Vendor Code of Conduct

Zale Corporation values its reputation as a company that maintains the highest standards of ethical business conduct and corporate social responsibility, and that treats its customers with honesty and integrity. Zale strives to promote stable, sustainable, long-term relationships with its vendors and other business partners based on the principles of mutual trust and fair dealing. Accordingly, Zale requires its merchandise vendors, as a condition of doing business with Zale, to conduct their businesses in a lawful and responsible manner and to certify adherence to the Zale Corporation Vendor Code of Conduct (the "Code").

Compliance with Applicable Laws, Rules and Regulations

Overview

Vendors must comply with applicable laws, rules and regulations regarding the sale of jewelry including, without limitation, customs regulations, import/export laws, stamping and tagging requirements, trademark registration laws, labor laws, tax laws, foreign corrupt practices laws and laws prohibiting deceptive trade practices.
Jewelry vendors must comply with the Federal Trade Commission's "Guides for the Jewelry, Precious Metals and Pewter Industries."
Vendors must guarantee and warrant, as provided in this Code, that the diamonds they supply to Zale are conflict-free.
Vendors must ensure that the products sold to Zale do not violate the patent, trademark, copyright or other proprietary rights of any third person or entity.
Vendors must comply with their national labor and environmental laws, rules and regulations. In addition, Zale expects its vendors to respect the fundamental International Labor Organization conventions and the Universal Declaration of Human Rights. Where the Code or applicable laws address the same issue, Zale expects its vendors, at minimum, to be in compliance with the applicable legal requirements of the country in which they operate.
In the event that Zale conducts an internal investigation regarding any practices regulated by this Code, vendors must cooperate fully in that investigation including, for example, by making all relevant records available and providing all relevant employees for interviews.

Prohibition against Conflict Diamonds

With respect to product fabricated from rough diamonds mined on or after January 1, 2003, vendors guarantee that all diamonds provided to Zale have been purchased from legitimate sources not involved in funding conflict and in compliance with United Nations Resolutions. Vendors guarantee that these diamonds are conflict-free, based on personal knowledge and/or written guarantees provided by the supplier of these diamonds.
With respect to product fabricated from diamonds mined before January 1, 2003, vendors guarantee that they are not knowingly selling conflict diamonds to Zale and that, to the best of their ability, they undertake reasonable measures to help prevent the sale of conflict diamonds.
For any product fabricated from rough diamonds mined on or after January 1, 2003, vendors will place the following warranty on each invoice or packing list submitted to Zale:
The diamonds herein invoiced have been purchased from legitimate sources not involved in funding conflict and in compliance with the United Nations Resolutions. The undersigned hereby guarantees that these diamonds are conflict-free, based on personal knowledge and/or written guarantees provided by the supplier of these diamonds.
Without by implication limiting the foregoing, vendors will not sell to Zale any diamond, gemstone, precious metal, pearl or other jewelry product to Zale that has been used to fund, or is the product of, illegal, violent, inhumane or terrorist activity. Vendors will ensure the legitimate origin and commerce stream of their products.
Vendors will provide Zale with proof of warranty from their sources of merchandise upon request. Vendors will retain for at least five years the warranties accompanying their purchases of diamonds and diamond jewelry.
Vendors will ensure that the products sold to Zale have not been mined or processed using oppressive or unlawful labor practices, child labor or forced labor and otherwise have not been obtained by a means or from a source that may be embarrassing to Zale.

Security of the Supply Chain

Zale expects its vendors to develop and implement effective security procedures throughout their merchandise supply chain.

Labor, Health and Safety Laws

Working Hours. Zale expects its vendors to comply with applicable laws and industry standards regarding working hours. Zale recognizes that those in management positions may exceed these limits in the course of carrying out their roles and responsibilities. Also, in light of the seasonal nature of business, Zale recognizes that vendors' employees may be expected in special circumstances to work longer hours for relatively short periods of time. Where this occurs, it should be in compliance with the regulations of the country of employment. Working hours exceeding 48 hours per week should be planned in a way to ensure safe and humane working conditions. Consecutive working days must be in accordance with local regulations.
Remuneration. Zale expects its vendors to comply with local laws regarding minimum wages, working hours, employee benefits and overtime.
Discrimination. Zale expects that its vendors will not discriminate based on race, origin, religion, disability, gender, sexual orientation, union or political affiliation or age.
Harassment and Abuse. Zale expects its vendors to provide a safe workplace free from harassment that does not permit the use of monetary fines, corporal punishment or other forms of mental or physical abuse, coercion or intimidation.
Forced Labor. Zale expects its vendors to prohibit the use of any forced labor, whether in the form of prison labor, indentured labor, bonded labor or otherwise. Forced labor should be considered to include any work or service that is extracted from any person under the threat of penalty for non-performance or for which the worker does not offer himself or herself voluntarily.
Child Laborers and Young Workers. Zale objects to the employment of persons below the age of 14, where the law of the applicable country permits, or younger than the age for completing compulsory education, whichever is greater in the relevant country. In addition, employers must comply with all applicable local legal requirements for young workers under the age of 18, particularly those pertaining to hours of work, wages, health, safety and general working conditions.

Freedom of Association

Zale expects its vendors to allow employees and other workers to associate freely with any lawful workers' association or collective bargaining association.

