Document:

Exhibit 4.2b

 

FIRST AMENDMENT, dated as of September 24, 2010
(this “Amendment”), to the Credit Agreement dated as of May 10,
2010 (the “Credit Agreement”), among ZALE CORPORATION, a Delaware
corporation (the “Borrower”), Z INVESTMENT HOLDINGS, LLC, a Delaware
limited liability company, as administrative agent (the “Administrative
Agent”), and each lender from time to time party thereto (the “Lenders”
and, each individually, a “Lender”).

 

WHEREAS,
the Borrower has requested that the Lenders amend the Credit Agreement, as more
fully described herein; and

 

WHEREAS,
the sole Lender is willing to agree to such amendment, upon the terms and
subject to the conditions set forth herein.

 

NOW,
THEREFORE, in consideration of the mutual agreements herein contained and other
good and valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

 

SECTION 1.  Defined Terms.  Each capitalized term used and not defined
herein shall have the meaning assigned to it in the Credit Agreement, as
amended hereby.

 

SECTION 2.  Amendment of the Credit Agreement.  Effective as of the date hereof, the Credit
Agreement is amended as follows:

 

Section 1.01
of the Credit Agreement is hereby amended by deleting the definitions therein
of “Consolidated EBITDA” and “Consolidated Net Income” in their entirety.

 

Section 2.05(d) of
the Credit Agreement is hereby amended and restated in its entirety as follows:

 

“With respect to each Interest Payment Date
occurring prior to (and excluding) the Interest Payment Date on October 29,
2010, so long as no Event of Default has occurred and is continuing, the
Borrower may elect to (i) pay all interest due on such date in cash or (ii) pay
up to 33.3% of the interest due on such date by adding such interest to the
principal amount of the outstanding Loans and the remaining portion of the
interest in cash (such election, a “PIK Election”, and such interest
added to the principal amount of the outstanding Loans, the “PIK Amounts”).  The Borrower will give notice of such
election to the Administrative Agent at least three Business Days prior to the
applicable Interest Payment Date; provided, however, that in the event
no such notice is given to the Administrative Agent, so long as no Event of
Default has occurred and is continuing, the Borrower shall be deemed to have
made a PIK Election with respect to 33.3% of the interest due on such Interest
Payment Date, and such amount will be deemed a PIK Amount as set forth above.  With respect to each

 

 

Interest
Payment Date from and after (and including) the Interest Payment Date on October 29,
2010, all interest due on such date shall be paid in cash.”

 

Section 7.08(a) of
the Credit Agreement is hereby amended by deleting the text of such clause in
its entirety and replacing it with “[Intentionally Deleted]”.

 

SECTION 3.  Amendment Fee.  On the date hereof, the Borrower shall pay to
the Administrative Agent an amendment fee in the amount of $12,500,000.

 

SECTION 4.  Prepayment of Loans.  On the date hereof, the Borrower shall make a
cash payment to the Administrative Agent, for the account of the Lenders, in
the amount of $12,500,000 to prepay a portion of the outstanding principal
amount of the Loans equal to $11,250,000 (and such portion shall be deemed to
be due and payable on the date hereof) together with a premium of $1,250,000
with respect to the principal amount prepaid. 
For the avoidance of doubt, such premium shall be paid in cash on the
date hereof together with such principal prepayment.  It is acknowledged and agreed that Section 2.03(a) and
the first sentence of Section 2.03(d) of the Credit Agreement shall
not be applicable to the prepayment made pursuant to this Section 4, and
such terms are for purposes of such prepayment expressly superseded by the
terms of this Section 4.  For the
avoidance of doubt: (a) the total cash payment to be made by the Borrower
on the date hereof pursuant to this Section 4 is $12,500,000; (b) except
as expressly set forth in this Section 4, no prepayment premium is payable
with respect to the payments made pursuant to this Section 4; and (c) on
the date hereof, after giving effect to the transactions contemplated by this Section 4,
the outstanding aggregate principal amount of the Loans will be $140,453,774.

