<PAGE>

                                                                  Exhibit 10(af)

================================================================================

                    WILLIAM H. MORYTO RETIREMENT BENEFIT PLAN

                                       OF

                        LAZARE KAPLAN INTERNATIONAL INC.

                        Effective as of February 1, 2005

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                                TABLE OF CONTENTS

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WILLIAM H. MORYTO RETIREMENT BENEFIT PLAN......................................1

PRELIMINARY STATEMENT..........................................................1

ARTICLE I DEFINITIONS..........................................................1
   Section 1.1    Definitions..................................................1
   Section 1.2    Rules of Construction.......................................10

ARTICLE II ORGANIZATIONAL MATTERS.............................................11
   Section 2.1    Nature of Plan..............................................11
   Section 2.2    Name of Plan................................................11

ARTICLE III THE POLICY........................................................11
   Section 3.1    Acquisition.................................................11
   Section 3.2    Ownership...................................................11
   Section 3.3    Payment of Premiums.........................................12
   Section 3.4    Payment of Tax-Related Bonuses..............................12
   Section 3.5    Endorsement.................................................13
   Section 3.6    Collection of Death Proceeds................................13

ARTICLE IV ALLOCATION OF DEATH BENEFIT........................................13
   Section 4.1    Entire Death Benefit Allocable to Company...................13
   Section 4.2    Death Benefit Allocable to Company and Beneficiary..........13

ARTICLE V RETIREMENT BENEFITS.................................................14
   Section 5.1    Payment of Retirement Benefits..............................14
   Section 5.2    Postponement of Retirement Benefit Commencement Date........14
   Section 5.3    Postponement of Full Payout Date............................14
   Section 5.4    Determination of the Minimum Post-Payout Amount.............15
   Section 5.5    Determination of Tax Amounts................................15
   Section 5.6    Determination of Maturity Payment...........................15
   Section 5.7    Termination of Rights.......................................15

ARTICLE VI CHANGE IN CONTROL..................................................15
   Section 6.1    Funding of Benefits Following Initial Statutory
                     Change Date..............................................15
   Section 6.2    Account Control Agreement...................................16
   Section 6.3    Payment of Benefits Following a Statutory Change in
                     Control..................................................17
   Section 6.4    Credit Enhancement..........................................17
   Section 6.5    Overdue Payments............................................17

ARTICLE VII INSURER INSOLVENCY................................................18
   Section 7.1    Retirement Benefits.........................................18
</TABLE>


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<TABLE>
<S>                                                                           <C>
   Section 7.2    Curative Adjustments........................................18

ARTICLE VIII AMENDMENT........................................................19

ARTICLE IX ADMINISTRATION.....................................................19
   Section 9.1    Administrative Committee....................................19
   Section 9.2    Administration Costs........................................19
   Section 9.3    Legal Limitation............................................19
   Section 9.4    Claims Procedure............................................20

ARTICLE X MISCELLANEOUS.......................................................21
   Section 10.1   No Transfers................................................21
   Section 10.2   Nature of Plan; Remedies....................................21
   Section 10.3   Headings and Captions.......................................21
   Section 10.4   Construction................................................21
   Section 10.5   Assignment..................................................21
   Section 10.6   Severability................................................21
   Section 10.7   Applicable Law..............................................22
   Section 10.8   Arbitration.................................................22
   Section 10.9   Notices.....................................................22

ERISA RIGHTS..................................................................24

OTHER INFORMATION.............................................................26

SPLIT-DOLLAR ENDORSEMENT......................................................28
</TABLE>


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<PAGE>

                              PRELIMINARY STATEMENT

     In recognition of the contribution Mr. William H. Moryto has made to its
overall success and to encourage Mr. Moryto to continue in his efforts, Lazare
Kaplan International Inc. wishes to provide Mr. Moryto with certain benefits. To
accomplish the foregoing, a retirement benefit plan has been adopted that reads
in its entirety as follows:

                                    ARTICLE I

                                   DEFINITIONS

     Section 1.1 Definitions. Whenever used in this instrument, the following
terms have the respective meanings set forth in this Section 1.1.

     "Administrative Committee" means the committee appointed pursuant to
Section 9.1 to manage and administer the Plan.

     "Account Control Agreement" means that certain agreement between and among
the Company, the Financial Institution and the Participant referred to in
Section 6.1 and described in Section 6.2.

     "Affiliate" means any entity that, directly or indirectly through one or
more intermediaries, controls, is controlled by or is under common control with
the Company.

     "Aggregate Premium Amount" means the aggregate amount of Premiums paid by
the Company on or before the Date of Death or due and owing on such Date.

     "Assumed Cash Value" means, for any day of any Plan Year, the cash
surrender value the Policy would have on such day if (i) any dividend declared
on the Policy for any prior Plan Year was applied as a net single premium to
purchase paid-up whole life insurance or to fund a Permitted Payment; (ii)
mortality charges and administrative costs applicable have not increased since
the date on which the Policy was issued and will not change prior to the Date of
Death; (iii) the Policy has not lapsed on account of nonpayment of Premiums;
(iv) the Policy has not been surrendered in whole or in part (unless any amount
obtained upon such surrender has been applied to fund a Permitted Payment); (v)
no loan has been taken from the Insurer with respect to the Policy (unless the
proceeds from such loan have been applied to fund a Permitted Payment); and (vi)
the Company has funded all Permitted Payments made on or before such day with
amounts obtained from the Insurer upon partial surrender of the Policy to the
extent the amounts so obtained could be excluded from its gross income for
federal income tax purposes pursuant to Section 72(e) of the Code, and funded
the balance of such Payments with loans taken from the Insurer with respect to
the Policy and paid any interest on such loans when due.

     "Beneficiary" means the person or persons the Company has initially
designated as the beneficiary or beneficiaries under the Policy.

     "Board of Directors" means the board of directors of the Company.




<PAGE>

     "Business Day" means any day on which banks within the State of New York
are required to be opened for business.

     "Causal Termination Date" means the day on which the Participant's
employment was terminated for Cause by action on the part of the Company.

     "Causal Termination Month" means the month in which the Participant's
employment was terminated for Cause by action on the part of the Company.

     "Cause" means, with respect to the Participant, conduct that is
demonstrably and materially injurious to the Company that a majority of the
entire number of members of the Board of Directors determines constituted (i)
fraud, misappropriation or embezzlement; (ii) a breach (other than a de minimis
breach) of fiduciary duty involving personal profit; (iii) a willful failure
(after written notice thereof and an adequate opportunity to correct) to perform
stated a task within the scope of his duties, including a willful failure to
comply with a lawful resolution of the Board of Directors; or (iv) a willful
violation of any law (other than a misdemeanor).

     "Change Date" means a Statutory Change Date or a Nonstatutory Change Date,
as the context requires.

     "Change in Control Period" means a Statutory Change in Control Period or a
Nonstatutory Change in Control Period, as the context requires.

     "Change in Control Vested" means the (i) if the Initial Change Date is a
Nonstatutory Change Date, the state of having voluntarily ceased employment
within the two (2-) year period beginning with the second anniversary of the
Initial Change Date or after such second anniversary but within a subsequent
Change in Control Period; and (ii) if the Initial Change Date is a Statutory
Change Date, the state of having voluntarily ceased employment following the
first anniversary of the Initial Change Date.

     "Code" means the Internal Revenue Code of 1986, as amended, or any
corresponding provisions of any subsequent federal revenue law.

     "Company" means Lazare Kaplan International Inc, a Delaware corporation,
its successors and assigns.

     "Continuing Director" means a member of the Board of Directors who either
(i) was a member of such Board on the Effective Date, or (ii) was nominated or
appointed (before his initial election) to serve as a member by a majority of
the members of such Board who were persons described in clause (i) hereof at the
time of such nomination or appointment.

     "Date of Death" means the date on which the Participant dies.

     "Date of Death Month" means the month that includes the Date of Death.

