Exhibit 10.45
EXECUTION COPY
EMPLOYMENT AGREEMENT
     THIS EMPLOYMENT AGREEMENT dated as of January 29, 2009 by and between
FREDERICK’S OF HOLLYWOOD GROUP INC., a New York corporation having its principal
office at 1115 Broadway, New York, New York 10010 (“Company”), and THOMAS LYNCH,
residing at                      (“Executive”).
     WHEREAS, the Company desires to employ Executive as its Chief Executive
Officer pursuant to the terms and conditions herein set forth, superseding all
prior agreements between the Company, its subsidiaries and/or predecessors and
Executive.
     IT IS AGREED:
1. Employment, Duties and Acceptance.
     1.1. General. During the Term (as defined herein), the Company shall employ
Executive as its Chief Executive Officer (“CEO”). All of Executive’s powers and
authority in any capacity shall at all times be subject to the direction and
control of the Company’s Board of Directors. Executive shall report directly to
the Board of Directors of the Company. The Board may assign to Executive such
general management and supervisory responsibilities and executive duties for the
Company or any subsidiary of the Company, including serving as a director, as
are consistent with Executive’s status as CEO. The Company and Executive
acknowledge that Executive’s primary functions and duties as CEO shall be to
manage and supervise the overall operations of the Company’s business.
     1.2. Full-Time Position. Executive accepts such employment and agrees to
devote substantially all of his business time, energies and attention to the
performance of his duties hereunder. Nothing herein shall be construed as
preventing Executive from making and supervising personal investments, provided
they will not interfere with the performance of Executive’s duties hereunder or
violate the provisions of Section 6.4 hereof.
     1.3. Location. Executive shall be based in New England. Executive shall
undertake such travel, within or outside the United States, as is reasonably
necessary in the interests of the Company to fully perform his duties hereunder.
2. Term. The term of Executive’s employment hereunder commenced as of January 2,
2009 and shall continue for a period of two (2) years until January 2, 2011
(“Term”), unless terminated earlier as hereinafter provided in this Agreement,
or unless extended by mutual written agreement of the Company and Executive.
Unless the Company and Executive have otherwise agreed in writing, if Executive
continues to work for the Company after the expiration of the Term, his
employment thereafter shall be under the same terms and conditions provided for
in this Agreement, except that his employment will be on an “at will” basis and
the provisions of Sections 4.4 and 4.6(d) shall no longer be in effect.

 

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3. Compensation and Benefits.
     3.1. Annual Base Salary. During the Term, the Company shall pay to
Executive a salary (“Base Salary”) at the annual rate of $600,000. Executive’s
compensation shall be paid in equal, periodic installments in accordance with
the Company’s normal payroll procedures.
     3.2. Annual Performance Bonus. In addition to Base Salary, for each of the
fiscal years ending July 31, 2010 and July 30, 2011, Executive shall be eligible
to earn a target annual incentive bonus equal to sixty-five percent (65%) of his
Base Salary (“Bonus”), which bonus shall be based on achieving targeted
performance goals as determined by the Company’s Compensation Committee after
consultation with the Executive. The Bonus payable to Executive, if any, for the
fiscal year ending July 30, 2011 shall be prorated to compensate Executive for
the period from August 1, 2010 to the end of the Term. No Bonus shall be paid
for the fiscal year ending July 25, 2009. Any amounts due under this Section 3.2
shall be payable to the Executive within 90 days of the end of the applicable
fiscal year in a cash lump-sum payment.
     3.3. Benefits. Executive shall be eligible to participate in the welfare
benefit plans, practices, policies and programs (including, but not limited to,
medical, dental, short and long-term disability, employee life, group life and
accidental death insurance plans and programs) and all savings and retirement
plans in accordance with the terms and conditions of such plans, policies and
programs maintained by the Company for its senior executives.
     3.4. Insurance. The Company shall, at its own cost and expense, maintain
(i) a life insurance policy on the life of Executive that shall provide a death
benefit to Executive’s beneficiary in the amount of $1,500,000 and that shall be
owned by Executive and (ii) a disability insurance policy that shall provide a
non-taxable benefit of at least $10,000 per month payable to Executive until
Executive attains the age of 64 and that shall be owned by Executive.
Notwithstanding the foregoing, Executive hereby acknowledges that the cost of
premiums for such life insurance and disability insurance policies shall be
considered taxable income for Executive in the year paid by the Company and
shall be reported by the Company to the Internal Revenue Service as taxable
income.
     3.5. Vacation. Executive shall be entitled to five weeks of paid vacation
during each calendar year and to a reasonable number of other days off for
religious and personal reasons in accordance with the Company’s policies and
procedures applicable to senior executives of the Company. Notwithstanding
anything to the contrary provided herein, the amount accrued for vacation time
not taken in any calendar year shall be limited to a maximum of two weeks.
     3.6. Automobile. During the Term, Executive shall be entitled to an
automobile allowance of $1,250 per month.
     3.7. Expenses. The Company will pay or reimburse Executive for all
transportation, hotel and other expenses reasonably incurred by Executive on
business trips and for all other ordinary and reasonable out-of-pocket expenses
actually incurred by him in the conduct of the business of the Company against
itemized vouchers submitted with respect to any such expenses and approved in
accordance with customary procedures.

