SEPARATION AGREEMENT AND RELEASE


     FINLAY FINE JEWELRY CORPORATION  ("Finlay") and BARRY D. SCHECKNER ("you"),
hereby agree that:

     1. You have resigned effective July 31, 1999 (the "Resignation  Date"). You
agree that in addition to resigning your employment with Finlay you also resign,
effective  July 31,  1999,  from any  other  positions  you hold as a  Director,
Officer,  employee or otherwise of Finlay or Finlay's parent and any of Finlay's
subsidiaries.

     2. You will be paid your  salary  earned  through the  Resignation  Date in
accordance with Finlay's regular payroll cycle.

     3. Under Finlay's regular policies, you will be eligible:

        a. To receive your vested accounts, if any,  under the 401(k) plan.  You
will receive more detailed  information  regarding  your 401(k)  benefits  under
separate cover;

        b. To receive  payment  fo  your   accrued  but  unused   vacation   and
personal  days,  totaling  $23,976.30 on Finlay's  regular pay date  immediately
following the Resignation Date;

        c. To continue  your  health  insurance  coverage,  in  accordance  with
COBRA,  for a minimum of eighteen (18) months from your  Resignation  Date, upon
payment of the full applicable  premiums.  You will receive under separate cover
more detailed  information  regarding  insurance  benefits under COBRA.  Nothing
contained in this Agreement is intended to impair any of these rights; and

        d. To  exercise your vested  stock  options.  You have  twenty-one  (21)
days from the Resignation Date in which to exercise such options.

     4. In consideration for signing this Separation  Agreement and Release (the
"Agreement"),  Finlay will also  provide  you with the  following  payments  and
benefits:

        a. You will receive a total separation payment equal to $320,000.00 plus
a $50,000.00  subjective  bonus for 1998 for a total of $370,000.00 The bonus of
$50,000.00,  less  applicable  taxes  and  other  withholdings,   will  be  paid
immediately  following the fifth day after the Employee  Irrevocability  Date as
defined below.  Payment of the $320,000.00  will be made in two  installments as
follows: (i) on the later of Finlay's regular pay date immediately following the
Resignation Date or the Employee  Irrevocability Date as defined below, you will
receive in a lump sum $220,000.00,  less applicable taxes and other withholdings
and, (ii) the balance of $100,000.00 will be paid in a lump sum, less applicable
taxes and other withholdings, in January 2000.

     This separation  amount exceeds,  and is in lieu of, any other severance to
which you might otherwise be entitled.

<PAGE>

        b. Cobra  coverage   will  commence on  August  1, 1999. You    will  be
responsible  for  making  Cobra  payments  monthly at the  appropriate  employee
contribution  level in effect for active  employees in the plan, which amount is
currently  $234.00  per  month.  Your  current  coverage  level,  including  the
executive  medical plan, will continue  subject to whatever changes or revisions
are made to the plan.

       c. You    or  your    designee  will  receive   a   twelve   (12)   month
consulting  agreement (the "Consulting  Agreement")  with total  compensation of
$50,000.00 to be paid upon the completion of the twelve (12) month assignment in
a lump sum,  subject to the terms in such Agreement and which Agreement shall be
signed  by Finlay  immediately  following  the  fifth  day  after  the  Employee
Irrevocability Date.

        d. You will  have  sixty  (60)  days  from  December  31,  1999 in which
to exercise  five  thousand  (5,000)  option shares at $8.25 per share and until
sixty (60) days from  December  31, 1999 in which to exercise  any other  vested
options which have heretofore been granted to you.

        e. You  may keep the  computer  equipment  which  currently   resides in
your office for your personal use, including the installed  operating  software.
All data files pertaining to Finlay will be purged from the equipment.

        You  understand  and agree  that  you  would not  receive the monies and
other  benefits  specified in this  section 4 except for your  execution of this
Agreement and the fulfillment of the promises contained in this Agreement.

     5. You may immediately  begin your  employment  search provided it does not
interfere with the performance of your regular job duties,  which duties will be
performed in a competent  and  professional  manner.  Nothing in this  Agreement
shall be construed as a restriction  on your ability to obtain  employment or be
associated or affiliated with a competitor of Finlay in any capacity.

     6.  Finlay  hereby  confirms  that the  Directors  and  Officers  Liability
Insurance  coverage  currently  in effect with  respect to you will  continue to
cover  your  acts in  accordance  with the  terms  of that  policy  through  the
Resignation Date.

     7. You understand that Finlay makes no  representation as to the income tax
treatment  of any  payments  hereunder  and that any and all  payments  (and all
compensation,  benefits and/or other payments  previously made to you by Finlay)
will be subject to such tax treatment and to such deductions,  if any, as may be
required under applicable tax laws.

     8. You agree that you will take no action  which is  intended  to, or would
reasonably  be  expected  to  harm  or  disparage  Finlay,  to  impair  Finlay's
reputation,  or to lead to unwanted or unfavorable publicity to Finlay, nor will
you disclose any confidential or proprietary  information obtained by you during
the course of your employment.


