EXHIBIT 10.7c

SECOND LEASE AMENDMENT
AND AGREEMENT

     This Second Lease Amendment and Agreement (this “Second Amendment”) is made
and entered into to be effective as of June 30, 2004, by and between CP/HERS
WALNUT HILL, L.P., a Delaware limited partnership (“Landlord”) and ZALE
DELAWARE, INC., a Delaware corporation (“Tenant”).

RECITALS

     A. Principal Mutual Life Insurance Company (“Original Landlord”) entered
into that certain Lease dated as of September 17, 1992 (the “Original Lease”)
with Zale Corporation, as debtor and debtor-in-possession, as tenant (“Original
Tenant”) with respect to the land described on Exhibit A attached hereto and
made a part hereof and the remainder of the “Premises” as defined in the
Original Lease (and hereinafter so referenced), the street address of which is
901 West Walnut Hill Lane, Irving, Texas.

     B. Original Tenant assigned to Tenant all of Original Tenant’s rights,
title and interests in and to the Original Lease, and Tenant accepted such
assignment and expressly assumed and agreed to perform all of the terms,
covenants, conditions, obligations and liabilities required of the Original
Tenant under the Original Lease, all as evidenced by that certain Memorandum of
Assignment of Lease dated as of July 30, 1993, executed between Original Tenant
and Tenant.

     C. Original Landlord and Tenant entered into that certain First Lease
Amendment and Agreement dated effective as of February 1, 1996 (the “First
Amendment”) amending the Original Lease in certain respects (the Original Lease
as so amended is sometimes collectively referred to herein as the “Lease”).

     D. Landlord is the current owner of the Premises and the landlord’s
interest under the Lease, and Tenant is the current owner of the leasehold
estate and all of the tenant’s rights, title, interests, obligations and
liabilities under the Lease, free and clear of any mortgages or encumbrances on
said leasehold estate.

     E. Landlord and Tenant desire to amend the Lease as hereinafter provided.

     NOW, THEREFORE, FOR TEN DOLLARS ($10.00) IN HAND PAID, the mutual covenants
and agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

AGREEMENT

     1. Recitals and Attachments. The Recitals set forth above are incorporated
herein and made a part hereof by this reference and Attachment I, Attachment II
and Attachment III hereto are hereby made a part of this Second Amendment and of
the Lease.

 

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     2. Amendments. The Lease is hereby amended as follows:

     (a) Section 2 of the Lease is hereby deleted in its entirety and is
replaced with the following in that Tenant has exercised its options with
respect to the remaining Extension Periods:

     “2. TERM. The term of this Lease (the “Term”) shall be approximately
twenty-five (25) years, six (6) months, and fourteen (14) days beginning on
September 17, 1992 (the “Commencement Date”) and expiring March 31, 2018 (the
“Expiration Date”). There shall be no rights to renew or extend the Term beyond
the Expiration Date.”

     (b) Subsection 3.a. of the Lease is hereby deleted in its entirety and is
replaced with the following:

     “a. Basic Rental. Landlord hereby acknowledges receipt of Tenant’s payment
in full of “Basic Rental” (herein so called) through and including December 31,
2003. Tenant shall pay Basic Rental during the remaining portion of the Term
according to the following schedule:

                  Annual Rental

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  Annual

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  Monthly

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Time Period

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  Basic Rate per RSF

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  Basic Rental

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  Basic Rental

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01/01/04 – 06/30/04
  $8.75   $3,140,235.00   $261,686.25
07/01/04 – 12/31/04
  $0.00   $0.00   $0.00
01/01/05 – 09/30/05
  $8.75   $3,140,235.00   $261,686.25
10/01/05 – 03/31/08
  $9.25   $3,319,677.00   $276,639.75
04/01/08 – 06/30/08
  $9.50   $3,409,398.00   $284,116.50
07/01/08 – 12/31/08
  $0.00   $0.00   $0.00
01/01/09 – 12/31/09
  $10.00   $3,588,840.00   $299,070.00
01/01/10 – 12/31/10
  $10.25   $3,678,561.00   $306,546.75
01/01/11 – 12/31/11
  $10.50   $3,768,282.00   $314,023.50
01/01/12 – 12/31/12
  $10.75   $3,858,003.00   $321,500.25
01/01/13 – 12/31/13
  $11.25   $4,037,445.00   $336,453.75
01/01/14 – 12/31/14
  $11.50   $4,127,166.00   $343,930.50
01/01/15 – 12/31/15
  $11.75   $4,216,887.00   $351,407.25
01/01/16 – 12/31/16
  $12.00   $4,306,608.00   $358,884.00
01/01/17 – 03/31/18
  $12.25   $4,396,329.00   $366,360.75

     Basic Rental shall be abated during the two (2) respective six (6) month
periods as referenced above.”

     (c) Subsection 3.b.(i) of the Lease is hereby deleted in its entirety and
is replaced with the following:

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     “(i) all insurance and insurance-related expenses applicable to the
Premises, including commercially reasonable deductible amounts acceptable to
Landlord from time to time during the Term, but not exceeding $100,000.00 per
occurrence.”

