Document:

Unassociated Document

    EXHIBIT
10.4

     

    NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AND,
UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT, AS EVIDENCED BY A
LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF
WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER BONA FIDE LOAN SECURED BY
SUCH SECURITIES AND WHO AGREES IN WRITING TO BE BOUND BY THE PROVISIONS OF THAT
CERTAIN SECURITIES PURCHASE AGREEMENT DATED AS OF MARCH 16, 2010 OR SEPARATE
PURCHASE AGREEMENT DATED AS OF EVEN DATE, AS APPLICABLE, AND THAT CERTAIN
REGISTRATION RIGHTS AGREEMENT DATED AS OF MARCH 16, 2010.

     

    SERIES
B COMMON STOCK PURCHASE WARRANT

     

    FREDERICK’S
OF HOLLYWOOD GROUP INC.

     

    Warrant
No.: _______

     

    
      
        	
                Warrant
      Shares:  _______

              	 
      	
                Issuance
      Date:  March 16,
2010

              

      

    

     

    THIS
SERIES B COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies
that, for value received, _____________ (the “Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the six month anniversary of the
date hereof (the “Initial Exercise
Date”) and on or prior to the close of business on the five (5) year
anniversary of the Initial Exercise Date (the “Termination Date”)
but not thereafter, to subscribe for and purchase from Frederick’s of Hollywood
Group Inc., a New York corporation (the “Company”), up to
______ shares (the “Warrant Shares”) of
Common Stock.  The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in Section
2(b).

     

    Section
1.       Definitions.  Capitalized
terms used and not otherwise defined herein shall have the meanings set forth in
that certain Securities Purchase Agreement (the “Purchase Agreement”),
dated March 16, 2010, among the Company and the purchasers signatory thereto or
a separate purchase agreement dated as of even date among the Company and the
purchaser signatory thereto, as applicable.

     

    Section
2.       Exercise.

     

    (a)     Exercise of
Warrant.  Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the
Initial Exercise Date and on or before the Termination Date by delivery to the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder at the address of the Holder
appearing on the books of the Company) of a duly executed facsimile copy of the
Notice of Exercise Form annexed hereto; and, within three (3) Trading Days of
the date said Notice of Exercise is delivered to the Company, the Company shall
have received payment of the aggregate Exercise Price of the shares thereby
purchased by wire transfer or, if available, pursuant to the cashless exercise
procedure specified in Section 2(c) below.

     

    (b)     Exercise
Price.  The exercise price per share of the Common Stock under
this Warrant shall be $1.55, subject to
adjustment hereunder (the “Exercise
Price”).

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (c)      Cashless
Exercise.  This Warrant may also be exercised, in whole or in
part, at such time by means of a “cashless exercise” in which the Holder shall
be entitled to receive a certificate for the number of Warrant Shares equal to
the quotient obtained by dividing [(A-B) (X)] by (A), where:

     

    (A) = the
VWAP on the Trading Day immediately preceding the date on which Holder elects to
exercise this Warrant by means of a “cashless exercise,” as set forth in the
applicable Notice of Exercise;

     

    (B) = the
Exercise Price of this Warrant, as adjusted hereunder; and

     

    (X) = the
number of Warrant Shares that would be issuable upon exercise of this Warrant in
accordance with the terms of this Warrant if such exercise were by means of a
cash exercise rather than a cashless exercise.

     

    (d)      Mechanics of
Exercise.

     

    (i)         Delivery of Certificates
Upon Exercise.  Certificates for shares purchased hereunder
shall be transmitted by the Transfer Agent to the Holder by crediting the
account of the Holder’s prime broker with the Depository Trust Company through
its Deposit Withdrawal Agent Commission (“DWAC”) system if the
Company is then a participant in such system and either (A) there is an
effective Registration Statement permitting the resale of the Warrant Shares by
the Holder or (B) the shares are eligible for resale by the Holder without
volume or manner-of-sale limitations pursuant to Rule 144, and otherwise by
physical delivery to the address specified by the Holder in the Notice of
Exercise by the date that is three (3) Trading Days after the latest of (A) the
delivery to the Company of the Notice of Exercise Form, (B) surrender of this
Warrant, and (C) payment of the aggregate Exercise Price as set forth above
(including by cashless exercise, if permitted) (such date, the “Warrant Share Delivery
Date”).  This Warrant shall be deemed to have been exercised on
the first date on which all of the foregoing have been delivered to the
Company.  The Warrant Shares shall be deemed to have been issued, and
Holder or any other person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as of the date
the Warrant has been exercised, with payment to the Company of the Exercise
Price (or by cashless exercise, if permitted) and all taxes required to be paid
by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance of
such shares, having been paid.  If the Company fails for any reason to
deliver to the Holder certificates evidencing the Warrant Shares subject to a
Notice of Exercise by the third Trading Day following the Warrant Share Delivery
Date, the Company shall pay to the Holder, in cash, as liquidated damages and
not as a penalty, for each $1,000 of Warrant Shares subject to such exercise
(based on the VWAP of the Common Stock on the date of the applicable Notice of
Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth
Trading Day after such liquidated damages begin to accrue) for each Trading Day
after such Warrant Share Delivery Date until such certificates are delivered or
Holder rescinds such exercise.  Notwithstanding anything herein to the
contrary, the Company shall not be obligated to pay liquidated damages following
the date of a Buy-In (as hereinafter defined) by the holder.

