Document:

Exhibit
10.2

 

AML COMMUNICATIONS, INC.

 

INCENTIVE STOCK OPTION AGREEMENT
(OW)

 

THIS AGREEMENT is made as of February 19, 2008, between AML
Communications, Inc. a Delaware corporation (the “Company”), and Steven Ow
(the “Optionee”).

 

The Board of Directors has granted to the Optionee as a matter of
separate inducement in connection with his engagement with the Company, and not
in lieu of any salary or other compensation for his services, an option (the “Option”)
to purchase shares of the Common Stock, par value $0.01 per share, of the
Company (the “Common Stock”) on the terms and conditions set forth herein under
the 2005 Stock Incentive Plan (“Plan”). 
This Option is intended to qualify as an Incentive Stock Option under Section 422A
of the Internal Revenue Code (the “Code”).

 

This Option Agreement is entered into pursuant to Section 6.4 of
the Agreement and Plan of Merger by and among the Company, Mica-Tech, Inc.,
a California corporation, the Optionee and other shareholders of Mica-Tech, Inc.

 

The Board of Directors has approved the grant of options to purchase
common stock to Optionee.  However, the
optionee understands that the Company intends to increase in the number of
shares of common stock issuable under the Plan by approximately 1.3
million.  In furtherance of this
objective, the Board of Directors has approved such increase and will submit
this increase in authorized shares under the Plan for a vote at the next
scheduled meeting of stockholders currently scheduled for September 2008
and has recommended to its stockholders that they vote in favor of such
increase.

 

Capitalized terms used herein without definition shall have the same
meaning as in the Plan.

 

AGREEMENT

 

In consideration of the foregoing and of the mutual covenants set forth
herein and other good and valuable consideration, the parties hereto agree as
follows:

 

1.             SHARES OPTIONED;
OPTION PRICE.  The Optionee may purchase
all or any part of an aggregate of 1,200,000 shares of Common Stock, at the
price of $1.20 per share (which shall not be less than the greater of (A) 100%
of the Fair Market Value (as defined in the Plan) of the Common Stock on the
date of the grant of the Option or (B) the par value of the Common Stock;
provided, however, that each Option granted under the Plan to an Optionee who
owns (after application of the family and other attribution rules of Section 424(d) of
the Code), on the date of grant of the Option, more than 10% of the total
combined voting power of all classes of stock of the Company or of its parent
or subsidiary corporations (a “10% Optionee”) shall have an exercise price that
is not less than the greater of (X) 110% of the Fair Market Value of the
Common Stock on the date of grant of the Option or (Y) the par value of
the Common Stock) on the terms and conditions set forth herein.

 

2.             OPTION TERM, TIMES
OF EXERCISE.  At the time of this
Agreement none of Options shall be exercisable. 
The Option term shall end on February 19, 2013, which in no case
shall be greater than ten years (five years if the Optionee is a 10% Optionee)
from the date of grant of this Option.

 

(a)           Upon receipt of a
first monthly payment by the Company (or its wholly-owned subsidiary, Mica-Tech, Inc.)
of a minimum of $160,000 from a customer not later than October 1, 2008
for management of a minimum of 20 MW of power, options to purchase 300,000
shares of Common Stock shall become exercisable;

 

(b)           Upon receipt of a
first monthly payment by the Company (or its wholly-owned subsidiary, Mica-Tech, Inc.)
of a minimum of $160,000 from an additional customer not later than October 1,
2009 for 

 

1

 

management of a minimum of an additional 20 MW of power, options to
purchase an additional 300,000 shares of Common Stock shall become exercisable,
so long as prior customers have not materially reduced the amount of goods and
services purchased from the Company;

 

(c)           Upon receipt of a
first monthly payment by the Company (or its wholly-owned subsidiary, Mica-Tech, Inc.)
of a minimum of $320,000 from an additional customer not later than October 1,
2010 for management of a minimum of an additional 40 MW of power, options to
purchase an additional 300,000 shares of Common Stock shall become exercisable,
so long as prior customers have not materially reduced the amount of goods and
services purchased from the Company; and

 

(d)           Upon receipt of a
first monthly payment by the Company (or its wholly-owned subsidiary, Mica-Tech, Inc.)
of a minimum of $320,000 from an additional customer before August 1, 2011
for management of a minimum of an additional 40 MW of power, options to
purchase an additional 300,000 shares of Common Stock shall become exercisable,
so long as prior customers have not materially reduced the amount of goods and
services purchased from the Company.

