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                                                            Exhibit 10.39

                           HANOVER INDEMNITY AGREEMENT

     HANOVER INDEMNITY AGREEMENT dated as of December 17, 1996 by and between
RICHEMONT FINANCE S.A., a Luxembourg corporation ("Richemont") and HANOVER
DIRECT, INC., a Delaware corporation ("Hanover"), 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"), THE COMPANY STORE,
INC., a Wisconsin corporation ("TCS"), TWEEDS, INC., a Delaware corporation
("Tweeds"), LWI HOLDINGS, INC., a Delaware corporation ("LWI"), AEGIS CATALOG
CORPORATION, a Delaware corporation ("Aegis"), HANOVER DIRECT VIRGINIA INC.,
("HDV") and HANOVER REALTY, INC., Virginia corporations ("Hanover Realty"); and
together with Hanover, HDPI, Brawn, GBM, Gump's, TCS, Tweeds, LWI, Aegis and
HDV, each individually a "Borrower" and collectively, "Borrowers").

     WHEREAS, Hanover has entered into that certain Reimbursement Agreement
dated as of the date hereof with Swiss Bank Corporation, New York Branch (the
"Bank"), a copy of which is attached hereto as Exhibit I (the "Reimbursement
Agreement"), in connection with the Bank's issuance of three letters of credit
dated the date hereof which support certain obligations of Hanover (the "Letters
of Credit");

     WHEREAS, Richemont has entered into an agreement dated the date hereof with
the Bank, a copy of which is attached hereto as Exhibit II (the "Guarantee"),
pursuant to which Richemont has guaranteed the reimbursement obligations of
Hanover in connection with draws under any Letter of Credit;

     WHEREAS, the Borrowers have agreed to reimburse Richemont for any payment
it makes to the Bank under the Guarantee in accordance with the Reimbursement
Agreement.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties agree as follows:

     1. The Borrowers agree, jointly and severally, to pay to Richemont on or
before February 28, 1998 (or such later date as to additional amounts if such
additional amounts are paid by Richemont pursuant to the Guarantee after
February 28, 1998 in accordance with this Agreement) that amount required to
reimburse Richemont for all amounts paid by Richemont under the Guarantee in
connection with the Letters of Credit and all reasonable expenses incurred by
Richemont in connection therewith.


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     2. The Borrowers agree, jointly and severally, to pay Richemont interest on
any amounts paid by Richemont pursuant to the Guarantee at the Prime Rate of the
Bank in effect from time to time plus three and one-half percent (3.5%) from the
date such payments were made to the date Richemont is reimbursed therefor, but
in no event shall such rate be less than the rate charged Richemont by the Bank
with respect to any such drawings.

     3. All amounts due and owing hereunder shall be paid within ten (10) days
following receipt by Hanover, as agent for the Borrowers, of written notice from
Richemont that it has paid any amounts pursuant to the Guarantee.

     4. Notwithstanding any other provision contained herein, the aggregate
interest rate charged hereunder, including all charges or fees in connection
therewith deemed in the nature of interest under New York law, shall not exceed
the Highest Lawful Rate (as such term is defined below). If the rate of interest
(determined without regard to the preceding sentence) under this Agreement at
any time exceeds the Highest Lawful Rate (as defined below), the outstanding
amount of the amounts paid by Richemont hereunder shall bear interest at the
Highest Lawful Rate until the total amount of interest due hereunder equals the
amount of total interest which would have been due hereunder if the stated rates
of interest set forth in this Agreement had at all times been in effect. In
addition, if and when the amounts paid by Richemont hereunder are repaid in full
the total interest due hereunder (taking into account the limitation provided
for above) is less than the total amount of interest which would have been due
hereunder if the stated rates of interest set forth in this Agreement had at all
times been in effect, then to the extent permitted by law, the Borrowers shall
pay to Richemont an amount equal to the difference between the amount of
interest paid and the amount of interest which would have been paid if the
Highest Lawful Rate had at all times been in effect. Notwithstanding the
foregoing, it is the intention of Richemont and the Borrowers to conform
strictly to any applicable usury laws. Accordingly, if Richemont contracts for,
charges, or receives any consideration which constitutes interest in excess of
the Highest Lawful Rate, then any such excess shall be canceled automatically
and, if previously paid, shall at Richemont's option be applied to the
outstanding amounts due hereunder or be refunded to Hanover, as agent for the
Borrowers. As used in this paragraph, the term "Highest Lawful Rate" means the
maximum lawful interest rate, if any, that at any time or from time to time may
be contracted for, charged, or received under the laws applicable to Richemont
which are presently in effect or, to the extent allowed by law, under such
applicable laws which may hereafter be in effect and which allow a higher
maximum non-usurious interest rate than applicable laws now allow.


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     5. The Borrowers agree, jointly and severally, to defend, indemnify and
hold harmless Richemont from and against any and all claims and damages, losses,
liabilities, reasonable costs and expenses (including attorneys fees and costs)
which Richemont may incur (or which may be claimed against Richemont) by any
Person by reason of or in connection with the Guarantee or the issuance or
transfer of or payment or failure to pay under any Letter of Credit; provided
that the Borrowers shall not be required to indemnify Richemont for any claims,
damages, losses, liabilities, costs or expenses to the extent, but only to the
extent, caused by the willful misconduct or gross negligence of Richemont.

     6. Upon the execution hereof, the Borrowers agree to pay to Richemont a
one-time non-refundable fee equal to five percent (5%) of the principal amount
of each Letter of Credit, plus all fees incurred by Richemont in connection with
providing the Guarantee including legal fees, expenses, bank fees and any
similar costs and expenses.

