Document:

AMENDED AND RESTATED SECURITY AGREEMENT

     AMENDED AND RESTATED  SECURITY  AGREEMENT (this  "Agreement"),  dated as of
March 30, 2001, between FINLAY FINE JEWELRY CORPORATION,  a Delaware corporation
("Finlay"),  eFINLAY, INC., a Delaware corporation ("eFinlay" and, together with
Finlay and such other  Subsidiaries of Finlay which may from time to time become
party hereto, the "Companies"),  and SOVEREIGN BANK (successor to Fleet National
Bank, f/k/a BankBoston, N.A., f/k/a The First National Bank of Boston, successor
to Rhode Island Hospital Trust National Bank) ("Sovereign"),  a national banking
association  (hereinafter,  in such capacity,  the "Agent") for itself and other
banking institutions (hereinafter,  collectively,  the "Institutions") which are
or may become parties to an Amended and Restated Gold  Consignment  Agreement of
even date herewith (as amended,  restated or modified and in effect from time to
time, the "Consignment  Agreement"),  among the Companies,  the Institutions and
the Agent.

     WHEREAS,  Finlay entered into a Gold Consignment Agreement dated as of June
15,  1995 (as  amended or  otherwise  modified  and in effect  from time to time
immediately  prior to the date hereof,  the "Original  Consignment  Agreement"),
with Sovereign, pursuant to which Sovereign, subject to the terms and conditions
contained  therein,  agreed  to make  Purchases  and  Consignments  (as  defined
therein) to Finlay;

     WHEREAS, Finlay entered into a Security Agreement dated as of June 15, 1995
(as amended or otherwise  modified  and in effect from time to time  immediately
prior to the  date  hereof,  the  "Original  Finlay  Security  Agreement")  with
Sovereign,  pursuant to which Finlay provided  collateral security to secure the
due and prompt payment and  performance of all of its Obligations (as defined in
the Original Consignment Agreement);

     WHEREAS,  eFinlay entered into the eFinlay Guaranty,  dated as of September
29,  2000 (as  amended or  otherwise  modified  and in effect  from time to time
immediately  prior to the date hereof,  the "eFinlay  Guaranty") with Sovereign,
pursuant to which eFinlay  guaranteed all of the  Obligations (as defined in the
Original Consignment Agreement);

     WHEREAS,  eFinlay entered into the eFinlay  Security  Agreement dated as of
September 29, 2000 (as amended or otherwise  modified and in effect from time to
time  immediately  prior to the date  hereof,  the  "Original  eFinlay  Security
Agreement")  with  Sovereign,  pursuant  to which  eFinlay  provided  collateral
security  to secure the due and prompt  payment and  performance  of the eFinlay
Guaranty;

     WHEREAS,  Finlay and eFinlay have entered into the  Consignment  Agreement,
pursuant to which Finlay, eFinlay, the Agent and the Institutions have

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amended and restated the Original  Consignment  Agreement in its  entirety,  and
pursuant  to which the  Agent,  subject  to the terms and  conditions  contained
therein,  agrees to make  Purchases  and  Consignments  (as defined  therein) to
Finlay and eFinlay on behalf the Institutions;

     WHEREAS,  it is a condition  precedent to the Agent's  making any Purchases
and Consignments to Finlay and eFinlay under the Consignment Agreement on behalf
of the  Institutions  that  Finlay and eFinlay  amend and  restate the  Original
Finlay Security  Agreement and the Original eFinlay Security  Agreement in order
to confirm and continue the provision of  collateral  security to secure the due
and prompt payment and performance of all of Finlay's and eFinlay's  Obligations
(as defined in the Consignment Agreement, the "Obligations"); and

     WHEREAS, each Company (including,  without limitation,  Finlay and eFinlay)
wishes to grant security interests in favor of the Agent, for the benefit of the
Institutions and the Agent, as herein provided;

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

     1. Definitions. All capitalized terms used herein without definitions shall
have the respective meanings provided therefor in the Consignment Agreement. All
terms  defined  in  the  Uniform   Commercial   Code  of  the   Commonwealth  of
Massachusetts  and  used  herein  shall  have  the same  definitions  herein  as
specified therein.

     2. Grant of Security Interest.

          2.1.  Collateral  Granted.  Subject to the terms and provisions of the
     Intercreditor  Agreement,  each Company hereby grants to the Agent, for the
     benefit of the  Institutions  and the  Agent,  to secure  the  payment  and
     performance in full of all of the Obligations,  a security  interest in and
     so pledges  and assigns to the Agent,  for the benefit of the  Institutions
     and the Agent, the following properties, assets and rights of such Company,
     wherever located,  whether now owned or hereafter acquired or arising,  and
     all proceeds and products thereof (all of the same being hereinafter called
     the "Collateral"):

               All  Specified  Gold  Jewelry,  the Cash  Collateral  Account (as
          defined in the Cash Collateral Agreement),  all sums from time to time
          in the Cash  Collateral  Account and all Time  Deposits (as defined in
          the Cash Collateral Agreement).

          2.2.  Delivery of Instruments,  etc.  Pursuant to the terms hereof and
     subject  to the terms of the  Intercreditor  Agreement,  each  Company  has
     endorsed,   assigned  and   delivered  to  the  Agent  all   negotiable  or
     non-negotiable

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     instruments,  certificated  securities  and  chattel  paper  pledged  by it
     hereunder,  together  with  instruments  of  transfer  or  assignment  duly
     executed  in blank as the Agent may have  specified.  In the event that any
     Company  shall,  after  the  date  of this  Agreement,  acquire  any  other
     negotiable  or  non-negotiable  instruments,   certificated  securities  or
     chattel paper to be pledged by it hereunder,  such Company shall  forthwith
     endorse,  assign and  deliver  the same to the Agent,  accompanied  by such
     instruments  of transfer or assignment  duly executed in blank as the Agent
     may from time to time specify.

          2.3. Cash Collateral Agreement.  Concurrently herewith each Company is
     also  executing and delivering to the Agent the Cash  Collateral  Agreement
     pursuant to which each Company is granting a security  interest in favor of
     and  pledging  to the Agent,  for the benefit of the  Institutions  and the
     Agent,  certain  Collateral  consisting of the Cash Collateral  Account (as
     defined therein), all sums from time to time in the Cash Collateral Account
     and all Time  Deposits (as defined  therein).  The  provisions  of the Cash
     Collateral  Agreement are supplemental to the provisions of this Agreement,
     and nothing contained in the Cash Collateral  Agreement shall derogate from
     any of the  rights  or  remedies  of the  Agent or any of the  Institutions
     hereunder. Nor shall anything contained in the Cash Collateral Agreement be
     deemed to prevent or extend the time of  attachment  or  perfection  of any
     security interest in such Collateral created hereby.

     3. Title to Collateral,  etc. Subject to the provisions of ss.2.1(c) of the
Consignment  Agreement,  the Companies are the owner of the Collateral free from
any  adverse  lien,  security  interest  or other  encumbrance,  except  for the
security  interest  created by this  Agreement and other liens  permitted by the
Consignment Agreement.  None of the Collateral  constitutes,  or is the proceeds
of, "farm products" as defined in ss.9-109(3) of the Uniform  Commercial Code of
the Commonwealth of Massachusetts. None of the account debtors in respect of any
accounts,  chattel  paper or general  intangibles  and none of the  obligors  in
respect  of  any  instruments  included  in  the  Collateral  is a  governmental
authority subject to the Federal Assignment of Claims Act.

     4. Continuous Perfection. Each Company's place of business or, if more than
one,  chief  executive  office  is  indicated  on  the  Perfection  Certificates
delivered to the Agent herewith (the "Perfection Certificates"). No Company will
change the same, or the name,  identity or corporate structure of any Company in
any manner,  without providing at least thirty (30) days prior written notice to
the Agent. The Collateral,  to the extent not delivered to the Agent pursuant to
ss.2.2 or the Cash Collateral Agreement,  will be kept at those locations listed
on the Perfection  Certificates  and no Company will remove the Collateral  from
such locations, without providing at least thirty (30) days prior written notice
to the Agent (or, to the extent that the giving of such prior written  notice is
impracticable,  as soon as is  practicable,  but in any  event not less than ten
(10) days prior written notice).

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     5. No Liens.  Except for the  security  interest  herein  granted and liens
permitted by the Consignment Agreement,  the Companies shall be the owner of the
Collateral free from any lien, security interest or other encumbrance,  and each
Company  shall  defend the same against all claims and demands of all persons at
any time claiming the same or any interests  therein adverse to the Agent or any
of the Institutions.  No Company shall pledge,  mortgage or create, or suffer to
exist a security  interest in the  Collateral  in favor of any person other than
the Agent, for the benefit of the  Institutions and the Agent,  except for liens
permitted by the Consignment Agreement or the Intercreditor Agreement.

     6. No  Transfers.  No  Company  will  sell or  offer  to sell or  otherwise
transfer the  Collateral  or any  interest  therein  except for,  subject to the
provisions of the Consignment Agreement, sales of assets to the extent permitted
by the Consignment Agreement.

     7. Insurance.

          7.1.  Maintenance  of  Insurance.  Each  Company  will  maintain  with
     financially  sound and responsible  insurers  insurance with respect to its
     properties and business against such casualties and  contingencies as shall
     be in accordance  with general  practices of businesses  engaged in similar
     businesses in similar  geographic  areas.  Such insurance  shall be in such
     minimum  amounts that such  Company  will not be deemed a co-insurer  under
     applicable insurance laws,  regulations and policies and otherwise shall be
     in such  amounts,  contain  such  terms,  be in such  forms and be for such
     periods as may be reasonably  satisfactory to the Agent.  In addition,  all
     such  insurance  with respect to Specified Gold Jewelry shall be payable to
     the Agent for the benefit of the  Institutions  and the Agent as additional
     insured (with respect to liability  insurance policies) or loss payee under
     a  "standard"  or "New York" loss payee  clause  (with  respect to property
     insurance  policies)  as its  interests  may appear.  Without  limiting the
     foregoing,  each Company will (i) keep all of its physical property insured
     with casualty or physical  hazard  insurance on an "all risks" basis,  with
     broad form flood and earthquake  coverages and electronic  data  processing
     coverage,  with a full  replacement cost endorsement and an "agreed amount"
     clause  in an  amount  equal to 100% of the full  replacement  cost of such
     property, (ii) maintain all such workers' compensation or similar insurance
     as may  be  required  by law  and  (iii)  maintain,  in  amounts  and  with
     deductibles  equal to those generally  maintained by businesses  engaged in
     similar  businesses in similar  geographic areas,  general public liability
     insurance  against  claims  of  bodily  injury,  death or  property  damage
     occurring,  on,  in or  about  the  properties  of such  Company;  business
     interruption insurance; and product liability insurance.