 

SECTION 5.  Representation and Warranties.  The Borrower and the other Loan Parties
hereby represent and warrant to the Administrative Agent and the Lenders, as of
the date hereof, as follows:

 

(a)           Organization; Powers.  Each Loan Party is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, and has all requisite power and authority to carry on its
business as now conducted and, except where the failure to do so, individually
or in the aggregate, would not reasonably be expected to result in a Material
Adverse Effect, is qualified to do business in, and is in good standing in,
every jurisdiction where such qualification is required.

 

(b)           Authorization;
Enforceability.  The
transactions contemplated by this Amendment to be entered into by each Loan
Party are within such Loan Party’s corporate, limited liability company or
partnership powers and have been duly authorized by all necessary corporate or
organizational, and, if required, stockholder action.   This Amendment has been duly executed and
delivered by each Loan Party and constitutes a legal, valid and binding
obligation of each Loan Party, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or other
laws affecting creditors’ rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at law.

 

2

 

(c)           Governmental Approvals; No
Conflicts.  The
transactions contemplated by this Amendment (a) do not require any consent
or approval of, registration or filing with, or any other action by, any
Governmental Authority, except for those the failure of which to obtain would
not reasonably be expected to have a Material Adverse Effect; (b) will not
violate any applicable law or regulation or the Organization Documents of any
Loan Party or any order of any Governmental Authority, except for any such
violation which would not reasonably be expected to have a Material Adverse
Effect; (c) will not violate or result in a default under the Existing
Revolving Credit Facility or the Intercreditor Agreement (after giving effect
to the consents in respect thereof obtained on or prior to the date hereof) or
any other indenture, agreement (including any Material Contract) or other
instrument binding upon any Loan Party or its assets or give rise to a right
thereunder to require any payment to be made by any Loan Party or any of its
Subsidiaries, except for any such violation or default which would not
reasonably be expected to have a Material Adverse Effect; and (d) will not
result in the creation or imposition of any Lien on any asset of any Loan
Party, except Liens created under the Loan Documents or otherwise permitted
thereby.

 

(d)           Solvency.  Both immediately before and immediately after
giving effect to the transactions contemplated by this Amendment, the Borrower
and its Subsidiaries, on a consolidated basis, are Solvent.  No transfer of property is being made by the
Borrower or any other Loan Party and no obligation is being incurred by the
Borrower or any other Loan Party in connection with the transactions
contemplated by this Amendment with the intent to hinder, delay or defraud
either present or future creditors of any Loan Party.

 

(e)           Loan Document
Representations and Warranties.  The representations and warranties of the
Loan Parties set forth in the Credit Agreement and the other Loan Documents are
true and correct in all material respects (except that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof) on and as
of the date hereof, as though made on such date (and the words “as of the
Closing Date” in the introductory paragraph of Article V of the Credit
Agreement shall be deemed not to apply for purposes of this Section 5(e)).

 

(f)            Defaults.  No Default or Event of Default has occurred
and is continuing.

 

SECTION 6. 
Conditions Precedent to Effectiveness of Amendment.  The satisfaction of each of the following
shall constitute conditions precedent to the effectiveness of the Amendment:

 

(a)   Administrative Agent shall
have received this Amendment, duly executed by the parties hereto, and the same
shall be in full force and effect.

 

3

 

(b)   Administrative Agent shall
have received the reaffirmation and consent of each Guarantor attached hereto
as Exhibit A, duly executed and delivered by an authorized official
of each Guarantor.

 

(c)   Administrative Agent shall
have received a solvency certificate with respect to Borrower and its
Subsidiaries in the form attached hereto as Exhibit B, duly executed and
delivered by the Executive Vice President and Chief Financial Officer of
Borrower.

 

(d)   The representations and
warranties herein and in the Credit Agreement and the other Loan Documents
shall be true and correct in all material respects (except that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof) on and as of the date hereof, as though made on such date (and the
words “as of the Closing Date” in the introductory paragraph of Article V
of the Credit Agreement shall be deemed not to apply for purposes of this Section 6(d)).

 

(e)   No Default or Event of
Default shall have occurred and be continuing or shall result from the
consummation of the transactions contemplated herein.

 

(f)    Substantially simultaneously
with the effectiveness of this Amendment, the Borrower shall have made the
prepayment of the Loans, together with premium, as contemplated by Section 4
of this Amendment.

