Document:

<PAGE>

                          FARRELL EMPLOYMENT AGREEMENT

         This Agreement, made and entered on this 18th day of September, 2001 by
and between RED BELL BREWING COMPANY, a corporation organized and existing under
the laws of the Commonwealth of Pennsylvania (hereinafter referred to as the
"COMPANY") party of the first part, and MICHAEL T. FARRELL, an adult individual
resident of Pennsylvania with an address of 304 Arch St., 2F, Philadelphia, PA
19106 (hereinafter referred to as "Employee"), party of the second part.

         WHEREAS, Company desires to secure from Employee an employment
agreement and Employee desires to provide Company with such agreement for
consideration.

         NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto, intending to be legally bound, agree as follows:

 1.      POSITION

         A.       Position Description: Employee agrees to be employed by
                  Company as its General Counsel. Employee agrees to provide the
                  below described services to Company:

         B.       Employee's Efforts and Availability: Employee agrees to be
                  employed by the Company as its General Counsel on a full-time
                  basis and to devote 90% of his business time, attention and
                  efforts to carrying out the business of the Company and
                  promoting and furthering the business of the Company. However,
                  the parties agree that, from time to time, Employee will
                  engage in the practice of law for entities or individuals
                  other than the Company. It is agreed, however, that the duty
                  of Employee to the Company shall be primary at all times.

 2.      TERM

         This Agreement shall be effective when signed by the parties hereto and
shall remain effective for a term of five (5) years or unless sooner terminated
by Employee or by Company for good cause as defined in paragraph 5.

 3.      COMPENSATION

         Company shall compensate Employee for his services (as described in
Paragraph 1 above entitled POSITION) as follows:

         A.       Salary: Company shall pay to Employee $89,500 per anum in
                  Salary. This amount shall be paid by check or cash to Employee
                  in equal increments every two weeks. Further, this amount will
                  be reviewed at the beginning of each calender year by the
                  Board of Directors of the Company to determine the amount of
                  any increase or bonus to be added to this figure.

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         B.       Stock: Company shall issue to Employee, on the first business
                  day of each calendar year, registered options for Company
                  stock with a strike price of 10 cents. On January 1, 2002,
                  Employee shall receive 637,500 warrants with a strike price of
                  10 cents.

         C.       The Employee shall also receive 212,500 warrants with a strike
                  price of 10 cents on the date of this Agreement (or one third
                  of 637,500) in order to compensate Employee for the period of
                  September 2001 through December 31, 2001.

         D.       In order to provide an incentive in the Employee to enhance
                  the price of the stock, the number of warrants received by
                  Employee pursuant to this paragraph shall decrease by half
                  each succeeding year. Thus, on January 1, 2003, Employee shall
                  receive 318, 750 warrants. On January 1, 2004, Employee shall
                  receive 159,375 warrants. On January 1, 2005, Employee shall
                  receive 79, 687 warrants. Finally, on January 1, 2006,
                  Employee shall receive 39,843 warrants.

         E.       In the event that this agreement terminates in the middle of a
                  Callander year, the Employee shall only be entitled to a
                  prorated number of warrants for the portion of the year
                  actually worked. The Employee shall reimburse Company the
                  remainder of any options not earned by Employee under a
                  prorated calculation. If Employee cannot reimburse the
                  warrants for any reason, he shall, within 30 days of the
                  Company's demand, repay the cash equivalent of such warrants
                  based upon the then-prevailing share price, less the 10 cent
                  strike price.

         F.       Stock

                  In addition to the warrants described in paragraph 3(B) above,
                  upon the execution of this Agreement, Employee shall be issued
                  and shall on that date possess 750,000 additional warrants for
                  Company stock. The first 150,000 warrants shall vest and be
                  exercisable immediately. An additional 150,000 warrants shall
                  vest and be free to exercise one year from the execution of
                  this Agreement. An additional 150,000 warrants shall vest and
                  be free to exercise on the second anniversary of the execution
                  of this Agreement. An additional 150,000 options shall vest
                  and be free to exercise on the third anniversary of the
                  execution of this Agreement. The final 150,000 warrants shall
                  vest on the fourth anniversary of this Agreement. All of the
                  750,000 warrants will vest as delineated above even in the
                  event this agreement is terminated. Consequently, on the
                  fourth anniversary of the date of this Agreement, all 750,000
                  of Employee's options shall have vested whether Employee
                  remains employed at the Company or not. The strike price for
                  the first 300,000 warrants to vest shall be 10 cents. The
                  strike price for the second 300,000 warrants to vest shall be
                  15 cents. The strike price for the final 150,000 warrants to
                  vest shall be 20 cents

         G.       Acceleration

                  In the event that the ownership or control of the Company
                  shall change such that a controlling interest in the Company
                  is acquired by a third party, or in the event an offer is made
                  to the shareholders of the Company for the purchase of the
                  Company stock in order for a party to obtain a controlling
                  interest in the Company or if the Employee is terminated by
                  the Company, then, the vesting of all of Employee's warrants
                  shall be accelerated and all of the warrants described in this
                  paragraph 3 shall vest immediately and be made free to trade
                  by the Company as soon as possible but not later than 30 days
                  from the event triggering the provisions of this paragraph.

         H.       The Company will provide Employee with benefits no less
                  favorable than those provided to Robert Huttick or James Bell.

<PAGE>

4.       GUARANTEE OF COMPANY REGARDING SUCCESSOR COMPANY

         A.       In addition to the corporation's ongoing obligation to
                  continue to cause the options of the employee to vest even
                  after the termination of Employee's employment, the
                  Corporation hereby represents to and covenants with the
                  Employee that it shall guarantee that the terms of this
                  Agreement shall survive any transfer of ownership or control
                  of the Company such that this Agreement shall also apply to
                  and bind each and every successor entity of the Company.

5.       DEFAULT/REMEDIES

         A.       In the event of any breach of this Agreement, the Employee
                  shall have full rights to injunctive relief and an equitable
                  accounting of all diminution of salary, stock or benefits
                  arising out of such a violation, in addition to any other
                  existing rights, including the right to attorneys' fees and
                  costs expended to enforce the terms of this Agreement and
                  interest thereon, without requirement of posting bond. The
                  occurrence of any of the following events shall constitute a
                  breach and shall therefore permit the non-breaching party, at
                  its option and without prejudice to any other rights or
                  remedies provided for hereunder, or by law or equity, to
                  terminate this Agreement:

                  1.       If Employee violates any law, ordinance, rule or
                           regulation of a governmental agency in connection
                           with the performance of his employment
                           responsibilities hereunder (misdemeanors and traffic
                           violations excepted);

                  2.       Gross breach of any of Employee's obligations of
                           employment and/or failure to carry out the duties
                           assigned to him. Mere negligence shall not suffice;

                  3.       Breach of any of Company's obligations hereunder;

                  4.       Arrest or conviction of Employee for Theft;

                  5.       Use by Employee of any prohibited substances;

                  6.       Conviction by Employee of any felony;

                  7.       If either party violates any other term or condition
                           of this Agreement and fails to cure such violation
                           within thirty (30) days after written notice from the
                           non-breaching party requiring the allegedly violating
                           party to cure same.

<PAGE>

6.       TERMINATION

           This Agreement may be terminated at any time upon one month's notice
by the Employee. It may only be terminated by the Company for good cause. In the
event the Company terminates the agreement, the Employee shall continue to
receive Salary and shall be entitled to all of the warrants described in
Paragraph 3, including those in paragraph 3(C) which had not yet been received
or earned based upon the prorata calculation in that paragraph. Said warrants
will immediately be registered by the Company and made free to trade on an
accelerated basis pursuant to paragraph 3(D).

         If the Company shall terminate the Employee and it is judicially
determined that said termination does not meet the standard of "good cause" then
the Company shall reimburse the Employee all fees, including attorney's fees,
and costs incurred by the Employee in a suit based upon said termination.

         If the Employee shall terminate his employment, then he shall be
prohibited from competing with the Company within the industry or similar type
wihin a radius of 75 miles from the nearest Company property following such
termination for a period of one year.

7.       APPLICABLE LAW

         The terms and provisions of this contract shall be construed in
accordance with the substantive law of the Commonwealth of Pennsylvania.