     "Death Benefit Date" means the date on which the death benefit payable
under the Policy is paid.


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     "Death Benefit Payment" means a payment of an amount equal to the amount by
which (x) the sum of the death benefit paid to the Company under the Policy, the
amount of any Unanticipated Indebtedness existing on the Date of Death and the
amount of Unanticipated Withdrawals made prior to such Date, exceeds (y) the
Aggregate Premium Amount on such Date.

     "Death Benefit Tax Amount" means such amount, if any, as shall be
determined pursuant to Section 5.5(iii).

     "Death Benefit Tax Payment" means a payment to the Participant of an amount
equal to the Death Benefit Tax Amount.

     "Disability" means, with respect to the Participant, any medically
determinable physical or mental impairment that the Administrative Committee, on
the basis of competent medical evidence, reasonably expects to result in death,
or to be of long-continued and indefinite duration of not less than twelve
months, and considers to have rendered the Participant substantially unable to
perform his stated duties on a full-time basis.

     "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any corresponding provisions of any subsequent federal law relating
to the regulation of employee benefit plans.

     "Effective Date" means February 1, 2005.

     "Event of Insolvency" means any failure by the Insurer, due to financial
incapacity or distress, to pay or lend the Company any amount to which it may be
entitled under the Policy.

     "Financial Institution" means the financial institution designated pursuant
to Section 6.1.

     "Full Payout Date" means the tenth anniversary of Retirement Benefit
Commencement Date or such later anniversary to which the due date of the final
Retirement Benefit Payment has been postponed pursuant to Section 5.3.

     "Full Payout Month" means the month that includes the Full Payout Date.

     "Funding Amount" means, on any day, the then present value (determined
using a discount rate of four (4%) percent) of the series of future cash
payments anticipated to be received by the Participant under Section 5.1
(determined using the Funding Assumptions).

     "Funding Assumptions" means, collectively, (i) the Participant attains the
age of sixty-five (65) and is employed at all times between the Effective Date
and the Normal Retirement Date; (ii) the cash surrender value of the Policy on
any day of any Plan Year will equal the Funding Cash Value on such day; (iii)
the Participant will not apply for any postponement of the date on which payment
of Retirement Benefit Payments will commence; (iv) the Participant will apply
for a postponement of the Full Payout Date until the twentieth anniversary of
the Retirement Benefit Commencement Date; (v) the Date of Death will occur on
the first day following the Full Payout Date; and (vi) the Company will not make
any Section 3.2 Elections.


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<PAGE>

     "Funding Cash Value" means, for any day of any Plan Year, the Assumed Cash
Value on such day (determined as if the dividend rate for each Policy Year
ending on or before the Initial Statutory Change Date was the actual dividend
rate for such Policy Year and the dividend rate for each Policy Year beginning
with or after the Initial Statutory Change Date was the greater of (x) the
average dividend rate for the three- (3-) Policy-Year period immediately
preceding the Initial Statutory Change Date (or such part of such period as may
be applicable) or (y) six and five-tenths (6.5%) percent).

     "Guaranteed Cash Value" means, for any day of any Plan Year, the Assumed
Cash Value on such day (determined as if the dividend rate for all preceding
years were the minimum rate guaranteed by the Policy).

     "Guaranteed Full Net Value Payout Date" means the first date on which all
Guaranteed Net Value Payments have become payable.

     "Guaranteed Full Payout Date" means the first date by which one hundred
twenty (120) Primary Benefit Payments and/or Guaranteed Primary Retirement
Benefit Payments have become payable.

     "Guaranteed Net Value Amount" means, on the Insolvency Date, the excess, if
any, of (x) the Guaranteed Cash Value, over (y) the aggregate amount of
Retirement Benefit Payments received by the Participant prior to such Date.

     "Guaranteed Net Value Commencement Month" means the first month beginning
after the close of the Insolvency Year.

     "Guaranteed Net Value Payment" means, for any month commencing after the
close of the Insolvency Year, a payment of an amount sufficient to amortize the
Guaranteed Net Value Amount in the greater of (x) sixty (60) equal installments,
or (y) as many equal installments as there are months within the period
beginning with the Guaranteed Net Value Commencement Month and ending with the
tenth anniversary of the first day of the Plan Year beginning after the
Retirement Date.

     "Guaranteed Primary Benefit Amount" means, for any Plan Year, an amount
equal to ten (10%) percent of the Guaranteed Cash Value at the opening of the
first Plan Year beginning after the Normal Retirement Date.

     "Guaranteed Primary Benefit Payment" means for any month within a
Guaranteed Primary Benefit Plan Year, a payment of an amount sufficient to
amortize the Guaranteed Primary Benefit Amount for such Year in twelve (12)
equal installments.

     "Guaranteed Primary Benefit Plan Year" means any Plan Year beginning after
the Insolvency Year and before the earlier of the Causal Termination Date or the
Guaranteed Full Retirement Payout Date.

     "Income Tax" means, whether or not capitalized, any tax based on net income
or excess profits (or any tax in lieu of such a tax) imposed by any foreign
country or possession of the


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<PAGE>

United states or by the United States, any state or territory of the United
States or any political subdivision thereof.

     "Initial Change Date" means the first Change Date occurring after the
Effective Date.

     "Initial Change in Control Period" means, with respect to the Initial
Change Date, the two- (2-) year period beginning with such day.

     "Initial Post-Statutory Change of Control Vesting Date" means the first
Post-Statutory Change of Control Vesting Date occurring after the Effective
Date.

     "Initial Statutory Change Date" means the first Statutory Change Date
occurring after the Effective Date.

     "Insolvency Date" means, the first date on which an Event of Insolvency
occurs.

     "Insolvency Disability Benefit Amount" means, for any Plan Year, the
amount, if any, by which (x) the sum of (A) the aggregate amount received in
respect of the Policy (whether from the Insurer; any successor to the Insurer;
or any receiver, liquidator, conservator, trustee, custodian, or other similar
official of the Insurer or of the whole or any substantial part of the
properties or assets of the Insurer; or from any fund or other arrangement
created for the purpose of guaranteeing, assuming or reinsuring, in whole or in
part, any or all of the policies issued by any insurance company or group of
insurance companies) after an Event of Insolvency, and (B) the Plan Tax Savings
at the close of such Year, exceeds (y) the sum of (A) the aggregate amount of
Guaranteed Permitted Payments which the Participant has received or is scheduled
to receive under the Plan for all Plan Years and the aggregate amount of
Premiums paid by the Company for all prior Plan Years, (B) the aggregate amount
assessed against the Company for all prior Plan Years with respect to the Policy
in connection with any rehabilitation, liquidation or similar proceeding
involving the Insurer, and (C) the aggregate amount of Insolvency Disability
Benefit Payments received in prior Years.

     "Insolvency Disability Benefit Payment" means, for the first month
beginning after the close of any Plan Year, a payment of a sum equal to the
Insolvency Disability Amount at the close of such Year.

     "Insolvency Retirement Benefit Amount" means, for any Plan Year, the
amount, if any, by which (x) the aggregate amount received in respect of the
Policy (whether from the Insurer, any successor to the Insurer; or any receiver,
liquidator, conservator, trustee, custodian, or other similar official of the
Insurer or of the whole or any substantial part of the properties or assets of
the Insurer; or from any fund or other arrangement created for the purpose of
guaranteeing, assuming or reinsuring, in whole or in part, any or all of the
policies issued by any insurance company or group of insurance companies) after
an Event of Insolvency, exceeds (y) the sum of (A) the aggregate amount of
Guaranteed Permitted Payments which the Participant has received or is scheduled
to receive under the Plan for all Plan Years and the aggregate amount of
Premiums paid by the Company for all prior Plan Years, (B) the aggregate amount
assessed against the Company for all prior Plan Years with respect to the Policy
in connection with any rehabilitation, liquidation or similar proceeding
involving the Insurer, and (C) the aggregate amount of Insolvency Retirement
Benefit Payments received in prior Years.


