FIFTH AMENDMENT TO
AMENDED AND RESTATED FINANCING AGREEMENT

This FIFTH AMENDMENT TO AMENDED AND RESTATED FINANCING AGREEMENT (this
“Amendment”) is entered into as of September 22, 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 collectively with Group, the Parent, Frederick's and
Stores, individually, a “Borrower”, and collectively, the “Borrowers”), Wells
Fargo Bank, National Association, in its capacity as agent for the Lenders (in
such capacity, the “Agent”) and Wells Fargo Capital Finance, Inc. as Lender.

RECITALS

A.           WHEREAS, the Borrowers, the Lenders and the Agent are parties to
that certain Amended and Restated Financing Agreement, dated as of January 28,
2008, as amended by that certain First Amendment to Amended and Restated
Financing Agreement, dated as of September 9, 2008, as further amended by that
certain Second Amendment to Amended and Restated Financing Agreement, dated as
of September 21, 2009, as further amended by that certain Third Amendment to
Amended and Restated Financing Agreement, dated as of October 23, 2009, and as
further amended by that certain Fourth Amendment to Amended and Restated
Financing Agreement dated as of July 30, 2010 (as so amended, the “Financing
Agreement”);
 
B.           WHEREAS, the Borrowers have requested that the Agent and the
Lenders agree to certain further amendments to the Financing Agreement; and
 
C.           WHEREAS, the Agent and the Lenders are willing to agree to such
amendments upon the terms and subject to the conditions set forth herein.
 
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, and for other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Agent, the Lenders and the
Borrowers agree as follows:

1.           Definitions.  Unless otherwise defined herein, initial capitalized
terms have the meanings given to them in the Financing Agreement.
 
2.           Amendments to Financing Agreement.  Upon the Fifth Amendment
Effective Date (as hereinafter defined) the Financing Agreement is hereby
amended as follows:
 
a.)           Section 1.01 of the Financing Agreement is amended by adding the
following new defined terms (and corresponding definitions) in appropriate
alphabetical order therein:
 
 
(i)
“Adjustment Date” means, the first day of each fiscal quarter, commencing
January 29, 2012.

 
 
 

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(ii)
“Average Daily Availability” means the average daily Availability for the
immediately proceeding fiscal quarter.

 
 
(iii)
“Fifth Amendment” means the Fifth Amendment to Amended and Restated Financing
Agreement, dated as of September 22, 2011

 
 
(iv)
“Fifth Amendment Effective Date” means as defined in that certain Fifth
Amendment, among the Borrowers, the Lenders and the Agent.”

 
b.)           Section 1.01 of the Financing Agreement is amended by amending and
restating the following defined terms therein to read as follows:
 
 
(i)
“Agent” means Wells Fargo Bank, National Association.

 
 
(ii)
“Applicable Margin” means,

 
(a)           From and after the Fifth Amendment Effective Date until the first
Adjustment Date, the percentages set forth in Level III of the pricing grid
below; and
 
(b)           From and after the first Adjustment Date and on each Adjustment
Date thereafter, the Applicable Margin shall be determined from the following
pricing grid based upon the Average Daily Availability as of the fiscal quarter
ended immediately preceding such Adjustment Date; provided, however, that
notwithstanding anything to the contrary set forth herein, upon the occurrence
of an Event of Default, the Agent may, and at the direction of the Required
Lenders shall, immediately increase the Applicable Margin to that set forth in
Level III (even if the Average Daily Availability requirements for a different
Level have been met) and interest shall accrue at the Post-Default Rate; and
provided, further, that if the financial statements or any Borrowing Base
Certificates delivered hereunder are at any time restated or otherwise revised
(including as a result of an audit) or if the information set forth in such
financial statements or any Borrowing Base Certificates otherwise proves to be
false or incorrect such that the Applicable Margin would have been higher than
was otherwise in effect during any period, without constituting a waiver of any
Default or Event of Default arising as a result thereof, interest due under this
Agreement shall be immediately recalculated at such higher rate for any
applicable periods and shall be due and payable on demand.
 
