Document:

EXHIBIT
10.3

     

    EXECUTION
COPY

     

    EXHIBIT
B

     

    RESTRICTED
STOCK AGREEMENT

     

    THIS RESTRICTED STOCK AGREEMENT (this
“Agreement”) dated as of June 29, 2010, by and between Frederick’s of Hollywood
Group Inc., a New York corporation (the “Company”), and Thomas J. Lynch (the
“Employee”).

     

    WHEREAS,
on June 29, 2010, pursuant to the terms and conditions of the Company’s 2000
Performance Equity Plan (the “Plan”), the Board of Directors of the Company (the
“Board”) authorized the issuance to the Employee, effective on the date hereof,
of 150,000 shares of the authorized but unissued common stock of the Company,
$.01 par value (“Shares”), conditioned upon the Employee’s acceptance thereof
upon the terms and conditions set forth in this Agreement and subject to the
terms of the Plan; and

     

    WHEREAS,
the Employee desires to acquire the Shares on the terms and conditions set forth
in this Agreement and subject to the terms of the Plan;

     

    IT IS
AGREED:

     

    1.           Grant of
Shares.

     

    1.1           The
Company hereby issues to the Employee 150,000 Shares on the terms and conditions
set forth herein.

     

    1.2           Subject
to Section 3 below, the Shares shall be subject to forfeiture in the event of
the termination of Employee’s employment prior to the following
dates:  prior to January 2, 2012, all Shares shall be subject to
forfeiture, on or after January 2, 2012 and prior to January 2, 2013, 100,000
Shares shall be subject to forfeiture, on or after January 2, 2013 and prior to
January 2, 2014, 50,000 Shares shall be subject to forfeiture, on or after
January 2, 2014, no Shares shall be subject to forfeiture (each a “Restriction
Period” with respect to the applicable number of Shares).

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    1.3           The
Shares shall be represented by three stock certificates registered in the name
of the Employee, each representing 50,000 Shares.  All three
certificates (“Share Certificates”) shall bear the legends set forth in
Sections 6(vi) and 6(vii) of this Agreement.  The Share
Certificates shall be deposited with the Company, together with stock powers
endorsed in blank by the Employee and signature Medallion Guaranteed, which will
permit transfer to the Company of the Shares represented by each such Share
Certificate that is forfeited or shall not become vested in accordance with the
terms of this Agreement and the Plan.

     

    1.4           After
issuance, the Shares shall constitute issued and outstanding shares of common
stock of the Company for all corporate purposes, and the Employee shall have the
right to vote such Shares, to receive and retain all cash dividends as the Board
may, in its sole discretion, pay on such Shares, and to exercise all of the
rights, powers and privileges of a holder of common stock with respect to such
Shares, except that (a) the Employee shall not be entitled to delivery of a
Share Certificate until the Shares represented by such Share Certificate vest in
accordance with Section 1.3 below and (b) other than cash dividends as the
Board, in its sole discretion, distributes, the Company will retain custody of
all distributions (“Retained Distributions”) made or declared with respect to
the Shares (and such Retained Distributions will be subject to the same
restrictions, terms and conditions as applicable to the Shares) until such time,
if ever, as the Shares with respect to which such Retained Distributions shall
have been distributed have become vested.

     

    1.5           If
the Employee is still an employee of the Company at the end of a Restriction
Period, all of the Shares that are no longer subject to forfeiture, and the
Retained Distributions with respect thereto, shall vest and shall no longer be
subject to forfeiture by the Employee.  After the date that any Shares
become vested, the Company shall instruct its transfer agent to issue and
deliver to the Employee a new certificate for the Shares, which certificate
shall not bear the legend set forth in Section 6(vii).  If, at any
time prior to the vesting of any Shares in accordance with the first sentence of
this Section 1.3, the Employee’s employment with the Company is terminated for
any reason, subject to the provisions of Section 3, then the Shares that have
not then vested (and the Retained Distributions with respect thereto) shall be
forfeited to the Company and the Employee shall not thereafter have any rights
with respect to such Shares.  In such event, the Company is authorized
by the Employee to complete the stock powers to transfer the Shares to the
Company and deliver the Share Certificates and stock powers to the Company’s
transfer agent to return the Shares to the status of authorized but unissued
shares of common stock.

    
      
         

      

      
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    1.6           “Employment”.  The
Employee shall be considered to be employed by the Company pursuant to this
Section 1 if the Employment Agreement dated as of June 29, 2010 between the
Company and the Employee, as it may be amended from time to time (“Employment
Agreement”), has not been terminated by either party.

