EXHIBIT 10.1


 


THIRD AMENDMENT
TO


CREDIT
AND SECURITY AGREEMENT


 


This
THIRD Amendment to Credit AND SECURITY Agreement (this “Amendment”)
is entered into as of July 25, 2013, by and among Frederick’s of Hollywood Group
Inc., a New York corporation (“Group”), FOH Holdings, Inc.,
a Delaware corporation (“Parent”), Frederick’s of Hollywood Inc.,
a Delaware corporation (“Frederick’s”), Frederick’s of Hollywood
Stores, Inc., a Nevada corporation (“Stores”), and Hollywood
Mail Order, LLC, a Nevada limited liability company (“Mail Order” and together with Group, Parent, Frederick’s
and Stores, each individually, a “Borrower”, and collectively, the “Borrowers”) and SALUS
CAPITAL PARTNERS, LLC (the “Lender”).


 


RECITALS


 


WHEREAS, Borrowers
and Lender are parties to that certain Credit and Security Agreement, dated as of May 31, 2012 (as amended, supplemented, modified
and in effect from time to time, the “Credit Agreement”; all capitalized terms used but not specifically defined
herein shall have the respective meanings provided for such terms in the Credit Agreement); and


 


WHEREAS, Borrowers
have requested that Lender modify certain provisions of the Credit Agreement, and Lender has agreed to do so on the terms and conditions
set forth herein.


 


NOW, THEREFORE, in
consideration of the foregoing and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:


 


1.           Amendments
to the Credit Agreement. As of the effective date of this Amendment, the Credit Agreement is hereby amended as follows:


 


A.           Section 1 of the Credit
Agreement is hereby amended by adding the following defined term to be inserted in its proper alphabetical order:


 


“Third
Amendment” means that certain Third Amendment to Credit and Security Agreement dated as of July 25, 2013 by and among
the Borrowers and Lender.”


 


“Third
Amendment Effective Date” means July 25, 2013.”


 


B.           Section
2.4 of the Credit Agreement is hereby amended by deleting subsection 2.4(a) in its entirety and replacing it with the following:


 


“(a)           Interest
Rate Applicable to the Line of Credit. Except as otherwise provided in this Agreement, the unpaid principal amount of each
Advance (other than the FILO Advance) shall bear interest at a rate per annum equal to sum of (x) the Prime Rate, plus (y)
the Applicable Margin; provided, that (i) the effective interest rate payable by Borrowers with respect to such Advances
shall at no time be less than seven percent (7.0%) per annum, which minimum interest rate will apply regardless of fluctuations
in the Prime Rate that would otherwise cause the interest rate applicable to such Advances to be less than such minimum interest
rate floor, and (ii) notwithstanding the foregoing, during the period from and including the Third Amendment Effective Date through
October 31, 2013, the initial $1,500,000 of the outstanding balance of the Advances (other than the FILO Advance) shall bear interest
at twenty percent (20%) per annum.”


 




    	 



    	 



    

 


C.           Section
6 of the Credit Agreement is hereby amended by deleting subsection 6.2 in its entirety and replacing it with the following:


 


“(a)           Minimum Excess Availability.
From the Third Amendment Effective Date until October 31, 2013, there shall be no minimum excess Availability requirement. At
all times from and after October 31, 2013, Borrowers shall maintain Availability of no less than $1,500,000.”


 


D.           Section
6 of the Credit Agreement is hereby amended by adding a new Section 6.11 as follows:


 


“6.11     Budget.


 


(a)           Borrowers
have prepared and delivered to the Lender a budget (the “Budget”; which shall mean the initial budget, dated
July 23, 2013, and delivered to the Lender on July 23, 2013, together with any subsequent or amended budget(s) delivered to and
reasonably acceptable to Lender) which sets forth, among other information, (A) projected aggregate weekly cash disbursements of
Borrowers, (B) the projected aggregate amount of the total outstanding Obligations, (C) projected revenues of the Borrowers, and
(D) availability under the Borrowing Base. In addition, each week thereafter, Borrowers shall deliver to Lender, in form and substance
acceptable to Lender, a subsequent weekly Budget for the period from the delivery of such Budget forward for thirteen (13) weeks,
which subsequent Budget(s) shall roll forward by one week the immediately preceding Budget.