     

    (ii)        Delivery of New Warrants
Upon Exercise.  If this Warrant shall have been exercised in
part, the Company shall, at the request of a Holder and upon surrender of this
Warrant certificate, at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased Warrant Shares called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant.

     

    (iii)      Rescission
Rights.  If the Company fails to cause the Transfer Agent to
transmit to the Holder a certificate or the certificates representing the
Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date,
then, the Holder will have the right to rescind such exercise.

     

    
      
         

      

      
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    (iv)      Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Exercise.  In
addition to any other rights available to the Holder, if the Company fails to
cause the Transfer Agent to transmit to the Holder a certificate or the
certificates representing the Warrant Shares pursuant to an exercise on or
before the third Trading Day following the Warrant Share Delivery Date, and if
after such date the Holder is required by its broker to purchase (in an open
market transaction or otherwise) or the Holder’s brokerage firm otherwise
purchases, shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares which the Holder anticipated receiving upon such
exercise (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder the amount by which (x) the Holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the
number of Warrant Shares that the Company was required to deliver to the Holder
in connection with the exercise at issue times (2) the price at which the sell
order giving rise to such purchase obligation was executed, and (B) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored or deliver to
the Holder the number of shares of Common Stock that would have been issued had
the Company timely complied with its exercise and delivery obligations
hereunder.  For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (A) of the immediately
preceding sentence the Company shall be required to pay the Holder
$1,000.  The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In and, upon
request of the Company, evidence of the amount of such loss.  Nothing
herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.

     

    (v)       No Fractional Shares or
Scrip.  No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant.  As to any
fraction of a share which the Holder would otherwise be entitled to purchase
upon such exercise, the Company shall, at its election, either pay a cash
adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Exercise Price or round up to the next whole
share.

     

    (vi)      Charges, Taxes and
Expenses.  Issuance of certificates for Warrant Shares shall be
made without charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate, all of which
taxes and expenses shall be paid by the Company, and such certificates shall be
issued in the name of the Holder or in such name or names as may be directed by
the Holder; provided, however, that in the event certificates for Warrant Shares
are to be issued in a name other than the name of the Holder, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the Holder and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.

     

    (vii)     Closing of
Books.  The Company will not close its stockholder books or
records in any manner which prevents the timely exercise of this Warrant,
pursuant to the terms hereof.

     

    (e)      Holder’s Exercise
Limitations.  The Company shall not effect any exercise of this
Warrant, and a Holder shall not have the right to exercise any portion of this
Warrant, pursuant to Section 2 or otherwise, to the extent that after giving
effect to such issuance after exercise as set forth on the applicable Notice of
Exercise, the Holder (together with the Holder’s Affiliates, and any other
Persons acting as a group together with the Holder or any of the Holder’s
Affiliates), would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below).  For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned by the Holder
and its Affiliates shall include the number of shares of Common Stock issuable
upon exercise of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which would be
issuable upon (i) exercise of the remaining, nonexercised portion of this
Warrant beneficially owned by the Holder or any of its Affiliates and (ii)
exercise or conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other Common Stock
Equivalents) subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Holder or any of its
Affiliates.  Except as set forth in the preceding sentence, for
purposes of this Section 2(e), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder, it being acknowledged by the Holder that the Company is
not representing to the Holder that such calculation is in compliance with
Section 13(d) of the Exchange Act and the Holder is solely responsible for any
schedules required to be filed in accordance therewith.  To the extent
that the limitation contained in this Section 2(e) applies, the determination of
whether this Warrant is exercisable (in relation to other securities owned by
the Holder together with any Affiliates) and of which portion of this Warrant is
exercisable shall be in the sole discretion of the Holder, and the submission of
a Notice of Exercise shall be deemed to be the Holder’s determination of whether
this Warrant is exercisable (in relation to other securities owned by the Holder
together with any Affiliates) and of which portion of this Warrant is
exercisable, in each case subject to the Beneficial Ownership Limitation, and
the Company shall have no obligation to verify or confirm the accuracy of such
determination.  In addition, a determination as to any group status as
contemplated above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated
thereunder.  For purposes of this Section 2(e), in determining the
number of outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in (A) the Company’s most recent
periodic or annual report filed with the Commission, as the case may be, (B) a
more recent public announcement by the Company or (C) a more recent written
notice by the Company or the Transfer Agent setting forth the number of shares
of Common Stock outstanding.  Upon the written or oral request of a
Holder, the Company shall within two Trading Days confirm orally and in writing
to the Holder the number of shares of Common Stock then
outstanding.  In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the conversion or exercise of
securities of the Company, including this Warrant, by the Holder or its
Affiliates since the date as of which such number of outstanding shares of
Common Stock was reported.  The “Beneficial Ownership
Limitation” shall be 4.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon exercise of this Warrant.  The Holder may decrease
or, upon not less than 61 days’ prior notice to the Company, may increase the
Beneficial Ownership Limitation provisions of this Section 2(e), provided that
the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon exercise of this Warrant held by the
Holder and the provisions of this Section 2(e) shall continue to
apply.  Any such increase will not be effective until the 61st day
after such notice is delivered to the Company.  The provisions of this
paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 2(e) to correct this paragraph
(or any portion hereof) which may be defective or inconsistent with the intended
Beneficial Ownership Limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such
limitation.  The limitations contained in this paragraph shall apply
to a successor holder of this Warrant.