     (d) Subsection 3.c. of the Lease is amended by deleting the fourth sentence
and replacing it with the following:

     “Tenant shall pay to Landlord Scheduled Rent required under this Lease (and
any applicable Additional Rent payable directly to Landlord pursuant to this
Lease) without deduction or setoffs, at Tenant’s option, either (i) by wire
transfer of immediately available funds according to the following wiring
instructions:

JPMorgan Chase
ABA #021-000-021
Account Name: CP/HERS Walnut Hill
Account Number: 777-230-100

     or (ii) by check payable to Landlord and delivered to the following lockbox
address:

CP/HERS Walnut Hill
General Post Office
P. O. Box 5410
New York, New York 10087-5410.”

     (e) Subsection 3.c. of the Lease is also amended by deleting the last
sentence thereof and replacing it with the following:

     “Tenant shall pay Taxes directly to taxing authorities, and shall pay the
premiums for all insurance (other than the all-risk property insurance to be
carried by Landlord with respect to the Premises, subject to the last sentence
of Subsection 10.a. if and to the extent Tenant satisfies the condition to
maintaining such property insurance and maintains such property insurance)
directly to its insurers, prior to delinquency. Tenant shall deliver to Landlord
evidence satisfactory to Landlord of payment in full of all Taxes and insurance
premiums prior to the date on which any such amounts would become delinquent,
and shall, at Landlord’s written request, deliver evidence of payment in full of
any other portions of the Additional Rent as Landlord may reasonably require.
Tenant shall reimburse Landlord within thirty (30) days following receipt of
Landlord’s invoice therefor for (i) the cost of the all-risk property insurance
to be carried by Landlord with respect to the Premises, subject to the last
sentence of Subsection 10.a. if and to the extent Tenant satisfies the condition
to maintaining such property insurance and maintains such property insurance,
and (ii) for the amount of any deductible incurred by Landlord with respect to
any claim Landlord makes with respect to the insurance to be carried by Landlord
with respect to the Premises pursuant to express provisions of the Lease, if any
insured loss exceeding Landlord’s deductible amount with respect to such
insurance occurs at the Premises. Tenant, at its sole cost and expense, shall be
responsible for repairing any and all damage to the Premises for which the costs
do not exceed the applicable deductible amount. Notwithstanding the foregoing,
if any insured

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loss or uninsured loss was caused by the gross negligence or willful misconduct
of Landlord, its agents, employees or contractors, Tenant shall not be required
to pay the deductible therefor (if an insured loss) or for the cost of the
repair (if an uninsured loss), as applicable, and in such event, Landlord will
make the amount of the applicable insurance deductible available to fund that
portion of the repair costs (if an insured loss) or pay for the costs of the
repair (if an uninsured loss), as applicable.”

     (f) Subsection 6.b. of the Lease is hereby deleted, as are all references
to Tenant’s obligations to perform separation of utilities with respect to the
Premises. The parties acknowledge that Tenant has fulfilled all its obligations
under the Lease and the Agreement Regarding Utilities dated September 17, 1992
(as amended by First Amendment to Agreement Regarding Utilities dated as of
February 1, 1996) regarding the separation of utilities serving Lots 1, 3, 4, 5
and 6 of Las Colinas, Sector X First Installment, Revised for the City of
Irving, Dallas County, Texas, an addition according to the map or plat thereof
recorded in Volume 85068, Page 2623, Map Records, Dallas County, Texas, from the
utilities serving the Premises (i.e., Lot 2, described on such plat).

     (g) Subsection 7.b. of the Lease is amended by deleting all the language
added to the end of such Subsection pursuant to Subsection 2(k) of the First
Amendment.

     (h) Subsection 7.c. of the Lease is hereby deleted in its entirety and is
replaced with the following:

     “c. Repairs; Maintenance. Tenant, at its expense, shall maintain the
Premises to the Zale Headquarters Standard and, except as hereinafter expressly
provided, in good repair and condition, and perform routine care of landscaping
and regular mowing of grass, and servicing, maintenance, repair and replacements
of all aspects of the Premises including, without limitation, servicing,
maintenance, and repairs of Tenant Capital Items and Landlord Capital Items, and
replacements of Tenant Capital Items (but not replacements of Landlord Capital
Items), all in a manner consistent with the Zale Headquarters Standard, subject
to ordinary wear and tear, casualty and condemnation. Landlord, at its expense,
shall replace Landlord Capital Items (if necessary during the Term) in
accordance with the Zale Headquarters Standard. As used in this Lease, “Landlord
Capital Items” shall mean the roof, roof membrane, foundation slab, foundation,
curtain wall, interior permanent load-bearing walls and support columns and
other structural components of the Building and parking structure. As used in
this Lease, “Tenant Capital Items” shall mean all non-structural components and
all operating systems and components of the Building, including without
limitation the heating, ventilating and air conditioning systems, the plumbing,
mechanical and electrical systems, all other Building systems, elevators,
escalators, the paved parking areas, sidewalks and driveways, all non-structural
aspects of the parking structure, and any above-ground storage tanks now
existing or hereafter placed in or on the Premises, including without limitation
any such tanks installed to replace those described in Section 24 of this Lease.
Regarding the parking structure, for example (without limitation), crack(s) in
the façade(s), tier(s), and/or column(s) of the parking structure capable of
being repaired by patching, sealing or replacements of immaterial areas or
sections of concrete of the parking structure shall be considered non-structural
repairs or

