Document:

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EXHIBIT 10.42

                                                             [Execution Version]

                            TWENTY-FIRST AMENDMENT TO
                           LOAN AND SECURITY AGREEMENT

      THIS TWENTY-FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
"Amendment"), dated March 21, 2002, is entered into by and among CONGRESS
FINANCIAL CORPORATION, a Delaware 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
DIRECT VIRGINIA INC., a Delaware corporation ("HDV"), HANOVER REALTY, INC., a
Virginia corporation ("Hanover Realty"), THE COMPANY STORE FACTORY, INC., a
Delaware corporation ("TCS Factory"), THE COMPANY OFFICE, INC., a Delaware
corporation ("TCS Office"), 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") and KEYSTONE INTERNET SERVICES, INC., a Delaware
corporation ("Keystone Internet"; and together with HDPI, Brawn, GBM, Gump's,
HDV, Hanover Realty, TCS Factory, TCS Office, Silhouettes, HCS LLC and
Domestications, collectively, the "Borrowers" and each individually, a
"Borrower" ), and HANOVER DIRECT, INC., a Delaware corporation, ("Hanover"),
AMERICAN DOWN & TEXTILE COMPANY, a Wisconsin corporation ("American Down"), D.M.
ADVERTISING, INC., a New Jersey corporation ("DM Advertising, Inc."), KEYSTONE
LIQUIDATIONS, INC., a Delaware corporation, formerly known as Tweeds of Vermont,
Inc. ("Keystone Liquidations"), HANOVER HOME FASHIONS GROUP, LLC, a Delaware
limited liability company ("HHFG LLC"), ENCORE CATALOG, LLC, a Delaware limited
liability company ("Encore LLC"), CLEARANCE WORLD OUTLETS, LLC, a Delaware
limited liability company ("Clearance World"), SCANDIA DOWN, LLC, a Delaware
limited liability company ("Scandia Down, LLC"), ERIZON, INC., a Delaware
corporation ("erizon, inc."), HANOVER BRANDS, INC., a Delaware corporation
("Hanover Brands"), LACROSSE FULFILLMENT, LLC, a Delaware limited liability
company ("LaCrosse, LLC") and SAN DIEGO TELEMARKIETING, LLC, a Delaware
limited liability company ("San Diego LLC"; and together with Hanover, American
Down, DM Advertising, Inc., Keystone Liquidations, HHFG LLC, Encore LLC,
Clearance World, Scandia Down, LLC, erizon, inc., Hanover Brands and LaCrosse,
LLC, collectively, the "Existing Guarantors" and each individually, an "Existing
Guarantor"), and D.M. Advertising, LLC, a Delaware limited liability company
("DM Advertising, LLC"). Each Existing Guarantor, together with DM Advertising,
LLC, shall hereinafter be referred to individually as a "Guarantor" and
collectively as the "Guarantors".

                              W I T N E S S E T H:

<PAGE>

      WHEREAS, Borrowers, Existing Guarantors and Lender are parties to the Loan
and Security Agreement, dated November 14, 1995, as amended by First Amendment
to Loan and Security Agreement, dated February 22, 1996, Second Amendment to
Loan and Security Agreement, dated April 16, 1996, Third Amendment to Loan and
Security Agreement, dated May 24, 1996, Fourth Amendment to Loan and Security
Agreement, dated May 31, 1996, Fifth Amendment to Loan and Security Agreement,
dated September 11, 1996, Sixth Amendment to Loan and Security Agreement, dated
as of December 5, 1996, Seventh Amendment to Loan and Security Agreement, dated
as of December 18, 1996, Eighth Amendment to Loan and Security Agreement, dated
as of March 26, 1997, Ninth Amendment to Loan and Security Agreement, dated as
of April 18, 1997, Tenth Amendment to Loan and Security Agreement, dated as of
October 31, 1997, Eleventh Amendment to Loan and Security Agreement, dated as of
March 25, 1998, Twelfth Amendment to Loan and Security Agreement, dated as of
September 30, 1998, Thirteenth Amendment to Loan and Security Agreement, dated
as of September 30, 1998, Fourteenth Amendment to Loan and Security Agreement,
dated as of February 28, 2000, Fifteenth Amendment to Loan and Security
Agreement, dated as of March 24, 2000, Sixteenth Amendment to Loan and Security
Agreement, dated as of August 8, 2000, Seventeenth Amendment to Loan and
Security Agreement, dated as of January 5, 2001, Eighteenth Amendment to Loan
and Security Agreement, dated as of November 12, 2001, Nineteenth Amendment to
Loan and Security Agreement, dated as of December 18, 2001 and Twentieth
Amendment to Loan and Security Agreement, dated as of March 5, 2002 (as so
amended, the "Loan Agreement"), pursuant to which Lender has made loans and
advances to Borrowers; and