 

The deadlines in Sections 2(a) through (d) for satisfying the
conditions for option exerciseability may be extended for 60 days by mutual
agreement of the Company and the Optionee.

 

3.             TERMINATION OF
EMPLOYMENT; EFFECT ON OPTIONS.

 

(a)           In the event that an
Optionee who is employed by the Company or any of its subsidiaries on a
salaried basis (an “Employee”) ceases to be an Employee for any reason other
than normal retirement, disability or death (i) all outstanding Options
which have been granted to such person under the Plan and which have not yet
become vested shall immediately terminate upon termination of employment, and (ii) all
outstanding Options which have been granted to such person under the Plan and
which have become vested shall terminate three months thereafter (or such
earlier period of time as such Options may expire in accordance with their
terms), provided, however, if such person’s employment is terminated “For Cause”
(as defined below) all Options granted under the Plan to such person, whether
or not they have become vested at such time, shall immediately terminate upon
termination of employment.

 

(b)           In the event that an
Optionee who is an Employee ceases to be an Employee as a result of normal
retirement at age 65 or disability, all outstanding vested Options, shall be
exercisable for a period of one year from the date of such event by such person
(or such earlier period of time as such Options may expire in accordance with
their terms), and thereafter terminate.

 

(c)           In the event that an
Optionee who is an Employee ceases to be an Employee as a result of death, all
outstanding vested options, shall be exercisable by such person(s) to whom
the rights under such Options shall have passed by will or the applicable laws
of descent and distribution, for a period of six months from the date of death
(or such earlier period of time as such Options may expire in accordance with
their terms), and therefore terminate.

 

For the purposes of this Section 3, a termination of employment of
an Employee “For Cause” shall mean a termination for any of the following
reasons:

 

(i)            the commission of any unlawful job related act or wrongful act involving
moral turpitude by Employee;

 

(ii)           the refusal or failure of Employee to perform his duties as an employee
of the Company consistent with his employment agreement, so long as the Company
shall have first given Employee a written notice specifying the refusal or
failure, and Employee shall have failed to cure such refusal or failure within
30 days of the receipt of such written notice;

 

2

 

(iii)          continuing insubordination by Employee for a period of more than 7 days
after written notice specifying such insubordination with respect to the
direction of Executive by the President or the Board of Directors of the
Company.

 

4.             EXERCISE:  PAYMENT FOR AND DELIVERY OF STOCK AND PAYMENT
OF INCOME TAXES.  This Option may be
exercised only by the Optionee or his transferees by will or the laws of
descent and distribution.  This Option
may be exercised by giving written notice of exercise to the Company specifying
the number of shares of Common Stock to be purchased and the total purchase
price.

 

Payment of the exercise price of any Option shall be made in full in
cash concurrently with the exercise of such Option; provided, however, in the
discretion of the Committee, payment of such exercise price may instead be
made, in whole or in part:

 

(i)            with shares of
Common stock delivered to the Company concurrently with such exercise (such
shares to be valued on the basis of the aggregate Fair Market Value of such
shares on the date of such exercise), provided that the Company is not then
prohibited from purchasing or acquiring its Common Stock; and/or

 

(ii) by reducing the number of shares of Common Stock to be
delivered to the Optionee upon exercise of such Option (such reduction to be
valued on the basis of the aggregate Fair Market Value on the date of such
exercise of the additional shares that would otherwise have been delivered to
such Optionee upon exercise of such Option), provided that the Company is not
then prohibited from purchasing or acquiring its Common Stock.

 

If the Company becomes obligated to withhold an amount on account of any
federal or state income tax imposed as a result of an exercise of an Option
granted under the Plan (such amount shall be referred to herein as the “Withholding
Liability” and the first date upon which the Company is so obligated shall be
referred to herein as the “Withholding Date”), the Optionee shall pay the
Withholding Liability to the Company in full in cash on the Withholding Date;
provided, however, that, in the discretion of the Committee, payment of the
Withholding Liability to the Company may instead by made, in whole or in part:

 

(a)           with shares of
Common Stock delivered to the Company by such Optionee on the Withholding Date
(such shares to be valued on the basis of the aggregate Fair Market Value of
such shares on the Withholding Date), provided that the Company is not then
prohibited from purchasing or acquiring its Common Stock; and/or

 

(b)           by reducing the
number of shares of Common Stock to be delivered to such Optionee upon exercise
of such Option (such reduction to be valued on the basis of the aggregate Fair
Market Value on the date of such exercise of the additional shares that would
otherwise have been delivered to such Optionee upon exercise of such Option),
provided that the Company is not then prohibited from purchasing or acquiring
its Common Stock.