          7.2.  Insurance  Proceeds.  The proceeds of any casualty  insurance in
     respect of any casualty loss of any of the Collateral shall, subject to the
     rights,

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     if any, of other  parties  with a prior  interest in the  property  covered
     thereby,  (i) so long as no Default or Event of Default has occurred and is
     continuing  and to the extent that the amount of such proceeds is less than
     $50,000,  be  disbursed  to the  Companies  for direct  application  by the
     Companies solely to the repair or replacement of the Companies' property so
     damaged or destroyed  and (ii) in all other  circumstances,  be held by the
     Agent as cash  collateral for the  Obligations.  The Agent may, at its sole
     option, disburse from time to time all or any part of such proceeds so held
     as cash  collateral,  upon  such  terms  and  conditions  as the  Agent may
     reasonably prescribe, for direct application by the Companies solely to the
     repair or replacement  of the Companies'  property so damaged or destroyed,
     or the Agent may apply all or any part of such proceeds to the  Obligations
     with the Total  Commitment  (if not then  terminated)  being reduced by the
     amount so applied to the Obligations.

          7.3.  Notice of  Cancellation,  etc. All  policies of insurance  shall
     provide for at least thirty (30) days prior written  cancellation notice to
     the Agent.  In the event of failure by any Company to provide and  maintain
     insurance as herein  provided,  the Agent may, at its option,  provide such
     insurance  and charge the amount  thereof to the  Companies.  The Companies
     shall,  in accordance with the  requirements of the Consignment  Agreement,
     furnish  the  Institution  with  certificates  of  insurance  and  policies
     evidencing compliance with the foregoing insurance provision.

     8.  Maintenance of Collateral;  Compliance with Law. Each Company will keep
the  Collateral  in good order and repair and will not use the same in violation
of law or any policy of  insurance  thereon.  Subject to the  provisions  of the
Consignment Agreement, the Agent, or its designee, may inspect the Collateral at
any reasonable time,  wherever located. In accordance with the provisions of the
Consignment  Agreement,  each  Company  will pay  promptly  when due all  taxes,
assessments,  governmental charges and levies upon the Collateral or incurred in
connection  with  the  use or  operation  of  such  Collateral  or  incurred  in
connection with this Agreement. Each Company has at all times operated, and each
Company will continue to operate, its business in compliance with all applicable
provisions  of the federal Fair Labor  Standards  Act, as amended,  and with all
applicable  provisions  of  federal,  state and local  statutes  and  ordinances
dealing with the control,  shipment,  storage or disposal of hazardous materials
or substances  except where the failure to so comply would not have a Materially
Adverse Effect.

     9. Collateral Protection Expenses; Preservation of Collateral.

          9.1.  Expenses  Incurred  by  Agent.  In  its  discretion,   upon  the
     occurrence and during the continuance of an Event of Default, the Agent may
     discharge taxes,  Liens and other encumbrances at any time levied or placed
     on any of the Collateral (to the extent such taxes,  Liens or  encumbrances
     are  required  to be  discharged  by  any  Company  under  the  Consignment

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     Agreement),  make repairs  thereto and pay any necessary  filing fees.  The
     Companies  jointly and severally agree to reimburse the Agent on demand for
     any and all expenditures so made. The Agent shall have no obligation to any
     Company to make any such expenditures, nor shall the making thereof relieve
     any Company of any default.

          9.2. Agent's  Obligations and Duties.  Anything herein to the contrary
     notwithstanding,  each Company  shall remain  liable under each contract or
     agreement  comprised in the  Collateral to be observed or performed by such
     Company  thereunder.  Neither the Agent nor any Institution  shall have any
     obligation  or liability  under any such contract or agreement by reason of
     or  arising  out of this  Agreement  or the  receipt  by the  Agent  or any
     Institution of any payment relating to any of the Collateral, nor shall the
     Agent or any  Institution  be obligated in any manner to perform any of the
     obligations  of any  Company  under or  pursuant  to any such  contract  or
     agreement,  to make inquiry as to the nature or  sufficiency of any payment
     received by the Agent or any Institution in respect of the Collateral or as
     to the  sufficiency of any performance by any party under any such contract
     or agreement,  to present or file any claim,  to take any action to enforce
     any  performance  or to collect the  payment of any amounts  which may have
     been assigned to the Agent or to which the Agent or any  Institution may be
     entitled at any time or times.  The Agent's  sole duty with  respect to the
     custody,  safe keeping and physical  preservation  of the Collateral in its
     possession,   under  ss.9-207  of  the  Uniform   Commercial  Code  of  the
     Commonwealth  of  Massachusetts  or  otherwise,  shall be to deal with such
     Collateral in the same manner as the Agent deals with similar  property for
     its own account.

     10. Settlements and Deposits.  Whether or not any Obligations are due, upon
the occurrence  and during the  continuance of a Default or an Event of Default,
the Agent may demand,  sue for,  collect,  or make any  settlement or compromise
which it deems  desirable  with  respect to the  Collateral.  Regardless  of the
adequacy of Collateral or any other security for the  Obligations,  any deposits
or other sums at any time  credited by or due from the Agent or any  Institution
to the  Company  may at any time be  applied  to or set off  against  any of the
Obligations.

     11.  Notification  to Account  Debtors and Other  Obligors.  Subject to the
terms of the Intercreditor  Agreement, if a Default or an Event of Default shall
have  occurred  and be  continuing,  each Company  shall,  at the request of the
Agent, notify account debtors on accounts, chattel paper and general intangibles
of such Company and obligors on instruments for which such Company is an obligee
of the security  interest of the Agent in any account,  chattel  paper,  general
intangible or instrument  constituting Collateral and that payment thereof is to
be made directly to the Agent or to any financial institution  designated by the
Agent as the Agent 's agent therefor,  and the Agent may itself, if a Default or
an Event of Default shall have occurred and be continuing,  without notice to or
demand upon any Company, so notify account

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debtors and obligors. Subject to the terms of the Intercreditor Agreement, after
the  making  of such a request  or the  giving  of any such  notification,  each
Company  shall hold any  proceeds of  collection  of  accounts,  chattel  paper,
general intangibles and instruments  received by such Company as trustee for the
Agent, for the benefit of the Institutions  and the Agent,  without  commingling
the same with  other  funds of any  Company  and shall turn the same over to the
Agent in the identical form received,  together with any necessary  endorsements
or assignments.  Subject to the terms of the Intercreditor  Agreement, the Agent
shall apply the proceeds of  collection  of  accounts,  chattel  paper,  general
intangibles  and  instruments  received  by the Agent to the  Obligations,  such
proceeds  to be  immediately  entered  after  final  payment  in cash or solvent
credits of the items giving rise to them.

     12. Further Assurances.  Each Company, at its own expense,  shall do, make,
execute  and deliver  all such  additional  and  further  acts,  things,  deeds,
assurances and  instruments as the Agent may reasonably  require more completely
to vest in and assure to the Agent and the Institutions  their respective rights
hereunder  or in any of  the  Collateral,  including,  without  limitation,  (i)
executing,  delivering and, where appropriate,  filing financing  statements and
continuation  statements  under the Uniform  Commercial Code, and (ii) obtaining
any necessary or  appropriate  governmental  and other third party  consents and
approvals.

     13. Power of Attorney.

          13.1.  Appointment  and Powers of  Institutions.  Each Company  hereby
     irrevocably  constitutes  and  appoints  the Agent and any officer or agent
     thereof,  with  full  power  of  substitution,   as  its  true  and  lawful
     attorneys-in-fact  with full  irrevocable  power and authority in the place
     and stead of such  Company or in the Agent's  own name,  for the purpose of
     carrying out the terms of this  Agreement,  to take any and all appropriate
     action and to execute any and all  documents  and  instruments  that may be
     necessary or desirable to accomplish  the purposes of this  Agreement  and,
     without  limiting  the  generality  of the  foregoing,  hereby  gives  said
     attorneys the power and right, on behalf of such Company, without notice to
     or assent by such Company, to do the following:

               (a) upon the occurrence  and during the  continuance of a Default
          or an Event of  Default,  subject  to the  terms of the  Intercreditor
          Agreement,  generally to sell,  transfer,  pledge,  make any agreement
          with respect to or otherwise  deal with any of the  Collateral in such
          manner  as is  consistent  with  the  Uniform  Commercial  Code of the
          Commonwealth  of  Massachusetts  and as fully and completely as though
          the Agent were the absolute owner thereof for all purposes,  and to do
          at the Companies' joint and several expense, at any time, or from time
          to time,  all acts and  things  which the  Agent  deems  necessary  to
          protect,  preserve  or realize  upon the  Collateral  and the  Agent's
          security interest

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          therein, in order to effect the intent of this Agreement, all as fully
          and  effectively  as  such  Company  might  do,   including,   without
          limitation, the execution,  delivery and recording, in connection with
          any sale or other disposition of any Collateral,  of the endorsements,
          assignments  or other  instruments  of  conveyance  or  transfer  with
          respect to such Collateral; and

               (b) to file such financing  statements with respect hereto,  with
          or without such Company's signature,  or a photocopy of this Agreement
          in  substitution  for a  financing  statement,  as the  Agent may deem
          appropriate  and to  execute  in such  Company's  name such  financing
          statements and amendments  thereto and  continuation  statements which
          may require such Company's signature.

          13.2.  Ratification by Companies. To the extent permitted by law, each
     Company hereby  ratifies all that said attorneys shall lawfully do or cause
     to be done by virtue hereof. This power of attorney is a power coupled with
     an  interest  and shall be  irrevocable  so long as any  Obligations  shall
     remain outstanding and the Total Commitment shall not have been terminated.

          13.3. No Duty on Agent.  The powers  conferred on the Agent  hereunder
     are solely to protect the  interests of the Agent and the  Institutions  in
     the Collateral and shall not impose any duty upon the Agent to exercise any
     such powers.  The Agent shall be  accountable  only for the amounts that it
     actually receives as a result of the exercise of such powers and neither it
     nor  any  of  its  officers,  directors,   employees  or  agents  shall  be
     responsible  to any Company  for any act or failure to act,  except for the
     Agent's own gross negligence or willful misconduct.

     14. Remedies.  Subject to the terms of the Intercreditor  Agreement,  if an
Event of Default shall have occurred and be continuing,  the Agent may,  without
notice to or demand upon any Company,  declare this  Agreement to be in default,
and the Agent shall  thereafter have in any  jurisdiction  in which  enforcement
hereof is sought,  in addition to all other rights and remedies,  the rights and
remedies  of a secured  party  under the  Uniform  Commercial  Code,  including,
without limitation, the right to take possession of the Collateral, and for that
purpose  the Agent may, so far as the  Companies  can give  authority  therefor,
enter upon any premises on which the  Collateral  may be situated and remove the
same therefrom.  Subject to the terms of the Intercreditor  Agreement, the Agent
may in its  discretion  require  each Company to assemble all or any part of the
Collateral  at such location or locations  reasonably  convenient to the parties
within  the  state(s)  of any  Company's  principal  office(s)  or at such other
locations  reasonably  convenient  to the  parties  as the Agent may  designate.
Unless the Collateral is perishable or threatens to decline speedily in value or
is of a type  customarily sold on a recognized  market,  the Agent shall give to
the Companies at least five (5) Business  Days prior written  notice of the time
and place of any public

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sale of  Collateral  or of the time after  which any  private  sale or any other
intended  disposition is to be made. Each Company hereby  acknowledges that five
(5) Business Days prior written notice of such sale or sales shall be reasonable
notice. In addition,  each Company waives any and all rights that it may have to
a judicial  hearing in advance of the  enforcement  of any of the Agent's rights
hereunder, including, without limitation, its right following the occurrence and
during the  continuance of an Event of Default to take  immediate  possession of
the  Collateral and to exercise its rights with respect  thereto.  To the extent
that any of the  Obligations  are to be paid or performed by a person other than
the  Companies,  each  Company  waives  and  agrees  not to assert any rights or
privileges  which it may have under ss.9-112 of the Uniform  Commercial  Code of
the Commonwealth of Massachusetts.

