Document:

EXHIBIT
4.1

     

    AMENDMENT
TO AMENDED AND RESTATED RIGHTS AGREEMENT

    

    AMENDMENT,
dated as of October 25, 2010, to AMENDED AND RESTATED RIGHTS AGREEMENT, dated as
of April 24, 2007 (the “Rights
Agreement”), by and between Lazare Kaplan International Inc., a Delaware
corporation (the “Company”)
and Mellon Investor Services LLC, a New Jersey limited liability company
(formerly ChaseMellon Shareholder Services, L.L.C.) as Rights Agent (the “Rights
Agent”).

    

    WHEREAS,
the parties hereto have previously entered into the Rights
Agreement;

    

    WHEREAS,
the Company is entering into that certain Settlement Agreement, dated as of
October 25, 2010, among the Company, ABN AMRO Bank N.V., The Royal Bank of
Scotland PLC and certain other parties named therein (the “Settlement
Agreement”); and

    

    WHEREAS,
in connection with the execution and delivery of the Settlement Agreement, the
Company wishes to amend the Rights Agreement to add certain provisions which the
Company deems necessary and desirable.

    

    NOW
THEREFORE, the parties hereto hereby agree as follows:

    

    1.           Amendment.   The
Rights Agreement shall be hereby amended as follows:

    

    (a)           The
definition of “Acquiring
Person” as set forth in Section 1.1(a) of the Rights Agreement is hereby
amended by adding the following sentences to the end of such
definition:

    

    “This
definition of Acquiring Person shall not be deemed to include ABN AMRO Bank N.V.
and The Royal Bank of Scotland PLC and each of their respective affiliates
(collectively, “ABN”) solely with respect to Common Shares of the Company being
transferred by ABN to the Company pursuant to the Settlement Agreement dated as
of October 25, 2010, among the Company, ABN and the other parties named therein
(the “Settlement Agreement”). Without limiting the generality of the foregoing,
ABN has not and will not become an “Acquiring Person” as a result of the
transactions contemplated by the Settlement
Agreement.  Notwithstanding the foregoing, in the event that the
Settlement Agreement is determined to be null and void and of no force and
effect pursuant to the terms thereof, the first two sentences of this paragraph
shall be deemed omitted and of no further force and effect.”

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    

    2.           Ratification.    Except
as specifically provided herein, nothing herein contained shall otherwise
modify, reduce, amend or otherwise supplement the terms and provisions of the
Rights Agreement, which shall remain in full force and effect in accordance with
its terms.

    

    3.           Entire
Agreement.  This Amendment constitutes the entire agreement
between the parties hereto with respect to the amendment to the Rights Agreement
and the subject matter herein and shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns.

    

    4.           Governing
Law.  This Amendment shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware for contracts
executed and to be fully performed in such state and without regard to conflicts
of laws, except that the rights and obligations of the Rights Agent shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts to be made and performed entirely within such
state.

    

    5.           Counterparts.  This
Amendment may be executed in one or more counterparts each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.

    

    [Signature
Page to Follow]

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, this Amendment has been executed by the parties this 25th day of
October 2010.

    

    
      
        	 
      	
                LAZARE
      KAPLAN INTERNATIONAL INC.

              
	 
      	 
      	 
      
	 
      	
                By:

              	 
      
	 
      	 
      	
                Name:

              
	 
      	 
      	
                Title:

              
	 
      	 
      	 
      
	 
      	
                MELLON
      INVESTOR SERVICES LLC,

              
	 
      	
                as
      Rights Agent

              
	 
      	 
      	 
      
	 
      	
                By:

              	 
      
	 
      	 
      	
                Name:

              
	 
      	 
      	
                Title:

              

      

    

    
      
         

      

      
        3EXHIBIT
10.1

     

    SETTLEMENT
AGREEMENT

     

    This
SETTLEMENT AGREEMENT AND GENERAL RELEASE (the “Settlement Agreement”) is being
entered into this 26th day of October, 2010 (the “Effective Date”) by
and between ABN AMRO BANK N.V. (“ABN”), THE ROYAL BANK
OF SCOTLAND PLC (“RBS”), LAZARE KAPLAN
INTERNATIONAL INC. (“LKI”), LAZARE KAPLAN
JAPAN INC. (“LK
Japan”), LAZARE KAPLAN EUROPE INC. (“LK Europe”) and
LAZARE KAPLAN AFRICA INC. (“LK Africa,” together
with LK Japan and LK Europe, the “Guarantors,” the
Guarantors, together with LKI, the “LKI Parties” or
individually as an “LKI
Party”).  ABN, RBS, LKI, LK Japan, LK Europe and LK Africa are
referred to individually herein as the “Party” or
collectively as the “Parties.”