      WHEREAS, Borrowers and Existing Guarantors have requested that Lender
consent to, and enter into certain amendments to the Loan Agreement with respect
to the minimum amounts of Consolidated Working Capital, Consolidated Net Worth
and EBITDA that Hanover and its Subsidiaries are required to maintain and to
amend the definition of Consolidated Net Worth; and

      WHEREAS, Borrowers and Existing Guarantors have requested that DM
Advertising, LLC become a Guarantor pursuant to the terms and conditions of the
Loan Agreement, as amended hereby; and

      WHEREAS, the parties to the Loan Agreement desire to enter into this
Amendment to evidence and effectuate such consents, amendments and agreements,
and certain other amendments to the Financing Agreements relating thereto, in
each case subject to the terms and conditions and to the extent 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.

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            (a) Additional Definition. As used herein and in the Loan Agreement
and the other Financing Agreements, the term "DM Advertising, LLC" shall mean
D.M. Advertising, LLC, formerly known as Creative Capital Ventures, LLC, a
Delaware limited liability company, and its successors and assigns.

            (b) Amendment to Definition. All references to the term
"Consolidated Net Worth" in the Loan Agreement and the other Financing
Agreements are deemed amended and each such reference is hereby amended to mean,
as to any Person, at any time, in accordance with generally accepted accounting
principles, as in effect from time to time consistently applied, on a
consolidated basis for such Person and its Subsidiaries, the amount equal to the
result obtained by taking total assets and subtracting therefrom total
liabilities of such Person and its Subsidiaries; provided, however, (a) that
solely for purposes of calculating Consolidated Net Worth of Hanover and its
Subsidiaries as at the end of Hanover's 1995 fiscal year, up to $4,500,000 in
write-downs of Hanover's deferred taxes asset, as required pursuant to Financial
Accounting Standards No. 109, due to losses incurred by Hanover and its
Subsidiaries in such fiscal year, shall not be considered reductions of the
deferred taxes asset of Hanover, (b) that for purposes of calculating
Consolidated Net Worth of Hanover and its Subsidiaries, the outstanding
Indebtedness for Borrowed Money evidenced by the $25,000,000 IMR Subordinated
Note shall not be considered a liability of Hanover, and (c) that effective July
1, 2002, solely for purposes of calculating Consolidated Net Worth of Hanover
and its Subsidiaries for the fiscal month ending July 2002 and every fiscal
month thereafter, to the extent that goodwill or intangible assets (or both) of
Hanover or its Subsidiaries is impaired under the provisions of Financial
Accounting Standards No. 142 ("FAS No. 142"), such that Hanover is required
pursuant to FAS No. 142 to take a charge to write off part or all of goodwill or
intangible assets (or both) of Hanover or its Subsidiaries, then such write off
of goodwill or intangible assets (or both) shall not be considered a reduction
of total assets of such Subsidiaries or Hanover.

            (c) Interpretation. All capitalized terms used herein and not
defined herein shall have the meanings given to such terms in the Loan
Agreement.

      2. Assumption of Obligations; Amendments to Guarantees and Financing
Agreements; Acknowledgments with respect to Hanover 2001 Reorganization.

            (a) The Guarantee and Waiver, dated November 14, 1995, executed by
the Existing Guarantors, other than Hanover and Borrowers, as of such date, in
favor of Lender, as heretofore amended (the "Subsidiary Guarantee"), shall be
deemed further amended to include DM Advertising, LLC as an additional Guarantor
party signatory thereto. DM Advertising, LLC hereby expressly (i) assumes and
agrees to be directly liable to Lender, jointly and severally with the other
Guarantors signatories thereto and the Borrowers, for all Obligations (as
defined in the Subsidiary Guarantee), (ii) agrees to perform, comply with and be
bound by all terms, conditions and covenants of the Subsidiary Guarantee with
the same force and effect as if DM Advertising, LLC had originally executed and
been an original party signatory to the Subsidiary Guarantee, and (iii) agrees
that Lender shall have all rights, remedies and interests with respect to DM

                                     - 4 -
<PAGE>

Advertising, LLC and its properties with the same force and effect as if it had
originally executed and been an original party signatory to the Subsidiary
Guarantee.