     15. No Waiver, etc. Each Company waives demand, notice (except as expressly
provided herein or in the Consignment Agreement),  protest, notice of acceptance
of this Agreement, notice of loans made, credit extended, Collateral received or
delivered  or other action  taken in reliance  hereon and all other  demands and
notices  of any  description.  With  respect  to both  the  Obligations  and the
Collateral, each Company assents to any extension or postponement of the time of
payment or any other indulgence, to any substitution,  exchange or release of or
failure to perfect any security  interest in any Collateral,  to the addition or
release  of  any  party  or  person  primarily  or  secondarily  liable,  to the
acceptance  of partial  payment  thereon  and the  settlement,  compromising  or
adjusting  of any  thereof,  all in such manner and at such time or times as the
Agent may deem  advisable.  The Agent shall have no duty as to the collection or
protection of the Collateral or any income thereon,  nor as to the  preservation
of rights  against  prior  parties,  nor as to the  preservation  of any  rights
pertaining  thereto beyond the safe custody thereof as set forth in ss.9.2.  The
Agent  shall not be deemed to have  waived any of its  rights  upon or under the
Obligations or the Collateral  unless such waiver shall be in writing and signed
by the Required  Institutions.  No delay or omission on the part of the Agent in
exercising any right shall operate as a waiver of such right or any other right.
A waiver on any one occasion shall not be construed as a bar to or waiver of any
right on any future occasion.  All rights and remedies of the Agent with respect
to the Obligations or the Collateral,  whether  evidenced hereby or by any other
instrument  or papers,  shall be  cumulative  and may be  exercised  singularly,
alternatively, successively or concurrently at such time or at such times as the
Agent deems expedient.

     16. Marshalling. Neither the Agent nor any Institution shall be required to
marshal any present or future collateral  security (including but not limited to
this Agreement and the Collateral)  for, or other  assurances of payment of, the
Obligations  or any of them or to resort to such  collateral  security  or other
assurances of payment in any particular  order,  and all of its rights hereunder
and in respect of such collateral security and other assurances of payment shall
be cumulative and in addition to all other rights,  however existing or arising.
To the extent that it lawfully may, each

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Company  hereby  agrees  that  it  will  not  invoke  any  law  relating  to the
marshalling of collateral  which might cause delay in or impede the  enforcement
of the  Agent's  rights  under  this  Agreement  or under any  other  instrument
creating  or  evidencing  any of  the  Obligations  or  under  which  any of the
Obligations  is  outstanding  or by which any of the  Obligations  is secured or
payment thereof is otherwise  assured,  and, to the extent that it lawfully may,
each Company hereby irrevocably waives the benefits of all such laws.

     17. Proceeds of Dispositions; Expenses. Each Company shall pay to the Agent
on demand any and all reasonable expenses,  including reasonable attorneys' fees
and  disbursements,  incurred or paid by the Agent in protecting,  preserving or
enforcing the Agent's  rights under or in respect of any of the  Obligations  or
any of the Collateral.  After deducting all of said expenses, the residue of any
proceeds of collection or sale of the  Obligations or Collateral  shall,  to the
extent  actually  received in cash, be applied to the payment of the Obligations
in such order or preference as is provided in the Consignment Agreement,  proper
allowance and provision  being made for any  Obligations  not then due. Upon the
final  payment  and  satisfaction  in full of all of the  Obligations  and after
making any payments  required by Section  9-504(l)(c) of the Uniform  Commercial
Code of the Commonwealth of  Massachusetts,  any excess shall be returned to the
Companies,  and the Companies shall remain jointly and severally  liable for any
deficiency in the payment of the Obligations.

     18. Overdue Amounts. Until paid, all amounts due and payable by any Company
hereunder  shall be a debt  secured by the  Collateral  and shall bear,  whether
before or after judgment, interest at the rate of interest for overdue principal
set forth in the Consignment Agreement.

     19. Governing Law;  Consent to Jurisdiction.  THIS AGREEMENT IS INTENDED TO
TAKE EFFECT AS A SEALED  INSTRUMENT  AND SHALL BE GOVERNED BY, AND  CONSTRUED IN
ACCORDANCE  WITH, THE LAWS OF THE  COMMONWEALTH OF  MASSACHUSETTS.  Each Company
agrees that any suit for the enforcement of this Agreement may be brought in the
courts of the Commonwealth of Massachusetts or any federal court sitting therein
and consents to the  non-exclusive  jurisdiction of such court and to service of
process in any such suit being made upon such Company by registered or certified
mail  at such  Company's  Principal  Office.  Each  Company  hereby  waives  any
objection that it may now or hereafter have to the venue of any such suit or any
such court or that such suit is brought in an inconvenient court.

     20.  Waiver of Jury Trial.  EACH OF THE AGENT AND EACH  COMPANY  WAIVES ITS
RIGHT TO A JURY TRIAL WITH  RESPECT  TO ANY ACTION OR CLAIM  ARISING  OUT OF ANY
DISPUTE IN CONNECTION WITH THIS AGREEMENT,  ANY RIGHTS OR OBLIGATIONS  HEREUNDER
OR THE  PERFORMANCE OF ANY SUCH RIGHTS OR  OBLIGATIONS.  Except as prohibited by
law, each Company waives

<PAGE>

                                      -11-

any right which it may have to claim or recover in any litigation referred to in
the preceding sentence any special, exemplary, punitive or consequential damages
or any damages other than, or in addition to, actual  damages.  Each Company (i)
certifies  that  neither the Agent or any  Institution  nor any  representative,
agent or attorney of the Agent or any Institution has represented,  expressly or
otherwise,  that  the  Agent  or any  Institution  would  not,  in the  event of
litigation, seek to enforce the foregoing waivers and (ii) acknowledges that, in
entering into the Consignment  Agreement and the other Consignment  Documents to
which the Agent or any  Institution is a party,  the Agent and the  Institutions
are relying upon, among other things, the waivers and  certifications  contained
in this ss.20.

     21.  Concerning  Revised  Article 9 of the  Uniform  Commercial  Code.  The
parties  acknowledge and agree to the following  provisions of this Agreement in
anticipation of the possible  application,  in one or more  jurisdictions to the
transactions  contemplated  hereby,  of the  revised  Article  9 of the  Uniform
Commercial  Code in the  form  or  substantially  in the  form  approved  by the
American Law Institute and the National  Conference of  Commissioners on Uniform
State Law and contained in the 1999 official text of Revised Article 9 ("Revised
Article 9").

          21.1.  Attachment.  In applying the law of any  jurisdiction  in which
     Revised  Article 9 is in  effect,  the  Collateral  is all  Specified  Gold
     Jewelry,  the Cash  Collateral  Account (as defined in the Cash  Collateral
     Agreement),  all sums from time to time in the Cash Collateral  Account and
     all Time Deposits (as defined in the Cash  Collateral  Agreement),  in each
     case whether or not within the scope of Revised Article 9.

          21.2. Perfection by Filing. The Agent may at any time and from time to
     time,  pursuant to the  provisions  of ss.13,  file  financing  statements,
     continuation statements and amendments thereto that describe the Collateral
     of each Company and which contain any other information  required by Part 5
     of Revised Article 9 for the sufficiency or filing office acceptance of any
     financing statement, continuation statement or amendment, including whether
     any  Company  is  an  organization,   the  type  of  organization  and  any
     organization  identification  number issued to such  Company.  Each Company
     agrees to furnish any such  information to the Agent promptly upon request.
     Any such financing statements, continuation statements or amendments may be
     signed by the Agent on behalf of such  Company,  as provided in ss.13,  and
     may be filed at any time in any jurisdiction whether or not Revised Article
     9 is then in effect in that jurisdiction.

          21.3. Other  Perfection,  etc. Each Company shall at any time and from
     time  to  time,  whether  or not  Revised  Article  9 is in  effect  in any
     particular  jurisdiction,  take  such  steps as the  Agent  may  reasonably
     request  for the  Agent  (a) to  obtain  an  acknowledgement,  in form  and
     substance satisfactory to the Agent, of any bailee having possession of any
     of the

<PAGE>

                                      -12-

     Collateral  that the bailee  holds such  Collateral  for the Agent,  (b) to
     obtain   "control"   of  any   investment   property,   deposit   accounts,
     letter-of-credit   rights  or  electronic  chattel  paper  that  constitute
     Collateral   (as  such  terms  are  defined  in  Revised   Article  9  with
     corresponding  provisions  in Rev.  ss.ss.  9-104,  9-105,  9-106 and 9-107
     relating to what constitutes "control" for such items of Collateral),  with
     any   agreements   establishing   control  to  be  in  form  and  substance
     satisfactory  to the  Agent,  and (c)  otherwise  to insure  the  continued
     perfection  and  priority  of the Agent's  security  interest in any of the
     Collateral  and of the  preservation  of its  rights  therein,  whether  in
     anticipation  and following the  effectiveness  of Revised Article 9 in any
     jurisdiction.

          21.4.  Other  Provisions.  In applying the law of any  jurisdiction in
     which Revised Article 9 is in effect, the following  references to sections
     in this Agreement to existing  Article 9 of that  jurisdiction  shall be to
     the Revised Article 9 Section of that jurisdiction indicated below:

     ---------------------------------------------------------------------------
     Agreement Section         Existing Article 9       Revised Article 9
     ---------------------------------------------------------------------------
     3                         ss. 9-109(3)             Rev.ss.9-102(a)(34)
     ---------------------------------------------------------------------------
     9.2                       ss. 9-207                Rev.ss.9-207
     ---------------------------------------------------------------------------
     17                        ss. 9-504(1)(c)          Rev.ss.ss.9-608(a)(1)(C)
                                                        and 9-615(a)(3)
     ---------------------------------------------------------------------------

          21.5.  Savings  Clause.  Nothing  contained  in this  ss.21  shall  be
     construed  to narrow the scope of the Agent's  security  interest in any of
     the  Collateral  or the  perfection  or  priority  thereof  or to impair or
     otherwise  limit any of the rights,  powers,  privileges or remedies of the
     Agent or any  Institution  hereunder  except  (and then only to the extent)
     mandated by Revised Article 9 to the extent then applicable.

     22.  Miscellaneous.  The headings of each section of this Agreement are for
convenience  only and shall not  define or limit the  provisions  thereof.  This
Agreement and all rights and  obligations  hereunder  shall be binding upon each
Company  and its  respective  successors  and  assigns,  and shall  inure to the
benefit of the Agent,  the  Institutions  and their  respective  successors  and
assigns.  If any term of this Agreement shall be held to be invalid,  illegal or
unenforceable,  the  validity  of all  other  terms  hereof  shall  in no way be
affected thereby, and this Agreement shall be construed and be enforceable as if
such invalid,  illegal or unenforceable term had not been included herein.  Each
Company acknowledges receipt of a copy of this Agreement.

<PAGE>

                                      -13-

     IN WITNESS  WHEREOF,  intending to be legally bound, the Company has caused
this Agreement to be duly executed as of the date first above written.