     

    RECITALS:

     

    WHEREAS,
LKI and ABN are parties to: (i) the Facility Letter dated as of February 27,
2009 (the “Facility
Letter”) and (ii) the Amended and Restated Credit Agreement dated as of
February 27, 2009 (the “Credit
Agreement”);

     

    WHEREAS,
ABN asserts that LKI owes ABN principal plus unpaid interest and out-of-pocket
expenses under the Facility Letter and the Credit Agreement (the “New York
Obligations”);

     

    WHEREAS,
pursuant to two guaranties, each dated February 27, 2009 (the “Facility Letter
Guaranty” and the “Credit Agreement
Guaranty”), the Guarantors guaranteed the New York
Obligations;

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    WHEREAS,
ABN extended credit to Gulfdiam DMCC (“Gulfdiam”);

     

    WHEREAS,
ABN asserts that Gulfdiam owes ABN principal, interest, fees and expenses
pursuant to the credit ABN extended to Gulfdiam (the “Gulfdiam
Obligations”);

     

    WHEREAS,
pursuant to the Guaranty dated September 1, 2007 (the “LKI-Gulfdiam
Guaranty”), LKI guaranteed up to fifty-percent of the Gulfdiam
Obligations (the “LKI-Gulfdiam Guaranty
Obligations”);

     

    WHEREAS,
LK Japan and RBS are parties to the Amended and Restated Credit Facility
Agreement dated as of February 28, 2009 (the “Japan Credit
Agreement”);

     

    WHEREAS,
RBS asserts that LK Japan owes RBS principal plus all unpaid interest and
out-of-pocket expenses under the Japan Credit Agreement (the “Japan
Obligations”);

     

    WHEREAS,
pursuant to the Guarantee dated April 16, 2009 (the “Japan Guarantee,”
together with the New York Obligations, the LKI-Gulfdiam Guaranty Obligations,
the Facility Letter Guaranty, the Credit Agreement Guaranty, and the Japan
Obligations, the “ABN/RBS
Obligations”)), LKI guaranteed the Japan Obligations;

     

    WHEREAS,
LKI contends that it has claims against ABN and RBS arising from the
relationship and business dealings between LKI and ABN and LKI and RBS relating
to the ABN/RBS Obligations and Gulfdiam, and arising from other events,
circumstances and business dealings, that negate, excuse or give the LKI Parties
a right of set-off, from their payment obligations under the above described
ABN/RBS Obligations, credit facilities and guarantees and/or a claim for damages
against ABN and/or RBS (the “LKI
Claims”);

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    WHEREAS,
ABN and RBS contend that the LKI Claims are baseless and without merit;
and

     

    WHEREAS,
the Parties desire to avoid litigation, further expense and to resolve amicably
all matters and disputes among them;

     

    NOW,
THEREFORE, in consideration of the foregoing and for other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged, the
Parties, intending to be legally bound, hereby agree as follows:

     

    
      	 	
              1.

            	
              Consideration.

            

    

     

    
      	
               
      

            	
              a.

            	
              Payment.  LKI shall
      make a single payment of $14,000,000 (the “Settlement
      Amount”) by wire transfer of immediately available funds to the
      wire instructions set forth on Annex A no
      later than 4:00 p.m. (New York time) October 26, 2010, provided, that subject to
      Paragraph 3 below, ABN’s receipt of the Settlement Amount (on behalf of
      ABN and RBS) shall be deemed by ABN and RBS to constitute satisfaction in
      full by LKI of all of the ABN/RBS Obligations.  ABN shall apply
      the Settlement Amount pro rata to the ABN/RBS Obligations as follows:
      $7,488,387.16 to the New York Obligations, $5,073,402.01 to the
      LKI-Gulfdiam Guaranty Obligations and $1,438,210.83 to the Japan
      Obligations.

            

    

    
      
         

      

      
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              b.

