EXHIBIT 10.4







 


 





THE SECURITIES REPRESENTED BY THIS WARRANT
HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”). THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT (THE “WARRANT SHARES”)
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE SECURITIES ACT OR UNDER
STATE SECURITIES LAWS. THIS WARRANT AND THE WARRANT SHARES MAY NOT BE PLEDGED, SOLD, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO THE EXPRESS PROVISIONS OF THIS WARRANT, AND NO SALE, ASSIGNMENT, TRANSFER, OR OTHER DISPOSITION OF THIS WARRANT
SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH PROVISIONS SHALL HAVE BEEN COMPLIED WITH.


 


Date of Issuance: March 15, 2013


 


FREDERICK’S OF HOLLYWOOD GROUP INC.


 


Common Stock Purchase Warrant


 


Void after June 23, 2017


 


Frederick’s of
Hollywood Group Inc., a New York corporation (the “Company”), for value received, hereby certifies and
agrees that Five Island Asset Management LLC or its registered assigns (the “Registered Holder”), is
entitled, subject to the terms set forth below, to purchase from the Company, on or after the date hereof (the “Date
of Issuance”) and on or before June 23, 2017 at not later than 5:00 p.m. New York time, five hundred thousand
(500,000) duly authorized, validly issued, fully paid and nonassessable shares of the Company’s common stock, $0.01 par value
per share (the “Common Stock”) at an initial exercise price equal to $0.53 per share, in each case,
subject to adjustment in certain cases as described herein. The shares purchasable upon exercise of this Warrant, and the purchase
price per share, are hereinafter referred to as the “Warrant Shares” and the “Exercise Price,”
respectively. The term “Warrant” as used herein shall include this Warrant and any other warrants delivered
in substitution or exchange therefor, as provided herein.


 


This Warrant is issued
pursuant to that certain Series B Preferred Stock Purchase Agreement of even date herewith between the Company and the Registered
Holder (the “Purchase Agreement”). The Warrant Shares are entitled to the benefits of the registration
rights set forth in the Purchase Agreement and the annexes and exhibits thereto.


 






    	 



    	 



    

  





 


1.                 
Exercise.


 


1.1             
Method of Exercise.


 


(a)               
Reference is hereby made to that certain common stock purchase warrant, dated as of May 23, 2012, issued by the Company
with an initial exercise price of $0.53 and a maturity date of May 23, 2017 (the “Corresponding Warrant”).
This Warrant may only be exercised by the Registered Holder, in whole or in part, (x) upon the exercise of the Corresponding Warrant
by the holder thereof and (y) by surrendering this Warrant, with a Notice of Exercise in the form of Annex A hereto duly
executed by such Registered Holder or by such Registered Holder’s duly authorized attorney, at the principal office of the
Company set forth in Section 10 hereof, or at such other office or agency as the Company may designate in writing pursuant to Section
10 hereof, accompanied by payment in full with good, cleared funds, in lawful money of the United States, of the Exercise Price
payable in respect of the number of shares of Warrant Shares purchased upon such exercise or by a cashless exercise pursuant to
Section 1.2 below.


 


(b)              
The Company shall provide written notice to the Registered Holder of this Warrant immediately upon the receipt of any notice
of exercise relating to the Corresponding Warrant.


 


(c)               
Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the date
of its surrender as provided in Section 1.1(a) hereof. At such time, the person or persons in whose name or names any certificates
for Warrant Shares shall be issuable upon such exercise as provided in Section 1.1(d) hereof shall be deemed to have become the
holder or holders of record of the Warrant Shares represented by such certificates.


 


(d)              
As soon as practicable after the exercise of this Warrant, in full or in part, and in any event within ten (10) days thereafter,
the Company, at its expense, will cause to be issued in the name of, and delivered to, the Registered Holder, or as such Registered
Holder (upon payment by such Registered Holder of any applicable transfer taxes) may direct.


 


(i)                
a certificate or certificates for the number of full Warrant Shares to which such Registered Holder shall be entitled upon
such exercise (or evidence that such Warrant Shares have been issued in the name of the Registered Holder in book entry form) plus,
in lieu of any fractional share to which such Registered Holder would otherwise be entitled, cash in an amount determined pursuant
to Section 3 hereof; and


 


(ii)              
in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor, representing in
the aggregate on the face or faces thereof the number of Warrant Shares equal (without giving effect to any adjustment therein)
to the number of such shares called for on the face of this Warrant minus the number of such shares purchased by the Registered
Holder upon such exercise as provided herein.


