-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AP1Wi8KFcbzSGAJoHGuodrjVBBwPXjrs2rT7JuhxOevSE87UPKtr21tektPzB3I/ 521d+e745Idutx8XVVJM+w== 0001157523-09-001369.txt : 20090218 0001157523-09-001369.hdr.sgml : 20090218 20090218161831 ACCESSION NUMBER: 0001157523-09-001369 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20090218 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers: Compensatory Arrangements of Certain Officers ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20090218 DATE AS OF CHANGE: 20090218 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ZALE CORP CENTRAL INDEX KEY: 0000109156 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-JEWELRY STORES [5944] IRS NUMBER: 750675400 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04129 FILM NUMBER: 09618857 BUSINESS ADDRESS: STREET 1: 901 W WALNUT HILL LN STREET 2: MS 6B-3 CITY: IRVING STATE: TX ZIP: 75038 BUSINESS PHONE: 9725804000 MAIL ADDRESS: STREET 1: 901 WEST WALNUT HILL LANE STREET 2: MAIL STOP 6B-3 CITY: IRVING STATE: TX ZIP: 75038-1003 FORMER COMPANY: FORMER CONFORMED NAME: ZALE JEWELRY CO INC DATE OF NAME CHANGE: 19710510 8-K 1 a5898609.htm ZALE CORPORATION 8-K

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

Current Report

Dated February 18, 2009

of

ZALE CORPORATION

A Delaware Corporation
IRS Employer Identification No. 75-0675400
SEC File Number 001-04129

901 West Walnut Hill Lane
Irving, Texas 75038
(972) 580-4000

⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01

Entry Into a Material Definitive Agreement

On February 12, 2009, Zale Canada Co. (“Zale Canada”), a wholly-owned subsidiary of Zale Corporation (the “Company”), entered into a Joinder to Credit Agreement under which Zale Canada became a party to the Credit Agreement, dated as of July 23, 2003 (the “Credit Agreement”), among the Company, Zale Delaware, Inc., ZGCO, LLC, successor-by-reorganization to DDCC, Inc., and TXDC, L.P. (together, the “Original Borrowers”), the Lenders named therein, Bank of America, N.A., as Administrative Agent and Issuing Bank, Bank of America, N.A., as Collateral Agent (the “Collateral Agent”), and the Co-Syndication Agents named therein. In addition, on February 2, 2009, Zale Puerto Rico, Inc. (“Zale Puerto Rico” and, together with Zale Canada and the Original Borrowers, the “Borrowers”), another wholly-owned subsidiary of the Company, entered into a Joinder to Credit Agreement under which Zale Puerto Rico became a party to the Credit Agreement. Each of Zale Canada and Zale Puerto Rico also entered into a Joinder to Security Agreement by which it became a party to the related Security Agreement, dated as of July 23, 2003, among the Original Borrowers and the Collateral Agent. In addition, Zale Canada entered into a separate Security Agreement, governed by the laws of Canada, in connection with the pledge of its inventory, credit card receivables, accounts and other assets as collateral for all borrowings under the Credit Agreement.

Pursuant to the Joinder Agreements, (1) each of Zale Canada and Zale Puerto Rico has joint and several liability for all obligations of the Borrowers under the Credit Agreement, and (2) the inventory, credit card receivables and certain other assets of Zale Canada and Zale Puerto Rico have been pledged as collateral for all borrowings under the Credit Agreement. In addition, as a result of the Joinder Agreements, the inventory and credit card receivables of Zale Canada and Zale Puerto Rico may be included as eligible assets for purposes of determining the borrowing availability of the Borrowers under the $500 million revolving Credit Agreement. The Credit Agreement limits the borrowing availability of the Borrowers thereunder to the lesser of (a) 73 percent of the cost of eligible inventory during October through December and 69 percent of the cost of eligible inventory for the remainder of the year or (b) 90 percent of the appraised liquidation value of eligible inventory, in each case plus 85 percent of eligible credit card receivables and minus certain reserves that may be established under the Credit Agreement. Based on a January 2009 inventory appraisal, the Company’s current advance rate with respect to inventory is determined pursuant to clause (b) above is approximately 63 percent of the cost of eligible inventory. The advance rate under the Credit Agreement is subject to future inventory appraisals.

As of February 18, 2008, the Company had approximately $350 million of outstanding borrowings and $150 million of borrowing availability under the Credit Agreement. Under the terms of the Credit Agreement, the Company is required to maintain $50 million of borrowing availability or satisfy a minimum fixed charge coverage ratio of 1.1:1.0 for an applicable 12-month reference period.

The summary of the Joinder Agreements set forth above is qualified in its entirety by reference to the full text of the Joinder Agreements, which are attached hereto as Exhibits 4.1, 4.2, 4.3 and 4.4, and the Security Agreement, which is attached hereto as Exhibit 4.5.

Item 5.02

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On February 11, 2009, Zale Delaware, Inc., a wholly-owned subsidiary of the Company, entered into a Separation and Release Agreement with Rodney Carter. As provided in Mr. Carter’s employment security agreement (the “ESA”), (1) Mr. Carter will receive severance pay of $952,543, with such amount payable in equal monthly installments over a 24 month period; provided that all unpaid portions of such severance pay will be distributed to Mr. Carter in a lump sum payment on the payroll date immediately preceding March 15, 2010, (2) he will receive accrued but unpaid base salary, vacation pay or bonus, if any, (3) for a period of two years following his termination of employment, he will be eligible to continue medical insurance coverage at rates then applicable to employees for such coverage; provided that the Company’s obligation to make such coverage available will terminate in the event reasonably comparable benefits are made available to Mr. Carter in connection with any other employment, consultancy or other arrangement undertaken by Mr. Carter; and (4) he will be entitled to receive outplacement services for a period of three months.

Item 9.01

Financial Statements and Exhibits

	(d)	Exhibits.

	4.1	Joinder Agreement of Zale Canada Co. to Credit Agreement
	4.2	Joinder Agreement of Zale Canada Co. to Security Agreement
	4.3	Joinder Agreement of Zale Puerto Rico, Inc. to Credit Agreement
	4.4	Joinder Agreement of Zale Puerto Rico, Inc. to Security Agreement
	4.5	Security Agreement of Zale Canada Co.
	10.1	Separation and Release Agreement with Rodney Carter

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

		ZALE CORPORATION
		Registrant


Date:	February 18, 2009		By: /s/ Cynthia T. Gordon
			Cynthia T. Gordon
			Senior Vice President, Controller and Interim Chief Financial Officer

EX-4.1 2 a5898609_ex41.htm EXHIBIT 4.1

Exhibit 4.1

JOINDER TO CREDIT AGREEMENT

This Joinder to Credit Agreement (this “Joinder”) is made as of this 12^th day of February, 2009 by and among ZALE CANADA CO. (the “New Borrower”), the other Borrowers party hereto (individually, an “Existing Borrower”, and collectively, the “Existing Borrowers”, and together with the New Borrower, individually, a “Borrower” and collectively, the “Borrowers”), and BANK OF AMERICA, N.A., as administrative agent and collateral agent (in such capacity, the “Agent”) for the Lenders party to the Credit Agreement (as defined below), in consideration of the mutual covenants herein contained and benefits to be derived herefrom.

W I T N E S S E T H :

A. WHEREAS, the Existing Borrowers have entered into that certain Credit Agreement dated as of July 23, 2003 by, among others, (i) the Borrowers, (ii) the Lenders party thereto from time to time, and (iii) Bank of America, N.A., as Agent for the Lenders (as amended and in effect, the “Credit Agreement”); and

B. WHEREAS, the New Borrower is currently an Excluded Subsidiary under the Credit Agreement; and

C. WHEREAS, the Existing Borrowers have notified the Agent that they wish to join the New Borrower to the Credit Agreement as a Borrower as permitted by Section 2.1(c) of the Credit Agreement.

NOW, THEREFORE, in consideration of the premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Definitions: All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Credit Agreement.

2. Joinder and Assumption of Obligations. Effective as of the date of this Joinder, the New Borrower hereby acknowledges that it has received and reviewed a copy of the Credit Agreement, and acknowledges and agrees to:

(a) join in the execution of, and become a party to, the Credit Agreement as a Borrower thereunder, as indicated by its signature below;

(b) be bound by all representations, warranties, covenants, agreements, liabilities and acknowledgments of the Borrowers in the Credit Agreement and the other Loan Documents, in each case, with the same force and effect as if the New Borrower was an original signatory to the Credit Agreement and the other Loan Documents and was expressly named as a Borrower therein (except to the extent that such representations, warranties, covenants, agreements, liabilities and acknowledgments relate expressly to an earlier date or to a Plan, a Multiemployer Plan, a Guaranteed Pension Plan or any other matters relating to ERISA); and

(c) perform all duties and Obligations jointly and severally with the Existing Borrowers under the Credit Agreement and the other Loan Documents.

3. Borrowing Restricted. Notwithstanding the provisions of Section 2 hereof or anything else herein or in the Credit Agreement to the contrary, the New Borrower shall not be permitted to borrow Revolving Loans from the Lenders under the Credit Agreement or to obtain Letters of Credit for the account of the New Borrower from the Issuing Bank under the Credit Agreement, and the Lenders shall have no Commitments to, nor any obligation to make Revolving Loans to the New Borrower under the Credit Agreement and the Issuing Bank shall have no obligation to issue Letters of Credit for the account of the New Borrower under the Credit Agreement, in each case until such time as the Administrative Agent is satisfied, in its sole discretion, that any Revolving Loans made or Letters of Credit issued to or for the account of the New Borrower shall be in compliance with the provisions of the Bank Act (Canada) or other applicable law, or any statutes, regulations, ordinances, rules, orders, policies and procedures of or applicable to the Agent and each of the Lenders and the Issuing Bank. Notwithstanding the generality of the foregoing and under strict reserve thereof, the New Borrower hereby affirms the provisions of Section 9.15 of the Credit Agreement and Section 2(c) above.

4. Representations and Warranties. The New Borrower hereby makes all representations, warranties, and covenants set forth in the Credit Agreement as of the date hereof (except to the extent that such representations, warranties or covenants relate expressly to an earlier date or to a Plan, a Multiemployer Plan, a Guaranteed Pension Plan or any other matters relating to ERISA); provided, however, that such representations and warranties shall be subject to the matters set forth on the Schedules delivered pursuant to Section 6(d) hereto.

5. Ratification of Loan Documents. Except as specifically amended by this Joinder and the other documents executed and delivered in connection herewith, all of the terms and conditions of the Credit Agreement and of the other Loan Documents shall remain in full force and effect. Each of the Borrowers (including the New Borrower) hereby acknowledges and affirms that all Obligations of the Borrowers (including the New Borrower) under the Loan Documents are secured by the Collateral pursuant to, inter alia, the Security Agreement entered into by the Existing Borrowers and the Agent in connection with the Credit Agreement and joined into by the New Borrower pursuant to the Joinder to Security Agreement entered into by the New Borrower and the Agent in connection herewith.

6. Other Actions to be Undertaken. This Joinder shall not be effective until each of the following actions has been completed by the New Borrower to the reasonable satisfaction of the Agent:

(a) This Joinder shall have been duly executed and delivered by the respective parties hereto, and shall be in full force and effect and shall be in form and substance reasonably satisfactory to the Agent.

(b) All action on the part of the New Borrower necessary for the valid execution, delivery and performance by the New Borrower of this Joinder and all other documentation, instruments, and agreements to be executed in connection herewith shall have been duly and effectively taken and evidence thereof reasonably satisfactory to the Agent shall have been provided to the Agent.

(c) The New Borrower shall have delivered the following to the Agent, in form and substance reasonably satisfactory to the Agent:

(i) A Certificate of Legal Existence issued by the Province of Nova Scotia and a Certificate of Good Standing issued by each province and jurisdiction in which the New Borrower conducts business or maintains any Collateral.

(ii) A Certificate of an authorized officer attesting to the due adoption, continued effectiveness, and setting forth the text, of each corporate resolution adopted in connection with the assumption of obligations under the Credit Agreement, and attesting to the true signatures of each Person authorized as a signatory to any of the Loan Documents, together with true and accurate copies of all organizational documents.

(iii) The following Loan Documents:

(1) Joinder to Security Agreement;

(2) Security Agreement (Canada);

(3) Perfection Certificate;

(4) Landlord’s Waiver with respect to the New Borrower’s distribution center located in Markham, Ontario; and

(5) Such other documents and agreements as the Agent may reasonably require.

