<PAGE>   1
                   THIRTEENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

      THIRTEENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated as of September
30, 1998, by and among CONGRESS FINANCIAL CORPORATION, a Delaware corporation,
successor by merger to Congress Financial Corporation, a California corporation
("Lender"), HANOVER DIRECT PENNSYLVANIA, INC., a Pennsylvania corporation
("HDPI"), BRAWN OF CALIFORNIA, INC., a California corporation ("Brawn"), GUMP'S
BY MAIL, INC., a Delaware corporation ("GBM"), GUMP'S CORP., a California
corporation ("Gump's"), HANOVER HOLDING CORP., a Delaware corporation, successor
by merger of The Company Store, Inc. with and into Tweeds, Inc. ("HH Corp."),
LWI HOLDINGS, INC., a Delaware corporation ("LWI"), AEGIS CATALOG CORPORATION, a
Delaware corporation ("Aegis"), HANOVER DIRECT VIRGINIA INC., a Delaware
corporation ("HDV"), HANOVER REALTY, INC., a Virginia corporation ("Hanover
Realty"), THE AUSTAD COMPANY, a South Dakota corporation ("Austad"), TWEEDS,
LLC, a Delaware limited liability company ("Tweeds LLC"), SILHOUETTES, LLC, a
Delaware limited liability company ("Silhouettes LLC"), HANOVER COMPANY STORE,
LLC, a Delaware limited liability company ("HCS LLC"), DOMESTICATIONS, LLC, a
Delaware limited liability company ("Domestications LLC"), COLONIAL GARDEN
KITCHENS, INC., a Delaware corporation ("Colonial Garden"; and together with
HDPI, Brawn, GBM, Gump's, HH Corp., LWT, Aegis, HDV, Hanover Realty, Tweeds LLC,
Silhouettes LLC, HCS LLC and Domestications LLC, each individually referred to
herein as a "Borrower" and collectively, "Borrowers"), and HANOVER DIRECT, INC.,
a Delaware corporation ("Hanover"), AEGIS RETAIL CORPORATION, a Delaware
corporation, AEGIS SAFETY HOLDINGS, INC., a Delaware corporation ("Aegis
Holdings"), AEGIS VENTURES, INC., a Delaware corporation ("Aegis Ventures"),
AMERICAN DOWN & TEXTILE COMPANY, a Wisconsin corporation, BRAWN WHOLESALE CORP.,
a California corporation ("Brawn Wholesale"), THE COMPANY STORE FACTORY, INC., a
Delaware corporation, successor by merger of The Company Factory, Inc., a
Wisconsin corporation, with and into The Company Store Factory, Inc. ("TCS
Factory"), THE COMPANY OFFICE, INC., a Delaware corporation, successor by merger
to The Company Office, Inc., a Wisconsin corporation ("TCS Office"), COMPANY
STORE HOLDINGS, INC., a Delaware corporation ("CSHI"), D.M. ADVERTISING, INC., a
New Jersey corporation, GUMP'S CATALOG, INC., a Delaware corporation, GUMP'S
HOLDINGS, INC., a Delaware corporation, HANOVER CASUALS, INC., a Delaware
corporation ("Hanover Casuals"), HANOVER CATALOG HOLDINGS, INC., a Delaware
corporation ("Hanover Catalog"), HANOVER FINANCE CORPORATION, a Delaware
corporation ("HFC"), HANOVER LIST MANAGEMENT INC., a New Jersey corporation,
HANOVER VENTURES, INC., a Delaware corporation, LWI RETAIL, INC., an Ohio
corporation, SCANDIA DOWN CORPORATION, a Delaware corporation ("Scandia"),
AUSTAD HOLDINGS, INC., a Delaware corporation ("Austad Holdings"), YORK
FULFILLMENT COMPANY, INC., a Pennsylvania corporation ("York Fulfillment"), and
TWEEDS OF VERMONT, INC., a Delaware corporation, HANOVER HOME FASHIONS GROUP,
LLC, a Delaware limited liability company ("HHFG


<PAGE>   2

LLC"), HANOVER WOMEN'S APPAREL, LLC, a Delaware limited liability company ("HWA
LLC"), and KEYSTONE FULFILLMENT, INC., a Delaware corporation ("Keystone") (each
individually a "Guarantor" and collectively, "Guarantors").

