Document:

LAZARE KAPLAN INTERNATIONAL INC. 

EIGHTH AMENDMENT TO REVOLVING CREDIT AGREEMENT

          This
Eighth Amendment to Revolving Credit Agreement (herein, the “Amendment”)
is entered into as of April __, 2007, between Lazare Kaplan International Inc.,
a Delaware. corporation (the “Borrower”), and ABN AMRO Bank N.V., as
Administrative Agent (the “Agent”), ABN AMRO Bank N.V., as a lender
(“ABN
AMRO”) and Bank Leumi USA, as a lender (“Leumi” and together with
ABN AMRO, the “Banks”).

PRELIMINARY STATEMENTS

          A.
The Borrower, the Agent and the Banks entered into a certain Revolving Credit
Agreement, dated as of August 14, 2002, as amended by the First Amendment to
Revolving Credit Agreement between the Borrower and the Banks dated as of May
28, 2003, a Second Amendment to Revolving Credit Agreement dated as of November
24, 2003, a Third Amendment to Revolving Credit Agreement dated as of September
13, 2004, a Fourth Amendment to Revolving Credit Agreement dated as of November
24, 2004, a Fifth Amendment to Revolving Credit Agreement dated as of May 6,
2005, a Sixth Amendment to Revolving Credit Agreement dated as of July 15, 2005
and Seventh Amendment to Revolving Credit Agreement dated as of December 1,
2005 (the Revolving Credit Agreement, as the same has been amended prior to the
date hereof, being referred to herein as the “Credit Agreement”). All
capitalized terms used herein without definition shall have the same meanings
herein as such terms have in the Credit Agreement.

          B.
The Borrower has requested that the Banks extend the existing Termination Date
of December 1, 2007 in accordance with Section 24 of the Credit Agreement, and
make certain other amendments thereto and the Banks are willing to do so under
the terms and conditions set forth in this Amendment.

          NOW,
THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

SECTION 1.
AMENDMENTS.

          Subject
to the satisfaction of the conditions precedent set forth in Section 2 below,
the Credit Agreement shall be and hereby is amended as follows:

	
 

	
 

	
 

	
          1.1.
 The definition of “Commitment” in Section 1 of the Credit Agreement shall be
 amended and restated in its entirety to read as follows:

	
 

	
 

	
 

	
“Commitment:
 The several obligations of (a) ABN AMRO to make Loans to the Borrower up to
 an aggregate outstanding principal amount not to exceed $27,200,000, and (b)
 Leumi to make Loans to the Borrower up to an aggregate outstanding principal
 amount not to exceed $10,000,000, as such amounts may be reduced from time to
 time or terminated according to the terms of this Agreement.”

	
 

	
 

	
 

	
          1.2.
 The definition of “Termination Date” in Section 1 of the Credit Agreement
 shall be amended and restated in its entirety to read as follows:

	
 

	
 

	
 

	
 

	
“Termination
 Date: December 1, 2008, or such later date as may be extended pursuant to
 Section 24 hereof.”

	
 

	
 

	
 

	
 

	
          1.3.
 Section 8.3(a) shall be amended in its entirety to read as follows:

	
 

	
 

	
 

	
 

	
“(a) as of
 the end of each of its fiscal quarters, Working Capital of not less than one
 hundred million dollars ($100,000,000);”

	
 

	
 

	
 

	
 

	
          1.4.
 Section 9.1(f) shall be amended in its entirety to read as follows:

	
 

	
 

	
 

	
 

	
“(i) any of
 the Borrower or its Subsidiaries shall be in default (after any applicable
 period of grace or cure period) under any agreement or agreements evidencing
 a Capitalized Lease or Indebtedness in excess of $100,000 owing to any Person
 or any affiliate thereof, or shall fail to pay such amounts thereunder when due,
 or within any applicable period of grace or (ii) any lender of the Borrower
 or its Subsidiaries (other than the Banks) shall demand repayment of any
 Indebtedness payable on demand under any uncommitted borrowing facility;”

SECTION 2.
CONDITIONS PRECEDENT.