     

    1.7           No Right to
Employment.  Nothing in the Plan or in this Agreement shall
confer on the Employee any right to continue in the employ of, or other
relationship with, the Company (or with any parent, subsidiary or affiliate of
the Company) or limit in any way the right of the Company (or of any parent,
subsidiary or affiliate of the Company) to terminate the Employee’s employment
or other relationship with the Company (or with any parent, subsidiary or
affiliate of the Company) at any time, with or without cause.

     

    2.  
         Withholding
Tax.  Not later than the date as of which an amount first
becomes includible in the gross income of the Employee for federal income tax
purposes with respect to the Shares, the Employee shall pay to the Company, or
make arrangements satisfactory to the Company regarding the payment of, any
federal, state and local taxes of any kind required by law to be withheld or
paid with respect to such amount.  Notwithstanding anything in this
Agreement to the contrary, the obligations of the Company under the Plan and
pursuant to this Agreement shall be conditional upon such payment or
arrangements with the Company and the Company shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the Employee from the Company.

     

    3.     
      Special Vesting in Certain
Circumstances.  If Employee’s employment is terminated by the
Company for any reason other than (i) death, (ii) Disability (as defined in the
Employment Agreement) or (iii) for Cause (as defined in the Employment
Agreement), or if Employee terminates his employment for Good Reason (as defined
in the Employment Agreement), then all of the Shares that would otherwise have
vested on January 2, 2012, January 2, 2013 and January 2, 2014 shall continue to
vest as scheduled.

    
      
         

      

      
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    4.           Nonassignability of
Shares.  The Shares shall not be assignable or transferable
until they have vested.

     

    5.           Company
Representations.  The Company hereby represents and warrants to
the Employee that:

     

    (i)     
      the Company, by appropriate and all required
action, is duly authorized to enter into this Agreement and consummate all of
the transactions contemplated hereunder; and

     

    (ii)           the
Shares, when issued and delivered by the Company to the Employee in accordance
with the terms and conditions hereof, will be duly and validly issued and fully
paid and non-assessable.

     

    6.           Employee
Representations.  The Employee hereby represents and warrants
to the Company that:

     

    (i)       
    he is acquiring the Shares for his own account and not
with a view towards the distribution thereof;

     

    (ii)           he
has received a copy of all reports and documents required to be filed by the
Company with the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934, as amended (“Exchange Act”) within the last twenty-four
(24) months and all reports issued by the Company to its
shareholders;

     

    (iii)          he
understands that he must bear the economic risk of the investment in the Shares,
which cannot be sold by him unless they are registered under the Securities Act
of 1933, as amended (“Securities Act”), or an exemption therefrom is available
thereunder; provided that he understands that the Company is under no obligation
to register the Shares for sale under the Securities Act;

    
      
         

      

      
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    (iv)          in
his position with the Company, he has had both the opportunity to ask questions
and receive answers from the officers and directors of the Company and all
persons acting on its behalf concerning the terms and conditions of the offer
made hereunder and to obtain any additional information to the extent the
Company possesses or may possess such information or can acquire it without
unreasonable effort or expense necessary to verify the accuracy of the
information obtained pursuant to clause (ii) above;

     

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

     

    (vi)          in
the absence of an effective registration statement under the Securities Act, the
certificates evidencing the Shares shall bear the following legend:

     

    “The
securities represented by this certificate have been acquired for investment and
have not been registered under the Securities Act of 1933, as amended, or
applicable state securities laws and may not be sold or transferred in the
absence of such registration or pursuant to an exemption therefrom under said
Act and such laws, supported by an opinion of counsel, reasonably satisfactory
to the Company and its counsel, that such registration is not
required.”

     

    ;
and

     

    (vii)         he
understands that the certificates evidencing the Shares shall also bear the
following legend:

     

    “The
shares represented by this certificate have been acquired pursuant to a
Restricted Stock Agreement, dated as of June 29, 2010, a copy of which is on
file with the Company, and may not be transferred, pledged or disposed of except
in accordance with the terms and conditions thereof.”

     

    7.           Restriction on Transfer of
Shares.  Notwithstanding anything in this Agreement to the
contrary, and in addition to the provisions of Section 4 of this Agreement, the
Employee hereby agrees that he shall not sell, transfer by any means or
otherwise dispose of the Shares acquired by him without registration under the
Securities Act, or in the event that they are not so registered, unless
(i) an exemption from the Securities Act registration requirements is
available thereunder, and (ii) the Employee has furnished the Company with
notice of such proposed transfer and the Company’s legal counsel, in its
reasonable opinion, shall deem such proposed transfer to be so
exempt.