 


(b)           Not
later than 5:00 p.m. (Eastern time) on the Wednesday of each week following the end of each week set forth in the Budget, Borrowers
shall deliver or cause to be delivered to Lender, in form and substance satisfactory to Lender, a report that sets forth for the
immediately preceding week a comparison of Borrowers’ actual cash disbursements for, outstanding Obligations as of the end
of, and actual revenues for such week to Borrowers’ projected cash disbursements for, outstanding Obligations as of the end
of, and projected revenues for such week as set forth in the Budget.”


 


E.           Section
6 of the Credit Agreement is hereby amended by adding a new Section 6.12 as follows:


 


“6.12     Consultant.
No later than August 2, 2013, Borrowers shall have engaged HRC Retail Consulting LLC (or another consultant reasonably acceptable
to Lender with experience in turnaround situations in the retail industry) (the “Consultant”) at their sole
cost and expense. The terms, conditions, scope and duration of the Borrowers’ engagement of the Consultant shall be reasonably
acceptable to the Lender.”


 




    	2



    	 



    

 


F.           Section
8.1 of the Credit Agreement is hereby amended by deleting subsection (c) in its entirety and replacing such subsection with the
following:


 


“(c)           Borrowers
fail to observe or perform any covenant or agreement of Borrowers set forth in (i) any of clauses (e) through (q) or clause (s)
of Section 6.1, Section 6.2, Section 6.3, Section 6.9, Section 6.11 or Section 6.12
of this Agreement, or (ii) clauses (a), (b), (c), (d) or (r) of Section 6.1 of this Agreement, and such failure, if capable
of being remedied, shall remain unremedied for two (2) Business Days after the earlier of (A) the date upon which a Designated
Officer obtains knowledge of such failure, or (B) the date upon which Borrowers have received notice of such failure from
Lender, or (iii) any other covenant or agreement contained in Section 6 or elsewhere in this Agreement or in any other Loan
Document, and such failure, if capable of being remedied, shall remain unremedied for fifteen (15) days after the earlier of (A) the
date upon which a Designated Officer obtains knowledge of such failure, or (B) the date upon which Borrowers have received
notice of such failure from Lender;”


 


2.           Conditions
Precedent. The effectiveness of this Amendment is subject to the following conditions precedent (all documents to be in form
and substance satisfactory to Lender):


 


(a)           Lender shall have
received this Amendment executed by the Borrowers;


 


(b)           Lender
shall have received the resolutions of the board of directors or governing body of each of the Borrowers approving the execution
and delivery of this Amendment and the transactions contemplated hereby;


 


(c)           After
giving effect to this Amendment (i) all representations and warranties of the Borrowers set forth herein and in the Loan Documents
shall be true and correct in all material respects, (ii) no Event of Default or any other event which, upon the lapse of time,
service of notice, or both, which would constitute an Event of Default under any of the Loan Documents, shall have occurred and
be continuing, and (iii) Borrowers shall be in compliance with the Credit Agreement and the other Loan Documents; and Borrowers
shall have certified the foregoing matters to Lender; and


 


(d)           The
Borrowers shall pay to the Lender an amendment fee of $50,000.00, which fee shall be fully earned on the Third Amendment Effective
Date.


 


3.           Representations,
Warranties. Borrowers represent that, after giving effect to this Amendment:


 


(a)           No
consent or approval of, or exemption by any Person is required to authorize, or is otherwise required in connection with the execution
and delivery of this Amendment which has not been obtained and which remains in full force and effect; and


 




    	3



    	 



    

 


(b)           As
of the date hereof, each of the representations and warranties of the Borrowers set forth in the Credit Agreement and the other
Loan Documents are true, correct and complete in all material respects, except to the extent such representations and warranties
speak as to an earlier date, in which case the same are true, correct and complete as to such earlier date; and no Default or Event
of Default exists under the Credit Agreement.


 


4.           Confirmation
of Security Interests. Borrowers hereby confirm the security interests and liens granted by Borrowers to Lender, in and to
the Collateral in accordance with the Credit Agreement and other Loan Documents as security for the Obligations.