8.       ASSIGNMENT

         Neither this Agreement nor the rights or obligations of a party hereto
may be assigned or alienated in whole or in part without the express written
consent of all parties. This Agreement shall be binding and shall inure to the
benefit of the parties hereto and their successors and assigns.

9.       WAIVER

         The failure of either party to insist on performance of any provision
of this Agreement shall not be construed as a waiver of that provision in any
later instance.

10.      MODIFICATION

         This Agreement may not be modified or terminated orally. No claimed
modification, termination or waiver of any of its provisions shall be valid
UNLESS in writing signed by a duly authorized representative of Company.

11.      NOTICES

         Unless otherwise specifically provided hereunder, any notice, consent
or other communication required or permitted to be given by any provision of
this Agreement shall be in writing and shall be deemed to have been duly and
properly given or served for any purpose only if delivered personally with
receipt acknowledged or sent by registered or certified mail, return receipt
requested, postage and charges prepaid and addressed to the appropriate party,
or via facsimile, with the sending facsimile machine printing a journal
evidencing receipt by the receiving facsimile, as follows:

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                                 If to COMPANY:

                            Red Bell Brewing Company
                               3100 Jefferson St.
                             Philadelphia, PA 19121

                                 If to EMPLOYEE:

                               Michael T. Farrell
                                304 Arch St., 2F
                             Philadelphia, PA 19106

         The above-designated address for each party may be changed by written
notification to the other party.

12.      CAPTIONS

         The captions of the Paragraphs and Subparagraphs of this Agreement are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement or any of the provisions hereof.

13.      SEVERABILITY

         If any term, condition, clause or provision of this Agreement shall be
determined or declared to be void or invalid in law or otherwise, then only that
term, condition, clause or provision shall be stricken from this Agreement and
in all other respects this Agreement shall be valid and continue in full force,
effect and operation. Likewise, the failure of any party to meet its obligations
under any one or more of the Paragraphs herein, with the exception of the
satisfaction of the conditions precedent, shall in no way avoid or alter the
remaining obligations of the parties.

14.      INTEGRATION

         This document is intended by the parties as the final written
expression of the terms included herein and is the complete and exclusive
statement of their Agreement on the subjects governed hereby. There are no
representations or warranties other than those expressly set forth herein. These
terms may not be contradicted by evidence of any prior Agreement or of a
contemporaneous oral Agreement and may only be explained or supplemented by a
writing signed by an authorized representative of both parties.

<PAGE>

      IN WITNESS WHEREOF, each of the parties has executed this Agreement and
caused its respective seal to be affixed the day and year first above written.

                                   EMPLOYEE:

WITNESS:

                                       /s/ Michael Farrell
-------------------------              ----------------------------------
Name:                                  Name:    Michael Farrell
Address:

WITNESS:                              Red Bell Brewing Company

/s/ Robert Huttick                By:  /s/ James R. Bell
------------------------------         ----------------------------------
Name:  Robert Huttick                  Name:  James R. Bell
Title: Executive Vice-President        Title: President<PAGE>

                                                                     Exhibit 4.1

                        CERTIFICATE OF THE DESIGNATIONS,

                         POWERS, PREFERENCES AND RIGHTS

                                       OF

                     SERIES B PARTICIPATING PREFERRED STOCK

                                       OF

                              HANOVER DIRECT, INC.

                         (Pursuant to Section 151 of the
                        Delaware General Corporation Law)

      Hanover Direct, Inc., a Delaware corporation (the "Company"), hereby
certifies that the following resolution (this "Resolution") was adopted by the
Board of Directors of the Company:

      "RESOLVED, that pursuant to the authority expressly granted to and vested
in the Board of Directors of the Company (the "Board of Directors") by the
provisions of the Certificate of Incorporation of the Company (the "Certificate
of Incorporation"), there is hereby created, out of the 5,000,000 shares of
preferred stock, par value $0.01 per share, of the Company authorized in Article
Fourth of the Certificate of Incorporation (the "Preferred Stock"), a series of
the Preferred Stock consisting of 1,622,111 shares, which series shall have the
following powers, designations, preferences and relative, participating,
optional and other rights, and the following qualifications, limitations and
restrictions (in addition to any powers, designations, preferences and relative,
participating, optional or other rights, and any qualifications, limitations and
restrictions, set forth in the Certificate of Incorporation which are applicable
to the Preferred Stock):

      Section 1. Designation; Amount. The shares of Preferred Stock created
hereby shall be designated the "Series B Participating Preferred Stock" (the
"Series B Preferred Stock") and the authorized number of shares constituting
such series shall be 1,622,111.
<PAGE>
      Section 2. Dividends.

            (a) In the event any dividends are declared or paid or any other
distribution is made on or with respect to the common stock, par value $0.66-2/3
per share ("Common Stock"), of the Company, the holders of the Series B
Preferred Stock as of the record date established by the Board of Directors for
such dividend or distribution on the Common Stock shall be entitled to receive
dividends ("Participating Dividends") per share of Series B Preferred Stock, in
an amount (whether in the form of cash, securities or other property) determined
by multiplying the Liquidation Preference (as defined below) per share of Series
B Preferred Stock by the Applicable Rate (this and certain other initially
capitalized terms used herein have the meanings given in Section 9 hereof). Such
Participating Dividends shall be payable to the holders of the Series B
Preferred Stock as of the date immediately prior to the record date for such
dividend or distribution on the Common Stock, which date shall be the record
date for the Participating Dividends, and such dividends are to be payable on
the same payment date established by the Board of Directors for the payment of
such dividend or distribution on the Common Stock to the persons in whose name
the Series B Preferred Stock is registered at the close of business on the
applicable record date.

            (b) No dividend shall be paid or declared on any share of Common
Stock, unless a dividend, payable in the same consideration and manner, is
simultaneously paid or declared, as the case may be, on each share of Series B
Preferred Stock in an amount determined as set forth above. For purposes hereof,
the term "dividends" shall include any pro rata distribution by the Company of
cash, property, securities (including, but not limited to, rights, warrants or
options) or other property or assets to the holders of the Common Stock, whether
or not paid out of capital, surplus or earnings.

            (c) Prior to declaring any dividend or making any distribution on or
with respect to shares of Common Stock, the Company shall take all prior
corporate action necessary to authorize the issuance of any securities payable
as a dividend in respect of the Series B Preferred Stock.

            (d) The terms "declared dividends" and "dividends declared" or any
similar reference to "declared but unpaid Participating Dividends," whenever
used in this Resolution with reference to shares of Series B Preferred Stock
shall be deemed to include dividends required by Section 2(b) hereof to be
declared, whether or not the same have in fact been declared at the time in
question.

            (e) No dividend may be declared or paid in respect of the shares of
Series B Preferred Stock, except to the extent permitted by and in accordance
with the terms and conditions of the Working Capital Facility Documents.

      Section 3. Liquidation Preference. In the event of a liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary (a
"Liquidation"), the holders of the Series B Preferred Stock then outstanding
shall, to the extent permitted by and subject to the terms and conditions of the
Working Capital Facility Documents, be

                                       2
<PAGE>
entitled to receive out of the available assets of the Company, whether such
assets are stated capital or surplus of any nature, an amount on such date equal
to the Liquidation Preference per share of Series B Preferred Stock plus the
amount of any declared but unpaid Participating Dividends thereon as of such
date. Such payment shall be made before any payment shall be made or any assets
distributed to the holders of any class or series of the Common Stock or any
other class or series of the Company's capital stock ranking junior as to
liquidation rights to the Series B Preferred Stock. If upon any Liquidation the
assets available for distribution to the holders of the Series B Preferred Stock
are insufficient to permit the payment to the holders of the Series B Preferred
Stock of the full preferential amounts described in this paragraph, then all the
remaining available assets shall be distributed among the holders of the then
outstanding shares of Series B Preferred Stock pro rata according to the number
of the then outstanding shares of Series B Preferred Stock held by each holder
thereof. A Corporate Transaction (as defined below) of the Company (other than
an Excluded Corporation Transaction (as defined below)) shall, at the election
of the holders of a majority of the shares of Series B Preferred Stock
outstanding at the time and as a condition precedent to the consummation of the
merger, consolidation or sale, constitute a Liquidation for purposes of this
Section 3, with the result that the Company shall be required to redeem, the
Series B Preferred Stock outstanding prior to the consummation of the merger,
consolidation or sale applying the redemption procedures set forth in Section 4
below (other than as to price) as if it were a mandatory redemption on the date
of such merger, consolidation or sale.