Level
Average Daily Availability
LIBOR Margin
Base Rate Margin
I
Greater than $5,000,000
2.50%
1.25%
II
Less than or equal to $5,000,000 but greater than $3,000,000
2.75%
1.50%
III
Less than or equal to $3,000,000
 3.00%
1.75%

 
 
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(iii)
“Borrowing Base” means, at any time, the difference between:

 
(i)           the sum of
 
(A)           Ninety percent (90%) of the Eligible Credit Card Accounts at such
time,
 
(B)           Eighty-five percent (85%) of the then current Net Retail
Liquidation Value of Eligible Retail Inventory, provided that at no time shall
the amount attributable to Eligible In Transit Inventory exceed $1,000,000, and
 
(ii)           minus, the sum of (A) Required Minimum Availability Reserve, (B)
Availability Reserves and (C) without duplication, such other Reserves as the
Agent may deem appropriate in the exercise of its reasonable business judgment
based upon the lending practices of the Agent, which may include, without
limitation reserves for freight and duty with respect to outstanding Letters of
Credit; provided that the Agent shall have the right to have the Inventory
reappraised by an independent appraiser selected by the Agent from time to time
for the purpose of redetermining the advance rates of Eligible Inventory and, as
a result, the Borrowing Base.
 
 
(iv)
“Borrowing Base Certificate” means a certificate (in the form of Exhibit J
annexed to the Fifth Amendment, as such form may be revised from time to time by
the Agent), signed by the Chief Operating Officer or Chief Financial Officer of
the Borrower and setting forth the calculation of the Borrowing Base, together
with separate calculations showing the Borrower’s Inventory, Eligible Retail
Inventory and Eligible In Transit Inventory, in compliance with Section 7.01(a).

 
 
(v)
“L/C Sublimit” means, that portion of the Total Revolving Credit Commitment
equal to $10,000,000.

 
 
(vi)
“Maturity Date” means January 28, 2013, or such earlier date on which the
Revolving Loans shall become due and payable, in whole, in accordance with the
terms of this Agreement and the other Loan Documents.

 
 
(vii)
“Required Minimum Availability Reserve” means an amount equal to $1,500,000.

 

 
c.) 
Section 1.01 of the Financing Agreement is amended by deleting in their entirety
the following definitions:

 
 
(i)
“Consulting Agreement”

 
 
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(ii)
“Consulting Fees”

 
 
(iii)
“Eligible Accounts Receivable”

 
 
(iv)
“Eligible Wal-Mart Accounts Receivable”

 
 
(v)
“Eligible Warehouse Liquid Inventory”

 
 
(vi)
“Eligible Wholesale Inventory”

 
 
(vii)
“Other Eligible Accounts Receivable”

 
 
(viii)
“Wal-Mart”

 
d.)           Section 2.03(b) of the Financing Agreement is amended by adding
the following sentence to the end thereof:
 
The Total Revolving Credit Commitment shall terminate at 5:00 p.m. (Boston,
Massachusetts time) on the Maturity Date.
 
e.)           Section 2.05(a) of the Financing Agreement is amended and restated
in its entirety to read as follows:
 
(a)           [RESERVED]
 
f.)           Section 7.02(i) is amended by amending and restating the pro viso
in clause (v) in its entirety to read as follows:
 
provided that this Section 7.02(i) shall not prohibit payments not to exceed
$100,000 per year to each member of the Board of Directors of Group;
 
g.)           Section 7.02(n) is amended by amending and restating clause (v)
thereto in its entirety to read as follows:
 
(v) permit the Acquisition Documents to be amended or modified in any way which
could reasonably be expected to adversely affect the interests of the Lenders
without the prior written consent of the Lenders.
 
h.)           Section 12.01 of the Financing Agreement is amended by amending
and restating the notice address for counsel to Wells Fargo to:
 
Kevin J. Simard, Esq.
Choate, Hall & Stewart LLP
Two International Place
Boston, MA 02110
Tel.: (617) 248-4086
Fax:  (617) 502-4086
 
 
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i.)           The Financing Agreement shall be amended by replacing all
references to “Wells Fargo Retail Finance II, LLC” with the term “Wells Fargo
Bank, National Association.”
 
j.)           Schedule 1.01(C) of the Financing Agreement is deleted in its
entirety and the Schedule 1.01(C) attached as Exhibit A to this Agreement shall
be substituted in lieu thereof.
 