     

    
      
         

      

      
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    (f)       Call
Provision.  Subject to the provisions of Section 2(e) and this
Section 2(f), if, on any date commencing thirty (30) days after the Initial
Exercise Date, (i) the closing sales price of the Common Stock for any period of
seven (7) consecutive Trading Days (the “Measurement Period”)
exceeds $3.10  (subject to adjustment for forward and reverse stock
splits, recapitalizations, stock dividends and the like after the Issue Date)
and (ii) the average daily volume for such Measurement Period exceeds 100,000
shares of Common Stock per Trading Day, then the Company may, within one (1)
Trading Day of the end of such Measurement Period, call for cancellation of all
or any portion of this Warrant for which a Notice of Exercise has not yet been
delivered (such right, a “Call”) for
consideration equal to $.01 per Warrant Share.  To exercise this
right, the Company must deliver to the Holder an irrevocable written notice (a
“Call Notice”),
indicating therein the portion of unexercised portion of this Warrant to which
such notice applies.  If the conditions set forth below for such Call
are satisfied from the period from the date of the Call Notice through and
including the Call Date (as defined below), then any portion of this Warrant
subject to such Call Notice for which a Notice of Exercise shall not have been
received by the Call Date will be cancelled at 6:30 p.m. (New York City time) on
the thirtieth (30th) Trading Day after the date the Call Notice is received by
the Holder (such date and time, the “Call
Date”).  Any unexercised portion of this Warrant to which the
Call Notice does not pertain will be unaffected by such Call
Notice.  In furtherance thereof, the Company covenants and agrees that
it will honor all Notices of Exercise with respect to Warrant Shares subject to
a Call Notice that are tendered through 6:30 p.m. (New York City time) on the
Call Date.  The parties agree that any Notice of Exercise delivered
following a Call Notice which calls less than all the Warrant Shares shall first
reduce to zero the number of Warrant Shares subject to such Call Notice prior to
reducing the remaining Warrant Shares available for purchase under this
Warrant.  For example, if (A) this Warrant then permits the Holder to
acquire 100 Warrant Shares, (B) a Call Notice pertains to 75 Warrant Shares, and
(C) prior to 6:30 p.m. (New York City time) on the Call Date the Holder tenders
a Notice of Exercise in respect of 50 Warrant Shares, then (x) on the Call Date
the right under this Warrant to acquire 25 Warrant Shares will be automatically
cancelled, (y) the Company, in the time and manner required under this Warrant,
will have issued and delivered to the Holder 50 Warrant Shares in respect of the
exercises following receipt of the Call Notice, and (z) the Holder may, until
the Termination Date, exercise this Warrant for 25 Warrant Shares (subject to
adjustment as herein provided and subject to subsequent Call
Notices).  Subject again to the provisions of this Section 2(f), the
Company may deliver subsequent Call Notices for any portion of this Warrant for
which the Holder shall not have delivered a Notice of
Exercise.  Notwithstanding anything to the contrary set forth in this
Warrant, the Company may not deliver a Call Notice or require the cancellation
of this Warrant (and any such Call Notice shall be void), unless, from the
beginning of the Measurement Period through the Call Date, (1) the Company shall
have honored in accordance with the terms of this Warrant all Notices of
Exercise delivered by 6:30 p.m. (New York City time) on the Call Date, and (2)
the Registration Statement shall be effective as to all Warrant Shares and the
prospectus thereunder available for the sale of all such Warrant Shares to the
Holder (and the Company has no reason to believe that the use of such prospectus
will be suspended or otherwise unavailable for a period of thirty (30) days from
such Call Date), and (3) the Common Stock shall be listed or quoted for trading
on the Trading Market, and (4) there is a sufficient number of authorized shares
of Common Stock for issuance of all Securities under the Transaction Documents,
and (5) the issuance of the Warrant Shares shall not cause a breach of any
provision of Section 2(e) herein and (6) the Company otherwise is in material
compliance with each covenant of any Transaction Document.  The
Company’s right to call the Warrants under this Section 2(f) shall be exercised
ratably among the Holders based on each Holder’s initial purchase of
Warrants.

     

    
      
         

      

      
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    Section
3.       Certain Adjustments.

