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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
Current Report
Dated September 21, 2005
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 Securities Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) 12 under the
Securities Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) 12 under the
Securities Act (17 CFR 240.13e-2(c))
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Item 1.01 Entry Into a Material Definitive Agreement
On September 21, 2005, Zale Corporation entered into new employment
agreements with Mary L. Forte, its President and Chief Executive Officer (the
"Forte Agreement") and Sue E. Gove, its Executive Vice President and Chief
Operating Officer (the "Gove Agreement"). The material terms of the Forte
Agreement and the Gove Agreement are described below.
The Forte Agreement
Term. The Forte Agreement provides that Ms. Forte will continue in her
position as President and Chief Executive Officer until July 31, 2006. Beginning
on the 365th day prior to expiration, the term will automatically be extended on
a day to day basis unless either party delivers written notice to the other
party of an intention not to extend the term.
Base Salary. Under the Forte Agreement, the Company will pay Ms. Forte a
base salary of not less than $800,000 per year ("Base Salary"), retroactive to
August 1, 2005, to be reviewed annually by the Board of Directors (the "Board").
Ms. Forte's Base Salary may be increased, but not decreased, at the discretion
of the Board, unless such decrease is generally applicable to other senior
executives.
Bonus. Ms. Forte will be eligible to receive an annual incentive bonus as
determined by the Company's Executive Bonus Program. The annual Target Bonus (as
defined in the Forte Agreement) will be 125% of Ms. Forte's Base Salary and the
maximum annual bonus that Ms. Forte will be entitled to receive is 200% of her
Base Salary.
Stock Options/Restricted Stock Units. As soon as practicable following the
2005 Annual Meeting of Stockholders in November 2005, Ms. Forte will receive
25,000 restricted stock units, with such grant vesting based on the attainment
of certain performance goals, and 25,000 restricted stock units, with such grant
vesting on September 5, 2008. Both of these grants are subject to stockholder
approval of an amendment to the Company's 2003 Stock Incentive Plan at the 2005
Annual Meeting of Stockholders. As of September 6, 2005, Ms. Forte also received
a grant of a ten-year option to purchase 125,000 shares of the Company's common
stock at an exercise price equal to the fair market value of the shares on the
date of grant. These options will vest over four years, with one-fourth of the
shares underlying the option vesting on the first, second, third and fourth
anniversaries of the date of grant.
Long-Term Incentive Compensation. Under the Forte Agreement, Ms. Forte is
also eligible to participate in equity and other long-term incentive award
programs of the Company including, without limitation, the 2003 Stock Incentive
Plan, on a basis generally consistent with that of other senior-level
executives.
Other Benefits. The Forte Agreement provides that Ms. Forte will be
entitled to the same perquisites and fringe benefits on a basis no less
favorable than any other senior executive.
Termination of Employment. The Company may terminate Ms. Forte's employment
with the Company with or without Cause (as such term is defined in the Forte
Agreement) and Ms. Forte may terminate her employment with the Company with or
without Good Reason (as such term is defined in the Forte Agreement). If the
Company terminates Ms. Forte's employment other than for Cause, death or
disability or Ms. Forte terminates her employment for Good Reason: (i) the
Company will pay Ms. Forte an amount equal to two times the sum of (v) her then
current Base Salary and (w) the greater of her Target Bonus for the year of
termination or the average of the immediately preceding two years' annual
incentive bonuses; (ii) during the greater of (x) the 24-month period following
termination or (y) the number of months, including fractional months, remaining
in the term, the Company will provide Ms. Forte (and, as applicable, her family)
with executive perquisites and fringe and other benefits on a basis which is no
less favorable than the basis on which such perquisites and benefits are
provided to any other senior executive under any of the Company's plans; (iii)
all unvested options and other equity and long-term incentive awards will
immediately vest and continue to be exercisable for the remainder of their
respective terms; (iv) Ms. Forte will receive an additional two years of service
and age credit for purposes of determining the benefits payable to Ms. Forte
under the Company's Supplemental Executive Retirement Plan; and (v) any accrued,
but unpaid salary, bonuses, expenses or benefits as of the date of termination
will be paid. Any termination payments made under the agreement are subject to
the requirements of the American Jobs Creation Act of 2004 (the "AJCA").