                                      -2-

<PAGE>

        a. You shall  refer all  inquiries  with   respect to future  employment
to Arthur  Reiner,  Chairman and CEO, or Joseph  Melvin,  President and COO, who
shall not make any  statements  intended to harm your  character,  reputation or
business  prospects.  In  addition,  you  shall  be  provided  with  a  mutually
acceptable written reference.

        b. You  agree  to cooperate  fully with Finlay,  specifically  including
any  attorney  retained  by Finlay,  in  connection  with any  pending or future
litigation, business, or investigatory matter. The parties acknowledge and agree
that such  cooperation  may  include,  but shall in no way be limited  to,  your
making yourself  available for interview by Finlay,  or any attorney retained by
Finlay,  and providing to Finlay any documents in your  possession or under your
control  relating to the litigation,  business or investigatory  matter.  Finlay
agrees to provide you with  reasonable  notice of the need for  assistance  when
feasible.  Finlay  additionally  agrees to schedule  such  assistance  in such a
manner as not to interfere with any alternative  employment obtained by you when
possible.  If the  request  for  assistance  exceeds  the 250  hours of  service
contemplated by the Consulting  Agreement or occurs after the termination of the
Consulting  Agreement,  you shall be reimbursed for the reasonable  cost of your
time.

     9. It is  expressly  understood  and  agreed  that this  Agreement  and the
effectuation  of its terms do not  constitute  an  admission or statement by any
party that Finlay has acted unlawfully or is otherwise liable in any respect. It
is  further  agreed  that  evidence  of  this   Agreement,   its  terms  or  the
circumstances  surrounding the parties  entering into this  Agreement,  shall be
inadmissible  in any  action or  lawsuit  of any kind,  except for an action for
alleged breach of this Agreement.

     10. a. You agree not to disclose any information regarding the existence or
substance  of this  Agreement,  except  to an  attorney,  accountant,  spouse or
financial advisor with whom you choose to consult  regarding your  consideration
of this Agreement.

         b. Finlay  and  only  Finlay,  will issue a press  release to  announce
your resignation  from Finlay,  including  information  indicating that you have
resigned to "pursue other  interests".  You specifically  agree not to issue any
public  statement  concerning your employment at Finlay  containing  information
which would be inconsistent with that contained in said press release.

     11. You agree that for a period of one year following the Resignation Date,
you will not  solicit  or  offer  employment  to any  Finlay  employee  or offer
employment to any Finlay consultant without Finlay's written authorization.

     12. You knowingly and voluntarily release and forever discharge Finlay, and
its current and former parent, subsidiary,  affiliated and related corporations,
partnerships  and entities,  their  successors and assigns,  and the current and
former  owners,  shareholders,  directors,  officers  and/or  employees  of such
corporations,  partnerships  and  entities,  and their  affiliates,  successors,
assigns,   heirs,   executors  and  administrators   (referred  to  collectively
throughout  this  Agreement  as  "Finlay")  from and against any and all claims,
actions,  demands,  contracts and causes of action, known and unknown, which you
or your heirs,

                                      -3-

<PAGE>

executors,  administrators,  successors  and assigns  (referred to  collectively
throughout  this Agreement as "you") now or may have as of the date of execution
of this Agreement  against  Finlay,  including,  but not limited to, any alleged
violation of:

      .        The National Labor Relations Act, as amended;

      .        Title VII of the Civil Rights Act of 1964, as amended;

      .        Sections 1981 through 1988 of Title 42 of the United States Code,
               as amended;

      .        The Civil Rights Act of 1991;

      .        The Age Discrimination in Employment Act of 1967, as amended;

      .        The Employee Retirement Income Security Act of 1974, as amended;

      .        The Immigration Reform Control Act, as amended;

      .        The Americans with Disabilities Act of 1990, as amended;

      .        The Fair Labor Standards Act, as amended;

      .        The Occupational Safety and Health Act, as amended;

      .        The Family and Medical Leave Act of 1993;

      .        The New York Human Rights Act, as amended;

      .        The New York Minimum Wage Law, as amended;

      .        Equal Pay Law for New York, as amended;

      .        any other federal, state or local civil or human rights law or
               any other local, state or federal law, regulation or ordinance;

      .        any public policy, contract, tort, or common law; or

      .        any allegation for costs, fees, or other expenses including
               attorneys' fees incurred in these matters.

     You further  acknowledge and agree that you shall, on the Resignation Date,
provide to Finlay an additional  release in  substantially  the same form as set
forth above covering the period from the execution of this Agreement through the
Resignation Date.

     13.  You  confirm  and  agree  that,  except  for the  purpose  of  seeking
enforcement  of the terms of this  Agreement,  you have not and will not file or
institute any claims, charges,

                                      -4-

<PAGE>

actions,  complaints or any other  proceedings  against Finlay before any court,
administrative  agency or any  other  forum  based  upon or  arising  out of any
claims, actions, demands, contracts and causes of action by or in respect of you
against Finlay. In the event that any such claim, charge,  action,  complaint or
other  proceeding  is filed,  you shall not be entitled to recover any relief or
recovery therefrom, including costs and attorneys' fees.

