EXHIBIT 10.1

DEBT EXCHANGE AND PREFERRED STOCK CONVERSION AGREEMENT

THIS DEBT EXCHANGE AND PREFERRED STOCK CONVERSION AGREEMENT (“Agreement”), dated
as of February 1, 2010, among Frederick’s of Hollywood Group Inc., a New York
corporation (the “Company”), Fursa Capital Partners LP (“Fursa Capital”), Fursa
Master Rediscovered Opportunities L.P. (“Fursa Opportunities”), Blackfriars
Master Vehicle LLC – Series 2 (“Blackfriars”) and Fursa Master Global Event
Driven Fund L.P. (“Fursa Master”).  Each of Fursa Capital, Fursa Opportunities,
Blackfriars and Fursa Master is referred to herein as a “Holder” and
collectively such parties are referred to herein as the “Holders.”

WHEREAS, the Company has an aggregate of approximately $14,000,000 principal
amount of long term debt outstanding including accrued interest thereon due to
the Holders (the “Tranche C Debt”);

WHEREAS, the Holders own an aggregate of $7,500,000 of shares of the Company’s
Series A Preferred Stock (“Series A Preferred Stock”) and have accrued dividends
of approximately $1,100,000 of shares of Series A Preferred Stock;

WHEREAS, the Company has requested that the Holders exchange the outstanding
principal amount of the Tranche C Debt, together with all accrued interest, and
convert the Series A Preferred Stock, together with all accrued dividends
(collectively, the “Transaction”), for shares of common stock, par value $.01
per share, of the Company (“Common Stock”) as set forth herein;

NOW THEREFORE, in consideration of the premises and the mutual covenants and
agreements of the parties hereinafter set forth, the parties hereto hereby agree
as follows:

1.            Debt Exchange and Preferred Stock Conversion.

(a)           The Holders hereby agree, subject to the conditions set forth
herein, to exchange the principal amount of the Tranche C Debt, together with
all accrued interest (approximately $14,000,000) (collectively, the “Tranche C
Debt Value”), and convert approximately $8,600,000 of the Series A Preferred
Stock in accordance with its terms at a conversion price of $4.96 per share,
together with all accrued dividends (collectively, the “Preferred Stock Value”
and, together with the Tranche C Debt Value, the “Aggregate Value”), for an
aggregate number of shares of Common Stock equal to 50% of the Aggregate Value
as of the Closing (defined below) divided by the volume weighted average price
of the Common Stock for the five (5) trading days prior to and the five (5)
trading days including and after the public announcement of the execution of
this Agreement, subject to appropriate adjustment for reclassifications, stock
splits, stock dividends, spin-offs or distributions, share combinations or other
similar changes affecting the Common Stock as a whole (the “Conversion
Price”).  The shares of Common Stock issuable upon exchange of the Tranche C
Debt are referred to herein as the “Debt Exchange Shares” and the Debt Exchange
Shares together with the shares issuable upon conversion of the Series A
Preferred Stock are referred to collectively herein as the “Exchange
Shares.”  The Company and the Holders further agree to apply receipt of the Debt
Exchange Shares first to the principal portion of the Tranche C Debt and then to
the accrued interest. To the extent possible, the Company and the Holders shall
treat the Transaction as a tax-free reorganization pursuant to Internal Revenue
Code Section 368(a)(1)(E).

 
 

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(b)           At the Company’s 2010 Annual Meeting of Shareholders (“Shareholder
Meeting”), the Company will present the Transaction to shareholders for their
approval.  In connection with such Shareholder Meeting, the Company will prepare
and mail to its shareholders as promptly as practicable a proxy statement and
all other proxy materials (the “Proxy Statement”) for such meeting.  The Company
and the Holders shall cooperate with each other in all reasonable respects with
the preparation of the Proxy Statement and any amendment or supplement
thereto.  The Company shall notify the Holders of the receipt of any comments of
the Securities and Exchange Commission (“Commission”) with respect to the Proxy
Statement and any requests by the Commission for any amendment or supplement
thereto or for additional information, and shall provide to them promptly copies
of any correspondence between the Company or its counsel and the Commission with
respect to the Proxy Statement.  The Company shall give the Holders and their
counsel the opportunity to review the Proxy Statement and all responses to
requests for additional information by and replies to comments of the Commission
before their being filed with, or sent to, the Commission.  The Company will use
its commercially reasonable efforts, after consultation with the Holders, to
respond promptly to all such comments of and requests by the Commission and to
cause the Proxy Statement to be mailed to the Company’s shareholders entitled to
vote at the Shareholder Meeting at the earliest practicable time.

(c)           The Company will use its commercially reasonable efforts to obtain
the necessary approvals by its shareholders for the Transaction and any related
matters (“Shareholder Approval”) at the Shareholder Meeting and shall cause its
Board of Directors to include in the Proxy Statement its recommendation that the
Company’s shareholders vote in favor of the matters presented in the Proxy
Statement.  In the event that Shareholder Approval is not obtained on the date
on which the Shareholder Meeting is initially convened, the Board of Directors
of the Company shall adjourn the meeting from time to time as necessary for the
purpose of obtaining Shareholder Approval and shall use its commercially
reasonable efforts during any such adjournments to obtain Shareholder Approval.

(d)           By executing this Agreement, each Holder hereby appoints Thomas J.
Lynch or Thomas Rende, or either of them, with full power of substitution, as
its agent, attorney and proxy, representing an irrevocable proxy pursuant to
Section 609 of the New York Business Corporation Law, coupled with an interest,
so as to vote all the shares of Common Stock held by the Holders in accordance
with the vote of a majority of votes cast at the Shareholder Meeting excluding
the shares held by the Holders.

(e)           The Company shall comply with all legal requirements applicable to
the Shareholder Meeting and take such other actions as may be necessary to
effectuate the Transaction, including, but not limited to, providing notices to,
and responding to queries from, all applicable regulatory authorities and stock
exchanges and obtaining all necessary third party consents.

