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                                                                     EXHIBIT 4.1

                              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.

      (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

<PAGE>
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 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.
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     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 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.<PAGE>

                                                                     EXHIBIT 4.1

                              HANOVER DIRECT, INC.
                        2000 MANAGEMENT STOCK OPTION PLAN

         1. PURPOSE. The purpose of this Hanover Direct, Inc. 2000 Management
Stock Option Plan (the "Plan") is to advance the interests of Hanover Direct,
Inc. (the "Company") and its shareholders by providing employees and officers
of, and consultants to, the Company and its affiliates, through the grant of
options to purchase shares of Common Stock (as hereinafter defined), with a
larger personal and financial interest in the success of the Company.

         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 be constituted in such a manner as to
satisfy the requirements of applicable law, the provisions of Rule 16b-3 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor rule. The Committee shall be appointed, and vacancies shall be filled,
by the Board. The Committee shall have full power and authority to (i) select
the individuals to whom Options may be granted under the Plan; (ii) determine
the number of shares of Common Stock covered by each Option and the terms and
conditions, not inconsistent with the provisions of the Plan, governing such
Option; (iii) interpret the Plan and any Option granted thereunder; (iv)
establish such rules and regulations as it deems appropriate for the
administration of the Plan; and (v) take such other action as it deems necessary
or desirable for the administration of the Plan. Any action of the Committee
with respect to the administration of the Plan shall be taken by majority vote.
The Committee's interpretation and construction of any provision of the Plan or
the terms of any Option shall be conclusive and binding on all parties.

         3. PARTICIPANTS. Options may be granted under the Plan to any employee
or officer of, or consultant to, the Company or of any affiliate of the Company.
Nothing contained in the Plan, or in any Option granted pursuant to the Plan,
shall confer upon any employee any right to the continuation of his or her
employment, or limit in any way the Company's right to terminate his or her
employment.

         4. THE SHARES. The shares that may be delivered or purchased under the
Plan shall not exceed an aggregate of 20,000,000 shares (subject to adjustment
pursuant to Section 7) of common stock, par value $.66 2/3 per share, of the
Company (the "Common Stock") (subject to adjustment pursuant to Section 7). 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 an Option may again be subjected to an
Option under the Plan.

         5. OPTIONS. Options to purchase Common Stock ("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.

                  (a) TYPES OF OPTIONS. Options granted under the Plan shall, as
         determined by the Committee at the time of grant, be either Options
         intended to qualify as incentive stock options under Section 422 of the
         Internal Revenue Code of 1986, as amended (the "Code") ("Incentive
         Stock Options") or Options not intended to so qualify ("Nonstatutory
         Stock Options"); provided, however, that Incentive Stock Options may be
         granted only to employees of the Company or a subsidiary (within the
         meaning of Section 424(f) of the Code) of the Company (a "Subsidiary").
         Each option agreement shall identify the Option as an Incentive Stock
         Option or as a Nonstatutory Stock Option. Notwithstanding such
         designation, however, to the extent that the aggregate fair market
         value (determined on the date of grant) of Common Stock for which a
         participant is granted Incentive Stock Options that first become
         exercisable during any given calendar year exceeds $100,000, the Option

<PAGE>

         shall be treated as a Nonqualified Stock Option. For this purpose,
         Incentive Stock Options shall be taken into account in the order in
         which they were granted.

                  (b) PRICE. The 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; provided, however, that an Incentive Stock Option granted to an
         employee who owns stock possessing more than 10% of the total combined
         voting power of all classes of stock of the Company or any parent
         (within the meaning of Section 424(e) of the Code) or Subsidiary shall
         have a purchase price for the underlying shares equal to 110% of the
         fair market value of the Common Stock on the date of grant.

                  Solely for purposes of this Section 5(b) and Section 5(a), 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 10 trading
         days immediately preceding the date of grant and the 10 trading days
         immediately following such date.

                  (c) PER-PARTICIPANT LIMIT. No participant may be granted
         Options during any consecutive 12-month period on more than 1,000,000
         shares of Common Stock (subject to adjustment pursuant to Section 7).

                  (d) 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 the participant. Notwithstanding the foregoing, the
         Committee may, in the manner established by the Committee, allow a
         participant to transfer, without payment of consideration, any
         Nonstatutory Stock Option granted under the Plan to the participant's
         spouse, children, grandchildren, parents, and/or siblings, or to one or
         more trusts or partnerships for the benefit of such family members. 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).