 

5.             RIGHTS IN SHARES BEFORE
ISSUANCE AND DELIVERY.  Neither the
Optionee nor his transferees by will or the laws of descent and distribution
shall be, or have any rights or privileges of, a stockholder of the Company
with respect to any shares of Common Stock issuable upon exercise of this
Option, unless and until certificates representing such shares shall have been
issued and delivered.

 

6.             ADJUSTMENTS IN
STOCK.  Subject to the provisions of the
Plan, if the outstanding securities of the class then subject to the Plan are
increased, decreased or exchanged for or converted into a different number or
kind of securities as a result of a reorganization, merger or consolidation,
recapitalization, reclassification, stock dividend or other distribution, stock
split, reverse stock split or the like, then, the Committee shall make
appropriate and proportionate adjustments in the following:

 

(a)           the number and type
of shares or other securities that may thereafter be acquired upon the exercise
in full of Options thereafter granted under the Plan; and

 

3

 

(b)           the number and types
of shares or other securities that may be acquired upon the exercise in full of
Options theretofore granted under the Plan;

 

provided however, that any such adjustments in Options theretofore
granted under the Plan shall be made without changing the aggregate exercise
price of the unexercised portion of such Options.

 

7.             NONTRANSFERABILITY
OF OPTION.  This Option is not
transferable otherwise than by will or the laws of descent and
distribution.  This Option shall not be
otherwise transferred, assigned, pledged, hypothecated or otherwise disposed of
in any way, whether by operation of law or otherwise, and shall not be subject
to execution, attachment or similar process.  Upon any attempt to transfer this Option
otherwise than by will or the laws of descent and distribution or to assign,
pledge, hypothecate or otherwise dispose of this Option, or upon the levy of an
execution, attachment or similar process upon this Option, this Option shall
immediately terminate and become null and void.

 

8.             LEGALITY.           No securities
issuable upon exercise of this Option shall be issued and delivered unless and
until, in the opinion of the Company, such securities may be issued and
delivered without causing the Company to be in violation of or incur any
liability under any federal, state or other securities law, any requirement of
any securities-exchange listing agreement to which the Company may be a party,
or any other requirement of law or of any regulatory body having jurisdiction
over the Company.

 

9.             TERMINATING
TRANSACTIONS.  Upon (i) the
dissolution or liquidation of the Company, (ii) a reorganization, merger
or consolidation of the Company (individually or collectively, a “Merger”) with
one or more corporations as a result of which the Company goes out of existence
or becomes a subsidiary of another corporation, or (iii) the acquisition
of all or substantially all of the assets or more than eighty percent (80%) of
the then outstanding stock of the Company by another entity, Options granted
under the Plan shall terminate unless provisions be made in writing in
connection with such transaction for the assumption of such Options or the
substitution for such Options of a new option covering the stock of a successor
corporation, or a parent or subsidiary thereof or of the company, with
appropriate adjustments as to the number and kind of shares and prices, in
which event such Options shall continue in the manner and under the terms so
provided.  Each of such transactions
referred to in (i), (ii) and (iii) above shall be referred to as a “Terminating
Transaction.”  Notwithstanding the
foregoing, each holder of outstanding Options granted under the Plan, whether
or not such Options have become vested at such time, shall have the right to
exercise such Options to the full extent not theretofore exercised at such time
immediately prior to the consummation of the Terminating Transactions as the
Committee shall designate, or in lieu thereof, in the case of a Merger and in
the discretion of the Committee, be entitled to receive upon the consummation
of the Merger, for each outstanding Option held by such person and in exchange
for the surrender and cancellation thereof, a cash payment from the Company or
its successor equal to the consideration paid per share of Common Stock in the
merger (or the Fair Market Value thereof) minus the exercise price of such
Option multiplied by the number of shares of Common Stock subject to such
Option.