          The
effectiveness of this Amendment is subject to the satisfaction of all of the
following conditions precedent:

	
 

	
 

	
 

	
          2.1.
 The Borrower, the Agent and the Banks shall have executed and delivered this
 Amendment, and the Borrower shall have executed and delivered replacement
 Promissory Notes to the Banks.

	
 

	
 

	
 

	
          2.2.
 The Agent shall have received copies (executed or certified, as may be
 appropriate) of all legal documents or proceedings taken in connection with
 the execution and delivery of this Amendment to the extent the Agent or its
 counsel may reasonably request.

	
 

	
 

	
 

	
          2.3.
 Legal matters incident to the execution and delivery of this Amendment shall
 be satisfactory to the Agent and its counsel.

	
 

	
 

	
 

	
          2.4.
 Lazare Kaplan Europe Inc., Lazare Kaplan Japan Inc. and Lazare Kaplan Africa
 Inc. shall have executed and delivered to the Agent their consent to this
 Amendment in the form set forth below.

SECTION 3.
REPRESENTATIONS.

          In
order to induce the Banks to execute and deliver this Amendment, the Borrower
hereby represents to the Banks that as of the date hereof the representations
and warranties set forth in Section 6 of the Credit Agreement are and shall be
and remain true and correct (except 

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that the
representations contained in Section 6(d) shall be deemed to refer to the most
recent financial statements of the Borrower delivered to the Banks) and the
Borrower is in compliance with the terms and conditions of the Credit Agreement
and no Default or Event of Default has occurred and is continuing under the
Credit Agreement or shall result after giving effect to this Amendment.

SECTION 4.
MISCELLANEOUS.

          4.1.
Except as specifically amended herein, the Credit Agreement shall continue in
full force and effect in accordance with its original terms. Reference to this
specific Amendment need not be made in the Credit Agreement, the Notes, or any
other instrument or document executed in connection therewith, or in any
certificate, letter or communication issued or made pursuant to or with respect
to the Credit Agreement, any reference in any of such items to the Credit
Agreement being sufficient to refer to the Credit Agreement as amended hereby.

          4.2.
The Borrower agrees to pay on demand all costs and expenses of or incurred by
the Agent in connection with the negotiation, preparation, execution and
delivery of this Amendment, including the fees and expenses of counsel for the
Agent.

          4.3.
This Amendment may be executed in any number of counterparts, and by the
different parties on different counterpart signature pages, all of which taken
together shall constitute one and the same agreement. Any of the parties hereto
may execute this Amendment by signing any such counterpart and each of such
counterparts shall for all purposes be deemed to be an original. This Amendment
shall be governed by the internal laws of the State of New York.

[SIGNATURE PAGE TO FOLLOW]

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          This
Eighth Amendment to Revolving Credit Agreement is entered into as of the date
and year first above written.

	
 

	
 

	
 

	
 

	
 

	
LAZARE KAPLAN INTERNATIONAL INC.

	
 

	
 

	
 

	
 

	
By

	
 

	
 

	
 

	

	
 

	
 

	
Name

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Title

	
 

	
 

	
 

	
 

	

Accepted and
agreed to:

	
 

	
 

	
 

	
 

	
 

	
ABN AMRO BANK N.V., individually and as Agent

	
 

	
 

	
 

	
 

	
 

	
By

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Name

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Title

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
By

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Name

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Title

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
BANK LEUMI USA

	
 

	
 

	
 

	
By

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Name

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Title

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
By

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Name

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Title

	
 

	
 

	
 

	
 

	

GUARANTOR’S ACKNOWLEDGEMENT AND CONSENT

          Each
of the undersigned heretofore executed and delivered to the Bank a Guaranty
dated August 14, 2002. Each of the undersigned hereby consents to the Eighth
Amendment to the Credit Agreement as set forth above and confirms that its
Guaranty and all of the undersigned’s obligations thereunder remain in full
force and effect. Each of the undersigned further agrees that the consent
thereof to any further amendments to the Credit Agreement shall not be required
as a result of this consent having been obtained, except to the extent, if any,
required by the Guaranty referred to above.

	
 

	
 

	
 

	
 

	
 

	
LAZARE KAPLAN EUROPE INC.

	
 

	
 

	
 

	
By

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Name

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Title

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
LAZARE KAPLAN JAPAN INC.

