Document:

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EXHIBIT 10.15

                              HANOVER DIRECT, INC.

                      2002 STOCK OPTION PLAN FOR DIRECTORS

        1.      Purpose. The purpose of the Hanover Direct, Inc. 2002 Stock
Option Plan for Directors (the "Plan") is to advance the interests of Hanover
Direct, Inc. (the "Company") by providing non-employee directors of the Company,
through the grant of options to purchase shares of Common Stock (as hereinafter
defined), with a larger personal and financial interest in the Company's
success.

        2.      Administration. The Plan shall be administered by a committee
(the "Committee") consisting of at least two members of the Board of Directors
of the Company (the "Board"). The Committee shall have full power and authority
to interpret the Plan, to establish such rules and regulations as it deems
appropriate for the administration of the Plan, and to take such other action as
it deems necessary or desirable for the administration of the Plan. The
Committee's interpretation and construction of any provision of the Plan or the
terms of any Option (as hereinafter defined) shall be conclusive and binding on
all parties.

        3.      Participants. Each director of the Company who is neither an
employee of the Company nor an Ineligible Director (as hereinafter defined) (a
"Non-Employee Director") shall be eligible to be granted Options to purchase
shares of Common Stock ("Options") under the Plan. An "Ineligible Director"
means any director of the Company who is a nonresident alien.

        Nothing contained in the Plan, or in any Option granted pursuant to the
Plan, shall confer upon any Director any right to the continuation of his or her
directorship or limit in any way the right of the Company to terminate his or
her directorship at any time.

        4.      The Shares. Options may be granted from time to time under the
Plan for the purchase, in the aggregate, of not more than 500,000 shares of
common stock, par value $0.66 2/3 per share, of the Company ("Common Stock")
(subject to adjustment pursuant to Section 13). Such shares of Common Stock may
be set aside out of the authorized but unissued shares of Common Stock not
reserved for any other purpose or out of previously issued shares acquired by
the Company and held in its treasury. Any shares of Common Stock which, by
reason of the termination or expiration of an Option or otherwise, are no longer
subject to purchase pursuant to an Option granted under the Plan, may again be
subjected to an Option under the Plan.

        5.      Option Grants. Options shall be evidenced by Option agreements
which shall be subject to the terms and conditions set forth in the Plan and
such other terms and conditions not inconsistent herewith as the Committee may
approve.

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                (a)     Initial Appointment Awards. As of the effective date of
                his or her initial appointment or election to the Board (or, if
                later, the effective date of the Plan) (the "Initial Appointment
                Date"), a Non-Employee Director shall receive a grant of an
                Option to purchase 50,000 shares of Common Stock (subject to
                adjustment pursuant to Section 13).

                (b)     Annual Service Awards. On each Award Date (as
                hereinafter defined) occurring after a Non-Employee Director's
                Initial Appointment Date, such Non-Employee Director shall be
                granted, provided he or she continues to serve as a member of
                the Board on such date, an Option to purchase 25,000 shares of
                Common Stock (subject to serve as a member of the Board on such
                date, an Option to purchase 25,000 shares of Common Stock
                (subject to adjustment pursuant to Section 13). An "Award Date"
                means August 2, 2002, August 1, 2003 and August 3, 2004.

        6.      Option Price. The price (the "Option Price") at which shares of
Common Stock may be purchased upon the exercise of an Option granted under the
Plan shall be the fair market value of such shares on the date of grant of such
Option. Solely for purposes of this Section 6, the fair market value of a share
of Common Stock shall be deemed to be the average of the closing prices of the
Common Stock on the Award Date, the 10 trading days immediately preceding the
Award Date, and the 10 trading days immediately following the Award Date.

        7.      Term And Exercisability Of Options. Options shall be granted for
a maximum term of 10 years. Subject to the other provisions of the Plan relating
to exercisability of Options, or as otherwise provided by the Committee and
evidenced in an Option agreement, the participant shall have the cumulative
right as of the first, second, and third anniversaries of the date of grant, to
purchase up to one-third, two-thirds, and 100%, respectively, of the Option
Shares; provided, however, that in the event of a Change of Control (as such
term is defined in the Hanover Direct, Inc. Key Executive Twenty-Four Month
Compensation Continuation Plan), the participant shall have the cumulative right
to purchase up to 100% of the Option Shares.

        8.      Termination Of Directorship. Except as otherwise provided in
this Section 8, or as otherwise provided by the Committee and evidenced in an
Option agreement, no person may exercise an Option more than three months after
the first date on which he or she ceases to be a director of the Company. If a
participant ceases to be a director of the Company by reason of death or
disability, any Options held by him or her may be exercised within 12 months
after the date he or she ceases to be a director of the Company. In no event may
an Option be exercised after the expiration of the term of such Option.

        9.      Payment. Full payment of the purchase price for shares of Common
Stock purchased upon the exercise, in whole or in part, of an Option granted
under the Plan shall be made at the time of such exercise. The Option Price may
be paid in cash or in shares of Common Stock valued at their fair market value
on the date of exercise. Alternatively, an Option may be exercised in whole or
in part by delivering a properly executed exercise notice together with
irrevocable instructions to a broker to deliver promptly to the Company the
amount

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of sale or loan proceeds necessary to pay the Option Price, and such other
documents as the Committee may determine.