                              W I T N E S S E T H:

      WHEREAS, Borrowers, Guarantors and Lender are parties to the Loan and
Security Agreement, dated November 14, 1995, as amended by the First Amendment
to Loan and Security Agreement, dated February 22, 1996, the Second Amendment to
Loan and Security Agreement, dated April 16, 1996 (the "Second Amendment to Loan
Agreement"), the Third Amendment to Loan and Security Agreement, dated May 24,
1996, the Fourth Amendment to Loan and Security Agreement, dated May 31, 1996,
the Fifth Amendment to Loan and Security Agreement, dated September 11, 1996,
the Sixth Amendment to Loan and Security Agreement, dated as of December 5,
1996, the Seventh Amendment to Loan and Security Agreement, dated as of December
18, 1996, the Eighth Amendment to Loan and Security Agreement, dated as of March
26, 1997, the Ninth Amendment to Loan and Security Agreement, dated as of April
18, 1997, the Tenth Amendment to Loan and Security Agreement, dated as of
October 31, 1997, the Eleventh Amendment to Loan and Security Agreement, dated
as of March 25, 1998, and the Twelfth Amendment, dated as of September 30, 1998,
(as so amended, the "Loan Agreement"), pursuant to which Lender has made loans
and advances to Borrowers; and

      WHEREAS, Borrowers and Guarantors have requested that Lender make a term
loan to TCS Factory in the original principal amount of $2,000,000 and a term
loan to TCS Office in the original principal amount of $700,000; and

      WHEREAS, the parties to the Loan Agreement desire to enter into this
Thirteenth Amendment to Loan and Security Agreement (this "Amendment") to
evidence and effectuate such amendments and agreements, to the extent and
subject to the terms and conditions set forth herein;

      NOW, THEREFORE, in consideration of the premises and covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:

       1. Definitions.

            (a) Additional Definitions. As used herein or in any of the other
Financing Agreements, the following terms shall have the meanings given to them
below, and the Loan Agreement shall be deemed and is hereby amended to include,
in addition and not in limitation, the following definitions:


                                     - 2 -
<PAGE>   3

                  (i) "TCS Factory Lease" shall mean the Lease, dated as of
August 26, 1993, between Company Store Holdings, Inc., f/k/a TCSA, Inc., and TCS
Factory with respect to the Real Property covered by the Mortgage made by TCS
Factory to Lender, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.

                  (ii) "TCS Factory Term Loan" shall mean the Obligations at any
time outstanding in respect of the Term Loan to be made by Lender to TCS Factory
pursuant to Section 2(a) hereof.

                  (iii) "TCS Factory Term Note" shall mean the Term Promissory
Note, dated of even date herewith, made by TCS Factory payable to the order of
Lender in the original principal amount of $2,O00,000, as such note now exists
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.

                  (iv) "TCS Office Lease" shall mean the Lease, dated as of
August 26, 1993, between Company Store Holdings, Inc., f/k/a TCSA, Inc., and TCS
Office with respect to the Real Property covered by the Mortgage made by TCS
Office to Lender, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.

                  (v) "TCS Office Term Loan" shall mean the Obligations at any
time outstanding in respect of the Term Loan to be made by Lender to TCS Office
pursuant to Section 2(b) hereof.

                  (vi) "TCS Office Term Note" shall mean the Term Promissory
Note, dated of even date herewith, made by TCS Office payable to the order of
Lender in the original principal amount of $700,000, as such note now exists or
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.

            (b)   Amendments to Definitions.

                  (i) Mortgages. Section 1.86 of the Loan Agreement is hereby
deleted in its entirety and replaced with the following:

                  "1.86 "Mortgages" shall mean, individually and collectively,
            each of the following (as the same now exist or may hereafter be
            amended, modified, supplemented, extended, renewed, restated or
            replaced): (a) the Open-End Fee and Leasehold Mortgage and Security
            Agreement, dated as of November 14, 1995, by HDPI in favor of Lender
            with respect to the Real Property and related assets of HDPI located
            in Hanover, Pennsylvania, as amended by the Mortgage Modification


                                     - 3 -
<PAGE>   4

            Agreement, dated as of June 26, 1998, between Lender and HDPI, (b)
            the Deed of Trust, Assignment and Security Agreement, dated as of
            November 14, 1995, by Hanover Realty in favor of Lender with respect
            to the Real Property and related assets of Hanover Realty in
            Roanoke, Virginia, as amended by Amendment No. 1 to Deed of Trust,
            Assignment and Security Agreement, dated as of June 26, 1998,
            between Lender and Hanover Realty, (c) the Mortgage and Security
            Agreement, dated as of September 30, 1998, by TCS Factory in favor
            of Lender with respect to the Real Property and related assets of
            TCS Factory located at 2929 Airport Road, La Crosse, Wisconsin, and
            (d) the Mortgage and Security Agreement, dated as of September 30,
            1998, by TCS Office in favor of Lender with respect to the Real
            Property and related assets of TCS Office located at 455 Park Plaza
            Drive, La Crosse, Wisconsin."