 

(g)   Administrative Agent shall
have (i) received all fees and other amounts due and payable by any Loan
Party to the Administrative Agent in connection with this Amendment on or prior
to the effective date of this Amendment and (ii) been reimbursed for the
expenses referenced in Section 11 hereof (to the extent invoiced).

 

(h)   Administrative Agent shall
have received the consent to this Amendment from the administrative agent under
the ABL Credit Agreement and an amendment to the Intercreditor Agreement in
form and substance satisfactory to Administrative Agent, each of which shall be
in full force and effect.

 

SECTION 7.  Effect of Amendment.  Except as expressly set forth herein, this
Amendment shall not constitute an amendment or waiver of any provision of the
Credit Agreement and shall not be construed as an amendment, waiver or consent
to any further or future action on the part of the Borrower that would require
an amendment, waiver or consent of the Required Lenders or the Administrative
Agent.  Except as expressly amended or
supplemented hereby, the provisions of the Credit Agreement are and shall
remain in full force and effect.  This
Amendment shall be deemed a Loan Document for purposes of the Credit
Agreement.  Each of the parties hereto
hereby confirms, approves and ratifies in all respects the Credit Agreement,
and each of the parties hereto and each of the Guarantors hereby confirms and
ratifies in all respects all of the other agreements, documents and instruments
to which such Person is a party and 

 

4

 

delivered
in connection with the Credit Agreement. 
Without limiting the generality of the foregoing, the Borrower and the
Guarantors hereby confirm that the pledges and the security interest granted
pursuant to the Loan Documents continue to secure all of the Obligations under
and ratify (i) the Credit Agreement and (ii) the other Loan
Documents.

 

SECTION 8.  Incorporation by Reference.  Sections 10.13, 10.14 and 10.17 of the Credit
Agreement are hereby incorporated into this Amendment as if set forth in full
herein, mutatis mutandis.

 

SECTION 9.  Counterparts.  This Amendment may be executed in
counterparts (and by different parties hereto in different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract. 
Delivery of an executed counterpart of a signature page of this
Amendment by telecopy or other electronic image scan transmission (e.g.,
“pdf” or “tif” via e-mail) shall be effective as delivery of a manually
executed counterpart of this Amendment.

 

SECTION 10.  Headings and Construction.  (a)  Section headings used herein
are for convenience of reference only, are not part of this Amendment and shall
not affect the construction of, or be taken into consideration in interpreting,
this Amendment.

 

From
and after the effective date of this Amendment, each reference in the Credit
Agreement to “this Agreement” , “hereof” , “hereunder”  or words of like import, and all references
to the Credit Agreement in any and all agreements, instruments, certificates
and other documents, shall be deemed to mean the Credit Agreement as modified
and amended by this Amendment and as the same may be further amended, modified
or supplemented in accordance with the terms thereof.

 

SECTION 11.  Expenses.  Without limiting other payment obligations of
the Borrower set forth in the Credit Agreement, the Borrower agrees to pay all
reasonable costs and expenses incurred by the Administrative Agent as required
pursuant to Section 10.04 of the Credit Agreement in connection with the
preparation, execution and delivery of this Amendment and any other documents,
agreements and/or instruments which may be delivered in connection herewith,
including, without limitation, the reasonable fees and expenses of
Administrative Agent’s counsel, Kirkland & Ellis LLP.

 

[Signature Pages Follow]

 

5

 

IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered by their duly authorized officers as of the day and year
first above written.

 

	
   

  	
  ZALE
  CORPORATION, as Borrower,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
   

  	
  Name: Matthew
  W. Appel

  
	
   

  	
   

  	
   

  	
  Title:   EVP
  and CFO

  

 

 

	
   

  	
  Z
  INVESTMENT HOLDINGS, LLC, as Administrative Agent,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  PETER MORROW

  
	
   

  	
   

  	
   

  	
  Name: Peter
  Morrow

  
	
   

  	
   

  	
   

  	
  Title:   Manager

  

 

 

	
   

  	
  Z
  INVESTMENT HOLDINGS, LLC, as sole Lender,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  PETER MORROW

  
	
   

  	
   

  	
   

  	
  Name: Peter
  Morrow

  
	
   

  	
   

  	
   

  	
  Title:   Manager

  

 

 

Exhibit A

 