 

10.           NOTICES.  Any notice to be given to the Company shall
be addressed to the Company in care of its Secretary at its principal office,
and any notice to be given to the Optionee shall be addressed to him at the
address given beneath his signature hereto, or as such other address as the
Optionee may hereafter designate in writing to the Company.  Any such notice shall have been deemed duly
given when deposited in a post office or branch post office regularly
maintained by the United States Government.

 

11.           LAWS APPLICABLE TO
CONSTRUCTION.  This Agreement has been
executed and delivered the day and year first above written at Ventura County,
California, and this Agreement shall be construed and enforced in accordance
with the laws of the State of California.

 

12.           CONSTRUCTION.  The parties agree that each of them has
retained counsel or has an opportunity to retain counsel but has expressly
waived such opportunity.  The parties
have reviewed and had an opportunity to revise this Agreement and, therefore,
the normal rule of construction to the effect that any ambiguities are to
be resolved against the drafting party shall not be employed in the
interpretation of this Agreement or any amendments hereto.

 

[signature page follows]

 

4

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
on its behalf by an authorized officer, attested by its Secretary or one of its
Assistant Secretaries, and the Optionee has hereunto set his hand on the day
and year first above written.

 

 

	
  AML
  COMMUNICATIONS, INC.

  	
   

  	
  OPTIONEE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Jacob
  Inbar

  	
   

  	
  Steven
  Ow

  
	
   

  	
  President &
  CEO

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
  Social
  Security No.:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Edwin
  McAvoy

  	
   

  	
   

  
	
   

  	
  Secretary

  	
   

  	
  Address:

  

 

5Exhibit 10.1

 

SETTLEMENT AND RELEASE AGREEMENT

 

 

This Settlement and Release Agreement (“Agreement”)
is made and entered into by and among John A. Zimmermann
(“Employee”) on the one hand, and Zale Corporation and
Zale Delaware, Inc. (collectively,
“Zale” or the “Company”) on the other, hereinafter collectively
referred to as the “Parties” or individually as a “Party.”

 

RECITALS

 

WHEREAS, Employee had been employed by Zale as Group
President, Zale North America; and

 

WHEREAS, the Parties desire to settle fully
and finally, in the manner set forth herein, all differences between them which
have arisen, or which may arise, prior to, or at the time of, the execution of
this Agreement, including, but in no way limited to, any and all claims and
controversies arising out of the employment relationship between Employee and
Zale, and the cessation of Employee’s employment with Zale, effective August 6,
2007 (the “Separation Date”).

 

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

 

1.             Employee,
for himself and on behalf of his attorneys, heirs, assigns, successors,
executors, and administrators, hereby GENERALLY RELEASES, ACQUITS, AND
DISCHARGES Zale Corporation, Zale Delaware, Inc. and their respective
current and former parent, subsidiary, affiliated, and related corporations,
firms, associations, partnerships, and entities (collectively, all of the Zale
entities are referred to as the “Company Parties”), their successors and
assigns, and the current and former owners, shareholders, directors, officers,
employees, agents, attorneys, representatives, and insurers of said
corporations, firms, associations, partnerships, and entities, and their
guardians, successors, assigns, heirs, executors, and administrators
(hereinafter collectively referred to as the “Releasees”) from and
against any and all claims, complaints, grievances, liabilities, obligations,
promises, agreements, damages, causes of action, rights, debts, demands,
controversies, costs, losses, and expenses (including, without limitation,
attorneys’ fees and expenses) whatsoever, under any municipal, local, state, or
federal law, common or statutory — including, but in no way limited to, claims
arising under the Employment Agreement (as defined below), the Age
Discrimination in Employment Act of 1967, 29 U.S.C. § 621, et seq.,
as amended, the Older Workers Benefit Protection Act, 29 U.S.C. § 626(f) et seq., Title VII of the Civil Rights Act of 1964, 42
U.S.C. § 2000e, et seq., as
amended (including the Civil Rights Act of 1991), the Americans with
Disabilities Act of 1990, 42 U.S.C. §§ 12101, et seq.,
as amended, the Employee Retirement Income Security Act of 1974, (ERISA), 29
U.S.C. §§ 1001 et seq., as amended, the Labor
Management Relations Act, 29 U.S.C. §§ 141 et seq., as
amended, the Occupational Safety and Health Act (“OSHA”), 29 U.S.C. §§
651 et seq., as amended, the Racketeer
Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961 et seq., as amended, the Sarbanes Oxley Act of 2002, the
Sabine Pilot Doctrine, the

