Document:

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                              HANOVER DIRECT, INC.
                   UNSECURED LINE OF CREDIT & PROMISSORY NOTE

$25,000,000                                                 New York, New York
                                                            March 1, 2000

      FOR VALUE RECEIVED, the undersigned, HANOVER DIRECT, INC., a Delaware
corporation ("Borrower"), promises to pay to the order of RICHEMONT FINANCE,
S.A., or its assigns ("Lender"), on or before the Maturity Date referred to
below, TWENTY-FIVE MILLION DOLLARS ($25,000,000), or such lesser amount as shall
then be outstanding under this Line of Credit and Promissory Note as evidenced
by Lender's record of the loans made hereunder.

      Fees: The Borrower will pay the Lender a monthly fee of $62,500 each month
in arrears from the date of the Note up to the Maturity Date (as defined below).

      Interest: The Borrower will pay the Lender monthly interest at a rate of
0.583% on the average monthly balance outstanding in arrears.

      All outstanding principal, fees and interest not previously paid shall be
due and payable in full on the date (the "Maturity Date") which is the earlier
to occur of December 30, 2000 and the date on which Lender makes an equity
infusion in Borrower or any of Borrower's subsidiaries. Principal, fees and
interest on this Note are payable in lawful currency of the United States of
America to the Lender at its principal office at 35 Boulevard, Prince Henri,
L1724 Luxemborg, or as such other place as may be designated by Lender, in same
day funds.

A.    Representations and Warranties

1.    Borrower is a corporation duly organized, validly existing and in good
      standing under the laws of its jurisdiction of incorporation. Borrower has
      the corporate power and authority to execute and deliver this Note and to
      perform its obligations hereunder.

2.    This Note has been duly authorized by all necessary corporate action on
      the part of Borrower, and this Note constitutes a legal, valid and binding
      obligation of Borrower enforceable against Borrower in accordance with its
      terms, except as such enforceability may be limited by (i) applicable
      bankruptcy, insolvency, reorganization, moratorium or other similar laws
      affecting the enforcement of creditors' rights generally and (ii) general
      principles of equity (regardless of whether such enforceability is
      considered in a proceeding in equity or at law).
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3.    The execution, delivery and performance by Borrower of this Note will not
      (i) violate, or result in the creation of any lien in respect of any
      property of Borrower under, any indenture, mortgage, deed of trust, loan,
      purchase or credit agreement, lease, corporate charter or by-laws, or any
      other agreement or instrument by which Borrower is bound, (ii) conflict
      with or result in a breach of any of the terms, conditions or provisions
      of any order, judgment, decree, or ruling of any court, arbitrator or
      governmental authority applicable to Borrower or (iii) violate any
      provision of any statute or other rule or regulation of any governmental
      authority applicable to Borrower.

4.    No approval, consent, waiver, authorization, registration, declaration or
      filing by, from or with any governmental authority or other person or
      entity is required in connection with the execution, delivery or
      performance by Borrower of this Note.

B.    Covenants

1.    Borrower shall at all times maintain its corporate existence and shall not
      merge or consolidate with any other entity (unless Borrower shall be the
      survivor) without Lender's consent.

2.    Borrower shall provide to Lender such information about its assets,
      liabilities and business as Lender shall from time to time reasonably
      request, including, without limitation, financial statements of Borrower
      and its subsidiaries.

C.    Events of Default

      An "Event of Default" shall exist under this Note if any of the following
      conditions or events shall occur and be continuing:

      (a)   Borrower defaults in the payment of any principal, fees or interest
            on this Note when the same becomes due and payable, whether at
            maturity or by declaration or otherwise; or

      (b)   Borrower defaults in the performance of any other obligation
            hereunder or any representation or warranty made by Borrower in this
            Note proves to have been false or incorrect in any material respect
            on the date as of which made; or

      (c)   Borrower (i) is unable to pay, or admits in writing its inability to
            pay, its debts as they become due, (ii) files, or consents by answer
            or otherwise to the filing against it of, a petition for relief or
            reorganization or arrangement or any other petition in bankruptcy,
            for liquidation or to take advantage of any bankruptcy, insolvency,
            reorganization, moratorium or other similar law of any jurisdiction,
            (iii) makes an assignment for the benefit of its

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            creditors, (iv) consents to the appointment of a custodian,
            receiver, trustee or other officer with similar powers with respect
            to it or with respect to any substantial part of its property, (v)
            is adjudicated as insolvent or to be liquidated, or (vi) takes
            corporate action for the purpose of any of the foregoing; or

      (d)   A court or governmental authority of competent jurisdiction enters
            an order appointing, without consent by Borrower, a custodian,
            receiver, trustee or other officer with similar powers with respect
            to it or with respect to any substantial part of its property, or
            constituting an order for relief or approving a petition for relief
            or reorganization or any other petition in bankruptcy or for
            liquidation or to take advantage of any bankruptcy or insolvency law
            of any jurisdiction, or ordering the dissolution, winding-up or
            liquidation of Borrower, or any such petition shall be filed against
            Borrower.

