THIRD AMENDMENT
TO THE
LILLIAN VERNON CORPORATION
PROFIT SHARING PLAN

     THIRD AMENDMENT, dated as of December 15, 2002, to the Lillian Vernon
Corporation Profit Sharing Plan, by Lillian Vernon Corporation (the “Company”).

     The Company maintains the Lillian Vernon Corporation Profit Sharing Plan,
as amended and restated effective October 1, 1997, and as subsequently amended
(the “Plan”). Pursuant to its authority under Article X of the Plan, the Company
now wishes to amend the Plan.

     This amendment of the Plan is adopted to reflect certain provisions of the
Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”) and to make
such other changes as the Company deems appropriate. This amendment is intended
as good faith compliance with the requirements of EGTRRA and is to be construed
in accordance with EGTRRA and guidance issued thereunder. Except as otherwise
provided, this amendment shall be effective as of January 1, 2002. This
amendment shall supersede the provisions of the Plan to the extent those
provisions are inconsistent with the provisions of this amendment.

     NOW, THEREFORE, the Plan is amended as follows:

     I.        Effective as of May 1, 2002, Article One is amended by adding the
following new section 1.6A:

          1.6A    Catch-Up Contribution. Amounts that are contributed to the
Plan by the Employer on behalf of a Participant in accordance with Section 3.1A
of the Plan.

     II.      Section 1.10 is amended by adding the following to the end of the
second paragraph thereof:

  For Plan Years beginning on or after January 1, 2002, the annual Compensation
of each Employee taken into account under the Plan shall not exceed the dollar
limitation contained in Code Section 401(a)(17) in effect for the Plan Year.

     III.     Section 2.2 is amended in its entirety as follows:

           2.2    Reinstatement of Eligibility Upon Rehire.

 

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       (a)     An Eligible Employee who terminates employment and who is
subsequently reemployed shall again become an Eligible Employee on the first day
of the calendar quarter following his/her reemployment date.          (b)     An
Employee who terminates employment before becoming an Eligible Employee but
after satisfying the service conditions set forth in Section 2.1, and who is
subsequently reemployed, shall become an Eligible Employee on the first day of
the calendar quarter following his/her reemployment date.          (c)     An
Employee who terminates employment before becoming an Eligible Employee and
before satisfying the service conditions set forth in Section 2.1, and who is
subsequently reemployed prior to the end of the 12-month period commencing on
his/her original employment date, shall become an Eligible Employee in
accordance with the terms of Section 2.1(a). If the Employee has not satisfied
the terms of Section 2.1(a) by the end of the 12-month period commencing on
his/her original employment date, then the terms of Section 2.1(b) shall apply.
         (d)     An Employee who terminates employment before becoming an
Eligible Employee and before satisfying the service conditions set forth in
Section 2.1, and who is subsequently reemployed after the end of the 12-month
period commencing on his/her original employment date, shall become an Eligible
Employee in accordance with the terms of Section 2.1(b).

       IV.          Section 3.1(a) is amended by replacing the second sentence
thereof in its entirety as follows:

  No Participant shall be permitted to have Pre-tax Contributions made under
this Plan, or any other qualified plan maintained by the Employer during any
calendar year, in excess of the dollar limitation contained in Code
Section 402(g) in effect for such calendar year, except to the extent permitted
under Section 3.1A of the Plan and Code Section 414(v).

       V.            Effective as of May 1, 2002, Article Three is amended by
adding the following new Section 3.1A:

       3.1A     Catch-Up Contributions. Effective May 1, 2002, all Employees who
are eligible to make Pre-tax Contributions under this Plan and who have attained
age 50 before the close of the Plan Year shall be eligible to make Catch-Up
Contributions in accordance with, and subject to the limitations of, Code
Section 414(v). Such Catch-Up Contributions shall not be taken into account for
purposes of implementing the required limitations of Code Sections 402(g) and
415. The Plan shall not be treated as failing to satisfy the provisions of the
Plan implementing the requirements of Code Sections 401(k)(3), 410(b) or 416, as
applicable, by reason of the making of such Catch-Up Contributions.

       VI.          Section 3.3(d) is amended in its entirety as follows:

       (d)     In the event that any portion of a Participant’s Pre-tax
Contributions is returned pursuant to Section 3.1 as a result of the applicable
limit under Code Section 402(g), such Participant’s Average Deferral Percentage
shall be determined before such

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     excess deferral is returned, provided such Participant is a Highly
Compensated Employee.

     VII.       Subsections (d) and (e) of Section 3.4, implementing the
“multiple use test” set forth in Treasury Regulations Section 1.401(m)-2, are
deleted in their entirety.