        No shares of Common Stock shall be issued or transferred to a
participant until full payment therefor has been made, and a participant shall
have none of the rights of a stockholder until shares are issued or transferred
to him or her.

        10.     Nontransferability. Options granted under the Plan shall not be
transferable other than by will or by the laws of descent and distribution, and,
during a participant's lifetime, shall be exercisable only by him or her.
Notwithstanding the foregoing, a participant may transfer any Option granted
under the Plan to the participant's spouse, children, grandchildren, parents,
and/or siblings or to one or more trusts for the benefit of such family members,
if the agreement evidencing such Option so provides and the participant does not
receive any consideration for the transfer. Any Option so transferred shall
continue to be subject to the same terms and conditions that applied to such
Option immediately prior to its transfer (except that such transferred Option
shall not be further transferable by the transferee during the transferee's
lifetime).

        11.     Issuance Of Shares. If a participant so requests, shares
purchased upon the exercise of an Option may be issued or transferred in the
name of the participant and another person jointly with the right of
survivorship.

        12.     Status Of Options. Options granted under the Plan are
nonqualified options not qualifying as incentive stock options under Section 422
of the Internal Revenue Code of 1986, as amended.

        13.     Changes In Capital Structure, Etc. In the event of any merger,
share exchange, reorganization, consolidation, recapitalization,
reclassification, distribution, stock dividend, stock split, reverse stock
split, split-up, spin-off, or other similar transaction or event affecting the
Common Stock, the Committee is authorized, to the extent it deems appropriate,
to make substitutions or adjustments in the aggregate number and kind of shares
of Common Stock reserved for issuance under the Plan, in the number, kind and
price of shares of Common Stock subject to outstanding awards, and in the award
limits under the Plan (or to make provision for cash payment to the holder of an
Option). Outstanding Options shall be appropriately amended as to price and
other terms in a manner consistent with the aforementioned adjustment to the
shares of Common Stock subject to the Plan. Fractional shares resulting from any
adjustment in Options pursuant to this Section 13 may be settled in cash or
otherwise as the Committee shall determine. Notice of any adjustment shall be
given by the Company to each holder of an Option which shall have been adjusted
and such adjustment (whether or not such notice is given) shall be effective and
binding for all purposes of this Plan.

        14.     Effective Date And Termination Of Plan. The Plan shall become
effective on the date of its adoption by the Board or a duly authorized
committee thereof, subject to the ratification of the Plan by the affirmative
vote or consent of holders of a majority of the issued and outstanding shares of
Common Stock. The Plan shall terminate 10 years from the date of its adoption or
such earlier date as the Board or such committee may determine. Any Option

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outstanding under the Plan at the time of its termination shall remain in effect
in accordance with its terms and conditions and those of the Plan.

        15.     Amendment. The Board or a duly authorized committee thereof may
amend the Plan in any respect from time to time; provided, however, that no
amendment shall become effective unless approved by affirmative vote of the
Company's shareholders if such approval is necessary or desirable for the
continued validity of the Plan or if the failure to obtain such approval would
adversely affect the compliance of the Plan with Rule 16b-3 or any successor
rule under the Securities Exchange Act of 1934 or any other rule or regulation.
No amendment may, without the consent of a participant, impair his or her rights
under any Option previously granted under the Plan.

        The Board or a duly authorized committee thereof shall have the power,
in the event of any disposition of substantially all of the assets of the
Company, its dissolution, any merger or consolidation of the Company with or
into any other corporation, or the merger or consolidation of any corporation
into the Company, to amend all outstanding Options to terminate such Options as
of such effectiveness. If the Board shall exercise such power, all Options then
outstanding shall be deemed to terminate upon such effectiveness.

        16.     Legal And Regulatory Requirements. No Option shall be
exercisable and no shares will be delivered under the Plan except in compliance
with all applicable federal and state laws and regulations including, without
limitation, compliance with the rules of all domestic stock exchanges on which
the Common Stock may be listed. Any share certificate issued to evidence shares
for which an Option is exercised may bear such legends and statements as the
Committee shall deem advisable to assure compliance with federal and state laws
and regulations. No Option shall be exercisable, and no shares will be delivered
under the Plan, until the Company has obtained consent or approval from
regulatory bodies, federal or state, having jurisdiction over such matters as
the Committee may deem advisable.

        In the case of the exercise of an Option by a person or estate acquiring
the right to exercise the Option by bequest or inheritance, the Committee may
require reasonable evidence as to the ownership of the Option and may require
consents and releases of taxing authorities that it may deem advisable.