            Upon the occurrence of an Event of Default, Lender may, at its
      option, declare the entire unpaid principal balance of, and all accrued
      fees and interest on, this Note to be immediately due and payable. If an
      Event of Default described in paragraph (c) or (d) above has occurred,
      this Note shall automatically become immediately due and payable. Upon
      this Note becoming due and payable, whether automatically or by
      declaration, this Note will forthwith mature and the entire unpaid
      principal amount hereof, plus all accrued and unpaid interest hereon,
      shall all be immediately due and payable, in each and every case without
      presentment, demand, protest or further notice, all of which are hereby
      waived.

D.    General

            In addition to the foregoing, Lender may proceed to protect and
      enforce its rights hereunder by an action at law, suit in equity or other
      appropriate proceeding, whether for the specific performance of any
      agreement contained herein, or for an injunction against a violation of
      any of the terms hereof or thereof, or in aid of the exercise of any power
      granted hereby or by law or otherwise.

            Lender or its assignee may assign this Note to any person or entity
      without Borrower's consent. Lender or its assignee shall be entitled to
      apply this Note in payment of the price payable in respect of any equity
      infusion by Lender in erizon.

            Failure of Lender to exercise any of its rights and remedies shall
      not constitute a waiver of the right to exercise the same at that or any
      other time. All rights and remedies of Lender shall be cumulative to the
      full extent permitted by law.

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      The invalidity or unenforceability of any provision of this Note shall not
impair the validity or enforceability of any other provision of this Note.

      This Note and the rights of Lender hereunder are subject to the terms of a
Subordination Agreement between Lender and its subsidiaries and GECC.

      THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE
STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PROVISIONS.

Accepted and Agreed to:

By Hanover Direct Inc.

Name: /s/ [ILLEGIBLE]
Print Name:
Title
Date

By Richemont Finance S.A.

Name: /s/ Alan Grieve
Print Name: Alan Grieve
Title
Date

Name: /s/ Jan du Plessis
Print Name: Jan du Plessis
Title
Date

                                                  /s/ Lazara M. Morejon
                                                    LAZARA M. MOREJON

                                             My Commission Expires July 2, 2001<PAGE>   1
                                   AGREEMENT

AGREEMENT dated as of March 26, 1999 by and between Richemont Finance S.A., a
Luxembourg corporation ("Richemont"), and Hanover Direct, Inc., a Delaware
corporation ("Hanover").

                              W I T N E S S E T H:

WHEREAS, Hanover entered into that certain Reimbursement Agreement dated as of
December 18, 1996 with Swiss Bank Corporation (now UBS A.G., Stamford Branch)
("Bank") (as amended to the date hereof, the "Reimbursement Agreement") in
connection with the Bank's issuance of three letters of credit which support
certain obligations of Hanover (the "Letters of Credit");

WHEREAS, Richemont entered into an agreement dated as of December 18, 1996 with
the Bank pursuant to which Richemont guaranteed the reimbursement obligations
of Hanover in connection with draws under any Letter of Credit (the
"Guarantee"); and

WHEREAS, Richemont and Hanover and certain of Hanover's subsidiaries (Hanover
and such certain subsidiaries are herein collectively referred to as the
"Borrowers") entered into that certain Hanover Indemnity Agreement dated as of
December 17, 1996 (as amended to the date hereof, the "Indemnity Agreement")
whereby the Borrowers have agreed to reimburse Richemont for any payment it
makes to the Bank under the Guarantee in accordance with the Reimbursement
Agreement;

WHEREAS, Richemont and Hanover have agreed to extend the terms of the Indemnity
Agreement to March 31, 2000 on the terms and conditions set forth herein.

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

1.   The parties agree to amend the Indemnity Agreement to extend its term to
     March 31, 2000 and to take all steps necessary to so amend the Indemnity
     Agreement, and Hanover agrees to cause those of its subsidiaries that are
     party thereto to consent to such amendment.