                  (ii) Real Property.

                  (A) Section 4.1(vi) of the Loan Agreement is hereby deleted
and the following substituted therefor "(vi) [Intentionally Deleted]; and".

                  (B) Section 1.111 of the Loan Agreement shall be deemed
deleted in its entirety and replaced with the following:

                  "1.111 "Real Property" shall mean all now owned and hereafter
            acquired real property of Borrowers, together with all buildings,
            structures, and other improvements located thereon and all licenses,
            easements and appurtenances relating thereto, wherever located,
            including without limitation, the real property, leasehold interests
            and related assets more particularly described in the Mortgages,
            located in Hanover, Pennsylvania, Roanoke, Virginia, and La Crosse,
            Wisconsin."

                  (iii) Reference Bank. All references to the term "Reference
Bank" in the Loan Agreement and the other Financing Agreements shall be deemed
and each such reference is hereby amended to mean First Union National Bank, or
such other bank as Lender may from time to time designate.

                  (iv) Term Loan Borrowers. All references to the "Term Loan
Borrowers" herein and in the Loan Agreement and the other Financing Agreements
shall mean, individually and collectively, HDPI, Hanover Realty, TCS Factory and
TCS Office.

                  (v) Term Loans. All references to the "Term Loans" herein and
in the Loan Agreement and the other Financing Agreements shall mean,
individually and collectively, the


                                     - 4 -
<PAGE>   5

Obligations evidenced by the Restated HDPI Term Note, the Restated Hanover
Realty Term Note, the TCS Factory Term Note and the TCS Office Term Note.

      2. TCS Factory Term Loan; TCS Office Term Loan.

            (a) Subject to and upon the terms and conditions contained herein
and in the other Financing Agreements, Lender shall, contemporaneously herewith,
make a term loan to TCS Factory in the principal amount of Two Million Dollars
($2,000,000) (the "TCS Factory Term Loan"). The TCS Factory Term Loan is (a)
evidenced by the TCS Factory Term Note in such original principal amount duly
executed and delivered by TCS Factory to Lender concurrently herewith; (b) to be
repaid, together with interest and other amounts, in accordance with this
Agreement, the TCS Factory Term Note, and the other Financing Agreements; and
(C) secured by all of the Collateral.

            (b) Subject to and upon the terms and conditions contained herein
and in the other Financing Agreements, Lender shall, contemporaneously herewith,
make a term loan to TCS Office in the principal amount of Seven Hundred Thousand
Dollars ($700,000) (the "TCS Office Term Loan"). The TCS Office Term Loan is
(a) evidenced by the TCS Office Note in such original principal amount duly
executed and delivered by TCS Office to Lender concurrently herewith; (b) to be
repaid, together with interest and other amounts, in accordance with this
Agreement, the TCS Office Term Note, and the other Financing Agreements; and (c)
secured by all of the Collateral.

            (c) Each of TCS Office and TCS Factory hereby irrevocably authorizes
and directs Lender to disburse the proceeds of the TCS Office Term Loan and the
TCS Factory Term Loan to the respective Revolving Loan Borrowers in the
respective amounts set forth on Exhibit A attached hereto to repay or to
partially repay the outstanding amounts of intercompany loans owed by each of
TCS Office and TCS Factory, respectively, to such Revolving Loan Borrowers in
the amounts set forth on Exhibit A (each such disbursement, an "Intercompany
Loan Repayment Amount"). Each such Revolving Loan Borrower shall, in turn, treat
such disbursements by Lender of such Intercompany Loan Repayment Amounts as a
payment or partial payment of the outstanding amount of intercompany loans owed
by TCS Office or TCS Factory, as the case may be, to each such Revolving Loan
Borrower. Each such Revolving Loan Borrower hereby irrevocable authorizes and
directs Lender to then apply each such Intercompany Loan Repayment Amount to the
respective Revolving Loan account of each such Revolving Loan Borrower for
application to the then outstanding Obligations of each such Revolving Loan
Borrower to Lender in respect of Revolving Loans. Each such Revolving Loan
Borrower hereby acknowledges the right of Lender to charge principal, interest,
fees and other obligations of TCS


                                     - 5 -
<PAGE>   6

Office and TCS Factory as Term Loan Borrowers in respect of the TCS Office Term
Loan and the TCS Factory Term Loan to the Revolving Loan account of such
Revolving Loan Borrower under Section 2.9(f) of the Loan Agreement.