     

    (a)      Stock Dividends and
Splits.  If the Company, at any time while this Warrant is
outstanding:  (i) pays a stock dividend or otherwise makes a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Company upon exercise of this Warrant), (ii) subdivides outstanding shares of
Common Stock into a larger number of shares, (iii) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller number of
shares or (iv) issues by reclassification of shares of the Common Stock any
shares of capital stock of the Company, then in each case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event, and the
number of shares issuable upon exercise of this Warrant shall be proportionately
adjusted such that the aggregate Exercise Price of this Warrant shall remain
unchanged.  Any adjustment made pursuant to this Section 3(a) shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.

     

    (b)      Subsequent Equity
Sales.  If the Company or any Subsidiary thereof, as
applicable, at any time while this Warrant is outstanding, shall sell or grant
any option to purchase, or sell or grant any right to reprice, or otherwise
dispose of or issue (or announce any offer, sale, grant or any option to
purchase or other disposition) any Common Stock or Common Stock Equivalents
entitling any Person to acquire shares of Common Stock, at an effective price
per share less than the then Exercise Price (such lower price, the “Base Share Price” and
such issuances collectively, a “Dilutive Issuance”)
(if the holder of the Common Stock or Common Stock Equivalents so issued shall
at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights per share which are issued in connection with
such issuance, be entitled to receive shares of Common Stock at an effective
price per share that is less than the Exercise Price, such issuance shall be
deemed to have occurred for less than the Exercise Price on such date of the
Dilutive Issuance), then, the Exercise Price shall be reduced to a price equal
to the Base Share Price (but in no event below $1.21, adjusted for any
subsequent stock splits, reverse splits and similar capital adjustments). Such
adjustment shall be made whenever such Common Stock or Common Stock Equivalents
are issued. Notwithstanding the foregoing, no adjustments shall be made, paid or
issued under this Section 3(b) in respect of an Exempt Issuance. The Company
shall notify the Holder, in writing, no later than the Trading Day following the
issuance of any Common Stock or Common Stock Equivalents subject to this Section
3(b), indicating therein the applicable issuance price, or applicable reset
price, exchange price, conversion price and other pricing terms (such notice,
the “Dilutive Issuance
Notice”).

     

    (c)      Fundamental
Transaction.  If, at any time while this Warrant is
outstanding, (i) the Company, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Company with or into
another Person, or (ii) the Company, directly or indirectly, in one or more
related transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property, (not including a migratory merger), (each a “Fundamental
Transaction”), then, upon any subsequent exercise of this Warrant, the
Holder shall have the right to receive, for each Warrant Share that would have
been issuable upon such exercise immediately prior to the occurrence of such
Fundamental Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the number of
shares of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and any additional consideration
(the “Alternate
Consideration”) receivable as a result of such Fundamental Transaction by
a holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction (without regard to
any limitation in Section 2(e) on the exercise of this Warrant).  For
purposes of any such exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration.  If holders of Common Stock are given any choice as to
the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction.  To the extent necessary to effectuate the foregoing
provisions, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder’s right to exercise such warrant
into Alternate Consideration.  The terms of any agreement pursuant to
which a Fundamental Transaction is effected shall include terms requiring any
such successor or surviving entity to comply with the provisions of this Section 3(d) and
insuring that this Warrant (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.  .

     

    
      
         

      

      
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    (d)      Calculations.  All
calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be.  For purposes of this
Section 3, the number of shares of Common Stock deemed to be issued and
outstanding as of a given date shall be the sum of the number of shares of
Common Stock (excluding treasury shares, if any) issued and
outstanding.

     

    (e)      Notice to
Holder.

     

    (i)         Adjustment to Exercise
Price.  Whenever the Exercise Price is adjusted pursuant to any
provision of this Section 3, the Company shall promptly mail to the Holder a
notice setting forth the Exercise Price after such adjustment and setting forth
a brief statement of the facts requiring such adjustment.

     

    (ii)         Notice to Allow Exercise by
Holder.  If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the Company shall
declare a special nonrecurring cash dividend on or a redemption of the Common
Stock, (C) the Company shall authorize the granting to all holders of the Common
Stock rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification of the Common
Stock, any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property, or (E) the Company shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the
Company, then, in each case, the Company shall cause to be mailed to the Holder
at its last address as it shall appear upon the Warrant Register of the Company,
at least 20 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders of
the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice.  To the extent that
any notice provided hereunder constitutes, or contains, material, non-public
information regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a Current Report
on Form 8-K.  The Holder shall remain entitled to exercise this
Warrant during the period commencing on the date of such notice to the effective
date of the event triggering such notice except as may otherwise be expressly
set forth herein.

     

    
      
         

      

      
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      Section
4.     Transfer of
Warrant.

       

      (a)        Transferability.  Subject
to compliance with any applicable securities laws and the conditions set forth
in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase
Agreement or the separate purchase agreement dated as of even date, as
applicable, this Warrant and all rights hereunder (including, without
limitation, any registration rights) are transferable, in whole or in part, upon
five (5) days written notice to the Company and the surrender of this Warrant at
the principal office of the Company or its designated agent, together with a
written assignment of this Warrant substantially in the form attached hereto
duly executed by the Holder or its agent or attorney and funds sufficient to pay
any transfer taxes payable upon the making of such transfer.  Upon
such surrender and, if required, such payment, the Company shall execute and
deliver a new Warrant or Warrants in the name of the assignee or assignees, as
applicable, and in the denomination or denominations specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled.  The Warrant, if properly assigned in
accordance herewith, may be exercised by a new holder for the purchase of
Warrant Shares without having a new Warrant issued.