     14. You understand  that if this Agreement were not signed,  you would have
the right to voluntarily assist other individuals or entities in bringing claims
against  Finlay.  You hereby  waive that right and you will not provide any such
assistance other than assistance in an investigation or proceeding  conducted by
a government agency or as required by law.

     15.  Except as  provided  in section 4 (e)  hereof,  you agree to return to
Finlay  on the  Resignation  Date,  your  keys,  identification  and  any  other
equipment,   data  file  (excluding  personal  files),  documents  or  materials
belonging to Finlay that you have in your possession.

     16. In the event that you or your  affiliates  breach this Agreement or the
Consulting Agreement, Finlay will be entitled to recover or withhold any payment
and/or other  benefits  paid or payable under this  Agreement or the  Consulting
Agreement  and to  obtain  all  other  relief  provided  by law or  equity.  The
prevailing  party in any  litigation  resulting  from any  such  claim  shall be
entitled to recover  reasonable  attorneys' fees and expenses of litigation from
the losing party.

     17. This  Agreement  shall be binding on the  parties and their  respective
heirs, successors and assigns.

     18.  This  Agreement  and the  Consulting  Agreement  sets forth the entire
agreement  between the parties and their  affiliates with respect to the subject
matter herein and therein and fully  supersedes any and all prior  agreements or
understandings between them pursuant to such subject matter.

     19. This  Agreement  may not be  modified,  altered or changed  except upon
express written consent of both parties  wherein  specific  reference is made to
this Agreement.

     20.  If  any  provision  of  this  Agreement  should  be  held  invalid  or
unenforceable by operation of law or by any tribunal of competent  jurisdiction,
or if  compliance  with or  enforcement  of any  provision is restrained by such
tribunal,  the application of any and all provisions other than those which have
been held invalid or unenforceable shall not be affected.

     21. This Agreement  shall be governed and construed in accordance  with the
laws of the State of New York (without reference to its rules as to conflicts of
laws).  Any  dispute  arising  hereunder  shall  be  brought  before  a court of
competent jurisdiction in the City, County and State of New York.

     22. You may revoke this  Agreement for a period of seven (7) days following
the day you execute this  Agreement.  Any revocation  within this period must be
submitted, in

                                      -5-

<PAGE>

writing, to Joseph Melvin,  President, and state, "I hereby revoke my acceptance
of our  Separation  Agreement and Release."  The  revocation  must be personally
delivered to Mr. Melvin or his designee,  or mailed to Mr. Melvin at Finlay Fine
Jewelry  Corporation,  521 5th  Avenue,  4th  Floor,  New  York,  NY  10175  and
postmarked within seven (7) days of execution of this Agreement.  This Agreement
shall not  become  effective  or  enforceable  until the  revocation  period has
expired (the "Employee  Irrevocability Date"). If the last day of the revocation
period is a Saturday,  Sunday or legal holiday in New York,  then the revocation
period  shall not expire until the next  following  day which is not a Saturday,
Sunday or legal holiday.

     YOU  ACKNOWLEDGE  THAT YOU  HAVE  BEEN  ADVISED  IN  WRITING  THAT YOU HAVE
TWENTY-ONE  (21) DAYS TO CONSIDER THIS AGREEMENT AND TO CONSULT WITH AN ATTORNEY
PRIOR TO EXECUTION OF THIS AGREEMENT. YOU AGREE THAT ANY MODIFICATIONS, MATERIAL
OR OTHERWISE,  MADE TO THIS AGREEMENT DO NOT RESTART OR AFFECT IN ANY MANNER THE
ORIGINAL TWENTY-ONE (21) DAY CONSIDERATION PERIOD.

     HAVING ELECTED TO EXECUTE THIS AGREEMENT, TO FULFILL THE PROMISES SET FORTH
HEREIN,  AND TO RECEIVE  THEREBY THE SUMS AND  BENEFITS SET FORTH IN SECTION "4"
ABOVE, YOU FREELY AND KNOWINGLY,  AND AFTER DUE  CONSIDERATION,  ENTER INTO THIS
AGREEMENT  INTENDING TO FOREVER WAIVE, SETTLE AND RELEASE ALL CLAIMS YOU HAVE OR
MIGHT HAVE AGAINST FINLAY.















                                      -6-
<PAGE>


     IN WITNESS WHEREOF,  the parties hereto  knowingly and voluntarily  execute
this Separation Agreement and Release as of the date set forth below:


Sworn to before me this
6th day of June, 1999.




/s/Bonni G. Davis                         /s/Barry D. Scheckner
-------------------------                 ----------------------------------
Notary Public                             Barry D. Scheckner

                                          June 6, 1999
                                          ----------------------------------
                                          Date



                                          Finlay Fine Jewelry Corporation



                                          By  /s/ Joseph M. Melvin
                                              ------------------------------
                                              Joseph M. Melvin, President

                                          June 6, 1999
                                          ----------------------------------
                                          Date














                                      -7-