(d) The New Borrower shall have delivered the following to the Agent, in form and substance satisfactory to the Agent:

(i) Supplemental schedules to the Credit Agreement to include any information pertaining to the New Borrower that may be required to be listed on such schedules.

(ii) Favorable written legal opinions of the Borrowers’ counsel addressed to the Agent and the Lenders, covering such matters relating to the New Borrower as the Agent shall reasonably request.

(e) The Agent shall have received all documents and instruments, including Uniform Commercial Code financing statements and PPSA financing statements and estoppel letters, required by law or reasonably requested by the Agent to create, perfect or evidence the first priority Liens intended to be created under the Loan Documents and all such documents and instruments shall have been so filed, registered or recorded to the satisfaction of the Agent.

7. Post-Closing Obligations. The New Borrower covenants and agrees to deliver to the Agent, in form and substance reasonably satisfactory to the Agent and within thirty (30) days following the date hereof, a duly executed Blocked Account Agreement among the Agent, the New Borrower and Royal Bank of Canada; provided, however, that the Agent may (but has no obligation to), in its sole and exclusive discretion, either extend the time period noted above for the delivery of the document described in this Section 7 or waive in its entirety the obligation that such document be delivered.

8. Miscellaneous.

(a) This Joinder may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument.

(b) This Joinder expresses the entire understanding of the parties with respect to the transactions contemplated hereby. No prior negotiations or discussions shall limit, modify, or otherwise affect the provisions hereof.

(d) Any determination that any provision of this Joinder or any application hereof is invalid, illegal or unenforceable in any respect and in any instance shall not effect the validity, legality, or enforceability of such provision in any other instance, or the validity, legality or enforceability of any other provisions of this Joinder.

(e) The Borrowers shall pay all costs and expenses of the Agent, including, without limitation, reasonable attorneys’ fees in connection with the preparation, negotiation, execution and delivery of this Joinder.

(f) The Borrowers warrant and represent that the Borrowers have consulted with independent legal counsel of their selection in connection with this Joinder and are not relying on any representations or warranties of the Agent or the Lenders or their counsel in entering into this Joinder.

(g) THIS JOINDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

[SIGNATURE PAGES FOLLOW]

IN WITNESS WHEREOF, each of the undersigned has caused this Joinder to be duly executed and delivered by its proper and duly authorized officer as of the date set forth above.

	BORROWERS:

	ZALE DELAWARE, INC., as Borrower


	By:	/s/ David Sternblitz
	Name:	David Sternblitz
	Title:	Vice President & Treasurer


	ZALE CORPORATION, as a Borrower


	By:	/s/ David Sternblitz
	Name:	David Sternblitz
	Title:	Vice President & Treasurer


	ZGCO, LLC, as a Borrower


	By:	/s/ David Sternblitz
	Name:	David Sternblitz
	Title:	Vice President & Treasurer


	TXDC, L.P., as a Borrower


	By:	/s/ David Sternblitz
	Name:	David Sternblitz
	Title:	Vice President & Treasurer


	ZALE CANADA CO., as a Borrower


	By:	/s/ David Sternblitz
	Name:	David Sternblitz
	Title:	Vice President & Treasurer

	BANK OF AMERICA, N.A., as Agent


	By:	/s/ Andrew Cerussi
	Name:	Andrew Cerussi
	Title:	SVP

EX-4.2 3 a5898609_ex42.htm EXHIBIT 4.2

Exhibit 4.2

JOINDER TO SECURITY AGREEMENT

This Joinder to Security Agreement (this “Joinder”) is made as of this 12th day of February, 2009 by and between ZALE CANADA CO. (the “New Grantor”) and BANK OF AMERICA, N.A., as successor in interest to Fleet Retail Finance Inc., as collateral agent (in such capacity, the “Collateral Agent”) for the Secured Parties (as defined in the Security Agreement (as defined below)), in consideration of the mutual covenants herein contained and benefits to be derived herefrom.

W I T N E S S E T H :

A. WHEREAS, Zale Delaware, Inc., Zale Corporation, ZGCO, LLC (successor in interest to DDCC, Inc.) and TXDC, L.P. (individually, an “Existing Grantor”, and collectively, the “Existing Grantors”, and together with the New Grantor, individually, a “Grantor” and collectively, the “Grantors”) have entered into that certain Credit Agreement dated as of July 23, 2003 by, among others, (i) the Grantors, as Borrowers, (ii) the Lenders party thereto from time to time, and (iii) Bank of America, N.A., as Agent for the Lenders (as amended and in effect, the “Credit Agreement”); and

B. WHEREAS, the Existing Grantors have entered into that certain Security Agreement dated as of July 23, 2003 by and among the Existing Grantors and the Collateral Agent (the “Security Agreement”), pursuant to which the Existing Grantors have granted a security interest and lien in and to the Collateral (as defined in the Security Agreement) to the Collateral Agent for the benefit of the Secured Parties to secure the Secured Obligations (as defined in the Security Agreement); and

C. WHEREAS, the New Grantor is currently an Excluded Subsidiary under the Credit Agreement; and

D. WHEREAS, the Existing Grantors have notified the Agent that they wish to join the New Grantor to the Credit Agreement as a Borrower and to the Security Agreement as a Grantor as permitted by Section 2.1(c) of the Credit Agreement.

1. Definitions: All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Security Agreement or the Credit Agreement, as applicable.

2. Joinder to Security Agreement.

- 1 -

(a) As security for the payment or performance, as the case may be, in full of the Secured Obligations, the New Grantor hereby bargains, assigns, mortgages, pledges, hypothecates and transfers to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, and hereby grants to the Collateral Agent, its successors and assigns, for the benefit of the Secured Parties, a security interest in, all of such New Grantor’s right, title and interest in, to and under the Collateral.

(b) New Grantor hereby (a) joins in the execution of, and becomes a party to, the Security Agreement, (b) agrees that the New Grantor shall, for all purposes, be deemed to be a “Grantor” under the Security Agreement, and (c) agrees that the New Grantor is bound by all representations, warranties, covenants, agreements, liabilities and obligations of the Grantors under the Security Agreement and all related documents, in each case, with the same force and effect as if the New Grantor was a signatory to the Security Agreement and such related documents and was expressly named therein (except to the extent that such representations, warranties, covenants, agreements, liabilities and obligations expressly related to an earlier date).

3. Miscellaneous.

(e) The Grantors shall pay all costs and expenses of the Collateral Agent, including, without limitation, reasonable attorneys’ fees in connection with the preparation, negotiation, execution and delivery of this Joinder.

(f) The New Grantor warrants and represents that the New Grantor has consulted with independent legal counsel of its selection in connection with this Joinder and is not relying on any representations or warranties of the Collateral Agent or the Lenders or their counsel in entering into this Joinder.

- 2 -

[SIGNATURE PAGES FOLLOW]

- 3 -

IN WITNESS WHEREOF, each of the undersigned has caused this Joinder to be duly executed and delivered by its proper and duly authorized officer as of the date set forth above.

	ZALE CANADA CO., as New Grantor


	By:	/s/ David Sternblitz
	Name:	David Sternblitz
	Title:	Vice President & Treasurer

Signature Page to Joinder to Security Agreement

	BANK OF AMERICA, N.A., as Collateral Agent


	By:	/s/ Andrew Cerussi
	Name:	Andrew Cerussi
	Title:	SVP

Signature Page to Joinder to Security Agreement

EX-4.3 4 a5898609_ex43.htm EXHIBIT 4.3

Exhibit 4.3

JOINDER TO CREDIT AGREEMENT

This Joinder to Credit Agreement (this “Joinder”) is made as of this 2nd day of February, 2009 by and among ZALE PUERTO RICO, INC. (the “New Borrower”), the other Borrowers party hereto (individually, an “Existing Borrower”, and collectively, the “Existing Borrowers”, and together with the New Borrower, individually, a “Borrower” and collectively, the “Borrowers”), and BANK OF AMERICA, N.A., as administrative agent and collateral agent (in such capacity, the “Agent”) for the Lenders party to the Credit Agreement (as defined below), in consideration of the mutual covenants herein contained and benefits to be derived herefrom.

W I T N E S S E T H :

B. WHEREAS, the New Borrower is currently an Excluded Subsidiary under the Credit Agreement; and

C. WHEREAS, the Existing Borrowers have notified the Agent that they wish to join the New Borrower to the Credit Agreement as a Borrower as permitted by Section 2.1(c) of the Credit Agreement.

1. Defined Terms. All capitalized terms used herein but not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement.

(a) join in the execution of, and become a party to, the Credit Agreement as a Borrower thereunder, as indicated by its signature below;

- 1 -

(c) perform all duties and Obligations jointly and severally with the Existing Borrowers under the Credit Agreement and the other Loan Documents.

3. Representations and Warranties. Except as provided below, the Borrowers (including the New Borrower) hereby restate all representations, warranties, and covenants set forth in the Credit Agreement as of the date hereof (except to the extent that such representations, warranties or covenants relate expressly to an earlier date); provided, however, that such representations and warranties shall be subject to the matters set forth on the Schedules delivered pursuant to Section 5(c)(iv) hereto.

4. Ratification of Loan Documents. Except as specifically amended by this Joinder and the other documents executed and delivered in connection herewith, all of the terms and conditions of the Credit Agreement and of the other Loan Documents shall remain in full force and effect. Each of the Borrowers (including the New Borrower) hereby acknowledges and affirms that all Obligations of the Borrowers (including the New Borrowers) under the Loan Documents are secured by the Collateral pursuant to the Security Agreement entered into by the Existing Borrowers and the Agent in connection with the Credit Agreement and joined into by the New Borrower pursuant to the Joinder to Security Agreement entered into by the Borrowers and the Agent in connection herewith.

5. Other Actions to be Undertaken. This Joinder shall not be effective until each of the following actions has been completed by the New Borrower to the reasonable satisfaction of the Agent:

(c) The New Borrower shall have delivered the following to the Agent, in form and substance reasonably satisfactory to the Agent:

(i) A Certificate of an authorized officer attesting to the due adoption, continued effectiveness, and setting forth the text, of each corporate resolution adopted in connection with the assumption of obligations under the Credit Agreement, and attesting to the true signatures of each Person authorized as a signatory to any of the Loan Documents, together with true and accurate copies of all organizational documents.

(ii) The following Loan Documents:

- 2 -

(1) Joinder to Security Agreement;

(2) Perfection Certificate; and

(3) Such other documents and agreements as the Agent may reasonably require.

(iii) Supplemental schedules to the Credit Agreement to include any information pertaining to the New Borrower that may be required to be listed on such schedules.

(iv) Favorable written legal opinions of the New Borrower’s counsel addressed to the Agent and the Lenders, covering such matters relating to the New Borrower as the Agent shall reasonably request.

(v) Documentation evidencing that the New Borrower has paid all outstanding taxes owing in Puerto Rico.

(d) The Agent shall have received all documents and instruments, including Uniform Commercial Code financing statements, required by law or reasonably requested by the Agent to create or perfect the first priority Liens intended to be created under the Loan Documents and all such documents and instruments shall have been so filed, registered or recorded to the satisfaction of the Agent.

6. Post-Closing Obligations. The New Borrower covenants and agrees to deliver to the Agent, in form and substance reasonably satisfactory to the Agent and within thirty (30) days following the date hereof, the following:

(a) (i) a Certificate of Legal Existence and Good Standing issued by the Secretary of the Commonwealth of Puerto Rico with respect to the New Borrower, and (ii) a certificate of incorporation of the New Borrower certified by the Secretary of the Commonwealth of Puerto Rico as being in full force and effect.

(b) (i) a duly executed Blocked Account Agreement among the Agent, the New Borrower and Banco Popular (the “Puerto Rico Blocked Account Bank”), pursuant to which, among other things, the Agent shall have obtained “control” (as defined in the Uniform Commercial Code (as defined in the Security Agreement)) of the following DDAs maintained by the New Borrower with the Puerto Rico Blocked Account Bank: (i) 250001493, (ii) 131001396, and (iii) 030072387, and (ii) a duly executed Agreement of Assignment of Deposit Account as Collateral Security between the Agent and the New Borrower with respect to such DDAs; provided, however, that the Agent may (but has no obligation to), in its sole and exclusive discretion, either extend the time period noted above for the delivery of the documents described in this clause (b) or waive in its entirety the obligation that such documents be delivered.