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replacements and accordingly are Tenant Capital Items for which Tenant shall be
responsible at its cost. Serious structural defects requiring replacements of
major portions or the entirety of the façade(s), tier(s) and/or column(s) or
material areas or sections of concrete of the parking structure would be
examples of replacements of Landlord Capital Items for which Landlord would be
responsible at its cost. Tenant Capital Items shall also include any utility
lines, conduits, meters or other equipment located on lands abutting or adjacent
to the Premises that are owned or leased by Tenant or its affiliate(s) to the
extent that same pertain to utilities serving the Premises. “Casualty” shall
include damage by fire, storm, flood, explosion, falling objects, riot,
insurrection, acts of war and acts of God. Tenant shall, throughout the Term,
take good care of the Premises and keep them free from waste or nuisance and, at
the end of the Term, deliver the Premises and all improvements and equipment
therein (other than Tenant’s Property that Tenant elects to remove or Landlord
requires be removed) clean and free of trash and in good repair and condition,
except for ordinary wear and tear and casualty between the last necessary
repair, replacement, or restoration made by Tenant or Landlord pursuant to such
party’s respective obligations under this Lease. On the first day of each month
during the Term, Tenant shall deliver to Landlord a completed maintenance
checklist, the form of which is attached hereto as Exhibit C, together with
copies of all Service Contracts (defined below) that have not previously been
delivered by Tenant to Landlord, including, without limitation, for janitorial,
landscaping, elevator and escalator service, and for routine maintenance of all
Building systems including, without limitation, mechanical, electrical and
plumbing systems, and life-safety and HVAC systems. Landlord, at its sole cost
and expense, may from time to time inspect the Premises to ensure Tenant is
complying with its obligations under this Section 7 and the other provisions of
this Lease; currently, Landlord anticipates making such inspections on a
quarter-annual basis, but may make such inspections more frequently in its
reasonable discretion. Any entry by Landlord under this Section 7 shall be
during Tenant’s normal business hours, following reasonable oral notice by
Landlord to Tenant. Landlord’s representatives shall be accompanied at all times
during such inspections by representatives designated by Tenant, and Landlord
shall strictly observe all security procedures reasonably promulgated by Tenant
from time to time during the Term applicable to such visits. If any inspection
reveals that Tenant is not properly and timely performing any maintenance,
repair and/or replacement obligations with respect to the Premises including,
without limitation, its servicing, maintenance, and repair (but not replacement)
obligations with respect to Landlord Capital Items, in the manner required
hereunder, Landlord may notify Tenant as to such matters, and Tenant shall
promptly perform the applicable servicing, maintenance, repair and/or
replacement obligations in a manner as necessary to maintain the Premises to the
Zale Headquarters Standard and all improvements and equipment therein in good
order and condition. If such failure by Tenant pertains to (i) any of the
matters described on Exhibit C attached hereto, (ii) any servicing, repair or
maintenance obligations of Tenant hereunder with respect to Tenant Capital Items
and/or Landlord Capital Items, (iii) any replacement obligations with respect to
Tenant Capital Items, or (iv) any of the other matters necessary to maintain the
Premises to the Zale Headquarters Standard (any of such matters constituting and
being hereinafter referred to as a “Material Tenant Repair”), Landlord shall
notify Tenant of such failure in writing. If Tenant fails to perform a Material
Tenant Repair after receipt

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of written notice from Landlord describing the work to be performed, within the
period specified in such notice by Landlord (which specified period shall be a
commercially reasonable length of time given the scope of the work to be
performed, sufficient to complete the type of work described in such notice and
may vary from notice to notice) (the “Designated Cure Period”), and such failure
continues for an additional ten (10) day period following Landlord’s second
written notice of the need for such Material Tenant Repair, Landlord shall be
entitled to (y) cause such specific Material Tenant Repair to be performed as
required under the terms of this Lease and/or (z) declare an Event of Default
under this Lease, without any further notice, grace or cure rights. Tenant shall
pay to Landlord within thirty (30) days after receipt from Landlord of
Landlord’s written demand therefor, the actual costs incurred by Landlord in
performing the Material Tenant Repair (collectively, the “Maintenance Charges”).

     In addition, if Landlord reasonably determines that emergency repairs are
necessary to avoid imminent personal injury or imminent substantial damage to
the Premises (an “Emergency Repair”), and Landlord is unable to contact Tenant,
despite Landlord’s reasonable, good faith efforts to do so given the
circumstances of the specific emergency, or if, after contacting Tenant, Tenant
refuses or fails to act promptly and appropriately, Landlord shall be entitled
to cause the Emergency Repair to be made in a manner that complies, as closely
as possible given the circumstances, with all of Tenant’s security procedures.
Landlord shall notify Tenant as soon as practicable of the Emergency Repair and
the work undertaken to alleviate the immediate emergency. Tenant shall pay
Landlord within thirty (30) days following written demand, for the actual cost
of work performed by or on behalf of Landlord to effect the Emergency Repair.

     For purposes of this Lease, the “Zale Headquarters Standard” shall be as
described on Exhibit E, attached hereto and made a part hereof for all purposes.

     With respect to any improvement, alteration or addition proposed by Tenant
pursuant to Subsection 7.b. and/or any Material Tenant Repair required to be
made by Tenant pursuant to this Subsection 7.c. of an estimated cost exceeding
$500,000.00, Landlord reserves the right to require Tenant, prior to
commencement of such work, to comply with one of the following at Landlord’s
election: (i) to post payment and/or performance bonds or (ii) to provide other
assurances reasonably acceptable to Landlord (such as a letter of credit or
other security) to ensure timely payment and performance of such items.

