of business
during Consultant’s period of engagement under this Agreement), and in any
event must be promptly delivered to the Company upon the expiration or termination
of Consultant’s services with the Company. 
Consultant agrees that upon her 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 Consultant’s engagement with the Company, Consultant shall timely
notify and promptly provide a copy of the subpoena, process or other request to
the Company.  For this purpose,
Consultant irrevocably nominates and appoints the Company (including any
attorney retained by the Company), as her true and lawful attorney-in-fact, to
act in Consultant’s name, place and stead to perform any reasonable and prudent
act that Consultant 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, shall survive the expiration or 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 shall not render
invalid or unenforceable any remaining restrictions on confidentiality and
disclosure.  Additionally, should a court
of competent jurisdiction determine that the scope of any provision of this Section 9
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.

 

10.                               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 shall be fully severable and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never constituted a part of this Agreement; and the
remaining provisions of this Agreement shall remain in full force and effect
and shall not be affected by the illegal, invalid or unenforceable provision or
by its severance herefrom.  Furthermore,
in lieu of such illegal, invalid or unenforceable provision, there shall be
added as part of this Agreement, a provision as similar in its terms to such
illegal, invalid or enforceable provision as may be possible and be legal,
valid and enforceable.

 

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11.                               Arbitration.

 

(a)                                  The
parties agree that any controversy or claim (including all claims pursuant to
common and statutory law) relating to this Agreement or arising out of
Consultant’s provision of Services under this Agreement, shall be resolved
exclusively through arbitration pursuant to the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association (“AAA”).  Any such arbitration proceeding shall take
place in Dallas County, Texas.  All
disputes shall be resolved by a single arbitrator admitted to practice law in
Texas for a minimum of 10 years.  The
arbitrator will have the authority to award the same remedies, damages and
costs that a court could award.  The
arbitrator shall issue a reasoned award explaining the decision, the reasons
for the decision and any damages awarded. 
The arbitrator’s decision will be final and binding.  The judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.  This provision can be enforced under the
Federal Arbitration Act.

 

(b)                                 As
the sole exception to the exclusive and binding nature of the arbitration
commitment set forth above, Consultant and the Company agree that the Company
shall have the right to initiate an action in a 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 6, 7, 8 and 9, above,
without the necessity of proving inadequacy of legal remedies or irreparable
harm or posting bond; provided, however, that if Executive engages in
activities prohibited by Sections 6, 7, 8 or 9, 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 11
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.

 

(c)                                  Should
a court of competent jurisdiction determine that the scope of any provision of
this Section 11 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.

 

(d)                                 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 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 bear their own costs and
attorneys’ fees incurred in arbitration.

 

12.                               Survival.  Consultant acknowledges and agrees that this
Agreement, including but not limited to Sections 6, 7, 8 and 9, shall survive
the expiration or termination of Consultant’s engagement under this Agreement
for whatever reason.  The existence of
any claim or cause of action of Consultant against the Company, whether
predicated on this Agreement or 

 

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otherwise,
shall not constitute a defense to the enforcement by the Company of the covenants
of Consultant contained in this Agreement, including but not limited to those
contained in Sections 6, 7, 8 and 9.

 

13.                                 Ownership
of Work Product.  All work
product, property, data, documentation, information or materials conceived,
discovered, developed or created by Consultant pursuant to this Agreement
(collectively, the “Work Product”) shall be owned exclusively by Company.  To the greatest extent possible, any “Work
Product shall be deemed to be a “work made for hire” (as defined in the United States
Copyright Act, 17 U.S.C.A. §101 et  seq., as amended) and owned
exclusively by Company.  Consultant
hereby unconditionally and irrevocably transfers and assigns to Company all
right, title and interest in or to any Work Product.

 

14.                                 Notices.

 

(a)                                  All
notices provided for or required by this Agreement shall be in writing and
shall be delivered personally to the other party, or mailed by certified or
registered mail (return receipt requested), or delivered by a recognized
overnight courier service, as follows:

 

	
  If to Company:

  	
   

  	
  Zale Corporation

  
	
   

  	
   

  	
  901 West Walnut Hill Lane

  
	
   

  	
   

  	
  Irving, TX 75038

  
	
   

  	
   

  	
  Attn:  Neal Goldberg, CEO

  
	
   

  	
   

  	
  with a copy to the Zale’s General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  If to Consultant:

  	
   

  	
  Mary Elizabeth Burton

  
	
   

  	
   

  	
  131 Tamit Place

  
	
   

  	
   

  	
  Palm Desert, CA 92260

  
	
   

  	
   

  	
   

  

 

(b)                                 Notices
delivered pursuant to Section 14 hereof shall be deemed given: at the time
delivered, if personally delivered, three (3) business days after being
deposited in the mail, if mailed; and one (1) business day after timely
delivery to the courier, if by overnight courier service.

 

(c)                                  Either
party hereto may change the address to which notice is to be sent by written
notice to the other party in accordance with the provisions of this Section 14.