     VIII.     Section 3.6(a)(i) is amended in its entirety as follows:

     (i)         The dollar limitation contained in Code Section 415(c)(1)(A) in
effect for the Plan Year; or

     IX.        Section 3.6(a)(ii) is amended by replacing “25%” with “100%”
where such percentage appears.

     X.          Subsection (d) of Section 3.6 is deleted in its entirety.

     XI.        Section 4.3 is amended by replacing the first sentence thereof
in its entirety as follows:

  All Employer Matching Contributions will be invested in Lillian Vernon Common
Stock, unless otherwise directed or approved by the Board.

     XII.       Section 4.5 is amended by replacing “Validation Date” with
“Valuation Date” where such term appears.

     XIII.      Section 5.3(d) is amended in its entirety as follows:

  Any amount of a Participant’s Employer Contribution Account attributable to
Employer Matching Contributions not vested upon Termination of Employment shall
constitute a forfeiture and shall first be used to reinstate a Participant’s
vested Account balance pursuant to Section 7.9, and then shall be used to reduce
future Employer Matching Contributions.

     XIV.      Section 6.3(b) is amended by replacing “twelve months” with “six
months” where such term appears.

     XV.       Subsection (d) of Section 6.3 is deleted in its entirety.

     XVI.      Section 7.2 is amended by adding the following to the end of the
first paragraph thereof:

  Notwithstanding the foregoing, the Value of a Participant’s vested Accounts
shall be determined without regard to that portion of the Account balance that
is attributable to the Participant’s Rollover Account established under
Section 11.12 of the Plan.

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     XVII.      Section 7.7 is amended in its entirety as follows:

       7.7    Direct Transfer of a Distribution. Notwithstanding any provision
of the Plan to the contrary, a distributee may elect, at the time and in the
manner prescribed by the Committee, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by the
distributee in a direct rollover. For purposes of this Section 7.7, the
following definitions shall apply:          (a)     Eligible rollover
distribution: An eligible rollover distribution is any distribution of all or
any portion of the balance to the credit of the distributee, except that an
eligible rollover distribution does not include: any distribution that is one of
a series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and the distributee’s
designated beneficiary, or for a specified period of ten years or more; any
distribution to the extent such distribution is required under Code
Section 401(a)(9); the portion of any distribution that is not includible in
gross income (determined without regard to the exclusion for net unrealized
appreciation with respect to Employer securities); and any distribution made on
account of hardship.          (b)     Eligible retirement plan: An eligible
retirement plan is any one of the following plans that accepts the distributee’s
eligible rollover distribution: an individual retirement account described in
Code Section 408(a), an individual retirement annuity described in Code
Section 408(b), an annuity plan described in Code Section 403(a) or 403(b), a
qualified trust described in Code Section 401(a), or an eligible plan under Code
Section 457(b) which is maintained by a state, political subdivision of a state,
or any agency or instrumentality of a state or political subdivision of a state
and which agrees to separately account for amounts transferred into such plan
from this Plan.          (c)     Distributee: A distributee includes an Employee
or former Employee. In addition, the Employee’s or former Employee’s surviving
Spouse and the Employee’s or former Employee’s Spouse or former Spouse who is
the Alternate Payee under a qualified domestic relations order, as defined in
Code Section 414(p), are distributees with regard to the interest of the Spouse
or former Spouse.          (d)     Direct rollover: A direct rollover is a
payment by the Plan to the eligible retirement plan specified by the
distributee.

     XVIII.      Effective for required minimum distributions made for calendar
years beginning on or after January 1, 2003, Section 7.1(b) and the second
paragraph of Section 7.3 are deleted, and the following new Section 7.8 is added
to the Plan:

           7.8     Required Minimum Distributions. This Section 7.8 shall apply
for purposes of determining required minimum distributions for calendar years
beginning on or after January 1, 2003. The provisions of this Section 7.8 shall
take precedence over any inconsistent provisions of the Plan. All distributions
required under this Section 7.8 shall be determined and made in accordance with
the Treasury regulations under Code Section 401(a)(9).

           (a)     Time and Manner of Distribution

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       (i)     The Participant’s entire interest will be distributed, or begin
to be distributed, to the Participant no later than the Participant’s Required
Beginning Date.          (ii)    If the Participant dies after distributions
have begun, the Participant’s remaining interest, if any, must be distributed to
his Beneficiary at least as rapidly as under the method of distribution elected
by the Participant.          (iii)   If the Participant dies before
distributions begin, the Participant’s entire interest will be distributed no
later than as follows:

       A.     The Participant’s entire interest will be distributed by
December 31 of the calendar year containing the fifth anniversary of the
Participant’s death. However, if the Participant’s surviving Spouse is the
Participant’s sole Designated Beneficiary, the Spouse may elect, no later than
the September 30 of the calendar year in which distribution would otherwise be
required pursuant to the preceding sentence, to defer distribution until the
December 31 of the calendar year in which the Participant would have attained
age 70½.