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<PAGE>

     "Insolvency Retirement Benefit Payment" means, for the first month
beginning after the close of any Plan Year, a payment of a sum equal to the
Insolvency Retirement Amount at the close of such Year.

     "Insolvency Year" means, the first Plan Year within which an Event of
Insolvency occurs.

     "Insurer" means the insurance company that issues the Policy.

     "Maturity Payment" means a payment of an amount equal to the excess, if
any, of (x) the sum of the amount payable to the Company under the Policy upon
maturity thereof, the amount of any Unanticipated Indebtedness existing on at
such time and the amount of Unanticipated Withdrawals made prior to such time,
over (y) the aggregate amount of Premiums paid by the Company on or before such
time (or due and owing on at such time).

     "Maturity Tax Amount" means such amount, if any, as shall be determined
pursuant to Section 5.5(iv).

     "Maturity Tax Payment" means a payment to the Participant of an amount
equal to the Maturity Tax Amount.

     "Minimum Post-Payout Amount" means an amount equal to the premium amount
necessary to purchase a paid-up policy from the Insurer on the Full Payout Date
equal in face amount to the aggregate amount of Premiums paid by the Company on
or before such Date or due and owing on such Date.

     "Nonstatutory Change Date" means the date on which a Nonstatutory Change in
Control occurs.

     "Nonstatutory Change in Control" means, with respect to the Company, (i)
the acquisition by one person, or more than one person or entity acting as a
group, of ownership of Voting Shares possessing more than thirty (30%) percent
of the total voting power for the election of the Board of Directors (excluding,
however, acquisitions by (A) the Company or its Affiliates, (B) any employee
benefit plan sponsored by the Company or its Affiliates or (C) a Tempelsman
Family Member or any entity controlled by one or more such Members); (ii) the
consummation of a consolidation or merger of the Company with and into, or a
transfer of all or substantially all the assets of the Company to, another
entity, other than an entity in which those persons holding Voting Shares
immediately prior to such transaction, have substantially the same proportionate
voting rights in respect of such entity, immediately after such transaction, as
they had in respect of the Company immediately prior to such transaction; (iii)
the approval by the shareholders of the Company and/or the Board of Directors of
a plan for the liquidation or dissolution of the Company; or (iv) the election
or appointment of any person to the Board of Directors if, by such election or
appointment, a majority of the members of such Board ceases to consist of
individuals who are Continuing Directors.

     "Nonstatutory Change in Control Period" means, with respect to any day on
which a Nonstatutory Change in Control occurs, the two- (2-) year period
beginning with such day.


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<PAGE>

     "Normal Retirement Date" means the day on which the Participant attains age
sixty-five (65).

     "Normal Retirement Year" means the Plan Year within which the Normal
Retirement Date occurs.

     "Participant" means Mr. William H. Moryto, his heirs and personal
representatives.

     "Participating Company" means the Company or any Affiliate thereof.

     "Permitted Investments" means (i) direct obligations of, or obligations the
principal of and interest on which are unconditionally guaranteed by, the United
States of America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America), in each
case maturing within one year from the date of acquisition thereof; (ii)
investments in commercial paper maturing within Two Hundred Seventy 270 days
from the date of acquisition thereof and having, at such date of acquisition,
the highest credit rating obtainable from Standard & Poor's or from Moody's
Investors Service; and (iii) investments in certificates of deposit, banker's
acceptances and time deposits maturing within One Hundred Eighty (180) days from
the date of acquisition thereof issued or guaranteed by or placed with, and
money market and other deposit accounts issued or offered by, any domestic
office of any commercial bank organized under the laws of the United States of
America or any State thereof which has a combined capital and surplus and
undivided profits of not less than Five Hundred Million Dollars ($500,000,000).

     "Permitted Payment" means any Primary Benefit Payment, Retirement Dividend
Payment, Death Benefit Payment or Maturity Payment.

     "Person" means, whether or not capitalized, any individual or trust,
estate, partnership, limited liability company, corporation or other entity.

     "Plan" means the retirement benefit plan set forth herein, as amended from
time to time.

     "Plan Year" means the annual period beginning on each anniversary of the
first day of the first month following the month which includes the Effective
Date.

     "Policy" means, as the context requires, the term life insurance contract
(No. 168466674) insuring the life of the Participant that was issued to the
Participant by the Insurer as of February 16, 2004 and that will be assigned to
the Company by the Participant on the Effective Date as well as the permanent
life insurance contract insuring the life of the Participant (having terms
substantially identical to the specimen contract annexed hereto as Exhibit A)
into which such term life insurance contract will be converted promptly
following the Effective Date.

     "Policy Year" means the annual period beginning on each anniversary of the
date on which the Policy was issued.

     "Post-Statutory Change in Control Vesting Date" means, with respect to any
Statutory Change in Control Date, the earlier of (x) the first day following
such Date on which the Participant could become Change in Control Vested by
voluntarily ceasing his employment, or


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<PAGE>

(y) the day following such Date on which the Participant's employment is
terminated by the Company for any reason other than Cause.

     "Premium" means any amount required to be paid as consideration for the
Policy.

     "Primary Benefit Amount" means the amount by which (x) the Assumed Cash
Value on the Retirement Benefit Commencement Date, exceeds (y) the Minimum
Post-Payout Amount.

     "Primary Benefit Payment" means, for any month commencing with or after the
Retirement Benefit Commencement Date, a payment of an amount sufficient to
amortize the Primary Benefit Amount in as many equal installments as there are
months within the period beginning with the Retirement Benefit Commencement
Month and ending with the Full Payout Month.

     "Primary Benefit Tax Amount" means, for any month within a Retirement
Benefit Plan Year, such amount, if any, as shall be determined for such month
pursuant to Section 5.5(i).

     "Primary Benefit Tax Payment" means, for any month within a Retirement
Benefit Plan Year, a payment to the Participant of an amount equal to the
Primary Benefit Tax Amount for such month.

     "Retirement Benefit Commencement Date" means the first day of the first
Plan Year beginning after the Retirement Date or such later day to which the
commencement of Retirement Benefit Payments has been postponed pursuant to
Section 5.2.

     "Retirement Benefit Commencement Month" means the month that includes the
Retirement Benefit Commencement Date.

     "Retirement Benefit Payment" means any payment to which the Participant is
entitled pursuant to Section 5.1.

     "Retirement Benefit Period" means the period commencing with the Retirement
Benefit Commencement Date and ending with the Retirement Benefit Termination
Date.

     "Retirement Benefit Termination Date" means the last day of the earliest of
the Date of Death Month, the Causal Termination Month or the Full Payout Month.

     "Retirement Benefit Year" means any Plan Year within which a Retirement
Benefit Payment becomes due.

     "Retirement Date" means the date as of which the Participant voluntarily
ceases his employment with the Company.

     "Retirement Dividend Payment" means, for any Retirement Benefit Year, a
payment of an amount equal to the amount, if any, by which (x) the Assumed Cash
Value at the earlier of the Retirement Benefit Termination Date or the close of
such Year (determined as if the amount declared as a dividend on the Policy for
such Year had been determined by reference to the Insurer's actual investment,
expense and mortality experience), exceeds (y) the Assumed Cash


                                        8




<PAGE>

Value at such time (determined as if no amount was declared as a dividend on the
Policy for such Year and there was no guaranteed interest rate with respect to
the Policy for such Year).

     "Retirement Dividend Tax Amount" means, for any Retirement Benefit Plan
Year, such amount, if any, as shall be determined for such Year pursuant to
Section 5.5(ii).

     "Retirement Dividend Tax Payment" means, for any Retirement Benefit Plan
Year, a payment to the Participant in an amount equal to the Retirement Dividend
Tax Amount for such Year.

     "Section 3.2 Election" means a designation of beneficiary made by the
Company pursuant to the final sentence of Section 3.2.

     "Section 6.3 Payment" means a payment to the Participant described in
Section 6.3.

     "Separation Date" means the date which is six (6) months after the date on
which the Participant's separation from service (as determined by the Service
for purposes of Section 409A(a)(2)(A)(i) of the Code).

     "Service" means the Internal Revenue Service.

     "Statutory Change Date " means the date on which a Statutory Change in
Control occurs.

     "Statutory Change in Control" means, a "change in the ownership" with
respect to the Company, a "change in effective control" with respect to the
Company or a "change in the ownership of a substantial portion of the assets" of
the Company (in each case as determined in accordance with subpart B of Part IV
of Notice 2005-1 issued by the Service or any Treasury Regulation promulgated by
the Service to carry out the purposes of Section 409A of the Code).

     "Statutory Change in Control Period" means, with respect to any day on
which a Statutory Change in Control occurs, the two- (2-) year period beginning
with such day.

     "Tax Gross-Up Factor" means fifty-eight and seventy-three one-hundredths
(58.73%) percent.

     "Tax Payment" means, a Primary Benefit Tax Payment, a Retirement Dividend
Tax Payment, a Maturity Tax Payment or a Death Benefit Tax Payment.

     "Tempelsman Family Member" means. (i) Maurice Tempelsman; (ii) any
descendant (whether biological or adopted) of Maurice Tempelsman; (iii) the
spouse of any person described in clause (i) or (ii) hereof; (iv) the estate of
any person described in clause (i), (ii) or (iii) hereof; or (v) any trust
created by or arising under the will of any person described in clause (i) (ii)
or (iii) hereof.

     "Termination Date" means the date on which the Participant's employment is
terminated by action on the part of the Company.


                                        9




<PAGE>

     "Ultimate Parent Entity" means, with respect to any agreement that would
result in a Change in Control, any person acquiring Voting Shares or Company
assets pursuant to such agreement that has a net book value (or net worth) of
not less than Two Hundred Fifty Million Dollars ($250,000,000), as set forth on
an audited balance sheet (prepared, as of a date on or after the first
anniversary of the date on which such acquisition is consummated, in accordance
with United States generally accepted accounting principles or comparable
international standards), and any other person having such a net book value (or
net worth), as set forth on such a balance sheet, that is an "ultimate acquiring
entity" (within the meaning assigned to that term in the Premerger Notification
Rules of the Hart-Scott-Rodino Antitrust Improvements Act of 1976) with respect
to such acquiring person.

     "Unanticipated Indebtedness" means, at the Date of Death, the amount of the
indebtedness against the Policy existing at that time (including any interest
payable thereon but excluding the amount of any indebtedness against the Policy
the proceeds of which were used to make Permitted Payments).

     "Unanticipated Withdrawal" means, at the earlier of the Date of Death or
the date on which the Policy is scheduled to mature, the aggregate amounts
obtained by the Company prior to such date upon surrender of all or a portion of
the Policy (excluding any such amount which was used make a Permitted Payment).

     "Voting Share" means an outstanding security of the Company possessing the
right to vote for the election of directors of the Company.

     Section 1.2 Rules of Construction. Unless the context otherwise requires,
(i) a term shall have the meaning assigned to it in Section 1.1; (ii) the term
"Nonstatutory Change in Control" shall not include an event which qualifies as a
Statutory Change in Control; (iii) references to the Participant's "employment"
shall be to his full-time employment (or, if the Participant and the Company
mutually agree, his part-time employment) by one or more Participating Companies
and references to the Participant as "employed" shall be to his being employed
full time by one or more such Companies; (iv) if the Participant's employment
ceases on account of Disability, such cessation shall be deemed a termination of
his employment by the Company other than for Cause; (v) an increase in the
percentage of Voting Shares owned by any specified person resulting from an
acquisition by the Company or any Affiliate thereof of Voting Shares owned by
any other person (other than a Tempelsman Family Member) shall not be considered
an "acquisition" of ownership of Voting Shares by such specified person for
purposes of determining whether a Nonstatutory Change of Control has occurred;
(vi) a transaction shall not be considered a Statutory Change in Control if
immediately following such transaction more than fifty (50%) percent of the
Voting Shares are owned by Tempelsman Family Members; (vii) an insurance term
not otherwise defined herein shall have the meaning assigned to it in the
Policy; (viii) the Policy shall be deemed to be perpetual (i.e., will be deemed
never to mature) if the Date of Death occurs prior to the date on which the
Policy is scheduled to mature; (ix) "or" shall not be exclusive; (x) words in
the singular shall include the plural, and vice versa; (xi) all references to
"Section" or "Article" shall be to sections and articles of the Plan; and (xii)
words in the masculine gender shall include the feminine and neuter, and vice
versa.


                                       10




<PAGE>

                                   ARTICLE II

                             ORGANIZATIONAL MATTERS

     Section 2.1 Nature of Plan. The Plan is intended to qualify as unfunded for
tax purposes and to qualify, for purposes of Title I of ERISA, as an unfunded
plan maintained primarily for the purpose of providing deferred compensation for
a select group of management or highly compensated employees of the Company.
Consequently, the Participant shall be an unsecured general creditor of the
Company with respect to benefits to which he is entitled hereunder and the Plan
shall constitute a mere promise by the Company to pay such benefits in the
future. The benefits provided to the Participant by the Plan are not part of any
salary reduction plan and are not provided in lieu of a bonus or salary
increase. The Plan is not intended to confer any legal rights upon the
Participant for a continuation of employment, nor shall its existence limit the
Company's right to discharge the Participant or otherwise deal with the
Participant without regard to the effect its action might have upon the
Participant under the Plan. Any provision hereof to the contrary
notwithstanding, if a court of competent jurisdiction determines that the Plan
does not satisfy the definitional requirements of Section 201(2) of ERISA and
such determination becomes final, (i) the Plan shall be terminated ab initio and
neither the Participant nor the Beneficiary shall have any right to receive any
benefit under the Plan or under the Policy; and (ii) the Company shall be
entitled to a payment from the Participant of a sum equal to the aggregate
amount paid to him under the Plan and to a payment from the Beneficiary in an
amount equal to the portion of the death benefit paid to the Beneficiary under
the Policy.

     Section 2.2 Name of Plan. The Plan shall be known as the "William H. Moryto
Benefit Plan of Lazare Kaplan International Inc."

                                   ARTICLE III

                                   THE POLICY

     Section 3.1 Acquisition. Promptly following the Effective Date, (i) the
Company shall acquire the Policy from the Participant by assignment; and (ii)
promptly, thereafter, the Company and the Participant shall take any and all
actions within their respective controls which may be necessary to convert the
Policy into a permanent insurance policy having terms and conditions
substantially identical to specimen life insurance policy annexed hereto as
Exhibit A.

     Section 3.2 Ownership. The Company shall be the sole and absolute owner of
the Policy, and except as otherwise provided by Section 3.5, shall have all of
the rights with respect thereto, including the right to (i) select the
settlement option under the Policy and the beneficiary or beneficiaries to
receive the portion of the Policy proceeds to which the Company is not entitled
under the Plan; (ii) assign or surrender the Policy; (iii) take or repay a
policy loan from the Insurer with respect to the Policy; (iv) pledge or assign
the policy for purposes of securing a loan from any person; (v) amend or modify
the Policy with the written consent of the Insurer, and (vi) exercise any right,
receive any benefit or enjoy any privilege provided by the Policy.
Notwithstanding the foregoing, once the Company has exercised its right to
designate the


                                       11




<PAGE>

Beneficiary pursuant to clause (i) of the preceding sentence, it shall not have
the right to revoke or otherwise modify such designation; provided, however,
that the Company shall have the right, at any time and from time to time
following the Normal Retirement Date, to designate either the Beneficiary or
itself as the beneficiary to receive the portion of the Policy proceeds in
excess of the Aggregate Premium Amount by giving the Participant written notice
of such designation; and further provided that the Company shall have the right
to designate itself as the beneficiary to receive the portion of the Policy
proceeds in excess of the Aggregate Premium Amount unless it reasonably believes
that the after-tax cost of the Death Benefit Tax Amount it will be required to
pay to the Beneficiary as a result of such designation will be less than the
after-tax cost of the tax related bonuses it will be obligated to pay to the
Participant pursuant to Section 3.4 as a result of such designation.