 
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(f)           Subject to the terms and conditions of this Agreement, the
consummation of the Transaction contemplated by this Agreement shall take place
at a closing (“Closing”) to be held at 10:00 a.m., local time, on the fourth
business day after the date on which the last of the conditions set forth in
Section 4(c) below is fulfilled, at the offices of Graubard Miller, The Chrysler
Building, 405 Lexington Avenue, New York, New York 10174, or at such other time,
date or place as the parties may agree upon in writing.  The Company shall send
to the Holders at least two business days prior to the Closing a notice
indicating the amount of interest accrued on the Tranche C Debt and the amount
of dividends accrued on the Series A Preferred Stock through the date of the
Closing and the number of Exchange Shares each Holder will be issued upon the
Closing.  At the Closing, the Holders shall deliver any and all documentation
evidencing the Tranche C Debt and certificates representing the Series A
Preferred Stock, together with stock powers medallion guaranteed, for
cancellation and the Company shall deliver to the Holders certificates
representing the Exchange Shares.  From and after the Closing, any and all
documentation evidencing the Tranche C Debt and any certificates representing
the Series A Preferred Stock shall represent solely the right to receive the
Exchange Shares.  In the event that as a result of the Transaction, fractions of
shares would be required to be issued, such fractional shares shall be rounded
up or down to the nearest whole share.  The Company shall pay any documentary,
stamp or similar issue or transfer tax due on such Transaction, except that the
Holders shall pay any such tax due because the Exchange Shares are issued in a
name other than the Holders’.

(g)           On the Closing, the Company shall issue to the Holders warrants
(“Warrants”) to purchase an aggregate of 1,500,000 shares of Common Stock
(“Warrant Shares”) in the form attached hereto as Exhibit A.  The Warrants shall
be issued as follows: (i) a three-year Warrant to purchase 500,000 Warrant
Shares at an exercise price equal to 150% of the Conversion Price, (ii) a
five-year Warrant to purchase 500,000 Warrant Shares at an exercise price equal
to 175% of the Conversion Price and (iii) a seven-year Warrant to purchase
500,000 Warrant Shares at an exercise price equal to 200% of the Conversion
Price.  Notwithstanding the foregoing, the exercise price of the Warrants shall
not be less than the closing price of the Common Stock on the Closing.

2.             Representations and Warranties of Company.  The Company hereby
represents and warrants to the Holders as follows:

(a)           As of the date hereof, the Company has 200,000,000 shares of
Common Stock authorized, of which 26,418,185 shares of Common Stock are issued
and outstanding, and 10,000,000 shares of preferred stock authorized, of which
3,629,325 shares of Series A Preferred Stock are issued and outstanding and are
convertible into 1,512,219 shares of Common Stock, and 544,399 shares of Series
A Preferred Stock representing accrued dividends are convertible into 226,833
shares of Common Stock.  As of the date hereof, the Company has reserved for
issuance 2,914,315 shares of Common Stock upon exercise of all outstanding
options and warrants.  All of the issued and outstanding shares of Common Stock
are, and all shares reserved for issuance will be, upon issuance in accordance
with the terms specified in the instruments or agreements pursuant to which they
are issuable, duly authorized, validly issued, fully paid and
nonassessable.  The Exchange Shares to be issued and delivered to the Holders
upon exchange of the Tranche C Debt and conversion of the Series A Preferred
Stock have been duly authorized and when issued upon exchange of the Tranche C
Debt and conversion of the Series A Preferred Stock, will be validly issued,
fully-paid and non-assessable.  The Warrants to be issued and delivered to the
Holders upon the Closing have been duly authorized and the Warrant Shares, when
issued upon exercise of the Warrants against payment therefore, will be validly
issued, fully-paid and non-assessable.

 
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(b)           The Company has full legal power to execute and deliver this
Agreement and, subject to receipt of Shareholder Approval, to perform its
obligations hereunder.  All acts required to be taken by the Company to enter
into this Agreement and, subject to receipt of Shareholder Approval, to carry
out the transactions contemplated hereby have been properly taken, and this
Agreement constitutes a legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization or other similar legal requirements
affecting the enforcement of creditors’ rights generally and by general
principles of equity, and does not conflict with, result in a breach or
violation of or constitute (or with notice of lapse of time or both constitute)
a default under any instrument, contract or other agreement to which the Company
or its subsidiaries is a party.

(c)           The affirmative vote of the holders of record of at least a
majority of the shares of Common Stock (together with the Series A Preferred
Stock voting on an as converted basis with the Common Stock) cast at the
Shareholder Meeting with respect to the matters referred to in Section 1 hereof
is the only vote of the holders of any class or series of the capital stock of
the Company required to approve the transactions contemplated hereby.

(d)           No broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.

(e)           The Company has delivered or made available to the Holders prior
to the execution of this Agreement, true and complete copies of all periodic
reports, registration statements and proxy statements filed by it with the
Commission since July 27, 2008.  Each of such filings with the Commission
(collectively, the “SEC Filings”), as of its filing date, complied in all
material respects with the requirements of the rules and regulations promulgated
by the Commission with respect thereto and did not contain any untrue statement
of a material fact or omit a material fact necessary in order to make the
statements contained therein not misleading in light of the circumstances in
which such statements were made.

(f)            Since October 24, 2009, except as disclosed in the SEC Filings
filed by the Company with the Commission before the date of this Agreement, the
Company and its subsidiaries, taken as a whole, has not suffered any material
adverse change in its assets, liabilities, financial condition, results of
operations or business, except for those occurring as a result of general
economic or financial conditions affecting the United States as a whole or the
region in which the Company conducts its business or developments that are not
unique to the Company but also affect other entities engaged or participating in
the women’s intimate apparel industry generally in a manner not materially less
severely.  For purposes of this section, revenues and operating results
materially consistent with the Company’s revenues and operating results for the
quarter ended October 24, 2009, as reflected in the Company’s Quarterly Report
on Form 10-Q for the quarter ended October 24, 2009, shall not be deemed a
material adverse change.

 
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(g)           No information to be contained in the Proxy Statement to be
prepared pursuant to this Agreement and no representation or warranty by the
Company contained in this Agreement contains any untrue statement of a material
fact or omits a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances in
which such statements were made.

(h)           Since October 24, 2009 and except as disclosed in the SEC Filings
filed by the Company with the Commission before the date of this Agreement, the
Company has conducted its business in compliance in all material respects with
all applicable laws, rules, regulations, court or administrative orders and
processes and rules, directives and orders of regulatory and self-regulatory
agencies and bodies, except as would not reasonably be expected, singly or in
the aggregate, to be materially adverse to the business, assets or financial
condition of the Company.

3.             Representations and Warranties of the Holders.  Each Holder
jointly and severally represents and warrants to the Company as follows:

(a)           The Holder has full legal power to execute and deliver this
Agreement and to perform its obligations hereunder.  All acts required to be
taken by the Holder to enter into this Agreement and to carry out the
transactions contemplated hereby have been properly taken; and this Agreement
constitutes a legal, valid and binding obligation of the Holder enforceable in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization or other similar legal requirements affecting the enforcement of
creditors’ rights generally and by general principles of equity.

(b)           The Holder has reviewed the SEC Filings of the Company.

(c)           The Holder has been given an opportunity to ask questions and
receive answers from the officers and directors of the Company and to obtain
additional information from the Company.

