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                                                            Exhibit 4.12

                                 THIRD AMENDMENT
                                       TO
                                WARRANT AGREEMENT
                        BETWEEN HANOVER DIRECT, INC. AND
                                NAR GROUP LIMITED

            This Third Amendment, dated as of August 23, 1996 (this
"Amendment"), to that certain Warrant Agreement, dated as of October 25, 1991,
between NAR Group Limited (formerly known as North American Resources Limited)
("NAR") and The Horn & Hardart Company ("H&H"), predecessor-in-interest to
Hanover Direct, Inc. (the "Company").

            WHEREAS, H&H and NAR are parties to that certain Warrant Agreement,
dated as of October 25, 1991, amended by a First Amendment to Warrant Agreement
and Warrant Certificate, dated as of July 29, 1992, and by a Second Amendment to
Warrant Agreement and Warrant Certificate, dated as of November 13, 1995 (as so
amended, the "Warrant Agreement").

            WHEREAS, pursuant to an Assumption Agreement, dated as of September
7, 1993, between H&H and the Company, the Company assumed the due and punctual
performance and observance of each and every covenant and condition of H&H in
the Warrant Agreement.

            WHEREAS, the Company and NAR desire to further amend the Warrant
Agreement.

            NOW, THEREFORE, in consideration of the premises and agreements
herein contained and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:

            A. Amendments to the Warrant Agreement. The Warrant Agreement is
hereby amended as follows:

            Section 5 is hereby amended by adding a new subparagraph (c) as
follows and redesignating subparagraphs 5(c) and 5(d) as subparagraphs 5(d) and
5(e), respectively:

          "(c) The Holder may also exercise all, but not less than all, of its
          Warrants in a "cashless" or "net-issue" exercise of each such Warrant
          by presentation and surrender of the Holder's Warrant Certificate to
          the Company at its principal executive offices with a Cashless
          Exercise Form annexed hereto duly executed (a "Cashless Exercise"). In
          the event of a Cashless Exercise, the Holder shall exchange each
          Warrant subject to a Cashless Exercise for that number


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          of Warrant Shares stated in the Agreement, as the same may have been
          duly adjusted from time to time, multiplied by a fraction, the
          numerator of which shall be the difference between (x) the then
          current market price per share of Common Stock (as defined in Section
          1(d) of Annex B hereto) and (y) the Exercise Price per share of Common
          Stock for each such warrant, and the denominator of which shall be the
          then current market price per share. The Cashless Exercise Form shall
          set forth the calculation upon which the Cashless Exercise is based."

            B. Ratification. Except as expressly amended hereby all terms and
provisions of the Warrant Agreement, as heretofore amended, remain unamended,
unmodified and in full force and effect. The Warrant Agreement, as amended
hereby, and all rights and powers created thereby, is in all respects ratified
and confirmed. From and after the date hereof, all references to the Warrant
Agreement shall be deemed to mean the Warrant Agreement as amended by this
Amendment.

            C. Counterparts. This Amendment may be executed in counterparts,
each of which, when executed and delivered, shall for all purposes be deemed an
original. Both of the counterparts, when taken together, shall constitute but
one and the same Amendment.

            D. Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
principles of conflict of laws.

            E. Definitions. Except as otherwise expressed or provided or unless
the context otherwise requires, all terms used herein which are defined in the
Warrant Agreement shall have the meanings ascribed to them in the Warrant
Agreement.


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            IN WITNESS WHEREOF, the parties hereto have caused this Third
Amendment to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.

                              HANOVER DIRECT, INC.


                              By: __________________________
                                  Name:
                                  Title


                              NAR GROUP LIMITED


                              By: __________________________
                                  Name:
                                  Title


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                             CASHLESS EXERCISE FORM

                    (To be executed upon exercise of Warrant
                            pursuant to Section 5(c))

To Hanover Direct, Inc.:

            The undersigned hereby irrevocably elects to exchange its Warrants
for such number of shares of Common Stock set forth on the calculation attached
hereto pursuant to the Cashless Exercise provisions of Section 5(c) of the
Warrant Agreement, dated as of October 25, 1991, and a First Amendment and
Second Amendment thereto, dated as of July 29, 1992 and November 13, 1995,
respectively, between NAR Group Limited (formerly known as North American
Resources Limited) and Hanover Direct, Inc, successor-in-interest to The Horn &
Hardart Company. The undersigned's Warrant Certificate is attached hereto.

            Please issue a certificate or certificates for such Common Stock in
the name of:

            Name __________________________________

            (Please Print Name, Address and Federal
            Tax ID Number)

            Address _______________________________
            _______________________________________
            _______________________________________

            Federal Tax ID Number _________________


            Signature _____________________________

            NOTE: The above signature should correspond exactly with the name on
            the first page of this Warrant Certificate or with the name of the
            assignee appearing in the assignment form below.


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                        Calculation of Cashless Exercise

Current Market Price $________ = A

Exercise Price for Warrant Shares, as adjusted $ _______ = B

A-B = $ _______

Number of Warrants to be exchanged, as adjusted _______________ = C


Number of Warrant Shares = ( ________________ / ____________) X _____________
                             (insert A-B)      (insert A)         (insert C)