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EXHIBIT 10.41
                                                             [Execution Version]

                             TWENTIETH AMENDMENT TO
                           LOAN AND SECURITY AGREEMENT

        THIS TWENTIETH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
"Amendment"), dated as of March 5, 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"), LWI
HOLDINGS, INC., a Delaware corporation ("LWI"), 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"), 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")
and KEYSTONE INTERNET SERVICES, INC., a Delaware corporation ("Keystone
Internet"; and together with HDPI, Brawn, GBM, Gump's, LWI, HDV, Hanover Realty,
TCS Factory, TCS Office, Tweeds LLC, 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."), SCANDIA DOWN CORPORATION, a
Delaware corporation ("Scandia"), 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"), KITCHEN & HOME, LLC, a Delaware limited liability company
("Kitchen & Home LLC"), DOMESTICATIONS KITCHEN & GARDEN, LLC, a Delaware limited
liability company ("Domestications K&G 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"), ERIZON.COM, INC., a Delaware corporation
("erizon.com"), LACROSSE FULFILLMENT, LLC, a Delaware limited liability company
("LaCrosse, LLC") and SAN DIEGO TELEMARKETING, LLC, a Delaware limited liability
company ("San Diego LLC"; and together with Hanover, American Down, DM
Advertising, Inc., Scandia, Keystone Liquidations, HHFG LLC, Kitchen & Home LLC,
Domestications K&G LLC, Encore LLC, Clearance World, Scandia Down, LLC, erizon,
inc., Hanover Brands, erizon.com, LaCrosse, LLC, collectively, "Guarantors" and
each individually, a "Guarantor").

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                              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 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, and Nineteenth Amendment
to Loan and Security Agreement, dated as of December 18, 2001 (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 consent to,
and enter into certain amendments to the Loan Agreement and agreements with
respect to certain transactions as described herein in connection with, the
corporate reorganization of certain Borrowers and Guarantors; 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:

        I.      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:

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                        1.      "CCV" shall mean Creative Capital Ventures, LLC,
a Delaware limited liability company, and its successors and assigns.

                        2.      "Hanover 2001 Reorganization" shall mean,
individually and collectively, the declaration and payment of dividends,
mergers, dissolutions, reorganization steps and transactions effected under the
Hanover 2001 Reorganization Agreements.

                        3.      "Hanover 2001 Reorganization Agreements" shall
mean, collectively, the agreements, documents and instruments listed in Schedule
1 hereto, the Hanover Subsidiary 2001 Dissolution Agreements and all related
agreements, documents and instruments executed, delivered or filed in connection
with, or otherwise evidencing, each of the transactions consented to in Section
2 hereof, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.

                        4.      "Hanover Subsidiary 2001 Dissolution Agreements"
shall mean, collectively, the certificates or agreements executed, delivered or
filed in connection with, or otherwise evidencing, the dissolution of each of
Tweeds LLC, Kitchen & Home LLC, Domestications K&G LLC, Henre and erizon.com,
and all related agreements, documents and instruments, as the same now exist or
may hereafter entered into, be amended, modified, supplemented, extended,
renewed, restated or replaced.

                        5.      "Henre" shall mean Henre, Inc., a Delaware
corporation, and its successors and assigns.

                        6.      "Intercompany Subordination Agreement" shall
mean the Subordination Agreement, dated as of November 15, 1995, between Lender
and Hanover Direct, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.

                        7.      "LWI/HDPI Merger" shall mean the merger of LWI
Holdings, Inc. with and into Hanover Direct Pennsylvania, Inc., with Hanover
Direct Pennsylvania, Inc. as the surviving corporation.

                        8.      "Scandia Trademark License Agreements" shall
mean the trademark license agreements between Scandia and the owner or lessor of
certain retail stores party thereto regarding the sale and distribution of
certain "Scandia Down" products, as the same now exist or may hereafter entered
into, be amended, modified, supplemented, extended, renewed, restated or
replaced.

                        9.      "Scandia/HDV Merger" shall mean the merger of
Scandia Down Corporation with and into Hanover Direct Virginia Inc., with
Hanover Direct Virginia Inc. as the surviving corporation.

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

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        II.     Consents to Hanover 2001 Reorganization.

                A.      Consents to Proposed Dividends. Subject to the terms and
conditions contained herein and in the Loan Agreement and in the other Financing
Agreements, and notwithstanding anything to the contrary contained in Section
6.6 of the Loan Agreement, Lender consents, effective upon the earlier of the
date hereof or the effective date of the applicable transaction of the Hanover
2001 Reorganization, to 1. the declaration and payment by LWI to Hanover Brands
of a single non-cash dividend in the amount of $33,234,468 in the aggregate
consisting of an intercompany receivable of LWI in such amount, from legally
available assets therefor, and 2. the declaration and payment by Scandia to
Hanover Brands of a single non-cash dividend in the amount of $1,671,062 in the
aggregate consisting of an intercompany receivable of Scandia in such amount,
from legally available assets therefor.

                B.      Consents to Recapitalizations and Mergers. Subject to
the terms and conditions contained herein and in the Loan Agreement and in the
other Financing Agreements, and notwithstanding anything to the contrary
contained in Sections 6.5, 6.6(a), 6.6(c) or 6.9 of the Loan Agreement, Lender
consents, effective upon the earlier of the date hereof or the effective date of
the applicable transaction of the Hanover 2001 Reorganization, to the following
transactions:

                        1.      the contribution by Hanover Brands to the equity
of DM Advertising in the form of a. the assumption of certain intercompany
indebtedness owed by DM Advertising to certain of its Affiliates in the amount
of $32,420,701.53 in the aggregate, and b. the forgiveness of certain
intercompany indebtedness owed by DM Advertising to Hanover Brands in the amount
of $1,287,162.87 in the aggregate, and in consideration of such assumption and
forgiveness of intercompany indebtedness, the assignment and transfer by DM
Advertising to Hanover of an intercompany receivable of DM Advertising in the
amount of $5,953,735 in the aggregate and the increase by DM Advertising of the
capital account of Hanover Brands by $27,824,129.40, in each case, subject to
the security interests and liens of Lender in the assets of Hanover Brands, all
in accordance with the applicable Hanover 2001 Reorganization Agreements;

