Document:

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                   AMENDMENT TO LETTER OF CREDIT NO. S567171

      Amendment to Letter of Credit No. S567171 issued by Swiss Bank
Corporation, Stamford Branch on February 18, 1998 (the "Letter of Credit") for
the account of Hanover Direct, Inc., a Delaware corporation (the "Company"), in
favor of State Street Bank and Trust Company, as successor trustee under the
Indenture of Trust dated as of September 1, 1987 (the "Trustee"). Terms used
herein but not otherwise defined shall have the meanings ascribed to such terms
in the Letter of Credit.

                              W I T N E S S E T H:

      WHEREAS, Swiss Bank Corporation, Stamford Branch has assigned all of its
interests and obligations under the Letter of Credit to UBS AG, Stamford Branch
and UBS AG, Stamford Branch has assumed all of the obligations of Swiss Bank
Corporation, Stamford Branch under the Letter of Credit;

      WHEREAS, UBS AG, Stamford Branch has agreed to extend the Scheduled
Expiration Date of the Letter of Credit from March 30, 1999 to March 31, 2000;
and

      WHEREAS, UBS AG, Stamford Branch and the Trustee wish to amend the Letter
of Credit as provided herein.

      NOW, THEREFORE, in consideration of the premises set forth herein and
other valuable consideration, the parties hereto hereby agree as follows.

      1. As of the date hereof, the Letter of Credit is hereby amended as
follows:

      (a) The references throughout the Letter of Credit to "Swiss Bank
Corporation, Stamford Branch" are hereby amended to refer to "UBS AG, Stamford
Branch".

      (b) The parties hereto hereby agree that any references in the Letter of
Credit to "the Bank" shall be deemed to be references to "UBS AG, Stamford
Branch".

      (c) The references to the "March 30, 1999" expiration date in the Letter
of Credit shall be deemed to be "March 31, 2000". The "Scheduled Termination
Date" in the Letter of Credit shall be deemed to mean "March 31, 2000".

      2. Except as provided herein, the Letter of Credit shall remain in full
force and effect and unaffected hereby except as the Letter of Credit shall be
deemed to have been amended by the terms of this Amendment from and after the
date hereof.

      3. This Amendment may be executed in one or more counterparts, each of
which taken together shall constitute an original and all of which shall
constitute one and the same instrument.
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      IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
this ___ day of March, 1999.

                                                 UBS AG, STAMFORD BRANCH

                                                 By: /s/ Richard T. Conway
                                                     --------------------------
                                                     Name: Richard T. Conway
                                                     Title: Associate Director
                                                     Loan Portfolio Support, US

                                                 By: /s/ Thomas R. Salzano
                                                     --------------------------
                                                     Name: Thomas R. Salzano
                                                     Title: Associate Director
                                                     Loan Portfolio Support, US

                                                 STATE STREET BANK AND TRUST
                                                 COMPANY, AS TRUSTEE

                                                 By: /s/ Laurel Melody Casasanta
                                                     ---------------------------
                                                     Name:
                                                     Title:

                                      -2-
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                                    UBS AG,
                                Stamford Branch
                            677 Washington Boulevard
                        Stamford, Connecticut 06901-3793

                    EXTENSION OF SCHEDULED TERMINATION DATE

State Street Bank and Trust Company, as Trustee
Goodwin Square
225 Asylum Street, 23rd Floor
Hartford, Connecticut 06103

Attention: Corporate Trust Department

       Re: Irrevocable Letter of Credit Ref. No. S567171
           For the Account of Hanover Direct, Inc.

Ladies and Gentlemen:

      The undersigned, two duly authorized officers of UBS AG, Stamford Branch
(as successor to Swiss Bank Corporation, Stamford Branch) (the "Bank"), hereby
notify the Trustee with respect to the above-referenced Letter of Credit issued
by the Bank in favor of the Trustee (the "Letter of Credit"), that the Scheduled
Termination Date of the Letter of Credit heretofore in effect has been extended
and that the Scheduled Termination Date as so extended is March 31, 2000. The
terms used in this Certificate and not defined herein shall have the meanings
given in the Letter of Credit.

      Please be advised that UBS AG, Stamford Branch has assumed all of the
obligations of Swiss Bank Corporation, Stamford Branch in connection with the
Letter of Credit. In order to provide you with the appropriate notice
information, a First Amendment to the Letter of Credit will be prepared. The
changes effected by the First Amendment to the Letter of Credit will be limited
to revising the expiration date to March 31,2000, substituting "UBS AG, Stamford
Branch" in place of "Swiss Bank Corporation, Stamford Branch", and making any
appropriate address, telephone number and facsimile number changes. Certain
provisions regarding the "Year 2000" issue will be added to the Reimbursement
Agreement dated as of December 18, 1996, as amended, pursuant to the terms of
the Second Amendment to the Reimbursement Agreement.

      IN WITNESS WHEREOF, the Bank has executed and delivered this Certificate
this __ day of March, 1999.

                                                  UBS AG,
                                                  Stamford Branch

                                                  By: /s/ Richard T. Conway
                                                      --------------------------
                                                      Name: Richard T. Conway
                                                      Title: Associate Director
                                                      Loan Portfolio Support, US

                                                  By: /s/ Thomas R. Salzano
                                                      --------------------------
                                                      Name: Thomas R. Salzano
                                                      Title: Associate Director
                                                      Loan Portfolio Support, US<PAGE>   1

                                SECOND AMENDMENT
                                       TO
                             REIMBURSEMENT AGREEMENT

      SECOND AMENDMENT, dated as of March __, 1999 (the "Second Amendment"), by
and between UBS AG, a banking corporation organized under the laws of
Switzerland, acting through its Stamford Branch (said UBS AG being the successor
to Swiss Bank Corporation, as described below), and HANOVER DIRECT, INC., a
Delaware corporation having its principal place of business in Weehawken, New
Jersey (the "Borrower"). Capitalized terms used but not defined herein have the
meanings given to them in the Reimbursement Agreement referred to below.