     Notwithstanding anything in this Lease to the contrary, during the final
five (5) years of the Term, if Tenant is obligated to make (and makes) a
replacement of a Tenant Capital Item the cost of which exceeds $250,000.00, that
has a useful life that extends beyond the Expiration Date, Landlord will
reimburse Tenant proportionately for the cost of the replacement within thirty
(30) days following completion thereof, to the extent that the remaining useful
life of such Tenant Capital Item (assuming normal use and proper maintenance and
repair), extends beyond the Expiration Date. The useful lives of certain
replacement Tenant Capital Item shall be determined by reference to the
estimated service lives of various system components surveyed and compiled by
the Technical

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Committee of the American Society of Heating, Refrigerating and Air Conditioning
Engineers, Inc. (“ASHRAE”) and set forth in Chapter 36 of the 2003 ASHRAE
Handbook, Heating, Ventilating and Air Conditioning Applications, Inch-Pound
Edition, adjusted for local conditions (“ASHRAE Standards”), as same may be
updated from time to time during the Term. If the useful life of the replacement
Tenant Capital Item is not addressed by ASHRAE Standards, the useful life of
such replacement Tenant Capital Item shall be determined by Landlord in its
reasonable judgment. For purposes of the calculation of the reimbursement
obligation of Landlord pursuant to this paragraph, the useful life of such
replacement item shall be the lesser of (i) the actual useful life of such item
or (ii) seven (7) years, notwithstanding that a longer useful life may be
indicated by ASHRAE Standards (if applicable) or may otherwise apply.”

     (i) Subsection 7.d. of the Lease is amended by (1) deleting the phrase
“Subject to the provisions of this Lease regarding Hard Construction which is
the subject of Reimbursable Tenant Expenditures, all” and replacing it with
“All” in the first sentence thereof, (2) to add the phrase “using good quality
materials consistent with the Zale Headquarters Standard” after the phrase “good
and workmanlike manner” appearing in the fourth (4th) sentence thereof and
(3) to delete the last sentence thereof.

     (j) A new Subsection 7.f. is added to the Lease as follows:

     “f. Annual Budget. No later than thirty (30) days prior to the end of
Tenant’s fiscal year (which currently runs August 1 through July 31), Tenant
shall deliver to Landlord, for its approval, but only as contemplated below, a
budget setting forth the repair, maintenance and capital expenditures expected
to be incurred by Tenant in connection with the maintenance and operation of the
Premises in accordance with the Zale Headquarters Standard during the following
fiscal year (including without limitation proposed expenditures for repairs to
Landlord Capital Items and Tenant Capital Items and replacements to Tenant
Capital Items). Each such budget shall be in the form attached hereto as
Exhibit G. In the event that the amount budgeted for repairs and maintenance
required by Tenant under this Lease with respect to a specific line item shows a
decrease of more than ten percent (10%) for the same line item from the
preceding fiscal year, or if the aggregate budget amount for such fiscal year
decreases by more than three percent (3%) from the aggregate budget amount from
the preceding fiscal year (in either case, “Material Reduction”), Tenant shall
include a written justification of such reduced amount. If Landlord, acting
reasonably and in good faith, rejects Tenant’s justification of the Material
Reduction as being non-compliant with the Zale Headquarters Standard, Landlord
shall notify Tenant in writing within thirty (30) days following Landlord’s
receipt of Tenant’s justification that Landlord reasonably disputes same.
Thereafter, the parties shall promptly proceed in good faith until an approved
budget is achieved. In the event of a budget dispute, the preceding fiscal
year’s approved budget shall apply to the fiscal year in dispute until an
approved budget is achieved for the fiscal year in dispute. If the approved
budget for the fiscal year in dispute is not achieved after good faith efforts
by both parties on or prior to the expiration of the third (3rd) month of the
applicable fiscal year, then the preceding fiscal year’s approved budget
escalated to reflect any net increase in the Consumer Price Index during such
fiscal year shall be the revised budget applicable to the fiscal year in
dispute. As used herein, “Consumer Price

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Index” or “CPI” shall mean the Consumer Price Index, Dallas-Fort Worth, Texas,
All Urban Consumers (base index year 1982-84=100), as published by the United
States Department of Labor, Bureau of Labor Statistics or, if that index is
revised or no longer published, such alternative index as Landlord reasonably
shall select in good faith to produce results equivalent, as nearly as possible,
to those that would have been obtained if the Consumer Price Index had not been
so revised or discontinued. The CPI escalation factor shall be the quotient
resulting from dividing the CPI number for the first month of the fiscal year in
dispute (or latest published CPI number that is available) by the CPI number for
the first month of the previous fiscal year. Within sixty (60) days after the
expiration of each fiscal year, Tenant shall deliver to Landlord a detailed
statement (i) setting forth the actual expenses incurred by Tenant in
maintaining the Premises during such fiscal year and (ii) stating in comparative
form the expenses actually incurred by Tenant in maintaining the Premises during
the fiscal year in question and the amounts set forth in such fiscal year’s
approved budget. Each such statement shall be certified by the either chief
financial officer of Tenant or Tenant’s manager or director over facilities as
being true and correct in all material respects. NOTWITHSTANDING ANY OTHER
PROVISIONS OF THIS SUBSECTION 7F, IT IS UNDERSTOOD AND AGREED THAT NO APPROVAL
BY LANDLORD OF ANY BUDGET OR ANY ITEM THEREIN, NOR ANY FAILURE OF LANDLORD TO
OBJECT TO ANY BUDGET OR ANY ITEM THEREIN, NOR ANY REASONS EXPRESSED FOR ANY
OBJECTION BY LANDLORD, NOR THE AMOUNT OF ANY BUDGET ITEM, WHETHER LESS THAN OR
MORE THAN PRIOR FISCAL YEARS, SHALL IN ANY WAY INDICATE ANY CONSENT OF OR WAIVER
BY LANDLORD, OR IN ANY WAY PERTAIN TO OR AFFECT, (1) ANY OF TENANT’S OBLIGATIONS
UNDER THIS LEASE WITH RESPECT TO MAINTAINING THE PREMISES AT THE ZALE
HEADQUARTERS STANDARD, OR (2) ANY OTHER PROVISIONS OF THIS LEASE PERTAINING TO
TENANT’S MAINTENANCE AND REPAIR OBLIGATIONS.”