                        2.      the contribution by erizon, inc. to the equity
of Keystone Internet in the form of a. the assumption of certain intercompany
indebtedness owed by Keystone Internet to certain of its Affiliates in the
amount of $7,702,110.93 in the aggregate, and b. the forgiveness of certain
intercompany indebtedness owed by Keystone Internet to erizon, inc. in the
amount of $3,898 in the aggregate, and in consideration of such assumption and
forgiveness of intercompany indebtedness, the increase by Keystone Internet of
the amount of the capital account of Hanover Brands by $7,706,110.93, in each
case, subject to the security interests and liens of Lender in the assets of
Keystone Internet and erizon,inc., all in accordance with the applicable Hanover
2001 Reorganization Agreements;

                        3.      the merger of Scandia with and into HDV,
pursuant to the Scandia/HDV Merger, with HDV as the surviving corporation, all
in accordance with the applicable Hanover 2001 Reorganization Agreements;

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                        4.      immediately upon the effectiveness of the
Scandia/HDV Merger, the contribution, assignment and transfer by HDV to Scandia
Down, LLC of all of the right, title and interest of HDV in and to all assets
and properties acquired by HDV from Scandia pursuant to the Scandia/HDV Merger,
including, without limitation, the Scandia Trademark License Agreements and the
trademark "Scandia Down", together with the goodwill symbolized thereby, in each
case, subject to the security interests and liens of Lender therein, all in
accordance with the applicable Hanover 2001 Reorganization Agreements;

                        5.      the contribution, assignment and transfer by
Hanover to Hanover Brands of all of Hanover's right, title and interest in and
to the one hundred percent (100%) membership interest of CCV, and immediately
thereafter, the contribution, assignment and transfer by Hanover Brands to HDV
of all of Hanover Brands' right, title and interest in and to the one hundred
percent (100%) membership interest in CCV, in each case, subject to the security
interests and liens of Lender in the assets of Hanover Brands, all in accordance
with the applicable Hanover 2001 Reorganization Agreements;

                        6.      immediately upon the effectiveness of the
contributions, assignments and transfer of the membership interest in CCV
consented to in Section 2(b)(v) hereof, the change by CCV of its name to "D.M.
Advertising, LLC", all in accordance with the applicable Hanover 2001
Reorganization Agreements;

                        7.      the merger of BC Corporation of Tennessee, Inc.,
a Tennessee corporation, with and into The Horn & Hardart Company, Inc., a New
York corporation, with The Horn & Hardart Company, Inc. as the surviving
corporation, all in accordance with the applicable Hanover 2001 Reorganization
Agreements; and

                        8.      the merger of LWI with and into HDPI, pursuant
to the LWI/HDPI Merger, with HDPI as the surviving corporation, all in
accordance with the applicable Hanover 2001 Reorganization Agreements.

                C.      Dissolutions. Subject to the terms and conditions
contained herein and in the Loan Agreement and in the other Financing
Agreements, and notwithstanding anything contained in Section 6.7 of the Loan
Agreement to the contrary, Lender consents, effective upon the earlier of the
date hereof or the effective date of the applicable transaction of the Hanover
2001 Reorganization, to the dissolution of each of Tweeds LLC, Kitchen & Home
LLC, Domestications K&G LLC, Henre and erizon.com.

        III.    Acknowledgments with respect to dividends, equity contributions
and mergers pursuant to the Hanover 2001 Reorganization. Effective as of the
earlier of the date hereof or effective date of completion of the Hanover 2001
Reorganization as to the respective parties thereto:

                A.      Each Borrower and each Guarantor hereby acknowledges,
confirms and agrees that, by operation of law and as provided in the Hanover
2001 Reorganization Agreements, as the case may be, and this Amendment:

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                        1.      Lender shall continue to have valid and
perfected security interests, liens and rights in and to all of the assets and
properties transferred by Scandia to Hanover Brands and by LWI to Hanover Brands
pursuant to the declaration and payment of the dividends consented to in Section
2(a) hereof, pursuant to the Hanover 2001 Reorganization Agreements or
otherwise, and all such assets and properties shall be deemed included in the
Guarantor Collateral, as the case may be, and such security interests, liens and
rights and their perfection and priorities have continued and shall continue in
all respects in full force and effect;

                        2.      the intercompany indebtedness owed to Hanover
Brands arising under the intercompany receivables that are assigned and
transferred to Hanover Brands pursuant to the dividends consented to in Section
2(a) hereof and pursuant to the equity contribution consented to in Section
2(b)(i) hereof is and shall be subordinated to the prior right of Congress to
receive the indefeasible payment in full of the Obligations in accordance with
and subject to the terms and conditions of the Intercompany Subordination
Agreement, and Hanover Brands shall not accept payments in respect of such
indebtedness without the prior written consent of Congress;