7. Miscellaneous.

- 3 -

[SIGNATURE PAGES FOLLOW]

- 4 -

IN WITNESS WHEREOF, each of the undersigned has caused this Joinder to be duly executed and delivered by its proper and duly authorized officer as of the date set forth above.

	BORROWERS:

	ZALE DELAWARE, INC., as Borrower


	By:	/s/ David Sternblitz
	Name:	David Sternblitz
	Title:	Vice President & Treasurer


	ZALE CORPORATION, as a Borrower


	By:	/s/ David Sternblitz
	Name:	David Sternblitz
	Title:	Vice President & Treasurer


	ZGCO, LLC, as a Borrower


	By:	/s/ David Sternblitz
	Name:	David Sternblitz
	Title:	Vice President & Treasurer


	TXDC, L.P., as a Borrower


	By:	/s/ David Sternblitz
	Name:	David Sternblitz
	Title:	Vice President & Treasurer


	ZALE PUERTO RICO, INC., as a Borrower


	By:	/s/ David Sternblitz
	Name:	David Sternblitz
	Title:	Vice President & Treasurer

Signature Page to Joinder to Credit Agreement

	BANK OF AMERICA, N.A., as Agent


	By:	/s/ Andrew Cerussi
	Name:	Andrew Cerussi
	Title:	SVP

Signature Page to Joinder to Credit Agreement

EX-4.4 5 a5898609_ex44.htm EXHIBIT 4.4

Exhibit 4.4

JOINDER TO SECURITY AGREEMENT

This Joinder to Security Agreement (this “Joinder”) is made as of this 2nd day of February, 2009 by and between ZALE PUERTO RICO, INC. (the “New Grantor”) and BANK OF AMERICA, N.A., as successor in interest to Fleet Retail Finance Inc., as collateral agent (in such capacity, the “Collateral Agent”) for the Secured Parties (as defined in the Security Agreement (as defined below)), in consideration of the mutual covenants herein contained and benefits to be derived herefrom.

W I T N E S S E T H :

C. WHEREAS, the New Grantor is currently an Excluded Subsidiary under the Credit Agreement; and

D. WHEREAS, the Existing Borrowers have notified the Agent that they wish to join the New Borrower to the Credit Agreement as a Borrower as permitted by Section 2.1(c) of the Credit Agreement.

1. Definitions: All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Security Agreement or the Credit Agreement, as applicable.

2. Joinder to Security Agreement.

- 1 -

3. Miscellaneous.

- 2 -

[SIGNATURE PAGES FOLLOW]

- 3 -

IN WITNESS WHEREOF, each of the undersigned has caused this Joinder to be duly executed and delivered by its proper and duly authorized officer as of the date set forth above.

	ZALE PUERTO RICO, INC., as New Grantor


	By:	/s/ David Sternblitz
	Name:	David Sternblitz
	Title:	Vice President & Treasurer

Signature Page to Joinder to Security Agreement

	BANK OF AMERICA, N.A., as Collateral Agent


	By:	/s/ Andrew Cerussi
	Name:	Andrew Cerussi
	Title:	SVP

Signature Page to Joinder to Security Agreement

EX-4.5 6 a5898609_ex45.htm EXHIBIT 4.5

Exhibit 4.5

Execution Version

SECURITY AGREEMENT

EXECUTED by the parties hereto as of the 12th day of February, 2009.

TO:	BANK OF AMERICA, N.A., a national banking association organized under the federal laws of the United States of America, having an office at 100 Federal Street, Floor 9, Boston, Massachusetts 02110, U.S.A., as administrative agent and collateral agent (in such capacity, including its successors and assigns, hereinafter the “Collateral Agent”) for the Secured Parties (as defined herein), in consideration of the mutual covenants contained herein and benefits derived herefrom;

GRANTED BY:	ZALE CANADA CO., a Nova Scotia unlimited liability company, having its registered office at 1959 Upper Water Street, Suite 900, Halifax, Nova Scotia, B3J 2N2 and its chief executive office and principal place of business at 901 West Walnut Hill Lane, Irving, Texas 75038 (hereinafter the “Grantor”).

WITNESSETH

Reference is made to the Credit Agreement dated July 23, 2003 (as such has been or may be further amended, supplemented, restated, replaced or otherwise modified from time to time, the “Credit Agreement”) by and among, amongst others, (i) Zale Delaware, Inc., Zale Corporation, DDCC, Inc. (predecessor-in-interest to ZGCO, LLC), and TXDC, L.P., as Borrowers, (ii) the Lenders party thereto from time to time, and (iii) Bank of America, N.A., as Collateral Agent, for itself and the Lenders.

The Lenders have agreed to make Loans and otherwise extend credit support to the Borrowers pursuant to, and upon the terms and subject to the conditions specified in, the Credit Agreement.

The Borrowers and the Lenders have agreed that the Grantor shall join as a Borrower under the Credit Agreement pursuant to a Joinder to Credit Agreement of even date herewith, executed by the Grantor, as Borrower, the other Borrowers and the Collateral Agent.

The obligations of the Lenders to join the Grantor as a Borrower and to continue to make Loans and otherwise extend credit support are each conditioned upon, among other things, the execution and delivery by the Grantor of a security agreement in the form hereof to secure the Secured Obligations (as defined herein).

Accordingly, the Grantor and the Collateral Agent, on behalf of itself and each other Secured Party (and each respective successors and assigns), hereby agree as follows:

Security Agreement – Zale Canada Co. (2009)

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SECTION 1 – GRANT OF SECURITY INTEREST

1.1	Security Interest

	As a general and continuing security for the payment and performance, as the case may be, in full of the Secured Obligations, the Grantor, IN CONSIDERATION THEREOF, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, hereby bargains, assigns, mortgages, pledges, hypothecates and transfers to the Collateral Agent, including its successors and assigns, for the benefit of the Secured Parties, and hereby grants to the Collateral Agent, including its successors and assigns, for the benefit of the Secured Parties, a continuing security interest in, all of the Grantor’s right, title and interest in, to and under the following property of the Grantor, whether now owned or hereafter-acquired by or on behalf of the Grantor, wherever located (hereinafter, collectively, the “Collateral”):

	(a)	all Accounts;

	(b)	all Inventory;

	(c)	all Deposit Accounts and Concentration Accounts;

	(d)	all Documents of Title relating to the Grantor’s Inventory;

	(e)	all Chattel Paper arising from the sale of the Grantor’s Inventory;

	(f)	all Instruments, Intangibles, Supporting Obligations and Letter of Credit Rights arising from the sale of Inventory;

	(g)	all policies and certificates of insurance and all insurance proceeds, refunds, and premium rebates, including, without limitation, proceeds of fire and credit insurance, with respect to any of the foregoing;

	(h)	all books, records, and information relating to any of the foregoing, and all rights of access to such books, records and information;

	(i)	all liens, guaranties, rights, remedies, and privileges pertaining to any of the foregoing ((a) through (h)), including the right of stoppage in transit; and

	(j)	any of the foregoing whether now owned or now due, or in which the Grantor has an interest, or hereafter acquired, arising, or to become due, or in which any Grantor obtains an interest, and all products, Proceeds, substitutions, and accessions of or to any of the foregoing.

	Notwithstanding the foregoing, the term “Collateral” shall expressly exclude any Inventory or other Goods that have been delivered to the Grantor on a consignment basis (“Consigned Inventory”), or any Accounts, Documents of Title, Chattel Paper, Instruments, Intangibles, Supporting Obligations, Letter of Credit Rights or any other assets or properties described above, to the extent that any of the foregoing relate to, or arise out of the sale or other disposition of, any of the Consigned Inventory or Proceeds thereof.

Security Agreement – Zale Canada Co. (2009)

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	Without limiting the foregoing, the Grantor hereby designates the Collateral Agent as its true and lawful attorney, exercisable by the Collateral Agent whether or not an Event of Default exists, with full power of substitution, at the Collateral Agent’s option, to file one or more financing statements, financing change statements, or to sign other documents for the purpose of perfecting, confirming, continuing or protecting the security interest granted by the Grantor, without the signature of the Grantor (the Grantor hereby appointing the Collateral Agent as its attorney to sign the Grantor’s name to any such document, whether or not an Event of Default exists), and naming the Grantor as debtor and the Collateral Agent as secured party, provided, that the Collateral Agent shall have the same rights as the Grantor’s true and lawful attorney referred to above to enforce the security interest granted by the Grantor, but only if an Event of Default exists.

1.2	Definition of Terms Used Herein

	(a)	Terms used but not defined herein and defined in the PPSA shall have the same meanings herein as in the PPSA unless the context otherwise requires; for the purposes of this Security Agreement, “PPSA” means the Personal Property Security Act of Ontario (or any successor statute) or similar legislation of any other Canadian jurisdiction, the laws of which are required by such legislation to be applied in connection with the issue, perfection, enforcement, opposability, validity or effect of security interests;

	(b)	Capitalized terms not otherwise defined herein shall have the same meanings as ascribed to them in the Credit Agreement;

	(c)	Any reference to “Collateral” shall, unless the context otherwise requires, refer to “Collateral or any part thereof”;

	(d)	The grant of the “security interest” herein provided for shall include, without limitation, a mortgage, hypothecation, pledge, charge and assignment of the Collateral in favour of the Collateral Agent (for itself and on behalf of the Secured Parties);

	(e)	The term “encumbrance” shall include, without limitation, a security interest, lien, hypothec, claim, charge, deemed trust or encumbrance of any kind whatsoever;

	(f)	“Accounts” shall mean all accounts, accounts receivable, receivables, and rights to payment (whether or not earned by performance) arising out of the sale, lease, license, assignment or other disposition of Inventory and/or arising out of the use of a credit or charge card or information contained on or used with that card;

	(g)	“Canadian Plan” shall mean any pension or other employee benefit plan and which is: (a) a plan maintained by the Grantor or one of its Subsidiaries; (b) a plan to which the Grantor or any of its Subsidiaries contributes or is required to contribute; (c) a plan to which the Grantor or any of its Subsidiaries was required to make contributions at any time during the five (5) calendar years preceding the date of this Security Agreement; or (d) any other plan with respect to which the Grantor or any of its Subsidiaries or Affiliates has incurred or may incur liability, including contingent liability either to such plan or to any Person, administration or Governmental Authority, including the FSCO;

Security Agreement – Zale Canada Co. (2009)

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	(h)	“Chattel Paper” shall have the meaning given to the term “chattel paper” in the PPSA;

	(i)	“Concentration Account” shall have the meaning assigned to such term in the Credit Agreement;

	(j)	“Deposit Account” shall mean any chequing or other demand deposit account into which proceeds of Collateral are deposited;

	(k)	“Document of Title” shall have the meaning given to the term “document of title” in the PPSA;

	(l)	“FSCO” shall mean the Financial Services Commission of Ontario and any Person succeeding to the functions thereof and includes the Superintendent under such statute and any other Governmental Authority empowered or created by the Supplemental Pensions Act (Québec) or the Pension Benefits Act (Ontario) or any Governmental Authority of any other Canadian jurisdiction exercising similar functions in respect of any Canadian Plan of the Grantor or any of its Subsidiaries or Affiliates and any Governmental Authority succeeding to the functions thereof;

	(m)	“Goods” shall have the meaning given to the term “goods” in the PPSA;

	(n)	“Instrument” shall have the meaning given to the term “instrument” in the PPSA;

	(o)	“Intangibles” shall have the meaning given to the term “intangibles” in the PPSA, and shall also include, without limitation, all: intangibles under which the account debtor’s principal obligation is a monetary obligation; rights to payment for credit extended; deposits; amounts due to the Grantor; credit memoranda in favour of the Grantor, tax refunds and abatements; insurance refunds and premium rebates, records; customer lists; telephone numbers; causes of actions; judgments; payments under any settlement or other agreement; licenses; internet addresses and domain names; computer software programs; trade names, trademarks, service marks, together with all goodwill connected with and symbolized by any of the foregoing; all other intangible property of the Grantor in the nature of intellectual property, and any warranty claims;

	(p)	“Inventory” shall include, without limitation, “inventory” as defined in the PPSA and also all: (a) Goods which (i) are leased by a Person as lessor, (ii) are held by a Person for sale or lease or to be furnished under a contract of service, (iii) are furnished by a Person under a contract of service, or (iv) consist of raw materials, work in process, or materials used or consumed in a business; (b) Goods of said description in transit; (c) Goods of said description which are returned, repossessed and rejected; (d) packaging and shipping materials related to any of the foregoing; and (e) all Documents of Title which represent any of the foregoing;

Security Agreement – Zale Canada Co. (2009)

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	(q)	“Letter of Credit Right” shall mean a right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance;

	(r)	“Perfection Certificate” shall mean the certificate substantially in the form of Annex 1 hereto, completed and supplemented with the schedules and attachments contemplated thereby and duly executed by a Financial Officer of the Grantor;

	(s)	“Proceeds” shall have the meaning given to the term “proceeds” in the PPSA;

	(t)	“Secured Obligations” shall mean the Obligations as defined in the Credit Agreement;

	(u)	“Secured Parties” shall mean (a) the Lenders, (b) the Agents and their Affiliates, (c) the Issuing Bank, (d) the Arranger, (e) the beneficiaries of each indemnification obligation undertaken by the Grantor under any Loan Document, (f) any other Person to whom Obligations are owed, and (g) the successors and assigns of each of the foregoing; and

	(v)	“Supporting Obligations” shall mean a Letter of Credit Right and all other secondary obligation, including, namely, lien notes, judgments, chattel mortgages, mortgages, security interests, hypothecs, assignments, guarantees, suretyships, accessories, bills of exchange, negotiable instruments, invoices, that supports the payment or performance of an Account, Chattel Paper, a Document of Title, an Intangible, an Instrument or investment property, and all other rights, benefits and documents now or hereafter taken, vested in or held by the Grantor in respect of or as security for the same and the full benefit and advantage thereof.