       

      (b)        New
Warrants.  This Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or
attorney.  Subject to compliance with Section 4(a), as to any transfer
which may be involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to
be divided or combined in accordance with such notice.  All Warrants
issued on transfers or exchanges shall be dated the Issuance Date and shall be
identical with this Warrant except as to the number of Warrant Shares issuable
pursuant thereto.

       

      (c)        Warrant
Register.  The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the “Warrant Register”),
in the name of the record Holder hereof from time to time.  The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the
contrary.

       

      (d)        Transfer
Restrictions.  If, at the time of the surrender of this Warrant
in connection with any transfer of this Warrant, the transfer of this Warrant
shall not be either (i) registered pursuant to an effective registration
statement under the Securities Act and under applicable state securities or blue
sky laws or (ii) eligible for resale without volume or manner-of-sale
restrictions or current public information requirements pursuant to Rule 144,
the Company may require, as a condition of allowing such transfer, that the
Holder or transferee of this Warrant, as the case may be, comply with the
provisions of Section 4.1 of the Purchase Agreement or the separate purchase
agreement dated as of even date, as applicable.

       

      (e)        Representation by the
Holder.  Unless the Holder exercises this Warrant by cashless
exercise pursuant to Section 2(c), the Holder, by the acceptance hereof,
represents and warrants that it is acquiring this Warrant and, upon any exercise
hereof, will acquire the Warrant Shares issuable upon such exercise, for its own
account and not with a view to or for distributing or reselling such Warrant
Shares or any part thereof in violation of the Securities Act or any applicable
state securities law, except pursuant to sales registered or exempted under the
Securities Act.

       

      Section
5.     Miscellaneous.

       

      (a)        No Rights as Stockholder
Until Exercise.  This Warrant does not entitle the Holder to
any voting rights, dividends or other rights as a stockholder of the Company
prior to the exercise hereof as set forth in Section 2(d)(i).

       

      (b)        Loss, Theft, Destruction or
Mutilation of Warrant.  The Company covenants that upon receipt
by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant or any stock certificate relating to
the Warrant Shares, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it (which, in the case of the Warrant, shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.

       

      (c)        Saturdays, Sundays,
Holidays, etc.  If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not
be a Business Day, then, such action may be taken or such right may be exercised
on the next succeeding Business Day.

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      (d)        Authorized
Shares.  The Company covenants that, during the period the
Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this
Warrant.  The Company further covenants that its issuance of this
Warrant shall constitute full authority to its officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for the Warrant Shares upon the exercise of the purchase rights
under this Warrant.  The Company will take all such reasonable action
as may be necessary to assure that such Warrant Shares may be issued as provided
herein without violation of any applicable law or regulation, or of any
requirements of the Trading Market upon which the Common Stock may be
listed.  The Company covenants that all Warrant Shares which may be
issued upon the exercise of the purchase rights represented by this Warrant
will, upon exercise of the purchase rights represented by this Warrant and
payment for such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges created by the Company in respect of the issue thereof (other than taxes
in respect of any transfer occurring contemporaneously with such
issue).

       

      Except
and to the extent as waived or consented to by the Holder, the Company shall not
by any action, including, without limitation, amending its articles of
incorporation or through any reorganization, 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 assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant against
impairment.  Without limiting the generality of the foregoing, the
Company will (i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in
par value, (ii) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares upon the exercise of this Warrant and (iii) use reasonable best
efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof, as may be, necessary to
enable the Company to perform its obligations under this Warrant.

       

      Before
taking any action which would result in an adjustment in the number of Warrant
Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.

       

      (e)        Jurisdiction.  All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be determined in accordance with the provisions of the
Purchase Agreement or the separate purchase agreement dated as of even date, as
applicable.

       

      (f)        Restrictions.  The
Holder acknowledges that the Warrant Shares acquired upon the exercise of this
Warrant, if not registered and the Holder does not utilize cashless exercise,
will have restrictions upon resale imposed by state and federal securities
laws.

       

      (g)        Nonwaiver and
Expenses.  No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as a waiver of
such right or otherwise prejudice Holder’s rights, powers or remedies,
notwithstanding the fact that all rights hereunder terminate on the Termination
Date.  If the Company willfully and knowingly fails to comply with any
provision of this Warrant, which results in any material damages to the Holder,
the Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.

       

      (h)        Notices.  Any
notice, request or other document required or permitted to be given or delivered
to the Holder by the Company shall be delivered in accordance with the notice
provisions of the Purchase Agreement or the separate purchase agreement dated as
of even date, as applicable.

       

      (i)        Limitation of
Liability.  No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.

