Document:

PROPRIETARY RIGHTS ASSIGNMENT

         WHEREAS, RDF ACQUISITION CORP. ("Purchaser") has this day acquired all
of the assets of RUE DE FRANCE, INC. (the "Company"); and

         WHEREAS, the undersigned, Pamela F. Kelley (the "Assignor"), is a
principal shareholder of the Company and its president; and

         WHEREAS, Assignor has agreed to execute this Proprietary Rights
Assignment to induce Purchaser to purchase the assets of the Company.

         NOW, THEREFORE, for One ($1.00) Dollar and other good and valuable
consideration, the receipt of which is hereby acknowledged, the Assignor does
hereby assign and agree with Purchaser as follows:

         1. ASSIGNMENT. Assignor does hereby assign to Purchaser Assignor's
entire right, title and interest in and to all Proprietary Property and
Documents (collectively, "Proprietary Rights") as such terms are hereinafter
defined.

         2. CONSENT TO USE OF NAME AND PHOTOGRAPH. Assignor does hereby further
grant to Purchaser the right to use in perpetuity her name and photograph in
connection with a "Dear Friends" or similar letter in the Rue de France catalog,
website or advertisement or other media in connection with the promotion of the
business of the Purchaser as currently appearing in the Rue de France "Summer
2000" catalog. If the Purchaser shall desire to change the photograph or copy
(other than changes to reflect changes in the description of products or their
location in the catalog or other minor changes not of a substantive nature),
then such proposed changes shall be submitted to the Assignor in writing, if
Assignor is then living, for Assignor's approval, which approval will not be
unreasonably withheld. If the Assignor fails to object to any such proposed
change in writing within ten (10) days after the same is submitted to Assignor,
then such proposed change shall be deemed approved. All proposed changes shall
be personally delivered to Assignor or mailed to Assignor at 20 Willow Street,
Newport, Rhode Island 02840 or at such other address as Assignor may from time
to time submit to Purchaser in writing.

         3. GENERAL. The Assignor agrees that any and all Documents made or kept
by Assignor of work performed by Assignor in connection with the business of the
Company or which are otherwise in Assignor's possession and relate or pertain to
the business of the Company, its customers or their respective Affiliates (as
hereinafter defined), shall be and are the sole and exclusive property of the
Company and have been assigned to and have become the sole and exclusive
property of the Purchaser. The Assignor represents that she has delivered all
Documents to the Purchaser at the Company's place of business and will not take
with Assignor any Documents or reproductions thereof except as may be necessary
for her to perform her duties under the employment agreement between her and the
Purchaser dated the date hereof.

         The Assignor acknowledges and agrees that the Proprietary Rights are
the exclusive and valuable property of the Purchaser, its customers, suppliers
or their respective Affiliates, as the case may be, and the Assignor shall
neither have, nor claim to have, any right, title or interest therein or
thereto. All opportunities relating to the Proprietary Rights whether or not
involving

<PAGE>

third parties shall belong to the Purchaser, its customers, suppliers or their
respective Affiliates, as the case may be.

         Any and all Proprietary Property shall be deemed to have been work
specifically ordered or commissioned by the Company and assigned to the
Purchaser and each such work shall be considered a "work made for hire" within
the meaning of 17 U.S.C. ss.101 of the United States Copyright Act, if
applicable, and all rights to such work shall belong entirely to the Purchaser.
The Assignor shall from time to time upon the request of the Purchaser (and at
the Purchaser's expense) promptly execute and deliver to the Purchaser, its
customers, suppliers or their respective Affiliates, as the case may be, any
instruments necessary to effect the irrevocable assignment of all of Assignor's
right, title and interest, including inventor, copyright and author rights, in
such works to the Purchaser, its customers, suppliers or their respective
Affiliates, as the case may be, and for the Purchaser, its customers, suppliers
or their respective Affiliates, as the case may be, to obtain proprietary rights
in connection therewith.

         The Assignor represents that Assignor has communicated and fully
disclosed to the Purchaser any and all Proprietary Property made or conceived by
Assignor prior to the date hereof.