      Section 4. Redemption by the Company.

            (a) On August 23, 2005 (the "Final Redemption Date"), the Company
shall, to the extent permitted by and subject to the terms and conditions of the
Working Capital Facility Documents, redeem for cash all shares of Series B
Preferred Stock that are then outstanding at a redemption price per share equal
to the Liquidation Preference thereof plus the amount of any declared but unpaid
Participating Dividends thereon as of such date ("Final Redemption Price"). Not
more than sixty (60) nor less than thirty (30) days prior to the Final
Redemption Date, notice by first class mail, postage prepaid, shall be given to
each holder of record of the Series B Preferred Stock, at such holder's address
as it shall appear upon the stock register of the Company on such date. Each
such notice of redemption shall be irrevocable and shall specify the date that
is the Final Redemption Date, the Final Redemption Price, the identification of
the shares to be redeemed, the place or places of payment in New York, New York
and that payment will be made upon presentation and surrender of the
certificate(s) evidencing the shares of Series B Preferred Stock to be redeemed.
On or after the Final Redemption Date, each holder of shares of Series B
Preferred Stock shall surrender the certificate evidencing such shares to the
Company at the place designated in such notice and shall thereupon be entitled
to receive payment of the Final Redemption Price. If, on the Final Redemption
Date, funds in cash in an amount sufficient to pay the aggregate Final
Redemption Price for all outstanding shares of Series B Preferred Stock shall be
available therefor and shall have been irrevocably set aside and deposited with
a bank or trust company in trust for purposes of payment of such Final
Redemption Price, then, notwithstanding that the certificates evidencing any
shares so called for redemption shall not have been surrendered, the shares
shall no longer be deemed outstanding, the holders thereof shall cease to be

                                       3
<PAGE>
stockholders, and all rights whatsoever with respect to the shares so called for
redemption (except the right of the holders to receive the Final Redemption
Price upon surrender of their certificates therefor) shall terminate. If at the
Final Redemption Date, the Company does not have sufficient capital and surplus
legally available to redeem all the outstanding shares of Series B Preferred
Stock, the Company shall take all measures permitted under the Delaware General
Corporation Law to increase the amount of its capital and surplus legally
available, and the Company shall redeem as many shares of Series B Preferred
Stock as it may legally redeem, ratably from the holders thereof in proportion
to the number of shares held by them, and shall thereafter from time to time, as
soon as it shall have funds available therefor, redeem as many shares of Series
B Preferred Stock as it legally may until it has redeemed all of the outstanding
shares of Series B Preferred Stock.

            (b) To the extent permitted by and subject to the terms and
conditions of the Working Capital Facility Documents, the Company may, at any
time at its option, redeem all or any number of the then outstanding shares of
Series B Preferred Stock for cash at a redemption price per share (the "Optional
Redemption Price") equal to the Liquidation Preference thereof plus the amount
of all declared but unpaid Participating Dividends thereon as of the redemption
date. In order to exercise its right of optional redemption, the Company shall,
not more than sixty (60) nor less than thirty (30) days prior to the redemption
date, give notice by first class mail, postage prepaid, to each holder of record
of the Series B Preferred Stock, at such holder's address as it shall appear
upon the stock register of the Company on such date. Each such notice of
redemption shall be irrevocable and shall specify the redemption date (the
"Optional Redemption Date"), the Optional Redemption Price, the identification
of the shares to be redeemed, the place or places of payment in New York, New
York and that payment will be made upon presentation and surrender of the
certificate(s) evidencing the shares of Series B Preferred Stock to be redeemed.

      Section 5. Redemption at Option of Holders.

            (a) In the event that a Change of Control (as defined below) shall
occur at any time while any shares of Series B Preferred Stock are outstanding,
each of the holders of the then outstanding shares of Series B Preferred Stock
shall have the right to give notice that they are exercising a Change of Control
election (a "Change of Control Election") with respect to all or any number of
such holder's shares of Series B Preferred Stock, during the period ending on
the 30th day after the earlier of (i) such holder's receipt of the notice
referred to in Section 5(c) hereof or (ii) the date as of which such holder
obtains actual knowledge of such Change of Control. Upon any such election, the
Company shall, to the extent permitted by and subject to the terms and
conditions of the Working Capital Facility Documents, redeem for cash each of
such holder's shares for which such an election is made at a redemption price
equal to the Liquidation Preference thereof plus the amount of any declared but
unpaid Participating Dividends thereon as of the Change of Control Payment Date.

            (b) As used herein, "Change of Control" means the occurrence of any
of the following events:

                                       4
<PAGE>
                  (1) the acquisition, in a transaction approved by the Board of
Directors, by any Person, other than Richemont Finance S.A. ("Richemont"), or
its affiliates, including any "person" within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), of beneficial ownership within the meaning of Rule 13d-3 promulgated
under the Exchange Act, of more than 50% of either

            (i)   the then outstanding shares of Common Stock (the "Outstanding
                  Company Common Stock") or

            (ii)  the combined voting power of the then outstanding securities
                  of the Company entitled to vote generally in the election of
                  directors (the "Outstanding Company Voting Securities");

                  (2) a majority of the individuals who, as of the Closing Date,
constitute the members of the Board of Directors not elected by the holders of
Series B Preferred Stock or Richemont or its affiliates (the "Incumbent Board")
cease for any reason to serve on such Board of Directors; provided that any
individual who becomes a director of the Company subsequent to the Closing Date,
whose election, or nomination for election by the Company's stockholders, was
approved by the vote of at least a majority of the directors then comprising the
Incumbent Board shall be deemed a member of the Incumbent Board; and provided,
further, that any individual who was initially elected as a director of the
Company as a result of an actual or threatened election contest, as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, or
any other actual or threatened solicitation of proxies or consents by or on
behalf of any Person other than the Board of Directors shall not be deemed a
member of the Incumbent Board; or

                  (3) approval by the stockholders of the Company of a
reorganization, merger or consolidation of the Company or sale or other
disposition of all or substantially all of the assets of the Company (a
"Corporate Transaction"); excluding, however, a Corporate Transaction (an
"Excluded Corporate Transaction") pursuant to which the individuals or entities
who are the beneficial owners, respectively, of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or indirectly, more than
50% of, respectively, the outstanding shares of common stock, and the combined
voting power of the outstanding securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting from, or
the transferee Person in, such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns 100% of the
Outstanding Company Common Stock or all or substantially all of the Company's
assets either directly or indirectly) in substantially the same proportions
relative to each other as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be.

                                       5
<PAGE>
            (c) On or before the third (3rd) Business Day after a Change of
Control, the Company shall mail to all holders of record of the Series B
Preferred Stock at their respective addresses as the same shall appear on the
books of the Company as of such date, a notice disclosing (i) the Change of
Control, (ii) that, if such holder exercises the Change of Control Election, the
Company will redeem any or all of such holder's shares of Series B Preferred
Stock at a redemption price equal to the Liquidation Preference thereof plus the
amount of accrued and unpaid Participating Dividends as of the Change of Control
Payment Date and (iii) the procedure which the holder must follow to exercise
the Change of Control Election. To exercise the Change of Control Election, a
holder of the Series B Preferred Stock must deliver, during the 30-day period
referred to in Section 5(a) hereof, written notice to the Company (or an agent
designated by the Company for such purpose) of the holder's exercise of the
Change of Control Election, accompanied by each certificate evidencing shares of
the Series B Preferred Stock with respect to which the Change of Control
Election is being exercised, duly endorsed for transfer to the Company. On or
prior to the third (3rd) Business Day after the end of such 30-day period or
after such earlier date as elections are received from all holders of the Series
B Preferred Stock (the "Change of Control Payment Date") after receipt of each
such written notice, the Company shall redeem all shares of Series B Preferred
Stock properly surrendered to the Company (or an agent designated by the Company
for such purpose) during the 30-day period referred to in Section 5(a) hereof
for redemption in connection with the exercise of the Change of Control Election
and shall cause payment to be made on such day in cash for such shares of Series
B Preferred Stock. If in connection with any Change of Control Election, the
Company does not have sufficient capital and surplus legally available to redeem
all of the outstanding shares of Series B Preferred Stock with respect to which
a Change of Control Election has been made, the Company shall take all measures
permitted under the Delaware General Corporation Law to increase the amount of
its capital and surplus legally available, and the Company shall redeem as many
shares of Series B Preferred Stock with respect to which the Change of Control
Election has been made as it has capital and surplus legally available therefor,
ratably from the holders thereof in proportion to the total number of shares
tendered, and shall thereafter from time to time, as soon as it shall have
capital and surplus legally available therefor, redeem as many shares of Series
B Preferred Stock as it has capital and surplus available therefor until it has
redeemed all of the outstanding shares of Series B Preferred Stock with respect
to which the Change of Control Election has been made.