 


1.2             
Cashless Exercise of Warrant. In addition to the method of payment set forth in Section 1.1 and in lieu of
any cash payment required thereunder, the Registered Holder may elect to receive the number of shares of Common Stock equal to
the product of (x) the number of Warrant Shares multiplied by (y) a fraction, the numerator of which is the Market Value (as defined
below) of the Common Stock less the Exercise Price and the denominator of which is such Market Value. As used herein, the phrase
“Market Value” at any date shall be deemed to be the volume weighted average of the last reported sale
prices of the Common Stock for the last ten (10) Trading Days prior to the date of exercise, as officially reported by the principal
securities exchange on which the Common Stock is listed or admitted to trading, or, if the Common Stock is traded “over
the counter”, by a quotation system (including the pink sheets or Nasdaq OTC Electronic Bulletin Board) covering such trades
or if the Common Stock is not listed or admitted to trading on any national securities exchange or sold “over the counter,”
the average closing bid price as furnished by the Financial Industry Regulatory Authority through Nasdaq or similar organization
if Nasdaq is no longer reporting such information, or if the Common Stock is not quoted on Nasdaq or traded “over the counter,”
as determined in good faith by resolution of the Board of Directors of the Company (the “Board of Directors”),
based on the best information available to it. “Trading Day” shall mean a day during which trading in
securities generally occurs in the applicable securities market or on the principal securities exchange or bulletin board on which
the Common Stock is then traded, listed or quoted.


 






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2.                 
Shares to be Fully Paid; Reservation of Shares. The Company covenants that all shares of Common Stock which
may be issued upon the exercise of the rights represented by this Warrant will, upon issuance by the Company, be duly and validly
issued, fully paid and nonassessable, and free from preemptive rights and free from all taxes, liens, duties and charges with
respect thereto and, in addition, the Company covenants that it will from time to time take all such action as may be requisite
to assure that the par value per share of the Common Stock is at all times equal to or less than the effective Exercise Price.
The Company further covenants that, from and after the Date of Issuance and during the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have authorized and reserved, free from preemptive rights, out
of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the exercise of this Warrant, a sufficient
number of shares of Common Stock to provide for the exercise of the rights represented by this Warrant. If at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to effect the exercise of this Warrant, the Company
shall take any and all corporate action as is necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose. The Company will take all such action within its control as may be necessary
on its part to assure that all such shares of Common Stock may be so issued without violation of any applicable law or regulation,
or of any requirements of any national securities exchange upon which the Common Stock of the Company may be listed.


 


3.                 
Fractional Shares. The Company shall not be required upon the exercise of this Warrant to issue any fractional
shares, but shall make an adjustment therefor in cash on the basis of the Market Value for each fractional share of the Company’s
Common Stock which would be issuable upon exercise of this Warrant.


 


4.                 
Requirements for Transfer.


 


(a)               
Warrant Register. The Company will maintain a register (the “Warrant Register”) containing
the names and addresses of the Registered Holder or Registered Holders. Any Registered Holder of this Warrant or any portion thereof
may change its address as shown on the Warrant Register by written notice to the Company requesting such change, and the Company
shall promptly make such change. Until this Warrant is transferred on the Warrant Register of the Company, the Company may treat
the Registered Holder as shown on the Warrant Register as the absolute owner of this Warrant for all purposes, notwithstanding
any notice to the contrary, provided, however, that if and when this Warrant is properly assigned in blank, the Company may, but
shall not be obligated to, treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to
the contrary.


 






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(b)              
Warrant Agent. The Company may, by written notice to the Registered Holder, appoint an agent for the purpose of maintaining
the Warrant Register referred to in Section 4(a) hereof, issuing the Common Stock issuable upon the exercise of this Warrant, exchanging
this Warrant, replacing this Warrant or any or all of the foregoing. Thereafter, any such registration, issuance, exchange, or
replacement, as the case may be, may be made at the office of such agent.