3.           Conditions to Effectiveness.  This Amendment shall become effective
upon the satisfaction (or waiver by the Agent) of each of the following
conditions (the first date on which said conditions have been so satisfied (or
so waived), the “Fifth Amendment Effective Date”):
 
a.)           The Agent shall have received the following, each in form and
substance satisfactory to the Agent, and, unless indicated otherwise, dated as
of the date hereof:
 
 
(i)
This Amendment, duly executed by the Borrowers, the Agent and the Lenders,
together with all Schedules referenced therein; and

 
 
(ii)
The Successor Agent Agreement, duly executed by Wells Fargo and Wells Fargo
Retail Finance II, LLC and the Administrative Borrower.

 
b.)           On the Fifth Amendment Effective Date, no Default or Event of
Default shall exist.
 
c.)           The Borrowers shall have paid all reasonable fees, costs and
expenses of the Agent and the Lenders in connection with this Amendment,
including, without limitation, the fees and expenses of Choate, Hall & Stewart
LLP.
 
d.)           If the Fifth Amendment Effective Date shall not have occurred by
the close of business (New York time) on September 22, 2011 (or such later time
as the Agent consents to in writing), this Amendment shall be deemed rescinded,
null and void.
 
4.           Consent and Waiver.  Except as expressly stated herein, nothing
herein shall be deemed to constitute a waiver of compliance with, or other
modification of, any term or condition contained in the Financing Agreement, the
Security Agreements or any other Loan Document and nothing contained herein
shall constitute a course of conduct or dealing among the parties hereto. Except
as expressly stated herein, the Agent and the Lenders reserve all rights,
privileges and remedies under the Loan Documents.
 
5.           Representations.  In order to induce the Agent and the Lenders to
execute this Amendment, the Borrowers hereby represent, warrant and covenant to
the Agent and the Lenders that as of the date hereof and as of the Fifth
Amendment Effective Date (which representations, warranties and covenants shall
survive execution and delivery of this Amendment):
 
a.)           the Borrowers are duly organized, validly existing and in good
standing under the laws of their respective jurisdictions of formation;
 
 
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b.)           the Borrowers have the power and authority to execute, deliver and
perform their obligations under this Amendment;
 
c.)           the execution, delivery and performance by the Borrowers of this
Amendment has been duly authorized by all necessary action and does not and will
not require any registration with, consent or approval of, notice to or action
by, any other Person;
 
d.)           this Amendment constitutes the legal, valid and binding obligation
of the Borrowers, enforceable against the Borrowers in accordance with its
terms;
 
e.)           no Default or Event of Default exists; and
 
f.)           by its signature below, each of the Borrowers agrees that it shall
constitute an immediate Event of Default if any representation or warranty made
in this Section 5 is untrue or incorrect in any material respect on and as of
the Fifth Amendment Effective Date, in each case after giving effect to this
Amendment.
 
6.           Fee.  In consideration for the amendments to the Financing
Agreement provided herein, the Borrowers shall pay an amendment fee to the
Agent, for the ratable benefit of the Lenders based upon their Pro Rata Shares,
in an amount equal to $100,000 (the “Amendment Fee”), which fee shall be fully
earned on the Fifth Amendment Effective Date, and due and payable upon the
earlier of (i) an Event of Default; or (ii) February 29, 2012 (“Amendment
Payment Date”).  The Borrower hereby authorized the Agent to make a Revolving
Loan in the amount of the Amendment Fee on the Amendment Payment Date.
 
7.           Counterparts.  This Amendment may be executed by the parties hereto
in any number of separate counterparts, each of which when so executed, shall be
deemed an original and all said counterparts when taken together shall be deemed
to constitute but one and the same instrument.
 
8.           Successors and Assigns.  This Amendment shall be binding upon and
inure to the benefit of the Borrowers and their successors and permitted
assigns, and the Lenders and the Agent and their successors and permitted
assigns.
 