     (k) The first sentence of Section 8 of the Lease is hereby deleted in its
entirety and is replaced with the following:

     “Tenant shall (a) continuously occupy at least fifty-one percent (51%) of
the Building and use the Premises only for lawful purposes consistent with the
uses permitted which are consistent with other office buildings in the vicinity
of the Building (the “Permitted Use”), (b) comply with all laws, orders, rules,
private restrictions and restrictive covenants, and regulations relating to the
use, condition, and occupancy of the Premises, including without limitation, at
Tenant’s cost, making any repairs to Tenant Capital Items and Landlord Capital
Items and/or replacements of Tenant Capital Items in order to comply therewith,
(c) within sixty (60) days after the Commencement Date, deliver to Landlord a
narrative description of a life safety plan for the Building and make such
modifications thereto as Landlord may reasonably request in order to comply with
changes in applicable laws (the “Safety Plan”), and (d) continuously implement
the Safety Plan (with such modifications thereto as Landlord may from time to
time reasonably request in order to comply with changes in applicable laws) and
deliver to Landlord narrative descriptions thereof (and any amendments thereto,
and affirming Tenant’s compliance therewith).”

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     (l) Subsection 10.a. of the Lease is amended by deleting the first sentence
thereof and replacing it with the following:

     “Landlord shall insure (subject to the last sentence of this Subsection
10.a. if and to the extent Tenant satisfies the condition to maintaining such
insurance and maintains such insurance as provided herein), at Tenant’s cost,
the Premises with a policy or policies covering the following: (i) “All Risk”
property insurance excluding any coinsurance provision, in an amount adequate to
cover the full replacement cost of the Building and other improvements
(including rental loss coverage for the benefit of Landlord for the actual loss
sustained), (ii) Boiler and Machinery coverage to the extent not covered under
the “All Risk” above, and (iii) such other insurance and/or amounts of coverage
as Landlord may reasonably require to the extent customarily carried on property
similar to the Premises.”

     (m) Subsection 10.a. of the Lease is also amended by adding the following
clause at the end of the second sentence thereof “and (4) excess or umbrella
commercial general liability insurance coverage in excess of the primary
coverage set forth in clause (1) above of not less than $10,000,000 per
occurrence/general aggregate”.

     (n) The first sentence of Subsection 10.b. of the Lease is amended by
deleting the phrase “regardless of whether the negligence of the other party
caused such loss” and replacing it with “REGARDLESS OF CAUSE, INCLUDING WITHOUT
LIMITATION, WHETHER THE NEGLIGENCE OF THE OTHER PARTY CAUSED SUCH LOSS.”

     (o) Section 15 of the Lease is hereby deleted in its entirety. Landlord
hereby releases and relinquishes any landlord’s lien or right to assert a
landlord’s lien it may have, now or in the future, arising by operation of law,
under statute or by contract, in any detached, movable personal property of any
kind owned by Tenant and located on the Premises now or in the future.

     (p) Subsection 17.e. of the Lease is amended by deleting the sentence
beginning with “For purposes of” and ending with “ABA No.: 073000228”.

     (q) A new Subsection 17.f. is added to the Lease as follows:

     “f. submit the matter to arbitration as provided in Subsection 18.b.
below.”

     (r) The first sentence of Subsection 18.b. of the Lease is amended by
deleting the phrase “Tenant Allowance Amounts” and replacing it with “any
allowances payable to Tenant”. In addition, the second sentence of clause (ii)
of Subsection 18.b. is deleted and is replaced with the following:

     “In the event that the arbitration results in a decision in favor of a
party requiring the other party to pay or reimburse the other party any sum or
make an expenditure to a third party, the obligated party shall comply with the
requirements of such arbitration decision within ten (10) days of the time set
by the arbitrator(s) to do so.”