                                  FINLAY FINE JEWELRY
                                    CORPORATION

                                  By:  /s/ Bruce Zurlnick
                                      ----------------------------------
                                      Title:  Senior Vice President, Treasurer
                                                and Chief Financial Officer

                                  eFINLAY, INC.

                                  By:  /s/ Bruce Zurlnick
                                      ----------------------------------
                                      Title:  Senior Vice President, Treasurer
                                                and Chief Financial Officer

Accepted:

SOVEREIGN BANK (successor
to Fleet National Bank, f/k/a
BankBoston, N.A., f/k/a The First
National Bank of Boston,
successor to Rhode Island
Hospital Trust National Bank),
as Agent

By:  /s/ Patricia Malerba
   --------------------------
     Title: V.P.

<PAGE>

                                      -14-

                          CERTIFICATE OF ACKNOWLEDGMENT

COMMONWEALTH OR STATE OF NEW YORK     )
                                      )  ss.
COUNTY OF NEW YORK                    )

     Before  me,  the  undersigned,  a  Notary  Public  in and  for  the  county
aforesaid,  on this  30th  day of  March,  2001,  personally  appeared  Bruce E.
Zurlnick to me known  personally,  and who, being by me duly sworn,  deposes and
says that  he/she is the Sr.  V.P.  Treasurer  and CFO of  Finlay  Fine  Jewelry
Corporation and eFinlay, Inc., and that said instrument was signed and sealed on
behalf of said corporations by authority of their Boards of Directors,  and said
Bruce E. Zurlinck  acknowledged  said  instrument to be the free act and deed of
said corporation.

                                        /s/ Bonni G. Davis
                                        ---------------------------------------
                                        Notary PublicAMENDED AND RESTATED INTERCREDITOR AGREEMENT

     This Amended and Restated Intercreditor Agreement (this "Agreement"), dated
as of March 30, 2001, is by and between  SOVEREIGN BANK  ("Sovereign  Bank"),  a
national  banking  association,  as  successor  to Fleet  National  Bank,  f/k/a
BankBoston, N.A., f/k/a The First National Bank of Boston, as successor to Rhode
Island  Hospital  Trust National Bank,  with an office at 1 West  Mezzanine,  15
Westminster  Street,  Providence,  Rhode Island 02903,  in its capacity as agent
under the Bank Agreement and the other Bank Documents  referred to below for the
Institutions  (as defined in the Bank  Agreement) and GENERAL  ELECTRIC  CAPITAL
CORPORATION,  a corporation organized under the banking laws of the State of New
York,  in its  capacity as agent under the GE Capital  Agreement  and GE Capital
Security  Documents  referred  to below with the  acknowledgment  and consent of
FINLAY FINE JEWELRY CORPORATION, a Delaware corporation, ("Finlay") and EFINLAY,
INC.,  a  Delaware  corporation   ("eFinlay"  and,  together  with  Finlay,  the
"Obligors").  The Agent (as hereinafter  defined) and GE Capital (as hereinafter
defined) shall be referred to  individually as a "Lender" and  collectively  the
"Lenders".

     WHEREAS,  Finlay,  Finlay  Enterprises,  Inc., a Delaware  corporation (the
"Parent"),  GE Capital and the financial institutions party thereto entered into
a Credit  Agreement,  dated as of May 26, 1993 as amended and  restated on March
28,  1995 and as further  amended  and  restated  as of  September  11, 1997 (as
further amended,  restated,  replaced,  renewed or refinanced from time to time,
the "GE Capital Agreement"),  pursuant to which GE Capital has agreed to advance
funds to Finlay and the Parent (collectively,  the "Borrowers") for the purposes
stated therein (the credit facility  established under the GE Capital Agreement,
the "Dollar Facility");

     WHEREAS,  to secure all present  and future  obligations  of the  Borrowers
under  or in  connection  with  the GE  Capital  Agreement  and the  other  Loan
Documents (as defined therein), including, without limitation, the "Lender Debt"
(as defined therein),  pursuant to the Security  Documents (as defined in the GE
Capital  Agreement) the Borrowers,  eFinlay,  Finlay  Jewelry,  FMBI and certain
other  subsidiaries of Finlay from time to time party to such Security Documents
(collectively,  the "Grantors") granted to GE Capital a security interest in the
property  described in such  Security  Documents as in effect on the date hereof
and all proceeds thereof (the "GE Capital Collateral");

     WHEREAS,  Rhode Island  Hospital  Trust National Bank ("Rhode Island Bank")
and Finlay entered into a Gold Consignment Agreement,  dated as of June 15, 1995
(as amended,  restated,  supplemented or modified from time to time  immediately
prior to the  effectiveness of this Agreement,  the "Original Bank  Agreement"),
pursuant to which Rhode Island Bank agreed to purchase  from and consign back to
Finlay  certain  amounts  of  Precious  Metal (as  defined  therein)  content of
Specified Gold Jewelry (as defined therein);

<PAGE>

                                      -2-

     WHEREAS,  to secure all present and future  obligations  of Finlay to Rhode
Island Bank under or in  connection  with the Original  Bank  Agreement  and the
other Consignment Documents (as defined in the Original Bank Agreement),  Finlay
granted to Rhode Island Bank a security interest in the collateral  described in
the Security  Documents  (as defined in the  Original  Bank  Agreement)  and all
proceeds thereof;

     WHEREAS,  Sovereign Bank  succeeded to the rights and  obligations of Rhode
Island Bank in respect of the Original  Bank  Agreement,  the other  Consignment
Documents  (as  defined  in  the  Original  Bank  Agreement)  and  the  Original
Intercreditor Agreement (as defined below);

     WHEREAS,  eFinlay entered into the eFinlay Guaranty,  dated as of September
29, 2000 (as  amended,  restated,  supplemented  or  modified  from time to time
immediately  prior  to  the  effectiveness  of  this  Agreement,   the  "eFinlay
Guaranty") with Sovereign Bank,  pursuant to which eFinlay guaranteed all of the
Obligations (as defined in the Original Bank Agreement);

     WHEREAS,  to secure  all  present  and  future  obligations  of  eFinlay to
Sovereign  Bank under or in connection  with the eFinlay  Guaranty and the other
Consignment  Documents  (as defined in the  Original  Bank  Agreement),  eFinlay
granted to Sovereign Bank a security interest in the collateral described in the
Security  Documents (as defined in the Original Bank Agreement) and all proceeds
thereof;

     WHEREAS,  Finlay and eFinlay  have  entered  into the Amended and  Restated
Consignment  Agreement (as amended,  restated,  replaced,  renewed or refinanced
from time to time, the "Bank  Agreement"),  of even date  herewith,  pursuant to
which Finlay,  eFinlay,  the Agent and the  Institutions (as defined in the Bank
Agreement,  the  "Institutions")  have amended and  restated  the Original  Bank
Agreement in its entirety,  and pursuant to which the Agent and the Institutions
have agreed,  subject to the terms and conditions  contained  therein,  that the
Agent will make Purchases and  Consignments  (as defined  therein) to Finlay and
eFinlay  on behalf of the  Institutions  (the  facility  created  under the Bank
Agreement, the "Gold Facility");

     WHEREAS,  Finlay and eFinlay have,  pursuant to the Security  Documents (as
defined in the Bank  Agreement,  the "Bank Security  Documents"),  confirmed and
continued the provision of  collateral  security  described in the Bank Security
Documents  as in effect on the date hereof and all  proceeds  thereof (the "Bank
Collateral")  to the Agent for the benefit of the Agent and the  Institutions to
secure all present and future obligations of Finlay and eFinlay to the Agent and
the  Institutions  under or in connection  with the Bank Agreement and the other
Consignment Documents (as defined in the Bank Agreement);

     WHEREAS,  GE Capital and Rhode Island Bank  entered  into an  Intercreditor
Agreement,  dated as of June 15, 1995 (as  amended,  restated,  supplemented  or
modified  from  time to time  immediately  prior  to the  effectiveness  of

<PAGE>

                                      -3-

this Agreement,  the "Original Intercreditor  Agreement"),  pursuant to which GE
Capital  and  Rhode  Island  Bank set  forth the  relative  priorities  of their
respective  security interests in and liens on the GE Capital Collateral and the
Bank Collateral and to establish certain other matters relating thereto;

     WHEREAS,  it is a condition  precedent to the Agent's  making any Purchases
and Consignments to Finlay and eFinlay under the Bank Agreement on behalf of the
Institutions  that GE  Capital  and the Agent  amend and  restate  the  Original
Intercreditor  Agreement (and that Finlay and eFinlay acknowledge and consent to
such amendment and restatement) in order to confirm and continue the Agent's and
GE Capital's relative  priorities of their respective  security interests in and
liens on the GE Capital  Collateral  and the Bank  Collateral  and to  establish
certain other matters relating thereto; and

     NOW, THEREFORE,  in consideration of the premises and the  representations,
warranties,  terms and  covenants  hereinafter  set forth and for other good and
valuable  consideration,  receipt of which is hereby  acknowledged,  the parties
agree as follows:

SECTION 1. DEFINITIONS.

     Section 1.1 Certain  Defined  Terms.  As used herein,  the following  terms
shall have the following meanings:

          "Agent"  shall mean, at any time,  the Agent under the Bank  Agreement
     and the Bank Security Documents at such time.

          "Applicable Percentage" shall mean 85%.

          "Approved  Vendor" shall mean an "Approved  Vendor",  (as such term is
     defined in the Bank  Agreement as in effect on the date  hereof)  listed on
     Schedule 1 hereto or of which GE Capital shall have been  supplied  written
     notice.

          "Bank  Agreement"  shall have the meaning assigned to that term in the
     preamble to this Agreement.

          "Bank  Collateral" shall have the meaning assigned to that term in the
     preamble to this Agreement.

          "Bank Documents"  shall mean the "Consignment  Documents" as such term
     is defined in the Bank Agreement, as in effect on the date hereof.

          "Bank  Obligations"  shall  mean  the  "Obligations"  as such  term is
     defined in the Bank Agreement as in effect on the date hereof.

          "Bank  Priority  Collateral"  shall mean the following  property which
     constitutes  Bank  Collateral:  (i) Specified Gold Jewelry,  (ii) Bank Sale
     Proceeds, (iii) Post Default Bank Proceeds, and (iv) Cash Deposits.

<PAGE>

                                      -4-

          "Bank Sale Proceeds"  shall have the meaning  assigned to that term in
     Section 2.1.4 hereof.

          "Bank Security Documents" shall have the meaning assigned to that term
     in the preamble to this Agreement.

          "Borrowers"  shall  have  the  meaning  assigned  to that  term in the
     preamble to this Agreement.

          "Cash  Deposits"  shall have the meaning  assigned to that term in the
     Bank Agreement as in effect on the date hereof.

          "Consignment Memo" shall mean a memorandum,  substantially in the form
     of Exhibit A hereto,  prepared by the Obligors and  pertaining  to sales of
     consignment  inventory  supplied  by an  Approved  Vendor for any  calendar
     month.

          "Default  Notice" shall mean a written notice given by the Agent to GE
     Capital and the Borrowers in accordance with Section 2.1.4 hereof.