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     3.8. Stock Options.
          (a) As additional compensation for Executive entering into this
Agreement and agreeing to be bound by its terms and for the services to be
rendered by Executive hereunder, the Company hereby grants to Executive a
ten-year non-qualified option (“Option”) to purchase 360,000 shares of the
Company’s common stock, $.01 par value (“Common Stock”) under the Company’s 1988
Stock Option Plan (“Plan”).
          (b) The Option shall be evidenced by a Stock Option Agreement, dated
the date of this Agreement (“Grant Date”), in the form attached hereto as
Exhibit A. The Option shall have an exercise price equal to the Fair Market
Value (as defined in the Plan) of a share of the Common Stock on the Grant Date.
Except as otherwise provided in the Stock Option Agreement, 120,000 shares will
vest on each of (i) the Grant Date, (ii) January 2, 2010 and (iii) January 2,
2011. The Option shall expire on January 28, 2019.
     3.9. Stock Grant. The Company hereby grants to Executive an aggregate of
100,000 shares of restricted stock under the Company’s 2000 Performance Equity
Plan (“Stock Grant”), which shall be evidenced by a Restricted Stock Agreement,
dated the date of this Agreement, in the form attached hereto as Exhibit B.
50,000 of such shares of Common Stock associated with the Stock Grant shall vest
on each of January 2, 2010 and 2011, provided that (a) Executive is employed by
the Company on each such date and (b) Executive has completed the Stock Purchase
(defined in Section 3.10 below) in accordance with the terms of the Restricted
Stock Agreement.
     3.10. Stock Purchase. Executive agrees to purchase a minimum of 250,000
shares of the Company’s Common Stock in the open market for his own account
under a Rule 10b5-1 trading plan to be entered into during the first open window
period during which Executive is able to enter into a 10b5-1 trading plan in
accordance with the terms of the Company’s Insider Trading Policy (the “Stock
Purchase”). Executive agrees to continue to own and hold any shares purchased
subject to this Section 3.10 throughout the term of Executive’s employment with
the Company.
4. Termination.
     4.1. Death. If Executive dies during the term of this Agreement,
Executive’s employment hereunder shall terminate and the Company shall pay to
Executive’s estate the amount set forth in Section 4.6(a).
     4.2. Disability. The Company, by written notice to Executive, may terminate
Executive’s employment hereunder if Executive shall fail because of illness or
incapacity to render services of the character contemplated by this Agreement
for ninety (90) consecutive calendar days in any consecutive twelve calendar
month period. Upon such termination, the Company shall pay to Executive the
amount set forth in Section 4.6(b).
     4.3. By Company for “Cause”. The Company, by written notice to Executive,
may terminate Executive’s employment hereunder for “Cause.” As used herein,
“Cause” shall mean: (a) the refusal, or failure resulting from the lack of good
faith efforts, by Executive to carry out specific directions of the Board which
are of a material nature, or the refusal, or failure resulting