(d)           The Holder has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Company’s securities and has obtained, in its judgment,
sufficient information about the Company to evaluate the merits and risks of an
investment in the Company.

(e)           The Holder is relying solely on the representations and warranties
contained in Section 2 hereof and in certificates delivered hereunder, as well
as the SEC Filings, in making its decision to enter into this Agreement and
consummate the transactions contemplated hereby and no oral representations or
warranties of any kind have been made by the Company or its officers, directors,
employees or agents to the Holder.

 
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(f)           No broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Holder.

(g)           The Exchange Shares and Warrant Shares are to be acquired for the
Holder’s own account and is not intended to be sold or otherwise disposed of in
violation of the securities laws of the United States.

(h)           The Holder is an “accredited investor” within the meaning of Rule
501(a) under the Securities Act of 1933, as amended (“Securities Act”).

(i)           The Holder understands that the Exchange Shares and Warrant Shares
are not registered under the Securities Act or in any state and that such
securities may not be sold unless they are subsequently registered or an
exemption from such registration is available.  The Holder acknowledges that the
certificates representing the Exchange Shares and Warrant Shares may contain
legends to reflect the foregoing.

4.             Conditions.

(a)           The obligations of the Company to consummate the transactions
contemplated by this Agreement, including the Transaction, shall be subject to
the fulfillment of the following conditions:

(i)           The representations and warranties of the Holders set forth in
Section 3 hereof shall be true and correct in all material respects on and as of
the Closing and a certificate certifying such shall be delivered.

(ii)           All proceedings, corporate or otherwise, to be taken by the
Holders in connection with the consummation of the transactions contemplated by
this Agreement shall have been duly and validly taken and all necessary
consents, approvals or authorizations of any governmental or regulatory
authority or other third party required to be obtained by the Company or the
Holders shall have been obtained in form and substance reasonably satisfactory
to the Company.

(iii)           Shareholder Approval shall be obtained by the necessary
affirmative vote of the shareholders of the Company as described above in
Section 2(c).

(iv)           The Holders shall have delivered to the Company any and all
documentation evidencing the Tranche C Debt and certificates representing the
Series A Preferred Stock, together with stock powers medallion guaranteed, for
cancellation.

(v)           All necessary documentation, including UCC-3 termination
statements, shall have been filed terminating the security interest evidenced by
the Tranche C Debt.
 
(vi)           The Holders shall have delivered the Lockup Agreements (defined
below).

 
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(b)           The obligation of the Holders to consummate the transactions
contemplated by this Agreement, including the Transaction, shall be subject to
the fulfillment of the following conditions:

(i)           The representations and warranties of the Company set forth in
Section 2 hereof shall be true and correct in all material respects on and as of
the Closing and a certificate certifying such shall be delivered.

(ii)           All proceedings, corporate or otherwise, required to be taken by
the Company on or prior to such date in connection with the consummation of the
transactions contemplated by this Agreement shall have been duly and validly
taken and all necessary consents, approvals or authorizations of any
governmental or regulatory authority or other third party required to be
obtained by the Company or the Holders shall have been obtained in form and
substance reasonably satisfactory to the Holders.

(iii)         Shareholder Approval shall be obtained by the necessary
affirmative vote of the shareholders of the Company as described above in
Section 2(c).

(iv)         The Company shall have caused the Debt Exchange Shares and Warrant
Shares to be approved for listing on the NYSE Amex or any national securities
exchange on which the Common Stock is then listed.

5.             Registration.

(a)(i)        To the extent not previously registered for resale, the Company
shall file a registration statement (the “Required Registration Statement”) to
register the Exchange Shares and the Warrant Shares to be received by the Holder
under this Agreement (collectively the “Registrable Securities”) for resale
pursuant to the Securities Act, as soon as practicable after the date
hereof.  The Company shall use commercially reasonable efforts to cause the
Required Registration Statement to be declared effective by the Commission as
promptly as practicable thereafter.  Each Holder hereby agrees that it will not
sell, assign or transfer any shares of Common Stock owned by such Holder,
including the Registrable Securities, in the open market for a period of 12
months from the Closing (“Restricted Period”); provided, however, that the
Restricted Period shall terminate with respect to an aggregate of 250,000 shares
of Common Stock on each one month anniversary of the Closing.  Each Holder shall
be permitted to transfer any shares of Common Stock owned by such Holder,
including the Registrable Securities, to an affiliated entity or its members,
partners, officers, directors or shareholders, provided that such transferee
shall agree to continue to be bound by the foregoing restriction.  On the
Closing, each Holder will enter into a lockup agreement (collectively, the
“Lockup Agreements”) in a form mutually satisfactory to the Company and the
Holders evidencing such restrictions.

 
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(ii)           In connection with the foregoing, the Company will, as
expeditiously as possible, use its commercially reasonable efforts to:  (A)
furnish to the Holders copies of reasonably complete drafts of all such
documents proposed to be filed (including exhibits), and the Holders shall have
the opportunity to object to any information pertaining solely to it that is
contained therein and the Company will make the corrections reasonably requested
by any of them with respect to such information prior to filing the Required
Registration Statement or amendment; (B) prepare and file with the Commission
such amendments and supplements to such Required Registration Statement and any
prospectus used in connection therewith as may be necessary to maintain the
effectiveness of such registration statement and to comply with the provisions
of the Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement; (C) promptly notify the
Holders:  (1) when the Required Registration Statement or any prospectus used in
connection therewith, or any amendment or supplement thereto, has been filed
and, with respect to such registration statement or any post-effective amendment
thereto, when the same has become effective; (2) of any written comments from
the Commission with respect to any filing referred to in clause (A) and of any
written request by the Commission for amendments or supplements to the Required
Registration Statement or prospectus; and (3) of the notification to the Company
by the Commission of its initiation of any proceeding with respect to the
issuance by the Commission of, or of the issuance by the Commission of, any stop
order suspending the effectiveness of such registration statement; (D) furnish
the Holders such number of copies of the prospectus contained in the Required
Registration Statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 promulgated under the
Securities Act relating to the Registrable Securities, and such other documents,
as the Holders may reasonably request to facilitate the disposition of its
Registrable Securities; (E) notify the Holders at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which any prospectus included in the
Required Registration Statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and at the request of
the Holders promptly prepare and furnish such Holders a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and (F) make available for inspection by the Holders and
any attorney, accountant or other agent retained by the Holders (collectively,
the “Inspectors”), all financial and other records, pertinent corporate
documents and properties of the Company as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause the
Company’s officers, directors and employees to supply all information reasonably
requested by any such Inspector in connection with the Required Registration
Statement, and permit the Inspectors to participate in the preparation of such
registration statement and any prospectus contained therein and any amendment or
supplement thereto.

