<PAGE>

                                                                Exhibit 10.7


                               SECURITY AGREEMENT

                                                            Date: August 7, 2000

1.  GRANT OF SECURITY INTEREST

The Birch Pond Group, Inc., Inc., a Massachusetts corporation with a principal
place of business at 4 Batterymarch Park, Quincy, Massachusetts 02169 (the
"Debtor") hereby grants to Citizens Bank of Massachusetts (the "Secured Party"),
a security interest in all of the Debtor's present and future right, title and
interest in and to the property described on SCHEDULE A (all of which is
hereinafter called the "Collateral") to secure (a) all indebtedness, obligations
and liabilities, whether now existing or hereafter arising, of Debtor and of The
J. Jill Group, Inc., a Delaware corporation ("J. Jill") to Secured Party,
including, without limitation, those arising under an Unlimited Guaranty dated
on or near the date hereof from Debtor to Secured Party and under a certain
Fourth Amended and Restated Loan Agreement ("Loan Agreement") between J. Jill
and Secured Party, as each may hereafter be amended, substituted, renewed,
extended or replaced; and (b) the full payment and performance of all covenants
and agreements herein contained on the part of the Debtor to be kept and
performed (collectively hereafter referred to as "Obligations").

2.  REPRESENTATIONS, AGREEMENTS AND WARRANTIES OF DEBTOR

Debtor hereby represents and warrants that:

(a) Debtor has the power to execute, deliver and perform this Agreement. The
execution, delivery and performance of this Agreement (i) have been duly
authorized and are within its powers, (ii) will not violate any provision of its
organizational documents, (iii) will not violate any law, regulation or court
order and (iv) will not result in a default under any agreement or indenture to
which the Debtor is a party.

(b) Debtor has good and marketable title to the property and assets which are
reflected on its financial statements, tax returns or other information
furnished to the Secured Party, and which Debtor purports to own, except such
property and assets as have been disposed of in the ordinary course of business
after the date of any such document. All of the Collateral is owned by the
Debtor free and clear of all liens, pledges, security interests and mortgages,
except for liens, pledges, security interests or mortgages in favor of the
Secured Party or liens, pledges, security interests or mortgages previously
disclosed to the Secured Party in writing and acknowledged in writing by the
Secured Party or as otherwise provided in the Loan Agreement. No effective
financing statement covering the Collateral or any


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proceeds thereof is on file in any public office, except as disclosed in writing
to the Secured Party.

(c) Debtor has not, during the preceding five (5) years, changed its name, been
a party to a merger, or used any other name except as previously described to
the Secured Party in writing.

(d) The Debtor's principal place of business and the Debtor's chief executive
office is the location set forth on SCHEDULE A noted as "Debtor's Address." The
Debtor maintains places of business and the Collateral is now and will continue
to be kept at such location and at the additional locations, if any, noted as
"Additional Collateral Locations" on SCHEDULE B until such time as it shall be
moved, which shall occur only after at least thirty (30) days written notice to
Secured Party and the execution by Debtor and filing of such additional filing
statements as Secured Party shall request.

(e) If any of the Collateral now existing or hereafter acquired is or is to be
attached to real estate, a description of said real estate to which such
Collateral is or is to be attached and the name and address of each record owner
thereof is set forth on SCHEDULE B noted as "Owner and Description of Real
Estate" or will be provided in writing to Secured Party on demand.

3.  COVENANTS AND AGREEMENTS OF DEBTOR

Debtor hereby agrees and covenants that:

(a) Debtor will keep the Collateral free from all liens, security interests and
encumbrances except for the security interest granted herein or those
specifically permitted in writing by the Secured Party or permitted by the Loan
Agreement and will defend the Collateral against all claims and demands of all
persons at any time claiming any interest therein. Debtor will not sell or
otherwise transfer the Collateral or any interest therein except inventory in
the ordinary course of business or as otherwise provided in the Loan Agreement.

(b) Debtor will not change its name without giving the Secured Party 30 days
prior written notice in which it sets forth its new name and the date on which
the new name shall first be used. Debtor shall maintain its principal place of
business and chief executive office, or if the Debtor is an individual with no
place of business, its residence, at the address set forth on SCHEDULE A noted
as "Debtor's Address." Debtor shall, at all times, keep the Secured Party
accurately informed in writing of each location where the Debtor's assets are
kept and of each of its places of business and Debtor shall not remove any
records to another state or change the location or



                                      -2-
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open or close, move or change any existing or new place of business without
giving the Secured Party at least thirty (30) days' prior written notice
thereof.