Reaffirmation and Consent

 

Each
of the undersigned (i) acknowledges the terms of the amendment, dated as
of September 24, 2010 (the “Amendment”), to the credit agreement
dated as of May 10, 2010 (the “Credit Agreement”), among Zale
Corporation, a Delaware corporation, Z Investment Holdings, LLC, a Delaware
limited liability company, as administrative agent, and each lender from time
to time party thereto, (ii) confirms the representations and agreements
applicable to the undersigned therein and (iii) reaffirms and agrees that:
its guaranty remains in full force and effect; nothing in such guaranty
obligates any Credit Party to notify the undersigned of any changes in the
financial accommodations made available to Borrower or to seek reaffirmations
of its respective guaranty; and no requirement to so notify the undersigned or
to seek reaffirmations in the future shall be implied by the execution of this
reaffirmation and consent.

 

Each
capitalized term used and not defined herein shall have the meaning assigned to
it in the Credit Agreement, as amended by the Amendment.

 

[Signature
Pages Follow]

 

 

IN
WITNESS WHEREOF, the undersigned have caused this reaffirmation and consent to
be duly executed and delivered by their duly authorized officers as of September 24,
2010

 

	
   

  	
  ZALE
  DELAWARE, INC., as a Guarantor

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
   

  	
  Name: Matthew
  W. Appel

  
	
   

  	
   

  	
   

  	
  Title:   EVP
  and CFO

  

 

	
   

  	
  ZALE PUERTO RICO, INC., as a Guarantor

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
   

  	
  Name: Matthew
  W. Appel

  
	
   

  	
   

  	
   

  	
  Title:   EVP
  and CFO

  

 

	
   

  	
  ZGCO, LLC, as a Guarantor

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
   

  	
  Name: Matthew
  W. Appel

  
	
   

  	
   

  	
   

  	
  Title:   EVP
  and CFO

  

 

	
   

  	
  TXDC, L.P., as a Guarantor

  
	
   

  	
   

  
	
   

  	
  by
  ZALE DELAWARE, INC., its general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
   

  	
  Name: Matthew
  W. Appel

  
	
   

  	
   

  	
   

  	
  Title:   EVP
  and CFO

  

 

	
   

  	
  ZALE CANADA CO., as a Guarantor

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
   

  	
  Name: Matthew
  W. Appel

  
	
   

  	
   

  	
   

  	
  Title:   EVP
  and CFO

  

 

 

	
   

  	
  ZALE CANADA FINCO, LLC, as a Guarantor

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
   

  	
  Name: Matthew
  W. Appel

  
	
   

  	
   

  	
   

  	
  Title:   EVP
  and CFO

  

 

	
   

  	
  ZALE
  INTERNATIONAL, INC., as a Guarantor

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
   

  	
  Name: Matthew
  W. Appel

  
	
   

  	
   

  	
   

  	
  Title:   EVP
  and CFO

  

 

	
   

  	
  ZALE
  EMPLOYEES’ CHILD CARE ASSOCIATION, INC., as a Guarantor

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
   

  	
  Name: Matthew
  W. Appel

  
	
   

  	
   

  	
   

  	
  Title:   EVP
  and CFO

  

 

	
   

  	
  ZAP, INC., as a Guarantor

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
   

  	
  Name: Matthew
  W. Appel

  
	
   

  	
   

  	
   

  	
  Title:   EVP
  and CFO

  

 

	
   

  	
  ZCSC, LLC, as a Guarantor

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
   

  	
  Name: Matthew
  W. Appel

  
	
   

  	
   

  	
   

  	
  Title:   EVP
  and CFO

  

 

	
   

  	
  FINCO
  HOLDING LP, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  by
  ZALE CANADA FINCO 2, Inc., its general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
   

  	
  Name: Matthew
  W. Appel

  
	
   

  	
   

  	
   

  	
  Title:  EVP
  and CFO

  

 

 

	
   

  	
  FINCO
  PARTNERSHIP LP, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  by
  ZALE CANADA FINCO 2, INC., its general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
   

  	
  Name: Matthew
  W. Appel

  
	
   

  	
   

  	
   

  	
  Title:   EVP
  and CFO

  

 

	
   