     (s) Subsection 19.a. of the Lease is amended by deleting clauses (iii) and
(iv) thereof and replacing them with the following:

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     ”(iii) necessary repairing, restoring, altering, remodeling, painting,
cleaning, or otherwise putting the Premises into condition to relet the Premises
to another single-tenant in the Las Colinas, Texas market, and making any
Material Tenant Repairs that Tenant was required to perform pursuant to the
Lease on or prior to the termination of Tenant’s possession of the Premises or
this Lease but did not perform in accordance with the Lease (subject to the cost
allocation provisions of Section 7.d. hereof pertaining to certain late-term
replacements of Tenant Capital Items, if applicable), (iv) if Tenant is
dispossessed of the Premises and this Lease is not terminated, reletting all or
any part of the Premises (including brokerage commissions attributable to the
unexpired portion of this Lease, costs of such necessary tenant finish work, and
other costs incidental to such reletting and making any Material Tenant Repairs
that Tenant was required to perform pursuant to the Lease on or prior to the
termination of Tenant’s possession of the Premises or this Lease but did not
perform in accordance with the Lease (subject to the cost allocation provisions
of Section 7.d. hereof pertaining to certain late-term replacements of Tenant
Capital Items, if applicable).”

     (t) The last sentence of the first paragraph of Section 24 of the Lease is
hereby deleted and is replaced with the following:

     “Tenant acknowledges the presence and its use of one above-ground storage
tank for diesel fuel for use in connection with Tenant’s back-up electric
generator on the Premises, and Tenant hereby agrees to maintain the registration
of same as required by law, indemnifies and holds harmless Landlord with respect
to such tanks, shall properly maintain such tanks as required by law (including,
without limitation, the implementation and maintenance of proper primary and
secondary containment measures), and shall remove same from the Premises, at
Tenant’s sole cost and expense, under Landlord’s supervision and direction and
in compliance with all applicable laws, within thirty (30) days following the
expiration or termination of this Lease.”

     (u) Exhibits B, E and F to the Original Lease, and Attachment I to the
First Amendment are hereby deleted in their entirety. A replacement Exhibit E to
the Original Lease is attached to this Second Amendment as Attachment II. A new
Exhibit G to the Original Lease is attached to this Second Amendment as
Attachment III. The parties acknowledge and agree that a replacement Exhibit C
to the Original Lease shall be implemented in connection with the replacement or
refurbishment of the Building chillers contemplated pursuant to Section 6 of,
and Attachment I to, this Second Amendment, in accordance with manufacturer
recommendations.

     (v) The addresses for notices to Landlord as shown beside Landlord’s
signature block to the Original Lease are deleted and replaced with the
following:

“CP/HERS Walnut Hill, L.P.
c/o ING Clarion Partners
230 Park Avenue, 12th Floor
New York, New York 10169
Attention: Portfolio Manager

-10-

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With a copy to:

CP/HERS Walnut Hill, L.P.
c/o ING Clarion Realty Services
5950 Berkshire Lane, Suite 560
Dallas, Texas 75225
Attention: General Manager

With a copy to:

CP/HERS Walnut Hill, L.P.
c/o ING Clarion Partners
One Federal Street, 18th Floor
Boston, Massachusetts 02110
Attention: Portfolio Manager”

     3. Representations by Landlord. Landlord hereby represents to Tenant as
follows:

     (a) Landlord is the current owner of the Premises, subject to various
easements and other title exceptions; provided, however, that such title
exceptions do not include any mortgages, deeds of trust or other security
instruments pursuant to which Landlord has encumbered the Premises.

     (b) Landlord has the power and authority to execute and deliver this Second
Amendment and to perform its obligations hereunder, and Landlord has taken all
necessary action to authorize the execution and delivery of this Second
Amendment. This Second Amendment has been duly authorized, executed and
delivered by Landlord and does not conflict with, contravene or constitute a
default under or breach of any (i) agreements, contracts or documents to which
Landlord is a party or by which Landlord is bound, or (ii) law, statute, rule,
ordinance, regulation or public or private restriction governing or pertaining
to Landlord. The execution and delivery of this Second Amendment by Landlord
requires no consent, approval, joinder or action by any other party or entity
(governmental, judicial or private) or by any other officer, director, or
committee or board of Landlord, which has not been previously and properly
obtained.

     4. Representations by Tenant. Tenant hereby represents to Landlord as
follows:

     (a) Tenant has not received any notice of default with respect to any of
the restrictions, covenants, conditions or requirements of The Las Colinas
Association or any of the restrictions, covenants, conditions or requirements
now of record with respect to the Premises. There are no delinquent monetary
obligations, assessments or other fees or amounts owed to the Las Colinas
Association for which Tenant has been invoiced. Tenant represents and warrants
to Landlord that it has paid the 2004 assessment to the Las Colinas Association
in the amount of $30,119.21 prior to the date hereof.

     (b) Tenant has the power and authority to execute and deliver this Second
Amendment and to perform its obligations hereunder, and Tenant has taken all
necessary action

-11-

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to authorize the execution and delivery of this Second Amendment. This Second
Amendment has been duly authorized, executed and delivered by Tenant and does
not conflict with, contravene or constitute a default under or breach of any
(i) agreements, contracts or documents to which Tenant is a party or by which
Tenant is bound, (ii) law, statute, rule, ordinance, regulation or public or
private restriction governing or pertaining to Tenant, or (iii) any litigation
or legal or administrative proceedings affecting Tenant, and is not adversely
affected by any litigation or legal or administrative proceedings affecting
Tenant. The execution and delivery of this Second Amendment by Tenant requires
no consent, approval, joinder or action by any other party or entity
(governmental, judicial or private) or by any other officer, director, committee
or board of Tenant, which has not been previously and properly obtained.

     (c) Tenant is not currently the subject of or involved in, any insolvency
proceeding or bankruptcy case.

