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                                                                   EXHIBIT 10.12


                                                                  EXECUTION COPY

                     AMENDED AND RESTATED SECURITY AGREEMENT
                     ---------------------------------------

         AMENDED AND RESTATED SECURITY AGREEMENT, dated as of January 22, 2003,
among FINLAY FINE JEWELRY CORPORATION, a Delaware corporation ("Borrower"),
FINLAY JEWELRY, INC., a Delaware corporation, ("Finlay") , Finlay Merchandising
& Buying, Inc., a Delaware corporation ("Finlay Merchandising") and eFinlay,
Inc., a Delaware corporation ("eFinlay"); (Borrower, Finlay, Finlay
Merchandising and eFinlay are sometimes collectively referred to herein as
"Grantors" and individually as a "Grantor"), and GENERAL ELECTRIC CAPITAL
CORPORATION, a Delaware corporation ("GE Capital"), individually and as agent
for the Lenders (in such capacity, the "Agent").

                              W I T N E S S E T H:

         WHEREAS, the parties hereto are each party to the Amended and Restated
Credit Agreement dated as of September 11, 1997, among the Borrower, the Parent,
the Lenders thereunder and Agent (as amended, the "Existing Credit Agreement");

         WHEREAS, each Grantor is party to a Security Agreement dated as of May
26, 1993 (as amended, the "Existing Security Agreements"), in favor of Agent;

         WHEREAS, the Borrower, the Parent, the Lenders and the Agent have
agreed to further amend and restate the Existing Credit Agreement on terms set
forth in the Second Amended and Restated Credit Agreement, dated as of the date
hereof (including all annexes, exhibits and schedules thereto, as from time to
time amended, restated, supplemented or otherwise modified, the "Credit
Agreement"), among the Borrower, the Parent, the Lenders, Agent and Fleet
Precious Metals, Inc., as Documentation Agent, pursuant to which the Lenders
have agreed to continue to make secured revolving credit advances to the
Borrower from time to time;

         WHEREAS, the Grantors, the Lenders and Agent have agreed to amend and
restate the Existing Security Agreements to provide for the foregoing on the
terms set forth in this Agreement;

         WHEREAS, it is the intent of the parties hereto that this Agreement not
constitute a novation of the obligations and liabilities under the Existing
Security Agreements or evidence payment of all or any of such obligations and
liabilities, that this Agreement amend and restate in its entirety the Existing
Security Agreements, and that from and after the effectiveness of this agreement
the Existing Security Agreements be of no further force or effect except as to
evidence the granting of the Liens thereunder, the incurrence of the obligations
of the parties thereto and the representations and warranties made thereunder;
and


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         WHEREAS, it is a condition precedent to the obligation of the Agent and
the Lenders to make and continue their respective secured revolving credit
advances to the Borrower under the Credit Agreement that the Grantors shall have
executed and delivered this Agreement to the Agent;

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

         1. DEFINED TERMS.
            -------------

         (a) All capitalized terms used but not otherwise defined herein have
the meanings given to them in the Credit Agreement. All other terms contained in
this Security Agreement, unless the context indicates otherwise, have the
meanings provided for by the UCC to the extent the same are used or defined
therein.

         (b) "Agreement" or "Security Agreement" means this Amended and Restated
Security Agreement.

         (c) "Uniform Commercial Code jurisdiction" means any jurisdiction that
has adopted all or substantially all of Article 9 as contained in the 2000
Official Text of the Uniform Commercial Code, as recommended by the National
Conference of Commissioners on Uniform State Laws and the American Law
Institute, together with any subsequent amendments or modifications to the
Official Text.

         2. GRANT OF LIEN.
            -------------

         (a) To secure the prompt and complete payment, performance and
observance of all of the Obligations, each Grantor hereby grants, assigns,
conveys, mortgages, pledges, hypothecates and transfers to Agent, for itself and
the benefit of Lenders, a Lien upon all of its right, title and interest in, to
and under all personal property and other assets (except as expressly excluded
below), whether now owned by or owing to, or hereafter acquired by or arising in
favor of such Grantor (including under any trade names, styles or derivations
thereof), and whether owned or consigned by or to, or leased from or to, such
Grantor, and regardless of where located (all of which being hereinafter
collectively referred to as the "Collateral"), including:

                  (i)     all Accounts;

                  (ii)    all Chattel Paper;

                  (iii)   all Documents;

                  (iv)    all General Intangibles (including, without
         limitation, payment intangibles, Software, pension reversions and tax
         refunds (provided, however, that the interest of such Grantor in tax
         refunds in which a security interest is granted hereunder shall be
         limited to the



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         amount payable to such Grantor under the terms of the Tax Allocation
         Agreement in the event that the Tax Allocation Agreement reduces such
         amount from that otherwise payable to such Grantor as a tax refund);

                  (v)     all Equipment (excluding any equipment to the extent
         Grantor is prohibited from granting a lien on such equipment pursuant
         to the terms of the License Agreements set forth on Schedule A, but
         including such equipment in the event that any such License Agreement
         or amendment, modification or waiver of any provision thereof hereafter
         permits the granting of a lien or encumbrance on such equipment);

                  (vi)    all Fixtures (excluding any fixture to the extent
         Grantor is prohibited from granting a lien on such fixture pursuant to
         the terms of the License Agreements set forth on Schedule A, but
         including such fixture in the event that any such License Agreement or
         amendment, modification or waiver of any provision thereof hereafter
         permits the granting of a lien or encumbrance on such fixture);

                  (vii)   all Goods;

                  (viii)  all Inventory (excluding Consignment Inventory);

                  (ix)    all Instruments;

                  (x)     all Investment Property;

                  (xi)    all Deposit Accounts, of any Grantor, including all
         Blocked Accounts, depository accounts, Disbursement Accounts, and all
         other bank accounts and all deposits therein;

                  (xii)   all money, cash or cash equivalents of any Grantor;

                  (xiii)  all Supporting Obligations and Letter-of-Credit Rights
         of any Grantor;

                  (xiv)   the commercial tort claims listed on Schedule V; and

                  (xv)    to the extent not otherwise included, all Proceeds
         (including all proceeds of any kind of Consignment Inventory, except to
         the extent that any consignor has an interest in payments under
         property and casualty insurance), tort claims, insurance claims and
         other rights to payments not otherwise included in the foregoing and
         products of the foregoing and all accessions to, substitutions and
         replacements for, and rents and profits of, each of the foregoing.