  	
  ZALE
  CANADA DIAMOND SOURCING INC., as a Guarantor

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
   

  	
  Name: Matthew
  W. Appel

  
	
   

  	
   

  	
   

  	
  Title:   EVP
  and CFO

  

 

	
   

  	
  ZALE CANADA FINCO 1, INC., as a Guarantor

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
   

  	
  Name: Matthew
  W. Appel

  
	
   

  	
   

  	
   

  	
  Title:   EVP
  and CFO

  

 

	
   

  	
  ZALE CANADA FINCO 2, INC., as a Guarantor

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
   

  	
  Name: Matthew
  W. Appel

  
	
   

  	
   

  	
   

  	
  Title:   EVP
  and CFO

  

 

	
   

  	
  ZALE
  CANADA HOLDING LP, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  by
  ZALE INTERNATIONAL, INC., its general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
   

  	
  Name: Matthew
  W. Appel

  
	
   

  	
   

  	
   

  	
  Title:   EVP
  and CFO

  

 

 

Exhibit B

 

Solvency Certificate

 

ZALE CORPORATION

901 W. Walnut Hill Lane

Irving, Texas 75038-1003

 

September 24, 2010

 

Z
Investment Holdings, LLC

One
Embarcadero Center, 39th Floor

San
Francisco, CA 94111

 

Re:                             Solvency Certificate delivered pursuant to the Credit Agreement
referenced below

 

Ladies
and Gentlemen:

 

Reference
is hereby made to that certain Credit Agreement (as amended by that certain
First Amendment (the “First Amendment”), dated as of September 24,
2010, and as may be further amended, restated, supplemented and modified
hereafter, the “Credit Agreement”), dated as of May 10, 2010, among
Zale Corporation, a Delaware corporation (the “Borrower”), the lenders
party thereto (the “Lenders”) and Z Investment Holdings, LLC, as
administrative agent for the Lenders (the “Administrative Agent”).  This Solvency Certificate is delivered
pursuant to Section 6(c) of the First Amendment. Capitalized terms
used herein but not defined have the meaning given to such terms in the Credit
Agreement or the First Amendment, as the case may be.

 

The
undersigned, the Executive Vice President and Chief Financial Officer of the
Borrower, in his capacity as a Financial Officer of the Borrower and not in his
individual capacity, certifies and represents to the Administrative Agent and
Lenders, as of the date hereof, that the Borrower and its Subsidiaries, on a
consolidated basis, are Solvent both immediately before and immediately after
giving effect to the transactions contemplated by the First Amendment.

 

[Signature Page Follows]

 

 

IN
WITNESS WHEREOF, the undersigned has executed this Solvency Certificate as of
the day and year first above written.

 

	
   

  	
  ZALE
  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
  Name:

  	
  Matthew
  W. Appel

  
	
   

  	
  Title:

  	
  EVP
  and CFOEXHIBIT 4.4b

 

FIRST AMENDMENT TO

INTERCREDITOR AGREEMENT

 

This First Amendment to
Intercreditor Agreement (the “First Amendment”) is made as of September 24,
2010, by and among BANK OF AMERICA,
N.A. (“Bank of America”), in its capacity as administrative agent and
collateral agent (together with its respective successors and assigns in such
capacities, the “ABL Agent”) for
the ABL Secured Parties and Z INVESTMENT HOLDINGS, LLC
in its capacity as administrative agent (together with its successors and
assigns in such capacities, the “Term
Agent”) for the Term Secured Parties,
in consideration of the mutual covenants herein contained and benefits to be
derived herefrom.

 

WITNESSETH

 

WHEREAS,
the ABL Borrowers, the ABL Guarantors, and the ABL Agent, among others, have
entered into an Amended and Restated Credit Agreement dated as of May 10,
2010 (the “Credit Agreement”); and

 

WHEREAS,
the Term Borrower has entered into a Credit Agreement (the “Term Loan Agreement”)
dated as of May 10, 2010 the lenders party thereto, and the Term Agent;
and

 

WHEREAS,
the ABL Agent and the Term Agent have entered into a certain Intercreditor
Agreement dated as of May 10, 2010 (the “Intercreditor Agreement”); and

 

WHEREAS,
the Term Borrower, the Term Agent and the Term Secured Parties have agreed to
enter into an amendment to the Term Credit Agreement, which amendment would,
unless consented to by the ABL Agent, violate the terms of the Intercreditor
Agreement; and

 

WHEREAS,
the ABL Agent and the Term Agent have agreed to amend certain provisions of the
Intercreditor Agreement as set forth herein.