       

      (j)        Remedies.  The
Holder, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Warrant.  The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of this Warrant and hereby agrees to waive and not to
assert the defense in any action for specific performance that a remedy at law
would be adequate.

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

       

      (k)        Successors and
Assigns.  Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the benefit of
and be binding upon the successors and permitted assigns of the Company and the
successors and permitted assigns of Holder.  The provisions of this
Warrant are intended to be for the benefit of any Holder from time to time of
this Warrant and shall be enforceable by the Holder or holder of Warrant
Shares.

       

      (l)        Amendment.  This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Holder.

       

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

       

      (n)        Headings.  The
headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.

       

      ********************

       

      (Signature
Pages Follow)

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officer thereunto duly authorized as of the date first above
indicated.

       

      
        
          
            
              
                	
                        FREDERICK’S OF HOLLYWOOD GROUP
  INC.

                      
	 
      	 
      
	
                        By: 

                      	
                        /s/
      Thomas Rende

                      
	 
      	
                        Name:  Thomas
      Rende

                      
	 
      	
                        Title:    Chief
      Financial
Officer

                      

              

            

          

        

      

       

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

       

      NOTICE OF EXERCISE

       

      TO:  FREDERICK’S
OF HOLLYWOOD GROUP INC.

       

      (1)         The
undersigned hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in full), and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.

       

      (2)         Payment
shall take the form of (check applicable box):

       

      o     in
lawful money of the United States; or

       

      o     
[if permitted] the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection 2(c), to
exercise this Warrant with respect to the maximum number of Warrant Shares
purchasable pursuant to the cashless exercise procedure set forth in subsection
2(c).

       

      (3)         Please
issue a certificate or certificates representing said Warrant Shares in the name
of the undersigned or in such other name as is specified below:

       

      _______________________________

       

      The
Warrant Shares shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:

       

      _______________________________

       

      _______________________________

       

      _______________________________

       

      (4)         Accredited
Investor.  Unless the undersigned exercises this Warrant by
cashless exercise pursuant to Section 2(c) of the Warrant, the undersigned
hereby represents and warrants that it is an “accredited investor” as defined in
Regulation D promulgated under the Securities Act of 1933, as amended, and
satisfies the criteria set forth in Rule 501(a) therein.

       

      (5)         Legend.  Unless
otherwise permitted under the Securities Purchase Agreement, dated March 16,
2010, by and between the Company and each purchaser signatory thereto or the
separate purchase agreement dated as of even date, as applicable, the
certificates representing these securities will bear a legend restricting
transfer under the Securities Act and applicable state securities
laws.

       

      [SIGNATURE
OF HOLDER]

       

      Name of
Investing Entity:                                                                                                                         

       

      Signature
of Authorized Signatory of Investing Entity:                                                                       

       

      Name of
Authorized Signatory:                                                                                                                

       

      Title of
Authorized Signatory:                                                                                                                  

       

      Date:                                                

       

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

       

      ASSIGNMENT
FORM

       

      (To
assign the foregoing warrant, execute this form and supply required
information.

      Do not
use this form to exercise the warrant.)

       

      FOR VALUE
RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all
rights evidenced thereby are hereby assigned to

       

      _______________________________________________
whose address is

       

      _______________________________________________________________

       

      _______________________________________________________________.

       

      Dated:  ______________,
_______

       

      Holder’s
Signature:                                                                      
  

       

      Holder’s
Address:                                                                           

                                                                                 

                                                                                 

       

      Signature
Guaranteed:                                                                                                 

       

      NOTE:  The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust
company.  Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.

       

      
        
           

        

        
          12EXHIBIT 10.1

	 

INDEMNITY AGREEMENT

            THIS AGREEMENT is made and entered into as of the 17th day of March, 2010, by and
between ALL Fuels & Energy Company, a Delaware corporation (the “Corporation”), and Brad
Knaack (“Agent”).

RECITALS

 

WHEREAS, Agent performs a valuable service to the Corporation in his capacity as
a Director of the Corporation;

 

WHEREAS, the Corporation’s bylaws (the “Bylaws”) provide for the
indemnification of the directors, officers, employees and other agents of the
Corporation, including persons serving at the request of the Corporation in such
capacities with other corporations or enterprises, as authorized by the Delaware
General Corporation Law (the “GCL”);

 

WHEREAS, the Bylaws and the GCL, by their non-exclusive nature, permit contracts
between the Corporation and its agents, officers, employees and other agents with
respect to indemnification of such persons; and

 

WHEREAS, in order to induce Agent to continue to serve as a Director of the
Corporation, the Corporation has determined and agreed to enter into this Agreement
with Agent;

            NOW, THEREFORE, in consideration of Agent’s continued service as a Director of the
Corporation after the date hereof, the parties hereto agree as follows:

AGREEMENT

            1.         SERVICES TO THE CORPORATION. Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as a director, officer or other
fiduciary of an affiliate of the Corporation (including any employee benefit plan of the Corporation)
faithfully and to the best of his ability so long as he is duly elected and qualified in accordance with
the provisions of the Bylaws or other applicable charter documents of the Corporation or such
affiliate; provided, however, that Agent may at any time and for any reason resign from such position
(subject to any contractual obligation that Agent may have assumed apart from this Agreement) and
that the Corporation or any affiliate shall have no obligation under this Agreement to continue Agent
in any such position.