 

15.                                 Miscellaneous.

 

(a)                                  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,
that certain Employment Agreement dated October 12, 2006 between Executive
and Company (the “Employment Agreement”), which are hereby terminated with
respect to Executive.  Other than those
obligations set forth in this Consulting Agreement, Executive hereby expressly
releases the Company from any and all obligations under any and all prior written
or oral agreements, including but not limited to, the Employment Agreement;
provided, however, that nothing herein shall affect any right to 

 

6

 

indemnification that Executive
may have in connection with her prior service with the Company and its
affiliates pursuant to the terms of the Company’s Certificate of Incorporation,
Bylaws or applicable Delaware law or any vested benefits Executive may have in
the Company’s 401K Plan, consistent with the terms and conditions of such Plan.

 

(b)                             No
waiver, termination or discharge of this Agreement, or any of the terms or
provisions hereof, shall be binding upon either party hereto unless confirmed
in writing.  This Agreement may not be
modified or amended, except by a writing executed by both parties hereto.  No waiver by either party hereto of any term
or provision of this Agreement or of any default hereunder shall affect such
party’s rights thereafter to enforce such term or provision or to exercise any
right or remedy in the event of any other default, whether or not similar.

 

(c)                              This
Agreement shall be 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 agree that any action to
enforce or interpret this Agreement 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.

 

(d)                             Consultant
may not assign this Agreement, in whole or in part, without the prior written
consent of Company, and any attempted assignment not in accordance herewith
shall be null and void and of no force or effect.  This Agreement shall be binding on and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.

 

(e)                              This
Agreement may be executed in one or more counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute the same
Agreement.  Any signature page of
any such counterpart, or any electronic facsimile thereof, may be attached or
appended to any other counterpart to complete a fully executed counterpart of
this Agreement, and any telecopy or other facsimile transmission of any
signature shall be deemed an original and shall bind such party.

 

[Signature page follows]

 

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IN WITNESS WHEREOF,
the parties hereto have caused their duly authorized representatives to execute
this Agreement as of the day and year first above written.

 

	
   

  	
  “Company”

  
	
   

  	
   

  	
   

  
	
   

  	
  ZALE CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Neal Goldberg

  
	
   

  	
  Name:

  	
  Neal Goldberg

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  “Consultant”

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Mary Elizabeth Burton

  
	
   

  	
  Mary Elizabeth Burton

  

 

8Exhibit 10.3

 

FORM OF

EMPLOYMENT
SECURITY AGREEMENT

 

This
Employment Security Agreement (the “Agreement”) is between Zale
Corporation (“Company”) and the undersigned Executive 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 1.7 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.  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 1.7 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                               Termination Benefits in Connection With Disability.  If Executive has a Termination of Employment as a
result of a Disability, he or she will receive the following termination
benefits:

 

(a)                                  Severance Pay.  Subject
to Sections 1.7 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
payment of any Accrued Obligations in accordance with the provisions of Section 1.1(b).

 

4

 

(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)                                 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.

 

1.4                               Termination
Benefits in Connection With Death.  If Executive has a Termination of
Employment due to death while employed by Company, his or her estate will
receive the following benefits:

 

(a)                                  Severance Pay.  Subject to Section 2.1(a),
Executive’s estate 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’s estate will be
entitled to payment of any Accrued Obligations in accordance with the
provisions of Section 1.1(b).

 

(c)                                  Continued
Welfare Benefits.  Executive’s
dependants 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.

 

(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                               Distributions on Account of Death of
Executive During the Severance Period.  If Executive becomes entitled to Severance
Pay pursuant to Section 1.1, 1.2 or 1.3 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, 1.2 or 1.3, as applicable.

 

5

 

(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
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.

 

1.6                            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, 1.2, 1.3 or 1.4, he or she will receive the
following termination benefits:

 

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

 

(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 dependants 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.

 

6

 

1.7                            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)
(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 Sections 1.1(a), 1.3(a) and
1.4(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 

 

7

 

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 (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.

 

8

 

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 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.

 

9

 

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 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.

 

10

 

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
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.

 

11

 

3.5                               Fees
and Expenses.  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 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

 

12

 

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.

 

4.4                               Amendment.  Except as provided in Section 1.7, 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.

 

13

 

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 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),
1.2(c), and 1.3(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.

 

14

 

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) 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 

 

15

 

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 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:

 

16

 

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

 

17

 

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

 

(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) 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 

 

18

 

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.

 

(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, in the cases of Sections 1.1 and 1.2, Bonus (as
specified in Section 5.3), and (b) the applicable Severance Period
specified in Section 5.14; provided, however, that in the event of payment
under Sections 1.3 or 1.4, the amount of any payment received by Executive
pursuant to any death or disability plan or insurance maintained by Company on
Executive’s behalf shall be deducted from any amounts payable pursuant to this
Agreement.

 

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

 

	
  QUALIFYING TERMINATION 

  OTHER THAN DURING A 

  PROTECTION PERIOD - 

  SECTION 1.1

  	
   

  	
  QUALIFYING TERMINATION 

  DURING A PROTECTION 

  PERIOD - SECTION 1.2

  	
   

  	
  TERMINATION OF 

  EMPLOYMENT DUE TO 

  DISABILITY OR DEATH -

  SECTIONS 1.3 AND 1.4

  	
   

  
	
  1.5 years

  	
   

  	
  3 years

  	
   

  	
  1 year

  	
   

  

 

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

 

19

 

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

 

ZALE CORPORATION.

 

	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
					

 

EXECUTIVE

 

 

	
   

  	
   

  

 

20

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