 

NOW
THEREFORE, it is hereby agreed as follows:

 

1.             Definitions.   All capitalized terms used herein and not
otherwise defined shall have the same meaning herein as in the Intercreditor
Agreement.

 

2.             Amendment to Section 5.  The provisions of Section 5.2(b) of
the Intercreditor Agreement are hereby amended as follows:

 

a.             Clause (b) (iii) is
hereby deleted in its entirety;

 

b.             Clause (b)(vi) is
hereby amended by adding the following at the end thereof:

 

, other than principal payments required to be made under the First
Amendment to the Term Credit Agreement dated September 24, 2010 in an
amount not to exceed $12,500,000;

 

1

 

3.             Consent to Amendment of Term
Credit Agreement.  The ABL
Agent and the ABL Secured Parties hereby consent to the amendment of the Term
Credit Agreement in accordance with the provisions of Exhibit B hereto and
waive any breach of the provisions of Section 5.2(b) or any other
provision of the Intercreditor Agreement as a result thereof.

 

4.             Conditions to Effectiveness.  This First Amendment shall not be effective
until each of the following conditions precedent have been fulfilled:

 

a.             This First Amendment shall
have been duly executed and delivered by the Borrowers, the ABL Guarantors, the
Term Guarantors, the ABL Agent and the Term Agent.

 

b.             The amendment to the Term
Credit Agreement in accordance with the provisions of Exhibit B hereto
shall have been executed by the parties thereto and shall have become
effective.

 

5.             Miscellaneous.

 

a.             Except as provided herein,
all terms and conditions of the Intercreditor Agreement remain in full force
and effect.

 

b.             This First Amendment may be
executed in several counterparts and by each party on a separate counterpart,
each of which when so executed and delivered, each shall be an original, and
all of which together shall constitute one instrument.  Delivery of an executed counterpart of a
signature page hereto by telecopy or by electronic email in .pdf format
shall be effective as delivery of a manually executed counterpart hereof.

 

c.             This First Amendment
expresses the entire understanding of the parties with respect to the matters
set forth herein and supersedes all prior discussions or negotiations
hereon.  Any determination that any
provision of this First Amendment or any application hereof is invalid, illegal
or unenforceable in any respect and in any instance shall not affect the
validity, legality, or enforceability of such provision in any other instance,
or the validity, legality or enforceability of any other provisions of this
First Amendment.

 

d.             This First Amendment shall
be governed by, and construed in accordance with, the law of the State of New
York (without regard to its principles relating to choice and conflicts of
law), but including section 5-1401 and 5-1402 of the New York General
Obligations Law and any applicable laws of the United States of America.

 

[signature pages follow]

 

2

 

IN WITNESS WHEREOF, the parties hereto have caused
this First Amendment to be executed and their seals to be hereto affixed as the
date first above written.

 

	
   

  	
   

  	
  BANK OF AMERICA, N.A., in its capacity as ABL
  Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ ANDREW CERUSSI

  
	
   

  	
   

  	
  Name:

  	
  Andrew
  Cerussi

  
	
   

  	
   

  	
  Title:

  	
  Senior
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Z
  INVESTMENT HOLDINGS, LLC, in its capacity as the Term Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ PETER MORROW

  
	
   

  	
   

  	
  Name:

  	
  Peter Morrow

  
	
   

  	
   

  	
  Title:

  	
  Manager

  

 

Signature Page to First Amendment to
Intercreditor Agreement

 

 

ACKNOWLEDGMENT

 

Each ABL Obligor and Term
Obligor hereby acknowledges that it has received a copy of this First Amendment
and consents thereto, agrees to recognize all rights granted thereby to the ABL
Agent and the Term Agent, and will not do any act or perform any obligation
which is not in accordance with the agreements set forth in this First
Amendment. Each ABL Obligor and Term Obligor further acknowledges and agrees
that it is not an intended beneficiary or third party beneficiary under this First
Amendment and (i) as between the ABL Secured Parties and the ABL Obligors,
the ABL Documents remain in full force and effect as written and are in no way
modified hereby, and (ii) as between the Term Secured Parties, the Term
Obligors, the Term Documents remain in full force and effect as written and are
in no way modified hereby.