            (b) DM Advertising, LLC hereby expressly 1. assumes and agrees to be
directly liable for all Obligations under, contained in, or arising out of the
Loan Agreement, the General Security Agreement, dated November 14, 1995, by the
Existing Guarantors, other than Hanover and Borrowers, as of such date, in favor
of Lender, as heretofore amended (the "Subsidiary General Security Agreement"),
and the other Financing Agreements applicable to all Guarantors and as applied
to DM Advertising, LLC as a Guarantor, 2. agrees to perform, comply with and be
bound by all terms, conditions and covenants of the Loan Agreement, the
Subsidiary General Security Agreement and the other Financing Agreements
applicable to all Guarantors and as applied to DM Advertising, LLC as a
Guarantor with the same force and effect as if DM Advertising, LLC had
originally executed and been an original Guarantor or Debtor, as the case may
be, party signatory to the Loan Agreement, the Subsidiary General Security
Agreement and the other Financing Agreements, and 3. agrees that Lender shall
have all rights, remedies and interests, including security interests in the
Collateral granted pursuant to Section 3 hereof, the Loan Agreement, the
Subsidiary General Security Agreement, and the other Financing Agreements, with
respect to DM Advertising, LLC and its properties and assets with the same force
and effect as if DM Advertising, LLC had originally executed and had been an
original Guarantor or Debtor, as the case may be, party signatory to the Loan
Agreement, the Subsidiary General Security Agreement and the other Financing
Agreements, and such agreements shall be deemed so amended.

            (c) Each Guarantor, including, without limitation, DM Advertising,
LLC as a Guarantor pursuant hereto, hereby expressly and specifically ratifies,
restates and confirms the terms and conditions of its respective Guarantee(s) in
favor of Lender and its liability for all of the Obligations (as defined in its
Guarantee(s)), and all other obligations, liabilities, agreements and covenants
thereunder.

            (d) Each Borrower, and each Guarantor, including, without
limitation, DM Advertising, LLC, hereby agrees that all references to Guarantor
or Guarantors or other terms intended to refer to a Guarantor or Guarantors,
such as Debtor or Debtors, contained in any of the Financing Agreements are
hereby amended to include DM Advertising, LLC and each other person or entity at
any time hereafter made a "Guarantor" under the Loan Agreement, as an additional
Guarantor or Debtor, or other appropriate term of similar import, as the case
may be.

      3. Collateral. Without limiting the provisions of the Loan Agreement, the
Subsidiary General Security Agreement, the other Financing Agreements and
Section 2(b) hereof, as collateral security for the prompt payment and
performance when due of all of the Obligations of DM Advertising, LLC to Lender,
DM Advertising, LLC hereby grants to Lender, a continuing security interest in,
and lien upon, and right of setoff against, and DM Advertising, LLC hereby
pledges and assigns to Lender, all of its now owned and hereafter acquired and
arising assets and properties, all of which shall be included in the definition
of Collateral as set forth in the

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Subsidiary General Security Agreement (which definition is hereby amended
accordingly), including, without limitation, the following:

            (a) all present and future Accounts;

            (b) all Inventory;

            (c) all Equipment;

            (d) all Real Property;

            (e) all present and future books, records, ledger cards, computer
programs and other property and general intangibles evidencing or relating to
any of the above, any other collateral or any account debtor, together with the
file cabinets or containers in which the foregoing are stored; and

            (f) all present and future products and proceeds of the foregoing,
in any form, including, without limitation, any insurance proceeds and any
claims against third persons for loss or damage to or destruction of any or all
of the foregoing.

      4. Consolidated Working Capital. Section 6.19(b) of the Loan Agreement is
hereby deleted in its entirety and replaced with the following Section 6.19(b)
and a new Section 6.19(c) as follows:

                  "(b) Hanover shall, commencing with the fiscal month ending
            April 2000 and for each fiscal month thereafter in any fiscal year
            thereafter through and including the fiscal month ending February
            2002, maintain Consolidated Working Capital, calculated on a
            consolidated basis for Hanover and its Subsidiaries, of not less
            than the following amounts as at the end of each such fiscal month
            for each such fiscal:

<TABLE>
<CAPTION>
                       Period                 Amount
                       ------                 ------
<S>                                           <C>
                       March                  $20,000,000
                       April                  $20,000,000
                       May                    $20,000,000
                       June                   $20,000,000
                       July                   $20,000,000
                       August                 $20,000,000
                       September              $20,000,000
                       October                $20,000,000
                       November               $20,000,000
                       December               $20,000,000
</TABLE>

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<PAGE>

<TABLE>
<S>                                           <C>
                       January                $12,500,000
                       February               $12,500,000
</TABLE>

                  (c) Hanover shall, commencing with the fiscal month ending
            March 2002 and for each fiscal month thereafter in any fiscal year
            thereafter, maintain Consolidated Working Capital, calculated on a
            consolidated basis for Hanover and its Subsidiaries, of not less
            than the following amounts as at the end of each such fiscal month
            for each such fiscal:

<TABLE>
<CAPTION>
                       Period                  Amount
                       ------                  ------
<S>                                           <C>
                       March                  $20,000,000
                       April                  $20,000,000
                       May                    $20,000,000
                       June                   $20,000,000
                       July                   $20,000,000
                       August                 $20,000,000
                       September              $20,000,000
                       October                $20,000,000
                       November               $20,000,000
                       December               $12,500,000
                       January                $15,000,000
                       February               $15,000,000"
</TABLE>

      5. Consolidated Net Worth. Section 6.20 (b) of the Loan Agreement is
hereby deleted in its entirety and replaced with the following Section 6.20(b)
and a new Section 6.20(c) as follows:

                  "(b) Hanover shall commencing with the fiscal month ending
            April 2000 and for each fiscal month thereafter in any fiscal year
            thereafter though and including the fiscal month ending February
            2002, maintain Consolidated Net Worth, calculated on a consolidated
            basis for Hanover and its Subsidiaries, of not less than the
            following amounts as at the end of each such fiscal month for each
            such fiscal:

<TABLE>
<CAPTION>
                       Period                 Amount
                       ------                 ------
<S>                                           <C>
                       March                  $34,000,000
                       April                  $34,000,000
                       May                    $34,000,000
                       June                   $34,000,000
                       July                   $30,000,000
                       August                 $30,000,000
</TABLE>

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<PAGE>

                       September              $30,000,000
                       October                $30,000,000
                       November               $30,000,000
                       December               $37,500,000
                       January                $37,500,000
                       February               $37,500,000

                  (c) Hanover shall commencing with the fiscal month ending
            March 2002 and for each fiscal month thereafter in any fiscal year
            thereafter, maintain Consolidated Net Worth, calculated on a
            consolidated basis for Hanover and its Subsidiaries, of not less
            than the following amounts as at the end of each such fiscal month
            for each such fiscal:

<TABLE>
<CAPTION>
                       Period                 Amount
                       ------                 ------
<S>                                           <C>
                       March                  $36,000,000
                       April                  $35,000,000
                       May                    $35,000,000
                       June                   $35,000,000
                       July                   $35,000,000
                       August                 $34,000,000
                       September              $32,500,000
                       October                $32,500,000
                       November               $32,500,000
                       December               $35,000,000
                       January                $37,000,000
                       February               $36,500,000
</TABLE>

      6. EBITDA. Sections 6.31(c) and 6.31(d) of the Loan Agreement are hereby
deleted in their entirety and replaced with the following:

                  "(c) Hanover and its Subsidiaries shall not, as to any fiscal
            quarter during the fiscal year 2002 of Hanover and its Subsidiaries,
            permit EBITDA of Hanover and its Subsidiaries commencing on the
            first day of such fiscal year and ending on the last day of the
            applicable fiscal quarter set forth below on a cumulative
            year-to-date basis ("YTD"), to be less than the respective amount
            set forth below opposite such fiscal quarter end YTD period:

<TABLE>
<CAPTION>
                  Fiscal Quarter
                 End YTD Periods                         Cumulative
              for Fiscal Year 2002                     Minimum EBITDA
              --------------------                     --------------
<S>                                                    <C>
              (i) December 30, 2001
</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
                  Fiscal Quarter
                 End YTD Periods                         Cumulative
              for Fiscal Year 2002                     Minimum EBITDA
              --------------------                     --------------
              <S>                                      <C>
              through March 30, 2002                   ($1,000,000)

              (ii) December 30, 2001
              through June 29, 2002                     $1,200,000

              (iii) December 30, 2001
              through September 28, 2002                $1,500,000

              (iv) December 30, 2001
              through December 28, 2002                 $7,000,000
</TABLE>

                  (d) Hanover and its Subsidiaries shall not, as to the first
            fiscal quarter during the fiscal year 2003 of Hanover and its
            Subsidiaries, permit EBITDA of Hanover and its Subsidiaries
            commencing on the first day of such fiscal year and ending on the
            last day of the first fiscal quarter set forth below on a cumulative
            year-to-date basis ("YTD"), to be less than the respective amount
            set forth below opposite such fiscal quarter end YTD period:

<TABLE>
<CAPTION>
                  Fiscal Quarter
                 End YTD Periods                         Cumulative
              for Fiscal Year 2003                     Minimum EBITDA
              --------------------                     --------------
<S>                                                    <C>
              (i) December 29, 2002                     ($1,000,000)
              through March 29, 2003
</TABLE>

                  (e) provided, that, as to any applicable period in Section
            6.31(a), (b), (c) or (d), to the extent that Hanover and Borrowers
            shall have received any cash proceeds from the sale of any Capital
            Stock or from the proceeds of loans in respect of any subordinated
            indebtedness under the Richemont Credit Facilities other than
            proceeds of loans under the Richemont $10,000,000 Credit Agreements,
            in each case, to the extent permitted hereunder, then the amount of
            such cash proceeds shall be added back to EBITDA for purposes of
            determining cumulative EBITDA for the applicable period and for each
            subsequent quarterly period during the then-current fiscal year."