	
 

	
 

	
 

	
By

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Name

	
 

	
 

	
 

	
 

	

	
 

	
 

	
Title

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
LAZARE KAPLAN AFRICA INC.

	
 

	
 

	
 

	
By

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Name

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
TitleApril 13, 2007

Lazare Kaplan
International Inc.

19 West 44th Street

New York, New York 10036

Attention: Mr. William H. Moryto

	
 

	
 

	
Re:

	
Facility
 Letter

Ladies and
Gentlemen:

In accordance
with our recent discussions, we are please to confirm ABN AMRO Bank N.V.’s (the
“Bank”) agreement to hold available to Lazare Kaplan International Inc.
(the “Borrower”) a revolving loan facility for own-note borrowings (“Loans”)
up to a maximum aggregate principal amount of $7,800,000 (the “Facility”).
The Facility will be available at the Bank’s discretion in accordance with this
letter agreement (the “Facility Letter”) until the earlier to occur of
(i) notice from the Bank that the Bank has terminated the Facility or (ii)
December 1, 2008. 

Reference is
made to the Revolving Credit Agreement dated as of August 14, 2002 (as the same
has been and may be amended, restated or otherwise modified, the “Credit
Agreement”) by and among the Borrower, the Bank (as Administrative Agent,
Arranger and a lender) and Bank Leumi USA. Terms used herein but not otherwise
defined shall have the meaning assigned to such terms in the Credit Agreement
and such terms are hereby incorporated herein by reference. 

The Bank’s
agreement to make the Loans under the Facility is subject to the following terms
and conditions:

The proceeds
of the Loans shall be used for working capital. The Borrower acknowledges and
agrees that compliance by the Borrower with the terms and conditions set forth
herein, merely entitles the Borrower to make requests for Loans hereunder, the
granting of which, however, shall, in each case, remain within the Bank’s sole
and absolute discretion. 

The interest
rate applicable to the Loans made under this Facility shall be either (i) the
Base Rate or (ii) the LIBOR Rate plus LIBOR Rate Margin. Each Base Rate Loan
shall bear interest for the period commencing with the Drawdown Date thereof
and ending on the last day of the Interest Period with respect thereto at a
rate per annum equal to the Base Rate. Each LIBOR Rate Loan shall bear interest
for the period commencing with the Drawdown Date thereof and ending on the last
day of there Interest Period with respect thereto at rate per annum equal to
the sum of (i) the LIBOR Rate determined for such Interest Period plus (ii)
LIBOR Rate Margin. Without limiting the uncommitted nature of this Facility
Letter and the Bank’s right to demand repayment of the Loans hereunder,
together with all interest accrued thereon and any other obligations
thereunder, the Borrower promises to pay interest on each Loan in arrears on
each Interest Payment Date with respect thereto and upon demand. The Borrower
hereby further promises to pay to the order of the Bank, on demand, at the
place of payment indicated in the

attached note,
interest on any unpaid amounts under this Facility Letter following an Event of
Default under the Credit Agreement or after demand by the Bank under this
Facility Letter, at a rate per annum equal to the Base Rate plus two percent
(2%) until such amount is paid in full. 

Section 4.1 of
the Credit Agreement shall be applicable to all Loans with interest based on
the LIBOR Rate. Please be advised that Loans with interest based on the LIBOR
Rate are made in the Bank’s sole and absolute discretion. 

As security
for the Facility, you will provide us with an unconditional guaranty in favor
of the Bank by the Guarantors. 

Without in any
way limiting the uncommitted nature of the Facility, you agree that if any of
the Borrower or its Subsidiaries shall default under any agreement or
agreements evidencing any indebtedness in excess of $100,000 owing to any
person, or if such Indebtedness shall be payable on demand, and demand shall be
made, or any affiliate thereof, or shall fail to pay such amounts thereunder
when due or demanded, irrespective of any applicable period of grace or cure
period, then the Bank may, by written notice to the Borrower, demand, and the
Borrower will make, immediate payment to the Bank of all Loans and other
amounts outstanding under the Facility, including but not limited to interest,
costs and expenses, whether mature, contingent or unmatured. 