Health and Safety

Zale encourages its vendors to provide a safe and healthy environment for their employees in accordance with applicable laws and regulations. Appropriate procedures should be in place to prevent accidents and injury to health arising out of, linked with or occurring in the course of work or as a result of the operation of employer facilities. Facilities should provide adequate fire exits, safety equipment, lighting and ventilation, as well as clean restrooms and adequate living quarters where necessary. Vendors are also encouraged to have a nominated health and safety representative who monitors the compliance of its facilities with health and safety procedures.

Preservation of the Environment

Zale expects its vendors to protect the environment within their respective spheres of influence. This includes supporting initiatives to promote greater environmental responsibility along the entire jewelry supply chain, as well as complying with locally applicable environmental laws and regulations. More specifically, Zale believes that natural resources should be developed in a manner that respects the needs of current and future generations. The jewelry industry uses metals and other minerals for a wide variety of purposes. It is therefore in the industry's best interest to ensure that the minerals upon which it depends are obtained, produced and used in environmentally and socially responsible ways.

Compliance with Zale Policies and Procedures

Zale Quality Assurance Requirements

Vendors must comply with the quality assurance requirements outlined in Zale's Merchandise Vendor Manual (the "Vendor Manual") and any applicable Product Information Sheets ("PIW").
Vendors must ensure that the products sold to Zale are exactly as stamped and as described to Zale on any tagging and/or PIW. Products must be accurately marked or labeled with the country of origin in compliance with applicable laws, including those of the country of manufacture.
Vendors must ensure that any diamond, pearl or gemstone products sold to Zale are genuine, naturally occurring stones unless specified in writing as otherwise. Such products may not be treated or enhanced unless such treatments are properly disclosed to Zale, as further described in the Vendor Manual.
Zale expects its vendors to conduct business with integrity and to communicate to Zale honestly regarding the nature of products they supply, accurately disclosing the weight, color and clarity treatments of gemstones, the standard of fineness and trademarks of articles of precious metals and other matters as required by applicable federal, state and local laws and regulations.

Zale Merchandise Exclusivity Policy

If a vendor commits to providing an item "exclusively" to Zale, that vendor will not, without Zale's written permission, offer that item or a substantially similar item to another retailer.

Zale Gift and Gratuity Policy

Zale vendors may not provide any benefit, gift, service or favor to a Zale employee that could influence or compromise, or be perceived by others as influencing or compromising, the business judgment of the Zale employee. For example, (a) vendors may not make any payments of any nature to, or lend money to, any employee, (b) vendors may not employ an employee in any capacity, (c) employees are not allowed to own any financial interests in vendors, except for holdings of less than 5% of publicly held corporations, (d) vendors may not provide travel, lodging or unusual benefits to an employee unless a Zale officer (other than the recipient) has first determined in writing that acceptance of such benefits conforms to customary industry practice and will be a good use of the employee's time and (e) vendors may not provide any other type of meals or entertainment if the value thereof exceeds normal or customary social contact or that, if reciprocated by the employee, would not be covered under Zale's policies for expense reimbursement. These prohibitions are equally applicable to relatives of Zale employees and to any person who shares a residence with a Zale employee.
Generally, key employees of vendors (including any person with responsibility for sales to Zale) and their immediate family members may not be employed by Zale, and key employees of a vendor should not date or socialize frequently with Zale employees.
Vendors may not directly solicit Zale customers and may not disparage Zale, or its merchandise, business or employees.

Zale Confidentiality Requirements

Zale vendors are prohibited from disclosing any proprietary or confidential information about Zale, its business or its employees to any third parties, including any customers or competitors of Zale or any media representatives. Confidential information includes, without limitation, customer information, business plans, financial data and reports, sales data, purchasing information, forecasts, products and pricing, identity of employees, information about Zale employee compensation or benefit plans, store rankings, internal procedures, merchandise assortments, internal audits or investigations, litigation and any other matter Zale may designate as confidential.
Vendors and their employees may not trade in Zale Corporation stock if they are in possession of any material, non-public information about Zale. If there is any uncertainty as to whether information is material or non-public, vendors must contact Zale's General Counsel.

Code Compliance and Indemnity

In the event a vendor fails to comply with this Code or Zale's other policies and procedures, Zale may suspend current business activity, cancel outstanding orders or terminate its relationship with the vendor.
Vendors agree to indemnify Zale and hold Zale harmless for any breach by them of this Vendor Code of Conduct, including for any claims, liabilities, costs and expenses made against Zale, any of its affiliates or its or their officers, directors, employees or agents arising out of or in connection with a breach of this Vendor Code of Conduct.
The obligations contained in this Vendor Code of Conduct shall apply notwithstanding any language to the contrary, including any so-called "merger" or "integration" provisions, in any bid, proposal, invoice, shipping or other documents between Zale and its vendors.

Communication

Vendors should take appropriate steps to ensure the provisions of this Code are communicated to their employees and their own supply chain. Vendors are also encouraged to ensure that the principles referred to above are adopted and applied by their employees, suppliers, agents and contractors so far as reasonably possible.

Summary

Exceptions to this Vendor Code of Conduct may be made only by the Chief Executive Officer of Zale. Vendors, through their authorized representatives, must certify their receipt, acceptance and agreement to comply with this Code in the attached Certification.

This Vendor Code of Conduct is dated June 2004.