(b)           The Company shall bear all fees and expenses attendant to
registering the Registrable Securities, but the Holders shall pay any and all
sales commissions and the expenses of any legal counsel selected by it to
represent it in connection with the sale of the Registrable Securities.  The
Company shall use its commercially reasonable efforts to cause the Required
Registration Statement to remain effective until all the Registrable Securities
registered thereunder are sold or until the delivery to the Holders of an
opinion of counsel to the Company to the effect set forth in Section 5(i) below.

 
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(c)(i)        The Company will indemnify the Holders, their directors and
officers and each underwriter, if any, and each person who controls any of them
within the meaning of the Securities Act or the Exchange Act, against all
claims, losses, damages and liabilities (or actions or proceedings, commenced or
threatened, in respect thereof), joint or several, arising out of or based on
any untrue statement (or alleged untrue statement) of a material fact contained
in any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any registration,
qualification or compliance pursuant to this Section 5 or based on any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company in connection with any such registration,
qualification or compliance, and will reimburse the Holders, their directors and
officers, each such underwriter and each person who controls any of them within
the meaning of the Securities Act or the Exchange Act for any legal and any
other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action or proceeding;
provided that the Company will not be liable to the Holders in any such case to
the extent that any such claim, loss, damage, liability or expense arises out of
or is based on any untrue statement or omission based upon written information
furnished to the Company by or on behalf of the Holders specifically stating
that it is intended for inclusion in any registration statement under which
Registrable Securities are registered. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the Holders
or any such director, officer or controlling person, and shall survive the
transfer of such securities by the Holders.

(ii)           The Holders shall indemnify the Company, each of its directors
and officers and each underwriter, if any, of the Company’s securities covered
by such registration statement, each person who controls the Company or such
underwriter within the meaning of the Securities Act and the Exchange Act and
the rules and regulations thereunder, each other securityholder participating in
such distribution and each of their officers and directors and each person
controlling such other securityholder, against all claims, losses, damages and
liabilities (or actions or proceedings, commenced or threatened, in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company and such other security holders, directors, officers, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action or proceeding, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such document in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
the Holders specifically stating that it is intended for inclusion in such
document. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director, officer
or controlling person, and shall survive the transfer of such securities by the
Holders.

 
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(d)           In order to provide for just and equitable contribution under the
Securities Act in any case in which (A) any person entitled to indemnification
under Section (c) makes a claim for indemnification pursuant hereto but such
indemnification is not enforced in such case notwithstanding the fact that this
section provides for indemnification in such case, or (B) contribution under the
Securities Act, the Exchange Act or otherwise is required on the part of any
such person in circumstances for which indemnification is provided under this
section, then, and in each such case, the Company and the Holders shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement (including legal and other
expenses reasonably incurred in connection with investigation or defense)
incurred by the Company and the Holders, as incurred, in proportion to their
relative fault and the relative knowledge and access to information of the
Securities Indemnifying Party (defined below), on the one hand, and the
Securities Indemnified Party (defined below), on the other hand, concerning the
matters resulting in such losses, liabilities, claims, damages and expenses, the
opportunity to correct and prevent any untrue statement or omission, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission of a material fact relates to information supplied by the Securities
Indemnifying Party, on the one hand, or the Securities Indemnified Party, on the
other hand, and any other equitable considerations appropriate under the
circumstances; provided that no person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this section, each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act
shall have the same rights to contribution as the Company.

(e)           Each party desiring indemnification or contribution under Section
5(c) and 5(d) hereof (the “Securities Indemnified Party”) shall give notice to
the party required to provide indemnification or contribution (the “Securities
Indemnifying Party”) promptly after such Securities Indemnified Party has actual
knowledge of any claim as to which indemnity or contribution may be sought, and
shall permit the Securities Indemnifying Party to assume, at its sole cost and
expense, the defense of any such claim or any litigation resulting therefrom,
provided that counsel for the Securities Indemnifying Party, who shall conduct
the defense of such claim or any litigation resulting therefrom, shall be
approved by the Securities Indemnified Party (whose approval shall not be
unreasonably withheld).  The Securities Indemnified Party may participate in
such defense at the Securities Indemnified Party's expense unless (A) the
employment of counsel by the Securities Indemnified Party has been authorized in
writing by the Securities  Indemnifying Party, (B) the Securities Indemnified
Party has been advised by such counsel employed by it that there are legal
defenses available to it involving potential conflict with those of the
Securities Indemnifying Party (in which case the Securities Indemnifying Party
will not have the right to direct the defense of such action on behalf of the
Securities Indemnified Party), or (C) the Securities Indemnifying Party has not
in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees and expenses of counsel for the
Securities Indemnified Party shall be at the expense of the Securities
Indemnifying Party. The failure of any Securities Indemnified Party to give
notice as provided herein shall not relieve the Securities Indemnifying Party of
its obligations under this Section 5.  No Securities Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Securities Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Securities Indemnified Party of a release from
all liability in respect to such claim or litigation. No Securities Indemnified
Party shall settle any claim or demand without the prior written consent of the
Securities Indemnifying Party (which consent will not be unreasonably
withheld).  Each Securities Indemnified Party shall furnish such information
regarding itself or the claim in question as the Securities Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.  The
provisions of Section 5(c) and 5(d) shall be in addition to any other rights to
indemnification or contribution which an Indemnified Party may have pursuant to
law, equity, contract or otherwise.

 
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(f)           Each Holder shall furnish to the Company such information
regarding itself and the distribution proposed by it as the Company may
reasonably request in writing and as shall be reasonably required in connection
with any registration, qualification or compliance referred to in this Section
5.

(g)           The Company shall comply with all of the reporting requirements of
the Exchange Act and with all other public information reporting requirements of
the Commission, which are conditions to the availability of Rule 144 for the
sale of the Common Stock. The Company shall cooperate with the Holders in
supplying such information as may be necessary for the Holders to complete and
file any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of Rule 144.

(h)           The Company represents and warrants to the holders of Registrable
Securities that the granting of the registration rights to the Holders hereby
does not and will not violate any agreement between the Company and any other
security holders with respect to registration rights granted by the Company.

(i)           The rights granted under this Section 5 shall terminate upon
delivery to the Holders of an opinion of counsel to the Company reasonably
satisfactory to the Holders to the effect that such rights are no longer
necessary for the public sale of the Registrable Securities without restriction
as to the number of securities that may be sold at any one time or the manner of
sale.

(j)            The rights granted under this Section 5 shall not be
transferable.