         (b) In addition, to secure the prompt and complete payment, performance
and observance of the Obligations and in order to induce Agent and Lenders as
aforesaid,



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each Grantor hereby grants to Agent, for itself and the benefit of Lenders, a
right of setoff against the property of such Grantor held by Agent or any
Lender, consisting of property described above in Section 2(a) now or hereafter
in the possession or custody of or in transit to Agent or any Lender, for any
purpose, including safekeeping, collection or pledge, for the account of such
Grantor, or as to which such Grantor may have any right or power, which such
right of setoff may be exercised by Agent if an Event of Default has occurred
and is continuing.

         3. AGENT'S AND LENDERS' RIGHTS: LIMITATIONS ON AGENT'S AND LENDERS'
OBLIGATIONS.

         (a) It is expressly agreed by Grantors that, anything herein to the
contrary notwithstanding, each Grantor shall remain liable under each of its
Contracts and each of its IP Licenses to observe and perform all the conditions
and obligations to be observed and performed by it thereunder. Neither Agent nor
any Lender shall have any obligation or liability under any Contract or IP
License by reason of or arising out of this Security Agreement or the granting
herein of a Lien thereon or the receipt by Agent or any Lender of any payment
relating to any Contract or IP License pursuant hereto. Neither Agent nor any
Lender shall be required or obligated in any manner to perform or fulfill any of
the obligations of any Grantor under or pursuant to any Contract or IP License,
or to make any payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency of any performance
by any party under any Contract or IP License, or to present or file any claims,
or to take any action to collect or enforce any performance or the payment of
any amounts which may have been assigned to it or to which it may be entitled at
any time or times.

         (b) In addition to and not in substitution for any similar requirement
in the Credit Agreement, Agent may at any time after an Event of Default has
occurred and is continuing, without prior notice to any Grantor, notify Account
Debtors and other Persons obligated on the Collateral that Agent has a security
interest therein, and that payments shall be made directly to Agent.
Furthermore, at any time after an Event of Default has occurred and is
continuing, if Agent determines that Account Debtor's contra-accounts or set-off
rights may cause the Borrowing Limit to be less than zero, Agent may notify
Account Debtors that Agent has a security interest therein, and that payments
shall be made directly to Agent. Upon the request of Agent, each Grantor shall
so notify Account Debtors and other Persons obligated on Collateral. Once any
such notice has been given to any Account Debtor or other Person obligated on
the Collateral, the affected Grantor shall not give any contrary instructions to
such Account Debtor or other Person without Agent's prior written consent.

         (c) Agent may at any time in Agent's own name, in the name of a nominee
of Agent or in the name of any Grantor communicate (by mail, telephone,
facsimile or otherwise) with Account Debtors, parties to Contracts and obligors
in respect of Instruments to verify with such Persons, to Agent's satisfaction,
the existence, amount terms of, and any other matter relating to, Accounts,
payment intangibles, Instruments or Chattel Paper. If an Event of Default shall
have occurred and be continuing, each


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Grantor, at its own expense, shall cause the independent certified public
accountants then engaged by such Grantor to prepare and deliver to Agent and
each Lender at any time and from time to time promptly upon Agent's request the
following reports with respect to each Grantor: (i) a reconciliation of all
Accounts; (ii) an aging of all Accounts; (iii) trial balances; and (iv) a test
verification of such Accounts as Agent may request. If requested by Agent, each
Grantor, at its own expense, shall deliver to Agent the results of each physical
verification, if any, which such Grantor may in its discretion have made, or
caused any other Person to have made on its behalf, of all or any portion of its
Inventory.

         4. REPRESENTATIONS AND WARRANTIES. Each Grantor represents and warrants
that:

         (a) Each Grantor has rights in and the power to transfer each item of
the Collateral upon which it purports to grant a Lien hereunder free and clear
of any and all Liens other than the liens permitted under Section 9.2 of the
Credit Agreement.

         (b) No effective security agreement, financing statement, equivalent
security or Lien instrument or continuation statement covering all or any part
of the Collateral is on file or of record in any public office, except such as
may have been filed (i) in favor of Agent pursuant to this Security Agreement or
the other Loan Documents, and (ii) in connection with the liens permitted under
Section 9.2 of the Credit Agreement.

         (c) This Security Agreement is effective to create a valid and
continuing Lien on and, upon the filing of the appropriate financing statements
listed on Schedule I hereto, a perfected Lien in favor of Agent, for itself and
the benefit of Lenders, on the Collateral with respect to which a Lien may be
perfected by filing pursuant to the UCC. Such Lien is prior to all other Liens,
except the liens permitted under Section 9.2 of the Credit Agreement that would
be prior to Liens in favor of Agent for the benefit of Agent and Lenders as a
matter of law, and is enforceable as such as against any and all creditors of
and purchasers from any Grantor (other than purchasers and lessees of Inventory
in the ordinary course of business or to the extent provided for under Section
9-408(d) of the UCC). All action by any Grantor necessary or desirable to
perfect such Lien on each item of the Collateral has been duly taken.

         (d) Schedule II hereto lists all Instruments, Letter-of-Credit Rights
and Chattel Paper of each Grantor. All action by any Grantor necessary or
desirable to protect and perfect the Lien of Agent on each item set forth on
Schedule II (including the delivery of all originals thereof to Agent and the
legending of all Chattel Paper as required by Section 5(b) hereof) has been duly
taken. The Lien of Agent, for the benefit of Agent and Lenders, on the
Collateral listed on Schedule II hereto is prior to all other Liens, except the
liens permitted under Section 9.2 of the Credit Agreement that would be prior to
the Liens in favor of Agent as a matter of law, and is enforceable as such
against any and all creditors of and purchasers from any Grantor.

         (e) Each Grantor's name as it appears in official filings in the state
of its incorporation or other organization, the type of entity of each Grantor
(including



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corporation, partnership, limited partnership or limited liability company),
organizational identification number issued by each Grantor's state of
incorporation or organization or a statement that no such number has been
issued, each Grantor's state of organization or incorporation, the location of
each Grantor's chief executive office, principal place of business, offices, all
warehouses and premises where Collateral is stored or located, and the locations
of its books and records concerning the Collateral are set forth on Schedule
III-A, Schedule III-B, Schedule III-C and Schedule III-D, respectively hereto.
Each Grantor has only one state of incorporation or organization.

         (f) With respect to the Accounts, except as specifically disclosed in
the most recent collateral report delivered to Agent (i) they represent bona
fide sales of Inventory or rendering of services to Account Debtors in the
ordinary course of each Grantor's business and are not evidenced by a judgment,
Instrument or Chattel Paper; (ii) there are no setoffs, claims or disputes
existing or asserted with respect thereto (other than in connection with License
Agreements and Unapproved License Agreements) and no Grantor has made any
agreement with any Account Debtor for any extension of time for the payment
thereof, any compromise or settlement for less than the full amount thereof, any
release of any Account Debtor from liability therefor, or any deduction
therefrom except a discount or allowance allowed by such Grantor in the ordinary
course of its business for prompt payment and disclosed to Agent; (iii) to each
Grantor's knowledge, there are no facts, events or occurrences which in any way
impair the validity or enforceability thereof or could reasonably be expected to
reduce the amount payable thereunder as shown on any Grantor's books and records
and any invoices, statements and collateral reports delivered to Agent and
Lenders with respect thereto; (iv) no Grantor has received any notice of
proceedings or actions which are threatened or pending against any Account
Debtor which might result in any material adverse change in such Account
Debtor's financial condition; and (v) no Grantor has knowledge that any Account
Debtor (except as to those Account Debtors referred to in the Factor Guaranties)
is unable generally to pay its debts as they become due. Further with respect to
the Accounts (x) the amounts shown on all invoices, statements and collateral
reports which may be delivered to the Agent with respect thereto are actually
and absolutely owing to such Grantor as indicated thereon and are not in any way
contingent; (y) no payments have been or shall be made thereon except payments
immediately delivered to the applicable Blocked Accounts or the Agent as
required pursuant to Section 8.22 of the Credit Agreement; and (z) to each
Grantor's knowledge, all Account Debtors have the capacity to contract.

         (g) With respect to any Inventory scheduled or listed on the most
recent collateral report delivered to Agent pursuant to the terms of this
Security Agreement or the Credit Agreement, (i) such Inventory (other than
Inventory in-transit) is located at one of the applicable Grantor's locations
set forth on Schedule III-A, Schedule III-B, Schedule III-C or Schedule III-D
hereto, as applicable, (ii) no Inventory is now, or shall at any time or times
hereafter be stored at any other location, except as otherwise provided under
the Credit Agreement and, in connection with any such other location, each
applicable Grantor will obtain, to the extent required by the Credit Agreement,



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bailee, landlord and mortgagee agreements, (iii) the applicable Grantor has
good, indefeasible and merchantable title to such Inventory and such Inventory
is not subject to any Lien or security interest or document whatsoever except
for the Lien granted to Agent, for the benefit of Agent and Lenders, and except
for the liens permitted under Section 9.2 of the Credit Agreement, (iv) except
as specifically disclosed in the most recent collateral report delivered to
Agent, such Inventory is Eligible Inventory of good and merchantable quality,
free from any defects, (v) such Inventory is not subject to any licensing,
patent, royalty, trademark, trade name or copyright agreements with any third
parties which would require any consent of any third party upon sale or
disposition of that Inventory or the payment of any monies to any third party
upon such sale or other disposition, and (vi) the completion of manufacture,
sale or other disposition of such Inventory by Agent following an Event of
Default shall not require the consent of any Person and shall not constitute a
breach or default under any contract or agreement to which any Grantor is a
party or to which such property is subject.

         (h) No Grantor has any ownership interest in, or title to, any Patent,
Trademark or Copyright except as set forth in Schedule IV hereto. This Security
Agreement is effective to create a valid and continuing Lien on and, upon filing
of the Copyright Security Agreements with the United States Copyright Office and
filing of the Patent Security Agreements and the Trademark Security Agreements
with the United States Patent and Trademark Office, perfected Liens in favor of
Agent on each Grantor' s Patents, Trademarks and Copyrights and such perfected
Liens are enforceable as such as against any and all creditors of and purchasers
from any Grantor to the extent provided for under Section 9-408(d) of the UCC.
Upon filing of the Copyright Security Agreements with the United States
Copyright Office and filing of the Patent Security Agreements and the Trademark
Security Agreements with the United States Patent and Trademark Office and the
filing of appropriate financing statements listed on Schedule I hereto, all
action necessary or desirable to perfect Agent's Lien on each Grantor's Patents,
Trademarks or Copyrights shall have been duly taken.

         (i) All motor vehicles owned by each Grantor are listed on Schedule VI
hereto, by model, model year and vehicle identification number ("VIN"). Upon
Agent's request, each Grantor shall deliver to Agent motor vehicle title
certificates for all motor vehicles from time to time owned by it and shall
cause those title certificates to be filed (with Agent's lien noted thereon) in
the appropriate state motor vehicle filing office.

         5. COVENANTS. Each Grantor covenants and agrees with Agent, for the
benefit of Agent and Lenders, that from and after the date of this Security
Agreement and until all of the Obligations have been paid (or in the case of
Letter of Credit Obligations, cash collateralized in accordance with the Credit
Agreement) in full:

         (a) Further Assurances: Pledge of Instruments; Chattel Paper.