         The Assignor shall assist the Purchaser in every proper way upon
request (and at the Purchaser's expense) to obtain for its benefit patents,
copyrights, trade names, trademarks, service names, service marks and domain
names for any and all Proprietary Rights in the United States and all foreign
countries. All such patents, copyrights, trade names, trademarks, service names,
service marks, domain names and any registrations and applications therefor are
to be, and remain, the exclusive property of the Purchaser and the Assignor
agrees that Assignor will, whenever so requested by the Purchaser or its duly
authorized agent, make, execute and deliver to the Purchaser its Affiliates,
successors, assigns, or nominees, without charge for Assignor's time (it being
agreed that any out-of-pocket expenses will be borne or reimbursed by the
Purchaser), any and all applications, assignments and all other instruments
which the Purchaser or its Affiliates shall deem necessary or appropriate in
order to apply for and obtain such patents, copyrights, trade names, trademarks,
service names, service marks and domain names or in order to assign and convey
to the Purchaser or its Affiliates, their successors, assigns or nominees, the
sole and exclusive right, title and interest therein and thereto.

         Assignor acknowledges that the violation by Assignor of any of the
foregoing covenants could not reasonably or adequately be compensated by damages
in an action at law. Therefore, in addition to any other remedies or sanctions
provided by law, and without limiting the right of the Purchaser, its Affiliates
or any of their successors or assigns to pursue all other or legal and equitable
rights available to them, the Purchaser and its Affiliates shall have the right
to compel specific performance hereof by the Assignor, and, in furtherance
thereof, to apply to any court with jurisdiction over the Assignor to enforce
the provisions hereof.

         The Purchaser may assign its rights hereunder to any third party. Upon
any such assignment by the Purchaser, the term "Purchaser" as used herein shall
be deemed to include any such assignee of the Purchaser, and the assignee shall
have the right to enforce all of the Purchaser's rights and remedies hereunder
in its own name as if a party hereto in the place and stead of the Purchaser.

         This Assignment shall be binding upon the Assignor and Assignor's
respective successors-in-interest, heirs and personal representatives.

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<PAGE>

         This Assignment shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without regard to its
conflict of laws rules.

         Assignor agrees to execute and deliver without further compensation,
such other agreements, instruments, documents, certificates, affidavits or other
writings as the Purchaser may reasonably require to more fully vest in the
Purchaser all rights to the Proprietary Rights.

         For purposes of this Assignment the following definitions shall apply:

               i) "Affiliates" shall mean an affiliate or associate as those
terms are defined by the Rules and Regulations promulgated under the Securities
Act of 1933, as amended;

               ii) "Documents" means any and all: (i) books, textbooks, letters,
pamphlets, drafts, memoranda, notes, records, drawings, files, documents,
manuals, compilations of information, correspondence or other writings of any
kind and all copies, abstracts and summaries of any of the foregoing which
relate to any aspect of the business of the Company, and (ii) computer programs
and software created, developed or enhanced by the Assignor or in Assignor's
possession which relate to any aspect of the business of the Company, whether
embodied in a computer disc, print-out or other format;

               iii) "Proprietary Property" means all tangible and intangible
property either made, conceived or developed, in whole or in part, by the
Assignor which relates or pertains to any aspect of the business of the Company
or its customers, suppliers or their respective Affiliates whether as an
officer, director, employee, consultant, independent contractor or otherwise or
owned by, or licensed to, the Company or its customers, suppliers or their
respective Affiliates, including, without limitation, discoveries, designs,
methods, formulas, techniques, ideas, concepts, programs, computer software or
hardware, data bases, specifications, documentation, algorithms, source codes,
object codes, program listings, product platforms and architectures, screens,
websites, formats, technology, know-how, inventions, research and development
whether or not any of the foregoing is patentable, trademarkable or
copyrightable and patents, copyrights, trademarks, trade names, service names,
service marks, logos, domain names and designs and other proprietary rights and
registrations and applications and the rights to apply therefor.

         IN WITNESS WHEREOF, the undersigned has executed this Assignment on the
_____ day of April, 2000.

                                                  ------------------------------
                                                       PAMELA F.  KELLEY

                                     3RIGHT OF FIRST REFUSAL AGREEMENT

         Agreement made as of the 31st day of March, 2000, by and between
LILLIAN VERNON CORPORATION ("LVC") and PAMELA F. KELLEY ("KELLEY").