     Section 3.3 Payment of Premiums. On or before the due date of any Premium,
or within the grace period provided in the Policy, the Company shall pay the
full amount of the Premium to the Insurer, and shall promptly furnish the
Participant evidence of timely payment of such Premium. In addition, at the time
the Policy is converted into a permanent policy, the Company shall pay an
unscheduled premium in the amount of Seven Hundred Sixty-Eight Dollars and
Fifty-Five Cents ($768.55) as well as any Premium then due. The Company shall
(i) within ninety (90) days following the Effective Date, issue irrevocable
written instructions to the Insurer directing it to grant the Participant full
access to all information regarding the Policy and to furnish the Participant
with copies of all notices, requests, demands, claims, and other communications
it issues or receives with respect to the Policy; (ii) within ten (10) days
following the issuance of such written instructions, furnish the Participant
with a copy thereof; and (iii) within ninety (90) days after the close of each
calendar year, furnish the Participant with a statement of the amount includible
in gross income by him for federal, state and local income tax purposes as a
result of having cost-free insurance protection provided under the Policy during
the calendar year.

     Section 3.4 Payment of Tax-Related Bonuses. At the time it furnishes the
statement described in Section 3.3 for any calendar year, the Company shall pay
the Participant, as compensation, an amount equal to the aggregate amount of
federal, state and local income taxes he would be required to pay for the
related calendar year if (i) the amount shown on such statement constituted his
entire gross income for such year; (ii) such gross income was wholly allocable
to New York City for state and local income tax purposes; (iii) the state and
local taxes payable on such gross income for such calendar year were allowed as
a deduction for such year in determining his taxable income for federal income
tax purposes; (iv) he was not allowed any other deductions or any personal
exemptions for such year in determining his taxable income for federal, state or
local income tax purposes; and (v) he was subject to the highest marginal
federal, New York State and New York City income tax rates for such year
applicable to individuals having his marital and filing status. Notwithstanding
the foregoing, the amount payable to the Participant pursuant to this Section
3.4 for any calendar year ending after the Normal Retirement Date and beginning
prior to the date on which the Participant attains the age of seventy-five (75)
shall not exceed Forty-Five Thousand Dollars ($45,000).

     Section 3.5 Endorsement. Promptly following the Effective Date, the Company
shall execute an endorsement to the Policy substantially in the form annexed
hereto as Exhibit B.


                                       12




<PAGE>

Such endorsement shall not be terminated or modified by the Company without the
express written consent of the Participant.

     Section 3.6 Collection of Death Proceeds. Upon the death of the
Participant, the Company shall cooperate with the Beneficiary to take whatever
action is necessary to collect the death benefit payable under the Policy.

                                   ARTICLE IV

                           ALLOCATION OF DEATH BENEFIT

     Section 4.1 Entire Death Benefit Allocable to Company. If on or before the
Date of Death, (i) the Participant has voluntarily ceased his employment prior
to the Normal Retirement Date and was not Change in Control Vested on such Date;
(ii) the Company has designated itself sole beneficiary under the Policy on the
most recent Section 3.2 Election; (iii) the Participant has attained the age of
seventy-five (75) and the Company has not designated the Beneficiary as
beneficiary to receive the portion of the death benefit payable under the Policy
in excess of the Aggregate Premium Amount; (iv) the Participant's employment was
terminated by action on the part of the Company for Cause; or (v) a Section 6.3
Payment has been made or the Company's obligation to make such a Payment has
become fixed; the Company shall have the unqualified right to receive the death
benefit payable under the Policy and no portion of such death benefit shall be
paid to the Beneficiary (except to the extent a portion of such death benefit,
in effect, shall be payable to the Participant in the form of a Death Benefit
Payment pursuant to Article V).

     Section 4.2 Death Benefit Allocable to Company and Beneficiary. Except in a
circumstance described in Section 4.1, the Company shall have the unqualified
right to receive a portion of the death benefit payable under the Policy equal
to the Aggregate Premium Amount, and the balance of such death benefit, if any,
shall be paid directly to the Beneficiary in the manner and in the amount or
amounts provided in the beneficiary designation provision of the Policy. In no
event shall the amount payable to the Company under this Section 4.2 exceed the
amount of the death benefit payable under the Policy, and no amount shall be
paid to the Beneficiary from such death benefit until the amount due the Company
under this Section 4.2 has been paid in full.

                                    ARTICLE V

                               RETIREMENT BENEFITS

     Section 5.1 Payment of Retirement Benefits. If the Participant has attained
the age of sixty-five (65) and (i) has been employed at all times between the
Effective Date and the Normal Retirement Date, (ii) has voluntarily ceased his
employment prior to the Normal Retirement Date and was Change in Control Vested
on the Retirement Date, or (iii) has had his employment terminated by action of
the Company for any reason other than Cause; he shall be entitled to (i) a
Primary Benefit Payment and a Primary Benefit Tax Payment for each month
beginning within the Retirement Benefit Period; (ii) a Retirement Dividend
Payment and a Retirement Dividend Tax Payment for the first month beginning
after the close of each Retirement Benefit Year; (iii) a Death Benefit Payment
and a Death Benefit Tax Payment for the


                                       13




<PAGE>

earlier of the sixth month beginning after the Date of Death or the first month
beginning after the Death Benefit Date; and (iv) a Maturity Payment and a
Maturity Tax Payment for the third month beginning after the date on which the
Policy is scheduled to mature. Any payment to which the Participant shall be
entitled under this Section 5.1 for any month shall be made on or before the
fifth Business Day of such month. The immediately preceding sentence to the
contrary notwithstanding, no payment shall be made prior to the Separation Date,
and any amount that shall otherwise become due on or before such Date shall be
payable on the first Business Day following such Date.

     Section 5.2 Postponement of Retirement Benefit Commencement Date. The
Administrative Committee, upon application by the Participant, shall grant him
one or more successive five- (5-) year postponements of the date on which
payment of Retirement Benefit Payments will commence. To satisfy the
requirements of this Section 5.2, (i) an application to the Administrative
Committee for any five- (5-) year postponement must be submitted (on a form
provided by the Committee) not less than three hundred sixty-five (365) days
before the date prescribed for the payment of Retirement Benefit Payments to
commence (as such date may have previously been postponed pursuant to this
Section 5.2); and (ii) no such Payments shall have previously become due and
payable.

     Section 5.3 Postponement of Full Payout Date. The Administrative Committee,
upon application by the Participant, shall grant him one postponement of the
date on which the final Primary Benefit Payment shall become due and payable;
provided that the date to which the Full Payout Date may be postponed pursuant
to this Section 5.3 shall be an anniversary of the Retirement Benefit
Commencement Date and shall not occur earlier than the fifteenth anniversary and
not later than the twentieth anniversary of such Date. To satisfy the
requirements of this Section 5.3, (i) an application to the Administrative
Committee for any postponement of the Full Payout Date must be submitted (on a
form provided by the Committee) not less than three hundred sixty-five (365)
days before the Retirement Benefit Commencement Date; and (ii) no such Payments
shall have previously become due and payable.

     Section 5.4 Determination of the Minimum Post-Payout Amount. On or before
the first Business Day of the first Retirement Benefit Year, the Administrative
Committee, after due consultation with the Insurer's In Force Reprojection Unit,
shall make a good faith determination of the amount, if any, of the Minimum
Post-Payout Amount.