      3. Acknowledgment by Guarantors. Guarantors hereby acknowledge, confirm
and agree that their Guarantees guaranteeing the payment and performance of all
Obligations of Borrowers are in full force and effect as of the date hereof, and
the "Obligations" (as such term is defined in the Guarantees) shall, without
limitation, extend to and cover the TCS Factory Term Loan and the TCS Office
Term Loan.

      4. Representations, Warranties and Covenants. Borrowers and Guarantors
represent, warrant and covenant with and to Lender as follows, which
representations, warranties and covenants are continuing and shall survive the
execution and delivery hereof, the truth and accuracy of, or compliance with
each, together with the representations, warranties and covenants in the other
Financing Agreements, being a condition of the effectiveness of this Amendment
and a continuing condition of the making or providing of any Revolving Loans or
Letter of Credit Accommodations by Lender to Borrowers:

            (a) This Amendment and each other agreement or instrument to be
executed and delivered by each of the Borrowers and Guarantors, as the case may
be, hereunder have been duly authorized, executed and delivered by all necessary
action on the part of each of the Borrowers and Guarantors which is a party
hereto and thereto, and is in full force and effect as of the date hereof, and
the agreements and obligations of each of the Borrowers and Guarantors, as the
case may be, contained herein and therein constitute legal, valid and binding
obligations of each of Borrowers and Guarantors, as the case may be, enforceable
against them in accordance with their terms.

            (b) Neither the execution, delivery or performance of this Amendment
or any of the agreements, documents or instruments to be delivered pursuant to
this Agreement (i) has violated or shall violate any Federal or State securities
laws or any other law or regulation or any order or decree of any court or
governmental instrumentality in any respect applicable to Borrowers or
Guarantors, or (ii) does or shall conflict with or result in the breach of, or
constitute a default in any respect under any mortgage, deed of trust, security
agreement, agreement or instrument to which any of Borrowers or Guarantors is a
party or may be bound, or (iii) shall violate any provision of the Certificates
of Incorporation or by-laws of Borrowers or Guarantors that are corporations or
any provisions of the Certificates of Formation or Operating Agreements of
Borrowers or Guarantors.


                                     - 6 -
<PAGE>   7

             (c) No action of, or filing with, or consent of any governmental or
public body or authority, other than the recording of the Mortgages and the UCC
Fixture Filings executed and delivered to Lender pursuant to this Amendment, and
no approval or consent of any other party, is required to authorize, or is
otherwise required in connection with, the execution, delivery and performance
of this Amendment and each other agreement or instrument to be executed and
delivered pursuant to this Amendment.

             (d) All of the representations and warranties set forth in the Loan
Agreement, as amended hereby, and in the other Financing Agreements, are true
and correct in all material respects after giving effect to the provisions of
this Amendment, except to the extent any such representation or warranty is made
as of a specified date, in which case such representation or warranty shall have
been true and correct as of such date.

             (e) Except as set forth on Exhibit B hereto, which sets forth
certain of Borrowers obligations with respect to the Real Property of TCS Office
and TCS Factory located in La Crosse, Wisconsin, and the time periods and other
requirements for compliance therewith, Borrowers and Guarantors are in
compliance with all obligations in respect of environmental matters as provided
by the Financing Agreements

             (f) As soon as available, but in any event by no later than January
15, 1999, TCS Factory shall deliver, or cause to be delivered to Lender, a
release by the City of La Crosse with respect to the Purchase Contract covering
the parcel of Real Property subject to the Mortgage made by TCS Factory in favor
of Lender.

             (g) After giving effect to the provisions of this Amendment, no
Event of Default or Incipient Default exists or has occurred and is continuing.