            	
              Delivery
      of ABN’s Interest in LKI’s Shares to LKI.  ABN hereby
      conveys, transfers, assigns and delivers to LKI, and LKI hereby accepts
      from ABN, ABN’s respective legal and equitable right, title and interest
      in and to (i) certificate LK2049, representing 1,180,000 shares of LKI
      stock (ii) certificate LK2050, representing 125,000 shares of LKI stock,
      (iii) certificate LK2052, representing 180,000 shares of LKI stock and
      (iv) all other shares of LKI stock maintained by ABN in the Share Account
      (as defined below) representing 666,103 shares of LKI stock (collectively
      2,151,103 shares of LKI stock the “LK Shares”),
      which shares are held by CitiGroup Global Mkts. Inc. (the “Securities
      Intermediary”) in account number 401-14839-16 (the “Share
      Account”).  Except as a different time period is
      specified below, within ten (10) days of execution of this Settlement
      Agreement, (1) ABN shall deliver a letter of instruction to the Securities
      Intermediary, in form and substance reasonably satisfactory to the
      Securities Intermediary and ABN, to effect the transfer of the LK Shares
      (including, to the extent certificated, the actual certificates
      representing such LK Shares or a lost certificate affidavit with respect
      to any lost certificates), from the Share Account to LKI (subject to
      paragraph 3 of this Settlement Agreement), (2) ABN shall deliver a letter
      of instruction to LKI’s transfer agent, BNY Mellon Share Owners Services
      (“BNY
      Mellon”), 480 Washington Blvd., Jersey City, New Jersey 07310-1990,
      in form and substance reasonably satisfactory to BNY Mellon and ABN, to
      effect the transfer of the LK Shares to LKI, subject to Paragraph 3 of
      this Settlement Agreement, and to take direction from LKI with respect to
      the LK Shares, (3) on the Effective Date, ABN shall deliver to BNY Mellon
      a copy of a corporate resolution of ABN authorizing the transfer of the LK
      Shares free and clear of any lien or encumbrances imposed by ABN, (4) ABN
      shall deliver to BNY Mellon an original stock power with Medallion
      Signature Guarantee, if possible, or similar certification and (5) on the
      Effective Date, LKI shall deliver to ABN evidence prior to the transfer of
      the LK Shares that LKI has waived the poison pill.  For ten (10)
      days following the Effective Date, ABN and LKI shall cooperate with any
      reasonable requests of BNY Mellon or the Securities Intermediary that are
      actually necessary to transfer the LK Shares to
  LKI.

            

    

    
      
         

      

      
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              c.

            	
              Assignment
      of Insurance.  ABN hereby conveys, transfers, assigns and
      delivers to LKI, and LKI hereby accepts from ABN, all of ABN’s right,
      title and interest: (i) if any, under the certain insurance policies
      numbered  B0576GNYA96B, B0576GMYA96B, B0576GLYA472 and
      B0576GLYB472 (the “Insurance
      Policies”), but only to the extent of ABN’s interest in the
      Insurance Policies and subject to the provisos of this clause (c); (ii)
      any payment made to any LKI Party under the Agreement for Interim Payment,
      dated December 31, 2009, between LKI and the underwriters of the Insurance
      Policies numbered B0576GLYA472 and B0576GLYB472 (the “Interim Payment
      Agreement”); and (iii) any amounts that any LKI Party receives with
      respect to any settlement reached or judgment rendered in connection with
      the Insurance Policies and/or the Interim Payment Agreement; provided, that nothing
      herein constitutes nor shall be deemed a conveyance, transfer or
      assignment of any right, title or interest that Gulfdiam or any other
      person may have with respect to the Insurance Policies; provided, further, that
      nothing herein constitutes nor shall be deemed a conveyance, transfer, or
      assignment of ABN’s right, title or interest in the Gulfdiam Obligations
      or ABN’s right, title or interest to receive proceeds of the Insurance
      Policies from Gulfdiam or any other person (other than an LKI Party) as a
      creditor of Gulfdiam or any other person (other than an LKI Party) to the
      extent that Gulfdiam or any other person (other than an LKI Party) is
      entitled to any proceeds of the Insurance
  Policies.

            

    

    
      
         

      

      
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    2.           Releases.   In
consideration of the Settlement Amount, transfer of the LK Shares and the other
terms and conditions set forth herein the Parties release each other as follows
(each, a “Release” and
collectively, the “Releases”):

     

    
      	
               
      

            	
              a.