1.3	Rules of Interpretation.

The rules of interpretation specified in Section 1.2 of the Credit Agreement shall be applicable to this Agreement.

1.4	Grantor Remains Liable

Notwithstanding anything herein to the contrary:

	(a)	the Grantor shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein to perform all its duties and obligations thereunder to the same extent as if this Security Agreement had not been executed;

	(b)	the exercise by the Collateral Agent of any of the rights or remedies hereunder shall not release the Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral; and

	(c)	the Collateral Agent shall not have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Security Agreement, nor shall the Collateral Agent be obligated to perform any of the obligations or duties of the Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

Security Agreement – Zale Canada Co. (2009)

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SECTION 2 – REPRESENTATIONS AND WARRANTIES

The Grantor does hereby represent and warrant that each representation, warranty, covenant and agreement made in the Credit Agreement by the Grantor is hereby reiterated as if incorporated by reference herein (except to the extent that such representation, warranty, covenant and agreement expressly relate to an earlier date or to a Plan, a Multiemployer Plan, a Guaranteed Pension Plan or any other matter relating to ERISA), and (subject to the foregoing parenthetical exception) is hereby confirmed as true and correct as of the date hereof, and further represents and warrants to the Collateral Agent that as of the date hereof:

2.1	Title and Authority

The Grantor has good and valid rights in, and title to, the Collateral with respect to which it has purported to grant a security interest hereunder and has full power and authority to grant to the Collateral Agent the security interest in such Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Security Agreement, without the consent or approval of any other Person other than any consent or approval which has been obtained.

2.2

Filings

The Perfection Certificate has been duly prepared, completed and executed, and the information set forth therein is correct and complete in all material respects. Fully executed PPSA financing statements or other appropriate filings, recordings or registrations containing a description of the Collateral (as and if required) have been filed in each governmental, municipal or other office as is necessary to publish notice of and protect the validity of and to establish a legal, valid and perfected security interest in favour of the Collateral Agent (for the benefit of the Secured Parties) in respect of all Collateral in which the security interest may be perfected by filing, recording or registration in all the Provinces, other than Québec, and Territories of Canada (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of continuation statements.

2.3	Validity and Priority of Security Interest

The security interest constitutes (a) a legal and valid security interest in all of the Collateral securing the payment and performance of the Secured Obligations, and (b) subject to the filings described in Section 2.2 above, a perfected security interest in all of the Collateral, to the extent that perfection of the security interest can be achieved by filings or recordings. The security interest is and shall be prior to any other Lien on any of the Collateral, subject only to those Liens expressly permitted pursuant to Section 6.2 of the Credit Agreement.

Security Agreement – Zale Canada Co. (2009)

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2.4	Absence of Other Liens

The Collateral is owned by the Grantor free and clear of any Lien, except for Liens expressly permitted pursuant to Section 6.2 of the Credit Agreement. Except as provided herein and in the Credit Agreement or disclosed in the Perfection Certificate, the Grantor has not filed or consented to the filing of (a) a registration application, financing statement or analogous document under the Civil Code of Québec, the PPSA (or any successor statute) or similar legislation of any other jurisdiction, the Uniform Commercial Code, or any other applicable law covering any Collateral, (b) any assignment or hypothecation in which the Grantor assigns or hypothecates any Collateral or any security agreement or similar instrument covering any Collateral with the United States Patent and Trademark Office, the United States Copyright Office or the Canadian Intellectual Property Office, or (c) any assignment or hypothecation in which the Grantor assigns or hypothecates any Collateral or any security agreement or similar instrument covering any Collateral with any foreign governmental, municipal or other office, which registration application, financing statement or analogous document, assignment, hypothecation, security agreement or similar instrument is still in effect, except, in each case, for Liens expressly permitted pursuant to Section 6.2 of the Credit Agreement.

2.5	Bailees, Warehousemen, Etc.

Except as otherwise disclosed in the Perfection Certificate, no Inventory of the Grantor is in the care or custody of any third party or stored or entrusted with a bailee or other third party and none shall hereafter be placed under such care, custody, storage, or entrustment except for goods in transit.

2.6	Pension Matters

	(a)	Neither the Grantor nor any of its Subsidiaries have any Canadian Plan. Furthermore, no Canadian Plan has been terminated or partially terminated by any such Person, nor is it insolvent or in reorganization, nor have any proceedings been instituted to terminate, in whole or in part, or reorganize any Canadian Plan.

	(b)	Neither the Grantor nor any of its Subsidiaries has ceased to participate (in whole or in part) as a participating employer in any Canadian Plan which is a pension plan or has withdrawn from any Canadian Plan which is a pension plan in a complete or partial withdrawal, nor has a condition occurred which if continued would result in a complete or partial withdrawal.

	(c)	Neither the Grantor nor any of its Subsidiaries has any unfunded liability on windup or withdrawal liability, including contingent withdrawal or windup liability, to any Canadian Plan or any solvency deficiency in respect of any Canadian Plan.

	(d)	Neither the Grantor nor any of its Subsidiaries has any unfunded liability on windup or any liability in respect of any Canadian Plan (including to the FSCO) other than for required insurance premiums or contributions or remittances which have been paid, contributed and remitted when due.

Security Agreement – Zale Canada Co. (2009)

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	(e)	The Grantor and its Subsidiaries have made all contributions to any Canadian Plan required by law or the terms thereof to be made by it when due, and it is not in arrears in the payment of any contribution, payment, remittance or assessment or in default in filing any reports, returns, statements, and similar documents in respect of such Canadian Plan required to be made or paid by it pursuant to said Canadian Plan, any law, act, regulation, directive or order or any employment, union, pension, deferred profit sharing, benefit, bonus or other similar agreement or arrangement.

	(f)	Neither the Grantor nor any of its Subsidiaries is liable or, to the best of the Grantor’s knowledge, alleged to be liable, to any employee or former employee, director or former director, officer or former officer or other Person resulting from any violation or alleged violation of any Canadian Plan, any fiduciary duty, any law or agreement in relation to any Canadian Plan or has any unfunded pension or like obligations or solvency deficiency (including any past service or experience deficiency funding liabilities), other than accrued obligations not yet due, for which it has made full provision in its books and records.

	(g)	All vacation pay, bonuses, salaries and wages, to the extent accruing due, are properly reflected in the Grantor’s and its Subsidiaries’ books and records.

	(h)	Neither the Grantor nor any of its Subsidiaries has made any application for a funding waiver or extension of any amortization period in respect of any Canadian Plan.

	(i)	There has been no prohibited transaction or violation of any fiduciary responsibilities with respect to any Canadian Plan.

	(j)	There are no outstanding or pending or threatened investigations, claims, suits or proceedings in respect of any Canadian Plans (including to assert rights or claims to benefits) that could give rise to a Material Adverse Effect.

SECTION 3 – COVENANTS OF THE GRANTOR

The Grantor covenants and agrees with the Collateral Agent that so long as there shall remain any Secured Obligations:

3.1	Change of Name; Location of Collateral; Records; Place of Business

(a)

The Grantor agrees to furnish the Collateral Agent (a) prompt written notice of any change in (i) the Grantor’s trade name used to identify it in the conduct of its business or in the ownership of its properties, (ii) any office in which it maintains books and records relating to Collateral owned by it and having a value in excess of $10,000,000 or any office or facility at which Collateral owned by it and having a value in excess of $10,000,000 is located (including the establishment of any such new office or facility) or (iii) the acquisition by the Grantor of any property for which additional filings, registrations, publications or recordings are necessary to perfect, set-up and maintain the Collateral Agent’s security interest therein, and (b) prior written notice of any change in (i) its corporate name the location of its chief executive office or its principal place of business, (iii) its identity or corporate structure, (iv) its jurisdiction of incorporation, Federal Taxpayer Identification Number or organizational identification number assigned to it by its jurisdiction of organization. Notwithstanding the foregoing, if the Grantor’s Federal Taxpayer Identification Number or organizational identification number assigned to it by its jurisdiction of organization is changed by the applicable Governmental Authority, the Grantor will furnish to the Collateral Agent prompt written notice of any such change not later that ten (10) days from the date the Grantor has been notified by such Governmental Authority of such change. The Grantor agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the PPSA or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected first priority security interest in all of the Collateral.

Security Agreement – Zale Canada Co. (2009)

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(b)

The Grantor agrees to maintain, or cause to be maintained, at its own cost and expense, such complete and accurate records with respect to the Collateral owned by it as is consistent with its current practices, but in any event to include complete accounting records indicating all payments and proceeds received with respect to any part of the Collateral.

3.2	Periodic Certification

The Grantor shall deliver to the Collateral Agent, at least thirty (30) days prior to setting up a location in the Province of Québec in which it intends on maintaining tangible property, a deed of movable hypothec in form and substance and on terms and conditions reasonably satisfactory to the Collateral Agent which has been published in each governmental, municipal or other appropriate office in the Province of Québec to the extent necessary to protect, perfect and set-up the security interest and hypothec.

Without limiting the scope of the foregoing, each year, at the time of delivery of annual financial statements with respect to the preceding fiscal year pursuant to Section 5.1 of the Credit Agreement, the Grantor shall deliver, or cause to be delivered, to the Collateral Agent a certificate executed by a Financial Officer of the Grantor confirming that there has been no change in the information contained in the Perfection Certificate since the date of the Perfection Certificate delivered on the date hereof or the date of the most recent certificate delivered pursuant to this Section 3.2 or, if any such change has occurred specifying such revised information.

3.3	Protection of Security

The Grantor shall, at its own cost and expense, take any and all actions reasonably necessary to defend title to the Collateral against all Persons and to defend the security interest of the Collateral Agent in the Collateral and the priority thereof against any Lien not expressly permitted pursuant to Section 6.2 of the Credit Agreement.

Security Agreement – Zale Canada Co. (2009)

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3.4	Further Assurances

The Grantor agrees, at its own expense, to execute, acknowledge, deliver and cause to be filed all such further instruments and documents and take all such actions as the Collateral Agent may from time to time reasonably request to assure, preserve, protect and perfect the security interest and the rights and remedies created hereby, including the payment of any fees and taxes required in connection with the execution and delivery of this Security Agreement, the granting of the security interest and the filing of any financing statements or other documents in connection herewith or therewith. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note or other instrument in an amount in excess of $5,000,000, such note or instrument shall be immediately pledged and delivered to the Collateral Agent, duly endorsed in a manner satisfactory to the Collateral Agent.

3.5	Taxes; Encumbrances

At its option during the continuance of an Event of Default, the Collateral Agent may discharge past due taxes, assessments, charges, fees or Liens (other than Liens permitted under the Credit Agreement) at any time levied or placed on the Collateral, and may take any other action which the Collateral Agent may deem necessary or desirable to repair, maintain or preserve any of the Collateral to the extent the Grantor fails to do so as required by the Credit Agreement or this Security Agreement, and the Grantor agrees to reimburse the Collateral Agent on demand for any payment made or any expense incurred by the Collateral Agent pursuant to the foregoing authorization; provided, however, that the Collateral Agent shall not have any obligation to undertake any of the foregoing and shall have no liability on account of any action so undertaken except to the extent that any liability on account of any such action resulted from the gross negligence, bad faith, or breach of the contractual obligations of the Collateral Agent; and provided further that the making of any such payments or the taking of any such action by the Collateral Agent shall not be deemed to constitute a waiver of any Default or Event of Default arising from the Grantor’s failure to have made such payments or taken such action. Nothing in this Section 3.5 shall be interpreted as excusing the Grantor from the performance of any covenants or other promises of the Grantor with respect to taxes, assessments, charges, fees, Liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents.

