Document:

EXHIBIT 10.3

EXECUTION VERSION

 

 

SECOND
FINANCING AGREEMENT AND NOTE MODIFICATION AGREEMENT

 

 

THIS second
FINANCING AGREEMENT AND NOTE MODIFICATION AGREEMENT (“Second Modification”) is entered into on April
20, 2012 to be effective as of April 1, 2012 (the “Effective Date”), by and among Frederick’s of Hollywood Group
Inc., a New York corporation (“Group”), FOH Holdings, Inc., a Delaware corporation (the “Parent”),
Frederick’s of Hollywood, Inc., a Delaware corporation (“Frederick’s”), Frederick’s of Hollywood
Stores, Inc., a Nevada corporation (“Stores”), Hollywood Mail Order, LLC, a Nevada limited liability company
(“Mail Order” and together with Group, the Parent, Frederick’s and Stores, individually, a “Borrower”,
and collectively, the “Borrowers”), the lending parties from time to time a party to the Financing Agreement
(as hereinafter defined) (individually a “Lender” and collectively, the “Lenders”) and
Hilco Brands, LLC, a Delaware limited liability company, as arranger and agent for the Lenders (in such capacity, the “Agent”).

 

Background

 

A.Pursuant
to the terms of that certain Financing Agreement dated as of July 30, 2010 between and among
the Borrowers, the Lenders and the Agent, as amended, including by that certain Financing Agreement and Note Modification
Agreement (the “First Modification”) dated as of July 29, 2011 (the “Financing
Agreement”), the Lenders made available to the Borrowers a secured term loan in the maximum original principal
amount of Seven Million One Hundred Thousand and 00/100 Dollars ($7,100,000.00), plus any PIK Interest payable in accordance with
Section 2.03(c) of the Financing Agreement (the “Loan”), which Loan is evidenced
by a certain Secured Promissory Note also dated as of July 30, 2010 and also amended by the First Modification in the original
principal amount of the Loan (the “Note”). The Note is secured by inter
alia: a Security Agreement dated July 30, 2010 from the Borrowers to the Lenders (the “Security Agreement”)
granting to the Agent, for the benefit of the Lenders, a continuing security interest in the Collateral more particularly described
in the Security Agreement.

 

B.Group
subsequently merged Fredericks.com, Inc. (“Guarantor”) into Mail Order on or around July 30, 2011 (the “Subsidiary
Merger”). Mail Order is a 100% wholly-owned subsidiary of Frederick’s, which is 100% wholly owned by the Parent,
which is 100% wholly owned by Group.

 

C.The Lenders and the Borrowers now
wish to again amend the Loan Documents to modify the repayment terms of the Loan.

 

Now, therefore, in consideration of the
mutual covenants and undertakings herein contained, and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound, the parties hereto covenant and agree as follows:

 

    	 

    	 

    

 

1.Amendments.

 

(a)Increase to Principal Amount of
Loan and Note. From and after the Effective Date of this Second Modification, the Loan will be a secured term loan in the principal
amount of Seven Million Three Hundred and Seven Thousand Seven Hundred and Thirty-Nine and 78/100 Dollars ($7,307,739.78), plus
any PIK Interest payable in accordance with Section 2.03(c) of the Financing Agreement, and the maximum principal amount of the
Note as of the Effective Date is hereby increased accordingly to Seven Million Three Hundred and Seven Thousand Seven Hundred and
Thirty-Nine and 78/100 Dollars ($7,307,739.78), plus any PIK Interest payable in accordance with Section 2.03(c) of the Financing
Agreement; such increase in the principal amount being attributable to (i) the fee in the amount of Twenty Thousand and 00/100
Dollars ($20,000.00) payable to Lender pursuant to Section 3 below, and (ii) the otherwise scheduled cash payment of Regular Interest
in the amount of $187,739.78 on the Loan that was due and payable on April 1, 2012 and is added to the principal balance of the
Note pursuant to Subsection 1(b)(ii) below. Exclusive of any increase in the amount of PIK Interest payable, the proceeds of Twenty
Thousand and 00/100 Dollars ($20,000.00) increase to the principal balance of the Loan shall be used to finance the Fees provided
for in Section 3 below.

