WAIVER AND AMENDMENT NO. 1 TO CREDIT AGREEMENT

Exhibit 10.1

WAIVER AND AMENDMENT NO. 1 TO CREDIT AGREEMENT

This Waiver and Amendment No. 1 to Credit Agreement, dated as of May 26, 2009 (this “Amendment ”), to Credit Agreement, dated as of August 11, 2008 (as hereafter amended, restated or otherwise modified, the “ Credit Agreement ”) is entered into by and among PERFUMANIA HOLDINGS, INC. (f/k/a E Com Ventures, Inc.), a Florida corporation (“ Perfumania Holdings ”), QUALITY KING FRAGRANCE, INC., a Delaware corporation (“ QKF ”), SCENTS OF WORTH, INC., a Florida corporation (“ Scents of Worth ”), FIVE STAR FRAGRANCE COMPANY, INC., a New York corporation (“ Five Star Fragrance ”), DISTRIBUTION CONCEPTS, LLC, a Florida limited liability company (“ Distribution Concepts ”), NORTHERN GROUP, INC., a New York corporation (“ Northern Group ”), PERFUMANIA, INC., a Florida corporation (“ Perfumania ”), MAGNIFIQUE PARFUMES AND COSMETICS, INC., a Florida corporation (“ Magnifique Parfumes ”), TEN KESEF II, INC., a Florida corporation (“ Ten Kesef ”) and PERFUMANIA PUERTO RICO, INC., a Puerto Rico corporation (“ Perfumania PR ”) (Perfumania Holdings, QKF, Scents of Worth, Five Star Fragrance, Distribution Concepts, Northern Group, Perfumania, Magnifique Parfumes, Ten Kesef and Perfumania PR are sometimes collectively referred to herein as the “ Borrowers ” and individually as a “ Borrower ”); the other Credit Parties signatory thereto (each a “ Credit Party ” and, collectively, the “ Credit Parties ”); and General Electric Capital Corporation, for itself, as Lender, and as Agent for Lenders (in such capacity, “ Agent ”), and the other Lenders signatory hereto.

RECITALS

A. Borrowers, Agent and Lenders are desirous of making specific amendments to the Credit Agreement, as and to the limited extent expressly set forth herein.

B. Events of Default have occurred and currently exist under the Credit Agreement as a result of (i) Borrowers’ breach of the financial covenant set forth in Section (d)  of Annex G to the Credit Agreement, for the period ended on or about October 31, 2008, (ii) Borrowers’ breach of Section 6.1 of the Credit Agreement as a result of the purchase by Magnifique Parfumes and Cosmetics, Inc. of the inventory and fixtures of three (3) retail stores from The Fragrance Depot, Inc. (which after the purchase changed its name) in the Sawgrass and Dolphin Malls in Florida and the assumption of the related leases for a purchase price of $1,500,000 plus the value of the inventory (approximately $245,000) and the formation of a new wholly-owned subsidiary of Magnifique Parfumes and Cosmetics, Inc., The Fragrance Depot, Inc., a Florida corporation, which holds no assets and engages in no business, formed to reserve the corporate name “Fragrance Depot,” (iii) the existence of another subsidiary, E Com Ventures Company (f/k/a PerHold FL, Inc.), wholly-owned by Perfumania Holdings which has no assets or business and was formed to hold the E com name, but was not listed on Schedule 3.8 to the Credit Agreement, (iv) Borrowers’ breach of the financial covenants set forth in Sections (a) , (b)  and (d)  of Annex G to the Credit Agreement, for the period ended January 31, 2009, (v) Borrowers’ breach of Section (a) of Annex E to the Credit Agreement based on failure to deliver the monthly financial information for the Fiscal Month of January 2009 and

(vi) Borrowers’ breach of Section (d) of Annex F to the Credit Agreement based on the failure to deliver the annual audited Financial Statements for the Fiscal Year ended on or about January 31, 2009 (the “ Existing Events of Default ”);

C. Agent and Lenders are willing to grant a waiver limited to the Existing Events of Default, as set forth in, and subject to the terms and conditions of, this Amendment;

D. This Amendment shall constitute a Loan Document and these Recitals shall be construed as part of this Amendment.

NOW THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, and of the Loans and other extensions of credit heretofore, now or hereafter made to, or for the benefit of, Borrowers by Lenders, Borrowers, Agent and Lenders hereby agree as follows:

1. Definitions . Except to the extent otherwise specified herein, capitalized terms used in this Amendment shall have the same meanings ascribed to them in the Credit Agreement.

2. Amendments .

2.1. Section 1.5(a) of the Credit Agreement is hereby amended by it in its entirety and replacing it with the following:

“(a) Borrowers shall pay interest to Agent, for the ratable benefit of Lenders in accordance with the various Loans being made by each Lender, in arrears on each applicable Interest Payment Date, at the following rates: (i) with respect to the Revolving Credit Advances, the Index Rate plus the Applicable Revolver Index Margin per annum or, at the election of Borrower Representative, the applicable LIBOR Rate plus the Applicable Revolver LIBOR Margin per annum; and (ii) with respect to the Swing Line Loan, the Index Rate plus the Applicable Revolver Index Margin per annum.