                                   BACKGROUND

WHEREAS:

         A. LVC, RDF Acquisition Corp. (the "Company"), Rue de France, Inc.
("RDF"), Kelley and Brendan P. Kelley have entered into an Asset Purchase
Agreement dated as of March 31, 2000 (the "Asset Purchase Agreement");

         B. The Company and Kelley have entered into an Employment Agreement
dated the date hereof (the "Employment Agreement");

         C. LVC is the parent of the Company and has agreed to grant Kelley a
right of first refusal to purchase all of the capital stock of the Company
before LVC consummates a Change of Control Transaction (defined below); and

         D. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Employment Agreement.

         NOW, THEREFORE, the parties agree as follows:

         1. RIGHT OF FIRST REFUSAL. Before LVC consummates a Change of Control
Transaction (defined below) with respect to the Company during the Right of
First Refusal Period (defined below) it shall first offer ("Offer") to Kelley in
writing the right to purchase all of the outstanding capital stock of the
Company for a fixed purchase price (the "Purchase Price") payable in cash at the
closing of such purchase by Kelley. Kelley shall have twenty (20) days from the
date of such Offer to accept the same. Such acceptance shall be in writing and
shall be accompanied by a deposit equal to ten (10%) percent of the Purchase
Price and shall specify a date for closing at the headquarters of LVC which
shall be not later than thirty (30) days from the date of Kelley's acceptance of
the Offer. A Change of Control Transaction shall mean a sale of all or
substantially all of the assets of the Company to an unaffiliated third party,
or a sale of more than fifty (50%) percent of the voting stock of the Company to
an unaffiliated third party or a merger, consolidation or other reorganization
of the Company with an unaffiliated third party such that after such merger,
consolidation or other reorganization LVC owns less than fifty (50%) percent of
the voting stock of the surviving entity. A spin-off of the shares of the
Company or a public offering of stock of the Company shall not be considered a
Change of Control Transaction and Kelley's right of first refusal shall
terminate upon the happening of

<PAGE>

either of such events. If Kelley does not timely exercise her right of first
refusal, then LVC or the Company, as the case may be, may proceed to consummate
a Change of Control Transaction; provided, however, if the sale is an asset
sale, then the consummation of such sale shall be conditioned upon the purchaser
of the assets assuming in writing the obligations of the Company to Kelley under
the Employment Agreement and the obligations of the Company to RDF under the
provisions of Section 1.5 (The Calculation and Payment of the Contingent Portion
of the Purchase Price) of the Asset Purchase Agreement. Such assumption shall
release both the Company and LVC from any further obligation under the
Employment Agreement and under Section 1.5 of the Asset Purchase Agreement. If
the Change of Control Price (defined below) is less than the Purchase Price,
then, before consummating such Change of Control Transaction, LVC shall reoffer
to Kelley the right to purchase the capital stock of the Company at the lower
Change of Control Price except in such case Kelley shall have ten (10) days in
which to accept the same. If LVC and Kelley cannot agree upon the cash
equivalent value of the consideration offered in the Change of Control
Transaction (the "Change of Control Price"), then the same shall be determined
by an investment banker mutually acceptable to the parties. If the parties
cannot agree upon a mutually acceptable investment banker, then either party may
apply to the American Arbitration Association in the City of New York for the
appointment of the same. The fees and expenses of such investment banker and, if
necessary, the American Arbitration Association shall be borne equally by the
parties. The Right of First Refusal Period shall mean the period commencing on
the date hereof and ending on the earlier of (x) five (5) years from the date
hereof, (y) the termination of the Employment Agreement by Kelley without Good
Reason or the termination of the Employment Agreement by the Company for Cause
and (z) the death of Kelley.

         2.       GENERAL PROVISIONS

                  (a) ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the
entire agreement between the parties hereto with respect to the transactions
contemplated hereby and supersedes all prior agreements or understandings
between the parties with respect thereto. This Agreement shall not be altered or
otherwise amended or terminated (except as provided in Section 1 hereof) except
pursuant to an instrument in writing signed by each of the parties hereto.

                  (b) DESCRIPTIVE HEADINGS. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provisions of this Agreement.