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from the lack of good faith efforts, by Executive to perform a material part of
Executive’s duties hereunder; (b) the commission by Executive of a material
breach of any of the provisions of this Agreement; (c) fraud or dishonest action
by Executive in his relations with the Company or any of its subsidiaries or
affiliates, or with any customer or business contact of the Company or any of
its subsidiaries or affiliates (“dishonest” for these purposes shall mean
Executive knowingly making a material misstatement or omission, or knowingly
committing a material improper act, for his personal benefit); or (d) the
conviction of Executive of any crime involving an act of moral turpitude.
Notwithstanding the foregoing, no “Cause” for termination shall be deemed to
exist with respect to Executive’s acts described in clauses (a) or (b) above,
unless the Company shall have given written notice to Executive specifying the
“Cause” with reasonable particularity and, within thirty (30) calendar days
after such notice, Executive shall not have cured or eliminated the problem or
thing giving rise to such “Cause;” provided, however, that a repeated breach
after notice and cure of any provision of clauses (a) or (b) above involving the
same or substantially similar actions or conduct, shall be grounds for
termination for “Cause” without any additional notice from the Company. Upon
such termination, the Company shall pay to executive the amount set forth in
Section 4.6(c).
     4.4. By Employee for “Good Reason”. The Executive, by written notice to the
Company, may terminate Executive’s employment hereunder if a “Good Reason”
exists. For purposes of this Agreement, “Good Reason” shall mean the occurrence
of any of the following circumstances without the Executive’s prior express
written consent: (a) a substantial and material breach of this Agreement by the
Company; (b) a failure by the Company to make any payment to Executive when due,
unless the payment is not material and is being contested by the Company, in
good faith; or (c) a material and adverse change in Executive’s compensation and
benefits described in Section 3 of this Agreement with which Executive
disagrees. Notwithstanding the foregoing, “Good Reason” shall not be deemed to
exist with respect to the Company’s acts described in clauses (a), (b) or
(c) above, unless the Executive shall have given written notice to the Company
specifying the Good Reason with reasonable particularity and, within thirty
(30) calendar days after such notice, the Company shall not have cured or
eliminated the problem or thing giving rise to such Good Reason; provided,
however, that a repeated breach after notice and cure of any provision of
clauses (a), (b) or (c) above involving the same or substantially similar
actions or conduct, shall be grounds for termination for Good Reason without any
additional notice from the Executive. Upon such termination, the Company shall
pay to Executive the amount set forth in Section 4.6(d).
     4.5. By Company Without “Cause”. The Company may terminate Executive’s
employment hereunder without “Cause”. Upon such termination, the Company shall
pay to Executive the amount set forth in Section 4.6(d).
     4.6. Compensation Upon Termination.
          (a) Payment Upon Death. In the event that Executive’s employment is
terminated pursuant to Section 4.1, the Company shall no longer be under any
obligation to Executive or his legal representatives pursuant to this Agreement
except for (i) the Base Salary due Executive pursuant to Section 3.1 hereof
through the date of termination, (ii) any Bonus which would have become payable
under Section 3.2 for the year in which the employment was terminated prorated
by multiplying the full amount of the Bonus by a fraction, the numerator of

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which is the number of “full calendar months” worked by Executive during the
year of termination and the denominator of which is 12 (a “full calendar month”
is a month in which the Executive worked at least two weeks), which Bonus will
be calculated and paid after the Company’s fiscal year end and in accordance
with the Company’s customary procedures (“Pro-Rated Bonus”), (iii) all earned
and previously approved but unpaid Bonuses for any year prior to the year of
termination, (iv) all valid expense reimbursements and (v) all accrued but
unused vacation pay.
          (b) Payment Upon Disability. In the event that Executive’s employment
is terminated pursuant to Section 4.2, the Company shall no longer be under any
obligation to Executive or his legal representatives pursuant to this Agreement
except for (i) the Base Salary due Executive pursuant to Section 3.1 hereof
through the date of termination, (ii) any Pro-Rated Bonus which would have
become payable under Section 3.2 for the year in which the employment was
terminated, which Pro-Rated Bonus will be calculated and paid after the
Company’s fiscal year end and in accordance with the Company’s customary
procedures, (iii) all earned and previously approved but unpaid Bonuses for any
year prior to the year of termination, (iv) all valid expense reimbursements;
(v) all accrued but unused vacation pay; and (vi) medical coverage at the
Company’s expense through the date of termination.
          (c) Payment Upon Termination by the Company For “Cause”. If the
Company terminates Executive’s employment hereunder pursuant to Section 4.3, the
Company shall have no further obligations to the Executive hereunder, except the
Company shall pay to Executive his Base Salary, all valid expense reimbursements
and all unused vacation pay required by law through the date of termination.
          (d) Payment Upon Termination by Company Without Cause or by Executive
for “Good Reason”. In the event that Executive’s employment is terminated
pursuant to Section 4.4 or 4.5, the Company shall have no further obligations to
Executive hereunder except for: (i) the Base Salary due Executive pursuant to
Section 3.1 hereof for a period of: (A) four (4) months from the date of
termination if such date is prior to July 2, 2009; (B) six (6) months from the
date of termination if such date is between July 2, 2009 and January 2, 2010; or
(C) eight (8) months from the date of termination if such date is after
January 2, 2010 and prior to the end of the Term; (ii) any Pro-Rated Bonus which
would have become payable under Section 3.2 for the year in which the employment
was terminated, which Pro-Rated Bonus will be calculated and paid after the
Company’s fiscal year end and in accordance with the Company’s customary
procedures; (iii) all earned and previously approved but unpaid Bonuses;
(iv) all valid expense reimbursements; (v) all accrued but unused vacation pay;
(vi) accelerated vesting of the portion of the Option (as defined in
Section 3.8) that would otherwise have vested within the one-year period
following termination as set forth in the Stock Option Agreement; and
(vii) continued vesting of the Stock Grant (as defined in Section 3.9) as set
forth in the Restricted Stock Agreement. In order and to the extent necessary to
comply with Internal Revenue Code Section 409A (“Section 409A”), all cash
amounts due under this paragraph 4.6(d) shall be payable to Executive in a
lump-sum cash payment on the six-month anniversary of the date of Executive’s
termination of employment.
     4.7. Resignation as Director Upon Termination of Employment. If Executive’s
employment hereunder is terminated for any reason, then Executive shall, at the
Company’s