            (d) In the event that an Asset Disposition shall occur at any time
while any shares of Series B Preferred Stock are outstanding, each of the
holders of the then outstanding shares of Series B Preferred Stock shall have
the right to give notice that they are exercising an Asset Disposition election
(an "Asset Disposition Election") with respect to all or any number of such
holder's shares of Series B Preferred Stock, during the period ending on the
30th day after the earlier of (i) such holder's receipt of the notice referred
to in Section 5(e) hereof or (ii) the date as of which such holder obtains
actual knowledge of such Asset Disposition. Upon any such election, subject to
the last sentence of the last paragraph of this Section 5(d), the Company shall,
to the extent permitted by and subject to the terms and conditions of the
Working Capital Facility Documents, redeem for cash each of such holder's shares
for which such an election is made, to the extent of the remaining Net Available
Cash after application of clauses (A)

                                       6
<PAGE>
and (B) below and as permitted by applicable law, at a redemption price equal to
the Liquidation Preference thereof plus the amount of any declared but unpaid
Participating Dividends thereon as of the Asset Disposition Payment Date (as
defined below) ("Asset Disposition Redemption Price") on the terms and subject
to the conditions set forth in this Section 5(d).

      The Company will not and will not permit any of the Company's Subsidiaries
to, directly or indirectly, consummate any Specified Asset Disposition unless
the following conditions are satisfied:

            (i)   such Specified Asset Disposition is permitted by the Working
                  Capital Facility Documents;

            (ii)  the Company or such Subsidiary receives consideration at the
                  time of such Specified Asset Disposition at least equal to the
                  fair market value (including as to the value of all non-cash
                  consideration), as determined in good faith by the Company's
                  Board of Directors; provided, however, that such condition
                  shall not be applicable if the holders of at least two-thirds
                  of the outstanding shares of Series B Preferred Stock consent
                  to the waiver of the provisions of this clause (ii), and

            (iii) an amount equal to 100% of the Net Available Cash from such
                  Specified Asset Disposition is applied by the Company (or such
                  Subsidiary, as the case may be) as provided in subparagraphs
                  (A), (B) and (C) below; provided, however, that such condition
                  shall not be applicable if the holders of at least two-thirds
                  of the outstanding shares of Series B Preferred Stock consent
                  to the waiver of the provisions of this clause (iii):

      (A)   first, to prepay, repay, redeem or purchase its indebtedness under
            the Working Capital Facility Documents;

      (B)   second, at the election of the Company, to retain an amount such
            that the sum of Excess Availability (as defined in the Working
            Capital Facility Documents in effect on the date thereof) and cash,
            cash equivalents and marketable securities of the Company and its
            Subsidiaries, after giving effect to the prepayment under clause (A)
            above, is not more than $22,000,000; and

      (C)   third, to the extent of the balance of such Net Available Cash after
            application in accordance with clauses (A) and (B), to make an offer
            to the holders of the Series B Preferred Stock to redeem the Series
            B Preferred Stock for cash pursuant to and subject to the conditions
            contained in this Section 5;

            provided, however, that (1) in connection with any prepayment,
            repayment or purchase of indebtedness pursuant to clause (A), the

                                       7
<PAGE>
            Company or any such Subsidiary will permanently retire such
            indebtedness and will cause the related loan commitment (if any) to
            be permanently reduced in an amount equal to the principal amount so
            prepaid, repaid or purchased, to the extent permitted by and subject
            to the terms and conditions of the Working Capital Facility
            Documents, and (2) any application of the Net Available Cash from
            such Asset Disposition shall be subject to the terms and conditions
            of the Working Capital Facility Documents.

      If and to the extent any Net Available Cash from any Specified Asset
Disposition is retained by the Company in accordance with clause (ii)(B) of the
preceding paragraph (any such amount so retained, the "Shortfall"), the Company
shall, not later than fifty (50) days following the date of such Specified Asset
Disposition, be required to calculate its average Excess Availability for the
forty-five (45) days following the date of such Specified Asset Disposition
("Average Excess Availability") and deliver a notice executed by the Company's
principal financial officer to the holders of record of the Series B Preferred
Stock certifying the calculation of the Average Excess Availability. To the
extent the Average Excess Availability exceeds $22,000,000 (such amount, the
"Excess"), the Company shall, to the extent permitted by and subject to the
terms and conditions of the Working Capital Facility Documents, be required to
use any amount of such Excess (up to the amount of the Shortfall) to make a
further offer to the holders of the Series B Preferred Stock to redeem
additional shares of the Series B Preferred Stock for cash pursuant to and
subject to the conditions contained in this Section 5 (except that references to
the date of the Specified Asset Disposition shall instead refer to the final day
of the 45-day period referred to above).

      The Company will not, and will not permit any of the Company's
Subsidiaries to, directly or indirectly, consummate any Asset Disposition other
than a Specified Asset Disposition unless the following conditions are
satisfied:

            (i)   the Company or such Subsidiary receives consideration at the
                  time of such Asset Disposition at least equal to the fair
                  market value (including as to the value of all non-cash
                  consideration), as determined in good faith by the Company's
                  Board of Directors; provided, however, that such condition
                  shall not be applicable if the holders of at least two-thirds
                  of the outstanding shares of Series B Preferred Stock consent
                  to the waiver of the provisions of this clause (i), and

            (ii)  an amount equal to 100% of the Net Available Cash from such
                  Asset Disposition is applied by the Company (or such
                  Subsidiary, as the case may be) as provided in subparagraphs
                  (A) and (B) below; provided, however, that such condition
                  shall not be applicable if the holders of at least two-thirds
                  of the outstanding shares of Series B Preferred Stock consent
                  to the waiver of the provisions of this clause (ii):

                                       8
<PAGE>
      (A)   first, to repay in full and indefeasibly satisfy all Obligations (as
            defined therein) under the Working Capital Facility Documents; and

      (B)   second, to the extent of the balance of such Net Available Cash
            after application in accordance with clause (A), to make an offer to
            the holders of the Series B Preferred Stock to redeem the Series B
            Preferred Stock for cash pursuant to and subject to the conditions
            contained in this Section 5.

      The Company shall not be obligated to redeem any shares of Series B
Preferred Stock pursuant to this Section 5(d) unless and until the holders of
two-thirds of the then outstanding shares of Series B Preferred Stock (the
"Requisite Holders") have made an Asset Disposition Election.

            (e) On or before the third (3rd) Business Day after an Asset
Disposition, the Company shall mail to all holders of record of the Series B
Preferred Stock at their respective addresses as the same shall appear on the
books of the Company as of such date, a notice disclosing (i) the Asset
Disposition, (ii) that, if such holder exercises an Asset Disposition Election,
the Company will redeem any or all of such holder's shares of Series B Preferred
Stock at the Asset Disposition Redemption Price and (iii) the procedure which
the holder must follow to exercise the Asset Disposition Election; provided,
that the Company will not be required to mail such notice if and to the extent
that there is no balance of Net Available Cash for application in accordance
with clause (ii)(C) of Section 5(d) above. To exercise the Asset Disposition
Election, a holder of the Series B Preferred Stock must deliver during the
30-day period referred to in Section 5(d) written notice to the Company (or an
agent designated by the Company for such purpose) of the holder's exercise of
the Asset Disposition Election, accompanied by each certificate evidencing
shares of the Series B Preferred Stock with respect to which the Asset
Disposition Election is being exercised, duly endorsed for transfer to the
Company. On or prior to the third (3rd) Business Day after the end of such
30-day period or after such earlier date as elections are received from all
holders of the Series B Preferred Stock (the "Asset Disposition Payment Date"),
to the extent permitted by and subject to the terms and conditions of the
Working Capital Facility Documents, the Company shall, to the extent of the
balance of Net Available Cash pursuant to clause (ii)(C) of Section 5(d) above
and subject to the last sentence of the last paragraph of Section 5(d) above
redeem all shares of Series B Preferred Stock properly surrendered to the
Company (or an agent designated by the Company for such purpose) during the
30-day period referred to in Section 5(d), for redemption in connection with the
exercise of the Asset Disposition Election and shall cause payment to be made on
such day in cash for such shares of Series B Preferred Stock. If, in connection
with any Asset Disposition Election, there is Net Available Cash but the Company
does not have sufficient capital and surplus legally available to redeem all of
the outstanding shares of Series B Preferred Stock with respect to which an
Asset Disposition Election has been made, the Company shall, to the extent
permitted by and subject to the terms and conditions of the Working Capital
Facility Documents, take all measures permitted under the Delaware General
Corporation Law to increase the amount of its capital and surplus legally
available, and the Company shall redeem as many shares of Series B Preferred
Stock with respect to which the Asset Disposition Election has been made as it
has capital and surplus legally