            	
              Mutual Release Among
      ABN and LKI Parties.  ABN, on the one hand, and each LKI
      Party, on the other, on their own behalf and on behalf of each of their
      successors, predecessors, successors in interest and assigns, parents,
      subsidiaries, affiliates (which, for the purposes of this Settlement
      Agreement, does not include Gulfdiam), current and former officers,
      directors, attorneys, principals, members, representatives, agents,
      servants and employees and their respective issue, heirs, executors,
      administrators, successors and assigns (in each case, past, present or
      future) hereby release and forever discharge each other, and each other’s
      successors, predecessors (including, but not limited to, The Royal Bank of
      Scotland N.V. and its successors, predecessors, successors in interest and
      assigns, parents, subsidiaries, affiliates, current and former officers,
      directors, attorneys, principals, members, representatives, agents,
      servants and employees and its respective issue, heirs, executors,
      administrators, successors and assigns (in each case, past, present or
      future), collectively, “RBS N.V.”)),
      former lenders of the ABN/RBS Obligations (including, but not limited to,
      RBS N.V.), successors in interest, heirs, assigns, parents, subsidiaries,
      affiliates (which, for the purposes of this Settlement Agreement, does not
      include Gulfdiam), current and former officers, directors, attorneys,
      principals, members, representatives, agents, servants, employees and
      their respective issue, heirs, executors, administrators, successors and
      assigns (in each case, past, present, or future) from any and all claims,
      suits, demands, obligations, liabilities, damages (including but not
      limited to consequential and punitive damages), actions, causes of action,
      claims for attorney fees, costs and expenses, and lawsuits of every kind
      and description, in law or in equity, whether in the United States (based
      on any federal or state law or right of action) or in any other country in
      the world (based on any foreign law or right of action), whether known or
      unknown, whether foreseen or unforeseen, whether matured or unmatured,
      accrued or not accrued, which any of them ever had, now has or may in the
      future have for, upon or by reason of any matter, cause, or thing
      whatsoever, whether known or unknown, or disclosed to any of them, from
      the beginning of time to the Effective Date related to the ABN/RBS
      Obligations and the LKI Claims (the “ABN/LKI Released
      Claims”).

            

    

    
      
         

      

      
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                b.

              	
                Mutual Release Among
      RBS and LKI Parties.  RBS, on the one hand, and each LKI
      Party, on the other, on their own behalf and on behalf of each of their
      successors, predecessors, successors in interest, and assigns, parents,
      subsidiaries, affiliates (including, but not limited to RBS N.V., but
      which, for the purposes of this Settlement Agreement, does not include
      Gulfdiam), current and former officers, directors, attorneys, principals,
      members, representatives, agents, servants and employees and their
      respective issue, heirs, executors, administrators, successors and assigns
      (in each case, past, present or future) hereby release and forever
      discharge each other, and each other’s successors, predecessors,
      successors in interest, heirs, assigns, parents, subsidiaries, affiliates
      (including, but not limited to RBS N.V., but which, for the purposes of
      this Settlement Agreement, does not include Gulfdiam), current and former
      officers, directors, attorneys, principals, members, representatives,
      agents, servants, employees and their respective issue, heirs, executors,
      administrators, successors and assigns (in each case, past, present or
      future) from any and all claims, suits, demands, obligations, liabilities,
      damages (including, but not limited to consequential and punitive
      damages), actions, causes of action, claims for attorney fees, costs and
      expenses, and lawsuits of every kind and description, in law or in equity,
      whether in the United States (based on federal or state law or right of
      action) or in any other country in the world (based upon any foreign law
      or right of action), whether known or unknown, whether foreseen or
      unforeseen, whether matured or unmatured, accrued or not accrued, which
      any of them ever had, now has or may in the future have for, upon or by
      reason of any matter, cause, or thing whatsoever, whether known or
      unknown, or disclosed to any of them, from the beginning of time to the
      effective date of this Settlement Agreement related to the ABN/RBS
      Obligations and the LKI Claims (the “RBS/LKI Released
      Claims”).

              
	 	 	 

      

    

    
      	
               
      

            	
              c.

            	
              It
      is the intention of all of the Parties that the releases contained in
      paragraph 2(a) and 2(b) be the broadest form of release of liability
      permitted by law and is meant to encompass, inter alia, any past,
      present or future claim, condition or injury, except any claim that may
      arise out of the breach of this Settlement
  Agreement.

            

    

    
      
         

      

      
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                d.