       B.     If the Participant’s surviving Spouse is the Participant’s sole
Designated Beneficiary and the surviving Spouse dies after the Participant but
before distributions to the surviving Spouse begin, this subsection (a)(iii)
will apply as if the surviving Spouse were the Participant.

      For purposes of this subsection (a)(iii) and subsection (c), unless
subsection (a)(iii)(B) applies, distributions are considered to begin on the
Participant’s Required Beginning Date. If subsection (a)(iii)(B) applies,
distributions are considered to begin on the date distributions are required to
begin to the surviving spouse under subsection (a)(iii)(A).

       (iv)    Unless the Participant’s interest is distributed in a single sum
on or before the Required Beginning Date, as of the first Distribution Calendar
Year distributions will be made in accordance with sections (b) and (c) of this
Section 7.8.

   (b)      Distributions During Participant’s Lifetime

       (i)       During the Participant’s lifetime, the minimum amount that will
be distributed for each Distribution Calendar Year is the lesser of:

        A.     the quotient obtained by dividing the Participant’s Account
Balance by the distribution period in the Uniform Lifetime Table set forth in
section 1.401(a)(9)-9 of the Treasury regulations, using the Participant’s age
as of the Participant’s birthday in the Distribution Calendar Year; or

        B.     if the Participant’s sole Designated Beneficiary for the
Distribution Calendar Year is the Participant’s Spouse, the quotient obtained by
dividing the Participant’s Account Balance by the number in

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    the Joint and Last Survivor Table set forth in section 1.401(a)(9)-9 of the
Treasury regulations, using the Participant’s and Spouse’s attained ages as of
the Participant’s and Spouse’s birthdays in the Distribution Calendar Year.

          (ii)     Required minimum distributions will be determined under this
subsection (b) beginning with the first Distribution Calendar Year and up to and
including the Distribution Calendar Year that includes the Participant’s date of
death.

  (c)   Distributions After Participant’s Death

         (i)     Death On or After Date Distributions Begin

                  A.     If the Participant dies on or after the date
distributions begin and there is a Designated Beneficiary, the minimum amount
that will be distributed for each Distribution Calendar Year after the year of
the Participant’s death is the quotient obtained by dividing the Participant’s
Account Balance by the longer of the remaining Life Expectancy of the
Participant or the remaining Life Expectancy of the Participant’s Designated
Beneficiary, determined as follows:

                       (1)     The Participant’s remaining Life Expectancy is
calculated using the age of the Participant in the year of death, reduced by one
for each subsequent year.                          (2)     If the Participant’s
surviving Spouse is the Participant’s sole Designated Beneficiary, the remaining
Life Expectancy of the surviving Spouse is calculated for each Distribution
Calendar Year after the year of the Participant’s death using the surviving
Spouse’s age as of the Spouse’s birthday in that year. For Distribution Calendar
Years after the year of the surviving Spouse’s death, the remaining Life
Expectancy of the surviving Spouse is calculated using the age of the surviving
Spouse as of the Spouse’s birthday in the calendar year of the Spouse’s death,
reduced by one for each subsequent calendar year.          
                (3)     If the Participant’s surviving Spouse is not the
Participant’s sole Designated Beneficiary, the Designated Beneficiary’s
remaining Life Expectancy is calculated using the age of the beneficiary in the
year following the year of the Participant’s death, reduced by one for each
subsequent year.

                  B.     If the Participant dies on or after the date
distributions begin and there is no Designated Beneficiary as of September 30 of
the year after the year of the Participant’s death, the minimum amount that will
be distributed for each Distribution Calendar Year after the year of the
Participant’s death is the quotient obtained by dividing the Participant’s
Account Balance by the Participant’s remaining

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    Life Expectancy calculated using the age of the Participant in the year of
death, reduced by one for each subsequent year.

                 (ii)     Death Before Date Distributions Begin. If the
Participant dies before the date distributions begin, the Participant’s entire
interest will be distributed in accordance with subsection (a)(iii) above.