(c) Debtor will, at its expense, furnish to the Secured Party upon its demand
such further information, will execute and deliver to the Secured Party such
financing statements and other agreements, instruments or documents, and will do
all such acts as the Secured Party may, at any time or from time to time,
reasonably request, or as may be necessary or appropriate to establish and
maintain a valid and enforceable security interest of the Secured Party in the
Collateral as provided in the Loan Agreement.

(d) Debtor will keep the Collateral (to the extent that it consists of tangible
property) at all times insured against risks of loss or damage by fire
(including so-called extended coverage), theft and such other casualties as the
Secured Party may reasonably require, including collision in the case of any
motor vehicle, all in such amounts (but in no event in an amount less than the
full insurable value thereof), under such forms of policies, under such terms,
for such periods and written by such companies or underwriters as Secured Party
may approve, which approval may not be unreasonably withheld, losses in all
cases to be payable first to the Secured Party "as its interest may appear." All
policies of insurance shall provide for at least thirty (30) days' prior written
notice of cancellation to the Secured Party, and Debtor shall furnish the
Secured Party with certificates of such insurance or other evidence satisfactory
to the Secured Party as to compliance with the provisions of this paragraph.
Debtor hereby irrevocably appoints Secured Party to act (such appointment being
coupled with an interest) as attorney-in-fact for Debtor in making, adjusting
and settling claims under such policies of insurance or endorsing Debtor's name
on any drafts drawn by insurers of the Collateral or any other documents to
effect collection. In the event of any loss or damage to any of the Debtor's
assets, including the Collateral, Debtor shall give immediate written notice to
Secured Party and to Debtor's insurers of such loss or damage and shall promptly
file proofs of loss with said insurers.

(e) Debtor will notify the Secured Party in writing promptly upon its learning
of any event, condition, loss, damage, litigation, administrative proceeding or
other circumstance which may materially and adversely affect the Collateral.

(f) Debtor will keep the Collateral in good order and repair, reasonable wear
and tear excepted, will not waste or destroy the Collateral or any part thereof
and will not use the Collateral in violation of any applicable statute,
ordinance or policy of insurance thereon. The Secured Party may examine and
inspect the Collateral, the Debtor's books and records and any documents or
instruments relating to the Collateral at any reasonable time or times and,
prior to an Event of Default, upon reasonable notice wherever located.


                                      -3-
<PAGE>

(g) At its option, but without obligation to do so, the Secured Party may upon
and during the continuance of an Event of Default and with prior notice to
Debtor, discharge taxes, liens, security interests or other encumbrances at any
time levied or placed on the Collateral; may place and pay for insurance on the
Collateral; may order and pay for the repair, maintenance and preservation of
the Collateral; and may pay any fees for filing or recording such instruments or
documents as may be necessary or desirable to perfect the security interest
granted herein. The Debtor agrees to reimburse the Secured Party on demand for
any reasonable out-of-pocket payment made or expense incurred by the Secured
Party pursuant to the foregoing authorization, and all such payments and
expenses shall constitute part of the Obligations.

(h) If any part of the Collateral is a fixture, the Debtor will, on demand, use
reasonable efforts to furnish the Secured Party with a disclaimer or release
signed by all persons having an interest in the real estate or any interest in
the Collateral which is prior to the Secured Party's interest.

(i) If any account or other Collateral is ever represented or evidenced by a
promissory note, Debtor will immediately deliver such note to the Secured Party,
endorsed in such manner as Secured Party may require.

(j) At any time or times that an Event of Default has occurred, and is
continuing, Secured Party may notify any account debtors of its security
interest in accounts and collect all amounts due thereon, and the Debtor agrees,
at the request of the Secured Party, to notify in writing all or any account
debtors of the Secured Party's interest in the Collateral in whatever manner
Secured Party requests and, if Secured Party so requests, to permit the Secured
Party to mail such notices at the Debtor's expense. Until the Secured Party
shall otherwise notify the Debtor as provided herein, all proceeds of and
collections of Collateral shall be retained by the Debtor and used solely for
the ordinary and usual operation of the Debtor's business and as permitted by
the Loan Agreement. From and after such notice by the Secured Party to the
Debtor, all proceeds of and collections of the Collateral shall be held in trust
by the Debtor for the Secured Party and shall not be commingled with the
Debtor's other funds or deposited in any bank account of the Debtor and the
Debtor agrees to deliver to the Secured Party on the dates of receipt thereof by
the Debtor, duly endorsed to the Secured Party or to bearer, or assigned to the
Secured Party, as may be appropriate, all proceeds of the Collateral in the
identical form received by the Debtor.

