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                                                                    Exhibit 10.1
June 23, 2003


                         EMPLOYMENT AGREEMENT AMENDMENT

                               Amendment Number 2

      This Amendment Number 2 to the Employment Agreement, made as of September
1, 2002 and amended by Amendment Number 1 thereto made as of September 1, 2002
(as so amended, the "Employment Agreement"), between Hanover Direct, Inc., a
Delaware corporation (the "Company"), and Thomas C. Shull ("Shull"), shall be
effective as of August 3, 2003.

                              W I T N E S S E T H :

      WHEREAS, the Company and Shull entered into the Employment Agreement; and

      WHEREAS, the Company and Shull now desire to amend the Employment
Agreement in certain respects.

      NOW, THEREFORE, it is agreed by and between the parties hereto to the
following amendments to the Employment Agreement:

      1. The first sentence of paragraph 4(a) of the Employment Agreement is
hereby amended to read as follows:

            "In consideration for providing his services as President/CEO,
            during the Agreement Term, Shull shall receive, in addition to the
            other consideration provided in this Agreement, compensation at the
            rate of $67,500 per month or $810,000 per annum (the "Base
            Compensation"), payable in accordance with the Company's normal
            payroll policies; provided, however, that for purposes of the 2002
            Management Incentive Plan referred to in Exhibit 1, and the 2003
            Management Incentive Plan, if any, Shull's annual Base Compensation
            shall be deemed to be $600,000 through March 31, 2003; and,
            provided, further, however, that solely for purposes of (1) Sections
            2.9(ii) and 5.1(i) of the Hanover Direct, Inc. Eighteen Month Key
            Executive Compensation Continuation Plan effective as of April 25,
            2001, as amended, (2) clause (ii) of the definition of "For Good
            Reason" contained in Section 5 of this Agreement, and (3) the
            Transaction Bonus Agreement between the Company and Shull dated May
            14, 2001 as amended September 1, 2002, Shull's Base Compensation
            (therein referred to as annualized base salary or base pay) shall be
            equal to the higher of Shull's Base Compensation
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            (or annualized base salary or base pay) at the time of the Change of
            Control and Shull's Base Compensation on August 2, 2003 ( which was
            $900,000)."

      2. Shull acknowledges that he is aware of and consents to the changes to
the Company's vacation and merchandise discount policies recently published or
to be published Company-wide, which constitute part of his employee benefits.

      3. Except as hereunder provided, the Employment Agreement shall remain in
full force and effect without further modification.

      IN WITNESS WHEREOF, the Company and Shull have executed this Amendment
Number 2 as of June 23, 2003.

                                    HANOVER DIRECT, INC.

                                    By: /s/ Brian C. Harriss
                                        ----------------------------------
                                        Name: Brian C. Harriss
                                        Title: EVP, HR & Legal



                                    /s/ Thomas C. Shull
                                    --------------------------------
                                    THOMAS C. SHULL