                                       9
<PAGE>
available therefor, ratably from the holders thereof in proportion to the total
number of shares tendered, and shall thereafter from time to time, to the extent
permitted by and subject to the terms and conditions of the Working Capital
Facility Documents, as soon as it shall have capital and surplus legally
available therefor, redeem as many shares of Series B Preferred Stock as it has
capital and surplus available therefor until it has redeemed all of the
outstanding shares of Series B Preferred Stock with respect to which the Asset
Disposition Election has been made.

            (f) In the event that an Equity Sale shall occur at any time while
any shares of Series B Preferred Stock are outstanding, each of the holders of
the then outstanding shares of Series B Preferred Stock shall have the right to
give notice that they are exercising an Equity Sale election ("Equity Sale
Election") with respect to all or any number of such holder's shares of Series B
Preferred Stock during the period ending on the 30th day after the earlier of
(i) such holder's receipt of the notice referred to in Section 5(g) or (ii) the
date as of which such holder obtains actual knowledge of such Equity Sale. Upon
any such election, the Company shall, to the extent permitted by and subject to
the terms and conditions of the Working Capital Facility Documents, redeem for
cash each of such holder's shares for which such an election is made, to the
extent of the remaining Available Cash after application of clause (A) below and
as permitted by applicable law, at a redemption price equal to the Liquidation
Preference thereof plus the amount of accrued and unpaid Participating Dividends
thereon as of the Equity Sale Payment Date (as defined below) ("Equity Sale
Redemption Price") on the terms and subject to the conditions set forth in this
Section 5(f). The Company will not and will not permit any of the Company's
Subsidiaries to, directly or indirectly, consummate any Equity Sale unless the
following conditions are satisfied:

            (i)   such Equity Sale is permitted by the Working Capital Facility
                  Documents;

            (ii)  the Company or such Subsidiary receives consideration at the
                  time of such Equity Sale at least equal to the fair market
                  value (including as to the value of all non-cash
                  consideration), as determined in good faith by the Company's
                  Board of Directors; provided, however, that such condition
                  shall not be applicable if the holders of at least two-thirds
                  of the outstanding shares of Series B Preferred Stock consent
                  to the waiver of the provisions of this clause (ii), and

            (iii) an amount equal to 100% of the Available Cash from such Equity
                  Sale is applied by the Company (or such Subsidiary, as the
                  case may be) as provided in subparagraphs (A) and (B) below;
                  provided, however, that such condition shall not be applicable
                  if the holders of at least two-thirds of the outstanding
                  shares of Series B Preferred Stock consent to the waiver of
                  the provisions of this clause (iii);

                                       10
<PAGE>
      (A)   first, to prepay, repay, redeem or purchase its indebtedness under
            the Working Capital Facility Documents; and

      (B)   second, to the extent of the balance of such Available Cash after
            application in accordance with clause (A), to make an offer to the
            holders of the Series B Preferred Stock to redeem the Series B
            Preferred Stock for cash pursuant to and subject to the conditions
            contained in this Certificate of Designations;

            provided, however, that (1) in connection with any prepayment,
            repayment or purchase of indebtedness pursuant to clause (A) above,
            the Company or any such Subsidiary will permanently retire such
            indebtedness and will cause the related loan commitment (if any) to
            be permanently reduced in an amount equal to the principal amount so
            prepaid, repaid or purchased, to the extent permitted by and in
            accordance with the terms and conditions of the Working Capital
            Facility Documents, and (2) any application of the Available Cash
            from such Equity Sale shall be subject to the terms and conditions
            of the Working Capital Facility Documents.

      The Company shall not be obligated to redeem any shares of Series B
Preferred Stock pursuant to this Section 5(f) unless and until the Requisite
Holders have made an Equity Sale Election.

            (g) On or before the third (3rd) Business Day after an Equity Sale,
the Company shall mail to all holders of record of the Series B Preferred Stock
at their respective addresses as the same shall appear on the books of the
Company as of such date, a notice disclosing (i) the Equity Sale, (ii) that, if
such holder exercises an Equity Sale Election, the Company will, to the extent
permitted by applicable law, redeem any or all of such holder's shares of Series
B Preferred Stock at the Equity Sale Redemption Price and (iii) the procedure
which the holder must follow to exercise the Equity Sale Election; provided,
that the Company will not be required to mail such notice if and to the extent
that there is no balance of Available Cash for application in accordance with
clause (ii)(B) of Section 5(f) above. To exercise the Equity Sale Election, a
holder of the Series B Preferred Stock must deliver during the 30-day period
referred to in Section 5(f), written notice to the Company (or an agent
designated by the Company for such purpose) of the holder's exercise of the
Equity Sale Election, accompanied by each certificate evidencing shares of the
Series B Preferred Stock with respect to which the Equity Sale Election is being
exercised, duly endorsed for transfer to the Company. On or prior to the third
(3rd) Business Day after the end of such 30-day period or after such earlier
date as elections are received from all holders of the Series B Preferred Stock
(the "Equity Sale Payment Date"), to the extent permitted by and subject to the
terms and conditions of the Working Capital Facility Documents, the Company
shall, to the extent of the balance of Available Cash pursuant to clause (ii)(B)
of Section 5(f) above and subject to the last sentence of the last paragraph of
Section 5(f) above, redeem all shares of Series B Preferred Stock properly
surrendered to the Company (or an agent designated by the

                                       11
<PAGE>
Company for such purpose) during the 30-day period referred to in Section 5(f),
for redemption in connection with the exercise of the Equity Sale Election and
shall cause payment to be made on such day in cash for such shares of Series B
Preferred Stock. If, in connection with any Equity Sale Election, there is
Available Cash but the Company does not have sufficient capital and surplus
legally available to redeem all of the outstanding shares of Series B Preferred
Stock with respect to which an Equity Sale Election has been made, the Company
shall, to the extent permitted by and subject to the terms and conditions of the
Working Capital Facility Documents, take all measures permitted under the
Delaware General Corporation Law to increase the amount of its capital and
surplus legally available, and the Company shall redeem as many shares of Series
B Preferred Stock with respect to which the Equity Sale Election has been made
as it has capital and surplus legally available therefor, ratably from the
holders thereof in proportion to the total number of shares tendered, and shall
thereafter from time to time, to the extent permitted by and subject to the
terms and conditions of the Working Capital Facility Documents, as soon as it
shall have capital and surplus legally available therefor, redeem as many shares
of Series B Preferred Stock as it has capital and surplus available therefor
until it has redeemed all of the outstanding shares of Series B Preferred Stock
with respect to which the Equity Sale Election has been made.

            (h) In the event that the Company does not have sufficient funds to
take any of the actions required by this Section 5, then the Company shall, to
the extent permitted by and subject to the terms and conditions of the Working
Capital Facility Documents, purchase, redeem or otherwise acquire the shares of
Series B Preferred Stock from the holders thereof who make an election pursuant
to this Section 5 pro rata according to the number of then outstanding shares of
Series B Preferred Stock held by each holder thereof.

      Section 6. Restricted Payments; Status of Redeemed Shares.