     Section 5.5 Determination of Tax Amounts. For purposes of the Plan, (i) the
Primary Benefit Tax Amount for any month shall be the product obtained by
multiplying (x) the Primary Benefit Payment for such month by (y) the Tax
Gross-Up Factor; (ii) the Retirement Dividend Tax Amount for any Retirement
Benefit Year shall be the product obtained by multiplying (x) the Retirement
Dividend Payment for such Year by (y) the Tax Gross-Up Factor; (iii) the Death
Benefit Tax Amount shall be the product obtained by multiplying (x) the Death
Benefit Payment by (y) the Tax Gross-Up Factor; and (iv) the Maturity Tax Amount
shall be the product obtained by multiplying (x) the Maturity Payment, by (y)
the Tax Gross-Up Factor.

     Section 5.6 Determination of Maturity Payment. On or before the fifth (5th)
Business Day of the second month beginning after the date on which the Policy is
scheduled to mature, the Administrative Committee, after due consultation with
the Company's accountants, shall make a


                                       14




<PAGE>

good faith determination of the Maturity Payment that is payable for the first
month beginning after such Date.

     Section 5.7 Termination of Rights. No amount otherwise payable pursuant to
this Article V shall be paid if the such amount becomes due on or after the day
on which a Section 6.3 Payment has been made or the Company's obligation to make
such a Payment has become fixed.

                                   ARTICLE VI

                                CHANGE IN CONTROL

     Section 6.1 Funding of Benefits Following Initial Statutory Change Date. If
the Participant is employed on the Initial Statutory Change Date or his
employment has been terminated on or before such Date by the Company for any
reason other than Cause, then (i) on or before the thirtieth Business Day
following such Date, the Administrative Committee, after due consultation with
the Company's accountants, shall determine the Funding Amount; (ii) on or before
the sixtieth Business Day following such Change Date, the Company shall (A)
deposit a sum of money equal to the Funding Amount in a segregated account
established and maintained by the Company at an office located within the United
States of a financial institution selected by the Participant and reasonably
acceptable to the Company (or, if a mutually acceptable financial institution
cannot be found, JPMorgan Chase Bank, N.A. or any successor thereto), and (B)
upon the establishment of such account, the Company shall notify the Participant
of the location, account name and account number of such account and shall
deliver to the Participant an Account Control Agreement with respect to such
account duly executed by the Company and such Financial Institution containing
the provisions described in Section 6.2; and (iii) upon (A) assigning or
surrendering the Policy, (B) taking a loan from the Insurer with respect to the
Policy, or (C) pledging the Policy for purposes of securing a loan from any
person, at any time prior to the date on which the Company has made a Section
6.3 Payment, the Company will immediately deposit the proceeds of such
transaction in such account. All right, title and interest in and to amounts on
deposit in such account shall be subject to the claims of the Company's
creditors.

     Section 6.2 Account Control Agreement. The Account Control Agreement shall
provide, among other things, that (i) withdrawals of funds by the Company from
the segregated account prior to the first anniversary of the Date of Death shall
only be permitted by the Financial Institution solely for the purposes of (A)
paying Premiums as and when due, and only upon presentation to the Financial
Institution of a certificate of the chief financial officer of the Company,
dated as of the date of the proposed withdrawal, in form and substance
reasonably satisfactory to the Financial Institution and the Participant,
setting forth the amount and due date of the related Premium and representing
that the proposed withdrawal will be applied solely to the payment thereof,
together with documentation substantiating the amount and due date of such
Premium, and (B) making Permitted Payments, Tax Payments and a Section 6.3
Payment as and when due, and only upon presentation to the Financial Institution
of a certificate of the chief financial officer of the Company, dated as of the
date of the proposed withdrawal, in form and substance reasonably satisfactory
to the Financial Institution and the Participant, setting forth the amount and
due date of the related Permitted Payment, Tax Payment or Section 6.3 Payment,
as


                                       15




<PAGE>

the case may be, and representing that the proposed withdrawal will be applied
to solely to the funding thereof; (ii) only cash and Permitted Investments may
be held in the segregated account amounts; (iii) authority for selecting
Permitted Investments to be held in the segregated account will be vested solely
in the Financial Institution; and (iv) liquidation of the segregated account
shall be permitted by the Financial Institution only upon presentation to it of
a certificate of the chief financial officer of the Company, dated as of the
date of the proposed liquidation, in form and substance reasonably satisfactory
to the Financial Institution and the legal representative of the Participant's
estate, representing that (A) the Participant has voluntarily ceased his
employment and was not Change in Control Vested on the Retirement Date, (B) the
Participant's employment was terminated by the Company for Cause, (C) the
Participant has died and either the Participant has received all Permitted
Payments and Tax Payments scheduled to be paid under the Plan, and no Premiums
are scheduled to be paid for any period ending after the date of the proposed
liquidation, or amounts received by the Company in the proposed liquidation
will, to the extent necessary, be applied to the funding of any Permitted
Payments or Tax Payments which are then due or may become due under the Plan and
in prepayment of any and all Premiums which might be payable for all periods
ending after the date of the proposed liquidation, or (D) the Participant is
entitled to a Section 6.3 Payment and either the Participant has received all
such distributions, or amounts received by the Company in the proposed
liquidation will, to the extent necessary, be applied to the funding of any such
distributions which are then due or may become due under the Plan. In addition,
the Account Control Agreement shall contain such provisions and terms as are
customary for agreements of its type and such other terms as may be reasonably
satisfactory to the Company, the Participant and the Financial Institution.

     Section 6.3 Payment of Benefits Following a Statutory Change in Control.

          Section 6.3.1 Payment Accruing on Account of a Statutory Change in
Control. If the Participant is Change in Control Vested on a Statutory Change of
Control Date or his employment has been terminated by the Company for any reason
other than Cause on or before such Date, the Administrative Committee, after due
consultation with the Company's accountants, shall promptly determine the
Funding Amount, and the Company shall pay such Amount to the Participant on or
before the tenth Business Day following such determination.

          Section 6.3.2 Payment Accruing on Account of a Post-Statutory Change
in Control Vesting Date. Promptly following the Initial Post-Statutory Change in
Control Vesting Date, the Administrative Committee, after due consultation with
the Company's accountants, shall promptly determine the Funding Amount,
(determined as at such Initial Post-Statutory Change in Control Vesting Date)
and the Company shall pay such Amount to the Participant on or before the tenth
Business Day following such determination.

          Section 6.3.3 Payment Accruing on Account of Certain Other Events. If
at any time after a Statutory Change in Control occurs and before the Company's
obligation to make a payment pursuant to Section 6.3.1 or Section 6.3.2 arises,
the Company (A) defaults in the performance of its obligations under Section 3.3
or Section 6.1 and such failure continues for ten (10) Business Days after
written notice thereof has been given to the Company by the Participant; or (B)
(a) surrenders the Policy in whole or in part (unless any amount obtained upon
such surrender has been applied to fund a Permitted Payment), (b) takes a loan
from the Insurer


                                       16




<PAGE>

with respect to the Policy (unless the proceeds from such loan have been applied
to fund a Permitted Payment), (c) terminates or modifies the endorsement to the
Policy without the express written consent of the Participant or (d) pledges,
hypothecates or otherwise encumbers its interest in the Policy; the
Administrative Committee, after due consultation with the Company's accountants,
shall promptly determine the Funding Amount (determined as at the date of the
relevant event), and the Company shall pay such Amount to the Participant on or
before the tenth Business Day following such determination.

     Section 6.4 Credit Enhancement. If any agreement to which the Company is a
party would result in a Nonstatutory Change in Control, the Company shall use
its best efforts to include in such agreement provisions requiring the Ultimate
Parent Entity with respect to such agreement to issue its unconditional
guarantee of payment of the Company's obligations to the Participant under the
Plan which instrument shall contain such terms and conditions as are typically
found in instruments of its type and to execute such further agreements as may
be reasonably appropriate to effect the foregoing agreement to guarantee. If no
such guarantee is provided by the Ultimate Parent Entity with respect to such
agreement, the Change of Control resulting therefrom shall be be treated as a
Statutory Change in Control for purposes of Sections 6.1 and 6.2.