 

CONFIDENTIAL
SETTLEMENT AND RELEASE AGREEMENT

 

 

1

 

American Jobs Creation Act of 2004, Texas Labor Code §§ 21.001 et seq., as amended, Texas Labor Code §§ 61.001 et seq., as amended, 
or any other claims, including, without limitation, claims in equity — for
any actions or omissions whatsoever, whether known or unknown and whether
connected with the employment relationship between Employee and Zale, and/or
the cessation of Employee’s employment with Zale, or not, which existed or may
have existed prior to, or contemporaneously with, the execution of this
Agreement (collectively, the “Released Claim(s)”).  Furthermore, to the extent permitted by law,
Employee forever waives, releases, and covenants not to sue or file or assist
with suing or filing any complaint or claim against any Releasee with any
court, governmental agency or other entity based on a Released Claim, whether
known or unknown at the time of execution. 
Employee also waives any right to recover from any Releasee in a civil
suit brought by any governmental agency or any other individual on his behalf
with respect to any Released Claim.  This
general release covers both claims that Employee knows about and those he may
not know about, except that it does not release any claims or rights that
Employee may have under the Age Discrimination in Employment Act of 1967 (and
any amendments thereto) that arise after the date Employee signs this
Agreement.  Employee represents and
warrants that he has not assigned or otherwise transferred, in whole or in
part, any or all of the claims released by him hereunder.

 

Employee
acknowledges that the amount being paid pursuant to Paragraph 7 of this
Agreement constitutes complete satisfaction and full compensation for any and
all alleged unpaid  salary, vacation,
severance, hours worked.

 

2.             Employee
acknowledges and agrees that he will keep the negotiations leading to this
Agreement, as well as the terms, amount, and fact of this Agreement STRICTLY
AND COMPLETELY CONFIDENTIAL, and that he will not communicate or otherwise
disclose to any employee of Zale (past, present, or future), or to any member
of the general public, the terms, amounts, or existence of this Agreement,
except as may be required by law or compulsory process; provided, however,
disclosure of this Agreement and its terms and conditions by Employee to his
tax/financial advisors, spouse, or attorneys, each of whom or which agree to
maintain confidentiality, or to taxing authorities, or to an arbitrator in a
proceeding to enforce the terms of this Agreement, shall not be a breach of
this Agreement.  If asked about any of
such matters, Employee’s response shall be that he does not care to discuss any
of such matters.  The Parties agree that
this paragraph is a material inducement to Zale entering into this
Agreement.  Additionally, the Parties
agree that Zale may enforce this paragraph without posting a bond.

 

3.             Employee
expressly acknowledges, agrees, and covenants that he will not make any public
or private statements, comments, or communication in any form, oral, written,
or electronic, which in any way could constitute libel, slander, or
disparagement of Zale or any other Releasee or which may be considered to be
derogatory or detrimental to the good name or business reputation of Zale or
any other Releasee; provided, however, that the terms of this paragraph
shall not apply to communications between Employee and his spouse, clergy, or
attorneys, which are subject to a claim of privilege existing under common law,
statute, or rule of procedure. 
Employee specifically agrees not to issue any public statement
concerning his employment at Zale and/or the cessation of such employment.   The Parties agree that this provision is a
material inducement to Zale entering into this Agreement.  Additionally, the Parties agree that Zale may
enforce this paragraph without posting a bond.

 

CONFIDENTIAL
SETTLEMENT AND RELEASE AGREEMENT

 

 

2

 

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

 

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

 

6.             Employee
and Zale specifically agree that following the execution of this Agreement,
neither Party shall be bound by the terms of that certain Employment Agreement
executed by and between the Parties as of February 16, 2006 (the “Employment
Agreement”), except that Employee shall continue to be bound by all
obligations contained in paragraphs 9, 10, 11, 12 and 13 of the Employment
Agreement, except to the extent such provisions are in conflict with this
Agreement.