              	
                ABN,
      RBS and each LKI Party covenant not to institute, maintain or prosecute
      any action, claim, proceeding or cause of action of any kind to enforce
      any of the ABN/LKI Released Claims or RBS/LKI Released
      Claims.  In any litigation arising from or related to an alleged
      breach of this Settlement Agreement between ABN and any LKI Party, or RBS
      and any LKI Party, ABN, RBS and each LKI Party covenant and agree that the
      release in this paragraph 2 may be pleaded as a defense, counterclaim or
      crossclaim, and shall be admissible into evidence without any foundation
      or testimony whatsoever.

              
	 	 	 

      

    

    
      
        	
                 
      

              	
                e.

              	
                The
      rights of the Parties as against all persons or entities that are not
      released by the Releases (including but not limited to, any other
      financial institutions, other diamond related companies or any insurance
      companies) are not affected and such rights (if any) may be enforced in
      existing or future legal actions involving any Party.

              
	 	 	 

      

    

    
      	
               
      

            	
              f.

            	
              Nothing
      contained in this Settlement Agreement shall be deemed a waiver of any
      Party’s right to seek discovery (or object to such discovery request) from
      any other Party in connection with any actually pending litigation
      (whether such litigation is pending on the Effective Date or in the
      future), arbitration, mediation or alternative dispute resolution
      proceeding to which such Party is a
party.

            

    

    
      
         

      

      
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    3.           Limitations
on Settlement Agreement.

     

    
      	
               
      

            	
              a.

            	
              Notwithstanding
      anything to the contrary contained herein, if, at any time, the payment of
      the Settlement Amount, exchange of the Releases, transfer of the LK Shares
      or ABN’s rights under the Insurance Policies or any other consideration
      provided hereunder shall be invalidated, declared to be fraudulent or
      preferential, reduced, disgorged, reclaimed, recouped, set aside or
      rescinded by a final order, judgment or approval of a settlement agreement
      or stipulation of settlement by a court of competent jurisdiction and ABN
      shall be required, by such final order, judgment or approval of a
      settlement agreement or stipulation of settlement, to return any portion
      of the Settlement Amount to any LKI Party or its successors (including,
      but not limited to, any trustee, receiver, litigation trust or bankruptcy
      estate): (i) this Settlement Agreement (including, but not limited to, the
      Releases) shall be null and void and of no force and effect, (ii) ABN and
      RBS shall be free, in accordance with the Credit Agreement, the Facility
      Letter, the Facility Letter Guaranty, the Credit Agreement Guaranty, the
      LKI-Gulfdiam Guaranty, the Japan Credit Agreement, the Japan Guarantee,
      applicable law and equity, to exercise and enforce or to take steps to
      exercise and enforce all other rights, powers, privileges and remedies
      available to it with respect to the ABN/RBS Obligations as if this
      Settlement Agreement had not been entered into, (iii) the transfer of the
      LK Shares to LKI shall be deemed null and void and the Parties shall take
      all steps necessary to restore the ownership of rights to the LK Shares
      and the proceeds thereof as in effect on the Effective Date, (iv) LKI’s
      rights granted hereunder to and under the Insurance Policies shall be
      deemed null and void and the Parties shall take all steps necessary to
      restore ABN’s rights to the Insurance Policies and the proceeds thereof as
      in effect on the Effective Date; (v) the LKI Parties shall be free to
      assert the LKI Claims and take all other steps under applicable law and
      equity, to exercise and enforce or to take steps to exercise and enforce
      all other rights, powers, privileges and remedies available to it with
      respect to the LKI Claims as if this Settlement Agreement had not been
      entered into and (vi) ABN shall return the Settlement Amount to
      LKI.  In such event, any and all statutes of limitations
      applicable to the LKI Claims and the ABN/RBS Obligations shall be deemed
      to have been tolled from the Effective Date through the date of such final
      order, judgment or approval of a settlement agreement or stipulation of
      settlement (the “Tolling
      Period”) and each of ABN, RBS and each LKI Party, on behalf of
      itself and its successors, successors in interest, assigns, parents,
      subsidiaries, affiliates (other than Gulfdiam) current and former
      officers, directors, attorneys, principals, members, representatives,
      agents, servants and employees and their respective issue, heirs,
      executors, administrators, successors and assigns (in each case, past,
      present or future) forever waive any and all defenses based on calculation
      of any and all applicable statutes of limitation that include the Tolling
      Period.