           (d)       Definitions. For purposes of this Section 7.8, the
following definitions shall apply:

                 (i)     Designated Beneficiary: The individual who is
designated as the Beneficiary under Section 1.5 of the Plan and is the
designated beneficiary under section 401(a)(9) of the Internal Revenue Code and
section 1.401(a)(9)-1, Q&A-4, of the Treasury regulations.    
               (ii)     Distribution Calendar Year: A calendar year for which a
minimum distribution is required. For distributions beginning before the
Participant’s death, the first Distribution Calendar Year is the calendar year
immediately preceding the calendar year which contains the Participant’s
Required Beginning Date. For distributions beginning after the Participant’s
death, the first Distribution Calendar Year is the calendar year in which
distributions are required to begin under subsection (a)(ii). The required
minimum distribution for the Participant’s first Distribution Calendar Year will
be made on or before the Participant’s Required Beginning Date. The required
minimum distribution for other Distribution Calendar Years, including the
required minimum distribution for the Distribution Calendar Year in which the
Participant’s Required Beginning Date occurs, will be made on or before
December 31 of that Distribution Calendar Year.    
               (iii)     Life Expectancy: Life expectancy as computed by use of
the single life table in section 1.401(a)(9)-9 of the Treasury Regulations.    
               (iv)     Participant’s Account Balance: The Account balance as of
the last Valuation Date in the calendar year immediately preceding the
Distribution Calendar Year (valuation calendar year) increased by the amount of
any contributions made and allocated or forfeitures allocated to the Account
balance as of dates in the valuation calendar year after the Valuation Date and
decreased by distributions made in the valuation calendar year after the
Valuation Date. The Participant’s Account Balance for the valuation calendar
year includes any amounts rolled over or transferred to the Plan either in the
valuation calendar year or in the Distribution Calendar Year if distributed or
transferred in the valuation calendar year.                    (v)     Required
Beginning Date: If a Participant is a 5% Owner, the April 1 following the
calendar year in which the Participant attains age 70½. If a Participant is not
a 5% Owner, the April 1 following the later of (x) the calendar year in which
the Participant attains age 70½ and (y) the calendar year in which the
Participant actually retires.

 XIX.    Article Seven is amended by adding the following new Section 7.9:

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       7.9     Location of Former Participants. If a former Participant who is
entitled to a distribution cannot be located and the Committee has made
reasonable efforts to locate the former Participant, then the former
Participant’s vested interest shall be treated as a forfeiture pursuant to
Section 5.3(d). The Committee will be deemed to have made reasonable efforts to
locate the former Participant (or, in the case of a deceased former Participant,
his Beneficiary) after having used at least one private locator service or
governmental locator or letter-forwarding service, chosen by the Committee in
its discretion, to locate the Participant. The former Participant’s Accounts
shall be forfeited as of the last day of the Plan Year in which occurs the close
of the 12 consecutive calendar month period following the last of the two
successive mailings. If the former Participant or Beneficiary makes a written
claim for the vested interest after it has been forfeited, the Committee shall
cause the vested interest to be reinstated from forfeitures pursuant to
Section 5.3(d). If such forfeitures are insufficient, the Employer shall make an
additional contribution to the Plan as necessary to reinstate the Participant’s
entire vested interest.

       XX.          Section 9.5 is amended by replacing the second paragraph
thereof in its entirety as follows:

       For purposes of this section, any action required or authorized to be
taken by the claimant may be taken by a representative authorized in writing by
the claimant to represent him. If the claim is denied by the Committee, in whole
or in part, the claimant shall be furnished written notice of the denial of the
claim within 90 days after the Committee member’s receipt of the claim or within
180 days after such receipt if special circumstances require an extension of
time. If special circumstances require an extension of time, the claimant shall
be furnished written notice prior to the termination of the initial 90-day
period which explains the special circumstances requiring an extension of time
and the date by which the Committee member expects to render the benefit
determination. A written notice of denial of the claim shall contain the
following: (i) specific reason or reasons for denial; (ii) reference to specific
Plan provisions on which the denial is based; (iii) a description of any
additional material or information necessary for the claimant to perfect the
claim, and an explanation of why the material or information is necessary; and
(iv) an explanation of the claims review procedure and the time limits
applicable to such procedures, including a statement of the claimant’s right to
bring a civil action under ERISA Section 502(a) following a denial upon review
of the claim.