 

(b)Restatement of Note Repayment
Terms.

 

(i)Section 2.02 of the Financing Agreement
is hereby amended and restated in its entirety as follows:

 

SECTION 2.02.Note; Repayment
of Loan.

 

(a)The Loan made by the
Lenders (in the proportionate shares set forth opposite each Lender’s name on Schedule 2.02 hereto) to the Borrowers shall
be evidenced by the Note.

 

(b)Unless otherwise required
to be sooner paid pursuant to the provisions of this Agreement, the outstanding principal amount of the Loan together with all
accrued interest thereon shall be due and payable in full on the Maturity Date.

 

(ii)The regularly scheduled
payment of Regular Interest in the amount of $187,739.78 on the Loan that is due and payable on April 1, 2012, shall be deemed
to be paid in kind and shall be added to the principal balance of the Note and the principal amount of the Note shall be increased
by such amount as of the Effective Date.

 

2.Confirmation of Loan Documents
and Indebtedness. The Borrowers hereby covenant and confirm that, except as specifically modified by this Second Modification,
all of the terms and conditions of the Financing Agreement and all other Loan Documents, as previously amended, shall be unmodified
and shall remain in full force and effect. The Borrowers hereby acknowledge and confirm that the Security Agreement shall secure
the full amount of the Loan. The Borrowers hereby acknowledge and agree that as of the Effective Date, the principal balance outstanding
under the Note as of the date hereof (and following this Second Modification) is Seven Million Three Hundred and Seven Thousand
Seven Hundred and Thirty-Nine and 78/100 Dollars ($7,307,739.78), plus any additional PIK Interest payable in accordance with Section
2.03(c) of the Financing Agreement, and that the accrued amount of PIK Interest as of April 1, 2012 was Seven Hundred and Thirty-Four
Thousand Four Hundred and Nine and 84/100 Dollars ($734,409.84), and the Borrowers hereby affirm the aforesaid indebtedness and
all of the Borrowers’ liabilities and obligations under the Loan Documents.

 

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3.Fees. Concurrently with the
execution and delivery of this Second Modification, and as consideration for the amendments and modifications related thereto and
the conversion of the Regular Interest payment to PIK Interest as provided for in Section 1(b)(ii) above, the Borrowers shall pay
to Lender the sum of Twenty Thousand and 00/100 Dollars ($20,000.00), which fees shall be paid by the increase in the outstanding
principal amount of the Loan and the Note as provided for herein. In addition, the Borrowers shall pay all of the costs and expenses
of the Agent and the Lenders incurred in connection with this Second Modification including, without limitation, reasonable attorneys’
fees.

 

4.No Novation. The parties to
this Second Modification acknowledge and confirm that this Second Modification shall not be construed as a novation of the Note
and shall not prejudice any present or future rights, remedies, benefits or powers belonging to or accruing to the Lenders under
the terms of the Loan Documents. The parties to this Second Modification further acknowledge and confirm that this Second Modification
does not constitute a release, termination or waiver of any existing default or of any of the liens, security interests, rights
or remedies granted to the Lenders in any of the Loan Documents, which liens, security interests, rights and remedies are hereby
ratified, confirmed, extended and continued.

