Exhibit 10.7
EMPLOYMENT SECURITY
AGREEMENT
This Employment Security Agreement (the “
Agreement ”) is between Zale Corporation (“
Company ”) and the undersigned Senior Vice President
of Company (“ Executive ”).
WHEREAS,
in order to achieve its
long-term objectives, Company recognizes that it is essential to
attract and retain qualified executives; and
WHEREAS , in consideration of
Executive’s valuable service for, and critical contribution
to the success of, Company, Company desires to provide Executive
with certain benefits in the event Executive’s employment is
terminated, either in connection with or unrelated to a Change of
Control of Company, on the terms and subject to the conditions set
forth in this Agreement. Capitalized terms that are used in
this Agreement but not defined in connection with their use are
defined in Article V.
NOW, THEREFORE
, in consideration of the
promises and of the mutual covenants herein contained and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, it is agreed as follows:
ARTICLE I
TERMINATION BENEFITS
1.1
General Termination
Benefits . If Executive incurs a Qualifying
Termination other than during a Protection Period, he or she will
receive the following termination benefits:
(a)
Severance Pay
. Subject to
Sections 1.5 and 2.1(a), Executive will receive Severance Pay in
equal installments commencing on the first ordinary payroll payment
date that follows the date that is sixty (60) days after the date
of Termination of Employment and thereafter in accordance with and
at times consistent with Company’s ordinary payroll
practices.
(b)
Accrued Obligations
. Executive will be
entitled to (i) payment of any earned and unpaid Base
Compensation as of Termination of Employment; (ii) payment of
any earned but unused vacation as of the Termination of Employment,
to the extent such vacation pay is provided under the vacation plan
or policy sponsored by Company that is applicable to Executive; and
(iii) any other earned and unpaid obligations as of the
Termination of Employment, including but not limited to any bonus
to which Executive may have become entitled but which has not yet
been paid as of Termination of Employment under the bonus plan or
policy sponsored by Company that is applicable to Executive (the
“ Accrued Obligations ”). Accrued
Obligations described in clauses (i) and (ii) above will
be paid as part of Executive’s final ordinary payroll payment
from Company for active employment or contemporaneously with such
payment, but in no event later than thirty (30) days after such
Termination of Employment, and Accrued Obligations described in
clause (iii) above will be paid in accordance with the terms
of the plan, policy, agreement or arrangement under which they
arose (including with respect to time of payment or
distribution).
(c)
Continued Welfare
Benefits . Executive and/or Executive’s
dependents will be entitled to elect to continue their respective
health or welfare coverage pursuant to COBRA. Provided that
Executive and/or Executive’s dependents elect and
maintain such
COBRA coverage until the expiration of their eligibility under
COBRA, following such expiration, Executive and/or
Executive’s dependents also will be entitled to elect to
continue such coverage for the remainder, if any, of the Severance
Period. Such health and other welfare benefits will be
provided monthly and will provide the same coverage as available to
others who elect coverage pursuant to COBRA, even though, following
the expiration of Executive’s eligibility for COBRA, it would
not be pursuant to COBRA, provided that the continued participation
of Executive and such dependents is possible under the general
terms and provisions of such health or welfare plans. If
Executive’s participation in any such plan is barred or would
result in adverse tax consequences to Executive or Company, Company
will arrange to provide Executive on a monthly basis with benefits
substantially similar to those that Executive otherwise would have
been entitled to receive under such pl an 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).
(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
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Termination of
Employment. Company will pay the outplacement service
provider directly for the cost of such outplacement
services.
(e)
Equity
Compensation Adjustments . Any equity-based compensation awards
granted to Executive by Company under an Equity Plan that vested
prior to such Termination of Employment will be governed by the
terms of such awards and such Equity Plan. Any equity-based
compensation awards granted to Executive by Company under an Equity
Plan that are unvested on Termination of Employment will expire,
unless otherwise provided in such awards or such Equity Plan.
Following his or her Termination of Employment, Company will not
grant Executive any equity-based compensation awards.