          "Default  Period" shall have the meaning  assigned  thereto in Section
     2.1.4 hereof.

          "Dollar  Facility" shall have the meaning assigned to that term in the
     preamble to this Agreement.

          "Dollar  Value"  shall  mean,  as to any  Precious  Metal  content  of
     Specified Gold Jewelry at any time, the average (mean) of the Agent's "bid"
     and "ask" spot quotations for Precious Metal at such time.

          "eFinlay" shall have the meaning assigned to that term in the preamble
     to this Agreement.

          "eFinlay  GE Capital  Guaranty"  shall mean the  Guaranty  dated as of
     September 29, 2000,  issued by eFinlay in favor of GE Capital,  as amended,
     restated, supplemented or modified from time to time.

          "eFinlay  GE  Capital  Security  Agreement"  shall  mean the  Security
     Agreement  dated as of September 29, 2000,  between GE Capital and eFinlay,
     as amended, restated, supplemented or modified from time to time.

          "Finlay" shall have the meaning  assigned to that term in the preamble
     to this Agreement.

          "Finlay Jewelry" shall mean Finlay Jewelry, Inc.

          "FMBI" shall mean Finlay Merchandising & Buying, Inc.

<PAGE>

                                      -5-

          "GE Capital"  shall mean, at any time,  the agent under the GE Capital
     Agreement and the GE Capital Security Documents at such time.

          "GE Capital Agreement" shall have the meaning assigned to that term in
     the preamble to this Agreement.

          "GE Capital  Collateral"  shall have the meaning assigned to that term
     in the preamble to this Agreement.

          "GE Capital Loan  Documents"  shall mean the "Loan  Documents" as such
     term is  defined  in the GE  Capital  Agreement  as in  effect  on the date
     hereof, as such Loan Documents may be amended, restated,  replaced, renewed
     or refinanced from time to time.

          "GE Capital  Obligations" shall mean the "Lender Debt" as such term is
     defined in the GE Capital Agreement as in effect on the date hereof.

          "GE Capital Security Documents" shall mean the "Security Documents" as
     such term is defined in the GE Capital  Agreement  as in effect on the date
     hereof  and,  as to all  provisions  thereof  pursuant  to which a security
     interest  or lien is granted  therein,  the GE Capital  Agreement,  in each
     case,  as such  Security  Documents  and GE Capital  Agreement are amended,
     restated,  replaced,  renewed  or  refinanced  from  time to time and shall
     include without  limitation the eFinlay GE Capital Guaranty and the eFinlay
     GE Capital Security  Agreement,  and the guaranties and security agreements
     entered into by FMBI and Finlay Jewelry in favor of GE Capital.

          "GE Capital Priority Collateral" shall mean all property  constituting
     GE Capital Collateral, other than Bank Priority Collateral.

          "Grantor" shall have the meaning assigned to that term in the preamble
     to this Agreement.

          "Lien" shall mean a security interest or lien granted by any Grantor.

          "Obligors"  shall  have  the  meaning  assigned  to  that  term in the
     preamble to this Agreement.

          "Payment  Amount"  shall  mean,  for any host  store for any  calendar
     month, the amount paid by such host store in respect of such calendar month
     to an Obligor  under such host  store's  licensed  department  agreement or
     arrangement with such Obligor.

          "Post Default Bank Proceeds"  shall have the meaning  assigned to that
     term in Section 2.1.4(c) hereof.

          "Post Default Ratio" shall mean, as to any calendar month, a fraction,
     the numerator of which is the number of days in such  calendar  month which
     occurred on or following the issuance of a Default  Notice  (whether or not
     such

<PAGE>

                                      -6-

     Default  Notice was issued in such  calendar  month)  under  Section  2.1.4
     hereof  and the  denominator  of which is the total  number of days in such
     calendar month; provided,  however, that, notwithstanding the foregoing, in
     the event that a Default  Notice is issued on or after  November  15 in any
     year,  then,  and in such event,  the Post Default  Ratio for that November
     shall be .5.

          "Precious  Metal"  shall  have  the  meaning  specified  in  the  Bank
     Agreement as in effect on the date hereof.

          "Specified Gold Jewelry" shall have the meaning  assigned to that term
     in the Bank  Agreement  as in effect on the date  hereof,  and in any event
     shall not  include  any  proceeds  of  Specified  Gold  Jewelry  other than
     proceeds of casualty  insurance in respect of any loss or destruction of or
     damage to Specified  Gold  Jewelry,  which  proceeds of casualty  insurance
     shall be included.

          "Specified  Jewelry  Purchase  Price" shall mean, with respect to each
     item of  Specified  Gold  Jewelry,  the  price  paid by an  Obligor  to the
     Approved  Vendor for such item of Specified Gold Jewelry,  such price being
     currently  evidenced by the amount shown in the  Consignment  Memo for such
     Approved  Vendor as the "memo billing price" of such item of Specified Gold
     Jewelry supplied by such Approved Vendor.

          "Specified  Jewelry  Sale  Amount"  shall  mean  twice  the sum of the
     Specified Jewelry Purchase Price for all Specified Gold Jewelry sold during
     the month covered by the Payment Amount.

          "Store  Settlement  Amount"  shall  mean,  for any host  store for any
     calendar  month,  the  gross  sales  amount  (prior  to rent,  commissions,
     expenses and other  deductions)  that such store has reported to an Obligor
     for such  calendar  month  under  such host  store's  licensed  department,
     agreement or arrangement with such Obligor.

          "Store Statement" shall mean a settlement statement,  substantially in
     the form of Exhibit B hereto,  prepared by a host store in which an Obligor
     operates a licensed department.

          "Subject  Proceeds"  shall have the  meaning  assigned to that term in
     Section 2.1.4 hereof.

     Section 1.2 Other Definitional Provisions. The words "hereof", "herein" and
"hereunder"  and words of similar import when used in this Agreement shall refer
to  this  Agreement  as a  whole  and not to any  particular  provision  of this
Agreement,  and section and subsection  references are to this Agreement  unless
otherwise specified.

<PAGE>

                                      -7-

SECTION 2. TERMS, CONDITIONS AND PRIORITY OP SECURITY INTERESTS.

     Section 2.1 Security Interests of GE Capital.

          Section 2.1.1 The GE Capital  Collateral.  (a) The Agent  acknowledges
     the grant to GE Capital of the GE Capital  Collateral  and agrees that such
     grant  does not  conflict  with or cause a  default  under  any of the Bank
     Documents.  The Agent agrees not to contest the  validity,  perfection,  or
     enforceability  of any  security  interest  of GE Capital in the GE Capital
     Collateral.  The Agent consents to the execution,  delivery and performance
     by the Grantors of the GE Loan Documents,  subject to any contrary terms of
     this Agreement.

          (b)  Notwithstanding  the order or time of  attachment,  or the order,
     time or manner of perfection, or the order or time of filing or recordation
     of any documents or  instruments,  or other method of perfecting a security
     interest  in favor of GE Capital in any of the GE Capital  Collateral,  and
     notwithstanding  any conflicting terms or conditions which may be contained
     in any of the Bank  Documents  or GE Capital Loan  Documents,  the Liens in
     favor of GE Capital upon the GE Capital Priority  Collateral have and shall
     have priority over the Liens held by the Agent upon the GE Capital Priority
     Collateral  and  the  Liens  of the  Agent  upon  the GE  Capital  Priority
     Collateral  are and shall be, in all respects,  subject and  subordinate to
     the Liens held by GE Capital in the GE Capital  Priority  Collateral to the
     full extent of the GE Capital Obligations. It is understood and agreed that
     it is the intent of this  Agreement that the Agent have no Lien upon any GE
     Capital  Priority  Collateral,  except to the  extent of any Lien which the
     Agent may have on proceeds of  Specified  Gold  Jewelry  arising from sales
     thereof  during a Default  Period,  and that the relative  interests of the
     Agent and GE Capital  in such  proceeds  are  addressed  in  Section  2.1.4
     hereof.

          (c) The  priorities  established  or  confirmed  in  paragraph  (b) of
     Section 2.1.1 shall not be altered or otherwise  affected by any amendment,
     modification,  supplement, extension, renewal, restatement,  replacement or
     refinancing of the GE Capital  Agreement,  any of the other GE Capital Loan
     Documents or the Dollar  Facility,  nor by any action or inaction  which GE
     Capital or any holder of any GE Capital  Obligation  may take in connection
     therewith,  other than any action  taken in  contravention  of the terms of
     this Agreement.

          (d) As between  the Agent and GE  Capital,  GE Capital  shall have the
     exclusive right to manage,  perform and enforce the terms of the GE Capital
     Agreement  and the other GE Capital Loan  Documents  with respect to the GE
     Capital  Priority  Collateral,  to exercise and enforce all  privileges and
     rights thereunder  according to its business judgment,  including,  without
     limitation,  the exclusive right to take or retake control or possession of
     such GE Capital Priority Collateral and to hold, prepare for sale, process,
     sell,  lease,  dispose  of,  or  liquidate  any or all of such  GE  Capital
     Priority Collateral, in each case, subject to Section 2.1.4 hereof.

          (e)  Notwithstanding  anything to the  contrary  contained in the Bank
     Agreement or the other Bank Documents,  in the event of any sale,  transfer
     or disposition of any GE Capital Priority Collateral by or at the direction
     of GE

<PAGE>

                                      -8-

     Capital  while  any event of  default  under the GE  Capital  Agreement  is
     continuing  and in  furtherance by GE Capital of its rights to realize upon
     the GE Capital Priority Collateral in any case, not in contravention of the
     terms  hereof,  the Agent will,  at the request of GE Capital,  immediately
     deliver  such  release  documents  with respect to the Lien of the Agent on
     such GE Capital Priority Collateral as GE Capital may reasonably request.

          (f)  Notwithstanding  any rights or  remedies  available  to the Agent
     under any of the Bank Agreement, any other Bank Document, applicable law or
     otherwise,  so long as any GE Capital Obligations are outstanding or the GE
     Capital Agreement is in effect,  the Agent will not, directly or indirectly
     seek to foreclose or realize upon (judicially or  non-judicially)  its Lien
     on any GE Capital Priority Collateral, take any other action against the GE
     Capital Priority  Collateral or seek to assert any claim,  interest or Lien
     in the GE Capital Priority Collateral, without, in each instance, the prior
     written  consent of GE Capital.  Nothing  contained in this  paragraph  (f)
     shall  prevent  the  Agent  from  enforcing  any or all of its  rights  and
     remedies  against the Obligors under the Bank Documents or against the Bank
     Priority  Collateral,  so long as the Agent takes no action with respect to
     or against  the GE Capital  Priority  Collateral  in  contravention  of the
     immediately preceding sentence.

          Section 2.1.2 The Bank  Collateral.  (a) GE Capital  acknowledges  the
     grant to the Agent of the Bank  Collateral  and agrees that such grant does
     not  conflict  with or cause a  default  under any of the GE  Capital  Loan
     Documents.  GE Capital agrees not to contest the validity,  perfection,  or
     enforceability   of  any  security  interest  of  the  Agent  in  the  Bank
     Collateral. GE Capital consents to the execution,  delivery and performance
     by the Obligors of the Bank Agreement and the other Bank Documents, subject
     to any contrary terms of this Agreement.