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request, resign as a director of the Company and all of its subsidiaries,
effective upon the occurrence of such termination.
5. Executive Indemnity. The Company agrees to indemnify Executive and hold
Executive harmless against all costs, expenses (including, without limitation,
reasonable attorneys’ fees) and liabilities (other than settlements to which the
Company does not consent, which consent shall not be unreasonably withheld)
(collectively, “Losses”) reasonably incurred by Executive in connection with any
claim, action, proceeding or investigation brought against or involving
Executive with respect to, arising out of or in any way relating to Executive’s
employment with the Company or Executive’s service as a director of the Company;
provided, however, that the Company shall not be required to indemnify Executive
for Losses incurred as a result of Executive’s intentional misconduct or gross
negligence (other than matters where Executive acted in good faith and in a
manner he reasonably believed to be in and not opposed to the Company’s best
interests). Executive shall promptly notify the Company of any claim, action,
proceeding or investigation under this paragraph and the Company shall be
entitled to participate in the defense of any such claim, action, proceeding or
investigation and, if it so chooses, to assume the defense with counsel selected
by the Company; provided that Executive shall have the right to employ counsel
to represent him (at the Company’s expense) if Company counsel would have a
“conflict of interest” in representing both the Company and Executive. The
Company shall not settle or compromise any claim, action, proceeding or
investigation without Executive’s consent, which consent shall not be
unreasonably withheld; provided, however, that such consent shall not be
required if the settlement entails only the payment of money and the Company
fully indemnifies Executive in connection therewith. The Company further agrees
to advance any and all expenses (including, without limitation, the fees and
expenses of counsel) reasonably incurred by the Executive in connection with any
such claim, action, proceeding or investigation, provided Executive first enters
into an appropriate agreement for repayment of such advances if indemnification
is found not to have been available.
6. Protection of Confidential Information; Non-Solicitation.
     6.1. Acknowledgement. Executive acknowledges that:
          (a) As a result of his employment with the Company, Executive has
obtained and will obtain secret and confidential information concerning the
business of the Company and its subsidiaries and affiliates (referred to
collectively in this Section 6 as the “Company”), including, without limitation,
financial information, designs and other proprietary rights, trade secrets and
“know-how,” customers and sources (“Confidential Information”).
          (b) The Company will suffer substantial damage which will be difficult
to compute if, during the period of his employment with the Company or
thereafter, Executive should divulge Confidential Information.
          (c) The provisions of this Agreement are reasonable and necessary for
the protection of the business of the Company.
     6.2. Confidentiality. Executive agrees that he will not at any time, either
during the Term or thereafter, divulge to any person or entity any Confidential
Information obtained or