      7. Amendment Fee. In addition to all other fees, charges, interest and
expenses payable by Borrowers to Lender under the Loan Agreement and the other
Financing Agreements, Borrowers shall pay to Lender the following additional
fees:

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<PAGE>

            (a) Borrowers shall pay to Lender, contemporaneously herewith, a
closing fee in the amount of $75,000, which fee is fully earned as of the date
hereof and may be charged into the loan account(s) of any Borrower.

            (b) Tranche B Term Loan Borrowers shall pay to Lender,
contemporaneously herewith, a closing fee in the amount of $25,000, which fee is
fully earned as of the date hereof and may be charged into the loan account(s)
of any Tranche B Term Loan Borrower.

      8. Exhibits.

            (a) Exhibits A, B-1, B-4 and C to the Loan Agreement are hereby
deleted in their entirety and replaced with the information set forth on
Exhibits A, B-1, B-4 and C attached hereto.

            (b) Exhibit A to the Subsidiary General Security Agreement is hereby
amended to include, in addition and not in limitation, the information set forth
on Exhibit D attached hereto.

      9. Representations, Warranties and Covenants. Each Borrower and Guarantor
represents, warrants and covenants 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 the Borrowers or Guarantors hereunder have been duly
authorized, executed and delivered by all necessary action on the part of such
Borrowers and Guarantors which are parties hereto and thereto and, if necessary,
their respective stockholders (with respect to any corporation) or members (with
respect to any limited liability company), and is in full force and effect as of
the date hereof, as the case may be, and the agreements and obligations of
Borrowers and Guarantors, as the case may be, contained herein and therein
constitute legal, valid and binding obligations of Borrowers and Guarantors, as
the case may be, enforceable against them in accordance with their terms.

            (b) As of the date hereof, each Borrower and Guarantor is duly
organized and validly existing in good standing under the laws of its State of
incorporation or formation, as applicable.

            (c) As of the date hereof, DM Advertising, LLC (i) is duly licensed
or qualified to do business as a foreign limited liability company or foreign
corporation, as the case may be, and is in good standing in each of the
jurisdictions set forth in Exhibit A annexed hereto, which are, as of the date
hereof, the only jurisdictions wherein the character of the properties owned or
licensed or the nature of the business of DM Advertising, LLC, makes such
licensing or

                                     - 10 -
<PAGE>

qualification to do business necessary; and (ii) has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted and will be conducted in the future.

            (d) The assets and properties of each Borrower and Guarantor are
owned by it, free and clear of all security interests, liens and encumbrances of
any kind, nature or description, as of the date hereof, except those security
interests existing in favor of Lender and those granted pursuant hereto in favor
of Lender, and except for Liens (if any) permitted under Section 6.4 of the Loan
Agreement or the other Financing Agreements.

            (e) No action of, or filing with, or consent of any governmental or
public body or authority, other than the filing of UCC financing statements, 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.

            (f) All of the representations and warranties set forth in the Loan
Agreement as amended hereby, and 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.

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

      10. Conditions Precedent. Concurrently with the execution and delivery
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) Lender shall have received a photocopy of an executed original
or executed original counterparts of the following documents by facsimile (with
the originals to be delivered within five (5) Banking Days after the date
hereof), as the case may be:

                  (i) this Amendment, duly authorized, executed and delivered by
each Borrower and Guarantor; and

                  (ii) a Guarantee and Waiver, duly authorized, executed and
delivered by DM Advertising, LLC in favor of Lender with respect to the
Obligations of Borrowers under the Financing Agreements;

            (b) Lender shall have received, in form and substance satisfactory
to Lender, such UCC financing statements and other documents and instruments, in
each case duly executed (if applicable) and delivered by Borrowers and
Guarantors, which Lender in its sole discretion has

                                     - 11 -
<PAGE>

determined are necessary to perfect the security interests of Lender in all
Collateral now or hereafter owned by DM Advertising, LLC;