9.           Further Assurance.  The Borrowers hereby agree from time to time,
as and when requested by the Agent, to execute and deliver or cause to be
executed and delivered, all such documents, instruments and agreements and to
take or cause to be taken such further or other action as the Agent may
reasonably deem necessary or desirable in order to carry out the intent and
purposes of this Amendment.
 
10.           GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT
REGARD TO ITS CONFLICT OF LAWS PROVISIONS OTHER THAN SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).
 
11.           Severability. Wherever possible, each provision of this Amendment
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Amendment shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Amendment.
 
 
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12.           Reaffirmation.  Each Borrower hereby ratifies and reaffirms all of
its payment and performance obligations, contingent or otherwise, under each of
the Loan Documents to which it is a party (after giving effect hereto).  Each
Borrower hereby acknowledges that, except as expressly modified herein, each of
the Loan Documents, remains in full force and effect and is hereby ratified and
reaffirmed.
 
13.           Acknowledgment of Rights; Release of Claims.  Each Borrower hereby
acknowledges that: (a) it has no defenses, claims or set-offs to the enforcement
by the Agent or the Lenders of the liabilities, obligations and agreements of
the Borrowers under the Financing Agreement, the Security Agreements or other
Loan Documents on the date hereof; and (b) to its knowledge, the Agent and the
Lenders have fully performed all undertakings and obligations owed to it as of
the date hereof. In consideration of the Agent and the Lenders entering into
this Amendment, each Borrower hereby irrevocably releases and forever discharges
the Agent, the Lenders and their respective Affiliates, and each such Person's
respective directors, officers, employees, agents, attorneys and representatives
(each, a “Released Person”) of and from all damages, losses, claims, demands,
liabilities, obligations, actions or causes of action whatsoever which such
Borrower may now have or claim to have against any Released Person for or
because of any matter or thing done, omitted or suffered to be done or omitted
by any of the Released Persons prior to and including the date hereof and on
account of or in any way concerning, arising out of or founded upon the
Financing Agreement, the Security Agreements or any other Loan Document, whether
presently known or unknown and of every nature and extent whatsoever. This
Section 13 shall survive the termination of the Financing Agreement, the
Security Agreements and payment in full of the Obligations thereunder.
 
 
[Signature Pages Follow]
 
 
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IN WITNESS WHEREOF, the parties hereto have caused this Fifth Amendment to
Amended and Restated Financing Agreement to be duly executed by their respective
duly authorized officers as of the date first written above.

 

 
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          

 
Signature Page of Fifth Amendment to Amended and Restated Financing Agreement
 
 
 

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AGENT:

WELLS FARGO BANK, NATIONAL ASSOCIATION
               
 
By:
/s/ Joseph Burt     Name:       Joseph Burt     Title:  Director          

 

 
LENDER:

WELLS FARGO CAPITAL FINANCE, INC.
               
 
By:
/s/ Joseph Burt     Name:       Joseph Burt     Title:  Director          

 
Signature Page of Fifth Amendment to Amended and Restated Financing Agreement
 
 
 

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Exhibit A to Fifth Amendment
 
Schedule 1.01(C)
 
Lender
Revolving Credit Commitment
Percentage
Wells Fargo Capital Finance, Inc.
$12,500,000
100.00%
Total
$12,500,000
100.00%

 
 
 

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EXHIBIT J
 
FORM OF BORROWING BASE CERTIFICATE
Frederick's of Hollywood Group Inc.
                                   