 (k) Upon the occurrence of an Event of Default and during the continuation
thereof, Secured Party may direct account debtors to make payments directly to
the Secured Party, and to perform all acts the Debtor could take to collect on
such



                                      -4-
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accounts, including, but without limitation, the right to notify postal
authorities to change the address for delivery, open mail, endorse checks, bring
collection suits, and realize upon Collateral securing such accounts.

(l) Secured Party may from time to time after the occurrence and during the
continuance of an Event of Default without demand or notice, apply and set off
any deposit accounts of Debtor with Secured Party and any other amounts owing
from Secured Party to Debtor, against any and all Obligations even though such
Obligations be unmatured and regardless of the adequacy of security for the
Obligations.

(m) After the occurrence and during the continuance of an Event of Default,
Debtor hereby irrevocably constitutes and appoints the Secured Party as the
Debtor's true and lawful attorney, with full power of substitution, at the sole
cost and expense of the Debtor but for the sole benefit of the Secured Party, to
convert the Collateral into cash, including, without limitation, completing the
manufacture or processing of work in process, and the sale (either public or
private) of all or any portion or portions of the Inventory and other
Collateral: to enforce collection of the Collateral, either in its own name or
in the name of the Debtor, including, without limitation, executing releases,
compromising or settling with any account debtors and prosecuting, defending,
compromising or releasing any action relating to the Collateral, to receive,
open and dispose of all mail addressed to the Debtor and to take therefrom any
remittances or proceeds of Collateral in which the Secured Party has a security
interest, to notify Post Office authorities to change the address for delivery
of mail addressed to the Debtor to such address as the Secured Party shall
designate, to endorse the name of the Debtor in favor of the Secured Party upon
any and all checks, drafts, money orders, notes, acceptances or other
instruments of the same or different nature: to sign and endorse the name of the
Debtor on and to receive as secured party any of the Collateral, any invoices,
schedules of Collateral, freight or express receipts, or bills of lading,
storage receipts, warehouse receipts, or other documents of title of the same or
different nature relating to the Collateral; to sign the name of the Debtor on
any notice to the Debtors or on verification of the Collateral, and to sign and
file or record on behalf of the Debtor any financing or other statement in order
to perfect or protect the Secured Party's security interest. The Secured Party
shall not be obliged to do any of the acts or exercise any of the powers
hereinabove authorized, but if the Secured Party elects to do any such act or
exercise any such power, it shall not be accountable for more than it actually
receives as a result of such exercise of power, and it shall not be responsible
to the Debtor except for gross negligence, willful misconduct or bad faith. All
powers conferred upon the Secured Party by this Agreement, being coupled with an
interest, shall be irrevocable so long as any Obligation of the Debtor to the
Secured Party shall remain unpaid.


                                      -5-
<PAGE>

4.  EVENT OF DEFAULT

"Event of Default" shall have the meaning provided in the Loan Agreement.

5.  REMEDIES

Upon and after the occurrence of an Event of Default, all of the Obligations,
may, at the option of the Secured Party and without demand, notice or legal
process of any kind, be declared, and immediately shall become due and payable,
and the Secured Party shall have the following additional rights and remedies:

(a) All of the rights and remedies of a secured party under the Uniform
Commercial Code or any other applicable law or at equity, all of which rights
and remedies shall be cumulative and non-exclusive, to the extent permitted by
law, in addition to any other rights and remedies contained in this Security
Agreement or in any other agreement, document or instrument evidencing,
governing or securing the Obligations.

(b) The right to (i) take possession of the Collateral, without resort to legal
process and without prior notice to Debtor, and for that purpose Debtor hereby
irrevocably appoints (such appointment being coupled with an interest) the
Secured Party its attorney-in-fact to enter upon any premises on which the
Collateral or any part thereof may be situated and remove the Collateral
therefrom, or (ii) require the Debtor to assemble the Collateral and make it
available to Secured Party in a place designated by the Secured Party which is
reasonably convenient to Debtor and Secured Party. The Debtor shall make
available to the Secured Party all premises, locations and facilities necessary
for the Secured Party's taking possession of the Collateral or for removing or
putting the Collateral in salable form.