6.             Press Release; Filings.  Promptly after execution of this
Agreement, the Company shall issue a press release announcing the
Transaction.  The Company shall also file with the Commission a Current Report
on Form 8-K with respect to the transactions contemplated hereby.  The Company
shall provide the Holders with drafts of both the press release and Form 8-K and
a reasonable opportunity to comment thereon.  No party hereto shall make any
public announcements in respect of this Agreement or the transactions
contemplated herein inconsistent with the press release and Form 8-K without the
prior approval of the other parties as to the form and content thereof, which
approval will not be unreasonably withheld.  Notwithstanding the foregoing, any
disclosure may be made by a party which its counsel advises is required by
applicable law or regulation, in which case the other party shall be given such
reasonable advance notice as is practicable in the circumstances and the parties
shall use their best efforts to cause a mutually agreeable release or
announcement to be issued.  The parties may also make appropriate disclosure of
the transactions contemplated by this Agreement to their officers, directors,
agents and employees.

 
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7.             Termination.  This Agreement may be terminated no later than the
Closing:

(a)           At the option of any party in the event that the transactions
contemplated by this Agreement have not occurred by July 31, 2010 and such delay
was not as a result of any breach of this Agreement by the terminating party;

(b)           By the Holders if the Company’s Board of Directors failed to
recommend or withdrew or modified in a manner adverse to the Holders its
approval or recommendation of the Transaction;

(c)           At the option of any party in the event that Shareholder Approval
was not obtained at the Shareholder Meeting and any adjournment thereof;

(d)           At the option of any party if any other party has materially
breached a term of this Agreement and has not cured such breach within 30 days;
or

(e)           At the option of any party if any competent regulatory authority
shall have issued an order making illegal or otherwise restricting, preventing,
prohibiting or refusing to approve the transactions contemplated hereby, and
such order shall have become final and non-appealable.

8.            Miscellaneous.

(a)           Section headings used in this Agreement are for convenience of
reference only and shall not affect the construction of this Agreement.

(b)          This Agreement may be executed in any number of counterparts and by
the different parties on separate counterparts and each such counterpart shall
be deemed to be an original, but all such counterparts shall together constitute
but one and the same agreement.

(c)           This Agreement shall be a contract made under and governed by the
laws of the State of New York.

(d)           All obligations of the Company and rights of the Holders expressed
herein shall be in addition to and not in limitation of those provided by
applicable law.

(e)           The rights and obligations under this Agreement are not
assignable.  This Agreement shall be binding upon the Company, the Holders and
their respective successors and permitted assigns, and shall inure to the
benefit of the Company, the Holders and their respective successors and
permitted assigns.

 
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(f)           The terms and provisions of this Agreement are intended solely for
the benefit of each party hereto and their respective successors or permitted
assigns, and it is not the intention of the parties to confer third-party
beneficiary rights upon any other person or entity.

(g)           All amendments or modifications of this Agreement and all
consents, waivers and notices delivered hereunder or in connection herewith
shall be in writing.

(h)           This Agreement constitutes the entire agreement among the parties
with respect to the subject matter hereof and supersedes all prior agreements
and undertakings, both written and oral, among the parties with respect thereto.

9.            WAIVER OF JURY TRIAL.  EACH OF THE COMPANY AND THE HOLDERS HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

10.          Specific Performance.  The parties hereto acknowledge and agree
that any remedy at law for any breach of the provisions of this Agreement would
be inadequate, and each party hereto hereby consents to the granting by any
court of an injunction or other equitable relief, without the necessity of
actual monetary loss being proved, in order that the breach or threatened breach
of such provisions may be effectively restrained.

 
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the date first above written.

 
FREDERICK’S OF HOLLYWOOD GROUP INC.
       
By:  
/s/ Thomas Rende
   
Name:  Thomas Rende
   
Title:  Chief Financial Officer
       
FURSA CAPITAL PARTNERS LP
       
By:
/s/ William F. Harley
   
Name: William F. Harley
   
Title:  Chief Investment Officer
       
FURSA MASTER REDISCOVERED OPPORTUNITIES
L.P.
       
By:
/s/ William F. Harley
   
Name: William F. Harley
   
Title:  Chief Investment Officer
       
BLACKFRIARS MASTER VEHICLE LLC –
SERIES 2
     
           
By:
/s/ William F. Harley
   
Name:  William F. Harley
   
Title:  Chief Investment Officer
       
FURSA MASTER GLOBAL EVENT DRIVEN
FUND L.P.
       
By:
/s/ William F. Harley
   
Name: William F. Harley
   
Title:  Chief Investment Officer

 
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Exhibit A
Form of Warrant

THE SECURITIES REPRESENTED BY THIS WARRANT HAVE BEEN ACQUIRED FOR INVESTMENT AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”). THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT (THE “WARRANT SHARES”) MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE SECURITIES ACT
OR UNDER STATE SECURITIES LAWS.  THIS WARRANT AND THE WARRANT SHARES MAY NOT BE
PLEDGED, SOLD, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO
THE EXPRESS PROVISIONS OF THIS WARRANT, AND NO SALE, ASSIGNMENT, TRANSFER, OR
OTHER DISPOSITION OF THIS WARRANT SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL
SUCH PROVISIONS SHALL HAVE BEEN COMPLIED WITH.

Date of Issuance: ______ __, 2010
 
FREDERICK’S OF HOLLYWOOD GROUP INC.
 
Common Stock Purchase Warrant
 
(Void after ______________)
 
Frederick’s of Hollywood Group Inc., a Delaware corporation (the “Company”), for
value received, hereby certifies and agrees that ___________ or its registered
assigns (the “Registered Holder”), is entitled, subject to the terms set forth
below, to purchase from the Company, at any time or from time to time on or
after the date hereof (the “Date of Issuance”) and on or before _______________
[three, five or seven years from closing] at not later than 5:00 p.m. New York
time (such date and time, the “Expiration Time”), _________ (________) duly
authorized, validly issued, fully paid and nonassessable shares of the Company’s
common stock, $0.01 par value per share (the “Common Stock”) at an initial
exercise price equal to $____ [150%, 175% or 200% of the conversion price, but
not less than the closing price of the Company’s common stock on the date of
issuance] per share, subject to adjustment in certain cases as described herein.
The shares purchasable upon exercise of this Warrant, and the purchase price per
share, are hereinafter referred to as the “Warrant Shares” and the “Exercise
Price,” respectively.  The term “Warrant” as used herein shall include this
Warrant and any other warrants delivered in substitution or exchange therefor,
as provided herein.
 