 

	
   

  	
   

  	
  ZALE
  DELAWARE, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:
  

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
  Name:

  	
  Matthew
  W. Appel

  
	
   

  	
   

  	
  Title:

  	
  EVP
  and CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ZALE
  CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:
  

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
  Name:

  	
  Matthew
  W. Appel

  
	
   

  	
   

  	
  Title:

  	
  EVP
  and CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ZGCO,
  LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
  Name:

  	
  Matthew
  W. Appel

  
	
   

  	
   

  	
  Title:

  	
  EVP
  and CFO

  

 

Signature
Page to First Amendment to Intercreditor Agreement

 

 

	
   

  	
   

  	
  TXDC,
  L.P.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  ZALE
  DELAWARE, INC.

  
	
   

  	
   

  	
   

  	
  Its
  General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:
  

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
  Name:

  	
  Matthew
  W. Appel

  
	
   

  	
   

  	
  Title:

  	
  EVP
  and CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ZALE
  PUERTO RICO, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:
  

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
  Name:

  	
  Matthew
  W. Appel

  
	
   

  	
   

  	
  Title:

  	
  EVP
  and CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ZALE
  CANADA CO.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
  Name:

  	
  Matthew
  W. Appel

  
	
   

  	
   

  	
  Title:

  	
  EVP
  and CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ZALE
  CANADA DIAMOND SOURCING INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:
  

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
  Name:

  	
  Matthew
  W. Appel

  
	
   

  	
   

  	
  Title:

  	
  EVP
  and CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ZAP, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:
  

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
  Name:

  	
  Matthew
  W. Appel

  
	
   

  	
   

  	
  Title:

  	
  EVP
  and CFO

  
	
   

  	
   

  	
   

  	
   

  
	
  Signature Page to
  First Amendment to Intercreditor Agreement

  

 

 

	
   

  	
   

  	
  ZALE
  CANADA HOLDING, LP.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:
  

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
  Name:

  	
  Matthew
  W. Appel

  
	
   

  	
   

  	
  Title:

  	
  EVP
  and CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ZCSC,
  LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:
  

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
  Name:

  	
  Matthew
  W. Appel

  
	
   

  	
   

  	
  Title:

  	
  EVP
  and CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ZALE
  INTERNATIONAL, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
  Name:

  	
  Matthew
  W. Appel

  
	
   

  	
   

  	
  Title:

  	
  EVP
  and CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ZALE
  EMPLOYEES’ CHILD CARE ASSOCIATION, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
  Name:

  	
  Matthew
  W. Appel

  
	
   

  	
   

  	
  Title:

  	
  EVP
  and CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ZALE
  CANADA FINCO 2, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
  Name:

  	
  Matthew
  W. Appel

  
	
   

  	
   

  	
  Title:

  	
  EVP
  and CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FINCO
  HOLDING LP.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:
  

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
  Name:

  	
  Matthew
  W. Appel

  
	
   

  	
   

  	
  Title:

  	
  EVP
  and CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FINCO
  PARTNERSHIP LP.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:
  

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
  Name:

  	
  Matthew
  W. Appel

  
	
   

  	
   

  	
  Title:

  	
  EVP
  and CFO

  
	
   

  	
   

  	
   

  	
   

  
	
  Signature Page to
  First Amendment to Intercreditor Agreement

  

 

 

	
   

  	
   

  	
  ZALE
  CANADA FINCO, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
  Name:

  	
  Matthew
  W. Appel

  
	
   

  	
   

  	
  Title:

  	
  EVP
  and CFO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ZALE
  CANADA FINCO 1, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  MATTHEW W. APPEL

  
	
   

  	
   

  	
  Name:

  	
  Matthew
  W. Appel

  
	
   

  	
   

  	
  Title:

  	
  EVP
  and CFO

  
	
   

  	
   

  	
   

  	
   

  
	
  Signature Page to First Amendment to Intercreditor Agreement

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