                  (c) NOTICES. All notices or other communications pursuant to
this Agreement shall be in writing and shall be deemed to be sufficient if
telecopied or sent by nationally-recognized, overnight courier to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):

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<PAGE>

         if to LVC, to:

                           c/o Lillian Vernon Corporation
                           One Theall Road
                           Rye, New York 10580-1450
                           Attention: Chief Executive Officer
                           Telecopier: (914) 925-1444

         with copies to:

                           Salon, Marrow, Dyckman & Newman, LLP
                           685 Third Avenue
                           New York, New York 10017
                           Attention: Joel Salon
                           Telecopier: (212) 661-3339

         if to the Executive, to:

                           Pamela F.  Kelley
                           20 Willow Street
                           Newport, Rhode Island 02840

         with copies to:

                           Lawson & Weitzen, LLP
                           425 Summer Street
                           Boston, Massachusetts 02210
                           Attention: George Christodoulo
                           Telecopier: (617) 439-3987

All such notices and other communications shall be deemed to have been delivered
and received (A) in the case of delivery by telecopy, on the date of such
delivery if delivery is confirmed on that date by telephone call with the
recipient and (B) in the case of delivery by nationally-recognized, overnight
courier, on the Business Day (defined below) following dispatch. As used herein,
"Business Day" shall mean any day that is not a Saturday, Sunday or a day on
which banking institutions in New York, New York are not required to be open.
Failure to accept a notice does not invalidate same.

                  (d) ARBITRATION. Except as hereinafter provided with respect
to injunctive relief, the parties agree to arbitrate any and all claims,
controversies or disputes arising under or out of this Agreement or relating in
any way thereto. All such claims, controversies or disputes shall be submitted
to arbitration in the City of New York, State of New York, to arbitrators
designated under and pursuant to the Rules of the American Arbitration
Association, and the

                                       3
<PAGE>

arbitration shall be had under the auspices of said Association and subject to
its rules. The parties consent to the jurisdiction of the Supreme Court of the
State of New York and of any United States District Court sitting in the State
of New York with respect to any and all proceedings relating to any such
arbitration, and the parties further agree that any and all process and notices
of motions or applications in relation to any such arbitration may be served
upon a party personally or by registered or certified mail, return receipt
requested. Such service may be accomplished either within or without the State
of New York, and such notice shall be given of all applications and hearings as
is provided by the laws of the State of New York. The award of the arbitrators
shall be final and binding upon the parties and judgment thereon may be entered
as provided by the laws of the State of New York.

                  (e) GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF
THE STATE OF NEW YORK OR ANY OTHER JURISDICTION OTHER THAN THE STATE OF NEW
YORK) TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE
STATE OF NEW YORK WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS
AGREEMENT, EVEN IF UNDER SUCH JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW
ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.

                  (f) BENEFITS OF AGREEMENT; ASSIGNMENT. The terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors, assigns, representatives,
heirs and estate, as applicable. If this Agreement is assigned by LVC in
connection with the sale of all or substantially all of the operating assets of
LVC and the obligations hereunder of LVC are assumed in writing by the purchaser
of such assets, then in such event LVC shall have no further liability hereunder
to the Executive. Anything contained herein to the contrary notwithstanding,
this Agreement shall not be assignable by the Executive.

                  (g) WAIVER OF BREACH. The waiver by either party of a breach
of any provision of this Agreement by the other party must be in writing and
shall not operate or be construed as a waiver of any subsequent breach by such
other party.

                  (h) SEVERABILITY. It is the desire and intent of the parties
hereto that the provisions of this Agreement be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, if any particular provision of this
Agreement shall be adjudicated by a court of competent jurisdiction to be
invalid, prohibited or unenforceable for any reason, such provision, as to such
jurisdiction, shall be ineffective, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.

                                       4
<PAGE>

                  (i)      INTERPRETATION AND CONSTRUCTION.

                           (i) This Agreement shall be construed according to
         its fair meaning as if prepared jointly by the parties hereto.

                           (ii) Each section, subsection and lesser section of
         this Agreement constitutes a separate and distinct undertaking,
         covenant and/or provision hereof.

                           (iii) This Agreement may be executed in counterparts,
         each of which shall be deemed an original, and all of which shall
         constitute but one and the same instrument which may be sufficiently
         evidenced by one counterpart.

         IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.

                                              LILLIAN VERNON CORPORATION

                                           BY:
                                              --------------------------------
                                                  Lillian Vernon,
                                                  Chairman and Chief Executive
                                                  Officer

                                           -----------------------------------
                                                  PAMELA F.  KELLEY

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