3.6	Assignment of Security Interest

(a)

If at any time the Grantor shall take a security interest in any property of an account debtor or any other Person to secure payment and performance of an Account and the property securing payment and performance of the Account has a value in excess of $5,000,000, the Grantor shall promptly assign such security interest to the Collateral Agent. Such assignment need not be filed of public record unless necessary to continue the perfected status of the security interest against creditors of, and transferees from, the account debtor or other Person granting the security interest.

Security Agreement – Zale Canada Co. (2009)

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(b)

To the extent that the Grantor is a beneficiary under any written letter of credit relating to the Collateral in an amount in excess of $5,000,000 now or hereafter issued in favour of the Grantor, the Grantor shall deliver such letter of credit to the Collateral Agent. The Collateral Agent shall from time to time, at the request and expense of the Grantor, make such arrangements with the Grantor as are in the Collateral Agent’s reasonable judgment necessary and appropriate so that the Grantor may make any drawing to which the Grantor is entitled under such letter of credit, without impairment of the Collateral Agent’s perfected security interest in the Grantor’s rights to proceeds of such letter of credit or in the actual proceeds of such drawing. At the Collateral Agent’s request, the Grantor shall, for any letter of credit relating to the Collateral in an amount in excess of $5,000,000, whether or not written, now or hereafter issued in favour of the Grantor as beneficiary, execute and deliver to the issuer and any confirmer of such letter of credit an assignment of proceeds form, in favour of the Collateral Agent and satisfactory to the Collateral Agent and such issuer or (as the case may be) such confirmer, requiring the proceeds of any drawing under such letter of credit to be paid directly to the Collateral Agent.

3.7	Continuing Obligations of the Grantor

The Grantor shall remain liable to observe and perform all the conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Collateral, all in accordance with the terms and conditions thereof, except where the failure to do so would not have a Material Adverse Effect, and the Grantor agrees to indemnify and hold harmless the Collateral Agent and the Secured Parties from and against any and all liability for such performance.

3.8	Limitation on Modification of Accounts

The Grantor will not, without the Collateral Agent’s prior written consent, grant any extension of the time of payment of any of the Accounts, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any Person liable for the payment thereof or allow any credit or discount whatsoever thereon, other than extensions, releases, credits, discounts, compromises or settlements granted or made in the ordinary course of business and consistent with its current practices.

3.9

Insurance

The Grantor hereby irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as the Grantor’s true and lawful agent, exercisable after the occurrence and during the continuance of any Event of Default, for the purpose of making, settling and adjusting claims in respect of Collateral under policies of insurance, endorsing the name of the Grantor on any cheque, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto. In the event that the Grantor at any time or times shall fail to obtain or maintain any of the policies of insurance required hereby or to pay any premium in whole or in part relating thereto, the Collateral Agent may, without waiving or releasing any obligation or liability of the Grantor hereunder or any Default or Event of Default, in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Collateral Agent deemed advisable. All sums disbursed by the Collateral Agent in connection with this Section 3.9 including reasonable attorney’s fees, court costs, expenses and other charges relating thereto shall be payable, upon demand, by the Grantor to the Collateral Agent and shall be additional Secured Obligations secured hereby.

Security Agreement – Zale Canada Co. (2009)

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3.10

Legend

At the request of the Collateral Agent if an Event of Default shall occur and be continuing, the Grantor shall legend, in form and manner satisfactory to the Collateral Agent, its Accounts and its books, records and documents evidencing or pertaining thereto with an appropriate reference to the fact that such Accounts have been assigned to the Collateral Agent for the benefit of the Secured Parties and that the Collateral Agent has a security interest therein.

3.11

Payment

The Grantor will pay duly and punctually all sums of money owed by it to the Collateral Agent or any other Secured Party under this Security Agreement at the times and places and in the manner provided for herein, the Credit Agreement or any other Loan Document, as applicable.

3.12	Credit Agreement

The Grantor acknowledges having reviewed the covenants contained in the Credit Agreement which relate to the Grantor and its business, and hereby covenants and agrees to observe and perform all covenants provided for in the Credit Agreement which relate to it and to do all things necessary or appropriate to ensure that it is in compliance with such covenants at all times.

3.13	Canadian Plans.

Neither the Grantor nor any of its Affiliates will permit any of the following:

	(a)	the existence of any unfunded, solvency, or deficiency on windup liability or any accumulated funding deficiency (whether or not waived), or of any amount of unfunded benefit liabilities in respect of any Canadian Plan;

	(b)	failure to pay any amounts required to be paid by it or them when due;

	(c)	the existence of any liability upon it or them or Lien on any of its or their property in respect of any Canadian Plan;

	(d)	failure to make all required contributions to any Canadian Plan when due; and

	(e)	engaging in a prohibited transaction or violation of the fiduciary responsibility rules with respect to any Canadian Plan that could reasonably be expected to result in liability.

Security Agreement – Zale Canada Co. (2009)

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SECTION 4 – COLLECTIONS

4.1	Collections

	(a)	The Grantor shall at all times comply with the Cash Receipts provisions of Section 2.21 of the Credit Agreement including, without limitation, after the occurrence and during the continuation of an Event of Default or a Cash Control Event, the provisions of Section 2.21(f) causing the sweep on each Business Day of all Cash Receipts into the Fleet Concentration Account.

	(b)	Without the prior written consent of the Collateral Agent, the Grantor shall not modify or amend the instructions pursuant to any of the Credit Card Notifications or the Blocked Account Agreements. So long as no Event of Default or Cash Control Event occurs and is then continuing, the Grantor shall have sole control over the manner of disposition of the funds in the Concentration Accounts (except for the Fleet Concentration Account), for the benefit and on behalf of the Collateral Agent and the other Secured; provided, however, that such privilege may, at the option of the Collateral Agent, be terminated upon the occurrence and during the continuance of any Event of Default or Cash Control Event in accordance with Section 2.21 of the Credit Agreement.

4.2	Power of Attorney

The Grantor hereby irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as the Grantor’s true and lawful agent and attorney-in-fact, and in such capacity the Collateral Agent shall have the right, with power of substitution for the Grantor and in the Grantor’s name or otherwise, for the use and benefit of the Collateral Agent and the Secured Parties, (a) at any time, whether or not a Default or Event of Default has occurred, to take actions required to be taken by the Grantor under Section 1.1 of this Security Agreement, (b) upon the occurrence and during the continuance of an Event of Default or Cash Control Event or as otherwise permitted under the Credit Agreement, (i) to take actions required to be taken by the Grantor under Section 4.1 of this Security Agreement, (ii) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof; (iii) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral; and (c) upon the occurrence and during the continuance of an Event of Default or as otherwise permitted in the Credit Agreement (i) to sign the name of the Grantor on any invoices, schedules of Collateral, freight or express receipts, or bills of lading storage receipts, warehouse receipts or other documents of title relating to any of the Collateral; (ii) to sign the name of the Grantor on any notice to its account debtors; (iii) to sign the name of the Grantor on any proof of claim in bankruptcy against account debtors; (iv) to the extent relating to the Collateral, to sign change of address forms to change the address to which the Grantor’s mail is to be sent to such address as the Collateral Agent shall designate; (v) to receive and open the Grantor’s mail, remove any Proceeds of Collateral therefrom and turn over the balance of such mail either to any of the Borrowers or to any trustee in bankruptcy or receiver of the Grantor, or other legal representative of the Grantor whom the Collateral Agent determines to be the appropriate person to whom to so turn over such mail; (vi) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral; (vii) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral; (viii) to take all such action as may be necessary to obtain the payment of any letter of credit and/or banker’s acceptance of which the Grantor is a beneficiary to the extent relating to Collateral; (ix) to repair, manufacture, assemble, complete, package, deliver, alter or supply goods, if any, necessary to fulfill in whole or in part the purchase order of any customer of any Grantor; (x) to use for the purposes permitted by Section 6, any or all Intangibles of the Grantor relating to the Collateral, provided that the Collateral Agent’s use of such Intangibles will comply with all applicable law; and (xi) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Security Agreement, as fully and completely as though the Collateral Agent were the absolute owner of the Collateral for all purposes; provided, however, that nothing herein contained shall be construed as requiring or obligating the Collateral Agent or any other Secured Party to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent or any other Secured Party, or to present or file any claim or notice. It is understood and agreed that the appointment of the Collateral Agent as the agent and attorney-in-fact of the Grantor for the purposes set forth above is coupled with an interest and is irrevocable.

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4.3	No Obligation to Act

The Collateral Agent shall not be obligated to do any of the acts or to exercise any of the powers authorized by Section 4.2 hereof, but if the Collateral Agent elects to do any such act or to exercise any of such powers, it shall not be accountable for more than it actually receives as a result of such exercise of power, and shall not be responsible to the Grantor for any act or omission to act except for any act or omission to act which constitutes gross negligence, bad faith, or breach of the contractual obligations of the Collateral Agent. The provisions of Section 4.2 hereof shall in no event relieve the Grantor of any of its obligations hereunder or under any other Loan Document with respect to the Collateral or any part thereof or impose any obligation on the Collateral Agent or any other Secured Party to proceed in any particular manner with respect to the Collateral or any part thereof, or in any way limit the exercise by the Collateral Agent or any other Secured Party of any other or further right which it may have on the date of this Security Agreement or hereafter, whether hereunder, under any other Loan Document, by law or otherwise.

SECTION 5 – DEFAULT

The Grantor agrees that, upon the occurrence and during the continuance of an Event of Default, the security interests hereby constituted shall become enforceable and the Collateral Agent shall be entitled to exercise and enforce any or all of the remedies herein provided or which may otherwise be available to the Collateral Agent by statute, at law or in equity and all amounts secured hereby shall immediately be paid to the Collateral Agent (for itself and on behalf of the Secured Parties) by the Grantor.

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SECTION 6 – REMEDIES ON DEFAULT

If the security interests hereby constituted become enforceable, the Collateral Agent shall have, in addition to any other rights, remedies and powers which it may have at law, in equity or under the PPSA, the Civil Code of Quebec (the “CCQ”) or the Uniform Commercial Code (the “Code”) (whether or not the CCQ or the Code applies to the affected Collateral), the following rights, remedies and powers:

6.1	Power of Entry

The Grantor shall forthwith upon demand assemble and deliver to the Collateral Agent possession of all of the Collateral at such place as may be specified by the Collateral Agent. The Collateral Agent may take such steps as it considers necessary or desirable to obtain possession of all or any part of the Collateral and, to that end, the Grantor agrees that the Collateral Agent, its servants or agents or Receiver (as hereinafter defined) may, at any time, during the day or night, enter upon lands and premises where the Collateral may be found for the purpose of taking possession of and/or removing the Collateral or any part thereof. In the event of the Collateral Agent taking possession of the Collateral, or any part thereof, the Collateral Agent shall have the right to maintain the same upon the premises on which the Collateral may then be situate.

6.2	Power of Sale

The Collateral Agent may sell, lease or otherwise dispose of all or any part of the Collateral, as a whole or in separate parcels, by public auction, private tender or by private contract, with or without notice, except as otherwise required by applicable law, with or without advertising and without any other formality, all of which are hereby waived by the Grantor. Such sale, lease or disposition shall be on such terms and conditions as to credit and otherwise and as to upset or reserve bid or price as the Collateral Agent, in its sole discretion, may deem advantageous. If such sale, transfer or disposition is made on credit or part cash and part credit, the Collateral Agent need only credit against the Secured Obligations the actual cash received at the time of the sale. Any payments made pursuant to any credit granted at the time of the sale shall be credited against the Secured Obligations as they are received. The Collateral Agent may buy in or rescind or vary any contract for sale of all or any of the Collateral and may reasonably resell without being answerable for any loss occasioned thereby. Any such sale, lease or disposition may take place whether or not the Collateral Agent has taken possession of the Collateral. The Collateral Agent may, before any such sale, lease or disposition, perform any commercially reasonable repair, processing or preparation for disposition and the amount so paid or expended shall be deemed advanced to the Grantor by the Collateral Agent, shall become part of the Secured Obligations, shall bear interest at the highest rate per annum charged by the Collateral Agent on the Secured Obligations or any part thereof and shall be secured by this Security Agreement.