                        3.      the intercompany indebtedness owed to certain
Affiliates assumed by Hanover Brands pursuant to the equity contribution
consented to in Section 2(b)(i) hereof is and shall be subordinated to the prior
right of Congress to receive the indefeasible payment in full of the Obligations
in accordance with and subject to the terms and conditions of the Intercompany
Subordination Agreement, and such Affiliates shall not accept payments in
respect of such indebtedness without the prior written consent of Congress;

                        4.      HDV, as the surviving corporation pursuant to
the Scandia/HDV Merger, has continued and shall continue to be directly and
primarily liable in all respects for the Obligations of Scandia arising prior to
the effective time of the Scandia/HDV Merger;

                        5.      Lender shall continue to have valid and
perfected security interests, liens and rights in and to all of the assets and
properties owned and acquired a. by HDV, as the surviving corporation of the
Scandia/HDV Merger, and b. by each Borrower or Guarantor that is the purchaser,
assignee or transferee of any such assets and properties, pursuant to the
Hanover 2001 Reorganization Agreements or otherwise, and all such assets and
properties shall be deemed included in the Collateral or the Guarantor
Collateral, as the case may be, and such security interests, liens and rights
and their perfection and priorities have continued and shall continue in all
respects in full force and effect;

                        6.      HDPI, as the surviving corporation pursuant to
the LWI/HDPI Merger, has continued and shall continue to be directly and
primarily liable in all respects for the Obligations of LWI arising prior to the
effective time of the LWI/HDPI Merger; and

                        7.      Lender shall continue to have valid and
perfected security interests, liens and rights in and to all of the assets and
properties owned and acquired a. by HDPI, as the surviving corporation of the
LWI/HDPI Merger, and b. by each Borrower or Guarantor that is the purchaser,
assignee or transferee of any such assets and properties, pursuant to the
Hanover 2001 Reorganization Agreements or otherwise, and all such assets and
properties shall be deemed included in the Collateral or the Guarantor
Collateral, as the case may be, and such security

                                      -6-
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interests, liens and rights and their perfection and priorities have continued
and shall continue in all respects in full force and effect;

                B.      Without limiting the generality of the foregoing, 1.
none of the transactions contemplated by the Hanover 2001 Reorganization
Agreements shall in any way limit, impair or adversely affect the Obligations
now or hereafter owed to Lender by any existing or former Borrowers or
Guarantors or any security interests or liens in any assets or properties
securing the same, 2. the security interests, liens and rights of Lender in and
to the assets and properties of HDV, as the surviving corporation of the
Scandia/HDV Merger, and HDPI, as the surviving corporation of the LWI/HDPI
Merger, or any Borrower or Guarantor that is the recipient, assignee or
transferee of any assets or properties contributed, assigned or transferred
pursuant to the Hanover 2001 Reorganization Agreements, have continued and, upon
and after the consummation of the Scandia/HDV Merger, the LWI/HDPI Merger, or
such contribution, assignment or transfer, as the case may be, shall continue to
secure all Obligations to Lender of HDV and HDPI, or the predecessor owner of
such assets and properties, as the case may be, in addition to all other
existing and future Obligations of HDV and HDPI, or such Borrower or Guarantor,
as the case may be, to Lender.

        IV.     Acknowledgments Regarding Subsidiary Dissolutions. Each of
Borrowers and Guarantors hereby acknowledges, confirms and agrees that, upon the
effectiveness of the dissolutions of the Borrower and Guarantors consented to
under Section 2(c) hereof:

                A.      The dissolutions of the Borrower and Guarantors
consented to under Section 2(c) hereof shall not in any way limit, impair or
adversely affect the Obligations now or hereafter owed to Lender by any
continuing Borrower or Guarantor, including, without limitation, any such
Obligations they have as shareholders of such dissolved Borrower and Guarantors
pursuant to applicable law; and

                B.      Lender shall continue to have valid and perfected
security interests, liens and rights in and to all assets and properties of each
existing or former Borrower or Guarantor whose dissolution has been consented to
under Section 2(c) hereof. Such assets and properties shall continue to be
deemed included in the Collateral or Guarantor Collateral, as applicable, and
such security interests, liens and rights and their perfection and priorities
shall continue in all respects in full force and effect.

        V.      Allocation of Revolving Loans and Letter of Credit
Accommodations. Each of Borrowers and Guarantors confirms, acknowledges and
agrees that:

                A.      as of and after the effective date of the Hanover 2001
Reorganization as to LWI, the portion of the Revolving Loans and Letter of
Credit Accommodations to or for the account of LWI determined by Lender to be
allocable to the Inventory and other Collateral of LWI before the consummation
of the Hanover 2001 Reorganization shall be deemed to be Revolving Loans and
Letter of Credit Accommodations of HDPI;

                B.      as of and after the effective date of the Hanover 2001
Reorganization as to Tweeds LLC, the portion of the Revolving Loans and Letter
of Credit Accommodations to or for

                                      -7-
<PAGE>
the account of Tweeds LLC determined by Lender to be allocable to the Inventory
and other Collateral of Tweeds LLC before the consummation of the Hanover 2001
Reorganization shall be deemed to be Revolving Loans and Letter of Credit
Accommodations of HDV;

                C.      contemporaneously with any determination by Lender of
the outstanding amount of Revolving Loans and Letter of Credit Accommodations to
be allocated to HDPI as provided in Section 5(a) hereof, the outstanding amount
of Revolving Loans and Letter of Credit Accommodations of the transferor
Borrower shall be reduced by those amounts so allocated, but without thereby
relieving the transferor Borrower of liability therefor; and

                D.      contemporaneously with any determination by Lender of
the outstanding amount of Revolving Loans and Letter of Credit Accommodations to
be allocated to HDV as provided in Section 5(b) hereof, the outstanding amount
of Revolving Loans and Letter of Credit Accommodations of the transferor
Borrower shall be reduced by those amounts so allocated, but without thereby
relieving the transferor Borrower of liability therefor.