     Section 6.5 Overdue Payments. In the event the Company fails to pay in full
when due any amount to which the Participant shall be entitled pursuant to
Section 5.4 and such failure continues for a period of ten (10) days, such past
due payment shall bear interest at the lesser of (i) the maximum rate permitted
by applicable law or (ii) eighteen (18%) percent per annum.

                                   ARTICLE VII

                               INSURER INSOLVENCY

     Section 7.1 Retirement Benefits.

          Section 7.1.1 Insolvency Prior to the Retirement Benefit Commencement
Date. If an Event of Insolvency occurs on or before the Retirement Benefit
Commencement Date and the Participant would be entitled, except that he has
filed or has the right to file an application pursuant to Section 5.2, to
commence receiving Retirement Benefit Payments for the first month of the first
Plan Year beginning after the later of the Normal Retirement Date or the
Insolvency Date; then in lieu of any Retirement Benefit Payments, the
Participant shall only be entitled to receive (i) a Guaranteed Primary Benefit
Payment for each month beginning after the close of the later of the Normal
Retirement Year or the Insolvency Year and ending on or before the earlier of
the Causal Termination Date or the Guaranteed Full Payout Date; and (ii) an
Insolvency Retirement Benefit Payment for the first month beginning after the
close of each Plan Year. Any payment to which the Participant shall be entitled
under this Section 7.1.1 for any month shall be made on or before the fifth
Business Day of such month; provided that any payment that becomes due prior to
the Separation Date shall be paid on the first Business Day following such Date.

          Section 7.1.2 Insolvency Subsequent to the Retirement Benefit
Commencement Date. If an Event of Insolvency occurs after the Retirement Benefit
Commencement Date, then


                                       17




<PAGE>

in lieu of any Retirement Benefit Payments due on or payable after such Date,
the Participant shall thereafter only be entitled to receive a Guaranteed Net
Value Payment for each month beginning after the close of the Insolvency Year
and ending on or before the earlier of the Causal Termination Date or the
Guaranteed Full Net Value Payout Date. Any payment to which the Participant
shall be entitled under this Section 7.1.2 for any month shall be made on or
before the fifth Business Day of such month; provided that any payment that
becomes due prior to the Separation Date shall be paid on the first Business Day
following such Date.

     Section 7.2 Curative Adjustments. If at any time following the occurrence
of an Event of Insolvency the Policy has been restored to its full cash value,
the death benefit payable under the Policy has either been unaffected by such
Event or has been fully reinstated and all other rights and benefits that the
Company or the Beneficiary possessed under the Policy prior to such Event and
that were adversely affected by such Event have been fully reinstated; the
Administrative Committee shall, to the extent possible, make one or more
payments to the Participant so that, immediately following the last such
payment, the net amount paid to the Participant under the Plan equals the net
amount that would have been payable to him if such Event had not occurred.

                                  ARTICLE VIII

                                    AMENDMENT

     The Plan may be amended by action of the Board of Directors; provided,
however, that it may not be amended so as to adversely affect the rights of the
Participant or the Beneficiary unless the affected party consents to such
amendment in writing. Notwithstanding the foregoing, the Plan may be amended,
without the consent of the Participant or the Beneficiary, so as to (i) change
the meaning of the term "Plan Year" whenever the Company changes its taxable
year for federal income tax purposes so that each Plan Year is coterminous with
the taxable year of the Company with which it commenced; and (ii) provide that
once the Primary Benefit Amount for any Plan Year has been determined, the
Primary Benefit Amount for any subsequent Plan Year will not be affected by any
intervening change in the meaning of the term "Plan Year."

                                   ARTICLE IX

                                 ADMINISTRATION

     Section 9.1 Administrative Committee. At the discretion of the Board of
Directors, the Plan shall be administered by the Compensation Committee or by a
committee specifically established to manage and administer the Plan and
appointed by the Board of Directors. In addition to such powers as may be
delegated to it by the Board of Directors, the Administrative Committee shall
have the power to (i) interpret the Plan, (ii) establish such rules (not
inconsistent with the terms of the Plan) as it may deem necessary for the
administration of the Plan, (iii) make such determinations as are necessary for
the administration of the Plan, (iv) employ agents, attorneys, actuaries,
auditors, and accountants to furnish services in connection with the Plan, and
(v) calculate benefits due under the Plan. The Administrative Committee shall
have authority to delegate responsibility for performance of ministerial
functions necessary for


                                       18




<PAGE>

administration of the Plan to such officers of the Participating Companies,
including the Participant, as it shall, in its sole discretion, deem
appropriate.

     Section 9.2 Administration Costs. All expenses incurred in connection with
the administration of the Plan shall be borne by the Company.

     Section 9.3 Legal Limitation. No member of the Administrative Committee
shall be required to authorize or engage in any transaction which he determines,
in his sole discretion, to be unlawful or might subject him, any Participating
Company, the Participant or any Beneficiary to liability (other than liability
for taxes) under federal, state or local law.

     Section 9.4 Claims Procedure.

          Section 9.4.1 Filing of Claims. Any person who believes that he or she
is being denied a benefit to which he or she is entitled under the Plan may file
a written request for such benefit with the Administrative Committee setting
forth his or her claim. The request must be addressed to the Administrative
Committee at the Company's then principal place of business.

          Section 9.4.2 Claim Decision. Upon receipt of a claim, the
Administrative Committee shall advise the claimant that a reply will be
forthcoming within thirty (30) days and shall, in fact, deliver such reply
within such period. The Administrative Committee may, however, extend the reply
period for an additional thirty (30) days for reasonable cause. To deny a claim
in whole or in part, the Administrative Committee shall render a written
opinion, using language calculated to be understood by the claimant, setting
forth (i) the specific reason or reasons for such denial; (ii) the specific
reference to pertinent provisions of the Plan on which such denial is based;
(iii) a description of any additional material or information necessary for the
claimant to perfect the claim and an explanation why such material or such
information is necessary; and (iv) appropriate information as to the steps to be
taken if the claimant wishes to submit the claim for review. If such a written
opinion is not furnished to the claimant within the reply period (as it may be
extended for reasonable cause by the Administrative Committee), the claim shall
be deemed to have been denied.

          Section 9.4.3 Request for Review. Within sixty (60) days after the
receipt by the claimant of a written or a deemed denial, the claimant may
request in writing that the Administrative Committee review the determination.
Such request must be addressed to Administrative Committee, at the Company's
then principal place of business. The claimant or his or her duly authorized
representative may, but need not, review the pertinent documents and submit
issues and comments in writing for consideration by the Administrative
Committee. If the claimant does not request a review of the determination by the
Administrative Committee within such sixty- (60-) day period, he or she shall be
barred and estopped from challenging the determination.

          Section 9.4.4 Review of Decision. Within thirty (30) days after the
Administrative Committee's receipt of a request for review, it shall review its
determination. After considering all materials presented by the claimant, the
Administrative Committee shall render a written opinion, written in a manner
calculated to be understood by the claimant, setting


                                       19




<PAGE>

forth the specific reasons for the decision and containing specific references
to the pertinent provisions of the Plan on which the decision is based. If
special circumstances require that the thirty- (30-) day time period be
extended, the Administrative Committee will so notify the claimant and will
render the decision as soon as possible, but no later than sixty (60) days after
receipt of the request for review. If the Administrative Committee's decision on
review is not furnished to the claimant within the time limitations described
above, the claim will be deemed denied on review.

                                    ARTICLE X

                                  MISCELLANEOUS

     Section 10.1 No Transfers. The Participant shall not have, during his
lifetime, any right to assign or alienate in any other manner any rights he may
have under the Plan, nor shall any such rights be subject to garnishment or any
similar procedure.