Date:
     
FAX TO:
   
Updates:
Weekly Update
                                   
A c c o u n t s  R e c e i v a b l e :
                                           
Credit Card Receivables (FOH)
As of:
                     
Standard Advance Rate on Cost:
     
90.0%
       
90.0%
 
Eligible Credit Card Receivables
                   
TOTAL ACCOUNTS RECEIVABLE
                                             
I n v e n t o r y :
                                         
COST
 
Beginning Frederick's Inventory Balance:
As of:
                                     
 
     
ADD:
Purchases
                       
Freight and Duty
                       
Other Adjustments (explain)
Vendor Returns at Cost
                                         
Total Increases
                                               
Inventory Available for Sale
                                               
LESS:
Cost of Sales
         
 
           
Markdowns at Cost
                       
Price Adjustments
                       
Physical Adjustments (Shrink from Physical Inventories)
                 
Other Adjustments (explain)
General Markdowns & Unit Adjustment
                                       
Total Reductions
                                             
Ending Frederick's Stock Ledger Inventory:
As of:
                 
(Eligible In-transit Inventory not to exceed $1MM)
                   
LESS:
Shrink:
                               
Year to date retail sales
 
As of:
                   
Year to date direct sales
 
As of:
           
(Year to Date Sales to be reset twice annually after receipt & review of
physical inventory results)
               
IP Location 393 - Over/Short discrepancies & Loc 397 - Locker Stock Shortage(FOH
Stores Report)
             
IP Location 666 - Test of new SKUs (FOH Stores Report)
                 
IP Location 888 - RTV/Damaged warehouse inventory (FOH Stores Report)
               
Closed Stores
                       
IP Locations 810-3000 - Returned Consigned Inventory (HMO Direct Report)
               
IP Locations 999 - V - Inventory (HMO Direct Report)
                 
IP Locations 1002 - VV - Int'l WHS
                     
IP Location 391 - PR Location For Stores (FOH Stores Report)
                 
IP Location 975 - RTV Whs (FOH Stores Report)
                   
IP Location 799 - Returns HMO (HMO Direct Report)
                                         
Total Inventory Reserves (updated weekly)
                                           
ELIGIBLE FREDERICK'S INVENTORY:
As of:
                                               
Standard Advance Rate on Cost (85% NRLV):
                                         
TOTAL FREDERICK'S STANDARD BORROWING BASE
                                                                 
COST
   
LESS:
Gift Certificates - 50% of open liability
       
As of:
           
Customer Deposits - 100% of open liability
                   
Other Liability
                       
Landlord Lien Rent Reserves (PA, TX, WA)
                   
Reserve for Personal Property Taxes in Texas
                   
Reserve for Texas Sales Taxes
                       
Availability Reserve ($1,500M)
                                             
Total Availability Reserves (updated monthly)
                                           
COMBINED STANDARD INVENTORY BORROWING BASE
             
TOTAL STANDARD INVENTORY & ACCOUNTS RECEIVABLE BORROWING BASE
             
AVAILABILITY CALCULATION (due 10:00am PST for same-day funding)
   
Beginning Principal Balance as of:
                       
ADD:
Advances through
                   
Fees as of
                     
Adjustments
                     
Loan
                     
LESS:
Payments through
               
Ending Principal Balance Prior to Advance Request
                   
ADD:
Estimated Accrued Interest
                                         
Loan Balance Prior to Today's Request
                                               
Net Availability Prior to Today's Request
                     
Today's Receipts
                     
Total Availability
                       
Today's Advance Request:
                           
Wire #1 (Frederick's)
             
Ending Loan Balance Inclusive of Today's Receipts
                                             
Total L/C's Outstanding
Documentary:
 
            +
Standby:
 
        =
         
(Not to exceed $10.0MM)
                                               
Total Exposure
                     
Excess Availability
                                             
The undersigned represents and warrants that the information set forth above is
true and complete. The undersigned grants a security interest in the collateral
reflected above to Wells Fargo Bank, National Association.   Frederick's of
Hollywood Group Inc. represents and warrants that (a) said collateral complies
with their representations, warrants, and covenants contained in the Loan
Agreement between lender and undersigned; (b) no “Event of Default” (as defined
in the Loan and Security Agreement under Section 8) is presently in existence;
and (c) all or a portion of the advance request hereby will be utilized by the
Borrower to cover 100% of the Borrower's obligation for sales tax on account of
sales since the most recent borrowing under the Loan and Security Agreement.
                         
Authorized Signer:                Printed Name:
 
Thomas Rende
 
Signature:  _______________________________
WFCF  Account Manager:   Printed Name: ____________________________
 
Signature:  _______________________________