Without in any
way affecting the uncommitted nature of this Facility, you agree that so long
as this Facility is in effect and until all Loans and obligations incurred
hereunder are paid in full, you shall comply with the covenants set forth in
Section 8 of the Credit Agreement. 

Upon the
execution of this Facility Letter and the related note, the Borrower
acknowledges that $2,800,000 of loans made under the Credit Agreement shall be
allocated to the note under this Facility and such loans shall be deemed
“Loans” under this Facility and shall be subject to the terms of this Facility
Letter, including, but not limited to the Bank’s right to demand repayment of
such Loans at any time. 

The terms of
this Facility Letter shall not be amended without the prior written consent of
each of the Borrower and the Bank. 

The Borrower
shall pay to the Bank, on demand, the reasonable costs, expenses and
disbursements (including, but not limited to legal fees) in connection with the
preparation, interpretation, amendment, modification, cancellation, enforcement
or restructuring of the Borrower’s obligations under this Facility Letter. 

All
obligations under this Facility are payable immediately on demand. In addition
to any other rights ABN may have, and without limiting the uncommitted nature
of this Facility, if the Borrower does not comply with any of its undertakings
in this letter agreement, or an Event of Default shall have occurred under Section
9.1(a)-(j) of the Credit Agreement, or should any guaranty issued in support of
this Facility be canceled or in any other way become ineffective or impaired,
the Bank may, at its option, declare all Loans and other obligations under this
Facility to the Bank to be, whereupon they shall become, immediately due and
payable, without presentment, demand, protest or further notice of any kind,
all of which the Borrower hereby waives.

For the
avoidance of doubt, this is not a committed facility; no commitment fee shall
be charged and the Bank may terminate this Facility or demand the Loans at any
time. This Facility Letter shall be governed and construed in accordance with
the laws of the State of New York.

If you are in
agreement with the foregoing, kindly indicate your acceptance by signing the
attached copy of this letter in the space provided and the attached promissory
note and returning the same to us. 

Very truly yours,

ABN AMRO Bank N.V.

	
 

	
 

	
 

	
Anna Martin

	
Ned Koppelson

	
 

	
 

	
 

	
Accepted and
 agreed:

	
 

	
LAZARE KAPLAN INTERNATIONAL INC.

	
 

	
 

	
 

	
 

	
By

	
 

	
 

	
 

	

	
 

	
Name

	
 

	
 

	
 

	

	
 

	
Title

	
 

	
 

	
 

	

	
 

PROMISSORY NOTE

New York, New York

April 13, 2007

$7,800,000

          On
April 13, 2007, FOR VALUE RECEIVED, the undersigned, LAZARE KAPLAN
INTERNATIONAL INC., a Delaware corporation (the “Borrower”) promises to pay
to the order of ABN AMRO Bank N.V. at its New York office at 565 Fifth Avenue,
New York, New York 10017, ON DEMAND the principal sum of Seven
Million Eight Hundred Thousand Dollars ($7,800,000), or such lesser amount as
may be advanced to the Borrower hereon pursuant to the Agreement hereinafter
identified.

          The
Borrower hereby promises to pay interest, at the place of payment, ON DEMAND
(computed on the basis of a year of 360 days for the actual number of days
elapsed) on the principal amount from time to time remaining unpaid hereon from
the date hereof until paid at the rates, and payable in the manner specified in
the Agreement and ON DEMAND or otherwise on the dates, specified in the
Agreement.

          All
loans made by the payee hereof against this Note, and all payments made by the
Borrower on account of the unpaid principal amount hereof, shall be recorded on
the books and records of the holder hereof and endorsed hereon prior to any
transfer hereof, and the Borrower agrees that in any action or proceeding
instituted to collect or enforce collection of this Note, the amount shown as
owing on this Note on the books and records of the holder hereof shall be
deemed prima facie correct.

          This
Note is issued under the terms and provisions of Facility Letter bearing even
date herewith by and among the Borrower and ABN AMRO BANK N.V, and this Note
and the holder hereof are entitled to all of the benefits provided for by said
Agreement or referred to therein, including the ability of the Bank to demand
payment of the Note at any time.

          The
Loans evidenced by this Note may be prepaid in whole or in part on any business
day, without penalty or premium. 