This Warrant is issued pursuant to that certain Debt Exchange and Preferred
Stock Conversion Agreement of even date herewith between the Company and the
Registered Holder (the “Exchange and Conversion Agreement”).  The Warrant Shares
are entitled to the benefits of the registration rights set forth in the
Exchange and Conversion Agreement.

 

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1.           Exercise.
 
1.1.         Method of Exercise
 
(a)  This Warrant may be exercised by the Registered Holder, in whole or in
part, by surrendering this Warrant, with a Notice of Exercise in the form of
Annex A hereto (the “Notice of Exercise”) duly executed by such Registered
Holder or by such Registered Holder’s duly authorized attorney, at the principal
office of the Company set forth in Section 11 hereof, or at such other office or
agency as the Company may designate in writing pursuant to Section 11 hereof
(the “Company’s Office”), accompanied by payment in full with good, cleared
funds, in lawful money of the United States, of the Exercise Price payable in
respect of the number of shares of Warrant Shares purchased upon such exercise
or by surrendering the Warrant pursuant to Section 1.2 below.
 
(b)  Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the day on which the appropriate
Annex form shall be received by the Company as provided in Section 1.1(a)
hereof. At such time, the person or persons in whose name or names any
certificates for Warrant Shares shall be issuable upon such exercise as provided
in Section 1.1(c) hereof shall be deemed to have become the holder or holders of
record of the Warrant Shares represented by such certificates.
 
(c)  As soon as practicable after the exercise of this Warrant, in full or in
part, and in any event within ten (10) days thereafter, the Company, at its
expense, will cause to be issued in the name of, and delivered to, the
Registered Holder, or as such Registered Holder (upon payment by such Registered
Holder of any applicable transfer taxes) may direct:
 
(i)           a certificate or certificates for the number of full Warrant
Shares to which such Registered Holder shall be entitled upon such exercise (or
evidence that such Warrant Shares have been issued in the name of the Registered
Holder in book entry form) plus, in lieu of any fractional share to which such
Registered Holder would otherwise be entitled, cash in an amount determined
pursuant to Section 3 hereof; and
 
(ii)          in case such exercise is in part only, a new warrant or warrants
(dated the date hereof) of like tenor, representing in the aggregate on the face
or faces thereof the number of Warrant Shares equal (without giving effect to
any adjustment therein) to the number of such shares called for on the face of
this Warrant minus the number of such shares purchased by the Registered Holder
upon such exercise or surrender as provided herein.

 
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1.2          Exercise by Surrender of Warrant.  In addition to the method of
payment set forth in Section 1.1 and in lieu of any cash payment required
thereunder, the Warrant may be exercised by surrendering the Warrant in the
manner specified in this Section 1, together with irrevocable instructions to
the Company to issue in exchange for the Warrant the number of shares of Common
Stock equal to the product of (x) the number of Warrant Shares multiplied by (y)
a fraction, the numerator of which is the Market Value (as defined below) of the
Common Stock less the Exercise Price and the denominator of which is such Market
Value. As used herein, the phrase “Market Value” at any date shall be deemed to
be the volume weighted average of the last reported sale prices of the Common
Stock for the last ten (10) Trading Days prior to the date of exercise, as
officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading, or, if the Common Stock is traded “over
the counter”, by a quotation system (including the pink sheets or Nasdaq OTC
Electronic Bulletin Board) covering such trades or if the Common Stock is not
listed or admitted to trading on any national securities exchange or sold “over
the counter,” the average closing bid price as furnished by the Financial
Industry Regulatory Authority through Nasdaq or similar organization if Nasdaq
is no longer reporting such information, or if the Common Stock is not quoted on
Nasdaq or traded “over the counter,” as determined in good faith by resolution
of the Board of Directors of the Company, based on the best information
available to it.  “Trading Day” shall mean a day during which trading in
securities generally occurs in the applicable securities market or on the
principal securities exchange or bulletin board on which the Common Stock is
then traded, listed or quoted.
 
2.            Shares to be Fully Paid; Reservation of Shares. The Company
covenants that all shares of Common Stock which may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance by the Company, be
duly and validly issued, fully paid and nonassessable, and free from preemptive
rights and free from all taxes, liens, duties and charges with respect thereto
and, in addition, the Company covenants that it will from time to time take all
such action as may be requisite to assure that the par value per share of the
Common Stock is at all times equal to or less than the effective Exercise
Price.  The Company further covenants that, from and after the Date of Issuance
and during the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized and reserved, free from
preemptive rights, out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the exercise of this Warrant, a sufficient
number of shares of Common Stock to provide for the exercise of the rights
represented by this Warrant.  If at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the exercise
of this Warrant, the Company shall take any and all corporate action as is
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose.  The Company will take
all such action within its control as may be necessary on its part to assure
that all such shares of Common Stock may be so issued without violation of any
applicable law or regulation, or of any requirements of any national securities
exchange upon which the Common Stock of the Company may be listed.
 
3.           Fractional Shares. The Company shall not be required upon the
exercise of this Warrant to issue any fractional shares, but shall make an
adjustment therefor in cash on the basis of the Market Value for each fractional
share of the Company’s Common Stock which would be issuable upon exercise of
this Warrant.
 
4.           Requirements for Transfer.
 
(a)  Warrant Register. The Company will maintain a register (the “Warrant
Register”) containing the names and addresses of the Registered Holder or
Registered Holders. Any Registered Holder of this Warrant or any portion thereof
may change its address as shown on the Warrant Register by written notice to the
Company requesting such change, and the Company shall promptly make such change.
Until this Warrant is transferred on the Warrant Register of the Company, the
Company may treat the Registered Holder as shown on the Warrant Register as the
absolute owner of this Warrant for all purposes, notwithstanding any notice to
the contrary, provided, however, that if and when this Warrant is properly
assigned in blank, the Company may, but shall not be obligated to, treat the
bearer hereof as the absolute owner hereof for all purposes, notwithstanding any
notice to the contrary.

 
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(b)  Warrant Agent. The Company may, by written notice to the Registered Holder,
appoint an agent for the purpose of maintaining the Warrant Register referred to
in Section 4(a) hereof, issuing the Common Stock issuable upon the exercise of
this Warrant, exchanging this Warrant, replacing this Warrant or any or all of
the foregoing. Thereafter, any such registration, issuance, exchange, or
replacement, as the case may be, may be made at the office of such agent.
 
(c)  Transfer. Subject to the provisions of applicable securities laws and this
Section 4, this Warrant and all rights hereunder are transferable, in whole or
in part, upon the surrender of this Warrant with a properly executed Assignment
Form in substantially the form attached hereto as Annex B (the “Assignment”) at
the principal office of the Company.
 