    
      
         

      

      
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    8.           Miscellaneous.

     

    8.1           Notices.  All
notices, requests, deliveries, payments, demands and other communications that
are required or permitted to be given under this Agreement shall be in writing
and shall be either delivered personally or by private courier (e.g., Federal
Express), or sent by registered or certified mail, return receipt requested,
postage prepaid, to the parties at their respective addresses set forth herein,
or to such other address as either party shall have specified by notice in
writing to the other.  Notice shall be deemed duly given hereunder
when delivered or mailed as provided herein.

     

    8.2           Plan Paramount; Conflicts
with Plan.  This Agreement shall, in all respects, be subject
to the terms and conditions of the Plan, whether or not stated
herein.  In the event of a conflict between the provisions of the Plan
and the provisions of this Agreement, the provisions of the Plan shall in all
respects be controlling.

     

    8.3           Waiver.  The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any other or subsequent
breach.

     

    8.4           Entire
Agreement.  This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof.  This
Agreement may not be amended except in writing executed by the Employee and the
Company.

     

    8.5           Binding Effect;
Successors.  This Agreement shall inure to the benefit of and
be binding upon the parties hereto and, to the extent not prohibited herein,
their respective heirs, successors, assigns and
representatives.  Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto and as provided
above, their respective heirs, successors, assigns and representatives any
rights, remedies, obligations or liabilities.

     

    8.6           Governing
Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to choice of
law provisions.

    
      
         

      

      
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    8.7           Headings.  The
headings contained herein are for the sole purpose of convenience of reference,
and shall not in any way limit or affect the meaning or interpretation of any of
the terms or provisions of this Agreement.

     

    8.8           Section
409A.  This Agreement is intended to comply with the provisions
of Section 409A of the Internal Revenue Code of 1986, as amended (“Section
409A”).  To the extent that the Shares or any payments or benefits
provided hereunder are not considered compliant with Section 409A, the parties
agree that the Company shall take all actions necessary to make such payments
and/or benefits become compliant.

     

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INTENTIONALLY LEFT BLANK]

    
      
         

      

      
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    IN
WITNESS WHEREOF, the parties hereto have signed this Agreement as of the day and
year first above written.

    

    
      
        
          
            
              
                	
                        EMPLOYEE

                      	 
      	
                        FREDERICK’S
      OF HOLLYWOOD GROUP INC.

                      
	 
      	 
      	 
      
	
                        /s/Thomas Lynch

                      	 
      	
                        By: 

                      	
                        /s/Linda LoRe

                      
	
                        THOMAS
      LYNCH

                      	 
      	 
      	
                        Linda
      LoRe, President

                      
	 
      	 
      	 
      	 
      
	
                        Address
      of Employee:

                      	 
      	
                        Address
      of Company:

                      
	
                          

                      	 
      	
                        1115
      Broadway

                      
	
                           

                      	 
      	
                        New
      York, New York
10010

                      

              

            

          

        

      

    

    
      
         

      

      
        8EXHIBIT
10.4

    

    

    ANNUAL
INCENTIVE BONUS PLAN

     

    The Board
of Directors (“Board”) of Frederick’s of Hollywood Group Inc. (“FOHG”) has
adopted this Annual Incentive Bonus Plan (“Plan”) on June 29, 2010, effective
with FOHG’s 2011 fiscal year, which begins on August 1, 2010 and ends on July
30, 2011.

     

    Purpose. The Plan provides for
select employees of FOHG and its subsidiaries to receive annual cash incentive
payments based on the achievement of specific goals and objectives established
by the Board and/or Compensation Committee of the Board
(“Committee”).

     

    Plan
Administration.  The Plan will be administered by the
Committee.  The Committee’s powers include, but are not limited to,
the authority to select the employees to participate in the Plan, to determine
what goals, objectives and conditions need to be achieved to earn an award,
whether such goals, objectives and conditions have been met, to determine
whether payment of an award should be made, and to determine whether an award
should be modified or eliminated.  The Committee, in its sole
discretion and on such terms and conditions as it may provide, may select one or
more directors and/or officers of FOHG (“Plan Administrators”) to operate the
Plan, perform day-to-day administration of the Plan, and maintain records of the
Plan; provided that no Plan Administrator shall participate in the establishment
of any goal, objective or condition relating to such Plan Administrator nor
shall such Plan Administrator be involved in the approval of any payment of an
award under the Plan to such Plan Administrator.  All decisions made
by the Committee and/or any Plan Administrator will be final, conclusive and
binding on all persons, and will be given the maximum deference permitted by
law.  If any participant is employed pursuant to an employment
agreement, the terms of such employment agreement shall supersede any
conflicting terms of this Plan.