 

5.Representations and Further Agreements.
Each Borrower hereby represents and warrants to the Agent and the Lenders as follows:

 

(a)Organization,
Good Standing, Etc. Each Loan Party (i) is a corporation, limited liability company or limited partnership duly organized,
validly existing and in good standing under the laws of the state of its organization, (ii) has all requisite power and authority
to conduct its business as now conducted and as presently contemplated and, in the case of the Borrowers, to execute and deliver
this Second Modification, and to consummate the transactions contemplated thereby, and (iii) is duly authorized or qualified to
do business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which
the transaction of its business makes such qualification necessary except where the failure to be qualified or in good standing
could not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

 

(b)Authorization,
Etc. The execution, delivery and performance by each Loan Party of this Second Modification, (i) have been duly authorized
by all necessary action, (ii) do not and will not contravene its charter or by-laws, its limited liability company or operating
agreement or its certificate of partnership or partnership agreement, as applicable, any applicable law, any Material Contract
or any agreement, instrument or other document evidencing, governing or securing any Indebtedness of such Loan Party, (iii) do
not and will not contravene any other agreement, instrument or document binding on or otherwise affecting it or any of its properties,
to the extent the obligation thereunder is material or to the extent such contravention (either individually or in the aggregate)
could reasonably be expected to have a Material Adverse Effect, (iv) do not and will not result in or require the creation of any
Lien (other than pursuant to any Loan Document) upon or with respect to any of its properties, and (v) do not and will not result
in any suspension, revocation, impairment, forfeiture or non-renewal of any permit, license, authorization or approval applicable
to its operations or any of its properties, except where such suspension, revocation, impairment, forfeiture or non-renewal could
not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

 

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(c)Governmental
Approvals. No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority is
required in connection with the due execution, delivery and performance by any Loan Party of this Second Modification.

 

(d)Representations and Warranties.
The Borrowers hereby acknowledge and agree that Borrowers have no defense, set-off, recoupment or claim against Lenders of any
kind whatsoever as of the date hereof with respect to the Loan or the matters covered hereby, and that all of the representations
and warranties contained in the Loan Documents, as amended (except as modified by the schedule attached to this Second Modification),
are true, accurate and correct on and as of the date hereof as if made on and as of the date hereof. The Borrowers further represent
and warrant that no default exists under the Loan Documents or may exist upon the delivery of notice, passage of time or both.

 

(e)Binding
Effect. This Second Modification constitutes the legal, valid and binding obligations of each of the Loan Parties enforceable
in accordance with the terms hereof.

 

(f)Litigation. There is no pending
or, to the knowledge of any Loan Party, threatened action, suit or proceeding affecting any Loan Party before any court or other
Governmental Authority or any arbitrator that (i) either individually or in the aggregate could reasonably be expected to
have a Material Adverse Effect or (ii) relates to this Second Modification, the Note or any other Loan Document or any transaction
contemplated hereby.

 

6.No Further Commitment. Nothing
in this Second Modification shall be construed to commit the Lenders to any further covenant or default waivers or to any additional
increase of credit or other modification or amendment of the Loan Documents, nor as a waiver by the Lenders of any rights or remedies
to which the Lenders may be entitled under any of the Loan Documents.

 

7.Release. The Borrowers on each
of their own behalf and on behalf of its trustees, partners, employees and agents, for themselves, and their successors, trustees
and assigns, hereby releases the Agent and the Lenders, their shareholders, officers, directors, employees, agents and attorneys
and each of their respective successors, trustees, and assigns and affiliates, of and from any and all actions, causes of action,
proceedings, claims, demands, damages, costs, liabilities, losses, agreements and obligations, of any nature whatsoever, whether
contingent or matured, known or unknown, at law or in equity arising out of, or in any way related to the Loan, or the transactions
contemplated under the Loan Documents.

 

8.Construction. Any capitalized
terms used in this Second Modification not otherwise defined herein shall have the meaning assigned to them in the Financing Agreement,
as amended.

 

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9.Multiple Counterparts. This
Second Modification may be executed in one or more counterparts, all of which taken together shall constitute the same agreement.

 

10.Binding Effect. This Second
Modification shall be binding upon and inure to the benefit of the parties hereto and their respective successors, trustees, assigns
and affiliates.