 


(c)               
Transfer. Subject to the provisions of applicable securities laws and this Section 4, this Warrant and all rights
hereunder are transferable, in whole or in part, upon the surrender of this Warrant with a properly executed Assignment Form in
substantially the form attached hereto as Annex B (the “Assignment”) at the principal office of
the Company.


 


(d)              
Exchange of Warrant Upon a Transfer. On surrender of this Warrant for exchange, properly endorsed on the Assignment
and subject to the provisions of this Warrant and limitations on assignments and transfers as contained in this Section 4, the
Company at its expense shall issue to or on the order of the Registered Holder a new warrant or warrants of like tenor, in the
name of the Registered Holder or as the Registered Holder (on payment by the Registered Holder of any applicable transfer taxes)
may direct, for the number of shares issuable upon exercise hereof.


 


5.                 
Adjustments and Other Rights. The Exercise Price and the number of Warrant Shares issuable upon exercise
of this Warrant shall be subject to adjustment from time to time as follows; provided,
that if more than one subsection of this Section 5 is applicable to a single event, the subsection shall be applied that
produces the largest adjustment and no single event shall cause an adjustment under more than one subsection of this Section 5
so as to result in duplication.


 


5.1             
Stock Dividends – Split-Ups. If after the Date of Issuance, and subject to the provisions of Section
5.7 below, the number of outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock,
or by a split-up of shares of Common Stock, or other similar event, then, on the effective date of such stock dividend, split-up
or similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall be increased in proportion to
such increase in outstanding shares of Common Stock.


 


5.2             
Aggregation of Shares. If after the Date of Issuance, and subject to the provisions of Section 5.7, the number
of outstanding shares of Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of
shares of Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split,
reclassification or similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall be decreased
in proportion to such decrease in outstanding shares of Common Stock.


 






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5.3             
Adjustments in Exercise Price. Whenever the number of shares of Common Stock purchasable upon the exercise
of the Warrants is adjusted, as provided in Sections 5.1 and 5.2 above, the Exercise Price shall be adjusted (to the nearest
cent) by multiplying such Exercise Price immediately prior to such adjustment by a fraction (x) the numerator of which shall be
the number of shares of Common Stock purchasable upon the exercise of the Warrants immediately prior to such adjustment, and (y)
the denominator of which shall be the number of shares of Common Stock so purchasable immediately thereafter.


 


5.4             
Replacement of Securities upon Reorganization, Etc. In case of any reclassification or reorganization of
the outstanding shares of Common Stock (other than a change covered by Section 5.1 or 5.2 hereof or that solely affects the par
value of such shares of Common Stock), or in the case of any merger or consolidation of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the continuing corporation and that does not result in any reclassification
or reorganization of the outstanding shares of Common Stock), or in the case of any sale or conveyance to another corporation
or entity of all or substantially all of the assets or all or substantially all other property of the Company, as an entirety
or substantially as an entirety, in connection with which the Company is dissolved, the Registered Holder shall thereafter have
the right to purchase and receive, upon the basis and upon the terms and conditions specified in the Warrants and in lieu of the
shares of Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented
thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification,
reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the Registered Holder
would have received if such Registered Holder had exercised his, her or its Warrant(s) immediately prior to such event; and if
any reclassification also results in a change in the number of shares of Common Stock covered by Section 5.1 or 5.2, then such
adjustment shall be made pursuant to Sections 5.1, 5.2, 5.3 and this Section 5.4. The provisions of this Section 5.4 shall similarly
apply to successive reclassifications, reorganizations, mergers or consolidations, sales or other transfers.


 


5.5             
Other Events. For so long as the Registered Holder holds this Warrant
or any portion thereof, if any event occurs as to which the provisions of this Section 5 are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board of Directors, fairly and adequately protect the purchase
rights of the Warrants in accordance with the essential intent and principles of such provisions, then the Board of Directors shall
make such adjustments in the application of such provisions, in accordance with such essential intent and principles, as shall
be reasonably necessary, in the good faith opinion of the Board of Directors, to protect such purchase rights as aforesaid. The
Exercise Price or the number of Warrant Shares into which this Warrant is exercisable shall not be adjusted in the event of a change
in the par value of the Common Stock or a change in the jurisdiction of incorporation of the Company.


