AMENDMENT NO. 3
                                     TO THE
                          FINLAY RETIREMENT INCOME PLAN

                          (As Restated March 23, 1995)


     The Finlay  Retirement  Income Plan as  heretofore  amended (the "Plan") is
hereby further amended in the following respects:


     1. Section  7.2.1.1 is amended by adding the following  sentence at the end
thereof:


     "Effective  January 1,  1998,   a   Participant   shall  be  entitled  to a
     hardship  withdrawal  under  this  Section  7.2.1.1  if  (a) he  meets  all
     requirements  therefor  other than the receipt of all amounts  available to
     him as a loan, (b) the need is for funds to purchase a principal  residence
     of the Participant, (c) the obtaining of loans other than the mortgage loan
     in connection  with such purchase  would  disqualify the  Participant  from
     obtaining the necessary  amount of mortgage loan,  and (d) the  Participant
     demonstrates  to the  satisfaction  of the Committee  that the amount to be
     withdrawn  for the purpose of such  purchase  cannot be obtained from other
     resources  that are  reasonably  available  to the  Participant  (including
     assets of the  Participant's  spouse and minor children that are reasonably
     available to the Participant)."

     2. A new Article XVII is added to read as follows:

                                  ARTICLE XVII

                                PARTICIPANT LOANS

               17.1 Loans to Parties in Interest. This Article XVII is effective
          January 1, 1998 or as soon thereafter as the Committee determines that
          administration of loans hereunder is practicable. Upon the application
          of a  Participant  who is a "party in interest"  with  respect to  the
          Plan (within the meaning of section 3(14) of ERISA),  the Committee or
          its delegate (in either case, the "Loan Administrator") shall instruct
          the Trustee to make a loan to such Participant from the  Participant's
          Accounts,   provided  that  such  loan  meets  the   requirements   of
          Section 17.2.  No more  than one loan may be  outstanding  at the same
          time.  The  loan  request  shall be made on the  Appropriate  Form and
          submitted to the Loan  Administrator,  together with such  application
          fee  as  the   Administrator   may  authorize   (if  any).   The  Loan
          Administrator  shall  notify   the  Participant  in  writing within a 
          reasonable  time 

                                       
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          of   the   approval  or   denial  of such  loan  request,   and   such
          notification by the Loan Administrator  shall be final. The status and
          rights under the Plan of a  Participant  who obtains a loan under this
          Article  XVII shall not be  affected,  except to the  extent  that the
          Participant  has  assigned an interest in the  Participant's  Accounts
          pursuant  to the  applicable  provisions  of Section  17.2.  All loans
          shall be granted according to rules adopted by the Loan  Administrator
          and  applicable to all  Participants  who are parties in interest on a
          uniform  basis  that  does  not   discriminate   in  favor  of  highly
          compensated  employees  (within the  meaning of section  414(q) of the
          Code). The Committee may at any time suspend  authorization for future
          loans to  Participants,  but no such suspension  shall affect any loan
          then outstanding under this Article XVII.

               17.2 Loan  Requirements.  A loan  shall not be made  pursuant  to
          Section 17.1 unless such loan meets all of the following requirements:

               17.2.1  Amount.  Such  loan must be in an amount no less than one
          thousand dollars ($1,000) and shall not exceed the lowest of:

               (a) fifty  thousand  dollars  ($50,000)  reduced  by the  highest
          outstanding  principal balance during the preceding twelve (12) months
          of all loans to the  Participant  from  this and any  other  qualified
          employer plan (as described in section  72(p)(4) of the Code) which is
          maintained by an Employer or Affiliate ("controlled group loans"); or

               (b) one-half of the vested balance of the Participant's Accounts,
          reduced  by  the  current   outstanding   principal   balance  of  all
          "controlled group loans" (as described in paragraph (a) above); or

               (c)  such  other  amount  as  may  be   determined  by  the  Loan
          Administrator  in  order to  comply  with  any  restrictions  under an
          Investment  Fund that limit the  liquidation  of  investments  to fund
          Participant loans or otherwise.

          If   there is a   "controlled  group  loan"  (other  than  a loan made
          under this Plan) currently  outstanding,  one-half of the value of the
          Participant's  vested interest under the plan from which such loan was
          made shall be included in the amount  determined  under paragraph (b),
          above.

               17.2.2 Adequate Security.  All loans must be adequately  secured.
          For this  purpose,  no more than  one-half of  the total  value of the
          Participant's  vested  Accounts  under  the  Plan may be  assigned  as
          collateral security. If the Loan Administrator subsequently determines
          that the loan is no longer adequately secured, additional security may
          be required.


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               17.2.3 Interest. All loans must bear interest,  payable with each
          scheduled  loan  payment  (and  in  no  event  less   frequently  than
          quarterly),  at the prime rate of such bank as the Loan  Administrator
          shall  specify  plus 2%.  The  Loan  Administrator  shall  at  regular
          intervals  (but no  less  frequently  than  quarterly)  determine  the
          applicable rate on the basis of a review of pertinent information.

               17.2.4  Repayment Term. Such loan must provide for  substantially
          level amortization  (within the meaning of section  72(p)(2)(C) of the
          Code) with payments  made at least  quarterly for a fixed term of one,
          two,  three or four years.  A Participant  shall have the right on any
          scheduled payment date to prepay the full outstanding  balance of such
          loan and accrued interest without  penalty.  Partial  prepayment shall
          not be permitted.  Unless the Loan Administrator determines that it is
          impractical to do so, such loan shall be repaid by substantially level
          payroll  deductions  from pay in each pay  period in which the loan is
          outstanding.

               17.2.5  Promissory  Note.  Such  loan  must  be  evidenced  by  a
          promissory   note  and  loan  agreement   containing  such  terms  and
          provisions  as the Loan  Administrator  shall  determine,  executed by
          the Participant  and, if the Loan  Administrator  shall so  determine,
          also executed by the Participant's spouse.

               17.3 Funding of Participant Loans.

               17.3.1  Source of Funds.  A  Participant's  loan  shall be funded
          solely by reduction of the  Participant's  Account  balances as of the
          effective date of the loan in the following order of priority:  First,
          from the  Profit-Sharing  and  Matching  Contributions  Account to the
          extent  vested  at the date of the loan,  next from the  Participant's
          Closed Savings Account (including any Rollover Account) and last, from
          the Participant's  Elective Contributions Account. The promissory note
          executed  pursuant to Section  17.2.5 by a Participant  who receives a
          loan  shall be held by the  Trustee  as an asset of the Trust Fund and
          allocated  solely to the Account or Accounts of the  Participant  from
          which the loan was made. For all purposes hereunder, the value of such
          promissory  note  shall be  considered  to be the  outstanding  unpaid
          principal amount of the note plus accrued interest.

               17.3.2   Allocation  Among   Investment   Funds;   Valuation.   A
          Participant  shall specify the Investment Fund or Funds from which his
          loan will be  funded.  The value of that  portion  of a  Participant's
          Accounts to be borrowed shall be determined as of the first  Valuation
          Date  for  which it is  possible  to do so  under  the  administrative
          procedures established by the Committee, and the loan proceeds will be
          distributed in a single payment as soon as practicable thereafter.


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               17.4 Loan  Payments.  Payments  of  principal  and  interest on a
          Participant's  loan  shall  be  allocated  among  Investment  Funds in
          accordance with rules adopted by the Loan Administrator.

               17.5 Loan  Expenses.  The Loan  Administrator  may  determine  to
          charge any fees, taxes or other expenses incurred in connection with a
          loan to the Accounts of the Participant  obtaining such loan or to the
          Participant  directly.  Such charges shall be imposed on a uniform and
          nondiscriminatory basis.

               17.6  Disposition of Loan Upon Certain Events.  In the event that
          distribution of a  Participant's  Account is required to be made under
          the terms of the Plan  before the  Participant  repays an  outstanding
          loan,  the Trustee  shall offset the  outstanding  balance of any loan
          from  such  Account  against  the value of the  Participant's  Account
          before making a distribution.

               17.7 Compliance with Applicable Law. The Loan Administrator shall
          take such  actions as are deemed  appropriate  in order to assure full
          compliance  with all  applicable  laws  and  regulations  relating  to
          Participant loans and the granting and repayment thereof.

               17.8  Default.  The  outstanding  principal  amount  and  accrued
          interest  of a  loan  made  pursuant  to  Section  17.1  shall  become
          immediately  due  and  payable  if the  Participant  fails  to  make a
          scheduled  loan payment by the required  date, or on the date on which
          distribution  of the  Participant's  Accounts  is  made  or  otherwise
          commences  following the Participant's  Termination of Employment.  In
          such  event,  the Loan  Administrator  may  execute  upon  the  Plan's
          security interest in the  Participant's  Accounts to satisfy the debt;
          provided,  however,  that execution shall not occur until such time as
          the  Participant's  Account could be  distributed  to the  Participant
          consistent with the requirements  for  qualification of the Plan under
          section 401(a) of the Code. The Loan  Administrator may take any other
          action deemed  appropriate to obtain payment of the outstanding amount
          of  principal  and  accrued  interest,  which  may  include  accepting
          payments of principal  and interest that were not made on schedule and
          permitting the loan to remain  outstanding  under its original payment
          schedule.  Any costs incurred by the Loan Administrator in collecting,
          or attempting to collect,  amounts in default shall be charged against
          the  Participant's  Accounts.  If the Loan  Administrator is unable to
          obtain payment of the outstanding  principal and accrued interest (or,
          in the Loan  Administrator's  discretion,  payment of only the overdue
          amount of such  principal),  the Loan  Administrator  shall  take such
          further action as is deemed appropriate to prevent loss to the Plan as


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          a result of the default.  Any discretion by the Loan  Administrator in
          this  regard  shall be  exercised  in a uniform  manner  that does not
          discriminate  in favor of highly  compensated  employees  (within  the
          meaning of Section 414(q) of the Code).


     3. Sections 8.1 and 8.13.3 are amended to substitute  "$5,000" for "$3,500"

therein,  effective  January 1, 1998 (with respect to Participants who terminate

employment  thereafter and, to the extent permitted by law, all Participants who

have  then   previously   terminated   employment  but  have  not  yet  received

distribution).


     4. Section 12.1 is amended by revising the first  sentence  thereof to read
as follows:


               Effective January 1, 1990, except as herein limited,  the Company
          shall have the right to amend the Plan by  resolution  of the Board of
          Directors or the Committee  (acting in its capacity as management  and
          delegee of the Board of  Directors,  and not in the  capacity  of Plan
          fiduciaries)  to any  extent  that  it may  deem  advisable,  and  all
          Employers and Participants shall be bound thereby.


               IN WITNESS WHEREOF,  the Company has caused this instrument to be
          executed by its duly authorized officer the 3rd day of December, 1997.


                                            FINLAY ENTERPRISES, INC.



                                            By:/s/ David B. Cornstein
                                               ----------------------------
                                               Chairman

ATTEST:



/s/ Bonni G. Davis
-----------------------------
Secretary

                                              





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