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learned by him as a result of his employment with, or prior retention by, the
Company, except: (i) in the course of performing his duties hereunder; (ii) with
the Company’s express written consent; (iii) to the extent that any such
information is in the public domain other than as a result of Executive’s breach
of any of his obligations hereunder; or (iv) where required to be disclosed by
court order, subpoena or other government process. If Executive shall be
required to make disclosure pursuant to the provisions of clause (iv) of the
preceding sentence, Executive promptly, but in no event more than two
(2) business days after learning of such subpoena, court order, or other
government process, shall notify, by personal delivery or by electronic means,
confirmed by mail, the Company and, at the Company’s expense, Executive shall:
(a) take all reasonably necessary and lawful steps required by the Company to
defend against the enforcement of such subpoena, court order or other government
process and (b) permit the Company to intervene and participate with counsel of
its choice in any proceeding relating to the enforcement thereof.
     6.3. Documents. Upon termination of his employment with the Company,
Executive will promptly deliver to the Company all memoranda, notes, records,
reports, manuals, drawings, blueprints and other documents (and all copies
thereof) relating to the business of the Company and all property associated
therewith, which he may then possess or have under his control; provided,
however, that Executive shall be entitled to retain copies of such documents
reasonably necessary to document his financial relationship (both past and
future) with the Company.
     6.4. Non-Solicitation. During the period commencing on the date hereof and
ending on the date which is one year after the date upon which Executive’s
employment hereunder is terminated, Executive, without the prior written
permission of the Company, shall not, anywhere in the world, (i) employ or
retain, or have or cause any other person or entity to employ or retain, any
person who was employed or retained by the Company at any time within 180 days
prior to the termination of Executive’s employment; or (ii) solicit, interfere
with, or endeavor to entice away from the Company, for the benefit of any
person, firm or corporation engaged in any business which is directly or
indirectly in competition with the Company, any of its customers or other
persons with whom the Company has a contractual relationship.
     6.5. Injunctive Relief. If Executive commits a breach, or threatens to
commit a breach, of any of the provisions of Sections 6.2, 6.3 or 6.4, the
Company shall have the right and remedy to seek to have the provisions of this
Agreement specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed by Executive that the services being rendered
hereunder to the Company are of a special, unique and extraordinary character
and that any such breach or threatened breach will cause irreparable injury to
the Company and that money damages will not provide an adequate remedy to the
Company. The rights and remedies enumerated in this Section 6.5 shall be in
addition to, and not in lieu of, any other rights and remedies available to the
Company under law or equity. In connection with any legal action or proceeding
arising out of or relating to this Agreement, the prevailing party in such
action or proceeding shall be entitled to be reimbursed by the other party for
the reasonable attorneys’ fees and costs incurred by the prevailing party.
     6.6. Modification. If any provision of this Section 6 is held to be
unenforceable because of the scope, duration or area of its applicability, the
tribunal making such determination

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shall have the power to modify such scope, duration, or area, or all of them,
and such provision or provisions shall then be applicable in such modified form.
     6.7. Survival. The provisions of this Section 6 shall survive the
termination of this Agreement for any reason.
     7. Miscellaneous Provisions.
     7.1. Notices. All notices provided for in this Agreement shall be in
writing, and shall be deemed to have been duly given when (i) delivered
personally to the party to receive the same, or (ii) when mailed first class
postage prepaid, by certified mail, return receipt requested, addressed to the
party to receive the same at his or its address set forth below, or such other
address as the party to receive the same shall have specified by written notice
given in the manner provided for in this Section 7.1. All notices shall be
deemed to have been given as of the date of personal delivery or mailing
thereof.
If to Executive:
Mr. Thomas Lynch
If to the Company:
Frederick’s of Hollywood Group Inc.
1115 Broadway
New York, New York 10010
Attn: General Counsel
with a copy to:
Graubard Miller
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Attn: David Alan Miller, Esq.
Fax No.: (212) 818-8881
     7.2. Entire Agreement; Waiver. This Agreement, the Stock Option Agreement
and the Restricted Stock Agreement set forth the entire agreement of the parties
relating to the employment of Executive and are intended to supersede all prior
negotiations, understandings and agreements. No provisions of this Agreement,
the Stock Option Agreement or the Restricted Stock Agreement may be waived or
changed except by a writing by the party against whom such waiver or change is
sought to be enforced. The failure of any party to require performance of any
provision hereof shall in no manner affect the right at a later time to enforce
such provision.

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     7.3. Governing Law. All questions with respect to the construction of this
Agreement, and the rights and obligations of the parties hereunder, shall be
determined in accordance with the law of the State of New York applicable to
agreements made and to be performed entirely in New York.
     7.4. Binding Effect; Nonassignability. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the Company. This
Agreement shall not be assignable by Executive, but shall inure to the benefit
of and be binding upon Executive’s heirs and legal representatives.
     7.5. Severability. Should any provision of this Agreement become legally
unenforceable, no other provision of this Agreement shall be affected, and this
Agreement shall continue as if the Agreement had been executed absent the
unenforceable provision.
     7.6. Section 409A. This Agreement is intended to comply with the provisions
of Section 409A. To the extent that any payments and/or benefits provided
hereunder are not considered compliant with Section 409A, the parties agree that
the Company shall take all actions necessary to make such payments and/or
benefits become compliant.
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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

             
 
      /s/ Thomas Lynch                   THOMAS LYNCH    
 
                FREDERICK’S OF HOLLYWOOD GROUP INC.    
 
           
 
  By:   /s/ Peter Cole    
 
           
 
      Peter Cole
Executive Chairman    

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