          Demand
of payment of this Note shall be sufficiently made upon the Borrower by
written, telex, telegraphic, electronic or telephonic notice given by or on
behalf of the holder to the Borrower at its last known address. No other method
of delivering actual demand or notice is precluded hereby, and any such notice
or demand shall be fully effective, without further demand, presentment,
protest or notice of any kind, all of which are hereby waived by the Borrower.
No delay on the party of the holder in exercising any of its options, powers or
rights, or partial or single exercise thereof shall constitute a waiver thereof.
The options, powers and rights of the holder hereof specified herein are in
addition to those otherwise created. 

          This
Note shall be construed in accordance with, and governed by, the internal laws
of the State of New York.

          The
Borrower hereby promises to pay all costs and expenses (including attorneys’
fees) suffered or incurred by the holder hereof in collecting this Note or in
enforcing any rights in any collateral therefor.

	
 

	
 

	
 

	
 

	
LAZARE
 KAPLAN INTERNATIONAL INC.

	
 

	
 

	
 

	
By:

	
 

	
 

	
 

	

	
 

	
Its:

	
 

	
 

	
 

	

GUARANTY

          This
Guaranty Agreement (the “Guaranty”) dated as of this 13th day of
April, 2007, from each of the parties who have executed this Guaranty (being
herein referred to collectively, as the “Guarantors” and individually, as a “Guarantor”)
in favor of ABN AMRO Bank N.V. (“ABN AMRO”).

W I T N E S S E T H     T
      H A T :

          WHEREAS,
LAZARE KAPLAN INTERNATIONAL INC., a Delaware corporation, (the “Borrower”)
and ABN AMRO have entered into the Facility Letter, dated as of April 13, 2007
(such Facility Letter as the same may be amended, modified, supplemented,
restated and/or replaced from time to time being hereinafter referred to as the
“Facility
Letter”), pursuant to which ABN AMRO as the “Bank” agreed, subject to
certain terms and conditions, to extend credit and make certain other financial
accommodations to the Borrower;

          WHEREAS,
the Bank shall be hereinafter referred to as the “Guaranteed Creditor”;

          WHEREAS,
pursuant to the Facility Letter, the Bank has required, among other things, that
each Guarantor provide to the Guaranteed Creditor its payment guarantee of the
credit facilities under the Facility Letter;

          WHEREAS,
the Borrower provides each Guarantor that is a subsidiary of the Borrower
(whether directly or indirectly) with substantial financial, management,
administrative, and technical support, and each Guarantor will benefit,
directly or indirectly, from credit and other financial accommodations extended
by the Guaranteed Creditor to the Borrower;

          WHEREAS,
as to each Guarantor that is not a subsidiary of the Borrower, it is in the
best business interest of such Guarantor and its stockholders that the Borrower
receive credit and other financial accommodations extended by the Guaranteed
Creditor because of the mutual business interests and endeavors of the Borrower
and such Guarantor;

          NOW,
THEREFORE, for and in consideration of the benefits accruing to each Guarantor,
the receipt and sufficiency are hereby acknowledged, each Guarantor hereby
makes the following representations and warranties to the Guaranteed Creditor
and hereby covenants and agrees with the Guaranteed Creditor as follows:

          Section
1. All capitalized terms used herein without
definition shall have the same meanings herein as such terms have in the
Facility Letter.

          Section
2. Each Guarantor hereby jointly and severally
guarantees to the Guaranteed Creditor, the due and punctual payment when due of
(a) any and all indebtedness, obligations, and liabilities of whatsoever kind
and nature of the Borrower under the Facility Letter, whether direct or
indirect, absolute or contingent, due or to become due, and whether now
existing or hereafter arising and howsoever held, evidenced, or acquired, (the “Bank
Obligations”), (b) any and all reasonable expenses and charges,
legal or otherwise, suffered or incurred by the Guaranteed Creditor, in
collecting or enforcing any of such indebtedness, obligations, or liabilities
or in realizing on or protecting or preserving any security therefor, if any
(all of the

foregoing
being hereinafter referred to as the “Guaranteed Indebtedness”). In case of
failure by the Borrower to punctually pay any Guaranteed Indebtedness, each
Guarantor hereby jointly and severally agrees to make such payment or to cause
such payment to be made punctually as and when the same shall become due and
payable, whether at stated maturity, by acceleration or otherwise. All payments
hereunder by any Guarantor shall be made in immediately available and freely
transferable funds in Dollars without set-off, counterclaim or other defense or
withholding or deduction of any nature. Notwithstanding anything in this
Guaranty to the contrary, the right of recovery against a Guarantor under this
Guaranty shall not exceed $1.00 less than the amount which would render such
Guarantor’s obligations under this Guaranty void or voidable under applicable
law, including fraudulent conveyance law.