Change of Control. If within two years following a Change of Control (as
defined in the Forte Agreement) or following a Potential Change of Control (as
defined in the Forte Agreement) which is followed within one year by a Change of
Control, Ms. Forte terminates her employment with the Company for Good Reason or
the Company terminates Ms. Forte's employment for any reason other than for
Cause: (i) the Company will pay Ms. Forte an amount equal to three times the sum
of (v) her then current Base Salary and (w) the greater of her Target Bonus for
the year of termination or the average of the immediately preceding two years'
annual incentive bonuses, and such Base Salary and bonus will be the greatest of
each such amount as determined on (x) the date of the Potential Change of
Control, (y) the date of the Change of Control or (z) the date of termination of
Ms. Forte's employment; (ii) during the greater of (x) the 24-month period
following termination or (y) the number of months, including fractional months,
remaining in the term, the Company will provide Ms. Forte (and, as applicable,
her family) with executive perquisites and fringe and other benefits on a basis
which is no less favorable than the basis on which such perquisites and benefits
are provided to any other senior executive under any of the Company's plans;
(iii) all unvested options and other equity and long-term incentive awards will
immediately vest and continue to be exercisable for the remainder of their
respective terms; (iv) Ms. Forte will receive the actuarial value of the
Company's Supplemental Executive Retirement Plan as of the date of termination;
(v) Ms. Forte will receive a tax-gross up payment for any excise tax imposed by
Section 4999 of the Code (as defined in the Forte Agreement); and (vi) any
accrued, but unpaid salary, bonuses, expenses or benefits as of the date of
termination will be paid. Any Change of Control payments made under the
agreement are subject to the requirements of the AJCA.
Nonsolicitation and Noncompetition. Ms. Forte is subject to certain
nonsolicitation and noncompetition provisions for a period of 18 months
following termination. In the event that termination is in connection with a
Change of Control, such noncompetition provisions shall apply for a period of 12
months.
The foregoing descriptions of the terms of the Forte Agreement is qualified
in its entirety by reference to the Forte Agreement, which is attached hereto as
Exhibit 10.1 and is incorporated herein by reference.
The Gove Agreement
Term. The Agreement provides that Ms. Gove will continue in her position as
Executive Vice President and Chief Operating Officer until July 31, 2006.
Beginning on the 365th day prior to expiration, the term will automatically be
extended on a day to day basis unless either party delivers written notice to
the other party of an intention not to extend the term.
Base Salary. Under the Gove Agreement, the Company will pay Ms. Gove a base
salary of not less than $650,000 per year ("Base Salary"), retroactive to August
1, 2005, to be reviewed annually by the Board of Directors (the "Board"). Ms.
Gove's Base Salary may be increased, but not decreased, at the discretion of the
Board, unless such decrease is generally applicable to other senior executives.
Bonus. Ms. Gove will be eligible to receive an annual incentive bonus as
determined by the Company's Executive Bonus Program. The annual Target Bonus (as
defined in the Gove Agreement) will be 80% of Ms. Gove's Base Salary and the
maximum annual bonus that Ms. Gove will be entitled to receive is 150% of her
Base Salary.
Stock Options/Restricted Stock Units. As soon as practicable following the
2005 Annual Meeting of Stockholders in November 2005, Ms. Gove will receive
15,000 restricted stock units, with such grant vesting based on the attainment
of certain performance goals, and 15,000 restricted stock units, with such grant
vesting on September 5, 2008. Both of these grants are subject to stockholder
approval of an amendment to the Company's 2003 Stock Incentive Plan at the 2005
Annual Meeting of Stockholders. As of September 6, 2005, Ms. Gove also received
a grant of a ten-year option to purchase 75,000 shares of the Company's common
stock at an exercise price equal to the fair market value of the shares on the
date of grant. These options will vest over four years, with one-fourth of the
shares underlying the option vesting on the first, second, third and fourth
anniversaries of the date of grant.
