SEVERANCE AGREEMENT AND GENERAL RELEASE

Exhibit 10.1

SEVERANCE AGREEMENT AND GENERAL RELEASE

FINLAY FINE JEWELRY CORPORATION, its parent corporation, affiliates, subsidiaries, successors, assigns, current and former employees, directors and agents (collectively "Finlay") and JOSEPH MELVIN, whose address is 133 Stephen Mather Road, Darien, CT 06820, hereby agree that:

1.           Your employment has terminated effective August 14, 2009 (the "Termination Date").  You have been paid your salary earned through the Termination Date in accordance with Finlay's regular payroll cycle (unless otherwise required by local law).

2.           Under Finlay's regular policies, you are eligible:

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

b.           To receive payment for your accrued but unused vacation and personal days.

c.           If you are currently enrolled in Finlay's health insurance plans, to continue such health insurance coverage in accordance with COBRA, for a minimum of eighteen (18) months from the Termination Date, upon payment of the full applicable premiums.  You have received under separate cover more detailed information regarding insurance benefits under COBRA.  Nothing contained in this Severance Agreement and General Release (the "Agreement and Release") is intended to impair any of these rights.

3.           In consideration for signing this Agreement and Release, in lieu of any other severance, retention or bonus payments to which you might otherwise be entitled under Finlay’s regular policies, commencing on Finlay's regular pay date immediately following the last to occur of your execution of this Agreement and Release, the Termination Date and the Employee Irrevocability Date, you will receive, in six (6) installments, severance pay totaling twelve (12) weeks’ salary (i.e. $107,320.62), less applicable taxes and other withholding.

Notwithstanding anything herein to the contrary, the payment of any benefits hereunder in excess of two (2) months’ base salary (the “Mitigated Benefits”) shall be reduced by an amount equal to the gross amounts you received or earned as compensation, profits or otherwise from your employment or engagement in any business or activity with Finlay (excluding any investment income or capital gains) with respect to the same period for which such Mitigated Benefits are payable (“Other Income”).  As a condition to receipt of payment of the Mitigated Benefits, you shall, no later than seven (7) days prior to the date such payment is due, certify in writing to the Senior Vice President, Human Resources of Finlay, all amounts of Other Income earned by you during the preceding payroll period so that the appropriate offsets can be made.

You understand and agree that you would not receive the payment specified in this section "3" above, except for your execution of this Agreement and Release and the fulfillment of the promises contained herein.

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

You affirm that you have been paid and/or received all compensation, wages, bonuses, commission, and/or benefits, to which you may be entitled and that no other compensation, wages, bonuses, commissions and/or benefits are due to you except as provided in this Agreement and Release.

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

b.   In consideration of the terms hereof, you hereby agree and forever waive any claims you may have for re-employment by Finlay.

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

7.           You agree not to disclose any information regarding the existence or substance of this Agreement and Release, except to an attorney with whom you choose to consult regarding your consideration of this Agreement and Release, your spouse/life partner or your tax advisor.

8.           You knowingly and voluntarily release and forever discharge Finlay, of and from any and all claims, known and unknown, which against Finlay you and your heirs, executors, administrators, successors and assigns (referred to collectively throughout this Agreement and Release as "you") have or may have as of the date of execution of this Agreement and Release, including, but not limited to, any alleged violation of:

9.           You affirm that you have not filed, caused to be filed or are presently a party to any claim, complaint, or action against Finlay in any form or forum.  You furthermore affirm that you have no known workplace injuries.

10.           You understand that if this Agreement and Release were not signed, you would have the right to voluntarily assist other individuals or entities in bringing claims against Finlay.  You hereby waive that right and you will not provide any such assistance other than assistance in an investigation or proceeding conducted by an agency of the United States government.  Moreover, you shall not be entitled to receive any relief, recovery or monies, including attorneys' fees, in connection with any complaint or charge brought against Finlay, without regard as to who brought any said complaint or charge.

11.           You acknowledge that you returned to Finlay on the Termination Date, your keys, identification and any other e