             2.         INDEMNITY OF AGENT. The Corporation hereby agrees to hold harmless and
indemnify Agent to the fullest extent authorized or permitted by the provisions of the Bylaws and
the GCL, as the same may be amended from time to time (but, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than the Bylaws or
the GCL permitted prior to adoption of such amendment), as follows:

                        (a)       against any and all expenses (including attorneys’ fees), witness fees,
damages, judgments, fines and amounts paid in settlement and any other amounts that Agent
becomes legally obligated to pay because of any claim or claims made against him in connection
with any threatened, pending or completed action, suit or proceeding, whether civil, criminal,
arbitrational, administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is threatened to be made a
party, by reason of the fact that Agent is, was or at any time becomes a director, officer, employee
or other agent of Corporation, or is or was serving or at any time serves at the request of the
Corporation as a director, officer, employee or other agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise; and

                        (b)       otherwise to the fullest extent as may be provided to Agent by the Corporation
under the non-exclusivity provisions of the GCL and the Bylaws.

            3.         LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section
2 hereof shall be paid by the Corporation:

                        (a)       on account of any claim against Agent solely for an accounting of profits made
by Agent in violation of Section 16 of the Securities Exchange Act of 1934 and amendments thereto
or similar provisions of any federal, state or local statutory law;

                        (b)       on account of Agent’s conduct that is established by a final judgment as
knowingly fraudulent or deliberately dishonest or that constituted willful misconduct;

                        (c)       on account of Agent’s conduct that is established by a final judgment as
constituting a breach of Agent’s duty of loyalty to the Corporation or resulting in any personal profit
or advantage to which Agent was not legally entitled;

                        (d)       for which payment is actually made to Agent under a valid and collectible
insurance policy or under a valid and enforceable indemnity clause, bylaw or agreement, except in
respect of any excess beyond payment under such insurance, clause, bylaw or agreement;

                        (e)       if indemnification is not lawful (and, in this respect, both the Corporation and
Agent have been advised that the Securities and Exchange Commission believes that indemnification
for liabilities arising under the federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to appropriate courts for
adjudication); or

                        (f)        in connection with any proceeding (or part thereof) initiated by Agent, or any
proceeding by Agent against the Corporation or its directors, officers, employees or other agents,
unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was
authorized by the Board of Directors of the Corporation, (iii) such indemnification is provided by
the Corporation, in its sole discretion, pursuant to the powers vested in the Corporation under the
GCL, or (iv) the proceeding is initiated pursuant to Section 8 hereof.

            4.         CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a director, officer, employee
or other agent of the Corporation (or is or was serving at the request of the Corporation as a director,
officer, employee or other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent shall be subject to any
possible claim or threatened, pending or completed action, suit or proceeding, whether civil,
criminal, arbitrational, administrative or investigative, by reason of the fact that Agent was serving
in the capacity referred to herein.

            5.         PARTIAL INDEMNIFICATION. Agent shall be entitled under this Agreement to
indemnification by the Corporation for a portion of the expenses (including attorneys’ fees), witness
fees, damages, judgments, fines and amounts paid in settlement and any other amounts that Agent
becomes legally obligated to pay in connection with any action, suit or proceeding referred to in
Section 2 hereof even if not entitled hereunder to indemnification for the total amount thereof, and
the Corporation shall indemnify Agent for the portion thereof to which Agent is entitled.

            6.         NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days after
receipt by Agent of notice of the commencement of any action, suit or proceeding, Agent will, if a
claim in respect thereof is to be made against the Corporation under this Agreement, notify the
Corporation of the commencement thereof; but the omission so to notify the Corporation will not
relieve it from any liability which it may have to Agent otherwise than under this Agreement. With
respect to any such action, suit or proceeding as to which Agent notifies the Corporation of the
commencement thereof:

 

                        (a)       the Corporation will be entitled to participate therein at its own expense;

                        (b)       except as otherwise provided below, the Corporation may, at its option and
jointly with any other indemnifying party similarly notified and electing to assume such defense,
assume the defense thereof, with counsel reasonably satisfactory to Agent. After notice from the
Corporation to Agent of its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently incurred by Agent in
connection with the defense thereof except for reasonable costs of investigation or otherwise as
provided below. Agent shall have the right to employ separate counsel in such action, suit or
proceeding but the fees and expenses of such counsel incurred after notice from the Corporation of
its assumption of the defense thereof shall be at the expense of Agent unless (i) the employment of
counsel by Agent has been authorized by the Corporation, (ii) Agent shall have reasonably
concluded, and so notified the Corporation, that there is an actual conflict of interest between the
Corporation and Agent in the conduct of the defense of such action or (iii) the Corporation shall not
in fact have employed counsel to assume the defense of such action, in each of which cases the fees
and expenses of Agent’s separate counsel shall be at the expense of the Corporation. The
Corporation shall not be entitled to assume the defense of any action, suit or proceeding brought by
or on behalf of the Corporation or as to which Agent shall have made the conclusion provided for
in clause (ii) above; and

                        (c)        the Corporation shall not be liable to indemnify Agent under this Agreement
for any amounts paid in settlement of any action or claim effected without its written consent, which
shall not be unreasonably withheld. The Corporation shall be permitted to settle any action except
that it shall not settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent’s written consent, which may be given or withheld in Agent’s
sole discretion.