       Review may be requested at any time within 60 days following the date the
claimant received written notice of the denial of his claim. The Committee shall
afford the claimant a full and fair review of the decision denying the claim and
shall: (i) provide, upon request and free of charge, reasonable access to and
copies of all documents, records and other information relevant to the claim;
(ii) permit the claimant to submit to the Committee written comments, documents,
records and other information relating to the claim; and (iii) provide a review
that takes into account all comments, documents, records and other information
submitted by the claimant relating to the claim, without regard to whether such
information was submitted or considered in the initial determination.    
     The decision on review by the Committee shall be in writing and shall be
issued within 60 days following receipt of the request for review. The period
for decision may

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  be extended to a date not later than 120 days after such receipt if the
Committee determines that special circumstances require extension. If special
circumstances require an extension of time, the claimant shall be furnished
written notice prior to the termination of the initial 60-day period which
explains the special circumstances requiring an extension of time and the date
by which the Committee expects to render its decision on review. The decision on
review shall include: (i) specific reasons for the decision; (ii) references to
the specific Plan provisions on which the decision of the Committee is based;
iii) A statement that the claimant is entitled to receive, upon request and free
of charge, reasonable access to and copies of all documents, records and other
information relevant to the claimant’s claim; and (iv) a statement describing
the claimant’s right to bring a civil action under ERISA Section 502(a).

       XXI.     Section 11.12(a) is amended in its entirety as follows:

       (a)     The Trustee may receive, with the consent of the Committee, a
direct rollover or a participant rollover contribution of an eligible rollover
distribution, excluding any after-tax contributions, from: (i) a qualified plan
described in Code Sections 401(a) or 403(a), (ii) an annuity contract described
in Code Section 403(b), or (iii) an eligible plan under Code Section 457(b)
which is maintained by a state, political subdivision of a state, or any agency
or instrumentality of a state or political subdivision of a state. The Trustee
may also receive, with the consent of the Committee, a participant rollover
contribution of the portion of a distribution from an individual retirement
account or annuity described in Code Section 408(a) or (b) that is eligible to
be rolled over and would otherwise be includible in the Participant’s gross
income.

       XXII.      Subsection B. of Section 12.2 is amended in its entirety as
follows:

       B.     Key Employee. “Key Employee” shall mean any Employee or former
Employee (including any deceased Employee) who, at any time during the Plan Year
that includes the Determination Date, was:

                (a)     An officer of the Employer having annual Limitation
Compensation in excess of $130,000 (as adjusted pursuant to Code Section 416(i)
for Plan Years beginning after December 31, 2002);                   (b)     A
5% owner of the Employer; or                   (c)     A 1% owner of the
Employer having annual Limitation Compensation from the Employer of more than
$150,000.

       The determination of who is a Key Employee shall be made in accordance
with Code Section 416(i)(1) and the applicable regulations and other guidance of
general applicability issued thereunder.

      XXIII.      Subsection H. of Section 12.2 is amended by adding the
following new subparagraph (k) to the end thereof:

       (k)     Notwithstanding the foregoing, effective for Plan Years beginning
on or after January 1, 2002, the following rules shall apply to the
determination of the Plan’s Top Heavy status:

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       (i)     The present values of accrued benefits and the amounts of account
balances of an Employee as of the determination date shall be increased by the
distributions made with respect to the Employee under the Plan and any plan
aggregated with the Plan under Section 416(g)(2) of the Code during the 1-year
period ending on the determination date. The preceding sentence shall also apply
to distributions under a terminated plan which, had it not been terminated,
would have been aggregated with the Plan under Section 416(g)(2)(A)(i) of the
Code. In the case of a distribution made for a reason other than separation from
service, death, or Total and Permanent Disability, this provision shall be
applied by substituting “5-year period” for “1-year period.”

       (ii)     The accrued benefits and amounts of account balances of any
individual who has not performed services for the Employer during the 1-year
period ending on the determination date shall not be taken into account.

    XXIV.      Section 12.3 is amended by adding the following new subsection D.
to the end thereof:

                    D.     Notwithstanding the foregoing, effective for Plan
Years beginning on or after January 1, 2002, Employer Matching Contributions
shall be taken into account for purposes of satisfying the minimum contribution
requirements of Code Section 416(c)(2) and the Plan. Employer Matching
Contributions that are used to satisfy the minimum contribution requirements
shall be treated as Employer Matching Contributions for purposes of the actual
contribution percentage test and other requirements of Code Section 401(m).

     XXV.     Section 12.4 is deleted in its entirety.

     XXVI.     Wherever a provision of this Amendment causes a change in any
internal cross-reference to any section or subsection of the Plan, such
cross-reference shall be updated accordingly.

     XXVII.     Except as otherwise stated, this Third Amendment shall be
effective as of January 1, 2002.

     XXVIII.     In all respects not amended, the Plan is hereby ratified and
confirmed.

* * * * * *

     To record the adoption of the Third Amendment as set forth above, the
Company has caused this document to be signed on this 13th day of December,
2002.

              LILLIAN VERNON CORPORATION               By:   /s/ SUSAN HANDLER

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Secretary

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