(c) The right to sell or otherwise dispose of all or any part of the Collateral
by public or private sale or sales. Unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Secured Party will give the Debtor at least seven (7)
days' prior written notice of the time and place of any public sale thereof or
of the time after which any private sale or any other intended disposition
(which may include, without limitation, a public sale or lease of all or part of
the Collateral) is to be made. The Debtor agrees that seven (7) days is a
reasonable time for such notice. The Secured Party, its employees, attorneys and
agents may bid and become purchasers at any such sale, if public, and may
purchase at any private sale any of the Collateral that is of a type customarily
sold on a recognized market or which is subject to widely distributed standard
price quotations. Any public or private sale shall be free from any right of
redemption which the Debtor waives and releases. If there is a deficiency after
such



                                      -6-
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sale following the application of the net proceeds from such sale, the Debtor
shall be responsible for the same, with interest at the highest rate permitted
by law.

6.  WAIVERS

DEBTOR AND SECURED PARTY IRREVOCABLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY
PROCEEDINGS HEREAFTER INSTITUTED BY OR AGAINST THE DEBTOR OR THE SECURED PARTY
IN RESPECT OF THIS AGREEMENT, ANY DOCUMENT, INSTRUMENT OR AGREEMENT EVIDENCING,
GOVERNING OR SECURING THE OBLIGATIONS HEREBY SECURED OR THE COLLATERAL.

FURTHER, DEBTOR WAIVES NOTICE OF NON-PAYMENT, DEMAND, PRESENTMENT, PROTEST OR
NOTICE OF PROTEST OF THE COLLATERAL AND ALL OTHER NOTICES, CONSENTS TO ANY
RENEWALS OR EXTENSIONS OF TIME OF PAYMENT THEREOF AND GENERALLY WAIVES ANY AND
ALL SURETYSHIP DEFENSES AND DEFENSES IN THE NATURE THEREOF.

7.  GENERAL

(a) Secured Party shall have the unrestricted right from time to time to apply
(or to change any application already made) the proceeds of any of the
Collateral to any Obligations, as the Secured Party, in its sole discretion, may
determine.

(b) No waiver by the Secured Party of any Event of Default shall be effective
unless in writing nor operate as a waiver of any other Event of Default or of
the same Event of Default on a future occasion, nor shall the failure or delay
of the Secured Party to exercise, or the partial exercise of, any right, power
or privilege provided for hereunder in any circumstances preclude the full
exercise of such right, power or privilege in the same or similar circumstances
in the future or the exercise of any other right or remedy.

(c) This Security Agreement is intended as the final, complete and exclusive
statement of the provisions contained in this Security Agreement. No amendment,
modification, termination or waiver of any provision of this Security Agreement
or consent to any departure by the Debtor therefrom shall, in any event, be
effective unless the same shall be in writing and signed by the Secured Party.
Any waiver of, or consent to any departure from, any provision of this Security
Agreement shall be effective only in the specific purpose for which it is given,
and shall not be deemed to extend to similar situations or to the same situation
at a subsequent time. No notice to or demand upon the Debtor shall in any case
entitle Debtor to any other or further notice or demand in similar or other
circumstances.


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<PAGE>

(d) All rights of the Secured Party hereunder shall inure to the benefit of its
successors and assigns, and all obligations of the Debtor shall bind the
successors and assigns of Debtor.

(e) Debtor will pay to the Secured Party on demand any and all costs and
expenses, including reasonable attorney's fees and expenses relating to the
appraisal and/or valuation of assets and all costs and expenses incurred or paid
by the Secured Party in establishing, exercising, collecting, defending,
preserving, protecting, administering or enforcing its rights in the Collateral
or under any of the Obligations.

(f) This Security Agreement and the security interest created hereby shall be
governed by and construed in accordance with the laws of the The Commonwealth of
Massachusetts.

(g) Whenever possible, each provision of this Security Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Security Agreement shall to any extent be held
invalid or unenforceable, then only such provision shall be deemed ineffective
and the remainder of this Security Agreement shall not be affected thereby.

(h) Debtor will execute and deliver to the Secured Party any writings and do all
things reasonably necessary, to carry into effect the provisions and intent of
this Agreement, or to vest more fully in or assure to the Secured Party
(including, without limitation, all steps to create and perfect) the security
interest in the Collateral granted to the Secured Party by this Agreement or to
comply with applicable statute or law and to facilitate the collection of the
Collateral.

         IN WITNESS WHEREOF, Debtor has duly authorized and executed this
Agreement as a sealed agreement as of the date first above written.


                                        DEBTOR:

                                        THE BIRCH POND GROUP, INC.

                                        By:   /s/ Dennis J. Adomaitis
                                             -------------------------------
                                        Name:     Dennis J. Adomaitis
                                             -------------------------------
                                        Title:    President
                                              ------------------------------




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                                   SCHEDULE A
                                       to
                               SECURITY AGREEMENT


DEBTOR, DEBTOR'S ADDRESS:

The Birch Pond Group, Inc.
4 Batterymarch Park
Quincy, MA 02169




COLLATERAL:

All of the following property of Debtor, wherever located and whether now
existing or hereafter created or acquired:

All equipment as defined in the Uniform Commercial Code ("UCC"), including all
machinery, tools, parts, furniture, furnishings, trade fixtures, and motor
vehicles, and additions and accessions thereto and substitutions and
replacements therefor;

All "inventory", as defined in the UCC, including raw materials, work in
process, finished goods, and all goods held for sale or lease or to be furnished
under contacts for service or which have been so furnished, and materials used
or consumed or to be used or consumed in the business of the Debtor;

All "accounts", as defined in the UCC, including all rights of payment for goods
sold or leased or services rendered, all rights of payment under contracts
whether or not currently due or not yet earned by performance, all other
obligations and amounts of every kind and nature owing to the Debtor, including
all rights the Debtor may have or acquire for securing or enforcing the
foregoing;

All "general intangibles", as defined in the UCC, including goodwill, trade
secrets, computer programs, customer lists, trade names, trademarks, copyrights,
franchises, licenses, patents, income tax refunds, and choses in action;

All "chattel paper" as defined in the UCC;

All "documents", as defined in the UCC, and all instruments, as defined in the
UCC, whether or not negotiable;


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All books and records relating to any of the property described herein;

All "deposit accounts" as defined in the UCC, and all other accounts maintained
by the Debtor with any bank, trust company, investment firm or fund or any
similar institution or organization;

All "investment property" as defined in the UCC including all stocks and other
securities, rights in and to brokerage and other security accounts, and rights
and entitlements to securities, and all other property in the nature of
investment property;

Any deposits, credits, collateral or property of the Debtor at any time now or
hereafter in the possession, custody, safekeeping or control of the Secured
Party;

All products, accessions, and proceeds, including insurance and condemnation
proceeds, of any of the foregoing.



<PAGE>


                                   SCHEDULE B
                                       to
                               SECURITY AGREEMENT





                         ADDITIONAL COLLATERAL LOCATIONS





                      OWNER AND DESCRIPTION OF REAL ESTATE





<PAGE>


                                   SCHEDULE A
                                       to
                               FINANCING STATEMENT


DEBTOR, DEBTOR'S ADDRESS:                 SECURED PARTY, SECURED PARTY'S ADDRESS

The Birch Pond Group, Inc.                Citizens Bank of Massachusetts
4 Batterymarch Park                       28 State Street
Quincy, MA 02169                          Boston, MA 02109




COLLATERAL:

All of the following property of Debtor, wherever located and whether now
existing or hereafter created or acquired:

All equipment as defined in the Uniform Commercial Code ("UCC"), including all
machinery, tools, parts, furniture, furnishings, trade fixtures, and motor
vehicles, and additions and accessions thereto and substitutions and
replacements therefor;

All "inventory", as defined in the UCC, including raw materials, work in
process, finished goods, and all goods held for sale or lease or to be furnished
under contracts for service or which have been so furnished, and materials used
or consumed or to be used or consumed in the business of the Debtor;

All "accounts", as defined in the UCC, including all rights of payment for goods
sold or leased or services rendered, all rights of payment under contracts
whether or not currently due or not yet earned by performance, all other
obligations and amounts of every kind and nature owing to the Debtor, including
all rights the Debtor may have or acquire for securing or enforcing the
foregoing:

All "general intangibles", as defined in the UCC, including goodwill, trade
secrets, computer programs, customer lists, trade names, trademarks, copyrights,
franchises, licenses, patents, income tax refunds, and choses in action;

All "chattel paper" as defined in the UCC;

All "documents", as defined in the UCC, and all instruments, as defined in the
UCC, whether or not negotiable;


<PAGE>

All books and records relating to any of the property described herein;

All "deposit accounts" as defined in the UCC, and all other accounts maintained
by the Debtor with any bank, trust company, investment firm or fund or any
similar institution or organization;

All "investment property" as defined in the UCC including all stocks and other
securities, rights in and to brokerage and other security accounts, and rights
and entitlements to securities, and all other property in the nature of
investment property;

Any deposits, credits, collateral or property of the Debtor at any time now or
hereafter in the possession, custody, safekeeping or control of the Secured
Party;

All products, accessions, and proceeds, including insurance and condemnation
proceeds, of any of the foregoing.