(d)  Exchange of Warrant Upon a Transfer. On surrender of this Warrant for
exchange, properly endorsed on the Assignment and subject to the provisions of
this Warrant and limitations on assignments and transfers as contained in this
Section 4, the Company at its expense shall issue to or on the order of the
Registered Holder a new warrant or warrants of like tenor, in the name of the
Registered Holder or as the Registered Holder (on payment by the Registered
Holder of any applicable transfer taxes) may direct, for the number of shares
issuable upon exercise hereof.
 
5.           Adjustment.
 
5.1           Stock Dividends – Split-Ups.  If after the date hereof, and
subject to the provisions of Section 5.6 below, the number of outstanding shares
of Common Stock is increased by a stock dividend payable in shares of Common
Stock, or by a split-up of shares of Common Stock, or other similar event, then,
on the effective date of such stock dividend, split-up or similar event, the
number of shares of Common Stock issuable on exercise of each Warrant shall be
increased in proportion to such increase in outstanding shares of Common Stock.
 
5.2           Aggregation of Shares.  If after the date hereof, and subject to
the provisions of Section 5.6, the number of outstanding shares of Common Stock
is decreased by a consolidation, combination, reverse stock split or
reclassification of shares of Common Stock or other similar event, then, on the
effective date of such consolidation, combination, reverse stock split,
reclassification or similar event, the number of shares of Common Stock issuable
on exercise of each Warrant shall be decreased in proportion to such decrease in
outstanding shares of Common Stock.
 
5.3           Adjustments in Exercise Price.  Whenever the number of shares of
Common Stock purchasable upon the exercise of the Warrants is adjusted, as
provided in Section 5.1 and 5.2 above, the Exercise Price shall be adjusted (to
the nearest cent) by multiplying such Exercise Price immediately prior to such
adjustment by a fraction (x) the numerator of which shall be the number of
shares of Common Stock purchasable upon the exercise of the Warrants immediately
prior to such adjustment, and (y) the denominator of which shall be the number
of shares of Common Stock so purchasable immediately thereafter.

 
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5.4           Replacement of Securities upon Reorganization, etc.  In case of
any reclassification or reorganization of the outstanding shares of Common Stock
(other than a change covered by Section 5.1 or 5.2 hereof or that solely affects
the par value of such shares of Common Stock), or in the case of any merger or
consolidation of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the continuing corporation and
that does not result in any reclassification or reorganization of the
outstanding shares of Common Stock), or in the case of any sale or conveyance to
another corporation or entity of all or substantially all of the assets or all
or substantially all other property of the Company, as an entirety or
substantially as an entirety, in connection with which the Company is dissolved,
the Warrant holders shall thereafter have the right to purchase and receive,
upon the basis and upon the terms and conditions specified in the Warrants and
in lieu of the shares of Common Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented thereby,
the kind and amount of shares of stock or other securities or property
(including cash) receivable upon such reclassification, reorganization, merger
or consolidation, or upon a dissolution following any such sale or transfer,
that the Warrant holder would have received if such Warrant holder had exercised
his, her or its Warrant(s) immediately prior to such event; and if any
reclassification also results in a change in the number of shares of Common
Stock covered by Section 5.1 or 5.2, then such adjustment shall be made pursuant
to Sections 5.1, 5.2, 5.3 and this Section 5.4.  The provisions of this
Section 5.4 shall similarly apply to successive reclassifications,
reorganizations, mergers or consolidations, sales or other transfers.
 
5.5           Notices of Changes in Warrant.  Upon every adjustment of the
Warrant Price or the number of shares issuable upon exercise of a Warrant, the
Company shall give written notice thereof to the Warrant Agent, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of a Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.  Upon the
occurrence of any event specified in Sections 5.1, 5.2, 5.3 or 5.4, then, in any
such event, the Company shall give written notice to each Warrant holder, at the
last address set forth for such holder in the warrant register, of the record
date or the effective date of the event, which notice shall state the Exercise
Price resulting from such adjustment and the increase or decrease, if any, in
the number of shares purchasable at such price upon the exercise of a Warrant,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.  Failure to give such notice, or any defect
therein, shall not affect the legality or validity of such event.
 
5.6           Form of Warrant.  The form of Warrant need not be changed because
of any adjustment pursuant to this Section 5, and Warrants issued after such
adjustment may state the same Exercise Price and the same number of shares as is
stated in the Warrants initially issued pursuant to this Agreement.  However,
the Company may at any time in its sole discretion make any change in the form
of Warrant that the Company may deem appropriate and that does not affect the
substance thereof, and any Warrant thereafter issued or countersigned, whether
in exchange or substitution for an outstanding Warrant or otherwise, shall be in
the form as so changed
 
 
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6.           No Impairment. The Company will not, by amendment of its Articles
of Incorporation, as amended, or through any reorganization, recapitalization,
sale or transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant but will at all times in good
faith carry out all such terms and take all such actions as may be reasonably
necessary or appropriate in order to protect the rights herein of the holder of
this Warrant against dilution or other impairment.
 
7.           Redemption.  At any time after _______, 2011, [first anniversary of
the issuance date] this Warrant may be redeemed by the Company, in whole but not
in part, at its sole option, upon not less than twenty (20) business days’ prior
written notice as provided in Section 11 hereof (“Redemption Notice”) to the
Registered Holder, at the redemption price of $0.01 per share for every share of
Common Stock purchasable upon exercise hereof at the time of such redemption, if
the last sale price of a share of Common Stock is at least 200% of the Exercise
Price for the 10 consecutive trading days ending on the day prior to the day on
which notice of redemption is given to the Registered Holder.  The sending of
the Redemption Notice shall not affect the Registered Holder’s ability to
exercise the Warrant at any time prior to the date of redemption.  On and after
the date of redemption, the holder shall only have the right to receive $0.01
per share of Common Stock purchasable upon exercise hereof at the time of such
redemption.
 
8.           Notices of Record Date, Etc.  In case the Company shall take a
record of the holders of its Common Stock (or other stock or securities at the
time deliverable upon the exercise of this Warrant) for the purpose of entitling
or enabling them to receive any dividend or other distribution, or to receive
any right to subscribe for or purchase any shares of stock of any class or any
other securities, or to receive any other right; or of any capital
reorganization of the Company, any reclassification of the capital stock of the
Company, any consolidation or merger of the Company with or into another
corporation (other than a consolidation or merger in which the Company is the
surviving entity), or any transfer of all or substantially all of the assets of
the Company; or of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company, then, and in each such case, the Company will mail or
cause to be mailed to the Registered Holder of this Warrant a notice specifying,
as the case may be, (i) the date on which a record is to be taken for the
purpose of such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, or (ii) the effective date on
which such reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock (or such other
stock or securities at the time deliverable upon the exercise of this Warrant)
shall be entitled to exchange their shares of Common Stock (or such other stock
or securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up.  The Company will use commercially reasonable efforts
to cause such notice to be mailed promptly, and in any event, at least ten (10)
business days prior to the record date or effective date for the event specified
in such notice unless such prior notice is waived by the Registered Holder in
writing.