2.   The parties agree to use their reasonable best efforts to obtain the
     Bank's consent to amend the Reimbursement Agreement, the Letters of Credit
     and the Guarantee and other related agreements, as necessary, to extend
     the terms of those instruments or agreements to March 31, 2000.

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3.   Hanover shall use its reasonable best efforts to obtain from Congress
     Financial Corporation ("Congress") its consent to extend the various
     agreements referenced herein.

4.   Richemont agrees to use its reasonable best efforts to obtain from
     Congress its consent to amend the terms of the Subordination Agreement
     between itself and Congress dated as of December 18, 1996 to the extension
     of the various agreements referenced herein.

5.   Upon the completion of all actions necessary to obtain the extension to
     March 31, 2000 of the agreements referred to herein and the issuance of
     the extended Letters of Credit, the Borrower agrees to pay to Richemont a
     fee equal to 9-1/2% of the principal amount of each Letter of Credit, plus
     all fees incurred by Richemont in connection with providing the Guarantee,
     including all legal fees, expenses, bank fees and any similar costs and
     expenses, all pursuant to the terms of the Term Sheet of even date
     herewith and attached hereto as Exhibit A.

6.   All capitalized terms used herein and not otherwise defined in the
     Agreement shall have the meaning ascribed thereto in the Reimbursement
     Agreement.

7.   This Agreement contains the entire agreement of the parties with respect
     to its subject matter, supersedes all prior discussions between them, and
     shall be amended or modified only by a writing executed by the parties
     hereto.

8.   This Agreement shall be construed under and enforced in accordance with
     the laws of New York, without reference to conflict of laws principles.

RICHEMONT FINANCE S.A.

By:    /s/ J. DU PLESSIS
      -------------------      /s/ A. GRIEVE
Name:   J. du Plessis            A Grieve
      -------------------
Title:
      -------------------

HANOVER DIRECT, INC.

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

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                                                                      Exhibit A
                                           TERM SHEET

                                $25.8 MILLION LETTERS OF CREDIT

<TABLE>
<S>                         <C>
PARTIES:                    Hanover Direct, Inc. ("Hanover"), Richemont, S.A. ("Richemont"),
                            UBS, A.G., Stamford Branch ("UBS") and Congress Financial Corp.
                            ("Congress").

FACILITY:                   In accordance with the Reimbursement Agreement, dated December 18,
                            1996, between Hanover and UBS, UBS has issued three letters of
                            credit for up to $25,837,082 (the "Letters of Credit").

TERM:                       The expiration date of the Letters of Credit shall be extended
                            until March 31, 2000 at the closing of the contemplated transaction
                            (the "Closing").

FACILITY FEE AND            A facility fee of 9-1/2% of the principal amount of the Letters of
EXPENSE:                    Credit shall be paid by Hanover to Richemont, subject to reduction
                            for prepayment, other than that portion of the facility fee paid at
                            closing.  In addition, Hanover shall pay all fees incurred by
                            Richemont in connection with providing the facilities described
                            herein, including legal fees, expenses, bank fees and any other
                            similar costs and expenses.

TIMING OF                   Payment of the facility fee and expenses incurred by Richemont
PAYMENTS:                   shall be made as follows: (a) $500,000 shall be paid at Closing,
                            and (b) the balance shall be paid in four equal quarterly
                            installments.  Provision shall be made to prorate the remaining
                            quarterly payments of the facility fee balance but, by way of
                            clarification, not the $500,000 fee payable at closing, in the
                            event of prepayment of amounts due thereunder by Hanover.

INTEREST:                   Interest on all amounts, if any, drawn under the Letters of Credit
                            shall be paid to Richemont at a rate equal to 3.5% above the prime
                            rate, but in no event shall such rate be less than the rate charged
                            Richemont by UBS with respect to any such drawings, plus 2%.
                            Interest shall be paid quarterly in arrears based on a 360-day year
                            and actual days elapsed.

REIMBURSEMENT               Hanover and Richemont shall amend the Agreement, dated December 18,
AGREEMENT:                  1996 and amended as of February 18, 1998, to reflect the terms set
                            forth herein.
</TABLE>

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<TABLE>
<S>                         <C>
SUBORDINATION:              Obligations of Hanover to Richemont in connection herewith shall be
                            subordinated to all obligations of Hanover to Congress under that
                            Loan and Security Agreement, dated as of November 14, 1995, as
                            amended, between Congress, Hanover and certain other borrowers.

SECURITY:                   Unsecured.
</TABLE>

ACCEDPTED
/s/ J. DU PLESSIS                                   /s/  A. GRIEVE
-------------------------                           ---------------------------
J. du Plessis                                       A. Grieve

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