            (a) After any Optional Redemption Date, Change of Control Payment
Date, Equity Sale Payment Date, Asset Disposition Payment Date or the Final
Redemption Date (each, a "Redemption Date"), unless and until the full
redemption price for the shares of Series B Preferred Stock to be redeemed has
been paid to, or set aside in trust with a bank or a trust company for the
benefit of, the holders of the Series B Preferred Stock, (i) no dividends or
other distribution shall be paid, declared, made or set aside for payment on the
Common Stock or any other capital stock of the Company ranking junior to or on a
parity with the Series B Preferred Stock as to dividends or as to distributions
upon Liquidation other than in shares of, or warrants or rights to acquire,
solely Junior Stock and (ii) no shares of capital stock of the Company ranking
junior to or on a parity with the Series B Preferred Stock as to dividends or as
to distributions upon Liquidation shall be redeemed, retired, purchased or
otherwise acquired for any consideration (or any payment made to or available
for a sinking fund for the redemption of any such shares) by the Company or any
Subsidiary (except by conversion into or exchange for solely shares of Junior
Stock).

            (b) Any shares of Series B Preferred Stock which shall at any time
have been redeemed pursuant to Sections 4 or 5 hereof shall, after such
redemption, be

                                       12
<PAGE>
retired and, upon the taking of any action required by applicable law, have the
status of authorized but unissued shares of Preferred Stock, without designation
as to series, and shall not be reissued as Series B Preferred Stock.

      Section 7. Voting Rights.

            (a) The Series B Preferred Stock shall have the voting rights set
forth in this Section 7.

            (b) On or before the third (3rd) day after the occurrence of a
Voting Trigger (as defined in Section 10 hereof), the Company shall mail to all
holders of record of the Series B Preferred Stock at their respective addresses
as the same shall appear on the books of the Company as of such date, a notice
disclosing (i) the Voting Trigger, and (ii) that such holders have the exclusive
right, voting separately as a class and by taking such actions as are set forth
in this Section 7(b), to elect two directors of the Company (the "Preferred
Stock Directors"), the remaining directors to be elected by the other class or
classes of stock entitled to vote therefor, at a meeting of stockholders held
for the purpose of electing directors (the "Director Right"); provided, that if
the holders of record of a majority of the outstanding shares of the Series B
Preferred Stock do not, within fifteen (15) days of the date on which notice of
the Voting Trigger is received by such holders notify the Company of their
intent to cause the Director Right to be vested, the Director Right shall not
vest solely with respect to the Voting Trigger of which notice was given;
provided, further, that in the event that such a notice is not received by the
Company, if the event giving rise to the relevant Voting Trigger is not cured or
is still in effect, as the case may be, on each subsequent six (6) month
anniversary of the occurrence of the Voting Trigger, the Company shall give
notice to such effect by mail to all holders of record of the Series B Preferred
Stock, and the holders of a majority of the outstanding shares of the Series B
Preferred Stock shall have an option, exercisable within fifteen (15) dates of
receipt of such notice, to cause the Director Right to be vested.

      In the event that the Director Right is vested in accordance with the
preceding paragraph, such Director Right may be exercised initially either at a
special meeting of the holders of the Series B Preferred Stock, called as
hereinafter provided, or at any annual meeting of stockholders held for the
purpose of electing directors, upon the written request of holders of record of
25% of the shares of Series B Preferred Stock then outstanding addressed to the
Secretary of the Company at least 10 days prior to the meeting, and thereafter
at such annual meetings or by the written consent of the holders of the Series B
Preferred Stock pursuant to Section 228 of the Delaware General Corporation Law.

      If such Director Right shall not already have been initially exercised, a
proper officer of the Company shall, upon the written request of holders of
record of 25% of the shares of the Series B Preferred Stock then outstanding
addressed to the Secretary of the Company, call a special meeting of holders of
the Series B Preferred Stock. Such meeting shall be held at the earliest
practicable date upon the notice required for annual meetings of stockholders at
the place for holding annual meetings of stockholders of the

                                       13
<PAGE>
Company or, if none, at a place in the City of New York, New York designated by
the Secretary of the Company. If such meeting shall not be called by the proper
officers of the Company within 30 days after the personal service of such
written request upon the Secretary of the Company, or within 30 days after
mailing the same within the United States, by registered mail, then the holders
of record of 25% of the shares of the Series B Preferred Stock then outstanding
may designate in writing a holder of the Series B Preferred Stock to call such
meeting at the expense of the Company.

      At any meeting held for the purpose of electing directors at which the
holders of the Series B Preferred Stock shall have the right to elect a
director, the presence in person or by proxy of the holders of a majority of the
then outstanding shares of the Series B Preferred Stock shall be required and be
sufficient to constitute a quorum of such class for the election of a director
by such class. In any such election, the holders of Series B Preferred Stock
shall be entitled to cast one vote per share of Series B Preferred Stock held of
record on the record date for the determination of the holders of Series B
Preferred Stock entitled to vote in such election. If the directors are to be
elected at an annual meeting, the Preferred Stock Directors shall be elected at
the same time as other members of the Board of Directors. A Preferred Stock
Director may only be removed without cause by the vote of the holders of a
majority of the Series B Preferred Stock, at a vote of the then outstanding
shares of Series B Preferred Stock, voting as a single class, at a meeting
called for such purpose (or by unanimous written consent in lieu of such a
meeting) in accordance with the voting procedures set forth in Section 7(b).

      The term of office of each Preferred Stock Director shall terminate upon
the election of his or her successor at any meeting of stockholders for the
purpose of electing directors (it being understood that such successor shall be
elected by the holders of the Series B Preferred Stock).

      Any action permitted to be taken by the holders of the Series B Preferred
Stock pursuant to this Section 7(b) may be taken without a meeting by the
written consent of the holders of Series B Preferred Stock having not less than
the minimum number of votes necessary to authorize or take such action.

      If for any reason a Preferred Stock Director shall resign or otherwise be
removed from the Board of Directors, then his or her replacement shall be a
person elected by the holders of the Series B Preferred Stock, in accordance
with the voting procedures set forth in Section 7(b).

            (c) So long as any shares of Series B Preferred Stock remain
outstanding, the Company shall not, without the written consent or affirmative
vote of the holders of at least two-thirds of the outstanding shares of Series B
Preferred Stock, (i) amend, alter or repeal, whether by merger, consolidation,
combination, reclassification or otherwise, the Certificate of Incorporation or
By-laws of the Company or any provisions thereof (including the adoption of a
new provision thereof) if such amendment, alteration or repeal would adversely
alter or change the rights, preferences or privileges of the Series B Preferred
Stock or (ii) create, authorize or issue any class, series or shares of
Preferred Stock or any other class of capital stock ranking either as to payment
of

                                       14
<PAGE>
dividends or distribution of assets upon Liquidation (x) prior to or on a parity
with the Series B Preferred Stock or (y) junior to the Series B Preferred Stock,
if such junior securities may be redeemed, in any circumstance, on or prior to
the Final Redemption Date. The vote of the holders of at least two-thirds of the
outstanding shares of Series B Preferred Stock, voting separately as one class,
shall be necessary to adopt any alteration, amendment or repeal of any provision
of the Certificate of Designations setting forth a copy of this Resolution, in
addition to any other vote of stockholders required by law.

            (d) The holders of the Series B Preferred Stock shall be entitled to
vote at or participate in any meeting of stockholders of the Company, and to
participate in any action proposed to be taken by written consent, in each case
together with the holders of the Common Stock voting or consenting as a single
class, and to receive notice of any such meeting or any such proposed action in
the same manner as notice is provided to holders of the Common Stock. Each share
of Series B Preferred Stock shall be entitled to ten (10) votes per share when
so voting or consenting with the Common Stock as a single class. In addition,
each share of Series B Preferred Stock will entitle the holder thereof to vote
in accordance with applicable law.

      Section 8. Observer Rights.

            (a) For so long as Richemont continues to own at least twenty-five
percent (25%) of the shares of Series B Preferred Stock then outstanding, the
Company shall invite a representative of Richemont (the "Representative"), which
Representative shall be selected from time to time by Richemont and reasonably
acceptable to the Company, to attend, in person or by conference call, all
meetings of the Board of Directors and any committee thereof (provided that the
Company shall be entitled to exclude the Representative from a meeting of any
committee of independent directors for the purpose of considering transactions
involving Richemont or its affiliates (other than the Company and its
Subsidiaries) and from any meeting of the Board or a committee if the Board or
such committee determines that, in light of the business to be transacted, the
presence of the Representative would not be appropriate ) in a non-voting
observer capacity and, in this respect, shall give such Representative (at the
same time and in the same manner as given to members of the Board of Directors
or the relevant committee) copies of all notices, minutes, consents and other
Board of Directors' or committee members' materials (with the exception of
materials provided to members of any committee of independent directors with
respect to any meeting for the purpose of considering transactions involving
Richemont or its affiliates (other than the Company and its Subsidiaries) and
with the exception of materials which the Board or a committee thereof
determines, in light of the content of such materials, is not appropriate to
provide the Representative) that it provides to its directors or committee
members (as appropriate); provided, however, that in no event shall the failure
to provide the notice described above or to provide the Representative with the
minutes, consents and other materials described above invalidate in any way any
action taken at a meeting of the Board of Directors or any meeting of any
committee thereof.