            (c) Lender shall have received, in form and substance satisfactory
to Lender (i) a copy of the Certificate of Formation or Articles of Organization
of DM Advertising, LLC, and all amendments thereto, certified by the Secretary
of State of its jurisdiction of formation as of the most recent practicable date
certifying that each of the foregoing documents remains in full force and effect
and has not been modified or amended, except as described therein, (ii) a copy
of the Operating Agreement of DM Advertising, LLC, certified by the Secretary or
Assistant Secretary of the company, and (iii) a certificate from the Secretary
or Assistant Secretary of DM Advertising, LLC, dated the date hereof, certifying
that each of the foregoing documents remains in full force and effect and has
not been modified or amended, except as described therein;

            (d) Lender shall have received, in form and substance satisfactory
to Lender, evidence, as of the most recent practicable date, that DM
Advertising, LLC is duly qualified and in good standing in each jurisdiction set
forth in Exhibit A annexed hereto;

            (e) Lender shall have received, in form and substance satisfactory
to Lender (i) a Management and Incumbency Certificate of DM Advertising, LLC
identifying all managers, officers or other persons authorized to act on its
behalf, (ii) Company Resolutions of DM Advertising, LLC, evidencing the adoption
and subsistence of company resolutions approving the execution, delivery and
performance by DM Advertising, LLC of this Amendment and the agreements,
documents and instruments to be delivered pursuant to this Amendment, in each
case signed by all members of DM Advertising, LLC, and (iii) a Certificate of
the Secretary or Assistant Secretary of DM Advertising, LLC identifying all
members of DM Advertising, LLC;

            (f) Lender shall have received written consents from each of the
Participants with respect to the transactions contemplated by this Amendment,
each duly authorized, executed and delivered by such Participants;

            (g) Lender shall have received, in form and substance satisfactory
to Lender, an opinion of counsel to Borrowers and Guarantors with respect to the
transactions contemplated by this Amendment, the Guarantee and Waiver and such
other matters as Lender shall reasonably request, addressed to Lender, in form
and substance and satisfactory to Lender; and

            (h) Lender shall have received, in form and substance satisfactory
to Lender, a true and correct copy of any consent, waiver or approval to or of
this Amendment, which any Borrower or Guarantor is required to obtain from any
other Person, and such consent, approval or waiver shall be in a form reasonably
acceptable to Lender.

      11. 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

                                     - 12 -
<PAGE>

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.

      12. 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.

      13. Governing Law. The validity, interpretation and enforcement of this
Amendment in any dispute arising out of the relationship between the parties
hereto, whether in contract, tort, equity or otherwise shall be governed by the
internal laws of the State of New York, without regard to any principle of
conflict of laws or other rule of law that would result in the application of
the law of any jurisdiction other than the State of New York.

                                     - 13 -
<PAGE>

      14. 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.

      15. 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.

                                     - 14 -
<PAGE>

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

                                       CONGRESS FINANCIAL CORPORATION

                                       By: /s/ Janet Last
                                           ---------------------------------

                                       Title: SVP
                                              ------------------------------

                                       HANOVER DIRECT PENNSYLVANIA, INC.
                                       BRAWN OF CALIFORNIA, INC.
                                       GUMP'S BY MAIL, INC.
                                       GUMP'S CORP.
                                       HANOVER DIRECT VIRGINIA INC.
                                       HANOVER REALTY, INC.
                                       THE COMPANY STORE FACTORY, INC.
                                       THE COMPANY OFFICE, INC.
                                       SILHOUETTES, LLC
                                       HANOVER COMPANY STORE, LLC
                                       DOMESTICATIONS, LLC
                                       KEYSTONE INTERNET SERVICES, INC.

                                       By: /s/ Edward M. Lambert
                                           ---------------------------------

                                       Title: Vice President
                                              ------------------------------

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

HANOVER DIRECT, INC.

By: /s/ Edward M. Lambert
----------------------------

Title: EVP & CFO
----------------------------

                       [SIGNATURES CONTINUE ON NEXT PAGE]

                                     - 15 -
<PAGE>

                    [SIGNATURES CONTINUED FROM PREVIOUS PAGE]

AMERICAN DOWN & TEXTILE COMPANY
DM ADVERTISING, INC.
KEYSTONE LIQUIDATIONS, INC.
HANOVER HOME FASHIONS GROUP, LLC
ENCORE CATALOG, LLC
CLEARANCE WORLD OUTLETS, LLC
SCANDIA DOWN, LLC
ERIZON, INC.
HANOVER BRANDS, INC.
LA CROSSE FULFILLMENT, LLC
SAN DIEGO TELEMARKETING, LLC
D.M. ADVERTISING, LLC

By: /s/ Edward M. Lambert
----------------------------

Title: Vice President
----------------------------

                                     - 16 -<PAGE>
                                                                 EXHIBIT 10.55

                     ADDENDUM TO ACCOUNT PURCHASE & CREDIT
                      CARD MARKETING & SERVICES AGREEMENT

     This Addendum to Account Purchase & Credit Card Marketing & Services
Agreement ("Addendum") is entered into by and between Capital One Services,
Inc., a Delaware corporation ("COSI") and Capital One Bank, a Virginia banking
corporation ("COB")(jointly and severally, or as appropriate as to a particular
party's obligation, "Capital One") and Hanover Direct, Inc., a Delaware
corporation ("HDI"), as of July 7, 1999.