      5. Conditions Precedent. Concurrently with the execution hereof (except to
the extent otherwise indicated below), and as a further condition to the
effectiveness of this Amendment and the agreement of Lender to the modifications
and amendments set forth in this Amendment:

             (a) Borrowers and Guarantors shall have delivered to Lender an
original of this Amendment, duly authorized, executed and delivered by each of
Borrowers and Guarantors;

             (b) Each of Borrowers and Guarantors shall have delivered to
Lender, in form and substance satisfactory to Lender, each of the following
agreements, documents or instruments to which it is a party, duly authorized,
executed and delivered:


                                     - 7 -
<PAGE>   8

                  (i) an original of each of the TCS Factory Term Note and the
TCS Office Term Note;

                  (ii) an original Guarantee and Waiver, dated of even date
herewith, by the Borrowers, other than TCS Office in favor of Lender with
respect to the Obligations of TCS Office to Lender;

                  (iii) an original Guarantee and Waiver, dated of even date
herewith, by Borrowers, other than TCS Factory, in favor of Lender with respect
to the Obligations of TCS Factory to Lender;

                  (iv) an original Guarantee and Waiver, dated of even date
herewith, by Guarantors, other than Borrowers and Hanover, in favor of Lender
with respect to the Obligations of TCS Office and TCS Factory to Lender;

                  (v) an original guarantee and Waiver, dated of even date
herewith, by Hanover, in favor of Lender with respect to the Obligations of TCS
Office and TCS Factory to Lender;

                  (vi) an original Mortgage and Security Agreement, dated of
even date herewith, by TCS Factory in favor of Lender with respect to the Real
Property of TCS Factory securing the Guarantor Obligations and the other
Obligations of TCS Factory, including, without limitation, the TCS Factory Term
Loan, up to the Maximum Credit;

                  (vii) an original Mortgage and Security Agreement, dated of
even date herewith, by TCS Office in favor of Lender with respect to the Real
Property of TCS Office securing the Guarantor Obligations and other Obligations
of TCS Office, including, without limitation, the TCS Office Term Loan, up to
the Maximum Credit;

                  (viii) an original UCC Fixture Filing between TCS Office, as
debtor, and Lender, as secured party, for filing with the Clerk of La Crosse
County, Wisconsin;

                  (ix) an original UCC Fixture Filing between TCS Factory, as
debtor, and Lender, as secured party, for filing with the Clerk of La Crosse
County, Wisconsin;

                  (x) an agreement or agreements, in form and substance
acceptable to Lender (A) assigning the TCS Factory Lease to HH Corp., (B)
amending certain provisions of the TCS Factory Lease, and (C) subordinating any
interest of the lessee in the Real Property covered by the TCS Factory Lease to
the interest of Lender in the Real Property covered by the Mortgage made by TCS
Factory to Lender; together with memorandum(s) or amendment to any existing
memorandums with respect to such


                                     - 8 -
<PAGE>   9

agreement(s), in form acceptable for recording with the Clerk of La Crosse
County, Wisconsin;

                  (xi) an agreement or agreements, in form and substance
acceptable to Lender (A) assigning the TCS Office Lease to HH Corp., (B)
amending certain provisions of the TCS Office Lease, and (C) subordinating any
interest of the lessee in the Real Property covered by the TCS Factory Lease to
the interest of Lender in the Real Property covered by the Mortgage made by TCS
Factory to Lender; together with memorandum(s) or amendments to any existing
memorandums with respect to such agreement(s), in form acceptable for recording
with the Clerk of La Crosse County, Wisconsin;

            (c) Lender shall have received evidence that all prior encumbrances
upon the Real Property subject to the Mortgages made by TCS Factory and TCS
Office in favor of Lender have been satisfied and discharged and have been
delivered to Lender, in form and substance satisfactory to Lender and a title
insurance company acceptable to Lender (the "Title Company"), including, without
limitation, the release of any liens of the State of Wisconsin Investment Board
with respect to the Real Property and any other assets of TCS Factory and the
release of any liens of Prudential Interfunding Corp with respect to the Real
Property and any other assets of TCS Office;

            (d) Lender shall have received a certificate of occupancy with
respect to each improved parcel of Real Property subject to the Mortgages made
by TCS Factory and TCS Office in favor of Lender, together with other evidence
satisfactory to Lender of final municipal approval for completion of any
improvements on such Real Property and the legal occupancy thereof by TCS
Factory, TCS Office and the tenant under the amended lease agreements referred
to in Sections 5(b)(x) and (xi) hereof;

            (e) Lender shall have received a full ALTA (highest standard)
as-built survey by a licensed surveyor with respect to each parcel of Real
Property subject to the Mortgages made by TCS Factory and TCS Office in favor of
Lender, certified to Lender and the Title Company, according to a certification
satisfactory in form and substance to Lender and the Title Company, showing the
current location of all improvements, setbacks, easements, rights of way and
other matters affecting title to or use of such property;