        VI.     Release.

                A.      Release.

                        1.      Each Borrower and Guarantor, on behalf of itself
and its successors and assigns, hereby, jointly and severally, absolutely,
unconditionally and irrevocably releases, remises and forever discharges Lender,
its respective successors and assigns, and their respective present and former
shareholders, affiliates, subsidiaries, divisions, predecessors, directors,
officers, attorneys, employees, agents and other representatives (Lender and all
such other parties being hereinafter referred to collectively as the "Releasees"
and individually as a "Releasee"), of and from all demands, actions, causes of
action, suits, covenants, contracts, controversies, agreements, promises, sums
of money, accounts, bills, reckonings, damages and any and all other claims,
counterclaims, defenses, rights of set-off, demands and liabilities whatsoever
arising in connection with the transactions contemplated by the Hanover 2001
Reorganization or the Hanover 2001 Reorganization Agreements or this Amendment
(individually, a "Claim" and collectively, "Claims") of every name and nature,
known or unknown, suspected or unsuspected, both at law and in equity, which any
Borrower or Guarantor, or any of its or his or their successors, assigns, or
other legal representatives may now or hereafter own, hold, have or claim to
have against the Releasees or any of them for, upon, or by reason of any nature,
cause or thing whatsoever which arises at any time on or prior to the day and
date of this Amendment, for or on account of, or in relation to, or in any way
in connection with the Hanover 2001 Reorganization or the Hanover 2001
Reorganization Agreements or this Amendment.

                        2.      Each Borrower and Guarantor understands,
acknowledges and agrees that the release set forth above may be pleaded as a
full and complete defense and may be used as a basis for an injunction against
any action, suit or other proceeding which may be instituted, prosecuted or
attempted in breach of the provisions of such release.

                        3.      Each Borrower and Guarantor agrees that no fact,
event, circumstance, evidence or transaction which could now be asserted or
which may hereafter be discovered shall

                                      -8-
<PAGE>
affect in any manner the final and unconditional nature of the release set forth
in this Section 6(a).

                B.      Covenant Not to Sue. Each Borrower and Guarantor, on
behalf of itself and its successors and assigns, hereby absolutely,
unconditionally and irrevocably, jointly and severally, covenants and agrees
with each Releasee that it will not sue (at law, in equity, in any regulatory
proceeding or otherwise) any Releasee on the basis of any Claim released,
remised and discharged by any Borrower or Guarantor pursuant to Section 6(a)
hereof. If any Borrower or Guarantor violates the foregoing covenant, each
Borrower and Guarantor agrees to pay, in addition to such other damages as any
Releasee may sustain as a result of such violation, all attorneys' fees and
costs incurred by any Releasee as a result of such violation.

        VII.    Exhibits.

                A.      Exhibits A, B-1, B-3, B-4, C, G and H-3 to the Loan
Agreement are hereby deleted in their entirety and replaced with the information
set forth on Exhibits A, B-1, B-3, B-4, C, G and H-3 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.

        VIII.   Representations, Warranties and Covenants. Each Borrower and
Guarantor represents, warrants and covenants with, to and in favor of 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 Borrowers or Guarantors hereunder have been duly
authorized, executed and delivered by all necessary action on the part of
Borrowers and Guarantors which is a party 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 or 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)     Neither the execution and delivery of the Hanover 2001
Reorganization Agreements, nor the consummation of the transactions contemplated
by the Hanover 2001 Reorganization Agreements, nor compliance with the
provisions of the Hanover 2001 Reorganization Agreements, shall result in the
creation or imposition of any lien, claim, charge or encumbrance upon any of the
Collateral, except in favor of Lender pursuant to this Amendment and the
Financing Agreements as amended hereby.

                                      -9-
<PAGE>
               (c)     Neither the execution and delivery of the Hanover 2001
Reorganization Agreements, nor the consummation of the transactions therein
contemplated, nor compliance with the provisions thereof, (i) has violated or
shall violate any Bulk Sales Act, Bulk Transfer Act or Article 6 of the UCC, if
applicable, the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as
amended, if applicable, or 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 or (ii) does, or shall conflict with or result in
the breach of, or constitute a default in any respect under any material
mortgage, deed of trust, security agreement, agreement or instrument to which
any of Borrowers or Guarantor is a party or may be bound, other than conflicts
or defaults under certain real estate leases, intellectual property licenses and
equipment leases, or (iii) shall violate any provision of the Certificate of
Incorporation or Certificate of Formation, as applicable, or By-Laws or
Operating Agreement, as applicable, of any Borrower or Guarantor.