     5. Access Statutes Compliance. Section 5 of the First Amendment is hereby
deleted in its entirety. As of the date of this Second Amendment, Tenant assumes
the responsibility with respect to the entirety of the Premises, including
without limitation the lobby areas, building access and egress, and related
sidewalks, driveways, ramps and curbs, and parking areas, escalators and
elevators of the Building for compliance with the Americans With Disabilities
Act of 1990, the Texas Architectural Barriers Act and any other federal, state,
county, or municipal laws, codes, statutes or ordinances now or hereafter
enacted governing the same or similar subject matter (as such statutes may be
amended from time to time, the “Access Statutes”), it being the intent of the
parties that Landlord shall have no compliance responsibilities whatsoever with
respect to Access Statutes, all such compliance responsibilities being hereby
assumed by Tenant, irrespective of existing conditions at the Premises.

     6. Premises Improvements.

     (a) Tenant, at its sole cost and expense shall make the improvements
described on Attachment I to this Second Amendment within the applicable time
periods described on Attachment I in accordance with mutually acceptable plans,
specifications, contractors, pricing and scheduling pursuant to Section 7 and
other applicable provisions of the Lease (except that the cost allocation
provisions of Subsection 7.c. pertaining to certain late-term replacements of
Tenant Capital Items shall not apply to such work). The improvements set forth
on Attachment I shall be considered Material Repairs for purposes of Section 7
of the Lease. Landlord will supervise the construction and/or installation of
the improvements set forth on Attachment I, and Tenant shall pay Landlord a
construction supervision fee in the amount of two percent (2%) of the total
design and construction costs of such improvements prior to commencement of the
applicable portion thereof, it being acknowledged and agreed that such
improvements shall be performed in phases as provided in Attachment I.

     (b) Landlord, at its expense, agrees to repair and/or replace, as necessary
in Landlord’s reasonable judgment, in accordance with mutually acceptable plans
and specifications and otherwise consistent with the Zale Headquarters Standard
on or prior to June 30, 2006, the existing sidewalks and pavers at the circular
driveway and entrance to the Building at a cost not to exceed $60,000.00. Tenant
shall be responsible for any such costs exceeding $60,000.00.

-12-

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     7. Broker’s Fees. Landlord and Tenant represent to each other that the only
brokers, finders or similar parties involved with respect to the execution of
this Second Amendment as The Staubach Company, representing Tenant, and ING
Clarion Realty Services, representing Landlord, and Landlord and Tenant hereby
indemnify and hold harmless each other with respect to any fees or commissions
claimed by any other brokers, finders or similar parties. Landlord shall be
responsible for paying to The Staubach Company within thirty (30) days after the
execution of this Second Amendment, a fee for all services rendered in
connection with the execution of this Second Amendment, as specified in and as
required by the terms of a separate agreement pertaining thereto executed
between Landlord and The Staubach Company. Except for the fee to be paid to The
Staubach Company as specified in and as required by the terms of the separate
agreement pertaining thereto between Landlord and The Staubach Company described
in this Section, no other amounts shall be owed to The Staubach Company by
Landlord in connection with the execution of this Second Amendment and/or the
other documents executed contemporaneously herewith. Landlord shall pay all
amounts owing to ING Clarion Realty Services, as and when due, if any, and
Landlord shall indemnify and hold Tenant harmless from any claim for payment
made by ING Clarion Realty Services for any brokerage fee or commission in
connection herewith.

     8. Miscellaneous.

     (a) The terms and conditions hereof may not be modified, amended, altered
or otherwise affected except by instrument in writing executed by Landlord and
Tenant.

     (b) Except as extended and expressly modified by the First Amendment and by
this Second Amendment, the terms and conditions of the Original Lease are and
will remain in full force and effect as originally written.

     (c) This Second Amendment may be executed in several counterparts, and all
so executed will constitute one and the same instrument, binding on the parties
hereto, notwithstanding that the parties are not signatories to the same
counterpart.

     (d) This Second Amendment shall be binding upon the parties hereto, their
successors and assigns, and shall inure to the benefit of the parties’
respective legal representatives, successors and assigns.

     (e) If any provision of this Second Amendment is held to be illegal or
unenforceable, such fact shall not affect any other provision of this Second
Amendment, and this Second Amendment shall be construed as if such provision had
never been contained herein.

     (f) The captions, headings and arrangements used in this Second Amendment
are for convenience only and do not in any way affect, limit, amplify or
otherwise modify the terms and provisions hereof.

     (g) THIS SECOND AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE LAWS OF THE UNITED
STATES APPLICABLE TO THE TRANSACTIONS IN TEXAS.

-13-

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     (h) The Original Lease, the First Amendment and this Second Amendment,
contain the entire agreement between the parties hereto with respect to the
matters set forth herein. No variations, modifications or changes hereof shall
be binding upon any party unless set forth in a document duly executed by the
parties hereto. Except as expressly provided in this Second Amendment, this
Second Amendment completely supersedes and replaces all prior written and oral
communications between Landlord and Tenant and their respective agents and
representatives regarding the subject matter hereof, all such communications
being entirely merged into this Second Amendment and extinguished for all
purposes upon the execution hereof and being of no further force or effect
whatsoever.