     

    Eligibility.  Participation in
the Plan is limited to select employees as determined by the
Committee.  Additional participants may be added to the Plan during a
fiscal year at the discretion of the Committee; provided that the incentive
payment, if any, for such participants shall be pro-rated based on the actual
period during which such individual was a participant in the Plan during the
fiscal year and, provided, further, that no additional participants may be added
during the last quarter of a fiscal year.

     

    Timing of
Payment.  Awards (if any)
under the Plan shall be paid as soon as practicable after the end of the fiscal
year during which the award was earned.  Awards (if any) shall be made
only to participants employed by FOHG and/or its subsidiaries at the time of the
payout and shall be paid in cash in a single lump sum, net of all required
payroll deductions and taxes.  It is intended that this Plan comply
with the requirements of Internal Revenue Code Section 409A so that none of the
payments to be provided hereunder will be subject to the additional tax imposed
under Section 409A, and any ambiguities will be interpreted to so
comply.

     

    Plan
Structure.  The Plan provides for payment of annual cash
bonuses (each an “Annual Bonus”) to participants based upon:

     

    
      	
               
      

            	
              ·

            	
              achievement
      of individual performance objectives, which shall be approved annually by
      the Committee; and

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              ·

            	
              FOHG’s
      annual financial performance, which shall be based upon an evaluation of
      Adjusted EBITDA (defined below) against a target adjusted EBITDA approved
      annually by the Board (“Target Adjusted EBITDA”).  For purposes
      of the Plan, Adjusted EBITDA is defined as earnings before interest,
      taxes, depreciation, amortization, stock compensation expense, any bonus
      awarded hereunder and adjustments for non-recurring items as determined by
      the Board.

            

    

     

    Bonus
Potential.  The maximum Annual Bonus for each participant shall
be equal to a percentage of the participant’s base salary as determined by the
Committee or in accordance with the employment agreement of the participant, if
any.  If any adjustments are made to a participant’s base salary
during the fiscal year, the Committee at its discretion may adjust the
applicable Annual Bonus percentage pro-rata for the remainder of such fiscal
year.

     

    Bonus
Calculation. The percentage of the maximum Annual Bonus that each
participant shall be entitled to under the Plan will be equal to the sum of the
Company Performance Component and the Individual Performance Component, each as
set forth below:

     

    
      Company Performance
Component

    

     

    
      	
               
      

            	
              ·

            	
              Up
      to 80% of a participant’s maximum Annual Bonus may be paid out to such
      participant upon FOHG’s achievement of the percentages of Target Adjusted
      EBITDA as described in the following
table:

            

    

     

    
      
        
          
            
              
                	
                        
                          Percentage of

                          Target Adjusted

                          EBITDA Achieved

                        

                      	 	 	
                        
                          Maximum Percentage of Annual

                          Bonus(1)

                        

                      	 
	
                        <100

                      	% 	 	 	0	%
	 	100	%	 	 	10	%
	 	110	%	 	 	20	%
	 	120	%	 	 	40	%
	 	130	%	 	 	60	%
	 	140	%	 	 	80	%

              

            

          

        

      

    

    
       

      
        

      

    

    
      	
               
      

            	
              (1)

            	
              Percentages
      will be adjusted pro rata if the percentage of Target Adjusted EBITDA
      achieved falls between two grid
percentages.

            

    

     

    Individual Performance
Component

     

    
      	
               
      

            	
              ·

            	
              Up
      to 20% of a participant’s maximum Annual Bonus may be paid out upon the
      achievement of such participant’s individual performance objectives if
      Adjusted EBITDA is 80% or more of Target Adjusted EBITDA for such fiscal
      year.

            

    

     

    
      	
               
      

            	
              ·

            	
              Individual
      performance objectives will be comprised of measurable goals jointly
      developed by the participant and his or her immediate supervisor and
      approved by the Committee.  For a participant to receive at
      least a portion of the individual performance component of his or her
      Annual Bonus under the Plan, at least 75% of the participant’s individual
      performance objectives must be achieved.  If such participant
      achieves more than 75% of the participant’s individual performance
      objectives, the percentage of the individual component of the Annual Bonus
      will be determined on a proportional basis up to a maximum of 20% of a
      participant’s maximum Annual Bonus. The Committee will have the discretion
      to adjust the percentage paid to the individual for the individual
      component of the Annual Bonus upward or downward to account for
      circumstances that make achievement of any goal easier or more difficult
      than anticipated at the time the goal was
  established.

            

    

     

    
      
         

      

      
        2

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