EXHIBIT 10.2
 
FINANCING AGREEMENT AND NOTE MODIFICATION AGREEMENT

THIS FINANCING AGREEMENT AND NOTE MODIFICATION AGREEMENT (“Modification”) is
made effective as of July 29, 2011, by and among Frederick’s of Hollywood Group
Inc., a New York corporation (“Group”), FOH Holdings, Inc., a Delaware
corporation (the “Parent”), Frederick’s of Hollywood, Inc., a Delaware
corporation (“Frederick’s”), Frederick’s of Hollywood Stores, Inc., a Nevada
corporation (“Stores”), Hollywood Mail Order, LLC, a Nevada limited liability
company (“Mail Order” and together with Group, the Parent, Frederick’s and
Stores, individually, a “Borrower”, and collectively, the “Borrowers”), the
lending parties  from time to time a party to the Financing Agreement (as
hereinafter defined) (individually a “Lender” and collectively, the “Lenders”)
and Hilco Brands, LLC, a Delaware limited liability company, as arranger and
agent for the Lenders (in such capacity, the “Agent”).
 
Background
 
A.           Pursuant to the terms of that certain Financing Agreement dated as
of July 30, 2010 between and among the Borrowers, the Lenders and the Agent (the
“Financing Agreement”), the Lenders made available to the Borrowers a secured
term loan in the maximum original principal amount of Seven Million and 00/100
Dollars ($7,000,000.00) (the “Loan”), which Loan is evidenced by a certain
Secured Promissory Note also dated July 30, 2010 in the original principal
amount of Seven Million and 00/100 Dollars ($7,000,000.00) (the “Note”).  The
Note is secured by inter alia:  a Security Agreement dated July 30, 2010 from
the Borrowers to the Lenders (the “Security Agreement”) granting to the Agent,
for the benefit of the Lenders, a continuing security interest in the Collateral
more particularly described in the Security Agreement.
 
B.           Group is currently contemplating to merge Fredericks.com, Inc.
(“Guarantor”) into Mail Order prior to the end of Group’s fiscal year ending
July 30, 2011 (the “Subsidiary Merger”).  The Guarantor and Mail Order are each
100% wholly-owned subsidiaries of Frederick’s, which is 100% wholly owned by the
Parent, which is 100% wholly owned by Group.
 
C.           The Lenders and the Borrowers now wish to amend the Loan Documents
to:  (i) acknowledge and consent to the Subsidiary Merger;  (ii) extend the
compliance date for the Debt Service Coverage Ratio covenant set forth in
Section 6.01(s) of the Financing Agreement (the “Covenant Extension”); and (iii)
increase the principal amount of the Loan by One Hundred Thousand and 00/100
Dollars ($100,000.00) to finance the extension fee payable by the Borrowers to
the Lenders as consideration for the Covenant Extension provided for herein.
 
Now, therefore, in consideration of the mutual covenants and undertakings herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
the parties hereto covenant and agree as follows:
 

 
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1.           Amendments.
 
(a)           Increase to Principal Amount of Loan and Note.  From and after the
effective date of this Modification, the Loan will be a secured term loan in the
principal amount of Seven Million One Hundred Thousand and 00/100 Dollars
($7,100,000.00), and the maximum principal amount of the Note is hereby
increased accordingly to Seven Million One Hundred Thousand and 00/100 Dollars
($7,100,000.00).  The proceeds of the One Hundred Thousand and 00/100 Dollars
($100,000.00) increase to the principal balance of the Loan shall be used to
finance the Extension Fee provided for in Section 3 below.
 
(b)           Extension of Minimum Debt Coverage Ratio Covenant Compliance
Date:  The compliance date for the Debt Service Coverage Ratio covenant set
forth in Section 6.01(s) of the Financing Agreement is hereby extended to the
Fiscal Year ending July 28, 2012.  Accordingly, compliance with the Debt Service
Coverage Ratio covenant is waived for the reporting periods ending on:  July 30,
2011; October 29, 2011; January 28, 2012; and April  28, 2012.
 