            

    

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              b.

            	
              Nothing
      contained herein, however, shall bar any action or claim to enforce the
      terms of this Settlement Agreement.

            

    

     

    4.           Representations
and Warranties of each LKI Party.  In order to induce RBS and
ABN to enter into this Settlement Agreement, each LKI Party hereby represents
and warrants to each of RBS and ABN as follows and agrees that each of the said
representations and warranties shall be deemed to survive until full and
complete performance of this Settlement Agreement:

     

    
      	
               
      

            	
              a.

            	
              Authority.  The
      execution, delivery and performance by each LKI Party of this Settlement
      Agreement and the consummation of the transactions contemplated hereby
      are: (i) within the power of such LKI Party and (ii) has been duly
      authorized by all necessary actions on the part of such LKI Party pursuant
      to the resolutions delivered by each LKI Party to RBS and ABN, which have
      been duly adopted by the appropriate governing body of each LKI Party and
      are continuing in effect.

            

    

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

      

    
      	
               
      

            	
              b.

            	
              Enforceability.  This
      Settlement Agreement has been duly executed and delivered by each LKI
      Party and constitutes a legal, valid and binding obligation of such LKI
      Party, enforceable against such LKI Party in accordance with its terms,
      except as may be limited by bankruptcy, insolvency or other governmental
      rules of general application relating to or affecting the enforcement of
      creditors’ rights generally and general principles of
    equity.

            

    

     

    
      	
               
      

            	
              c.

            	
              Non-Contravention.  The
      execution and delivery by each LKI Party of this Settlement Agreement and
      the performance and consummation of the transactions contemplated hereby
      do not violate (i) any law applicable to such LKI Party or (ii) any
      provision of, or result in the breach or the acceleration of, or entitle
      any other person to accelerate, any material contractual obligation of
      such LKI Party.

            

    

     

    
      	
               
      

            	
              d.

            	
              Approvals.  No
      consent, approval, order or authorization of, or registration, declaration
      or filing with, any governmental authority or other person (including
      equity holders of any person) is required in connection with the execution
      and delivery of this Settlement Agreement by any LKI Party or the
      performance or consummation of the transactions contemplated hereby,
      except for those which have been made or obtained and are in full force
      and effect.

            

    

     

    5.           Representations
and Warranties of RBS.  In order to induce the LKI Parties to
enter into this Settlement Agreement, RBS hereby represents and warrants to each
LKI Party (severally, and not jointly) as follows and agrees that each of the
said representations and warranties shall be deemed to survive until full and
complete performance of this Settlement Agreement:

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    
      
        	 	
                a.

              	
                Authority.  The
      execution, delivery and performance by RBS of this Settlement Agreement
      and the consummation of the transactions contemplated hereby are: (i)
      within the power of RBS and (ii) has been duly authorized by all necessary
      actions on the part of
RBS.

              

      

    

     

    
      	
               
      

            	
              b.

            	
              Enforceability.  This
      Settlement Agreement has been duly executed and delivered by RBS and
      constitutes a legal, valid and binding obligation of RBS, enforceable
      against RBS in accordance with its terms, except as may be limited by
      bankruptcy, insolvency or other governmental rules of general application
      relating to or affecting the enforcement of creditors’ rights generally
      and general principles of equity.

            

    

     

    
      	
               
      

            	
              c.

            	
              Non-Contravention.  The
      execution and delivery by RBS of this Settlement Agreement and the
      performance and consummation of the transactions contemplated hereby do
      not violate (i) any law applicable to RBS or (ii) any provision of, or
      result in the breach or the acceleration of, or entitle any other person
      to accelerate, any material contractual obligation of
  RBS.

            

    

     

    
      	
               
      

            	
              d.

            	
              Approvals.  No
      consent, approval, order or authorization of, or registration, declaration
      or filing with, any governmental authority or other person (including
      equity holders of any person) is required in connection with the execution
      and delivery of this Settlement Agreement by RBS or the performance or
      consummation of the transactions contemplated hereby, except for those
      which have been made or obtained and are in full force and
      effect.

            

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    6.           Representations
and Warranties of ABN.  In order to induce the LKI Parties to
enter into this Settlement Agreement, ABN hereby represents and warrants to each
LKI Party (severally, and not jointly) as follows and agrees that each of the
said representations and warranties shall be deemed to survive until full and
complete performance of this Settlement Agreement:

     

    
      	
               
      

            	
              a.