     WHEREAS, Capital One and HDI entered into an Account Purchase & Credit
Card Marketing & Servicing Agreement ("Agreement") as of March 9, 1999; and

     WHEREAS, Capital One and HDI now desire to amend certain provisions of the
Agreement.

     NOW THEREFORE, the parties agree as follows:

     1.   The current definition of "Purchased Accounts" in the Agreement
          is hereby deleted in its entirety and replaced with the following
          definition:

          "Purchased Accounts = Accounts from the purchased
          Existing Portfolio on the Closing Date, excluding (i)
          Charged-off Accounts, (ii) all Gumps Department Store
          corporate credit accounts; (iii) all six-pay Gumps accounts;
          and (iv) all eighteen-pay Gumps accounts."

     2.   The current definition of "Charged-off Accounts" in the
          Agreement is hereby deleted in its entirety and replaced
          with the following:

          "Charged-off Accounts = Credit accounts issued under the
          Existing Agreement that have been charged-off on the
          books and records of the applicable issuer, net of
          recoveries, pursuant to Applicable Law and, in every
          event, (i) all accounts 180 days past due, (ii) all
          fraudulent accounts, (iii) all accounts with lost or
          stolen cards, (iv) all bankrupt accounts, (v) all
          accounts with deceased account holders, and (vi) any
          other instance mutually agreed upon by the parties."

     3.   The current definition of "Term" in the Agreement is
          hereby deleted in its entirety and replaced with the
          following definition:

                         "Term = as defined in IV.A.l."
<PAGE>

          4.   Section II.A.1 is hereby deleted in its entirety and replaced
               with the following:

               "Replacement.  Capitol One shall provide services generally
               of a type provided previously by GECC with respect to HDI's
               private label credit card program, except that Capital One
               assumes no responsibility for any account programs serviced
               by GECC and closed as of the closing date, including, without
               limitation, the insurance sales and deferred billing programs.
               Capital One shall do this by (a) purchasing from HDI the
               Purchased Accounts at a price equal to 100% of the par value
               of the outstanding receivables of accounts and (ii) continuing
               to fund the portfolio's growth pursuant to the provisions of
               this Agreement."

          5.   A new Section II.B.3 is hereby inserted to read as follows, and
the current Section II.B.3 will officially become Section II.B.4; the current
Section II.B.4 will officially become II.B.5 and the current Section II.B.5 will
officially become II.B.6:

               "HDI's Override Authority.  Notwithstanding Section II.B.2
               above, and solely for the Gumps Department Store accounts,
               Capital One shall not object to HDI overriding certain credit
               limits set by Capital provided that overrides are made solely
               pursuant to the Gumps Credit policy attached as Exhibit A.
               In those instances that HDI exercises such override authority
               and in the event Gumps accounts are later charged-off, HDI
               and Capital One agree that Capital One will be only responsible
               for the first one percent (1%) of the Gumps amounts so
               charged-off and HDI shall be solely responsible for all other
               charged-off losses".

          6.   A new Section II.B.4.(b) is hereby inserted to read as follows,
and the current Section II.B.4.(b) will officially become Section II.B.4.(c)
and the current Section II.4.3(c) will officially become II.B.4.(d):

               "Should Capital One offer a 9.9% annual prime rate (the "9.9
               Card") to qualifying Accounts, HDI agrees to reduce the fee
               set forth in Section B.3.(a) from 0.625% of the quarterly
               average outstanding receivable balance (2.5% annualized)
               under the dual-line product, to .15% of the quarterly average
               outstanding receivable balance (.60% annualized), excluding
               Delinquent Accounts. Capital One agrees to limit the number
               of accounts holding the 9.9 Card to a maximum of 20,000. Capital
               One and HDI also agree

                                       2

<PAGE>
               to evaluate the success of the 9.9 Card program 18 months after
               the Closing Date, unless terminated sooner by mutual agreement of
               the parties, and if either party determines to discontinue the
               program, the parties shall convert existing affected Accounts to
               a new program.