          Section
3. Each Guarantor further jointly and severally agrees
to pay on demand all reasonable out of pocket expenses, legal and/or otherwise
(including court costs and reasonable attorneys’ fees), paid or incurred by the
Guaranteed Creditor in endeavoring to collect the Guaranteed Indebtedness or
any part thereof, or in enforcing or endeavoring to enforce any Guarantor’s
obligations hereunder, or any part thereof, or in protecting, defending or
enforcing this Guaranty in any litigation, bankruptcy or insolvency proceedings
or otherwise.

          Section
4. Each Guarantor agrees that, upon demand, such
Guarantor shall pay to the Guaranteed Creditor the full amount of the
indebtedness hereby guaranteed when due (subject to the right of recovery from
such Guarantor pursuant to the last sentence of Section 2 above) whether or not
any one or more of the other Guarantors shall then or thereafter pay any amount
whatsoever in respect to their obligations hereunder, provided, however,
that the aggregate amount payable by the Guarantors shall in no event exceed
the amount due and owing to the Guaranteed Creditor by the Borrower.

          Section
5. Each Guarantor agrees that such Guarantor will not
exercise or enforce any right of exoneration, contribution, reimbursement,
recourse or subrogation available to such Guarantor against any Person liable
for payment of the indebtedness hereby guaranteed, or as to any security
therefor, unless and until the full amount owing and payable to the Guaranteed
Creditor of the Guaranteed Indebtedness has been fully paid and satisfied and
the Facility Letter shall have expired or otherwise terminated. The payment by
any Guarantor of any amount or amounts to the Guaranteed Creditor pursuant
hereto shall not in any way entitle any such Guarantor, either at law, in
equity or otherwise, to any right, title or interest (whether by way of
subrogation or otherwise) in and to the Guaranteed Indebtedness or any part
thereof or any collateral security therefor, if any, or any other rights or
remedies in any way relating thereto or in and to any amounts theretofore, then
or thereafter paid or applicable to the payment thereof howsoever such payment
may be made and from whatsoever source such payment may be derived unless and
until all of the Guaranteed Indebtedness and all costs and expenses suffered or
incurred by the Guaranteed Creditor in enforcing this Guaranty have been paid
and satisfied in full and the uncommitted agreement by the Guaranteed Creditor
to extend any Guaranteed Indebtedness shall have expired or otherwise
terminated and unless and until such payment in full and termination, any
payments made by any Guarantor hereunder and any other payments from whatsoever
source derived on account of or applicable to the Guaranteed Indebtedness or
any part thereof shall be held and taken to be merely payments to the Guaranteed
Creditor reducing pro tanto the indebtedness hereby guaranteed.

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          Section
6. This Guaranty is a continuing, absolute and
unconditional guaranty of payment and not merely of collection, and shall
remain in full force and effect as against each Guarantor until all of the
Guaranteed Indebtedness shall be fully paid and satisfied and the Facility
Letter shall have expired or have been terminated. The Guaranteed Creditor may
at any time or from time to time release any Guarantor from its obligations
hereunder or effect any compromise with any Guarantor and no such release or
compromise shall in any manner impair or otherwise affect the obligations
hereunder of the other Guarantors. No release, compromise, or discharge of any
one or more of the Guarantors shall release, compromise or discharge the
obligations of the other Guarantors hereunder.