 
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9.           No Rights of Shareholders.  Subject to other Sections of this
Warrant and the provisions of the Exchange and Conversion Agreement, the
Registered Holder shall not be entitled to vote, to receive dividends or
subscription rights, nor shall anything contained herein be construed to confer
upon the Registered Holder, as such, any of the rights of a shareholder of the
Company, including without limitation any right to vote for the election of
directors or upon any matter submitted to shareholders, to give or withhold
consent to any corporate action (whether upon any recapitalization, issuance of
stock, reclassification of stock, change of par value or change of stock to no
par value, consolidation, merger, conveyance, or otherwise), to receive notices,
or otherwise, until the Warrant shall have been exercised as provided herein.
 
10.           Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement reasonably satisfactory to the Company, or (in the case of
mutilation) upon surrender and cancellation of this Warrant, the Company will
issue, in lieu thereof, a new Warrant of like tenor.
 
11.           Mailing of Notices, Etc.
 
(i)            All notices, requests, consents, and other communications in
connection with this Warrant shall be in writing and shall be deemed delivered
(i) three (3) business days after being sent by registered or certified mail,
return receipt requested, postage prepaid, (ii) one (1) business day after being
sent via a reputable overnight courier service guaranteeing next business day
delivery in the Holder’s country or region, or (iii) on actual receipt if
delivered by facsimile or by hand, in each case delivery shall be made to the
intended recipient as set forth below:
 
If to the Company:
 
Frederick’s of Hollywood Group Inc.
1115 Broadway
New York, New York 10010
Facsimile No.: (212) 213-4925
Attention: Thomas J. Lynch, Chief Executive Officer

With a copy to:

Graubard Miller
405 Lexington Avenue
New York, New York 10174
Facsimile No.: (212) 818-8881
Attention: David Alan Miller, Esq.

If to the Registered Holder:

To the address set forth in the Warrant Register as described in Section 4
hereof
 
12.         Change or Waiver. Any term of this Warrant may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of the change or waiver is sought.

 
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13.         Headings. The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
 
14.         Severability.  If any provision of this Warrant shall be held to be
invalid and unenforceable, such invalidity or unenforceability shall not affect
any other provision of this Warrant.
 
15.         Governing Law and Submission to Jurisdiction. This Warrant will be
governed by and construed in accordance with the laws of the State of New York
without regard to principles of conflict or choice of laws of any
jurisdiction.  The parties hereby agree that any action, proceeding or claim
against it arising out of, or relating in any way to this Warrant shall be
brought and enforced in the courts of the State of New York, and irrevocably
submit to such jurisdiction, which jurisdiction shall be exclusive.
 
16.         Supplements and Amendments.  The Company and the Registered Holder
may from time to time supplement or amend this Warrant in order to cure any
ambiguity, to correct or supplement any provision contained herein which may be
defective or inconsistent with any provision herein, or to make any other
provisions in regard to matters or questions arising hereunder which the Company
and the Holder may deem necessary or desirable.
 
17.         Successors.  All the covenants and provisions of this Warrant shall
be binding upon and inure to the benefit of the Company and the Registered
Holder and their respective successors and assigns hereunder.
 
18.         Benefits of this Warrant.  Nothing in this Warrant shall be
construed to give to any person, entity or corporation other than the Company
and the Registered Holder of the Warrant Certificate any legal or equitable
right, remedy or claim under this Warrant; and this Warrant shall be for the
sole and exclusive benefit of the Company and the Registered Holder of the
Warrant Certificate.

 
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IN WITNESS WHEREOF, FREDERICK’S OF HOLLYWOOD GROUP INC. has caused this Warrant
to be signed by its duly authorized officers under its corporate seal and to be
dated on the day and year first written above.

FREDERICK’S OF HOLLYWOOD GROUP INC.
 
By: 
 
 
Name:
 
Title:
 

 
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ANNEX A

NOTICE OF EXERCISE FORM

To:
Dated:

In accordance with the Warrant enclosed with this Form of Election to Purchase,
the undersigned hereby irrevocably elects to purchase  _____________ shares of
common stock (“Common Stock”), $.01 par value per share, of Frederick’s of
Hollywood Group Inc. (“Company”) and encloses herewith $________ in cash,
certified or official bank check or checks or other immediately available funds,
which sum represents the aggregate Exercise Price (as defined in the Warrant)
for the number of shares of Common Stock to which this Form of Election to
Purchase relates, together with any applicable taxes payable by the undersigned
pursuant to the Warrant.
 
or
 
In accordance with the Warrant enclosed with this Form of Election to Purchase,
the undersigned hereby irrevocably elects to purchase ____________ shares of
common stock (“Common Stock”), $.01 par value per share, of Frederick’s of
Hollywood Group Inc. (“Company”) by surrender of the unexercised portion of the
attached Warrant (with a “Market Value” of $____).

The undersigned hereby represents, warrants to, and agrees with, the Company
that:

(i)            He/She/It is acquiring the Warrant Shares for his/her/its own
account and not with a view towards the distribution thereof;

(ii)           He/She/It has received a copy of all reports and documents
required to be filed by the Company with the Commission pursuant to the
Securities Exchange Act of 1934, as amended, within the last 12 months and all
reports issued by the Company to its shareholders;

(iii)          He/She/It understands that he/she/it must bear the economic risk
of the investment in the Warrant Shares, which cannot be sold unless they are
registered under the Securities Act of 1933 (the “Securities Act”) or an
exemption therefrom is available thereunder and that the Company is under no
obligation to register the Warrant Shares for sale under the Securities Act;

(iv)          He/She/It is aware that the Company shall place stop transfer
orders with its transfer agent against the transfer of the Warrant Shares in the
absence of registration under the Securities Act or an exemption therefrom as
provided herein;

 
Signature:
     
Address:

 

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ANNEX B

ASSIGNMENT FORM

FOR VALUE RECEIVED, _________________________________ hereby sells, assigns and
transfers all of the rights of the undersigned under the attached Warrant with
respect to the number of shares of Common Stock covered thereby set forth below,
unto:

Name of Assignee
 
Address
 
No. of Shares

 
 

Dated:
 
Signature:
 
Dated:
 
Witness:

 
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