      WHEREAS, Swiss Bank Corporation, New York Branch and the Borrower were
parties to that certain Reimbursement Agreement dated as of December 18, 1996;

      WHEREAS, Swiss Bank Corporation, New York Branch subsequently assigned all
of its rights and obligations under the Reimbursement Agreement to Swiss Bank
Corporation, Stamford Branch and Swiss Bank Corporation, Stamford Branch assumed
all of the obligations of Swiss Bank Corporation, New York Branch under the
Reimbursement Agreement;

      WHEREAS, Swiss Bank Corporation, Stamford Branch and the Borrower amended
the Reimbursement Agreement pursuant to the First Amendment to Reimbursement
Agreement dated as of February 18, 1998 by and between Swiss Bank Corporation,
Stamford Branch and the Borrower;

      WHEREAS, Swiss Bank Corporation, Stamford Branch subsequently assigned all
of its interests and obligations under the Reimbursement Agreement, as amended,
to UBS AG, Stamford Branch (hereinafter referred to as the "Bank"), and the Bank
has assumed all of the obligations of Swiss Bank Corporation, Stamford Branch
under the Reimbursement Agreement, as amended.

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

      1. As of the date hereof, the Reimbursement Agreement is hereby further
amended as follows:

      (a) All references throughout the Reimbursement Agreement to "Swiss Bank
Corporation, Stamford Branch" and "Swiss Bank Corporation" are hereby amended to
read "UBS AG, Stamford Branch" and "UBS AG," respectively.

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      (b) Section 2.03 of the Reimbursement Agreement is hereby amended by
deleting the reference to "0.25%" in paragraph (b) and replacing it with
"0.375%."

      (c) Article VI is hereby amended by adding at the end thereof the
following language:

            "6.11 Year 2000 Compliance. The Borrower and each Subsidiary have
            conducted and are continuing to conduct a review and assessment of
            their respective computer applications, and have undertaken certain
            modifications thereto, relating to any defect or potential defect
            relating to "Year 2000" compatibility. Based on the foregoing review
            and modification, the Borrower believes that no such defect could
            reasonably be expected to have a Material Adverse Effect."

      (d) Article VII is hereby amended by adding at the end thereof the
following language:

            "7.10 Year 2000 Compliance. The Borrower and each Subsidiary shall
            take all actions necessary to eliminate any defects in computer
            software, databases, hardware, controls and peripherals which may
            occur in connection with the occurrence of the year 2000 or the use
            thereof on any date after December 31, 1999, to the extent such
            defect could reasonably be expected to have a Material Adverse
            Effect."

      2. It shall be a condition precedent to the effectiveness of this Second
Amendment that the Guarantor shall have provided the Bank with a guarantee of
the Reimbursement Obligations of the Borrower during the term of the Direct Pay
Letters of Credit, as amended, or shall have amended the Guaranty to extend its
term to March 31, 2000, as applicable.

      3. This Second Amendment may be executed in counterparts, each of which,
upon execution and delivery by the parties, shall be considered an original, and
all of which, taken together, shall constitute one and the same instrument.

      4. This Second Amendment, and all of the obligations of the parties
hereunder, shall be construed in accordance with and governed by the laws of the
State of New York, without regard to the conflict of laws principles thereof.

      5. From and after the date hereof, all references to the Reimbursement
Agreement contained in the Reimbursement Agreement, the Loan Documents, the
Hanover Indemnity Agreement and any other documents or agreements referred to in
any of them, as such documents may from time to time be amended, supplemented,
modified or restated, shall be deemed to be references to the Reimbursement
Agreement as amended by the First Amendment to the Reimbursement Agreement dated
as of February 18, 1998 and this Second Amendment. Except as specifically
amended by the First and

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Second Amendments, the Reimbursement Agreement shall remain in full force and
effect in accordance with its terms.

      6. The provisions of this Second Amendment are severable, and if any
clause or provision shall be held invalid and unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction and shall not in
any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Second Amendment in any jurisdiction.

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            IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed as of the date first above written.

                                         UBS AG, STAMFORD BRANCH

                                         By: /s/ Richard T. Conway
                                            ------------------------------------
                                         Name:  Richard T. Conway
                                         Title: Associate Director
                                                Loan Portfolio Support, US

                                         By: /s/ Thomas R. Salzano
                                            ------------------------------------
                                         Name:  Thomas R. Salzano
                                         Title: Associate Director
                                                Loan Portfolio Support, US

                                         HANOVER DIRECT, INC.

                                         By:
                                            ------------------------------------
                                         Name:
                                         Title:

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            IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed as of the date first above written.

                                         UBS AG, STAMFORD BRANCH

                                         By:
                                            ------------------------------------
                                         Name:
                                         Title:

                                         By:
                                            ------------------------------------
                                         Name:
                                         Title:

                                         HANOVER DIRECT, INC.

                                         By: /s/ Robert Vill
                                            ------------------------------------
                                         Name: Robert Vill
                                         Title: VP Finance -- Treasurer

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