 

7.             Subject
to the terms of paragraphs 18, 20 and 22 contained herein, effective  after the complete and proper execution of
this Agreement by Employee and in exchange for the general release set forth in
this Agreement and other valuable consideration received by the Parties, the
Parties agree as follows:

 

(a)                                  Employee shall
receive a total of total of six hundred forty-eight thousand seven hundred
fifty-eight dollars and seventy-seven cents ($648,758.77) in “Severance Pay”
representing Employee’s base salary as of the Separation Date for the period
from the Separation Date through February 15, 2009.  The Severance Pay shall be paid as follows: (i) within
three (3) days after the expiration of the Revocation Period (hereinafter
defined), Zale will pay to Employee two hundred forty thousand six hundred
forty two dollars and twenty three cents ($240,642.23) (which represents
Employee’s Severance Pay from the Separation Date through February 28,
2008), less deductions required by law; and (ii) beginning on the first
regularly scheduled payroll date that is after the expiration of the Revocation
Period and ending on February 15, 2009, Zale will pay to Employee the
remaining four hundred eight thousand one hundred sixteen dollars and twenty
one cents ($408,116.21) in equal payments, less deductions required by law, at
Zale’s regular pay periods in consideration for the promises, covenants,
agreements, and releases set forth herein. 
The Severance Pay described in this paragraph will be paid to Employee
pursuant to the direct deposit arrangement between Employee and Zale in effect
as of the Separation Date.

 

(b)                                 Within three (3) days
after the expiration of the Revocation Period (hereinafter defined), Zale will
pay to Employee $1,077.25 per month (less $470.86 per month for the aggregate
amount of the bi-monthly co-pays Employee was obligated to pay) for each month
of COBRA benefits Employee has paid for with his own money since August 6,
2007.  Thereafter, through August 6,
2008, Zale will continue to provide Employee
his medical benefits, if any, in effect as of the Separation Date.  Any continued medical benefits provided
pursuant to this paragraph 7(b) will count in satisfaction of Employee’s
right to continue such benefits pursuant to the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“COBRA”).  Employee has elected to continue his benefits
by 

 

CONFIDENTIAL
SETTLEMENT AND RELEASE AGREEMENT

 

 

3

 

                                                completing and submitting the COBRA election forms to the
Zale COBRA Administrator. From August 6,
2007, through August 6, 2008, Employee’s premiums for coverage will be
equal to the amount that Company employees pay for such coverage and such
premiums will be submitted by Employee directly to the Zale COBRA Administrator. 
Thereafter, Employee will have the right to elect to continue such
medical benefits for the remainder of the COBRA eligibility period by paying
the full cost of such coverage to Zale’s COBRA Administrator.  Employee has been provided with a notice of
the interaction of the extended medical insurance benefits under this Agreement
and his COBRA rights following his Separation Date.

 

Any health or welfare benefits received
by or available to Employee from or in connection with any other employment of
Employee that are reasonably comparable to, but not necessarily as financially
or otherwise beneficial to Employee as the benefits provided to Employee by
Company at the time of the Separation Date will be deemed the equivalent
thereof and will terminate Company’s obligation under this Section 7(b) to
provide medical coverage through August 6, 2008; provided, however,
that nothing in this paragraph will limit or terminate Employee’s or Employee’s
dependents’ right to continue any Company group health plan coverage at
Employee’s or such dependent’s cost for the remainder of the COBRA period.  Employee agrees to advise Company of the
availability of any such subsequent benefit coverages within 30 days following
such availability.

 

The provisions of this Section 7(b) will
not prohibit Company from changing the terms of any medical benefit programs
provided that any such changes apply to all employees of Company (e.g., Company may switch insurance carriers or preferred
provider organizations or change coverages).

 

(c)                                  The payments
which would have been due and payable in accordance with this Paragraph 7 shall
be reduced by an amount equal to any amounts that the Employee receives in
connection with any other employment from the Separation Date through February 15,
2009.  Any fringe benefits received by or
available to the Employee in connection with any other employment that are
reasonably comparable, but not necessarily as financially or otherwise
beneficial to the Employee as the fringe benefits then being provided by the
Company pursuant to this Paragraph 7 shall be deemed to be the equivalent
thereof and shall terminate the Company’s responsibility to continue providing
the fringe benefits then being provided by the Company pursuant to this
Paragraph 7.