5.6             
Adjustment Rules. Any adjustments pursuant to this Section 5
shall be made successively whenever an event referred to herein shall occur.


 






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5.7             
Form of Warrant. The form of Warrant need not be changed because of any adjustment pursuant to this Section
5, and Warrants issued after such adjustment may state the same Exercise Price and the same number of shares as is stated in the
Warrants initially issued pursuant to the Purchase Agreement. However, the Company may at any time in its sole discretion make
any change in the form of Warrant that the Company may deem appropriate and that does not affect the substance thereof, and any
Warrant thereafter issued or countersigned, whether in exchange or substitution for an outstanding Warrant or otherwise, shall
be in the form as so changed.


5.8             
Payment of Taxes. The Company will pay all taxes (other than taxes
based upon income) and other governmental charges that may be imposed with respect to the issue or delivery of shares of Common
Stock upon exercise of the Warrant, excluding any tax or other charge imposed in connection with any transfer involved in the issue
and delivery of shares of Common Stock in a name other than that in which the Warrants so exercised were registered.


6.                 
No Impairment. The Company will not, by amendment of its Certificate of Incorporation, as amended (the “Certificate
of Incorporation”), or through any reorganization, recapitalization, sale or transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant but will at all times in good faith carry out all such terms and take all such actions as
may be reasonably necessary or appropriate in order to protect the rights herein of the holder of this Warrant against dilution
or other impairment.


 


7.                 
Notices of Record Date, Etc. In case the Company shall take a record of the holders of its Common Stock (or
other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling
them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of stock of
any class or any other securities, or to receive any other right; or of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the surviving entity), or any transfer of all or substantially all of the assets
of the Company; or of the voluntary or involuntary dissolution, liquidation or winding-up of the Company, then, and in each such
case, the Company will mail or cause to be mailed to the Registered Holder of this Warrant a notice specifying, as the case may
be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount
and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification,
consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock (or such other stock or securities at the time deliverable upon the exercise
of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities
or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation
or winding-up. The Company will use commercially reasonable efforts to cause such notice to be mailed promptly, and in any event,
at least ten (10) business days prior to the record date or effective date for the event specified in such notice unless such
prior notice is waived by the Registered Holder in writing.


 






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8.                 
No Rights of Shareholders. Subject to other Sections of this Warrant and the provisions of the Purchase Agreement
and the Certificate of Incorporation, the Registered Holder shall not be entitled to vote, to receive dividends or subscription
rights, nor shall anything contained herein be construed to confer upon the Registered Holder, as such, any of the rights of a
shareholder of the Company, including without limitation any right to vote for the election of directors or upon any matter submitted
to shareholders, to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification
of stock, change of par value or change of stock to no par value, consolidation, merger, conveyance, or otherwise), to receive
notices, or otherwise, until the Warrant shall have been exercised as provided herein.


 


9.                 
Replacement of Warrant. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement
reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company
will issue, in lieu thereof, a new Warrant of like tenor.


 


10.             
Mailing of Notices, Etc. All notices, requests, consents, and other communications in connection with this
Warrant shall be in writing and shall be deemed delivered (i) three (3) business days after being sent by registered or certified
mail, return receipt requested, postage prepaid, (ii) one (1) business day after being sent via a reputable overnight courier
service guaranteeing next business day delivery in the Registered Holder’s country or region, or (iii) on actual receipt
if delivered by facsimile or by hand, in each case delivery shall be made to the intended recipient as set forth below:


 


If to the Company:


 


Frederick’s of Hollywood Group Inc.

6255 Sunset Blvd., 6th Floor

Hollywood, CA 90028

Facsimile No.: (323) 464−4219

Attention: Thomas J. Lynch, Chief Executive Officer


 


With a copy to:


 


Graubard Miller

405 Lexington Avenue

New York, New York 10174

Facsimile No.: (212) 818−8881

Attention: David Alan Miller, Esq.


 


If to the Registered Holder:


 


To the address set
forth in the Warrant Register as described in Section 4 hereof.


 


 


 


11.             
Change or Waiver. Any term of this Warrant may be changed or waived only by an instrument in writing signed
by the party against which enforcement of the change or waiver is sought.


 






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12.             
Headings. The headings in this Warrant are for purposes of reference only and shall not limit or otherwise
affect the meaning of any provision of this Warrant.