                  (e) TERM AND EXERCISABILITY OF OPTIONS. Options may be granted
         for terms of not more than 10 years and shall be exercisable in
         accordance with such terms and conditions as are set forth in the
         option agreement evidencing the grant of such Options. In no event
         shall an Incentive Stock Option granted to an employee who owns stock
         possessing more than 10% of the total combined voting power of all
         classes of stock of the Company or any parent (within the meaning of
         Section 424(e) of the Code) or Subsidiary be exercisable after the
         expiration of five years from the date such Incentive Stock Option is
         granted.

                  Except as otherwise provided in Section 5(f), no Option
         granted under the Plan shall be exercisable by a participant during the
         first year after the date of grant of such Option.

                  (f) TERMINATION OF EMPLOYMENT. Except to the extent otherwise
         provided in the option agreement evidencing such Option, an Option may
         not be exercised after a participant ceases to be an employee, officer
         or consultant except as set forth in this Section 5(f).

                           (i) DEATH, DISABILITY, OR RETIREMENT. If a
                  participant ceases to be an employee, officer or consultant by
                  reason of death, permanent disability (within the meaning of
                  Section 22(e)(3) of the Code), or, in the case of an employee,
                  retirement at or after age 65, the participant (or the
                  participant's estate in the event of the participant's death)
                  may, within one (1) year following such cessation, exercise
                  the Option with respect to all or any part of the shares of
                  Common Stock subject thereto regardless of whether the Option
                  was otherwise exercisable at the time of such cessation.
                  Except in the case of the participant's death or permanent
                  disability, the exercise of an Incentive Stock Option more
                  than three (3) months after a participant ceases to be an
                  employee of the Company or a Subsidiary will cause such Option
                  to be treated as a Nonstatutory Stock Option.

<PAGE>

                           (ii) OTHER REASONS. If a participant ceases to be an
                  employee, officer or consultant for any reason other than
                  death, permanent disability, or retirement at or after age 65,
                  the participant may, within three (3) months following such
                  cessation, exercise the Option with respect to all or any part
                  of the shares of Common Stock subject thereto, but only to the
                  extent that such Option was exercisable at the time of such
                  cessation.

                  In no event may an Option be exercised after the expiration of
         the term of such Option.

                  (g) 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 purchase price may be paid in cash or, if so provided in
         the option agreement evidencing the grant of such Option, in shares of
         Common Stock valued at their fair market value on the date of purchase.
         Alternatively, if the option agreement evidencing the grant of such
         Option so provides, the 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 of sale or loan proceeds necessary to pay the purchase price
         and applicable withholding taxes, and such other documents as the
         Committee may determine.

         6. WITHHOLDING. No later than the date as of which an amount first
becomes includible in the gross income of a participant for Federal income tax
purposes with respect to any Option under the Plan, the participant shall pay to
the Company, or make arrangement satisfactory to the Committee regarding the
payment of, any Federal, state, or local taxes required by law to be withheld
with respect to such amount. Unless otherwise determined by the Committee,
withholding obligations may be settled with Common Stock, including Common Stock
that is part of the Option that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements and the Company shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind due to the
participant.

         7. 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 holders 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 7 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.

         8. EFFECTIVE DATE AND TERMINATION OF PLAN. The Plan shall become
effective on the date of its adoption by the Board, 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 may determine.
Any Option 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.

         9. AMENDMENT. The Board 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 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
under the Exchange Act or any other rule or regulation. No amendment may,
without the consent of a participant, impair such participant's rights under any
Option previously granted under the Plan. The Board shall have the power, in

<PAGE>

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 other corporation into
the Company, to amend all outstanding Options to terminate such Options as of
the effectiveness of such transaction. If the Board shall exercise such power,
all Options then outstanding shall be deemed to terminate upon such
effectiveness. The Board may, in its sole discretion, amend all outstanding
Options to cause them to be immediately exercisable prior to the effectiveness
of such termination.

         10. LEGAL AND REGULATORY REQUIREMENTS. No Option shall be exercisable
and no shares shall be delivered under the Plan except in compliance with all
applicable Federal and state laws and regulations including, without limitation,
compliance with withholding tax requirements and 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 shall 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.

         11. GENERAL PROVISIONS. (a) Nothing contained in the Plan, or in any
Option granted pursuant to the Plan, shall confer upon any employee any right to
the continuation of the employee's employment. (b) Nothing contained in the
Plan, or in any Option granted under the Plan, shall be construed to prevent the
Company from taking any corporate action which is deemed by the Company to be
appropriate or in its best interest, whether or not such action would have an
adverse effect on the Plan or any Option granted under the Plan. No participant,
beneficiary, or other person shall have any claim against the Company as a
result of any such action. (c) The Plan and all Options made and actions taken
thereunder shall be governed by and construed in accordance with the laws of the
State of New York.

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