               (i)     At any time and from time to time, upon the written
      request of Agent and at the sole expense of Grantors, each Grantor shall
      promptly and duly execute and deliver any and all such further instruments
      and documents and


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      take such further actions as Agent may deem desirable to obtain the full
      benefits of this Security Agreement and of the rights and powers herein
      granted, including (A) unless otherwise provided under Section 8.19 of the
      Credit Agreement, using its commercially reasonable efforts to secure all
      consents and approvals necessary or appropriate for the assignment to or
      for the benefit of Agent of any IP License or Contract held by such
      Grantor and to enforce the security interests granted hereunder; and (B)
      filing any financing or continuation statements under the UCC with respect
      to the Liens granted hereunder or under any other Loan Document as to
      those jurisdictions that are not Uniform Commercial Code jurisdictions.

               (ii)    Unless Agent shall otherwise consent in writing (which
      consent may be revoked), each Grantor shall deliver to Agent all
      Collateral consisting of negotiable Documents, certificated securities,
      Chattel Paper and Instruments (in each case, accompanied by stock powers,
      allonges or other instruments of transfer executed in blank) (excluding
      instruments evidencing ordinary course employee loans or advances, the
      aggregate principal amount of all such loans and advances shall not exceed
      $150,000 at any time, plus amounts permitted under Section 9.4(i) of the
      Credit Agreement) promptly after such Credit Party receives the same.

               (iii)   Each Grantor shall, to the extent required under the
      Credit Agreement, obtain or use commercially reasonable efforts to obtain
      waivers or subordinations of Liens from landlords and mortgagees, and each
      Credit Party shall in all instances obtain signed acknowledgements of
      Agent's Liens from bailees having possession of any Grantor's Goods that
      they hold for the benefit of Agent.

               (iv)    If required by the terms of the Credit Agreement and not
      waived by Agent in writing (which waiver may be revoked), each Grantor
      shall obtain authenticated Control Letters from each issuer of
      uncertificated securities, securities intermediary, or commodities
      intermediary issuing or holding any financial assets or commodities to or
      for any Grantor (it being understood and agreed that Agent shall not issue
      any entitlement orders or other instructions under any such Control
      Agreement unless an Event of Default has occurred and is continuing).

               (v)     To the extent required under Section 8.22 and Section 9.8
      of the Credit Agreement, each Grantor shall obtain a blocked account,
      lockbox or similar agreement with each bank or financial institution
      holding a Deposit Account for such Grantor.

               (vi)    Each Grantor that is or becomes the beneficiary of a
      letter of credit shall promptly, and in any event within five (5) Business
      Days after becoming a beneficiary, notify Agent thereof and enter into a
      tri-party agreement with Agent and the issuer and/or confirmation bank
      with respect to Letter-of-Credit Rights assigning such Letter-of-Credit
      Rights to Agent and directing all


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      payments thereunder to the Payment Account, all in form and substance
      reasonably satisfactory to Agent.

               (vii)   Each Grantor shall take all steps necessary to grant the
      Agent control of all electronic chattel paper in accordance with the UCC
      and all "transferable records" as defined in each of the Uniform
      Electronic Transactions Act and the Electronic Signatures in Global and
      National Commerce Act.

               (viii)  Each Grantor hereby irrevocably authorizes the Agent at
      any time and from time to time to file in any filing office in any Uniform
      Commercial Code jurisdiction any initial financing statements and
      amendments thereto that (a) indicate the Collateral (i) as all assets of
      such Grantor or words of similar effect, regardless of whether any
      particular asset comprised in the Collateral falls within the scope of
      Article 9 of the UCC or such jurisdiction, or (ii) as being of an equal or
      lesser scope or with greater detail, and (b) contain any other information
      required by part 5 of Article 9 of the UCC for the sufficiency or filing
      office acceptance of any financing statement or amendment, including (i)
      whether such Grantor is an organization, the type of organization and any
      organization identification number issued to such Grantor, and (ii) in the
      case of a financing statement filed as a fixture filing or indicating
      Collateral as as-extracted collateral or timber to be cut, a sufficient
      description of real property to which the Collateral relates. Each Grantor
      agrees to furnish any such information to the Agent promptly upon request.
      Each Grantor also ratifies its authorization for the Agent to have filed
      in any Uniform Commercial Code jurisdiction any initial financing
      statements or amendments thereto if filed prior to the date hereof.

               (ix)    Each Grantor shall promptly, and in any event within five
      (5) Business Days after the same is acquired by it, notify Agent of any
      commercial tort claim (as defined in the UCC) acquired by it and unless
      otherwise consented by Agent, such Grantor shall enter into a supplement
      to this Security Agreement, granting to Agent a Lien in such commercial
      tort claim.

         (b) Maintenance of Records. Grantors shall keep and maintain, at their
own cost and expense, satisfactory and complete records of the Collateral,
including a record of any and all payments received and any and all credits
granted with respect to the Collateral and all other dealings with the
Collateral. Grantors shall mark their books and records pertaining to the
Collateral to evidence this Security Agreement and the Liens granted hereby. If
any Grantor retains possession of any Chattel Paper or Instruments with Agent's
consent, such Chattel Paper and Instruments shall be marked with the following
legend: "This writing and the obligations evidenced or secured hereby are
subject to the security interest of General Electric Capital Corporation, as
Agent, for the benefit of Agent and certain Lenders."

         (c) Covenants Regarding Patent, Trademark and Copyright Collateral.


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               (i)     Grantors shall notify Agent immediately if they know or
      have reason to know that any application or registration relating to any
      material Patent, Trademark or Copyright (now or hereafter existing) may
      become abandoned or dedicated, or of any adverse determination or
      development (including the institution of, or any such determination or
      development in, any proceeding in the United States Patent and Trademark
      Office, the United States Copyright Office or any court) regarding any
      Grantor's ownership of any material Patent, Trademark or Copyright, its
      right to register the same, or to keep and maintain the same.