     7. To the extent that any of the Letters of Credit have outstanding
balances at their date of maturity which are not paid in full by the Borrowers,
or if the Borrowers by February 28, 1998 has failed to pay to Richemont all
amounts due to Richemont as provided in Section 2 hereof, Richemont shall have
the option, but not the obligation, exercisable at any time prior to payment in
full of all amounts due to Richemont hereunder by written notice to Hanover, to
convert the then outstanding principal and interest in respect of this Agreement
into common stock of Hanover (the "Hanover Common Stock"), such conversion to be
exercisable at the lower of the mean of the bid and ask prices of Hanover Common
Stock on November 8, 1996, or the mean of the bid and ask prices of Hanover
Common Stock on each of the thirty days immediately prior to the date of
exercise of the conversion privilege. Richemont shall be entitled to require
that Hanover, at its expense, use its best efforts to issue and to register with
the Securities and Exchange Commission and with any state which may require
registration of such common stock and list on the appropriate securities
exchange any such common stock so required to be delivered to Richemont.

     8. The Borrowers and Richemont each hereby (i) acknowledge that the
obligations hereunder (other than those set forth in paragraph 5 above) are
subordinate in right of payment to the Borrowers' existing and future
obligations to Congress Financial Corporation ("Congress") under that certain
Loan and Security Agreement dated as of November 14, 1995 by and among Congress
and the Borrowers, as amended and the other Financing Agreements (as defined
therein) (ii) agree that, concurrently with the execution and delivery of this
Agreement, the Borrowers and Richemont will enter into a Subordination Agreement
with Congress in form and substance satisfactory to Richemont and Congress.


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     9. Hanover agrees that it shall provide Richemont with notice of any
request for an extension of the Expiration Date of a Letter of Credit under
Section 2.07 of the Reimbursement Agreement and that any extension shall be
subject to the prior written consent of Richemont.

     10. Each Borrower represents and warrants with respect to itself that (i)
such Borrower is a corporation duly organized and validly existing under the
laws of the jurisdiction of its incorporation or creation and is qualified do
business under the laws of each jurisdiction in which it is required to qualify
to do business, (ii) such Borrower has the power and authority to execute,
deliver and perform this Agreement, and (iii) when executed and delivered, this
Agreement will be the legal, valid and binding obligation or agreement, as the
case may be, of such Borrower, enforceable against it in accordance with its
respective terms, subject to the effect of any applicable bankruptcy,
moratorium, insolvency, reorganization or other similar law affecting the
enforceability of creditors' rights generally.

     11. No amendment, modification or waiver of any provision of this Agreement
shall be effective unless such amendment, modification, waiver or consent shall
be in writing and signed by Hanover, as agent for the Borrowers, and Richemont,
and the same shall then be effective only for the period and on the conditions
and for the specific instances and purposes specified in such writing.

     12. All documents executed pursuant to the transactions contemplated
herein, including, without limitation, this Agreement shall be deemed to be
contracts made under, and for all purposes shall be construed in accordance
with, the internal laws and judicial decisions of the State of New York. The
Borrowers and Richemont hereby submit to the jurisdiction and venue of the
federal courts of New York for the purposes of resolving disputes hereunder or
for the purposes of collection.

     13. If any provision of this Agreement shall be determined to be illegal or
invalid as to one or more of the parties hereto, then such provision shall
remain in effect with respect to all parties, if any, as to whom such provision
is neither illegal nor invalid, and in any event all other provisions hereof
shall remain effective and binding on the parties hereto.

     14. This Agreement, constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all previous proposals,
negotiations, representations, commitments and other communications between or
among the parties, both oral and written, with respect thereto.


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     15. This Agreement may be executed in counterparts, each of which shall be
an original and all of which, taken together, shall constitute one and the same
instrument.

     16. The parties acknowledge and agree that Hanover is acting as agent for
the Borrowers and that notice to Hanover shall be deemed to be sufficient notice
to the Borrowers under this Agreement.

     IN WITNESS WHEREOF, the undersigned hereby agree as of the date first above
written.


                                    RICHEMONT FINANCE S.A.


                                    By: __________________________________
                                      Name:_______________________________
                                      Title:______________________________


                                    By: __________________________________
                                       Name: _____________________________
                                       Title: ____________________________



                                    HANOVER DIRECT, INC.


                                    By: __________________________________
                                       Name: _____________________________
                                       Title: ____________________________



                                    HANOVER DIRECT PENNSYLVANIA, INC.


                                    By: _________________________________
                                       Name: ____________________________
                                       Title: ___________________________


                                    BRAWN OF CALIFORNIA, INC.


                                    By: _________________________________
                                       Name: ____________________________
                                       Title: ___________________________


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                                    GUMP'S BY MAIL, INC.


                                    By: _________________________________
                                       Name: ____________________________
                                       Title:____________________________


                                    GUMP'S CORP.

                                    By: _________________________________
                                       Name: ____________________________
                                       Title: ___________________________


                                    THE COMPANY STORE, INC.


                                    By: _________________________________
                                       Name: ____________________________
                                       Title: ___________________________


                                    TWEEDS, INC.


                                    By: _________________________________
                                       Name: ____________________________
                                       Title: ___________________________


                                    LWI HOLDINGS, INC.


                                    By: _________________________________
                                       Name: ____________________________
                                       Title: ___________________________


                                    AEGIS CATALOG CORPORATION

                                    By: _________________________________
                                       Name: ____________________________
                                       Title: ___________________________


                                    HANOVER DIRECT VIRGINIA INC.


                                    By: _________________________________
                                       Name: ____________________________
                                       Title: ___________________________


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