                (d)     No court of competent jurisdiction has issued any
injunction, restraining order or other order which has prohibited or prohibits
consummation of the Hanover 2001 Reorganization or any part thereof, and no
governmental action or proceeding has been threatened or commenced seeking any
injunction, restraining order or other order which seeks to void or otherwise
modify the transactions described in the Hanover 2001 Reorganization Agreements.

                (e)     As of the date hereof, each Borrower and Guarantor (i)
is duly organized and validly existing in good standing under the laws of its
State of incorporation or formation, as applicable, (ii) 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 any such Borrower or Guarantor, makes
such licensing or qualification to do business necessary; and (iii) 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.

                (f)     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.

                (g)     Upon the effectiveness of each of the mergers consented
to under Section 2(b) hereof, each such merger has become effective in
accordance with the terms of each of the applicable Hanover 2001 Reorganization
Agreements applicable to it and of the applicable corporate statutes of the
States of incorporation of each Borrower and each Guarantor that is a
constituent corporation pursuant to the mergers so consented to. As of the
respective date of the effectiveness of the respective mergers consented to
under Section 2(b) hereof, (i) HDV was and continues to be the surviving
corporation of the Scandia/HDV Merger, and (ii) HDPI was and continues to be the
surviving corporation of the LWI/HDPI Merger.

                (h)     Neither the dividend payments consented to in Section
2(a) hereof, nor the consummation of the mergers consented to under Section 2(b)
hereof, nor the dissolution of

                                      -10-
<PAGE>
certain Guarantors as consented to under Section 2(c) hereof, nor the execution,
delivery and/or filing of the applicable merger documents in respect of the
Hanover 2001 Reorganization Agreements, or any other agreements, documents or
instruments in connection therewith, nor the consummation of the transactions
therein contemplated, nor compliance with the provisions thereof if consummated
or effected on or before the date hereof has resulted in or if consummated or
effected after the date hereof shall result in the creation or imposition of any
lien, claim, charge or incumbrance upon any of the Collateral, except in favor
of Lender.

                (i) All actions and proceedings required by the Hanover 2001
Reorganization Agreements applicable to the declaration and payment of the
dividends consented to in Section 2(a) hereof, the mergers consented to under
Section 2(b) hereof and the Hanover Subsidiary 2001 Dissolution Agreements,
applicable law and regulation, have been or shall be taken prior to the
effectiveness of such dividends, mergers and dissolutions and all transactions
required thereunder have been and shall be, or will be duly and validly
consummated.

                (j)     No court of competent jurisdiction has, or prior to the
effectiveness thereof shall have, issued any injunction, restraining order or
other order which prohibits the declaration or payment of the dividends as
consented to under Section 2(a) hereof, the consummation of the mergers as
consented to under Section 2(b) hereof or the dissolution of the Borrower and
Guarantors as consented to under Section 2(c) hereof, and no governmental action
or proceeding has been, or, prior to the effectiveness thereof, shall have been,
threatened or commenced, seeking any injunction, restraining order or other
order which seeks to void or otherwise modify the transactions described in the
Hanover 2001 Reorganization Agreements applicable to the dividends consented to
in Section 2(a) hereof or the mergers consented to in Section 2(b) hereof or in
the Hanover Subsidiary 2001 Dissolution Agreements.

                (k)     Each Borrower and Guarantor is solvent and will continue
to be solvent after giving effect to the Hanover 2001 Reorganization and the
transactions contemplated by the Hanover 2001 Reorganization Agreements, is able
to pay its debts as they mature and has (and has reason to believe it will
continue to have) sufficient capital (and not unreasonably small capital) to
carry on its business and all businesses in which it is about to engage. After
giving effect to the Hanover 2001 Reorganization, and after giving effect to the
transactions contemplated by the Hanover 2001 Reorganization Agreements, the
assets and properties of each Borrower and Guarantor at a fair valuation and at
their present fair salable value are, and will be, greater than the indebtedness
of each such Borrower and Guarantor, respectively, and including subordinated
and contingent liabilities computed at the amount which, to the best of each
such Borrower's and Guarantor's, represents an amount which can reasonably be
expected to become an actual or matured liability.

                (l)     Neither the declaration and payment of the dividends
consented to under Section 2(a) hereof, nor the consummation of the mergers
consented to under Section 2(b) hereof, nor the dissolution of the Borrower and
Guarantors consented to under Section 2(c) hereof, nor the execution, delivery
or filing of the Hanover 2001 Reorganization Agreements applicable to the
dividends as consented to under Section 2(a) hereof or the mergers as consented
to under Section 2(b) hereof, or the Hanover Subsidiary 2001 Dissolution
Agreements or any other agreements, documents or instruments in connection
therewith, nor the consummation of the transactions

                                      -11-
<PAGE>
therein contemplated, nor compliance with the provisions thereof before the date
hereof or upon the effectiveness of such dividends, mergers and dissolutions (i)
has violated or will violate any Federal or State securities laws, any State
corporation law, or any other law or regulation or any order or decree of any
court or governmental instrumentality in any respect, or (ii) does or will
conflict with or result in the breach of, or constitute a default in any respect
under any material mortgage, deed of trust, security agreement, agreement or
instrument to which any existing or former Guarantor or Borrower is a party or
may be bound, other than conflicts or defaults under certain real estate leases,
intellectual property licenses and equipment leases, or (iii) does or will
violate any provision of the Certificate of Incorporation or Certificate of
Formation, as applicable, or By-Laws or Operating Agreement, as applicable, of
any Borrower or Guarantor.