6.3	Validity of Sale

No person dealing with the Collateral Agent or its servants or agents shall be concerned to inquire whether the security hereby constituted has become enforceable, whether the powers which the Collateral Agent is purporting to exercise have become exercisable, whether any money remains due on the security of the Collateral, as to the necessity or expedience of the stipulations and conditions subject to which any sale, lease or disposition shall be made, otherwise as to the propriety or regularity of any sale or any other dealing by the Collateral Agent with the Collateral or to see to the application of any money paid to the Collateral Agent. In the absence of fraud on the part of such persons, such dealings shall be deemed, so far as regards the safety and protection of such person, to be within the powers hereby conferred and to be valid and effective accordingly.

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6.4	Receiver-Manager

The Collateral Agent may, in addition to any other rights it may have, appoint by instrument in writing a receiver, an interim receiver or receiver and manager (each of which are herein called a “Receiver”) of all or any part of the Collateral or may institute proceedings in any court of competent jurisdiction for the appointment of such a Receiver. Any such Receiver is hereby given and shall have the same powers and rights and exclusions and limitations of liability as the Collateral Agent has under this Security Agreement, at law or in equity. In exercising any such powers, any such Receiver shall, to the extent permitted by law, act as and for all purposes shall be deemed to be the agent of the Grantor and the Collateral Agent and the other Secured Parties shall not be responsible for any act or default of any such Receiver. The Collateral Agent may appoint one or more Receivers hereunder and may remove any such Receiver or Receivers and appoint another or others in his or their stead from time to time. Any Receiver so appointed may be an officer or employee of the Collateral Agent. A court need not appoint, ratify the appointment by the Collateral Agent of or otherwise supervise in any manner the actions of any Receiver. Upon the Grantor receiving notice from the Collateral Agent of the taking of possession of the Collateral or the appointment of a Receiver, all powers, functions, rights and privileges of each of the directors and officers of the Grantor with respect to the Collateral shall cease, unless specifically continued by the written consent of the Collateral Agent.

6.5	Carrying on Business

The Collateral Agent may carry on, or concur in the carrying on of, all or any part of the business or undertaking of the Grantor, may, to the exclusion of all others, including the Grantor, enter upon, occupy and use all or any of the premises, buildings, plant and undertaking of or occupied or used by the Grantor and may use all or any of the tools, machinery, equipment and intangibles of the Grantor for such time as the Collateral Agent sees fit, free of charge, to carry on the business of the Grantor and, if applicable, to manufacture or complete the manufacture of any Inventory and to pack and ship the finished product.

6.6	Dealing with Collateral

The Collateral Agent may seize, collect, realize, dispose of, enforce, release to third parties or otherwise deal with the Collateral or any part thereof in such manner, upon such terms and conditions and at such time or times as may seem to it advisable, all of which without notice to the Grantor except as otherwise required by any applicable law. The Collateral Agent may demand, sue for and receive any Accounts Receivable with or without notice to the Grantor, give such receipts, discharges and extensions of time and make such compromises in respect of any Accounts Receivable which may, in the Collateral Agent’s absolute discretion, seem bad or doubtful. The Collateral Agent may charge on its own behalf and pay to others, sums for costs and expenses incurred including, without limitation, legal fees and expenses on a solicitor and his own client scale and Receivers’ and accounting fees, in or in connection with seizing, collecting, realizing, disposing, enforcing or otherwise dealing with the Collateral and in connection with the protection and enforcement of the rights of the Collateral Agent hereunder including, without limitation, in connection with advice with respect to any of the foregoing. The amount of such sums shall be deemed advanced to the Grantor by the Collateral Agent, shall become part of the Secured Obligations, shall bear interest at the highest rate per annum charged by the Collateral Agent on the Secured Obligations or any part thereof and shall be secured by this Security Agreement.

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6.7	Right to Use

For the purpose of enabling the Collateral Agent to exercise the Collateral Agent’s Rights and Remedies (as hereinafter defined) under Section 6 (including, without limitation, in order to take possession of, hold, preserve, process, assemble, prepare for sale, market for sale, complete production of, advertise for sale and sell or otherwise dispose of or alienate the Collateral) at such time as the Collateral Agent shall be lawfully entitled to exercise the Collateral Agent’s Rights and Remedies under Section 6, upon the Collateral Agent’s request, the Grantor shall, and by the terms hereof hereby, (i) grants to the Collateral Agent (for itself and on behalf of the Secured Parties) a royalty-free, non-exclusive, irrevocable license , such license being with respect to the Collateral Agent’s exercise of the Collateral Agent’s Rights and Remedies under Section 6 including, without limitation, in connection with any completion of the manufacture of Inventory or any sale or other disposition of Inventory (a) to use, apply, and affix any trademark, trade name, logo, or the like in which the Grantor now or hereafter has rights, (b) to use, license, sublicense any intellectual property, computer software now owned, held or hereafter acquired by the Grantor, including in such license access to all media such and to the extent to which any of the licensed items may be recorded or stored and to all computer software programs such and to the extent used for the compilation or print out thereof, provided that the Collateral Agent’s use of the property described in subclauses (a) and (b) above will comply with all applicable law, and (c) to use any and all furniture, fixtures and equipment contained in any premises owned or occupied by the Grantor in connection with the exercise of the Collateral Agent’s Rights and Remedies under Section 6, and (ii) without limiting the provisions of Section 6.1, above, agrees to provide the Collateral Agent and/or its agents with access to, and the right to use, any such premises owned or occupied by the Grantor.

6.8	Retention of Collateral

Upon notice to the Grantor and subject to any obligation to dispose of any of the Collateral, as provided in the PPSA, the Collateral Agent may elect to retain all or any part of the Collateral in satisfaction of the Secured Obligations or any of them.

6.9	Pay Encumbrances

The Collateral Agent may pay any encumbrance that may exist or be threatened against the Collateral. In addition, the Collateral Agent may borrow money, at standard commercial rates, required for the maintenance, preservation or protection of the Collateral or for the carrying on of the business or undertaking of the Grantor and may grant further security interests in the Collateral in priority to the security interest created hereby as security for the money so borrowed. In every such case the amounts so paid or borrowed together with costs, charges and expenses incurred in connection therewith shall be deemed to have been advanced to the Grantor by the Collateral Agent, shall become part of the Secured Obligations, shall bear interest at the highest rate per annum charged by the Collateral Agent on the Secured Obligations or any part thereof and shall be secured by this Security Agreement.

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6.10	Application of Payments Against Secured Obligations

Any and all payments made in respect of the Secured Obligations from time to time and moneys realized on the Collateral may be applied to such part or parts of the Secured Obligations as the Collateral Agent may see fit, subject to the terms of the Credit Agreement. The Collateral Agent shall, at all times and from time to time, have the right to change any appropriation as it may see fit, subject to the terms of the Credit Agreement. Any insurance moneys received by the Collateral Agent pursuant to this Security Agreement may, at the option of the Collateral Agent, be applied to rebuilding or repairing the Collateral or be applied against the Secured Obligations in accordance with the provisions of this Section.

6.11

Set-Off

The Secured Obligations will be paid by the Grantor without regard to any equities between the Grantor and the Collateral Agent and/or any other Secured Party or any right of set-off or cross-claim. Any indebtedness owing by the Collateral Agent and/or any other Secured Party to the Grantor may be set off and applied by the Collateral Agent against the Secured Obligations at any time or from time to time either before or after maturity, without demand upon or notice to anyone.

6.12	Deficiency

If the proceeds of the realization of the Collateral are insufficient to repay the Collateral Agent and the other Secured Parties all moneys due to them, the Grantor shall forthwith pay or cause to be paid to the Collateral Agent (either for itself or on behalf of the Secured Parties) such deficiency.

6.13	Collateral Agent Not Liable

Neither the Collateral Agent nor any of the other Secured Parties shall be liable or accountable for any failure to seize, collect, realize, dispose of, enforce or otherwise deal with the Collateral. The Collateral Agent and the other Secured Parties shall not be bound to institute proceedings for any such purposes or for the purpose of preserving any rights of the Collateral Agent, the Grantor or any other person, firm or corporation in respect of the Collateral and shall not be liable or responsible for any loss, cost or damage whatsoever which may arise in respect of any such failure including, without limitation, resulting from the negligence of the Collateral Agent or any of its officers, servants, agents, solicitors, attorneys, Receivers or otherwise other than for any loss, cost or damage arising as a result of any such person’s wilful misconduct or gross negligence. Neither the Collateral Agent nor any of the other Secured Parties, nor their respective officers, servants, agents or Receivers shall be liable by reason of any entry into possession of the Collateral or any part thereof, to account as a mortgagee in possession, for anything except actual receipts, for any loss on realization, for any act or omission for which a mortgagee in possession might be liable, for any negligence in the carrying on or occupation of the business or undertaking of the Grantor as provided in Section 6.5 or for any loss, cost, damage or expense whatsoever which may arise in respect of any such actions, omissions or negligence other than for any loss, cost or damage arising as a result of any such person’s wilful misconduct or gross negligence.

6.14	Extensions of Time

The Collateral Agent and any of the other Secured Parties may grant renewals, extensions of time and other indulgences, take and give up securities, accept compositions, grant releases and discharges, perfect or fail to perfect any securities, release any part of the Collateral to third parties and otherwise deal or fail to deal with the Grantor, debtors of the Grantor, guarantors, sureties and others and with the Collateral and other securities as the Collateral Agent may see fit, all without prejudice to the liability of the Grantor to the Collateral Agent and the other Secured Parties or the Collateral Agent’s and the other Secured Parties’ rights and powers under this Security Agreement.

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6.15	Rights in Addition

The rights and powers conferred by this Section 6 are in supplement of and in addition to and not in substitution for any other rights or powers the Collateral Agent may have from time to time under this Security Agreement or under applicable law. The Collateral Agent may proceed by way of any action, suit, remedy or other proceeding at law or in equity and no such remedy for the enforcement of the rights of the Collateral Agent shall be exclusive of or dependent on any other such remedy. Any one or more of such remedies may from time to time be exercised separately or in combination.

SECTION 7 – PERFECTION OF SECURITY INTEREST

7.1	Perfection by Filing.

The Grantor hereby authorizes the Collateral Agent, pursuant to the provisions of Section 1 and Section 4.2, to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral, in such filing offices as the Collateral Agent shall deem appropriate, and the Grantor shall pay the Collateral Agent’s reasonable costs and expenses incurred in connection therewith. The Grantor hereby further agrees that, where applicable, a carbon, photographic, or other reproduction of this Security Agreement shall be sufficient as a financing statement and may be filed as a financing statement in any and all jurisdictions.

7.2	Other Perfection, etc.

The Grantor shall at any time and from time to time take such steps as the Collateral Agent may reasonably request for the Collateral Agent (a) to obtain an acknowledgment, in form and substance reasonably satisfactory to the Collateral Agent, of any bailee having possession of any of the Collateral that the bailee holds such Collateral for the Collateral Agent, (b) to obtain, where applicable, “control” of any Deposit Accounts, Letter of Credit Rights, or Chattel Paper (electronic or otherwise), with any agreements establishing control to be in form and substance satisfactory to the Collateral Agent, and (c) otherwise to ensure the continued perfection of the Collateral Agent’s security interest in any of the Collateral with the priority described in Section 2.3 and of the preservation of its rights therein.

7.3	Savings Clause.

Nothing contained in this Section 7 shall be construed to narrow the scope of the Collateral Agent’s security interest in any of the Collateral or the perfection or priority thereof or to impair or otherwise limit any of the Collateral Agent’s Rights and Remedies (as hereinafter defined) hereunder except (and then only to the extent) as mandated by the PPSA.

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SECTION 8 – GENERAL

8.1

Notices

All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 9.1 of the Credit Agreement.

8.2	Security Interest Absolute

All rights of the Collateral Agent hereunder, the security interest and all obligations of the Grantor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Secured Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document, or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Secured Obligations, or (d) any other circumstance that might otherwise constitute a defence available to, or a discharge of, the Grantor in respect of the Secured Obligations or this Security Agreement.