          Section
7. In case of the dissolution, liquidation or
insolvency (howsoever evidenced) of, or the institution of voluntary bankruptcy
or receivership proceedings against the Borrower or the institution of
involuntary bankruptcy proceedings against the Borrower that are not dismissed
within sixty (60) days following the commencement thereto, all of the
Guaranteed Indebtedness relating to the Borrower which is then existing shall
immediately become due or accrued and payable from the Guarantors. All payments
received from the Borrower or on account of the Guaranteed Indebtedness from
whatsoever source, shall be taken and applied as payment on the indebtedness
hereby guaranteed, and this Guaranty shall apply to and secure any ultimate
balance that shall remain owing to the Guaranteed Creditor.

          Section
8. The liability hereunder shall in no way be affected
or impaired by (and the Guaranteed Creditor is hereby expressly authorized to
make from time to time, without notice to any of the Guarantors), any sale,
pledge, surrender, compromise, settlement, release, renewal, extension,
impairment, indulgence, alteration, substitution, exchange, change in, modification
or other disposition of any of the Guaranteed Indebtedness, either express or
implied, or of the Facility Letter or any other contract or contracts
evidencing any thereof, or of any security or collateral therefor or any
guaranty thereof. The liability hereunder shall in no way be affected or
impaired by any acceptance or release by the Guaranteed Creditor of any
security for or other guarantors upon any of the Guaranteed Indebtedness, or by
any failure, neglect or omission on the part of the Guaranteed Creditor to
realize upon or protect any of the Guaranteed Indebtedness, or any collateral
or security therefor, if any, (including, without limitation, impairment of
collateral and failure to perfect security interest in any collateral), or to
exercise any lien upon or right of appropriation of any moneys, credits or
property of the Borrower or any Guarantor, possessed by the Guaranteed
Creditor, toward the liquidation of the Guaranteed Indebtedness, or by any
application of payments or credits thereon. In order to hold any Guarantor
liable hereunder, there shall be no obligation on the part of the Guaranteed
Creditor, at any time, to resort for payment to the Borrower or to any other
Guarantor, or to any other Person, its property or estate, or resort to any
collateral, security, property, liens or other rights or remedies whatsoever,
and the Guaranteed Creditor shall have the right to enforce this Guaranty
against any Guarantor irrespective of whether or not other proceedings or steps
are pending seeking resort to or realization upon or from any of the foregoing
are pending.

          Section
9. All diligence in collection or protection, and all
presentment, demand, protest and/or notice, as to any and everyone, whether or
not the Borrower or the Guarantors or others, of dishonor and of default and of
non-payment and of the creation and existence of any and all of said Guaranteed
Indebtedness, and of any security and collateral therefor, and of the

- 3 -

acceptance of
this Guaranty, and of any and all extensions of credit and indulgence
hereunder, are expressly waived.

          Section
10. The Guarantors waive any and all defenses, claims
and discharges of the Borrower, or any other obligor or guarantor, pertaining
to the Guaranteed Indebtedness, except the defense of discharge by irrevocable
payment in full. Without limiting the generality of the foregoing, the
Guarantors will not assert, plead or enforce against the Guaranteed Creditor
any defense of waiver, release, discharge in bankruptcy, statute of
limitations, res judicata, statute of frauds, anti-deficiency statute,
fraud, incapacity, minority, usury, illegality or unenforceability which may be
available to the Borrower or any other Person liable in respect of any of the
Guaranteed Indebtedness, or any set-off available against the Guaranteed
Creditor to the Borrower or any such other Person, whether or not on account of
a related transaction. The Guarantors agree that the Guarantors shall be and
remain jointly and severally liable for any deficiency remaining after
foreclosure or other realization on any lien or security interest, if any,
securing the Guaranteed Indebtedness, whether or not the liability of the
Borrower or any other obligor for such deficiency is discharged pursuant to
statute or judicial decision.

          Section
11. If any payment applied by the Guaranteed Creditor
to the indebtedness hereby guaranteed is thereafter set aside, recovered,
rescinded or required to be returned for any reason (including, without
limitation, the bankruptcy, insolvency or reorganization of the Borrower or any
other obligor), the Guaranteed Indebtedness to which such payment was applied
shall for the purposes of this Guaranty be deemed to have continued in
existence, notwithstanding such application, and this Guaranty shall be
enforceable as to such of the Guaranteed Indebtedness as fully as if such
application had never been made.