Long-Term Incentive Compensation. Under the Gove Agreement, Ms. Gove is
also eligible to participate in equity and other long-term incentive award
programs of the Company including, without limitation, the 2003 Stock Incentive
Plan, on a basis generally consistent with that of other senior-level
executives.
Other Benefits. The Gove Agreement provides that Ms. Gove will be entitled
to the same perquisites and fringe benefits on a basis no less favorable than
any other senior executive.
Termination of Employment. The Company may terminate Ms. Gove's employment
with the Company with or without Cause (as such term is defined in the Gove
Agreement) and Ms. Gove may terminate her employment with the Company with or
without Good Reason (as such term is defined in the Gove Agreement). If the
Company terminates Ms. Gove's employment other than for Cause, death or
disability or Ms. Gove terminates her employment for Good Reason: (i) the
Company will pay Ms. Gove an amount equal to two times the sum of (v) her then
current Base Salary and (w) the greater of her Target Bonus for the year of
termination or the average of the immediately preceding two years' annual
incentive bonuses; (ii) during the greater of (x) the 24-month period following
termination or (y) the number of months, including fractional months, remaining
in the term, the Company will provide Ms. Gove (and, as applicable, her family)
with executive perquisites and fringe and other benefits on a basis which is no
less favorable than the basis on which such perquisites and benefits are
provided to any other senior executive under any of the Company's plans; (iii)
all unvested options and other equity and long-term incentive awards will
immediately vest and continue to be exercisable for the remainder of their
respective terms; (iv) Ms. Gove will receive an additional two years of service
and age credit for purposes of determining the benefits payable to Ms. Gove
under the Company's Supplemental Executive Retirement Plan; and (v) any accrued,
but unpaid salary, bonuses, expenses or benefits as of the date of termination
will be paid. Any termination payments made under the agreement are subject to
the requirements of the AJCA.
Change of Control. If within two years following a Change of Control (as
defined in the Gove Agreement) or following a Potential Change of Control (as
defined in the Gove Agreement) which is followed within one year by a Change of
Control, Ms. Gove terminates her employment with the Company for Good Reason or
the Company terminates Ms. Gove's employment for any reason other than for
Cause: (i) the Company will pay Ms. Gove an amount equal to three times the sum
of (v) her then current Base Salary and (w) the greater of her Target Bonus for
the year of termination or the average of the immediately preceding two years'
annual incentive bonuses, and such Base Salary and bonus will be the greatest of
each such amount as determined on (x) the date of the Potential Change of
Control, (y) the date of the Change of Control or (z) the date of termination of
Ms. Gove's employment; (ii) during the greater of (x) the 24-month period
following termination or (y) the number of months, including fractional months,
remaining in the term, the Company will provide Ms. Gove (and, as applicable,
her family) with executive perquisites and fringe and other benefits on a basis
which is no less favorable than the basis on which such perquisites and benefits
are provided to any other senior executive under any of the Company's plans;
(iii) all unvested options and other equity and long-term incentive awards will
immediately vest and continue to be exercisable for the remainder of their
respective terms; (iv) Ms. Gove will receive the actuarial value of the
Company's Supplemental Executive Retirement Plan as of the date of termination;
(v) Ms. Gove will receive a tax-gross up payment for any excise tax imposed by
Section 4999 of the Code (as defined in the Gove Agreement); and (vi) any
accrued, but unpaid salary, bonuses, expenses or benefits as of the date of
termination will be paid. Any Change of Control payments made under the
agreement are subject to the requirements of the AJCA.
Nonsolicitation and Noncompetition. Ms. Gove is subject to certain
nonsolicitation and noncompetition provisions for a period of 18 months
following termination. In the event that termination is in connection with a
Change of Control, such noncompetition provisions shall apply for a period of 12
months.
The foregoing descriptions of the terms of the Gove Agreement is qualified
in its entirety by reference to the Gove Agreement, which is attached hereto as
Exhibit 10.2 and is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
10.1 Employment Agreement between Zale Corporation and Mary L. Forte
10.2 Employment Agreement between Zale Corporation and Sue E. Gove
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
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Registrant
Date: September 27, 2005 By: /s/ Mark R. Lenz
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Mark R. Lenz
Group Senior Vice President and
Chief Financial Officer