8.3	Suretyship Waivers by Grantor

The Grantor waives demand, notice, protest, notice of acceptance of this Security Agreement, notice of loans made, credit extended, Collateral received or delivered or other action taken in reliance hereon and all other demands and notices of any description. With respect to both the Secured Obligations and the Collateral, the Grantor assents to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of or failure to perfect any security interest in any Collateral, to the addition or release or any party or person primarily or secondarily liable, to the acceptance of partial payment thereon and the settlement, compromising or adjusting of any thereof, all in such manner and at such time or times as the Collateral Agent may deem advisable. The Collateral Agent shall have no duty as to the collection or protection of the Collateral or any income therefrom, the preservation of rights against prior parties, or the preservation of any rights pertaining thereto. The Grantor further waives any and all other suretyship defences.

8.4	Marshalling

Neither the Collateral Agent nor any other Secured Party shall be required to marshal any present or future collateral security (including but not limited to the Collateral) for, or other assurances of payment of, the Secured Obligation or any of them or to resort to such collateral security or other assurances of payment in any particular order, and all of the rights and remedies of the Collateral Agent or any Secured Party hereunder and of the Collateral Agent or any other Secured Party in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights and remedies, however existing or arising. To the extent that it lawfully may, the Grantor hereby agrees that it will not invoke any law relating to the marshalling of collateral which might cause delay in or impede the enforcement of the Collateral Agent’s Rights and Remedies under this Security Agreement or under any other instrument creating evidencing any of the Secured Obligations or under which any of the Secured Obligations is outstanding or by which any of the Secured Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, the Grantor hereby irrevocably waives the benefits of all such laws.

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8.5	Survival of Agreement

All covenants, agreements, representations and warranties made by the Grantor herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Security Agreement or any other Loan Document shall be considered to have been relied upon by the Collateral Agent and the other Secured Parties and shall survive the execution and delivery of this Security Agreement and the other Loan Documents and the making of any Loans and the issuance of any Letters of Credit, and shall continue in full force and effect as long as the Secured Obligations are outstanding and unpaid or the Letter of Credit Outstandings do not equal zero, or are not fully cash collateralized in a manner satisfactory to the Issuing Bank and the Collateral Agent, and as long as the Commitments have not expired or terminated.

8.6	Binding Effect; Several Agreement; Assignments

Whenever in this Security Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party (subject to the provisions of the Credit Agreement), and all covenants, promises and agreements by or on behalf of the Grantor that are contained in this Security Agreement shall bind and inure to the benefit of the Grantor and its successors and assigns. This Security Agreement shall be binding upon the Grantor and the Collateral Agent and their respective successors and assigns, and shall inure to the benefit of the Grantor, the Collateral Agent and the other Secured Parties and their respective successors and assigns, except that the Grantor shall not have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such attempted assignment or transfer shall be void) except as expressly permitted by this Security Agreement or the Credit Agreement.

8.7	Collateral Agent’s Fees and Expenses; Indemnification

(a)

Without limiting any of its obligations under the Credit Agreement or the other Loan Documents, the Grantor agrees to pay all reasonable out-of-pocket expenses reasonably incurred by the Collateral Agent, including the reasonable and documented fees, charges and disbursements of any counsel and any outside consultants for the Collateral Agent, in connection with (i) the administration of this Security Agreement, (ii) the custody or preservation of, or the sale of, collection from or other realization upon any of the Collateral, (iii) the exercise, enforcement or protection of any of the Collateral Agent’s Rights and Remedies hereunder or (iv) the failure of the Grantor to perform or observe any of the provisions hereof.

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	(b)	Without limiting any of its indemnification obligations under the Credit Agreement or the other Loan Documents, the Grantor agrees to indemnify each Secured Party and their respective Affiliates (each such Person being called an “Indemnitee”), and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the reasonable and documented fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of, (i) the execution or delivery or performance of this Security Agreement or any other Loan Document, the performance by the Grantor of its obligations under this Security Agreement or any other Loan Document, or the consummation of the transactions contemplated by the Loan Documents or any other transactions contemplated hereby, or (ii) any actual prospective claim, litigation, investigation or proceeding relating to any of the foregoing or to the Collateral, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses resulted from the gross negligence, wilful misconduct bad faith, or breach of the contractual obligations of such Indemnitee or any Affiliate of such Indemnitee (or of any officer, director, employee, advisor or agent of such Indemnitee or any such Indemnitee’s Affiliates) or with respect to a claim by one Indemnified Party against another Indemnified Party.

	(c)	Any such amounts payable as provided hereunder shall be additional Secured Obligations secured hereby and by the other Security Documents. All amounts due under this Section 8.7 shall be payable on written demand therefor.

8.8	Governing Law

This Security Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein, except as required by mandatory provisions of law.

8.9	Waivers; Amendment.

(a)

The rights, remedies, powers, privileges, and discretions of the Collateral Agent hereunder (herein, the “Collateral Agent’s Rights and Remedies”) shall be cumulative and not exclusive of any rights or remedies which it would otherwise have. No delay or omission by the Collateral Agent in exercising or enforcing any of the Collateral Agent’s Rights and Remedies shall operate as, or constitute, a waiver thereof. No waiver by the Collateral Agent of any Event of Default or of any Default under any other agreement shall operate as a waiver of any other Event of Default or other Default hereunder or under any other agreement. No single or partial exercise of any of the Collateral Agent’s Rights or Remedies, and no express or implied agreement or transaction of whatever nature entered into between the Collateral Agent and any Person, at any time, shall preclude the other or further exercise of the Collateral Agent’s Rights and Remedies. No waiver by the Collateral Agent of any of the Collateral Agent’s Rights and Remedies on any one occasion shall be deemed a waiver on any subsequent occasion, nor shall it be deemed a continuing waiver. The Collateral Agent’s Rights and Remedies may be exercised at such time or times and in such order of preference as the Collateral Agent may determine. The Collateral Agent’s Rights and Remedies may be exercised without resort or regard to any other source of satisfaction of the Secured Obligations. No waiver of any provisions of this Security Agreement or any other Loan Document or consent to any departure by the Grantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on the Grantor in any case shall entitle the Grantor to any other or further notice or demand in similar or other circumstances.

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(b)

Neither this Security Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Collateral Agent and the Grantor with respect to such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.2 of the Credit Agreement.

8.10	WAIVER OF JURY TRIAL

EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY LEGAL PROCEEDINGS DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, COLLATERAL AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS SET FORTH IN THIS SECTION 8.10.

8.11	Severability

In the event any one or more of the provisions contained in this Security Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction).

8.12	Counterparts.

This Security Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which, when taken together, shall constitute a single contract. Delivery of an executed counterpart of a signature page to this Security Agreement by facsimile or other electronic transmission shall be effective as delivery of a manually executed counterpart hereof.

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8.13	Sections and Headings

Article and Section headings used herein are for the purpose of reference only, are not part of this Security Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Security Agreement.

8.14	Jurisdiction

	(a)	The Grantor agrees that any suit for the enforcement of this Security Agreement may be brought in the courts of the Province of Ontario and consent to the non-exclusive jurisdiction of such courts. The Grantor hereby waives any objection which it may now or hereafter have to the venue of any such suit or any such court or that such suit is brought in an inconvenient forum.

	(b)	Each party to this Security Agreement irrevocable consents to service of process in the manner provided for notices in Section 8.1. Nothing in this Security Agreement or any other Loan Document will affect the right of any party to this Security Agreement to serve process in any other manner permitted by law.

8.15	Termination; Release of Collateral

Except for those provisions which expressly survive the termination thereof, the Credit Agreement, this Security Agreement and the security interest shall terminate when all the Secured Obligations have been paid in full, the Lenders have no further commitment to lend, the Letter of Credit Outstandings have been reduced to zero or fully cash collateralized in a manner reasonably satisfactory to the Issuing Bank and the Collateral Agent, and the Issuing Bank has no further obligation to issue Letters of Credit under the Credit Agreement, and any Other Liabilities have been fully cash collateralized in a manner reasonably satisfactory to the respective Lender to whom such Other Liabilities are owed, at which time the Collateral Agent shall execute and deliver to the Grantor, at the Grantor’s expense, all PPSA discharges, releases and similar documents that the Grantor shall reasonably request to evidence such termination. Any execution and delivery of discharges or documents pursuant to this Section 8.15 shall be without recourse to, or warranty by, the Collateral Agent.

8.16

No Merger

Neither the taking of any judgment nor the exercise of any power of seizure or sale shall operate to extinguish the liability of the Grantor to make payment of or satisfy the Secured Obligations. The acceptance of any payment or alternate security shall not constitute or create any novation and the taking of a judgment or judgments under any of the covenants herein contained shall not operate as a merger of such covenants.

Security Agreement – Zale Canada Co. (2009)

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8.17	Security Interest Effective Immediately

Neither the execution or registration of this Security Agreement nor any partial advances by the Collateral Agent shall bind the Collateral Agent to advance any other amounts to the Grantor. The parties intend the security interest created hereby to attach and take effect forthwith upon execution of this Security Agreement by the Grantor and the Grantor acknowledges that value has been given and that the Grantor has rights in the Collateral.

8.18	Provisions Reasonable

The Grantor expressly acknowledges and agrees that the provisions of this Security Agreement and, in particular, those respecting remedies and powers of the Collateral Agent against the Grantor, its business and the Collateral upon default, are commercially reasonable and not manifestly unreasonable.

8.19	Number and Gender

In this Security Agreement, words importing the singular number include the plural and vice-versa and words importing gender include all genders.

8.20	Precedence

Except as limited herein, in the event that any provisions of this Security Agreement contradict and are otherwise incapable of being construed in conjunction with the provisions of the Credit Agreement, the provisions of the Credit Agreement, as applicable, shall take precedence over those contained in this Security Agreement.

8.21	Receipt of Copy

The Grantor acknowledges receipt of an executed copy of this Security Agreement.

8.22	Judgment Currency

If, for the purposes of obtaining or enforcing judgment in any court or for any other purpose hereunder or in connection herewith, it is necessary to convert a sum due hereunder in any currency into another currency, such conversion shall be carried out to the extent and in the manner provided in the Credit Agreement.

8.23	Waiver of The Limitation of Civil Rights Act (Saskatchewan)

Without limiting the generality of the foregoing, the Grantor agrees that The Limitation of Civil Rights Act (Saskatchewan) will not apply to this Security Agreement or any rights, remedies or powers of the Collateral Agent, any Secured Party or any Receiver hereunder.

Security Agreement – Zale Canada Co. (2009)

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8.24

Language

The parties hereto acknowledge that they have requested and are satisfied that the foregoing, as well as all notices, actions and legal proceedings be drawn up in the English language. Les parties à cette convention reconnaissent qu’elles ont exigé que ce qui précède ainsi que tous avis, actions et procédures légales soient rédigés et exécutés en anglais et s’en déclarent satisfaites.

[signature page follows]

Security Agreement – Zale Canada Co. (2009)

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IN WITNESS WHEREOF, the Grantor has duly executed this Security Agreement as of the date first above written.

	ZALE CANADA CO.

	Per:	/s/ David Sternblitz
	Name:	David Sternblitz
	Title:	Vice President & Treasurer



	BANK OF AMERICA, N.A.
	on its own behalf and as Collateral Agent

	Per:	/s/ Andrew Cerussi
	Name:	Andrew Cerussi
	Title:	SVP

Security Agreement – Zale Canada Co. (2009)

EX-10.1 7 a5898609_ex101.htm EXHIBIT 10.1

Exhibit 10.1

CONFIDENTIAL SEPARATION AND RELEASE AGREEMENT

The following document is a Confidential Release Agreement (the “Agreement”) required in order for you to receive severance and other benefits under your Employment Security Agreement dated December 22, 2008 (the “ESA”). Please review the Agreement carefully. If you wish to accept the terms of the Agreement, you must deliver it to Mary Ann Doran, Senior Vice President Human Resources, within 47 days following the Separation Date, as defined in the Agreement. Thus, the Agreement must be delivered to Mary Ann Doran, Senior Vice President Human Resources, by 5:00 p.m. on March 9, 2009.

If you choose not to execute the Agreement or if you fail to execute and deliver the Agreement within the timeframe described above, you will not be entitled to any of the severance payments or separation benefits provided for in the event of a Qualifying Termination under your ESA other than earned wages and any rights you may have under COBRA.