                (m)     The aggregate amount of the actual and contingent
indebtedness, liabilities and obligations, other than those owed to Lender or to
any other Borrower or Guarantor (so long as such indebtedness, liabilities and
obligations owed to such other Borrower or Guarantor constitute valid
intercompany indebtedness that is not indirectly or beneficially owed to or held
by a Person other than a Borrower or Guarantor), incurred by the Borrower and
Guarantors dissolved or which will be dissolved as consented to under Section
2(c) hereof, including any such indebtedness, liabilities and obligations
arising in connection with or relating to such dissolutions, shall not (i) as to
Tweeds LLC, Henre or erizon.com, exceed $10,000, (ii) as to any of
Domestications K&G LLC, exceed $106,100 or (iii) as to Kitchen & Home LLC,
exceed $31,200.

                (n)     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 filings with the United States Patent and Trademark Office, and
no approval or consent of any other party, including, without limitation,
Richemont or the Persons signatory parties to the Scandia Trademark License
Agreements, is required to authorize, or is otherwise required in connection
with, the execution, delivery and performance of this Amendment.

                (o)     No changes or modifications are needed to update or
amend the existing Evidence of Property Insurance and Certificate of Liability
Insurance issued by the existing insurance broker or agent of Borrowers and
Guarantors in favor of Lender after giving effect to the transactions
contemplated hereby and by the Hanover 2001 Reorganization Agreements.

                (p)     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.

                (q)     On or before March 22, 2002, Borrowers and Guarantors
shall deliver, or caused to be delivered, to Lender, in form and substance
satisfactory to Lender, (i) a Guarantee and Waiver by CCV in favor of Lender
with respect to the Obligations of Borrowers, (ii) an amendment to the Loan
Agreement with respect to the inclusion of CCV as a Guarantor under the
Financing Agreements, (iii) copies of the formation and organizational
documents, instruments and agreements of CCV as may be required by Lender,
certified by the Secretary of

                                      -12-
<PAGE>
State of its jurisdiction of formation, (iv) such company resolutions and
authorization documents in respect thereof that Lender may reasonably require,
(v) an opinion of counsel to CCV, Borrowers and the other Guarantors with
respect to the transactions contemplated by the Guarantee and the amendment, and
such other matters as Lender shall reasonably request, addressed to Lender, and
(vi) such other documents, instruments and agreements that Lender may reasonably
request in connection with the transactions contemplated by with such Guarantee
and Waiver and such amendment to the Loan Agreement.

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

        9.      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 this Amendment by facsimile (with
the originals to be delivered within five (5) Banking Days after the date
hereof), as the case may be, duly authorized, executed and delivered by
Borrowers and Guarantors;

                (b)     Lender shall have received, in form and substance
satisfactory to Lender, (i) true, correct and complete photocopies of all of the
Hanover 2001 Reorganization Agreements and (ii) evidence that (A) the Hanover
2001 Reorganization Agreements have been duly executed and delivered by and to
the appropriate parties thereto and (B) the transactions contemplated by the
Hanover 2001 Reorganization have been consummated prior to, or contemporaneously
with, the execution of this Amendment;

                (c)     Each Borrower and Guarantor shall have duly executed and
delivered to Lender such UCC financing statements and other documents and
instruments which Lender in its sole discretion has determined are necessary to
perfect the security interests of Lender in all Collateral now or hereafter
owned by such Borrower or Guarantor;

                (d)     Lender shall have received, in form and substance
satisfactory to Lender, Secretary's or Assistant Secretary's Certificates of
Directors' Resolutions with Shareholders' Consent (other than in respect of
Hanover) evidencing the adoption and subsistence of corporate resolutions
approving the execution, delivery and performance by each Borrower and Guarantor
that is a corporation of this Amendment and the agreements, documents and
instruments to be delivered pursuant to this Amendment;

                                      -13-
<PAGE>

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

                (f)     Lender shall have received an opinion of counsel to
Borrowers and Guarantors with respect to the transactions contemplated by this
Amendment and the Hanover 2001 Reorganization Agreements, and such other matters
as Lender shall reasonably request, addressed to Lender, in form and substance
and satisfactory to Lender; and

                (g)     each of Borrowers and Guarantors shall deliver, or cause
to be delivered, 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.

        10.     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.

        11.     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.

        12.     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.     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.

                                      -14-
<PAGE>

        14.     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.

                                      -15-
<PAGE>

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      -16-
<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.,
                                 successor to the merger of LWI Holdings, Inc.
                                 with and into Hanover Direct Pennsylvania, Inc.
                                 BRAWN OF CALIFORNIA, INC.
                                 GUMP'S BY MAIL, INC.
                                 GUMP'S CORP.
                                 HANOVER DIRECT VIRGINIA INC.,
                                  successor to the merger of Scandia Down
                                 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]

                                      -17-
<PAGE>

                    [SIGNATURES CONTINUED FROM PREVIOUS PAGE]

AMERICAN DOWN & TEXTILE COMPANY
D.M. 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

By:     Edward M. Lambert

Title:  Vice President

                                      -18-

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