               (ii)    If any Grantor, either itself or through any agent,
      employee, licensee or designee, files an application for the registration
      of any Patent, Trademark or Copyright with the United States Patent and
      Trademark Office, the United States Copyright Office or any similar office
      or agency, such Grantor shall give Agent prior written notice thereof,
      and, upon request of Agent, Grantor shall execute and deliver any and all
      Patent Security Agreements, Copyright Security Agreements or Trademark
      Security Agreements as Agent may request to evidence Agent's Lien on such
      Patent, Trademark or Copyright, and the General Intangibles of such
      Grantor relating thereto or represented thereby.

               (iii)   Grantors shall take all actions necessary or requested by
      Agent to maintain and pursue each application, to obtain the relevant
      registration and to maintain the registration of each of the material
      Patents, Trademarks and Copyrights (now or hereafter existing), including
      the filing of applications for renewal, affidavits of use, affidavits of
      noncontestability and opposition and interference and cancellation
      proceedings, unless the applicable Grantor shall determine that such
      Patent, Trademark or Copyright is not material to the conduct of its
      business.

               (iv)    In the event that any material Patent, Trademark or
      Copyright is infringed upon, or misappropriated or diluted by a third
      party, such Grantor shall comply with Section 5(a)(ix) of this Security
      Agreement. Such Grantor shall, unless such Grantor shall reasonably
      determine that such Patent, Trademark or Copyright Collateral is not
      material to the conduct of its business or operations, promptly sue for
      infringement, misappropriation or dilution and to recover any and all
      damages for such infringement, misappropriation or dilution, and shall
      take such other actions as Agent shall in its reasonable judgment deem
      appropriate under the circumstances to protect such material Patent,
      Trademark or Copyright Collateral.

         (d) Indemnification. In any suit, proceeding or action brought by Agent
or any Lender relating to any Collateral for any sum owing with respect thereto
or to enforce any rights or claims with respect thereto, each Grantor will save,
indemnify and keep Agent and Lenders harmless from and against all expense
(including reasonable attorneys' fees and expenses), loss or damage suffered by
reason of any defense, setoff, counterclaim, recoupment or reduction of
liability whatsoever of the Account Debtor or



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other Person obligated on the Collateral, arising out of a breach by any Grantor
of any obligation thereunder or arising out of any other agreement, indebtedness
or liability at any time owing to, or in favor of, such obligor or its
successors from such Grantor, except in the case of Agent or any Lender, to the
extent such expense, loss, or damage is attributable to the gross negligence or
willful misconduct of Agent or such Lender as finally determined by a court of
competent jurisdiction. All such obligations of Grantors shall be and remain
enforceable against and only against Grantors and shall not be enforceable
against Agent or any Lender.

         (e) Compliance with Terms of Accounts, etc. In all material respects,
each Grantor will perform and comply with all obligations in respect of the
Collateral and all other agreements to which it is a party or by which it is
bound relating to the Collateral.

         (f) Limitation on Liens on Collateral. No Grantor will create, permit
or suffer to exist, and each Grantor will defend the Collateral against, and
take such other action as is necessary to remove, any Lien on the Collateral
except the liens permitted under Section 9.2 of the Credit Agreement, and will
defend the right, title and interest of Agent and Lenders in and to any of such
Grantor's rights under the Collateral against the claims and demands of all
Persons whomsoever.

         (g) Limitations on Disposition. No Grantor will sell, license, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so except as permitted by the Credit Agreement.

         (h) Further Identification of Collateral. Grantors will, if so
requested by Agent, furnish to Agent, as often as Agent reasonably requests,
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Agent may reasonably
request, all in such detail as Agent may specify.

         (i) Notices. Grantors will advise Agent promptly, in reasonable detail,
(i) of any Lien (other than the liens permitted under Section 9.2 of the Credit
Agreement) or claim made or asserted against any of the Collateral, and (ii) of
the occurrence of any other event which would have a material adverse effect on
the aggregate value of the Collateral or on the Liens created hereunder or under
any other Loan Document.

         (j) Good Standing Certificates. Not less frequently than twice each
calendar year, each Grantor shall, unless Agent shall otherwise consent, provide
to Agent a certificate of good standing from its state of incorporation or
organization.

         (k) No Reincorporation. Without limiting the prohibitions on mergers
involving the Grantors contained in the Credit Agreement, no Grantor shall
reincorporate or reorganize itself under the laws of any jurisdiction other than
the jurisdiction in which it is incorporated or organized as of the date hereof
without the prior written consent of Agent.


                                       11
<PAGE>

         (l) Terminations; Amendments Not Authorized. Each Grantor acknowledges
that it is not authorized to file any financing statement or amendment or
termination statement with respect to any financing statement without the prior
written consent of Agent and agrees that it will not do so without the prior
written consent of Agent, subject to such Grantor's rights under Section
9-509(d)(2) of the UCC.

         (m) Authorized Terminations. Agent will promptly deliver to each
Grantor for filing or authorize each Grantor to prepare and file termination
statements and releases in accordance with Section 12.8(d) of the Credit
Agreement.

         6. AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
            ---------------------------------------

         On the Closing Date each Grantor shall execute and deliver to Agent a
power of attorney (the "Power of Attorney") substantially in the form attached
hereto as Exhibit A. The power of attorney granted pursuant to the Power of
Attorney is a power coupled with an interest and shall be irrevocable until the
all of the Obligations have been paid (or in the case of Letter of Credit
Obligations, cash collateralized in accordance with the Credit Agreement) in
full. The powers conferred on Agent, for the benefit of Agent and Lenders, under
the Power of Attorney are solely to protect Agent's interests (for the benefit
of Agent and Lenders) in the Collateral and shall not impose any duty upon Agent
or any Lender to exercise any such powers. Agent agrees that (a) except for the
powers granted in clause (h) of the Power of Attorney, it shall not exercise any
power or authority granted under the Power of Attorney unless an Event of
Default has occurred and is continuing, and (b) Agent shall account for any
moneys received by Agent in respect of any foreclosure on or disposition of
Collateral pursuant to the Power of Attorney provided that none of Agent or any
Lender shall have any duty as to any Collateral, except as provided under the
UCC, and Agent and Lenders shall be accountable only for amounts that they
actually receive as a result of the exercise of such powers. NONE OF AGENT,
LENDERS OR THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS
OR REPRESENTATIVES SHALL BE RESPONSIBLE TO ANY GRANTOR FOR ANY ACT OR FAILURE TO
ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF DAMAGES
ATTRIBUTABLE TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY
DETERMINED BY A COURT OF COMPETENT JURISDICTION, NOR FOR ANY PUNITIVE,
EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.