 


5.           Payment of
Lender Fees and Expenses. Borrowers agree to pay any and all fees and expenses, including reasonable counsel fees and disbursements,
incurred by Lender in connection with the preparation and execution of this Amendment and all documents, instruments and agreements
contemplated hereby.


 


6.           No Other Modifications,
Conflicts with Loan Documents, etc. This Amendment is intended to supplement and modify the Credit Agreement and the rights
and obligations of the parties under the Credit Agreement shall not in any way be vacated, modified or terminated except as herein
provided. All terms and conditions contained in each and every agreement or promissory note or other evidence of indebtedness of
Borrowers to the Lenders are incorporated herein by reference. If there is a conflict between any of the provisions of the Credit
Agreement and the provisions of this Amendment, then the provisions of this Amendment shall govern.


 


7.           Governing
Law. This Amendment shall be construed in accordance with the substantive laws (other than conflict laws) of the State of New
York.


 


8.           Full Force
and Effect. Except as expressly amended hereby, all terms and conditions of the Credit Agreement, and any and all Exhibits
annexed thereto and all other writings submitted by the Borrowers to the Lender pursuant thereto, shall remain unchanged and in
full force and effect.


 


9.           Counterparts.
This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which
shall be considered one and the same document. Delivery of an executed counterpart of a signature page of this document by facsimile
or by electronic mail or e-mail file attachment shall be effective as delivery of a manually executed counterpart of this document.


 




    	4



    	 



    

 


10.           RELEASE.
EACH BORROWER, TOGETHER WITH ITS SUCCESSORS AND ASSIGNS, HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT,
CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO
REPAY THE INDEBTEDNESS OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM LENDER. EACH BORROWER HEREBY VOLUNTARILY
AND KNOWINGLY RELEASES AND FOREVER DISCHARGES LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, AFFILIATES SUCCESSORS AND ASSIGNS, FROM
ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN,
ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, ASSERTED OR UNASSERTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN
EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH BORROWERS MAY NOW OR HEREAFTER
(WHETHER OR NOT PRESENTLY SUSPECTED, CONTEMPLATED OR ANTICIPATED) HAVE AGAINST LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS
AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS,
OR OTHERWISE, AND ARISING FROM ANY LOAN OR ADVANCE, INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING,
COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER
THE CREDIT AGREEMENT OR LOAN DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.


 


[Signature Page Follows.]


 




    	5



    	 



    

 


IN WITNESS WHEREOF,
the parties hereto have caused this Third Amendment to the Credit and Security Agreement to be executed and delivered as of the
day and year first above written.


 


	 	BORROWERS:	 
	 	 	 
	 	FREDERICK’S OF HOLLYWOOD GROUP INC.	 
	 	 	 
	 	By:	/s/ Thomas Lynch	 
	 	 	Name:  Thomas Lynch	 
	 	 	Title:  Chief Executive Officer	 
	 	 	 
	 	FOH HOLDINGS, INC.	 
	 	 	 
	 	By:	/s/ Thomas Lynch	 
	 	 	Name:  Thomas Lynch	 
	 	 	Title:  Chief Executive Officer	 
	 	 	 
	 	FREDERICK’S OF HOLLYWOOD, INC.	 
	 	 	 
	 	By:	/s/ Thomas Lynch	 
	 	 	Name:  Thomas Lynch	 
	 	 	Title:  Chief Executive Officer	 
	 	 	 
	 	FREDERICK’S OF HOLLYWOOD STORES, INC.	 
	 	 	 
	 	By:	/s/ Thomas Lynch	 
	 	 	Name:  Thomas Lynch	 
	 	 	Title:  Chief Executive Officer	 
	 	 	 
	 	HOLLYWOOD MAIL ORDER, LLC	 
	 	 	 
	 	By:	/s/ Thomas Lynch	 
	 	 	Name:  Thomas Lynch	 
	 	 	Title:  Chief Executive Officer	 
	 	 	 
	 	LENDER:	 
	 	 	 
	 	SALUS CAPITAL PARTNERS, LLC	 
	 	 	 
	 	By:	/s/ Kyle Shonak	 
	 	 	Name:  Kyle Shonak	 
	 	 	Title:  Senior Vice President	 


 


[Third Amendment to Credit and Security
Agreement]