(f)
401(k) Plan
. The terms of the
401(k) Plan will govern Executive’s account balance, if
any, under such 401(k) Plan.
1.2
Termination Benefits in
Connection with a Change of Control . If Executive incurs a Qualifying
Termination during a Protection Period, he or she will receive the
following termination benefits:
(a)
Severance Pay
. Subject to
Sections 1.5 and 2.1(a), Executive will receive Severance Pay in a
single lump-sum
within fifteen (15) days after the date on which the general
release required pursuant to Section 2.1(a) is executed
and delivered to Company and becomes irrevocable in accordance with
its terms . Any Severance Pay payable pursuant to this
Section 1.2(a) will be reduced to the extent that
Executive previously received any Severance Pay pursuant to
Section 1.1(a).
(b)
Accrued Obligations
. Executive will be
entitled to payment of any Accrued Obligations in accordance with
the provisions of Section 1.1(b).
(c)
Continued Welfare
Benefits . Executive and Executive’s
dependents will be entitled to receive health and other welfare
benefits in accordance with the provisions of
Section 1.1(c) for the duration of the Severance
Period.
(d)
Outplacement
Services . Executive will be entitled to receive
outplacement services in accordance with the provisions of
Section 1.1(d).
(e)
Equity
Compensation Adjustments . Any equity-based compensation awards
granted to Executive by Company under an Equity Plan that vested
prior to such Termination of Employment will be governed by the
terms of such awards and such Equity Plan. Any equity-based
compensation awards granted to Executive by Company under an Equity
Plan that are unvested on Termination of Employment will vest
immediately upon Termination of Employment, unless otherwise
provided in such awards or such Equity Plan. Following his or
her Termination of Employment, Company will not grant Executive any
equity-based compensation awards.
(f)
401(k) Plan
. The terms of the
401(k) Plan will govern Executive’s account balance, if
any, under such 401(k) Plan.
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(g)
Conditional Cap on Severance
Pay . If the
payments to Executive pursuant to this Agreement (when considered
with all other payments made to Executive as a result of a
Termination of Employment that are subject to Section 280G of
the Code) (the amount of all such payments, collectively, the
“ Parachute Payment ”) result in Executive
becoming liable for the payment of any excise taxes pursuant to
section 4999 of the Code (“ 280G Excise Tax ”),
Executive will receive the greater on an after-tax basis of
(i) the severance benefits payable pursuant to this
Section 1.2 or (ii) the severance benefits payable
pursuant to this Section 1.2 as reduced to avoid imposition of
the 280G Excise Tax (the “ Conditional Capped Amount
”).
Not more than
fourteen (14) days following the Termination of Employment, Company
will notify Executive in writing (A) whether the severance
benefits payable pursuant to this Section 1.2 when added to
any other Parachute Payments payable to Executive exceed an amount
equal to 299% (the “ 299% Amount ”) of
Executive’s “base amount” as defined in
Section 280G(b)(3) of the Code, (B) the amount that
is equal to the 299% Amount, (C) whether the severance benefit
described in Section 1.2(g)(i) or the Conditional Capped
Amount pursuant to section 1.2(g)(ii) is greater on an
after-tax basis and (C) if the Conditional Capped Amount is
the greater amount, the amount that the severance benefits payable
pursuant to this Section 1.2 must be reduced to equal such
amount.
The calculation of
the 299% Amount, the determination of whether the termination
benefits described in Section 1.2(g)(i) or the
Conditional Capped Amount described in
Section 1.2(g)(ii) is greater on an after-tax basis and,
if the Conditional Capped Amount in Section 1.2(g)(ii) is
the greater amount, the determination of how much Executive’s
termination benefits must be reduced in order to avoid application
of the 280G Excise Tax will be made by Company’s public
accounting firm in accordance with section 280G of the Code or any
successor provision thereto. The costs of obtaining
such determination will be borne by Company.
1.3
Distributions on Account of
Death of Executive During the Severance Period
. If Executive
becomes entitled to Severance Pay pursuant to Section 1.1 or
1.2 and dies during the Severance Period, the following benefits
will be payable:
(a)
Severance Pay
. Any remaining
Severance Pay payable to Executive as of the date of his or her
death will continue to be paid to Executive’s estate pursuant
to Section 1.1 or 1.2, as applicable.