         7. REMEDIES: RIGHTS UPON DEFAULT.
            -----------------------------

         (a) In addition to all other rights and remedies granted to it under
this Security Agreement, the Credit Agreement, the other Loan Documents and
under any other instrument or agreement securing, evidencing or relating to any
of the Obligations, if any Event of Default shall have occurred and be
continuing, Agent may exercise all rights and remedies of a secured party under
the UCC. Without limiting the generality of the foregoing, each Grantor
expressly agrees that in any such event Agent, without demand of performance or
other demand, advertisement or notice of any kind (except the


                                       12
<PAGE>

notice specified below of time and place of public or private sale) to or upon
such Grantor or any other Person (all and each of which demands, advertisements
and notices are hereby expressly waived to the maximum extent permitted by the
UCC and other applicable law), may forthwith enter upon the premises of such
Grantor where any Collateral is located through self-help, without judicial
process, without first obtaining a final judgment or giving such Grantor or any
other Person notice and opportunity for a hearing on Agent's claim or action and
may collect, receive, assemble, process, appropriate and realize upon the
Collateral, or any part thereof, and may forthwith sell, lease, license, assign,
give an option or options to purchase, or sell or otherwise dispose of and
deliver said Collateral (or contract to do so), or any part thereof, in one or
more parcels at a public or private sale or sales, at any exchange at such
prices as it may deem acceptable, for cash or on credit or for future delivery
without assumption of any credit risk. Agent or any Lender shall have the right
upon any such public sale or sales and, to the extent permitted by law, upon any
such private sale or sales, to purchase for the benefit of Agent and Lenders,
the whole or any part of said Collateral so sold, free of any right or equity of
redemption. Such sales may be adjourned and continued from time to time with or
without notice. Agent shall have the right to conduct such sales on any
Grantor's premises or elsewhere and shall have the right to use any Grantor's
premises without charge for such time or times as Agent deems necessary or
advisable.

         If any Event of Default shall have occurred and be continued, each
Grantor further agrees, at Agent's request, to assemble the Collateral and make
it available to Agent at a place or places designated by Agent which are
reasonably convenient to Agent and such Grantor, whether at such Grantor's
premises or elsewhere. Until Agent is able to effect a sale, lease, or other
disposition of Collateral, Agent shall have the right to hold or use Collateral,
or any part thereof, to the extent that it deems appropriate for the purpose of
preserving Collateral or its value or for any other purpose deemed appropriate
by Agent. Agent shall have no obligation to any Grantor to maintain or preserve
the rights of such Grantor as against third parties with respect to Collateral
while Collateral is in the possession of Agent. Agent may, if it so elects, seek
the appointment of a receiver or keeper to take possession of Collateral and to
enforce any of Agent's remedies (for the benefit of Agent and Lenders), with
respect to such appointment without prior notice or hearing as to such
appointment. Agent shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale to the Obligations as
provided in the Credit Agreement, and only after so paying over such net
proceeds, and after the payment by Agent of any other amount required by any
provision of law, need Agent account for the surplus, if any, to any Grantor. To
the maximum extent permitted by the UCC and other applicable law, each Grantor
waives all claims, damages, and demands against Agent or any Lender arising out
of the repossession, retention or sale of the Collateral except such as arise
out of the gross negligence or willful misconduct of Agent or such Lender as
finally determined by a court of competent jurisdiction. Each Grantor agrees
that ten (10) days prior notice by Agent of the time and place of any public
sale or of the time after which a private sale may take place is reasonable
notification of such matters. Grantors shall remain liable for any deficiency if
the proceeds of any sale or disposition of the Collateral are insufficient


                                       13
<PAGE>

to pay all Obligations, including any attorneys' fees and other expenses
incurred by Agent or any Lender to collect such deficiency.

         (b) Except as otherwise specifically provided herein, each Grantor
hereby waives presentment, demand, protest or any notice (to the maximum extent
permitted by the UCC and other applicable law) of any kind in connection with
this Security Agreement or any Collateral.

         (c) To the extent that applicable law imposes duties on the Agent to
exercise remedies in a commercially reasonable manner, each Grantor acknowledges
and agrees that it is not commercially unreasonable for the Agent (i) to fail to
incur expenses reasonably deemed significant by the Agent to prepare Collateral
for disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition, (ii) to fail to
obtain third party consents for access to Collateral to be disposed of, or to
obtain or, if not required by other law, to fail to obtain governmental or third
party consents for the collection or disposition of Collateral to be collected
or disposed of, (iii) to fail to exercise collection remedies against Account
Debtors or other Persons obligated on Collateral or to remove Liens on or any
adverse claims against Collateral, (iv) to exercise collection remedies against
Account Debtors and other Persons obligated on Collateral directly or through
the use of collection agencies and other collection specialists, (v) to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (vi) to
contact other Persons, whether or not in the same business as the Grantor, for
expressions of interest in acquiring all or any portion of such Collateral,
(vii) to hire one or more professional auctioneers to assist in the disposition
of Collateral, whether or not the Collateral is of a specialized nature, (viii)
to dispose of Collateral by utilizing internet sites that provide for the
auction of assets of the types included in the Collateral or that have the
reasonable capacity of doing so, or that match buyers and sellers of assets,
(ix) to dispose of assets in wholesale rather than retail markets, (x) to
disclaim disposition warranties, such as title, possession or quiet enjoyment,
(xi) to purchase insurance or credit enhancements to insure the Agent against
risks of loss, collection or disposition of Collateral or to provide to the
Agent a guaranteed return from the collection or disposition of Collateral, or
(xii) to the extent deemed appropriate by the Agent, to obtain the services of
other brokers, investment bankers, consultants and other professionals to assist
the Agent in the collection or disposition of any of the Collateral. Each
Grantor acknowledges that the purpose of this Section 7(c) is to provide
non-exhaustive indications of what actions or omissions by the Agent would not
be commercially unreasonable in the Agent's exercise of remedies against the
Collateral and that other actions or omissions by the Agent shall not be deemed
commercially unreasonable solely on account of not being indicated in this
Section 7(c). Without limitation upon the foregoing, nothing contained in this
Section 7(c) shall be construed to grant any rights to any Grantor or to impose
any duties on Agent that would not have been granted or imposed by this Security
Agreement or by applicable law in the absence of this Section 7(c).