     (i) Contemporaneously with the execution of this Second Amendment, Landlord
and Tenant will execute and deliver that certain Memorandum of Second Amendment
to Lease, of even date herewith, to be recorded in the Real Property Records of
Dallas County, Texas, for the purpose of putting all parties on notice of the
existence of this Second Amendment.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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EXECUTED TO BE EFFECTIVE AS OF THE DATE ABOVE FIRST WRITTEN.

         
TENANT:
  ZALE DELAWARE, INC.,
 
  a Delaware corporation
 
       

  By:    

     

--------------------------------------------------------------------------------

 

      Sue E. Gove

      Executive Vice President and

      Chief Operating Officer
 
       
 
       
LANDLORD:
  CP/HERS WALNUT HILL, L.P.,
 
  a Delaware limited partnership
 
       

  By:    

     

--------------------------------------------------------------------------------

 

      Mark M. Weld

      Authorized Person

-15-

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ATTACHMENT I

          Capital Expenditure

--------------------------------------------------------------------------------

  Minimum Specifications

--------------------------------------------------------------------------------

  Deadline

--------------------------------------------------------------------------------

1. Replace cooling tower
  Capacity and specifications equal to or exceeding existing equipment with
stainless steel basins and variable frequency drive (suggested models:  
June 30, 2006

  2-Cell Marley Crossflow Model #NC8307K2 or #NC8306JZ or Baltimore Air Coil
(BAC) Model #3552A-NM-2)    
 
       
2. Replace or refurbish chillers
  Capacity and specifications equal to or exceeding existing equipment with
variable frequency drive on flakt fan(s)   June 30, 2006
 
       
3. Replace energy management system
  Specifications to be mutually agreed to by the parties   June 30, 2007
 
       
4. Install new fire panels and associated devices
  Addressable intelligent fire panel with voice evacuation and all associated
initiating and notification devices, large enough to accommodate 20% additional
expansion capability and meeting or exceeding all applicable legal and/or code
requirements (including, without limitation, Texas Accessibility Standards).  
June 30, 2007

All specifications, contractors and pricing shall require Landlord’s approval in
its reasonable discretion. Landlord has estimated the aggregate costs of such
items to be approximately $1,800,000 (inclusive of Landlord’s construction
management fees; provided, however, if the actual aggregate costs of such items
inclusive of Landlord’s construction management fee is less than $1,800,000,
Tenant shall only be required to expend the actual aggregate costs). Tenant will
be required to submit bid(s) from three (3) reputable and qualified contractors
reasonably approved by Landlord for each phase of the work at least sixty
(60) days prior to commencement of the work for such phase. Landlord will have
thirty (30) days to respond to Tenant’s bids with its approval (such approval
not to be unreasonably withheld, conditioned or delayed), or its reasons for
disapproval, as applicable, after consultation with Landlord’s consultants. Each
phase of the work will be performed in accordance with contracts approved by
Landlord (such approval not to be unreasonably withheld, conditioned or
delayed).

A-I-1

 

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ATTACHMENT II

Replacement Exhibit E to Original Lease

“ZALE HEADQUARTERS STANDARD”

     For purposes of this Lease, the “Zale Headquarters Standard” shall be the
standard required to maintain the Premises improvements in overall good
condition and repair and the exterior facades of the Premises improvements and
the surrounding grounds, landscaping, sidewalks, driveways, paving, and other
exterior common areas in a neat and attractive appearance, all in Landlord’s
reasonable judgment. Such standard as applied to the interiors of the Premises
shall be consistent with the standards of similarly-classed single-tenant office
building properties of comparable age in the Las Colinas area of Irving, Texas
recognizing that portions of the Premises are distribution areas; and such
standard as applied to the exteriors of the Premises shall be consistent with
the standards of similarly-classed office building properties of comparable age
in the general vicinity of the Premises (regardless of whether such properties
are single-tenant or multi-tenant).

A-II-1

 

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ATTACHMENT III

New Exhibit G to Original Lease

“FORM OF ANNUAL BUDGET”

                                      Contracted   Contract     Budget

--------------------------------------------------------------------------------

  Service Provider

--------------------------------------------------------------------------------

  Expiration Date

--------------------------------------------------------------------------------

REPAIRS & MAINTENANCE
                       
Maintenance and Engineering Salaries
                       
HVAC
                       
Annual chiller inspection
                       
Elevator / Escalators
                       
Monthly maintenance
                       
Annual QEI license fee required by state
                       
Water Treatment
                       
Electrical
                       
Annual infrared electrical inspection
                       
Landscaping
                       
Exterior landscape maintenance (incl color chgs)
                       
Irrigation repairs
                       
Pest Control
                       
Security Inspections (Annual)
                       
Electrical
                       
Fire panel
                       
Fire panel monitoring
                       
Fire extinguishers
                       
Generator maintenance
                       
Fuel treatment
                       
Cleaning Services
                       
Contract cleaning
                       
Window cleaning
                       
Trash services
                       
Unplanned Repairs Contingency
                       
Parking Lot
                       
Sweeping / Striping
                       
Utilities
                       
Electricity
                       
Water
                       
TOTAL REPAIRS & MAINTENANCE
                       
 
                       
TAXES & INSURANCE
                       
Real Estate Taxes
                       
Insurance
                       
Property
                       
Liability
                       
TOTAL TAXES & INSURANCE
                       
 
                       
CAPITAL
                       
Project Description:
                       
project 1
                       
project 2
                       
project 3
                       
 
                       
TOTAL CAPITAL BUDGET
                       

A-III-1