            	
              Authority.  The
      execution, delivery and performance by ABN of this Settlement Agreement
      and the consummation of the transactions contemplated hereby are: (i)
      within the power of ABN and (ii) has been duly authorized by all necessary
      actions on the part of ABN.

            

    

     

    
      	
               
      

            	
              b.

            	
              Enforceability.  This
      Settlement Agreement has been duly executed and delivered by ABN and
      constitutes a legal, valid and binding obligation of ABN, enforceable
      against ABN in accordance with its terms, except as may be limited by
      bankruptcy, insolvency or other governmental rules of general application
      relating to or affecting the enforcement of creditors’ rights generally
      and general principles of equity.

            

    

     

    
      	
               
      

            	
              c.

            	
              Non-Contravention.  The
      execution and delivery by ABN of this Settlement Agreement and the
      performance and consummation of the transactions contemplated hereby do
      not violate (i) any law applicable to ABN or (ii) any provision of, or
      result in the breach or the acceleration of, or entitle any other person
      to accelerate, any material contractual obligation of
  ABN.

            

    

     

    
      	
               
      

            	
              d.

            	
              Approvals.  No
      consent, approval, order or authorization of, or registration, declaration
      or filing with, any governmental authority or other person (including
      equity holders of any person) is required in connection with the execution
      and delivery of this Settlement Agreement by ABN or the performance or
      consummation of the transactions contemplated hereby, except for those
      which have been made or obtained and are in full force and
      effect.

            

    

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    7.           Costs and
Expenses.  Each Party shall bear its own costs and expenses
related to this Settlement Agreement, including attorneys’ fees incurred in
connection therewith.

     

    8.           No
Admission. This Settlement
Agreement is a settlement and compromise of disputed claims and does not
constitute and is not to be construed as a reflection or admission of any
wrongdoing, fault, or liability by any Party or of any of their parents,
subsidiaries, affiliates, current and former officers, directors, attorneys,
principals, members, representatives, agents, servants or
employees.

     

    9.           Disclosure.  To
the extent required in the legal opinion of LKI’s counsel, LKI will file this
Settlement Agreement with the Securities Exchange Commission.

     

    10.         Representation
by Counsel. The Parties represent
and acknowledge that they have discussed this Settlement Agreement with legal
counsel; that they have read and understand all the provisions of this
Settlement Agreement; that they voluntarily enter into this Settlement
Agreement; and that they have the capacity to enter into this Settlement
Agreement.

     

    11.         Jointly
Drafted.  This Settlement Agreement shall be considered as
drafted jointly by the Parties, and no ambiguity or uncertainty found in the
terms hereof shall be construed for or against either Party based on an
attribution of drafting to either Party.

     

    12.         Headings.  The
headings used herein are for purposes of reference only and shall not otherwise
affect the meaning or interpretation of any provision hereof.

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    13.         Choice of
Law; Jurisdiction.  This Settlement Agreement shall be governed
by, and construed in accordance with, the internal laws of the State of New York
applicable to contracts executed and fully performed within the State of New
York.  The Parties hereto irrevocably submit to the jurisdiction of
the New York Supreme Court, New York County, or the United States District Court
for the Southern District of New York with respect to any suit, action or
proceeding arising out of or relating to this Settlement Agreement.

     

    14.         Counterparts. This Settlement
Agreement may be executed and delivered (including, without limitation, by
facsimile transmission or other electronic means) in counterparts, each of which
shall be deemed an original, but all of which shall constitute the same
instrument.

     

    15.         Benefit
of Successors.  This Settlement Agreement shall inure to the
benefit of the Parties hereto and their respective successors and
assigns.

     

    16.         Amendments,
Waivers, Etc.  No amendment to or waiver of any provision of
this Settlement Agreement, nor consent to any departure by any Party of its
obligations under this Settlement Agreement, shall in any event be effective
unless the same shall be in writing and signed by the Parties affected by such
amendment, modification or waiver, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.

     

    17.         No
Waiver.  Nothing contained in this Settlement Agreement shall
be construed or interpreted, nor is it intended, as a waiver of or limitation of
any rights, powers, privileges or remedies that: (i) ABN or RBS may have with
respect to the ABN/RBS Obligations or the Gulfdiam Obligations against any party
other than the LKI Parties or (ii) any claims that any LKI Party may have
against any party other than ABN, The Royal Bank of Scotland N.V. or
RBS.