Please contact Mary Ann Doran, Senior Vice President Human Resources, if you have any questions regarding the Confidential Separation and Release Agreement:

Mary Ann Doran
Senior VP Human Resources
901 W. Walnut Hill Lane
Irving, TX 75038
972.580.4583
mdoran@zalecorp.com

CONFIDENTIAL RELEASE AGREEMENT

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CONFIDENTIAL SEPARATION AND RELEASE AGREEMENT

This Confidential Release Agreement (“Agreement”) is made and entered into by and between Rodney Carter (“Employee”) on the one hand, Zale Delaware, Inc. (“Zale” or the “Company”) on the other, hereinafter collectively referred to as the “Parties.”

RECITALS

WHEREAS, Employee was employed by Zale;

WHEREAS, Employee’s last day of employment is January 20, 2009 (the “Separation Date”);

NOW, THEREFORE, in consideration of the Recitals and the mutual promises, covenants, and agreements set forth herein and in the Employment Security Agreement between Employee and Zale dated December 22, 2008 (the “ESA”), the receipt and sufficiency of which are hereby acknowledged, and to fulfill Employee’s obligation under Section 2.1 of the ESA, the Parties covenant and agree as follows:

1. RELEASE OF CLAIMS

(a) Employee, individually and on behalf of Employee’s attorneys, heirs, assigns, successors, executors, and administrators, hereby GENERALLY RELEASES, ACQUITS, AND DISCHARGES Zale and its respective current and former parent (including, but not limited to Zale Corporation), subsidiary, affiliated, and related corporations, firms, associations, partnerships, and entities, 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” and individually as a Releasee”) from and against any and all claims, complaints, grievances, liabilities, obligations, promises, agreements, damages, wages, bonuses, causes of action, rights, debts, demands, controversies, costs, losses, and expenses (including 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 Age Discrimination in Employment Act of 1967 (“ADEA”), 29 U.S.C. § 621, et seq., as amended, 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, state/local anti-discrimination and anti-retaliation laws, 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 , 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 American Jobs Creation Act of 2004, The Worker Adjustment and Retraining Notification Act, 29 U.S.C. 2101 et seq., as amended, Texas Labor Code §§ 21.001 et seq., as amended, Texas Labor Code §§ 61.001 et seq., as amended, or any other claims, including claims in equity or common law claims -- for any actions or omissions whatsoever, whether known or unknown and whether connected with the employment relationship between Employee and Zale, the cessation of Employee’s employment with Zale which existed or may have existed prior to, or contemporaneously with, the execution of this Agreement (collectively, the “Released Claim(s)”). Employee agrees that this Agreement includes a release of any and all negligence claims, contractual claims, wrongful discharge claims, and claims of discrimination or retaliation of every possible kind.

CONFIDENTIAL RELEASE AGREEMENT

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(b) Employee understands that nothing in this Agreement is intended to interfere with or deter Employee’s right to challenge the waiver of an ADEA claim or state law age discrimination claim or the filing of an ADEA charge or ADEA complaint or state law age discrimination complaint or charge with the EEOC or any state discrimination agency or commission or to participate in any investigation or proceeding conducted by those agencies. Further, Employee understands that nothing in this Agreement would require Employee to tender back the money received under this Agreement if Employee seeks to challenge the validity of the ADEA or state law age discrimination waiver, nor does the Employee agree to ratify any ADEA or state law age discrimination waiver that fails to comply with the Older Workers’ Benefit Protection Act by retaining the money received under the Agreement. Further, nothing in this Agreement is intended to require the payment of damages, attorneys’ fees or costs to Zale should Employee challenge the waiver of an ADEA or state law age discrimination claim or file an ADEA or state law age discrimination suit except as authorized by federal or state law. Notwithstanding the foregoing two sentences, as provided above Employee also waives any right to recover from any Releasee in a civil suit brought by any governmental agency or any other individual on Employee behalf with respect to any Released Claim.

(c) This release excludes any claim which cannot be released by private agreement, such as workers’ compensation claims, claims after the Effective Date of this Agreement, and the right to file administrative charges with certain government agencies. Nothing in this Agreement shall be construed to prohibit Employee from filing a charge with or participating in any investigation or proceeding conducted by the Equal Employment Opportunity Commission, National Labor Relations Board, or a comparable state or local agency. Notwithstanding the previous two sentences, Employee agrees to waive any right to recover monetary damages in any charge, complaint, or lawsuit against Zale filed by Employee or by anyone else on Employee’s behalf.

(d) This general release covers both claims that Employee knows about and those that Employee may not know about, except that it does not waive any rights or claims, including claims under the ADEA, that may arise after the Effective Date of this Agreement (as defined below). Employee further represents and warrants that: (i) Employee has been fully and properly paid for all hours worked, (ii) Employee has received all leave in accordance with applicable law; and (iii) Employee has not suffered any on the job injury for which Employee has not already filed a claim. Employee further acknowledges, agrees and hereby stipulates that: (i) during Employee’s employment with the Company, Employee was allowed to take all leave and afforded all other rights to which Employee was entitled under the Family and Medical Leave Act (“FMLA”); and (ii) the Company has not in any way interfered with, restrained or denied the exercise of (or attempt to exercise) any FMLA rights, nor terminated or otherwise discriminated against Employee for exercising (or attempting to exercise) any such rights.

CONFIDENTIAL RELEASE AGREEMENT

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2. Employee acknowledges and agrees that Employee will keep the terms, amount, and facts of, and any discussions leading up to, this Agreement STRICTLY AND COMPLETELY CONFIDENTIAL, and that Employee 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, copies, or fact of this Agreement, except as may be required by law or compulsory process; provided, however, that Employee may make such disclosures to Employee’s tax/financial advisors or legal counsel as long as they agree to keep the information confidential. If asked about any of such matters, Employee’s response shall be that Employee may not discuss any of such matters. In the event of a breach of the confidentiality provisions set forth in this paragraph of the Agreement by Employee, Zale may suspend any payments due under this Agreement pending the outcome of litigation and/or arbitration regarding such claimed breach of this Agreement by Employee. The Parties agree that this paragraph is a material inducement to Zale entering into this Agreement. Additionally, the Parties agree that a breach of this paragraph by Employee will cause Zale irreparable harm and that Zale may enforce this paragraph without posting a bond.

3. Employee acknowledges and agrees that he has ongoing obligations under the ESA, including, but not limited to, continued compliance with the covenants set forth in Article II of the ESA.

4. In consideration for the covenants and other agreements set forth in the ESA and Employee’s agreement to, compliance with, and execution, without revocation, of this Agreement as set forth in Section 14, Employee shall receive:

(a) $952,543.00, less applicable taxes and withholding, representing Employee’s “Severance Pay” as defined in the ESA, payable in equal installments over the 24 month period following the first ordinary payroll payment date that follows the date that is sixty (60) days after the Separation Date; provided, however, that all unpaid portions of such Severance Pay shall be distributed to Employee in a lump sum on the payroll date immediately preceding March 15, 2010.

(b) Employee shall be entitled to receive the Accrued Obligations, if any, specified in Section 1.1(b) of the ESA.

(d) Employee shall be entitled to receive the outplacement services specified in Section 1.1(d) of the ESA.

CONFIDENTIAL RELEASE AGREEMENT

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5. 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 being available for interview by Zale, or any attorney or other consultant retained by Zale, and providing to Zale any documents in Employee’s possession or under Employee’s control. Zale agrees to provide Employee with reasonable notice of the need for assistance when feasible.

6. Employee agrees that, in addition to the cessation of Employee’s employment with Zale, Employee shall cease from holding or reporting that Employee holds any positions as a director, officer and/or employee with Zale and/or any of the Releasees, effective on the Separation Date.

7. Employee waives and releases forever any right and/or rights Employee 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.

8. Zale and Employee agree that any controversy or claim (including all claims pursuant to common and statutory law) relating to this Agreement or the ESA or arising out of or relating to the subject matter of this Agreement, the ESA or Employee’s employment by Zale will be resolved exclusively through binding arbitration pursuant to the dispute resolution provisions contained in Article III and the provisions of Section 4.7 of the ESA.

9. 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 either 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.

10. 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.

11. This Agreement and the ESA constitute the entire Agreement of the Parties, and supersede all prior and contemporaneous negotiations and agreements, oral or written. All prior and contemporaneous negotiations and agreements are deemed incorporated and merged into this Agreement and the ESA and are deemed to have been abandoned if not so incorporated. No representations, oral or written, are being relied upon by any party in executing this Agreement other than the express representations of this Agreement and the ESA. This Agreement cannot be changed or terminated without the express written consent of the Parties. The rights under this Agreement may not be assigned by Employee, unless Zale consents in writing to said assignment. Employee represents that Employee has not assigned any of the claims related to the matters set forth herein.

CONFIDENTIAL RELEASE AGREEMENT

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

13. 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.

14. By executing this Agreement, Employee acknowledges and agrees that Employee:

	(a)	specifically waives any rights or claims arising under the ADEA and/or analogous state or local laws and Title VII of the Civil Rights Act of 1964 and other federal and local anti-discrimination and anti-retaliation laws;

	(b)	may take up to forty-five (45) calendar days from the Separation Date to consider whether or not Employee desires to execute this Agreement;

	(c)	may revoke this Agreement at any time during the seven (7) calendar day period after Employee signs and delivers this Agreement to Zale. Any such revocation must be in writing and delivered to Zale’s Senior Vice President of Human Resources, Mary Ann Doran at 901 W. Walnut Hill Lane, Irving, TX 75038 by such seventh (7th) calendar day. Employee understands that this Agreement is not effective, and Employee is not entitled to the Separation Pay and benefits in Paragraph 4, until the expiration of this seven (7) calendar day revocation period. Employee understands that upon the expiration of such seven (7) calendar day revocation period this entire Agreement will be binding upon Employee and will be irrevocable;

	(d)	has carefully read and fully understands all of the provisions of this Agreement and that any and all questions regarding the terms of this Agreement have been asked and answered to Employee’s complete satisfaction;

	(e)	knowingly and voluntarily agrees to all of the terms set forth in this Agreement and to be bound by this Agreement;

	(f)	is hereby advised in writing to consult with an attorney and tax advisor of Employee’s choice prior to executing this Agreement and has had the opportunity and sufficient time to seek such advice;

CONFIDENTIAL RELEASE AGREEMENT

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	(g)	understands that rights or claims under the ADEA and Title VII of the Civil Rights Act of 1964 that may arise after the date this Agreement is executed are not waived; and

	(h)	the rights and claims waived in this Agreement are in exchange for consideration over and above anything to which Employee is already entitled; and

15. The Parties represent that they have the sole and exclusive right and full capacity to execute this Agreement.

16. The “Effective Date” of this Agreement is the date that is eight (8) days following the date on which Employee signs this Agreement, so long as Employee has not revoked acceptance of this Agreement before such date.

17. By executing this Agreement, Employee also acknowledges that Employee (a) is not relying upon any statements, understandings, representations, expectations, or agreements other than those expressly set forth in this Agreement and the ESA; (b) has made Employee’s own investigation of the facts and is relying solely upon Employee’s own knowledge and the advice of Employee’s own legal counsel; and (c) 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.

18. All terms and provisions of this Agreement, and the drafting of this Agreement, have been negotiated by the Parties at arm’s length and to mutual agreement, with consideration by and participation of each, and no party shall be deemed the scrivener of this Agreement.

CONFIDENTIAL RELEASE AGREEMENT

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PLEASE READ CAREFULLY. THIS CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE INCLUDES THE RELEASE OF ALL CLAIMS AGAINST THE COMPANY, KNOWN OR UNKNOWN, THAT MAY HAVE OCCURRED AS OF THE DATE OF THIS AGREEMENT. THIS AGREEMENT ALSO CONTAINS A PROVISION REQUIRING THE PARTIES TO RESOLVE ANY DISPUTES BY ARBITRATION.

The parties have signed this Agreement on the dates written by the signatures below, to be effective on the Effective Date. Notwithstanding any other provision in this Agreement, if Employee does not sign and deliver this Agreement to Mary Ann Doran at 901 W. Walnut Hill Lane, Irving, TX 75038 on or before 47 days following the Separation Date, then this Agreement will be null and void and Employee will not be entitled to the Separation Pay, outplacement services, or any other consideration described in this Agreement.

EXECUTED in _________, Texas on this _____day of ____________________, 2009

Date: ____________ ______________________________

EXECUTED in Irving, Texas on this _____day of _________________________, 2009

		ZALE DELAWARE, INC.

Date:	February 18, 2009	By:	/s/ Mary Ann Doran
			Mary Ann Doran
		Its:	Senior Vice President Human Resources

EO - TX

CONFIDENTIAL RELEASE AGREEMENT

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