2.           Confirmation of Loan Documents and Indebtedness.  The Borrowers
hereby covenant and confirm that, except as specifically modified by this
Modification, all of the terms and conditions of the Financing Agreement and all
other Loan Documents, as amended, shall be unmodified and shall remain in full
force and effect.  The Borrowers hereby acknowledge and confirm that the
Security Agreement shall secure the full amount of the Loan as increased
hereby.  The Borrowers hereby acknowledge and agree that Borrowers have no
defense, set-off, recoupment or claim against Lenders of any kind whatsoever as
of the date hereof, and that all of the representations and warranties contained
in the Loan Documents are true, complete and correct as of the date hereof
(except to the extent that such representations and warranties relate solely to
an earlier date).  The Borrowers hereby acknowledge and agree that the principal
balance outstanding under the Note as of the date hereof (and following this
Modification) is Seven Million One Hundred Thousand and 00/100 Dollars
($7,100,000.00), and that the accrued amount of PIK Interest as of June 30, 2011
was Three Hundred Ninety-Two Thousand and 00/100 Dollars ($392,000.00) (an
additional $1,166.67 per day has been added after June 30, 2011), and the
Borrowers hereby affirm the aforesaid indebtedness and all of the Borrowers’
liabilities and obligations under the Loan Documents.
 
3.           Fees.  Concurrently with the execution and delivery of this
Modification, and as consideration for the Covenant Extension provided for
herein, the Borrowers shall pay to Lender the sum of One Hundred Thousand and
00/100 Dollars ($100,000.00), which Extension Fee shall be paid by the increase
in the principal amount of the Loan and the Note as provided for herein.  In
addition, the Borrowers shall pay all of the costs and expenses of the Agent and
the Lenders incurred in connection with this Modification including, without
limitation, reasonable attorneys’ fees.
 
4.           No Novation.  The parties to this Modification acknowledge and
confirm that this Modification shall not be construed as a novation of the Note
and shall not prejudice any present or future rights, remedies, benefits or
powers belonging to or accruing to the Lenders under the terms of the Loan
Documents.
 

 
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5.           Representations.  The  Borrowers hereby represent and warrant to
the Lenders that consummation of the Subsidiary Merger will not violate,
invalidate, contravene or breach any applicable law, any covenant,
representation, or warranty of the Financing Agreement or any other agreement,
instrument or other document evidencing, governing or securing any Indebtedness
of any Loan Party, any Material Contract, the charter, by-laws, limited
liability company or operating agreement, certificate of partnership or
partnership agreement, as applicable, of any Loan Party, or any agreement,
instrument or other document binding on or otherwise affecting any Loan Party or
any properties of any Loan Party, to the extent the obligation thereunder is
material or to the extent such contravention (either individually or in the
aggregate) could reasonably be expected to have a Material Adverse
Effect.  In express reliance on the foregoing representation and warranty,
the Agent hereby consents to the Subsidiary Merger and agrees that the
Subsidiary Merger will not constitute an Event of Default under the Financing
Agreement.
 
6.           No Further Commitment.  Nothing in this Modification shall be
construed to commit the Lenders to any further covenant or default waivers or to
any additional increase of credit or other modification or amendment of the Loan
Documents, nor as a waiver by the Lenders of any rights or remedies to which the
Lenders may be entitled under any of the Loan Documents.
 
7.           Release.  The Borrowers on each of their own and on behalf of its
trustees, partners, employees and agents, for themselves, and their successors,
trustees and assigns, hereby releases the Agent and the Lenders, their
shareholders, officers, directors, employees, agents and attorneys and each of
their respective successors, trustees, and assigns and affiliates, of and from
any and all actions, causes of action, proceedings, claims, demands, damages,
costs, liabilities, losses, agreements and obligations, of any nature
whatsoever, whether contingent or matured, known or unknown, at law or in equity
arising out of, or in any way related to the Loan, or the transactions
contemplated under the Loan Documents.
 