                                       14
<PAGE>

         (d) Neither the Agent nor the Lenders shall be required to make any
demand upon, or pursue or exhaust any of their rights or remedies against, any
Grantor, any other obligor, guarantor, pledgor or any other Person with respect
to the payment of the Obligations or to pursue or exhaust any of their rights or
remedies with respect to any Collateral therefor or any direct or indirect
guarantee thereof. Neither the Agent nor the Lenders shall be required to
marshal the Collateral or any guarantee of the Obligations or to resort to the
Collateral or any such guarantee in any particular order, and all of its and
their rights hereunder or under any other Loan Document shall be cumulative. To
the extent it may lawfully do so, each Grantor absolutely and irrevocably waives
and relinquishes the benefit and advantage of, and covenants not to assert
against the Agent or any Lender, any valuation, stay, appraisement, extension,
redemption or similar laws and any and all rights or defenses it may have as a
surety now or hereafter existing which, but for this provision, might be
applicable to the sale of any Collateral made under the judgment, order or
decree of any court, or privately under the power of sale conferred by this
Security Agreement, or otherwise.

         8. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL. For the
purpose of enabling Agent to exercise rights and remedies under Section 7 hereof
(including, without limiting the terms of Section 7 hereof, in order to take
possession of, hold, preserve, process, assemble, prepare for sale, market for
sale, sell or otherwise dispose of Collateral) at such time as Agent shall be
lawfully entitled to exercise such rights and remedies, each Grantor hereby
grants to Agent, for the benefit of Agent and Lenders, an irrevocable,
nonexclusive license (exercisable without payment of royalty or other
compensation to such Grantor) to use, license or sublicense any Intellectual
Property now owned or hereafter acquired by such Grantor, and wherever the same
may be located, and including in such license access to all media in which any
of the licensed items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof.

         9. LIMITATION ON AGENT'S AND LENDERS' DUTY IN RESPECT OF COLLATERAL.
Agent and each Lender shall use reasonable care with respect to the Collateral
in its possession or under its control. Neither Agent nor any Lender shall have
any other duty as to any Collateral in its possession or control or in the
possession or control of any agent or nominee of Agent or such Lender, or any
income thereon or as to the preservation of rights against prior parties or any
other rights pertaining thereto.

         10. REINSTATEMENT. This Security Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against any Grantor for liquidation or reorganization, should any Grantor become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of any
Grantor's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Obligations,
whether as a "voidable preference," "fraudulent conveyance," or otherwise, all
as though


                                       15
<PAGE>

such payment or performance had not been made. In the event that any payment, or
any part thereof, is rescinded, reduced, restored or returned, the Obligations
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.

         11. NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give and
serve upon any other party any communication with respect to this Security
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and either shall be delivered in person
or sent by registered or certified mail, return receipt requested, with proper
postage prepaid, or by facsimile transmission and confirmed by delivery of a
copy by personal delivery or United States Mail as otherwise provided for in the
Credit Agreement:

         (a) If to Agent, at:

                      General Electric Capital Corporation
                      800 Connecticut Avenue, Two North
                      Norwalk, CT  06854
                      Attention: Account Manager - Finlay
                      Telecopier: (203) 852-3640

                      with copies to:

                           General Electric Capital Corporation
                           201 High Ridge Road
                           Stamford, Connecticut 06927
                           Attention: Commercial Finance Legal Counsel
                           Telecopier: (203) 316-7889


                           -and-


                           Weil, Gotshal & Manges LLP
                           767  Fifth Avenue
                           New York, New York 10153
                           Attention: Ted S. Waksman, Esq.
                           Telecopier: (212) 310-8007

         (b) If to Pledgors, at:

                           Finlay Fine Jewelry Corporation
                           529 Fifth Avenue, 5th Flr.
                           New York, New York 10017
                           Attention: Bruce Zurlnick




                                       16
<PAGE>

                           Telecopier: (212) 808-2946

                      With copies to:

                           Finlay Enterprises, Inc.
                           529 Fifth Avenue, 6th Flr.
                           New York, New York 10017
                           Attention: Bonni G. Davis, Esq.
                           Telecopier: (212) 808-0349

                      -and-

                           Blank Rome LLP
                           405 Lexington Avenue
                           New York, New York 10174
                           Attention: Richard DiStefano, Esq.
                           Telecopier: (212) 885-5001


or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly served, given or delivered (a) if by registered or certified
mail, return receipt requested, four (4) Business Days following the date when
sent, (b) if by telex, when sent and answerback received, (c) if by overnight
courier, when received, (d) if by telecopier, when sent, or (e) when receipted
for, if personally delivered or delivered by messenger. Failure or delay in
delivering copies of any notice, demand, request, consent, approval, declaration
or other communication to the persons designated above to receive copies shall
in no way adversely affect the effectiveness of such notice, demand, request,
consent, approval, declaration or other communication.

         12. SEVERABILITY. Whenever possible, each provision of this Security
Agreement shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision of this Security Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating
the remainder of such provision or the remaining provisions of this Security
Agreement. This Security Agreement is to be read, construed and applied together
with the Credit Agreement and the other Loan Documents which, taken together,
set forth the complete understanding and agreement of Agent, Lenders and
Grantors with respect to the matters referred to herein and therein.