            (b) Richemont and the Company agree that knowledge of any matter or
information discussed or presented for discussion at any of the Company's Board
of

                                       15
<PAGE>
Director's meetings, including any committees thereof, or any portion thereof at
which the Representative is not present in person or by conference telephone
will not be imputed to Richemont or its Representative to the extent that such
matter or information is not expressly set forth in notices, minutes, consents
and other written materials actually received by the Representative.
Furthermore, Richemont and the Company agree that the Representative will be
given sufficient time by the Chairperson of the Board of Directors or the
relevant committee thereof to withdraw at the Representative's election from
observation of or participation in any of the Company's Board of Directors'
meetings, including any committees thereof, prior to the commencement of any
discussion of material non-public information.

            (c) In connection with attendance at any meeting of the Company's
Board of Directors, including any committees thereof, the Company shall
reimburse Richemont for any reasonable out-of-pocket expenses incurred by the
Representative.

            (d) The Company represents and warrants that it has secured all
approvals and consents required to grant the contractual rights contained in
this Section 8 to Richemont and the Representative.

            (e) Richemont agrees that it will execute and deliver to the
Company, and cause each Representative to execute and deliver to the Company and
Richemont, an agreement, in form and substance reasonably satisfactory to the
Company, pursuant to which Richemont or the Representative, as the case may be,
agrees to hold confidential all information which Richemont or the
Representative, as the case may be, learns as a result of the attendance by the
Representative at the Board of Director and committee meetings.

      In addition to and not in limitation of any foregoing reference to the
Working Capital Facility Documents, the terms and conditions of the Series B
Preferred Stock are subject to the terms and conditions of the Working Capital
Facility Documents.

      Section 9. Certain Definitions.

      The following terms shall have the following respective meanings herein:

      "Applicable Rate" means, with respect to any dividend required to be paid
pursuant to Section 2(a) hereof due to the declaration or payment of a dividend
on the Common Stock, a fraction (x) the numerator of which is the dividend per
share of Common Stock so declared or paid and (y) the denominator of which is
the per share Fair Market Value of the Common Stock as of the close of business
on the Business Day immediately preceding the record date for such dividend on
the Common Stock.

      "Approved Option Plan" means, collectively, (i) the Company's Stock Option
Plan, as amended, 1993 Restricted Stock Award Plan, All Employee Equity
Investment Plan, 1993 Executive Equity Investment Plan, as amended, 1996 Stock
Option Plan, as amended, 1999 Stock Option Plan for Directors and 2000
Management Stock Option Plan, as well as the Short-Term and Long-Term Incentive
Plans for Rakesh K. Kaul and options granted pursuant to the Services Agreement
between the Company and Meridian

                                       16
<PAGE>
Ventures, LLC and Thomas C. Shull together providing for the aggregate issuance
of not more than 53,630,000 shares of Common Stock thereunder (subject to
adjustment as therein provided for certain capital events) and (ii) a stock
option plan or plans adopted after August 23, 2000 providing for the grant of
options to employees and directors of the Company to purchase not more than
1,000,000 shares of Common Stock at an exercise price per share as of the date
of the grant not less than the fair market value per share of Common Stock as of
the date of the grant.

      "Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by the Company
or any Subsidiary, including any disposition by means of a merger, consolidation
or similar transaction, of any of the following (in each case, to the extent
permitted by and subject to the terms and conditions of the Working Capital
Facility Documents):

            (i)   any shares of common stock of a Subsidiary (other than
                  directors' qualifying shares or shares required by applicable
                  law to be held by a Person other than the Company or a
                  Subsidiary),

            (ii)  all or substantially all the assets of any division or line of
                  business of the Company or any Subsidiary, or

            (iii) any other assets of the Company or any Subsidiary outside of
                  the ordinary course of business of the Company or such
                  Subsidiary.

      Notwithstanding the preceding, the following items shall not be deemed to
be Asset Dispositions:

            (i)   a transfer of assets between or among the Company and its
                  wholly owned Subsidiaries, or

            (ii)  an issuance of Capital Stock by a wholly owned Subsidiary to
                  the Company or to another wholly owned Subsidiary.

      "Available Cash" from an Equity Sale means cash payments, cash equivalents
and Marketable Securities received therefrom after payment of underwriting
discounts placement fees or similar commissions.

      "Business Day" means a day other than a Saturday, Sunday or day on which
banking institutions in New York are authorized or required to remain closed.

      "Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.

      "Congress" means Congress Financial Corporation, and its affiliates and
their respective successors and assigns (including, without limitation, any
replacement or take out lender with respect to the Working Capital Facility
Documents).

                                       17
<PAGE>
      "Common Stock" means the common stock, par value $0.66-2/3 per share, of
the Company.

      "Equity Sale" means, to the extent permitted by and subject to the terms
and conditions of the Working Capital Facility Documents, the issuance or sale
by the Company or a Subsidiary of Capital Stock of the Company or a Subsidiary
(or any series of related issuances or sales) where the cumulative aggregate
gross proceeds to the Company and its Subsidiaries equals or exceeds $1.0
million; provided, that there shall be excluded from the foregoing the sale of
Common Stock of the Company upon the exercise of options issued under an
Approved Option Plan and the sale of common stock of a Subsidiary which
constitutes an Asset Disposition.

      "Fair Market Value" means, per share of Common Stock, the Twenty Day
Average of the average closing prices of the Common Stock's sales on all
domestic securities exchanges on which the Common Stock may at the time be
listed, or, if there have been no sales on any such exchange on any day, the
average of the highest bid and lowest asked prices on all such exchanges at the
end of such day, or, if on any day the Common Stock is not so listed, the
average of the representative bid and asked prices quoted in the NASDAQ National
Market System (including the NASDAQ Small Cap Market) as of 4:00 P.M., New York
City time, on such day, or, if on any day the Common Stock is not quoted in the
NASDAQ National Market System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by Pink
Sheets LLC, or any similar or successor organization (and in each such case
excluding any trades that are not bona fide, arm's length transactions). If at
any time the Common Stock is not listed on any domestic securities exchange or
quoted in the NASDAQ National Market System or the domestic over-the-counter
market, the "Fair Market Value" of the Common Stock shall be the fair market
value thereof as determined (I) jointly by the Company and Richemont if
Richemont then owns a majority in aggregate liquidation preference of the shares
of Series B Preferred Stock then outstanding or (ii) if Richemont and the
Company cannot so agree, by an internationally recognized investment banking
firm selected by Richemont and reasonably acceptable to the Company or (iii) if
Richemont does not then own a majority in aggregate liquidation preference of
the shares of Series B Preferred Stock then outstanding, by an internationally
recognized investment banking firm selected by the Company and reasonably
acceptable to the holder of a majority in aggregate Liquidation Preference of
the shares of Series B Preferred Stock then outstanding.

      "GAAP" means U.S. generally accepted accounting principles consistently
applied.

      "Junior Stock" means capital stock of the Company ranking junior to the
Series B Preferred Stock both as to dividends and as to distributions upon
liquidation, dissolution or winding up of the Company.

      "Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).