 

(d)                                 Within three (3) days after the expiration of the Revocation Period
(hereinafter defined), Zale will pay to Employee the value of his
remaining four (4) weeks unused and accrued vacation time through August 6,
2007, in the amount of $32,519.22, less deductions required by law.  On August, 11, 2008, Zale shall pay to
Employee his Supplemental Executive Retirement Plan (“SERP”) benefit to
the extent such benefit was fully vested as of December 31, 2004, in the
amount of $25,099.61, less deductions required by law, subject to the terms of
that certain letter dated December 20, 2006, from Zale to Employee, such
payments to be 

 

CONFIDENTIAL
SETTLEMENT AND RELEASE AGREEMENT

 

 

4

 

                                                made in
accordance with the terms of such letter and the SERP.  Zale shall pay to Employee $152,621.92 (the “Bonus
Amount”) in full satisfaction of all amounts owed to Employee under any
bonus plans, including, without limitation, Zale’s FY 2007 Management Bonus
Plan.  The Bonus Amount will be paid by
Zale to the Employee within three (3) days after the expiration of the
Revocation Period (hereinafter defined), less deductions required by law,
pursuant to the direct deposit arrangement between Employee and Zale as of the
Separation Date.  Employee represents and
warrants that he as returned to Zale his employee identification badge, keys,
and all Company-owned equipment and documents, and that he does not have and
will not maintain copies of the same.

 

(e)                                  Employee has reconciled his outstanding expenses and advances with Zale and paid Zale
any outstanding balance owed after all agreed offsets were taken.

 

(f)                                    Zale shall provide Employee with three (3) months of outplacement
services with an entity designated by Zale.  Zale will pay the outplacement provider
directly for the cost of such outplacement services.  Such outplacement services will commence on
the first business day following the expiration of the Revocation Period
(hereinafter defined), and will end on the three (3) month anniversary
thereof.

 

8.             Employee
previously agreed in his Employment Agreement and, for independent
consideration, now acknowledges and agrees that for a period of three (3) years
from the Separation Date, Employee shall not, on his own behalf or on behalf of
any other person, partnership, association, corporation, or other entity, (a) directly,
indirectly, or through a third party hire or cause to be hired; (b) directly,
indirectly or through a third party solicit; or (c) 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, nor shall he 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 Paragraph
8 shall be tolled on a day-for-day basis for each day during which the Employee
participates in any activity in violation of such restrictions.  The Parties agree that the above restrictions
on hiring and solicitation are completely severable and independent agreements
supported by good and valuable consideration and, as such, shall survive the
termination of this Agreement for whatever reason.  The Parties further agree that any invalidity
and 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 an arbitrator and/or court of competent
jurisdiction determine that the scope of any provision of this Paragraph 8 is
too broad to be enforced as written, the Parties intend that the arbitrator
and/or court reform the provision to such narrower scope as it determines to be
reasonable and enforceable.

 

9.             Employee
agrees to cooperate fully with Zale, specifically including any attorney or
other consultant retained by Zale, in connection with any pending or future
litigation, arbitration, business, or investigatory matter.  The Parties acknowledge and agree that such
cooperation may include, but shall in no way be limited to, Employee’s making
himself available for interview by Zale, or any attorney or other consultant
retained by Zale, and providing to Zale

 

CONFIDENTIAL
SETTLEMENT AND RELEASE AGREEMENT

 

 

5

 

any
documents in his possession or under his control.  Zale agrees to provide Employee with
reasonable notice of the need for assistance when feasible.  Zale additionally agrees to schedule such
assistance in such a manner as not to interfere with any alternative employment
obtained by Employee when possible.

 

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

 

(a)                                  Employee shall not use in
any way or disclose any of the Trade Secrets, directly or indirectly, at any
time in the future, unless the information becomes public knowledge other than
as a result of an unauthorized disclosure by the Employee.  All files, records, documents, information,
data, and similar items relating to the business of Zale, whether prepared by
Employee or otherwise coming into his possession, will remain the exclusive
property of Zale.  Employee represents
and warrants that he has delivered to Zale all of the foregoing which were in
his possession.