(b)
Accrued Obligations
. Executive’s estate will be
entitled to payment of any Accrued Obligations unpaid as of the
date of Executive’s death in accordance with the provisions
of Section 1.1(b).
(c)
Continued Welfare
Benefits . Executive’s dependents will be
entitled to continue to receive any health or other welfare
benefits that they received 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).
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(d)
Outplacement
Services . Any outplacement service benefits
available to Executive pursuant to Section 1.1(d) or
1.2(d) will cease as of the date of Executive’s
death.
(e)
Equity
Compensation Adjustments . Upon death of Executive, any equity-based compensation awards
granted to Executive by Company under an Equity Plan that vested
prior to Executive’s death will be governed by the terms of
such awards and such Equity Plan. Any equity-based
compensation awards granted to Executive by Company under an Equity
Plan that are unvested on Executive’s death will expire,
unless otherwise provided in such awards and such Equity
Plan.
(f)
401(k) Plan
. The terms of the
401(k) Plan will govern Executive’s account balance, if
any, under such 401(k) Plan.
1.4
Termination Benefits in
Connection With a Termination Other Than a Qualifying
Termination . If Executive has a Termination of Employment
that is not described in Section 1.1 or 1.2, including due to
death or Disability, he or she will receive the following
termination benefits:
(a)
Severance Pay
. Executive will not receive any
Severance Pay.
(b)
Accrued Obligations
. Executive or Executive’s
estate, as applicable, will be entitled to payment of any Accrued
Obligations in accordance with the provisions of
Section 1.1(b).
(c)
Continued Welfare
Benefits . Executive and/or Executive’s
dependants, as applicable, will be entitled to continue their
health and welfare benefits, if any, pursuant to COBRA.
(d)
Equity
Compensation Adjustments . Any equity-based compensation awards granted to
Executive by Company under an Equity Plan that vested prior to such
Termination of Employment will be governed by the terms of such
awards and such Equity Plan. Any equity-based compensation
awards granted to Executive by Company under an Equity Plan that
are unvested on Termination of Employment will expire, unless
otherwise provided in such awards or such Equity Plan.
Following his or her Termination of Employment, Company will not
grant Executive any equity-based compensation awards.
(e)
401(k) Plan
. The terms of the
401(k) Plan will govern Executive’s account balance, if
any, under such 401(k) Plan.
1.5
Code
Section 409A .
(a)
It is the intention of
Company and Executive that the provisions of this Agreement comply
with Section 409A of the Code and the rules, regulations and
other authorities promulgated thereunder (including the transition
rules thereof) (collectively, “ 409A ”),
and all provisions of this Agreement will be construed and
interpreted in a manner consistent with 409A.
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(b)
To the extent Executive is
a “specified employee,” as defined in
Section 409A(a)(2)(B)(i) of the Code and as determined in
good faith by Company, notwithstanding the timing of payment
provided in any other Section of this Agreement, no payment,
distribution or benefit under this Agreement that constitutes a
distribution of deferred compensation (within the meaning of
Treasury Regulation Section 1.409A-1(b)) upon separation from
service (within the meaning of Treasury Regulation
Section 1.409A-1(h)), after taking into account all available
exemptions, that would otherwise be payable during the six-month
period after separation from service will be made during such
six-month period, and any such payment, distribution or benefit
will instead be paid on the first business day after such six-month
period.
(c)
In the event that Company
determines that any provision of this Agreement does not comply
with 409A, Company will be entitled, without Executive’s
consent, to amend or modify such provision to comply with 409A;
provided , however , that such amendment or
modification will, to the greatest extent commercially practicable,
maintain the economic value to Executive of such
provision.
(d)
For purposes of 409A, each
installment of Severance Pay under Section 1.1(a) will be
deemed to be a separate payment as permitted under Treasury
Regulation Section 1.409A-2(b)(2)(iii).