            7.         EXPENSES. The Corporation shall advance, prior to the final disposition of any
proceeding, promptly following request therefor, all expenses incurred by Agent in connection with
such proceeding upon receipt of an undertaking by or on behalf of Agent to repay said amounts if
it shall be determined ultimately that Agent is not entitled to be indemnified under the provisions of
this Agreement, the Bylaws, the GCL or otherwise.

            8.         ENFORCEMENT. Any right to indemnification or advances granted by this
Agreement to Agent shall be enforceable by or on behalf of Agent in any court of competent
jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request therefor. Agent, in such
enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of
prosecuting his claim. It shall be a defense to any action for which a claim for indemnification is
made under Section 3 hereof (other than an action brought to enforce a claim for expenses pursuant
to Section 8 hereof, provided that the required undertaking has been tendered to the Corporation) that
Agent is not entitled to indemnification because of the limitations set forth in Section 4 hereof.
Neither the failure of the Corporation (including its Board of Directors or its shareholders) to have
made a determination prior to the commencement of such enforcement action that indemnification
of Agent is proper in the circumstances, nor an actual determination by the Corporation (including
its Board of Directors or its shareholders) that such indemnification is improper shall be a defense
to the action or create a presumption that Agent is not entitled to indemnification under this
Agreement or otherwise.

            9.         SUBROGATION. In the event of payment under this Agreement, the Corporation
shall be subrogated to the extent of such payment to all of the rights of recovery of Agent, who shall
execute all documents required and shall do all acts that may be necessary to secure such rights and
to enable the Corporation effectively to bring suit to enforce such rights.

            10.       NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or hereafter acquire under
any statute, provision of the Corporation’s Amended and Restated Certificate of Incorporation or
Bylaws, agreement, vote of shareholders or directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding office.

 

            11.       SURVIVAL OF RIGHTS.

                        (a)       The rights conferred on Agent by this Agreement shall continue after Agent
has ceased to be a director, officer, employee or other agent of the Corporation or to serve at the
request of the Corporation as a director, officer, employee or other agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise and shall inure to the
benefit of Agent’s heirs, executors and administrators.

                        (b)       The Corporation shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of
the Corporation, expressly to assume and agree to perform this Agreement in the same manner and
to the same extent that the Corporation would be required to perform if no such succession had taken
place.

            12.       SEPARABILITY. Each of the provisions of this Agreement is a separate and distinct
agreement and independent of the others, so that if any provision hereof shall be held to be invalid
for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of the
other provisions hereof. Furthermore, if this Agreement shall be invalidated in its entirety on any
ground, then the Corporation shall nevertheless indemnify Agent to the fullest extent provided by
the Bylaws, the GCL or any other applicable law.

            13.       ARBITRATION. The parties agree that any dispute arising between them related to
this Agreement or the performance hereof shall be submitted for resolution to the American
Arbitration Association for arbitration in the Des Moines, Iowa, office of the Association under the
then-current rules of arbitration. The Arbitrator or Arbitrators shall have the authority to award to
the prevailing party its reasonable costs and attorneys fees. Any award of the Arbitrators may be
entered as a judgment in any court competent jurisdiction.

            14.       GOVERNING LAW. This Agreement shall be interpreted and enforced in accordance
with the laws of the State of Delaware.

            15.       AMENDMENT AND TERMINATION. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless in writing signed by both parties hereto.

            16.       IDENTICAL COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original but all of which
together shall constitute but one and the same Agreement. Only one such counterpart need be
produced to evidence the existence of this Agreement.

            17.       HEADINGS. The headings of the sections of this Agreement are inserted for
convenience only and shall be deemed to constitute part of this Agreement or to affect the
construction hereof.

            18.       NOTICES. All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given (i) upon delivery if delivered by hand to
the party to whom such communication was directed or (ii) upon the third business day after the date
on which such communication was mailed if mailed by certified or registered mail with postage
prepaid:

                        (a)       If to Agent, at the address indicated on the signature page hereof; and

                        (b)       If to the Corporation, to: ALL Fuels & Energy Company, 6165 N.W. 86th
Street, Johnston, Iowa 50131, or to such other address as may have been furnished to Agent by the
Corporation.

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

ALL FUELS & ENERGY COMPANY

By: /s/ DEAN E. SUKOWATEY

Dean E. Sukowatey

President

 

AGENT:

/s/ BRAD KNAACK

Brad Knaack, individually

Address of Agent:

1307 Megans Way

Correctionville, Iowa 51016

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