8.           Construction.  Any capitalized terms used in this Modification not
otherwise defined herein shall have the meaning assigned to them in the
Financing Agreement, as amended.
 
9.           Multiple Counterparts.  This Modification may be executed in one or
more counterparts, all of which taken together shall constitute the same
agreement.
 
10.           Binding Effect.  This Modification shall be binding upon and inure
to the benefit of the parties hereto and their respective successors, trustees,
assigns and affiliates.
 
11.           Miscellaneous.  This Modification shall be governed by and
construed under the laws of the State of New York.  This Modification represents
the entire agreement between the parties hereto respecting the subject matter
hereof, and no party shall be bound by any prior discussions, proposals or oral
agreements.  The parties agree that this Modification may be amended only in a
writing signed and approved by both parties.  The parties agree that each and
every provision of this Modification has been mutually negotiated, prepared and
drafted, and each party has been represented by counsel, so that in connection
with the construction of any provision hereof, no consideration shall be given
to the issue of which party actually prepared, drafted, requested or negotiated
any provision or deletion.  The Note, as amended, and this Modification shall
together be considered a single note.
 

 
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12.           Consent of Revolving Loan Agent.  Wells Fargo Retail Finance II,
LLC (“Wells Fargo”), in its capacity as arranger and administrative agent for
the Revolving Loan Secured Parties (as such term is defined in the Intercreditor
Agreement by and between Wells Fargo and Agent dated as of July 30, 2010) joins
in this Modification for the purpose of agreeing to the increase, modification,
and extension provided for herein.
 

 

 

 

 

 

 
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IN WITNESS WHEREOF, the parties hereto have caused this Modification to be
executed by their respective officers thereunto duly authorized as of on the
date first above written.
 

 
BORROWERS:
         
FREDERICK’S OF HOLLYWOOD GROUP INC.
           
By:
/s/ Thomas Rende       Name:  Thomas Rende       Title:    Chief Financial
Officer          

 

 
FOH HOLDINGS, INC.
           
By:
/s/ Thomas Rende       Name:  Thomas Rende       Title:    Chief Financial
Officer          

 

 
FREDERICK’S OF HOLLYWOOD, INC.
           
By:
/s/ Thomas Rende       Name:  Thomas Rende       Title:    Chief Financial
Officer          

 

 
FREDERICK’S OF HOLLYWOOD STORES, INC.
           
By:
/s/ Thomas Rende       Name:  Thomas Rende       Title:    Chief Financial
Officer          

 

 
HOLLYWOOD MAIL ORDER, LLC
  By: FOH Holdings, Inc., its Manager
           
By:
/s/ Thomas Rende       Name:  Thomas Rende       Title:    Chief Financial
Officer          

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AGENT:
         
HILCO BRANDS, LLC
           
By:
/s/ Eric W. Kaup      
Name:  Eric W. Kaup
     
Title:    Authorized Signatory
         

 

 
LENDERS:
         
HILCO BRANDS, LLC
           
By:
/s/ Eric W. Kaup      
Name:  Eric W. Kaup
     
Title:    Authorized Signatory
         

 

 
INFINITY FS FINANCE I, LLC
           
By:
/s/ Ike S. Franco      
Name: Ike S. Franco
     
Title:   Principal
         

 

 
INFINITY FS FINANCE I, LLC
           
By:
/s/ Bradley W. Snyder      
Name: Bradley W. Snyder
     
Title:   Authorized Signatory
         

 
                                                   

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REVOLVING LOAN AGENT:
         
WELLS FARGO RETAIL FINANCE II, LLC
           
By:
/s/ Joseph Burt      
Name:  Joseph Burt
     
Title:    Director
         

 
 
 
 
 
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