          (b)  Notwithstanding  the order or time of  attachment,  or the order,
     time or manner of perfection, or the order or time of filing or recordation
     of any documents or  instruments,  or other method of perfecting a security
     interest  in  favor  of  the  Agent  in any of  the  Bank  Collateral,  and
     notwithstanding  any conflicting terms or conditions which may be contained
     in any of the GE Capital Loan Documents or the Bank Documents, the Liens in
     favor the  Agent  upon the Bank  Priority  Collateral  have and shall  have
     priority  over  the  Liens  held  by GE  Capital  upon  the  Bank  Priority
     Collateral  and the Liens of GE Capital upon the Bank  Priority  Collateral
     are and shall be, in all  respects,  subject and  subordinate  to the Liens
     held by the Agent upon the Bank  Priority  Collateral to the full extent of
     the Bank  Obligations.  The  execution  and  delivery by GE Capital of this
     Agreement shall  constitute  receipt by GE Capital of notice,  given by the
     Agent to GE Capital  pursuant to and in accordance with the requirements of
     section  9-114(b)  of the  Uniform  Commercial  Code,  with  respect to all
     present  and  future  Specified  Gold  Jewelry  which  has  been  or may be
     consigned by the Agent to the Obligors  under the Bank  Agreement,  with GE
     Capital  acknowledging  this  Agreement as notice that the Agent expects to
     deliver Consigned Precious Metal to the Obligors on consignment.

<PAGE>

                                      -9-

          (c) The  priorities  established or confirmed in paragraph (b) of this
     Section 2.1.2 shall not be altered or otherwise  affected by any amendment,
     modification,  supplement, extension, renewal, restatement,  replacement or
     refinancing  of the Bank  Agreement,  any other Bank  Document  or the Gold
     Facility,  nor by any  action  or  inaction  which  the  Agent  may take in
     connection  therewith,  other than any action taken in contravention of the
     terms of this Agreement.

          (d) As  between GE Capital  and the  Agent,  the Agent  shall have the
     exclusive  right to  manage,  perform  and  enforce  the  terms of the Bank
     Agreement  and the other Bank  Documents  with respect to the Bank Priority
     Collateral,  to exercise and enforce all privileges  and rights  thereunder
     according to its business  judgment,  including,  without  limitation,  the
     exclusive  right to take or  retake  control  or  possession  of such  Bank
     Priority  Collateral and to hold, prepare for sale,  process,  sell, lease,
     dispose of, or liquidate  any or all of such Bank Priority  Collateral,  in
     each case, subject to Section 2.1.4 hereof.

          (e)  Notwithstanding  anything  to the  contrary  contained  in the GE
     Capital  Agreement or the other GE Capital Loan Documents,  in the event of
     any sale,  transfer or disposition of any Bank Priority Collateral by or at
     the  direction  of the  Agent  while any  event of  default  under the Bank
     Agreement is continuing  and in  furtherance  by the Agent of its rights to
     realize  upon  the  Bank  Priority   Collateral,   in  any  case,   not  in
     contravention  of the terms hereof,  GE Capital will, at the request of the
     Agent,  immediately deliver such release documents with respect to the Lien
     of GE Capital on such Bank Priority  Collateral as the Agent may reasonably
     request.

          (f)  Notwithstanding  any rights or remedies  available  to GE Capital
     under any of the GE Capital Agreement,  any other GE Capital Loan Document,
     applicable  law  or  otherwise,   so  long  as  any  Bank  Obligations  are
     outstanding  or the Bank  Agreement  is in  effect,  GE  Capital  will not,
     directly or  indirectly  (except as  otherwise  provided  in Section  2.1.4
     hereof) seek to foreclose or realize upon  (judicially  or  non-judicially)
     its Lien on any Bank Priority Collateral, take any other action against the
     Bank Priority  Collateral or seek to assert any claim,  interest or Lien in
     the Bank Priority Collateral,  without, in each instance, the prior written
     consent of the Agent. Nothing contained in this paragraph (f) shall prevent
     GE Capital from enforcing any or all of its rights and remedies against the
     Grantors under the GE Capital  Agreement or against the GE Capital Priority
     Collateral,  so long as GE  Capital  takes no  action  with  respect  to or
     against the Bank Priority  Collateral in  contravention  of the immediately
     preceding sentence.

          Section  2.1.3  Default  Notices.  (a)  In the  event  that  an  event
     constituting  an  "Event  of  Default"  under  and as  defined  in the Bank
     Agreement shall be continuing,  and the Agent shall be aware of such event,
     the Agent shall give to GE Capital at its address for notices under Section
     6.3 hereof,  prompt written notice of such event;  provided,  however, that
     the failure of the Agent to give any such  written  notice shall not result
     in any  liability  of the Agent to GE Capital.  In the event that the Agent
     shall send to any Obligor any notice of the occurrence of any such Event of
     Default or requiring  redelivery of all Consigned  Precious  Metal (as such
     term is defined in the Bank  Agreement  as in effect on the date hereof) or

<PAGE>

                                      -10-

     the  immediate  payment  of the Spot  Value (as such term is defined in the
     Bank Agreement as in effect on the date hereof) of such Consigned  Precious
     Metal, or any similar notice,  the Agent shall  concurrently send a copy of
     such notice to GE Capital; provided, however, that the failure of the Agent
     to send any such notice to GE Capital  shall not result in any liability of
     the  Agent  to GE  Capital.  Nothing  contained  in this  paragraph  (a) or
     elsewhere in this Agreement shall be deemed to be a waiver by GE Capital of
     the right to receive any notice to which it is  entitled  under the Uniform
     Commercial Code or other applicable law.

          (b) In the event  that an event  constituting  an  "Event of  Default"
     under and as defined in the GE Capital  Agreement shall be continuing,  and
     GE Capital shall be aware of such event, GE Capital shall give to the Agent
     at its address for notices under Section 6.3 hereof,  prompt written notice
     of such event;  provided,  however,  that the failure of GE Capital to give
     any such written  notice shall not result in any liability of GE Capital to
     the  Agent.  In the event that GE Capital  shall send to any  Borrower  any
     notice of the  occurrence of any such Event of Default or  accelerating  or
     demanding immediate payment of the GE Capital  Obligations,  or any similar
     notice,  GE Capital  shall  concurrently  send a copy of such notice to the
     Agent;  provided,  however, that the failure of GE Capital to send any such
     notice to the Agent shall not result in any  liability of GE Capital to the
     Agent.  Nothing  contained  in  this  paragraph  (b) or  elsewhere  in this
     Agreement  shall be  deemed  to be a waiver  by the  Agent of the  right to
     receive  any notice to which it is entitled  under the  Uniform  Commercial
     Code or other applicable law.

          (c) In the event that General  Electric  Capital  Corporation  (or the
     entity most recently  identified  under this paragraph (c)) shall no longer
     be "GE  Capital"  for the  purposes  of this  Agreement,  General  Electric
     Capital  Corporation  (or the entity most  recently  identified  under this
     paragraph  (c))  shall  notify the Agent in  writing  of the  identity  and
     address  for notices of the entity so  constituting  "GE  Capital"  for the
     purposes of this Agreement.  Until so notified, the Agent may treat General
     Electric Capital  Corporation or the entity most recently  identified under
     this paragraph (c), as the case may be, as "GE Capital" for the purposes of
     this Agreement.

          (d) In the event  that  Sovereign  Bank (or the entity  most  recently
     identified under this paragraph (d)) shall no longer be the "Agent" for the
     purposes of this  Agreement,  Sovereign  Bank (or the entity most  recently
     identified  under this paragraph (d)) shall notify GE Capital in writing of
     the  identity  and address for  notices of the entity so  constituting  the
     "Agent" for the purposes of this Agreement.  Until so notified,  GE Capital
     may treat Sovereign Bank or the entity most recently  identified under this
     paragraph  (d), as the case may be, as the "Agent" for the purposes of this
     Agreement.

          Section  2.1.4  Certain  Proceeds.  Notwithstanding  anything.  to the
     contrary contained in this Agreement, from and after the time, if any, that
     the Agent shall give a notice to GE Capital,  substantially  in the form of
     Exhibit C hereto,  under this Section  2.1.4 that an Event of Default under
     the Bank Agreement is continuing,  and until such notice has been withdrawn
     in writing by the Agent (a

<PAGE>

                                      -11-

     "Default  Period"),  the following  provisions  shall apply to all proceeds
     (other than  proceeds  from sales,  exchanges  or other  dispositions  made
     directly  by the Agent or an agent  (other than an Obligor) of the Agent of
     Specified Gold Jewelry without  violation of this Agreement  (collectively,
     "Bank  Sale  Proceeds"))  of  GE  Capital  Collateral,  including,  without
     limitation, proceeds of Specified Gold Jewelry ("Subject Proceeds"):

          (a)  All  Subject  Proceeds,   including,  without  limitation,  those
     constituting Bank Priority Collateral, shall continue to be collected by GE
     Capital in  accordance  with the terms of the GE Capital  Agreement  and GE
     Capital Security Documents.

          (b) (i) GE  capital  shall  allocate  proceeds  received  from  the GE
     Capital  Collateral between proceeds of Specified Gold Jewelry and other GE
     Capital Collateral as provided in clause (c) below of this Section 2.1.4.

               (ii) The  Obligors  shall  deliver to GE Capital  such  copies of
          checks  constituting  Payment Amounts,  Store Statements,  Consignment
          Memos,  statements  regarding  the sale of Specified  Gold Jewelry and
          other  materials  as may be needed in order for GE Capital to make the
          necessary  calculations  under clause (c) below.  Subject to paragraph
          (iii)  below,  GE  Capital  shall  have  no  obligation  to  make  any
          allocation of any Payment  Amount or other  proceeds of Specified Gold
          Jewelry to the extent that it has not received  any such  information,
          and  shall not apply any such  proceeds  to any  indebtedness  pending
          making an  allocation  under  paragraph  (i) above or paragraph  (iii)
          below.

               (iii) In the  event  that GE  Capital  shall be unable to make an
          allocation  due to the failure of the Obligors to supply the necessary
          information  under this clause (b), and such inability  shall continue
          for  fifteen  (15) days  following  the  latter of the  receipt of any
          Payment Amount or other proceeds of Specified Gold Jewelry or the date
          that all information relating to such Payment Amount or other proceeds
          of Specified  Gold  Jewelry  necessary  to make the  allocation  first
          became  available  to  the  Obligors,   GE  Capital  shall  make  such
          allocations  with  respect to such  Payment  Amount or other  proceeds
          which GE Capital shall  determine in its reasonable  judgment and in a
          manner which in its reasonable  judgment is consistent  with the terms
          of this Agreement;  provided,  however,  that as to any Specified Gold
          Jewelry which the Obligors do not sell or otherwise  dispose of in the
          ordinary  course of business,  whether due to the  commencement of any
          bankruptcy  proceeding  involving an Obligor as a debtor or otherwise,
          GE Capital shall not have a right to allocate the proceeds of any such
          sale or  disposition,  and each of the Agent and GE  Capital  shall be
          entitled to claim their  respective  interests in such proceeds to the
          extent the Agent or GE  Capital,  as the case may be, is  entitled  to
          priority as to such proceeds under the terms of this Agreement.