            (f) Lender shall have received updated evidence of casualty
insurance and loss payee endorsements required pursuant to the Loan Agreement
and under the other Financing Agreements, in form and substance satisfactory to
Lender, together with certificates of insurance policies and/or endorsements
naming Lender as mortgagee, loss payee and additional insured, as applicable;


                                     - 9 -
<PAGE>   10

            (g) Lender shall have received, in form and substance satisfactory
to Lender, Secretary's Certificates of Directors' Resolutions with Shareholders'
Consent evidencing the adoption and subsistence of corporate resolutions
approving the execution, delivery and performance by those Borrowers and
Guarantors that are corporations and Manager Certificates and Company
Resolutions evidencing the adaption and subsistence of company resolutions
approving the execution, delivery and performance by those Borrowers and
Guarantors that are limited liability companies of this Amendment and the
agreements, documents and instruments to be delivered pursuant to this
Amendment;

            (h) Lender shall have received an appraisal, in form and substance
satisfactory to Lender, prepared by an appraiser and in form, scope and
methodology, satisfactory to Lender, addressed to Lender or upon which Lender is
expressly permitted to rely, with respect to the Real Property of TCS Office and
TCS Factory;

            (i) Lender shall have received updated environmental audits of the
owned real property of TCS Factory and of TCS Office conducted by an independent
environmental engineering firm acceptable to Lender, and in form, scope and
methodology satisfactory to Lender, addressed to Lender or upon which Lender is
expressly permitted to rely, confirming to the satisfaction of Lender and its
environmental consultant, which consultant shall review such updated audits and
any follow-up work requested by such consultant at Borrowers' expense, that (i)
each of TCS Factory and TCS Office are in compliance with all material
applicable Environmental Laws and (ii) the absence of any material environmental
problems;

            (j) Lender shall have received, in form and substance satisfactory
to Lender, a valid and effective title insurance policy issued by the Title
Company (i) insuring the priority, amount and sufficiency of the Mortgages made
by TCS Factory and TCS Office, (ii) insuring against matters that would be
disclosed by surveys and (iii) containing any legally available endorsements,
assurances or affirmative coverage requested by Lender for protection of its
interests;

            (k) Lender shall have received an opinion(s) of counsel to Borrowers
and Guarantors with respect to this Amendment, the Mortgages made by each of TCS
office and TCS Factory and the transactions and agreements and other instruments
contemplated by this Amendment, and such other matters as Lender shall
reasonably require, in form and substance and satisfactory to Lender;

            (l) each of Borrowers and Guarantors shall deliver, or cause to be
delivered, to Lender a true and correct copy of each consent, waiver or approval
with respect to this Amendment or any of the instruments or agreements executed
and delivered pursuant


                                     - 10 -
<PAGE>   11

to this Amendment, that any Borrower or Guarantor obtains from any other Person,
and which such consent, approval or waiver shall be in form and substance
acceptable to Lender; and

            (m) UCC, tax and judgment searches against TCA Office and TCS
Factory with the Wisconsin Secretary of State and the Clerk of La Crosse County,
Wisconsin showing no financing statements or other liens of record against
either TCS Office or TCS Factory except in favor of Lender and except as
otherwise permitted under the Loan Agreement.

      6. Effect of this Amendment. This Amendment constitutes the entire
agreement of the parties with respect to the subject matter hereof, and
supersedes all prior oral or written communications, memoranda, proposals,
negotiations, discussions, term sheets and commitments with respect to the
subject matter hereof. Except as expressly provided herein, no other changes or
modifications to the Loan Agreement or any of the other Financing Agreements, or
waivers of or consents under any provisions of any of the foregoing, are
intended or implied by this Amendment, and in all other respects the Financing
Agreements are hereby specifically ratified, restated and confirmed by all
parties hereto as of the effective date hereof. To the extent that any provision
of the Loan Agreement or any of the other Financing Agreements conflicts with
any provision of this Amendment, the provision of this Amendment shall control.

      7. Further Assurances. Borrowers and Guarantors shall execute and deliver
such additional documents and take such additional action as may be reasonably
requested by Lender to effectuate the provisions and purposes of this Amendment.

      8. Governing Law. The rights and obligations hereunder of each of the
parties hereto shall be governed by and interpreted and determined in accordance
with the internal laws of the State of New York (without giving effect to
principles of conflict of laws).