                                       18
<PAGE>
      "Liquidation Preference" means initially $47.36; provided, however, that
during each period set forth on the table below, the Liquidation Preference
shall equal the amount set forth opposite such period:

<TABLE>
<CAPTION>
               Period                                     Liquidation Preference
               ------                                     ----------------------
<S>                                                       <C>
Original Issuance Date - February 28, 2002                        $47.36
March 1, 2002 - May 31, 2002                                      $49.15
June 1, 2002 - August 31, 2002                                    $51.31
September 1, 2002 - November 30, 2002                             $53.89
December 1, 2002 - February 28, 2003                              $56.95
March 1, 2003 - May 31, 2003                                      $60.54
June 1, 2003 - August 31, 2003                                    $64.74
September 1, 2003 - November 30, 2003                             $69.64
December 1, 2003 - February 29, 2004                              $72.25
March 1, 2004 - May 31, 2004                                      $74.96
June 1, 2004 - August 31, 2004                                    $77.77
September 1, 2004 - November 30, 2004                             $80.69
December 1, 2004 - February 28, 2005                              $83.72
March 1, 2005 - May 31, 2005                                      $86.85
June 1, 2005 - August 23, 2005                                    $90.11
</TABLE>

      "Marketable Securities" means publicly traded debt or equity securities
that are listed for trading on a national securities exchange.

      "Net Available Cash" from an Asset Disposition means cash payments, cash
equivalents and Marketable Securities received therefrom (including any cash
payments received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise and proceeds from the sale or other
disposition of any securities received as consideration, but only as and when
required, but excluding any other consideration received in the form of
assumption by the acquiring Person of indebtedness or other obligations relating
to such properties or assets or received in any other noncash form), in each
case net of

            (i)   all legal, title and recording tax expenses, commissions and
                  other fees and expenses incurred, and all Federal, state,
                  provincial, foreign and local taxes required to be accrued as
                  a liability under GAAP, as a consequence of such Asset
                  Disposition,

            (ii)  all payments made on any indebtedness which is secured by any
                  assets subject to such Asset Disposition, in accordance with
                  the terms of any Lien upon or other security agreement of any
                  kind with respect to such assets, or which must by its terms,
                  or in order to obtain a necessary consent to such Asset
                  Disposition, or by applicable law, be repaid out of the
                  proceeds from such Asset Disposition,

                                       19
<PAGE>
            (iii) all distributions and other payments required to be made to
                  minority interest holders in Subsidiaries as a result of such
                  Asset Disposition, and

            (iv)  the deduction of appropriate amounts provided by the seller as
                  a reserve, in accordance with GAAP, against any liabilities
                  associated with the property or other assets disposed in such
                  Asset Disposition and retained by the Company or any
                  Subsidiary after such Asset Disposition.

      "Original Issuance Date" means December 19, 2001.

      "Outstanding Company Common Stock" shall have the meaning set forth in
Section 5.

      "Outstanding Company Voting Securities" shall have the meaning set forth
in Section 5.

      "Person" means and includes all natural persons, corporations, business
trusts, associations, companies, partnerships, limited liability companies and
other entities and governments and agencies and political subdivisions.

      "Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.

      "Richemont" means Richemont Finance S.A. and its affiliates and its and
their respective successors and assigns.

      "Specified Asset Dispositions" means the Asset Dispositions contemplated
by Section 3 of the Nineteenth Amendment to Loan Agreement.

      "Subsidiary" means any corporation, partnership, limited liability
company, trust, association or other entity (i) at least 50% of the outstanding
voting securities of which are at the time owned or controlled, directly or
indirectly, by the Company or (ii) with respect to which the Company possesses,
directly or indirectly, the power to direct or cause the direction of the
affairs or management of such person.

      "Twenty Day Average" means, with respect to any prices and in connection
with the calculation of Fair Market Value, the average of such prices over the
twenty Business Days ending on the Business Day immediately prior to the day as
of which "Fair Market Value" is being determined.

      "Voting Trigger" means the first to occur of any of the following:

                                       20
<PAGE>
            (i)   a default by the Company in respect of any of its obligations
                  under the Series B Preferred Stock or the Agreement, dated as
                  of December 19, 2001, between Richemont and the Company;

            (ii)  an "Event of Default" as defined under the Working Capital
                  Facility Documents as in effect on the date hereof,
                  irrespective of any requirement of notice or action by the
                  lenders thereunder; and

            (iii) a failure by the Company to redeem at least 811,056 shares of
                  Series B Preferred Stock on or prior to August 31, 2003.

      "Working Capital Facility Documents" means the revolving loan and term
loan facilities provided by Congress to the Company and certain of its
Subsidiaries and affiliates as set forth in the Loan and Security Agreement,
dated November 14, 1995, by and among the Lender, the Company and certain
Subsidiaries and affiliates of the Company, as amended, including, without
limitation, the Nineteenth Amendment to Loan and Security Agreement, dated as of
December 18, 2001 (the "Nineteenth Amendment to Loan Agreement"), together with
the other agreements, documents and instruments referred to therein or at any
time executed or delivered in connection therewith or related thereto, as the
same exist and are in effect, in each case, as of the date hereof ; provided,
that the term Working Capital Facility Documents shall include subsequent
amendments, modifications, supplements, restatements and replacements thereto
(including, without limitation, with a take out or replacement lender) so long
as such amendments, modifications, supplements, restatements or replacements do
not include any terms that are less favorable to the holders of the Series B
Participating Preferred Stock than the terms related solely to the following
provisions of the following Sections of the Nineteenth Amendment to Loan
Agreement as in effect on the date hereof: (a) the definitions contained in
Section 1, (b) the redemption of the Series B Participating Preferred Stock set
forth in Section 2 and the Asset Sales provisions set forth in Section 3, (c)
the provisions related to the application of proceeds set forth in Section 4,
and (d) the adjustments to the lending formulas set forth in Sections 5, 6, 7
and 8.

      Section 10. Dividend Received Deduction.

      For federal income tax purposes, the Company shall report distributions on
the Series B Preferred Stock as dividends, to the extent of the Company's
current and accumulated earnings and profits (as determined for federal income
tax purposes).

      Section 11. Withholding Taxes.

      All amounts payable with respect to the Series B Preferred Stock,
including without limitation actual or "deemed" dividends thereon or payments
upon redemption thereof, will be made free and clear of and without withholding
or deduction for or on account of any present or future taxes, duties, levies,
assessments or other governmental charges of whatever nature, including
interest, penalties and additions to tax, imposed or levied by or on behalf of
the United States or any political subdivision thereof or any authority or

                                       21
<PAGE>
agency thereof or therein having the power to tax payments in respect of the
Series B Preferred Stock (all such present or future taxes, duties, levies, and
assessments being hereinafter referred to as "Taxes"). If the Company shall be
required by law to withhold or deduct any Taxes from or in respect of any actual
or "deemed" dividend or any other sum payable in respect of the Series B
Preferred Stock (i) the amount required to be withheld and/or the sum payable
shall be increased as necessary so that after making all required withholdings
and deductions the holders of the then outstanding shares of Series B Preferred
Stock receive (or are treated as receiving) an amount equal to the amount they
would have received (or been treated as receiving) had no such withholdings or
deductions been made, (ii) the Company shall make such withholdings or
deductions, (iii) the Company shall pay the full amount withheld and/or deducted
to the relevant taxation authority or other authority in accordance with
applicable law, and (iv) the Company shall furnish each holder of the then
outstanding shares of Series B Preferred Stock, at its address referred to in
Section 7.2 of that certain Agreement, dated as of December 19, 2001 between the
Company and Richemont Finance S.A., or as otherwise noticed with respect
thereto, with the original or a certified copy of a receipt evidencing payment
thereof. The holders of the then outstanding shares of Series B Preferred Stock
shall supply the Company with such documentation as it reasonably may request
including, without limitation, Form W-8BEN.

      Section 12. No Reissuance.

      After the Original Issuance Date, no shares of Series B Preferred Stock
shall be issued or reissued as shares of Series B Preferred Stock. All shares of
Series B Preferred Stock surrendered for redemption or otherwise acquired by the
Company or any Subsidiary shall be retired and shall not be reissued as shares
of Series B Preferred Stock."

      Section 13. Severability.

      To the extent that any provision hereof is found to be invalid or
unenforceable, such invalidity or unenforceability shall not affect the validity
or enforceability of any other provision of this Certificate of Designations.

      Section 14. Delivery of Documents.

      The Company will deliver to any stockholder of the Company, upon its
request, copies of the Working Capital Facility Documents and any other
agreements or documents referred to herein, as well as any amendments to the
foregoing.

                                       22
<PAGE>
      IN WITNESS WHEREOF, the Company has caused this Certificate of
Designations to be signed by Thomas C. Shull, its President, this 19th day of
December, 2001.

                                    By:  /s/ Thomas C. Shull
                                         -------------------
                                           Name:  Thomas C. Shull
                                           Title: President

                                       23

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