ARTICLE II
EXECUTIVE COVENANTS
2.1
Release;
Covenants. As a condition of obtaining benefits under this
Agreement, Executive will be required to (a) within forty-five
(45) days following Termination of Employment execute and deliver
to Company a
general release of claims
against Company in
such form as may be required by Company and (b) comply with
the covenants set forth in this Article II. In the event
that Executive fails to execute and deliver such general release
within such forty-five-day period or revokes such general release
(but only to the extent revocation is permitted under the terms of
such general release), then Executive will forfeit all entitlement
to any payment, benefit or other amount hereunder.
Executive’s failure to comply with the covenants of this
Article II will be governed by Section 2.7 and
Article III.
2.2
Confidential
Information . Company promises to disclose to Executive and
Executive acknowledges that in and as a result of his or her
employment with Company, he or she will receive, make use of,
acquire, have access to and/or become familiar with various trade
secrets and proprietary and confidential information of Company and
its Affiliates, including, but not limited to, processes, computer
programs, compilations of information, records, financial
information, sales reports, sales procedures, customer
requirements, pricing techniques, customer lists, methods of doing
business, identities, locations, performance and compensation
levels of employees and other confidential information which are
owned by Company and/or its Affiliates and regularly used in the
operation of its business, and as to which Company and/or its
Affiliates take precautions to prevent dissemination to persons
other than certain directors, officers and employees (collectively,
“ Trade Secrets ”). Executive acknowledges
and agrees that the Trade Secrets:
(a)
are secret and not known
in the industry;
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(b)
give Company or its
Affiliates an advantage over competitors who do not know or use the
Trade Secrets;
(c)
are of such value and
nature as to make it reasonable and necessary to protect and
preserve the confidentiality and secrecy of the Trade Secrets;
and
(d)
are valuable, special and
unique assets of Company or its Affiliates, the disclosure of which
could cause substantial injury and loss of profits and goodwill to
Company or its Affiliates.
Executive promises not
to use in any way or disclose any of the Trade Secrets, directly or
indirectly, either during or after his or her employment by
Company, except as required in the course of his or her employment,
if required in connection with a judicial or administrative
proceeding, or if the information becomes public knowledge other
than as a result of an unauthorized disclosure by Executive.
All files, records, documents, information, data compilations and
similar items containing non-public and confidential information
relating to the business of Company, whether prepared by Executive
or otherwise coming into his or her possession, will remain the
exclusive property of Company and may not be removed from the
premises of Company under any circumstances without the prior
written consent of Company (except in the ordinary course of
business during Executive’s employment by Company), and in
any event must be promptly delivered to Company upon termination of
Executive’s employment with Company. Executive agrees
that upon receipt of any subpoena, process or other request to
produce or divulge, directly or indirectly, any Trade Secrets to
any entity, agency, tribunal or person, whether received during or
after the term of Executive’s employment with Company,
Executive will timely notify and promptly provide a copy of the
subpoena, process or other request to Company. For this
purpose, Executive irrevocably nominates and appoints Company
(including any attorney retained by Company), as his or her true
and lawful attorney-in-fact, to act in Executive’s name,
place and stead to perform any reasonable and prudent act that
Executive might perform to defend and protect against any
disclosure of any Trade Secrets.
The parties agree that
the above restrictions on confidentiality and disclosure are
completely severable and independent agreements supported by good
and valuable consideration and, as such, will survive the
termination of this Agreement for whatever reason. The parties
further agree that any invalidity or unenforceability of any one or
more of such restrictions on confidentiality and disclosure will
not render invalid or unenforceable any remaining restrictions on
confidentiality and disclosure. Additionally, should an arbitrator
or court of competent jurisdiction determine that the scope of any
provision of this Section 2.2 is too broad to be enforced as
written, the parties intend that the court reform the provision to
such narrower scope as it determines to be reasonable and
enforceable.
2.3
Non-Competition
. As a material
inducement for Company’s promise to provide the trade secrets
and proprietary and confidential information described in
Section 2.2, Executive agrees that during the term of his or
her employment with Company and 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
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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 on
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