               (iv) GE Capital  shall  promptly  account to the Agent as to each
          allocation  made by GE Capital with  respect to any Payment  Amount or

<PAGE>

                                      -12-

          other proceeds,  and in any event within three (3) business days after
          making  such  allocation,  and shall remit  proceeds  of each  Payment
          Amount or other proceeds as provided in paragraph (d) below.

               (v) The Agent shall have the right,  as to any allocation made by
          GE Capital under clause (iii) above, to contest such allocation within
          fifteen (15) days following receipt of same, and, in the event that GE
          Capital and the Agent cannot agree on such allocation  within a period
          of fifteen  (15) days  following  the date of exercise by the Agent of
          such right to contest,  then such  allocation  shall be  determined by
          binding arbitration  pursuant to an arbitration to be conducted in New
          York City under the rules and the auspices of the American Arbitration
          Association.

          (c) With  respect to sales,  exchanges  or other  dispositions  by the
     Obligors  during any calendar month of Specified  Gold Jewelry  supplied by
     each Approved  Vendor,  the Agent shall be entitled to receive,  subject to
     paragraph (b) of this Section 2.1.4,  as Post Default Bank  Proceeds,  from
     each Payment Amount or other proceeds of Specified Gold Jewelry received by
     GE Capital from each host store or otherwise  (including from purchasers of
     Specified Gold Jewelry) in respect of such calendar month, an amount ("Post
     Default Bank Proceeds") equal to:

               (I) in the case of any  Payment  Amount,  and  assuming  that the
          calculation  in this  clause (I) can be made,  the  greater of (A) the
          product of (1) the  quotient  obtained by dividing  (x) the product of
          the Specified  Jewelry Sale Amount times the Applicable  Percentage by
          (y) the Store Settlement Amount times (2) the Payment Amount times (3)
          the Post Default Ratio [an example of this  calculation is provided on
          Exhibit D hereto],  and (B) the product of (1) the number of ounces of
          gold  included  in the  Specified  Gold  Jewelry  sold,  exchanged  or
          otherwise  disposed  of during  the month  covered  by the  applicable
          Payment Amount and listed as sold,  exchanged or otherwise disposed of
          in the applicable  Consignment Memo times (2) the average "Spot Value"
          of  "Precious  Metal"  (each,  as defined in the Bank  Agreement as in
          effect on the date hereof) during the applicable  calendar month times
          (3) the Post  Default  Ratios  times (4) the ratio of (a) the  Payment
          Amount to (b) the Store Settlement Amount, or

               (II) in the case of proceeds of Specified Gold Jewelry other than
          any Payment Amount or, subject to paragraph (b) of this Section 2.1.4,
          in the event  that due to a change in the  method of  payment  for any
          sale, exchange or other disposition of Specified Gold Jewelry or other
          circumstance,   including,   without  limitation,  the  bankruptcy  or
          insolvency of one or more host stores,  the  calculation  in (I) above
          cannot  be  made,  then,  and in any such  event  (Post  Default  Bank
          Proceeds shall be) the greater of (1) the Dollar Value of the Precious
          Metal  content of the  Specified  Gold  Jewelry so sold,  exchanged or
          disposed of on the date of such sale,  exchange  or other  disposition
          and (2) eighty-five percent (85%) of that portion of such

<PAGE>

                                      -13-

          proceeds,  in each case under clauses (1) and (2), after deducting the
          cost of such sale,  exchange or other  disposition,  including the pro
          rata share of amounts,  if any, due the host store,  allocable to such
          sale, exchange or other disposition.

          (d) GE  Capital  shall  turn  over to the  Agent by wire  transfer  in
     immediately  available  funds at its  Principal  Office  (as  such  term is
     defined  in the Bank  Agreement  as in effect on the date  hereof)  or such
     other office as the Agent may specify to GE Capital in writing from time to
     time,  all  amounts  collected  by GE  Capital  in good  funds and which GE
     Capital has determined,  pursuant to the allocation provisions completed by
     GE Capital under paragraphs (b) and (c) above, constitute Post Default Bank
     Proceeds. For each day that GE Capital has not turned over to the Agent any
     Post  Default  Bank  Proceeds  which  day  occurs  after the  business  day
     immediately following the business day on which GE Capital received same in
     immediately  available  funds  whether or not an  allocation  with  respect
     thereto  has been  completed,  GE  Capital  shall  pay (on the date that GE
     Capital  makes  payment of such Post Default Bank Proceeds to the Agent) to
     the Agent  interest on such Post Default Bank Proceeds at the Federal Funds
     Effective  Rate, as such term is defined in the Bank Agreement as in effect
     on the date hereof.

          (e) So long as any GE Capital Obligations remain outstanding or the GE
     Capital  Agreement  remains in  effect,  the Agent  will not,  directly  or
     indirectly seek to foreclose or realize upon (judicially or non-judicially)
     its Lien on any Subject Proceeds, take any other action against any Subject
     Proceeds  or seek to assert  any  claim,  interest  or Lien in any  Subject
     Proceeds, other than by enforcement of its rights under this Section 2.1.4,
     without, in each instance, the prior written consent of GE Capital.

          (f) The  Agent,  at the  request  of GE  Capital  shall  furnish to GE
     Capital  such  information  concerning  the  Agent's  "bid" and "ask"  spot
     quotations  for  Precious  Metal as GE Capital  determines  it  requires to
     allocate proceeds under this Agreement.

          (g) For the  purposes of this  Section  2.1.4,  the term  business day
     means a  "Business  Day" as such term is  defined in each of the GE Capital
     Agreement and the Bank Agreement.

     Section 2.2 Payments Received by the Lenders. Subject to Section 2.1.4: (1)
should any payments or distribution or security, or the proceeds of any thereof,
be collected or received by the Agent in respect of the Bank  Obligations at any
time,  and the property  constituting  such payment,  distribution,  security or
proceeds  constitutes GE Capital Priority  Collateral,  the Agent will forthwith
turn over the same to GE Capital in the form received (except for endorsement or
the assignment by the Agent when necessary and without recourse,  representation
or

<PAGE>

                                      -14-

warranty)  and,  until so turned  over,  the same  shall be held in trust by the
Agent as the property of GE Capital; and

     (2) should any payments or distribution or security, or the proceeds of any
thereof,  be  collected  or  received by GE Capital in respect of the GE Capital
Obligations   at  any  time,  and  the  property   constituting   such  payment,
distribution,  security or proceeds  constitutes  Bank Priority  Collateral,  GE
Capital  will  forthwith  turn over the same to the  Agent in the form  received
(except for  endorsement  or the  assignment  by GE Capital when  necessary  and
without  recourse,  representation  or warranty)  and, until so turned over, the
same shall be held in trust by GE Capital as the property of the Agent.

     Section 2.3 Right to Sue.  Nothing  herein shall restrict GE Capital or the
Agent from  commencing  or  maintaining  any  judicial  proceeding  against  the
Grantors  to obtain a judgment  against the  Grantors  for all or part of the GE
Capital  Obligations or the Bank  Obligations,  respectively,  or to enforce any
such  judgment as a judgment  creditor;  provided,  however,  that any monies or
other property or the proceeds  thereof  received by a Lender which  constitutes
proceeds of the GE Capital  Priority  Collateral  or the Bank  Collateral  or is
subject to the  provisions  of  Section  2.1.4  hereof,  shall be subject to all
provisions hereof applicable thereto.

SECTION 3. REPRESENTATIONS.

     Each of GE Capital and the Agent, as to itself, represents and warrants, to
the other, as follows.

     Section 3.1. Power and Authority;  Authorization; No Violation. It has full
power, authority and legal right to execute,  deliver and perform this Agreement
and the  execution,  delivery and  performance  of this Agreement have been duly
authorized by all necessary  action on its part. This Agreement does not require
any  approval  or consent of any  trustee  or  holders  of any  indebtedness  or
obligations and will not violate any provision of law, governmental  regulation,
order or decree or any provision of any indenture,  mortgage,  contract or other
agreement entered into by it or by which it is bound.

     Section 3.2 Consents. No consent, license, approval or authorization of, or
registration or declaration with, any governmental instrumentality,  domestic or
foreign, is required in connection with the execution,  delivery and performance
of this Agreement.

     Section 3.3 Binding Obligation. This Agreement constitutes its legal, valid
and binding  obligation,  enforceable in accordance  with its terms,  subject to
bankruptcy,  insolvency,  reorganization,  moratorium  and  other  similar  laws
affecting  creditors'  rights  generally  and to the  availability  of equitable
remedies.

<PAGE>

                                      -15-

SECTION 4. MODIFICATIONS OF LENDER OBLIGATIONS; RELIANCE.

     Section 4.1 Regarding the GE Capital  Obligations.  (1) The Agent  consents
that, without the necessity of any reservation of rights against it, and without
notice to or further  assent by it, (a) any demand for payment of any GE Capital
Obligation may be rescinded,  in whole or in part, and any GE Capital Obligation
may be  continued,  and the GE  Capital  Obligations,  or the  liability  of the
Grantors  or any other  party upon or for any part  thereof,  or any  collateral
security or guaranty  therefor,  or right of offset with respect  thereto,  may,
from  time to  time,  in  whole  or in part,  be  renewed,  extended,  modified,
accelerated,  compromised,  waived,  surrendered, or released and (b) any one or
more of the GE Capital Loan Documents may be amended, modified,  supplemented or
terminated,  in whole or in part, as GE Capital may deem  advisable from time to
time, and any GE Capital  Priority  Collateral may be sold,  exchanged,  waived,
surrendered or released, in each case all without notice to or further assent by
the Agent,  which  will  remain  bound  under this  Agreement,  and all  without
impairing,  abridging, releasing or affecting the priority of interests provided
for  herein,   notwithstanding   any  such  renewal,   extension   modification,
acceleration,  compromise,  amendment, supplement,  termination, sale, exchange,
waiver, surrender or release; provided,  however, that nothing contained in this
paragraph  (1)  shall be  deemed  to  constitute  a waiver  by the  Agent of any
"Default"  or "Event of  Default"  under and as  defined  in the Bank  Agreement
arising  from any such  action.  The  Agent  waives  any and all  notice  of the
creation,  modification,  renewal, extension or accrual of any of the GE Capital
Obligations  and  notice  of or  proof  of  reliance  by GE  Capital  upon  this
Agreement,  and the GE Capital Obligations,  and any of them, shall conclusively
be deemed to have been  created,  contracted  or incurred in reliance  upon this
Agreement,  and all dealings between the Grantors and GE Capital shall be deemed
to have been consummated in reliance upon this Agreement. The Agent acknowledges
and agrees  that GE Capital has relied  upon the stated  priority  of  interests
provided for herein in making funds  available to Borrowers under the GE Capital
Agreement.

     (2) The Agent further  acknowledges that part of the GE Capital Obligations
is  indebtedness  which is revolving in nature and that the amount thereof which
may be  outstanding at any time or from time to time may be increased or reduced
and subsequently  reborrowed,  and that the terms of the GE Capital  Obligations
may be modified, extended or amended from time to time, and the aggregate amount
of the GE Capital Obligations may be increased or reduced, all without notice to
or consent by the Agent and without affecting the provisions  hereof.  The Agent
agrees  that GE Capital  shall have no  obligation  to  marshall  any GE Capital
Priority Collateral.  Nothing contained in this paragraph (2) shall constitute a
waiver by the Agent of any "Default" or "Event of Default"  under and as defined
in the Bank  Agreement  arising from any action  described in this paragraph (2)
taken by the Grantors or GE Capital.