         13. NO WAIVER; CUMULATIVE REMEDIES. Neither Agent nor any Lender shall
by any act, delay, omission or otherwise be deemed to have waived any of its
rights or remedies hereunder, and no waiver shall be valid unless in writing,
signed


                                       17
<PAGE>

by Agent and then only to the extent therein set forth. A waiver by Agent of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which Agent would otherwise have had on any future occasion.
No failure to exercise nor any delay in exercising on the part of Agent or any
Lender, any right, power or privilege hereunder, shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law. None of the
terms or provisions of this Security Agreement may be waived, altered, modified
or amended except by an instrument in writing, duly executed by Agent and
Grantors.

         14. LIMITATION BY LAW. All rights, remedies and powers provided in this
Security Agreement may be exercised only to the extent that the exercise thereof
does not violate any applicable provision of law, and all the provisions of this
Security Agreement are intended to be subject to all applicable mandatory
provisions of law that may be controlling and to be limited to the extent
necessary so that they shall not render this Security Agreement invalid,
unenforceable, in whole or in part, or not entitled to be recorded, registered
or filed under the provisions of any applicable law.

         15. TERMINATION OF THIS SECURITY AGREEMENT. Subject to Section 10
hereof, this Security Agreement shall terminate when all of the Obligations have
been paid (or in the case of Letter of Credit Obligations, cash collateralized
in accordance with the Credit Agreement) in full.

         16. SUCCESSORS AND ASSIGNS. This Security Agreement and all obligations
of Grantors hereunder shall be binding upon the successors and assigns of each
Grantor (including any debtor-in-possession on behalf of such Grantor) and
shall, together with the rights and remedies of Agent, for the benefit of Agent
and Lenders, hereunder, inure to the benefit of Agent and Lenders, all future
holders of any instrument evidencing any of the Obligations and their respective
successors and assigns. No sales of participations, other sales, assignments,
transfers or other dispositions of any agreement governing or instrument
evidencing the Obligations or any portion thereof or interest therein shall in
any manner impair the Lien granted to Agent, for the benefit of Agent and
Lenders, hereunder. No Grantor may assign, sell, hypothecate or otherwise
transfer any interest in or obligation under this Security Agreement.

         17. COUNTERPARTS. This Security Agreement may be authenticated in any
number of separate counterparts, each of which shall collectively and separately
constitute one and the same agreement. This Security Agreement may be
authenticated by manual signature, facsimile or, if approved in writing by
Agent, electronic means, all of which shall be equally valid.

         18. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE
LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND



                                       18
<PAGE>

PERFORMANCE, THIS SECURITY AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL
BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE, AND
ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH GRANTOR HEREBY
CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY,
CITY OF NEW YORK, NEW YORK, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN GRANTORS, AGENT AND LENDERS PERTAINING
TO THIS SECURITY AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS, PROVIDED, THAT AGENT, LENDERS AND GRANTORS ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW
YORK COUNTY, AND, PROVIDED, FURTHER, NOTHING IN THIS AGREEMENT SHALL BE DEEMED
OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN
ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR
THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
AGENT. EACH GRANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH GRANTOR
HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT. EACH GRANTOR HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND
OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO SUCH GRANTOR AT THE ADDRESS SET FORTH ON THE SIGNATURE PAGES
TO THE CREDIT AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON
THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE
U.S. MAILS, PROPER POSTAGE PREPAID.

         19. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT DISPUTES
ARISING HEREUNDER OR RELATING HERETO BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF
THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO


                                       19
<PAGE>

WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO
RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, AMONG
AGENT, LENDERS, AND GRANTORS ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH, THIS SECURITY
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED HERETO
OR THERETO.

         20. SECTION TITLES. The Section titles contained in this Security
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.

         21. NO STRICT CONSTRUCTION. The parties hereto have participated
jointly in the negotiation and drafting of this Security Agreement. In the event
an ambiguity or question of intent or interpretation arises, this Security
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Security Agreement.

         22. ADVICE OF COUNSEL. Each of the parties represents to each other
party hereto that it has discussed this Security Agreement and, specifically,
the provisions of Section 18 and Section 19, with its counsel.

         23. BENEFIT OF LENDERS. All Liens granted or contemplated hereby shall
be for the benefit of Agent, individually, and Lenders, and all proceeds or
payments realized from Collateral in accordance herewith shall be applied to the
Obligations in accordance with the terms of the Credit Agreement.






                                       20
<PAGE>


         IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer as of the
date first set forth above.

                                         FINLAY FINE JEWELRY CORPORATION

                                         By: /s/ Bruce E. Zurlnick
                                             -----------------------------------
                                         Name: Bruce E. Zurlnick
                                               ---------------------------------
                                         Title: Sr. V.P., Treas. & CFO
                                                --------------------------------


                                         FINLAY JEWELRY, INC.

                                         By: /s/ Bruce E. Zurlnick
                                             -----------------------------------
                                         Name: Bruce E. Zurlnick
                                               ---------------------------------
                                         Title: Sr. V.P., Treas. & CFO
                                                --------------------------------


                                         Finlay Merchandising & Buying, Inc.

                                         By: /s/ Bonni G. Davis
                                             -----------------------------------
                                         Name: Bonni G. Davis
                                               ---------------------------------
                                         Title: V.P., Sec., & General Counsel
                                                --------------------------------


                                         eFINLAY, INC.

                                         By: /s/ Bonni G. Davis
                                             -----------------------------------
                                         Name: Bonni G. Davis
                                               ---------------------------------
                                         Title: V.P., Sec., & General Counsel
                                                --------------------------------





           [Signature Page to Amended and Restated Security Agreement]

<PAGE>



GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent

By: /s/ Charles Chiodo
    ------------------

Name: Charles Chiodo

Title: Duly Authorized Signatory

















           [Signature Page to Amended and Restated Security Agreement]