      9. Binding Effect. This Amendment shall be binding upon and inure to the
benefit of each of the parties hereto and their respective successors and
assigns.

      10. Counterparts. This Amendment may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment, it shall not be necessary
to produce or account for more than one counterpart thereof signed by each of
the parties hereto.


                                     - 11 -
<PAGE>   12
Exhibit 10.36


             IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed on the day and year first written.


                              CONGRESS FINANCIAL CORPORATION

                              By:    [ILLEGIBLE]
                                 ---------------------------
                              Title: 1st. VP
                                    ------------------------


                              HANOVER DIRECT PENNSYLVANIA, INC.

                              By:    Larry Svoboda
                                 ---------------------------
                              Title: VP
                                    ------------------------


                              BRAWN OF CALIFORNIA, INC.

                              By:    Larry Svoboda
                                 ---------------------------
                              Title: VP
                                    ------------------------


                              GUMP'S BY MAIL, INC.

                              By:    Larry Svoboda
                                 ---------------------------
                              Title: VP
                                    ------------------------


                              GUMP'S CORP.

                              By:    Larry Svoboda
                                 ---------------------------
                              Title: VP
                                    ------------------------


                              HANOVER HOLDING CORP.

                              By:    Larry Svoboda
                                 ---------------------------
                              Title: VP
                                    ------------------------


                              LWI HOLDINGS, INC.

                              By:    Larry Svoboda
                                 ---------------------------
                              Title: VP
                                    ------------------------

                       (SIGNATURES CONTINUE ON NEXT PAGE]


                                     - 12 -
<PAGE>   13

                    [SIGNATURES CONTINUED FROM PREVIOUS PAGE]


                              AEGIS CATALOG CORPORATION

                              By:    Larry Svoboda
                                 ---------------------------
                              Title: VP
                                    ------------------------


                              HANOVER DIRECT VIRGNIA INC.

                              By:    Larry Svoboda
                                 ---------------------------
                              Title: VP
                                    ------------------------


                              HANOVER REALTY, INC.

                              By:    Larry Svoboda
                                 ---------------------------
                              Title: VP
                                    ------------------------


                              THE AUSTAD COMPANY

                              By:    Larry Svoboda
                                 ---------------------------
                              Title: VP
                                    ------------------------


                              TWEEDS, LLC

                              By:    Larry Svoboda
                                 ---------------------------
                              Title: VP
                                    ------------------------


                              SILHOUETTES, LLC

                              By:    Larry Svoboda
                                 ---------------------------
                              Title: VP
                                    ------------------------

                              HANOVER COMPANY STORE, LLC

                              By:    Larry Svoboda
                                 ---------------------------
                              Title: VP
                                    ------------------------

                       [SIGNATURES CONTINUE ON NEXT PAGE]


                                     - 13 -
<PAGE>   14

                        [SIGNATURES CONTINUED FROM PREVIOUS PAGE]


                              DOMESTICATIONS, LLC

                              By:    William Kingsford
                                 ---------------------------
                              Title: VP
                                    ------------------------


                              COLONIAL GARDEN KITCHENS, INC.


                              By:    William Kingsford
                                 ---------------------------
                              Title: VP
                                    ------------------------


                              THE COMPANY STORE FACTORY, INC.

                              By:    William Kingsford
                                 ---------------------------
                              Title: VP
                                    ------------------------


                              THE COMPANY OFFICE, INC.

                              By:    William Kingsford
                                 ---------------------------
                              Title: VP
                                    ------------------------

By their signatures below, the
undersigned Guarantors
acknowledge and agree to be
bound by the applicable
provisions of this Amendment:


HANOVER DIRECT, INC

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------


AEGIS RETAIL CORPORATION

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------

                            [SIGNATURES CONTINUE ON NEXT PAGE]


                                     - 14 -
<PAGE>   15

               [SIGNATURES CONTINUED FROM PREVIOUS PAGE]

AEGIS SAFETY HOLDINGS, INC.

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------


AEGIS VENTURES, INC.

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------


AMERICAN DOWN & TEXTILE COMPANY

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------


BRAWN WHOLESALE CORP.

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------


COMPANY STORE HOLDINGS, INC.

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------


D.M. ADVERTISING, INC.

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------


GUMP'S CATALOG, INC.

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------


                       [SIGNATURES CONTINUE ON NEXT PAGE]


                                     - 15 -
<PAGE>   16

                    [SIGNATURES CONTINUED FROM PREVIOUS PAGE]

GUMP'S HOLDINGS, INC.