     Section 4.2 Regarding the Bank  Obligations.  (1) GE Capital consents that,
without  the  necessity  of any  reservation  of rights  against it, and without
notice to or  further  assent by it,  (a) any  demand  for  payment  of any Bank
Obligations may be rescinded,  in whole or in part, and any Bank Obligations may
be continued, and the Bank Obligations,  or the liability of the Obligors or any
other party upon or for any part thereof, or any collateral security or guaranty
therefor,  or right of offset

<PAGE>

                                      -16-

with respect  thereto,  may, from time to time, in whole or in part, be renewed,
extended, modified, accelerated,  compromised,  waived, surrendered, or released
and  (b)  any  one or  more of the  Bank  Documents  may be  amended,  modified,
supplemented or terminated, in whole or in part, as the Agent may deem advisable
from time to time,  and any Bank  Priority  Collateral  may be sold,  exchanged,
waived,  surrendered or released,  in each case all without notice to or further
assent by GE Capital,  which will remain  bound  under this  Agreement,  and all
without impairing,  abridging,  releasing or affecting the priority of interests
provided for herein,  notwithstanding any such renewal,  extension modification,
acceleration,  compromise,  amendment, supplement,  termination, sale, exchange,
waiver, surrender or release; provided,  however, that nothing contained in this
paragraph  (1) shall be  deemed to  constitute  a waiver  by GE  Capital  of any
"Default" or "Event of Default" under and as defined in the GE Capital Agreement
arising  from any such  action.  GE  Capital  waives  any and all  notice of the
creation,  modification,  renewal,  extension  or  accrual  of any  of the  Bank
Obligations and notice of or proof of reliance by the Agent upon this Agreement,
and the Bank Obligations,  and any of them, shall conclusively be deemed to have
been created,  contracted or incurred in reliance upon this  Agreement,  and all
dealings  between  the  Obligors  and the  Agent  shall be  deemed  to have been
consummated in reliance upon this Agreement.  GE Capital acknowledges and agrees
that the Agent has relied upon the stated  priority of  interests  provided  for
herein in making gold or credit  therefor  available to the  Obligors  under the
Bank Agreement.

     (2) GE Capital further  acknowledges  that part of the Bank Obligations are
obligations  which are revolving in nature and that the amount thereof which may
be  outstanding at any time or from time to time may be increased or reduced and
subsequently  reincurred,  and that the  terms  of the Bank  Obligations  may be
modified, extended or amended from time to time, and the aggregate amount of the
Bank  Obligations may be increased or reduced,  all without notice to or consent
by GE Capital and without  affecting the  provisions  hereof.  GE Capital agrees
that  the  Agent  shall  have  no  obligation  to  marshall  any  Bank  Priority
Collateral. Nothing contained in this paragraph (2) shall constitute a waiver by
GE Capital of any "Default" or "Event of Default" under and as defined in the GE
Capital  Agreement arising from any action described in this paragraph (2) taken
by the Obligors or the Agent.

SECTION 5. TRANSFER OF LENDER OBLIGATIONS.

     Neither GE Capital nor the Agent will sell,  assign or otherwise  transfer,
in whole or in part,  any Lien on the GE Capital  Collateral  or any Lien on the
Bank  Collateral,  respectively,  to any other person or entity (a "Transferee")
unless, in any such case, such Transferee  expressly  acknowledges in writing to
GE Capital or the Agent, as the case may be, the priority and  subordination  of
interests provided for herein and agrees to be bound by all of the terms hereof.
The foregoing shall not apply to any subsequent holder of GE Capital Obligations
or Bank Obligations which is not an agent,  unless such subsequent holder is the
sole  holder of all  Obligations  under  the GE  Capital  Agreement  or the Bank
Agreement.

<PAGE>

                                      -17-

SECTION 6. MISCELLANEOUS.

     Section 6.1 No Waiver;  Cumulative Remedies. No failure by either Lender to
exercise,  and no delay  by such  Lender  in  exercising  from  time to time any
rights,  power and privileges  under its respective  Obligations,  or any right,
power or privilege under this Agreement  shall operate as a waiver thereof;  nor
shall any single or partial exercise of any right, power or privilege under this
Agreement  preclude any other or further exercise thereof or the exercise of any
other  right,  power or  privilege.  The rights and  remedies  provided  in this
Agreement and in any agreement relating to any of the GE Capital  Obligations or
Bank Obligations and all other agreements, instruments and documents referred to
in any of the foregoing are  cumulative and shall not be exclusive of any rights
or remedies provided by law.

     Section 6.2 Further  Assurances.  Each Lender agrees to execute and deliver
such  further  documents  and to do such  other acts and things as the other may
reasonably request in order fully to effect the purposes of this Agreement.

     Section 6.3 Notices. All notices,  requests and other communications to any
party hereunder shall be in writing and shall be personally delivered or sent by
registered mail, postage prepaid,  return receipt  requested,  or by a reputable
courier delivery service or, alternatively by telecopy, and shall be given,

     if to the Agent:           Sovereign Bank
                                Precious Metals
                                1 West Mezzanine
                                15 Westminster Street
                                Providence, Rhode Island 02903-2449
                                Attention:  Albert L. Brown,
                                              Senior Vice President
                                Telecopier:  (401) 752-1412

     with a copy to:            Bingham Dana LLP
                                150 Federal Street
                                Boston, Massachusetts 02110
                                Attention:  Robert A.J. Barry, Esq., or
                                            Marijane Benner Browne, Esq.
                                Telecopier: (617) 951-8228

     If to GE Capital:          General Electric Capital Corporation
                                800 Connecticut Avenue
                                Two North
                                Norwalk, Connecticut 06854
                                Attention:  Finlay Account Manager
                                Telecopier: (203) 852-3640 and
                                Attention:  John Sirico, Esq.
                                Telecopier: (203) 316-7822

     with a copy to:            Weil, Gotshal & Manges LLP

<PAGE>

                                      -18-

                                767 Fifth Avenue
                                New York, New York  10153
                                Attention:   Warren T. Buhle, Esq.
                                Telecopier: (212) 310-8007

     if to the Obligors, :      Finlay Fine Jewelry Corporation
     the Borrowers or the       529 Fifth Avenue
     Grantors                   New York, New York 10017
                                Attention:   Mr. Bruce Zurlnick
                                Telecopier:  (212) 808-2946

     with a copy to:            Blank Rome Tenzer Greenblatt LLP
                                The Chrysler Building
                                405 Lexington Avenue
                                New York, New York  10174
                                Attention:   James M. Kaplan, Esq.
                                Telecopier:  (212) 885-5047

or such other address or telecopy number as such party may hereafter  specify by
notice to GE Capital, the Agent and the Obligors.  Each such notice,  request or
other  communication  shall be  effective  (i) if given by  telecopy,  when such
telecopy is transmitted to the telecopy number specified in this Section and the
appropriate  confirmation by the recipient thereof is received, (ii) if given by
registered  mail, 72 hours after such  communication  is deposited with the post
office,  addressed  as  aforesaid  or (iii) if given by any  other  means,  when
delivered at the address specified in this Section.

     Section 6.4. GOVERNING LAW; SUCCESSORS AND ASSIGNS.  THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND  INTERPRETED IN ACCORDANCE  WITH, THE LAWS OF THE STATE OF NEW
YORK  (WITHOUT  REGARD  TO ITS  CONFLICTS  OF  LAWS  PRINCIPLES)  APPLICABLE  TO
CONTRACTS  MADE AND TO BE  PERFORMED  IN SUCH STATE,  SHALL BE BINDING  UPON AND
INURE TO THE BENEFIT OF GE CAPITAL, THE AGENT, AND THEIR RESPECTIVE  SUCCESSORS,
TRANSFEREES AND ASSIGNS.

     Section 6.5  Counterparts.  This  Agreement  may be executed by the parties
hereto in any number of separate  counterparts all of which taken together shall
constitute one and the same instrument.

     Section 6.6  Third-Party  Beneficiaries.  The terms and  provisions of this
Agreement  shall be for the sole  benefit of GE Capital  and the Agent and their
respective  successors  and  assigns.  No other  person  shall  have any  right,
benefit, or priority by reason of this Agreement.

<PAGE>

                                      -19-

     Section  6.7  Severability.  In the event  that any one or more  provisions
contained in this Agreement should for any reason be held to be invalid, illegal
or  unenforceable  in any  respect  under the laws of any  government  or by any
governmental agency, such unenforceability shall not affect any other provisions
of this Agreement. In the event that any provision hereof shall be held invalid,
illegal  or  unenforceable  the  parties  shall use all  reasonable  efforts  to
substitute a valid, legal and enforceable provision which, insofar as practical,
implements the purposes and intents hereof.

     Section 6.8 Submission to Jurisdiction. Any legal action or proceeding with
respect to this  Agreement may be brought in the courts of the State of New York
or of the United States of America for the Southern  District of New York or any
New York State court located in the Borough of Manhattan,  and, by execution and
delivery of this  Agreement  each of the Obligors and each of the Lenders hereby
respectively  accepts for itself and in respect of its  property,  generally and
unconditionally,  the jurisdiction of the aforesaid courts.  Each of the Lenders
hereby irrevocably waives, in connection with any such action or proceeding, (i)
any objection,  including,  without  limitation,  any objection to the laying of
venue or based on the  grounds  of  forum  non  conveniens,  which it may now or
hereafter  have  to the  bringing  of any  such  action  or  proceeding  in such
respective  jurisdictions,  (ii) the right to impose any setoff,  non-compulsory
counterclaim or cross-claim and (iii) trial by jury.

     Section  6.9  Termination;  Amendments,  Etc.  This  Agreement  may  not be
rescinded  or canceled or modified in any way unless  consented to in writing by
the Lenders.

<PAGE>

                                      -20-

     IN WITNESS  WHEREOF,  the parties  hereto caused this  Agreement to be duly
executed and delivered an of the day and year first above written.

                                        SOVEREIGN BANK (as successor to
                                        Fleet National Bank, f/k/a  BankBoston,
                                        N.A., f/k/a The First National Bank of
                                        Boston, as successor to Rhode Island
                                        Hospital Trust National Bank), as Agent

                                        By:  /s/ Patricia Malerba
                                           ----------------------------------
                                             Name:   Patrica Malerba
                                             Title:  V.P.

                                        GENERAL ELECTRIC CAPITAL
                                        CORPORATION, as Agent

                                        By:  /s/ Charles Chiodo
                                           ----------------------------------
                                             Name:   Charles Chiodo
                                             Title:  Authorized Signatory

Acknowledged and Agreed:

FINLAY FINE JEWELRY
CORPORATION

By:  /s/ Bruce Zurlnick
   ------------------------
Name:  Bruce Zurlnick
Title: Senior Vice President, Treasurer
         and Chief Financial Officer

EFINLAY, INC.

By:  /s/ Bruce Zurlnick
   ------------------------
Name:  Bruce Zurlnick
Title: Senior Vice President, Treasurer
         and Chief Financial Officer

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