          7.   A new Section B.6 is hereby inserted as follows:

               "Additional Capital One Fees.  At the end of each quarter, the
               parties hereby agree to calculate the amount of fees paid by each
               party during such quarter under Sections A.4 and B.3.(b). If
               during such period, fees paid by HDI to Capital One pursuant to
               Section A.4 exceed fees paid by Capital One to HDI pursuant to
               Section B.3.(b), Capital One agrees to pay HDI one-half of the
               amount of such excess. [By way of illustration only, if under
               Section A.4, HDI paid Capital One $1,000, and if under B.3.(b),
               Capital One paid HDI $500, then Capital One would pay HDI $250
               ($500 subtracted from $1,000, divided by 2)]. If Capital One pays
               more fees to HDI during any quarter, Capital One is not obligated
               to pay HDI any further fees."

          8.   A new Section IV.B.3(b) is hereby to read as follows, and the
current Section IV.B.3(b) will officially become Section IV.B.3(c), and the
current Section IV.B.3(c) will officially become IV.B.3(d), and the current
Section IV.B.3(d) will officially become IV.B.3(e):

               "reconcile with GECC, within 3 days of the Closing Date, any
               discrepancies between the Purchase Price paid and the outstanding
               amount of the receivables of the Purchased Accounts, as reflected
               on the Tape received from GECC on the Closing Date. If, as a
               result of this reconciliation, the estimated portion of the
               Purchase Price delivered to Capital One prior to the Closing Date
               from HDI is materially changed, Capital and HDI will "true-up"
               any such discrepancies."

          9.   A new Section IV.B.3(f) is hereby inserted as follows:

               "wire a portion of the Purchase Price, based on the June 2, 1999
               Preliminary Tape, to Capital One no later than the day before the
               scheduled Closing Date. Such amount will represent an estimate of
               HDI's portion of the Purchase Price, which estimate will be
               agreed upon by HDI and Capital One. Upon receipt of a
               confirmation of HDI's funds, Capital One will wire GECC the
               Purchase Price on

                                       3
<PAGE>
          the Closing Date. HDI and Capitol One agree to reconcile such amounts
          paid to GECC within 10 business days of Closing."

     10.  A new Section W. is hereby added to Section IV of the Agreement as
follows:

     "W.  SPECIFIC INDEMNIFICATION. In the event that the purchase and sale of
          the Existing Portfolio as contemplated in that certain Portfolio
          Purchase and Sale Agreement by and among HDI and GECC (the "GECC
          Agreement") is not consummated in accordance with the GECC Agreement
          due primarily to any act or omission of HDI, then, in addition to the
          obligations of HDI pursuant to Subsection J above, HDI agrees to
          indemnify and hold harmless Capitol One and its affiliates and the
          officers, directors, employees, agents and partners of Capitol One and
          its affiliates (collectively, the "Indemnified Parties"), from any
          liability, loss, cost, expense and damages (including, without
          limitation, punitive damages) paid or payable to GECC or on its
          behalf, and any interest thereon, including reasonable attorneys' fees
          (collectively, "Losses"), which results in any material part from or
          is caused in any material part by the notice letter sent to account
          holders by Capital One with the concurrence of HDI on or around May
          17, 1999 ("Pre-Closing Letter") or any related changes in terms or
          benefits or any actions or omissions by HDI, any affiliate of HDI or
          any of their respective agents relating to the Pre-Closing Notice or
          any such changes in terms or benefits; provided that, in no event,
          shall HDI be obligated under this section to indemnify any Indemnified
          Party against any Losses to the extent such Losses result from the
          gross negligence or willful misconduct of the Indemnified Parties or
          from any violation of applicable law by the Indemnified Parties."

     All other terms and conditions of the Agreement remain in full force and
effect.

     This Addendum may be executed in separate counterparts, which, when taken
together, shall constitute the same agreement.

                                       4
<PAGE>
     IN WITNESS WHEREOF, the parties have caused this Addendum to be duly
executed and to be effective as of the date first written above.

HANOVER DIRECT, INC.                              CAPITAL ONE SERVICES, INC.

By: /s/ Rakesh K. Kaul                            By: /s/ Jory A. Berson
   -------------------------                      --- --- ---- -- ------
        Rakesh K. Kaul                            Jory A. Berson
        President & Chief                         Vice President, Marketing
        Executive Officer                         and Analysis

                                                  CAPITAL ONE BANK

                                                  By: /s/ Jory A. Berson
                                                  --- --- ---- -- ------
                                                  Jory A. Berson
                                                  Vice President, Marketing
                                                  and Analysis

                                       5

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