The Applicable Margins shall be set in accordance with the following grid:

2.2. Section 1.14 of the Credit Agreement is hereby amended by deleting the first sentence thereof in its entirety and replacing it with the following:

“Each Credit Party that is a party hereto shall, during normal business hours, from time to time upon five (5) Business Days prior notice as frequently as Agent reasonably determines to be appropriate: (a) provide Agent and any of its officers, employees and agents access to its properties, facilities, advisors, officers and employees of each Credit Party and to the Collateral,

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(b) permit Agent, and any of its officers, employees and agents, to inspect, audit and make extracts from any Credit Party’s books and records, and (c) permit Agent, and its officers, employees and agents, to inspect, review, evaluate and make test verifications and counts of the Accounts, Inventory and other Collateral of any Credit Party (it being understood that at least three field examinations will be conducted per year).”

2.3. Section 6.13 of the Credit Agreement is hereby amended by deleting clauses (e), (f) and (g) thereof in their entirety.

2.4. Section 6 of the Credit Agreement is hereby amended by adding the following new Section 6.18 :

“6.18 Subsidiary Restrictions . Neither The Fragrance Depot, Inc., a Florida corporation wholly-owned by Magnifique Parfumes nor E Com Ventures Company (f/k/a PerHold FL, Inc.), a Florida corporation wholly-owned by Perfumania Holdings shall engage in any trade or business, or own any assets or incur any liabilities, Indebtedness or Guaranteed Indebtedness.”

2.5. Annex A of the Credit Agreement is hereby amended by deleting clause (b) in the definition of “Borrowing Base” and replacing it with the following:

“(b) beginning with the first Borrowing Base Certificate delivered after the date of Waiver and Amendment No. 1 to this Agreement, up to 85% of the appraised net orderly liquidation value percentage (from the most recently completed and delivered appraisal of Borrowers’ Inventory pursuant to this Agreement; provided , that , during the period beginning December 16 and ending December 31 of each year, the net orderly liquidation value percentage for the immediately following month of January shall be used in this calculation) of Eligible Inventory, valued at the lower of cost (determined on a weighted average basis, which approximates a first-in, first-out basis) or market;

provided , further , that the maximum amount of Eligible Inventory used in determining the Borrowing Base (and to which the advance rate determined under clause (b) above shall be applied) shall not exceed the amount set forth below for each applicable month end set forth below:

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2.6. Annex A of the Credit Agreement is hereby amended by deleting the definition of “Index Rate” in its entirety and replacing it with the following:

“‘ Index Rate ’ means, for any day, a floating rate equal to the highest of (i) the rate publicly quoted from time to time by The Wall Street Journal as the “prime rate” (or, if The Wall Street Journal ceases quoting a prime rate, the highest per annum rate of interest published by the Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled “Selected Interest Rates” as the Bank prime loan rate or its equivalent), (ii) the Federal Funds Rate plus 50 basis points per annum, and (iii) the sum of (x) the LIBOR Rate for a LIBOR Period of three (3) months as it appears on Reuters Screen LIBOR01 Page as of 11:00 a.m (London, England time) two (2) Business Days prior to such day, plus (y) the excess of the Applicable Revolver LIBOR Margin over the Applicable Revolver Index Margin, in each instance, as of such day. Each change in any interest rate provided for in the Agreement based upon the Index Rate shall take effect at the time of such change in the Index Rate.”

2.7. Annex A of the Credit Agreement is hereby amended by adding the following sentence to the definition of “LIBOR Rate”:

“Notwithstanding the foregoing, the LIBOR Rate shall in no event be less than 2.00%.”

2.8. Annex A of the Credit Agreement is hereby amended by adding the following definition of “Short-Term Advances to Suppliers” in the appropriate alphabetical order:

“‘ Short-Term Advances to Suppliers ’ means Advances to Suppliers if, and only to the extent that, a Credit Party or Credit Parties shall receive Inventory shipments within five (5) Business Days from the applicable supplier to which such Advances have been paid.”

2.9. Annex E of the Credit Agreement is hereby amended by deleting clause (c) and replacing it with the following:

(c) Operating Plan . To Agent and Lenders, (i) as soon as available, but not later than the end of each Fiscal Year, an annual operating plan for Borrowers, on a combined and, commencing with the Projections for the Fiscal Year ending on or about month-end, January, 2010, combining basis consistent with the historical Financial Statements of Borrowers, approved by the Board of Directors of each of the Borrowers, for the following Fiscal Year, which (A) includes a statement of all of the material assumptions on which such plan is based, (B) includes monthly balance sheets, income statements and statements of cash flows for the following year and (C) integrates sales, gross profits, operating expenses, operating profit, cash flow projections and Borrowing Availability projections, all prepared on the same basis and in similar detail as that on which operating results are reported (and in the case of cash flow projections, representing management’s good faith estimates of future financial performance based on historical performance), and including plans for personnel, Capital Expenditures and facilities; and (ii) thirty (30) days after the end of the Fiscal Years

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ended January 31, 2010 and January 31, 2011, a one-year operating plan for Borrowers, on a combined and combining basis consistent with the historical Financial Statements of Borrowers, approved by the Board of Directors of each of the Borrowers, for the Fiscal Year ended on or about month-end January, 2011 or January, 2012, as the case may be, which (A) includes a statement of all of the material assumptions on which such plan is based