     

    18.         Third
Party Beneficiary.  The Royal Bank of Scotland N.V. is a third
party beneficiary of this Settlement Agreement.

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    19.         Notices.  All
notices, demands, or other communications hereunder shall be in writing and
shall be sent overnight mail to the following recipients, or to such other
recipients and addressees as the Parties may hereafter designate in
writing:

    

    
      
        
          
            
              	
                      To
      LKI Parties:

                       

                      Lazare
      Kaplan International Inc.

                      19
      West 44th
      Street

                      New
      York, New York 10036

                      Attention:
      William Moryto

                    	 
      	
                      With copies
      to:

                       

                      Herrick,
      Feinstein LLP

                      2
      Park Avenue

                      New
      York, New York 10016

                      Attention:
      Christopher J. Sullivan, Esq.

                      Fax:  (212)
      592-1500

                    
	 
      	 
      	 
      
	
                      To
      ABN:

                      ABN
      AMRO Bank N.V.

                      Foppingadreef
      22, Amsterdam

                      Postbus
      283, 1000 EA, Amsterdam

                      AA
      3532

                      Attention:
      Harko Vos

                      Email:
      harko.vos@nl.abnamro.com

                    	 
      	
                      With copies
      to:

                       

                      Orrick,
      Herrington & Sutcliffe LLP

                      51
      West 52nd Street

                      New
      York, New York 10019

                      Attention:
      John Ansbro, Esq.

                      Fax:  (212)
      506-3741

                    
	 
      	 
      	 
      
	
                      To
      RBS:

                       

                      The
      Royal Bank of Scotland plc

                      Head
      of Legal, GBM

                      135
      Bishopsgate

                      London
      EC2M 3UR

                    	
                        

                    	
                      With copies
      to:

                       

                      Orrick,
      Herrington & Sutcliffe LLP

                      51
      West 52nd Street

                      New
      York, New York 10019

                      Attention:
      John Ansbro, Esq.

                      Fax:  (212)
      506-3741

                    

            

          

        

      

    

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the Parties have executed this Settlement Agreement as of the
date written above.

     

    
      	 
      	
              LAZARE
      KAPLAN INTERNATIONAL INC.

            
	 
      	 
      
	 
      	
              By:______________________________

            
	 
      	
              Name:___________________________

            
	 
      	
              Title:
      ____________________________

            
	 
      	 
      
	 
      	
              LAZARE
      KAPLAN EUROPE INC.

            
	 
      	 
      
	 
      	
              By:______________________________

            
	 
      	
              Name:___________________________

            
	 
      	
              Title:
      ____________________________

            
	 
      	
              LAZARE
      KAPLAN AFRICA INC.

            
	 
      	 
      
	 
      	
              By:______________________________

            
	 
      	
              Name:___________________________

            
	 
      	
              Title:
      ____________________________

            
	 
      	 
      
	 
      	
              LAZARE
      KAPLAN JAPAN INC.

            
	 
      	 
      
	 
      	
              By:______________________________

            
	 
      	
              Name:___________________________

            
	 
      	
              Title:
      ____________________________

            

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    
      	 
      	
              ABN
      AMRO BANK N.V.

            
	 
      	 
      
	 
      	
              By:______________________________

            
	 
      	
              Name:___________________________

            
	 
      	
              Title:
      ____________________________

            
	 
      	 
      
	 
      	
              By:______________________________

            
	 
      	
              Name:___________________________

            
	 
      	
              Title:
      ____________________________

            

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    
      	 
      	
              THE
      ROYAL BANK OF SCOTLAND PLC

            
	 
      	 
      
	 
      	
              By:______________________________

            
	 
      	
              Name:___________________________

            
	 
      	
              Title:
      ____________________________

            

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    Annex A

    Wire
Instructions

    

    Beneficiary's
bank:

    ABN AMRO
Bank N.V.  (Belgium Branch)

    Pelikaanstraat
70-76

    2018
Antwerp, Belgium

    

    Swift
Address:

    ABNABE2AIDJ

    

    Account
beneficiary:

    BE89674540608185

    

    Name/
Address Beneficiary:

    ABN AMRO
INT US LOAN ACC

    Pelikaanstraat
70-76

    2018
Antwerp, Belgium

    

    Details
of payment:

    Agreement
dated 26 October 2010

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