          Section
12. The liability of the Guarantors under this
Guaranty is in addition to and shall be cumulative with all other liabilities
of the Guarantors after the date hereof to the Guaranteed Creditor as a
guarantor of the indebtedness hereby guaranteed, without any limitation as to
amount, unless the instrument or agreement evidencing or creating such other
liability specifically provides to the contrary.

          Section
13. Any invalidity or unenforceability of any
provision or application of this Guaranty shall not affect other lawful
provisions and applications hereof, and to this end the provisions of this Guaranty
are declared to be severable. Without limiting the generality of the foregoing,
any invalidity or unenforceability against any Guarantor of any provision or
application of the Guaranty shall not affect the validity or enforceability of
the provisions or application of this Guaranty as against the other Guarantors.

          Section
14. Any demand for payment on this Guaranty or any
other notice required or desired to be given hereunder to any Guarantor shall
be in writing (including, without limitation, notice by telecopy) and shall be
given to the relevant party at its address or telecopier number set forth on
the appropriate signature page hereof, or such other address or telecopier
number as such party may hereafter specify by notice to the Guaranteed Creditor
given by United States certified or registered mail or by telecopy. Each such
notice, request or other communication shall be effective (i) if given by
telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section and a confirmation of such telecopy has been received
by the

- 4 -

sender, or
(ii) if given by mail, 5 days after such communication is deposited in the
mail, certified or registered with return receipt requested, addressed as
aforesaid.

          Section
15. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAW OF THE STATE OF NEW YORK (without regard to principles of
conflicts of laws) in which state it shall be performed by the Guarantors and
may not be waived, amended, released or otherwise changed except by a writing
signed by the Banks. This Guaranty and every part thereof shall be effective
upon delivery to the Guaranteed Creditor without further act, condition or
acceptance by the Guaranteed Creditor, shall be binding upon the Guarantors and
upon the legal representatives, successors and assigns of the Guarantors, and
shall inure to the benefit of the Guaranteed Creditor, its successors, legal
representatives and assigns. The Guarantors waive notice of the Guaranteed
Creditor’s acceptance hereof. This Guaranty may be executed in counterparts and
by different parties hereto on separate counterparts each of which shall be an
original, but all together to be one and the same instrument.

          Section
20. Each Guarantor hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any State court sitting in New York City, for purposes of all
legal proceedings arising out of or relating to this Guaranty or the transactions
contemplated hereby. Each Guarantor irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such proceeding brought in such a court and any
claim that any such proceeding brought in such court has been brought in an
inconvenient forum. EACH GUARANTOR AND, BY ACCEPTING THE BENEFITS OF THIS
AGREEMENT, THE GUARANTEED CREDITOR HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY.

[SIGNATURE PAGES TO GUARANTY AGREEMENT TO
FOLLOW]

- 5 -

          IN
WITNESS WHEREOF, the Guarantors have caused this Guaranty to be executed and
delivered as of the date first above written.

	
 

	
 

	
 

	
 

	
GUARANTORS:

	
 

	
 

	
 

	
 

	
LAZARE
 KAPLAN EUROPE INC.

	
Address:

	
 

	
 

	
c/o Lazare
 Kaplan International Inc.

	
 

	
 

	
529 Fifth
 Avenue

	
 

	
 

	
New York,
 New York 10017

	
By: 

	
 

	
Telecopier
 No. 212-697-3197

	
 

	

	
 

	
Its:

	
 

	
 

	
 

	

	
 

	
 

	
LAZARE
 KAPLAN JAPAN INC.

	
Address:

	
 

	
 

	
c/o Lazare
 Kaplan International Inc.

	
 

	
 

	
529 Fifth
 Avenue

	
 

	
 

	
New York,
 New York 10017

	
By: 

	
 

	
Telecopier
 No. 212-697-3197

	
 

	

	
 

	
Its:

	
 

	
 

	
 

	

	
 

	
 

	
LAZARE
 KAPLAN AFRICA INC.

	
Address:

	
 

	
 

	
c/o Lazare
 Kaplan International Inc.

	
 

	
 

	
529 Fifth
 Avenue

	
 

	
 

	
New York,
 New York 10017

	
By: 

	
 

	
Telecopier
 No. 212-697-3197

	
 

	

	
 

	
Its:

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