 

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

 

11.           The
Company and Employee expressly agree that Trade Secrets were provided to
Employee during his employment with Zale. 
As a material inducement for the Company 

 

CONFIDENTIAL
SETTLEMENT AND RELEASE AGREEMENT

 

 

6

 

providing such Trade Secrets, the Employee previously agreed in his
Employment Agreement and, for independent consideration, now acknowledges and
agrees that for a period of three (3) years from the Separation Date, he will
not, directly or indirectly, compete with the Company by providing
services to any other person, partnership, association, corporation, or other
entity that is in a “Competing Business.” 
“Competing Business,” as used herein, is defined to mean any business
that engages in whole or in part in the retail sale of jewelry in the United
States and/or Puerto Rico, including, but not limited to, specialty jewelry
retailers and other retailers having jewelry divisions or departments, and the
Employee’s employment function or affiliation with the Competing Business is
directly or indirectly related to such business of jewelry.  The three (3) year period shall expire
on August 6, 2010; provided, however, that such three (3) year period
shall be tolled on a day-for-day basis for each day during which the Employee
participates in any activity in violation of such restrictions.  The Parties agree that the above restrictions
on competition are completely severable and independent agreements supported by
good and valuable consideration and, as such, shall survive the termination of
this Agreement for whatever reason.  The
Parties further agree that any invalidity or unenforceability of any one or
more of such restrictions on competition shall not render invalid or unenforceable
any remaining restrictions on competition. 
Additionally, should an arbitrator or court of competent jurisdiction
determine that the scope of any provision of this Paragraph 11 is too broad to
be enforced as written, the Parties intend that the arbitrator and/or court
reform the provision to such narrower scope as it determines to be reasonable
and enforceable.

 

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

 

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

 

14.           This
Agreement constitutes the entire Agreement of the Parties, and supersedes all
prior and contemporaneous negotiations and agreements, oral or written, with
respect to its subject matter, except that this Agreement specifically
incorporates as if fully set forth herein paragraphs 9, 10, 11, 12 and 13 of
the Employment Agreement; provided, however, that to the extent a conflict
exists between the terms of this Agreement and the terms of paragraphs 9, 10,
11, 12 and 13 of the Employment Agreement, the terms of this Agreement shall
and hereby do control.  Subject to the
foregoing severance, all prior and contemporaneous negotiations and agreements
are deemed incorporated and merged into this Agreement.  No representations, oral

 

CONFIDENTIAL
SETTLEMENT AND RELEASE AGREEMENT

 

7

 

or written, are being relied upon by any Party in executing this
Agreement other than the express representations of this Agreement.  This Agreement cannot be changed or
terminated without the express written consent of the Parties.  Employee agrees and acknowledges that, except
as set forth herein, Zale and the other Releasees have no further obligations
to Employee.

 

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

 

The Parties hereby agree that any action to
enforce an arbitrator’s award pursuant to Section 16 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.

 

16.           The Parties agree that any controversy or claim (including all claims
pursuant to common and statutory law) arising out of or relating to this
Agreement or arising out of or relating to the subject matter of this Agreement
or the Employment 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.  The arbitrator will have the authority to
award the same remedies, damages and costs that a court could award.  The arbitrator shall issue a reasoned award
explaining the decision, the reasons for the decision and any damages
awarded.  The arbitrator’s decision will
be final and binding.  The judgment on
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.  This provision can
be enforced under the Federal Arbitration Act.

 

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

 

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

 

CONFIDENTIAL
SETTLEMENT AND RELEASE AGREEMENT

 

8

 

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

 

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

 

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

 

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

 

21.           Any
term or provision of this Agreement which must survive the termination of this
Agreement in order to be effective shall so survive such termination.

 

22.           This Agreement is being provided to Employee pursuant to the
requirement, as set forth in Section 8 of the Employment Agreement, that
in order to be entitled to severance and other separation payments, Employee
must sign and return a release of claims in favor of Zale in a form acceptable
to and provided by Zale.  Any release of
claims that is executed after March 3, 2008,

 

CONFIDENTIAL
SETTLEMENT AND RELEASE AGREEMENT

 

9

 

will not be acceptable to Zale. 
Accordingly, if this Agreement is not executed by Employee and delivered
to Zale on or before March 3, 2008, then this Agreement will be void
and of no further force or effect, and Employee will not be entitled to any
payments under this Agreement or under the Employment Agreement.

 

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

 

	
   

  	
  EXECUTED in
                ,
  Texas on this           day
  of             ,
  2008.

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  John A. Zimmermann

  
	
   

  	
   

  	
   

  
	
   

  	
  EXECUTED in Irving, Texas on this
            day of
              ,
  2008.

  	
   

  
	
   

  	
   

  
	
   

  	
  ZALE CORPORATION

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTED in Irving, Texas on this
            day of
              ,
  2008.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ZALE DELAWARE, INC.

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
									

 

CONFIDENTIAL
SETTLEMENT AND RELEASE AGREEMENT

 

10

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