     Section 10.2 Nature of Plan; Remedies. The Plan is in the nature of a
contract between the Company and the Participant. If the Company shall commit or
threaten to commit a breach of any of its obligations hereunder, any person
adversely affected thereby shall be entitled, in addition to any other remedy to
which he may be entitled at law or in equity, to an injunction or injunctions to
prevent breaches of the provisions of the Plan and to have the right to have the
provisions of this instrument specifically enforced, it being acknowledged and
agreed that any such breach would cause irreparable damage to such person for
which money damages could not provide an adequate remedy.

     Section 10.3 Headings and Captions. The headings and captions contained in
the Plan are inserted for convenience only and shall not in any way affect the
meaning or interpretation hereof.

     Section 10.4 Construction. No strict rule of construction shall be applied
against the Company.

     Section 10.5 Assignment. No amount distributable or to become distributable
to any person under the Plan shall be transferable, assignable or subject to
interference or control by any creditors of such person, or subject to any claim
for alimony or for the support of a spouse pursuant to a decree of divorce or
legal separation, or to being taken or reached by any legal or equitable process
in satisfaction of any debt or obligation of such person prior to his receipt of
such amount.

     Section 10.6 Severability. If any particular provision of the Plan shall be
found to be illegal, invalid or unenforceable in any situation or jurisdiction,
such provision shall not affect the validity or enforceability of the remaining
provisions hereof or the validity or enforceability of the offending provision
in any other situation or jurisdiction. If the final judgment of a court of
competent jurisdiction declares any provision of the Plan illegal, invalid or
unenforceable, such court shall have the power to reduce the scope, duration or
area of such provision, to delete specific words or phrases, or to replace any
illegal, invalid or unenforceable provision with a


                                       20




<PAGE>

provision that is legal, valid and enforceable and that comes closest to
expressing the intention of the offending provision

     Section 10.7 Applicable Law. The Plan shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
New York.

     Section 10.8 Arbitration. Any controversy or claim arising out of or
relating to this Agreement, the making, interpretation or the breach thereof,
shall be settled by arbitration in New York City in accordance with the rules
then obtaining of the American Arbitration Association and judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof and any party to the arbitration may, if he or it so
elects, institute proceedings in any court having jurisdiction for the specific
performance of any such award. The powers of the arbitrator or arbitrators shall
include, but not be limited to, the awarding of injunctive relief. The
arbitrator shall include in any award in the prevailing party's favor the amount
of his or its reasonable attorneys' fees and expenses and all other reasonable
costs and expenses of the arbitration. In the event that the arbitrator does not
rule in favor of the prevailing party in respect of all the claims alleged by
such party, the arbitrator shall include in any award in favor of the prevailing
party the amount of his or its reasonable attorneys' fees and other expenses and
such other reasonable costs and expenses of the arbitration as he deems just and
equitable under the circumstances. Except as provided above, each party shall
bear his or its own attorney's fees and expenses and the parties shall bear
equally all other costs and expenses of the arbitration. Notwithstanding the
foregoing, neither the Participant nor the Company may commence an arbitration
proceeding with respect to any controversy or claim until the Administrative
Committee has rendered a written opinion with respect thereto pursuant to
Section 9.4.4 or until one hundred eighty-three (183) days following the day on
which such a review was requested.

     Section 10.9 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
Business Days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:

     If to the Participant:   Mr. William H. Moryto
                              8 East Brook Drive
                              Holmdel, New Jersey 07733

     If to the Company:       Lazare Kaplan International Inc.
                              19 West 44th Street
                              New York, New York 10036
                              Attn: Administrative Committee
                                    of the Board of Directors

     With a copy to:          Warshaw Burstein Cohen
                              Schlesinger & Kuh, LP


                                       21




<PAGE>

                              555 Fifth Avenue
                              New York, New York 10017

                              Attn: Barry Klingman, Esq.

     Executed as of the first day of February, 2005

                                        LAZARE KAPLAN INTERNATIONAL  INC.


                                        By:
                                            ------------------------------------
                                            Leon Tempelsman, President


                                       22




<PAGE>

                                                                      APPENDIX A

                                  ERISA RIGHTS

     The Regulations of the Department of Labor require that the following
information with respect to your rights under ERISA be annexed to this
instrument.

     As the sole participant in the William H. Moryto Retirement Benefit Plan of
Lazare Kaplan International Inc., you are entitled to certain rights and
protections under the Employee Retirement Income Security Act of 1974 ("ERISA").
ERISA provides that you shall be entitled to:

          (i) Examine, without charge, at the Plan administrator's office and at
other specified locations, all Plan documents, including any insurance
contracts, and copies of all documents filed by the Plan with the U.S.
Department of Labor, such as detailed annual reports and Plan descriptions.

          (ii) Obtain copies of all Plan documents and other Plan information
upon written request to the Plan administrator. The Plan administrator may make
a reasonable charge for the copies.

          (iii) Receive a summary of the Plan's annual financial report. The
plan administrator is required by law to furnish you with a copy of this summary
annual report.

          (iv) Obtain a statement telling you whether you have a right to
receive a retirement benefit at your normal retirement age (age 65) and, if so,
what your benefits would be at normal retirement age if you stop working under
the Plan now. If you do not have a right to a retirement benefit, the statement
will tell you how many more years you have to work to get a right to a
retirement benefit. This statement must be requested in writing and is not
required to be given more than once a year. The Plan must provide the statement
free of charge.

          (v) File suit in a federal court, if any materials requested are not
received within 30 days of your request, unless the materials were not sent
because of matters upon the control of the administrator. The court may require
the Plan administrator to pay up to $100 for each day's delay until the
materials are received.

     In addition to creating rights for you, ERISA imposes obligations upon the
people who are responsible for the operation of the Plan.

     The people who operate your Plan, called "fiduciaries" of the Plan, have a
duty to act prudently and in the interest of you and your beneficiaries.

     No one, including your employer or any other person, may fire you or
otherwise discriminate against you in any way to prevent you from obtaining a
retirement benefit or exercising your rights under ERISA.


                                       23




<PAGE>

     If your claim for a retirement benefit is denied in whole or in part, you
must receive a written explanation of the reason for the denial. You have the
right to have the Plan review and reconsider your claim.

     If you have a claim for benefits which is denied or ignored, in whole or in
part, you may file suit in a state or federal court. If it should happen that
Plan fiduciaries misuse the Plan's money, or if you are discriminated against
for asserting your rights, you may seek assistance from the U.S. Department of
Labor, or you may file suit in a federal court. The court will decide who should
pay court costs and legal fees.

     If you are successful, the court may order the person you have sued to pay
these costs and fees. If you lose, the court may order you to pay these costs
and fees, for example, if it finds your claim is frivolous.

     If you have any questions about your Plan, you should contract the Plan
administrator.

     If you have any questions about this statement or about your rights under
ERISA, you should contact the nearest area office of the United States Labor -
Management Services Administration, Department of Labor.


                                       24




<PAGE>

                                                                      APPENDIX B

                                OTHER INFORMATION

<TABLE>
<S>                       <C>
Plan Name:                William H. Moryto Retirement Benefit Plan of Lazare
                          Kaplan International Inc.

Plan Sponsor:             Lazare Kaplan International Inc.
                          Sixteenth Floor
                          19 West 44th Street
                          New York, New York 10036

Employer Identification
Number:                   12-2728690

Type of Plan:             Pension Plan

Plan Identification
Number:

Plan Administrator:       The Plan is administered by the Administrative
                          Committee of the Board of Directors which maintains an
                          office at:

                               Lazare Kaplan International Inc.
                               Sixteenth Floor
                               19 West 44th Street
                               New York, New York 10036

Agent for Service
of Legal Process:         The Prentice-Hall Corporation System, Inc.
                          2711 Centerville Road, Suite 400
                          Wilmington, DE 19808
</TABLE>


                                       25




<PAGE>

                                                                       EXHIBIT A

                                [SPECIMEN POLICY]


                                       26




<PAGE>

                                                                       EXHIBIT B

                            SPLIT-DOLLAR ENDORSEMENT


                                       27