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------


HANOVER CASUALS, INC.

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------


HANOVER CATALOG HOLDINGS, INC.

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------


HANOVER FINANCE CORPORATION

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------


HANOVER LIST MANAGEMENT INC.

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------


HANOVER VENTURES, INC.

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------


LWI RETAIL, INC.

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------

                           [SIGNATURES CONTINUE ON NEXT PAGE]


                                     - 16 -
<PAGE>   17

                    [SIGNATURES CONTINUED FROM PREVIOUS PAGE]

SCANDIA DOWN CORPORATION

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------


TWEEDS OF VERMONT, INC.

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------


YORK FULFILLMENT COMPANY, INC.

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------


AUSTAD HOLDINGS, INC.

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------


HANOVER HOME FASHIONS GROUP, LLC

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------


HANOVER WOMEN'S APPAREL, LLC

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------


KEYSTONE FULFILLMENT, INC.

By:    William Kingsford
   ---------------------------
Title: VP
      ------------------------


                                     - 17 -
<PAGE>   18

                                    EXHIBIT A


          To Thirteenth Amendment To Loan and Security Agreement

           Intercompany Loans Owed By The Company Store Factory, Inc.


Revolving Loan          Outstanding Amount     Intercompany Loan
Borrower that is        of Intercompany        Repayment Amount
now payee under         Loans
loan made to The
Company Store
Factory, Inc.


Domestications,
LLC*                    $2,000,000             Full Amount of The
                                               Company Store
                                               Factory, Inc. Term
                                               Advance

               Intercompany Loans Owed By The Company Office, Inc.


Revolving Loan          Outstanding Amount     Intercompany Loan
Borrower that is        of Intercompany        Repayment Amount
now payee under         Loans
loan made to The
Company Office,
Inc.

Domestications,         $700,000              Full Amount of The
LLC*                                          Company Office, Inc.
                                              Term Advance

* Hanover Direct Virginia Inc. originally made the loans set forth above to The
Company Store Factory, Inc. and The Company Store Office, Inc., respectively. In
connection with Phase I of the Hanover 1998 Reorganization and the transfer of
certain assets and liabilities from Hanover Direct Virginia Inc. to
Domestications, LLC, the right to repayment of both such loans was transferred
to Domestications, LLC.

<PAGE>   19

                                    EXHIBIT B
                                       TO
                             THIRTEENTH AMENDMENT TO
                           LOAN AND SECURITY AGREEMENT

           Environmental Matters with respect to Certain Real Property
             Located at 455 Park Plaza Drive, La Crosse, Wisconsin

      As soon as available, but in any event, by no later than February 15,
1999, TCS Office shall furnish to Lender, in form and substance satisfactory to
Lender, (a) evidence that the thirty-five (35) gallon drum of waste oil on or at
the Real Property of TCS Office located at 455 Park Plaza Drive, La Crosse,
Wisconsin (the "TCS Office Real Property"), has been stored in a manner to
reduce the possibility of leakage, spillage or other contamination of soil, and
(b) evidence that the Wisconsin Department of Natural Resources has issued a
letter or stating that the 2,000 gallon underground storage tank located at the
TCS Office Real Property and any contamination related thereto has been
sufficiently remediated so that the site and TCS Office comply with all
Wisconsin Environmental Laws and that no further remediation or other action
with respect to the site is necessary (the "UST La Crosse, Wisconsin
Remediation").

      In addition to, and not in limitation of, the foregoing, pending the
completion of the UST La Crosse, Wisconsin Remediation, upon the earlier of (i)
February 15, 1999 (the "UST Remediation Date"), or (ii) the existence or
occurrence and continuance of an Event of Default or Incipient Default, Lender
may, without limiting Lender's other rights and remedies under the Loan
Agreement and the other Financing Agreements, in its sole discretion, establish
a reserve against the availability of Revolving Loans in an amount, as
determined by Lender, not to exceed $225,000; provided, that, if TCS Office has
not completed the UST La Crosse, Wisconsin Remediation by February 15, 1999,
Lender agrees to extend the UST Remediation Date to such later date beyond
February 15, 1999, as Lender may determine in its good faith discretion and set
forth in writing, so long as, during the period between September 30, 1998 and
February 15, 1999 (and at all times thereafter through the extended UST
Remediation Date, if the UST Remediation Date is so extended by Lender), TCS
Office uses, and continues to use its best efforts to effect the UST La Crosse,
Wisconsin Remediation, as determined by Lender in good faith.