 

11.Miscellaneous. This Second
Modification shall be governed by and construed under the laws of the State of New York. This Second Modification represents the
entire agreement between the parties hereto respecting the subject matter hereof, and no party shall be bound by any prior discussions,
proposals or oral agreements. The parties agree that this Second Modification may be amended only in a writing signed and approved
by both parties. The parties agree that each and every provision of this Second Modification has been mutually negotiated, prepared
and drafted, and each party has been represented by counsel, so that in connection with the construction of any provision hereof,
no consideration shall be given to the issue of which party actually prepared, drafted, requested or negotiated any provision or
deletion. The Note, as amended, and this Second Modification shall together be considered a single note.

 

12.Further Assurances. Each Loan
Party shall take such action and execute, acknowledge and deliver, and cause each of their Subsidiaries to take such action and
execute, acknowledge and deliver, at their sole cost and expense, such agreements, instruments or other documents as the Agent
may reasonably require from time to time in order (i) to carry out more effectively the purposes of this Agreement and the
other Loan Documents, (ii) subject to valid and perfected Liens (subject only to Permitted Liens) any of the Collateral or
any other property of the Guarantors and their Subsidiaries in the manner covered by the Security Agreement, (iii) to establish
and maintain the validity and effectiveness of any of the Loan Documents and the validity, perfection and priority of the Liens
intended to be created thereby, (iv) to file financing statements or otherwise perfect its Lien under applicable non-bankruptcy
law and (v) to better assure, convey, grant, assign, transfer and confirm unto the Agent the rights now or hereafter intended
to be granted to the Agent and the Lenders under this Agreement or any other Loan Document. In furtherance of the foregoing, to
the maximum extent permitted by applicable law, each Loan Party (i) authorizes the Agent to execute any such agreements, instruments
or other documents in such Loan Party’s name and to file such agreements, instruments or other documents in any appropriate
filing office, (ii) authorizes the Agent to file any financing statement required hereunder or under any other Loan Document, and
any continuation statement or amendment with respect thereto, in any appropriate filing office without the signature of such Loan
Party, and (iii) ratifies the filing of any financing statement, and any continuation statement or amendment with respect
thereto, filed without the signature of such Loan Party prior to the date hereof.

 

 

 

[SIGNATURES PAGES CONTAINED ON NEXT PAGE]

 

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IN WITNESS WHEREOF, the parties hereto have
caused this Second Financing Agreement and Note Modification Agreement to be executed by their respective officers thereunto duly
authorized as of on the date first above written.

 

 

	 	BORROWERS:
	 	 
	 	FREDERICK’S OF HOLLYWOOD GROUP INC.
	 	 
	 	By: 	/s/ Thomas Rende
	 	 	Name: Thomas Rende
Title: Chief Financial Officer

 

	 	FOH HOLDINGS, INC.
	 	 
	 	By: 	/s/ Thomas Rende
	 	 	Name: Thomas Rende
Title: Chief Financial Officer

 

	 	FREDERICK’S OF HOLLYWOOD, INC.
	 	 
	 	By: 	/s/ Thomas Rende
	 	 	Name: Thomas Rende
Title: Chief Financial Officer

 

	 	FREDERICK’S OF HOLLYWOOD STORES, INC.
	 	 
	 	By: 	/s/ Thomas Rende
	 	 	Name: Thomas Rende
Title: Chief Financial Officer

 

	 	HOLLYWOOD MAIL ORDER, LLC
	 	 
	 	By: 	FOH Holdings, Inc., its Manager
	 	 	 	 
	 	 	By:	/s/ Thomas Rende
	 	 	 	Name: Thomas Rende
Title: Chief Financial Officer

 

 

[SIGNATURES PAGES CONTINUED ON NEXT PAGE]

 

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	 	AGENT:
	 	 
	 	HILCO BRANDS, LLC
	 	 
	 	By: 	/s/ Eric W. Kaup
	 	 	Name: Eric W. Kaup
Title: Managing Director

 

	 	LENDERS:
	 	 
	 	HILCO BRANDS, LLC
	 	 
	 	By: 	/s/  Eric W. Kaup
	 	 	Name:  Eric W. Kaup
Title: Managing Director

 

	 	 
	 	INFINITY FS FINANCE I, LLC
	 	 
	 	By: 	/s/ Ike S. Franco
	 	 	Name: Ike S. Franco
Title: Managing Director

 

    	7EXHIBIT 10.6

EXECUTION VERSION

 

 

SECOND AMENDMENT TO 

INTERCREDITOR AGREEMENT

 

 

This SECOND AMENDMENT
TO INTERCREDITOR AGREEMENT (this “Amendment”) is entered into as of April 20, 2012, by and among WELLS FARGO BANK,
National Association, as successor to WELLS FARGO RETAIL FINANCE II, LLC, and in
its capacity as arranger and administrative agent for the Revolving Loan Secured Parties (as defined in the Agreement) (the “Revolving
Loan Agent”) and HILCO BRANDS, LLC, in its capacity as agent for the Term Loan Secured Parties (as defined in the Agreement)
(the “Term Loan Agent”).

 

RECITALS

 

A.WHEREAS,
the Revolving Loan Agent and the Term Loan Agent are parties to that certain Intercreditor Agreement, dated as of July 30, 2010
(as amended, restated, or otherwise modified from time to time, the “Agreement”);

 

B.WHEREAS,
the Term Loan Lenders and the Borrowers wish to amend the Term Loan Documents to, among other things, increase the principal amount
of the Term Loan Debt; and

 

C.WHEREAS,
the Revolving Loan Agent and the Term Loan Agent are willing to agree to such amendment and to amend the terms of the Agreement
upon the terms and subject to the conditions set forth herein.

 

NOW, THEREFORE, in
consideration of the premises and the mutual agreements herein contained, and for other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Revolving Loan Agent and the Term Loan Agent agree as follows:

 

1.Definitions.
Unless otherwise defined herein, initial capitalized terms have the meanings given to them in the Agreement.

 

2.Amendments
to Agreement. Upon the satisfaction of Section 3, the definition of “Maximum Priority Term Loan Debt” in
Section 1.1 of the Agreement is hereby amended by deleting it in its entirety and replacing it with the following:

 

“"Maximum Priority Term Loan Debt" shall
mean, as of any date of determination, (a) the sum of (i) the principal amount of up to $7,307,739.78, plus (ii) any PIK interest
payable in accordance with Section 2.03(c) of the Term Loan Agreement, minus (iii) the aggregate amount of all principal payments
and prepayments of the Term Loan Debt received by Term Loan Agent or the Term Loan Lenders plus (b) any amount of interest (including
default interest) on such amount (and including, without limitation, any interest which would accrue and become due but for the
commencement of Insolvency or Liquidation Proceeding, whether or not such amounts are allowed or allowable in whole or in part
in such case or similar proceeding), plus (c) any fees, costs, expenses and indemnities payable under any of the Term Loan Documents
(and including, without limitation, any fees, costs, expenses and indemnities which would accrue and become due on such amounts
but for the commencement of Insolvency or Liquidation Proceedings, whether or not such amounts are allowed or allowable in whole
or in part in such case or similar proceeding). Notwithstanding anything to the contrary herein or in the Term Loan Agreement,
the proceeds of the Term Loan Debt may be used to finance fees in the aggregate amount of Twenty Thousand and 00/100 Dollars ($20,000.000)
but shall not be used to finance any additional fees payable to the Term Loan Lenders.”

 

    	 

    	 

    
 

3.Conditions
to Effectiveness. This Amendment shall become effective upon the Revolving Loan Agent’s receipt of that certain Second
Financing Agreement and Note Modification Agreement, dated as of the date hereof, by and among the Borrowers, the Term Loan Agent
and the Term Loan Lenders.