 


13.             
Severability. If any provision of this Warrant shall be held to be invalid and unenforceable, such invalidity
or unenforceability shall not affect any other provision of this Warrant.


 


14.             
Governing Law and Submission to Jurisdiction. This Warrant will be governed by and construed in accordance
with the laws of the State of New York without regard to principles of conflict or choice of laws of any jurisdiction (other than
§ 5-1401 of the New York General Obligations Law). The parties hereby agree that any action, proceeding or claim against
it arising out of, or relating in any way to this Warrant shall be brought and enforced in the courts of the State of New York,
and irrevocably submit to such jurisdiction, which jurisdiction shall be exclusive.


 


15.             
Supplements and Amendments. The Company and the Registered Holder may from time to time supplement or amend
this Warrant in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or
inconsistent with any provision herein, or to make any other provisions in regard to matters or questions arising hereunder which
the Company and the Registered Holder may deem necessary or desirable.


 


16.             
Successors. All the covenants and provisions of this Warrant shall be binding upon and inure to the benefit
of the Company and the Registered Holder and their respective successors and assigns hereunder.


 


17.             
Benefits of this Warrant. Nothing in this Warrant shall be construed to give to any person, entity or corporation
other than the Company and the Registered Holder of the Warrant any legal or equitable right, remedy or claim under this Warrant;
and this Warrant shall be for the sole and exclusive benefit of the Company and the Registered Holder of the Warrant.


 


[SIGNATURE PAGE FOLLOWS]


 






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IN WITNESS WHEREOF, FREDERICK’S
OF HOLLYWOOD GROUP INC. has caused this Warrant to be signed by its duly authorized officers under its corporate seal and to be
dated on the day and year first written above.


 


 


 


	 	FREDERICK’S OF HOLLYWOOD GROUP INC.
	 	 
	 	By: 	/s/ Thomas J. Lynch
	 	Name:	Thomas J. Lynch
	 	Title:	Chief Executive Officer



 






    	 



    	 



    






 





ANNEX A


 


NOTICE OF EXERCISE FORM


 





	To:	Dated:










 


In accordance with
the Warrant enclosed with this Form of Election to Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of common stock (“Common Stock”), $.01 par value per share, of Frederick’s of Hollywood
Group Inc. (“Company”) and encloses herewith $________ in cash, certified or official bank check or checks
or other immediately available funds, which sum represents the aggregate Exercise Price (as defined in the Warrant) for the number
of shares of Common Stock to which this Form of Election to Purchase relates, together with any applicable taxes payable by the
undersigned pursuant to the Warrant.


 


or


 


In accordance with
the Warrant enclosed with this Form of Election to Purchase, the undersigned hereby irrevocably elects to purchase ____________
shares of common stock (“Common Stock”), $.01 par value per share, of Frederick’s of Hollywood
Group Inc. (“Company”) by surrender of the unexercised portion of the attached Warrant (with a “Market
Value” of $____).


 


The undersigned hereby
represents, warrants to, and agrees with, the Company that:


 


(i) He/She/It is acquiring
the Warrant Shares for his/her/its own account and not with a view towards the distribution thereof;


 


(ii) He/She/It has
received a copy of all reports and documents required to be filed by the Company with the United States Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as amended, within the last 12 months and all reports issued by the
Company to its shareholders;


 


(iii) He/She/It understands
that he/she/it must bear the economic risk of the investment in the Warrant Shares, which cannot be sold unless they are registered
under the Securities Act of 1933 (the “Securities Act”) or an exemption therefrom is available thereunder
and that the Company is under no obligation to register the Warrant Shares for sale under the Securities Act;


 


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


 


 





	Signature:  	 
	 	 
	Address:  	 








 






    	 



    	 



    




 





ANNEX B


 


ASSIGNMENT FORM


 


FOR VALUE RECEIVED,
_________________________________ hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant
with respect to the number of shares of Common Stock covered thereby set forth below, unto:


 


	
        Name
of Assignee
	
        Address 
	
        No.
of Shares 

	 	 	 
	 	 	 
	 	 	 


 





	Dated:	 
	 	 
	Signature:	 
	 	 
	Dated:	 
	 	 
	Witness: