Frederick's of Hollywood in deal with HGI Funding

The members of the Consortium as a group beneficially own approximately 88.6% of the Company's common stock. The acquisition will be accomplished through FOHG Holdings, LLC ("Holdings"), an entity controlled by the Consortium that was formed for the purpose of the transaction.

Under the merger agreement, the Company's shareholders who are not members of the Consortium will receive $0.27 per share in cash upon completion of the transaction.

The price represents a premium of 50% to the closing price of the Company's shares on September 27, 2013, the last trading day before the announcement by the Consortium of its proposal, and a premium of 46% over the average closing price of the Company's common stock for the 45 trading days prior to that date.

The Company's board of directors delegated to its lead independent, disinterested director the authority to review the initial transaction proposal from, and negotiate terms of the proposal with, the Consortium, with the assistance of legal and financial advisors.

The lead director completed a thorough review of the proposal, considered alternatives, negotiated improved terms of the Consortium's proposal and concluded that the transaction with the Consortium was fair to and in the best interests of the Company's shareholders other than the members of the Consortium. Based on the recommendation of the lead director, the merger agreement was also approved by the full board other than William Harley and Thomas Lynch, who recused themselves from the deliberations.

In addition, in connection with the execution of the merger agreement, the Company and Holdings entered into a new employment agreement with Thomas Lynch, chief executive officer of the Company, which will take effect only upon the consummation of the merger. Under the new employment agreement, Mr. Lynch agreed to continue to serve as chief executive officer for three years following the merger.

Completion of the transaction is subject to certain customary conditions, including receipt of shareholder approval. The merger agreement must be approved by the affirmative vote of the holders of at least two-thirds of all outstanding shares of the Company's common stock.

Frederick's of Hollywood