 

4.Consent
and Waiver. Except as expressly stated herein, nothing herein shall be deemed to constitute a waiver of compliance with, or
other modification of, any term or condition contained in the Agreement and nothing contained herein shall constitute a course
of conduct or dealing among the parties hereto. Except as expressly stated herein, the Revolving Loan Agent and the Revolving Loan
Secured Parties reserve all rights, privileges and remedies under the Agreement.

 

5.Consent
to Amendment to Term Loan Agreement. Pursuant to Section 10.4 of the Agreement, the Revolving Loan Agent consents to the amendments
contained in that certain Second Financing Agreement and Note Modification Agreement, dated as of the date hereof, by and among
the Borrowers, the Term Loan Agent and the Term Loan Lenders, a copy of which is attached as Exhibit “A” hereto.

 

6.Further
Assurances. Each of the parties hereto acknowledges and agrees that it will execute and deliver, and cause the Revolving Loan
Secured Parties and the Term Loan Secured Parties, respectively, to execute and deliver, such additional documents and take such
additional action as may be necessary or desirable in the reasonable opinion of either of the Revolving Loan Agent or the Term
Loan Agent to effectuate the provisions and purposes of this Amendment.

 

7.Counterparts.
This Amendment may be executed by the parties hereto in any number of separate counterparts, each of which when so executed, shall
be deemed an original and all said counterparts when taken together shall be deemed to constitute but one and the same instrument.

 

8.GOVERNING
LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT
REGARD TO ITS CONFLICT OF LAWS PROVISIONS OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

 

9.Severability.
Wherever possible, each provision of this Amendment shall be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Amendment shall be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions
of this Amendment.

 

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

 

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

 

	 	TERM LOAN AGENT:
	 	 
	 	HILCO BRANDS, LLC
	 	 
	 	By: 	/s/ Eric W. Kaup
	 	 	Name: Eric W. Kaup
Title: Managing Director

 

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Each of the undersigned Borrowers hereby
acknowledges and agrees that: (i) although it has signed this acknowledgement, it is not a party to the Intercreditor Agreement,
and does not, and will not, receive any right, benefit, priority or interest under or because of the existence of the Intercreditor
Agreement, (ii) it will execute and deliver such additional documents and take such additional action as may be necessary or desirable
in the reasonable opinion of either of the Revolving Loan Agent or the Term Loan Agent to effectuate the provisions and purposes
of the Intercreditor Agreement, and (iii) it will cause any party that becomes a Borrower or Guarantor under the Revolving Loan
Documents or the Term Loan Documents to deliver a similar acknowledgment to this Agreement.

 

	 	BORROWERS:
	 	 
	 	FREDERICK’S OF HOLLYWOOD GROUP INC.
	 	 
	 	By: 	/s/ Thomas Rende
	 	 	Name: Thomas Rende
Title: Chief Financial Officer

 

	 	FOH HOLDINGS, INC.
	 	 
	 	By: 	/s/ Thomas Rende
	 	 	Name: Thomas Rende
Title: Chief Financial Officer

 

	 	FREDERICK’S OF HOLLYWOOD, INC.
	 	 
	 	By: 	/s/ Thomas Rende
	 	 	Name: Thomas Rende
Title: Chief Financial Officer

 

	 	FREDERICK’S OF HOLLYWOOD STORES, INC.
	 	 
	 	By: 	/s/ Thomas Rende
	 	 	Name: Thomas Rende
Title: Chief Financial Officer

 

	 	HOLLYWOOD MAIL ORDER, LLC
	 	 
	 	By: 	FOH Holdings, Inc., its Manager
	 	 	 	 
	 	 	By:	/s/ Thomas Rende
	 	 	 	Name: Thomas Rende
Title: Chief Financial Officer

 

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